EXHIBIT 10.4
JOINT OPERATING AGREEMENT
BETWEEN
AMNI INTERNATIONAL PETROLEUM DEVELOPMENT
COMPANY LIMITED
AND
LIBERTY TECHNICAL SERVICES LTD.
REGARDING THE DEEP
ZONES OF THE IMA FIELD
TABLE OF CONTENTS
ARTICLES PAGE
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ARTICLE I - DEFINITIONS 1
1.1 Definitions 1
1.2 Schedules 9
1.3 Interpretation 9
ARTICLE II - DURATION 10
2.1 Effective Date and Term 10
2.2 Continuing Obligation 10
ARTICLE III - SCOPE AND UNDERSTANDING 10
3.1 Scope 10
3.2 Understanding 11
ARTICLE IV - PARTICIPATING INTEREST 11
4.1 Participating Interest 11
4.2 Ownership, Obligations and Liabilities Governed by Joint Venture Agreement 11
ARTICLE V - THE OPERATOR 11
5.1 Designation of the Operator 11
5.2 Resignation or Removal of the Operator 11
5.3 Removal of the Operator 12
5.4 Appointment of Successor 12
5.5 Commingling of Funds 13
ARTICLE VI - AUTHORITY AND DUTIES OF THE OPERATOR 13
6.1 Rights 13
6.2 Responsibility 14
6.3 Liens and Encumbrances 15
6.4 Employees and Contractors 15
6.5 Representation of The Parties 16
6.6 Records 16
6.7 Reports 16
6.8 Consultation and Information 17
6.9 Joint Account Expenditures and Actions 17
6.10 Disposal and Abandonment 18
ARTICLE VII - RIGHTS OF THE PARTIES 20
7.1 Reservation of Rights 20
7.2 Inspection Rights 20
7.3 Access Rights 20
ARTICLE VIII - THE OPERATING COMMITTEE 21
8.1 Establishment and Powers 21
8.2 Representation 21
8.3 Chairman 22
8.4 Meetings 22
8.5 Minutes 22
8.6 Action Without a Meeting 23
8.7 Sub-Committees 23
8.8 Voting Procedure 23
8.9 Concession Provisions 24
8.10 Notification to the Committee 24
8.11 Costs 24
ARTICLE IX - PROJECT MANAGER 25
9.1 25
ARTICLE X - FUNDING OF THE JOINT OPERATIONS 25
10.1 Cash Call 25
10.2 Payments for Joint Operations Expenditures 26
10.3 Failure of a Party to Pay a Cash Call 26
ARTICLE XI - INSURANCE AND LITIGATION 27
11.2 Joint Account Insurance 27
11.3 Indemnity 29
11.4 Litigation 29
11.5 IMA #11 Insurance Proceeds 31
ARTICLE XII - EXPLORATION WORK PROGRAMME AND BUDGET 31
12.1 Annual Work Programme and Budget 31
12.2 Authorization for Expenditure 32
12.3 Amendment 32
ARTICLE XIII - APPRAISAL WORK PROGRAMME AND BUDGET 33
13.1 Joint Work Programme and Budget 33
13.2 Authorization for Expenditure 33
13.3 Review and Amendment 34
ARTICLE XIV - DEVELOPMENT WORK PROGRAMME AND BUDGET 34
14.1 Joint Work Programme and Budget 34
14.2 Authorization for Expenditure 35
14.3 Review and Amendment 36
ARTICLE XV - PRODUCTION WORK PROGRAMME AND BUDGET 37
15.1 Annual Work Programme and Budget 37
15.2 Authorization for Expenditure 37
15.3 Amendment 38
ARTICLE XVI - SOLE RISK OPERATIONS 38
16.1 Definitions 38
16.2 Sole Risk Operations 39
16.3 Conditions for Sole Risk Operations 40
16.4 Sole Risk Notice 40
16.5 Sole Risk Operation as Joint Operation 41
16.6 Sole Risk Operation 41
16.7 Operator of Sole Risk Operation 41
16.8 Commencement of Sole Risk Operation 41
16.9 Information Concerning Sole Risk Operation 42
16.10 Election to Participate in Further work 42
16.11 Use of Joint Property and Personnel of the Operator for Sole Risk Operation 42
16.12 Indemnification of the Non-Consenting Party 42
16.13 Title to The Sole Risk Operation, Production and Facilities 42
ARTICLE XVII - ACCOUNTING PROCEDURE 43
17.1 43
ARTICLE XVIII - DEFAULT 43
18.1 Failure to Pay 43
18.2 Remedy of Default 44
18.3 Continuation of Default 44
18.4 45
18.5 45
18.6 Other Remedies 45
ARTICLE XIX - DISPOSITION OF PRODUCTION 45
19.1 Right and Obligation to Take in Kind 45
19.2 Offtake Agreement for Crude Oil 46
19.3 Separate Agreement for Natural Gas 47
ARTICLE XX - CONFIDENTIALITY 47
20.1 Confidentiality Data and Information 47
20.2 Trading Rights 48
ARTICLE XXI - PUBLIC ANNOUNCEMENTS 49
21.1 49
21.2 49
21.3 49
ARTICLE XXII - OUTGOINGS AND GRANTS 49
22.1 Outgoings 49
22.2 Grants 50
ARTICLE XXIII - COVENANT, UNDERTAKING, RELATIONSHIP AND TAX 50
23.1 Covenant and Undertaking 50
23.2 Relationship 50
23.3 Tax 51
ARTICLE XXIV - ASSIGNMENT AND ENCUMBRANCES 51
24.1 Restriction 51
ARTICLE XXV - WITHDRAWAL 51
25.1 Restriction 51
25.2 Withdrawal 51
25.3 Conditions 52
ARTICLE XXVI - FORCE MAJEURE 53
26.1 53
26.2 54
ARTICLE XXVII - NOTICES 54
27.1 54
ARTICLE XXVIII - DISPUTE RESOLUTIONS PROVISIONS 54
28.1 54
28.2 54
JOINT OPERATING AGREEMENT
-------------------------
THIS JOINT OPERATING AGREEMENT is made effective the 30th day of June, 1998.
BETWEEN:
AMNI INTERNATIONAL PETROLEUM DEVELOPMENT COMPANY LIMITED, of ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Street, Victoria Island, ▇.▇. ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇, ▇▇▇▇▇▇▇ (hereinafter referred to as "AMNI."
and
LIBERTY TECHNICAL SERVICES LTD., of ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇▇ (hereinafter referred to as "Liberty")
WHEREAS
1. Pursuant to the Joint Venture Agreement dated as of even date herewith (as
modified from time to time, a AJoint Venture Agreement@) AMNI and Liberty
entered into a joint venture for the exploration and development of the
Deep Zones associated with the IMA Field;
2. AMNI and Liberty each hold certain working and revenue interest in the Deep
Zones pursuant to the provisions contained in the Joint Venture Agreement;
3. The Joint Venture Agreement contemplates the execution of an agreement
providing for the joint exploration, development and production operation
of the Deep Zones as well as the management of the Deep Zones by the
Operator, all in accordance with the terms, provisions and conditions
hereinafter set forth;
NOW THEREFORE, in consideration of the promises and covenants hereinafter set
forth, the Parties hereby agree as follows:
ARTICLE I - DEFINITIONS
-----------------------
1.1 DEFINITIONS
Capitalized terms used herein but not defined herein shall have the
meanings specified by the Joint Venture Agreement.
1.1.1 "ABANDONMENT AGREEMENT" means the proper plugging and abandoning
of a well in compliance with the Regulations and the restoration of
the well site to the satisfaction of any governmental body having
jurisdiction with respect thereto and to the reasonable satisfaction
of the owner and occupier of the surface.
1.1.2 "ACCOUNTING PROCEDURE" means the procedure set out in Schedule "A"
hereto.
1.1.3 "ACT"means the Petroleum Act of 1969 (Nigeria) and its subsidiary
legislation, all amendments thereto and all Regulations, policies and
statements passed in relation thereto.
1.1.4 "AFFILIATE" OR "AFFILIATED COMPANY" means a company, partnership or
other legal entity which controls, or is controlled by, an entity
which controls a Party, and for the purposes hereof, "control" means
the ownership directly or indirectly of more than fifty (50%) percent
of the shares or voting rights or privileges in a company, partnership
or legal entity.
1.1.5 "AGREEMENT" OR "JOINT OPERATING AGREEMENT," "HEREOF," "HEREIN,"
"HERETO" and similar expressions means this Joint Operating Agreement,
together with schedules attached hereto and any amendment or
amendments made between the Parties in writing from time to time.
1.1.6 "AGREED INTEREST RATE" means interest compounded on a monthly basis,
at the rate per annum equal to the one (1) month term LIBOR rate for
U.S. Dollar deposits, as published by The Wall Street Journal or, if
not published, then by the Financial Times of London plus two percent
(2%) application on the first Business Day prior to the due date of
payment and thereafter on the first Business Day of each succeeding
one (1) month term. If the aforesaid rate is contrary to any
applicable usury law, the rate of interest to be charged shall be the
maximum rate permitted by such applicable law.
1.1.7 "AMNI" means Amni International Petroleum Development Company Limited.
1.1.8 "APPRAISAL WELL" means any well whose purpose at the time of
commencement of drilling such well is the determination of the extent
or the volume of Petroleum reserves contained in an existing
Discovery.
1.1.9 "ASSETS" means the fixed and moveable assets of the Joint Operations
including without limitation any OPL or OML establishing the Deep
Zones of the IMA Field, exploration, development, production,
transportation, storage, delivery and export facilities and associated
assets including but not limited to offices, housing and welfare
facilities.
1.1.10 "AUTHORITY FOR EXPENDITURE" OR "AFE" means a written statement of an
operation proposed to be conducted pursuant to this Agreement, which
statement shall include:
(a) the type, purpose and location of such operation, in sufficient
detail to enable a Party to understand the nature, scope and
sequence of such operation, the proposed time frame over which
such operation will be conducted and, if such operation is the
drilling or deepening of a well, the projected total depth
thereof, the proposed surface coordinates of the well and, if
they will differ materially from the surface coordinates of the
well, the proposed bottomhole coordinates therefor; and
(b) the proposing Party's estimate of the anticipated costs of such
operation, which estimate shall be in sufficient detail to enable
a Party to identify, in summary form, the anticipated costs of
the various identifiable segments of such operation, including,
if applicable, those costs which relate to drilling, completing
and equipping a well.
1.1.11 "AVAILABLE PRODUCTION" means the quantity of Petroleum which can be
efficiently and economically produced and saved from the producing
▇▇▇▇▇ subject to any production allowable within limitations imposed
by the Ministry or other technical limitations resulting from
operations.
1.1.12 "BARREL" means a quantity consisting of forty-two (42) United States
gallons, corrected to a temperature of sixty (60) degrees Fahrenheit
under one (1) atmosphere of pressure.
1.1.13 "BUSINESS DAY" means a day on which the banks in London, England and
Zurich, Switzerland are customarily open for business.
1.1.14 "CALENDAR QUARTER" means a period of three (3) consecutive months
commencing on January 1 and ending the following March 31, a period of
three (3) months commencing on April 1 and ending on the following
June 30, a period of three (3) months commencing on July 1 and ending
on the following September 30 or a period of three (3) months
commencing on October 1 and ending on the following December 31
according to the Gregorian Calendar.
1.1.15 "CALENDAR YEAR" means a period of twelve (12) months commencing on
January 1 and ending on the following December 31 according to the
Gregorian Calendar.
1.1.16 "CASH CALL" means the amount in Dollars (or such other currency as the
Operating Committee shall reasonably designate) which the Operating
Committee requires a Cash Call Party to pay into the Joint Account
during a Cash Call Month to meet such Party's Participating Interest
of Petroleum Costs required to be paid during the Cash Call Month,
after adjusting for balances or deficits in such bank account or the
Operator's accounting records (as the case may be) as well as any
credit receipts anticipated during such month, all in accordance with
Article VIII of this Agreement.
1.1.17 "CASH CALL MONTH" means the calendar month in which specific costs and
expenditures are to be incurred for the Joint Account.
1.1.18 "CASH CALL PARTY" means a party that has an obligation, be it direct
or indirect, to pay for costs associated with the exploration,
development and production of Petroleum from the Deep Zones of the IMA
Field.
1.1.19 "CASH PREMIUM" means the payment made pursuant to Article XVI by a
Non-Consenting Party to reinstate its right to participate in a Sole
Risk Operation.
1.1.20 "COMMERCIAL PRODUCTION QUOTA" means the quantity of Petroleum fixed or
established by the National Petroleum Investments Management Services
("NAPIMS") (or any other regulatory agency from time to time on behalf
of the Ministry as the permissible quantity that may be produced from
the Deep Zones of the IMA Field (or a portion hereof), on a crude
stream basis for a particular month or Calendar Quarter.
1.1.21 "COMPLETION" means an operation intended to complete a well through
the Christmas tree as a producer of Petroleum in one or more Zones
including, but not limited to, the setting of production casing,
perforating, stimulating the well and production Testing conducted in
such operation. "COMPLETE" and other derivatives shall be construed
accordingly.
1.1.22 "CONCESSION" means a certain geographic area described and governed by
an OPL or OML and allocated to an owner for the purpose of exploration
and exploitation.
1.1.23 "CONCESSION BLOCK 237" means the surface area delineated in OPL 237
details of which are more particularly described in the survey plan
annexed to OPL 237, as such area may vary from time to time during the
term of OPL 237 and any extensions thereto, or Oil Mining Lease
arising therefrom.
1.1.24 "CRUDE OIL" means the liquid petroleum which has been treated but not
refined and includes condensates but excludes water and sediments.
1.1.25 "DATA" has the meaning set out in Article 20.2.1
1.1.26 "DAY(S)" means a calendar day unless otherwise specifically
provided.
1.1.27 "DEFAULTING PARTY" shall have the meaning ascribed in Article XVIII.
1.1.28 "DEEPENING" means an operation whereby a well is drilled to an
objective zone below the deepest zone in which the well was previously
drilled, or below the deepest zone proposed in the associated AFE,
whichever is the deeper. Deepen and other derivatives shall be
construed accordingly.
1.1.29 ▇▇▇▇▇ ZONES@ means all geological formations within and around the IMA
Field that are north (upthrown) and south (downthrown) of the
geological fault dividing the IMA field, all depths below the
geological producing reservoir within the IMA Field, known as the AF@
sand, as currently shown on the maps and schematic cross-section
materials covering the IMA Field, which are attached as Schedule AD@
to the Joint Venture Agreement between Amni International Petroleum
Company Limited and Liberty Technical Services Ltd, of even date
herewith or a depth of 12,150 feet (true vertical depth), whichever is
the lesser depth, lying within the geographical co-ordinates along the
northern boundary of OML 112 and OPL 237, to the southern boundary of
OML 112, to the western boundary of OML 112 and to the eastern
boundary of 550,000 meters East, as reflected on the maps of the IMA
Field attached to the Joint Venture Agreement.
1.1.30 "DEVELOPMENT PLAN" means a plan for the development of Petroleum from
an Exploitation Area covering all or a portion of the Deep Zones of
the IMA Field.
1.1.31 "DEVELOPMENT WELL" means any well drilled for the production of
Petroleum pursuant to a Development Plan.
1.1.32 "DISCOVERY" means the discovery of an accumulation of Petroleum whose
existence until that moment was unknown.
1.1.33 "DOLLARS" OR "US$" means dollars of the United States of America.
1.1.34 "EFFECTIVE DATE" means the date this Agreement comes into effect as
stated in Article II.
1.1.35 "ENTITLEMENT" means a quantity of Petroleum of which a Party has the
right and obligation to take delivery pursuant to the terms of the
Joint Venture Agreement or, if applicable, an offtake agreement, and
shall be derived from the Party's Participating Interest in the
Petroleum produced after adjustment for overlifts and underlifts.
1.1.36 "EXPLOITATION AREA" means that part of the Deep Zones of the IMA Field
which is delineated in a Development Plan approved as a Joint
Operation or as Sole Risk Operation.
1.1.37 "EXPLOITATION PERIOD" means any and all periods of exploitation during
which the production and removal of Petroleum from the Deep Zones of
the IMA Field is permitted under OML 112 or Concession Block 237.
1.1.38 "EXPLORATION WELL" means any well drilled during the course of
exploration work other than an Appraisal Well or Development Well.
1.1.39 "G & G DATA" means any geological, geophysical and geochemical data
and other information that is not obtained through a wellbore.
1.1.40 "GOVERNMENT" means the Federal government of Nigeria as represented by
the Ministry of Petroleum Resources.
1.1.41 AIMA FIELD@ means the area reflected on Schedule D, which area is
contained within Concession Block 469 as delineated in Nigeria Oil
Prospecting License 469, dated August 24, 1993, subsequently converted
to Oil Mining License 112 on February 18, 1998 and, if applicable,
Concession Block 237
1.1.42 "JOINT ACCOUNT" means those accounts maintained by the Operator and
the Liberty in accordance with the provisions of the Joint Venture
Agreement and this Agreement and of the Accounting Procedure for Joint
Operations.
1.1.43 "JOINT OPERATIONS" means those operations and activities carried out
by the Operator pursuant to this Agreement, the costs of which are
chargeable to all Parties.
1.1.44 "JOINT PROPERTY" means, at any point in time, all ▇▇▇▇▇, facilities,
equipment, materials, information, funds and the property held for the
Joint Account and that has been acquired and/or will be paid for by
the Parties based on their Participating Interests.
1.1.45 "JOINT VENTURE AGREEMENT" has the meaning specified in the
introduction on the first page hereof.
1.1.46 "LIBERTY" means Liberty Technical Services Ltd.
1.1.47 "MINISTRY" means the Ministry of Petroleum Resources of the
Government.
1.1.48 "NON-CONSENTING PARTY" means a Party who elects not to participate in
a Sole Risk Operation.
