The English and Albanian versions of this contract shall both have equal value and be referred to in construing or interpreting this contract; in case, however, of any conflict in such construction or interpretation, the English version shall prevail.
The coordinates of the contract area are detailed in Annex.
Delineation of Area F is as follows
Northern limit: Latitude N 410 00’ 00”
Eastern limit: Longitude E 19° 37’ 00”
Southern limit: Latitude N 40° 36’ 17”
Western limit: Coastal line defined at average high i tide.
Environmental impact assessment and management plan
Bankers Petroleum Albania shall, prior to conducting petroleum operations in a portion of the contract area submit for the approval from the relevant environmental authority a report (the "baseline study") on the environmental baseline status of the portion of the contract area where such petroleum operations are intended to be conducted.
Subject to earlier termination pursuant to Arts. 24.1 or 24.2, this contract shall automatically terminate in its entirety if all of the contract area has been relinquished or the development and production period or any subsequent extension has lapsed pursuant to this contract provisions.
Bankers Petroleum Albania shall comply with Albania Environmental Protection Laws provided that any new environmental laws and regulations issued, or any change in the interpretation or application of existing environmental laws and regulations occurring, after the effective date shall be subject to Art.18.4
Bankers Petroleum Albania will adopt internationally accepted measures to avoid or minimize environmental contamination so that such contamination will not cause degradation to the quality of life or health of human beings, animals and vegetative resources.
Wherever it has been unable to avoid such contamination of the environment, it will be responsible for the damage caused and for taking reasonable steps to return the affected media or medium, as much as is practicable, to its condition on the effective date, and to remedy any significant negative environmental impact directly caused by the operations to the extent required by Albanian laws and regulations applicable to oil and gas industry and in accordance with good international petroleum industry practices.
Bankers Petroleum Albania shall maintain at its business offices in Albania books of account in accordance with accounting practices required under Albanian law, the accounting procedure and accounting practices generally used in the international petroleum industry and such other books and records as may be necessary to show the work performed under this contract,including the amount of all available petroleum. Bankers Petroleum Albania shall keep its books of account and accounting records in Dollars and Albanian Leke.
In the event of any arbitration proceedings under Art. 21 of this contract, which involve Bankers Petroleum Albanian books of account, those books of account maintained in accordance with the accounting procedure and international petroleum industry practices shall prevail over inconsistent portions of the books of account maintained in accordance with Albanian law.
Books of account and other books and records referred to that are necessary to show the work performed under this contract shall be kept in English language and be available at all reasonable times for inspection by duly authorized representatives of the government and Albanian tax authorities.
Each cost item in a statement of exploration activity shall be conclusively deemed to be an approved cost after 3 months following the receipt of that statement by the government, unless within the said 3 months the government takes written audit exception thereto in accordance with Art. 4.8 of the contract. In that event, government and Bankers Petroleum Albania shall confer in a timely manner and attempt to reach a settlement, in the course of which said Parties shall identify rejected costs and suspended costs that result from such audit.
Each cost item in a statement of development activity shall be conclusively deemed to be an approved cost after 12 months following the receipt of that statement by the government, unless within the said 12 months period the government takes written audit exception thereto. In the event the government takes such written exception, the government and Bankers Petroleum Albania shall confer in a timely manner and attempt to reach a settlement, in the course of which said parties shall identify rejected costs and suspended costs that result from such audit. Supporting documents and accounts will be available to the government during said 12 month period.
The government shall make every reasonable effort to conduct audits in a manner which will result in a minimum of inconvenience to Bankers Petroleum Albania and its petroleum operations. Bankers Petroleum Albania shall make every reasonable effort to cooperate with AKBN and, as appropriate, will provide reasonable facilities and assistance.
All adjustments resulting from an audit agreed between Bankers Petroleum Albania and the government shall be rectified promptly in the subsequent statement of activities by Bankers Petroleum Albania and reported to the government. If any dispute shall arise in connection with an audit, it shall be discussed by the finance management of the government and Bankers Petroleum Albania and, if not solved, the item or items in dispute shall be settled by arbitration as provided in Art. 21 of the contract.
