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 Among











THE REPUBLIC OF GHANA














HrpuhlU n| CihAXvi











GHANA NATIONAL PETROLEUM CORPORATION


























And











HELICONIA ENERGY GHANA LIMITED








Heliconia Energy





Ghana Limited








IN RESPECT OF BLOCKS


OFFSHORE CAPE THREE POINTS BASIN, GHANA





DATE:


 Among














The Republic of Ghana














Ghana National Petroleum Corporation














And














Heliconia Energy Ghana Limited

















In Respect of Blocks


Offshore Cape Three Points




















Date:


 TABLE OF CONTENTS





ARTICLE PAGE


1. DEFINITIONS 2


2 SCOPE OF THE AGREEMENT, INTERESTS


OF THE PARTIES AND CONTRACT AREA 8


3. EXPLORATION PERIOD 11





4. MINIMUM EXPLORATION PROGRAMME 14


5. RELINQUISHMENT 18


6. JOINT MANAGEMENT COMMITTEE 19


7. RIGHTS AND OBLIGATIONS OF CONTRACTOR


AND GNPC 23


8. COMMERCIALLY 26


9. SOLE RISK ACCOUNT 31


10. SHARING OF CRUDE OIL 34


11. MEASUREMENT AND PRICING OF CRUDE OIL 42


12. TAXATION AND OTHER IMPOSTS 45


13. FOREIGN EXCHANGE TRANSACTIONS 48


14. SPECIAL PROVISIONS FOR NATURAL GAS 50


15. DOMESTIC SUPPLY REQUIREMENT (CRUDE OIL) 57





16. INFORMATION AND REPORTS: CONFIDENTIALITY 58


17. INSPECTION. SAFETY AND ENVIRONMENTAL


PROTECTION 61


ACCOUNTING AND AUDITING 63





TITLE TO AND CONTROL OF GOODS AND EQUIPMENT 65


PURCHASING AND PROCUREMENT 67


ARTICLE PAGE


21. EMPLOYMENT AND TRAINING 68


22. FORCE MAJEURE 70


23. TERM AND TERMINATION 71


24. CONSULTATION. ARBITRATION AND 74


INDEPENDENT EXPERT


25. ASSIGNMENT 76


26. MISCELLANEOUS 77


27. NOTICE 80


-3ft "3]






















































































Peholeum Agreemertl, MO&GNP&Heliconia


 ANNEXES








ANNEX PAGE





CONTRACT AREA


1 1








2 ACCOUNTING GUIDE 2











SECTION 1


1.1 GENERAL PROVISIONS 3


1.2 STATEMENTS REQUIRED TO BE SUBMITTED 3


BY CONTRACTOR


1.3 LANGUAGE, MEASUREMENT AND UNITS OF ACCOUNTS 4








SECTION 2


2.0 CLASSIFICATION AND ALLOTMENT OF COSTS 6


AND EXPENDITURE


EXPLORATION EXPENDITURE


2.2 6


2.3 DEVELOPMENT EXPENDITURE 7


2.4 PRODUCTION EXPENDITURE 7


2.5 SERVICE COSTS 8


2.6 GENERAL AND ADMINISTRATIVE EXPENSES 8








SECTION 3


3.0 COSTS, EXPENSES, EXPENDITURES AND


CREDITS OF CONTRACTOR 9


3.2 COST OF ACQUIRING SURFACE RIGHTS


AND RELINQUISHMENT 9


3.3 LABOUR AND ASSOCIATED LABOUR COSTS 9


3.4 TRANSPORTATION COSTS


10


3.5 CHARGES FOR SERVICES 10


3.6 RENTALS, DUTIES AND OTHER ASSESSMENTS 11


3.7 INSURANCE AND LOSSES 11


3.8 LEGAL EXPENSES 11


3.9 TRAINING COSTS AND THE TECHNOLOGY





SUPPORT PAYMENT 11


3.10 GENERAL AND ADMINISTRATIVE EXPENSES 11


3.11 UTILITY COSTS 12


312 OFFICE FACILITY CHARGES 12


3.13 COMMUNICATION CHARGES


12


3,14 ECOLOGICAL AND ENVIRONMENTAL CHARGES 12


3.15 ABANDONMENT COST 12


3.16 OTHER COSTS 12


3,17 COSTS NOT ALLOWABLE UNDER THE AGREEMENT 12


3.18 ALLOWABLE AND DEDUCTIBILITY 1.3





3.19 CREDITS UNDER THE AGREEMENT 13


3.20 DUPLICATION OF CHARGES AND CREDITS 14





























iu


Peuvleuni Agrooment. MOE/GNPCSHekcanta


 ANNEX PAGE





SECTION 4 .


4.0 MATERIAL 15


4.1 VALUE OF MATERIAL CHARGED TO THE


ACCOUNTS UNDER THE AGREEMENT 15


42 VALUE OF MATERIAL PURCHASED FROM AFFILIATE 15


4.3 CLASSIFICATION OF MATERIALS 16


4.4 DISPOSAL OF MATERIALS 16


4.5 WARRANTY OF MATERIALS 16


4.6 CONTROLLABLE MATERIALS 16


SECTION 5


5.0 CASH CALL STATEMENT 17


SECTION 6


6.0 PRODUCTION STATEMENT 18


SECTION 7 VALUE OF PRODUCTION STATEMENT 19


7,0


SECTION 8


8.0 COST STATEMENT 20


SECTION 9 STATEMENT OF EXPENDITURES AND RECEIPTS 21


9.0


SECTION 10


10.0 FINAL END-OF-YEAR STATEMENT 22


SECTION 11


11.0 BUDGET STATEMENT 23


SECTION 12 LONG RANGE PLAN AND FORECAST 24


12.0


12.2 CHANGES OF PLAN AND FORECAST 25
































_________ ft


Petroleum Agreement. MQE/GNPC/Heltconia


THIS PETROLEUM AGREEMENT, made this ........ day of


............................................ 2005 by and among the Government of the Republic of


Ghana (hereinafter referred to as "The State"), represented by the Minister of Energy


(hereinafter referred to as the “Minister"), the Ghana National Petroleum Corporation, a


public corporation established by Provisional National Defence Council I^w 64 of 1983


(hereinafter referred to as “GNPC"), and Heliconia Energy Ghana Limited, a wholly


owned subsidiary of Atlantic Energy Bermuda Limited, with registered address at No.


5, 2nd West Street, West Airport Residential Area. Accra, Ghana and (hereinafter


referred to as "Contractor")


WITNESSETH:


1. All Petroleum existing in its natural state within Ghana is the properly of the


Republic of Ghana and held in trust by the State.


2. GNPC has by virtue of the Petroleum Law the right to undertake Exploration,


Development and Production of Petroleum over all blocks declared by the


Minister to be open for Petroleum Operations.


3. GNPC is further authorised to enter into association by means of a Petroleum


Agreement with a contractor for the purpose of Exploration, Development and


Production of Petroleum.


4. The Contract Area that is the subject matter of this Petroleum Agreement has


been declared open for Petroleum Operations by the Minister and the


Government of Ghana desires to encourage and promote Exploration,


Development and Production within the said area. GNPC and the State have


assured Contractor that all of said area is within the jurisdiction of Ghana.


5. Contractor, having the financial ability, technical competence and professional


skills necessary for carrying out the Petroleum Operations herein described,


desires to associate with GNPC in the Exploration for, and Development and


Production of, the Petroleum resources of the said area.


6. The Parties recognise that Ghanaian nationals should as soon as reasonably


possible be engaged in employment at all levels in the Petroleum industry,


including technical, administrative and managerial positions, and that to


achieve this objective an adequate programme of training must be established


as an integral part of this Agreement.





NOW THEREFORE, in consideration of the mutual covenants herein contained, it is


hereby agreed and declared as follows:


 ARTICLE 1








DEFINITIONS


1. In this Agreement:


1.1 “Accounting Guide” means the accounting guide which is attached hereto as


Annex 2 and made a part hereof;


1.2 “Additional Interest” means the additional interest of GNPC provided for in


Article 2.5;


1.3 “Additional Interest Costs” has the meaning given to it in Article 2.9,


1.4 “Additional interest Funding” has the meaning given to it in Article 2.10;


1.5 “Affiliate” means any person, whether a natural person, corporation,


partnership, unincorporated association or other entity:


a) in which one of the Parties hereto or one of the companies comprising


Contractor directly or indirectly hold more than fifty percent (50%) of the


share capital or voting rights;


b) which holds directly or indirectly more than fifty percent (50%) of the


share capital or voting rights in a Party hereto or one of the companies


comprising Contractor,


c) in which the share capital or voting rights are directly or indirectly and to


an extent more than fifty percent (50%) held by a company or companies


holding directly or indirectly more than fifty percent (50%) of the share


capital or voting rights in a Party hereto; or


d) which holds directly five percent (5%) or more of the share capital or


voting rights in Contractor.


1.6 “Agreement" means this Agreement between the State, GNPC and Contractor,


and includes the Annexes attached hereto and any agreed revisions thereto;


1.7 “Appraisal Programme” means a programme which may include extended well


testing carried out following a Discovery of Petroleum for the purpose of


delineating the accumulation or accumulations including extended well testing


of Petroleum to which that Discovery relates in terms of thickness and lateral


extent and estimating the quantity of recoverable Petroleum therein: __














Petroleum Agreement. MO&GUPC'Heliconta 2


1.8 "Appraisal Well" means a well drilled for the purposes of an Appraisal


Programme;


1.9 “Associated Gas” means Natural Gas produced from a well in association with


Crude Oil:


1.10 “Barrel1’ means a quantity or unit of Crude Oil equal to forty-two (42) United


Slates gallons at a temperature of sixty (60) degrees Fahrenheit and at 14.65


psia pressure.


