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 STUBB CREEK MARGINAL FIELD FARM-OUT AGREEMENT








BETWEEN








NIGERIAN NATIONAL PETROLEUM COPORATION


and


SHELL PETROLEUM DEVELOPMENT COMPANY OF NIGERIA





LTD





and





NIGERIAN AGIP OIL COMPANY LTD


and





ELF PETROLEUM NIGERIA LTD


as Farmor





AND





UNIVERSAL ENERGY RESOURCES LIMITED





as Farmee
































Page 1


INDEX PAGE





RECITALS 5





ARTICLE 1


DEFINITIONS AND INTERPRETATION 5


ARTICLE 2





REPRESENTATIVES 11


ARTICLE 3


FARM-OUT 11





ARTICLE 4


RE-DEFINITION OF FARM-OUT AREA 13


ARTICLE 5





FINANCIAL OBLIGATIONS 15


ARTICLE 6


RIGHTS AND OBLIGATIONS OF THE PARTIES 18





ARTICLE 7


OPERATIONS 23


ARTICLE 8





HEALTH AND ENVIRONMENTAL STANDARDS 24


ARTICLE 9 •


REPRESENTATIONS, WARRANTIES AND DISCLAIMERS 25





ARTICLE 10


' NATURAL GAS ' 26


ARTICLE 11





EVACUATION OF FARMEE’S PETROLEUM 27


ARTICLE 12


GOVERNMENT PARTICIPATION 27








ARTICLE 13


CONFIDENTALITY 27


Page 2





A





/


ARTICLE 14


ABANDONMENT SECURITY 29





ARTICLE 15


LIABILITY AND IDEMNITY 30


ARTICLE 16





INSURANCE 35


ARTICLE 17


APPLICABLE LAW AND DISPUTE RESOLUTION 38


ARTICLE 18





ASSIGNMENT OF INTEREST 40


ARTICLE 19


TERMINATION 42





ARTICLE 20


NOTICES 45


ARTICLE 21





RELATIONSHIP OF THE PARTIES AND TAX MATTERS 47


ARTICLE 22


FORCE MAJEURE 47


ARTICLE 23


GENERAL PROVISIONS 48


APPROVAL BY THE HONOURABLE MINISTER 52








SCHEDULES





SCHEDULE A


FARM-OUT AREA, FARM-OUT DEPTH AND FARM-OUT FACILITIES: 54


STUBB CREEK FIELD


SCHEDULE B





DESCRIPTION OF ENVIRONMENTAL CONDITIONS OF THE


FARM-OUT AREA - ENVIRONMENTAL EVALUATION STUDIES 55


SCHEDULE C








DECOMMISSIONING AND ABANDONMENT SECURITY


Page 3


THIS AGREEMENT is made the 23rd day of December 2003





BETWEEN:








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


"SHELL"),


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)





And





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).

















m


/


Page 4


WHEREAS:-





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


granted by die Federal Government of Nigeria including OML 14 which


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


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





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


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


which diey hold in OML 14, and


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


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


OML 14 whereby SHELL was appointed operator to conduct petroleum


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


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


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


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


Marginal Field;


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


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


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


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


the Farmor;


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


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


follows:





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;





Page 5


 (1)) as it relates to SHELL


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





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


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


or indireedy controlled by N.V. Koninklijke Nederlandsche


Petroleum Maatschappij and The SheLl Transport and Trading


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


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


the issued voting stock of company entitled to vote or ownership


of equivalent rights to determine the decisions of such company


or entity;





1.1.2 “Agreement” means this agreement including the Schedules;


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


commencement is die determination of the extent, volume or producibility


of Hydrocarbons contained in a Discovery.


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


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


defined in Article 3.


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


Area that is outside die Farm-out Depdi.


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


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


regard to the transportation or disposal of Production from die Marginal


Field including but widiout limitation to die Hydrocarbon Handling


Agreement and the Offtake Agreement.


1.1.7 “Abandonment Security Agreement” means an agreement substantially


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


thereto as are necessary to;


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


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


documents comprising die schedules thereof, and/or


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


the documents comprising its schedules effective and enforceable (in


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


under die law applicable at the date of execution thereof.


Page 6


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


America.


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


arrangement;


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


Agreement.


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


Page 7


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


Operator.


