The exploration period shall consist of the 1st exploration period of 36 months and a second exploration period of 36 months commencing on the day next following the end of the first period or of its extension if the contractor elects to enter into one.
The development period starts on the day of the 1st commercial discovery of oil and continues for a period of 20 years development period.
The contractor (occidental, transglobe, the corporation) shall take all proper measures, according to generally accepted methods in the petroleum industry to prevent loss or waste of petroleum above or under the ground.
The ministry of oil and minerals has the right to prevent any operation on any well that it might reasonably expect would result in loss or damage.
Except when multiple producing reservoirs in the same well can only produce economically through a single tubing string, petroleum shall not be produced from multiple oil bearing zones through one string of tubing at the same time, except with the prior approval of the ministry of oil and minerals.
The contractor shall record data regarding the quantities of petroleum and water produced monthly from each area. Daily or weekly statistics regarding the production from the development area shall be available for examination by the ministry of oil and minerals.
Daily drilling records must show the quantity and type of cement and the amount of any other materials used in the well to protect petroleum, gas bearing or fresh water strata.
During the petroleum operations, the contractor shall comply with the laws, decrees, and other rules and regulations with respect to environmental protection and safety, including, conducting environmental impact assessment studies prior to the commencement of any petroleum operations.
Each statement of expenditure for any quarter shall conclusively be presumed to be true and correct 24 months following its submission to the ministry of oil and minerals, unless within the said 24 months period, the ministry takes written exception.
During the period, the ministry of oil and minerals have the right to audit the operator's or the contractor's accounts, records and supporting documents upon reasonable notice in Yemen and, if necessary, abroad. In addition, the ministry of oil and minerals can require the contractor to engage an international independent auditing firm selected by both parties to very, in accordance with generally accepted international auditing standards, the charge for the contractor's affiliated companies. The ministry of oil and minerals has to specify in writing charges to be verified. Such specification shall constitute a written exception, as provided above, pending verification. The cost of the independent auditors shall be paid by the contractor as a recoverable cost.
The contractor (occidental, transglobe, the corporation) shall pay to the ministry of oil and minerals the following production bonuses : a) US$1,000,000 within 30 days after the announcement of commercial discovery; b) US$1,000,000 within 30 days after the 1st date when the total average daily production of crude oil produced and not used in petroleum operations has been sustained at the rate of 25,000 barrels per day for 30 consecutive days ; c) US$2,000,000 within 30 days after the 1st date when the total average daily production of crude oil produced and not used in petroleum operations has been sustained at the rate of 50,000 barrels per day for 30 consecutive days; d) US$3,000,000 within 30 days after the 1st date when the total average daily production of crude oil and not used in petroleum operations, has been sustained at the rate of 75,000 barrels per day for a period of 30 consecutive days; e) US$4,000,000 within 30 days after the 1st date when the total average daily production of crude oil produced and not used in petroleum operations, has been sustained at the rate of 100,000 barrels per day for a period of 30 consecutive days; f) US$5,000,000 within 30 days after the 1st date when the total average daily production of crude oil produced and not used in petroleum operations, has been sustained at the rate of 150,000 barrels per day for a period of 30 consecutive days.
Expatriate employees of the contractor (occidental, transglobe, the corporation), its contractors and their subcontractors working in exploration operations are exempt from all personnel income taxes and similar taxes during exploration
The contractor (occidental, transglobe, the corporation) shall pay a fixed tax of 3% of all its exploration expenditures. This fixed tax shall be paid 3 months after the tax year in which the exploration expenditures are incurred. Such payments shall be made to the tax authorities and accompanied by statements authenticated by the ministry of oil and minerals. Within 150 days after the end of each tax year, the ministry of oil and minerals shall furnish to the contractor official receipts evidencing the payment of the tax.
The total taxable income of the contractor (occidental, transglobe, the corporation) with respect to any tax year shall be an amount calculated as follows: a) the total value of all crude oil received by the contractor in a tax year, plus; b) an amount equal to the contractor's income taxes.
