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as Farmor



as Farmee

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THIS AGREEMENT is made the 23rd day of December 2003



body corporate established under the laws ol the hederal Republic of

Nigeria whose Head Office is at NNPC Towers, Abuja, Nigeria,

(hereinafter referred to as "NNPC"),


NIGERIA LIMITED, a company incorporated under die laws of the

Federal Republic of Nigeria and having its registered office at Freeman

House, No. 21/22 Marina, Lagos, Nigeria (hereinafter referred to as


3. ’ ELF PETROLEUM NIGERIA LIMITED, a company incorporated

under the laws of die Federal Republic of Nigeria and having its registered

office at No 35, Kofo Abayomi Street, Victoria Island, Lagos, Nigeria,

(hereinafter referred to as "Elf),


incorporated under the laws of the Federal Republic of Nigeria and having

its registered office at Plot PC 23 Engineering Close, Victoria Island, Lagos,

Nigeria (hereinafter referred to as “NAOC”),

(NNPC, SHELL, ELF, NAOC,) hereinafter collccdvcly called “Farmor”

where the context so admits, which expression shall include their respective

successors and assigns)



incorporated under the laws of die Federal Republic of Nigeria and having its

registered office at No. 25 Idoro Road, Uyo, Akwa Ibom State, Nigeria

(hereinafter referred to as "Farmee" where die context so admits, which

expression shall include its respeedve successors and assigns).



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(A) The Farmor hold participating interests in several oil mining leases (OMLs)

granted by die Federal Government of Nigeria including OML 14 which

contains Stubb Creek Field, (hereinafter referred to as "OML 14") in the

following proportions: NNPC 55%, SHELL 30%, Elf 10% and NAOC 5%;

(B) The Farmor are entitled to the benefits and rights, and subject to die duties and

obligations of a lessee under OML 14 by virtue of die participating interest

which diey hold in OML 14, and

(C) The Farmor are parties to a joint venture under a joint operating agreement

dated 11th July 1991, which governs their relationship in relation to, inter alia,

OML 14 whereby SHELL was appointed operator to conduct petroleum

operations within die areas covered-by their oil mining leases, and

(D) Pursuant to the Petroleum Amendment Act (number 23) of 1996 and by

virtue of a letter dated 27th August 2001 from the Office of the Presidential

Adviser for Petroleum and Energy, Stubb Creek Field has been declared a

Marginal Field;

(E) Farmee has been allocated Stubb Creek Field by die Government in die

Marginal Field Allocation Round whereupon die Parties wish to set out the

terms and conditions of the farm-out by the Farmor of die Marginal Field to

Farmee, Provided that full legal tide to OML 14 shall wholly be retained by

the Farmor;

NOW, THEREFORE, in consideration of the above premises and of the mutual

covenants of die Parties as hereinafter set forth, the Parties hereby agree as



1.1 Definitions and Interpretation

In this Agreement the following terms shall have die meanings specified below:

1.1.1 ’’Affiliate*1 - means

(a) as it relates to all Parties except SFIELL; a company or other entity thar.

direedy, or indireedy through one or more intermediaries, controls or is

controlled by, or is under common control of, or with, a Party;

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 (1)) as it relates to SHELL

(i) N.V. Koninklijke Nederlandsche Petroleum Maatschappij,

(ii) The “Shell Transport and Trading Company Pic, and any

company (other than SHELL) which is for the time being directly

or indireedy controlled by N.V. Koninklijke Nederlandsche

Petroleum Maatschappij and The SheLl Transport and Trading

Company, Pic or either of them. For the [purpose of this

definition, “Control” means ownership of a minimum of 50% of

the issued voting stock of company entitled to vote or ownership

of equivalent rights to determine the decisions of such company

or entity;

1.1.2 “Agreement” means this agreement including the Schedules;

1.1.3 “Appraisal” means the activity whose purpose at the time of its

commencement is die determination of the extent, volume or producibility

of Hydrocarbons contained in a Discovery.

1.1.4 “Farm-out” means the grant of possession and use of Farm-out Area to

Farmee for the purpose of conducting Operations in the Marginal Field as

defined in Article 3.

1.1.5 “Additional Reservoir” means any new Petroleum Deposit in die Farm-out

Area that is outside die Farm-out Depdi.

1.1.6 "Associated Agreements" means all agreements to which some or all

Parties arc party under which die Farmor provide services to Farmee with

regard to the transportation or disposal of Production from die Marginal

Field including but widiout limitation to die Hydrocarbon Handling

Agreement and the Offtake Agreement.

1.1.7 “Abandonment Security Agreement” means an agreement substantially

in die form of Schedule C provided diat such amendments shall be made

thereto as are necessary to;

(i) make provision for die principles set out in the schedules thereof

(ii) comply with the Regulations and/or any third party signatory to die

documents comprising die schedules thereof, and/or

(iii) as may be required to render die Abandonment Security Agreement and/or

the documents comprising its schedules effective and enforceable (in

accordance with the intention of the Parties as set out in this Agreeri

under die law applicable at the date of execution thereof.

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1.1.8 “Discovery” means the finding by drilling of an accumulation of

Hydrocarbons within the Farm-out Area the existence of which until that

moment was unknown or not confirmed.

1.1.9 "Dollars" or "US$" means the legal currency of the United States of


1.1.10 “Dry Crude” means treated crude oil from Marginal Field with a water

content of less than 0.5% by volume, measured in accordance with

Department of Petroleum Resources (DPR) approved methods in

accordance with the provision of the Regulations.

1.1.11 “Effective Date” shall be as defined in Article 3 of this Agreement;

1.1.12 "Encumbrances” means any mortgage, charge (whether fixed or floating),

pledge, claim, lien, equity or other security agreement or arrangement, or any

royalty interest, production payment, net profit interest, carried interest,

deferred obligation, right of pre-emption or similar agreement or


1.1.13 "Farmee" means Universal Energy Resources Limited

1.1.14 “Farm-out” means the grant of possession and use of Farm-out Area to

Farmee for the purpose of conducting Operations in the Marginal Field as

defined in Article 3.

1.1.15 "Farm-out Area" means the area within OML 14 delineated by its co¬

ordinates shown in Schedule A as may be amended from time to time by the

agreement of the Parties in accordance with the provisions of this


1.1.16 “Farm-out Depth" means the True Vertical Depth (TVD) of the deepest

well drilled in the Marginal Field as at the Effective Date, which is 9829 Feet

True Vertical Depth Subsea as indicated in Schedule A.

1.1.17 “Farm-out Facilities" means all property, facilities and equipment

belonging to the Farmor within the Farm-out Area that shall be handed over

to the Farmee by Farmor on 'as is' basis, including all benefits and liabilities,

pursuant to this Agreement.

1.1.18 "Government" means the Government of the Federal Republic of Nigeria,

including, as the context requires, state and local governments, its ministries,

agencies, and other subdivisions.

1.1.19 "Gross Negligence or Wilful Misconduct" means an intentional and

conscious, or reckless disregard of good and prudent oil and gas field practice

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or of the terms of this Agreement, and shall not include any omissions, errors

or mistakes made by any director, officer, employee, agent, contractor or

subcontractor of such Party or its Affiliates in the exercise in good faith of

any authority or discretion conferred upon such Party under this Agreement.

1.1.20 “Health Safety and Environmental or ‘PISE’ Standards” means the

standards as set out by the Department of Petroleum Resources and the JV


1.1.21 "Joint. Operating Agreement" or "JOA" means the Joint Operating

Agreement between the Farmor dated 11th July 1991, as may be amended

from time to time, which governs their relationship in relation to, inter alia,

OML 14 whereby SHELL was appointed operator to conduct petroleum

operations within the areas covered by their oil mining leases.

1.1.22"JV Operator" means SHELL, as the Operator for the time being of the

Joint Venture.

1.1.23"Joint Venture" means the joint venture between the Farmor.

1.1.24 "LIBOR" means the London Inter Bank Offer Rate as quoted by the

National Westminster Bank in London for three months United States

Dollar deposits at 11.00 hours on the relevant date, or the maximum legally

permissible rate, if less. If the London Inter Bank Rate, is not so quoted on

the relevant date, such rate last previously so quoted shall be taken, provided

that if National Westminster Bank shall not have quoted such rate for sever.

(7) consecutive days, the rate published in the Financial Times, London on

the day after the relevant date shall be substituted.

1.1.25 "Marginal Field " means Stubb Creek Field situated in the Farm-Out Area

as defined in 1.1.15.

1.1.26 “MFO” means Universal Energy‘Resources Limited as marginal field

operator on behalf of herself and Partners where applicable.

1.1.27"Minister" or "Ministry" means the Minister or Ministry of Petroleum

Resources of the Federal Republic of Nigeria, as the context requires,

including the Department of Petroleum Resources ("DPR") of the Ministry.

1.1.28 “Month” means a calendar month;

1.1.29 “Natural Gas” means all gaseous Hydrocarbons produced in association

with Crude Oil or from reservoirs, which produce mainly gaseous


1.1.30 “Nigeria” means the Federal Republic of Nigeria;

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1.1.31 "Oil Mining Lease ("OML") means die lease to die Farmor granted by

die Minister under the Petroleum Act 1969 Cap 350, laws of die Federation

of Nigeria 1990 as amended, to a lessee to search for, win, work, carry away

and dispose Petroleum from all the area covered by OML 14.

1.1.32 "Operations" means the exploration, prospecting, winning, working and

carrying away of petroleum undertaken by die Farmee in respect of the

Marginal Field, and all matters ancillary thereto, including further Appraisal

within the Farm-out Area in accordance with die terms of this Agreement.

1.1.33 “Party" means any party to diis Agreement, its successors and permitted

assigns and “Parties" means all such parties collectively.

1.1.34 "Petroleum" means mineral oil (or any related hydrocarbon) or natural gas

as it exists in its natural state in strata and docs not include coal or

bituminous shales or other stratified deposits from which oil can be

extracted by destructive distillation.

