The term of this license shall be either 30 years commencing from the effective date or for the duration of production from the contract area, whichever shall be earlier (in addition to the 7 year exploration period).
At the end of the term provided for above, provided that this license has not earlier been terminated, the parties may negotiate concerning the terms and conditions of a further license.
Environmental impact assessment and management plan
The authorization to flare marginal or small deposits of natural gas may only be granted on submission of a duly substantiated technical and economic and environmental impact evaluation report evidencing that it is not feasible to exploit or preserve the natural gas.
The development plan shall include: the necessary measures to be taken for the protection of the environment.
Company shall provide an effective and safe system for disposal of water and waste oil, oil base mud and cuttings in accordance with accepted petroleum industry practice, and shall provide for the safe completion or abandonment of all boreholes and wells.
Company shall exercise its rights and carry out its responsibilities under this contract in accordance with accepted petroleum industry practice, and shall take steps in such manner as to:
(a) Result in minimum ecological damage or destruction;
(b) Control the flow and prevent the escape or the avoidable waste of petroleum discovered in or produced from the contract area;
(c) Prevent damage to petroleum-bearing strata;
(d) Prevent the entrance of water through boreholes and wells to petroleum bearing strata, except for the purpose of secondary recovery;
(e) Prevent damage to onshore lands and to trees, crops, buildings or other structures;
(f) Prevent damage to marine life and fishing activities in offshore operations; and
(g) Avoid any actions, which would endanger the health or safety of persons.
Company shall maintain, at its offices in Sierra Leone, books of account and supporting records in the manner required by applicable law and accepted accounting principles generally used in the petroleum industry and shall file reports, tax returns and any other documents and any other financial returns which are required by applicable law.
In addition to the books and reports required above, company shall maintain, at its office in Sierra Leone, a set of accounts and records relating to petroleum operations under this license. Such accounts shall be kept in accordance with the requirements of the applicable law and accepted accounting principles generally used in the industry.
Company will provide the government with quarterly summaries of the petroleum costs incurred under this license.
The government shall review all financial statements submitted by the company as required by this license, and shall signify its provisional approval or disapproval of such statements in writing within 90 days of receipt, failing which the financial statements as submitted by company shall be deemed approved by the government.
The government shall have the right at its sole expense and upon giving reasonable notice in writing to company to audit the books and accounts of company relating to petroleum operations within 2 years from the submission by company of any report of financial statement. The government shall not, in carrying out such audit, interfere unreasonably with the conduct of petroleum operations. Any such audit shall be completed within 9 months after commencement.
Company shall provide all necessary facilities for auditors including working space and access to all relevant personnel, records, files and other materials.
Subject to any adjustments resulting from such audits, company’s accounts and financial statements shall be considered to be correct on expiry of a period of 2 years from the date of their submission unless before the expiry of such 2 year period the government has notified company of any exceptions to such accounts and statements.
Company shall pay to the government as a signature bonus the sum of US$ [X] on the effective date.
The company shall pay to the government as a development bonus the sum of US$ [X] on the date of the approval of each commercial development.
The company shall pay to the government the sum of US$ [X] as a lease extension bonus on the approval date of entry into any of the extension periods, or on the extension of any period pursuant to the relevant provisions of this contract.
The company shall pay to the government as an assignment fee on the date of approval of each assignment requested by any of the entities constituting the company to any assignee in accordance with the relevant provisions of this contract, in the following cases:
a) During any exploration period, in case company assigns in whole or in part of it’s rights, privileges, duties and obligations to any assignee other than an affiliate company of the same company, company shall pay to the government the sum equivalent to 10%, valued in US dollars, of the total financial commitment of the exploration phase during which the assignment is made and according to the assigned percentage (or an assignment fee of US$ 750,000).
b) During any development or production period, in case company assigns in whole or in part of its rights, privileges, duties and obligations to any assignee other than an affiliate company of the same company or member, company shall pay to the government the sum of 10%, valued in US dollars, of the value of each assignment deal which could be any of the following:
- The financial value to be paid by the assignee to the assignor; or
- The financial value of shares or stocks to be exchanged between the assignor and the assignee; or
- The financial commitments for technical programs; or
- The financial value of the reserves, to be swapped between the assignor and the assignee from the development areas; or
- Any other type of deal to be declared (or an assignment fee of US$ 1,500,000)
c) In case of an assignment to an affiliate company of any of the entities constituting the company during any exploration or development phase; company shall pay to the government the sum of US$ 500,000.
