The duration of this contract, for each parcel of the concession area that will become a field under the terms set out herein, shall correspond to the period elapsed since the date of entry into force until the declaration of commerciality of one or more discoveries, plus a period of 27 years corresponding to the production phase.
To this total duration will be added extensions that may be authorized by the government in the terms of the contract.
The production phase of each field will begin on the date of submission of the declaration of commercially by the company to the government, and will have a duration of 27 years, and may be reduced or extended.
Best practices of the oil industry includes: preservation of the environment and respect to the people, which determines the adoption of technologies and procedures associated with the prevention and mitigation of environmental damage, as well as the control and environmental monitoring of the operations of oil and natural gas exploration and production.
The company must have a safety and environment management system that meets the best practices of the oil industry and the applicable legislation.
The company must, in the execution of the contract:
a) Ensure the preservation of an ecologically balanced environment;
b) Minimize impacts and/or damage to the environment;
c) Ensure the safety of operations in order to protect human life and the environment;
d) Ensure the protection of the Brazilian historical and culture heritage;
e) Repair the degraded environment in accordance with the technical solution required by the competent environmental organization;
f) Control the operations so that the methods and substances employed do not involve risk to human life and the environment.
The government may request copy of studies submitted for the approval of the competent environmental organization if the realization of their contents may become necessary for instruction/management of the contract.
If there is environmental licensing process which the competent organization deems necessary for the achievement of public hearing, the company must send the government a copy of studies designed to obtain licenses at an earlier date of the hearing.
The company must submit to the government a copy of the environmental permits and their respective renewals within 30 days after its acquisition, or, before that, when necessary to instruct authorization procedure that requires such documents.
The company must immediately inform the government and the competent authorities of any occurrence, due to fact or act either intentional or accidental, involving risk or damage to the environment or human health, material damage to its own assets or of third parties, fatalities or serious injuries for the personnel or to third parties or unscheduled interruptions of the operations, according to the applicable legislation.
The company shall assume full and objective responsibility for all damage to the environment that may result, directly or indirectly, from the execution of the operations.
The company will have to repair and/or indemnify the damage resulting from the operations.
The company must indemnify the federal government and the government, for all and any action, appeal, demand or contested judicial arbitration, audit, inspection, investigation or controversy of any kind, as well as for any indemnifications, compensations, punishments, fines or penalties of any nature, arising from or related to such damages and losses.
The government may hold financial and accounting audit of this contract and the calculation statements of the government holdings, in accordance with applicable law.
The government will audit directly or through agreements, according to the applicable legislation.
The government will notify the company at least 30 days in advance.
The government will have broad access to documents, books, papers, records, and other parts, including contracts and agreements signed by the company and related to the acquisition of goods and services for the operations for the last five closed calendar years.
The company is responsible for the information provided by third parties.
The company must keep at the disposal of the government certificates of local content in addition to contracts tax documents and other proving records corresponding to the good or service purchased, for a term of 10 calendar years.
The government may require from the company any documents necessary to resolve any doubts.
The holding or not of the audit does not exclude or reduce the responsibility of the company for the faithful fulfilment of the obligations of this contract.
The company will be subject to the tax system in the federal, state and municipal extent, being forced to fulfil it in accordance with deadlines and conditions set forth in the applicable legislation.
If the special share is due to a field in any quarter of the calendar year, the company will be obliged to carry qualified expenses with research, development and innovation in the areas of interest and topics relevant to the sector of petroleum, natural gas and biofuel, in an amount equivalent to 1% of the gross revenue of the production for such field.
The amount referred to in this paragraph is due for each field, originated from the concession area.
The company will have up to the 30th June of the year following the calculating calendar year of the gross revenue of production to employ the application of these resources.
The company shall provide the government with a full report of the qualified expenditures with research, development and innovation, in the deadlines and formats defined in the applicable legislation.
At least 50% of the resources should be intended for universities or research and development institutes accredited by the government for the implementation of activities and projects approved by the government in relevant subjects or priority area.
At least 10% of the resources must be intended for the hiring of activities of research, development and innovation in companies supplying the oil industry, in order to increase the ability of the industries for the purposes of local content.
The rest of the resources could be for the activities of research and development and innovation, in lines of research or projects determined by the company.
The resources mentioned in this paragraph may be spent on facilities of the own company or through its affiliates, provided it is located in Brazil, or contracted by the companies based in Brazil irrespective of the fact of these involve or be related to the operations of this contract.
Eventual qualified expenses with research, development and innovation carried out by the company at amounts greater than the equivalent to 1% of the gross amount of production may be compensated on behalf of the company for the proof of this requirement in future periods of this contract.
Such compensation is restricted to the field in which the applied resources exceeded the percentage of 1%.
