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 PETROLEUM AGREEMENT












Government of the Republic of Ghana


Ghana National Petroleum Corporation











AND 




TULLOW OIL

Tullow Ghana limited & Sabre Oil and Gas Limited 
 

IN RESPECT OF


THE SHALLOW WATER TANO


CONTRACT AREA




DATE APRIL 2006

 Petroleum Agreement


THE SHALLOW WATER TANO








Contents


ARTICLE 1


DEFINITIONS............................................ ...................................5

ARTICLE  2 l


SCOPE OF THE AGREEMENT, INTERESTS OF THE PARTIES AND CONTRACT AREA............................12


ARTICLE X ........................................................


EXPLORATION PERIOD.. ................................15


ARTICLE 4............................................ ..............._ 18


MINIMUM APPRAISAL AND/OR EXPLORATION PROGRAMME............................... ..........................IS

ARTICLE 5; .....................22


RELINQUISHMENT ..................................22


ARTICLE 6. _________________ ______24

JOINT MANAGEMENT COMMITTEE .................................. 24


ARTICLE 7 ........................29


RIGHTS AND OBLIGATIONS OF CONTRACTOR AND GNPC.................................. ...................................29


ARTICLE • ..... ** ----- ------ _ 32


COMMERCIALITY ...................................32


ARTICLE 9^........... ... ____ ... 38


SOLE RISK ACCOUNT ...................................38


ARTICLE 10 _______ ____ 41


SHARING OF CRUDE Oil____


ARTICLE 11 ...................................48


MEASUREMENT AND PRICING OF CRUDE Oil .................... ...................................48


ARTICLE 12


TAXATION AND OTHER IMPOSTS....... .................................51

ARTICLE 13 .................................55


FOREIGN EXCHANGE TRANSACTIONS                                                                                ...................................55


ARTICLE 14

SPECIAL PROVISIONS FOR NATURAL CAS............................................-............... ...................................57


PART I - GENERAL............................... .................................. 57


PART II- ASSOCIATED GAS................ .. . ............................. ...................................57





Petroleum Agreement for Shallow water Tana (MQE-GNPC/Tullow-Sabre) - April 2DDG


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 PART Ul-NON-ASSOCIATED GAS.................................... ........... 58


PART IV NATURAL GAS PROJECTS................................. ---------60





ARTICLE 15                                                                                              64





DOMESTIC SUPPLY REQUIREMENTS (CRUDE OIL)............... ............64





ARTICLE 16.......................................................................... .....65

INFORMATION AND REPORTS : CONFIDENTIALITY..................................................................................65





ARTICLE 17„..................                                                ........ 68


INSPECTION, SAFETY AND ENVIRONMENTAL PROTECTION 68 
 

ARTICLE 18 ..................................................................................70
ACCOUNTING AND AUDITING. 70



ARTICLE 19                                                 72

TITLE TO AND CONTROL OF GOODS AND EQUIPMENT........ 72


ARTICLE 20.................................................. 74

PURCHASING AND PROCUREMENT....... 74 
 

ARTICLE 21 ......... 75

EMPLOYMENT AND TRAINING. 75 
 

ARTICLE 22. 77

FORCE MAJEURE................................ 77 
 

ARTICLE 23 78

TERM AND TERMINATION.......................................................... 78





ARTICLE 24_____________________„._____..______________________________________ 81

CONSULTATION, ARBITRATION AND INDEPENDENT EXPERT.... 81





ARTICLE 25_____________________ 84 

ASSIGNMENT........................ 84





ARTICLE 26_________________ 85


MISCELLANEOUS................ ... 85





ARTICLE 27---.................... ...88


NOTICE.............................................................-.................................... ... 88





ANNEX 1 - CONTRACT AREA.............................................. 1


...„3


ANNEX 2 - ACCOUNTING GUIDE------------------------------------------------------- 3




SECTION l.......................................................................................................................... ..... 4


1.1 GENERAL PROVISIONS....,..............................................................................


1.2 STATEMENTS REQUIRED TO BE SUBMITTED B Y CONTRACTOR............... .....4


1.3 LANGUAGE. MEASUREMENT. AND UNITS OF ACCOUNTS......................... .....5


SECTION 2..................................*....................................................................................... ---.7


2.0 CLASSIFICATION AND ALLOTMENT OF COSTS AND EXPENDITURE...... ..... 7





Petroleum Agreement for Shallow water lanD (MQE-GNPC/Iullow-Sabre) - April 2DQB









 2.1 ALL EXPENDITURE RELATING TO PETROLEUM OPERATIONS SHALL BE CLASSIFIED. AS





SECTION FOLLOWS:.................................................................................................................................... 7


3 ....................................................... 11


3.0 COSTS, EXPENSES. EXPENDITURES AND CREDITS OF CONTRACTOR...................................11


3.1 CONTRA CTOR FOR THE PURPOSE OF THIS A GREEMENT SHALL CHARGE THE





3.2 FOLLOWING ALLOWABLE COSTS TO THE ACCOUNTS:.............................................................11


COST OF ACQUIRING SURFACE RIGHTS AND RELINQUISHMENT..........................................11


3.3 LABOUR AND ASSOCIATED LABOUR COSTS........................................................................ 12


3.4 TRANSPORTATION COSTS...............................................................................................................12


3.5 CHARGES FOR SER PICES................................ 12


3.6 RENTALS. DUTIES AND OTHER ASSESSMENTS...........................................................................13


3.7 INSURANCE AND LOSSES....,...........„ .......................................................................................13


3.8 LEGAL EXPENSES............................*................................................................................................13


3.9 TRAINING COSTS...................................................................................................................... 15





3.11 UTILITY COSTS...................................................................... 15


3.12 OFFICE FACILITY CHARGES..............................................................................................


3.13 COMMUN1CA TION CHA RGES...................................................................... 15


3.14 ECOLOGICAL AND ENVIRONMENTAL CHARGES........................................................... .. 15


3.15 ABANDONMENT COST................................................................................................... 16


3.16 OTHER COSTS.....................................................................................................................


3.17 COSTS NOT ALLOWABLE UNDER THE AGREEMENT...................................................... ............16


3.18 ALLOWABLE AND DEDUCTIBILITY.......................................................................... ............17


3.19 CREDITS UNDER THE AGREEMENT.................................................................................. ... 17


3.20 DUPUCA TION OF CHARGES AND CREDITS................................................................ ... 18


SECTION 4........................................................................................................ . 19


4.0 MATERIAL.................................................................................. 19


4.1 VALUE OF MATERIAL CHARGED TO THE ACCOUNTS UNDER THE AGREEMENT.... ...........19


4.2 VALUE OF MATERIAL PURCHASED FROM AN AFFILIATE................. 19


4.3 CLASSIFICATION OF MATERIALS............................................................................. ............20


4.4 DISPOSAL OF MA TERIALS.................................................... ?0


4.5 WARRANTY OF MA TERIALS................................................. m


4.6 CONTROLLABLE MA TERIALS............................................................................................


SECTION 5............................................................................................................................... .. 92


5.0 CASH CALL STATEMENT............................................................. 27


SECTION 6................................................................................................. 97,


6.0 PRODUCTION STATEMENT„................................_.............................................. ........... 23


SECTION 7....................................................................................................................................... ............24


7.0 VALUE OF PRODUCTION STA TEMENT..........................................


SECTION 8................................................................................................ ............ 25


8.0 COST STATEMENT.............................................................................""""" 25


SECTION 9............................................................................................... 9f,


9.0 STATEMENT OF EXPENDITURES AND RECEIPTS.............................................. ...........26


SECTION 10..................................................................................................... 27


10.0 FINAL END-OF-YEAR STATEMENT___________________________________________________________' ’


SECTION 11................................................................................................... ”>8


11.0 BUDGET STA TEMENT.............................................................. 9*


SECTION 12................................................................................................ 99


12,0 LONG RANGE PLAN AND FORECAST...................................... 29


ANNEX 3 - SAMPLE AOE CALCULATION.................................................................._......... ............ ^ 1


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Pat'.ilEum Afjr3P.mHRi hr SheW ws'.ei Tanc (^DE GlIPC/Tullnw-Satira; - April ?OQO 3


THIS PETROLEUM AGREEMENT, made this ...... day of


-----..................2006 by and among the Government of the Republic of Ghana


(hereinafter referred to as "The State"), represented by the Minister for Energy (hereinafter


referred to as the “Minister”), the Ghana National Petroleum Corporation, a public


corporation established by Provisional National Defence Council Law 64 of 1983


(hereinafter referred to as “GNPC”), and Tullow Ghana Limited, a Jersey company


(hereinafter referred to as “Tullow") and Sabre Oil and Gas Limited, a United Kingdom


company, (the two companies hereinafter collectively referred to as "Contractor")


WITNESSETH:





1. All Petroleum existing in its natural state within Ghana is the property of the


Republic of Ghana and held in trust by the State.


2. GNPC has by virtue of the Petroleum Law the right to undertake Exploration,


Development and Production of Petroleum over all blocks declared by the Minister


to be open for Petroleum Operations.


3. GNPC is further authorised to enter into association by means of a Petroleum





Agreement with a contractor for the purpose of Exploration, Development and


Production of Petroleum.





4. The Contract Area that is the subject matter of this Petroleum Agreement covers the


appraisal, development and production of three existing discoveries namely the


North, South and West Tano fields, in addition to exploration in the adjoining area,


all this area having been declared open for Petroleum Operations by the Minister;


and the Government of Ghana desires to encourage and promote Exploration,


Development and Production within the said area. GNPC and die State have assured


Contractor that all of said area is within the jurisdiction of the Republic of Ghana.





5. Contractor, having the financial ability, technical competence and professional skills


necessary for carrying out the Petroleum Operations herein described, desires to


associate with GNPC in the Exploration for, and Development and Production of,


the Petroleum resources of the said area.


6. The Parties recognise that Ghanaian nationals should as soon as reasonably possible


be engaged in employment at all levels in the Petroleum industry, including


technical, administrative and managerial positions, and that to achieve this objective


an adequate programme of training must be established as an integral part of this


Agreement.





NOW THEREFORE, in consideration of ihe mutual covenants herein contained, it is


hereby agreed and declared as follows:


PfltrnluuiB AijrRBiiisnl for Shallow walur Tanu (MDE-GUPC/Iulluw-Sahra) - April 2Q0B 4


-aft-A


 ARTICLE 1





DEFINITIONS





1. In this Agreement:


1.1 “Accounting Guide” means the accounting guide which is attached hereto as


Annex 2 and made a part hereof;





1.2 “Additional Interest” means the Additional Interest of GNPC provided for in


Article 2.5 and Article 2.6;





1.3 “Affiliate” means any person, whether a natural person, corporation, partnership,


unincorporated association or other entity:


a) in which one of the Parties hereto or one of the companies comprising


Contractor directly or indirectly hold more than fifty percent (50%) of the share


capital or voting rights;


b) which holds directly or indirectly more than fifty percent (50%) of the share


capital or voting rights in a Party hereto or of the companies comprising


Contractor,


c) in which the share capital or voting rights are directly or indirectly and to an





extent more than fifty percent (50%) held by a company or companies holding


directly or indirectly more than fifty percent (50%) of the share capital or voting


rights in a Party hereto or in one of the companies comprising Contractor, or


d) which holds directly five percent (5%) or more of the share capital or voting





rights in Contractor,





1.3 “Agreement” means this Agreement between the State, GNPC and Contractor, and


includes the Annexes attached hereto;





1.4 “Appraisal Programme” means a programme carried out on the existing three


Discoveries or following a Discovery of Petroleum for the purpose of delineating the


accumulation of Petroleum to which that Discovery relates in terms of thickness and


lateral extent and estimating the quantity of recoverable Petroleum therein;





1.5 “Appraisal Well” means a well drilled for the purposes of an Appraisal


Programme;


Petroleum Agreement for Shallow water lano (MOE-GNPC/Iullow-Sabre) - April ZflQB 5








1.6 “Associated Gas” means Natural Gas produced from a well in association with


Crude Oil;


1.7 “Barrel” means a quantity or unit of Crude Oil equal to forty-two (42) United States


gallons at a temperature of sixty (60) degrees Fahrenheit and at 14.65 psia pressure.


1.8 “Block” means an area of approximately 685 square kilometres as depicted on the


reference map prepared by the Minister in accordance with the provisions of the


Petroleum Law;


1.9 “Calendar Year” means the period of twelve (12) months of the Gregorian


calendar, commencing on January 1 and ending on the succeeding December 31;


1.10 “Carried Interest” means an interest held by GNPC in respect of which Contractor


pays for the conduct of Petroleum Operations without any entitlement to


reimbursement from GNPC as expressly provided for in this Agreement;


1.11 “Commercial Discovery” means a Discovery which is determined to be


commercial in accordance with the provisions of this Agreement;


1.12 “Commercial Production Period” means in respect of each Development and


Production Area the period from the Date of Commencement of Commercial


Production until the termination of this Agreement or earlier relinquishment of such


Development and Production Area;


1.13 “Contract Area” means the area of 983 sq km covered by this Agreement in which


Contractor is authorised to explore for, develop and produce Petroleum, which area


is described in Annex 1 attached hereto and made a part of this Agreement, but


excluding any portions of such area in respect of which Contractor’s rights hereunder


are from time to time relinquished or surrendered pursuant to this Agreement;


1.14 “Contractor” means Tullow Ghana Limited and Sabre Oil and Gas Limited and


their respective successors and assignees;


1.15 “Contract Year” means a period of twelve (12) Months, commencing on the


Effective Date or any anniversary thereof;


1.16 “Crude Oil” means hydrocarbons which are liquid at 14.65 psia pressure and sixty


(60) degrees Fahrenheit and includes condensates and distillates obtained from


Natural Gas;





6


1.17 “Date of Commencement of Commercial Production” means, in respect of each


Development and Production Area, the date on which production of Petroleum under


a programme of regular production, lifting and sale commences;


1.18 “Date of Commercial Discovery” means the date referred to in Article 8.12;


1.19 “Delivery Point” shall have the meaning ascribed it in Article 10.5;


1.20 “Development” or “Development Operations” means the preparation of a


Development Plan, the design, engineering, building and installation of facilities for


Production, and includes drilling of Development Wells, construction and


installation of equipment, pipelines, facilities, plants and systems, in and outside the


Contract Area, which are required for achieving Production, treatment, transport,


storage and lifting of Petroleum, and preliminary Production and testing activities


carried out prior to the Date of Commencement of Commercial Production, and


includes all related planning and administrative work, and also includes drilling and


installation of wells and equipment for pressure maintenance and/or for increasing


production rates and may also include the construction and installation of secondary


and tertiary recovery systems, where these are included as part of the Development


Plan;


1.21 “Development Costs” means Petroleum Costs incurred in Development Operations;


1.22 “Development and Production Area” means that portion of the Contract Area


reasonably determined by Contractor (or by GNPC if a Sole Risk Operation pursuant


to Article 9) on the basis of the available seismic and well data to cover the areal


extent of an accumulation of Petroleum constituting a Commercial Discovery,


enlarged in area by ten percent (10%), such enlargement to extend uniformly around


the perimeter of such accumulation; and further enlarged by the area covering any


extension of the accumulation which is revealed by further development work


provided such extension is within the Contract Area;


1.23 “Development Period” means in respect of each Development and Production


Area, the period from the Date of Commercial Discovery until the Date of


Commencement of Commercial Production;


1.24 “Development Plan” means the plan for development of a Commercial Discovery


prepared by Contractor in consultation with the Joint Management Committee and


approved by the Minister pursuant to Article 8;











Petroleum Agreement for Shallow water Tana (MOE-GNPC/Tullow-Sabre) - April 2006 7


125 “Development Well” means a well drilled in accordance with a Development Plan


for producing Petroleum, for pressure maintenance or for increasing the Production


rate; . .


1.26 “Discovery” means finding during Exploration Operations an accumulation of


Petroleum not previously known or proven to have existed, which is recovered or


recoverable at the surface in a flow measurable by conventional petroleum industry


testing methods;


1.27 “Discovery Area” means that portion of the Contract Area, reasonably determined


by Contractor (or by GNPC if a Sole Risk Operation pursuant to Article 9) on the


basis of the available seismic and well data to cover the areal extent of the geological


structure in which a Discovery is made. A Discovery Area may be modified at any


time by Contractor (or by GNPC if applicable), if justified on the basis of new


information, but may not be modified after the date of completion of the Appraisal


Programme;


1.28 “Effective Date” shall have the meaning ascribed to it in Article 26.8D;


1.29 “'Exploration” or “Exploration Operations” means the search for Petroleum by


geological, geophysical and other methods and the drilling of Exploration Well(s)


and includes any activity in connection therewith or in preparation thereof and any


relevant processing and appraisal work, including technical and economic feasibility


studies, that may be carried out to determine whether a Discovery of Petroleum


constitutes a Commercial Discovery;


1.30 “Exploration Costs” means all expenditures made and costs incurred, both within


and outside Ghana, in conducting Exploration Operations hereunder determined in


accordance with the Accounting Guide attached hereto an Annex 2;


1.31 “Exploration Period” means the period commencing on the Effective Date and


continuing during the time provided for in Article 3.1 within which Contractor is


authorised to carry out Exploration Operations and shall include any periods of


extensions provided for in this Agreement. The period shall terminate with respect


to any Discovery Area on the Date of Commercial Discovery in respect of such


Discovery Area;


1.32 “Exploration Well” means a well drilled in the course of Exploration Operations


conducted hereunder during the Exploration Period, but does not include an


* -- lisalWell;








Petroleum Agreement for Shallow waterTano (MOE-GNPC/Tullnw-Sabre) - April 20QG 8


1.33 “Extension Period” means any of the First Extension Period or Second Extension


Period;


1.34 “First Extension Period” shall have the meaning ascribed to it in Article 3.1 (a)(iii);


1.35 “Force Majeure” means any event beyond the reasonable control of the Party


claiming to be affected by such event which has not been brought about at its


instance, including, but not limited to, earthquake, storm, flood, lightning or other


adverse weather conditions, war, embargo, blockade, riot or civil disorder;


1.36 “Foreign National Employee” means an expatriate employee of Contractor, its


Affiliates, or its Sub-contractors who is not a citizen of Ghana;


1.37 “Ghana” means the territory of the Republic of Ghana and includes the sea, seabed


and subsoil, tire continental shelf and all other areas within the jurisdiction of the


Republic of Ghana;


1.38 “Gross Production” means the total amount of Petroleum produced and saved from


a Development and Production Area during Production Operations which is not used


by Contractor in Petroleum Operations and is available for distribution to the Parties


in accordance with Article 10;


1.39 “Gross Negligence” means any act or failure to act (whether sole, joint or


concurrent) which was in reckless disregard of or wanton indifference to harmful


consequences such person or entity knew or should have known such act or failure


would have on another person or entity;


1.40 “Initial Appraisal Period” shall have the meaning ascribed to it in Article 3.1(a)(i);


1.41 “Initial Exploration Period” shall have tire meaning ascribed to it in Article


3-l(a)(ii);


1.42 “Initial Interest” means the interest of GNPC in all Petroleum Operations provided


for in Article 2.4;


1.43 “Joint Management Committee (JMC)” means the committee established


pursuant to Article 6.1 hereof;


1.44 “Market Price” shall have the meaning ascribed to it in Article 11.7;





1.45 “Minister” means Minister for Energy;





Petroleum Agreement for Shallow water Tano (MOE-GNPC/Tullow-Sabre) - April 2QQG


9


1.46 “Month” means a month of the Calendar Year,


1.47 “Natural Gas” means all hydrocarbons which are gaseous at 14.65 psia pressure


and sixty (60) degrees fahrenheit temperature and includes wet gas, dry gas and


1.48 residue gas remaining after the extraction of liquid hydrocarbons from wet gas;


“Non-Associated Gas” means Natural Gas produced from a well other than in


association with Crude Oil;


1.49 “Operator” means Tullow or such other Party as may be appointed by Contractor





with the approval of GNPC and the State, which approval shall not be unreasonably


1.50 withheld, or delayed;


“Participating Interest” means for GNPC, the interest held by GNPC in


accordance with the provisions of Article 2.4 and Article 2.5; and for Contractor, the


1.51 interest held by Contractor in accordance with the provisions of Article 2.9;


“Party” means the State, GNPC or Contractor, as the case may be;


1.52 “Paying Interest” means an interest held by GNPC in respect of which GNPC pays


for the conduct of Petroleum Operations;


1.53 “Petroleum” means Crude Oil or Natural Gas or a combination of both;


1.54 “Petroleum Costs” means all expenditures made and costs incurred, both within


and outside Ghana, in conducting Petroleum Operations hereunder determined in


1.55 accordance with the Accounting Guide attached hereto as Annex 2;


“Petroleum Income Tax Law” means the Petroleum Income Tax Law, 1987


(PNDCL 188);


1.56 “Petroleum Law” means the Petroleum (Exploration and Production) Law, 1984


(PNDCL 84);


1.57 “Petroleum Operations” means all activities, both in and outside Ghana, relating to


the Exploration for, Appraisal, Development, Production, handling and


transportation of Petroleum contemplated under this Agreement and includes


1.58 Exploration Operations, Development Operations and Production Operations and all


activities in connection therewith;


“Petroleum Product” means any product derived from Petroleum by any refining


or other process;


allow water Tano (MQE-GNPC/Tullow-Sabre) - April 2006 ^0


1.59 “Production” or “Production Operations” means activities not being


Development Operations, undertaken in order to extract, save, treat, measure,


handle, store, load and transport Petroleum to storage and/or loading points and to


carry out any type of primary and secondary operations, including recycling,


recompression, maintenance of pressure and water flooding and all related activities


1.60 such as planning and administrative work and shall also include maintenance, repair


and replacement of facilities, and well workovers, conducted after the Date of


Commencement of Commercial Production of the respective Development and


Production Area;


“Production Costs” means Petroleum Costs incurred in Production Operations;


1.61 “Quarter” means a period of three (3) Months, commencing January 1, April 1,


July 1 or October 1;


1.62 “Rate of Return” shall have the meaning ascribed to it in Article 10;





1.63 “Second Extension Period” shall have the meaning ascribed to it in Article


3.1(a)(iii);


1.64 “Sole Risk Operation” means an operation conducted at the sole cost, risk and





expense of GNPC referred to in Article 9;


1.65 “Specified Rate” means the rate which the National Westminster Bank, Pic,





London, certifies to be the London Interbank offered rate (LIBOR) in the London


Interbank Eurodollar market on thirty (30) day deposits, in effect on the last business


1.66 day of the last respective preceding month, plus one and one-half per cent (1.5%);


“Standard Cubic Foot” or “SCF” means the quantity of gas that occupies one (1)


cubic foot at 14.65 psia pressure and sixty (60) degrees Fahrenheit temperature;


1.67 “State” means the Government of the Republic of Ghana;





1.68 “Subcontractor” has the meaning assigned to that term in the Petroleum Income


Tax Law;


1.69 “Termination” means termination of this Agreement pursuant to Article 23 hereof;





1.70 “Work Programme” means the annual plan for the conduct of Petroleum


Operations prepared pursuant to Articles 4.3, 6.4 and 6.5.





Petroleum Agreement for Shallow water lano (MGE-GNPC/Tullow-Sabre) - April 2DDG 11


 ARTICLE 2








SCOPE OF THE AGREEMENT. INTERESTS OF THE PARTIES


AND CONTRACT AREA





2.1 This Agreement provides for the Exploration for and Development and Production


of Petroleum in the Contract Area by GNPC in association with Contractor.


2.2 Subject to the provisions of this Agreement, Contractor shall be responsible for the


execution of such Petroleum Operations as are required by the provisions of this


Agreement and subject to Article 9, is hereby appointed the exclusive entity to


conduct Petroleum Operations in the Contract Area. GNPC shall at all times


participate in the management of Petroleum Operations and in order that the Parties


may cooperate in the implementation of Petroleum Operations GNPC and Contractor


shall establish a Joint Management Committee, to conduct and manage Petroleum


Operations.


2.3 In the event that no Commercial Discovery is made in the Contract Area, or that


Gross Production achieved from the Contract Area is insufficient fully to reimburse


Contractor in accordance with the terms of this Agreement, then Contractor shall


bear its own loss; GNPC and the State shall have no obligations whatsoever to


contractor in respect of such loss.


2.4 GNPC shall have a twelve and one-half percent (1214%) Initial Interest in respect of


Cmde Oil and a ten percent (10%) Initial Interest in respect of Natural Gas in all


Petroleum Operations under this Agreement. With respect to all Exploration and


Development Operations GNPC’s Initial Interest shall be a Carried Interest With


respect to all Production Operations GNPC’s Initial Interest shall be a Paying


Interest.


2.5 GNPC shall have the option to acquire an Additional Interest of ten percent (10%) in


every Commercial Discovery of Petroleum. In order to acquire the Additional


Interest, GNPC must notify Contractor within ninety (90) days after Contractor’s


notice to the Minister that a Discovery is a Commercial Discovery, of its intention to


acquire the Additional Interest. If within such ninety (90) day period GNPC does


not give such notice, GNPC’s interest will remain as described in Article 2.4. If


GNPC acquires the Additional Interest, GNPC shall be responsible for paying ten


percent (10%) of all future Petroleum Costs including Development and Production


Costs as approved by the JMC. GNPC and Contractor shall agree on the mode of


financing such Additional Interest.