Company shall pay to the government the sum of US$ [X] as a production bonus when the total average daily production from the area first reaches the rate of 5,000 barrels of oil or equivalent per day as for a period of 30 consecutive producing days. Payment shall be made within 15 days thereafter.
Company shall also pay to the government the additional sum of US$ [X] as a production bonus when the total average daily production from the area first reaches the rate of 10,000 barrels of oil or equivalent per day for a period of 30 consecutive producing days. Payment shall be made within 15 days thereafter.
Company shall also pay to the government the additional sum of US$ [X] as a production bonus when the total average daily production from the Area first reaches the rate of 25,000 barrels of oil or equivalent per day for a period of 30 consecutive producing days. Payment will be made within 15 days thereafter.
Company shall also pay to the government the additional sum of US$ [X] as a production bonus when the total average daily production from the area first reaches the rate of 50 000 barrels of oil or equivalent per day for a period of 30 consecutive producing days. Payment shall be made within 15 days thereafter.
The rate of capital allowances shall be in accordance with the Income Tax Act 2000; i.e.
- 100% for exploration costs.
- For development and production, an annual allowance of 25% for 4 years succeeding the year of expenditure.
A loss in any year of assessment may be carried forward as a deduction against income of the subsequent year of assessment.
Restrictions on transactions with affiliated parties
Sales in arm’s length commercial transactions shall mean sales to purchasers independent of the seller, which do not involve crude oil exchange or barter transactions, government to government transaction, sales directly or indirectly to affiliates, or sales involving consideration other than payment in US dollars or currencies convertible to same, or affected in whole or in part by considerations other than the usual economic incentives for commercial arm’s length crude oil sales.
The rate of royalty for oil production shall be 12% and shall be delivered to the government as royalty pursuant to the provisions of the Petroleum Act.
The government shall have a 10% free carried interest with respect to all production operations.
In addition to the initial interest provided for, the government shall have the option in respect of each development and production area to contribute a proportionate share not exceeding [X]% of all development and production costs in respect of such development and production area, (or make arrangements satisfactory to the company to that effect) therefore acquiring an additional interest of up to [X]% in petroleum operations in such development and production area.
The government shall notify company of its option within 90 days of the date of commercial discovery.
If the government opts to take an additional interest then within 6 months of its election, the government shall reimburse licensee for all expenditure attributable to the government’s additional interest and incurred from the date of commercial discovery to the date the government notifies the company of its election.
Company shall be required to employ Sierra Leone citizens in all categories and functions, except if there are no Sierra Leone citizens in the national market with the required qualifications and experience, under terms to be regulated.
The company shall prepare in respect of each year a local employment statement, containing the following information:
a. the number of Sierra Leoneans employed by the company directly, or indirectly through its subcontractors, their level within the organization and their salary scale;
b. the mean salary of foreign employees hired by the company directly, or indirectly through its subcontractors, on at the same levels as the Sierra Leonean workers;
c. the percentage that the number of Sierra Leoneans employed by company or subcontractor represent of the total number of company and subcontractors’s employees respectively;
d. the percentage that the total salaries of Sierra Leoneans employed under items (a) above represents of the company and subcontractor’s total salaries;
e. a detailed description of the procedures adopted during the year to identify and purchase goods and services from Indian suppliers; and
f. a detailed exposition of how the number of new Sierra Leoneans hired and trained for the year compared with the projected recruitment for that year and how the total number of Sierra Leoneans employed compared with the previous two years, with explanations for any significant variations.
