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PETROLEUM AGREEMENT






GOVERNMENT OF THE REPUBLIC OF GHANA



GHANA NATIONAL PETROLEUM CORPORATION



BRITTANIA-U GHANA LIMITED



HILLS OIL MARKETING COMPANY LIMITED




SOUTHWEST SALTPOND BLOCK


2014



TABLE OF CONTENTS



PAGE



ARTICLE



1.



DEFINITIONS



3



2.



SCOPE OF THE AGREEMENT, INTERESTS

OF THE PARTIES AND CONTRACT AREA



10



3.



EXPLORATION PERIOD



14



4.



MINIMUM EXPLORATION PROGRAMME



16



5.



RELINQUISHMENT



19



6.



JOINT MANAGEMENT COMMITTEE



20



7.



RIGHTS AND OBLIGAnONS OF CONTRACTOR

ANDGNPC



24



8.



COMMERCIALITY



28



9.



SOLE RISK ACCOUNT



34



10.



SHARING OF CRUDE OIL



37



11.



MEASUREMENT AND PRICING OF CRUDE OIL



43



12.



TAXATION AND OTHER IMPOSTS



46



13.



FOREIGN EXCHANGE TRANSACTIONS



49



14.



SPECIAL PROVISIONS FOR NATURAL GAS



51



15.



DOMESTIC SUPPLY REQUIREMENT (CRUDE OIL)



57



16.



INFORMATION AND REPORTS: CONFIDENTIALITY



58



17.



INSPECTION, SAFETY AND ENVIRONMENTAL

PROTECTION



62



18.



ACCOUNTING AND AUDITING



64



19.



TITLE TO AND CONTROL OF GOODS AND EQUIPMENT



66



20.



PURCHASING AND PROCUREMENT



68



ii



ARTICLE



PAGE



21.



-EMPLOYMENT AND TRAINING



69



22.



FORCE MAJEURE



70



23.



TERM AND TERMINATION



71



24.



CONSULTATION, ARBITRATION AND

INDEPENDENT EXPERT



75



25.



ASSIGNMENT



76



26.



MISCELLANEOUS



77



27.



NOTICE



80



ANNEX 1



CONTRACT AREA



ANNEX 2



ACCOUNTING GUIDE



ANNEX 3



SAMPLE AOE CALCULATION



ANNEX 4



FORM OF CONFIDENTIALITY AGREEMENT



iii



THIS PETROLEUM AGREEMENT, made this 18th day of July 2014 by and among:



1.



Government of the Republic of Ghana (hereinafter referred to as "the State"),

represented by the Minister for Energy and Petroleum (hereinafter referred to as the

"Minister");



2. Ghana National Petroleum Corporation, a public corporation established by the

Ghana National Petroleum Corporation Act, 1983 PNDCL 64 (hereinafter referred to as

"GNPC");

3.



Brittania-U Ghana Limited, a company incorporated in Ghana and having its

registered office at No 12 Airport Bypass P.O Box C2444, Cantonment Accra, Ghana

(hereinafter referred to as "Contractor" or "Brittania-U"); and



4. Hills Oil Marketing Company Limited, a company incorporated in Ghana and having

its registered office at 181 Adjele Road, Marte Tsuru, East Airport, Accra-Ghana

(hereinafter referred to as "Contractor" or "Hills Oil")

WITNESSES THAT:

1. All Petroleum existing in its natural state within Ghana is the property of the Republic of



Ghana and held in trust by the State on behalf of the people of Ghana.

2. In accordance with the Petroleum Law, the Minister has prepared a reference map

showing areas of potential petroleum fields within the jurisdiction of Ghana, divided

into numbered areas and each of which is described as a "block".

3. GNPC has by virtue of the Petroleum Law the right to undertake Exploration,



Development and Production of Petroleum over all blocks declared by the Minister to be

open for Petroleum Operations.

4. GNPC is further authorised to enter into association by means of a Petroleum Agreement

with a contractor for the purpose of Exploration, Development and Production of

Petroleum.

5. The Contract Area that is the subject matter of this Petroleum Agreement is within the

jurisdiction of the Republic of Ghana and has been declared open for Petroleum

Operations by the Minister and the State desires to encourage and promote Exploration,

Development and Production within the said area.

6. Contractor, having the financial ability, technical competence and professional skills

necessary for carrying out the Petroleum Operations herein described, desires to

associate with GNPC in the Exploration for, and Development and Production of, the

Petroleum resources of the said area.

7. Contractor shall comply with all the applicable laws of Ghana as in effect from time to

time including, without limitation. any regulations, policies or directives issued by or



I



other acts of the Petroleum Commission pursuant to the Petroleum Commission Act,

2011(Act 821) ..

8. The Parties are committed to providing Ghanaian nationals employment at all levels in



the Petroleum industry, including technical, administrative and managerial positions, and

Contractor accordingly commits to providing and supporting an adequate programme of

training for Ghanaian nationals as an integral part of this Agreement.

9. GNPC has aspirations of building operatorship capacity within a period of fifteen (15)



years from the Effective Date of this Agreement. Without prejudice to the rights of the

Parties under this Agreement, Contractor is committed to supporting GNPC to develop

its institutional capacity to enable GNPC to fulfill its aspirations

10. The Parties are committed to providing an annual local content plan for fulfilling the



applicable Ghanaian content requirements with respect to the provision of goods and

services.



NOW THEREFORE, in consideration of the mutual covenants herein contained, it is hereby



agreed and declared as follows:



2



ARTICLE 1

DEFINITIONS

1.



In this Agreement:



1.1 "Accounting Guide" means the accounting guide which is attached hereto as Annex 2 and

made a part hereof;



1.2 "Additional Interest" means the additional interest ofGNPC provided in Article 2.5;

1.3 "Affiliate" means with respect to any person, whether a natural person, corporation,

partnership, unincorporated association or other entity, which directly, or indirectly through

one or more intermediaries, controls, is controlled by, or is under common control with a

Party. For this purpose "control" means the direct or indirect ownership of an aggregate of

more than fifty per cent (50%) of voting capital or voting rights of or the entitlement

(directly or indirectly) to appoint a majority of the directors or equivalent management body

of, or to direct the policies or operations of the other entity;



1.4 "Agreement" means this Agreement between the State, GNPC and Contractor, and

includes the Annexes attached hereto, in each case, as amended from time to time;



1.5 "Appraisal" means operations and activities carried out following a Discovery of

Petroleum for the purpose of delineating the accumulations of Petroleum to which that

Discovery relates in terms of thickness and lateral extent and estimating the quantity of

recoverable Petroleum therein and all operations or activities to resolve all uncertainties

required for determination of commerciality of such a discovery;



1.6 "Appraisal Programme" means a programme for the conduct of Appraisal;

1.7 "Appraisal Well" means a well drilled pursuant to an Appraisal Programme;

1.8 "Associated Gas" means Natural Gas produced from a well in association with Crude Oil;

1.9 "Barrel" means a quantity or unit of Crude Oil equal to forty-two (42) United States

gallons at a temperature of sixty (60) degrees Fahrenheit and at fourteen and sixty-five onehundredths per square inch at atmospheric (14.65 psia) pressure;



1.10



"Block" means an area of approximately 685 square kilometers as depicted on the

reference map prepared by the Minister in accordance with the provisions of the Petroleum

Law;



1.11



"bopd" means barrels of oil per Day;



1.12



"Calendar Year" means the period of twelve (12) months of the Gregorian calendar,

commencing on January 1 and ending on the succeeding December 31 ;



1.13



"Carried Interest" means an interest held by GNPC pursuant to this Agreement in

respect of which Contractor pays for the conduct of Petroleum Operations without any

entitlement to reimbursement from GNPC other than for Production Operations;



3



"Commercial Discovery" means a Discovery which is determined to be commercial in

~ccordance with the provisions of Article 8 of this Agreement;



1.14



1.15 "Commercial Production Period" means in respect of each Development and

Production Area the period from the Date of Commencement of Commercial Production

until the termination of this Agreement or earlier relinquishment of such Development and

Production Area;

1.16 "Contract Area" means the area of approximately 2,050 sq.km covered by this

Agreement in which Contractor is authorised in association with GNPC to explore for,

develop and produce Petroleum, which is described in Annex 1 attached hereto and made a

part of this Agreement, but excluding any portions of such area in respect of which

Contractor's rights hereunder are from time to time relinquished or surrendered pursuant to

this Agreement;

.

1.17



"Contractor" means Brittania-U Ghana Limited and includes its respective successors

and assignees;



1.18



"Contract Year" means a period of twelve (12) calendar months, commencing on the

Effective Date or any anniversary thereof;



1.19 "Crude Oil" means hydrocarbons which are liquid at fourteen and sixty-five onehundredths per square inch at atmospheric (14.65 psia) pressure and sixty (60) degrees

Fahrenheit and includes condensates and distillates obtained from Natural Gas;

1.20 "Date of Commencement of Commercial Production" means, in respect of each

Development and Production Area, the date on which production of Petroleum under a

programme of regular production, lifting and sale commences as defined in a Development

Plan;

1.21



"Date of Commercial Discovery"means the date referred to in Article 8.14;



1.22



"Day" means a day in the Gregorian calendar;



1.23



"Default Rate" means LIBOR plus 3%;



1.24



"Delivery Point" has the meaning given to such term in Article 10.5;



1.25 "Development" or "Development Operations" means the following activities carried

out in connection with a Development Plan: the building and installation of facilities for

Production, and includes drilling of Development Wells, construction and installation of

equipment, pipelines, facilities, plants and systems, in and outside the Contract Area, which

are required for achieving Production, treatment, transport, storage and lifting of Petroleum,

and preliminary Production activities carried out prior to the Date of Commencement of

Commercial Production, and includes all related planning and administrative work, and may

also include the construction and installation of approved secondary and tertiary recovery

systems;

1.26



"Development Costs" means Petroleum Costs incurred in Development Operations;



1.27



"Development and Production Area" means that portion of the Contract Area

reasonably determined by Contractor in consultation with the JMC (or by GNPC if a Sole



4



Risk Operation pursuant to Article 9) on the basis of the available seismic and well data to

cover the areal extent of an accumulation or accumulations of Petroleum constituting a

Commercia!" Discovery, enlarged in area by ten percent (10%), such enlargement to extend

uniformly around the perimeter of such accumulation;

1.28



"Development Period" means in respect of each Development and Production Area,

the period from the Date of Commercial Discovery until the Date of Commencement of

Commercial Production;



1.29



"Development Plan" means the plan for development of a Commercial Discovery

prepared by Contractor in consultation with the Joint Management Committee and approved

by the Minister pursuant to Article 8;



1.30 "Development Well" means a well drilled in accordance with a Development Plan for

producing Petroleum including wells for pressure maintenance or for increasing the

Production rate;

1.31



"Discovery" means finding within a well at the end of drilling during Exploration

Operations, one or more accumulations of Petroleum the existence of which, until that

finding, was unproved by drilling, and which can be or is recovered at the surface in a

flow measurable by conventional international petroleum industry testing methods (and

in the case of water depths greater than four hundred (400) metres including Modular

Formation Dynamics Testing (also referred to as "MDT" by Schlumberger);



1.32



"Discovery Area" means that portion of the Contract Area, determined by JMC (or by

GNPC if a Sole Risk Operation pursuant to Article 9) on the basis of the available seismic

and well data to cover the areal extent of the geological structure in which a Discovery is

made. A Discovery Area may be modified at any time by JMC (or by GNPC if applicable),

if justified on the basis of new information, but may not be modified after the date of

completion of the Appraisal Programme and submission of a report under Article 8;



1.33 "Discovery Notice" means a notification to the Minister, Petroleum Commission and

GNPC, providing information which shall include, the name and location of the well from

which the accumulation(s) have been found, the depth interval(s), estimates of gross and net

pay thickness, stratigraphy, and type of reservoir and fluids encountered;

1.34

1.35



"EffectiveDate" shall have the meaning ascribed to it in Article 26.8;



"Exploration" or "Exploration Operations" means the search for Petroleum by

geological, geophysical and other methods and the drilling of Exploration Welles) and

includes any activity in connection therewith or in preparation thereof and any relevant

processing and appraisal work, including technical and economic feasibility studies, that

may be carried out to determine whether a Discovery of Petroleum constitutes a

Commercial Discovery;



1.36 "Exploration Costs" means Petroleum Costs incurred, both within and outside Ghana,

in conducting Exploration Operations hereunder determined in accordance with the

Accounting Guide attached hereto an Annex 2;

1.37 "Exploration Period" means the period commencing on the Effective Date and

continuing during the time provided for in Article 3. I within which Contractor is authorized



5



I

to cany out Exploration Operations and shall include any periods of extensions provided for

in this Agreement. The period shall terminate with respect to any Discovery Area on the

Date of Commercial Discovery in respect of such Discovery Area;

1.38



"Exploration Well" means a well drilled in the course of Exploration Operations

conducted hereunder during the Exploration Period, but does not include an Appraisal Well;



1.39



"First Extension Period" has the meaning given to such term in Article 3.1 (a) hereof;



1.40 "Force Majeure" means any event beyond the reasonable control of the Party claiming

to be affected by such event which has not been brought about directly or indirectly at its

own instance or which has not been brought about directly or indirectly at the instance of an

Affiliate; provided that the State shall not be considered for this purpose an Affiliate of

. GNPC. Force Majeure events may, include but are not limited to, earthquake, storm, flood,

lightning or other adverse weather conditions, war, embargo, blockade, riot or civil

disorder;

1.41



"Foreign National Employee" means an expatriate employee of Contractor,

Affiliates, or its Sub-contractors who is not a citizen of Ghana;



its



1.42 "Ghana" means the territory of the Republic of Ghana and includes rivers, streams,

water courses, the territorial sea, seabed and subsoil, the contiguous zone, the exclusive

economic zone, continental shelf, the airspace and all other areas within the jurisdiction of

Ghana;

1.43 "Gross Production" means the total amount of Petroleum produced and saved from a

Development and Production Area during Production Operations which is not used by

Contractor in Petroleum Operations and is available for distribution to the Parties in

accordance with Article 10;

1.44



"Gross Negligence" means any act or failure to act (whether sole, joint or concurrent)

which was made in reckless disregard to, harmful consequences such person knew or

should have known, such act or failure would have on another person or entity;



1.45



"Indigenous Ghanaian company" means a company incorporated under the

Companies Act (Act 179) of Ghana



a) having at least fifty-one per cent of its equity owned by a citizen or citizens of Ghana;

and

b) where practical, Ghanaian citizens holding at least eighty per cent of semor

management positions and one hundred per cent of non-managerial and

c) other positions.

1.46



"Initial Exploration Period" has the meaning given to such term in Article 3.1(a)

hereof;



1.47 "Initial Interest" means the interest of GNPC in all Petroleum Operations provided for

in Article 2.4;



I

6



"International Good Oil Field Practice" means all those uses and practices that are



1.48



generally accepted in the international petroleum industry as good, safe, economical and

efficient in exploring for, developing, producing, processing and transporting Petroleum;

1.49 "Joint Management Committee (JMC)" means the committee established pursuant to

Article 6.1 hereof;

1.50 "Market Price" means the market price for Crude Oil realized by Contractor under this

Agreement as determined in accordance with Article 11.7 hereof;

1.51



"Minister"means Minister for Energy and Petroleum;



1.52



"Month"means a month of the Calendar Year;



1.53



"Natural Gas" means all hydrocarbons which are gaseous at fourteen and sixty-five

one-hundredths per square inch at atmospheric (14.65 psia) pressure and sixty (60) degrees

Fahrenheit temperature and includes wet gas, dry gas and residue gas remaining after the

extraction of liquid hydrocarbons from wet gas;



1.54 "Non-Associated Gas" means Natural Gas produced from a well other than In

association with Crude Oil;

1.55 "Operator" means Brittania-U or the person as may be jointly proposed by the Parties

and approved by the Minister, (which approval shall not be unreasonably withheld), being

either GNPC or a Contractor Party to conduct Petroleum Operations hereunder on behalf of

the Parties;

"Participating Interest" means for GNPC, the interest held by GNPC in accordance

with the provisions of Article 2.4 and Article 2.5 and for the Contractor, the interest held by

the Contractor in accordance with the provisions of Article 2.10;



1.56



"Party" means the State, GNPC or Contractor, as the case may be;



1.57



1.58 "Paying Interest" means an interest held by GNPC in respect of which GNPC pays for

the conduct of Petroleum Operations as expressly provided for in Article 2.5;

"Petroleum" means Crude Oil or Natural Gas or a combination of both;



1.59



1.60 "Petroleum Commission" means a body established by an Act of Parliament

(Petroleum Commission Act, 2011) for the regulation and the management of the utilization

of petroleum resources in the upstream sector;

1.61 "Petroleum Commission Act" means the Petroleum Commission Act, 2011 (Act 821)

as the same may be amended from time to time;

"Petroleum Costs" means all expenditures made and costs incurred both within and

outside Ghana, in conducting Petroleum Operations hereunder determined in accordance

with the Accounting Guide attached hereto as Annex 2;



1.62



1.63



"Petroleum Income Tax Law" means the Petroleum Income Tax Law, 1987 (PNDCL

188) as the same may be amended from time to time;



7



I



1.64



"Petroleum Law" means the Petroleum (Exploration and Production) Law, 1984



(PNDCL 84) as the same may be amended from time to time;

1.65 "Petroleum Operations"means all activities, both in and outside Ghana, relating to the

Exploration for, Development, Production, handling, storage, processing and transportation

(to the Delivery Point) of Petroleum contemplated under this Agreement and includes

Exploration Operations, Development Operations and Production Operations and all

activities in connection therewith;

1.66



"Petroleum Product" means any product derived from Petroleum by any refining or

other process;



1.67 "Pre-Award Attachment" means any order, decree, injunction or other decision

(however denominated) of any court, arbitral body or other competent authority requested

by a Party and issued prior to a final arbitral award issued pursuant to Article 24 of this

Agreement that attaches, seizes, freezes or otherwise restricts the use or alienation of any

property (whether tangible or intangible) of the other Party pending issuance of the final

arbitral award, whether such property is in the possession or control of a Party or of a third

party;

1.68 "Production" or "Production Operations" means activities other than Exploration

Operations or Development Operations undertaken in order to extract, save, treat, measure,

handle, store and transport (to the Delivery Point) Petroleum to storage and/or loading

points and to carry out any type of primary, secondary or tertiary operations, including

recycling, recompression, injection for maintenance of pressure and water flooding and all

related activities such as planning and administrative work and shall also include

maintenance, repair, abandonment or decommissioning and replacement of facilities, and

well workovers in every case, conducted after the Date of Commencement of Commercial

Production of the respective Development and Production Area;

1.69



"Production Costs" means Petroleum Costs incurred in Production Operations;



1.70



"Quarter" means a period of three (3) Months, commencing January 1, April 1, July 1

or October I and ending March 31, June 30, September 30, or December 31, respectively;



1.71



"Second Extension Period" has the meaning given to such term in Article 3.1 (a)

hereof;



1. 72 "Sole Expert" means the person appointed to resolve a dispute pursuant to to Articles

24 hereof;

1. 73 "Sole Risk" means an operation conducted at the sole cost, risk and expense of GNPC

referred to in Article 9;

1.74 "Specified Rate" means the rate which the Financial Times or if the Financial Times is

not so published, then by the Wall Street Journal certifies to be the London Interbank

offered rate (LIBOR) in the London Interbank Eurodollar market on thirty (30) day

deposits, in effect on the last business day of the last respective preceding Month, plus one

per cent (1 %). In the event that neither the Financial Times nor the Wall Street Journal is

published, the Parties shall endeavor to agree on a source of certification for UBOR in

reference to market practice. If the Parties are unable to agree on a source of certification for



8



LIBOR, any Party may refer the matter to a Sole Expert for certification. If the aforesaid

rate is contrary to any applicable usury law, the rate of interest to be charged shall be the

maximum rate permitted by such applicable law;

.



1.75 "Standard Cubic Foot" or "SCF" means the quantity of gas that occupies one (1)

cubic foot at 14.65 psia pressure and sixty (60) degrees Fahrenheit temperature;

1.76 "State" means the Government of the Republic of Ghana including all political

subdivisions thereof and specifically excluding GNPC;

1.77 "Subcontractor" means a third party with whom GNPC or Contractor has entered into

a contract for the provision of goods or services in connection with the Petroleum

Operations;

1.78



"Termination" means termination of this Agreement pursuant to Article 23 hereof;



1.79 "Work Programme" means the annual plan for the conduct of Petroleum Operations

prepared pursuant to Articles 4.3, 6.4 and 6.5; and

1.80



"Year" means a continuous twelve (12) Month period.



9



I



ARTICLE



SCOPE OF THE AGREEMENT,

AND CONTRACT AREA



INTERESTS



2



OF THE PARTIES



2.1 This Agreement provides for the Exploration for and Development and Production of

Petroleum in the Contract Area by GNPC in association with Contractor.

2.2 Subject to the provisions of this Agreement, Contractor shall be responsible for the

execution of such Petroleum Operations as are required by the provisions of this

Agreement and subject to Article 9, is hereby appointed the exclusive entity to conduct

Petroleum Operations in the Contract Area. GNPC shall at all times participate in the

management of Petroleum Operations and in order that the Parties may cooperate in the

implementation of Petroleum Operations, GNPC and Contractor shall establish a Joint

Management Committee, to conduct and manage Petroleum Operations.

2.3



In the event that no Commercial Discovery is made in the Contract Area, or

that Gross Production achieved from the Contract Area is insufficient fully to

reimburse Contractor in accordance with the terms of this Agreement, then Contractor

shall bear its own loss; GNPC and the State shall have no obligations whatsoever to

Contractor in respect of such loss.



2.4 GNPC shall have a twenty percent (20%) Initial Interest in all Petroleum Operations

under this Agreement. With respect to all Exploration and Development Operations

GNPC's Initial Interest shall be a Carried Interest. With respect to all Production

Operations GNPC's Initial Interest shall be a Paying Interest.

2.5 In addition to the Initial Interest provided for in Article 2.4, GNPC shall have the option

in respect of each Development and Production Area to acquire an additional interest not

exceeding five percent (5%) in Petroleum Operations in such Development and

Production Area, by contributing to all the Development and Production Costs incurred

after the Date of Commercial Discovery, in respect of such Development and Production

Area (or make arrangements satisfactory to Contractor to that effect). GNPC shall notify

Contractor of the exercise of its option to acquire an Additional Interest within ninety

(90) days of the Date of Commercial Discovery.

2.6 If GNPC opts to take an Additional Interest as provided for in Article 2.5 then within six

(6) Months of the date of its election, GNPC shall reimburse Contractor for all

expenditures attributable to GNPC's Additional Interest incurred from the Date of

Commercial Discovery to the date GNPC notifies Contractor of its election together

with interest at a rate (the "Contractor Third Party Rate") no higher than (a) the

weighted average rate applicable to any third party debt financing pursuant to which

the Contractor (or its Affiliates) has financed such Additional Interest from and

including the date of the relevant expenditure to and excluding the date the Contractor

is reimbursed or (b) if Contractor has no third party debt financing, the Specified

Rate. With respect to all Development and Production Costs incurred subsequent to the

Date of Commercial Discovery in any Development and Production Area, the Additional

Interest shall be a Paying Interest.



10



For the avoidance of doubt GNPC shall only be liable to contribute to Petroleum

Costs:

a)



incurred in respect of Development Operations in any Development and Production

Area and to the extent only of any Additional Interest acquired in such

Development and Production Area under Article 2.5; and



b)



incurred in respect of Production Operations in any Development and Production

Area both to the extent of:

i)



its twenty percent (20%) Initial Interest; and



ii)



any Additional Interest acquired in such Development and Production Area

under Article 2.5



2.7 Subject to JMC approval, GNPC may during the Exploration Period contribute to

Petroleum Operations by providing relevant services to be approved within the JMC.

Upon completion of the work associated with said contribution, GNPC shall invoice the

Contractor for the costs incurred and shall provide reasonable supporting documentation

in respect of such costs. Contractor shall pay GNPC the invoiced amount within thirty

(30) days of receipt of the invoice. GNPC may elect to earn credit for the invoiced

amounts incurred toward its share, if any of Development Costs should it elect to hold an

Additional Interest pursuant to Article 2.5 above. Such credit shall incur interest at the

Specified Rate annually from the respective dates such contributed costs were incurred

until they are paid or utilized as credits toward GNPC's share of Development Costs. If

during the Exploration Period, GNPC has earned such credit and GNPC elects not to

hold an Additional Interest or no Commercial Discovery is made in the Contract Area

Contractor shall reimburse GNPC in an amount equivalent to the credit within sixty (60)

days following the end of the Exploration Period or Contractor's relinquishment of the

entire Contract Area, whichever occurs first. The actual amount of any costs to be

invoiced or credit earned by GNPC pursuant to this paragraph must be approved by the

JMC prior to provision of the relevant services and shall be the fair market rates at which

such services could be obtained under freely competitive conditions at the time of

approval.

2.8 Upon notifying Contractor of its decision to acquire an Additional Interest pursuant to

Article 2.5, GNPC may at the same time:

a)



elect to have Contractor advance part or all of GNPC's total proportionate share of

Development Costs as they are incurred, including such Costs as will already have

been incurred from the Date of Commercial Discovery and which are reimbursable

under Article 2.7 on terms (i.e., period of payment and interest rate) no worse

than the Contractor Third Party Rate or Specified Rate as applicable; and



b)



Notify the Contractor and mutually agree in good faith any arrangements for the

payment of the balance of GNPC's total proportionate share of Development Costs

on terms (i.e. period of payment) no worse than the Contractor Third Party Rate or



Specified Rate as applicable.



11



2.9 Contractor's participating Interest in all Petroleum Operations and in all rights under this



Agreement shall be eighty per cent (80%) and shall be reduced proportionately at any

given time and in any given part' of the Contract Area by the exercise of the option of

Additional Interest of GNPC pursuant to Article 2.5 or the Sole Risk Interest of GNPC

pursuant to Article 9.

