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EX-10.51
17
PRODUCTION SHARING CONTRACT PANNA & MUKTA
PRODUCTION SHARING CONTRACT
EXHIBIT 10.51
AMONG
THE GOVERNMENT OF INDIA
AND
OIL & NATURAL GAS CORPORATION LIMITED
AND
RELIANCE INDUSTRIES LIMITED
AND
ENRON OIL & GAS INDIA LTD.
WITH RESPECT TO CONTRACT AREA
ARTICLE
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.
29.
30.
31.
32.
33.
34.
35.
IDENTIFIED AS PANNA AND MUKTA FIELDS
TABLE OF CONTENTS
CONTENTS
Preamble
Definitions
Duration
Relinquishment
Work Programme
Management Committee
Operatorship and Operating Agreement
General Rights and Obligations of the Parties
Government Assistance
Discovery, Development and Production
Unit Development
Measurement of Petroleum
Protection of the Environment
Recovery of Costs
Production Sharing of Petroleum between Contractor
and Government
Taxes, Royalties, Rentals, etc.
Payment
Customs Duties
Domestic Supply, Sale, Disposal and Export of Crude Oil
Valuation of Oil
Currency and Exchange Control Provisions
Natural Gas
Employment, Training and Transfer of Technology
Local Goods and Services
Insurance and Indemnification
Records, Reports, Accounts and Audit
Information, Data, Confidentiality, Inspection
and Security
Title to Petroleum, Data and Assets
Assignment of Interest
Guarantee
Termination of Contract
Force Majeure
Applicable Law and Language of the Contract
Sole Expert, Conciliation and Arbitration
Entire Agreement, Amendments, Waiver and Miscellaneous
Certificates
36.
Notices
APPENDICES:
Appendix A
-
Description of Contract Area
Appendix B
-
Map of Contract Area
Appendix C
-
Accounting Procedure to Production Sharing
Contract
Appendix D
-
Calculation of the Investment Multiple for
Production Sharing Purposes
Appendix E
-
Form of Financial and Performance Guarantee
Appendix F
-
Equipment
Appendix G
-
Development Commitment Specified by the
Companies
Appendix H
-
Production Profile of the Panna and Mukta
Fields
This Contract made and entered into as of the 22nd day of December 1994
by and among:
THE PRESIDENT OF INDIA, acting through the Joint Secretary
(Exploration), Ministry of Petroleum and Natural Gas (hereinafter
referred as Government);
AND
OIL & NATURAL GAS CORPORATION LIMITED (ONGC), a body corporate established under
the provisions of the Companies Act, 1956, which expression shall include its
successors and such assigns as are permitted under Article 28 hereof acting
through its duly authorized Chairman & Managing Director;
AND
RELIANCE INDUSTRIES LTD. ("RIL"), a body corporate established under the laws of
India, which expression shall include its 35 successors and such assigns as are
permitted under Article 28 hereof acting through its duly authorized Chief
Executive Officer (Oil & Gas);
AND
ENRON OIL & GAS INDIA LTD. ("EOGIL"), a body corporate established under the
laws of the Cayman Islands, which expression shall include its successors and
such assigns as are permitted under Article 28 hereof acting through its duly
authorized (Vice) President;
WITNESSETH:
WHEREAS
1.
By virtue of Article 297 of the Constitution of India,
Petroleum in its natural state in the Territorial Waters and
the Continental Shelf of India is vested in the Union of
India;
2.
The Territorial Waters, Continental Shelf, Exclusive Economic Zone And
Other Maritime Zones Act, 1976 (No. 80 of 1976) provides for the grant
of a Lease or letter of authority by the Government to explore and
exploit the resources of the Continental Shelf;
3.
The Oil Fields (Regulation and Development) Act, 1948, (53 of 1948)
(hereinafter referred to as "the Act") and the Petroleum and Natural
Gas Rules, 1959, made thereunder (hereinafter referred to as "the
Rules") make provision inter alia for the regulation of Petroleum
Operations and the grant of petroleum exploration licenses and mining
leases for exploration and development of Petroleum in India;
4.
The Act and the Rules provide for the grant by the Government of mining
leases in respect of the Territorial Waters and the Continental Shelf,
and the Contractor is being duly granted a mining lease to carry out
Petroleum Operations in that area offshore identified as Panna and
Mukta Fields, more particularly described in Appendices A and B;
5.
The Government desires that the Petroleum resources which may exist in
the Contract Area be discovered and exploited with the utmost
expedition in the overall interest of India in accordance with sound
international petroleum industry practices;
6.
The Government is satisfied that it is in the public interest to enter
into this Contract on terms different from those specified in Section
12 of the Oil Fields (Regulations and Development) Act, 1948, and the
Government is entering into this Agreement on the terms and conditions
specified herein.
7.
EOGIL and RIL have represented that they have, or will acquire
and make available, the necessary financial and technical
resources and the technical and industrial competence and
experience necessary for proper discharge and/or performance
of all obligations required to be performed under this
Contract in accordance with good international petroleum
industry practices and will provide guarantees as required in
Article 29 for the due performance of their undertakings
hereunder;
8.
The Parties desire to enter into this Contract with respect to the
Contract Area referred to in Appendices A and B on the terms and
conditions herein set forth.
NOW, THEREFORE, in consideration of the premises and covenants and conditions
herein contained, IT IS HEREBY AGREED between the Parties as follows:
2
ARTICLE 1
DEFINITIONS
In this Contract, unless the context requires otherwise, the
following terms shall have the meaning ascribed to them hereunder:
1.1
"Accounting Procedure" means the principles and procedures
of accounting set out in Appendix C.
1.2
"Affiliate" means a company that directly or indirectly controls or
is controlled by a Party to this Contract or a company which
directly or indirectly controls or is controlled by a company which
controls a Party to this Contract, it being understood that
"control" means ownership by one company of more than fifty percent
(50%) of the voting securities of the other company, or the power
to direct, administer and dictate policies of the other company
even where the voting securities held by such company exercising
such effective control in that other company is less than fifty
percent (50%) and the term "controlled" shall have a corresponding
meaning.
1.3
"Appendix" means an Appendix attached to this Contract and
made a part hereof.
1.4
"Appraisal Programme" means a programme, approved by the Management
Committee for the appraisal of an Existing or New Discovery of
Petroleum in the Contract Area for the purpose of delineating the
Petroleum Reservoirs to which the Discovery relates in terms of
thickness and lateral extent and determining the characteristics
thereof and the quantity and quality of recoverable Petroleum
therein.
1.5
"Appraisal Well" means a Well drilled within the Contract Area
pursuant to an approved Appraisal Programme.
1.6
"Arms Length Sales" means sales of Petroleum made freely on the
open international market, in freely convertible currencies,
between willing and unrelated sellers and buyers and in which such
buyers and sellers have no contractual or other relationship,
directly or indirectly, or any common or joint interest as is
reasonably likely to influence selling prices and shall, inter
alia, exclude sales (whether direct or indirect, through brokers or
otherwise) involving Affiliates, sales between entities comprising
the Contractor, sales between governments and government-owned
entities, counter trades, restricted or distress sales, sales
involving barter arrangements and generally any transactions
motivated in whole or in part by considerations other than normal
commercial practices.
1.7
"Article" means an article of this Contract and the term
"Articles" means more than one Article.
3
1.8
"Associated Natural Gas" or "ANG" means Natural Gas
occurring in association with Crude Oil either as free Gas
or in solution, if such Crude Oil can by itself be
commercially produced.
1.9
"Barrel" means a quantity or unit equal to 158.9074 litres
(forty-two (42) United States gallons) liquid measure, at a
temperature of sixty (60) degrees Fahrenheit (15.56 degrees
Centigrade) under one atmosphere of pressure (14.7 psia).
1.10
"Basement" means any igneous or metamorphic rock, or rock or any
stratum of such nature, in and below which the geological structure
or physical characteristics of the rock sequence do not have the
properties necessary for the accumulation of Petroleum in
commercial quantities and which reflects the maximum depth at which
any such accumulation can be reasonably expected in accordance with
the knowledge generally accepted in the international petroleum
industry.
1.11
"Calendar Month" means any of the twelve (12) months of the
Calendar Year unless specified otherwise.
1.12
"Calendar Quarter" means a period of three consecutive Calendar
Months commencing on the first day of January, April, July and
October of each Calendar Year.
1.13
"Calendar Year" means a period of twelve consecutive months
according to the Gregorian calendar commencing with the first day
of January and ending with the thirty-first day of December.
1.14
"Commercial Discovery" means a Discovery which, when produced, is
likely to yield a reasonable profit on the funds invested in
Petroleum Operations, after deduction of Contract Costs, and which
has been declared a Commercial Discovery in accordance with the
provisions of Article 9 and/or Article 21, after consideration of
all pertinent operating and financial data such as recoverable
reserves, sustainable production levels, estimated development and
production expenditures, prevailing prices and other relevant
technical and economic factors according to generally accepted
practices in the international petroleum industry.
1.15
"Commercial Production" means production of Crude Oil or Natural
Gas or both from a Field within the Contract Area and delivery of
the same at the relevant Delivery Point under a programme of
regular production and sale.
1.16
"Company" means either EOGIL or RIL.
1.17
"Companies" means EOGIL and RIL.
1.18
"Condensate" means those low vapour pressure hydrocarbons
obtained from Natural Gas through condensation or extraction
4
and refers solely to those hydrocarbons that are liquid at normal
surface temperature and pressure conditions (provided that in the
event Condensate is produced from an Oil Field and is segregated
and transported separately to the Delivery Point, then the
provisions of this Contract shall apply to such Condensate as if it
were Crude Oil.)
1.19
"Contract" means this agreement and the Appendices attached hereto
and made a part hereof and any amendments made thereto pursuant to
the terms hereof.
1.20
"Contract Area" means the area described in Appendix A and
delineated on the map attached as Appendix B, or any portion of the
area remaining after relinquishment or surrender from time to time
pursuant to the terms of this Contract.
1.21
"Contract Costs" means Exploration Costs, Development Costs,
Production costs, and all other costs related to Petroleum
Operations as set forth in Section 3 of the Accounting Procedure.
1.22
"Contract Year" means a period of twelve consecutive months counted
from the Effective Date or from the anniversary of the Effective
Date.
1.23
"Contractor" means EOGIL, RIL and ONGC.
1.24
"Cost Petroleum" means the portion of the total volume of Petroleum
produced and saved from the Contract Area which the Contractor is
entitled to take from the Contract Area in a particular period for
the recovery of Contract Costs as provided in Article 13.
1.25
"Cost Recovery Limit" shall have the meaning given in
Article 13.1.2.
1.26
"Crude Oil" means crude mineral oil, asphalt, ozokerite and all
kinds of hydrocarbons and bitumens, both in solid and in liquid
form, in their natural state or obtained from Natural Gas by
condensation or extraction, including distillate and Condensate
when commingled with the heavier hydrocarbons and delivered as a
blend at the Delivery Point but excluding verified Natural Gas.
1.27
"Delivery Point" means, except as otherwise herein provided or as
may be otherwise agreed between the Government and the Contractor,
the point at which Petroleum reaches the upstream weld of the
outlet flange of the delivery facility, either offshore or onshore
and different Delivery Points may be established for purposes of
sales to the Government, export or domestic sales.
1.28
"Development Area" means that part of the Contract Area
corresponding to the area of an Oil Field or Gas Field delineated
in simple geometric shape, together with a
5
reasonable margin of additional area surrounding the Field
consistent with international petroleum industry practice and
approved by the Management Committee or the Government, as the case
may be.
1.29
"Development Costs" means those costs and expenditures
incurred in carrying out Development Operations, as
classified and defined in Section 2 of the Accounting
Procedure and allowed to be recovered in terms of Section 3
thereof.
1.30
"Development Operations" means operations conducted in accordance
with the Development Plan and shall include, but not be limited to,
the purchase, shipment or storage of equipment and materials used
in developing Petroleum accumulations, the drilling, completion,
Recompletion and testing of Development Wells, the drilling,
completion and Recompletion of Wells for Gas or water injection,
the laying of gathering lines, the installation of offshore
platforms and installations, the installation, hook up and
commissioning of separators, tankage, pumps, artificial lifting and
other producing and injection facilities required to produce,
process and transport Petroleum into main oil storage or Gas
processing facilities, either onshore or offshore, including the
laying of pipelines within or outside the Contract Area, storage
and Delivery Point or Points, the installation of storage or Gas
processing facilities, the installation of export and loading
facilities and other facilities required for development and
production of the Petroleum accumulations and for the delivery of
Crude Oil and/or Gas at the Delivery Point(s) and also including
incidental operations not specifically referred to herein as
required for the most efficient and economic development and
production of the Petroleum accumulations in accordance with good
international petroleum industry practices.
1.31
"Development Plan" means a plan containing proposals
required under Article 9 or Article 21.
1.32
"Development Well" means a Well drilled, deepened, completed, or
Recompleted after the date of approval of the Development Plan
pursuant to Development Operations or Production Operations for the
purposes of producing Petroleum, increasing production, sustaining
production or accelerating extraction of Petroleum including
production Wells, injection Wells and dry Wells.
1.33
"Discovery" means the finding, during Exploration Operations, of a
deposit of Petroleum not previously known to have existed, which
can be recovered at the surface in a flow measurable by
conventional petroleum industry testing methods, including an
Existing Discovery and a New Discovery.
6
1.34
"Discovery Area" means that part of the Contract Area about which,
based upon Discovery and the results obtained from a Well or Wells
drilled in such part, both the Government and the Contractor are of
the opinion that Petroleum exists and is likely to be produced in
commercial quantities.
1.35
"Effective Date" means the date on which this Contract is
executed.
1.36
"Environmental Clearance" means permission granted in writing by
the Government to the Contractor to perform all activities
necessary and appropriate to conduct Petroleum Operations subject
to conditions specified with regard to protection of the
environment and minimizing Environmental Damage.
1.37
"Environmental Damage" means soil erosion, removal of vegetation,
destruction of wildlife, pollution of groundwater or surface water,
land contamination, air pollution, noise pollution, bush fire,
disruption to water supplies, to natural drainage or natural flow
of rivers or streams, damage to archaeological, palaeontological
and cultural sites and shall include any damage or injury to, or
destruction of, soil or water in their physical aspects together
with vegetation associated therewith, aquatic or terrestrial
mammals, fish, avifauna or any plant or animal life whether in the
sea or in any other water or on, in or under land provided such
damage is in violation of legislation relating to the protection of
the environment.
1.38
"Excess ANG" shall have the meaning given in Article 21.4.
1.39
"Existing Discovery" means a Discovery made by ONGC before the
Effective Date and accepted by the Parties as a Commercial
Discovery.
1.40
"Exploration Costs" means those costs and expenditures
incurred in carrying out Exploration Operations, as
classified and defined in Section 2 of the Accounting
Procedure and allowed to be recovered in terms of Section 3
thereof.
1.41
"Exploration Operations" means operations conducted in the Contract
Area pursuant to this Contract in searching for Petroleum or in the
course of an Appraisal Programme and shall include but not be
limited to aerial, geological, geophysical, geochemical,
palaeontological, palynological, topographical and seismic surveys,
analysis, studies and their interpretation, investigations relating
to the subsurface geology including structure test drilling,
stratigraphic test drilling, drilling of Exploration Wells or
Appraisal Wells and other related activities such as testing,
surveying, drill site preparation and all work necessarily
connected therewith that is conducted in connection with Petroleum
exploration.
7
1.42
"Exploration Well" means a Well drilled for the purpose of
searching for undiscovered Petroleum accumulations on any
geological entity (be it of structural, stratigraphic, facies or
pressure nature) to at least a depth or stratigraphic level
specified in the Work Programme.
1.43
"Field" means an Oil Field or a Gas Field in the Contract Area in
respect of which a Development Plan has been duly approved in
accordance with Article 9 or Article 21 hereof.
1.44
"Financial Year" means the period from the first day of April
through the thirty-first day of March of the following Calendar
Year.
1.45
"Foreign Company" means a Company within the meaning of Section 591
of the Companies Act, 1956, as amended from time to time.
1.46
"Gas" means Natural Gas.
1.47
"Gas Field" means an area within the Contract Area consisting of a
single Gas Reservoir or multiple Gas Reservoirs all grouped on or
related to the same individual geological structure or
stratigraphic conditions, designated by the Contractor and approved
by the Government or Management Committee, as the case may be, (to
include the maximum area of potential productivity in the Contract
Area in a simple geometric shape) in respect of which a Commercial
Discovery has been declared or a Development Plan has been approved
in accordance with Article 9 or Article 21 hereof.
1.48
"Investment" shall have the meaning assigned in paragraph 3
of Appendix D.
1.49
"Investment Multiple" means the ratio of accumulated Net Cash
Income to accumulated Investment in the Contract Area, earned by
the Companies, as determined in accordance with Appendix D.
1.50
"LIBOR" means the London Inter-Bank Offering Rate for six-month
deposits of United States Dollars as quoted by the London office of
the Bank of America (or such other Bank as the Parties may agree)
for the day or days in question.
1.51
"Lessee" means any person or body corporate, including the
Contractor, which holds a mining lease under the Petroleum and
Natural Gas Rules, 1959, for the purpose of carrying out Petroleum
Operations in the Contract Area and their successors and permitted
assigns.
1.52
"Management Committee" means the committee constituted
pursuant to Article 5 hereof.
1.53
"Minimum Work Obligation" means the Work Programme related
8
to those items specified in Appendix G as approved by the
Management Committee.
1.54
"Natural Gas" means wet Gas, dry Gas, all other gaseous
hydrocarbons, and all substances contained therein, including
sulphur and helium, which are produced from Oil or Gas Wells,
excluding those condensed or extracted liquid hydrocarbons that are
liquid at normal temperature and pressure conditions, and including
the residue Gas remaining after the condensation or extraction of
liquid hydrocarbons from Gas.
1.55
"Net Cash Income" shall have the meaning assigned in
paragraph 2 of Appendix D.
1.56
"New Discovery" means a Discovery made after the Effective
Date.
1.57
"Non Associated Natural Gas" or "NANG" means Natural Gas which is
produced either without association with Crude Oil or in
association with Crude Oil which by itself cannot be commercially
produced.
1.58
"Oil" means "Crude Oil".
1.59
"Oil Field" means an area within the Contract Area consisting of a
single Oil Reservoir or multiple Oil Reservoirs all grouped on or
related to the same individual geological structure, or
stratigraphic conditions, designated by the Contractor and approved
by the Government or the Management Committee, as the case may be
(to include the maximum area of potential productivity in the
Contract Area in a simple geometric shape) in respect of which a
Commercial Discovery has been declared and a Development Plan has
been approved in accordance with Article 9 hereof and a reference
to an Oil Field shall include a reference to the production of
Associated Natural Gas from that Oil Field.
1.60
"Operating Agreement" means the Joint Operating Agreement entered
into by the Parties constituting Contractor in accordance with
Article 6, with respect to the conduct of Petroleum Operations.
1.61
"Operating Committee" means the committee established by
that name in the Operating Agreement.
1.62
"Operator" means the Party so designated in Article 6.
1.63
"Participating Interest" means the percentage of participation of
the constituents of the Contractor at any given time in the rights
and obligations under this Contract. Initially the Participating
Interest of the constituents of Contractor are as follows:
9
1.
2.
3.
ONGC
RIL
EOGIL
40%
30%
30%
1.64
"Parties" means the Parties signatory to this Contract including
their successors and permitted assigns under this Contract and the
term "Party" means any of the Parties.
1.65
"Petroleum" means Crude Oil and/or Natural Gas existing in
their natural condition.
1.66
"Petroleum Operations" means, as the context may require,
Exploration Operations, Development Operations or Production
Operations or any combination of such operations, including, but
not limited to, collection of seismic information, drilling and
completion and Recompletion of Wells, construction, operation and
maintenance of all necessary facilities, plugging and abandonment
of Wells, environmental protection, transportation, storage, sale
or disposition of Petroleum to the Delivery Point, Site Restoration
and all other incidental operations or activities as may be
necessary.
1.67
"Production Costs" means those costs and expenditures incurred in
carrying out Production Operations as classified and defined in
Section 2 of the Accounting Procedure and allowed to be recovered
in terms of Section 3 thereof.
1.68
"Production Operations" means all operations conducted for the
purpose of producing Petroleum from the Contract Area after the
commencement of production from the Contract Area, including the
operation and maintenance of all necessary facilities therefor.
1.69
"Profit Petroleum" means all Petroleum produced and saved from the
Contract Area in a particular period as reduced by Cost Petroleum
and calculated as provided in Article 14.
1.70
"Recompletion" means an operation whereby a completion in one zone
is abandoned in order to attempt a completion in a different zone
within the existing wellbore.
1.71
"Reservoir" means a naturally occurring discrete
accumulation of Petroleum.
1.72
"Section" means a section of the Accounting Procedure.
1.73
"Self-Sufficiency" means, in relation to any Financial Year, that
the volume of Crude Oil and Crude Oil equivalent of Petroleum
products exported from India during that Financial Year either
equals or exceeds the volume of Crude Oil and Crude Oil equivalent
of Petroleum products imported into India during the same Financial
Year.
1.74
"Site Restoration" shall mean all activities required to
10
return a site to its state as of the Effective Date pursuant to the
Contractor's environmental impact study or to render a site
compatible with its intended after-use (to the extent reasonable)
after cessation of Petroleum Operations in relation thereto and
shall include, where appropriate, proper abandonment of Wells or
other facilities, removal of equipment and structures (whether
installed before or after the Effective Date), and debris,
establishment of compatible contours and drainage, replacement of
top soil, revegetation, slope stabilization, infilling of
excavations or any other appropriate actions in the circumstances.
1.75
"Subcontractor" means any company or person contracted by
the Operator to provide services with respect to the
Petroleum Operations.
1.76
"Well" means a borehole, made by drilling in the course of
Petroleum Operations, but does not include a seismic shot hole.
1.77
"Work Programme" means all the plans formulated for the
performance of the Petroleum Operations.
1.78
"Year" means Financial Year.
11
ARTICLE 2
DURATION
2.1
The term of this Contract shall be for a period of twentyfive (25) years from the Effective Date, unless the Contract
is terminated earlier in accordance with its terms, but may
be extended on such terms and conditions as may be mutually
agreed by the Parties hereto.
12
ARTICLE 3
RELINQUISHMENT
3.1
The Contractor may, with the approval of the Management Committee,
voluntarily relinquish a portion of the Contract Area other than an
area for which a Development Plan has been approved. Contractor
shall give the Government written notice of relinquishments thirty
(30) days prior to the end of any Calendar Year.
3.2
Relinquishment of less than all of the Contract Area shall
be in blocks of not less than one hundred square kilometres
(100 sq. kms.) and be of such shape and location as the
Government may deem appropriate for enabling effective
exploration and exploitation of such area.
3.3
Relinquishment of all or a part of the Contract Area or termination
of the Contract shall not be construed as absolving the Contractor
of any liability undertaken or incurred by the Contractor in
respect of the Contract Area prior to the date of such
relinquishment or termination.
13
ARTICLE 4
WORK PROGRAMME
4.1
The Contractor shall commence Petroleum Operations not later than
six (6) months from the Effective Date.
4.2
As soon as possible after the Effective Date, in respect of the
period ending with the last day of the Financial Year in which the
Effective Date falls and thereafter ninety (90) days before
commencement of each following Financial Year, the Contractor shall
submit to the Management Committee, through the Operating
Committee, the Work Programmes and budgets relating to Petroleum
Operations, including the Minimum Work Obligations, to be carried
out during the ensuing Financial Year.
4.3
The Contractor may propose amendments to the details of an approved
Work Programme and budget in the light of the then existing
circumstances and shall submit to the Management Committee, through
the Operating Committee, modifications or revisions to the Work
Programme and budgets.
14
ARTICLE 5
MANAGEMENT COMMITTEE
5.1
For the purpose of proper and expeditious performance of
Petroleum Operations under the provisions of this Contract,
there shall be constituted a committee to be called the
Management Committee.
5.2
The Management Committee shall consist of four (4) members, one (1)
member nominated by and representing Government and one (1) member
nominated by and representing each constituent of the Contractor.
The member nominated by ONGC shall act as chairman.
5.3
A representative of the Operator acting as the convenor
shall call the meetings of the Management Committee.
5.4
Government and the Contractor may nominate alternate members with
full authority to act in the absence and on behalf of the members
nominated under Article 5.2 and may, at any time, nominate another
member or alternate member to replace any member nominated earlier
by notice to other members of the Management Committee.
5.5
A quorum of the Management Committee shall consist of three
(3) members.
5.6
The following matters shall be submitted to the Management
Committee for approval:
(a)
annual Work Programmes and budgets and any modifications
or revisions thereto, as proposed by the Operating
Committee, for Exploration Operations, Development
Operations and/or Production Operations;
(b)
proposals for an Appraisal Programme, the declaration of a
New Discovery as a Commercial Discovery and the approval
of Development Plans as may be required under this
Contract, or revisions or additions to an Appraisal
Programme or a Development Plan;
(c)
delineation of a Field and a Development Area;
(d)
appointment of auditors;
(e)
collaboration with lessees or contractors of other
areas;
(f)
claims or settlement of claims for or on behalf of or
against the Contractor in excess of limits specified in
the Operating Agreement or fixed by the Management
Committee from time to time;
(g)
any proposed mortgage, charge or encumbrance on
petroleum assets, petroleum reserves or production of
15
Petroleum;
(h)
any other matter required by the terms of this Contract
to be submitted for the approval of the Management
Committee;
(i)
any other matter which the Contractor or the Operating
Committee decides to submit to it.
5.7
The Management Committee shall not take any decision without
obtaining prior approval of the Government, where such
approval is required under this Contract.
5.8
The Management Committee shall meet at least once every three (3)
months or more frequently at the request of any member. Operator
shall convene each meeting by notifying the members at least twenty
eight (28) days prior to such meeting (or a shorter period of
notice if the members unanimously so agree) of the time and place
of such meeting and the purpose thereof and shall include in such
notice a provisional agenda for such meeting. The Operator shall be
responsible for processing the final agenda for such meeting and
the agenda shall include all items of business requested by the
members to be included, provided such requests are received by the
Operator at least ten (10) days prior to the date fixed for the
meeting. The Operator shall forward the agenda to the members at
least nine (9) days prior to the date fixed for the meeting.
Matters not included in the agenda may be taken up at the meeting
by any member with the unanimous consent of all the members.
5.9
The Chairman, and in his absence any other member nominated by
ONGC, shall preside over the meetings of the Management Committee.
5.10
The Operator shall appoint one of the members nominated by the
constituents of the Contractor as secretary to the Management
Committee with responsibility, inter alia, for preparation of the
minutes of every meeting in the English language and provision to
every member of the Management Committee with two (2) copies of the
minutes not later than twenty-eight (28) days after the date of the
meeting.
5.11
Within twenty-one (21) days of the receipt of the minutes of a
meeting, members shall notify the Operator and the other members of
their approval of the minutes by putting their signatures on one
copy of the minutes and returning the same to the Operator or by
indicating such approval to the Operator by telex, cable, or
facsimile, with copies to the other members. Any member may suggest
any modification, amendment or addition to the minutes by telex,
cable or facsimile to the Operator and other members or by
indicating such suggestions when returning the copy of the minutes
to the Operator. If the Operator or any other member does not agree
with the modification, amendment or addition to the
16
minutes suggested by any member, the matter shall be brought to the
attention of the other members and resubmitted to the Management
Committee for approval at the next meeting and the minutes shall
stand approved as to all other matters. If a member fails to
appropriately respond within the aforesaid twenty-one (21) day
period as herein provided, the minutes shall be deemed approved by
such member.
5.12
The meetings of the Management Committee shall be held in New
Delhi, India unless otherwise mutually agreed by the members of the
Management Committee.
5.13
All matters requiring the approval of the Management Committee
shall be approved by a vote of three (3) or more members of the
Management Committee one (1) of whom shall be the Government
representative.
17
ARTICLE 6
OPERATORSHIP AND OPERATING AGREEMENT
6.1
EOGIL shall be the Operator for purposes of this Contract.
6.2
No change in operatorship shall be effected without the consent of
the Government, which consent shall not be unreasonably withheld.
6.3
The operating functions required of the Contractor under this
Contract shall be performed by the Operator on behalf of all
constituents of the Contractor subject to, and in accordance with,
the terms and provisions of this Contract, and generally accepted
international petroleum industry practice.
6.4
The constituents of the Contractor shall execute a mutually
agreed Operating Agreement. The Agreement shall be
consistent with the provisions of this Contract and shall
provide for, among other things:
(a)
the appointment, resignation, removal and
responsibilities of the Operator;
(b)
the establishment of an Operating Committee;
(c)
functions of the Operating Committee taking into
account the provisions of the Contract, procedures for
decision making, frequency and place of meetings; and
(d)
contribution to costs, default, sole risk, disposal of
petroleum and assignment as between the parties to the
Operating Agreement.
18
ARTICLE 7
GENERAL RIGHTS AND OBLIGATIONS OF THE PARTIES
7.1
Subject to the provisions of this Contract, the Contractor
shall have, but not be limited to, the following rights:
(a)
the exclusive right during the term hereof to carry out
Petroleum Operations in the Contract Area and to
recover costs and expenses as provided in this
Contract;
(b)
the right to use, free of charge, such quantities of
Petroleum produced from any Field as are reasonably
required for conducting Petroleum Operations in the
Contract Area in accordance with generally accepted
practices in the international petroleum industry;
(c)
the right to lay, build, construct or install
pipelines, roads, bridges, ferries, aerodromes,
landing fields, radio telephones, satellite
communications and related communication and
infrastructure facilities and exercise other ancillary
rights as may be reasonably necessary for the conduct
of Petroleum Operations subject to such approvals as
may be required, which shall not be unreasonably
withheld, under the applicable laws and/or regulations
in force from time to time for the regulation and
control thereof;
(d)
the right to have an expatriate work force as required
and necessary together with their required personal
effects;
(e)
the right to flare Gas temporarily when and as necessary,
provided the Operator shall give notice thereof to the
Government within forty-eight (48) hours of the start of
such flaring and the issue shall be discussed in the next
meeting of the Management Committee;
(f)
the right to use all wells, equipment and facilities
installed as of the Effective Date in the Contract Area
("Assets") free of any additional cost or charges or
encumbrances and assignment of such Assets to Operator on
behalf of the Contractor;
(g)
such other rights as are specified in this Contract.
7.2
The Government reserves the right to itself, or to grant to the
Lessee or others, the right to prospect for and mine minerals or
substances other than Petroleum within the Contract Area; provided,
however, that if after the Effective Date, the Lessee or others are
issued rights, or the Government proceeds directly to prospect for
and mine in the Contract Area for any minerals or substances other
than
19
Petroleum, the Contractor shall use reasonable efforts to avoid
obstruction to or interference with such operations within the
Contract Area and, in either case, the Government shall use
reasonable efforts to ensure that operations carried out do not
obstruct or unduly interfere with Petroleum Operations in the
Contract Area. In the event of any conflict, Petroleum Operations
shall take preference.