PatrnlBuir * ,r nl " iw watsr Tana (MOE-GNPC/Tullow-Safare) - April 2006 12


In the event that Contractor decides to seek project finance from a bank or group of


banks for the financing of Development Operations, Contractor shall offer GNPC


the opportunity (but not an obligation) to join in the said project financing with


respect to its Additional Interest. GNPC shall not, by its action or inaction, impede


or delay Contractor in its efforts to obtain such project financing.


If GNPC fails to pay for the costs associated with its Additional Interest and those


associated with Production Operations as described in Article 2.4 and Article 2.6,


then Contractor shall be entitled to recover the said costs, together with interest at the


Specified Rate, from Production revenues.


In the event that GNPC, having acquired the Additional Interest, subsequently


wishes to dispose of it (or part of it) to a third party, GNPC shall notify Contractor of


such intent and shall inform Contractor of the price which is to be paid by such third


party for the same, and Contractor shall have the right for a period of forty five days


from receipt of such notice to inform GNPC that it wishes to acquire such interest at


the price notified to it by GNPC, being the price at which it was to have been sold to


the third party.


2.6 If GNPC opts to take an Additional Interest as provided for in Article 2.5 then within


six (6) Months of its election, GNPC shall reimburse Contractor for all expenditures


attributable to GNPC’s Additional Interest and incurred from the Date of


Commercial Discovery to the date GNPC notifies Contractor of its election.


2.7 For the avoidance of doubt GNPC shall only be liable to contribute to Petroleum


Costs:





a) incurred in respect of Development Operations in any Development and


Production Area and to the extent only of any Additional Interest acquired in


such Development and Production Area under Article 2.5; and





b) incurred in respect of Production Operations in any Development and


Production Area both to the extent of:


i. its twelve and half percent (12l/z%) Initial Interest in respect of Crude





Oil and ten percent (10%) Initial Interest in respect of Natural Gas as


the case may be; and





ii. any Additional Interest acquired in such Development and Production


Area under Article 2.5.


=5vr





Petroleum Agreement for Shallow water Tang (MOE-GNPC/Tullow-SabrB) - April 2006 13








2.8 GNPC may during the Exploration Period assist Contractor in carrying out


Contractor’s obligations expeditiously and efficiently as stipulated in Article 7.3.


Upon completion of the work associated with said assistance, GNPC shall invoice


the Contractor for the costs incurred and shall provide reasonable supporting


documentation in respect of such costs. Contractor shall pay GNPC the invoiced


amount within thirty (30) days of receipt of the invoice. The actual amount of the


invoice submitted by GNPC shall be at rates agreed by GNPC and the Contractor for


such services.


2.9 Contractor's Participating Interest in all Petroleum Operations and in all rights under


this Agreement shall be eighty-seven and one half per cent (87&%), in respect of


Crude Oil and ninety percent (90%) in respect of Natural Gas reduced


proportionately at any given time and in any given part of the Contract Area by the


Additional Interest of GNPC pursuant to Article 2.5 or the Sole Risk Interest of


GNPC pursuant to Article 9.


2.10 As of the Effective Date, the Contract Area shall cover a total of approximately nine


hundred and eighty three square kilometres (983km2) as depicted by Annex 1 and


shall from time to time during the term of this Agreement be reduced according to


the terms herein. During the term of the Agreement, Contractor shall pay rentals to


the State for that area included within the Contract Area at the beginning of each


Contract Year according to the provisions of Article 12.2 (v) below provided that a


pro-rata payment shall be made to cover a period of less than one (1) frill Contract


Year.


















































Petroleum Agreement for Shallow water Tano (MDE-GNPC/Tullow-Sabre) - April 2QDB








 ARTICLE 3








EXPLORATION PERIOD





3.1 The Exploration Period shall begin on the Effective Date and shall not cover a


period of more than six and one half (6V2) years except as provided for in accordance


with this Agreement and the Petroleum Law.


a) The Exploration Period shall be divided as follows:


(i) an Initial Appraisal Period of two (2) years (“Initial Appraisal Period”);


and/or


(ii) an Initial Exploration Period of two and one half (2V£) years ("Initial


Exploration Period") depending on Contractor’s minimum Work


Programme in Article 4.3; and


(iii) Two (2) extension periods totalling four (4) years:


1. Two (2) years for the first such period (“First Extension Period”); and





2. Two (2) years for the second of such periods (“Second Extension


Period”).





b) Within the first twelve (12) Months of the Initial Appraisal Period, Contractor


shall drill one (1) Appraisal Well. Following the end of the first twelve (12)


Months of the Initial Appraisal Period, Contractor shall drill one(l) additional


Appraisal Well within the next twelve (12) months if the Appraisal Well referred


to in Article 4.3(a)(i) was successful. If the Appraisal Well referred to in Article


4.3(a)(i) was unsuccessful, then Contractor shall drill one (1) Exploration Well


within the next eighteen (18) Months after the end of the first twelve (12)


months of the Initial Appraisal Period. Contractor shall have the right to


relinquish the entire Contract Area and withdraw from this Agreement upon the


expiration of any of the Initial Appraisal and/or Exploration Period, the First


Extension Period and the Second Extension period; subject only to notifying


GNPC not less than thirty (30) days before expiration of the relevant period and


provided Contractor has completed the applicable work obligation of the Initial


Appraisal and/or Exploration Period or any of the Extension Periods (as


applicable) during which such relinquishment and withdrawal is made.





c) Where Contractor has fulfilled its work and expenditure obligations set out in


Article 4.3 before the end of Initial Appraisal and/or Exploration Period or any


of the Extension Periods and has exercised its option by applying to the Minister


in writing for an extension into the next phase, the Minister will be deemed to


have granted an extension into the First Extension Period or, Second Extension


” ' >d, as applicable.





Petroleum Agrr _ tallow water Tano (MQE-GNPC/Tullow-Sabre) - April 20QE 15


d) For each well drilled by Contractor or with Contractor’s participation during the


Initial Appraisal and/or Exploration Period (beyond those referred to in Article


4.3), the Initial Appraisal and/or Exploration Period shall be extended by three


(3) Months and the commencement of subsequent periods shall be postponed in


their entirety accordingly.


3.2 Following the end of the Second Extension Period, subject to the provisions of


Article 3.4, Contractor will be entitled to an extension or extensions, by reference to


Article 8, of the Exploration Period as follows:


a) Where at the end of the Second Extension Period Contractor is drilling or testing


any well, Contractor shall be entitled to an extension for such further period as


may be reasonably required to enable Contractor to complete such work and


assess the results and, in the event that Contractor notifies the Minister that the


results from any such well show a Discovery which merits appraisal, Contractor


shall be entitled to a further extension for such period as may be reasonably


required to carry out an Appraisal Programme and determine whether the


Discovery constitutes a Commercial Discovery;


b) Where at the end of the Second Extension Period Contractor is engaged in the


conduct of an Appraisal Programme in respect of a Discovery which has not


been completed, Contractor shall be entitled to a further extension following the


end of the Second Extension for such period as may be reasonably required to


complete that Appraisal Programme and determine whether the Discovery


constitutes a Commercial Discovery;


c) Where at the end of the Second Extension Period Contractor is in the process of


completing an aspect of the Approved Work Programme not falling under


paragraphs (a) or (b) in this Article 3.2 above, or under Article 4.3(c),


Contractor will be entitled to such extension of time as the Minister considers


reasonable for the purpose of completing such work;


d) Where pursuant to Article 8 Contractor has before the end of the Second


Extension Period, including extensions under (a), (b) and (c) above, given to the


Minister a notice of Commercial Discovery, Contractor shall, if the Exploration


Period would otherwise have been terminated, be entitled to a further extension


of the Exploration Period in which to prepare the Development Plan in respect


of the Discovery Area to which that Development Plan relates until either:


i) the Minister has approved the Development Plan as set out in Article 8, or


jft








Petroleum Agreement for Shallow water Tano (MDE-GNPC/Tullow-Sahre) - April 20QB 16


 ii) in the event that the Development Plan is not approved by the Minister as


set out in Article 8 and the matter or matters in issue between the Minister


and Contractor have been referred for resolution under Article 24, one (1)


Month after the date on which the final decision thereunder has been given.





3.3 Where Contractor has during the Initial Appraisal and/or Exploration Period or, as


the case may be, during the First Extension Period failed to fulfill its work and


expenditure obligations under Article 4 in respect of that period but has made


reasonable arrangements to remedy its default during the First Extension Period or,


as the case may be, the Second Extension Period, Contractor shall be entitled to an


extension subject to such reasonable terms and conditions as the Minister may


stipulate to assure performance of the work.


3.4 Save in respect of a Discovery Area:


a) In the circumstances and subject to the limitations set forth in Section 12(3) of


the Petroleum Law; or


b) In a case falling within the provisions of Article 3.2(d)


nothing in Article 3.2 shall be read or construed as requiring or permitting the


extension of the Exploration Period beyond seven (7) years from the Effective Date


except for reasons of Force Majeure.


3.5 The provisions of Article 3.2(a), (b) and (c) so far as they relate to the duration of the


extension period to which Contractor will be entitled shall be read and construed as


requiring the Minister to give effect to the provisions of Article 8 relating to the time


within which Contractor must meet the requirements of that Article.





3.6 In the event that the Contractor is in the course of drilling or testing any well at the


end of the Initial Appraisal and/or Exploration Period or the First Extension Period


then it shall be permitted to complete the said drilling or testing without breaching


this Agreement.





If Contractor elects thereafter to enter into the First Extension Period or the Second


Extension Period, as the case may be, the commencement of the First Extension


Period or the Second Extension Period shall not be affected by the duration of the


period required for the completion of drilling or testing as referred to above, but shall


remain as stated in Article 4.3(a) or Article 4.3(b) as applicable.


jm











Petroleum Agreement for Shallow water Tano (MOE-GNPC/Tullow-Sabre) - April 2QDG 17


 ARTICLE 4








MINIMUM APPRAISAL AND/OR EXPLORATION PROGRAMME


4.1 Appraisal and/or Exploration Operations shall begin as soon as practicable and in


any case not later than sixty (60) days after the Effective Date.


4.2 GNPC shall, at the request of Contractor, make available to it such records and


information relating to the Contract Area as are relevant to the performance of


Appraisal and/or Exploration Operations by Contractor and are in GNPC's


possession, provided that Contractor shall licence the data and reimburse GNPC for


the costs reasonably incurred in procuring or otherwise making such records and


information available to Contractor.


4.3 Subject to the provisions of this Article, in discharge of its obligations to carry out


Appraisal and/or Exploration Operations in the Contract Area, Contractor shall


during the several phases into which the Appraisal and/or Exploration Period is


divided carry out the work specified hereinafter:


a)(i) Initial Appraisal Period: Commencing on the Effective Date and


terminating at the end of two (2) Contract Years.


Description of Work: By the end of the Initial Appraisal Period, Contractor


shall have undertaken the Work Programme described below:








1) Licence, reprocess and interpret the 814 sq km of CGG/GNPC 3-D


seismic data;


2) Drill one (1) Appraisal Well within twelve (12) Months;





3) Drill additional one (1) Appraisal Well within the next twelve (12)


Months following the end of the twelve month period referred to in


Article 4.3(a)(i)(2) above; or undertake the work described in Article


4.3(a)(ii) below.





If the Well in Article 4.3(a)(i)(2) above is successful, then Contractor shall submit a


Development Plan pursuant to Article 8. For the purpose of this Article “successful”


means declaring a Commercial Discovery pursuant to Articles 8.8, 8.9 and 14.15.





a)(ii) Initial Exploration Period: Commencing on the Effective Date and


terminating at the end of two and one half (2Yi) Contract Years.


Petroleum Aareei^^^allow waierTano (MOE-GNPC/Tullow-Sabre) - April 2006 18








Description of Work: By the end of the Initial Exploration Period, Contractor


shall have undertaken the Work Programme described below:


In addition to work described in Article 4.3(a)(i)(l) and (2) above, Contractor


shall drill one (1) Exploration Well within the next eighteen (18) Months


following the end of the twelve month period referred to in Article 4.3(a)(i)(2)


above.


Minimum Expenditure: Contractor’s minimum expenditure for work in the


Initial Appraisal and/or Exploration Period shall be twenty million United States


Dollars (U.S.$20,000,000).


b) First Extension Period: Commencing at the end of the Initial Exploration


Period and terminating at the end of a further two (2) Contract Years.


Description of Work: By the end of the First Extension Period, Contractor


shall have drilled at least one (1) Exploration Well in die Contract Area.


Minimum Expenditure: Contractor’s minimum expenditure for the work in


the First Extension Period shall be ten million United States dollars


(U.S.$10,000,000).


c) Second Extension Period:Commencing at the end of the First Extension Period


and terminating at the end of a further two (2) Contract Years.


Description of Work: By the end of the Second Extension Period,


Contractor shall have drilled one (1) Exploration Well in the Contract Area.


Minimum Expenditure: minimum expenditure for work in the Second


Extension Period shall be ten million United States dollars (U.S.S 10,000,000).


d) Work and expenditures accomplished in any period in excess of the above


obligations may, with the approval of the Minister which GNPC shall assist to


obtain, be applied as credit in satisfaction of obligations called for in any other


Period. The fulfillment of any work obligation shall relieve Contractor of the


corresponding minimum expenditure obligation, but the fulfillment of any


minimum expenditure obligation shall not relieve Contractor of the


corresponding work obligation.


(e) The principle of Article 4 is that, the fulfillment of any minimum Work


Programme supersedes its corresponding minimum expenditure obligation.


19


 However, for the Initial Exploration Period and any Extension Period, for which


the entire minimum work obligation is not met by Contractor, the corresponding


part of the minimum expenditure obligation relating to the unfulfilled work


obligation shall be paid to GNPC whereupon Contractor shall be deemed to have


fulfilled such minimum work obligation. However, Contractor’s entitlement to


proceed to the next Extension Period shall be at the discretion of the Minister.





4.4 No Appraisal Wells drilled, except those referred to in Article 4.3, or seismic


surveys carried out by Contractor as part of an Appraisal Programme undertaken


pursuant to Article 8 and no expenditure incurred except those referred to in Article


4.3 by Contractor in carrying out such Appraisal Programme shall be treated as


discharging the minimum work obligations under Article 4.3.


4.5 The seismic reprocessing programme in Article 4.3(a), when combined with existing


data, shall be such as will enable a study of the regional geology of the Contract Area


and the preparation of a report thereon with appropriate maps, cross sections and


illustrations, as well as a geophysical survey of the Contract Area which, when


combined with existing data, shall provide:


a) a minimum seismic grid adequate to define prospective drill sites over


prospective closures as interpreted from data available to Contractor; and


b) a seismic evaluation of structural and stratigraphic conditions over the remaining


portions of the Contract Area.


4.6 Each obligation Well shall be drilled at a location and to an objective depth


determined by Contractor in consultation with GNPC. Except as otherwise provided


in Article 4.7 and 4.8 below, the minimum depth of each obligatory Well shall be


whichever of the following is first encountered:


a) the depth of 3,200 metres measured from the Rotary Table Kelly Bushing


(RTKB);


b) the depth sufficient to penetrate 300 metres into the primary target;


c) the depth at which Contractor encounters geologic basement.


4.7 The minimum depth of the first obligatory Appraisal Well in Article 4.3 shall be


whichever of the following is first encountered:


a) the depth of 3,000 meters measured from the Rotary Table Kelly Bushing


(RTKB);


b) the depth sufficient to penetrate 500 metres into the Top Albian; or


c) the depth at which Contractor encounters geological basement.





Petroleum Agrei 20


4.8 If in the course of drilling an obligation Well the Contractor concludes that drilling


to the minimum depth specified in Article 4.6 or 4.7 above is impossible,


impracticable or imprudent in accordance with accepted international petroleum


industry drilling and engineering practice, then Contractor may plug and abandon the


Well and GNPC shall have the option of either:


a) waiving the minimum depth requirement, in which case Contractor will be


deemed to have satisfied the obligation to drill such Well; or


b) requiring Contractor to drill a substitute Well at a location determined by


Contractor in consultation with GNPC and to the relevant minimum depth set


forth in Article 4.6 or 4.7, except that if in the course of drilling such substitute


Well Contractor establishes that drilling to the relevant minimum depth


specified in Article 4.6 or 4.7 above is impossible, impracticable or imprudent in


accordance with accepted petroleum industry drilling and engineering practice,


then Contractor may plug and abandon the substitute Well and will be deemed


to have satisfied the obligation to drill one (1) Well to the minimum depth to


which such well had been planned.


The above option shall be exercised by GNPC within thirty (30) days from the


plugging and abandonment of the said Well, and failure to exercise such option shall


constitute a waiver of the minimum depth requirement pursuant to Article 4.6 or 4.7


above, as the case may be.


4.9 During the Exploration Period, Contractor shall have the right to perform additional


Exploration Operations, including without limitation performing gravity and


magnetic surveys, drilling stratigraphic wells and performing additional geological


and geophysical studies, provided the minimum work obligations are performed


within the applicable period.


4.10 During the Exploration Period, Contractor shall deliver to GNPC and the Minister


reports on Exploration Operations conducted during each Quarter within thirty (30)


days following the end of that Quarter. Further requests for information by the


Minister under Section 9(1) of the Petroleum Law shall be complied with within a


reasonable time and copies of documents and other material containing such


information shall be provided to GNPC.

















Petroleum Agreement for Shallow water Tano (MOE-GNPC/Tullnw-Sabre) - April 2Q0B


 ARTICLE 5





RELINQUISHMENT


5.1 Except as provided in Article 8.3, 8.9, 14.9 and 14.14, Contractor shall relinquish


portions of the Contract Area in the manner provided hereafter.


a) If on or before the expiration of the Initial Appraisal and/or Exploration Period,





Contractor elects to enter into the First Extension Period pursuant to Article


3.1(c) then subject to Article 5.2, and in the case of the existing three


Discoveries, to Articles 8.9 and 8.17, at the commencement of the First


Extension Period the area retained shall be one hundred per cent (100%) of the


original Contract Area as at the Effective Date;


b) If on or before the expiration of the First Extension Period, Contractor elects to


enter into the Second Extension Period pursuant to Article 3.1(c) then subject to


Article 5.2 at the commencement of the Second Extension Period the area


retained shall not exceed fifty (50%) of the original Contract Area as at the


Effective Date;


c) On the expiration of the Second Extension Period, Contractor shall subject to


Article 5.2 relinquish the remainder of the retained Contract Area.


5.2 The provisions of Article 5.1 shall not be read or construed as requiring Contractor





to relinquish any portion of the Contract Area which constitutes or forms part of


either a new Discovery Area or a Development and Production Area.





PROVIDED HOWEVER THAT if at the end of the Initial Appraisal and/or


Exploration Period, the First Extension Period or the Second Extension Period, as


the case may be, Contractor elects not to enter into the First Extension Period or the


Second Extension Period, Contractor shall relinquish the entire Contract Area other


than any Discovery or Development and Production Area.


5.3 Each area to be relinquished pursuant to this Article shall be selected by Contractor


and shall be measured as far as possible in terms of continuous and compact units of


a size and shape which will permit the carrying out of Petroleum Operations in the


relinquished portions.


5.4 Without prejudice to the foregoing provisions of this Article 5, in the event that,


following the relinquishment of the Contract Area, the Contractor has retained one


PetraleumTrtp'eBniew for Shallow water Tano (MOE-GNPC/Tullow-Sabra) - April 20QB 22





T '





 or more Development and Production Areas, and Contractor and GNPC have, after


reviewing all the relevant technical data and information, determined that the field or


reservoirs for which a Development and Production Area was granted covers


Petroleum lying outside such Development and Production Area, and provided such


outside areas are not under any contract, the Contractor and GNPC shall endeavour


to reach an agreement on unitization between the Contractor (with respect to the


Contract Area) and GNPC (as holder of the area outside of the Contract Area) to


cover the full development of the reservoir or field.




















































































































Petroleum Agreement for Shallow water Tano (MOE-GNPC/Tullow-Sabre) - April 2006 23


 ARTICLE 6





IOINT MANAGEMENT COMMITTEE





6.1 In order that the Parties may at all times cooperate in the implementation of


Petroleum Operations, GNPC and Contractor shall not later than thirty (30) days


after the Effective Date establish a Joint Management Committee (JMC). Without


prejudice to the rights and obligations of Contractor for day-to-day management of


the operations, the JMC shall oversee and supervise the Petroleum Operations and


ensure that all approved Work Programmes and Development Plans are complied


with and also that accounting for costs and expenses and the maintenance of records


and reports concerning the Petroleum Operations are carried out in accordance with


this Agreement and the accounting principles and procedures generally accepted in


the international petroleum industry.


6.2 The composition of and distribution of functions within the JMC shall be as follows:


i) The JMC shall constitute of three (3) representatives of GNPC and three (3)


representatives of Contractor. GNPC and Contractor shall also designate a


substitute or alternate for each member. In the case of absence or incapacity


of a member of the JMC, his alternate shall automatically assume the rights


and obligations of the absent or incapacitated member,


ii) The Chairperson of the JMC shall be designated by GNPC from amongst the


members of the JMC;


iii) Contractor shall be responsible in consultation with GNPC for the preparation


of agenda and supporting documents for each meeting of the JMC and for


keeping records of the meetings and decisions of the JMC (GNPC shall have


the right to inspect all records of the JMC at any time);


iv) At any meeting of the JMC four (4) representatives shall form a quorum,


provided that at least two (2) of such representatives shall be representatives


of GNPC and at least two (2) of such representatives shall be representatives


of the Contractor.





6.3 Meetings of the JMC shall be held and decisions taken as follows:





i) All meetings of the JMC shall be held in Accra, Dublin or London or such


other place as may be agreed upon by members of the JMC;


M





Petroleum Agreement for Shallow water Tano (MQE-GNPC/Tullow-Sabre) - April 200G 24








 ii) The JMC shall meet at least twice yearly and at such times as the members


may agree;


iii) A meeting of the JMC may be convened by either GNPC or the Contractor


giving not less than twenty (20) days notice to the other or, in a case requiring


iv) urgent action, notice of such lesser duration as the members may agree upon;


Decisions of the JMC shall require unanimity provided, however, that


decisions and approvals required for budgets and day-to-day operational


matters associated with Appraisal, Development and Production Operations


the expenditures, outlays or advances for which Contractor will be required to


v) make on a one hundred percent (100%) basis shall require approval of the


Contractor’s representatives only. However, for the appraisal work in the


Initial Appraisal Period, Contractor shall require unanimity of the JMC.


Any member of the JMC may vote by written and signed proxy held by


another member;


vi) Decisions of the JMC may be made without holding a meeting if all


representatives of both Parties notify their consent thereto in the manner


vii) provided in Article 27;


GNPC and Contractor shall have the right to bring expert advisors to any





JMC meetings to assist in the discussions of technical and other matters


viii) requiring expert advice;


The JMC may also establish subcommittees it deems appropriate for carrying





out its functions, such as:


a) a technical subcommittee;


ix) b) an audit subcommittee; and


c) an accounting subcommittee.


costs and expenses related to attendance by GNPC outside Ghana (e.g.


business class travel, transportation, lodging, per diem and insurance), shall


be borne by Contractor and treated as Petroleum Costs. Subject to GNPC


providing to Contractor reasonable supporting documentation in respect of


such costs and expenses, those costs and expenses shall be reimbursed by


Contractor to GNPC.











