EXHIBIT 10.1
WEST GHARIB EGYPT JOINT OPERATING AGREEMENT
INTERNATIONAL JOINT OPERATING AGREEMENT
WEST GHARIB AREA
THIS AGREEMENT is made as of the Effective Date,
AMONG:
DUBLIN INTERNATIONAL PETROLEUM (EGYPT) LIMITED, a body corporate
organized under the laws of the Republic of Ireland (hereinafter
referred to as "Dublin");
-and-
GHP EXPLORATION (WEST GHARIB) LTD., a body corporate organized under
the laws of Bermuda (hereinafter referred to as "GHP");
-and-
▇▇▇▇▇▇▇ PETROLEUM INC., a body corporate organized under the laws of
the British Virgin Islands (hereinafter referred to as "▇▇▇▇▇▇▇").
WITNESSETH:
WHEREAS, Dublin and Tanganyika Oil Company Ltd. ("Tanganyika") entered into the
Concession Agreement for Petroleum Exploration and Exploitation (the
"Concession") with the Government of the Arab Republic of Egypt and the Egyptian
General Petroleum Corporation ("EGPC") for the ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇
of Egypt, a copy of which is attached hereto as Exhibit "B"; and
WHEREAS Tanganyika has transferred its entire right, title and interest in the
Concession to Dublin; and
WHEREAS Dublin and ▇▇▇▇▇▇▇ are parties to a Farmout Agreement dated April 27,
1998, pursuant to which and subject to the terms thereof, Dublin agreed to
assign a Participating Interest to ▇▇▇▇▇▇▇; and
WHEREAS Dublin and GHP are parties, or successors to the parties, to a Farmout
Agreement dated April 27, 1998, pursuant to which and subject to the terms
thereof, Dublin agreed to assign a Participating Interest to GHP; and
WHEREAS, the Parties desire to define their respective rights and obligations
with respect to their operations under the Concession.
NOW, THEREFORE, in consideration of the premises and the mutual covenants and
agreements and obligations set out below and to be performed, the Parties agree
as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following words and terms shall have the meaning
ascribed to them below:
1.1 "Accounting Procedure" means the rules, provisions and conditions set
forth and contained in Exhibit "A" to this Agreement.
1.2 "AFE" means an authorization for expenditure pursuant to Article 6.6.
1.3 "Affiliate" means a company, partnership or other legal entity which
controls, or is controlled by, or which is controlled by an entity
which controls a Party. Control means the ownership or the right to
cast or cause to be cast, directly or indirectly, of fifty (50%)
percent or more of the shares or voting rights in a company,
partnership or legal entity.
1.4 "Agreed Interest Rate" means interest compounded on a monthly basis, at
the rate per annum equal to the one (1) month term, LIBOR rate for U.S.
dollar deposits, as published by The Wall Street Journal or if not so
published, then by the Financial Times of London, plus five percent
(5%), applicable on the first Business Day prior to the due date of
payment and thereafter on the first Business Day of each succeeding one
(1) month term. If the aforesaid rate is contrary to any applicable
usury law, the rate of interest to be charged shall be the maximum rate
permitted by such applicable law.
1.5 "Agreement" means this agreement, together with Exhibits "A" and "B"
attached to this agreement and forming a part hereof.
1.6 "Appraisal Well" means any well whose purpose at the time of
commencement of drilling such well is the determination of the extent
or the volume of Hydrocarbon reserves contained in an existing
Discovery.
1.7 "Board of Directors" means the Board of Directors of the Operating
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Company and "Director" means a member of the Board of Directors.
1.8 "Business Day" means a day on which the banks in Cairo, Egypt are
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customarily open for business.
1.9 "Calendar Quarter" means a period of three (3) months commencing with
January 1 and ending on the following March 31, a period of three (3)
months commencing with April 1 and ending on the following June 30, a
period of three (3) months commencing with July 1 and ending on the
following September 30, or a period of three (3) months commencing with
October 1 and ending on the following December 31 according to the
Gregorian Calendar.
1.10 "Calendar Year" means a period of twelve (12) months commencing
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with January 1 and ending on the following December 31 according to the
Gregorian Calendar.
1.11 "Cash Premium" means the payment made pursuant to Article 7.5(B) by a
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Non-Consenting Party to reinstate its rights to participate in an
Exclusive Operation.
1.12 "Commercial Discovery" shall have the meaning set out in Article III(c)
(i) of the Concession.
1.13 "Completion" means an operation intended to complete a well through the
Christmas tree as a producer of Hydrocarbons in one or more Zones,
including, but not limited to, the setting of production casing,
perforating, stimulating the well and production Testing conducted in
such operation. "Complete" and other derivatives shall be construed
accordingly.
1.14 "Concession" means collectively the Concession Agreement authorized and
put in full force by Law 15 of 1998 of the Arab Republic of Egypt and
which agreement is attached as Exhibit "B" hereto, and any Development
Leases or other mineral rights which may be derived from the Concession
Agreement including any extension, renewal or amendment of any of the
foregoing.
1.15 "Concession Area" has the meaning ascribed to the term 'Area' in the
Concession as the same may be adjusted from time to time in accordance
with the terms thereof.
1.16 "Consenting Party" means a Party who agrees to participate in and pay
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its share of the cost of an Exclusive Operation.
1.17 "Cost Oil" means that portion of the total production of Hydrocarbons
which is allocated to the Parties under the Concession for the recovery
of Petroleum Costs and referred to and defined as "Cost Recovery
Petroleum" in Article VII(a)1 of the Concession.
1.18 "Crude Oil" has the meaning given to such term in the Concession.
1.19 "Day" means a calendar day unless otherwise specifically provided.
1.20 "Deepening" means an operation whereby a well is drilled to an
objective Zone below the deepest Zone in which the well was previously
drilled, or below the deepest Zone proposed in the associated AFE,
whichever is the deeper. "Deepen" and other derivatives shall be
construed accordingly.
1.21 "Defaulting Party" shall have the meaning ascribed in Article 8.1.
1.22 "Development Block" has the meaning given to such term in the
Concession.
1.23 "Development Lease" has the meaning given to such term in the
Concession.
1.24 "Development Period" has the meaning given to such term in Article
III(d)(iii) of the Concession.
1.25 "Development Plan" means the plan for the development of Hydrocarbons
from a Development Lease which shall include, inter alia:
A) Details of the proposed work to be undertaken, personnel required and
expenditures to be incurred, including the timing of same;
B) An estimated date for the commencement of production;
C) A delineation of the proposed Development Lease; and
D) Any other information requested by the Operating Committee.
1.26 "Development Well" means any well drilled for the production of
Hydrocarbons in the Development Period.
1.27 "Discovery" means the discovery of an accumulation of Hydrocarbons
whose existence until that moment was unproven by drilling, and for
greater certainty, shall include a Commercial Oil Well and a Commercial
Gas Well (as those terms are defined in the Concession).
1.28 "▇▇▇▇▇▇▇ Farmout Agreement" means the Farmout Agreement between Dublin
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and ▇▇▇▇▇▇▇ dated April 27, 1998 and any amendments and revisions
thereto.
1.29 "Effective Date" means the date this Agreement comes into effect as
stated in Article II.
1.30 "EGPC" means the Egyptian General Petroleum Corporation.
1.31 "Entitlement" means a quantity of produced Hydrocarbons of which a
Party has the right and obligation to take delivery pursuant to the
Concession or, if applicable, an offtake agreement, which, subject to
the terms of the GHP Farmout Agreement and the ▇▇▇▇▇▇▇ Farmout
Agreement, shall be derived in proportion to that Party's Participating
Interest in the Hydrocarbons produced after adjustment for overlifts
and underlifts.
1.32 "Excess Cost Oil" has the meaning given to "Excess Cost Recovery
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Petroleum" in Article VII(a)2 of the Concession.
1.33 "Exclusive Operations" means those operations and activities carried
out by Operator, pursuant to this Agreement, the costs of which are
chargeable to the account of less than all the Parties.
1.34 "Exclusive Well" means a well drilled pursuant to an Exclusive
Operation.
1.35 "Exploration Advisory Committee" means the committee of that name
provided for in the Concession.
1.36 "Exploration Period" means any and all periods of exploration set out
in the Concession.
1.37 "Exploration Sub-Period" means one of the periods for exploration set
out in the Concession.
1.38 "Exploration Well" means any well drilled during the course of
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exploration work other than an Appraisal Well or Development Well.
1.39 "Farmout Agreements" means the ▇▇▇▇▇▇▇ Farmout Agreement and the GHP
Farmout Agreement.
1.40 "Financial Year" has the meaning given to such term in the Concession.
1.41 "G & G Data" means geological, geophysical and geochemical data and
other information that is not obtained through a wellbore.
1.42 "GHP Farmout Agreement" means the Farmout Agreement between Dublin and
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GHP dated April 27, 1998 and any amendments and revisions thereto.
1.43 "Government" means the Government of the Arab Republic of Egypt or any
agency thereof.
1.44 "Gross Negligence" means any act or failure to act (whether sole, joint
or concurrent) by a Party which was intended to cause, or which was in
reckless disregard of or wanton indifference to, harmful consequences
such Party knew, or should have known, such act or failure would have
had on the safety or property of another person or entity, or which was
in reckless disregard of or wanton indifference to the rights of
another party or the Government, but shall not include any error of
judgement or mistake made by such Party in the exercise in good faith
of any function, authority or discretion conferred on the Party
employing such under this Agreement.
1.45 "Hydrocarbons" means all substances including liquid and gaseous
hydrocarbons which are subject to and covered by the Concession.
1.46 "Joint Account" means the accounts and records established and
maintained by Operator for Joint Operations in accordance with the
provisions of this Agreement and of the Accounting Procedure.
1.47 "Joint Operations" means those operations and activities carried out by
Operator pursuant to this Agreement, the costs of which are chargeable
to all Parties.
1.48 "Joint Property" means, at any point in time and subject to the
Concession, all ▇▇▇▇▇, facilities, equipment, materials, information,
funds and the property held for the Joint Account.
1.49 "Mandatory Appraisal Well" means an Appraisal Well which, unless
otherwise agreed to by EGPC, is required pursuant to the terms of the
Concession to be drilled before notice of a Commercial Discovery may be
given, excepting any such well which would qualify as an obligatory
well under the Minimum Work Obligations for the then current
Exploration Sub-Period..
1.50 "Minimum Work Obligations" means the work and/or expenditure
obligations during the Exploration Period, as specified in the
Concession, which must be performed or expended in order to satisfy the
obligations contained in the Concession.
1.51 "Non-Consenting Party" means a Party who elects not to participate in
an Exclusive Operation.
1.52 "Non-Operator(s)" means the Party or Parties to this Agreement other
than Operator.
1.53 "Operating Committee" means the committee constituted in accordance
with Article V.
1.54 "Operating Company" means the company to be created to conduct
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operations under the Concession after a Commercial Discovery.
1.55 "Operator" means a Party to this Agreement designated as such in
accordance with this Agreement.
1.56 "Participating Interest" means the undivided percentage interest of
each Party in the rights and obligations derived from the Concession
and this Agreement.
1.57 "Party" means any of the entities named in the first paragraph to this
Agreement and any respective successors or assigns in accordance with
the provisions of this Agreement.
1.58 "Petroleum Costs" means costs and expenses incurred by the Parties
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and allowed by EGPC to be recovered pursuant to the Concession.
1.59 "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.
1.60 "Production Sharing Oil" means that portion of the total production of
Hydrocarbons, in excess of Cost Oil, which is allocated to the Parties
under the terms of Article VII(b) of the Concession and includes the
Parties share of Excess Cost Oil contemplated in Article VII(a)2 of the
Concession.
1.61 "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.
1.62 "Reworking" means an operation conducted in the wellbore of a well
after it is Completed to secure, restore, or improve production in a
Zone which is currently open to production in the wellbore. Such
operations include, but are not limited to, well stimulation
operations, but exclude any routine repair or maintenance work, or
drilling, Sidetracking, Deepening, Completing, Recompleting, or
Plugging Back of a well. "Rework" and other derivatives shall be
construed accordingly.
1.63 "Senior Supervisory Personnel" means with respect to a Party, any
individual who functions as such Party's senior resident manager, who
directs all operations and activities of such Party in the country or
region in which he is resident, and any individual who functions for
such Party or one of its Affiliates at a management level equivalent to
or superior to the senior resident manager, or any officer or director
of such Party or one of its Affiliates, but excluding all managers or
supervisors who are responsible for or in charge of installations or
facilities, onsite drilling, construction or production and related
operations, or any other field operations.
1.64 "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. "Side-track" and other
derivatives shall be construed accordingly.
1.65 "Testing" means an operation intended to evaluate the capacity of a
Zone to produce Hydrocarbons. "Test" and other derivatives shall be
construed accordingly.
1.66 "Work Program and Budget" means a work program for Joint Operations and
budget therefor as described and approved in accordance with Article
VI.
1.67 "Zone" means a stratum of earth containing or thought to contain a
common accumulation of Hydrocarbons separately producible from any
other common accumulation of Hydrocarbons.
ARTICLE II
EFFECTIVE DATE AND TERM
2.1 Effective Date and Term
This Agreement shall have effect from the 27th Day of April, 1998 and
shall, subject always to the Parties' continuing obligations under
Article XV, continue in effect until the Concession terminates and
thereafter until all materials, equipment and personal property used in
connection with the Joint Operations have been removed and disposed of,
and final settlement has been made among the Parties.
For the avoidance of doubt, the portions of this Agreement described in
(A), (B) and (C) below shall remain in effect until:
A) all ▇▇▇▇▇ have been properly abandoned in accordance with Article X;
and
B) all obligations, claims, arbitrations and lawsuits have been settled
or otherwise disposed of in accordance with Article 4.5 and Article
XVIII; and
C) the time relating to the protection of confidential information and
proprietary technology has expired in accordance with Article XV.
ARTICLE III
PARTICIPATING INTERESTS
3.1 Scope
A) The purpose of this Agreement is to establish the respective
rights and obligations of the Parties with regard to
operations under the Concession, including without limitation,
the joint exploration, appraisal, development and production
of Hydrocarbon reserves from the Concession Area.
B) Without limiting the generality of Article 3.1(A), the
following activities are outside of the scope of this
Agreement and are not addressed herein:
1) Construction, operations, maintenance, repair and removal of facilities
downstream from the point of delivery of the Parties' share of Hydrocarbons
under the offtake agreement provided for in Article 9.2;
2) Transportation of Hydrocarbons beyond the point of delivery of the Parties'
shares of Hydrocarbons under the offtake agreement provided for in Article 9.2;
3) Marketing and sales of Hydrocarbons, except as expressly provided in Articles
8.7 and in Article IX;
4) Acquisition of rights to explore for, appraise, develop or produce
Hydrocarbons outside of the Concession Area (other than as a consequence of
unitization with an adjoining area under the terms of the Concession); and
5) Exploration, appraisal, development or production of minerals other than
Hydrocarbons, whether inside or outside of the Concession Area.
3.2 Participating Interests
A) The Participating Interests of the Parties shall be as follows :
Dublin - 50%
GHP - 30%
▇▇▇▇▇▇▇ - 20%
B) If a Party transfers all or part of its Participating Interest pursuant
to the provisions of this Agreement and the Concession, the
Participating Interests of the Parties shall be revised accordingly.
3.3 Ownership, Obligations and Liabilities
A) Unless otherwise provided in this Agreement or either of the
Farmout Agreements, all the rights and interests in and under
the Concession, all Joint Property and any Hydrocarbons
produced from the Concession Area shall, subject to the terms
of the Concession and any laws and regulations which may be
applicable, be owned by the Parties in accordance with their
respective Participating Interests.
B) Unless otherwise provided in this Agreement or either of the
Farmout Agreements, the obligations of the Parties under the
Concession and all liabilities and expenses incurred by
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) Subject to the terms of this Agreement and the Farmout
Agreements, each Party shall pay when due, in accordance with
the Accounting Procedure, its Participating Interest share of
Joint Account expenses, including cash advances and interest,
accrued pursuant to this Agreement and the Accounting
Procedure shall govern the accrual and satisfaction of the
respective obligations, liabilities and credits among the
Parties.
ARTICLE IV
OPERATOR
4.1 Designation of Operator
Dublin is designated as Operator and agrees to act in accordance with
the terms and conditions of the Concession and this Agreement, which
terms and conditions shall also apply to any successor Operator.
4.2 Rights and Duties of Operator
A) Subject to the terms and conditions of this Agreement,
Operator shall have exclusive charge of and shall conduct all
Joint Operations. Operator may employ independent contractors
and/or agents (which may include Affiliates of Operator) in
such Joint Operations.