7.3
The Contractor shall:
(a)
except as otherwise expressly provided in this Contract,
conduct all Petroleum Operations at its sole risk, cost
and expense and provide all funds necessary for the
conduct of Petroleum Operations including funds for the
purchase or lease of equipment, materials or supplies
required for Petroleum Operations as well as for making
payments to employees and Subcontractors;
(b)
conduct all Petroleum Operations within the Contract Area
diligently, expeditiously, efficiently and in a safe and
workmanlike manner in accordance with good international
petroleum industry practice pursuant to the approved Work
Programmes;
(c)
ensure provision of all information, data, samples etc.
which the Contractor may be required to furnish under
the applicable laws;
(d)
ensure that all equipment, materials, supplies, plant and
installations used for Petroleum Operations comply with
generally accepted standards in the international
petroleum industry and are of proper construction and kept
in good working order;
(e)
in the preparation and implementation of Work Programmes
and in the conduct of Petroleum Operations, follow good
international petroleum industry practices with such
degree of diligence and prudence reasonably and ordinarily
exercised by experienced parties engaged in a similar
activity under similar circumstances and conditions;
(f)
after the designation of a Field and a Development Area,
pursuant to this Contract, forthwith proceed to take all
necessary action for prompt and orderly development of the
Field and the Development Area and for the production of
Petroleum in accordance with the terms of this Contract;
(g)
appoint a technically competent and sufficiently
experienced representative, and, in his absence, a
suitably qualified replacement therefor, who shall be
resident in India and who shall have full authority to
take such steps as may be necessary to implement this
Contract and whose names shall, on appointment within
20
ninety (90) days after commencement of the first
Contract Year, be made known to the Government;
(h)
provide acceptable working conditions, living
accommodation and access to medical attention and nursing
care in the Contract Area for all personnel employed in
Petroleum Operations and extend these benefits to other
persons who are engaged in or assisting in the conduct of
Petroleum Operations in the Contract Area;
(i)
7.4
be always mindful of the rights and interests of India
in the conduct of Petroleum Operations;
The infrastructure such as pipelines as may be
developed/established by the Contractor within the country may, to
the extent capacity is available, be available to the Government or
any other entity upon payment of compensation which shall include,
but not be limited to, cost of operation, repair, maintenance,
interest and profit. The Government and any other entity using any
of Contractor's facilities shall indemnify and hold harmless
Contractor from and against any and all loss, damage or injury
arising out of or connected with such use.
21
ARTICLE 8
GOVERNMENT ASSISTANCE
8.1
Upon application in the prescribed manner, and subject to
compliance with applicable laws and relevant procedures, the
Government will without any cost to itself:
(a)
(b)
(c)
(d)
(e)
provide the right of ingress and egress from the Contract
Area and any facilities used in Petroleum Operations,
wherever located, and which may be within their control;
use their good offices, when necessary, to assist
Contractor in procurement of facilities and services
required for execution of Petroleum Operations
including necessary approvals, permits, consents,
authorisations, visas, work permits, licenses, rights
of way, easement, surface rights and security
protection, required pursuant to this Contract and
which may be available from resources within the
Government's control;
use their good offices to assist in identifying and
making available necessary priorities for obtaining
local goods and services;
in the event that onshore facilities are required
outside the Contract Area for Petroleum Operations
including, but not limited to, storage, loading and
processing facilities, pipelines and offices, use their
good offices in assisting the Contractor to obtain from
the authorities of the state government in the state in
which such facilities are required, such licenses,
permits, authorizations, consents, security protection,
surface rights and easements as are required for the
construction and operation of the said facilities by
the Contractor;
in the event there is no economical passage other than
through national parks, sanctuaries, mangroves, wetlands
of national importance, biosphere reserves or other
biologically sensitive areas, assist in obtaining the
prior written permission of the concerned authorities.
8.2
ONGC shall provide data, if any, related to the Contract
Area to the Contractor which has not been previously
provided.
8.3
Environmental Clearance(s), if any, at the Effective Date shall be
assigned to EOGIL without obligation to remediate or correct any
prior commission of omission by ONGC, but obligations, after the
Effective Date, shall be binding on Contractor.
22
ARTICLE 9
DISCOVERY, DEVELOPMENT AND PRODUCTION
9.1
If and when a New Discovery is made within the Contract
Area, the Contractor shall:
(a)
forthwith inform the Government of the Discovery;
(b)
promptly thereafter, but in no event later than a period
of thirty (30) days from the date of such Discovery,
furnish to the Government particulars, in writing, of the
Discovery;
(c)
9.2
9.3
promptly run tests to determine whether the New
Discovery is of potential commercial interest and,
within a period of sixty (60) days after completion of
such tests and analysis of results, submit a report to
the Management Committee and the Government containing
data obtained from such tests and its analysis and
interpretation thereof, together with a written
notification to the Government of whether, in the
Contractor's opinion, such New Discovery is of
potential commercial interest and merits appraisal.
If, pursuant to Article 9.1(c), the Contractor notifies the
Government that a New Discovery is of potential commercial
interest, the Contractor shall prepare and submit to the Management
Committee, within one hundred and twenty (120) days of such
notification, a proposed Appraisal Programme with a Work Programme
and budget to carry out an adequate and effective appraisal of such
New Discovery designed to achieve both the following objectives:
(a)
determine without delay, and, in any event, within the
period specified in Article 9.5, whether such New
Discovery is a Commercial Discovery; and
(b)
determine, with reasonable precision, the boundaries of
the area to be delineated as a Field.
The proposed Appraisal Programme for a New Discovery shall be
considered by the Management Committee within forty-five (45) days
after submission thereof pursuant to Article 9.2. The Appraisal
Programme, together with the Work Programme and budget submitted by
the Contractor, revised in accordance with any agreed amendments or
additions thereto, approved by the Management Committee, shall be
adopted as the Appraisal Programme and the Contractor shall
promptly commence implementation thereof; and the Yearly budget
adopted pursuant to Article 4, shall be revised accordingly. Where,
in the case of an Existing Discovery, Contractor desires to carry
out additional appraisal work, the Contractor shall submit its
proposed Appraisal Programme in respect of the Existing Discovery
with a Work Programme and budget to the Management Committee for
its approval within
23
one hundred twenty (120) days of the Effective Date.
9.4
The Contractor shall, unless otherwise agreed, in respect of a New
Discovery of Crude Oil, advise the Management Committee, by notice
in writing within a period of twenty-four (24) months from the date
on which the notice provided for in Article 9.1 was delivered,
whether such New Discovery is a Commercial Discovery or not. Such
notice shall be accompanied by a report on the New Discovery
setting forth all relevant technical and economic data as well as
all evaluations, interpretations and analysis of such data and
feasibility studies relating to the New Discovery prepared by or
for the Contractor, with respect to the Discovery. If the
Contractor is of the opinion that Petroleum has been discovered in
commercial quantities, it shall propose that the Government or
Management Committee, as the case may be, declare the New Discovery
as a Commercial Discovery based on the report submitted. In respect
of a New Discovery of Gas, the provisions of Article 21 shall
apply.
9.5
The Management Committee shall, within forty-five (45) days of the
date of the notice referred to in Article 9.4, consider the
proposal of the Contractor and request any other additional
information it may reasonably require so as to reach a decision on
whether or not to declare the New Discovery as a Commercial
Discovery. Such decision shall be made within the later of (a)
ninety (90) days from the date of notice referred to in Article 9.4
or (b) ninety (90) days of receipt of such other information as may
be reasonably required under this Article 9.5. In the case of an
Existing Discovery, Contractor shall within ninety (90) days of the
Effective Date propose a Development Plan following the plan
brought out in Appendix G, intended to achieve the production
profile brought out in Appendix H, containing the detailed
information required in Article 9.6, with supporting budget. Where
a Development Plan is so agreed it shall be the approved
Development Plan pursuant to Article 9 hereof.
9.6
If a New Discovery is declared commercial the Contractor shall
submit to the Management Committee, a comprehensive plan for the
development of the Commercial Discovery within two hundred (200)
days of the declaration of the Discovery as a Commercial Discovery.
Such plan shall contain detailed proposals by the Contractor for
the construction, establishment and operation of all facilities and
services for and incidental to the recovery, storage and
transportation of the Petroleum from the proposed Development Area
to the Delivery Point together with all data and supporting
information including but not limited to:
(a)
Description of the nature and characteristics of the
24
Reservoir, data, statistics, interpretations, and
conclusions on all aspects of the geology, reservoir
evaluation, petroleum engineering factors, reservoir
models, estimates of reserves in place, possible
production magnitude, nature and ratio of Petroleum fluids
and analysis of producible Petroleum;
9.7
(b)
Outlines of the development project and/or alternative
development projects, if any, describing the production
facilities to be installed and the number of wells to be
drilled under such development project and/or alternative
development projects, if any;
(c)
Estimate of the rate of production to be established
and projection of the possible sustained rate of
production in accordance with generally accepted
international petroleum industry practice under such
development project and/or alternative development
project, if any, which will ensure that the area does
not suffer an excessive rate of decline of production
or an excessive loss of reservoir pressure;
(d)
estimates of Development Costs and Production Costs
under such development project and/or alternative
development projects, if any;
(e)
Contractor's recommendations as to the particular
project that it would prefer, if any;
(f)
Work Programme and budget for Development and
Production Operations;
(g)
anticipated adverse impact on the environment and
measures to be taken for prevention or minimization
thereof and for general protection of the environment
in conduct of operations; and
(h)
production profiles, financial / commercial analysis of
the project proposal.
Any proposed Development Plan submitted by the Contractor pursuant
to Articles 9.5 and/or 9.6 will be approved by the Management
Committee with such amendments and modifications as may be agreed
upon by the Contractor, within seventy-five (75) days of submission
of the Development Plan, which approval shall not be unreasonably
withheld. If such a Development Plan has not been approved by the
Management Committee within the seventy-five (75) day period, the
Contractor shall have the right to submit such plan directly to the
Government for approval, which approval shall not be unreasonably
withheld. The submission will be answered within sixty (60) days of
receipt.
9.8
The Management Committee shall obtain such approvals from
25
the Government as may be required, except where this Contract
provides that the Contractor may obtain such approvals directly.
9.9
If the Management Committee fails to declare a New Discovery of Oil
to be commercial while the Contractor consider that it is
commercial or the Management Committee fails to declare the New
Discovery as a Commercial Discovery within the time limit
stipulated in Article 9.5 hereof, the Contractor may declare the
New Discovery as a Commercial Discovery and submit development and
production plans in respect of the Discovery to the Management
Committee as per the provisions of Article 9.6 and after such plans
have been approved by the Management Committee, the Contractor
shall, acting solely, provide the entire Development Costs and
undertake development of the Oil Field. If, however, the Field
turns out to be non-commercial, the entire Development Cost of the
Field shall be borne solely by the Contractor and shall not be
recoverable as Cost Petroleum from any other Field or Contract Area
but shall be recoverable solely from such Field.
9.10
In the event that the Government considers a New Discovery to be
commercial but the Contractor considers the same as non-commercial,
the Government shall give notice to the Contractor to that effect
and thereafter the Field relating to such New Discovery shall be
excluded from the Contract Area for all purposes. In this event,
the Contractor shall have no claim on the production from such
Field.
9.11
Work Programmes and budgets for Development and Production
Operations shall be submitted to the Management Committee, as soon
as possible after the designation of a Development Area and
thereafter not later than 31st December each Calendar Year in
respect of the Financial Year immediately following.
9.12
The Management Committee, when considering any Work Programme and
budget, may require the Contractor to prepare an estimate of
potential production to be achieved through the implementation of
the programme and budget for each of the three (3) Financial Years
following the Financial Year to which the Work Programme and budget
relate. If major changes in Financial Year to Financial Year
estimates of potential production are required, these shall be
based on concrete evidence necessitating such changes.
9.13
Not later than the fifteenth (15) day of January each Calendar
Year, in respect of the Financial Year immediately following, the
Contractor shall determine the "Programme Quantity". The Programme
Quantity for any Financial Year shall be the maximum quantity of
Petroleum based on Contractor's estimates, as approved by the
Management Committee, which can be produced from a Field consistent
with sound international petroleum industry practices and
26
minimizing unit production cost, taking into account the capacity
of the producing Wells, gathering lines, separators, storage
capacity and other production facilities available for use during
the relevant Financial Year, as well as the transportation
facilities up to the Delivery Point.
9.14
Proposed revisions to the details of a Development Plan or an
annual Work Programme or budget in respect of Development and
Production Operations shall, for good cause and if the
circumstances so justify, be submitted to the Management Committee
for approval, through the Operating Committee.
27
ARTICLE 10
UNIT DEVELOPMENT
10.1
If a Reservoir in a New Discovery Area is situated partly within
the Contract Area and partly in an area in India over which other
parties have a contract or license/lease to conduct Petroleum
Operations, the Government may, for securing the most effective
recovery of Petroleum from such Reservoir, by notice in writing to
the Contractor, require that the Contractor:
(a)
collaborate and agree with such other parties on the
joint development of the Reservoir;
(b)
submit such agreement between the Contractor and such
other parties to the Government for approval; and
(c)
prepare a plan for such joint development of the
Reservoir, within one hundred and eighty (180) days of the
approval of the agreement referred to in (b) above.
10.2
If no plan is submitted within the period specified in Article
10.1(c) or such longer period as the Contractor and other parties
may agree or, if such plan as submitted is not acceptable to the
Government and the parties cannot agree on amendments to the
proposed joint development plan, the Government may cause to be
prepared, at the expense of the Contractor and the other parties
referred to in Article 10.1, a plan for such joint development
consistent with generally accepted practices in the international
petroleum industry which shall take into consideration any plans
and presentations made by the Contractor and the aforementioned
other parties.
10.3
If the Parties are unable to agree on the plan for joint
development, then any of them may refer the matter to a sole expert
for final determination pursuant to Article 33, provided that the
Contractor may in case of any disagreement on the issue of joint
development or the proposed joint development plan, or within sixty
(60) days of determination by a sole expert, notify the Management
Committee that it elects to surrender its rights in the New
Discovery Area in lieu of participation in a joint development.
10.4
If a proposed joint development plan is agreed and adopted by the
parties, or adopted following determination by the sole expert, the
plan as finally adopted shall be the approved joint development
plan and the Contractor shall comply with the terms of the
Development Plan as if the Commercial Discovery is established.
10.5
The provisions of Articles 10.1, 10.2, 10.3 and 10.4 shall apply
MUTATIS MUTANDIS to a New Discovery of a Reservoir located partly
within the Contract Area, which, although not equivalent to a
Commercial Discovery if developed alone,
28
would be a Commercial Discovery if developed together with that
part of the Reservoir which extends outside the Contract Area to
areas subject to contract or given on license/lease for Petroleum
Operations by other parties.
10.6
If a New Discovery is situated partly within the Contract Area and
partly outside the Contract Area, the area outside the Contract
Area over which, at the time of the making of the New Discovery by
the Contractor, no production sharing contract similar to this
Contract has been granted or is under negotiation and/or no
license/lease to conduct petroleum operations has been granted, the
Government will favourably consider the extension of the Contract
Area to include the entire area of the Reservoir if so requested by
the Contractor.
29
ARTICLE 11
MEASUREMENT OF PETROLEUM
11.1
The volume and quality of Petroleum produced and saved from a Field
shall be measured by methods and appliances generally accepted and
customarily used in generally accepted international petroleum
industry practice.
11.2
The Government may, at all reasonable times, inspect and test the
appliances used for measuring the volume and determining the
quality of Petroleum, provided that any such inspection or testing
shall be carried out in such a manner so as not to unduly interfere
with Petroleum Operations.
11.3
Before commencement of production in a Field, except for the
Fields which are producing as of the Effective Date, the
Parties shall mutually agree on:
(a)
methods to be employed to optimize the measurement of
volumes of Petroleum;
(b)
the point at which Petroleum shall be measured and the
respective shares allocated to the Parties in
accordance with the terms of this Contract;
(c)
the frequency of inspections and testing of measurement
appliances and relevant procedures relating thereto;
and
(d)
the consequences of a determination of an error in
measurement.
In the case of existing Fields, this Article 11.3 shall be given
force as soon as practicable after the Effective Date, but in any
case, not later than one hundred eighty (180) days after the
Effective Date.
11.4
The Contractor shall undertake to measure the volume and quality of
the Petroleum produced and saved from a Field at the agreed
measurement point consistent with generally accepted practices in
the international petroleum industry. The Contractor shall not make
any alteration in the agreed method or procedures for measurement
or to any of the approved appliances used for the purpose without
the written consent of the Government.
11.5
The Contractor shall give the Government timely notice of its
intention to conduct calibration operations or any agreed
alteration for such operations and the Government shall have the
right to be present and observe, either directly or through
authorized representatives, such operations.
30
ARTICLE 12
PROTECTION OF THE ENVIRONMENT
12.1
12.2
The Government and the Contractor recognise that Petroleum
Operations will cause some impact on the environment in the
Contract Area. Accordingly, in performance of the Contract, the
Contractor shall conduct its Petroleum Operations with due regard
to concerns with respect to protection of the environment and
conservation of natural resources. In the furtherance of any laws,
regulations and rules promulgated by the Government, the Contractor
shall:
(a)
employ generally accepted industrial standards, including
as required, advanced techniques, practices and methods of
operation for the prevention of Environmental Damage in
conducting its Petroleum
Operations;
(b)
take necessary and adequate steps to prevent Environmental
Damage and, where some adverse impact on the environment
is unavoidable, to minimize such damage and the
consequential effects thereof on property and people; and
(c)
adhere to the guidelines, limitations or restrictions, if
any, imposed by Environmental Clearance as applicable on
the Effective Date and as such Environmental Clearance may
be revised, expanded or replaced as a result of
Contractor's application(s) duly submitted after the
Effective Date.
If the Contractor fails to substantially comply with the provisions
of Article 12.1 or materially contravenes any relevant law, and
such failure or contravention results in substantial Environmental
Damage, the Contractor shall forthwith take all necessary and
reasonable measures to remedy the failure and the effects thereof.
12.3
If the Government has, on reasonable grounds, reason to believe
that any works or installations erected by the Contractor or any
operations conducted by the Contractor are endangering or may
endanger persons or any property of any person, or are causing
avoidable pollution, or are harming fauna and flora or the
environment to a degree which is unlawful, the Government may,
pursuant to applicable law, require the Contractor to take remedial
measures within such reasonable period as may be determined by the
Government and, if appropriate, repair such damage. The Government
may, pursuant to applicable law, require the Contractor to
discontinue Petroleum Operations in whole or in part until the
Contractor has taken such action.
12.4
The Contractor shall, within one hundred twenty (120) days of the
Effective Date, cause a person or persons with special knowledge on
environmental matters, approved by the
31
Government, to carry out an environmental impact study in order:
12.5
12.6
(a)
to determine, at the time of the study, the prevailing
situation relating to the environment, human beings and
local communities, the wildlife and marine life in the
Contract Area and in the adjoining or neighbouring areas;
and
(b)
to establish the likely effect on the environment, human
beings and local communities, the wildlife and marine life
in the Contract Area and in the adjoining or neighbouring
areas in consequence of the relevant phase of Petroleum
Operations to be conducted under this Contract.
The Contractor shall ensure that:
(a)
Petroleum Operations are conducted in an environmentally
acceptable and safe manner consistent with good
international petroleum industry practice and that such
Petroleum Operations are properly monitored;
(b)
the pertinent completed environmental impact studies are
made available to its employees and to its Subcontractors
to develop adequate and proper awareness of the measures
and methods of environmental protection to be used in
carrying out the Petroleum Operations; and
(c)
the contracts entered into between the Contractor and its
Subcontractors relating to its Petroleum Operations shall
include the provisions stipulated herein and any
established measures and methods for the implementation of
the Contractor's obligations in relation to the
environment under this Contract.
The Contractor shall, prior to conducting any drilling activities,
prepare and submit for review by the Government contingency plans
for dealing with oil spills, fires, accidents and emergencies,
designed to achieve rapid and effective emergency response. The
plans referred to above shall be discussed with the Government and
concerns expressed shall be taken into account.
12.6.1
In the event of an emergency, accident, oil spill
or fire arising from Petroleum Operations
affecting the environment, the Contractor shall
forthwith notify the Government and shall
promptly implement the relevant contingency plan
and perform such Site Restoration as may be
necessary.
12.6.2
In the event of any other emergency or accident
arising from the Petroleum Operations affecting
32
the environment, the Contractor shall take such
action as may be prudent and necessary in
accordance with good international petroleum
industry practice in such circumstances.
12.7
In the event that the Contractor fails to take necessary action to
comply with any of the terms contained in Article 12.5 and Article
12.6 within a reasonable period specified by the Government, the
Government, after giving the Contractor reasonable notice in the
circumstances, may take any action which may be necessary to ensure
compliance with such terms and recover from the Contractor,
immediately after having taken such action, all costs and
expenditures incurred in connection with such action together with
such interest as may be determined in accordance with Section 1.7
of Appendix C of this Contract.
12.8
Contractor shall notify the Government upon determination by it
that the estimated remaining recoverable reserves of any Field net
of operating costs equal two and one-half (2 1/2) times the
estimated abandonment cost whereupon the Government shall, within
sixty (60) days, take control of the Field and the abandonment
obligation or, failing which, the Contractor may then proceed to
recover the abandonment cost from the remaining production and
abandon such Field.
12.9
Any and all costs incurred by Contractor pursuant to this Article
shall be cost recoverable including, but not limited to, sinking
funds established for abandonment.
12.10
The responsibility of the Contractor for the environment
hereunder shall be limited to damage to the environment
which:
(a)
occurs after the date of the environmental impact
assessment ("EIA") made to establish the benchmark
condition. The EIA will be conducted as soon after the
Effective Date as is reasonably possible;
(b)
results from an act or omission of Contractor in
violation of existing law; and
(c)
notwithstanding the above, Contractor shall be responsible
for any damage to the environment because of any evidence
of Oil spill, blow-out, fire, etc., during the course of
Joint Operations from the Effective Date.
33
ARTICLE 13
RECOVERY OF COSTS
13.1
The Contractor shall be entitled to recover Contract Costs
out of the total volume of Petroleum produced and saved from
the Contract Area in each Financial Year in accordance with
the provisions of this Article, and, in respect of sole risk
or exclusive operations, Article VII of the Operating
Agreement.
13.1.1
Development Costs incurred by the Contractor in
the Contract Area shall be aggregated, and the
Contractor shall be entitled to recover out of
Cost Petroleum the aggregate of such Development
Costs at the rate of one hundred percent (100%)
per annum, provided, however, that, subject to the
remaining provisions of this Article 13.1, the
Contractor shall not, for the purposes only of
determining the volume of Petroleum to which
Contractor shall be entitled under Article 13.1 as
Cost Petroleum, claim as Contract Costs
Contractor's Development Costs incurred after the
Effective Date in connection with Development
Operations under the Development Plan for Panna
and Mukta Fields (as those Fields are determined
in the Development Plan first approved by the
Management Committee) which exceed Contractor's
Cost Recovery Limit (as hereinafter defined).
13.1.2
For the purposes of this Article 13.1,
Contractor's "Cost Recovery Limit" means costs
incurred after the Effective Date relating to the
construction and/or establishment of such
facilities as are necessary to produce, process,
store and transport Petroleum from within the
Existing Discoveries, in order to enable Oil
production of thirty-eight thousand three hundred
barrels per day (38,300 BOPD) in accordance with
the Development Plan for the Panna and Mukta
Fields. Such costs shall include costs incurred
in relation to those items illustrated in
Appendix G and matters in connection therewith.
Appendix G, Annex G-1, further describes
Companies' development concept based on an
assumed project start date of 1st July, 1993, and
Parties understand and agree that the schedules
and activities contained in such assessment shall
be revised, subject to Management Committee
approval, by the Contractor in Contractor's
Development Plan first submitted pursuant to this
Contract.
The Parties agree that for the purposes of this
Article 13.1 the Contractor's Cost Recovery Limit
shall be the sum of Five Hundred Seventy-seven
Million Five Hundred Thousand U.S. Dollars
(US$577,500,000).
34
13.1.3
The Parties acknowledge that the amount
representing Contractor's Cost Recovery Limit has
been agreed by Contractor on the basis of the
following assumptions and/or factors and/or
information:
(a)
Included in calculations for the Cost
Recovery Limit are costs relating to Gas
compression offshore required for
delivering Gas into ONGC's pipeline;
excluded from the Cost Recovery Limit are
Site Restoration and exploration or
appraisal drilling;
(b)
the Cost Recovery Limit does not include
any costs for the development of any
satellite Fields;
(c)
the Contractor being able to obtain all
necessary approvals (including Government
and state government approvals) to enable
Contractor to carry out the Development
Operations contemplated by the Development
Plan for the Panna and Mukta Fields in
accordance with the timing set out in such
plan;
(d)
the data relating to the Contract Area
provided by ONGC from time to time prior to
the Effective Date inclusive of the data
package pertaining to the Contract Area
prepared by ONGC and made available for
inspection and purchase by the Companies
pursuant to the Government's "Notice
Inviting Offers for Joint Ventures to
Develop Medium- Sized Oil and Gas Field in
India, 1992";
(e)
international market conditions relating to
the availability and cost of materials and
services in the international petroleum
industry in constant 1993 United States
Dollars;
(f)
the range of physical reservoir
characteristics in respect of the Oil and
Gas Fields comprising the Existing
Discoveries not being materially different
from the ranges for such characteristics as
revealed in the data referred to in Article
13.1.3(d) on which Companies based their
assessment as described in Annex G-1 to
Appendix G;
(g)
with regard to onshore facilities not
included in the Cost Recovery Limit as per
Articles 13.1.3(a) and 13.1.4(a), ONGC and
Companies will determine a fee,terms and
35
conditions for the referenced facilities,
which fee shall be determined by an
internationally recognized expert in the
field, who shall be selected by two members
of the Operating Committee from a group of
three internationally recognized experts
selected by ONGC and the cost of the
facilities shall be cost recoverable and
not subject to the Cost Recovery Limit; and
(h)
13.1.4
no capital investment of a material nature
is required on the Equipment contained in
Appendix F.
Having regard, inter alia, to the matters
referred to in Article 13.1.3, the Parties agree
as follows:
(a)
Included in calculations for the Cost
Recovery Limit are costs relating to Gas
compression offshore required for
delivering Gas into ONGC's pipeline system;
excluded from the Cost Recovery Limit are
water injection; Site Restoration and
exploration or appraisal drilling and
capital investment, if any, of a material
nature, on the Equipment contained in
Exhibit F shall not be subject to the Cost
Recovery Limit;
(b)
the costs of developing the reserves and/or
potential reserves and/or satellite Fields
referred to in Article 13.1.3(b) shall not
be subject to the Cost Recovery Limit,
notwithstanding that the development,
within the Contract Area, of such reserves
and/or potential reserves and/or satellite
Fields may include shared flowlines,
injection lines, Gas-lift lines and other
facilities with those constructed as part
of the Development Plan for the Panna and
Mukta Fields;
(c)
in the event that the Contractor's Cost
Recovery Limit is exceeded as a result of:
(i)
delays in carrying out the
Development Operations referred
to in Article 13.1.3(c) due to a
delay in obtaining any necessary
approval;
(ii)
material changes to the
Development Plan for the Panna
and Mukta Fields
36
necessitated by Contractor's
review of data provided, if any,
to the Companies by the
Government and/or ONGC after the
Effective Date where the
Companies are able to establish
that had such data been available
prior to the Effective Date then
the Companies, acting reasonably,
would have included such changes
in the Development Plan for the
Panna and Mukta Fields;
(iii)
a material change to the
international market conditions
referred to in Article 13.1.3(e);
(iv)
a variation to the Development
Plan for the Panna and Mukta
Fields approved by the Management
Committee; or
(v)
an event of force majeure as
provided in Article 31;
(vi)
capital investments of a material
nature, reasonably required as at
the Effective Date on the
Equipment shown in Appendix F;
then the Management Committee shall, at the
request of the Operator, in a meeting
convened under Article 5.8, promptly
consider what, if any, increase should be
made to the Contractor's Cost Recovery
Limit to fairly reflect the circumstances
in question PROVIDED THAT in the case of
delays referred to in Article 13.1.3(c) the
Management Committee shall not be obligated
to consider any increase where, and to the
extent that, such delay has been caused by
the Companies' failure to act in a diligent
manner.
13.1.5
In the event that:
(a)
there is any dispute between the Parties
whether or to what extent a circumstance
referred to in Article 13.1.4(c) has arisen
or resulted in the Contractor's Cost
Recovery Limit being exceeded; or
(b)
the Management Committee is unable to agree
whether an increase should be made to the
Contractor's Cost Recovery Limit or is
unable to agree on the amount of any such
increase;
37
then, at any time after thirty (30) days from the
date of the Management Committee meeting referred
to in Article 13.1.4(c), any Party shall be at
liberty to refer the matter to arbitration in
accordance with the provisions of Article 33.
13.1.6
Costs incurred by the Companies prior to the
Effective Date hereof which have been approved by
the Government, in writing, shall be cost
recoverable for purposes hereof after approval of
the Management Committee.
13.2
Exploration Costs (if any) incurred by the Contractor in respect of
the Contract Area up to the date of Commercial Production of
Petroleum from the Contract Area shall be aggregated, and the
Contractor shall be entitled to recover the aggregate of such
Exploration Costs out of the Cost Petroleum from the Contract Area
at the rate of one hundred percent (100%) per annum of such
Exploration Costs beginning from the date of such Commercial
Production.
13.3
The Contractor shall be entitled to recover out of the Cost
Petroleum from the Contract Area the Exploration Costs which it has
incurred in that Contract Area in any Financial Year after the date
of Commercial Production from the Contract Area at the rate of one
hundred percent (100%) per annum of such Exploration Costs
beginning from the date such Exploration Costs are incurred.
13.4
The Contractor shall be entitled to recover Exploration Costs as
provided in Articles 13.2 and 13.3 in relation to the values of the
quantity of Petroleum produced, saved and sold from the Contract
Area, in the relevant year, provided that such Exploration Costs
once recovered shall not be allowable for recovery against any
other contract area.
13.5
Development Costs incurred by the Contractor in the Contract Area
up to the date of Commercial Production from the Contract Area
shall be aggregated, and the Contractor shall be entitled to
recover out of the Cost Petroleum from that Contract Area the
aggregate of such Development Costs at the rate of one hundred
percent (100%) per annum of such Development Costs beginning from
the date of such Commercial Production from the Contract Area.
13.6
The Contractor shall be entitled to recover out of the Cost
Petroleum produced from the Contract Area the Development Costs
which it has incurred on such Contract Area after the date of
Commercial Production from the Contract Area at the rate of one
hundred percent (100%) per annum of such Development Costs
beginning from the date such Development Costs are incurred.
13.7
The Contractor shall be entitled to recover in full during
any Financial Year the Production Costs incurred in the
38
Contract Area out of the Cost Petroleum.
13.8
If during any Financial Year the Cost Petroleum is not sufficient
to enable the Contractor to recover in full the Contract Costs due
for recovery in that Financial Year in accordance with the
provisions of Articles 13.1 through 13.7, then, subject to the
provisions of Article 13.1:
a)
recovery shall first be made of the Production Costs;
and
b)
recovery shall next be made of the Exploration Costs;
and
c)
recovery shall then be made of the Development Costs.
The unrecovered portions of Contract Costs shall be carried forward
to the following Financial Year and the Contractor shall be
entitled to recover such Costs in such Financial Year or the
subsequent Financial Years as if such costs were due for recovery
in that Financial Year, or the succeeding Financial Years, until
the unrecovered costs have been fully recovered out of Cost
Petroleum from the Contract Area.
13.9
For the purposes of this Article, as well as Article 14, costs,
receipts and income shall be converted into production unit
equivalents, and vice versa, using the relevant prices established
pursuant to Article 19 for Crude Oil and Article 21 for Natural
Gas.
13.10
Pending completion of the calculations required to establish
definitively the Contractor's entitlement to Cost Petroleum from
the Contract Area in any Financial Year, the Contractor shall take
delivery, provisionally, of volumes of Crude Oil and/or Natural Gas
representing its estimated Cost Petroleum entitlement calculated
with reference to estimated production quantities, costs and prices
for the Contract Area as established by the Contractor and approved
by the Management Committee. Such provisional determination of Cost
Petroleum shall be made every quarter on a cumulative basis. Within
sixty days of the end of each Financial Year, a final calculation
of the Contractor's entitlement to Cost Petroleum, based on actual
production quantities, costs and prices for the entire Financial
Year, shall be undertaken and any necessary adjustments to the Cost
Petroleum entitlement shall be agreed upon between the Government
and the Contractor and made as soon as practicable thereafter.
13.11
Nothing herein contained shall provide for the recovery of costs by
ONGC which were incurred prior to the Effective Date.
39
ARTICLE 14
PRODUCTION SHARING OF PETROLEUM BETWEEN
CONTRACTOR AND GOVERNMENT
14.1
The Contractor and the Government shall share in the Profit
Petroleum from the Contract Area in accordance with the provisions
of this Article. The share of Profit Petroleum, in any Financial
Year, shall be calculated for the Contract Area on the basis of the
Investment Multiple actually achieved by the Companies at the end
of the preceding Financial Year for the Contract Area as provided
in Appendix D.