If a the government or Bankers Petroleum Albania fails to make any payment due under the provisions of this contract within the time that is specified for such payment, then such party shall add to such overdue payment interest at a rate per annum of 2.5% higher than the London Interbank Borrowing Offered Rate (“LIBOR”) for 3 month deposits of 60 United States Dollars as quoted by the London Office of Citibank (or such other bank as the parties may agree) at approximately 1L00 AM London Time for the day or days that the rate will apply.
Bankers Petroleum Albania shall pay to the government a one time only signature bonus totaling US$ 1 million within 60 days after the effective date (the date on which the decree of the council of ministers of the government of Albania approving this contract enters in force. ).
Bankers Petroleum Albania shall pay a production bonus of:
-US$ 100,000 to the government when average daily barrels of crude oil equivalent (BOE) production from the contract area over any consecutive 90 day period reaches 5,000 BOE per day
-a further production bonus of US$ 500,000 to the government when average daily BOE production from the contract area over any consecutive 90 day period reaches 15,000 BOE per day
-a further production bonus of US$ 1,000,000 to the government when average daily BOE production from the contract area over any consecutive 90 day period reaches US$ 30,000 BOE per day.
Any production bonuses paid to the government pursuant to Art. 27 shall not be recoverable.
Other than the royalty tax and Albanian profit tax as described above, each entity comprising Bankers Petroleum Albania, their respective affiliated companies and expatriate personnel shall be exempt from Albanian taxes, with respect to all activities relating to the petroleum operations. This exemption does not include normal port, warehouse and postal charges and other similar customary charges of general application for actual services rendered.
Each of the entities comprising Bankers Petroleum Albania, as may result during the term of this contract, is subject to the payment of profit tax in Albania, in accordance with Albanian law and the provisions of this Art. 9, at the rate of 50% applicable on its share of profit petroleum.
Each entity comprising Bankers Petroleum Albania separately shall be subject to the profit tax in accordance with Law No 7811 dated 12/04/94 “On the Fiscal System in the Petroleum Sector (Exploration and Production)” and shall comply with that law's requirements.
Pursuant to applicable Albanian law, Bankers Petroleum Albania is required to withhold any taxes, social security payments and/or health insurance payments from wages paid to its Albanian employees or subcontractors or to perform all or some of social security and health insurance payments for its Albanian employee and will comply with such requirements and, where applicable, remit such taxes and payments to the appropriate authorities of the Albanian government.
Production Share - "Profit Oil features (triggers for variations in split - IRR, factor, production, etc .)
The government allocation share of available petroleum which the government is entitled to is determined for each calendar month using the “R” Factor applicable to that calendar year (calculated as provided in Art. 7.7), which shall be equal to:
R Factor Government Allocation
0
1.0
2.0 < R 15%
On a monthly basis, available petroleum remaining after deducting the royalty tax and government allocation and all recoverable costs and expenses under this contract for in a given month shall be profit petroleum. Bankers Petroleum Albania is entitled to all profit petroleum, and pursuant to Art. 7.5 shall be taken in kind at the metering point by the company and freely disposed of by export or otherwise, at the sole risk, cost, and expense of the company.
Production Share - Cost Oil features (basis of calculation, limits on cost recovery - e.g. as % of revenue or production, capex uplift, etc.)
Bankers Petroleum Albania shall render to the government, as promptly as practicable, but not later than 60 days after each calendar quarter, a statement of cost recovery for that quarter.
Bankers Petroleum Albania shall recover all costs and expenses under the contract out of a proportion of available petroleum. The portion of available petroleum that is cost recovery petroleum is 100% after the royalty tax and government allocation is deducted.
Bankers Petroleum Albania shall be entitled to take the cost recovery petroleum in kind, freely export it, and dispose of it.
