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 CENTRAL AFRICAN REPUBLIC








1993 Model Contract For Exploration


And Production of Petroleum Between The


Government & International Oil Companies


 CONTENTS














ARTICLE


1 Definitions............................................................................................


2 Scope and duration of the Contract.......................................................


3 Granting of the exploration Permit, renewal and surface relinquishment


4 Exploration work obligations and guarantee..........................................


5 Appraisal of a Discovery........................................................................


6 Granting and renewal of a Concession...................................................


7 Transportation of Petroleum by pipelines..............................................


8 Production from a Commercial Field......................................................


9 Obligation to supply domestic market with Crude Oil.............................


10 Natural Gas...........................................................................................


11 Company’s rights relating to the conduct of Petroleum Operations.........


12 Company's obligations relating to the conduct of Petroleum Operations.


13 Information and reports.........................................................................


14 Annual Work Programs.........................................................................


15 Supervision of Petroleum Operations.....................................................


16 Valuation of Crude Oil and Natural Gas.................................................


17 Royalty on production...........................................................................


18 Taxation................................................................................................


19 Incentives to petroleum exploration.......................................................


20 Accounting and audit.............................................................................


21 Import and export..................................................................................


22 Foreign exchange control.......................................................................


23 Assignment............................................................................................


24 Ownership and transfer of assets upon termination.................................


25 Responsibility and insurance...................................................................


26 Cancellation of the Permit, revocation of a Concession and


termination of the Contract....................................................................


27 Applicable law and stability of conditions .........................................


28 Force Majeure.......................................................................................


29 Arbitration and expertise........................................................................


30 Miscellaneous provisions........................................................................











APPENDIX





1 Delimitation of the Exploration Permit





2 Accounting Procedure........................














a /


 CONTRACT











BETWEEN


the Central African Republic, hereinafter referred to as "the State", hereby represented


by the Minister of Defense, Veterans, Energy, Mines and Hydraulics,





on the one hand,





AND





_• a company organized under the laws in force in_,


having its headquarters in_, hereinafter referred to as "the Company",


hereby represented by_, duly commissioned hereto,


(in the event the Contract is-.signed by other companies, the





above should be filled in by..such companies)


} on the other hdnd,











WITNESSETH:








WHEREAS the discovery and exploitation of Petroleum in the territory of the Central African


Republic would provide an economic benefit for the development of the country;


WHEREAS the Company represents that it has the technical competence and financial ability


to perform the Petroleum Operations herein described;


CONSIDERING the Ordinance N° 93.007 of May 25, 1993 stating the Petroleum Code


which governs the legal and fiscal regime applicable to Petroleum exploration, exploitation and


transportation activities in the Central African Republic;








NOW THEREFORE, the Parties hereby agree as follows:


























48


 ARTICLE 1





DEFINITIONS





The terms used in this Contract shall have the following meaning:


1.1. "Year" or "Calendar Year" means a period of twelve (12) consecutive months


starting January first (1st) and ending on the subsequent December thirty-first (31st).


1.2. "Contract Year" means a period of twelve (12) consecutive months starting on the


Effective Date or the anniversary date of said Effective Date.


1.3. "Petroleum Code" means the Ordinance N° 93.007 of May 25, 1993, governing the


legal and fiscal regime applicable to Petroleum exploration, exploitation and


transportation activities, as well as the instruments establishing the implementation


thereof.


1.4. "Concession" means a Petroleum exploitation concession with respect to a


Commercial Field, as granted pursuant to the provisions $f Article 6.


1.5. "Contract" means this instrument and.its appendices, a$. well.as any modification or


extension hereto mutually agreed upop'by the Parties' pursuaht to the provisions of


Article 30.2. vV ■ .


1.6. "Effective Date" means the dhte of entry.. into: effect of the Contract as defined in


Article 2.3.


1.7. "Discovery" means the discovery; of a Petroleum accumulation made dining the


drilling of a well carried out under this Contract, of which the commercial nature has


not yet been established.


1.8. "Department in charge of Petroleum" means at any time the administrative


department in charge of Petroleum.


1.9. "Dollar" means dollar of the United States of America.


1.10. " State" means the Central African Republic.


1.11. "Appraisal" means exploration activities, including, but not limited to, drilling which


are performed pursuant to Article 5.2. after the declaration of a Discovery, the purpose


of which is to confirm the commercial nature of said Discovery and to delineate, as the


case may be, the extent of the Commercial Field so discovered.


1.12. "Exploratory Well" means any well drilled in view of making a Discovery, excluding


inter alia an Appraisal well or a development well.














49


1.13. "Franc CFA" means franc of the Union of the State members of the Central African


States' Bank (BEAC).


1.14. "Natural Gas" means the dry gas and wet gas produced alone or in association with


Crude Oil, as well as any other gaseous products extracted from the wells.


1.15. "Associated Natural Gas" means the Natural Gas existing in a reservoir in solution


with Crude Oil, or as gas cap in contact with Crude Oil, and which is or may be


produced in association with Crude Oil.


1.16. "Non Associated Natural Gas" means Natural Gas other than Associated Natural


Gas.


1.17. "Commercial Field" means a Petroleum-impregnated geological entity in one or


several overlaying reservoirs in respect of which die Appraisal operations set forth in


Article 5 have been carried out, and which, in accordance with good international


petroleum industry practice and pursuant to the Contract, may be developed and


exploited under economic conditions for the Company.


1.18. "Petroleum" means Crude Oil and Natural Gas.


1.19. "Minister" means at any time the Minister in'charge of Petroleum dr.his duly qualified


representative. ... \ X ■'(


1.20. "Operator" means the operator, designated t>y. the Company for purposes of


conducting the Petroleum Operations.


1.21. "Petroleum Operations" means Petrqleiiim prospection, exploration, development,


exploitation, separation, treatment, forage and transportation operations up to the


Delivery Point, performed by'tii'6 .Company under this Contract, including the treatment


of Natural Gas, but excludmg.Tefining operations and the marketing of petroleum


products.


1.22. "Parties" means the State and the Company. "Party" means, as the case may be, the


State or the Company.


1.23. "Permit" means the exclusive Petroleum exploration permit granted by the State


pursuant to the provisions of Article 3.


1.24. "Crude Oil" means crude mineral oil, asphalt, ozokerite and all other petroleum which


is liquid in its natural state or obtained from Natural Gas through condensation or


extraction, including condensates and Natural Gas liquids.


1.25. "Delivery Point" means the F.O.B. Petroleum loading point at the export terminal or


any other point mutually agreed upon by the Parties, inside or outside the Central


African Republic. As the case may be, several Delivery Points may be agreed upon by


the Parties for purposes of this Contract.


1.26. "Annual Work Program” means the detailed program for the Petroleum Operations


which shall be performed during a Calendar Year, as approved pursuant to the


provisions of Article 13.


1.27. "Company” means the Company, as well as any entity to which a participating interest


may be assigned pursuant to Article 23. If the Company is composed of several


entities, such entities shall be joint and several and the Company shall not be considered


as a legal entity.


1.28. "Affiliated Company" means:


a) any company or any other entity which directly or indirectly controls or is controlled


by a company constituting a party hereto; or


b) any company or any other entity which directly or indirectly controls or ^ controlled


by a company or entity which directly or indirectly controls a company constituting a


party hereto.


For purposes of the foregoing definition, "control" means the direct or indirect


ownership by a company or any other entity of a percentage of the shares or interest


forming the capital of another company or entity;, whiehare enough to hold a majority


of voting rights exercisable at general meetings df that other company or entity, or to


give a determining position in the management of'that other cdm£ahy or entity.


1.29. "Third Party” means any person Qthef than an Affiliated'Company.


1.30. "Quarter" means a period of three (3) .consecutive months starting on tire first day of


January, April, July or October.


. . . . Article 2


SCOPE AND DURATION OF THE CONTRACT


2.1. The scope of this Contract is, pursuant to the legislation in force in the Central African


Republic, to define the rights and obligations of the Parties with respect to the activities


of the Company related to the Permit set forth in Article 3.1. and to the Concessions


set forth in Article 6 which may result therefrom.


This Contract establishes the conditions under which the Company shall proceed to


exploration for Petroleum inside the Permit area and, if any, inside the Concessions.


It also establishes the conditions under which shall be performed the development and


exploitation of the Petroleum Commercial Fields which have given rise to the granting


of the Concessions set forth in Article 6, as well as the separation, treatment, storage,


transportation, marketing of Petroleum so produced and any other Petroleum


Operations which result therefrom up to the Delivery Point and which are authorized


under said Contract.











51


 (c) the delimitation of the relinquished areas shall be subject to the approval of the


Minister and shall accompany the application for the renewal of the term of validity


of the Permit, to which shall be attached a report specifying the work performed


over the relinquished areas from the Effective Date and the results obtained


therefrom.





Depending on the surface area and the shape of the initial


Permit area, specific relinquishment conditions may be





specified in the Contract, in particular in the event the


Permit has been divided into several zones, due to its


surface area.








3.8. The Company may at any time notify the Minister, with at least three (3) months' prior


notice, that it relinquishes its rights on all or part of the Permit In the event of


relinquishment in part, the provisions of Article 3.7. shall apply, mutatis mutandis, to


the delimitation of the relinquished area. Any volontary relinquishment during the term


of validity of the Permit shall not reduce the exploration work commitments set forth in


Article 4, nor the amount of the corresponding guarantee.








ARTICLE4

















4.1. During the initial period of validity of the Permit, the Company shall:





(a) cany out at least (• •• ) kilometers of seismic survey; the work with


respect to such seismic '•.survey shall commence within_(_) months





from the Effective Date; aild





(b) drill at least __(_) Exploratory Wells; the first Well shall commence


within_ (_) months from the Effective Date.





4.2. During the first renewal period of the Permit, the Company shall:





(a) carry out at least (_) kilometers of seismic survey;








(b) drill at least (_) Exploratory Wells.





4.3. During the second renewal period of the Permit, the Company shall:





(a) carry out at least C_) kilometers of seismic survey;





(b) drill at least (_) Exploratory Wells.























5 4


 The minimum exploration program shall take into account


the characteristics of each Permit. As priority is given to


drilling, the obligations under paragraphs (a) above may


be removed, as the case may be.