14.2
Profit Petroleum
14.2.1
When the Investment Multiple of the Companies at
the end of any Financial Year is less than two
(2.0), the Government shall be entitled to take
and receive five percent (5%) and the Contractor
shall be entitled to take and receive ninety-five
percent (95%) of the total Profit Petroleum from
the Contract Area with effect from the start of
the succeeding Financial Year.
14.2.2
When the Investment Multiple of the Companies at
the end of any Financial Year in respect of any
Contract Area is equal to or more than two (2.0)
but is less than two and one-half (2.5), the
Government shall be entitled to take and receive
fifteen percent (15%) and the Contractor shall be
entitled to take and receive eighty-five percent
(85%) of the total Profit Petroleum from the
Contract Area with effect from the start of the
succeeding Financial Year.
14.2.3
When the Investment Multiple of the Companies at
the end of any Financial Year in respect of the
Contract Area is equal to or more than two and
one-half (2.5) but is less than three (3.0), the
Government shall be entitled to take and receive
twenty-five percent (25%) and the Contractor
shall be entitled to take and receive seventyfive percent (75%) of the total Profit Petroleum
from the Contract Area with effect from the start
of the succeeding Financial Year.
14.2.4
When the Investment Multiple of the Companies at
the end of any Financial Year in respect of the
Contract Area is equal to or more than three
(3.0) but is less than three and one-half (3.5),
the Government shall be entitled to take and
receive forty percent (40%) and the Contractor
shall be entitled to take and receive sixty
percent (60%) of the total Profit Petroleum from
the Contract Area with effect from the start of
40
the succeeding Financial Year.
14.2.4
When the Investment Multiple of the Companies at
the end of any Financial Year in respect of the
Contract Area is equal to or more than three and
one-half (3.5), the Government shall be entitled
to take and receive fifty percent (50%) and the
Contractor shall be entitled to take and receive
fifty percent (50%) of the total Profit Petroleum
from the Contract Area with effect from the start
of the succeeding Financial Year.
14.3
The value of the Companies' Investment Multiple at the end of any
Financial Year in respect of the Contract Area shall be calculated
in the manner provided for, and on the basis of net cash flows
specified, in Appendix D to this Contract. However, the volume of
Profit Petroleum to be shared between the Government and the
Contractor shall be determined for each quarter on a cumulative
basis. As regards the period from the Effective Date through the
end of the first full Financial Year, in view of the vagaries of
short-term financial records and to assure equitable calculation of
the Investment Multiple based on reasonable historical records, the
Investment Multiple calculated at the end of the first full
Financial Year shall be applied retroactively to the Effective
Date, and until the actual value can be determined, the provisional
Investment Multiple for that period shall be calculated on the
basis of Contractor's estimate of revenues and expenditures as
provided in the Development Plan. Pending finalization of accounts,
delivery of Profit Petroleum shall be taken by the Government and
the Contractor on the basis of provisional estimated figures of
Contract Costs, production, prices, receipts, income and any other
income or allowable deductions and on the basis of the value of the
Investment Multiple achieved at the end of the preceding Financial
Year. All such provisional estimates shall be finally approved by
the Management Committee but are deemed valid until such time as
the Management Committee reaches a decision or a decision is
rendered under Article 33. When it is necessary to convert monetary
units into physical units of production equivalents or vice versa,
the price or prices determined pursuant to Articles 19 and 21 for
Crude Oil and Natural Gas, respectively, shall be used. Within
sixty (60) days of the end of each Financial Year, a final
calculation of Profit Petroleum based on actual costs, quantities,
prices and income for the entire Financial Year shall be undertaken
and any necessary adjustments to the sharing of Profit Petroleum
shall be agreed upon between the Government and the Contractor and
made as soon as is practicable thereafter.
14.4
The Profit Petroleum due to the Contractor in any Financial Year
from the Contract Area shall be divided between the Parties
constituting the Contractor in proportion to their
41
respective Participating Interests.
42
ARTICLE 15
TAXES, ROYALTIES, RENTALS, ETC.
15.1
The Companies and the operations under this Contract shall be
subject to all fiscal legislation in India, except where, pursuant
to any authority granted under any applicable law, they are exempt
wholly or partly from the application of the provisions of a
particular law or as otherwise provided herein.
15.2.1
For the purpose of computing profits or gains of the business
consisting of and prospecting for or extraction or production of
Petroleum, there shall be made in lieu of the allowances admissible
under the Income Tax Act, 1961, such allowances as are specified in
this Agreement pursuant to Section 42 in relation to:
(a)
expenditure by way of infructuous or abortive
exploration expenses in respect of any area surrendered
prior to the beginning of Commercial Production; and
(b)
after the beginning of commercial production, to
expenditure incurred, whether before or after such
Commercial Production, in respect of drilling or
exploration activities or services or in respect of
physical assets used in that connection.
15.2.2
Payments made by the Companies pursuant to Article 16 shall be
deductible for income tax purpose in the year in which payment is
made by the Companies, as permissible under Section 42 of the
Income Tax Act, 1961.
15.3.1
In respect of matters not covered above, deduction shall be allowed
in accordance with other provisions of Income Tax Act, 1961, and
the rules framed thereunder.
15.3.2
The revenue from the Business consisting of Petroleum
Operations shall be determined in accordance with Article 19
for its Participating Interest share of Crude Oil saved and
sold, or otherwise disposed of, from each Field and from any
revenue realized on the sale of ANG or NANG referred to in
Article 21 as well as any other gains or receipts from
Petroleum Operations as reduced by the deductions as
specified within this Article, and, except as herein
provided, all the provisions of the Income Tax Act, 1961,
shall apply.
43
15.4
The following terms used in Section 42 of the Income Tax Act, 1961,
and Articles 15.2 and 15.3 shall have the meanings corresponding to
the terms used in this Contract and defined in Article 1 as
follows:
15.5
(a)
"Previous Year" means the year as defined in Section
2(34) of the Income Tax Act, 1961.
(b)
The other terms used herein and not defined in the Income
Tax Act, 1961 shall have the meaning therein ascribed in
Article 1.
Except for income tax as otherwise provided in this Article, the
Government covenants to the Companies that the Companies shall not
be liable to the Government for payment of:
(a)
any taxes calculated by reference to income from or
sale of Petroleum; or
(b)
any customs or excise duties, export duties or any other
statutory charge on the import or re-export of machinery,
plant, equipment, materials or supplies imported by or on
behalf of Contractor or its subcontractors solely and
exclusively for use in Petroleum Operations.
Any such payment, if the Companies are made liable shall be
reimbursed by the Government.
15.6.1
The constituents of the Contractor shall be liable to pay
royalties and cess on their Participating Interest share of
Crude Oil and Natural Gas saved and sold in accordance with
the provisions of this Agreement. The royalty on Oil saved
and sold will be paid at Rs. 481 per metric ton and cess on
Oil saved and sold will be paid at Rs. 900 per metric ton.
Royalty on Gas saved and sold will be paid at ten percent
(10%) of the value at wellhead. No cess shall be payable on
Gas or Condensate or other Natural Gas liquids produced in
association with Gas. Royalty and cess shall not exceed the
herein above amounts throughout the term of the Contract.
Royalty and cess shall be payable in Indian Rupees. Any such
additional payment shall be made by the Government.
15.6.2
All payments (except income tax) made by Contractor or its
constituents as applicable under appropriate law including, but not
limited to, taxes whether levied by the Central Government or state
government, or any other local or statutory authority, royalties,
cess, levies, duties, rentals, lease rent, license fees, export
duties,
44
countervailing duties, provision for sinking fund for environmental
or abandonment costs, or any other charges whatsoever, directly
attributable to Petroleum Operations shall be cost recoverable.
15.7
If any change in or to any Indian law, rule or regulation by any
authority dealing with income tax or other corporate tax,
export/import tax, customs duty, or tax imposed upon Petroleum or
dependent on the value of Petroleum (including Royalty and cess)
results in a material change to the economic benefits accruing to
any of the Parties to this Contract after the Effective Date, the
Parties shall consult promptly to make necessary revisions and
adjustments to the Contract in order to maintain such expected
benefits to each of the Parties.
45
ARTICLE 16
PAYMENT
16.1
The Companies shall pay to ONGC in consideration of the right to
commence and carry out exploration and drilling activities in the
Contract Area, pursuant to and in accordance with the Notice
Inviting Offers for Joint Ventures to Develop Medium Size Oil and
Gas Fields in India- 1992 and the bid submitted in response
thereto, as follows:
(a)
within two (2) days following the Effective Date,
excluding days on which the banks in India or the
United States are closed, Three Million Six Hundred
Thousand United States Dollars (US$3,600,000). EOGIL
shall pay One Million Eight Hundred Thousand United
States Dollars (US$1,800,000) and RIL shall pay One
Million Eight Hundred Thousand United States Dollars
(US$1,800,000). ONGC's bank wire transfer instructions
are as follows:
ACCOUNT NUMBER: 01 00000 3054
OIL & NATURAL GAS CORPORATION LIMITED
STATE BANK OF INDIA, OVERSEAS BRANCH
VIJAYA BUILDING,
BARAKHAMBA ROAD,
NEW DELHI, INDIA 110 001
(b)
When and if the hereinafter set forth production
quantities are reached, the Companies will within fifteen
(15) days following such attainment pay ONGC in accordance
with the following schedule:
(i)
Another Six Million United States Dollars
(US$6,000,000) after achieving a cumulative
production of fifty million barrels of Oil;
(ii)
Another Nine Million United States Dollars
(US$9,000,000) after achieving a cumulative
production of one hundred million barrels
of Oil; and
(iii)
Another Fifteen Million United States
Dollars (US$15,000,000) after achieving a
cumulative production of two hundred
million barrels of Oil.
16.2
Cumulative production shall, for purposes of this Article,
mean Oil produced.
16.3
Each Company shall pay its share of the payment in the
proportion that it received Petroleum.
46
ARTICLE 17
CUSTOMS DUTIES
17.1
Machinery, plant, equipment, materials and supplies imported by a
Contractor or its Subcontractors for use in Petroleum Operations
shall be exempted from customs duties subject to compliance with
procedures, if any, as may be determined pursuant to applicable
customs duty legislation, Article 23 and the terms herein
specified.
17.2
Contractor shall, from time to time and as required, submit to the
Government a list of Subcontractors who are engaged by it for the
purpose of obtaining the various categories of items pursuant to
the conduct of Petroleum Operations and who may claim exemptions
hereunder.
17.3
In order to qualify for the exemption from customs duties as
provided for in Article 17.1, all imported items for which duty
exemption is being claimed shall be certified, by a representative
of the Contractor, to be imported under the terms of this Contract
for use in carrying out Petroleum Operations and shall be certified
by a representative of the Government to be eligible for such
exemption pursuant to the terms of the Contract. In order to
expedite such exemption, Contractor may submit a certified list of
qualified items up to sixty (60) days in advance of anticipated
import.
17.4
The Government shall have the right to inspect the records and
documents of the physical item or items for which an exemption is
or has been provided under Article 17.1 to determine that such item
or items are being or have been imported for the purpose for which
the exemption was granted. The Government shall also be entitled to
inspect such physical items wherever located to ensure that such
items are being used or held for the purpose herein specified and
any item not being so used shall immediately become subject to
payment of the applicable customs duties.
17.5
Subject to Article 27, the Contractor and its Subcontractors may
sell or otherwise transfer in India or sell for export all imported
items which are no longer required for Petroleum Operations,
subject to applicable laws governing customs duties and sale or
disposal of such items.
47
ARTICLE 18
DOMESTIC SUPPLY, SALE, DISPOSAL AND
EXPORT OF CRUDE OIL
18.1
Until such time as the total availability to the Government and
government companies of Crude Oil from all Petroleum production
activities in India meets the total national demand, as determined
by the Government, each constituent of the Contractor shall be
required to offer to the Government or its nominee all of the
Contractor's entitlement to Crude Oil from each Field in order to
assist in satisfying the national demand, provided, however, that
nothing contained in any contract entered into by the Contractor
for the supply, sale or disposal of Petroleum, with any nominee of
the Government pursuant to this Contract shall in any manner
abrogate the obligation of the Government contained herein.
18.2
Pursuant to Article 18.1 and subject to Articles 18.4 and 18.6,
each constituent of Contractor shall offer to sell to the
Government (or its nominee) its total Participating Interest share
of Crude Oil to which it is entitled under Articles 13 and 14 at
the price determined in accordance with Article 19 for sales to
Government and the Government shall have the option to purchase the
whole or any portion thereof at the said price.
18.3
The aforementioned offer shall be made by each constituent of
Contractor, in writing, at least six (6) months preceding the
Financial Year in which the sale is to be made, specifying the
estimated quantities and grade of Crude Oil being offered (based
upon estimates which shall be adjusted within ninety (90) days of
the end of each Financial Year on the basis of actual quantities
produced and saved). The Government shall exercise its option to
purchase, in writing, not later than ninety days (90) preceding the
Financial Year in respect of which the sale is to be made,
specifying the quantity and grade of Crude Oil which it elects to
take in the ensuing year. Failure by the Government to give such
notice within the period specified shall be conclusively deemed an
election to take all of the Crude Oil offered (adjusted as provided
herein) in the ensuing Financial Year.
Notwithstanding the above, during the first six (6) months
commencing with the Effective Date of this Contract, notices cited
in Article 18.3 shall be given as soon as practicable and are
deemed to satisfy the notice obligations of this Article 18.3.
18.4
If, during any Financial Year, India attains Self-Sufficiency, the
Government shall promptly thereafter, but in no event later than
the end of that Financial Year, so advise the Contractor by written
notice. In such event, as from the end of the first quarter of the
following Financial Year, or such earlier date as the Parties may
48
mutually agree, Government's option to purchase shall be suspended
and each constituent of Contractor shall have the right to lift and
export their Participating Interest share of Crude Oil until such
time, if any, as Self-Sufficiency shall have ceased to exist. If
Self-Sufficiency ceases to exist during a Financial Year, the
Government shall recover its option to purchase under Article 18.2
in respect of the following Financial Year by giving notice thereof
to the Contractor as provided in Article 18.3.
18.5
All payments in respect of sales to the Government pursuant to
provisions of this Article 18 shall be made by the Government
within the period for credit applicable in the calculation of the
price pursuant to Article 19. If no time frame for credit is
applicable in such calculation, payment shall be made within forty
five (45) days from the date the invoice is delivered to the
Government. Contractor shall submit a monthly invoice to the
Government for the quantity of Crude Oil delivered. Payment shall
be made in United States Dollars by bank wire to the credit of the
Foreign Company's designated account with a bank within or outside
India. All amounts unpaid by the Government by the due date shall,
from the due date, bear interest calculated on a day-to-day basis
at the LIBOR plus one percentage (1%) point from the due date
compounded daily until paid.
18.6
If full payment is not received by Contractor when due as provided
in Article 18.5, the Contractor shall, at any time thereafter,
notify the Government of the default and, unless such default is
remedied within fifteen (15) days from the date of the notice, the
Contractor shall have the right, unless otherwise agreed, upon
written notice to the Government and without prejudice to the
Contractor's right to recover all costs, charges, expenses and
losses, incurred by the Contractor:
a)
to suspend the Government's option to purchase under
Article 18.2 and transport the Petroleum to any onshore
facility and sell as each constituent of Contractor may
in its absolute discretion deem fit;
b)
without prejudice to the foregoing, to freely lift,
sell and export all its Participating Interest share of
Crude Oil subject to the destination restrictions
specified in Article 18.7, until the Government has
paid the due amount plus interest as provided herein;
c)
if the payment plus interest is not received by the
Contractor within one hundred and eighty (180) days
from the date the payment was due, to receive and
export the Government's share of Profit Oil until such
time as either Government has paid all amounts due plus
interest, or the value, based on the price as determined in accordance with Article 19, of Government's
share of Profit Oil so sold is equal to all amounts due
49
plus interest, whichever first occurs; provided, however,
that if the Government makes a payment to the Contractor
after the Contractor has commenced sale of Government's
share of Profit Oil and such payment together with the
value of Government's share of Profit Oil sold (based on
the price determined in accordance with Article 19)
exceeds the amount due plus interest, necessary adjustment
shall be carried out to refund to the Government forthwith
the excess amount received by the Contractor.
18.7
The Contractor shall be entitled to freely lift, sell and export
any Crude Oil which the Government is unable to take or has elected
not to purchase pursuant to this Article 18 subject to Government's
generally applicable destination restrictions to countries with
which the Government, for policy reasons, has severed or restricted
trade.
18.8
No later than sixty (60) days prior to the commencement of
production in a Field (or Fields where production is from more than
one Field), and thereafter no less than sixty (60) days before the
commencement of each Financial Year, the Contractor shall cause to
be prepared and submitted to the Parties a production forecast
setting out the total quantity of Crude Oil that it estimates can
be produced from a Field during the succeeding year, based on the
maximum efficient rate of recovery of Crude Oil from that Field in
accordance with good petroleum industry practice. No later than
thirty (30) days prior to the commencement of each Calendar
Quarter, the Contractor shall advise its estimate of production for
the succeeding Calendar Quarter and shall endeavour to produce the
forecast quantity for each Calendar Quarter.
Notwithstanding the above, during the first six (6) months
commencing with the Effective Date of this Contract, notices cited
in Article 18.8 shall be given as soon as practicable and are
deemed to satisfy the notice obligations of this Article 18.8.
18.9
Each Party comprising the Contractor shall, throughout the term of
this Contract, have the right to separately take in kind and
dispose of all its share of Cost Petroleum and Profit Petroleum and
shall have the obligation to lift the Cost Petroleum and Profit
Petroleum on a current basis and in such quantities so as not to
cause a restriction of production or inconvenience to the other
Parties.
18.10
The Government shall, throughout the term of this Contract, have
the right to separately take in kind and dispose of its share of
Profit Petroleum and of such portion of the Contractor's share of
Petroleum as is purchased by the Government pursuant to Article 18,
subject to Article 18.6 and shall have the obligation to lift all
of the Oil on a current basis and in such quantities so as not to
cause a
50
restriction of production or inconvenience to the other Parties.
Subject to Force Majeure, any Party with an obligation to lift Oil
and failing to do so shall compensate the other Parties for any
loss of revenue due to such failure and will, at its own cost and
risk, be liable for all incident expenses, including demurrage, if
any.
18.11
For the purpose of implementing the provisions of Articles 18.9 and
18.10, a Crude Oil lifting procedure shall be agreed upon by the
Parties as soon as practicable but no later than two (2) months
after the Effective Date of this Contract. Such lifting procedure
shall include, but not necessarily be limited to:
(a)
a procedure for notification by the Operator to the
Government, and to each Party comprising the
Contractor, of projected Crude Oil production;
(b)
a procedure for notification by the Government, and by
each Party comprising the Contractor, to the Operator, of
its expected offtake and the consequences of inability or
failure to offtake.
51
ARTICLE 19
VALUATION OF OIL
19.1
For the purpose of this Contract, the value of Crude Oil shall be
based on the price determined as provided herein.
19.2
A price for Crude Oil shall be determined for each Calendar Month
or such other period as the Parties may agree (hereinafter referred
to as "the Delivery Period") in terms of United States Dollars per
Barrel, FOB Delivery Point for Crude Oil produced and sold or
otherwise disposed of from each Contract Area, for each Delivery
Period, in accordance with the appropriate basis for that type of
sale or disposal specified below.
19.3
In the event that some or all of Contractor's total sales of Crude
Oil during a Delivery Period are made to third parties in Arms
Length Sales, all sales so made shall be valued at the weighted
average of the prices actually received by Contractor, calculated
by dividing the total receipts from all such sales FOB the Delivery
Point by the total number of Barrels of the Crude Oil sold in such
sales.
19.4
19.3.1
In the event that a portion of such third party
Arms Length Sales are made on a basis other than
an FOB basis as herein specified, the portion
shall be valued at the prices equivalent to the
prices FOB the Delivery point for such sales
determined by deducting all costs (such as
transportation, demurrage, loss of Crude Oil in
transit and similar costs) incurred downstream of
the Delivery Point, and the prices so determined
shall be deemed to be the actual prices received
for the purpose of calculation of the weighted
average of the prices for all third party Arms
Length Sales for the Delivery Period.
19.3.2
Each constituent of Contractor shall separately
submit to the Government, within fifteen (15)
days of the end of each Delivery Period, a report
containing the actual prices obtained in their
respective Arms Length Sales to third parties of
any Crude Oil. Such reports shall distinguish
between term sales and spot sales and itemize
volumes, customers, prices received and credit
terms, and the constituent of the Contractor
shall allow the Government to examine the
relevant sales contracts.
In the event that some or all of a constituent of Contractor's
total sales of Crude Oil during a Calendar Month are made to the
Government, the price of all sales so made shall, unless otherwise
agreed between the Parties, be determined on the basis of either
the FOB selling price per Barrel of one or more crude oils which,
at the time of
52
calculation, are being freely and actively traded in the
international market and are similar in characteristics and quality
to the Crude Oil and/or Condensate in respect of which the price is
being determined, such FOB selling price to be ascertained from
Platt's Crude Oil Market Wire daily publication ("Platt's"), or the
spot market for the same crude oils ascertained in the same manner,
whichever price, in the opinion of the Parties, more truly reflects
the current value of such crude oils. For any Calendar Month in
which sales take place, the price shall be the arithmetic average
price per Barrel determined by calculating the average for the
preceding Calendar Month of the mean of the high and low FOB or
spot prices for each day of the crude oil(s) selected for
comparison adjusted for differences in the Crude Oil and the crude
oil(s) being compared for quality, transportation costs, delivery
time, quantity, payment terms, the market area into which the Crude
Oil is being sold, other contract terms to the extent known and
other relevant factors. In the event that Platt's ceases to be
published or is not published for a period of thirty (30)
consecutive days, the Parties shall agree on an alternative daily
publication.
19.5
19.4.1
Notwithstanding anything herein otherwise
provided, the price paid for such sales shall be,
in any Calendar Month,the FOB selling price for a
Marker Crude ("Marker Crude") which shall be Brent
(DTD) on a United States Dollar per Barrel basis
less US$0.10 per Barrel.
19.4.2
The Marker Crude price will be based on the
previous Calendar Month's average of the daily
low and high quotations of Marker Crude as
published by Platts' Market wire. The average is
to be calculated up to three (3) decimals to
arrive at a United States Dollar per Barrel
price, which will be applicable for the month of
supply.
19.4.3
The Government and/or its nominee shall pay any
and all sales tax payable on the sale of Oil to
the Government or its nominee.
19.4.4
The Government and/or its nominee shall enter into
a Crude Oil sales agreement with the Constituents
of the Contractor which shall contain terms and
conditions normally contained in international
Crude Oil sales agreements of a similar nature.
In the event that in any Delivery Period some but not all of a
constituent of Contractor's sales of Crude Oil from the Contract
Area are made to the Government or a Government company and some
but not all of a constituent of Contractor's sales of Crude Oil
from the Contract Area are
53
made to third parties in Arms Length Sales and the price as
established in accordance with Article 19.4 differs by more than
one percent (1%) from the price as determined in accordance with
Article 19.3 for the same Delivery Period, the Parties shall meet,
upon notice from any Party, to determine if the prices established
for the relevant Delivery Period for sales to the Government should
be adjusted taking into account third party Arms Length Sales made
by a constituent of Contractor of the same or similar Crude Oil
from the relevant Field or other fields and published information
in respect of other genuine third party Arms Length Sales of the
same or similar crude oil for that Delivery Period. Until the
matter of an adjustment for the relevant Delivery Period is finally
determined , the price as established in accordance with this
Article will apply for that Delivery Period. Any adjustment, if
necessary, will be made within thirty (30) days from the date the
adjustment for that Delivery Period is finally determined.
19.6
A constituent of Contractor shall determine the relevant prices in
accordance with this Article and the calculation, basis of
calculation and the price determined shall be supplied to the
Government and shall be subject to agreement by the Government
before it is finally determined. Pending final determination, the
last established price, if any, for the Crude Oil shall be used.
19.7
In the event that the Parties fail to reach agreement on any matter
concerning selection of the crude oil(s) for comparison, the
calculation, the basis of, or mechanism for the calculation of the
prices, the prices arrived at, the adjustment of any price or
generally about the manner in which the prices are determined
according to the provisions of this Article within thirty (30)
days, or such longer period as may be mutually agreed between the
parties, from the date of commencement of Commercial Production or
the end of each Delivery Period thereafter, any Party may refer the
matter or matters in issue for final determination by a sole expert
appointed as provided in Article 33.
19.7.1
Within ten (10) days of the said appointment, the
Parties shall provide the expert with all
information they deem necessary or as the expert
may reasonably require.
19.7.2
Within fifteen (15) days from the date of his
appointment, the expert shall report to the
Parties on the issue(s) referred to him for
determination, applying the criteria or mechanism
set forth herein and indicate his decision
thereon to be applicable for the relevant
Delivery Period for Crude Oil and such decision
shall be accepted as final and binding by the
Parties.
54
19.7.3
Except for the adjustment referred to in
Article 19.5, any price or pricing mechanism
agreed by the Parties pursuant to the provisions
of this Article shall not be changed
retroactively.
19.8
Any sale or disposal to Affiliates or other sale or disposal of
Crude Oil produced from a Field, other than to the Government or
Government companies or to third parties in Arms Length Sales, in
any Delivery Period, shall be valued on the same basis as sales to
the Government or a Government company. In the event of such a sale
or disposal by a Company, such Company shall submit to the
Government, within fifteen (15) days of the end of each Delivery
Period, all relevant information concerning such sales or
disposals.
19.9
In the event that in any Delivery Period there is more than one
type of sales referred to in Articles 19.3, 19.4 and 19.8, then,
for the purpose of calculating Cost Petroleum and Profit Petroleum
entitlement pursuant to Articles 13 and 14, a single price per
Barrel of Crude Oil for all the sales for the relevant Delivery
Period shall be used. Such single price shall be the weighted
average of the prices determined for each type of sale, weighted by
the respective volumes of Crude Oil sold in each type of sale in
the relevant Delivery Period.
19.10
In this Article the term "Government" shall include any other
agency or nominee of the Government to whom Crude Oil is to be
sold.
19.11
The provisions specified above for the determination of the price
of sales of Crude Oil shall apply mutatis mutandis to Condensates.
19.12
The Parties shall meet annually, or sooner upon notice served by
any Party on the others, to review the list of selected Crude Oils
or the mechanism established pursuant to this Article 19 in light
of any new facts since the date of selection of such Crude Oils or
establishment of such mechanism and to determine what adjustment
(if any) should be made to the said selection or mechanism by
mutual agreement of the Parties.
55
ARTICLE 20
CURRENCY AND EXCHANGE CONTROL PROVISIONS
20.1
Subject to the provisions herein, and to compliance with the
relevant provisions of the laws of general application in India
governing currency and foreign exchange and related administrative
instructions and procedures issued thereunder on a
non-discriminatory basis, each Foreign Company comprising the
Contractor shall, during the term of this Contract have the right
to:
(a)
repatriate funds relating to Petroleum Operations abroad,
in United States Dollars or any other freely convertible
currency acceptable to the Government and the Foreign
Company;
(b)
receive, retain and use abroad the proceeds of any
export sales of Petroleum under the contract;
(c)
open, maintain and operate bank accounts with reputable
banks, both inside and outside India, for the purpose
of this Contract;
(d)
freely import, through normal banking channels, funds
necessary for carrying out the Petroleum Operations;
(e)
convert into foreign exchange and repatriate sums
imported pursuant to (d) above in excess (if any) of
its requirements; and
(f)
make payments of interest and principal outside of India
for purchases, services and loans obtained abroad without
the requirement that funds used in making such payments
must come from or originate in India.
Provided however, that repatriation pursuant to sub-paragraphs (a)
and (e) and payments pursuant to sub-paragraph (f) shall be subject
to the provisions of any treaties or bilateral arrangements between
the Government and any country with respect to payments to that
country.
20.2
The rates of exchange for the purchase and sale of currency by the
Contractor shall be the prevailing rates of general application
determined by the State Bank of India or such other financial body
as may be mutually agreed by the Parties and in accordance with
prevailing currency and exchange regulations and, for accounting
purposes under this Contract, these rates shall apply as provided
in Section 1.6 of Appendix C.
20.3
Domestic Companies shall be subject to the relevant provisions of
the applicable laws in India governing currency and foreign
exchange and related administrative instructions and procedures
issued thereunder.
56
ARTICLE 21
NATURAL GAS
21.1
Subject to Article 21.2, the Indian domestic market shall have the
first call on the utilisation of Natural Gas discovered pursuant to
Petroleum Operations and produced from the Contract Area.
Accordingly, any proposal by the Contractor relating to Discovery
and production of Natural Gas from the Contract Area shall be made
in the context of the Government's policy for the utilisation of
Natural Gas and shall take into account the objectives of the
Government to develop its resources in the most efficient manner
and to promote conservation measures.
21.2
Contractor shall have the right to use Natural Gas produced from
the Contract Area for the purpose of Petroleum Operations
including, but not limited to, reinjection for pressure maintenance
in the Oil Fields, Gas lifting and power generation.
21.3
For the purpose of sales to the domestic market pursuant to this
Article 21, the Delivery Point shall be the Delivery Point set
forth in the Gas sales contract entered into by the Contractor.
21.4
ASSOCIATED NATURAL GAS (ANG)
21.4.1
In the event that a New Discovery of Crude Oil
contains ANG, Contractor shall declare in the
proposal for the declaration of the New Discovery
as a Commercial Discovery as specified in
Article 9, whether (and by what amount) the
estimated production of ANG is anticipated to
exceed the quantities of ANG which will be used
in accordance with Article 21.2 (hereinafter
referred to as "the Excess ANG"). In such event
the Contractor shall indicate whether, on the
basis of the available data and information, it
has reasonable grounds for believing that the
Excess ANG could be commercially exploited in
accordance with the terms of this Contract along
with the Commercial Production of the Crude Oil
from the Oil Field, and whether the Contractor
intends to so exploit the Excess ANG.
21.4.2
Based on the principle of full utilization and
minimum flaring of ANG, a proposed development
plan for an Oil Field (or Oil Fields), shall, to
the extent economically reasonable, include a
plan for utilisation of the ANG from the Existing
Discovery and New Discovery, including estimated
quantities to be flared, reinjected, and to be
used for Petroleum Operations; and, if the
Contractor proposes to commercially exploit the
Excess ANG for sale in the domestic market in
57
accordance with Government's policy, or
elsewhere, the proposed plans for such
exploitation.
If an Existing Discovery is determined to possess
Excess ANG, and such Existing Discovery is
producing or capable of producing as of the
Effective Date of this Contract, Contractor is
granted the right to flare, without penalty or
limitation, such Excess ANG until Gas
transportation facilities, if any, can be provided
for, and such right shall be extended to such
future time or times as such Gas transportation
facilities may become unavailable or their
capacity would restrict or limit production of
Crude Oil. Government will use its good offices to
effect early reduction and/or elimination of such
flaring by causing Gas transportation to be made
available at reasonable rates if a proposal to
that effect is proposed by Contractor or a Company
and approved by the Management Committee.
21.4.3
If the Contractor wishes to exploit the Excess
ANG (whether from an Existing or New Discovery),
such ANG shall first be offered for sale to the
Government (or its nominee) in writing in
accordance with the terms of this Contract. On
receipt of such offer, the Government (or its
nominee) shall, within three (3) months of the
date of receipt thereof, notify the Contractor,
in writing, whether or not it wishes to exercise
its option to purchase the Excess ANG.
21.4.4
If the Government exercises its option to
purchase the Excess ANG as provided in
Article 21.4.3:
(a)
the Government shall indicate in the notice
exercising the option, a date, within two
(2) years of the date of the Contractor's
offer, for commencement of purchase of the
Excess ANG;
(b)
21.4.5
within six (6) months of the date of
notification of the exercise of the
Government's option pursuant to Article
21.4.3., the Contractor and the Government
(or its nominee) shall agree on the terms
for the sale to Government (or its nominee)
of the Excess ANG.
