Mr. Marc Lorenceau, president of Addax Petroleum Benin ; Mr. Jean Claude Gandur, President of Addax and Oryx Group ; Mr. Wade Cherwayco, President of Abacan Resource.
Regarding Block 1, the period covered by the contract shall be divided into two periods: an exploration period and an exploitation period. The exploration period shall be for an initial period of 2 years with possible extension. The duration of the exploitation permit shall be fixed at 25 years from the day on which the discovery has been declared a commercial discovery. This may be subject to an extension.
Regarding Seme Block, the exploitation permit relating to the seme block shall expire when the hydrocarbon commercial exploitation shall not be viable anymore in the same block, either in the present oilfield of some, or in any other reservoir contained in the perimeter of Block 1, with a maximum period of 25 years. This may be subject to an extension.
Environmental impact assessment and management plan
Addax Petroleum Benin and Abacan Resource must submit to the government, a general development program indicating, among others, the measures to be adopted for the protection of the environment.
At the time of submitting this general development program, Addax Petroleum Benin and Abacan Resource must submit to the Ministry of Mines, Energy and Hydraulics for review and approval a schematic summary of the restoration activities of the environment once the petroleum operations have ended, indicating the manner in which the corresponding costs shall be financed using a special account for the specific purpose of financing the obligations concerning the restoration of the environment and the abandonment procedure.
Addax Petroleum Benin and Abacan Resource shall undertake to call on experts to examine the probable impact of the petroleum operations on the environment. This study must include: a) the state of the environment and the level of pollution in the contract area and the neighbouring areas before the petroleum operations b) the impact of these operations on the environment.
Addax Petroleum Benin and Abacan Resource must submit to the government, a general development program indicating, among others, the measures to be adopted for the protection of the environment.
During the performance of the contract, Addax Petroleum Benin and Abacan Resource must adopt the necessary measure in order to prevent or to reduce to a minimum the pollution of the ground, atmosphere and water, and ensure that this pollution does not harm the plants and the wildlife and, in general, prevent everything that could materially harm the environment. If Addax Petroleum Benin and Abacan Resource cannot prevent the pollution of the environment, it must take the necessary measures to reduce to a minimum the effects of the pollution according to the international standards.
Addax Petroleum Benin and Abacan Resource must design and build facilities endeavoring to reduce to a minimum the pollution of the environment and must, among others, adopt specific procedures on the drilling sites and the location site of the exploitation equipment such as a drainage/recovery system of crude oil spillage and other derivatives as well as polluted waters and a waste recovery system.
In the event of danger which may affect the environment, Addax Petroleum Benin and Abacan Resource must immediately notify it to the government and take the measures prescribed in the emergency procedures adopted by the government, Addax Petroleum Benin and Abacan Resource according to the good practices of the oil industry.
At the end of the contract, in any other situation than the abandonment case, Addax Petroleum Benin and Abacan Resource must take the measures according to the good practices of the oil industry to restore the environment and the sites where the petroleum operations have been performed to their original state on the effective date of the contract, taking into account the rules of the abandonment procedure.
The government must cooperate in order to complete the procedures on behalf of Addax Petroleum Benin and Abacan Resource and at the written request of the latter, for obtaining the licenses, permits, surface rights, easements, rights of free access to the contract area and exit therefrom, the utilization of the waters and any other types of encumbrances on any land or water expanse of public or private nature to enable Addax Petroleum Benin and Abacan Resource to finalize the petroleum operations on the territory of Benin, in accordance with the laws in force in the country.
The audited accounts of Addax Petroleum Benin and Abacan Resource must be submitted to the government no later than 3 months after the end of the calendar year.
The government may, after submitting notice to Addax Petroleum Benin and Abacan Resource no later than 6 months following the date of submission of the financial accounts, submit all financial accounts of Addax Petroleum Benin and Abacan Resource relating to the calendar year in question to the auditing of an international company of chartered accountants appointed by agreement between the parties.