For the avoidance of doubt, the Participating Interest of the Contractor Parties shall be

divided as at the Effective Date as follows:

(a)

(b)



Brittania-U shall hold a seventy six percent [76%] Participating Interest;

Hills Oil shall hold a four percent (4%) Participating Interest;



Subject to Article 25, the transfer or disposal by the Contractor of all or part of

the Contractor's Participating Interest, whether directly or indirectly by assignment,

merger, consolidation or sale of stock or other conveyance, other than with or to an

Affiliate shall be subject to the following procedure:



2.10



a) Once the Contractor and a proposed transferee (a third party or a Party) have fully

negotiated the final tenns and conditions of a transfer, such final terms and

conditions shall be promptly disclosed in full detail to GNPC and the State in a

notice from the transferor. GNPC shall have the right to acquire the Participating

Interest from the transferor, on the same terms and conditions agreed to by the

proposed transferee if, within thirty (30) Days of transferor's notice, GNPC delivers

to the transferor, a counter-notice that it accepts the agreed terms and conditions of

the transfer without reservations or conditions. If GNPC does not deliver such

counter-notice, the transfer to the proposed transferee may be made, subject to the

other provisions of this Agreement and the laws and regulations, under terms and

conditions no more favourable to the transferee than those set forth in the notice to

GNPC and the State, provided that the transfer shall be concluded within one

hundred and eighty (180) Days from the date of the notice plus such reasonable

additional period as may be required to secure requisite approvals.

b) In the event that Contractor's proposed transfer of part or all of its Participating

Interest involves consideration other than cash or involves other properties included

in a wider transaction then the Participating Interest (or part thereof) shall be

allocated a reasonable and justifiable cash value by the transferor in any notification

to the State and GNPC which such cash value may be disputed by the State or

GNPC. In the event of any dispute between the transferor and the State or GNPC as

to the cash value of any consideration paid, the Parties shall meet at a mutually

convenient time and place to attempt to resolve the dispute and to agree upon a cash

valuation. In the event the Parties fail to reach agreement within ninety (90) calendar

days from the date on which such notification is received by GNPC or the State from

the transferor, Article 24 of this Agreement shall apply. The State and/or GNPC may

satisfy the requirements of this Article 2.10 by agreeing to pay such cash value in

lieu of the consideration payable in the said proposed transfer.

2.11



As of the Effective Date, the Contract Area shall cover a total of approximately 2,050 sq.

km as depicted by Annex 1 and shall from time to time during the term of this

Agreement be reduced according to the terms herein. During the term of the Agreement,

Contractor shall pay rentals to the State for that area included within the Contract Area at



12



the beginning of each Contract Year according to the provisions of Article 12.1 (d)

below,



13



I



I

ARTICLE 3



EXPLORATION PERIOD

3.1



3.2



The Exploration Period shall begin on the Effective Date and shall not extend beyond

seven (7) years except as provided for in accordance with the Petroleum Law.

a)



The Exploration Period shall be divided into an Initial Exploration Period of three

(3) years ("Initial Exploration Period") and two (2) extension periods of one and

half (1.5) years each (respectively "First Extension Period" and "Second Extension

Period") and where applicable the further periods for which provision is made

hereafter.



b)



Where Contractor has fulfilled its work and expenditure obligations set out in

Article 4.3 before the end of the Initial Exploration Period or, as the case may be,

the First Extension Period, and has exercised its option by applying to the Minister

in writing for an extension, the Minister will be deemed to have granted an

extension into the First or, as the case may be, into the Second Extension Period.



Following the end of the Second Extension Period, subject to the provisions of Article

3.4, Contractor will be entitled to an extension or extensions, by reference to Article 8, of

the Exploration Period as follows:

a)



Where at the end of the Second Extension Period Contractor is drilling or testing

any well, Contractor shall be entitled to an extension for such further period as may

be reasonably required to enable Contractor to complete such work and assess the

results and, in the event that Contractor notifies the Minister that the results from

any such well show a Discovery which merits appraisal, Contractor shall be entitled

to a further extension for such period as may be reasonably required to carry out an

Appraisal Programme and determine whether the Discovery constitutes a

Commercial Discovery;



b)



Where at the end of the Second Extension Period Contractor is engaged in the

conduct of an Appraisal Programme in respect of a Discovery which has not been

completed, Contractor shall be entitled to a further extension following the end of

the Second Extension for such period as may be reasonably required to complete

that Appraisal Programme and determine whether the Discovery constitutes a

Commercial Discovery;



c)



Where at the end of the Second Extension Period Contractor has undertaken work

not falling under paragraphs (a) or (b) which is not completed, Contractor will be

entitled to a further extension following the end of the Second Extension Period for

such period as the Minister considers reasonable for the purpose of enabling such

work to be completed.



d)



Where pursuant to Article 8 Contractor has before the end of the Second Extension

Period, including extensions under (a), (b) and (c) above, given to the Minister a

notice of Commercial Discovery, Contractor shall, if the Exploration Period would

otherwise have been terminated, be entitled to a further extension of the Exploration



t



14



Period in respect of the Discovery Area during which it must prepare the

Development Plan in respect of the Commercial Discovery until either:

i)



the Minister has approved the Development Plan as set out in Article 8, or



ii)



in the event that the Development Plan is not approved by the Minister as set

out in Article 8 and the matter or matters in issue between the Minister and

Contractor have been referred for resolution under Article 24, one (1) Month

after the date on which the final decision thereunder has been given.



3.3



Where at the end of the Initial Exploration Period or, as the case may be, at the end of

the First Extension Period Contractor has failed to complete its minimum work and

expenditure obligations as specified in Article 4 in respect of that period but has made

reasonable arrangements to remedy its defaultduring the First or, as the case may be, the

Second Extension Period, Contractor shall be entitled to an extension subject to such

reasonable terms and conditions as the Minister may stipulate to assure performance of

the work.



3.4



Save in respect of a Discovery Area:

a)



in the circumstances and subject to the limitations set forth in Section 12 (3) of the

Petroleum Law; or



b)



in a case falling within the provisions of Article 3.2 (d)



nothing in Article 3.2 shall be read or construed as requiring or permitting the extension

of the Exploration Period beyond seven (7) years from the Effective Date except for

reasons of Force Majeure.

3.5



The provisions of Articles 3.2 (a), (b) and (c) so far as they relate to the duration of the

extension period to which Contractor will be entitled shall be read and construed as

requiring the Minister to give effect to the provisions of Article 8 relating to the time

within which Contractor must meet the requirements of that Article.



I



,



15



I

ARTICLE 4

MINIMUM EXPLORATION



PROGRAMME



4.1



Exploration Operations shall begin as soon as practicable and in any case not later than

ninety (90) days after the Effective Date.



4.2



GNPC shall, at the request of Contractor, make available to Contractor such records and

information relating to the Contract Area as are relevant to the performance of

Exploration Operations by Contractor and are in GNPC's possession, provided that

Contractor shall reimburse GNPC for licensing the data and for other costs reasonably

incurred in procuring or otherwise making such records and information available to

Contractor.



4.3



Subject to the provisions of this Article, in discharge of its obligations to carry out

Exploration Operations in the Contract Area, Contractor shall during the several phases

into which the Exploration Period is divided carry out the work specified hereinafter:

a) Initial Exploration Period:

Commencing on the

terminating at the end of the third (3rd) Contract Year;



Effective Date



and



Description of Work

1.



11.



111.



Re-process 800 kilometers of existing 2D seismic data

Acquire and process 1500 square kilometers of new 3D seismic data

Drill one (1) exploration well.



Contractor's minimum expenditure for the work in the

Initial Exploration Period shall be forty million United States Dollars (US

$40,000,000)

Minimum Expenditure:



b) First Extension Period:



Commencing at the end of the Initial Exploration Period



and terminating eighteen (18) months later.



Description of Work

1.



Conduct G&G studies



ii. Drill one (1) exploration well

Minimum Expenditure: Contractor's minimum Expenditure for the work in the

First Extension Period shall be thirty million United States Dollars (US

$30,000,000).



I

I



c) Second Extension Period:

Commencing at the end of the First Extension and

terminating eighteen months later.

Description of Work



16



1.



Continue G&G studies



11.



Drill one (1) exploration well



Minimum Expenditure: Minimum Expenditure for work in the Second Extension



Period shall be thirty million United States Dollars (US $30,000, 000).

d)



Work and expenditures accomplished in any period in excess of the above

obligations may be applied as credit in satisfaction of obligations called for in any

other Period. The fulfillment of any work obligation shall relieve Contractor of the

corresponding minimum expenditure obligation, but the fulfillment of any

minimum expenditure obligation shall not relieve Contractor of the corresponding

work obligation. Without prejudice to Article 23.4(e), should the Contractor fail to

perform any of its minimum work obligations under Article 4.3 within the

relevant Period, the Contractor shall pay to GNPC, any unspent amount of the

Minimum Expenditure obligation under Article 4.3(a-c) for the Initial

Exploration Period, the First Extension Period or the Second Extension Period as

the case may be.



4.4



No Appraisal Wells drilled or seismic surveys carried out by Contractor as part of an

Appraisal Programme undertaken pursuant to Article 8 and no expenditure incurred by

Contractor in carrying out such Appraisal Programme shall be treated as discharging the

minimum work obligations under Article 4.3.



4.5



The seismic programme in Article 4.3(a), when combined with existing data, shall be

such as will enable a study of the regional geology of the Contract Area and the

preparation of a report thereon with appropriate maps, cross sections and illustrations, as

well as a geophysical survey of the Contract Area which, when combined with existing

data, shall provide:



4.6



4.7



a)



a minimum seismic grid adequate to define prospective drill sites over prospective

closures as interpreted from data available to Contractor; and



b)



a seismic evaluation of structural and stratigraphic conditions over the remaining

portions of the Contract Area.



Each Exploration Well shall be drilled at a location and to an objective depth determined

by Contractor in consultation with GNPc. Except as otherwise provided in Articles 4.7

and 4.8 below, the minimum depth of each obligatory Exploration Well shall be

whichever of the following is first encountered:

a)



the depth of 4,500 meters measured from the Rotary Table Kelly Bushing (RTKB);



b)



the depth at which Contractor encounters geologic basement.



The minimum depth of one (I) of the obligatory Exploration Wells in Article 4.3 shall be

whichever of the following is first encountered:



17



I



I

a)



4.8



the depth of 4,500 meters measured from the Rotary Table Kelly Bushing (RTKB);



-b)



the depth sufficient to penetrate base of Devonian; or



c)



the depth at which Contractor encounters geological basement



If in the course of drilling an Exploration Well, the Contractor concludes that drilling to

the minimum depth specified in Article 4.6 or 4.7 above is impossible, impracticable or

imprudent in accordance with International Good Oil Field Practice then Contractor may

plug and abandon the Exploration Well and GNPC shall have the option of either:

a)



waiving the minimum depth requirement, in which case Contractor will be deemed

to have satisfied the obligation to drill such Exploration Well; or



b)



requiring Contractor to drill a substitute Exploration Well at a location determined

by Contractor in consultation with GNPC and to the minimum depth set forth in

Article 4.6 or 4.7, except that if in the course of drilling such substitute Exploration

Well Contractor establishes that drilling to the minimum depth specified in Article

4.6 or 4.7 above is impossible, impracticable or imprudent in accordance with

International Good oil field practice then Contractor may plug and abandon the

substitute Exploration Well and will be deemed to have satisfied the obligation to

drill one (1) Exploration Well to the minimum depth to which such well had been

planned.



The above option shall be exercised by GNPC within thirty (30) days from the plugging

and abandonment of the Exploration Well, and failure to exercise such option shall

constitute a waiver of the minimum depth requirement pursuant to (a) above.

4.9



During the Exploration Period, Contractor shall have the right to perform additional

Exploration Operations subject to the terms of this Agreement, applicable law and

approval by the JMC, including without limitation performing gravity and magnetic

surveys, drilling stratigraphic wells and performing additional geological and

geophysical studies, provided the minimum work obligations are completed within the

applicable period and provided further that Contractor may elect to perform such

additional Exploration Operations in the absence of approval by the JMC at their Sole

Risk but only in the event of a subsequent Commercial Discovery associated with such

additional Exploration Operations shall the costs of such Exploration Operations be

considered allowable Petroleum Costs for AOE purposes.



4.10



During the Exploration Period, Contractor shall deliver to GNPC and the Minister

reports on Exploration Operations conducted during each Quarter within thirty (30) days

following the end of that Quarter. Further requests for information by the Minister under

Section 9(1) of the Petroleum Law shall be complied with within a reasonable time and

copies of documents and other material containing such information shall be provided to

GNPC.



18



ARTICLES



RELINQUSIHMENT

5.1



5.2



Except as provided in Article 5.2,8.3,8.10,8.11,8.16,8.19,8.20,8.21,14.7

and 14.11,

Contractor shall relinquish portions of the Contract Area in the manner provided

hereafter.

a)



If on or before the expiration of the Initial Exploration Period, Contractor elects to

enter into the First Extension Period pursuant to Article 3.3 then subject to Article

5.2 at the commencement of the First Extension Period the area retained shall not

exceed eighty percent (80%) of the Contract Area as at the Effective Date;



b)



If on or before the expiration of the First Extension Period, Contractor elects to

enter into the Second Extension Period pursuant to Article 3.3 then subject to

Article 5.2 at the commencement of the Second Extension Period the area retained

shall not exceed sixty percent (60%) of the Contract Area as at the Effective Date;



c)



On the expiration of the Second Extension Period, Contractor shall subject to

Article 5.2 relinquish the remainder of the retained Contract Area.



The provisions of Article 5.1 shall not be read or construed as requiring Contractor to

relinquish any portion of the Contract Area which constitutes or forms part of either a

Discovery Area (excluding a Discovery Area determined by the terms of this Agreement

to neither merit appraisal nor to be commercial) or a Development and Production Area.

PROVIDED HOWEVER THAT if at the end of the Initial Exploration Period or the



First Extension Period as the case may be Contractor elects not to enter into the First or

Second Extension Period Contractor shall relinquish the entire Contract Area.

5.3



5.4



Each area to be relinquished pursuant to this Article shall be selected by Contractor and

shall be measured as far as possible in terms of continuous and compact units of a size

and shape which will permit the carrying out of Petroleum Operations in the relinquished

portions.

Contractor shall have the right at any time to relinquish all or part of the Contract Area

provided it has undertaken the work obligations of the relevant Period during which such

relinquishment is made and provided further that provision shall have been made for the

decommissioning, abandoning, removing or eliminating movable and immovable assets

acquired or used by the Contractor in such relinquished part of the Contract Area (which

the Minister elects not to retain)



19



I

f



I

ARTICLE 6



JOINT MANAGEMENT COMMITTEE

6.1



In order that GNPC may at all times participate in respect of the implementation of

Petroleum Operations, GNPC and Contractor shall not later than thirty (30) days after

the Effective Date establish a Joint Management Committee (JMC). Without prejudice

to the rights and obligations of Contractor for day-to-day management of the operations,

the JMC shall oversee, supervise and approve Petroleum Operations and ensure that all

approved Work Programmes and Development Plans are complied with and also that

accounting for costs and expenses and the maintenance of records and reports

concerning the Petroleum Operations are carried out in accordance with this Agreement

and the accounting principles and procedures generally accepted in the international

petroleum industry.



6.2



The composition of and distribution of functions within the JMC shall be as provided

hereinafter.



1



6.3



i)



The JMC shall be composed of two (2) representatives of GNPC and two (2)

representatives of Contractor. GNPC and Contractor shall also designate a

substitute or alternate for each member. In the case of absence or incapacity of a

member of the JMC, such alternate shall automatically assume the rights and

obligations of the absent or incapacitated member.



ii)



The Chairperson of the JMC shall be designated by GNPC from amongst the

members of the JMC.



iii)



Contractor shall be responsible in consultation with GNPC for the preparation of

agenda and supporting documents for each meeting of the JMC and for keeping

records of the meetings and decisions of the JMC. GNPC shall have the right to

inspect all records of the JMC at any time. Contractor shall circulate the agenda

and supporting documents for each meeting to all members and the substitutes or

alternates designated pursuant to Article 6.2(i).



iv)



At any meeting of the JMC three (3) representatives shall form a quorum.



Meetings of the JMC shall be held and decisions taken as follows.

i)



All meetings of the JMC shall be held in Accra or such other place as may be

agreed upon by members of the JMC.



ii)



The JMC shall meet at least twice yearly and at such times as the members may

agree.



iii)



A meeting of the JMC may be convened by either Party giving not less than

twenty (20) days' notice to the other or, in a case requiring urgent action, notice

of such lesser duration as the members may agree upon.



iv)



Decisions of the JMC shall require unanimity.



20



v)



Any member of the JMC may vote by written and signed proxy held by another

member;

-



vi)



Decisions of the JMC may be made without holding a meeting if all

representatives of both Parties notify their consent thereto in the manner

provided in Article 27.



vii)



GNPC and Contractor shall have the right to bring expert advisors to any JMC

meetings to assist in the discussions of technical and other matters requiring

expert advice.



viii)



The JMC may also establish such subcommittees as it deems appropriate for

carrying out its functions including:

a)

b)

c)

d)



ix)



6.4



a technical subcommittee;

an audit subcommittee;

an accounting subcommittee;

a contracts and procurement subcommittee.



Costs and expenses related to attendance by GNPC in or outside Accra, (e.g.

travel, transportation, lodging, per diem and insurance) in accordance with

applicable laws, regulations and GNPC policies and procedures shall be borne by

Contractor and treated as Petroleum Cost.



The JMC shall oversee Exploration Operations as follows (except those additional Sole

Risk Exploration Operations carried out pursuant to Article 4.9 without JMC approval):

i)



Not later than ninety (90) days before the commencement of each Calendar Year,

Contractor shall prepare and submit to the JMC for its review and approval a

detailed Work Programme and Budget covering all Exploration Operations which

Contractor proposes to carry out in that Calendar Year and shall also give an

indication of Contractor's tentative preliminary exploration plans for the succeeding

Calendar Year. Where the Effective Date occurs later than 30 June in any Calendar

Year Contractor shall have the option of submitting a single detailed Work

Programme and Budget covering the remaining months of the Calendar Year in

which the Effective Date occurs and the succeeding Calendar Year.



ii)



Upon notice to the Minister and GNPC, Contractor may amend any Work

Programme or budget submitted to the JMC pursuant to this Article which notice

will state why in Contractor's opinion the amendment is necessary or desirable.

Any such amendment shall be submitted to the JMC for review and approval.



iii) Every Work Programme submitted to the JMC pursuant to this Article 6.4 and



every revision or amendment thereof shall be consistent with the requirements set

out in Article 4.3 relating to minimum work and expenditure for the period of the

Exploration Period in which such Work Programme or budget falls;

iv)



Contractor shall report any Discovery to GNPC immediately following such

Discovery and shall place before the JMC for review its Appraisal Programme (or



21



I



•

any amendment thereto) prior to submission pursuant to Article 8.4 or Article 8.6

thereof to the Minister and the Petroleum Commission. Within thirty (30) days of

completion of the Appraisal Programme a JMC meeting to discuss the results of the

Appraisal Programme shall be convened to take place before submission of the

detailed Appraisal report to the Minister and the Petroleum Commission as

provided for in Article 0;

v)



The JMC will review and approve Work Programmes and budgets and any

amendments or revisions thereto, and Appraisal Programmes and any amendments

or revisions thereto, submitted to it by Contractor pursuant to this Article, and

timely give such advice as it deems appropriate which Contractor shall consider

before submitting the Work Programmes, budget and Appraisal Programmes, as

applicable, for approvals pursuant to this Agreement or as required by law.



vi) After the date of the first Commercial Discovery, Contractor shall seek the



concurrence of GNPC's JMC representatives, which concurrence shall not be

unreasonably withheld, on any proposal for the drilling of an Exploration Well or

Wells not associated with the Commercial Discovery and not otherwise required to

be drilled under Article 4.3. If concurrence is not secured by Contractor, Contractor

may nevertheless elect to drill the Exploration Well or Wells but only in the event

of a subsequent Commercial Discovery associated with the Well or Wells shall the

costs of such Well or Wells be considered Petroleum Costs for AOE purposes and

deductible cost for Ghana income tax purposes.



I

6.5



6.6



6.7



From the Date of Commercial Discovery the JMC shall have supervision of Petroleum

Operations as follows:

i.



Within sixty (60) days after the Date of Commercial Discovery Contractor shall

prepare and submit to the JMC for approval any revisions to its annual Work

Programme and budget that may be necessary for the remainder of that Calendar

Year and for the rest of the Exploration Period.



ii.



At least ninety (90) days before the Commencement of each subsequent Calendar

Year Contractor shall submit to the JMC for review and approval a detailed Work

Programme and budget setting forth all Development and Production Operations

which Contractor proposes to carry out in that Calendar Year and the estimated cost

thereof and shall also give an indication of Contractor's plans for the succeeding

Calendar Year; and



iii.



Within sixty (60) days of the Date of Commencement of Commercial Production

and thereafter not later than one hundred and twenty (120) days before the

commencement of each Calendar Year Contractor shall submit to the JMC for its

approval an annual production schedule which shall be in accordance with

international good oilfield practice, and shall be designed to provide the most

efficient, beneficial and timely production of the Petroleum resources.



Lifting schedules for Development and Production Areas shall be subject to JMC

approval.

The JMC shall review all of Contractors reports on the conduct of Petroleum



22



Operations.

6.8



Contractor's insurance programine and the programmes for training and technology

transfer submitted by Contractor and the accompanying budgets for such schemes and

programmes shall be subject to JMC approval.



6.9



Any contract to be entered into or awarded by Contractor for the provision of services

for Petroleum Operations shall be subject to approval by the JMC.



6.10



If during any meeting of the JMC the Parties are unable to reach agreement concerning

any of the matters provided for in Article 6.5, 6.6, 6.7, 6.8, and 6.9 the matter shall be

deferred for reconsideration at a further meeting to be held not later than fifteen (15)

days following the original meeting: If after such further meeting the Parties are still

unable to reach agreement, the matter in dispute shall be referred to the Parties forthwith.

Failing agreement within fifteen (15) days thereafter, the matter in dispute shall, at the

request of any Party, be referred for resolution under Article 24.



6.11



For the avoidance of doubt, the concurrence or approval of JMC representatives shall not

be unreasonably withheld or delayed with respect to any proposal and/or program

submitted by Contractor in accordance with this Article 6.



l



23



•

ARTICLE 7



RIGHTS AND OBLIGATIONS OF CONTRACTOR AND GNPC

7.1



,



Subject to the provisions of this Agreement, Contractor shall be responsible for the

conduct of Petroleum Operations and shall perform its obligations in a workmanlike

manner, with due care and expedition and in accordance with International Good Oil

Field Practice, including without prejudice to the generality of the foregoing:

a)



conduct Petroleum Operations with utmost diligence, efficiency and economy, in

accordance with best international petroleum industry practices, observing sound

technical and engineering practices using appropriate advanced technology and

effective equipment, machinery, materials and methods;



b)



take all practicable steps to ensure compliance with Section 3 of the Petroleum

Law; including ensuring the recovery and prevention of waste of Petroleum in the

Contract Area in accordance with best international petroleum industry practices;



c)



prepare and maintain in Ghana full and accurate records of all Petroleum Operations

performed under this Agreement;



d)



prepare and maintain accounts of all operations under this Agreement in such a

manner as to present a full and accurate record of the costs of such Petroleum

Operations, in accordance with the Accounting Guide;



e)



disclose to GNPC and the Minister any operating or other agreement among the

Parties that constitute Contractor relating to the Petroleum Operations hereunder,

which agreement shall not be inconsistent with the provisions of this Agreement.



f)



prepare and implement a programme (to be approved by the JMC) to develop

GNPC's institutional capacity to become a competent operator;



g)



provide and be solely responsible for the payment of all costs related or incidental

to all services, equipment and supplies necessary for the execution of the activities

to be conducted by the Contractor under this Agreement and the related documents;



h)



prepare and submit in accordance with this Agreement for approval by the JMC (i)

the Development Plan and (ii) such other matters as are specified in this Agreement

and the related documents as subject to approval by the JMC;



i)



take all measures consistent with International best Practice (i) to control the flow

and prevent loss or waste of Petroleum, (ii) to prevent any injurious ingress of water

and damage to Petroleum bearing strata and (iii) to manage reservoir pressure;



j)



not to flare any Natural Gas except to the extent necessary to mitigate or prevent an

emergency or for safe operations as provided in the Development Plan;



24



7.2



k)



keep the Minister and GNPC promptly advised in wntmg of all material

developments which occur, or the occurrence of which is reasonably foreseeable,

affecting or likely to affect Petroleum Operations;



1)



to take such steps in case of emergency, and make such immediate expenditures as

are necessary in accordance with International best Practice, Environmental,

Industrial Hygiene and Safety Legislation and/or this Agreement and the related

documents for the protection of health, life, the environment and property, and to

report in reasonable detail all such steps taken and expenditures made promptly to

theJMC;



m)



notify promptly the Minister and GNPC if the Contractor becomes aware of any

unusual event or circumstance occurring in the Contract Area or such other areas

where Contractor is undertaking activities contemplated under this Agreement or

the related documents that could reasonably be expected to adversely affect the

environment;



n)



implement and administer contracts entered into with Affiliates in the same fashion

as it would contracts entered into with non-Affiliate third parties in comparable

transactions negotiated, implemented and administered on an arm's-length basis;



0)



maintain or

other assets

accordance

Agreement;



p)



perform and observe each other term, covenant and agreement of the Contractor

contained in this Agreement and the related documents.



decommission, as appropriate, all existing facilities and assets and all

used or held for use in connection with Petroleum Operations, in

with International Good Oil Field Practice, applicable law and this

and\



In connection with its performance of Petroleum Operations, Contractor shall have the

right within the terms of and pursuant to applicable law and regulations:

a)



to establish offices in Ghana and to assign to those offices such representatives as it

shall consider necessary for the purposes of this Agreement;



b)



to use public lands for installation and operation of shore bases, and terminals,

harbours and related facilities, petroleum storage and processing, pipelines from

fields to terminals and delivery facilities, camps and other housing;



c)



to receive licenses and permission to install and operate such communications and

transportation facilities as shall be necessary for the efficiency of its operations;



d)



to bring to Ghana, provided that reasonable efforts are made to identify Ghanaian

personnel with the requisite skill and experience, in accordance with Contractor's

plan for training and developing Ghanaian nationals referenced in Article 8.13 (0)

and 21.1 such number of Foreign National Employees as shall be necessary for its

operations, including employees assigned on permanent or resident status, with or

without families, as well as those assigned on temporary basis such as rotational

(rota) employees;



25



f



•



,



7.3



e)



to provide or arrange for reasonable housing, schooling and other amemties,

permanent and temporary, for its employees and to import personal and household

effects, furniture and vehicles, for the use of its personnel in Ghana;



f)



to be solely responsible for provision of health, accident, pension and life insurance

benefit plans on its Foreign National Employees and their families; and such

employees shall not be required to participate in any insurance, compensation or

other employee or social benefit programs established in Ghana;



g)



to have, together with its personnel, at all times the right of ingress to and egress

from its offices in Ghana, the Contract Area, and the facilities associated with

Petroleum Operations hereunder in Ghana including the offshore waters, using its

owned or chartered means of land, sea and air transportation; and



h)



to engage such Subcontractors, expatriate and national, including also consultants,

and to bring such Subcontractors and their personnel to Ghana as are necessary in

order to carry out the Petroleum Operations in a skillful, economic, safe and

expeditious manner; and said Subcontractors shall have the same rights as

Contractor specified in this Article 7.2 to the extent they are engaged by Contractor

for the Petroleum Operations hereunder.



