1
BADIN-II REVISED
PETROLEUM CONCESSION
AGREEMENT
BETWEEN
THE PRESIDENT OF THE ISLAMIC
REPUBLIC OF PAKISTAN
AND
UNION TEXAS PAKISTAN, INC.,
OCCIDENTAL PETROLEUM (PAKISTAN), INC.,
OIL AND GAS DEVELOPMENT CORPORATION
AND
THE FEDERAL GOVERNMENT OF THE ISLAMIC REPUBLIC OF PAKISTAN
[EFFECTIVE JANUARY 22, 1995]
2
BADIN-II REVISED PETROLEUM CONCESSION
AGREEMENT
TABLE OF CONTENTS
Page
ARTICLE - I
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE - II
RIGHTS AND LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE - III
WORK OBLIGATIONS AND SURRENDER OF LICENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE - IV
WORKING INTERESTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE - V
LEASES FOR PETROLEUM DEVELOPMENT AND PRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE - VI
ASSIGNMENT, SURRENDER OF AREAS AND TERMINATION
OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE - VII
WELLHEAD VALUE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE - VIII
NATURAL GAS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE - IX
RIGHT OF ACQUISITION OF PETROLEUM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE - X
DISPOSAL OF PETROLEUM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(i)
3
ARTICLE - XI
FOREIGN EXCHANGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE - XII
IMPORTS AND EXPORTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE - XIII
TAXATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE - XIV
FORCE MAJEURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE - XV
MANAGEMENT AND OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE - XVI
ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
ARTICLE - XVII
REFINERY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
ARTICLE - XVIII
OTHER MINERALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
ARTICLE - XIX
AUDIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
ARTICLE - XX
PRODUCTION BONUSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
ARTICLE - XXI
INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
ARTICLE - XXII
TRAINING, EMPLOYMENT AND SOCIAL WELFARE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
ARTICLE - XXIII
DEVELOPMENT FINANCING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
ARTICLE - XXIV
PARENT COMPANY GUARANTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
(ii)
4
ARTICLE - XXV
EFFECTIVENESS AND DURATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
ARTICLE - XXVI
ROYALTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
ARTICLE - XXVII
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
ANNEXURE - I
MAP OF BADIN-II REVISED AREA
ANNEXURE - I-A
MAP OF BADIN-II REVISED AREA TO BE ATTACHED
ANNEXURE - II
BADIN-II REVISED JOINT OPERATING AGREEMENT
ANNEXURE - III
FORM OF DEVELOPMENT AND PRODUCTION LEASE
ANNEXURE - IV
EXHIBIT A
SRO 367(I)/94 DATED MAY 9, 1994
ANNEXURE - IV
EXHIBIT B
CGO-2/93 DATED MAY 20, 1993
ANNEXURE - IV
EXHIBIT C
SRO 336(I)/94 DATED APRIL 26, 1994
ANNEXURE - IV
EXHIBIT D
LIST OF MACHINERY, EQUIPMENT, MATERIALS,VEHICLES
ACCESSORIES, SPARES, CHEMICALS AND CONSUMABLES ETC.
ANNEXURE - IV
EXHIBIT E
SRO 366 (I)/94 DATED ▇▇▇ ▇▇▇, ▇▇▇▇
(▇▇▇)
5
ANNEXURE - IV
EXHIBIT F
CBR'S LETTER C.NO.10(14)/93-ICM&CON DATED JUNE 13, 1994
ANNEXURE - IV
EXHIBIT G
LIST OF COMMISSARY STORES
ANNEXURE - V
PARENT COMPANY GUARANTEE
(iv)
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BADIN-II REVISED
PETROLEUM CONCESSION AGREEMENT
THIS AGREEMENT, made and entered into between THE PRESIDENT OF THE ISLAMIC
REPUBLIC OF PAKISTAN (hereinafter referred to as the "President" which term
shall include his successors and assigns); and
UNION TEXAS PAKISTAN, INC., a corporation formed and existing under the laws of
the State of Delaware, U.S.A. and registered in Pakistan under Section 277 of
the Companies Act, 1913 (VII of 1913), having its principal office in Pakistan
at ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇-▇,
▇▇▇▇▇▇▇▇ (hereinafter referred to as "Union Texas" which term shall include its
successors and assigns); and
OCCIDENTAL PETROLEUM (PAKISTAN), INC., a corporation formed and existing under
the laws of the State of Delaware, U.S.A. and registered in Pakistan under
Section 277 of the Companies Act, 1913 (VII of 1913), having its principal
office in Pakistan at ▇▇-▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
(hereinafter referred to as "Occidental" which term shall include its
successors and assigns); and
OIL AND GAS DEVELOPMENT CORPORATION, a statutory corporation established under
the Oil and Gas Development Corporation Ordinance, 1961 (XXXVII of 1961),
having its principal office at ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇-▇, ▇▇-▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ (hereinafter referred to as "OGDC" which term shall include its
successors and assigns); and
THE FEDERAL GOVERNMENT OF THE ISLAMIC REPUBLIC OF PAKISTAN as a Working
Interest Owner and a party to this Agreement and in its capacity as a Working
Interest Owner (hereinafter referred to as "Government Holdings" which term
shall include its successors and assigns).
WITNESSETH
WHEREAS, the President, Union Texas, Occidental and OGDC are parties to the
Petroleum Concession Agreement dated January 21, 1992, and they desire to amend
that agreement so as to provide for, among other things, the renewal of the
Exploration Licence No.115/Pakistan/90 and the application of the of the
Petroleum Policy 1994 of the Government of Pakistan dated March 1994 (the "1994
Petroleum Policy") to the activities undertaken in accordance with this
Agreement;
[PAGE # ... 1]
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WHEREAS, in accordance with the provisions of the 1994 Petroleum Policy the
President, Union Texas, Occidental and OGDC desire to include Government
Holdings as a Working Interest Owner and a party to this Agreement;
WHEREAS, the President has granted to Union Texas, Occidental and OGDC a
renewal of the Exploration Licence No.115/Pakistan/90 as amended hereby,
including Government Holdings as a party thereto, and extend those certain
Petroleum concessions and other rights in and to the Badin-II Revised Area
hereinafter described and as hereinafter more particularly set forth and
reserve unto itself an interest as more particularly described herein;
NOW, THEREFORE, the President, Union Texas, Occidental, OGDC and Government
Holdings do hereby agree as follows:
[PAGE # ... 2]
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ARTICLE - I
DEFINITIONS
Whenever used in this Agreement, the following terms shall have the following
meanings:
1.1 "Accounting Procedure" - means Exhibit "A" to the Joint Operating
Agreement.
1.2 "Act" - means the Regulation of Mines and Oilfields and Mineral
Development (Government Control) Act, 1948, as amended and in effect
on the Effective Date.
1.3 "Affiliate" - means a company controlling or controlled by a party to
this Agreement. The term "control", as used in this Article 1.3, shall
mean the right to exercise, directly or indirectly, more than fifty
percent (50%) of the voting rights in the company controlled at its
general meeting.
1.4 "Agreement" - means this Badin-II Revised Petroleum Concession
Agreement effective as of January 22, 1995, among the President and
Union Texas, Occidental, OGDC and Government Holdings.
1.5 "Annexure" - means one of the Annexures annexed to this Agreement, all
of which are hereby made a part hereof.
1.6 "Appraisal Well" - means any additional well drilled with respect to a
Discovery prior to the Commercial Discovery Notice Date.
1.7 "Article" - means an article of this Agreement.
1.8 "Badin-II Revised Area" - means the area covered by the Badin-II
Licence as outlined on the map contained in Annexure I, excluding the
area covered by the leases granted under the Badin-II PCA, and any
portion thereof which may be Surrendered in accordance with this
Agreement. The Badin-II Revised Area will be outlined and more
particularly described in Annexure 1-A which is to be initialled by
the President and the Working Interest Owners and attached hereto as
soon as practicable after the Effective Date.
1.9 "Badin-II Revised Licence" - means the Badin-II Revised Exploration
Licence No. 115/Pakistan/90 effective from the Effective Date, insofar
as it covers the Badin-II Revised Area, as renewed in accordance with
the Rules.
[PAGE # ... 3]
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1.10 "Badin-II Revised Voting Interest" - means with respect to the
Badin-II Revised Area and any Lease granted with respect thereto, in
matters relating to (a) Exploration and Appraisal Activities and all
other matters other than Development Activities, five percent (5%) for
Government Holdings, twenty-four percent (24%) for OGDC and
thirty-five and five tenths percent (35.5%) for each of Union Texas
and Occidental, and (b) only Development Activities, the Badin-II
Revised Working Interest of each of Government Holdings, OGDC, Union
Texas and Occidental determined in accordance with the provisions of
Article IV in respect of the Discovery Area with respect to which such
Development Activities are undertaken.
1.11 "Badin-II Revised Working Interest" - means the Working Interest of
each of Union Texas, Occidental, OGDC and Government Holdings, as such
Working Interest may be adjusted from time to time in accordance with
the provisions of Article IV, in respect of the Badin-II Revised Area,
the Badin-II Revised Licence and any Leases that may be granted with
respect thereto.
1.12 "Badin-II PCA" - means the Petroleum Concession Agreement dated
January 21, 1992 among the President, Union Texas, Occidental, and
OGDC.
1.13 "Badin-II Licence" - means Exploration Licence No. 115/Pakistan/90 as
in effect up to the Effective Date and as may be extended pursuant to
Article 3.1(b) of the Badin-II PCA and the Rules.
1.14 "Barrel" - means a quantity of Crude Oil and Condensate equivalent in
volume to forty-two (42) United States Gallons adjusted to sixty (60)
degrees Fahrenheit after correction for basic sediment and water
("BS&W").
1.15 "BOE" - means barrel of oil equivalent.
1.16 "BOE/day" - means barrels of oil equivalent per day. Quantities of
Natural Gas produced and saved shall be converted to a barrel of Crude
Oil equivalent on a BTU basis.
1.17 "BTU" - means a British thermal unit.
1.18 "Calendar Quarter" - means a period of three (3) consecutive months,
according to the Gregorian Calendar, which begins 1 January, 1 April,
1 July or 1 October.
1.19 "Calendar Year" - means the period from 1 January to 31 December, both
inclusive, according to the Gregorian Calendar. The tax year of
Working Interest Owner shall be the period from 1 July to 30 June,
both inclusive, according to the Gregorian Calendar.
[PAGE # ... 4]
10
1.20 "Commercial Discovery" - means a Discovery of Petroleum either duly
evaluated by one or more Appraisal ▇▇▇▇▇ which Discovery, in the
opinion of the Operating Committee, would justify, on the basis of
technical and economic considerations, its development and would
assure Commercial Production or, which has otherwise been approved by
the Government as commercial under this Agreement.
1.21 "Commercial Discovery Notice Date" - means the date when the Operator
formally notifies the Director General Petroleum Concessions that a
Commercial Discovery has been made.
1.22 "Commercial Production" - means the production of Petroleum of a
quantity and quality which Operator reasonably estimates with the
concurrence of the Government (which concurrence shall not be
unreasonably withheld) to be sufficient, over the relevant period to
cover the costs reasonably estimated to be incurred with respect to
the development and production of that Petroleum.
1.23 "Condensate" - means liquid Petroleum (excluding Crude Oil, NGL and
LPG), produced at the surface by processing or separation from Natural
Gas.
1.24 "Crude Oil" - means all Petroleum other than Natural Gas, Condensate,
LPG, and NGL which at standard atmospheric conditions of pressure and
temperature is in a liquid phase.
1.25 "Date of Commercial Production" - means the date when the Operator
commences, on a regular basis, Commercial Production from a Commercial
Discovery.
1.26 "Development Activities" - means all operations undertaken with
respect to a Discovery Area in accordance with the approved
Development Plan including operations approved by the Operating
Committee after the Commercial Discovery Notice Date with respect to
that Discovery Area.
1.27 "Development Plan" - means the plan submitted to the President for
approval in accordance with Rule 33.
1.28 "Director General Petroleum Concessions or DGPC" - means any officer
or authority appointed by the Government to exercise the powers and
perform the functions of the Director General Petroleum Concessions
under the Rules.
1.29 "Discovery" - means the finding of a deposit of Petroleum not
previously known to have existed which is established by conventional
Petroleum industry testing methods in a significant measure.
[PAGE # ... 5]
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1.30 "Discovery Area" - means an area as defined in Rule 2(C) of the Rules.
1.31 "Effective Date" - means 12:00 a.m. on January 22, 1995.
1.32 "Expenditures" - means for purposes other than the assessment of
income tax, expenditures incurred in connection with, or incidental
to, the conduct of Petroleum Operations, whether chargeable to capital
or revenue account, including operating costs, whether or not with
respect to producing ▇▇▇▇▇ and other assets or, prepayments made after
the Effective Date, acquired for subsequent use in the Petroleum
Operations. Such Expenditures are more particularly classified and
identified as set forth in the Accounting Procedure.