B) In the conduct of Joint Operations, Operator shall exercise
its best efforts to:
1) Perform Joint Operations in accordance with the
provisions of the Concession, this Agreement and the
instructions of the Operating Committee not in
conflict with this Agreement and in material
compliance with applicable laws, rules, regulations
and decrees of the Arab Republic of Egypt;
2) Conduct all Joint Operations in a diligent, safe and
efficient manner in accordance with good and prudent
oil field practices and conservation principles
generally followed by the international petroleum
industry under similar circumstances;
3) Subject to Article 4.6 and the Accounting Procedure,
neither gain a profit nor suffer a loss as a result
of being the Operator in its conduct of Joint
Operations, provided that Operator may rely on
Operating Committee approval of specific accounting
practices not in conflict with the Accounting
Procedure;
4) Perform the duties for the Operating Committee set
out in Article V and prepare and submit to the
Operating Committee the proposed Work Programs and
Budgets and AFEs as provided in Article VI;
5) Acquire all licenses, permits, consents, approvals,
surface or other rights that may be required for or
in connection with the conduct of Joint Operations;
6) Upon receipt of reasonable advance notice, permit the
representatives of any of the Parties to have at all
reasonable times and at their own risk and expense
reasonable access to the Joint Operations with the
right to observe all such Joint Operations and to
inspect all Joint Property and to conduct financial
audits as provided in the Accounting Procedure;
7) Maintain the Concession in full force and effect.
Operator shall promptly pay and discharge all
liabilities and expenses incurred in connection with
Joint Operations and use its reasonable efforts to
keep and maintain the Joint Property free from all
liens, charges and encumbrances arising out of Joint
Operations;
8) Pay to the Government for the Joint Account, within
the periods and in the manner prescribed by the
Concession and all applicable laws and regulations,
all periodic payments, royalties, taxes, fees and
other payments pertaining to Joint Operations, but
excluding any taxes measured by the incomes of the
Parties;
9) Carry out the obligations of Contractor, as such term
is defined in the Concession, including, but not
limited to, preparing and furnishing such reports,
records and information as may be required pursuant
to the Concession;
10) Have, in accordance with the decisions of the
Operating Committee, Article 5.14, and Article
6.3(C), the exclusive right and obligation to
represent the Parties in all dealings with the
Government with respect to matters arising under the
Concession and Joint Operations. Operator shall
notify the other Parties as soon as possible of such
meetings. Non-Operators shall have the right to
attend such meetings but only in the capacity of
observers. Nothing contained in this Agreement
shall restrict any Party from holding discussions
with the Government with respect to any issue
peculiar to its particular business interests arising
under this Agreement, but in such event such Party
shall promptly advise the Parties, if possible,
before and in any event promptly after such
discussions, provided that such Party shall not be
required to divulge to the Parties any matters
discussed to the extent the same involve proprietary
information on matters not affecting the Parties; and
11) Take all necessary and proper measures for the
protection of life, health, the environment and
property in the case of an emergency; provided,
however, that Operator shall immediately notify the
Parties of the details of such emergency and
measures.
4.3 Employees of Operator
Subject to the Concession and this Agreement, Operator shall determine
the number of employees, the selection of such employees, the hours of
work and the compensation to be paid all such employees in connection
with Joint Operations and Exclusive Operations conducted by Operator
under this Agreement. Operator shall employ only such employees, agents
and contractors as are reasonably necessary to conduct Joint
Operations.
4.4 Information Supplied by Operator
A) Operator shall provide each Non-Operator with one (1) paper
copy of the following data and reports as they are currently
produced or compiled from the Joint Operations:
1) Copies of all logs or surveys;
2) Daily drilling progress reports;
3) Copies of all tests and core analysis reports;
4) Copies of the plugging reports;
5) Copies of the final geological and geophysical maps
and reports in seismic digital format;
6) Engineering studies, development schedules and annual
progress reports on development projects;
7) Field and well performance reports, including
reservoir studies and reserve estimates;
8) Copies of all reports relating to Joint Operations
furnished by Operator to the Government, except
magnetic tapes which shall be stored by Operator and
made available for inspection and/or copying at the
sole expense of the Non-Operator requesting same;
9) Other reports as frequently as is justified by the
activities or as instructed by the Operating
Committee; and
10) Subject to Article 15.3, such additional information
for Non-Operators as they or any of them may request,
provided that the requesting Party or Parties pay the
costs of preparation of such information and that the
preparation of such information will not unduly
burden Operator's administrative and technical
personnel. Only Non-Operators who pay such costs
shall receive such additional information.
B) Operator shall give Non-Operators access at all reasonable
times to all other data acquired in the conduct of Joint
Operations. Any Non-Operator may make copies of such other
data at its sole expense.
4.5 Settlement of Claims and Lawsuits
A) Operator shall promptly notify the Parties of any and all
material claims or suits and such other claims and suits as
the Operating Committee may direct which arise out of Joint
Operations or relate in any way to Joint Operations. Operator
shall represent the Parties and defend or oppose or settle the
claim or suit. Operator may in its sole discretion compromise
or settle any such claim or suit or any related series of
claims or suits for an amount not to exceed the equivalent of
one hundred thousand (U.S.$100,000) Dollars (U.S.) inclusive
of legal fees. Operator shall obtain the approval and
direction of the Operating Committee on amounts in excess of
the above stated amount. Each Non-Operator shall have the
right to be represented by its own counsel at its own expense
in the settlement, compromise or defense of such claims or
suits.
B) Any Non-Operator shall promptly notify the other Parties of
any claim made against such Non-Operator by a third party
which arises out of or which may affect the Joint Operations
and such Non-Operator shall defend or settle the same in
accordance with any directions given by the Operating
Committee. Those costs, expenses and damages incurred pursuant
to such defense or settlement which are attributable to Joint
Operations shall be for the Joint Account.
C) Notwithstanding Article 4.5(A) and Article 4.5(B), each Party
shall have the right to participate in any such suit,
prosecution, defense or settlement conducted in accordance
with Article 4.5(A) and Article 4.5(B) at its sole cost and
expense; provided always that no Party may settle its
Participating Interest share of any claim without first
satisfying the Operating Committee that it can do so without
prejudicing the interests of the Joint Operations.
4.6 Liability of Operator
A) Except as set out in this Article 4.6, neither the Party
designated as Operator nor any other Indemnitee (as defined
below) shall bear (except as a party to the extent of its
Participating Interest share) any damage, loss, cost, expense
or liability resulting from performing (or failing to perform)
the duties and functions of the Operator and the Indemnitees
are hereby released from liability to Non-Operators for any
and all damages, losses, costs, expenses and liabilities
arising out of, incident to or resulting from such performance
or failure to perform, even though caused in whole or in part
by a pre-existing defect, the negligence (sole, joint or
concurrent), Gross Negligence, strict liability or other legal
fault of Operator (or any such Indemnitee).
B) Except as set out in this Article 4.6, the Parties shall in
proportion to their Participating Interests defend and
indemnify Operator and its Affiliates, and their respective
consultants, agents, employees, officers and directors (the
"Indemnitees"), from any and all damages, losses, costs,
expenses (including reasonable legal costs, expenses and
attorneys' fees) and liabilities incident to claims, demands
or causes of action of every kind and character brought by or
on behalf of any person or entity, which claims, demands or
causes of action arise out of, are incident to or result from
Joint Operations regardless of the cause of such damage, loss,
injury, illness or death and even though caused in whole or in
part by a pre-existing defect, the negligence (whether sole,
joint or concurrent), Gross Negligence, strict liability or
other legal fault of Operator (or any such Indemnitee).
C) Nothing in this Article 4.6 shall be deemed to relieve the
Party designated as Operator from its Participating Interest
share of any damage, loss, cost, expense or liability arising
out of, incident to or resulting from Joint Operations.
D) Notwithstanding Articles 4.6(A) and 4.6(B), if any Senior
Supervisory Personnel of Operator or its Affiliates engage in
Gross Negligence that proximately causes the Parties to incur
damage, loss, cost, expense or liability for claims, demands
or causes of action referred to in Articles 4.6(A) or 4.6(B),
Operator shall solely be responsible for the first five
million ($5,000,000) Dollars (U.S.) of such damages, losses,
costs, expenses and liabilities.
E) Notwithstanding the foregoing, under no circumstances shall
any Indemnitee (except as a Party to the extent of its
Participating Interest) bear any cost, expense or liability
for environmental, consequential, punitive or any other
similar indirect damages or losses, including but not limited
to, those arising from business interruption, reservoir or
formation damage, inability to produce Hydrocarbons, loss of
profits, pollution control and environmental amelioration or
rehabilitation.
4.7 Insurance Obtained by Operator
A) Operator shall procure and maintain or cause to be procured
and maintained for the Joint Account all insurance in the
types and amounts required by the Concession and applicable
laws, rules and regulations.
B) Operator shall obtain for the Joint Account such further
insurance, at competitive rates, as the Operating Committee
may from time to time require.
C) Any Party may elect not to participate in the insurance to be
procured under Article 4.7(B) provided such Party:
1) gives prompt written notice to that effect to
Operator;
2) does nothing which may interfere with Operator's
negotiations for such insurance for the other
Parties; and
3) obtains and maintains such insurance (in respect of
which an annual certificate of adequate coverage
from a reputable insurance broker shall be sufficient
evidence) or other evidence of financial
responsibility which fully covers its Participating
Interest share of the risks that would be covered by
the insurance procured under Article 4.7(B),
and which the Operating Committee may determine to be
acceptable. No such determination of acceptability
shall in any way absolve a non-participating Party
from its obligation to meet each cash call, including
any cash call in respect of damages and losses and/or
the costs of remedying the same, in accordance with
the terms of this Agreement. If such Party obtains
other insurance, such insurance shall contain a
waiver of subrogation in favor of all the other
Parties and the Operator, but only in respect of
their interests under this Agreement.
D) The cost of insurance in which all the Parties are
participating shall be for the Joint Account and the cost of
insurance in which less than all the Parties are participating
shall be charged to the Parties participating in proportion to
their respective Participating Interests.
E) Operator shall, in respect of all insurance obtained pursuant
to this article:
1) promptly inform the participating Parties when such
insurance is obtained and supply them with copies of
the relevant policies when the same are issued;
2) arrange for the participating Parties, according to
their respective Participating Interests, to be named
as co-insurers on the relevant policies with waivers
of subrogation in favor of all the Parties; and
3) duly file all claims and take all necessary and
proper steps to collect any proceeds and credit any
proceeds to the participating Parties in proportion
to their respective Participating Interests.
F) Operator shall use its reasonable efforts to require all
contractors performing work in respect of Joint Operations to
obtain and maintain any and all insurance in the types and
amounts required by any applicable laws, rules and regulations
or any decision of the Operating Committee and shall use its
reasonable efforts to require all such contractors to name the
Parties as additional insureds on contractors' insurance
policies or to obtain from their insurers waivers of all
rights of recourse against Operator, Non-Operators and their
insurers.
4.8 Commingling of Funds
Operator may not commingle with Operator's own funds the monies which
Operator receives from or for the Joint Account pursuant to this
Agreement.
4.9 Resignation of Operator
Subject to Article 4.11, Operator may resign as Operator at any time by
so notifying the other Parties at least one hundred and twenty (120)
Days prior to the effective date of such resignation. Operator shall
continue to act as such until a successor has taken over.
4.10 Removal of Operator
A) Subject to Article 4.11, Operator shall be removed upon
receipt of notice from any Non-Operator if:
1) An order is made by a court or an effective
resolution is passed for the dissolution,
liquidation, winding up or reorganization by
creditors of Operator;
2) Operator dissolves, liquidates or terminates its
corporate existence;
3) Operator becomes insolvent, bankrupt o r makes an
assignment for the benefit of creditors; or
4) A receiver is appointed for a substantial part of
Operator's assets.
B) Subject to Article 4.11, Operator may be removed by the
decision of the Non-Operators if Operator has committed a
material breach of this Agreement and has either failed to
commence to rectify the breach within thirty (30) Days of
receipt of a notice from Non-Operators detailing the alleged
breach or failed to diligently pursue such activities to
completion. Any decision of Non-Operators to give notice of
breach to Operator or to remove Operator under this Article
4.10(B) shall be made by the unanimous vote of all
Non-Operators.
C) If Operator together with any Affiliate of Operator is or
becomes the holder of a Participating Interest of less than
twenty percent (20%), then Operator shall be required to
promptly notify the other Parties. The Operating Committee
shall then vote within thirty (30) Days of such notification
on whether or not a successor Operator should be named
pursuant to Article 4.11.
D) If there is a direct or indirect change in control of Operator
(other than a transfer of control to an Affiliate of
Operator), Operator shall be required to promptly notify the
other Parties. Upon a Non-Operator's inquiry in respect of a
change of control, Operator shall reply within ten (10) Days
of receipt of such inquiry or of such change of control. The
Operating Committee shall vote within thirty (30) Days of
receipt of such notice or reply from Operator on whether or
not a successor Operator should be appointed pursuant to
Article 4.11. For purposes of this Article, control means the
ownership directly or indirectly of fifty percent (50%) or
more of the shares or voting rights of Operator.
4.11 Appointment of Successor
When a change of Operator occurs pursuant to Article 4.9 or Article
4.10:
A) The Operating Committee shall meet as soon as possible to
appoint a successor Operator pursuant to the voting procedure
of Article 5.9. However, no Party may be appointed successor
Operator against its will.
B) If the Operator disputes the commission of or failure to
rectify a material breach alleged pursuant to Article 4.10(B)
and proceedings are initiated pursuant to Article XVIII, no
successor Operator may be appointed pending the conclusion or
abandonment of such proceedings and during the period such
proceedings are pending Operator shall continue to act as
such, subject to the terms of Article 8.3 with respect to
Operator's breach of its payment obligations.
C) If an Operator is removed, other than in the case of Article
4.10(C) or Article 4.10(D), neither Operator nor any Affiliate
of Operator shall have the right to vote for itself on the
appointment of a successor Operator, nor be considered as a
candidate for the successor Operator.
D) A resigning or removed Operator shall be compensated out of
the Joint Account for its reasonable expenses directly related
to its resignation or removal, except in the case of Article
4.10(B).
E) If requested by the resigning Operator or the successor
Operator or any Non-Operator, the Operating Committee shall
arrange for the taking of an independent inventory of all
Joint Property and Hydrocarbons, and an audit of the books and
records of the removed Operator. Such inventory and audit
shall be completed, if possible, no later than the effective
date of the change of Operator. The liabilities and expenses
of such inventory and audit shall be charged to the Joint
Account.
F) The resignation or removal of Operator and its replacement by
the successor Operator shall not become effective prior to
receipt of any necessary Government approvals.
G) Upon the effective date of the resignation or removal, the
successor Operator shall succeed to all duties, rights and
authority prescribed for Operator. The former Operator shall
transfer to the successor Operator custody of all Joint
Property, Hydrocarbons in storage or in transit, books of
account, records and other documents maintained by Operator
pertaining to the Concession and to Joint Operations. Upon
delivery of the above-described property and data, the former
Operator shall be released and discharged from all obligations
and liabilities as Operator accruing after such date.
ARTICLE V
OPERATING COMMITTEE
5.1 Establishment of Operating Committee
To provide for the overall supervision and direction of Joint
Operations, there is established an Operating Committee composed of
representatives of each Party holding a Participating Interest. Each
Party shall appoint one (1) representative and one (1) alternate
representative to serve on the Operating Committee. Each Party shall as
soon as possible and in any event within thirty (30) Days after the
date of this Agreement give notice in writing to the other Parties of
the name and address of its representative and alternate representative
to serve on the Operating Committee. Each Party shall have the right to
change its representative and alternate at any time by giving proper
notice to such effect to the other Parties.
5.2 Powers and Duties of Operating Committee
The Operating Committee shall have power and duty to authorize and
supervise Joint Operations that are necessary or desirable to discharge
the obligations of the Parties under the Concession, any applicable
laws and regulations and to properly explore and exploit the Concession
Area in accordance with this Agreement and in a manner appropriate in
the circumstances.
5.3 Authority to Vote
The representative of a Party, or in his absence his alternate
representative, shall be authorized to represent and bind such Party
with respect to any matter which is within the powers of the Operating
Committee and is properly brought before the Operating Committee. Each
such representative shall have a vote equal to the Participating
Interest of the Party such person represents. Each alternate
representative shall be entitled to attend all Operating Committee
meetings but shall have no vote at such meetings except in the absence
of the representative for whom he is the alternate. In addition to the
representative and alternate representative, each Party may also bring
to any Operating Committee meetings such technical and other advisors
as it may deem appropriate.
5.4 Subcommittees
The Operating Committee may establish such subcommittees, including
technical subcommittees, as the Operating Committee may deem
appropriate. The functions of such subcommittees shall be in an
advisory capacity or as otherwise determined unanimously by the
Parties. Each subcommittee shall appoint a chairman.
