This contract is made and entered into in both the English language and the Albanian language. In the event of a conflict between the English language version and the Albanian language version, the English version will prevail.
Unless sooner terminated in accordance with the terms hereof, this Agreement shall remain in effect during the evaluation period and any development and production period.
The evaluation period commences on the date the contract is approved and continues until the last day of the month which is eighteen months following the date the contract is approved. The evaluation period shall be extended for a further period of up to 6 months, but written request must be delivered at least 45 days prior to the expiration of the evaluation period.
Saxon International Energy shall conduct petroleum operations in a safe and proper manner in accordance with generally accepted international petroleum industry practice and shall cause as little damage as reasonably practicable to the general environment, including, among other things, the surface, air, lakes, rivers, sea, animal life, plant life, crops, other natural resources and property.
In the event of a blow-out, accident or other emergency, Saxon International Energy shall take all immediate steps to bring the emergency situation under control and protect against loss of life and loss of or damage to property and prevent harm to natural resources and the general environment
If the government reasonably determines that any work or installations erected by Saxon International Energy (but not those works or installations which were in place prior to the effective date or are transferred to Saxon International Energy after this contract is approved) endanger or may endanger persons or third party property or cause pollution or harm the environment to an unacceptable degree, the government may require Saxon International Energy to take remedial measures within a reasonable period and to repair any damage to the environment.
In the event that Saxon International Energy fails to take the remedial measures required by the government within the time period established therefor, the government may carry out such remedial measures for the company account. Any remedial measures required to be undertaken by environmental authorities of the Government of Albania in respect of those works or installations in the contract area which were in place prior to the effective date or were transferred to Saxon International Energy after the effective date shall be for the government's account.
The government and National Petroleum Agency shall ensure that Saxon International Energy has use of the railways, roads, highways, water, land surface, timber, electricity, sanitary structures and other infrastructures in Albania, at commercially reasonable rates and on a non-discriminatory basis, in conformity with Albanian legislation, so as to be able:
(a) to perform the petroleum operations in compliance with this contract; and
(b) to produce, transport, export and sell petroleum in or from Albania as provided in this contract and the law governing petroleum operations.
The government shall have 12 months from receipt of each cost account statement pursuant to the accounting procedure to raise objections as to that cost account statement, provided that the government shall not be entitled to conduct more than two audits of Saxon International Energy's records and accounts in any fiscal year.
The government and Saxon International Energy shall agree on any required adjustments. Supporting documents and accounts will be available to the government for 12 months. If within 3 months, following the lapse of the above 12 month timeframe the government has not advised Saxon International Energy of its exception to the cost account statement, the cost account statement shall be considered as approved.
Other than those taxes and duties set forth in Art. 13.1 and Art. 14.1, Saxon International Energy and its respective affiliates, subcontractors and expatriate personnel shall be exempted from Albanian taxes and duties, with respect to all activities relating to the petroleum operations to the extent so provided in Albanian Law. This exemption does not include normal port, warehouse and postal charges and other similar customary charges of general application for actual services rendered.
Saxon International Energy's foreign subcontractors will not be responsible for taxes and duties to the extent that they apply, directly or indirectly, to the petroleum operations, Saxon International Energy’s Albanian sub-contractors will not be discriminated against with regard to taxes and duties to the extent that they apply, directly or indirectly, to the petroleum operations.
Employees of Saxon International Energy and its sub-contractors will not be subject to taxes and duties on any income or profit realized by them, directly or indirectly, from their work, in the petroleum operations, nor on the import or re-export of their personal or household belongings, which items may be freely imported and subsequently exported.
Saxon International Energy shall be liable to tax on profit in conformity with Law No.7811, date 12/04/1994 “On approval of decree No.782, date 22.2.1994 “On the fiscal system in the hydrocarbons sector (Exploration-Production)”, and amended by Law No.S297, date 04.03.1998, and in conformity with the license agreement.
Production Share - "Profit Oil features (triggers for variations in split - IRR, factor, production, etc .)
After Saxon International Energy has recovered all of its petroleum costs from the cost recovery petroleum, the remaining cost recovery petroleum shall be "profit petroleum". As its reward for the risk of conducting the petroleum operations under the petroleum agreement, Saxon International Energy shall be entitled to 100% of the profit petroleum.
Production Share - Cost Oil features (basis of calculation, limits on cost recovery - e.g. as % of revenue or production, capex uplift, etc.)