Recoverable costs and expenses in each month shall be recovered first from cost recovery crude oil, if any, and second from cost recovery gas, if any.
Bankers Petroleum Albania shall employ Albanian personnel if their professional skills, knowledge and experience are adequate to the company's requirements and shall reasonably cause its subcontractors to follow this procedure. During production, Bankers Petroleum Albania will gradually replace its non-executive expatriate personnel by qualified Albanian personnel, as available.
Bankers Petroleum Albania and its subcontractors shall:
(i) Give priority to local contractors as long as their prices and the quality and availability of their performance are comparable with international prices and performance.
(ii) Give preference to locally manufactured materials, equipment, machinery and consumables, so long as their price, quality and time of delivery are comparable to internationally available materials, equipment, machinery and consumables. For purposes of price comparison, the cost of imported items will exclude custom duties, but will include transportation and insurance costs.
(iii) Submit for competitive bidding in accordance with operator's policy, any contract with an estimated value in excess of US$2 million.
Banker Petroleum Albania shall be free to select its employees and determine the number thereof to be used for petroleum operations hereunder in accordance with international petroleum industry practices without prejudice.
Bankers Petroleum Albania will prepare and carry out training programs for its Albanian employees engaged in petroleum operations hereunder with respect to applicable aspects of the petroleum industry and it shall cooperate with the government's training program by spending up to US $ 100,000 for training funds during each contract year of the exploration period. All costs and expenses incurred by related to training programs for Albanian employees shall be recovered by Bankers Petroleum Albania under Art. 7 of the contract.
Full title to fixed and moveable assets shall be transferred automatically from Bankers Petroleum Albania to the government when the "R" Factor (as explained in Art. 7.7) equals one (l) or at the time of the termination of this contract whichever first occurs.
Title to assets not subject to cost recovery by Bankers Petroleum Albania or imported into Albania by the company's expatriate personnel or by Banker's petroleum Albania subcontractors will not be transferred to the government, and these items can be, at their owner's option, either sold in Albania subject to Art. 12.5, or freely exported.
During the entire term of this contract and any extension period, Bankers Petroleum Albania is entitled to the full free use in Albania of all fixed and moveable assets acquired or obtained for the petroleum operations regardless of whether or not their cost has been recovered by Bankers Petroleum Albania.
During the term of this Contract and any extension thereof, Bankers Petroleum Albania is entitled to the full use in the contract area, and any other area approved by the government;
- All fixed and moveable assets acquired or obtained by the Bankers Petroleum Albania for the petroleum operations.
- For the purpose of transporting petroleum within or from the contract area to the point of export or any other delivery point agreed upon by the government and Bankers Petroleum Albania, to construct, and operate any pipelines and related facilities, as well as other transportation and/or terminal facilities within or outside the contract area, in accordance with an approved development work program and budget. The construction of any facility outside the contract area shall not unreasonably interfere with the government's or third parties' operations shall be done in coordination with AKBN and shall not be in contradiction with the approved development policies of the Albanian Government and other
competent Albanian authorities.
If Bankers Petroleum Albania wishes to make use of any pipeline, transportation and terminal facilities, which are at the disposal of the government and are not then needed for other Petroleum operations, the government and Bankers Petroleum Albania shall meet and agree on mutually satisfactory conditions for the use thereof based on a reasonable economic tariff.
Within 3 months after the effective date, Bankers Petroleum Albania shall take all necessary steps to commence performance of the following minimum work program covering that period of time collectively referred to as the “exploration period”:
-First exploration period (3 years from effective date)
Minimum Work Program/Minimum Expenditure in USD
1. G&G Evaluation/ 900,000
2. Seismic Reprocessing (2D)/400 km/100,000
3. Exploration Wells 2000 m/ 4,000,000
Total Commitment km 5,000,000
G&G: US$100,000 for reprocessing 400 kilometres of 2-D seismic lines; and US$900,000 for acquisition of technical data, interpretation of geological, geophysical and well data, and conducting regional geological and structural studies (mapping,balanced cross sections).