5.5 Notice of Meeting
A) Operator may call a meeting of the Operating Committee by
giving notice to the Parties at least fifteen (15) Days in
advance of such meeting.
B) Any Non-Operator may request a meeting of the Operating
Committee by giving proper notice to all the other Parties.
Upon receiving such request, Operator shall call such meeting
for a date not less than fifteen (15) Days nor more than
twenty (20) Days after receipt of the request.
C) The notice periods above may only be waived with the unanimous
consent of all the Parties.
5.6 Contents of Meeting Notice
A) Each notice of a meeting of the Operating Committee as
provided by Operator shall contain:
1) The date, time and location of the meeting; and
2) An agenda of the matters and proposals to be
considered and/or voted upon, together with copies of
all materials relating or relevant thereto or
reasonably necessary for the consideration thereof.
B) A Party, by notice to the other Parties given not less than
seven (7) Days prior to a meeting, may add additional matters
to the agenda for a meeting.
C) On the request of a Party, and with the unanimous consent of
all Parties, the Operating Committee may consider at a meeting
a proposal not contained in such meeting agenda.
5.7 Location of Meetings
All meetings of the Operating Committee shall be held in Cairo, Arab
Republic of Egypt or elsewhere as may be decided by the Operating
Committee.
5.8 Operator's Duties for Meetings
A) With respect to meetings of the Operating Committee and any
subcommittee, Operator's duties shall include, but not be
limited to:
1) Timely preparation and distribution of the agenda;
2) Organization and conduct of the meeting; and
3) Preparation of a written record or minutes of each meeting.
B) Operator shal have the right to appoint the chairman of the
Operating Committee and all subcommittees.
5.9 Voting Procedure
Except as otherwise expressly provided in this Agreement, all
decisions, approvals and other actions of the Operating Committee on
all proposals coming before it under this Agreement shall be decided by
the affirmative vote of two (2) or more Parties, which are not
Affiliates, then having collectively at least sixty five percent (65%)
of the Participating Interests.
5.10 Record of Votes
The chairman of the Operating Committee shall appoint a secretary who
shall make a record of each proposal voted on and the results of such
voting at each Operating Committee meeting. Each representative shall
sign and be provided a copy of such record at the end of such meeting
and it shall be considered the final record of the decisions of the
Operating Committee.
5.11 Minutes
The secretary shall provide each Party with a copy of the minutes of
the Operating Committee meeting within seven (7) Days after the end of
the meeting. Each Party shall have fifteen (15) Days after receipt of
such minutes to give notice of its objections to the minutes to the
secretary. Any objection to the minutes shall become an agenda item for
the next meeting unless earlier resolved. A failure to give notice
specifying objection to such minutes within said fifteen (15) Day
period shall be deemed to be approval of such minutes. In any event,
the votes recorded under Article 5.10 shall take precedence over the
minutes described above.
5.12 Voting by Notice
A) In lieu of a meeting, Operator may submit any proposal for a
decision of the Operating Committee by giving each
representative proper notice describing the proposal so
submitted. Each Party shall communicate its vote by proper
notice to Operator and the other Parties within the following
time periods after receipt of Operator's notice as is
applicable thereto:
1) twenty four (24) hours in the case of operations
which involve the use of a drilling rig, service rig,
well servicing equipment or seismic crew that is
standing by in the Concession Area; or
2) ten (10) Days in the case of all other proposals.
B) Except in the case of Article 5.12(A)(1), any Non-Operator
may, by notice delivered to all Parties within five (5) Days
of receipt of Operator's notice, request that the proposal be
decided at a meeting rather than by notice. In such an event,
that proposal shall be decided at a meeting duly called for
that purpose.
C Except as provided in Article X, any Party failing to
communicate its vote shall be deemed to have voted against
such proposal.
D) If a meeting is not requested, then at the expiration of the
appropriate time period, Operator shall give each Party a
confirmation notice stating the tabulation and results of the
vote.
5.13 Effect of Vote
All decisions taken by the Operating Committee pursuant to this
Article, shall be conclusive and binding on all the Parties, except
that:
A) If pursuant to this Article, a Joint Operation, other than an
operation to fulfil the Minimum Work Obligations, has been
properly proposed to the Operating Committee and the Operating
Committee has not approved such proposal in a timely manner,
then any Party shall have the right for the appropriate period
specified below to propose, in accordance with Article VII, an
Exclusive Operation involving operations essentially the same
as those proposed for such Joint Operation.
1) For proposals involving the use of a drilling rig
that is standing by the Concession Area, such right
shall be exercisable for twenty-four (24) hours after
the time specified in Article 5.12(A)(1) has expired
or after receipt of Operator's notice given pursuant
to Article 5.13(D), as applicable;
2) For proposals to develop a Discovery, such right
shall be exercisable for ten (10) Days after the date
the Operating Committee was required to consider such
proposal pursuant to Article 5.6 or Article 5.12; or
3) For all other proposals, such right shall be
exercisable for five (5) Days after the date the
Operating Committee was required to consider such
proposal pursuant to Article 5.6 or Article 5.12.
B) If a Party voted against any proposal which was approved by
the Operating Committee and which could be conducted as an
Exclusive Operation pursuant to Article VII, then such Party
shall have the right not to participate in the operation
contemplated by such approval. Any such Party wishing to
exercise its right of non-consent must give notice of
non-consent to all other Parties within ten (10) Days (or
within twenty-four (24) hours if the drilling rig, service
rig, well servicing equipment or seismic crew to be used in
such operation is standing by in the Concession Area)
following Operating Committee approval of such proposal. The
Parties that were not entitled to give or did not give notice
of non-consent shall be Consenting Parties as to the
operation contemplated by the Operating Committee approval,
and shall conduct such operation as an Exclusive Operation
under Article VII. Any Party that gave notice of non-
consent shall be a Non-Consenting Party as to such Exclusive
Operation.
C) If the Consenting Parties to an Exclusive Operation under
Article 5.13(A) or (B) concur, then the Operating Committee
may, at any time, pursuant to this Article, reconsider and
approve, decide or take action on any proposal that the
Operating Committee declined to approve earlier, or modify or
revoke an earlier approval, decision or action.
D) Once a Joint Operation for the drilling, Deepening, Testing,
Side-tracking, Plugging Back, Completing, Recompleting,
Reworking or plugging of a well, has been approved and
commenced, such operation shall not be discontinued without
the consent of the Operating Committee; provided, however,
that such operation may be discontinued, if:
1) an impenetrable substance or other condition in
the hole is encountered which in the reasonable
judgement of Operator causes the continuation of such
operation to be impractical; or
2) other circumstances occur which in the reasonable
judgement of Operator causes the continuation of such
operation to be unwarranted.
On the occurrence of either of the above, Operator shall
promptly notify the Parties that such operation is being
discontinued pursuant to the foregoing, and any Party shall
have the right to propose, in accordance with Article VII, an
Exclusive Operation to continue such operation.
5.14 Representation of Non-Operators
A) Each of Dublin, GHP and ▇▇▇▇▇▇▇ shall have the right to
appoint one (1) representative to the Exploration Advisory
Committee. This right is assignable by any of such Parties to
any other of such Parties, to an Affiliate of any of such
Parties and to a third party permitted assignee. The Operator
shall be entitled to appoint a representative to the
Exploration Advisory Committee if a Party fails or refuses to
appoint its representative or, without prejudice to Article
8.2, if a Party's Participating Interest is transferred
pursuant to Article 8.4.
B) Notwithstanding the appointment of a representative to the
Exploration Advisory Committee by one or more Non-Operators,
and provided that the Operator consults with and considers
the input of the representative(s) appointed by the Non-
Operators, the Operator shall be the primary spokesman for the
Joint Operators on the Exploration Advisory Committee. The
respective Party's member to the Exploration Advisory
Committee shall fully support and vote in conformity with
the decisions and instructions of the Operating Committee with
respect to matters brought before the Exploration Advisory
Committee, notwithstanding that such decision or instruction
may not have been approved unanimously by the Operating
Committee.
ARTICLE VI
WORK PROGRAMS AND BUDGETS
6.1 Exploration and Appraisal
A) Immediately after the date of execution of this Agreement,
Operator shall deliver to the Parties a proposed Work Program
and Budget detailing the Joint Operations to be performed in
the Concession Area for the remainder of the current Financial
Year and the next ensuing Financial Year. Within fifteen (15)
Days of such delivery, the Operating Committee shall meet to
consider and to endeavour to agree on a Work Program and
Budget.
B) At least sixty (60) Days prior to the applicable deadline
under Article IV(c) of the Concession or such other deadline
as may be agreed to by EGPC, Operator shall deliver to the
Parties a proposed Work Program and Budget detailing the Joint
Operations to be performed in the Concession Area for the
following Financial Year. Within thirty (30) Days of such
delivery, the Operating Committee shall meet to consider and
to endeavour to agree on a Work Program and Budget. Upon
receipt of Operating Committee approval, such Work Program and
Budget shall be submitted to the Exploration Advisory
Committee as required by the Concession. The Operating
Committee shall further meet and consider any revisions to the
Work Program and Budget recommended by the Exploration
Advisory Committee and make any such revisions as may be
agreeable prior to submission to the EGPC.
C) If a Discovery is made, Operator shall deliver any notice of
Discovery required under the Concession and shall as soon as
possible or within such time period as directed by the
Operating Committee, submit to the Parties a report
containing available details concerning the Discovery and
Operator's recommendation as to whether the Discovery merits
appraisal. If the Operating Committee determines that the
Discovery merits appraisal, Operator, within ninety (90) Days,
shall deliver to the Parties a proposed Work Program and
Budget for the appraisal of the Discovery. Within thirty (30)
Days of such delivery, or earlier if necessary to meet any
applicable deadline under the Concession, the Operating
Committee shall meet to consider, modify and then either
approve or reject the appraisal Work Program and Budget. If
the appraisal Work Program and Budget is approved by the
Operating Committee, Operator shall take such steps as may be
required under the Concession to secure approval of the
appraisal Work Program and Budget by EGPC. In the event EGPC
requires changes in the appraisal Work Program and Budget, the
matter shall be resubmitted to the Operating Committee for
further consideration.
D) In addition to the requirements of Article 6.1(C), if a
Discovery is made and the drilling of a Mandatory Appraisal
Well or ▇▇▇▇▇ is required under the Concession in order to
obtain a Development Lease in respect of the Discovery , the
Operating Committee shall consider the drilling of the
Mandatory Appraisal Well(s). Each of the Parties shall have
the right not to participate in the drilling of such Mandatory
Appraisal Well in which case the provisions of Article VII
(and Article 7.4(C) in particular) shall apply.
E) The Work Program and Budget agreed pursuant to this Article
shall include the Minimum Work Obligations, or at least that
part of such Minimum Work Obligations required to be carried
out during the Financial Year in question under the terms of
the Concession. If, within the time periods prescribed in this
Article, the Operating Committee is unable to agree on such
Work Program and Budget, then the proposal capable of
satisfying the Minimum Work Obligations for the Financial
Year in question that receives the largest Participating
Interest vote (even if less than the applicable percentage
under Article 5.9) shall be deemed adopted as part of the
annual Work Program and Budget. If competing proposals
receive equal votes, then Operator shall choose between those
competing proposals. Any portion of a Work Program and Budget
adopted pursuant to this Article, instead of Article 5.9
shall include only such operations for the Joint Account as
are reasonably necessary to maintain the Concession in full
force and effect, including such operations as are necessary
to fulfill the Minimum Work Obligations required for the given
Financial Year.
F) Subject to Article 6.7, approval of any such Work Program and
Budget, which includes an Exploration or Appraisal Well,
whether by drilling, Deepening or Sidetracking, shall include
approval for only expenditures necessary for the drilling,
Deepening, or Sidetracking, of such well, as applicable.
When an Exploration Well or Appraisal Well has reached its
authorized depth, all logs, cores and other approved Tests
have been conducted and the results furnished to the Parties,
Operator shall submit to the Parties in accordance with
Article 5.12(A)(1) an election to participate in an attempt
to Complete or perform additional downhole operations for such
well. Operator shall include in such submission Operator's
recommendation on such Completion attempt and an AFE for such
Completion costs. In the event that less than all of the
Parties elect to participate in such Completion, the
Completion may proceed as an Exclusive Operation under Article
VII. Any Party that gave notice of non-consent shall be a
Non-Consenting Party as to such Exclusive Operation.
6.2 Development
If, before or after the drilling of any Mandatory Appraisal ▇▇▇▇▇, the
Operating Committee determines that a Discovery may be a Commercial
Discovery, the Operator shall prepare and submit a Development Plan to
the Operating Committee for approval prior to providing notice of the
Commercial Discovery to EGPC. The Operating Committee shall meet to
consider, modify and either approve or reject the Development Plan. If
the Development Plan is approved by the Operating Committee, Operator
shall, as soon as possible and in accordance with the timing
requirements set out in the Concession, provide notice of the
Commercial Discovery to EGPC.
Within sixty (60) Days following receipt of such notice by the
Government and EGPC, Operator and EGPC shall meet to review all
appropriate data with a view to agreeing on the existence of a
Commercial Discovery. If EGPC or the Government require changes in the
Development Plan, Operator shall resubmit the matter to the Operating
Committee for review and approval. Upon EGPC's agreement that the
Discovery constitutes a Commercial Discovery under the Concession the
Operating Company contemplated in Article VI of the Concession shall be
formed for the purposes of conducting further operations and activities
under the Concession.
6.3 Operating Company
A) Upon formation of the Operating Company, as aforesaid, the
Parties shall meet to allocate duties and responsibilities
between the Operating Company and the Operator. To the extent
that the Operator's duties and responsibilities under this
Agreement are assumed by the Operating Company, the Operator
shall be released from any further responsibility and
liability therefor.
B) Provided there are three (3) Parties and no more than three
(3) Parties to this Agreement, each Party that holds at least
a twenty percent (20%) Participating Interest shall be
entitled to appoint one (1) Direct or to represent Contractor
on the Board of Directors of the Operating Company. In all
other cases, each Party shall be entitled to appoint one
(1) Director to the Board of Directors for each twenty-
five percent (25%) Participating Interest held by such Party.
Parties having a Participating Interest less than twenty-
five percent (25%) shall be entitled to have a representative
attend Directors' meetings as an observer only. The Operator
shall be entitled to appoint representatives to fill any
vacancy in the four (4) positions allotted to Contractor on
the Board of Directors.
C) Notwithstanding the formation of the Operating Company, the
Operator shall continue to represent the interests of the
Parties in all matters that are not specifically delegated to
the Operating Company under the Concession and, except for the
appointment of Contractor's Directors to the Board of
Directors of the Operating Company as set forth in Article
6.3(B), shall continue to satisfy the obligations of
Contractor under the Concession on behalf of the Non-Operators
in accordance with the terms of this Agreement. Without
limiting the generality of the foregoing, Operator shall:
1) Review and provide recommendations to the Parties
with respect to proposals and recommendations
submitted by the Operating Company to the Board of
Directors thereof, including, without limitation,
proposed Work Programs and Budgets, production
schedules and estimated cash requirements;
2) Assist the Operating Company, by secondment of
personnel or through a service contract, in the
conduct of the Operating Company's operations under
the Concession as agent for the Parties and EGPC;
3) Make reasonable efforts to cause the Operating
Company to submit the proposed Work Program and
Budget to the Operating Committee within a timeframe
so as to allow for a reasonable period to conduct its
review and obtain its approval prior to submission to
the Board of Directors; and
4) In the event that the Board of Directors require
changes to any Work Program and Budget, resubmit the
matter to the Operating Committee for approval.
D) In the meetings of the Board of Directors and of the
shareholders of the Operating Company, each Party's
respective member(s) of the Board of Directors and their
respective representative(s) and the Party's representatives
at the shareholder meetings (and any proxy for them) and the
members of the Operating Company management appointed by the
Operator, shall fully support and vote in conformity with the
decisions of the Operating Committee previously made in
accordance with the provisions of the Agreement and any other
resolution previously taken by the Parties under this
Agreement. If a Party will not have a representative present
at a meeting of either the Board of Directors or the
shareholders of the Operating Company, such Party shall, prior
to such meeting, furnish the other Party a written proxy for
the votes to be taken at such meeting, consistent with the
vote of the Operating Committee. If an Exclusive Operation is
to be conducted by the Operating Company, the Parties shall
agree upon procedures regarding decision making within and
governance of the Parties' interests in the Operating Company
in conducting such operations, including without limitation,
procedures for Board of Directors voting by the Parties,
confidentiality and allocation of the Exclusive Operations
costs and expenses within the Operating Company.
E) After formation of the Operating Company, certain of the Joint
Operations shall be carried out by Operating Company, pursuant
to the Concession, as agent on behalf of the shareholders of
Operating Company, or where necessary by Operator or through
duly authorized agents or independent contractors engaged by
either Operator or Operating Company.