The local procurement statement shall be submitted to the government within 60 days after the end of each year.
In the acquisition of plant, equipment, services and supplies for petroleum operations, the company shall give preference to materials, services and products produced in Sierra Leone, of the same or approximate quality, if such materials, services and products can be supplied in due time at prices, which are no more than 10% higher than the imported items including transportation, insurance costs and customs charges due. Sierra Leonean companies shall be mandatorily consulted on the same terms as those used for consulting companies on the international market.
The company shall always contract local service providers, to the extent to which the services they provide are similar to those available on the international market, and their prices, when subject to the same tax charges, are no more than ten percent higher than the prices charged by foreign contractors for similar services.
The company shall prepare in respect of each year a local procurement statement, containing the following information:
a. The amount of expenditure incurred by the company directly, or indirectly through its subcontractors, on goods supplied, produced or manufactured in Sierra Leone;
b. the amount of expenditure incurred by the company directly, or indirectly through its subcontractors, on services provided by Sierra Leonean entities;
c. the respective percentages that the expenditures recorded under items (a) and (b) above represent of the company’s total expenditures;
d. a detailed description of the procedures adopted during the year to identify and purchase goods and services from Sierra Leonean suppliers; and
e. a detailed exposition of how the local purchases for the year as recorded under items (a) and (b) above compared with the projected purchases included in the budget statement for that year, with explanations for any significant variations.
The local procurement statement shall be submitted to the government within 60 days after the end of each year.
Company shall pay to the government the sum of US$ 200,000 every year from the effective date during the exploration and development period, and US$ 500,000 for each contract year during the production period.
The government may use this money at its sole discretion to train Sierra Leonean personnel and transfer the management and technical skills required for the efficient conduct of petroleum operations, and for other general and educational training purposes.
This sum shall be paid to the government on the effective date, and at the latest, on January 15th each calendar year thereafter and shall not be prorated.
Company shall, if so requested by the government, provide opportunities for a mutually agreed number of employees nominated by the government to be seconded for on-the-job training or attachment to all phases of its petroleum operations under a mutually agreed secondment contract.
Company shall regularly provide to the government information and data relating to worldwide petroleum science and technology, petroleum economics and engineering available to the company.
The company has the right to use public lands in accordance with existing law for installation and operation of shore bases, and terminals, harbors and related facilities, pipelines from fields to terminals and delivery facilities, camps and other housing. The company also has the right to receive licenses and permission to install and operate such communications and transportation facilities as shall be necessary for the efficiency of its operations.
The development plan shall include:
Company’s proposals relating to the spacing, drilling and completion of wells, the production, storage, transportation and delivery facilities required for the production, storage, transportation of the petroleum, including without limitation:
i) the estimated number, size and production capacity of production platforms if any;
ii) the estimated number of production wells;
iii) the particulars of feasible alternatives for transportation of the petroleum, including pipelines;
iv) the particulars of onshore installations required, including the type and specifications or size of same; and
v) the particulars of other technical equipment required for the operations.
Company shall keep the government regularly and fully informed of operations being carried out by company and provide the government with all information, data, (film, paper, digital forms and magnetic tapes), samples, interpretations and reports (including progress and completion reports).
The natural gas produced from any petroleum deposit shall be exploited, and flaring of the same is expressly forbidden, except flaring for short periods of time when required for purpose of testing or other safety reasons. In the case of marginal or small deposits, the government may authorize the
flaring of associated gas in order to make its exploitation viable.
In the event that crude oil available to the government is insufficient to fulfill the domestic supply requirements, the company shall be obliged together with any third parties which produce crude oil in Sierra Leone, to supply a volume of crude oil to be used for such domestic supply requirements.
The government shall take all necessary and possible steps to facilitate the implementation by the company of the objectives of this license, and to protect the property and operations of the company, its employees and agents in the territory of Sierra Leone.