1.1.35 Petroleum Operations' shall have the meaning ascribed to it in the

Petroleum Profits Tax Act, Cap 354, Laws of the Federation of Nigeria,


1.1.36 “Petroleum Profits Tax” or "PPT" has the meaning ascribed to it in the

Petroleum Profits Tax Act, Cap 354, and Laws of the Federation of Nigeria


1.1.37 "Regulations" means any and all statutes, laws, rules, orders and

regulations affecting oil mining leases and Marginal Fields and companies

conducting petroleum operations in effect from time to time and made by

government authorities having jurisdiction over oil mining leases and the

Farm-out Area and over operations conducted thereon, and any laws, orders

or Regulations of any State or local Government authority.

1.1.38 Work Programme,, means any programme of Operations to be carried out

in the Farm-Out Area.

1.2 Interpretation

All references to Articles, Schedules and Appendices are, unless otherwise

expressly stated, references to Articles, Schedules and Appendices to this


The headings in this Agreement are inserted for convenience only and shall

be ignored in construing this Agreement. Unless the context otherwise

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requires in this Agreement references to the singular include a reference to

die plural and vice versa and references to one gender will include all


References in this Agreement to any statute, statutory instrument, act or

regulation will be a reference to the same as amended, re-enacted or

replaced from time to time and will include any rules or regulations passed

in pursuance of the same.

1.3 Conflicts

In the event of any conflict or inconsistency between the provisions of the

main body of this Agreement and die Schedules and/or Exhibits hereto, the

provisions of die main body of this Agreement shall prevail.

In die event of any conflict or inconsistency between die provisions of this

Agreement and die OML, the provisions of the OML, as applicable shall

govern this Agreement and it shall be deemed to be modified accordingly

and, as so modified, diis Agreement shall continue in full force and effect.

The unenforceability of any provisions of this Agreement for any reason

whatsoever shall not prejudice the enforceability or validity of the rest of

this Agreement or any other provision hereof.

1.4 Schedules

The following Appendices are attached hereto and incorporated into diis


(a) Schedule A: Farm-out Area, Farm-out Depth, and Farm-out

Facilities: Stubb Creek Field




(c) Schedule C: Decommissioning and Abandonment Security

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2.1 Farmor’s Representative

2.1.1 Each of the Farmor hereby appoints SHELL as its representative and

hereby authorises the said representative to act for and on behalf of each of

die Farmor in die performance and administration of diis Agreement.

2.2 Farmee's Representative (If Farmee is more than party)

2.2.1 The Partners to Stubb Creek Marginal field agree that Universal Energy

Resources Limited is the operator and has the exclusive responsibility for

executing the Operations and shall represent the Partners in the performance

and administration of this Agreement.

2.2.2 Notwithstanding Article 2.2.1, each of die Farmee shall be jointly and severally

liable for its obligations under this Agreement.



3.1 Farm-out

3.1.1 Subject to the terms and conditions of dais Agreement, the Farmor hereby

grant to the Farmee, for the term of this Agreement, possession and use of

die Farm-out Area for die purpose of Farmee conducting Operations in the

Marginal Field togetiier with all rights, benefits, duties and liabilities

associated with conducting Petroleum Operations in the Fami-out Area and

Farmee hereby accepts subject to the terms of diis Agreement and

Government consent, die possession and use of die Farm-out Area and/or

Farm- out Facilities for die purpose of conducting Operations in the

Marginal Field together with all rights, benefits, obligations and liabilities

associated with the conduct of Petroleum Operations in the Farm-out Area.

3.1.2 Farmee shall use the Farm-out Area only for the purposes set forth in this

Agreement, and in accordance widi die terms of diis Agreement, die OMj.

and the Regulations.

3.1.3 Except as otherwise provided for in diis Agreement, the costs and expenses

incurred in the Operations, as well as any losses and risks derived dierefrom,

shall be borne by Farmee, and Farmor shall not be responsible to bear or

repay any of the Farmee's costs provided such losses are not caused by die


3.1.4 It is understood and agreed that this Agreement is subject to the provisions

of die OML and the Regulations.

3.1.5 As between the Farmor and Farmee, die Farmor shall retain all ownership

rights to die OML, and the rights, ride and interest or estate of die Farmee

shall be equivalent to diose of a sub-lessee in accordance with the terms of

diis Agreement.

3.2 Government Approvals

3.2.1 The Farmor and Farmee each undertake to obtain all necessary approvals

from die relevant authorides in relation to tiieir respective rights and

obligations under tiiis Agreement. In this regard, each Party shall provide

reasonable assistance to the other Party, as necessary, in order for such

approvals to be obtained in a timely manner.

3.3 Effective Date and Term of Farm-out

3.3.1 The Effective Date of die Farm-out intended by this Agreement shall be the

latter of:

(a) The payment by Farmee of any signature bonus and/or other fees

payable to die Government upon the tenns of the allocation of die

Marginal Field to Farmee.

(b) The obtaining of all approvals and consents required by the Regulations

for the Farm-out.

(c) The receipt by Farmor from Farmee of copies of the certificates of

insurance in respect of the classes of insurance listed in Article 16.1.1,

16.1.2, and 16.1.3.

3.3.2 Term of Agreement Subject to Article 19 this Agreement shall be for an initial period of sixey

months from the Effective Date. If prior to die end of die initial sixty mondi period, Farmee serves cn the

JV Operator notification from DPR of approval and renewal of die farm-

out to Farmee by Government, die Agreement shall, subject to die terms

hereof, continue in full force and effect from die end of die sixty irio»v.h

period of die Effective Date for so long as die Farmor continue to have the

right to conduct Petroleum Operations within any part of the area currently

included within OML 14, unless terminated earlier in accordance with

Article 19.

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3.3.3 Hand Over

Not later than fourteen days after the Effective Date of the Farm-out in

accordance with this Article 3, or at such other time as the Parties shall

agree, JV Operator shall give custody to Farmec on an 'as is and where is'


(a) of the Farm-out Area;

(b) of all the Farm-out Facilities;

3.4 Environmental Baseline Survey

Farmee shall carry out an Environmental Base Line Survey in line with die

requirements set out in Schedule B, signed by Farmee and Farrnor the

acceptance of which shall be confirmation by the Parties that this Surrey

fairly and completely describes the status of the environmental condition of

die Farm-out Area as at the Effective Date of tiiis Agreement.

Failure of Farmee to conduct the Environmental Base Line Survey in

accordance with Article 3.4 above shall be deemed to be acceptance of

Farmor’s assessment of the environmental state of die Farm-out Area as at

the Effective Date and shall be a waiver of any subsequent claims against

Farrnor arising out of or concerning the environmental condition of die

Farm-out Area.



4.1 If new information has become available based upon relevant, objective,

scientific and technical factors that indicates diat the Marginal Field may

extend beyond die Farm-out Area, Farmee shall inform Farrnor and may

request an amendment to die Marginal Field in accordance with the

provisions of this Article.

4.2 The factors on which a case for re-definition of die Marginal Field could be

• made shall include but not limited to, acquisition, processing and

interpretation of new seismic data, new development concepts, results from

appraisal or development wells drilled within the Marginal Field by Farmee,

or outside die Farm-out Area by JV Operator.

4.3 Any such request shall be in writing and shall substantiate in detail and with

relevant dam the reasons behind Farmee’s request for a re-definition ot the

Pa8e 13 ,^Vj

n I' 0


t iU-rC .

Marginal Field. Not later than ninety days upon receiving such request for

re-definition of the Marginal Field, the Parties will meet to discuss such

request. Farmor shall consider Farmee’s request, and may at its absolute

discretion agree to a re-definition of the Marginal Field as Farmor may deem

tit. If Parties cannot agree on die a re-definition within six (6) months of the

request, or if die Parties fail to meet within ninety days of the request as

provided in this Article 4.3, dien the request shall be deemed to be refused

by Farmor, and may be revisited only for the purposes of a unitisation witii

Farmor at the discretion of die Farmor. The provisions of dais Agreement,

including consideration, shall apply mutatis mutandis to a re-definition made

other than for unitisation.

4.4 If, and as long as, widi respect to any request for re-definition, no agreement

has been reached, die Marginal Field shall remain as set out in this


4.5 If, as a result of such request Farmor considers it appropriate, or die

Marginal Field appears to straddle die boundary or boundaries of Farmor’s

oil mining lease or a neighbouring oil mining lease not being the property of

the Farmor, Farmee shall prompdy report same to DPR, and shall use its

best endeavours to reach agreement with the holders of such oil mining

lease, subject to die Regulations on die development of die Marginal Field

as a unit with such straddled fields, including agreement on participation, die

allocation of production and the determination of the consideration for such

participation. If an agreement is reached, die unitised area shall be deemed

to be subject to the terms of DPR’s guidelines on unitisation.

4.6 If Farm-out Area is reduced by surrender expiration and/or relinquishment,

revocation of die OML, then die Farm-out Area shall be re-defined to

exclude any area affected by such surrender, expiration and/or

relinquishment and in die event of revocation of die OML, it shall revert to


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5.1 Ovcriding Royalty

As consideration for the Farm-out, Farmee shall pay to the Farrnor

Ovcriding Royalty (“Override”). The Override shall be determined in

accordance with this Article 5.

5.1.1 Farmee shall pay to Farrnor as follows:

(a) With respect to the production of Crude Oil from die Marginal Field,

the Farmee shall pay to the Farrnor an Override of 2.5% of the daily

production up to 2,000 Bopd. Subsequently 3.0% of the value of

Farmee’s daily production from 2,001 to 5,000 Bopd; and

subsequently 5.5% of die value of Farmee’s daily production from

5,001 to 10,000 Bopd; and subsequendy 7.5% of the value of the

Farmee’s daily production between 10,001 and 15,000 Bopd. For

production in excess of 15,000 Bopd, die Farmee shall pay the

Farrnor such additional rate of Override as shall be negotiated and

agreed between the Parties.

