NOTICE: The text below was created automatically and may contain errors and differences from the contract's original PDF file. Learn more here BLOCK 245 RESOLUTION AGREEMENT
THIS AGREEMENT (“FGN Resolution Agreement”) is made this d w n.- \pril 2011.
THE FEDERAL GOVERNMENT OF NIGERIA (hereinafter rcrcrred to as the FGN) represented
bv Honourable Attorney General of the Federation, and Minister of Justice., the Minister of Petroleum
Resources and the Minister of Finance; and
SHELL NIGERIA ULTRA-DEEP LIMITED, a company incorporated under the laws of the Federal
Republic of Nigeria having its registered office at Freeman house, 21/22 Marina, Lagos (hereinafter
referred to as SNUD, which expression where the context so admits shall include its successors-m-title and
NIGERIAN NATIONAL PETROLEUM CORPORATION, a stn tutory corporation established
under the laws of the Federal Republic of Nigeria whose Head Office is a t NNPC Towers, Central Area,
Herbert Macaulay Way, P.M.B 190, Garki, Abuja, Nigeria (hereinafter referred to as "NNPC' which
expression where the context so admits shall .include its successors-m-utle and assigns), and
NIGERIAN AGIP EXPLORATION LIMITED a company established under the laws of the Federal
Republic of Nigeria whose registered office is at Churchgate Building, Plot 473 AO Constitution Avenue,
Central Busmess Area, Abuja, (hereinafter referred, to as “NAE”, which expression where the context so
admits shall include its successors-iii-title and assigns), and
SHELL NIGERIA EXPLORATION AND PRODUCTION COMPANY LIMITED, a company
incorporated under the laws of the Federal Republic of Nigeria having its registered office at Freeman
house, 21/22 Manna, Lagos (hereinafter referred to as SNEPCO, which expression where the context so
admits shall include its successors-in-title and assigns);
FGN, SNUD, NNPC, SNEPCO and NAE may also be referred to herein individually as a "Party” or,
collectively, as the !?Parties”.
A. On the 29th of April 1998, FGN gran ted an Oil Prospecting License (OPL 245) over oil block 245
(“Block 245”) to Malabu Oil & and Gas Limited company incorporated under the laws of the
Federal Republic of Nigeria (“MALABU’').
B. On 30th March, 2001, MALABU and SNUD entered into a Farm-in Agreement, and a Deed of
Assignment under which MALABU assigned forty (40) percent equity interest in OPL 245 to
C. On the 2nd July 2001, FGN revoked OPL 245.
D. By a letter dated, the 23rd May 2002, the then Honourable Minister ot Petroleum Resources, on
behalf of FGN awarded Block 245 to SNUD on the basis or a Production. Sharing Contract
(“PSC”), following a competitive bid with another international oil company, on the invitation of
E. On 22nd December 2003, NNPC executed a PSC with SNUD, (hereinafter referred to as the
“2003 PSC”), granting SNUD the right to exclusively operate Block .245 as contractor for a term
of thirty (30) years.
F. Subsequent to the revocation referred to in. paragraph C above and the execution of the 2003
PSC, various law suits involving the FGN, NNPC, MALABU and SNUD, were instituted to
determine disputes arising from the revocation, of OPL 245 by the FGN, the termination of the
agreements between MALABU and SNUD referred to in paragraph B above, and the execution of
the 2003 PSC in respect thereof, with SNUD.
G. On 30th November, 2006, the FGN executed a. settlement agreement with MALABU ’wherein
the FGN, without admission ot liability for any alleged wrongfol, unlawful, unjust or any like
conduct, agreed to re-allocate Block 245 to MALABU in consideration of MALABU discharging
and releasing the FGN from ail claims and. suits filed by MALABU against the FGN in.
connection with the revocation of MALABU’s interest on 2nd July 2001.
H. As a result of the execution of the settlement agreement referred to in paragraph G above, a
number of dispute resolution proceedings were initiated by SNUD against the FGN including the
Bilateral Investment Treaty (BIT) arbitration No. ARB/07/18 pending at the International
Centre for the Settlement of Investment Disputes (“ICSID Arbitration”), to enforce SNUD’s
rights to exclusively operate Block 245 as Contactor on the basis of the 2003 PSC between NNPC
I. The extant cases of those referred to in. paragraphs F and H above, are:
i. CA/A/25M/2003 - SNUD vs. The House of Representatives and MALABU.
ii. ICC No. 12136 MS (C12137/MS) SNUD vs. MALABU. (Arbitration with resulting award
in favor of SNUD delivered on 20“’ December 2004, and costs of USJ2.735 million
awarded against MALABU.)
iii. FHC/NRJ/01/2009 - SNUD vs. MALABU, by which the ICC Award was registered on
29 March, 2010, making it enforceable in Nigeria.)
iv. ICSID Case No. ARB/07/18- Bilateral Investment Treaty arbitration between SNUD
and the FGN. (Ruling pending.)