A technical-scientific committee, with responsibilities and composition as defined in a resolution of the government, should annually prepare and publish a list of priority areas, activities and projects of interest and relevant topics in research, development and innovation for the oil, natural gas and biofuel industry, as well as guidelines for the application of resources from the obligation set out above.
The company will pay the following governmental and third parties holdings: royalties at the corresponding amount of 10% of the production of oil and natural gas held in the concession area;
The recruitment and hiring may be carried out in Brazil or abroad and according to selection criterion of the company, provided the applicable law is respected, even with respect to the minimum percentage of Brazilian labor used.
The recruitment and hiring of the services may be carried out in Brazil or abroad, provided the applicable law is respected, even with respect to the minimum percentage of Brazilian labor used.
The company must:
Ensure preference to hiring Brazilian suppliers, whenever their offers present good conditions of price, time and quality that are more favorable, or equivalent to those of non-Brazilian suppliers.
The processes of acquisition or hiring of goods and services targeted to the fulfilment of the object of this contract shall:
a) Include Brazilian suppliers among the suppliers invited to submit proposals.
b) Provide the specifications of hiring also in Portuguese language.
c) Accept equivalent specifications, provided the best practices of the oil industry are met.
A copy of the commitment of local goods and services offered by the company winner of the bidding of the block for the purpose of this contract is to be attached.
For the purposes of benchmarking, the local content of goods and services should be expressed in percentages in relation to the amount of the good or service purchased or hired.
The local content should be proven to the government through the presentation of certificates of their local content.
The goods and services whose local content is inferior to 10% will be considered as aliens in the computation of local content for the fulfilment of the contractual obligations.
Notwithstanding the above provision, the local content on the purchase of drills, as well as the maritime projects of seismic date acquisition and chartering of drilling rigs, will still be considered even if its local content is
inferior to 10%.
For the determination of the percentage of local content, the monetary values corresponding to the purchases of goods and services will be updated for the month and year in which the verification of compliance with the provisions in this clause is accomplished, using the general market price index of Getulio Vargas Foundation.
The milestones for local content measurement by the government will be:
a) The end of the exploration phase.
b) The end of each module of the development phase.
c) The closure of the stage of development in a field that does not include modular development.
For the purposes of benchmarking of the local content, the development phase will begin on the date of submission of the declaration of commerciality and will close, for each module of the development phase, with the first among the following occurrences:
a) The course of ten years after the extraction of the first oil.
b) The abandonment, by the company, of the development of the module of the development phase.
c) The achievement of the investments foreseen in the development plan.
The government may exempt the company from the compliance with the local content percentage with which it is committed in relation to recruitment of a specific good or service when:
a) There is no Brazilian supplier for the purchased product or contracted service.
b) All proposals received from Brazilian suppliers present an excessive delivery limit in relation to non-Brazilian counterparts.
c) All proposals received from Brazilian suppliers present an excessive price in relation to non-Brazilian counterparts.
d) There is no replacement of a given technology for which there is no off with local content. In this case the exemption of compliance with local content only applies to goods and services replaced by new technology.
The exemption from the requirement of compliance with the local content does not extend to the overall percentage of local content.
The request must be made in a reasoned way and presented to the government during the duration of the phase or step in which the exemption is intended.
If the government has granted the exemption mentioned in the caput of this paragraph due to the conditions provided in "a", "b", "c" and "d", the company is obliged to prove the accomplishment of the alleged conditions for the granting of the exemption.
The company may request from the government the adjustment of the local content with which it has committed itself to.
The request for reduction of local content should be made in relation to the supply lines of the table of local content, whereas the local content for the other items.
The adjustments in the committed local content do not extend to the overall local content.
The request must be made in a reasoned way and presented to the government during the duration of the phase or step in which the exemption is intended.
It is the duty of the operator company to continuously monitor all the activities that involve operational, environmental or human health risks, through a monitoring center, necessarily located in Brazil.
The monitoring center must be located onshore and endowed with technology and size compatible with the risks taken by the operator company according to the best practices of the oil industry.
The company must provide directly, buy, rent, lease or in any other way obtain, at its own expenses and risk, all the goods, movable and immovable estates, including, but not limited to, facilities, buildings, systems, equipment, machines, materials and supplies, which are necessary for the execution of the operations.
The government may authorize the positioning or the construction of facilities or equipment in a place outside the concession area, aiming for complementing or optimizing the logistic structure related to the operations.
If there are wells or pre-existing production infrastructure in the concession area, which may be used for any purpose, the company will take the responsibility, without the right to wavier or any type of compensation by the government and federal government, on the obligations provided in clauses 18 and 21.
Clause 18 deals with goods, equipment, facilities and materials.
Clause 21 deals with operational and environmental safety.
The company must perform the obligations relating to the minimum exploratory program on the terms and conditions described in annex II of this contract (to be agreed between the parties).