Provided that Contractor has complied with all of its obligations under this Agreement,

and as long as they appropriately complete applicable procedures and other requirements

prescribed by relevant authorities, GNPC shall assist Contractor in carrying out

Contractor's obligations expeditiously and efficiently as stipulated in this Agreement, and

in particular GNPC shall use its reasonable best efforts to assist Contractor and its

Subcontractors to:

a)



establish supply bases and obtain necessary communications facilities, equipment

and supplies;



b)



obtain necessary approvals to open bank accounts in Ghana;



c)



subject to Article 21.3 hereof, obtain entry visas and work permits or any other

documentation that may be required from time to time for such number of Foreign

National Employees of Contractor and its Subcontractors engaged in Petroleum

Operations and members of their families who will be resident in Ghana, and make

arrangements for their travel, arrival, medical services and other necessary

amenities;



d)



comply with Ghana customs procedures and obtain permits for the importation of

necessary materials;



e)



obtain the necessary permits to transport documents, samples or other forms of data

to foreign countries for the purpose of analysis or processing if such is deemed

necessary for the purposes of Petroleum Operations;



26



f)



assist with the acquisition of any approvals or waivers required from any

Government agencies dealing with fishing, meteorology, navigation and

communications as required;



g)



identify qualified Ghanaian personnel as candidates for employment by Contractor

in Petroleum Operations; and



h)



procure access on competitive commercial terms for the storage, processing,

transportation and/or marketing of Petroleum produced under this Agreement

through facilities owned by the State, GNPC (or its Affiliates) or any third party.



7.4



All reasonable and documented expenses incurred by GNPC in connection with any of

the matters set out in Article 7.3 above shall be borne by Contractor.



7.5



GNPC shall render assistance to Contractor in emergencies and major accidents, and

such other assistance as may be requested by Contractor, provided that any reasonable

expenses involved in such assistance shall be borne by Contractor.



J



27



I

ARTICLE 8

COMMERCIALITY

8.1



Contractor shall submit a Discovery Notice to the Minister and Petroleum Commission

in writing as soon as possible after any Discovery is made, but in any event not later than

thirty (30) days after the date any such Discovery is made.



8.2



As soon as possible after the analysis of the test results of such Discovery is

complete and in any event not later than one hundred (100) days from the date of such

Discovery, Contractor shall by a further notice in writing to the Minister indicate

whether in the opinion of Contractor the Discovery merits Appraisal.



8.3



Where the Contractor does not make the indication required by Article 8.1 and 8.2

within the period indicated or indicates that the Discovery does not merit Appraisal,

Contractor shall, subject to Article 8.20 below, relinquish the Discovery Area associated

with the Discovery.



8.4



Where Contractor indicates that the Discovery merits Appraisal, Contractor shall within

one hundred and eighty (180) days from the date of such Discovery submit to the

Petroleum Commission for approval and to the Minister for information purposes an

Appraisal Programme to be carried out by Contractor in respect of such Discovery. For

the avoidance of doubt unless otherwise instructed by the Petroleum Commission,

Contractor shall appraise each Discovery where Contractor indicates that such Discovery

merits Appraisal.



8.5



In the absence of regulations of general application otherwise governing the process, the

Petroleum Commission and the Contractor shall adhere to the following procedure in

connection with the submission for approval of an Appraisal Programme. The Petroleum

Commission shall within ninety (90) days of submission of the Appraisal Programme,

give the Contractor a notice in writing stating:

i.

ii.



I

I



iii.



whether or not the Appraisal Programme has been approved or conditionally

approved;

any revisions or improvements required by the Petroleum Commission to be

made to the proposed Appraisal Programme, and the reasons thereof; or

if conditionally approved, any conditions for approval of the proposed Appraisal

Programme.



If the Petroleum Commission does not provide such notice after the ninety (90) Day time

period described above then the Appraisal Programme shall be deemed not approved. In

the event of a dispute arising out of this Article 8.5 Contractor may lodge a complaint

with the Minister within thirty (30) days after receipt of such notice or the date deemed

not approved, as applicable. If such dispute is not resolved by the Minister within thirty

(30) days from the date such complaint was lodged, such dispute shall be resolved in

accordance with Article 24.

If the Petroleum Commission has not given a notice in writing pursuant to this Article,

then the arbitration panel shall determine whether the Petroleum Commission's failure to

give such notice was reasonable and lawful. If the Petroleum Commission has given a



28



notice in writing pursuant to this Article, and the Parties cannot agree on the revisions or

conditions, then the arbitration panel shall determine whether the Petroleum

Commission's giving such revisions or conditions proposed was reasonable and lawful.

8.6



Where Contractor seeks to amend an approved Appraisal Programme, it shall

submit such amendment to the JMC for review and approval pursuant to Article

6.4(v)before submission to the Petroleum Commission for approval.



8.7



Unless Contractor and the Minister otherwise agree in any particular case,

Contractor

shall have a period of two (2) years from the date of Discovery to

complete

the

Appraisal Programme. In the event Contractor requires a period of more than the two

(2) years to complete the Appraisal Programme, Contractor shall submit request to the

Minister for an extension with a firm programme with

timelines to justify the

request.



8.8



Contractor shall commence the Appraisal Programme within one hundred and fifty (150)

days from the date of approval of the Appraisal Programme by the Petroleum

Commission. Where the Contractor is unable to commence Appraisal within one

hundred and fifty (150) days from the date of approval of the Appraisal Programme by

the Petroleum Commission, GNPC shall be entitled to exercise the option provided for

in Article 9.1 to enable prompt Appraisal, provided however that after Contractor

actually embarks on Appraisal or obtains an extension of time for such work this option

may not be exercised.



8.9



Not later than ninety (90) days from the date on which said Appraisal Programme

relating to the Discovery is completed, Contractor will submit to the Minister and

Petroleum Commission a report-containing the results of the Appraisal Programme. Such

report shall include all available technical and economic data relevant to a determination

of commerciality, including, but not limited to, geological and geophysical conditions,

such as structural configuration, physical properties and the extent of reservoir rocks,

areas, thickness and depth of pay zones, pressure, volume and temperature analysis of

the reservoir fluids; preliminary estimates of Crude Oil and/or Natural Gas reserves;

recovery drive characteristics; anticipated production performance per reservoir and per

well; fluid characteristics, including gravity, sulphur percentage, sediment and water

percentage and refinery assay pattern.



8.10



Not later than ninety (90) days from the date on which said Appraisal Programme is

completed Contractor shall, by a further notice in writing, inform the Minister whether

Commercial Discovery.

the Discovery in the opinion of Contractor is or is not a



8.11



If Contractor fails to notify the Minister as provided in Article 8.1 or informs the

Minister that the Discovery is not commercial, then subject to Article 8.21 Contractor

shall relinquish such Discovery Area; provided, however, that in appropriate cases,

before declaring that a Discovery is not commercial, Contractor shall consult with the

other Parties and may make appropriate representations proposing minor changes in the

fiscal and other provisions of this Agreement which may, in the opinion of Contractor,

affect the determination of commerciality. The other Parties may, where feasible, and in

the best interests of the Parties agree to make such changes or modifications in the

existing arrangements.



29



I



8.12



If Contractor pursuant to Article 8.10 informs the Minister that the Discovery is a

Commercial Discovery, Contractor shall not later than one hundred and eighty (180)

days thereafter, prepare and submit to the Minister a Development Plan.



8.13



The Development Plan referred to in Article 8.12 shall be based on detailed engineering

studies and shall include:

a)



Contractor's proposals for the delineation of the proposed Development and

Production Area and for the development of any reservoir(s), including the method

for the disposal of Associated Gas in accordance with the provisions of Article

14.4;



b)



the way in which the Development and Production of the reservoir is planned to be

financed;

.



c)



Contractor's proposals relating to the spacing, drilling and completion of wells, the

production, storage, processing, gas utilization, transportation, delivery facilities

and necessary infrastructure developments required for the production, storage and

transportation of the Petroleum, including without limitation:

i)



the estimated number, size and production capacity of production facilities

if any;



ii)



the estimated number of Production Wells;



iii) the particulars of feasible alternatives for transportation of the Petroleum,

including pipelines;

iv)



the particulars of onshore installations required, including the type and

specifications or size thereof; and



v)



the particulars of other technical equipment required for the operations;



d)



the estimate of the reserves together with the estimated annual production profiles

throughout the life of the field to be developed pursuant to the Development Plan

for Crude Oil and Natural Gas from the Petroleum reservoirs;



e)



tie-ins with other petroleum fields where applicable;



f)



information on operation and maintenance;



g)



a description of technical solutions including enhanced recovery methods;



h)



estimates of capital and operating expenditures;



i)



the economic feasibility studies carried out by or for Contractor in respect of

alternative methods for Development of the Discovery, taking into account:

i)

ii)



location;

water depth (where applicable);



30



iii) meteorological conditions;

iv) estimates of capital and operating expenditures; and

v) any other relevant data and evaluation thereof;

j)



the safety measures to be adopted in the course of the Development and Production

Operations, including measures to deal with emergencies;



k)



environmental impact assessments as required by the applicable

Republic of Ghana in effect and as amended from time to time;



1)



measures to protect the environment and a contingency plan for handling of

emergencies (including the provision and maintenance of equipment stockpiles to

respond to an emergency



m)



Contractor's proposals with respect to the procurement of goods and services

obtainable in Ghana;



n)



Contractor's technology transfer plan



0)



Contractor's plan for training and employment of Ghanaian nationals;



p)



the timetable for effecting Development Operations; and



q)



a plan for decommissioning and abandonment



laws of the



8.14



The date of the Minister's approval of the Development Plan shall be the Date of

Commercial Discovery.



8.15



The Minister shall within ninety (90) Days following submission of the

Development Plan give Contractor a notice in writing stating:

i)



whether or not the Development

conditionally approved;



Plan as submitted



has been approved or



ii)



any revisions proposed by the Minister to the Development Plan as submitted, and

the reasons thereof; or



iii) if conditionally approved, any conditions pursuant to which the Development Plan

is approved.



8.16



If the Minister does not provide such notice within ninety (90) Days following the

submission of the Development Plan by the Contractor and thirty (30) days following

approval, such

a second notice from Contractor requesting the Minister's

Development Plan shall be deemed not approved.



8.18



Where the Development Plan is not approved by the Minister as provided under Article

8.16 above, the Parties shall within a period of thirty (30) days from the date of the

notice by the Minister as referred to under Article 8.16 above meet to agree on the

revisions or conditions proposed by the Minister to the Development Plan. In the event



31



of failure to agree to the proposed revisions or conditions, within fourteen (14) days

following said meeting any matters in dispute between the Minister and the Contractor

shall be referred for resolution in accordance with Article 24.7. If the Minister has not

given a notice in writing pursuant to Article 8.16, then the arbitration panel shall

determine whether the Minister's failure to give such notice was reasonable and lawful.

If the Minister has given a notice in writing pursuant to Article 8.l6(ii) or 8. 16(iii), and

the Parties cannot agree on the revisions or conditions, then the arbitration panel shall

determine whether the Minister's giving such revisions or conditions proposed was

reasonable and lawful.



8.19



Where the issue in dispute referred for resolution pursuant to Article 24 is finally decided

in favour of Contractor the Minister shall forthwith give the requisite approval to the

Development Plan submitted by Contractor.



8.20



Where the issue in question referred for resolution pursuant to Article 24 is finally

decided in favour of the Minister in whole or in part, Contractor shall forthwith:



8.21



i)



amend the proposed Development Plan to give effect to the final decision rendered

under Article 24, and the Minister shall give the requisite approval to such revised

Development Plan; or



ii)



subject to Article 8.21 below relinquish the Discovery Area.



Notwithstanding the relinquishment provisions of Articles 8.3 and 8.11 above, if

Contractor indicates that a Discovery does not at the time merit appraisal, or after

appraisal does not appear to be a Commercial Discovery but may merit appraisal or

potentially become a Commercial Discovery at a later date during the Exploration

Period, then Contractor need not relinquish the Discovery Area and may continue its

Exploration Operations in the Contract Area during the Exploration Period; provided

that the Contractor shall explain what additional evaluations, including Exploration work

or studies, are or may be planned in order to determine whether subsequent appraisal is

warranted or that the Discovery is commercial. Such evaluations shall be performed by

Contractor according to a specific time table, subject to its right of earlier relinquishment

of the Discovery Area. After completion of the evaluations, Contractor shall make the

indications called for under Article 8.4 or 8.1 0 and either proceed with appraisal,

confirm commerciality or relinquish the Discovery Area.

In any case, if a Discovery is made in the Initial Exploration Period or First Extension

Period, the Contractor shall by the end of the subsequent phase (that is the First

Extension Period or Second Extension Period as the case may be), take a decision to

appraise the Discovery or relinquish such Discovery. Likewise, if the Contractor has

completed the appraisal of a Discovery in the Initial Exploration Period or First

Extension Period, the Contractor shall by the end of the subsequent phase (that is, the

First Extension Period or Second Extension Period as the case may be), take a decision

to determine commerciality or relinquish such Discovery. If at the end of the Exploration

Period the Contractor has neither indicated its intent to proceed with an Appraisal

Programme nor declared the Discovery to be a Commercial Discovery, then the

Discovery Area shall be relinquished.



8.21



Upon completion of an Appraisal Programme and before Contractor makes a

determination of non-comrnerciality, Contractor may consult with the other Parties and



32



may make appropriate representations proposing minor changes in the fiscal and other

_ provisions of this Agreement which may, in the opinion of Contractor, affect the

determination of commerciality. The other Parties may, agree to make such changes or

modifications in the existing arrangements. In the event the Parties do not agree on such

changes or modifications, then subject to Articles 8.20 and 8.22 Contractor shall

relinquish the Discovery Area.

8.22



Nothing in Articles 8.4, 8.11,

Contractor to relinquish:

a)



b)



8.19 or 8.20 above shall be read or construed as requiring



any area which constitutes or forms part of another Discovery Area in respect of

which:

i)



Contractor has given the Minister a separate notice stating that such

Discovery merits appraisal; or



ii)



Contractor has given the Minister a separate notice indicating that such

Discovery is a Commercial Discovery; or



any area which constitutes or forms part of a Development and Production Area.



8.23



For the avoidance of doubt, where Contractor makes a Discovery after the expiration of

the Exploration Period Contractor shall notify the Minister of such Discovery pursuant to

Article 8.1 and surrender such Discovery to GNPC.



8.24



In the event a field extends beyond the boundaries of the Contract Area, the Minister

may require the Contractor to exploit said field in association with the third party holding

the rights and obligations under a petroleum agreement covering the said field (or GNPC

as the case may be). The exploitation in association with said third party or GNPC shall

be pursuant to good unitization and engineering principles and in accordance with

International Good Oil Field Practice.



33



I



ARTICLE



9



SOLE RISK ACCOUNT

9.1



Subject to Article 8.2, GNPC may notify Contractor that at its Sole Risk, it may

commence to appraise a Discovery, provided that within thirty (30) days of such

notification from GNPC, Contractor may elect to commence to appraise that Discovery

within its Work Programme.



9.2



Where an appraisal undertaken under Article 9.1 at the Sole Risk of GNPC results in a

determination that a Discovery is a Commercial Discovery, Contractor may develop the

Commercial Discovery upon reimbursement to GNPC of all expenses incurred in

undertaking the appraisal and after arranging with GNPC satisfactory terms for the

payment of a premium equivalent to seven hundred per cent (700%) of such expenses.

Such premium shall not be reckoned as cost of Petroleum Operations for the purpose of

the Accounting Guide. In the event that Contractor declines to develop said Discovery,

Contractor shall relinquish the Development and Production Area established by the

Appraisal Programme conducted by GNPC under Article 9.1.



9.3



During the Exploration Period GNPC may, at its Sole Risk, require Contractor to

continue drilling to penetrate and test horizons deeper than those contained in the Work

Programme of Contractor or required under Article 4. GNPC may also at its Sole Risk

require the Contractor to test a zone or zones which Contractor has not included in

Contractor's test programme. Notice of any such requirement shall be given to

Contractor in writing as early as possible prior to or during the drilling of the well, but in

any case not after Contractor has begun work to complete or abandon the well. The

exercise by GNPC of this right shall be in an agreed manner such agreement not to be

unreasonably withheld or delayed by Contractor which does not prevent Contractor from

complying with its work obligations under Article 4.3.



9.4



At any time before commencing deeper drilling as required by GNPC pursuant to Article

9, Contractor may elect to embody the required drilling in its own Exploration

Operation, in which case any resulting Discovery shall not be affected by the provisions

ofthis Article 9 shall not apply to any resulting discovery.



9.5



Where any Sole Risk deeper drilling required pursuant to this Article 9 results in a

Discovery, GNPC shall have the right, at its Sole Risk, to appraise, develop, produce and

dispose of all Petroleum from such Discovery and if it desires to do so shall conduct

such Sole Risk operations unless GNPC proposes otherwise and Contractor agrees.

Provided however that if at the time such Petroleum is tested from the producing horizon

in a well, Contractor's Work Programme includes a well or wells to be drilled to the

same producing horizon, and provided that the well or wells drilled by Contractor

result(s) in a Petroleum producing well producing from the same horizon, Contractor

shall, after reimbursing GNPC for all costs associated with its Sole Risk deeper drilling

in said well and after arranging with GNPC satisfactory terms for the payment of a

premium equivalent to seven hundred per cent (700%) of such expenses, have the right

to include production from that well in its total production for the purposes of

establishing a Commercial Discovery, and, if a Commercial Discovery is subsequently

established, to develop, produce and dispose of the Petroleum in accordance with the



34



provisions of this Agreement Such premium shall not be reckoned as Petroleum Costs

for the purposes of the Accounting Guide.



9.6



Alternatively, if at the time such Petroleum is tested from a producing horizon in a well

pursuant to a Sole Risk operation Contractor's Work Programme does not include a well

to be drilled to said horizon, Contractor has the option to appraise and lor develop, as the

case may be, the Discovery for its account under the terms of this Agreement if it so

elects within a period of sixty (60) days after such Discovery. In such case, Contractor

shall reimburse GNPC for all expenses incurred by GNPC in connection with such Sole

Risk operations, and shall make satisfactory arrangements with GNPC for the payment

of a premium equivalent to seven hundred percent (700%) of such expenses Such

premium shall not be reckoned as Petroleum Costs for the purposes of the Accounting

Guide.



9.7



During the term of this Agreement, GNPC shall have the right, at its Sole Risk, and upon

six (6) months prior notice to Contractor, to drill one (1) or two (2) wells per Calendar

Year within the Contract Area provided that the work intended to be done by GNPC had

not been scheduled for a Work Programme to be performed by Contractor and the

exercise of such right by GNPC and the arrangement made by GNPC for undertaking

such drilling do not interfere with a Work Programme or prevent Contractor from

satisfying its work obligations. Within thirty (30) days after receipt of such notice

Contractor may elect to drill the required well or wells as part of Contractor's

Exploration Operations.



9.8



In the event that a well drilled at the Sole Risk of GNPC in accordance with Article 9.7

above results in a Discovery, GNPC shall notify Contractor and shall have the right to

appraise and develop as the case may be or require Contractor to develop, after GNPC

declares a Commercial Discovery, such Commercial Discovery for a mutually agreed

service fee, so long as Contractor has an interest in the Contract Area, GNPC taking all

the interest risk and costs and hence having the right to all Petroleum produced from the

Commercial Discovery, provided however that Contractor has the option to appraise

and/or develop, as the case may be, the Discovery for its account under the terms of this

Agreement if it so elects within a period of sixty (60) days after receipt of GNPC's

written notice of such Discovery.



9.9



Contractor shall reimburse GNPC for all expenses incurred by GNPC in connection with

such Sole Risk operations, and shall make satisfactory arrangements with GNPC for the

payment of a premium equivalent to seven hundred percent (700%) of such expenses

before exercising the option under Article 9.7. Such premium shall not be reckoned as

Petroleum Costs for the purposes of Accounting Guide.



9.10



In the event that Contractor declines to develop the Commercial Discovery or no

agreement is reached on the service fee arrangement as provided for in Article 9.8 above,

Contractor shall relinquish the Development and Production Area associated with such

Commercial Discovery.



9.11



Sole Risk operations under this Article 9 shall not extend the Exploration Period nor the

term of this Agreement provided however that and Contractor shall complete any agreed

programme of work commenced by it under this Article at GNPC's Sole Risk, and

subject to such provisions hereof as the Parties shall then agree, even though the



35



I



Exploration Period as defined in Article 3 or the term of this Agreement may have

expired.

9.12



GNPC shall indemnify and hold harmless Contractor against all actions, claims,

demands and proceedings whatsoever brought by any third party or the State, arising out

of or in connection with Sole Risk operations under this Article 9, unless such actions,

claims, demands and proceedings are caused by Contractor's gross negligence or willful

misconduct.



I



36



ARTICLE 10

- SHARING OF CRUDE OIL



10.1



Gross Production of Crude Oil from each Development and Production Area shall

(subject to a Calendar Year adjustment developed under the provisions of Article 10.7)

be distributed amongst the Parties in the following sequence and proportions:

a)



Ten percent (10%) of the Gross Production of Crude Oil shall be delivered to the

State as ROYALTY, pursuant to the provisions of the Petroleum Law. Upon notice

to Contractor, the State shall have the right to elect to receive cash in lieu of its

royalty share of such Crude Oil. The State's notice shall be given to Contractor at

least ninety (90) days in advance of each lifting period, such periods to be

established pursuant to the provisions of Article 10.7. In such case, said share of

Crude Oil shall be delivered to Contractor and it shall pay to the State the value of

said share in cash at the relevant weighted average Market Price for the relevant

period as determined in accordance with Article 11.7;



b)



After distribution of such amounts of Crude Oil as are required pursuant to Article

10.1 (a), the amount of Crude Oil, if any, shall be delivered to GNPC to the extent

it is entitled for Sole Risk operations under Article 9;



c)



After distribution of such amounts of Petroleum as are required pursuant to Articles

1 0.1 (a) and I 0.1 (b), the remaining Crude Oil produced from each Development and

Production Area shall be distributed to Contractor and, subject to Article 1 0.1 (e)

below, to GNPC on the basis of their respective Participating Interests pursuant to

Article 2;



d) The State's AOE (as hereinafter defined), if any, shall be distributed to the State out

of the Contractor's share of Crude Oil determined under Article 10.1 (c). The State

shall also have the right to elect to receive cash in lieu of the AOE share of Crude

Oil accorded to it pursuant to Article 10.2. Notification of said election shall be

given in the same notice in which the State notifies Contractor of its election to

receive cash in lieu of Crude Oil under Article 1 0.1 (a). In such case, said Crude oil

share shall be delivered to Contractor and it shall pay to the State the value of said

share in cash at the relevant weighted average Market Price for the relevant period as

determined in accordance with Article 11.7;

e) In the event that GNPC has failed to pay any amounts due to Contractor pursuant to

Article 15.2 of this Agreement ( such amounts with interest thereon in accordance

with Article 26.6 being hereinafter called "Default Amounts") and for so long as any

such advances and interest thereon remain uncovered by Contractor, an amount of

Crude Oil shall be delivered to GNPC sufficient in value to reimburse it for its share

of Production Costs paid by it to that date, until such share of Production Costs has

been fully reimbursed to it, after which a volume of Crude Oil shall be delivered to

Contractor equivalent in value to the outstanding amounts of the aforesaid Default

Amounts until such Default Amounts are fully recovered by Contractor. The value

of the Crude Oil for the purpose of this Article 10 shall be the Market Price

determined pursuant to Article 11.7



37



I



10.2



At any time the State shall be entitled to a portion of Contractor's share of Crude Oil

then being produced from each separate Development and Production Area (hereinafter

referred to as "Additional Oil Entitlements" or "AOE") on the basis of the after-tax

inflation-adjusted rate of return ("ROR") which Contractor has achieved with respect



to such Development and Production Area as of that time. Contractor's ROR shall be

calculated on its NCF and shall be determined separately for each Development and

Production Area at the end of each Month in accordance with the following

computation-



(a)



Definitions:



"NCF" means Contractor's net cash flow for the Month for which the calculation is

being made, and shall be computed in accordance with the following formula:

NCF = x - y - z

where

"x" equals all revenues received during such Month by Contractor from the

Development and Production Area, including an amount computed by multiplying

the amount of Crude Oil taken by Contractor during such Month in accordance with

Articles 1 0.1 (d) and 10.1 (e); excluding such Crude Oil taken by Contractor for

payment of interest in respect of Petroleum Costs incurred by Contractor on GNPC's

behalf, by the Market Price applicable to such Crude Oil during the Month when

lifted, plus any other proceeds specified in the Accounting Guide received by

Contractor, including, without limitation, the proceeds from the sale of any assets to

which Contractor continues to have title. For the avoidance of doubt, "x" shall not

include revenues from Crude Oil lifted by Contractor which is part of another Party's

entitlement (e.g. Royalty, AOE Oil delivered to Contractor because the State has

elected to receive cash in lieu of Crude Oil, Crude Oil purchased by Contractor from

GNPC or the State) but shall include revenues from Crude Oil owned by Contractor

but lifted by another Party (e.g. Crude Oil purchased by GNPC or the State from

Contractor).



e



1



"y" equals one-twelfth /iz) of the income tax paid by the Contractor to the State with

respect to the Calendar Year in respect of the Development and Production Area. If

there are two (2) or more Development and Production Areas, the total income tax

paid by Contractor in accordance with the Petroleum Income Tax Law 1987 shall for

purposes of this calculation be allocated to the Development and Production Area on

the basis of hypothetical tax calculations for the separate Development and

Production Areas. The hypothetical tax calculation for each Development and

Production Area shall be determined by allocating the total amount of tax incurred for

each Calendar Year by Contractor under the Petroleum Income Tax Law to each

Development and Production Area based on the ratio that the chargeable income from

a given Development and Production Area bears to the total chargeable income of

Contractor. The chargeable income of Contractor is determined under section 2 of the

Petroleum Income Tax Law and the chargeable income of a Development and

Production Area shall be calculated by deducting from the gross income derived from

or allocated to that Area those expenses deductible under section 3 of the Petroleum



38



Income Tax Law which are reasonably allocable to that Area. A negative chargeable

income for an Area shall be treated as zero for purposes of this allocation and not

more (or less) than the total income tax paid by Contractor shall be allocated between

the Areas.