J. On 2nd July 2010, FGN again issued a letter to MALABU, re-allocating Block 245 to MALABU.
K. FGN is willing to settle all claims to any interest in OPL 245 by SNUD against FGN and/or
MALABU in the terms of this Agreement.
L. Pursuant to paragraph K above, FGN has entered into agreements of even date, respectively with
MALABU and SNUD (The ‘Resolution Agreements’), in respect of the resolution referred to in
paragraph K above, by which, MALABU has relinquished all claims to OPL 245 and agrees to all
future actions which FGN may take under this FGN Resolution Agreement with respect to OPL 245.
M. SNUD agrees to the reallocation of its interest in Block 245 to SNEPCO, an Affiliate of SNUD, and
SNEPCO agrees to reimburse the past costs and the signature bonus paid by SNUD in respect of
Block 245 as well as to agree terms with NAE to jointly undertake the future development of the Block
N. FGN and SNUD now wish to resolve their differences amicably with respect to Block 245 and to set
out the agreed interests of the Parties with respect to Block 245 in accordance with the terms of tlnis
FGN Resolution Agreement.
NOW THEREFORE, pursuant to FGN’s confirmation of the full and final resolution with MALABU
and SNUD, of all MALABU’s and SNUD’s respective claims and issues in dispute over Block 245 and a
mutual reciprocal release from all claims, under the Resolution Agreements, FGN, SNUD, NNPC,
SNEPCO and NAE HAVE AGREED m the manner hereinafter stated:
1.1 SNEPCO shall reimburse SNUD in respect of: (i) costs incurred by SNUD under Clause 2(i);
and (u) costs of three hundred thirty five million and six hundred thousand. US Dollars
($335,600,000) incurred by SNUD related to the execution, of the work-programme pursuant to
the terms of the 2003 PSC and in consideration of this payment SNUD hereby consents to the
reallocation of the interests in Block 245 by the FGN as agreed in Clause 1.2 herein.
1.2 The FGN hereby causes the allocation of Block 245 and will cause the grant of the relevant Oil
Prospecting license by the Minister of Petroleum Resources in favour of SNEPCO and MAE as
joint licence holders under the Petroleum Act Cap P IO. Laws of the Federation of Nigeria, 2004
on the terms ot this FGN Resolution Agreement.
1.3 Following the execution or tills FGN Resolution Agreement, (i) SNUD shall, on behalf of
SNEPCO and NAE pay to the FGN the Signature Bonus in accordance with Clause 2 below,
and FGN hereby agrees that not later than seven (7) days thereafter FGN shall grant the Oil
Prospecting license in respect of Block 245 to SNEPCO and N AE and (ii) NAE shall, on behalf
of NAE and SNEPCO and FGN, appoint an escrow agent for the purpose of paying to FGN a
sum equal to one billion ninety two million and forty thousand Dollars (US$1,092,040.000) for
the purposes of FGN settling all and any existing claims and/or issues over Block 245, in.
accordance with Clause 3 below,
1.4 Upon the grant of the Oil Prospecting License to SNEPCO and NAE pursuant to Clause 1.2
hereof, NNPC and SNUD agree that the 2003 PSC is terminated as of the date of grant of the
Oil. Prospecting License to SNEPCO and NAE. Consequent upon the termination of the 2003
PSC, NNPC and SNUD release and discharge each, other folly and effectively from all and. any
existing and continuing obligations that would other-wise survive the termination of the 2003
PSC except that this release shall not be deemed to extend to any claim or obligations related
thereto and arising from this FGN Resolution Agreement.
1.5 The FGN confirms that the Oil Prospecting License to be granted to SNEPCO and NAE shall
be for an aggregate period of ten. (10) years commencing from the date it is issued, and any
OMLs which may derive therefrom shall have a duration of twenty (20) years plus additional
renewals as allowed by law.
