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TABLE OF CONTENTS
PREAMBLE
SECTION I SCOPE AND DEFINITIONS
1.1 Scope
1.2 Definitions
SECTION H TERM, SURRENDER AND TERMINATION
2.1 Term
2.2 Exploration Period
2.3 Surrender during Exploration Period
2.4 Development and Production Period
2.5 Termination
SECTION HI GENERAL RIGHTS AND OBLIGATIONS OF THE CONTRACTOR
3.1 Rights of the Contractor
3.2 Obligations in respect of the conduct of Petroleum Operations
3.3 Abandonment and disposal of assets
3.4 Records and reports of Petroleum Operations
3.5 Joint liability and indemnity
3.6 Local employment, training and preference
3.7 Environmental and safety measures
3.8 Registration and office
SECTION IV GENERAL RIGHTS AND OBLIGATIONS OF THE GOVERNMENT
AND THE MINISTER
4.1 Rights of the Government and the Minister
4.2 Obligations of the Government and the Minister
SECTION V WORK AND EXPENDITURE OBLIGATIONS AND BUDGET
5.1 Exploration
5.2 Bank guarantee
5.3 Discovery and appraisal
5.4 Development and production
SECTION VI GOVERNMENT PARTICIPATION
6.1. Government participation
SECTION VH COST RECOVERY AND PRODUCTION SHARING
7.1. Cost recovery
7.2 Production sharing
SECTION Vffl PRODUCTION RATE AND MARKETING
8.1. Production rate
8.2. Marketing
SECTION IX UNITIZATION
9.1 Unitization
TABLE OF CONTENTS
PREAMBLE
SECTION I SCOPE AND DEFINITIONS
1.1 Scope
1.2 Definitions
SECTION II TERM, SURRENDER AND TERMINATION
2.1 Term
2.2 Exploration Period
2.3 Surrender during Exploration Period
2.4 Development and Production Period
2.5 Termination
SECTION III GENERAL RIGHTS AND OBLIGATIONS OF THE CONTRACTOR
3.1 Rights of the Contractor
3.2 Obligations in respect of the conduct of
Petroleum Operations
3.3 Abandonment and disposal of assets
3.4 Records and reports of Petroleum Operations
3.5 Joint liability and indemnity
3.6 Local employment, training and preference
3.7 Environmental and safety measures
3.8 Registration and office
SECTION IV GENERAL RIGHTS AND OBLIGATIONS OF THE GOVERNMENT AND THE MINISTER
4.1 Rights of the Government and the Minister
4.2 Obligations of the Government and the
Minister
SECTION V WORK AND EXPENDITURE OBLIGATIONS AND BUDGET
5.1 Exploration
5.2 Bank guarantee
5.3 Discovery and appraisal
5.4 Development and production
SECTION VI GOVERNMENT PARTICIPATION
6.1 Government participation
SECTION VII COST RECOVERY AND PRODUCTION SHARING
7.1 Cost recovery
7.2 Production sharing
SECTION VIII PRODUCTION RATE AND MARKETING
8.1 Production rate
8.2 Marketing
SECTION IX UNITIZATION
9.1 Unitization
21ETHIOPIA
1986 Model Production Sharing Petroleum Agreement Between The Government Of Ethiopia & International CompaniesETHIOPIA
1986 Model Production Sharing Petroleum Agreement Between The Government Of Ethiopia & International CompaniesSECTION X DOMESTIC CONSUMPTION
10.1 Domestic consumption
SECTION XI RENTALS, ROYALTIES AND BONUSES
11.1 Annual rentals
11.2 Royalties
11.3 Production bonuses
SECTION xn VALUATION AND MEASUREMENT
12.1 Valuation
12.2 Measurement
SECTION xm NATURAL GAS
13.1 Non-associated Natural Gas
13.2 Associated Natural Gas
13.3 Other provisions
SECTION XIV FINANCIAL AND FISCAL MATTERS AND ACCOUNTING
14.1 Finances
14.2 Taxation
14.3 Foreign exchange control
14.4 Accounting
SECTION XV IMPORTS AND EXPORTS
15.1 Imports
15.2 Exports
SECTION XVI GOVERNING LAW AND DISPUTES
16.1 Governing law
16.2 Arbitration
16.3 Force Majeure
SECTION XVH GENERAL
17.1 Confidentiality
17.2 Waiver
17.3 Notice
17.4 Headings and amendments
APPENDICES
I ACCOUNTING PROCEDURES
H CONTRACT AREA
SECTION X DOMESTIC CONSUMPTION
10.1 Domestic consumption
SECTION XI RENTALS, ROYALTIES AND BONUSES
11.1 Annual rentals
11.2 Royalties
11.3 Production bonuses
SECTION XII VALUATION AND MEASUREMENT
12.1 Valuation
12.2 Measurement
SECTION XIII NATURAL GAS
13.1 Non-associated Natural Gas
13.2 Associated Natural Gas
13.3 Other provisions
SECTION XIV FINANCIAL AND FISCAL MATTERS AND ACCOUNTING
14.1 Finances
14.2 Taxation
14.3 Foreign exchange control
14.4 Accounting
SECTION XV IMPORTS AND EXPORTS
15.1 Imports
15.2 Exports
SECTION XVI GOVERNING LAW AND DISPUTES
16.1 Governing law
16.2 Arbitration
16.3 Force Majeure
SECTION XVII GENERAL
17.1 Confidentiality
17.2 Waiver
17.3 Notice
17.4 Headings and amendments
APPENDICES
I ACCOUNTING PROCEDURES
II CONTRACT AREA
22MODEL PRODUCTION SHARING
PETROLEUM AGREEMENT
THIS AGREEMENT, made and entered into on this _____ day of ______ 198_ by and between:
THE GOVERNMENT OF SOCIALIST ETHIOPIA (herein referred to as the "Government"), represented for the purposes of this Agreement by the Minister of Mines and Energy (herein referred to as the "Minister"),
and
_____, a corporation duly organized and existing under the laws of _____ (herein referred to as the "Contractor"), represented for the purposes of this Agreement by ______, its ________.
The Government and the Contractor are herein referred to individually as "Party" or collectively as "Parties".
WITHNESSETH:
WHEREAS, the title to all Petroleum existing in its natural condition on, in or under the Territory of Ethiopia is vested in the State and the People of Ethiopia; and
WHEREAS, the Government wishes to promote the exploration, development and production of the Petroleum on, in or under the Contract Area and the Contractor desires to join and assist the Government in the exploration, development and production of potential Petroleum within the Contract Area; and
WHEREAS, the Contractor represents that it has the financial ability, technical competence and professional skills to carry out the Petroleum Operations herein described; and
WHEREAS, the Petroleum Operations Proclamation No. ___/ 1986 provides that a Petroleum Agreement may be entered into between the Government and any person;
NOW, THEREFORE, the Government hereby grants to the Contractor in consideration of the payments, covenants and agreements contained herein on the part of the Contractor, the sole right to explore, develop and produce Petroleum in the Contract Area and to exercise other rights granted by this Agreement, and, further in consideration of the undertakings and covenants contained herein, the Parties agree as follows:
23MODEL PRODUCTION SHARING
PETROLEUM AGREEMENT
THIS AGREEMENT, made and entered into on this _____ day of ______ 198_ by and between:
THE GOVERNMENT OF SOCIALIST ETHIOPIA (herein referred to as the "Government"), represented for the purposes of this Agreement by the Minister of Mines and Energy (herein referred to as the "Minister"),
and
_____, a corporation duly organized and existing under the laws of _____ (herein referred to as the "Contractor"), represented for the purposes of this Agreement by ______, its ________.
The Government and the Contractor are herein referred to individually as "Party" or collectively as "Parties".
WITHNESSETH:
WHEREAS, the title to all Petroleum existing in its natural condition on, in or under the Territory of Ethiopia is vested in the State and the People of Ethiopia; and
WHEREAS, the Government wishes to promote the exploration, development and production of the Petroleum on, in or under the Contract Area and the Contractor desires to join and assist the Government in the exploration, development and production of potential Petroleum within the Contract Area; and
WHEREAS, the Contractor represents that it has the financial ability, technical competence and professional skills to carry out the Petroleum Operations herein described; and
WHEREAS, the Petroleum Operations Proclamation No. ___/ 1986 provides that a Petroleum Agreement may be entered into between the Government and any person;
NOW, THEREFORE, the Government hereby grants to the Contractor in consideration of the payments, covenants and agreements contained herein on the part of the Contractor, the sole right to explore, develop and produce Petroleum in the Contract Area and to exercise other rights granted by this Agreement, and, further in consideration of the undertakings and covenants contained herein, the Parties agree as follows:
23
SECTION I: SCOPE AND DEFINITIONS
1.1. Scope
This Agreement is a production sharing agreeing and it shall cover
Petroleum Operations in the Contract Area. The Contract Area is described
and delineated in Appendix II hereto and is periodically adjusted in
accordance with the provisions of this Agreement. During the term of this
Agreement all Petroleum production resulting from the conduct of
Petroleum Operations shall be divided between the Parties in accordance
with the provisions of Sections VI through XIII hereof.
1.2. Definitions
In this Agreement, unless the context clearly indicates otherwise words in
the singluar include the plural, the plural indicates the singular, and words
that are not defined herein, but that are defined in the Petroleum
Proclamation, shall have the meanings set forth in that law.
1.2.1. "Accounting Procedures" means the accounting procedures and
reporting requirements set forth in Appendix I hereto.
1.2.2. "Affiliate" of any specified person means any person directly or
indirectly controlling or controlled by or under direct or indirect
common control of another person. For the purposes of this
definition, "control" means the power to direct, administer, or
dictate the management and policies of such person or the
ownership of fifty per cent (50 %) or more of voting rights in such
person; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
1.2.3. "Appraisal Area" means the area within the Contract Area subject
to an appraisal work programme and budget as set forth in Section
5.3.2.
1.2.4. "Associated Natural Gas" means Natural Gas which exists in a
reservoir in solution with Crude Oil or, as gas-cap gas, in contact
with Crude Oil, and is or could be produced with Crude Oil.
1.2.5. "Barrel" means a quantity consiting of 158.984 litres at standard
atmospheric pressure of 1.01325 bar and temperature of fifteen
degrees Celsius (15° C).
1.2.6. "Calendar Quarter" means a period of three (3) consecutive months
beginning January 1, April 1, July 1, or October 1 and ending March
31, June 30, September 30 and December 31, respectively.
34
SECTION I: SCOPE AND DEFINITIONS
1.1. Scope
This Agreement is a production sharing agreement and it shall cover
Petroleum Operations in the Contract Area. The Contract Area is described
and delineated in Appendix II hereto and is periodically adjusted in
accordance with the provisions of this Agreement. During the term of this
Agreement all Petroleum production resulting from the conduct of
Petroleum Operations shall be divided between the Parties in accordance
with the provisions of Sections VI through XIII. hereof.
1.2. Definitions
In this Agreement, unless the. context clearly-. iqdicates otherwise, words in
the singular include the plt4r41i the plural indicates the singular, and words
that are not defined herein, but that'; ar6 defined in the Petroleum
Proclamation, shall have the meanitigs'set'forth in that law.
1.2.1. "Accounting Procedure's."-, rheans the accounting procedures and
reporting requirements set forth in Appendix I hereto.
1.2.2. "Affiliate” of any" specified person means any person directly or
indirectly controlling or controlled by or under direct or indirect
common control of another person. For the purposes of this
definition, "control" means the power to direct, administer, or
dictate the management and policies of such person or the
ownership of fifty per cent (50 %) or more of voting rights in such
person; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
1.2.3. "Appraisal Area" means the area within the Contract Area subject
to an appraisal work programme and budget as set forth in Section
5.3.2.
1.2.4. "Associated Natural Gas" means Natural Gas which exists in a
reservoir in solution with Crude Oil or, as gas-cap gas, in contact
with Crude Oil, and is or could be produced with Crude Oil.
1.2.5. "Barrel" means a quantity consisting of 158.9S4 litres at standard
atmospheric pressure of 1.01325 bar and temperature of fifteen
degrees Celsius (15°C).
1.2.6. "Calendar Quarter" means a period of three (3) consecutive months
beginning January 1, April 1, July 1, or October 1 and ending March
31, June 30, September 30 and December 31, respectively.
1.2.7. "Calendar Year" means a period of twelve (12) months commencing January 1 and ending the following December 31, according to the Gregorian Calendar.
1.2.8. "Commercial Discovery" means a discovery or an accumulation of discoveries of Petroleum that, in the judgment of the Contractor, can be demonstrated to be producible commercially based on consideration of all pertinent operating and financial data as set forth in Section 5.3.5.
1.2.9. "Contract Area" means the area described and delineated in Appendix II hereto as adjusted in accordance with the provisions of this Agreement regarding term, surrender and termination.
1.2.10. "Contractor" means the Contractor, its successors or any assignee or assignees of any interest of the Contractor.
1.2.11. "Crude Oil" means all hydrocarbons regardless of gravity which are produced at the wellhead in a liquid state at atmospheric pressure, asphalt and ozokerites and the liquid hydrocarbons known as distillate or condensate obtained from Natural Gas by condensation or extraction.
1.2.12. "Development Area" means an area within the Contract Area containing a Commercial Discovery as set forth in Section 5.4.3.
1.2.13. "Development and Production Period" means the period set forth in Sections 2.1 and 2.4.
1.2.14. "Effective Date" means the date this Agreement is signed by the Minister and the Contractor.
1.2.15. "Exploration Period" means the period set forth in Sections 2.1, 2.2 and 2.3.
1.2.16. "Minister" means the Minister of Mines and Energy or any successors in jurisdiction.
1.2.17. "Natural Gas" means hydrocarbons that are in a gaseous phase at atmospheric conditions of temperature and pressure including wet mineral gas, dry mineral gas, casing-head gas and residue gas remaining after the extraction or separation of liquid hydrocarbons from wet gas, and non-hydrocarbon gas produced in association with liquid or gaseous hydrocarbons.
1.2.18 "Non-associated Natural Gas" means Natural Gas other than Associated Natural Gas.
251.2.7. "Calendar Year" means a period of twelve (12) months commencing January 1 and ending the following December 31, according to the Gregorian Calendar.
1.2.8. "Commercial Discovery" means a discovery or an accumulation of discoveries of Petroleum that, in the judgment of the Contractor, can be demonstrated to be producible commercially based on consideration of all pertinent operating and financial data as set forth in Section 5.3.5.
1.2.9. "Contract Area" means the area described and delineated in Appendix II hereto as adjusted in accordance with the provisions of this Agreement regarding term, surrender and termination.
1.2.10. "Contractor" means the Contractor, its successors or any assignee or assignees of any interest of the Contractor.
1.2.11. "Crude Oil" means all hydrocarbons regardless of gravity which are produced at the wellhead in a liquid state at atmospheric pressure, asphalt and ozokerites and the liquid hydrocarbons known as distillate or condensate obtained from Natural Gas by condensation or extraction.
1.2.12. "Development Area" means an area within the Contract Area containing a Commercial Discovery as set forth in Section 5.4.3.
1.2.13. "Development and Production Period" means the period set forth in Sections 2.1 and 2.4.
1.2.14. "Effective Date" means the date this Agreement is signed by the Minister and the Contractor.
1.2.15. "Exploration Period" means the period set forth in Sections 2.1, 2.2 and 2.3.
1.2.16. "Minister" means the Minister of Mines and Energy or any successors in jurisdiction.
1.2.17. "Natural Gas" means hydrocarbons that are in a gaseous phase at atmospheric conditions of temperature and pressure including wet mineral gas, dry mineral gas, casing-head gas and residue gas remaining after the extraction or separation of liquid hydrocarbons from wet gas, and non-hydrocarbon gas produced in association with liquid or gaseous hydrocarbons.
1.2.18 "Non-associated Natural Gas" means Natural Gas other than Associated Natural Gas.
251.2.19. "Operating Agreement" means the agreement set
forth in Section 6.1.
1.2.20. "Participating Interest" means the Government's
interest in Petroleum Operations for a
particular Development Area as set forth in
Section 6.1.
1.2.21 "Petroleum Proclamation" means the "Petroleum
Operations Proclamation No._/1986".
1.2.22 "Petroleum" means Crude Oil and Natural Gas and
excludes hydrocarbons produced from oil shales
or tar sands.
1.2.23 "Petroleum Operations" means the operations
authorized under this Agreement, related to the
exploration, development, extraction,
production, field separation, treatment (but
excluding refining), storage, transportation of
Petroleum up to the point of exportation or
entry into a system for domestic consumption,
and marketing of Petroleum, excluding, refining
of Crude Oil, but including the processing of
Natural Gas.
1.2.24 "Petroleum Operations Costs" means the costs
and expenses incurred by the Contractor for the
purposes of conducting Petroleum Operations
under this Agreement, as set forth in Appendix I
hereto.
1.2.25 "State" means the'State of Ethiopia.
1.2.26 "Subcontractor" means any person with whom the
Contractor establishes a relationship for the
provision of services required for performance
under this Agreement.
261.2.19. "Operating Agreement" means the agreement set
forth in Section 6.1.
1.2.20. "Participating Interest" means the Government's
interest in Petroleum Operations for a
particular Development Area as set forth in
Section 6.1.
1.2.21 "Petroleum Proclamation" means the "Petroleum
Operations Proclamation No._/1986".
1.2.22 "Petroleum" means Crude Oil and Natural Gas and
excludes hydrocarbons produced from oil shales
or tar sands.
1.2.23 "Petroleum Operations" means the operations
authorized under this Agreement, related to the
exploration, development, extraction,
production, field separation, treatment (but
excluding refining), storage, transportation of
Petroleum up to the point of exportation or
entry into a system for domestic consumption,
and marketing of Petroleum, excluding, refining
of Crude Oil, but including the processing of
Natural Gas.
1.2.24 "Petroleum Operations Costs" means the costs
and expenses incurred by the Contractor for the
purposes of conducting Petroleum Operations
under this Agreement, as set forth in Appendix I
hereto.
1.2.25 "State" means the'State of Ethiopia.
1.2.26 "Subcontractor" means any person with whom the
Contractor establishes a relationship for the
provision of services required for performance
under this Agreement.
26SECTION II: TERM, SURRENDER AND TERMINATION
2.1 Term
2.1.1. This Agreement shall consist of an Exploration Period, and a Development and Production Period, both of which may run concurrently.
2.1.2. This Agreement shall remain in effect during the initial term of the Exploration Period and all extensions thereof and shall automatically terminate in its entirety at the end of the Exploration Period, except as to any Development Area.
2.1.3. After expiration of the-Exploration Period, this Agreement shall remain in effect as to each Development Area during the Development and Production Period, for the Development Area and shall automatically terminate with respect to each Development Area upon the expiration of the Development and Production Period for the relevant Development Area.
2.2. Exploration Period
2.2.1. The initial term of the Exploration Period provided by this Agreement shall be ____________ (______) years, commencing on the Effective Date hereof.
2.2.2. The Contractor shall begin Petroleum Operations within ninety (90) days after the Effective Date. Petroleum Operations shall be deemed to have begun when the Contractor has actually commenced the movement of personnel and equipment to Ethiopia for the purposes of conducting Petroleum Operations and, specifically, on the date of departure for a direct Ethiopia destination of plane or vessel transporting such personnel or equipment or both.
2.2.3. The Exploration Period shall have a first extension and a second extension, following the initial term, for successive terms of _________ (______) years and _________ (_______) years, respectively, each upon the Contractor's application to the Minister at least sixty (60) days prior to the termination date of the current term of the Exploration Period, provided that the Contractor has fulfilled the exploration work and expenditure obligations set forth in Section 5.1 for the current term under this Agreement.
27SECTION II: TERM, SURRENDER AND TERMINATION
2.1 Term
2.1.1. This Agreement shall consist of an Exploration Period, and a Development and Production Period, both of which may run concurrently.
2.1.2. This Agreement shall remain in effect during the initial term of the Exploration Period and all extensions thereof and shall automatically terminate in its entirety at the end of the Exploration Period, except as to any Development Area.
2.1.3. After expiration of the-Exploration Period, this Agreement shall remain in effect as to each Development Area during the Development and Production Period, for the Development Area and shall automatically terminate with respect to each Development Area upon the expiration of the Development and Production Period for the relevant Development Area.
2.2. Exploration Period
2.2.1. The initial term of the Exploration Period provided by this Agreement shall be ____________ (______) years, commencing on the Effective Date hereof.
2.2.2. The Contractor shall begin Petroleum Operations within ninety (90) days after the Effective Date. Petroleum Operations shall be deemed to have begun when the Contractor has actually commenced the movement of personnel and equipment to Ethiopia for the purposes of conducting Petroleum Operations and, specifically, on the date of departure for a direct Ethiopia destination of plane or vessel transporting such personnel or equipment or both.
2.2.3. The Exploration Period shall have a first extension and a second extension, following the initial term, for successive terms of _________ (______) years and _________ (_______) years, respectively, each upon the Contractor's application to the Minister at least sixty (60) days prior to the termination date of the current term of the Exploration Period, provided that the Contractor has fulfilled the exploration work and expenditure obligations set forth in Section 5.1 for the current term under this Agreement.
27In order to enable the Contractor to complete drilling, logging,
testing or plugging of any exploratory well which is actually being
drilled, logged, tested or plugged at the end of the second extension
of the Exploration Period, the Minister shall grant a further
extension to such second extension for such a time as he determines
may be reasonable, which in any event shall not extend the term of
the second extension by more than six (6) months.
2.2A, In order to expeditiously complete the evaluation of a discovery, the
Minister shall extend the term of the Exploration Period for an
additional _ (_) months term beyond the second extension
period for each area designated as an Appraisal Area upon the
Contractor's submission to the Minister, .at least sixty (60) days prior
to the termination date of the second-extension, of an appraisal
work programme and budget under'S.e'ction'' 5.3.2; provided, however,
that the Contractor has fulfilled'"- the exploration work and
expenditure obligations set forth.in Sectipn; 5:1 for the curent term
under this Agreement. Thereafter, if the Contractor shall determine
that an Appraisal Area, does not contain a Commercial Discovery
and if no further'..extension is.-granted under Section 2.2.5, the
Exploration Period for the relevant Appraisal Area shall terminate.
2.2.5. Upon justification by ..th'e-.:-.Contractor and in addition to the
extensions set forth above,'the Minister may extend the term of the
Exploration Period in. respect to the Appraisal Area of a Natural Gas
discovery for a period up to_ (_) years for the purposes of
further appraising and evaluating the Natural Gas discovery and
establishing its economic viability as well as preparing a preliminary
development scheme of a Natural Gas project.
2.3. Surrender during Exploration Period
2.3.1. At or prior to the end of the initial term of the Exploration Period
the Contractor shall surrender at least_per cent (_) of the
original Contract Area.
2.3.2. At or prior to the end of the first extension of the Exploration
Period the Contractor shall surrender at least_per cent (_)
of the original Contract Area.
2.3.3. When calculating the surrender obligation under Sections 2.3.1 and
2.3.2, each area then designated as a Development Area shall be
deducted from the original Contract Area.
In order to enable the Contractor to complete
drilling, logging, testing or plugging of any
exploratory well which is actually being drilled,
logged, tested or plugged at the end of the
second extension of the Exploration Period, the
Minister shall grant a further extension to such
second extension for such a time as he determines
may be reasonable, which in any event shall not
extend the term of the second extension by more
than six (6) months.
2.2.4. In order to expeditiously complete the evaluation
of a discovery, the Minister shall extend the
term of the Exploration Period for an additional
_____ (__) months term beyond the second
extension period for each area designated as an
Appraisal Area upon the Contractor's submission
to the Minister, at least sixty (60) days prior
to the termination date of the second extension,
of an appraisal work programme and budget under
Section 5.3.2; provided, however, that the
Contractor has fulfilled the exploration work and
expenditure obligations set forth in Section 5.1
for the curent term under this Agreement.
Thereafter, if the Contractor shall determine
that an Appraisal Area does not contain a
Commercial Discovery and if no further extension
is granted under Section 2.2.5, the Exploration
Period for the relevant Appraisal Area shall
terminate.
2.2.5. Upon justificaiton by the Contractor and in
addition to the extensions set forth above, the
Minister may extend the term of the Exploration
Period in respect to the Appraisal Area of a
Natural Gas discovery for a period up to ____
(__) years for the purposes of further appraising
and evaluating the Natural Gas discovery and
establishing its economic viability as well as
preparing a preliminary development scheme of a
Natural Gas project.
2.3. Surrender during Exploration Period
2.3.1. At or prior to the end of the initial term of the
Exploration Period the Contractor shall surrender
at least ___ per cent (___) of the original
Contract Area.
2.3.2. At or prior to the end of the first extension of
the Exploration Period the Contractor shall
surrender at least ____ per cent (___) of the
original Contract Area.
2.3.3. When calculating the surrender obligation under
Sections 2.3.1 and 2.3.2, each area then
designated as a Development Area shall be deducted
the original Contract Area.
282.3.4. At or prior to the end of the second extension to the Exploration Period, the Contractor shall surrender the remainder of the original Contract Area which is not included within an Appraisal Area or Development Area.
2.3.5. The Contractor shall have the right to surrender at any time all or part of the Contract Area not designated as a Development Area, upon giving the Minister prior written notice.