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


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


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


OML 14 whereby SHELL was appointed operator to conduct petroleum


operations within the areas covered by their oil mining leases.


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


Joint Venture.


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


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


National Westminster Bank in London for three months United States


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


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


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


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


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


the day after the relevant date shall be substituted.


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


as defined in 1.1.15.


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


operator on behalf of herself and Partners where applicable.


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


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


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


1.1.28 “Month” means a calendar month;


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


with Crude Oil or from reservoirs, which produce mainly gaseous


Hydrocarbons.


1.1.30 “Nigeria” means the Federal Republic of Nigeria;


Page 8


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,


1990.


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


1990.


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


regulations affecting oil mining leases and Marginal Fields and companies


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


government authorities having jurisdiction over oil mining leases and the


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


or Regulations of any State or local Government authority.


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


in the Farm-Out Area.








1.2 Interpretation





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


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


Agreement.





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


be ignored in construing this Agreement. Unless the context otherwise


Page 9 /








i


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


genders.


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





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


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


in pursuance of the same.


1.3 Conflicts





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


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


provisions of die main body of this Agreement shall prevail.


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





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


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


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





The unenforceability of any provisions of this Agreement for any reason


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


this Agreement or any other provision hereof.


1.4 Schedules





The following Appendices are attached hereto and incorporated into diis


Agreement:


(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


EVALUATION S'FUDIES


(c) Schedule C: Decommissioning and Abandonment Security


























Page 10





\ u\


r^y


 ARTICLE 2


REPRESENTATIVES





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.


ARTICLE 3


FARM-OUT


3.1 Farm-out


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


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


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


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


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


Farmee hereby accepts subject to the terms of diis Agreement and


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


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


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


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


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


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


and the Regulations.


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


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


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


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


Farmor.


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


of die OML and the Regulations.


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


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


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


diis Agreement.


3.2 Government Approvals


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


from die relevant authorides in relation to tiieir respective rights and


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


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


approvals to be obtained in a timely manner.


3.3 Effective Date and Term of Farm-out


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


latter of:


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


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


Marginal Field to Farmee.


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


for the Farm-out.


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


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


16.1.2, and 16.1.3.


3.3.2 Term of Agreement


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


months from the Effective Date.


3.3.2.2 If prior to die end of die initial sixty mondi period, Farmee serves cn the


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


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


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


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


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


included within OML 14, unless terminated earlier in accordance with


Article 19.


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'


basis:


(a) of the Farm-out Area;





(b) of all the Farm-out Facilities;





3.4 Environmental Baseline Survey


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





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


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


fairly and completely describes the status of the environmental condition of


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





Failure of Farmee to conduct the Environmental Base Line Survey in


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


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


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


Farrnor arising out of or concerning the environmental condition of die


Farm-out Area.








ARTICLE 4


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


-hty


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


Agreement.


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


Government.
































Page 14


 ARTICLE 5


FINANCIAL OBLIGATIONS





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


Farmee.


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





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Page 15 4





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


the Parties.


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


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


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


payment net of all applicable handling charges


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


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


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


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


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


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


confidential by JV Operator unless otherwise agreed by Farmee.


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


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


recovery operations, or Natural Gas that may be flared.


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


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


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


days immediately following the end of each calendar month,.


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


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


basis of the mentioned monthly report most recently presented by the


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


understanding that such payment shall be adjusted when Farmee furnishes


Farmor the report of reference.


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


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


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


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


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


to time by the. Farmor.

















Page 16








lM





»


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 %);


and


(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.














Page 17








i


 ARTICLE 6


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


out Area.


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





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


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


of this agreement.





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


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


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


Page 18





/


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


this Agreement.


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


way the rights of the Farmor to procure and maintain additional


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


expense.


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


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


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


the Farmor.


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


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


Agreement.


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


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


claim to agency of or partnership with the Farmor.


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


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


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


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


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


to endanger the OML.


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


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


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


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


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


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


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


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


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


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


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


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


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


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


obligations under the OML.





Page 19


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


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


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


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


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


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


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


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


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


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


would otherwise have been entitled to under this Agreement had such


charge or lien not been created by the Farmee.


6.2 Rights and obligations of the Farmor


6.2.1 In accordance with this Agreement, the Farmor shall:


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


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


except as may be applicable over the Farm-out Area


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


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


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


possession of the Farmor as Farmee may reasonably require for Operations


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


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


party).