(b) For the purpose of the Override , the daily production shall mean the

entire daily production of Crude Oil from die Marginal Field.

(c) Widi respect to the production of Natural Gas from the Marginal

Field, the Farmee shall pay to die Farrnor an Override of 0 % of the

value of Farmee’s production between 0 and 20 Million Standard

Cubic Feet per Day (MMSCF/D); For production higher than 20

Million Standard Cubic Feet per-Day (MMSCF/D), die terms and

conditions of such production shall be agreed between Farrnor and


5.2.1 (a) All payments due under Article 5.1.1(a) from the Farmee shall be

made in Crude Oil allocation from Farmee to Farrnor in such

quantum as will generate an amount sufficient to cover all such

payment under this Agreement

(b ) In respect of such allocation, Farrnor shall have the option at its sole

discretion to elect to take delivery thereof:

(i). at the fence between Farmee’s facilities and Farmor’s facilities; or


Page 15 4

(ii) at such other outlet of Farmce’s Crude Oil as may be agreed by

the Parties.

(c) 1 'armor shall have the option at its sole discretion to elect to receive

the Override from Farmee at all times in US Dollars equivalent at the

prevailing market prices for Farmee’s Crude Oil on the date of

payment net of all applicable handling charges

5.2.2 For the purpose of calculation of the Override, Farmee shall keep full and

correct accounts for all Petroleum measured as stipulated in Article 7.2.3,

and Farmor shall have access at all times to the books of Farmee containing

such accounts and may make excerpts therefrom. Farmee shall, within sixty

(60) days after the end of each calendar year, deliver to JV Operator an

abstract of such accounts for each year, which shall be treated as

confidential by JV Operator unless otherwise agreed by Farmee.

5.2.3 Farmee shall be required to account for or measure. Petroleum unavoidably

lost or used in operations hereunder, including Petroleum used in secondary

recovery operations, or Natural Gas that may be flared.

5.2A Without prejudice to Article 6.4 (i), Farmee shall furnish Farmor a copy of

any report presented by Farmee to DPR on the number of barrels of Crude

Oil and other Petroleum produced in the Farm-out Area within the five (5)

days immediately following the end of each calendar month,.

5.2.5 If Farmee should not supply copy of such report, JV Operator may elect to

calculate the payments due to Farmor under this Article 5 proceeding on the

basis of the mentioned monthly report most recently presented by the

Farmee to the Minister, and Farmee shall pay on such basis, on the

understanding that such payment shall be adjusted when Farmee furnishes

Farmor the report of reference.

5.3 Unless otherwise provided herein, any payment which Farmee is required

to make to the Farmor pursuant to this Agreement shall be made within

thirty days following the date of lifting by the Farmee of the Petroleum

produced from its Operations. Where payments are to be made in cash,

they shall be made to a bank account to be nominated in writing from time

to time by the. Farmor.

Page 16



5.4 Any overdue payment shall bear interest, calculated and compounded

monthly, from the due date until the date on which die payment is received

at the annual rate of:

(a) in die case of payments which have been die subject of a bona fide

dispute, LIBOR plus one percent (1%); and

(b) in the case of all other late payments, LIBOR plus one per cent (1 %);


(c) in die case of payments in local currency, it shall be the Minimum

Rediscount Rate (MRR) advised by the Central Bank of Nigeria

(CBN) plus six percent (6%) during the period in which the amount

in default remains unpaid..

5.5 If any sums due to Farmor from Fannee shall remain unpaid for a

continuous period of three mondis, after it has become due, Farmee shall be

considered to be in "Default" and shall be deemed to have granted to die

Farmor a lien upon all Crude Oil produced from die Marginal Field, and the

proceeds therefrom to secure discharge of the said sums due from Farmee,

together with interest thereon at the rate provided in Article 5.4 above.

5.6 It is hereby agreed that throughout the period of such Default, Farmee shall

not be entitled to its production from the Marginal Field which shall then

vest in and be die property of die Farmor while any sums (including

interest) due from Farmee remains outstanding.

5.7 Farmor shall be audiorised to sell such production from die Marginal Field

at die best price obtainable under die circumstances and, after deducting aii

costs, charges, and expenses it in connection with such sale,

shall recover from the remaining proceeds all moneys due to it by Fannee,

together with interest accrued. Any surplus remaining diereafter shall be

paid to die Farmee.

5.8 Notwithstanding die provision of Articles 5.5 and 5.6 above, Farmor may

upon not less tiian 30 days prior notice to Farmee suspend performance of

their services or obligations to Farmee under the Associated Agreements, if

applicable. The exercise of such right shall not constitute a waiver of any

other remedies available to die Farmor under diis Agreement.

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6.1 Rights and obligations of the Farmee

611 Save and except as otherwise provided in this Agreement, the Farmee shall

to the extent provided for in this Agreement:

(a) Have the right to conduct Operations by itself, its agents and/or its

contractors. If the. Farmee does not conduct any Operations itself, it

shall nonetheless remain responsible for such Operations as the Farmee

to the extent provided under this Agreement and the Regulations.

(b) Conduct all its Operations in accordance with the terms of the OML, the

Regulations and this Agreement in a manner consistent with good and

prudent oil and gas field practice and with that degree of diligence and

prudence reasonably and ordinarily exercised by experienced oil and gas

companies engaged in similar activities under similar circumstances and

conditions to meet Health Safety and Environmental Standards of DPR

and the JV Operator.

(c) Have the right to all reservoirs lying totally within the Farm-out Area

and down to the Farm-out Depth.

(d) Grant to the Farmor access to all seismic, geological, geophysical,

drilling, well production, operating and other data and reports as it may

compile during the term hereof and at the end of the Agreement

surrender all original data and reports to the DPR.

(e) Acquire all permits, consents, approvals, surface or other rights that may

be required for or in connection with the conduct of the Operations in

the Farm-Out Area, and not start any activity until the appropriate

permit, consent or approval has been obtained, have the right to deal

directly with Government on all matters relating to the Operations other

than those relating directly or indirectly to the OML outside of the Farm

out Area.

(f) Fully inform and submit to JV Operator all plans of activities and

Government interface in respect of the Marginal Field and adhere to any

instructions of JV Operator in respect thereof as stipulated in the terms

of this agreement.

(g) Pay and be liable for all taxes, rates and assessments of every description,

whatsoever that may be imposed on Farmee by any lawful authority in

respect of the Farm-out Area or by reason of this Agreement.

Page 18


(h) Make all payments due to the Farmor in accordance with the terms oi

this Agreement.

(i) Obtain the Insurance required under Article 16, without limiting in any

way the rights of the Farmor to procure and maintain additional

insurance coverage as they determine to be appropriate at the Farmor’s


(j) Maintain good relations with the host communities, Local and State

Governments and inhabitants of the areas in and around the Farm-out

Area and do nothing to undermine the relationship of these parties with

the Farmor.

(k) Not exercise all or any rights or authority over the Farm-Out Area in

derogation of the rights of the Farmor as stipulated in the terms of this


6.1.2 Farmce shall not represent itself in its Operations in any part of the Farm-

out Area in any way or manner that might reasonably be interpreted as a

claim to agency of or partnership with the Farmor.

6.1.3 Farmce shall not conduct any of its operations in a violation of the terms

and conditions of the OML and shall do or cause to be done within the

scope of its authority and, with due diligence, all such lawful acts and things

within its control as may be necessary to keep and maintain the OML in

force and effect in so far as the Farm-out Area is concerned and do nothing,

to endanger the OML.

6.1.4 Farmee shall be responsible for acquiring any surface rights and rights-of-way

required for the Operations, provided that JV Operator shall to the extent

possible, and subject to any required consent first having been granted, grant

easements or licence to the Farmee with regard to any such surface rights and

rights-of-way that may be in its possession which it is free to and/or is able to

grant. Notwithstanding the foregoing however, JV Operator shall not be

responsible for any failure by Government or any owner of land or surface

right to grant consent to any such easements and/or licence.

6.1.5 Farmee, at its sole expense, shall have the right and obligation to perfect title

to and/or make any modification necessary to cause any such surface rights

and rights-of-way to remain in compliance with all requirements oi the laws

of Nigeria provided however, that the Farmee shall not have the right ro

make any such modification that will adversely affect (other than in an

immaterial way) the ability of the Farmor to comply with any oi its

obligations under the OML.

Page 19

6.1.6 hxccpt as otherwise provided in this Agreement or as may be authorised by

the mutual agreement in writing of the Parties, Farmee shall not permit or

suffer any lien or other encumbrance to be filed or to remain against the

Farm-out Area and/Farm-out facilities unless there is a bona fide dispute

with respect thereto. Farmee may only create a lien or other encumbrance

on Farmee’s facilities and/or Petroleum produced and saved as a result of

its Operations subject always to Farmor’s overriding royalty payments and

any right reserved to the Farmor in respect thereof under the terms of this

Agreement. The lien to be created by the Farmee under this Article 6.1.6

shall not for any reason rank in priority over the right which, the Farmor

would otherwise have been entitled to under this Agreement had such

charge or lien not been created by the Farmee.

6.2 Rights and obligations of the Farmor

6.2.1 In accordance with this Agreement, the Farmor shall:

(a) Pay and be liable for all taxes, rates and assessments of every description

whatsoever that may be imposed by any lawful authority over the OML

except as may be applicable over the Farm-out Area

(b) Subject to any confidentiality obligations by which it is bound, herein, give

the Farmee access, on reasonable prior notice during business hours, to such,

information and/or data relating to the Marginal Field which is in the.

possession of the Farmor as Farmee may reasonably require for Operations

(excluding analyses prepared by or on behalf of the Farmor for their own

internal purposes, or proprietary information of the Farmor or a third


(c) Have the right and access to all original data resulting from the Operations

including but not limited to geological, geophysical, engineering, well logs,

completion, production, operations, status reports and any other data as the

Farmee may compile during the term hereof, provided however, that the

Farmee shall keep and use such original data during the term of this


(d) Have the right, in the event of any environmental or safety problem or any

emergency involving the safeguarding of Lives or property or for the

prevention of pollution, or risk of damage to the OML or the Farmor’s

Petroleum Operations around the Farm-out Area (“Incident”) which, in the

opinion of the JV Operator could be mitigated by a suspension of

Operations, to issue notice in writing to Farmee, requiring Farmee to

suspend Operations or any part thereof and inform and seek clarification

from DPR.. Farmee shall not resume Operations until permitted to do so in

Page 20

writing by OPR upon consultation with JV Operator. Any expense incurred

by Farmer, as a result of any such suspension shall not be recoverable from

the Farmor provided the Incident was not caused by the Farmer.