Petroleum Agreement For Shallow water Tana (MGE-GNPC/Tultow-Sabre) - April 2QQ5 25


l"





6.4 The JMC shall oversee Exploration Operations as follows:





i) Notwithstanding the time limit for submission provided for in Article 8.4 and


14.10, not later than sixty (60) days after the Effective Date, Contractor shall


prepare and submit to the JMC for its review a reasonably detailed Appraisal


Programme and budget prior to submission to the Minister pursuant to Article


8.4 and Article 14.10 setting forth all appraisal work relating to the appraisal


well drilling obligation referred to in Article 4.3(a) (i) that the Contractor


proposes to carry out and the estimated cost thereof. Within thirty (30) days of


completion of this Appraisal Programme a JMC meeting to discuss the results of


the Appraisal Programme shall be convened to take place before submission of


the detailed Appraisal Programme report provided for in Article 8.7, after which


Contractor shall make the declaration required in Article 8.8 or Article 8.9;





ii) Not later than sixty (60) days after the Effective Date and thereafter at least


ninety (90) days before the commencement of each subsequent Contract Year,


Contractor shall prepare and submit to the JMC for its review a reasonably


detailed Work Programme and budget setting forth all Appraisal and/or


Exploration Operations which Contractor proposes to carry out in that Contract


year and the estimated cost thereof, and shall also give an indication of


Contractor’s tentative preliminary appraisal and/or exploration plans for the


succeeding Contract year,


iii) Upon notice to the Minister and GNPC, Contractor may amend any Work


Programme or budget submitted to the JMC pursuant to this Article which


notice will state why in Contractor’s opinion the amendment is necessary or


desirable. Any such amendment shall be submitted to the JMC for review;





iv) Every Work Programme submitted to the JMC pursuant to this Article 6.4 and


every revision or amendment thereof shall be consistent with the requirements


set out in Article 4.3 relating to minimum work and expenditure for the period


of the Exploration Period in which such Work Programme or budget falls;


v) Contractor shall report any Discovery to GNPC immediately following such


Discovery and shall place before the JMC for review its Appraisal Programme


prior to submission thereof to the Minister. Within thirty (30) days of


completion of the Appraisal Programme a JMC meeting to discuss the results of


the Appraisal Programme shall be convened to take place before submission of


the detailed Appraisal Programme report provided for in Article 8.7;











Petroleum Agreement lor Shallow water Tano (MOE-GNPC/Iullow-Sabre) - April 2D0G 2 6


vi) The JMC will review Work Programmes and budgets and any amendments or


revisions thereto, and Appraisal Programmes, submitted to it by Contractor


pursuant to this Article 6, and timely give such advice as it deems appropriate


which Contractor shall consider before submitting the Programme to GNPC and


the Minister for their information;


vii) After the date of the first Commercial Discovery, Contractor shall seek the


concurrence of GNPC’s JMC representatives, which concurrence shall not be


unreasonably withheld, on any proposal for the drilling of an Exploration Well


or Wells not associated with the Commercial Discovery and not otherwise


required to be drilled under Article 4.3. If concurrence is not secured by


Contractor, Contractor may nevertheless elect to drill the Exploration Well or


Wells but the costs of such Well or Wells shall be considered Petroleum Costs


for AOE purposes and deductible cost for Ghana income tax purposes only in


the event there is a subsequent Commercial Discovery associated with the Well


or Wells.


6.5 From the first occurring Date of Commercial Discovery the JMC shall have


supervision of Petroleum Operations as follows:


i. Within sixty (60) days after the Date of Commercial Discovery Contractor shall


prepare and submit to the JMC for approval any revisions to its annual Work


Programme and budget that may be necessary for the remainder of that Contract


Year and for the rest of the Exploration Period;


ii. At least ninety (90) days before the Commencement of each subsequent


Calendar Year Contractor shall submit to the JMC for review and approval a


reasonably detailed Work Programme and budget setting forth all Development


and Production Operations which Contractor proposes to carry out in that


Calendar Year and the estimated cost thereof and shall also give an indication of


Contractor’s plans for the succeeding Calendar Year;


iii. Within sixty (60) days of the Date of Commencement of Commercial


Production and thereafter not later than one hundred and twenty (120) days


before the commencement of each Calendar Year Contractor shall submit to the


JMC for its review and approval an annual production schedule which shall be


in accordance with good international oilfield practice, and shall be designed to


provide the most efficient, beneficial and timely production of the Petroleum


resources.





6.6 The JMC shall approve lifting schedules for Development and Production Areas as


well as review all of Contractor’s reports on the conduct of Petroleum Operations.





Petroleum Agreemem for Shallow water Tano (MDE-GNPC/Tullow-Sabre) - April Z006 27








6.7 The JMC shall approve Contractor’s insurance programme and the programmed for


training and technology transfer submitted by Contractor and the accompanying


budgets for such schemes and programmes.


6.8 If during any meeting of the JMC the Parties are unable to reach agreement


concerning any of the matters provided for in Article 6.5 and 6.6, the matter shall be


deferred for reconsideration at a further meeting to be held not later than fifteen (15)


days following the original meeting. If after such further meeting the Parties are still


unable to reach agreement, the matter in dispute shall be referred to the Parties


forthwith. Failing agreement within fifteen (15) days thereafter, the matter in dispute


shall, at the request of any Party, be referred for resolution under Article 24.

























































































Petroleum Agreement for Shallow water Tano (MDE-GNPC/Tullow-Sabre) - April 20GB 28


 ARTICLE 7








RIGHTS AND OBLIGATIONS OF CONTRACTOR AND CNPC





7.1 Subject to the provisions of this Agreement, Contractor shall be responsible for the


conduct of Petroleum Operations and shall:


a)conduct Petroleum Operations with utmost diligence, efficiency and economy, in


accordance with accepted International Petroleum Industry practices, under the same


or similar circumstances observing sound technical and engineering practices using


appropriate advanced technology and effective equipment, machinery, materials and


methods;


a) take all practicable steps to ensure compliance with Section 3 of the Petroleum


Law; including ensuring the recovery and prevention of waste of Petroleum in the


Contract Area in accordance with accepted International Petroleum Industry


practices under the same or similar circumstances;


b) prepare and maintain in Ghana full and accurate records of all Petroleum


Operations performed under this Agreement;


c) prepare and maintain accounts of all Petroleum Operations under this Agreement in


such a manner as to present a full and accurate record of the costs of such


Petroleum Operations, in accordance with the Accounting Guide;


d) disclose to GNPC and the Minister any operating or other agreement among the


Parties that constitute Contractor relating to the Petroleum Operations hereunder,


which agreement shall not be inconsistent with the provisions of this Agreement.


7.2 In connection with its performance of Petroleum Operations, Contractor shall have


the right within the terms of applicable law:


a) to establish offices in Ghana and to assign to those offices such representatives


as it shall consider necessary for the purposes of this Agreement;


b) to use public lands for installation and operation of shore bases, and terminals,


harbours and related facilities, pipelines from fields to terminals and delivery


ilities, camps and other housing;





Petroleum Agreement for Shallow water Tano (MQE-BNPC/Tullow-Sabra) - April 200G 29


c) to receive licenses and permission to install and operate such communications


and transportation facilities as shall be necessary for the efficiency of its


operations;


d) to bring to Ghana such number of Foreign National Employees as shall be


necessary for its operations, including employees assigned on permanent or


resident status, with or without families, as well as those assigned on temporary


basis such as rotational (rota) employees;


e) to provide or arrange for reasonable housing, schooling and other amenities,


permanent and temporary, for its employees and to import personal and


household effects, furniture and vehicles, for the use of its personnel in Ghana;


f) to be solely responsible for provision of health, accident, pension and life


insurance benefit plans on its Foreign National Employees and their families;


and such employees shall not be required to participate in any insurance,


compensation or other employee or social benefit programs established in


Ghana;


g) to have, together with its personnel, at all times the right of ingress to egress


from its offices in Ghana, the Contract Area, and the facilities associated with


Petroleum Operations hereunder in Ghana including the offshore waters, using


its owned or chartered means of land, sea and air transportation;


h) to engage such Subcontractors, expatriate and national, including also


consultants, and to bring such Subcontractors and their personnel to Ghana as


are necessary in order to carry out the Petroleum Operations in a skillful,


economic, safe and expeditious manner; and said Subcontractors shall have the


same rights as Contractor specified in this Article 7.2 to the extent they are


engaged by Contractor for the Petroleum Operations hereunder.


7.3 GNPC shall assist Contractor in carrying out Contractor’s obligations expeditiously


and efficiently as stipulated in this Agreement, and in particular GNPC shall use its


best efforts to assist Contractor and its Subcontractors to:





a) establish supply bases and obtain necessary communications facilities,


equipment and supplies;


b) obtain necessary approvals to open bank accounts in Ghana;








c) subject to Article 21 hereof, obtain entry visas and work permits for such


number of Foreign National Employees of Contractor and its Subcontractors


30


Petroleum Agreement for Shallow water Tano (MOE-GNPC/Tullew-Sabre) - April 200E


engaged in Petroleum Operations and members of their families who will be


resident in Ghana, and make arrangements for their travel, arrival, medical


services and other necessary amenities;


d) comply with Ghana customs procedures and obtain permits for the importation


of necessary materials;


e) obtain the necessary permits to transport documents, samples or other forms of


data to foreign countries for the purpose of analysis or processing if such is


deemed necessary for the purposes of Petroleum Operations;


f) contact Government agencies dealing with fishing, meteorology, navigation and


communications as required;


g) identify qualified Ghanaian personnel as candidates for employment by


Contractor in Petroleum Operations; and


h) procure access on competitive commercial terms, to infrastructure owned by the


State or GNPC or any Affiliate of or entity controlled by the State or GNPC or


owned by any third party, required for the transportation and/or processing of


Petroleum produced under this Agreement.


7.4 All reasonable expenses incurred by GNPC in connection with any of the matters set


out in Article 7.3 above shall be borne by Contractor.


7.5 GNPC shall use its best efforts to render assistance to Contractor in emergencies and


major accidents, and such other assistance as may be requested by Contractor,


provided that any reasonable expenses involved in such assistance shall be borne by


Contractor.


JS





























Petroleum Agreement for Shallow water Tano (MOE-GNPC/Tullow-Sabre) - April 2Q06 31








 ARTICLE 8





COMMERCIALITY


8.1 Contractor shall notify the Minister and GNPC in writing as soon as possible after


any Discovery is made, but in any event not later than thirty (30) days after any


Discovery is made.


8.2 As soon as possible after the analysis of the test results of such Discovery is


complete and in any event not later than one hundred (100) days from the date of


such Discovery, Contractor shall by a further notice in writing to the Minister


indicate whether in the opinion of Contractor the Discovery merits appraisal.


8.3 Where the Contractor indicates that the Discovery does not merit appraisal,


Contractor shall, subject to Article 8.17 below, relinquish the Discovery Area


associated with the Discovery.


8.4 Where Contractor indicates that the Discovery merits appraisal, Contractor shall


submit to the Minister within one hundred and eighty (180) days from the date of


Discovery, an Appraisal Programme to be carried out by Contractor in respect of


such Discovery. After thirty (30) days following its submission the Appraisal


Programme shall be deemed approved as submitted, unless the Minister has before


the end of the said thirty (30) period given the Contractor a notice in writing stating:


i. that the Appraisal Programme as submitted has not been approved; and


ii. the revisions proposed by the Minister to the Appraisal Programme


submitted, and the reasons therefor.


8.5 Unless Contractor and the Minister otherwise agree in any particular case,


Contractor shall have a period of two (2) years from the date of Discovery to


complete the Appraisal Programme.


8.6 Contractor shall commence to conduct the Appraisal Programme within one hundred


and fifty (150) days from the date of approval or deemed approval of the Appraisal


Programme by the Minister. Where the Contractor is unable to commence the


conduct of the Appraisal Programme within one hundred and fifty (150) days from


the date of approval or deemed approval of the Appraisal Programme by the


Minister, GNPC shall be entitled to exercise the option provided for in Article 9.1 to


enable prompt appraisal, provided however that after Contractor actually embarks on


Petroleum Agreement for Shallow water Tarra (MQE-GNPC/Tullow-Sabre) - April 2D0B 32








V'





appraisal work or obtains an extension of time for such work, this option may not be


exercised.





8.7 Not later than ninety (90) days from the date on which said Appraisal Programme


relating to the Discovery is completed, Contractor will submit to the Minister a


report containing the results of the Appraisal Programme. Such report shall include


all available technical and economic data relevant to a detennination of


commerciality, including, but not limited to, geological and geophysical conditions,


such as structural configuration, physical properties and the extent of reservoir rocks,


areas, thickness and depth of pay zones, pressure, volume and temperature analysis


of the reservoir fluids; preliminary estimates of Crude Oil and Natural Gas reserves;


recovery drive characteristics; anticipated production performance per reservoir and


per well; fluid characteristics, including gravity, sulphur percentage, sediment and


water percentage and refinery assay pattern.


8.8 Not later than ninety (90) days from the date on which said Appraisal Programme is





completed Contractor will, by a further notice in writing, inform the Minister


whether the Discovery in the opinion of Contractor is or is not a Commercial


Discovery.


8.9 If Contractor informs the Minister that the Discovery is not a Commercial





Discovery, then subject to Articles 8.17, Contractor shall relinquish such Discovery


Area; provided, however, that in appropriate cases, before declaring that a Discovery


is not a Commercial Discovery, Contractor shall consult with the other Parties and


may make appropriate representations proposing minor changes in the fiscal and


other provisions of this Agreement which may, in the opinion of Contractor, affect


the determination of commerciality. The other Parties may, where feasible, and in


the best interests of the Parties agree to make such changes or modifications in the


existing arrangements.





8.10 If Contractor pursuant to Article 8.8 informs the Minister that the Discovery' is a


Commercial Discovery, Contractor shall not later than one hundred and eighty (180)


days thereafter, prepare and submit to the Minister a Development Plan.


8.11 The Development Plan referred to in Article 8.10 shall be based on detailed


engineering studies and shall include:


a) Contractor’s proposals for the delineation of the proposed Development and


Production Area and for the development of any reservoir(s), including the


method for the disposal of Associated Gas in accordance with the provisions of


^Aj^rie 14.4;





Petroleum Agreement for Shallow water Tano (MDE-GNPC/Follow-Safare) - April 2Q0R


33


 b) the way in wliich the Development and Production of the reserv oir is planned to


be financed;


c) Contractor’s proposals relating to the spacing, drilling and completion of wells,


the production, storage, transportation and delivery facilities required for the


production, storage and transportation of the Petroleum, including without


limitation:


i) the estimated number, size and production capacity of production


platforms if any;


ii) the estimated number of Production Wells;





iii) the particulars of feasible alternatives for transportation of the Petroleum,


including pipelines;


iv) the particulars of onshore installations required, including the type and


specifications or size thereof; and


v) the particulars of other technical equipment required for the operations;





d) the estimated production profiles for Crude Oil and Natural Gas from the


Petroleum reservoirs;


e) estimates of capital and Production Operation expenditures;





*) the economic feasibility studies carried out by or for Contractor in respect of


alternative methods for Development of the Discovery, taking into account:


i) location;


ii) water depth (where applicable);


iii) meteorological conditions;


iv) estimates of capital and Production Operation expenditures; and


v) any other relevant data and evaluation thereof;


the safety measures to be adopted in the course of the Development and


Production Operations, including measures to deal with emergencies;


e necessary measures to be taken for the protection of the environment;





Petroleum Agreement for Shallow water Tana (MOE-GHPC/Tullaw-Sabre) - April 2Q06 34


i) Contractor’s proposals with respect to the procurement of goods and services


obtainable in Ghana;


j) Contractor’s plan for training and employment of Ghanaian nationals; and


k) the timetable for effecting Development Operations.


8.12 The date of the Minister’s approval of the Development Plan shall be the Date of


Commercial Discovery.


8.13 After thirty (30) days following its submission, the Development Plan shall be


deemed approved as submitted, unless the Minister lias before the end of the said


thirty (30) day period given Contractor a notice in writing stating:


i) that the Development Plan as submitted has not been approved; and


ii) the revisions, proposed by die Minister, to the Development Plan as submitted,


and the reasons therefor.


8.14 Where the Development Plan is not approved by the Minister as provided under


Article 8.13 above, the Parties shall within a period of thirty (30) days from the date


of the notice by the Minister as referred to under Article 8.13 above meet to agree on


the revisions proposed by the Minister to the Development Plan. In the event of


failure to agree to the proposed revisions, within fourteen (14) days following said


meeting any matters in dispute between the Minister and the Contractor shall be


referred for resolution in accordance with Article 24.





8.15 Where the issue in dispute referred for resolution pursuant to Article 24 is finally


decided in favour of Contractor the Minister shall forthwith give the requisite


approval to the Development Plan submitted by Contractor.


8.16 Where the issue in question referred for resolution pursuant to Article 24 is finally


decided in favour of the Minister in whole or in part, Contractor shall forthwith:


i) amend the proposed Development Plan to give effect to the final decision


rendered under Article 24, and the Minister shall give the requisite approval to


such revised Development Plan; or •


ii) subject to Article 8.19 below relinquish the Discovery Area.





8.17 Notwithstanding the relinquishment provisions of Articles 8.3 and 8.9 above, if


Contractor indicates that a Discovery does not at the time merit appraisal, or after





Petroleum ffljrEemBnt ftp Shallow water Tano (MOE-GNPC/Tullow*Satire) - April 20DB 35








S*-





appraisal does not appear to be a Commercial Discovery but may merit appraisal or


potentially become a Commercial Discovery at a later date during the Exploration


Period, then Contractor need not relinquish the Discovery Area and may continue its


Exploration Operations in the Contract Area during the Exploration Period provided


that the Contractor shall explain what additional evaluations, including Exploration


work or studies (within or outside the Discovery Area), are or may be planned in


order to determine whether subsequent appraisal is warranted or that the Discovery


is a Commercial Discovery. Such evaluations shall be performed by Contractor


according to a specific time table, subject to its right of earlier relinquishment of the


Discovery Area. After completion of the evaluations, Contractor shall make the


indications called for under Article 8.2 or 8.8 and either proceed with appraisal,


confirm commerciality or relinquish the Discovery Area. In any case, if at the end of


the Exploration Period Contractor has not indicated its intent to proceed with an


Appraisal Programme or that the Discovery is a Commercial Discovery, then the


Discovery Area shall be relinquished.


8.18 Before Contractor indicates that the Discovery will not merit appraisal, or after an


Appraisal Programme, indicates it will not be a Commercial Discovery. Contractor


may consult with the other Parties and may make appropriate representations


proposing minor changes in the fiscal and other provisions of this Agreement which


may, in the opinion of Contractor, affect the determination of commerciality. The


other Parties may, agree to make such changes or modifications in the existing


arrangements. In the event die Parties do not agree on such changes or


modifications, then subject to Article 8.17 and Article 8.19 Contractor shall


relinquish the Discovery Area.


8.19 Nothing in Article 8.3. 8.9, 8.16 or 8.17 above shall be read or construed as requiring


Contractor to relinquish:


a) any area which constitutes or forms part of another Discovery Area in respect of


which:


i) Contractor has given the Minister a separate notice indicating that such


Discovery merits appraisal or confirmation; or


ii) Contractor has given the Minister a separate notice indicating that such


Discovery is a Commercial Discovery; or


b) any area which constitutes or forms part of a Development and Production


Area.


-3^





Petroleum Agreement for Shallow water Tano (MOE-GHPC/Iullow-Sabre) - April 2Q0E 36





8.20 In the event a field extends beyond the boundaries of the Contract Area, the Minister


may require Contractor if it so wishes, to exploit said Field in association with the


third party holding the adjacent area, pursuant to unitization and engineering


principles and practices in accordance with accepted international Petroleum


industry practices.





























































































































Petroleum Agreement for Shallow water Tano (MDE-SNPC/Tullow-Sabre) - April 2D0E 37








 ARTICLE 9








SOLE RISK ACCOUNT





9.1 Subject to Article 8.6 above, unless and until Contractor has notified GNPC that it


wishes to appraise a Discovery, GNPC may notify Contractor that it will at its sole


cost, risk and expense commence to appraise that Discovery, provided that within


thirty (30) days of such notification from GNPC, Contractor may elect to commence


to appraise that Discovery within its Work Programme.


9.2 Where an appraisal undertaken under Article 9.1 at the sole expense of GNPC


results in a determination that a Discovery is a Commercial Discovery, Contractor


may develop the Commercial Discovery upon reimbursement to GNPC of all


expenses incurred in undertaking the appraisal and arranging with GNPC


satisfactory terms for the payment of a premium equivalent to seven hundred per


cent (700%) of such expenses. Such premium shall not be reckoned as cost of


Petroleum Operations for the purpose of the Accounting Guide. In the event that


Contractor declines to develop said Discovery, Contractor shall relinquish the


Development and Production Area established by the Appraisal Programme


conducted by GNPC under Article 9.1.


9.3 During the Exploration Period GNPC may, at its sole risk and expense, require


Contractor to continue drilling to penetrate and test horizons deeper than those


contained in the Work Programme of Contractor or required under Article 4. GNPC


may also at its sole risk ask the Contractor to test a zone or zones which Contractor


has not included in Contractor’s test programme. Notice of this shall be given to


Contractor in writing as early as possible prior to or during the drilling of the well,


but in any case not after Contractor has begun work to test, complete or abandon the


well. The exercise by GNPC of this right shall be in an agreed manner which does


not prevent Contractor from complying with its work obligations under Article 4.3.


9.4 At any time before commencing such deeper drilling or testing under Article 9.3,


Contractor may elect to embody the required drilling or testing in its own


Exploration Operations, in which case any resulting Discovery shall not be affected


by the provisions of this Article 9.


9.5 Where any sole risk deeper drilling or testing results in a Discovery, GNPC shall


have the right, at its sole cost, risk and expense, to appraise, develop, produce and


dispose of all Petroleum from that deeper horizon, provided however that if at the


time such Petroleum is tested from the well, Contractor’s Work Programme includes


a well or wells to be drilled to the same producing horizon, and provided that that the


Petroleum J " w water Tann (MOE-GNPC/Tullow-Sabre) - April 2DQB 38


well or wells result (s) in a Petroleum producing well producing from the same


horizon, Contractor shall, after reimbursing GNPC for all costs associated with its


sole risk deeper drilling in said well, have the right to include production from that


well in its total production for the purposes of establishing a Commercial Discovery,


and, if a Commercial Discovery is subsequently established, to develop, produce and


dispose of the Petroleum in accordance with the provisions of this Agreement.


9.6 Alternatively, if at the time such Petroleum is tested from the well, Contractor’s


Work Programme does not include a well to be drilled to said horizon, Contractor


has the option to appraise and/or develop, as the case may be, the Discovery for its


account under the terms of this Agreement if it so elects within a period of sixty (60)


days after such Discovery. In such case, Contractor shall reimburse GNPC for all


expenses incurred by GNPC in connection with such Sole Risk Operations, and shall


make satisfactory arrangements with GNPC for the payment of a premium


equivalent to seven hundred percent (700%) of such expenses.


9.7 During the term of tins Agreement, GNPC shall have the right, at its sole cost, risk


and expense, and upon six (6) months prior notice to Contractor, to drill one (1) or


two (2) wells per Calendar Year within the Contract Area provided that the work


intended to be done by GNPC had not been scheduled for a Work Programme to be


performed by Contractor and the exercise of such right by GNPC and the


arrangement made by GNPC for undertaking such drilling do not hinder Contractor


from satisfying its work obligations or delay it in so doing. Within thirty (30) days


after receipt of such notice Contractor may elect to drill the required well or wells as


part of Contractor’s Exploration Operations.


9.8 In the event that a well drilled for the account and risk of GNPC in accordance with


.Article 9.7 above results in a Discovery, GNPC shall have the right to appraise and


develop as the case may be or require Contractor to develop, after GNPC declares a


Commercial Discovery, such Commercial Discovery for a mutually agreed service


fee, so long as Contractor has an interest in the Contract Area, GNPC taking all the


interest risk and costs and hence having the right to all Petroleum produced from the


Commercial Discovery, provided however that Contractor has the option to appraise


and/or develop, as the case may be, the Discovery for its account under the terms of


this Agreement if it so elects within a period of sixty (60) days after receipt of


GNPC’s written notice of such Discovery.





9.9 Contractor shall reimburse GNPC for all expenses incurred by GNPC in connection


with such Sole Risk Operations, and shall make satisfactory arrangements with


GNPC for the payment of a premium equivalent to seven hundred percent (700%) of


such expenses before exercising the option under Article 9.7. Such premium shall


not be reckoned as Petroleum Costs for the purposes of Accounting Guide.


Petrnleum Agregmenljor Shallow waterTano (MDE-GNPC/Tullow-Sabre) - April 2DDB


39








9.10 In the event that Contractor declines to develop the Commercial Discovery or no


agreement is reached on the service fee arrangement as provided for in Article 9.8,


Contractor shall relinquish die Development and Production Area associated with


such Commercial Discovery.


9.11 Sole Risk Operations under this Article shall not extend the Exploration Period nor


the term of this Agreement and Contractor shall complete any agreed programme of


work commenced by it under this Article at GNPC’s sole risk, and subject to such


provisions hereof as the Parties shall then agree, even though die Exploration Period


as defined in Article 3 or the term of this Agreement may have expired.


9.12 GNPC shall indemnify and hold harmless Contractor against all actions, claims,


demands and proceedings whatsoever brought by any third party or the State, arising


out of or in connection with Sole Risk Operations under this Article 9, unless such


actions, claims, demands and proceedings are caused by Contractor’s Gross


Negligence provided that under no circumstances shall Contractor be liable for


consequential loss (including but not limited to loss of profit or loss of production).


9.13 The exercise by GNPC of its sole risk rights under diis Article 9 shall be performed


in an agreed manner with Contractor, which does not prevent Contractor from


complying with its work obligations under Article 4.3, an Appraisal Programme or a


Development Plan and shall include a financing plan satisfactory to Contractor


where GNPC has nominated Contractor to perform the Sole Risk Operations on its


behalf.





9.14 GNPC shall not elect to conduct any Sole Risk Operations during the first twelve


month period of the Initial Appraisal and/or Exploration Period or within the


boundaries of a Development and Production Area or a Discovery Area.






































PHtroIeum Agreement for Shallow water Tano (MOE-GNPC/Tullow-Sabre) - April ZHDE 40


 ARTICLE 10








SHARING OF CRUDE OIL


lO.l Gross Production of Crude Oil from each Development and Production Area shall


(subject to a Calendar Year adjustment developed under the provisions of Article


10.7) be distributed amongst the Parties in the following sequence and proportions:


a) Five per cent (5%) of the Gross Production of Crude Oil shall be delivered to the


State as ROYALTY, pursuant to the provisions of the Petroleum Law. The rate


of royalty on the Gross Production of Natural Gas shall be three per cent (3%).