1.1.49 "NON-OPERATOR" means the Party or Parties to the Agreement other than
the Operator.
1.1.50 "OIL MINING LEASE" or "OML" means a lease called an oil mining lease
issued by the Ministry following the fulfilment of the minimum work
obligations or the discovery of Commercial Quantities of Petroleum.
1.1.51 "OIL MINING LEASE 112" or "OML 112" means the oil mining lease that
was issued by the Ministry to the holder of OPL 469 on February 18,
1998 and includes (a) all rights, title and interest granted
thereunder, including any extension, renewal or amendment thereof made
in writing, and (b) all schedules and plans attached thereto or
referred to therein pursuant to which the Amni has acquired an
interest in all Petroleum found and produced within the geographic
area defined and described therein including the right to prospect
for, take and remove and sell any petroleum.
1.1.52 "OIL PROSPECTING LICENSE" OR "OPL" means a license called an oil
prospecting license issued by the Ministry and which grants to the
holder exclusive rights to explore and prospect for Petroleum within
the area of the license.
1.1.53 "OIL PROSPECTING LICENSE NO. 237" OR "OPL 237" means Oil Prospecting
License No. 237 issued by the Minister of Petroleum Resource of the
Government to the Owner on December 22, 1994, and includes: (a) all
rights, title and interest granted thereunder including any extension,
renewal or amendment thereof made in writing and (b) all schedules and
plans attached thereto or referred to therein pursuant to which the
Owner has acquired an interest in all Petroleum found and produced
within Concession Block 237, including the right to prospect for, take
and remove and sell any Petroleum.
1.1.54 "OPERATOR" means a Party to this Agreement designated as such in
accordance with this Agreement.
1.1.55 "OPERATING COMMITTEE" means the committee constituted in accordance
with Article VIII.
I.1.56 "OWNER" means AMNI.
1.1.57 "PARTICIPATING INTEREST" means the Participating Interests of the
Parties as defined in the Joint Venture Agreement.
1.1.58 "PARTIES" means collectively AMNI and Liberty and any respective
successor-in-title or assigns in accordance with the provisions of
this Agreement.
1.1.59 "PARTY" means AMNI or Liberty and any respective successors-in-title
or assigns in accordance with the provisions of this Agreement.
1.1.60 "PETROLEUM" means all mineral oil (or any related hydrocarbons)
natural gas, as it exists in its natural state in strata (including
condensate, sulphur and any and all other liquid and gaseous
hydrocarbons) and does not include coal or bituminous states or other
stratified deposits from which oil can be extracted by destructive
distillation.
1.1.61 "PETROLEUM COSTS" means those reasonable costs, claims and expenses
incurred by the Operator, from time to time on or after the Effective
Date, both within and outside of Nigeria, directly related to
exploration, development and production of Petroleum from the Deep
Zones of the IMA Field that have been properly incurred pursuant to
the terms of this Joint Operating Agreement.
1.1.62 "PETROLEUM OPERATIONS" means the entire process of exploring, drilling
and producing the Petroleum contained in the Deep Zones of the IMA
Field in accordance with the Regulations and the laws of the Federal
Republic of Nigeria.
1.1.63 "PLUGGING BACK" means a single operation whereby a deeper Zone is
abandoned in order to attempt a Completion in a shallower Zone. "PLUG
BACK" and other derivatives shall be construed accordingly.
1.1.64 "RECOMPLETION" means an operation whereby a Completion in one
Zone is abandoned in order to attempt a Completion in a different Zone
within the existing wellbore. "RECOMPLETE" and other derivatives shall
be construed accordingly.
1.1.65 "REGULATIONS" means all rules, orders, policy statements and
regulations affecting Oil Prospecting Licenses and Oil Mining Leases
in effect from time to time and made by the Government in respect of
concession blocks and operations conducted thereon.
1.1.66 "REWORKING" means an operation conducted in the wellbore of a well
after Completion to secure, restore, or improve production in a Zone
which is currently open to production in the wellbore. Such operations
include but are not limited to well stimulation operations, but
exclude any routine repair or maintenance work, or drilling,
Sidetracking, Deepening, Completing, Recompleting, or Plugging Back of
a well. "REWORK" and other derivatives shall be construed accordingly.
1.1.67 "SENIOR SUPERVISORY PERSONNEL" means any supervisory employee of the
Operator who functions as the Operator=s designated manager or
supervisor who is responsible for, or in charge of onsite drilling,
construction or production and related operations or any other field
operation.
1.1.68 "SIDETRACKING" means the directional control and intentional deviation
of a well from vertical so as to change the bottom hole location
unless done to straighten the hole or to drill around junk in the hole
or to overcome other mechanical difficulties. "SIDETRACK" and other
derivatives shall be construed accordingly.
1.1.69 "SOLE RISK OPERATOR" means a Party who agrees to participate in and
pay its share of the cost of a Sole Risk Operation.
1.1.70 "SOLE RISK OPERATION" means those operations and activities carried
out by the Sole Risk Operator, pursuant to this Agreement, the costs
of which are chargeable to the account of less than all the Parties.
1.1.71 "SOLE RISK EXPLORATORY WELL" means a well drilled pursuant to a Sole
Risk Operation.
1.1.72 "TAX OIL" means thirty percent (30%) of the total production of
Petroleum from the Deep Zones of the IMA Field which shall be held
pursuant to an arrangement acceptable to the parties hereto pursuant
to which the Government will be paid all royalties, petroleum profits
taxes and other taxes and governmental levies due and owing with
respect to Joint Operations
1.1.73 "TESTING" means an operation intended to evaluate the capacity of a
Zone to produce Petroleum. "TEST" and other derivatives shall be
construed accordingly.
1.1.74 "WORK PROGRAMME AND BUDGET" means a work programme for Joint
Operations and budget thereof as described and approved in accordance
with Articles 12, 13, 14 and 15.
1.1.75 "ZONE" means a stratum of earth containing or thought to contain a
common accumulation of Petroleum separately producible from any other
common accumulation of Petroleum.
1.2 SCHEDULES
1.2.1 The following Schedules are attached hereto and incorporated in this
Agreement:
(a) Schedule "A" which is the Uniform Accounting Procedure
(b) Schedule "B" which is the Uniform Project Implementation
Procedure;
(c) Schedule "C" which is the Uniform Nomination Scheduling
and Lifting Procedure;
(d) Schedule "D" which is a map showing the location of the IMA
Field; and
(e) Schedule "E" which is a copy of the AFE that has been
submitted to the insurance carriers regarding the drilling
of IMA #11.
1.3 INTERPRETATION
1.3.1 Save to the extent that the context or the express provisions of this
Agreement otherwise requires:
(a) Words importing the singular shall include the plural and vice
versa;
(b) Headings are for convenience of reference only and shall not
affect the construction of this Agreement;
(c) All references to articles and schedules shall be construed as
references to articles of and schedules to this Agreement.
(d) All references to documents or other instruments include all
amendments and replacements thereof and supplements thereto;
(e) All references to persons or corporations include their
successors-in-title, transferees, assigns and legal
representatives;
(f) All references to any statute or statutory provision shall
include references to any statute or statutory provisions which
amends, extends, consolidates or replaces the same for which has
been amended, extended, consolidated or replaced by the same and
shall include any orders, Regulations, instrument or other
subordinate legislation made under the relevant statue.
ARTICLE II - DURATION
---------------------
2.1 EFFECTIVE DATE AND TERM
This Agreement shall be deemed to have commenced on the Effective Date
of the Joint Venture Agreement and shall, subject to Article XXV,
continue for so long as the Joint Venture Agreement remains in force
or, otherwise until all materials, equipment and personal property
used in connection with the Joint Operations have been removed and
disposed of, and final settlement has been made among the Parties in
accordance with their respective rights and obligations hereunder.
For the avoidance of doubt, portions of this Agreement as described in
(a), (b), and (c) below shall remain in effect until:
(a) all ▇▇▇▇▇ have been properly abandoned in accordance with Article
6.10;
(b) all obligations, claims, arbitrations and lawsuits have been
settled or otherwise disposed of; and
(c) the time relating to the protection of confidential information
and proprietary technology has expired in accordance with Article
XX.
2.2 CONTINUING OBLIGATION
The provisions of this Agreement which for any reason require action
or forbearance after the expiration of the term of this Agreement or
the termination of this Agreement for whatever cause either generally
or in respect of the party by virtue of that Party withdrawing from
this Agreement or selling, transferring or assigning the whole of its
Participating Interest shall remain operative and in full force and
effect regardless of the expiry or termination of this Agreement.
ARTICLE III - SCOPE AND UNDERSTANDING
-------------------------------------
3.1 SCOPE
3.1.1 The scope of this Agreement shall extend to the exploration for and
the production and marketing of Petroleum in respect of the Deep Zones
of the IMA Field.
3.1.2 Notwithstanding the foregoing, this Agreement shall not extend to any
joint financing arrangements or any joint marketing or joint sales of
Petroleum.
3.2 UNDERSTANDING
This Agreement and the Joint Venture Agreement represent the entire
understanding of the Parties in relation to the Deep Zones of the IMA
Field.
ARTICLE IV - PARTICIPATING INTEREST
-----------------------------------
4.1 PARTICIPATING INTEREST
The Participating Interests of the Parties in the Production and
Petroleum Costs are as set forth in the Joint Venture Agreement.
4.2 OWNERSHIP, OBLIGATIONS AND LIABILITIES GOVERNED BY JOINT VENTURE
AGREEMENT
(a) Unless otherwise provided in this Agreement, all the rights and
interests in and under the Joint Venture Agreement, all Joint
Property and any Petroleum produced from the Deep Zones of the
IMA Field shall be owned by the Parties in accordance with the
provisions of the Joint Venture Agreement.
(b) Unless otherwise provided in this Agreement, the obligations of
the Parties under the Joint Venture Agreement and all liabilities
and expenses incurred in accordance with the terms of this
Agreement by the Operator in connection with Joint Operations
shall be charged to the Joint Account and all credits to the
Joint Account shall be shared by the Parties, as among
themselves, in accordance with their respective Participating
Interests.
(c) Unless otherwise provided in this Agreement, all liabilities and
costs incurred by any Party in accordance with the terms of this
Agreement in connection with Joint Operations shall be borne by
the Parties in accordance with the provisions of the Joint
Venture Agreement.
ARTICLE V - THE OPERATOR
------------------------
5.1 DESIGNATION OF THE OPERATOR
AMNI is hereby designated as the Operator, and agrees to act in
accordance with the terms and conditions of the Joint Venture
Agreement, all applicable Regulations and this Agreement, which terms
and conditions shall also apply to any successor Operator.
5.2 RESIGNATION OR REMOVAL OF THE OPERATOR
Subject to Article 5.3, the Operator may resign as Operator at any
time by so notifying the other Parties at least one hundred twenty
(120) Days prior to the effective date of such resignation.
5.3 REMOVAL OF THE OPERATOR
(a) Subject to Article 5.3, the Operator shall be removed upon
receipt of notice from any Non-Operator if:
(i) an order is made by a court or an effective resolution is
passed for the dissolution, liquidation, winding up, or
reorganization of the Operator;
(ii) the Operator dissolves, liquidates or terminates its
corporate existence;
(iii)the Operator becomes insolvent, bankrupt or makes an
assignment for the benefit of creditors;
(iv) a receiver is appointed for a substantial part of the
Operator's assets;
(v) the Operator commits a substantial breach of a material
provision of this Agreement and fails to cure the breach
within thirty (30) Days after notice of the breach; or
(vi) the Operator or has its rights suspended pursuant to Section
15.1 of the Joint Venture Agreement.
(b) If the Operator together with any Affiliate of the Operator
ceases to be a holder of a Participating Interest, then the
Operator shall be required to promptly notify the other Parties.
The Operating Committee shall then vote within fourteen (14) Days
of such notification on whether or not a successor Operator
should be named pursuant to Article 5.4.
5.4 APPOINTMENT OF SUCCESSOR
When a change of Operator occurs pursuant to Article 5.2 or Article
5.3:
(a) The Operating Committee shall meet as soon as possible to appoint
a successor Operator pursuant to the voting procedure of Article
VIII. However, no Party may be appointed successor Operator
against its will.
(b) If an Operator is removed, neither the Operator nor any Affiliate
of the Operator shall have the right to vote for itself on the
appointment of a successor Operator, nor be considered as a
candidate for the successor Operator.
(c) A resigning or removed Operator shall be compensated out of the
Joint Account for its reasonable expenses directly related to its
resignation or removal.
(d) The Operating Committee shall arrange for the taking of an
independent inventory of all Joint Property and Petroleum, and an
audit of the books and records of the removed Operator. Such
inventory and audit shall be completed, if possible, no later
than the effective date of the change of Operator. The
liabilities and expenses of such inventory and audit shall be
charged to the Joint Account.
(e) The resignation or removal of the Operator and its replacement by
the successor Operator shall not become effective prior to
receipt of any necessary governmental approvals.
(f) Upon the effective date of the resignation or removal, the
successor Operator shall succeed to all duties, rights and
authority prescribed for the Operator. The former Operator shall
transfer to the successor Operator custody of all Joint Property,
books of account, records and other documents maintained by the
Operator pertaining to the Deep Zones and to Joint Operations.
Upon delivery of the above-described property and data, the
former Operator shall be released and discharged from all
obligations and liabilities as Operator accruing after such date.
5.5 COMMINGLING OF FUNDS
The Operator may not commingle with its own funds the monies which it
receives from or for the Joint Account pursuant to the Joint Venture
Agreement and this Agreement.
ARTICLE VI - AUTHORITY AND DUTIES OF THE OPERATOR
-------------------------------------------------
6.1 RIGHTS
6.1.1 Subject to the terms and conditions of the Joint Venture Agreement and
this Agreement, the Operator shall have all of the rights, functions
and duties of the Operator under the Joint Venture Agreement and shall
have exclusive charge of and shall conduct all the Joint Operations
under the overall supervision of the Operating Committee. The Operator
may employ technical advisors, independent contractors and/or agents
in such Joint Operations.
6.1.2 The Operator shall remain responsible for all Joint Operations as the
Operator as and to the extent provided under this Agreement, whether
conducted by itself, its technical advisers, its Affiliates, its
agents or its contractors.
6.1.3 Notwithstanding anything in this Agreement to the contrary, (a) the
bottom hole location for the first well to be drilled under this
Agreement shall be determined by the Operator after consultation with
and consideration of the views of Liberty and (b) all ▇▇▇▇▇ drilled
under this Agreement shall be drilled pursuant to "turnkey" drilling
contracts upon such terms and with such contractors as are reasonably
acceptable to the Parties hereto.
6.2 RESPONSIBILITY
6.2.1 Subject to the overall supervision of the Operating Committee, the
responsibilities of the Operator shall include but not be limited to:
(a) the preparation of Work Programme and Budget and AFE's pursuant
to the provisions of this Agreement,
(b) the implementation of such Work Programme and Budget as shall
together with relevant AFE's have been approved by the Operating
Committee;
(c) the provision to each of the Parties of reports, data and
information concerning the Joint Operations pursuant to the
provisions of this Agreement;
(d) the planning for and obtaining of all requisite services and
material;
(e) the direction and control of statistical and accounting services;
and
(f) the provision of all technical and advisory services required for
the efficient performance of the Joint Operations.
6.2.2 The Operator shall conduct the Joint Operations in a proper and
workmanlike manner in accordance with methods and practices
customarily used in good and prudent oil and gas fields practice and
with that degree of diligence and prudence reasonably and ordinarily
exercised by experienced operators engaged in a similar activity under
similar circumstances and conditions. The Operator shall further do or
cause to be done with due diligence, all such acts and things within
its control as may be necessary to keep and maintain the Deep Zones of
the IMA Field in force and effect and shall conduct the Joint
Operations in compliance with the requirements of the Act, any OPL or
OML controlling as to the Deep Zones of the IMA Field and any other
applicable laws and Regulations and in accordance with approved Work
Programme and Budget.
6.2.3 The Operator shall only be liable for any loss or damage which results
from:
(a) its failure to obtain or maintain any insurance which it is
required to obtain and maintain under Article 11.2, unless the
Operator has used all reasonable endeavours to obtain or maintain
any such insurance but has been unable to do so and has promptly
so notified the parties participating or proposing to participate
therein; or
(b) its willful misconduct;
provided that in neither case shall the Operator be liable for
any consequential loss, including but not limited to inability to
produce Petroleum, production or loss of profits. For the
avoidance of doubt, the Operator shall not be liable for any loss
or damage resulting from the negligence of the Operator, its
servants, agents, contractors or employees. Nothing in this
Article shall, however, be deemed to release the Party designated
as Operator from any costs, expense or liability attributable to
its Participating Interest share of Joint Operations.
6.3 LIENS AND ENCUMBRANCES
The Operator shall, insofar as it may be within its control, keep all
Joint Property, the Deep Zones of the IMA Field and any OPL or OML
controlling as to the Deep Zones of the IMA Field free from all liens,
charges and encumbrances arising out of the Joint Operations.
6.4 EMPLOYEES AND CONTRACTORS
6.4.1 Subject to the provisions of the Joint Venture Agreement and this
Agreement, the Operator shall determine (based on the approved Work
Programme and Budget) the number of employees, the selection of such
employees, the hours of work and remuneration and such employees shall
be the employees of the Operator and not of the Parties. The Operator
shall employ only such employees, agents and contractors as are
reasonably necessary to conduct the Joint Operations.
