NOTICE: The text below was created automatically and may contain errors and differences from the contract's original PDF file. Learn more here STUBB CREEK MARGINAL FIELD FARM-OUT AGREEMENT
NIGERIAN NATIONAL PETROLEUM COPORATION
SHELL PETROLEUM DEVELOPMENT COMPANY OF NIGERIA
NIGERIAN AGIP OIL COMPANY LTD
ELF PETROLEUM NIGERIA LTD
UNIVERSAL ENERGY RESOURCES LIMITED
DEFINITIONS AND INTERPRETATION 5
RE-DEFINITION OF FARM-OUT AREA 13
FINANCIAL OBLIGATIONS 15
RIGHTS AND OBLIGATIONS OF THE PARTIES 18
HEALTH AND ENVIRONMENTAL STANDARDS 24
ARTICLE 9 •
REPRESENTATIONS, WARRANTIES AND DISCLAIMERS 25
' NATURAL GAS ' 26
EVACUATION OF FARMEE’S PETROLEUM 27
GOVERNMENT PARTICIPATION 27
ABANDONMENT SECURITY 29
LIABILITY AND IDEMNITY 30
APPLICABLE LAW AND DISPUTE RESOLUTION 38
ASSIGNMENT OF INTEREST 40
RELATIONSHIP OF THE PARTIES AND TAX MATTERS 47
FORCE MAJEURE 47
GENERAL PROVISIONS 48
APPROVAL BY THE HONOURABLE MINISTER 52
FARM-OUT AREA, FARM-OUT DEPTH AND FARM-OUT FACILITIES: 54
STUBB CREEK FIELD
DESCRIPTION OF ENVIRONMENTAL CONDITIONS OF THE
FARM-OUT AREA - ENVIRONMENTAL EVALUATION STUDIES 55
DECOMMISSIONING AND ABANDONMENT SECURITY
THIS AGREEMENT is made the 23rd day of December 2003
1. The NIGERIAN NATIONAL PETROLEUM CORPORATION, a
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"),
2. THE SHELL PETROLEUM DEVELOPMENT COMPANY OF
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),
4. NIGERIAN AGIP OIL COMPANY LIMITED, a company
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)
UNIVERSAL ENERGY RESOURCES LIMITED, a company
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).
(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
(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
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
1.0 ARTICLE 1
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;
(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
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.
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
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
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;
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.
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
Page 9 /
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.
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.
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
(b) Schedule B: DESCRIPTION OF ENVIRONMENTAL CONDITIONS OF
THE FARM-OUT AREA - ENVIRONMENTAL
(c) Schedule C: Decommissioning and Abandonment Security
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.
3.1.1 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
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
(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
184.108.40.206 Subject to Article 19 this Agreement shall be for an initial period of sixey
months from the Effective Date.
220.127.116.11 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
Page 12 L/)
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
RE-DEFINITION OF 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
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
(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.
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 incurred.by 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.
RIGHTS AND OBLIGATIONS OF THE PARTIES
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
(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.
(h) Make all payments due to the Farmor in accordance with the terms oi
(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
(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.
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
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.
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
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
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.
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
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
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
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.
HEALTH AND ENVIRONMENTAL STANDARDS
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.
REPRESENTATIONS, WARRANTIES AND DISCLAIMERS
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
(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.
EVACUATION OF FARMEE’s PETROLEUM
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
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
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
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
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
LIABILITIES AND INDEMNITIES
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,
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.
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.
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
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
ABANDONMENT OF EXISTING WELLS, THE RESTORATION OF
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
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
(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
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:
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,
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
Seepage and Pollution Policy to j
respond to claims for bodily injury,
loss or damage to or loss of use of
caused by seepage & pollution ■
arising from Farmee's Operations
including cost of
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.
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
8.Marine (Hull & In line with
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.
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
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.
APPLICABLE LAW AND DISPUTE RESOLUTION
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. /
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
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
ASSIGNMENT OF INTEREST (S)
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
(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
(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.
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
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
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
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.
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
Herbert Macaulay Way
Central Business District
The Shell Petroleum Development Company of Nigeria Limited
21/22 Marina Lagos
Page 45 c
Nigerian Agip Oil Company Limited
Plot PC 23, Engineering Close, Victoria Island, Lagos, Nigeria
P.O. Bol4 1268,
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,
Facsimile: 01- 2623744
Telephone: 01 - 261 3720
Telex: 21320 elf ng
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.
RELATIONSHIP OF THE PARTIES AND TAX MATTERS
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.
FURTHERMORE, EACH PARTY HEREBY AGREES TO
INDEMNIFY AND HOLD HARMLESS THE OTHER PARTIES
FROM AND AGAINST ANY AND ALL LIABILITY AND/OR
RESPONSIBILITY OF SUCH PARTY FOR THE FILING OF TAX
RETURNS, PAYMENT OF TAXES AND/OR THE ASSESSMENT
AND PAYMENT OF ANY RELATED FEES OR PENALTIES.
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
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
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.
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
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.
For: NIGERIAN NATIONAL PETROLEUM CORPORATION
l4ame : ENGR. F.M. KUPOEOKUN
Designation : GRO
In the presence of:
Name: Chief SENA AIN THUN Y MCI Arb.
Designation: GROUP GENERAL MANAGER,
CORPORATE SECRETARIAT AND LEGAL DIVISION
For: THE SHELL PETROLEUM DEVELOPMENT
COMPANY OF NIGERIA LIMITED
Name : Vto^'WL
Designation : ^ (L
In the presence of:
Name: o.odc Q.u« ^0
For: ELF PETROLEUM NIGERIA LIMITED
IOj (vi At L L |
Designation :'^X6co'Ti^€ ’biRECF^ ^
In the presence of:
For: NIGERIAN AGIP OIL COMPANY LIMITED
In the presence of:
Name: ' <= •
For: UNIVERSAL ENERGY RESOURCES LIMITED
Name : ENGR. EMMANUEL MBOHO
Designation : MANAGING DIRECTOR
In the presence of:
Signature: r'°'“ *
Name: BARRISTER (Mrs.) NKOYO AMANA
Designation: COMPANY SECRETARY
APPROVED BY THE HONOURABLE MINISTER
This Day of .. Cfi. .S.V.ftrT............. 2003
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
PLUGGING AND ABANDONMENT OF EXISTING WELLS,
THE RESTORATION OF 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 the conduct of
Name: ^^DfCE^M. DAUKORU
Designation: PRESIDENTIAL ADVISER ON PETROLEUM AND
FOR AND ON BEHALF OF MINISTER OF PETROLEUM
A CA t
In the presence of:
FARM-OUT AREA, FARM-OUT DEPTH AND FARM-OUT FACILITIES:
STUBB CREEK FIELD
The Farm-out Area is captured within the boundaries defined by the following
coordinates in meters:
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.
(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.
DESCRIPTION OF ENVIRONMENTAL CONDITION
FARM-OUT AREA BASED ON ENVIRONMENTAL
The environmental status of the Stubb Creek Field will be described in an
Environmental Evaluation Report to be provided by Farmor to Farmee.
DECOMMISSIONING AND ABANDONMENT SECURITY
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.