4.4. Each Exploratory Well set forth in Articles 4.1. to 4.3. shall be drilled to the minimum


contractual depth of_(_) meters, or to a lesser depth if discontinuing


drilling according to good international petroleum industry practice is justified by one


of the following reasons:


(a) basement is encountered at a depth less than the above-mentioned minimum


contractual depth;


(b) continued drilling is manifestly dangerous due to abnormal formation pressure;





(c) petroleum formations are encountered, requiring the installation of protective


casings which prevent reaching the above-mentioned minimum contractual depth;


or


(d) the objective which was specified in the E^pforatoiy Well.location report at a


depth deemed to be lower than the abovc-mentibned minimum-contractual depth is


reached before such depth. V’


In any of the above cases, rite. Company shall obtain jprior approval of the Minister,


prior to discontinuing drilling,,-Which approval, shall ,not be withheld without being duly


justified, and the well in question shall be deemed to have been drilled to the minimum


contractual depth. v-...*


4.5. If either during the initial period-.Q.f.ihe Permit or during the first renewal period the


Company drills a number :of Exploratory Wells greater than the minimum drilling


obligations specified for said period, the excess wells may be carried forward to the


following renewal period(s) and shall be deducted from the obligations specified for


said period(s), provided that at least one Exploratory Well shall be drilled during each


renewal period of the Permit


For purposes of Articles 4.1. to 4.3., Appraisal wells drilled under an Appraisal


program shall not be considered as Exploratory Wells and only one well per Discovery


shall be deemed to be an Exploratory Well.


4.6. Upon the Effective Date, the Company shall provide an irrevocable bank guarantee


acceptable to the Minister, guaranteeing its minimum work obligations for the first


initial exploration period provided for in Article 4.1.


In the event of renewal of the Permit, the Company shall also provide a similar


guarantee guaranteeing the minimum work obligations for that renewal period.


 The amount of the guarantee shall be calculated by using the unit costs per km of


seismic survey and per Exploratory Well set forth as follows:


(a) Dollars_(_) per km of seismic survey to be carried out;





(b) Dollars ( ) million per Exploratory Well to be drilled.


Three (3) months after completion of a seismic survey or an Exploratory Well drilled to


the minimum contractual depth, the above-mentioned guarantee shall be adjusted in


such a manner as to guarantee the outstanding balance of the minimum contractual


work obligations for the current exploration period, as valued in accordance with die


provisions of the previous paragraph.


If, upon expiry of any exploration period, or in the event of whole relinquishment or


cancellation of the Permit, the exploration work has not reached the minimum


commitments prescribed in this Article 4, the Minister shall have the right to call for the


guarantee as a compensation for the non-performance of the work commitments


undertaken by the Company.


After the payment has been made, the Company shap.be deemed to have fulfilled its


minimum exploration work obligations under Article 4 of this Contract; the Company


may, except in the event of cancellation of the ^eriliit; due to avmaterial breach of this


Contract, continue to benefit horn the - pfoidsions of said ’Cdritract and obtain the


renewal of the Permit, subject to apply therefor in the appropriate manner.





ARTICL££f





APPRAISAL 6$ A DISCOVERY








5.1. If the Company discovers Petroleum in the Permit, it shall notify the Minister thereof as


soon as possible, and provide him with information and data related thereto, as well as


perform, in accordance with good international oil industry practice, the tests necessary


to the determination of the shows encountered during drilling.





5.2. If the Company wishes to appraise the above-mentioned Discovery, It shall diligently


submit to the Minister an Appraisal work program and corresponding budget, no later


than eighteen (18) months following the date on which the Discovery has been notified


as set forth in Article 5.1. above. The Minister shall not reject such Appraisal program,


unless he may justify the reason thereof.





The Company shall then diligently perform the Appraisal work with respect to that


Discovery, in compliance with said program. Upon completion of said Appraisal work,


which shall not extend beyond the term of validity of the Permit provided for in Article


3, including the possible extensions thereof, the Company shall provide the Minister


with a report containing the technical and economic information with respect to the


field so discovered and appraised, which shall establish, in the Company's opinion,


whether said field is commercial or not. Such report shall include, inter alia, the











56


following information: geological and petrophysical characteristics of the field;


estimated delimitation of the field; results of the drill stem tests and production tests


performed; preliminary economic study with respect to the exploitation of the field


If, upon completion of the Appraisal work program, the Company declares the Field as


Commercial, it shall also submit to the Minister within six (6) months following


completion of Appraisal work a development and production plan with respect to said


Commercial Field, in accordance with the provisions of Article 6.2.


5.3. During the term of validity of the Permit, the Minister may, with at least six (6) months'


prior notice, request the Company to relinquish all its rights over the area


encompassing a Discovery, including Petroleum which may be produced from said


Discovery, if the Company:


(a) has not submitted an Appraisal work program with respect to said Discovery


within eighteen (18) months following the date on which the Discovery has been


notified to the Minister, or


(b) does not declare the Field as Commercial within two (2) years after completion of


Appraisal work.





ARIJCpE 6





GRANTING ANDRElsrEWALOEACbNCESSION








6.1. Each Commercial Field shall give. 'the'-,right of granting a Concession, under the


following conditions: .... ( } **•


(a) If after completion of the-Appraisal program with respect to a Discovery set forth


in Article 5.2., such Discovery is declared as Commercial Field by the Company, it


shall submit with the development and production plan provided for in Article 6.2.


an application for a Concession, in accordance with the provisions of the


Petroleum Code;


(b) The Concession shall be granted by decree, after approval of the development and


production plan with respect to the Commercial Field in question, for an initial


period of twenty-five (25) years from the date of granting thereof; it shall cover the


extent of the Commercial Field located inside the Permit then in force;


(c) Upon expiry of the initial period specified in paragraph (b), the term of validity of


the Concession shall be renewed by decree, under this Contract, for an additional


period of no more than ten (10) years, in the event the Company apply therefor


with supporting materials at least one (1) year prior to said expiry, provided that


the Company has fulfilled all its obligations and gives evidence that a commercial


production from the Concession in question may remain possible after the expiry of


the initial period of the Concession;














57


(d) If, upon expiry of the renewal period of the Concession specified in paragraph (c),


the exploitation of the Commercial Field remains possible, the Parties shall


mutually agree upon the conditions applicable to the continuation of exploitation.


6.2. For each Commercial Field, the Company shall submit to the Minister a development


and production plan, containing, inter alia, the following with respect to that


Commercial Field:


the delimitation of its extent as well as the corresponding technical supporting


materials;


an estimate of the recoverable reserves, both proven and probable, and of the


corresponding production profile, as well as a study on the methods for recovery


of Petroleum and utilization of Natural Gas;


the description of facilities and work required for the exploitation of the


Commercial Field, such as the number of wells, the facilities required for the


production, treatment, storage and transportation of Petroleum, as well as the time


schedule for the performance of those facilities and work;


a study ("6tude d'impact") on environment specifying the possible impacts of the


planned work concerning the environment arid'how such work intend to take into


account environmental concerns; <"’}


the estimates of development Capitol expenditures ahd production costs, as well as


an economic study which demonstrates the cbniinercial nature of the Field;





the delimitation and surface of the Concession applied for, inside the Permit in


force, with respect to the Commercial' Field.


Within ninety (90) days following receipt of the development and production plan, the


Minister may propose revisions or modifications to said plan and to the Concession


area applied for. The provisions of Article 14.2 of this Contract shall apply, mutatis


mutandis, to said development and production plan as regards the approval thereof.


In the event the Minister has not notified any revision or modification within the above-


mentioned time period of ninety (90) days, the development and production plan


submitted by the Company shall be deemed to be approved on the date of expiry of said


time period.


When the results obtained during the development justify some modifications to the


development and production plan, said plan may be modified by using the same


procedure as that provided for above with respect to its initial approval.


6.3. When the Company considers a Held as Commercial and when Petroleum discoveries


have been made by contract holders other than the Company in the same region, the


Company shall, upon request from the Minister, act in concert with said holders, in


accordance with the provisions of Article 7.2. below, prior to submitting the


development and production plan provided for in Article 6.2.














58


In addition, if the Commercial Field spreads beyond the Permit area, the Minister may


request the Company to exploit said Field in association with the holder(s) of the


contiguous Permit(s) under a unitization agreement, in accordance with the following


provisions:


(a) The Company shall submit to the Minister for approval the development and


production plan with respect to the Commercial Field prepared jointly with the


holder(s) of the contiguous Permit(s) within a time period which shall not exceed


one (1) year from the request;


(b) If the development and production plan is not submitted within the above-


mentioned time period, or if it is not approved, the Minister may prepare, or may


cause to be prepared, a development and production plan in accordance with good


international oil industry practice. The Company shall approve said plan if the


conditions specified by the Minister does not give rise for die Company to


investments greater than those which the Company would have borne with respect


to the Commercial Field in question if the Company had developed it by itself.


6.4. For each Commercial Held which has given rise to the granting of a Concession, the


Company undertakes to perform, at its expense, all the.Petroleum Operations required


for the development and production of said Held, in compliance with the development


and production plan approved.


Such Petroleum Operations shall cotpmence within six-,'(6}. m6hths following the date


on which the Concession has beeii granted, and the Cbiripany shall diligently cany them


out. \ vC--


6.5. Any application for relinquishment, m.jyhole of part, of a Concession, submitted by the


Company with at least one (1) ye^r's' priof notice, shall be favorably examined provided


that the Company has fulfilled ali.its -bbligations and undertakes to cany out the work


which may be prescribed , by j the Minister for purposes of public safety, field


conservation and protection of environment and aquifers, in accordance with good


international oil industry practice. The above-mentioned prior notice shall be


accompanied with the list of the actions which the Company undertakes to cany out for


purposes of its relinquishment, and such relinquishment shall come into effect only after


completion of the work prescribed by the Minister.





ARTICLE 7





TRANSPORTATION OF PETROLEUM BY PIPELINES








7.1. The Company shall have the right to transport, or cause to be transported while


keeping the ownership thereof, Petroleum extracted under this Contract, to the points


of gathering, treatment, storage, loading or major consumption, under the conditions


set forth in the Petroleum Code. It shall benefit in particular from the provisions set


forth in the second paragraph of Article 36 and in Article 37 of said Code.











59


The authorization for transportation of Petroleum by pipelines outside the Concession


areas shall be granted by decree, upon application submitted by the Company or by


each individual entity constituting the Company in accordance with the provisions of


Article 40 of the Petroleum Code. Said authorization shall not be withheld if the


project of construction of pipelines and related facilities complies with the regulations


in force and allows to ensure transportation of extracted Petroleum under the best


economic and technical conditions.


7.2. In the event of several Petroleum discoveries in the same geographical region, the


Company shall reach amicable agreement with the other producers for the joint


construction and/or utilization of pipelines and/or facilities which allow to lift all or part


of their respective production. Any protocol, agreement or contract entered into for


this purpose shall be subject to prior approval of die Minister.


