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STRATEGIC ALLIANCE AGREEMENT
BETWEEN
NIGERIAN PETROLEUM DEVELOPMENT
COMPANY LIMITED
AND
SEPTA ENERGY NIGERIA LIMITED
FOR
THE DEVELOPMENT AND PRODUCTION OF
OMLS 4, 38 AND 41.
STRATEGIC ALLIANCE AGREEMENT
BETWEEN
NIGERIAN PETROLEUM DEVELOPMENT COMPANY LIMITED
and
SEPTA ENERGY NIGERIA LIMITED
fO£ fit**
THE DEVELOPMENT AND PRODUCTION OP OMU 4. 38 AND 41
THIS AGREEMENT is made This day of........................2010
BETWEEN NIGERIAN PETROLEUM DEVELOPMENT COMPANY LIMITED, a company
incorporated under the laws of the Federal Republic of Nigeria whose registered
office is at 62, Sapele Road, Benin City (hereinafter referred to as ‘'NPDC" which
expression shall where the context so admits, include its successors and assigns) T
of fhe one part; %
AND
SEPTA ENERGY NIGERIA LIMITED, a company incorporated under the laws of the
Federal Republic of Nigeria whose registered office is at Plot 90, Ajose Adeogun
Street, Victoria Island, Lagos (hereinafter referred to as “SEPTA" which expression
shall, where the context so admits, include its successors and assigns) of the other
part.
i
WHEREAS the Federal Government of Nigeria (Government) has granted consent
vide a Deed of Assignment dated 16,h September 2010 for the Nigeria National
Petroleum Corporation (NNPC) to assign its fifty five per cent (55%) equity interest
in fhe Contract Area to NPDC;
WHEREAS SEPTA has offered to carry NPDC's equity interest share of Petroleum
Operation Costs and provide technical expertise as and when required in
relation to Petroleum Operations in the Contract Area;
WHEREAS Government in consideration of the huge capital outlay and other
resources required for Petroleum Operations in the aforementioned assets has
approved that NPDC enter into a strategic alliance with SEPTA for fhe provision
of funding and technical expertise;
WHEREAS NPDC and SEPTA warrant that they have the right, power and authority
to enter into this Agreement;
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WHEREAS SEPTA represents that it has technical competence, professional skills
and funds (both local and foreign) necessary to support NPDC in Petroleum
Operations for the Contract Area and has agreed to provide the funds for
corrying out Petroleum Operations and further agreed to support NPDC with
technical expertise.
NOW THEREFORE in consideration of the premises and mutual covenants herein
contained, the Parties hereby agree as follows:
ARTICLE 1
1.0 DEFINITIONS
1.1 In this Agreement, including the recitals and the Annexes attached hereto
unless the context otherwise requires, words and expressions used shall
bear the meanings stated herein:
"Accounting Procedure" means, the rules and procedures set forth in Annex "C"
attached hereto and forming part of this Agreement;
"Affiliate or Affiliated Company" means, a company or other entity that controls
or is controlled by a Party, or a company or other entity which controls or is
controlled by a company or other entity which controls a Party; and for the
purpose of this definition, '‘control" means, ownership by one company or entity
of at least fifty-one per cent {51 %) of:
(a) the voting stock, if the other company is a company issuing stock; or
(b) the controlling rights or interest if the other entity is not a company.
"Available Crude Oil" means, the Crude Oil won, saved and allocated to NPDC
from the Contract Area.
“Available Natural Gas" means, the non associated natural gas won, saved and
allocated to NPDC from the Contract Area.
"Barrel” means, a quantity or unit of Crude Oil, equal to forty-two (42) United
States gallons at the temperature of sixty degrees (60°) Fahrenheit at normal
atmospheric pressure.
ft*
“Barrels of Oil Equivalent’' or "BOE" means, the amount of energy equivalent
contained in a barrel of crude oil (5.8 X 10 BTU).
"BCF" means, billion cubic feet of Natural Gas.
“Budget* means, the cost estimate of items included in Work Programme.
"CAPEX" means, the costs referred to in Article II, paragraph 2 of Annex “C” of
this Agreement.
“Agreement” means, this Strategic Alliance Agreement including the Annexes
attached hereto.
"Contract Area” means, the areo covered by Oil Mining Leases (OMLs) 4, 38 and
41 and any subdivisions arising therefrom in compliance with the relinquishment
provisions of Paragraph 12 of the first schedule to the Petroleum Act. The
Coordinates of the Contract Area is as described in Annex "A" hereto.
“Term of Agreement" means, the period referred to in Article 3.
“Companies Income Tax" or “CIT" means, the fax obligations arising from the
utilization of natural gas as defined in the Companies Income Tax Act Cap C20
LFN 2004, as amended (CITA)
“Contract Year1’ means, a period of twelve (12) consecutive calendar months
from the Effective Date of this Agreement or from the anniversary of the Effective
Date.
“Cost Oil” means, the quantum of Available Crude Oil allocated to the Parties to
enable the Parties to generate the proceeds to recover their respective costs '
incurred in carrying out Petroleum Operations under this Agreement.
“Cost Gas” means, the quantum of non associated gas allocated to the Parties
to enable the Parties to generate the proceeds to recover their respective costs
incurred in carrying out Petroleum Operations with respect to non associated
gas under this Agreement.
"Crude Oil" means, mineral oil in its natural state before it has been refined or
treated (excluding basic sediments and wafer or other foreign substances).
“Crude Oil Proceeds’1 means, the amount In U.S. Dollars determined by
multiplying the Official Selling Price by the number of Barrels of Available Crude
Oil lifted by either Party.
"Development’1 means, Petroleum Operations undertaken in the Contract Area
for the purpose of putting the Contract Area into production pursuant to any
development programme approved in accordance with Article 9 hereof.
"Development Costs” means, the cost of developmental activities which
includes but is not limited to drilling, completing, capping, plugging and
abandoning, appraisal, development, water injection or gas injection wells, the
construction and installation of facilities and equipment required for the
production, storage, transportation and delivery and evacuation of Crude Oil
and Natural Gas as well as the installation of secondary recovery facilities.
Development Costs shall also include cost incurred during incremental
Production activities,
“Effective Date" means, the date of the execution of this Agreement by the
Parties hereto being the day and year first above written.
“Financial Year" means, a period of twelve (12) calendar months from fhe lsJ
January fo the 31December.
“Fixed Assets" means, immovable property and Includes movable property,
which has been affixed, installed, constructed or attached to immovable
property as part of the facilities utilised for carrying ouf Petroleum Operations.
“Foreign Exchange” means, currency other than that of Nigeria that is
acceptable fo both NPDC and SEPTA.
"Gross Negligence’1 means, any act or failure to act by fhe Operator or SEPTA
which was intended to cause or which was in reckless disregard or wanton
indifference to the harmful consequence that the Operator or SEPTA knew or
should have known such act or failure would have on (a) safety of life or
property or (b) Petroleum Operations or (c) books and accounts particularly oil
industry accounting standards and procedures.
"Incremental Production" means, monthly production of Crude Oil or Natural
Gas over and above Proven, Developed and Producing reserves attributable to
capital contributions by SEPTA,
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“LIBOR'1 means, the seven-day term London Inter-Bank Offer Rate for U.S. Dollars
:for similar amounts to the sums in question, quoted by Barclays Bank in London at
11:00 a.m. on the first business day of the relevant period.
“Management Committee” means, the committee established by NPDC and
SEPTA to carry out the functions set out in Article 7 of this Agreement.
“Market Price” means, official selling price in a given month of the Crude Oil and
non associated Natural Gas produced from the Contract Area in US Dollars per
Barrel, shall be related to Dated Brenl + Differential (NNPC) In accordance with
the NNPC's monthly published price for the different grades of Crude Oil.
“MCF" means, million cubic feet of Natural Gas.
I "Dated Brent" means, the average of Platt's mid-range quotations of Dated Brent
,,.W crude as published by Platts Crude Oil marketwire.
•Li
& "Differential'’ means, the monthly premium as published by NNPC.
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The applicable pricing shail be on either Prompt, Advanced or Deferred basis.