If the total value of such crude oil received in any tax year by the contractor is equal to zero, then the contractor shall not be required to pay income taxes for this tax year.
In calculating its income taxes, the ministry of oil and minerals is entitled to deduct the income taxes of the contractor paid by him on the contractor's behalf.
Production Share - "Profit Oil features (triggers for variations in split - IRR, factor, production, etc .)
The crude oil remaining after deducing royalty and cost of oil from the total production shall be taken and disposed of separately by the ministry of oil and minerals and the contractor (occidental, transglobe, The corporation) as fallows: a)For the portion of the production up to and including 25/000 barrels: 64% to the ministry of oil and minerals and 36% to the contractor; b) for the portion up to and including 50,000 barrels: 70% to the ministry of oil and minerals and 30% to the contractor; c) for the portion which exceeds 50,000 barrels up to and including 75,000 barrels: 75% to the ministry of oil and minerals and 25% to the contractor; d) for the portion that exceeds 75,000 and up to 100,000 barrels: 80% for the ministry of oil and minerals and 20% for the contractor; for the portion that exceeds 100,000 barrels: 82% to ministry of oil and minerals and 18% for the contractor.
Production Share - Cost Oil features (basis of calculation, limits on cost recovery - e.g. as % of revenue or production, capex uplift, etc.)
The contractor should recover all costs, expenses and expenditures incurred for all petroleum operations out of and to the extent of a maximum of 50% per quarter of all the crude oil produced and saved from the agreement and not used in the operations and after royalty payments (‘Cost Oil’). A) Operating expenses incurred and paid after initial commercial production shall be recoverable in the tax year in which they arose. B) Exploration expenditures shall be recoverable at the rate of 50% per year starting either in their tax year or in the tax year in which initial commercial production occurs. C) Development expenditures shall be recoverable at the rate of 50% per year starting in the tax year in which they occurred or in which initial production occurs. The recovery of costs and expenses shall be allocated to each quarter proportionately, if it has not, it shall be carried forward for recovery in the next quarter.
The non-recoverable costs and expenses are listed at 7.2.
Restrictions on transactions with affiliated parties
To evaluate the prevailing market value of the quantity of cost oil the contractor (occidental, transglobe, The corporation) is entitled to use, under each calendar quarter, the weighted average price realized in freely convertible currency, from F.O.B point of export sales to non-affiliated companies, at arm’s length by either the ministry of oil and minerals or the contractor under all sales of crude oil from the contract area. Are excluded any government to government sales that do not reflect international oil market prices and any crude oil sales contracts involving barter
The state is entitled to take as royalty from the total crude oil produced a non-recoverable amount of the monthly average daily net production commencing with the first barrel produced in the following percentages:
- 3% of the portion of production up to and including 25,000 barrels
- 5% of that additional portion of production which exceeds 25,000 barrels and to up to and including 50,000 barrels
- 6% of the additional portion of production which exceeds 50,000 barrels up to and including 75,000 barrels
- 8% of the additional portion of production which exceeds 75,000 barrels up to and including 100,000 barrels
- 10% of the additional portion of production which exceeds 100,000 barrels
The Corporation is the ministry of oil and minerals’ operating company. It acquires at the effective date of the agreement a carried 5% of the contractor’s rights and working assets. TransGlobe and Occidental acquire the remaining 95% and shall fund, bear and pay all costs, expenses and expenditure of petroleum operations conducted.
The contractor (occidental, transglobe, the corporation), its contractors and subcontractors shall:
a) Give priority to local contractors and subcontractors, their terms and conditions are competitive with those of other contractors and subcontractors and the prices of their services are not higher than the prices of others by more than 10%. b) Give preference to locally manufactured materials, equipment consumable so long as their quality is comparable to what is internationally available. However, it may be imported if the local price of such items at the contractor’s operating is more than 10% higher than the price of such imported items after transportation and insurance costs have been added.
