NOTICE: The text below was created automatically and may contain errors and differences from the contract's original PDF file. Learn more here
AN ACT TO RATIFY THE PRODUCTION SHARING
CONTRACT BETWEEN NATIONAL OIL COMPANY
OF LIBERIA REPRESENTING THE REPUBLIC OF
LIBERIA AND ORANTO PETROLEUM LIMITED
FOR OFFSHORE BLOCK LB 14
APPROVED JULY 23, 2009
PUBLISHED BY AUTHORITY
MINISTRY OF FOREIGN AFFAIRS
MONROVIA, LIBERIA
PRINTED JULY 29,2009
PRODUCTION SHARING CONTRACT
BETWEEN
NATIONAL OIL COMPANY OF LIBERIA
REPRESENTING THE REPUBLIC OF LIBERIA
AND
ORANTO PETROLEUM LIMITED
OFFSHORE BLOCK LB 14
2009
"AN ACT TO RATIFY THE PRODUCTION SHARING CONTRACT BETWEEN
THE NATIONAL OIL COMPANY REPRESENTING THE REPUBLIC OF
LIBERIA AND ORANTO PETROLEUM LIMITED FOR OFFSHORE BLOCK
LB-14.”
IT IS ENACTED BY THE SENATE AND HOUSE OF REPRESENTATIVES OF THE
REPUBLIC OF LIBERIA IN LEGISLATURE ASSEMBLED:
Section I: That immediately after the passage of this Act “AN ACT TO
RATIFY THE PRODUCTION SHARING CONTRACT BETWEEN THE
NATIONAL OIL COMPANY REPRESENTING THE REPUBLIC OF LIBERIA
AND ORANTO PETROLEUM LIMITED OFFSHORE BLOCK LB 14”, as herein
recited below word for word in the authentic English version be, and the
same is hereby ratified to give full force and effect to the provision as
contained herein.
SECTION II: SHORT TITLE: This Act to ratify the PRODUCTION
SHARING CONTRACT BETWEEN THE NATIONAL OIL COMPANY
REPRESENTING THE REPUBLIC OF LIBERIA AND ORANTO PETROLEUM
LIMITED FOR OFFSHORE BLOCK LB 14” shall also be cited as the
PRODUCTION SHARING CONTRACT ACT OF LIBERIA AND ORANTO
PETROLEUM LIMITED ”
SECTION III: That any and all obligations, covenants, terms and
conditions as contained in the above mentioned PRODUCTION SHARING
CONTRACT shall be carried to fi.il 1 completion unless otherwise modified,
amended, or repealed.
SECTION IV: This Act shall take effect immediately upon the publication
into handbill.
*
ANY LAW TO THE CONTRARY NOTWITHSTANDING
ORANTO BLOCK LB-14 PSC JUNE 10,2009 CONFIDENTIAL
Table of Contents
ITICLE 1 -DEFINITIONS....................................................................................................... 2
ITICLE 2 SCOPE OF THE CONTRACT.............................................................................. 6
ITICLE 3 DURATION OF EXPLORATION PERIODS AND SURRENDERS................. 7
ITICLE 4 EXPLORATION WORK COMMITMENTS..,..................................................... .9
ITICLES 5 ESTABLISHMENT AND APPROVAL OF ANNUAL WORK PROGRAMS
AND BUDGETS.......................................................................................................................... 11
ITICLE 6 CONTRACTOR’S OBLIGATIONS IN RESPECT OF THE EXPLORATION 13
HlRIODS AND ENVIRONMENTAL MANAGEMENT..........................................................
ITICLE 7 CONTRACTOR’S RIGHTS IN RESPECT OF THE EXPLORATION 15
PERIODS....................................................................................................................................
ARTICLE 8 ACTIVITY REPORTS DURING THE EXPLORATION PERIODS AND
IUPERVISION OF PETROLEUM OPERATIONS....................................................................16
ARTICLE 9 OCCUPATION OF LAND.....................................................................................18
ARTICLE 10 USE OF FACILITIES........................................................................................19
ARTICLE 11 APPRAISAL OF A PETROLEUM DISCOVERY -.........................................20
ARTICLE 12 GRANT OF AN EXCLUSIVE EXPLOITATION AUTHORIZATION IN
RESPECT OF A COMMERCIAL DISCOVERY........................................................................23
ARTICLE 13 DURATION OF THE EXPLOITATION PERIOD.............................................24
ARTICLE 14 EXPLOITATION OBLIGATION........................................ 25
ARTICLE 15 CONTRACTOR’S OBLIGATIONS AND RIGHTS IN RESPECT OF
EXCLUSIVE EXPLOITATION AUTHORIZATIONS........................ 26
ARTICLE 16 RECOVERY OF PETROLEUM COSTS AND PRODUCTION SHARING.....28
ARTICLE 17 TAXATION..........................................................................................................30
ARTICLE 18 VALUATION OF PETROLEUM........................................................................37
ARTICLE 19 BONUSES AND HYDROCARBON DEVELOPMENT FUND.........................40
ARTICLE 20 OWNERSHIP AND ABANDONMENT OF ASSETS........................................42
ARTICLE 21 NATURAL GAS---................................................................. 43
ARTICLE 22 FOREIGN EXCHANGE CONTROL...................................................................47
ARTICLE 23 APPLICABLE LAW............................................................................................48
ARTICLE 24 MONETARY UNIT.......................................................................................49
ARTICLE 25 ACCOUNTING METHOD AND AUDITS................................................ 50
ARTICLE 26 IMPORT AND EXPORT.....................................................................................51
ARTICLE 27 DISPOSAL OF PRODUCTION...........................................................................53
3
ORANTO BLOCK LB-14 PSC JUNE 10, 2009 CONFIDENTIAL
ARTICLE 28 PROTECTION OF RIGHTS................................................................................54
ARTICLE 29 PERSONNEL AND TRAINING..........................................................................56
ARTICLE 30 ACTIVITY REPORTS IN RESPECT OF EXCLUSIVE EXPLOITATION
AUTHORIZATIONS....................................................................................................................58
ARTICLE 31 ARBITRATION....................................................................................................59
ARTICLE 32 TERMINATION..................................................................................................61
ARTICLE 33 FORCE MAJEURE..............................................................................................63
ARTICLE 34 JOINT AND SEVERAL OBLIGATIONS AND GUARANTEES......................64
ARTICLE 35 RIGHTS OF ASSIGNMENT...............................................................................65
ARTICLE 36 STABILITY OF CONDITIONS...........................................................................66
ARTICLE 37 IMPLEMENTATION OF THE CONTRACT......................................................67
ARTICLE 38 EFFECTIVE DATE..............................................................................................69
APPENDIX 1................................................................................................................................71
APPENDIX 2................................................................................................................................7h^
4
PRODUCTION SHARING CONTRACT
BETWEEN
The Republic oi Liberia, (STATE) represented for the purposes of this Contract by the
National Oil Company of Liberia (NOCAL), a company incorporated under the laws of
Liberia, the Minister of Finance, the Minister of Lands, Mines & Energy and the Chairman of
the National Investment Commission
AND
Orauto Petroleum Limited, a company incorporated in the jurisdiction of Nigeria,
hereinafter referred to as “the Contractor”.
WHEREAS
• the discovery and exploitation of petroleum are important for the interest and the
economic development of the country and its people;
• the Contractor wishes to undertake operations for exploration and development for
exploitation, transportation, storage, processing and marketing of Hydrocarbons;
• NOCAL has the rights in respect of Petroleum Exploration and Exploitation over the
entirety of available areas in Liberia including the Delimited Area defined hereinafter;
• NOCAL wishes to promote the development of the Delimited Area, and the
Contractor wishes to cooperate with NOCAL by assisting it in the exploration for and
production of the potential resources within the Delimited Area, and thereby
encouraging the economic growth of the country;
The Contractor represents that it has the financial resources, die technical competence and the
organization capacity necessary to carry out in the Delimited Area, the Petroleum Operations
specified hereinafter. NOW THEREFORE, THE PARTIES HEREBY AGREE AS
FOLLOWSft-
ORANTO BLOCK LB-14 PSC JUNE 10, 2009 CONFIDENTIAL
ARTICLE 1
DEFINITIONS
The following terms used in this contract shall have the following meaning:
1.1 AFFILIATED COMPANY means:
a company or any other entity which directly or indirectly controls or is controlled by
any entity constituting the Contractor; or
a company or any other entity which directly or indirectly controls or is controlled by
a company or entity which itself directly or indirectly controls any entity constituting
the Contractor.
Such “control'’ means direct or indirect ownership by a company or any other entity
of holding filly percent (50%) or more of the shares, conferring voting rights, forming
the stock of another company.
1.2 ANNUAL WORK PROGRAM means the document describing, item by item, the
Petroleum Operations to be carried out during a Calendar Year within the Delimited
Area and in each Exploration Perimeter, if any, established in accordance with the
Contract.
1.3 APPRAISAL PERIMETER means any part of the Delimited Area where one or
more Hydrocarbon discoveries have been made, and in respect of which NOCAL has
granted to the Contractor an exclusive appraisal authorization for the purpose of
appraising the extent of said discoveries.
1.4 ARMS LENGTH SALES For the purpose of determining arms length sales, the
price of Crude Oil will generally be based in a per barrel basis of one or more Crude
Oil blends which at the time of calculation are being freely and actively traded in the
international oil market and have similar characteristics and quality to the Crude Oil
being marketed. The price for such Crude Oil will be ascertained from Piatt’s Crude
Oil Market Wire daily publication or the spot market for the same Crude Oil
ascertained in a similar manner.
1.5 ASSOCIATED NATURAL GAS means Natural Gas, which exists in the reservoir
with Crude Oil, which is or could be produced in association with Crude Oil.
1.6 BARREL means U.S. barrel, i.e., 42 U.S. gallons measured ul u lemptffauufc of 60° F
and under an atmospheric pressure.
1.7 BUDGET means the itemized cost estimates of the Petroleum Oporation?'described
in an Annual .Work Program.
-i
1.8 CALENDAR QUARTER means a period of threo (3) consecutive months beginning
on January 1, April 1, July 1 or October 1, and ending on the following March thirty-
first (31s*), June thirtieth (30th), September thjrtjpth^J3Qlh) or December (31Jt),
respectively, according to the Gregorian calendar
2
ORANTO BLOCK LB-14 PSC JUNE 10, 2009 CONFIDENTIAL
1.9 CALENDAR YEAR means a period of twelve (12) consecutive months beginning
on January first (1st) and ending on the following December thirty-first (31s'),
1.10 according to the Gregorian calendar.
CAPITAL GOODS means:
(a) Plant or equipment (but not motor vehicles of any kind), and spare parts for
these goods, for use exclusively and directly in manufacturing, agriculture, or
forestry;
(b) The following goods for a producer’s use exclusively and directly in a mining
or petroleum project or in mining or petroleum exploration or development;
(c) Plant or equipment (including four-wheel-drive motor vehicles but not
motorcycles, sedans or luxury vehicles as defined by regulation) and spare
parts for these goods; and,
(d) From the inception of exploration until the date commercial production
begins, intermediate inputs (including but not limited to explosives, drilling
mud, grinding balls, tires for trucks used in operations, and similar items
specified in regulations).
1.11 COMMERCIAL PRODUCTION
(a) “commercial production” begins on the date of the first shipment of petroleum
or natural gas extracted from the area covered under this Contract as part of a
regular program of profit-seeking activity.
1.12 (b) Commercial production ends on the last day of a tax period in which the
number of shipments is less than one-tenth of the average shipments during
the first three years of commercial production.
CONTRA Cl' means this Production Sharing Contract and its appendices forming an
integral part hereof, together with any extension, renewal, replacement or
1.13 modification hereto, which may be mutually agreed between the Parties.
CONTRACT YEAR means a period of twelve (12) consecutive months beginning
on the Effective Date or on the anniversary thereof.
1.14 CONTRACTOR means Oranto Petroleum Limited and any of its successors and
permitted assigns that shall act as Operator and shall conduct Petroleum Operations.
1.15 CRUDE OIL means crude mineral oil, asphalt, ozokerite, and all kinds of petroleum
Hydrocarbon and bituqicn, either solid or liquid in their natural condition or obtained
from Natural Gas by condensation or extraction, including condensates and Natural
1.16 Gas liquids. .)
DELIMITED AREA means the area in respect of which NOCAL under
Contract, grants to the Contractor an exclusive exploration right. The ai
3
ORANTO BLOCK LB-14 PSC JUNE 10, 2009 CONFIDENTIAL
surrendered by the Contractor In accordance with the provisions of Articles 3.5 and
3.6 shall be deemed as excluded from the Delimited Area, which shall be reduced
accordingly. Conversely, the Exploration Pcrimetcr(s) shall be an integral part of the
Delimited Area during the term of the relevant exclusive exploration authorization.
1.17 DELIVERY POINT means the F. O. B. point connection the loading facilities to the
vessel when loading Crude Oil in the Republic of Liberia or any other transfer point
mutually agreed between the Parties.
1.18 DOLLAR means dollar of the United Suites of America.
1.19 EFFECTIVE DATE means the date of ratification and publication of the hand bill
under Article 38
1.20 EXPI-OITATION PERIMETER means any part of the Delimited Area in respect of
which NOCAL has granted to the Contractor an exclusive exploitation authorization.
1.21 EXPLORATION means acquisition of seismic data, prospecting,, drilling and all
other activities leading to the establishment of existence or non-existence of
hydrocarbon in the Delimited Area.
1.22 EXPLORATION PERIMETER means any part of the Delimited Area in respect of
which NOCAL has granted the relevant exclusive Exploration Authorization.
1.23 FIELD means a commercial accumulation of Petroleum in one or several overlaying
horizons, which has been appraised in accordance with the provisions of Article 11.
1.24 FISCAL YEAR means a period of twelve (12) consecutive months beginning on
January first (1st) and ending on the following December thirty-first (3151).
1.25 GOVERNMENT means the Government of Liberia from time to time and/or any and
all ministries, national directorates, departments, national institutes, provincial
government, provincial directorates, commissions, agencies and corporations under
the direct or indirect control of a government or owned thereby and shall include any
court, legislature, council or other state government or national, regional, provincial,
municipal or local authorities.
1.26 Hydrocarbon means the definition under the Liberian Petroleum I^aw of 2000.
1.27 LAW(S) means any constitution, ratified treaty obligation, law, statute, decree, rule,
regulation, judicial act of decision, judgment, order, proclamation, directive,
executive order or other sovereign act of the State
9
1.28 Marine Pollution means the introduction by the contractor or sub-contractor, directly
or indirectly, of substances or energy, including toxic waste, oil spills or any other
solids, liquids or gases into the marine environment (including estuaries) in such
deleterious effects aS harm to living resources, hazard to human health, hindrance to
marine activities including fishing and navigation, or impairment of quality for use of
sea-water, and reduction of amenities.
4
ORANTO BLOCK LB-14 PSC JUNE 10, 2009 CONFIDENTIAL
NATURAL GAS means methane, ethane, propane, butane and dry or wet gaseous
hydrocarbons, whether or not associated with Crude Oil, as well as gaseous products
extracted in association with petroleum, such as, without limitation, nitrogen,
hydrogen sulfide, carbon dioxide, helium and water vapor.
IJO NON-ASSOCIATED NATURAL GAS means Natural Gas other than Associated
Natural Gas.
I 31 Operator shall mean Oranto Petroleum Limited and any subsequent Contractor party
approved as Operator.
1.32 PARTIES means NOCAL and the Contractor, and PARTY means either NOCAL or
the Contractor.
1.33 PETROLEUM COSTS means all expenditures actually incurred and paid by the
Contract for the purposes of the Petroleum Operations under this Contract, and
determined in accordance with the Accounting Procedure attached hereto as Appendix
2.
PETROLEUM OPERATIONS means all activities undertaking by the Contractor,
including but not limited to exploration, appraisal, prospecting, assessment,
marketing, abandonment, decommissioning, development, drilling, production,
exploitation, processing, storage, transport, distribution, sale, etc of Crude Oil and
Natural Gas.
1.35 REVENUE CODE means the Revenue Code of Liberia Act of 2000, as such may be
amended from time to time, or any succession code.
1.36 THIRD PARTY means a company or any other entity, other than the Contractor,
which docs not come within the foregoing definition.
1.37 TOTAL PRODUCTION means the total production of Crude Oil or the total production of Natural Gas obtained from the whole Delimited Area less the quantities used for the requirements of the Petroleum Operations and any Unavoidable Losses.
1.38 Unavoidable Loss means any loss that is solely caused by un-intentional or un-willful
misconduct or gross negligence.
i
5
■
ORANTO BLOCK LB-14 PSC JUNE 10, 2009 CONFIDENTIAL
ARTICLE 2
SCOPE OF THE CONTRACT
2.1 The Contract is a Production Sharing Contract as provided for under Article 7.1 of the
Liberian Petroleum Law and includes all the provisions of the agreement between
2.2 NOCAL and the Contractor.
NOCAL authorizes the Contractor to be the Operator pursuant to the terms set forth
herein and to carry out the useful and necessary Petroleum Operations in the
2.3 Delimited Area, on an exclusive basis.
The Contractor under takes, for all the work necessary for carrying out the Petroleum
Operations provided for hereunder, to comply with good international petroleum
industry practice and to be subject to the laws and regulations in force in Liberia unless otherwise provided under this Contract.
2.4 The Contractor shall supply all financial and technical means necessary for the proper
performance of the Petroleum Operations.
2.5 The Contractor shall bear alone the financial risk associated with the performance of
the Petroleum Operations. The Petroleum Costs related thereto shall be recoverable
2.6 by the Contractor in accordance with the provisions or Article 16.2.
During the term hereof, in the event of production, the Total Production arising from
the Petroleum Operations shall be shared between the Parties according to the terms
2.7 set forth in Articles 16.2 and 16.3.
On the Effective Date, the Delimited Area shall be the area as defined in Appendix 1.
2.8 The Contractor shall furnish NOCAL with all reports, information and data referred to
hereunder, including without limitation any agreement, for the provision of goods and
services in respect of Petroleum excess of $250,000.00 binding on the
entities constituting the Contractor.