1.33 "Exploration and Appraisal Activities" - means all operations as
approved by the Operating Committee, including the drilling of
Appraisal ▇▇▇▇▇, (other than Development Activities) performed in
order to determine the existence of previously unknown Petroleum,
including topographic, geodetic, hydrographic, meteorological and
bathymetric studies and surveys; geological and geophysical studies
and surveys; drilling, testing and evaluation of data from Exploration
▇▇▇▇▇ and Appraisal ▇▇▇▇▇; and technical or economic studies
pertaining to any of the foregoing operations.
1.34 "Exploration Well" - means a well which tests a clearly separate
geological entity (be it either structural, stratigraphic,
lithological, or facies of a differing pressure nature) penetrating a
prospective geological interval or intervals prior to that entity
being classified as a Discovery.
1.35 "Government" - means The Federal Government of the Islamic Republic of
Pakistan.
1.36 "Joint Operating Agreement" - means the Badin-II Revised Joint
Operating Agreement attached hereto as Annexure II.
1.37 "Joint Operations" - means all Petroleum Operations that are conducted
by the Operator for all of the Working Interest Owners under the Joint
Operating Agreement.
1.38 "Lease" - means the grant of the exclusive right to perform all
activities in connection with exploration, development, production and
transportation of all Petroleum underlying the surface area covered by
a development and production lease granted in accordance with the
Rules in the Badin-II Revised Area.
1.39 "Licensee" - means Union Texas, Occidental, OGDC and Government
Holdings and their respective successors and assigns.
[PAGE # ... 6]
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1.40 "Liquified Petroleum Gas" or "LPG" - means a marketable mixture of
propane and butane separated from Natural Gas by compression,
extraction or other processes and marketed in conformity with the
quality and specifications established by Pakistan Standard
Specifications No. 1705-1976 for Commercial Butane-Propane Mixture as
amended from time to time.
1.41 "Minimum Expenditure" - means with respect to the (i) first Renewal
Period US$1,500,000, (ii) second Renewal Period US$1,500,000, and
(iii) third Renewal Period US$750,000.
1.42 "Minimum Work Program" - means the work described in Article 3.2 of
this Agreement for each Renewal Period undertaken with respect to the
Badin-II Revised Area.
1.43 "Natural Gas" - means all hydrocarbons which at standard atmospheric
conditions of pressure and temperature are in a gaseous phase.
1.44 "Natural Gas Liquids" or "NGL" - means ethane and any higher molecular
hydrocarbons separated from Natural Gas by compression, extraction or
other process, but does not include Condensate, propane or butane
fraction extracted from Natural Gas for the manufacture of LPG.
1.45 "Operating Committee" - means the committee constituted pursuant to
the terms of the this Agreement and the Joint Operating Agreement.
1.46 "Operator" - means the person so designated from time to time pursuant
to the Joint Operating Agreement, which person shall initially be
Union Texas.
1.47 "Optional Interest" - means an amount (not to exceed twenty percent
(20%)) expressed as a percentage of one hundred percent (100%) of the
Working Interests by which Government Holdings has elected to increase
its Working Interest in accordance with Article IV.
1.48 "Petroleum" - means all liquid and gaseous hydrocarbons existing in
their natural condition in the strata, as well as all substances,
including sulphur, produced in association with such hydrocarbons, but
does not include basic sediments and water.
1.49 "Petroleum Operations" - means all Petroleum exploration, prospecting,
developing and producing activities conducted by the Working Interest
Owners under and pursuant to the Badin-II Revised Licence, this
Agreement and the Joint Operating Agreement and include any gas-oil
separation, pressure maintenance, pipeline and other transportation,
Crude Oil storage or other activity necessary to facilitate the
production of Petroleum. Petroleum
[PAGE # ... 7]
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Operations do not include the construction or operation of any Crude
Oil refinery.
1.50 "Private Working Interest Owner" - means a Working Interest Owner
other than Government Holdings or any other entity in which the
Government owns more than fifty-one percent (51%) of the shares.
1.51 "Renewal Period" - means a period of twelve (12) months beginning on
the Effective Date and from each anniversary of the Effective Date for
which the President has granted a renewal of the Badin-II Licence as
set out in the Rules.
1.52 "Royalty Petroleum" - means the Petroleum taken in kind by the
Government in payment of the royalty obligation of the Working
Interest Owners as provided in Article XXVI and the Rules.
1.53 "Rules" - means the Pakistan Petroleum (Exploration and Production)
Rules, 1986, including all Schedules, as amended and in effect on the
Effective Date.
1.54 "Share of Expenditures" - means the share of Expenditures for
Exploration and Appraisal Activities of Union Texas, Occidental and
OGDC determined in accordance with Article IV.
1.55 "Surrender" - means the termination of rights with respect to the
whole or any part of the Badin-II Revised Area including the
expiration of rights according to the terms of the Badin-II Revised
Licence, any Lease and this Agreement.
1.56 "Wellhead Value" - means the value for Petroleum as determined in
accordance with the provisions of the Rules and Article VII.
1.57 "Working Interest" - means all or any undivided interest in the
entirety of the Petroleum concession and other rights granted and
obligations and liabilities imposed by this Agreement, the Joint
Operating Agreement, the Badin-II Revised Licence and any Leases,
including the enjoyment of the exclusive right to explore for,
prospect for, develop, produce, own, sell and otherwise dispose of
Petroleum from all or part of the Badin-II Revised Area and which
interest is chargeable with and currently obligated to bear and pay
its proportionate part, except as otherwise provided in Article IV, of
all costs and expenditures (including royalties on production and
rental) incurred by Working Interest Owners in exploring and
prospecting for, drilling, developing, producing, selling and
otherwise disposing of Petroleum from all or part of the Badin-II
Revised Area.
1.58 "Working Interest Owner" - means an entity owning a Working Interest
in the Badin-II Revised Area or any Lease granted with respect
thereto.
[PAGE # ... 8]
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ARTICLE - II
RIGHTS AND LIABILITIES
2.1 The President has renewed the Badin-II Licence No.115/Pakistan/90 in
accordance with the Rules as the Badin-II Revised Exploration Licence
No.115/Pakistan/90 and grants to the Licensees effective on the
Effective Date, the rights more particularly described in this
Agreement, including, but not limited to, the exclusive right of being
granted Leases and of conducting or causing to be conducted Petroleum
exploration, prospecting, development and production operations
hereunder and thereunder within the Badin-II Revised Area including
the transportation (whether by pipeline or otherwise), storage,
terminalling, export and sale of Petroleum, subject to the provisions
of this Agreement.
2.2 (a) Union Texas shall act as Operator for the Badin-II Revised
Area subject to the provisions of the Joint Operating
Agreement and no change of the Operator may take place without
the consent of the Government.
(b) The Petroleum Operations, with respect to Badin-II Revised
Area, shall be conducted diligently, and in conformity with
the requirements of the Rules, this Agreement and all
applicable laws and regulations. In the event that the
standards of performance with respect to a particular
Petroleum Operation is not specified in the Rules or
applicable laws and regulations, then any such Petroleum
Operation shall be conducted in accordance with good oilfield
practice.
2.3 This Agreement contemplates Petroleum Operations which will or may
require the construction and operation of temporary or permanent
exploration, prospecting and production facilities (including
pipelines) both within and outside the Badin-II Revised Area. The
President, subject to relevant laws and Rules, agrees to assist the
Operator in carrying out all Petroleum Operations contemplated hereby
including the construction and operation of such facilities and in
obtaining for the Operator and its contractors and sub-contractors
such communication permits (radio, telex, telefax, telephone and PABX,
etc.) work permits, security clearances and aviation permits or
licenses, or other clearances, permits and authorizations as shall be
necessary or convenient in connection with the Petroleum Operations to
be conducted under this Agreement and the Joint Operating Agreement.
[PAGE # ... 9]
15
2.4 The President shall upon request use his good offices and assist in
acquiring at reasonable cost for the sole account of the Working
Interest Owners any surface rights required by them in carrying out
any Petroleum Operations contemplated hereunder, including, but not
limited to, acquisition of land and terminal facilities together with
the necessary means of communication and transportation between such
facilities and the Badin-II Revised Area.
2.5 The rights, duties, and obligations of the Working Interest Owners in
relation to the President shall be joint and several. Nothing herein
contained shall be construed as creating a partnership or joint
venture of any kind, an association or a trust or a taxable entity or
as imposing upon the Working Interest Owners any partnership duty,
obligation or liability.
[PAGE # ... 10]
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ARTICLE - III
WORK OBLIGATIONS AND SURRENDER OF LICENCE
3.1 The renewal of the Badin-II Revised Licence with respect to the
Badin-II Revised Area is valid for a Renewal Period of one year
effective from the Effective Date. The President shall grant in
accordance with Rule 21 of the Rules to the Licensees two (2)
subsequent renewals of the Badin-II Revised Licence.
3.2 As a Minimum Work Program for the renewal of the Badin-II Revised
Licence, the Working Interest Owners shall conduct the work as
specified below:
RENEWAL MINIMUM WORK MINIMUM EXPENDITURE
PERIOD PROGRAM (US DOLLARS)
First Two (2) Exploration ▇▇▇▇▇ 1,500,000
Second Two (2) Exploration ▇▇▇▇▇ 1,500,000
Third One (1) Exploration Well 750,000
Four (4) of the Exploration ▇▇▇▇▇ to be drilled in accordance with the
Minimum Work Program shall be drilled to the Lower Cretaceous Upper
Shale Unit of the Lower Goru formation and one of the Exploration
▇▇▇▇▇ to be drilled in accordance with the Minimum Work Program shall
be drilled through the Jurassic-Cretaceous Sembar Formation to the top
of the Chiltan limestone. The performance of the Minimum Work Program
for each Renewal Period for which the Badin-II Licence is extended is
the unconditional obligation of the Working Interest Owners. The
average estimated cost for an Exploration Well used for purposes of
determining the Minimum Expenditure is US$750,000.
3.3 The Operator shall keep the DGPC informed of the progress of each well
and shall:
a) as soon as possible, make known to the DGPC its proposals for
testing;
b) test potentially productive horizons indicated by wireline
recording;
[PAGE # ... 11]
17
c) promptly undertake the technical evaluation of the test
results and of all other relevant data and submit the same to
the DGPC as soon as possible.
3.4 The Minimum Expenditures obligations set forth in Article 3.2 shall be
satisfied if the Working Interest Owners fulfil the Minimum Work
Program for any Renewal Period at a lower cost than the Minimum
Expenditures for such Renewal Period.
3.5 If during a Renewal Period any ▇▇▇▇▇ in excess of the number of ▇▇▇▇▇
required to be drilled in accordance with the Minimum Work Program for
that Renewal Period are drilled and such excess well or ▇▇▇▇▇ fulfil
the requirements for the Minimum Work Program, then such excess ▇▇▇▇▇
may be carried forward and deducted from the Minimum Work Program
required for any succeeding Renewal Period. If for any Renewal Period
a well required to be drilled in accordance with the Minimum Work
Program for that Renewal Period has not been drilled, then the
Licensees shall pay to the Government, as liquidated damages, the AFE
cost, as approved by the Operating Committee, (excluding costs of
testing, completion and surface facilities and equipment) of the well
which was not drilled or, in the event that no AFE has been approved
for such well, US$750,000, shown as the Minimum Expenditure for the
well.
3.6 a) All Exploration ▇▇▇▇▇ drilled by the Working Interest Owners
pursuant to Article 3.2, shall be treated as fulfilment of the
obligation of the Working Interest Owners, if they have been
drilled to the objective formation as provided in Article 3.2.
b) If the Operating Committee is of the opinion that it is
impossible or impractical due to technical difficulties to
satisfactorily complete an Exploration Well to the objective
formation, the Working Interest Owners shall drill a
substitute well within a reasonable time from the abandonment
of such Exploration Well for the purpose of discharging the
Minimum Work Program and the Badin-II Revised Licence shall be
extended in accordance with the Rules for a period of time
equal in length to the time needed for drilling and testing
the substitute well.
3.7 Once the Working Interest Owners have completed the Minimum Work
Program, they shall have no further work obligation with respect to
the Badin-II Revised Licence for any remaining Renewal Period for
which a renewal may be granted.
3.8 At the end of each of the first and second Renewal Period, the Working
Interest Owners shall Surrender an area equal to ten percent (10%) of
the Badin-II Revised Area after excluding the area covered by the
Leases granted or applied
[PAGE # ... 12]
18
for with respect to the Badin-II Revised Area on or prior to the end
of each such Renewal Period.
3.9 The Badin-II Revised Licence as it relates to any well, the drilling
of which was begun on or prior to the expiration of the Badin-II
Revised Licence, shall continue until the completion of any such well
being drilled. In the event any such well results in a Commercial
Discovery, this Agreement shall continue to apply until the
corresponding Lease has expired. If any such well results in a
Discovery, the procedures as set forth in Article V shall be followed.