2.3.6. The location and configuration of any area to be surrendered by the Contractor under this Section shall be submitted for approval to the Minister which approval shall not be unreasonably withheld, sixty (60) days prior to the date of each surrender and shall consist, as far as practicable, of reasonably contiguous area in order to facilitate further exploration.
2.3.7. No surrender shall reduce the minimum amount of Contractor's exploration work and expenditure obligations or the related bank guarantee in respect thereof as provided in Sections 5.1 and 5.2.
2.3.8. Any surrender under Section 2.3.5 shall be credited toward the Contractor's next surrender obligation under Sections 2.3.1 and 2.3.2.
2.4. Development and Production Period
2.4.1. The term of the Development and Production Period provided for by this Agreement in respect of a Commercial Discovery shall commence on the date of adoption of the development plan as set forth in Section 5.4.5 and shall continue until December 31 of the ___________ (_______) Calendar Year.
2.4.2. If, at the expiration of the Development and Production Period for any Development Area, commercial production remains economically feasible, the Minister shall, at the Contractor's request, enter into good faith negotiations regarding an extension of the Development and Production Period.
2.4.3. If, subsequent to the designation of the area encompassing a Commercial Discovery as a Development Area, the extent of the area encompassing the Commercial Discovery is demonstrated to be different than that designated in the development plan under Section 5.4.5, the Development Area shall be adjusted
292.3.4. At or prior to the end of the second extension to the Exploration Period, the Contractor shall surrender the remainder of the original Contract Area which is not included within an Appraisal Area or Development Area.
2.3.5. The Contractor shall have the right to surrender at any time all or part of the Contract Area not designated as a Development Area, upon giving the Minister prior written notice.
2.3.6. The location and configuration of any area to be surrendered by the Contractor under this Section shall be submitted for approval to the Minister which approval shall not be unreasonably withheld, sixty (60) days prior to the date of each surrender and shall consist, as far as practicable, of reasonably contiguous area in order to facilitate further exploration.
2.3.7. No surrender shall reduce the minimum amount of Contractor's exploration work and expenditure obligations or the related bank guarantee in respect thereof as provided in Sections 5.1 and 5.2.
2.3.8. Any surrender under Section 2.3.5 shall be credited toward the Contractor's next surrender obligation under Sections 2.3.1 and 2.3.2.
2.4. Development and Production Period
2.4.1. The term of the Development and Production Period provided for by this Agreement in respect of a Commercial Discovery shall commence on the date of adoption of the development plan as set forth in Section 5.4.5 and shall continue until December 31 of the ___________ (_______) Calendar Year.
2.4.2. If, at the expiration of the Development and Production Period for any Development Area, commercial production remains economically feasible, the Minister shall, at the Contractor's request, enter into good faith negotiations regarding an extension of the Development and Production Period.
2.4.3. If, subsequent to the designation of the area encompassing a Commercial Discovery as a Development Area, the extent of the area encompassing the Commercial Discovery is demonstrated to be different than that designated in the development plan under Section 5.4.5, the Development Area shall be adjusted
29(f) if Petroleum Operations are interrupted for more than one
hundred eight (180) days.
2.5.3. The period of notice with respect to a termination event under
Section 2.5.2 (a) above shall be thirty (30) days, and with respect to
any other termination event specified in Section 2.5.2 shall be
ninety (90) days. If, however, the Contractor remedies the
termination event within the period of the notice, the Minister shall
withdraw the notice to the same effect as if the termination event
had not occurred under this Agreement, unless a termination event
of the same type has previously occurred under this Agreement, in
which case the Minister may, but is not required to, withdraw the
notice.
2.5.4. If a termination event specified in Section 2.5.2 is the result of
Force Majeure as set forth in Section., 16.3^ then neither occurrence
of the termination event nor the'Cohtjriuance of. it-.unremedied shall
result in termination of this-Agreement for so\iong as such Force
Majeure continues.
2.5.5. When this Agreement \is tisrminated-.or expires, in whole or in part,
the Contractor shrill..‘conclude Petroleum Operations in the area as
to Which this Agreement has., terminated or expired in an orderly
manner calculated to miniinfee harm or loss to the State or any
person. Y\
In the event of surrender of an Appraisal Area or a Development
Area or termination of this Agreement, the Minister may require
the Contractor to continue, for the account of the Government,
Petroleum Operations for properties currently producing or capable
of producing Petroleum until the right and responsibility for
continuing such operations have been transferred to another person
or the Government or an agency thereof but for a period not to
exceed one hundred eighty (180) days after the date this Agreement
would otherwise terminate with respect to all or any portion of the
Contract Area concerned; provided, however, that the Government:
(a) shall bear all costs, risks and expenses of Petroleum
Operations during such take-over period to the extent this
period extends beyond the date that this Agreement would
otherwise terminate and shall be entitled during this same
period to all the production and proceeds from the sale
thereof;
(b) shall reimburse the Contractor within thirty (30) days after
the submission of an invoice specifying the costs and expenses
of such operations during such take-over period, such invoices
to be submitted no more than every thirty (30) days.
3 0
(f) if Petroleum Operations are interrupted for more than one hundred eight (180) days.
2.5.3. The period of notice with respect to a termination event under Section 2.5.2 (a) above shall be thirty (30) days, and with respect to any other termination event specified in Section 2.5.2 shall be ninety (90) days. If, however, the Contractor remedies the termination event within the period of the notice, the Minister shall withdraw the notice to the same effect as if the termination event had not occurred under this Agreement, unless a termination event of the same type has previously occurred under this Agreement, in which case the Minister may, but is not required to, withdraw the notice.
2.5.4. If a termination event specified in Section 2.5.2 is the result of Force Majeure as set forth in Section 16.3, then neither occurrence of the termination event nor the continuance of it unremedied shall result in termination of this Agreement for so long as such Force Majeure continues.
2.5.5. When this Agreement is terminated or expires, in whole or in part, the Contractor shall conclude Petroleum Operations in the area as to which this Agreement has terminated or expired in an orderly manner calculated to minimize harm or loss to the State or any person.
In the event of surrender of an Appraisal Area or a Development Area or termination of this Agreement, the Minister may require the Contractor to continue, for the account of the Government, Petroleum Operations for properties currently producing or capable of producing Petroleum until the right and responsibility for continuing such operations have been transferred to another person or the Government or an agency thereof but for a period not to exceed one hundred eighty (180) days after the date this Agreement would otherwise terminate with respect to all or any portion of the Contract Area concerned; provided, however, that the Government:
(a) shall bear all costs, risks and expenses of Petroleum Operations during such take-over period to the extent this period extends beyond the date that this Agreement would otherwise terminate and shall be entitled during this same period to all the production and proceeds from the sale thereof;
(b) shall reimburse the Contractor within thirty (30) days after the submission of an invoice specifying the costs and expenses of such operations during such take-over period, such invoices to be submitted no more than every thirty (30) days.
30SECTION III: GENERAL RIGHTS AND OBLIGATION OF THE CONTRACTOR
3.1 Rights of the Contractor
3.1.1. The Contractor shall:
(a) have the sole and exclusive right to conduct Petroleum Operations in the Contract Area in accordance withthe provisions of this Agreement;
(b) have the right to enter upon the Contrac Area and conduct Petroleum Operations there, but notwithstanding this provision and the provisions of Section 3.1.1(a):
(i) permission may be granted to other persons to explore for, develop and produce minerals in the Contract Area other than Petroleum, so long as the activities of such persons do not unreasonably interfere with Petroleum Operations; and
(ii) easments and rights of ways in the Contract Area of reasonable scope and duration may be granted to other persons for the benefit of land adjacent to the Contract Area.
(c) subject to the approval of the Minister, which approval shall not be unreasonably withheld, have access over the Territory of Ethiopia for the purpose of constructing, laying, operating, and maintaining both onshore and offshore pipelines, cables and any other facilities required for Petroleum Operations;
(d) have the right, subject to approval of the minister, to use water in the Contract Area for operational purposes, but the Contractor shall not deprive any land, domestic settlement or livestock watering place of the water supply to which they are accustomed;
(e) have the right for the purposes of Petroleum Operations to use gravel, sand, clay, and stone in the Contract Area subject to the limitations set forth in Section 3.1.1 (b); and
3 SECTION HI: GENERAL RIGHTS AND
OBLIGATIONS OF THE CONTRACTOR
3.1. Rights of the Contractor
3.1.1. The Contractor shall:
(a) have the sole and exclusive right to conduct Petroleum Operations
in the Contract Area in accordance..Vvith the provisions of this
Agreement;
(b) have the right to enter";.u'p6'r> the Contract Area and conduct
Petroleum Operations vtherdy-but notwithstanding this provision and
the provisions of Section 3.1.1(a):......
(i) permission may be granted ‘ to other persons to explore for,
develop and produce-.-mlperals in the Contract Area other than
Petroleum, so long'-; as the activities of such persons do not
unreasonably irttecfere with Petroleum Operations; and
(ii) easements and rights of ways in the Contract Area of
reasonable scope and duration may be granted to other persons
for the benefit of land adjacent to the Contract Area;
(c) subject to the approval of the Minister, which approval shall not be
unreasonably withheld, have access over the Territory of Ethiopia
for the purpose of constructing, laying, operating and maintaining
both onshore and offshore pipelines, cables and any other facilities
required for Petroleum Operations;
(d) have the right, subject to approval of the Minister, to use water in
the Contract Area for operational purposes, but the Contractor shall
not deprive any land, domestic settlement or livestock watering
place of the water supply to which they are accustomed;
(e) have the right for the purposes of Petroleum Operations to use
gravel, sand, clay and stone in the Contract Area subject to the
limitations set forth in Section 3.1.1 (b); and
(f) have the right, subject to the approval of
the concerned authorities, to install,
operate and use telecommunication facilities.
3.1.2. The Contractor shall not carry on Petroleum
Operations on any part of the land in the
Contract Area designated for a public purpose but
may have surface access over, on and through such
land for the purpose of conducting Petroleum
Operations to the extent such access does not
interfere with the public purpose.
3.1.3. The Contractor shall have the right to sell,
assign, transfer, convey or otherwise dispose of
all or any part of the rights and interests under
this Agreement to any Affiliate or other person
with the prior written consent of the Minister,
which consent shall not be unreasonably withheld.
3.2. Obligations in respect of the conduct of Petroleum
Operations
3.2.1. The Contractor shall carry out the Petroleum
Operations within the scope of this Agreement
diligently and In accordance with generally
accepted international petroleum industry
practice. The Contractor and its employees shall
perform no business activities in Ethiopia
outside the scope of this Agreement without
the prior written consent of the Minister.
3.2.2. Specifically, the Contractor shall in accordance
with generally accepted international petroleum
industry practice:
(a) ensure that all machinery, plant, equipment
and installations used in Petroleum
Operations are of proper and accepted
construction and are kept in good repair;
(b) ensure that all exploratory wells with
significant shows of Petroleum are properly
tested;
(c) use the resources of the Contract Area as
productively as practicable, prevent damage
to producing formations and ensure that
Petroleum discovered, mud or any other fluids
or substances do not escape or waste;
(d) prevent damage to Petroleum and water bearing
strata that are adjacent to a producing
formation or formations and prevent water
from entering any strata bearing Petroleum,
except where water injection methods are used
for secondary recovery operations or are
intended otherwise in accordance with
generally accepted international petroleum
industry practice;
32(f) have the right, subject to the approval of the concerned
authorities, to install, operate and use telecommunication
facilities*
3.1.2. The Contractor shall not carry on Petroleum Operations on any part
of the land in the Contract Area designated for a public purpose but
may have surface access over, on and through such land for the
purpose of conducting Petroleum Operations to the extent such
access does not interfere with the public purpose.
3.1.3. The Contractor shall have the right to sell, assign, transfer, convey
or otherwise dispose of all or any part of the rights and interests
under this Agreement to any Affiliate or other person with the prior
written consent of the Minister, which consent shall not be
unreasonably withheld.
3.2. Obligations in respect of the conduct of Petroleum Operations
3.2.1. The Contractor shall e^rry'out the Petroleum Operations within the
scope of this Agre.en?epf' diligently arid In accordance with generally
accepted international-petroleutfi.industry practice. The Contractor
and its employees shall perfbrnn no business activities in Ethiopia
outside the scope of this.'Agreement without the prior written
consent of the Minister'^
3.2.2. Specifically, thei Contractor shall in accordance with generally
accepted international petroleum industry practice:
(a) ensure that all machinery, plant, equipment and installations
used in Petroleum Operations are of proper and accepted
construction and are kept in good repair;
(b) ensure that all exploratory wells with significant shows of
Petroleum are properly tested;
(c) use the resources of the Contract Area as productively as
practicable, prevent damage to producing formations and
ensure that Petroleum discovered, mud or any other fluids or
substances do not escape or waste;
(d) prevent damage to Petroleum and water bearing strata that
are adjacent to a producing formation or formations and
prevent water from entering any strata bearing Petroleum,
except where water injection methods are used for secondary
recovery operations or are intended otherwise in accordance
with generally accepted international petroleum industry
practice;
(e) use its best efforts, including complying with the provisions of Section 9.1, to protect the State from loss of production by reason of production on adjacent areas under the control of authorities other than the State;
(f) properly store Petroleum in receptacles constructed for that purpose, and not store Crude Oil in an earthern reservoir, except temporarily in an emergency; and
(g) drain waste oil and salt water and place refuse into receptacles constructed for that purpose and situated at a safe distance from any tank, well, storage or other facility and dispose of waste oil, salt water and refuse in accordance with generally accepted international petroleum industry practice, avoiding pollution.
3.2.3. In conducting offshore operations, the Contractor shall ensure that works and installations erected shall be:
(a) constructed, plated, marked, buoyed, equipped and maintained so that there are safe and convenient channels for shipping;
(b) fitted with navigational aids approved by the appropriate Government authority;
(c) illuminated between sunset and sunrise in a manner approved by the appropriate Government authority; and
(d) kept in good repair and working order.
3.2.4. Prior to commencing the drilling of any well covered by this Agreement or reentering any well on which work has been discontinued for more than six (6) months, the Contractor shall give the Minister thirty (30) days written notice explaining the justification for such drilling and submit a drilling program with a well location report. The Minister may, in his discretion, waive this thirty (30) day notice requirement.
33(e) use its best efforts, including complying with the provisions of Section 9.1, to protect the State from loss of production by reason of production on adjacent areas under the control of authorities other than the State;
(f) properly store Petroleum in receptacles constructed for that purpose, and not store Crude Oil in an earthern reservoir, except temporarily in an emergency; and
(g) drain waste oil and salt water and place refuse into receptacles constructed for that purpose and situated at a safe distance from any tank, well, storage or other facility and dispose of waste oil, salt water and refuse in accordance with generally accepted international petroleum industry practice, avoiding pollution.
3.2.3. In conducting offshore operations, the Contractor shall ensure that works and installations erected shall be:
(a) constructed, plated, marked, buoyed, equipped and maintained so that there are safe and convenient channels for shipping;
(b) fitted with navigational aids approved by the appropriate Government authority;
(c) illuminated between sunset and sunrise in a manner approved by the appropriate Government authority; and
(d) kept in good repair and working order.
3.2.4. Prior to commencing the drilling of any well covered by this Agreement or reentering any well on which work has been discontinued for more than six (6) months, the Contractor shall give the Minister thirty (30) days written notice explaining the justification for such drilling and submit a drilling program with a well location report. The Minister may, in his discretion, waive this thirty (30) day notice requirement.
33 3.2.5. The Contractor shall be entitled to employ any person qualified in
the judgment of the Contractor to undertake Petroleum Operations
on the Contractor’s behalf.
Any Subcontractor retained by the Contractor shall have the
necessary professional experience to perform the task to be assigned
and the Contractor shall ascertain that any Subcontractor shall
abide by all applicable laws and regulations of Ethiopia and the
relevant provisions of this Agreement. The Contractor shall notify
the Minister in writing of the name and address of any
Subcontractor retained within thirty (30) days of such retention.
The employees of the Contractor and any Subcontractor shall abide
by the applicable laws of Ethiopia and\£hall respect local customs in
the country.
3.3. Abandonment and disposal of asSjets
3.3.1. The Contractor sh£Jl. rtbt,’ except;, wlrere there is danger to the safety
and health of human life or.- a/'-risk'of significant damage to the
environment or a risk of significant economic loss, abandon a well or
withdraw casing, tubing ::or.';%down-hole pumps or other down-hole
equipment therefrom; or remove surface equipment used or useful in
production therefrom;-if ’any, prior to giving the Minister (a) thirty
(30) days written notice of such action with respect to a well that is
or has been producing within a Development Area and (b) seventy-
two (72) hours written notice of such action with respect to any
other well.
3.3.2. The Contractor shall securely plug and clearly mark any well that it
abandons in accordance with generally accepted international
petroleum industry practice to prevent pollution, sub-sea damage or
damage to underground strata through the entry of water or
otherwise.
3.3.3. The Contractor shall state in its notice of abandonment of a well
whether the well is capable of providing a fresh water supply and if
required by the Minister, the Contractor shall complete such well
and render it operational for producing water at its own cost and
expense.
3.3.4. Where the Contractor applies to abandon an exploratory well in
which Petroleum of potentially commercial significance has not
been found, the Minister may request the Contractor to deepen,
sidetrack or test that well subject to the following provisions:
(a) any such additional Petroleum Operations shall be at the sole
cost, risk and expense of the Government, and the Government
shall advance to the Contractor the funds necessary to
conduct the drilling operations;
3.2.5. The Contractor shall be entitled to employ any person qualified in the judgment of the Contractor to undertake Petroleum Operations on the Contractor's behalf. Any Subcontractor retained by the Contractor shall have the necessary professional experience to perform the task to be assigned and the Contractor shall ascertain that any Subcontractor shall abide by all applicable laws and regulations of Ethiopia and the relevant provisions of this Agreement. The Contractor shall notify the Minister in writing of the name and address of any Subcontractor retained within thirty (30) days of such retention. The employees of the Contractor and any Subcontractor shall abide by the applicable laws of Ethiopia and shall respect local customs in the country. 3.3 Abandonment and disposal of assets 3.3.1. The Contractor shall not, except where there is danger to the safety and health of human life or a risk of significant economic loss, abandon a well or withdraw casing, tubing or down-hole pumps or other down-hole equipment therefrom or remove surface equipment used or useful in production therefrom, if any, prior to giving the Minister (a) thirty (30) days written notice of such action with respect to a well that is or has been producing within a Development Area and (b) seventy-two (72) hours written notice of such action with respect to any other well. 3.3.2. The Contractor shall securely plug and clearly mark any well that it abandons in accordance with generally accepted international petroleum industry practice to prevent pollution, sub-sea damage or damage to underground strata through the entry of water or otherwise. 3.3.3. The Contractor shall state in its notice of abandonment of a well whether the well is capable of providing a fresh water supply and if required by the Minister, the Contractor shall complete such well and render it operational for producing water at its own cost and expense. 3.3.4. Where the Contractor applies to abandon an exploratory well in which Petroleum of potentially commercial significance has not been found, the Minister may request the Contractor to deepen, sidetrack or test that well subject to the following provisions: (a) any such additional Petroleum Operations shall be at the sole cost, risk and expense of the Government, and the Government shall advance to the Contractor the funds necessary to conduct the drilling operations; 34(b) the Contractor shall not be obligated to undertake such additional work if it will materially interfere with the conduct of the Contractor's Petroleum Operations or if it is not technically or operationally feasible; and
(c) the Government shall keep the Contractor informed about such additional work and in the event that the operations undertaken under this Section 3.3.4 result in a discovery which the Contractor elects to evaluate and/or develop as a Commercial Discovery, the Contractor shall reimburse the Government _________ per cent (______ %) of the costs and expenses incurred by the Government for the conduct of the operations and such sum shall be paid within thirty (30) days of such election made by the Contractor. If the Contractor does not make such election, the Government may require the Contractor to surrender all its rights over such discovery.
3.3.5. The Contractor shall within sixty (60) days after termination or expiration of this Agreement or the surrender of part of the Contract Area, or the expiration of the take-over period in Section 2.5.5, if later, deliver to the Minister in good repair and working order, each well within the area covered by the termination, expiration, or surrender, then producing or capable of producing Petroleum, together with all casing, tubing and surface or sub-surface equipment used or useful in the conduct of producing operations, unless the Minister requires the Contractor to plug the well.
3.3.6. In the case of termination or expiration of this Agreement or the surrender of an area within the Contract Area pursuant to the terms hereof, if the area, or part thereof, subject to the termination, expiry or surrender has been determined to be capable of production or is currently producing or has previously produced Petroleum commercially, the Contractor shall transfer at no cost to the Government the plants, appliances and installations in the area subject to the termination, expiry or surrender. The Minister may decline the transfer and the Minister may require the Contractor to remove all or some of the plants, appliances and installations at no cost to the Government.
3.4. Records and reports of Petroleum Operations
3.4.1. The Contractor shall record, in an original or reproducible form of good quality and on tapes where relevant, all geological and geophysical information and data relating to the Contract Area obtained by the Contractor in the course of conducting Petroleum
35(b) the Contractor shall not be obligated to undertake such additional work if it will materially interfere with the conduct of the Contractor's Petroleum Operations or if it is not technically or operationally feasible; and
(c) the Government shall keep the Contractor informed about such additional work and in the event that the operations undertaken under this Section 3.3.4 result in a discovery which the Contractor elects to evaluate and/or develop as a Commercial Discovery, the Contractor shall reimburse the Government _________ per cent (______ %) of the costs and expenses incurred by the Government for the conduct of the operations and such sum shall be paid within thirty (30) days of such election made by the Contractor. If the Contractor does not make such election, the Government may require the Contractor to surrender all its rights over such discovery.
3.3.5. The Contractor shall within sixty (60) days after termination or expiration of this Agreement or the surrender of part of the Contract Area, or the expiration of the take-over period in Section 2.5.5, if later, deliver to the Minister in good repair and working order, each well within the area covered by the termination, expiration, or surrender, then producing or capable of producing Petroleum, together with all casing, tubing and surface or sub-surface equipment used or useful in the conduct of producing operations, unless the Minister requires the Contractor to plug the well.
3.3.6. In the case of termination or expiration of this Agreement or the surrender of an area within the Contract Area pursuant to the terms hereof, if the area, or part thereof, subject to the termination, expiry or surrender has been determined to be capable of production or is currently producing or has previously produced Petroleum commercially, the Contractor shall transfer at no cost to the Government the plants, appliances and installations in the area subject to the termination, expiry or surrender. The Minister may decline the transfer and the Minister may require the Contractor to remove all or some of the plants, appliances and installations at no cost to the Government.
3.4. Records and reports of Petroleum Operations
3.4.1. The Contractor shall record, in an original or reproducible form of good quality and on tapes where relevant, all geological and geophysical information and data relating to the Contract Area obtained by the Contractor in the course of conducting Petroleum
35 Operations thereon and shall deliver a copy of all such information
and data, including the interpretations thereof and logs and records
of wells, to the Minister as soon as practicable after the same has
come into the possession of the Contractor.
3.4.2. The Contractor shall keep logs and records of the drilling,
deepening, plugging or abandonment of wells consistent with
generally accepted international petroleum industry practice and
containing particulars of:
(a) the sub-surface strata through which the well was drilled;
(b) the casing, tubing and down-hole equipment run in the well and
modifications and alterations therecif;
(c) Petroleum, water and workable-rplnerals encountered; and
(d) any other information, 'reasonably required by the Minister.
The information required by Septiort 2.4.2 shall be submitted to the
3.4.3.
Minister in the form of. '-.completion reports as soon as
3.4.4. practicable.
The Contractor ..-maiy Femove, for the purpose of laboratory
examination or ^analysis, petrological specimens or samples of
Petroleum found in'the Contract Area and characteristic samples of
the strata or water encountered in a well and, as soon as
practicable, shall give the Minister, without charge, a
representative part of each specimen and sample removed.
3.4.5. The Contractor shall supply to the Minister:
(a) daily reports on drilling operations and weekly reports on
geophysical operations;
(b) within fifteen (15) days after the end of each Calendar
Quarter, a report on the progress of Petroleum Operations
during the preceding Calendar Quarter covering:
(i) a detailed description of the Petroleum Operations
carried out and the factual information obtained;
(ii) a description of the area in which the Contractor has
operated;
(iii) an account of the expenditure on Petroleum Operations
in accordance with the Accounting Procedures set forth
in Appendix !; and
3 6
Operations thereon and shall deliver a copy of all
such information and data, including the
interpretations thereof and logs and records of
wells, to the Minister as soon as practicable
after the same has come into the possession of the
Contractor.
3.4.2 The Contractor shall keep logs and records of the
drilling, deepening, plugging or abandonment of
wells consistent with generally accepted
international petroleum industry practice and
containing particulars of:
(a) the sub-surface strata through which the well
was drilled;
(b) the casing, tubing and down-hole equipment run
in the well and modifications and alterations
thereof;
(c) Petroleum, water and workable minerals
encountered; and
(d) any other information reasonably required
by the Minister.
3.4.3 The information required by Section 3.4.2 shall
be submitted to the Minister in the form of well
completion reports as soon as practicable.