Access Rights

The Farmor shall, at all reasonable times and at their cost, have the right of

access to the Farm-Out Area for their authorised representative(s), and at

the Farmor’s expense, provided such Farmor give Farmee reasonable notice

in writing of the date such access is required and nominates in such notice

the authorised representatives to whom such access is to be granted.

PROVIDED always that the JV Operator shall be entitled to dispense with

such notice in the event of an emergency.

Each Farmor so requesting such access shall relieve, indemnify and hold

harmless the Farmee from and against all claims, Liabilities, costs, damages

and expenses of every kind and nature in respect of personal injury including

fatal injury or disease of any representative of such Farmor save and except

where such personal injury was caused or contributed by the negligence or

breach of duty of any employee, agents or contractors of the Farmee.


Farmee shall make available to Farmor copies of all statutory reports to DPR

including a copy of the report or form presented by Farmee to DPR on the

number of barrels of Crude Oil and volumes of other hydrocarbon produced

from the Marginal Field, every calendar month which report shall be

submitted within fifteen (15) days immediately following the end of each

calendar month.

Farmee shall submit within forty five days after the end of each calendar

quarter, a quarterly progress report to Farmor which shall contain a

narrative report of all the activities during such calendar quarter under this

Agreement with plans and maps showing the places where the described

work was done

Within three months after the end of each Calendar Year Farmee shall

deliver to Farmor an annual report which shall consolidate the information

contained in the quarterly progress reports furnished in respect of such

Calendar Year.

Farmee shall report all incidences of environmental pollution or communal

disturbances occurring in the Farm-out Area or from Operations immediately

upon their occurrence and in any event not less than twenty-four hours


6.5 Books and Accounts

Farmee shall keep complete books of accounts of Operations consistent

with modern petroleum industry and accounting practices and procedures.

The statutory books and accounts of this Agreement shall be kept in Naira

and U. S. Dollars. All other books of accounts for the Operations shall be

kept in both Naira and U. S. Dollars.

6.6 Farmors Inspection Rights

6.6.1 Subject as otherwise provided in this Agreement, the Farmor shall have

access to and the right to inspect, not more than twice a year, all books,

records and inventories maintained by the Farmee and relating to the

Operations, provided that JV Operator gives the Farmee not less than

fourteen (14) days prior notice of the date upon which it desires to make

such inspection and identifies the person or persons to conduct such


6.6.2 Not more than once in six months and subject to a minimum of 14 days

. notice the Farmor may audit or cause the audit of the books and accounts

relating to Operations and the Marginal Fields throughout the term of this

Agreement. However in the event of disagreement of audit report an

external auditor shall be appointed by both Parties to audit the books.

6.6.3 Notwithstanding the limitations under this Article 6, Farmor shall upon

notice at any other time other than as provided have access to the records,

books, inventories and accounts of the Farmee for the purposes of

inspection and/or audit upon showing reasonable cause to do so.

6.7 Covenant and Undertaking

Each Party hereby covenants and undertakes with the other Party that it wiii

comply with all applicable provisions and requirements of the Regulations

and the OML and will do all such acts and things within its control as may¬

be necessary to keep and maintain the OML in full force and effect.

Page 22



7.1 Operations conducted in the Farm -out Area shall be at the sole cost, risk

and expense of Farmee, and Farmee shall ensure that its Operations do not

conflict with or cause any hindrance to Farmor’s Petroleum Operations.

Farmee shall discuss its Annual Work Programme and proposed budget

with the Farmor before submission to the DPR. Farmor shall have the richt

k >

but not the obligation to review and/or comment upon the said work

programme. Should Farmor wish to propose a revision as to certain specific

features of the said Work Programme and Budget, it shall within four (4)

weeks after receipt thereof so notify the Farmee in writing specifying in

reasonable, detail the review requested and its reasons therefore. Farmee

shall use its best endeavours to resolve the request for revisions proposed by

Farmor and give reasonable regard to any comments by the Farmor. If

Farmor has not made any comments and/or proposed any revisions in

writing within four (4) weeks, then it shall be deemed that Farmor has no

comments thereon.

7.2 Exploration and Appraisal

7.2.1 Farmee has the right to further drill Appraisal/Development wells in the

Marginal Field, and all reservoirs lying totally within the Farm-out Area

down to the Farm-out Depth, shall be considered to be part of the Marginal

field and subject to the terms of this Agreement.

7.2.2 If in the course of Operations Farmee suspects the presence of Additional

Re.servoir(s) below the Farm-out Depth and desires to drill into such

Additional Reservoirs, Farmee shall submit its Work Programme to Farmor

for consideration of the safety and technical issues thereof as Farmor so

wishes. Farmor shall not unreasonably withhold its consent for such drill log

PROVIDED that if Farmor does not give its consent within a period of 30

days from the date of submission of such programme by Farmee, the matter

shall be referred to DPR for resolution. The Farmor reserve the. right to

participate in the development of such Additional Reservoir(s) and the

terms and conditions therefore shall be subject to separate agreement

between the Parties.

7.2.3 Farmee shall measure all Petroleum produced and saved from the Marginal

Field and the duly authorised representatives of Farmor shall have the righ;

to examine such measurements and to test the appliances used therefore. If

Farmee wishes to alter its measuring appliance, it shall give reasonable

Page 23

Hh 1

notice to the Fa mi or to enable its representative to be present during such

alteration, and Farmec shall use standard measuring.

7.3 Meetings and Minutes

Farmec and Farmor shall meet at least once every twelve (12) Months to

discuss Operations. Such meetings shall be called by Farmec. upon not less

than fourteen (14) days advance notice with the agenda for the meeting

attached. Any Party may require additional items to be put on the agenda

provided notice thereof is received not later than seven (7) days before the

meeting in question. Notwithstanding the foregoing, if either Party reasonably

believes the circumstances so require, it shall be entitled to call a meeting at

such other time and upon shorter notice than that stipulated above.



8.1 With the goal of achieving safe and reliable operations in compliance with all

Regulations including avoiding significant and unintended impact on the

safety or health of people or property or the environment, the Farmec must

in the conduct of Operations conform to the applicable HSE Standards arid

Regulations, as notified to the Farmee from time to time.

8.2 Farmee. shall establish and provide to the Parties a programme for regular

HSE audits and shall grant the Farmor and/or its agents the right from time

to time upon reasonable notice, to observe Operations in the Farm-out

Area, conduct HSE audits or join HSE audits conducted by the Farmee at

Farmor’s own cost. Such visit or audit by the Farmor shall not of itsell

constitute an endorsement or warranty by the Farmor of the Farmees

Operations or environmental standards. If any such HSE Audit reveals any

potential environmental issue which may affect Farmor’s Petroleum

Operations or reputation, the Farmee shall at its own cost abide by any

instructions of the Farmor to correct and/or otherwise prevent and/or

arrest such situation including the suspension of Operations.

Page 24




9.1 Farmee hereby represents and warrants to the Farmor that:

(a) it has all the requisite corporate power to execute this Agreement, and

to perform its obligations hereunder and thereunder and that in so

doing, such action will not violate any obligations binding on it or its

assets or result in any liability to any third party or the creation of any


(b) it accepts the Farm-out Area farmed-out to it under this Agreement

on an “as is where is” basis upon its successful participation in die

Marginal Field Allocation Round of the Government, and without

any warranty, express or implied, being made by or on behalf of die


(c) it has made its own investigations as to tide to and the validity of die

OML; and it has and hereby acknowledges the contents thereof

(d) no payments were made or will be made, or consideration given or

will be given to obtain the Marginal Field in violation of Nigerian

law, or which would be in violation of die laws of the Federal

Republic of Nigeria.

9.2 Farmee hereby covenants that all representations and warranties made by it

herein are true and correct as of die Effective Date.

9.3 No representations or warranties, express or implied, are made by the

Farmor and/or their Affiliates concerning die accuracy or completeness of

any information and/or data on die Marginal Field supplied to Farmee

under Article 6.2.1(b) of tiiis Agreement and/or before the execution of this

Agreement, and neither the Farmor nor tiieir Affiliates shall be liable in any

way to Farmee for receipt or use by Farmee of such Information and

Farmee expressly disclaims any such- liability whetiier in negligence or


9.4 No warranties, representations, covenants, undertakings, promises, forecasts

or odier statements whatsoever whether written or oral (and whether

implied or otherwise) made by or on behalf of die Farmor or any other

person may form the basis of, or be pleaded in connection with, any claim

by the Farmee under or in connection with this Agreement and, without

limitation to the generality of the foregoing, no shareholder, director,

employee, agent, consultant or representative of any of them make any

representations, warranties or undertakings as to: A

Page 25 , ,



 (i) the validity of the OML or the Farmor’s tide to the Marginal Field;

(ii) die amounts of hydrocarbon reserves attributable to die Marginal

Field; or

(iii) any geological, engineering, economic or other interpretations,

forecasts or evaluations.



10.1 The Farmee shall be fully and solely responsible for die handling and

disposal of all Natural gas produced in an environmentally responsible

manner in accordance with all-applicable laws and regulations of the Federal

Government subject to agreement on payments and other consideration due

to the Farmor from the production of and disposal of Natural Gas.

10.2 The Farmee shall be fully responsible for the payment of any flare penalty

or any other penalties or duties levied by Government in respect of any

Natural Gas that originates from the Marginal Field.