F) In the conduct of Joint Operations, Operator, under the
direction and supervision of the Operating Committee, shall
use all reasonable efforts to require that Operating Company
shall:
1) Conduct diligently all Joint Operations in accordance
with Operator's standards and the practices generally
followed by the petroleum industry in the Arab
Republic of Egypt under similar circumstances and
conditions and in conformance with good oilfield and
engineering practices; perform all Joint Operations
in an efficient and economic manner and in compliance
with the provisions of the Concession and all
applicable laws and regulations;
2) Proceed with due diligence to acquire for the Joint
Account any and all surface rights that may be
required for or in connection with the conduct of the
Joint Operations;
3) Keep the Joint Property free from liens, charges and
encumbrances arising out of the Joint Operations;
4) Pay all costs and expenses incurred by it in the
Joint Operations promptly and when due and payable;
5) Purchase and maintain in force any and all insurance
required by law and purchase or provide any
additional insurance authorized by the Board of
Directors; and
6) Carry out each program of Joint Operations adopted by
the Operating Committee within the limits of the
approved Operating Company budget and shall not
undertake any Joint Operations not included in an
approved budget or make any expenditures during a
budget period in excess of the budgeted amounts
approved therefor except in compliance with the
internal rules and regulations of the Operating
Company and subject to approval as may be required
under Articles 6.6 and 6.7 of this Agreement, as
applicable.
6.4 Itemization of Expenditures
A) During the preparation of the proposed Work Programs and
Budgets contemplated in this Article, Operator shall consult
with the Operating Committee regarding the contents of such
Work Programs and Budgets.
B) Each Work Program and Budget and Development Plan submitted by
Operator shall contain an itemized estimate of the costs of
Joint Operations and all other expenditures to be made for the
Joint Account during the Calendar Year in question and shall
inter alia:
1) identify each work category in sufficient detail to
afford the ready identification of the nature, scope
and duration of the activity in question;
2) include such reasonable information regarding
Operator's allocation procedures and estimated
manpower costs as the Operating Committee may
determine; and
3) comply with the requirements of the Concession.
C) The Work Program and Budget shall designate the portion or
portions of the Concession Area in which Joint Operations
itemized in such Work Program and Budget are to be conducted
and shall specify the kind and extent of such operations in
such detail as the Operating Committee may deem suitable.
6.5 Contract Awards
A) Operator shall award each contract for approved Joint
Operations tendered or placed by Operator on the following
basis:
1) For contracts in amounts less than or equal to two
hundred thousand ($200,000) Dollars (U.S.) Operator
shall award the contract to the best qualified
contractor as determined by cost and ability to
perform the contract without the obligation to tender
and without informing or seeking the approval of the
Operating Committee, exceptthat before entering into
contracts with Affiliates of the Operator, Operator
shall obtain the approval of the Operating Committee.
If requested by any Party, Operator shall circulate
to the Parties a copy of the final version of the
contract awarded.
2) For contracts anticipated to be in an amount greater
than two hundred thousand ($200,000) Dollars (U.S.)
Operator shall:
(a) Provide the Parties with a list of the
entities whom Operator proposes to invite to
tender for the said contract;
(b) Add to such list any entity whom a Party
requests to be added within fourteen (14)
Days of receipt of such list;
(c) Prepare and dispatch the tender documents to
the entities on the list as aforesaid and to
Non-Operators; (d) After the expiration of
the period allowed for tendering, consider
and analyze the details of all bids
received;
(e) Prepare and circulate to the Parties a bid
analysis, stating Operator's determination
as to the entity to whom the contract should
be awarded, the reasons therefor, and the
technical, commercial and contractual terms
to be agreed upon; and
(f) Upon the request of a Party, provide such
Party with a copy of the final version of
the contract.
3) For contracts in amounts greater than five hundred
thousand ($500,000) Dollars (U.S.), Operator shall
obtain Operating Committee approval of its award
recommendation.
B) Notwithstanding the above, Operator shall comply with all
applicable rules, procedures, decrees and regulations
regarding tendering for and awarding of contracts, services
and importation of equipment, materials and consumables as
required from time to time by EGPC. Approval of the Operating
Committee shall be required if Operator proposes to not comply
with such EGPC tender and award rules in respect of any
contract, service or materials with a value in excess of fifty
thousand ($50,000) Dollars (U.S.).
C) Operator undertakes to use all reasonable efforts to require
Operating Company to submit contracts to tender in compliance
with the internal rules and regulations of the Operating
Company and EGPC policies or practice. Operator shall use all
reasonable efforts to require the Operating Company to
competitively tender for all purchases of materials or
equipment and hiring of services or equipment with a value
estimated to exceed fifty thousand ($50,000) Dollars (U.S.).
In all purchases of materials or equipment and hiring of
services or equipment, it is understood that Operating
Company or Operator, as the case may be, are subject to the
provisions regarding use of local contractors and supplies set
out in Article XXVI of the Concession. If Operating Company
estimates a contract value will exceed five hundred thousand
($500,000) Dollars (U.S.), Operator shall provide each Party
with a list of the proposed bidders and each Party shall have
the right to make suggestions for inclusion on such list and
this shall be conveyed to the Operating Company. Upon the
Operating Company's completion of its evaluation and
submission of same to Operator, Operator shall notify the
Operating Committee of the entity to whom the Operating
Company proposes to award such contract. Operator's notice
shall be supported by a summary of the Operating Company's
analysis of the various bids received. For purposes of
approval of any tender or contract in excess of five hundred
thousand ($500,000) Dollars (U.S.), Operating Committee shall
vote on the award in advance of the vote by the Board of
Directors.
6.6 Authorization for Expenditure ("AFE") Procedure
Subject to the requirements of the Operating Company,
A) If a commitment or expenditure has been approved as part of a
Work Program and Budget, and if such commitment or expenditure
is estimated to be in excess of one hundred thousand
($100,000) Dollars (U.S.), or if the expenditure or commitment
is not included in an approved Work Program and Budget, then
prior to making such commitment or expenditure, Operator shall
send to each Non-Operator an AFE containing Operator's best
estimate of the total funds required to carry out such work,
the estimated timing of expenditures, and any other necessary
supportive information.
B) If an AFE covers commitments or expenditures within the
monetary amounts set out in the Work Program and Budget, it is
for informational purposes only, unless:
1) the AFE costs exceed the costs for such operation in
the approved budget by more than ten percent (10%) of
the applicable line item amount for such operation or
by more than five percent (5%) of the total Work
Program and Budget; or
2) the AFE is technically incorrect.
In the event that the circumstances in either Article
6.6(B)(1) or (2) occur, the Operating Committee shall vote on
the AFE. If such AFE is not approved by the Operating
Committee, the work in question shall immediately cease.
C) Each AFE proposed by the Operator shall:
1) Identify the operation by specific reference to the
applicable line items in the Work Program and Budget;
2) Describe the work in detail;
3) Contain Operator's best estimate of the total funds
required to carry out such work;
4) Outline the proposed work schedule;
5) Provide a timetable of expenditures, if known; and
6) Be accompanied by such other supporting information
as is necessary for an informed decision.
6.7 Overexpenditures of Work Programs and Budgets
Subject to the requirements of the Operating Company,
A) For expenditures on any line item of an approved Work Program
and Budget, Operator shall be entitled to incur without
further approval of the Operating Committee an overexpenditure
for such line item up to ten percent (10%) of the authorized
amount for such line item; provided that the cumulative total
of all expenditures for a Calendar Year shall not exceed five
percent (5%) of the total Work Program and Budget in question.
B) At such time that Operator is certain that the limits of
Article 6.7(A) will be exceeded, Operator shall furnish a
supplemental AFE for the estimated overexpenditures to the
Operating Committee for its approval and shall provide the
Parties with full details of such overexpenditures. Operator
shall promptly give notice of the amounts of overexpenditures
when actually incurred. Should the Operating Committee fail to
approve the supplemental AFE, all work in question shall
immediately cease.
ARTICLE VII
OPERATIONS BY LESS THAN ALL PARTIES
7.1 Limitation on Applicability
A) No operations may be conducted in furtherance of the
Concession except as Joint Operations under Article V, or as
Exclusive Operations under this Article.
B) Operations which are required to fulfil the Minimum Work
Obligations must be proposed and conducted as Joint Operations
under Article V and may not be proposed or conducted as
Exclusive Operations under this Article VII. Except for
Exclusive Operations relating to Deepening, Testing,
Completing, Sidetracking, Plugging Back, Recompletions or
Reworking of a well drilled to fulfil the Minimum Work
Obligations or the drilling of any Mandatory Appraisal Well,
no Exclusive Operations may be proposed or conducted until the
Minimum Work Obligations for the then current Exploration
Sub-Period are fulfilled.
C) No Exclusive Operation shall be conducted:
1) until it has been proposed as a Joint Operation;
2) which conflicts or would interfere with a Joint
Operation;
3) which relates to a Zone which the Parties have agreed
to appraise or develop under an approved Work Program
and Budget;
4) which relates to a currently producing Zone or to any
previously discovered Zone which is capable of
producing Hydrocarbons in commercial quantities;
5) which relates to a Zone which is above the
stratigraphic equivalent of the deepest Zone
producing or capable of producing Hydrocarbons in
commercial quantities; and
6) if a well proposed thereunder is to be drilled at
substantially the same location, to the same
subsurface target or into the same Zone as a well
included in an approved Work Program and Budget.
D) No Party may propose or conduct an Exclusive Operation under
this Article unless and until such Party has properly
exercised its right to propose an Exclusive Operation pursuant
to Article 5.13(A), or is entitled to conduct an Exclusive
Operation pursuant to Article 5.13(B), Article 6.1(D), Article
6.1(F), Article VII or Article 10.1(C).
E) Subject to this Article, any operation that may be proposed
and conducted as a Joint Operation may be proposed and
conducted as an Exclusive Operation.
7.2 Procedure to Propose Exclusive Operations
A) Subject to Article 7.1, if any Party proposes to conduct an
Exclusive Operation, such Party shall give notice of the
proposed operation to all Parties, other than Non-Consenting
Parties who have relinquished their rights to participate in
such operation and have no option to reinstate such rights
under Article 7.4(D). Such notice shall specify that such
operation is proposed as an Exclusive Operation, the work to
be performed, the location, the objectives, and estimated cost
of such operation.
B) Any Party entitled to receive such notice shall have the right
to participate in the proposed operation in accordance with
the following:
1) For proposals to Deepen, Test, Complete, Side-track,
Plug Back, Recomplete or Rework involving the use of
a drilling rig, service rig, well servicing equipment
that is standing by in the Concession Area, or
proposals to acquire G & G Data where the seismic
crew and equipment are standing by in the Concession
Area, any such Party wishing to exercise such right
must so notify Operator within twenty-four (24) hours
after receipt of the notice proposing the Exclusive
Operation; or
2) For all other proposals, any such Party wishing to
exercise such right must so notify Operator within
ten (10) Days after receipt of the notice proposing
the Exclusive Operation.
C) Failure of a Party to whom a proposal notice is delivered to
properly reply within the period specified above shall
constitute an election by that Party not to participate in the
proposed operation.
D) If all Parties properly exercise their rights to participate,
then the proposed operation shall be conducted as a Joint
Operation. The Operator shall commence such Joint Operation as
promptly as practicable and conduct it with due diligence,
provided that with respect to operations pursuant to which a
party has given a notice under Article 7.2(F), the Operator
may proceed with operations prior to the expiry of the
applicable time period in this Article 7.2.
E) If less than all Parties entitled to receive such proposal
notice properly exercise their rights to participate, then:
1) Immediately after the expiration of the applicable
notice period set out in Article 7.2(B), the Operator
shall notify all Parties of the names of the
Consenting Parties and the recommendation of the
proposing Party as to whether the Consenting Parties
should proceed with the Exclusive Operation.
2) Concurrently, Operator shall request the Consenting
Parties to specify the Participating Interest each
Consenting Party is willing to bear in the Exclusive
Operation.
3) Within twenty-four (24) hours after receipt of such
notice, each Consenting Party shall respond to the
Operator stating that it is willing to bear a
Participating Interest in such Exclusive Operation
equal to:
(a) Only its Participating Interest;
(b) A fraction, the numerator of which is such
Consenting Party's Participating Interest
and the denominator of which is the
aggregate of the Participating Interests of
the Consenting Parties; or
(c) The total of its Participating Interest as
contemplated by Article 7.2(E)(3)(b) plus
all or any part of the difference between
one hundred percent (100%) and the total of
the Participating Interests subscribed by
the other Consenting Parties.
4) Any Consenting Party failing to advise Operator
within the response period set out above shall be
deemed to have elected to bear the Participating
Interest set out in Article 7.2(E)(3)(b) as to the
Exclusive Operation.
5) If within the response period set out above, the
Consenting Parties subscribe for less than one
hundred percent (100%) of the Participating Interest
in the Exclusive Operation, the Party proposing
such Exclusive Operation shall be deemed to have
withdrawn its proposal for the Exclusive Operation,
unless within twenty-four (24) hours of the expiry
of the response period set out in Article 7.2(E)(3),
the proposing Party notifies the other Consenting
Parties that the proposing Party shall bear the
unsubscribed Participating Interest.
6) If one hundred percent (100%) subscription to the
proposed Exclusive Operation is obtained, Operator
shall promptly notify the Consenting Parties of their
Participating Interests in the Exclusive Operation.
7) As soon as any Exclusive Operation is fully
subscribed pursuant to Article 7.2(E)(6), Operator
(subject to Article 7.8(G)), shall commence such
Exclusive Operation as promptly as practicable and
conduct it with due diligence in accordance with this
Agreement.
8) If such Exclusive Operation has not been commenced
within One Hundred Twenty (120) Days (excluding any
extension specifically agreed by all Parties or
allowed by the force majeure provisions of Article
XVI), the right to conduct such Exclusive Operation
shall terminate. If any Party still desires to
conduct such Exclusive Operation, written notice
proposing such operation must be resubmitted to the
Parties in accordance with Article V, as if no
proposal to conduct an Exclusive Operation had been
previously made.
F) In accordance with Article 6.1(F), in the event that less than
all of the Parties elect to participate in the Completion or
other downhole operations referred to in Article 6.1(F), such
Completion or downhole operations referred to in the election
notice may be conducted as an Exclusive Operation. In
anticipation of such possibility, and notwithstanding anything
to the contrary in the provisions of Article 5.12, Article
5.13 and this Article VII:
1) Should the Operator, at the time it submits the
election to the Parties pursuant to Article 6.1(F),
be prepared to undertake such Completion or
downhole operations regardless of the election of
the other Parties, the Operator may, at the same
time it submits the notice under Article 5.12(A) to
the other Parties, also provide a notice under
Article 7.2(A) to conduct such Completion or downhole
operations as an Exclusive Operation. In such a case,
the time periods under Article 5.12(A) and 7.2(B)
shall run concurrently and, notwithstanding Article
5.13, Operator may proceed immediately with such
Completion or other downhole operations at the risk
and expense of it and the other Parties who elect to
participate.
2) Should a Non-Operator, at the time it makes its
election pursuant to Article 6.1(F), be prepared to
undertake such Completion or downhole operations
regardless of the election of the other Parties, it
may immediately notify the other Parties of such by
providing a notice under Article 7.2(A). In such a
case, the time periods under Article 5.12(A) and
7.2(B) shall run concurrently and upon receipt of
such notice under Article 7.2(A), Operator may
proceed immediately with such Completion or other
downhole operations at risk and expense of the Party
giving such notice and the other Parties electing to
participate.
Should less than all Parties elect to participate, then if a
Party has given a notice under Article 7.2(A), it shall be
deemed to have elected to bear a Participating Interest in
such Exclusive Operation in accordance with Article
7.2(E)(3)(c).
7.3 Responsibility for Exclusive Operations
A) The Consenting Parties shall bear in accordance
with the Participating Interests agreed under
Article 7.2(E) the entire cost and liability of
conducting an Exclusive Operation and shall
indemnify the Non-Consenting Parties from any and
all costs and liabilities incurred incident to such
Exclusive Operation (including but not limited to all
costs, expenses or liabilities for environmental,
consequential, punitive or any other similar indirect
damages or losses arising from business interruption,
reservoir or formation damage, inability to produce
petroleum, loss of profits, pollution control and
environmental amelioration or rehabilitation) and
shall keep the Concession Area free and clear of all
liens and encumbrances of every kind created by or
arising from such Exclusive Operation.
B) Notwithstanding Article 7.3(A), each Party shall continue to
bear its Participating Interest share of the cost and
liability incident to the operations in which it participated,
including but not limited to plugging and abandoning and
restoring the surface location, but only to the extent those
costs were not increased by the Exclusive Operation.