Upon the execution of this FGN Resolution Agreement by all the Parties herein:
i) FGN and SNUD as parties to an escrow agreement dated 22"° December 2003 (“the Escrow
Agreement”) shall issue to the Escrow Agent, (|P Morgan. Chase Bank) a notice (in the form
attached to this FGN Resolution Agreement as Schedule 1) as required under Clause 10.1 of
the Escrow Agreement, terminating the Escrow Agreement with an instruction to pay the sum.
of two hundred and seven, million nine hundred sixty thousand US Dollars ($207,960,000.00)
representing the Signature Bonus, into the FGN Receiving Account. 'The balance or the
Escrow Fund shall be paid into the Shell Receiving Account free of any taxes. The Parties
acknowledge and agree that the payment of the Signature Bonus made pursuant to tins Clause
2(1), represents the full payment of the Signature Bonus for rhe acquisition by SNEPCO and
NAE of all rights over Block 245 and that no other payments are or will be due by any of
SNUD. SNEPCO and NAE to FGN in this respect other than, as provided for in. Clause 3.
.ii) FGN and. NAE shall enter into an escrow agreement (“Escrow .Agreement no. 2”),
substantially in the form attached to this FGN Resolution Agreement as Schedule 2, with a
bank of international standing acceptable to such. Parties within five (5) Business Days from
the Execution Date.
For the purposes of Clause 2(i) above, “Escrow Agent”, “Escrow Fund”, “FGN Receiving Account”
and “Shell Receiving Account” shall have the meaning ascribed, to them in the Escrow Agreement.
.3 ’Within five (51 Business Days of the grant and delivery to SNEPCO and NAE. by FGN of the Oil
Prospecting license tor Block 245 duly issued jointly in the name of SNEPCO and NAE pursuant to
Clause 1.2 above NAE shall, on behalf of both NAE and SNEPCO, wire transfer to the account
opened in accordance with the Escrow Agreement no. 2 the amount of one billion ninety two million
and forty thousand Dollars (US$1,092,040,000) to the benefit of FGN pursuant to Clause 1.3.
Subject to receipt by NAE and SNEPCO of a letter from FGN confirming that it has achieved the
full and final resolution of all claims and issues in. dispute over Block 245 and obtained a release from
all claims on. Block 245 from the relevant parties, NAE and SNEPCO as parties to the Fiscrow
Agreement No,2 shall issue to the escrow agent, a notice (in the form attached to the Escrow
Agreement No.2) terminating the Escrow Agreement No. 2 with an instruction to pay die sum.
indicated in this Clause 3 into the FGN Escrow Account as defined in the Escrow Agreement No.2.
4 The rights and obligations of NAE and SNEPCO as between themselves in the operations of Block
245 shall be governed, by a Production Sharing Agreement (PSA) to be executed between themselves
or between themselves and/or their nominees.
5 The PSA shall be treated as and deemed a “Production Sharing Contract” as defined in section 17 of
the Deep Offshore and Inland Basin Production Sharing Contracts Act, Cap D3, Laws of the
Federation or Nigeria 2004.
6. The FGN confirms to NAE and SNEPCO that die fiscal terms as provided in the Deep Offshore
and Inland Basin Production Sharing Contracts Act Cap D3, Laws of the Federation of Nigeria, 2004,
shall be applicable to the PSA between NAE and SNEPCO with respect to Block 245.
In the event of any enactment of or change in the laws or regulations of Nigeria or any rules,
procedures, guidelines, instructions directives or policies, applying to this FGN Resolution
Agreement and/or the Oil Prospecting License for Block .245 and/or subsequent Oil Mining Lease
(OML) derived therefrom, including the above fiscal terms, introduced by any Government
department or Government parastatals or agencies occurs subsequent to the Execution Date, winch
materially and adversely affects the rights and. obligations or the economic benefits of NAE and
SNEPCO, the relevant Parties shall agree to such modifications to this FGN Resolution Agreement
and/or any agreements between, the relevant Parties in furtherance hereof as will redress and remove,
the adverse effect ot such changes with retroactive effect from the date of such adverse change.
7. Tax Oil under the PSA shall be allocated, in the proportion of their interests in Block 245, to NAE
and SNEPCO, as Holder as defined in the Deep Offshore and Inland Basin Production Sharing
Contracts Act. Each of NAE and SNEPCO shall have the right to lift its share of the allocated Tax
Oil. and remit the proceeds thereof to the appropriate agencies of the FGN for the discharge of their
proportionate share of the PPT obligations attributable to the Contract Area.