“Prompt” basis shall be five (5) consecutive published quotations after the bill of
lading date with the bill of lading date as day zero.
ipw ■
“Advanced” valuation shall be five (5) consecutive published quotations with the
fifth day before the bill of lading day i.e the bill of lading day is day six.
j/Spi •
“Deferred” pricing option shail be five (5) consecutive published quotations with
^ the 14th day after the bill of lading date as day one i.e. the bill of lading date is
|, - day zero.
However, each Party's preferred option must be indicated at close of work (4.00
pm) of the sixth (6m) working day before the first day of the laycan. In case either
Party's preferred option is not advised to the PMT by close of work of the 6?h
working day prior to the first day of the laycan, the Prompt option will apply in
the valuation of that Party’s lifting.
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For Natural Gas it shall be US Dollars /MCF according to the gas pricing
regulations.
"Natural Ga$" means, all gaseous hydrocarbons produced in association with
Crude Oil or from reservoirs which produce gaseous hydrocarbons.
"Natural Gas Proceeds" means, the amount in U.S. Dollars determined by
multiplying the Official Selling Price by the number of Barrels of Available Crude
Oil lifted by either Party
"Operator" means, any operator appointed to carry out Petroleum Operations in
the Contract Area.
"Operating Committee" means, the operating committee established under the
joint operating agreement governing the operations of the Contract Area.
"Party" means, NPDC or SEPTA.
"Parties" means, bath NPDC and SEPTA.
"Petroleum Operations" means, all Crude Oil and Natural Gas Development and
Production Operations, processing, transportation and Crude Oil terminal
activities for or with respect to the Contract Area.
"Petroleum Operations Costs" means, expenditures made and obligation
incurred in carrying out Petroleum Operations as determined in accordance with
this Agreement and the Accounting Procedure.
"Petroleum Protit Tax” or “PPT" means, the tax obligations arising from the
Petroleum Operations as defined in the Petroleum Profit Tax Act Cap PI 3 LFN
2004, as amended {PPT Act).
"Production Costs" means, all costs incurred in carrying out Production
Operations.
"Production Operations" means, all operations carried out subsequent to
Development in order to produce, treat store, convey and deliver Crude Oil and
Natural Gas from wells, platforms and facilities to a refinery, terminal or other
utilisation or marketing point.
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X.
“Profit OH'1 means, the balance of Available Crude Oil after the allocation of
Royalty Oil, Cost Oil and Tax Oil.
“Profit Gas" means, the balance of Available Natural Gas after the allocation of
Royalty Gas, Cost Gas and Tax Gas.
“Proven, Developed and Producing” or "PDP” or “PI Developed” means, the
monthly production forecast attached to this Agreement attributable to the
Proved, Developed and Producing reserves from the Contract Area not less than
26 Million BOE or greater than 40 Million BOE In the aggregate.
---* “Project Management Team” or "PMTM means, a team made up of personnel
\ from NPDC and SEPTA appointed by the Management Committee and
controlled by SEPTA for a minimum period of 3 years and no longer than 5 years
■ from the Effective Date.
“Quarter” means, the time interval from: Janudfy to March 31st inclusive, April
1st to June 30th inclusive, July to 301h September inclusive, October Is1 to
December 31 inclusive.
“Royalty” means, the amount payable pursuant to the Petroleum Act and
Petroleum (Drilling and Production) Regulations Cap P10 LFN 2004, as amended.
"Royalty Oil" means, the quantum of Available Crude Oil allocated to NPDC
which will generate an amount of proceeds equal to the actual payment of
Royalty.
“Royalty Gas" means, 1he quantum of Available Natural Gas allocated to NPDC
which will generate an amount of proceeds equal to the actual payment of
Royalty.
|f “Tax Oil” means, the quantum of Available Crude Oil allocated to NPDC which
C--- will generate an amount of proceeds equal to the actual payment of PPT.
Ifev
ML “Tax Gas” means, the quantum of Available Natural Gas allocated to NPDC
which will generate an amount of proceeds equal to the actual payment of CIT.
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‘US. Dollars” means the currency of the United States of America.
s
"Willful Misconduct" means, in relation to the Operator or SEPTA, an intentional,
conscious, reckless and wanton disregard of:
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(a) any material provision of this Agreement; or
(b) any substantial part of the Work Programme as contained in Article 9.
But shall not include an intentional and conscious disregard of either (a) or (b)
above, if the same relates to safeguarding of life, property or Petroleum
Operations.
"Work Programme" means, for the applicable period a statement itemizing the
Petroleum Operations to be carried out in the Contract Area.
“Working Capital" means, the funds required to conduct Production Operations.
“2P Reserves” means, 335 Million BOE
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ARTICLE 2
ENTRY FEE
2.1 NPDC acknowledges SEPTA’S obligation to pay Fifty Four (54) Million U.$.
Dollars to NPDC as an entry fee for participation in the development of 2P
Reserves.
2.2 The entry fee shall be paid into an account of and in the name of NPDC
Jo no later than Seventy (70) days after the execution of this Agreement.
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fir.
y. 2.3 No later than 70 days prior to the commencement of the Work
P programme for the capture of contingent resources up to ICO Million
fT. Barrels Crude Oil and 357 BCF of Natural Gas, SEPTA shall pay to NPDC a
further sum of Twenty Six Million, Six Hundred Thousand (26.6) Million U.S,
yl. Dollars.
2.4 The entry fee shall not be recoverable as Cost Oil or Cost Gas.
2.5 This Agreement shall commence upon the payment of the entry fee by
SEPTA.
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ARTICLE 3
DURATION OF THE AGREEMENT
3.1 This Agreement shall remain in full force and effect till the cumulative
production from the Contract Area has reached 165 Million Barrels of
Crude Oil and 900 BCF of Natural Gas making up a total of 335 Million BOE
Barrels of Oil Equivalent, thereafter, this Agreement shall terminate. Upon
payment of the entry fee referred to in Article 2.3, the Agreement shall be
renewed on the same terms and conditions with respect to the capture of
the contingent resources of 100 Million Barrels Crude Oil and 357 BCF of
Natural Gas.
3.2 if new producible reserves are added to the volumes referred to in Article
3.1. the duration of this Agreement shall, subject to new terms and
conditions agreed upon by the Parties, be extended till the full recovery of
such new reserves.
3.3 Subject to mutual agreement of Ihe Parties this Agreement may be
terminated whenever it appears evident that the cumulative production
referred to in Article 3.1 hereinabove cannot be economically attained.