Addax Petroleum Benin and Abacan Resource shall be required to pay, under the conditions and the due dates established by the Beninese tax legislation, all the taxes and duties to which it is subject, in particular income tax equal to 55% of the taxable profit and the export revenue tax at the rate of 3.12% of the free on board value.
Addax Petroleum Benin and Abacan Resource shall be released from any tax obligations which, by definition, are included in the profit-oil received by the government as well as in the oil production tax also received by the government.
Addax Petroleum Benin and Abacan Resource and their subcontractors shall be also exempt: from the VAT (value added tax) on the activities strictly related to the petroleum operations; from the franchise tax for a period of 5 years; from the surface royalties and from social security contributions for expatriate personnel.
Production Share - "Profit Oil features (triggers for variations in split - IRR, factor, production, etc .)
If the government exercises its option of participation, Addax Petroleum Benin and Abacan Resource shall assign to it the portion that has been claimed.
If the government does not pay its share of costs during the 3 months following the due date for reimbursement agreed between the parties, Addax Petroleum Benin and Abacan Resource, Addax Petroleum Benin and Abacan Resource shall have the right to retain 50% of the share of profit-oil of the government until total recovery of said costs.
The remainder of the available crude every year after deduction of the recoverable petroleum costs shall be shared between the government and Addax Petroleum Benin and Abacan Resource, whether the government shall exercise or not its option of participation.
A progressive scale will be applied in order to share benefits: regarding oil, the share of the government and Addax Petroleum Benin and Abacan Resource will be as follow: up to 5,000 barrels per day, the profit will be split evenly between the government (50%) and Addax Petroleum Benin and Abacan Resource (50%); between 5,001 and 10,000 barrels per day, the government will get 55% and Addax Petroleum Benin and Abacan Resource 45%; between 10,001 and 20,000, the government will get 60% and Addax Petroleum Benin and Abacan Resource 40%; between 20,001 and 50,000, the government will get 65% and Addax Petroleum Benin and Abacan Resource 35%; between 50,001 and 100,000, the government will get 70% and Addax Petroleum Benin and Abacan Resource 30%; over 100,000 barrels per day, the government will get 75% and Addax Petroleum Benin and Abacan Resource 25%.
Regarding condensate, from 0 to 100,000 barrels per day, the profit will be split evenly between the government (50%) and Addax Petroleum Benin and Abacan Resource (50%). Over 100,000 barrels per day, the government will get 55% and Addax Petroleum Benin and Abacan Resource 45%.
Production Share - Cost Oil features (basis of calculation, limits on cost recovery - e.g. as % of revenue or production, capex uplift, etc.)
In case of a participation, the government shall pays its share of the petroleum costs, in proportion to said participation, when said costs have been committed by Addax Petroleum Benin and Abacan Resource.
If the government exercises its option of participation, it will reimburse to Addax Petroleum Benin and Abacan Resource in proportion to said participation, its share of the petroleum costs incurred by Addax Petroleum and Abacan Resource with respect to the contract area before the date on which its decision to participate has been notified to Addax Petroleum and Abacan Resource who shall assist it without cost in the search for necessary funds.
The petroleum costs that can be recovered will be limited every year to 69% of the available crude for Block 1, and for the Seme Block to 79% of the available crude of one year.
The recovery of the exploitation costs shall be made entirely during the year when such costs have been incurred. The recovery of the exploration costs shall be made from the start-up year of the first commercial production deriving from the development area. The development investments shall be amortized over 5 years after the first production. The investments related to the exploitation phase shall be amortised over 5 years from the date of their realisation.
The cost recovery plan can be amended by an agreement between the government, Addax Petroleum Benin and Abacan Resource if the economic limit of a field is reached.