[PAGE # ... 13]
19
ARTICLE - IV
WORKING INTERESTS
4.1 The Badin-II Revised Working Interest of Government Holdings, Union
Texas, Occidental and OGDC shall:
(a) in the Badin-II Revised Area, subject to the further
provisions of this Article 4.1, be:
GOVERNMENT HOLDINGS 5.0%
OGDC 24.0%
UNION TEXAS 35.5%
OCCIDENTAL 35.5%
(b) in any Discovery Area in the Badin-II Revised Area in the
event that Government Holdings exercises its option to
increase its Working Interest in any such Discovery Area in
accordance with Article 4.4 from the Commercial Discovery
Notice Date for that Discovery Area, be:
GOVERNMENT HOLDINGS 5.0% plus the Optional Interest
OGDC 24.0%
UNION TEXAS 35.5% less its proportionate
share of the Optional Interest
OCCIDENTAL 35.5% less its proportionate
share of the Optional Interest
4.2 The Working Interest Owners shall bear and pay for all the
Expenditures incurred by Operator in connection with the performance
of Exploration and Appraisal Activities conducted with respect to the
Badin-II Revised Area and any Leases granted with respect thereto in
accordance with their respective Share of Expenditures. The Share of
Expenditures of Government Holdings, Union Texas, Occidental and OGDC
shall be:
[PAGE # ... 14]
20
GOVERNMENT HOLDINGS 0.0%
OGDC 24.0%
UNION TEXAS 38.0%
OCCIDENTAL 38.0%
4.3 The Working Interest Owners shall bear and pay for all Expenditures
incurred by the Operator in connection with Development Activities in
accordance with their respective Badin-II Revised Working Interests in
the Discovery Area to which such Development Activities relate as such
Working Interests are determined after giving effect to the provisions
of this Article IV.
4.4 (a) As of the Commercial Discovery Notice Date for each Discovery
Area within the Badin-II Revised Area or any Lease, made
during the term of this Agreement or any such Lease,
Government Holdings shall have the right to increase its five
percent (5%) Working Interest up to a maximum of twenty-five
percent (25%) in that Discovery Area. Government Holdings
shall notify, in writing, the other Working Interest Owners
whether it intends to exercise such right within thirty (30)
days of the date of the approval by the Government of the
Development Plan for such Discovery Area and include in such
notice the Optional Interest.
(b) Union Texas and Occidental, shall in proportion to their
respective Working Interests, promptly assign to Government
Holdings the Optional Interest to be acquired by Government
Holdings, such assignment shall be effective as of the
Commercial Discovery Notice Date for such Discovery Area. The
assignment to Government Holdings by Union Texas and
Occidental of their proportionate share of the Optional
Interest shall not effect a transfer of any of the
Expenditures made by Union Texas or Occidental with respect to
that portion of the Optional Interest assigned to Government
Holdings prior to the Commercial Discovery Notice Date in
accordance with the provisions of this Article 4.4(b).
4.5 (a) Government Holdings shall promptly reimburse, without interest
and subject to adjustment based on audit, Union Texas and
Occidental for their respective Working Interest share of all
Expenditures made with respect to such Discovery Area from the
Commercial Discovery Notice Date to the date on which
Government Holdings exercised its option. The reimbursement
shall be shared by Union Texas and Occidental in proportion to
their respective contributions to the total amount of the
Expenditures to be reimbursed. Reimbursements made pursuant to
this Article 4.5(a) shall be paid in US currency.
[PAGE # ... 15]
21
(b) The reimbursement by Government Holdings pursuant to this
Article 4.5 shall not be computed as taxable income of the
Working Interest Owners receiving such reimbursement either
for income tax or for capital gains purposes provided that
such Working Interest Owners reduce their claim of total
Expenditures by the amount of the reimbursement received by
each of them. Such reimbursement shall not be subject to any
sales, transfer, or registration tax or similar levy.
[PAGE # ... 16]
22
ARTICLE - V
LEASES FOR PETROLEUM DEVELOPMENT AND PRODUCTION
5.1 In the event of a Discovery within the Badin-II Revised Area or any
Lease, the Operator shall promptly inform the DGPC in accordance with
Rules 52(a) and (b) of the Rules. The Operator shall, within a
reasonable time, after the Discovery submit to the Operating Committee
a recommendation as to the further activities to be conducted with
respect to that Discovery. The Operator shall within thirty (30) days
after the date on which the Operating Committee determines whether the
Discovery (i) merits the performance of further Exploration and
Appraisal Activities, (ii) is a Commercial Discovery that does not
require the performance of further Exploration and Appraisal
Activities, or (iii) is not a Commercial Discovery and merits no
further activity of any type, deliver written notice to DGPC of such
determination made by the Operating Committee.
In the event that a Working Interest Owner, contrary to the
determination made by the Operating Committee in clause (iii) of
Article 5.1, is of the opinion that a Discovery is a Commercial
Discovery that Working Interest Owner may proceed in accordance with
the provisions of Article 8 of the Joint Operating Agreement to
develop that Discovery. In such event, the Working Interest Owner may
request that the Operator notify the DGPC that such Working Interest
Owner considers the Discovery to be a Commercial Discovery. Upon such
determination made by a Working Interest Owner, the provisions of
Article 8 of the Joint Operating Agreement shall apply to the further
activities conducted with respect to any such Discovery.
5.2 (a) For each Discovery with respect to which the Operator notifies
the DGPC that the Operating Committee has determined that the
Discovery merits the further performance of Exploration and
Appraisal Activities, the Operator shall, within a reasonable
time, submit to the DGPC an appraisal program and budget for
the further Exploration and Appraisal Activities that the
Operating Committee has approved to be performed with respect
to the Discovery. The Working Interest Owners shall, in
accordance with the appraisal program, continue diligently to
appraise the Discovery.
(b) For each Discovery with respect to which the Operator notifies
the DGPC that the Operating Committee has determined that the
Discovery is a Commercial Discovery (whether such
determination has been made after further Exploration and
Appraisal Activities have been undertaken with
[PAGE # ... 17]
23
respect to that Discovery or the Operating Committee has
determined that the Discovery is Commercial Discovery on the
basis of the initial Exploration Well), the Operator shall
submit to the DGPC a Development Plan for the development of
the Discovery in accordance with this Article V.
5.3 For each Commercial Discovery, the Operator shall, within a reasonable
time, submit an application for grant of a Lease which shall be
accompanied by:
(a) a report on the Commercial Discovery; and
(b) a Development Plan for approval by the Government. The
Government's approval of a Development Plan shall not be
unreasonably withheld and such approval shall be granted
within a reasonable period of time from the date on which the
Development Plan is submitted to the Government.
In the event that the Commercial Discovery is within a Lease
previously granted under this Agreement, then the application for a
grant of a Lease shall state that a new Lease is not required to be
granted and that the Discovery Area is subject to the terms and
conditions of the Lease in which any portion of the Discovery Area is
located. The Development Plan may be a revision of a Development Plan
that had previously been approved by the Government if the Discovery
Area to which such revised Development Plan relates is within a Lease.
5.4 The report on the Commercial Discovery referred to in Article 5.3
shall include, but not be limited to:
(a) the chemical composition, physical properties and quality of
Petroleum discovered;
(b) the thickness and extent of the production strata;
(c) petrophysical properties of the reservoirs;
(d) the productivity indices for ▇▇▇▇▇ tested at various rates of
flow;
(e) permeability and porosity of the reservoirs;
(f) the estimated production capacity of the reservoirs; and
[PAGE # ... 18]
24
(g) economic feasibility studies carried out by or for the
Operator in respect of the Commercial Discovery including an
analysis of prospective cash flows from the Petroleum
Operations which the Operator proposes to undertake.
5.5 The Development Plan referred to in Article 5.3 shall include
particulars of but not be limited to:
(a) proposals for the development and production of the Commercial
Discovery, including possible alternatives and proposals
relating to the disposition of Natural Gas;
(b) proposals relating to the spacing, drilling and completion of
▇▇▇▇▇, the production and storage installations and transport
and delivery facilities required for the production, storage
and transport of Petroleum. Such proposals will cover:
(i) the estimated number, size and production capacity of
production facilities, if any;
(ii) estimated number of production ▇▇▇▇▇;
(iii) particulars of production equipment and storage
facilities;
(iv) particulars of feasible alternatives for the
transportation of Petroleum including pipelines;
(v) particulars of equipment required for the operations;
(c) the production profiles for Crude Oil and Natural Gas and
other products;
(d) cost estimates of capital and recurring Expenditures;
(e) profitability estimates;
(f) proposals (if any) related to the establishment of processing
facilities and the processing of Petroleum in Pakistan;
(g) safety measures to be adopted in the course of development and
production operations including measures to deal with
emergencies and environmental measures;
[PAGE # ... 19]
25
(h) a description of the organization in Pakistan, pursuant to
Rule 35 of the Rules;
(i) an estimate of the time required to complete each phase of the
proposed development;
(j) a description of the measures to be taken to ensure compliance
with Rule 61 of the Rules regarding the employment and
training of Pakistani personnel; and
(k) A description of the abandonment plan on termination of
Petroleum rights in accordance with the provisions of Rule 69
of the Rules.
5.6 When the Government has approved, pursuant to Rule 33 of the Rules,
the Development Plan, it shall grant to the Working Interest Owners a
Lease in accordance with Rule 27 of the Rules for the Discovery Area.
5.7 Each Lease shall be granted for an initial term of twenty (20) years.
Upon application from any Working Interest Owner, the President shall
renew the Lease for a period of five (5) years, if Commercial
Production is continuing at the time of the application through a
secondary recovery project or otherwise.
5.8 Each such Lease issued shall be granted in the names (and undivided
Working Interests) of each of the Working Interest Owners that have a
Working Interest in the Discovery Area to which such Lease relates and
shall obligate them in accordance with their respective Badin-II
Revised Working Interests therein.
5.9 The Surrender, at any time of any part of the Badin-II Revised Area
which is covered by any Lease, shall terminate such Lease as to that
portion so Surrendered and shall excuse the performance of any
obligation under such Lease with respect to that portion Surrendered
and any unaccrued obligation provided in the Act, the Rules or this
Agreement with respect to the area Surrendered.
5.10 Not less than ninety (90) days prior to the beginning of each Calendar
Year following the commencement of regular shipments of Crude Oil,
Condensate or Natural Gas, the Operator shall prepare and furnish to
the Government for approval a forecast statement and the basis thereof
setting forth by quarters the total quantity of Crude Oil (by quality,
grade and gravity), Condensate and Natural Gas that the Operator
estimates can be produced, saved and transported hereunder during such
Calendar Year in accordance with good oilfield practices. The
Operator shall endeavour to produce in each Calendar
[PAGE # ... 20]
26
Year the forecast quantity. The Crude Oil and Condensate shall be run
to storage tanks, constructed, maintained and operated by the Operator
in accordance with the Rules. All Petroleum shall be metered or
otherwise measured in accordance with the Rules.
[PAGE # ... 21]
27
ARTICLE - VI
ASSIGNMENT, SURRENDER OF AREAS AND TERMINATION OF AGREEMENT
6.1 Subject to this Article VI and in accordance with Rule 8 of the Rules,
no Working Interest Owner shall sell, assign, transfer, convey or
otherwise dispose of all or any part of its rights or Working Interest
under this Agreement, the Badin-II Revised Licence and any Lease
without the prior written consent of the Government.
6.2 Provided that the proposed assignor gives written notice of the
proposed assignment to all Working Interest Owners and further
provided that the Government does not inform the proposed assignor in
writing of the Government's objection thereto (which objection shall
not unreasonably be made) within ninety (90) days after such notice is
received, such consent shall be deemed to have been given.
6.3 To the extent of any such assignment, the rights and privileges
granted to and the obligations assumed by the assignor under and
pursuant to this Agreement, the Badin-II Revised Licence and any Lease
(to the extent of such assignment) shall inure to the benefit of and
be binding upon the assignee provided that in the case of an
assignment to an Affiliate, the assignor shall remain bound by such
obligations unless released in writing by the Government and all other
Working Interest Owners.
6.4 Any assignment covering less than an entire five percent (5%) Working
Interest shall not serve to increase the number of representatives on
the Operating Committee provided for in the Joint Operating Agreement
and assignor and assignee shall in such cases agree upon a single
representative to represent their combined Working Interests.
6.5 In the event a Surrender covers the entire remaining Badin-II Revised
Area, the Badin-II Revised Licence and all Leases then outstanding,
this Agreement shall be terminated, and the Working Interest Owners
shall after such Surrender have no further obligation under the Act,
the Rules, this Agreement, the Badin-II Revised Licence or any such
Lease except for obligations which have accrued and have not been
discharged prior to such Surrender.
6.6 Notwithstanding the provisions of this Agreement, the term of this
Agreement shall continue, and the obligation of the Working Interest
Owners to Surrender the entirety of the Badin-II
[PAGE # ... 22]
28
Revised Area or the retained parts of the Badin-II Revised Area shall
be postponed, until the completion or abandonment of any well being
drilled at the end of the third Renewal Period and, in the event such
well results in a Commercial Discovery, thereafter until the
corresponding Lease has expired.
6.7 Upon the termination of this Agreement, the Badin-II Revised Licence
and all Leases then outstanding, each Working Interest Owner shall be
entitled to its share in any unobligated and unexpended funds of the
Working Interest Owners to the extent of such Working Interest Owner's
contribution thereto.
6.8 Subject to Article 6.9 below, the Government shall, in accordance with
the Rules, have the right to terminate this Agreement and revoke the
Badin-II Revised Licence and any Lease upon giving sixty (60) days
written notice of its intention to do so.