(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


Agreement


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


emergency involving the safeguarding of Lives or property or for the


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


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


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


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


suspend Operations or any part thereof and inform and seek clarification


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


Page 20


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


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


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


Access Rights


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


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


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


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


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


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


such notice in the event of an emergency.


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


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


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


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


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


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


Reports


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


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


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


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


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


calendar month.


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


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


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


Agreement with plans and maps showing the places where the described


work was done


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


deliver to Farmor an annual report which shall consolidate the information


contained in the quarterly progress reports furnished in respect of such


Calendar Year.


Farmee shall report all incidences of environmental pollution or communal


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


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


thereafter.


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


inspection.


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


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


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


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


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





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


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


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


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


6.7 Covenant and Undertaking


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


comply with all applicable provisions and requirements of the Regulations


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


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

















Page 22


 ARTICLE 7


OPERATIONS





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


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


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


Farmee shall discuss its Annual Work Programme and proposed budget


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


k >


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


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


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


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


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


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


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


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


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


comments thereon.


7.2 Exploration and Appraisal


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


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


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


field and subject to the terms of this Agreement.


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


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


Additional Reservoirs, Farmee shall submit its Work Programme to Farmor


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


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


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


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


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


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


terms and conditions therefore shall be subject to separate agreement


between the Parties.


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


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


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


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








Page 23





Hh 1





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


alteration, and Farmec shall use standard measuring.





7.3 Meetings and Minutes


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





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


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


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


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


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


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


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








ARTICLE 8


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.





























Page 24





/


ARTICLE 9


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


Encumbrance;


(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


Farmor.


(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


odierwise.





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 , ,


A UK





i


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


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


Field; or


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





forecasts or evaluations.











ARTICLE 10


NATURAL GAS


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.


ARTICLE 11


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


Agreements.


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.


ARTICLE 12


GOVERNMENT PARTICIPATION


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.


ARTICLE 13


CONFIDENTIALITY


13.1 Confidentiality Obligation


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


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


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


considered confidential by the acquiring Party and shall be kept confidential


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


Page 27


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


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


information and data may be disclosed as follows:


To an Affiliate provided such Affiliate maintains confidentiality as provided


in this Article 13;


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


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


the Joint Operating Agreement;


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


compliance with any applicable laws or regulations, the joint Operating


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


order of any court binding upon a Party;


Subject to Article 13.4 to contractors, consultants and attorneys employed


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


contractors', consultants' or attorneys' work;


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


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


under diis Agreement;


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


rules or requirements of any government or stock exchange having


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


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


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


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


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


Parties (such consent not to be unreasonably withheld);


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


implementing this Agreement, subject to each Party taking customary


precautions to ensure such data and information are kept confidential.


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


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


of this Article.


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


to disclose such Confidential Information to prospective assignees of the





Page 28


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


their own Petroleum Operations in the OML.





13.4 Confidentiality Undertaking from Certain Recipient Parties


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





prior to such disclosure the disclosing Party has obtained a written


undertaking from die recipient party to keep die data and information


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


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


13.5 Survival of Confidentiality Obligations





The obligations of confidentiality contained in this Article 13 shall survive


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


Parties until expiration of die OML.








ARTICLE 14


ABANDONMENT SECURITY





14.1 Farmee shall provide security funds to satisfy abandonment obligations


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


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


funds shall be reduced or released as the underlying obligations and


liabilities are met, reduced or released.


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


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


Abandonment Security Agreement, which shall be completed and executed


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


Farmee. The Abandonment Security Agreement shall be in accordance with


Schedule C.


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


funds for abandonment costs pursuant to an Abandonment Security


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


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


responsibility for any shortfall or surplus arising from the decommissioning


or abandonment operations.


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


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


joint signatories to the account. The process of decommissioning activities


Page 29


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


under this agreement in accordance with DPR’s regulation on


decommissioning and abandonment guidelines. In case of a compelling


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


referred to DPR for consideration and approval provided that such approval


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





ARTICLE 15


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,


Page 30











i


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


Misconduct.


15.3 Third Party Liability


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


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


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


or in connection with Operations.


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


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


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


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


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


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


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


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


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


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


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


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


15.4 Injury to Farmee’s personnel


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


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


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


negligence of Farmor, its agents or servants.