Petroleum costs including all those accumulated prior to the approval of the first development plan shall be fully included without amortisation commencing in the calendar quarter in which such costs are incurred. It is understood that neither the Albpetrol's share nor the deemed production shall be treated as petroleum costs, but the costs of Saxon International Energy in producing and delivering to Albpetrol the Albpetrol's share and the deemed production are petroleum costs.
Available petroleum shall be measured at the measurement point and allocated as set forth in this contract available petroleum shall be allocated between Albpetrol (the "government's share”) and Saxon International Energy ("cost recovery petroleum") based on the R factor.
R Factor is defined as:
Where R Factor 0.0 < R < 1.0000, Albpetrol's share is 1%, cost recovery petroleum is 99%
Where R Factor 1.0000 ≤ R < 1.5000, Albpetrol's share is 3%, cost recovery petroleum is 97%
Where R Factor 1.5000 ≤ R < 2.0000, Albpetrol's share is 4%, cost recovery petroleum is 96%
Where R Factor 2.0000 ≤ R, Albpetrol's share is 5%, cost recovery petroleum is 95%
Albpetrol's share shall be lifted in oil and delivered in kind to Albpetrol in the contract area at pad D.
The R Factor is calculated as follows:
Rn= Ak/Bk
where:
Rn means the R Factor for calendar quarter N.
Ak means the sum of Saxon International Energy revenues minus profit petroleum tax accrued in calendar quarter N and all preceding calendar quarters following the date the contract is approved.
Bk means the sum of petroleum costs in calendar quarter N and all preceding calendar quarters following the approval of the contract.
Any re-adjustment in entitlement for the current calendar quarter will he spread over the remainder of the current fiscal year in a way that the party which is entitled to additional available petroleum for the current calendar quarter will lift the readjustment quantity in equal monthly proportions in addition to its regular entitlements. If the production in any month is insufficient to supply the re-adjustment quantity, then the unsupplied entitlement shall be carried forward and spread equally over the remaining months of the current calendar quarter.
The determination of the R Factor shall first be done for the first calendar quarter following the date the contract is approved.
Saxon International Energy will select its management and employees according to its discretion, and shall determine the conditions of employment and the number of employees to be used for petroleum operations. However, Saxon International Energy and its sub-contractors will, to the extent available, employ qualified Albanians to carry out the petroleum operations, giving priority to Albpetrol personnel, if their professional skills, knowledge and expertise fit with operational requirements. Otherwise, Saxon International Energy shall be free to employ such expatriate professionals as it deems necessary.
Saxon International Energy, its contractors and subcontractors shall give priority to goods and materials produced in Albania if these goods and materials are being offered under equally favorable conditions regarding the quality, price and availability, and in the quantities required, Saxon International Energy shall give priority to services performed by Albanian sub-contractors if such services are offered under equally favorable conditions regarding the quality, price and availability they may be offered by foreign sub-contractors. For the above purposes, prices for locally manufactured materials, equipment, machinery and consumables and for services of local contractors shall be compared with the prices of goods and services in the international market after transportation and insurance costs have been added.
Saxon International Energy shall be entitled to use free of charge and for the performance of the petroleum operations, all other assets, equipment, means and infrastructure (including roads, electricity power lines and water, oil and gas pipelines) existing in the contract area or located at Lagjjia Kastriot, Rruga Vasil Peruke, Fier on the day this contract is approved, but (unless otherwise agreed with the supplier) subject to payment, on a non-discriminatory basis, at reasonable cost for electricity, water, oil and gas used under commercially reasonable terms and conditions, the pipelines that transport the petroleum produced in the contract area to the ports and refineries in Albania.
In accordance with section 3.2 of the license agreement, the parties have the exclusive right to construct and install all facilities and equipment (including storage, treatment, pipelines and other means of transportation) required for the petroleum operations.
Saxon International Energy shall commence the conduct of petroleum operations for the wells described in Annex D not later than [] days after Albpetrol advises Saxon International Energy that the contract has been approved by the council of ministers.
1. Saxon International Energy will:
(i) select eight wells from the contract area for reactivation or re-completion in the Driza reservoir;
(ii) select two wells from the Contract Area for reactivation or re-completion in the Marinza reservoir;
(iii) select two wells from the Contract Area for reactivation or re-completion in the Southern Area Patos Marinza (Driza); and
(iv) maintain the following existing 28 producing wells and disposal well: all Pad D and Pad H wells and pre-existing wells 989, 1317, 2250, 2471, AAP-1, 976, 3013, 876 and disposal well 1842.