1.11 “Block” means an area of approximately 685 square kilometres as depicted on


the reference map prepared by the Minister in accordance with the provisions of


the Petroleum Law;


1.12 “Calendar Year” means the period of twelve (12) months of the Gregorian


calendar, commencing on January 1 and ending on the succeeding December


31;





1.13 “Carried Interest" means an interest held by GNPC in respect of which


Contractor pays for the conduct of Petroleum Operations without any


entitlement to reimbursement from GNPC;





1.14 “Commercial Discovery” means a Discovery which is determined to be


commercial in accordance with the provisions of this Agreement;


1.15 “Commercial Production Period" means in respect of each Development and


Production Area the period from the Date of Commencement of Commercial


Production until the termination of this Agreement or earlier relinquishment of


such Development and Production Area;


1.16 “Contract Area” means the area covered by this Agreement in which Contractor


is authorised to explore for, develop and produce Petroleum, which is described


in Annex 1 attached hereto and made a part of this Agreement, but excluding


any portions of such area in respect of which Contractor’s rights hereunder arc


from time to time relinquished or surrendered pursuant to this Agreement;


1.17 “Contractor” means Heliconia Energy Ghana Limited and its respective-


successors and assignees.


1.18 “Contract Year" means a period of twelve (12) calendar months, commencing


on the Effective Date or any anniversary thereof;


1.19 “Crude Oil” means hydrocarbons which are liquid at 14.65 psia pressure and


sixty (60) degrees Fahrenheit and includes condensates and distillates obtained


from Natural Gas;





1.20 “Date of Commencement of Commercial Production" means, in respect of each


Development and Production Area, ihe date on which production of Petroleum


under a programme of regular production, lifting and sale commences;


Date of Commercial Discovery" means the date referred to in Article 8.12;











Petroleum Agreement. MOB'CNPC/Heliconia 3





1.22 "Deepwater"* means water depths in excess of 400 metres;


1.23 “Development” or “Development Operations” means the preparation of a


Development Plan, the building and installation of facilities for Production, and


includes drilling of Development Wells, construction and installation of


equipment, pipelines, facilities, plants and systems, in and outside the Contract


Area, which are required for achieving Production, treatment, transport, storage


and lifting of Petroleum, and preliminary Production and testing activities


carried out prior to the Date of Commencement of Commercial Production, and


includes all related planning and administrative work, and may also include the


construction and installation of secondary and tertiary recovery systems;


1.24 “Development Costs” means Petroleum Costs incurred in Development


Operations;


1.25 “Development and Production Area” means that portion of the Contract Area


reasonably determined by Contractor (or by GNPC if a Sole Risk Operation


pursuant to Article 9) on the basis of the available seismic and well data to


cover the areal extent of an accumulation or accumulations of Petroleum


constituting a Commercial Discovery, enlarged in area by ten percent (10%),


such enlargement to extend uniformly around the perimeter of such


accumulation (or accumulations);


1.26 “Development Period” means in respect of each Development and Production


Area, the period from the Date of Commercial Discovery until the Date of


Commencement of Commercial Production;


1.27 “Development Plan” means the plan for development of a Commercial


Discovery prepared by Contractor in consultation with the Joint Management


Committee and approved by the Minister pursuant to Article 8:


1.28 “Development Well” means a well drilled in accordance with a Development


Plan for producing Petroleum, for pressure maintenance or for increasing the


Production rate;


1.29 “Discovery” means finding during Exploration Operations an accumulation or


accumulations of Petroleum which, until that finding, was not a Discovery and


which can be, and is/are recovered at the surface in a flow measurable by


conventional petroleum industry testing methods;


1.30 “Discovery Area” means that portion of the Contract Area, reasonably


determined by Contractor (or by GNPC if there is a Sole Risk operation


pursuant to Article 9) on the basis of the available seismic and well data to


cover the areal extent of the geological structure in which a Discovery is made.


A Discovery Area may be modified at any time by Contractor (or by GNPC if


applicable), if justified on the basis of new information, but may not be


modified after the date of completion of the Appraisal Programme.


1.31 “Effective Date” shall have the meaning ascribed to it in Article 26.8;











Petroleum Agreement, MOE'GNPC/Hehcoma 4


1.32 “Exploration” or “Exploration Operations” means the search for Petroleum by


geological, geophysical and other methods and the drilling of Exploration


Well(s) and includes any activity in connection therewith or in preparation


thereof and any relevant processing and appraisal work, including technical and


economic feasibility studies, that may be carried out to determine whether a


Discovery of Petroleum constitutes a Commercial Discovery:


1.33 “Exploration Period” means the period commencing on the Effective Date and


continuing during the time provided for in Article 3.1 within which Contractor


is authorised to carry out Exploration Operations and shall include any periods


of extensions provided for in this Agreement, flic period shall terminate with


respect to any Discovery Area on the Date of Commercial Discovery in respect


of such Discovery Area;


1.34 “Exploration Well” means a well drilled in the course of Exploration


Operations conducted hereunder during the Exploration Period, but does not


include an Appraisal Well;


1.35 “Force Majeure” means any event beyond the reasonable control of the Party


claiming to be affected by such event which has not been brought about at its


instance, including, but not limited to, earthquake, storm, flood, lightning or


other adverse weather conditions, war, embargo, blockade, riot or civil disorder;


1.36 "Foreign National Employee” means an expatriate employee of Contractor, its


Affiliates, or its Sub-contractors who is not a citizen of Ghana;


1.37 “Ghana” means the territory of the Republic of Ghana and includes the sea.


seabed and subsoil, the continental shelf and all other areas within the


jurisdiction of the Republic of Ghana;


1.38 “Gross Negligence” means any act or failure to act by Contractor which was in


reckless disregard of, or in wanton indifference to, harmful consequences on


the safety of persons and/or on property which the Contractor knew, or should


have known, would result from its act or failure to act;


1.39 “Gross Production” means the total amount of Petroleum produced and saved


from a Development and Production Area during Production Operations which


is not used by Contractor in Petroleum Operations and is available for


distribution to the Parties in accordance with Article 10;


1.40 “Initial Interest” means the interest of GNPC in all Petroleum Operations


provided for in Article 2.4;


1.41 “Joint Management Committee (JMC)” means the committee established


pursuant to Article 6.1 hereof;


1.42 “Market Price” means the market price for Crude Oil delivered to Contractor


under Article 10 or to GNPC under Article 15 of this Agreement, as determined


in accordance with Article 11.7 hereof; A 9TV














Petroleum Agreement. MO&GHPQHeltconta 5


1.43 ‘'Minister" means Minister for Energy;


1.44 “Month” means a month of the Calendar Year


1.45 “Natural Gas’' means all hydrocarbons which are gaseous at 14.65 psia pressure


and sixty (60) degrees Fahrenheit temperature and includes wet gas, dry gas and


residue gas remaining after the extraction of liquid hydrocarbons from wet gas;


1.46 Non-Associated Gas" means Natural Gas produced from a well other than in


association with Crude Oil;


1.47 “Operator" means Heliconia Energy Ghana Limited or such other Party as may


be appointed by Contractor with the approval of GNPC and the State, which


approval shall not be unreasonably withheld.


1.48 “Paid Interest” means an interest held by GNPC in respect of which GNPC


pays for the conduct of Petroleum Operations as expressly provided in Article


2.7;


1.49 “Party” means the State, GNPC or Contractor, as the case may be;


1.50 “Petroleum” means Crude Oil or Natural Gas or a combination of both;


1.51 “Petroleum Costs” means all expenditures made and costs incurred in


conducting Petroleum Operations hereunder determined in accordance with the


Accounting Guide attached hereto as Annex 2;


1.52 “Petroleum Income Tax Law” means the Petroleum Income Tax Law, 1987


(PNDCL 188);


1.53 “Petroleum Law” means the Petroleum (Exploration and Production) Law,


1984 (PNDCL 84);


1.54 “Petroleum Operations” means all activities, both in and outside Ghana, relating


to the Exploration for, Development, Production, handling and transportation of


Petroleum contemplated under this Agreement and includes Exploration


Operations, Development Operations and Production Operations and all


activities in connection therewith;


1.55 “Petroleum Product” means any product derived from Petroleum by any


refining or other process;


1.56 “Production” or “Production Operations” means activities not being


Development Operations undertaken in order to extract, save, treat, measure,


handle, store and transport Petroleum to storage and/or loading points and to


carry out any type of primary and secondary operations, including recycling,


recompression, maintenance of pressure and water flooding and all related


activities such as planning and administrative work and shall also include


maintenance, repair and replacement of facilities, and well workovers,


conducted after the Date of Commencement of Commercial Production of the


respective Development and Production Area; *3 tT'*








Petroleum Agreement. MQ&GNPC/HeHcoma 6





 1 -57 “Production Costs’’ means Petroleum Costs incurred in Production

1-58 “Quarter” means a Calendar Quarter, commencing January I, April 1, July I or


October 1;


1-59 “Sole Expert” means the person appointed to resolve a dispute pursuant to


Article24.8 hereof;


1 -60 “Sole Risk” means an operation conducted at the sole cost, risk and expense of


GNPC referred to in Article 9;


1-61 “Specified Rate” means the rate which the Bank of England, London, certifies


to be the London Interbank offered rate (LIBOR) in the London Interbank


Eurodollar market on thirty (30) day deposits, in effect on the last business day


of the last respective preceding month, plus one per cent (1%);


1-62 “Standard Cubic Foot” or “SCF” means the quantity of gas that occupies one


(1) cubic foot at 14.65 psia pressure and sixty (60) degrees Fahrenheit


temperature;


l63 “State” means the Government of the Republic of Ghana;


1 *64 “Subcontractor” has the meaning assigned to that term in the Petroleum Income


fax Law;


1-65 “Termination” means termination of this Agreement pursuant to Article 23


hereof;


1-66 “Work Programme” means the annual plan for the conduct of Petroleum





Operations prepared pursuant to Articles 6.4 and 6.5. .___


■i t \





















































Petroleum Agreement. MO0GNPC/Hehr.onia 7


 ARTICLE 2








SCOPE OF THE AGREEMENT, INTERESTS OF THE PARTIES


AND CONTRACT AREA


2.1 This Agreement provides for the Exploration for and Development and


Production of Petroleum in the Contract Area by GNPC in association with


Contractor.


2.2 .Subject to the provisions of this Agreement, Contractor shall be responsible for


the execution of such Petroleum Operations as are required by the provisions of


this Agreement and subject to Article 9, is hereby appointed the exclusive entity


to conduct Petroleum Operations in the Contract Area. GNPC shall at all times


participate in the management of Petroleum Operations and in order that the


Parties may cooperate in the implementation of Petroleum Operations GNPC


and Contractor shall establish a Joint Management Committee, to conduct and


manage Petroleum Operations.