"z" equals all Petroleum Costs specified in the Accounting Guide and expended by

Contractor during such Month with respect to the. Development and Production

Area, including any Petroleum Costs paid by Contractor on GNPC's behalf, and not

reimbursed by GNPC within the month, provided that all Petroleum Costs for

Exploration Operations not directly attributable to a specific Development and

purposes of this calculation be allocated to the

Production Area shall for

Development and Production Area having the earliest date of Commencement of

Commercial Production; and provided further that for the purpose of the ROR

calculation Petroleum Costs shall not include any amounts in respect of interest on

loans obtained for the purposes of carrying out Petroleum Operations.

"F An", "SAn", "TAn" and "ZAn" means First Account, Second Account, Third

Account and Fourth Account, respectively, and represent amounts as of the last day of

the Month in question as determined by the formulae in (b) below.

"FAn-I", "SAn-I". "TAn-I", and "ZAn-I", respectively, mean the lesser of (i) the FAn,

SAn, TAn, or ZAn, as the case may be, as of the last day of the Month immediately

preceding the Month in question, or (ii) zero. Stated otherwise, F An-I shall equal FAn

as of the last day of the Month immediately preceding the Month in question if such

FAn was a negative number, but shall equal zero if such FAn was a positive number.

Likewise, SAn-1 shall equal SAn as of the last day of the Month immediately

preceding the Month in question if such SAn was a negative number, but shall equal

zero if such SAn was a positive number. Likewise TAn-1 shall equal TAn as of the last

day of the Month immediately preceding the Month in question if such TAn was a

negative number, but shall equal zero if such TAn was a positive number. Likewise,

ZAn-1 shall equal ZAn as of the last day of the month immediately preceding the

Month in question if such ZAn was a negative number, but shall equal zero if such

ZAn was a positive number. In the ROR calculation for the first Month of Petroleum

Operations, FAn-I, SAn-I, TAn-J and ZAn-J shall be zero.

"i" for the month in question equals one (1) subtracted from the quotient of the

United States Industrial Goods Wholesale Price Index ("USIGWPI) for the Month

second preceding the Month in question (e.g. use August data for October's

computation) as first reported in the International Financial statistics of the

International Monetary Fund, divided by the USIGWPI for the same second

preceding Month of the immediately preceding Calendar Year as first reported in the

International Financial Statistics of the International Monetary Fund.

If the

USIGWPI ceases to be published, a substitute U.S. Dollar-based price index shall be

used.

"n" refers to the nth Month in question.

"n-l " refers to the Month immediately preceding the nth Month



I



b) Formulae:



39



I

FAn = ( FAn_I ( 1 +



(0.125 +

12



SAn = ( SAn_I ( 1 +



i»))

. + NCF



(0.175 +



12



i»))



+ NCF



In the calculation of SAn an amount shall be subtracted from NCF identical to the

value of any AOE which would be due to the State if reference were made hereunder

only to the FAn.



(0.225 +

TA" = ( TA,,_, ( 1 +

12



-»



+ NCF



In the calculation of TAn an amount shall be subtracted from NCF identical to the

value of any AOE which would be due to the State if reference were made hereunder

only to the FAn and SAn.



ZAn



=



+

( ZAn_I ( 1 + (0.275

12



-»



+ NCF



In the calculation of ZAn an amount shall be subtracted from NCF identical to the

value of any AOE which would be due to the State if reference were made hereunder

only to the FAn, SAn and TAn.

c)



Prospective Application:

The State's AOE measured in barrels of oil will be as follows:

i)



If FAn, SAn, TAn and ZAn are all negative, the State's AOE for the

Month in question shall be zero;



ii)



If FAn is positive and SAn, TAn and ZAn are all negative, the State's

AOE for the Month in question shall be equal to the absolute amount

resulting from the following monetary calculation:

5%. of the FAn for that Month divided by the weighted average Market

Price as determined in accordance with Article 11.7.



iii)



If both FAn and SAn are positi ve, but both TAn and ZAn are negati ve, the

State's AOE for the Month in question shall be equal to an absolute

amount resulting from the following monetary calculation:



,

40



the aggregate of 5% of FAn for that Month plus 15% of the SAn for that

Month all divided by the weighted average Market Price as determined

in accordance with Article 11.7.

iv)



If FAn, SAn and TAn are all positive but ZAn is negative, the State's

AOE for the Month in question shall be equal to the absolute amount

resulting from the following monetary calculation:

the aggregate of 5% of the FAn for that Month plus 15% of the SAn for

that Month plus 18% of the TAn for that Month all divided by the

weighted average Market Price as determined in accordance with Article

11.7.



v)



If FAn, SAn, TAn and ZAn are all positive, the State's AOE for the

Month in question shall be equal to the absolute amount resulting from

the following monetary calculation:

the aggregate of 5% of the FAn for that Month plus .15% of the SAn for

that Month plus 18% of the TAn for that Month plus 20% of the ZAn for

that Month all divided by the weighted average Market Price as

determined in accordance with Article 11.7.



d)



The AOE calculations shall be made in U.S. Dollars with all non-dollar

expenditures converted to U.S. Dollars in accordance with Section 1.3.5 of

Annex 2. When the AOE calculation cannot be definitively made because of

disagreement on the World Market Price or any other factor in the formulae,

then a provisional AOE calculation shall be made on the basis of best

estimates of such factors, and such provisional calculation shall be subject to

correction and revision upon the conclusive determination of such factors, and

appropriate retroactive adjustments shall be made.



e)



The AOE shall be calculated on a monthly basis, with the AOE to be paid



commencing with the first Month following the Month in which the FAn, SAn,

TAn, or ZAn, (as applicable) becomes positive. Because the precise amount of

the AOE for a Calendar Year cannot be determined with certainty until after

the end of that Calendar year, deliveries (or payments in lieu) of the AOE with

respect to a Month shall be made during such Calendar Year based upon the

Contractor's good faith estimates of the amounts owing, with any adjustments

following the end of the Calendar Year to be settled pursuant to the procedures

agreed to pursuant to Article 10.7. Final calculations of the AOE shall be

made within thirty (30) days following the filing by the Contractor of the

annual tax return for such Calendar year pursuant to the Petroleum Income

Tax Law, and the amount of the AOE shall be appropriately adjusted in the

event of a subsequent adjustment of the amount of tax owing on such term.

10.3



GNPC shall act as agent for the State in the collection of all Petroleum or money

accruing to the State under this Article and delivery or payment to GNPC by

Contractor shall discharge Contractor's liability to deliver the share of the State.



I

41



10.4



The State or GNPC, having met the requirements of Article 15.1, may elect, in

accordance with terms and conditions to be mutually agreed by the Parties, that all or

part of the Crude Oil to be distributed to the State or to GNPC pursuant to this Article

shall be sold and delivered by the State or GNPC to Contractor or its Affiliate for use

and disposal and in such case Contractor or its Affiliate shall pay to the State or to

GNPC, as the case may be, the Market Price for any Crude Oil so sold and delivered.

Market Price for purposes of this Article 10.4 shall be the amounts actually realized by

Contractor or said Affiliate on its resales of said Crude Oil in arm's length commercial

transactions, or for its other resales or dispositions of said Crude Oil, based upon world

market prices determined in the manner specified in Article 11.7(b).



10.5



Ownership and risk of loss of all Crude Oil produced from the Contract Area which is

purchased, and all of its percentage Interest or other Crude Oil lifted, by Contractor shall

pass to Contractor at the outlet flange ("Delivery Point") of the marine terminal or other



storage facility for loading into tankers or other transportation equipment referred to in

Article 11.1.

10.6



Subject to the provisions of Article 15 hereof, Contractor shall have the right freely to

export and dispose of all the Petroleum allocated and/or delivered to it pursuant to this

Article.



10.7



The Parties shall through consultation enter into supplementary agreements concerning

Crude Oil lifting procedures, lifting and tanker schedules, loading conditions, Crude Oil

metering, and the settlement oflifting imbalances, if any, among the Parties at the end of

each Calendar Year. The Crude Oil to be distributed or otherwise made available to the

Parties in each Calendar Year in accordance with the preceding provisions of this Article

shall insofar as possible be in reasonably equal monthly quantities.



10.8



To assist in the making of the AOE calculation in accordance with Article 10.2, there is

attached as Annex 3 to this Agreement a worked example of the calculation using

hypothetical figures, rates and thresholds, for the purpose of illustration only



42



ARTICLE 11



MEASUREMENT



AND PRICING OF CRUDE OIL



11.1



Crude Oil shall be delivered by Contractor to storage tanks or other suitable holding

facility constructed, maintained and operated in accordance with applicable laws and

good oilfield practice. Crude Oil shall be metered or otherwise measured for quantity and

tested for quality in such storage tanks for all purposes of this Agreement. Any Party

may request that measurements and tests be done by an internationally recognized

inspection company. Contractor shall arrange and pay for the conduct of any

measurement, or test so requested provided, however, that in the case of (1) a test

requested for quality purposes and/or (2) a test requested on metering (or measurement)

devices, or where the test results demonstrate that such devices are accurate within

acceptable tolerances agreed to by the Parties or if not established by the Parties, then in

accordance with International Good Oil Field Practice, the Party requesting the test shall

reimburse Contractor for the costs associated with the test or tests.



11.2



GNPC or its authorized agents shall have the right:

a)



to be present at and to observe such measurement of Crude Oil;



b)



to examine and test whatever appliances are used by Contractor therefor;



c) to appoint an independent Surveyor to inspect, measure and determine the quality of

Crude Oil.

d) to install or require Contractor to install equipment for the purpose of determining

the quantity and quality of Crude Oil.

11.3



In the event that GNPC considers Contractor's methods of measurement to be inaccurate

GNPC shall notify Contractor to this effect and the Parties shall meet within ten (10)

days of such notification to discuss the matter. Where after thirty (30) days the Parties

cannot agree over the issue they shall refer for resolution under Article 24 the sole

question of whether Contractor's method of measuring Crude Oil is accurate and

reasonable. Retrospective adjustments to measurements shall be made where necessary

to give effect to the decision rendered under Article 24.



11.4



If upon the examination or testing of appliances provided for in Article 11.2 any such

appliances shall be discovered to be defective:



11.5



a)



Contractor shall take immediate steps to repair or replace such appliance; and



b)



subject to the establishment of the contrary, such error shall be deemed to have

existed for three (3) months or since the date of the last examination and testing,

whichever occurred more recently.



In the event that Contractor desires to adjust, repair or replace any measuring appliance,

it shall give GNPC reasonable notice to enable GNPC or its authorized agent to be

present.



43



I



11.6



Contractor shall keep full and accurate accounts concerning all Petroleum measured as

aforesaid and provide GNPC with copies thereof on a monthly basis, not later than ten

(10) days after the end of each month.



11.7



The Market Price for Crude Oil delivered to Contractor hereunder shall be established

with respect to each lifting or other period as provided elsewhere in this Agreement as

follows:



11.8



a)



on Crude Oil sold by Contractor in "arm's length commercial transactions"(defined

in Article 11.7(c) below), the Market Price shall the price actually realized by

Contractor on such sales;



b)



on sales of Crude Oil by Contractor not in an arm's length commercial transaction,

on exports by Contractor without sale or on sales under Article 15.2, the Market

Price shall be determined by reference to world market prices of comparable Crude

Oils sold in ann's length transactions for export in the major world petroleum

markets, and adjusted for oil quality, location, timing and conditions of pricing,

delivery and payment; provided that in the case of sales under Article 15.2 where

such sales relate to part only of Contractor's entitlement, prices actually realized by

Contractor in sales of the balance of its proportionate share falling within Article

11.7(a) above shall be taken into account in determining Market Price. For

purposes of this Article 11. 7 (b), "comparable Crude Oils" shall mean Crude Oils of

similar API gravity, sulphur content, and acidity, and if Contractor cannot identify

comparable Crude Oils for the purposes of this Article, the Parties may agree on an

alternative method for establishing a comparable Crude Oil.



c)



sales in "arm's length commercial transactions" shall mean sales to purchasers

independent of the seller, which do not involve Crude Oil exchange or barter

transactions, government to government transaction, sales directly or indirectly to

Affiliates, or sales involving consideration other than payment in u.s. Dollars or

currencies convertible thereto, or affected in whole or in part by considerations other

than the usual economic incentives for commercial arm's length Crude Oil sales;



d)



the price of Crude Oil shall be expressed in u.s. Dollars per barrel, F.O.B. the point

of delivery by Contractor;



e)



if Crude Oils of various qualities are produced from the Contract Area, the market

Price shall be determined separately for each type sold and/or exported by

Contractor, only to the extent that the different quality grades remain segregated

through to the point where they are sold, and if grades of different quality are

commingled into a common stream, Contractor and GNPC shall agree on an

equitable methodology for assessing relative value for each grade of Crude Oil

comprising the blend and shall implement the agreed methodology for having the

producer(s) of higher quality Crude Oil(s) be reimbursed by the producer(s) of

lower quality Crude Oil(s);.



Contractor shall provide to GNPC information in accordance with Section 7 of the

Accounting Guide on each lifting which shall include the buyer of the cargo, sales basis

with respect to Benchmark crude oil, the pricing basis, the differential, any deductions



44



and the Market Price determined by it for each lifting not later than thirty five (35) days

after the end of such lifting. For the purposes of this Article 11.8 the obligation of

Contractor shall be joint and several.

.



11.9



If GNPC considers that the Market Price notified by Contractor was not correctly

determined in accordance with the provisions of Article 11.7, it shall so notify

Contractor not later than thirty (30) days after notification by Contractor of such price,

and GNPC and Contractor shall meet not later than twenty (20) days thereafter to agree

on the correct Market Price.



11.10



In the event that GNPC and Contractor fail to agree upon the commencement of

meetings for the purpose described in Article 11.9 above, the Market Price shall be

referred for determination in accordance with Article 24 of this Agreement.



11.11 Pending a determination under Article 11.10 the Market Price will be deemed to be



the last Market Price agreed or determined, as the case may be, or if there has been no

such previous agreement or determination, the price notified by Contractor for the

lifting in question under Articlell.8Error! Reference source not found. Should the

determined price be different from that used in accordance with the foregoing then the

difference plus interest at the Specific Rate as stated in Article 26.6 shall be paid in

cash by or to Contractor, as the case may be within thirty (30) days of such

determinati on.



45



ARTICLE 12

TAXATION AND OTHER IMPOSTS

12.1



Subject to applicable laws and regulations, the tax, duty, fee and other imposts that shall

be imposed by the State or any entity or any political subdivision on Contractor, its

Subcontractors or its Affiliates in respect of activities related to Petroleum Operations

and the sale and export of Petroleum shall include but not limited to the following:

a) Taxes in accordance with the Petroleum Income Tax Law 1987 (PNDC L188) and

income tax shall be levied at the rate of thirty-five per cent (35 %);

b) Notwithstanding Article 12.1 (a), tax in respect of income andlor gain (in either

case, calculated in accordance with Ghanaian law) resulting from the direct or

indirect sale, transfer or assignment of (a) a partial or the entire interest in this

Agreement, (b) assets acquired or used in Petroleum Operations under this

Agreement, or (c) shares of Contractor at the rate determined by Ghanaian law in

effect at the time of the sale, transfer or assignment.

c) Payments for rental of Government property, public lands or for the provisions of

specific services requested by Contractor from public enterprises; provided,

however, that the rates charged Contractor for such rentals or services shall not

exceed the prevailing rates charged to other members of the public who receive

similar services or rentals;

d) Surface rentals payable to the State pursuant to Section 18 of the Petroleum Law per

square kilometre of the area remaining at the beginning of each Contract Year as

part ofthe Contract Area, in the amounts as set forth below.

Phase of Operation



Surface Rentals Per Annum



Initial Exploration Period



US $ SOper sq. km.



1 st Extension Period



us



2nd Extension Period



US $ 100 per sq. km.



Development & Production Area



US $ 200 per sq. km.



$ 75 per



sq. km.



These rentals shall be pro-rated where the beginning of a Period and the end of a Period

or the creation of a Development and Production Area occurs during the course of a

Calendar Year.

12.2



,



Save for withholding tax at the rate provided for under applicable law from the

aggregate amount due to a resident Subcontractor or non-resident Subcontractor,

Contractor shall not be obliged to withhold any amount in respect of tax from any sum

due from Contractor to any Subcontractor in respect of work and services for or in

connection with this Agreement.



46



12.3



Contractor shall not be liable for any export tax on Petroleum exported from Ghana and

no duty or other charge shall be levied on such exports. Vessels or other means of

transport used in the export of Contractors Petroleum from Ghana shall not be liable for

any tax, duty or other charge by reason of their use for that purpose



12.4



Subject to the local purchase obligations hereunder, Contractor and

Subcontractors

may import into Ghana all plant, equipment and materials to be used solely and

exclusively in the conduct of Petroleum Operations without payment of customs and

other duties and taxes on imports save administrative fees and charges;

PROVIDED THAT:



a)



GNPC shall have the right of first refusal for any item imported duty free under this

Article which is later sold in Ghana; and



b) where GNPC does not exercise its right of purchase Contractor may sell to any other

person subject to the relevant law.



12.5



Contractor shall not be liable to pay VAT in respect of plant, equipment and materials,

and related services supplied in Ghana, to be used solely and exclusively in the conduct

of Petroleum Operations.



12.6



Foreign National Employees of Contractor or its Affiliates, and of its

Subcontractors, shall be permitted to import into Ghana free of import duty their

personal and household effects in accordance with Section 22.7 ofPNDCL 64;

provided, however, that no property imported by such employee shall be resold by such

employee in Ghana except in accordance with Article 12.2.



12.7



Subject to GNPC's rights under Article 19, Contractor, Subcontractors and Foreign

National Employees shall have the right to export from Ghana all items imported duty

free pursuant to Article 12.4 Such exports shall be exempt from all customs and other

duties, taxes, fees and charges on exports save minor administrative charges.



12.8



12.9



Parties will negotiate in good faith to ensure that Contractor is afforded tax

credits for corporate taxes paid in Ghana. However no adverse effect should

the economic rights of GNPC or the State.



occur to



The Ghana Income Tax law applicable generally to individuals who are not employed in

the petroleum industry shall apply in the same fashion and at the same rates to

employees, of Contractor, its Affiliates and its Subcontractors provided, however, that

Foreign National Employees of Contractor, its Affiliates and its Subcontractors, as

permitted under Section 28 of the Petroleum Income Tax Law, shall be exempt from the

income tax and withholding tax liabilities unless they are resident in Ghana for more

than thirty (30) continuous days or sixty (60) days in aggregate in any Calendar Year.



12.10 Subject to guidelines to be issued by the Minister, the Contractor shall make contributions



to a decommission fund based on estimated costs of abandonment in proportion to its

Participating Interest. Such contributions shall be allowed as deduction from assessable

income from the year of assessment the contributions commenced. In the year of

assessment in respect of which decommission has been completed in accordance with an



47



I



I

approved decommission plan, the surplus funds shall be treated as chargeable income

and subject to tax. The amount left after the tax shall be subject to Additional Oil

Entitlement at the highest rate at which the Contractor paid AbE during the period of

contributions to the relevant decommission fund. Any surplus after payment of the tax

and AOE shall revert to the Contractor.

12.11 Notwithstanding the above provision of this Section, the Taxation Laws of Ghana to the



extent that they are applicable shall be applied to the Employees of Contractor, Affiliates

or its Subcontractors.



48



ARTICLE 13



FOREIGN EXCHANGE TRANSACTIONS



The provisions of this article 13 shall be subject to applicable legislation governing foreign

exchange transactions in Ghana in force from time to time.

13.1



Contractor shall for the purpose of this Agreement be entitled to receive, remit with the

approval of the Bank of Ghana, keep and utilize freely abroad all the foreign currency

obtained from the sales of the Petroleum assigned to it by this Agreement or purchased

hereunder, or from transfers, as well as its own capital, receipts from loans and in general

all assets thereby acquired abroad. Upon making adequate arrangements with regard to

its commitment to conduct Petroleum Operations, Contractor shall be free to dispose of

its foreign currency or assets as it deems fit.



13.2



Contractor shall have the right to open and maintain in Ghana bank accounts in foreign

currency and Ghanaian currency. No restriction shall be made on the import by

Contractor in an authorized manner of funds assigned to the performance of the

Petroleum Operations and Contractor shall be entitled to purchase Ghanaian currency

through authorized means, without discrimination, at the prevailing rate of exchange;

provided, however, that such prevailing rate applicable to Contractor hereunder for all

transactions for converting Ghanaian currency into U.S. Dollars, and vice versa, shall be

at a buying or selling, as the case may be, rate of exchange not less favourable to

Contractor than that quoted by the State or its foreign exchange control authority to any

person or entity on the dates of such conversion (excepting those special rates provided

by the State to discretely defined groups for special, limited purposes).



13.3



Contractor shall be entitled to convert in an authorized manner into foreign currencies of

its choice funds imported by Contractor for the Petroleum Operations and held in Ghana

which exceeds its local requirements at the prevailing rate of exchange referred to in

Article 13.2 and remit and retain such foreign currencies outside Ghana.



13.4



In the event of resale by Contractor or its Affiliate of Crude Oil purchased from the State

or GNPC, the State or GNPC shall have the right to request payment for such sales of its

share of production to Contractor or its Affiliate to be held in the foreign currency in

which the resale transaction took place or in U.S. Dollars.



13.5



Contractor shall have the right to make direct payments outside of Ghana from its home

offices in Nigeria, and elsewhere, to its Foreign National Employees, and to those of its

Subcontractors and suppliers 'not resident in Ghana' (as that term is defined in Section

160 of the Internal Revenue Act 2000 (Act 592)) for wages, salaries, purchases of goods

and performance of services, whether imported into Ghana or supplied or performed

therein for Petroleum Operations carried out hereunder, in accordance with the

provisions of this Agreement, in respect of services performed within the framework of

this Agreement, and such payments shall be considered as part of the costs incurred in

Petroleum Operations. In the event of any changes in the location of Operator's home or

other offices, Operator shall so notify GNPC and the State.



49



I

13.6



All payments which this Agreement obligates Contractor to make to GNPC or the State,

including income taxes, shall be made in United States Dollars, except as requested

otherwise pursuant to Article 13.4 above. All payments shall be made by telex transfer

in immediately available funds to a bank to be designated by GNPC or the State, and

reasonably accessible to Contractor by way of its being able to receive payments made

by Contractor and give a confirmation of receipt thereof, or in such other manner as may

be mutually agreed.



13.7



All payments which this Agreement obligates GNPC or the State to make to Contractor

shall be made in United States Dollars. All payments shall be made by electronic

transfer ( or in such other manner as may be mutually agreed) in immediately available

funds to a bank to be designated by Contractor, and reasonably accessible to GNPC or

the State by way of its being able to receive payments made by GNPC or the State and

give confirmation of receipt thereof



13.8



All payments due to the Contractor in respect of the conduct of petroleum operations

in Ghana shall first be paid to the Contractor's bank account in Ghana.



50



ARTICLE 14

SPECIAL PROVISioNS FOR NATURAL GAS

PARTI-GENERAL



All natural gas produced by Contractor in association with GNPC under this Agreement shall be

the property of the Corporation in accordance with the provisions of Section 16.2 of the

Petroleum Law, subject to the terms of this Agreement.

14.1



Contractor shall have the right to use Natural Gas produced from any Development and

Production Area for Petroleum Operations within the Contract Area such as reinjection

for pressure maintenance and/or power generation at no cost.



14.2



Contractor shall not flare nor vent Natural Gas except:



14.3



a)



to the extent provided for in an approved Development Plan;



b)



during production testing operations;



c)



when required for operational safety and the safety of persons engaged in Petroleum

Operations in accordance with international Petroleum industry practice;



d)



as otherwise authorized by the Minister.



Contractor shall have the right to extract and dispose of liquid hydrocarbons pursuant to

the provisions of this Agreement relating to Crude Oil. Residual Natural Gas remaining

after the extraction of liquid hydrocarbons is subject to the provisions of this Article 14.



PART II -ASSOCIATED GAS

14.4



All gas produced in association with Crude Oil is the property ofGNPC.



14.5



Based on the principle of full utilisation of Associated Gas and without substantial

impediment to Crude Oil production, the Development Plan of each Development and

Production Area shall include a plan of utilization for the Associated Gas.



14.6



If Contractor considers that production, processing and utilisation of Associated Gas

from any Development and Production Area is non-economic, GNPC or any State

appointed agency, body or subcontractor shall have the option to offtake such Associated

Gas not used as reinjection for pressure maintenance and/or power generation pursuant

to Article 14.2 and or not utilized otherwise as per Article 14.5 at the outlet flange of the

gas-oil separator on the crude oil production facility at its Sole Risk for its own use.

GNPC and Contractor shall work together to develop the appropriate interface between

Gas infrastructure owned by the State and/or GNPC and Contractor's Development Plan

and to that end the Development Plan proposed by Contractor shall include:

a)



a statement of the facilities necessary for the delivery to GNPC of such Associated

Gas; and



51



I



b)



a plan for the reinjection of Associated Gas into the reservoir if needed for pressure

support and



c)



a plan for power-generation.



d)



a plan for any other use.



14.7



The decision ofGNPC as to whether or not to exercise the option provided for in Article

14.6 shall be made in a timely manner. In making such decision and in its subsequent

conduct GNPC shall avoid the prevention of or delay to the orderly start up or

continuation of the production of Crude Oil as envisaged in the approved Development

Plan.