In the event no amicable agreement can be reached, the Minister may demand, pursuant


to Article 39 of the Petroleum Code, the Company to associate with the other


producers for the joint construction and/or utilization, under the best technical and


economic conditions, of pipelines and/or facilities, provided that such request shall not


give rise for the Company to investments greater than those which the Company would


have borne if the Company had carried out the transportation project by itself.


7.3. In accordance with the provisions of Article''42 '‘of ithe Petroleum Code, when the


Company operates a pipeline and the related -faeiiities, it may. be req'uested to accept,


within the limit and the duration of its:bxc8ss transportation‘capacity, the transportation


of Petroleum produced by other p^pdiu'cers subject, to ffce jpayment of the transportation


tariff provided for in the Petroleum\Code.





7.4. For purposes of providing incentives...to-.fhe carrying out of a project of Petroleum


exportation by pipeline, the State..-Shall-.ii'aVe the right to associate with the Company


and, as the case may be, with .other prcxlucers, for purposes of constituting the entity or


entities which shall be responsible* for the construction and/or operation of all or part of


the required transportation pipelines. The terms and conditions of such association


shall be the purpose of a separate agreement to be executed in due time by the various


parties concerned.








ARTICLE 8


PRODUCTION FROM A COMMERCIAL FIELD











8.1. For each Commercial Field which has given rise to in the granting of a Concession, the


Company undertakes to produce reasonable quantities of Petroleum in accordance with


good international oil industry practice, taking into account inter alia the rules of good


conservation and optimum recovery of Petroleum reserves under economic conditions.


For this purpose, the Company shall inter alia:


(a) Apply to the exploitation of any Commercial Field the most appropriate methods in


order to ensure the conservation of said Field and to raise the Petroleum


production thereof to an optimum level under economic conditions;


(b) Carry out, during the preparation of the development and production plan set forth


in Article 6.2, studies on enhanced recovery and use such methods if they allow, in


accordance with good international oil industry practice and under economic


conditions, an improvement of the recovery rate of Petroleum of the Commercial


Field in question;


(c) Carry out periodically for each producing well the tests and measurements which


allow to monitor the proper exploitation of any Commercial Held.


8.2. As fom the commencement of production, within three (3) months prior to the expiry


of each Calendar Year (and for the production program with respect to the first year of


production, at least three (3) months prior to the planned date of commencement of


production), the Company shall submit to the Minister with respect to each Commercial


Held, the production program established in accordance with the provisions of Article


8.1., and the corresponding budget, for the following Calendar Year. The Company


shall undertake to produce during each Calendar Year-the quantities estimated in the


production program relating to each Commercial -Field, as approved pursuant to Article


14. • -KV


8.3. The Company shall measure, at oneori several points as rhutuiaily agreed upon by die


Parties (in particular at the liftmg\point of each Commercial Held and at the Delivery


Point), the quantity and quality of Petroleum.produced after extraction of the water,


sediments and associated substances (showing. Separately the volume of Petroleum used


for the requirements of Petroleum Derations and unavoidable losses), by using, with


prior approval of the Department*, in charge of Petroleum, the appliances and


procedures customarily used"in...the international petroleum industry. If during


exploitation the Company-., wiihes to change said measurement appliances and


procedures, it shall obtain prior approval of the Department in charge of Petroleum.


The Department in charge of Petroleum shall have the right to examine those


measurements and to inspect or cause to be inspected the appliances and procedures


used.


Where the appliances and procedures used have caused an overstatement or


understatement of measured quantities of Petroleum, the error shall be deemed to have


existed since the date of the last calibration of the appliances, unless the contrary can be


justified, and the appropriate adjustment shall be made for the period of existence of


such error.


8.4. The Company shall become the owner of Petroleum produced under this Contract at


the wellhead.























A


JL


 ARTICLE 9





OBLIGATION TO SUPPLY DOMESTIC MARKET


WITH CRUDE OIL








9.1. The Company shall meet in priority the needs of the domestic Crude Oil consumption


in the Central African Republic, in the event the State cannot meeet such needs from


the share(s) of production which the State is entitled to and if such domestic market


supply is technically possible.


9.2. For this purpose, the Company shall undertake to sell to the State, if the State so


requests, from the Crude Oil production in the Central African Republic which the


Company is entitled to, the portion necessary to meet the needs of the domestic


consumption in the country, which shall be equal at the maximum to the percentage


which the quantity of Crude Oil produced by the Company during a Calendar Year


represents compared with the total quantity of Crude Oil produced during such Year in


the Central African Republic.


For this purpose, the Minister shall notify at least thr^e (3) months prior to the expiry


of each Calendar Year the quantity of Crude QftwMplt the State dbsires to purchase, in


accordance with the provisions of this Articlej.during the following-Y6ar.


Lifting shall be made to the State., or; to the beneficiary designated by the Minister


through reasonable and equal .quantities, ona.regular basis during said Year, in


accordance with procedures to be: agreed.upon.by die Parties. The price of Crude CHI


so sold to the State shall be the Ex-Field.Price*defined in Article 16; it shall be payable


in Franc CFA








ARTICLE 10








NATURAL GAS








10.1. The provisions of this Contract shall apply, mutatis mutandis, to Natural Gas subject to


the specific provisions of this Article.


10.2. Any quantity of Associated Natural Gas which cannot be economically re-injected





neither used for the Petroleum Operations nor treated to be sold, may be flared by the


Company subject to prior approval of the Minister, which approval shall not be


withheld if flaring said Gas is in accordance with good international petroleum industry


practice. Unless in the event of emergency, the Company shall request the approval of


the Minister at least two (2) months in advance; such request shall be accompanied with


a study demonstrating with all the necessary evidences that all or part of such Gas


cannot be usefully and economically utilized for purposes of improving through gas re¬


injection the maximum economic rate of recovery of Crude Oil or for purposes of any


other utilization which could be normally contemplated


10.3. If the Company decides:





(a) to flare the Associated Natural Gas in accordance with the provisions of Article


10.2. above; or


(b) not to exploit a Non-Associated Natural Gas Discovery;


the State shall have the right to exploit, treat and lift said Natural Gas, without paying


any compensation to the Company. In such a case, the State shall bear all the


additional costs required for production, treatment and lifting of said Natural Gas.





ARTICLE 11





COMPANY’S RIGHTS RELATING TO THE


CONDUCT OF PETROLEUM OPERATIONS





11.1. In accordance with the provisions of the Petroleum* Code and this Contract, the


Company shall have the right to;


(a) explore for, extract, treat, store, trapspph, sell and export Petroleum coming from


the fields included within the P&miirafea and the CbnceSsions which such Permit


allows to be entitled to, as wdl. aS.the related substances' and/or the products which


derive therefrom by separitrioriortreatment excluding refining;


(b) have access to and occupy the required land, inside the Permit area and the


Concessions which such Permit-allbws' to be entitled to, for purposes of conducting


Petroleum Operations; ...... ■. } ’*


(c) cany out any work arid-facilities, as well as, more generally, any actions and


operations necessary for the performance of Petroleum Operations.


The Company may, inter alia, pursuant to the regulations in force and subject to the


payment of applicable fee, if any:


(a) use the water necessary for the Petroleum Operations provided that the persons or


livestock watering points are not deprived of the water supply;


(b) use the stones, sand, clay, gypsum, limestone and other analogous substances


necessary for the Petroleum Operations.


11.2. Subject to prior approval of the Minister, which approval shall not be withheld without


any duly justified reason, the Company shall have the right to build and operate any


facilities and work necessary for the Petroleum Operations such as, without limitation


to, roads, trails, pipelines, landing strips, telecommunication systems, production,


treatment and storage facilities, whether inside or outside the Permit or the Concessions


which may result from such Permit


Said authorization by the Minister may be subject to the utilization of the excess


capacity of said facilities by Third Parties, provided that such utilization shall not


interfer with the Petroleum Operations and provided that said Third Parties shall pay


the Company a fair and equitable compensation.


11.3. Subject to compliance with the legislation in force, the foreign personnel employed by


the Company and its subcontractors for the requirements of the Petroleum Operations


and their families shall be authorized to enter into and stay in the Central African


Republic.


The Minister shall provide assistance to the Company for the issue and renewal of the


administrative documents required for the entry and stay in the Central African


Republic and die exit of said personnel and their families, in particular with respect to


visas, working permits and residence permits, in accordance with the legislation in force


in the Central African Republic.





ARTICLE 12





COMPANY'S OBLIGATIONS RELATING TO


THE CONDUCT OF PETROLEUlVt bpERATIONS





12.1. The Company shall comply with the liiws and regulations'in force in the Central African


Republic and with the provisions.of this Contract. \


12.2. The Company shall carry out all work required for the performance of the Petroleum


Operations in accordance with good- international petroleum industry practice.


12.3. The Company shall during Petroleum Operations take any actions necessary for the


protection of environment


The Company shall, inter alia, take any reasonable steps in order to:


(a) ensure that all facilities and equipment used for the requirements of the Petroleum


Operations are in good order and correctly kept in good repair during the term of


this Contract;


(b) avoid losses and discharges of Petroleum produced as well as losses and discharges


of mud or any other product used in Petroleum Operations;


(c) ensure the protection of water bearing strata encountered during Petroleum


Operations;


(d) store Petroleum produced in storage facilities erected for that purpose;


(e) as the case may be, rehabilitate the sites of Petroleum Operations upon completion


of each Petroleum Operation.











64


12.4. Hie Company shall open within three (3) months following the Effective Date, an office


in the Central African Republic, and maintain it during the term of the Contract; said


office shall include in particular a representative authorized to conduct Petroleum


Operations, to whom any notice under this Contract shall be delivered.


The Company shall notify the Minister, upon the date on which this Contract is


executed, of the entity designated as Operator. Any change of Operator shall receive


prior approval of the Minister, which approval shall not be withheld without any duly


justified reason.


12.5. The Company shall, for the performance of Petroleum Operations, employ in priority,


subject to similar qualifications, citizens from the Central African Republic and


contribute to the training of such personnel in view of allowing them to have access to


any position of qualified worker, supervisor, executive and manager.


For that purpose, the Company shall establish, at the end of each Calendar Year, in


agreement with the Minister, a plan for recruiting Central African personnel and a plan


for training and further training in order to reach a larger participation of such


personnel in Petroleum Operations.