8. The Parties hereby expressly agree that nothing in tins FGN Resolution Agreement shall be taken as
an admission by FGN, or any of its agents and authorities, including NNPC, of the possibility that
either SNEPCO or NAE acting in their respective capacities as Contractor’ (as such term is defined),
under existing production sharing contracts with NNPC are engaged in Petroleum Operations, nor
can it be cited in any ongoing arbitral proceedings between NAE’, SNEPCO and any of the agencies
of FGN in respect of such existing production sharing contracts between NAE, SNEPCO and
9. FGN confirms that all sums reimbursed to SNUD by SNEPCO under Clause 1.1 (ii) above is
expenditures on mineral assets, being the acquisition of petroleum deposits or rights in or over such
deposits and information relating to the extent of such deposits, and is incurred wholly, exclusively,
necessarily and reasonably for the purposes of petroleum operations in Block 245 and shall be treated
accordingly for the purposes of the laws listed in the First Schedule to the Federal Inland Revenue
(Establishment) Act 2007, and as such each of NAE and SNEPCO shall be entitled to treat the sums
referred to in Clause 1.1 (ii) above in accordance with their participating interest in the Block 245 when
calculating PPT and pursuant to the PSC Act.
10. FGN hereby grants full and unconditional exemption from any obligations and liabilities in respect of
capital gains tax, taxes on income, withholding taxes and Value Added Tax in respect of the
transactions and payments mentioned in Clause 1 arising from or relating to this FGN Resolution
Agreement. Norwithstanding the foregoing and without prejudice to the position of FGN and NNPC,
NAE and SNEPCO shall not be precluded from presenting a claim for any allowances applicable by
law on die amount of Signature Bonus to FIRS in the normal course.
11 The Parties enter into this Agreement on the understanding that NAE and SNEPCO and/or their
permitted assigns shall be sole and exclusive owners of Block 245 for the duration of the Oil.
Prospecting Licence and any OML derived therefrom, including any renewals allowed by law.
Notwithstanding the foregoing, if at any time FGN and/or its relevant agencies and institutions
decides by law to participate or acquire any interest tn the Oil Prospecting license or any OML for
Block 245 issued pursuant to this FGN Resolution .Agreement, the FGN undertakes to NAE and
(i) the participation of the FGN and/or its relevant agencies and institutions shall be exercised
by way of acquiring not more than fifty (50%) percent interest under the Oil Prospecting
licence or relevant oil mining lease subject to the payment bv FGN to NAE and SNEPCO
of the cost of the latters’ acquisition of Block 245 which shall be an amount equal to the
proportionate share relative to the interest acquired by the FGN and/or its relevant
agencies and institutions of the sums paid by NAE and SNEPCO under Clauses 2 and 3 of
this FGN Resolution Agreement net of any taxes, levies or other duties whatsoever; plus
accrued interest as agreed by the relevant parties; and
(ii) the FGN and/or its relevant agencies and institutions shall enter into a production sharing
contract with NAE and SNEPCO as Contractors for the exclusive conduct of petroleum
Operations m respect of the FGN’s acquired interest in the Block 245 (“FGN PSC”); The
Executi on version
terms of the FGN PSC shall be no less favourable than the terms previously agreed
between. NNPC and SNUD in the agreement referenced m Preamble E; and
fell rhe I'GN’s and/or its relevant agencies and institutions' proportionate share relative to its
acquired interest, or all costs incurred by NAE and SNEPCO in Block 245 from the date of
the grant of the Oil Prospecting Licence, pursuant to Clause 1.3, up to the date of the
acquisition, of interest by FGN and/or its relevant agencies and institutions pursuant to this
Clause 11, shall, be recoverable by NAE and SNEPCO under the FGN PSC.
12. FGN confirms that the terms of this FGN Resolution Agreement have been agreed by all the
appropriate agencies of the FGN including the Ministry of Finance, and the Federal Inland
13 FGN acknowledges that, in entering into this FGN Resolution Agreement, the other Parties have
relied on its express or implied representation and other assurances made by its agents and
representatives before the signature of tins FGN Resolution Agreement regarding the efficacy of
the terms thereof.
14. Tins FGN Resolution Agreement and any agreements executed by the Parties on the date or this
FGN Resolution Agreement or in pursuance thereof, supersede all and any agreement or
arrangement between the Parties or any of them entered into prior to the date of this FGN
Resolution Agreement, either by letter directive, or howsoever relating to Block 245.
15. No amendments, changes or modifications to this FGN Resolution .Agreement shall be valid
except if the same are in writing and. signed by a duly authorised representative ot each of the
1(5. Each of the Parties shall do all such acts and execute and deliver all such documents as shall be
reasonably required in order to fully perform and cany out the terms or this FGN Resolution
17. FGN shall indemnify, save and hold harmless, and defend SNUD, SNEPCO and NAE from and
against all suits, proceedings, claims, demands, losses and liability of any nature or kind, including,
but not limited to, all litigation costs, attorneys’ fees, settlement payments, damages, and all other
related costs and expenses, based on, arising out of, related to, or in connection with: (i) tins FGN
Resolution Agreement, (ii) the Resolution Agreements and/or (iii) the issuance of the Oil
Prospecting licence in respect of Block 245 jointly in the name of SNEPCO and NAE, and arising
out of any asserted prior interest in Block 245.