14.8



If GNPC or any State appointed agency, body or subcontractor elects to offtake

Associated Gas under Article 14.6 above, GNPC shall be responsible for any additional

facilities needed for the delivery of the Gas to GNPC, provided that:

(a) if Contractor subsequently wishes to participate in GNPC's gas utilization

programme, it shall reimburse GNPC for the costs of such facilities plus a premium

of three hundred percent (300%); or

(b) if Contractor subsequently develops a gas utilization programme and requires the use

of GNPC's gas facilities, Contractor shall pay GNPC an agreed fee for such use.

Provided there is excess capacity, GNPC shall allow access to such gas facilities on a

non-discriminatory basis, at a reasonable market-based fee. In the absence of a

market-based fee, the fee shall reflect levels that are calculated to yield a return on

invested capital comparable to similar circumstances in the upstream gas industry.

(c) If Contractor considers that it may be economic to produce Associated Gas for sale,

the provision of Articles 14.13 and Part IV below shall apply as to such Associated

Gas



PART III - NON-ASSOCIATED

14.9



GAS



Contractor shall have the right to commercialize a Discovery of Non-Associated Gas in

the Contract Area in accordance with the provisions of this Agreement. Except as

otherwise provided in this Agreement, the terms applicable to a Discovery as provided

under Article 8 of this Agreement shall apply to a Discovery of non-Associated Gas.



14.10 Where Contractor submits notice pursuant to Article 8.1 indicating that the Discovery



does not at that time merit Appraisal but may merit Appraisal or additional evaluation at

a later date during the Exploration Period or during the initial period under a new

Agreement made pursuant to Article 14.17 below, then Contractor need not submit a

proposed Appraisal Programme at that time but instead shall indicate what other studies

or evaluations (in accordance with a definite time-table) may be warranted before an

Appraisal Programme is undertaken. Where Contractor's Notice indicates that the

Discovery will not merit appraisal at any time during the Exploration Period or during

the initial period under a new Agreement made pursuant to Article 14.18, then



52



Contractor shall relinquish the rights to the Non-Associated Gas within that Discovery

Area.

14.11



Not later than ninety (90) days from the date on which the Appraisal Programme relating

to a Discovery is concluded, Contractor shall submit to the Minister a report containing

the results of the Appraisal Programme (the "Appraisal Report"). The Appraisal Report

may conclude that the Discovery merits commercial assessment. If the Appraisal Report

concludes that the Discovery merits commercial assessment, Contractor shall submit to

the Minister within sixty (60) days from the date of submission of the Appraisal Report,

a programme incorporating a specific timetable for conducting such commercial

assessment for approval by the Minister. If the Minister approves this programme, such

commercial assessment shall be conducted within the Exploration Period and, if

applicable, during the initial period under a new Agreement made pursuant to Article

14.17. Notwithstanding the above, the Minister may approve the conduct of other

studies or evaluation, in accordance with a specific timetable, which may be warranted

before a commercial assessment is undertaken, if Contractor notifies the Minister that

commercial assessment of the Discovery is not warranted at that time but the Discovery

may merit such assessment at a later date during the Exploration Period or during the

initial period aforesaid.



14.12



The purpose of the commercial assessment shall be to study the uses to which

production from the Discovery Area separately, can be devoted and whether involving

exports or domestic utilization. As part of the assessment, the Parties shall also pursue

discussions on the required contractual arrangements for disposition of the Natural Gas

to GNPC. Contactor may undertake the Gas commercialization project at a level that

will facilitate the achievement of the Contractor's rate of return, and shall use the State's

gas infrastructure if available.



14.13



Contractor may consult with the Minister and GNPC and may make appropriate

representations proposing changes in the fiscal and other provisions of this Agreement

which may, in the opinion of Contractor, affect the above determinations made pursuant

to Articles 14.10 and 8.6. The Minister and GNPC may, where feasible and in the best

interests of the Parties, agree to make such changes or modifications in the existing

arrangements.



PART IV NATURAL GAS PROJECTS

14.14



If at any time during the commercial assessment Contractor informs the Minister in

writing that the Discovery can be produced commercially, it shall within (one hundred

and eighty) 180 days submit to the Minister and to GNPC its proposals for an

agreement relating to the development of the Discovery on the principles set forth in

this Part IV of Article 14. The State and GNPC undertake on receipt of such notice to

negotiate in good faith with Contractor with a view to reaching agreement on terms for

such production. Any such agreement will be based on terms and fiscal requirements

which shall be no less favourable to Contractor than those provided for in Articles 10

and 11 and which take full account of, among other things, the legitimate interest of

the State as the resource owner, the value of the gas in the market bearing in mind the

use which can be made of such Natural Gas. For the avoidance of doubt, the pricing



53



I



discussions in this Article 14.14 shall not apply to any Natural Gas which may be used

for ~ export project.



I



14.15



If at any time during the commercial assessment Contractor has identified a market for

the reserves of Non-Associated Gas or any part thereof that can be saved without

prejudice to an export project, the Parties shall proceed in good faith to negotiate the

appropriate contractual arrangements for the disposition of the Natural Gas. In the

event of a market for such Gas, Contractor shall receive for delivery its share of the

Natural Gas at a price to be agreed in good faith between GNPC and Contractor,

taking into account among other things, the cost of finding and developing the Natural

Gas, a reasonable return on exploration and development investment and the uses

which will be made of the Natural Gas.



14.16



In the event of a Discovery of Natural Gas in the Contract Area which is to be

developed and commercially produced, the provisions of this Agreement in respect to

interests, rights and obligations of the Parties regarding Crude Oil shall apply to

Natural Gas, with the necessary changes in points of detail, except with respect to

specific provisions in this Agreement concerning Natural Gas and different or

additional provisions concerning Natural Gas which may be agreed by the Parties in

the future.

a)



The system for the allocation of Natural Gas among the Parties shall follow the

same general format as Article 10.1 provides for Crude Oil, with the exception that

the royalty to be delivered to the State on Natural Gas shall be at the rate of five

(5%) percent for domestic gas projects and seven and a half percent (7.5%) for

Natural Gas to be exported.



b)



The Parties recognize that projects for the Development and Production of Natural

Gas are generally long-term in nature for both the project developers and the

customers who purchase the Natural Gas. Substantial investments and dedication

of facilities require long-term commitments on both sides. This Agreement, being

for a specific term of years, may not cover the length of time for which customers in

given cases will require commitments on the part of the Parties to this Agreement to

deliver their respective shares of the output. Accordingly the Parties agree to

consider undertaking such commitments where reasonably required for the efficient

and viable development of a Natural Gas project. It is recognized that, unless

otherwise agreed by the Parties hereto, Contractor will have no right or interest in

the project or the Natural Gas produced and delivered after the term of this

Agreement has expired.



c)



In the event that Contractor or an Affiliate by mutual agreement with GNPC and the

State constructs facilities to receive Natural Gas from the Development and

Production Area for further processing or for use as a feedstock or fuel in order to

convert such a Natural Gas into one or more commercially marketable products, the

Contractor shall be entitled to pay GNPC or the State for such gas the price, if any,

paid by the State or GNPC under this Article 14.16.



d)



The Parties will consider collaboration in obtaining any common external financing

available for Natural Gas production possibilities, including project financing;



54



however, each Party shall remain free to finance externally its share of such

facilities to the extent it prefers to do so.

14.17



a) Where Contractor has during the continuance of the Exploration Period made a

Discovery of Non-Associated Gas but has not before the end of the Exploration

Period declared that Discovery to be commercial, the State and GNPC will, if

Contractor so requests, enter into a new Petroleum Agreement with Contractor in

respect of the Discovery Area to which that Discovery relates;

b)

The State and GNPC shall not be under any obligation to enter into an

Agreement pursuant to Article 14.17(a) above unless before the end of the

Exploration Period Contractor has carried out an Appraisal Programme in respect of

that Discovery pursuant to Article 14.11 and submitted to the Minister a report

thereon pursuant to Article 14.11, or has commenced an Appraisal Programme and

has notified the Minister of reasonable arrangements to undertake and complete

such an Appraisal Programme during the period provided for in (c) (i) below:

c)



A Petroleum Agreement entered into pursuant to Article 14.17 (a):

i)



shall, unless the Discovery in respect of which the Agreement has been

made is declared by Contractor to be a Commercial Discovery, continue in

force for an initial period not exceeding three (3) years;



ii)



shall in the event that the Discovery is declared by Contractor to be a

Commercial Discovery

a)



continue in force for an aggregate period not exceeding 25 (twentyfive) years;



b)



include, or be deemed to include, all the provisions which, mutatis

mutandis, would have applied to a Commercial Discovery of NonAssociated Gas pursuant to Article 14.14 if Contractor had declared

such Discovery to be a Commercial Discovery under this

Agreement;



iii) shall contain in respect of the initial period or of any renewal period details

of the evaluations or studies (in accordance with a specific timetable) which

Contractor proposes to undertake in order to determine or keep under

review the commerciality of the Discovery

iv) shall confer on GNPC pre-emptive rights in respect of the Gas contained in

the reservoir to which the Discovery relates substantially in the form of the

provisions hereinafter set out in Article 14.16 (e) below.

d)

Where Contractor has not, before the end of the initial period, declared

the Discovery to be commercial and the Minister has in his discretion determined

that further evaluation or studies may be required before the Discovery can be

declared commercial, the right of Contractor to retain the Discovery Area shall

continue for a further period not exceeding in the aggregate three (3) years. The

right of Contractor to retain the Discovery Area aforesaid shall be secured by the



55



I



renewal of the Agreement referred to in Article 14.17 (a) or where necessary by a

new Agreement entered into by the Parties for that purpose.

e)



14.18



i)



Where Contractor has not declared the Discovery to be a

Commercial Discovery, if GNPC has identified a market for the Gas

contained in the reservoir to which the Discovery relates, or any part

thereof, it may at any time during the initial period or the aggregate

period referred to in 14.17 (d) above serve on Contractor a notice

giving particulars of the quantities of Gas required to serve that

market and the price offered; and on the basis of the procedure

detailed in Article 9, exercise the right referred to in Article 14.17 (c)

(iv) above.



ii)



Within three (3) months from the receipt of a notice as aforesaid Contractor

may declare the Discovery to be commercial and in accordance with the

Agreement and the Petroleum Law prepare and submit to the Minister a

Development Plan for the production of the Gas in association with GNPC.



iii)



If. Contractor has not, within the period of three (3) months aforesaid,

declared the Discovery to be commercial, GNPC may at its sole risk and

expense develop the Discovery and in that event the Contractor shall cease

to have any rights in respect of the Gas in the reservoir required for that

purpose.



For the purpose of calculating the State's 7.5% for export gas and 5.0% for domestic gas

royalty share on Natural Gas; if the State elects to take its royalty on Natural Gas in cash,

the value of such Natural Gas shall be the actual realized price received by the

Contractor, less transportation, compression and marketing costs which shall be in

accordance with the principles indicated in Article 11 ..



,



56



ARTICLE 15



DOMESTIC



SUPPLY REQUIREMENTS



(CRUDE OIL)



15.1



Crude Oil for consumption in Ghana (in this Article called the "Domestic Supply

Requirement") shall be supplied, to the extent possible, by the State and GNPC from

their respective entitlements under this Agreement and under any other contract for the

production of Crude Oil in Ghana.



15.2



Consumption shall for the purposes of this Article include crude oil processed in Ghana

and the equivalent of crude oil derived products imported into Ghana.



15.3



In the event that Crude Oil available to the State and GNPC, pursuant to this agreement

and pursuant to other contracts for the production of Crude Oil in Ghana is insufficient to

fulfill the Domestic Supply Requirements, the Contractor shall be obliged together with

any third parties which produce Crude Oil in Ghana within 2 months' notice from the

State, to supply a volume of Crude Oil to be used for such Domestic Supply

Requirements, calculated on the basis of the ratio of Contractor's entitlement to Crude

Oil under Article 10.1 (d) to the sum of the similar entitlements of all such third parties

and provided that Contractor's obligation to supply Crude Oil for purposes of meeting

the Domestic Supply Requirement shall not exceed the total of Contractor's said

entitlement under this Agreement and any other agreement for similar purposes to this

agreement.



15.4



The State shall purchase any Crude Oil supplied by Contractor pursuant to this Article at

the Market Price determined under Article 11.7 for the Month of delivery, and the State

shall pay such prices in accordance with Article 13.7 within thirty (30) days after receipt

of invoice, failing which Contractor's obligations in respect of the Domestic Supply

Requirement under this Article 15 shall be suspended until payment is made good, at

which time deliveries shall be resumed subject to any alternative commitments that may

have been reasonably entered into by Contractor to dispose of the Domestic Supply

Requirement Crude Oil during the period of default in payment. Contractor shall recover

any amount due and unpaid by State, plus interest at the Specified Rate, from GNPC's

proceeds of sale as provided in Article 1 0.1 (d).



15.5



The calculation of the domestic supply requirement shall be done on a Calendar Year

basis, broken down by Month. The calculation shall begin with the determination of the

quantities of Crude Oil required for Consumption in Ghana in each relevant Month (the

"Monthly Domestic Consumption") during the applicable Calendar Year.



57



I



------------



....•.



ARTICLE 16



INFORMA TION AND REPORTS: CONFIDENTIALITY

16.1



Contractor shall keep GNPC regularly and fully informed of operations being carried

out by Contractor under this Agreement and provide GNPC with all information, data,

(film, paper and digital forms), samples, interpretations and reports, (including progress

and completion reports) including but not limited to the following:

a)



processed seismic data and interpretations thereof;



b)



well data, including butnot limited to electric logs and other wireline surveys, and

mud logging reports and logs, oil or hydrocarbon samples, samples of cuttings and

cores and analyses made therefrom;



c)



any reports prepared from drilling data or geological or geophysical data, including

maps or illustrations derived therefrom;



d)



well testing and well completion reports;



e)



reports dealing with location surveys, seabed conditions and seafloor hazards and

any other reports dealing with well, platform or pipeline locations;



f)



reservoir investigations and estimates regarding reserves, field limits and economic

evaluations relating to future operations;



g)



daily, weekly, monthly and other regular reports on Petroleum Operations;



h)



comprehensive final reports upon the completion of each specific project or

operation;



i)



contingency programmes and reports on safety and accidents;



j)



procurement plans, subcontracts and contracts for the provision of services to

Contractor.



k)



for such subcontracts and contracts for the provision of services to Contractor

i. bid documents and their evaluation reports

ii. a statement showing the values, executing companies, award and completion

dates



Data shall be provided on film, paper and in digital format as available in an acceptable

format to GNPc. In respect of the reports, including text and graphics, paper and digital

copies shall be submitted.



16.2



Contractor shall have the right to retain for its own use in connection with the conduct of

Petroleum Operations under this Agreement copies of data, well logs, maps, magnetic



58



tapes, other geological and geophysical information, portions of core samples and copies

of r~orts, studies and analyses, referred to in Article 16.1.

16.3



Not later than ninety (90) days following the end of each Calendar Year, Contractor shall

submit to GNPC a report covering Petroleum Operations performed in the Contract Area

during such Calendar Year. Such report shall include, but not be limited to:

a)



a statement of the number of Exploration Wells, Appraisal Wells and Development

Wells drilled, the depth of each such well, and a map on which drilling locations are

indicated;



b)



a statement of any Petroleum encountered during Petroleum Operations, as well as a

statement of any fresh water layers encountered and of any other minerals

discovered;



c)



a statement of the quantity of Petroleum produced and of all other minerals

produced therewith from the same reservoir or deposit;



d)



a summary of the nature and extent of all exploration activities in the Contract Area;



e)



a general summary of all Petroleum Operations in the Contract Area; and



f)



a statement of the number of employees engaged in Petroleum Operations in Ghana,

identified as Ghanaian or non-Ghanaian. Contractor will inform the latter that

details as to nationality are required by GNPC and that Contractor is available to

assist them to supply that information.



16.4



All data, information and reports including interpretation and analysis supplied by

Contractor pursuant to this Agreement shall be treated as confidential and shall not be

disclosed by Contractor to any other person without the express written consent of the

other Parties. However subject to Article 16.6, GNPC shall have the right to disclose

data, information and reports including interpretation and analysis in respect of

Petroleum Operations to any other person.



16.5



The provisions of Article 16.4 shall not prevent disclosure by Contractor:



J



i)



to its Affiliates, advisers or consultants;



ii)



subject to Article 16.6, to a Bona Fide Potential Assignee of all or part of

Contractor's Interest hereunder provided with respect to a bonafide

potential assignee of Contractor GNPC is given prior notice of such

potential assignee;



iii)



subject to Article 16.6, to banks or other lending institutions for the

purpose of seeking external financing of costs of the Petroleum

Operations;



iv)



to non-Affiliates who shall provide services for the Petroleum Operations,

including Subcontractors, vendors and other service contractors, where this



59



.



---------is essential

for their provision of such services, and provided GNPC

is notified about such disclosure;

to governmental 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, and provided GNPC is given

prior notice of such disclosure; or



v)



Or

by any Party

1.



11.



to the extent necessary in any Arbitration Proceedings or proceedings before

a Sole Expert or in proceedings before any court;

with respect to data etc., which already through, no fault of the disclosing

Party is in the public domain.



16.6



Any disclosure of information or provision of data to any third party by Contractor under

Article 16.5(i), 16.5(ii), 16.5(iii) and 16.5(iv) shall require such persons to observe the

confidentiality of such data by either executing a confidentiality agreement substantially

in the form attached hereto as Annex [4] or incorporating the relevant confidentiality

provisions in their service agreements. Disclosure under Articles 16.5(i), 16.5(ii),

16.5(iii) and (iv) shall not be made unless before such disclosure the disclosing Party has

obtained a written undertaking from the recipient party to keep the information strictly

confidential and to use the information for the sole purpose described in Articles 16.5(i),

16.5(ii), 16.5(iii) and 16.5(iv) whichever applies with respect to the disclosing Party.



16.7



Public statements and press releases regarding the Petroleum Operations undertaken

under this Agreement shall be issued jointly by the Contractor and GNPC, and the

Parties shall agree on the timing and wording of such statements and releases to the

public. Where, however, a Party is required to make a public announcement or statement

under the applicable laws, rules or regulations of any government, legal proceedings or a

stock exchange having jurisdiction over such Party or any of its Affiliates, that Party

shall inform the other Party of such requirement and submit the text of the proposed

announcement or statement for comment and/or approval. Should a Party fail to respond

for more than five (5) days (or such shorter period as may be reasonable in the event of

an emergency or disaster) to request for the approval of a public statement or

announcement for such purposes, such failure shall be deemed approval of the request.



16.8



Subject in all cases to the terms of any technical services agreements, all intellectual

property rights to any and all inventions, discoveries or improvements made or

conceived in connection with Petroleum Operations either through a Contractor Party's

employees, contractors (including the Contractor Parties), sub-contractors, secondees or

otherwise, shall be jointly owned by GNPC and Contractor.



16.9



Notwithstanding any provision to the contrary in this Agreement, if a Contractor Party or

an Affiliate of a Contractor Party has confidential information, proprietary intellectual

property or technology actually used in Petroleum Operations then, subject to GNPC (or



60



its successors or permitted assignees) entering into a usual and customary non-disclosure

and licensing agreement (which such agreement shall be on terms that are commercially

reasonable under the circumstances), such Contractor Party or its Affiliate shall provide

GNPC (or its successors or permitted assignees) with rights to use such confidential

information, proprietary intellectual property or technology in other operations of GNPC

(or its successors or permitted assignees) outside of the Contract Area. The terms and

conditions of the foregoing rights will be provided for in separate agreements to be

agreed between GNPC (or its successors or permitted assignees) and such Contractor

Party or its relevant Affiliate. Further, GNPC (or its successors or permitted assignees)

and such Contractor Party or its relevant Affiliate will enter into a usual and customary

confidentiality agreement relating to confidential information disclosed to GNPC (or its

successors or permitted assignees) pursuant to any such licensing agreements, which

confidentiality agreement shall restrict, inter alia, GNPC (or its successors or permitted

assignees) from making disclosure of such information to such Contractor Party's oil and

gas industry competitors.



,



61



I

ARTICLE 17



INSPECTION, SAFETY AND ENVIRONMENTAL PROTECTION

17.1



GNPC shall have the right of access to all sites and offices of Contractor and the right to

inspect all buildings and installations used by Contractor relating to Petroleum

Operations. Such inspections and audits shall take place in consultation with Contractor

and at such times and in such manner as not unduly to interfere with the normal

operations of Contractor.



17.2



Contractor shall take all necessary steps, in accordance with International Good Oil Field

practice, to perform activities pursuant to the Agreement in a safe manner and shall

comply with all requirements of Governing Law, including labour, health safety and

environmental laws and regulations issued by the Environmental Protection Agency of

Ghana and other relevant State agencies



17.3



Contractor shall provide an effective and safe system for disposal of water and waste oil,

oil base mud and cuttings in accordance with applicable laws and International Good Oil

Field Practice, and shall provide for the safe completion or abandonment of all boreholes

and wells.



17.4



Contractor shall exercise its rights and carry out its responsibilities under this Contract in

accordance with International Good Oilfield Practice, and shall take steps in such

manner as to:

a)



result in minimum ecological damage or destruction;



b)



control the flow and prevent the escape or the avoidable waste of Petroleum

discovered in or produced from the Contract Area;



c)



prevent damage to Petroleum-bearing strata;



d) prevent the entrance of water through boreholes and wells to Petroleum-bearing

strata, except for the purpose of secondary recovery;



17.5



1



e)



prevent damage to onshore lands and to trees, crops, buildings or other structures;

and



f)



avoid any actions which would endanger the health or safety of persons.



In the event of a release, of Petroleum or other materials on the seabed, in the sea, on

land or in fresh water, or if Contractor's operations result in any other form of pollution

or otherwise cause harm to fresh water, marine, plant or animal life, Contractor shall, in

accordance with International Good Oil Field Practice promptly take all necessary

measures, to control the pollution, to clean up Petroleum or other released material, or to

repair, to the maximum extent feasible, damage resulting from any such circumstances.

If such release or pollution results directly from negligence, gross negligence or willful

misconduct of the Contractor, its Affiliate or Sub- Contractor and shall not be included as

Petroleum Cost under this Agreement.



62



17.6



Contractor shall notify GNPC immediately in the event of any emergency or major

accident or major release of materials into the environment (and promptly in the event of

any other accident or release of materials into the environment) and shall take such action

as may be prescribed by the Operator's emergency procedures and by accepted

international Petroleum industry practices.



17.7



If Contractor does not act promptly so as to control, clean up or repair any pollution or

damage, GNPC may, after giving Contractor reasonable notice in the circumstances, take

any actions which are necessary, in accordance with applicable laws and International

Good Oil Field Practice in the same or similar circumstances and the documented

reasonable costs and expenses of such actions shall be borne by Contractor and shall,

subject to Article 17.5 be included as Petroleum Costs.



I



,



63



ARTICLE 18

ACCOUNTING AND AUDITING

18.1



Contractor shall maintain, at its offices in Ghana, books of account and supporting

records in the manner required by applicable law and accepted accounting principles

generally used in the international petroleum industry and shall file reports, tax returns

and any other documents and any other financial returns which are required by

applicable law.



18.2



In addition to the books and reports required by Article 18.1 Contractor shall maintain, at

its office in Ghana, a set of accounts and records relating to Petroleum Operations under

this Agreement. Such accounts shall be kept in accordance with the requirements of the

applicable law and accepted accounting principles generally used in the international

Petroleum industry.



18.3



The accounts required by Articles 18.1 and 18.2 shall be kept in United States Dollars or

such other currency as GNPC and Contractor may agree.



18.4



Contractor will provide GNPC with quarterly financial statements and summaries of the

Petroleum Costs incurred under this Agreement.



18.5



GNPC shall review all financial statements submitted by the Contractor as required by

this Agreement, and shall signify its provisional approval or disapproval of such

statements in writing within ninety (90) days of receipt failing which the financial

statements as submitted by Contractor shall be deemed approved by GNPC; in the event

that GNPC indicates disapproval of any such statement, the Parties shall meet within

fifteen (15) days of Contractor's receipt of the notice of disapproval to review the matter.



18.6



Notwithstanding any provisional approval pursuant to Article 18.5 GNPC shall have the

right and upon giving reasonable notice in writing to Contractor to audit the books and

accounts of Contractor relating to Petroleum Operations within two (2) years from the

submission by Contractor of any report of financial statement. GNPC shall not, in

carrying out such audit, interfere unreasonably with the conduct of Petroleum

Operations. Any such audit shall be undertaken by an independent auditing firm and

shall be completed within nine (9) months after commencement. Contractor shall

provide all necessary facilities for auditors appointed hereunder by GNPC including

working space and timely access to all relevant personnel, records, files and other

materials. If and GNPC desires verification of charges from an Affiliate, Contractor

shall obtain for GNPC or its representatives an audit certificate to this purpose from the

statutory auditors of the Affiliate concerned. Copies of audit reports shall be provided to

the Contractor and GNPC. Any unresolved audit claim resulting from such audit, upon

which Contractor and GNPC are unable to agree shall be submitted to the JMC for

decision which must be unanimous. In the event that a unanimous decision is not

reached in respect of any audit claim, then such unresolved audit claim shall be

submitted for resolution in accordance with Article 24. Subject to any adjustments

resulting from such audits, Contractor's accounts and financial statements shall be

considered to be correct on expiry of a period of two (2) years from the date of their

submission unless before the expiry of such two year period GNPC has notified

Contractor of any exceptions to such accounts and statements.



64



------------



•



......•



18.7



Nothing in this Article shall be read or construed as placing a limit on GNPC's access to

Contractor's books and accounts in respect of matters arising under Article 23.4 and

23.5.



18.8



In the event of any changes in location of Operator's home office, Operator shall so

notify GNPC and the State.



18.9



Petroleum Costs incurred with respect to the Contract Area shall have no bearing on

allowable or non-allowable costs under any other contract area or Contractor's eligibility

or otherwise for deductions in computing Contractor's net income from Petroleum

Operations for income tax purposes in any other contract area. Similarly, Petroleum

Costs incurred in any other contract area shall have no bearing on allowable or nonallowable costs in respect of the Contract Area or Contractor's eligibility or otherwise

for deductions in computing Contractor's net income from Petroleum Operations for

income tax purposes in respect of the Contract Area.