6.4.2 In the case of any proposed contract for the Joint Operations where
the cost thereof will or is likely to exceed two hundred and fifty
thousand dollars ($250,000) or such lesser amounts as shall from time
to time be determined by the Operating Committee having regard (inter
alia) to the nature of the Joint Operations, the Operator shall,
unless otherwise agreed by the Operating Committee in the
circumstances referred to in Article 6.9.2:
(a) obtain competitive sealed bid tenders and consult fully with the
Operating Committee over the preparation of a list of the persons
to be invited to tender (including any sub-contractors or
suppliers) and the preparation of the tender documents, such
consultation to take place on a timely enough basis to allow the
members of the Operating Committee to make recommendations;
(b) after the expiration of the period allowed for tender, and the
bids have been opened, report details of all bids received and
any rebids, amendments to bids and subsequent negotiations to the
Operating Committee and make a recommendation to them;
(c) obtain the approval of the Operating Committee to the material
terms of the recommended bid prior to entering into any contract
in respect thereof;
(d) use all reasonable endeavours to ensure that any such contract
can be freely assigned to any of the Non-Operators in the event
of the resignation or removal of the Operator under Article 5.2
and include provisions whereby (a) only the Operator shall incur
any liability to the contractor or supplier under the contract
and (b) the Operator shall be entitled to enforce the contract on
behalf of all the Parties and to recover on behalf of all the
Parties any loss or damage caused by them by breach of such
contract by the contractor or supplier subject to such
limitations and exceptions as may be provided in the contract;
(e) promptly notify the Operating Committee of each such contract and
of any subsequent revisions thereto and furnish copies of all
such contracts and revisions to the Operating Committee.
6.5 REPRESENTATION OF THE PARTIES
Subject to the provisions of the Joint Venture Agreement, the Operator
shall represent the Parties in all matters or dealings with the
Ministry, any other governmental authorities or third parties insofar
as the same relate to the Joint Operations, provided that there is
reserved to each Party the unfettered right to deal with the Ministry
or any other governmental authorities or third parties in respect of
matters relating solely to its own Participating Interest. The
Operator shall in any event give prior notice to the Parties of any
representations which it proposes to make as Operator to the Ministry,
any other governmental authority or third party, which may reasonably
be expected to have a material effect upon the interests of the
Parties, and shall also give notice to the Parties of the results of
any such representation. Non-Operators shall have the right to attend
or be represented at such meetings, and the Operator shall, as early
as practicable, before such meeting, notify the other Parties, of such
meeting. Any Non-Operator proposing to meet with the Ministry or other
governmental authorities shall, as early as practicable, before such
meeting, notify the other Parties and, so far as it may be within such
Party's power, arrange for the other Parties to attend or be
represented at such meeting.
6.6 RECORDS
The Operator shall prepare and maintain proper books, records and
inventories of the Joint Operations which shall be kept in compliance
with the Accounting Procedure and with due regard to the requirements
of the Act, the Joint Venture Agreement and any OPL or OML controlling
as to the Deep Zones of the IMA Field.
6.7 REPORTS
The Operator shall:
(a) promptly provide each Party with daily drilling reports (by
telex) and monthly production reports of Joint Operations and
such other reports as the Operating Committee shall decide and,
at the sole cost of the Party requesting same, such additional
reports as such Party shall reasonably request; and
(b) promptly make all reports concerning the Joint Operations to the
appropriate governmental authorities as required under the Act
and the Governmental documents governing the Deep Zones of the
IMA Field after review by the Parties concurrently therewith,
furnish copies of all such reports to all the Parties together,
when furnishing to the Parties a copy of the quarterly report to
the Government with a brief commentary on exploration activity.
6.8 CONSULTATION AND INFORMATION
6.8.1 The Operator shall freely consult with the Parties and keep them
informed in a timely manner of matters concerning the Joint
Operations. In particular the Operator shall ensure that the Parties
are advised of circumstances which, in the reasonable opinion of the
Operator, may warrant the taking out of insurance either for the Joint
Account or by the Parties individually.
6.8.2 Without prejudice to the generality of Article 6.8.1, the Operator
shall:
(a) inform each Party of all logging, coring, testing and other
material Joint Operations with such advance notice as is
practicable in the circumstances, so that each Party may, subject
to Article 7.3 have one or more representatives present on
location during the conduct of Joint Operations; and
(b) provide each Party with copies of all well logs and core analyses
and such engineering, geological, geophysical, technical and
other material data and information relating to the Joint
Operations. Further, Operator shall provide a Party with such
additional data and information as such Party shall reasonably
request, at the sole cost of the Party requesting such data and
information.
6.9 JOINT ACCOUNT EXPENDITURES AND ACTIONS
6.9.1 The Operator is authorized to make such expenditures, incur such
commitments for expenditures and take such actions as are required to
properly maintain and operate the Joint Operations and Joint Property
and as shall have been authorized by the Operating Committee in
accordance with Articles XII, XIII, XIV and XV (but subject to Article
6.4.2) or as are authorized under Article 6.9.2.
6.9.2 The Operator is authorized to make any expenditure or incur
commitments for expenditures or take any actions it deems necessary in
case of an emergency for the safeguarding of lives or property or the
prevention of mitigation of pollution. The Operator shall promptly
notify the Operating Committee of any such circumstances and the
amount of expenditures and commitments for expenditures so made and
incurred and actions so taken.
6.9.3 If necessary to carry out an approved Work Programme and Budget, the
Operator is authorized to make expenditures on a line item of an
approved Work Programme and Budget item in excess of the Work
Programme and Budget approved therefore up to but no exceeding ten
percent (10%) of the value stated in the Work Programme and Budget for
such item provided however that no cumulative total of such
expenditures shall exceed five percent (5%) of the total annual Work
Programme and Budget. Such excess expenditure shall be reported
promptly to the Operating Committee by the Operator.
6.9.4 The Operator is authorized to make expenditures for Joint Operations
in the Deep Zone of the IMA Field during any year not included in an
approved Work Programme and Budget or not provided for in an approved
Work Programme and Budget, limited, however, to a total, not exceeding
$100,000 provided that (a) such expenditures shall not be for purposes
theretofore rejected by the Operating Committee and (b) such
expenditures shall be reasonably necessary for the maintenance of the
Deep Zones of the IMA Field or any Joint Property, and provided
further that the said expenditures will be reported promptly to the
Operating Committee and thereafter the amount for which no prior
Operating Committee authorization is required shall be increased back
to the said maximum of $100,000.
6.10 DISPOSAL AND ABANDONMENT
6.10.1 If the Operator shall consider that any item of Joint Property is no
longer needed or suitable for the Joint Operations the Operator shall,
subject to the provisions of the Accounting Procedure, dispose of the
same. The Operator shall notify the Operating Committee of such
disposal as soon as practicable thereafter.
6.10.2 If the Parties shall decide to abandon the Joint Operations or any
part thereof, the Operator shall recover and endeavor to dispose of as
much of the Joint Property as can economically and reasonably be
recovered or as may be required to be recovered under the Act, any OPL
or OML controlling as to the Deep Zones of the IMA Field or any other
applicable law, and the net costs or net proceeds therefrom shall be
charged or credited to the Joint Account for eventual allocation in
proportion to the Participating Interests of the Parties.
6.10.3 Without prejudice to Article 6.10.2, following any proposal made to
the Operating Committee for the Operator to prepare a development Work
Programme and Budget for a particular Discovery, the Parties shall,
before submission to the Ministry of a programme in good faith
negotiate, agree and execute an Abandonment Agreement relating to the
abandonment (which expression shall include demolition and removal
together with any necessary site reinstatement) of any offshore
installation and pipelines used in connection with the Joint
Operations. The terms of the Abandonment Agreement shall be prepared
in all respects with due regard to and in accordance with the
requirements of the Act and shall provide inter alia for:
(a) an equitable sharing between the Parties of their liability to
meet the costs of and other obligations relating to the
abandonment of such offshore installations and pipelines;
(b) the preparation and periodic review by the Operator for
submission to the Parties of estimates of the likely costs to the
Parties of such abandonment and of the amount and value of the
net recoverable reserves of the field in question, provided that
any Party shall have the right reasonably to require the
preparation of further reports and studies in relation thereto;
(c) the obligation of each party, when the estimated value of the net
recoverable reserves of the field in question equals one hundred
thirty-five percent (135%) of the said estimated abandonment
costs, to provide to the other Parties adequate security for its
liability to meet such abandonment costs;
(d) the determination and periodic review by the Parties (other than
the Party proposing the creation, or maintenance, amendment for
replacement of existing, security for its said liability to meet
such abandonment costs) of the adequacy of such proposal, such
determination to be made by the Operating Committee;
(e) without prejudice to the provisions of paragraphs (c) and (d)
above, the security to be provided by each Party may include but
shall not be limited to: (1) an irrevocable guarantee from such
Party's parent company; (2) an irrevocable guarantee or letter of
credit from a bank or other financial institution having a credit
rating satisfactory to the other Party acting reasonably; (3)
security in favor of the Parties over assets of such party or a
third party; or (4) the establishment of a trust fund to receive
proceeds from such Party's entitlement to production from the IMA
Field;
(f) in the event of the failure of any Party to satisfy the relevant
proportion of the other Parties as to the adequacy of the
security which it proposes pursuant to paragraph (d) above, such
Party shall be obliged to pay proceeds from such Party's
entitlement to production from the IMA Field to the Operator or
an independent third party as trustee for the Parties, which
proceeds shall be deposited and retained in an interest-bearing
account; property in the payment into such account shall pass to
the trustee at the time of their payment into the account;
failure to make such payments shall constitute a default for the
purposes of Article 17; upon the liability of the Parties to meet
their respective abandonment obligations failing to be discharged
such proceeds shall be applied in the discharge of the said
respective liability of the Party obliged to make such payments
and any balance shall be returned to such Party;
(g) any Party intending to assign the whole or any part of its
interest in the Deep Zones in the IMA Field and in and under this
Agreement shall require the assignee of the interest to be
assigned and novated into the Abandonment Agreement and assumes
any liability thereunder corresponding to the said interest to be
assigned to it, and no person shall acquire such interest until
such obligation on the part of such Party has been discharged.
ARTICLE VII - RIGHTS OF THE PARTIES
-----------------------------------
7.1 RESERVATION OF RIGHTS
Unless otherwise provided in this Agreement or the Joint Venture
Agreement, each Party reserves all its rights under the Deep Zones of
the IMA Field.
7.2 INSPECTION RIGHTS
Each Party shall have the right to inspect, at all reasonable times
during usual business hours, all books, records and inventories of any
kind or nature maintained by or on behalf of the Operator and relating
to the Joint Operations other than those books, records and
inventories maintained by the Operator as the owner of a Participating
Interest, provided that such Party gives the Operator not less than
fourteen (14) Days' prior notice of the date upon which it desires to
make such inspection and identifies the person or persons to conduct
such inspection.
7.3 ACCESS RIGHTS
Each Party shall have the right, at all reasonable times and at its
sole risk and expense, of access to the areas contained within the IMA
Field and/or the Joint Operations, provided such Party gives the
Operator reasonable notice of the date such access is required and
identifies the representative or representatives to whom such access
is to be granted. If any party wishes access to be given to more than
one representative at a time the Operator shall not be required to
grant such for the additional representatives if, and to the extent
that, the granting of such access will interfere with the conduct of
Joint Operations.
ARTICLE VIII - THE OPERATING COMMITTEE
--------------------------------------
8.1 ESTABLISHMENT AND POWERS
To provide for the overall supervision and direction of the Joint
Operations, there is hereby established an Operating Committee which
shall exercise overall supervision and control of all matters
pertaining to the Joint Operations. Without limiting the generality of
the foregoing, but subject as otherwise provided in the Joint Venture
Agreement and elsewhere in this Agreement, the powers and duties of
the Operating Committee shall include:
(a) the consideration and determination of all matters relating to
general policies, procedures and methods of operation hereunder;
(b) the approval of any public announcement or statement regarding
this Agreement or the Joint Operations;
(c) the consideration, revision and approval or disapproval, of all
proposed Work Programme and Budget and AFE's, all of which are to
be prepared in accordance with the provisions of this Agreement;
(d) the determination of the timing and location of all ▇▇▇▇▇ drilled
under the Joint Operations and any change in the use or status of
a well;
(e) the determination of whether the Operator will represent the
parties regarding any matters or dealings with the Ministry, any
other governmental authorities or third parties insofar as the
same relate to the Joint Operations, provided that there is
reserved to each Party the unfettered right to deal with the
Ministry, any other governmental authorities or any third party
in respect of matters relating solely to its own Participating
Interest;
(f) the consideration and, if so required, the determination of any
other matter relating to the Joint Operations which may be
referred to it by the Parties or any of them (other than any
proposal to amend this Agreement) or which is otherwise
designated under the Joint Venture Agreement and this Agreement
for reference to it; and
(g) authorize and supervise Joint Operations that are necessary or
desirable to fulfill the Joint Venture Agreement and properly
explore and exploit the Deep Zones of the IMA Field in accordance
with this Agreement and in the manner appropriate in the
circumstances.
8.2 REPRESENTATION
The Operating Committee shall consist of seven members appointed by
the Parties from time to time on the following terms.
AMNI 6 representatives
Liberty 1 representative
Each Party shall as soon as possible after the date of this Agreement,
give notice in writing to the other Parties and the Operator of the
name and address of its initial representatives to serve on the
Operating Committee. Any Party may change its representatives by
giving not less than seven (7) Days' written notice of such changes to
the other Party.
8.3 CHAIRMAN
One of the representatives of the Party which is the Operator shall be
the Chairman of the Operating Committee.
8.4 MEETINGS
8.4.1 The Operating Committee shall hold meetings every sixty (60) Days (or
at such other regular intervals as shall be agreed by the Operating
Committee) in Lagos, Nigeria, or at such other place as shall be
agreed by the Operating Committee. The Operator shall call such
meetings and shall give at least twenty-one (21) Business Days' notice
of the time and date of each meeting, together with an agenda and all
available data and information relating to the matters to be
considered at that meeting. By notice to the other Parties, any Party
can advise of additional matters which such Party desires to be
considered at the meeting, and provided such notice is given at least
seven (7) Business Days before the date of the meeting, those matters
will be considered.
8.4.2 The Operating Committee shall hold a special meeting upon the request
of any of the Parties. Such request shall be made by notice to all the
other Parties and state the matters to be considered at that meeting.
Upon receiving such request the Operator shall without delay call a
special meeting for a date not less than seven (7) nor more than ten
(10) Business Days after receipt of the request.
8.4.3 For any meeting of the Operating Committee, the period of notice
stipulated above may be waived with the consent of all the Parties.
8.4.4 Any Party not represented at a meeting may vote on any matter on the
agenda for such meeting by either:
(a) appointing a proxy in writing; or
(b) giving notice of such vote to the Operator prior to the
submission of such matter for vote at such meeting.
8.5 MINUTES
The Chairman of the Operating Committee shall appoint a secretary for
the Operating Committee who will record resolutions and the result of
voting thereon as directed by the meeting or any Party and who will
prepare the minutes and provide each party with a copy thereof not
more than fifteen (15) Business Days after the end of the meeting.
Each Party shall notify all the other Parties of its approval or
disapproval of the minutes within ten (10) Business Days of receipt
thereof. A Party who fails to do so will be deemed to have approved
the minutes. Any minute approved as aforesaid shall be prima facie
evidence of the decisions taken by the Operating Committee in the
meeting to which such minutes relate. The disapproval of any minute as
aforesaid shall not affect the validity of any decision duly taken by
the Operating Committee in the meeting to which such minute relates.
8.6 ACTION WITHOUT A MEETING
8.6.1 The Parties may vote on and determine by notice to the Operator any
proposal which is submitted to them by the Operator by notice and
which they could validly determine at a meeting of the Operating
Committee if duly held for that purpose. Each Party shall cast its
vote within ten (10) Business Days after the proposal is received by
it except that where the Parties are required to vote on and determine
any proposal relating to the deepening, plugging back, testing,
suspension, or abandonment of a well on which drilling equipment is
then located or any other situation where the matter presented for
consideration by its nature requires determination in less than ten
(10) Business Days and such fact and lesser period are so stated in
the notice submitting the proposal, the Parties shall cast their votes
within such lesser period which shall not be less than forty-eight
(48) hours after receipt of the proposal. Failure by a Party to cast
its vote within the relevant period shall be regarded as a vote by
that Party against the proposal.
8.6.2 The Operator shall give prompt notice of the result of any such voting
to the Parties and any decision so taken shall be binding on the
Parties notwithstanding that any Party shall have requested a special
meeting to discuss any such proposal under Article 8.4.2.
8.7 SUB-COMMITTEES
The Operating Committee may establish such advisory sub-committees as
it considers desirable from time to time. Liberty shall be entitled to
have a representation on any such sub-committee. Each sub-committee so
established shall be given written terms of reference and shall be
subject to such procedures as the Operating Committee shall determine.
The meetings of sub-committees will as far as possible be arranged so
that the minutes of such meetings can be presented to the Parties in
sufficient time for consideration before the next following regular
meeting of the Operating Committee.
8.8 VOTING PROCEDURE
8.8.1 Each member of the Operating Committee shall be entitled to one vote.
8.8.2 Save as otherwise provided in this Agreement including, without
limitation, Article 8.8.4, all decisions of the Operating Committee
shall be taken by majority vote.
8.8.3 Save as otherwise provided in this Agreement, all the Parties shall be
bound by each decision of the Operating Committee duly made in
accordance with the provisions of this Agreement.
8.8.4 Notwithstanding anything herein to the contrary, decisions of the
Operating Committee relating to the following matters shall require
the affirmative vote of all members of the Operating Committee:
(a) any modification of or amendment to this Agreement, the Joint
Venture Agreement or the OPL and OML applicable to the Deep Zones
of the IMA Field;
(b) the selection of a new Operator; or
(c) any modification of or amendment to any approved Work Programme,
Budget or AFE, if as a result of such modification or amendment
the cost of the Work Programme, Budget or AFE would be altered by
more than 30%.
8.9 CONCESSION PROVISIONS
8.9.1 Working Obligations
In respect of the working obligations, the Operating Committee
shall, unless and to the extent that relief from such obligations
is sought and obtained from the Ministry, determine the location
and the time at which such obligations are to be discharged.