2.3 In the event that no Commercial Discovery is made in the Contract Area, or that


Gross Production achieved from the Contract .Area is insufficient fully to


reimburse Contractor in accordance with the terms of this Agreement, then


Contractor shall bear its own loss; GNPC and the State shall have no


obligations whatsoever to Contractor in respect of such loss.


2.4 GNPC shall have a ten percent (10%) Initial Interest in all Petroleum


Operations under this Agreement. With respect to all Exploration and


Development Operations GNPC’s Initial Interest shall be a Carried Interest.


With respect to all Production Operations GNPC’s Initial Interest shall be a


Paid Interest.


2.5 In addition to the Initial Interest provided for in Article 2.4, GNPC shall have


the option in respect of each Development and Production Area to contribute a


proportionate share not exceeding five percent (5%) of all Development and


Production Costs in respect of such Development and Production Area, (or


make arrangements satisfactory to Contractor to that effect) thereby acquiring


an Additional Interest of up to five percent (5%) in Petroleum Operations in


such Development and Production Area. GNPC shall notify Contractor of its


option within ninety (90) days of the Date of Commercial Discovery.


2.6 If GNPC opts to take an Additional Interest as provided for in Article 2.5 then


within six (6) months, GNPC shall reimburse Contractor for all expenditure


attributable to GNPC’s Additional Interest incurred from the Date of


Commercial Discovery to the date GNPC acquires the Additional Interest.


-A '








Petroleum Agreement. MOEtGNPC/Hehcoma 8


GNPC shall so reimburse Contractor as soon as il is reasonably possible after


the date of such acquisition by GNPC.


2.7 For the avoidance of doubt GNPC shall only be liable to contribute to


Petroleum costs:


a) incurred in respect of Development Operations in any Development and


Production Area and to the extent only of any Additional Interest acquired


in such Development and Production Area under Article 2.5; and


b) incurred in respect of Production Operations in any Development and


Production Area both to the extent of:


i) its ten percent (10%) Initial Interest; and


ii) any Additional Interest acquired in such Development and Production


Area under Article 2.5


2.8 GNPC may during the Exploration Period contribute to the seismic and


exploratory drilling programmes as specified in Article 4.3 by providing


relevant services subject to Article 20.3. Upon completion of the work


associated with said contribution, GNPC shall earn credit for the costs incurred


toward its share, if any, of Development Costs, should it elect to hold an


Additional Interest pursuant to Article 2.5 above. Such credit shall carry


interest at the Specified Rate annually from the respective dates such


contributed costs were incurred until they are utilised as credits toward GNPC's


Additional Interest pursuant to Article 2.5 above. If during the Exploration


Period GNPC has earned such credit and if GNPC elects not to hold an


Additional Interest or no Commercial Discovery is made in the Contract Area.


Contractor shall reimburse GNPC in an amount equivalent to the credit within


sixty (60) days following the end of the Exploration Period or Contractor's


relinquishment of the entire Contract Area, whichever first occurs. The actual


amount of any credit earned by GNPC shall be the fair market rates at which


such services could be obtained under freely competitive conditions at the time


they were performed.


2.9 Upon notifying Contractor of its decision to acquire the Additional Interest


pursuant to Article 2.5, GNPC may specify in such notification one or more of


the following:


a) that notwithstanding the provisions in .Article 2.6, GNPC shall reimburse


Contractor in accordance with Article 10.1(d) for all expenditure


attributable to the Additional Interest which has been incurred from the Date


of Commercial Discovery until the date GNPC acquires the Additional











Petroleum Agreement. MODGNPOHehcoma 9


 GNPC’s acquisition of the Additional Interest until the date all the


expenditure (and accrued interest thereon) is reimbursed in full: and/or





b) that Contractor shall fund all or part of GNPC's total proportionate share of


the Development Costs in respect of the Additional Interest as they are


incurred (such share being referred to as the “Additional Interest Costs*’):


and/or


c) that all or part of the credit referred to in Article 2.8 (as specified by GNPC


in the notification) and the applicable interest thereon (together referred to


as the “Credit Amount’’) shall be used to:


i) reduce the amount to be reimbursed to the Contractor pursuant to


Section 2.9(a); or


ii) fund the Additional Interest Costs whether in whole or in part


depending on the monetary value of the credit amount.


2.10 Contractor shall have an obligation to provide the funding for the Additional


Interest Costs minus the credit amount (if any) notified to Contractor pursuant


to Article 2.9(c)(ii). The funding referred to in this Article 2.10 shall carry


interest at the Specified Rate from the date the funding is provided by


Contractor until the date the funding (plus accrued interest thereon) has been


repaid in full to Contractor by GNPC. The funding and interest specified herein


shall be referred to as the “Additional Interest Funding”.


2.11 The aggregate amount of the Additional Interest Funding shall be reimbursed to


Contractor by GNPC in accordance with Article 10. fid).


2.12 Contractor’s participating interest in all Petroleum Operations and in all rights


under this Agreement shall be ninety per cent (90%), reduced proportionately at


any given time and in any given part of the Contract Area by the participating


interest of GNPC pursuant to Article 2.5 or the Sole Risk interest of GNPC


pursuant to Article 9.


2.13 As of the Effective Date, the Contract Area shall cover a total of approximately


2,080 square kilometers as depicted by Annex One and shall from time to time


during the term of this Agreement be reduced according to the terms herein.


During the term of the Agreement, Contractor shall pay rentals to the State for


that area included within the Contract Area at the beginning of each Contract


Year according to the provisions of Article 12.2(v) below. ,--- __




















Petroleum Agreement, MOE/GNPC/Heticonia 10





 ARTICLE 3








EXPLORATION PERIOD


3.1 The Exploration Period shall begin on the Effective Date and shall not cover a


period of more than seven (7) years except as provided for in accordance with


the Petroleum Law.


a) The Exploration Period shall be divided into an Initial Exploration Period


of 3 years ("Initial Exploration Period") and two (2) extension periods of 2


years each (respectively "First Extension Period" and "Second Extension


Period") and where applicable the further periods for which provision is


made hereafter.


b) Where Contractor has fulfilled its work and expenditure obligations set out


in Article 4.3 before the end of the Initial Exploration Period or, as the case


may be, the First Extension Period, and has exercised its option by applying


to the Minister in writing for an extension, the Minister will be deemed to


have granted an extension into the First Extension Period or, as the case


may be. into the Second Extension Period.


c) For each well drilled by Contractor or with Contractor's participation


during the Initial Exploration Period beyond those referred to in Article


4.3, the Initial Exploration Period shall be extended by three (3) months


and the commencement of each subsequent period shall be extended by


three (3) months.


3.2 Following the end of the Second Extension Period, subject to the provisions of


Article 3.4, Contractor will be entitled to an extension or extensions, by


reference to Article 8, of the Exploration Period as follows:


a) Where at the end of the Second Extension Period Contractor is drilling or


testing any well, Contractor shall be entitled to an extension for such


further period as may be reasonably required to enable Contractor to


complete such work and assess the results and, in the event that Contractor


notifies the Minister that the results from any such well show a Discovery


which merits appraisal, Contractor shall be entitled to a further extension


for such period as may be reasonably required to carry' out an Appraisal


Programme and determine whether the Discovery constitutes a Commercial


Discovery;


b) Where at the end of the Second Extension Period Contractor is engaged in


the conduct of an Appraisal Programme in respect of a Discovery which


k >c «0t been completed. Contractor shall be entitled to a further extension


4 tr ^








Petroleum Agreement. MOE/GNPC'Hebconia it





 following the end ot the Second Extension for such period as may he


reasonably required to complete that Appraisal Programme and determine


whether the Discovery constitutes a Commercial Discovery:


c) Where at the end of ihe Second Extension Period Contractor has





undertaken work not falling under paragraphs (a) or (b) which is not


completed. Contractor will be entitled to a further extension following the


end of the Second Extension Period for such period as the Minister


considers reasonable for the purpose of enabling such work to be


completed.





d) Where pursuant to Article 8 Contractor lias before the end of the Second


Extension Period, including extensions under (a), (b) and (c) above, given


to the Minister a notice of Commercial Discovery, Contractor shall, if the


Exploration Period would otherwise have been terminated, be entitled to a


further extension of the Exploration Period in which to prepare the


Development Plan in respect of the Discovery Area to which that


Development Plan relates until either:





i) tiie Minister has approved the Development Plan as set out in Article 8,


or





ii) in the event that the Development Plan is not approved by the Minister


as set out in Article 8 and the matter or matters in issue between the


Minister and Contractor have been referred for resolution under Article


24, one (1) month after the date on which the final decision thereunder


has been given.





3.3 Where Contractor has during the Initial Exploration Period or. as the case may


be, during the First Extension Period failed to fulfill its work and expenditure


obligations under Article 4 in respect of that period but has made reasonable


arrangements to remedy its default during the First Extension Period or, as the


case may be, the Second Extension Period, Contractor shall be entitled to an


extension subject to such reasonable terms and conditions as the Minister may


stipulate to assure performance of the work.


3.4 Save in respect of a Discovery Area:





a) in the circumstances and subject to the limitations set forth in Section 12


(3) of the Petroleum Law; or























Petroleum Agreement. MOE'GNPCSHeliconia 12


 nothing in Article 3.2 shall he read or construed as requiring or permitting the


extension of the Exploration Period beyond seven (7) years from the Effective


Date except for reasons of Force Majeure.


3.5 The provisions of Article 3.2 (a), (b) and (c) so far as they relate to the duration


of the Extension Period to which Contractor will be entitled shall be read and


construed as requiring the Minister to give effect to the provisions of Article 8


relating to the time within which Contractor must meet the requirements of that











V\A&$








































































































13


Petroleum Agreement. MOE/GNPC/Helicoma


 ARTICLE 4





MINIMUM EXPLORATION PROGRAMME


4.1 Exploration Operations shall begin as soon as practicable and in any case not





later than sixty (60) days after the Effective Date


4.2 GNPC shall, at the request of Contractor, make available to it such records and


information relating to the Contract Area as are relevant to the performance of


Exploration Operations by Contractor and are in GNPC’s possession, provided


that Contractor shall reimburse GNPC for the costs reasonably incurred in


procuring or otherwise making such records and information available to


Contractor.