10.3 In the event tiiat the Farmor are prevented from Gas flaring in the OML,

Farmor shall give notice diereof to die Farmee to stop all Gas flaring and if

necessary, stop production of all hydrocarbons upon notification to DPR.

10.4 At such time as Farmee decides to develop Natural Gas from die Marginal

Field, Farmee and Farmor shall agree upon the procedures (Including but

not limited to, payment schedules and notice requirements) for payment of

the Override relative to such Natural Gas.



11.1 Where applicable, pending the execution of a hydrocarbon handling

agreement in respect of the Marginal Field, Farmee shall pay to Farmor the

cost of treatment, handling, transportation and terminalling of Farmee's

' Crude oil and Natural Gas which pass through Farmor’s Facilities.

11.2 Associated Agreements

11.2.1 Prior to commencement by Farmee of production of Crude Oil from the

Marginal Field, the Parties shall in good faith, upon the request of Farmee

and subject to availability in the Farmor’s evacuation facilities, certification

by DPR and not less than three (3) Calendar Months prior to first delivery

of Crude Oil, negotiate and conclude the terms of the Associated


11.2.2 Farmee recognizes that pursuant to the Associated Agreements the Farmor

are required to perform certain acts, undertake certain obligations, assume

certain liabilities and are entitled to certain powers, rights and benefits all on

Farmee's behalf accruing from such undertaking.



12.1 Farmee hereby agrees that if the Government, either acting by itself or

through any of its agencies, asserts any right it may have to acquire an

interest in the Marginal Field/or any portion thereof, then Farmee shall use

its best endeavours to ensure that Government assumes a corresponding

part of each of Farmee's obligations and liabilities under this Agreement.

Any such Government participation shall not discharge or relieve Farmee of

any of its duties and/or obligations under this Agreement.



13.1 Confidentiality Obligation

Unless otherwise specified in this Agreement, the Parties agree that all

information and data acquired or obtained by any Party pursuant to this

Agreement and/or the implementation of its terms and conditions, shall be

considered confidential by the acquiring Party and shall be kept confidential

and not be disclosed at any time to any person or entity not a party to this

Page 27

Agreement, without the prior written consent of the other Parties (such

consent not to be unreasonably withheld). However, such confidential

information and data may be disclosed as follows:

To an Affiliate provided such Affiliate maintains confidentiality as provided

in this Article 13;

To a government agency or other entity when required by applicable law,

the terms and conditions of the OML and/or the terms and conditions of

the Joint Operating Agreement;

To the extent such data and information is required to be furnished in

compliance with any applicable laws or regulations, the joint Operating

Agreement or pursuant to any legal proceedings or because of any other-

order of any court binding upon a Party;

Subject to Article 13.4 to contractors, consultants and attorneys employed

by a Party where disclosure of such data or information is essential to such

contractors', consultants' or attorneys' work;

Subject to Article 13.4, to a bank or other financial institution to the extent

appropriate to assist a Party in arranging for funding for its obligations

under diis Agreement;

To the extent such data and information must be disclosed pursuant to any

rules or requirements of any government or stock exchange having

jurisdiction over the disclosing Party; provided that if any Party desires to

disclose information in an annual or periodic report to its or its Affiliates'

shareholders and to the public and such disclosure is not required pursuant

to any rules or requirements of any government or stock exchange, then

such disclosure shall not be made without the prior consent of the other

Parties (such consent not to be unreasonably withheld);

(7) To a Party's employees, associates and partners for the purposes of

implementing this Agreement, subject to each Party taking customary

precautions to ensure such data and information are kept confidential.

.2 In the event that any entity constituting Farmee ceases to hold an interest

under this Agreement, such entity will continue to be bound by the provisions

of this Article.

.3 In the event that this Agreement is terminated, the Farmor shall be at liberty

to disclose such Confidential Information to prospective assignees of the

Page 28

Marginal Field and/or such other Parties as it may require in the conduct of

their own Petroleum Operations in the OML.

13.4 Confidentiality Undertaking from Certain Recipient Parties

Disclosure pursuant to Articles 13.1(4) and 13.1(5) shall not be made unless

prior to such disclosure the disclosing Party has obtained a written

undertaking from die recipient party to keep die data and information

striedy confidential and not to use or disclose the data and information

except for the express purpose for which disclosure is to be made.

13.5 Survival of Confidentiality Obligations

The obligations of confidentiality contained in this Article 13 shall survive

the termination of this Agreement and shall continue to be binding upon the

Parties until expiration of die OML.



14.1 Farmee shall provide security funds to satisfy abandonment obligations

from die Marginal Field including without limitation, security to cover the

cost of any abandonment in accordance with Schedule C. Such security

funds shall be reduced or released as the underlying obligations and

liabilities are met, reduced or released.

14.2 Upon commencement of Operations and prior to submission of its first

work programme to DPR, the Parties shall negotiate and agree the

Abandonment Security Agreement, which shall be completed and executed

by all Parties prior to any exploration and or development activities by

Farmee. The Abandonment Security Agreement shall be in accordance with

Schedule C.

14.3 If Farmee has, at the effective date of termination, already provided security

funds for abandonment costs pursuant to an Abandonment Security

Agreement entered into pursuant to this Agreement, the adequacy of such

security shall be reviewed by both Farmee and Farmor. Farmee shall take

responsibility for any shortfall or surplus arising from the decommissioning

or abandonment operations.

14.4 The security funds so provided by the Farmee shall be paid into an escrow

account, established under this agreement, both Farmee and Farmor shall be

joint signatories to the account. The process of decommissioning activities

Page 29

 shall be. carded out by the h’armce on termination of Farmee’s Operations

under this agreement in accordance with DPR’s regulation on

decommissioning and abandonment guidelines. In case of a compelling

reason for a deferment of decommissioning or abandonment, it shall be

referred to DPR for consideration and approval provided that such approval

shall not result in any liability to the Farmor for breach of any statute or tort



15.1 General Liability and Indemnity

15.1.1 Farmee shall assume full responsibility and liability for Operations it

conducts under this Agreement, including, but not limited to, the cost of all

Operations, abandonment, and third party liabilities.

15.1.2 Farmor hereby agree to indemnify and hold harmless the Farmee, its

Affiliates and all officers and directors of the Farmee from and against all

losses, claims, liabilities, damages, costs arising from or attributable to

previous actions in the Farm-out Area prior to the Effective Date save as

contributed to or escalated by an act or omission of the Farmee, its servants

and/or agents. Farmor also agrees to indemnify and hold harmless Farmee

against loss or damage caused to or suffered by Farmee as result of any

environmental mishap, safety problem or other emergency arising from or

out of the Farmor’s operations in the OML outside the Farm-out Area, save

as contributed to or escalated by an act or omission of the Farmee, its

servants and/or agents.

15.1.3 Farmee hereby agrees to indemnify and hold harmless the Farmor, their

respective Affiliates, and all officers and directors from and against all losses,

liabilities, damages, costs, or expenses of every nature arising from or

attributable to the conduct of Operations by Farmee under this Agreement,

save as contributed to or escalated by an act or omission of the Farmer, its

servants and/or agents.

15.2 Limit of Farmor liability to Farmee

Farmor shall not be liable for or to any persons in respect of any damages,

claims or compensation payable under any applicable law arising in

particular from accidental death or injury, to any workman, visitor, Invitee,

or other persons whether or not in the employment of the Farmee, agents

and/or contractors arising out of the Operations or due to any other cause,

Page 30


save and except an accident or injury arising from the negligence of Farmor,

their agents or servants. The Farmee shall indemnify and hold Farmor

harmless from all such damages, claims, expenses, compensation and the

like arising under any obligation imposed upon Farmor under statute except

where Farmor is found to have acted in Gross Negligence or Wilful


15.3 Third Party Liability

15.3.1 Farmee shall indemnify and hold harmless Farmor, their agents and servants

from all liability for personal injury, including fatal injury and disease, loss of

or damage to property and inconvenience to any Third Party arising out of

or in connection with Operations.

15.3.2 Farmee shall be responsible for settling all valid claims for loss, damage,

injury or death to any third party, (including Farmor’s personnel) caused by

the Farmee or his agents or servants in the Operations. Farmor shall pass

any claim presented to Farmor by any injured third party to the Farmee. If

the Farmc.e delays or refuses to settle the claim and the Third Party

continues to claim against Farmor, then if in the opinion of Farmor the

claim is valid, Farmor may, in consultation with the Farmee, pay the thin!

patty the amount of the claim and recover such amount from Farmee.

15.3.3 Except as otherwise provided in this Agreement, any loss, claims, damages

and or causes of action brought by a third party against the Parties or any of

them arising directly or indirectly, out of the conduct of Operations in the

Farm-out Area shall be for Farmee's sole account.

15.4 Injury to Farmee’s personnel

Farmee shall be liable for, and shall indemnify Farmor against all claims in

respect of all diseases and injuries to, death of, any and all employees of

Farmee, its agents and servants howsoever arising, except where due to the

negligence of Farmor, its agents or servants.

15.5 Injury to Farmor’s Personnel

Farmor shall be liable for and shall indemnify the Farmee against all claims

in respect of all diseases and injuries to, death of, any and all employees of

Farmor their agents and servants arising from the exercise by Farmor ot any

of their rights and obligations under this Agreement, except where such is

due to the negligence of Farmee, its agents or servants.

Page 31

15.6 Damage to Farmcc' Property

Farmee shall be responsible for all damage to, loss of use of and loss of the

Farmee’s equipment, vehicles, machines, tools or other property, including

the property of its employees, during Operations. <.