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ARTICLE 4
RIGHTS AND OBLIGATIONS OF THE PARTIES
4.1 In accordance with this Agreement SEPTA shall:
(a} subject to Article 8.1 and in accordance with the approved Work
Programme and Budget, SEPTA shall provide all the funds required
for NPDCs 55% share of Petroleum Operation Costs in respect of
the Contract Area;
(b) deliver to NPDC, within seventy {70) days from the Effective Date, a
parent company guarantee from Seven Energy International
Limited in the form set out in Annex G covering the total amount of
the minimum disbursement required to meet NPDC’s fifty five per
cent (55%) share of Petroleum Operation Costs for the full
Development of the Contract Area and additional funds which
SEPTA may be obliged to provide in accordance with Article 8.2;
(c) SEPTA shall carry out an agreed annual training programme in
accordance with Article 14 hereof;
(d) in addition to the foregoing, SEPTA shall also provide training
facilities for NPDC/NNPC staff with an annual sum of Three Hundred
and Fifty Thousand US Dollars ($350,000)for a period of five (5) years
from the Effective Date, which amount shall be paid in January of
each year into an account of and in the name of NPDC;
(e) be subject to all Nigerian laws, orders and regulations applicable to
Petroleum Operations;
(f) respect all the rights concerning industrial property and indemnify
and hold NPDC harmless from and against all claims, loss, damage
or action arising out of or resulting from, violation of such rights. Any
such costs to SEPTA relating to the above shall be reimbursable
unless such costs result from the Gross Negligence or Willful
Misconduct on the part of SEPTA;
(g) not to transfer or assign any rights acquired and obligations
undertaken by SEPTA under this Agreement without prior written
consent of NPDC, which consent shall not be unreasonably
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its
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(h) indemnify ond hold harmless NPDC its servants, agents and
representatives from and against all losses, fees (including legal
fees and expenses) of whatsoever kind and nature which NPDC
may suffer or be compelled to poy to employees, representatives
or agents of SEPTA'S sub-contractors as a consequence of any final
decision given by a Nigerian court except where actions or failure
to act on the part of NPDC or its employees, agents or
representatives contributed to the losses, in which case such costs
as are attributable to the action or failure on the part of NPDC shall
m be recoverable by SEPTA;
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(i) have the right to lift, in accordance with Annex ‘E’ and freely
I export and retain abroad the receipts from the sale of its share of
Available Crude Oil and Available Natural Gas allocated to it
hereunder subject to Article 10;
4.2 In accordance with this Agreement, NPDC shall;
(a) have full access, at all reasonable times during usual business hours
to all books, records, inventories and accounts of any kind or
nature maintained by PMT in relation to Petroleum Operations;
(b) furnish PMT with all geophysical, geological, drilling, well,
production, cash call request and other data and information
relating to the Contract Area;
jc) have the right of access to the Contract Area at all reasonable
times to inspect and observe Petroleum Operations of every kind
and character carried on in the Contract Area, PMT shall provide
NPDC with necessary facilities to gain such access provided that
the provision of such facilities shall not unduly interfere with the
conduct of Petroleum Operations hereunder;
(d) Act as an interface between PMT and the Department of
Petroleum Resources (DPR) for all purposes relating to Petroleum
Operations hereunder;
(e) assist PMT in every way possible to ensure that the provisions of this
Agreement shall be carried out under applicable Nigerian laws
and regulations including without limitations, the obtaining of
necessary approvals for the payments and transfers of funds
13
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(fj have the right to nominate pursuant to Article 6 of this Agreement,
professional staff to occupy defined functional positions in the
agreed organizational structure for Petroleum Operations for as
long as this Agreement subsists;
{g} after the take-over of Petroleum Operations, pursuant to Article 6.5
hereof, ensure that Petroleum Operations are conducted in a
good and workmaniike manner and in accordance with
internationally accepted petroleum industry practices and with the
object of avoiding waste, and obtaining maximum ultimate
recovery of Crude Oil and Natural Gas at minimum cost;
fh) ensure the renewal of each Oil Mining Lease in the Contract Area
under the Petroleum Act CAP P10 LPN 2004, as amended, and
(i) have a right of first refusal in the event SEPTA wishes to assign any
interest under this Agreement to a third party.
Article 5
POWERS AND OBLIGATIONS OF THE OPERATOR
5,1 In the event NPDC is designated o$ the Operator of the Contract Area or
part thereof, the conduct of Petroleum Operations shaii be deemed fo be
assigned to PMT subject to supervision of the Management Committee.
PMT shall undertake the following duties:
(a) conduct all joint operations with utmost good faith and in o good
workmanlike manner in accordance with good industry practice
and all applicable laws and regulations;
(bj maintain full and accurate records of a!i Petroleum Operations
performed under this Contract;
|c) be always mindful, in the conduct of its operations, of the rights
and overall interests of Nigeria;
(d) give preference to such goods and services which are available in
Nigerio and can be rendered by Nigerian citizens provided they
meet the required specifications and are competitive in price;
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(e) For the purpose of arriving at Profit Oil and Profit Gas, carry out the
estimated and final PPT calculation in accordance with the PPT
Act and CITA CAP C21 LFN 2004 and submit same on a timely
basis to NPDC;
(f) Allocate to each Party the right to lift, in accordance with Annex
"E“, and freely export and retain abroad the receipts from the its
share of proceeds from the sale of Available Crude Oil and
Available Natural Gas allocated to it hereunder;
(g) give to the Parties full access, at all reasonable times during usual
business hours to all books, records, inventories and accounts of
any kind or nature maintained relating to Petroleum Operations,
provided that the Party gives to PMT not less than seven (7) days
prior notice in writing;
(h) give the Parties the right of access to the Contract Area at all
reasonable times to inspect and observe Petroleum Operations of
every kind and character carried on in the Contract Area. PMT
shall provide either Party with necessary facilities to gain such
access provided that the provision of such facilities shall not
unduly interfere with the conduct of Petroleum Operations
hereunder;
(i) consult freely with and make full and frank disclosure to the Parties
concerning Petroleum Operations and keep them currently
advised of all malters of importance arising in connection
therewith;
(j) except as otherwise provided in this Agreement or as may be
authorized by the Management Committee, PMT shall not permit
or suffer any lien or other encumbrance to be filed or fo remain
against any material, physical equipment, real or personal
property thereon or related thereto, nor against Crude Oil and
Natural Gas produced and saved as a result of its operations
hereunder, unless such lien is imposed by a Court of competent
jurisdiction;
(k) have the right to assign and retain such technical, administrative
and supervisory personnel as deployed to it and consultants as
may be necessary for the conduct of Petroleum Operations,
subject to approval of the Management Committee;
35
2
(I) keep accurate records and books of accounts with respecf to
Petroleum Operations, which shall be available during normal
business hours to NPDC and SEPTA authorized representatives.
Such records and books shall comply with Annex "C" and
generally accepted Accounting Principles and Procedure and
with due regard to the requirements of the iaws and regulations;
(m) promptly provide the Parties with copies of all Management
Committee approvals for any expenditure, when requested by a
Party/Parties;
(n) not without the written approval of the Management Committee
dispose of, sell or re-export ony property of such historic cost
exceeding One Hundred Thousand Naira (N)OO,000.00) per unit or
batch or such other value as may, from time to time, be
determined by Management Committee. Notwithstanding the
provision herein, PMT hereof shall furnish NPDC and SEPTA quarterly
returns of ail items of property disposed of, regardless of value;
(o) utilize in Petroleum Operations, equipment exclusively owned and
made available by a Party and the charges thereafter to the
operations shall be as specified in the Accounting Procedure;
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ARTiqjJL*
CONDUCT OF JOINT OPERATIONS
6.1 The Parties shall work together to ensure the efficient conducl of
Petroleum Operations in the Contract Area. To this effect an operating
structure shall be established where the various departments shall be
constituted info operating units and shall have the substantive positions
and their respective deputies alternatively manned by the Parties, as
specified in Annex B to this Agreement for os long as the conduct of
Petroleum Operations subsist.
6.2 Subject to Article 6.5 hereof, the Project/Operations Manager position to
which the operating structure reports shall be held initially by SEPTA for a
period of three (3) years and thereafter the position shall be held by
NPDC.
6.3 PMT shall be based in an NPDC office. An operational base shall be sited
in a convenient location.
6.4 All personnel of PMT shall receive uniform treatment with respect to
salaries and other benefits in line with their respective positions.
6.5 Without prejudice to SEPTA's right to Cost Oil, Profit Oil, Cost Gas and Profit
Gas as provided for in Article 10, PMT shall be fully responsible for
Petroleum Operations for a minimum of three (3) years but not exceeding
five (5) years from the Effective Date. Thereafter, SEPTA shall cease 1o
control PMT. However, where SEPTA has not recovered all costs before the \
expiration of five (5) years, SEPTA shall be entitled to recover such costs.
6.6 Upon NPDC being fully responsible for Petroleum Operations, NPDC shall
continue with Petroleum Operations in accordance with the provisions of
this Agreement.
6.7 Litigation and settlement of claims in connecflon with the Contract Area,
or Petroleum Operations shall be conducted for and on behalf of the
Parties by NPDC pursuant to the direction of the PMT; provided however,
that NPDC shall have authority to settle claims and litigation not
exceeding N300,000.00 (Three Hundred Thousand Naira} or the foreign
currency equivalent without the approval of PMT. NPDC, however, shall
promptly report any such aforesaid settlement to PMT, NPDC shall notify
v SEPTA of any process served upqn it or of any process it intends to serve in
17
any action in relation to Petroleum Operations. Nothing contained in this
Article 6.7 shall preclude SEPTA from acting on its own behalf (and at its
own expense) if, in its opinion, it considers such action advisable or
necessary to protect its particular interest hereunder. However, SEPTA shall
not pursue a course of action contrary to the course of action then being
undertaken for the Petroleum Operations with respect to such litigation.