4.3 Subject to the provisions of this Article, in discharge of its obligations to carry


out Exploration Operations in the Contract Area, Contractor shall during the


several phases into which the Exploration Period is divided carry out the work


specified hereinafter:


a) Initial Exploration Period; The Initial Exploration Period shall be the





period commencing on the Effective Date and terminating at the end of the


three (3) Contract Years;


Description of Work: By the end of the Initial Exploration Period,





Contractor, at its own expense, shall have undertaken the following work


described below:


i) Contractor shall acquire, process and interpret a minimum of


eight hundred square kilometers (800 km2) of 3-D seismic data;


ii) Contractor shall drill one (l) Exploration Well in the Contract





Area.


Minimum Expenditure; Contractor’s minimum expenditure for the work


in the Initial Exploration Period shall be seventeen million U.S. Dollars


(US$17,000,000).


b) First Extension Period: Commencing at the end of the Initial Exploration


Period and terminating at the end of two (2) Contract Years thereafter or at


the end of any extension to the First Extension Period pursuant to Article


4 t'i














FeHdeum Agreement. MOE/GNPCWeliconia t4


Description of Work: By the end of the First Extension Period Contractor,


at its own expense, shall drill one (l) Exploration Well.


Minimum Expenditure: Contractor’s minimum expenditure for the work


in the First Extension Period shall be ten million U S. Dollars (U S.


$10,000,000)


c) Second Extension Period: Commencing at the end of the First Extension


Period (or any extension thereof) and terminating at the end of two (2)


Contract Years thereafter or at the end of any extension to the Second


Extension Period pursuant to Article 3.2.


Description of Work: Contractor shall drill one (1) Exploration Well in


the Contract Area.


Minimum Expenditure: Minimum expenditure lor work in the Second


Extension Period shall be ten million U.S. Dollars (U.S. $10,000,000)


d) Work and expenditures accomplished in any period in excess of the above


obligations may be applied as credit in satisfaction of obligations called for


in any other period. The fulfillment of any work obligation shall relieve


Contractor of the corresponding minimum expenditure obligation, but the


fulfillment of any minimum expenditure obligation shall not relieve


Contractor of the corresponding work obligation.


4.4 No Appraisal Wells drilled or seismic surveys carried out by Contractor as pan


of an Appraisal Programme undertaken pursuant to Article 8 and no


expenditure incurred by Contractor in carrying out such Appraisal Programme


shall be treated as discharging the minimum work obligations under Article 4.3.


If during the Exploration Period, the Contractor drills a well within the


Contract Area which penetrates a structure which had been penetrated by a well


drilled prior to the Effective Date, the well shall be treated as an Exploration


Well provided such a structure was not associated with a Discovery as defined


in this Agreement as a result of the previous well drilled.


4.5 The seismic programme in Article 4.3(a), when combined with existing data,


shall be such as will enable a study of the regional geology of the Contract Area


and the preparation of a report thereon with appropriate maps, cross sections


and illustrations, as well as a geophysical survey of the Contract Area which,


when combined with existing data, shall provide:


a) a minimum seismic grid adequate to define prospective drill sites over


prospective closures as interpreted from data available to Contractor; and


*3rr ***








Petroleum Agreeirrent, MOE/GNPO'Hellconla 15


b) a seismic evaluation of stmctural and stratigraphic conditions over the


remaining portions of the Contract Area.


4.6 Each Exploration Well shall be drilled at a location and to an objective depth


determined by Contractor in consultation with GNPC. Except as otherwise


provided in Article 4.7 below:


a) The Exploration Wells to be drilled in the Initial Exploration Period, the


First Extension Period and the Second Extension Period, shall be


whichever of the following is first encountered:





(i) the depth of ten thousand feet (10,000) feet measured from the


Rotary Table Kelly Bushing (RTKB); or


(ii) one thousand feet (1,000) feet into the Cenomanian formation; or


(iii) the depth at which Contractor encounters geological basement.


4.7 If in the course of drilling an Exploration Well the Contractor concludes that


drilling to the minimum depth specified in Article 4.6 above is impossible,


impracticable or imprudent in accordance with accepted international petroleum


industry drilling and engineering practice, then Contractor may plug and


abandon the Exploration Well and GNPC shall have the option of either:





a) waiving the minimum depth requirement, in which case Contractor will be


deemed to have satisfied the obligation to drill such Exploration Well; or


b) requiring Contractor to drill a substitute Exploration Well at a location





determined by Contractor in consultation with GNPC and to the minimum


depth set forth in Article 4.6 except that if in the course of drilling such


substitute Exploration Well Contractor establishes that drilling to the


minimum depth specified in Article 4.6 above is impossible, impracticable


or imprudent in accordance with accepted petroleum industry drilling and


engineering practice, then Contractor may plug and abandon the substitute


Exploration Well and will be deemed to have satisfied the obligation to


drill one (l) Exploration Well.





The above option shall be exercised by GNPC within thirty (30) days from the


plugging and abandonment of the Exploration Well, and failure to exercise such


option shall constitute a waiver of the minimum depth requirement pursuant to


(a) above.





4.8 During the Exploration Period, Contractor shall have the right to perform


additional Exploration Operations, including without limitation performing


gjgjjuty and magnetic surveys, drilling stratigraphic wells and performing








Petroleum Agreement, MOE/G NPC/Heliconin 16


 additional geological and geophysical studies, provided the minimum work


obligations are performed within the applicable period.


4.9 During the Exploration Period, Contractor shall deliver to GNPC and the





Minister reports on Exploration Operations conducted during each Calendar


Quarter within thirty (30) days following the end of that Quarter. Further


requests for information by the Minister under Section 9(1) of the Petroleum


Law shall be complied with within a reasonable time and copies of documents


and other material containing such information shall be provided to GNPC.

















































































































17


Petroleum Agreement, MOE/GNPC/Heliconia


 ARTICLE 5








RELINQUISHMENT





5.1 Except as provided in Article 8.3, 8.9, 14.9 and 14.11, Contractor shall


relinquish portions of the Contract Area in the manner provided hereafter.


s


a) If on or before the expiration of the Initial Exploration Period, Contractor


elects to enter into the First Extension Period pursuant to Article 3.3 then


subject to Article 5.2 at the commencement of the First Extension Period


the area retained shall not exceed seventy five per cent (75%) of the


Contract Area as at the Effective Date;


b) If on or before the expiration of the First Extension Period, Contractor


elects to enter into the Second Extension Period pursuant to Article 3.3


then subject to article 5.2 at the commencement of the Second Extension


Period the area retained shall not exceed twenty five per cent (25%) of the


Contract Area as at the Effective Date;


c) On the expiration of the Second Extension Period, Contractor shall subject


to Article 5.2 relinquish the remainder of the retained Contract Area.


5.2 The provisions of Article 5.1 shall not be read or construed as requiring


Contractor to relinquish any portion of the Contract Area which constitutes or


forms part of either a Discovery Area or a Development and Production Area.


Any Discovery Area within the Contract Area shall not be relinquished for the


sole reason that the Contractor elects not to enter into the First Extension Period


or the Second Extension Period or on the expiry of the Second Extension


Period.


5.3 Subject to Article 5.2, if at the end of the Initial Exploration Period or the First


Extension Period as the case may be Contractor elects not to enter into the First


or Second Extension Period Contractor shall relinquish the entire Contract


Area.





5.4 Each area to be relinquished pursuant to this Article shall be selected by


Contractor and shall be measured as far as possible in terms of continuous and


compact units of a size and shape which will permit the carrying out of


Petroleum Operations in the relinquished portions. ,---:---


rgL











Petroleum Agreement, MOE/GNPC/Heficoma 18





 ARTICLE 6








JOINT MANAGEMENT COMMITTEE


6.1 In order that the Parties may at all times cooperate in the implementation of


Petroleum Operations, GNPC and Contractor shall not later than thirty (30)


days after the Effective Date establish a Joint Management Committee (JMC).


Without prejudice to the rights and obligations of Contractor for day-to-day


management of the operations, the JMC shall oversee and supervise the


Petroleum Operations and ensure that all approved Work Programmes and


Development Plans are complied with and also that accounting for costs and


expenses and the maintenance of records and reports concerning the Petroleum


Operations are carried out in accordance with this Agreement and the


accounting principles and procedures generally accepted in the international


petroleum industry.


6.2 The composition of and distribution of functions within the JMC shall be as


follows:





i) The JMC shall constitute of two (2) representatives of GNPC and two


(2) representatives of Contractor. GNPC and Contractor shall also


designate a substitute or alternate for each member. In the case of


absence or incapacity of a member of the JMC, his alternate shall


automatically assume the rights and obligations of the absent or


incapacitated member;


ii) The Chairperson of the JMC shall be designated by' GNPC from amongst


the members of the JMC;


iii) Contractor shall be responsible in consultation with GNPC for the


preparation of agenda and supporting documents for each meeting of the


JMC and for keeping records of the meetings and decisions of the JMC


(GNPC shall have the right to inspect all records of the JMC at any


time);


iv) At any meeting of the JMC three (3) representatives shall form a


quorum.


6.3 Meetings of the JMC shall be held and decisions taken as follows:





i) All meetings of the JMC shall be held in Accra or such other place as


may be agreed upon by members of the JMC; ry ~r~


o Ll )











Petroleum Agreement. MOE/GNPOHeliconia 19


ii) The JMC shall meet at least twice yearly and at such times as the


members may agree


iii) A meeting of the JMC may be convened by either Party giving not less


than twenty (20) days notice to the others or, in a case requiring urgent


action, notice of such lesser duration as the members may agree upon;


iv) Decisions of the JMC shall require unanimity provided, however, that


decisions and approvals required for budgets and day-to-day operational


matters associated with performing the Appraisal Programme and the


Development and Production Operations including the related


expenditures, outlays or advances for which Contractor will be required


to make on a one hundred percent (100%) basis shall require approval of


the Contractor’s representatives only;


v) Any member of the JMC may vote by written and signed proxy held by


another member;


vi) Decisions of the JMC may be made without holding a meeting if all


representatives of both Parties notify their consent thereto in the manner


provided in Article 27;


vii) GNPC and Contractor shall have the right to bring expert advisors to any


JMC meetings to assist in the discussions of technical and other matters


requiring expert advice;


viii) 'Hie JMC may also establish subcommittees it deems appropriate for


carrying out its functions, such as:


a) a technical subcommittee;


b) an audit subcommittee; and


c) an accounting subcommittee.


ix) Costs and expenses related to attendance by the Parties in or outside


Accra, shall be borne by Contractor and treated as Petroleum Costs


provided that such costs and expenses are sufficiently documented to


show that they were properly incurred.