Upon notice to Contractor, the State shall have the right to elect to receive cash


in lieu of its royalty share of such Petroleum. The State's notice shall be given to


Contractor at least ninety (90) days in advance of each lifting period, such


periods to be established pursuant to the provisions of Article 10.7. In such


case, said share of Crude Oil shall be delivered to Contractor and it shall pay to


the State the value of said share in cash at the relevant Market Price for the


relevant period as determined in accordance with Article 11.7;


b) The State’s AOE (as hereinafter defined) Share of Crude Oil, if any, shall be


distributed to the State out of the Contractor’s share of Petroleum determined


under Article 10.1 (d). The State shall also have the right to elect to receive cash


in lieu of the AOE share of Crude Oil accorded to it pursuant to Article 10.2.


Notification of said election shall be given in the same notice in which the State


notifies Contractor of its election to receive cash in lieu of Crude Oil under


Article 10.1 (a). In such case, said share of Crude Oil shall be delivered to


Contractor and it shall pay to the State the value of said share in cash at the


relevant Market Price for the relevant period as determined in accordance with


Article 11.7 for Crude Oil;


(c) After distribution of such amounts of Crude Oil as are required pursuant to


Article 10.1(a), the amount of Crude Oil, if any, shall be delivered to GNPC to


the extent it is entitled for Sole Risk Operations under Article 9;


(d) In the event that GNPC has failed to pay any amounts due to Contractor


pursuant to Article 15.2 of this Agreement (such amounts together with interest


thereon in accordance with Article 26.7 being hereinafter called “Default


Amounts”) and for so long as any such advances and interest thereon remain


unrecovered by Contractor, an amount of Crude Oil shall be delivered to GNPC


sufficient in value to reimburse it for its share of Production Costs paid by it to


that date, until such share of Production Costs has been fully reimbursed to it,


Petroleum Agree^n^^alluw water Tano {MQE-GNPC/Tullow-Sabre) - April ZQDB 41





 after which a volume of Crude Oil shall be delivered to Contractor equivalent in


value to the outstanding amounts of the aforesaid Default Amounts until such


Default Amounts are fully recovered by Contractor. The value of the Crude Oil


for the purposes of this Article 10 shall be the Market Price determined


pursuant to Article 11.7.





10.2 At any time the State shall be entitled to a portion of Contractor’s share of Crude Oil


then being produced from each separate Development and Production Area


(hereinafter referred to as “Additional Oil Entitlements” or “AOE”) on the basis of


the after-tax inflation-adjusted rate of return (“ROR”) which Contractor has


achieved with respect to such Development and Production Area as of that time.


Contractor’s ROR shall be calculated on its NCF and shall be determined separately


for each Development and Production Area at the end of each Quarter in accordance


with the following computation:


(a) Definitions:


“ NCF” means Contractor’s net cash flow for the Quarter for which the calculation


is being made and shall be computed in accordance with the following formula:


NCF = x-y-z


where


“x” equals all revenues received during such Quarter by Contractor from the


Development and Production Area, including an amount computed by multiplying


the amount of Crude Oil taken by Contractor during such Quarter in accordance


with Article 10.1 (d) and (e); excluding such Crude Oil taken by Contractor for


payment of advances and interest in respect of Petroleum Costs incurred by


Contractor on GNPC’s behalf, and Default Amounts as defined in Article 10.1 (e)


by the Market Price applicable to Crude Oil during the Quarter when lifted, plus


any other proceeds specified in the Accounting Guide received by Contractor,


including, without limitation, the proceeds from the sale of any assets to which


Contractor continues to have title. For the avoidance of doubt, “x” shall not


include revenues from Royalty or AOE Crude Oil delivered to Contractor because


the State has elected to receive cash in lieu or which is Crude Oil lifted by


Contractor which is part of another Party’s entitlement (e.g. Crude Oil purchased


by Contractor from GNPC or the State) but shall include revenues from Crude Oil


owned by Contractor but lifted by another Party (e.g. Crude Oil purchased by


GNPC or the State from Contractor).











Petroleum Agreement for Shallow water Tano (MQE-GNPC/Tullow-SPbre) - April 20QB 42


“y” equals one-quarter (lA) the income tax paid by the Contractor to the State with


respect to the Calendar Year in respect of the Development and Production Area.


If there are two (2) or more Development and Production Areas, the total income


tax paid by Contractor in accordance with the Petroleum Income Tax Law 1987


shall for purposes of this calculation be allocated to the Development and


Production Area on the basis of hypothetical tax calculations for the separate


Development and Production Areas. The hypothetical tax calculation for each


Development and Production Area shall be determined by allocating the total


amount of tax incurred for each Calendar Year by Contractor under the Petroleum


Income Tax Law to each Development and Production Area based on the ratio that


the chargeable income from a given Development and Production Area bears to


the total chargeable income of Contractor. The chargeable income of Contractor is


determined under section 2 of the Petroleum Income Tax Law and the chargeable


income of a Development and Production Area shall be calculated by deducting


from the gross income derived from or allocated to that Area those expenses


deductible under section 3 of the Petroleum Income Tax Law which are directly


allocable to that Area as well as those expenses deductible under the said Section 3


which are not attributable to any Development and Production Area where the


Development and Production in question had the earliest Date of Commencement


of Commercial Production. A negative chargeable income for an Area shall be


treated as zero for purposes of this allocation and not more (or less) than the total


income tax paid by Contractor shall be allocated between tire Areas.


“z” equals all Petroleum Costs specified in the Accounting Guide and expended by


Contractor during such Quarter with respect to the Development and Production


Area, including any Petroleum Costs paid by Contractor on GNPC’s behalf, and


not reimbursed by GNPC within the Quarter, provided that all Petroleum Costs for


Exploration Operations not directly attributable to a specific Development and


Production Area shall for purposes of this calculation be allocated to the


Development and Production Area having the earliest date of Commencement of


Commercial Production; and provided further that for the purpose of the ROR


calculation Petroleum Costs shall not include any amounts in respect of interest on


loans obtained for the purposes of carrying out Petroleum Operations.


For the avoidance of doubt, where Petroleum Costs are expended before the first


Date of Commencement of Commercial Production, the NCF computation shall


nonetheless be made for each such Quarter and once a Development and


Production Area is delineated, costs directly attributable to such Area as well as


Exploration Costs not attributable to any other Area shall be retrospectively


deemed allocated to the Development and Production Area having the first Date of


Commencement of Commercial Production; provided that where, after the


delineation of such Development and Production Area but before its Date of





43


Commencement of Commercial Production, another Development and Production


Area is delineated, Contractor may elect either to maintain the original


retrospective allocation or reallocate those Exploration Costs attributable to the


new Development and Production Area to such new area.


“FAn”, “SAn”, “TAn”, “YAn” and “ZAn” means First Account, Second Account,


Third Account, Fourth Account and Fifth Account, respectively, and represent


amounts as of the last day of the Month in question as determined by the formulae


in (b) below.


*TA„_i”, “SAn.i’\ “TAn„r, “YAn_i’and “ZAn_i” respectively, mean the lesser of (i)


the FAn, SAn, TAn, YAn_j or ZA*, as the case may be, as of the last day of the


Quarter immediately preceding the Quarter in question, or (ii) zero. Stated


otherwise, FAn.! shall equal FAn as of the last day of the Quarter immediately


preceding the Quarter in question if such FAn was a negative number, but shall


equal zero if such FAn was a positive number. Likewise, SAn_! shall equal SAn as


of the last day of the Quarter immediately preceding the Quarter in question if


such SAn was a negative number, but shall equal zero if such SAn was a positive


number. Likewise TAn_! shall equal TAn as of the last day of the Quarter


immediately preceding the Quarter in question if such TAn was a negative number,


but shall equal zero if such TAn was a positive number. Likewise YAn.] shall


equal YAn as of the last day of the Quarter immediately preceding the Quarter in


question if such YAn was a negative number, but shall equal zero if such YAn was


a positive number. Likewise, ZAn_i shall equal ZAn as of the last day of the


Quarter immediately preceding the Quarter in question if such ZAn was a negative


number, but shall equal zero if such ZAn was a positive number. In the ROR


calculation for the first Quarter of Petroleum Operations, FAn.i, SAn_!, TAn.]t YAn.j


and ZAn_! shall be zero.





“i” for the Quarter in question equals one (1) subtracted from the quotient of the


United States Industrial Goods Wholesale Price Index (“USIGWPI) for the


Quarter second preceding the Quarter in question as first reported in the


International Financial statistics of the International Monetary Fund, divided by


the USIGWPI for the same second preceding Quarter as first reported in the


International Financial Statistics of the International Monetary Fund. If the


USIGWPI ceases to be published, a substitute U.S. Dollar-based price index shall


be used.


“n” refers to the nth Quarter in question.








“n-L’ refers to the Quarter immediately preceding the nth Quarter.


Petroleum Agreement for Shallow watBr Tana (MOE-GNPC/Tullow-Sabre) - April 2008











 Formulae:





FAn = (FA*, (1 + (0.18 + i)/4)) + NCF





SAn = (JS^.7 (1 + 0.2J + i) /4)) + ^VCF





In the calculation of SAn an amount shall be subtracted from NCF identical to the


value of any AOE which would be due to the State if relerence were made


hereunder only to the FAn.





TAn = (TA. i (1 + (0.28 + i)/4)) + NCF








In the calculation of TAn an amount shall be subtracted from NCF identical to the


value of any AOE which would be due to the State if reference were made


hereunder only to the FAn and SAn.








ZAn = (ZA^ (1 + (0.33 + i)/4)) + NCF





In the calculation of ZAn an amount shall be subtracted from NCF identical to the


value of any AOE which would be due to the State if reference were made hereunder


only to the FAn> SAn and TAn.


c) Prospective Application:


The State’s AOE measured in barrels of Crude Oil will be as follows:


i) If FAn, SAn, TAn, and ZAn are all negative, the State’s AOE for the


Quarter in question shall be zero;


ii) If FAn is positive and SAn, TAn, and ZAn are all negative, the State’s


AOE for the Quarter in question shall be equal to the absolute amount


resulting from the following monetary calculation:


Ten percent (10 %) of the FAn for that Quarter divided by the Market


Price of Crude Oil as determined in accordance with Article 11.7.


iii) If both FAn and SAn are positive, but both TA„ and ZAn are negative, the


State’s AOE for the Quarter in question shall be equal to an absolute


amount resulting from the following monetary calculation:


Petroleum Agreement for Shallow ws'.ir Iano (MDE-GNPE/Tullow-Sabre) - April 200B * 5


 the aggregate of ten percent (10 %) of FAn for that Quarter plus fifteen


percent (15%) of the SAn for that Quarter all divided by the Market Price


of Crude Oil as determined in accordance with Article 11.7


iv) If FAnj SAn and TAn are all positive but ZAn are negative, the State’s





AOE for the Quarter in question shall be equal to the absolute amount


resulting from the following monetary calculation:





the aggregate of ten percent (10%) of the FAn for that Quarter plus


fifteen percent (15%) of the SAn for that Quarter plus twenty percent


(20%) of the TAn for that Quarter all divided by the Market Price of


Crude Oil as determined in accordance with .Article 11.7


v) If FAn, SAn TAn and ZAn are all positive the State’s AOE for the Quarter


in question shall be equal to the absolute amount resulting from the


following monetary calculation:


the aggregate of ten percent (10%) of the FAn for that Quarter plus fifteen





percent (15%) of the SAn for that Quarter plus twenty percent (20%) of


the TA,, for that Quarter plus twenty-five percent (25%) of the ZAn for


that Quarter all divided by the Market Price of Crude Oil as determined


in accordance with Article 11.7.





d) The AOE calculations shall be made in U.S. Dollars with all non-dollar


expenditures converted to U.S. DoDars in accordance with Section 1.3.5 of


Annex 2. When the AOE calculation cannot be definitively made because of


disagreement on the Market Price or any other factor in the formulae, then a


provisional AOE calculation shall be made on the basis of best estimates of


such factors, and such provisional calculation shall be subject to correction and


revision upon the conclusive determination of such factors, and appropriate


retroactive adjustments shall be made.


e) The AOE shall be calculated on a Quarterly basis, with the AOE to be paid





commencing with the first Quarter following the Quarter in which the FAm


SAn, TAn, or ZAn, (as applicable) becomes positive. Because the precise


amount of the AOE for a Quarter cannot be determined with certainty until


after the end of that Quarter, deliveries (or payments in lieu) of the AOE with


respect to a Quarter shall be made during such Quarter based upon the


Contractor’s good faith estimates of the amounts owing, with any adjustments


following the end of the Quarter to be settled pursuant to the procedures agreed


to pursuant to Article 10.7. Final calculations of the AOE shall be made


within thirty (30) days following the filing by the Contractor of the annual tax


return for such Calendar year pursuant to the Petroleum Income Tax Law, and





Petroleum Agreement for Shqllay water Tano (MQE-GNPC/Tullow-Sabra) - April 200G 46


Or





 the amount of the AOE shall be appropriately adjusted in the event of a


subsequent adjustment of the amount of tax owing on such term





10.3 GNPC shall act as agent for the State in the collection of all Petroleum or money


accruing to the State under this Article and delivery or payment to GNPC by


Contractor shall discharge Contractor’s liability to deliver the share of the State.


10.4 The State or GNPC, having met the requirements of Article 15.1, may elect, in


accordance with terms and conditions to be mutually agreed by the Parties, that all or


part of the Crude Oil to be distributed to the State or to GNPC pursuant to this Article


shall be sold and delivered by the State or GNPC to Contractor or its Affiliate for use


and disposal and in such case Contractor or its Affiliate shall pay to the State or to


GNPC, as the case may be, the Market Price for any Crude Oil so sold and delivered.


Market Price for purposes of this Article 10.4 shall be determined in the manner


specified in Article 11.7.


10.5 Except as otherwise provided in this Agreement, GNPC’s and Contractor’s respective


right and entitlement to the volume of Gross Production of Crude Oil at the first


metering or (fiscalization) point shall be shared according to Articles 2.4, 2.5 and 2.7.


Ownership and risk of loss of all Petroleum lifted or sold by Contractor or GNPC shall


pass to Contractor or GNPC, as the case may be, after the custody transfer at the fiscal


metering skid at the outlet flange (‘'Delivery Point”) of the marine terminal or other


storage or holding facility or pipeline for loading into tankers or other transportation


equipment referred to in Article 11.1.


10.6 Subject to the provisions of Article 15 hereof, Contractor shall have the right freely to


export and dispose of all the Petroleum allocated and/or delivered to it pursuant to this


Article.


] 0.7 Tire Parties shall through consultation enter into supplementary agreements concerning


Crude Oil lifting procedures, lifting and tanker schedules, loading conditions, Crude Oil


metering, and the settlement of lifting imbalances, if any, among the Parties at the end of


each Quarter. The Crude Oil to be distributed or otherwise made available to the Parties


in each Calendar Year in accordance with the preceding provisions of this Article shall


insofar as possible be in reasonably equal quarterly quantities.


10.8 To assist in the making of the AOE calculation in accordance with Article 10.2, there is


attached as Annex 3 to this Agreement a worked example of the calculation using


'hetical figures, rates and thresholds, for the purpose of illustration only.

















Petroleum Agreement for Shallow water Tana (MDE-BNPC/Tullow-Sabre) - April 2006 47


 ARTICLE 11








MEASUREMENT AND PRICING OF CRUDE OIL





11.1 Crude Oil shall be delivered by Contractor to storage tanks constructed, maintained


and operated in accordance with applicable laws and good international petroleum


industry oilfield practice under the same or similar circumstances. Crude Oil shall


be metered or otherwise measured for quantity and tested for quality in such storage


tanks for all purposes of this Agreement. Any Party may request that measurements


and tests be done by an internationally recognised inspection company. Contractor


shall arrange and pay for tire conduct of any measurement, or test so requested


provided, however, that in the case of (1) a test requested for quality purposes and


(2) a test requested on metering (or measurement) devices, or where the test


demonstrates that such devices are accurate within acceptable tolerances, the Party


requesting the test shall reimburse Contractor for the costs associated with the lest or


tests.


11.2 GNPC or its authorised agent shall have the right:


a) to be present at and to observe such measurement of Crude Oil; and


b) to examine and test whatever appliances are used by Contractor.


11.3 in the event that GNPC considers Contractor’s methods of measurement to be


inaccurate GNPC shall notify Contractor to this effect and the Parties shall meet


within ten (10) days of such notification to discuss the matter. If after thirty (30)


days the Parties cannot agree over the issue they shall refer for resolution under


Article 24 the sole question of whether Connector's method of measuring Crude Oil


is accurate and reasonable. Retrospective adjustments to measurements shall be


made where necessary to give effect to the decision rendered under Article 24.


11.4 If upon the examination or testing of appliances provided for in Article 11.2 any


such appliances shall be discovered to be defective:


a) Contractor shall take immediate steps to repair or replace such appliance; and


b) subject to the establishment of the contrary, such error shall be deemed to have


existed for three (3) Months or since the date of the last examination and testing,


hever occurred more recently.








Petroleum Agreement for Shallow water Tano (MDE-GNPC/TullowSabre) - April 200E 48


11.5 In the event that Contractor desires to adjust, repair or replace any measuring


appliance, it shall give GNPC reasonable notice to enable GNPC or its authorised


agent to be present.


11.6 Contractor shall keep full and accurate accounts concerning all Petroleum measured


as aforesaid and provide GNPC with copies thereof on a monthly basis, not later


than ten (10) days after the end of each month.


11.7 The Market Price for Crude Oil delivered to Contractor hereunder shall be


established with respect to each lifting as follows:





a) on Crude Oil sold by Contractor in “arm’s length commercial transactions”


(defined in Article 11.7(c) below), the Market Price shall be the price actually


realized by Contractor on such sales;





b) on other sales by Contractor, on exports by Contractor without sale and on sales


under Article 15.2, the Market Price shall be determined by reference to world


Market Prices of comparable Crude Oils sold in arm’s length transactions for


export in the major world petroleum markets, and adjusted for oil quality,


location and conditions of pricing, delivery and payment, provided that in the


case of sales under Article 15.2 where such sales relate to part only of


Contractor’s entitlement, prices actually realized by Contractor in sales of the


balance of its proportionate share falling within Article 11.7(a) above shall be


taken into account in determining Market Price;


c) sales in “arm’s length commercial transactions” shall mean sales to purchasers





independent of the seller, which do not involve Crude Oil exchange or barter


transactions, government to government transaction, sales directly or indirectly


to Affiliates, or sales involving consideration other than payment in U.S. Dollar


or currencies convertible thereto, or affected in whole or in part by


considerations other than the usual economic incentives for commercial ami’s


length Crude Oil sales;





d) the price of Crude Oil shall be expressed in U.S. Dollars per barrel, F.O.B. the


Delivery Point by Contractor;


e) If the quality of various Crude Oils produced from the Contract Area is


different, segregated and sold separately, the Market Price shall be determined


separately for each type sold and/or exported by Contractor only to the extent


that the different quality grades remain segregated through to the point where


they are sold, and if grades of different quality are commingled into a common


stream. Contractor and GNPC shall agree to an equitable methodology for





Petroleum Agreementrar Shallow water Tano (MDE-GNPC/Tullow-Sabre) - April 2DDB 49





[W








assessing relative value for each grade of Crude Oil comprising the blend and


shall implement the agreed methodology for having the producer(s) of higher


quality Crude Oil(s) reimbursed by the producers) of lower quality Crude


Oil(s), as appropriate.


11.8 Contractor shall notify GNPC of the market Price determined by it for its respective


lifting during each Quarter not later than thirty (30) days after the end of that


Quarter.


11.9 If GNPC considers that the price notified by Contractor was not correctly determined


in accordance with the provisions of Article 11.7, it shall so notify Contractor not


later than thirty (30) days after notification by Contractor of such price, and GNPC


and Contractor shall meet not later than twenty (20) days thereafter to agree on the


correct Market Price.


11.10 In the event that GNPC and Contractor fail to agree upon the commencement of


meetings for that purpose, or if, having met, cannot agree on the applicable Market


Price, the Market Price shall be referred for determination in accordance with Article


24 of this Agreement.


11.11 Pending a determination under Article 11.10, the Market Price will be deemed to be


the last Market Price agreed or determined, as the case may be, or if there has been


no such previous agreement or determination, the price notified by Contractor for the


lifting in question under Article 11.8. Should the determined price be different from


that used in accordance with the foregoing then the difference plus interest at the


Specified rate shall be paid in cash or in Crude Oil by or to Contractor, as the case


may.be, within thirty (30) days of such determination.


3$






































Petroleum Agreement for Shallow water Tano (MOE-GNPC/Tullow-Sabra) - April 2DQS 50





 ARTICLE 12





TAXATION AND OTHER IMPOSTS





12.1 No tax, duty, fee or other impost shall be imposed by the State or any political


subdivision on Contractor, its Subcontractors or its Affiliates in respect of activities


related to Petroleum Operations and to the sale and export of Petroleum other than as


provided in this Article.


12.2 Contractor shall be subject to the following:





i) Royalty as provided for in Articles 10.1 and 14.17;





ii) Income Tax levied at the rate of thirty-five percent (35%) pursuant to the


provisions of the Petroleum Income Tax Law, 1987, PNDC Law 188. Where


a new income tax regime comes into force as a result of the promulgation of


the new Petroleum Income Tax Law currently before Cabinet, Contractor


shall have tire option of either applying tire new income tax regime to this


Petroleum Agreement or remaining under the Petroleum Income Tax Law,


1987, PNDC Law 188;


iii) Additional Oil Entitlement as provided for in Article 10.2;





iv) Payments for rental of Government property, public lands or for the


provisions of specific services requested by Contractor from public


enterprises; provided, however, that the rates charged Contractor for such


rentals or services shall not exceed the rates charged to other members of the


public who receive similar services or rentals;


v) Surface rentals payable to the State pursuant to Article 18 of the Petroleum


Law per square kilometre of the area remaining at the beginning of each


Contract Year as part of the Contract Area, in the amounts as set forth below:


Phase of Operation Surface Rentals Per Annum





Initial Exploration Period US S75,000


1st Extension Period US S75,000


2nd Extension Period US $75,000


Development & Production Area US $100 per sq. km.





51


vi) Taxes, duties, fees or other imposts of a minor nature and amount insofar as


they do not relate to the stamping and registration of this (1) Agreement, (2)


any assignment of interest in this Agreement, or (3) any contract in respect of


Petroleum Operations between Contractor and any Subcontractor.


12.3 Save for withholding tax at a rate of five percent (5%) from the aggregate amount


due to any Subcontractor (other than the State or any entity wholly-owned or


controlled by the State where such entity is in possession of a certificate of


exemption from withholding tax from the Commissioner of Internal Revenue


Service, in which case withholding tax shall not be payable) if and when required by


Section 27(1) of the Petroleum Income Tax Law, Contractor shall not be obliged to


withhold any amount in respect of tax from any sum due from Contractor to any


Subcontractor. Notwithstanding the foregoing, the withholding tax in respect of


services provided to Contractor by an Affiliate of any company comprising


Contractor shall be waived provided such services are charged at cost.


12.4 Contractor shall not be liable for any export tax on Petroleum exported from Ghana


and no duty or other charge shall be levied on such exports. Vessels or other means


of transport used in the export of Contractor’s Petroleum from Ghana shall not be


liable for any tax, duty or other charge by reason of their use for that purpose.


12.5 Subject to the local purchase obligations hereunder, Contractor and Subcontractors


may import into Ghana all plant, equipment and materials to be used solely and


exclusively in the conduct of Petroleum Operations without payment of customs and


other duties, taxes, fees and charges on imports save minor administrative charges;


PROVIDED THAT:


a) GNPC shall have the right of first refusal for any item imported duty free under


this Article which is later sold in Ghana; and


b) where GNPC does not exercise its right of purchase Contractor may sell to any


other person only subject to all import duty and taxes as if such items were being


imported at the time of such sale; provided, however, that no duty or tax shall be


levied if the purchaser could have imported the item sold free of duty or tax


under an exemption similar to Contractor’s hereunder.


12.6 Foreign National Employees of Contractor or its Affiliates, and of its


Subcontractors, shall be permitted to import into Ghana free of import duty their


personal and household effects in accordance with Section 22.7 of PNDCL 64;








Petroleum Agreement for Shallow water Tano (MDE-GNPC/Tullow-Sabre) - April 2DDS 52


provided, however, that no property imported by such employee shall be resold by


such employee in Ghana except in accordance with Article 12.5.


12.7 Subject to GNPC’s rights under Article 19, Contractor, Subcontractors and Foreign


National Employees shall have the right to export from Ghana all previously


imported items as defined. Such exports shall be exempt from all customs and other


duties, taxes, fees and charges on exports save minor administrative charges.


12.8 The Ghana Income Tax law applicable generally to individuals who are not


employed in the petroleum industry shall apply in the same fashion and at the same


rates to employees of Contractor, its Affiliates and its Subcontractors; provided,


however, that Foreign National Employees of Contractor, its Affiliates, and its


Subcontractors shall be exempt from the income tax and withholding tax liabilities


unless they are resident in Ghana for more dian thirty (30) continuous days or sixty


(60) days in aggregate in any Calendar Year.