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ARTICLE 7
MANAGEMENT COMMITTEE
7.1 A Management Committee shall be established within thirty (30) days
from the Effective Date of this Agreement for the purpose of providing
orderly direction on all matters pertaining to Petroleum Operations and
Work Programme. The powers and duties of the Management Committee
shall include but not be limited to the following:
a) the revision, amendment and approval of all proposed Work
Programme and Budget;
b} the revision, amendment and approval of any proposed
recommendations made by either Party or by any sub-committee,
with respect to Petroleum Operations;
c) ensuring that PMT carries out the decisions of the Management
Committee and also to ensure that Petroleum Operations is
conducted in accordance with the relevant Nigerian laws;
d) the revision or approval of the sale or disposal of any items or
movable property relating to Petroleum Operations in accordance
with the provisions of this Agreement;
e) resolution of all audit observations;
f) the consideration of periodic performance in respect of approved
Work Programme and 8udget:
g) review of the award of contracts for Petroleum Operations with
individual value of Five Hundred Thousand United States Dollars
(USD$ 500,000) and above;
h) approval of qualified contractors and subcontractors list;
i) any other matters relating to Petroleum Operations.
7.2 (a) The Management Committee shall consist of eight (8) persons
appointed by the Parties as follows:
NPDC - 4
SEPTA - 4
(b) Each Party shall designate by notice in writing to the other Party,
the names of its representatives to serve as members of the
Management Committee as provided in Article 7.2(a) hereof and
u their respective alternates, which members or alternates shall be
V. authorised to represent that Party with respect to the decisions of
the Management Committee. Such notice shall give the names,
titles and addresses of the designated members and alternates.
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{c} At least fourteen (14) days prior to each scheduled Management
Committee meeting, the Secretary shall notify members of the ':n
meeting and deliver to each member an agenda of matters with
briefs to be considered during each meeting. Matters which are
not delivered within the period stated shall not be considered
unless otherwise agreed by the Management Committee,
However, no agenda shall be required in the event of an
emergency meeting. ' *=t
(d) Either Party may change any of its respective members or »s
alternates from time to time by notifying the other Party in writing
not less than ten (10) days in advance of the effective date of such «
change.
(e) NPDC shall appoint the chairman (Chairman) of the Management
Committee. $EPTA shall appoint the secretary (Secretary); NPDC
shall appoint the assistant secretary (Assistant Secretary) both of
whom shall have no voting rights. The Secretary shall keep minutes
of all meetings and records of all decisions of the Management
Committee. The minutes of each meeting shall be approved by the
Management Committee at the next meeting and signed by the
Chairman and Secretary and copies thereof delivered to each
Party.
{f) The Project /Operations Manager and his Deputy if not members or
alternates, shall attend all Management Committee meetings but
shall have no voting rights.
7.3 Unless otherwise agreed by the Parties, the Management
Committee shall meet at an NPDC office once every three (3)
calendar months or at such other intervals or venue as may be
agreed by the Management Committee. The quorum for any
meeting of the Management Committee shall consist of three (3)
representatives of NPDC and three (3) representatives of SEPTA. The
Chairman or his alternate and the SEPTA’S Managing Director or his
alternate must be present at every Management Committee
meeting fora quorum to be formed.
7.4(a) Except as otherwise expressly provided in this Agreement all
decisions of the Management Committee shall be reached by the
unanimous vote of the Parties. If unanimity is not obtained on any
matter {Including any matter pertaining to a Work Programme or
Budget) proposed to the Management Committee, then the
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Management Committee shall meet again to attempt to resolve
such matter not later than fourteen (14) days after the meeting in
which the proposed matter was rejected by a negative vote. Any
portion of such proposal that is not rejected shall insofar as possible
be carried out. At least seven (7) days prior to such second
meeting, the Party casting the dissenting vote shall provide to the
other Party in writing in reasonable detail the reasons for such
dissenting vote, if such written reasons are not provided at least
seven (7) days prior to such second meeting, then the proposal shall
be deemed approved. In such second meeting the agenda shall
comprise such written reasons as provided by the dissenting Party, if
unanimity is not obtained in the second meeting, then the
Management Committee shall meet a third time within fourteen
(M) days after the second meeting, If unanimity is not obtained
during the third meeting then NPDC and SEPTA may agree to
appoint an independent qualified expert to advice on the matter,
which advice shall be binding on the Parties. In the event of failure
of the Parties to agree to the appointment of the said expert the
provisions of Article 23 shall apply.
(b) The Parties shall be bound and abide by each decision of the
Management Committee duly made in accordance with the
provisions of this Agreement.
(c) NPDC shall exercise its votes in such manner to give effect to
decisions and procedures in accordance with the decisions of the
Management Committee and shall implement Management
Committee's decisions at any Operating Committee meeting.
7.5 The Management Committee shall establish technical sub-committees
and any other advisory sub-committees from time to time as it considers
necessary such as finance and budget and legal/services sub¬
committees:
|a) Each sub-committee established pursuant to this Article 7.5 shall be
given terms of reference by the Management Committee and shall
be subject to such direction and procedures as the Management
Commitlee may give or determine.
(b) The Management Committee shall appoint the members of the
sub-committees which shall comprise equal representation from
the Parties. The chairmen and the secretaries of the sub¬
committees shall be appointed by the Management Committee.
21
(c) The deliberations and recommendations of any sub-committee
shall be advisory only and shall become binding and effective
upon acceptance by the Management Committee.
»Wg88WMS«3^^
m
7.6 The Management Committee shall cease to exist upon the expiration of
the conduct of Petroleum Operations by PMT: thereafter a new body
shall be established to be known as supervisory committee to take care
of SEPTA'S continued interest in the reserve.
7.7 SEPTA shall attend all joint operating agreement Operation Committee
meetings as NPDC’s adviser. SEPTA shall be on observer and not entitled
to vote at the meetings.
ARTICLE 8
FUNDING OF PETROLEUM OPERATIONS
SEPTA shall provide all the funds required for NPDC’s 55% share of
Petroleum Operation Costs, (subject to Article 8.2) in accordance with
approved Work Programme and Budget. A review of the Work
Programme shall be concluded by PMT subject to approval of the
Management Committee within fifty (50) days from the Effective Date to
estimate the capital investments for the Development and the required
initial Working Capital. Based on this review the Management Committee
shall within seven (7) days approve the amount for the capital
Investments, which shall be covered by the parent company guarantee.
The costs incurred by the Parties in carrying out Petroleum Operations shall
be recovered by the Parties through Cost Oil or Cost Gas, in accordance
with Article 10 and the Accounting Procedure as set out In Annex 'C‘.
All bank transactions shall be made through bank accounts opened and
maintainedby SEPTA exclusively for the Petroleum Operations.
SEPTA shall open and maintain project bank account(s) exclusively for
funding Petroleum Operations and shall procure that NPDC shall have
unlimited inquiry and audit mandate and a right to copies of all
information and transactional documents including all accounts records
and balances as they occur from bank accounts and project bank
accounts referred to in Articles 8.3 and 8,4.
If after takeover of Petroleum Operations by NPDC pursuant to Article 6.5
hereof, the Parties agree that production can be increased and
22
additional Development Costs are required to add facilities not included
in the development programme, including but not limited to in-fill well,
secondary recovery facilities, additional processing facilities, deeper wells
and artificial lift, SEPTA shall provide NPDC share of Petroleum Operations
Costs required to carry out such additional development activities.
8.6 The additional capital investments referred to in Article 8.6 hereof shall be
recovered by SEPTA through Cost Oil and Cost Gas in accordance with
Article 10 and the Accounting Procedure, and SEPTA shall be entitled to
receive a share of Profit Oil and Profit Gas over the additional production
as provided for in Article 10.2 hereof.
8.7 SEPTA shall bear all losses associated with funding NPDC's 55% share of
Petroleum Operations under this Agreement.
ARTICLE 9
DEVELOPMENT PROGRAMME AND BUDGETS
9.1 If NPDC is designated the Operator of the Contract Area or part thereof
within sixty (60) days tram the Etfectirve Date, PMT shall submit to the
Management Committee for approval, the development plan which shall
include the development programme and relevant Budget appropriately
apportioned into yearly phases.