6.4 The JMC shall oversee Exploration Operations as follows:





Not later than sixty (60) days after the Effective Date and thereafter at least


ninety (90) days before the commencement of each subsequent Contract


Year, Contractor shall prepare and submit to the JMC for its review a


reasonably detailed Work Programme and budget setting forth all


xploration Operations which Contractor proposes to carry out in that








Petroleum Agreement, MOE/GNPCHeticoma 20


Contract Year and the estimated cost thereof, and shall also give an


indication of Contractor's tentative preliminary exploration plans for the


succeeding Contract Year,


ii) Upon notice to the Minister and ON PC, Contractor may amend any Work


Programme or budget submitted to the JMC pursuant to this Article which


notice will state why in Contractor’s opinion the amendment is necessary


or desirable. Any such amendment shall be submitted to the JMC for


review;


iii) Every Work Programme submitted to the JMC pursuant to this Article 6.4


and every revision or amendment thereof shall be consistent with the


requirements set out in Article 4.3 relating to minimum work and


expenditure for the period of the Exploration Period in which such Work


Programme or budget falls;


iv) Contractor shall report any Discovery' to GNPC immediately following


such Discovery and shall place before the JMC for review its Appraisal


Programme prior to submission thereof to the Minister. Within thirty (30)


days of completion of the Appraisal Programme a JMC meeting to discuss


the appraisal shall be convened to take place before submission of the


detailed appraisal report provided for in Article 8.7;


v) The JMC will review Work Programmes and budgets and any amendments


or revisions thereto, and Appraisal Programmes, submitted to it by


Contractor pursuant to this Article, and timely give such advice as it deems


appropriate which Contractor shall consider before submitting the


Programme to GNPC and the Minister for their information.


vi) After the date of the first Commercial Discoveiy, Contractor shall seek the


concurrence of GNPC’s JMC representatives, which concurrence shall not


be unreasonably withheld, on any proposal for the drilling of an


Exploration Well or wells not associated with the Commercial Discovery


and not otherwise required to be drilled under Article 4.3. If concurrence


is not secured by Contractor, Contractor may nevertheless elect to drill the


Exploration Well or wells but the costs of such well or wells shall be


considered Petroleum Costs for AGE purposes and a deductible cost for


Ghana income tax purposes only in the event there is a subsequent


Commercial Discovery associated with the well or wells.


6.5 From the first occurring Date of Commercial Discovery the JMC shall have the


supervision of Petroleum Operations as follows:


i. Within sixty (60) days after the Date of Commercial Discoveiy' Contractor


shall prepare and submit to the JMC for approval any revisions to its











Petroleum Agreement, MOB'GNPC/Hehconra 21


 annual Work Programme and budget that may be necessary for the


remainder of that Contract Year and for the rest of the Exploration Period;





ii. At least ninety (90) days before the commencement of each subsequent


Calendar Year Contractor shall submit to the JMC for review and approval


a reasonably detailed Work Programme and budget setting forth all


Development and Production Operations which Contractor proposes to


carry out in that Calendar Year and the estimated cost thereof and shall also


give an indication of Contractor’s plans for the succeeding Calendar Year;





iii. Within sixty (60) days of the Date of Commencement of Commercial


Production and thereafter not later than one hundred and twenty (120) days


before the commencement of each Calendar Year Contractor shall submit


to the JMC for its approval an annua! production schedule which shall be


in accordance with good international oilfield practice, and shall be


designed to provide the most efficient, beneficial and timely production of


the Petroleum resources.





6.6 The JMC shall approve lifting schedules prepared and submitted by the


Contractor for Development and Production Areas as well as review all of


Contractor’s reports on the conduct of Petroleum Operations.


6.7 The JMC shall approve Contractor’s insurance programme and the programmes





for training and technology transfer submitted by Contractor and the


accompanying budgets for such schemes and programmes.


6.8 If during any meeting of the JMC the Parties are unable to reach agreement


concerning any of the matters provided for in Article 6.5 and 6.6, the matter


shall be deferred for reconsideration at a further meeting of the JMC to be


reconvened not later than fifteen (15) days following the original meeting. Any


of the Parties may provide further information to the JMC at or prior to such


meeting to assist the JMC resolve the matters in dispute. If after such further


meeting the Parties are still unable to reach agreement, the matters in dispute


shall immediately be referred to the Management of the Parties and the Minister


for resolution. If fifteen (15) days after the referral, there is still no agreement,


then at the request of either Party, the matters in dispute shall be resolved in


accordance with Article 24.
































Petroleum Agreement, MO&GNPC/Heliconia 22


 ARTICLE 7








RIGHTS AND OBLIGATIONS OF CONTRACTOR AND GNPC


7.1 Subject to the provisions of this Agreement, Contractor shall be responsible for


the conduct of Petroleum Operations and shall:


a) conduct Petroleum Operations with utmost diligence, efficiency and


economy, in accordance with accepted petroleum industry practices,


observing sound technical and engineering practices using appropriate


advanced technology and effective equipment, machinery, materials and


methods;


b) take all practicable steps to ensure compliance with Section 3 of the


Petroleum Law; including ensuring the recovery and prevention of waste of


Petroleum in the Contract Area in accordance with accepted petroleum


industry practices;


c) prepare and maintain in Ghana full and accurate records of all Petroleum


Operations performed under this Agreement;


d) prepare and maintain accounts of all operations under this Agreement in


such a manner as to present a full and accurate record of the costs of such


operations, in accordance with the Accounting Guide; and


e) disclose to GNPC and the Minister any operating or other agreement among


the Parties that constitute Contractor relating to the Petroleum Operations


hereunder, which agreement shall not be inconsistent with the provisions of


this Agreement.


7.2 In connection with its performance of Petroleum Operations, Contractor shall


have the right within the terms of applicable law;


a) to establish offices in Ghana and to assign to those offices such


representatives as it shall consider necessary for the purposes of this


Agreement;


b) to use public lands for installation and operation of shore bases, and


terminals, harbours and related facilities, pipelines from fields to terminals


' J divery facilities, camps and other housing; *=v














Polroloum Agreement. MOE'GNPOH&icoma 23


 c) to receive licenses and permission to install and operate such


communications and transportation facilities as shall be necessary for the


efficiency of its operations;


d) to bring to Ghana such number of Foreign National Employees as shall be


necessary for its operations, including employees assigned on permanent or


resident status, with or without families, as well as those assigned on


temporaiy basis such as rotational (rota) employees;


e) to provide or arrange for reasonable housing, schooling and other


amenities, permanent and temporary, for its employees and to import


personal and household effects, furniture and vehicles, for the use of its


personnel in Ghana;


f) to be solely responsible for provision of health, accident, pension and life


insurance benefit plans on its Foreign National Employees and their


families; and such employees shall not be required to participate in any


insurance, compensation or other employee or social benefit programs


established in Ghana;


g) to have, together with its personnel, at all times the right of ingress to and


egress from its offices in Ghana, the Contract Area, and the facilities


associated with Petroleum Operations hereunder in Ghana including the


offshore waters, using its owned or chartered means of land, sea and air


transportation;


h) to engage such Subcontractors, expatriate and national, including also


consultants, and to bring such Subcontractors and their personnel to Ghana


as are necessary in order to carry out the Petroleum Operations in a skillful,


economic, safe and expeditious manner; and said Subcontractors shall have


the same rights as Contractor specified in tins Article 7.2 to the extent they


are engaged by Contractor for the Petroleum Operations hereunder.


7.3 GNPC shall assist Contractor in carrying out Contractor’s obligations


expeditiously and efficiently as stipulated in this Agreement, and in particular


GNPC shall use its best efforts to assist Contractor and its Subcontractors to:





a) establish supply bases and obtain necessaiy communications facilities,


equipment and supplies;





b) obtain necessary approvals to open bank accounts in Ghana;


c) subject to Article 21 hereof, obtain entry visas and work permits for such





number of Foreign National Employees of Contractor and its


^Subcontractors engaged in Petroleum Operations and members of their


„ -to








Petroleum Agreement, MOE/GNPC/Helicoma 24


families who will be resident in Ghana, and make arrangements lor their


travel, arrival, medical services and other necessary amenities;


d) - comply with Ghana customs procedures and obtain permits for the


importation of necessary materials:


e) obtain the necessary' permits to transport documents, samples or other


forms of data to foreign countries for the purpose of analysis or processing


if such is deemed necessary for the purposes of Petroleum Operations:


f) contact Government agencies dealing with fishing, meteorology,


navigation and communications as required; and


g) identify qualified Ghanaian personnel as candidates for employment by


Contractor in Petroleum Operations.


7.4 All reasonable expenses incurred by GNPC in connection with any of the


matters set out in Article 7.3 above shall be borne by Contractor.





7.5 GNPC shall use its best efforts to render assistance to Contractor in


emergencies and major accidents, and such other assistance as may be


requested by Contractor, provided that any reasonable expenses involved in


such assistance shall be borne by Contractor. ^ t\






























































Petroleum Agreement. KtOE/GNPOHehconia 25


 ARTICLE 8








COMMERCIALITY


8.1 Contractor shall notify the Minister and GNPC in writing as soon as possible


alter any Discovery is made, but in any event not later than thirty (30) days alter


any Discovery is made.


8.2 As soon as possible after the analysis of the test results of such Discovery is


complete and in any event not later than one hundred (100) days from the date


of such Discovery, Contractor shall by a further notice in writing to the


Minister indicate whether in the opinion of Contractor the Discovery merits


appraisal.