7.4 Consequences of Exclusive Operations
A) With regard to any Exclusive Operation, other than an Exclusive
Operation which is a Mandatory Appraisal Well, for so long as a
Non-Consenting Party has the option to reinstate the rights it relinquished
under Article 7.4(D) below, such Non-Consenting Party shall be entitled to
have access, concurrently with the Consenting Parties, to all data and
other information relating to such Exclusive Operation, other than G & G
Data obtained in an Exclusive Operation. For the acquisition of G&G Data,
if a Non-Consenting Party desires to receive and acquire the right at any
time to use all or part of such G & G Data, then such Non-Consenting Party
shall have the right to do so by paying to the Consenting Parties the
amount set out in Article 7.5(A) and the Cash Premium set out in Article
7.5(B)(3). B) With regard to any Exclusive Operation, other than an
Exclusive Operation which is a Mandatory Appraisal Well and subject to
Articles 7.4(C) and (D) below, each Non-Consenting Party shall be deemed to
have relinquished to the Consenting Parties, and the Consenting Parties
shall be deemed to own, in proportion to their respective Participating
Interests in the Exclusive Operation as determined in accordance with
Article 7.2(E)(3):
1) All of each such Non-Consenting Party's right to
participate in operations for the acquisition of, and
all rights to have access to, all G & G Data obtained
from such Exclusive Operation or in further
operations in a well or Deepened or Sidetracked
portion of a well in which the Exclusive Operation
was conducted and in any Discovery made or appraised
in the course of such Exclusive Operation; and
2) All of each such Non-Consenting Party's right pursuant to the Concession
to take and dispose of Hydrocarbons produced and saved:
(a) From the well or Deepened or Sidetracked portion of a
well in which such Exclusive Operation was conducted,
and
(b) From any ▇▇▇▇▇ drilled to appraise or develop a
Discovery made or appraised in the course of such
Exclusive Operation, and
(c) From the Development Lease containing the Discovery
arising out of such Exclusive Operation. C) Where an
Exclusive Operation is the drilling of a Mandatory
Appraisal Well, each Non-Consenting Party in such
Exclusive Operation shall be deemed to have
relinquished to the Consenting Parties, and the
Consenting Parties shall be deemed to own in proportion
to their Participating Interest in such Exclusive
Operation as determined in accordance with Article
7.2(E)(3):
1) All of each such Non-Consenting Party's right to
participate in further operations in the Development
Lease containing such Mandatory Appraisal Well; and
2) All of each such Non-Consenting Party's right pursuant
to the Concession to take and dispose of Hydrocarbons
produced and saved from the Development Lease
containing such Mandatory Appraisal Well. In such case,
a Non-Consenting Party shall have no option to
reinstate such relinquished rights and Article 7.4(D)
shall not apply.
D) With the exception of the right to reinstate set out in Article 7.4(G),
a Non-Consenting Party shall have the following and only the following
options to reinstate the rights it relinquished pursuant to Article 7.4(B):
1) If the Consenting Parties decide to appraise a
Discovery made in the course of an Exclusive Operation,
the Consenting Parties shall submit to each
Non-Consenting Party the approved appraisal program.
For thirty (30) Days (or forty-eight (48) hours if the
drilling rig which is to be used in such appraisal
program is standing by in the Concession Area) from
receipt of such appraisal program, each Non-Consenting
Party shall have the option to reinstate the rights it
relinquished pursuant to Article 7.4(B) and to
participate in such appraisal program. The
Non-Consenting Party may exercise such option by
notifying Operator within the period specified above
that such Non-Consenting Party agrees to bear its
Participating Interest share of the expense and
liability of such appraisal program, to pay the lump
sum amount as set out in Article 7.5(A) and to pay the
Cash Premium as set out in Article 7.5(B);
2) Without prejudice to Article 7.4(C), if the Consenting
Parties decide to develop a Discovery made or appraised
in the course of an Exclusive Operation, each
Non-Consenting Party shall have the option, exercisable
for a period of sixty (60) Days from the receipt by the
Non-Consenting Parties of all information pertaining to
the Discovery, including the proposed Development Plan,
to reinstate the rights it relinquished pursuant to
Article 7.4(B) and to participate in such development.
Each Non-Consenting Party may exercise such option by
notifying the Party proposing to act as Operator for
such development within the period specified above that
such Non-Consenting Party agrees to bear its
Participating Interest share of the liability and
expense of such development and such future operating
and production costs, to pay the lump sum amount as set
out in Article 7.5(A) and to pay the Cash Premium as
set out in Article 7.5(B).
3) If the Consenting Parties decide to Deepen, Test,
Complete, Side-track, Plug Back, Recomplete or Rework
an Exclusive Well, other than a Mandatory Appraisal
Well, and such further operation was not included in
the original proposal for such Exclusive Well, the
Consenting Parties shall submit to the Non-Consenting
Parties the approved AFE for such further operation.
For thirty (30) Days (or forty-eight (48) hours if the
drilling rig which is to be used in such operation is
standing by in the Concession Area) from receipt of
such AFE, each Non-Consenting Party shall have the
option to reinstate the rights it relinquished pursuant
to Article 7.4(B) and to participate in such operation.
Each Non-Consenting Party may exercise such option by
notifying the Operator within the period specified
above that such Non-Consenting Party agrees to bear its
Participating Interest share of the liability and
expense of such further operation, to pay the lump sum
amount as set out in Article 7.5(A) and to pay the Cash
Premium as set out in Article 7.5(B).
E) If a Non-Consenting Party does not properly and in a timely manner
exercise such option, including paying in a timely manner in accordance
with Article 7.5, all lump sum amounts and Cash Premiums, if any, due to
the Consenting Parties, such Non-Consenting Party shall have forfeited the
options as set out in Article 7.4(D) and the right to participate in the
proposed program, plan or operation, unless such program, plan or operation
is materially modified or expanded.
F) A Non-Consenting Party shall become a Consenting Party with regard to an
Exclusive Operation at such time as the Non-Consenting Party gives proper
notice pursuant to Article 7.4(D); provided that such Non-Consenting Party
shall in no way be deemed to be entitled to any lump sum amount or Cash
Premium paid incident to such Exclusive Operation. The Participating
Interest of such Non-Consenting Party in such Exclusive Operation shall be
its Participating Interest at the time the Non-Consenting Party elected not
to participate. The Consenting Parties who assumed a portion of the
Non-Consenting Party's Participating Interest in such Exclusive Operation
shall contribute the Participating Interest of the Non-Consenting Party
proportionately to their assumption of same. If all Parties participate in
the proposed operation, then such operation shall be conducted as a Joint
Operation pursuant to Article V.
G) If, after the expiry of the period in which a Non-Consenting Party may
exercise its option to participate in the development of a Discovery, the
Consenting Parties desire to proceed, Operator, or if Operator is a
Non-Consenting Party, the Party chosen by the Consenting Parties to act as
Operator, shall, subject to Article 6.2 hereof, give notice to EGPC under
Article III(c)(iii) of the Concession that the Consenting Parties consider
the Discovery to be a Commercial Discovery. Conditional upon EGPC's
agreement that such Discovery constitutes a Commercial Discovery, the
Parties and EGPC shall meet to determine the extent of the area capable of
production to be covered by a Development Lease and shall submit such area
to the Government for approval in accordance with Article III(d)(i) of the
Concession. Upon written concurrence by EGPC of the Consenting Party's
determination that the Discovery is a Commercial Discovery and Government
approval of the Development Lease, each Non-Consenting Party in such
Discovery shall forfeit its right to reinstate its interest in the
applicable Development Lease and shall be deemed to have withdrawn from the
Concession and this Agreement to the extent that it relates to such
Development Lease; provided, however, if EGPC or the Government require
revision or modification to the Development Plan approved by the Consenting
Parties, each Non-Consenting Party shall be notified, provided with all
requested revisions or modifications to the Development Plan and shall have
ten (10) Days in which to reinstate its right as to the Development Lease.
In the event that such Development Lease represents the only interest of
the Non-Consenting Party in the Concession Area and as such the
Non-Consenting Party is deemed to have withdrawn from the entire
Concession, then such Party shall also forfeit all of its shares and voting
rights in the Operating Company that were issued pursuant to the
Concession.
7.5 Premium to Participate in Exclusive Operations
A) Within thirty (30) Days of the exercise of its option under Article
7.4(D), or with respect to G&G Data, within thirty (30) Days of its request
to acquire the right to use all or part of such G&G Data under Article
7.4(A), each such Non-Consenting Party shall pay in immediately available
funds to the Consenting Parties that took all or a portion of the cost
obligation of the Participating Interest of the Non-Consenting Party in
such Exclusive Operation proportionately to their assumption of such
obligation, a lump sum amount payable in the currency designated by such
Consenting Parties. Such lump sum amount shall be equal to such
Non-Consenting Party's Participating Interest share of all liabilities and
expenses, including overhead, that were incurred in every Exclusive
Operation relating to the G&G Data, Discovery or well, as the case may be,
in which the Non-Consenting Party desires to reinstate the rights it
relinquished pursuant to Article 7.4(B), and that were not previously paid
by such Non-Consenting Party.
B) In addition to Article 7.5(A), if a Cash Premium is due, then within
thirty (30) Days of the exercise of its option under Article 7.4(A) or
7.4(D) each such Non-Consenting Party shall pay in immediately available
funds, in the currency designated by the Consenting Parties who took the
risk of such Exclusive Operations, to such Consenting Parties in proportion
to their assumption of such risk, a Cash Premium equal to the total of:
1) Six hundred percent (600%) of such Non-Consenting
Party's Participating Interest share of all liabilities
and expenses, including overhead, that were incurred in
any Exclusive Operations relating to the drilling,
Deepening, Testing, Completing, Sidetracking, Plugging
Back, Recompleting and Reworking of the Exploration
Well which made the Discovery in which the
Non-Consenting Party desires to reinstate the rights it
relinquished pursuant to Article 7.4(B), and that were
not previously paid by such Non-Consenting Party; plus
2) Four hundred percent (400%) of the Non-Consenting
Party's Participating Interest share of all liabilities
and expenses, including overhead, that were incurred in
any Exclusive Operations relating to the drilling,
Deepening, Testing, Completing, Sidetracking, Plugging
Back, Recompleting and Reworking of the Appraisal
Well(s) other than Mandatory Appraisal Well(s), which
delineated the Discovery made in the Exclusive
Operations in which the Non-Consenting Party desires to
reinstate the rights it relinquished pursuant to
Article 7.4(B), and that were not previously paid by
such Non-Consenting Party; plus
3) One hundred percent (100%) of the Non-Consenting
Party's Participating Interest share of all liabilities
and expenses, including overhead, that were incurred by
the Consenting Parties in any Exclusive Operation for
the acquisition of G & G Data in which the
Non-Consenting Party desires to reinstate the rights it
relinquished pursuant to Article 7.4(B), and that were
not previously paid by such Non-Consenting Party.
7.6 Order of Preference of Operations
A) Except as otherwise specifically provided in this Agreement, if any
Party desires to propose the conduct of an operation that will conflict
with an existing proposal for an Exclusive Operation, such Party shall have
the right exercisable for five (5) Days, or twenty-four (24) hours if the
drilling rig to be used is standing by in the Concession Area, from receipt
of the proposal for the Exclusive Operation, to deliver to all Parties
entitled to participate in the proposed operation such Party's alternative
proposal. Such alternative proposal shall contain the information required
under Article 7.2(A).
B) Each Party receiving such proposals shall elect by delivery of notice to
Operator within the appropriate response period set out in Article 7.2(B)
to participate in one of the competing proposals. Any Party not notifying
Operator within the response period shall be deemed not to have voted.
C) The proposal receiving the largest aggregate Participating Interest vote
shall have priority over all other competing proposals. In the case of a
tie vote, the Operator shall choose among the proposals receiving the
largest aggregate Participating Interest vote. Operator shall deliver
notice of such result to all Parties entitled to participate in the
operation within five (5) Days of the end of the response period, or
twenty-four (24) hours if the drilling rig to be used is standing by in the
Concession Area.
D) Each Party shall then have two (2) Days (or twenty-four (24) hours if
the drilling rig to be used is standing by in the Concession Area) from
receipt of such notice to elect by delivery of notice to Operator whether
such Party will participate in such Exclusive Operation, or will relinquish
its interest pursuant to Article 7.4(B). Failure by a Party to deliver such
notice within such period shall be deemed an election not to participate in
the prevailing proposal.
E) Notwithstanding the provisions of Article 7.4(B), if for reasons other
than the encountering of granite or other practically impenetrable
substance or any other condition in the hole rendering further operations
impracticable, a well drilled as an Exclusive Operation fails to reach the
deepest objective Zone described in the notice proposing such well,
Operator shall give notice of such failure to each Non-Consenting Party who
submitted or voted for an alternative proposal under this Article to drill
such well to a shallower Zone than the deepest objective Zone proposed in
the notice under which such well was drilled. Each such Non-Consenting
Party shall have the option exercisable for forty-eight (48) hours from
receipt of such notice to participate in the initial proposed Completion of
such well. Each such Non-Consenting Party may exercise such option by
notifying the Operator that it wishes to participate in such Completion and
by paying its share of the cost of drilling such well, calculated in the
manner provided in Article 7.8(B), to its deepest depth drilled in the Zone
in which it is Completed. If any such Non-Consenting Party does not
properly elect to participate in the first Completion proposed for such
well, the relinquishment provisions of Article 7.4(B) shall continue to
apply to such Non-Consenting Party's interest.
7.7 Stand-By Costs
When an operation has been performed, all tests have been conducted and
the results of such tests furnished to the Parties, stand by costs
incurred pending response to any Party's notice proposing an Exclusive
Operation for Deepening, Testing, Sidetracking, Completing, Plugging
Back, Recompleting, Reworking or other further operation in such well
(including the period required under Article 7.6 to resolve competing
proposals) shall be charged and borne as part of the operation just
completed. Stand by costs incurred subsequent to all Parties
responding, or expiration of the response time permitted, whichever
first occurs, shall be charged to and borne by the Parties proposing
the Exclusive Operation in proportion to their Participating Interests,
regardless of whether such Exclusive Operation is actually conducted.
7.8 Miscellaneous
A) Each Exclusive Operation shall be carried out by the Consenting Parties
acting as the Operating Committee, subject to the provisions of this
Agreement applied mutatis mutandis to such Exclusive Operation and subject
to the terms and conditions of the Concession.
B) The computation of liabilities and expenses incurred in Exclusive
Operations, including the liabilities and expenses of Operator for
conducting such operations, shall be made in accordance with the principles
set out in the Accounting Procedure.
C) Operator shall maintain separate books, financial records and accounts
for Exclusive Operations which shall be subject to the same rights of audit
and examination as the Joint Account and related records, all as provided
in the Accounting Procedure. Said rights of audit and examination shall
extend to each of the Consenting Parties and each of the Non-Consenting
Parties so long as the latter are, or may be, entitled to elect to
reinstate its interest in such operations.
D) Operator, if it is not a Consenting Party and it is conducting an
Exclusive Operation for the Consenting Parties, shall be entitled to
request cash advances and shall not be required to use its own funds to pay
any cost and expense and shall not be obliged to commence or continue
Exclusive Operations until cash advances requested have been made, and the
Accounting Procedure shall apply to Operator in respect of any Exclusive
Operations conducted by it.
E) Should the Parties determine that a Discovery constitutes a Commercial
Discovery, and prior to notification of EGPC regarding such Commercial
Discovery, should any Party wish to drill an additional Appraisal Well
other than a Mandatory Appraisal Well, prior to development, then subject
to Article 7.1(B), the Party proposing such well as an Exclusive Operation
shall be entitled to proceed first, but without the right to future
reimbursement of costs or to any premium pursuant to Article 7.5. If, as
the result of drilling such well as an Exclusive Operation, the Parties
proposing to develop a Discovery decide to not develop the Discovery, then
each Non-Consenting Party who voted in favor of such development prior to
the drilling of such appraisal well shall pay to the Consenting Party the
amount such Non-Consenting Party would have paid had such appraisal well
been drilled as a Joint Operation.
F) In the case of any Exclusive Operation for Deepening, Testing,
Completing, Sidetracking, Plugging Back, Recompleting or Reworking, the
Consenting Parties shall be permitted to use, free of cost, all casing,
tubing and other equipment in the well, that is not needed for Joint
Operations, but the ownership of all such equipment shall remain unchanged.
On abandonment of a well after such Exclusive Operation, the Consenting
Parties shall account for all such equipment to the Parties who shall
receive their respective Participating Interest shares, in value, less cost
of salvage.
G) If the Operator is a Non-Consenting Party to an Exclusive Operation to
develop a Discovery, then, subject to obtaining any necessary Government
approval, the Operator may resign, but in any event shall resign on the
request of the Consenting Parties, as Operator for the Development Lease
for such Discovery and the Consenting Parties shall select a Party to serve
as Operator for such Development Lease.