3.4.4 The Contractor may remove, for the purpose of
laboratory examination or analysis, petrological
specimens or samples of Petroleum found in'the
Contract Area and characteristic samples of the
strata or water encountered in a well and, as soon
as practicable, shall give the Minister, without
charge, a representative part of each specimen and
sample removed.
3.4.5 The Contractor shall supply to the Minister:
(a) daily reports on drilling operations and
weekly reports on geophysical operations;
(b) within fifteen (15) days after the end of each
Calendar Quarter, a report on the progress of
Petroleum Operations during the preceding
Calendar Quarter covering:
(i) a detailed description of the Petroleum
Operations carried out and the factual
information obtained;
(ii) a description of the area in which the
Contractor has operated;
(iii) an account of the expenditure on Petroleum
Operations in accordance with the
Accounting Procedures set forth in
Appendix I; and
36(iv) a map indicating the location of all wells and other
Petroleum Operations;
(c) within three (3) months of the end of each Calendar Year, an
annual report covering the matters specified in paragraph (b)
for the preceding Calendar Year.
3.4.6. The Contractor shall submit copies of all contracts or agreements
with Subcontractors as soon as practicable after execution of such
contracts or agreements.
3.4.7. The Contractor shall supply any further information concerning the
Petroleum Operations that the Minister :'ma.y reasonably require.
3.5. Joint liability and indemnity
3.5.1. At any time where the-.Cpritractor consists of more than one person,
their liability shall'be 'joint: and several.
The Contractor shall supply ..-to., the Minister a copy of the joint
operating agreement between those persons as soon as it is
available.
3.5.2. The Contractor ..shall obtain and maintain for the Petroleum
Operations insurance of the type and for such reasonable amounts
and coverage as may be approved by the Minister. The said
insurance shall, inter alia, cover loss or damage to all installations
and equipment used in Petroleum Operations, pollution, property
insurance and third partly liability insurance.
3.5.3. The Contractor shall indemnify, defend and save the State harmless
against all claims, losses and damage of any nature whatsoever,
including without limitation, claims for loss or damage to property,
or death of or injury to persons caused by, or resulting from, any
operation conducted by or on behalf of the Contractor under the
terms of this Agreement.
3.6. Local employment, training and preference
3.6.1. The Contractor and the Subcontractors shall give preference to the
employment of Ethiopian nationals in all Petroleum Operations to
the fullest extent possible, provided such nationals have the required
qualifications and experience.
3 7
(iv) a map indicating the location of all wells
and other Petroleum Operations;
(c) within three (3) months of the end of each
Calendar Year, an annual report covering the
matters specified in paragraph (b) for the
preceding Calendar Year.
3.4.6. The Contractor shall submit copies of all
contracts or agreements with Subcontractors as
soon as practicable after execution of such
contracts or agreements.
3.4.7. The Contractor shall supply any further
information concerning the Petroleum Operations
that the Minister may reasonably require.
3.5. Joint liability and indemnity
3.5.1. At any time where the Contractor consists of
more than one person, their liability shall be
joint and several.
The Contractor shall supply to the Minister a
copy of the joint operating agreement between
those persons as soon as it is available.
3.5.2. The Contractor shall obtain and maintain for
the Petroleum Operations insurance of the type
and for such reasonable amounts and coverage as
may be approved by the Minister. The said
insurance shall, inter alia, cover loss or damage
to all installations and equipment used in
Petroleum Operations, pollution, property
insurance and third partly liability insurance.
3.5.3. The Contractor shall indemnify, defend and save
the State harmless against all claims, losses and
damage of any nature whatsoever, including
without limitation, claims for loss or damage to
property, or death of or injury to persons caused
by, or resulting from, any operation conducted by
or on behalf of the Contractor under the terms of
this Agreement.
3.6. Local employment, training and preference
3.6.1. The Contractor and the Subcontractors shall give
preference to the employment of Ethiopian
nationals in all Petroleum Operations to the
fullest extent possible, provided such nationals
have the required qualifications and experience.
37 3.6.2. The Contractor shall establish a training and employment
programme, approved by the Minister, for Ethiopian nationals and
shall contribute a minimum of_(_) United States dollars
per year during the Exploration Period, increased to a minimum of
_ (_) United States dollars per year during the
Development and Production Period, for the training of Ethiopian
nationals as may be identified by the Minister.
3.6.3. The Contractor and the Subcontractors shall give preference to
Ethiopian materials, products and services used in Petroleum
Operations where those materials, products and services are of
comparable quality and are readily available at competitive prices.
3.6A. The Contractor shall submit a report oh‘a. regular basis detailing the
employment of Ethiopian national? arid t.bfe utilization of Ethiopian
materials, products and services ••ih-.;a';form to., be specified by the
Minister. In addition, the C.on-tiWtpr shall, within' thirty (30) days of
employing, notify the .. Minister the nairne \and the terms and
conditions of emploympnt of any Ethiopian national.
3.7. Environmental and safety measures.. V
3.7.1. The Contractor shalT'cbrrducit Petroleum Operations in a safe and
proper manner in accprdknce with generally accepted international
petroleum industry /practice and shall cause as little damage as
reasonably practicable to the general environment, including, inter
alia, the surface, air, seas, lakes, rivers, marine life, animal life,
plant life, crops, other natural ressources and property, and shall
forthwith repair any damage caused to the extent reparable, and
shall pay reasonable compensation for all damage which is beyond
repair.
3.7.2. In the event of a blow-out, accident or other emergency, the
Contractor shall take immediate steps to bring the emergency
situation under control and protect against loss of life and property
and prevent harm to natural resources and the general environment.
3.7.3. The Minister may, if he reasonably determines that the Petroleum
Operations may endanger persons or property, harm natural
resources or the general environment, cause pollution, harm marine
life, animal life or plant life, or interfere with navigation and
fishing, order the Contractor to take reasonable remedial measures
and order the Contractor to discontinue Petroleum Operations
pending the implementation of those measures.
3.6.2. The Contractor shall establish a training and employment programme, approved by the Minister, for Ethiopian nationals and shall contribute a minimum of _________ (________) United States dollars per year during the Exploration Period, increased to a minimum of ________ (_______) United States dollars per year during the Development and Production Period, for the training of Ethiopian nationals as may be identified by the Minister.
3.6.3. The Contractor and the Subcontractors shall give preference to Ethiopian materials, products and services used in Petroleum Operations where those materials, products and services are of comparable quality and are readily available at competitive prices.
3.6.4. The Contractor shall submit a report on a regular basis detailing the employment of Ethiopian nationals and the utilization of Ethiopian materials, products and services in a form to be specified by the Minister. In addition, the Contractor shall, within thirty (30) days of employing, notify the Minister the name and the terms and conditions of employment of any Ethiopian national.
3.7. Environmental and safety measures
3.7.1. The Contractor shall conduct Petroleum Operations in a safe and proper manner in accordance with generally accepted international petroleum industry practice and shall cause as little damage as reasonably practicable to the general environment, including, inter alia, the surface, air, seas, lakes, rivers, marine life, animal life, plant life, crops, other natural ressources and property, and shall forthwith repair any damage caused to the extent reparable, and shall pay reasonable compensation for all damage which is beyond repair.
3.7.2. In the event of a blow-out, accident or other emergency, the Contractor shall take immediate steps to bring the emergency situation under control and protect against loss of life and property and prevent harm to natural resources and the general environment.
3.7.3. The Minister may, if he reasonably determines that the Petroleum Operations may endanger persons or property, harm natural resources or the general environment, cause pollution, harm marine life, animal life or plant life, or interfere with navigation and fishing, order the Contractor to take reasonable remedial measures and order the Contractor to discontinue Petroleum Operations pending the implementation of those measures.
383.8. Registration and office
3.8.1. The Contractor shall register to do business with the appropriate Ethiopian authorities and shall establish and maintain an office in Ethiopia.
3.8.2. The Contractor shall notify the Minister, before Petroleum Operations begin, the name and address of the person resident in Ethiopia who will supervise the Petroleum Operations, and prior notice of any subsequent change shall be given to the Minister.
393.8. Registration and office
3.8.1. The Contractor shall register to do business with the appropriate
Ethiopian authorities and shall establish and maintain an office in
Ethiopia.
3.8.2. The Contractor shall notify the Minister, before Petroleum
Operations begin, the name and address of the person resident in
Ethiopia who will supervise the Petroleum Operations, and prior
notice of any subsequent change shall be given to the Minister.
SECTION IV; GENERAL RIGHTS AND OBLIGATIONS
OF THE GOVERNMENT AND THE MINISTER
4.1. Rights of the Government and the Minister
4.1.1. The Minister, or a person authorized by him in writing, may at all
reasonable times inspect Petroleum Operations, and any records of
the Contractor relating thereto, and the Contractor shall pay all
reasonable expenses connected with such an inspection.
4.1.2. The Minister may require the Contractor.-' to perform an obligation
which the Contractor has failed.-to-perfbrm under this Agreement by
giving reasonable written notice, and after- failure to comply with
that notice, may execute \-any necessary. Works for which the
Contractor shall pay forthwith. The Minister may give notice to the
Contractor to perforin Sn obligation, hereunder at any time, but not
later than ninety 00) days after the termination or expiration of
this Agreement or surrender* of\thO part of the Contract Area to
which the obligation relates;. Failure of the Minister to provide
notice to the Contractor; under this provision shall not constitute a
waiver of any .other.. .rights the Minister may have under this
Agreement in connection with the performance of any obligation of
the Contractor.
4.2. Obligations of the Government and the Minister
4.2.1. The Government shall not unreasonably refuse to grant or renew any
visas, work and entry or exit permits necessary for personnel
employed in the Petroleum Operations by the Contractor or its
Subcontractors, and their dependants; nor shall the Government
unreasonably refuse to grant any necessary rights of way and
easements as may be required by the Contractor or its
Subcontractors.
The Minister shall use his best efforts to assist and expedite the
4.2.2.
execution of Petroleum Operations carried on hereunder by
rendering all necessary assistance in obtaining visas, work or other
permits, authorizations, import or other licences, and rights of way
and easements as may be necessary.
SECTION IV: GENERAL RIGHTS AND OBLIGATIONS OF THE GOVERNMENT AND THE MINISTER
4.1. Rights of the Government and the Minister
4.1.1. The Minister, or a person authorized by him in writing, may at all reasonable times inspect Petroleum Operations, and any records of the Contractor relating thereto, and the Contractor shall pay all reasonable expenses connected with such an inspection.
4.1.2. The Minister may require the Contractor to perform an obligation which the Contractor has failed to perform under this Agreement by giving reasonable written notice, and after failure to comply with that notice, may execute any necessary works for which the Contractor shall pay forthwith. The Minister may give notice to the Contractor to perform an obligation hereunder at any time, but not later than ninety (90) days after the termination or expiration of this Agreement or surrender of the part of the Contract Area to which the obligation relates. Failure of the Minister to provide notice to the Contractor under this provision shall not constitute a waiver of any other rights the Minister may have under this Agreement in connection with the performance of any obligation of the Contractor.
4.2. Obligations of the Government and the Minister
4.2.1. The Government shall not unreasonably refuse to grant or renew any visas, work and entry or exit permits necessary for personnel employed in the Petroleum Operations by the Contractor or its Subcontractors, and their dependants; nor shall the Government unreasonably refuse to grant any necessary rights of way and easements as may be required by the Contractor or its Subcontractors.
4.2.2. The Minister shall use his best efforts to assist and expedite the execution of Petroleum Operations carried on hereunder by rendering all necessary assistance in obtaining visas, work or other permits, authorizations, import or other licences, and rights of way and easements as may be necessary.
40
SECTION V: WORK AND EXPENDITURE
OBLIGATIONS AND BUDGETS
5.1. Exploration
5.1.1. The Contractor shall carry out the following work
obligations and make the following exploration
expenditure during the initial term of the
Exploration Period:
(a) geological and geophysical operations,
including_(_) kilometers of seismic surveys
with minimum expenditure of ____ (____)
United States dollars for such seismic
operations; and
(b) drill_______ (____) exploratory well(s) to a
minimum depth of _____ (____) meters per well
with minimum drilling expenditure of
_____ (___) United States dollars for each
such well.
5.1.2. The Contractor shall carry out the following
work obligations and make the following
exploration expenditures during the first
extension to the Exploration Period:
(a) geological and geophysical operations,
including ___.(___) kilometers of seismic
surveys with minimum expenditure of ____
(___) United States dollars for such seismic
operations; and
(b) drill ____.(___) exploratory well(s) to a
minimum depth of ____.(___) meters per well
with minimum drilling expenditure of____.
(___) United States dollars for each
such well.
5.1.3. The Contractor shall carry out the following
work obligations and make the following
exploration expenditures during the second
extension to the Exploration Period:
(a) geological and geophysical operations,
including ____.(___) kilometers of seismic
surveys with minimum expenditure of
____.(___) United States dollars for such
seismic operations; and
(b) drill ____.(___) exploratory well(s) to a
minimum depth of ____.(___) meters per well
with minimum drilling expenditure of ____.
(___) United States dollars for each
such well.
41 SECTION V: WORK AND EXPENDITURE
OBLIGATIONS AND BUDGETS
5.1. Exploration
5*1.1. The Contractor shall carry out the following work obligations and
make the following exploration expenditure during the initial term
of the Exploration Period:
(a) geological and geophysical operations, including_(_)
kilometers of seismic surveys with--minimum expenditure of
_ (_) United/"States ' dollars:-.. fqr .. such seismic
operations; and
(b) drill_ (;••y ^ exploratory \yeli(s) to a minimum depth
of fe" X V )meters-per well with minimum drilling
expenditure of- , ... \C\ ; ) United States dollars for each
such well.
5.1.2. The Contractor shall carry out the following work obligations and
make the following •••exploration expenditures during the first
extension to the Exploration Period:
(a) geological and geophysical operations, including_(_)
kilometers of seismic surveys with minimum expenditure of
_ (_) United States dollars for such seismic
operations; and
(b) drill ^ (___) exploratory well(s) to a minimum depth of
l meters per well with minimum drilling
expenditure of_(_) United States dollars for each
such well.
5.1.3. The Contractor shall carry out the following work obligations and
make the following exploration expenditures during the second
extension to the Exploration Period:
(a) geological and geophysical operations, including __(_)
kilometers of seismic surveys with minimum expenditure of
_ (_) United States dollars for such seismic
operations; and
(b) drill (_) exploratory well(s) to a minimum depth of
~ ( ) meters per well with minimum drilling
expenditure of_ (_) United States dollars for each
such well.
5.1.4. The required minimum expenditure obligations set
forth in Sections 5.1.1, 5.1.2 and 5.1.3 are
expressed in constant United States dollars of
the month of the Effective Date and shall be
adjusted annually on the anniversary of the
Effective Date, so as to reflect the balance of
Contractor's minimum expenditure obligations, as
follows:
(a) at the end of each year of the Exploration
Period, the minimum expenditure obligations
for the initial term of the Exploration
Period, the first extension or second
extension, whichever is applicable, shall be
reduced in accordance with paragraph (b)
below by the amount of expenditure actually
made during that year on seismic-and
exploratory drilling work;
(b) in determining the amount of expenditure
actually made during a year on seismic and
exploratory drilling work and only for the
purpose of making the adjustment provided for
in Sections 5.1.4(a) and 5.1.5, no amount of
expenditure in excess of the amount
specified for each specific work in Sections
5.1.1, 5.1.2 and 5.1.3 (as adjusted for
inflation, in accordance with paragraph (c)
below, between (i) the month of the
Effective Date and (ii) the month in the
prior year corresponding to the month of the
Effective Date) shall be considered, unless
otherwise agreed to in writing by the
Minister;
(c) at the end of each year of the Exploration
Period, in order to determine the minimum
expenditure obligations for the remaining
years of the initial term of the Exploration
Period, the first extension or second
extension, whichever is applicable, the
balance of the minimum expenditure
obligations corresponding to such term at the
end of the prior year, as reduced for
expenditure under the provisions of Section
5.1.4 (a), shall be adjusted by multiplying
that amount by the number which is the sum of
one (1) and the decimal equivalent of the
percentage change in the monthly index of
U.S. Consumer Prices, seasonally adjusted, as
reported in the International Financial
Statistics” of the International Monetary
Fund between (i) the month in the year of the
adjustment corresponding to the month of the
Effective Date and (ii) the month in the
prior year corresponding to the month of the
Effective Date.
5.1.5. If, during the initial Exploration Period or the
first extension thereof, the Contractor exceeds
the expenditure obligations for such period, then
such excess may be credited toward the
expenditure obligations for the following
extension or extensions of the Exploration
Period.
425.1.4. The required minimum expenditure obligations set forth in Sections
5.1.1, 5.1.2 and 5.1.3 are expressed in constant United States dollars
of the month of the Effective Date and shall be adjusted annually on
the anniversary of the Effective Date, so as to reflect the balance
of Contractor's minimum expenditure obligations, as follows:
(a) at the end of each year of the Exploration Period, the
minimum expenditure obligations for the initial term of the
Exploration Period, the first extension or second extension,
whichever is applicable, shall be reduced in accordance with
paragraph (b) below by the amount of expenditure actually
made during that year on seishiic} and exploratory drilling
work;
(b) in determining the... anjount of expenditure actually made
during a year on. seisnhic and exploratory drilling work and only
for the purp.oses;. pi making ,the'-..adjustment provided for in
Sections 5.1.4.(a) and 5.l>5y.'hci amount of expenditure in
excess of the amount-‘ specified for each specific work in
Sections 5.1.1, 5.1,2'and 5.1.3 (as adjusted for inflation, in
accordance with- parag^aph (c) below, between (i) the month of
the Effective.. Date * and (ii) the month in the prior year
corresponding to" the month of the Effective Date) shall be
considered,- unless otherwise agreed to in writing by the
Minister;
(c) at the end of each year of the Exploration Period, in order to
determine the minimum expenditure obligations for the
remaining years of the initial term of the Exploration Period,
the first extension or second extension, whichever is
applicable, the balance of the minimum expenditure
obligations corresponding to such term at the end of the prior
year, as reduced for expenditure under the provisions of
Section 5.1.4 (a), shall be adjusted by multiplying that-amount
by the number which is the sum of one (1) and the decimal
equivalent of the percentage change in the monthly index of
U.S. Consumer Prices, seasonally adjusted, as reported in the
"International Financial Statistics" of the International
Monetary Fund between (i) the month in the year of the
adjustment corresponding to the month of the Effective Date
and (ii) the month in the prior year corresponding to the month
of the Effective Date.
5.1.5. If, during the initial Exploration Period or the first extension
thereof, the Contractor exceeds the expenditure obligations for such
period, then such excess may be credited toward the expenditure
obligations for the following extension or extensions of the
Exploration Period.
4 2
5.1.6. The fulfilment of any work obligations shall not relieve the Contractor of the corresponding expenditure obligations; nor shall the fulfilment of any expenditure obligations relieve the Contractor of the corresponding work obligations. If the continuation of any drilling activity is precluded for justifiable technical reasons, prior to reaching the minimum depth herein specified, the Minister shall authorize the Contractor to terminate such activity and may deem the Contractor to have met the work obligation in respect of that well or may specify an appropriate and reasonable substitute work obligation.
5.1.7. The Contractor shall prepare and submit to the Minister for discussion, thirty (30) days after the Effective Date, the following:
(a) a general statement of exploration work and budget for each year of the Exploration Period; and
(b) a detailed statement of the exploration work programme and budget for the first year of the initial term of the Exploration Period.
5.1.8. The Contractor shall prepare and submit to the Minister for discussion, ninety (90) days before the end of each year in the Exploration Period, the following:
(a) revisions, if any, to the general statement of exploration work and budget for the remaining years of the Exploration Period; and
(b) a detailed statement of the exploration work programme and budget for the next year in the Exploration Period.
5.1.9. The Contractor may make changes to the detailed statement of exploration work programme and budget therefor for any year of the Exploration Period, if those changes do not materially affect the original objectives of the statement. The Contractor shall notify the Minister of such changes as soon as practicable.
5.2. Bank guarantee
5.2.1. The Contractor shall provide to the Minister at the commencement of the initial term of the Exploration Period and each extension thereof, a bank guarantee for the minimum expenditure obligations set forth herein as adjusted under Sections 5.1.4 and 5.1.5, from an institution and in a form acceptable to the Minister, and in an amount which shall correspond to expenditure obligations for the applicable term of the Exploration Period.
43 5.1.6. The fulfilment of any work obligations shall not relieve the
Contractor of the corresponding expenditure obligations; nor shall
the fulfilment of any expenditure obligations relieve the Contractor
of the corresponding work obligations. If the continuation of any
drilling activity is precluded for justifiable technical reasons, prior
to reaching the minimum depth herein specified, the Minister shall
authorize the Contractor to terminate such activity and may deem
the Contractor to have met the work obligation in respect of that
well or may specify an appropriate and reasonable substitute work
obligation.
5.1.7. The Contractor shall prepare and siibmit to the Minister for
discussion, thirty (30) days after the Effective Date, the following:
(a) a general statement of expior&tion workvand budget for each
year of the Exploration Period; and
(b) a detailed statement of the exploration work programme and
budget for ftie'-flrst* year of-the initial term of the Exploration
Period.
5.1.8. The Contractor shall--.prepare and submit to the Minister for
discussion, ninety...(933) daiys before the end of each year in the
Exploration Period, tfre following:
(a) revisions, if any, to the general statement of exploration work
and budget for the remaining years of the Exploration Period;
and
(b) a detailed statement of the exploration work programme and
budget for the next year in the Exploration Period.
5.1.9. The Contractor may make changes to the detailed statement of
exploration work programme and budget therefor for any year of the
Exploration Period, if those changes do not materially affect the
original objectives of the statement. The Contractor shall notify the
Minister of such changes as soon as practicable.
5.2. Bank guarantee
5.2.1. The Contractor shall provide to the Minister at the commencement
of the initial term of the Exploration Period and each extension
thereof, a bank guarantee for the minimum expenditure obligations
set forth herein as adjusted under Sections 5.1.4 and 5.1.5, from an
institution and in a form acceptable to the Minister, and in an
amount which shall correspond to expenditure obligations for the
applicable term of the Exploration Period.
5.2.2. If, at the end of the initial term of the
Exploration Period, any extension thereof or
upon the date of expiration or termination of
this Agreement, the Contractor has not made the
minimum work obligations and/or the expenditure
obligations required during the initial term of
the Exploration Period or any applicable extension thereof, the Contractor or its guarantor shall immediately pay the amount corresponding to the unexpended obligations to the Government. If, however, as provided in Section 5.1.5, during the initial term of the Exploration Period or the first extension thereof, the Contractor exceeds its expenditure obligations for such period, the excess shall be credited toward the expenditure obligations for the following extension or extensions of the Exploration Period and the amount of the required guarante, shall be correspondingly reduced.
5.2.3. The amount of any bank guarantee for the initial term of the Exploration Period or any extension thereof shall be adjusted annually to reflect the amount of the expenditure actually made on seismic and exploratory drilling work and the inflation adjustment, all as determined under the provisions of Sections 5.1.4 and 5.1.5.
5.3. Discovery and appraisal
5.3.1. The Contractor shall notify the Minister as soon as practicable, but in no event later than (48) hours, after the discovery of Petroleum within the Contract Area. This notice shall include all available details of the discovery and particulars on any testing programme to be undertaken in order to allow the Minister to send a representative during testing operations.
5.3.2. Within ninety (90) days after the date of the notice of the discovery under Section 5.3.1, if the Contractor considers that a discovery merits appraisal, the Contractor shall submit to the Minister a detailed appraisal work programme and budget to evaluate as expeditiously as possible whether the discovery is a Commercial Discovery.
This work programme shall include an indication of the location, nature and size of the discovery, with a designation of the area to be included in the evaluation, which area shall be designated as an Appraisal Area. The appraisal work programme shall also include all drilling, testing and evaluation to be conducted in the Appraisal Area and the preparation of all technical and economic studies related to recovery, treatment and transportation of Petroleum
445.2.2. If, at the end of the initial term of the Exploration Period, any
extension thereof or upon the date of expiration or termination of
this Agreement, the Contractor has not made the minimum work
obligations and/or the expenditure obligations required during the
initial term of the Exploration Period or any applicable extension
thereof, the Contractor or its guarantor shall immediately pay the
amount corresponding to the unexpended obligations to the
Government. If, however, as provided in Section 5.1.5, during the
initial term of the Exploration Period or the first extension thereof,
the Contractor exceeds its expenditure obligations for such period,
the excess shall be credited toward the expenditure obligations for
the following extension or extensions of. the Exploration Period and
the amount of the required guarantee *, shall be correspondingly
reduced.
5.2.3. The amount of any bank ••.'guarantee for...-the \iriitial term of the
Exploration Period or •.;any\ extension -thereof shall be adjusted
annually to reflect the..ariidunt of the Expenditure actually made on
seismic and exploratory ’drilling..work' and the inflation adjustment,
all as determined under the provisions of Sections 5.1.4 and 5.1.5.
5.3. Discovery and appraisal ;
5.3.1. The Contractor shcdi notify the Minister as soon as practicable, but
in no event later than (48) hours, after the discovery of Petroleum
within the Contract Area. This notice shall include all available
details of the discovery and particulars on any testing programme to
be undertaken in order to allow the Minister to send a
representative during testing operations.