The parties commit themselves to make all efforts to resolve among themselves, amicably, all and any dispute or controversy arising from this contract or related to it.
The parties may, provided they enter into a formal and written agreement, appeal to an independent expert to obtain reasoned opinion that may lead to the end of the dispute or controversy.
If such an agreement is signed, the arbitration may only be performed after the issuance of an opinion by an expert.
The government will decide on the suspension or not of the activities of the dispute or controversy.
The criterion to substantiate the decision should be the need to avoid personal or material risk of any nature, in particular as regards the operations.
If, at any moment, one of the parties consider that there are no conditions for an amicable settlement of the dispute or controversy, such matter should be submitted to arbitration ad hoc, using as a parameter the rules laid down in the Regulation of Arbitration (Arbitration Rules) of the United Nations Commission on International Trade Law - UNCITRAL and in line with the following precepts:
a) The choice of arbitrators shall follow the standard established in the Arbitration Rules of UNCITRAL;
b) Three arbitrators should be chosen. Each party shall choose an arbitrator. The two arbitrators so appointed shall appoint the third arbitrator, who will act as president;
c) By agreement of the parties a single arbitrator may be determined under the assumptions on which the involved amounts are not large;
d) The city of Rio de Janeiro, Brazil, will be the seat of arbitration and the place of delivery of the arbitral award;
e) The language to be used in the arbitration proceeding shall be the Portuguese language. The parties may, however, instruct the process with testimony or documents in any other language if the arbitrators so decide, without the need for official translation;
f) All and every expenditure required for the installation and development of arbitration, such as costs and advance of arbitration and expert fees, shall be borne solely by the company. The government will only compensate such amounts in case of final conviction, in the form as decided by the arbitrators;
g) In merit, the arbitrators shall decide on the basis of the Brazilian substantive laws;
h) The arbitral award shall be final and its contents will oblige the parties. Any amounts perhaps owed by the government will be paid off through writ of payment, except in the case of official recognition of the application; and
i) If there is a need for precautionary, preparatory or incidental measures, or other precaution measures before being introduced to arbitration, the concerned party may require them directly to the judiciary, with background in the applicable legislation.
The parties by common agreement, may choose to institutionalize the arbitration in the International Court of Arbitration of the International Chamber of Commerce or before another arbitration chamber notoriously recognized and of unblemished reputation in line with the rules of the chosen chamber.
If the dispute or controversy involves exclusively members of the Federal Public Administration, the matter may be submitted to the Board of Conciliation and Arbitration of the Federal Administration - CCAF, Federal Attorney General.
The parties elect the courts of Federal Justice - Judicial Section of Rio de Janeiro, Brazil, as the only competent one, with the express waiver of any other, no matter how privileged it may be.
Any and all data and information acquired, processed, produced or developed in any way, obtained as a result of the operations and of the contract, are strictly confidential and, therefore, may not be disclosed by the company without prior formal and written permission of the government, except:
a) If the data and information are already public or become public through a third party authorized to disclose them;
b) If there is no obligation of disclosure resulting from legal imposition or judicial determination;
c) If the disclosure is performed in accordance with the rules and limits imposed by a stock exchange in which shares of the company are negotiated;
d) If the disclosure is directed to the affiliate, consultant or agent of the company;
e) If the disclosure is directed to the financial institution and the security company against which the company is appealing or working as a consultant of;
f) If the disclosure is directed to the possible transferee in good faith, affiliate or its consultant; and
g) If the disclosure is directed to the company or hired under another system of oil and natural gas exploration and production of an adjacent area, the subsidiary or its consultant, aiming for signing an agreement of individualization of production.
In the cases provided for in lines "d", "e", "f" and "g", the disclosure of data and information is subject to a formal agreement and prior written consent of confidentiality.
The agreement should provide that the third party mentioned in such points shall be obligated to comply with (amongst others) the above provisions, without however having the benefit of the exceptions provided for in items (a) to (f) above for the dissemination of data and information without prior consent of the government.
The third party does not count with the benefit of the exceptions provided for in lines "a" to "g" for the dissemination of data and information without prior consent of the government.
In the cases provided for in lines "a" to "g", the company must send the government notification, within 30 days from the disclosure.
The notification must be accompanied by the data and/or information disclosed, the reasons for disclosure and the relationship of third parties who had access to such data and/or information.
In the cases provided for in lines "d" to "g", the notification must be accompanied, also, by a copy of the confidentiality agreement.
The above provisions shall remain in force and will remain after the termination of this contract.
The government commits itself not to disclose any data and information obtained as a result of the operations and related to areas held by the company.
This provision does not apply where disclosure is necessary for compliance with the legal provisions which are applicable to it or for the purposes for which it was formed.