12.6. The Company shall also contribute to the traimng-.and- further training of the agents


from the Department in charge of Petroleum;' ur .accordance witjh’a plan established in


agreement with the Minister at the end of ek^h Calendar-YdarV For that purpose, the


Company shall allocate to that plan'.of:• training of Central' African personnel from the


Administration or place at die. .Munster's disposal s rmriiinum of Dollars_(_)


per year during the term of-.Validity of the: Permit and, as from the granting of a


Concession, a minimum of Dollars s' \t\J ) per year.





/•VESICLE 13





INFORM ATION AND REPORTS








13.1. The Company shall record and keep in accordance with good international petroleum


industry practice all information and data resulting from the Petroleum Operations and


shall, as soon as practicable, provide the Department in charge of Petroleum with a


copy of all information, data, documents, reports and interpretations, obtained or


prepared in the course of the Petroleum Operations, including, inter alia:


(a) geological studies and synthesis reports as well as the maps and documents related


thereto;


(b) geophysical studies, measurement and interpretation reports, along with the maps,


profiles, sections or any other document related thereto and, upon request from the


Department in charge of Petroleum, a copy of the records made; in any event, such


records shall be provided to the Department in charge of Petroleum upon


termination of the Contract;


 (c) well location reports, well completion reports, measurements, drill stem tests,


production tests, and logs as well as analyses, with a copy of records made;


(d) more generally, all reports, measurements, analyses or other results with respect to





any activity carried out under this Contract


All maps, sections and all other geophysical and geological documents and logs shall be


provided to the Department in charge of Petroleum on an appropriate transparent


support for subsequent reproduction and, as the case may be, on a digitalized support


The Company shall also provide the Department in charge of Petroleum with a


representative portion of the cores, cuttings and samples of fluids produced during drill


stem tests or production tests.





Upon request from the Minister, the Company shall provide him with any other


information or data in its possession relating to the Petroleum Operations.


Upon termination or in the event of relinquishment or cancellation of this Contract, the


original documents, including magnetic tapes, shall be transferred to the Department in


charge of Petroleum, which is the owner thereof. ; IT the Minister so requests, the


seismic records shall however be kept by the Corjopany arid remain freely at the State's


disposal during a time period of ten (10) years ’froni ’sSd termination, relinquishment or


cancellation.





13.2. In addition, the Company shall provide-.tiie Departmerit in charge of Petroleum with the


following periodical reports: \;*S'\


(a) daily reports on drilling and production] activities;





(b) weekly reports on geophysical w.brk;


(c) as from granting of a Concession, monthly reports on development and


exploitation activities along with statistics on production;


(d) within thirty (30) days from the end of each Quarter, a report on the Petroleum





Operations carried out during the previous Quarter, which shall include in


particular the description of the Petroleum Operations earned out and a detailed


statement of expenses incurred;


(e) within three (3) months from the end of each Calendar Year, a report on the


Petroleum Operations carried out during the previous Year, along with a detailed


statement of expenses incurred and a list of personnel employed by the Company.


13.3. The Department in charge of Petroleum may have access to the technical and economic


files of the Company relating to the Petroleum Operations, of which at least one copy


shall be kept in the Central African Republic.


13.4. The Parties undertake to consider as confidential and not to communicate to Third


Parties the data and information relating to the Petroleum Operations, during a time


period of five (5) years from the obtention thereof. However, each Party may


communicate them to persons employed by such Party or working on its behalf, which


persons shall undertake to comply with this confidentiality provision.


The Minister may use data and information provided by the Company in order to


prepare and publish any report of general interest Notwithstanding the provisions of


the preceding paragraph, the Minister may also disclose any data and information


relating to an area which the Company is no longer entitled to under this Contract








ARTICLE 14


ANNUAL WORK PROGRAMS











14.1. The Petroleum Operations carried out by the Company during any Calendar Year shall


be performed on the basis of the Annual Work Program and corresponding budget with


respect to said Calendar Year.


For that purpose, within three (3) months.pfior to the end. of eaeh-.Calendar Year (or


within thirty (30) days following tbe.EffectiVe Date. ai. regards the Annual Weak


Program and corresponding budget' wltii'respect to. tjhie current Calendar Year), the


Company shall submit to theMiitiStei* the Annual. Work' Program and corresponding


budget planned for the following CalendarYear.


Each Annual Work Program and coripspohding budget shall be broken down into the


various exploration activities and, as -the case may be, into the Appraisal activities for


each Discovery, and the developmeht and production activities for each Commercial


Field.


14.2. The Minister shall not reject the Annual Work Program and corresponding budget


submitted by the Company without any duly justified reason. The Minister may


propose revisions or modifications to the Annual Work Program and corresponding


budget by notifying the Company thereof within a time period of thirty (30) days


following receipt of this Program. In that event, the Minister and the Company shall


meet as soon as possible to review the revisions or modifications requested and to


establish by mutual agreement the Annual Work Program and corresponding budget in


final form, in accordance with good international petroleum industry practice. The date


on which the Annual Work Program and corresponding budget are deemed to be


approved shall be the date of the above-mentioned mutual agreement. However, with


respect to the Annual Work Program relating to exploration and Appraisal, the


Program and budget established by the Company after the above-mentioned meeting


shall be deemed to be approved as from the date on which they have been submitted,


provided that they comply with the obligations set forth in Articles 4 and 5.


If the Minister does not notify the Company of his wish for revision or modification


within the above-mentioned time period of thirty (30) days, the Annual Work Program


and corresponding budget submitted by the Company shall be deemed to be approved


by the Minister on the date of expiry of said time period.


14.3. The results obtained during the performance of work or special circumstances may


justify some changes in the Annual Work Program and corresponding budget. In that


event, after notifying the Minister thereof, the Company may make such changes,


provided that the basic objectives of said Annual Work Program shall not be changed.





ARTICLE 15





SUPERVISION OF PETROLEUM OPERATIONS








15.1. Petroleum Operations shall be subject to supervision by the Department in charge of


Petroleum. The duly commissioned representatives from the Department in charge of


Petroleum shall have the right, inter alia, to supervise Petroleum Operations and, at


reasonable intervals, to inspect the facilities, equipment^: material, records and books


relating to Petroleum Operations, provided that . 'such inspection shall not unduly delay


the proper conduct of said Operations. V>.V‘*


For purposes of permitting the exercise-of the above-rnentioned rights, the Company


shall provide the representatives.-' of the Department in charge of Petroleum with


reasonable assistance regardihg. tfansportatipn ahd accomodation, and transportation


and accomodation costs directly related.tQ. supervision and inspection shall be borne by


the Company.


15.2. The Company shall regularly inform the Department in charge of Petroleum of the


performance of Petroleum Operations and of the accidents which have occurred, if any.


The Company shall, in particular, notify the Department in charge of Petroleum, as


soon as possible and at least one (1) month in advance, of the planned Petroleum


Operations such as geological or geophysical survey, drilling.


In the event the Company decides to abandon a well, it shall notify the Department in


charge of Petroleum thereof at least seventy-two (72) hours prior to such


abandonment; such time period shall be extended up to thirty (30) days with respect to


producing wells.


15.3. The Department in charge of Petroleum may require the Company to carry out, at the


latter’s expense, any work considered as necessary for the safety of Petroleum


Operations.


 ARTICLE 16





VALUATION OF CRUDE OIL AND NATURAL GAS








16.1. For purposes of this Contract, the unit selling price of Crude Oil shall be the F.O.B.


"Market Price" at the Delivery Point, expressed in Dollars per barrel, accurately


reflecting the current international market price as determined below. A Market Price


shall be established for each type of Crude Oil or Crude Oil mix.


An "Ex-Field Value" shall also be determined, from the Market Price, as provided for


in Article 16.5. below.


16.2. The Market Price of Crude Oil, calculated each Quarter, shall be the weighted average


of the prices obtained by the Company and the State from sales contracts with Third


Parties. Commissions paid in sales to Third Parties shall not exceed the amounts


customarily paid in the international petroleum industry.


In the event such sales to Third Parties are not made during the Quarter in question, the


value shall be established by comparison with the "Current International Market


Price", during the Quarter in question, of Crude/Cfe produce^ in the Central African


Republic and die neighbouring producing, countries, taking into\acc6uht the differences


in quality, gravity, transportation and.payinent conditions. -.


The term "Current International Market Price" means the price which permits the


Crude Oil sold to reach, at the.treatment or consumption places, a competitive price


equivalent to that of Crude Oils of the. same- quality coming from other regions and


delivered under comparable commercial,, conditions, including quantities as well as


destination and utilization of $uch; Grade Oils, taking into account the market


conditions and the type of contracts:'-


16.3. A committee headed by the Minister, or his deputy, consisting of representatives from


the Administration and representatives from the Company shall meet upon request from


its president, in order to establish, in accordance with the provisions of this Article 16,


the Market Price of the Crude Oil produced, which shall apply to the preceding


Quarter. The decisions of the committee shall be taken unanimously.


In the event no decision is taken by the committee within a time period of thirty (30)


days after the end of the Quarter in question, the Market Price of the Crude Oil


produced shall be definitely determined by a worldwide recognized expert appointed by


mutual agreement upon the Parties, or, failing such agreement, by the International


Center for Technical Expertise from the International Chamber of Commerce. The


expert shall establish the price in accordance with the provisions of this Article 16


within twenty (20) days from his appointment. The expertise costs shall be shared


equally by the Parties.


16.4. Pending the determination of the price, the Market Price provisionally applicable to a


Quarter shall be the Market Price of the preceding Quarter. Any necessary adjustment


shall be made no later than thirty (30) days after the determination of the Market Price


for the Quarter in question.


16.5. The Ex-Field Value shall be equal to the above-defined Market Price, as reduced by the


actual costs of transportation and, as the case may be, of treatment of the Crude Oil


extracted, incurred from the exit of the main storage centers related to the Commercial


Field (after separation and treatment of Petroleum from one or several Fields) up to the


Delivery Point The Ex-Field Value shall be determined for each Crude Oil and each


Quarter, by using the procedure provided for in this Article 16.


16.6. For purposes of this Contract, the value of Natural Gas sold or assigned to Third


Parties or the State shall be the actual price obtained by the Company with respect to


the sale of said Natural Gas.


With respect to sales or assignments of Natural Gas other than to Third Parties or the


State, the value shall be determined by agreement between the Minister and the


Company taking into account, inter alia, the principles then in force in the world as


regards marketing of Natural Gas, the quality and quantity of Natural Gas and the price


of the Central African Natural Gas sold to Thjrdv.Parties under comparable market


conditions. /*""*■-v* •••.. \ ..


As and when required, the Ex-Field VMue of Natural 'Gas * shall be established in


accordance with the principles provided for in Article H6.5.








