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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;














2


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,




















k


 .-Ui








'I


’ JUK


“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.


k





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.














6


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.











7


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.


L


‘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:


:|5








(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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<5


 ;-(<


I


:|














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.


- J


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.







































































10


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.














REST OF PAGE INTENTIONALLY LEFT BLANK


 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














12


 its


ij





(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;





I


(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


ssr














L~








(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;


frr


r











14


(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;





\


i





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■ A









































16


 11

















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.











REST OF PAGE INTENTIONALLY LEFT BLANK


 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.








19


 {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











20


 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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0^



































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.





REST OF PAGE INTENTIONALLY LEFT BLANK





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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tr







































































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.








REST OF PAGE INTENTIONALLY LEFT BLANK


 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.








REST OF PAGE INTENTIONALLY LEFT BLANK


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