5.3.2. Within ninety (90) days after the date of the notice of the discovery
under Section 5.3.1, if the Contractor considers that a discovery
merits appraisal, the Contractor shall submit to the Minister a
detailed appraisal work programme and budget to evaluate as
expeditiously as possible whether the discovery is a Commercial
Discovery.
This work programme shall include an indication of the location,
nature and size of the discovery, with a designation of the area to
be included in the evaluation, which area shall be designated as an
Appraisal Area. The appraisal work programme shall also include all
drilling, testing and evaluation to be conducted in the Appraisal
Area and the preparation of all technical and economic studies
related to recovery, treatment and transportation of Petroleum
4 4
from the Appraisal Area. The duration of this appraisal work programme shall not exceed __________ (____) months unless otherwise agreed in writing by the Minister and, in any event, it shall not exceed the remaining term of the Exploration Period as provided in Section 2.2 of this Agreement. Performance of the obligations under an appraisal work programme and budget shall not satisfy all or any part of the exploration work and expenditure obligations for the Exploration Period set forth in Section 5.1, as those obligations are separate and independent.
5.3.3. If the Minister does not request in writing any changes to the appraisal work programme and budget for any Appraisal Area within thirty (30) days after receipt thereof, the programme shall be deemed approved and adopted by the Minister.
If the Minister requests any changes to the appraisal work programme and budget for any Appraisal Area, then the Contractor and the Minister shall meet within fifteen (15) days after the Minister's written notification as to these requested changes to agree on an appraisal work programme and budget. The work programme and budget shall be approved and adopted by the Minister after such agreement has been reached, and, in any event, shall be deemed approved and adopted by the Minister thirty (30) days after written notification of the requested changes.
5.3.4. After adoption of the appraisal work programme and budget, the Contractor shall diligently continue to evaluate the discovery without undue interruptions until the Contractor determines whether the discovery is a Commercial Discovery.
Within thirty (30) days after the evaluation is completed, but in any event prior to the expiration of the Exploration Period, the Contractor shall notify and report to the Minister whether the Appraisal Area or any part thereof contains a Commercial Discovery. Such report shall include all relevant technical and economic data relating thereto.
5.3.5. For the purposes of this Section, the Contractor shall make a determination as to whether a discovery is a Commercial Discovery on the basis of whether that discovery can be produced commercially after consideration of all pertinent operating and financial data collected during the performance of the appraisal work programme and otherwise, including but not limited to Crude Oil or Natural Gas recoverable reserves, sustainable production levels and other relevant technical and economic factors, according to generally accepted international petroleum industry practice.
45from the Appraisal Area. The duration of this appraisal work programme shall not exceed __________ (____) months unless otherwise agreed in writing by the Minister and, in any event, it shall not exceed the remaining term of the Exploration Period as provided in Section 2.2 of this Agreement. Performance of the obligations under an appraisal work programme and budget shall not satisfy all or any part of the exploration work and expenditure obligations for the Exploration Period set forth in Section 5.1, as those obligations are separate and independent.
5.3.3. If the Minister does not request in writing any changes to the appraisal work programme and budget for any Appraisal Area within thirty (30) days after receipt thereof, the programme shall be deemed approved and adopted by the Minister.
If the Minister requests any changes to the appraisal work programme and budget for any Appraisal Area, then the Contractor and the Minister shall meet within fifteen (15) days after the Minister's written notification as to these requested changes to agree on an appraisal work programme and budget. The work programme and budget shall be approved and adopted by the Minister after such agreement has been reached, and, in any event, shall be deemed approved and adopted by the Minister thirty (30) days after written notification of the requested changes.
5.3.4. After adoption of the appraisal work programme and budget, the Contractor shall diligently continue to evaluate the discovery without undue interruptions until the Contractor determines whether the discovery is a Commercial Discovery.
Within thirty (30) days after the evaluation is completed, but in any event prior to the expiration of the Exploration Period, the Contractor shall notify and report to the Minister whether the Appraisal Area or any part thereof contains a Commercial Discovery. Such report shall include all relevant technical and economic data relating thereto.
5.3.5. For the purposes of this Section, the Contractor shall make a determination as to whether a discovery is a Commercial Discovery on the basis of whether that discovery can be produced commercially after consideration of all pertinent operating and financial data collected during the performance of the appraisal work programme and otherwise, including but not limited to Crude Oil or Natural Gas recoverable reserves, sustainable production levels and other relevant technical and economic factors, according to generally accepted international petroleum industry practice.
45
5.4. Development and production
5.4.1. If the Contractor reports that the discovery for any Appraisal Area
is a Commercial Discovery under Sections 5.3.4 and 5.3.5, a
development plan shall be prepared and submitted to the Minister
within six (6) months after the completion of the appraisal work
programme.
5.4.2. The development plan shall be prepared on the basis of sound
engineering and economic principles in accordance with generally
accepted international petroleum industry practice, shall ensure
that the Petroleum deposits do not suffer an excessive rate of
decline of production or an excessive loss of reservoir pressure and
shall adopt the optimum economic well spacing appropriate for the
development of those Petroleum deposits.
5.4.3. The development plan shall contain:
(a) details and the extent of the proposed development area
relating to the Commercial Discovery, which area shall
correspond as closely as possible to the geographical extension
of the Commercial Discovery in the Contract Area, and shall
be disgnated as the Development Area for the Commercial
Discovery concerned;
(b) proposals relating to the spacing, drilling and completion of
wells, the production and storage installations, and
transportation and delivery facilities required for the
production, storage and transportation of Petroleum;
(c) proposals relating to necessary infrastructure investments,
training and employment of Ethopian nationals, and plans to
maximize the use of Ethopian materials, products and
services in accordance with Section 3.6 herein;
(d) a production forecast and a detailed estimate of the
investment and expenses involved; and
(e) an estimate of the time required to complete each phase of
the development plan.
5.4.4. The Minister may require the Contractor to provide within a
specified time period such further information as the Minister may
reasonably need to evaluate the development plan for any
Development Area.
The Minister may also request that the Contractor makes such
revisions to the development plan as are reasonable to contribute to
the efficient development of Ethopian infrastructure and to assist
other national needs, without impairing the economic viability of
the development of the Development Area.
46
5.4. Development and production
5.4.1. If the Contractor reports that the discovery for any Appraisal Area
is a Commercial Discovery under Sections 5.3A and 5.3.5, a
development plan shall be prepared and submitted to the Minister
within six (6) months after the completion of the appraisal work
programme.
5.4.2. The development plan shall be prepared on the basis of sound
engineering and economic principles in accordance with generally
accepted international petroleum industry practice, shall ensure
that the Petroleum deposits do not suffer an excessive rate of
decline of production or an excessive loss of reservoir pressure and
shall adopt the optimum economic well-', spacing appropriate for the
development of those Petroleum deposits....-'
5.4.3. The development plan shall cont^dnr
(a) details and the. ..extent' of the ..proposed development area
relating to -.they Commercial'-..Discovery, which area shall
correspond as ..closely as . possible to the geographical extension
of the Commercial Djstpv'ery in the Contract Area, and shall
be designated as the..Development Area for the Commercial
Discovery concerned;-.
(b) proposals relating to the spacing, drilling and completion of
wells, the "production and storage installations, and
transportation and delivery facilities required for the
production, storage and transportation of Petroleum;
(c) proposals relating to necessary infrastructure investments,
training and employment of Ethiopian nationals, and plans to
maximize the use of Ethiopian materials, products and
services in accordance with Section 3.6 herein;
(d) a production forecast and a detailed estimate of the
investment and expenses involved; and
(e) an estimate of the time required to complete each phase of
the development plan.
5.4.4. The Minister may require the Contractor to provide within a
specified time period such further information as the Minister may
reasonably need to evaluate the development plan for any
Development Area.
The Minister may also request that the Contractor makes such
revisions to the development plan as are reasonable to contribute to
the efficient development of Ethiopian infrastructure and to assist
other national needs, without impairing the economic viability of
the development of the Development Area.
5.4.5. If the Minister does not request in writing any changes to the
development plan within ninety (90) days after receipt thereof, the
plan shall be deemed approved and adopted by the Minister.
If the Minister requests any changes to the development plan, then
the Contractor and Minister shall meet within fifteen (15) days of
the Minister's written notification as to these requested changes to
agree on a development plan. The plan shall be approved and
adopted by the Minister after such agreement has been reached and,
in any event, shall be deemed approved and adopted by the Minister
sixty (60) days after written notification of the requested changes.
5.4.6. After the development plan has been adopted by the Minister, the
Contractor shall submit to the Minister-fpr discussion ninety (90)
days before the end of each CalendarV-Yeaf in the Development and
Production Period a detailed, statement of theV■•development work
programme and budget therefor-for the following year; provided,
however, that a detailed’: statement of the development work
programme and the..budget! therefor for-.thO. first full Calendar Year
of the Development-:'artd Production.‘•Period and the portion of the
year preceding thevfirst full- Calendar Year, shall be submitted
within ninety (90) days after.the date of adoption by the Minister of
the development plan under'Section 5.4.5.
Each such annual detailed statement of the development work
programme and budget therefor shall be consistent with the
development plan adopted by the Minister under Section 5.4.5.
5.4.7. The Contractor may submit, during the term of the Development
and Production Period, revisions to any development plan. These
revisions shall be consistent with the provisions of Section 5.4.2 and
shall be subject to the approval procedure set forth in Sections
5.4.5.
5.4.8. The Contractor shall commence development work no later than six
(6) months after the date of adoption of the development plan under
Section 5.4.5.
5.4.9. Where the Minister and the Contractor agree that a mutual
economic benefit can be achieved by constructing and operating
common facilities (including, but not limited to, roads, pipelines and
other transportation, communication and storage facilities), the
Contractor shall use its best efforts to reach agreement with other
producers on the construction and operation of such common
facilities.
Other producers may use the facilities of the Contractor where
4 7
5.4.5. If the Minister does not request in writing any
changes to the development plan within ninety
(90) days after receipt thereof, the plan shall
be deemed approved and adopted by the Minister.
If the Minister requests any changes to the
development plan, then the Contractor and
Minister shall meet within fifteen (15) days of
the Minister's written notification as to these
requested changes to agree on a development plan.
The plan shall be approved and adopted by the
Minister after such agreement has been reached
and, in any event, shall be deemed approved and
adopted by the Minister sixty (60) days after
written notification of the requested changes.
5.4.6. After the development plan has been adopted by
the Minister, the Contractor shall submit to the
Minister far discussion ninety (90) days before
the end of each Calendar Year in the Development
and Production Period a detailed statement of
the development work programme and budget the
therefor for the following year; provided,
however, that a detailed statement of the
development work programme and the budget
therefor for the first full Calendar Year of the
Development and Production Period and the portion
of the year preceding the first full Calendar
Year, shall be submitted within ninety (90) days
after the date of adoption by the Minister of the
development plan under Section 5.4.5
Each such annual detailed statement of the
development work programme and budget therefor
shall be consistent with the development plan
adopted by the Minister under Section 5.4.5.
5.4.7. The Contractor may submit, during the term of the
Development and Production Period, revisions to
any development plan. These revisions shall be
consistent with the provisions of Section 5.4.2
and shall be subject to the approval procedure
set forth in Sections 5.4.5.
5.4.8. The Contractor shall commence development work no
later than six (6) months after the date of
adoption of the development plan under Section
5.4.5.
5.4.9. Where the Minister and the Contractor agree that
a mutual economic benefit can be achieved by
constructing and operating common facilities
(including, but not limited to, roads, pipelines
and other transportation, communication and
storage facilities), the Contractor shall use its
best efforts to reach agreement with other
producers on the construction and operation of
such common facilities.
Other producers may use the facilities of the
Contractor where
47
there exists excess capacity and on payment of a reasonable compensation which includes a reasonable return on investment to the Contractor and provided such use does not materially interfere with the Contractor's Petroleum Operations.
48 there exists excess capacity and on payment of a reasonable
compensation which includes a reasonable return on investment to
the Contractor and provided such use does not materially interfere
with the Contractor's Petroleum Operations.
J
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4 8
SECTION VI: GOVERNMENT PARTICIPATION
6.1. Government participation
6.1.1. The Government may participate in the Petroleum Operations in any
Development Area and acquire a Participating Interest not to
exceed _ per cent (_ ) therein. The Government may
acquire such interest either directly ...or through a specialized
Government entity.
6.1.2. The Government shall notify:*the Contractor-..in .writing of its
decision to participate within :6ne-hundred;;tWeh^y (120) days after
the date of adoption by 'ihe Minister of the development plan under
Section 5.4.5 for the particular Development Area concerned. The
notice shall speciiy-'tne percentage'ihterest to be acquired by the
Government and the'identity of\the Government entity that will
hold the interest if other than-tho Government itself.
6.1.3. If the Government (elects to participate with respect to any
particular Development-Area, then:
(a) the Government's participation shall be effective from the
date of adoption of the development plan under Section 5.4.5
for the particular Development Area concerned;
(b) the Government or the Government entity, whichever is
specified, and the Contractor shall within_(_) months
after the Government participation is effective enter into an
Operating Agreement in a mutually acceptable form
consistent with generally accepted international petroleum
industry practice and this Operating Agreement shall not
create or be considered as a partnership or any other similar
entity;
(c) the Government shall, within thirty (30) days after the end of
the Calendar Quarter in which it elected to participate,
reimburse the Contractor, without interest, for the
Government pro-rata share of expenditure incurred by the
Contractor in conducting Petroleum Operations in the
Development Area concerned from the date of adoption of the
development plan under Section 5.4.5 to the date of payment;
SECTION VI: GOVERNMENT PARTICIPATION
6.1. Government participation
6.1.1. The Government may participate in the Petroleum
Operations in any Development Area and acquire a
Participating Interest not to exceed ______
percent (_____ ) therein. The Government may
acquire such interest either directly or through
a specialized Government entity.
6.1.2. The Government shall notify the
Contractor in writing of its decision to
participate within one hundred twenty (120)
days after the date of adoption by the
Minister of the development plan under Section
5.4.5 for the particular Development Area
concerned. The notice shall specify the
percentage interest to be acquired by the
Government and the identity the Government
entity that will hold the interest if other
than the Government itself.
6.1.3. If the Government elects to participate with
respect to any particular Develop merit Area,
then:
(a) the Government's participation shall be
effective from the date of adoption of the
development plan under Section 5.4.5 for the
particular Development Area concerned;
(b) the Government or the Government entity,
whichever is specified, and the Contractor
shall within _____(_____) months after the
Government participation is effective enter
into an Operating Agreement in a mutually
acceptable form consistent with generally
accepted international petroleum industry
practice and this Operating Agreement shall
not create or be considered as a partnership
or any other similar entity;
(c) the Government shall, within thirty (30)
days after the end of the Calendar Quarter
in which it elected to participate,
reimburse the Contractor, without interest,
for the Government pro-rata share of
expenditure incurred by the Contractor in
conducting Petroleum Operations in the
Development Area concerned from the date of
adoption of the development plan under
Section 5.4.5 to the date of payment;
49(d) the person acting as operator shall remain as
operator of the Development Area in accordance with
the rights, authorities and obligations of the
operator under the Operating Agreement;
(e) the Government, as a party under the Operating
Agreement, shall in respect of the Development Area
concerned:
(i) have the right to vote in proportion to its
Participating Interest on all decisions made
under an Operating Agreement which permit a vote
by a party;
(ii) separately take and dispose of its Participating
Interest share of all Petroleum produced and
saved;
(iii) pay its proportionate part of the expenditure
incurred in conducting Petroleum Operations in
accordance with the Operating Agreement and
accounting procedures attached thereto;
(iv) own a Participating Interest share in all
materials and equipment acquired for use
under the Operating Agreement; and
(v) have the right common with all other parties
to carry out sole risk operations in accordance
with the provisions of the Operating Agreement;
and
(f) the Government may, upon reasonable written
notice, require the Contractor to lend to the
Government up to ___ percent (___%) of the funds
required to pay the Government's pro-rata share of
expenditure. The loan shall bear interest at
____ percent. The Government shall make repayments
of the loan on a quarterly basis in an amount equal
to __ percent (___) of the difference between the
gross receipts attributable to the Government's
Participating Interest in the Development Area and
the costs and expenses, including royalty but
excluding income taxes, attributable to the
Government's Participating Interest in the
Development Area for Petroleum Operations,
Repayments of the loan shall be applied first to
accrued and unpaid interest and the balance shall be
applied in reduction of the outstanding principal
balance.
50(d) the person acting as operator shall remain as
operator of the Development Area in accordance with
the rights, authorities and obligations of the
operator under the Operating Agreement;
(e) the Government, as a party under the Operating
Agreement, shall in respect of the Development Area
concerned:
(i) have the right to vote in proportion to its
Participating Interest on all decisions made
under an Operating Agreement which permit a vote
by a party;
(ii) separately take and dispose of its Participating
Interest share of all Petroleum produced and
saved;
(iii) pay its proportionate part of the expenditure
incurred in conducting Petroleum Operations in
accordance with the Operating Agreement and
accounting procedures attached thereto;
(iv) own a Participating Interest share in all
materials and equipment acquired for use
under the Operating Agreement; and
(v) have the right common with all other parties
to carry out sole risk operations in accordance
with the provisions of the Operating Agreement;
and
(f) the Government may, upon reasonable written
notice, require the Contractor to lend to the
Government up to ___ percent (___%) of the funds
required to pay the Government's pro-rata share of
expenditure. The loan shall bear interest at
____ percent. The Government shall make repayments
of the loan on a quarterly basis in an amount equal
to __ percent (___) of the difference between the
gross receipts attributable to the Government's
Participating Interest in the Development Area and
the costs and expenses, including royalty but
excluding income taxes, attributable to the
Government's Participating Interest in the
Development Area for Petroleum Operations,
Repayments of the loan shall be applied first to
accrued and unpaid interest and the balance shall be
applied in reduction of the outstanding principal
balance.
50SECTION VII: COST RECOVERY AND PRODUCTION SHARING
7.1. Cost recovery
7.1.1 The Contractor shall be entitled to recover its Petroleum Operations Costs from Crude Oil produced within the Contract Area and that is not used in Petroleum Operations, to the extent permitted by the provisions of this Section 7.1 and Appendix I.
7.1.2 The Contractor shall retain and dispose, in each Calendar Year, of that volume of Crude Oil (hereinafter referred to as "Cost Oil") the value of which is equal to the recoverable Petroleum Operations Costs for that Calendar Year, limited to an amount not exceeding the maximum share of production determined according to the following incremental scale:
Average daily production from the Contract Area | Maximum share of average daily production available for cost recovery
First 20,000 Barrels/day | _____%
Next 30,000 Barrels/day | _____%
Any volume over first 50,000 Barrels/day | _____%
7.1.3. To the extent that the recoverable Petroleum Operations Costs for any Calendar Year exceed the value of the maximum amount of Crude Oil available under Section 7.1.2, the excess shall be carried forward for recovery in the next succeeding Calendar Year or Calendar Years.
7.1.4. For the purpose of valuation of Cost Oil, the provisions of Section 12.1 shall apply.
51SECTION VII: COST RECOVERY AND PRODUCTION SHARING
7.1. Cost recovery
7.1.1 The Contractor shall be entitled to recover its Petroleum Operations Costs from Crude Oil produced within the Contract Area and that is not used in Petroleum Operations, to the extent permitted by the provisions of this Section 7.1 and Appendix I.
7.1.2 The Contractor shall retain and dispose, in each Calendar Year, of that volume of Crude Oil (hereinafter referred to as "Cost Oil") the value of which is equal to the recoverable Petroleum Operations Costs for that Calendar Year, limited to an amount not exceeding the maximum share of production determined according to the following incremental scale:
Average daily production from the Contract Area | Maximum share of average daily production available for cost recovery
First 20,000 Barrels/day | _____%
Next 30,000 Barrels/day | _____%
Any volume over first 50,000 Barrels/day | _____%
7.1.3. To the extent that the recoverable Petroleum Operations Costs for any Calendar Year exceed the value of the maximum amount of Crude Oil available under Section 7.1.2, the excess shall be carried forward for recovery in the next succeeding Calendar Year or Calendar Years.
7.1.4. For the purpose of valuation of Cost Oil, the provisions of Section 12.1 shall apply.
51
7.2 Production sharing
7.2.1 The balance of Crude Oil remaining in any Calendar
Year after deduction of the royalty payments under
Section 11.2 and after recoverable Petroleum
Operations Costs have been satisfied to the extent
and in the manner aforesaid in Section 7.1, shall
be referred to as "Profit Oil" and shall be
shared, taken and disposed of between the
Government and the Contractor as follows:
Increments Government's Contractor's
of Profit share share
Oil
First 20,000 ____ % ____ %
Barrels/day
Next 20,000
Barrels/day ____ % ____ %
Next 30,000
Barrels/day ____ % ____ %
Next 30,000
Barrels/day ____ % ____ %
Any volume over
first 100,000
Barrels/day ____ % ____ %
7.2.2 For the purpose of this Section, Cost Oil and
Profit Oil calculations shall be done for each
Calendar Quarter on an accumulative basis. To the
extent that actual quantities, prices and expenses
are not known on the date of said calculations,
provisional estimates shall be made based on the
annual development work programme and budget
submitted to the Minister under Section 5.4.6.
Within thirty (30) days of the end of each
Calendar Quarter, adjustments shall be made based
on actual quantities, prices and expenses in
relation to such Quarter.
Within sixty (60) days of the end of each Calendar
Year, a final calculation of Cost Oil and Profit
Oil based on actual data pertaining to that Year
shall be prepared and any necessary adjustments
shall be made.
The Government may elect to take in kind all or
any part of the total Government's share of Profit
Oil under this Section 7.2 or direct the
Contractor to lift and market all or any part of
such Crude Oil, all in accordance with the
provisions of Section 8.2.
If the Government elects not to take and receive
in kind all or part of the Government's share of
Profit Oil, the Contractor shall make payment to
the Government for the Government's share of
Profit Oil not taken in kind within thirty (30)
days after the end of each month.
52 7.2. Production sharing
7.2.1. The balance of Crude Oil remaining in any Calendar Year after
deduction of the royalty payments under Section 11.2 and after
recoverable Petroleum Operations Costs have been satisfied to the
extent and in the manner aforesaid in Section 7.1, shall be referred to
as "Profit Oil" and shall be shared, taken and disposed of between the
Government and the Contractor as follows:
Increments of Profit Oil Government's Contractor's
share. share
First 20,000 Barrels/day ... %
Next 20,000 Barrels/day .;•• •• \.,J % \ V - v'‘1 %
Next 30,000 Barrels/day V*.. .... '• %
Next 30,000 Barrels/day-: ' ... \ \ Y'v-% %
Any volume over first
100,000 Barrels/day V\ % %
7.2.2. For the purpose of this Section, Cost Oil and Profit Oil calculations
shall be done for each Calendar Quarter on an accumulative basis. To
the extent that actual quantities, prices and expenses are not known
on the date of said calculations, provisional estimates shall be made
based on the annual development work programme and budget
submitted to the Minister under Section 5.4.6. Within thirty (30) days
of the end of each Calendar Quarter, adjustments shall be made based
on actual quantities, prices and expenses in relation to such Quarter.
Within sixty (60) days of the end of each Calendar Year, a final
calculation of Cost Oil and Profit Oil based on actual data pertaining
to that Year shall be prepared and any necessary adjustments shall be
made.
7.2.3. The Government may elect to take in kind all or any part of the total
Government's share of Profit Oil under this Section 7.2 or direct the
Contractor to lift and market all or any part of such Crude Oil, all in
accordance with the provisions of Section 8.2.
7.2.4. If the Government elects not to take and receive in kind all or part of
the Government's share of Profit Oil, the Contractor shall make
payment to the Government for the Government's share of Profit Oil
not taken in kind within thirty (30) days after the end of each month.
5 2
SECTION VIII: PRODUCTION RATE AND MARKETING
8.1. Production rate
8.1.1. The Contractor shall produce Petroleum at the maximum economic efficient rate having consideration for generally accepted international petroleum industry practice and international standards for the conservation of Petroleum resources. The Contractor shall submit ninety (90) days before the start of each Calendar Year an estimated production schedule for each Development Area.
8.1.2. The Contractor shall submit Petroleum production reports on a regular basis and in a form to be designated by the Minister.
8.2. Marketing
8.2.1. The Contractor, if so directed by the Government, shall be obligated to market all or any part of the Petroleum produced and saved from the Contract Area subject to the provisions of this Agreement.
8.2.2. Except to the extent the provisions of Section 6.1 with respect to Government participation or Section 10.1 with respect to domestic consumption are applicable, or to the extent the Minister elects to take in kind all or any part of the royalty production under Section 11.2 or the Government's share of Profit Oil under Section 7.2, the Contractor shall be entitled to take and receive and freely export Petroleum produced under this Agreement.
8.2.3. Title to Petroleum produced to which the Contractor is entitled under this Agreement shall pass to the Contractor at the wellhead.