6.9 A Lease may be revoked if Commercial Production has not been commenced
within five (5) years from the grant of said Lease; however, it is
understood and agreed that no such revocation shall be made where the
inability to commence production is the result of force majeure, or if
there is construction of transportation system to commence such
Commercial Production.
6.10 The termination of this Agreement for whatever reasons shall be
without prejudice to the obligations incurred and not discharged by
the Working Interest Owners prior to the date of termination.
6.11 In the event of the termination of this Agreement, the Government may
require the Working Interest Owners, for a period not to exceed one
hundred eighty (180) days, to continue, for the account of the
Government, Petroleum production activities until the right to
continue such production has been transferred to another entity. Costs
shall be accounted for pursuant to the terms of the Joint Operating
Agreement.
6.12 Within ninety (90) days after the termination of this Agreement
pursuant to Article 6.8, unless the Government has granted an
extension of this period, the Working Interest Owner shall complete
all reasonable and necessary action as directed by the Government to
avoid environmental damage or hazard to human life or third party
property.
6.13 No consent under the Rules shall be required for (i) the assignment to
another Working Interest Owner of a Working Interest Owner's entire
Working Interest and Petroleum attributable thereto pursuant to the
default and forfeiture provisions of the Joint Operating Agreement,
(ii) the transfer among Working Interest Owners of disproportionate
rights to Petroleum pursuant to the sole risk provisions of the Joint
Operating Agreement, or in order to effect any
[PAGE # ... 23]
29
reimbursement contemplated by this Agreement or the Joint Operating
Agreement, or (iii) any transfer of a portion of a Working Interest
that occurs by operation of Article IV or the failure or refusal of a
Working Interest Owner to participate with one or more other Working
Interest Owners in an extension or renewal of this Agreement, the
Badin-II Revised Licence or any Lease.
6.14 If Government Holdings assigns all or any portion of its Working
Interest, the assignee shall be liable for its Working Interest share
of any payments required to be paid under Article XX or Article XXII,
after the effective date of the assignment.
[PAGE # ... 24]
30
ARTICLE - VII
WELLHEAD VALUE
7.1 The Wellhead Value of Crude Oil and Condensate shall be calculated and
applied with respect to each Working Interest Owner for the purposes
of determining royalty as follows:
(a) If the President or his designee elects to acquire Crude Oil
or Condensate to meet national market requirements under the
Rule 41 of the Rules, the Wellhead Value shall be the sales
price actually realised by the Working Interest Owners for a
Barrel of Crude Oil or Condensate, less the actual costs of
gathering, processing, treatment and transportation from the
point of production (wellhead) to the point of sale.
(b) If Crude Oil or Condensate is sold to parties other than
Affiliates in arm's length transactions, the Wellhead Value
shall be the sales price actually realised by the Working
Interest Owners for a Barrel of Crude Oil or Condensate less
the actual cost of gathering, processing, treatment and
transportation from the point of production (wellhead) to the
point of sale.
(c) With respect to all other transactions: (1) to Affiliates, (2)
sales by barter or exchange, and (3) sales other than those
specified in Article 7.1 (a) or (b), the Wellhead Value shall
be greater of:
(i) Actual sales price received less the actual costs of
gathering, processing, treatment and transportation
costs incurred from the point of production
(wellhead) within Pakistan to the point of sale;
(ii) The Wellhead Value per Barrel determined in
accordance with Article 7.1 (a); or
(iii) The Wellhead Value per Barrel determined in
accordance with Article 7.1 (b).
(d) The adjustment on account of transportation and other costs
shall be made on actual cost basis.
7.2 To facilitate computations, the Wellhead Value of Crude Oil and
Condensate shall be determined at the end of each month as the
weighted average value of all such transactions that took place during
the month.
[PAGE # ... 25]
31
7.3 The Wellhead Value of Natural Gas or other gaseous substances whether
produced from the Area with Crude Oil or Condensate or otherwise shall
be calculated as follows:
(a) If sold to the President or his designee, the Wellhead Value
shall be the price actually received as provided for in
Article-VIII reduced by all compression, dehydration,
liquefaction, treatment and transportation costs incurred from
point of production (wellhead) to the point of sale;
(b) If sold to parties other than Affiliates at the wellhead in
its natural state, the Wellhead Value shall be the price
realised from such sale;
(c) If sold to parties other than Affiliates, not in its natural
state but after processing, the Wellhead Value shall be the
sales price actually realised from such sale less the cost of
processing, gathering, transportation to processing facility,
compression, treatment, dehydration and liquefaction.
(d) If sold to an Affiliate, the Wellhead Value shall be greater
of:
(i) the price actually received reduced by gathering,
compression, dehydration, liquefaction, processing,
treatment and transportation costs incurred from the
point of production (wellhead) to the point of sale;
or
(ii) the Wellhead Value determined in accordance with
Article 7.3(a), (b), or (c) above whichever is
greater.
7.4 The Operator is expressly permitted to use Petroleum produced
hereunder for the drilling, production, pressure maintenance and other
Petroleum Operations free of all costs, royalty and excise duty in
accordance with SRO 545(I)/94 and SRO 546(I)/94 both dated June 9,
1994 provided that the Operator shall not be entitled to include any
notional cost of Petroleum so used in claiming its business expenses
for income tax purposes.
7.5 To facilitate computations, the Wellhead Value of Natural Gas shall be
determined at the end of each month as the weighted average value of
all such transactions that took place during the month.
7.6 Each of the Private Working Interest Owners shall deliver to the
Government at the time that the audit report required under Article
19.1 is delivered, a certificate prepared by their respective
chartered accountants that certifies that for its Working Interest for
the Year for which the certificate relates that (i) its royalty
obligation has been determined by reference to the Wellhead Value, and
[PAGE # ... 26]
32
(ii) processing charges with respect to its share of the Royalty
Petroleum to the extent that reimbursement has been received from the
Government, have been deducted from its operating expenses or included
as "other income" for tax purposes, and (iii) the amounts referred to
in clauses (i) and (ii) have been reflected in its audited accounts.
[PAGE # ... 27]
33
ARTICLE - VIII
NATURAL GAS
8.1 Upon a Commercial Discovery and within three (3) months of the Working
Interest Owners making a written request indicating the recoverable
reserves, daily supply volume, quality, pressures as well as other
relevant information, the President will have the option to decide to
purchase the Natural Gas by making the necessary allocation to a
specified buyer. Thereafter, the Working Interest Owners and the
buyer(s) within six (6) months thereof shall mutually agree upon the
time frame for the construction of pipeline network and other terms
and conditions including, but not limited to, "take or pay" basis for
utilization of such gas. If the indication of a specified buyer is not
given by the President within a period of three (3) months as referred
to above or the agreement is not reached with the specified buyer
within six (6) months, the Working Interest Owners shall be free to
use Natural Gas for power generation, fertilizer production or any
other industrial or commercial purpose.
8.2 Whenever a Working Interest Owner is selling pipeline quality Natural
Gas of acceptable specification to the President or his designee, it
shall subject to Article 9.3, receive a price per Million BTUs
("MMBTU"). The price to be paid shall be determined for a six (6)
monthly period (hereinafter referred to as "the Price Notification
Period") starting at eight o'clock (8:00) a.m. P.S.T. on 1st January
and 1st July each year except the first period which may commence from
the Date of Commercial Production and continue until the 30th of June
or 31st of December as the case may be. The price to be notified per
MMBTU shall be computed as follows:
(1) First determine the "Marker Price" which shall be sixty-seven
and five tenths percent (67.5%) of the weighted average C&F
price per barrel of the basket of Crude Oils imported into
Pakistan during the first six (6) months period of the seven
(7) months period immediately preceding the relevant Price
Notification Period.
(2) Using the appropriate conversion factor, convert the Marker
Price to MMBTU rounding the quotient to four (4) decimal
places to arrive at the Marker Price per MMBTU.
(3) Not later than twenty (20) days prior to the commencement of
the Price Notification Period during which the Operator
expects first gas production to commence, Operator shall
submit to the authority
[PAGE # ... 28]
34
established under the Natural Gas (Price for Supplies by
Producers) Rules, 1976 (hereinafter referred to as the "Price
Determining Authority") a calculation of Marker Price in US
Dollars to be fixed on the first, day of such Notification
Period.
(4) Thereafter, Operator shall submit to the Price Determining
Authority the relevant Marker Price calculation in US Dollars
(applicable to each six (6) month Price Notification Period)
prior to each preceding 10 December and 10 June, respectively.
(5) The President shall ensure that details of the quantities and
C&F prices of the Crude Oils imported into Pakistan as
referred to in Article 8.2(1) hereof, are supplied to Operator
not later than twenty- five (25) days prior to the
commencement of the relevant Price Notification Period in
order that they may be included in the calculations to be made
pursuant to Article 8.2(1) and (2).
(6) Operator shall submit to the Price Determining Authority a
draft pricing notification setting out the US Dollar prices
resulting from Article 8.2(1) and (2) above for the relevant
Price Notification Period at the same time as submitting the
calculation pursuant to Article 8.2(3) and (4) above (as the
case may be).
(7) Such pricing notification shall be published in US Dollars in
the official Gazette for the purposes of the Gas Sales
Agreement within forty five (45) days of the date of receipt
of the aforesaid draft pricing notification.
8.3 For purchases of Condensate and LPG to meet internal requirements of
Pakistan, the price payable to Working Interest Owners, subject to
Article 9.3, shall be calculated as under:
(a) The price in US Dollars per Barrel allowed for Condensate,
delivered at the nearest operating refinery shall be equal to
the FOB price of internationally quoted comparable condensate
as mutually agreed by the parties. No other adjustment or
discount will apply.
(b) The price allowed for LPG produced from new projects shall be
equal to the C&F price in US Dollars calculated by using the
FOB price as reported in a mutually acceptable publication and
the freight cost based on proper off-loading facilities at
Karachi as may be notified by the Government from time to
time.
[PAGE # ... 29]
35
ARTICLE - IX
RIGHT OF ACQUISITION OF PETROLEUM
9.1 Should the President require the Working Interest Owners (other than
Government Holdings) to deliver Petroleum to meet the domestic
requirements of Pakistan according to Rule 41 of the Rules, the
following shall apply:
(i) If in any year there is domestic demand in excess of the
Government's and OGDC's share of production, the President may
require such Working Interest Owners to sell Crude Oil in
Pakistan on a pro-rata basis with other producers in Pakistan,
according to the Crude Oil production of each producer in a
Calendar Year. The President shall give the foreign Working
Interest Owners at least three (3) months notice in advance of
such requirements, and the term of the supply will be on an
annual basis. The pro-rata basis shall be calculated by
multiplying the excess of domestic consumption over the amount
of Crude Oil available to the President and OGDC from the
total Crude Oil production in Pakistan, by a fraction, the
numerator of which is the Working Interest share of production
of such Working Interest Owner less Royalty Petroleum, and the
denominator of which is the total production in Pakistan less
the amount of Crude Oil available to the President and OGDC,
provided that a Working Interest Owner will have available for
export (or such other disposition as it may decide upon) in
any one year not less than sixty percent (60%) of its Working
Interest share of production.
(ii) Whenever a Working Interest Owner, other than Government
Holdings, is selling Crude Oil to the President or his
designees such Working Interest Owner shall be entitled to
receive a price in US Dollars per barrel, subject to Article
9.3 for such Crude Oil delivered at the cost of the Working
Interest Owners to the nearest operating refinery which shall
be calculated as under:
(a) (1) The arithmetic average of the FOB spot prices
during the month of delivery of a basket of
Arabian/Persian Gulf Crude Oils or a Crude
Oil comparable in quality to Crude Oil
produced under this Agreement as mutually
agreed; or
(2) In the event no agreement is reached as to
the basket or a comparable Crude Oil or on
related matters, then the basis shall be FOB
market price of a Crude Oil as may be
mutually agreed which can be demonstrated to
be
[PAGE # ... 30]
36
applicable to contracts negotiated with
unrelated parties on an arms length basis
under which the consideration is wholly cash,
payable on normal terms.
(b) Plus freight for marine transportation of Crude Oil
from Ras Tanura, Saudi Arabia to Karachi, Pakistan as
applicable from time to time for chartered vessels.
(c) Plus or minus a quality yield differential between
Crude Oil produced under this Agreement and the Crude
Oil referred to in Article 9.1 (ii) (a) above. For
this purpose the differential shall be determined on
yield value based on refinery operating conditions
where the Crude Oil will be processed and at mutually
agreeable reference prices of petroleum products
prevailing in Arabian/Persian Gulf and published in
an internationally recognized publication acceptable
to the Parties.
9.2 The President or his designee shall purchase Crude Oil and Condensate
delivered at "nearest operating refinery" Natural Gas at the wellhead,
"transmission system" or the "main consumption centre" and LPG at "a
point" as may be agreed. Title to and risk of loss of the Petroleum
purchased by the President or his designee shall pass at the transfer
points referred to above which shall be construed as the "Delivery
Points" for the purpose of this Agreement.