6
ORANTO BLOCK LB-14 PSC JUNE 10,2009 CONFIDENTIAL
ARTICLE 3
DURATION OF EXPLORATION PERIODS AND SURRENDERS
3.1 The exclusive exploration authorization is hereby granted to the Contractor for a
period of nine (9) consecutive years defined by three (3) consecutive periods.
A first Exploration Period of four (4) Contract Years, a second Exploration Period of
three (3) Contact Years and the third Exploration Period of two (2) Contract Years in
respect of the entire Delimited Area.
The first Exploration Period will be divided to two stages, a first stage of two (2)
Contract Years and a second stage of two (2) Contract Years. After the 2D and 3D
Seismic Surveys, based on the evaluation result, the contractor has the right to decide
whether to go on to the second stage according to its own judgment. The contractor
shall have the right' to terminate the project at any stage, but must be done in
accordance with the provisions of Articles 4.7 and 32.1 of this Contract.
3.2 If during the first exploration period set forth above the Contractor has fulfilled the
exploration work commitments defined in Article 4, as ascertained by the
Government, the exclusive exploration authorization shall, at the Contractor’s request,
be renewed for a second exploration period of two (2) Contract Years.
3.3 If, at the end of such second exploration period and provided that is has fulfilled its
work commitments as set forth above, and the Contractor so requests, a third
exploration period shall be authorized for two (2) Contractual Years.
3.4 The applications referred to in Articles 32 and 33 shall be made at least sixty (60)
days prior to the expiration of the current exploration period.
3.5 The Contractor shall surrender at least the following surfaces:
a. -Twenty-five percent (25%) of the initial surface'of the Delimited Area at the
expiration of the first exploration period.
b. Additional twenty-five percent (25%) of the initial surface of the Delimited
Area at the expiration of the second exploration period.
Such surrenders shall be constituted of one area or a limited number of areas of
simple geometrical shape delimited by north-south, cast-west lines or by natural
boundaries of the area concerned.
For the purpose of computing the surface to be surrendered, the surface in respect to
any Exploration Perimeter shall be deducted from the initial surface of the Delimited
Area.
The surfaces previously surrendered pursuant to the provisions of Article 3.6 shall be
deducted for die surfaces to be surrendered.
7
ORANTO BLOCK LB-14 PSC JUNE 10, 2009 CONFIDENTIAL
Subject to its compliance with the above-mentioned requirements, the Contractor
shall have the right to determine the size, shape and location of areas to be
surrendered.
The Contractor undertakes to furnish NOCAL with a precise description and a map
showing the details of the surrendered areas and those retained, together with a report
specifying the work carried out in the surrendered areas from the Effective Date and
the results obtained.
3.6 During any exploration period, the Contractor may, at any time, notify NOCAL that it
surrenders the whole or any part of the Delimited Area and the rights granted to it by
giving sixty (60) day’s notice to that effect.
No surrender during or at the expiration of any exploration period shall reduce the
work commitments and the investment obligations set forth in Article 4 for the current
exploration period.
In the event of surrender, the Contractor shall have the exclusive right to retain, for
their respective term, the surfaces in respect of Appraisal Perimeters and Exploitation
Perimeters which would have been granted and to carryout the Petroleum Operations
therein.
3.7 At tire expiration of the third exploration period set forth in Article 3.3, the Contractor
shall surrender the whole remaining surface of the Delimited Area except as to any
Appraisal Perimeters and Exploitation Perimeters which would have then been
granted or applied for.
3.8 If at the expiration of all the exploration periods the Contractor has not been obtained
or is not applying for an exclusive appraisal authorization or an exclusive exploitation
authorization, this Contractor shall terminate.
If an exploratory well is operating at the expiry of an exploration period, then
NOCAL shall grant Contractor an extension of the exclusive exploration authorization
of 90 days (after the exploration well is terminated and the rig released) in order to
evaluate the results of the well and at Contractor’s discretion apply for an exclusive
appraisal authorization or an exclusive exploitation authorization.
3.9 The termination of this Contract, whatever the reason thereof except arising from
Force Majeure, shall not relieve the Contractor of any obligations under this Contract
that wee incurred prior to, or arising from, said termination and which shall be fulfilled.
8
ORANTO BLOCK LB-14 PSC JUNE 10,2009 CONFIDENTIAL
ARTICLE 4
EXPLORATION WORK COMMITMENTS
4.1 The Contractor shall commence the geological and seismic work within six (6)
months from the Effective Date.
4.2 The Contractor, during the first exploration period defined in Article 3.1, shall carry
out a minimum work programme at a cost of no less than 10 Million Dollars which
includes the following:
(a) 3D Seismic Survey of 1,600 sq. km.
(b) 2D Seismic Survey of 300 km.; and,
(c) Contingent on a successful 3D seismic acquisition program and subsequent
interpretation of the data, the Contractor undertakes to make reasonable efforts to drill
in the first period. In the event that such a well is drilled in the first exploration period
it would satisfy the second exploration period minimum well commitment.
4.3 The Contractor, during the second exploration period defined in Article 3.1, shall
curry out a minimum work programme at a cost of no less than 12 million Dollars,
including a commitment to drill a minimum of one (1) exploration well.
4.4 The Contractor, during the third exploration period defined in Article 3.1, shall carry
out a minimum work programme at a cost no less than 15 million Dollars, including
acquisition of 800 sq. km. of 3D Seismic Data and commitment to drill a minimum of
one (1) exploration well.
4.5 Each of the exploratory wells shall be drilled to a minimum depth of two thousand
(2,000) meters, after deduction of the water depth, or 100 meters into the top of the
Albian section, whichever shall come first, or to a lesser depth if the continuation of
drilling performed in accordance with good international petroleum industry practice
is prevented for any of the following reasons:
(a) The basement is encountered at a lesser depth than the minimum contractual
depth;
(b) Continuation of drilling presents an obvious danger due to the existence of
abnormal formation pressure;
(c) Rock formations arc encountered the hardness of which prevents, in practice,
the continuation of drilling by the use of appropriate equipment; -
(d) Petroleum formations are encountered the crossing of which requires, for their
protection, the laying of casing preventing the minimum contractual depth
from being reached.
9
ORANTO BLOCK LB-14 PSC JUNE 10, 2009 CONFIDENTIAL
4.6 In the event that any of the above reasons stated in section 4.5 occurs, the exploratory
well shall be deemed to have been drilled to the minimum contractual depth.
Notwithstanding any provision in this Article to the contrary, NOCAL and the
Contractor may, at any time, agree to abandon the drilling of a well at a lesser depth
than the minimum contractual depth.
4.7 In order to carry out the exploration drilling defined in Article 4.3 and 4.4 in the best
technical conditions in accordance with good international petroleum industry
practice, the Contractor undertakes to make the expenditure required to meet the
objectives of the well work programme which will include drilling and as appropriate,
testing.
4.8 If during the exploration period the Contractor has performed its work commitments
for an amount lesser than the amount specified above, it shall be deemed to have
fulfilled its investment obligations relating to that period. Conversely, the Contractor
shall perform the entirety of its work commitments set forth in respect of an
exploration period even if it results in exceeding the amount specified above for that
period.
4.9 In the event where the number of exploration wells drilled by the Contractor and/or
the amount of seismic data acquired during any exploration period exceed the number
of wells and/or the amount of seismic data provided for in the work commitment for
that period, as specified in this Article 4, the number of additional exploration wells
drilled and/or the amount of seismic data acquired by the Contractor during such
exploration period may be carried forward and treated as work undertaken in
discharge of the Contractor’s commitment to drill exploration wells and/or seismic
data acquired during the succeeding period.
4.10 if at the expiration of any of the three (3) exploration periods defined in Articles 3.1,
3.2 and 3.3 or upon the date of surrender of the whole Delimited Area, or upon the
date of termination of this Contract, the Contractor has not fulfilled its applicable
work commitments set forth in this Article, it shall pay as compensation to NOCAL,
within thirty (30) days after that date of expiration, surrender or termination, the
work commitments above-defined for the current
4
10
ORANTO BLOCK LB-14 PSC JUNE 10, 2009 CONFIDENTIAL
ARTICLES 5
ESTABLISHMENT AND APPROVAL OF ANNUAL WORK
PROGRAMS AND BUDGETS
5.1 At least three (3) months before the beginning of each Calendar Year, or for the first
year, within two (2) months from the Effective Date, the Contractor shall prepare and
submit for approval to NOCAL, an Annual Work Program together with the related
Budget for die entire Delimited Area, specifying the Petroleum Operations that the
Contractor proposes to perform during the Calendar Year and their cost.
5.2 If NOCAL wishes to propose any revisions or modifications to the Petroleum
Operations specified in said Annual Work Program, it shall, within thirty (30) days
after receipt of the program, so notify the Contractor, presenting all justifications
deemed useful. In that event, NOCAL and the Contractor shall meet as soon as
possible to consider the proposed revisions or modifications and to mutually establish
the Annual Work Program and the related Budget in its final form, in accordance with
good international petroleum industry practice. However, during the Exploration
Period, the Annual Work Program and the related Budget established by the
Contractor after the above mentioned meeting shall be deemed to be approved
provided that they comply with the obligations set forth in Article 4.
Each part of the Annual Work Program and Budget, in respect of which NOCAL has
not proposed any revision or modification within the period of thirty (30) days above-
mentioned, shull be carried out by the Contractor within the stated time.
5.3 Should NOCAL fail to notify the Contractor of its wish for revision or modification
within the period of thirty (30) days above-mentioned, such Annual Work Program
and the related Budget submitted by the Contractor shall be deemed to be approved by
NOCAL. It is agreed by NOCAL and the Contractor that the Contractor may acquire
knowledge as and when the work is implemented or certain events may justify
changes to the details of the Annual Work Program. In that event, after notification to
NOCAL, the Contractor may make such changes provided that the basic objectives of
said Annual Work Program are not modified.
5.4 Whenever NOCAL is required to exercise its discretion or its approval is required
under this Contract, it shall exercise its discretion or grant its approval on the basis of
the efficient and economic conduct of Petroleum Operations in respect of the
Delimited Area and in accordance with good international oil industry practice.
5.5 At the commencement of the first Exploration Period NOCAL and the Contractor
shall form a Joint Operations Committee (JOC) consisting of not more than three (3)
members appointed by NOCAL and not more than three (3) members appointed by
the Contractor. Each Party shall have the right to change its representative by giving
thirty (30) days notice to such effect to the other Parties. The purpose of this JOC will
be to review presem anil future Petroleum Operations and report jointly to NOCAL
and the Contractor
11
ORANTO BLOCK LB-14 PSC JUNE 10, 2009 CONFIDENTIAL
5.6 The JOC shall meet twice every calendar year or as otherwise agreed by the members.
No meeting of the JOC shall be held unless two (2) members each appointed by the
Contractor and NOCAL are present.
5.7 The Contractor shall appoint the first Chairman of the JOC who shall hold office until
the second anniversary following the Effective Date. Thereafter, NOCAL and the
Contractor shall have the alternating right to nominate a Chairman of the JOC who
shall hold office for a period of two (2) years.
5.8 All costs of the meeting of the JOC shall be borne by the Contractor and these costs
will be regarded as recoverable costs. Members of the JOC shall be entitled to sitting
fees for attendance at the JOC (payable by the Contractor) in amounts to be mutually
agreed by the Parties.
12
ORANTO BLOCK I.B-14 FSC JUNE 10, 2009 CONFIDENTIAL
ARTICLES 5
ESTABLISHMENT AND APPROVAL OF ANNUAL WORK
PROGRAMS AND BUDGETS
5.1 At least three (3) months before the beginning of each Calendar Year, or for the first
year, within two (2) months from the Effective Date, the Contractor shall prepare and
submit for approval to NOCAL, on Annual Work Program together with the related
Budget for die entire Delimited Areu, specifying tho Petroleum Operations, that the
Contractor proposes to perform during Use Calendar Year und their coat.
5.2 If NOCAL wishes to propose any revisions or modifications to the Petroleum
Operations specified in said Annual Work Program, it shall, within thirty (30) days
after receipt of the program, so notify the Contractor, presenting all justifications
deemed useful. In tliut event, NOCAL und the Contractor shall meet as soon as
possible to consider the proposed revisions or modifications und to mutually establish
the Annual Work Program and the related Budget in its final form, in accordance with
good international petroleum industry practice. However, during lire Exploration
Period, the Annual Work Program und the related Budget established by the
Contractor alter the above mentioned meeting shall be deemed to be approved
provided that they comply with the obligations set forth in Article 4.
Each part of the Annual Work Program and Budget, in respect of which NOCAL has
not proposed any revision or modification within the period of thirty (30) days above-
mentioned. shall be carried out by the Contractor within the stated time.
5.3 Should NOCAL fail to notify the Contractor of its wish for revision or modification
w ithin the period of thirty (30) days above-mentioned, such Annual Work Program
and the related Budget submitted by the Contractor shall be deemed to be approved by
NOCAL. It is agreed by NOCAL and the Contractor that the Contractor may acquire
knowledge as and when the work is implemented or certain events may justify
changes to the details of the Annual Work Program. In that event, after notification to
NOCAL the Contractor may make such changes provided that the basic objectives of
said Annual Work lYogram are not modified.
5.4 Whenever NOCAL is required to exercise its discretion or its approval is required
under this Contract, it shall exercise its discretion or grant its approval on the basis or
the efficient and economic conduct of Petroleum Operations in respect of the
Delimited Area and in accordance with good international oil industry practice.
5.5 At the commencement of the first Exploration Period NOCAL and the Contractor
shall form a Joint Operations Committee (JOC) consisting of not more thari three (3)
members appointed by NOCAL und not more than three (3) members appointed by
the Contractor. Each Party shall have Use right to change its representative by giving
thirty (30) days notice to such effect to the other Parties. The purpose of this JOC will
be to review presen; art figure Petroleum Operations and report jointly to NOCAL
and the Contractor *
II
ORANTO BLOCK LB-14 PSC JUNE 10,2009 CONFIDENTIAL,
5.6 The JOC shall meet twice every calendar year or as otherwise ugreed by the members.
No meeting of the JOC shall be held unless two (2) members each appointed by the
Contractor and NOCAL arc present.
5.7 Tlic Contractor shall appoint the first Chairman of the JOC who shall hold office until
the second anniversary following the Effective Date. Thereafter, NOCAL and the
Contractor shall have the alternating right to nominate a Chairman of the JOC who
shall hold office for u period of two (2) years.
5.8 All costs of the meeting of the JOC shall be borne by the Contractor and these costs
will regarded as recoverable costs. Members of the JOC shall lie entitled to sitting
fees for attendance agreed by the Parties.
12
ORANTO BLOCK LB-14 PSC JUNE 10,2009 CONFIDENTIAL
ARTICLE 6
CONTRACTOR’S OBLIGATIONS IN RESPECT OF THE
EXPLORATION PERIODS AND ENVIRONMENTAL MANAGEMENT
6.1 The Contractor shall provide all the necessary funds and purchase or hire all the
equipment, facilities and materials required to carry out the Petroleum Operations.
6.2 The Contractor shall provide all technical assistance, including the personnel required
to carry out the Petroleum Operations.
6.3 The Contractor shall be responsible for the preparation and performance of the
Annual Work Programs which shall be carried out in the most appropriate manner in
observance of good international petroleum industry practice.
6.4 The Contractor undertakes to take all the reasonable and practical steps to:
(a) Ensure the protection from contamination of strata containing potable or
treatable water encountered during its work;
(b) Provide an effective and safe method for the discharge or disposal of drill
cuttings and drilling muds generated during drilling operations;
(c) Carry out the tests reasonably necessary for determining the value of any
potentially commercially viable show encountered during drilling and the
exploitability of any possible Hydrocarbon discoveries and;
(d) Provide an effective and safe method for the disposal of produced water and
waste lubricating oils generated by its operations;
(c) Control the flow of petroleum so as to prevent avoidable waste and escape to
the environment.
6.5 The Contractor further undertakes to carry out all petroleum operations in accordance
with the Environmental Protection and Management Laws of Liberia and consistent
with good international petroleum industry practice. In this respect, the Contractor
shall:
(a) Submit to the Government and Environmental Impact Statement (E1S) prior to
the commencement of exploration and production.
(b) Take reasonable preventative, corrective and restorative measures to protect
from pollution, contamination or damage resulting Petroleum Operations
water bodies, land surfaces and the atmosphere, and that any pollution,
contamination and damage of such water bodies, land surface and atmosphere
hereunder the rectified.
Subject to the foregoing, and at the conclusion of Petroleum Operations in the
Delimited Area, the Contractor will undertake reasonable efforts to restore the
Delimited Area to a state in which it was before the Petroleum Operations.
However, the Contractor shall have no liability for any environmental
damages caused after the transfer of such assets as per Article 20.1.
13
f
U>|4 I’lCJUNL 10. 2009 CONFIDENTIAL
6.6 All works and facilities by the Contractor hereunder Mull, according to their
nature and to the circumstances, be built, placed, signaled. marked, fitted and
preserved so as to allow at any time and in safety free passage to navigation within the
Delimited Area, and without prejudice to the forgoing, the Contractor shall, in order
to facilitate navigation, install the sound and optical devices approved or required by
the competent authorities and maintain them in a manner satisfactory to said
authorities.
6.7 In the exercise of its right to build, carry out work and maintain all facilities necessary
for the purposes hereof, the Contractor shall not disturb and existing graveyard or
building used for religious purposes, nor cause a nuisance to any government or
public building, except with the prior consent of NOCAL. and shall make good the
damage caused by it in that event.
6.8 In its conduct of Petroleum Operations, the Contractor undertakes to take all
necessary precautions to prevent Marine Pollution in Liberian waters in support of
Petroleum Operations.
6.9 In order to prevent pollution. NOCAL and Contractor agree that Contractor shall
conduct its petroleum operations consistent with good international petroleum
industry practice environmental as may be applicable to prevent pollution and
preserve the environment. NOCAL. the Contractor and EPA shall meet and consider
any measure, which may be necessary to preserve the environment.