8.2.4. One hundred and eighty (180) days prior to the estimated date of commencement of regular production from the first Development Area, the Minister shall notify the Contractor in writing whether it elects to take in kind all or any part of the royalty production under Section 11.2 or the Government's share of Profit Oil under Section 7.2.
53 SECTION Vffls PRODUCTION RATE AND MARKETING
8.1. Production rate
8.1.1. The Contractor shall produce Petroleum at the maximum economic
efficient rate having consideration for generally accepted
international petroleum industry practice and international
standards for the conservation of -.Petroleum resources. The
Contractor shall submit ninety (90) 4£ys-before The start of each
Calendar Year an estimated' production schedule for each
Development Area.
8.1.2. The Contractor shallV-subrrtit Petroleum:^production reports on a
regular basis and irt'’^.f'prrh to be designated by the Minister.
8.2. Marketing
8.2.1. The Contractor, if so. directed by the Government, shall be obligated
to market ail or any..part of the Petroleum produced and saved from
the Contract Area subject to the provisions of this Agreement.
8.2.2. Except to the extent the provisions of Section 6.1 with respect to
Government participation or Section 10.1 with respect to domestic
consumption are applicable, or to the extent the Minister elects to
take in kind all or any part of the royalty production under Section
11.2 or the Government’s share of Profit Oil under Section 7.2, the
Contractor shall be entitled to take and receive and freely export
Petroleum produced under this Agreement.
8.2.3. Title to Petroleum produced to which the Contractor is entitled
under this Agreement shall pass to the Contractor at the wellhead.
8.2.4. One hundred and eighty (180) days prior to the estimated date of
commencement of regular production from the first Development
Area, the Minister shall notify the Contractor in writing whether it
elects to take in kind all or any part of the royalty production under
Section 11.2 or the Government's share of Profit Oil under Section
7.2.
This election shall be effective until the
Minister elects in writing to change its election
with respect to taking in kind all or any part of
the royalty production or the Government's share
of Profit Oil in which case the new election shall
be effective one hundred eighty (180) days after
the date the Minister gives written notice of such
election; provided, however, that such election
shall not interfere with the proper performance of
any sales agreement for Crude Oil produced within
the Contract Area that the Contractor has executed
prior to the notice of such election.
Failure by the Minister to give timely notice of
its original election shall be conclusively deemed
to evidence the Minister's election not to take in
kind all or any part of the royalty production or
the Government's share of Profit Oil. Any sale by
the Contractor of the royalty production or the
Government's share of Profit Oil shall not be for
a term of more than twelve (12) months, without
the written consent of the Minister.
8.2.5. The Minister shall take, at the agreed upon
point of exportation or entry into a system, for
domestic consumption, regular delivery at
reasonable intervals during the period of its
election to take Crude Oil in kind as provided in
Section 8.2.4.
At a reasonable time prior to the date of
commencement of regular production from a
Development Area, the Parties shall agree on
procedures covering the scheduling, storage and
lifting of produced Crude Oil from the agreed
upon point of exportation or entry into a system
for domestic consumption.
8.2.6. If the Minister elects not to take and receive in
kind all or any part of the royalty production or
the Government's share of Profit Oil, then the
Minister may direct the Contractor to market or
itself buy such production, whichever the
Contractor shall elect to do, and the price paid
to the Government for such production shall not
be less than the value for that Petroleum
determined in accordance with Section 12.1. In
such event, the Contractor shall pay the royalty
and Government's share of Profit Oil in
accordance with the provisions of Sections 7.2,
11.2 and 14.1.2.
54This election shall be effective until the Minister elects in writing
to change its election with respect to taking in kind all or any part
of the royalty production or the Government's share of Profit Oil in
which case the new election shall be effective one hundred eighty
(180) days after the date the Minister gives written notice of such
election; provided, however, that such election shall not interfere
with the proper performance of any sales agreement for Crude Oil
produced within the Contract Area that the Contractor has
executed prior to the notice of such election.
Failure by the Minister to give timely notice of its original election
shall be conclusively deemed to evidence the Minister's election not
to take in kind all or any part of the royalty production or the
Government's share of Profit Oil. Any .sale by the Contractor of the
royalty production or the Government's share of Profit Oil shall not
be for a term of more than twelve(12) months, without the written
consent of the Minister.
8.2.5. The Minister shall take, 'at- the agreed-i-urpon point of exportation or
entry into a system, fpr domestic consumption, regular delivery at
reasonable intervals diiring the period -of its election to take Crude
Oil in kind as provided in Section 8,2.4.
At a reasonable time.-prior, t‘6 the date of commencement of regular
production from ..a-D$yeiopment Area, the Parties shall agree on
procedures covering /the scheduling, storage and lifting of produced
Crude Oil from the'agreed upon point of exportation or entry into a
system for domestic consumption.
8.2.6. If the Minister elects not to take and receive in kind all or any part
of the royalty production or the Government's share of Profit Oil,
then the Minister may direct the Contractor to market or itself buy
such production, whichever the Contractor shall elect to do, and the
price paid to the Government for such production shall not be less
than the value for that Petroleum determined in accordance with
Section 12.1. In such event, the Contractor shall pay the royalty and
Government's share of Profit Oil in accordance with the provisions
of Sections 7.2, 11.2 and 14.1.2.
f
D 4
SECTION IX: UNITIZATION
9.1. Unitization
9.1.1. If commercially producible deposits extend
beyond the Contract Area into other parts of the
Territory of Ethiopia in which other persons
have contracts for the exploration and
production of Petroleum, or in which another
contract has been granted to the Contractor, the
Minister may require, that the Contractor
develop and produce Petroleum therefrom,
in co-operation with such other contractors. The
Minister may require the Contractor to adopt
similar arrangement for other areas within the
Contract Area where those areas, if developed
and produced in connection with Petroleum
deposits in any adjacent areas would be
commercially producible.
9.1.2. If the Minister so requires, the Contractor
shall co-operate with other contractors
in preparing a proposal for joint development
and production of such Petroleum deposits.
This proposal shall be submitted for approval
o£ the Minister within six (6) months after the
Contractor's receipt of the Minister's
notification, which approval shall not
be unreasonably withheld.
9.1.3. If the proposal is not submitted within the
period so stated or if the Minister does not
approve that proposal, the Minister may prepare
or cause to be prepared in accordance with the
generally accepted international petroleum
industry practice and at the cost of the
Contractor and the other contractors involved, a
plan for joint development and production.
If the Minister adopts such a plan, the
Contractor shall comply with all the conditions
contained therein, provided that those
conditions do not reduce the economic benefit to
the Contractor under this Agreement.
9.1.4. The provisions of Sections 9.1.1, 9.1.2 and
9.1.3 shall be applicable to deposits of
Petroleum within the Contract Area that extend
to areas outside the boundaries of the State;
provided, however, that in these cases the
Minister shall be empowered to impose the
special rules and conditions which may be
necessary to comply with the general principles
of international law and satisfy obligations
under an agreement with an adjacent state with
respect to the production of such Petroleum
deposits.
55 SECTION IX: UNITIZATION
9.1. Unitization
If commercially producible deposits extend beyond the Contract
9.1.1.
Area into other parts of the Territory of Ethiopia in which other
persons have contracts for the exploration and production of
Petroleum, or in which another contract has been granted to the
Contractor, the Minister may require, tfictt the Contractor develop
and produce Petroleum therefrom, in. eo*:Pperation with such other
contractors. The Minister may'require the Contractor to adopt
similar arrangement for other-areas5 within the Contract Area where
those areas, if developed and. produced in connection with Petroleum
deposits in any adjacent areas'; would be-• c o m iner dally producible.
9.1.2. If the Minister so-:, requires, the! Contractor shall co-operate with
other contractors iri' preparing.a-.jjroposal for joint development and
production of such Petroleum deposits. This proposal shall be
submitted for approval"*of\the Minister within six (6) months after
the Contractor's- receipt of the Minister’s notification, which
approval shall not be/unreasonably withheld.
9.1.3. If the proposal is not submitted within the period so stated or if the
Minister does not approve that proposal, the Minister may prepare
or cause to be prepared in accordance with the generally accepted
international petroleum industry practice and at the cost of the
Contractor and the other contractors involved, a plan for joint
development and production.
If the Minister adopts such a plan, the Contractor shall comply with
all the conditions contained therein, provided that those conditions
do not reduce the economic benefit to the Contractor under this
Agreement.
9.1.4. The provisions of Sections 9.1.1, 9.1.2 and 9.1.3 shall be applicable
to deposits of Petroleum within the Contract Area that extend to
areas outside the boundaries of the State; provided, however, that in
these cases the Minister shall be empowered to impose the special
rules and conditions which may be necessary to comply with the
general principles of international law and satisfy obligations under
an agreement with an adjacent state with respect to the production
of such Petroleum deposits.
SECTION X: DOMESTIC CONSUMPTION
10.1. Domestic consumption
10.1.1. The Minister may require the Contractor by written notice given
one hundred eighty (180) days in advance to supply Crude Oil to the
State to meet the State's domestic consumption needs. Such Crude
Oil shall be supplied from the Crude Oil..to which the Contractor is
otherwise entitled under this Agreement:-
10.1.2. The maximum amount of Crude Oif’^that the Contractor shall be
obligated to supply to the State -to' meet its domestic consumption
needs under Section 10.14 shali’be equal to the difference between:
(a) the total domestic consumptiqkneOds multiplied by a fraction
the numerator of which..is\the total Crude Oil production from
the Contract Area and' -the' kfenominator is the total Crude Oil
production in the..Terjritofy of Ethiopia; and
(b) the amount . of Crude Oil from the Contract Area to which the
Government ..is entitled under this Agreement, including
royalties in kind, Government participation production and
Government's share of Profit Oil.
Such determination shall be made on a quarterly basis.
10.1.3. If the Contractor supplies Crude Oil for domestic consumption, the
price paid to the Contractor shall be calculated in accordance with
Section 12.1 and paid in United States dollars or any other
currencies mutually agreed.
10.1.4* The Contractor may comply with Section 10.1.1, upon the written
consent of the Minister, by importing Crude Oil and exporting the
same amount, with adjustments to be made in price and volume to
reflect transportation costs, differences in quality, gravity and the
terms of the sale.
o o
SECTION X: DOMESTIC CONSUMPTION
10.1. Domestic consumption
10.1.1. The Minister may require the Contractor by
written notice given one hundred eighty (180)
days in advance to supply Crude Oil to the State
to meet the State's domestic consumption needs.
Such Crude Oil shall be supplied from the Crude
Oil to which the Contractor is otherwise
entitled under this Agreement.
10.1.2. The maximum amount of Crude Oil that the
Contractor shall be obligated to supply to the
States ta’ meet its domestic consumption needs
under Section 10.1.1 shall be equal to the
difference between:
(a) the total do rustic consumption, needs
multiplied by a fraction the numerator of
which is the total Crude Oil production from
the Contract Area and the denominator is the
total Crude Oil production in the.
Territory of Ethiopia; and
(b) the amount of Crude Oil from the Contract
Area to which the Government is entitled
under this Agreement, including royalties in
kind, Government participation production
and Government's share of Profit Oil.
Such determination shall be made on a quarterly
basis.
10.1.3. If the Contractor supplies Crude Oil for
domestic consumption, the price paid to the
Contractor shall be calculated in accordance
with Section 12.1 and paid in United States
dollars or any other currencies mutually agreed.
10.1.4. The Contractor may comply with Section 10.1.1,
upon the written consent of the Minister, by
importing Crude Oil and exporting the same
amount, with adjustments to be made in price and
volume to reflect transportation costs,
differences in quality, gravity and the terms of
the sale.
56
SECTION XI: BONUSES, RENTALS, ROYALTIES
AND PAYMENTS
11.1 Annual rentals
11.1.1. The Contractor shall pay to the Minister during the term of the
Exploration Period the following annual rentals for all unsurrendered
parts of the Contract Area that have not been designated as a
Development Area:
(a) during the initial term of.ExfJibration Period _(_)
United States dollars per..square kilometer?: >•
(b) during the first..extension to the...E.xploration Period _
(_) United .States dollars; p&;. squ&'fe kilometer;
(c) during the second extension-..-to the Exploration Period_
(_) United States ^ollars per square kilometer; and
(d) during any ..other extension to the Exploration Period_
(_) United States dollars per square kilometer.
11.1.2. The Contractor shall pay to the Minister during the term of the
Development and Production Period an annual rental of_(_)
United States dollars per square kilometer for each part of the
Contract Area that is designated as a Development Area .
11.1.3. The first annual rental payment shall be made within thirty (30) days
after the Effective Date of this Agreement. All subsequent annual
rental payments shall be made within thirty (30) days after the
anniversary of the Effective Date and shall be calculated on the
basis of the length of time during the year that any part of the
Contract Area was being held by the Exploration Period or the
Development and Production Period. If during any year a change
occurs with regard to the Contract Area that results in an increase
in the annual rental payment due, the payment for the following
year shall be adjusted to compensate for the difference.
5 7
SECTION XI: BONUSES, RENTALS, ROYALTIES
AND PAYMENTS
11.1 Annual rentals
11.1.1. The Contractor shall pay to the Minister during
the term of the Exploration Period the following
annual rentals for all unsurrendered parts of
the Contract Area that have not been designated
as a Development Area:
(a) during the initial term of Exploration
Period __(__) United States dollars per
square kilometer.
(b) during the first extension to
the Exploration Period __(__) United-States
dollars per square kilometer;
(c) during the second extension to the
Exploration Period __(__) United States
dollars per square kilometer; and
(d) during any other extension to the
Exploration Period __(__) United States
dollars per square kilometer.
11.1.2. The Contractor shall pay to the Minister during
the term of the Development and Production
Period an annual rental of __(__) United States
dollars per square kilometer for each part of
the Contract Area that is designated as a
Development Area.
11.1.3. The first annual rental payment shall be made
within thirty (30) days after the Effective Date
of this Agreement. All subsequent annual rental
payments shall be made within thirty (30) days
after the anniversary of the Effective Date and
shall be calculated on the basis of the length
of time during the year that any part of the
Contract Area was being held by the Exploration
Period or the Development and Production Period.
If during any year a change occurs with regard
to the Contract Area that results in an increase
in the annual rental payment due, the payment
for the following year shall be adjusted to
compensate for the difference.
57
11.2. Royalties
11.2.1. The Contractor shall pay, within ten (10) days
after the end of each calendar month, to the
Minister a royalty at a rate depending on the
total daily production in a Development Area of
all Crude Oil and Natural Gas produced and saved
and not used in Petroleum Operations, and
determined according to the following
incremental scale:
Average Crude Oil production from a Royalty
Development Area
First 10,000 Barrels/day ____%
Between 10,000 and 20,000 Barrels/day ____%
Greater than 20,000 Barrels/day ____%
Average Natural Gas production from a Royalty
Development Area
First 50 million cubic feet/day ____%
Between 50 and 100 million cubic
feet/day ____%
Greater than 100 million cubic
feet/day ____%
11.2.2. The Minister may elect to take all or any
part of the royalty in kind from any Development
Area in accordance with the provisions of
Section 8.2. and unless the Minister elects to
take royalty in kind as provided in this
Section, the royalty shall be paid in cash.
11.2.3. The royalty taken in cash shall be valued, at
the agreed upon point of exportation or entry
into a system for domestic consumption, in
accordance with the appropriate provisions of
Section 12.1.
11.2.4. The title to the royalty production not taken in
kind shall pass to the Contractor at the
wellhead.
11.3. Production bonuses
11.3.1. The Contractor shall pay to the Minister the
following sums when production of Crude Oil from
the Contract Area attains the following levels
for the specified periods of time:
(a) ___(___) United States dollars after daily
production averages ___(___) barrels per day
for a period of ___(___) consecutive days;
and
(b) ___(___) United States dollars after daily
production averages ___(___) barrels per
day for a period of ___(___) consecutive
days.
11.3.2. The payment under Section 11.3.1 shall be made
within thirty (30) days after the last day of
the applicable ___(___) day period.
5811-2. Royalties
11.2.1. The Contractor shall pay, within ten (10) days after the end of each
calendar month, to the Minister a royalty at a rate depending on the
total daily production in a Development Area of all Crude Oil and
Natural Gas produced and saved and not used in Petroleum
Operations, and determined according to the following incremental
scale:
Average Crude Oil production from a
Development Area Royalty
First 10,000 Barrels/day %
Between 10,000 and 20,000 Barrels/day %
Greater than 20,000 Barrels/day %
Average Natural Gas production!rqrrva
Development Area Royalty
First 50 million cubic vfeet/day _%
Between 50 and 1Q0.-million cubic feet/day _%
Greater than 100 million cubic feet/day _%
11.2.2. The Minister may elect.tb-t^fce all or any part of the royalty in kind
from any Development Area in accordance with the provisions of
Section 8.2. and,.- unless-the Minister elects to take royalty in kind as
provided in this Section, the royalty shall be paid in cash.
11.2.3. The royalty taken in cash shall be valued, at the agreed upon point
of exportation or entry into a system for domestic consumption, in
accordance with the appropriate provisions of Section 12.1.
11.2.4. The title to the royalty production not taken in kind shall pass to the
Contractor at the wellhead.
11.3. Production bonuses
11.3.1. The Contractor shall pay to the Minister the following sums when
production of Crude Oil from the Contract Area attains the
following levels for the specified periods of time:
(a) _ (_) United States dollars after daily production
averages_(_) barrels per day for a period of_
(_) consecutive days; and
(b) _ (_) United States dollars after daily production
averages_(_) barrels per day for a period of _
(_) consecutive days.
11.3.2. The payment under Section 11.3.1 shall be made within thirty (30)
days after the last day of the applicable_(_) day period.
b 3
SECTION XIIs VALUATION AND MEASUREMENT
12.1. Valuation
12.1.1. The value of Crude Oil for all purposes shall be:
(a) if the Crude Oil is sold by the Contractor to third parties in arm's
length transactions, the net realized price (i.e., after deducting
commissions and brokerages) for that*, sale, at the F.O.B. point of
exportation or the point of entry vi'nto' a system for domestic
consumption; v-.. \ ..
(b) where Crude Oil is sold b.yth'£Con tractor. other than to third parties
in arm’s length transaction's or is relevantly appropriated without
being disposed off..that Crude Qil-.Shall be valued at the following
applicable price:
(i) if there have been -.Sale's of Crude Oil by the Contractor to
third Parties inf arrti's length transactions during the three (3)
months prececling-'that sale or appropriation, the weighted
average per ..unit price paid in these sales, net of commissions
and brokerages, at the F.O.B. point of exportation, adjusted
for quality, grade, quantity, transportation costs and any
special circumstances, unless less than twenty-five per cent
(25 96) by volume of Crude Oil sales during this period are
made to third parties, in which event Crude Oil sold other than
to third parties in arm's length transactions shall be valued
according to paragraph (b) (ii) below;
(ii) if there have been no sales of Crude Oil by the Contractor to
third Parties in arm's length transactions during the three (3)
months preceding that sale or appropriation, the average per
unit price for the prior three (3) months, net of commissions
and brokerages, at the F.O.B. point of exportation paid in
arm's length transactions of sales of Crude Oil of a similar
quality, grade, and quantity originating from countries in the
same general geographical area of Ethiopia, adjusted for
quality, grade, quantity, transportation costs and any special
circumstances;
(iii) provided that, if as a result of rapid fluctuations in prices
during the three (3) months period, or any other reason, the
price determined under (i) or (ii) above is not fair and
equitable, the market value shall be determined by reference
to prices during such period as may be appropriate.
5 9
SECTION XII: VALUATION AND MEASUREMENT
12.1. Valuation
12.1.1. The value of Crude Oil for all purposes shall
be:
(a) if the Crude Oil is sold by the Contractor
to third parties in arm's length
transactions, the net realized price (i.e.,
after deducting commissions and brokerages)
for that sale, at the F.O.B. point of
exportation or the point of entry into a
system for domestic consumption;.
(b) where Crude Oil is sold by the
Contractor, other than to third parties in
arm's length transactions or is relevantly
appropriated without being disposed
of, that Crude Oil shall be valued at
the following applicable price:
(i) if there have been sales of Crude Oil
by the Contractor to third Parties
in arm's length transactions during
the three (3) months preceding that
sale or appropriation, the weighted
average per unit price paid in these
sales, net of commissions and
brokerages, at the F.O.B. point of
exportation, adjusted for quality,
grade, quantity, transportation costs
and any special circumstances, unless
less than twenty-five per cent (25 %) by
volume of Crude Oil sales during this
period are made to third parties, in
which event Crude Oil sold other than to
third parties in arm's length
transactions shall be valued according
to paragraph (b) (ii) below;
(ii) if there have been no sales of Crude Oil
by the Contractor to third Parties in
arm's length transactions during the
three (3) months preceding that sale or
appropriation, the average per unit
price for the prior three (3) months,
net of commissions and brokerages, at
the F.O.B. point of exportation paid in
arm's length transactions of sales of
Crude Oil of a similar quality, grade,
and quantity originating from countries
in the same general geographical area of
Ethiopia, adjusted for quality, grade,
quantity, transportation costs and any
special circumstances;
(iii) provided that, if as a result of rapid
fluctuations in prices during the three
(3) months period, or any other reason,
the price determined under (i) or (ii)
above is not fair and equitable, the
market value shall be determined by
reference to prices during such period
as may be appropriate.
59(c) If the Minister and the Contractor cannot reach agreement on the value of Crude Oil within thirty (30) days, such determination shall be made by an internationally recognized expert appointed by the Contractor and the Minister, but if they fail to agree within thirty (30) days on the appointment of such expert, then such appointment shall be made by the International Chamber of Commerce. The expert shall report his determination within twenty (20) days of his appointment and his determination shall be final and binding upon the Government and the Contractor.
Pending the determination of the value of Crude Oil for a given period, the value of Crude Oil determined for the preceding Calendar Quarter will be provisionally applied to make calculation and payment until the applicable value for that period is finally determined. Any adjustment to provisional calculation and payment, if necessary, will be made within thirty (30) days after such applicable value is finally determined.
12.1.2. The value of Natural Gas for all purposes shall be:
(a) where Natural Gas is sold by the Contractor to third parties in arm’s length transactions, the net realized price obtained for such Natural Gas at the point where title and risk pass to the buyer;
(b) where Natural Gas is sold by the Contractor other than to third parties in arm's length transactions or is sold to the Government, that Natural Gas shall be valued at a price and in a currency to be determined by agreement between the Minister and the Contractor.
12.1.3. For the purposes of this Section 12.1:
(a) "relevantly appropriated" means appropriated to refining or to any use except Petroleum consumed in the course of Petroleum Operations;and
(b)a sale of Petroleum is a at "arm's length" if the following conditions are satisfied:
(i) the price is the sole consideration for the sale;
(ii) the terms of the sale are not affected by any commercial relationship, other than that created by the contract of sale itself, between the seller or an Affiliate and the buyer or an Affiliate;and
(iii) the seller or an Affiliate do not have, directly or indirectly, an interest in the subsequent resale or disposal of the Petroleum or any product derived therefrom.
60(c) If the Minister and the Contractor cannot reach agreement on the value of Crude Oil within thirty (30) days, such determination shall be made by an internationally recognized expert appointed by the Contractor and the Minister, but if they fail to agree within thirty (30) days on the appointment of such expert, then such appointment shall be made by the International Chamber of Commerce. The expert shall report his determination within twenty (20) days of his appointment and his determination shall be final and binding upon the Government and the Contractor.
Pending the determination of the value of Crude Oil for a given period, the value of Crude Oil determined for the preceding Calendar Quarter will be provisionally applied to make calculation and payment until the applicable value for that period is finally determined. Any adjustment to provisional calculation and payment, if necessary, will be made within thirty (30) days after such applicable value is finally determined.
12.1.2. The value of Natural Gas for all purposes shall be:
(a) where Natural Gas is sold by the Contractor to third parties in arm’s length transactions, the net realized price obtained for such Natural Gas at the point where title and risk pass to the buyer;
(b) where Natural Gas is sold by the Contractor other than to third parties in arm's length transactions or is sold to the Government, that Natural Gas shall be valued at a price and in a currency to be determined by agreement between the Minister and the Contractor.
12.1.3. For the purposes of this Section 12.1:
(a) "relevantly appropriated" means appropriated to refining or to any use except Petroleum consumed in the course of Petroleum Operations;and
(b)a sale of Petroleum is a at "arm's length" if the following conditions are satisfied:
(i) the price is the sole consideration for the sale;
(ii) the terms of the sale are not affected by any commercial relationship, other than that created by the contract of sale itself, between the seller or an Affiliate and the buyer or an Affiliate;and
(iii) the seller or an Affiliate do not have, directly or indirectly, an interest in the subsequent resale or disposal of the Petroleum or any product derived therefrom.
6012.2. Measurement
12.2.1. The volume and quality of Petroleum produced and saved by the
Contractor shall be measured by methods and appliances in
accordance with generally accepted international petroleum
industry practice, which shall be approved by the Minister.
12.2.2. The Minister may inspect the appliances used for measuring the
volume and determining the quality of Petroleum and may appoint
an inspector to supervise the measurement of volume and
determination of quality.