8.3 Where the Contractor indicates that the Discovery does not merit appraisal,


Contractor shall, subject to Article 8.17 below, relinquish the Discover)' Area


associated with the Discovery.


8.4 Where Contractor indicates that the Discovery merits appraisal, Contractor shall


submit to the Minister an Appraisal Programme to be carried out by Contractor in


respect of such Discovery.


8.5 Unless Contractor and the Minister otherwise agree in any particular case.


Contractor shall have a period of two (2) years from the date of Discover)' to


complete the Appraisal Programme but in the case where this occurs in


deepwater then Contractor shall have a period of three (3) years to complete the


Appraisal Programme.


8.6 Contractor shall commence appraisal work within one hundred and eighty (180)


days from the date of submission of the Appraisal Programme to the Minister.


Where the Contractor is unable to commence appraisal work within one


hundred and eighty (180) days from the date of submission of the Appraisal


Programme to the Minister. GNPC shall be entitled to exercise the option


provided for in Article 9.1 to enable prompt appraisal, provided however that


after Contractor actually embarks on appraisal work or obtains an extension of


time for such work this option may not be exercised.


8.7 Not later than ninety (90) days from the date on which said Appraisal


Programme relating to the Discover)' is completed Contractor will submit to the


Minister a report containing the results of the Appraisal Programme. Such


report shall include all available technical and economic data relevant to a


determination of commerciality, including, but not limited to, geological and


geophysical conditions, such as structural configuration, physical properties and


' t of reservoir rocks, areas, thickness and depth of pay zones, pressure.








Petroleum Agreement. MOE/GNPC/Hehconia 26


 volume and temperature analysis of the reservoir lluids; preliminary estimates


of Crude Oil and Natural Gas reserves; recovery drive characteristics;


anticipated production performance per reservoir and per well; fluid


characteristics, including gravity, sulphur percentage, sediment and water


percentage and refinery assay pattern.


8.8 Not later than ninety (90) days from the date on which the report containing the





results of the Appraisal Programme is submitted to the Minister. Contractor will


by a further notice in writing, inform the Minister whether the Discover)7 in the


opinion of Contractor is or is not commercial.


8.9 If Contractor informs the Minister that the Discovery’ is not commercial, then


subject to Article 8.17, Contractor shall relinquish such Discovery Area;


provided, however, that in appropriate cases, before declaring that a Discovery


is not commercial. Contractor shall consult with GNPC and may make


appropriate representations proposing minor changes in the fiscal and other


provisions of this Agreement which may, in the opinion of Contractor, affect


the determination of commerciality. The other Parties may, where feasible, and


in the best interests of the Parties agree to make such changes or modifications


in the existing arrangements.


8.10 If Contractor pursuant to Article 8.8 informs the Minister that the Discovery is


Commercial Contractor shall not later than one hundred and eighty (180) days


thereafter, prepare and submit to the Minister a Development Plan.


8.11 The Development Plan referred to in Article 8.10 shall be based on detailed


engineering studies and shall include:





a) Contractor’s proposals for the delineation of the proposed Development


and Production Area and for the development of any reservoir(s), including


the method for the disposal of Associated Gas in accordance with the


provisions of Article 14.4;





b) the way in which the Development and Production of the reservoir is


planned to be financed;


c) Contractor's proposals relating to the spacing, drilling and completion of


wells, the production, storage, transportation and delivery facilities


required for the production, storage and 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;











27


Petroleum Agreement, MOEJGNPC/Hehcomi


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 thereof ; and


v) the particulars of other technical equipment required for the


operations;


d) the estimated production profiles for Crude Oil and Natural Gas from the


Petroleum reservoirs;


e) estimates of capital and operating expenditures;


f) the economic feasibility studies carried out by or for Contractor in respect


of alternative methods for Development of the Discovery, taking into


account:


i) location;


ii) water depth (where applicable);


iii) meteorological conditions;


iv) estimates of capital and operating expenditures; and


v) any other relevant data and evaluation thereof;


g) the safety measures to be adopted in the course of the Development and


Production Operations, including measures to deal with emergencies;


h) the necessary measures to be taken for the protection of the environment;


i) Contractor’s proposals with respect to the procurement of goods and


services obtainable in Ghana;


j) Contractor’s plan for training and employment of Ghanaian nationals; and


k) the timetable for effecting Development Operations.


8,2 The date of the Minister’s approval of the Development Plan shall be the Date


of Commercial Discovery.


813 After thirty (30) days following its submission, the Development Plan shall be


deemed approved as submitted, unless the Minister has before the end of the


said thirty (30) day period given Contractor a notice in writing stating:


0 that the Development Plan as submitted has not been approved; and





Petroleum Agreement. WOBGNPO'Hehconia


ii) the revisions, proposed by the Minister, to the Development Plan as


submitted, and the reasons thereof.


8.14 Where the Development Plan is not approved by the Minister as provided under


Article 8.13 above, the Parties shall within a period of thirty (30) days from the


date of the notice by the Minister as referred to under Article 8.13 above meet


to agree on the revisions proposed by the Minister to the Development Plan, In


the event of failure to agree to the proposed revisions, within fourteen (14) days


following said meeting any matters in dispute between the Minister and the


Contractor shall be referred for resolution in accordance with Article 24.


8.15 Where the issue in dispute referred for resolution pursuant to .Article 24 is


finally decided in favour of Contractor the Minister shall forthwith give the


requisite approval to the Development Plan submitted by Contractor.


8.16 Where the issue in question referred for resolution pursuant to Article 24 is


finally decided in favour of the Minister in whole or in part, Contractor shall


forthwith:


i) amend the proposed Development Plan to give effect to the final decision


rendered under Article 24. and the Minister shall give the requisite


approval to such revised Development Plan; or


ii) subject to Article 8.19 below relinquish the Discovery Area.


8.17 Notwithstanding the relinquishment provisions of Articles 8.3 and 8.9 above, if


Contractor indicates that a Discoveiy does not at the time merit appraisal, or


after appraisal does not appear to be commercial but may merit appraisal or


potentially become commercial at a later date during the Exploration Period,


then Contractor need not relinquish the Discovery Area and may continue its


Exploration Operations in the Contract Area during the Exploration Period


provided that the Contractor shall explain what additional evaluations,


including Exploration work or studies, are or may be planned in order to


determine whether subsequent appraisal is warranted or that the Discovery is


commercial. Such evaluations shall be performed by Contractor according to a


specific timetable, to be determined by the JMC, subject to its right of earlier


relinquishment of the Discovery Area. After completion of the evaluations,


Contractor shall make the indications called for under Article 8.2 or 8.8 and


either proceed with appraisal, confirm commerciality or relinquish the


Discovery Area. In any case, if at the end of the Exploration Period Contractor


has not indicated its intent to proceed with an Appraisal Programme or that the


 8.18 Before Contractor indicates that the Discover)' will not merit appraisal, or after


appraisal will not be commercial. Contractor may consult with the other Parties


and may make appropriate representations proposing minor changes in the


fiscal and other provisions of this Agreement which may, in the opinion of


Contractor, affect the determination of commerciality. The other Parties may,


agree to make such changes or modifications in the existing arrangements. In


the event the Parties do not agree on such changes or modifications, then


subject to Articles 8.17 and 8.19 Contractor shall relinquish the Discovery


Area.


8.19 Nothing in Article 8.3, 8.9, 8.16 or 8.17 above shall be read or construed as


requiring Contractor to relinquish;


a) any area which constitutes or forms part of another Discovery Area in





respect of which;


i) Contractor has given the Minister a separate notice confirming that


such Discovery merits appraisal or confirmation; or


ii) Contractor has given the Minister a separate notice indicating that


such Discovery is commercial; or





b) any area which constitutes or forms part of a Development and Production


Area.



























































Petroleum Agreement, MOE/GNPUHehconle 30


 ARTICLE 9





SOLE RISK ACCOUNT


9.1 Unless and until Contractor has notified GNPC that it wishes to appraise die


Discovery. GNPC may notify Contractor that it will at its Sole Risk commence


to appraise that Discovery, provided dial within thirty (30) days of such


notification from GNPC. Contractor may elect to commence to appraise that


Discovery within its Work Programme.


9.2 Where an appraisal undertaken under Article 9.1 at the Sole Risk of GNPC


results in a determination that a Discovery is commercial, Contractor may


develop the Commercial Discovery upon reimbursement to GNPC of all


expenses incurred in undertaking the appraisal and arranging with GNPC


satisfactory terms for the payment of a premium equivalent to five hundred per


cent (500%) of such expenses. Such premium shall not be reckoned as cost of


Petroleum Operations for the purpose of the Accounting Guide. In the event


that Contractor declines to develop said Discovery, Contractor shall relinquish


the Development and Production Area established by the Appraisal Programme


conducted by GNPC under Article 9.1.


9.3 During the Exploration Period GNPC may, at its Sole Risk, require Contractor


to continue drilling to penetrate and test horizons deeper than those contained in


the Work Programme of Contractor or required under Article 4. GNPC may


also at its Sole Risk ask the Contractor to test a zone or zones which Contractor


has not included in Contractor’s test programme. Notice of this shall be given


to Contractor in writing as early as possible prior to or during the drilling of the


well, but in any case not after Contractor has begun work to complete or


abandon the well. The exercise by GNPC of this right shall be in an agreed


manner, which does not prevent Contractor from complying with its work


obligations under Article 4.3 and is subject to the Health. Safety and


Environmental (HS & E) considerations.


9.4 At any time before commencing such deeper drilling Contractor may elect to


embody the required drilling in its own exploration operation, in which case


any resulting Discovery shall not be affected by the provisions of this Article.


9.5 Where any Sole Risk deeper drilling results in a Discovery, GNPC shall have


the right, at its Sole Risk, to develop, produce and dispose of all Petroleum


from that deeper horizon, provided however that if at the time such Petroleum


is tested from the well, Contractor's Work Programme includes a well or wells


to be drilled to the same producing horizon, and provided that the well or wells


result (s) in a Petroleum producing well producing from the same horizon,


■)r shall, after reimbursing GNPC for all costs associated with its Sole











Petroleum Agreement, MOE/G NPC'Hehconia 31


Risk deeper drilling in said well, have the right to include production from that


well in its total production Tor ihc purposes of establishing a Commercial


Discovery, and. if a Commercial Discover)' is subsequently established, to


develop, produce and dispose of the Petroleum in accordance -with the


provisions of this Agreement.