15.7 Damage to Farmor's Property

Farmee shall be responsible for and shall indemnify Farmor for loss or

damage to property belonging to Farmor including their employees, agents

and servants, which is damaged, by the Farmee or as a result of Operations

from Effective date of this Agreement or by any person or persons whom

Farmee has allowed onto Farm-out Area or by any person being on the

premises who the Farmee ought to have removed or ejected, unless such

loss or damage is caused by the Gross Negligence or Wilful Misconduct oi

the Farmor. Where relevant, the'Farmee shall be responsible for the cost of

repairs, replacement, transportation and all other incidental expenses which

Farmor may incur in replacing or repairing the property.

15.8 Liability for acts of Farmec's contractors

Farmee shall indemnify Farmor against all actions, claims, demands and

damages arising from acts or omissions of its employees, contractors and/or

agents or from the employment of such contractors, their agents and

servants, including claims brought by such contractors against the Farmor or

any of them.

15.9 Liens

Without prejudice to Article 6.1.6 herein, Farmee shall indemnify Farmor

for and against any liens issued against the Farm-Out Area and/or the

Farm-out Facilities, arising from any dispute between Farmee and any third

party whether or not in consequence of any default by the Farmee to any

third party. It is hereby expressly agreed that the creation of any lien or

encumbrance other than in accordance with the terms of this agreement

shall be a Material Breach under the terms of this Agreement. Farmee shall

notify Farmor of any possible lien, which may affect Farm-Out Area and/or

the Farm-out Facilities.

15.10 War and confiscation Risk

Farmee acknowledges that Farmor have no duty or responsibility to Farmee,

his contractors, agents and servants in respect of any equipment, materials

Page 32

and any other property of the Farmee and such contractors and their agents

and servants in the event of:

(a) war, insurrection, civil commotion, hostilities (whether or not war be

declared or civil war recognised) sabotage, violence, seizure, riot,

rebellion, blockage, revolution and embargo, by whomsoever carried

out and/or in any case,

(b) nationalisation, expropriation, confiscation, sequestration and any

other orders and/or acts of any competent authority or any

purported authority which affects the liberty or die rights in property

of persons generally or that of the Farmee, its contractors, their

agents and servants.

15.10.1 Farmee hereby undertakes to fully indemnify Farmor against all claims,

demands, and losses and against all costs of disputing them, in connection

with any of the aforesaid circumstances and all other matters related


15.10.2 Farmee shall indemnify, hold harmless and defend Farmor and their

respective Affiliates from and against all losses, liability, claims, fines, costs,

(including attorney's fees and expenses) and causes of action arising with

respect thereto, including but not limited to PLUGGING AND


THE SURFACE OF THE LAND as may be required under the applicable

permits or as may be required by any applicable governmental agency

having jurisdiction over well abandonment and the removal of or failure to

remove any materials, facilities or equipment used or required by Farmee in

die conduct of Operations.

15.11 Extent of Indemnities

The indemnities to either Party under diis Agreement cover, all sums paid

by or on behalf of the indemnified party in satisfaction of the judgement of

any court of law, and all sums including costs, legal fees and expenses paid

or incurred by the indemnified party in settling or forestalling any claims or

demands made against the indemnified party arising out of the risks against

which the indemnity was given but shall not cover any indirect or

consequential losses.

Page 33



15.12 Environmental Compliance

15.12.1 Farmee assumes full responsibility for, and agrees to indemnify, hold

harmless and defend Farmor and their respective Affiliates from and

against all loss, liability, claims, fines, expenses, costs (including

attorney's fees and expenses) and causes of action, including, but not

limited to those caused by or arising out of:

(a) tire enforcement or threatened enforcement, of any applicable law,

governmental rules, orders and regulations regarding any waste

material, or

(b) any environmental clean-up related direedy or indirectly to


15.12.2 The Farmee shall be liable and shall indemnify Farmor from and

against any loss or damage to any person or property arising out of

pollurion or contamination caused by the discharge or escape of oil,

other pollutants or contaminants from die Farmcc’s Operations, die

presence, disposal, release or threatened release of any waste material

or hazardous substance by itself (including its contractors and

subcontractors of any rier) into the atmosphere or into or upon land or

any water course or body of water, including ground water, to the

extent such are attributable, in whole or in part, to Operations under

diis Agreement.


Page 34



16.1 Farmee shall procure and maintain insurance as is normally carried in

respect of Operations including any insurance required by the Regulations,

which shall as a minimum be the insurance set out in the table below up to

the financial limit specified:

Specific !

Insurance Financial Limits Comment


1. Cost of Well Control Insurance Thirty Million Essential

which would respond in the event U.S. Dollars

of a well getting out of control in

the course of drilling activities,

including recompletion,

reconditioning, reworking, testing,

replacing, cleaning out, until

completion or abandonment.

2. General Third Party Liability Thirty Million Essential

Insurance to cover legal liability to U.S. Dollars

third parties including bodily

injury/death resulting from the

Farmee's activities


Seepage and Pollution Policy to j

respond to claims for bodily injury,

loss or damage to or loss of use of

property 1

caused by seepage & pollution ■

arising from Farmee's Operations

including cost of

removing/nullifying/cleaning up

Seepage or pollution

3.Employer’s Liability Insurance In line with Essential

to cover Farmee's responsibility to Workmen’s

its employees for bodily Compensation

injury/accident/death suffered in Act

the course of employment.

Page 35

4. Onshore Property Policy to Full If onshore

cover risk of Fire, Lightening &

Allied Perils against Farmee 's replacement assets

movable assets, buildings, value

and other facilities.

5. Offshore Assets Policy to cover Full If

risk of damage to Offshore

Property including offshore replacement offshore

platforms (if any) value assets

6. Construction All Risks (CAR) Full If required

Insurance to cover fabrication,

construction and maintenance construction

activities of Farmee value

7. Motor Vehicle & Passenger In line with

Liability Insurance as may be

required by Statute or similar statutory

regulation in the country of use for requirements

motor vehicles used by Fannee in

its Operations.

8.Marine (Hull & In line with

Machinery/Protection &

Indemnity) to cover risk of statutory

loss/damage to crafts/vessels requirements

owned /employed by Farmee in its

Operations, including third-party

liability arising therefrom.

9. Aircraft (Hull / Liability) In line with

Insurance to cover loss/damage to statutory

Farmee's aircrafts employed in the requirements

business, and legal liabilities for

damage to property or injury/death

of 3rd party arising therefrom.

Page 36

16.2 The Farmee shall procure the insurance policies set out in the table above

from an insurance company that complies with the following conditions:

(a) Insurer must meet minimum capitalisation requirement as stipulated

under the Insurance Decree for Special Risks (Oil/Gas Business is

classified as 'Special Risk').

(b) In addition, Insurer should possess current NAICOM (Nigerian

Insurance Commission) licence to operate as an Insurer in the

specified class (classes).

(c) Experience in Oil/Gas Business - Insurer should possess a specialised

Energy Department appropriately staffed by persons with relevant

qualifications/experience. Insurer may be required to indicate Oil &

Gas Clients currently serviced.^

(d) Desirable for Insurer to possess Federal Ministry of Finance approval

for participation in the Insurance of Federal Government Assets.

(e) Insurer must maintain adequate technical reserves in accordance with

S. 24 of the Insurance Decree.

(f) Insurer must show evidence of adequate and valid Reinsurance


16.3 Insurance Policy shall require that Insurer notifies JV Operator in the event

of non payment of premium or other default in the Insurance Policy prior

to the taking of any adverse action such as termination, by the Insurer

16.4 Farmee shall promptly inform Farmor of such insurance and provide the

Farmor with copies of the cover notes and the annual coverage certificates

when the same are issued.

16.5 Farmee shall arrange for all the Farmor, in proportion to dieir respective

Participating Interests, to be named as co-insureds with waivers of

subrogation in favour of all the Parties; and

16.6 Farmee shall duly file all claims and take all necessary steps to collect any


16.7 Farmee shall also require all contractors or subcontractors performing work

in respect of the Operations to effect and maintain any and all insurance

required by the Regulations and this Agreement and shall make its best

Page 37


 efforts to ensure that all such contractors and subcontractors have their

insurers include Farmee as additional insureds and waive rights of recourse

against Farmee and its respective employees.



17.1 Applicable Law

This Agreement, including the dispute resolution procedure specified in

Article 17.3 and 4 below, shall be governed by, construed, interpreted and

applied in accordance with laws of the Federal Republic of Nigeria

excluding any rules of law which would otherwise refer the matter to the

laws of another jurisdiction.

17.2 Dispute Resolution Procedures

17.2.1 in the event of a dispute between or among the Parties regarding this

Agreement, its interpretation, performance, or any other matter relating to

this Agreement, which the Parties cannot resolve amicably, the matter shall

be finally settled by binding arbitration upon written notice from the

initiating Party to the other Parties. Farmee shall appoint one (1) arbitrator

and, JV Operator as operator of tire Joint Venture, shall appoint another

arbitrator and each shall inform the other of the name of its arbitrator so

appointed within thirty (30) days from the date on which notice was

received from the Party initiating the arbitration proceeding. If either fails to

inform the other of the appointment of its arbitrator within the time limit

prescribed, the other Party may request that such arbitrator be appointed in

accordance with the Arbitration and Conciliation Act of Nigeria. The two

(2) arbitrators thus appointed shall choose the third arbitrator who will act

as die presiding arbitrator of the tribunal. No arbitrator shall be an employee

or agent or former employee or agent of any of the Parties. In die case of

failure to agree on die appointment of a third arbitrator within thirty (30)

days of the appointment of the later of the two (2) above mentioned

arbitrators, such third arbitrator shall be appointed by die Chief Justice of

Nigeria on the application of any Party involved in die difference or dispute

(notice of intention to apply having been given in writing by the applicant

Party to the otiier Party, which for the Farmor, shall be the JV Operator).

When appointed, the presiding arbitrator shall convene meetings of die

arbitration panel. The award shall be delivered within three months of die

appointment of the presiding arbitrator, or within such extended period as

may be agreed by the Parties. /

Page 38


l h£

17.2.2 The Parties shall extend to the arbitrators all facilities (including access to

the Operations) for obtaining any information required for the proper

determination of the dispute.