6.10 NOCAL and the Contractor shall commission periodic environmental audits as
required to ensure compliance with EIS.
6.11 The Contractor and its subcontractors shall be obligated to give preference to
enterprises and goods from Liberia, if conditions of proven experience, price, quality,
delivery time and terms of payment arc similar to those from other countries or from
non-Liberian sources.
14
ORANTO BLOCK LB-14 PSC JUNE 10, 2009 CONFIDENTIAL
ARTICLE 7
CONTRACTOR’S RIGHTS IN RESPECT OF THE EXPLORATION
PERIODS
7.1 Without prejudice to the provisions hereof, the Contractor shall have the right to carry
out the Petroleum Operations within the Delimited area. Such rights includes, inter
alia;
(a) full responsibility for, management of and control over all the Petroleum
Operations;
(b) authority to exercise any rights conferred hereby through agents and
independent contractors, and to pay accordingly any of their expenses and
costs in the place and in the currency chosen by the Contractor.
7.2 The Contractor shall have the right to clear the ground, dig, perforate, drill, build,
erect, place, supply, operate, manage and maintain ditches, pools, wells, trenches,
excavations, dams, canals, water conduits, plants, tanks, basins, maritime and other
storage facilities, primary distillation units, first extraction gasoline separator units,
sulfur plants, and other facilities for Petroleum production, together with the
pipelines,, pumping stations, generator units, power plants, high voltage lines,
telephone, telegraph, radio and other communication facilities, factories, warehouses,
offices, employees' housing, hospitals, premises, ports, docks, harbors, dikes, jetties,
dredges, sea walls, under water piers and other facilities, ships, vehicles, railways,
warehouses, workshops, foundries, repair shops and all the auxiliary services which
are necessary for or useful to the Petroleum Operations or in connection therewith;
and all additional facilities which are or may become necessary for or reasonably
subsidiary to the carrying out of the Petroleum Operations.
7.3 The agents, employees and representatives of the Contractor or its subcontractors
shall have the right, for the purposes of the Petroleum Operations to enter into or
leave the Delimited Area and shall have free access to all the facilities set up by the
Contractor.
7.4 The Contractor shall have the right, subject to the payment of fees applicable in
Liberia, to remove and use the surface soil, mature timber, clay, sand, limestone,
gypsum, stones and other similar materials, which may be necessary for the
performance of the Petroleum Operations.
With the consent of the competent administrative services which shall not be
unreasonably withheld, the Contractor may make reasonable use of such materials for
the performance of the Petroleum Operations, subject to payment of fees applicable in
Liberia, when they are located on land owned by the STATE and placed in the
vicinity of the land w-here said Operations are taking place. NOCAL shall assist the
Contractor in obtaining any such consent from any Liberian administrative bodies.
15
ORANTO BLOCK LB-14 PSC JUNE 10, 2009 CONFIDENTIAL
The Contractor may take or use the water necessary for the Petroleum Operations, provided
that existing irrigation or navigation are not impaired and that land, house or watering places
for livestock are not deprived or a reasonable quantity of water.
ARTICLE 8
ACTIVITY REPORTS DURING TIIE EXPLORATION PERIODS AND
SUPERVISION OF PETROLEUM OPERATIONS
8.1 Subject to the terms of Articles 8.5 and 8.6, NOCAL shall own and may freely use all
the original data and documents relating to the Petroleum Operations such as, but
without limitation, records, samples, geological, geophysical, petrophysical, drilling
and operating reports.
8.2 The Contractor undertakes to furnish NOCAL with the following periodic reports:
(a) daily reports on drilling operations;
(b) weekly reports on seismic operations;
(c) within thirty (30) days after each Calendar Quarter, a report on the Petroleum
Operations carried out together with a detailed statement of Petroleum Costs
in respect of the preceding quarter,
(d) prior to the end of February of each Calendar Year, an annual report on the
Petroleum Operations carried out together with a detailed statement of
Petroleum Costs in respect of the preceding Calendar Year.
8.3 In addition, the following reports or documents shall be furnished to NOCAL as soon
as they are prepared or obtained:
(a) a copy of all geological surveys and syntheses together with the related maps;
(b) a copy of all geophysical surveys, measurement and interpretation reports,
map profiles, sections or other documents related thereto, as well as, at
NOCAL’s request, the originals of all recorded seismic magnetic tapes;
(c) a copy of the drilling location and completion report for each well together
with a complete set of recorded logs;
(d) a copy of all drill tests or production tests together with any study related to
the flow or production of a well;
(e) a cop>^ of all reports relating to core analyses.
i
All maps, sections, profiles, logs and all other geological or geophysical documents
shall be supplied on an appropriate transparent support In vlow of subsequent
reproduction.
16
ORANTO BLOCK LB-14 PSC JUNE 10, 2009 CONFIDENTIAL
A representative portion of the cores and cuttings removed from each well, as well as
samples of fluids produced during drill tests or production tests shall also be supplies
to NOCAL within a reasonable period.
Upon expiration or in the event of surrender or termination of this Contract, the
original documents and samples relating to the Petroleum Operations shall be
provided to NOCAL.
8.4 The Contractor shall keep NOCAL informed of its activities through the duly
designated representative of the latter. In particular, the Contractor shall notify
NOCAL as soon as possible and in any event at least fifteen (15) days in advance of
all projected Petroleum Operations, such as any geological survey, seismic surveys,
and commencement of drilling and installation of a platform. In the event the
Contractor decides to abandon drilling it shall notify NOCAL thereof within at least
seventy-two (72) houts prior to such abandonment, unless operational safety demands
a faster response.
8.5 All data, information, documents, reports and statistics including interpretation and
analysis supplied by the Contractor pursuant to this Contract shall be treated as
confidential and shall not be disclosed by any Party to any other person without the
express written consent of the other Parties within the life of the exploration,
appraisal, development, production or exploration authorization period.
8.6 The provision of Article 8.5 shall not prevent disclosure:
8.6.1 By NOCAL or the State
(a) To any agency of the State or to any advisor or consultant to NOCAL
(b) For the purpose of complying with the State’s international obligations
for the submission of statistic and related data.
8.6.2 By the Contractor
(a) To its affiliates, advisors or consultants
(b) To a bona fide potential assignee or all or part or the contractor’s
interest hereunder
(c) To banks or other lending institutions for the purpose of seeking
external financing of costs of the Petroleum Operations
(d) To Non-Affiliates who shall provide services for the Petroleum
Operations, including sub-contractors, vendors, and other service
(e) contractors, where this is essential for their provision of services.
i
To government agencies for obtaining necessary rulings, permits,
licenses' and approvals, or as may be required by applicablelaw or
financial stock exchange, accounting or reporting practices^
17
ORANTO BLOCK LB-14 PSC JUNE 10, 2009 CONF1E
Any Party disclosing information or providing data to a Third Party under die terms
Article shall require such persons to undertake the confidentiality of such data.
ARTICLE 9
OCCUPATION OF LAND
The STATE shall make available to the Contractor, and only for the purposi
Petroleum Operation, any land, which it owns and which is necessary for said opera!
Contractor shall have the right to build and the obligation to maintain, above and I
ground, the facilities nccessaiy for the Petroleum Operations.
The Contractor shall indemnify the STATE for any damage caused to the land
connection with the construction, use and maintenance of its facilities on such land.
The STATE shall authorize the Contractor to build, use and maintain telephone,
and piping systems above and below the ground and along the land not bclongi
STATE, provided that the Contractor pays to the land-owners, a reasonable com
mutually agreed upon,
The rights on land owned by private persons, which would be necessary for the cai
of the Petroleum Operations, shall be acquired by direct agreement between the C
and the private person concerned.
In event an agreement cannot be reached between the Contractor and privafc
concerned, the Contractor shall request the State to facilitate the process of n<
between the private owner and the Contractor for the acquisition of the land a
market value.
Notwithstanding anything mentioned herein to the contrary, any and all costs exp
Contractor pursuant to this A be considered cost recoverable and shall
be treated as Petroleum Costs
18
'I
ORANTO BLOCK LB-14 PSC JUNE 10,2009 CONFIDENTIAL
ARTICLE 10
USE OF FACILITIES
10.1 For the purpose of the Petroleum Operations, the Contractor shall have the right to
use, in accordance with the applicable laws, including but not limited to, any railroad,
tramway, road, airport, landing strip, canal, river, bridge, waterway and any telephone
or telegraph network in Liberia whether owned by the STATE or by any private
enterprise, subject to the payment of fees then in effect or mutually agreed upon
which will ,not he in excess of the prices and tariffs charged to Third Parties for
similar services.
The Contractor shall have the right to use for the purposes of the Petroleum
Operations any land, sea or air transportation means for the transportation of its
employees or equipment, subject to compliance with the laws and regulations which
generally govern the use of such means of transportation.
10.2 The STATE shall have the right to use for exceptional matters any transportation and
communication facility installed by the Contractor, subject to a fair compensation
mutually agreed upon which will not be in excess of the prices and tariffs charged to
Third Parties for similar services provided that such use does interfere with Petroleum
Operations. In the event of any requisition of such facilities, the State shall indemnify
the Contractor for all loss, damages, claims, penalties and cause of actions sustained
for the period of such requisition of such facilities.
10.3 IStb,thing in this Contract shall limit the STATE’S right to build, operate and maintain’
on, under and along the land made available to the Contractor for the purposes of the
Petroleum Operators, roads, railroads, airports, landing strips, canals, bridges,
pipelines, useful telephone and telegraph lines, provided that such rights is not
exercised in a manner which restricts or hinders the Contractor’s rights hereunder, or
the Petroleum Operations.
19
ORANTO BLOCK LB-14 PSC JUNE 10, 2009 CONFIDENTIAL
ARTICLE 11
APPRAISAL OF A PETROLEUM DISCOVERY
i-
11.1 In the event the Contractor discovers Petroleum, it shall, as promptly as possible,
notify NOCAL thereof and submit to it, within thirty (30) days after the date of the
temporary plugging or abandonment of the discovery wdll, a report including all
available information relating to said discovery.
*
11.2 If the Contractor wishes to undertake appraisal work relating to the abovementioned
Petroleum discovery, it shall submit for approval to NOCAL, within six (6) months
after the date of notification of said discovery, the appraisal work program and the
estimate of the related Budget.
The Provisions of Article 5 shall be applicable, mutates mutandis, to said program as
regards its approval and performance, it being understood that the submitted program
shall comply with good international petroleum industry practice.
11.3 If the Contractor meets the conditions referred to in Article 11.2 and on request to
NOCAL, the letter shall grant to it an exclusive appraisal authorization for duration of
two (2) years from the date of approval of the appraisal work program and the related
Budget, in respect of the Appraisal Perimeter specified in said program. Except
otherwise provided by this Article, the Contractor shall, during the term of said
exclusive appraisal authorization, be subject to the same regime as that applicable to
the exclusive exploration authorization.
11.3.1 The Contractor shall then diligently carry out the appraisal work program for
the discovery in question; in particular it shall drill the appraisal wells and
carry out the production tests specified in said program.
At the Contractor’s request at least thirty (30) days prior to the expiration of
the appraisal period above-defined, the duration of said period may be
extended by a maximum of six (6) months, provided that such extension is
justified by the continuation of the drilling and production tests specified in
the appraisal program.
Further extensions of the appraisal period may be requested by the Contractor
and granted by NOCAL in the event that further geological, geophysical,
.,. subsurface, facilities or commercial work is considered justified by the
Contractor in order to establish whether the field corresponding to the
Petroleum discovery is commercial.
11.3.2 Within three (3) months after the completion of appraisal work, and no later
than thirty (30) days prior to the expiration of the appraisal period, the
■ : Contractor shall provide NOCAL with a detailed report giving all the
information relating to the discovery and the appraisal thereof.
1L3.3 If, after having carried out the appraisal work, the Contractor considers that
the Field corresponding to the Petroleum discovery is commercial, it shall
submit to NOCAL, together with the previous report, an application for an
20
ORANTO BLOCK LB-14 PSC JUNE 10,2009 CONFIDENTIAL
exclusive exploitation authorization accompanied by a detailed development
and production plan for said Field, specifying inter alia;
(a) the planned delimitation of the Exploitation Perimeter applied for by
the Contractor, so that it covers the areas defined by the seismic
.closure of the field concerned, together with all the technical
justifications with respect to the extent of said Field;
(b) an estimate of the reserve in place; the proven and probable
recoverable reserves and the corresponding annual productions,
together with a study on the methods of recovery and the possible
valorization of the products associated with Crude Oil, such as any
Associated Natural Gas;
(c) item by item, the description of equipment and work necessary for
production, such as the number of development wells, the number
platforms, pipelines, production, processing, storage and loading
facilities together with their specifications;
(d) the estimated schedule for its implementation and the projected date of
production start-up;
(c) the estimates of investments and exploitation costs together with an
economic evaluation demonstrating the commercial nature of the
discovery in question.
11.3.4 The commercial nature of one or more Petroleum Fields shall be determined
by the Contractor, provided that it shall, at the end of appraisal work, submit
to NOCAL the economic study referred to in Article 11.3.3 (e) demonstrating
the commercial nature of said Field or Fields.
A Field may be declared commercial by the Contractor if, after taking into
account the provisions of this Contract and the submitted development and
production plan, the projected incomes and expenses determined in
accordance with good international petroleum industry practice confirm the
commercial nature of said Field.
11.3.5 For the purposes of evaluating the commercial nature of said Field or Field,
NOCAL and the Contractor shall meet within thirty (30) days after the
submission of the development and production plan accompanied by the
economic evaluation.
11.3.6 The development and production plan submitted by the Contractor shall be
subject to the approval of* NOCAL. Within nine (90) days after the
submission of said plan, NOCAL may propose revisions or modifications
hereto by notifying the Contractor thereof with all the useful justifications. In
that event, the .Partied shall meet as soon as possible in order to consider the
proposed revisions or rhodifications and establish by mutual agreement the
plan in its final form; the plan shall be deemed to be approved by NOCAL
upon the date of such agreement*^/
21
ORANTO BLOCK LB-14 PSC JUNE 10,2009 CONFIDENTIAL
If the Parties fail to an agreement by mutual negotiation, the Contractor has
the right to make the final decision of the dovolopmcnt and production plan.
Should NOCAL fail to notify the Contractor of Its wish for revision or
modification within the above-mentioned nine (90) day period, the plan
submitted by the Contractor shall be deemed to be approved by NOCAL at the
expiration of said period, automatically entry into force.
11.4 If for reasons not technically justified, the Contractor, within twelve (12) months after
notification to NOCAL of a Petroleum discovery, has not applied for an exclusive
appraisal authorization or if, after its granting, it has not commenced the appraisal
work in respect of said discovery, or if the Contractor, within eighteen (18) months
after completion of the appraisal work, docs not declare the discovery as commercial,
NOCAL may require that the Contractor surrenders all its rights in respect of the area
deemed to encompass said discovery without any compensation for the Contractor. In
the event of a .difference of opinion between the Contractor and NOCAL, either Party
may request a determination by a Sole Expert as provided in Articles 31.4 and 31.5 If,
within sixty (60) days after Sole Experts decision, the Contractor has not notified its
decision to apply for an exclusive appraisal authorization, it shall surrender said area
and will forfeit all its rights on Petroleum which could be produced from said
discovery, and any area so shall be deducted from the surfaces to be
surrendered under Article 3.5
ORANTO BLOCK LB-14 PSC JUNE 10, 2009 CONFIDENTIAL
ARTICLE 12
GRANT OF AN EXCLUSIVE EXPLOITATION AUTHORIZATION IN
RESPECT OF A COMMERCIAL DISCOVERY
12.1 A commercial Petroleum discovery shall entitle the Contractor to an exclusive right, if
it so requests pursuant to the conditions set forth in Article 11.3.3, to obtain, in respect
of the field concerned, an exclusive exploitation authorization covering the related
Exploitation Perimeters with the Delimited Area shall not be limited.
12.2 If the Contractor makes several commercial discoveries in the Delimited Area, each
such discovery shall, in accordance with provisions of Article 12.1 give rise to an
exclusive exploitation authorization each corresponding to an Exploitation Perimeter.
The number of exclusive exploitation authorizations and related Exploitation
Perimeters within the Delimited Area shall not be limited.
12.3 If in the course of work carried out after the grant of an exclusive exploitation
authorization, it appears that the area defined by the seismic closure of the Field
concerned is larger than originally estimated pursuant to Article 11.3.3, NOCAL shall
grant to the Contractor, as part of'the exclusive exploitation authorization already
granted, an additional area so that the entirety of said field is included in the
Exploitation Perimeter, provided, however, that the Contractor supplies NOCAL,
together with its application with the technical evidence of the extension so required
and provided, further, that the above mentioned extension is an integral part of the
Delimited Area as defined at the time of said application.
12.4 Where a field extends beyond the boundaries of the Delimited Area, NOCAL may
require the Contractor to exploit said Field in association with the right holder of the
adjacent area under the provisions of a unitization agreement
Within six (6) months after NOCAL has notified its request, the Contractor shall
submit to its approval the development and production plan of the Field concerned
which shall be prepared in agreement with the right holder of the adjacent area.jS/L^
1
23
ORANTO BLOCK LB-14 PSC JUNE 10, 2009 CONFIDEN TIAL
ARTICLE 13
DURATION OF THE EXPLOITATION PERIOD
13.1 The duration of an exclusive exploitation authorization during which the Contractor is
authorized to carry out the exploitation of a Field declared commercial is set at
twenty-five (25) years from its date of issue.
If upon expiration of the exploitation period of twenty-five years above-defined, a
commercial exploitation of a Field remains possible NOCAL may authorize the
Contractor, at the latter’s request submitted at least twelve (12) months prior to said
expiration, to continue under this Contract the exploitation of said Field during an
additional period of no more than ten (10 years, provided that the Contractor has
fulfilled all its obligations during the current exploitation period.