8.10 NOTIFICATION TO THE COMMITTEE
8.10.1 Information
Notwithstanding anything herein to the contrary, with respect to
any requirement herein that the Operator consult with or inform
the Operating Committee, the Operator shall take all necessary
measures to ensure that all members of the Operating Committee
timely receive adequate notification of such matters and such
reasonable supporting information as any such member may request.
8.11 COSTS
8.11.1 Payment of Costs
Each Party shall be solely responsible for the costs incurred by
such Party=s representatives with respect to serving on the
Operating Committee including, without limitation, all expenses
related to attending meetings of the Operating Committee.
ARTICLE IX - PROJECT MANAGER
----------------------------
9.1 Pursuant to the terms of this Agreement and Article 6.1.1., the
Operator may appoint a project manager to assist the Operator in the
discharge of its technical and operational functions under this
Agreement.
ARTICLE X - FUNDING OF THE JOINT OPERATIONS
-------------------------------------------
10.1 CASH CALL
Subject to the Joint Venture Agreement, each Party shall pay its
Participating Interest of Petroleum Costs incurred for the Joint
Account and such payment shall be made in accordance with the
following procedure:
10.1.1 The Operator shall, not later than thirty (30) Business Days prior to
the first day of the Cash Call Month, submit to each Party:
(a) an itemized estimate of such cost and expenditures (hereinafter
the "Estimated Expenditures"), as well as an itemized return of
the actual expenditures for the month (hereinafter the "Actual
Expenditure Month") which is two months preceding the Cash Call
Month (the total expenditure in any Actual Expenditure Month is
hereinafter referred to as the "Actual Expenditure" for such
month);
(b) an itemization of the cash available or cash deficit in the Joint
Account as the case may be as of such date as well as any credit
expected to be received in the Cash Call Month; and
(c) such Party's Cash Call for that month which shall be its
Participating Interest share of Estimated Expenditures adjusted
by the case or deficits and credits in (b) above.
10.1.2 Subject to Article 10.1.3, each party shall pay its respective Cash
Call into the Joint Account not later than the due date, which is the
first day of the Cash Call Month. Liberty shall have the right to
request reasonable documentation from Amni evidencing Amni=s deposit
of its portion of the Cash Call in to the Joint Account. Liberty=s
obligation to make payments as provided herein shall be suspended
until such time as Amni provides such reasonable documentation.
10.1.3 The Parties may dispute a Cash Call on the basis that Operator's
estimated expenditure for the Cash Call Month exceeds what costs and
expenditure should reasonably be incurred for the Joint Account for
that month based on the approved Work Programme and Budget. In the
event that the Parties so dispute any portion of a Cash Call, the
Parties shall give to the Operator a notice in writing specifying the
amount in dispute and the reason therefore not later than eight (8)
Days from the date of receipt of such Cash Call. The Parties may not,
however, dispute any portion of a Cash Call required for the
protection of life and property or for the prevention of pollution
pursuant to sub-Article 6.9.2.
10.1.4 The undisputed portion of the Cash Call shall be paid by the Parties
into the Joint Account not later than the due date and the Parties
shall use their best endeavours to resolve the matter on the disputed
portion promptly. Upon settlement, the disputed portion or amount
agreed, as the case may be, shall be paid by the Parties into the
Joint Account not later than ten (10) days from the date of resolution
of the dispute. If the dispute is not settled by the date Parties
receive the Operator's itemized return of actual expenditures for the
Cash Call Month with respect to which the dispute arose, as included
with the submittal referred to in Article 10.1.1(a), provided such
actual expenditures are in accordance with approved Work Programme and
Budget under this Agreement, or are expenses incurred pursuant to
Article 6.9.2, the Parties shall pay the Joint Account, by the due
date of the next Cash Call, or shall receive a credit against the
amount of such Cash Call, as the case may be, the difference between:
(1) the undisputed portion of the Cash Call with respect to which the
dispute arose and which has already been paid by Parties, and
(2) the actual expenditure for such Cash Call Month.
10.1.5 Unless otherwise agreed, each Party shall pay its Cash Call entirely
in the currency of the Cash Call.
10.2 PAYMENTS FOR JOINT OPERATIONS EXPENDITURES
Except as may otherwise be agreed by the Parties, all payments for
Joint Operations expenditures shall be made solely from the Joint
Accounts.
10.3 FAILURE OF A PARTY TO PAY A CASH CALL
If a Party fails to meet its Cash Call by the due date specified in
Article 10.1.2 such Party shall become the Defaulting Party and
Article XVIII of this Agreement shall apply.
ARTICLE XI - INSURANCE AND LITIGATION
-------------------------------------
11.1 INTENTIONALLY DELETED
11.2 JOINT ACCOUNT INSURANCE
The Operator shall at all times while Joint Operations are conducted,
subject to Operating Committee=s approval on policy terms and
conditions, obtain and maintain for itself and Non-Operator and pay
for, and charge to the Joint Account all insurance in the types and
amounts required by the Joint Venture Agreement and applicable laws,
rules and Regulations in respect of the Joint Property and Joint
Operations, including but not limited to the following:
(a) employer's liability insurance covering each employee engaged in
the Joint Operations when such employee is not covered by
workmen's compensation;
(b) comprehensive general third party liability and property damage
insurance covering Joint Operations endorsed to include offshore
operations, seepage and pollution to a limit of not less than US
$15,000,000 or its equivalent in local currency;
(c) motor vehicle liabilities insurance;
(d) aviation liability to a limit of not less than US $15,000,000 or
its equivalent in local currency;
(e) charterer's legal liability insurance to provide coverage arising
out of the use of any chartered barges or vessels;
(f) marine insurance; and
(g) any insurance required by any contract entered into by the
Operator in furtherance of Joint Operations including
contractor's all risk insurance.
11.2.1 The Operator shall obtain and maintain such other insurance at
competitive rates, as may be determined by the Operating Committee.
11.2.2 The insurance carried by the Operator pursuant to Article 11.2 hereof
shall name the Non-Operator as additional or coinsured and
underwriters shall waive all rights of subrogation in favour of the
Non-Operator and its employees.
11.2.3 In the event that the Operator fails to take out and maintain any of
the insurance policies provided for in Article 11.2, being an
insurance which the Operator is obliged to take out, the Operator
shall be solely responsible for any loss, claims, demands or damages
arising therefrom, except where the Operator has used all reasonable
endeavours to obtain or maintain such insurance but has been unable to
do so and has promptly notified the Non-Operator.
11.2.4 The Operator shall use its best efforts to require all contractors and
subcontractors, if any, to maintain insurance of such types and in
such amounts required by any applicable laws, rules and Regulations or
any decision of the Operating Committee while performing work in
respect to Joint Operations, provided that such insurance policies
shall include waivers of all rights or recourse, by subrogation or
otherwise, against the Parties and their respective Affiliates,
directors, servants, agents and employees. The Operator shall use its
best efforts to require all such contractors to name the Parties as
additional insureds on the contractor's insurance policies.
11.2.5 Where applicable, the Operator shall use reasonable efforts to ensure
that marine drilling rigs and work boats used in Joint Operations are
insured by the owners of such vessels on a full form (hull, tackle and
machinery) or on an all risks form, that adequate protection and
indemnity, collision and tower's liability insurance is maintained by
such owners and that such insurance policies include waivers of all
rights, by subrogation or otherwise, against the Parties and their
respective Affiliates, directors, servants, agents and employees.
11.2.6 The Operator shall in respect of all insurance to be obtained pursuant
to this Article 11.2 from the Effective Date and thereafter before the
end of each year:
(a) upon notice to the Operating Committee, discuss and obtain the
approval of the Operating Committee on premium rates and policy
terms and conditions including but without limitation to
deductibles and insured value.
(b) promptly notify the Operating Committee of any loss.
(c) duly file all claims and take all necessary and proper steps to
collect any proceeds and credit them to the Joint Account.
Notwithstanding anything contained in this Article 11.2.6 herein,
Non-Operators may appoint an insurance broker or brokers to look after
their insured interests hereunder.
11.2.7 The Operator shall, not later than thirty (30) Days from the date of
the issuance of an Insurance Policy or renewal of same pursuant to
this Agreement, furnish Non-Operator with true copies of the Policies
or renewal endorsements with respect to the insurance required under
Article 11.2 hereof.
11.2.8 All policies and certificates of insurance obtained and maintained in
accordance with Articles 11.1 and 11.2 shall state:
(a) the types and amounts of insurance carried;
(b) the insurance company or companies underwriting the coverage;
(c) the effective and expiration dates of all policies;
(d) that each Party shall be given not less than thirty (30) Days'
advance written notice of any material changes or cancellation of
any policy;
(e) that a written waiver of subrogation endorsement in favour of the
Party not carrying the insurance has been attached to all
policies of insurance required under Article 11.1 hereof; and
(f) the territorial limits of all policies.
11.2.9 Liability of Operator under Article 11.2.3 for failure to take out the
insurance required by Article 11.2, except where so agreed to by
Non-Operator in writing, shall not be diminished by the provision of
the information required under Article 11.2.8.
11.2.10 The limits of insurance coverage set forth in Article 11.1 or 11.2 are
meant to be minimum amounts only. Insurance Policies pursuant to this
Article XI shall be obtained and maintained, or extended as the case
may be, by the relevant Party to such further limits as the Operating
Committee shall determine and advised to the Parties, based on the
scope and risk of planned operations.
11.3 INDEMNITY
11.3.1 Except as otherwise provided in this Article XI and in Article 6.2.3,
any loss or damage suffered by the Parties or either of them from
third party claims arising out of the Operator's conduct of the Joint
Operations shall be for the Joint Account. Any loss, damage or costs
suffered by the Operator from claims arising out of the Operator's
conduct of the Joint Operations and any recovery from insurance
provided under Article 11.2 shall be for the Joint Account.
11.3.2 If any Party fails to take out and maintain any insurance policy which
such Party is obliged to take out under Article 11.1, such Party shall
hold harmless and indemnify the other Party from and against all
claims, actions causes of actions, loss and damage suffered by each
other Party arising out of, or in connection with, such failure.
11.4 LITIGATION
11.4.1 The Operator shall promptly notify the Parties of:
(a) any incidents, accidents or circumstances causing damage to Joint
Property, the cost of which may exceed $250,000 or such lesser
amounts as shall from time to time be determined by the Operating
Committee; and
(b) any claim, litigation, lien, demand or judgment relating to the
Joint Operations where the total amount in dispute and/or the
total amount of damages together with any costs are estimated to
exceed $100,000, or such lesser amount as shall from time to time
be determined by the Operating Committee.
The Operator shall have the authority to commence, prosecute, defend,
pursue or settle any claim, litigation, lien, demand or judgment
relating to the Joint Operations (other than between the Parties) both
on behalf of itself and, if appropriate, the other Parties provided
that:
(i) in the case of any litigation (irrespective of the estimated
amount of damages and costs) to be pursued, prosecuted or
defended otherwise than in any court in Nigeria, the
Operator shall have no such authority without the prior
approval of all the Parties except such authority as may be
necessary:
(1) to prevent judgment being given against any Party while
full authority of the Parties is being sought; or
(2) solely to enable the Operator to contest the exercise
by the relevant court of jurisdiction in the matter,
provided that the Operator first obtain legal advice in
the relevant jurisdiction from an appropriate reputable
legal practitioner that the contest itself would not
constitute submission by the Operator to such
jurisdiction; and
(ii) where the total amount in dispute and/or the total amount of
damages together with any costs are estimated to exceed
$100,000 or such lesser amount as shall from time to time be
determined by the Operating Committee, the Operator shall
have no authority (subject to subparagraph (i) above)
without the prior approval of the Operating Committee.
11.4.2 Any Non-Operator shall promptly notify the other Parties of any claim,
litigation, lien, demand or judgment brought by it or against it
relating to, or which may affect the Joint Operations. If such claim,
litigation, lien, demand or judgment would give rise to any claim for
indemnity under Article 23.2.2, the Operator shall have the authority
to take over the conduct of such claim, litigation, lien, demand or
judgment and Article 11.4.1 shall apply thereto.
11.4.3 Notwithstanding Articles 11.4.1 and 11.4.2, each party shall have the
right to participate in any prosecution, defense or settlement
conducted in accordance with Articles 11.4.1 and 11.4.2 at its sole
cost and expense provided that such participation shall not prejudice
the conduct thereof by the Operator or the interests of the Joint
Operations.
11.4.4 For the avoidance of doubt it is hereby declared that the conduct of
any litigation involving a Sole Risk Project will be in the hands of
the Participating Party or Parties and at the sole cost and expense of
such Participating Party.
11.5 IMA #11 INSURANCE PROCEEDS
Attached as Schedule E is the AFE that has been submitted by Abacan to
the insurance carriers with respect the insurance claim resulting from
the blow-out of the IMA #9 well. The Parties agree that all insurance
payments received by Abacan with respect to the re-drill of the IMA
#11 well (the AInsurance Proceeds@) shall be Joint Property with each
Party being deemed to have contributed to the Joint Account its
Participating Interest. Amni acknowledges that Liberty shall conduct
all negotiations with the insurance companies liable for payment with
respect to the IMA #9 well blow-out. Liberty shall attempt to cause
the insurance carriers to fund Insurance Proceeds in such a way that
the contractors drilling the IMA #11 well receive payment directly
from the insurance carriers. Amni agrees to use reasonable efforts to
co-ordinate its operations to facilitate Liberty=s efforts to cause
such direct payment. To the extent Liberty is unable to cause the
insurance carriers to pay the contractors directly, then each Party
shall be responsible for its Participating Interest of Petroleum Costs
of the costs of drilling the IMA #11 well and as and when Insurance
Proceeds are received, each Party shall receive its Participating
Interest of Petroleum Costs of such Insurance Proceeds.
ARTICLE XII - EXPLORATION WORK PROGRAMME AND BUDGET
---------------------------------------------------
12.1 ANNUAL WORK PROGRAMME AND BUDGET
The Operator shall, within sixty (60) Days after the execution of this
Agreement and thereafter on an annual basis not later than September
1st in each Calendar Year submit to the Parties a proposed exploration
Work Programme and Budget for the next Calendar Year (the September 1,
1998 delivery shall also include the Work Programme and Budget for the
remainder of the 1998 Calendar Year), showing:
(a) Joint Operations to be performed in the Deep Zones of the IMA
Field and other work to be undertaken;
(b) the information required under the Account Procedure; and
(c) such other information as the Operating Committee shall have
required the Operator to provide.
12.1.2 The proposed exploration Work Programme and Budget shall be subject to
consideration, revision and approval by the Operating Committee and
the Parties. The Operating Committee shall consider such exploration
Work Programme and Budget and make such revisions thereto as shall be
agreed as soon as practicable but in any event not later than November
30. Not later than December 31, the Operating Committee shall approve
an exploration Work Programme and Budget and such approval shall,
subject to Articles 12.2 and 12.3 authorize and oblige the Operator to
proceed with it.
12.2 AUTHORIZATION FOR EXPENDITURE
12.2.1 Such as provided in Articles 6.9.2, 6.9.3 and 6.9.4, the Operator
shall, before entering into any commitment or incurring any
expenditure under an approved exploration Work Programme and Budget,
submit to each Non-Operator an AFE. An AFE shall be prepared in
accordance with Section 3 of the Uniform Project Implementation
Procedure. Subject to the approval of the AFE hereunder, the Operator
shall be authorized and obliged, subject to Article 12.3, to proceed
with such commitment or expenditure. An AFE shall be approved by
affirmative decision of a majority of the Operating Committee or by
signature of the Parties having an aggregate Participating Interest
sufficient for an affirmative decision of the Operating Committee.
12.2.2 In the event that the Operating Committee gives its approval to any
exploration Work Programme and Budget or any AFE executed in
connection therewith, Liberty may, by notice to AMNI given not more
than thirty (30) Days following the date of Liberty's receipt of
notice of such approval, elect not to proceed with such Work Programme
and Budget or AFE as applicable, and the operations and work covered
by such Work Programme and Budget or AFE shall be conducted as Sole
Risk Operations in accordance with Article XVI with AMNI being the
Sole Risk Party.
12.3 AMENDMENT
At any time either Party may, by notice to the Operating Committee,
propose that an approved exploration Work Programme and Budget and/or
an approved AFE be amended. The Operating Committee shall consider
such proposal and, if the Operating Committee so requires, the
Operator shall prepare and submit to the Parties a revised exploration
Work Programme and Budget incorporating any such amendment and showing
the matter listed in Article 12.1.1 and the information required under
Section 3 of the Uniform Project Implementation Procedure. To the
extent that an amendment is approved by the Operating Committee, the
approved exploration Work Programme and Budget and/or AFE shall be
amended accordingly provided always that any such amendment shall not
invalidate any authorized commitment or expenditure made by the
Operator prior thereto, provided that any revised Work Programme and
Budget or AFE shall be subject to Liberty's rights under Article
12.2.2.
ARTICLE XIII - APPRAISAL WORK PROGRAMME AND BUDGET
--------------------------------------------------
13.1 JOINT WORK PROGRAMME AND BUDGET
13.1.1 In the event of a Discovery, the Operator shall, if the Operating
Committee so decides and as soon as Practicable after such decision,
submit to each Non-Operator a proposed appraisal Work Programme and
Budget for such Discovery showing:
(a) the ▇▇▇▇▇ to be drilled and other projects and work to be undertaken;
(b) the information required under the Accounting Procedure;
(c) details of the number of employees and contract personnel required;
and
(d) such other information as the Operating Committee shall have required
the Operator to provide.
13.1.2 The proposed appraisal Work Programme and Budget shall be subject to
consideration, revision and approval by the Operating Committee. The
Operating Committee shall as soon as practicable consider such
appraisal Work Programme and Budget and make such revisions thereto as
shall be agreed. If the Operating Committee approves an appraisal Work
Programme and Budget, such approval shall be subject to Articles 13.2
and 13.3, authorize and oblige the Operator to proceed with it.