17.2.3 The arbitration shall take place in Lagos, Nigeria. The language to be used in

the arbitral proceedings shall be English.

17.2.4 The absence or default of any Party to the arbitration shall not be permitted

to prevent or hinder the arbitration in any or all of its stages. Furthermore,

the refusal of die Party to allow the arbitrators to access information

required for die resolution of the dispute shall not prevent the arbitrators

from rendering an award to resolve die dispute.

17.2.5 The costs of die arbitration proceedings shall be divided equally among die

Parties to such proceedings; provided, however, that each Party to die

arbitration proceeding shall be responsible for its own attorney’s fees, as

well as the costs and expenses of any witnesses presented by such Party,

regardless of which Party prevails.

17.2.6 Pending the arbitrators’ decision or award, die operations or activities,

which have given rise to the arbitration, need not be discontinued. It is

hereby agreed diat any such pending arbitration shall not in any event, have

the effect of hindering Petroleum Operations by the Farmor on the OML

nor shall Farmee be entided to apply for any such order. In die event die

decision or award recognises that die dispute was justified, provisions may

be made dicrein for the appropriate reparation to be made.

17.2.7 Judgement regarding any arbitral award rendered may be entered in any

court having jurisdiction, or application may be made to such court for a

judicial acceptance of the award and an' order of enforcement, as the case

may be.

17.2.8 Although each Party shall pay its own attorney’s fees and costs related to

participation in the arbitral proceedings, no matter which Party prevails, die

arbitrators may, at the request of a Party, direct that all or part of such

Party’s attorney’s fees and costs related to participation in die arbitral

proceedings are to be paid by the Party initiating the arbitration, if the

arbitrators deem die claim of such initiating Party to be frivolous.

17.2.9 The Parries undertake to keep striedy confidential die contents of die

arbitral proceedings.

Pape 39




18.1 Rights of Assignment

18.1.1 Subject always to Farmor’s approval and die consent of Government and

die provisions hereinafter contained, Farmee shall not at any time assign or

transfer all or part of its rights and obligations under tiiis Agreement except

as follows:

(a) If Farmee desires to assign its right and obligations under tiiis

Agreement, or any part thereof, to a third party, it shall provide the

Farmor with die full details of die proposed assignment transaction,

as well as financial and other data and information about the

proposed third party assignee', as requested by Farmor in order to be

able to determine that the proposed assignee or transferee (die

“Assignee”) is suffieiendy qualified to assume the rights and

obligations which it proposes to assign. Such assignment shall not be

made unless the Farmor shall have consented to such assignment or

transfer in writing based on dieir satisfaction widi die competence of

the Assignee to discharge the obligations under tiiis Agreement as

they relate to the Farm-out Area. Farmor shall not grant such consent

if the proposed assignment or transfer may, in the reasonable opinion

of any of die Farmor bring the OML operations into disrepute or

affect die good-standing of die OML or any of the Farmor (or their

respective Affiliates). Farmor shall, widiin sixty (60) days of receipt of

notice of such assignment from the assigning or transferring Party

(the “Assignor”), or within such longer period as may reasonably be

required to consider any information provided by the Assignor with

regard to the financial and technical capability of die Assignee, either

consent to such assignment in writing or notify the Assignor in

writing that such consent is withheld. A failure by Farmor to so

notify widiin such period shall be deemed to be consent by Farmor to

such assignment;

(b) the Assignor shall have fully performed all of its duties and

obligations under the Agreement up to die effective date of the

assignment or transfer; and

(c) die Assignor shall, notwidistanding die assignment, be liable to die

odier Parties for any obligations, financial or otherwise which have

vested, matured or accrued under the provisions of the OML or tiiis

Agreement prior to the effective date of such assignment.

(c) The Assignee shall have no lights in and under this Agreement arising

out of such assignment to it unless and until the Assignee has

expressly undertaken in writing to perform die obligations of die

Assignor under this Agreement, including Abandonment obligations,

to the satisfaction of die Farmor.

(d) If die Assignor has provided security pursuant to an Abandonment

Security Agreement entered into pursuant to Article 14, die Assignor

shall not be entided to a release of such security (or such part thereof

as is attributable to die interest to be assigned) until die Assignee has

complied with the requirements specified in such Abandonment

Security Agreement as they apply to die Party holding the interest to

be assigned, notwithstanding that at the time such Assignee is

required to provide security in terms of this Article 18 it may not be a

Party. Until die Assignor* becomes entided to any such release, die

security which it has provided pursuant to such Abandonment

Security Agreement (or the relevant part thereof) shall remain in place

and shall be held as security for the share of the costs of

abandonment of die Party holding die interest in question.

18.2 Assignment to Affiliates

18.2.1 Farmee may, at any time upon notice to the Farmor transfer all or part of its

rights and obligations under diis Agreement to an Affiliate subject to any

necessary consent and approval of the Government. Farmee shall remain

liable to die Farmor for all obligations under diis Agreement transferee!

pursuant to diis Article 18 and such obligations shall in addition become the

obligations of the assignee. This requirement may be waived by the Farmor

if such Affiliate is of the same or better financial standing and technical

competence as Farmee and assignee has given an unconditional undertaking

to assume all obligations of the Farmee'under this Agreement.

18.2.2 If at any time an assignee ceases to be an Affiliate, die interest transferred

shall be re-transferred to Farmee prior to such cessation and Farmee shall be

bound to accept such re-transfer notwitiistanding tiiat it may have ceased to

be a party to diis Agreement, provided always that if:

(i) an order has been made by a court or an effective resolution has been

passed on the dissolution, liquidation, winding up or reorganisation

under any bankruptcy laws of Farmee; or

(ii) Farmee has become insolvent, bankrupt or has made an assignment

for the benefit of creditors.

Page 41

 die Farmor shall be entided to terminate this Agreement in accordance widi

die provisions of Article 19 herein.



19.1 Early Termination

This Agreement may be terminated immediately under die following


(a) If Farmee or any Party constituting Famiee is declared bankrupt

and is forced to make restitution to its creditors, or becomes

insolvent, or is found by a court having competent and filial

jurisdiction to have wilfully violated any Nigerian laws and

regulations governing petroleum operations, financial transactions

and/or commercial operations during the term of the Agreement.

(b) If the DPR determines diat die Operations conducted by Farmee

arc not being conducted in compliance widi applicable Nigerian

Petroleum laws and regulations, or environmental, healtii and

safety standards, and Farmee does not restore its Operations to

compliance within ninety (90) days after receiving a written notice

from the DPR regarding the aforementioned non-compliance.

(c) If Farmee assigns its rights and interests under tiiis Agreement

widiout a prior written notice and prior written consent of the


(d) If it is established diat the Farmee intentionally extracts or produces

any Petroleum outside the Farm-out Area, unless such extraction or

production is expresslly authorized or unavoidable as a result of

operations carried out in accordance with Nigerian laws and


(e) If the Farmee is unable to remedy or remove die cause of a Material

Breach after die full 90-day notice period stipulated in Article 19.2.

19.1.1 The Farmor may terminate this Agreement in accordance widi the

procedure specified in Article 19.2 herein if the Farmee has

committed a Material Breach of its obligations hereunder. For

purposes of this Agreement, “Material Breach” shall mean a substantial

P ipe 42

/ V

 breach of the provisions of this Agreement and/or the Regulations by

the Farmce and shall include but not limited to the provisions of

Articles 8, 15.9, 14, 16, 19.1.1 (a) - (d) below:

(a) If the Farmor determines and the DPR approves that Farmee's

Operations are substantially interfering with Petroleum Operations

conducted by the Farmor.

(b) if it is established that the Farmee discloses confidential information

related to the Petroleum Operations in breach of the provisions of this

Agreement and such disclosure causes prejudice to Farmor or the State.

(c) If JV Operator is notified of any breach by Farmee of the Insurance


(d) If Farmee intentionally submits false information to the Government or

to Farmor.

19.1.2 If Farmor consider that one of the causes set out in Article 19.1.1 including

19.1.1 (a) - (d) exists to terminate this Agreement, Farmor shall notify Farmee

in writing of the particular cause, requiring Farmce- to remedy or remove the

cause of breach, within a period of ninety (90) days, from the date of

notification. If, after the end of the ninety (90) day notice period such cause

has not been remedied or removed, or if agreement has not been reached on a

plan to remedy or remove the cause, Farmor may terminate this Agreement in

accordance with the provisions of Article 19.1 above.

19.2 If Farmee stops Operations for a period of more than ninety (90) days with no

cause or justification acceptable under the Regulations, Farmor may terminate

this agreement upon issuing thirty (30) days notice in writing to Farmee.

19.3 If any of the entities constituting Farmee, but not all of them, gives Farmor

due cause to terminate this Agreement pursuant to the provisions of Article

19.1 above, then such termination shall take effect only with respect to such

entity or entities, and the rights and obligations that such entity or entities hold

under this Agreement, except as herein provided in the preceding paragraph,

shall revert to Farmor without compensation, PROVIDFD that the other

entities may, acquire, subject to agreement between themselves and the

Farmor on terms applicable thereto, such entity's rights and obligations

proportionate to their respective participating interests, subject to the

approval of the Farmor and the Government of such assignment.

19.4 The termination of the Agreement envisaged in this Article or by any reason

whatsoever shall be without prejudice to any rights, which may have accrued

to any Party in accordance with this Agreement, the OML or the Regulations.

19.5 Events following termination

In the event of termination of this Agreement for any of the circumstances

specified in Article 19.1 above, the Farm-out shall immediately expire and


19.5.1 Farmee shall remain responsible for the proper decommissioning and/or

abandonment of all Operations and restoration of all land in the Farm-out

Area, including any associated facilities and, for the avoidance of doubt, the

Farm-out Facilities in accordance with the Regulations and the provisions of

this Agreement.