12.9 Pursuant to part 1 Section 3(2) of tire Petroleum Income Tax Law, the parties hereby


confirm that in respect of Capital Allowance deductions for the purposes of


calculating chargeable income of the Contractor, the Contractor shall fully depreciate


in five (5) years. The mode of calculation shall be in accordance with the Capital


Allowances schedule annexed to the Petroleum Income Tax Law 1987 (PNDC


L.188).


12.10 With regard to each Development and Production Area, Contractor shall accrue


estimated costs of decommissioning and abandonment of operations and facilities,


site restoration and other associated operations and have such costs allowed prior to


abandonment as a deduction against chargeable income over the estimated life of the


estimated reserves on a straight line basis, commencing on the date when fifty


percent (50%) of the estimated reserves have been produced from such area.


Estimates with regard to costs will be reviewed on an annual basis for adjustment


and will be adjusted to reflect actual expenses as incurred. The implementation of


this Article 12.10 shall be subject to detailed guidelines to be issued by the Minister,


but to the extent that such guidelines suggest potential changes to what is agreed in


this Article 12.10, any such changes shall be subject to prior agreement between the


Parties hereto.





12.11 It is the intent of the Parties that payments by Contractor of tax levied by the


Petroleum Income Tax Law qualify as creditable against the income tax liability of


each company comprising Contractor in its jurisdiction. Should the fiscal authority


involved determine that the Petroleum income Tax Law does not impose a creditable


tex, the Parties agree to negotiate in good faith with a view to establishing a


Petroleum Agreement for Shallow water Tanc (MOE-GNPC/Julkw-Sshre) - April 2QQG 53





 creditable tax on the precondition that no adverse effect should occur to the


economic rights of GNPC or the State.






























































































































































Petroleum Agreement for Shallow watBrlanu (MQE-DNPC/TullDW-Sabre) - April 2DDB 54











 ARTICLE 13








FORFIGN EXCHANGE TRANSACTIONS


13.1 Contractor shall for the purpose of this Agreement be entitled to receive, remit, keep


and utilise freely abroad all the foreign currency obtained from the sales of the


Petroleum assigned to it by this Agreement or purchased hereunder, or from


transfers, as well as its own capital, receipts from loans and in general all assets


thereby acquired abroad. Upon making adequate arrangements with regard to its


commitment to conduct Petroleum Operations, Contractor shall be free to dispose of


this foreign currency or assets as it deems fit.


13.2 Contractor shall have the right to open and maintain in Ghana bank accounts in


foreign currency and Ghanaian currency. No restriction shall be made on the import


by Contractor in an authorised manner of funds assigned to the performance of the


Petroleum Operations and Contractor shall be entitled to purchase Ghanaian


currency through authorised means, without discrimination, at the prevailing rate of


exchange; provided, however, that such prevailing rate applicable to Contractor


hereunder for all transactions for converting Ghanaian currency into U.S. Dollars,


and vice versa, shall be at a buying or selling, as the case may be, rate of exchange


not less favourable to Contractor than that quoted by the State or its foreign


exchange control authority to any person or entity on the dates of such conversion


(excepting those special rates provided by the State to discretely defined groups for


special, limited purposes).


13.3 Contractor shall be entitled to convert in an authorised manner into foreign


currencies of its choice funds imported by Contractor for the Petroleum Operations


and held in Ghana which exceeds its local requirements at tire prevailing rate of


exchange referred to in Article 13.2 and remit and retain such foreign currencies


outside Ghana.


13.4 In the event of resale by Contractor or its Affiliate of Crude Oil purchased from the


State or GNPC, the State or GNPC shall have the right to request payment for such


sales of its share of production to Contractor or its Affiliate to be held in the foreign


currency in which the resale transaction took place or in U.S. Dollars.


13.5 Contractor shall have the right to make direct payments outside of Ghana from its


home offices, and elsewhere, to its Foreign National Employees, and to those of its


Subcontractors and suppliers ‘not resident in Ghana’ (as that term is defined in Part


IV, Division 1, Section 160 of the Internal Revenue Act, 2000 (Act 592) for wages,


salaries, purchases of goods and performance of services, whether imported into


A9rBement far Shallow water Tano (MOE-GNPC/Tullow-Sabre) - April 2DD3 5 5


■ \v.a&





 Ghana or supplied or performed therein for Petroleum Operations carried out


hereunder, in accordance with the provisions of this Agreement, in respect of


services performed within the framework of this Agreement, and such payments


shall be considered as part of the costs incurred in Petroleum Operations. In the


event of any changes in the location of Operator’s home or other offices, Operator


shall so notify GNPC and the State.





13.6 All payments which this Agreement obligates Contractor to make to GNPC or the


State, including income taxes, shall be made in U.S. Dollars, except as requested


otherwise pursuant to Article 13.4 above. All payments shall be made by electronic


transfer in immediately available funds to a bank to be designated by GNPC or the


State, and reasonably accessible to Contractor by way of its being able to receive


payments made by Contractor and give a confirmation of receipt thereof, or in such


other manner as may be mutually agreed.





All payments which this Agreement obligates GNPC or the State to make to


Contractor shall be made in U.S. Dollars. All payments shall be made by electronic


transfer in immediately available funds to a commercial bank to be designated by


Contractor, and reasonably accessible to GNPC or the State by way of its being able


to receive payments made by GNPC or the State and give confirmation of receipt


thereof, or in such other manner as may be mutually agreed.






























































Petroleum Agreement for Shallow water Tana (MOE-GNPC/Tullnw-Sabni) - April 2GD& 56


 ARTICLE 14





SPECIAL PROVISIONS FOR NATURAL CAS





PART I - GENERAL





14.1 Contractor shall have the right to use Natural Gas produced from any Development


and Production Area for Petroleum Operation within the Contract Area such as


reinjection for pressure maintenance and/or power generation.


14.2 Contractor shall have the right to flare Natural Gas:


a) to the extent provided in an approved Development Plan;


b) during production testing operations;


c) when required for the safety of persons engaged in Petroleum Operations in


accordance with Petroleum Industry practice;


d) where reinjection is inadvisable from the point of view of good reservoir or


petroleum engineering practice; or


e) as otherwise authorised by the Minister.


14.3 Contractor shall have the right to extract condensate and Natural Gas liquids for


disposition under the provisions relating to Crude Oil. Residual Natural Gas


remaining after the extraction of condensate and Natural Gas liquids is subject to the


provisions of this Article.


PART II - ASSOCIATED GAS


14.4 Based on the principle of full utilisation of Associated Gas and without substantial


impediment to Crude Oil production, the Development Plan of each Development


and Production Area shall include a plan of utilisation for Associated Gas.


14.5 If Contractor considers production, processing and utilisation of Associated Gas


from any Development and Production Area to be non-economic, GNPC shall have


the option to offtake such Associated Gas at the outlet flange of the gas-oil separator


Petroleum Agreement (or Shallow water Tano (MOE-GNPC/Tullow-Sabre) - April Z0Q6 57


 at its Sole Risk for its own use and to that end the Development Plan proposed by


Contractor shall include:





a) a statement of the facilities necessary for the delivery to GNPC of such


Associated Gas; and


b) a plan for the reinjection of such Associated Gas into the reservoir.


14.6 A. If GNPC elects to offtake Associated Gas under Article 14.5 above, GNPC


shall pay for the cost of any additional facilities and any related production


cost required for the delivery of the gas to GNPC, provided that:


a) if Contractor subsequently wishes to participate in GNPC’s gas


utilisation programme, it shall reimburse GNPC for the costs of such


facilities plus a premium of three hundred percent (300%); or


b) if Contractor subsequently develops a gas utilisation programme and


requires the use of such facilities, Contractor shall pay GNPC an agreed


fee for such use.


B. The decision of GNPC as to whether or not to exercise the option provided


for in Articles 14.5 shall be made in timely manner. In making any such


decision and in its subsequent conduct GNPC shall avoid the prevention of or


delay to the orderly start up or continuation of the production of crude oil as


envisaged in Contractor’s Development Plan.


PART III - NON-ASSOCIATED GAS


14.7 Contractor shall notify the Minister in writing as soon as any Discovery of Non-


Associated Gas is made in the Contract. Area.


14.8 As soon as possible after the technical evaluation of the test results of such


Discovery is complete and in any event not later than one hundred eighty (180) days


from the date of Discovery, Contractor shall by a further notice in writing to the


Minister (the “Notice”) indicate whether in Contractor’s opinion the Discovery


merits appraisal.


14.9 Where Contractor’s Notice indicates that the Discovery does not at that time merit


appraisal but may merit appraisal or additional evaluation at a later date during the


Exploration Period or during the initial period under a new petroleum agreement


made pursuant to Article 14.18 below, then Contractor need not submit a proposed





58


Appraisal Programme at that time but instead shall indicate what other studies or


evaluations may be warranted before an Appraisal Programme is undertaken. Where


Contractor’s Notice indicates that the Discovery will not merit appraisal at any time


during the Exploration Period or during the initial period under a new petroleum


agreement made pursuant to Article 14.18, then GNPC may by Notice to Contractor


require Contractor to relinquish the rights to the Non-Associated Gas within that


Discovery Area.


14.10 Where Contractor’s Notice indicates that the Discovery merits the drilling of one or


more Appraisal Wells at that time, Contractor shall prepare and submit to the JMC


the appropriate Appraisal Programme which Programme shall be scheduled to be


completed within two (2) years of the submission of the Notice to the Minister.


14.11 Not later than ninety (90) days from the date on which the Appraisal Programme


relating to a Discovery is concluded, Contractor shall submit to the Minister a report


containing the results of the Appraisal Programme. If the report concludes that the


Discovery merits commercial assessment, Contractor shall notify the Minister within


one hundred eighty (180) days from the date on which the Appraisal Programme


relating to the Discovery was completed of a Programme of such assessment and


shall conduct such programme during the rest of the Exploration Period and, if


applicable, during tire initial period under a new petroleum agreement made pursuant


to Article 14.18. Notwithstanding the above, Contractor may also notify the


Minister that commercial assessment of the Discovery is not warranted at that time


but the Discovery may merit such assessment at a later date during the Exploration


Period or during the initial period aforesaid. If Contractor so notifies the Minister,


Contractor shall also indicate what other studies or evaluation may be warranted


before a commercial assessment is undertaken.


14.12 The purpose of the commercial assessment shall be to study the uses to which


production from the Discovery Area, separately or together with any Natural Gas


referred to in Part II of this .Article 14, can be devoted and whether involving exports


or domestic utilisation. As part of the assessment, the Parties shall also pursue


discussions on the required contractual arrangements for disposition of the Natural


Gas to potential purchasers and/or consumers of the Natural Gas.


14.13 Contractor may consult with the other Parties and may make appropriate


representations proposing changes in the fiscal and other provisions of this


Agreement which may, in the opinion of Contractor, affect the above determinations


made pursuant to Articles 14.10 and 14.11. The other Parties may. where feasible


and in the best interests of the Parties, agree to make such changes or modifications


: existing arrangements.





Petroleum Agreement for How water Tana (MDE-GNPC/Tulluw-Sabre) - April 20QG 59


14.14 Nothing in this Part III of Article 14 shall be read or construed as requiring


Contractor to relinquish any area


i) which constitutes or forms part of another Discovery Area in respect of which


Contractor has given to the Minister a separate notice indicating that such


Discovery merits confirmation or commercial assessment; or


ii) which Contractor has given the Minister a separate notice in respect of


indicating that such Discovery is a Commercial Discovery; or


iii) which constitutes or forms part of a Development and Production Area.


14.15 Notwithstanding the provisions of Article 14.7 through to Article 14.13 of Part III, in


the case of the existing three (3) fields, Contractor shall abide by the provisions of


Article 4.3(a)(i) which requires the submission of a Development Plan.


PART IV NATURAL GAS PROJECTS


14.16 If at any time during the commercial assessment Contractor informs the Minister in


writing that the Discovery can be produced commercially, it shall as soon as


reasonably possible thereafter submit to the Minister and to GNPG its proposals for


an agreement in accordance with Article 8 relating to the development of the


Discovery on the principles set forth in this Part IV of Article 14. The State and


GNPC undertake on receipt of such notice to negotiate in good faith with Contractor


with a view to reaching agreement on terms for such production. Any such


agreement will be based on tenns and fiscal requirements which shall be no less


favourable to Contractor than those provided for in Articles 10 and 11 and which


take full account of the legitimate interest of the State as the resource owner.


14.17 If at any time during the commercial assessment Contractor has identified a market


in Ghana for the reserves of Associated and/or Non-Associated Gas or any part


thereof that can be saved without prejudice-to an export project, the Parties shall


proceed in good faith to negotiate the appropriate contractual arrangements for the


disposition of the Natural Gas. In the event of a domestic market for such Natural


Gas, Contractor and GNPC shall receive for delivery onshore of its share of the


Natural Gas at a price to be agreed between GNPC and Contractor taking into


account among other tilings the cost of developing the Natural Gas and the uses


which will be made of the Natural Gas.


14.18 In the event of a Discovery of Natural Gas in the Contract Area which is to be


d and commercially produced, the provisions of this Agreement in respect





PBtrnie iallow water Tann (MDE-GNPC/Tullow-Sabre) - April 2QDE 60


 to interests, rights and obligations of the Parties regarding Crude Oil shall apply to


Natural Gas, with the necessary changes in points of detail, except with respect to


specific provisions in this Agreement concerning Natural Gas and different or


additional provisions concerning Natural Gas which may be agreed by the Parties in


the future.


a) The system for the allocation of Natural Gas among the Parties shall follow the





same general format as Article 10.1 provides for Crude Oil, with the exception


that the royalty to be delivered to the State on Natural Gas shall be at the rate of


three percent (3%) of the annual Gross Production of Natural Gas as an


incentive to enhance the viability of a Gas project on the basis herein provided


for.








b) The Parties recognise that projects for the Development and Production of


Natural Gas are generally long-term in nature for both the project developers


and the customers who purchase the Natural Gas. Substantial investments and


dedication of facilities require long-term commitments on both sides. This


Agreement, being for a specific term of years, may not cover the length of time


for which customers in given cases will require commitments on the part of the


Parties to this Agreement to deliver their respective shares of the output.


Accordingly the Parties agree to consider undertaking such commitments where


reasonably required for the efficient and viable development of a Natural Gas


project. It is recognised that, unless otherwise agreed by the Parties hereto,


Contractor will have no right or interest in the project or the Natural Gas


produced and delivered after the term of this Agreement has expired unless a


petroleum agreement pursuant to Article 14.19 (A) has been entered into.





c) In the event that Contractor or an Affiliate decides to construct facilities to


receive Natural Gas from the Development and Production Area for further


processing or for use as a feedstock or fuel in order to convert such Natural Gas


into one or more commercially marketable products, the Contractor shall be


entitled to pay for such Natural Gas the price paid by the State or GNPC under


Article 14.17.





d) The Parties will consider collaboration in obtaining any common external


financing available for Natural Gas processing or Natural Gas utilisation


facilities, including project financing; however, each Party shall remain free to


finance externally its share of such facilities to the extent it prefers to do so.





14.19 A) Where Contractor has during the continuance of the Exploration Period made a


Discovery of Non-Associated Gas but has not before tire end of the Exploration


Period declared that Discovery to be a Commercial Discovery, the State and





Petroleum Agi or Shallow water Tano (MQE-GNPC/TullowSabre) - Apnl 2DDG 61


---5





 GNPC will, if Contractor so requests, enter into a new petroleum agreement with


Contractor in respect of the Discovery Area to which that Discovery relates.


B) The State and GNPC shall not be under any obligation to enter into an





Agreement pursuant to Article 14.19(A) unless before the end of the Exploration


Period Contractor has carried out an Appraisal Programme in respect of that


Discovery pursuant to Article 14.10 and submitted to the Minister a report


thereon pursuant to Article 14,11, or has notified the Minister of reasonable


arrangements to undertake and complete such an Appraisal Programme during


the period provided for in (C) (i) below.





C) A Petroleum Agreement entered into pursuant to Article 14.19 (A):





i) shall unless the Discovery in respect of which the Agreement has been


made is declared by Contractor to be a Commercial Discovery continue


in force for an initial period not exceeding five (5) years;


ii) shall in the event that the Discovery is declared by Contractor to be a





Commercial Discovery:





a) continue in force for an aggregate period not exceeding thirty (30)


years;





b) include, or be deemed to include, all the provisions which, mutatis


mutandis, would have applied to a Commercial Discovery of


Non-Associated Gas if Contractor had declared such Discovery to


be a Commercial Discovery under this Agreement;


iii) shall contain in respect of the initial period or of any renewal period


details of the evaluations or studies which Contractor proposes to


undertake in order to determine or keep under review the commerciality


of the Discovery;


iv) shall confer on GNPC preemptive rights in respect of the Gas contained





in the reservoir to which the Discovery relates substantially in the form


of the provisions hereinafter set out in Article 14.18 (D).





D) In the event that the Parties are unable to agree to the detailed terms of


the Petroleum Agreement contemplated in Article 14.19A and the


Exploration Period expires, GNPC itself, or a third party may, at its sole


risk and expense, complete the Appraisal Programme relating to the


Discovery and/or develop the Discovery, provided that Contractor shall


PetrolBum Agreement f nf^£\^lanD (MOE-GNPC/Tullow-Sabre) - April 2006


62


'VX'k&M i _


 have the right of first refusal in respect of any transaction proposed by


GNPC or such third party for the development of the Discovery.





E (i) Where Contractor has not, before the end of the initial period, declared


the Discovery to be a Commercial Discovery and the Minister has in his


discretion determined that further evaluation or studies may be required


before the Discovery can be declared a Commercial Discovery, the right


of Contractor to retain the Discovery Area shall continue for a further


period not exceeding in the aggregate five (5) years. The right of


Contractor to retain the Discoveiy Area aforesaid shall be secured by the


renewal of the Agreement referred to in Article 14.19A or where


necessary by a new Agreement entered into by the Parties for that


purpose.





(ii) Where Contractor has not declared the Discovery to be a Commercial


Discovery, if GNPC has identified a market for the Gas contained in the


reservoir to which the Discovery relates, or any part thereof, it may at


any time during the initial period or the aggregate period referred to in


14.19 D above serve on Contractor a notice giving particulars of the


quantities of Natural Gas required to serve that market and the price


offered; and on the basis of the procedure detailed in Article 9, exercise


the right referred to in Article 14.19 C (iv) above.


14.20 For the purposes of calculating the State’s 3% royalty share on Natural Gas, if


the State elects to take its Royalty on Natural gas in cash, the value of such


Natural Gas shall be the actual price realized.





14.21 Within three (3) months from the receipt of a notice as aforesaid Contractor


may declare the Discovery to be a Commercial Discovery and in accordance


with the Agreement and the Petroleum Law prepare and submit to the


Minister a Development Plan for the production of the Gas in association with


GNPC to serve the market identified at the price offered.


14.22 If Contractor has not, within the period of three (3) months aforesaid,


declared the Discovery to be a Commercial Discovery, GNPC may at its sole


risk and expense develop the Discovery to the extent necessary to meet the


requirements of the market identified as aforesaid, and in that event the


Contractor shall cease to have any rights in respect of the Gas in the reservoir


required for that purpose.











Petroleum Agreement for Shallow wat8r Tano (MQE-GNPC/Tullnw-Sabre) - April 2006 63


 ARTICLE 15











DOMESTIC SUPPLY REQUIREMENTS (CRUDE OIL)


15.1 Crude Oil for consumption in Ghana (in this Article called the “Domestic Supply


Requirement”) shall be supplied, to the extent possible, by the State and GNPC from


their respective entitlements under this Agreement and under any other contract for


the production of Crude Oil in Ghana.


15.2 In the event that Crude Oil available to the State pursuant to Article 15.1 is


insufficient to fulfill the Domestic Supply Requirement, Contractor shall upon three


(3) month’s notice from the State, be obliged together with any third parties which


produce Crude Oil in Ghana, to supply a volume of Crude Oil to be used for such


Domestic Supply Requirement, calculated on the basis of the ratio of Contractor’s


entitlement to Crude Oil under Article 10.1 (d) to the entitlements of all such third


parties producing Crude Oil in Ghana and provided that Contractor’s obligation to


supply Crude Oil for purposes of meeting the Domestic Supply Requirement shall


not exceed the total of Contractor’s entitlement of Gross Production of Crude Oil


after deduction of the State’s Royalty under this Agreement.


The Contractor shall ensure that any contract for the supply of the Contractor’s share


of Crude Oil under this Agreement shall be made subject to the requirement in this


Article 15 to meet the Domestic Supply Requirement.


The State shall purchase any Crude Oil supplied by Contractor pursuant to this


Article at a price which matches the Market Price determined under Article 11.7 for


the Month of delivery. The State shall pay such prices in accordance with Article


13.7 within thirty (30) days after receipt of Contractor’s invoice, failing which


Contractor’s obligations in respect of the Domestic Supply Requirement under this


Article 15 shall be suspended until payment is made good, at which time deliveries


shall be resumed subject to any alternative commitments that may have been


reasonably entered into by Contractor to dispose of the Domestic Supply


Requirement Crude Oil during the period of default in payment. Contractor shall


recover any amount due and unpaid by the State, plus interest at the interest rate


defined in Article 26.7, from GNPC’s share of Crude Oil as provided in Article

















^roleum AgreementfarShallow water Tano (MDE-GNPC/Tullow-Sabre) - April 2006 64


Vk





 ARTICLE 16





INFORMATION AND REPORTS : CONFIDENTIALITY


16.1 Contractor shall keep GNPC regularly and fully informed of operations being carried


out by Contractor and provide GNPC with all information, data, (film, paper and


digital forms), samples, interpretations and reports, (including progress and


completion reports) but not limited to the following:


a) processed seismic data and interpretations thereof;


b) well data, including but not limited to electric logs and other wireline surveys,


and mud logging reports and logs, samples of cuttings and cores and analyses


made therefrom;


c) any reports prepared from drilling data or geological or geophysical data,


including maps or illustrations derived therefrom;


d) well testing and well completion reports;


e) reports dealing with location surveys, seabed conditions and seafloor hazards


and any other reports dealing with well, platform or pipeline locations;


f) reservoir investigations and estimates regarding reserves, field limits and


economic evaluations relating to future operations;


g) daily, weekly, monthly and other regular reports on Petroleum Operations;


h) comprehensive final reports upon the completion of each specific project or


operation;


i) contingency programmes and reports on safety and accidents;


j) procurement plans, Subcontractors and contracts for the provision of services to


Contractor.


Where appropriate, data shall be provided on film, paper and in digital format. In


respect of the reports, including text and graphics, paper and digital copies shall be


submitted.


Ms


Petroleum Agreement for Shallow water Tano (MDE-GNPC/Tullow-Sabre) - April 20DG 65





16.2 Contractor shall have the right to retain for its own use in connection with the


conduct of Petroleum Operations under this Agreement copies of data, well logs,


maps, magnetic tapes, other geological and geophysical information, portions of core


samples and copies of reports, studies and analyses, referred to in Article 16.1.


16.3 Not later than ninety (90) days following the end of each Calendar Year, Contractor


shall submit to GNPC a report covering Petroleum Operations performed in the


Contract Area during such Calendar Year. Such report shall include, but not be


limited to:


a) a statement of the number of Exploration Wells, Appraisal Wells and


Development Wells drilled, the depth of each such well, and a map on which


drilling locations are indicated;


b) a statement of any Petroleum encountered during Petroleum Operations, as well


as a statement of any fresh water layers encountered and of any other minerals


discovered;


c) a statement of the quantity of Petroleum produced and of all other minerals


produced therewith from the same reservoir or deposit;


d) a summary of the nature and extent of all exploration activities in the Contract


Area;


e) a general summary of all Petroleum Operations in the Contract Area; and


f) a statement of the number of employees engaged in Petroleum Operations in


Ghana, identified as Ghanaian or non-Ghanaian. With regard to non-Ghanaian


employees, where GNPC requires the details as to nationality, Contractor shall


assist in providing such information.


16.4 All data, information and reports including interpretation and analysis supplied by


Contractor pursuant to this Agreement, including without limitation, that described


in Articles 16.1. 16.2 and 16.3 shall be treated as confidential and shall not be


disclosed by any Party to any other person without the express written consent of the


other Parties.


16.5 The provisions of Article 16.4 shall not prevent disclosure:








Petroleum i illow water lano (MOE-GNPC/Tullow-Sabre) - April 2GQB 66


a) by GNPC or the State:


i) to any agency of the State or to any adviser or consultant to GNPC or the


State; or


ii) for the purpose of obtaining a Petroleum Agreement in respect of any


acreage adjacent to the Contract Area.


b) by Contractor:


i) to its Affiliates, advisers or consultants;


ii) to a bona fide potential assignee of all or part of Contractor’s interest


hereunder provided GNPC is given prior notice of such potential


assignee;


iii) to banks or other lending institutions for the purpose of seeking external


financing of costs of the Petroleum Operations;


iv) to non-Affiliates who shall provide services for the Petroleum


Operations, including Subcontractors, vendors and other service


contractors, where this is essential for their provision of such services,


and provided GNPC is notified about such disclosure;


v) to governmental agencies for obtaining necessary rulings, permits,


licenses and approvals, or as may be required by applicable law or


financial stock exchange, accounting or reporting practices, and


provided GNPC is notified about such disclosure; or


vi) to such persons and for such purposes as the Joint Management


Committee may permit from time to time.


c) by any Party:


i) to the extent necessary in any arbitration proceedings or proceedings


before a Sole Expert or in proceedings before any court;


ii) with respect to data, etc., which already through, no fault of the


disclosing Party is in the public domain.