13.2 AUTHORIZATION FOR EXPENDITURE
13.2.1 Save as provided in Articles 6.9.2, 6.9.3 and 6.9.4, the Operator
shall, before entering into any commitment or incurring any
expenditure under an approved appraisal Work Programme and Budget,
submit to the Operating Committee an AFE therefor. An AFE shall be
prepared in accordance with Section 3 of the Uniform Project
Implementation Procedure. Subject to the approval of such AFE
hereunder, the Operator shall be authorized and obliged, subject to
Article 13.3, to proceed with such commitment or expenditure. An AFE
shall be approved by affirmative decision of the Operating Committee.
13.2.2 In the event that the Operating Committee gives its approval to any
appraisal Work Programme and Budget or any AFE executed in connection
therewith, Liberty may, by notice to AMNI given not more than twenty
(20) Days following the date of Liberty's receipt of notice of such
approval or of such AFE, elect not to proceed with such Work Programme
and Budget or AFE as applicable, and the operations and work covered
by such Work Programme and Budget or AFE shall be conducted as Sole
Risk Operations in accordance with Article XVI with AMNI being the
Sole Risk Party.
13.3 REVIEW AND AMENDMENT
13.3.1 The Operator shall, as and when required by the Operating Committee,
review the approved appraisal Work Programme and Budget and submit to
the Parties a report thereon.
13.3.2 At any time either party may, by notice to the other Party propose
that an approved appraisal Work Programme and Budget and/or an
approved AFE be amended. The Operating Committee shall consider such
proposal and, if the Operating Committee so requires, the Operator
shall prepare and submit to the Parties a revised appraisal Work
Programme and Budget incorporating any such amendment and showing the
matter listed in Article 13.1.1 and the information required under
Section 3 of the Uniform Project Implementation Procedure. To the
extent that any such amendment or revised appraisal Work Programme and
Budget is approved by the Operating Committee, the approved appraisal
Work Programme and Budget and/or AFE shall be amended accordingly,
provided always that any such amendment shall not invalidate any
authorized commitment or expenditure made by the Operator prior
thereto, and further provided that any revised Work Programme and
Budget or AFE shall be subject to Liberty's rights under Article
13.2.2.
ARTICLE XIV - DEVELOPMENT WORK PROGRAMME AND BUDGET
---------------------------------------------------
14.1 JOINT WORK PROGRAMME AND BUDGET
14.1.1 The Operator shall, if the Operating Committee so decides and as soon
as practicable after such decision, submit to the Non-Operators a
proposed development Work Programme and Budget for a Discovery
showing:
(a) the projects and other work to be undertaken;
(b) the information required under the Accounting Procedure;
(c) the manner in which the development is to be managed with details of
the number of employees and contract personnel required;
(d) the estimate of the date of commencement of production and of the
annual rates of production; and
(e) such other information as the Operating Committee shall have required
the Operator to provide.
14.1.2 The proposed development Work Programme and Budget shall be subject to
consideration, revision and approval by the Operating Committee. The
Operating Committee shall meet to consider such development Work
Programme and Budget as soon as practicable and to make such revisions
thereto as shall be agreed. Unless the Operating Committee otherwise
agrees to an earlier date, the Operating Committee shall approve or
reject the development Work Programme and Budget within thirty (30)
Days of its submission by the Operator to the Parties provided that,
within the said period of thirty (30) Days any Party wishing to carry
out further work or studies in connection with the development of the
Discovery may, by notice to the other Party specifying the further
work or studies, require that the said period be extended up to a
maximum total period of:
(a) in the case of the carrying out of further appraisal drilling of the
Discovery, ninety (90) Days; and
(b) in all other cases, sixty (60) Days;
and in such event the said period shall be so extended. A Party proposing to
carry out further appraisal drilling of the Discovery shall, in its said notice
to the other Party, inform them of its intention and:
(i) the Operator shall carry out such drilling at the risk, cost and
expense of such Party and the provisions of Article XVI (other than
the first sentence of Article 16.3) shall apply as if such Party were
a Sole Risk Party and such drilling were Sole Risk Operation under
that Article;
(ii) such Party shall not be entitled to any reimbursement from the other
Party of the costs and expenses thereof, unless as a result of such
drilling all the Parties decide not to proceed with the development of
the Discovery in which event the other Party shall pay to such Party
within twenty-eight (28) Days of the decision not to proceed with the
development an amount equal to the lesser of the amount it would have
contributed to the Joint Account had such additional drilling or work
been carried out as part of the Joint Operations or its share of the
additional costs incurred; such amount shall be paid in Dollars or
other approved currencies as approved by the Parties applicable to the
costs and expenses; and
(iii) all data and information obtained from such additional drilling and
work shall promptly be made available to, and be owned jointly by, all
the Parties.
14.2 AUTHORIZATION FOR EXPENDITURE
14.2.1 Save as provided in Articles 6.9.2, 6.9.3 and 6.9.4, the Operator
shall, before entering into any commitment or incurring any
expenditure with respect to the preparation of a development Work
Programme and Budget or under an approved development Work Programme
and Budget, submit to the Operating Committee an AFE therefor. An AFE
shall be prepared in accordance with Section 3 of the Uniform Project
Implementation Procedure. Subject to the approval of such AFE
hereunder, the Operator shall be authorized and obliged, subject to
Article 14.3, to proceed with such commitment or expenditure provided
always that an AFE within an approved development Work Programme and
Budget shall be deemed to have been approved by the Operating
Committee unless, within fourteen (14) Days (or such longer period as
shall have been agreed by the Parties) of its submission to the
Parties, any Party gives notice to the Operator that they require such
AFE to be formally approved by the Operating Committee.
14.2.2 In the event that the Operating Committee gives its approval to any
development Work Programme and Budget or any AFE executed in
connection therewith, Liberty may, by notice to AMNI given not more
than thirty (30) Days following the date of Liberty's receipt of
notice of such approval of such Work Programme, Budget or AFE, elect
not to proceed with such Work Programme, Budget or AFE as applicable,
and the operations and work covered by such Work Programme, Budget or
AFE shall be conducted as Sole Risk Operations in accordance with
Article XVI with AMNI being the Sole Risk Party.
14.3 REVIEW AND AMENDMENT
14.3.1 The Operator shall, in each Year, review the approved development Work
Programme and Budget and submit to the Operating Committee not later
than September 1st a report thereon together with an update of such
development Work Programme and Budget dealing separately with the next
Year and the remaining phase of the approved development Work
Programme and Budget and showing the matters listed in Article 14.1.1
and the information required under Section 3 of the Uniform Project
Implementation Procedure.
14.3.2 At any time either Party may, by notice to the other Party propose
that an approved development Work Programme and Budget and/or an
approved AFE be amended. The Operating Committee shall consider such
proposal and, if the Operating Committee agrees to such an amendment,
the Operator shall prepare and submit to the Operating Committee a
revised development Work Programme and Budget incorporating any such
amendment and showing the matters listed in Article 14.1.1 and the
information under Section 3 of the Uniform Project Implementation
Procedure. To the extent that any such amendment or revised
development Work Programme and Budget is approved by the Operating
Committee, the approved development Work Programme and Budget and/or
AFE shall, subject to obtaining any necessary consent or approval of
the Ministry, be deemed amended accordingly provided always that any
such amendment shall not invalidate any authorized commitment or
expenditure made by the Operator prior thereto, and further provided
that any revised Work Programme and Budget or AFE shall be subject to
Liberty's rights under Article 14.2.2.
ARTICLE XV - PRODUCTION WORK PROGRAMME AND BUDGET
-------------------------------------------------
15.1 ANNUAL WORK PROGRAMME AND BUDGET
15.1.1 The Operator shall not later than September 1st in the year prior to
the commencement of production and each subsequent Year, submit to the
Operating Committee a proposed production Work Programme and Budget
for the Year showing:
(a) the projects and other work to be undertaken;
(b) the information required under the Accounting Procedure:
(c) an estimate of the date of commencement of production (if
approximate) and of the total production by Quarters and the
maximum daily rate to be achieved in each Quarter;
(d) details of the number of employees and contract personnel
required; and
(e) such other information as the Operating Committee shall have
required the Operator to provide.
15.1.2 The proposed production Work Programme and Budget shall be subject to
consideration, revision and approval by the Operating Committee. The
Operating Committee shall consider such production Work Programme and
Budget and make such revisions thereto as shall be agreed as soon as
practicable but in any event not later than October 1st. Not later
than December 31st the Operating Committee shall approve a production
Work Programme and Budget and such approval shall subject to Articles
15.2 and 15.3 authorize and oblige the Operator to proceed with it.
15.2 AUTHORIZATION FOR EXPENDITURE
15.2.1 Save as provided in Articles 6.9.2, 6.9.3 and 6.9.4, the Operator
shall, before entering into any commitment or incurring any
expenditure under an approved Work Programme and Budget, submit to the
Operating Committee an AFE therefor. An AFE shall be prepared in
accordance with Section 3 of the Uniform Project Implementation
Procedure. Subject to the approval of the AFE hereunder, the Operator
shall be authorized and obliged, subject to Article 15.3, to proceed
with such commitment or expenditure. An AFE may be approved by
affirmative decision of the Operating Committee or by signature by
Parties having an aggregate Participating Interest sufficient for an
affirmative decision of the Operating Committee.
15.2.2 In the event that the Operating Committee gives its approval to any
production Work Programme and Budget or any AFE executed in connection
therewith, Liberty may, by notice to AMNI given not more than thirty
(30) Days following the date of Liberty's receipt of notice of such
approval or of such AFE, elect not to proceed with such Work Programme
and Budget or AFE as applicable, and the operations and work covered
by such Work Programme and Budget or AFE shall be conducted as Sole
Risk Operations in accordance with Article XVI with AMNI being the
Sole Risk Party.
15.3 AMENDMENT
At any time either Party may, by notice to the Operating Committee, propose
that an approved production Work Programme and Budget and/or an approved
AFE be amended. To the extent that an amendment is approved by the
Operating Committee, the approved production Work Programme and Budget
and/or AFE shall be deemed amended accordingly provided always that any
such amendment shall not invalidate any authorized commitment or
expenditure made by the Operator prior thereto, and further provided that
any revised Work Programme and Budget or AFE shall be subject to Liberty's
rights under Article 15.2.2.
ARTICLE XVI - SOLE RISK OPERATIONS
----------------------------------
16.1 DEFINITIONS
For the purpose of this Article XVI:
16.1.1 "Common Costs" means overhead expenses in respect of operating and
maintenance charges and depreciation on common user assets which are
shared by Sole Risk Operations and Joint Operations.
16.1.2 "Exploratory Well" means:
(a) a well drilled in the Deep Zones of the IMA Field in an area
lying outside the interpreted closure of any structural or
stratigraphic trap on which closure a well has been drilled which
is capable of producing Petroleum, or
(b) a well in the Deep Zones of the IMA Field in any area lying
inside the interpreted closure of any structural or stratigraphic
trap, to the extent to which it is deepened or plugged back to a
stratigraphic level different from that to which it had
previously been drilled and found capable of producing Petroleum;
or
(c) any well that has been agreed by the Parties to be an Exploratory
Well.
16.1.3 "Non-Proposing Party/ies" means the Parties not giving notice of an
intention to conduct a Sole Risk Operation.
16.1.4 "Non-Sole Risk Party/ies" means the parties not participating in a
Sole Risk Operation.
16.1.5 "Production Facilities" means drilling and/or production, platforms
and/or petroleum storage and transportation facilities required to
produce and deliver any Petroleum that may be discovered from an
Exploratory Well within the Deep Zones of the IMA Field.
16.1.6 "Proposing Party/ies" means the Parties giving notice of its intention
to conduct a Sole Risk Operation as hereinafter defined.
16.1.7 "Sole Risk Exploratory Well" means an Exploratory Well drilled by a
Sole Risk Party/ies pursuant to this Article XVI.
16.1.8 "Sole Risk Notice" means a notice given pursuant to Article 16.4 of a
Party's intention to conduct a Sole risk Operation.
16.1.9 "Sole Risk Operation" means an operation conducted for only one of the
Parties in accordance with the provisions of this Article XVI.
16.1.10 "Sole Risk Party/ies" means the Party/ies who undertakes to conduct a
Sole Risk Operation pursuant to this Article XVI.
16.2 SOLE RISK OPERATIONS
Subject to Article 16.3, Sole Risk Operations shall only include and be
undertaken in respect of any one or more of the following activities:
(a) the deepening, side tracking or plugging back of an Exploratory Well;
(b) the drilling of an Exploratory Well including testing and coring
programmes;
(c) the drilling of appraisal and development ▇▇▇▇▇ and the installation
of Production Facilities to develop a discovery made by a Sole Risk
Exploratory Well, provided the purchase of such Facilities is not
otherwise to increase or accelerate production of Petroleum from
geological structures in the Deep Zones of the IMA Field other than
the geological structure on which such Sole Risk Exploratory Well was
Drilled;
(d) any other activity or project agreed by the Parties to be undertaken
as a Sole Risk Operation; and
(e) any operation governed by a Work Programme and Budget or an AFE made
pursuant to Articles XII, XIII, XIV or XV for which Liberty has
elected not to participate in pursuant to the terms of such Articles.
16.3 CONDITIONS FOR SOLE RISK OPERATIONS
(a) No Sole Risk Operation may be conducted if it would adversely affect
Joint Operations or conflict with all or any part of any current Work
Programme and Budget.
(b) No Sole Risk Operation shall be undertaken until:
(i) The operations comprising the Sole Risk Operation shall first
have been proposed in writing to the Operating Committee in
complete form. The appropriate proposal to be in complete form
shall specify as Joint Operations such as location of proposed
well, scope of geological and geophysical programmes, proposed
depth, itemized estimate of the costs thereof, economic analysis,
expected date of commencement and the expected date of
completion.
(ii) The Operating Committee shall have disapproved or be deemed to
have disapproved the proposal, in accordance with the procedures
set forth in Article VIII.
(c) A Sole Risk Operation for the deepening or sidetracking of an
Exploratory Well in course of drilling may be proposed only if such
well has not encountered a Discovery and the Parties have decided to
abandon the well following their receipt of all drilling and Test
results.
16.4 SOLE RISK NOTICE
Within 6 months after the Operating Committee disagrees with a proposal for
Joint Operations or, in the case of Article 16.3 (c) within forty-eight
(48) hours after notice from the Operator recommending abandonment of an
Exploratory Well, any Party may give to the other Party a Sole Risk Notice,
in writing. The Non-Proposing Party shall have ninety (90) Days, after the
receipt of the sole Risk Notice, within which to notify the Party giving
the Sole Risk Notice, whether or not to participate in the costs of such
Sole Risk Operation ("Participation Notice"); provided, however, that in
the case of a Sole Risk activity pursuant to Article 16.3(c) the period in
which to give Participation Notice shall be forty-eight (48) hours.
16.5 SOLE RISK OPERATION AS JOINT OPERATION
If the Non-Proposing Party elects to participate in the proposal which is
the subject of a Sole Risk Notice within the applicable period specified in
Article 16.4, such Sole Risk Operation shall be carried out by the Operator
as Joint Operation and the current Work Programme and Budget shall be
deemed to be amended accordingly.
16.6 SOLE RISK OPERATION
In the event the Non-Proposing Party does not elect, within the applicable
period specified in Article 16.4 to participate in a proposed Sole Risk
Operation, the Proposing Party shall be entitled to carry out the Sole Risk
Operation at its Sole Risk, cost and expenditure. Costs and expenses of the
Sole Risk Operation incurred by the Sole Risk Party shall be computed in
accordance with the Accounting Procedure.
16.7 OPERATOR OF SOLE RISK OPERATION
Notwithstanding that the Operator may not be the Sole Risk Party, the Sole
Risk Operation shall, subject to Article 16.7.3 and Article 16.8, be
carried out promptly and diligently by the Sole Risk Operator for the sole
account and benefit of the Sole Risk Party.
16.7.1 Any Sole Risk Operation shall be carried out at the sole risk, cost
and expense of, and under the overall supervision and control, of the
Sole Risk Party but otherwise pursuant to this Agreement.
16.7.2 The Sole Risk Operator shall keep and maintain separate books, records
and accounts (including bank accounts) with respect to the Sole Risk
Operations, including Sole Risk share of all Common Costs in
connection therewith, which shall be subject to the right of
examination and audit by the Sole Risk Party and Non-Consenting Party.
16.7.3 The Sole Risk Party shall be obligated to advance the estimated
expenditure for the Sole Risk Operation to the Operator within fifteen
(15) Days after receipt of the Operator's request therefor. The
Operator shall not use, or be required to use, Joint Account funds or
its own funds for the purpose of paying the costs and expenses of the
Sole Risk Operation.
16.8 COMMENCEMENT OF SOLE RISK OPERATION
It is hereby understood and agreed that the Sole Risk Party shall do all
things necessary to enable the Operator on its behalf to commence the Sole
Risk Operation within ninety (90) Days after expiration of the period
specified in Article 16.4 for giving a Participation Notice in the case of
a Sole Risk Operation under Articles 16.2(a), (b), (c) or (e); or within
one hundred eighty (180) Days after expiration of the period specified in
Article 16.4 for giving a Participation Notice in case of projects under
Article 16.2(d); or within 48 hours after expiry of the period specified in
Article 16.4 for giving a Participation Notice in case of projects under
Article 16.3(c). If the Sole Risk Operation specified in the Sole Risk
Notice is not commenced within the period specified in this Article 16.8
for reasons attributable to the Proposing Party, then the right of the
Proposing Party to carry out the Sole Risk Operation shall lapse.
16.9 INFORMATION CONCERNING SOLE RISK OPERATION
The Operator shall, in relation to the Sole Risk Operation, furnish to the
Parties all information and data which the Operator is obligated to give
the Non-Operators under the terms of this Agreement.