65



ARTICLE 19



TITLE TO AND CONTROL OF GOODS AND EQUIPMENT

19.1



19.2



GNPC shall be the sole and unconditional owner of:

a)



Petroleum produced and recovered as a result of Petroleum Operations, except for

such Petroleum as is distributed to the State and to Contractor pursuant to Article 10

or 14 hereof;



b)



all physical assets other than those to which Article 19.3 or 19.4 apply, which are

purchased, installed, constructed or used by Contractor in Petroleum Operations as

from the time that:

i)



the full cost thereof has been recovered in accordance with the provisions of

the Accounting Guide; or



ii)



this Agreement is terminated and Contractor has not disposed of such assets

prior to such termination, whichever occurs first.



Contractor shall have the use of the assets referred to in Article 19.1(b) for purposes of its

operations under this Agreement without payment provided that Contractor shall remain

liable for maintenance, insurance and other costs associated with such use. Where

Contractor has failed to keep any such asset in good working condition (normal wear and

tear excepted), GNPC shall have the right to recover the cost of repair or replacement of

such assets from Contractor. Contractor shall indemnify GNPC against all losses,

damages, claims or legal action resulting from Contractor's use of such assets, if and in as

far as such losses, damages, claims or legal actions were directly caused by Contractor's

gross negligence or willful misconduct.



19.3



Equipment or any other assets rented or leased by Contractor which is imported into

Ghana for use in Petroleum Operations and subsequently re-exported therefrom, which is

of the type customarily leased for such use in accordance with International Good Oil

Field Practice or which is otherwise not owned by Contractor shall not be transferred to

GNPc. No equipment or assets owned or leased by a Subcontractor shall by reason of

the provisions of this Article 19 be deemed to be transferred to GNPC.



19.4



All assets acquired by Contractor which are not affected by the provisions of Article

19 .1 (b) above may, where required for further Petroleum Operations, be retained by

GNPC for such operations provided that GNPC shall thereby be liable to pay a

reasonable and mutually agreed fee for such use, and shall bear the cost of repair or

replacement upon failure to keep such assets in good working condition (normal wear

and tear excepted), and further provided that Contractor does not require such assets for

its Petroleum Operations.



19.5



Upon the termination of Petroleum Operations in any Area, Contractor shall give GNPC

the option to acquire any movable and immovable assets used for such Petroleum

Operations and not affected by the provisions of Article 19.1 (b) at a reasonable and



66



f



I

mutually agreed price, always provided that Contractor does not require such assets for

Contractor's Petroleum Operations in the Contract Area.

19.6



All assets which are not affected by Article 19.1 (b) nor subject to Article 19.4 or 19.5

above, and all subcontractor equipment, may be freely exported by Contractor or its

Subcontractor, respectively, at its discretion.



1



67



ARTICLE 20



PURCHASING AND PROCUREMENT

20.1



Subject to all applicable laws to which it is subject the Contractor, its subcontractors or

other entities which cooperate with them shall:

a) acquire materials, equipment, machinery and consumer goods produced or provided

in Ghana by an Indigenous Ghanaian company in Ghana which are of the same or

approximately the same quality as foreign materials, equipment, machinery and

consumer goods and which are available for sale and delivery in due time at prices

which are no more than ten percent higher than the imported items including

transportation and insurance costs and custom charges due;

b) Contract local Ghanaian service provided by Indigenous Ghanaian company to the

extent to which the services they provide are similar to those available on the

international market and their prices when subject to the same tax charges are no more

than ten percent higher than the prices charged by foreign contractors for similar

services,



20.2



For the purposes of Article 20.1, price comparisons shall be made on a c.i.f.

Accra delivered basis.



I



68



ARTICLE 21

EMPLOYMENT AND TRAINING

21.1



In order to establish programmes to train Ghanaian personnel for work in Petroleum

Operations and for the transfer of management and technical skills required for the

efficient conduct of Petroleum Operations, Contractor shall make the following

payments to GNPC:



a)



Training: US $ 500, 000 per Contract year



b)



Technology support (one-time payment)

•

•



Initial Exploration Period:

US $500, 000

Commercial Discovery: US $1,500,000



21.2



All payments pursuant to Articles 21. 1 (a) and (b) above shall be paid by Contractor by

wire transfer to a designated GNPC account within thirty (30) days of receiving an

invoice from the GNPC. The invoice shall state the amount due and purpose for such

payment. All payments under Articles 21.I(a) and (b) above shall be considered

Petroleum Costs.



21.3



Where qualified Ghanaian personnel are available for employment in the conduct of

Petroleum Operations, Contractor shall ensure that in the engagement of personnel it

shall as far as reasonably possible provide opportunities for the employment of such

personnel. For this purpose, Contractor shall submit to GNPC an employment plan with

number of persons and the required professions and technical capabilities prior to and

during the conduct of Petroleum Operations. GNPC shall be given the opportunity to

provide the qualified personnel according to the said plan.



21.4



Contractor shall, if so requested by GNPC, provide opportunities for a mutually agreed

number of personnel nominated by GNPC to be seconded for on-the-job training or

attachment in all phases of its Petroleum Operations under a mutually agreed secondment

contract. Such secondment contract shall include continuing education and short

industry courses mutually identified as beneficial to the secondee. Cost and other

expenses connected with such assignment of GNPC personnel shall be borne by the

Contractor and shall be considered as Petroleum Costs.



21.5



Contractor shall regularly provide to GNPC information and data relating to worldwide

Petroleum science and technology, Petroleum economics and engineering available to

Contractor, and shall assist GNPC personnel in every way to acquire knowledge and

skills in all aspects of the Petroleum industry.



21.6



It is agreed that there will be no disclosure or transfer of any documents, data, knowhow, technology or other information owned or supplied by Contractor, its Affiliates, or

non-Affiliates, to third parties without Contractor's prior written consent, and then only

upon agreement by the recipients to retain such information in strict confidence.



69



ARTICLE 22



FORCE MAJEURE

22.1



The failure of a Party to fulfill any term or condition of this Agreement, except for the

payment of monies, shall be excused if and to the extent that such failure arises from

Force Majeure, provided that, if the event is reasonably foreseeable such party shall have

prior thereto taken all appropriate precautions and all reasonable alternative measures

with the objective of carrying out the terms and conditions of this Agreement. A Party

affected by an event of Force Majeure shall promptly give the other Parties notice of

such event and also of the restoration of normal conditions.



22.2



A Party unable by an event of Force Majeure to perform any obligation hereunder shall

take all reasonable measures to remove its inability to fulfill the terms and conditions of

this Agreement with a minimum of delay, and the Parties shall take all reasonable

measures to minimize the consequences of any event of Force Majeure.



22.3



Any period set herein for the completion by a Party of any act required or permitted to be

done under the terms of this Agreement, shall be extended for a period of time equal to

that during which such Party was unable to perform such actions as a result of Force

Majeure, together with such time as may be required for the resumption of Petroleum

Operations.



70



I



ARTICLE



23



TERM AND TERMINATION

23.1



Subject to this Article 23 the term of this Agreement shall be twenty-five (25) years

commencing from the Effective Date.



23.2



Unless this Agreement has been earlier terminated, all rights and obligations of the

Parties shall cease and this Agreement shall terminate at the end of the term provided for

in Article 23.1, above.



23.3



Subject to Article 22, Termination of this Agreement shall result upon the occurrence of

any of the following:



23.4



a)



the relinquishment or surrender of the entire Contract Area;



b)



the termination of the Exploration Period including extensions pursuant to Article 3

without notification by Contractor of commerciality pursuant to Article 8 in respect

of a Discovery of Petroleum in the Contract Area, provided however Termination

shall not occur while Contractor has the right to evaluate a Discovery for appraisal

or commerciality and/or propose a Development Plan pursuant to Articles 8 or 14,

or once a Development Plan has been approved, nor when the provisions of Articles

8.14 through 8.22 are applicable;



c)



if, following a notice that a Discovery is a Commercial Discovery the Exploration

Period terminates under Article 3 without a Development Plan being approved,

provided however that Termination shall not occur when the provisions of Articles

8.14 through 8.22 are applicable; or



d)



the failure of Contractor through any cause other than Force Majeure, to commence

preparations with respect to Development Operations pursuant to Article 8.12.



Subject to Article 22 and pursuant to procedures described in Article 23.5 below

GNPC and/or the State may terminate this Agreement upon the uncorrected occurrence

of any of the events (or failures to act listed) below:

a)



the submission by Contractor to GNPC of a written statement which Contractor

knows or should have known to be false, in a material particular; or the release by

Contractor to any print or electronic media or to a stock exchange of a written

statement regarding the Petroleum Operations in Ghana in breach of Article 16.7

and in a form which Contractor knows or should have known to be false in a

material particular provided that in the event of intent on the part of Contractor to

cause serious damage to GNPC or the State, a period for remedy of such false

statement shall not be given;



b) the assignment or purported assignment by Contractor of this Agreement contrary to

the provisions of Article 25 hereof;



71



c)



the insolvency or bankruptcy of Contractor, the entry by Contractor into any

agreements or composition with its creditors, taking advantage of any law for the

benefit of debtors or Contractor's entry into liquidation, or receivership, whether

compulsory or voluntary, Provided that if Contractor is more than one Party, then

the insolvency or bankruptcy of one Contractor Party shall not lead to a termination

of the Agreement if the other Contractor Party will assume the rights and

obligations of the defaulting Contractor Party under this Petroleum Agreement. In



such a case, GNPC shall have the right to acquire a proportionate share of the

interest of the defaulting Contractor Party in respect of GNPC's Initial and

Additional Interest.

d) the intentional extraction by Contractor of any material of potential economic value

other than as authorized under this Agreement, or any applicable law. Where,

however, in the course of Petroleum Operations conducted in accordance with

accepted International Good Oil Field practice, Contractor unavoidably extracts any

mineral, Contractor shall immediately notify the Minister responsible for natural

resources and surrender such mineral to the State.

e)



failure by Contractor

i)



to fulfill its minimum work obligations pursuant to Article 4.3; save where

the Minister has waived the default;



ii)



to carry out an approved Appraisal Programme undertaken by Contractor

pursuant to Article 8, unless Contractor notifies GNPC and the Minister that

the Appraisal Programme should be amended and submits said amendment

to the JMC for its review; or



iii) to carry out the terms of an approved Development Plan.

f) failure by Contractor to comply with any of its obligations pursuant to Article 7.1



hereof or any other material obligation under this Agreement;



23.5



g)



failure by Contractor to make any payment of any sum due to GNPC or the State

pursuant to this Agreement within thirty (30) days after receiving notice that such

payment is due; or



h)



failure by Contractor to comply with any decisions reached as a result of any

arbitration proceedings conducted pursuant to Article 24 hereof.



If GNPC and/or the State believe an event or failure to act as described in Article 23.4 above

has occurred, a written notice shall be given to Contractor describing the event or failure.

Contractor shall have thirty (30) days from receipt of said notice to commence and pursue

remedy of the event or failure cited in the notice. If after said thirty (30) days Contractor

has failed to commence appropriate remedial action, GNPC and/or the State may then

issue a written Notice of Termination to Contractor which shall become effective thirty

(30) days from receipt of said Notice by Contractor unless Contractor has referred the

matter to arbitration. In the event that Contractor disputes whether an event specified in

Article 23.3 or Article 23.4 has occurred or been remedied, Contractor may, any time up to



72



•



the effective date of any Notice of Termination refer the dispute to arbitration pursuant to

Article 24 hereof. If so referred, GNPC and/or the State may not terminate this Agreement

in respect of such event except in accordance with the terms of any resulting arbitration

award as provided for in Article 24.

23.6



Upon Termination of this Agreement, all rights of Contractor hereunder shall cease, except

for such rights as may at such time have accrued, and without prejudice to any obligation

or liability imposed or incurred under this Agreement prior to Termination and to such

rights and obligations as the Parties may have under applicable law.



23.7



Upon Termination of this Agreement or in the event of an assignment of all the

rights of Contractor, all wells and associated facilities shall be left in a state of good repair

in accordance with applicable laws and International Good Oil Field Practice.



73



ARTICLE 24



CONSULTATION, ARBITRATION AND INDEPENDENT EXPERT

24.1



Except in the cases specified in Article 26.3 any dispute arising between the State and

GNPC or either of them on one hand and Contractor on the other hand in relation to or in

connection with or arising out of any terms and conditions of this Agreement shall be

resolved by consultation and negotiation among senior personnel authorized by each.



24.2



In the event that no agreement is reached within thirty (30) days after the date when

either Party notifies the other that a dispute or difference exists within the meaning of this

Article or such longer period specifically agreed to by the Parties or provided elsewhere

in this Agreement, any Party shall have the right subject to Article 24.8 to have such

dispute or difference finally settled through international arbitration under the auspices of

the International Chamber of Commerce (the "ICe') and adopting the Rules of

Arbitration of the International Chamber of Commerce (the "ICC Rules"), which ICC

Rules are deemed incorporated by reference into this Article 24, save as otherwise

provided herein. The failure or refusal to submit to arbitration in accordance with this

Article and/or the seeking of any Pre-Award Attachment by any Party shall be deemed a

breach of this Agreement by such Party. In the event of a breach of this Article, each

non-breaching Party shall, without prejudice to any other remedies, be entitled to recover

from each breaching Party all costs and expenses, including reasonable attorneys' fees,

that such non-breaching Party was thereby required to incur



24.3



The tribunal shall consist of three (3) arbitrators. Each Party to the dispute shall appoint

one (1) arbitrator and those so appointed shall designate a chairman arbitrator. If a

Party's arbitrator and/or the chairman arbitrator is/are not appointed within the periods

provided in the rules referred to in Article 24.1 and 24.2 above, such Party's arbitrator

and/or the chairman arbitrator shall at the request of any Party to the dispute be

appointed by the ICC International Court of Arbitration in accordance with the ICC



Rules.

24.4



No arbitrator or sole expert shall be a citizen of the home country of any Party hereto,

and shall not have any economic interest or relationship with any such Party.



24.5



The seat of the arbitration proceedings shall be in London or at such other location as the

Parties may agree in writing. The proceedings shall be conducted in the English

language.



24.6



If the opinions of the arbitrators are divided on issues put before the tribunal, the decision

of the majority of the arbitrators shall be determinative. The award of the tribunal shall

be final and binding upon the Parties and enforceable by the Parties in whose favour the

award is made. Each of the State and GNPC hereby irrevocably agree that to the extent

that such party, has any right of immunity from any legal proceedings or enforcement of

awards in connection with or arising from terms and conditions of this Agreement,

including immunity from service of process, immunity from jurisdiction or judgement or

any arbitration tribunal, immunity from execution of judgment or tribunal award, such

party hereby expressly and irrevocably waives any such immunity and agrees not to



74



I



assert or invoke any such rights or claim in any such proceedings provided, however, that

the provisions hereof shall not constitute a waiver by any Party of any right that it now or

hereafter has to claim sovereign immunity for itself or any of its assets in respect of any

effort to confirm, enforce, or execute any Pre-Award Attachment.



24.7



The right to arbitrate disputes arising out of this Agreement shall survive the termination

of this Agreement.



24.8



In lieu of resorting to arbitration, the Parties to a dispute arising under this Agreement,

including the Accounting Guide, which such Parties by mutual written agreement

consider appropriate, may be referred for determination by a sole expert to be appointed

by agreement of the Parties who is a recognised specialist with respect to the subject of

the dispute (a "Sole Expert"). In such case, the Parties shall agree on the terms of

reference for such proceeding, the schedule of presentation of evidence and testimony of

witnesses, and other procedural matters. The decision of the Sole Expert shall be final

and binding upon the Parties. The sole expert shall have ninety (90) days after his

appointment to decide the case, subject to any extensions mutually agreed to by the

Parties to the dispute. Upon failure of the sole expert to decide the matter within such

time, any Party shall have the right to have such dispute or difference settled through

arbitration under the foregoing provisions of this Article 24.



24.9



Except as set forth in Article 24.1 above, each Party to a dispute shall pay its own

counsel and other costs; however, costs of the arbitration tribunal shall be allocated in

accordance with the decision of the tribunal. The costs and fees of the sole expert shall

be borne equally by the Parties to the dispute.



24.10 Neither the State and/or GNPC, on the one hand, and Contractor, on the other hand, shall

be held liable to the other for any consequential, special, indirect or punitive damages

(including loss of profit or loss of production) arising directly or indirectly out of or in

relation or in connection to this Agreement, regardless of cause or fault.



75



ARTICLE 25



ASSIGNMENT

25.1



This Agreement shall not be assigned by Contractor directly or indirectly in whole or in

part, without the prior written consent of GNPC, and the Minister except that this

Agreement may be assigned to a wholly owned Affiliate of Contractor upon notice to the

Minister and GNPC. GNPC and/or the Minister may impose such reasonable conditions

upon the giving of consent under this Article as may be deemed by GNPC or the

Minister appropriate in the circumstances.



25.2



Any assignment of this Agreement shall bind the assignee as a Party to this Agreement

to all the terms and conditions hereof unless otherwise agreed and as a condition to any

assignment Contractor shall provide an unconditional undertaking by the assignee to

assume all obligations assigned by Contractor under this Agreement.



25.3



Where in consequence of an assignment hereunder Contractor is more than one person:

a)



any operating or other agreement made between the persons who constitute

contractor and relating to the Petroleum Operations hereunder shall be disclosed to

GNPC and the Minister and shall not be inconsistent with the provisions of this

Agreement;



b)



an operating agreement shall be established by the JMC to regulate the conduct of

Petroleum Operations thereafter, including cash-calls and the limits of authority;



c)



no change in the scope of the operations may take place without the prior approval

in writing of GNPC which approval shall not be unreasonably delayed or withheld;

and



d) the duties and obligations of Contractor hereunder shall be joint and several except

those relating to the payment of income tax pursuant to Article 12 which shall be the

several obligation of each such person.

25.4



GNPC's acquisition of additional participating Interest under Article 2 or a Sole Risk

Interest pursuant to Article 9 shall not be deemed to be an assignment within the

meaning of this Article 25.



76



I



ARTICLE 26



MISCELLANEOUS

26.1



This Agreement and the relationship between the State and GNPC on one hand and

Contractor on the other shall be governed by and construed in accordance with the laws

of the Republic of Ghana in effect and as amended from time to time.



26.2



The State, its departments and agencies, shall support this Agreement and the due

exercise and performance of rights and obligations of the Parties hereunder.



26.3



Where a Party considers that a significant change in the circumstances prevailing at the

time the Agreement was entered into, has occurred affecting the economic balance of the

Agreement, the Party affected hereby shall notify the other Parties in writing of the

claimed change with a statement of how the claimed change has affected the relations

between the Parties.



26.4



The other Parties shall indicate in writing their reaction to such representation within a

period of three (3) months of receipt of such notification and if such significant changes

are established by the Parties to have occurred, the Parties shall meet to engage in

negotiations and shall effect such changes in, or rectification of, these provisions as they

may agree are necessary.



26.5



No waiver by any Party of any of its rights hereunder shall be construed or implied, but

shall be binding on such Party only if made specifically, expressly and in writing.



26.6



Except for payment obligations arising under the Petroleum Income Tax Law, any Party

failing to pay any amounts payable by it under this Agreement (including the provisions

of Annex 2) on the respective dates on which such amounts are payable by such Party

hereunder shall be obligated to pay interest on such unpaid amounts to the Party to

which such amounts are payable. The rate of such interest with respect to each day of

delay during the period of such nonpayment shall be the Default Rate shall be the rate at

which the Financial Times, or if the Financial Times is not so published the Wall

Street Journal certifies to be the London Interbank offered rate (LIBOR) in the London

Interbank Eurodollar market on thirty (30) day deposits, in effect on the last business day

of the respective preceding Month, plus two percent (2%). Such interest shall accrue

from the respective dates such amounts are payable until the amounts are duly paid. The

Party to whom any such amount is payable may give notice of nonpayment to the Party

in default and if such amount is not paid within fifteen (15) days after such notice, the

Party to which the amount is owed may, in addition to the interest referred to above, seek

remedies available pursuant to Article 24.



26.7



a) The rights and obligations under this Agreement of the State and GNPC on the one

hand and Contractor on the other shall be separate and proportional and not joint. This

Agreement shall not be construed as creating a partnership or joint venture, nor an

association or trust (under any law other than the Petroleum Law), or as authorizing any

Party to act as agent, servant or employee for any other Party for any purpose

whatsoever except as provided in Article 10.4.



77



b)



The duties and obligations of each Party constituting Contractor hereunder shall be

joint and several and it is recognized that each such Party shall own and be

responsible for its undivided Interest in" the rights and obligations of Contractor

hereunder; provided, however, that the following payments shall be the separate

obligation of and shall be made by each Party which constitutes the Contractor:

i)



Payments under the Petroleum Income Tax Law;



ii)



Payments of royalty taken in cash under the provisions of Article 1 0.2 (a);

and



iii) AOE share under the provisions of Article 10.2 (b).

26.8



This Agreement shall not take effect unless and until it has been ratified by the

Parliament of Ghana. (the "Effective Date").



26.9



In construing this Agreement:

a)



no consideration shall be given to the captions of the Articles, Sections, or

Subsections which are inserted for convenience in locating the provisions of

this Agreement and not as an aid in its construction;



b)



the word "includes" and its derivatives means "includes, but is not limited to"

and corresponding derivative expressions;



c)



a defined term has its defined meaning throughout this Agreement and each

annex, and attachment to this Agreement, regardless of whether it appears

before or after the place where it is defined;



d)



the plural shall be deemed to include the singular, and vice versa;



e)



each gender shall be deemed to include the other genders;



f)



Each annex and attachment to this Agreement is a part of this Agreement, but

if there is any conflict or inconsistency between the main body of this

Agreement and any annex or attachment, the provisions of the main body of

this Agreement shall prevail; and



g)



each reference to an Article, Section or Subsection refers to an Article, Section

or Subsection of this Agreement unless expressly otherwise provided.



26.10



This Agreement comprises the full and complete agreement of the Parties hereto with

respect to the subject matter hereof and supersedes and cancels all prior

communications, understandings and agreements between the Parties hereto, whether

written or oral, expressed.



26.11



Each contractor Party warrants that neither it nor any of its Affiliates or any of its or their

officers, directors or employers has made, offered, or authorized and will not make,

offer, or authorize with respect to the matters which are the subject of this Agreement,

any payment, gift, promise or other advantage, whether directly or through any other

person or entity, to or for the use or benefit of any public official (i.e., any person



78



I



holding a legislative, administrative or judicial office, including any person employed by

or acting on behalf of a public agency, a public enterprise or a public international

organization) or any political party or political party official or candidate for office,

where such payment, gift, promise or advantage would violate to the extent applicable to

such Party (i) the applicable laws of Ghana; (ii) the laws of the country of incorporation

of such Party or such Party's ultimate parent company and of the principal place of

business of such ultimate parent company; (iii) the principles described in the

Convention on Combating Bribery of Foreign Public Officials in International Business

Transactions, signed in Paris on December 17, 1997, which entered into force on

February 15, 1999, and the Convention's Commentaries; (iv) the United States of

America Foreign Corrupt Practices Act 1977; and (v) the United Kingdom Bribery Act

2010. Each Party shall defend, indemnify and hold the other Parties harmless from and

against any and all claims, damages, losses, penalties, costs and expenses arising from or

related to, any breach by such first Party of such warranty. Such indemnity obligation

shall survive termination or expiration of this Agreement. Each Party shall in good time

(i) respond in reasonable detail to any notice from any other Party reasonably connected

with the above-stated warranty; and (ii) furnish applicable documentary support for such

response upon request from such other Party.



26.12 Contractor shall at all times comply, and shall ensure that its agents, subcontractors and

Affiliates while in Ghana carrying out activities contemplated by this Agreement and

related documents comply, with the laws of the Republic of Ghana in effect from time

to time during the term of this Agreement to the extent that the Contractor has notice

of or, with the exercise of reasonable inquiry, would have knowledge of, such laws.

Nothing in this Agreement or any related document shall require the Contractor or

any of its agents, subcontractors or Affiliates to violate the laws of the Republic of

Ghana in effect from time to time. To the extent any conflict exists between the terms

of this Agreement and the laws of the Republic of Ghana, the Contractor shall not be

found to be in breach of this Agreement to the extent the Contractor complies with the

terms of this Agreement; provided, however, that where this Agreement specifically

refers to the law of the Republic of Ghana, a breach of such law shall constitute a

breach of this Agreement.



79



ARTICLE 27



NOTICE

27.



Any Notice, Application, Requests, Agreements, Consent, Approval, Instruction,

Delegation, Waiver or other communication required or permitted to be given hereunder

shall be in writing and shall be deemed to have been properly given when delivered in

person to an authorised representative of the Party to whom such notice is directed or

when actually received by such Party through registered mail, telex or telegram at the

following address or at such other address as the Party shall specify in writing fifteen

(15) days in advance:



FOR THE STATE:

MINISTERFOR ENERGY AND PETROLEUM

MINISTRY OF ENERGY AND PETROLEUM

PRIVATE MAIL BAG

MINISTRY POST OFFICE

ACCRA, GHANA

Telephone:

Telex:

Telefax:



233 (0)302667151- 3

2436 ENERGY GH

233 (0)302 668262



FOR GHANA NA TIONAL PETROLEUM CORPORA TION:

THE CHIEF EXECUTIVE

GHANA NATIONAL PETROLEUM CORPORATION

PETROLEUM HOUSE

HARBOUR ROAD

PRIVATE MAIL BAG

TEMA

GHANA

Telephone:

Telefax:



233-(0)303-204726

233-(0)303-202854



FOR CONTRACTOR

BRITTANIA-U GHANA LIMITED

CHIEF EXECUTIVE OFFICER

NO. 12 AIRPORT BYPASS,

Po. BOXC2444, CANTOMENT, ACCRA

Telephone:

Telefax:



+233244171619

+234234 1- 462 7745



80



I



HILLS OIL AND PETROLEUM MARKETING

CHIEF EXECUTIVE OFFICER

181 ADJELE ROAD

MARTE TSURU, EAST AIRPORT

ACCRA - GHANA



COMPANY LIMITED



81



IN WITNESS WHEREOF the parties have caused this Agreement to be executed by their duly

authorized representatives as of the date first,written above.