9.3 The President or his designee shall pay to a Pakistani Working
Interest Owner up to thirty percent (30%) of its sales proceeds in
foreign exchange for all Petroleum purchases in accordance with the
provisions of this Article IX, the Petroleum Policy and the rate of
exchange prevailing on the date of transaction except as specifically
provided herein. Payments for any Petroleum purchased from foreign
Working Interest Owners by the President or his designee shall be by
remittance in United States Dollars to a bank designated by the
foreign Working Interest Owners of an amount equivalent to the
invoiced price of Petroleum purchased during the month within thirty
(30) days of receipt of invoice. If not so paid, the liquidated
damages shall be paid on the unpaid balance after the due date at the
rate per annum of 1.5 percentage points above the London interbank
offer rate ("LIBOR") for one month deposits of U.S. Dollars as
reported by an agreed publication.
9.4 The President shall have the right to purchase all or a portion of any
Working Interest Owners' share of Petroleum in case of a national
emergency or war at the price determined in accordance with Article
9.1.
[PAGE # ... 31]
37
ARTICLE - X
DISPOSAL OF PETROLEUM
10.1 Each Working Interest Owner shall have the right to take in kind and
separately dispose of its share of Petroleum produced and saved in
accordance with this Agreement, the Licence or any Lease at
competitive prices on arm's length basis under which the consideration
is wholly cash payable on normal terms. Subject to Article IX and the
Rules, each Working Interest Owner shall have the right to export from
Pakistan, free from any export restriction, duty or similar tax its
share of Petroleum, including Petroleum delivered to it in accordance
with the provisions of the Joint Operating Agreement, or to otherwise
dispose of such Petroleum. The President shall issue or cause to be
issued any permits or authorizations required for such exports within
a reasonable time and no export duties or other fees shall be levied
or charged.
If requested by the President at any time or from time to time,
Private Working Interest Owners shall use their good offices to assist
OGDC and Government Holdings in disposing of shares of Petroleum
produced hereunder at the best available prices; provided that in no
event shall Private Working Interest Owners be required to purchase or
otherwise provide a market for OGDC and/or Government Holdings' share
of Petroleum produced hereunder. The OGDC and Government Holdings
shall reimburse the Private Working Interest Owners for all expenses
incurred in rendering to the OGDC and Government Holdings any such
assistance on a no-profit no-loss basis.
10.2 The Working Interest Owners shall refrain from exporting Petroleum
from Pakistan to countries prohibited by the Pakistani laws,
regulations and administrative requirements.
10.3 Natural Gas which is not used in Joint Operations, and the processing
and utilization of which, in the opinion of the Working Interest
Owners, is not economical, shall be returned to the subsurface
structure if economical to do so, or may be flared with the approval
of the Government in accordance with the Rules. In the event the
Working Interest Owners choose not to process and sell Natural Gas,
the President may elect to off-take at the outlet flange of the
gas-oil separator and use, either itself or through its designee, such
Natural Gas if it is not required for Joint Operations. There shall be
no charge to the President or his designee for such Natural Gas.
[PAGE # ... 32]
38
ARTICLE - XI
FOREIGN EXCHANGE
11.1 The Operator may call for contributions to the Joint Account (as
defined in the Joint Operating Agreement) to be made in such currency
components (i.e., Rupees or US Dollars and other freely convertible
foreign exchanges) as the Operator may from time to time specify,
giving due consideration to the currency aspects of Expenditures
anticipated to be made under this Agreement. Each Working Interest
Owner shall contribute its Badin-II Revised Working Interest share of
each currency component.
11.2 The Operator shall be allowed to keep the foreign exchange
contributions of the Working Interest Owners, as may be required for
incurring Expenditures in foreign exchange, in a foreign currency bank
account in a scheduled bank in Pakistan, and shall be free to utilize
the amount thereof for incurring foreign exchange Expenditures under
the Joint Operating Agreement, subject to appropriate documentation of
the amounts utilized.
11.3 If any Private Working Interest Owner assigns an interest to a
non-Pakistani assignee pursuant to Article VI, such Private Working
Interest Owner shall be allowed to retain abroad and freely dispose of
all proceeds resulting from such assignment.
11.4 The Private Working Interest Owners shall be entitled (a) to receive
in US Dollars or in Pakistani Rupees payment for their share of
Petroleum exported or sold under this Agreement and (b) to retain
abroad and freely dispose of such payments in accordance with the
relevant foreign exchange rules as in effect on the Effective Date.
11.5 The Working Interest Owners may meet any Rupee obligation which may be
discharged within Pakistan (including without limitation obligations
to contribute Rupees to the Joint Account for each of the Badin-II
Revised Area and obligations to pay taxes and other sums to agencies
of the Government) with Rupees obtained pursuant to this Agreement.
The President undertakes that the State Bank of Pakistan will make
available for sale to the Private Working Interest Owners, as
requested, Rupees in sufficient amounts to meet the Private Working
Interest Owner needs on surrender of an equivalent amount in US
Dollars or other convertible currency.
11.6 The Working Interest Owners shall effect all purchases and sales of
Rupees contemplated in this Agreement (including without limitation
the purchase of
[PAGE # ... 33]
39
Rupees for contribution to the Joint Account for the Badin-II Revised
Area as provided in Article 11.1, the sale of Rupees and the purchase
of Rupees to meet local obligations as provided in Article 11.5) at
the official rate of exchange established by the Foreign Exchange Rate
Committee on the day of the relevant purchase or sale of Rupees. The
President undertakes that such rate of exchange shall never be such as
to constitute a discrimination against any Private Working Interest
Owner in particular or the Petroleum industry in general.
11.7 The Private Working Interest Owners shall pay cash royalties in the
currencies for which the corresponding production was sold.
11.8 The Private Working Interest Owners shall remit funds to Pakistan
through normal banking channels sufficient to meet all Pakistan Rupee
obligations under this Agreement to the extent Rupees are not
available in Pakistan.
11.9 The Private Working Interest Owners shall not avail themselves of any
Rupee borrowing facilities.
[PAGE # ... 34]
40
ARTICLE - XII
IMPORTS AND EXPORTS
12.1 (a) The Operator, its contractors and subcontractors engaged in
Petroleum Operations under this Agreement shall be permitted
to import, export, transfer and dispose of the machinery,
equipments, materials, specialised vehicles, accessories,
spares, chemicals and consumables, etc. in accordance with SRO
367(1)/94 dated 9th May, 1994 (Annexure IV - Exhibit A) as
amended from time to time, provisions of CGO-2/93 dated 20th
May, 1993 wherever applicable (Annexure IV - Exhibit B), and
the provisions of this Agreement. No license or
import-cum-export authorization fee shall be levied on such
imports/exports in accordance with Import Fee Order 1993 as
amended by SRO 336(1)/94 dated 26th April, 1994 (Annexure IV -
Exhibit C).
(b) The initial list of machinery, equipment, materials,
specialised vehicles, accessories, spares, chemicals and
consumables, etc. required for Petroleum Operations approved
by the relevant Regulatory Authority under Article 12.1(a)
above is attached as Annexure IV - Exhibit D hereto. The
Operator shall, however, as provided in Rule 60 of the Rules,
give preference to goods which are produced or available in
Pakistan and services which are rendered by Pakistani
nationals and companies provided such goods and services are
offered on competitive terms. National firms which appear
capable of supplying goods and services to the type demanded
shall always be included in invitations to bid. For
classification of items imported by a Petroleum Sector
Company, its contractors or subcontractors, the harmonized
system of classification will be followed. The local
manufacturers and producers of the Petroleum Sector machinery
and equipment etc. will be entitled to concessions contained
in SRO 366(1)/94 dated 9th May, 1994 (Annexure IV - Exhibit E)
and SRO 798(I)/90 dated July 30, 1990.
(c) Foreign employees and consultants of the Operator and its
contractors and subcontractors will be entitled to
import/export of used and bonafide personal and household
effects, excluding passenger vehicles, in accordance with
instructions contained in Central Board of Revenue's letter C.
No. 10(14)/93-ICM&CON dated 13th June, 1994 (Annexure IV -
Exhibit F).
[PAGE # ... 35]
41
12.2 The Operator, its contractors or their subcontractors shall be
entitled to export such of their items as have been imported into
Pakistan and are not required for the Petroleum Operations without
restriction and without the payment of any fee, tax or export duty.
The Operator shall ensure that equipments/materials imported by
itself, its contractors or subcontractors under this Article XII
against its import-cum-export authorization are exported if all the
Joint Operations under this Agreement are terminated unless otherwise
permitted in accordance with this Agreement.
12.3 Import of the items permitted under this Article XII hereof shall be
allowed subject to the following conditions:
(a) A condition shall be stamped on the import authorizations that
the item shall not be sold in Pakistan except with prior
permission of the Government.
The permission required under this Article 12.3(a) shall not
be necessary with respect to the transfer of title to any
property made pursuant to or incidental to any assignment by
the Working Interest Owners of all or any part of their
Working Interest under the provisions of Article I of this
Agreement.
(b) The Operator shall maintain proper accounts, statements and
records of all consumable stores received and expended and
send copies thereof (in duplicate) to the Ministry of Commerce
concerned by the 30th of January each year and finally within
thirty (30) days of the closing of operations in Pakistan.
(c) (i) Commissary stores can be imported after the first
arrival of an expatriate employee of the Operator
(Petroleum Sector Exploration and Production
Company), its contractors and their subcontractors in
accordance with instructions contained in the Central
Board of Revenue's letter ▇.▇▇. 10(14)/93-ICM&CON
dated 13th June, 1994 (Annexure IV - Exhibit F). Such
imports shall be confined to the items shown in
Annexure IV - Exhibit G excepting such items as are
locally available of proper standard. Such items
shall be specified by the Ministry of Commerce once
each year in the month of January.
(ii) As soon as an expatriate employee arrives in
Pakistan, an application will be made for the grant
of an import permit for the commissary stores
required for his indicating the duration of his
programmed stay in Pakistan.
[PAGE # ... 36]
42
(iii) Accounts for the sale of tobacco and liquor (if
imported) and drugs will be maintained for each
individual while those of the other items will be
maintained on an over-all basis.
(iv) Items of food and other commissary goods will be
stamped clearly to avoid resale in the market.
(v) CBR booklets will be maintained by individuals.
(d) Any other items of personal use, e.g. arms and ammunition,
pets etc., will not be permitted unless the conditions for
their import such as arms licences from district authorities,
quarantine requirements, etc. are fulfilled.
12.4 Subject to the rights granted under the provisions of this Agreement
and particularly those granted under this Article XII, any items
banned for import into Pakistan under the Import Policy in force from
time to time shall not be permitted without specific permission to be
obtained before shipment of goods from abroad.
12.5 The Operator and its contractors and subcontractors shall not be
liable to pay any tax, assessment, levy, octroi or charge imposed or
levied on the transportation or movement of the scheduled machinery
and equipment to and from the Badin-II Revised Area or on any item
imported/exported under this Article XII.
12.6 Imports/Exports under this Article shall be affected in accordance
with the Import/Export Policy in force on the Effective Date.
12.7 At least ten percent (10%) of the value of computer software contracts
shall be utilized by the Operator for using local software
capabilities, subject to such software capabilities being available in
Pakistan at a competitive price.
12.8 Operator, its contractors and subcontractors, shall be entitled at any
time to export any item or items for replacement, repair, modification
or renovation, and may re-import the same without the payment of
additional import duties subject to the production of a certificate
from the Director General Petroleum Concessions that the item needs to
be exempted for the said purpose.
[PAGE # ... 37]
43
ARTICLE - XIII
TAXATION
13.1 The profits or gains of each of the Working Interest Owners derived
from the operations hereunder and the determination of the tax thereon
shall be computed for purposes of Income Tax in accordance with the
provisions of the Income Tax Ordinance, 1979 (No. XXXI of 1979)
hereinafter referred to as the "Ordinance" and the rules contained in
Part I of the Fifth Schedule to the Ordinance, (hereinafter referred
to as the "Fifth Schedule") as in force on the Effective Date.
13.2 Where any Expenditures allocable to a Surrendered area or to a
drilling of a dry hole are deemed to be lost under Rule 2(2) of said
Schedule to the Ordinance, such Expenditures shall be allowed to the
Private Working Interest Owners as provided in Rule 2(3) (a) of the
Fifth Schedule in accordance with the amount actually spent by the
respective Working Interest Owner at the time such Expenditure was
incurred in the Badin-II Revised Area; provided, however, that, in
accordance with Clause (3) of the Fifth Schedule, all Expenditures
deemed to have been lost in terms of Rule 2(2) of the same Schedule
shall be allowed to be set off against all other income of the Working
Interest Owner (other than dividend income) accruing or arising from
or under any separate business or undertaking or this Agreement or
from any other past, present or future agreement entered into by the
Working Interest Owners with the President or the Government for
Petroleum exploration and development or from any other activity, on a
fully consolidated basis in accordance with Rule 2(3) of the Fifth
Schedule. Each Private Working Interest Owner hereby elects Subrule
2(3)(a) of the Fifth Schedule. OGDC hereby elects Subrule 2(3)(b) of
the Fifth Schedule.
13.3 In accordance with the provisions of Rule 4 of the Fifth Schedule,
read with the Act, the sum of payments by each of the Working Interest
Owners to the Government and taxes on income shall be limited to
fifty-five percent (55%) of profits or gains derived from the
operations or part of the operations. Provided that the aggregate of
the taxes on income and other payments to the Government shall not be
less than fifty percent of the profits or gains derived from the said
operations before the deduction of the payments to Government but
after making the depletion allowance for determining such profits and
gains as allowed under Rule 3 in Part I of the Fifth Schedule.