16.10 ELECTION TO PARTICIPATE IN FURTHER WORK
A Non-Consenting Party may at any time, elect to participate in a Sole Risk
Operation by paying to the other Party, an amount equal to its
Participating Interest of Petroleum Costs share of the cumulative cost and
expenditure of the Sole Risk Operation, incurred as of the date of such
election plus 250% thereof ("Re-entry Penalty"). The whole or any part of
the Re-entry Penalty shall be paid in cash in the currency in which the
Sole Risk costs have been incurred or in kind or both as may be mutually
agreed by the Parties. Following an election and payment as aforesaid, such
operations shall be carried out as Joint Operations.
16.11 USE OF JOINT PROPERTY AND PERSONNEL OF THE OPERATOR FOR SOLE RISK
OPERATION
A Sole Risk Party shall be entitled to use Joint Property and personnel of
the Operator for the Sole Risk Operation upon terms and conditions agreed
by the Parties, provided however that it is understood that, at all times,
the Joint Operations shall take precedence over the Sole Risk Operation in
such use of Joint Property and personnel.
16.12 INDEMNIFICATION OF THE NON-CONSENTING PARTY
The Sole Risk Party shall indemnify and hold harmless the Non-Consenting
Party from all suits, claims, liens, liabilities, damages, costs, losses
and expenses whatsoever directly or indirectly caused to third parties or
incurred by the Non-Consenting Party as a result of anything done or
omitted to be done in the course of carrying out the Sole Risk Operation.
16.13 TITLE TO THE SOLE RISK OPERATION, PRODUCTION AND FACILITIES
16.13.1 Subject to Article 16.10, all property acquired through a Sole Risk
Operation, including data and information, shall be wholly owned by
the Sole Risk Party.
16.13.2 In case of a Sole Risk Operation under Article 16.2(d) the relevant
facilities as well as any Petroleum produced therefrom shall be owned
by the Sole Risk Party until such time as the Non-Consenting Party has
elected to participate in further work under the Sole Risk Operation
pursuant to Article 16.10.
16.13.3 Notwithstanding the election of a Non-Consenting Party to participate
in a Sole Risk Operation involving production of Petroleum discovered
as the result of a Sole Risk Exploratory Well, and the payment by the
Non-Consenting Party of the amount of money referred to in Article
16.10, the Non-Consenting Party shall not be entitled to receive any
payment in kind of cash or credit for any Petroleum which was produced
as a result of a discovery from such Exploratory Well prior to the
date of such election and payment. Upon such election and payment
however the Non-Consenting Party shall be entitled to its
Participating Interest of Petroleum produced as a result of a
discovery from such Exploratory Well following such election and
payment.
ARTICLE XVII - ACCOUNTING PROCEDURE
-----------------------------------
17.1 The Accounting Procedure is hereby made part of this Agreement. In the
event of any conflict between any provision in the main body of this
Agreement and any provision in the Accounting Procedure, the provision
in the main body shall prevail.
ARTICLE XVIII - DEFAULT
-----------------------
18.1 FAILURE TO PAY
If any Party ("Defaulting Party") fails to pay in full its share of
any Cash Call or Advance by the due date as provided in Article X or
elsewhere in this Agreement (including all schedules thereto) (such
date being hereinafter the "Default Date"):
(i) the Operator shall notify by telex all the Parties of such
default as soon as practicable after the occurrence of such
default;
(ii) after the occurrence of such failure to pay, the Operator shall
serve on the Defaulting Party a formal notice (a "Default
Notice") declaring that the Defaulting Party is in default from
and including the Default Date;
(iii)each Non-Defaulting Party shall contribute, as hereinafter
provided, a share of the amount of default in the proportion that
its Participating Interest bears to the total of the
Participating Interests of the Non-Defaulting Parties, and
pending receipt of such additional contributions the Operator
shall make arrangements to meet any commitments falling due by
borrowing the necessary finance from outside sources or by making
the necessary finance available itself and all costs of any such
finance shall be charged to the Non-Defaulting Parties; finance
made available to the Operator shall bear interest calculated on
a day to day basis at the Agreed Interest Rate;
(iv) within five (5) Working Days following the date of notification
by the Operator under Article 18.1(i), the Operator shall notify
all the Parties of the liability of each of the Non-Defaulting
parties to contribute to the amount in default and shall make a
further Cash Call accordingly to take effect on the expiry of the
six (6) Business Days specified in Article 18.1(v);
(v) if such default continues for than six (6) Working Days after the
date of notification by the Operator under Article 18.1(i) each
of the Non-Defaulting Parties shall on the Business Day next
following such sixth Business Day pay the amount notified under
Article 18.1(iv), and thereafter shall continue to pay, in
addition to its share of subsequent Advances, the proportion
specified in Article 18.1(iii) of that part of all such
subsequent Advances attributable to the Defaulting Party until
such time as the Defaulting Party has remedied its default in
full, and failure by a Party to make such payment on behalf of a
Defaulting Party shall likewise and with the same results render
that Party in default; and
(vi) no Party shall be entitled at any time to call into question any
aspect of the Default Notice or its service on the Defaulting
Party other than on the grounds (a) that the Defaulting Party had
not failed to pay in full its share of any Cash Call or Advance
by the due date as aforesaid, (b) that any such failure was not
continuing at the date of service of the Default Notice (whether
in respect of the whole or any part of the amount which the
Defaulting Party failed to pay as aforesaid), (c) that the
Default Notice was not served on the Defaulting Party.
18.2 REMEDY OF DEFAULT
The Defaulting Party shall have the right to remedy the default at any
time by payment in full to the Operator or, if the Non-Defaulting
Party has paid any amounts under Article 18.1(v), to the
Non-Defaulting Party, in proportion to the amounts so paid by the
Non-Defaulting Party of all amounts which the Defaulting Party has
failed to pay (including the amount of Cash Calls and Advances
attributable to the Defaulting Party which the Non-Defaulting Party
has become liable to pay in terms of Article 18.1(v) together with
interest thereon calculated on a day to day basis at the Agreed
Interest Rate, from and including the due date for payment of such
amounts until but not including the actual date of payment.
18.3 CONTINUATION OF DEFAULT
18.3.1 If a Party defaults after the commencement of commercial
production and has not remedied the default by the sixth Business
Day after Notice thereof from the Operator, the Defaulting Party
shall not be entitled to its Participating Interest of Production
which shall vest in and be the property of the Non-Defaulting
Parties in the proportions which their respective Percentage
Interests of Petroleum Costs bear to the total of the same, and
Operator shall be authorized to sell such Petroleum, at the best
price obtainable under the circumstances and, after deducting all
reasonable costs, charges and expenses incurred by Operator in
connection with such sale, pay the proceeds proportionately to
the Non-Defaulting Parties which proceeds shall be credited
against all monies advanced pursuant to Article 18.1 together
with interest accrued thereon. Any surplus remaining shall be
paid to the Defaulting Party, and any deficiency shall remain a
debt due from the Defaulting Party to the Non-Defaulting Parties.
18.3.2 During the continuation of any default the Defaulting Party shall
not be entitled to be represented at meetings of the Operating
Committee or any sub-committee thereof nor to vote thereat (so
that the voting interest of each Non-Defaulting Party shall be in
the proportion which its Participating Interest bears to the
total of the Participating Interest of all the Non-Defaulting
Parties) and shall have no further access to any data and
information relating to the Joint Operations. The Defaulting
Party shall be bound by decisions of the Operating Committee made
during the continuation of default.
18.4 In the case of any Sole Risk Project pursuant to clause 16, the
provision of this clause 18 shall apply mutatis mutandis to the Sole
Risk Parties.
18.5 From the Default Date the Defaulting Party shall have no further
rights with respect to the Deep Zone of the IMA Field or this
Agreement except as provided for in this clause 18.
18.6 OTHER REMEDIES
All remedies provided hereunder shall be without prejudice to any
other rights available to the Non-Defaulting Parties whether at common
law, pursuant to statute or otherwise.
ARTICLE XIX - DISPOSITION OF PRODUCTION
---------------------------------------
19.1 RIGHT AND OBLIGATION TO TAKE IN KIND
Except with respect to Tax Oil or as otherwise provided in this
Article, each Party shall have the right and obligation to own, take
in kind and separately dispose of its Participating Interest of
Production from any Exploitation Area in such quantities and in
accordance with such procedures as may be set forth in the offtake
agreement referred to in Article 19.2 or in the special arrangements
for natural gas referred to in Article 19.3. If Government is party to
the offtake agreement, then the Parties shall endeavour to obtain its
agreement to the principles set forth in this Article.
19.2 OFFTAKE AGREEMENT FOR CRUDE OIL
If Crude Oil is to be produced from an Exploitation Area, the Parties
shall in good faith, and not less than three (3) months prior to first
delivery of Crude Oil, negotiate and conclude the terms of an
agreement to cover, the offtake of Crude Oil produced under the Joint
Venture Agreement, which agreement shall also provide for the sale of
the Tax Oil by the Operator. The Government may, if necessary and
practicable, also be party to the offtake agreement. This offtake
agreement shall to the extent possible be consistent with the Joint
Venture Agreement, and make provision for:
(a) The delivery point, at which title and risk of loss of
Participating Interest of Production of Crude Oil shall pass to
the Parties (or as the Parties may otherwise agree);
(b) The Operator's regular periodic advice to the Parties of
estimates of totalavailable production for succeeding periods,
Participating Interest of Production and grades of Crude Oil, for
as far ahead as is necessary for the Operator and the Parties to
plan offtake arrangements. Such advice shall also cover for each
grade of Crude Oil total available production and deliveries for
the preceding period, inventory and overlifts and underlifts;
(c) Nomination by the Parties to the Operator of acceptance of their
Participating Interest of Production of total available
production for the succeeding period. Such nominations shall in
any one period be for each Party's entire Participating Interest
of Production arising during that period subject to operational
tolerances and agreed minimum economic cargo sizes or as the
parties may otherwise agree;
(d) Elimination of overlifts and underlifts;
(e) If offshore loading or a shore terminal for vessel loading is
involved, risks regarding acceptability of tankers, demurrage and
(if applicable) availability of berths;
(f) Distribution to the Parties of Entitlements to ensure, to the
extent Parties take delivery of their Entitlements in proportion
to the accrual of such Entitlements, that each Party shall
receive currently Entitlements of grades, gravities and qualities
of Petroleum similar to Petroleum received by each other Party.
(g) To the extent that distribution of Entitlements on such basis is
impracticable due to availability of facilities and minimum cargo
sizes, a method of making periodic adjustments; and
(h) The option and the right of the other Parties to sell an
Entitlement which a Party fails to nominate for acceptance
pursuant to (c) above or of which a Party fails to take delivery,
in accordance with applicable agreed procedures, provided that
such failure either constitutes a breach of the Operator's or
Parties' obligations under the terms of the Contract, or is
likely to result in the curtailment or shut-in of production.
Such sales shall be made only to the limited extent necessary to
avoid disruption in Joint Operations. The Operator shall give all
Parties as much notice as is practicable of such situation and
that a sale option has arisen. Any sale shall be of the
unnominated or undelivered Entitlement as the case may be and for
reasonable periods of time as are consistent with the minimum
needs of the industry and in no event to exceed twelve (12)
months. The right of sale shall be revocable at will subject to
any prior contractual commitments. Sales to non-affiliated third
parties shall be for the realized price f.o.b. the delivery
point. Sales to any of the Parties or their Affiliates shall be
at current market value f.o.b. the delivery point. The Party
arranging the sale shall pay to the Party whose Entitlement is
involved the above price after deduction of all costs, including
storage costs, incurred in respect of such sale and a marketing
fee of an agreed percentage of the applicable price less
deductions, reflecting actual costs of disposal at immediate
notice. Current market value shall be the value of the
Entitlement in international markets (unless the Entitlement was
required to be delivered into the Government's domestic market,
in which case it shall be the value therein between a willing
buyer and seller and shall be agreed between the two Parties
concerned, or failing agreement, determined by an expert to be
appointed in accordance with procedures set forth in the offtake
agreement.
19.3 SEPARATE AGREEMENT FOR NATURAL GAS
The Parties recognize that if natural gas is discovered it may be
necessary for the Parties to enter into special arrangements for the
disposal of the natural gas, which are consistent with the Development
Plan and subject to the terms of the Joint Venture Agreement.
ARTICLE XX - CONFIDENTIALITY
----------------------------
20.1 CONFIDENTIALITY DATA AND INFORMATION
All data and information (the "Data") acquired or obtained by any
Party in respect of the Joint Operations and under or pursuant to this
agreement shall be considered confidential and shall be kept
confidential and not be disclosed during the term of this Agreement
and for a period of five (5) years thereafter and shall not be
divulged in any way to any third party without the prior written
approval of all the Parties, provided that:
(a) any Party may, without such approval, disclose the whole or any
part of the Data in good faith:
(i) to any Affiliate of such Party upon obtaining an undertaking
of confidentiality (in similar terms to this Article 20.1)
from such Affiliate;
(ii) to any bona fide prospective assignee of such part upon
obtaining an undertaking of confidentiality (in similar
terms to this Article 20.1) from such assignee and subject
to such Party having given not less than two (2) Business
Days' notice to the other Parties specifying the extent to
which that Party intends to disclose the Data to the
prospective assignee and the name of such prospective
assignee;
(iii)to any outside professional consultants engaged by or on
behalf of such Party and acting in that capacity, upon
obtaining an undertaking of confidentiality (in similar
terms to this Article 20.1) from such consultants, provided
that such Party shall promptly inform the other Parties of
the name of such consultants and the data disclosed to them;
(iv) to any bank or financial institution from whom such Party is
seeking or obtaining an undertaking of confidentially (in
similar term to this Article 20.1) from such bank or
institution;
(v) to the extent required by the Act, the OPL and OML governing
the Deep Zones of the IMA Field, any other applicable law or
the Regulations of the Ministry;
(vi) to the extent that the same has become generally available
to the public other than as a result of any breach by such
Party of its obligations hereunder;
(vii)pursuant to an order of any court of competent
jurisdiction; or
(viii) any government, stock exchange or securities commission
having jurisdiction over such Party.
(b) the Operator may disclose the Data to such persons as may be
necessary in connection with the conduct of the Joint Operations
upon obtaining an undertaking of confidentiality (in similar
terms to this Article 20.1) from such persons provided that the
Operator shall promptly inform the other Parties of the names of
such persons and of the Data disclosed to them.
In the event of any Party ceasing to hold a Participating Interest,
such Party shall nevertheless remain bound by this Article 20.1.
20.2 TRADING RIGHTS
20.2.1 The Operator may, with the prior approval of the Operating Committee
and on such terms and conditions as it shall approve, exchange any
Data for other similar data and information and the Operator shall
promptly provide all the Parties as shall request the same with
conformed copies of the agreement relating to such exchange and all
such other data and information provided that, notwithstanding the
foregoing provisions of this Article XX, if any Party is also the
owner or part owner of such other data and information it shall not be
entitled to prevent an exchange which has been approved by all the
other Parties.
20.2.2 A Party having acquired any data and information by the conduct of a
Sole Risk Project undertaken under Article XVI shall have the right to
take such data and information as its exclusive property without
seeking the prior approval of the Non-Consenting Parties, save that if
the Non-Consenting Party in accordance with Article 14.4 such data and
information shall thereafter become Joint Property and be subject to
the restrictions imposed by Article 20.1.
ARTICLE XXI - PUBLIC ANNOUNCEMENTS
----------------------------------
21.1 Subject to Articles 20.1, 21.2 and 21.3, the Operator shall be
responsible for the preparation and release of all announcements and
statements regarding this Agreement or the Joint Operations provided
always that no such public announcement or statement shall be issued
or made unless prior thereto all the Parties have been furnished with
a copy thereof and the approval of the Operation Committee has been
obtained.
21.2 Except as provided in Article 21.3, if any Party shall itself wish to
issue or make any public announcement or statement regarding this
Agreement or the Joint Operations it shall not do so unless prior
thereto it furnished all the Parties with a copy of such announcement
or statement obtains the approval of the Operating Committee provided
that, notwithstanding any failure to obtain such approval, no Party or
Affiliate of such Party shall be prohibited from issuing or making any
such public announcement or statement if it is necessary to do so in
order to comply with any applicable law or the regulations of a
recognized stock exchange.
21.3 The Sole Risk Party carrying out a Sole Risk Project (or the operating
if acting as operator for the Sole Risk Operation on behalf of the
Sole Risk Party) shall be responsible for the preparation and release
of all public announcements and statement to the Sole Risk Operation.
The unanimous approval of the Sole Risk Parties (if more than one)
shall be obtained to the terms of any such announcement or statement
before it is released. If, prior to the release of such announcement
or statement, the Non-Consenting Parties shall have discharged in full
their liabilities to the Sole Risk Party in accordance with Article
14.4, the provisions of Article 21.1 will apply.
ARTICLE XXII - OUTGOINGS AND GRANTS
-----------------------------------
22.1 OUTGOINGS
The Parties shall be liable for payments in accordance with their
Participating Interest. The Operator shall pay all such sums for the
Joint Account excepting royalties, petroleum profit taxes and other
taxes and governmental levies. If the Ministry shall require a Party
to deliver Petroleum in place of royalty, the Operator shall, with the
prior consent of each of the Parties, make arrangements with the
Ministry of such delivery.
22.2 GRANTS
Grants received by any of the Parties from any governmental agency or
body in Nigeria or internationally in respect of their respective
expenditures made pursuant to this Agreement will be retained by the
Party receiving the same. The Operator shall supply to any Party
applying for a grant, at the sole cost of the Party requiring the
same, all requisite data and information which such Party may
reasonably require for the purpose.