2. The following program of work shall be conducted on the evaluation wells and the evaluation area during the evaluation period:
(i) conduct reactivation or re-completion activity according to a program of Contractor's choosing;
(ii) maintain existing operational and PISE standards in the contract area;
(iii) evaluate performance of the evaluation wells, from an engineering
and economic basis;
(iv) evaluate requirements for additional water disposal capacity and
increase capacity as required;
(v) prepare a production, reserves and reservoir performance report.
3. Saxon International Energy commits to expend at least US$2 million in capital expenditures during the first 18 months after the effective date in conducting the evaluation program and adding the water disposal well. If the cost of the capital expenditures for the evaluation program and the water disposal well are less than US$2 million, Saxon International Energy may elect to expand the activities of the evaluation program by selecting additional wells for reactivation or re-completion.
4. Saxon International Energy shall also conduct the following activities during the evaluation period:
(i) carry out an update of the reserves evaluation of the contract area to a level of detail determined by Saxon International Energy;
(ii) evaluate existing and future infrastructure for development and commercialisation of product for internal and export markets;
(iii) review gas conservation and utilisation within the evaluation area; and
(iv) increase water disposal capacity in the evaluation area by adding an
additional disposal well;
(v) develop truck offloading options at either Fier or Ballsh refineries for crude oil sales delivery of production; and
(vi) review and report on continuous sand extract technology.
Any dispute or claim including any purported termination under Art. 22, arising out of or relating to this contract or the breach, termination or validity of this contract, or to the petroleum operations of this contract, shall be finally and conclusively settled by arbitration in accordance with the United Nations Commission on International Trade Law Arbitration Rules. The appointing authority under the rules shall be the President of the Court of International Arbitration of the International Chamber of Commerce in Paris, France.
The arbitration shall take place in Zurich, Switzerland. The language to be used in the arbitration proceedings shall be English. Saxon International Energy and the government expressly waive any right to appeal an arbitral award to any court whatsoever, and the arbitral award shall be final and binding upon the them.
Except as otherwise specified under this contract, all information acquired or received under this contract shall be maintained by the government and Saxon International Energy as strictly confidential and shall not be divulged without the prior written consent of the other party while this contract remains in force, except to the extent required to comply with laws, rules or regulations of any stock exchange to which Saxon International Energy may be subject. The above rule does not apply when such information becomes part of the public domain through sources other than through Saxon International Energy.
Saxon International Energy shall be bound by these obligations of confidentiality for a period of 5 years following termination of this contract.
The government and Saxon International Energy may disclose that information to its employees, affiliates, consultants or subcontractors to the extent required for the efficient conduct of petroleum operations provided that in the case of disclosure to employees and affiliates it ensures adequately the protection of the confidential nature of the information concerned in the case of disclosure to consultants or subcontractors provided that the intended recipients have first entered into a confidentiality undertaking.
For purposes of obtaining new offers on relinquished portions of the contract area or on areas adjacent to the contract area, the government may show any other entity data on such relinquished portions in uninterpreled and basic form during the term of this contract.
Subject to obtaining confidentiality undertakings as provided in Art. 23.2 above, either party may disclose such information obtained pursuant to this contract as required by financing institutions from which the disclosing party is seeking finance for the purposes of carrying out its obligations under this contract.
Subject to obtaining a confidentiality agreement Saxon International Energy may show any such information to bona fide potential assignees who have an interest in the petroleum rights granted to the company under this contract.
Subject to Art. 18.1(b), the activities of Saxon International Energy in performing the petroleum operations under this contract shall be governed by and conducted in accordance with the requirements of the Albanian law.
All questions with respect to the interpretation or enforcement of, or the rights and obligations of the government and Saxon International Energy under this contract and which are the subject of arbitration in accordance with Art. 19 shall be governed by the laws of England.
If, as a result of any change in the laws rules and regulations of Albania: (i) any right or benefit granted (or which is intended to be granted) to Saxon International Energy under this contract or the license agreement is infringed in some way; (ii) a greater obligation or responsibility is imposed onto Saxon International Energy; or (iii) in whatever other way the economic benefits accruing to Saxon International Energy from this contract or the license agreement are negatively influenced by any change in the laws, rules and regulations of Albania, and such an event is not provided for in this contract, Saxon International Energy and the government will immediately amend this contract and license agreement, and the government, National Petroleum Agency and the Ministry of Industry and Energy will immediately undertake other necessary actions to eliminate the negative economic effect on Saxon International Energy .