Liberia

Petroleum

National Oil Company of Liberia

The exclusive exploration authorization is hereby granted to the company for a period of [X] consecutive years defined by three consecutive periods. A first exploration period of [X] contract years, a second exploration period of [X] contract years and the third exploration period of [X] contract years in respect of the entire delimited area. If during the first exploration period the company has fulfilled the relevant exploration work commitments, as ascertained by the government, the exclusive exploration authorization shall, at the company’s request, be renewed for a second exploration period of [X] contract years. If, at the end of such second exploration period and provided that is has fulfilled the relevant work commitments, the contract so request, a third exploration period shall be authorized for 2 contractual years. The duration of an exclusive exploitation authorization during which the company is authorized to carry out the exploitation of a field declared commercial is set at 25 years from its date of issue. If upon expiration of the exploitation period of 25 years, a commercial exploitation of a field remains possible the government may authorize the company, at the latter’s request submitted at least 12 months prior to said expiration, to continue under this contract the exploitation of said field during an additional period of no more than 10 years, provided that the company has fulfilled all its obligations during the current exploitation period. If, upon expiration of that additional exploitation period, a commercial exploitation of said field remains possible, the company may request the government at least 12 months prior to said expiration that it be authorized to continue the exploitation of said field under this contract, during the current exploitation.

Model production sharing contract

The company undertakes to carry out all petroleum operations in accordance with the environmental protection and management laws of Liberia and all international environmental protocols. In this respect, the company shall submit to the government an environmental impact statement prior to the commencement of exploration and production.

The government and the company shall commission periodic environmental audits as required to ensure compliance with the environmental impact statement.

The company undertakes to carry out all petroleum operations in accordance with the environmental protection and management laws of Liberia and all international environmental protocols. In this respect, the company shall take reasonable preventative, corrective and restorative measures to protect from pollution, contamination or damage resulting petroleum operations water bodies, land surfaces and the atmosphere, and that any pollution, contamination and damage of such water bodies, land surface and atmosphere is rectified. At the conclusion of petroleum operations in the delimited area, the company will undertake reasonable efforts to restore the terrain to a state in which it is useable. In its conduct of petroleum operations, the company undertakes to take all necessary precautions to prevent marine pollution. In order to prevent pollution, the government and the company agree that the company shall observe all existing international environmental protocols, regulations and rules as may be applicable to prevent pollution and preserve the environment. The government and the company shall meet and consider any measure, which may be necessary to preserve the environment.

The company may take or use the water necessary for the petroleum operations, provided that existing irrigation or navigation are not impaired and that land, house or watering places for livestock are not deprived or a reasonable quantity of water.

The company shall maintain its accounts in accordance with the regulations in force and with the provisions of the accounting procedure set out in Appendix 2. After giving the company notice in writing, the state shall have the right to cause the registers and accounting books relating to the petroleum operations to be inspected and audited by its own agents or by experts of its election. The state shall have a period of 4 years following the end of each calendar year to carry out those inspections or audits relating to said year. The state may submit its objections to the company for any contradictions or errors found during such inspection or audits. Should the state fail to make any claim within the above period of 4 years, no further objection or claim shall be made by the Liberian administration for the calendar year concerned.

The company shall pay to the government the following bonuses: (a) $[X] when the total production of crude oil from the delimited area first reaches the average rate of 30,000 barrels per day during a period of 30 consecutive days. (b) $[X] when the total production of crude oil from the delimited area first reaches the average rate of 50,000 barrels per day during a period of 30 consecutive days. (c) $[X] when the total production of crude oil form the delimited area first reaches the average rate of [X] barrels per day during a period of 30 consecutive days. Each of the amounts referred to in (a), (b), and (c) above shall be paid with 30 days following the expiration of the reference period of 30 consecutive days. These bonuses shall not be recoverable and shall therefore not be treated as petroleum costs.

Except for the income tax defined in this article and the bonuses otherwise provided for, the company shall be exempt from all other levies, duties, taxes or contributions of any nature whatsoever arising from the petroleum operations and any revenues related to same or, more generally, on company’s property, activities or actions, including its establishment and its operation as detailed in this contract.

Unless otherwise provided for in this contract the company shall, in respect of its petroleum operations, be subject to the laws generally applicable and the regulations in force in Liberia concerning taxes which are or may be levied on incomes.

The company shall in respect of its net profit arising from petroleum operations, be liable to corporate income tax under the laws and regulations in force in Liberia. Income tax applicable to petroleum operations carried out under this contract shall be 35%, which shall be paid directly by the company to the government of Liberia.