9.6 Alternatively, if at the time such Petroleum is tested from the well, referred to


in Article 9.5. Contractor's Work Programme does not include a well to be


drilled to the same horizon, Contractor has the option to appraise and/or


develop, as the case may be, the Discovery for its account under the terms of


this Agreement if it so elects within a period of sixty (60) days after such


Discovery. In such case, Contractor shall reimburse GNPC for all expenses


incurred by GNPC in connection with such Sole Risk operations, and shall


make satisfactory' arrangements with GNPC for the payment of a premium


equivalent to five hundred percent (500%) of such expenses.


9.7 During the term of this Agreement, GNPC shall have the right, at its Sole Risk,


and upon six (6) months prior notice to Contractor, to drill one (1) or two (2)


wells per Calendar Year within the Contract Area provided that the work


intended to be done by GNPC had not been scheduled for a Work Programme


to be performed by Contractor and the exercise of such right by GNPC and the


arrangement made by GNPC for undertaking such drilling do not prevent


Contractor from satisfying its work obligations. Within thirty (30) days after


receipt of such notice Contractor may elect to drill the required well or wells as


part of Contractor’s Exploration Operations.


9.8 In the event that a well drilled for the account and risk of GNPC in accordance


with Article 9.7 above results in a Discovery, GNPC shall have the right to


appraise and develop as the case may be or require Contractor to develop, after


GNPC declares a Commercial Discovery, such Commercial Discovery for a


mutually agreed service fee, so long as Contractor has an interest in the


Contract Area, GNPC taking all the interest risk and costs and hence having the


right to all Petroleum produced from the Commercial Discovery, provided


however that Contractor has the option to appraise and/or develop, as the case


may be, the Discovery for its account under the terms of this Agreement if it so


elects within a period of sixty (60) days after receipt of GNPC’s written notice


of such Discovery.





9 9 Contractor shall reimburse GNPC for all expenses incurred by GNPC in


connection with such Sole Risk operations, and shall make satisfactory


arrangements with GNPC for the payment of a premium equivalent to five


hundred percent (500%) of such expenses before exercising the option under


Article 9.8. Such premium shall not be reckoned as Petroleum Costs for the


purposes of Accounting Guide. ^


A








32


Petroleum Agreement. MOE/GNPC/Hehconia


 9.10 In the event that Contractor declines to develop the Commercial Discovery or


no agreement is reached on the service lee arrangement as provided for in


Article. 9.8, Contractor shall relinquish the Development and Production Area


associated with such Commercial Discovery.





9.1 J Sole Risk operations under this Article shaLl not extend the Exploration Period


nor the term of this Agreement and Contractor shall complete any agreed


programme of work commenced by it under this Article at GNPC’s Sole Risk,


and subject to such provisions hereof as the Parties shall then agree, even


though the Exploration Period as defined in Article 3 or the term of this


Agreement may have expired.


9.12 GNPC shall indemnify and hold harmless Contractor against all actions, claims,


demands and proceedings whatsoever brought by any third party or the State,


arising out of or in connection with Sole Risk operations under this Article 9,


unless such actions, claims, demands and proceedings are caused by


Contractor’s Gross Negligence.






















































































Petroleum Agreement, MOEj'GNPOHeliQoma 33





 ARTICLE 10








SHARING OF CRUDE OIL





10.1 Gross Production of Crude Oil from each Development and Production Area


shall (subject to a Calendar Year adjustment developed under the provisions of


Article 10.7) be distributed amongst the Parties in the following sequence and


proportions:





a) Ten percent (10.0%) of the Gross Production of Crude Oil shall be


delivered to the State as ROYALTY, pursuant to the provisions of the


Petroleum Law provided that if the accumulation within the area is located


in water depth of four hundred metres (400m) {(about one thousand three


hundred and twelve feet (1312 ft.)} or more the ROYALTY shall be seven


and one half per cent (7.5 %). Upon notice to Contractor, the State shall


have the right to elect to receive cash in lieu of its royalty share of such


Crude Oil. The State's notice shall be given to Contractor at least ninety


(90) days in advance of each lifting period, such periods to be established


pursuant to the provisions of Article 10.7. In such case, said share of Crude


Oil shall be delivered to Contractor and it shall pay to the State the value of


said share in cash at the relevant weighted average Market Price for the


relevant period as determined in accordance with Article 11.7;


b) The State’s AOE (as hereinafter defined) share of Crude Oil, if any, shall


be distributed to the State out of the Contractor’s share of Crude Oil


determined under Article 10.1 (d). The State shall also have the right to


elect to receive cash in lieu of the AOE share of Crude Oil accorded to it


pursuant to Article 10.2. Notification of said election shall be given in the


same notice in which the State notifies Contractor of its election to receive


cash in lieu of Crude Oil under Article 10.1(a). In such case, said share


shall be delivered to Contractor and it shall pay to the State the value of


said share in cash at the relevant weighted average Market Price for the


relevant period as determined in accordance with Article 11.7;


c) The amount of Crude Oil, if any, shall be delivered to GNPC to which it is





entitled pursuant to its Sole Risk operations under Article 9, after


distribution of such amounts of Crude Oil as are required pursuant to


Article 10.1(a);





<0 After the distribution of such amounts of Crude Oil as are required


pursuant to Article 10.1(a) and (c), and subject to Article 10.1(e) below,


and PROVIDED that all Production Expenditure, as this term is defined in


Section 2.4 of the Accounting Guide (excluding all capital expenditures


erred to in Article 10.1(e)), relating to the Crude Oil being distributed


'jTtTn








Petroleum Agreement MO&GNP&Hehconia 34





 has been fully reimbursed lo the Parly llial funded it, the remaining Crude


Oil produced from each Development and Production Area shall be


distributed to Contractor and GNPC in the following order of priority;


i) first, an amount of Crude Oil shall be distributed to Contractor to


reimburse Contractor for all expenditure and accrued interest thereon


attributable to the Additional Interest as referred lo in Article 2.9(a);


ii) second, if Contractor has provided the Additional Interest Funding, an


amount of Crude Oil shall be distributed to Contractor to reimburse


Contractor for the Additional Interest Funding; and


iil) third, the remaining Crude Oil shall be distributed to each of Contractor





and GNPC in proportion to their respective participating interests


referred to in Ajlicle 2.





e) Contractor shall provide the funding for any capital expenditures approved


by the JMC. GNPC shall reimburse Contractor for GNPC’s proportionate


share, based on its participating interest in the Petroleum Operations, of


such capital expenditures (plus accrued interest at the Specified Rate


thereon from the date of payment thereof by Contractor until the dale


GNPC reimburses Contractor for its proportionate share and interest as


specified above), llie reimbursement shall be made through Contractor


receiving an amount of Crude Oil which would otherwise have been


distributed lo GNPC pursuant to Article 10.1(d);


f) The value of the Crude Oil used to reimburse any Party pursuant to Article


10.1(d) and Article 10.1(e) shall be the average Market Price as determined


pursuant to Article 11.7 for the Crude Oil delivered to Contractor in the


Month of its delivery.


10.2 At any time the State shall be entitled to a portion of Contractor's share of


Crude Oil then being produced from each separate Development and


Production Area which may consist of one or more accumulations (hereinafter


referred to as “Additional Oil Entitlements” or “AOE”). The AOE shall be


calculated on the basis of Contractor’s NCF and the after-tax inflation-adjusted


rates of return (“ROR *) referenced in the formulae in Article 10.2(b) and shall


be determined separately for each Development and Production Area at the end


of each Month in accordance with the formulae in Article 10.2(b) below:


(a) Definitions:





“ NCF” means Contractor’s net cash flow for the Month for which the


calculation is being made, and shall be computed in accordance with the














Petroleum Agreement, MOEJGNPQHeiicoaia 35


 NCF ---x-y-z





where


“x" equals all revenues received during such Month by Contractor from the


Development and Production Area, including an amount computed by


multiplying the amount of Crude Oil taken by Contractor during such Month in


accordance with Article 10.1 (d) and (e); excluding such Crude Oil taken by


Contractor for payment of interest in respect of Petroleum Costs incurred by


Contractor on GNPC's behalf, by the Market Price applicable to such Crude


Oil during the Month when lifted, plus any other proceeds specified in the


Accounting Guide received by Contractor, including, without limitation, the


proceeds from the sale of any assets to which Contractor continues to have


title. For the avoidance of doubt, *Y* shall not include revenues from Crude


Oil lifted by Contractor which is part of another Party's entitlement (e.g. Crude


Oil purchased by Contractor from GNPC or the State) but shall include


revenues from Crude Oil owned by Contractor but lifted by another Party (e.g.


Crude Oil purchased by GNPC or the State from Contractor).


“y" equals one-twelfth ('/J2) of the income tax paid by the Contractor to the


State with respect to the Calendar Year in respect of the Development and


Production Area. If there are two (2) or more Development and Production


Areas, the total income tax paid by Contractor in accordance with the


Petroleum Income Tax Law 1987 shall for purposes of this calculation be


allocated to the Development and Production Area on the basis of hypothetical


tax calculations for the separate Development and Production Areas. The


hypothetical tax calculation for each Development and Production Area shall be


determined by allocating the total amount of tax incurred for each Calendar


Year by Contractor under the Petroleum Income Tax Law to each Development


and Production Area based on the ratio that the chargeable income from a given


Development and Production Area bears to the total chargeable income of


Contractor. The chargeable income of Contractor is determined under section 2


of the Petroleum Income Tax Law and the chargeable income of a


Development and Production Area shall be calculated by deducting from the


gross income derived from or allocated to that Area those expenses deductible


under section 3 of the Petroleum Income lax Law which arc reasonably


allocable to that area. A negative chargeable income for an area shall be treated


as zero for purposes of this allocation and not more (or less) than the total


income tax paid by Contractor shall be allocated between the areas.