9.2 At the meetings of the Management Committee to consider and
approve the Work Programme and Budget for each year, PMT shall submit
a report on organizational structure to be utilized for conduct of
Petroleum Operations in accordance with Annex B. During such meetings,
PMT shall report on the review of the actual performance of
organizational structure for the previous year.
9.3 The Development plan shall include the Work Programme and Budget,
apportioned into quarterly phases, to be carried out under the
Development plan during the remainder of the financial year. In respect
of subsequent financial years, the Work Programme and Budget shall be
submitted not later than 3lsl August of the preceding financial year. Such
Work Programme and Budget shall comprise all requisite services
including, but nof limited to, environmental studies, drilling and
completion programmes, construction and assembling of field installations
and equipment, as may be necessary to permit the production, storage,
transportation and delivery of Crude Oil and Natural Gas from the
Contract Area. The Development programme and Budget shall be
detailed as necessary.
9.4 PMT shall submit to Management Committee any revision of the annual
Development programme and Budget. Any such revision of the approved
Development Budget shall be made by mutual agreement. In the event
of emergency or extraordinary circumstances that require immediate
action, PMT may fake actions it deems necessary to protect life and
property and the interest of Parties and shall promptly notify Parties in
writing within forty-eight (48) hours notwithstanding the provisions of this
Article 9.4 any cost so incurred shaii be recoverable.
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24
ARTICLE 10
RECOVERY OF PETROLEUM OPERATIONS COSTS AND CRUDE OIL AND NATURAL
GAS ALLOCATION
10.1 Crude Oil and Natural Gas Allocation
The allocation of Available Crude Oil and Available Natural Gas shall be
in accordance with Annex “C", Annex “D” and this Article 10, as follows:
(a) Royalty Oil and Royalty Gas shall be allocated to NPDC in such
quantum as will generate an amount of proceeds equal to NPDC’s
Royalty applicable to the Contract Area.
(b) Cost Oil and Cost Gas shall be allocated to the Parties in such
quantum as will generate an amount of proceeds sufficient to
recover the following:
I. Un-depreciated costs associated to Capital Costs as
defined in the Accounting Procedures incurred prior to
execution of this Agreement shall be allocated to NPDC;
II. Development Costs and Production Costs related to the
Production of PI Developed reserves as agreed in the
production profile attached hereto as Annex H shall be
allocated to SEPTA;
III. Incremental investment (Development Costs and Production
Costs}, made by SEPTA shall be recovered from incremental
volumes (i.e. the monthiy production from 2P reserves less
the Pi Developed reserves as indicated in the production
profile attached hereto as Annex H) shall be allocated to
SEPTA.
Costs expended in United States Dollars will be recovered in United
States Dollars through Cost Oil and Cost Gas allocations; costs
expended in currencies other than United States Dollars will be
converted to United States Dollars at the last available exchange
rate and recovered through Cost Oil and Cost Gas allocation.
(c) Tax Oil and Tax Gos shall be allocated to NPDC in such quantum as
will generate an amount of proceeds equal to the PPT and CIT
liability relevant to the production in the Contract Area.
25
(d) Profit Oil being the balance of Available Crude Oil after deducting
Royalty Oil, Cost Oil and Tax Oil and Profit Gas being the balance
of Available Natural Gas after deducting Royalty Gas, Cost Gas
and Tax Gas respectively shall be shared by the Parties pursuant to
the Accounting Procedure as follows:
I. Profit Oil and Profit Gas attributable to un-depreciated costs
associated to Capital Costs Incurred prior to execution of
this Agreement as indicated in the production profile
attached hereto as Annex H shall be allocated in the
following ratio:
NPDC - Ninety per cent (90%)
SEPTA-Ten per cent (10%)
II. Up to the full recovery of Development Costs by SEPTA Profit
Oil shall be allocated in the following ratio:
NPDC - Forty per cent (40%)
SEPTA - Sixty per cent (60%)
Thereafter, Profit Oil shall be allocated in the following ratio:
NPDC - Sixty five per cent (65%)
SEPTA - Thirty five per cent (35%)
III. Up to the full recovery of Development Costs related to the
contingent resources development. Profit Oil shall be
allocated in the following ratio:
NPDC - Forty per cent (40%)
SEPTA - Sixty per cent (60%)
Thereafter. Profit Oil shall be allocated in the following ratio:
NPDC - Sixty five per cent (65%)
SEPTA - thirty five per cent (35%)
26
iv. Up to the full recovery of Development Costs regarding non
associated gas by SEPTA, Profit Gas shall be allocated in the
following ratio:
NPDC - Forty per cent (40%)
SEPTA - Sixty per cent (60%)
Thereafter, Profit Gas shall be allocated in the following ratio;
NPDC - Sixty five per cent (65%)
SEPTA - Thirty five per cent (35%)
v. Up to the full recovery of the Development Costs to the
contingent resources development. Profit Gas shall be
allocated in the following ratio:
NPDC - Forty per cent (40%)
SEPTA - Sixty per cent (60%)
Thereafter, Profit Gas shall be allocated in the following ratio:
NPDC - Sixty five per cent (65%)
SEPTA - thirty five per cent (35%)
10.3 Each Party shall take in kind, lift and dispose of its allocation of Cost Oil
Cost Gas, Profit Oil and Profit Gas in accordance with the Lifting
Procedure (Annex D).
10.4 Either Party may at the request of 1he other, lift the other Party’s Cost Oil,
Cost Gas, Profit Oil and Profit Gas pursuant to Article 10.1 and the lifting
Party shall within thirty (30) days transfer to the account of the non-lifting
Party the proceeds of the sale lo which the non-lifting Party is entitled.
Overdue payments shall bear interest at the annua! rate of three (3)
months LIBOR,
10.5 Either Party may purchase any portion of their respective allocation of
Cost Oil Cost Gas, Profit Oil and Profit Gas from the Contract Area.
ft**
27
10.6 Both Parties shall meet on a monthly basis as may be agreed to reconcile
all Crude Oil and Natural Gas allocated and lifted during the period as
per Annex l,E".
ARTICLE 11
VALUATION Of AVAILABLE CRUDE OIL
H.l Available Crude Oil shall be valued in accordance with the following
procedures:
ja) On the commencement of production from new reservoirs, PMT
shall engage the services of an independent laboratory of good
repute to determine the assay of the new Crude Oil.
(b) When a new Crude Oil stream is produced, liftings shall be made
for a frial marketing period of three (3) calendar months or the
period required to lift the first three (3) cargoes, whichever is
shorter. During the trial marketing period PMT shall;
(i) collect samples of the new Crude Oil upon which the assay
shall be performed as provided in Article 11.1 (aj above;
(ii) determine quality and yield pattern of the new Crude Oil;
(iii) share in the marketing such that each Party markets
approximately their proportionate share of the new Crude
Oil, notwithstanding the fact that a Party’s share of Available
Crude Oil may be lifted in the process; payments thereafter
shall be made in accordance with Article 10.5;
(iv) exchange information regarding the marketing of the new
Crude Oil including documents which verify the sales price
and terms of each lifting;
(v) apply the actual F.O.B. sales price to determine the price of
each lifting. Such F.O.B, sales pricing for each lifting shail
continue after the trial marketing period until a valuation of
the new Crude Oii has been completed but in no event shall
It be longer than ninety {90} days after conclusion of the trial
marketing period.
jc) As soon as practicable but in any event not later than sixty (60)
days after the end of the trial marketing period, PMT shall review
the assay, yield, and actual sales data. PMT shall present a
28
proposal for the valuation of the new Crude Oil. A valuation
method either spot related or any other method acceptable to
both Parties shall be established for determining the price for each
lifting of Available Crude Oil. Such valuation method shall be in
accordance with the Official Selling Price published by NNPC or
relevant government authority. It is the intention of the Parties that
such prices shall reflect the true market value of the new Crude Oil.
The valuation method determined hereunder (including the
product yield values) shall be mutually agreed within thirty (30)
days from fhe aforementioned meeting failing which;
determination of such valuation shall be referred to an
independent consultant.
(d) upon the conclusion of fhe trial marketing period, the Parties shall
be entitled to lift their share of Available Crude Oil pursuant to
Article 10 and the Lifting Procedure.