ARTICLE 17





ROYALTY ON PRODUCTION








17.1. The Company shall pay the State a royalty on production, determined on the basis of


the Ex-Field Value of Petroleum (calculated from the Market Price in accordance with


the provisions of Article 16 above) and the quantities of Petroleum produced and ex¬


field measured by applying the royalty rate defined in Article 17.2.


The quantities of Petroleum which are either consumed for the requirements of


Petroleum Operations or re-injected in the fields, or lost or non-utilized, shall be


excluded from the calculation of this royalty. The quantities of Petroleum which are


lost or non-utilized shall be limited to justified amounts.
































70


17.2. The royalty rates applicable to the Company with respect to all its productions of


Crude Oil and Natural Gas obtained under this Contract shall be calculated as provided


for in paragraphs (a) and (b) below:


(a) Crude Oil and products other than Natural Gas:


Royalty rate: twelve point five percent (12.5%).


(b) Natural Gas:


Royalty rate: five percent (5%).


17.3. Royalty on production shall be paid, in whole or in part, either in cash or in kind. The


selection of the method of payment of royalty on production shall be notified to the


Company by the Minister, after advice from the Minister in charge of Finance, at least


three (3) months prior to the commencement of the first regular production under this


Contract Such selection shall remain in force as long as the Company has not received


a new notice from the Minister, which shall be made at least three (3) months prior to


the beginning of the Calendar Year for which the new method of payment shall be


applicable. If such selection is not notified within the time period provided for, royalty


shall be paid in whole in cash.


17.4. Royalty in cash shall be provisionally settled on. a:;tfionthly basis, and definitely on a


quarterly basis, to the Ministry in charge of Financed


Prior to the fifteenth (15th) day of e£cit month, the Company shall notify the Minister,


with all useful justifications, of aVstatement of the quantities of Petroleum dispatched


from the main storage centers related to the fields^-in production during the preceding


month, after deduction of the quantities excluded for the calculation of royalty, as


provided for in Article 17.1., and it shall pay the royalty corresponding to the preceding


month by considering the Market-PriC^ aiid the Ex-Field Value determined in Article 16


for the Quarter in question.


As soon as the Market Price and the Ex-Field Value applicable to the preceding


Quarter are determined, the Minister shall notify the Company of the final status of


settlement of the royalty, after deduction of the payments made on a provisional basis.


If this outstanding balance is negative, the amount shall be, until final settlement,


deducted from the amount of royalty on production which the Company shall be


subsequently liable to. If the outstanding balance is positive, the Company shall pay the


amount within thirty (30) days.


17.5. When royalty is paid in kind, it shall also be settled on a monthly basis.


Prior to the fifteenth (15) day of each month, the Company shall notify the Minister,


with all useful justifications, of a statement of the quantities of Petroleum dispatched


from the main storage centers related to the fields in production during the preceding


month, including the quantities paid to the State as royalty on production. After


checking, the Minister shall settle the above-mentioned monthly statement and notify


the Company prior to the twenty-fifth (25th) day of the same month of the status of


settlement of the royalty.














71


 Except as otherwise agreed upon by the Parties, as from the fifteenth (15th) day of each


month, the Company shall place at the State's disposal, or at the disposal of the


beneficiary designated by the Minister, at the exit of the main storage centers (after


separation or treatment of Petroleum from one or several fields), on a time basis to be


mutually agreed upon with the Minister, the quantities of Petroleum payable as royalty


for the preceding month. The Company shall undertake to store, free of any charge,


such quantities during at least thirty (30) days. If the Minister so requests and if the


Company has the necessary facilities, it shall transport and delivery said quantities to


the State or its beneficiary, at their expense.





The Minister or his beneficiary shall have a time period of thirty (30) days from the date


on which the Company has placed Petroleum at their disposal, to cause to be lifted such


Petroleum. If the entirety of the monthly royalty has not been lifted upon expiry of


such time period, the Company may dispose of the quantities unlifted, provided that it


shall pay in cash the amount of royalty corresponding to such quantities, in accordance


with Article 17.4. above.


Within three (3) months prior to the beginning of the Quarter for which the royalty in





kind shall be delivered, the Parties shall establish a lifting program relating to the


Petroleum which constitutes the royalty, on a most regular basis during die Quarter.








ARTTG£E18





Taxation








18.1. The Company shall be subject to cpxpora'te'- tax under the conditions provided for in the


Petroleum Code.


The net profits arising from all. the Company's Petroleum Operations in the territory of


the Central African Republic shall be subject to the direct tax of fifty percent (50%)


calculated on said net profits.





Another rate determined in accordance with the


provisions of Article 69 of the Petroleum Code may


be specified in the Contract.








The Company shall maintain for each Calendar Year, in accordance with the regulations


in force in Central African Republic and the provisions of this Contract, separate


accounts with respect to Petroleum Operations which shall be used, inter alia, to


establish a profit and loss account and a balance sheet which will show the results of


said Petroleum Operations as well as the assets and liabilities allocated or directly


related thereto.























72


Company's income arising from its activities of transportation of Petroleum by pipelines


in the territory of the Central African Republic shall be subject to joint taxation with


income arising from other Petroleum Operations. However, income arising from


transportation of Petroleum by pipelines will be subject to separate taxation, in


accordance with Article 76 of die Petroleum Code, if the Company so requests upon


submission of the development and production plan provided for in Article 6.2.


In the event the Company comprises several entities, their tax obligations shall be


individual


Unless as otherwise provided for by the Parties, corporate tax shall be paid in Dollars


through quarterly payments in advance with annual settlement after the results of the


preceding Calendar Year have been determined. Such payments in advance shall be


made prior to the end of each Quarter and shall be equal, except as otherwise agreed


upon (in particular, for the first year of payment of corporate tax) to the fourth of


corporate tax paid in the preceding Calendar Year.


The settlement and payment of the outstanding balance of corporate tax with respect to


profits of a given Calendar Year shall be made no later than the first day of May of the


following Year, upon remittance of the annual tax return...


If the Company has paid in advance an amount-.grfcater than die 'amount of corporate


tax which it is liable to with respect to the’profits of a giyeii' Ckehdar Year, the excess


amount shall be refunded within ninety:(90)days following, the remittance of its annual


tax return. .. \


18.2. The Company shall pay the State a supplerheritary petroleum payment (hereinafter


referred to as "Supplementary Payme&t^detenhined as follows:


(a) The Company (or each. entity, constituting the Company) shall attach to its annual


tax return the determinancy of the "R" ratio as defined hereafter and calculated


from the results recorded at the end of the preceding Calendar Year.


(b) The "R" ratio shall represent the ratio between "Accumulated Net Revenues" and


"Accumulated Investments", as determined from the accumulated amounts from


the Effective Date up to the end of the preceding Calendar Year, where:


- "Accumulated Net Revenues" means the sum of after tax profits calculated in


accordance with the Accounting Procedure;


- "Accumulated Investments" means the sum of exploration, Appraisal and


development expenditures calculated in accordance with the Accounting


Procedure.


(c) As long as the "R" ratio is lower than two (2), no Supplementary Payment shall be


payable.

















73


 (d) If said ratio is equal or greater than two (2), the Supplementary Payment to be paid


to the State shall be equal to_percent (__%) of the amount of profit


subject to corporate tax with respect to the preceding Calendar Year, as


determined prior to the allowances authorized under Article 19.


(e) Except as otherwise agreed upon, the Supplementary Payment shall not be


considered as a deductible charge for the determination of profit subject to


corporate tax.








As the case may be, a different method may be


provided for in the contract.








(f) The Supplementary Payment shall be paid in Dollars according to a procedure


similar to that defined in Article 18.1. with respect to payment of corporate tax.


18.3. The Company, its shareholders and its Affiliated Companyes shall benefit from the


taxation advantages provided for in Article 74 of the Petroleum Code.


In addition, in accordance with the provisions of.Article.7$ of the Petroleum Code, the


Company shall be exempt from any taxes on-turnover. The subcontractors who have


executed a contract with the Company for purposes of Pe.troteum Operations shall also


be exempt of any taxes on turnover 'as' -', regards purchasing' of goods and services


directly necessary for the execution-p.f such contract \"


Wages and salaries paid to the Company's employees in the Central African Republic


shall be subject to taxes related to sucb nacome, as well as to the social contribution for


development, in accordance with .the provisions of the General Tax Code in force.


18.4. The Company shall pay the Minister in charge of Finance the following annual rentals:


(a) Dollars_ (_) per sq. km. annually during the initial exploration


period of the Permit;


(b) Dollars_(_) per sq. km. annually during the first renewal period of


the Permit;


(c) Dollars__ (_) per sq. km. annually during the second renewal period


of the Permit and any extension thereof as provided for in Articles 3.4. and 3.5.;


(d) Dollars_(_) per sq. km. annually during the term of a Concession.


The annual rentals set forth in paragraphs (a), (b) and (c) above shall be paid in advance


each year, no later than the first day of each Contract Year, for the whole Contract


Year, on the basis of the surface of the Permit held by the Company on the date of


payment of said rentals.


 The annual rental related to a Concession shall be paid in advance each year, on the


beginning of each Calendar Year following the granting of such Concession (or, for the


Year of said granting within thirty (30) days from the date of granting, prorata temporis


for the remaining duration of the Year in question) on the basis of the surface of the


Concession on said date.


In the event of surface relinquishment during a Year or in the event of Force Majeure,





the Company shall have no right to be reimbursed for the annual rentals already paid.








ARTICLE 19


INCENTIVES TO PETROLEUM EXPLORATION











19.1. In accordance with the provisions of the Petroleum Code, the State grants the


Company the specific advantages provided for in this Article, in view of providing


incentives to petroleum exploration.


19.2. Depletion allowance


The Company may constitute each Calendar :Ye£ir a provision fb^pinposes of depletion


allowance equal to twenty percent (2G%)-.of-die Ex-Field Valhe -of Petroleum extracted


which represents the basis of calcpferion of the royalt^> tb the extent of twenty-five


percent (25%) of the net pipfit.'of the Year..in question, as determined prior to


deduction of said allowance. :


The depletion allowance shall be ••recorded as a specific item of the liabilities of the


balance sheet which shall show.the athount of allowances with respect to each Calendar


Year.


Such allowances shall be subject to corporate tax at the rate provided for in Article 18


in the event they are not re-invested as Approved Expenditures in the Central African


Republic within a time period of two (2) years; the term "Approved Expenditures"


means Petroleum exploration expenditures and any expenditure relating to a project


which has been authorized by the Minister beforehand. Such tax shall be paid upon


expiry of said time period of two (2) years, as regards the portion of the allowance not


re-invested to that date, increased by the interest due to the delay as provided for in


Article 20.4.