If the Government does not exercise its option to
purchase the Excess ANG the Contractor shall be
58
free to explore markets for the commercial
exploitation of the Excess ANG.
21.4.6
Where the Contractor is of the view that Excess
ANG cannot be commercially exploited, and chooses
not to exploit ANG, or is unable to find a market
for the Excess ANG pursuant to Article 21.4.5, the
Government shall be entitled to take and utilise
such Excess ANG.
21.4.7
If the Government elects to take the Excess ANG
as provided in Article 21.4.6:
(a)
the Contractor shall deliver such Excess
ANG to the Government (or its nominee) free
of cost, at the downstream flange of the
Gas/Oil separation facilities;
(b)
the Government or its nominee shall bear
all costs including gathering, treating,
processing and transporting costs beyond
the downstream flange of the Gas/Oil
separation facilities;
(c)
the delivery of such Excess ANG shall be
subject to procedures to be agreed between
the Government or its nominee and the
Contractor prior to such delivery, such
procedures to include matters relating to
timing of off-take of such Excess ANG,
which procedures shall not, in any way,
restrict Oil production.
21.4.8
Excess ANG which is not commercially exploited by
the Contractor, or taken by the Government or its
nominee pursuant to this Article 21, shall be
returned to the subsurface structure or flared
where such flaring is approved in the Development
Plan, which approval shall not be unreasonably
withheld, for the relevant Oil Field or where
reinjection is uneconomical or inadvisable in
accordance with good reservoir engineering practices.
21.4.9
Where the Contractor is of the view that there is
economic merit in flaring Gas in the absence of a
Gas transmission system or during such time as
the pipeline is inoperable or lacks capacity to
take all available Gas, Contractor shall have the
right to flare Gas. In any such event,
Contractor shall notify the Management Committee
within forty-eight (48) hours to obtain its
approval for continuing operations.
59
21.4.10
As soon as practicable after the New Discovery
referred to in Article 21.4.1 or the submission
to the Government of the proposal for the
declaration of the New Discovery as a Commercial
Discovery as therein specified, the Contractor
and the Government or its nominee shall meet to
discuss the sale and/or disposal of any ANG
discovered with a view to giving effect to the
provisions of this Article 21 in a timely manner.
21.4.11
21.5
Notwithstanding the above, during the first six
(6) months commencing with the Effective Date of
this Contract, notices cited in Article 21.4 shall
be given as soon as practicable and are deemed to
satisfy the notice obligations of this Article
21.4.
NON ASSOCIATED NATURAL GAS (NANG)
21.5.1
In the event of a New Discovery of NANG, the
Contractor shall promptly report such New
Discovery to the Management Committee and the
provisions of Articles 9.1 and 9.2 shall apply.
The remaining provisions of Article 9 would apply
to the New Discovery and development of NANG only
in so far as they are not inconsistent with the
provisions of Articles 21.5.1 to 21.5.13.
21.5.2
If, pursuant to Article 9.1, the Contractor gives
notification that a New Discovery is of potential
commercial interest, the Contractor shall submit
to the Management Committee, within one (1)
Calendar Year from the date of notification of
the above New Discovery, the proposed Appraisal
Programme, including a Work Programme and budget
to carry out an adequate and effective appraisal
of such New Discovery, to determine (i) without
delay, whether such New Discovery is a Commercial
Discovery and (ii) with reasonable precision, the
boundaries of the area to be delineated as a
Field. Such programme shall be supported by all
relevant data such as Well data, Contractor's
best estimate of reserve range and production
potential and shall indicate the date of
commencement of the proposed Appraisal Programme.
Where in the case of an Existing Discovery,
Contractor desires to carry out additional
appraisal work, the Contractor shall submit its
proposed Appraisal Programme with a Work
Programme and budget to the Management Committee
within one hundred twenty (120) days of the
Effective Date for approval.
21.5.3
The proposed Appraisal Programme for an Existing
Discovery or a New Discovery shall be considered
60
by the Management Committee within sixty (60) days
of its submission by the Contractor and the
programme together with the Work Programme and
budget submitted by the Contractor revised in
accordance with any agreed amendments or additions
thereto approved by the Management Committee,
shall be adopted as the Appraisal Programme and
the Contractor shall promptly proceed with
implementation of such programme.
21.5.4.
If on the basis of the results of the Appraisal
Programme, the Contractor is of the opinion that
NANG has been discovered in commercial
quantities, it shall submit to the Management
Committee, as soon as practicable but not later
than five (5) years from the date of notification
of the aforementioned New Discovery, a proposal
for the declaration of the New Discovery as a
Commercial Discovery. Such proposal shall take
into account the Government's policies on Gas
utilisation and propose alternative options (if
any) for use or consumption of the NANG and be
supported by, inter alia, technical and economic
data, evaluations, interpretations and analyses
of such data, feasibility studies relating to the
New Discovery prepared by or on behalf of the
Contractor and other relevant information.
21.5.5
In the case of a New Discovery, simultaneously
with the Contractor's Appraisal Programme,
Government and the Contractor shall seek to reach
an agreement on the development, production,
processing, utilisation and sale of the NANG, in
the context of Article 21.1, within thirty-six
(36) months of the date of notification of the
Discovery referred to in Article 21.5. If no
proposal is submitted to the Management Committee
by the Contractor within five (5) years from the
date of notification of such New Discovery, the
Contractor shall relinquish its rights to develop
such New Discovery and the area relating to such
New Discovery shall be excluded from the Contract
Area.
21.5.6
Where the Contractor has submitted a proposal for
the declaration of a New Discovery as a
Commercial Discovery, the Management Committee
shall consider the proposal of the Contractor
with reference to commercial utilisation of the
NANG in the domestic market or elsewhere and in
the context of Government's policy on Gas
utilisation and the chain of activities required
to bring the NANG from the Delivery Point to
61
potential consumers in the domestic market or
elsewhere. The Management Committee may, within
ninety (90) days, request that the Contractor
submit any additional information on the New
Discovery and the related Appraisal Programme that
it may reasonably require to facilitate a decision
on whether or not to declare the New Discovery as
a Commercial Discovery.
21.5.7
21.5.8
The Management Committee shall make a decision
regarding the declaration of a New Discovery as a
Commercial Discovery within the latter of:
(a)
one hundred eighty (180) days of receipt of
such proposal; or
(b)
one hundred eighty (180) days of receipt of
the additional information referred to
above.
If the Management Committee, with the approval of
the Government, declares a New Discovery a
Commercial Discovery, such declaration shall be
accompanied by an indication of the probable
date(s) by when the market(s) would be ready to
receive the Gas and an estimate of the quantities
of Gas that could be so utilised. The
Contractor, in such an event, shall, within One
(1) Calendar Year of the declaration of the New
Discovery as a Commercial Discovery, submit a
Development Plan for the development of the Gas
Field to the Management Committee for its
approval. Such plan shall be supported by all
relevant information including, inter alia, the
information required in Article 9.6. In the case
of an Existing Discovery, Contractor shall within
ninety (90) days of the Effective Date propose a
Development Plan following the plan brought out
in Appendix G, intended to achieve the production
profile brought out in Appendix H, containing the
detailed information required in Article 9.6,
with supporting budget and the Management
Committee shall render its decision regarding
such proposal within thirty (30) days of such
submittal. Where a Development Plan is so
agreed, it shall be an approved Development Plan
pursuant to this Article.
62
21.5.9
If the Development Plan has not been approved by
the Management Committee within one hundred and
eighty (180) days of its submission, the
Contractor shall have the right to submit such
plan or plans directly to the Government for
approval, within sixty (60) days of the expiry of
the time provided to the Management Committee to
approve the plan or plans. The Government shall
respond to the submission within ninety (90) days
of receipt thereof. If the Government rejects
the Contractor's proposed plan or plans, the
Government shall state in writing the reasons for
such rejection and the Contractor shall have the
right to resubmit, within sixty (60) days of
written notice of such rejection, such plan or
plans duly amended to meet the Government's
objections thereto. Such right of resubmission
of each proposed plan or plans shall be
exercisable by the Contractor only once. If the
Parties are unable to agree, any Party shall have
the right to submit the matter to arbitration.
If no such plan or plans is/are submitted to the
Government within the aforesaid period, the
Contractor shall relinquish its right to develop
such Gas Field and such Gas Field shall be
excluded from the Contract Area.
21.5.10
If the Management Committee is unable to agree on
the declaration of a New Discovery as a
Commercial Discovery within the time limit
prescribed in Article 21.5.7, the Contractor, or
any of its constituents, shall be entitled to
submit such proposal directly to the Government
for approval. In such event, the Contractor, or
any of its constituents, shall also submit a
comprehensive plan or plans for development of
such New Discovery, which shall detail the
proposed Development Plan for utilisation of the
NANG produced in the domestic market giving,
inter alia, the data specified in Article 21.5.8.
The proposal for declaration of the New Discovery
as a Commercial Discovery as well as the proposed
Development Plan shall be submitted to the
Government within one hundred and eighty (180)
days of the expiry of the time given to the
Management Committee to reach a decision on the
proposal for declaration of the New Discovery as
a Commercial Discovery and Government shall
respond to the said submission within one hundred
63
twenty (120) days of its receipt. If the
Government disapproves the proposed plan or plans,
the Government shall state in writing the reasons
for such disapproval and the concerned Parties
shall have the right to resubmit, within sixty
(60) days, such plan or plans duly amended to meet
the Government's objections thereto. Such right of
resubmission of each proposed plan or plans shall
be exercisable by the Contractor only once. In the
event the Government does not approve such plan or
plans, any Party shall have the right to submit
the matter to arbitration. If no such plan (plans)
is (are) submitted to the Government within the
aforesaid period, the Contractor shall relinquish
its rights to develop such Gas Field and such Gas
Field shall be excluded from the Contract Area.
21.5.11
In the event the Management Committee , or
Government, as the case may be, approves the
Contractor's proposal for declaration of the New
Discovery as a Commercial Discovery and also the
comprehensive plan or plans for development of
such New Discovery and for the utilisation of
NANG produced in the domestic market, the Gas
Field shall be promptly developed by the
Contractor in accordance with the approved plan
which shall be the Development Plan for the
Field.
21.5.12
In the event the Contractor does not commence
development of a New Discovery within ten (10)
years from the date of completion of the first
Discovery Well, the Contractor shall relinquish
its rights to develop such New Discovery and the
area relating to such New Discovery shall be
excluded from the Contract Area.
21.5.13
The price of the ANG and NANG produced from the
Oil or Gas Field for use in India shall be
specified in the Gas sales contract, which shall
be in accordance with the provisions of this
Article 21.5.13, between the Contractor and the
nominee of the Government.
(a)
Unless the context otherwise requires, the
following words and terms wherever and
whenever used or appearing in this
64
Article 21.5.13 shall have the following
meaning:
(i)
"British Thermal Unit" or "BTU"
means the amount of energy
required to raise the temperature
of one (1) pound (avoirdupois) of
pure water, at sixty degrees
(60(degree)) Fahrenheit, one
degree (1(degree)) Fahrenheit at
an absolute pressure of 14.73
pounds per square inch.
(ii)
"Buyer" means the Government of
India or as Authority of India
Limited ("GAIL").
(iii)
"Deliverability" means the lesser
of the maximum aggregate rate of
all wells in the Contract Area or
the maximum delivery capacity of
the processing facility, subject
to generally accepted
international petroleum industry
practices.
(iv)
"Delivery Point" means the
upstream weld at the underwater
connection between
Seller'spipeline and ONGC's
underwater Gas transmission line
or lines which transport Gas from
the Bassein Field to the Hazira
area.
(b)
(v)
"Maximum Delivery Pressure" has
the meaning set forth in Article
21.5.13(c).
(vi)
"MMBTU" means one million
(1,000,000) BTU's on a net
heating value basis.
(vii)
"Seller" means Contractor.
The Seller agrees to produce and deliver,
on a daily basis, to the Buyer one hundred
percent (100%) of the Deliverability of ANG
and NANG and Condensate delivered therewith
at the Delivery Point and the Buyer,
provided the Gas and Condensate are made
available and tendered for delivery by the
Seller, agrees to take and purchase, on a
daily basis, one hundred percent (100%) of
the Deliverability of ANG and NANG and
Condensate delivered therewith, provided,
however, that Seller, at Seller's sole
discretion, subject to generally accepted
operator practices in the international
petroleum industry, may adjust deliveries
to provide for necessary maintenance,
service and testing. Buyer may request that
Seller vary deliveries to accommodate
similar circumstances in the
65
Buyer's operation and Seller's approval
shall not be unreasonably withheld.
Communications procedures shall be mutually
agreed in the Gas sales contract in
accordance with internationally accepted
industry standards.
(c)
The Gas and Condensate sold hereunder shall
be separated into Gas and Condensate at the
offshore processing facility, measured
separately, and recombined and delivered at
the Delivery Point at the operating
pressure of the Buyer's owned or contracted
pipeline up to a maximum pressure ("Maximum
Delivery Pressure") of one thousand (1000)
psig.
(d)
Subject to the provisions hereof, the Buyer
shall pay the Seller for each MMBTU of Gas
delivered hereunder, or for each MMBTU of
Gas for which the Buyer is obligated to pay
hereunder, a price calculated as follows:
The Base Price ("Base Price") in United
States Dollars (US$) per MMBTU is fixed on
the basis of ninety-nine percent (99%) of a
Low Sulfur Fuel Oil Basket ("LSFO Basket")
calculated as the average of the daily mean
value for low and high prices of fuel oil
taking into account equal parts of:
(1)
bulk residual fuel oil,
containing one percent (1%)
sulfur, quoted for barges at
Northwest Europe, (Barges, FOB
Rotterdam); and
(2)
bulk residual fuel oil,
containing one percent (1%)
sulfur, quoted for Mediterranean,
basis Italy, (Cargoes, FOB Med,
basis Italy); and
(3)
a theoretical blend of residual
fuel oil composed of Singapore
Cargoes made up of seventy-four
percent (74%) of LSWR-SR 0.3%,
(three-tenths percent (0.3%)
sulfur), and twenty-six percent
(26%) of HSFO 180, three and
one-half percent (3.5%) sulfur,
viscosity 180 centistokes.
The Base Price is calculated on the basis
of the arithmetic average of the monthly
values of the prices of the listed products
as published in Platt's Oilgram Price
Report for the eighteen (18) months of May,
1992 through October, 1993, inclusive.
(These values are derived from the mean of
the daily
66
ranges on days the postings are published
to give a monthly value.) For the purpose
of this Contract, Base Price will be equal
to $ 2.32/MMBTU.
The price of Gas for each MMBTU for each
Calendar Quarter thereafter shall be
determined by the following formula:
Price = Base Price x (A/B)
Where:
A
= a value calculated for the
HS/LSFO Basket, defined in this
Article 21.5.13 (d), evaluated for
the twelve (12) months preceding
the Calendar Quarter using the
method for averaging as described
for calculating the Base Price,
and
B
= A value calculated for the
HS/LSFO Basket, evaluate for the
twelve (12) months April 1993
through March 1994.
The High Sulfur/Low Sulfur Fuel Oil Basket
("HS/LSFO Basket") is valued as equal parts
of:
(1)
bulk residual fuel oil, containing
one percent (1%) sulphur, quoted
for Mediterranean, basis Italy,
(Cargoes, FOB Med, basis Italy);
and
(2)
bulk residual fuel oil, containing
one percent (1%) sulfur, quoted
for Northwest Europe Cargoes, CIF,
basis ARA, (Cargoes CIF NWE, Basis
ARA), and
(3)
bulk residual fuel oil, Singapore
Cargoes, containing three and
one-half percent (3.5%) sulfur,
viscosity 180 centistokes,
(Singapore HSFO, 180 cst), and
(4)
bulk residual fuel oil, Cargoes,
FOB Arab Gulf, viscosity 180
centistokes, (Arab Gulf, FOB HSFO
180 cst)
using the method for averaging as described
for calculating the Base Price.
The Floor Price ("Floor Price") shall be
ninety percent (90%) of the monthly values
of
67
the prices of the LSFO Basket as published
in Platt's Oilgram Price Report for the
eighteen (18) months of May, 1992 through
October, 1993, inclusive. (These values are
derived from the mean of the daily ranges
on days the postings are published to give
a monthly value.) For the purpose of this
Contract, Floor Price will be equal to $
2.11/MMBTU.
Notwithstanding results of the calculations
for price as shown in this Article 21.5.13
(d), the actual price shall in no event be
less than a Floor Price ("Floor Price")
which is calculated as US$2.11/MMBTU, nor
more than a Ceiling ("Ceiling") of the
Floor Price plus US$1.00/MMBTU, provided
that after seven (7) years from the
Effective Date, the Seller shall have the
option to revise the Ceiling to one hundred
fifty percent (150%) of ninety percent
(90%) of the same or equivalent basket of
fuel oils used in calculating the Base
Price averaged over the immediately
preceeding eighteen (18) months.
Parties agree to convert US$/barrel prices
for fuel oil as published in Platt's
Oilgram to US$/MMBTU using a factor of
6.28.
If Platt's Oilgram is no longer published,
an alternate publication shall be mutually
agreed upon.
(e)
21.5.14
Parties acknowledge that Gas is to be
eceived by GAIL at Hazira downstream of
separation and sweetening facilities owned
and operated by ONGC. In order to
compensate ONGC for cost of ownership and
operations of these facilities, Contractor
shall make payments to ONGC on the basis of
the costs fixed on an incremental basis by
an internationally recognised expert who
shall be selected by two members of the
Operating Committee from a panel of three
internationally recognised experts selected
by ONGC. In case there is no agreement
between the Companies and ONGC on the
advice tendered, the matter shall be
referred to Government. The decision of
Government shall be final and binding on
all the Parties.
Nothing contained in any contract entered into by
the Contractor for the supply, sale or disposal
68
of Gas, with any nominee of the Government shall
in any manner abrogate the obligation of the
Government contained herein.
21.5.15
The Government and/or its nominee shall pay any
and all sales tax payable on the sale of Gas to
the Government or its nominee.
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70
ARTICLE 22
EMPLOYMENT, TRAINING AND TRANSFER OF TECHNOLOGY
22.1
Without prejudice to the right of the Contractor to select and
employ personnel in numbers and with the qualifications as, in the
opinion of the Contractor, are required for carrying out Petroleum
Operations in a safe, cost effective and efficient manner, the
Contractor shall, to the maximum extent reasonably possible,
employ, and require the Operator and Subcontractors to employ,
citizens of India having appropriate qualifications and experience,
taking into account the experience required and the level and
nature of the Petroleum Operations.
22.2
Contractor shall offer up to two (2) man months per year of
on-the-job training and practical experience in skilled, management
and executive positions of their ongoing Petroleum Operations to
Indian nationals of the Government's choice.
22.3
Contractor shall associate and involve mutually agreed numbers of
citizens of India designated by the Government, which shall in no
event exceed three (3) people at any one time, in the technological
aspects of the then ongoing Petroleum Operations for up to two man
months per year.
Such aspects shall include:
(a)
seismic data acquisition, processing and
interpretation;
(b)
computerized formation evaluation using well logs;
(c)
computerized analysis of geological data for basin
analysis;
(d)
laboratory core analysis;
(e)
reservoir simulation and modelling;
(f)
geochemistry, including analytical methods, source rock
studies, hydrocarbon generation, modelling;
(g)
measurement-while-drilling techniques;
(h)
stimulation of wells;
(i)
production engineering including, optimization methods
for surface and subsurface facilities (e.g. NODAL
analysis and implementation);
(j)
reservoir engineering and management including gas and
water injection;
(k)
enhanced oil recovery techniques;
71
(l)
gas production technology;
(m)
pipeline technology;
(n)
well design and drilling technology;
(o)
design of offshore facilities.
22.4
Except as herein provided, no Party shall be obliged to disclose by
virtue of this Article 22 any data, process or information, whether
owned by itself, any of its Affiliates or a third party, of a
proprietary nature.
22.5
At the request of the Government the Contractor shall separately
endeavour to negotiate, in good faith, technical assistance
agreements with the Government setting forth the terms by which
each constituent of the Contractor may render technical assistance
and make available commercially proven technical information of a
proprietary nature for use in India by the Government. The issues
to be addressed in negotiating such technical assistance agreements
shall include, but not be limited to, licensing issues, royalty
conditions, confidentiality restrictions, liabilities, costs and
method of payment.
72
ARTICLE 23
LOCAL GOODS AND SERVICES
23.1
In the conduct of Petroleum Operations, the Contractor
shall:
(a)
give preference to the purchase and use of goods
manufactured, produced or supplied in India provided that
such goods are available on terms equal to or better than
imported goods with respect to timing of delivery, quality
and quantity required, price and other terms;
(b)
employ Indian Subcontractors having the required skills
or expertise, to the extent reasonably possible, in so
far as their services are available on comparable
standards with those obtained elsewhere and at
competitive prices and on competitive terms; provided
that where no such Subcontractors are available,
preference shall be given to non-Indian Subcontractors
who utilise Indian goods to the maximum extent possible
subject however to the proviso in paragraph (a) above;
(c)
cooperate to the extent possible and without financial
obligation with domestic companies in India to enable them
to develop skills and technology to service the petroleum
industry;
(d)
ensure that provisions in terms of paragraphs (a) to
(c) above are contained in contracts between the
Operator and its Subcontractors.
23.2
The Contractor shall establish appropriate procedures, including
tender procedures, for the acquisition of goods and services which
shall ensure that suppliers and Subcontractors in India are given
adequate opportunity to compete for the supply of goods and
services. The tender procedures shall include, inter alia, the
financial amounts or value of contracts which will be awarded on
the basis of selective bidding or open competitive bidding, the
procedures for such bidding, and the exceptions to bidding in cases
of emergency.
23.3
Within one hundred and twenty (120) days after the end of each
Calendar Year, the Contractor shall provide the Government with a
report outlining its achievements in utilising Indian resources
during that Calendar Year.
23.4
In this Article "goods" means equipment, materials and
supplies.
73
ARTICLE 24
INSURANCE AND INDEMNIFICATION
24.1
INSURANCE
24.1.1
The Contractor shall, during the term of this
Contract, obtain and maintain insurance coverage
for and in relation to Petroleum Operations for
such amount and against such risks in accordance
with generally accepted international operating
practices as are set forth herein, and shall
furnish to the Government certificates evidencing
that such coverage is in effect. Such insurance
policies shall include the Government as
additional insured and shall waive subrogation
against the Government. The insurance shall,
without prejudice to the generality of the
foregoing, cover:
24.1.2
24.2
(a)
Loss or damage to all installations,
equipment and other assets for so long as
they are used in or in connection with
Petroleum Operations; provided, however, if
Contractor fails to insure any such
installation, equipment or assets, it shall
replace any loss thereof or repair any
damage caused thereto;
(b)
Loss, damage or injury caused by pollution
in the course of or as a result of
Petroleum Operations;
(c)
Loss or damage to property or bodily injury
suffered by any third party in the course
of or as a result of Petroleum Operations
for which the Contractor may be liable;
(d)
With respect to Petroleum Operations
offshore, the cost of removing wrecks and
cleaning up operations following any
accident in the course of or as a result of
Contractor's Petroleum Operations;
(e)
The Contractor's and/or Operator's
liability to its employees engaged in
Petroleum Operations.
The Contractor shall require its Subcontractors to
obtain and maintain insurance against the risks
referred to in Article 24.1.1 relating mutatis
mutandis to such Subcontractors.
INDEMNITY
74
The Contractor shall indemnify, defend and hold the Government
harmless against all claims, losses and damages of any nature
whatsoever, including without limitation, claims for loss or damage
to property or injury or death to persons caused by or resulting
from any Petroleum Operations conducted by or on behalf of the
Contractor.
24.3
ONGC shall indemnify and hold the Companies harmless against all
claims, losses and damages of any nature whatsoever, including, but
not by way of limitation, claims for loss or damage to property or
injury or death to persons or Environmental Damage caused by or
resulting from and attributable to any operations in the nature of
Petroleum Operations conducted by or on behalf of ONGC or failure
to comply with any Environmental Clearance(s) prior to the
Effective Date.
75
ARTICLE 25
RECORDS, REPORTS, ACCOUNTS AND AUDIT
25.1
The Contractor shall prepare and maintain at an office in India
accurate and current books, records, reports and accounts of its
activities for and in connection with Petroleum Operations so as to
present a fair, clear and accurate record of all its activities,
expenditures and receipts. The Contractor shall also keep
representative samples of cores and cuttings.
25.2
Based on generally accepted and recognised accounting principles
and modern petroleum industry practices, records, books, accounts
and accounting procedures in respect of Petroleum Operations shall
be maintained on behalf of the Contractor by the Operator, at its
business office in India.
25.3
The annual audit of accounts shall be carried out on behalf of the
Contractor by a qualified, independent firm of internationally
recognised chartered accountants, registered in India and selected
by the Contractor.
25.4
Accounts, together with the auditor's report thereon, shall be
submitted to the Parties for approval not later than the thirtieth
(30th) day of September following the Financial Year.
25.5
The Government shall have the right to audit the accounting records
of the Contractor in respect of Petroleum Operations as provided in
the Accounting Procedure.
25.6
The accounting and auditing provisions and procedures specified in
this Contract are without prejudice to any other requirements
imposed by any statute in India, including, without limitation, any
specific requirements of the statues relating to taxation of
companies.
25.7
For the purpose of any audit referred to in Article 25.5, the
Operator or the Contractor shall make available to the auditor all
such books, records, accounts and other documents and information
as may be reasonably required by the auditor during normal business
hours.
76
ARTICLE 26
INFORMATION, DATA, CONFIDENTIALITY, INSPECTION AND SECURITY
26.1
The Contractor shall, promptly after they become available, make
available to the Government in its offices all data obtained as a
result of Petroleum Operations under the Contract including, but
not limited to, geological, geophysical, geochemical,
petrophysical, engineering, well logs, maps, magnetic tapes, cores
and production data as well as all interpretative and derivative
data, including reports, analyses, interpretations and evaluations
prepared in respect of Petroleum Operations (hereinafter referred
to as "Data"). Data shall be the property of the Government,
provided however, that the Contractor shall have the right to make
use of such Data, free of cost, for the purpose of Petroleum
Operations under this Contract as provided herein.
26.2
Contractor shall keep the Government currently advised of all
developments taking place during the course of Petroleum Operations
and shall furnish the Government with such progress reports
containing full and accurate information relating to Petroleum
Operations (on a periodic basis) as the Government may reasonably
require, provided that this obligation shall not extend to
proprietary technology. Without prejudice to the generality of the
foregoing, the Contractor shall submit regular statements and
reports relating to Petroleum Operations as provided in Appendix C.
Contractor shall meet with the Government at a mutually convenient
location to present the results of all geological and geophysical
work carried out as well as the results of all engineering and
drilling operations as soon as practical after such Data becomes
available to the Contractor.
26.3
All Data, information and reports obtained or prepared by, for or
on behalf of, the Contractor pursuant to this Contract shall be
treated as confidential and, subject to the provisions hereinbelow,
the Parties shall not disclose the contents thereof to any third
party without the consent in writing of the other Parties.
26.4
The obligation specified in Article 26.3 shall not operate
so as to prevent disclosure:
(a)
to Affiliates, Contractors, or Subcontractors for the
purpose of Petroleum Operations;
(b)
to employees, professional consultants, advisers, data
processing centres and laboratories, where required, for
the performance of functions in connection with Petroleum
Operations for any Party comprising the Contractor;
(c)
to banks or other financial institutions, in connection
with Petroleum Operations;
77
(d)
to bona fide intending assignees or transferees of an
interest hereunder of a Party comprising the Contractor
or in connection with a sale of stock of a Party
comprising the Contractor;
(e)
to the extent required by any applicable law or in
connection with any legal proceedings or by the
regulations of any stock exchange upon which the shares of
a Party comprising Contractor are quoted;
(f)
to Government departments for, or in connection with, the
preparation by or on behalf of the Government of
statistical reports with respect to Petroleum Operations,
or in connection with the administration of this Contract
or any relevant law or for any purpose connected with
Petroleum Operations;
(g)
by a Party with respect to any Data or information
which, without disclosure by such Party, is generally
known to the public.
26.5
Any Data, information or reports disclosed by the Parties
comprising the Contractor to any person other than pursuant to
Article 26.4 (a), (b) and (g) shall be disclosed on the terms that
such Data, information or reports shall be treated as confidential
by the recipient. Prompt notice of disclosures made by the
Contractor pursuant to Article 26.5 shall be given to the
Government.
26.6
Any Data, information and reports relating to the Contract Area,
which, in the opinion of the Government, might have significance in
connection with offers by the Government of open acreage or an
exploration programme to be conducted by a third party in another
area, may be disclosed by the Government for such purposes on
conditions to be agreed upon between the Government and the
Contractor.
26.7
Where an area ceases to be part of the Contract Area, the
Contractor shall continue to treat Data and information with
respect to the area as confidential and shall deliver to the
Government copies or originals of all Data and information in its
possession with respect to the area. The Government shall, however,
have the right to freely use the Data and information thereafter.
26.8
The Government shall, at all reasonable times, through duly
authorised representatives, be entitled to observe Petroleum
Operations and to inspect all assets, books, records, reports,
accounts, contracts, samples and Data kept by the Contractor or the
Operator in respect of Petroleum Operations under the Contract,
provided, however, that the Contractor shall not be required to
disclose any proprietary technology. The duly authorised
representatives shall be given reasonable assistance by the
Contractor for such functions and the Contractor shall afford such
78
representatives all facilities and privileges afforded to its own
personnel in the field including the use of office space and
housing, free of charge. The representatives shall be entitled to
make a reasonable number of surveys, measurements, drawings, tests
and copies of documents, take samples, and make a reasonable use of
the equipment and instruments of the Contractor provided that such
functions shall not unduly interfere with the Contractor's
Petroleum Operations.
26.9
Contractor shall give reasonable advance notice to the Government,
or to any other authority designated by the Government for such
purpose, of its programme of conducting surveys by aircraft or by
ships, indicating, inter alia, the name of the survey to be
conducted, approximate extent of the area to be covered, the
duration of the survey, the commencement date, and the name of the
airport or port from which the survey aircraft or ship will
commence its voyage.
26.10
The Government, or the authority designated by the Government for
such purpose, shall have the right to inspect any aircraft or ship
used by the Contractor or a Subcontractor carrying out any survey
or other operations in the Contract Area and shall have the right
to put on board such aircraft or ship Government officers in such
number as may reasonably be necessary to ensure compliance by the
Contractor or the Subcontractor with the security requirements of
India.
26.11
Expatriate employees and Subcontractors shall, for national
security purposes, be subject to the approval of the Government,
such approval not to be unreasonably withheld.
79
ARTICLE 27
TITLE TO PETROLEUM, DATA AND ASSETS
27.1
The Government is the sole owner of Petroleum underlying the
Contract Area and shall remain the sole owner of Petroleum produced
pursuant to the provisions of this Contract except that part of
Crude Oil or Gas the title whereof has passed to each constituent
of the Contractor or any other person in accordance with the
provisions of this Contract.
27.2
Title to Crude Oil and/or Gas to which each constituent of the
Contractor is entitled under this Contract, and title to Crude Oil
and/or Gas sold to Government or its nominee by the constituents of
the Contractor shall pass to the relevant Party, or as the case may
be, to Government or its nominee at the Delivery Point. Contractor
shall be responsible for all costs and risks prior to the Delivery
Point and each Party shall be responsible for all costs and risks
associated with such Party's share after the Delivery Point. Where
the Government or its nominee purchases all or some of the
Contractor's share of Crude Oil or Condensate, the Government or
its nominee shall be responsible for all costs and risks in respect
of the amount purchased, after the Delivery Point.
27.3
Title to all Data specified in Article 26 shall be vested in the
Government and the Contractor shall have the right of use thereof
as therein provided.