16.6 Any Party disclosing information or providing data to any third party under this


Article shall require such persons to observe the confidentiality of such data.


Promptly after the Effective Date, the Parties shall agree upon a mutually acceptable


international petroleum industry standard form of confidentiality agreement.


Contractor shall require the execution of an agreement substantially on the terms


contained in such agreed form of agreement by a potential assignee prior to


disclosure of such data; and shall provide copies of all such signed agreements to





PetroleumAgfesmont for Shallow water Tano (MOE-GNPC/Tullow-Sabra) - April 2006 67





 ARTICLE 17





INSPECTION. SAFETY AND ENVIRONMENTAL PROTECTION


17.1 GNPC shall have the right of access to all sites and offices of Contractor and the


right to inspect all buildings and installations used by Contractor relating to


Petroleum Operations. Such inspections and audits shall take place in consultation


with Contractor and at such times and in such manner as not unduly to interfere with


the normal operations of Contractor.


17.2 Contractor shall take all necessary steps, in accordance with accepted Petroleum


industry practice, to perform activities pursuant to the Agreement in a safe manner


and shall comply with all requirements of the Law of Ghana, including labour, health


safety and environmental laws and regulations issued by the Environmental


Protection Agency.


17.3 Contractor shall provide an effective and safe system for disposal of water and waste


oil, oil base mud and cuttings in accordance with accepted Petroleum industry


practice, and shall provide for the safe completion or abandonment of all boreholes


and wells.





17.4 Contractor shall exercise its rights and carry out its responsibilities under this


Contract in accordance with accepted Petroleum industry practice, and shall take


steps in such manner as to:





a) result in minimum ecological damage or destruction;


b) control the flow and prevent the escape or the avoidable waste of Petroleum


discovered in or produced from the Contract Area;


c) prevent damage to Petroleum-bearing strata;





d) prevent the entrance of water through boreholes and wells to Petroleum-bearing


strata, except for the purpose of secondary recovery;


e) prevent damage to onshore lands and to trees, crops, buildings or other


structures; and





f) avoid any actions which would endanger the health or safety of persons.





17.5 If Contractor’s failure to comply with the requirements of Article 17.4 results in the


release of Petroleum or other materials on the seabed, in the sea, on land or in fresh


Petroleum Agreement lor Shallow waterTano (MQE-GNPC/Tullnw-Ssbre) - April 2QDB 6 8


r


water, or if Contractor’s operations result in any other form of pollution or otherwise


cause harm to fresh water, marine, plant or animal life, Contractor shall, in


accordance with accepted Petroleum industry practice, promptly take all necessary


measures to control the pollution, to clean up Petroleum or other released material,


or to repair, to the maximum extent feasible, damage resulting from any such


circumstances. If such release or pollution results directfy from the Gross


Negligence of Contractor, the cost of subcontract clean-up and repair activities shall


be borne by Contractor and shall not be included as a Petroleum Cost under this


Agreement.


17.6 Contractor shall notify GNPC immediately in the event of any emergency or major


accident and shall take such action as may be prescribed by GNPC’s emergency


procedures and by accepted international petroleum industry practices in the same or


similar circumstances.


17.7 If Contractor does not act promptly so as to control, clean up or repair any pollution


or damage, GNPC may, after giving Contractor reasonable notice in the


circumstances, take any actions which are necessary, in accordance with accepted


international petroleum industry practice in the same or similar circumstances and


the reasonable costs and expenses of such actions shall be borne by Contractor and


subject to Article 17.5 be included as Petroleum Costs.






























































Petroleum Agreement for Shallow water Tsno (MGE-GNPC/Tullow-Sabre) - April 2D0G


 ARTICLE 18








ACCOUNTING AND AUDITING





18.1 Contractor shall maintain, at its offices in Ghana, books of account and supporting


records in the manner required by applicable law and accepted accounting principles


generally used in the international petroleum industry and shall file reports, tax


returns and any other documents and any other financial returns which are required


by applicable law


18.2 In addition to the books and reports required by Article 18.1 Contractor shall


maintain, at its office in Ghana, a set of accounts and records relating to Petroleum


Operations under this Agreement. Such accounts shall be kept in accordance with


the requirements of the applicable law and accepted accounting principles generally


used in the international petroleum industry.


18.3 The accounts required by Articles 18.1 and 18.2 shall be kept in United States


Dollars.


18.4 Contractor will provide GNPC with quarterly summaries of the Petroleum Costs


incurred under this Agreement.


18.5 GNPC shall review all financial statements submitted by the Contractor as required


by this Agreement, and shall signify its provisional approval or disapproval of such


statements in writing within ninety (90) days of receipt failing which the financial


statements as submitted by Contractor shall be deemed approved by GNPC; in the


event that GNPC indicates its disapproval of any such statement, the parties shall


meet within fifteen (15) days of Contractor’s receipt of the notice of disapproval to


review the matter.


18.6 Notwithstanding any provisional approval pursuant to Article 18.5 GNPC shall have


the right at its sole expense and upon giving reasonable notice in writing to


Contractor to audit the books and accounts of Contractor relating to Petroleum


Operations within two (2) years from the submission by Contractor of any report of


financial statement. GNPC shall not, in carrying out such audit, interfere


unreasonably with the conduct of Petroleum Operations. Any such audit shall be


undertaken by an independent international auditing firm and shall be completed


within nine (9) months after commencement. An extension of time to complete an


audit shall be allowed upon receipt by Contractor from GNPC’s auditing firm of a


written statement representing that the auditors have used reasonable efforts to


complete the subject audit and they require additional time not to exceed three (3)


Petroleum Agrg^^r^Shallow water Tano (MOE-GNPC/Tullow-Sabra) - April 2D06 70


months to complete such audit. If after a period of one (1) year the subject audit has


not been completed by GNPC the books and accounts covering such period shall be


deemed approved. Contractor shall provide all necessary facilities for auditors


appointed hereunder by GNPC including working space and access to all relevant


personnel, records, files and other materials.


If GNPC desires verification of charges from an Affiliate, Contractor shall at


GNPC’s sole expense obtain for GNPC or its representatives an audit certificate to


this purpose from the statutory auditors of the Affiliate concerned. Copies of audit


reports shall be provided to the Contractor and GNPC. Any unresolved audit claim


resulting from such audit, upon which Contractor and GNPC are unable to agree


shall be submitted to the JMC for decision which must be unanimous. In the event


that a unanimous decision is not reached in respect of any audit claim, then such


unresolved audit claim shall be submitted for resolution in accordance with Article


24. Subject to any adjustments resulting from such audits, Contractor’s accounts and


financial statements shall be considered to be correct on expiry of a period of two (2)


years from the date of their submission unless before the expiry of such two year


period GNPC has notified Contractor of any exceptions to such accounts and


statements.


18.7 Nothing in this Article shall be read or construed as placing a limit on GNPC’s


access to Contractor’s books and accounts in respect of matters arising under Article


23;4(a).





















































Petroleum Agreement for Shallow water Tano (MOE-GNPC/Tullow-Sabre) - April ZQQB 71








 ARTICLE 19








TITLE TO AND CONTROL OF GOODS AND EQUIPMENT





19.1 GNPC shall be the sole and unconditional owner of:





a) Petroleum produced and recovered as a result of Petroleum Operations, except


for such Petroleum as is distributed to the State and to Contractor pursuant to


Article 10 or Article 14 hereof;


b) all physical assets other than those to which Article 19.3 or 19.4 apply, which





are purchased, installed, constructed or used by Contractor in Petroleum


Operations as from the time that:


i) the full cost thereof has been recovered by Contractor in accordance with





the provisions of the Accounting Guide from its proportionate share of


Petroleum revenues and any other revenues it receives in respect of


Petroleum Operations; or





ii) this Agreement is terminated and Contractor has not disposed of such


assets prior to such termination, whichever occurs first.





19.2 Contractor shall have the use of the assets referred to in Article 19.1(b) for purposes


of its operations under this Agreement without payment provided that Contractor


shall remain liable for maintenance, insurance and other costs associated with such


use in accordance with international petroleum industry practices in the same or


similar circumstances. Where Contractor has failed to keep any such asset in good


working condition (normal wear and tear excepted), GNPC shall have the right to


recover the cost of repair or replacement of such assets from Contractor. Contractor


shall indemnify GNPC against all losses, damages, claims or legal action resulting


from Contractor's use of such assets, if and in as far as such losses, damages, claims


or legal actions were directly caused by Contractor’s Gross Negligence.





19.3 Equipment or any other assets rented or leased by Contractor which is imported into


Ghana for use in Petroleum Operations and subsequently re-exported therefrom,


which is of the type customarily leased for such use in accordance with international


petroleum industry practice or which is otherwise not owned by Contractor shall not


be transferred to GNPC. No equipment or assets owned or leased by a


Subcontractor shall by reason of the provisions of this Article 19 be deemed to be


transferred to GNPC.





Petroleum Agreement for Shallow water Tano (MQE-GNPC/Tullow-Sabre) - April 2006 72





19.4 All assets owned by Contractor which are not affected by the provisions of Article


19.1 (b) above may, where required for further Petroleum Operations, be retained by


GNPC for such operations provided that GNPC shall thereby be liable to pay a


reasonable and mutually agreed fee for such use, and shall bear the cost of repair or


replacement upon failure to keep such assets in good working condition (normal


wear and tear excepted), and further provided that Contractor does not require such


assets for its Petroleum Operations.


19.5 Upon the termination of Petroleum Operations in any .Area, Contractor shall give





GNPC the option to acquire any movable and immovable assets used for such


Petroleum Operations and not affected by the provisions of Article 19.1 (b) at a


reasonable and mutually agreed price, always provided that Contractor does not


require such assets for Contractor’s Petroleum Operations in the Contract Area.


«


19.6 All assets which are not affected by Article 19.1 (b) nor subject to Article 19.3 or


19.4 above, and all subcontractor equipment, may be freely exported by Contractor


orits Subcontractor, respectively, at its discretion.










































































Petroleum Agreement for Shallow wator Tano (MOE-GHPC/Iullow-Sabre) - April 20DG 73


rVv&j2t








/





 ARTICLE 20








PURCHASING AND PROCUREMENT


20.1 In the acquisition of plant, equipment, services and supplies for Petroleum


Operations, Contractor shall give preference to materials, services and products


produced in Ghana including shipping services provided by vessels owned or


controlled by Ghanaian shipping companies if such materials, services and products


meet standards generally acceptable to international oil and gas companies and


supplied at prices, grades, quantities, delivery dates and on other commercial terms


equivalent to or more favourable than those at which such materials, services and


products can be supplied from outside Ghana.


20.2 For the purposes of Article 20.1, price comparisons shall be made on a c.i.f. Accra


delivered basis.

































































Petroleum Agreement for Shallow water Tana (MQE-GNPC/Tullow-Sabre) - April 2Q0G 74


r[/M&&


Ar'r-'


 ARTICLE 21








EMPLOYMENT AND TRAINING





21.1 In order to establish programmes to train Ghanaian personnel for work in Petroleum


Operations and for the transfer of management and technical skills required for the


efficient conduct of Petroleum Operations, Contractor shall pay to GNPC the sum of


three hundred thousand United States dollars (US$300,000) per year from the


Effective Date to maintain and implement such programmes. Such expenditure shall


qualify for deduction against income tax under the Income Tax law and shall be


considered as Petroleum Costs.


The above amounts shall be payable within thirty (30) days after the beginning of


each Calendar Year, provided that the sum payable shall be pro rata for any period of


less than a full Calendar Year (e.g. from the Effective Date to the end of the


Calendar Year). GNPC shall prepare and present to JMC its intentions for such


programmes on an annual basis and Contractor’s JMC representatives may offer


suggestions in this regard.


In addition to the annual sums payable pursuant to Article 21.1 above, Contractor


shall pay to GNPC on a once-off basis a single further sum of five hundred thousand


United States dollars (U.S.$500,000) in respect of technical support for GNPC.


Such expenditure shall also qualify for deduction against income tax under the


Income Tax law and shall be considered as a Petroleum Cost


21.2 Where qualified Ghanaian personnel are available for employment in the conduct of


Petroleum Operations, Contractor shall ensure that in the engagement of personnel it


shall as far as reasonably possible provide opportunities for the employment of such


personnel. For this puipose, Contractor shall submit to GNPC an employment plan


with the number of persons and the required professions and technical capabilities


prior to the performance of Petroleum Operations. GNPC shall provide the qualified


personnel according to the said plan.


21.3 Contractor shall, if so requested by GNPC, provide opportunities for a mutually


agreed number of GNPC personnel nominated by GNPC to be seconded for


on-the-job training or attachment in all phases of its Petroleum Operations under a


mutually agreed secondment contract. Expenses of secondment shall not be credited


against the training obligation under Article 21.1. Such secondment contract shall


include continuing education and short industry courses mutually identified as


beneficial to the secondee. Costs and other expenses connected with such


Petroleum^Aorgrarj^pr Shallow water Tara (MOE-GNPC/lullow-Sabre) - April 20DB


75











assignment of GNPC personnel on secondment shall be borne by the Contractor and


shall qualify for deduction against income expenditure under the Petroleum Income


Tax Law and shall be considered as Petroleum Costs.


21.4 Contractor shall regularly provide to GNPC information and data relating to


worldwide Petroleum science and technology, Petroleum economics and engineering


available to Contractor, and shall assist GNPC personnel in every way to acquire


knowledge and skills in all aspects of the Petroleum industry.


21.5 It is agreed that there will be no disclosure or transfer of any documents, data, know¬


how, technology or other information owned or supplied by Contractor, its


Affiliates, or non-Affiliates, to third parties without Contractor’s prior written


consent, and then only upon agreement by the recipients to retain such information in


strict confidence.













































































Petroleum Agreement for Shallow water Tano (MOE-GNPC/Tullow-Sabre) - April 200B 76


 ARTICLE 22





FORCE MAIEURE


22.1 The failure of a Party to fulfil any term or condition of this Agreement, except for


the payment of monies, shall be excused if and to the extent that such failure arises


from Force Majeure, provided that, if the event is reasonably foreseeable such party


shall have prior thereto taken all appropriate precautions and all reasonable


alternative measures with the objective of carrying out the terms and conditions of


this Agreement. A Party affected by an event of Force Majeure shall promptly give


the other Parties notice of such event and also of the restoration of normal


conditions.


22.2 A Party unable by an event of Force Majeure to perform any obligation hereunder


shall take all reasonable measures to remove its inability to fulfil the terms and


conditions of this Agreement with a minimum of delay, and the Parties shall take all


reasonable measures to minimise the consequences of any event of Force Majeure.


22.3 Any period set herein for the completion by a Party of any act required or permitted


to be done hereunder, shall be extended for a period of time equal to that during


which such Party was unable to perform such actions as a result of Force Majeure,


together with such time as may be required for the resumption of Petroleum


Operations.


22.4 Except in the case of:


a) a law of general application;


b) an action taken in consequence of an emergency arising from a condition of


Force Majeure;


GNPC may not claim Force Majeure in respect of any action or provision of the


State or any agency of the State.




















Petroleum Agreement for Shallow water Tano (MOE-GNPC/Tullow-Sabre) - April 2006 77





 ARTICLE 23








TERM AND TERMINATION


23.1 Subject to this Article 23 and to the Petroleum (Exploration and Production) Law


PNDCL 84 (Section 12) the term of this Agreement shall be thirty (30) years


commencing from the Effective Date.


23.2 At the end of the term provided for in Article 23.1, provided that this Agreement has


not earlier been terminated, the Parties may negotiate concerning the terms and


conditions of a further agreement with respect to the Contract Area or any part


thereof, but no failure to enter any such further agreement shall -give rise to


arbitration pursuant to Article 24 hereof.


23.3 Subject to Article 22, Termination of this Agreement shall result upon the


occurrence of any of the following:


a) the relinquishment or surrender of the entire Contract Area;


b) the termination of the Exploration Period including extensions pursuant to


Article 3 without notification by Contractor of commerciality pursuant to Article


8 in respect of a Discovery of Petroleum in the Contract Area; provided,


however, Termination shall not occur while Contractor has the right to evaluate


a Discovery for appraisal or commerciality and/or propose a Development Plan


pursuant to Articles 8 or 14, or once a Development Plan has been approved, nor


when the provisions of Articles 8.13 through 8.19 are applicable;


c) if, following a notice that a Discovery is a Commercial Discovery the


Exploration Period terminates under Article 3 without a Development Plan


being approved, provided however that Termination shall not occur when the


provisions of Articles 8.13 through 8.19 are applicable; or


d) the failure of Contractor through any cause other than Force Majeure, to


commence preparations with respect to Development Operations pursuant to


Article 8.11.


23.4 Subject to Article 22 and pursuant to procedures described in Article 23.5 below


GNPC and/or the State may terminate this Agreement upon the uncorrected


^__ocjjurrence of any of the events (or failures to act listed) below:


Petroleum Agreement for Shallow water Tano (HOE-BNPC/Tullow-Sabrs) - April 200G 7 8


 a) the submission by Contractor to GNPC of a written statement which Contractor


knows or should have known to be false, in a material particular; provided that


in the event of intent on the part of Contractor to cause serious damage to GNPC


b) or the State, a period for remedy of such false statement shall not be given;


the assignment or purported assignment by Contractor of this Agreement


contrary to the provisions of Article 25 hereof;


c) the insolvency or bankruptcy of Contractor, the entry by Contractor into any





agreements or composition with its creditors, taking advantage of any law for


the benefit of debtors or Contractor’s entry into liquidation, or receivership,


whether compulsory or voluntary, and there is thereby justifiable anticipation


that the obligations of Contractor hereunder will not be performed; provided,


however, if the Contractor is comprised of more than one non-Affiliated entity,


then the insolvency or bankruptcy of one Contractor Party shall not lead to a


termination of the Agreement if the other Contractor Party or Parties will assume


the rights and obligations of the defaulting Contractor Party under the Petroleum


Agreement;





d) the intentional extraction by Contractor of any material of potential economic


value other than as authorised under this Agreement, or any applicable law


except for such extraction as may be unavoidable as a result of Petroleum


e) Operations conducted in accordance with accepted international petroleum


industry practice, in the same or similar circumstances;


failure by Contractor





i) to fulfill its minimum work obligations pursuant to Article 4.2; save


where the Minister has waived the default; or


ii) to carry out an approved Appraisal Programme undertaken by Contractor





pursuant to Article 8, unless Contractor notifies GNPC and the Minister


that the Appraisal Programme should be amended and submits said


amendment to the JMC for its review;





substantial and material failure by Contractor to comply with any of its


0


obligations pursuant to Article 7.1 hereof;


g) failure by Contractor to make any payment of any sum due to GNPC or the State


pursuant to this Agreement within thirty (30) days after receiving notice that


such payment is due, except where liability for payment of such sum is disputed


od faith by Contractor in which case the matter shall, if agreement in





Petroleum Agreement for Shallow water Tano (MQE-GNPC/TullowSabre) - April 2DG6 79


 relation to it cannot be reached after thirty (30) days, be referred to arbitration


under Article 24;





h) failure by Contractor to comply with any decisions reached as a result of any


arbitration proceedings conducted pursuant to Article 24 hereof.


23.5 If GNPC and/or the State believe an event or failure to act as described in Article


23.4 above has occurred, a written notice shall be given to Contractor describing the


event or failure. Contractor shall have thirty (30) days from receipt of said notice to


commence and pursue remedy of the event or. failure cited in the notice. If after said


thirty (30) days Contractor has failed to commence appropriate remedial action,


GNPC and/or the State may then issue a written Notice of Termination to Contractor


which shall become effective thirty (30) days from receipt of said . Notice by


Contractor unless Contractor has referred the matter to arbitration. In the event that


Contractor disputes whether an event specified in Article 23.3 or Article 23.4 has


occurred or been remedied, Contractor may, any time up to the effective date of any


Notice of Termination refer the dispute to arbitration pursuant to Article 24 hereof.


If so referred, GNPC and/or the State may not terminate this Agreement in respect of


such event except in accordance with the terms of any resulting arbitration award.


23.6 Upon termination of this Agreement, all rights of Contractor hereunder shall cease,


except for such rights as may at such time have accrued, and without prejudice to


any obligation or liability imposed or incurred under this Agreement prior to


Termination and to such rights and obligations as the Parties may have under


applicable law.


23.7 Upon termination of this Agreement or in the event of an assignment of all the rights


of Contractor, all wells and associated facilities shall be left in a state of good repair


in accordance with accepted international petroleum industiy practice.









































Petroleum Agreement for Shallow water Tano (MOE-GNPC/Tullow-Sabre) - April 20QB


 ARTICLE 24








CONSULTATION. ARBITRATION AND INDEPENDENT EXPERT


24.1 Except in the cases specified in Article 26.4 any dispute arising between the State


and GNPC or either of them on one hand and Contractor on the other hand in


relation to or in connection with or arising out of any terms and conditions of this


Agreement shall be resolved by consultation and negotiation among senior personnel


authorized by each Party. In the event that no agreement is reached within thirty (30)


days after the date when either Party notifies the other that a dispute or difference


exists within the meaning of this Article or such longer period specifically agreed to


by the Parties or provided elsewhere in this Agreement, any Party shall have the right


subject to Article 24.7 to have such dispute or difference finally settled through


international arbitration under the auspices of the International Chamber of


Commerce (the “ICC”) and adopting the Rules of Arbitration of the International


Chamber of Commerce (the “ICC Rules”), which ICC Rules are deemed


incorporated by reference into this Article 24, save as otherwise provided herein.


24.2 The tribunal shall consist of three (3) arbitrators. Each Party to the dispute shall


appoint one (1) arbitrator and those so appointed shall designate a chairman


arbitrator. If a Party's arbitrator and/or the chairman arbitrator is not appointed


within the periods provided in the rules referred to in Article 24.1 above, such Party's


arbitrator and/or the chairman arbitrator shall at the request of any Party to the


dispute be appointed by the ICC International Court of Arbitration in accordance


with the ICC Rules.


24.3 No arbitrator or Sole Expert shall be a citizen of the home country of any Party


hereto, and no arbitrator or Sole Expert shall have any economic interest or


relationship with any such Party.


24.4 The arbitration proceedings shall be conducted in London, England or at such other


location as selected by the arbitrators unanimously, but which must be located in a


State which is a party to the New York Convention on the Recognition and


Enforcement of Foreign Arbitral Awards and located within any one of the States


specified in the Schedule to the Arbitration (Foreign Awards) Instrument, 1963 (LI


261), as may be amended from time to time. The proceedings shall be conducted in


the English language.





24.5 The award of the tribunal shall be final and binding upon the Parties and enforceable


by the Parties in whose favour the award is made. Each of the Republic of Ghana


and GNPC hereby irrevocably agree that to the extent that such party, has any right


Petroleum^greyj^^or Shallow water Tano (MQE-GNPC/Tullow-Sabre) - April 20QB 81


''WA&'





of immunity from any legal proceedings whether in Ghana, England or elsewhere


in connection with or arising from terms and conditions of this Agreement,


including immunity from service of process, immunity from jurisdiction or


judgement or any arbitration tribunal, immunity from execution of judgement or


tribunal award, such party hereby expressly and irrevocably waives any such


immunity and agrees not to assert or invoke any such rights or claim in any such


proceedings whether in Ghana, England or elsewhere.


24.6 The right to arbitrate disputes arising out of this Agreement shall survive the


termination of this Agreement.


24.7 Unless where a matter is specifically required to be referred to a Sole Expert under


this Agreement, the Parties to a dispute arising under this Agreement may, in lieu of


resorting to arbitration, mutually agree to refer such matter for determination by a


Sole Expert to be appointed by agreement of the Parties. The Sole Expert


proceedings shall be administered in accordance with the Rules for Expertise of the


International Chamber of Commerce and any hearings or meetings shall take place


in Accra, Ghana. Where, however, the Parties fail to agree upon the appointment of a


Sole Expert within forty-five (45) days of the notice by one Party to the other Parties


of a dispute pursuant to this Agreement, the Sole Expert shall be appointed by the


International Centre for Expertise established by the International Chamber of


Commerce (ICC). The decision of the Sole Expert shall be given in writing with full


reasoning and shall be final and binding upon the Parties and shall be treated as if it


was an award by a sole arbitrator. The Sole Expert shall have ninety (90) days after


his appointment to decide the case, subject to any extensions mutually agreed to by


the Parties to the dispute. Upon failure of the Sole Expert to decide the matter in a


prompt and timely manner, any Party may call for arbitration under Article 24.1


above.