Witnessed:



FOR THE STATE



By: J


I~



~



rav U-.eL..;g~rt-H



Signature: _ _,ft-,,---,-_G_-,

}_U_i.Q_'



Its:



(YII



~0fOL



~



4@_;;IetuJ


_



t-



fETj~

FOR GHANA NATIONAL PETROLEUM

CORPORATION



Witnessed:



By:



By:



ALEXANDER MOULD



_



Si



Its:



ACTING CHIEF EXECUTIVE



Its:



--------------



FOR BRITT ANIA-U GHANA LIMITED:



Witnessed:



By: UJU C. IFEJIKA (MRS)



By:



Signature:



Its:



Chairman/CEO



_



Signature:



_



_



Its: --------------



82



I



FOR HILLS OIL MARKETING



By:



------------------------



Signature:



Its:



COMPANY LIMITED



_



------------------------



By:



_



Signature:



Its:



_



-----------------------



83



I



ANNEXl



CONTRACT AREA

The Contract Area is the South West Saltpond Block in the Saltpond Basin.

X-Coordinates



Y -Coordinates



660929.4092



469099.5984



660811.0951



525198.6840



697797.9030



525280.5938



696951.5022



469873.1905



,



\. I



l-.



\



•,



o



84



ANNEX 2

ACCOUNTING GUIDE

The purpose of this Accounting Guide is to establish equitable methods as between the Parties

for determining charges and credits applicable to operations under the Agreement. Principles

established by this Accounting Guide shall truly reflect the Contractor's actual cost.



,,



85



I



SECTION 1



1.1



1.2



GENERAL PROVISIONS



1.1.1



Words and terms appearing in this Annex shall have the same meaning as in the

Agreement and to that end shall be defmed in accordance with Article 1 of the

Agreement.



1.1.2



This Annex may be amended by a unanimous decision of the JMC.



1.1.3



In the event of a conflict between the provisions of the Accounting Guide and

the provisions of the Agreement, the provisions of the Agreement shall prevail.



STATEMENTS REQUIRED TO BE SUBMITTED BY CONTRACTOR

1.2.1



Within sixty (60) days from the Effective Date, Contractor shall propose to

GNPC an outline of the chart of accounts, operating records and reports to be

prepared and maintained, which shall describe the basis of the accounting

principles and procedures to be used during the term of the Agreement, and

shall be consistent with normal practice of the international petroleum industry.



1.2.2



Within ninety (90) days of the receipt of such proposal GNPC shall either

accept it or request such revisions as GNPC deems necessary. Failure to notify

contractor of any requested revisions within a ninety (90) day period shall be

deemed acceptance of such proposal.



1.2.3



Within one hundred and eighty (180) days from the Effective Date, the parties

shall either agree on such outline or submit any outstanding issue for

determination by a Sole Expert pursuant to the provisions of Article 24.



1.2.4



Following agreement over the outline Contractor shall prepare and submit to

GNPC formal copies of the chart of accounts relating to the accounting,

recording and reporting functions listed in such outline. Contractor shall also

permit GNPC to inspect its manuals and to review all procedures which are to

be followed under the Agreement.



1.2.5



Without prejudice to the generality of the foregoing, Contractor shall make

separate statements relating to Petroleum Operations for each Development and

Production Area as follows:

a) Cash Call Statement (see Section 5)

b) Production Statement (see Section 6)

c) Value of Production Statement (see Section 7)

d) Cost Statement (see Section 8)

e) Statement of Expenditures and Receipts (see Section 9)

f) Final End-of-Year Statement (see Section 10)

g) Budget Statement (see Section 11)

h) Long Range Plan and Forecast (see Section 12)



86



1.3



LANGUAGE, MEASUREMENT, AND UNITS OF ACCOUNTS



1.3.1



The U.S. Dollar being the currency unit for investments and compensation hereunder

shall therefore be the unit of currency for all bookkeeping and reporting under the

Agreement. When transactions for an asset or liability are in Ghana Cedis or currency

other than the u.S. Dollar, the respective accounts shall be kept in such other currency as

well as the U.S. Dollar.



1.3.2



Measurement required under this Annex shall be in the metric system and Barrels.



1.3.3 The English language shall be employed.

1.3.4



Where necessary for purposes of clarification, Contractor may also prepare financial

reports in other languages, units of measurement and currencies.



1.3.5



It is the intent of the Parties that no Party shall experience any gain or loss at the expense

of or to the benefit of the other as a result of exchange of currency. Where any such gain

or loss arises it shall be charged or credited to the accounts under the Agreement.



1.3.6



The rate of exchange for the conversion of currency shall be the rate quoted by the Bank

of Ghana, or, where buying and selling rates are quoted, the arithmetic average of those

rates, at a close of business on the date of such currency conversion.

Current Assets and Liabilities shall be translated at the rate prevailing on the date of

settlement of the account.



1.3.7



1.3.8



To translate revenue received and expenditures made in Ghana Cedis or in U.S. Dollars,

the average of the monthly rate between the currencies shall be used.



1.3.9



Expenditures made in Ghana Cedis or in U.S. Dollars in respect of capital items shall be

translated at the rate prevailing at the date of acquisition.



87



SECTION

2.0 CLASSIFICATION

2.1



AND ALLOTMENT



2



OF COSTS AND EXPENDITURE



All expenditure relating to Petroleum Operations shall be classified, as follows:



a)

b)

c)

d)

e)



Exploration Expenditure;

Development Expenditure;

Production Expenditure;

Service Costs; and

General and Administrative expenses



and shall be defined and allotted as herein below provided.

2.2



EXPLORATION EXPENDITURE

Exploration Expenditure shall consist of all direct, indirect and allotted costs incurred

in the search for Petroleum in the Contract Area, including but not limited to

expenditure on:



a) aerial, geographical, geochemical, paleontological, geological, topographical and

seismic surveys, and studies and their interpretation;



b) borehole drilling and water drilling;

c) labour, materials and services used in drilling wells with the objective of finding

new Petroleum reservoirs or for the purpose of appraising of Petroleum reservoirs

already discovered, provided such wells are not completed as producing wells;



d) facilities used solely for Exploration Operations, including access roads, where

applicable, and purchased geological and geophysical information;



e) all service costs allotted to the Exploration Operations on an equitable basis;

f) all General and Administrative



Expenses allotted to Exploration Operations based

on the percentage share of projected budget expenditure which will be adjusted to

actual expenditure at the end of each year.



2.3



DEVELOPMENT EXPENDITURE

Development Expenditure shall consist of all expenditure incurred in Development

Operations, including but not limited to expenditure on:

a) drilling wells which are completed as producing wells and drilling wells for

purposes of producing a Petroleum reservoir already discovered, whether these

wells are dry or producing;



88



b) completing wells by way of installation of casing or equipment or otherwise after

a well has been drilled for the purpose of bringing such well into use as a

producing well;

c) intangible drilling costs such as labour, consumable material and services having

no salvage value which are incurred in drilling and deepening of wells for

producing purposes;

d) field facilities such as pipelines, flow lines, production and treatment units,

wellhead equipment, subsurface equipment, enhanced recovery systems, offshore

platforms, Petroleum storage facilities and access roads for production activities;

e) engineering and design studies for field facilities;

f) all service costs allotted to Development Operations on an equitable basis;

g) all General and Administrative Expenses allotted to Development Operations

based on the percentage projected budget expenditure which will be adjusted to

actual expenditure as the end of the year.

2.4



PRODUCTION EXPENDITURE

Production Expenditure shall consist of but not limited to all expenditure incurred in

Petroleum Operations after the Date of Commencement of Commercial Production,

such expenditure being other than Exploration Expenditure, Development

Expenditure, General and Administrative Expenses and Service Costs. The balance of

General and Administrative Expenses and Service Costs not allotted to Exploration

Operations or to Development Operations under Section 2.2 and 2.3 shall be allotted

to Production Expenditure.



2.5



SERVICE COSTS

2.5.1



Service Costs shall consist of but not be limited to all direct and indirect

expenditure incurred in support of Petroleum Operations within or outside

Ghana, including but not limited to the construction or installation of

Warehouses, piers, marine vessels, vehicles, motorised rolling equipment,

aircraft, fire security stations, workshops, water and sewerage plants, power

plants, housing community and recreational facilities and furniture, tools

land, equipment used in such construction or installation.

Service Costs in any Calendar Year shall include the total costs incurred in

such year to purchase and construct or install such facilities as well as the

annual costs of maintaining and operating such facilities.



2.5.2



All Service Costs will be regularly allotted on an equitable basis to

Exploration Expenditure, Development Expenditure and Production

Expenditure.



89



I



2.6



GENERAL AND ADMINISTRATIVE EXPENSES

General and Administrative Expenses shall consist of:'



2.6.1



All main office, field and general administrative costs, in the Republic of

Ghana, including but not limited to supervisory, accounting and employee

relations services;



2.6.2



An overhead charge for the actual cost of services rendered outside the

Republic of Ghana by Contractor and its Affiliates for managing Petroleum

Operations and for staff advice and assistance, including but not limited to

financial, legal, accounting and employee relations services.



All General and administrative Expenses will be regularly allotted as specified in

subsections 2.2 (f), 2.3 (g) and 2.4 to Exploration Expenditure, Development Expenditure and

Production Expenditure.



90



SECTION 3



COSTS, EXPENSES,



EXPENDITURES



AND CREDITS



OF CONTRACTOR

3.1



Contractor for the purpose of this Agreement shall charge the following allowable

costs to the accounts:

a)

b)

c)

d)

e)

f)



g)

h)

i)

j)

k)

1)

m)

n)

0)



p)

3.2



costs of acquiring surface rights;

labour and associated costs;

transportation costs;

charges for services;

material costs;

rentals, duties and other assessments;

insurance and losses;

legal expenses;

training expenses;

general and administrative expenses;

utility costs;

office facility charges;

communication charges;

ecological and environmental charges;

abandonment cost: and

such other costs necessary for the Petroleum Operations.



COST OF ACQUIRING SURFACE RIGHTS AND RELINQUISHMENT

Cost of acquiring surface rights shall consist of all direct costs attributable to the

acquisition, renewal or relinquishment of surface rights acquired and maintained in

force over the Contract Area.



3.3



LABOUR AND ASSOCIATED LABOUR COSTS

Labour and associated labour costs shall include but not be limited to:

a) gross salaries and wages including bonuses of those employees of Contractor and

of its Affiliates engaged in Petroleum Operations who are permanently or

temporarily assigned to Ghana;

b) costs regarding holidays, vacation, sickness and disability payments applicable to

the salaries and wages chargeable under (a);

c) expenses or contributions made pursuant to assessments or obligations imposed

under the laws of the Republic of Ghana which are applicable to cost of salaries

and wages chargeable under (a);

d) cost of established plans for employees' life insurance, hospitalisation, pensions

and other benefits of a like nature customarily granted to employees; and



91



e) reasonable travel and personal expenses of employees and families, including

those made for travel and relocation of the personnel, all of which shall be in

accordance with usual practice of the Contractor:

3.4



TRANSPORTATION



COSTS



Transportation costs and other related costs of transportation of employees,

equipment, materials and supplies necessary for the conduct of Petroleum Operations.

3.5



CHARGES

3.5.1



FOR SERVICES



Charges for services shall include:



a) the costs of third party contracts which are the actual costs of contracts for

technical and other services entered into by Contractor for Petroleum

Operations made with third parties other than Affiliates of Contractor,

provided that the prices paid by Contractor are no higher than the

prevailing rates for such services in the world market;

b) Technical and other services of personnel assigned by the Contractor and

its Affiliates when performing management, engineering, geological,

geophysical, administrative, legal, accounting, treasury, tax, employee

relations, computer services, purchasing, and all other functions for the

direct benefit of Petroleum Operations;

c) General services, including, but not without limitation, professional

consultants and others who perform services for the direct benefits of

Petroleum Operations.

3.5.2



3.6



Services furnished by Contractor and its Affiliates shall be charged at rates

commensurate with those currently prevailing for such services in the world

market.



RENTALS, DUTIES AND OTHER ASSESSMENTS

All rentals, taxes, duties, levies, charges, fees, contributions and any other

assessments and charges levied by the Government in connection with Petroleum

Operations or paid for the benefit of Petroleum Operations, with the exception of the

income tax specified in the Article 12. of the Agreement



3.7



INSURANCE AND LOSSES

a) Insurance premium and costs incurred for insurance, provided that if such

insurance is wholly or partly placed with an Affiliate of Contractor, such premium

and costs shall be recoverable only to the extent not in excess of those generally

charged by competitive insurance companies other than Affiliate; and;

b) costs and losses incurred as a consequence of events, which are, insofar as not

made good by insurance, allowable under Article 17 of the Agreement.



92



c) Costs or expenses necessary for the repair or replacement of property resulting

from damage or losses incurred.



3.8



LEGAL EXPENSES

All costs and expenses of litigation and legal or related services necessary or

expedient for the procuring, perfecting, retaining and protecting the rights hereunder

and in defending or prosecuting lawsuits involving the Contract Area or any third

party claim arising out of activities under the Agreement, or sums paid in respect of

legal services necessary or expedient for the protection of the joint interest of GNPC

and Contractor, provided that where legal services are rendered in such matters by

salaried or regularly retained lawyers of Contractor or an Affiliate of Contractor, such

compensation will be included instead under either Section 3.3 or 3.5, as applicable.



3.9



TRAINING COSTS

All costs and expenses incurred by Contractor in trammg of its employees and

nominees of GNPC to the extent that such training is attributable to Petroleum

Operations under the Agreement.



3.10 GENERAL AND ADMINISTRATIVE EXPENSES

General and Administrative Expenses shall consist of the costs described in

Subsection 2.6.1 and the charge described in Subsection 2.6.2.

3.11



UTILITY COSTS

Any water, electricity, heating, fuel or other energy and utility costs used and

consumed for the Petroleum Operations.



3.12 OFFICE FACILITY CHARGES

The cost and expenses of constructing, establishing, maintaining and operating

offices, camps, housing and any other facilities necessary to the conduct of Petroleum

Operations. The cost of constructing or otherwise establishing any operating facility

which may be used at any time in operations of more than one field shall be charged

initially to the field or fields for which the facility is first used. Costs incurred,

thereafter shall be allocated in a reasonable manner, consistent with international

accounting practice, to the fields for which the facility is used.



3.13



COMMUNICA TION CHARGES

The costs of acquiring, leading, installing, operating, repamng and maintaining

communication systems, including radio and microwave facilities.



93



3.14



ECOLOGICAL AND ENVIRONMENTAL CHARGES

All charges for environmental



protection



and safety measures



conducted



III



the



Contract Area in accordance with Article 17 of the Agreement.

3.15



ABANDONMENT COST

Cost relating to the decommissioning and abandonment of operations and facilities,

site restoration and other associated operations accrued from a reasonable date in

advance based on estimate of such cost (with subsequent adjustments to actuals) as

provided in Article 12.10 of the Agreement.



3.16



OTHER COSTS

Any other costs not covered or dealt with in the foregoing provisions which are

incurred and not mentioned in Section 3.16 for the necessary and proper conduct of

Petroleum Operations.



3.17



COSTS NOT ALLOWABLE UNDER THE AGREEMENT

The following costs shall not be allowable under the Agreement:

a)



commission paid to intermediaries by Contractor;



b)



charitable donations and contributions, except where prior approval has been

obtained from GNPC;



c)



interest incurred on loans raised by the Contractor;



d) petroleum marketing costs or costs of transporting petroleum beyond the delivery

point;

e)



the costs of any Bank Guarantee under the Agreement and any other amounts

spent on indemnities with regard to non-fulfilment of contractual obligations;



f)



premium paid as a result of GNPC exercising a Sole Risk option under Article 9

of this Agreement;



g)



cost of arbitration under Article 24 of the Agreement or dispute settlement by any

independent expert under the terms of the Agreement;



h)



fines and penalties imposed by any applicable law or and a competent Court of

Law;



i)



cost incurred as a result of gross negligence or wilful misconduct chargeable to

Contractor or the Operator under the terms of the Agreement.



94



3.18



ALLOWABLE



AND DEDUCTIBILITY



The costs and expenses set forth herein shall be for the purpose of determining

allowable or non-allowable costs and expenses only and shall have no bearing on

Contractor's eligibility or otherwise for deductions in computing Contractor's net

income from Petroleum Operations for income tax purposes under the Agreement.

3.19



CREDITS UNDER THE AGREEMENT

The net proceeds of the following transactions will be credited to the accounts under

the Agreement:

a) the net proceeds of any insurance or claim in connection with Petroleum

Operations or any assets charged to the accounts under the Agreements when such

operations or assets were insured and the premium charged to the accounts under

the Agreement;

b) revenue received from third parties for the use of property or assets charged to the

accounts under this Agreement;

c) any adjustment from the suppliers or manufacturers or their agents in connection

with a defective equipment or material the cost of which was previously charged

to the account under the Agreement;

d) the proceeds received for inventory materials previously charged to the account

under the Agreement and subsequently exported from the Republic of Ghana or

transferred or sold to third parties without being used in the Petroleum Operations;

e) rentals, refunds or other credits received which apply to any charge which has

been made to the account under the Agreement, but excluding any award granted

under arbitration or Sole Expert proceedings;

f) the proceeds from the sale or exchange of plant or facilities from the Development



and Production Area or plant or facilities the acquisition costs of which have been

deducted in the computation of F AP, SAP, TAP, ZAP or HAP for the relevant

Development and Production Area;

g) the proceeds derived from the sale or issue of any intellectual property the

development costs of which were incurred pursuant to this Agreement;

h) the proceeds from the sale of any petroleum information derived from Petroleum

Operations under this Agreement.



95



3.20



DUPLICATION



OF CHARGES



AND CREDITS



Notwithstanding any provision to the contrary in this Annex, it is the intention that

there shall be no duplication of charges or credits in the accounts under the

Agreement.



96



l

SECTION 4

MATERIAL

4.1



VALUE OF MATERIAL CHARGED TO THE ACCOUNTS UNDER

THE AGREEMENT

Material purchased, leased or rented by Contractor for use in Petroleum Operations

shall be valued at the actual net cost incurred by Contractor. The net cost shall

include invoice price less trade and cash discounts, if any, purchase and procurement

fees plus freight and forwarding charges between point of supply and point of

shipment, freight to port of destination, insurance, taxes, customs duties, consular

fees, other items chargeable against imported material, and any other related costs

actually paid.



4.2



VALUE OF MATERIAL PURCHASED FROM AN AFFILIATE

Contractor shall notify GNPC of any goods supplied by an Affiliate of Contractor.

Materials purchased from Affiliate of Contractor shall be charged at the prices

specified in Sections 4.2.1, 4.2.2 and 4.2.3 below.

4.2.1



New Material (Condition "A")

New material shall be classified as Condition "A". Such material shall be

valued at the prevailing market price, plus expenses incurred in procuring

such new materials, and in moving such materials to the locations where the

material shall be used.



4.2.2



Used Material (Condition "B")

Used material shall be classified as Condition "B" provided that it is in

sound and serviceable condition and is suitable for reuse without

reconditioning. Such material shall be valued at not more than seventy five

per cent (75%) of the current price of new material valued according to

Section 4.2.1 above.



4.2.3



Used Material (Condition "C")

Used material which is serviceable for original function as good second hand

material after reconditioning and cannot be classified as Condition "B" shall

be classified as Condition "C", Such material shall be valued at not more

than fifty per cent (50%) of the current price of new material valued

according to Section 4.2.1 above. The cost of reconditioning shall be

charged to the reconditioned material provided that that the value of such

Condition "C" material plus the cost of reconditioning does not exceed the

value of Condition "8" material.



97



I



4.3



CLASSIFICATION OF MATERIALS

Material costs shall be charged to "the respective Exploration Expenditure,

Development Expenditure, Operating Expenditure accounts at the time the material is

acquired and on the basis of the intended use of the material. Should such material

subsequently be used other than as intended, the relevant charge will be transferred to

the appropriate account.



4.4



DISPOSAL OF MATERIALS

Sales of property shall be recorded at the net amount collected by the Contractor from

the purchaser.



4.5



WARRANTY OF MATERIALS

In the case of defective material or equipment, any adjustment received by Contractor

from the suppliers or manufacturers of such materials or their agents will be credited to

the accounts under the Agreement.



4.6



CONTROLLABLE MATERIALS

4.6.1



The Contractor shall control the acquisition, location, storage and disposition

of materials which are subject to accounting record control, physical

inventory and adjustment for averages and shortages (hereinafter referred to

as Controllable Material).



4.6.2



Unless additional inventories are scheduled by the JMC, Contractor shall

conduct one physical inventory of the Controllable Material each Calendar

Year which shall be completed prior to the end of the year. The Contractor

shall conduct said inventory on a date to be approved by the JMC. Failure on

the part of GNPC to participate in a JMC schedule or approved physical

inventory shall be regarded as approval of the results of the physical

inventory as conducted by the Contractor.



4.6.3



The gain or loss resulting from the physical inventory shall be reflected in the

stock records of Controllable Materials. The Contractor shall compile a

reconciliation of the inventory with a reasonable explanation for such gains

or losses.

Failure on the part of GNPC to object to Contractor's

reconciliation within thirty (30) days of compilation of said reconciliation

shall be regarded as approval by GNPC.



98



l



SECTIONS

CASH CALL STATEMENT

5.1



In respect of any Exploration costs to which GNPC is contributing or any Development

and Production Area in which GNPC elects to take a participating Interest, and in any

case where Contractor conducts Sole Risk Operations for GNPC's account, Contractor

shall at least fifteen (15) days prior to the commencement of any Month submit a Cash

Call Statement to GNPc. Such Cash Call Statement shall include the following

information:

a) Due Date;

b) Payment Instructions;

c) The balance prior to the Cash Call being issued;

d) Amount of US Dollars due; and

e) An estimation of the amounts of US Dollars required from GNPC for the following

month.



5.2



Not later than the twenty-fifth day of each Month, Contractor will furnish GNPC a

statement reflecting for the previous Month:

a)

b)

c)



5.3



Payments;

The nature of such payments by appropriate classifications; and

The balance due to or from GNPC.



Contractor may in the case where a large unforeseen expenditure becomes necessary

issue a special Cash Call Statement requiring GNPC to meet such Cash Call within ten

(10) days of receipt of such Statement.



99



,



I

SECTION 6

PRODUCTION

6.1



6.2



STATEMENT



Subsequent to the Date of Commencement of Commercial Production from the Contract

Area, Contractor shall submit a monthly Production Statement to GNPC showing the

following information for each Development and Production Area as appropriate:

a)



the quantity of Crude Oil produced and saved;



b)



the quantity of Natural Gas produced and saved;



c)



the quantities of Petroleum used for the purpose of conducting drilling and

Production Operations, pumping to field storage and reinjections;



d)



the quantities of Natural Gas flared;



e)



the size of Petroleum stocks held at the beginning of the Month;



f)



the size of Petroleum stocks held at the end of the Month.



The Production Statement of each Calendar Month shall be submitted to GNPC not later

than ten (l0) days after the end of such Month.



I

I

100



SECTION 7



VALUE OF PRODUCTION STATEMENT



7.



During each Quarter Contractor shall prepare a statement providing calculations of the

value of Crude Oil produced and saved based on the Market Price established under

Article 11 of the Agreement, the amounts of Crude Oil allocated to each of the Parties

during that Quarter, the buyer of the cargo, sales basis with respect to Benchmark crude

oil, the pricing basis, the differential, and any deductions. Statement shall be submitted

to the Minister and GNPC not later than thirty (30) days following the determination,

notification and acceptance of the World Market Price to GNPC according to Article 11

of the Agreement.



I

1

101



1



II

SECTION 8

COST STATEMENT

8.1



Contractor shall prepare with respect to each Quarter, a Cost Statement containing the

following information:

a)



Total Petroleum Costs in previous Quarters, if any;



b)



Petroleum Costs for the Quarter in question;



c)



Total Petroleum Costs as of the end of the Quarter in question (subsection 8.1 (a)

plus subsection 8.1 (b) above;



d)



Petroleum Costs for Development Operations advanced in the Quarter in respect

ofGNPC's participating Interest pursuant to Article 2.8 of the Agreement;



e)



Costs as specified in (d) above which have been recovered during the Quarter

pursuant to Article 10.1 (e) of the Agreement and the balance, if any, of such

costs unrecovered and carried forward for recovery in a later period.



8.2



Petroleum Costs for Exploration, Development and Production Operations as detailed

above shall be separately identified for each Development and Production Area.

Petroleum Costs for Exploration Operations not directly attributable to a specific

Development Area shall be shown separately.



8.3



The Cost Statement of each Quarter shall be submitted to GNPC no later than thirty

(30) days after the end of such Quarter



I



102



SECTION 9



STATEMENT OF EXPENDITURES



9.1



9.2



AND RECEIPTS



Subsequent to the Date of Commencement of Commercial Production from the Contract

Area, Contractor shall prepare with respect to each Quarter a Statement of Expenditures

and Receipts. The Statement will distinguish between Exploration Expenditure and

Development Expenditure and Production Expenditure and will identify major items of

expenditure within these categories. The statement will show the following:

a)



actual expenditures and receipts for the Quarter in question;



b)



cumulative expenditure and receipts for the budget year in question;



c)



latest forecast of cumulative expenditures at the year-end; and



d)



variations between budget forecast and latest forecast and explanations therefor.



The Statement of Expenditures and Receipts of each Calendar Quarter shall be submitted

to GNPC not later than thirty (30) days after the end of such Quarter for provisional

approval by GNPc.



1

J

J



103



II

SECTION 10

FINAL END-OF- YEAR STATEMENT



10.



The Contractor will prepare a Final End-of-Year Statement. The Statement will contain

information as provided in the Production Statement, Value of Production Statements,

Cost Statement and Statements of Expenditures and Receipts, as appropriate. The Final

End-of-year Statement of each Calendar Year shall be submitted to GNPC within ninety

(90) days of the end of such Calendar Year. Any necessary subsequent adjustments shall

be reported promptly to GNPC.



I



104



SECTION 11

BUDGET STATEMENT



11.1.1



The Contractor shall prepare an annual budget Statement. This will distinguish between

Exploration Expenditure, Development Expenditure and Production Expenditure and

will show the following;

a) Forecast Expenditures and Receipts for the budget year under the Agreement;

b) cumulative Expenditures and Receipts to the end of said budget year; and

c) the most important individual items of Exploration, Development and Production

Expenditures for said budget year.



The budget may include a budget line or lines for unforeseen expenditures which, however, shall

not exceed ten percent (10%) of the total budgetary expenditure.

11.2



11.3



The Budget Statement shall be submitted to GNPC and JMC with respect to each budget

year no less than ninety (90) days before the start of such year except in the case of the

first year of the Agreement when the Budget Statement shall be submitted within sixty

(60) days of the Effective Date.