Upon commencement of the petroleum operations, the company shall provide funding for social and welfare programmes in Liberia and for that purpose the company shall devote an annual social and welfare budget: (a) [X] during each year of the exploration period; and (b) [X] during each year of the exploitation period. An escrow account shall be established by both parties for the purposes of receiving money and paying for the programmes and they shall both be signatories to such account, except for the contribution to the University of Liberia which shall be paid directly to the institution. The training requirements shall be developed by both parties with the understanding that the government shall provide 70% of the training candidates and the company shall provide 30% of the candidates. The training and social and welfare programmes shall be mutually agreed by the parties. The training and social and welfare expenses borne by the company shall be included in recoverable petroleum costs. Funding for the training and social and welfare programmes shall be paid within 30 days of the effective date. Thereafter, payments shall be made within 30 days of each subsequent anniversary of the contract. Each calendar year, up to a total of 10% of the share of crude oil production to which the company is entitled, shall be sold to the government by the company for the purpose of satisfying the needs of the domestic market of Liberia. Such contribution of the company shall be in proportion to its share of production, in the total crude oil production in Liberia. The quantity of crude oil the company shall be obligated to sell to the government shall be notified to it by the government at least 3 months prior to the beginning of each calendar quarter. To stimulate research in the field of hydrocarbon, most especially in continental areas, and to assist the government in its overall goal of achieving energy sustainability, a hydrocarbon development fund, to be managed by the government, has been established. Within 30 days of the effective date of this contract, the company shall make a contribution of [X] to this fund. The contribution to the hydrocarbon development fund referred to in this contract will be recoverable and therefore, shall be considered as petroleum costs.

The quantity of crude oil from the delimited area remaining during each calendar year after the company has taken from the total production the portion necessary for the recovery of the petroleum costs shall be shared between the government and the company as follows: The remaining oil production shall be shared according to the daily total production from the delimited area: [X] Barrels per day; government's share: [X]%; company's share: [X]% [X] Barrels per day; government's share: [X]%; company's share: [X]% [X] Barrels per day; government's share: [X]%; company's share: [X]% [X] Barrels per day; government's share: [X]%; company's share: [X]% In case of natural gas, the following production sharing shall apply: [X] total production; government's share: [X]%; company's share: [X]% For the purpose of this article, the daily total production shall be the average rate of total production during the calendar quarter in question.

For the purposes of recovery of the petroleum costs, the company may freely take each calendar year a portion of the production in no event greater than [X] of the total production of crude oil or gas from the delimited area, or only any lesser percentage which would be necessary and sufficient to recover remaining cost. If during a calendar year the petroleum costs not yet recovered by the company under the provisions of this article exceed the equivalent in value of [X] of the total production of crude oil or total production of gas from the delimited area, as calculated above, the balance of the petroleum costs which cannot be recovered in that calendar year shall be carried forward in the following calendar year or years until full recovery of the petroleum costs or until the expiration of this contract.

All other petroleum costs, including the costs supplies, personnel and manpower expenses, costs of services provided to the company in respect of the petroleum operations, provided, however, that costs of supplies, personnel and services rendered by affiliated companies shall be deductible provided that they do not exceed those which would be normally charged in arm’s length transactions between independent buyer and seller for identical or similar supplies or services.

Surface rentals shall be payable to the government per square kilometer of the area remaining at the beginning of each calendar year as part of the delimited area, in the amounts as set out below: First exploration period: $ [X] per sq. km per annum. Second exploration period: $ [X] per sq. km per annum. Third exploration period: $ [X] per sq. km per annum. Development & exploitation area: $ [X] per sq. km per annum.

The company shall, for the purposes of the petroleum operations, employ Liberian personnel whenever qualified for requirements of the employment. Managers, technicians, engineers, accountants, geologists, geophysicists, scientists, chemists, drillers, foremen, mechanics, skilled workers, secretaries and executive employees may be hired outside Liberia if similarly qualified specialists cannot be hired in Liberia.

The company and its subcontractors shall be obligated to give preference to enterprises and goods from Liberia, if conditions of price, quality, delivery time and terms of payment are similar to those from other counties or from non Liberia sources. Specifically, the company commits itself to award to only Liberians, supply, constructions or service contracts, the estimated value of which is under [X].

Upon commencement of the petroleum operations, the company shall provide funding for training programmes [X] and for the purpose the company shall devote an annual training budget of: (a) [X] during each year of the exploration period; and (b) [X] during each year of the exploitation period. Additionally, the company shall make an annual contribution of [X] to the University of Liberia for the enhancement of programmes in geology, mining engineering and environmental studies.

The state shall authorize the company to build, use and maintain telephone, telegraph and piping systems above and below the ground and alone the land not belonging to the state, provided that the company pays to the land-owners, a reasonable compensation mutually agreed upon. For the purpose of the petroleum operations, the company shall have the right to use, in accordance with the applicable laws, any railroad, tramway, road, airport, landing strip, canal, river, bridge, waterway and any telephone or telegraph network in Liberia whether owned by the state or by any private enterprise, subject to the payment of fees then in effect or mutually agreed upon which will not be in excess of the prices and tariffs charged to third parties for similar services. The company shall have the right to use for the purposes of the petroleum operations any land, sea or air transportation means for the transportation of its employees or equipment, subject to compliance with the laws and regulations which generally govern the use of such means of transportation.

