The term of this contract shall be 30 years.
The term of this contract may not cover the length of time for which project developers and natural gas customers require commitment to deliver 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.
Vitol Upstream Ghana shall take all necessary steps, in accordance with accepted petroleum
industry practice, to perform activities in a safe manner. Vitol Upstream Ghana shall comply with all requirements of governing law, including all applicable labor, health and safety and environmental laws and regulations in force. Vitol Upstream Ghana shall provide an effective and safe system for disposal of water and waste oil, oil base mud and cuttings in accordance with accepted petroleum industry practice, and shall provide for the safe completion or abandonment of all boreholes
and wells.
Vitol Upstream Ghana shall exercise its rights and carry out its responsibilities under this contract in accordance with accepted petroleum industry practice, and shall take reasonable 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;
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.
If Vitol Upstream Ghana’s failure to comply with these requirements results in the release of petroleum or other materials on the seabed, in the sea, on land or in fresh water, or if operations result in any other form of pollution or otherwise cause harm to fresh water, marine, plant or animal life, Vitol Upstream Ghana shall 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. The costs of clean-up and repair activities shall be borne by Vitol Upstream Ghana and shall not be included as petroleum costs.
Ghana National Petroleum Corporation shall have the right at its sole expense and upon giving reasonable notice in writing to Vitol Upstream Ghana to audit the books and accounts relating to petroleum operations within 2 years from the submission by Vitol Upstream Ghana of any report of financial statement.
Vitol Upstream Ghana shall pay to Ghana National Petroleum Corporation a technology support payment of US$ 1,000,000 or its equivalent in kind. This shall qualify for deduction against income tax under the Petroleum Income Tax Law and shall be considered as petroleum costs.
Vitol Upstream Ghana is to pay to the government an additional oil entitlement (AOE) in accordance with the Petroleum Law and the Petroleum Income Tax Law 1987 out of its share of petroleum. The government may elect to take the AOE in cash or in oil. If the AOE is taken in cash, the cash payment is based on a weighted average market price. The AOE is a multi-tier, rate-of-return-based mechanism, which captures a share of net cash flows that exceed stipulated thresholds. Net cash flow for the AOE for any month is calculated as total revenues received after payment of royalties (the Vitol Upstream Ghana’s cost oil plus share of profit oil), less income taxes and allowable costs (excluding interest payments), and subtracting cumulative negative net cash flows in the preceding month (which are adjusted based on a stipulated real rate of return).
For each tier of the AOE formula, the government collects a share of the cumulative positive net cash flow, with any resulting payments then subtracted for purposes of the net cash flow calculation in the next tier of the AOE. This share is collected only once the threshold Rate of Return (RoR) of each tier is reached.
The tiers start at a threshold of a real RoR of 12.5% and from one tier to the next there is an increment of 5% in the RoR, reaching a threshold RoR of 27.5%% for the fourth account. The government’s AOE for the First Account (ie first tier) is 15% of the positive net cash flow, for the Second Account (ie second tier) is 17.5%, for the Third Account (ie third tier) is 20%, and finally, for the Fourth Account (fourth tier) is 25%.
No AOE is collected below a threshold RoR of 12.5%
The government shall receive 12.5% of the gross production as crude oil as royalties.
The royalty for natural gas will be 7.5% of the annual gross production.
Ghana National Petroleum Corporation (GNPC) shall have a 10% initial interest in all petroleum operations under this contract.
In addition to the initial interest, GNPC shall have the option to contribute a proportionate share (not exceeding 10%) of all development and production costs to each development and production area, (or make arrangements to that effect) to acquire an additional interest of up to 10% in petroleum operations in that development and production area.
If GNPC opts to take an additional interest then GNPC shall reimburse Vitol Upstream Ghana for all expenditure attributable to GNPC’s additional interest incurred from the date of commercial discovery to the date GNPC acquires the additional interest.
The petroleum costs GNPC shall liable to contribute to are those for development operations in any development and production area (to the extent of any additional GNPC interest) and costs for production operations in any development and production area to the extent of its 10% initial interest and any additional interest acquired.
The crude oil remaining after the payment of royalties shall be distributed to Vitol Upstream Ghana and the GNPC in the following order of priority:
i) first, an amount of crude oil shall be distributed to Vitol Upstream Ghana to reimburse
all expenditures and accrued interest attributable to any additional interest taken by GNPC;
ii) second, if Vitol Upstream Ghana has provided the additional interest funding, an amount of crude oil shall be distributed to reimburse Vitol Upstream Ghana for the additional interest funding; and
iii) third, the remaining crude oil shall be distributed to Vitol Upstream Ghana and GNPC in proportion to their respective participating interests.
Ghanaian nationals should as soon as reasonably possible be employed at all levels in the petroleum industry, including technical, administrative and managerial positions. Where qualified Ghanaian personnel are available for employment in the conduct of petroleum operations, Vitol Upstream Ghana shall ensure that in the engagement of personnel it shall as far as reasonably possible provide opportunities for the employment of Ghanaians. Vitol Upstream Ghana shall submit to Ghana National Petroleum Corporation (GNPC) an employment plan with number of persons and the required professions and technical capabilities prior to the performance of petroleum operations. GNPC shall provide the qualified personnel according to that plan. Vitol Upstream Ghana 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. This 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 Vitol Upstream Ghana and considered as petroleum costs.
In the acquisition of plant, equipment, services and supplies for petroleum operations, Vitol Upstream Ghana shall give preference to materials, services and products produced in Ghana including shipping services provided by vessels owned or controlled by Ghanaian shipping companies if such materials, services and products can be supplied at prices, grades, quantities, delivery dates and on other commercial terms equivalent to or more favorable than those at which such materials, services and products can be supplied from outside Ghana.