ARTICLE XXIII - COVENANT, UNDERTAKING, RELATIONSHIP AND TAX
-----------------------------------------------------------
23.1 COVENANT AND UNDERTAKING
Subject to the overriding responsibility of the Operator under Article
6.2.2, each Party hereby covenants and undertakes with the other Party
that it will comply with all the applicable provisions and
requirements of the Act and the OPL and OML establishing the Deep
Zones of the IMA Field and will do all such acts and things within its
control as may be necessary to keep and maintain any OPL and OML
establishing the Deep Zones of the IMA Field in force and effect.
23.2 RELATIONSHIP
23.2.1 The rights, duties, obligations and liability of the Parties
hereunder shall be several and not joint or collective. Each
Party shall be responsible only for its individual obligations
hereunder. It is expressly agreed that it is not the purpose or
intention of this Agreement to create, nor shall the same be
construed as creating, any mining partnership, commercial
partnership or other partnership, joint venture, association or
trust, or as authorizing any Party to act as an agent, servant or
employee for any other Party for any purpose whatsoever except as
explicitly set forth in the Joint Venture Agreement and this
Agreement.
23.2.2 Subject to Article 6.2.3 each Party agrees to indemnify each
other's Party, to the extent of its Participating Interest share
for any claim by or liability to (including any cost and expenses
necessarily incurred in respect of such claim or liability) any
person not being a Party hereto, arising from or in connection
with the Joint Operations including, without prejudice to the
generality of the foregoing, any claim or liability based on the
tort of negligence.
23.2.3 The Operator hereby covenants and undertakes that it will perform
such acts, execute such documents, and do all other things as may
be necessary to enable it to perform each and every agreement,
covenant, undertaking, obligation and liability made, undertaken
or assumed under this Agreement and further will not perform (or
omit to perform) any act the performance (or the omission of the
performance) of which would, if the Owner were a Party, render
the Owner in breach of any such agreement covenant, undertaking,
obligation or liability.
23.3 TAX
The Operator shall be responsible for reporting and discharging all
taxes relating to the ownership and operation of the properties
subject to this Agreement and shall satisfy such obligations out of
the Tax Oil.
ARTICLE XXIV - ASSIGNMENT AND ENCUMBRANCES
------------------------------------------
24.1 RESTRICTION
This Agreement and all the provisions hereof shall be binding upon and
enure to the benefit of the Parties hereto and their respective
successors and assigns but neither this Agreement not any of the
rights, interest or obligations hereunder or under OML 112, OPL 237 or
in respect of the IMA Field shall be assigned or pledged by any Party
without the prior written consent of the other Party, which consent
shall not be unreasonably withheld, and the Government, if necessary,
but may be assigned to Affiliates without such consent subject to the
provisions of this Agreement. Further, AMNI hereby consents to a
pledge by Liberty to of its interests in this Joint Operating
Agreement, the Joint Venture and in the Deep Zones of the IMA Field to
financial institutions now or hereafter providing credit to Liberty.
The Parties acknowledge that the interests conveyed to Liberty with
respect to its 10% undivided interest in the Deep Zones is subject to
obtaining all necessary governmental approvals required to consummate
the transactions provided for herein. The Parties agree to obtain such
approvals as promptly as possible. If by December 1, 1998 the
necessary government approvals have not been obtained, then the
Parties shall enter into such amendments to this Agreement and the
Joint Venture Agreement and such other contractual agreements as are
necessary to provide Liberty (or its nominee) with all of the rights
and benefits that were to be provided to Liberty pursuant to this
Agreement and the Agreements executed in connection herewith.
ARTICLE XXV - WITHDRAWAL
------------------------
25.1 RESTRICTION
No Party may withdraw from this Agreement unless it also withdraws
from the Joint Venture Agreement, and in such case in accordance with
the following provisions of this Article.
25.2 WITHDRAWAL
Subject to the provisions of this Article, any Party may withdraw from
this Agreement and the Joint Venture Agreement by giving notice to all
other Parties stating that it wishes to withdraw from the Joint
Venture Agreement and this Agreement and specifying a proposed
effective date of withdrawal which shall be at least sixty (60) Days,
but not more than one hundred eighty (180) Days after the date of such
notice. Such notice shall be unconditional and irrevocable when given.
Within twenty (20) Business Days of receipt of such notice, any of the
other Parties may similarly give notice that it wishes to withdraw
from the Joint Venture Agreement and this Agreement. If all the other
parties give such notice no assignment shall take place, the Parties
shall be deemed to have decided to abandon the Joint Operations and
the Joint Venture Agreement shall be determined on the earliest
possible date. If less than all the other Parties give such notice,
the withdrawing Parties shall withdraw from the Joint Venture
Agreement and this Agreement and the non-withdrawing parties shall
take the place of the withdrawing parties in accordance with Article
25.3 without compensation whatsoever.
25.3 CONDITIONS
With respect to Article 25.2:
(a) a withdrawing Party shall assign all of its said interest to the
non-withdrawing Parties and such interest shall (unless otherwise
agreed by such non-withdrawing parties) be allocated to them in
the proportions in which their respective Participating Interest
prior to the effective date of withdrawal (as hereinafter
defined) bear to the total of the same;
(b) a withdrawing Party shall promptly join in such actions as may be
necessary or desirable to obtain any necessary or desirable to
obtain consent or approval of the Ministry in connection with,
and shall execute and deliver all documents necessary to effect
any such assignment and a withdrawal shall not be effective and
binding upon the Parties until the date upon which the same shall
have been done (the "effective date of withdrawal");
(c) a withdrawing Party shall promptly join in all actions required
by the other Parties for the maintenance of the Deep Zone of the
IMA Field provided that its participation in such actions shall
not cause it to incur after the date on which notice of
withdrawal shall have been given any financial obligations except
as provided in this Article XXV;
(d) a withdrawing Party shall pay all fines and penalties which may
be prescribed by the Ministry and all costs and expenses incurred
by the other Parties in connection with such withdrawal;
(e) a withdrawing Party shall not be allowed to withdraw from the
Joint Venture Agreement and this Agreement if its said interest
is subject to any liens, charges or encumbrances other than rent
and royalty payable under the OML and OPL governing the Deep
Zones of the IMA Field, unless the other Parties are willing to
accept the assignment subject to such additional liens, charges
and encumbrances;
(f) unless the Party or Parties acquiring its said interest agree to
accept the withdrawing Party's liabilities and obligations, a
withdrawing Party shall remain liable and obligated for its
Participating Interest share of all expenditure accruing to the
Joint Account under any Work Programme and Budget approved by the
Operating Committee and authorized by AFE prior to the date on
which notice of withdrawal is given even if the operations
concerned are to be implemented thereafter provided always that
this sub-paragraph (f) shall not render a withdrawing Party
liable for any amounts which such Party would not have been
obliged to pay had it not withdrawn; and
(g) a withdrawing Party shall remain liable and obligated for its
Participating Interest share of all net costs and obligations
that in any way relate to the abandonment of Joint Operations or
a Sole Risk Project in which such withdrawing Party participated
if abandonment occurs within five (5) years after the effective
date of withdrawal and, prior to such withdrawal, such
withdrawing Party shall provide the other Parties with such
security therefor as is acceptable to all such other Parties.
(h) If such withdrawing Party has, at the effective date of the
withdrawal, already provided security for abandonment costs
pursuant to an Abandonment Agreement entered into pursuant to
Article 6.10.3 the adequacy of such security (both in terms of
the proposed withdrawal in question and otherwise) shall be
reviewed by the non-withdrawing Parties. Without prejudice to the
right of the majority in Participating Interests of the
non-withdrawing Parties to require the withdrawing Party to
provide additional or substitute security for its said share, if
the said majority of the non-withdrawing Parties determines that
the security in question should not be released, the withdrawing
Party shall not be entitled to any such release and the security
in question (together with such additional security as the
majority in Participating Interests of the non-withdrawing
Parties shall have required the withdrawing Party to provide)
shall be held as security for such withdrawing Party's said share
until its liability under this Article 25.3(h) has been
discharged.
ARTICLE XXVI - FORCE MAJEURE
----------------------------
26.1 The obligations, so far as and to the extent that the obligations are
affected, of each of the Parties hereunder, other than the obligations to
make payments of money or furnish security, shall be suspended during the
period and to the extent that such Party is rendered unable, wholly or in
part, from carrying out its obligations under this Agreement by 'Force
Majeure' (as hereinafter defined). In such event, such Party shall give
notice of suspension as soon as reasonably possible to the other Parties
stating the date and extent of such suspension and the cause thereof. Any
of the Parties whose obligations have been suspended as aforesaid shall use
all reasonable endeavours to remedy such cause and shall resume the
performance of such obligations as soon as reasonably possible after the
removal of the cause and shall so notify all the other Parties.
26.2 For the purposes of this Agreement, "Force Majeure" shall mean any event
beyond the reasonable control of a Party and which by the exercise of
reasonable efforts, the Party is not able to prevent, and includes, but is
not limited to, such events as governmental restrictions, strikes,
lockouts, shortages of labor or material, acts of God, insurrection, riots,
wars, fire, storms, hurricanes, floods and the like.
ARTICLE XXVII - NOTICES
-----------------------
27.1 Except as otherwise specifically provided, all notices authorized or
required between the Parties by any of the provisions of this Agreement
shall be delivered pursuant to Article 15.5 of the Joint Venture Agreement.
ARTICLE XXVIII - DISPUTE RESOLUTIONS PROVISIONS
-----------------------------------------------
28.1 This Agreement shall be governed by, construed, interpreted and applied in
accordance with the laws of England.
28.2 Any dispute arising out of and relating to this Agreement and which the
Parties have not settled by themselves, shall finally be decided, to the
exclusion of the courts, by arbitration in accordance with the arbitration
rules of the International Chamber of Commerce. Three arbitrators shall be
appointed, each party appointing one arbitrator, and the two arbitrators
thus appointed choosing the presiding arbitrator. In reaching a decision,
the arbitrators shall be guided by the terms of this Agreement and
international practice in similar agreements.
IN WITNESS WHEREOF the Parties have caused this Agreement to be executed by
their duly authorized officers and representatives as of the day and year first
above written.
SIGNED, SEALED AND DELIVERED SIGNED, SEALED AND DELIVERED
for and on behalf of for and on behalf of
AMNI INTERNATIONAL PETROLEUM LIBERTY TECHNICAL SERVICES
DEVELOPMENT COMPANY LIMITED LTD.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇ ▇. Cherwayko
----------------------- ------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Name: ▇▇▇▇ ▇. Cherwayko
Designation: Managing Director ------------------------
Chief Executive Officer Designation: President
------------------------
SCHEDULE "A"
------------
ACCOUNTING PROCEDURE
--------------------
This Schedule "A" is attached to and forms part of the Joint Operating Agreement
made between AMNI INTERNATIONAL PETROLEUM DEVELOPMENT COMPANY LIMITED AND
LIBERTY TECHNICAL SERVICES LTD. the 30th day of June, 1998, (the "Agreement").
I DEFINITIONS AND PURPOSE
-------------------------
1.1 Words and phrases defined in Article 1 of the Agreement, when used herein,
shall have the meaning assigned to them therein.
1.2 The purpose of this Accounting Procedure is to establish equitable methods
and rules for determining and reporting changes and credits applicable to
Joint Operations under this Agreement, to the end that the Operator shall,
subject to the provisions of this Agreement, neither gain nor lose by
reason of the fact that it acts as the Operator.
II CHARGEABLE COSTS AND EXPENDITURES
------------------------------------
The Operator shall charge the Joint Account for all reasonable costs and
expenses made in connection with the conduct of Joint Operations (the
Operator shall not charge the Joint Account, and the Parties shall not be
liable, for any unreasonable costs and expenses). Such costs shall include,
but not be limited to:
2.1 CONCESSION PAYMENTS
--------------------
All direct costs necessary to acquire and to maintain rights to the Deep
Zones of the IMA Field or to acquire and to maintain such permits as are
required for the Joint Operations.
2.2 LABOUR AND RELATED COSTS
---------------------------
Salaries and wages, including bonuses of employees of the Operator who are
directly engaged in the conduct of Joint Operations, whether temporarily or
permanently assigned, irrespective of the location of such employees. The
costs of salaries and wages referred to herein shall include, without
limitation, the costs of employee benefits, customary allowances and
personal expenses incurred under the Operator's allowances and personal
expenses incurred under the Operators' practice and policy, and amount
imposed by applicable Governmental authorities, which are applicable to
such employees. These costs and expenses shall include:
2.2.1 Cost of established plans for employee group life insurance,
hospitalization, pension, retirement, savings and other benefits
plan;
2.2.2 Cost of holidays, vacations, sickness and disability benefits;
2.2.3 Cost of living, housing, and other customary allowances;
2.2.4 Reasonable personal expenses which are reimbursable under the
Operator's standard personnel policies;
2.2.5 Obligations imposed by Government authorities;
2.2.6 Cost of transportation of employees, other than as provided in
paragraph 2.3 below, as required in the conduct of Joint
Operations.
2.2.7 Charges in respect of employees temporarily engaged in Joint
Operations calculated to reflect the actual costs thereto during
the period or period of such engagement.
2.3 EMPLOYEE RELOCATION AND RELATED COSTS
-----------------------------------------
For the purposes of this paragraph 2.3, the following words shall have the
following respective meanings, namely:
"Relocation Costs" means, with respect to employees of the Operator
-----------------
relocation costs, Transportation Costs and transfer expenses, in conformity
with the Operator's established and Customary practices, including
transportation of such employees' families and their personnel and
household effects.
"Transportation Costs" for the above purpose shall include the cost of
---------------------
freight and passenger service, meals, hotels, and other expenditures
related to the transfer.
2.3.1 Relocation Costs, Transportation Costs and transfer expenses, within
Nigeria, for personnel engaged in Joint Operations.
2.3.2 Relocation Costs and Transportation Costs with respect to expatriate
employees, including:
(a) Relocation Costs and Transportation Costs for the Operator's
employees and their families transferring to the Joint
Operations;
(b) Relocation Costs and other related expenses incurred in the final
repatriation or transfer of the Operator's expatriate employees
and families in the case of such employees' retirement or
separation from the company, or
in the case of such employees' relation to the Operator's Head
Office.
PROVIDED HOWEVER, that:
(a) Relocation Costs incurred in moving an expatriate employee and
his family beyond his point of origin, established at the time of
his transfer to Nigeria, will not be charged to the Joint
Account; and
(b) no charge shall be made to the Joint Account with respect to
expenses incurred in the final repatriation or transfer of the
Operators' expatriate employees and families to other areas
outside of the Contract Area.
2.3.3 Relocation Costs and Transportation Costs with respect to
Nigeria employees on training assignments outside the Contract
Area.
2.3.4 Charges in respect of employees temporarily engaged in Joint
Operations shall be calculated to reflect the actual costs
thereto during the period or periods of such engagement.
2.4 SERVICES PROVIDED BY THIRD PARTIES/MARKET ORIENTATED AFFILIATES
---------------------------------------------------------------------
The cost of professional, technical, consultation, utilities and other
services procured from third party sources pursuant to any contract or
other arrangement between such third parties and the Operator for the
purposes of the Joint Operations.
2.5 SERVICES PROVIDED BY THE OPERATOR'S AFFILIATES, NON-OPERATOR OR
----------------------------------------------------------------------
NON-OPERATORS AFFILIATES
-------------------------
The cost of professional, administrative, scientific and technical services
provided or performed by the Non-Operator, or by any Affiliate of the
Operator or Non-Operator for the direct benefit of Joint Operations,
including, but not limited to, services provided by the Producing,
Exploration, Legal, Financial, Purchasing, Insurance, Accounting, and
Computer Services Departments of Non-Operator or such Affiliates.
2.5.1 Costs and charges hereinabove referred to shall include, without
limitation, the costs and charges for specific projects or
studies carried out for the Joint Account by Non-Operators or
Non-Operators' Affiliates.
2.5.2 Charges for providing the above services shall reflect the actual
cost only of providing such services and shall not include any
element of profit.
2.5.3 The charge out rate shall include all costs and expenses
incidental to the employment of the personnel utilized for the
aforesaid services.
2.5.4 The charges for services rendered for purchasing and/or for
coordinating forwarding and expediting shall be chargeable to the
extent that the same have not been fully reimbursed under
provisions of Article 3.1.3 hereof.
2.6 DAMAGE AND LOSS TO JOINT PROPERTY
--------------------------------------
Subject to the provisions of paragraph 2.6.2 hereunder, all costs or
expenses incurred for the repair or replacement of Joint Property resulting
from damages or losses by fire, flood, storm, theft, accident or any other
cause shall be for the Joint Account.
2.6.1 The Operator shall furnish the Non-Operators with written notice
of any occurrence of damage or loss incurred which is estimated
to exceed $50,000.00 as soon as practicable after the occurrence
of the event giving rise to the said damage or loss.
2.6.2 Where the loss or damage, referred to in this paragraph 2.6 is
insured against pursuant to this Agreement, any recoveries or
deductibles under the relevant insurance policies shall be for
the Joint Account. Recoveries or deductibles relating to
insurance obtained by an individual Party shall be for the sole
account of that Party.
2.7 LEGAL EXPENSES
---------------
All costs or expenses of handling, investigating, asserting defending and
settling litigation or claims arising our of or relating to Joint
Operations or necessary to protect or recover the Assets, including, but
not limited to legal fees, court costs, arbitration costs, cost of
investigation or procuring evidence and amounts paid in settlement or
satisfaction of any such litigation, arbitration or claims in accordance
with the provisions of this Agreement.
2.8 DUTIES AND TAXES
------------------
All duties and taxes, fees and government assessment of every kind and
nature except as excluded by this Agreement.