If the Company incurs Approved Expenditures for purposes of using the depletion


allowance, it shall add to its taxable profit, under the same rate as the depreciation of


said Expenditures, an amount equal to those investments. When the allowance is used


in another manner, the same re-incorporation shall be made once.


19.3. Investment credit





In view of providing incentives to Petroleum exploration in the Central African


Republic, the Company may benefit from an investment credit equal to fifty percent


(50%) of the exploration expenditures incurred by the Company during a time period of


three (3) years from the date of commencement of its first regular commercial


Petroleum production in the Central African Republic, which production shall be kept


during that whole period. Such investment credit may be immediately deducted from


the profit subject to the corporate tax.


19.4. For a given year, the fiscal advantage of investment credit shall not be authorized along


with the depletion allowance, nor vice versa.


For purposes of this Article, the exploration expenditures shall exclude, inter alia, any


expenditures relating to Appraisal operations.








ARTICLE 20


ACCOUNTING AND AUDIT











20.1. The Company shall maintain its accounting in accordance'Vitft.die regulations in force


arid the Accounting Procedure attactiidd; hereto as Appendix 2.


20.2. Records and books shall be maintained.. in, the; French language and expressed in


Dollars. They shall be supported by detrihed documents demonstrating the expenses


and receipts of the Company under this Gbiitract


Such records and books shall he'used, inter alia, to determine the gross income,


operating costs and net profits-of the Company, as well as to establish the Company's


tax return. For information purposes, the profit and loss accounts and balance sheets


shall also be maintained in Franc CFA.


20.3. After notifying the Company in writing, the State may cause to be examined and





audited the records and books relating to Petroleum Operations by experts of its


election or by its own agents. The State will have a period of five (5) years from the


end of a given Calendar Year to perform such examinations or audits and submit its


objections to the Company for any contradictions or errors found during such


examinations or audits. The Company shall provide any necessary assistance to the


persons designed by the State for that purpose and facilitate their performance. The


reasonable audit expenses shall be reimbursed by the Company to the State and shall be


considered as a deductible charge for purposes of calculating the taxable profit


























76


20.4. The amounts due to the State or to the Company shall be paid in Dollars or in another


convertible currency to be mutually agreed upon by the Parties.


In the event of delay in a payment, the amounts payable shall bear interest at a rate of


_percent (___%) per year from the day such amounts should have been paid up


to the day on which they are paid, with monthly capitalization of interests if the delay is


greater than thirty (30) days.








ARTICLE 21


IMPORT AND EXPORT








21.1. The Company shall have the right to import in the Central African Republic, in its own


name or on behalf of its subcontractors, all the equipment, materials, transportation


vehicles and four-wheel vehicles, aircraft, spare parts and consumable materials


necessary for Petroleum Operations.


21.2. The expatriate employees and their families which work in the Central African Republic


for the Company or its subcontractors shaU- haVe^the right to import in the Central


African Republic, during their first year, of Settlement, their-.household appliances and


personal effects as well as one automobtieper employee.\


21.3. The goods set forth in Articles-.2T.lV and 21,2v.jshall be imported by the Company in


accordance with the provisions .©? Article 79\©£ the Petroleum Code, with exemption or


suspension of any import duties and tixes, as the case may be. The equipment,


materials and vehicles directly necesSaiy-for Petroleum Operations and intended to be


re-exported shall benefit frora the temporary import regime.


The Company and its subcontractors shall proceed to import goods only to the extent


that said goods are not available in the Central African Republic under equivalent


conditions of price, quantity, quality, delivery time and terms of payment, it being


understood that the Company and its subcontractors shall give preference to Central


African companies as regards any construction, supply or service contract, under


equivalent conditions of price, quantity, quality, delivery time and terms of payment


For any contract of which the estimated value exceeds two hundred thousand


(200,000) Dollars, the Company shall select its subcontractors through tenders, or


according to any other method customarily used in the international petroleum industry.


21.4. The Company and its subcontractors, as well as their expatriate employees and their


families, shall have the right to re-export from the Central African Republic, free of any


export duties and taxes, the goods imported under Articles 21.1. and 21.2. which


would no longer be necessary for Petroleum Operations, subject to the application of


the provisions set forth in Article 24.2.




















ii


21.5. The Company and its subcontractors shall have the right to sell in the Central African


Republic the goods which they have imported when such goods are no longer


necessary for Petroleum Operations, provided they inform in advance the Minister


thereof. In that event, the seller shall be required to fulfill all the formalities prescribed


by the regulations then in force and to pay all duties and taxes applicable on the


transaction date, unless the above-mentioned goods are assigned to the State or to


companies which hold a petroleum contract entered into with the State.


21.6. During the term of this Contract and subject to the provisions of Article 9 and the


regulations then in force, the Company shall have the right to fieely export Petroleum


which it is entitled to under this Contract, free of any export duties and taxes.


21.7. All imports, exports and re-exports under this Contract shall be subject to the


formalities required by customs as provided for by the regulations then in force. Each


import declaration shall be review by the Department in charge of Petroleum which will


certify that the goods are necessary for Petroleum Operations.





ARTICLE 22


FOREIGN EXCHANGE q

22.1. The Company shall be subject to the frireijgn exchange..Control regulations in force in


the Central African Republic;, if beling understood that the Company and its


subcontractors shall benefit during the term ..of this Contract from the following


guarantees regarding exclusively Petroleuifr Operations:





(a) the right to open and operate bank accounts outside the Central African Republic;





(b) the right to contract abroad the loans necessary for the performance of their


activities in the Central African Republic;





(c) the right to receive and retain abroad all the amounts acquired or borrowed abroad,


including the proceeds of sales of Petroleum, and to fieely dispose thereof, to the


extent such amounts exceed their fiscal obligations and domestic requirements for


the Petroleum Operations in the Central African Republic;





(d) the right to freely remit outside the Central African Republic the proceeds of sales


of Petroleum which the Company is entitled to under this Contract as well as the


dividends and proceeds of any kind arising from the Petroleum Operations;


(e) the right to pay directly abroad the foreign enterprises which provide for goods and





services necessary for the performance of Petroleum Operations;




















78


(f) the right to exchange, for purposes of Petroleum Operations, national currency and


foreign convertible currencies, through banks and agents established in the Central


African Republic and officially authorized, at exchange rates which are no less


favorable to the Company or its subcontractors than either the current daily rate or


the rate generally applicable in the Central African Republic to other enterprises on


the day the exchange transactions occur.


22.2. The Company shall submit to the Minister in charge of Finance, no later than fourty-


five (45) days after the end of each Quarter, a report with details of the exchange


transactions made under this Contract during the preceding Quarter, including the


transactions on accounts opened abroad made in accordance with the provisions of


Article 22.1.(a) above.


22.3. The Company's expatriate employees shall have the right, in accordance with the


regulations then in force in the Central African Republic, to freely exchange and to


freely transfer to their country of origin the savings arising from their salaries, as well as


the retirement and social contributions paid by or for said employees, provided they


have fulfilled their tax obligations in the Central African Republic.








ARTICLE 2.3. .. • 4





ASSIGNMENT








23.1. In accordance with the provisions of the. Pejipleiim Code, the rights and obligations


arising from this Contract, as well as thePennit and the Concessions, shall not be


assigned, in whole or part, by anyo&the. entities constituting the Company, without


prior approval of the Ministei*..... }


The assignment shall include aRithe mining titles related to this Contract


If, within three (3) months after notice to the Minister of an intended assignment


accompanied with all the necessary information in support of the technical and financial


capacities of the assignee, as well as with the draft assignment deed and the terms and


conditions of such assignment, the Minister has not notified his justifiable refusal, said


assignment shall be deemed to have been approved by the Minister upon the end of said


time period of three (3) months.


As from the date of approval, the assignee shall acquire the quality of Company and


shall fulfill the obligations prescribed to the Company under the Petroleum Code and


this Contract, to which he shall adhere prior to the assignment.


If one of the entities constituting the Company submits to the Minister for approval an


intended assignment to an Affiliated Company, the Minister will authorize said


assignment within the above-mentioned time period of three (3) months; as the case


may be, the provisions of Article 25.4. shall be applicable.

















79


23.2. The Company or any entity constituting the Company shall also submit to the Minister


for prior approval:


(a) Any project which may give rise to a change in the control of the Company or the


entity in question, in particular through a new sharing of the registered shares.


The following shall be considered as elements of control of the Company or of an


entity: sharing of registered capital, nationality of major shareholders, as well as


statutory provisions concerning the head office and the rights and obligations


related to the registered shares as regards the majority required in the general


meetings.


However, assignment of registered shares to Affiliated Companies shall be free,


subject to prior notice to the Minister for information purposes and subject to the


application of the provisions of Article 25.4., as the case may be.


As regards assignment of registered shares to new shareholders, they shall be


subject to approval of the Minister only if they have the effect to assign to them


more than thirty percent (30%) of the capital of the enterprise.


(b) Any project of constitution of sureties with respect to'assets apd facilities allocated


to Petroleum Operations. v .. \


The projects set forth in paragraphs;.‘(a) aiiid (b) shall be nptified to the Minister. If


within three (3) months after said np^ce, the Minister has not notified the Company or


the entity in question of his justifiable refusal with respect to said projects, they shall be


deemed to be approved upon thb end of said tinie. period of three (3) months.


23.3. Where the Company consists of sCvei^l eiitities, it shall provide forthwith the Minister


with a copy of the joint operating, agreement which binds the entity constituting the


Company, and of any changes which may be made thereto, while specifying the name of


the enterprise appointed as "Operator” for the conduct of Petroleum Operations; any


change in the Operator shall be subject to approval of the Minister in accordance with


the provisions of Article 12.4.


23.4. Assignments made in breach of the provisions of this Article shall be null and void.





ARTICLE 24





OWNERSHIP AND TRANSFER OF ASSETS UPON TERMINATION








24.1. The Company shall be the owner of the assets, whether movable or unmovable, which


it has acquired for purposes of Petroleum Operations, subject to the following


provisions.

















80


24.2. Upon termination, relinquishment or cancellation of the Contract, whatever the reason


therefor, with respect to all or part of the Permit or a Concession, the asssets belonging


to the Company and necessary for Petroleum Operations in the relinquished area shall


become the ownership of the State at no cost, unless they shall be used by the Company


for purposes of exploitation of other Commercial Reids located in the Central African


Republic. Such transfer of ownership shall cause, as the case may be, the automatic


cancellation of any surety or security concerning those assets or which those assets


constitute.