3
(e) when a new Crude Oil stream is produced from the Contract Area
and is co-mingled with an existing Crude Oil produced in Nigeria
which has an established Official Selling Price basis then such basis
shall be applied to the extent practicable for determining the
Official Selling Price of the new Crude Oil. PMT shall meet and
decide on any appropriate modifications to such established $
valuation basis which may be required to reflect any change in fhe
market value of the Crude Oil as a result of co-mingling.
11.2 If in the opinion of either Party an agreed price valuation method fails to
reflect the market value of fhe Crude Oil produced in the Contract Area,
then such Party shall propose to the other Party modifications to such VI
valuation method once in evejy six (6) months but in no event more than
twice in any year. The Parties shall then meet within thirty (30) days of such
proposal and mutually agree on any modifications to such valuation
within thirty (30) days from such meeting failing which, determination of
such valuation shall be referred to an independent consultant.
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29
■ i
LTL^rLTn r*k hjth \ i j i.........f *.. i * i * i
ARTICLE 12
PAYMENTS
12.1 In each accounling period, enough Crude Oil and Natural Gas shall be
allocated to meet Cost Oil and Cost Gas obligations respectively.
12.2 The method of payment of any sum due from SEPTA to NPDC and vice
versa shall be in accordance with the prevailing guidelines of the Federal
Ministry of Finance of Nigeria, the Central Bank of Nigeria and in
accordance with Annex C.
12.3 Unless otherwise provided herein, any payments which NPDC is required
to make to SEPTA or which SEPTA is required to make to NPDC pursuant
to this Agreement shall be made within forty five (45) days following the
end of the month in which the obligation to make such payments occurs.
Overdue payments shall bear interest at the annual rate of three (3)
months LIBOR.
12.4 If any of the Parties engages in activities or business outside Petroleum
Operations, the cost of the facilities, assets and personnel, if any, used for
such business or activities shall not be chargeable to the operations.
4
H
i
i
i
30
AMCIE13
UTILISATION OF NATURAL GAS
13.1 NPDC’s share of Natural Gas produced from the Contract Area pursuant
to Development shall be allocated in accordance with Article 10. The
field development programme shall address gas utilization for the
Contract Area and shall be subject to the approval of the Management
Committee.
13.2 Notwithstanding the provisions of Article 13.1 hereof, the associated
Natural Gas produced with Crude Oil may be utilized at no cost to the
operations as fuel for Production Operations, gas recycling, secondary
recovery by gas injection, gas lift, or any other economical secondary
recovery schemes, stimulation of wells or artificial lifts necessary for the
Contract Area's full Development. Such usage shall be with the prior
written consent of NPDC, such consent shall not be unreasonably
withheld.
13.3 The Development plan to be approved pursuant to Article 9.1 will contain
plans to use Natural Gas both for operational and commercial purposes,
to meet the objective of zero flaring,
13.4 In the event that gas is flared in the course of production, the penalty shall
be treated as part of Production Cost.
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vf'?r
31
ARTICLE 14
TRAINING OF NPDC PERSONNEL
14.1 Each year SEPTA shall submit a detailed programme for training
for the following year in respect of NPDC and NNPC personnel. The final
training programme shall be mutually agreed by the Parties and shall
reflect any specific requirement of NPDC for implementation by SEPTA.
J
14.2 Costs and expenses incurred by SEPTA in training NPDC and NNPC
personnel, both on the job training and work attachment, shall be
included in Development Costs or Production Costs, depending on the
period at which the relevant costs are Incurred and recovered through
Cost Oil and Cost Gas.
14.3 SEPTA shall also provide for training facilities, in accordance with Article
4.1(d)
ARTICLE 15
SUB-CONTRACTORS
15.1 Subject to NPDC becoming the Operator and within ninety (90) days from
such appointment thereafter, annually at the commencement of every
financial year or as may be required af any ofher time, PMT shall prepare
and submit to Management Committee for approval, a list of contractors
and sub-contractors who may, as Petroleum Operations demand, be
invited by PMT to bid for contracts.
15.2 Subject to the provisions of this Article 15.1, PMT has the right upon the
prior approval of Management Committee to engage contractors and
sub-contractors for performing services which PMT is obliged to perform
under the terms of this Contract. Such services, however, shall be
performed for and on behalf of PMT who shall remain directly responsible
for the performance of these services. Such contracts/ sub contracts shall
be in the name of NPDC.
15.3 (a) Approval shall not be required for contracts whose price is less
than One Hundred Thousand (100,000) United States Dollars or its
equivalent in Naira or ofher currencies;
32
(b) PMT shall promptly deliver to Management Committee a copy of
each of the contracts referred to in this Article 15,3 following the
execution thereof.
15.4 Notwithstanding the provision of this Article 15 all contract awards shall be
by competitive tendering process.
15.5 in any event, for contracts whose contract price is equal to or exceeds
One Hundred Thousand (100,000) United States Dollars or the equivalent in
Naira, or other currencies, PMT shall select its contractors from the list of
approved qualified contractors as provided for in Article 15.1 hereof and
such selection shall be by means of competitive bidding with preference
being given to Nigerian persons and entities, as provided for in Annex f of
this Contract. The contract recommendation shall be considered and
approved by the Management Committee.
15.6 Subject to Article 15.4 hereof, PMT shall, wherever possible, utilize/extend
for Petroleum Operations existing/valid contracfs/agreements with NPDC
and/or SBPTA’s Affiliates by direct negotiations subject to prior approval of
the Management Committee.
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33
t **»
ARTICLE U
BOOKS AND ACCOUNTS. AUDIT AND OVERHEAD CHARGES
16.) Books and Accounfs
PMT shall keep complete books of accounts for which they are
responsible which shall be consistent with modern petroleum industry and
generally accepted accounting principles and procedures. The statutory
books and accounts of this Agreement shall be kept in Naira and United
States Dollars. All other books of accounfs as may be considered
necessary shall be kept in columnar form in both Naira and United States
Dollars. Officials of NPDC and SEPTA shall have reasonable access to
such books and accounts during business hours.
1
16.2 Audits §
The Parties and their external auditors shall have the right to inspect and
audit the books and accounts relating to this Agreement for any year by
giving thirty (30) days written notice to PMT. The PMT shall facilitate the
work of such inspection and auditing, provided, however, that the costs
of such inspection and auditing shall be met by the Party, and provided
also that if such inspection and auditing have not been so carried out
within three (3) years following the end of the year in Question, the books
and accounts relating to such year shall be deemed to be accepted by
the Parties as satisfactory. Any exception must be made in writing ninety
(90) days following the end of such audit and failure to give such written
notice within such time shall establish the correctness of the books and
accounfs.
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34
ARTICLE 17
TAXES. ROYALTIES. RATES AND DUES
17.1 Customs duties and other duties levied on imports and services by reason
of PMT activities in performing Development and Production Operations
hereunder, pursuant to Articles 8.1 and 8.2 shall be regarded as
Development Costs and Production Costs, as the case may be and shall
be recovered by the Parties in the manner provided for in this Agreement.
17.2 Taxes due on SEPTA'S income, in accordance with CITA shall be borne by
SEPTA and shall not under any circumstances be reimbursable to SEPTA.
17.3 NPDC shall pay its share of PPT and Royalty arising from the production of
Crude Oil won and saved in the Contract Area.
17.4 The Official Selling Price as advised by the relevant government authorities
and established by this Agreement shall be used in determining the
amount of NPDC’s share of PPT and Royalty in respect of Available Crude
Oil and Available Natural Gas produced and lifted from the Contract
Area.
17.5 SEPTA shall take all the necessary steps to ensure that the taxes which
SEPTA must pay in accordance with this Article 18 shall be accurately
paid, as and when due.
ARTICLE 18
INSURANCE
18.1 In the event NPDC becomes Operator, all property acquired under the
provisions of this Agreement shall be adequately insured with an
insurance company of good repute by PMT in the name of the NPDC
with limits of liability not less than those required by Nigerian laws and
regulations. The premium for such policies shall be included in Petroleum
Operations Costs.