12.2.3. Where the method of measurement, or the appliances used therefor,
have caused an overstatement or understatement of royalties or
share of the production, the error shall be-presumed to have existed
since the date of the last calibratioh'-bf the measurement devices,
unless the contrary is shown; “arid., an appropriat6- kjUst‘ment shali be
made at the average value for the period '-of the error, or by an
adjustment in del i veries.iri'.kind over an dqdivadent period.
12.2.4. The Contractor and the. Minister'-shall'determine the point at which
production shall be measured;-... •
6 ?
12.2.Measurement
12.2.1. The volume and quality of Petroleum produced and saved by the Contractor shall be measured by methods and appliances in accordance with generally accepted international petroleum industry practice, which shall be approved by the Minister.
12.2.2. The Minister may inspect the appliances used for measuring the volume and determining the quality of Petroleum and may appoint an inspector to supervise the measurement of volume and determination of quality.
12.2.3. Where the method of measurement, or the appliances used therefor, have caused an overstatement or understatement of royalties or share of the production, the error shall be presumed to have existed since the date of the last calibration of the measurement devices, unless the contrary is shown, and an appropriate adjustment shall be made at the average value for the period of the error, or by an adjustment in deliveries in kind over an equivalent period.
12.2.4. The Contractor and the Minister shall determine the point at which production shall be measured.
61 SECTION XIII: NATURAL GAS
13.1. Non-associated Natural Gas
13.1.1. If Non-associated Natural Gas is discovered, the Contractor and the Minister shall engage in good faith discussion to determine whether the Natural Gas discovery should be appraised with a view to its eventual development and production. Such discussions shall take into consideration among other things the following factors:
(a) priority uses for Natural Gas will be (i) its use in Petroleum Operations, (ii) its utilization in Ethiopia, and (ii) its sale for export projects, depending on the existence or potential of the respective markets;
(b) the quality, minimum quantities and costs of facilities required to produce, develop, transport and market the Natural Gas;
(c) the pricing of the Natural Gas for domestic utilization at levels that will ensure the economic viability of the project and the economic utilization of the Natural Gas for each Particular use, including reference to the value of the energy it may displace;
(d) the willingness of the Government to enter into long term sales arrangements with adequate safeguards for and from the Contractor in order to promote and develop the use of indigenous resources of Natural Gas in Ethiopia, as well as to develop on a timely basis the necessary downstream components of the project.
13.1.2. If the Contractor, after discussion with the Minister under Section 13.1.1, considers that the Non-associated Natural Gas discovery merits appraisal, the Contractor shall proceed with the appraisal programme as stipulated under Section 5.3 and, if necessary, the provisions of Section 2.2.5 shall apply.
13.1.3. If the Contractor and the Minister agree, after discussion under 13.1.1 and the completion of the appraisal programme, that the Non-associated Natural Gas discovery constitutes a Commercial Discovery the Contractor could proceed with its development and production through submission of a development plan in accordance with the provisions of Section 5.4. The Contractor and the Minister shall enter into good faith negotiations for detailed separate agreements to govern the development, processing, utilization and disposition or sale of the Natural Gas concerned.
For the purpose of expediting the execution of a domestic Gas development project, a Gas development advisory committee shall be established with representatives of the Government and the
62 SECTION XIII: NATURAL GAS
13.1. Non-associated Natural Gas
13.1.1. If Non-associated Natural Gas is discovered, the Contractor and the Minister shall engage in good faith discussion to determine whether the Natural Gas discovery should be appraised with a view to its eventual development and production. Such discussions shall take into consideration among other things the following factors:
(a) priority uses for Natural Gas will be (i) its use in Petroleum Operations, (ii) its utilization in Ethiopia, and (ii) its sale for export projects, depending on the existence or potential of the respective markets;
(b) the quality, minimum quantities and costs of facilities required to produce, develop, transport and market the Natural Gas;
(c) the pricing of the Natural Gas for domestic utilization at levels that will ensure the economic viability of the project and the economic utilization of the Natural Gas for each Particular use, including reference to the value of the energy it may displace;
(d) the willingness of the Government to enter into long term sales arrangements with adequate safeguards for and from the Contractor in order to promote and develop the use of indigenous resources of Natural Gas in Ethiopia, as well as to develop on a timely basis the necessary downstream components of the project.
13.1.2. If the Contractor, after discussion with the Minister under Section 13.1.1, considers that the Non-associated Natural Gas discovery merits appraisal, the Contractor shall proceed with the appraisal programme as stipulated under Section 5.3 and, if necessary, the provisions of Section 2.2.5 shall apply.
13.1.3. If the Contractor and the Minister agree, after discussion under 13.1.1 and the completion of the appraisal programme, that the Non-associated Natural Gas discovery constitutes a Commercial Discovery the Contractor could proceed with its development and production through submission of a development plan in accordance with the provisions of Section 5.4. The Contractor and the Minister shall enter into good faith negotiations for detailed separate agreements to govern the development, processing, utilization and disposition or sale of the Natural Gas concerned.
For the purpose of expediting the execution of a domestic Gas development project, a Gas development advisory committee shall be established with representatives of the Government and the
62Contractor to coordinate all upstream and downstream components of the project and facilitate its evaluation and implementation.
Unless otherwise agreed, the adoption of the relevant development plan under section 5.4. shall be made only once all agreements for the disposition or sale of the Natural Gas concerned have been concluded.
13.1.4. If the Contractor elects not to develop a Non-associated Natural Gas discovery which has been appraised and found of potential commercial interest in accordance with the provisions of Section 13.1.3, the Government shall have the right to proceed with the development and productions of the discovery at its sole risk, cost and expense, and shall reimburse the Contractor the certified costs and expenses directly attributable to the appraisal of such discovery provided, however, that:
(a) the Contractor surrenders all its rights under this Agreement in respect of the area corresponding to the Non-associated Natural Gas discovery;
(b) the appraisal programme was approved in writing by the Minister;
(c) the Contract and Government agree, with the assistance of specialized third parties when necessary, that sufficient economically recoverable gas reserves have been proved to support the demand for and the economic viability of a pre-identified domestic Natural Gas project for a period of at least twenty five (25) years under the pricing principles specified under Section 13.1 and taking into account the reimbursement included herein; and
(d) such reimbursement to the Contractor shall be made in ____ (___) years, without interest, in equal quarterly installments starting six (6) months after the date of adoption by the Minister of the development plan for the particular Natural Gas discovery concerned. The Government may elect to make reimbursements either in cash of in Crude Oil valued pursuant to the provisions of Section 12.1.
13.1.5. If the Contractor decides, after discussions under Section 13.1.1. and the completion of the appraisal programme, that the Non-associated Natural Gas discovery is not a Commercial Discovery, the Government shall have the right to proceed with further appraisal and development of the reservoirs corresponding to the Natural Gas discovery at its sole risk, cost and expense. The Government may develop, produce, take, process and utilize or sell the Non-associated Natural Gas without compensation to the Contractor provided, however, that:
(a) the Government shall bear all costs for any new fixtures and installations required for the development, productions, transportation, processing and utilization thereof;
83Contractor to coordinate all upstream and downstream components
of the project and facilitate its evaluation and implementation.
Unless otherwise agreed, the adoption of the relevant development
plan under Section 5.4 shall be made only once all agreements for
the disposition or sale of the Natural Gas concerned have been
concluded.
13.1.4. If the Contractor elects not to develop a Non-associated Natural
Gas discovery which has been appraised and found of potential
commercial interest in accordance with the provisions of Section
13.1.3, the Government shall have the right to proceed with the
development and production of the discovery at its sole risk, cost
and expense, and shall reimburse the Contractor the certified costs
and expenses directly attributable to the..appraisal of such discovery
provided, however, that:
(a) the Contractor surrenders' all- its rights under, this Agreement
in respect of the area cbrrespondir\g to vthe Non-associated
Natural Gas discovery?
(b) the appraisal..-programme . -was approved in writing by the
Minister;
(c) the Contractor and fhei-Government agree, with the assistance
of specialize^ third parties when necessary, that sufficient
economically recoverable gas reserves have been proved to
support the -demand for and the economic viability of a pre¬
identified domestic Natural Gas project for a period of at
least twenty five (25) years under the pricing principles
specified under Section 13.1 and taking into account the
reimbursement included herein; and
(d) such reimbursement to the Contractor shall be made in_
(_) years, without interest, in equal quarterly instalments
starting six (6) months after the date of adoption by the
Minister of the development plan for the particular Natural
Gas discovery concerned. The Government may elect to make
reimbursements either in cash or in Crude Oil valued pursuant
to the provisions of Section 12.1.
13.1.5. If the Contractor decides, after discussions under Section 13.1.1 and
the completion of the appraisal programme, that the Non-associated
Natural Gas discovery is not a Commercial Discovery, the
Government shall have the right to proceed with further appraisal
and development of the reservoirs corresponding to the Natural Gas
discovery at its sole risk, cost and expense. The Government may
develop, produce, take, process and utilize or sell the Non-
associated Natural Gas without compensation to the Contractor
provided, however, that:
(a) the Government shall bear all costs for any new fixtures and
installations required for the development, production,
transportation, processing and utilization thereof;
(b) the production of Natural Gas shall not materially interfere
with other Petroleum Operations; and
(c) rights of the Contractor under this Agreement in respect of
reservoirs other than the identified Non-associated Natural
Gas reservoirs will remain unaffected.
13.1.6. If after good faith discussions with the Minister under Section
13.1.1, the Contractor decides that there is no merit in appraising
the Non-associated Natural Gas discovery, the Contractor shall
submit to the Minister a report justifying its decision on the basis of
at least the following factors:
(a) evaluation of possible reserves taking into account test results
of the discovery well and any other..relevant information;
(b) market alternatives considered., for thie Non-associated Natural
Gas;
(c) investment and cost estimates; and \
(d) economic reserves under different, price assumptions.
If the Contractor fails to comply with this requirement within a
period of one (1) year..-afte'r-the date of the discovery, the Minister
may at his discretion terminate the rights of the Contractor in
respect of the area corresponding to the Non-associated Natural Gas
discovery.
13.2. Associated Natural Gas
13.2.1. Associated Natural Gas, which is not required for use in Petroleum
Operations and the development, production, processing and
utilization or sale of which the Contractor concludes is not
economical, shall be returned to the subsurface structure, but the
Contractor has the right to flare such Natural Gas in accordance
with generally accepted international petroleum industry practice,
provided the Contractor demonstrates that the flaring is required
for technical and economic reasons and the Minister appproves the
flaring, which approval shall not be unreasonably withheld.
If the Contractor determines to flare such Natural Gas, the
Government has the right to take such gas at no cost except to
compensate the Contractor for the additional costs to deliver the
Natural Gas to the Government.
13.2.2. If the Contractor and the Minister agree that the Associated
Natural Gas that is not required for Petroleum Operations may be
economically processed and utilized or sold other than in gas
recycling, reservoir pressure maintenance, gas lift or secondary
recovery operations, the Contractor and the Minister shall enter
into good faith negotiations for a separate agreement to govern the
processing, utilization and disposition or sale of the Natural Gas
concerned.
(b) the production of Natural Gas shall not materially interfere with other Petroleum Operations; and
(c) rights of the Contractor under this Agreement in respect of reservoirs other than the Identified Non-associated Natural Gas reservoirs will remain unaffected.
13.1.6 If after good faith discussions with the Minister under Section 13.1.1, the Contractor decides that there is no merit in appraising the Non-associated Natural Gas discovery, the Contractor shall submit to the Minister a report justifying its decision on the basis at least the following factors:
(a) evaluation of possible reserves taking into account test results of the discovery well and any other relevant information;
(b) market alternatives considered for the Non-associated Natural Gas;
(c) investment and cost estimates; and
(d) economic reserves under different price assumptions.
If the Contractor fails to comply with this requirement within a period of one (1) year after the date of the discovery, the Minister may at his discretion terminate the rights of the Contractor in respect of the area corresponding to the Non-associated Natural Gas discovery.
13.2 Associated Natural Gas
13.2.1 Associated Natural Gas, which is not required for use in Petroleum Operations and the development, production, processing and utilization or sale of which the Contractor concludes is not economical, shall be returned to the subsurface structure, but the Contractor has the right to flare such Natural Gas in accordance with generally accepted international petroleum industry practice, provided the Contractor demonstrates that the flaring is required for technical and economic reasons and the Minister approves the flaring, which approval shall not be unreasonably withheld.
If the Contractor determines to flare such Natural Gas, the Government has the right to take such gas to no cost except to compensate the Contractor for the additional costs to deliver the Natural Gas to the Government.
13.2.1 If the Contractor and the Minister agree that the Associated Natural Gas that is not required for Petroleum Operations may be economically processed and utilized or sold other than in gas recycling, reservoir pressure maintenance, gas lift or secondary recovery operations, the Contractor and the Minister shall enter into good faith negotiations for a separate agreement to govern the processing, utilization and disposition or sale of the Natural Gas concerned.
6413.3. Other provisions
13.3.1. The development and production of Natural Gas, whether associated or non-associated, shall be subject to this Agreement and the Accounting Procedures attached hereto as Appendix I as well as any special agreement entered into between the Minister and the Contractor pursuant to the provisions of Sections 13.1 and 13.2. However, the Minister and the Contractor may engage in good faith negotiations to modify the provisions of Section VII on cost recovery and production sharing in respect of Natural Gas, if the Minister determines that special circumstances relating to Natural Gas development and production exist which warrant such modification.
13.3.2. Except as otherwise agreed, the provisions of this Agreement shall apply mutatis mutandis to a production of Natural Gas and considering that six thousand (6000) cubic feet of Natural Gas at a temperature of fifteen degrees Celsius (15C) and standard atmospheric pressure of 1.01325 bar shall be deemed to be equivalent to one (1) Barrel of Crude Oil. Natural Gas liquids shall be treated as Crude Oil.
In the event that a Non-associated Natural Gas discovery is produced, the Petroleum Operations Costs incurred by the Contractor and directly attributable to the discovery shall be only recovered in accordance with Section 7.1 from part of the production from that discovery, unless an agreement made pursuant to this Section so provides.
13.3.3. The value of Natural Gas for all purposes shall be determined in accordance with the provisions of Section 12.1.
8513.3. Other provisions
13.3.1. The development and production of Natural Gas, whether associated or non-associated, shall be subject to this Agreement and the Accounting Procedures attached hereto as Appendix I as well as any special agreement entered into between the Minister and the Contractor pursuant to the provisions of Sections 13.1 and 13.2. However, the Minister and the Contractor may engage in good faith negotiations to modify the provisions of Section VII on cost recovery and production sharing in respect of Natural Gas, if the Minister determines that special circumstances relating to Natural Gas development and production exist which warrant such modification.
13.3.2. Except as otherwise agreed, the provisions of this Agreement shall apply mutatis mutandis to a production of Natural Gas and considering that six thousand (6000) cubic feet of Natural Gas at a temperature of fifteen degrees Celsius (15C) and standard atmospheric pressure of 1.01325 bar shall be deemed to be equivalent to one (1) Barrel of Crude Oil. Natural Gas liquids shall be treated as Crude Oil.
In the event that a Non-associated Natural Gas discovery is produced, the Petroleum Operations Costs incurred by the Contractor and directly attributable to the discovery shall be only recovered in accordance with Section 7.1 from part of the production from that discovery, unless an agreement made pursuant to this Section so provides.
13.3.3. The value of Natural Gas for all purposes shall be determined in accordance with the provisions of Section 12.1.
85SECTION XIV: FINANCIAL AND FISCAL MATTERS AND ACCOUNTING
14.1. Finances
14.1.1. The Contractor shall provide all funds necessary to conduct Petroleum Operations, shall bear the sole financial risk in carrying out such Petroleum Operations, and shall therefore have an economic interest in the development and production of Petroleum
from the Contract Area, except otherwise provided in this Agreement.
14.1.2. All payments under this Agreement by the Contractor to the Government or the Minister shall be made in United States dollars unless the Minister and the Contractor shall agree upon payment in other freely convertible foreign currency. Any delayed payments shall bear interest at_______ per cent(_________) per year.
14.1.3. Charges for services requested by the Contractor and actually rendered by the Government or its administrative or political subdivisions shall be made at generally applicable rates for such services.
14.2. Taxation
14.2.1. The Contractor and the Subcontractors shall be subject to, and comply with, all income tax laws and regulations of Ethiopia.
Unless otherwise agreed by the Parties, the provisions of Section 14.1.2 shall apply to income tax payments.
14.2.2. The salaries and other benefits in cash or in kind of expatriate employees of the Contractor and the Subcontractors derived from activities required for performance under this Agreement shall be exempt from personal income tax.
14.3. Foreign exchange control
14.3.1. The Contractor shall comply with the procedures and formalities required by the legislation and , regulations relating to foreign exchange in force from time to time in Ethiopia, provided, however, that the Contractor shall have the right:
(a) to open and keep one or more transferable or non-transferable Birr accounts with the Commercial Bank of Ethiopia. Such Birr accounts shall be credited with:
(i) the proceeds of the conversion into Birr pursuant to
paragraph (c) below of funds deposited in the external
accounts referred to in paragraph (b) below; and
66SECTION XIV: FINANCIAL AND FISCAL MATTERS AND ACCOUNTING
14.1. Finances
14.1.1. The Contractor shall provide all funds necessary to conduct Petroleum Operations, shall bear the sole financial risk in carrying out such Petroleum Operations, and shall therefore have an economic interest in the development and production of Petroleum
from the Contract Area, except otherwise provided in this Agreement.
14.1.2. All payments under this Agreement by the Contractor to the Government or the Minister shall be made in United States dollars unless the Minister and the Contractor shall agree upon payment in other freely convertible foreign currency. Any delayed payments shall bear interest at_______ per cent(_________) per year.
14.1.3. Charges for services requested by the Contractor and actually rendered by the Government or its administrative or political subdivisions shall be made at generally applicable rates for such services.
14.2. Taxation
14.2.1. The Contractor and the Subcontractors shall be subject to, and comply with, all income tax laws and regulations of Ethiopia.
Unless otherwise agreed by the Parties, the provisions of Section 14.1.2 shall apply to income tax payments.
14.2.2. The salaries and other benefits in cash or in kind of expatriate employees of the Contractor and the Subcontractors derived from activities required for performance under this Agreement shall be exempt from personal income tax.
14.3. Foreign exchange control
14.3.1. The Contractor shall comply with the procedures and formalities required by the legislation and , regulations relating to foreign exchange in force from time to time in Ethiopia, provided, however, that the Contractor shall have the right:
(a) to open and keep one or more transferable or non-transferable Birr accounts with the Commercial Bank of Ethiopia. Such Birr accounts shall be credited with:
(i) the proceeds of the conversion into Birr pursuant to
paragraph (c) below of funds deposited in the external
accounts referred to in paragraph (b) below; and
66
(ii) amounts received in Birr, subject to approval of the
National Bank of Ethiopia as to the source or origin;
(b) to open and keep foreign currency account with the
Commercial Bank of Ethiopia and freely dispose of the sums
deposited therein. Such account shall be credited only with
sums deposited in convertible currencies;
(c) to convert to Birr the foreign convertible currencies
acceptable to Ethiopian banks at rates of exchange quoted by
Commercial Banks operating in Ethiopia. Such rates shall not
be less favorable to the Contractor than the effective rate
applicable for similar transactions undertaken by any private
or state enterprise on the date of the transaction;
(d) to open and freely maintain foreign bank accounts outside
Ethiopia. Said bank accounts may be credited, with funds from
any source, except that such accounts shall not be credited
with the proceeds of the sale of Birr without the prior
approval of the National Bank of Ethiopia. Save in respect of
Ethiopia under this Agreement, the Contractor shall have the
right to retain abroad all proceeds and payments under this
Agreement received in said bank accounts, including but not
limited to the proceeds of sales of Petroleum here under, and
to dispose freely of the same without any obligation to
repatriate the same or any part thereof to Ethiopia;
(e) pay directly outside Ethiopia foreign Subcontractors for
purchase of goods and services necessary to carry out
Petroleum Operations here under; and
(f) freely repatriate abroad all proceeds from Contractor's
Petroleum Operations within Ethiopia.
Foreign Subcontractors of the Contractor shall have the same rights
and obligations specified above as the Contractor.
14.3.2. Any foreign Subcontractor of the Contractor and any of the
expatriate personnel of the Contractor or of any of its
Subcontractors, shall be entitled to receive outside Ethiopia the
whole or any part of his compensation provided, however, that such
foreign Subcontractor and expatriate personnel shall be required to
bring into Ethiopia such freely convertible currencies to meet
payments of Ethiopian taxes, living and other expenses.
14.3.3. The payment of principal, interest and/or costs due on funds and
loans in foreign currency shall not be made out of funds deposited in
the accounts opened and kept under Section 14.3.1 (a) above.
67
(ii) amounts received in Birr, subject to approval of the
National Bank of Ethiopia as to the source or origin;
(b) to open and keep foreign currency account with the
Commercial Bank of Ethiopia and freely dispose of the sums
deposited therein. Such account shall be credited only with
sums deposited in convertible currencies;
(c) to convert to Birr the foreign convertible currencies
acceptable to Ethiopian banks at rates of exchange quoted by
commercial banks operating in Ethiopia. Such rates shall not
be less favourable to the Contractor than the effective rate
applicable for similar transactions undertaken by any private
or state enterprise on the date of the transaction;
(d) to open and freely maintain., fpj^eigh bank .accounts outside
Ethiopia. Said bank accounts rnay- be credited, ..with funds from
any source, except that;-such' accounts ‘•shall not be credited
with the proceeds."of ‘••‘.the sale of Birr 'without the prior
approval of the National Bank .of Ethiopia. Save in respect of
funds needed'.by. the' ContracWr tq discharge its obligations in
Ethiopia under..this Agreement, the Contractor shall have the
right to retain abroad'all proceeds and payments under this
Agreement receiye<3‘.i h‘>.said bank accounts, including but not
limited to the proceeds of sales of Petroleum hereunder, and
to dispose /‘freely-’’of the same without any obligation to
repatriate the..same or any part thereof to Ethiopia;
(e) pay directly outside Ethiopia foreign Subcontractors for
purchases of goods and services necessary to carry out
Petroleum Operations hereunder; and
(f) freely repatriate abroad all proceeds from Contractors
Petroleum Operations within Ethiopia.
Foreign Subcontractors of the Contractor shall have the same rights
and obligations specified above as the Contractor.
14.3.2. Any foreign Subcontractor of the Contractor and any of the
expatriate personnel of the Contractor or of any of its
Subcontractors, shall be entitled to receive outside Ethiopia the
whole or any part of his compensation provided, however, that such
foreign Subcontractor and expatriate personnel shall be required to
bring into Ethiopia such freely convertible currencies to meet
payments of Ethiopian taxes, living and other expenses.
14.3.3. The payment of principal, interest and/or costs due on funds and
loans in foreign currency shall not be made out of funds deposited in
the accounts opened and kept under Section 14.3.1 (a) above.
14.3.4. The Contractor and the Subcontractors shall, within thirty (30) days after the end of each Calendar Quarter, submit to the National Bank of Ethiopia, with a copy to the Minister, a summary of all currency received, imported, remitted and maintained abroad pursuant to Section 14.3.1 during the relevant quarter.
14.3.5. Except as otherwise provided herein, expatriate employees of the Contractor and the Subcontractors shall comply with applicable foreign exchange legislation and regulations.
14.4. Accounting
14.4.1. The Contractor shall keep in Addis Ababa complete financial accounts and records in English and in United States dollars reflecting all Petroleum Operations.
If payments are made in other than United States dollars, such payments shall be recorded in United States dollars based on the exchange rate for the currency in which the payments are made, as quoted by ______ on the date of the actual transfer of funds.
Such accounts and records shall be prepared and maintained in accordance with generally accepted international petroleum industry practice and as prescribed in Appendix I to this Agreement and as may be prescribed in regulations issued pursuant to the Petroleum Proclamation.
14.4.2. The Contractor shall prepare on a Calendar Year bass an annual balance sheet and profit and loss statement in accordance with the Accounting Procedures set forth in Appendix I hereto and the generally applicable laws of Ethiopia. Such accounts and the reports to the Minister derived therefrom shall be certified by an independent auditor acceptable to the Minister and shall be submitted, along with the auditor's report, to the Minister and other appropriate authorities within ninety (90) days after the end of the Calendar Year to which they pertain.
14.4.3. The Government shall have the right, at its cost and expense, to carry out additional audits of the Contractor's books, records and accounts relating to this Agreement for any Calendar Year.
6814.3.4. The Contractor and the Subcontractors shall, within thirty (30) days after the end of each Calendar Quarter, submit to the National Bank of Ethiopia, with a copy to the Minister, a summary of all currency received, imported, remitted and maintained abroad pursuant to Section 14.3.1 during the relevant quarter.
14.3.5. Except as otherwise provided herein, expatriate employees of the Contractor and the Subcontractors shall comply with applicable foreign exchange legislation and regulations.
14.4. Accounting
14.4.1. The Contractor shall keep in Addis Ababa complete financial accounts and records in English and in United States dollars reflecting all Petroleum Operations.
If payments are made in other than United States dollars, such payments shall be recorded in United States dollars based on the exchange rate for the currency in which the payments are made, as quoted by ______ on the date of the actual transfer of funds.