The government shall take all necessary steps to facilitate the implementation by the company of the objectives of this contract, and the state shall protect the property and operations of the company, its employees and agents in the territory of Liberia.

The company shall commence the geological and seismic work within 3 months from the effective date. The company, during the first exploration period, shall carry out a minimum work programme at a cost of no less than $[X] million which includes a 3D seismic survey of [X] square km and the drilling of [X] exploration well(s). The company, during the second exploration period, shall carry out a minimum work programme at a cost of no less than $[X] million including a commitment to drill [X] exploration well(s). The company, during the third exploration period, shall carry out a minimum work programme at a cost no less than $[X] million including a commitment to drill [X] exploration well(s). Each of the exploratory wells shall be drilled to a minimum depth of [X] meters, after deduction of the water depth, or to a lesser depth if the continuation of drilling performed in accordance with good international petroleum industry practice is prevented for any of the following reasons: (a) The basement is encountered at a lesser depth than the minimum contractual depth; (b) Continuation of drilling presents an obvious danger due to the existence of abnormal formation pressure; (c) Rock formations are encountered the hardness of which prevents, in practice, the continuation of drilling by the use of appropriate equipment; (d) Petroleum formations are encountered the crossing of which requires, for their protection, the laying of casing preventing the minimum contractual depth from being reached. In the event that any of the above reasons occurs, the exploratory well shall be deemed to have been drilled to the minimum contractual depth. Notwithstanding any provision in this article to the contrary, the government and the company may, at any time, agree to abandon the drilling of a well at a lesser depth than the minimum contractual depth. The company undertakes to make the expenditure required to meet the objectives of the well work programme which will include drilling and as appropriate, testing.

In the event of any dispute between the government and the company relating to, or arising out of, the interpretation or execution of the provisions of this contract, the parties shall make their best efforts to settle such dispute amicably. If within 3 months from the date of notice of such dispute by either party to the other, the parties have not reached settlement, the dispute shall, at the request of the most diligent party, be referred for arbitration to the International Chamber of Commerce in accordance with its rules and regulations. The arbitration shall be held in [X]. The language used during the procedure shall be the English language. The arbitration shall be determined by 3 arbitrators. The arbitrators shall not have the same nationality as the parties. The arbitration tribunal’s award shall be final; it shall be binding on the parties and shall be enforceable in any court of appropriate jurisdiction. The expenses of any arbitration shall be borne equally by the parties, that is to say, each party shall pay the expenses of its own arbitrator and the expenses of the third arbitrator in equal shares, and any expenses imposed by the International Chamber of Commerce shall be shared equally by the parties. The performance by the parties of their obligations under this contract shall not be suspended during the course of the arbitration.

All data, information, documents, reports and statistics including interpretation and analysis supplied by the company pursuant to this contract shall be treated as confidential and shall not be disclosed by any party to any other person without the express written consent of the other parties within the life of the exploration, appraisal or exploration authorization period. The provision of this article shall not prevent disclosure: By the government: (a) To any agency of the state or to any advisor or consultant of same; or (b) For the purpose of complying with the state’s international obligations for the submission of statistic and related data. By the company: (a) To its affiliates, advisors or consultants; (b) To a bona fide potential assignee or all or part or the company’s interest hereunder; (c) To banks or other lending institutions for the purpose of seeking external financing of costs of the petroleum operations; (d) To non-affiliates who shall provide services for the petroleum operations, including sub-contractors, vendors, and other service contractors, where this is essential for their provision of services; or (e) To government agencies for obtaining necessary rulings, permits, licenses and approvals, or as may be required by applicable law or financial stock exchange, accounting or reporting practices. Any party disclosing information or providing data to a third party under the terms or this article shall require such persons to undertake the confidentiality of such data.

The laws and regulations in force in the Republic of Liberia and the provisions of international law as may be applicable to international oil and gas activities shall apply to the company, to this contract and to the operations which are the purpose of same, unless otherwise provided by the contract.

In the event of changes in circumstances from those existing at the effective date, that have a material effect on the terms of this contract, either the government or the company shall at the request of the other consult together. If it is established that such profound changes in circumstances have occurred, then the parties shall effect such changes in or clarifications to this contract that they agree are necessary. The parties shall meet in good faith to make the necessary revisions and adjustments to the contract in order to maintain such expected economic benefits to each of the parties, provided that the economic benefits to the parties shall not be reduced as a result of exercising the terms of this article. For the purposes of this contract the term “profound changes in circumstances” shall mean such changes in the economic conditions of the petroleum industry (world wide or in Liberia); or changes that result in such alteration of the conditions and assumptions relied upon by the parties (at the effective date of this contract) that the overall balance of equities and benefits reasonably anticipated by the parties will no longer be achievable. Additionally, the parties also agree to review the agreement every five years to consider the concerns of any of the parties.

This contract may not be amended or modified by virtue of the adoption or amendment of law or regulation by the State of Liberia after the effective date of this contract. This contract may only be amended or modified by written agreement of all parties.