15.5 Injury to Farmor’s Personnel


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


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


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


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


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





Page 31


15.6 Damage to Farmcc' Property


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


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


the property of its employees, during Operations. <.


15.7 Damage to Farmor's Property


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


damage to property belonging to Farmor including their employees, agents


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


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


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


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


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


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


repairs, replacement, transportation and all other incidental expenses which


Farmor may incur in replacing or repairing the property.


15.8 Liability for acts of Farmec's contractors


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


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


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


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


any of them.


15.9 Liens


Without prejudice to Article 6.1.6 herein, Farmee shall indemnify Farmor


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


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


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


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


encumbrance other than in accordance with the terms of this agreement


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


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


the Farm-out Facilities.


15.10 War and confiscation Risk


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


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


Page 32


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


and servants in the event of:


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





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


rebellion, blockage, revolution and embargo, by whomsoever carried


out and/or in any case,


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





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


purported authority which affects the liberty or die rights in property


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


agents and servants.


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





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


with any of the aforesaid circumstances and all other matters related


thereto.





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


consequential losses.














Page 33





A








f-


15.12 Environmental Compliance





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


harmless and defend Farmor and their respective Affiliates from and


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


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


limited to those caused by or arising out of:


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


governmental rules, orders and regulations regarding any waste


material, or





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


Operations.


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





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


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


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


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


or hazardous substance by itself (including its contractors and


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


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


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


diis Agreement.


















































/


Page 34


 ARTICLE 16


INSURANCE





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


respect of Operations including any insurance required by the Regulations,


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


the financial limit specified:





Specific !


Insurance Financial Limits Comment


inclusions


1. Cost of Well Control Insurance Thirty Million Essential


which would respond in the event U.S. Dollars


of a well getting out of control in





the course of drilling activities,


including recompletion,


reconditioning, reworking, testing,


replacing, cleaning out, until


completion or abandonment.





2. General Third Party Liability Thirty Million Essential


Insurance to cover legal liability to U.S. Dollars


third parties including bodily


injury/death resulting from the


Farmee's activities


AND





Seepage and Pollution Policy to j





respond to claims for bodily injury,


loss or damage to or loss of use of


property 1


caused by seepage & pollution ■


arising from Farmee's Operations


including cost of


removing/nullifying/cleaning up


Seepage or pollution





3.Employer’s Liability Insurance In line with Essential


to cover Farmee's responsibility to Workmen’s


its employees for bodily Compensation


injury/accident/death suffered in Act


the course of employment.





Page 35


4. Onshore Property Policy to Full If onshore


cover risk of Fire, Lightening &


Allied Perils against Farmee 's replacement assets


movable assets, buildings, value


and other facilities.


5. Offshore Assets Policy to cover Full If


risk of damage to Offshore


Property including offshore replacement offshore


platforms (if any) value assets


6. Construction All Risks (CAR) Full If required


Insurance to cover fabrication,


construction and maintenance construction


activities of Farmee value


7. Motor Vehicle & Passenger In line with


Liability Insurance as may be


required by Statute or similar statutory


regulation in the country of use for requirements


motor vehicles used by Fannee in


its Operations.


8.Marine (Hull & In line with


Machinery/Protection &


Indemnity) to cover risk of statutory


loss/damage to crafts/vessels requirements


owned /employed by Farmee in its


Operations, including third-party


liability arising therefrom.


9. Aircraft (Hull / Liability) In line with


Insurance to cover loss/damage to statutory


Farmee's aircrafts employed in the requirements


business, and legal liabilities for


damage to property or injury/death


of 3rd party arising therefrom.





























Page 36


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


from an insurance company that complies with the following conditions:


(a) Insurer must meet minimum capitalisation requirement as stipulated


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


classified as 'Special Risk').


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


Insurance Commission) licence to operate as an Insurer in the


specified class (classes).





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


Energy Department appropriately staffed by persons with relevant


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


Gas Clients currently serviced.^





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


for participation in the Insurance of Federal Government Assets.


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


S. 24 of the Insurance Decree.





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


arrangement.


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


proceeds.





16.7 Farmee shall also require all contractors or subcontractors performing work


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


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


Page 37








i


 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.








ARTICLE 17


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. /


Page 38


ro





l h£





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


the Operations) for obtaining any information required for the proper


determination of the dispute.