24.8 Each Party to a dispute shall pay its own counsel and other costs; however, costs of


the arbitration tribunal shall be allocated in accordance with the decision of the


tribunal. The costs and fees of the Sole Expert shall be borne equally by the Parties


to the dispute.


24.9 Any arbitration or Sole Expert proceeding pursuant to this Agreement shall be


conducted in accordance with the ICC Rules or the ICC Rules for Expertise (as


applicable) in effect on the date on which the proceeding is instituted.


24.10 In the event of a matter being referred for resolution under this Article 24; any


obligations of the Parties relating to such matter shall (unless otherwise provided


by this Agreement) be suspended, without liability to any Party, until said matter


has been resolved pursuant to this Article 24.


24.11 Neither the State and/or GNPC, on the one hand, and the Contractor, on the other


hand, shall be held liable to the other for any consequential, special, indirect or


Petroleum v water lane (MQE-GNPC/Tullow-Sabre) - April 2DQG 82


 punitive damages (including loss of profit or loss of production) arising directly or





indirectly out of or in relation or in connection to this Agreement, regardless of



























































































































































PBtroleum Agreement far Shallow water Tano (MQE-GNPC/Tullow-Sabre) - April 2QQ6 83


 ARTICLE 25








ASSIGNMENT





25.1 This Agreement shall not be assigned by any or all of the companies comprising


Contractor directly or indirectly in whole or in part, without the prior written consent


of GNPC, and the Minister, which consent shall not be unreasonably withheld or


delayed.


25.2 Any assignment of this Agreement shall bind the assignee as a Party to this


Agreement to all the terms and conditions hereof unless otherwise agreed and as a


condition to any assignment Contractor shall provide an unconditional undertaking


by the assignee to assume all obligations assigned by Contractor under this


Agreement.


25.3 Where in consequence of an assignment hereunder Contractor is more than one


person:


a) any operating or other agreement made between the persons who constitute


contractor and relating to the Petroleum Operations hereunder shall be disclosed


to GNPC and the Minister and shall not be inconsistent with the provisions of


this Agreement;


b) no change in the scope of the Petroleum Operations may take place without the


prior approval in writing of GNPC, which approval shall not be unreasonably


delayed or withheld; and


c) the duties and obligations of Contractor hereunder shall be joint and several


except those relating to the payment of income tax pursuant to Article 12 which


shall be the several obligation of each such person.


25.4 GNPC's acquisition of Additional Interest under Article 2 or a Sole Risk Interest


pursuant to Article 9 shall not be deemed to be an assignment within the meaning of


this Article.








Petroleum Agreement for Shallow water Tann CMDE-GNPC/Tullow-Sabrs) - Apnl 200B





 ARTICLE 26








MISCELLANEOUS





26.1 This Agreement and the relationship between the State and GNPC on one hand and


Contractor on the other shall be governed by and construed in accordance with the


laws of the Republic of Ghana consistent with such rules of international law as may


be applicable, including rules and principles as have been applied by international


tribunals.


26.2 The State, its departments and agencies, shall support this Agreement and shall take


no action which prevents or impedes the due exercise and performance of rights and


obligations of the Parties hereunder. As of the Effective Date of this Agreement and


throughout its Term, the State guarantees Contractor the stability of the terms and


conditions of this Agreement as well as the fiscal and contractual framework hereof


specifically including those terms and conditions and that framework that arc based


upon or subject to the provisions of the laws and regulations of Ghana (and any


interpretations thereof) including, without limitation, the Petroleum Income Tax


Law, the Petroleum Law, the GNPC Law and those other laws, regulations and


decrees that are applicable hereto.


26.3 This Agreement and the rights and obligations specified herein may not be modified,


amended, altered or supplemented except upon the execution and delivery of a


written agreement executed by the Parties. Any legislative or administrative act of


the State or any of its agencies or subdivisions which purports to vary any such right


or obligation shall, to the extent sought to be applied to this Agreement constitute a


breach of this Agreement by the State; provided, however, where a new income tax


rate comes into force as a result of the promulgation of the new Petroleum Income


Tax Law currently before Cabinet, Contractor shall have the option of either


applying the new income tax rate to this Petroleum Agreement or remaining under


the Petroleum Income Tax Law, 1987, PNDC Law 188.


26.4 Where a Party considers that a significant change in the circumstances prevailing at


the time the Agreement was entered into, has occurred affecting the economic


balance of the Agreement, the Party affected hereby shall notify die other Parlies in


writing of the claimed change with a statement of how the claimed change has


"* ted the relations between the Parties.











Petroleum Agreement for Shallow water Tann (MQE-ENPC/Tullow-Sabre) - April ZOQB 85


04^


A


26.5 The other Parties shall indicate in writing their reaction to such representation within


a period of three (3) Months of receipt of such notification and if such significant


changes are established by the Parties to have occurred, the Parties shall meet to


engage in negotiations and shall effect such changes in, or rectification of, these


provisions as they may agree are necessary to restore the relative economic position


of the Parties at the date of this Agreement.


26.6 No waiver by any Party of any of its rights hereunder shall be construed or implied,


but shall be binding on such Party only if made specifically, expressly and in writing.


26.7 Except for payment obligations arising under the Petroleum Income Tax Law, any


Party failing to pay any amounts payable by it under this Agreement (including the


provisions of Annex 2) on the respective dates on which such amounts are payable


by such Party hereunder shall be obligated to pay interest on such unpaid amounts to


the Party to which such amounts are payable. The rate of such interest with respect


to each day of delay during the period of such nonpayment shall be the Specified


Rate. Such interest shall accrue from the respective dates such amounts are payable


until the amounts are duly paid. The Party to whom any such amount is payable may


give notice of non-payment to the Party in default and if such amount is not paid


within fifteen (15) days after such notice, the Party to which the amount is owed


may, in addition to the interest referred to above, and without prejudice to Article


10.1 (e) seek remedies available pursuant to Article 24.


26.8 A) The rights and obligations under this Agreement of the State and GNPC on


the one hand and Contractor on the other shall be separate and proportional


and not joint. This Agreement shall not be construed as creating a partnership


or joint venture, nor an association or trust (under any law other than the


Petroleum Law), or as authorising any Party to act as agent, servant or


employee for any other Party for any purpose whatsoever except as provided


in Article 10.4.


B) The duties and obligations of each Party constituting Contractor hereunder


shall be joint and several and it is recognised that each such Party shall own


and be responsible for its undivided interest in the rights and obligations of


Contractor hereunder; provided, however, that the following payments shall


be the separate obligation of and shall be made by each Party which


constitutes the Contractor:





i) Payments under the Petroleum Income Tax Law;





ii) Payments of Royalty taken in cash under the provisions of Article 10.1


3$);and





Petroleum Agreement fnrSnallow water Tano (MOE-GNPC/Tullnw-Sabra) - April 2DDG 86








 iii) AOE share under the provisions of Article 10.1 (b).








C) Each Party warrants that it and its Affiliates have not made, offered, or


• authorized and will not make, offer, or authorize with respect to the matters


which are the subject of this Agreement, any payment, gift, promise or


other advantage, whether directly or through any other person or entity, to


or for the use or benefit of any public official (i.e., any person holding a


legislative, administrative or judicial office, including any person employed


by or acting on behalf of a public agency, a public enterprise or a public


international organization) or any political party or political party official or


candidate for office, where such payment, gift, promise or advantage would


violate (i) the applicable laws of Ghana; (ii) the laws of the-country of


incorporation of such Party or such Party’s ultimate parent company and of


the principal place of business of such ultimate parent company; or (iii) the


principles described in the Convention on Combating Bribery of Foreign


Public Officials in International Business Transactions, signed in Paris on


December 17, 1997, which entered into force on February 15, 1999, and the


Convention’s Commentaries. Each Party shall defend, indemnify and hold


the other Parties harmless from and against any and all claims, damages,


losses, penalties, costs and expenses arising from or related to, any breach


by such first Party of such warranty. Such indemnity obligation shall


survive termination or expiration of this Agreement. Each Party shall in


good time (i) respond in reasonable detail to any notice from any other


Party reasonably connected with the above-stated warranty; and (ii) furnish


applicable documentary support for such response upon request from such


other Party.


D) This Agreement shall not take effect unless and until it is ratified by the





Parliament of Ghana and this Agreement has been executed by the parties


^^ftjch ever occurs later (the “Effective Date”).



































Petroleum Agreement fur Shallow water Tano (MOE-GNPC/Tullow-Sabre) - April 2006 87








 ARTICLE 27








NOTICE


27 Any Notice, Application, Requests, Agreements, Consent, Approval, Instruction,


Delegation, Waiver or other communication required or permitted to be given


hereunder shall be in writing and shall be deemed to have been properly given when


delivered in person to an authorised representative of the Party to whom such notice


is directed or when actually received by such Party through registered mail, facsimile


or telegram at the following address or at such other address as the Party shall


specify in writing fifteen (15) days in advance:


FOR THE STATE:


MINISTER FOR ENERGY


MINISTRY OF ENERGY


PRIVATE MAIL BAG


MINISTRY POST OFFICE


ACCRA, GHANA


Telephone: 233 21 667151 - 3


Telefax: 233 21 668262








FOR GHANA NATIONAL PETROLEUM CORPORATION:


THE MANAGING DIRECTOR


GHANA NATIONAL PETROLEUM CORPORATION


PETROLEUM HOUSE


HARBOUR ROAD


PRIVATE MAIL BAG


TEMA


GHANA





Telephone: 233-22-204726


Telefax: 233-22-205449

















Petroleum Agreement For Shallow water Tano (MOE-GKPC/TullowSahre) - April 2006 88





 FOR CONTRACTOR:





EXFLORA TIONMANA GER


TULLOWGHANA LIMITED


P. O. BOX 532


CHANNEL HOUSE


7 ESPLANADE


ST HEUER


JERSEY


CHANNEL ISLANDS





JE4 5UW





Telephone: + 3531 737 700





Telefax-. + 3531 239 0400














MANAGING DIRECTOR


SABRE OIL AND GAS LIMITED


RUBISLAW PLACE


ABERDEEN


AB101XN








Telephone: + 44 1244 649 400


Telefax: + 44 1244 649 700


















































Petroleum Agreement for Shallow waterTano (MQE-GNPC/Tullnw-Sabre) - April 2006 89


 IN WITNESS WHEREOF the parties have caused this agreement to be executed by


their duly authorized representatives as of the date first written above.





FOR THE STATE















































FOR GHANA NATIONAL PETROLEUM CORPORATION


Witnessed:











By: ~





of-


Its.





Date........, ft^l! . Date...............









































Petroleum Agreement for Shallow water Tano (MOE-GNPC/Tullow-Sabre) - April 2006 90





 FOR TULLOW GHANA LIMITED


Witnessed:




















Da ......... Date..^.,......









































Date,...........















































Petroleum Agreement for Shallow watBr Tano (MDE-GNPC/Tultow-Sabre) - April 20QS 91








 Annexes















































Petroleum Agreement for Shallow water Tano (MQE-GNPC/Tullnw-Sabre) - April 2DQ8


 ANNEX 1 - CONTRACT AREA











The Contract Area is bounded to the North, starting at point “A” at the Ghana-Ivory Coast


border at Latitude 5° 05’ 51.02” N and Longitude 3° 06’ 15.92” W; thence proceed south


east along the coastline to point “B” at Latitude 5° 03’ 09.00” N and Longitude 2° 55’


00.00” W; thence proceed south to point “C” at Latitude 4° 40’ 00.00” N and Longitude 2°


55’ 00.00” W; thence proceed Northward to point “D” at the Ghana Ivory Coast border at


Latitude 4° 47’ 34.874” N and Longitude 3° 10’ 35.296” W; thence proceed North along


the Ghana Ivory Coast border to the beginning of Point “A” resulting in an area comprising


of approximately nine hundred and eighty-three (983) square kilometers.


The Contract Area is designated by the coordinates of the following point as shown in


Table I and the area covered by the A, B, C and D as indicated on the map on the following


page.


The Contract Area includes part of designated blocks 2/18,3/13, 8/5, 8/6 and 9/1.
























































Petroleum Agreement for Shallow water TanD (MOE-GNPC/Tullow-Sabre) - April 2QQ6





r


 CONTRACT AREA PLAT





































































































Table 1











Point Latitude Longitude


A 5° 05’ 51.02” N 3° 06' 15.92” W


B 5° 03’ 09.00” N 2C 55' 00.00" W


C 4° 40’ 00.00” N 2° 55" 00.00” W


D 4° 47’ 34.874” N 3° 10’ 35.296” W






































Petroleum Agreement for Shaft* water Tanc (MQE-GNPC/Tullow-Saore) - April 2006











ANNEX 2 - ACCOUNTING GUIDE











The purpose of this Accounting Guide is to establish equitable methods as between the


Parties for determining charges and credits applicable to operations under the Agreement


Principles established by this Accounting Guide shall truly reflect the Contractor's actual











































































































Petroleum Agreement for Shallow water Tano (MDE-GNPC/Tullow-Sabre) - April 2006 3


/Vi^





 SECTION 1








U GENERAL PROVISIONS


1.1.1 Words and terms appearing in this Annex shall have the same meaning as in





the Agreement and to that end shall be defined in accordance with Article 1


of the Agreement A reference to an Article in this Annex shall, unless


otherwise indicated, refer to an Article in the Agreement.





1.1.2 This Annex may be amended by written agreement upon a unanimous


decision of the JMC.


i


1.1.3 In the event of a conflict between the provisions of the Accounting Guide


and the provisions of the Agreement, the provisions of the Agreement shall


prevail.





1.2 STATEMENTS REQUIRED TO BE SUBMITTED BY CONTRACTOR





1.2.1 Within sixty (60) days from the Effective Date, Contractor shall propose to


GNPC an outline of the chart of accounts, operating records and reports to be


prepared and maintained, which shall describe the basis of the accounting


principles and procedures to be used during the term of the Agreement, and


shall be consistent with normal practice of the international petroleum


industry and Article 18.2.





1.2.2 Within ninety (90) days of the receipt of such proposal GNPC shall either


accept it or request such revisions as GNPC deems necessary. Failure to


notify Contractor of any requested revisions within a ninety (90) day period


shall be deemed acceptance of such proposal.


1.2.3 Within one hundred and eighty (180) days from the Effective Date, the





parties shall either agree on such outline or submit any outstanding issue for


determination by a Sole Expert pursuant to the provisions of Article 24.





1.2.4 Following agreement over the outline Contractor shall prepare and submit to


GNPC formal copies of the chart of accounts relating to the accounting,


recording and reporting functions listed in such outline. Contractor shall


also permit GNPC to inspect its manuals and to review all procedures which


are to be followed under the Agreement.


5F?^^\ater Tano (MOE-GNPC/Tullow-Sabre) - April 2006 4


Petroleum Agreement


 Without prejudice to the generality of the foregoing, Contractor shall make


separate statements relating to Petroleum Operations for each Development


and Production Area as follows:





a) Cash Call Statement (see Section 5)


b) Production Statement (see Section 6)


c) Value of Production Statement (see Section 7)


d) Cost Statement (see Section 8)


e) Statement of Expenditures and Receipts (see Section 9)


f) Final End-of-Year Statement (see Section 10)


g) Budget Statement (see Section 11)


h) Long Range Plan and Forecast (see Section 12)





1.3 LANGUAGE, MEASUREMENT, AND UNITS OF ACCOUNTS





1.3.1 The U.S. Dollar being the currency unit for investments and compensation


hereunder shall therefore be the unit of currency for all bookkeeping and


reporting under the Agreement. When transactions for an asset, capital item


or liability are in Ghana Cedis or currency other than the U.S. Dollar,


1.3.2 amounts in such other currency shall be immediately converted to U.S.


Dollars at the rate actually incurred and accounts required for the purposes of


this Agreement shall be maintained only in U.S. Dollars.


Measurement required under this Annex shall be in the metric system and





Barrels.


1.3.3 The English language shall be employed.





1.3.4 Where necessary for purposes of clarification, Contractor may also prepare


financial reports in other languages, units of measurement and currencies.


1.3.5 It is the intent of the Parties that no Party shall experience any gain or loss at


the expense of or to the benefit of the other as a result of exchange of


currency. Where any such currency exchange gain or loss arises it shall be


1.3.6 charged or credited to the accounts under the Agreement.


The rate of exchange for the conversion of currency shall be the rate actually


incurred in the purchase or sale of currencies required in Petroleum


tions as allowed under the laws of Ghana.








Petroleum Agreement for Shallow water Tano (MOE-GNPC/Tullow-Sabre) - April 20QG s


C[/v&$C


 1.3.7 To translate revenue received and expenditures made in Ghana Cedis or in





U.S. Dollars, the average of the preceding month’s rate between the


currencies shall be used.


















































































































































Petroleum Agreement for Shallow water Tano (MQE*GNPC/Tullow-Sflbre) - April 20QB 6








Ar^








t





 SECTION 2








2.0 CLASSIFICATION AND ALLOTMENT OF COSTS AND


EXPENDITURE








2.1 ALL EXPENDITURE RELATING TO PETROLEUM OPERATIONS


SHALL BE CLASSIFIED, AS FOLLOWS:





a) Exploration Expenditure;


b) Development Expenditure;


c) Production Expenditure;


d) Service Costs; and


e) General and Administrative expenses


and shall be defined and allotted as herein below provided.


2.2 EXPLORATION EXPENDITURE


Exploration Expenditure shall consist of all direct, indirect and allotted costs


incurred in Exploration Operations, in the search for Petroleum in the Contract


Area, including but not limited to expenditure on:





a) aerial, geographical, geochemical, paleontological, geological, bathymetrical,


topographical and seismic surveys, and all relevant studies and their


interpretation;





b) borehole drilling and water well drilling;


c) labour, consumables, materials and services used in drilling wells with the





objective of finding new Petroleum reservoirs or for the purpose of


appraising of Petroleum reservoirs already discovered, provided such wells


are not completed as producing wells save such wells temporarily abandoned


for future use as producing wells;





d) facilities used solely for Exploration Operations, including access roads,


where applicable, and purchased geological and geophysical information;





e) all service costs allotted to the Exploration Operations on an equitable basis;


Petroleum Agreement for Shallow water Tano (MUE-GNPC/Tullow-Sabre) - April 2DDB





k





 f) all General and Administrative Expenses allotted to Exploration Operations


based on the percentage share of projected budget expenditure which will be


adjusted to actual expenditure at the end of each year.


All of the above costs in connection with or related to an Appraisal Programme.








2.3 DEVELOPMENT EXPENDITURE


Development Expenditure shall consist of all expenditure incurred in Development


Operations, including but not limited to expenditure on:


a) drilling wells which are completed as producing wells and drilling wells for


purposes of producing a Petroleum reservoir already discovered, whether


these wells are dry or producing;


b) tangible drilling costs for completing wells such as installation of casing or


equipment or otherwise equipping a well after it has been drilled for the


purpose of bringing such well into use as a producing well;


c) intangible drilling costs such as labour, consumable material and services


having no salvage value which are incurred in drilling and deepening of wells


for producing purposes;


d) field facilities such as pipelines, flow lines, production and treatment units,


wellhead equipment, subsurface equipment, enhanced recovery systems,


offshore platforms and production facilities, Petroleum storage facilities


(whether offshore or onshore) and access roads for Production Operations;


e) engineering and design studies for field facilities;


f) all service costs allotted to Development Operations on an equitable basis;


g) all General and Administrative Expenses (incurred within or outside Ghana)


allocated to Development Operations based on the percentage share of


projected budget expenditure which will be adjusted to actual expenditure as


the end of the year.








Petroleum Agreement for Shallow water Tano (MDE-GNPC/Tullow-Sabre) - April 2DQG 8





2.4 PRODUCTION EXPENDITURE





Production Expenditure shall consist of but not be limited to all expenditure


incurred in Petroleum Operations, including appropriate abandonment charges,


after the Date of Commencement of Commercial Production, such expenditure


being other than Exploration Expenditure, Development Expenditure, General and


Administrative Expenses and Service Costs. The balance of General and


Administrative Expenses and Service Costs not allocated to Exploration


Operations or to Development Operations under Section 2.2 and 2.3 shall be


allocated to Production Expenditure.








2.5 SERVICE COSTS


2.5.1 Service Costs shall consist of but not be limited to all direct and indirect


expenditure incurred in support of Petroleum Operations (within and / or


outside the Republic of Ghana), including (but not limited to) the


construction, installation, purchase, hire or charter (as applicable) of the


following: of warehouses, piers, marine vessels, vehicles, motorised


rolling equipment, aircraft, fire security stations, workshops, water and


sewerage plants, power plants, offices, housing, community and


recreational facilities and furniture, fixtures, tools, land and equipment


used in such construction or installation.


Service Costs in any Calendar Year shall include the total costs incurred in


such year to purchase and construct or install such facilities as well as the


annual costs of maintaining and operating such facilities.


2.5.2 All Service Costs will be regularly allotted on an equitable basis to


Exploration Expenditure, Development Expenditure and Production


Expenditure.


2.6 GENERAL AND ADMINISTRATIVE EXPENSES


General and Administrative Expenses shall consist of:


2.6.1 All main office, field and general administrative costs, benefiting


Petroleum Operations the Republic of Ghana), including but not limited to


Petroleum Agreement for Shallow water lano (MQE-GNPC/Tullaw-Sabre) - April 2006 9


 supervisory, technical, accounting, financial, legal and employee relations


services;





2.6.2 An overhead charge for the actual unallocated cost of services rendered


outside the Republic of Ghana by Contractor or its Affiliates for managing





Petroleum Operations and for staff advice and assistance, including but not


limited to financial, legal, accounting and employee relations services.


Such overhead charges shall be allocated at a rate equivalent to the


following percentages of the total costs attributable to Petroleum


Operations as follows:





For the Exploration Phase:


U.S. Dollars 0-20 Million


One Point Two Five Percent (l'.25%)


U.S. Dollars 20-25 Million One Percent (1%)


U.S. Dollars 25 Million and above Zero Point Five Percent (0.5%)


For the Development Phase:





U.S. Dollars 0-50 Million One Point Two Five Percent (1.25%)


U.S. Dollars 50- 100 Million One Percent (1.00%)


U.S. Dollars 100 - 500 Million Zero Point Five Percent (0.5%)


U.S. Dollars 500 Million and above A Lumpsum of not less than U.S. Dollars


Two Point Five Million (USS2.5 Million)





2.6.3 All General and Administrative Expenses will be regularly allocated as


specified in subsections 2.2 (f), 2.3 (g) and 2.4 to Exploration Expenditure,


Development Expenditure and Production Expenditure.


3A





















































Petroleum Agreement for Shallow water Tano (MQE-GNPC/Tullow-Sabre) - April 20DG 10








 SECTION 3











3.0 COSTS, EXPENSES, EXPENDITURES AND CREDITS OF


CONTRACTOR








3.1 CONTRACTOR FOR THE PURPOSE OF THIS AGREEMENT SHALL


CHARGE THE FOLLOWING ALLOWABLE COSTS TO THE


ACCOUNTS:


a) costs of acquiring surface rights;


b) labour and associated costs;


c) transportation costs;


d) charges for services;


e) material costs;


f) rentals, duties and other assessments;


g) insurance and losses;


h) legal expenses;


i) training expenses;


j) general and administrative expenses;


k) utility costs;


l) office facility charges;


m) communication charges;


n) ecological and environmental charges;


o) abandonment cost; and


p) such other costs necessary for the Petroleum Operations


3.2 COST OF ACQUIRING SURFACE RIGHTS AND RELINQUISHMENT


Cost of acquiring surface rights shall consist of all direct costs attributable to the


acquisition, renewal or relinquishment of surface rights acquired and maintained in


^forc^over the Contract Area.











Petroleum Agreement for Shallow water Tano (MOE-GNPC/Tullow-Sabre) - April 2006 11


LABOUR AND ASSOCIATED LABOUR COSTS


_ Labour and associated labour costs shall include but not be limited to:


a) gross salaries and wages including bonuses of those employees of Contractor


and of its Affiliates engaged in Petroleum Operations who are permanently or


temporarily assigned to Ghana;


b) costs regarding holidays, vacation, sickness and disability payments


applicable to the salaries and wages chargeable under (a);


c) expenses or contributions made pursuant to assessments or obligations


imposed under the laws of the Republic of Ghana which are applicable to


cost of salaries and wages chargeable under (a);


- d) cost of established plans for employees* life insurance, hospitalisation,


pensions and other benefits of a like nature customarily granted to


employees; and


e) reasonable travel and personal expenses of employees and families, including


those made for travel and relocation of the personnel, all of which shall be in


accordance with usual practice of the Contractor.


1.4 TRANSPORTATION COSTS


Transportation costs and other related costs of transportation of employees,


equipment, materials and supplies necessary for the conduct of Petroleum


_ Operations.





3.5 CHARGES FOR SERVICES





3.5.1 Charges for services shall include:





a) actual costs under third party contracts for technical and all other


services entered into by Contractor for Petroleum Operations made


with third parties other than Affiliates of Contractor, provided that the


prices paid by Contractor are no higher than the prevailing rates for


such services in the regional (Gulf of Guinea) market;





Petroleum AgreemSrit for SRallnw water Tano (MDE-GNPC/Tullow-Sabre) - April 20D6 12


 b) cost of technical and other services of personnel assigned by the


Contractor and its Affiliates when performing management,


engineering, geological, geophysical, operations, technical,


administrative, legal, accounting, treasury, tax, employee relations,


computer services, purchasing, and all other functions for the direct


benefit of Petroleum Operations;





c) cost of general services, including, but not without limitation,


professional consultants and others who perform services for the direct


benefit of Petroleum Operations.