Initial exploration period (3 years): commencing on the effective date and terminating at the end of the [X] contract year.
i. Description of work: acquisition of 2D and 3D data from TGS-NOPEC. Acquisition of at least 2000 line kilometer of 2D and 2500 square kilometer of 3D seismic where not available at TGS-NOPEC
ii. Process and interpret data and drill at least 1 exploration well
iii. Minimum expenditure: minimum expenditure for the initial shall be US$ 20 million
First extension period: commencing at the end of the initial exploration period and terminating at the end of the [X] of contract period
i. Description of work: drill appraisal where deemed necessary
ii. Reinterpret or reprocess the seismic data and drill at least 1 exploration well
iii. Minimum expenditure: minimum expenditure for the second extension period shall be US$ 120 million
Second extension period: commencing at the end of the first extension and terminating at the end of seventh year of contract period
i. Description of work: acquire process and interpret 1,500 square kilometer of 3D seismic
ii. Drill one exploration well and 3 additional wells contingent upon a commercial discovery
iii. Minimum expenditure: minimum expenditure for work in the second extension period shall be US$ 120 million
Work and expenditures accomplished in any period in excess of the above obligation may be applied as credit in satisfaction of obligations called for in any other period. The fulfillment of any work obligation shall relieve company of the corresponding minimum expenditure obligation, but the fulfillment of any minimum expenditure obligation shall not relieve company of the corresponding work obligation.
Within 60 days of the effective date of any exploration period, the company shall deliver to the government a performance security in the form of an unconditional and irrevocable bank guarantee in the amount of the minimum expenditure for that period.
Any dispute or difference arising between the government on one hand and company on the other in relation to or in connection with or arising out of any terms and conditions of this license shall be resolved by consultation and negotiation.
In the event that no agreement is reached within 30 days after the date when either party notifies the other that a dispute or difference exists, any party shall have the right to have such dispute or difference settled through international arbitration under the rules and procedures and under the auspices of UNCITRAL/ICSID.
The tribunal shall consist of 3 arbitrators. The arbitration proceedings shall be conducted in London, England, or at such other location as selected by the arbitrators unanimously.
The proceedings shall be conducted in the English language.
The award of the tribunal shall be final and binding upon the parties. The award may be submitted to a court of appropriate jurisdiction to implement as a judicial decree.
The right to arbitrate disputes arising out of this license shall survive the termination of this license.
In lieu of resorting to arbitration, the parties to a dispute arising under this contract, including the accounting guide, which such parties by mutual agreement may consider appropriate may be referred for determination by a sole expert to be appointed by agreement of the parties.
The decision of the sole expert shall be final and binding upon the parties.
All data, information, reports and statistics including interpretation and analysis supplied by company pursuant to this license shall be treated as confidential and shall not be disclosed by any party to any other person without the express written consent of the other parties during the life of this license.
The provisions of this article shall not prevent disclosure:
By the government:
(i) To any agency of the government or to any adviser or consultant to the government;
(ii) For the purpose of obtaining a petroleum license in respect of any acreage adjacent to the contract area; or
(iii) For the purpose of complying with the state’s international obligations for the submission of statistics and related data.
By company:
(i) to its affiliates, advisers or consultants;
(ii) to a bona fide potential assignee of all or part of company’s interest;
(iii) to banks or other lending institutions for the purpose of seeking external financing of costs of the petroleum operations;
(iv) to non-affiliates who shall provide services for the petroleum operations, including subcontractors, vendors and other service contractors, where this is essential for their provision of such services;
(v) to governmental agencies for obtaining necessary rulings, permits, licenses and approvals, or as may be required by applicable law or financial stock exchange, accounting or reporting practices.
Any party disclosing information or providing data to any third party under this article shall require such persons to undertake the confidentiality of such data.
The bank guarantee shall be governed and construed in accordance with Sierra Leone Laws and subject to the exclusive jurisdiction of Sierra Leone courts
It is recognized by company and the government that the details of the exploration plan and development forecast may require changes in the light of existing circumstances and nothing herein contained shall limit the flexibility to make such changes. Consistent with that the plan and forecast may be revised annually.