Exploration Wells: drill two wells each to a minimum vertical depth of 2,000 metres.
During the first exploration period in addition to fulfilling the minimum work program set forth in this Art. 4.1.1, Bankers Petroleum Albania may elect to undertake additional exploration work including without limitation the drilling of additional well(s), seismic acquisition and processing, geological field work, and rock mechanical studies.
Any additional exploration work in excess of the minimum amounts described above (whether G&G or exploration wells or excess expenditure) may be credited against the Bankers Petroleum Albania minimum work obligations in subsequent exploration periods upon approval by the government.
-Second Exploration Period (2 Years)
Provided it has completed the minimum work program for the first exploration period or it has paid to the government the amount of U.S. Dollars pursuant to Art. 4.1.4 of this contract, Bankers Petroleum Albania shall have the option of extending the exploration period for an additional period of two (2) Years (“second exploration period”). Such option may be exercised by Bankers Petroleum Albania by giving to the government, not less than thirty (30) Days prior to the end of the first exploration period, written notice of:
(i) its election to enter the second exploration period and (ii) its commitment to perform the following minimum work program during the second exploration period:
Minimum Work Program/Minimum Expenditure in USD
1 Seismic Acquisition 20 sq. km/1,000,000
2 Exploration Wells 2000m/4,000,000
Total Commitment 5,000,000
G&G: Acquisition of 20 square kilometres of 3-D seismic or 50 kilometres of 2-D seismic, interpretation of geological, geophysical and well data. Regional geological and structural studies (mapping, balanced cross sections).
Exploration Wells: drill two wells each to a minimum vertical depth of 2,000 metres.
During the second exploration period in addition to fulfilling the minimum work program set forth in this article, Bankers Petroleum Albania may elect to undertake additional exploration work including without limitation the drilling of additional well(s), seismic acquisition and processing, geological field work, and rock mechanical studies.
Any additional Exploration work in excess of the minimum amounts described above (whether G&G or Exploration wells or excess expenditure) may be credited against Bankers Petroleum Albania's minimum work obligations in the third exploration period upon approval by the AKBN.
Third Exploration Period (2 Years)
Provided it has completed the minimum work program for the second exploration period or it has paid to the government the amount of U.S. Dollars pursuant to Art. 4.1.4 of this contract, Bankers Petroleum Albania shall have the option of extending the exploration period for an additional period of (2) Years (“third exploration period”) if, as approved by the government, there are special circumstances which require more time for Bankers Petroleum Albania to perform adequate exploration activity. Such option may be exercised by Bankers Petroleum Albania giving to the government, not less than 30 Days prior to the end of the second exploration period, a written notice of: (i) its election to enter the third exploration period and (ii) its commitment to perform the following minimum work program during the third exploration period:
Minimum work program/minimum expenditure in US$
Exploration wells 2000 m/4,000,000
Total commitment 4,000,000
Exploration wells: drill two wells each to a minimum vertical depth of 2,000 metres. During the third exploration period in addition to fulfilling the minimum work program set forth in this article, Bankers Petroleum Albania may elect to undertake additional exploration work including without limitation the drilling of additional well (s), seismic acquisition and processing, geological field work, and rock mechanical studies.
Bankers Petroleum shall take all proper measures, according to generally accepted methods in use in the international petroleum industry, to prevent loss or waste of petroleum above or under the ground during drilling, producing, gathering and distributing or storage operations. Upon completion of the drilling of a productive well, Bankers Petroleum Albania shall inform the government of the time when the well will be tested and the production rate, when results are determined.
With regards to operations and discovery, Bankers Petroleum Albania shall notify the government of the discovery in writing within 15 days after a date of discovery is determined by the company and will provide the government with the results of the testing.Following a discovery, Bankers Petroleum Albania may produce, transport and sell petroleum on test, as permitted by the government. Such production shall be subject to Art. 7.