Such accounts and records shall be prepared and maintained in accordance with generally accepted international petroleum industry practice and as prescribed in Appendix I to this Agreement and as may be prescribed in regulations issued pursuant to the Petroleum Proclamation.
14.4.2. The Contractor shall prepare on a Calendar Year bass an annual balance sheet and profit and loss statement in accordance with the Accounting Procedures set forth in Appendix I hereto and the generally applicable laws of Ethiopia. Such accounts and the reports to the Minister derived therefrom shall be certified by an independent auditor acceptable to the Minister and shall be submitted, along with the auditor's report, to the Minister and other appropriate authorities within ninety (90) days after the end of the Calendar Year to which they pertain.
14.4.3. The Government shall have the right, at its cost and expense, to carry out additional audits of the Contractor's books, records and accounts relating to this Agreement for any Calendar Year.
68SECTION XV: IMPORTS AND EXPORTS
15.1 Imports
15.1.1. Subject to the local purchase obligations of the Section 3.6, the Contractor and each Subcontractor shall be entitled to import into Ethiopia any and all drilling, geological, geophysical, production, treating, processing, transportation and other machinery and equipment necessary for Petroleum Operations, including aircraft, vessels, vehicles and other transportation equipment and parts therefor (other than sedan cars and fuel therefor), fuels, chemicals, lubricants, films, seismic tapes, house trailers, office trailers, disassembled prefabricated structures and other materials necessary for Petroleum Operations free of import taxes, charges, duties, levies and imposts of any kind, provided, however, that this shall not preclude the Contractor and the Subcontractor from paying charges to the Government for services actually rendered by any appropriate Government agency.
15.1.2. Other than as specified in this Agreement and the Petroleum Proclamation, all other imports by the Contractor, each Subcontractor and their employees shall be subject to all generally applicable import duties and taxes of Ethiopia.
15.1.3. Each expatriate employee of the Contractor and Subcontractors may, in accordance with prevailing regulations, import household goods and personal effects including one (1) sedan car per employee, within six (6) months of its arrival, free of import taxes, charges, duties, levies and imposts of any kind, provided, however, that such properties are imported for the sole use of the employee and his family.
15.2. Exports
15.2.1. All items imported under Section 15.1, and taken out from Ethiopia shall be exempt from export duties and other taxes and duties levied on exports, provided, however, that if these items are disposed of within Ethiopia, the Contractor, Subcontractors and expatriate employees, as the case may be, shall pay customs duties and taxes in accordance with the applicable laws.
15.2.2. The Contractor may export from Ethiopia, exempt of all export duties and other taxes levied on exports, the Petroleum produced from the Contract Area to with the Contractor is entitled in accordance with the provisions of the Agreement.
SECTION XV: IMPORTS AND EXPORTS
15.1 Imports
15.1.1. Subject to the local purchase obligations of Section 3.6, the
Contractor and each Subcontractor shall be entitled to import into
Ethiopia any and all drilling, geological, geophysical, production,
treating, processing, transportation and other machinery and
equipment necessary for Petroleum Operations, including aircraft,
vessels, vehicles and other transportation equipment and parts
therefor (other than sedan cars and fuel-therefor), fuels, chemicals,
lubricants, films, seismic tapes, house''^trailers, office trailers,
disassembled prefabricated structures;'and’’other materials necessary
for Petroleum Operations free of: ifnport taxes*-.charges, duties,
levies and imposts of any kitidi; provided, h.o.weyet', that this shall not
preclude the Contractor-arid the Subcontractor from paying charges
to the Government .for‘ services actually>endered by any appropriate
Government agency.-'-.
15.1.2. Other than as specified iri .- this’ Agreement and the Petroleum
Proclamation, all other - imports by the Contractor, each
Subcontractor and.their employees shall be subject to all generally
applicable import* duties'and taxes of Ethiopia.
15.1.3. Each expatriate employee of the Contractor and Subcontractors
may, in accordance with prevailing regulations, import household
goods and personal effects including one (1) sedan car per employee,
within six (6) months of its arrival, free of import taxes, charges,
duties, levies and imposts of any kind, provided, however, that such
properties -are imported for the sole use of the employee and his
family.
15.2. Exports
15.2.1. All items imported under Section 15.1, and taken out from Ethiopia
shall be exempt from export duties and other taxes and duties levied
on exports, provided, however, that if these items are disposed of
within Ethiopia, the Contractor, Subcontractors and expatriate
employees, as the case may be, shall pay customs duties and taxes
in accordance with the applicable laws.
15.2.2. The Contractor may export from Ethiopia, exempt of all export
duties and other taxes levied on exports, the Petroleum produced
from the Contract Area to which the Contractor is entitled in
accordance with the provisions of this Agreement.
8 9
15.2.3. Notwithstanding any other provision of this Agreement, the Contractor shall not make shipments of Petroleum produced from Petroleum Operations in Ethiopia to or through countries whose export destinations are proscribed by the State.
7015.2.3. Notwithstanding any other provision of this Agreement, the Contractor shall not make shipments of Petroleum produced from Petroleum Operations in Ethiopia to or through countries whose export destinations are proscribed by the State.
70SECTION XVI: GOVERNING LAW AND DISPUTES
16.1. Governing law
16.1.1. This Agreement shall be governed by, interpreted and construed in accordance with the laws of Ethiopia.
16.1.2. The Contractor agrees that it will abide by all laws and regulations in force in Ethiopia.
16.1.3. In the event that after the Effective Date of this Agreement the economic benefits to be derived by a Party from the Petroleum Operations under this Agreement are substantially affected by the promulgation of new laws and regulations of Ethiopia and if the affected Party so requests, the Parties shall agree to make the necessary adjustments to the relevant provisions of this Agreement, in order to ensure that the affected Party is restored to the same economic condition it would have been in if such change in the applicable laws had not taken place.
16.2. Arbitration
6.2.1. Except as otherwise provided in this Agreement, if, during the term of this Agreement or thereafter, any difference or dispute arises with respect to the construction, meaning or effect of this Agreement or arising out of or related or in connection with this Agreement or concerning the rights and obligation hereunder, which difference or dispute cannot be mutually resolved by the Parties within ninety (90) days, either Party shall have the right to submit the difference or dispute to a formal settlement process under this Section 16.2.
16.2.2. The difference or dispute referred to under Section 16.1.1 shall be finally settled by arbitration in accordance with the Arbitration Rules of the United Nations Commission on International Trade Law as at present in force.
16.2.3. The arbitration, including the rendering of the award, shall take place in Addis Ababa, Ethiopia and shall be in English. The decision of a majority of the arbitrators shall be final and binding upon the Parties.
71SECTION XVI: GOVERNING LAW AND DISPUTES
16.1. Governing law
16.1.1. This Agreement shall be governed by, interpreted and construed in accordance with the laws of Ethiopia.
16.1.2. The Contractor agrees that it will abide by all laws and regulations in force in Ethiopia.
16.1.3. In the event that after the Effective Date of this Agreement the economic benefits to be derived by a Party from the Petroleum Operations under this Agreement are substantially affected by the promulgation of new laws and regulations of Ethiopia and if the affected Party so requests, the Parties shall agree to make the necessary adjustments to the relevant provisions of this Agreement, in order to ensure that the affected Party is restored to the same economic condition it would have been in if such change in the applicable laws had not taken place.
16.2. Arbitration
6.2.1. Except as otherwise provided in this Agreement, if, during the term of this Agreement or thereafter, any difference or dispute arises with respect to the construction, meaning or effect of this Agreement or arising out of or related or in connection with this Agreement or concerning the rights and obligation hereunder, which difference or dispute cannot be mutually resolved by the Parties within ninety (90) days, either Party shall have the right to submit the difference or dispute to a formal settlement process under this Section 16.2.
16.2.2. The difference or dispute referred to under Section 16.1.1 shall be finally settled by arbitration in accordance with the Arbitration Rules of the United Nations Commission on International Trade Law as at present in force.
16.2.3. The arbitration, including the rendering of the award, shall take place in Addis Ababa, Ethiopia and shall be in English. The decision of a majority of the arbitrators shall be final and binding upon the Parties.
71 Any judgement upon the award of the arbitrators may be entered in
any court having jurisdiction thereof.
16.2.4. The number of arbitrators shall be three (3) and shall be appointed
as follows:
(a) each Party shall appoint one (1) arbitrator and so notify the
other Party of such appointment and those two (2) arbitrators
shall appoint the third arbitrator;
(b) if any of the arbitrators shall not have been appointed within
thirty (30) days after receipt of written request to do so,
either Party may request in writing the Secretary-General of
the International Centre for \ Settlement of Investment
Disputes to appoint the .arbitrator** or arbitrators not yet
appointed and to designate an’:arbitrator td bei-.the Chairman of
the arbitral tribunal.-'.' The-• Secretary^GenWral shall forthwith
send a copy of that\r$gties't to the other Party.
The SecretaryHieneral shall-.comply with the request within
thirty (30) days’from the receipt thereof or such longer period
as the Parties may agree. '*•
The Secretary-GenerM shall promptly notify the Parties of any
appointment or’ designation made by him pursuant to the
aforesaid request.
(c) if the arbitrator fails or is unable to act, his successor shall be
appointed in the same manner as the arbitrator whom he
succeeds.
16.3. Force Majeure
16.3.1. In this Agreement "Force Majeure" means an occurrence beyond the
reasonable control of the Contractor, the Minister .or the
Government, which hinders or prevents any of them from
performing their obligations under this Agreement, including but not
limited to occurrences such as riots, strikes, wars (declared or
undeclared), insurrections, rebellions, terrorist acts, civil
disturbances, orders of any governmental authority, whether such
authority be actual or assumed, natural phenomena or calamities;
provided, however, that the inability to obtain equipment, supplies,
or fuel shall not be a cause of Force Majeure, and provided further
that if any failure to comply with the provisions of this Agreement
is occasioned by a law, regulation or order of the Government, and
the Contractor is operating in accordance with generally accepted
international petroleum industry practice in the Contract Area and
is making reasonable efforts to comply with such law, regulation or
order, the occurrence shall be deemed beyond the reasonable control
of the Contractor.
Any judgement upon the award of the arbitrators
may be entered in any court having jurisdiction
thereof.
16.2.4. The number of arbitrators shall be three (3) and
shall be appointed as follows:
(a) each Party shall appoint one (1) arbitrator
and so notify the other Party of such
appointment and those two (2) arbitrators
shall appoint the third arbitrator;
(b) if any of the arbitrators shall not have
been appointed within thirty (30) days after
receipt of written request to do so, either
Party may request in writing the Secretary-
General of the International Centre for
Settlement of Investment Disputes to appoint
the arbitrator or arbitrators not yet
appointed and to designate arbitrator
to be the Chairman of the arbitral
tribunal. The Secretary-General shall
forthwith send a copy of that request to the
other Party.
The Secretary-General shall comply with the
request within thirty (30) days from the
receipt thereof or such longer period as
the Parties may agree.
The Secretary-General shall promptly notify
the Parties of any appointment or
"designation made by him pursuant to the
aforesaid request.
(c) if the arbitrator fails or is unable to act,
his successor shall be appointed in the same
manner as the arbitrator whom he succeeds.
16.3. Force Majeure
16.3.1. In this Agreement "Force Majeure" means an
occurrence beyond the reasonable control of the
Contractor, the Minister or the Government,
which hinders or prevents any of them from
performing their obligations under this
Agreement, including but not limited to
occurrences such as riots, strikes, wars
(declared or undeclared), insurrections,
rebellions, terrorist acts, civil disturbances,
orders of any governmental authority, whether
such authority be actual or assumed, natural
phenomena or calamities; provided, however, that
the inability to obtain equipment, supplies, or
fuel shall not be a cause of Force Majeure, and
provided further that if any failure to comply
with the provisions of this Agreement is
occasioned by a law, regulation or order of the
Government, and the Contractor is operating in
accordance with generally accepted international
petroleum industry practice in the Contract Area
and is making reasonable efforts to comply with
such law, regulation or order, the occurrence
shall be deemed beyond the reasonable control of
the Contractor.
7 216.3.2. If the Contractor, the Minister or the Government is prevented from
complying with this Agreement, in whole or in part, by Force
Majeure, the Party claiming Force Majeure shall give written notice
to the other Party as soon as practicable after its occurrence and
the obligations of the affected person which are directly related to
the Force Majeure shall be suspended during the continuance of the
the Force Majeure.
13.3.3. Subject to Section 16.3.4., the term of this Agreement shall be
automatically extended for the period of Force Majeure.
16.3.4. If an obligation is suspended by Force Majeure for more than one (1)
year, the Contractor and the Minister may enter into good faith
negotiations on the continuation of the Agreement.16.3.2. If the Contractor, the Minister or the Government is prevented from
complying with this Agreement, in whole or in part, by Force
Majeure, the Party claiming Force Majeure shall give written notice
to the other Party as soon as practicable after its occurrence and
the obligations of the affected person which are directly related to
the Force Majeure shall be suspended during the continuance of the
Force Majeure.
16.3.3. Subject to Section 16.3.4., the term of this Agreement shall be
automatically extended for the period of Force Majeure.
16.3.4. If an obligation is suspended by Force Majeure for more than one (1)
year, the Contractor and the Minister ..may enter into good faith
negotiations on the continuation of this\Agreement.
SECTION XVII: GENERAL
17.1 Confidentiality
17.1.1. Any information which the Contractor may supply to the Minister under this Agreement shall be supplied at the expense of the Contractor and the Minister shall, except with the consent of the Contractor, which shall not be unreasonably withheld, keep such information confidential, and shall riot disclose such information other than to a person employed by or on behalf of the Government.
17.1.2. Notwithstanding the provisions of Section 17.1.1, the Minister may use any information supplied, for the purpose of preparing and publishing any reports and returns required by law, and for the purpose of preparing and publishing reports and surveys of a general nature.
17.1.3. The Minister may publish any information of a geological, scientific or technical nature which relates to a surrendered area at any time after the surrender, and in any other case, three (3) years after the information was received unless the Minister determines, after representations by the Contractor, that a longer period shall apply.
17.1.4. The Minister may disclose such information obtained pursuant to this Agreement as required by lending institutions.
17.1.5. The Contractor shall not disclose to third parties such information obtained pursuant to this Agreement without the consent of the Minister, which consent shall not be unreasonably withheld.
17.2. Waiver
17.2.1. Any waiver of an obligation of the Contractor shall be in writing and signed by the Minister. No waiver shall be implied if the Minister does not exercise a remedy under this Agreement.
17.3. Notice
17.3.1. Any and all notices, requests, demands and other communications required or permitted to be made or given under this Agreement shall be in writing and shall be deemed to have been duly made or given if delivered by hand, mail, cable or telex as follows:
74 SECTION XVII: GENERAL
17.1 Confidentiality
17.1.1. Any information which the Contractor may supply to the Minister under this Agreement shall be supplied at the expense of the Contractor and the Minister shall, except with the consent of the Contractor, which shall not be unreasonably withheld, keep such information confidential, and shall riot disclose such information other than to a person employed by or on behalf of the Government.
17.1.2. Notwithstanding the provisions of Section 17.1.1, the Minister may use any information supplied, for the purpose of preparing and publishing any reports and returns required by law, and for the purpose of preparing and publishing reports and surveys of a general nature.
17.1.3. The Minister may publish any information of a geological, scientific or technical nature which relates to a surrendered area at any time after the surrender, and in any other case, three (3) years after the information was received unless the Minister determines, after representations by the Contractor, that a longer period shall apply.
17.1.4. The Minister may disclose such information obtained pursuant to this Agreement as required by lending institutions.
17.1.5. The Contractor shall not disclose to third parties such information obtained pursuant to this Agreement without the consent of the Minister, which consent shall not be unreasonably withheld.
17.2. Waiver
17.2.1. Any waiver of an obligation of the Contractor shall be in writing and signed by the Minister. No waiver shall be implied if the Minister does not exercise a remedy under this Agreement.
17.3. Notice
17.3.1. Any and all notices, requests, demands and other communications required or permitted to be made or given under this Agreement shall be in writing and shall be deemed to have been duly made or given if delivered by hand, mail, cable or telex as follows:
74(a) If to the Minister ________________________
(b) If to the Contractor: ____________________
Either Party may designate in writing, in conformance with the above, another address at which it should receive all future notices, requests, demands and other communications required or permitted to be made or given under this Agreement.
17.3.2. All notices, requests, demands and other communications required or permitted to be made or given under this Agreement shall be in English. All reports, agreements, or other documents produced by the Contractor in connection with this Agreement shall be in English.
17.3.3. A notice shall be effective upon receipt.
17.4. Headings and amendme
17.4.1. Headings are inserted in this Agreement for convenience only and shall not affect the construction or interpretation hereof.
17.4.2. This Agreement shall not be amended, modified or supplemented except by an instrument in writing signed by the Parties.
SIGNED on the day and year first before written:
The Minister _______________________
_______________________
The Contractor _______________________
_______________________
75(a) If to the Minister ________________________
(b) If to the Contractor: ____________________
Either Party may designate in writing, in conformance with the above, another address at which it should receive all future notices, requests, demands and other communications required or permitted to be made or given under this Agreement.
17.3.2. All notices, requests, demands and other communications required or permitted to be made or given under this Agreement shall be in English. All reports, agreements, or other documents produced by the Contractor in connection with this Agreement shall be in English.
17.3.3. A notice shall be effective upon receipt.
17.4. Headings and amendme
17.4.1. Headings are inserted in this Agreement for convenience only and shall not affect the construction or interpretation hereof.
17.4.2. This Agreement shall not be amended, modified or supplemented except by an instrument in writing signed by the Parties.
SIGNED on the day and year first before written:
The Minister _______________________
_______________________
The Contractor _______________________
_______________________
75 APPENDIX I
ACCOUNTING PROCEDURES
Section I: Introduction and definitions
1.1. Purpose
1.1.1. The Contractor shall maintain a separate set of accounts and records for its Petroleum Operation under the Agreement to which this Appendix is attached, in accordance with generally accepted international petroleum industry practice as more particularly, but not exclusively, set out in these Accounting Procedures. Accounts and records are required for several proposes, including, but not limited to:
(a) reporting to the Minister expenditure and receipts; (b) reporting actual expenditures to the Minister for comparison with minimum exploration obligations;
(c) calculating royalties;
(d) calculating cost recovery and production sharing as set forth in the relevant Sections of the Agreement;
(e) calculating Income taxes;
(f) preparation of the annual balance sheet and profit and loss account required by the relevant provisions of the Agreement; and
(g) any other requirements under the Agreement.
1.1.2. The Contractor may act as agent for the Government or for any other party in a number of matters. In such cases the Minister shall Separately determine, as appropriate, in consultation with the Contractor, the requisite accounting procedures. Such cases may include, but not be limited to, sales of Petroleum on behalf of the Government.
76 APPENDIX I
ACCOUNTING PROCEDURES
Section I: Introduction and definitions
1.1. Purpose
1.1.1. The Contractor shall maintain a separate set of accounts and records for its Petroleum Operation under the Agreement to which this Appendix is attached, in accordance with generally accepted international petroleum industry practice as more particularly, but not exclusively, set out in these Accounting Procedures. Accounts and records are required for several proposes, including, but not limited to:
(a) reporting to the Minister expenditure and receipts; (b) reporting actual expenditures to the Minister for comparison with minimum exploration obligations;
(c) calculating royalties;
(d) calculating cost recovery and production sharing as set forth in the relevant Sections of the Agreement;
(e) calculating Income taxes;
(f) preparation of the annual balance sheet and profit and loss account required by the relevant provisions of the Agreement; and
(g) any other requirements under the Agreement.
1.1.2. The Contractor may act as agent for the Government or for any other party in a number of matters. In such cases the Minister shall Separately determine, as appropriate, in consultation with the Contractor, the requisite accounting procedures. Such cases may include, but not be limited to, sales of Petroleum on behalf of the Government.
761.2. Definitions
1.2.1. The definitions set forth in Section 1.2 of the Agreement shall apply
to this Appendix I. In the event of any inconsistency or conflict
between the provisions of this Appendix and the Agreement, the
provisions of the Agreement shall prevail. Subject to this and for the
purpose of the Agreement and these Accounting Procedures, the
following terms shall have the meanings set forth below.
1.2.2. ’The Account" means the accounts and records maintained for the
Petroleum Operations.
1.2.3. "Petroleum Operations Costs" ...nife^ing the costs and expenses
incurred by the Contract^ (for} the purposes'-. of conducting
Petroleum Operations underbills' Agreement;}’all ais more specifically
set forth in Section IV .of these Accounting-.Procedures.
1.2.4. "Party" means each.legal entity constituting the Contractor.
1.2.5. "Operator" means the Party-. Appointed to carry out the Petroleum
Operations on behalf of-t-he Other Parties.
7 7
1.2. Definitions
1.2.1. The definitions set forth in Section 1.2 of the Agreement shall apply to this Appendix I. In the event of any inconsistency or conflict between the provisions of this Appendix and the Agreement, the provisions of the Agreement shall prevail. Subject to this and for the purpose of the Agreement and these Accounting Procedures, the following terms shall have the meanings set forth below.
1.2.2. "The Account" means the accounts and records maintained for the Petroleum Operations.
1.2.3. "Petroleum Operations Costs" means the costs and expenses incurred by the Contractor for the purposes of conducting Petroleum Operations under this Agreement, all as more specifically set forth in Section IV of these Accounting Procedures.
1.2.4. "Party" means each legal entity constituting the Contractor.
1.2.5. "Operator" means the Party appointed to carry out the Petroleum Operations on behalf of the other Parties.
77Section II: General principles of entries to the accounts
2.1.1. Receipts from sales or disposals of Petroleum shall not be credited to The Account. Each Party shall advise the Operator of such revenues, and of any other matter required, in sufficient detail to allow the Operator to maintain a memorandum record thereof in order to meet the legal and contractual reporting requirements under the Agreement
2.1.2. Each Party shall account individually to the Government for income tax.
2.1.3. The Contractor shall account to the Government for royalties as set forth in the relevant provisions of the Agreement.
2.1.4. The Contractor shall charge to The Account only those expenditure incurred for Petroleum Operations. The application of this principle to specific Petroleum Operations Costs is set forth in Section IV of these Accounting Procedures.
2.1.5. The Operator shall deal at arm's length whenever possible, and the price in dealings not at arm's length shall be no less favourable than if such dealings were conducted at arm's length.
2.1.6. The Operator shall not make a profit or loss from the diligent exercise of his duties as Operator and, in particular, the Operator shall charge to Petroleum Operations Costs:
(a) an equitable proportion of the costs of services provided by the Operator;
(b) a rental for use of the assets of the Operator; and
(c) administrative overhead, either as a fee approved in the annual budget, or as an agreed percentage of direct costs or by charging an equitable proportion of each element of cost incurred.
2.1.7. The Contractor shall maintain accounts in a single language and a single currency which shall be English and United States dollars respectively.
78Section II: General principles of entries to the accounts
2.1.1. Receipts from sales or disposals of Petroleum shall not be credited to The Account. Each Party shall advise the Operator of such revenues, and of any other matter required, in sufficient detail to allow the Operator to maintain a memorandum record thereof in order to meet the legal and contractual reporting requirements under the Agreement
2.1.2. Each Party shall account individually to the Government for income tax.
2.1.3. The Contractor shall account to the Government for royalties as set forth in the relevant provisions of the Agreement.
2.1.4. The Contractor shall charge to The Account only those expenditure incurred for Petroleum Operations. The application of this principle to specific Petroleum Operations Costs is set forth in Section IV of these Accounting Procedures.
2.1.5. The Operator shall deal at arm's length whenever possible, and the price in dealings not at arm's length shall be no less favourable than if such dealings were conducted at arm's length.
2.1.6. The Operator shall not make a profit or loss from the diligent exercise of his duties as Operator and, in particular, the Operator shall charge to Petroleum Operations Costs:
(a) an equitable proportion of the costs of services provided by the Operator;
(b) a rental for use of the assets of the Operator; and
(c) administrative overhead, either as a fee approved in the annual budget, or as an agreed percentage of direct costs or by charging an equitable proportion of each element of cost incurred.
2.1.7. The Contractor shall maintain accounts in a single language and a single currency which shall be English and United States dollars respectively.
78 2.1.8. Accounts shall be maintained on an accrual basis whereby entries are recorded in the period in which title or liability passes without the need to distinguish whether cash is disbursed or received in connection with the transaction. Petroleum Operations Costs shall include only the costs of materials consumed on leaving inventory. The costs of materials entering inventory will be included in working capital.
2.1.9. The Operator may dispose of minor assets and credit the proceeds to The Account; provided, however, that Petroleum or major equipment, the disposal of which would jeopardise the Petroleum Operations, shall not be considered a minor asset.
2.1.10. The accounts of the individual operations shall be maintained in a separable form, with reasonable allocations of common costs where necessary, in order to meet the several purposes of such accounts and to allow changes in the relationships between the Parties to be accounted for equitably and in particular to allow:
(a) the consideration for transfers or participating interests to be determined; and
(b) the costs of sole risk operations to be determined;
(c) the costs associated with different Development Areas to be identified.
2.1.11. If Petroleum Operations are to be abandoned, the Operator shall prepare a plan for the disposal of assets and an equitable settlement for the approval of the Parties.