7.9 Production Bonuses
Production bonuses shall be charged to the Joint Account if there is no
production of Hydrocarbons from an Exclusive Operation at the time they
are incurred. If there is production of Hydrocarbons from one (1) or
more Exclusive Operations, then any production bonus which becomes
payable under the Concession shall be borne by each Development Lease
in the proportion that its average daily production of Hydrocarbons
bears to the total average daily production of Hydrocarbons from the
Concession Area during the ninety (90) Day period preceding the date on
which the liability for the production bonus was incurred.
The Parties in a Development Lease shall bear the production bonus
allocated to that Development Lease in accordance with their
Participating Interests in the Development Lease as of the date on
which liability for the production bonus was incurred.
ARTICLE VIII
DEFAULT
8.1 Default and Notice
Any Party that fails to pay when due its Participating Interest share
of Joint Account expenses, including cash advances and interest,
incurred pursuant to this Agreement (a "Defaulting Party") shall be in
default under this Agreement. Operator, or any non-defaulting Party in
the case of the default of Operator, shall promptly give written notice
of such default to the Defaulting Party and each of the non-defaulting
Parties (the "Default Notice"). The amount not paid by the Defaulting
Party shall bear interest from the date due until paid in full.
Interest will be calculated using the Agreed Interest Rate.
8.2 Operating Committee Meetings and Data
After any default has continued for ten (10) Days from the date of the
Default Notice and for as long thereafter as the Defaulting Party
remains in default on any payment due under this Agreement, the
Defaulting Party shall not be entitled to attend Operating Committee
meetings or to vote on any matter coming before the Operating Committee
until all of its defaults have been remedied (including payment of
accrued interest). Further, the Defaulting Party shall not be entitled
to attend meetings of the Exploration Advisory Committee, nor the
Directors' Meetings of the Operating Company, nor shall it have the
right to vote in any meeting held by the Operating Company. Unless
agreed otherwise by the non-defaulting Parties, the voting interest of
each non-defaulting Party shall be in the proportion which its
Participating Interest bears to the total of the Participating
Interests of all the non-defaulting Parties. Any matters requiring
unanimous vote of the Parties shall not require the vote of the
Defaulting Party. After the said ten (10) Days and while the Defaulting
Party remains in default as aforesaid, the Defaulting Party shall not
have access to any data or information relating to Joint Operations,
and non-defaulting Parties shall be entitled to trade data without such
Defaulting Party's consent and the Defaulting Party shall have no right
to any data received on such trade unless and until its default is
remedied in full. Notwithstanding the foregoing, the Defaulting Party
shall be deemed to have approved, and shall join with the
non-defaulting Parties in taking any action to maintain and preserve
the Concession.
8.3 Allocation of Defaulted Accounts
A) The Party providing the Default Notice shall, either include in the
Default Notice or by separate notice, notify each non-defaulting Party of
the sum of money it is to pay as its portion (such portion being in the
ratio that each non-defaulting Party's Participating Interest bears to the
Participating Interests of all non-defaulting Parties) of such amount in
default (excluding interest). Each non-defaulting Party shall, if such
default continues, pay Operator, within five (5) Days after receipt of the
Default Notice, its share of the amount which the Defaulting Party failed
to pay. If any non-defaulting Party fails to pay its share of the amount in
default as aforesaid, such non-defaulting Party shall thereupon be in
default and shall be a Defaulting Party subject to the provisions of this
Article. The non-defaulting Parties which pay the amount owed by any
Defaulting Party shall be entitled to receive their respective share of the
principal and interest payable by such Defaulting Party pursuant to Article
8.1.
B) If Operator is a Defaulting Party, then all payments otherwise payable
to Operator for Joint Account costs pursuant to this Agreement shall be
made to the notifying Party instead, until the default is cured or a
successor Operator appointed. The notifying Party shall maintain such funds
in a segregated account separate from its own funds and shall apply such
funds to third party claims due and payable from the Joint Account of which
it has notice, to the extent Operator would be authorized to make such
payments under the terms of this Agreement. The notifying Party shall be
entitled to ▇▇▇▇ or cash call the other Parties in accordance with the
Accounting Procedure for proper third party charges that become due and
payable during such period to the extent sufficient funds are not
available. When Operator has cured its default or a successor Operator is
appointed, the notifying Party shall turn over all remaining funds in the
account to Operator and shall provide Operator and the other Parties with a
detailed accounting of the funds received and expended during this period.
The notifying Party shall not be liable for damages, losses, costs,
expenses or liabilities arising as a result of its actions under this
Article 8.3(B) except to the extent Operator would be liable under Article
4.6.
C) The total of all amounts paid by the non-defaulting Parties for the
Defaulting Party, together with interest accrued on such amounts, shall
constitute a debt due and owing by the Defaulting Party to the
non-defaulting Parties in proportion to such amounts paid. In addition, the
non-defaulting Parties may, in the manner contemplated by this Article,
satisfy such debt (together with interest) and may accrue an amount equal
to the Defaulting Party's Participating Interest share of the estimated
cost to abandon any Joint Property.
D) A Defaulting Party may remedy its default by paying to Operator the
total amount due, together with interest calculated as provided in Article
8.1, at any time prior to transfer of its interest pursuant to Article 8.4,
and upon receipt of such payment Operator shall remit to each
non-defaulting Party its proportionate share of such amount.
E) The rights granted to each non-defaulting Party pursuant to this
Article, shall be in addition to, and not in substitution for any other
rights or remedies which each non-defaulting Party may have at law or
equity or pursuant to the other provisions of this Agreement.
8.4 Transfer of Interest
A) For thirty (30) Days after each failure by the Defaulting Party to
remedy its default by the thirtieth (30th) Day following the Defaulting
Party's receipt of the Default Notice, without prejudice to any other
rights of the non-defaulting Parties to recover the amounts paid for the
Defaulting Party, together with interest accrued on such amount, each
non-defaulting Party shall have the option to give notice to the Defaulting
Party requiring the Defaulting Party to transfer its Participating Interest
to the non-defaulting Parties. To that end if any of the non-defaulting
Parties so elect, the Defaulting Party shall be deemed to have transferred
and to have empowered the electing non-defaulting Parties to execute on
said Defaulting Party's behalf any documents required to effect a transfer,
of all of its right, title and beneficial interest in and under this
Agreement and the Concession, and in all ▇▇▇▇▇ and Joint Property to the
electing non-defaulting Parties. If requested, each Party shall execute a
Power of Attorney in the form prescribed by the Operating Committee. The
Defaulting Party shall, without delay following any request from the
non-defaulting Parties, do any and all acts required to be done by
applicable law or regulation in order to render such transfer legally
valid, including, without limitation, the obtaining of all Government
consents and approvals, and shall execute any and all documents and take
such other actions as may be necessary in order to effect prompt and valid
transfer of the interests described above, free of all liens and
encumbrances. In the event all Government consents and approvals are not
timely obtained, the Defaulting Party shall hold its Participating Interest
in trust for such non-defaulting Parties who elected to assume such
Defaulting Party's Participating Interest.
B) In the absence of an agreement among the non-defaulting Parties to the
contrary, any such transfer to the non-defaulting Parties shall be in the
proportion that the non-defaulting Parties have paid the amounts due from
the Defaulting Party.
C) Subject to Article 12.1(C), on the effective date of such transfer the
Defaulting Party shall forthwith cease to be a Party to this Agreement. The
acceptance or non-acceptance by a non-defaulting Party of any portion of a
Defaulting Party's Participating Interest shall be without prejudice to any
rights or remedies such non-defaulting Parties have to recover the
outstanding debts (including interest) owed by the Defaulting Party.
8.5 Continuation of Interest
If, within thirty (30) Days after each failure by the Defaulting Party
to remedy its default by the thirtieth (30th) Day following the
Defaulting Party's receipt of the Default Notice, the non-defaulting
Parties fail to elect to acquire the Defaulting Party's Participating
Interest or elect not to acquire the Defaulting Party's Participating
Interest, as provided in Article 8.4 and to continue to bear the
Defaulting Party's Participating Interest share of liabilities and
expenses, then the non-defaulting Parties shall either (a) abandon
operations hereunder pursuant to Article 8.6, or (b) accumulate all
such liabilities and expenses as a debt pursuant to Article VIII, but
the Defaulting Party shall continue to be a Party subject to Article
8.2 and Article 8.7. If Operator disposes of any Joint Property or any
other credit or adjustment is made to the Joint Account, or if Operator
sells any of the Defaulting Party's Participating Interest share of
Hydrocarbons, then, in respect of the Defaulting Party's Participating
Interest share of the proceeds of such disposal, credit or adjustment
or sale, Operator shall be entitled to retain and to set off the same
against all amounts, together with interest accrued on such amount, due
and owing from the Defaulting Party plus an accrued amount equal to the
Defaulting Party's Participating Interest share of the estimated cost
to abandon any Joint Property. Any surplus remaining after setting off
the same as aforesaid shall be paid promptly to the Defaulting Party.
8.6 Abandonment
If, within thirty (30) Days after the failure by the Defaulting Party
to remedy its default by the thirtieth (30th) Day as aforesaid, no
non-defaulting Party elects to acquire the Defaulting Party's
Participating Interest as provided in Article 8.4, or to bear the
Defaulting Party's Participating Interest share of liabilities and
expenses as provided in Article 8.5, then no transfer shall be made and
Joint Operations shall be abandoned subject to any necessary consents
and notices being given, and each Party, including the Defaulting
Party, shall pay its Participating Interest share of all costs of
abandoning and relinquishing the Concession. If abandonment occurs as
aforesaid, all monies paid by the non-defaulting Parties for the
Defaulting Party pursuant to Article 8.3, together with interest
accrued on such amount, shall remain a debt due and owing by the
Defaulting Party.
8.7 Sale of Hydrocarbons
If a Party defaults after the commencement of commercial production and
has not remedied the default by the thirtieth (30th) Day as aforesaid,
then, during the continuance of such default, the Defaulting Party
shall not be entitled to its Entitlement which shall vest in and be the
property of the non-defaulting Parties, and Operator shall be
authorized to sell such Hydrocarbons at the best price obtainable under
the circumstances and, after deducting all costs, charges and expenses
incurred by Operator in connection with such sale, pay the proceeds
proportionately to the non-defaulting Parties which proceeds shall be
credited against all monies advanced pursuant to Article 8.3, together
with interest accrued thereon. Any surplus remaining shall be paid to
the Defaulting Party, and any deficiency shall remain a debt due from
the Defaulting Party to the non-defaulting Parties. Notwithstanding any
such sales by Operator, the provisions of Article 8.4 shall continue to
apply.
8.8 No Right of Set Off
Each Party acknowledges and accepts that a fundamental principle of
this Agreement is that each Party pays its Participating Interest share
of all amounts due under this Agreement as and when required.
Accordingly, any Party which becomes a Defaulting Party undertakes
that, in respect of either any exercise by the non-defaulting Parties
of any rights under or the application of any of the provisions of this
Article, such Party shall not raise by way of set off or invoke as a
defense, whether in law or equity, any failure to pay amounts due and
owing under this Agreement or any alleged or unliquidated claim that
such Party may have against Operator or any Non-Operator, whether such
claim arises under this Agreement or otherwise. Such Party further
undertakes not to raise by way of defense, whether in law or in equity,
that the nature or the amount of the remedies granted to the
non-defaulting Parties is unreasonable or excessive.
ARTICLE IX
DISPOSITION OF PRODUCTION
9.1 Right and Obligation to Take in Kind
Except as otherwise provided in this Article 9 and Article 8.7, each
Party shall have the right and obligation to own, take in kind and
separately dispose of its Participating Interest share of total
production available to the Parties pursuant to the Concession in such
quantities and in accordance with such procedures as may be set forth
in the offtake agreement referred to in Article 9.2 or in the special
arrangements for natural gas referred to in Article 9.3. If EGPC is
party to the offtake agreement, then the Parties shall endeavor to
obtain its agreement to the principles set forth in this Article 9. To
the extent that a Party requires separate facilities to exercise its
rights under this Article 9.1, the costs of such separate facilities
will be borne solely by such Party.
9.2 Offtake Agreement for Crude Oil
If Crude Oil is to be produced from the Concession, the Operator shall
submit an offtake agreement for the Parties consideration, and 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
Concession. EGPC may, if necessary and practicable, also be party to
the offtake agreement. This offtake agreement shall, to the extent
consistent with the Concession, make provision for:
A) The delivery point, at which title and risk of loss of Participating
Interest shares of Crude Oil shall pass to the Parties interested (or as
the Parties may otherwise agree);
B) Operator's regular periodic advice to the Parties of estimates of total
available production for succeeding periods, Entitlements, and grades of
Crude Oil for as far ahead as is necessary for Operator and the Parties to
plan offtake arrangements. Such advice shall also cover for each grade of
Crude Oil total available production and deliveries for the preceding
period, inventory and overlifts and underlifts;
C) Nomination by the Parties to Operator of acceptance of their Entitlement of
total available production for the succeeding period. Such nominations
shall in any one period be for each Party's entire Entitlement arising
during that period subject to operational tolerances and agreed minimum
economic cargo sizes or as the Parties may otherwise agree;
D) Elimination of overlifts and underlifts;
E) If offshore loading or a shore terminal for vessel loading is involved,
risks regarding acceptability of tankers, demurrage and (if applicable)
availability of berths;
F) Distribution to the Parties of Entitlements to ensure, to the extent
Parties take delivery of their Entitlements in proportion to the accrual of
such Entitlements, that each Party shall receive currently Entitlements of
grades, gravities and qualities of Hydrocarbons similar to Hydrocarbons
received by each other Party;
G) To the extent that distribution of Entitlements on such basis is
impracticable due to availability of facilities and minimum cargo sizes, a
method of making periodic adjustments; and
H) The option and the right of the other Parties to sell an Entitlement which
a Party fails to nominate for acceptance pursuant to Article 9.2(C) above
or of which a Party fails to take delivery, in accordance with applicable
agreed procedures, provided that such failure either constitutes a breach
of Operator's or Parties' obligations under the terms of the Concession, or
is likely to result in the curtailment or shut-in of production. Such sales
shall be made only to the limited extent necessary to avoid disruption in
Joint Operations. Operator shall give all Parties as much notice as is
practicable of such situation and that a sale option has arisen. Any sale
shall be of the unnominated or undelivered Entitlement as the case may be
and for reasonable periods of time in no event to exceed twelve (12)
months. The right of sale shall be revocable at will subject to any prior
contractual commitments. Sales to non-affiliated third parties shall be for
the realized price f.o.b. the delivery point. Sales to any of the Parties
or their Affiliates shall be at current market value f.o.b. the delivery
point. The Party arranging the sale shall pay to the Party whose
Entitlement is involved the above price after deduction of all costs,
including storage costs, incurred in respect of such sale and a marketing
fee of an agreed percentage of the applicable price less deductions,
reflecting actual costs of disposal at immediate notice. Current market
value shall be the value of the Entitlement in international markets
(unless the Entitlement was required to be delivered into the Government's
domestic market, in which case it shall be the value therein) between a
willing buyer and a willing seller and shall be agreed between the two
Parties concerned, or failing agreement, determined by an expert to be
appointed in accordance with procedures set forth in the offtake agreement.
If an offtake agreement has not been entered into by the date of first
delivery of Crude Oil, the Parties shall be bound by the principles set
forth in this Article 9.2 until an offtake agreement has been entered into.
9.3 Separate Agreement for Natural Gas
The Parties recognize that if natural gas is discovered it may be
necessary for the Parties to enter into a long term Gas Sales Agreement
as contemplated in Article III(d)(ii) of the Concession. Failing such
agreement, the Parties shall negotiate special arrangements, including
gas balancing, for the disposal of same.
9.4 EGPC Preferential Right of Purchase
In the event EGPC exercises its preferential right to purchase
Hydrocarbons produced under the Concession, each Party shall contribute
the quantity required proportionately to its Entitlement thereof. Or,
if EGPC requires that Crude Oil from the Concession be sold to or with
EGPC under a joint marketing arrangement or otherwise, Operator shall
use its best efforts to obtain the unanimous agreement of the Operating
Committee to the terms and conditions of any such arrangement or
agreement.
9.5 Government's Right of Requisition
In the event the Government requisitions Contractor's share of
Hydrocarbons produced under the Concession, each Party shall contribute
the quantity required proportionately to its Participating Interest
share thereof.
ARTICLE X
ABANDONMENT OF ▇▇▇▇▇
10.1 Abandonment of ▇▇▇▇▇ Drilled as Joint Operations
A) Any well which has been drilled as a Joint Operation and which
is proposed to be plugged and abandoned shall not be plugged
and abandoned without the consent of all Parties, and in the
event that the Operating Company has been formed, the consent
of EGPC.