If during the term of the agreement the contractor and ministry of oil and gas agree that the contractor has no foreseeable need for part or all of petroleum operations facilities, and that in the contractor’s opinion such capacity can be used for petroleum operations conducted by the ministry of oil and minerals or anyone acting on behalf of it, without interfering with the agreement, then the parties should meet to negotiate mutually satisfactory terms including reasonable payment by the third party user, including a proportional per barrel charge representing uncovered capital costs of the contractor for unused capacity.
At a reasonable time prior to initial commercial production, the contractor (occidental, transglobe, the corporation) shall submit for consideration to the ministry of oil and minerals a procedure for scheduling tanker listings from the agreed upon points of export and shall negotiate acceptable provisions relating to under lifting and over lifting production. These provisions shall include periodic and quarterly settlement of lifts in cash or in kind at the option of the ministry of oil and minerals
The 1st exploration period which is obligatory is 36 months starting on the effective date. The contractor is obliged to a) reprocess available seismic data related to the bloc (75); b) conduct, acquire, process and interpret a minimum 175square kilometers of 3-D seismic data; c) drill and evaluate 1 exploration well with a minimum depth of 200 meters in the basement.
Minimum financial commitment for each exploration work is a) U.S.$ 50,000; b) U.S $2,950,000; c) U.S. $3,000,000. The total is U.S. $6,000,000, the contractor is obligated to spend this amount on exploration during the 1st period. The minimum expenditure obligation for an additional exploration work is U.S $250,000.
The 2nd exploration period is optional. The contractor is obligated to a) drill and evaluate 2 exploration wells with a minimum of 200 meters in the basement for a minimum of U.S $6,000,000. If the contractor expends the second exploration period for a 6 months period, the minimum expenditure obligation for it is U.S $250,000.
In case a dispute arises under this agreement between the parties with respect to interpretation, application or validity, the parties to the dispute shall try to settle their differences by mutual agreement. Otherwise, they shall submit their dispute to arbitration.
Unless otherwise agreed by the parties to the dispute, the arbitration shall be held in Paris, France and conducted in the English language in accordance with the rules of conciliation and arbitration of the international chamber of commerce (ICC). The arbitration shall be initiated by either Party to the dispute by giving the other party a written notice identifying an arbitrator. The second party must respond within 45 days by identifying an arbitrator.
If the second party does not appoint its arbitrator, the first Party can apply to the court of arbitration of the ICC to appoint a second arbitrator. The 2 arbitrators shall, within 30 days, select a third arbitrator failing which the it arbitrator shall be appointed by the court of arbitration of the ICC at the request of either parties.
The parties hereto shall extend to the arbitration tribunal all facilities for obtaining any information required for the proper determination of the dispute. The absence of any party to the arbitration shall not be permitted to prevent the arbitration proceeding in any of its stages. Pending the decision of the arbitration tribunal, the petroleum operations which have given rise to the arbitration need not be discontinued. In the event the decision recognizes that the complaint was justified, provisions may be made for reparation.
Except as specifically provided in this agreement, the contractor (occidental, transglobe, the corporation), its contractors and their subcontractors shall not at any time during the term of this agreement or for a period of 4 years thereafter, use for their benefit or disclose any information acquired during the term of this agreement. The contractor may disclose information to others: a) to the extent necessary to permit others to perform any of the obligations under this agreement; b) in connections with the arranging of financing or assignment; c) to the extent required by any applicable law, provided that such disclosure will not cause any damage or prejudice to the rights of the ministry of oil and minerals.
28.3 approval of the MINISTRYAny use or disclosure not specifically author under Article 28.2 above, shall be subject to written authorization of the MINISTRY.These provisions will not apply to any information which the contractor acquired from any source other than from the performance of this agreement.
This agreement, it annexes, and any modifications, will be governed and interpreted according to Yemeni laws, except the laws which are inconsistent with this agreement.