If, upon expiration of that additional exploitation period, a commercial exploitation of
said Field remains possible, the Contractor may request NOCAL at least twelve (12)
months prior to said expiration that it be authorized to continue the exploitation of
said Field under this Contract, during the current exploitation.
13.2 The Contractor may, at any time, fully or partially surrender any exclusive
exploitation authorization by giving at least twelve (12) months’ prior notices which
may be reduced with NOCAL’s consent.
That notice shall be accompanied by the list of steps which the surrendering
Contractor undertakes to take, in accordance with good international petroleum
industry practices arising out of its surrender.
13.3 Interruption of development work or production of a Field declared commercial, for a
consecutive period of at least six (6) months, (unless extended by periods of Force
Majcure) decided by the Contractor without NOCAL’s consent, or abandonment of
the exploitation of Field, may give rise to the withdrawal of the exclusive exploitation
authorization concerned. In the event of any disagreement between NOCAL and the
Contractor regarding the circumstances of the interruption then the JOC shall meet to
resolve the disagreement.
13.4 Upon expiration surrender or withdrawal of the last exclusive exploitation
authorization granted to the Contractor, this Contract shall terminate.
13.5 The termination of this Contract, whatever the reason thereof; shall not relieve the
Contractor of anv obligations incurred prior to, or arising from, said expiration or
•)
24
ORANTO BLOCK LB-14 PSC JUNE 10,2009 CONFIDENTIAL
ARTICLE 14
EXPLOITATION OBLIGATION
14.1 For any field in respect of which an exclusive exploitation authorization has been
granted, the Contractor undertakes to perform, at its sole cost and its own financial
risk, all the Petroleum Operations useful and necessary for the exploitation of said
Field.
14.2 However, if the Contractor can provide commercial, technical or, accounting
evidence, during either the development period or the production period, that the
exploitation of a field cannot be commercially profitable notwithstanding that an
exclusive exploitation authorization has been granted in accordance with the
provisions of Article 12.1, NOCAL agrees not to force the Contractor to continue the
exploitation of such Field.
In that event, NOCAL, in its discretion, may withdraw the exclusive exploitation
authorization concerned from the Contractor wfthout any compensation for the latter,
by giving a sixty (60) days’ prior notice
ORANTO BLOCK LB-14 PSC JUNE 10, 2009 CONFIDENTIAL
ARTICLE 15
CONTRACTOR’S OBLIGATIONS AND RIGHTS IN RESPECT OF
EXCLUSIVE EXPLOITATION AUTHORIZATIONS
15.1 The Contractor shall commence development work not later than (6) months after
approval of the development and production plan referred to in Article 11.3.6 and
shall continue it with the maximum diligence.
15.2 The provisions of Articles 5, 6, 7, 8,9 and 10 are also applicable, mutatis mutandis, in
respect of any exclusive exploitation authorization.
15.3 the Contractor shall have the right to build, use, operate and maintain all the
Petroleum storage and transportation facilities which are necessary for the production
transportation and sale of Petroleum produced, pursuant to the conditions specified in
this Contract.
The Contractor may determine the route and location of any pipeline inside Liberia
which is on the surface land of Liberia or under the waters that lie within the
jurisdiction of the State which is necessary for the Petroleum Operations, provided
that it shall submit plans to NOCAL for approval prior to the commencement of work;
any pipeline crossing or running alongside roads or passageways (other than those
used exclusively by the Contractor) shall be built so as not to hinder the passage on
those roads or passageways.
15.4 The Contractor may, to the extent and for the duration of the excess capacity of a
pipeline or processing, transportation or storage facility built for the purses of the
Petroleum Operations, be obligated to accept the flow of Petroleum coming from
exploitations other than that of the Contractor, provided that such flow shall not cause
prejudice to the Petroleum Operations, and provided, further, that a reasonable tariff
covering a normal remuneration for capital invested in respect of the pipeline or
facility concerned shall be paid by the user.
15.5 Following the grant of an exclusive exploitation authorization, the Contractor
undertakes to proceed diligently with the carrying out of development wells, spacing
them in a manner so as to ensure, in accordance with good international petroleum
industry practice, the maximum economic recovery of the Petroleum contained in the
Field in question.
15.6 The Contractor shall, in the conduct of development and production operations,
comply with all good international petroleum industry practice which in particular
ensures the good conservation of fields and maximum economic recovery of
Petroleum.
The Contractor shall, inter alia, carry out enhanced recovery studies and use such
recovery processes if theymay lead to an increase In Petroleum recovery rate under
economic conditions^/ Q~z£t^
26
ORANTO BLOCK LB-14 PSC JUNE 10, 2009 CONFIDENTIAL
15.7 The Contractor shall provide NOCAL with all the reports, studies, measurement
results, tests and documents enabling the monitoring of the proper exploitation of
each Field. , «
The Contractor shall, in particular, carry out the following measures on each
producing well:
(a) monthly testing of production and gas/oil ratio;
.-(b) half-yearly measurement of the field reservoirs pressure.
15.8 The Contractor undertakes to produce every year from each Field quantities of
Petroleum in accordance with the provisions of Article 15.6.
The annual production rates of each field shall be submitted by the Contractor
together with the Annual Work Programs for the approval of NOCAL which shall not
be withheld provided that the Contractor gives proper technical and economic
grounds.
15.9 The Contractor shall measure, at the Delivery Point, all Petroleum produced and not
used for the requirements of the Petroleum Operations, and excluding Unavoidable
Losses, after extraction of water and sediments, by using the measurement appliances
and procedures customarily used in the international petroleum industry.
The authorized NOCAL’s representatives shall have the right to examine those
measurements and inspect or cause to be inspected the appliances or procedures used.
If the Contractor wishes to change said measurement appliances or procedures, it shall
obtain prior approval from NOCAL. Where the appliances and procedures used
therefore have caused an overstatement or understatement of measured quantities, the
error shall be deemed to have existed since the date of the last calibration of the
appliances, unless the contrary can be justified,/«nd die proper adjustment shall be
made for the period of existence of such error. Wy
27
ORANTO BLOCK LB-14 PSC JUNE 10,2009 CONFIDENTIAL
ARTICLE 16
RECOVERY OF PETROLEUM COSTS AND PRODUCTION SHARING
16.1 From the commencement of regular production of Crude Oil, the Contractor shall
market all the production of Crude Oil obtained from the Delimited Area, in
accordance with the provisions hereinafter defined.
16.2 For the purposes of recovery of the Petroleum Costs, the Contractor may freely take
each Calendar Year a portion of the Production in no event greater titan seventy
percent 70%) of the total Production of Crude Oil or gas from the Delimited Area, or
only any lesser percentage which would be necessary and sufficient, to recover
remaining cost.
The Value of. such portion of total Production allocated to the recovery of the
Petroleum Costs by the Contractor, as defined in the preceding paragraph, shall be
calculated in accordance with the provisions of Article 18.
If during a Calendar Year the Petroleum Costs not yet recovered by the Contractor
under the provisions of this Article 16.2 exceed the equivalent in value of seventy
percent (70%) of the Total Production of Crude Oil or Total Production of Gas from
the Delimited Area, as calculated above, the balance of the Petroleum Costs which
cannot be recovered in that Calendar Year shall be carried forward in the following
Calendar Year or Years until full recovery of the Petroleum Costs or until the
expiration of this Contract.
16.3 The quantity of Crude Oil from the Delimited Area remaining during each Calendar
Year after the Contractor has taken from the Total Production the portion necessary
for the recovery of the Petroleum Costs, hereinafter referred to as “Remaining Oil
Production,” shall be shared between NOCAL and the Contractor, on a field by field
basis, as follows:
The Remaining Oil Production shall be shared according to the daily Total Production
from the Delimited Area:
Increments of daily oil
Total Production (in NOCAL’s Share Contractor’s Share
Barrels per day)
From 0 to 100,000 35% 65%
From 100,000 to 150,000 47% 53%
Over 150,000 55% 45%
16.4 In case of natural gas, the following production shuring shall applyu.
Increments of dqily Gas NOCAL’s Share Contractor’s Share
Total Production 30% 70% £
28
ORANTO BLOCK. LB-14 PSC JUNE 10, 2009 CONFIDENTIAL
For the purpose of this Article, the daily total Production shall be the average rate of
Total Production during the calendar quarter in question.
16.5 NOCAL may receive its share of production defined in Article 16.3 and 16.4 either in
kind or in cash.
16.6 If NOCAL wishes to receive in kind all or part of its share of production defined in
Article 163 or 16.4 it shall so notiiy in writing the Contractor at least ninety (90) days
prior to the beginning of the calendar quarter concerned specifying the precise
quantity that it wishes to receive in kind during said quarter.
16.7 If NOCAL wishes to receive in cash all or part of its share of production defined in
Article 16.3 or 16.4 or if NOCAL has not notified the Contractor if its decision to
receive its share of production in kind pursuant to Article 16.7, the Contractor shall
market NOCAL’s share, of production to be taken in cash for the quarter concerned,
lift said share during such quarter and pay to NOCAL within thirty (30) days
following the date of each lifting, an amount equal to the quantity corresponding to
NOCAL’s share of production multiplied by the sale price defined in Article 18.
NOCAL may require payment, for sales of its share of production sold by the
Contractor, in Dollars or in the foreign currency in which the sale has been mader/fo^
29
ORANTO BLOCK LB-14 PSC JUNE 10. 2009 CONFIDENTIAL
ARTICLE 17
TAXATION
17.1 Unless otherwise provided for in this Contract the Contractor shall, in respect of its
Petroleum Operations, be subject to the laws generally applicable and the regulations
in force in Liberia concerning taxes which are or may be levied on incomes, or
determined thereto.
17.2 Surface Rent.
(a) Annual surface rentals shall be payable to the Government of Liberia
consolidated account per square kilometer of the area remaining of the
Delimited Area, in the amounts as set out below:
4
Phase of Operation Surface Rentals Per Annum
First Exploration Period $30 per sq. km.
Second Exploration Period $50 per sq. km.
Third Exploration Period $75 per sq. km.
Development & Exploitation Area $100 per sq. km
(b) The first payment shall be made within thirty (30) days of the Effective Date
and subsequent payments within thirty (30) days of subsequent anniversaries
of the Effective Date.
(c) Surface rent amounts stated in this section shall be subject to inflationary
adjustment in accordance with the GDP Implicit Price Deflator as published
and revised from time to time by the U.S. Department of Commerce, Bureau
of Economic Analysis (“the deflator”) and the Central Bank of Liberia (CBL).
The inflation-adjusted rent shall be effective January 1 of each calendar year
based on the ratio of the value of the revised deflator for the second quarter of
the immediately preceding calendar year to the value of the revised deflator
for the second quarter of 2008.
17.3 Income Tax
(a) Rate. The rate of tax on taxable income shall be twenty-five percent (25%).
The Contractor shall be liable to pay its income tax directly to the Government
of Liberia.
f
(b) It is specifically acknowledged that the provisions of this Article shall apply
individually to any entity comprising the Contractor under this Contract and
the Contractor is legally responsible for paying tax with respect to income of
the project.
i
(c) Regardless of the legal form of organization adopted by the Contractor, the
Contractor’s taxable income shall be determined separately for each
30
ORANTO BLOCK LB-14 PSC JUNE 10, 2009 CONFIDENTIAL
Production Sharing Contract or other project engaged in by the Contractor in
Liberia, and the Contractor shall not be permitted to consolidate income or
loss of this Production Sharing Contract or other project with that of any other.
(d) The filing and advance payment rules for the regular income tax under the
Revenue Code apply to Contractor.
Determination ofTaxable Income
(a) For purposes of determining income tax, income derived under this contract is
considered to be income of a resident legal person or of a permanent
establishment taxable according to rules applicable to a resident legal person
under the Revenue Code. Taxable income and income tax liability are
determined under provisions of the regular jncome tax provisions of the
Revenue Code subject to special rules under this Article.
(b) The Contractor’s gross income includes:
(1) The Contractor's cost share and profit share of income from a
petroleum project as specified in the Petroleum Law;
(2) Any other income that the Contractor receives from business activity
or investment accruing in, derived from, brought into or received in
Liberia, including currency gains when realized, less the deductions set
forth in Article !7 of this contract.
(c) Deductions Allowed from Gross Income. In accordance with the regular
income tax provisions of the Revenue Code, all expenditures incurred during
the tax period wholly, exclusively and necessarily in connection with project
operations (including non-capital operating costs but excluding capital costs
except to the extent of the annual allowance for depreciation), are allowed as
deductions, including but not limited to the following items:
(1) An allowance for depreciation of plant and equipment in accordance
with the depreciation rules of the regular income tax provisions of the
Revenue Code, subject to the special rule of Article 17.5.
(2) A carry forward of net operating loss from a prior year to the extent
permitted under the regular income lax provisions of the Revenue
Code as modified by Article 17.6.
(3) Interest on any indebtedness of the project, and other financing costs
incurred in connection with operations and paid to an affiliate or to a
third party, for the tax period incurred, subject to the special rule of
Article 17.7.
(4) Exploration expenditures incurred that are attributable to the project, to
the extent allowed by Article 17.8
31
ORANTO BLOCK LB-14 PSC JUNE 10, 2009 CONFIDENTIAL
(5) Payments to a Government-approved trust fund for reclamation and
decommissioning, subject to the specific limitations set out in Article
17.9.
(6) Subject to the regular income tax provisions of the Revenue Code,
management fees paid, whether to an affiliate or to a third party, but
not the amount in excess of two percent (2%) of other operating
expenses incurred for the tax period.
(7) Subject to the regular income tax provisions of the Revenue Code, the
amount of bad debt incurred, so long as that amount was subject to
income taxation in a prior tax period.
(8) Charitable contributions made in Liberia to a qualifying organization
within the meaning of the regular income tax provisions of the
Revenue Code for educational or community development projects,
social welfare, or medical purposes or for the provision of other social
services.
(9) Expenses related directly to the project’s “other income” under
subsection (b) (2), to the extent otherwise allowable as a deduction the
regular income tax provisions of the Revenue Code and this Article.
(c) The following expenses are not allowed as a deduction from gross income:
(1) A payment to an expatriate employee as reimbursement for taxes and
duties paid by the employee to the Government.
(2) A loss from a hedging transaction.
(3) Any incentive deduction allowed under the Revenue Code.
17.5 Special Rule for Depreciation
(a) For property placed in service before the start of commercial production, the
period for depreciation of property described the regular income tax provisions
of the Revenue Code shall begin in the first tax period in which commercial
production begins.
(b) The cost of tangible moveable property shall be recovered over the period and
by the method described in the regular income tax provisions of the Revenue
Code.
•
(c) In place of the 15-year period set out in the regular income tax provisions of
the Revenue Code for recovering the cost of tangible fixed property and
intangible property, Contractor shall be entitled to recover the cost of this
property oh an asset-by-asgetbasis over a five-year period at the rate of twenty
percent (2’b%) per year.
32
ORANTO BLOCK LB-14 PSC JUNE 10, 2009 CONFIDENTIAL
(d) Contractor’s tangible fixed property outside the project’s production area (or
beginning inside and extending outside) shall be depreciated over a 15-year
period or the expected period of commercial production (whichever is shorter)
using the straight-line method.
(e) If a project is terminated before the end of the cost recovery period, the
remaining unrecovered cost is treated as an expense deduction in determining
taxable income for the tax period in which the project is terminated.
17.6 Special Rule for Net Operating Loss Carry Forward. For the purposes of
determining Contractor’s taxable income, the for carry forward of net operating loss
under the regular income tax provisions of the Revenue Code shall begin with the first
tax period in which commercial production begins and shall be seven years rather
than five.
17.7 Special Rule for Interest Deduction
(a) Interest incurred in a tax period and subject to the limitations of the regular
income tax provisions of the Revenue Code may be carried forward to the next
tax period.
(b) The amount of the carry forward is treated as interest incurred in the
subsequent period, and is deductible to the extent permitted under the regular
income tax provisions of the Revenue Code.
(c) The interest carry forward allowed by this section does not expire.
17.8 Special Rule for Exploration Costs. Exploration costs are deductible in the first tax
period in which commercial production begins.
17.9 Special Rule for Decommissioning Expenses
(a) Payment for decommissioning expenses is deductible from gross income
under Article 17.4(c) only in the amount paid during the tax period:
(1) To defray reclamation or decommissioning expenses upon cessation of
commercial production, and remedying damage caused to land used by
the project or environmental damage the project may have caused
(including damage that extends beyond the contract area), but not if
drawn from a trust fund described in paragraph (2).
(2) To a trust fund established to defray future expenses of the type
specified in paragraph (1), but only if the fund has been approved by
the Minister in regulations and subject to any limitations or
requirements provided in regulations.
t
(b) tion under subsection (a) but not used for the
33
ORANTO BLOCK LB-14 PSC JUNE 10, 2009 CONFIDENTIAL
(1) If remaining after the tax period in which commercial production ends,
shall be included in income for the following tax period; or
(2) If used for another purpose, shall be included in income in the tax
period within which the amount is so used.
17.10 Attribution of Expenditures. Exploration, development, and capital goods
expenditures incurred prior to a project’s first tax period are attributable to it for
income tax purposes as follows:
(a) Exploration expenditures incurred prior to the identification of a site for
development are attributable to the first development site established under
this Contract and leading to commercial production.
(b) Subsequent exploration expenditures within the Delimited Area are attributed
in the same fashion to any subsequent development site leading to commercial
production.
(c) Exploration, development, and capital goods expenditures not attributable to a
project as described in this paragraph are not deductible in determining taxable
income.
17.11 Treatment of Property Transfers
(a) Unless an exception applies under this Article, Contractor’s gain or loss on the
transfer of depreciable property used by the project is treated in accordance
with the Revenue Code. Transfer of non-depreciable property used in the
business, or transfer of property other than property connected with petroleum,
is determined in accordance with the property transfer rules of the Revenue
Code.
(b) Special Cases
(1) Hedging. Hedging transactions are taxable as a separate business
activity, and hedging gains and losses incurred arc not includible or
deductible in determining taxable income of the project.