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


the arbitral proceedings shall be English.


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


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


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


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


from rendering an award to resolve die dispute.


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


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


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


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


regardless of which Party prevails.


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


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


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


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


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


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


be made dicrein for the appropriate reparation to be made.


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


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


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


may be.


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


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


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


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


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


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


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


arbitral proceedings.








Pape 39








j


 ARTICLE 18


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


as follows:


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


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


Farmor with die full details of die proposed assignment transaction,


as well as financial and other data and information about the


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


able to determine that the proposed assignee or transferee (die


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


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


made unless the Farmor shall have consented to such assignment or


transfer in writing based on dieir satisfaction widi die competence of


the Assignee to discharge the obligations under tiiis Agreement as


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


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


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


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


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


notice of such assignment from the assigning or transferring Party


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


required to consider any information provided by the Assignor with


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


consent to such assignment in writing or notify the Assignor in


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


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


such assignment;


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


obligations under the Agreement up to die effective date of the


assignment or transfer; and


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


odier Parties for any obligations, financial or otherwise which have


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


Agreement prior to the effective date of such assignment.


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


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


expressly undertaken in writing to perform die obligations of die


Assignor under this Agreement, including Abandonment obligations,


to the satisfaction of die Farmor.


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


Security Agreement entered into pursuant to Article 14, die Assignor


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


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


complied with the requirements specified in such Abandonment


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


be assigned, notwithstanding that at the time such Assignee is


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


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


security which it has provided pursuant to such Abandonment


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


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


abandonment of die Party holding die interest in question.


18.2 Assignment to Affiliates


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


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


necessary consent and approval of the Government. Farmee shall remain


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


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


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


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


competence as Farmee and assignee has given an unconditional undertaking


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


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


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


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


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


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


passed on the dissolution, liquidation, winding up or reorganisation


under any bankruptcy laws of Farmee; or


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


for the benefit of creditors.





Page 41


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


die provisions of Article 19 herein.





ARTICLE 19


TERMINATION





19.1 Early Termination


This Agreement may be terminated immediately under die following


circumstances:


(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


Government


(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


Regulations.


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


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


19.1.1 The Farmor may terminate this Agreement in accordance widi the





procedure specified in Article 19.2 herein if the Farmee has


committed a Material Breach of its obligations hereunder. For


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


P ipe 42


/ V








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


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


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





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


Operations are substantially interfering with Petroleum Operations


conducted by the Farmor.


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


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


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


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


Policy.


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


to Farmor.


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


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


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


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


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


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


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


accordance with the provisions of Article 19.1 above.


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


cause or justification acceptable under the Regulations, Farmor may terminate


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


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


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


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


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


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


shall revert to Farmor without compensation, PROVIDFD that the other


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


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


proportionate to their respective participating interests, subject to the


approval of the Farmor and the Government of such assignment.


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


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


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


19.5 Events following termination


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


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


cease.


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


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


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


Farm-out Facilities in accordance with the Regulations and the provisions of


this Agreement.


19.5.2 Farmee shall, not later than ninety (90 days) thereafter surrender possession


of the Farm-out Area to Farmor and cause Farmor to have full and


complete rights, titles, interests and estates as owner of the Farm-Out Area


and possessory interest (by way of reversion or otherwise.) in the Farm-out


Area.


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


Farmee.


.19.5.4 Each day following the ninety day period required for surrender of the


Farm-out Area that Farmee has not surrendered possession of the Farm out


Area in the condition required by this Agreement and the Regulations,


Farmee shall pay to Farmor a rent of Ten Thousand Naira (N10, 000) for


each day that Farmee retains possession of Farm-out Area. Farmee


irrevocably agrees that this rent is reasonable and a reasonable charge for its


continued presence in the Farm-out Area and is not and shall noi be


construed to be a penalty.


19.5.5 Prior to effective date of termination, Farmee shall satisfy all obligations and


liabilities it has incurred or that are attributable to it, including without


limitation, any statutory obligation or third party liabilities in respect of


Operations even if the obligations concerned are to be implemented


thereafter, or any liability for acts, occurrences or circumstances taking place


or existing, prior to its effective date of termination.