To achieve the objective of employing Ghanaian nationals at all levels in the petroleum industry an adequate program of training must be established as an integral part of this contract.
Vitol Upstream Ghana shall pay to Ghana National Petroleum Corporation (GNPC) US$ 5400,000 per year to maintain and implement programs 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.
Vitol Upstream Ghana shall regularly provide to GNPC information and data relating to worldwide petroleum science and technology, petroleum economics and engineering available to Vitol Upstream Ghana, and shall assist GNPC personnel to acquire knowledge and skills in all aspects of the petroleum industry. It is agreed that there will be no disclosure or transfer of any documents, data, know-how, technology or other information owned or supplied by Vitol Upstream Ghana, its affiliates, or non-affiliates, to third parties without Vitol Upstream Ghana’s prior written consent, and then only upon agreement by the recipients to retain such information in strict confidence.
Vitol Upstream Ghana shall have the right to use public lands for installation and operation of shore bases, and terminals, harbors and related facilities, pipelines from fields to terminals and delivery facilities, camps and other housing.
Vitol Upstream Ghana shall have the right to use natural gas produced from any development and production area for petroleum operation within the contract area such as reinjection for pressure maintenance and/or power generation.
Vitol Upstream Ghana shall have the right to flare natural gas:
a) to the extent provided in an approved development plan;
b) during production testing operations, including extended well testing operations with respect to crude oil;
c) when required for the safety of persons engaged in petroleum operations in accordance with petroleum industry practice;
d) where reinjection is inadvisable from the point of view of good reservoir or petroleum engineering practice; or
e) as otherwise authorized by the government.
The development plan shall include a plan for utilizing associated gas.
In the event that crude oil available to the government under this contract is insufficient to fulfill the domestic supply requirements, Vitol Upstream Ghana shall be obliged to supply it with crude oil. The amount provided will be calculated on the basis of the ratio of Vitol Upstream Ghana’s entitlement to crude oil to the similar entitlements of all third parties producing oil in Ghana. Vitol Upstream Ghana’s obligation shall not exceed the total crude oil it is entitled to under this contract.
Vitol Upstream Ghana’s minimum expenditure in the first exploration period shall be no less than US$ 10 million on the seismic data and US$ 40 million on the exploration well.
During the first extension period, Vitol Upstream Ghana shall spend a minimum of US$ 40 million to drill 1 exploration well and, if it requires, acquire additional data or re-process existing data to plan the drilling of this well.
During the second extension period, Vitol Upstream Ghana shall spend a minimum of US$ 40 million to drill 1 exploration well and, if it requires, acquire additional data or re-process existing data to plan the drilling of this well.
Any dispute or difference arising between the government and Ghana National Petroleum Corporation (GNPC) or either of them on one hand and Vitol Upstream Ghana on the other hand in connection with or arising out of any terms and conditions of this contract shall be resolved by consultation and negotiation. In the event that no agreement is reached the dispute may be settled through international arbitration under the auspices of the Arbitration Institute of the Stockholm Chamber of Commerce, Stockholm, Sweden. The arbitration proceedings shall be conducted in Stockholm, Sweden, or at such other location as selected by the arbitrators unanimously. The proceedings shall be conducted in English. The arbitration tribunal shall conduct the arbitration in accordance with the arbitration rules of the United Nations Commission on International Trade Law ("UNCITRAL") In lieu of resorting to arbitration, the parties may by mutual agreement refer the dispute for determination to a sole expert to be appointed by the parties.
All data, information and reports including interpretation and analysis supplied by Vitol Upstream Ghana under this contract shall be treated as confidential and shall not be disclosed by any party to any other person without the express written consent of the other parties. This shall not prevent disclosure:
a) by Ghana National Petroleum Corporation (GNPC) or the government:
i) to any agency of the government or to any adviser or consultant to GNPC or the government; or
ii) for the purpose of obtaining a petroleum contract from a third party in respect of any acreage adjacent to the contract area provided Vitol Upstream Ghana is notified and gives approval;
b) by Vitol Upstream Ghana:
i) to its affiliates, advisers or consultants;
ii) to a bona fide potential assignee of all or part of Vitol Upstream Ghana’s interest provided GNPC is notified;
iii) to banks or other lending institutions for the purpose of seeking external financing of costs of the petroleum operations;
iv) to non-affiliates who are providing services for the petroleum operations, including subcontractors, vendors and other service contractors, where this is essential for their provision of such services, and provided GNPC is notified about such disclosure;
v) 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 notified about such disclosure; or
vi) to such persons and for such purposes as the joint management committee may permit from time to time.
c) by any party:
i) to the extent necessary in any arbitration proceedings or proceedings before a sole expert or in proceedings before any court;
ii) with respect to data, etc., which already through, no fault of the disclosing party is in the public domain.
Any party disclosing information or providing data to any third party shall require them to observe the information’s confidentiality.
As of the effective date of this contract and throughout its term, the government guarantees Vitol Upstream Ghana the stability of the terms and conditions of this agreement as well as the fiscal and contractual framework. This specifically includes those terms and conditions and that framework that are based upon or subject to the provisions of the laws and regulations of Ghana including, without limitation, the Petroleum Income Tax Law, the Petroleum Law, the GNPC Law and those other laws, regulations and decrees that are applicable. This contract and the rights and obligations may not be modified, amended, altered or supplemented except upon the execution and delivery of a written agreement executed by the parties. Any legislative or administrative act of the government or any of its agencies or subdivisions which might vary any such right or obligation shall constitute a breach of this contract by the government.