3.5.2 Services furnished by Contractor and its Affiliates shall be charged at rates


commensurate with those currently prevailing for such services in the regional


(Gulf of Guinea) market








3.6 RENTALS, DUTIES AND OTHER ASSESSMENTS


All rentals, taxes, duties, levies, charges, fees, contributions and any other assessments


and charges levied by the Government in connection with Petroleum Operations or


paid for the benefit of Petroleum Operations, with the exception of the income tax


specified in the Article 12.2 (ii).








.7 INSURANCE AND LOSSES


a) Insurance premia and costs incurred for insurance, provided that if such


insurance is wholly or partly placed with an Affiliate of Contractor, such premia


and costs shall be recoverable only to the extent not in excess of those generally


charged by competitive insurance companies other than Affiliate;





b) costs and losses incurred as a consequence of events, which are, insofar as not


made good by insurance, allowable under 17 of the Agreement; and


c) Costs or expenses necessary for the repair or replacement of property resulting





from damage or losses incurred.








.8 LEGAL EXPENSES


All costs and expenses of litigation, arbitration, mediation and legal or related services


necessary or expedient for the procuring, perfecting, retaining and protecting the


rights hereunder and in defending or prosecuting lawsuits involving the Contract Area


or any third party claim arising out of activities under the Agreement, or sums paid in


respect of legal services necessary or expedient for the protection of the joint interest


Petra1 . mem forShallow water Tana (MOE-BHPC/Tullaw-Sabre) - April 20QB 13


ww


A'*-'





 of GNPC and Contractor, provided that where legal services are rendered in such


matters by salaried or regularly retained lawyers of Contractor or an Affiliate of


Contractor, such compensation will be included instead under either Section 3.3 or


3.5, as applicable.


M



































































































































Petroleum Agreement for Shallow water Tano (MOE-GNPC/Tullow-Sabre) - April 2DDG


riAA&&'


3.9 TRAINING COSTS


All costs and expenses incurred by Contractor in training of its employees and


nominees of GNPC to the extent that such training is attributable to Petroleum


Operations under the Agreement, including, without limitation, the amounts referred


to in Article 21.1.


3.10 GENERAL AND ADMINISTRATIVE EXPENSES


General and Administrative Expenses shall consist of the costs described in


Subsection 2.6.1 and the charge described in Subsection 2.6.2.


3.11 UTILITY COSTS


Any water, electricity, heating, fuel or other energy and utility costs used and


consumed for the Petroleum Operations.








3.12 OFFICE FACILITY CHARGES


The cost and expenses of constructing, establishing, maintaining and operating


offices, camps, housing and any other facilities necessary to the conduct of


Petroleum Operations. The cost of constructing or otherwise establishing any


operating facility which may be used at any time in operations of more than one


Development and Production Area shall be charged initially to the Development


and Production Area for which the facility is first used. Costs incurred thereafter


shall be allocated in a reasonable manner, consistent with generally accepted


international petroleum industry accounting practice, to the Development and


Production Area for which the facility is used.


3.13 COMMUNICATION CHARGES


The costs of acquiring, leading, installing, operating, repairing and maintaining


communication systems, including radio and microwave facilities.


3.14 ECOLOGICAL AND ENVIRONMENTAL CHARGES


All charges for environmental protection and safety measures conducted in the


Contract Area including, without limitation, those incurred in accordance with


1 i 17 of the Agreement.








Petroleum Agreement for Shallow water Tano (MOE-GNPC/Tullow-Sabre) - April 2008 15


C\Aa&@(


3.15 ABANDONMENT COST


Cost relating to the decommissioning and abandonment of Petroleum Operations


and facilities, site restoration and other associated operations pursuant to Article


12.10.








3.16 OTHER COSTS


Any other costs not covered or dealt with in the foregoing provisions which are


incurred and not mentioned in Section 3.17 for the necessary and proper conduct


of Petroleum Operations.





3.17 COSTS NOT ALLOWABLE UNDER THE AGREEMENT


The following costs shall not be allowable under the Agreement:


a) charitable donations and contributions, except where prior approval has been


obtained from GNPC;


b) interest incurred on loans raised by the Contractor, provided that it shall be





deductible for income tax purposes pursuant to the Petroleum Income Tax


Law;


c) petroleum marketing costs or costs of transporting petroleum beyond the





Delivery Point;


d) the costs of any Bank Guarantee under the Agreement and any other amounts


spent on indemnities with regard to nonfulfilment of contractual obligations;


e) premium paid as a result of GNPC exercising a Sole Risk option under Article


9 of this Agreement;


f) cost of arbitration under Article 24 of the Agreement or dispute settlement by


any independent expert under the terms of the Agreement;


g) final and unappealable fines and penalties imposed by a competent Court of





Law;





h) cost incurred as a result of Contractor’s Gross Negligence chargeable to


Contractor or the Operator under the terms of the Agreement.





16


3.18 ALLOWABLE AND DEDUCTIBILITY


The costs and expenses set forth herein shall be for the purpose of determining


s allowable or non-allowable costs and expenses only and shall have no bearing on


Contractor’s eligibility or otherwise for deductions in computing Contractor’s net


income from Petroleum Operations for income tax purposes or for purposes of


Article 10 under the Agreement.





3.19 CREDITS UNDER THE AGREEMENT


The net proceeds of the following transactions will be credited to the accounts


under the Agreement:





a) the net proceeds of any insurance or claim in connection with Petroleum


Operations or any assets charged to the accounts under the Agreements when


such operations or assets were insured and the premia charged to the accounts


under the Agreement;


b) revenue received from third parties for the use of property or assets charged





to the accounts under this Agreement;


c) any adjustment from the suppliers or manufacturers or their agents in


connection with a defective equipment or material the cost of which was


previously charged to the account under the Agreement;


d) the proceeds received for inventory materials previously charged to the


account under the Agreement and subsequently exported from the Republic


of Ghana or transferred or sold to third parties without being used in the


Petroleum Operations;


e) rentals, refunds or other credits received which apply to any charge which has


been made to the account under the Agreement, but excluding any award


granted under arbitration or sole expert proceedings;


f) the proceeds from the sale or exchange of plant or facilities from the





Development and Production Area or plant or facilities the acquisition costs


of which have been deducted in the AOE computation under Article lOfor


the relevant Development and Production Area;





g) the proceeds derived from the sale or issue of any intellectual property the


development costs of which were incurred pursuant to this Agreement; and








Petroleum Agreement for Shallow water Tano (MQE-GNPC/Tullow-Sabre) - April 200E 17





 h) the proceeds from the sale of any petroleum information derived from


Petroleum Operations under this Agreement.








3.20 DUPLICATION OF CHARGES AND CREDITS


Notwithstanding any provision to the contrary in this Annex, it is the intention that


there shall be no duplication of charges or credits in the accounts under the


Agreement.

















































































































Petroleum Agreement for Shallow water Tano (MOE-GNPC/Tullow-SabrE) - April 2DDG 18


 SECTION 4








4.0 MATERIAL








4.1 VALUE OF MATERIAL CHARGED TO THE ACCOUNTS UNDER THE


AGREEMENT


Material purchased, leased or rented by Contractor for use in Petroleum Operations


shall be valued at the actual net cost incurred by Contractor. The net cost shall


include invoice price less trade and cash discounts, if any, ’purchase and


procurement fees plus freight and forwarding charges between point of supply and


point of shipment, freight to port of destination and to point of usage or


installation, including but not limited to, insurance, taxes, customs duties, consular


fees, other costs incurred on such material, and any other related costs actually


paid.


4.2 VALUE OF MATERIAL PURCHASED FROM AN AFFILIATE


Contractor shall notify GNPC of any goods supplied by an Affiliate of Contractor.


Materials purchased from Affiliate of Contractor shall be charged at the prices


specified in Sections 4.2.1,4.2.2 and 4.2.3.


4.2.1 New Material (Condition UA”1


New material shall be classified as Condition “A”. Such material shall be


valued at the prevailing market price, plus expenses incurred in procuring


such new materials, and in moving such materials to the locations where


the material shall be used.


4.2.2 Used Material (Condition “B”)


Used material shall be classified as Condition “B” provided that it is in


sound and serviceable condition and is suitable for reuse without


reconditioning. Such material shall be valued at not more than seventy


five percent (75%) of the current price of new material valued according


to Section 4.2.1 above.








Petroleum Agreement for Shallow water Tano (MQE-GNPC/Tullow-Sabre) - April 2QDG 19





At*'"'


 4.2.3 Used Material (Condition UC”)





Used material which is serviceable for original function as good second


hand material after reconditioning and cannot be classified as Condition


“B” shall be classified as Condition “C”. Such material shall be valued at


not more than fifty percent (50%) of the current price of new material


valued according to Section 4.2.1 above. The cost of reconditioning shall


be charged to the reconditioned material provided that that the value of


such Condition “C” material plus the cost of reconditioning does not


exceed the value of Condition “B” material.





43 CLASSIFICATION OF MATERIALS


Material costs shall be charged to the respective Exploration Expenditure,


Development Expenditure, Operating Expenditure accounts at the time the


material is acquired and on the basis of the intended use of the material. Should


such material subsequently be used other than as intended, the relevant charge will


be transferred to the appropriate account.


4.4 DISPOSAL OF MATERIALS


Sales of property shall be recorded at the net amount collected by the Contractor


from the purchaser.


4.5 WARRANTY OF MATERIALS


In the case of defective material or equipment, any adjustment received by


Contractor from the suppliers or manufacturers of such materials or their agents will


be credited to the accounts under the Agreement. Contractor does not warrant any


material.


4.6 CONTROLLABLE MATERIALS


4.6.1 The Contractor shall control the acquisition, location, storage and


disposition of materials which are subject to accounting record control,


physical inventory and adjustment for overages and shortages (hereinafter


referred to as Controllable Material).


4.6.2 Unless additional inventories are scheduled by the JMC, Contractor shall


conduct one physical inventory of the Controllable Material each Calendar


Year which shall be completed prior to the end of each such year. The


Petroleum Agreemen rater Tana (MOE-GNPC/Iullow-Sabre) - April 2DDG 2 0


 Contractor shall conduct said inventory on a date to be approved by the


JMC. Failure on the part of GNPC to participate in a JMC schedule or


approved physical inventory shall be regarded as approval of the results of


the physical inventory as conducted by the Contractor.





4.6.3 The gain or loss resulting from the physical inventory shall be reflected in





the stock records of Controllable Materials. The Contractor shall compile


a reconciliation of the inventory with a reasonable explanation for such


gains or losses. Failure on the part of GNPC to object to Contractor’s


reconciliation within thirty (30) days of compilation of said reconciliation


shall be regarded as approval by GNPC.



















































































Petroleum Agreement for Shallow water Tano (MQE-GNPC/Tullow-Sabre) - April 2QQB 21


Oa


 SECTION 5











5.0 CASH CALL STATEMENT


5.1 In respect of any Petroleum Costs to which GNPC is contributing as provided in


Article 2 and in any case where Contractor conducts Sole Risk Operations for


GNPC's account, Contractor shall at least fifteen (15) days prior to the


commencement of any Month submit a Cash Call Statement to GNPC for its share of


Petroleum Costs. Such Cash Call Statement shall include the following


information:


a) Due Date;


b) Payment Instructions;


c) The balance prior to the Cash Call being issued;


d) Amount of US Dollars due; and


e) An estimation of the amounts of US Dollars required from GNPC for the


following Month.





5.2 Not later than the twenty-fifth (25th ) day of each Month, Contractor will furnish


GNPC a statement reflecting for the previous Month:


a) Payments;


b) The nature of such payments by appropriate classifications; and


c) The balance due to or from GNPC.


5.3 Contractor may in the case where a large unforeseen expenditure becomes necessary


issue a special Cash Call Statement requiring GNPC to meet such Cash Call within


ten (10) days of receipt of such Statement.





























Petroleum Agreement for Shallow water Tano (MOE-GNPC/Tullow-Sabre) - April 20Q6 22


 SECTION 6








6.0 PRODUCTION STATEMENT





6.1 Subsequent to the Date of Commencement of Commercial Production from the


Contract Area, Contractor shall submit a monthly Production Statement to GNPC


showing the following information for each Development and Production Area as


appropriate:


a) the quantity of Crude Oil produced and saved;


b) the quantity of Natural Gas produced and saved;


c) the quantities of Petroleum used for the purpose of conducting drilling and


Production Operations, pumping to field storage and reinjections;


d) the quantities of Natural Gas flared;


e) the size of Petroleum stocks held at the beginning of the Month;


f) the size of Petroleum stocks held at the end of the Month.





6.2 The Production Statement of each Calendar Month shall be submitted to GNPC not


later than ten (10) days after the end of such Month.


3\
































Petroleum Agreement for Shallow water Tano (MQE-GNPC/Tullow-Sabre) - April 2006 23





 SECTION 7








7.0 VALUE OF PRODUCTION STATEMENT


7. Contractor shall prepare a statement providing calculations of the value of Crude Oil


produced and saved during each Quarter based on the Market Price established


under Article 11 of the Agreement as well as the amounts of Crude Oil allocated to


each of the Parties during that Quarter. Such Statement shall be submitted to the


Minister and to GNPC not later than thirty (30) days following the determination,


notification and acceptance of the Market Price to GNPC according to Article 11 of


the Agreement.













































































Petroleum Agreement for Shallow water Tano (MQE-GNPC/Tullow-Sabre) - April 2006








n


 SECTION 8








8.0 COST STATEMENT








8.1 Contractor shall prepare with respect to each Quarter, a Cost Statement containing


the following information:


a) Total Petroleum Costs in previous Quarters, if any;


b) Petroleum Costs for the Quarter in question;


c) Total Petroleum Costs as of the end of the Quarter in question (subsection 8.1


(a) plus subsection 8.1 (b);


d) Petroleum Costs for Development Operations advanced in the Quarter in


respect of GNPC’s Participating Interest pursuant to Article 2 of the


Agreement;


e) Costs as specified in (d) above which have been recovered during the Quarter


pursuant to Article 10.1 (e) of the Agreement and the balance, if any, of such


costs unrecovered and carried forward for recovery in a later period.


Petroleum Costs for Exploration, Development and Production Operations as


detailed above shall be separately identified for each Development and Production


Area. Petroleum Costs for Exploration Operations not directly attributable to a


specific Development Area shall be shown separately.


8.2 The Cost Statement of each Quarter shall be submitted to GNPC no later than thirty


(301 days after the end of such Quarter.




















Petroleum Agreement for Shallow water Tano (MOE-GNPC/Tullow-Sabre) - April 2006 25


 SECTION 9








9.0 STATEMENT OF EXPENDITURES AND RECEIPTS


9.1 Subsequent to the Date of Commencement of Commercial Production from the


Contract Area, Contractor shall prepare with respect to each Quarter a Statement of


Expenditures and Receipts. The Statement will distinguish between Exploration


Expenditure and Development Expenditure and Production Expenditure and will


identify major items of expenditure within these categories. The statement will show


the following:


a) actual expenditures and receipts for the Quarter in question;


b) cumulative expenditure and receipts for the budget year in question;


c) latest forecast of cumulative expenditures at the year end; and


d) variations between budget forecast and latest forecast and explanations


therefor.


9.2 The Statement of Expenditures and Receipts of each calendar quarter shall be


submitted to GNPC not later than thirty (30) days after the end of such Quarter for


provisional approval by GNPC.


M
































Petroleum Agreement for Shallow water Tano (MQE-GNPC/Tullow-Sabre) - April 2QQB 26








 SECTION 10











10.0 FINAL END-OF-YEAR STATEMENT


10. The Contractor will prepare a Final End-of-Year Statement. The Statement


will contain information as provided in the Production Statement, Value of


Production Statements, Cost Statement and Statements of Expenditures and


Receipts, as appropriate. The Final End-of-year Statement of each Calendar


Year shall be submitted to GNPC within ninety (90) days of the end of such


Calendar Year. Any necessary subsequent adjustments shall be reported


promptly to GNPC.
















































































Petroleum Agreement for Shallow water Tano (MOE-GNPC/Tullow-Sabre) - April 2QDG 27


 SECTION 11








11.0 BUDGET STATEMENT


11.1 The Contractor shall prepare an annual budget Statement. This will distinguish


between Exploration Expenditure, Development Expenditure and Production


Expenditure and will show the following;


a) Forecast Expenditures and Receipts for the budget year under the Agreement;


b) cumulative Expenditures and Receipts to the end of said budget year, and


c) the most important individual items of Exploration, Development and


Production Expenditures for said budget year.


The budget may include a budget line or lines for unforeseen expenditures which,


however, shall not exceed ten percent (10%) of the total budgetary expenditure.


11.2 The Budget Statement shall be submitted to GNPC and JMC with respect to each


budget year no less than ninety (90) days before the start of such year except in the


case of the first year of the Agreement when the Budget Statement shall be


submitted within sixty (60) days of the Effective Date.


11.3 Where Contractor foresees that during the budget period expenditures have to be


made in excess of the ten percent (10%) pursuant to Section 11.1.1 hereof,


Contractor shall submit a revision of the budget to GNPC.





























Petroleum Agreement for Shallow water Tana (MDE-GNPC/Tullow-Sabre) - April 2006 28


rVw2&1


 SECTION 1 2








12.0 LONG RANGE PLAN AND FORECAST





12.1 Contractor shall prepare and submit to GNPC the following:





a) During the Exploration Period, an Appraisal and/or Exploration Plan for each


year commencing as of the Effective Date which shall contain the following


information:


i) Estimated Appraisal and/or Exploration Costs showing outlays for each


of the years or the number of years agreed and covered by the Plan;


ii) Details of seismic operations for each such year,





iii) Details of drilling activities planned for each such year;


iv) Details of infrastructure utilisation and requirements.





The Appraisal and/or Exploration Plan shall be revised on each anniversary


of the Effective Date. Contractor shall prepare and submit to GNPC the first


Appraisal and/or Exploration Plan for the Initial Exploration Period within


sixty (60) days after the Effective Date and thereafter shall prepare and


submit to GNPC no later than forty five (45) days before each anniversary of


the Effective Date a revised Appraisal and/or Exploration Plan.


In the event of a Development Plan being approved, the Contractor shall


prepare a Development Forecast for each Calendar Year of the Development


Period, which shall contain the following information:


i) forecast of capital expenditure portions of Development and Production


expenditures for each Calendar Year of the Development Period;


ii) forecast of operating costs for each Calendar Year;





iii) forecast of Petroleum production for each Calendar Year;








Petroleum Agreement for Shallow water Tano (MOE-GNPC/Tullow-Sabre) - April 2Q0B 29


iv) forecast of number and types of personnel employed in the Petroleum


Operations in the Republic of Ghana;


v) description of proposed Petroleum marketing arrangements;





vi) description of main technologies employed; and





vii) description of the working relationship of Contractor to GNPC.


c) The Development forecast shall be revised at the beginning of each Calendar





Year commencing as of the second year of the first Development forecast


Contractor shall prepare and submit to GNPC the first Development forecast


within one hundred and twenty (120) days of the date when the first


Development Plan is approved by the Minister and Contractor commences


the implementation of such plan and thereafter shall prepare and submit a


revised Development Forecast to GNPC no later than thirty (30) days before


each Calendar Year commencing as of the second year of the first


Development forecast.


12.2 CHANGES OF PLAN AND FORECAST





It is recognised by Contractor and GNPC that the details of the Appraisal and/or


Exploration Plan and Development forecast may require changes in the light of


existing circumstances and nothing herein contained shall limit the flexibility to


make such changes. Consistent with the foregoing the said Plan and Forecast may


be revised when appropriate. The Appraisal and/or Exploration Plan and


Development Forecast are for planning purposes only.


M









































Petroleum Agreement for Shallow water Tano (MOE-GHPC/lullow-Sabre) - April 20DB 30





ANNEX 3 - SAMPLE AOE CALCULATION





SAMPLE ADDITIONAL OIL ENTITLEMENT CALCULATION


This sample calculation has been prepared to illustrate the Additional Oil Entitlement


(AOE) provisions of Article 10 of the Petroleum Agreement to which this Annex 3 is


attached and made a part thereof. The assumptions used, year-by-year cash flows,


inflation rate, and resulting AOE payments are hypothetical only and are neither based


• t • K


upon nor do they represent an actual situation. They are designed to illustrate the


mechanics of each of the hypothetical AOE calculations only.


Sample AOE Calculation:


Contractor’s Revenues minus Income Taxes minus “Petroleum Costs”


Income Tax Rate: 35%


Petroleum Costs: Contractor’s Petroleum Costs including costs advanced on


GNPC’s behalf





Additional Oil Entitlement (AOE):


Discounted Cash Flow


Real Rate of Return (%*) AOE Rate (%)


19% or less 0%


Over 19% 5%





Over 20% 10%


Over 25% 15%


Over 30% 20%


Over 40% 25%


*Rate of Return exclusive of Inflation


M











Petroleum Agreement for Shallow water Tano (MOE-GNPC/Tullow-Sabre) - April 20DB 31








SAM PLE AOE CA LCUL ATION flVULLIOIS US DOLLARS)


rust MCF FAn©19 A Of 1 @ SAnftlO AOI2ft TAn©25 AOI 3 ft YAnft AOC4© ZAn@ AC* 5 ft Total AOC


%►* 3% %*.*. 10% p.a %p.* . 15% 30% »».•. 20% ^ 40% p.a. 25% Payment*


i -*2.0 424 420 410 42X5 42X1


3 -*15.0 4>74 *174 -*174 4177 417.9


3 •*150.0 -*171.7 4171.9 417-2.9 41719 4176X5


4 .*20.0 .*232-9 42340 42444 42544 4275.1


6 *10,0 -*278.8 4283.6 4308.2 -*333.9 -*388.9


6 *340.0' 45-7 414-4 4604 4110.8 42244


7 *220.0 , *213X1 *10.6 *1914 *19.) *1114 *16.7 *219 *44 41564 *514


a *200.0 52000 *1QX> *190X5 *19X5 *1714 *257 *1434 *29.1 4110.0 *817


9 *150.0 *150.0 *74 *1424 *144 *1284 *194 *109X1 $214 4712 *624


10 $100.6 *100.0 *5.0 *95.0 194 $834 *12.2 *727 *14.5 *466 *41.9


11 *65.0 *650 *3.3 *61.8 *6.2 *554 *8.3 *47.2 *94 4294 *27.2


12 *45X1 *45 *2.3 *424 *44 *384 *54 *327 *64 417.1 *184


13 *35 *35.0 *14 *33.3 *34 *29.9 *44 *254 *5.1 444 *147


14 $25.0 *25.0 *1J *234 *2-4 *21-4 *3.2 *184 *16 *8.2 S2.0 *124


13 *10.0 *10X1 too *0-5' *14 184 *14 *74 *14 *54 *14 *54


Total. *1013.0 *4U *79.0 *97.5 *96.4 *34 *3l*-5











1. Rates of return used above include annual inflation of 5%.


2. Year 7: AOE 1 = 0.05 * $213.0 MM (i.e. 0.05 times Cumulative Cash Flows compounded


annually at 19% p.a. + 5% inflation) = $10.6 MM.


3. Years 8 through 15: AOE 1 in nth year = nth Year FA * 0.05


4. Year 7: SA = -$14.4 MM * 1.25 + $220.0 MM - $10.6 MM = $191.3 MM


5. Year 7: AOE 2 = 0.10 * $191.3 MM (i.e. AOE Rate times Cumulative Cash Flow LESS AOE 1





compounded at 20% p.a. + 5% inflation) = $19.1 MM


6. Year 7: TA = -$60.6 MM * 1.30 + $220.0 MM - $10.6 MM - $19.1 MM = SI 11.4 MM


7. Year 7: AOE 3 = 0.15 * $111.4 MM (i.e. AOE Rate times Cumulative Cash Flow - AOE 1 -


AOE 2 compounded at 25% p.a. + 5% inflation) = $16.7 MM


8. Year 7: YA = -$110.8 MM * 1.35 + $220.0 MM - $10.6 MM - $19.1 MM - $16.7 = $23.9 MM


9. Year 7: AOE 4 = 0.20 * S23.9 MM (i.e. AOE Rate times Cumulative Cash Flow - AOE 1 - AOE





2 - AOE 3 compounded at 30% p.a. + 5% inflation) = S4.8 MM


10. Year 14: ZA = -S4.4 MM * 1.45 + $25.0 MM - $1.3 MM - $2.4 MM - $3.2 - S3.6 MM = 58.2


MM


11. Year 14: AOE 5 = 0.25 * $8.2 MM (i.e. AOE Rate times Cumulative Cash Flow - AOE 1 - AOE


2 - AOE 3 - AOE 4 compounded at 40% p.a. + 5% inflation) = S2.0 MM





Petroleum Agreement far Shallow waterlano (MOE-GNPC/Tullow-Sabrs) - April 21105 33