2.9 COSTS OF OFFICES, CAMPS, AND MISCELLANEOUS FACILITIES IN NIGERIA
------------------------------------------------------------------------
Net costs of establishing, maintaining, and operating offices, camps,
warehouses, housing and other facilities serving the Joint Operations. If
such facilities serve other operations in addition to the Joint Operations,
the net cost thereof shall be allocated to the properties and facilities
served on such equitable basis as may be approved by the Operating
Committee pursuant to Article 2.12 of this Agreement.
2.10 OPERATOR'S PARENT COMPANY HEAD OFFICE OVERHEAD
---------------------------------------------------
The charge for the Operator's parent company overhead (hereinafter called
"Head Office Overhead Charge").
2.10.1 The Head Office Overhead Charge shall cover professional,
administrative and technical services which include, but are not
limited to, production, exploration, treasury, payroll,
communications, personnel, executive administrative management,
central engineering and process engineering services provided by
the Operator's parent company Head Office or any of its
Affiliates to the extent not chargeable under paragraph 2.5 of
this Schedule "A."
2.10.2 In respect to the Operator's Head Office Overhead Charge, the
Operator shall charge monthly to the Joint Operations an amount
based on one-twelfth (2) of the estimated annual Head Office
Overhead Charge. Adjustments of the Head Office Overhead Charge,
based on actual expenditures, will be made at the end of each
calendar year.
2.10.3 For the purpose of calculating the Head Office Overhead Charges
pursuant to paragraph 2.10.2 hereof, costs, charges, and
expenditures relating to royalties, Concession rentals, taxes,
fees and charges paid to any government or taxing authority,
shall be excluded.
2.11 COSTS OF MATERIAL
-------------------
The costs of materials purchased or furnished by the Operator for use in
Joint Operations as provided under Section 3 of this accounting procedure.
2.12 COST OF THE OPERATOR'S EQUIPMENT AND FACILITIES
-----------------------------------------------------
The costs of equipment and Facilities owned and furnished by the Operator
or any of its Affiliates shall be charged to the Joint Account at rates
commensurate with the cost of ownership and operation.
2.12.1 The rates charged pursuant to this paragraph 2.12 shall not
exceed those currently prevailing for the supply of like
equipment and facilities on comparable terms in the area where
the Joint Operations are being conducted.
2.12.2 The equipment and facilities referred to herein shall exclude
major investment items such as, but not limited, to, drilling
rigs, producing platforms, oil treating facilities, oil and gas
loading and transportation systems, and terminal facilities and
other major facilities, charges for which shall be subject to a
separate agreement.
2.13 OTHER EXPENDITURES AND COSTS
-------------------------------
Any other expenditures and costs, not covered or dealt within the foregoing
provisions of this Section 2, which are incurred by the Operator in
accordance with the provisions of this Agreement.
III MATERIALS ADMINISTRATION
-------------------------
Costs, expenses, credits and other charges in respect of materials and
supplies, equipment, machines, tools and any other goods of a similar
nature acquired, used, consumed or disposed for the purposes of, or in the
course of the conduct of, the Joint Operations shall be for the Joint
Account as set forth in this Section 3.
3.1 MATERIALS ACQUISITION
----------------------
Materials purchased by the Operator shall be at Net Cost. "Net Cost" shall
include, but shall not be limited to, the invoice price less trade and cash
discounts actually received, purchase and procurement fees, freight and
forwarding charges, between point of supply and point of shipment, freight
to port of destination, insurance, customs duties, consular fees, excise
and other applicable taxes, other times chargeable against imported
materials and, where applicable, handling and transportation expenses from
point of importation to warehouse or operating site.
3.1.1 Except as otherwise provided in paragraph 3.1.4 and 3.1.5 below,
materials for use in the Joint Operations shall be purchased by
the Operator in arm's length transactions in the open market.
3.1.2 The Operator shall be under no obligation to purchase new, used
or surplus materials from the Non-Operators unless such materials
are of the specification required and have a competitive price.
3.1.3 Where an Affiliate of the Operator has arranged for the purchase,
coordinated the forwarding and expediting effort, a fee equal to
four percent (4%) of the FOB value of the materials will be added
to the cost of the materials purchased.
3.1.4 Whenever any material is not readily obtained at published or
listed prices because of national emergencies, strikes or other
usual causes over which the Operator has no control, the Operator
may charge Joint Account for the required material at the actual
cost incurred by the Operator in providing such material, and in
moving it to the Contract Area.
3.1.5 The Operator may purchase or otherwise acquire materials from an
affiliate on the same terms as set forth in this paragraph 3.1.
3.2 MATERIALS DISPOSAL
-------------------
The operator shall have the right to dispose of surplus materials as
provided in Article 2.10 of this Agreement.
3.2.1 Disposals of surplus material requiring Operating Committee
approval under Article 2.10 of this Agreement shall be effected
in accordance with a disposal and tendering procedure established
for such disposals by the Operator.
3.2.2 Any disposal and tendering procedure established by the Operator
for the purposes of subparagraph 3.2.1 shall:
(i) provide for disposal in arms length transactions in the open
market; and
(ii) include, for the Parties, a preferential right to purchase
same at a competitive price.
3.2.3 Proceeds from each sale or other disposal of material hereunder
shall be credited to the Joint Account.
3.3 INVENTORIES
-----------
At reasonable intervals, inventories shall be taken by the Operator of all
Joint Property. The Operator shall give thirty (30) days written notice of
its intent to take inventory to permit the Non-Operators to be represented
at the taking of such inventory. Failure on the Non-Operators to be
represented after due notice shall bind the Non-Operators to accept the
inventory taken by the Operator as correct.
3.3.1 Reconciliation of the physical inventory with the account of the
Joint Operations shall be made by the Operator and a list of
overages and shortages with relevant explanation where
appropriate shall be furnished to the Non-Operators, if
requested. Appropriate inventory and accounting adjustments shall
thereupon be made to the accounts of the Joint Operations.
3.3.2 Wherever there is a sale or change of interest in the Joint
Property, a special inventory of such Joint Property may be
carried out by the Operator, provided the purchaser of such
interest agrees to bear all of the expenses thereof. In such
cases, both the seller and the purchaser shall be entitled to be
represented at such inventory and shall be bound by inventory
whether or not such representation is provided.
SCHEDULE "B"
------------
UNIFORM PROJECT IMPLEMENTATION PROCEDURE
----------------------------------------
This Schedule "B" is attached to and forms part of the Joint Operating Agreement
made between AMNI INTERNATIONAL PETROLEUM DEVELOPMENT COMPANY LIMITED AND
LIBERTY TECHNICAL SERVICES LTD. the 30th day of June, 1998 ("the Agreement").
I DEFINITIONS
-----------
Words and phrases defined in Article 1 of the Agreement, when used herein,
shall have the same meanings assigned to them therein.
II APPLICATION
-----------
II.1 This Schedule sets out the procedure for initiating projects, tendering for
and implementing contracts and procuring materials and equipment for the
Joint Operations subject to sections 2.2 and 2.4 of this Schedule "B."
II.2 The procedure shall be applicable to all contracts and purchase orders
whose values exceed the respective limits set forth in Article 4.4 of this
Agreement and which, pursuant thereto, require the prior concurrence of the
Operating Committee.
III PROCEDURE FOR INITIATING PROJECTS
------------------------------------
3.1 The Operator realizing the need for a project or contract to which this
procedure applies pursuant to section 2 hereinabove, shall introduce it as
part of the proposed work programmes and budget to be developed and
submitted by the Operator, under this Agreement, to the Operating
Committee.
3.1.1 The Operator shall provide adequate information with respect to the
project including, without limitation, the following:
(i) A clear definition of the necessity and objective of the project;
(ii) Scope of the project; and
(iii) Cost Estimate thereof.
3.1.2 The Chairman of the Operating Committee shall forward or transmit the
project proposal along with all related documentation prepared and
provided by the Operator pursuant to Subsection 3.1.1 hereof to the
Sub-Committee established pursuant to Article 8.7 of the Agreement.
The Sub-Committee shall consider the proposal at its next meeting and,
if acceptable, shall recommend it to the Operating Committee for
approval.
3.1.3 The Operating Committee may, prior to confirming its approval, make
recommendations to the Operator regarding the selection, scope and
timing of the project. Such recommendations shall constitute an
instruction to the Operator who shall, where applicable, modify its
previous submittal as may be required by the said instruction of the
Operating Committee.
3.1.4 The project as approved pursuant to sub-sections 3.1.2 and 3.1.3 shall
form part of the Work Programme and Budget of the Joint Operations.
Such approval shall also constitute authorizations by the Operating
Committee to the Operator to initiate contacts and purchases relevant
to the project proposal.
3.1.5 Projects design and supervision/management shall first be drawn from
available Operator's in-house expertise or that of the Operator's
Affiliated Companies as approved by the Operating Committee under
approved budget.
3.1.6 After approval of the project/budget, the Operator shall:
(a) promptly provide the Operating Committee with copies of all
approved AFE's;
(b) prepare a detailed project implementation schedule including,
without limitation, detailed engineering design,
material/equipment procurement, inspection, transportation,
fabrication/construction, installation, testing and
commissioning; and
(c) shall present same to the Operating Committee including, without
limitation, the following:
(i) project definition;
(ii) project specification;
(iii)flow diagrams;
(iv) projects schedule;
(v) major equipment specifications; and
(vi) cost estimate of the project.
(d) prepare an activity status report as directed by the Operating
Committee.
IV CONTRACT TENDER PROCEDURE
---------------------------
4.1 The following tender procedure shall apply to work not directly undertaken
by the Operator itself or by the Operator's Parent Company which have a
cost of $50,000 or less.
4.1.1 The Operator shall maintain a list of approved companies for the
purposes of contracts for the Joint Operations, (the "Approved
Contractors' List"). The Non-Operators shall have the right to
propose companies to be included in the list. Operator shall be
responsible for prequalifying any Contractor to be included in
the Approved Contractors' List.
4.1.2 Contractors included in the Approved Contractors' List shall be
both local and/or overseas companies or entities. They shall also
be registered with the Department of Petroleum Resources of the
Ministry of Petroleum Resources.
4.1.3 When a contract is to be bid, the Operator shall present a list
of proposed bidders to the Operating Committee for concurrence
not less that fifteen (15) working days before issuance of
invitations to bid to prospective contractors. Non-Operators may
propose additional names to be included in the list of proposed
bidders or the deletion of any one thereof. Contract
specifications shall be in English and a recognized format used
in the international petroleum industry.
4.1.4 If the Operating Committee has not responded within fifteen (15)
working days following the presentation of the list of proposed
bidders as aforesaid, the Operator's list shall be deemed to have
been approved.
4.2 The Operator shall establish a Bid Committee who shall be responsible for
prequalifying bidders, sending out bid invitations, receiving and
evaluating bids and determining successful bidders to whom contracts shall
be awarded.
4.3 Analyses and recommendations of bids received and opened by the Bid
Committee shall be sent by Operator to the Operating Committee for
concurrence before a contract is executed with the selected contractor. The
Operating Committee shall respond within fifteen (15) working days.
Approval shall be deemed to have been given if the Operating Committee has
not responded within said period.
4.4 Prospective vendors/Contractors for work estimated in excess of $250,000.00
shall submit the commercial summary of their Bids to the Operator not
earlier than 15 minutes before the closure of Bid as specified in the
letter of invitation to Bid, if requested by the Operator.
4.5 In all cases in which an entity affiliated or otherwise related to Operator
is invited to bid, the Operator shall make full disclosure to the Operating
Committee of its relationship, if any, with the company or companies.
4.6 The foregoing procedures may be waived in emergency cases. In such cases
the Operator may negotiate directly with contractors. In respect of work
requiring specialized skill, upon the approval of Liberty, the Operator may
negotiate directly with the Contractors and promptly inform the Operating
Committee of the outcome of such negotiation.
V GENERAL CONDITIONS OF CONTRACTS
----------------------------------
Except as otherwise approved by the Parties, the following general
guidelines and conditions of contract shall apply.
5.1 PAYMENT OF TERMS
------------------
5.1.1 A minimum of 10% of contract price shall be held as a retention
payment until after the end of a guarantee period agreed with the
contractor which shall vary between six months and twelve months,
depending on the project, with the exception of drilling and
seismic data acquisition, well surveys and other such services. A
contractor may be given the option to provide other guarantee
equivalent to the 10% retention such as Letter of credit or
Performance Bond.
5.1.2 Provision shall be made for appropriate withholding tax as may be
applicable.
5.2 LANGUAGE OF CONTRACT
----------------------
The language of the contract shall be English.
5.3 LAWS, REGULATIONS, AND PERMITS
---------------------------------
5.3.1 The governing law of all agreements shall be the laws of England.
5.3.2 The Regulations shall apply to contractors performing in Nigeria
and, as far as practicable, they shall use indigenous human and
material resources.
5.3.3 All contracts shall include a provision whereby the Contractor
shall hold the Operator harmless and indemnify the Operator from
and against all liabilities, losses, damages and claims resulting
from claims and suits by third parties.
5.4 TERMINATION
-----------
Each contract shall also provide for early termination upon notice and the
Operator shall use all reasonable endeavours to obtain a termination
provision with minimal penalty.
5.5 LOCATION SUBSIDIARY
--------------------
Contracts shall provide, in the case of a foreign contractor, that the
local part of the work, where practicable, shall be performed by
contractors' local subsidiary.
6 MATERIALS & EQUIPMENT PROCUREMENT PROCEDURE
-----------------------------------------------
6.1 The Operator may, through own in-house or Parent Company procure materials
and equipment subject to conditions set forth hereinbelow.
6.2 The provisions of this Section 6 shall not apply to lump sum or turnkey
contracts/projects.
6.3 In ordering the equipment/materials, the Operator shall obtain from
vendors/manufacturers such rebates/discounts and such warranties/guarantees
that such vendors/manufacturers normally offer, and all rebates, discounts,
guarantees and all other grants and responsibilities shall be for the
benefit of the Joint Operations.
6.4 The Operator shall:
6.4.1 by means of established policies and procedures ensure that its
procurement efforts provide the best total value, with proper
consideration of quality, service, price, delivery and operating
costs to the benefit of the Joint Operations;
6.4.2 maintain appropriate records, which shall be kept up to date,
clearly documenting procurement activities;
6.4.3 provide a quarterly listing of excess materials in its stock list
to the Operating Committee; and
6.4.4 check the listings from other operators pursuant to subsection
6.4.2 above, prior to initiating any foreign purchase order.
6.5 The Operator shall initiate and maintain policies and practices which
create a competitive environment/climate amongst local and/or overseas
suppliers. Competitive quotation processes shall be employed for all local
procurements where the estimated value exceeds the equivalent of
$150,000.00.
6.5.1 Fabrication, whenever practicable shall be done locally provided
standards are not jeopardized. To this effective, the Joint
Operations recognize and shall accommodate local offers at a
reasonable premium.
6.5.2 Subject to Article 4.1.1, the Operator shall give preference to
Nigerian Indigenous Companies in the award of sub-contracts
provided the companies possess the requisite skill for the
execution of such contracts.
Contracts within the agreed financial limit of the Operator shall
be awarded to only competent Nigerian indigenous contractors.
Where there are no Nigerian Indigenous contractors possessing the
required skill/capability for the execution of such contracts,
the Operator shall notify the Operating Committee accordingly.
6.6 Analyses and recommendations of competitive quotations received pursuant to
section 6.5 shall be presented to the Operating Committee for approval
before a purchase order is issued to the selected vendor/manufacturer.
6.6.1 Approval shall be deemed to have been given if a response has not
been received within fifteen (15) working days of receiving the
analyses and recommendation presented pursuant to above section
6.6.
VII PROJECT MONITORING
-------------------
7.1 The Operator shall furnish monthly, a project report to the Operating
Committee.
7.1.1 For major contracts exceeding $1,000,000.00, or equivalent, the
Operator shall, in addition, furnish to Operating Committee a
detailed quarterly report which shall include:
(i) Approved budget total for each project;
(ii) Expenditure on each project;
(iii) Variances and explanation;
(iv) Number and value of construction change orders;
(v) Bar chart of schedule showing work in progress and work
already completed and schedule of mile-stones, and
significant events; and
(vi) Summary of progress during the reporting period, summary of
existing problems, if any, and proposed remedial action; and
anticipated problems; and percentage of completion.
7.1.2 In case of an increase in excess of 10% on the project, the
Operator shall promptly notify and obtain the consent of the
Operating Committee.
7.1.3 Not later that three (3) months following the physical completion
of any major projects over $1,000,000.00, or equivalent, the
Operator shall prepare and deliver to the Operating Committee a
project completion report which shall include the following:
(a) Cost performance of the project in accordance with the work
breakdown at the commencement of the project;
(b) Significant variations in any item or subitems; and
(c) Summary of problems and unexpected events encountered during
the project.
SCHEDULE "C"
------------
UNIFORM NOMINATION, SHIP SCHEDULING AND LIFTING PROCEDURE
---------------------------------------------------------
[The terms of this Schedule shall be negotiated by the Parties promptly after
the discover of a Commercial Quantities of Petroleum, with all Parties
negotiating in good faith]
SCHEDULE "D"
------------
MAP OF THE IMA FIELD
--------------------
[MAP OF THE IMA FIELD]
IMA FIELD, OML 112 (FORMERLY OPL 469) ) AND OPL 237
-------------------------------------------------------------
DEEP ZONES:
All geological formations within and around the Ima Field that are north
(upthrown) and south (downthrown) of the geological fault dividing the Ima
Field, all depths below the geological producing reservoir within the Ima Field,
known as the * F + sand, as currently shown on the maps and schematic
cross-section materials covering the Ima Field annexed hereto as Schedule A, or
a depth of 12,150 feet (true vertical depth), whichever is the lesser depth,
lying within the geological co-ordinates along the northern boundary of OML 112
and OPL 237, to the south boundary of OML 112, to the western boundary of OML
112 and to the eastern boundary of 550,000m E, as annexed hereto as Schedule B.
SCHEDULE "E"
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AFE FOR IMA # 11
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