Page 44


19.6 Approvals





Farmce shall promptly join in such actions as may be needed or desirable to


obtain any approval required in connection with the termination and


abandonment, and any penalties or expenses incurred by die Farmor in


connection with such termination shall be borne by Farmee.








ARTICLE 20


NOTICES





20.1 Delivery and Receipt of Notices





20.1.1 Any notice/notification, consent, or other communication to be given under


this Agreement, "Notice" shall, unless otherwise specifically provided


herein, be in writing and will be sufficiently made if delivered by hand or


regular mail, or by electronic communication means including electronic


mail or facsimile transmission to be confirmed (unless acknowledged or


otherwise agreed by the recipient) by letter, at the addresses hereinafter


specified and shall, unless otherwise provided herein, be deemed to have


been made on the day of delivery in the case of delivery by hand, five (5)





days after dispatch in the case of regular mail, or twenty-four (24) hours


after dispatch in the case of telegraphic communication. Unless otherwise


specified by not less than fifteen (15) days notice, Notices shall be given at


the following addresses:


The Group Managing Director NNPC





Nigerian National Petroleum Corporation


NNPC Towers


Herbert Macaulay Way





Central Business District


Abuja, Nigeria


Facsimile:


Telex:


Telephone:





The Shell Petroleum Development Company of Nigeria Limited


Freeman House


21/22 Marina Lagos


P.M.B. 2418


Lagos Nigeria


Facsimile:


Telephone: 01-2601600





Page 45 c








CAs


I C





 Telex


To NNPC:





Nigerian Agip Oil Company Limited


Plot PC 23, Engineering Close, Victoria Island, Lagos, Nigeria


P.O. Bol4 1268,


Lagos, Nigeria


Facsimile: 01-262 2241


Telephone: 01 - 260 0100


Telex: 28734 AGIP NG


Elf Petroleum Nigeria Limited





35, Kofo Abayomi Street, Victoria Island, Lagos, Nigeria


P.O. Box 927,


Lagos, Nigeria


Facsimile: 01- 2623744


Telephone: 01 - 261 3720


Telex: 21320 elf ng





To Farmee:


Universal Energy Resources Limited


25 Idoro Road


Uyo, Akwa Ibom State, Nigeria


Telephone: 08023187338; 087 - 776696


E-mail: emmanuelmboho@yahoo.co.uk








20.2 The Party receiving a Notice by hand shall cause a receipt for any said


Notice to be given to the person delivering same and shall record the


delivery of the said Notice in a permanent register and indicate the date and


time of delivery of the said receipt in the said register.


20.3 Each Party shall have the right to change its address at any time and


or/designate that copies of all such notices be directed to another person at


another address by giving written notice thereof to the other Parties.


























Page 46


 ARTICLE 21


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.








ARTICLE 22


FORCE MAJEURE





22.1 A “Force Majeure” situation includes delays, defaults or inability to perform


under this Agreement due to any event beyond die reasonable control of


any Party. Such event may be, but is not limited to, any act, event,


happening, or occurrence due to natural causes, acts or perils of navigation,


fire, hostilities, war (declared or undeclared), blockade, labour disturbances,


suikes, riots, insurrection, civil commotion including acts of hostilities by


local communities, quarantine restrictions, epidemics, storms, floods,


eardiquakes, blow-out, lightning, acts of or orders of Government, and


other acts of God.





22.2 If as a result of Force Majeure any Party is rendered unable, wholly or in


part, to carry out its obligations under diis Agreement, other than the


obligation to pay any amounts due or to furnish security, then the


Page 47











i


 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.








ARTICLE 23


GENERAL PROVISIONS





23.1 Press Releases


Farmce shall consult with JV Operator with regard to all press releases and


other announcements concerning diis Agreement or the Operations, subject


to the approval of DPR.


23.2 Conflict of Interest


Each Party for itself and for its directors, partners, employees and agents


warrants, covenants and represents to the other that, except as otherwise


expressly provided in this Agreement, neither it nor any of its directors,


employees, partners or agents has given to or received from the other Party


or any such other Parties, directors, partners, employees, or agents any


commission, fee, rebate, gift or other tiling or service in connection with


diis Agreement.


23.3 Effect of Invalid Provisions


In the event that any covenant, condition, or provision contained in this


Agreement is held to be invalid by a court of competent jurisdiction, die


invalidity of any such covenant, condition, or provision shall in no way


affect any other covenant, condition, or provision contained herein.