The government shall have the option to acquire a maximum participation of 15% of the rights and obligations of Addax Petroleum Benin and Abacan Resource relating to a discovery when the combination of the daily production of all the discoveries of the contract area reach for the first time a level of 20,000 barrels during at least 6 consecutive months.
Addax Petroleum Benin and Abacan Resource shall be at liberty to hire the personnel required to carry through the petroleum operations in accordance with the contract.
With regard to the recruitment of employees and to the extent where this is in accordance with an efficient and responsible exploitation of the petroleum operations, Addax Petroleum Benin and Abacan Resource must give preference to citizens of Benin qualified, through their training and experience, to exercise the duties in question. The same preference applies in relation to subcontractors to the extent where such subcontractors are competitive with regard to quality, costs and technical expertise to keep the established schedules of activities.
With regard to local procurement, Addax Petroleum Benin and Abacan Resource must give preference to subcontractors of Benin to the extent where such subcontractors are competitive with regard to quality, costs and technical expertise to keep the established schedules of activities.
Addax Petroleum Benin and Abacan Resource shall undertake to offer adequate training to the Beninese citizens employed for the petroleum operations during the validity of the contract.
To that end, within 3 months following the date of signature, a training program relating to the exploration period for an annual amount of US$ 50,000 at least shall be established and submitted by Addax Petroleum Benin and Abacan Resource to the government. Within 30 days following the start-up of the commercial production, Addax Petroleum Benin and Abacan Resource shall also submit to the government a training program relating to the exploitation period for an annual amount of at least US$ 100,000.
A storage facility including a portion of the land intended for the construction of a quay, a buoy mooring of CBM-PLEM type, a loading facility and, finally, the resupply base of Cotonou harbour under conditions agreed by the parties shall be put at the disposal of Addax Petroleum Benin and Abacan Resource, as a matter of priority, for the validity of the contract.
Furthermore, the government shall guarantee to Addax Petroleum Benin and Abacan Resource that the facilities shall be managed in accordance with the good practices of the international oil industry. Addax Petroleum Benin and Abacan Resource will finance the restoration of these facilities and will manage them according to good petroleum practices by taking into account the production forecast for Seme and Block 1.
The assets directly associated or related to the production operations such as, in particular, the producing wells, the platforms including the test and production separators, the oil pipelines, the submarine cable, without this listing being restrictive, shall be put at the disposal of Addax Petroleum Benin and Abacan Resource, free of charge. Addax Petroleum and Abacan Resource Benin shall have the right to use, with the government approval, some existing wells in order to find new reserves in the deep reservoirs according to the good practices of the oil industry. A "general development program" means a plan established for the development of an oil deposit or a gas deposit agreed to between the parties.
The government shall finally facilitate to Addax Petroleum Benin and Abacan Resource the use of any roads, storage tanks and other structures for storage and processing, piers and other loading and shipment structures, railway lines, pipelines and other transportation infrastructures existing in Benin and which are not exclusively used for other activities. Addax Petroleum Benin and Abacan Resource shall be the required passage rights and other reasonable dues.
The ownership of movable and immovable properties acquired for the petroleum operations shall be automatically transferred by Addax Petroleum Benin and Abacan Resource to the government as soon as their cost has been fully amortised or, otherwise, at the end of the contract.
During the period of the contract, Addax Petroleum Benin and Abacan Resource shall carry out directly the exploration and exploitation activities in the contract area.
Addax Petroleum Benin and Abacan Resource shall be required to carry through the production and development operations in all the development areas in accordance with the general development programs.
Addax Petroleum Benin and Abacan Resource shall, during the initial phase of the exploration period, undertake to do the following works: a) reprocess and interpret 500 km of 2d seismic lines or acquire 300 km of seismic lines during this period b) evaluate the productivity of the gaz contained in the H8 reservoir of Seme and assess its economic potential c) drill one well in Block 1 or, in the event the deep reservoirs under the Seme area prove to be a more attractive prospect, drill one well in deep reservoirs.