18.2 In case of loss of or damage to property, indemnifications paid by the
insurance companies shall be entirely received by NPDC for which
prompt report shall be made to PMT not later than seventy two (72) hours.
The amount so received shall be lodged in an account of and in the
name of NPDC that it shall nominate. PMT shall determine whether the lost
or damaged property should be repaired, replaced or abandoned. If the
decision of PMT is to repair or replace, PMT shall immediately replace or
repair such lost or damaged property, the cost of which is recoverable. In
the event that the loss or damage is attributable to SEPTA'S Gross
Negligence such cost of replacement or repair shall not be recoverable
as Petroleum Operations Cost.
18.3 PMT shall take out and maintain an insurance policy covering any and all
damages caused to third parties as a direct or indirect result of Petroleum
Operations in the name of NPDC. SEPTA shall defend and hold NPDC
harmless from damoges and losses caused to third parties as a
consequence of SEPTA Gross Negligence or Willful Misconduct in the
performance of this Article.
18.4 All insurance policies under this Article 18 shall be based on good
international petroleum industry practice and shall be taken out in the
Nigerian market except for those concerning risks for which PMT cannot
obtain coverage in Nigeria which shall be taken out abroad, to the extent
required by law.
In entering info contracts with any sub-contractor for the performance of
Petroleum Operations, PMT shall require such sub-contractor to take
adequate insurance in accordance with Article 18.1 and 18.3 above and
to properly indemnify NPDC and SEPTA for any damage done and to
properly indemnify and hold NPDC and SEPTA harmless against claims from
third parties.
) 8.6 PMT shall maintain other insurance policies in the name of NPDC required
under Nigerian law,
ARTICLE 1?
CONFIDENTIALITY AND PUBLIC ANNOUNCEMENTS
The Parties shall keep information mutually exchanged and all plans,
maps, drawings, designs, data, scientific, technical and financial reports
and other data and information of any kind or nafure relating to
Petroleum Operations including any discovery of hydrocarbons as strictly
confidential, at all times, and shall ensure that their entire or partiot
contents shall under no circumstances be disclosed by the Parties in any
announcement to the public or to any third party without the other Party's
prior written consent.
36
The provisions of ihis Article 19 shall not apply to disclosure to:
(a) sub-contractors, Affiliates, assignees, auditors, legal advisers,
provided that such disclosures are required for the effective
performance of the aforementioned recipients’ duties related to
Petroleum Operations;
(b) comply with statutory obligation or the requirements of any
governmental agency in which case SEPTA will notify NPDC of
any information so disclosed.
(c) finance institutions involved in the provision of finance for the
operations hereunder provided, in all such cases, that the
recipients of such data and information agree in writing to keep
such data and information strictly confidential,
(d) a third party for the purpose of negotiating an assignment of
Interest hereunder provided such third party executes an
undertaking to keep the information disclosed confidential.
19.2 Parties shall take all necessary measures in order to make their employees,
agents, representatives, proxies and in the case of PMT, sub-contractors
comply with the same obligations of confidentiality provided for in this
Article 19,
19,3 The provisions of this Article 19 shall not be voided by the expiry or
termination of this Agreement on any grounds whatsoever and these
provisions constitute a continuing obligation and accordingly the
restrictions arising therefrom shall be in force at ali times.
19.4 The Parties shall use their best endeavours to ensure that their servants,
employees, agents and in the case of PMT, subcontractors shall not make
any reference in public or publish any notes in newspapers, periodicals or
books nor divulge, by any other means whatsoever any information on
the activities under PMT's responsibility, or any reports, data or any facts
and documents that may come to their knowledge by virtue of this
Agreement, without the prior written consent of the other Party.
19.5 PMT shall submit to NPDC ali statutory reports and information for
submission to Government and other statutory bodies.
37
ARTICLE 20
FORCE MAJEURE
20.1 Any failure or delay on the part of either Party in the performance of its
obligations or duties under this Agreement shad be excused to the extent
attributable to Force Majeure. A Force Majeure situation shall include
delays, defaults or inability to perform under this Agreement due to any
event beyond the reasonable control of either Party. Such event may be,
but is not limited to, any act, event, happening, or occurrence due to
natural causes; and acts or perils of navigation, fire, hostilities, war
(declared or undeclared), blockade, labour disturbances, strikes, riots,
insurrection, civil commotion, quarantine restrictions, epidemics, storms,
floods, earthquakes, accidents, blowouts, lightning, and acts of or orders
of Government.
20.2 If operations are delayed, curtailed or prevented by Force Majeure, then
the time for carrying out the obligation and duties thereby affected, and
obligations hereunder, shall be extended for a period equal to the period
thus involved.
20.3 The Party whose ability to perform ifs obligations is so affected shall
promptly notify the other Party thereof not later than forty-eight (48) hours
after the establishment of the start of Force Majeure stating the cause,
and both Parties shall do all that fs reasonably within thefr powers to
remove such cause.
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ARTICLE 21
LAWS AND REGULATIONS
21,1 This Agreement shall be governed by and construed In accordance with
the laws of the Federal Republic of Nigeria and any dispute arising
therefrom shall be determined in accordance with such laws.
l: 21.2 In the event that any enactment of or change in the laws or regulations of
Nigeria or any rules, procedures, guidelines, instructions, directives, or
n policies, pertaining to the Agreement introduced by any government
department or parastatals or agencies occurs subsequent to the Effective
Date of this Agreement which materially and adversely affects the rights
L and obligations or the economic benefits of Parties, the Parties shall use
their best efforts to agree to such modifications to this Agreement as will
compensate for the effect of such changes, if the Parties fail to agree on
such modifications within a period of ninety (90) days following the date
on which the change in question took effect, the matter shall thereafter
be referred at the option of either Party to arbitration under Article 22
hereof. Following arbitrator’s determination, this Agreement shall be
deemed forthwith modified in accordance with that determination.
39
\
■X ARTICLE 22
ARBITRATION AND CONCILIATION
22.1 If a difference or dispute arises between NPDC and SEPTA concerning the
interpretation or performance of this Agreement, and if the Parties fail to
settle such differences or dispute by amicable agreement, then either
Party may serve on the other a demand for arbitration. Within thirty (30)
days of such demand being served, each Party shall appoint an arbitrator
and the two arbitrators thus appointed shall within a further thirty (30) days
appoint a third arbitrator and if the arbitrators do not agree on the
appointment of such third arbitrator, or if either Party fails to appoint the
arbitrator to be appointed by it, such an arbitrator or third arbitrator shall
be appointed by the Head of the Nigerian branch of Chartered institute
of Arbitrators in accordance with the provision of the Arbitration and
Conciliation Act Cap A)8 LFN 2004. Notice of the intention to apply to the
Chartered institute of Arbitrators shall be given in writing by the applicant
Party, to the other Party, and when appointed, the third arbitrator shall
convene meetings and act as chairman thereat. If an arbitrator fails or is
unable to act, a successor shall be appointed by the respective Party or
by the arbitrators in the event the chairman must be succeeded. The
arbitration award shall be binding upon the Parties and the expenses shall
be borne by the Parties in such proportion and manner as may be
! provided In the award. The venue of the arbitration shall be anywhere in
Nigeria as agreed by the Parties.
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40
ARTICLE 23
REPRESENTATIONS AND WARRANTIES
23.1 In consideration of NPDC entering into this Agreement, SEPTA warrants as
follows:
(a) SEPTA is not affiliated directly or indirectly with SEPLAT Petroleum
Development Company Limited;
(b) SEPTA has the power to enter into and perform this Agreement ano'
has taken all necessary action to execute, deliver and perform the
Agreement in accordance with the terms herein contained.
(c) The execution, delivery and performance of this Agreement by
SEPTA will not contravene in any respect, any of the provisions of:
(1} any law or regulations or order of any government authority.
Agency or Court applicable to or by which SEPTA may be
bound.
(2) any mortgage, agreement or other undertaking or
instrument to which SEPTA is a party or which is binding upon
it or any of its respective revenues or assets.
(d) Full disclosure has been made to NPDC prior to the Effective Date
of all facts in relation to SEPTA and its financial condition and affairs
as is material and ought properly to be made known to NPDC.