(2) Investment Gain. Gain on property the Contractor holds for
investment is determined under die Revenue Code and is includible in
income of a project, except to the extent reduced by any deductions
permitted under the Revenue Code for loss Incurred on the disposition
of property other than property used in a business if the property is
held for investment.
17.12 Successor Agreement. If this Contract is terminated and a now agreement is entered
into with Contractor for the same contract area, the prefect's -loss carry forward
existing at the termination date of the development agreement is deductible in the first
tax period of the successor project under the successor agreement, provided:
(a) The whole of the geographic atea covered by the contract area of the success*;
agreement is within the contract area of the original agreement; and
34
ORANTO BLOCK LB-14 PSC JUNE 10, 2009 CONFIDENTIAL
(b) The successor agreement entered into force within one month following the
termination of the original agreement.
17.13 Assignment of Rights and Interest If Contract assigns its rights and interest
pursuant to Article 35
(a) The taxable income of the project shall continue to be determined using the
tax cost and other tax attributes applicable at the date of the interest transfer,
and
(b) Contractor shall determine gain or loss under the regular income tax
provisions of the Revenue Code, which also applies to determine the
transferee’s tax cost in the interest. ■>
17.14 Transactions Between Related Persons
(a) General Rule. A project’s gain, loss, and other tax consequences in
transactions with related persons are subject to in Article 1.30 and regular
income tax provision of the Revenue Code concerning related persons.
(b) Transfer Pricing. A transaction with respect to production between
Contractor and a related person shall be on the basis of competitive
international prices and such other terms and conditions as would be fair and
reasonable had the transaction taken place between unrelated parties dealing at
arms’ length.
(c) Disclosure. Contractor must:
(1) Disclose related-party transactions and contemporaneously document
the manner in which prices are set in transfers to related persons.
(2) Notarize an agreement governing a related-party transaction in
accordance with the law of the related person’s country of residence.
(d) Guidelines. The Minister shall follow OECD transfer pricing guidelines in
evaluating the validity of the price set in a related party transfer.
17.15. Partnerships and Joint Ventures
(a) Pass-Through of Tai Attributes. If Contractor is organized as a partnership
or similar form of unincorporated joint venture, the project’s income,
expenses, loss, credits, and character of income or loss shall be attributed to
the partners in accordance with their interests (including the items specified in
Article 17.4, for the puipose of determining taxable income, loss, credits, and
tax liability sepyately for each partner.
(b) Application of Other Rules. If subsection (a) applies:
(1) The provisions of this Article shall apply separately to each partner,
35
ORANTO BLOCK LB-14 PSC JUNE 10, 2009 CONFIDENTIAL
(2) Each partner shall be considered a taxpayer and a producer and shall be
liable for income tax as determined under this Article.
17.16 Withholding Taxes. Contractor shall withhold taxes in accordance with the general
provisions of the Revenue Code, except that it shall withhold tax on payments made
to nonresidents at the following rates:
(a) Dividends, five percent (5%).
(b) Interest, six percent (6%).
(c) Payments for services, six percent (6%).
17.17 Goods Tax. Contractor is exempt from the payment of Goods Tax on:
(a) Raw materials or other inputs for use directly in manufacturing, or raw
materials for use directly in agriculture or forestry, or in a mining or petroleum
project or in natural resource exploration and development;
(b) Capital
36
ORANTO BLOCK LB-14 PSC JUNE 10,2009 CONFIDENTIAL
ARTICLE 18
VALUATION OF PETROLEUM
18.1 For the purposes of this Contract, the Crude Oil price shall be the F.O.B. “Market
Price” at the Delivery Point, expressed in Dollars per barrel and payable within thirty
(30) days after the date of the bill of lading, as determined hereinafter for each
quarter.
A market Price shall be determined for each type of Crude Oil or Crude Oil mix.
18.2 The Market Price applicable to lifting of Crude Oil made during a calendar quarter
shall be calculated at the end of said quarter and shall be equal to the weighted
average of the process obtained for Crude Oil from the Delimited Area during said
quarter by the Contractor and by NOCAL from independent purchasers, as adjusted to
take into account the differences in quality and gravity as well as in F.O.B. delivery
terms and payment conditions.
18.3 In the event such sales are not made, the Market Price shall be determined on the
basis of the prices obtained on the international market during said quarter between
independent buyers and sellers for sales of crude oils of quality similar to the Crude
Oil from the Delimited Area in the same markets as those in which the Liberian Crude
Oil would normally be sold, as adjusted to take into account the differences in quality,
gravity, transportation as well as in sales and payment conditions. For the avoidance
of doubt, oil sales into the Liberian market shall be valued according to the terms of
this Article 18.3.
18.4 The following transactions shall, inter alia, be excluded from the calculation of the
market Price of Crude Oil:
(a) Sales in which the buyer is an Affiliated Company of the seller as well as sales
between entities constituting the Contractor;
(b) Sales in exchange for other than payment in freely convertible currencies and
sales fully or partially made for reasons other then the usual economic
incentives involved in Crude Oil sales on the international market (such as
exchange contracts, sales from government to government or to government
agencies).
18.5 Within ten (10) days following the end of each quarter, the Parties shall advise each
other of the prices obtained for their share of production of Crude Oil from the
Delimited Area sold to independent purchasers during the quarter in question,
indicating for each sale the identity of the purchaser, the quantities sold, the delivery
and payment terms.
Within twenty (20) days following the end of each quarter, the Contractor shall
determine in accordance} with the provisions of Article 18.2 or Article 18.3, as the
case may be, the Market Price applicable for the quarter concerned, and shall notify
NOCAL of that Market Price, indicating, the method of calculation and all data used
in the calculation of that Market Price
37
ORANTO BLOCK LB-14 PSC JUNE 10, 2009 CONFIDENTIAL
With in thirty (30) days following receipt of the notice referred to in the preceding
paragraph, NOCAL shall verify that the calculation of Market Price complies with the
provisions hereof and shall notify the Contractor of its acceptance or objections.
Failing notification from NOCAL within that thirty (30) day period the market Price
provided for in the Contractor’s notice referred to in the preceding paragraph shall be
deemed to have been accepted by NOCAL.
In the event that NOCAL has notified objections to the Market Price, the parties shall
meet within fifteen (15) days following NOCAL’s notification to mutually agree on
the Market Price. If the parties fail to agree on the Market Price applicable to a given
quarter within seventy-five (75) days after the end of that quarter, NOCAL or the
Contractor may immediately submit to an expert, appointed in accordance with the
following paragraph, the determination of the Market Price (including the
determination of reference crude oils if the parties have not determined them).
The expert shall determine the price within thirty (30) days after his appointment and
his conclusions shall be final and binding on the Parties. The expert shall decide in
accordance with the provisions of this Article.
The expert shall be selected by agreement between the parties or, if no agreement is
reached, by the International Center of Expertise of the International Chamber of
Commerce in accordance with its rules on Technical Expertise, at the request of the
most diligent party. The expertise costs shall be charged to the Contractor and
included in the Petroleum Costs.
18.6 In the event it would be necessary to calculate on a provisional basis during a quarter
the Crude Oil price applicable to the lifting made during said quarter, that price shall
be established as follows:
(a) For any sale to independent buyers, the price applicable to that sale shall be
the price obtained for the Crude Oil for said sale, as adjusted to take into
account the F.O.B. delivery terms and thirty (30) days payment terms.
(b) For any lifting other than those which arc the subject of a sale to independent
buyers, the price applicable to that lifting shall be the Market Price determined
for the preceding quarter or, if that Market Price has not been determined a
price set up by agreement between the Parties or, failing agreement, the last
known Market Price.
Once the Market Price for a quarter has been determined on a final basis, adjustments,
if required, shall bo made within thirty (30) days.
18.7 PAYMENT OF ROYALTY
The Government of Liberia, through NOCAL, hereby agrees to expressly exclude
Section 3.7- Royalty as Tax of the Liberian Petroleum Law from being applied to or
having any effect on this Contract. The Government of Liberia, through NOCAL,
hereby further expressly waives any and all rights it may presently have or will have
38
ORANTO BLOCK LB-14 PSC JUNE 10,2009 CONFIDENTIAL
under the Liberian Petroleum Law, other laws, regulations, rules, orders, or decrees
which requires any royalty payment by the Contractor on the total production of
liquid and gaseous hydrocarbon from petroleum operations
18.8 EQUITY PARTICIPATION OF THE GOVERNMENT
The Government of Liberia, through NOCAL, hereby agrees to expressly exclude
Section 3.3 The National Oil Company’s Participation in Ownership of the Liberian
Petroleum Law from being applied to or having any effect on this Contract. The
Government of Liberia, through NOCAL hereby further waives any and all rights it
may presently have or will have under the Liberian Petroleum Law, other laws,
regulations, rules, orders, or decrees which requires the receipt of any equity interest
by NOCAL in and to the authorized, issued and outstanding capital share of the
Contractor in the petroleum operations at any time..
18.9 STOCK PURCHASE BY LIBERIAN CITIZENS
The Government of Liberia, through NOCAL, hereby agrees to expressly exclude
Section 3.4 of the Petroleum Law, (Stock Purchase by Liberians), from being applied
to or having any effect on this Contract. The Government of Liberia, through NOCAL
hereby further waives any and all rights it has or will have under the Petroleum Law,
or any other Law which requires the Contractor to make available (i) 10% of its stock
or shares, and/or (ii) other stock and/or share purchase to Liberian Citizens, through
procedures provided in die Petroleum Law and/or any other Law. In the event the
Contractor becomes a publicly traded company, then Liberian Citizens shall have the
option to purchase shares of the Contractor made available for purchase on the stock
exchange upon which the Contractor may be listed, subject to applicable taws.
In order to make an impact on the Social-Economic Development of the Liberian
Citizens, the Contractor undertakes to make an annual contribution of (one million
United States Dollars) US $1,000,000 during Exploitation Period directly to the
NOCAL into bank accounts held and controlled by NOCAL which shall be used for
social service programs such as the construction of schools, hospitals, roads etc. This
contribution is in addition to die Social and Welfare Budget payments stated in 29.3
of this Contract. This contribution borne by the Contractor shall be included in
recoverable Petroleum Costs. Prior to making any such payments the Contractor shall
■ verify bank accounts to which payment is to be made and NOCAL agrees to
• >' cooperate, assist to provide Contractor with any information it requires to conduct
such verification.
As provided in Article 19.3.3, all payments made under this Contract shall be made in
accordance with protocols laid down by the Extractiyelndustries Transparency
# Initiative (Em) X^b
e>
I
«
39
ifr
i
ORANTO BLOCK LB-14 PSC JUNE 10, 2009 CONFIDENTIAL
ARTICLE 19
BONUSES AND HYDROCARBON DEVELOPMENT FUND
19.1 The Contractor shall pay to NOCAL the following bonuses:
(a) Three million dollars (US$3,000,000) when the total Production of Crude Oil
from the Delimited Area first reaches the average rate of thirty thousand
(30.000) barrels per day during a period of thirty (30) consecutivo days.
(b) Four million dollars (US$4,000,000) when the total Production of Crude Oil
from the Delimited Area first reaches the average rate of fifty thousand
(50.000) barrels per day during a period of thirty (30) consecutive days.
(c) Six million dollars (US$6,000,000) when the Total Production of Crude Oil
form ‘ the Delimited Area first reaches the average rate of one hundred
thousand (100,000) barrels per day during a period of thirty (30) consecutive
days.
Each of the amounts referred to in (a), (b), and (c) above shall be paid with thirty (30)
days following the expiration of the reference period of thirty (30) consecutive days.
19.2 These bonuses shall be recoverable and shall therefore be treated as Petroleum
Expenditure.
19.3 HYDROCARBON DEVELOPMENT FUND
19.3.1 To stimulate research in the field of hydrocarbon, most especially in
continental areas, and to assist the Government in its overall goal of
achieving energy sustainability, a Hydrocarbon Development Fund, to
be managed by NOCAL, has been established.
The Contractor shall make a total contribution of five-hundred
thousand dollars (US$500,000.00). The payment shall be made within
thirty (30) days of the Effective Date of this Agreement.
19.3.2 The contribution to the Hydrocarbon Development Fund referred to in
Article 19.3.1 wiH^fccoverable and therefore, shall be considered as
Petroleum Costs
40
ORANTO BLOCK LB-14 PSC JUNE 10,2009 CONFIDENTIAL
19.4 RURAL ENERGY FUND
19.4.1 In accordance with the National Energy Policy, a Rural Energy Fund
(REFUND) has been established, inter alia, to integrate renewable energy
technologies into rural development. Considering that oil is a finite resource, it
is the policy of the Government that oil resources be used to support the
development of renewable energy resources in order to ensure energy
security and sustainability upon cessation of petroleum production.
The contractor shall therefore make an annual contribution of one-hundred
thousand dollars (US$100,000.00) during exploration and production through
NOCAL to the REFUND. The first payment shall be made within thirty (30)
days of die Effective Date of this Contract and thirty (30) days after each
♦
41
ORANTO BLOCK LB-14 PSC JUNE 10, 2009 CONFIDENTIAL
ARTICLE 20
OWNERSHIP AND ABANDONMENT OF ASSETS
20.1 Upon expiration, surrender or termination of this Contract, whatever the reason
thereof, in respect of all or part of the Delimited Area, or at the end of exploitation of
a Field, the Contractor shall transfer at no cost to NOCAL the ownership of assets,
movables and immovables, used for the requirements of the Petroleum Operations
carried out in the area so surrendered, located whether inside or outside the Delimited
Area, such as wells and their equipment, building, warehouses, docks, lands, offices,
plants, machinery and equipment, bases, harbors, wharfs, jetties, buoys, platforms,
pipelines, roads, bridges, railroads and other facilities.
Such transfer of ownership shall cause the automatic cancellation of any security or
surety concerning those assets, or which those assets constitute.
However, the Contractor may continue to use those assets beyond the date referred to
in the first paragraph, for the requirements of its Petroleum Operations in Liberia
governed by other contracts.
20.2 If NOCAL decides not to accept, all or part of the assets, the transfer of ownership
provided for in Article 20.1, it may, not later than ninety (90) days following the date
specified in said Article, require the Contractor in accordance with good international
petroleum industry practice, to perform abandonment operations and to remove, at the
cost of the Contractor, the (the accrued^sts of which shall be cost recoverable)
facilities relating to the surrendered area.Tw/(S^'
42
ORANTO BLOCK LB-14 PSC JUNE 10,2009 CONFIDENTIAL
ARTICLE 21
NATURAL GAS
I Non-Associated Natural Gas
21.1.1 In the event of a Non-Associated Natural Gas discovery, die Contractor shall
engage in discussions with NOCAL with a view to determining whether the
appraisal and exploitation of said discovery have a potentially commercial
nature.
21.1.2 If the Contractor, after the above-mentioned discussions, considers that the
appraisal of such Non-Associated Natural Gas discovery is justified, it shall
undertake the appraisal work program for said discovery.
The Contractor shall have the right, for the purposes of evaluating the
commerciality of the Non-Associated Natural Gas discovery, if it so requests
at least thirty (30) days prior to the expiration of the third exploration period
set forth in Article 3.3 to be granted an exclusive appraisal authorization
concerning the Appraisal Perimeter of the abovementioned discovery, for a
term of two (2) years.
In addition, the Parties shall jointly evaluate the possible outlets for the
Natural Gas, both on the local market and for export, together with the
necessary means for its marketing, and they shall consider the possibility of a
joint marketing of their shares of production in the event the Natural Gas
discovery would not otherwise be commercially exploitable. For that purpose,
a Consultative Committee for Natural Gas shall be established by the Parties
to ensure the coordination of the upstream and downstream components of the
Natural Gas project and facilitate its evaluation and implementation.
21.1.3 If, despite their reasonable endeavors, the Parties are not able to develop a
market for a Non-Associated Natural Gas discovery, the Contractor may, prior
to the expiry of the term of the exclusive appraisal authorization, request a
further three (3) year extension of the exclusive appraisal authorization for the
Appraisal Perimeter of the discovery and NOCAL will not unreasonably
withhold its approval for said extension. Further extension, of the exclusive
appraisal authorization may be requested by the Contractor prior to the expiry
of the then current authorization \L will not unreasonably withhold
its approval for those extensions,
?
43
ORANTO BLOCK LB-14 PSC JUNE 10,2009 CONFIDENTIAL
21.14 Following completion of appraisal work, in the event the Parties should jointly
• n.M' decide that the exploitation of that discovery is justified to supply the local
market, or in the event the Contractor should undertake to develop and
produce that Natural Gas for export, the Contractor shall submit prior to the
expiration of the appraisal period an application for and exclusive exploitation
authorization which NOCAL will grant under the terms provided by Article
12.1.
j (•
The Contractor shall then have the right and obligation to proceed with the
development and production of that Natural Gas in accordance with the
approved development plan, referred to in Article 11.3 and the provisions of
this Contract applicable to Crude Oil shall apply, mutatis mutandis, to Natural
Gas, unless otherwise specifically provided under Article 21.3.
' •- V* t
21.1.5 If the Contractor considers that the appraisal of the Non-Associated natural
Gas discovery concerned is not justified, NOCAL may, by giving twelve (12)
months prior notice which may be reduced either with NOCAL’s consent or
automatically in the event the exclusive exploration authorization expires
earlier, require the Contractor surrender its rights in respect of the area
encompassing said discovery.
In the same manner, if the Contractor, after completion of appraisal works,
considers that the Non-Associated Natural Gas discovery is not commercial,
NOCAL may, by giving three (3) months prior notice, unless the exclusive
exploration authorization expires earlier, require the Contractor to surrender its
rights on the area encompassing said discovery.
In both cases, the Contractor shall forfeit its rights to all Non-Associated
natural Gas which could be produced from said discovery, and NOCAL may
then carry out, or cause to be carried out, all the appraisal, development,
production, processing, transportation and marketing work relating to that
discovery, without any compensation for the Contractor.
21.1.6 Notwithstanding the terms of Article 21.1.4, if the Operator is of the view that
the Non-Associated Gas discovery in question is non-economic as a
standalond development but can demonstrate that there is sufficient
prospectivity in the region to support a combined development of current
discovered reserves and future exploration prospects as a combined economic
development, then NOCAL will provide the Contractor a period of thirty-six
(36) months before exercising its rights pursuant to Article 21,1.4.