Page 48








i


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


Agreement.


23.5 Counterparts


This agreement shall be executed in counterparts by all the Parties, each of


which shall be deemed an original.


23.6 Entirety of Agreement and Amendments


Tliis Agreement constitutes the entire Agreement and understanding among


the Parties hereto and supersedes any prior agreement and understanding


relating to the subject matter of this Agreement. This Agreement may be


modified or amended only by a duly authorised written instrument executed


by all of the Parties hereto.


IN WITNESS WHEREOF, the Parties have executed diis Agreement, in


triplicate, intending each copy to serve as an original, on die date first


written at the beginning of this Agreement.





For: NIGERIAN NATIONAL PETROLEUM CORPORATION














l4ame : ENGR. F.M. KUPOEOKUN


Designation : GRO


In the presence of:





Signature





Name: Chief SENA AIN THUN Y MCI Arb.





Designation: GROUP GENERAL MANAGER,


CORPORATE SECRETARIAT AND LEGAL DIVISION











Page 49


For: THE SHELL PETROLEUM DEVELOPMENT


COMPANY OF NIGERIA LIMITED











By


Name : Vto^'WL


Designation : ^ (L








In the presence of:


Signature:





Name: o.odc Q.u« ^0


Designation: Gp-


-4^-*








For: ELF PETROLEUM NIGERIA LIMITED





TECS'LL!


By:.


IOj (vi At L L |


Name :


Designation :'^X6co'Ti^€ ’biRECF^ ^





In the presence of:


Signature: ---G?ty^L^LUjUL--


Name: ©lA'CWVY'J





Designation:























Page 50


For: NIGERIAN AGIP OIL COMPANY LIMITED





lJP^


By :





Name


Designation





In the presence of:





Signature:


Name: ' <= •


Designation:








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























rV\





Page 51





i


APPROVED BY THE HONOURABLE MINISTER


This Day of .

In approving this Agreement, Government holds harmless the Farmor and





their respective Affiliates from and against any statutory fine, penalty or


liability on the OML arising out of:


(i) any failure by Farmee in complying with any Governmental law or


Regulation, or pollution or contamination caused by the discharge or


escape of oil, other pollutants or contaminants from the Fan-nee’s


Operations, the presence, disposal, release or threatened release of


any waste material or hazardous substance into the atmosphere or


into or upon land or any water course or body of water, including


ground water, to the extent such are attributable, in whole or in part,


to Farmee’s Operations in the Farm-out Area under this Agreement.





(ii) any failure by Farmee with respect to, including but not limited to


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


Operations. r





Signature:..................


Name: ^^DfCE^M. DAUKORU


Designation: PRESIDENTIAL ADVISER ON PETROLEUM AND


ENERGY,


FOR AND ON BEHALF OF MINISTER OF PETROLEUM


RESOURCES.





Page 52





A CA t





In the presence of:





?&r?i~e


Name: h





Signature:...... ^


Designation:


























































































































Page 53


 SCHEDULE A


FARM-OUT AREA, FARM-OUT DEPTH AND FARM-OUT FACILITIES:


STUBB CREEK FIELD


Farm-out Area:


The Farm-out Area is captured within the boundaries defined by the following


coordinates in meters:





Eastings Northings


A: 633825 68025


B: 640895 68025


C: 640895 62037


D: 633825 62037





These coordinates constitute die comers of a polygon encompassing areas of


Oil Mining Lease 14 as shown on the map attached hereto.





Farm- out Depth:


The Farm-out Depth is 9829 ft True Vertical Depth Subsea.


Farm-out Facilities:





(1) Stubb Creek wells ---1, 2, 3 and 4 (Wells -1, -3 and -4 are abandoned


wells)


If any additional Farm-out properties are identified they will be included In a


future side letter attached to this Agreement.









































/











VL


 SCHEDULE B


DESCRIPTION OF ENVIRONMENTAL CONDITION


FARM-OUT AREA BASED ON ENVIRONMENTAL


EVALUATION STUDIES








The environmental status of the Stubb Creek Field will be described in an


Environmental Evaluation Report to be provided by Farmor to Farmee.



































































































































i


 SCHEDULE C


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)





Where:





Y. = Amount to be paid annually into an escrow account as abandonment


security.


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.



































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