B) Should any such Party fail to reply within the period
prescribed in Article 5.12(A)(1) or Article 5.12(A)(2),
whichever is applicable, after delivery of notice of the
Operator's proposal to plug and abandon such well, such Party
shall be deemed to have consented to the proposed abandonment.
If all the Parties consent to abandonment, such well shall be
plugged and abandoned in accordance with applicable
regulations and at the cost, risk and expense of the Parties
or the Consenting Parties, as applicable.
C) If all Parties do not agree to the abandonment of such well,
those wishing to continue operations shall assume financial
responsibility over the well and shall be deemed to be
Consenting Parties conducting an Exclusive Operation pursuant
to Article VII. In the case of a producing well, the
Consenting Parties shall be entitled to continue producing
only from the Zone open to production at the time they assumed
responsibility for the well.
D) Each Non-Consenting Party shall be deemed to have relinquished
to the Consenting Parties in proportion to their Participating
Interests all of its interest in the wellbore of a produced
well and related equipment in accordance with Article 7.4(B),
insofar and only insofar as such interest covers the right to
obtain production from that wellbore in the Zone then open to
production.
E) Subject to Articles 6.3 and 7.8(G), Operator shall continue to
operate a produced well for the account of the Consenting
Parties at the rates and charges contemplated by this
Agreement, plus any additional cost and charges which may
arise as the result of the separate allocation of interest in
such well.
10.2 Abandonment of Exclusive Operations
This Article shall apply mutatis mutandis to the abandonment of an
Exclusive Well or any well in which an Exclusive Operation has been
conducted; provided that no well shall be permanently plugged and
abandoned unless and until all Parties having the right to conduct
further operations in such well have been notified of the proposed
abandonment and afforded the opportunity to elect to take over the well
in accordance with the provisions of this Article X.
ARTICLE XI
SURRENDER, EXTENSIONS AND RENEWALS
11.1 Surrender
A) Operator shall advise the Operating Committee of any surrender
requirement under the Concession at least one hundred and twenty (120)
Days in advance of the earlier of the date for filing an irrevocable
notice of such surrender or the date of such surrender. Prior to the
end of such period, the Operating Committee shall determine, pursuant
to Article V, the size and shape of the surrendered area, consistent
with the requirements of the Concession. If a sufficient vote of the
Operating Committee cannot be attained, then the proposal supported by
a simple majority of the Participating Interests shall be adopted. If
no proposal attains the support of a simple majority of the
Participating Interests, then the proposal receiving the largest
aggregate Participating Interest vote shall be adopted. In the event
of a tie, the Operator shall choose among the proposals receiving the
largest aggregate Participating Interest vote. The Parties shall
execute any and all documents and take such other actions as may be
necessary to effect the surrender. Each Party renounces all claims and
causes of action against Operator and any other Parties on account of
any area surrendered in accordance with the foregoing but against its
recommendation if Hydrocarbons are subsequently discovered under the
surrendered area. B) A surrender of all or any part of the Concession
Area which is not required by the Concession shall require the
unanimous consent of the Parties.
11.2 Extension of the Term
A) A proposal by any Party to extend the term of the Exploration Period
or Development Period or any Exploration Sub-Period of the Concession,
a proposal to enter into a new phase of the Exploration Period, and a
proposal to extend the term of the Concession shall be brought before
the Operating Committee pursuant to Article V.
B) Any Party shall have the right to enter into or extend the term of the
Exploration Period or Development Period or any Exploration Sub-Period
of the Concession or extend the term of the Concession, regardless of
the level of support in the Operating Committee. If any Party or
Parties take such action, any Party not wishing to extend or enter
into a new period shall have a right to withdraw, subject to the
requirements of Article XIII.
ARTICLE XII
TRANSFER OF INTEREST OR RIGHTS
12.1 Obligations
A) Subject always to the requirements of the Concession and subject to
the terms of transfer contained in Articles VIII or XIII, the transfer
of all or part of a Party's Participating Interest shall be effective
only if it satisfies the terms and conditions of this Article.
B) Except in the case of a Party transferring all of its Participating
Interest, no transfer shall be made by any Party which results in the
transferor or the transferee holding a Participating Interest of less
than five (5%) percent or holding any interest other than a
Participating Interest in the Concession and this Agreement.
C) The transferring Party shall, notwithstanding the transfer, be liable
to the other Parties for any obligations, financial or otherwise,
which have vested, matured or accrued under the provision of the
Concession or this Agreement prior to such transfer. Such obligations
shall include, without limitation, any proposed expenditure approved
by the Operating Committee prior to the transferring Party notifying
the other Parties of its proposed transfer.
D) The transferee shall have no rights in and under the Concession or
this Agreement unless and until it obtains any necessary Government
approval and expressly undertakes in writing to perform all
obligations of the transferor under the Concession and this Agreement
in respect of the Participating Interest being transferred, to the
satisfaction of the Parties.
E) The transferee other than an Affiliate shall have no rights in and
under the Concession or this Agreement unless each Party has consented
in writing to such transfer, which consent shall be denied only if
such transferee fails to establish to the reasonable satisfaction of
each Party its financial and technical capability to perform its
obligations under the Concession and this Agreement. With respect to a
transfer to an Affiliate, the transferring Party shall provide each of
the Parties with prior written notice of the transfer. Notwithstanding
such transfer, the transferring Party shall remain liable for any and
all obligations under this Agreement unless such Affiliate establishes
to the reasonable satisfaction of each Party its financial and
technical capability to perform its obligations under the Concession
and this Agreement.
F) Nothing contained in this Article shall prevent a Party from
mortgaging, pledging, charging or otherwise encumbering all or part of
its interest in the Concession and in this Agreement for the purpose
of security relating to a financing provided that:
1) such Party shall remain liable for all obligations
relating to such interest;
2) the encumbrance shall be subject to any necessary
approval of the Government and be expressly
subordinated to the rights of the other Parties under
this Agreement;
3) such Party shall ensure that any such mortgage, pledge,
charge or encumbrance shall be expressed to be without
prejudice to the provisions of this Agreement; and
4) such Party shall advise the remaining Parties of the
existence of any financing, subject to said Party's
right to disclosure under its financing agreements and
shall provide proof of compliance with Article
12.1(F)(3).
12.2 Rights
Each Party shall have the right, subject to the provisions of the
Concession and Article 12.1 hereof, to freely transfer its
Participating Interest.
ARTICLE XIII
WITHDRAWAL FROM AGREEMENT
13.1 Right of Withdrawal
A) Subject to the provisions of this Article, any Party may
withdraw from this Agreement and the Concession by giving
notice to all other Parties stating its decision to withdraw
and specifying a proposed effective date of withdrawal which
shall be at least sixty (60) Days, but not more than one
hundred eighty (180) Days after the date of such notice. Such
notice shall be unconditional and irrevocable when given.
B) Notwithstanding Article 13.1(A), a Party shall not have the right to
withdraw from this Agreement and the Concession until the Minimum Work
Obligation for the then current Exploration Sub-Period set forth in the
Concession has been fulfilled. However, if the Operating Committee or any
Party decides to accept new Minimum Work Obligations by voluntarily
extending the current or entering into a new Exploration Sub-Period under
the Concession, a Party that voted against such decision shall not be
prevented from withdrawing; provided that such Party delivers notice of its
withdrawal to all Parties within thirty (30) Days of such vote pursuant to
Article 11.2 and fully satisfies its Participating Interest share of the
outstanding Minimum Work Obligation for the then current Exploration
Sub-Period, if any.
C) Subject to Articles 13.1(A) and (B), 13.5 and 13.9, the effective date
of withdrawal for a withdrawing Party shall be the end of the calendar
month following the calendar month in which notice of withdrawal is given.
D) Notwithstanding anything to the contrary contained herein, a Party that
elects to withdraw shall not, unless such Party otherwise agrees, be
considered to have withdrawn from this Agreement or the Concession as it
applies to a Development Lease in which such Party has a Participating
Interest.
13.2 Withdrawal by Some or All of the Parties
A) Within thirty (30) Days of receipt of each withdrawing Party's
notification, each of the other Parties may also give notice that it
desires to withdraw from this Agreement and the Concession. Should all
Parties give notice of withdrawal, the Parties shall proceed to abandon the
Concession Area and terminate the Concession and this Agreement in
accordance with their respective terms. If less than all of the Parties
give such notice of withdrawal, then the withdrawing Parties shall take all
steps to withdraw from the Concession and this Agreement on the earliest
possible date and execute and deliver all necessary instruments and
documents to assign their Participating Interest to the Parties that are
not withdrawing, at its sole cost and expense and without any compensation
whatsoever, in accordance with the provisions of Article 13.6.
B) If any part of the withdrawing Party's Participating Interest remains
unclaimed after sixty (60) Days from the date of the first notice of
withdrawal, the Parties shall be deemed to have decided to withdraw from
the Concession and this Agreement, unless at least one Party agrees to
accept the unclaimed Participating Interest.
C) Any Party withdrawing under Article 11.2(B) or under this Article XIII
shall, at its option,
1) withdraw from the entirety of the Concession Area; or
2) withdraw only from all exploration activities under the Concession,
but not from any Development Lease made prior to such withdrawal.
A Party withdrawing pursuant to this Article 13.2(C)(2) shall
retain its rights in the Joint Property, but only insofar as
they relate to any such Development Lease, and shall abandon
all other rights in the Joint Property.
13.3 Rights of a Withdrawing Party
A withdrawing Party shall have the right to receive its Entitlement of
Hydrocarbons produced through the effective date of its withdrawal. The
withdrawing Party shall be entitled to receive all information to which
such Party is otherwise entitled under this Agreement until the
effective date of its withdrawal. After giving its notification of
withdrawal, a Party shall not be entitled to vote on any matters coming
before the Operating Committee, other than matters for which such Party
continues to have financial responsibility.
13.4 Obligations and Liabilities of a Withdrawing Party
A) A withdrawing Party shall, following its notification of
withdrawal, remain liable only for its share of the following:
1) Costs of Joint Operations, and Exclusive Operations in which
it has agreed to participate, that were approved by the
Operating Committee or Consenting Parties as part of a Work
Program and Budget or AFE prior to such Party's notification
of withdrawal, regardless of when they are actually
incurred;
2) Any Minimum Work Obligations for the current Exploration
Sub-Period or phase of the Concession, and for any
subsequent period or phase which has been approved pursuant
to Article 11.2 and with respect to which such Party has
failed to give its notice of withdrawal within the time
periods set out in Article 13.4(B);
3) Emergency expenditures as described in Articles 4.2(B)(11)
and 13.5;
4) All other obligations and liabilities of the Parties or
Consenting Parties, as applicable, with respect to acts or
omissions under this Agreement which were incurred or are
attributable to the period prior to the effective date of
such Party's withdrawal for which such Party would have been
liable, had it not withdrawn from this Agreement; and
5) In the case of a partially withdrawing Party, any costs and
liabilities with respect to Development Leases from which it
has not withdrawn.
The obligations and liabilities for which a withdrawing Party remains
liable shall specifically include its share of any costs of plugging
and abandoning ▇▇▇▇▇ or portions of ▇▇▇▇▇ in which it participated (or
was required to bear a share of the costs pursuant to Article
13.4(A)(1)), to the extent such costs of plugging and abandoning are
payable by the Parties under the Concession. Any liens, charges and
other encumbrances which the withdrawing Party placed on such Party's
Participating Interest prior to its withdrawal shall be fully
satisfied or released, at the withdrawing Party's expense, prior to
its withdrawal. A Party's withdrawal shall not relieve it from
liability to the non-withdrawing Parties with respect to any
obligations or liabilities attributable to the withdrawing Party under
this Article XIII merely because they are not identified or
identifiable at the time of withdrawal.
B) Notwithstanding the foregoing, a Party shall not be liable
for any operations or expenditures it voted against (other
than operations and expenditures described in Article
13.4(A)(2) or 13.4(A)(3)) if it sends notification of its
withdrawal within five (5) Days (or within twenty-four (24)
hours if the drilling rig to be used in such operation is
standing by on the Concession Area) of the Operating
Committee vote approving such operation or expenditure.
Likewise, a Party voting against voluntarily entering into
or extending of an Exploration Sub-Period, Exploration
Period or Development Period or any phase of the Concession
or voluntarily extending the Concession shall not be liable
for the Minimum Work Obligations associated therewith
provided that it sends notification of its withdrawal within
the earlier of thirty (30) Days of such vote pursuant to
Article 11.2 or five (5) Days prior to the last date upon
which the Parties must give notice to EGPC pursuant to the
Concession in order to enter such period or obtain such
extension.
13.5 Emergency
A Party's notification of withdrawal shall not become effective if prior to the
proposed effective date of withdrawal a well goes out of control or a fire, blow
out, sabotage or other emergency occurs. The notification of withdrawal shall
become effective only after the emergency has been contained and the withdrawing
Party has paid, or has provided, security satisfactory to the Parties for its
Participating Interest share of the costs of such emergency.
13.6 Assignment
A withdrawing Party shall assign its Participating Interest to each of the
non-withdrawing Parties which shall be allocated to them in the proportion which
each of their Participating Interests (prior to the withdrawal) bears to the
total Participating Interests of all the non-withdrawing Parties (prior to the
withdrawal), unless the non-withdrawing Parties agree otherwise. The expenses
associated with the withdrawal and assignments shall be borne by the withdrawing
Party.
13.7 Approvals
A withdrawing Party shall promptly join in such actions as may be necessary or
desirable to obtain any Government approvals required in connection with the
withdrawal and assignments, and any penalties or expenses incurred by the
Parties in connection with such withdrawal shall be borne by the withdrawing
Party.
13.8 Abandonment Security
A withdrawing Party shall provide Security satisfactory to the other Parties to
satisfy any such obligations or liabilities which were approved or accrued prior
to notice of withdrawal, but which become due after its withdrawal, including,
without limitation, Security to cover the costs of an abandonment, if
applicable; provided that the withdrawing Party was participating or was
obligated to participate in the operations which gave rise to such obligations
or liabilities. "Security" means a standby letter of credit issued by a bank or
an on demand bond issued by a corporation, such bank or corporation having a
credit rating indicating it has sufficient worth to pay its obligations in all
reasonably foreseeable circumstances.
13.9 Withdrawal or Abandonment by all Parties
In the event all Parties decide to withdraw or are required to do so pursuant to
this Article, the Parties agree that they shall be bound by the terms and
conditions of this Agreement for so long as may be necessary to wind up the
affairs of the Parties with the Government, to satisfy any requirements of
applicable law or to facilitate the sale, disposition or abandonment of property
or interests held by the Joint Account.
ARTICLE XIV
RELATIONSHIP OF PARTIES AND TAX
14.1 Relationship of Parties
The rights, duties, obligations and liabilities of the Parties under
this Agreement shall be individual, not joint or collective. It is not
the intention of the Parties to create, nor shall this Agreement be
deemed or construed to create a mining or other partnership, joint
venture, association or trust, or as authorizing any Party to act as an
agent, servant or employee for any other Party for any purpose
whatsoever except as explicitly set forth in this Agreement. In their
relations with each other under this Agreement, the Parties shall not
be considered fiduciaries except as expressly provided in this
Agreement.
14.2 Tax
Operator shall provide each Party, in a timely manner and at such
Party's sole expense, with such information with respect to Joint
Operations as such Party may reasonably request for preparation of its
tax returns or responding to any audit or other tax proceeding.
ARTICLE XV
CONFIDENTIAL INFORMATION - PROPRIETARY TECHNOLOGY
15.1 Confidential Information
A) Subject to the provisions of the Concession, the Parties agree that all
information and data acquired or obtained by any Party in respect of Joint
Operations shall be considered confidential and shall be kept confidential and
not be disclosed during the term of the Concession and for a period of two (2)
years after expiration of the Concession to any person or entity not a Party to
this Agreement, except:
1) To an Affiliate, provided such Affiliate maintains
confidentiality as provided in this Article;
2) To a governmental agency or other entity when required by
the Concession;
3) To the extent such data and information is required to be
furnished in compliance with any applicable laws or
regulations, or pursuant to any legal proceedings or because
of any order of any court binding upon a Party;
4) Subject to Article 15.1(B), to potential contractors,
contractors, consultants and attorneys employed by any Party
where disclosure of such data or information is essential to
such contractor's, consultant's or attorney's work;
5) Subject to Article 15.1(B), to a bona fide prospective
transferee of a Party's Participating Interest (including an
entity with whom a Party or its Affiliates is conducting
bona fide negotiations directed toward a merger,
consolidation or the sale of a majority of its or an
Affiliate's shares);
6) Subject to Article 15.1(B), to a bank or other financial
institution to the extent appropriate to a Party arranging
for funding for its obligations under this Agreement;
7) To the extent such data and information must be disclosed
pursuant to any rules or requirements of any government or
stock exchange having jurisdiction over such Party, or its
Affiliates; provided that if any Party desires to disclose
information in an annual or periodic report to its or its
Affiliates' shareholders and to the public and such
disclosure is not required pursuant to any rules or
requirements of any government or stock exchange, then such
Party shall comply with Article 20.2;
8) To its respective employees for the purposes of Joint
Operations, subject to each Party taking customary
precautions to ensure such data and information is kept
confidential; and
9) Where any data or information which, through no fault of a
Party, becomes a part of the public domain.