Where Contractor foresees that during the budget period expenditures have to be made

in excess of the ten percent (10%) pursuant to Section 11.1.1 hereof, Contractor shall

submit a revision of the budget to GNPC



105



I

1



II

SECTION 12

LONG RANGE PLAN AND FORECAST

12.1



Contractor shall prepare and submit to GNPC the following:

a)



During Exploration Period, an Exploration Plan for each year commencing as of

the Effective Date which shall contain the following information:

i)



Estimated Exploration Costs showing outlays for each of the years or the

number of years agreed and covered by the Plan;



ii)



Details of seismic operations for each such year;



iii)



Details of drilling activities planned for each such year;



iv)



Details of infrastructure utilization and requirements.



The Exploration Plan shall be revised on each anniversary of the Effective Date.

Contractor shall prepare and submit to GNPC the first Exploration Plan for the

Initial Exploration Period of two (2) years within sixty (60) days of the Effective

Date and thereafter shall prepare and submit to GNPC no later than forty five

(45) days before each anniversary of the Effective Date a revised Exploration

Plan.



I

b)



c)



In the event of a Development Plan being approved, the Contractor shall prepare

a Development Forecast for each calendar year of the Development Period,

which shall contain the following information:

i)



forecast of capital expenditure portions of Development and Production

expenditures for each Calendar Year of the Development Period;



ii)



forecast of operating costs for each Calendar Year;



iii)



forecast of Petroleum production for each Calendar year;



iv)



forecast of number and types of personnel employed in the Petroleum

Operations in the Republic of Ghana;



v)



description of proposed Petroleum marketing arrangements;



vi)



description of main technologies employed; and



vii)



description of the working relationship of Contractor to GNPC.



The Development forecast shall be revised at the beginning of each Calendar

Year commencing as of the second year of the first Development forecast

Contractor shall prepare and submit to GNPC the first Development forecast

within one hundred and twenty (120) days of the date when the first

Development Plan is approved by the Minister and Contractor commences the



106



implementation of such plan and thereafter shall prepare and submit a revised

Development Forecast to GNPC no later than forty five (45) days before each

Calendar Year commencing as of the second year of the first Development

forecast.



12.2



CHANGES OF PLAN AND FORECAST

It is recognized by Contractor and GNPC that the details of the Exploration Plan and

Development forecast may require changes in the light of existing circumstances and

nothing herein contained shall limit the flexibility to make such changes. Consistent

with the foregoing the said Plan and Forecast may be revised annually.



J



107



I



ANNEX 3 SAMPLE AOE CALCULATIONS



IF

SA



: 15.1[Jr9lt;



T



17.S96

22.59:6



VA



27.5



22.5'9&



32.5'916



.27.5'%



.LA



.117



4



. .596



Disclaimer: AOEs are calculated on a monthly basis but for ease of analysis the sample

calculations were based on annual figures.



Dation



Rate



. 3%



D:moonts in miBioo of USS)



ar



NCf



FAn@125

%p.a



AOE 1 @12.5%



SAn@175%



AOEl



TAn@115%



AGE 3



" p.a



.1M



@15"



~



@175%



YAn@11.5



A0E4@12..5%



lAnIli'32.5%



A0E5



TotaiAOl



~



@275%



Payments



27.5%



12.5%



12.5%



17.5%



15.0%



22.5%



17.5%



27.5%



22.5%



32.5%



1



(150.00)



(150.00)



0.00



(150.00)



0.00



(150.00)



0.00



(150.00)



0.00



(150.00)



0.00



0.00



'}



(240.00)



(413.25)



0.00



(420.75)



0.00



(428.25)



0.00



(435.75)



0.00



(443.25)



0.00



0.00



(310.00)



(787.30)



0.00



(817.00)



0.00



(847.45)



0.00



(878.65)



0.00



(910.60)



0.00



0.00



(550.00)



(1,459.34)



0.00



(1,534.49)



0.00



(1,613.55)



0.00



(1,696.64)



0.00



(1,783.87)



0.00



0..00



(28O.00)



(1,965.53)



0.00



(2,129.06)



0.00



(2,305.01)



0.00



(2,494.12)



0.00



(2,697.14)



0.00



0.00



(80.00)



(2,350.19)



0.00



(2,645.52)



0.00



(2,972.79)



0.00



(3,334.83)



0.00



(3,734.63)



0.00



0.00



14

r:



(65.00)



(2,779.47)



0.00



(3,252.85)



0.00



(3,795.85)



0..00



(4,416.95)



0.00



(5,125.42)



0.00



0.00



990.00



(2,220.29)



0.00



(2,929.68)



0.00



(3,773.79)



0.00



(4,774.12)



0.00



(5,954.94)



0.00



0.00



I



lA70.00



(1,094.43)



0.00



(2,060.27)



0.00



(3,266.11)



0.00



(4,760.22)



0.00



(6,598.95)



0.00



0.00



'10



1,630.00



365.93



45.74



(898.36)



0.00



(2,514.71)



0.00



(4,627.83)



0.00



(7,357.31)



0.00



45.74



970.00



970.00



121.25



(233.78)



0.00



(2,307.21)



0.00



(5,190.57)



0.00



(9,120.41)



0.00



121.25



750.00



750.00



93.75



374.55



56.18



(2,295.48)



0.00



(6,173.63)



0.00



(11,758.09)



0.00



149.93



680.00



680.00



85.00



595.00



89.25



(2,375.07)



0.00



(7,550.83)



0.00



(15,426.46)



0.00



174.25



410.00



410.00



51.25



358.75



53.81



(2,675.78)



0.00



(9,548.90)



0.00



(20,597.92)



0.00



105D6



220.00



220.00



27.50



192.50



28.88



(3,194.48)



0.00



(12,297.69)



0.00



(27,746.55)



0.00



56.38



0.00



652.61



7



l



I~



r~~

,:at



5,445.00



424A9



118.12



0.00



0.00



108



ANNEX 4



CONFIDENTIALITY AGREEMENT

THIS AGREEMENT is entered into this [_



] day of [



___], 20_ (the "Effective



Date") by and between [Contractor Party], a company organized and existing under the laws

_] (hereinafter referred to as the "Disclosing Party"); and [_



of[ _



_], a company organized and existing under the laws of [_



_]



(hereinafter referred to as the "Receiving Party").

The companies named above may collectively be referred to as the "Parties" or individually

as "Party".

WHEREAS in connection with the Possible Transaction (as defined below) by the Receiving

Party, the Disclosing Party is willing, in accordance with the terms and conditions of this

Agreement, to disclose certain Confidential Information (as defined below) relating to the

East Cape Three Points Offshore Block ( the "Area") shown in Exhibits A to D attached

hereto; and

WHEREAS the Petroleum Agreement covering the said Contract Area requires that the

Disclosing Party require the execution of a confidentiality agreement by Receiving Party

prior to the disclosure of Confidential Information in order to govern such disclosure and that

a copy of all such signed confidentiality agreements be provided to GNPC.

NOW THEREFORE, in consideration for the mutual undertakings of the Disclosing Party

and the Receiving Party under this Agreement, the Parties agree as follows:

1.



Definitions



As used in this Agreement the following words and terms shall have the meaning ascribed to

them below:

1.1



"Affiliated Company" means any Person which:



a.



Controls directly or indirectly a Party, or



b.



Is Controlled directly or indirectly by such Party, or



c.



Is directly or indirectly controlled by a Person which directly or indirectly Controls

such a Party.



1.2



"Confidential Information" means individually or collectively:



a.



any and all corporate information concerning the Disclosing Party and any Affiliated

Companies of the Disclosing Party, and



b. any and all data and information obtained as a result of petroleum operations in the

Area, including without limitation well data and seismic information together with all

other data and information obtained by or on behalf of the Disclosing Party in

connection with the Disclosing Party's petroleum operations in the Area, as well as



109



I

1



geological and economic reports, studies, interpretations and analyses prepared by or

on behalf of the Disclosing Party in connection with its petroleum operations in the

Area. Confidential Information includes certain proprietary data and information that

is the property of GNPC (hereinafter "GNPC Information") as described in Exhibit B

attached hereto.

Provided that, the following shall not constitute Confidential Information:

c. information that can be reasonably demonstrated by the Receiving Party as being

already lawfully known to Receiving Party as of the Effective Date;

d. information that is or becomes available to the public other than through the act or

omission of Receiving Party or of any other Person to whom Confidential Information

is disclosed by the Receiving Party pursuant to Article 4.2 unless public disclosure

was made pursuant to Article 4.1;

e. information that is acquired independently from a third party that has a right to

disseminate such information at the time it is acquired by the Receiving Party; or

f.



information that can be reasonably demonstrated by the Receiving Party to have been

developed by Receiving Party independently of the Confidential Information received

from Disclosing Party.



1.3

"Control" means the ownership directly or indirectly of 50% or more of the voting

rights in a Person or the ability to direct, directly or indirectly, the management or policies of

a Person, whether through the appointment of the directors, the ownership of voting shares or

other voting rights, pursuant to written contract or otherwise. "Controls", "Controlled by"

and other derivatives shall be construed accordingly.

1.4

"Evaluation Material" means information derived in whole or in part from

Confidential Information, and generated by or on behalf of the Receiving Party. For purposes

of this Agreement, Evaluation Material may include without limitation models, technical,

financial and economic reports, studies, interpretations, analyses, estimates of reserves, and

evaluations and notes of documents or meetings.

1.5

"GNPC" means Ghana National Petroleum Corporation, a Statutory Corporation

established by Provisional National Defence Council Law 64 of 1984 with its Head Office at

Petroleum House, Harbour Road, Tema.

1.6

"Person" means an individual, joint venture, corporation, company, firm, partnership,

limited partnership, Limited Liability Company, trust, estate, government agency or any other

entity, including unincorporated business associations.

"Petroleum Agreement" means the Petroleum Agreement dated _, 2012 between

1.7

the Government of the Republic of Ghana, Ghana National Petroleum Corporation, Cola

Natural Resources Ghana Limited and Medea Development Ghana Limited in respect of the

East Cape Three Points Offshore Block (and all amendments and supplements thereto).

1.8

"Possible Transaction" means any possible business arrangement with the

Disclosing Party under which Receiving Party would acquire directly or indirectly all or part

of the rights and interests owned by Disclosing Party andlor Disclosing Party Affiliates in one



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or more offshore hydrocarbon

the Area.

2.



exploration,



development or production assets located within



Disclosure



In connection with the Possible Transaction, Disclosing Party is willing to disclose to

Receiving Party certain Confidential Information. The Parties agree that the disclosure by the

Disclosing Party and the receipt by the Receiving Party of the Confidential Information is

subject to the terms of this Agreement.

3.



Undertaking of Confidentiality,



Restriction on Use and Damages



3.1

In consideration of the disclosure referred to in Article 2 above, the Receiving Party

agrees that the Confidential Information and the Evaluation Material shall be held and treated

strictly in confidence and may not be disclosed, licensed, traded, published or otherwise

revealed in any manner whatsoever, without the prior written consent of the Disclosing Party

except as provided in Article 4 below.

3.2

The Receiving Party shall (and shall procure that any Affiliated Company shall) not

use or permit the use of the Confidential Information and/or the Evaluation Material other

than for the purpose of evaluating the Area and determining whether to enter into

negotiations in connection with the Possible Transaction with the Receiving Party.

3.3

The Receiving Party shall (and shall procure that any Person that receives

Confidential Information and/or Evaluation Material pursuant to and in accordance with

Article 4.2 hereof shall) keep any Confidential Information it receives and any copies thereof

and any Evaluation Material secure and confidential (in a manner no less secure and

confidential than Receiving Party and such Persons keep their respective confidential

information) and to prevent the Confidential Information and any Evaluation Material from

being disclosed in breach of this Agreement.

3.4

The Receiving Party agrees not to disclose to anyone, except as provided for by

Article 4 below, the fact that the Confidential Information has been made available or that

discussions or negotiations are taking place or have taken place between Disclosing Party and

Receiving Party or any Party's Affiliated Companies.

3.5

The obligations of the Receiving Party for confidentiality and non-use as set forth in

this Agreement shall commence from receipt of the Confidential Information by the

Receiving Party. Further, the obligation not to disclose shall not be affected by bankruptcy,

receivership, assignment, attachment or seizure procedures, whether initiated by or against

the Receiving Party, nor by the rejection of any agreement between GNPC and Disclosing

Party and/or Receiving Party, by a trustee of Receiving Party in bankruptcy, or by the

Receiving Party as a debtor-in-possession or the equivalent of any of the foregoing.

3.6

The Receiving Party agrees to indemnify Disclosing Party against direct damages

(including, losses, damages, claims, expenses and reasonable attorney's fees) incurred or

suffered as a result of a breach of this Agreement by Receiving Party or its Affiliated

Companies. Such direct damages shall be the sole exclusive remedy, and all other remedies

or damages at law or in equity are waived except such equitable relief as may be granted

under Article 11. In no event shall the Parties be liable to each other for any other damages,



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including incidental, consequential, special, or punitive damages, regardless of negligence or

fault.



4.

Permitted

Disclosures



Disclosure



and



Obligation



of Receiving



Party



for Permitted



The Receiving Party may disclose Confidential Information and/or Evaluation Material

without the prior written consent of the Disclosing Party:

4.1

To the extent the Confidential Information and/or Evaluation Material is required to

be disclosed under applicable law, order, decree, regulation or rule of any governmental

entity having jurisdiction over the Receiving Party, or any regulatory entity, securities

commission or stock exchange on which the securities of the Receiving Party or any of its

Affiliated Companies are listed or are to be listed, provided that the Receiving Party shall

make all reasonable efforts to give written notice to the Disclosing Party prior to such

disclosure (including full details of the circumstances of such disclosure); or

4.2

To the following persons on a need to know basis and only for the purpose described

in Article 3.2:

4.2.1



employees, officers and directors of the Receiving Party;



4.2.2



employees, officers and directors of an Affiliated Company of the Receiving Party;



4.2.3 any professional consultant or agent retained by the Receiving Party or its Affiliated

Company; or

4.2.4 any bank, financial institution or entity financing or proposing to finance the Possible

Transaction, including any professional consultant retained by such bank, financial institution

or entity for the purpose of evaluating the Confidential Information and/or Evaluation

Material.

Prior to making any such disclosure to Persons under Articles 4.2.3 and 4.2.4 above,

however, the Receiving Party shall obtain an undertaking of confidentiality, on terms no less

stringent than contained in this Agreement, from each such Person; provided, however, that

in the case of outside legal counsel, the Receiving Party shall only be required to procure that

such legal counsel is bound by an obligation of confidentiality.

4.3

The Receiving Party shall be responsible to the Disclosing Party for any act or

omission of the entities and Persons described in Article 4.2 that would constitute breach of

this Agreement as if the action or omission had been perpetrated by the Receiving Party and

shall immediately notify the Disclosing Party upon becoming aware that Confidential

Information has been disclosed in breach of this Agreement.

5.



Ownership of Confidential Information



5.1

Receiving Party acknowledges the Confidential Information, excluding the GNPC

Information, remains the property of the Disclosing Party and the Disclosing Party may use

such Confidential Information for any purpose without obligation to the Receiving Party.

5.2

Receiving Party acknowledges that the GNPC Information is and remains the

property of GNPC and GNPC may use such GNPC Information for any purpose without



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obligation to the Disclosing Party or Receiving Party.

In addition, Receiving Party

acknowledges that in the event that it acquires, directly or indirectly an interest in the Area,

that it may be required to enter into a data licensing agreement with GNPC with respect to the

GNPC Information on terms to be agreed between GNPC and the Receiving Party.

5.3

The Receiving Party shall acquire no proprietary interest in or title or right to the

Confidential Information.

6.



Return of Confidential Information



6.1

Disclosing Party may demand the return of the Confidential Information at any time

upon giving written notice to Receiving Party.

6.2

Within thirty (30) days of receipt of the notice referred to in Article 6.1 or upon

completion of the Receiving Party's review and/or evaluation of the Confidential

Information, the Receiving Party shall retain no copies of the Confidential Information, but

shall:

6.2.1



Retum all of the original Confidential Information to the Disclosing Party;



6.2.2 Destroy or delete or cause to be destroyed or deleted all copies and reproductions

(both written and electronic) of Confidential Information and any Evaluation Material in its

possession and/or in the possession of persons to whom it was disclosed by the Receiving

Party. Confidential Information or Evaluation Material that is in electronic format (including

all electronic back-up files - subject to Art 6.3.1) shall also be deleted; and

6.2.3 Provide a written certification, signed by an authorized officer of the Receiving Party,

that Receiving Party has fully complied with its obligations under this Clause 6.2.

6.3



The provisions of Article 6.1 and 6.2 do not apply to the following:



6.3.1 Confidential Information or Evaluation Material that is retained in the computer

backup system of Receiving Party or a Person to whom it was disclosed under Article 4.2 if

the Confidential Information or Evaluation Material will be destroyed in accordance with the

regular on-going records retention process of Receiving Party or such Person and if the

Confidential Information is not used prior to its destruction;

6.3.2

Confidential Information or Evaluation material that must be retained under

applicable law or regulation, including by stock exchange regulations or by governmental

order, decree, regulation or rule; and

6.3.3 any corporate documents or reports of the Receiving Party which contain data derived

from the Confidential Information or Evaluation Material which were presented to its

executive board (or the equivalent thereof) and are required in accordance with applicable

law or its document retention policy to be retained;

provided that any Confidential Information and/or Evaluation Material that is so retained

shall remain subject to the terms of this Agreement.

7.



Remedies



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The Receiving Party understands and acknowledges that any breach of the terms of this

Agreement may cause the Disclosing Party irreparable harm, and damages may not be an

adequate remedy, and therefore agrees that the Disclosing Party, an Affiliated Company of

Disclosing Party shall have the right to apply to a court of competent jurisdiction for specific

performance and/or an order restraining and enjoining any such breach or further disclosure

and for such other relief as may be deemed appropriate. Such right is to be in addition to the

remedies otherwise available to the Disclosing Party, an Affiliated Company of Disclosing

Party at law or in equity.

8.



Term



This Agreement shall terminate on the later of five (5) years from the Effective Date or the

date on which disclosure is no longer restricted by the terms of the Petroleum Agreements

currently covering the Area.

9.



Representations and Warranties



The Disclosing Party represents and warrants that it has the right and authority to disclose the

Confidential Information to the Receiving Party. However the Disclosing Party, its Affiliated

Companies and their respective principals, officers, directors and employees make no

representation or warranties, express or implied as to the quality, accuracy and completeness

of the Confidential Information disclosed hereunder, and the Receiving Party expressly

acknowledges the inherent risk of error in the acquisition, processing, and interpretation of

geological and geophysical data. The Disclosing Party, its Affiliated Companies and their

respective principals, officers, directors and employees shall have no liability whatsoever

with respect to the use of or reliance upon the Confidential Information by the Receiving

Party or its Affiliated Companies or Persons to whom the Receiving Party discloses

Confidential Information under Article 4.2.



10.



Assignment



The rights and obligations of the Receiving Party under this Agreement may not be assigned

in whole or in part by the Receiving Party without the prior written consent of the Disclosing

Party. Any attempted assignment by Receiving Party without the prior written approval of

Disclosing Party shall be void. Without limiting the prior provisions of this Article 10, this

Agreement shall bind and inure to the benefit of the Parties and their respective successors

and permitted assigns.

11.



Governing Law and Dispute Resolution



11.1 This Agreement shall be governed by and interpreted in accordance with the laws of

England and Wales.

11.2

Any dispute ansmg out of, relating to, or in connection with this Agreement,

including any question regarding its existence, validity or termination, shall be settled under

the Rules of Arbitration of the International Chamber of Commerce by three arbitrators

appointed in accordance with said rules. The place of arbitration shall be Geneva,

Switzerland. The proceedings shall be in the English language.



114



11.3

The resulting arbitral award shall be final and binding without right of appeal, and

judgment upon such award may be entered by any court having jurisdiction thereof. A

dispute shall be deemed to have arisen when either Party notifies the other Party in writing to

that effect. Receiving Party understands and acknowledges that any breach of the terms of

this Agreement may cause the Disclosing Party irreparable harm for which damages may not

be an adequate remedy. Accordingly, the arbitrator may award both monetary and equitable

relief, including injunctive relief and specific performance or other such relief as may be

deemed appropriate. The Disclosing Party may apply to any competent judicial authority for

interim or conservatory relief; an application for such measures or an application for the



enforcement of such measures ordered by the arbitrator shall not be deemed an infringement

or waiver of the Agreement to arbitrate and shall not affect the powers of the arbitrator. Any

monetary award issued by the arbitrator shall be payable in u.s. dollars. Each Party waives

any right to damages other than those provided in Article 3.6.

11.4 Unless the parties expressly agree in writing to the contrary, the parties undertake as a

general principle to keep confidential all awards in their arbitration, together with all

materials in the proceedings created for the purpose of the arbitration and all other documents

produced by another party in the proceedings not otherwise in the public domain - save and to

the extent that disclosure may be required of a party by legal duty, to protect or pursue a legal

right or to enforce or challenge an award in bona fide legal proceedings before a state court or

other judicial authority.

11.5

Any Party that now or hereafter has a right to claim immunity for itself or any of its

assets hereby waives such immunity and agrees not to claim such immunity, in connection

with this Agreement, including any dispute hereunder. This waiver includes immunity from

(A) legal process of any sort whatsoever, (B) jurisdiction or judgment, award, determination,

order or decision of any court, arbitrator, tribunal or Expert, (C) inconvenient forum, and (D)

any effort to confirm, enforce, or execute any decision, settlement, award, judgment, service

of process, execution order, attachment (including pre-judgment attachment) or other remedy

that results from an expert determination, arbitration or any judicial or administrative

proceedings commenced pursuant to this Agreement.

12.



Non-exclusivity



The disclosure of Confidential Information to Receiving Party is non-exclusive, and

Disclosing Party may disclose the Confidential Information to others at any time pursuant to

the terms and conditions of the Petroleum Agreement.

13.



No Rights in the Area



Unless otherwise expressly stated in writing, any prior or future proposals or offers made in

the course of the discussions of the Parties are subject to all necessary management and

government approvals and may be withdrawn by either Party for any reason or for no reason

at any time. Nothing contained herein is intended to confer upon Receiving Party any right

whatsoever to the interest of Disclosing Party in the Area.

14.



No Waiver



No waiver by either Party of anyone or more breaches of this Agreement by the other Party

shall operate or be construed as a waiver of any future breach or breaches by the same or

other Party, whether of like or of different character. Except as may be expressly provided in



115



I



this Agreement no Party shall be deemed to have waived, released or modified any of its

rights under this Agreement unless such Party has expressly stated in writing, that it does

waive, release or modify such right.

15.



Modifications



No amendments, changes or modifications to this Agreement shall be valid except if the same

are in writing and signed by a duly authorized representative of each of the Parties hereto.

16.



Severability



If any term of this Agreement is held by a court of competent jurisdiction to be invalid or

unenforceable, then this Agreement, including all of the remaining terms, will remain in full

force and effect as if such invalid or unenforceable term had never been included.

17.



Interpretation



17.1

Headings. The topical headings used in this Agreement are for convenience only and

shall not be construed as having any substantive significance or as indicating that all of the

provisions of this Agreement relating to any topic are to be found in any particular Article.

17.2 Singular and Plural. Reference to the singular includes a reference to the plural and

VIce versa.

17.3 Include. The words "include" and "including" have an inclusive meaning, are used in

an illustrative sense and not a limiting sense, and are not intended to limit the generality of

the description preceding or following such term.

18.



Counterpart Execution



This Agreement may be executed in counterparts and each counterpart shall be deemed an

original Agreement for all purposes; provided that neither Party shall be bound to this

Agreement until both parties have executed a counterpart. For purposes of assembling the

counterparts into one document, Disclosing Party is authorized to detach the signature page

from one counterpart and, after signature thereof by Receiving Party, attach each signed

signature page to a counterpart.

19.



Entirety



This Agreement comprises the full and complete agreement of the Parties hereto with respect

to the disclosure of the Confidential Information and supersedes and cancels all prior

communications, understandings and agreements among the Parties with respect to disclosure

of the Confidential Information to the Receiving Party by the Disclosing Party, whether

written or oral, expressed or implied.

20.



No Third Party Beneficiaries



20.1 This Agreement is made for the benefit of the Parties, any Affiliated Company of the

Disclosing Party and their respective successors and permitted assigns.

20.2



It is the intention of the Parties that:



116



(a)



any person who is an Affiliated Company of the Disclosing Party; and



(b)



GNPC in respect of any GNPC Information,



has a right under the U.K. Contract (Rights of Third Parties) Act 1999 to enforce or enjoy the

benefit of any term of this Agreement. Except as aforesaid, a person who is not a party to

this Agreement has no right under such Act to enforce or enjoy the benefit of any term of this

Agreement.

20.3

Notwithstanding any provisions of this Agreement, the Parties to this Agreement do

not require the consent of any third party to vary this Agreement at any time provided that the

consent of GNPC will be required for any variation which relates to any provision as it

applies to GNPC Information.



21.



Notices



All notices authorized or required between the Parties by any of the prOVISIOns of this

Agreement shall be in writing. in English and delivered in person or by courier service or by

facsimile which provides written confirmation of complete transmission, and properly

addressed to such Parties as shown below. Oral communication and email do not constitute

notice for purposes of this Agreement and email addresses and telephone numbers for the

Parties are listed below as a matter of convenience only. A notice given under any provision

of this Agreement shall be deemed delivered only when received by the Party to whom such

notice is directed, and the time for such Party to deliver any notice in response to such

originating notice shall run from the date the originating notice is received. "Received" for

purposes of this Article 21 shall mean actual delivery of the notice to the address or facsimile

address of the Party specified hereunder. Each Party shall have the right to change its address

at any time and/or designate that copies of all such notices be directed to another person, by

giving written notice thereof to all other Parties.

Disclosing Party Name

Address:



Attention:

Facsimile:

Email:

Telephone



Receiving Party Name

Address:

Attention:



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I



Facsimile:

Email:

Telephone:



IN WITNESS WHEREOF the duly authorized representatives of the Parties have caused

this Agreement to be executed on the date first written above.



DISCLOSING PARTY



Signature:



_



Name: -----------------Title: ------------------



Date: ---------------



RECEIVING PARTY



Signature:

Name: ----------------Title:

Date: ------------------



118



_Il