(e) SEPTA have the requisite funds both in foreign and local currencies
to carry out NPDC‘s 55% share of Petroleum Operations under the
Contract Area.
(f) The representations and warranties set out above shall survive the
execution of this Agreement.
SEPTA shall provide a parent company guarantee.
41
ARTICLE 24
TERMINATION
24.1 NPDC shall be entitled to terminate this Agreement if any of the following
events occur:
(a) SEPTA defaults in the performance of its material obligations set
forth in Article 4.1 fa).
(b) SEPTA defaults in the performance of its obligations as set forth in,
4.1 (b) of this Agreement.
(c) SEPTA assign its rights and interests under this Agreement, without a
prior written notice and prior written consent of NPDC.
fd) SEPTA is adjudged insolvent, bankrupt or to have made restitution
to its creditors by a Court of competent jurisdiction in Nigeria.
(e) SEPTA liquidate or terminate its corporate existence.
(f) There is a breach of SEPTA'S parent company guarantee.
(g) (t is established and confirmed that SEPTA and SEPLAT Petroleum
Development Company Limited are Affiliates.
(h) The disposal of SEPTA’S rights and interests under this Agreement
through the sale of its parent company;
(i) The attainment of 335 Million BOE subject to Article 3.1.
24.2 Termination for any of the events specified in this Article 24.1 (c-i) above;
shall be with immediate effect and NPDC may by written notice to SEPTA
declare the Agreement terminated.
24.3 If the cause for termination is an event specified in Article 24.1 (a) and (b),
NPDC may give written notice thereof to SEPTA to remedy such default
within a period not less than thirty (30) working days of receipt of NPDC's
notice. If upon the expiration of the said period such default has not
42
been remedied or removed, the Agreement shall automatically
terminate,
24.4 Except such rights of SEPTA that may have accrued prior to the date of
termination, SEPTA's rights shall cease upon termination of this Agreement.
Such termination shall take place without prejudice to any other rights or
remedies which may be available to either Party.
24.5 Without prejudice to all other rights of NPDC herein contained, SEPTA shall
upon the termination of this Agreement permit inspection, copying and
auditing of operations accounts and records.
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43
ARTICLE 25
NOTICES
25.1 Any notices required to be given by either Party to the other shall be in
writing and shell be deemed to have been duly given if sent and
received by e-mail, mail fax, telegram or cable (confirmed by moil) or
registered post for or hand delivered at the following registered offices:
NIGERIAN PETROLEUM DEVELOPMENT COMPANY LIMITED,
62, SAPELE ROAD,
BENIN CITY, NIGERIA
SEPTA:
SEPTA ENERGY NIGERIA LIMITED,
HALLIBURTON HOUSE,
PLOT 90, AJOSE ADEOGUN STREET,
VICTORIA ISLAND, LAGOS, NIGERIA,
25.2 Either Party shall notify the other promptly of any change in the above
address.
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ARTICLE 26
GENERAL PROVISIONS
26.1 In consultation with NPDC, SEPTA shall obtain and pay for all necessary
permits or authority for the use of any patent device, instrument and the
like not belonging to SEPTA, necessary for the operations and such cost
; . shall be recovered. SEPTA agrees to defend at its own expense and after
consultation with NPDC, all legal proceedings brought against it or NPDC
claiming infringement of a patent on any method or equipment selected
or furnished by SEPTA or in its performance of the obligations under this
Agreement, provided NPDC notifies SEPTA promptly in writing of any such
infringement or claim against it and gives SEPTA authority, information and
assistance (at SEPTA’s expense) for the defense or assistance in defense of
such proceeding. NPDC may be represented by its own counsel at
SEPTA’S cost and may participate in proceedings to which if and SEPTA
are defendants, provided however that SEPTA shall control the defense
thereof.
26.2 This Agreement is drawn up in the English Language and the affairs of the
Agreement shall be conducted in the English Language.
26.3 Except a$ provided in Articles 3, 24 and 26.9, this Agreement shall not be
terminated, amended or modified in any respect except by mutual
consent in writing of the Parties hereto.
26.4 The title of this Agreement, the sequence and headings of the Articles of
this Agreement have been adopted for identification and reference
purposes only, and do not and shall not afreet the meaning or
interpretation of this Agreement.
26.5 If at any time, any provision of this Agreement is or becomes illegal,
invalid, or unenforceable in any respect under the laws of any relevant
jurisdiction, neither the legality, validity or enforceability of the remaining
provisions nor the legality, validity or enforceability of such provisions
under any other laws, shall in any way be affected or impaired thereby
and the remaining provisions of this Agreement shall be construed and
enforced as if the Agreement did not contain such invalid, illegal or
unenforceable provisions.
26.6 This Agreement together with attached Annexes shall constitute the entire
agreement between NPDC and SEPTA in respect of the transaction
rx contemplated herein and shall supersede all previous arrangements,
w*
45
promises, agreements, correspondences, etc. made in relation to this
Agreement.
SEPTA hereby represents and warrants that it has not engaged and shall
not engage any person, firm or company as a commission agent for
purposes of this Agreement and that it has not given or offered to give
{directly or indirectly) to any person any bribe, gift, gratuity, commission or
other thing of value, as any inducement or reward for doing or forbearing
to do any action or take any decision in relation to this Agreement or for
showing or forbearing to show favour or disfavour to any person in relation
thereto,
SEPTA further represents that it shall not either directly or indirectly give to
any person, director, employee, representative or agent of NPDC or any
Government official any commission, fee, rebate, gift or any
entertainment of significant cost or value, and shall not procure the
services of any commission agent or other third party to give any such gift,
fee, reward, concession, bribe, entertainment of significant cost or value
or any thing of a similar nature, for the purposes of Influencing or inducing
positively or adversely the execution of this Agreement or the doing of any
act in connection with this Agreement.
If SEPTA or any of its personnel, representatives, agents or sub-contractors
gives or offers to give (directly or indirectly) to any person any such
inducement or reward or anything of value, NPDC shall terminate this
Agreement immediately SEPTA without prior notification. It is hereby
expressly stated that the termination of this Agreement under this provision
shall not be deemed a breach of the Agreement by NPDC and shall not
give rise to any claim for cost or compensation or loss of profit on the part
of SEPTA.
NPDC agrees to indemnify, keep indemnified and hold harmless SEPTA
against any costs, decommissioning liabilities and environmental liabilities
of whatsoever nature and howsoever arising and any costs, expenses,
liabilities or other charges incurred as a result of or in connection with any
termination, dismissal or redundancy of any person employed or engaged
by NPDC arising prior to the Effective Date.
46
ARTICLE 27
TRANSFER OF PROPERTY UPON TAKE OVER OF OPERATORSHIP BY NPDC
27.1 Upon the effective date of take-over of operatorship pursuant to Article
6.5, SEPTA shall through the PMT deliver and/or transfer to NPDC the
following but not limited to:
(i) possession of all property including all equipment, inventories and
funds held by SEPTA.
{ii) originals of pertinent books of account and records
maintained for the operations; and
(iii) originals of ail documents, agreements and other papers
relating to the operations.
27.2 SEPTA shall upon delivery of above listed items, be certified as to having
complied with the foregoing obligations. Provided SEPTA shall nevertheless
remain liable for any obligations and liabilities arising solely from its failure
to disclose any matters that ought to have been disclosed to NPDC prior
to the take-over of operatorship.
27.3 All expenses incurred in connection with the change of operaforship
hereunder, including the deliveries and transfers required by Article 27.)
shall be for Production Operations Account.
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1
IN WITNESS WHEREOF THE PARTIES herein have caused this agreement to be
executed the day and year first above written.
Signed for and on behalf of
S NIGERIAN PETROLEUM DEVELOPMENT COMPANY LIMITED
by:
Signature:
Name:.........
DeSignation:....(?MM^.Ci.....
ij
In the presence of:
Signature:.
Name:......
Designation:.....
Signed for and on behalf of
SEPTA ENERGY NIGERIA LIMITED
* by:
Signature:.,
Name:..... .......i^jQVcMwgo.Ve-.....Ar\y..W.O.......
Designation:........o^e_<5
% In fhe presence of:
Signature:..
-h Name:...................
Designation:, ^SsOh' V .........................
............. -ir
48