2.1.12. The Contractor shall appoint an auditor, approved by the Minister to audit annually the accounts and records, including production records, of the Petroleum Operations and report thereon. The cost of such audit shall be borne by the Contractor.
73
2.1.8. Accounts shall be maintained on an accrual basis whereby entries are recorded in the period in which title or liability passes without the need to distinguish whether cash is disbursed or received in connection with the transaction. Petroleum Operations Costs shall include only the costs of materials consumed on leaving inventory. The costs of materials entering inventory will be included in working capital.
2.1.9. The Operator may dispose of minor assets and credit the proceeds to The Account; provided, however, that Petroleum or major equipment, the disposal of which would jeopardise the Petroleum Operations, shall not be considered a minor asset.
2.1.10. The accounts of the individual operations shall be maintained in a separable form, with reasonable allocations of common costs where necessary, in order to meet the several purposes of such accounts and to allow changes in the relationships between the Parties to be accounted for equitably and in particular to allow:
(a) the consideration for transfers or participating interests to be determined; and
(b) the costs of sole risk operations to be determined;
(c) the costs associated with different Development Areas to be identified.
2.1.11. If Petroleum Operations are to be abandoned, the Operator shall prepare a plan for the disposal of assets and an equitable settlement for the approval of the Parties.
2.1.12. The Contractor shall appoint an auditor, approved by the Minister to audit annually the accounts and records, including production records, of the Petroleum Operations and report thereon. The cost of such audit shall be borne by the Contractor.
73
Section III : Accounting treatment and specific purposes
3.1. Reports of revenues and expenditure to the Minister
Reports to the Minister shall show all required items, without
special adjustment, whether these items cover:
(a) receipts;
(b) Petroleum Operations Costs;
(c) cost recovery;
(d) production sharing;
(e) taxes, royalties and bonuses; or
(f) other transactions.
3.2. Reports concerning exploration obligations
3.2.1. Reports of actual expenditure on seismic and exploratory drilling
work shall be as recorded in The Account with adjustments
according to Sections 5.1 and 5.2 of the Agreement shown
separately.
3.2.2. Records shall be maintained in a separable form to allow reporting
and verification thereof by individual obligation.
3.2.3. Only Petroleum Operations Costs incurred in connection with
exploration activity shall be included for purposes of meeting
minimum exploration expenditure obligations. Costs incurred on
appraisal, development or production activity shall be excluded for
purposes of meeting minimum exploration expenditure obligations.
3.3. Royalty
The Contractor shall account to the Government for royalties.
3.4. Reports concerning cost recovery
The Contractor shall submit quarterly reports to the Minister
containing the following informations:
(a) recoverable Petroleum Operations Costs carried forward from
the previous Calendar Quarter, if any;
(b) recoverable Petroleum Operations Costs incurred and paid
during the Calendar Quarter in question;
80
Section in : Accounting treatment and specific purposes
3.1. Reports of revenues and expenditure to the Minister
Reports to the Minister shall show all required items, without
special adjustment, whether these items cover:
(a) receipts;
(b) Petroleum Operations Costs;
(c) cost recovery;
(d) production sharing;
(e) taxes, royalties and bonuses;.br \ * \
(f) other transactions.
3.2. Reports concerning exploration obligations \
3.2.1. Reports of actual\expenditure on' seismlc and exploratory drilling
work shall be as recorded in \The Account with adjustments
according to Sections 5.1.\and 5,2 of the Agreement shown
separately.
3.2.2. Records shall be xnaintaihed in a separable form to allow reporting
and verification thereof by individual obligation.
3.2.3. Only Petroleum Operations Costs incurred in connection with
exploration activity shall be included for purposes of meeting
minimum exploration expenditure obligations. Costs incurred on
appraisal, development or production activity shall be excluded for
purposes of meeting minimum exploration expenditure obligations.
3.3. Royalty
The Contractor shall account to the Government for royalties.
3A* Reports concerning cost recovery
The Contractor shall submit quarterly reports to the Minister
containing the following information:
(a) recoverable Petroleum Operations Costs carried forward from
the previous Calendar Quarter, if any;
(b) recoverable Petroleum Operations Costs incurred and paid
during the Calendar Quarter in question;
8 0
(c) total recoverable Petroleum Operations Costs for the
Calendar Quarter in question;
(d) quantity and value of Cost Oil taken and separately disposed
of by the Contractor for the Calendar Quarter in question;
(e) Petroleum Operations Costs recovered for the Calendar
Quarter in question and total cumulative amount of Petroleum
Operations Costs recovered up to the end of the Calendar
Quarter; and
(f) amount of recoverable Petroleum Operations Costs to be
carried forward into the next Calendar Quarter, if any.
Income tax
The accounts and records of the Petroleum-Operations shall be made
available to the Parties to allow them..to complete their individual
income tax returns in compliance with-applicable legislation relating
thereto.
Other purposes of accounts. '
The accounts and records of the\Cctntr'actor shall be maintained in
accordance with these Accounting'Procedures. Specific adjustments
to meet other purposes. Shalj\be shown separately in the reports
prepared.
(c) total recoverable Petroleum Operations Costs for the
Calendar Quarter in question;
(d) quantity and value of Cost Oil taken and separately disposed
of by the Contractor for the Calendar Quarter in question;
(e) Petroleum Operations Costs recovered for the Calendar
Quarter in question and total cumulative amount of Petroleum
Operations Costs recovered up to the end of the Calendar
Quarter; and
(f) amount of recoverable Petroleum Operations Costs to be
carried forward into the next Calendar Quarter, if any.
3.5. Income tax
The accounts and records of the Petroleum Operations shall be made
available to the Parties to allow them to complete their individual
income tax returns in compliance with applicable legislation relating
thereto.
3.6. Other purposes of accounts
The accounts and records of the Contractor shall be maintained in
accordance with these Accounting Procedures. Specific adjustments
to meet other purposes shall be shown separately in the reports
prepared.
Section IV - Charges and credits to Petroleum Operations Costs
4.1. General
4.1.1. The principles of charges to Petroleum Operations Costs shall be interpreted as set out in this Section IV for the specific cases covered. Transactions not covered by this Section shall be treated in accordance with the general principles of these Accounting Procedures.
4.1.2. The identified costs of goods and services provided by the Contractor or by third parties for the purposes of conducting Petroleum Operations under this Agreement, to be included in Petroleum Operations Costs, are set out in the remaining articles of this Section IV.
4.2. Goods and services provided by the Parties
4.2.1. The goods and services required for the purposes of carrying out Petroleum Operations may be supplied by third parties or the Contractor. When supplied by third parties the costs included in Petroleum Operations Costs shall be those actually incurred by the Contractor. Where supplied by the Contractor the cost to be included may be either:
(a) an agreed total charge determined within a competitive bidding process; or
(b) the identified costs to the Contractor plus a mark up or apportionment of the Contractor's administrative overhead costs.
4.2.2. Any mark up or apportionment of overhead costs shall not exceed three per cent (3 %) of identified costs and shall be determined on a basis agreed in advance in the budget eqch year.
4.3. Labour and related costs
4.3.1. The costs of salaries and wages of the Party's employees for the portion of their time directly employed in Petroleum Operations wether:
82 Section IV - Charges and credits to Petroleum Operations Costs
4-1- General
4.1.1. The principles of charges to Petroleum Operations Costs shall be
interpreted as set out in this Section IV for the specific cases
covered. Transactions not covered by this Section shall be treated in
accordance with the general principles of these Accounting
Procedures.
4.1.2. The identified costs of goods'‘ ahd '* services., provided by the
Contractor or by third parties, for the purpose^”'bf conducting
Petroleum Operations under.;"this Agreement,, ' to be included in
Petroleum Operation Gostsj'-are set out-;in;.the remaining articles of
this Section IV. ..... \.*
4.2. Goods and services proyided.by. the Parties
4.2.1. The goods and services.-required for the purposes of carrying out
Petroleum Operations may be supplied by third parties or the
Contractor. When supplied by third parties the costs included in
Petroleum Operation Costs shall be those actually incurred by the
Contractor. Where supplied by the Contractor the cost to be
included may be either:
(a) an agreed total charge determined within a competitive
bidding process; or
(b) the identified costs to the Contractor plus a mark up or
apportionment of the Contractor’s administrative overhead
costs.
4.2.2. Any mark up or apportionment of overhead costs shall not exceed
three per cent (3 96) of identified costs and shall be determined on a
basis agreed in advance in the budget each year.
4.3. Labour and related costs
4.3.1. The costs of salaries and wages of the Party's employees for the
portion of their time directly employed in Petroleum Operations
whether:
8 2
(a) carrying out managerial, administrative, legal, accounting, treasury auditing, tax, planning, personnel, data processing, engineering, purchasing, geological, geophysical or other functions for the benefit of the Petroleum Operations;
(b) such functions are carried out in Ethiopia or another country;
(c) the employee is assigned temporarily or‘ permanently to Petroleum Operations.
4.3.2. The costs of holidays, sickness, living and housing allowances, travel time, bonuses, personal expenses incurred, pension contributions and social security benefits which are customarily granted to the Party's employees and their families engaged on similar ventures in similar conditions together with the 'costs of,.,any amounts imposed by government authorities applicable to such-employments.
14.3.3. Relocation costs to the Contract Area vicinity of the employees of a Party permanently or temporarily assigned to the Petroleum Operations. Relocation costs from the Contract Area vicinity, except when an employee is reassigned to another location classified as a foreign location by the Party. Such costs include transportation of employees families and their personal and household effects and all other relocation costs in accordance with the usual practice of the Party.
4.3.4. The costs of such transportation of employees of the Party as is required in the conduct of Petroleum Operations.
4.4. Materials
4.4.1. Material costs will be charged to Petroleum Operations Costs when consumed from inventory. Material costs shall be calculated on a FIFO (first in first out) basis.
4.4.2. The costs of purchases of materials, equipment, machines, tools and any other goods of a similar nature shall be charged to inventory subject to the following:
(a) Acquisition - the Operator shall only purchase materials for use in Petroleum Operations that may be used in the foreseeable future. The accumulation of surplus stocks and inventory shall be avoided. Inventory levels shall, however, take into account the time lag for replacement, emergency needs and similar considerations.
83(a) carrying out managerial, administrative, legal, accounting,
treasury auditing, tax, planning, personnel, data processing,
engineering, purchasing, geological, geophysical or other
functions for the benefit of the Petroleum Operations;
(b) such functions are carried out in Ethiopia or another country;
(c) the employee is assigned temporarily or permanently to
Petroleum Operations.
4.3.2. The costs of holidays, sickness, living and housing allowances, travel
time, bonuses, personal expenses incurred, pension contributions and
social security benefits which are customarily granted to the Party's
employees and their families engaged on similar ventures in similar
conditions together with the costs of ...any amounts imposed by
government authorities applicable to such-employments.
4.3.3. Relocation costs to the Contract Area vicinity of the employees of
a Party permanently or temporarily assigned Vto the Petroleum
Operations. Relocation .Costs "from the.’ Contract Area vicinity,
except when an employee is reassigned tb another location classified
as a foreign location'- by the Party.--Such costs include transportation
of employees' families and theii\ personal and household effects and
all other relocation costs in'-accordance with the usual practice of
the Party.
4.3.4. The costs of such’ transportation of employees of the Party as is
required in the conduct of Petroleum Operations.
4.4. Materials
4.4.1. Material costs will be charged to Petroleum Operations Costs when
consumed from inventory. Material costs shall be calculated on a
FIFO (first in first out) basis.
4.4.2. The costs of purchases of materials, equipment, machines, tools and
any other goods of a similar nature shall be charged to inventory
subject to the following:
(a) Acquisition - the Operator shall only purchase materials for
use in Petroleum Operations that may be used in the
foreseeable future. The accumulation of surplus stocks and
inventory shall be avoided. Inventory levels shall, however,
take into account the time lag for replacement, emergency
needs and similar considerations.
(b) Components of costs- in addition to the invoice price the costs of material purchased by the Operator may include freight, transportation and related costs such as expediting, crating, dock charges, forwarders charges, customs clearance fees, inspection costs, insurance (provided that such costs are included in the invoice price), custom duties, taxes and other items that may be charged to imported materials or to materials purchased in Ethiopia.
(c) Supply of materials by all Parties - materials supplied by the parties shall be charged to the inventory at prices no higher than the prices for comparable material purchased on competitive basis from third party suppliers. This criterion shall apply to both new and used materials.
(d) Inventories - the Operator shall maintain both physical and accounting inventory of all materials in stock in accordance with generally accepted practices in the international petroleum industry and shall take a physical inventory of all such materials at least twice in any calendar year.
4.5. Technical services
4.5.1. The costs of technical services (whether or not associated with the ancilliary supply of goods) such as, but not limited to, the provision, construction, maintenance or operation of:
(a) utilities and auxiliaries - workshops, power and water facilities, warehouses, field roads, crude oil jetties and anchorages, treating plants and equipment, secondary recovery systems, Natural Gas plants and steam systems;
(b) production facilities - offshore platforms (including the costs of labour, fuel, hauling and supplies for both the offsite fabrication and onsite installation of platforms, and other construction costs in erecting platforms and installing submarine pipelines), wellhead equipment, production tubing, sucker rods, surface pumps, flow lines, gathering equipment, delivery lines and storage facilities;
(c) movables - surface and subsurface drilling and production tools, equipment and instruments, badges, floating craft, automotive equipment, aircraft, construction equipment, furniture and office equipment, and miscellaneous equipment; I
1
I
(b) Components of Costs - in addition to the invoice price the
costs of materials purchased by the Operator may include
freight, transportation and related costs such as expediting,
crating, dock charges, forwarders charges, customs clearance
fees, inspection costs, insurance (provided that such costs are
included in the invoice price), customs duties, taxes and other
items that may be charged to imported materials or to
materials purchased in Ethiopia.
(c) Supply of materials by the Parties - materials supplied by the
Parties shall be charged to inventory at prices no higher than
the prices for comparable material.purchased on a competitive
basis from third party suppliers, This. criterion shall apply to
both new and used materials.
(d) Inventories - the Operator shall maintain both a physical and
accounting inventory pf' all materials in stock in accordance
with generally ^accepted practices in the international
petroleum industry and shall--take, a physical inventory of all
such materials'-at least twice. inf any Calendar Year.
♦•5. Technical services
4.5.1. The costs of technical services (whether or not associated with the
ancilliary supply of goods) such as, but not limited to, the provision,
construction, maintenance or operation of:
(a) utilities and auxiliaries - workshops, power and water
facilities, warehouses, field roads, crude oil jetties and
•d anchorages, treating plants and equipment, secondary recovery
systems, Natural Gas plants and steam systems;
(b) production facilities - offshore platforms (including the costs
of labour, fuel, hauling and supplies for both the .offsite
] fabrication and onsite installation of platforms, and other
construction costs in erecting platforms and installing
submarine pipelines), wellhead equipment, subsurface lifting
j equipment, production tubing, sucker rods, surface pumps,
flow lines, gathering equipment, delivery lines and storage
facilities;
i (c) movables - surface and subsurface drilling and production
tools, equipment and instruments, barges, floating craft,
automotive equipment, aircraft, construction equipment,
i furniture and office equipment and miscellaneous equipment;
j
S 4
(d) development and production drilling - labour, materials and
services used in drilling wells with the object of penetrating a
proven reservoir, including the drilling of delineation wells as
well as redrilling, deepening or recompleting wells, and access
roads, if any, leading directly to wells;
(e) exploration drilling - labour, materials and services used in the
drilling of wells with the object of finding unproven reservoirs
of Crude Oil and Natural Gas, and access roads, if any, leading
directly to wells;
(f) surveys - labour, materials and.-.services used in aerial,
geological, topographical, geophysldal and seismic surveys, and
core hole drilling; and
(g) interpretation - laborafoiy"analysis, .drafting, geophysical and
geological interpretation,' engineering, and related data
processing. ' V'
4.5.2. The costs included iri-. Petroleum 'Operations Costs shall be:
(a) in the case of technical '• services performed by third parties
directly subcontracted, including outside consultants,
contractors / and ‘ utilities, the price paid by the Operator,
provided that such prices are no higher than the prices charged
by other suppliers for comparable work and services;
(b) in the case of technical services performed by the Parties,
prices which are no higher than the most favourable prices
charged to or by third parties for comparable services;
(c) in the case of equipment and facilities being furnished by a
Party the rates charged shall be commensurate with the cost
of ownership, or rented, and the cost of operation thereof, but
such rates shall not exceed those currently prevailing, in the
general vicinity of the Contract Area.
4.6. Insurance
4.6.1. Premiums for insurance required by the Parties and actual
expenditures incurred in the settlement of all losses, claims,
damages, judgments, and other expenses for the benefit of the
Petroleum Operations.
3 b
(d) development and production drilling - labour, materials and services used in drilling wells with the object of penetrating a proven reservoir, including the drilling of delineation wells as well as redrilling, deepening or recompleting wells, and access roads, if any, leading directly to wells;
(e) exploration drilling - labour, materials and services used in the drilling of wells with the object of finding unproven reservoirs of Crude Oil and Natural Gas, and access roads, if any, leading directly to wells;
(f) surveys - labour, materials and services use din aerial, geological interpretation, engineering, and related data processing.
(g) interpretation - laboratory analysis, drafting, geophysical and geological interpretation, engineering, and related data processing.
4.5.2. The costs included in Petroleum Operations Costs shall be:
(a) in the case of technical services performed by third parties directly subcontracted, including outside consultants, contractors and utilities, the price paid by the Operator, provided that such prices are no higher than the prices charged by other suppliers for comparable work and services;
(b) in the case of technical services performed by the Parties, prices which are no higher than the most favourable prices charged to or by third parties for comparable services;
(c) in the case of equipment and facilities being furnished by a Party the rates charged shall be commensurate with the cost of ownership, or rental, and the cost of operation thereof, but such rates shall not exceed those currently prevailing in the general vicinity of the Contract Area.
4.6. Insurance
4.6.1. Premiums for insurance required by the Parties and actual expenditures incurred in the settlement of all losses, claims, damages, judgments, and other expenses for the benefit of the Petroleum Operations.
854.6.2. Credits for settlements received from insurance companies in connection with the insurance required by the Parties.
4.6.3. Where insurance is not compulsory under the laws of Ethiopia a Party may opt not to participate in insurance. A Party so opting shall not share in either the costs of or settlements for the insurance.
4.7 Legal expenses
All costs or expenses of litigation or legal services otherwise necessary or expedient for the protection of the Petroleum Operations or other interest of the Parties under this Agreement, including but not limited to the fees of legal representatives, court costs, costs of investigation or procuring evidence and amounts paid in settlement or satisfaction of any such litigation or claims, but excluding any costs incurred in arbitration or litigation between the Parties on terms of this Agreement.
4.8. Other goods and services
4.8.1. The cost of all services and goods (other than materials purchased for inventory) purchased for proper use in Petroleum Operations shall be charged directly to Petroleum Operations Costs.
4.8.2. Such purchases may include, inter alia, the costs of establishing, maintaining and operating any offices, suboffices, camps warehouses, shore bases, water power and communication systems, roads, bridges, housing, recreational and others facilities directly serving the Petroleum Operations and where such facilities also serve other operations the costs shall be allocated to the operations served on an equitable basis.
4.9 General and administrative expenses
General and administrative expenses of the Contractor attributable to the Petroleum Operations under this Agreement shall be recoverable Petroleum Operations Costs, subject to the limitations set forth in the Petroleum Operations Income Tax Proclamation.
4.10. Interest payments
Interest payments on loans raised by the Contractor for the purpose of conducting Petroleum Operations under this Agreement other
864.6.2. Credits for settlements received from insurance companies in connection with the insurance required by the Parties.
4.6.3. Where insurance is not compulsory under the laws of Ethiopia a Party may opt not to participate in insurance. A Party so opting shall not share in either the costs of or settlements for the insurance.
4.7 Legal expenses
All costs or expenses of litigation or legal services otherwise necessary or expedient for the protection of the Petroleum Operations or other interest of the Parties under this Agreement, including but not limited to the fees of legal representatives, court costs, costs of investigation or procuring evidence and amounts paid in settlement or satisfaction of any such litigation or claims, but excluding any costs incurred in arbitration or litigation between the Parties on terms of this Agreement.
4.8. Other goods and services
4.8.1. The cost of all services and goods (other than materials purchased for inventory) purchased for proper use in Petroleum Operations shall be charged directly to Petroleum Operations Costs.
4.8.2. Such purchases may include, inter alia, the costs of establishing, maintaining and operating any offices, suboffices, camps warehouses, shore bases, water power and communication systems, roads, bridges, housing, recreational and others facilities directly serving the Petroleum Operations and where such facilities also serve other operations the costs shall be allocated to the operations served on an equitable basis.
4.9 General and administrative expenses
General and administrative expenses of the Contractor attributable to the Petroleum Operations under this Agreement shall be recoverable Petroleum Operations Costs, subject to the limitations set forth in the Petroleum Operations Income Tax Proclamation.
4.10. Interest payments
Interest payments on loans raised by the Contractor for the purpose of conducting Petroleum Operations under this Agreement other
86than exploration shall be recoverable Petroleum Operations Costs, subject to the limitations set forth in the Petroleum Operations Income Tax Proclamation.
4.11 Payments to the Government of Ethiopia
4.11.1. Contract, licence or permit necessary to acquire and maintain rights to the Contract Area shall be recoverable Petroleum Operations Costs.
4.11.2. All duties, taxes, fees and government assessments, but excluding income tax, royalties and Government's share of Profit Oil, shall be recoverable Petroleum Operations Costs.
4.12. Miscellaneous transactions
4.12.1. All costs or expenses necessary for the repair or replacement of the property used in Petroleum Operations resulting from uninsured damages or losses incurred by fire, flood, storm, accident, or any other cause.
4.12.2. Any gain or loss in the currency of account caused by the holding of balances of foreign exchange shall be entered to Petroleum Operations Costs although excessive such balances shall not be maintained.
4.12.3. The net proceeds of the following transactions shall be credited to Petroleum Operations Costs:
(a) the net proceeds of any insurance or claim in connection with the Petroleum Operations or any assets charged to Petroleum Operations Costs;
(b) revenue received from other persons for the use of property or assets charged to Petroleum Operations Costs;
(c) proceeds from all sales of material or assets charged to Petroleum Operations Costs;
(d) any rentals, refunds, adjustments or other credits received by the Contractor which apply to any charge which has been made to Petroleum Operations Costs.
87than exploration shall be recoverable Petroleum Operations Costs, subject to the limitations set forth in the Petroleum Operations Income Tax Proclamation.
4.11 Payments to the Government of Ethiopia
4.11.1. Contract, licence or permit necessary to acquire and maintain rights to the Contract Area shall be recoverable Petroleum Operations Costs.
4.11.2. All duties, taxes, fees and government assessments, but excluding income tax, royalties and Government's share of Profit Oil, shall be recoverable Petroleum Operations Costs.
4.12. Miscellaneous transactions
4.12.1. All costs or expenses necessary for the repair or replacement of the property used in Petroleum Operations resulting from uninsured damages or losses incurred by fire, flood, storm, accident, or any other cause.
4.12.2. Any gain or loss in the currency of account caused by the holding of balances of foreign exchange shall be entered to Petroleum Operations Costs although excessive such balances shall not be maintained.
4.12.3. The net proceeds of the following transactions shall be credited to Petroleum Operations Costs:
(a) the net proceeds of any insurance or claim in connection with the Petroleum Operations or any assets charged to Petroleum Operations Costs;
(b) revenue received from other persons for the use of property or assets charged to Petroleum Operations Costs;
(c) proceeds from all sales of material or assets charged to Petroleum Operations Costs;
(d) any rentals, refunds, adjustments or other credits received by the Contractor which apply to any charge which has been made to Petroleum Operations Costs.
874.13. Recoverability and deductibility ofPetroleum Operations Costs
4.13.1 The determination of whether the costs and expenses set forth herein are recoverable Petroleum Operations Costs shall not be interpreted to preclude the Contractor from deducting said amounts in computing its taxable income under the apllicable laws of Ethiopia.
4.13.2 For the purpose of cost recovery under this Agreement, no depreciation shall aplly to recoverable Petroleum Operations Costs, as such Costs are, subject to the maximum percentage limit specfied in Section 7.1 of this Agreement, recoverable either in the Calendar Year in ehich these Costs are incurred or the Calendar Year in which regular production commences whichever is the later.
APPENDIX II
CONTRACT AREA
88
4.13. Recoverability and deductibility of Petroleum Operations Costs
4.13.1. The determination of whether the costs and expenses set forth
herein are recoverable Petroleum Operations Costs shall apply only
to the purpose of cost recovery under this Agreement, and shall not
be interpreted to preclude the Contractor from deducting said
amounts in computing its taxable income under the applicable laws
of Ethiopia.
4.13.2. For the purpose of cost recovery under this Agreement, no
depreciation shall apply to recoverable Petroleum Operations Costs,
as such Costs are, subject to the rnaximum percentage limit
specified in Section 7.1 of this Agreement*-.recoverable either in the
Calendar Year in which these Cost.sv-4re-Incurred or the Calendar
Year in which regular production’: Commences* , whichever is the
later. \* V-- .\ V'
APPENDIX H
CONTRACT AREA
8 8