The Contract Area consists of the following three blocks: Kashkari Block, Bazarkhami Block and Zamarudsay Block. The Designated Fields consist of the following five fields: Angot Field, Kashkari Field, Aq Darya Field, Bazarkhami Field, and Zamarudsay Field
CNPC International, Ltd., organized and existing under the laws of the Cayman Islands, with offices in Beijing, China, at No. 6-1, Fuchengmen Beidajie, Xicheng District, 100034
For the parts of the Contract Area located outside the Designated Fields, the Contractor is authorised to conduct Exploration Operations during an Exploration Phase which shall be comprised of an initial exploration period of 4 years and 6 months, subject to two extensions of 2 years each (upon request and subject to the conditions of the agreement). If as result of the exploration the Contractor makes a commercially relevant discovery, the applicable Contract Area shall be converted into a Field, and the development and production phase shall start, with a duration of up to 25 years counted as from the discovery date (subject to one extention by request, for a term of up to 10 years). In case no commercially relevant discovery occurs within the Contract Area, at the end of the Exploration Phase, the Contract shall be automatically terminated for all parts of the Contract Area other than the Designated Fields. In the case of the Designated Fields, the duration of the Contract shall not exceed 25 years from the Effective Date (26/12/2011).
License for exploration, development and production of Hydrocarbons within the Contract Area, as per the terms and conditions of the Exploration and Production Sharing Contract
Environmental impact assessment and management plan
Prior to the commencement of operations, Contractor shall undertake and complete a Baseline Environmental Assessment of the relevant field or area, consistent with International Best Practices and applicable laws.In the course of operations the Contractor shall consider, investigate, assess and manage the impact of the activities in the environment and the socio-economic conditions of any person who might be directly affected thereby.
Upon completion of the operations, Contractor shall rehabilitate as far as reasonably possible the environment affected thereby to its natural or predetermined state or to land use. Additional protective measures shall also be taken by Contractor, including, but not limited to, preventing the pollution of any water well, river or lake; treatment and disposal of waste liquids in a manner approved by the Ministry of Mines; and properly secure permanent installations. Contractor shall also take all practical measures to minimize flaring of natural gas. The Ministry is entitled to require the Contractor to take remedial measures within a reasonable period established by the Ministry and to repair any damage to the environment in case the operations conducted by the Contractor endanger persons or third-party property, cause pollution or harm wildlife or the environment to an unnaceptable degree.
No later than June 30 of each year, Contractor shall submit detailed accounts showing all Hydrocarbonet Operations Expenditures and all Gross Contractor Revenues during the previous year. Accounts shall be audited by an accountant or auditor approved by both parties. The Ministry will be entitled to inspect the Contractor's accounts, books and records either directly or through an independent accountant. The Ministry shall have full and complete access to the contract area to observe the operations and perform examinations, surveys, drawings, tests and analyses.
Contractor is exempted from Business Tax Receipt during the term of the agreement for all business conducted in connection with its terms and conditions.
At the Effective Date, the income tax rate in Afghanistan was of 20%. The contract sets forth, however, that Contractor's taxable income shall be subject to an income tax rate of 30%, stabilized for the remaining period of the agreement.
Production Share - "Profit Oil features (triggers for variations in split - IRR, factor, production, etc .)
"After deduction of royalties and the recovery of cost oil by the Contractor, the Ministry shall be allocated a portion of the hydrocarbons produced and saved in any month as follows. If cumulative Gross Contractor Revenues divided by cumulative Hydrocarbons Operations Expenditures incurred up to the immediately preceding month are:
● less than or equal to 1, the Ministry is entitled to 0% of profit oil;
● greater than 1 but less than or equal to 1.3, the Ministry is entitled to 50% of profit oil;
● greater than 1.3 but less than or equal to 2.5, the Ministry is entitled to a sliding scale of between 50 and 70% of profit oil;
● greater than 2.5, the Ministry is entitled to 70% of profit oil.
These calculations shall be made separately in respect of the “designated fields” Kashkari, Angot, Aq Darya, Bazarkhami, Zamarudsay) and the rest of the contract area.
Production Share - Cost Oil features (basis of calculation, limits on cost recovery - e.g. as % of revenue or production, capex uplift, etc.)
No cost recovery cap. In any month, Contractor is entitled to retain hydrocarbons in the amount of outstanding costs incurred and not recovered in a previous month. Hydrocarbons are ring-fenced for cost-recovery purposes; costs incurred in fields other than the “designated fields” (Kashkari, Angot, Aq Darya, Bazarkhami, Zamarudsay) cannot be recovered via hydrocarbons produced in those "designated fields."
Restrictions on transactions with affiliated parties
The Contractor shall give preference to purchases by Afghan nationals and companies in marketing its products, in case such purchases are at prices not less that the price for arm's-length sales (understood as sales made between willing and unrelated buyers and sellers in exchange for cash, excluding sales involving barter, sales from government to government and other transactions motivated in whole or in part by considerations other than the usual economic benefits involved in sales of Hydrocarbons in the international market).