18. Each Party agrees that they and their employees, agents, agencies, subsidiaries, and attorneys will
keep confidential at all times, this Agreement, the terms thereof, and the discussions or negotiations
that led to the Agreement, except to the extent required by law or any competent regulatory body.
19.1 “Affiliate” means: a company which, directly or indirectly through one or more intermediaries,
controls or is controlled by, or is under common control with a Party. For this purpose control
means the direct or indirect ownership of in aggregate fifty percent (50%) or more of the voting
19.2 “Business Day” shall mean a day other than Saturday, Sundays and public holidays, on which banks
are open for business in Nigeria
19.3 “Clause” means a clause of this Resolution Agreement.
19.4 “Execution Date” means the date first written in this Resolution Agreement; being the date on
which all Parties to this Resolution Agreement execute this Resolution Agreement.
1.9.5 “PSA” means the production sharing agreement to be entered into between NAE and SNEPCO
for the conduct of Petroleum Operations in respect of OPL 245 pursuant to tins Agreement.
19.5 “Signature Bonus” means the sum referred to in Clause 2(i) of this Resolution Agreement.
SIGNED AND AGREED the day and year first above written.
For and <|n Behalf of the FEDERAL GOVERNMENT OF NIGERIA:
THE HON. ATTORNEY GENERAL OF THE FEDERATION
AND MINISTER OF JUSTICE.
’ ------.......Ah ‘.......
THE HON. MINISTER OF PETROLEUM RESOURCES
I \/>- mmA ‘A**’ ’
THE HObLllINjgTER O
The COMMON SEAL of NIGERIAN AGIP EXPLORATION LIMITED was affixed to this
Resolution Agreement and was duly delivered in. the presence of:
The COMMON SEAL of SHELL NIGERIA ULTRA-DEEP LIMITED was affixed to this FGN
Resolution Agreement and was duly delivered in the presence of:
The COMMON SEAL of SHELL NIGERIA EXPLORATION AND PRODUCTION
COMPANY LIMITED was affixed to this FGN .Resolution Agreement and was duly delivered in the
The COMMON SEAL of NIGERIAN NATIONAL PETROLEUM CORPORATION was affixed
to this FGN Resolution Agreement and was duly delivered in the presence of:
GROUP MANAGING DIRECTOR COMP. ■CRETAR.Y/LEGAL ADVISEtt
SCHEDULE I - PRO-FORMA NOTICE TO JP MORGAN CHASE BANK
JP Morgan Chase Bank
9Thomas Moore Street
London El W IYT
ATTENTION: Institutional Trust Services - Escrow Administration
We refer to the Escrow Agreement dated 22nd December 2003 between The Government of the
Federal Republic of Nigeria (FGN), Shell Nigeria Ultra Deep Limited (Shell) and JPMorgan Chase
Bank (the "Escrow Agreement"). Words and expressions used in this letter shall have the same
meanings as in the Escrow Agreement.
This is to notify the Escrow Agent in accordance with Clause 10.1 of the Escrow Agreement that FGN
and Shell have agreed to terminate the Escrow7 Agreement.
You are hereby instructed to release the sum of two hundred and seven million, nine hundred and sixty
thousand US dollars (US $207,960,000 million) out of the Escrow Funds into the FGN Receiving
Account on the date you receive from the FGN, a copy of the attached Block 245 Resolution
Agreement duly initialed and signed by all the parties therein; and you are further instructed to pay the
balance thereof outstanding in the Escrow Account into the Shell Receiving Account.
Upon the satisfaction of the conditions and instructions stated above and the Escrow Fund is zero. FGN
and Shell irrevocably instructs the Escrow Agent to close the Escrow Account.
Consequently the Escrow Agreement shall terminate on the date of closure of the Escrow Account but
no later than the-------------- day of ------■--------------------------2011 .
DATED THIS.........day of.................... 2011
SIGNED AND AGREED the day and year first above written.
For and on Behalf of the FEDERAL GOVERNMENT OF NIGERIA:
ACCOUNTANT GENERAL OF THE FEDERATION
For and on Behalf of SHELL NIGERIA ULTRA DEEP LIMTED:
PRO-FORMA ESCROW AGREEMENT NO.2