Within 60 days after the notice of discovery under Art. 6.1, Bankers Petroleum Albania will notify the government in writing whether it considers the discovery to be worthy of appraisal as a potential commercial discovery.
In case Bankers Petroleum Albania notifies the government under Art. 6.2 that it considers a discovery to be worthy of appraisal as a potential commercial discovery, Bankers Petroleum Albania shall promptly thereafter inform the government of its appraisal plans for the concerned discovery and will undertake the appraisal of the discovery by performing such works that, in Bankers Petroleum Albania's opinion, may be necessary to determine whether such discovery is worthy of being developed commercially, taking into consideration all relevant technical and economic factors.
Within 6 months after completion of the appraisal, Bankers Petroleum Albania shall either:
-Submit to the government a development plan for the purpose of declaring a commercial discovery; or
-Notify the government that the discovery could be commercial if other discoveries are made and jointly developed and exploited with it, or that Bankers Petroleum Albania proposes to do additional work in the contract Area for that purpose; or
-Notify AKBN that Bankers Petroleum Albania does not consider the discovery to be potentially commercial.
Any dispute, controversy, claim or difference of opinion, arising out of or relating to this contract or the breach, termination or validity thereof, or to the petroleum operations carried out hereunder, shall be finally and conclusively settled by arbitration in accordance with the United Nations Commission on International Trade Law (UNCITRAL).
The arbitration shall take place in Paris, France. The language to be used in the arbitration proceedings shall be English.
The right to arbitrate under Art. 21 shall survive the termination of this contract.
The government expressly waives any right to claim sovereign immunity in connection with any arbitration proceeding instituted pursuant to this article, any proceeding to compel enforcement of this article, or any proceeding to enforce any award made by arbitration under this article.
Bankers Petroleum Albania shall supply the government on a current basis with copies of all technical data records (including, but not limited to, seismic field tapes, geological and geophysical reports, logs and well surveys, information and interpretation thereof)--- which are available to the company, including sample tests, related to petroleum operations under this contract.
All such data shall be deemed to be strictly confidential and shall not be divulged by the government, except to other government authorities, without the consent of Bankers Petroleum Albania nor by it, except to affiliated companies, professional consultants, banks or financial institutions from whom Bankers Petroleum Albania or any entity comprising Bankers Petroleum Albania is seeking or obtaining finance and third parties who may be interested in acquiring an interest in this contract (provided always that such affiliated companies, consultants, banks, financial institutions and third parties are bound by a strict undertaking of confidentiality), or to the extent required by any stock exchange on which the shares of Bankers Petroleum Albania or any entity comprising the company or an affiliated company of Bankers Petroleum Albania or any entity comprising Bankers Petroleum Albania are quoted, with prior notification to the government, while this contract remains in force.
If the contract is terminated in the first exploration period or any subsequent exploration period, Bankers Petroleum Albania shall be bound not to divulge, except to affiliated companies, the data and information obtained by it and not to relinquish them in any manner whatsoever during at least 5 years from the termination of this contract. The confidentiality undertaking by the government does not include data on areas relinquished by Bankers Petroleum Albania, data which can be delivered to third parties provided that the recipients of such data agree to use them only to determine the possibility of entering into a contract for that area with the government and to maintain the data confidential.
If any new provisions or changes or amendments to Albanian laws or regulations, or any changes in the interpretation thereof, impose on Bankers Petroleum Albania new or higher tributes, taxes, duties, rights, payments or any other obligations, with respect to those expressly considered applicable to Bankers Petroleum Albania or its subcontractors under the terms of this contract, the government and Bankers Petroleum Albania agree to amend the contract that the profit sharing percentages established under Art. 7.6 be adjusted accordingly to maintain the economic equilibrium of this contract, by allowing Bankers Petroleum Albania to receive the same net share of profit sharing Petroleum as if no changes or amendments had occurred.