Royalties due to the Ministry shall correspond to 15% of the Hydrocarbons produced and saved from the Contract Area in any month, and not used in Hydrocarbons' Operations or flared or re-injected into the Contract Area
Contractor will also be responsible for the payment of annual surface rental fees to the Ministry in accordance to the following: during the initial exploration period, the amount of US$ 1.00 per hectare will be due; during the first extension period, the amount of US$ 4.00 per hectare; during the second extension period, the amount of US$ 8.00 per hectare; during the period from the first declaration of commercial discovery, the amount of US$ 15.00 per hectare/ abd during the development and production phase with respect to each field, the amount of US$ 40.00 per hectare. Surface rental fees shall alsobe paid to the owner of any utilized privately owned land. The amount shall be stipulated among the parties, or determined by a dispute resolution board.
Contractor shall give preference to goods that are produced or available in Afghanistan, and services that are rendered by Afghan nationals and companies, provided that such goods are similar in quality, quantity and price to imported foreign goods and services available at the time. Locally produced or available equipment, materials and supplies shall be deemed equal in price to imported items if the local cost of such locally produced or available items at the Contractor's operating base in Afghanistan is not more than 15% percent higher than the cost of such imported items before Customs Duties but after transportation and insurance costs have been added.
Contractor shall give preference to purchases by Afghan nationals and companies when marketing any part of its share of the Liquid Hydrocarbons produced and saved from the Contract Area, provided that the amount of such purchases is in accordance with the pricing standards established in the contract. The Ministry will also inform to the Contractor the amount of Liquid Hydrocarbons and Natural Gas it needs to meet Afghanistan's internal consumption requirements. Contractor shall be reimbursed for the cost of such products required by the Ministry.
In case of discovery of commercially relevant resources in any of the research areas, Contractor shall present to the Ministry a detailed proposal for the construction, establishment and operation of all facilities and services for and incidental to development, extraction, production, storage, transportation, sale and other disposal of Hydrocarbons. If the plan is approved and exploration of new wells is made possible, the Contractor shall carry out all development and production activities in such wells in accordance with the approved plan.
The Afghan Ministry of Mines is entitled to purchase (for a price determined in accordance with the agreement) a quantiy of Liquid Hydrocarbons and Natural Gas to meet the country's internal comsumption needs on any year.
The Ministry shall endeavor to provide adequate security within the Contract Area and any other areas in which Hydrocarbons Operations are conducted, including during travel to and from such areas. In the event that the Contractor considers the security provided for its personnel inadequate or inconsistent with its policies, supplementary security measures shall be implemented by the Contractor, including, but not limited to, the engagement of competent private security providers licensed to operate in Afghanistan. Such arrangements shall be revised from time to time in response to changes in security conditions.
All operations shall be carried out in accordance with the applicable laws and pursuant to Work Programmes and Work Programmes Budgets approved by the parties during the term of the agreement. Each Work Programme and Work Program Budget shall comply with the minimum exploration programme and the minimum production requirements established among the parties (and set forth, respectivelly, in part I and part II of Exhibit H to the agreement). Contractor shall advance all funds and purchase or lease all required technology, equipment, machinery, materials and supplies for purposes of the operations. The Contractor shall submit a financial guarantee in an amount equal to the estimated expenditures necessary to perform the minimum exploration program for the initial exploration period. Contractor also executed and delivered a General Performance Guarantee to the Ministry.
Any dispute or controversy not solved by mutual agreement within 45 days shall be settled by arbitration initiated by either party by submission to the International Centre for Settlement of Investment Disputes (ICSID), pursuant to the ICSID Convention of March 18, 1965. The Contractor shall not be treated as an Afghan company. The number of arbitrators shall be three, and the proceedings will be conducted in the English language, with the place of arbitration being London, England. Alternativelly to seeking a mutual agreement before the initiation of an arbitration procedure, the parties agree to submit the matter in dispute, in first instance, to administered expertise proceedings in accordance with the Rules for Expertise of the International Chamber of Commerce. The results of this procedure will not be binding, and all documents presented or produced shall be treated as confidential, and cannot be used in the course of an eventual arbitration procedure. Finally, the Ministry waives any rights it may have to claim sovereign immunity for itself or any of its assets to the fullest extent permitted by the laws of any applicable jurisdiction.
The Contractor shall indemnify, defend and hold the Government harmless against all claims, losses and damages of any nature, including claims for loss or damage to property or injury or death to persons, resulting from any Hydrocarbons Operations conducted by or on behalf of the Contractor, provided that the Contractor shall not be held responsible to the Government for any loss, claim, damage or injury caused by or resulting from any negligent action of personnel of the Govemment or from any environmental contamination existing in the Contract Area on or prior to the Effective Date.