[PAGE # ... 38]
44
13.4 In accordance with Clause (2) of the Fifth Schedule, royalty shall be
payable by the Working Interest Owners at the rate of twelve and
one-half percent (12-1/2%) of the Wellhead Value of any Petroleum
produced and saved by the Working Interest Owners and, for the
purposes of Article 13.3 hereof, shall form part of the sum of
payments to the Government.
13.5 Depreciation shall be allowed to the Working Interest Owners in
accordance with the provisions of the Ordinance and in particular the
Third Schedule thereof.
13.6 In case of any conflict in respect of taxation matters between any of
the provisions of this Agreement including its Annexes, and the
provisions now in effect of the Ordinance, and the Fifth Schedule
thereof, read with the Regulations as amended and in force on the
Effective Date, the provisions of the latter shall prevail.
[PAGE # ... 39]
45
ARTICLE - XIV
FORCE MAJEURE
14.1 Performance under and pursuant to this Agreement, the Badin-II Revised
Licence and any Lease by any Working Interest Owner (including the
Operator) shall be excused in the event such performance is prevented
by act of God, by law, war, strikes, lockouts, fires, floods,
tornadoes, cyclones, typhoons, lightning, explosions, acts of public
enemy, riot, insurrection or civil disturbance, acts or omissions to
act of authorities, or other happenings beyond the reasonable control
of any Working Interest Owner (including the Operator) and will not be
deemed to be a breach of this Agreement; provided, however, the
Working Interest Owner will be required to use reasonable diligence in
overcoming the obstacle, and the performance will be resumed within a
reasonable time or such time as may be agreed by the parties hereto
after the obstacle has been removed.
14.2 The term of this Agreement and of the Badin-II Revised Licence, a
Lease or the period provided in this Agreement for the performance by
any Working Interest Owner of any obligation, the performance of which
was prevented or delayed by an event of force majeure as the case may
be, shall be extended for a period equal to the duration of the force
majeure situation and such further period as is reasonably required to
resume operations.
14.3 In the event force majeure exceeds a period of three (3) continuous
years during the term of the Badin-II Revised Licence, the Operating
Committee or the Government may terminate the Badin-II Revised Licence
or this Agreement as it relates to the Licence on three (3) months
written notice and shall thereby be relieved of all outstanding work
obligations and training and social welfare obligations that have not
yet accrued under or with respect to the Badin-II Revised Licence. In
the event that the Badin-II Revised Licence is terminated pursuant to
this Article 14.3, the Working Interest Owners shall have the right to
be regranted the Badin-II Revised Licence for the remaining period of
its term within six (6) months after being notified in writing by the
Government that the conditions giving rise to the event of force
majeure no longer exist.
[PAGE # ... 40]
46
ARTICLE - XV
MANAGEMENT AND OPERATIONS
15.1 Union Texas, as Operator, shall prepare an annual work programme and
budget for the Badin-II Revised Area for each Calendar Year during the
term of this Agreement. Each such proposed work programme and budget
shall set out in reasonable detail the work to be carried out,
facilities to be purchased or created, training and employment
programmes, Expenditures on establishment, salaries and wages, social
welfare schemes to be undertaken, and an estimate of the Expenditures
to be incurred.
15.2 Such annual work programmes and budgets shall be prepared and
submitted to the Working Interest Owners at least sixty (60) days
prior to the first day of the Calendar Year covered thereby.
15.3 All matters concerning Joint Operations conducted with respect to the
Badin-II Revised Area required to be submitted for the approval by the
Operating Committee pursuant to the Joint Operating Agreement shall be
submitted for approval to an Operating Committee composed of at least
one representative of each Working Interest Owner. The President shall
nominate the Chairman of the Operating Committee who shall have no
vote. The representative of each Working Interest Owner shall have a
vote equal to the Badin-II Revised Voting Interest of such party. All
decisions or determinations of the Operating Committee shall require a
vote equal to fifty-five percent (55%) of the Badin-II Revised Voting
Interests (determined at the time and with respect to the subject
matter of the decision or determination before the Operating
Committee) of the Working Interest Owners, except as otherwise
provided in Article 5.2 and Article 8 of the Joint Operating
Agreement.
15.4 The Operator shall conduct all exploration, exploitation, drilling,
development and production operations in accordance with this
Agreement and the Rules. In case the Rules or this Agreement do not
provide for a specific operation, then customary good oil field
practice will be followed. The Operator shall set up an organization
in Pakistan with sufficient competence and capacity to conduct and
perform the Joint Operations in accordance with the provisions of the
Rules and this Agreement.
15.5 The Working Interest Owners shall on Surrender of the entire Badin-II
Revised Area or part thereof during the term of this Agreement deliver
to the President all data in original form including but not limited
to geological, geophysical surveys and drilling operations together
with interpretation, shotpoints, vibrated
[PAGE # ... 41]
47
points, magnetic tapes and other data, plans and charts thereof
relevant to the area Surrendered. On receipt of the above, the
President shall enjoy sole proprietary rights thereto, provided that
each Working Interest Owner may retain a copy thereof for use in
evaluating any retained part of the Badin-II Revised Area. All such
data retained by the Working Interest Owners delivered to the
President shall continue to be subject to the obligations of
confidentiality as set forth in Article 11 of the Joint Operating
Agreement.
15.6 The Operator shall as far as is reasonably practicable correctly label
and preserve for a period of twelve (12) months for reference
characteristic samples of strata or water encountered in any bore-hole
or well and samples of any Petroleum discovered in the Badin-II
Revised Area. The characteristic samples of said strata shall include,
but shall not be limited to, cuts of all cores and cuts of all ditch
samples. All characteristic samples, including ditch and core samples,
shall be supplied by the Operator to the President automatically
without any request being made by the President.
15.7 Any person or persons authorized by the Director General Petroleum
Concessions shall be entitled, at the cost of the Working Interest
Owners, to be present at their sole risk during any or all of the
Joint Operations, provided, that such persons abide by the applicable
safety rules. The Director General Petroleum Concessions shall give to
the Operator reasonable notice of such authorizations.
15.8 The Operator may utilize for the purpose of Joint Operations, drilling
and other equipment owned by OGDC or any of the Working Interest
Owners (or their respective Affiliates) as may be available from time
to time, provided that such equipment, in the opinion of the Operator,
in consultation with the Operating Committee, is suitable and adequate
for the efficient and expeditious performance of the Joint Operations
and that the cost, quality, and other conditions for the use of the
same are competitive with those applicable to comparable equipment
then available from any other source.
15.9 Subject to approval in accordance with Rule 34 of the Rules, the
Working Interest Owners have the right to lift and transport Petroleum
from each of the Badin-II Revised Area, either through transportation
facilities owned wholly or partly by them or through access
transportation facilities owned by a third party.
The Working Interest Owners and their respective Affiliates and third
party customers shall have the right and liberty to transport
Petroleum produced from the Badin-II Revised Area in such tankers as
they may see fit; provided, that in the event a Working Interest Owner
or its Affiliates wishes to charter any tanker at any time to
transport any such Petroleum as they may own or have
[PAGE # ... 42]
48
acquired and the President or any other Pakistani owner then having
available a Pakistani flag tanker which appears to the Working
Interest Owner or its Affiliates to be acceptable after consideration
of the age and state of condition and repair of the tanker and
suitable in all other respects for that purpose, the Working Interest
Owner or its Affiliate shall give preference to chartering such
tanker; provided that the duration, rates and conditions of any such
charter shall be agreed between the parties and the said rates and
conditions shall be competitive with those prevailing in the
international market.
15.10 (a) Each Working Interest Owner and the Operator shall undertake
to abide and comply with the instructions issued by the
Government from time to time in relation to the matters set
out below:
(i) the foreign nationals employed by the Operator before
arriving in Pakistan shall possess complete and
authorized travel documents for their stay in
Pakistan. In case they wish to extend their stay in
Pakistan beyond the specified period, they shall
obtain prior permission from the appropriate
authorities;
(ii) the employees of the Operator shall refrain from
taking photographs of prohibited and restricted
sites;
(iii) the employees of the Operator shall not visit areas
within ten (10) miles of the international border;
(iv) the programme of visits and movements of field survey
parties shall be forwarded to appropriate
authorities, local administration and the Director
General Petroleum Concessions well in advance;
(v) in the case of intended visits to the Badin-II
Revised Area, the Operator shall furnish the names,
nationalities and passport numbers (with places of
issue and validity periods) of foreign nationals
employed by the Operator and its contractors and
sub-contractors well in advance to the appropriate
authorities, local administration and the Director
General Petroleum Concessions; and;
(vi) foreign nationals shall be employed with the
requisite work permit and approval from the
Government.
(b) The Operator will use all reasonable endeavours to include in
any contract for the Joint Operations with any contractor or
subcontractor a provision requiring the employees of such
contractors or sub-
[PAGE # ... 43]
49
contractors to abide and comply with the instructions referred
to in this Article 15.10.
15.11 If and insofar as the Operator may at any time require the use of
helicopters for the purpose of its operations under this Agreement and
any agency in Pakistan may then have any helicopters available which
appear to the Operator to be in all respects suitable for such
purpose, the Operator shall hire such helicopters as it may then
require from the said agency; provided always, that the terms and
conditions for such hiring shall be and remain competitive with those
applicable to helicopters of comparable capability then available from
any other source.
15.12 The President shall supply to the Operator at an agreed cost, copies
of any and all geological, geophysical, well and other data in the
public domain which it has in its possession pertaining to the
Badin-II Revised Area or any free adjoining acreage. Such data shall
be retained in strict confidence by the Operator and shall not be
disclosed to any third party (except to its employees consultants, or
Affiliates who shall be similarly bound to treat it strictly
confidential).
15.13 (a) The Operator shall furnish to the Director General Petroleum
Concessions all reports required in accordance with the Rules.
The records and said reports shall be retained in strict
confidence by the Director General Petroleum Concessions and
shall not be disclosed to any third party (except to
Government employees or consultants who shall be similarly
bound to treat them as strictly confidential) until the
Surrender of that part the Badin-II Revised Area to which such
records and reports relate; except as provided for in the
Rules.
(b) The Operator shall submit to the Director General Petroleum
Concessions a copy of all plans information, occasional
reports including such reports prepared inside and/or outside
Pakistan prepared by itself or others relating the Badin-II
Revised Area and to all geological, geophysical and drilling
operations thereof including but not limited to copies of
primary data (field and reservoir data), transparencies of
seismic sections, interpretations, graphs, charts and well
logs as provided in the Rules.
(c) The Operator shall furnish to the Director General Petroleum
Concessions such other plans and information as to the Joint
Operations in the Badin-II Revised Area as the Director
General Petroleum Concessions may from time to time require.
[PAGE # ... 44]
50
(d) The Operator shall on Surrender of the entire Badin-II Revised
Area or part thereof, during the term of this Agreement,
deliver to the President all data in original including but
not limited to geological, geophysical surveys and drilling
operations together with interpretations, shot-points,
vibrated points, magnetic tapes, transparencies of seismic
sections etc. plans and charts thereof. On receipt of the
above, the President shall enjoy sole proprietary rights
thereto.
(e) The Working Interest Owners shall maintain the confidentiality
of the data required during the term of the Badin-II Revised
Licence or any Lease in accordance with the provisions of this
Agreement after the termination of this Agreement; provided,
however, that the Working Interest Owners may disclose any
such information to a third party if such third party enters
into an appropriate confidentiality agreement.
15.14 Unless otherwise agreed to by the Government, in case of export of any
rock or Petroleum samples from Pakistan for the purpose of testing and
analysis, samples equivalent in size and quantity shall, before such
exportation, be delivered to the Government.
[PAGE # ... 45]
51
ARTICLE - XVI
ARBITRATION
16.1 Any question or dispute between one or more Private Working Interest
Owners, as one party, and the President, as the other party, arising
out of or in connection with the terms of this Agreement or the
Badin-II Revised Licence or any Lease granted pursuant to this
Agreement (regardless of the nature of the question or dispute) shall,
as far as possible, be settled amicably. Failing an amicable
settlement within a reasonable period (which in no event shall exceed
three (3) months after any party to such dispute gives to the other
party notice of its intention to submit such question or dispute to
arbitration) such question or dispute shall at the request of any such
party be submitted to the International Centre for Settlement of
Investment Disputes (hereinafter called the "Centre") established by
the "Convention on the Settlement of Investment Disputes Between
States and Nationals of Other States" and the President and Union
Texas, Occidental, OGDC and Government Holdings to the extent required
by said Convention, hereby consent to arbitration thereunder. The
venue of the arbitration shall be as mutually agreed between the
parties to such dispute, in Pakistan or elsewhere. If such mutual
agreement cannot be reached, the venue shall be decided by the Centre.
The award rendered shall be final and conclusive. The judgment on the
award rendered may be entered in any court having jurisdiction or
application may be made in such court for a judicial acceptance of the
award and an order of enforcement as the case may be.