27.4
Assets in place or contracted for use in or on the Contract Area
purchased by the Contractor for use in Petroleum Operations shall
be owned by the Parties comprising Contractor in proportion to
their Participating Interest provided that the Government, or its
nominee, shall have the right to require vesting of full title and
ownership including abandonment obligations, if any, in it, free of
cost, charge and encumbrances, of any or all assets, whether fixed
or movable, acquired and owned by the Contractor for use in
Petroleum Operations inside or outside the Contract Area, except
assets required by a Party for ongoing operations in the nature of
Petroleum Operations in India, such right to be exercisable by the
Government, or its nominee, upon expiry or earlier termination of
the Contract.
27.5
Contractor shall be responsible in accordance with international
petroleum standards for proper maintenance, insurance and safety of
all assets acquired for Petroleum Operations for keeping them in
good repair, order and working condition at all times, and the
costs thereof shall be recoverable as Contract Costs in accordance
with Appendix C.
27.6
So long as this Contract remains in force, the Contractor shall,
free of any charge for the purpose of carrying out Petroleum
Operations hereunder, have the exclusive use of
80
the assets which have become or are the property of the Government
including, without limitation, those identified in Appendix F
except that the Sagar Laxmi shall be released to ONGC as soon as
alternate facilities are available, but not later than thirty (30)
months after the Effective Date unless agreed otherwise by the
Parties. During the period Contractor is using the Sagar Laxmi
Contractor shall pay to ONGC, as rental, a price to be based upon a
mutually agreed daily rate. The daily rate shall be determined in
accordance with competitive prices for like type of service. In the
event the daily rate cannot be mutually agreed upon it shall be
determined by an internationally recognized expert in the field
selected by two members of the Operating Committee from a group of
three internationally recognized experts selected by ONGC. If the
parties do not agree, the Government shall make the determination.
27.7
Equipment and assets no longer required for Petroleum Operations
shall first be offered free of cost, charge and encumbrance to the
Government, or its nominee, and, if not required by the Government,
or its nominee, will be so indicated in writing within thirty (30)
days of such offer. Failure to so indicate will be deemed to be a
rejection of the offer by the Government.
27.8
Assets not acquired by the Government, or its nominee, may
be sold or otherwise disposed of subject to the terms of
this Contract.
81
ARTICLE 28
ASSIGNMENT OF INTEREST
28.1
28.2
Subject to the terms of this Article and other terms of this
Contract, any Party comprising the Contractor may assign, or
transfer, a part or all of its Participating Interest, with the
prior written consent of the Government, which consent shall not be
unreasonably withheld, provided that the Government is satisfied
that:
(a)
the prospective assignee or transferee has the financial
standing, technical competence, capacity and ability to
meet its obligations hereunder, and is willing to provide
an unconditional undertaking to assume its Participating
Interest share of obligations and to provide a guarantee
in respect thereof as provided in the Contract.
(b)
the prospective assignee or transferee is not a company
incorporated in a country with which the Government,
for policy reasons, has restricted trade or business;
(c)
the prospective assignor or transferor and assignee or
transferee respectively are willing to comply with any
reasonable conditions of the Government as may be
necessary in the circumstances with a view to ensuring
performance under the Contract; and
(d)
the assignment or transfer will not adversely affect the
performance or obligations under this Contract or be
contrary to the interests of India.
An application by a Company for consent to assign or transfer shall
be accompanied by all relevant information concerning the proposed
assignment or transfer including detailed information on the
proposed assignee or transferee and its shareholding and corporate
structure, as was earlier required from the Companies constituting
the Contractor, the terms of the proposed assignment or transfer
and the unconditional undertaking referred to in Article 28.1(a)
above. The applicant shall also submit such information relating to
the prospective assignee or transferee of the assignment or
transfer as the Government may reasonably require to enable proper
consideration and disposal of the application.
28.3
No assignment or transfer shall be effective until the approval of
the Government is received, which approval may be given by the
Government on such terms as it may deem fit. Upon assignment or
transfer of its interest in this Contract, the assignor or
transferor shall be released and discharged from its obligations
hereunder only to the extent that such obligations are assumed by
the assignee or transferee with the approval of the Government.
82
28.4
The assignor shall clearly state in its deed of assignment, that
the assignee shall be liable for all future obligations, under the
Contract, to the extent of assignment.
28.5
Upon prior notice to the Contractor, the Government may assign or
transfer all or any part of its rights and interest under this
Contract to any Government company wholly or partly owned by the
Government and authorised by the Government to explore for and
exploit Petroleum in the Contract Area. Upon prior notice to the
Government, a Company may assign or transfer all or any part of its
rights and interest under this Contract to an Affiliate subject to
Article 6.2 and the parent company guarantee shall apply.
28.6
An assignment or transfer shall not be made so as to reduce the
Participating Interest of a constituent of the Contractor, at any
time, to less than ten percent (10%) of the total Participating
Interest of all the constituents of the Contractor, except where
the Government may, in special circumstances, so permit.
28.7
Nothing herein contained shall prohibit a Company in the normal
course of business from pledging its Participating Interest share
for purposes of financing, such as a mortgage, charge or
encumbrance on Petroleum assets or production of Petroleum at its
own risk, cost and responsibility. The Contractor shall provide the
Government with fifteen (15) days prior written notice before
entering into any such financing arrangements.
28.8
No assignment or pledge under this Article shall have the effect of
decreasing the benefits accruing to Government under this Contract
in any manner whatsoever.
83
ARTICLE 29
GUARANTEE
29.1
Each of the Companies shall deliver to the Government on
the Effective Date of this Contract:
(a)
a financial and performance guarantee, for the performance
of all obligations under the Contract, in the case of
EOGIL from a parent company of good financial standing
acceptable to the Government, in favour of the Government,
in the form and substance set out in Appendix E;
(b)
a legal opinion from its legal advisors, in a form
satisfactory to the Government, to the effect that the
aforesaid guarantee has been duly signed and delivered on
behalf of the guarantors with due authority and is legally
valid and enforceable and binding upon them.
29.2
If any of the documents referred to in Article 29.1 are not
delivered within the period specified herein, this Contract may be
cancelled by the Government upon ninety (90) days written notice of
its intention to do so.
29.3
Notwithstanding any change in the composition or shareholding of
the parent company furnishing the guarantees herein, it shall,
under no circumstances, be absolved of its obligations contained in
the guarantees provided pursuant to this Article.
84
ARTICLE 30
TERMINATION OF CONTRACT
30.1
This Contract may, subject to the provisions hereinbelow and
Article 31, be terminated by the Government without any financial
liability upon giving ninety (90) days written notice of its
intention to do so in the following circumstances, namely, that a
Company :
(a)
has knowingly submitted any false statement to the
Government in any manner which was a material
consideration in the execution of this Contract; or
(b)
has intentionally and knowingly extracted or authorised
the extraction of any mineral not authorised to be
extracted by the Contract or without the authority of
the Government except such extractions as may be
unavoidable as a result of operations conducted
hereunder in accordance with generally accepted
international petroleum industry practice which, when
so extracted, were immediately notified to the
Government; or
(c)
is adjudged bankrupt by a competent court or enters
into any agreement or scheme of composition with its
creditors or takes advantage of any law for the benefit
of debtors; or
(d)
has passed a resolution to apply to a competent court for
liquidation of the Company unless the liquidation is for
the purpose of amalgamation or reconstruction of which the
Government has been given notice and the Government is
satisfied that the Company's performance under this
Contract would not be adversely affected thereby and has
given its approval thereto; or
(e)
has assigned any interest in the Contract without the
prior consent of the Government as provided in
Article 28; or
(f)
fails to make any monetary payment required by law or
under this Contract by the due date or within the
specified period after the due date; or
(g)
fails to comply with or contravenes the provisions of
this Contract in a material particular; or
(h)
fails to comply with any final determination or award
made by a sole expert or arbitrators pursuant to
Article 33; or
(i)
has been served a notice of cancellation pursuant to
Article 29.2.
PROVIDED THAT
85
where the Contractor comprises two or more Companies, the
Government shall not exercise its rights of termination pursuant to
Article 30.1, on the occurrence, in relation to one or more, but
not all, of the Companies, of an event entitling the Government to
terminate the Contract, if any other Company or Companies
constituting the Contractor satisfies the Government that it, or
they, is/are willing and would be able to carry out the obligations
of the Contractor.
30.2
This Contract may also be terminated by the Government on giving
the requisite notice specified above if the events specified in
Article 30.1 (c) and (d) occur with respect to a company which has
given a guarantee pursuant to Article 29 subject, however, to
Article 30.3.
30.3
If the circumstances that give rise to the right of termination
under Article 30.1 (f) or (g) or Article 29.2 are remedied by the
Contractor within the ninety (90) day period or such extended
period as may be granted by the Government, following the notice of
the Government's intention to terminate the Contract as aforesaid,
such termination shall not become effective.
30.4
If the circumstance or circumstances that would otherwise result in
termination are the subject matter of proceedings under Article 33,
then termination shall not take place so long as such proceedings
continue and thereafter may only take place when and if consistent
with the arbitral award.
30.5
On termination of this Contract, for any reason whatsoever, the
rights and obligations of the Contractor shall cease but such
termination shall not affect any rights of any Party which may have
accrued or any obligations undertaken, or incurred, pursuant to
this Contract, by Government or the Contractor or any Party
comprising the Contractor and not discharged by the Contractor or
the Party prior to the date of termination.
30.6
In the event of termination pursuant to Articles 30.1 or
30.2:
(a)
the Government may require the Contractor, for a period
not exceeding one hundred and eighty (180) days from the
date of termination, to continue, for the account and at
the cost of the Government, Crude Oil or Natural Gas
production activities until the right to continue such
production has been transferred to another entity;
(b)
A Foreign Company, which is a constituent of the
Contractor, shall, subject to the provisions hereof, have
the right to remove and export all its property which has
not vested in the Government provided that in the event
that ownership of any property is in doubt,
86
or disputed, such property shall not be exported unless
and until the doubt or dispute has been settled in favour
of the Foreign Company.
87
ARTICLE 31
FORCE MAJEURE
31.1
Performance by any Party hereto of any of its obligations under
this Contract, or in fulfilling any condition of any lease granted
to such Party, or any lease issued thereunder, shall, except for
the payment of monies due under this Contract or under the Act and
the Rules or any law, be suspended or excused if, and to the extent
that, such non-performance or delay in performance is caused by
Force Majeure as defined in this Article.
31.2
For the purpose of this Contract, the term Force Majeure means any
cause or event, other than the unavailability of funds, whether
similar to or different from those enumerated herein, beyond the
reasonable control of, and unanticipated or unforeseeable by, and
not brought about at the instance of the Party claiming to be
affected by such event, or which, if anticipated or foreseeable,
could not be avoided or provided for, and which has caused the
non-performance or delay in performance. Without limitation to the
generality of the foregoing, the term Force Majeure shall include
natural phenomena or calamities, earthquakes, typhoons, fires, wars
declared or undeclared, hostilities, invasions, blockades, riots,
insurrection and civil disturbances.
31.3
Where a Party is claiming suspension of its obligations on account
of Force Majeure, it shall promptly, but in no case later than
seven (7) days after the occurrence of the event of Force Majeure,
notify the other Parties in writing giving full particulars of the
Force Majeure, the estimated duration thereof, the obligations
affected and the reasons for its suspension.
31.4
A Party claiming Force Majeure shall exercise reasonable diligence
to seek to overcome the Force Majeure event and to mitigate the
effects thereof on the performance of its obligations under this
Contract provided, however, that the settlement of strikes or
differences with employees shall be within the discretion of the
Party having the difficulty. The Party affected shall promptly
notify the other Parties as soon as the Force Majeure event has
been removed and no longer prevents it from complying with the
obligations which have been suspended and shall thereafter resume
compliance with such obligations as soon as possible. The period of
work commitment or this Contract may be extended by such additional
period as may be agreed by the Parties.
31.5
Notwithstanding anything contained herein, if an event of Force
Majeure occurs and is likely to continue for a period in excess of
thirty (30) days, the Parties shall meet to discuss the
consequences of the Force Majeure and the course of action to be
taken to mitigate the effects thereof or to be adopted in the
circumstances.
88
ARTICLE 32
APPLICABLE LAW AND LANGUAGE OF THE CONTRACT
32.1
Subject to the provisions of Article 33.12, this Contract
shall be governed and interpreted in accordance with the
laws of India.
32.2
Nothing in this Contract shall entitle the Government or the
Contractor to exercise the rights, privileges and powers conferred
upon it by this Contract in a manner which will contravene the laws
of India.
32.3
The English language shall be the language of this Contract and
shall be used in arbitral proceedings. All communication, hearings
or visual materials or documents relating to this Contract shall be
in English.
89
ARTICLE 33
SOLE EXPERT, CONCILIATION AND ARBITRATION
33.1
The Parties shall use their best efforts to settle amicably all
disputes, differences or claims arising out of or in connection
with any of the terms and conditions of this Contract or concerning
the interpretation or performance thereof.
33.2
Except for matters which, by the terms of this Contract, the
Parties have agreed to refer to a sole expert and any other matters
which the Parties may agree to so refer, any dispute, difference or
claim arising between the Parties hereunder which cannot be settled
amicably may be submitted by any Party to arbitration pursuant to
Article 33.3. Such sole expert shall be an independent and
impartial person of international standing with relevant
qualifications and experience appointed by agreement between the
Parties. Any sole expert appointed shall be acting as an expert and
not as an arbitrator and the decision of the sole expert on matters
referred to him shall be final and binding on the Parties and not
subject to arbitration. If the Parties are unable to agree on a
sole expert, the disputed subject matter may be referred to
arbitration.
33.3
Subject to the provisions herein, any unresolved dispute,
difference or claim which cannot be settled amicably within a
reasonable time may, except for those referred to in Article 33.2,
be submitted to an arbitral tribunal for final decision as
hereinafter provided.
33.4
The arbitral tribunal shall consist of three arbitrators. The Party
or Parties instituting the arbitration shall appoint one arbitrator
and the Party or Parties responding shall appoint another
arbitrator and both Parties shall so advise the other Parties. The
two arbitrators appointed by the Parties shall appoint the third
arbitrator.
33.5
Any Party may, after appointing an arbitrator, request the other
Party(ies) in writing to appoint the second arbitrator. If such
other Party fails to appoint an arbitrator within forty-five (45)
days of receipt of the written request to do so, such arbitrator
may, at the request of the first Party, be appointed by the
Secretary General of the Permanent Court of Arbitration at the
Hague, within forty-five (45) days of the date of receipt of such
request, from amongst persons who are not nationals of the country
of any of the Parties to the arbitration proceedings.
33.6
If the two arbitrators appointed by the Parties fail to agree on
the appointment of the third arbitrator within thirty (30) days of
the appointment of the second arbitrator and if the Parties do not
otherwise agree, the Secretary General of the Permanent Court of
Arbitration at the Hague
90
may, at the request of either Party and in consultation with both,
appoint the third arbitrator who shall not be a national of the
country of any Party.
33.7
If any of the arbitrators fails or is unable to act, his successor
shall be appointed in the manner set out in this Article as if he
was the first appointment.
33.8
The decision of the arbitration tribunal and, in the case of
difference among the arbitrators, the decision of the majority,
shall be final and binding upon the Parties.
33.9
Arbitration proceedings shall be conducted in accordance with the
arbitration rules of the United Nations Commission on International
Trade Law (UNCITRAL) of 1985 except that in the event of any
conflict between these rules and the provisions of this Article 33,
the provisions of this Article 33 shall govern.
33.10
The right to arbitrate disputes and claims under this Contract
shall survive the termination of this Contract.
33.11
Prior to submitting a dispute to arbitration, a Party may submit
the matter for conciliation under the UNCITRAL conciliation rules
by mutual agreement of the Parties. If the Parties fail to agree on
a conciliator (or conciliators) in accordance with the rules, the
matter may be submitted for arbitration. No arbitration proceedings
shall be instituted while conciliation proceedings are pending and
such proceedings shall be concluded within sixty (60) days.
33.12
The venue of conciliation or arbitration proceedings pursuant to
this Article, unless the Parties otherwise agree, shall be London,
England and shall be conducted in the English language. The
arbitration agreement contained in this Article 33 shall be
governed by the laws of England. Insofar as practicable, the
Parties shall continue to implement the terms of this Contract
notwithstanding the initiation of arbitral proceedings and any
pending claim or dispute.
33.13
The fees and expenses of a sole expert or conciliator appointed by
the Parties shall be borne equally by the Parties. Assessment of
the costs of arbitration including incidental expenses and
liability for the payment thereof shall be at the discretion of the
arbitrators.
91
ARTICLE 34
ENTIRE AGREEMENT, AMENDMENTS, WAIVER AND MISCELLANEOUS
34.1
This Contract supersedes and replaces any previous agreement or
understanding between the Parties, whether oral or written, on the
subject matter hereof, prior to the Effective Date of this
Contract.
34.2
This Contract shall not be amended, modified, varied or
supplemented in any respect except by an instrument in writing
signed by all the Parties, which shall state the date upon which
the amendment or modification shall become effective.
34.3
No waiver by any Party of any one or more obligations or defaults
by any other Party in the performance of this Contract shall
operate or be construed as a waiver of any other obligations or
defaults whether of a like or of a different character.
34.4
The provisions of this Contract shall inure to the benefit of and
be binding upon the Parties and their permitted assigns and
successors in interest.
34.5
In the event of any conflict between any provisions in the main
body of this Contract and any provision in the Appendices, the
provision in the main body shall prevail.
34.6
The headings of this Contract are for convenience of reference only
and shall not be taken into account in interpreting the terms of
this Contract.
92
ARTICLE 35
CERTIFICATES
35.1
A Company shall furnish, prior to execution of this Contract, a
duly authorised copy of a resolution properly and legally passed by
the Board of Directors of the Company specifying the person
authorised to execute this Contract along with a Certificate duly
signed by the Secretary or an Assistant Secretary of the Company
under its seal in this regard and to the effect that the Company
has the power and authority to enter into this Contract and to
perform its obligations thereunder and has taken all necessary
action to authorise the execution, delivery and performance of the
Contract.
93
ARTICLE 36
NOTICES
36.1
All notices, statements, and other communications to be given,
submitted or made hereunder by any Party to another shall be
sufficiently given if given in writing in the English language and
sent by registered post, postage paid, or by telegram, telex,
facsimile, radio or cable, to the address or addresses of the other
Party or Parties as follows:
a)
To the President of India through the
Secretary to the Government of India
Ministry of Petroleum and Natural Gas
Shastri Bhavan
Dr. Rajendra Prasad Marg
New Delhi 110 001, India
Attention: Joint Secretary
Facsimile No. : 91-11-384-787
b)
The Secretary
Oil & Natural Gas Corporation Limited
Tower II, 8th Floor, Jeevan Bharati
124 Connaught Circus
New Delhi 110 001, India
Facsimile No. : 91-11-331-6413
c)
Reliance Industries Limited
Maker Chambers IV, 3rd Floor
222 Nariman Point
Bombay 400 021 INDIA
Attention: Chief Executive Officer Oil & Gas
Facsimile No. :
022-204-2268
d)
Enron Oil & Gas India Ltd.
Amiya Apartments, 1st Floor
63A Linking Road, Santa Cruz (W)
Bombay 400 054 INDIA
Attention: Managing Director
Facsimile No.:
011-91-22-604-9119
with a copy to:
Enron Oil & Gas India Ltd.
1400 Smith Street
Houston, Texas 77002, U.S.A.
Attention: Vice President, Operations
Facsimile No. :
713-646-8115
36.2
Notices when given in terms of Article 36.1 shall be effective when
delivered if offered at the address of the other Parties as under
Article 36.1 during business hours on working days and, if received
outside business hours, on the next following working day.
36.3
Any Party may, by reasonable notice as provided hereunder to
94
the other Parties, change its address and other particulars
for notice purpose.
IN WITNESS WHEREOF, the representatives of the Parties to
this Contract being duly authorised have hereunto set their hands
and have executed these presents this 22 day of December 1994.
Signed for and on
behalf of the
President of India
By NAJERB JR.
In the presence of
V. RAMANI
Signed for and on behalf
of Oil & Natural Gas
Corporation Limited
By S. K. MANGLIK
In the presence of
R. N. DESAI
Signed for and on behalf
of Reliance Industries
Limited
By AKHIL GUPTA
In the presence of
Ba La SAGRAMANIA
Signed for and on behalf
of Enron Oil & Gas India Ltd.
By J. A. KOPECKY
In the presence of
E. J. VANDERMARK
95
DESCRIPTION OF CONTRACT AREA
APPENDIX A
The area comprising approximately 430 sq. km offshore India identified as
Panna Block and the area comprising approximately 777 sq. km offshore India
identified as the Mukta Block described herein and shown under map attached as
Appendix B-1 and B- 2.
Longitude and Latitude measurements are as follows:
MUKTA (about 100 km Northwest of Bombay) See Appendix B-2.
A.
B.
C.
D.
LATITUDE
19 degrees 27'00"N
19 degrees 27'00"N
19 degrees 12'00"N
19 degrees 12'00"N
LONGITUDE
71 degrees 38'00"E
71 degrees 54'00"E
71 degrees 54'00"E
71 degrees 38'00"E
PANNA (about 95 km Northwest of Bombay) See Appendix B-1.
LATITUDE
A.
B.
C.
D.
E.
19(degree)28'00"N
19(degree)28'00"N
19(degree)19'30"N
19(degree)15'00"N
19(degree)15'00"N
LONGITUDE
71(degree)54'00"E
72(degree)05'00"E
72(degree)05'00"E
72(degree)00'00"E
71(degree)54'00"E
96
WESTERN INDIA OFFSHORE
BOMBAY BASIN
WESTERN INDIA OFFSHORE
BOMBAY BASIN
97A
APPENDIX B-1
MAP OF CONTRACT AREA
PANNA BLOCK
APPENDIX B-2
MAP OF CONTRACT AREA
MUKTA BLOCK
97B
ACCOUNTING PROCEDURE
APPENDIX C
TO
PRODUCTION SHARING CONTRACT
BETWEEN
THE GOVERNMENT OF INDIA
AND
ONGC/RIL/EOGIL
98
TABLE OF CONTENTS
SECTIONS
SECTION 1:
CONTENT
1.5
1.6
1.7
1.8
1.9
1.10
GENERAL PROVISIONS
Purpose
Definitions
Inconsistency
Documentation and Statements to be Submitted by
the Contractor
Language and Units of Account
Currency Exchange Rates
Payments
Arms Length Transactions
Audit and Inspection Rights of the Government
Revision of Accounting Procedure
2.1
2.2
2.3
2.4
2.5
2.6
CLASSIFICATION, DEFINITION AND ALLOCATION OF
COSTS AND EXPENDITURES
Segregation of Costs
Exploration Costs
Development Costs
Production Costs
Service Costs
General and Administrative Costs
1.1
1.2
1.3
1.4
SECTION 2:
SECTION 3:
3.1
COSTS, EXPENSES, EXPENDITURES AND INCIDENTAL
INCOME OF THE CONTRACTOR
Costs Recoverable and Allowable Without Further
Approval of the Government
3.1.1
Surface Rights
3.1.2
Labor & Associated Costs
3.1.3
Transportation Costs
3.1.4
Charges for Services
(a) Third Party Contracts
(b) Affiliated Company Contracts
3.1.5
Communications
3.1.6
Office, Shore Bases and
Miscellaneous Facilities
3.1.7
Environmental Studies and Protection
3.1.8
Materials and Equipment
(a) General
(b) Warranty
(c) Value of Materials Charged to
the Account
3.1.9
Duties, Fees and Other Charges
3.1.10
Insurance and Losses
3.1.11
Legal Expenses
3.1.12
Training Costs
3.1.13
General and Administrative Costs
Costs Not Recoverable and Not Allowable under the
Contract
Other Costs Recoverable and Allowable
Incidental Income and Credits
Non-Duplication of Charges and Credits
3.2
3.3
3.4
3.5
99
SECTION 4:
RECORDS AND INVENTORIES OF ASSETS
Records
Inventories
4.1
4.2
SECTION 5:
PRODUCTION STATEMENT AND ROYALTY AND CESS
STATEMENT
SECTION 6:
VALUE OF PRODUCTION AND PRICING STATEMENT
SECTION 7:
STATEMENT OF COSTS, EXPENDITURES AND RECEIPTS
SECTION 8:
COST RECOVERY STATEMENT
SECTION 9:
PRODUCTION SHARING STATEMENT
SECTION 10:
END OF YEAR STATEMENT
SECTION 11:
BUDGET STATEMENT
100
ACCOUNTING PROCEDURE
SECTION 1
GENERAL PROVISIONS
1.1
PURPOSE
Generally, the purpose of this Accounting Procedure is to set out
principles and procedures of accounting which will enable the
Government of India to monitor effectively the Contractor's costs,
expenditures, production and income so that the Government's
entitlement to Profit Petroleum, royalty, cess, etc., as well as
Contractor's entitlement to Cost Petroleum and Profit Petroleum can
be accurately determined pursuant to the terms of the Contract.
More specifically, the purpose of the Accounting Procedure is to:
-
classify costs and expenditures and to define which
costs and expenditures shall be allowable for cost
recovery, production sharing and participation
purposes;
-
specify the manner in which the Contractor's accounts
shall be prepared and approved.
This Accounting Procedure is intended to apply to the provisions of
the Contract and is without prejudice to the computation of income
tax under applicable provisions of the Income Tax Act, 1961, as
amended.
1.2
DEFINITIONS
For purposes of this Accounting Procedure, the terms used herein
which are defined in the Contract shall have the same meaning when
used in this Accounting Procedure.
1.3
INCONSISTENCY
In the event of any inconsistency or conflict between the
provisions of this Accounting Procedure and the other provisions of
the Contract, the other provisions of the Contract shall prevail.
1.4
DOCUMENTATION AND STATEMENTS TO BE SUBMITTED BY THE
CONTRACTOR
1.4.1
Within thirty (30) days of the Effective Date of
the Contract, the Contractor shall submit to and
discuss with the Government a proposed outline of
charts of accounts, operating records and
reports, which outline shall reflect each of the
categories and sub-categories of costs and income
specified in Sections 2 and 3 and shall be in
accordance with generally accepted standards and
recognized accounting systems and consistent with
normal petroleum industry practice and procedures
101
for joint venture operations.
Within ninety (90) days of receiving the above
submission, the Government shall either provide
written notification of its approval of the
proposal or request, in writing, revisions to the
proposal.
Within one hundred and eighty (180) days from the
Effective Date of the Contract, the Contractor and
the Government shall agree on the outline of
charts of accounts, records and reports which
shall also describe the basis of the accounting
system and procedures to be developed and used
under this Contract. Following such agreement, the
Contractor shall expeditiously prepare and provide
the Government with formal copies of the
comprehensive charts of accounts, records and
reports and allow the Government to examine the
manuals and to review procedures which are, and
shall be, observed under the Contract.
1.4.2
1.4.3
Notwithstanding the generality of the foregoing,
the Contractor shall make regular Statements
relating to the Petroleum Operations as follows :
(i)
Production Statement and Royalty and
Cess Statement (see Section 5 of this
Accounting Procedure)
(ii)
Value of Production and Pricing
Statement (see Section 6 of this
Accounting Procedure)
(iii)
Statement of Costs, Expenditures and
Receipts (see Section 7 of this
Accounting Procedure)
(iv)
Cost Recovery Statement (see Section 8
of this Accounting Procedure)
(v)
Production Sharing Statement (see
Section 9 of this Accounting Procedure)
(vi)
End of Year Statement (see Section 10
of this Accounting Procedure)
(vii)
Budget Statement (see Section 11 of
this Accounting Procedure)
All reports and statements shall be prepared in
accordance with the Contract and the laws of India
and, where there are no relevant provisions in
either of these, in accordance with generally
accepted practices in the international petroleum
102
industry.
1.4.4
1.5
Each of the entities constituting the Contractor
shall be responsible for maintaining its own
accounting records in order to comply with all
legal requirements and to support all returns or
any other accounting reports required by any
Government authority in relation to the Petroleum
Operations. However, for the purposes of giving
effect to this Accounting Procedure, the
Contractor shall appoint, and notify the
Government in writing thereof, one of the Parties
constituting Contractor who shall be responsible
for maintaining, at its business office in India,
on behalf of the Contractor, all the accounts of
the Petroleum Operations in accordance with the
provisions of the Accounting Procedure and the
Contract.
LANGUAGE AND UNITS OF ACCOUNT
All accounts, records, books, reports and statements shall be
maintained on an accrual basis and prepared in the English
language. The accounts shall be maintained in United States
Dollars, which shall be the controlling currency of account for
cost recovery, production sharing and participation purposes.
Metric units and Barrels shall be employed for measurements
required under the Contract. Where necessary for clarification, the
Contractor may also maintain accounts and records in other
languages, currencies and units. Following any new discovery of
Petroleum the Parties shall meet to establish specific principles
and procedures for identifying all costs, expenditures, receipts
and income with respect to the Contract Area.
1.6
CURRENCY EXCHANGE RATES
1.6.1
1.6.2
For translation purposes between United States
Dollars and Indian Rupees or any other currency,
the previous month's average of the daily means
of the buying and selling rates of exchange as
quoted by the State Bank of India (or any other
financial body as may be mutually agreed between
the Parties) shall be used for the month in which
the revenues, costs, expenditures, receipts or
income are recorded. However, in the case of any
single non-US Dollar transaction in excess of the
equivalent of one hundred thousand US Dollars
(US$100,000), the conversion into US Dollars
shall be performed on the basis of the average of
the applicable exchange rates for the day on
which the transaction occurred.
Any realized or unrealized gains or losses from
the exchange of currency in respect of Petroleum
Operations shall be credited or charged to the
accounts. A record of the exchange rates used in
converting Indian Rupees or any other currencies
103
into United States Dollars as specified in Section
1.6.1 shall be maintained by the Contractor and
shall be identified in the relevant statements
required to be submitted by the Contractor in
accordance with Section 1.4.2.
1.7
PAYMENTS
1.7.1
Subject to the foreign exchange laws and
regulations prevailing from time to time, all
payments between the Parties shall, unless
otherwise agreed, be in United States Dollars and
shall be made through a bank designated by each
receiving Party.
1.8
1.7.2
Unless otherwise specified, all sums due under the
Contract shall be paid within forty-five (45) days
from the date on which the obligation to pay was
incurred.
1.7.3
Unless otherwise specified, all sums due by one
Party to the other under the Contract during any
month shall, for each day such sums are overdue
during such month, bear interest compounded daily
at the applicable LIBOR plus one percentage (1%)
point.
ARMS LENGTH TRANSACTIONS
Unless otherwise specifically provided for in the Contract, all
transactions giving rise to revenues, costs or expenditures which
will be credited or charged to the accounts prepared, maintained or
submitted hereunder shall be conducted at arms length or on such a
basis as will assure that all such revenues, costs or expenditures
will be equal to or better than, as the case may be, would result
from a transaction conducted at arms length on a competitive basis
with third parties. For the purposes of clarification, this means
revenues would be equal to or higher and costs would be equal to or
lower.
1.9
AUDIT AND INSPECTION RIGHTS OF THE GOVERNMENT
1.9.1
Without prejudice to statutory rights, the
Government, upon at least ninety (90) days
advance written notice to the Contractor, shall
have the right to inspect and audit, during
normal business hours , all records and documents
supporting costs, expenditures, expenses,
receipts and income, such as Contractor's
accounts, books, records, invoices, cash
vouchers, debit notes, price lists or similar
documentation with respect to the Petroleum
Operations conducted hereunder in each Financial
Year, within two (2) years (or such longer period
104
as may be required in exceptional circumstances)
from the end of such Financial Year.
1.9.2
The Government may undertake the conduct of the
audit either through its own representatives or
through a qualified firm of recognized
international chartered accountants, registered in
India, appointed for the purpose by the
Government.