B) Disclosure as pursuant to Article 15.1(A)(4), (5), and (6) shall not be made
unless prior to such disclosure the disclosing Party has obtained a written
undertaking from the recipient party to keep the data and information strictly
confidential and not to use or disclose the data and information except for the
express purpose for which disclosure is to be made.
15.2 Continuing Obligations
Any Party ceasing to own a Participating Interest during the term of
this Agreement shall nonetheless remain bound by the obligations of
confidentiality and any disputes shall be resolved in accordance with
Article XVIII.
15.3 Proprietary Technology
Nothing in this Agreement shall require a Party to divulge proprietary
technology to the other Parties; provided that where the cost of
development of proprietary technology has been charged to the Joint
Account, such proprietary technology shall be disclosed to all Parties
bearing a portion of such cost and may be used by such Party or its
Affiliates in other operations.
15.4 Trades
Notwithstanding the foregoing provisions of this Article, Operator may,
with prior approval of the Operating Committee, make well trades and
data trades for the benefit of the Parties, with any data, the cost of
which has been charged to the Joint Account, so obtained to be
furnished to all Parties. Operator shall obtain an undertaking from the
third party receiving such information to keep such information
confidential.
ARTICLE XVI
FORCE MAJEURE
16.1 Obligations
If as a result of Force Majeure any Party is rendered unable, wholly or
in part, to carry out its obligations under this Agreement, other than
the obligation to pay any amounts due or to furnish security, then the
obligations of the Party giving such notice, so far as and to the
extent that the obligations are affected by such Force Majeure, shall
be suspended during the continuance of any inability so caused, but for
no longer period. The Party claiming Force Majeure shall notify the
other Parties of the Force Majeure situation within a reasonable time
after the occurrence of the facts relied on and shall keep all Parties
informed of all significant developments. Such notice shall give
reasonably full particulars of said Force Majeure, and also estimate
the period of time which said Party will probably require to remedy the
Force Majeure. The affected Party shall use all reasonable diligence to
remove or overcome the Force Majeure situation as quickly as possible
in an economic manner, but shall not be obligated to settle any labor
dispute except on terms acceptable to it and all such disputes shall be
handled within the sole discretion of the affected Party.
16.2 Definition of Force Majeure
For the purposes of this Agreement, "Force Majeure" shall have the
meaning as set forth in Article XXIII(b) of the Concession.
ARTICLE XVII
NOTICES
17.1 Notices
Except as otherwise specifically provided, all notices authorized or
required between the Parties by any of the provisions of this
Agreement, shall be in writing, in English and delivered in person or
by registered mail or by courier service or by any electronic means of
transmitting written communications which provides confirmation of
complete transmission, and addressed to such Parties as designated
below. The originating notice given under any provision of this
Agreement shall be deemed delivered only when received by the Party to
whom such notice is directed, and the time for such Party to deliver
any notice in response to such originating notice shall run from the
date the originating notice is received. The second or any responsive
notice shall be deemed delivered when received. "Received" for purposes
of this Article with respect to written notice delivered pursuant to
this Agreement shall be actual delivery of the notice to the address of
the Party to be notified specified in accordance with this Article.
Each Party shall have the right to change its address at any time
and/or designate that copies of all such notices be directed to another
person at another address, by giving written notice thereof to all
other Parties.
In the case of a notice to Dublin at:
Dublin International Petroleum (Egypt) Limited
#▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
Tanganyika Oil Company Ltd.
▇▇▇ - ▇▇▇▇ - ▇▇▇ ▇▇▇▇▇▇ ▇.▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇ ▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
In the case of a notice to GHP at:
GHP Exploration (West Gharib) Ltd.
▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇
U.S.A .77027
Attention: ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
In the case of notice to ▇▇▇▇▇▇▇:
▇▇▇▇▇▇▇ Petroleum Inc.
#830, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
ARTICLE XVIII
APPLICABLE LAW AND DISPUTE RESOLUTION
18.1 Applicable Law
This Agreement shall be governed by, construed, interpreted and applied
in accordance with the laws of Alberta, Canada, excluding any choice of
law rules which would refer the matter to the laws of another
jurisdiction.
18.2 Dispute Resolution
A) Any dispute, controversy or claim arising out of or in relation to or in
connection with this Agreement or the operations carried out under this
Agreement, including without limitation any dispute as to the construction
validity, interpretation, enforceability or breach of this Agreement, shall be
exclusively and finally settled by arbitration, and any Party may submit such a
dispute, controversy or claim to arbitration.
B) The arbitration shall be heard and determined by three (3) arbitrators. All
decisions and awards by the arbitration tribunal shall be made by majority vote.
C) Unless otherwise expressly agreed in writing by the Parties to the
arbitration proceedings:
1) The arbitration proceedings shall be held in Calgary,
Alberta;
2) The arbitration proceedings shall be conducted in the
English language and the arbitrators shall be fluent in the
English language;
3) The arbitrators shall be and remain at all times wholly
independent and impartial;
4) The arbitration proceedings shall be conducted in accordance
with the UNCITRAL Model Law on International Commercial
Arbitration, in effect upon commencement of arbitration;
5) Any procedural issues not determined under the arbitral
rules selected pursuant to Article 18.2(C)(4) shall be
determined by the law of the place of arbitration, other
than those laws which would refer the matter to another
jurisdiction;
6) The costs of the arbitration proceedings (including legal
fees and costs) shall be borne in the manner determined by
the arbitrators;
7) The decision of the majority of the arbitrators, shall be
reduced to writing; final and binding without the right of
appeal; the sole and exclusive remedy regarding any claims,
counterclaims, issues or accountings presented to the
arbitrator; made and promptly paid in U.S. dollars free of
any deduction or setoff (except if the Party is a Defaulting
Party under Article VIII) and any costs or fees incident to
enforcing the award, shall to the maximum extent permitted
by law, be charged against the Party resisting such
enforcement;
8) Consequential, punitive or other similar damages shall not
be allowed;
9) The award shall include interest from the date of any breach
or violation of this Agreement, as determined by the
arbitral award, and from the date of the award until paid in
full, at the Agreed Interest Rate; and
10) Judgement upon the award may be entered in any court having
jurisdiction over the person or the assets of the Party.
Application may also be made to such court for a judicial
acceptance of the award and an order of enforcement, as the
case may be.
ARTICLE XIX
ALLOCATION OF COST RECOVERY RIGHTS
19.1 Allocation of Total Production
For the purposes of recovery of Petroleum Costs, the total quantity of
Hydrocarbons which are produced and saved from all Development Leases
in a Calendar Quarter and to which the Parties are entitled under the
Concession shall be designated as either Cost Oil or Production Sharing
Oil.
19.2 Allocation of Cost Oil
Subject to each of the Farmout Agreements and Article 19.4, Cost Oil
shall be allocated in accordance with the Parties' respective
Participating Interests. The allocation of Cost Oil shall be as
required to recover, in the sequence incurred, all Petroleum Costs and
which are recoverable in such Calendar Quarter.
19.3 Allocation of Production Sharing Oil
Production Sharing Oil shall be allocated among the Parties in
proportion to their respective Participating Interests.
19.4 Exclusive Operations and Extensions of the Exploration Period
Prior to the extension of the term of the Exploration Period or and
Exploration Sub-Period by less than all Parties or, where practicable,
prior to the conduct of an Exclusive Operation (or if not, as soon
thereafter as is practicable), the Parties shall meet to determine:
A) the allocation of Cost Oil and Production Sharing Oil between and Development
Leases in which the Parties have different Participating Interests;
B) the allocation of Cost Oil and Production Sharing Oil between the Parties
where Petroleum Costs have been incurred but do not relate to Joint Operations
resulting in the creation of a Development Lease but which become recoverable as
a result of production from another Development Lease elsewhere in the
Concession Area, provided always that Petroleum Costs in relation to a
Development Lease shall be recovered first;
C) without prejudice to Article 7.9, the manner in which the bonuses
contemplated in Article IX of the Concession will be discharged; and
D) such other matters as the Parties may agree.
ARTICLE XX
GENERAL PROVISIONS
20.1 Warranties as to no Payments, Gifts and Loans
Each of the Parties warrants that neither it nor its affiliates has
made or will make, with respect to the matters provided for hereunder,
any offer, payment, promise to pay or authorization of the payment of
any money, or any offer, gift, promise to give or authorization of the
giving of anything of value, directly or indirectly, to or for the use
or benefit of any official or employee of the Government or EGPC or to
or for the use or benefit of any political party, official, or
candidate for the purpose of influencing an official act or decision of
that person; inducing that person to do or omit to do any act in
violation of his or her lawful duty; or inducing that person to use his
or her influence with the Government or EGPC to affect or influence any
Government or EGPC decision; unless such offer, payment, gift, promise
or authorization is authorized by the written laws or regulations of
the Arab Republic of Egypt. Each of the Parties further warrants that
neither it nor its affiliates has made or will make any such offer,
payment, gift, promise or authorization to or for the use or benefit of
any other person if the Party knows, has a firm belief, or is aware
that there is a high probability that the other person would use such
offer, payment, gift, promise or authorization for any of the purposes
described in the preceding sentence. The foregoing warranties do not
apply to any facilitating or expediting payment to secure the
performance of routine Government action. Routine Government action,
for purposes of this Article 20.1, shall not include, among other
things, Government action regarding the terms, award or continuation of
the Concession. Each Party shall respond promptly, and in reasonable
detail, to any notice from any other Party or its auditors pertaining
to the above stated warranty and representation and shall furnish
documentary support for such response upon request from such other
Party.
20.2 Conflicts of Interest
A) Each Party undertakes that it shall avoid any conflict of interest between
its own interests (including the interests of Affiliates) and the interests of
the other Parties in dealing with suppliers, customers and all other
organizations or individuals doing or seeking to do business with the Parties in
connection with activities contemplated under this Agreement.
B) The provisions of the preceding paragraph shall not apply to:
1) A Party's performance which is in accordance with the local
preference laws or policies of the Government; or
2) A Party's acquisition of products or services from an
Affiliate, or the sale thereof to an Affiliate, made in
accordance with rules and procedures established by the
Operating Committee.
20.3 Public Announcements
A) Operator shall be responsible for the preparation and release of all public
announcements and statements regarding this Agreement and the Joint Operations;
provided that, no public announcement or statement shall be issued or made
unless prior to its release all the Parties have been furnished with a copy of
such statement or announcement and two (2) or more Parties holding more than
fifty percent (50%) of the Participating Interests have approved the same. Where
a public announcement or statement becomes necessary or desirable because of
danger to or loss of life, damage to property or pollution as a result of
activities arising under this Agreement, Operator is authorized to issue and
make such announcement or statement without prior approval of the Parties, but
shall promptly furnish all the Parties with a copy of such announcement or
statement.
B) If a Party wishes to issue or make any public announcement or statement
regarding this Agreement or the Joint Operations, it shall not do so unless
prior to its release, such Party furnishes all the Parties with a copy of such
announcement or statement, and obtains the approval of the Parties holding fifty
percent (50%) or more of the Participating Interests; provided that,
notwithstanding any failure to obtain such approval, no Party shall be
prohibited from issuing or making any such public announcement or statement if
it is necessary to do so in order to comply with the applicable laws, rules or
regulations of any government, legal proceedings or stock exchange having
jurisdiction over such Party as set forth in Articles 15.1(A)(3) and (7).
20.4 Successors and Assigns
Subject to the limitations on transfer contained in Article XII, this
Agreement shall inure to the benefit of and be binding upon the
successors and assigns of the Parties.
20.5 Waiver
No waiver by any Party of any one or more defaults by another Party in
the performance of this Agreement shall operate or be construed as a
waiver of any future default or defaults by the same Party, whether of
a like or of a different character. Except as expressly provided in
this Agreement no Party shall be deemed to have waived, released or
modified any of its rights under this Agreement unless such Party has
expressly stated, in writing, that it does waive, release or modify
such right.
20.6 Severance of Invalid Provisions
If and for so long as any provision of this Agreement shall be deemed
to be judged invalid for any reason whatsoever, such invalidity shall
not affect the validity or operation of any other provision of this
Agreement except only so far as shall be necessary to give effect to
the construction of such invalidity, and any such invalid provision
shall be deemed severed from this Agreement without affecting the
validity of the balance of this Agreement.
20.7 Modifications
Except as is provided in Article 20.6, there shall be no modification
of this Agreement except by written consent of all Parties.
20.8 Headings
The topical headings used in this Agreement are for convenience only
and shall not be construed as having any substantive significance or as
indicating that all of the provisions of this Agreement relating to any
topic are to be bound in any particular Article.
20.9 Singular and Plural
Reference to the singular includes a reference to the plural and vice
versa.
20.10 Gender
Reference to any gender includes a reference to all other genders.
20.11 Counterpart Execution
This Agreement may be executed in any number of counterparts and each
such counterpart shall be deemed an original Agreement for all
purposes; provided no Party shall be bound to this Agreement unless and
until all Parties have executed a counterpart. For purposes of
assembling all counterparts into one document, Operator is authorized
to detach the signature page from one or more counterparts and, after
signature thereof by the respective Party, attach each signed signature
page to a counterpart.
20.12 Entirety and Conflict
This Agreement constitutes the entire agreement of the Parties and
supersedes all prior understandings and negotiations of the Parties,
with the exception of Article 2 of the GHP Farmout Agreement and
Article 2 of the ▇▇▇▇▇▇▇ Farmout Agreement. In the event of a conflict
between Article 2 of the GHP Farmout Agreement and this Agreement, as
between GHP and Dublin, the terms of Article 2 of the GHP Farmout
Agreement shall govern to the extent of the conflict. In the event of a
conflict between Article 2 of the ▇▇▇▇▇▇▇ Farmout Agreement and this
Agreement, as between ▇▇▇▇▇▇▇ and Dublin, the terms of Article 2 of the
▇▇▇▇▇▇▇ Farmout Agreement shall govern to the extent of the conflict.
IN WITNESS of their agreement each Party has caused its duly authorized
representative to sign this instrument on the date indicated below such
representative's signature.
DUBLIN INTERNATIONAL PETROLEUM (EGYPT) LIMITED
By: -----------------------------------
Title: ___________________________________
Date: ___________________________________
GHP EXPLORATION (WEST GHARIB) LTD.
By: -----------------------------------
Title: ___________________________________
Date: ___________________________________
▇▇▇▇▇▇▇ PETROLEUM INC.
By: ___________________________________
-----------------------------------
Title: ___________________________________
Date: ___________________________________
3
TABLE OF CONTENTS
ARTICLE I DEFINITIONS..........................................................1
ARTICLE II EFFECTIVE DATE AND TERM.............................................7
ARTICLE III PARTICIPATING INTERESTS............................................8
ARTICLE IV OPERATOR...........................................................10
ARTICLE V OPERATING COMMITTEE.................................................17
ARTICLE VI WORK PROGRAMS AND BUDGETS..........................................21
ARTICLE VII OPERATIONS BY LESS THAN ALL PARTIES...............................28
ARTICLE VIII DEFAULT..........................................................38
ARTICLE IX DISPOSITION OF PRODUCTION..........................................42
ARTICLE X ABANDONMENT OF ▇▇▇▇▇................................................44
ARTICLE XI SURRENDER, EXTENSIONS AND RENEWALS.................................45
ARTICLE XII TRANSFER OF INTEREST OR RIGHTS....................................46
ARTICLE XIII WITHDRAWAL FROM AGREEMENT........................................48
ARTICLE XIV RELATIONSHIP OF PARTIES AND TAX...................................51
ARTICLE XV CONFIDENTIAL INFORMATION - PROPRIETARY TECHNOLOGY..................52
ARTICLE XVI FORCE MAJEURE.....................................................54
ARTICLE XVII NOTICES..........................................................55
ARTICLE XVIII APPLICABLE LAW AND DISPUTE RESOLUTION...........................57
ARTICLE XIX ALLOCATION OF COST RECOVERY RIGHTS................................59
ARTICLE XX GENERAL PROVISIONS.................................................60
INTERNATIONAL JOINT OPERATING AGREEMENT
Between :
DUBLIN INTERNATIONAL PETROLEUM (EGYPT) LIMITED
-and-
GHP EXPLORATION (WEST GHARIB) LTD.
-and-
▇▇▇▇▇▇▇ PETROLEUM INC.
West Gharib Area
Arab Republic of Egypt