16.2 If, for any reason, the request for arbitration proceedings is not
registered by the Centre, or if the Centre fails or refuses to take
jurisdiction over such dispute or the President is not a party to the
dispute, such dispute shall finally be settled by arbitration at The
Hague under the Rules of Arbitration of the International Chamber of
Commerce (the "Chamber Rules") and by three (3) arbitrators appointed
in accordance with the Chamber Rules. No such arbitrator shall be a
national of Pakistan or of the United States of America or the
nationality of any other party to the dispute nor shall any such
arbitrator be an employee or agent or former employee or agent of any
party to the dispute. The award rendered shall be final and
conclusive. The Judgment on the award rendered may be entered in any
court having jurisdiction or application may be made in such court for
judicial acceptance of the award and an order of enforcement as the
case may be.
16.3 This Article XVI shall apply only in a case of a dispute between the
Working Interest Owners or between the Working Interest Owners and the
President. In
[PAGE # ... 46]
52
the event of a dispute between the Pakistani Working Interest Owners
or a dispute between the Pakistani Working Interest Owners and the
President the arbitration shall be conducted in accordance with the
Arbitration Act, 1940.
[PAGE # ... 47]
53
ARTICLE - XVII
REFINERY
17.1 No Private Working Interest Owner shall be required to erect a
refinery, notwithstanding any provisions of the Rules.
17.2 The Private Working Interest Owners renounce any claim to participate,
on grounds of the production of Crude Oil in Pakistan, in any refinery
which may be erected by the President.
[PAGE # ... 48]
54
ARTICLE - XVIII
OTHER MINERALS
18.1 When any mineral, other than Petroleum and minerals necessary for the
generation of nuclear energy, is discovered by the Working Interest
Owners and the President does not have a pre-existing policy for
development and exploitation of such mineral by a non-Pakistani
corporation, a Working Interest Owner shall have the right to elect
within six (6) months after the date on which Operator notifies the
Director General Petroleum Concessions of such discovery, to develop
and exploit such mineral subject to reaching an accord after such
election with the appropriate licensing authority as to the terms and
conditions of an agreement governing the development and exploitation
of such mineral. The minerals necessary for the generation of nuclear
energy include, among others:
1.Uranium
2.Thorium
3.Zirconium
4.Niobium
5.Hafnium
6.Lithium and
7.Vanadium
18.2 Discovery of all minerals necessary for the generation of nuclear
energy shall be reported by Operator to the Pakistan Atomic Energy
Commission and the Director General Petroleum Concessions. The Working
Interest Owners shall have no right to develop and exploit such
minerals unless specific approval/concurrence is given by Pakistan
Atomic Energy Commission for the development and exploitation of these
nuclear minerals.
18.3 Minerals, other than those necessary for the generation of nuclear
energy, produced in suspension or combination with Petroleum shall
belong to the Working Interest Owners, subject to payment of royalty
if marketed. Royalty shall be at the rate specified by the appropriate
authority.
18.4 The income derived from the minerals, other than those necessary for
the generation of nuclear energy, produced in suspension or
combination with Petroleum shall be governed by Part II of the Fifth
Schedule of the Income Tax Ordinance 1979 (NO.XXXI of 1979) as amended
from time to time.
[PAGE # ... 49]
55
ARTICLE - XIX
AUDIT
19.1 The Operator shall maintain correct records and accounts of all
Expenditures made for Joint Operations, of all production obtained
from the Badin-II Revised Area and of all property acquired for the
Joint Account in accordance with customary industry practices and the
Accounting Procedure. The accounts shall be audited for the period
from the Effective Date to the end of the Calendar Year, and
thereafter annually by an independent firm of Chartered Accountants
selected by the Operator and approved by the Operating Committee.
Copies of the audit reports shall be delivered to the President and to
each of the Working Interest Owners within six (6) months of the end
of each Calendar Year. If neither the President nor the Working
Interest Owners or any of them shall take exception to any such
audited accounts within twenty-four (24) months after its receipt of
copies of the report relating thereto, the same shall be final and
binding on the Working Interest Owners and the President; provided,
however, that the accounts and support vouchers and documents,
together with such reasonable facilities as may be required for the
audit of the Joint Operations, shall be made available to the Auditor
General of Pakistan (with notification to the Director General,
Petroleum Concessions that this has been done) who may take such
action as he deems fit within two (2) years from the date of receipt
of the said report by the President and the President and the Working
Interest Owners shall, where necessary, take appropriate action with
regard to any matter arising out of the Auditor General's report.
19.2 The President or any non-Operator shall have the right, at its sole
cost to audit the Joint Account and related records for any Calendar
Year or portion thereof within two (2) years of the date of the
receipt of audit report provided in accordance with Article 19.1 with
respect to such Calendar Year, provided that thirty (30) days advance
notice is given to the Operator.
[PAGE # ... 50]
56
ARTICLE - XX
PRODUCTION BONUSES
20.1 With respect to Petroleum produced and saved from the Badin-II Revised
Area, the Private Working Interest Owners, shall pay the Government on
a Badin-II Revised Area basis, the following production bonuses:
BONUS AMOUNT CUMULATIVE
IN US DOLLARS PRODUCTION
FROM THE BADIN-II
REVISED AREA
(MMBOE)
$500,000 On Commencement
of Commercial
Production from the
Badin-II Revised Area
$1,000,000 30
$1,500,000 60
$3,000,000 80
$5,000,000 100
20.2 Pakistani Working Interest Owners other than OGDC and Government
Holdings will pay their share of production bonuses in Pakistani
Rupees.
20.3 Subject to the application of Article 6.4 of the Joint Operating
Agreement, payments due under Article 20.1 shall be made within sixty
(60) days after the occurrence of the first Commercial Production in
the Badin-II Revised Area and the remaining bonuses shall be payable
within sixty (60) days after each cumulative level of production as
set forth in Article 20.1 has been attained with respect to Petroleum
production from the Badin- II Revised Area. As long as the Government
is OGDC's majority shareholder, OGDC will not be subject to production
bonuses payable in accordance with the provisions of this Article XX.
However, once the Government no longer owns a majority of the
outstanding shares of OGDC, OGDC shall be obligated to pay its
Badin-II Revised Working Interest share of the production bonuses as
required by this Article.
20.4 Payments made under this Article XX are not to be amortized, expensed
or credited for Pakistani Income Tax purposes.
[PAGE # ... 51]
57
ARTICLE - XXI
INSURANCE
21.1 The Operator shall comply with all workmen's compensation and
employers' liability laws and other insurance laws of Pakistan. The
Operator shall also take out such insurance for the benefit of the
Joint Account of the parties, naming them as insured parties, as may
be determined by representatives of the parties. The Operator shall
require all contractors engaged in work in the Badin-II Revised Area
under this Agreement to similarly comply with such insurance as the
Operator may require.
21.2 The Working Interest Owners shall in accordance with Rule 70 of the
Rules, during the term of this Agreement, indemnify, defend and hold
the President and the Government effectively indemnified against all
proceedings, costs, charges, claims, losses, damages and demands
whatsoever, including, without limitation, claims for loss or damage
to property or injury or death to persons, caused by or resulting from
any Joint Operations conducted by or on behalf of the Working Interest
Owners; provided, however, that the Working Interest Owners shall not
be held responsible to the Government under this Article for any loss,
claim, damage or injury caused by or resulting from any negligent act
or wilful misconduct by personnel of the President and/or Government
or from any action of or against the President and/or Government. Any
obligation to indemnify the Government arising under this Agreement
shall be borne by the Working Interest Owners in proportion of their
respective Badin-II Revised Working Interest determined at the time of
the event or occurrence giving rise to the obligation to indemnify the
President and/or Government.
21.3 At the request of the President, the Working Interest Owners shall
provide evidence of any insurance required pursuant to this Agreement.
[PAGE # ... 52]
58
ARTICLE - XXII
TRAINING, EMPLOYMENT AND SOCIAL WELFARE
22.1 The Operator agrees to employ qualified nationals of Pakistan for
Joint Operations and, to undertake schooling and training for staff
positions, including administrative and executive management
positions. Preference will be given to employment of nationals and
unskilled workers from the Badin-II Revised Area. The Operator will
require its contractors and subcontractors, operating in Pakistan, to
do the same. The Operator undertakes to gradually replace its
expatriate staff with qualified nationals as they become available. An
annual programme for employment and training of nationals of Pakistan
shall be determined by the Operator in consultation with the Director
General Petroleum Concessions. Such programme shall be included in the
annual work programme and budget.
22.2 Within thirty (30) days of the end of each Calendar Year, the Operator
shall submit a written report to DGPC describing the number of
personnel employed, their nationality and positions and the status of
training programmes for nationals of Pakistan.
22.3 The Operator may also be required in accordance with Rule 61(2) of the
Rules to establish a programme, satisfactory to the President, to
train government personnel locally and abroad to develop the
capability of such personnel to effectively perform their duties
related to the supervision of the Petroleum industry. Such training
programme shall cover both technical and management disciplines (e.g.,
geology, geophysics, engineering, project management, accounting,
legal) and shall include on-the-job training and participation in
in-house seminars.
22.4 The Private Working Interest Owners, shall, in the aggregate spend for
training a minimum US Dollars $10,000 per Calendar Year prior to the
date of the first Commercial Production. Commencing with the date of
first Commercial Production the minimum Expenditures for training in
each Calendar Year shall be increased to US$25,000 per Calendar Year.
This Expenditure will be subject to upward review from time to time.
The unspent training amount during a Calendar Year unless agreed
otherwise shall be deposited into a special account maintained for
that purpose by the DGPC.
22.5 For each Calendar or portion thereof during the term of this
Agreement, the Private Working Interest Owners shall expend the
amounts set forth herein for the social welfare of the communities in
and around the Badin-II Revised Area.
[PAGE # ... 53]
59
Prior to Commercial Production from the Badin-II Revised Area, the
Private Working Interest Owners shall, in the aggregate, expend a
minimum of US$20,000 per Calendar Year. After Commercial Production
the Private Working Interest Owners shall, in the aggregate, expend
the minimum amounts set opposite the daily average rate of production
from the Badin-II Revised Area attained for the Calendar Year for
which such payment is to be made.
BADIN-II REVISED AREA AMOUNT PER YEAR
RATE OF PRODUCTION (US DOLLARS)
(BOE/DAY)
Less than 2,000 $20,000
2,001 - 5,000 $40,000
5,001 - 10,000 $75,000
10,001 - 50,000 $150,000
More than 50,000 $250,000
22.6 All such Expenditures made pursuant with this Article XXII shall be
treated for Pakistani income tax purposes as wholly and exclusively
incurred for the purposes of the income under rule 2(3), 2(4) or 2(5)
of the Fifth Schedule, as may be applicable.
[PAGE # ... 54]
60
ARTICLE - XXIII
DEVELOPMENT FINANCING
23.1 Subject to Article 11.9, any of the Working Interest Owners shall have
the right to obtain project financing for the development of any
Commercial Discovery made in the Badin-II Revised Area. The President,
upon request of a Working Interest Owner, shall, where possible, use
its good offices to assist in all things necessary to facilitate
project financing by a consortium of banks for any portion of the
development costs.
23.2 Subject to Article 11.9, any Working Interest Owner may, upon
informing the other Working Interest Owners and with the approval of
the President, which shall not be unreasonably withheld, mortgage and
pledge, by way of mortgage and hypothecation, any or all of its rights
hereunder, to secure the prompt payment of sums of money, principal
and interest, so borrowed, and the full and faithful discharge of any
and all obligations which it may undertake to obtain financing for the
purpose of this Agreement.
[PAGE # ... 55]
61
ARTICLE - XXIV
PARENT COMPANY GUARANTEE
24.1 The Private Working Interest Owners shall on the Effective Date
furnish a parent company guarantee as per the format of Annexure-V.
[PAGE # ... 56]
62
ARTICLE - XXV
EFFECTIVENESS AND DURATION
25.1 This Agreement shall be and remain in full force and effect commencing
on the Effective Date and so long thereafter as the Working Interest
Owners shall own any interest in the Badin-II Revised Licence or any
Lease granted with respect thereto, or until a final settlement has
been made after the Surrender of the entire Badin-II Revised Area,
expiration or termination of Petroleum rights granted under this
Agreement, the Badin-II Revised Licence or any Lease granted with
respect to the Badin-II Revised Licence.
[PAGE # ... 57]
63
ARTICLE - XXVI
ROYALTY
26.1 The Working Interest Owners shall pay to the government a royalty
equal to twelve and one-half percent (12- 1/2%) of the Wellhead Value
of the Working Interest Owners' annual gross production of Petroleum
produced and saved in each Calendar Year from the Badin-II Revised
Area subject to the Rules and the other provisions of this Agreement.
26.2 Royalty shall be payable in cash and/or kind at the option of the
Government.
26.3 Royalty in cash shall be payable monthly within ten (10) days from the
date of the receipt of the invoice proceeds. Payment shall be
accompanied by a certificate from the Working Interest Owner setting
forth in detail the basis for computation of the royalty. Such
certificate shall be in a form acceptable to the Government.
26.4 From the amount of royalty payable in respect of a Lease, there shall
be deducted the amount of Lease rent paid for the corresponding
period.
26.5 For the purposes of determining the amount of the royalty due, the
Wellhead Value of the Petroleum shall be determined in accordance with
Article VII.