1.9.3
In conducting the audit, the Government or its
auditors shall be entitled to examine and verify,
at reasonable times, all charges and credits
relating to Contractor's activities under the
Contract and all books of account, accounting
entries, material records and inventories,
vouchers, payrolls, invoices and any other
documents, correspondence and records considered
necessary by the Government to audit and verify
the charges and credits. The auditors shall also
have the right, in connection with such audit, to
visit and inspect, at reasonable times, all
sites, plants, facilities, warehouses and offices
of the Contractor directly or indirectly serving
the Petroleum Operations, and to physically
examine other property, facilities and stocks
used in Petroleum Operations, wherever located
and to question personnel associated with those
operations. Where the Government requires
verification of charges made by an Affiliate, the
Government shall have the right to obtain an
audit certificate from an internationally
recognized firm of public accountants acceptable
to both the Government and the Contractor, which
may be the Contractor's statutory auditor. Any
and all such costs shall be for the Government's
account.
1.9.4
Any audit exceptions shall be made by the
Government in writing and notified to the
Contractor within one hundred and twenty (120)
days following completion of the audit in
question.
1.9.5
The Contractor shall answer any notice of
exception under Section 1.9.4 within one hundred
and twenty (120) days of the receipt of such
notice. Where the Contractor has, after the one
hundred and twenty (120) days, failed to answer a
notice of exception, the exception shall prevail.
1.9.6
All agreed adjustments resulting from an audit and
all adjustments required by prevailing exceptions
shall be promptly made in the Contractor's
accounts and any consequential
105
adjustments to the Government's entitlement to
Petroleum shall be made as promptly as
practicable.
1.9.7
1.10
If the Contractor and the Government are unable
to reach final agreement on proposed audit
adjustments, either Party may refer any dispute
thereon to a sole expert as provided for in the
Contract. So long as any issues are outstanding
with respect to an audit, the Contractor shall
maintain the relevant documents and permit
inspection thereof until the issue is resolved.
REVISION OF THE ACCOUNTING PROCEDURE
1.10.1
By mutual agreement between the Government and the
Contractor, this Accounting Procedure may be
revised from time to time, in writing, signed by
the Parties, stating the date upon which the
amendments shall become effective.
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SECTION 2
CLASSIFICATION, DEFINITION AND ALLOCATION
OF COSTS AND EXPENDITURES
2.1
SEGREGATION OF COSTS
Costs shall be segregated in accordance with the purposes for which
such expenditures are made. All costs and expenditures allowable
under Section 3, relating to Petroleum Operations, shall be
classified, defined and allocated as set out below in this Section.
Expenditure records shall be maintained in such a way as to enable
proper allocation.
2.2
EXPLORATION COSTS
Exploration Costs are all direct and allocated indirect
expenditures incurred in the search for Petroleum in an area which
is, or was at the time when such costs were incurred, part of the
Contract Area, including expenditures incurred in respect of:
2.2.1
Aerial, geophysical, geochemical,
palaeontological, geological, topographical and
seismic surveys, analyses and studies and their
interpretation.
2.2.2
Core hole drilling and water well drilling.
2.2.3
Labor, materials, supplies and services used in
drilling Wells with the object of finding
Petroleum or in drilling Appraisal Wells provided
that if such Wells are completed as producing
Wells, the costs of completion thereof shall be
classified as Development Costs.
2.2.4
Facilities used solely in support of the purposes
described in Sections 2.2.1, 2.2.2 and 2.2.3
above, including access roads, all separately
identified.
2.2.5
Any Service Costs and General and Administrative
Costs directly incurred on exploration activities
and identifiable as such and a portion of the
remaining Service Costs and General and
Administrative Costs allocated to Exploration
Operations determined by the proportionate share
of total Contract Costs (excluding General and
Administrative Costs and Service Costs) represented by all other Exploration Costs.
2.2.6
Geological and geophysical information purchased
or acquired in connection with Exploration
Operations.
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2.2.7
2.3
Any other expenditure incurred in the search for
Petroleum not covered under Sections 2.3 or 2.4.
DEVELOPMENT COSTS
Development Costs are all direct and allocated indirect
expenditures incurred with respect to the development of the
Contract Area including expenditures incurred on account of:
2.4
2.3.1
Drilling Development Wells, whether these Wells
are dry or producing and drilling Wells for the
injection of water or Gas to enhance recovery of
Petroleum and Recompletion or working over of
existing or service wells.
2.3.2
Purchase, installation or construction of
production, transport and storage facilities for
production of Petroleum from a Field, such as
pipelines, flow lines, production and treatment
units, wellhead equipment, subsurface equipment,
enhanced recovery systems, offshore and onshore
platforms, export terminals and piers, harbours
and related facilities and access roads for
production activities.
2.3.3
Engineering and design studies for facilities
referred to in Section 2.3.2.
2.3.4
Any Service Costs, joint Development Plans and
General and Administrative Costs directly
incurred in Development Operations and
identifiable as such and a portion of the
remaining Service Costs and General and
Administrative Costs allocated to development
activities, determined by the proportionate share
of total Contract Costs (excluding General and
Administrative Costs and Service Costs) represented by all other Development Costs.
PRODUCTION COSTS
2.4.1
Production Costs are expenditures incurred on
Production Operations in respect of the Contract
Area after the start of production from the Field
(which are other than Exploration and Development
Costs). The balance of General and Administrative Costs and Service Costs not allocated to
Exploration Costs or Development Costs shall be
allocated to Production Costs.
2.4.2
Production Costs shall include costs for
completion of Exploration Wells by way of
installation of casing or equipment or otherwise
or for the purpose of bringing a Well into use as
a producing Well or as a Well for the injection
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of water or Gas to enhance recovery of Petroleum
and Recompletion or working over of existing or
service wells.
2.5
SERVICE COSTS
Service Costs are direct and indirect expenditures incurred in
support of Petroleum Operations in the Contract Area, including
expenditures on insurance, environmental protection, warehouses,
piers, marine vessels, vehicles, motorized rolling equipment,
aircraft, fire and security stations, workshops, water and sewerage
plants, power plants, housing, community and recreational
facilities and furniture and tools and equipment used in these
activities. Service Costs in any Year shall include the costs
incurred in such Year to purchase and/or construct the facilities
as well as the annual costs of maintaining and operating the same,
each to be identified separately. All Service Costs shall be
regularly allocated as specified in Sections 2.2.5, 2.3.4 and 2.4
to Exploration Costs, Development Costs and Production Costs and
shall be separately shown under each of these categories. Where
Service Costs are made in respect of shared facilities, the basis
of allocation of costs to Petroleum Operations hereunder shall be
on the basis of gross expenditures.
2.6
GENERAL AND ADMINISTRATIVE COSTS
General and Administrative Costs are expenditures incurred on
general administration and management primarily and principally
related to Petroleum Operations in or in connection with the
Contract Area, and shall include:
2.6.1
main office, field office and general
administrative expenditures in India, including
supervisory, accounting and employee relations
services;
2.6.2
an annual overhead charge for services rendered
by the parent company or an Affiliate of the
Operator outside India to support and manage
Petroleum Operations under the Contract, and for
staff advice and assistance including financial,
legal, accounting and employee relations
services, but excluding any remuneration for
services charged separately under this Accounting
Procedure calculated on the basis of one percent
(1%) of expenditures.
2.6.3
The expenditures used to calculate the monthly
indirect charge shall not include the indirect
charge (calculated either as a percentage of
expenditures or as a minimum monthly charge),
rentals on surface rights acquired and maintained
for the joint account, guarantee deposits,
109
concession acquisition costs, bonuses paid in
accordance with the Contract, royalties, value
added taxes and taxes paid under the Contract,
settlement of claims, proceeds from the sale of
assets (including division in kind) amounting to
more than US$10,000 per transaction, and similar
items mutually agreed upon by the parties.
Credits arising from any government subsidy
payment and disposition of joint account property
shall not be deducted from total expenditures in
determining such charge.
2.6.4
The indirect charges provided for in this Section
may be amended periodically by mutual agreement
between the Parties if, in practice, these charges
are found to be insufficient or
excessive.
110
SECTION 3
COSTS, EXPENSES, EXPENDITURES AND INCIDENTAL
INCOME OF THE CONTRACTOR
3.1
COSTS RECOVERABLE AND ALLOWABLE WITHOUT FURTHER APPROVAL OF
THE GOVERNMENT.
Costs incurred by the Contractor on Petroleum Operations pursuant
to the Contract as classified under the headings referred to in
Section 2 shall be allowable for the purposes of the Contract
except to the extent provided in Section 3.2 or elsewhere in this
Accounting Procedure, and subject to audit as provided for herein.
3.1.1
Surface Rights
All direct costs necessary for the acquisition,
renewal or relinquishment of surface rights
acquired and maintained in force for the purposes
of the Contract except as provided in Section
3.1.9. Why expected? How applicable?
3.1.2
Labor and Associated Costs
(a)
Costs of all Contractor's locally recruited
employees who are directly engaged in the
conduct of Petroleum Operations under the
Contract in India. Such costs shall include
the costs of employee benefits and
Government benefits for employees and
levies imposed on the Contractor as an
employer, transportation and relocation
costs within India of the employee and such
members of the employee's family (limited
to spouse and dependent children) as
required by law or customary practice in
India. If such employees are engaged in
other activities in India, in addition to
Petroleum Operations, the cost of such
employees shall be apportioned on a time
sheet basis according to sound and
acceptable accounting principles.
(b)
Assigned Personnel
Costs of salaries and wages, including
bonuses, of the Contractor's employees
directly and necessarily engaged in the
conduct of the Petroleum Operations under
the Contract, whether temporarily or
permanently assigned, irrespective of the
location of such employees, it being
understood that in the case of those
personnel only a portion of whose time is
wholly dedicated to Petroleum Operations
under the Contract, only that pro rata
portion of applicable salaries, wages
111
and other costs, as specified in Sections
3.1.2(c), (d), (e)and (f) shall be charged
and the basis of such pro rata allocation
shall be specified.
(c)
Expenses or contributions made pursuant to
assessments or obligations imposed under
the laws of India which are applicable to
the Contractor's cost of salaries and
wages.
(d)
The Contractor's cost of established plans
for employees' group life insurance,
hospitalization, pension, retirement and
other benefit plans of a like nature
customarily granted to the Contractor's
employees provided, however, that such
costs are in accordance with generally
accepted standards in the international
petroleum industry, applicable to salaries
and wages chargeable to Petroleum
Operations under Section 3.1.2(b) above.
(e)
Personal Income taxes where and when they
are paid by the Contractor to the
Government of India for the employee, in
accordance with the Contractor's standard
personnel policies.
(f)
Reasonable transportation and travel
expenses of employees of the Contractor,
including those made for travel and
relocation of the expatriate employees,
including their dependent family and
personal effects, assigned to India whose
salaries and wages are chargeable to
Petroleum Operations under Section
3.1.2(b). Actual transportation expenses of
personnel transferred to Petroleum
Operations from their country of origin
and/or relocation to their country of
origin shall be charged to the Petroleum
Operations. Where such transfer or
relocation is to or from a country other
than the country of origin there shall be
no reimbursement.
Transportation cost as used in this Section shall
mean the cost of freight and passenger service and
any accountable incidental expenditures related to
transfer travel and authorized under Contractor's
standard personnel policies. Contractor shall
ensure that all expenditures related to
transportation costs are equitably allocated to
the activities which have benefited from the
personnel concerned.
112
3.1.3
Transportation Costs
The reasonable cost of transportation of
equipment, materials and supplies within India and
from outside India to India necessary for the
conduct of Petroleum Operations under the
Contract, including, but not limited to, directly
related costs such as unloading charges, dock fees
and inland and ocean freight charges.
3.1.4
Charges for Services
(a)
Third Party Contracts
The actual costs of contract services,
services of professional consultants,
utilities and other services necessary for
the conduct of Petroleum Operations under
the Contract performed by third parties
other than an Affiliate of the Contractor,
provided that the transactions resulting in
such costs are undertaken pursuant to
Section 1.8 of this Accounting Procedure.
(b)
Affiliated Company Contracts
(i)
Professional and Administrative
Services and Expenses
Cost of professional and
administrative services provided
by any Affiliate for the direct
benefit of Petroleum Operations,
including, but not limited to,
services provided by the
production, exploration, legal,
financial, insurance, accounting
and computer services divisions
other than those covered by
Section 3.1.4(b)(ii) which
Contractor may use in lieu of
having its own employees.
Charges shall be equal to the
actual cost of providing their
services, shall not include any
element of profit and shall not
be any higher than the most
favorable prices charged by the
Affiliate to third parties for
comparable services under
similar terms and conditions
elsewhere and will be fair and
reasonable in the light of
prevailing international
petroleum industry practice and
experience.
113
(ii)
Scientific or Technical
Personnel
Cost of scientific or technical
personnel services provided by
any Affiliate of Contractor for
the direct benefit of Petroleum
Operations, which cost shall be
charged on a cost of service
basis. Charges therefor shall
not exceed charges for
comparable services currently
provided by outside technical
service organizations of
comparable qualifications.
Unless the work to be done by
such personnel is covered by an
approved Work Programme and
Budget, Operator shall not
authorize work by such personnel
without approval of the
Management Committee.
(c)
Equipment, facilities and property owned
and furnished by the Contractor's
Affiliates, at rates commensurate with the
cost of ownership and operation provided,
however, that such rates shall not exceed
those currently prevailing for the supply
of like equipment, facilities and property
on comparable terms in the area where the
Petroleum Operations are being conducted.
The equipment and facilities referred to
herein shall exclude major investment items
such as (but not limited to) drilling rigs,
producing platforms, oil treating
facilities, oil and gas loading and
transportation systems, storage and
terminal facilities and other major
facilities, rates for which shall be
subject to separate agreement with the
Government.
3.1.5
Communications
Cost of acquiring, leasing, installing, operating,
repairing and maintaining communication systems
including satellite, radio and microwave
facilities between the Contract Area and the
Contractor's base facility, offices, helicopter
bases, port and railway yards.
3.1.6
Office, Shore Bases and Miscellaneous Facilities
Net cost to Contractor of establishing,
maintaining and operating any office, sub-office,
shore base facility, warehouse, housing or other
facility directly serving the Petroleum
Operations. If any such facility services contract
114
areas other than the Contract Area, or any
business other than Petroleum Operations, the net
costs thereof shall be allocated on an equitable
and consistent basis.
3.1.7
Environmental Studies and Protection
Costs incurred in conducting the environmental
impact studies for the Contract Area, and in
taking environmental protection measures pursuant
to the terms of the Contract.
3.1.8
Materials and Equipment
(a)
General
So far as is practicable and consistent
with efficient and economical operation,
only such material shall be purchased or
furnished by the Contractor for use in the
Petroleum Operations as may be required for
use in the reasonably foreseeable future
and the accumulation of surplus stocks
shall be avoided to the extent possible.
Material and equipment held in inventory
shall only be charged to the accounts when
such material is removed from inventory and
used in Petroleum Operations. Contractor
shall be allowed to recover interest at the
LIBOR rate plus one percent (1%) for
reasonable inventories it carries. Costs
shall be charged to the accounting records
and books based on the average cost method.
(b)
Warranty
In the case of defective material or
equipment, any adjustment received by the
Contractor from the suppliers or
manufacturers or their agents in respect of
any warranty on material or equipment shall
be credited to the accounts under the
Contract.
(c)
Value of Materials Charged to the Accounts
Under the Contract.
(i)
Except as otherwise provided in
115
subparagraph (b), materials
purchased by the Contractor and
used in the Petroleum Operations
shall be valued to include
invoice price less trade and
cash discounts, if any, purchase
and procurement fees plus
freight and forwarding charges
between point of
supply and point of shipment,
freight to port of destination,
insurance, taxes, customs
duties, consular fees, other
items chargeable against
imported material and, where
applicable , handling and
transportation costs from point
of importation to or from
warehouse or operating site, and
these costs shall not exceed
those currently prevailing in
normal arms length transactions
on the open market.
(ii)
Material purchased from or sold to
Affiliates or transferred to or
from activities of the Contractor
other than Petroleum Operations
under the Contract:
(aa)
new material (hereinafter
referred to as condition A)
shall be valued at the current
international price which shall
not exceed the price prevailing
in normal arms length transactions on the open market;
(bb)
used material which is in sound
and serviceable condition and is
suitable for reuse without
reconditioning (hereinafter
referred to as condition B)
shall be priced at not more than
seventy-five percent (75%) of
the current price of the above
mentioned new materials;
(cc)
used material which cannot be
classified as condition B, but
which, after reconditioning,
will be further serviceable for
original function as good
second-hand condition B material
or is serviceable for original
function, but substantially not
suitable for reconditioning
(hereinafter referred to as
condition C) shall be priced at
not more than fifty per cent
(50%) of the current price of
the new material referred to
above as condition A.
The cost of reconditioning shall be charged to the
reconditioned material, provided that the
condition C material value plus the cost of
116
reconditioning does not exceed the value of
condition B material.
Material which cannot be classified as condition B
or condition C shall be priced at a value
commensurate with its use.
Material involving erection expenditure shall be
charged at the applicable condition percentage
(referred to above) of the current knocked-down
price of new material referred to above as
condition A.
When the use of material is temporary and its
service to the Petroleum Operations does not
justify the reduction in price in relation to
materials referred to above as conditions B and C,
such material shall be priced on a basis that will
result in a net charge to the accounts under the
Contract consistent with the value of the service
rendered.
3.1.9
Duties, Fees and Other Charges
Any duties, levies, fees, charges and any other
assessments levied by any governmental or taxing
authority in connection with the Contractor's
activities under the Contract and paid directly by
the Contractor except corporate income tax payable
by the constituents of the Contractor. If Operator
or its Affiliate is subject to income or
withholding tax as a result of service performed
at cost for Petroleum Operations under the
Agreement, its charges for such services may be
increased by the amount of such taxes incurred
("grossed up"), provided such charges have not
been otherwise recovered or a tax credit received.
3.1.10
Insurance and Losses
Insurance premia and costs incurred for insurance
required by law or pursuant to Article 24 of the
Contract, provided that such insurance is
customary, affords prudent protection against risk
and is at a premium no higher than that charged on
a competitive basis by insurance companies which
are not Affiliates. Actual costs and losses
incurred shall be allowable to the extent not made
good by insurance. Such costs may include, but are
not limited to, repair and replacement of property
resulting from damages or losses incurred by fire,
flood, storm, theft, accident or such other cause.
117
3.1.11
Legal Expenses
All reasonable costs and expenses resulting from
the handling, investigating, asserting, defending,
or settling of any claim or legal action necessary
or expedient for the procuring, perfecting,
retention and protection of the Contract Area and
in defending or prosecuting lawsuits involving the
Contract Area or any third party claim arising out
of Petroleum Operations under the Contract, or
sums paid in respect of legal services necessary
for the protection of the joint interest of
Government and the Contractor, shall be allowable.
Such expenditures shall include attorney's fees,
court costs, costs of investigation and
procurement of evidence and amounts paid in
settlement or satisfaction of any such litigation
and claims provided such costs are not covered
elsewhere in the Accounting Procedure. Where legal
services are rendered in such matters by salaried
or regularly retained lawyers of the Contractor or
an Affiliate, such compensation shall be included
instead under Sections 3.1.2 or 3.1.4(b)(i) above
as applicable.
3.1.12
Training Costs
All costs and expenses incurred by the Contractor
in training as is required under Article 22 of the
Contract.
3.1.13
General and Administrative Costs
The costs described in Section 2.6.1 and the
charge described in Section 2.6.2 of this
Accounting Procedure.
3.2
COSTS NOT RECOVERABLE AND NOT ALLOWABLE UNDER THE CONTRACT
The following costs and expenses shall not be recoverable or
allowable (whether directly as such or indirectly as part of any
other charges or expenses) for cost recovery and production sharing
purposes under the Contract:
(i)
(ii)
costs and charges incurred before the Effective
Date including costs in respect of preparation,
signature or ratification of this Contract except
as otherwise provided in Article 13.1;
expenditures in respect of any financial
transaction to negotiate, float or otherwise
obtain or secure funds for Petroleum Operations
including, but not limited to, interest,
commission, brokerage and fees related to such
118
transactions, and exchange losses on loans or
other financing;
(iii)
(iv)
(v)
(vi)
(vii)
(viii)
expenditures incurred in obtaining, furnishing and
maintaining the guarantees required under the
Contract and any other amounts spent on
indemnities with regard to non-fulfillment of
contractual obligations;
attorney's fees and other costs and charges in
connection with arbitration proceedings and sole
expert determination pursuant to the Contract;
fines and penalties imposed by courts of law of
the Republic of India;
donations and contributions;
expenditures for the creation of any partnership
or joint venture arrangement;
(ix)
amounts paid with respect to non-fulfillment of
contractual obligations;
(x)
costs incurred as a result of failure to insure
where insurance is required pursuant to the
Contract;
(xi)
(xii)
3.3
costs of marketing or transportation of Petroleum
beyond the Delivery Point;
costs and expenditures incurred as a result of
wilful misconduct or gross negligence of the
Contractor's supervisory personnel;
payments pursuant to Article 16 of the Contract.
OTHER COSTS RECOVERABLE AND ALLOWABLE.
Any other costs and expenditures not included in Section 3.1 or 3.2
of this Accounting Procedure but which have been incurred by the
Contractor for the necessary and proper conduct of Petroleum
Operations pursuant to an approved Work Programme and Budget.
3.4
INCIDENTAL INCOME AND CREDITS
All incidental income and proceeds received from Petroleum
Operations under the Contract, including but not limited to the
items listed below, shall be credited to the accounts under the
Contract and shall be taken into account for cost recovery,
production sharing and participation purposes in the manner
described in Articles 13 and 14 of the Contract:
(i)
The proceeds of any insurance or claim or
119
judicial awards in connection with Petroleum
Operations under the Contract or any assets
charged to the accounts under the Contract where
such operations or assets have been insured and
the premia charged to the accounts under the
Contract;
(ii)
(iii)
(iv)
Any adjustment received by the Contractor from the
suppliers/manufacturers or their agents in
connection with defective material, the cost of
which was previously charged by the Contractor to
the accounts under the Contract;
Rentals, refunds or other credits received by the
Contractor which apply to any charge which has
been made to the accounts under the Contract;
(v)
Prices originally charged to the accounts under
the Contract for materials subsequently exported
from the Republic of India without being used in
Petroleum Operations under the Contract;
(vi)
Proceeds from the sale or exchange by the
Contractor of plant or facilities from a Field,
the acquisition costs of which have been charged
to the accounts under the Contract for the
relevant Field;
(vii)
3.5
Revenue received from third parties for the use
of property or assets, the cost of which has been
charged to the accounts under the Contract;
Legal costs charged to the accounts under Section
3.1.11 of this Accounting Procedure and
subsequently recovered by the Contractor.
NON-DUPLICATION OF CHARGES AND CREDITS
Notwithstanding any provision to the contrary in this Accounting
Procedure, it is the intention that there shall be no duplication
of charges or credits to the accounts under the Contract.
120
SECTION 4
RECORDS AND INVENTORIES OF ASSETS
4.1
RECORDS
4.1.1
The Contractor shall keep and maintain detailed
records of property and assets in use for or in
connection with Petroleum Operations under the
Contract in accordance with normal practices in
exploration and production activities of the
international petroleum industry. Such records
shall include information on quantities, location
and condition of such property and assets, and
whether such property or assets are leased or
owned.
4.1.2
4.2
INVENTORIES
4.2.1
4.2.2
The Contractor shall furnish annually particulars
to the Government, by notice in writing as
provided in the Contract, of all major assets
acquired by the Contractor to be used for or in
connection with Petroleum Operations.
The Contractor shall:
(a)
not less than once every twelve (12)
Calendar Months with respect to movable
assets take an inventory of the
controllable assets used for or in
connection with Petroleum Operations in
terms of the Contract and address and
deliver such inventory to the Government
with a statement of the principles upon
which valuation of the assets mentioned in
such inventory has been based. Controllable
assets means those assets the Operator
shall submit to detailed record keeping.
(b)
not less than once every three (3) years
with respect to immovable assets, take an
inventory of the assets used for or in
connection with Petroleum Operations in
terms of the Contract and address and
deliver such inventory to the Government
together with a written statement of the
principles upon which valuation of the
assets mentioned in such inventory has been
based. Immovable assets means those assets
which are placed in service and have an
original cost in excess of Fifty Thousand
United States Dollars (US$50,000).
The Contractor shall give the Government at least
thirty (30) days notice in writing in the manner
provided for in the Contract of its intention to
take the inventory referred to in Section 4.2.1
121
and the Government shall have the right to be
represented when such inventory is taken.
4.2.3
When an assignment of rights under the Contract
takes place, a special inventory shall be taken by
the Contractor at the request of the assignee
provided that the cost of such inventory is borne
by the assignee and paid to the Contractor.
4.2.4
In order to give effect to Article 27 of the
Contract, the Contractor shall provide the
Government with a comprehensive list of all
relevant assets when requested by the Government
to do so.
122
SECTION 5
PRODUCTION STATEMENT AND ROYALTY AND CESS STATEMENT
5.1
From the date of first production, after the Effective Date, of
Petroleum from the Contract Area, the Contractor shall submit a
Production Statement for each Calendar Month to Government showing
the following information separately for each producing field and
in aggregate for the Contract Area:
5.1.1
The quantity of Crude Oil produced and saved.
5.1.2
The quality and characteristics of such Crude Oil
produced and saved.
5.1.3
The quantity of Associated Natural Gas and Non
Associated Natural Gas produced and saved.
5.1.4
The quality, characteristics and composition of
such Natural Gas produced and saved.
5.1.5
The quantities of Crude Oil and Natural Gas used
for the purposes of carrying on drilling and
Production Operations and pumping to field
storage, as well as quantities reinjected.
5.1.6
The quantities of Crude Oil and Natural Gas
unavoidably lost.
5.1.7
The quantities of Natural Gas flared and vented.
5.1.8
The size of Petroleum stocks held on the first
day of the Calendar Month in question.
5.1.9
The size of Petroleum stocks held on the last day
of the Calendar Month in question.
5.1.10
The quantities of Natural Gas reinjected into the
Petroleum Reservoir.
5.1.11
The number of days in the Calendar Month during
which Petroleum was produced from each Field.
5.1.12
The Gas/Oil ratio for each Field for the relevant
Calendar Month.
5.1.13
The water/Oil ratio for each Field for the
relevant Calendar Month, if available.
5.2
All quantities shown in this Statement shall be expressed in
both volumetric terms (barrels of oil and cubic metres of
gas) and in weight (metric tonnes).
5.3
The Government may direct in writing that the Contractor
include other particulars relating to the production of
Petroleum in its Production Statement, and the Contractor
123
shall to the extent possible comply with such direction.
5.4
The Production Statement for each Calendar Month shall be submitted
to Government no later than ten (10) days after the end of such
Calendar Month for Oil and the immediately succeeding Calendar
Month for Gas.
5.5
The Contractor shall, for the purposes of Article 15, submit a
statement to Government providing the calculation of the amount of
royalty and cess, separately, paid with respect to each Calendar
Month for each producing Field and in aggregate for the Contract
Area. The statement shall show the following information:
5.6
5.5.1
The quantity of Crude Oil and Condensate produced
and saved.
5.5.2
The quantity of ANG and NANG produced and saved.
5.5.3
The amount of royalty and cess, separately, paid
on Crude Oil and Condensate produced, saved and
sold and the particulars of the calculation
thereof.
5.5.4
The amount of royalty paid on ANG and NANG and
the particulars of the calculation thereof.
The Royalty and Cess Statement for each Calendar Month shall be
submitted to Government no later than twenty-one (21) days after
the end of such Calendar Month for Oil and the most recently
available Calendar Month for Gas.
124
SECTION 6
VALUE OF PRODUCTION AND PRICING STATEMENT
6.1
The Contractor shall prepare a Statement providing
calculations of the value of Crude Oil produced and saved
during each Calendar Month. This Statement shall contain
the following information:
6.1.1
The quantities, prices and receipts realized by
the Contractor as a result of sales of Crude Oil
to third parties (with any sales to Government
being separately identified) made during the
Calendar Month in question.
6.1.2
The quantities, prices and receipts realized
therefor by the Contractor as a result of sales of
Crude Oil made during the Calendar Month in
question, other than to third parties.
6.1.3
The quantities of Crude Oil appropriated by the
Contractor to refining or other processing without
otherwise being disposed of in the form of Crude
Oil.
6.1.4
The value of stocks of Crude Oil on the first day
of the Calendar Month in question.
6.1.5
The value of stocks of Crude Oil on the last day
of the Calendar Month in question.
6.1.6
The percentage volume of total sales of Crude Oil
made by the Contractor during the Calendar Month
that are Arms Length Sales to third parties.
6.1.7
Information available to the Contractor, in so
far as required for the purposes of Article 19 of
the Contract, concerning the prices of
competitive crude oils produced by the main
petroleum producing and exporting countries
including contract prices, discounts and premia,
and prices obtained on the spot markets.
6.2
The Contractor shall prepare a statement providing calculations of
the value of ANG and NANG produced and sold during each Calendar
Month for the most recently available Calendar Month. This
Statement shall contain all information of the type specified in
Section 6.1 for Crude Oil as is applicable to Gas and such other
relevant information as may be required by the Government.
6.3
The Statements required pursuant to Sections 6.1 and 6.2
shall include a detailed breakdown of the calculation of the
prices of Crude Oil, Associated Natural Gas and Non
Associated Natural Gas.
125
6.4
The Value of Production and Pricing Statement for each Calendar
Month shall be submitted to Government not later than twenty-one
(21) days after the end of such Calendar Month for Oil and the most
recently available Calendar Month for Gas.
126
SECTION 7
STATEMENT OF COSTS, EXPENDITURES AND RECEIPTS
7.1
The Contractor shall prepare with respect to each Calendar Quarter
a Statement of Costs, Expenditures and Receipts under the Contract.
The statement shall distinguish between Exploration costs,
Development Costs and Production Costs and shall separately
identify all significant items of costs and expenditure as itemized
in Section 3 of this Accounting Procedure within these categories.
The statement of receipts shall distinguish between income from the
sale of Petroleum and incidental income of the sort itemized in
Section 3.4 of this Accounting Procedure. If the Government is not
satisfied with the categories, it shall be entitled to request a
more detailed breakdown. The Statement shall show the following:
7.2
7.1.1
Actual costs, expenditures and receipts for the
Calendar Quarter in question.
7.1.2
Cumulative costs, expenditures and receipts for
the Year in question.
7.1.3
Latest forecast of cumulative costs, expenditures
and receipts at the Year end.
7.1.4
Variations between budget forecast and latest
forecast and explanations thereof.
The Statement of Costs, Expenditure and Receipts of each Calendar
Quarter shall be submitted to Government not later than sixty (60)
days after the end of such Calendar Quarter.
127
SECTION 8
COST RECOVERY STATEMENT
8.1
The Contractor shall prepare with respect to each Calendar
Quarter a Cost Recovery Statement containing the following
information:
8.1.1
Unrecovered Contract Costs carried forward from
the previous Calendar Quarter, if any.
8.1.2
Contract costs for the Calendar Quarter in
question.
8.1.3
Total Contract Costs for the Calendar Quarter in
question (Section 8.1.1 plus Section 8.1.2).
8.1.4
Quantity and value of Cost Petroleum taken and
disposed of by the Contractor for the Calendar
Quarter in question.
8.1.5
Contract Costs recovered during the Calendar
Quarter in question.
8.1.6
Total cumulative amount of Contract Costs
recovered up to the end of the Calendar Quarter
in question.
8.1.7
Amount of Contract Costs to be carried forward
into the next Calendar Quarter.
8.2
Where necessary and possible, the information to be provided under
Section 8.1 shall be identified separately Field by Field and also
separately for Crude Oil, Associated Natural Gas and Non Associated
Natural Gas.
8.3
The cost recovery information required pursuant to
Subsection 8.1 above shall be presented in sufficient detail
so as to enable Government to identify how the cost of
assets are being recovered.
8.4
The Cost Recovery Statement for each Calendar Quarter shall be
submitted to Government not later than sixty (60) days after the
end of such Calendar Quarter.
128
SECTION 9
PRODUCTION SHARING STATEMENT
9.1
The Contractor shall prepare with respect to each Calendar
Quarter a Production Sharing Statement containing the following
information:
9.1.1
The calculation of the applicable net cash flows
as defined in Appendix D for the Calendar Quarter
in question.
9.1.2
The Investment Multiple applicable in the
Calendar Quarter in question.
