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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
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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
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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).
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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
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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)
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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
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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.
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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.
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•
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
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,
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.
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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.
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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.
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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
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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.
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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
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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
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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
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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
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....•.
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
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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.
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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.
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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
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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
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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.
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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.
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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
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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:
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(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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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: ------------------
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