If the Minister decides not to use said assets, he may require the Company to remove


them at the latter's expense, it being understood that the abandonment operations shall


be carried out in accordance with good international petroleum industry practice.


During the term of die Permit or the Concessions resulting therefrom, the wells which


are considered by mutual agreement as unfitted for production may be taken back by


the State, upon request from the Minister, for purposes of being converted into water


wells. The Company shall then undertake to keep in place the casings along the


requested depth as well as, as the case may be, the wellhead, and to perform the


plugging of the well along the requested depth.








ARTICLE





RESPONSIBILITY AND INSURANCE





25.1. The Company shall indemnify and compensate any person, including the State, for any


damage or loss which the Company,- .its employees or subcontractors and their


employees may cause to the person, die property or the rights of other persons, caused


by or resulting from Petroleum (Dictations.


The Company shall indemnify, defend and hold harmless the State against all claims,


losses or damage whatsoever caused by, or resulting from, Petroleum Operations.





25.2. The Company shall take out and maintain in force, or cause to be taken out and


maintained in force by its subcontractors, all insurances with respect to Petroleum


Operations, of the type and for such amounts customarily used in the international


petroleum industry, including, inter alia, third party liability insurances and insurances


to cover damage to property and environment, without prejudice to such insurances as


may be required under the Central African legislation.





The Company shall provide the Minister with the certificates justifying the subscription


and maintenance of the above-mentioned insurances.


25.3. Where the Company consists of several entities, the obligations and responsibilities of


those entities under this Contract shall be several, except their obligations relating to


corporate tax.

















81


25.4. If one of the entities constituting the Company is a subsidiary, its parent-company shall


submit to the Minister for approval an undertaking guaranteeing the proper


performance of the obligations arising from this Contract





ARTICLE 26


CANCELLATION OF THE PERMIT, REVOCATION OF A





CONCESSION AND TERMINATION OF THE CONTRACT





26.1. Pursuant to the provisions of the Petroleum Code, the Permit may be cancelled or a


Concession may be revocated, as well as the Contract may be terminated, without


compensation, under one of the following occurrences:


(a) Material breach or recurrent breach by the Company of the provisions of the


Petroleum Code or this Contract;


(b) Delay exceeding three (3) months incurred by the Company with respect to a


payment due to the State; # }


(c) Stoppage of development work witb respect.to a Commercial Fteld during six (6)


consecutive months; ..•••••. V’--. ' \ V*


(d) After commencement of prodiictibn from a. -Gonimercial Field, stoppage of the


exploitation thereof during otie (1) year, \ \


(e) Failure of the Company to wxnplyvxwithin the prescribed time period, with an


arbitration award rendered.iii accordance with the provisions of Article 29 below;


or ; ;•


(f) Bankruptcy, composition with creditors or liquidation of assets of the Company or


its parent-company.


26.2. Except with respect to the occurrence set forth in paragraph (f) above, the State shall


^ pronounce the forfeiture provided for in Article 26.1. only after having served formal


notice on the Company, by registered mail with acknowledgement of receipt, to remedy


the breach in question within three (3) months (or within six (6) months with respect to


the occurrences set forth in paragraphs (c) and (d) above) from the date of receipt of


such notice.


Should the Company fail to comply with such prescription within the prescribed time


period, the State may pronounce ipso jure the cancellation of the Permit or the


revocation of the Concession, as well as the termination of this Contract


Any dispute as to whether any ground exists to justify the termination of the Contract


pronounced by the State due to the forfeiture may be subject to arbitration in


accordance with the provisions of Article 29. In that event, the Contract shall remain in


force until the execution of the arbitration award by the Parties.











2


 ARTICLE 27





APPLICABLE LAW AND STABILITY OF CONDITIONS








27.1. This Contract and the Petroleum Operations carried out under said Contract shall be


governed by the laws and regulations in force in the Central African Republic.


27.2. The Company shall be subject at any time to the laws and regulations in force in the


Central African Republic.


27.3. The Company shall not be subject to any provision which would give rise to an


aggravation, whether directly or indirectly, in the charges and obligations arising from


the regimes provided for in Part VIII of the Petroleum Code, as such regimes are


determined by the legislation and regulations in force on the date of signing this


Contract, unless as mutually agreed upon by the Parties.








ARTICLE 28


FORCE MAJJEU&E '


28.1. Any obligation arising from.. diB'-.Contract which either Party is prevented from


performing whether in whole or pit (except with respect to the payments such Party is


liable to), shall not be considered as a breach of this Contract if said non-performance is


caused by a case of Force Majeure, prpyrdfel, however, that there is a direct cause-and-


effect relationship between the .hbit^peiformance and the case of Force Majoreure


invoked. .•••*;••


For purposes of this Contract^ cases of Force Majeure are considered to include all


events which are unforeseeable, irresistible and beyond the control of the Party which


invokes it, such as earthquake, strike, riot, insurrection, civil disturbances, sabotage,


acts of war or acts attributable to war.


28.2. When either Party considers it is prevented from performing any of its obligations due


to a case of Force Majeure, it shall immediately notify the other Party thereof, stating


the grounds for establishing such case of Force Majeure, and it shall, in agreement with


the other Party, take all necessary and useful action to assure the resumption of the


obligations affected by the case of Force Majeure upon termination of that case of


Force Majeure. The obligations other than those affected by the case of Force Majeure


shall continue to be performed in accordance with the provisions of this Contract


28.3. If the performance of any of the obligations of the Contract is delayed due to a case of


Force Majeure, the duration of the resulting delay together with such time period as


may be required for the repair of any damage caused by the case of Force Majeure,


shall be added to the period provided for in the Contract for the performance of said


obligation, as well as to the term of the Contract and that of the related Petroleum


mining title.








S3


 ARTICLE 29





ARBITRATION AND EXPERTISE


29.1. In the event of any dispute between the State and the Company regarding the


interpretation or execution of the provisions of this Contract, the Parties shall make


their best efforts to settle such dispute amicably.


If, within three (3) months from the date of notice of such dispute, the Parties have not


reached amicable settlement, the dispute shall be submitted, upon request of the most


diligent Party, to the International Center for Settlement of Investment Disputes


(ICSID) in order to be settled by arbitration in accordance with the rules set forth by


the Convention on the Settlement of Investment disputes between States and Nationals


of other States, which Convention was signed on March 18, 1965 and ratified by the


Central African Republic on February 23,1966.


The arbitration tribunal shall consist of three (3) arbitrators. No arbitrator shall be a


national of the countries to which either Party belongs.


29.2. The seat of arbitration shall be Paris, France. The language used during the arbitration


proceedings shall be the French language and the.''applicable law shall be the laws of the


Central African Republic as well as the rules and practice of international law applicable


on the subject matter.





The arbitration award shall be finhli'it shall be binding ..on the Parties and immediately


enforceable.





The arbitration expenses shall be bqjTfeetjually by the Parties, subject to the decision of


the tribunal regarding the sharing;'there6f.


29.3. The Parties shall conform to any measure of conservation prescribed or recommended


by the arbitration tribunal. A request to arbitration shall give rise to the suspension of


the contractual provisions concerning the subject matter of the dispute, but all other


rights and obligations of the Parties under this Contract shall not be suspended.


29.4. In the event of any difficulty arising from the execution of this Contract, the Parties


hereby agree, prior to any arbitration or failing to reach amicable settlement, to request


an expert to provide assistance for the amicable settlement of such dispute. Such


expert shall be appointed by mutual agreement between the Parties or, failing such


agreement, by the International Center for Technical Expertise of the International


Chamber of Commerce, in accordance with its Regulations for Technical Expertise.


The expert expenses and fees shall be shared equally by the Parties (or borne by the


Company until granting the first Concession).


 ARTICLE 30





MISCELLANEOUS PROVISIONS








30.1. All notifications or other communications with respect to this Contract shall be made in


writing and shall be deemed to be valid as soon as they are delivered by hand upon


receipt to a qualified representative from the Party involved at the location of its main


office in the Central African Republic, or delivered by prepaid registered mail, with


acknowledgement of receipt, or sent by telex or by fax confirmed by a letter and after


acknowledgement of receipt by the adressee, to the addresses indicated below:


For the Central African Republic:























For tiie Company:























Notifications shall be deemed to be delivered on the date the addressee receives them


pursuant to the acknowledgement of receipt


The State and the Company may at any time change their authorized representative, or


modify the above-mentioned addresses, subject to at least ten (10) days' prior notice.


30.2. This Contract may be modified only in writing and by mutual agreement of the Parties.


30.3. Any waiver of the State concerning the execution of an obligation of the Company shall


be in writing and signed by the Minister, and no waiver shall be considered as a


precedent if the State does not exercice any of the rights which it is entitled to under


this Contract.


30.4. Headings in this Contract are inserted for puiposes of convenience and reference and in


no event shall define, restrict or describe the scope or object of the Contract or of any


of its clauses.














C r-


N h


30.5. Appendices 1 and 2 attached hereto are an integral part of this Contract.


30.6. The decree approving this Contract shall be published in the Official Gazette of the


Central African Republic, excluding the text of this Contract


IN WITNESS WHEREOF, the Parties have signed this Contract in_(_) copies.











DONE IN BANGUI, .





For the Central African Republic: For the Company:


The Minister of Defense, Veterans,


Energy, Mines and Hydraulics


























APPENDIX 1


DELIMITATION OF THE EXPLORATION PERMIT


 APPENDIX 2





ACCOUNTING PROCEDURE


ARTICLE 1





GENERAL PROVISIONS








1.1. Scope


This Accounting Procedure shall be used and observed for the performance of the obligations


Of the Contract to which it is attached.


The scope of this Accounting Procedure is to establish the rules and methods of accounting for


determining the costs and expenses incurred by the Company-with respect to the Petroleum


Operations (hereinafter referred to as "Petroleum Costs").








1.2. Accounts and Statements


The Company shall record in separate., accounts all transactions related to the Petroleum


Operations and shall permanently maintain the accounts.; books and registers which will set


apart, inter alia, exploration expenditures,. Appraisal expenditures with respect to each


Discovery, and, as the case may be, development- expenditures, production costs and financial


costs with respect to each Concession, -as-well as general and administrative expenses.


The Company's accounts, books and registers shall be maintained in accordance with the rules


of the chart of accounts in force in the Central African Republic and the rules and methods


customarily used in the international petroleum industry.


In accordance with the provisions of Article 20.2. of the Contract, the Company's accounts,


books and registers shall be maintained in the French language and expressed in DoUars.