21.2 ASSOCIATED NATURAL GAS
21.2.1 Intfie event of a commercial discovery of Crude Oil, the Contractor shall state
if it considers that the production of Associated Natural Gas is likely to exceed
the quantities necessary for the requirements of the Petroleum Operations
related to the production of Crude Oil (including re-injection operations), and
if it considers that such excess is capable of being produced in commercial
44
ORANTO BLOCK LB-14 PSC JUNE 10,2009 CONFIDENTIAL
quantities. In the event the Contractor shall have informed NOCAL of such as
excess, the Parties shall jointly evaluate the possible outlets for that excess of
Natural Gas, both on the local market and for export (including the possibility
of joint marketing of their shares of production of that excess of Natural Gas
in the event such excess would not other wise be commercially exploitable),
together with the means necessary for Its marketing.
In the event the Parties should decide that the development of the excess of
Natural Gas is justified, or in the event die Contractor would wish to develop
and produce that excess for export, the Contractor shall indicate in the
development and production program referred to in Article 11.33 the
additional facilities necessary for the development and exploitation of that
excess and its estimate of the costs related thereto.
The Contractor shall then have the right to proceed with the development and
exploitation of that excess in accordance with the development and production
program approved by NOCAL under the terms provided by Article 11.3.6, and
the provisions of the Contract applicable to Crude Oil shall apply, mutatis
mutandis, to the excess of Natural Gas, unless otherwise specifically provided
by Article 21.3.
A similar procedure shall be applicable if the sale of marketing of Associated
Natural Gas is decided during the exploitation of a Field.
21.2.2 In event the Contractor should not consider foe exploitation of foe excess of
Natural Gas as justified and if NOCAL, at any time, would wish to utilize it,
NOCAL shall notify foe Contractor thereof, in which event:
(a) the Contractor shall make available to NOCAL free of charge at foe
Crude Oil and Natural Gas separation facilities all or part of foe excess
that NOCAL wishes to lift;
(b) NOCAL shall be responsible for the gathering, processing,
compressing and transporting of that excess from the abovementioned
separation facilities, and shall bear any additional costs related thereto;
(c) foe construction of the facilities necessary for the operations referred to
in paragraph (b) above, together with the lifting of that excess by
NOCAL, shall be carried out in accordance with good international
petroleum industry practice and in such a manner as not to hinder the
production, lifting and transportation of Crude Oil by foe Contractor.
21.2.3 Any excess of Associated Natural Gas which would not be utilized under
Articles 21.2.1 and 21.23 shall be re-injected by foe Contractor. However, foe
Contractor shall have foe right to flare said gas in accordance with good
international petroleum industry practice, provided that foe Contractor
furnishes NOCAL with a report demonstrating that said gas cannot be
economically utilized to improve foe rate of recovery of Crude Oil by means
of re-injection pursuant to foe provisions of Article 15.6, and provided
45
✓ ORANTO BLOCK LB-14 PSC JUNE 10,2009 CONFIDENTIAL
further, that NOCAL approves said flaring, which approval shall not be
unreasonably withheld.
21.3 Provisions common to Associated and Nos-Associated Gas
21.3.1 In order to encourage the exploitation of Natural Gas, NOCAL may grant to
the Contractor specific benefits when they are duly justified concerning, inter
alia, the recovery of the Petroleum Costs relating to Natural Gas.
1 21.3.2 The Contractor shall have the right to dispose of its share of production of
Natural Gas, in accordance with the provisions of this Contract It shall also
have file right to proceed with the separation of liquids from all Natural Gas
Produced, and to transport, store as well as sell on the local market or for
export its share of liquid petroleum so separated which will be considered as
Crude Oil for the purposes of their sharing between the Parties under Article
16.
21.3.3 For the purposes of this Contract, the Natural Gas price, expressed in Dollars
per million BTU, shall be equal to:
(a) With respect to Natural Gas export sales to Third Parties, the price
obtained from purchasers;
(b) With respect to sales on the local market of Natural Gas as a " '
price as NOCAL and the Contractor shall mutually agree upo
f
-i
46
ORANTO BLOCK LB-14 PSC JUNE 10,2009 CONFIDENTIAL
ARTICLE 22
FOREIGN EXCHANGE CONTROL
22.1 The Contractor shall comply with the foreign exchange control regulations, subject to
the provisions of this Article.
22.2 The Contractor shall have the right to retain abroad all the foreign currencies arising
from export sales of all Petroleum to which it is entitled under this Contract, or from
assignments, as well as equity, incomes from loan and more generally, all assets
acquired abroad by it, and to freely dispose of such foreign currencies or assets to the
extent that they may exceed its requirements for its operations in Liberia.
22.3 No restriction shall be exercised on importation by the Contractor of funds intended
for the performance of the Petroleum Operations.
22.4 The Contractor shall have the right to purchase currencies of Liberia with foreign
currencies, and freely exchange into foreign currencies of its election any funds held
by it in Liberia in excess of its local requirements at exchange rates which shall not be
less favorable/Sum those generally applicable to any other buyer or seller of foreign
currencies^wra^’
47
ORANTO BLOCK LB-14 PSC JUNE 10,2009 CONFIDENTIAL
ARTICLE 23 '
GOVERNING LAW
i •,*
Applicability of Liberian Law: Except as explicitly provided in this Contract, tbp. Contractor
shall be subject to Liberian Law as in effect firim time io time, including with respect to
labour, environmental, health and safety, custbnis and tax matters, and shall conduct itself in
a manner consistent wldi Liberia’s obligation under international treaties and agreements
insoftr as those have the effect of Law in Liberia.
: i: r*
Construction and Interpretation-This Contract and the rights, obligations and duties of the
Parties under this Coatract shall be construed and interpreted in accordance with Liberian
Law and by such roles and pridciplcs of international law as may be applicable, particularly
with regard to an investment by Nationals of one country in another country. However, in the
event of a conflict between this Contract and any Law --- except for the Constitution in effect
as of tho Effective Date ■--- the rights, obligations and duties of a Party shall be deemed to be
those set forth in this ContracL^pf '
i
•1
48
ORANTO BLOCK LB-14 PSC JUNE 10,2009 CONFIDENTIAL
ARTICLE 24
MONETARY UNIT
24.1 The registers and accounting books relating to this Contract shall be maintained and
recorded In Dollars. Said registers and accounting books shall be used to determine
llie Petroleum Costs, gross Income, exploitation costs and net profits for the purpose
of the preparation of the Contractor’s tax return; they shall contain, inter alia.
Contractor’s accounts lowing the sales of Petroleum under this Contract
24.2 Whenever It is necessary to convert into Dollars expenses and incomes expressed in
another currency, the exchange rates to be used shall be equal to the arithmetic
average of the daily cfaafeg rates for the purchase and sale,*as published in the Central
Bank of Liberia wchsila (http://wwwcbLorgJr) for the Liberian Dollar and the Wall
Street Journal for purchase of ofoer currencies during the month when the expenses
were paid and the Income received.
20 The originals of tho registers and accounting boctorefcntd to in Article 24.1 shall
be kept in Liberia or as otherwise determined by Contractor. The registers and
by detailed Documents with respect to receipts
>
■i
49
ORANTO BLOCK LB-14 PSC JUNE 10,2009 CONFIDENTIAL
ARTICLE 25
ACCOUNTING METHOD AND AUDITS
25.1 The Contractor shall maintain its accounts in accordance with the regulations in force
and with the provisions of the Accounting Procedure set out in Appendix 2 attached
hereto forming an integral part of this Contract
25.2 After giving the Contractor notice thereof In writing, NOCAL shall have the right to
cause die registers and accounting books relating to the Petroleum Operations to be
inspected and audited by its own agents or by experts of its election, and shall have n
period of four (4) months following tho cud of each Calendar Year to cany out those
inspections or audits relating to said year and may submit its objections to the
Contractor for any contradictions or criers found during such inspection or audits.
Should NOCAL fail to within the abovementiooed period of four (4)
months, no further objc or claim shall be made by the Liberian administration for
die Calendar year concerned WT
VI'
•«l
Oli
50
ORANTO BLOCK LB-14 PSC JUNE 10,2009 CONFIDENTIAL
ARTICLE 26
IMPORT AND EXPORT
26.1 lift!
(b) ^ bcbSTV k^ooctncto^^ wbconCBrtof^^** furniture, clothing,
household appliances and all personal effects for all the foreign employees and
their families assigned to work in Liberia for the Contractor or its contractors
or subcontractors.
(c) However, the Contractor, its agents, contractors and subcontractor* undertake
not to proceed with the imports mentlonod In Article 26.1 (a) Insofar as such
items are available in Liberia under equivalent condition, of quantity, quality,
prioc, delivery and terms of payment unless specific requirements or technical
emergencies are presented by the Contractor.
(d) The Contractor. Its agents, contractor* and subcontractor* shall have the right
to re-export from Liberia, free of all duties and taxes and at any time, all the
items imported under Article 26.1 (a) and (b) which are no longer necessary
for the Petroleum Operations except the items which have become the
property of the State under the provisions of Article 20.
26.2 During the period from the. inception of exploration until the date commercial
production begins, tho following goods In addition to Article 26.1 are exempt from
import duties:
1
(a) Plant or equipment. Including but not limited to four-wheel-drive motor
vehicle* but not motorcycles, sedans or luxury vehicles as defined by
regulation) and iput parts for these goods;
51
ORANTO BLOCK LB-14 PSC JUNE 10.2009 CONFIDENTIAL
(b) Intermediate inputs (including but not limited to explosives, drilling mud.
grinding bulls, tuec for trucks used in operations, and similar items specified
in regulations), and ,
(c) Raw materials.
26.3 The Contractor, ha agents, contractors and subcontractors shall provided that they
inform tho STATE in advance of their Intent to sell and subject to the provisions of
Article 20, have the tight to sell in Liberia, all equipment, materials, machinery and
tools, goods and supplies which they have imported when they are considered as
surplus and no longer necessary for the Petroleum Operations. In that event, the seller
shall be responsible for paying all dutlea and taxes applicable on the date of the
transaction and for Tiling all the formalities prescribed by the regulations in force.
26.4 During tho teem of this Contract, the Contractor, its customers and their carriers shall
have the rfrfC to export freely ai the export point selected for fort purpose, free of all
duties and taxes and at my time, the portion of Petroleum to which foe Contractor is
entitled in accordance with foe provisions of this Contract, after deduction of all
dehvencs made to the STATE, provided however that foce for unprocessed
exporubles foall bo paid.
26.5 Contractor is not exempt from customs user fees of two and half percent (2.5%)
including fees for the inspection or pre-shipment
ORANTO BLOCK LB-14 PSC JUNE 10.2009 CONFIDENTIAL
ARTICLE 27
DISPOSAL OF PRODUCTION
27.1 Each Year, up to a total of ten percent (10%) of i Oil
to which the Contractor b entitled, shall ! to NOCAL by 0k
purpose of satisfying the needs of the of Liberia.
of* in
The quantity of Crude Oil the to NOCAL shall be
o it by NOCAL at least (3) prior to the beginning of
272 The price of the Crude Oil sold to NOCAL under Article 27.1 for the needs of the
domestic maikct shall be the Market Price defined in Article If.
That Crude Oil price shall be peyable to the Contractor in Dollars within 45 days
273 The of title to. »d risk oC the to which each
party is c made at the Delivery
27.4 Each of the Parties shall have the right and obligation, to dbpese of nd HA the share
of Petroleum to which I b entitled under this Contract Such ihare shall be lifted oa
as regular a basis as possible, it being understood that each of the Parties, within
reasonable limits, will be authorized to lift more (ovtriift) or leas (under!i ft) that its
share of Petroleum produced and unlifted by the lifting day to the extent that such
overlift or underlift does not infringe on the rights of the other Part/ and b compatible
with the production rate and the storage capacity.
In the establishment of tho sequence of liftings, priority will bo given to the Party with
tho largest share of produced and unllftod quantity of Petroleum at a given time. The
Parties shall periodically meet to establish a provisional lifting program on the basis
of tho principles above-described and taking into account the wishes of the Ihulios as
regards the datos and quantitiw oClheir liftings, provided that thoso wishes are
compatible with said princlples.~py^p7i'
ORAWO BLOCK LB-I4PSCJIWE 10,2009 CONFIDENTIAL
ARTICLE 2»
PROTECTION OF RIGHTS
The Contractor shall take all necanary steps to achieve the objectives of this Contract
28.1
In Hi conduct of Petroleum Operations.
28.2 NOCAL shall take all nocessory steps to facilitate the implementation by the
Contractor of the objectives of this Contract, and the STATE shall protect the
property and operations of the Contractor, Its employees and agents In the territory of
Liberia.
MJ At the
of Hi
to prohibit anchoring in the vicinity of
prohibit any hindrance to the use of any
on land or
28.4 The Contractor shall take out and cause to be taken out by Us contractors and
subcontractors, in respect of the Petroleum Operations all insurances of the type and
for such amounts customarily used in the international petroleum industry, including
without limitation, third party liability insurance and insurances to cover
damage to property, facilities, equipment and materials, without prejudice to such
insurances with would be required under Liberian legislation.
26.5 To enable the Contractor to carry out expeditiou 'y
Operations, NOCAL shall have toe obligation to an
i to:
28.5.1 Obtain the approvals or
28.5.2 Oo through the formalities of exchanging foreign
28.5 J Obtain office space, office supplies, transportation, and
28.5.4 Oo
28.5.5 Obtain entry and exit visas for the Expatriate Employees who will come to Liberia for
tho implementation of the Contract and for their dependants who will visit them or
reside in Liberia for a long period and provide assistance for their transportation and
moving as well as medical services and travel In Liberia;
28.5.6 Obtain cxessary permission to if data and
for analysis or
28.5.7 Contract departments engaged In fishing, aquatic product*, meteorology, oocin
shipping, civil aviation, railway, transportation, communication rnd services for
ORANTO BLOCK I.B-14 PSC JUNE 10, 2009 CONFIDENTIAL
on a timely basis approvals necessary for the conduct of the Petroleum Operation*
under the Contract.
JB.6 NOCAL may, at the request of the Contractor, sell to the Contractor data and samples
concerning the Contract Area other than those produced as a result of Petroleum
Operations hereunder in accordance with any relevant rules and regulations and
NOCAL shall also assist the Contractor to arrange the purchase of any oceanic
environment, hydrological, mctooratadcaj .earthquake and other data available from
the relevant department in Liberia.
i
55
ORANTO BLOCK LB-14 PSC JUNB 10,2009 CONFIDENTIAL
ARTICLE 29
PERSONNEL AND TRAINING
29.1 The Contractor shall give preference in employment to Liberian Nationals provided
that they are suitably qualified and available, which shall be determined by the sole
opinion of the Contractor, provided however, the Contractor shall have the right to
employ its own key penonnei in appropriate positions, and provided also that such
conditions are in cooformity with the Labour Practices Lew of Liberia.
29.2 Upon commencement of the Petroleum Operations, the Contractor shall provide an
annual contribution for Training Programmes and the Contractor shall make direct
payment to NOCAL of an annual Training Budget oft
(a) $ 12S,000 Dollars during each year of the exploration period;
(b) $175,000 Dollars during each year of the exploitation period.
Additionally, the Contractor shall make an annual contribution of One Hundred
Thousand Dollars ($100,000) to the University of Liberia, paid to dheedy lo NOCAL
for subsequent payment to (be University of Liberia, for the enhancement of
programmes in Geology, Mining Engineering. General Science and Environmental
Studies.
funding for Social and Welfare programmes in Liberia and for that purpose foe
Contractor shall make an annual Social and Welfare Budget payment d.rcctly to
NOCAL:
(a) $ 150,000.00 Dollars during each year of ihe exploration period;
(b) $250,000.00 Dollars during each year of the exploitation period.
The Training and Social and Welfare and University expenses borne by the
Contractor shall be included in recoverable Petroleum Costs. Funding for the
Training, Contribution to the University of Liberia and Social and Welfare
Programmes shall be paid within thirty (30) days of the Effective Date. Thereafter,
payments shall be made within thirty days of each subsequent anniversary of the
Such contributions for the Training. Social & Welfare and University of Liberia shall
be paid directly into bank accounts held and controlled by NOCAL or the University
of Liberia. Prior to making any such payment, the Contractor shall verify such bank
accounts sod NOCAL agrees to cooperate, assist and provide Contractor any
information \f requires to conduct such verification.
Aa provided la Article I9J3, all payments made under this Contract shall be made
in accordance- vri£ yagogb laid down by the Extractive Industries Transparency
Initiative (EITI).'
ORANTO BLOCK LB-14 PSC JUNE 10,2009 CONFIDENTIAL
29.4 The Entry into Liberia of *1) foreign personnel shall be authorized and the STATE
shall issue the documents necessary for that entry to all members of die foreign
personnel, such as entry visas, working permits and exit visas, in compliance with the
immigration regulations in force hi Liberia.
At the request of the Contractor, the STATE shall facilitate any Immigration
formalities with the Immigration Bureau, at the points of entry into and exit from
Liberia, in respect of the Contractor’s employees, contractors, subcontractors and
agents, and their families, ull without undue delays.
29.5 All the employees required for the conduct of the Petroleum Operations shall be under
the Contractor's authority or that of Its contractors, subcontractors and agenta, In their
capacity as employers. Their work, number of working hours, salaries and any other
matter* relating to their employment conditions shall be determined by the Contractor
or its contractors, subcontractors and agents, and shall conform to the Labour
Practices Law of Liberia.
29.6 The STATE and/or NOCAL shall assist Contractor in obtaining all Liberian
governmental permissions, registrations, licenses, and all other approvals or rights
that are needed for carrying out Petroleum Operations under this Contract provided
however, that Contract^ sliMte responsible for applicable fees required by law to
> - the relevant authoritics^j
57
ORANTO BLOCK LB-14 PSC JUNE 10.2009 CONFIDENTIAL
ARTICLE 30
ACTIVITY REPORTS IN RESPECT OF EXCLUSIVE EXPLOITATION
AUTHORIZATIONS
30.1 The provision of Article 12 shall apply, mutaiis mutandis, to any exclusive
exploitation authorizations. In addition, the following periodic activity reports shall
in respect of each Fiekt
(a) daily protection reports.