26.6 If the Government elects to take the royalty, or any part thereof, in
kind, it shall notify the Working Interest Owners in accordance with
the provisions of Article 26.7.
26.7 If the Government elects to take the royalty on Petroleum in kind, it
shall initially so notify the Operator in writing not less than six
(6) months prior to the commencement of deliveries of such Royalty
Petroleum, and thereafter not less than ninety (90) days prior to the
commencement of each six (6) month semester of each Calendar Year
specifying the quantity, and designating the grade and quality of
Royalty Petroleum that it elects to take, based upon the Operator's
estimates of production. Final adjustments shall be made within ninety
(90) days of the end of each Calendar Year on the basis of actual
quantifies. Such notice shall be effective for the ensuing six (6)
month semester of that Calendar Year. Failure to give such notice
shall be conclusively deemed to evidence the election by the
Government not to take any Royalty Petroleum.
[PAGE # ... 58]
64
26.8 Royalty Petroleum shall be delivered by the Operator, free of cost to
the Government subject to Article 27.5, at regularly spaced intervals
at the field terminal unless otherwise agreed. The Government shall
provide at the field terminal, at its sole expense, all storage,
transportation and other facilities necessary to receive such Royalty
Petroleum; provided, however, that if production of Petroleum is not
unreasonably impaired, the Government may use twelve and one-half
percent (12-1/2%) of field tank storage capacity for storage of
Royalty Petroleum free of charge; and if additional storage capacity
is available and is not required for Joint Operations and is utilized
to store Royalty Petroleum, the Government shall pay the Working
Interest Owners at the current rate for such field storage, and if no
such current rate is established, then at a fair rate to be agreed
upon in the light of accepted oil field practices.
26.9 Each of the Private Working Interest Owners shall deliver to the
Government, at the time that the audit report required under 19.1 is
delivered, a certificate prepared by their respective chartered
accountants that certifies for its Working Interest, for the year to
which the certificate relates that (i) its depletion allowance has
been calculated using Wellhead Value for tax purposes determined in
accordance with the applicable tax laws, (ii) its royalty has been
valued using the Wellhead Value in accordance with the Rules and this
Agreement, (iii) its processing charges on royalty, if paid, have been
deducted from its operating expenses or declared as "other income" for
tax purposes, and (iv) the amounts described in clauses (i), (ii) and
(iii) have been reflected in its audited accounts.
[PAGE # ... 59]
65
ARTICLE - XXVII
MISCELLANEOUS
27.1 The Operator shall conduct all exploration, exploitation, drilling,
development, production and other operations hereunder in accordance
with this Agreement the Joint Operating Agreement, the Rules and good
oilfield practices. Consistent with this requirement the Operator
shall endeavour to minimize exploration, development, production and
operating costs and to maximize the ultimate economic recovery of
Petroleum from the Badin-II Revised Area.
27.2 The Operator shall not start production from any well before testing
and making sure to the reasonable satisfaction of the President's
representative, that the well has been properly completed in
accordance with the Rules and good oilfield practices.
27.3 In connection with Operations provided for and described in this
Agreement, the Operator shall use the helicopters of Pakistan
International Airlines Corporation or other Government agencies, as
needed, provided such helicopters are suitable in the opinion of
Operator and available on terms comparable to those offered by
international operators in comparable areas.
27.4 If the President elects to receive the royalty in kind as provided in
accordance with Rule 37 of the Rules, the Working Interest Owners
shall deliver the Royalty Petroleum at the nearest operating refinery
or main transmission system, as the case may be, at the cost to the
Government for transportation, treatment and storage or as the
Government may reasonably require, in the same manner as if it were
the Working Interest Owners' Petroleum.
27.5 So long as production of Petroleum programmed by the Working Interest
Owners is not unreasonably impaired the President may use twelve and
one-half percent (12-1/2%) of the field tank storage capacity owned
jointly by the Working Interest Owners hereunder for storage of
Royalty Petroleum (other than Natural Gas) free of charge. If
additional storage capacity is available and is not required by the
Working Interest Owners and is utilized to store the President's
Royalty Petroleum, the President shall pay the Working Interest Owners
therefor at the current rate of storage in the oil fields and, if
there shall be no current rate established, then at a fair rate to be
agreed upon in the light of accepted oilfield practices.
[PAGE # ... 60]
66
27.6 All pipeline and Crude Oil terminal facilities owned jointly by the
Working Interest Owners hereunder shall be reserved for the
transportation of Petroleum produced by the Working Interest Owners
hereunder; provided, however, that to the extent, from time to time,
there is throughput capacity of the Working Interest Owners not being
utilized, such pipeline capacity may be used by the President for
Petroleum purchased from the Working Interest Owners and by other
Petroleum concessionaires in Pakistan, all of whom shall pay the
Working Interest Owners for such use a fee computed on a unit
volume/distance basis after taking into consideration the cost of
construction, operating and maintaining such pipeline or pipelines,
including depreciation thereof, and applicable taxes, and, for users
other than the President, a reasonable profit. The Working Interest
Owners shall not be responsible for the loss during transportation or
storage of Petroleum belonging to the President. Income derived from
such transportation and storage shall be governed by the Fifth
Schedule to the Income Tax ▇▇▇▇▇▇▇▇▇, ▇▇▇▇, as in force on the
Effective Date. The Working Interest Owners shall be entitled to form
a separate company for the ownership and operation of any such
pipeline or Petroleum terminal facility.
27.7 This Agreement shall be governed by and shall be given effect under
the laws of Pakistan.
27.8 This Agreement sets forth the entire agreement reached between the
Working Interest Owners and The President and it shall remain and
continue in force and shall be binding upon each of them throughout
its duration without any amendment, revision or alteration thereto
except as may hereafter be mutually agreed by the Working Interest
Owners with the approval of the President, and the Rules, Income Tax
Ordinance 1979, Regulation of Mines and Oilfields and Mineral
Development (Government Control) Act, 1948 and other laws as in force
on the Effective Date shall remain applicable for purposes hereof,
whether or not they are subsequently amended or revised; provided,
that where any matter is not specifically dealt with in this
Agreement, such matter shall be governed in accordance with the
applicable provision of the Rules, Income Tax Ordinance 1979,
Regulation of Mines and Oilfields and Mineral Development (Government
Control) Act, 1948 and other laws as in force on the Effective Date of
this Agreement.
27.9 Notices and other communications required to be given under this
Agreement shall be considered as properly given if written in the
English language and delivered to the addresses respectively shown
below:
[PAGE # ... 61]
67
a] In the case of the President to:
The Secretary Ministry of Petroleum and Natural Resources,
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ "▇"
▇▇▇▇▇▇▇▇▇.
Telephone : (92-51) 211220
Telex : 5862 PETNR PK
b] In the case of Government Holdings to:
The Director General Petroleum Concessions,
Department of Petroleum and Energy Resources,
Ministry of Petroleum and Natural Resources,
1019-A ▇▇-▇, ▇▇▇. ▇▇▇▇▇,
▇▇▇▇▇-▇-▇▇▇ ▇▇▇▇,
▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇▇ (▇▇▇▇▇▇▇▇).
Attention : Director General Petroleum Concessions,
Telephone : (92-51) 824993
Telex : 54089 TWPET PK
c] In the case of Union Texas to:
Union Texas Pakistan, Inc.
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇-▇▇▇▇▇ (▇▇▇▇▇▇▇▇).
Attention : President
Telephone : (▇▇-▇▇) ▇▇▇▇▇▇▇, 5610205, 5611194,
Telex : 25258, 29498 UNOTX PK
[PAGE # ... 62]
68
d] In the case of Occidental to:
Occidental Petroleum (Pakistan), Inc.
▇▇-▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇ (▇▇▇▇▇▇▇▇).
Attention : President & General Manager
Telephone : (92-51) 214261
Telex : 695 OXY IS
e] In the case of OGDC to:
Oil and Gas Development Corporation
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇-▇, ▇▇-▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ (▇▇▇▇▇▇▇▇).
Attention : Chairman
Telephone : (▇▇-▇▇) ▇▇▇▇▇▇▇
Telex : ▇▇▇▇ ▇▇▇▇ ▇▇, ▇▇▇▇ ▇▇▇▇ ▇▇
Any party may change its address by notifying all other parties thereof in
writing at least ten (10) days before the effective date of such change.
27.10 This Agreement shall inure to the benefit of and be binding upon the
respective successors and permitted assignees of the Working Interest
Owners hereto.
27.11 All headings used herein are for the purpose of reference only and
shall not be construed as in any way defining or limiting the meaning
of any provision.
27.12 The President hereby approves, on behalf of the Government, the
foreign private investment to be made by Union Texas and Occidental
and their respective assignees pursuant to this Agreement for purposes
of the issuance of such investment insurance and other investment
incentives as may be available to the Private Working Interest Owners
and their respective assignees from Overseas Private Investment
Corporation, an agency of the United States Government or its
successors.
[PAGE # ... 63]
69
27.13 All the rules, laws, regulations in effect on the Effective Date,
including the Workers' Welfare Fund Ordinance, 1971 and the Companies
Profits (Workers' Participations) Act, 1968, shall apply to this
Agreement throughout its term whether or not such Rules, Laws and
regulations are subsequently amended, repealed or replaced.
27.14 The Operator shall observe all laws, rules and regulations issued by
the Government in respect of protection of the environment and safety
of operations, including the ▇▇▇▇▇ ▇▇▇, ▇▇▇▇, the Oil and Gas (Safety
in Drilling and Production Regulations, 1974, the Territorial Waters
and Maritime ▇▇▇▇ ▇▇▇ ▇▇▇▇ and the Pakistan Environmental Protection
Ordinance, 1983.
27.15 The Working Interest Owners and the Government will enter into an
amendment of the Badin-II PCA to incorporate into the Badin-II PCA the
definition of "Lease" as it appears in Article 1.38 of this Agreement
and to incorporate such other provisions so as to give effect to that
change.
IN WITNESS WHEREOF, this Agreement has been duly executed by the respective
parties hereto this 17th day of December, 1994.
FOR AND ON BEHALF OF
THE PRESIDENT OF THE ISLAMIC
REPUBLIC OF PAKISTAN
BY: /s/ UNREADABLE
-----------------------------
NAME: Unreadable
---------------------------
TITLE: Unreadable
--------------------------
WITNESSES:
1. /s/ UNREADABLE
-------------------------------
2. /s/ UNREADABLE
-------------------------------
(TO NEXT PAGE)
[PAGE # ... 64]
70
(SIGNATURE PAGE CONTINUED)
UNION TEXAS PAKISTAN, INC.
BY: /s/ ▇.▇. ▇▇▇▇▇▇▇
------------------------------
NAME: ▇.▇. ▇▇▇▇▇▇▇
----------------------------
TITLE: President
---------------------------
WITNESSES:
1. /s/ UNREADABLE
-------------------------------
2. /s/ UNREADABLE
-------------------------------
OCCIDENTAL PETROLEUM (PAKISTAN), INC.
BY: /s/ UNREADABLE
------------------------------
NAME: UNREADABLE
----------------------------
TITLE: UNREADABLE
---------------------------
WITNESSES:
1. /s/ UNREADABLE
-------------------------------
2. /s/ UNREADABLE
-------------------------------
(TO NEXT PAGE)
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71
(SIGNATURE PAGE CONTINUED)
OIL AND GAS DEVELOPMENT CORPORATION
BY: /s/ UNREADABLE
------------------------------
NAME: Unreadable
----------------------------
TITLE: Unreadable
---------------------------
WITNESSES:
1. /s/ UNREADABLE
--------------------------------
2. /s/ UNREADABLE
--------------------------------
THE FEDERAL GOVERNMENT OF THE
ISLAMIC REPUBLIC OF PAKISTAN
BY: /s/ UNREADABLE
------------------------------
NAME: Unreadable
----------------------------
TITLE: Unreadable
---------------------------
WITNESSES:
1. /s/ UNREADABLE
-------------------------------
2. /s/ UNREADABLE
-------------------------------
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72
BADIN-II REVISED PETROLEUM CONCESSION AGREEMENT
The following describes Annexures to the Badin-II Revised Petroleum Concession
Agreement, which are omitted herein, but will be furnished upon request:
Annexure-I:
Map of Badin-II Revised Area (identifying areas under Badin-II
Revised Petroleum Concession Agreement) Annexure-II:
Badin-II Revised Joint Operating Agreement
Annexure-III:
Standard Form of Development and Production Lease
Annexure-IV:
(regarding the import/export of machinery and equipment and
other goods)
Exhibit A: SRO 367(I)/94 Dated May 9, 1994
Exhibit B: CGO-2/93 Dated May 20, 1993
Exhibit C: SRO 336(I)/94 Dated April 26, 1994
Exhibit D: List of Machinery, Equipment, Materials, Vehicles,
Accessories, Spares, Chemicals and Consumables, Etc.
Exhibit E: SRO 366(I)/94 Dated May 9, 1994
Exhibit F: Central Board of Revenues Letter
C.No.10(14)/93-ICM-CON Dated June 13, 1994
Exhibit G: List of Commissary Stores
Annexure-V:
Parent Company Guarantee
Exhibit A to Joint Operating Agreement (Badin-II Revised Accounting
Procedures)
[PAGE # ... 67]