During the first extension phase of 2 years, Addax Petroleum Benin and Abacan Resource must at least complete the following works: a) acquire 300 km of seismic lines if not yet realized b) drill a well.
During the second extension of the initial phase of the exploration period, Addax Petroleum Benin and Abacan Resource must at least complete the following works: a) acquire and reprocess 300 km of 2D seismic lines or their equivalent of 3D seismic lines b) drill a well.
Any exploration well drilled must at least be drilled at one of the following depths: the basement, H8 horizon, 2,800 metres TVD (True Vertical Depth), at the depth under which additional drilling becomes impracticable and would not be carried out by a prudent and reasonable operator in identical or similar conditions or any other depth defined by the government, Addax Petroleum Benin and Abacan Resource by mutual agreement.
Addax Petroleum Benin and Abacan Resource shall undertake, after carrying out the geological, geophysical, reservoir engineering and production technology studies to submit to the government an action program to produce the H6 and H6.5 reservoirs or other reservoirs in Block 1.
The arbitration procedure shall be implemented by 3 arbitrators in accordance with the rules of conciliation and arbitration of the international centre for the settlement of investments disputes (CIRDI) of the World Bank Group.
Any party can submit a matter to the decision of an expert if this is provided by the contract or that both parties reach a joint agreement to submit the decision to an expert.
Any decision rendered by the expert in accordance with this article under a provision of the contract which expressly provides for this procedure shall be final and binding on the parties. No party may then submit the matter decided by an expert to an arbitration procedure such as provided in the contract unless the parties jointly decide that the decision of an expert may be subject to a final and definite decision through arbitration, if the parties agree to accept it at the time a decision was made to submit the matter to an expert.
In case of non-compliance by Addax Petroleum Benin and Abacan Resource with the provisions of this contract, the government may terminate the contract if they do not rectify the failure to comply.
In particular, the government may automatically terminate the contract based on a failure to comply with the contract when Addax Petroleum Benin and/or Abacan Resource fail to: a) abide by the minimum work obligations; b) complete an evaluation or a work program; or c) execution of an arbitration award or decision of an expert.
However, if Addax Petroleum Benin and Abacan Resource complies with its obligations within 60 days of being notified of the failure to comply with the contract, the government may not automatically terminate the contract.
All the reports, data and information obtained or prepared by Addax Petroleum Benin and Abacan Resource, to the extent where they relate to all or part of the contract area, shall be treated confidentially. The government, Addax Petroleum Benin and Abacan Resource cannot divulgue these documents without the prior approval of the other party.
All reports, data and information communicated by the government or Addax Petroleum Benin and Abacan Resource to a third party in accordance with the above provisions, shall be made according to agreements the terms of which shall guarantee that these data, information or reports are treated by the recipient as strictly confidential.
The reports, data and information relating the contract area and considered as important by the government for the execution by a third party of an exploration program in a bordering area, shall be communicated to it by the government. In exchange, the Addax Petroleum Benin and Abacan Resource shall have access to the data, information and reports obtained by said third party concerning a bordering area of a comparable exploratory nature. The confidentiality clauses shall apply to this third party.
All the reports, data and information, including the interpretations and evaluations relating to any area that no longer forms part of the contract area following retrocession of an area or expiration of this contract, shall be treated by the Addax Petroleum Benin and Abacan Resource as strictly confidential for a period of 5 years from the date on which said area has ceased to form an integral part of the contract area or from the date of expiration of this contract.
3 years after the start of the production operations, the government shall have the right to purchase and Addax Petroleum Benin and Abacan Resource shall be under an obligation to sell a quantity of hydrocarbons in crude form or an equivalent quantity of refined products or gas equivalent such as agreed to between the government, Addax Petroleum Benin and Abacan Resource equivalent at most to 50% of the share of profit-oil to which Addax Petroleum Benin and Abacan Resource are entitled in order to meet the domestic consumption of Benin.