(b) monthly reports stating the quantities of Petroleum produced and those sold
during the previous month together with information on such sales.
Unless the Contractor gives Its written consent, the information relating to a Field
under exploitation, except statistical data about activity, shall be considered as
confidential by the Partios during the term of this Contract.
30.2 The Contractor shall forthwith notify the STATE of any material damage whatsoever
caused 10 the Hydrocarbon fields of facilities, and shall take all necessary Heps to
terminate it and carry out the necessary repairs.
30.3 From the year of granting an oxcluiive exploitation authorization, the annual report
referred to in Article 8.2 shall also include the following;
(a) Information on all development and pro.1 jction operations carried out during
the previous Calendar Year, including the quantities of Petrokrm produced
and those sold, if any,
(b) Information on all transportation and sales operations together with the
location of the mala facilities buil. by the Contractor, if an>.
(c) .. A statement specifying the number of employees and workers, their
qualification and their nationality, together with a report on the medical care
»
58
ORANTO BLOCK LB-14 PSC JUNE 10,2009 CONFIDENTIAL
ARTICLE 31
ARBITRATION
31.1 In the event of any disputo between the STATE or NOCAL and the Contractor
relating to, or arising out of, the interpretation or execution of the provisions of this
Contract, the parlies shall make their best effort* to settle such dispute amicably.
If within three (3) months from the date of notice of such dispute by either Party to
the other, the Parties have not reached settlement, the dispute shall, at the request of
the most diligent Party, be referred for arbitration to the International Chamber of
Commerce to accordance with Its rules and regulations.
31.2 Die arbitration shall be held in London, England. Die language used during die
procedure stall be the English language. The arbitration shall be determined by three
(3) arbitrators. D»c arbitrators shall not have the same nationality as the Parties.
The arbitration tribunal's award shall be final; it shall be binding on the Parties and
shall be enforceable in any court of appropriate Jurisdiction.
31.3 The expenses of any arbitration stall be borne equally by the Parties, that is to say,
each party shall pay the expenses of hs own arbitrator and the expenses of the tliird
arbitrator to equal shares, and any expenses Imposed by the International Chamber of
Commerce shall be shared equally by the Parties.
The performance by the Parties of their obligations under this Contract shall not be
31.4 A sole expert shall be an independent and impartial person of international standing
with relevant qualifications and experience appointed pursuant to the mutual
agreement of the Parties (“Sole Expert")- Any Sole Expert appointed shall act as an
expert and not aa an arbitrator or mediator and shall be instructed to endeavour to
resolve the dispute referred to him within thirty (30) days of his appointment, but to
any event within sixty (60) days of the appointment. Upoa the selection of the Sole
Expert, the Party receiving the notice of referral above shall submit its own Matemcnt
containing all information it considers relevant with respect to the matter in dilute
Die decision of the Sole Expert shall be final and binding and not subject »o any
appeal, save for fraud, corruption or manifest disregard of applicable procedure of this
Cootract. If the Parties are unable to agree on the appointment of a Sole Expert within
twenty (20) days after a Party has received a notice of referral under this Article the
Sole Expert shall be selected by the ICC Centre for Expertise, and the person so
selected shall be appointed by the Parties.
31.5 The Sola Expert stall decide the manner to which any deterroln^Joo U mode,
including whether the Parties dial] make oral or written submissions and ■ "
and the Parties stall cooperate with the Sole Expert and provide sucfci
and information as the Sole Expert may request AE corrtspoodaoci,
and information provided by a Party to the Sole Expert stall be copied to
Party, and any oral submissions to the Sole Expert shall be made to dM prewnoe
59
ORANTO BLOCK LB-14 PSC JUNE 10, 2009 CONFIDENTIAL
Panics and each Party shall have a right of response. The Sole Expert may obtain any
independent professional or technical advice as the Sole Expert considers nocessary.
The fees and expenses of a Sole Expert appointed under the provisions of Article 31.4
shall be borne oqually by the Parties.
31.6 Sovereign Immunity
Any Party that now or hereafter has a right to claim sovereign immunity for itself or
any of Its assets hereby waives any such immunity to the fullest extent permitted by
the laws of any applicable jurisdiction. This waiver includes immunity from (i) any
expert determination, mediation, or arbitration proceeding consamcei pursuant to
this Contract; (H) any judicial, administrative or other proceedings to aid the expert
determination, mediation, or arbitration commenced pursuant to this Contract; and
(iii) any effort to confirm, enforce, or
judgment, service of |
arbitration or any
judicial or administrative proceedings to this Contract. Each
Party and
60
ORANTO BLOCK LB-14 PSC JUNE 10. 2009 CONFIDENTIAL
ARTICLE 32
TERMINATION
32.1 Termination by the Contractor. During the Exploration and Exploitation Periods,
the Contractor may surrender, by not less than sixty (60) days notice to NOCAL all
of its rights and obligations hereunder in respect of all or any part of the Delimited
Area, and the Operator shall be relieved of all obligations to NOCAL in respect of the
area so surrendered except those obligations arising out of a related to the surrender.
32.2 Termination by NOCAL Subject to the provisions of Article 31. NOCAL shall
have the right to terminate this Contract if any of the following events (hereinafter
called “Events of Default”) shall occur and be continuing:
(a) Where the Contractor shall fail to make any of the payments described in this
Contract on the due payment date, and such default is not cured within forty-
five (45) days after notice by NOCAL or within such longer periods as may
be specified in said notice:
(b) Where the Contractor shall materially fail to comply with its work
commitments and other conditions in this Contract and such failure is not
cured within ninety (90) days after notice by NOCAL of within such longer
period as may be specified in the notice;
(c) Where the Contractor shall (i) voluntarily dissolve, liquidate or wind up its
affairs, or make an assignment of all of substantially all of its assets for the
benefit of creditors other than an assignment made to secure indebtedness
incurred in the ordinary course of business; (U) file a petition or application to
any tribunal for the appointment of a trustee or receiver for all or any
substantial part of the Contractor’s assets; (ill) commence any proceedings for
its bankruptcy, reorganization, arrangement, insolvency or readjustment of
debt under the laws of any jurisdiction, whether now or hereafter in effect, or
if any such petition or application is filed, or any such proceedings are
commenced against It, shall indicate its approval thereof, consent thereto or
acquiescence therein, or (iv) If any order Is entered appointing any such trustee
or receiver, or adjudicating the Contractor bankrupt or insolvent, or approving
the petition in any such proceedings, and provided that the Con tractor shall
fail to take corrective mcasurc(s) to have such order removed or lifted within
sixty (60) days;
(d) Where tho Contractor shall fail to carry out Exploration as required by Article
4, or cease Exploration for a period of twelve (12) consocutivo month! or
cease production with respect to all Production Areas for a period of twenty-
four (24) coi»ccutive months, unless such failure or cessation is consented to
by NOCAL or is caused by n state offorce majeurc.
32.3 Opportunity to cure.' In the ease of an alleged Event of Default described above,
NOCAL before taking any further action, shall provide Notice to the Contn
the alleged occurrence of such Event of Default and of NOCAL’s views in tha
61
ORANTO BLOCK IB-14 PSC JUNE 10.2009 CONFIDENTIAL
and shall offer the Contractor a fair opportunity to consult with NOCAL to resolve
the matter. I& after a reasonable' period of time of consultation, NOCAL is of the
reasonable opinion that the matter cannot be resolved by further consultation.
NOCAL may they send to the Contractor Notice of NOCAL’s intention to terminate
this Contract If the Event of Default is not cured within sixty (60) days after said
Notice, or within such longer period as may be necessary to allow a reasonable period
of time to effect such cure, then this Contract shall be terminated, subject to Article
31. |
32.4 Disputes Regarding Kvcots of Default. Notwithstanding the provision of Article
32.2 if the Contractor disputes whether there has been an Event of Default described
above and, within sixty (60) days after receipt by the Contractor of NOCAL’s Notice
of its intention to terminate this Contract, refers such dispute to arbitration in
accordance with Article 31, then termination of this Contract shaUgoUake effect until
the finality of and in accordance with, an arbitration award, My ’7'
62
ORANTO BLOCK LB-14 PSC JUNE 10,2009 a i mAL
ARTICLE 33
FORCE MAJEURE
33.1 No delay or default of a party in performing any of the obligations resulting from this
Contract shall be considered a breach of this Contract if such delay or default is
caused by a case of Force Majeure.
If in the event of Force M^jcure the performance of any of the obligations under this
Contract is delayed, that delay extended by the period of time required to repair the
damage caused during such delay and to resume the Petroleum Operations shall be
added to the period provided by this Contract for the performance of .aid obligation,
and the exclusive exploration or exploitation authorizations shall be extended by that
period as regards the area concerned by Force Majeure.
as: earthquake, flood, accident, strike, lockout, riot, delay in obtaining the rights-of-
different from those
already mentioned
333 Where a Party considers it is prevented from performing any of its obligations by the
occurrence of Force Majeure, it shall forthwith notify the other party thereof by
specifying the grounds far establishing Force Majeure, and take all necessary and
useful steps to ensure the normal resumption of the performance of the concerned
obligations upon termination of the event constituting the Force Majeure.
to be performed
ORANTO BLOCK LB-14 I'SC JUNE 10. 2009 CONFIDENTIAL
ARTICLE 34
JOINT AND SEVERAL OBLIGATIONS AND GUARANTEES
VI I All the clauses, conditions and provisions of this Contract shall be binding on the
Parties and their respective successors and assignees. This Contract constitutes the
only agreement between the Parties and no previous communication, promise or
agreement, whether oral or written, between the Parties, related to the purpose of this
Contract may be asserted to amend the clauses hereof.
The STATE certifies and guarantees that there is no other applicable agreement **iih
respect to the petroleum rights within the Delimited Are*, that it will perform its
obligation in fairness and good faith and that this Contract will not be cancelled,
amended or modified except by agreercat between the Parties.
34.2 Where the Contractor is constituted by several entities, the obligations and liabilities
of those entities under this Contract shall be joint and several.
64
ORANTO BLOCK LB-14 PSC JUNE 10.2009 CONFIDENTIAL
ARTICLE 35
RIGHTS OF ASSIGNMENT
35. I All or part of the rights and obligations arising from this Contract may be ossigned by
any of the entities constituting the Contractor to Tbirtl Parties whose technical and
financial reputation Is well established; the assignees with the other entities
constituting the Contractor shall thereafter be jointly and severally liable for the
obligations arising from this Contract.
The terms of any non-afllliated assignment shall bo subject to the prior written
approval of NOCAL which approval shall not be unreasonably withheld.
If w ,thm sutv (60) days following notification to NOCAL of a projected assignment
accompanied by aU the related information and the draft assignment deed, NOCAL
has not given its decision, that assignment shall be deemed to be approved by
NOCAL
From the date of approval of an assignment, the assignee shall comply with the terms
and conditions of this Contract.
35.2 Subject to the prior written approval of the State through NOCAL all or pan of the
joint and several rights and obligations arising from this Contract moy be freely
assigned at any time by any of the entities constituting the Contractor to one or more
Affiliated Companies or other entities constituting the Contractor.
ORANTO BLOCK LB-14 PSC JUNE 10,2009 CONFIDENTIAL
ARTICLE 36
STABILITY OF CONDITIONS
36.1 This Contract is executed and binding between Clio Parties in accordance with the laws
and regulations In force as of the Effective Date and on the basin of the provisions of
all said laws and regulations, as it regards, to , including but not limited to the
economic, petroleum, fiscal and financial provisions of this Contract.
36.2 This Contract may not be amended, cancelled or modified by virtue of the adoption or
amendment of any law, rule, order, decree or regulation by the State of Liberia after
the Effective Date of this Contract This Contract may only be amended or modified
by written agreement of all Parties to this Contract
36.3 Periodic Review: In the event of changes in circumstances from those existing at the
Effective Date, that have a significant material effect on die terms of this Contract,
cither NOCAL or the Contractor shall at the request of the other consult together. If it
mutually established that such Profound Changes in Circumstances have occurred,
then the Parties shall effect such changes in or clarifications to this Contract that they
mutually agree are necessary. The Parties shall meet in good faith to make the
necessary revisions and adjustments to die Contract in order to maintain such
expected economic benefits to each of the Parties, provided that the economic benefits
to the Parties shall not be reduced as a result of exercising the terms of this article. For
the purposes of this Contract the term “Profound Changes in Circumstances" shall
mean such changes in die economic conditions of the petroleum industry world wide
or in Liberia or such changes that result in such a material and fundamental alteration
of the conditions and assumptions relied upon by the Parties at the Effective Date of
this Contract (or the time after any subsequent review under this Article) to the effect
thut the overall balance of equilie*-end benefits reasonably anticipated by the Parties
will no longer be achicvableTX-'/'l-GdL
i
•i
i
66
ORANTO BLOCK LB-14 PSC JUNE 10,2009 CONFIDENTIAL
ARTICLE 37
IMPLEMENTATION OF THE CONTRACT
37.1 The Parties agree to cooperate in every possible manner to achieve the objectives of
this Contract.
NOCAL shall facilitate the Contractor's performance of its activities by granting it
any permits, licenses, access rights necessary for the performance of the Petroleum
Operations and by making available to it any appropriate services and facilities, so
that the Parties can obtain the best benefit from a sincere cooperation- However, the
Contractor shall observe tho applicable procedures and formalities, and shall apply to
the competent Ministries and/or Agencies of the Administration.
The Parties agree to respect the terms of this Contract and not to unilaterally abrogate
any part of the terms and conditions contained herein.
37.2 Any notices or other communication under this Contract shall be deemed to have been
made when they arc delivered to an authorized representative of the Party coocemcd
at the location of Said Party’s principal office in Liberia, or sent by telegram, cable or
facsimilo with all expenses paid, or deposited as registered kttcre with the Postal
administration of Liberia with postage prepaid in accordance with the contact address
of the Parties provided herein.
Notifications shall be deemed to have been made on the date when the addressee shall
receive them.
Notices to NOCAL should be sent to:
President and CEO
National Oil Company of Liberia
Episcopal Church Plaza, 3rd Floor
1000 Monrovia
10 Liberia
Tel: +231-6512929
E-Mail: fk
Notices to Orsnto Petroleum Limited should be sent to:
Group Managing Director
Plot 8, Water Corporation Way
Off Ligali Ayorindc Street
Oniro Estate, Victoria Island •
Lagos, Nigeria
Tel/Fax: H 234 1 2120p6
E-Mail: orm^il@ms!i^Qm
37.3 If NOCAL considers tljat the Contractor has committed a breach in the performance
of any of its obligations, It shall so notify the Contractor in writing and the Contractor
67
ORANTO BLOCK LB-14 PSC JUNE 10.2009 CONFIDENTIAL
shall have sixty (60) days to remedy the breach or refer the to arbitration in
37.4 The terms and conditions of this Contract may be modified only in writing and by
37.5 Unless otherwise specified in writing, the Ministry and NOCAL shall represent the
STATE under this Contract and is empowered to grant. In the name and on behalf of
the STATE, any consent necessary or useful for the implementation of this <
37.6 Heading in this Contract arc inserted for purposes of convenience and reference and
in no event shall define, restrict or describe the scope of object of the Contract or of
any of its clauses.
37.7 Appendices 1 and 2 attached hereto shnll form and integral part of this Contract.
37.8 Any waiver of the STATE or NOCAL concerning tho performance of any obligation
of the Contractor shall be In writing and signed by the representative of the STATE or
NOCAL, and no waiver shall be implied if the STATE or NOCALdoes not exercise
any of its rights to which H is entitled under this Contract P/Tif
ORANTO BLOCK LB-14 PSC JUNE 10.2009 CONFIDENTIAL
ARTICLE 38
EFFECTIVE DATE
Upon execution by the Parties and when promulgated as the law of the Republic of Liberia,
this Contract shall become effective, the date of ratification and publication of the hand bill
shall be referred to as the Effective Dale, and said Contract shall become binding on the
Parties. In addition to the foregoing, the STATE and/or NOCAL shall take all actions
necessary following the Fixccution Date to give this Contract the full force and effect of law
in the Republic of Liberia
Counterparts. This Contract may be executed in multiple counterparts, and by
dlficrcnt Parties in sopor ale counterparts, and each such counterpart shall be deemed an
original Contract for ull purposes, provided that no Party shall be bound by this Contract
unless and until all parties have executed a counterpart.
IN WITNESS WHEREOF, the Parties have signed this Contract on the date as set forthT^
below.
ON IIEIIALF OF NOCAI. AND THE GOVERNMENT OF LIBERIA:
c - (b ~
D*c
Ngafuan
MINISTER OF FINANCE
ORANTO BLOCK LB-14 PSC JUNE 10,2009 CONFIDENTIAL
to - 2-^? 9
Date •
J L* l*J ^0 09
Mr. Date
Oran to Group Managing Director
Oranto Petroleum Limited
yo
Hon. Philip A.Z. Bank Date
MINISTER OF JUSTICE
REPUBLIC OF LIBERIA
Approved:
r-j <
Her Excellent Date
Ellen Johnson Sirlcaf
PRESIDENT OF THE REPUBLIC OF LIBERIA
Ratified:
National Legislature of the Republic of I Jbcria Date
•!
70
ORANTO BLOCK LB-14 PSC JUNE 10, 2009 CONTIDENTTAL
APPENDIX 1
part of this Contract between the Republic of Liberia and the
Attached to and
Contractor
Pf LIMITED AREA
On the Effective Date, the Delimited Area, designated as Block LB 14. is formed by the area
Ihc geographical coordinates of those points arc the following, with Reference to the
(irecnwich meridian:
Bloch LB-14 Coordmates (WGS84)
Decimal Degrees
Corner labtude 1 iiuUtiMta
A _6 239 . -10723
B 6 201 ^10 645
5 6 191 -10 582
D 6 175 -10 518
re '6 161 -10.464 I
r?~ 6 147 -10426
|Q~ 5 399 -11.019
IH [5 587 -11231
Those coordinates arc only given for purposes of defining the Delimited Area and shall not
be considered as the boundaries of Ihc nnliomil jurisdiction of Liberia.