9.1.3
Based on Section 9.1.2 and Article 14, the
appropriate percentages of Profit Petroleum, if
any, for the Government and Contractor in the
Calendar Quarter in question.
9.1.4
The total amount of Profit Petroleum, if any, to
be shared between the Government and Contractor in
the Calendar Quarter in question.
9.1.5
Based on Sections 9.1.3 and 9.1.4, the amount of
Profit Petroleum due to the Government and
Contractor as well as to each constituent of the
Contractor in the Calendar Quarter in question.
9.1.6
The actual amounts of Petroleum taken by the
Government and Contractor as well as by each
constituent of the Contractor during the Calendar
Quarter in question to satisfy their entitlement
pursuant to Section 9.1.5.
9.1.7
Adjustments to be made, if any, in future
Calendar Quarters in the respective amounts of
Profit Petroleum due to the Government and
Contractor as well as to each constituent of the
Contractor on account of any differences between
the amounts specified in Sections 9.1.5 and
9.1.6, as well as any cumulative adjustments
outstanding from previous Calendar Quarters.
9.2
Where necessary and if possible, the information to be provided
under Section 9.1 shall be identified separately for each Field and
also separately for Crude Oil as distinct from Natural Gas.
9.3
The Production Sharing Statement shall be submitted to
Government not later than sixty (60) days after the end of
such Calendar Quarter.
129
SECTION 10
END OF FINANCIAL YEAR STATEMENT
10.1
The Contractor shall prepare a definitive End of Year Statement.
The statement shall contain aggregated information in the same
format as required in the Production Statement and Royalty and Cess
Statement, Value of Production and Pricing Statement, Statement of
Costs, Expenditure & Receipts, Cost Recovery Statement and
Production Sharing Statement, but shall be based on actual
quantities of Petroleum produced, income received and costs and
expenditures incurred. Based upon this Statement, any adjustments
that are necessary shall be made to the transactions concerned
under the Contract.
10.2
The End of Year Statement for each year shall be submitted to
Government within ninety (90) days of the end of such Year.
130
SECTION 11
BUDGET STATEMENT
11.1
The Contractor shall prepare a Budget Statement for each
Year. This statement shall distinguish between budgeted
Exploration Costs, Development Costs and Production Costs
and shall show the following:
11.1.1
Forecast costs, expenditures and receipts for the
Year in question.
11.1.2
11.2
1.
A schedule showing the most important individual
items of total costs, expenditures and receipts
for the Year.
The Budget Statement shall be submitted to Government with respect
to each Year not less than ninety (90) days before the start of the
Year provided that in the case of the Year in which the Effective
Date falls, the Budget Statement shall be submitted within ninety
(90) days of the Effective Date.
131
APPENDIX D
CALCULATION OF THE
INVESTMENT MULTIPLE FOR PRODUCTION SHARING PURPOSES
In accordance with the provisions of Article 14, the share
of the Government and the Contractor respectively of Profit
Petroleum from the Contract Area in any Financial Year shall
be determined by the Investment Multiple earned by the
Companies from the Contract Area at the end of the preceding
Financial Year. These measures of profitability shall be
calculated on the basis of the appropriate net cash flows as
specified in this Appendix D.
INVESTMENT MULTIPLE
2.
The "Net Cash Income" of the Companies from the Contract
Area in any particular Financial Year is the aggregate value
for the year of the following:
(i)
Cost Petroleum entitlement of the Companies as
provided in Article 13;
PLUS
(ii)
Profit Petroleum entitlement of the Companies as
provided in Article 14;
PLUS
(iii)
incidental income of the Companies of the type
specified in Section 3.4 of the Accounting
Procedure arising from Petroleum Operations and
apportioned to the Contract Area;
LESS
(iv)
the Companies' share of all Production Costs and
royalty/cess payments incurred on or in the
Contract Area;
LESS
(v)
3.
the notional income tax, determined in accordance
with paragraph 7 of this Appendix, payable by the
Companies on profits and gains from the Contract
Area.
The "Investment" made by the Companies in the Contract Area
in any particular Financial Year is the aggregate value for
the year of:
(i)
Exploration Costs incurred by the Companies in the
Contract Area and apportioned to the Contract Area
in the same proportion that said Costs were
recovered pursuant to Articles 13.2 and 13.3.
132
PLUS
(ii)
Development Costs incurred by the Companies in
the Contract Area.
4.
For the purposes of the calculation of the Investment Multiple,
Costs or expenditures which are not allowable as provided in the
Accounting Procedure shall be excluded from Contract Costs and be
disregarded.
5.
The Investment Multiple ratio earned by the Companies as at
the end of any Financial Year from the Contract Area shall
be calculated by dividing the aggregate value of the
addition of each of the annual Net Cash Incomes
(accumulated, without interest, up to and including that
Financial Year starting from the Financial Year in which
Production Costs were first incurred or production first
arose after the Effective Date on or in the Contract Area)
by the aggregate value of the addition of each of the annual
Investments (accumulated, without interest, up to and
including that Financial Year starting from the Financial
Year in which Exploration and Developments Costs were first
incurred).
6.
Profit Petroleum from the Contract Area in any Financial Year shall
be shared between the Government and the Contractor in accordance
with the value of the Investment Multiple earned by the Companies
as at the end of the previous Financial Year pursuant to Articles
14.2, 14.3 and 14.4.
GENERAL
7.
In determining the amount of notional income tax to be
deducted in the applicable cash flows specified in paragraph
2 of this Appendix, a notional income tax liability in
respect of the Contract Area shall be determined for each
Company, as if the conduct of Petroleum Operations by the
Company in the Contract Area constituted the sole business
of the Company and as if the provisions of the Income Tax
Act, 1961, with respect to the computation of income tax at
a fifty percent (50%) rate applicable to Petroleum
Operations on the basis of the income and deductions
provided for in Article 15 of this Contract were accordingly
applicable separately to the Contract Area, disregarding any
income, allowances, deductions, losses or set-off of losses
from any other Contract Area or business of the Company.
8.
Sample Calculation is attached in Appendix "D-1".
133
APPENDIX "D-1"
INVESTMENT MULTIPLE CALCULATION - EXAMPLE PROBLEM
The following example is intended to demonstrate the calculation and impact of
the Investment Multiple. The figures shown would be for the Companies and are
fictitious in this example for demonstration purposes. The investment multiple
is calculated individually for the Companies.
RIL OR EOGIL
Investment Multiple at beginning of
Financial Year 11
Profit Oil Shares at beginning of
Financial Year 11
US$ MILLIONS
A Cumulative Net Cash Income at
beginning of Financial Year 11
+ Cost Petroleum in Financial Year 11
+ Profit Petroleum in Financial Year 11
+ Incidental Income in Financial Year 11
- Production Costs in Financial Year 11
- Oil Royalty and Cess in Financial Year 11
- Gas Royalty in Financial Year 11
- Notional Income Tax in Financial Year 11
B = Cumulative Net Cash Income at end of
Financial Year 11
1.96
24.00%
100.00
10.00
1.00
.00
.60
1.57
0.41
2.00
106.42
C
D
Cumulative Investment at beginning of
Financial Year 11
+ Exploration Costs in Financial Year 11
+ Development Costs in Financial Year 11
+ Service Costs in Financial Year 11
= Cumulative Investment at end of
Financial Year 11
51.00
0.30
1.50
0.00
52.80
Investment Multiple at beginning of
Financial Year 12 = (B / D)
Profit Oil Shares at beginning of
Financial Year 12
2.02
18.00%
Since the Investment Multiple is calculated to be greater than 2.0 at the
beginning of Financial Year 12, the Profit Petroleum share to be received by RIL
or EOGIL falls from 24% to 18% at the inception of Financial Year 12.
In the event that the Investment Multiple were found to exceed 2.0
during the financial close of Financial Year 11, the Contractor may
have received excess Profit Petroleum during the first sixty (60)
days of Financial Year 12. In this case, the quantity of excess
Profit Petroleum will be calculated and the accounts will be
settled by adjustment to entitlements within sixty (60) days of the following
year (year twelve).
134
APPENDIX E
FORM OF FINANCIAL AND PERFORMANCE GUARANTEE
(to be furnished pursuant to Article 29 of the Contract)
WHEREAS ENRON EXPLORATION COMPANY, a Company duly organized and existing under
the laws of Delaware, U.S.A., having its registered office at 1400 Smith Street,
Houston, Texas, U.S.A., (hereinafter referred to as "the Guarantor" which
expression shall include its successors and assigns) is the indirect owner of
100% of the capital stock of ENRON OIL & GAS INDIA LIMITED ("Company") and
direct owner of its parent company; and
WHEREAS Company is signatory to a Production Sharing Contract of even date of
this guarantee in respect of an Offshore area identified as Panna and Mukta
Blocks (hereinafter referred to as "the Contract") made between the Government
of India (hereinafter referred to as "the Government"), Company, RELIANCE
INDUSTRIES LIMITED and OIL & NATURAL GAS CORPORATION LIMITED (hereinafter
referred to as "Contractor" which expression shall include its successors and
permitted assigns); and
WHEREAS the Guarantor wishes to guarantee the performance of Company or its
Affiliate Assignee under the Contract as required by the terms of the Contract;
NOW, THEREFORE, this Deed hereby provides as follows:
1.
The Guarantor hereby unconditionally and irrevocably guarantees to the
Government that it will make available, or cause to be made available,
to Company or any other directly or indirectly owned Affiliate of
Company to which any part or all of Company's rights or interest under
the Contract may subsequently be assigned ('Affiliate Assignee'), to
ensure that Company or any Affiliate Assignee can carry out its work
commitment as set forth in the Contract.
2.
The Guarantor further unconditionally and irrevocably guarantees to the
Government reasonable compliance by Company or any Affiliate Assignee,
of any obligations of Company or any Affiliate Assignee under the
Contract.
3.
The Guarantor hereby undertakes to the Government that if Company, or
any Affiliate Assignee, shall, in any respect, fail to perform its work
commitments under the Contract or commit any material breach of such
obligations, then the Guarantor shall fulfill or cause to be fulfilled
the obligations in place of Company or any Affiliate Assignee, and will
indemnify the Government against all actual losses, damages, costs,
expenses, or otherwise which may result directly from such failure to
perform or breach on the part of Company. In no event shall Guarantor be
liable for any special consequential, indirect, incidental or punitive
damages of any kind or character, including, but not limited to, loss of
profits or revenues, loss of product or loss of use arising out of or
related to a material breach by Company of its obligations under the
Contract.
4.
This guarantee shall take effect from the Effective Date and shall
remain in full force and effect for the duration of the Contract and
thereafter until no sum remains payable by Company, or its Affiliate
Assignee, under the Contract or as a result of any decision or award
made by any expert or arbitration tribunal thereunder.
5.
This guarantee shall not be affected by any change in the Articles of
Association and by-laws of Company or the Guarantor or in any instrument
135
establishing the Licensee.
6.
The liabilities of the Guarantor shall not be discharged or affected by
(a) any time indulgence, waiver or consent given to Company; (b) any
amendment to the Contract or to any security or other guarantee or
indemnity to which Company has agreed; (c) the enforcement or waiver of
any terms of the Contract or of any security, other guarantee or
indemnity; or (d) the dissolution, amalgamation, reconstruction or
reorganization of Company.
7.
This guarantee shall be governed by and construed in accordance with the
laws of India.
IN WITNESS WHEREOF the Guarantor, through its duly authorized
representatives, has caused its seal to be duly affixed hereto and this
guarantee to be duly executed the _____________ day of _________ 1994.
The seal of ___________ was hereto duly affixed by ___________this_____ day of
________ 1994 in accordance with its by-laws and this guarantee was duly signed
by ________________ and ______________________
as required by the said by-laws.
- -----------------------Secretary
-------------------Vice President
Witness:
- ----------------------
136
APPENDIX F
EQUIPMENT
The development plan, illustrated in Figure G-1 is based on the assumption that
ONGC has provided at the Effective Date, as represented in data and information
heretofore provided by ONGC, certain structures and facilities. All Equipment
specified below, including that not yet installed, shall be provided at ONGC's
cost and risk.
The following facilities have been installed and placed into service by ONGC as
of 1st August, 1993:
-
1 well platform PA
8 wells (PA-1, PA-2, PA-3, PA-4, PA-5, PA-6, PA-7, PA-8)
Early Production System ("EPS") jack-up rig SAGAR LAXMI,
including production systems and all fixtures and
appurtenances
Tanker loading system, loading buoy and appurtenances
PB, PD, PE (jackets only) installed; well fluid line
connecting each to EPS
- 23 development wells drilled in PB, PD, PE
- MA well platform
- 8 development wells drilled in MA
- 14" well fluid pipeline connects MA to Panna EPS
- Interconnecting Flowlines and Pipelines
The following facilities were assumed by the Companies to be installed and
commissioned by ONGC prior to the Effective Date and Companies' estimate of
project cost does not include the following (ONGC's schedule for installation as
represented to Companies is also shown):
PB Deck and Facilities - Fourth Quarter 1993
PD Deck and Facilities - First Quarter 1994
PE Deck and Facilities - Second Quarter 1994
MA Deck and Facilities - First Quarter 1994
137
APPENDIX G
DEVELOPMENT COMMITMENT SPECIFIED BY THE COMPANIES
The development plan, illustrated in Figure G-1 is based on the assumption that
ONGC has provided at the Effective Date, as represented in data and information
heretofore provided by ONGC, certain structures and facilities. The development
of the Fields is proposed to be completed by Contractor through its activities
under this Contract. The following describes what facilities, platforms and
wells are provided by ONGC prior to the Effective Date.
The following facilities have been installed and placed into service by ONGC:
1 well platform PA
- 8 wells (PA-1, PA-2, PA-3, PA-4, PA-5, PA-6, PA-7, PA-8)
- Early Production System, "EPS" (jack-up)
- Tanker loading system (via SBM)
- PB, PD, PE (jackets only) installed; well fluid line connecting each
to EPS
- 23 development wells drilled in PB, PD, PE
- MA well platform
- 8 development wells drilled in MA - 14" well fluid pipeline connects
MA to Panna EPS
The following facilities were assumed by the Companies to be installed and
commissioned by ONGC prior to the Effective Date and Companies' estimate of
project cost does not include the following (ONGC's schedule for installation as
represented to Companies is also shown):
PB Deck and Facilities - Fourth Quarter 1993
PD Deck and Facilities - First Quarter 1994
PE Deck and Facilities - Second Quarter 1994
MA Deck and Facilities - First Quarter 1994
Drill two horizontal wells from PD - Second half 1993
Drill two horizontal wells from PE - Second half 1993
Complete two horizontal wells from PE - Second half 1993
The following work, intended to complete the development plan contemplated, is
included in Companies plan and only these facilities and wells are subject to
the Cost Recovery Limit as defined in Article 13:
Panna
-
Drill two horizontal wells from PD
Drill two horizontal sections in two suspended wells on
PE and complete same
Fabricate and install PC and PF jackets
Fabricate (or refurbish) and install PC and PF deck
packages
Drill nine horizontal wells from PC
Drill nine horizontal wells from PF
Fabricate and install PPA and PQ
138
-
Lay necessary well fluid, gaslift and free gas lines
Lay sour gas export line from PPA to proposed ONGC 42"
pipeline
Acquire 850 km of 2-D seismic data
Drill two exploratory wells
Geophysical, geological and engineering studies
Mukta
-
Fabricate and install MB jacket
-
Fabricate (or refurbish) and install MB deck package
Drill six directional wells from MB
Lay MB-MA well fluid line
Lay PPA-MA-MB gaslift line
Drill two exploratory wells
Geophysical, geological and engineering studies
Reprocess and interpret the 1988-89 3-D survey and usable
data from the 1991 SBS 2- D survey
Annex G-1 shows Companies' development concept based on an assumed project start
date of 1st July, 1993.
139
APPENDIX G
TECHNICAL INFORMATION
ANNEXURE G-1
The following analysis is based on information presented by GOI which has
not been independently verified. Hence, the information given here is
without warranty, although we believe it to be accurate. We have accounted
for relevant technical details provided in the Docket and Data Package.
These technical data are subject to different interpretations and may not
necessarily lead to unique results.
VIIA TECHNICAL INFORMATION FOR PANNA FIELD
(a,b,c)
1.
LOCATION
The 430 square kilometers Panna block is located in the Offshore Bombay
basin of India about 50 km east of the giant Bombay High field. Panna
field is a large culmination that occurs where the west-plunging axis of
the Heera-Bassein structural block intersects the western flank of the
fault-bound north-south trending Central Graben (FIGURE VIIA-1).
2.
STRATIGRAPHY
Commercial hydrocarbons are trapped in porous and permeable shoal
carbonate reservoirs of the Bassein B zone (Middle Eocene) and A zone
(Early Oligocene). The B zone consists of over 300 meters of porous algal
and fusillinid packstones and grainstones. It is the primary oil reservoir
in Panna with up to 27 meters of oil column and 25 meters of gas. The B
zone overlies shales and thin sandstones of the Early Eocene-Paleocene
Basal Clastics formation which have yielded some interesting but
apparently subcommercial tests of oil and gas.
The top of the B-zone is an unconformable surface overlain by 10 to 15
meters of thin shales and argillaceous limestones called the Tight zone.
The Tight zone grades upward into the A zone. It consists of 50 to 60
meters of interbedded tight and porous wackestones and packstones which
are in turn overlain by alternating shales and tight limestones of the
upper Bassein formation. The A zone is primarily a gas reservoir with
upwards of 75 meters of gas column. Mappable seismic reflectors occur at
the top A zone (H3A) and top B zone (H3B) (FIGURE VIIA-2).
3.
STRUCTURE
ONGC structure maps on the B and A zones are shown in FIGURES VIIA-3 and
4. A EEC/RIL seismic time map on the H3B reflector is exhibited in FIGURE
VIIA-5. Comparison of the time map with the cited B zone structure map
reveals similarities in the general structural aspects of Panna field
including a large broad low-relief SE structure which was tested by the
BS-1,3,6 and 8 exploration wells; a high-relief WNW structure penetrated
in a flank position by the BN-1 development well; and another high-relief
NW structure that was also penetrated in a flank position by the BS-5
exploration well. Both the BN-1 and BS-5 wells have indicated log pay but
neither was production tested.
The time map exhibits numerous NW-SE oriented faults with upwards of 100
meters of throw on the eastern margin of the field and lesser amounts of
the 5 to 20 meters range in the field proper where they appear to control
the cited high-relief "pop-up" structures. The seismic section, BS-425A,
located on FIGURE VIIA-6 reveals the nature of the faults along a WNW-ESE
transect (FIGURE VIIA-7). Although all appear to have normal throw, their
similar orientation and cross sectional geometry suggest a possible
transtensional wrench component. This is supported by the smaller
conjugate ENE-WSW faults that lie en-echelon along the larger fault
trends.
The large SE structure currently under development by ONGC is considered
as the Base-Case reserve target in this proposal. It will be referred to
by platform designation as the "PA-PF" structure. The two smaller
high-relief structures are considered as upside Success Case targets whose
development would be contingent on the successful outcome of a work
program detailed later in this document. They are referred to as the "PG"
and "PH" structures as shown in FIGURE VIIA-3 which exhibits a conceptual
development scheme overlay to the B zone structure.
4.
RESERVOIR CHARACTERIZATION
Core studies indicate that both the A and B zones have been subjected to
sea-level lowering and emergence which brought about diagenetic
dissolution and general enhancement of porosity and permeability (FIGURES
VIIA-8,9). Hydrocarbon fluid contacts appear to be extremely consistent
throughout the greater field area. The W-E diagrammatic cross section of
FIGURE VIIA-10 demonstrates the cross cutting nature of the fluid levels
through formational boundaries.
Well performance data suggest strong pressure support from an active water
drive mechanism associated with the massive B zone aquifer.
Dissolution-enhanced vertical permeability and the cited small-scale
faults are interpreted to have locally breached the sealing capacity of
the Tight zone between the A and B zones. Therefore, concurrent production
of B zone oil and A zone gas is not advised, especially in the early life
of the field.
Detailed petrophysical analysis was done on straight-hole exploration
wells with complete modern log suites including BS-5, BS-6 and BS-8. TABLE
VIIA-1 lists the petrophysical input parameters utilized for the density
porosity and Archie water saturation calculations. The oil/free-water
contact was observed at 1760 meters subsea in analysed wells. Similarly,
the gas/oil contact consistently occurred at 1733 meters subsea as defined
by RFT and log analysis data. In the B zone, up to 50 meters of the upper
hydrocarbon-bearing interval has average density porosity of 29% while the
middle and lower water-wet portions exhibit an average density porosity of
20%. For the A zone, only higher porosity beds were counted as pay with an
average of 13 meters net out of 55 gross and 23% density porosity.
Petrophysical analysis of the B Zone indicates that there is a distinct
zonation of the hydrocarbon interval as depicted on the type log in FIGURE
VIIA-11. These zones include the following:
ZONE BASE
--------Free Gas
Free Oil
Moveable Oil
Residual Oil
SUBSEA ELEVATION(m)
------------------1733
1746*
1751*
1760
* Surfaces vary 1-2 meters as a function of reservoir quality
5.
VOLUMETRIC RESERVE CALCULATIONS
Volumetric input parameters, depict the maximum, minimum and most likely
values of area under closure, net pay thickness, porosity and water
saturation for each hydrocarbon zone of the A and B intervals. Volumetric
parameters for the Base Case "PA-PF" structure are listed in TABLE VII(d)
i. The Success Case for "PG" and "PH" is set forth in TABLE VII(d) ii. It
bears noting that the distinction of the various hydrocarbon zones in the
A interval are generally inferred from production tests of the BS-4, BS-9
and PBM-2 exploration wells. Determination of the cited hydrocarbon zones
is inhibited by A zone's poorer reservoir quality and interbedded nature.
Fluid properties of A and B zones are listed in TABLE VIIA-2. Of note is
the residual oil (ROS) and gas (RGS) saturation values of 40% and 45%
respectively. The assumed average value for ROS of 40%, which is common
for carbonate reservoirs, compares with values of 32% - 37% from data
provided in the data package for the highest-quality reservoir samples.
The high RGS value of 45% is consistent with the strong water-drive model
where reservoir pressure drawdown remains relatively low through the
field's productive life.
The methodology for volumetric calculations utilizes the B zone and A zone
structure maps to determine the area and resulting rock volume of each
cited hydrocarbon zone in the respective A and B intervals. Average values
for pay, porosity, hydrocarbon saturation were then utilized to calculate
oil and gas in place. Recoverable reserves were calculated by subtracting
ROS and RGS from the hydrocarbon saturation of the respective zones and
assuming a sweep efficiency for the natural water drive as follows:
A zone (gas) sweep efficiency
A zone (oil) sweep efficiency
B zone (gas) sweep efficiency
B zone (oil) sweep efficiency
=
=
=
=
70%
60%
95%
60%
Although calculated, no A zone recoverable oil reserves were included in
the Base or Success Cases because the oil occurs in a rim around the outer
perimeter of the field where it is beyond reach with the envisioned
development scheme that targets B zone oil and A zone gas reserves.
Comparison of volume per unit area calculations (e.g. MMt/square
kilometers) indicate that the A zone oil reservoir requires 5X the area of
the B zone oil reservoir to yield an equivalent volume of recoverable
reserves. Stated another way, for a given drainage area, the A zone will
yield 20% of the reserves delivered by the B zone. FIGURE VIIA-12 shows
the recoverable reserve uncertainty for the base case PA-PF structure
expressed as a log normal distribution on a log probability scale. It
indicates the following range:
PROBABILITY
>or =
----------(%)
RECOVERABLE
RECOVERABLE
Oil
Gas
--------------------(MMt)
(MMM cubic meters)
Minimum
90
12.1
7.25
Most Likely
50
16.2
10.00
Maximum
10
22.4
13.88
The most likely reserve range was utilized in the Base Case development
plan and production profile. Comparison of the oil inplace for the B zone
and recoverable B zone oil indicates a recovery factor of 23.8%. Gas
recovery for the A and B zones is 27.3%. This low gas recovery is a
function of the relatively high percentage of solution gas to total gas
volume (33.6%) and the relatively poor A zone reservoir quality and high
residual gas saturation assumed for the water drive model. Detailed
reserves by zone are listed in TABLES VIIA-(e)i for the base case, TABLE
VIIA-(e)ii for the upside reserves and TABLE VIIA-(e)iii for the combined
"Success case".
(d,e) PANNA PARAMETERS AND RESERVES
Please refer to TABLES VII A-(d)i, (d)ii, (e)i, (e)ii, (e)iii
(f)
PLANS FOR UTILIZATION OF GAS - PANNA
1.
The natural water drive characteristics of the Panna field are well
substantiated and therefore, no gas re-injection for pressure
maintenance is necessary. Instead, all effort will be made to avoid
flaring any gas volumes other than as necessary for optimum oil
production. It should be recognised that under some development
scenarios increased gas flaring will result from unavailability of
the GOI-owned gas transmission line. GOI approval for such temporary
flaring is presumed and is a condition of this bid.
2.
The need for gas lifting of producing wells is not an immediate
concern due to the flow capability of the producing wells. Adequate
gas lift gas is available and facilities to gather, compress and
distribute for either sale or gas lift is planned.
3.
Upon the installation of either a processing platform or other means
of compression and dehydration, gas sales will begin (expected no
later than July, 1995).
4.
Flaring until gas processing facilities are installed will be
minimised by flaring only gas associated with oil production.
5.
The proposed gas transportation option is a connection to the
planned 42-inch ONGC gas pipeline to Hazira. The connecting pipeline
will be built by the Bidder as part of the cost-recoverable work
program.
VIIB. TECHNICAL INFORMATION FOR MUKTA FIELD
(a,b,c)
1.
LOCATION
The 777 square kilometers Mukta block is located in the offshore
Bombay basin of India about 25 km east of the giant Bombay High
field and 25 km west of Panna field. It contains a complex of
relatively small structures that are positioned on the axial crest
of the west-plunging Heera-Bassein structural block. The Mukta block
lies approximately midway between two major NW-SE structural
elements that cut the Heera-Bassein nose. These include the Bombay
High fault to the west and the Central Graben to the east (FIGURE
VIIB-1). The numerous mapped structures of the block have been
geographically subdivided into three structural blocks or areas by
ONGC called B-57, B-19 and B-126. The B-57 and B-19 areas are
jointly called Mukta field. FIGURE VIIB-2 highlights the significant
structural closures and defines the B-57 seismic 3-D map area in
red.
2.
STRATIGRAPHY
Commercial hydrocarbons are trapped in multiple porous and permeable
shoal carbonate reservoirs of the Bassein B zone (Middle Eocene) and
sandstones of the underlying Early Eocene-Paleocene Basal Clastics
formation. The Bassen A zone (Early Oligocene) has tested high rates
of gas and condensate in several exploration wells but exhibits low
porosity and is considered to have limited reserve potential. The B
zone consists of 200 to 250 meters of tight mudstones and pelletal
wackestones interbedded with porous algal and fusillinid packstones
and grainstones. The impermeable lithologies form effective seals
for three major reservoir intervals called B upper, B middle and B
lower. No free water level was observed in the porous B zones
suggesting oil columns in excess of 70 meters. However, significant
water tests from apparent pay zones indicate that much of the oil
saturation is residual. The B zone overlies the Basal Clastics
formation which consists of 25 to 35 meters of shale underlain by 25
to 40 meters of porous and permeable sandstone. Hydrocarbon columns
appear to be in the range of 10 to 20 meters with a well defined
oil/ free-water contact.
The top of the B-zone is an unconformable surface overlain by 5 to
10 meters of thin shales and argillaceous limestones called the
Tight zone. The Tight zone grades upwards into the A zone. It
consists of 40 to 50 meters of low-porosity pelletal wackestones
which are in turn overlain by alternating shales and tight
limestones of the upper Bassein formation. The A zone is considered
to be a marginal gas reservoir and was not quantified in this
evaluation. Mappable seismic reflectors occur at the top A zone
(H3A), top B zone (H3B) and top Basal Clastics (H4) (FIGURE VIIA-2).
3.
STRUCTURE
FIGURE VIIB-3 is an ONGC structure map on top of the B zone in the
B-57 and B-19 area. The map is based on 2-D seismic data and
exhibits a series of interpreted NE-SW faults that separate and trap
B upper oil pools with columns up to 85 meters in thickness. A
generally-SW-NE diagrammatic cross section through the mapped area
depicts the interpretation (FIGURE VIIB-4). It demonstrates the
sealing nature of the faults and thick multiple hydrocarbons.
The seismic section, BS-423, located in FIGURE VIIB-5, reveals the
structural aspects of the same area shown in FIGURE VIIB-3 following
a WNW-ESE transect oriented normal to the cited fault trend (FIGURE
VIIB-6) and subparallel to the cross section of FIGURE VIIB-4. At
the approximate top of the Bassein (H3), shown in blue, the section
clearly shows a moderate relief structure on the east side that
corresponds to the position of the B-57-1 and B-57-12 exploration
wells and MA development platform. Another low-relief structure can
be seen on the western side which occurs in the B-126 area. The one
critical aspect of the previous interpretation that is not supported
by this hard data is any evidence of faulting in the Bassein
interval.
FIGURE VIIB-8 is a depth structure map on top B zone in the B-57
area. It was interpreted from a recent vintage 3-D seismic survey by
ONGC. It basically covers the same area as the previous 2-D
interpretation (FIGURE VIIB-3) and is mapped at the same structural
level. Areas of structural closure have been colored orange. The two
interpretations are radically different. The 3-D map shows no faults
in support of the hard seismic data (FIGURE VIIB-7) and depicts
relatively small closures on a SW plunging structural nose. The most
significant structure with approximately 30 meters of relief is the
MA platform structure which also agrees with the cited hard seismic
data.
From review of the data package and communications with ONGC
representatives in the negotiating sessions, it is the understanding
of EEC/RIL that reserves quoted by ONGC for the Mukta field do not
reflect the recent 3-D interpretation and are based on the cited 2-D
interpretation designed to account for the apparent large oil
columns. Based on the compelling evidence of the 3-D interpretation,
it is the position of EEC/RIL that the MA structure is the only
quantifiable feature available for a base case analysis at this
time. The subsequent volumetric evaluation of the MA structure
utilizes the ONGC 3-D B zone structure map and detailed log analysis
to derive base case reserves. The upside case assumes two appraisal
tests of features that are exactly 50% of the size of the MA
structure with one success and one dry.
4.
RESERVOIR CHARACTERIZATION
Core studies indicate that the B zone reservoirs have roughly half
of the porosity and a fraction of the matrix permeability observed
in the neighboring Panna block. The Mukta area appears to have been
the site of a lower-energy environment of deposition in comparison
to Panna. The sequence exhibits alternating low-energy finer-grained
carbonate and moderate-energy pelletal to fussillinid wackestones,
packstones and grainstones. Core descriptions indicate that like
Panna, the A and B zones have been subjected to sea-level lowering
and emergence which brought about diagenetic dissolution and general
enhancement of porosity and permeability. This secondary
macro-porosity and permeability seem to be critical to the excellent
fluid flow rates exhibited in both the exploration and development
wells in the block.
The occurrence of multiple tight and porous zones in the B interval
suggests cyclic emergence of a restricted shallow marine platform
environment. The stratigraphic thinning of the Bassein formation at
Mukta relative to Panna, 225 versus 325 meters, indicates that the
Mukta area was possibly in a higher paleostructural position during
Bassein deposition. It is located on the landward side of the Bombay
High structural block which is devoid of Bassein age sediments.
These observations suggest that the currently west-plunging
Heera-Bassein nose may have undergone structural rotation from a
previously east-plunging position with stratigraphic thinning and
pinchout of Bassein reservoirs on to the Bombay High block. This
paleostructural and stratigraphic setting provides the mechanism for
the trapping of a large volume of hydrocarbons in the Mukta area
prior to structural rotation in to its current setting.
FIGURES VIIB-7 through 11 show production test results by zone
overlain on the appropriate 3-D structure map for the B-57 area. A
similar set of production overlays are shown in FIGURES VIIB-12 to
15 on the 2-D ONGC structure maps of the B-126 area.