Whenever it is necessary to convert into Dollars the expenses and receipts paid or received in


any other currency, such expenses and receipts shall be valued on the basis of the exchange


rate quoted at the Paris exchange market, in accordance with methods to be mutually agreed


upon.


























87


1.3. Interpretation





The definitions of the terms used in this Appendix 2 shall be the same as those of the


corresponding terms set forth in the Contract


In the event of any conflict between the provisions of this Accounting Procedure and the


Contract, the provisions of the Contract shall prevail.








1.4. Modifications


The provisions of the Accounting Procedure may be modified by mutual agreement of the


Parties.


The Parties hereby agree that if any provision of the Accounting Procedure proves inequitable


to either Party, such provision shall be modified in good faith by the Parties in order to avoid


any unfairness.








ARTICLED$


PETROLEUM COSTS \








The Company shall maintain accounts v/hich wiU reconf in detail the Petroleum Costs borne


with respect to the Petroleum Operations,., aridfhe following costs and expenses shall be


charged to the debit of such accounts: /•', \





2.1. Personnel expenses


All payments made or expenses incurred to cover the salaries and wages of employees of the


Company and its Affiliated Companies who are directly assigned either temporarily or


continuously to the Petroleum Operations in the Central African Republic, including costs of


legal and social insurance benefits as well as all additional costs or expenses provided for in the


individual or collective employment contracts or as provided for in the administrative policies


of the Company.





2.2. Buildings


Building costs, maintenance and related costs, as well as rents paid for all offices, houses,


warehouses and buildings, including housing and recreational facilities for employees, and the


costs of equipment, furniture, fixtures and supplies necessary for the operation of such


buildings required for the performance of the Petroleum Operations.

















c 8


2.3. Materials, equipment and rentals





The costs of equipment, materials, machinery, articles, supplies and facilities purchased or


supplied for the requirements of the Petroleum Operations, as well as rentals or compensations


paid or incurred for the use of any equipment and facilities required for the Petroleum


Operations, including equipment belonging to the Company.








2.4. Transportation


Transportation of employees, equipment, materials and supplies within the Central African


Republic, as well as between the Central African Republic and other countries, required for the


Petroleum Operations. The costs of transportation of employees shall include the moving


expenses for the employees and their families paid by the Company in accordance with its


policies.








2.5. Services rendered by subcontractors


The costs of services rendered by subcontractors, consultants, ■ experts, as well as the costs


related to the services rendered by the State or any other Ceikiul African.^iithprity.








2.6. Insurance and claims


Premiums paid for insurance policies customarily/subscribed for the Petroleum Operations to


be performed by the Company as well as allexpenses incurred and paid for the setdement of all


losses, claims, compensations and other expenses, including those related to legal services, not


recovered by the insurer and all expenses arising from court decisions.


If, after approval of the Minister, no insurance is subscribed with respect to a specific risk, all


expenses incurred and paid by the Company for the settlement of all losses, claims,


compensations, court decisions and other expenses.





2.7. Legal expenses


All expenses for the conduct, review and settlement of disputes or claims arising from the


Petroleum Operations, or the expenses required to defend or recover assets acquired in the


performance of the Petroleum Operations, including, inter alia, lawyer fees, court expenses,


costs of investigations or inquiries and amounts paid in settlement or satisfaction of such


disputes or claims. If such actions are to be conducted by the legal staff of the Company, a


reasonable compensation shall be included in the Petroleum Costs, which shall not exceed in


any case the cost of supplying said service usually charged by a Third Party.


2.8. General and administrative expenses ("Overheads")


2.8.1. Overheads in the Central African Republic shall represent the wages and expenses of


the Company's employees engaged in the Petroleum Operations in the Central African


Republic, whose work time is not directly allocated thereto, as well as the costs of


maintaining and operating in the Central African Republic a main administrative office


and sub-offices necessary for the Petroleum Operations.


2.8.2. The Company shall add a reasonable amount as foreign overheads necessary for the


performance of the Petroleum Operations and borne by the Company and its Affiliated


Companies; such amounts shall correspond to the costs of the services rendered for the


benefit of the Petroleum Operations.


The amounts charged shall be provisional amounts established on the basis of die


experience of the Company and shall be adjusted annually according to the actual costs


boms by the Company, provided, however, such amounts shall not exceed die


following limits:


(a) prior to the granting of the first Concession: __percent C__%) of die


Petroleum Costs excluding Overheads;


(b) from the granting of the first Concession; : __ percent (_%) of the


Petroleum costs excluding financial cpsts and Overheads.' -. '{


2.9. Other expenses


All expenses incurred by the Company (includirig interests on funds provided to the Company


for purposes of financing the development'• and transportation Petroleum Operations, as


determined in accordance with thb provisions of paragraphs 3 and 4 of Article 71 of the


Petroleum Code) other than the expenses covered and set forth by the preceding provisions of


this Article 2 of this Appendix 2, and other than the expenses excluded from the Petroleum


Costs in accordance with the provisions of the Contract.















































90


 ARTICLE 3





COST EVALUATION BASIS FOR SERVICES,


MATERIALS AND EQUIPMENT USED IN THE


PETROLEUM OPERATIONS








3.1. Technical services


A reasonable rate shall be charged for the technical services rendered by the Company or its


Affiliated Companies for the benefit of the Petroleum Operations earned out under this


Contract, such as gas, water, core analyses and any other analyses and tests, provided that such


rates shall not exceed those normally charged by independent technical service companies and


laboratories for like services.








3.2. Purchase of materials and equipment


The materials and equipment purchased and the services rencieied necessary for the Petroleum


Operations shall be charged to the Petroleum Costs Account.kt the "Net Cost" incurred by the


Contractor. **• . \...\...-


"Net Cost" shall include the cost of purchasing (after deduction of discounts and reductions


obtained, if any) and such items as.. taxes;- - shipping agejit. fees,- transportation, loading and


unloading costs, licence fees related tb.ffie Supply of materials and equipment, as well as transit


losses not recovered through insurance.'"





3.3. Utilization of equipment arid f&cili ties owned by the Company


Equipment and facilities owned by the Company and used in the Petroleum Operations shall be


charged to the Petroleum Costs Account at a rental rate which shall cover maintenance,


repairs, depreciation and services required for the Petroleum Operations, provided such costs


shall not exceed those normally charged in the Central African Republic for like services.








3.4. Valuation of material


All material transferred from the warehouses of the Company or its Affiliated Companies, or


by any entity constituting the Company or their Affiliated Companies, shall be valued as


follows:


(a) New material


New material (condition "A") means new material which has never been used: one


hundred percent (100%) of the Net Cost.














91


(b) Material in good condition


Material in good conditions (condition "B") means material in good condition which is still


usable for its initial purpose without repair seventy-five percent (75%) of the Net Cost of


new material as defined in paragraph (a).


(c) Other used material


Other used material (condition "C") means material still usable for its initial purpose, but


only after repairs and reconditioning: fifty percent (50%) of the Net Cost of new material


as defined in paragraph (a).


(d) Materia] in poor condition


Material in poor conditions (condition "D") means material no longer usable for its initial


purpose, but still usable for other purposes: twenty-five percent (25%) of the Net Cost of


new material as defined in paragraph (a).


(e) Scrap and discard


Scrap and discard (condition "E") means material-..beyond-'usage and repain prevailing


price of scrap material. v-.. \...


(f) Valuation


The Parties may replace the rates Specified in paragp&phs (b) to (e) by valuations jointly


made by their representatives.





3.5. Materials and equipment disposed by the Company


(a) Materials, equipment and consumables purchased by all the entities constituting the


Company or shared among them in kind shall be valued in accordance with the principles


defined in Article 3.4. above.


(b) Materials and equipment purchased by any entity constituting the Company or by Third


Parties shall be valued at the sales price received which shall in no event be less than the


price determined in accordance with the principles defined in Article 3.4. above.


(c) The corresponding amounts shall be credited to the Petroleum Costs Account.


























92


 ARTICLE 4





DEPRECIATION OF CAPITAL EXPENDITURES


AND EXPLORATION EXPENDITURES





4.1. Capital expenditures


For purposes of determining the taxable net profit arising from all the Petroleum Operations


carried out by the Company in the territory of the Central African Republic, capital


expenditures incurred by the Company and necessary for the Petroleum Operations shall be


depreciated under a straight-line basis.


The minimum duration of depreciation shall be five (5) Calendar Years (or ten (10) Calendar


Years with respect to capital expenditures relating to transportation) from the Calendar Year


during which such capital expenditures are incurred, or from the Calendar Year during which


the assets corresponding to such capital expenditures are put into normal service, whichever is


later.








4.2. Exploration expenditures


Petroleum exploration expenditures incurred tjy the Company- in die territory of the Central


African Republic, including, inter alia, Vgepiogical and.; geophysical exploration costs and


exploratory well drilling costs (excluding productive''exploratory well costs which shall be


capitalized) shall be considered as charges entirely deductible upon the year they are incurred


or may be depreciated under a depreciation regifne .selected by the Company.








ARTICLE 5


DETERMINATION OF THE SUPPLEMENTARY





PETROLEUM PAYMENT





For purposes of determining the supplementary petroleum payment, the following terms shall


have the following meaning:








5.1. Accumulated net revenues


The sum of the Company's profits after payment of corporate tax, of royalty on production


and, as the case may be, of the supplementary petroleum payment, calculated from the


Effective Date up to the end of the preceding Year.


5.2. Accumulated Investments





The sum of exploration expenditures, Appraisal expenditures and development expenditures


(excluding, inter alia, financial costs, production and transportation costs, Overheads) which


are charged to the Petroleum Costs account in accordance with Article 1.2. of the Accounting


Procedure, calculated from the Effective Date up to the end of the preceding Year, without


any deduction of depreciation which may have been made by the Company.








ARTICLE 6





INVENTORIES








6.1. Frequency


The Company shall keep permanent inventories both in quantity and value of all materials used


in the Petroleum Operations and shall proceed at reasonable intervals, at least once a year, with


the physical inventories such as required by the Parties..








6.2. Notification


A written notice of intention to conduct an inventory shall, be sent by the Company at least


sixty (60) days before the commencetiient of .said inventory, so that the Minister and the


entities constituting the Company may be repieSented, at their expense, during the inventory


operations. V'*"








6.3. Information


In the event the Minister or any entity constituting the Company shall not be represented


during an inventory, said Party or Parties shall be bound by the inventory established by the


Company, which shall then furnish to such Party or Parties a copy of said inventory.