H»c surface of the Delimited Area above-defined is deemed to be equal to 3.l2lsq km
MAP OK BLOCK LB-14
71
ORANTO BI.OCK LB-14 PSC JUNE 10,2009 CONFIDENTIAL
APPENDIX 2
Attached to and part the Republic of Liberia and the
Article I Garni Provisions
LI Object
This Accounting Procedure shall be followed and observed in the performance of the
obligations under the Contract to which this Appendix la attached.
The purpose of this Accounting Procedure la to establish the principles of accounting
which shall reflect the Operators actual costs relating to Joint Operations to the end
tliut the Operator shall subject to the processes of the Contract neither gain nor lose by
reason of the fact that it acts as Operator.
1.2 Acconnts and Statements ''
The registers and accounting books of the Contractor shall be In conformity with
accounting rules and regulations for business applicable in Liberia. However, the
Contractor may apply the accounting rules and procedures in conformity with the
Revenue Code of Liberia
In accordance with the provisions of Article 25 of the Contract, accounts, books and
registers shall be maintained and recorded in Dollars. These accounts shall be used,
inter alia, to determine the aroosmtof Petroleum Costs, therecoveryofsaid Costs, the
TV Contractor shall record all operations connected with the Petroleum Operations in
accounts separate from those relating to any other activities which it may carry out in
the Republic of Liberia.
All accounts, books, records and statements, together with documents supporting
expenses iraaared. such as invoices and service contracts, shall be kept in the
Republic of Liberia in order to be provided at the request of the competent authorities
of Liberia.
In the event of any conflict between the provisions of this Accounting Procedure and
the Contract, tba provisions of the Revenue Code of lAeria shall prevail.
1.4 TV definitions contained in Article 1 of the Contract shall apply to this Accounting
Procedure and shall have the same meanings when used herein. In addition certain
terms used herein are defined as follows: /"
72
ORANTO BLOCK LB-14 PSC JUNE 10.2009 CONFIDENTIAL
Exclusive Operation Account dial! mean the accounts maimained by Operator to
record all expenditures, receipts and other transactions of Parties participating in
Operations by less than all parties.
Material shall mean the personal property, including but not limited to equipment
and supplies, acquired and held for use in tbc Petroleum Operations. .
15 Modifications
The provisions of this Accounting Procedure may be modified by mutual agreement
between the Parties.
'la 'V »*
The Parties agree that if any provision of the Accounting Procedure proves
inequitable to either Party, such provision shall be modified in good faith by the
Parties.
Article D - Petroleum Coats
II.1 Petroleum Costs Account
The Contractor shall maintain a “Petroleum Costs Account” which will record in
detail the expenses incurred by tbc Contractor directly relating to the Petroleum
Operations earned out under this Contract, and which will be recoverable in
accordance with the provisions of Article 16 of the Contract
The Petroleum Costs Account shall, inter alia, record separately, by Appraisal
Perimeter or Exploitation Perimeter if any, the following expenses:
(a) exploration expenditures;
(b) appraisal expenditures;...,
(c) development expenditures;
(d) exploitation expenses;
(c) financial costs;
(f) overhead costs in Liberia;
(g) overhead costs abroad.
The Petroleum Costs Account shall enable, inter alia, to identify at any time:
(a) the total amount of Petroleum Costs since die Effective Date;
(b) the total amount of Petroleum Costs recovered;
73
ORANTO BLOCK LB-14 PSC JUNE 10.2009 »y ?131a
(c) the total amount credited to the Petroleum Cotta Account pursuant to Article
11.4(b) below:
For the purposes of Article 16 of the Cootrct. Petroleum Cotta shall be recovered in
the following sequence:
(a) exploitation expenses in respect of a Field incurred and paid from the date of
(b) financial costs;
In addition, within each of the foregoing categories, the costs shall be recovered in the
sequence in which they are incurred.
not to duplicate any item of the credit or debit of the accounts maintained under the
Contract.
11.2 Items debited to the Petroleum Costs Accoant
The following expenses and costs shall be debited to the Petroleum Costs Account
and also be deductible for income tax return purposes, according to Article 17:
IL2.1 Personnel Kipci.se*
All payments and costs in respect to Contractor's employees will be those
costs directly or indirectly assigned to the Petroleum Operations carried out
under this Contract. The precise amounts of expenses will be reviewed in the
Aiture and will be in agreement with accepted human resource procedures
adopted by the Contractor that are generally applicable in the international oil
and gas industry. The expenses allowed will be the actual expenses incurred
as permitted by such human resource procedures.
II.2.2 Overhead Costs In Liberia
Wages and salaries of the Contractor'* personnel directly engaged in the
Petroleum Operations in the Republic of Liberia, whose work time is not
directly allocated to the programs, as well as costs of maintaining and
operating. In Liberia a main and administrative office and sub-offices
necessary for the Petroleum Operations.
74
ORANTO BLOCK LB-14 PSC JUNE 10,2009 CONFIDENTIAL
The Contractor shall chargo costa paid abroad, connected to the carrying out of
the Petroleum Operations by the Contractor or its Affiliated Companies. The
amounts charged shall be the actual costs borne by the Contractor. These
costs, including a detailed breakdown of the costs, will be provided to the JOC
for its review and written approval.
11.2.4 Buildings
Construction, maintenance expenses, we well as rents paid for all offices,
houses, warehouses and buildings of other types, including housing for
employees, and cost of equipment, furniture, and fittings necessary foe the
operation of those buildings directly required for the performance of the
Petroleum Operations.
11.2.5 Damage* and Louc*
All costs and expenses necessary for the repair or replacement of Joint
Property resulting from damages and losses incurred by fire, flood, storm,
theft, accident, or any other cause. Operator shall furnish Noo-Operatora
written notice of damages and losses incurred in excess of one hundred
thousand U.S. dollars (IJS 100.000) for each incident as soon as practicable
after a report thereof has been received by the Operator. The Operator shall
furnish to any Non-Operator, in respect of any damage and loss, such
information and documentation as may be reasonably requested
II.2.6 Materials, Equipment and Rentals
Costs of equipment, materials, machinery, and facilities purchased or provided
for use in the Petroleum Operations, as well as rentals or compensations paid
or incurred for the use of any equipment of facilities required directly for the
performance of the Petroleum Operations.
11.2.7 Services
Costs of services directly related to Petroleum operations rendered by
subcontractors und consultants, as well as any costs directly related to services
rendered by the STATE or NOCAL or any other authorities of the Republic of
Liberia.
Costs of services directly elated to Petroleum Operations rendered by
Affiliated Companies, provided that such costs shall not exceed those
normally charged by independent companies for an identical or similar
service.
Premiums paid. Including those paid to Affiliated Companies, for Insurances
customarily taken out for the Petroleum Operations to be carried out by the
Contractor. Losses not covered by the applicable insurance provisions*
including the relevant deductible amounts will also be debited to till* Account/^--
75
ORANTO BLOCK LB-14 PSC JUNB 10.2009 CONFIDENTIAL
11.2.9 l.cgal Expenses ....
All expenses of handling, investigation defending, protecting or recovering
Joint Property and settlement of litigation or claims directly arising by reason
of the Petroleum Operations.
n.2.10 Financial Coats
All interests paid by the Contractor in respect of the loans from Third parlies
and advances obtained from Affiliated Companies, provided that those loans
and advances shall be for the purpose of the financing of Petroleum Costs
related only to the development of Petroleum Operations in respect of a field.
In the event such financing is provided by Affiliated Companies, the allowable
interest rates shall not exceed the rates customarily used in the International
financial market for loans of a similar nature.
11.2.11 Other Expenses
Any other expenses incurred and paid by the Contractor for the purposes of
the necessary and proper conduce of the Petroleum Operations under Ihc
approved annual Work Programs and Budgets, other than the expenses
covered and dealt with by the Foregoing provisions of this Article and other
than the expenses excluded from the Petroleum Costs.
11.2.12 Ecological and Environmental Charges
All costs incurred for the benefit of the Joint Property and ©Acr Property
under the Contract as a result of governmental or regulatory requirements
and/or Operator's policies to comply with environmental rules applicable to
Operations. These costs may include periodic environmental audits,
ecological or archaeological surveys and pollution control procedures required
by the applicable laws and regulations.
IL3 Expense* not chargeable to the Petroleum Costs Account
The expenses which are not directly necessary* for the performance of the Petroleum
Operations, and the expenses excluded by the provisions of the Contract or this
Accounting Procedure as well as by the regulations in force in Liberia, are not
chargeable to the Petroleum Costs Account and shall therefore not be recoverable.
Such expenses shall be:
(a) expenses relating to the period before the Effective Date;
(b) i out beyond the Delivery Point,
76 i
ORANTO BLOCK LB-14 PSC JUNE 10.2009 CONFIDENTIAL
(c) financial costs relating to the financing of exploration Petroleum Operations,
and those relating to the share of financing of development Petroleum
Operations; .
(d) bonuses defined in Article 18.9 and in Article 19.1 of this Contract;
II.4 Items credited to the Petroleum Coals Account
The following incomes and proceeds shall, inter alia, be credited to the Petroleum
Costa Account:
(a) Income arising from the marketing of the quantity of Crude Oil to which the
Contractor Is entitled under Article 16 of the Contract for the purpose of
recovery of the Petroleum Costs;
(b) any other incomes or proceeds misted to the Petroleum Operations
specifically those arising frexn:
• Sales of related substances;
• Any services rendered to Third Parties using the facilities dedicated to the
Petroleum Operations, including, but not limited to, processing
transportation and storage of products for Third Parties in those facilities /
77
ORANTO BLOCK LB-14 PSC JUNE 10.2009 CONFIDENTIAL
I1I.I Technical Services *
A reasonable rate shall be charged for the technical services rendered by the
Contractor or its Affiliated Companies for the direct benefit of the Petroleum
Operations carried out under the Contract, such as gas. water, core analyses and any
other nalysea and tests, provided that web charges shall not exceed those normally
charged by independent technical service companies and laboratories for similar
III.2 Purchase of Materials and Kqaipmeat
Materials and equipment purchase from third Parties and directly necessary for the
performance of the petroleum Operations carried out under the Contract shall be
“Net CosT shall include such items at taxes, shipping agent fees, transportation,
loading and unloading costs, license fees, related to the supply of materials and
equipment, as well as transit kam oot recovered through inwrance.
HU Use of Eqaipment and FadlHire EiclusivcJy by the Contractor
Equipment and facilities owned by the Contractor and used directly for the Petroleum
Operations shall be charged to the Petroleum Costs Account at a rental rate which
shall be sufficient to com maintenance, repairs, depreciation and services required
ft* the performance of the Petroleum Operations.
Maintenance, repairs, and services required for the performance of the Petroleum
Operations shall bo charged to the Petroleum Cos's Accounts as operating expenses
III.4 Valuation of Materials
All materials transferred to Liberia from the Contractor’s warehouses, or from those
of any entity constituting the Contractor or their Affiliated Companies, shall be valued
as follows:
(•) New Material....... .......
' • ' * ‘ ''njj, , ..... . |
New material (condition “A") means new material which litui never been used;
one hundred percent (100%) of the current market price, which corresponds to
the price normally charged for similar supplies in arm’s length transactions
between buyer and seller.
Material in fcood condition (condition "B") means material in good condition
which is still usable for its original purpose without repajr, at a maximum of
seventy-five percent (75%) of the price of new material IT. ,
78
ORANTO BLOCK LB-14 PSC JUNB 10,2009 CONFIDENTIAL
(b) Other Used Material
Other used material (condition “C") means material still usable for its original
purpose, but only after repairs and Reconditioning: at a maximum of fifty
percent (50%) of the price of new material.
(c) Material In Poor Condition
Material in poor condition (condition “D") means material no longer usable
for its original purpose but still usable for other purposes: at a maximum of
twenty-five percent (25%) of the price of new material.
(d) Scrap Material
Scrap material (condition "E") means material beyond usage and repair,
prevailing price of scrap material.
III.5 Warranty of Material |
The Operator docs not warrant the material charged to tiie Joint Account beyond the
manufacture's or supplier's guarantee, express or implied.
III. 6 Materials a ad Equipment Disposed By the Contractor
Material and equipment purchased by all the entities constituting the Contractor shall
be valued in accordance with the principles defined in Article III.4 above.
Materials and equipment purchased by any entity constituting the Contractor or by
Third Parties shall be valued at the received sale price, which shall in no event be less
than the price determined in accordance with the principles defined in Article III.4
above.
The corresponding amounts shall be credited to the Petroleum Costs Account.
Article IV - Inventories
IV. 1 Period
The Contractor shall keep a permanent inventory both in quantity and value of all
normally controllable materials used for the Petroleum Operations and shall proceed
at reasonable intervals with the physical inventories as required by the Parlies.
IV.2 Notice
A written notice of intention to take an inventory shall bo send by the Contractor at
least ninety (90) daf s prior to the commencement of said Inventory so that the STATE
and the entitles constituting the rmay be represented at their own expenses
during the inventory Operations.
79
ORANTO BLOCK LB-14 PSC JUNE 10,2009 CONFIDENTIAL
IV. 3 Information
In the event the STATE or any entity commuting the Contractor shall not be
represented at an inventory, such Party or Parties shall be board to accept the
inventory taken by the Contractor which shall furnish to such Party or Parties a copy
of said inventory.
Article V - Fiaancial and Accounting Statements
The Contractor shall furnish the STATE and NOCAL with all the reports, records and
statements provided by the provisions of the Contract and the applicable regulations
and, inter alia, the following financial and accounting statements:
V. 1 State of Exploration Work Obligations
Such annual statement shall be submitted not later than one (I) month after the end of
each Contractual Year in respect of the exploratkm periods.
It shall present with details the exploration work and expenditures carried out by the
Contractor to fulfill its obligations act forth Article 4 of the Contract, «c: «fin|
specifically appraisal wells and related appraisal expenditures as w^Il as development
expenditures, exploitation expenses, overhead costa and bonuses.
V.2 Statement of Recovery of Petroleum Coats
A quarterly statement shall be submitted not later than ooo (1) month after the end of
each Calendar Quarter. It shall present the following items of the Petroleum Coats
Account
of the quarter,
(c) the quantity and the value of the production of Petroleum taken by the
Contract of during the quarter for the purpose of recovery of the Petroleum
Costs;
(d) the amount of incomes or Proceeds credited fix the purpose of Article II.5 (b)
above during the quarter;
(e) the amount of Petroleum Costs which remain to be recovered «
the end ofthe quarter
Costs shall be
80
2009
ATTESTATION TO:
“AN ACT TO RATIFY THE PRODUCTION SHARING CONTRACT BETWEEN
THE NATIONAL OIL COMPANY OF LIBERIA REPRESENTING THE
REPUBLIC OF LIBERIA AND ORANTO PETROLEUM LIMITED FOR
OFFSHORE BLOCK LB 14."
RESENTATIVES, R.L.
2009
2009
FOURTH SESSION OF THE FIFTY SECOND
LEGISLATURE OF THE REPUBLIC OF LIBERIA FOURTH SESSION OF THE . FIFTY SECOND
HOUSE'S ENGROSSED BILL NO.16 ENTITLED: LEGISLATURE OF THE REPUBLIC OF LIBERIA
HOUSE’S ENGROSSED BILL NO.16 ENTITLED:
-AN ACT TO RATIFY THE PRODUCTION SHARING
CONTRACT BETWEEN THE NATIONAL OIL “AN ACT TO RATIFY' THE PRODUCTION SHARING
COMPANY OF LIBERIA REPRESENTING THE CONTRACT BETWEEN THE NATIONAL OIL
REPUBLIC OF LIBERIA AND ORANTO PETROLEUM COMPANY OF LIBERIA REPRESENTING THE
LIMITED FOR OFFSHORE BLOCK LB 14.” REPUBLIC OF LIBERIA AND ORANTO PETROLEUM
On motion. Bill read. On motion, the Bill was adopted on its LIMITED FOR OFFSHORE BLOCK LB 14.”
first reading and sent to Committee room on TJun-sday. July 16. On motion. Bill read. On motion, the Bill was adopted on its
2009 @ 12:25 GMT. first reading and sent to Committee room on Tnursday, Julv 23,
On motion. Bill taken from committee room for its second 2009 @11:05 GMT.
reading. On motion, under the suspension of the rule, the On motion. Bill taken from committee room for its second
second reading of the Bill constituted the third reading and the reading. On motion, under the suspension of the mle. the
Bill was adopted, passed into the full force of law. and ordered second reading of the Bill constituted the third-reading and the
engrossed today Tuesday. July 21,2009 @ 16:00 GMT. Bill was adopted, passed into the full force*of law, and ordered
REPUBLIC OF LIBERIA
THE HONORABLE HOUSE OF REPRESENTATIVES
Capitol Building
PO Box 9005
Monrovia. Libena
2009
FOURTH SESSION OF THE FI KI*Y-SECOND LEGISLATURE OF
THE REPUBLIC OF LIBERIA
SCHEDULE OF THE HOUSE’S ENROLLED BILL NO. 15 ENTITLED:
AN AC r TO RATH Y THE PRODUCTION SHARING CONTRACT BETWEEN
NATIONAL OIL COMPANY OF LIBERIA REPRESENTING THE REPUBLIC
OF LIBERIA AND ORANTO PETROLEUM LIMITED FOR OFFSHORE
BLOCK LB 14."
PRESENTED TO THE PRESIDENT OF THE REPUBLIC OF LIBERIA
FOR EXECUTIVE APPROVAL
RECEIVED THIS ^ DAY OF _A.D. 2009
AT THE HOUR OF ///* •
[Signature]
THE PRESIDENT OF THE REPUBLIC OF LIBERIA