There are 3 water free gas tests of the A zone in the block which
are localized on defined structural closures in the north-east B-57
area in wells B-57-1, 2 and 7 (FIGURES VIIB-7 and 12). Poor or wet A
zone tests were recorded in the remainder of the area.
The B upper and B middle zones are the two most prolific intervals
in the block with 8 water free oil tests each. The B upper tested
rates up to 1900 BOPD and the B middle reported a maximum rate of
2083 BOPD from the BS-57-1. The better tests occur on defined
structural closures in the B-57 and B-126 areas with the exception
of well B-57-10 which tested water free rates of 408 and 1455 BOPD
respectively from the B upper and middle zones. The well is located
on a small WSW-plunging nose with no apparent closure implying a
stratigraphic component to the trapping mechanism. However, it bears
noting that other wells located on the regional SW-plunging nose
that runs diagonally through the B-57 map area are wet or have
tested high water cuts including B-57-5, 6, 17 and 18 (FIGURES
VIIB-8, 9, 13, 14).
The most structurally controlled interval in the Mukta block is the
B lower zone. It has three significant water free oil tests in the
block. Both the B-57-1 and 12 wells in the MA structure tested high
rates of up to 2314 BOPD (FIGURE VIIB-10). Also the structurally
highest mapped well in the B-126 area, B-126-1, reported an
excellent rate of 2286 BOPD (FIGURE VIIB-15). It is the
understanding of EEC/RIL that the MA platform was positioned and the
subsequent 8 development wells were drilled on the basis of the
cited 2-D interpretation in the B-57 area (FIGURE VIIB-3). An
important point to make is that the 3-D map matches extremely well
with the results of the completions in the B lower zone. Wells MA-1,
5, 6 and 7 are clearly at the edge of closure and tested water or
had high water cut except MA 7 which was not tested and has not been
completed. Another well (MA-2?) that was completed as a producer has
quit flowing (due to water encroachment?) leaving only three
currently producing wells. These results indicate that the 3-D maps
are reliable and that the B lower zone reservoir may have at least a
partial water drive mechanism. The pressure drawdown observed in the
development wells has been interpreted by ONGC as evidence for a
depletion drive mechanism. It is the position of EEC/RIL that
accurate bottom hole pressure monitoring and remediation of
cement/mechanical problems is required before accurate determination
of drive mechanism and reservoir modeling can be done. This would
provide the basis for any future pressure maintenance or waterflood
operations.
The Basal Clastics sandstone reservoirs have yielded significant
tests in 3 wells in the B-57 area (B-57-6, 12,18) and B-126 area
(B-126-2,4,5) respectively with rates up to 1540 BOPD (FIGURE B-16).
A certain degree of stratigraphic trapping seems to be occurring in
non-closed areas (FIGURES VIIB-11,15). This indicates reserves may
be difficult to quantify and conversely that all future exploration
and development wells should evaluate this interesting interval. All
development wells proposed in the Mukta base development plan are
scheduled to be Basal Clastics tests.
Detailed petrophysical analysis was done on straight-hole
exploration wells with complete modern log suites. TABLE VIIB-1
lists the petrophysical input parameters utilised for the density
porosity and Waxman-Smit water saturation calculations of the B zone
reservoirs and Archie water saturation calculations for Basal
clastics.
FIGURE VIIB-17 is a cross plot of BQV versus Porosity with an
interpreted trend line that provides an algorithum tying clay
conductance effects into the log analysis through the Waxman-Smit
water saturation model. Petrophysical analysis of the B zone
indicates that there is a distinct zonation of the hydrocarbon
interval as depicted on the type log in FIGURE VIIB-18. These zones
include the following :
ZONE BASE
--------Free Oil
Moveable Oil
Residual Oil
WATER SATURATION RANGE
---------------------15 to 30%
31 to 59%
60 to 100%
FIGURE VIIB-19 is a capillary pressure curve from a typical Mukta B
zone reservoir. It demonstrates that for water saturations of 20% or
less, oil columns of more than 100 meters are required to displace
the water from the low permeability matrix. It is clear from the 3-D
mapping that the largest closures at Mukta have around 30 meters of
relief as seen at the location of the type log of well B-57-12.
Clearly, none of the free oil zones exceed 30 meters of thickness in
the type log example nor do they in other exploration wells
examined. This observation combined with the presence of ubiquitous
residual oil saturation and lack of free water level in the Bassein
reservoirs supports the cited hypothesis of a large accumulation
that has been later breached or tilted leaving oil behind in
existing smaller structures and stratigraphic traps. The large oil
colums of a major accumulation would be required to achieve the free
oil saturations seen today and explain the top to bottom residual
oil saturation of the Bassein B zones.
FIGURE VIIB-20 is a diagrammatic Resistivity Index versus Water
Saturation plot. It provides an explanation of the effects on log
analysis of a breached or waterflooded reservoir. The straight line
represents the water drainage cycle of a normal reservoir that has
been filled with hydrocarbons over the course of geologic time. In
essence, oil has displaced water. The arcuate imbibition cycle line
represents a breached or flood reservoir where oil has been
displaced by water. The saturation exponent "N" is derived from the
slope of the lines. Clearly, for a given resistivity, the resulting
water saturation calculated would be much higher if the reservoir
was following the imbibition cycle rather than the water drainage
cycle. It is concluded that much of the original thick oil columns
mapped by ONGC and disappointing wet tests of apparent pay zones are
a product of this breached reservoir phenomena. Restricting pay
counts to the free oil zones provides a realistic minimum case and
gives the analyst a conservative approximation of oil column height.
Inclusion of the moveable pay provides a maximum case.
5.
VOLUMETRIC RESERVE CALCULATIONS
Volumetric input parameters, listed in TABLE VIIB-(d), depict the
maximum, minimum and average values of area under closure, net pay
thickness, porosity and water saturation for each hydrocarbon zone
for the B upper, middle, lower and Basal Clastic intervals.
Fluid properties of the B zones and Basal Clastics are listed in
TABLE VIIB-2. Of note is the residual oil (ROS) saturation value of
40% which is the same used at Panna.
The methodology for volumetric calculations of the base case MA
structure utilizes the B upper zone structure map to determine the
area and resulting rock volume of each cited hydrocarbon zone in the
respective B zones and Basal Clastics intervals. Values for pay,
porosity, and hydrocarbon saturation derived from analysis of the
B-57-1 and 12 wells and utilized to estimate oil and gas in place.
Recoverable reserves were calculated by subtracting ROS from the
hydrocarbon saturation of the respective zones and assuming a sweep
efficiency for partial water drive of 60%. Oil in place was
calculated using only the Moveable and Free oil zones. FIGURE
VIIB-21 shows the recoverable reserve uncertainty for the base case
MA-MB structure expressed as a log normal distribution on a log
probability scale. It indicates the following range :
PROBABILITY
>or =
----------(%)
RECOVERABLE
OIL
----------(MMt)
RECOVERABLE
GAS
----------(MMM cubic meters)
Minimum
90
4.1
0.46
Most likely
50
5.3
1.85
Maximum
10
6.7
3.57
The base case most-likely reserves represents an average between the
maximum case which combines moveable and free oil zone reserves and
a minimum case of free oil zone reserves only. Gas reserves occur as
solution gas and show a wide range from a maximum value derived from
total oil in place assuming a severe depletion pressure draw down of
the reservoir to a minimum based on pressure supported water drive
mechanism and straight GOR based volume related to oil produced.
Comparison of oil in place for the B zone and recoverable oil
indicates a most likely case recovery factor of 17.2%. Gas recovery
is 51.8% reflecting the partial water drive/depletion drive model
assumed for the reservoir. Reserves for the base case are listed in
TABLE VII B-(e)i. The upside is assumed to be 50% of the Base Case
reserves. The Success Case is a combination of the two as follows:
CASE
---Base
Upside
Success
RECOVERABLE
OIL
(MMt)
----------5.37
2.68
8.05
RECOVERABLE
GAS
(MMM cubic meters)
----------1.85
0.93
2.78
(d,e) MUKTA PARAMETERS AND RESERVES
Please refer to TABLES VIIB-(d)i, (e)i and (e)ii.
(f)
PLANS FOR UTILIZATION OF GAS - MUKTA
(i)
A study is needed to justify water-injection pressure maintenance.
No gas re-injection is contemplated.
(ii) After the MA permanent deck is installed at Mukta, appropriate
testing will be undertaken to determine the timing for gas lift gas
installation. Given the water production observed, the need for gas
lifting at some point is considered likely and provisions for this
eventuality have been made in the Base Case work program.
(iii) Apart from the gas requirement for internal use such as
power-generation and technical flaring, the bulk of the gas will be
available for sale after dehydration and compression.
(iv) During the producing life of the field efforts will be continuously
made to minimise flaring. Flaring of associated gas is presumed,
without GOI restriction, until the gas sales line is commissioned.
(v)
(g)
After hookup, gas not used in operation will be sold via Panna
facilities.
MONITORING SYSTEMS & RESERVOIR MANAGEMENT
1
MONITORING SYSTEM
Production of all fluids will be monitored on a well by well basis,
as well as on an aggregate basis as required by standard oil/gas
field practices. For effective operational control these production
rates will be recorded on a daily basis. For fiscal purposes,
production will be aggregated and reported monthly. An appropriate,
state of the art well testing system will be installed at each unit.
The field will be monitored locally at platforms and remotely from
the shore base. EEC/RIL intend to operate the satellite platforms
unmanned to the extent possible and to use computer-assisted
operations to monitor ongoing performance.
2
RESERVOIR MANAGEMENT
Reservoir Management will be carried out through conventional
surface as well as down hole monitoring systems, such as bottom hole
pressure surveys, production testing and well deliverability testing
at prescribed intervals. This data will be analysed at regular
intervals, but at least once a year to study the reservoir
performance and to ascertain the reservoir drive mechanism. The
operations will be adjusted to maximize economic recovery. It is
envisioned that a suitable mathematical model will be used and
updated as and when required.
VIII PROPOSED PANNA/MUKTA WORK PROGRAMME
(a)
CONCEPTUAL DEVELOPMENT PLAN
Data Package material provided by GOI demonstrates a significant potential
for increased reserves at Panna/Mukta in the event of exploration
success(the Success Case). Described below is a staged development scheme
in which Stage I provides a building block towards the expansion needed in
the Success Case. The Success Case arises in the event of positive results
from exploratory wells included in the EEC/RIL firm work commitment. The
fully developed Success Case is described first so that the integrated,
building-block nature of Stage I is apparent. The firm work programme bid
by EEC/RIL commits to all items needed for Stage I(the Base Case); we are
dedicated to full Success Case development in the event of exploration
success. The risk of such exploration work precludes a firm commitment to
additional platforms, pipelines and development wells until the additional
reserves are conclusively demonstrated.
1
SUCCESS CASE DEVELOPMENT (29.5 MMt or 224 MMBO remaining recoverable
oil reserves)
EEC/RIL are proposing four exploratory wells as part of the firm
work programme. We believe, because of exploratory wells previously
drilled in the Panna G and H areas, that both of these areas are
likely to contain commercially viable accumulations. In addition,
several Mukta area wells have shown encouraging results. As a
result, we assume that one of the two exploratory tests proposed at
Mukta will also yield a commercially viable develop the Panna/Mukta
fields will require (See FIGURE VIII-1):
- 8 Well platforms at Panna
- 3 Well platforms at Mukta
- 1 Common 45,000 BOPD processing facility
(INCLUDING LIVING QUARTERS)
- 1 Inter-field (Mukta-Panna) well fluid pipeline and gas lift line
(POSSIBLY ALSO A WATER FLOOD LINE)
- 84 Development wells
- 1 Export gas line
EEC/RIL are capable of developing a highly accelerated production
schedule but, to do so, require the full support and cooperation of
GOI.
2.
BASE CASE DEVELOPMENT (155 MMBO or 20.4 MMT or remaining recoverable
oil reserves)
This case corresponds to RIL/EEC's committed work programme and is
not a reflection of our expectations, which are reflected in the
Success Case. The extensive drilling campaign conducted by ONGC has
demonstrated the viability of developing a large area on Panna and
supports the installation of one additional platform at Mukta. The
development plan and schedule are illustrated in FIGURES VIII-2,
VIII-3 and includes:
-
6 Well platforms at Panna
2 Well platforms at Mukta
1 Common 45,000 BOPD processing facility and living quarters.
1 Interfield (Mukta-Panna) well fluid pipeline and gas lifline
(POSSIBLY ALSO A WATERFLOOD LINE)
- 67 Development wells
- 4 Exploratory wells
- 1 Export gas line
The Base Case assumes that a sour gas export line will be laid from
PPA to an interconnect on the proposed ONGC 42-inch sour gas line
and that the 42-inch line will be available no later than April 1,
1995.
3
ACCELERATED DEVELOPMENT
A limited, unique window of opportunity could exist wherein EEC/RIL
may acquire an existing, operating 40,000 BOPD Floating Production
System (FPS) capable of a significant acceleration of the
availability of processing at a major cost saving to GOI/EEC/RIL.
This approach would have positive early cash flow implications to
all concerned and obviously enhances the value of the project to a
major degree (See FIGURE VIII-4). Uncertainty about securing the
facility preclude bidding the project based on acquiring the unit.
However, EEC/RIL commit to a "Best Efforts" ("Reasonable
Endeavours") attempt to acquire the unit if GOI will commit by July
26, 1993 to awarding the requested blocks to EEC/RIL.
(b)
PANNA/MUKTA WORK DEVELOPMENT
Since Panna/Mukta development has started, a baseline must be established
so that the transition from ONGC to EEC/RIL is clearly defined.
Accordingly, following are sections defining status of the development,
specifying ONGC activities which we presume will be completed and then
future work which EEC/RIL commit to undertake.
1.
STATUS AS OF JULY 1, 1993
The following facilities have been installed and placed into service
by ONGC:
-
1 Well platform PA
8 Wells (PA-1, PA-2, PA-3, PA-4, PA-5, PA-6, PA-7, PA-8)
Early Production System, "EPS" (Jack-up)
Tanker Loading via SBM
PB, PD, PE (Jackets only) installed; well fluid line
connecting each to EPS.
23 Development wells drilled in PB, PD, PE.
MA (Jacket only) installed.
8 Development wells drilled in MA
14" well fluid pipeline connects MA to Panna EPS.
We understand that The Panna EPS is currently processing
approximately 13,000 BOPD derived from the PA, PB, PD, PE and MA
platforms against a design capacity of 10,000 BOPD. Production rates
and bottomhole pressures for individual wells on the PB, PD, PE and
MA platforms cannot currently be measured due to the temporary
decks. Efforts are being made to balance reservoir withdrawals
areally and to minimise gas production, all of which is being
flared.
2.
WORK PLANNED AND COMMITTED BY ONGC
We understand that ONGC has work in progress on certain projects
related to ongoing Panna/Mukta development. In formulating the bid,
EEC/RIL have assumed that ONGC will design, fabricate and install
permanent decks and facilities for the PB, PD, PE and MA jackets at
its own cost. The bid assumes that the decks and facilities will be
installed and commissioned according to the following schedule:
PB - fourth quarter, 1993; PD - first quarter, 1994; PE - second
quarter 1994, MA - first quarter 1994. Early installation of these
deck packages is considered imperative to monitor and optimise
reservoir performance.
EEC/RIL would be willing to negotiate the following alternatives to
the above:
- EEC/RIL assumption of responsibility for fabrication of one or
more of the deck packages currently under construction
- EEC/RIL would prefer to manage the deck installation
- EEC/RIL would be willing to locate, purchase and refurbish used
deck packages or fabricate new deck packages to substitute for
those under fabrication by ONGC, if this does not result in any
delay in project timing.
We understand that ONGC has committed to drilling two horizontal
wells from PD and two horizontal wells plus two horizontal
completions from PE in the second half of 1993. The bid assumes
that EEC/RIL will have the option, but not the obligation, to
accept assignment of any or all drilling rig, service and supply
contracts and will perform the work at GOI/EEC/RIL expense
(subject to cost recovery).
WORK TO ACHIEVE BASE CASE DEVELOPMENT
EEC/RIL are committed to proceeding with the Base Case development.
EEC/RIL plan to pursue a very aggressive development schedule
(FIGURE VIII-3) which can only be achieved with the active
assistance of ONGC and GOI authorities.
3.
WORK PLAN OFFERED AND COMMITTED BY EEC/RIL
PANNA
-
Drill two horizontal wells from PD
Drill two horizontal wells from PE
Complete two horizontal wells from PE
Fabricate and install PC and PF jackets
Fabricate (or refurbish) and install PC and PF deck
packages
Drill nine horizontal wells from PC
Drill nine horizontal wells from PF
Fabricate and install PPA and PQ
Lay necessary well fluid, gaslift and free gas lines
Lay sour gas export line from PPA to proposed ONGC
42-inch pipeline
Drill two exploratory wells
Geophysical, geological and engineering studies.
MUKTA
-
Fabricate and install MB jacket
Fabricate (or refurbish) and install MB deck package
Drill six directional wells from MB
Lay MB-MA wellfluid line
Lay PPA-MA-MB gaslift line
Drill two exploratory wells
Geophysical, geological and engineering studies
Please note that a second EPS is included in the Base Case
development plan. However, a firm commitment has not been made since
the economics are marginal (if new construction is required) and
highly sensitive to project timing and EPS cost.
(c)
DEVELOPMENT WORK COMMITMENT
EEC/RIL will immediately begin, the design and fabrication of a jacket and
deck for location PC. If available, a used deck will be acquired and
refurbished; otherwise, a new deck will be fabricated (EEC/RIL plan to
install used decks wherever possible to minimise costs). A new nine-slot
jacket will be fabricated for PC. At the time of jacket installation, nine
conductors will be driven. As soon as the PC jacket is installed and
drilling on PD and PE is completed, the rig will be moved to PC and nine
horizontal wells will be drilled. EEC/RIL plan to employ a single rig to
drill all Panna horizontal wells to take advantage of the associated
learning curve to minimise drilling time and cost. After drilling is
completed, the rig will be moved to PF and the deck will be installed on
PC. Production will commence from PC as soon as a well fluid line is
installed. Drilling prior to deck installation on PC will allow production
to be significantly accelerated due to the lead time required to prepare
the deck package.
Nine horizontal wells will also be drilled from PF. However, in this case,
the deck package will be available and installed prior to drilling. This
approach has the advantages of allowing produce-while-drilling operations
to accelerate production and raising the wellheads further above the
splash zone.
Work will commence immediately on the design and fabrication of a new
jacket for MB. Six directional wells will be drilled from MB and should be
completed at the time the MB deck package becomes available (pre-monsoon
1995). Production will ensue after the installation of the deck package
and a wellfluid line from MB to MA is installed.
Work will commence immediately on the design and fabrication of a new
45,000 BOPD production processing jacket and deck (PPA) as described
below:
FUNCTIONAL/DESIGN BASIS
-
Production and Test Manifolds
Production and Test Separation
Gas Compression
Gas Dehydration
Chemical Injection (Corrosion Inhibition)
Produced Water Treatment, Disposal
-
Power Generation
Safety systems
Fire Protection
Utilities
STRUCTURAL BASIS
-
8-Pile
86'x160' Deck
Structural Redundancy
Earthquake Zone IV Design
PPA is expected to be available for installation pre-monsoon 1995.
Work will also commence immediately on design and fabrication of a
separate 100-man quarters platform (PQ).
Although not currently in the Base Case development plan, studies will be
conducted to ascertain the merit of combining PPA and PQ. In addition, the
desirability of a manifolding platform (PLM), possibly combined with PQ,
will be investigated. A manifolding platform may be justified given the
large number of lines associated with the producing platforms, riser loads
on PA and the future connections and disconnections associated with the
Sagar Laxmi (EPS-I), the second early production system (EPS-II) and the
PPA.
Work will begin immediately to secure a jack-up suitable for conversion
(preferably already converted) for service as a second early production
system (EPS-II) of 10,000 BOPD capacity. If such a unit can be secured at
a cost and within a time frame that project economics are enhanced, it
will be implemented. Installation of EPS-II would occur post-monsoon 1994
and would allow Panna/Mukta production processing capacity to be expanded
to 20,000 BOPD at the beginning of 1995. EPS-II will allow considerable
acceleration of oil production prior to the commissioning of PPA. In
addition, the Sagar Laxmi and EPS-II can be retained temporarily after the
installation of PPA to process as much as 65,000 BOPD in the event
production exceeds expectations or the Success Case is achieved. Although
EEC/RIL have included the installation of EPS-II in discussion, additional
economic analysis will be conducted to confirm that the acceleration of
oil production justifies the additional expense.
The need for future gas lift and free gas lines is anticipated. The lines
will be installed when required by field performance and when convenient
in terms of lay barge utilisation. A long gas lift line from PPA to MA and
MB will almost certainly be required, whereas a free gas line should be
unnecessary.
Preliminary EEC/RIL studies indicate that a significant possibility of
communication between the Panna A-zone and B-zone exists. As a result,
EEC/RIL intend to defer production from the A-zone gascap to maximise oil
recovery. However, although every effort will be made to minimise gas
production, elevated gas-oil ratios are inevitable given the thin oil
column and free gas lines may become necessary prior to gascap blowdown.
The Base Case assumes that a gas export line may be laid from PPA to a
connection with the proposed 42-inch ONGC gas pipeline to Hazira. It is
assumed that line installation would occur pre-monsoon 1995 with resulting
gas sales in July, 1995, that 100% of Panna/Mukta gas will be taken and
that oil production will not be restricted by gas flaring considerations.
As an alternative not considered in the Base Case, EEC/RIL is studying the
possibility of constructing a sour gas pipeline to the Bombay area and
constructing onshore sweetening plant.
EEC/RIL assume that suitable shore base facilities (including dock space,
yard space, warehousing, communications) will be made available for lease
to support Panna/Mukta operations.
(d)
EXPLORATION WORK COMMITMENT
Two exploratory wells will be drilled at Panna and two at Mukta. These
wells will be drilled as soon as possible by either of the two rigs after
firm locations are established and when the development drilling schedule
allows.The wells must be drilled early enough to allow timely jacket and
deck commitments to be made in the event of success to ensure minimum
delay in the development program. Details of the program are as follows :
PANNA
SEISMIC - Reprocess and interpret all usable data in concession
Commitment
:
850 +/- km
DRILLING - Drill and evaluate 2300 +/- meter delineation tests. Penetrate
base of Basal Clastics (Paleocene-Early Eocene) below B Zone (middle
Eocene) limestone. Maintain options to test, complete and suspend at
mudline if results warrant.
Commitment
:
2 wells
POTENTIAL RESERVES
Based upon the assumption that both of the above mentioned delineation
tests are successful, inplace and recoverable reserves are provided in
TABLE VIIA-(e). For this purpose, we have assumed that the tests will be
on Panna structures PG and PH (FIGURE VIIA-3). However, after reprocessing
and interpreting seismic (SEE ABOVE WORK COMMITMENT), the best two
structures will be selected and drilled.
MUKTA
SEISMIC - Reprocess and interpret the 1988-89 3D survey (150 sq.km, 4100
+/- line km) and all usable data from 1991 SBS 2D survey (750 +/- km).
Commitment
:
Processing and interpretation as
noted above.
DRILLING - Drill and evaluate two 2300 +/- meter delineation tests.
Penetrate to base of Basal Clastics (Paleocene-Early Eocene) below B Zone
(middle Eocene) limestone. Maintain options to test, complete and suspend
at mudline if results warrant.
Commitment
:
2 wells
POTENTIAL RESERVES Based upon the assumption that one of the above
mentioned delineation tests is successful, inplace and recoverable
reserves are expected to increase by 50% those provided in TABLE
VIIB-(e)ii. After reprocessing and interpreting seismic (SEE ABOVE WORK
COMMITMENT) the best two prospects will be selected and drilled.
f)
OTHER COMMITMENTS
EEC/RIL have committed to a Base Case development plan based upon data
packages prepared by GOI. Upon contract signature, it is assumed that all
relevant information will be provided to EEC/RIL and that key ONGC
personnel will be made available to allow optimization of the development
plan. Based upon this information, EEC/RIL will perform the following
technical work the results of which will be shared with GOI.
PANNA
The Panna field oil accumulation is relatively thin and lies between an
active aquifer and a gascap. Optimum oil recovery will be achieved by
minimising gascap gas production thereby minimising movement of the oil
bank into the gascap (which results in unrecoverable residual oil
saturations in the gascap) and maintaining reservoir energy. EEC/RIL
believe that the added expense of drilling horizontal wells will be more
than made up by the increase in productivity index such completions will
achieve.
EEC/RIL intend to conduct single well simulations to determine the optimum
completion interval placement with respect to the fluid contacts, optimum
production rate and optimum horizontal completion length.
The results of detailed geological modeling, PVT analysis, petrophysical
analysis and well performance studies will be used to prepare a 3-D
full-field reservoir simulation model for the Panna field. The model will
be used to optimise areal well placement and platform locations. Analysis
of fluid contact movements and areal balancing of withdrawals will be
conducted. The model will be used to forecast fluid production rates and
pressure changes and will be used to determine the optimum time for gas
cap blowdown. History matching will be complicated by the lack of
individual well data concerning PB, PD and PE and by the lack of current
gas production measurements.
Drilling and completion studies will be conducted to minimise costs and
formation damage. EEC/RIL are experienced in the drilling of horizontal
wells and hope to meet or exceed ONGC performance. In particular, we
believe that great improvements in current cementing and formation damage
control practices can be made.
MUKTA
The drive mechanism controlling the lower B Zone reservoir performance
cannot be conclusively determined at present since the temporary deck at
MA precludes individual well testing and bottomhole pressure measurements.
One of the MA wells has ceased to produce, probably due to water
production, and significant water production is occurring from one or more
of the remaining wells. In addition, flowing wellhead pressures are
declining. Based upon this evidence, as well as geological considerations,
we currently assume that the reservoir is producing with a partial water
drive. Early installation of the permanent MA deck is considered vital to
allow well testing and bottomhole pressure measurement to identify the
drive mechanism.
Once appropriate data has been collected, reservoir engineering studies
will be conducted (probably 3-D reservoir simulation) to optimise the
development plan. Due to the observed water production, gas-lifting will
almost certainly be required and is therefore included in the Base Case
commitment.
Waterflood facilities and pipelines are not included in the Base Case
commitment since the necessity of water injection has not been
established, however, PPA will include deck space and utilities to allow
for subsequent addition of injection facilities if justified. The
requirements for water injection facilities will be identified shortly
after testing the MA wells and measuring bottomhole pressures. The risk of
premature water breakthrough and poor sweep efficiency in the naturally
fractured reservoir must also be assessed. Pressure transient analysis
will probably be used to confirm well interference and analyze dual
porosity behavior. If these preliminary studies indicate that
waterflooding might be beneficial, a pilot waterflood using one of the EPS
units at MA could be conducted. If the above studies indicate that
waterflooding is economically viable, EEC/RIL will proceed to install the
necessary infrastructure.
The MA wells penetrate four reservoirs which appear to be effectively
sealed from each other. EEC/RIL therefore intend to drill directional
wells from MB to penetrate multiple pays. Engineering studies will be
conducted to optimise the completion design and depletion plan - single
completions, single completions with sliding sleeve or tubing selectives
or dual completions. As the reservoir mechanism becomes better understood,
horizontal drilling applications may become evident.
g)
PANNA/MUKTA FACILITIES
Systems analysis (nodal analysis) will be conducted to optimise surface
and subsurface equipment design and operation.
Appendix-3
WORK PROGRAM COMMITTED BY EEC/RIL
PANNA
o
Drill and complete two horizontal wells from PD
o
Drill and complete two horizontal wells from PE
o
Complete two horizontal wells from PE
o
Fabricate and install PC and PF jackets
o
Fabricate (or refurbish) and install PC and PF deck packages
o
Drill nine horizontal wells from PC
o
Drill nine horizontal well from PF
o
Fabricate and install PPA and PQ
o
Lay necessary well fluid, gaslift and free gas lines
o
Lay sour gas export line from PPA to proposed ONGC 42-inch pipeline
o
Drill two exploratory wells
o
Geophysical, geological and engineering studies
MUKTA
o
o
o
o
o
o
Fabricate and install MB jacket
Fabricate (or refurbish) and install MB deck package
Drill six directional wells from MB
Lay MB-MA wellfluid line
Lay PPA-MA-MB gaslift line
Geophysical, geological and engineering studies
YEAR
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Appendix - B1
Appendix - B2
Appendix G
Figure G-1
Figure VIIA-1
Figure VIIA-2
Figure VIIA-3
Figure VIIA-4
Figure VIIA-5
Figure VIIA-6
Figure VIIA-7
Figure VIIA-8
APPENDIX H
ESTIMATED PRODUCTION PROFILE OF THE
PANNA AND MUKTA FIELDS
Oil
(THOUSAND BARRELS
PER YEAR)
1098
1098
3285
6256
13922
12693
10954
9516
8735
7913
7179
6549
5997
5511
7655
6502
5579
4899
4407
3792
3260
2834
2355
1986
1695
Gas
(MILLION CUBIC METERS
PER YEAR)
0
0
100
201
566
521
456
402
493
484
479
473
470
467
527
521
513
507
549
581
564
552
354
232
159
140
GRAPHICAL CONTENT APPENDIX
Map of Contract Area - Panna Block
Map of Contract Area - Mukta Block
Panna and Mukta Field Development Base Case Reserves
Regional Seismic Map on Early Eocene Top (H4) - Panna Field
Generalised Stratigraphy - Panna Field
Structure Contour Map on Top of B Zone - Panna Field
Structure Contour Map on Top of A Zone - Panna Field
Time Structure Map H3B - Panna Field
Scheme of Seismic Profiles - Panna Field
REA Bombay High INE BS-425A (Migrated) - Panna Field
B-Schematic View of Ground Water System and Development/
Destruction of Porosity in "B" Zone (Middle Eocene) - Panna
Field
Figure VIIA-9 A-Schemiatic View of Ground Water System and Development/
Destruction of Porosity in "A" Zone (Early Oligocene) - Panna
Field
Figure VIIA-10 Geological Section Across Panna Field
Figure VIIB-1 Regional Map at H4 Level
Figure VIIB-2 Isochron Map at the Top of Basal Clastics (H4) - Mukta and
B 126 Fields
Figure VIIB-3 Structure Map on Top of B-Upper Reservoir - Mukta Field
Figure VIIB-4 Geological Section Across Mukta and B 126 Fields
Figure VIIB-5 Scheme of Seismic Profiles
Figure VIIB-6 Area Bombay High Line BS-423
Figure VIII-3 Panna/Mukta Development Schedule Revised Base Case
Figure VIIB-7 Isochron Map at the Top of A-Zone (H3A) - Mukta Field (Based
on 3D Data)
Figure VIIB-8 Structure Map on B-Upper Top - Mukta Field (Based on 3D Data)
Figure VIIB-9
Figure VIIB-10
Figure VIIB-11
Figure VIIB-12
Figure VIIB-13
Figure VIIB-14
Figure VIIB-15
Figure VIIB-16
Figure VIIB-17
Figure VIIB-18
Figure VIIB-19
Figure VIIB-20
B Upper Zone - Production Test Results
Structure Map on B-Upper Top - Mukta Field (Based on 3D Data)
B Middle Zone - Production Test Results
Structure Map on B-Upper Top - Mukta Field (Based on 3D Data)
B Lower Zone - Production Test Results
Isochron Map at the Top of Basal Clastics (H4) - Mukta Field
(Based on 3D Data)
Structure Contour Map at the Top of B-Upper - B 126 Field
A Zone - Production Test Results
Structure Contour Map at the Top of B-Upper - B 126 Field
B Upper Zone - Production Test Results
Structure Contour Map at the Top of B-Upper - B 126 Field
B Middle Zone - Production Test Results
Structure Contour Map at the Top of B-Upper - B 126 Field
B Lower Zone - Production Test Results
Structure Contour Map at the Top of B-Upper - B 126 Field
Basal Clastrics - Production Test Results
Clay Conductance - Mukta Field
Type Log - Mukta Field
Capillary Pressure (Centrifuge) Data - Mukta Field
I-SW Plot