19.5.2 Farmee shall, not later than ninety (90 days) thereafter surrender possession

of the Farm-out Area to Farmor and cause Farmor to have full and

complete rights, titles, interests and estates as owner of the Farm-Out Area

and possessory interest (by way of reversion or otherwise.) in the Farm-out


19.5.3 At the time of such surrender, all obligations of the OML and Regulations

concerning decommissioning and abandonment shall have been fulfilled by


.19.5.4 Each day following the ninety day period required for surrender of the

Farm-out Area that Farmee has not surrendered possession of the Farm out

Area in the condition required by this Agreement and the Regulations,

Farmee shall pay to Farmor a rent of Ten Thousand Naira (N10, 000) for

each day that Farmee retains possession of Farm-out Area. Farmee

irrevocably agrees that this rent is reasonable and a reasonable charge for its

continued presence in the Farm-out Area and is not and shall noi be

construed to be a penalty.

19.5.5 Prior to effective date of termination, Farmee shall satisfy all obligations and

liabilities it has incurred or that are attributable to it, including without

limitation, any statutory obligation or third party liabilities in respect of

Operations even if the obligations concerned are to be implemented

thereafter, or any liability for acts, occurrences or circumstances taking place

or existing, prior to its effective date of termination.

Page 44

19.6 Approvals

Farmce shall promptly join in such actions as may be needed or desirable to

obtain any approval required in connection with the termination and

abandonment, and any penalties or expenses incurred by die Farmor in

connection with such termination shall be borne by Farmee.



20.1 Delivery and Receipt of Notices

20.1.1 Any notice/notification, consent, or other communication to be given under

this Agreement, "Notice" shall, unless otherwise specifically provided

herein, be in writing and will be sufficiently made if delivered by hand or

regular mail, or by electronic communication means including electronic

mail or facsimile transmission to be confirmed (unless acknowledged or

otherwise agreed by the recipient) by letter, at the addresses hereinafter

specified and shall, unless otherwise provided herein, be deemed to have

been made on the day of delivery in the case of delivery by hand, five (5)

days after dispatch in the case of regular mail, or twenty-four (24) hours

after dispatch in the case of telegraphic communication. Unless otherwise

specified by not less than fifteen (15) days notice, Notices shall be given at

the following addresses:

The Group Managing Director NNPC

Nigerian National Petroleum Corporation

NNPC Towers

Herbert Macaulay Way

Central Business District

Abuja, Nigeria




The Shell Petroleum Development Company of Nigeria Limited

Freeman House

21/22 Marina Lagos

P.M.B. 2418

Lagos Nigeria


Telephone: 01-2601600

Page 45 c





Nigerian Agip Oil Company Limited

Plot PC 23, Engineering Close, Victoria Island, Lagos, Nigeria

P.O. Bol4 1268,

Lagos, Nigeria

Facsimile: 01-262 2241

Telephone: 01 - 260 0100

Telex: 28734 AGIP NG

Elf Petroleum Nigeria Limited

35, Kofo Abayomi Street, Victoria Island, Lagos, Nigeria

P.O. Box 927,

Lagos, Nigeria

Facsimile: 01- 2623744

Telephone: 01 - 261 3720

Telex: 21320 elf ng

To Farmee:

Universal Energy Resources Limited

25 Idoro Road

Uyo, Akwa Ibom State, Nigeria

Telephone: 08023187338; 087 - 776696


20.2 The Party receiving a Notice by hand shall cause a receipt for any said

Notice to be given to the person delivering same and shall record the

delivery of the said Notice in a permanent register and indicate the date and

time of delivery of the said receipt in the said register.

20.3 Each Party shall have the right to change its address at any time and

or/designate that copies of all such notices be directed to another person at

another address by giving written notice thereof to the other Parties.

Page 46



21.1 Relationship of the Parties

Except as otherwise specified in this Agreement, the rights, duties,

obligations and liabilities of the Parties under this Agreement shall be

several, not joint or collective. It is not the intention of die Parties to create,

nor shall this Agreement be deemed or construed to create, a mining or

other partnership, joint venture, association or trust, or to authorise any

Party to act as an agent, servant or employee for any odier Party for any

purpose whatsoever. In their relations widi each other under diis

Agreement, the Parties shall not be considered fiduciaries except as

expressly provided in diis Agreement.

21.2 Tax Liability

Each Party shall prepare and file the requisite income and other tax reports

and returns required of such Party in accordance with the Regulations.









22.1 A “Force Majeure” situation includes delays, defaults or inability to perform

under this Agreement due to any event beyond die reasonable control of

any Party. Such event may be, but is not limited to, any act, event,

happening, or occurrence due to natural causes, acts or perils of navigation,

fire, hostilities, war (declared or undeclared), blockade, labour disturbances,

suikes, riots, insurrection, civil commotion including acts of hostilities by

local communities, quarantine restrictions, epidemics, storms, floods,

eardiquakes, blow-out, lightning, acts of or orders of Government, and

other acts of God.

22.2 If as a result of Force Majeure any Party is rendered unable, wholly or in

part, to carry out its obligations under diis Agreement, other than the

obligation to pay any amounts due or to furnish security, then the

Page 47


 obligations of the Party giving notice of Force Majeure, shall be suspended

during the continuance of any inability so caused, but for no longer period.

The Party claiming Force Majeure shall notify the other Party of the Force

Majeure situation within twenty-four (24) hours after the occurrence of die

facts relied on and shall keep the other Party informed of all significant

developments. Such notice shall give reasonably full particulars of said Force

Majeure and also estimate die period of time, which said Party will probably

require to remedy the Force Majeure. The affected Party shall use all

reasonable endeavours to remove or overcome the Force Majeure situation

as quickly as possible in an economic manner but shall not be obligated to

setde any labour dispute except on terms acceptable to it and all such

disputes shall be handled witiiin the sole discretion of the affected Party.



23.1 Press Releases

Farmce shall consult with JV Operator with regard to all press releases and

other announcements concerning diis Agreement or the Operations, subject

to the approval of DPR.

23.2 Conflict of Interest

Each Party for itself and for its directors, partners, employees and agents

warrants, covenants and represents to the other that, except as otherwise

expressly provided in this Agreement, neither it nor any of its directors,

employees, partners or agents has given to or received from the other Party

or any such other Parties, directors, partners, employees, or agents any

commission, fee, rebate, gift or other tiling or service in connection with

diis Agreement.

23.3 Effect of Invalid Provisions

In the event that any covenant, condition, or provision contained in this

Agreement is held to be invalid by a court of competent jurisdiction, die

invalidity of any such covenant, condition, or provision shall in no way

affect any other covenant, condition, or provision contained herein.

Page 48


23.4 Titles and Headings

The titles and headings of the various paragraphs hereof are intended solely

for means of reference, and are not intended for any purpose whatsoever to

modify, explain, or place any construction on any of the provisions of this


23.5 Counterparts

This agreement shall be executed in counterparts by all the Parties, each of

which shall be deemed an original.

23.6 Entirety of Agreement and Amendments

Tliis Agreement constitutes the entire Agreement and understanding among

the Parties hereto and supersedes any prior agreement and understanding

relating to the subject matter of this Agreement. This Agreement may be

modified or amended only by a duly authorised written instrument executed

by all of the Parties hereto.

IN WITNESS WHEREOF, the Parties have executed diis Agreement, in

triplicate, intending each copy to serve as an original, on die date first

written at the beginning of this Agreement.



Designation : GRO

In the presence of:


Name: Chief SENA AIN THUN Y MCI Arb.



Page 49




Name : Vto^'WL

Designation : ^ (L

In the presence of:


Name: o.odc Q.u« ^0

Designation: Gp-





IOj (vi At L L |

Name :

Designation :'^X6co'Ti^€ ’biRECF^ ^

In the presence of:

Signature: ---G?ty^L^LUjUL--

Name: ©lA'CWVY'J


Page 50



By :



In the presence of:


Name: ' <= •





In the presence of:

Signature: r'°'“ *




Page 51



This Day of .

In approving this Agreement, Government holds harmless the Farmor and

their respective Affiliates from and against any statutory fine, penalty or

liability on the OML arising out of:

(i) any failure by Farmee in complying with any Governmental law or

Regulation, or pollution or contamination caused by the discharge or

escape of oil, other pollutants or contaminants from the Fan-nee’s

Operations, the presence, disposal, release or threatened release of

any waste material or hazardous substance into the atmosphere or

into or upon land or any water course or body of water, including

ground water, to the extent such are attributable, in whole or in part,

to Farmee’s Operations in the Farm-out Area under this Agreement.

(ii) any failure by Farmee with respect to, including but not limited to



may be required under the applicable permits or as may be required

by any applicable governmental agency having jurisdiction over well

abandonment and the removal of or failure to remove any materials,

facilities or equipment used or required by Farmee in the conduct of

Operations. r







Page 52

A CA t

In the presence of:


Name: h

Signature:...... ^


Page 53




Farm-out Area:

The Farm-out Area is captured within the boundaries defined by the following

coordinates in meters:

Eastings Northings

A: 633825 68025

B: 640895 68025

C: 640895 62037

D: 633825 62037

These coordinates constitute die comers of a polygon encompassing areas of

Oil Mining Lease 14 as shown on the map attached hereto.

Farm- out Depth:

The Farm-out Depth is 9829 ft True Vertical Depth Subsea.

Farm-out Facilities:

(1) Stubb Creek wells ---1, 2, 3 and 4 (Wells -1, -3 and -4 are abandoned


If any additional Farm-out properties are identified they will be included In a

future side letter attached to this Agreement.







The environmental status of the Stubb Creek Field will be described in an

Environmental Evaluation Report to be provided by Farmor to Farmee.




The decommissioning and Abandonment security shall be in accordance

with die formula below:

Y = [0.1 D/t]*(l+r)(,'n)


Y. = Amount to be paid annually into an escrow account as abandonment


D = Development cost of field.

0.1 D = 10% of development cost of field,

t = Expected field life

r = LIBOR rate

n = Particular year of production

The time of first payment shall be not later than seven (7) days after the

commencement of production by Farmee from the Marginal Field.