*‘z" equals all Petroleum Costs specified in the Accounting Guide and expended


by Contractor during such Month with respect to the Development and


Production Area, including any Petroleum Costs paid by Contractor on GNPC’s


behalf, and not reimbursed by GNPC within the Month, provided that all











Petroleum Agreement. MOE'GNP&Hehconia 36





 Petroleum Costs far Exploration Operations not directly attributable to a


specific Development and Production Area shall for purposes of this


calculation be allocated to the Development and Production Area having the


earliest date of Commencement of Commercial Production: and provided


further that for the purpose of the ROR calculation Petroleum Costs shall not


include any amounts in respect of interest on loans obtained for the purposes of


carrying out Petroleum Operations.


FAn or First Account is the net cash Hows from the Development and


Production Area at the end of Month n, less the current value of the cumulative


negative net cash flows up to the end of the Month immediately preceding the


Month in question, using a real rale of return of 12.5% p.a. and inflation of i.


SAn or Second Account is the net cash flows from the Development and


Production Area for that Month, less the current value of any cumulative


negative net cash flows up to the end of the Month immediately preceding the


Month in question, using a real rate of return of 17.5% and inflation of i.


TAn or Third Account is the net cash flows from the Development and


Production Area at the end of Month n, less the current value of any cumulative


negative net cash flows up to the Month immediately preceding the Month in


question, using a real rate of return of 22.5% and inflation of i.


ZAn of Fourth Account is the net cash flows from the Development and





Production Area for Month n, less the current value of any cumulative negative


net cash flows up to the end of the Month immediately preceding the Month in


question, using a real rate of return of 27.5% and inflation of i.


FA n_| shall equal FAn as of the last day of the Month immediately preceding





the Month in question if such FAn was negative, but shall equal zero if such


FAn was a positive number.





SAn_| shall equal SAn as of the last day of the Month immediately preceding the


Month in question if such SAn was negative, but shall equal zero if such SAn


was a positive number.


TAn.| shall equal TAn as of the last day of the Month immediately preceding the


Month in question if such TAn was negative, but shall equal zero if such TAn


was a positive number.


ZAn.| shall equal ZAn as of the last day of the Month immediately preceding the





Month in question if such ZAn was a negative number but shall equal zero if


such ZAn was a positive number. In the AOF. calculation for the first Month of


Petroleum Operations, FAn.|, SAn.|. TA,,.) and ZAn_i shall be zero. *3'cTS











37


Petroleum Agreement MOE/GNP&Hebconia


 NCF ---x - v - z





where





“x” equals all revenues received during such Month by Contractor from the


Development and Production Area, including an amount computed by


multiplying the amount of Crude Oil taken by Contractor during such Month in


accordance with Article 10.1 (d) and (e); excluding such Crude Oil taken by


Contractor for payment of interest in respect of Petroleum Costs incurred by


Contractor on GNPC’s behalf, by the Market Price applicable to such Crude


Oil during the Month when lifted, plus any other proceeds specified in the


Accounting Guide received by Contractor, including, without limitation, the


proceeds from the sale of any assets to which Contractor continues to have


title. For the avoidance of doubt, “x" shall not include revenues from Crude


Oil lifted by Contractor which is part of another Party’s entitlement (e.g. Crude


Oil purchased by Contractor from GNPC or the State) but shall include


revenues from Crude Oil owned by Contractor but lifted by another Party (e.g.


Crude Oil purchased by GNPC or the State from Contractor).


“y” equals one-twelfth (l/,2) of the income tax paid by the Contractor to the





State with respect to the Calendar Year in respect of the Development and


Production Area,. If there are two (2) or more Development and Production


Areas, the total income tax paid by Contractor in accordance with the


Petroleum Income Tax Law 1987 shall for purposes of this calculation be


allocated to the Development and Production Area on the basis of hypothetical


tax calculations for the separate Development and Production Areas. The


hypothetical tax calculation for each Development and Production Area shall be


determined by allocating the total amount of tax incurred for each Calendar


Year by Contractor under the Petroleum Income Tax Law to each Development


and Production Area based on the ratio that the chargeable income from a given


Development and Production Area bears to the total chargeable income of


Contractor. The chargeable income of Contractor is determined under section 2


of the Petroleum Income Tax Law and the chargeable income of a


Development and Production Area shall be calculated by deducting from the


gross income derived from or allocated to that Area those expenses deductible


under section 3 of the Petroleum Income Tax Law which are reasonably


allocable to that area. A negative chargeable income for an area shall be treated


as zero for purposes of this allocation and not more (or less) than the total


income lax paid by Contractor shall be allocated between the areas.


“z” equals all Petroleum Costs specified in the Accounting Guide and expended





by Contractor during such Month with respect to the Development and


Production Area, including any Petroleum Costs paid by Contractor on GNPC's


behalf, and not reimbursed by GNPC within the Month, provided that all














Petroleum Agreement. MQE/GNPC/Heliconia


 “i” for the month in question equals the percentage change in the l Inited States


Industrial Goods Wholesale Price Index (“USIGWPI) applicable Cor the Month


compared to that applicable for the same Month of the preceding Calendar


Year. The USIGWPI applicable for any Month shall be the index which uses


data for the second preceding Month i.e. January data for the March


computation. If the USIGWPI ceases to be published, a substitute U S. Dollar-


based price index shall be used.


“n” refers to the nth Month in question.





wn-l” refers to the Month immediately preceding the nth Month





b) Formulae:





























In the calculation of SA„ an amount shall be subtracted from NCF identical to


the value of any AOE which would be due to the State if reference were made


hereunder Only to the FAn.




















In the calculation of TAn an amount shall be subtracted from NCF identical to


the value of any AOE which would be due to the State if reference were made


hereunder only to the FAn and SAn.




















In the calculation of ZA„ an amount shall be subtracted from NCF identical to


the value of any AOE which would be due to the Slate if reference were made


hereunder only to the FAn, SAnand TAn.




















Petroleum Agreement, MOE/GNPC/Heliconia


 In the event of a conflict between the definitions of the FAn, SAn. TA„ and 7. A„


and the mathematical formulae in Article 10.2(h), the mathematical formulae


shall prevail.





c) Prospective Application:


The State’s AGE measured in barrels of oil will be as follows;


i) If FAn, SAn TAn and ZAn are all negative* the State’s AOE for the





Month in question shall be zero;


ii) If FAn is positive and SAn> TAn and ZAn are all negative, the


State’s AOE for the Month in question shall be equal to the


absolute amount resulting from the following monetary calculation:


Ten percent (10%) of the FAn for that Month divided by the


weighted average Market Price as determined in accordance with


Article 11.7.


iii) If both FAn and SA„ are positive, but both TAn and ZAn are


negative, the State’s AOE for the Month in question shall be equal


to an absolute amount resulting from the following monetary


calculation:


the aggregate of ten percent (10%) of FA„ for that Month plus


twelve and one half percent (12.5%) of the SA„ for that Month all


divided by the weighted average Market Price as determined in


accordance with Article 11.7.


jv) If FAn, SAn and TAn are all positive but ZAn is negative, the State's





AOE for the Month in question shall be equal to the absolute


amount resulting from the following monetary calculation:





the aggregate of ten percent (10%) of the FAn for that Month plus


twelve and one half percent (12.5%) of tine SAn for that Month plus


sixteen percent (16%) of the TA„ for that Month all divided by the


weighted average Market Price as determined in accordance with


Article 11.7.





v) If FA,„ SAn, TAn and ZAn arc all positive, the State’s AOE for the


Month in question shall be equal to the absolute amount resulting


from the following monetary calculation:





the aggregate of ten percent (10%) of the FAn For that Month plus


twelve and one half percent (12.5%) of the SAn for ,that Month plus








Petroleum Agreement. MOE/GNPC/Hehcomn 39


 sixteen percent (16%) of the TAn for that Month plus twenty


percent (20%) of the ZA„ for that Month all divided by the


weighted average Market Price as determined in accordance with


Article 11.7.





d) The AGE calculations shall be made in U S. Dollars with all non-dolJar


expenditures converted to U.S. Dollars in accordance with Section 1.3.5


of Annex 2. When the AOE calculation cannot be definitively made


because of disagreement on the World Market Price or any other factor


in the formulae, then a provisional AOE calculation shall be made on the


basis of best estimates of such factors, and such provisional calculation


shall be subject to correction and revision upon the conclusive


determination of such factors, and appropriate retroactive adjustments


shall be made.





e) The AOE shall be calculated on a monthly basis, with the AOE to be


paid commencing with the first Month following the Month in which the


FAn, SAn, TAn, or ZAn, (as applicable) becomes positive. Because the


precise amount of the AOE for a Calendar Year cannot be determined


with certainty until after the end of that Calendar year, deliveries (or


payments in lieu) of the AOE with respect to a Month shall be made


during such Calendar Year based upon the Contractor's good faith


estimates of the amounts owing, with any adjustments following the end


of the Calendar Year to be settled pursuant to the procedures agreed to


pursuant to Article 10.7, Final calculations of the AOE shall be made


within thirty (30) days following the filing by the Contractor of the


annual tax return for such Calendar year pursuant to the Petroleum


Income Tax Law, and the amount of the AOE shall be appropriately


adjusted in the event of a subsequent adjustment of the amount of tax


owing on such term.





10.3 GNPC shall act as agent for the State in the collection of all Petroleum or


money accruing to the State under this Article and delivery or payment to


GNPC by Contractor shall discharge Contractor's liability to deliver the share


to the State.


10.4 The State or GNPC, having met the requirements of Article 15.1, may elect, in





accordance with terms and conditions to be mutually agreed by the Parties, that


all or part of the Crude Oil to be distributed to the State or to GNPC pursuant to


this Article shall be sold and delivered by the State or GNPC to Contractor or


its Affiliate for use and disposal and in such case Contractor or its Affiliate


shall pay to the State or to GNPC, as the case may be, the Market Price for any


Crude Oil so sold and delivered. Market Price for purposes of this Article 10.4


shall be the amounts actually realised by Contractor or said Affiliate on its


f said Crude Oil in arm’s length commercial transactions, or for its











Petroleum Agreement, MOE/GNPQHehconia 40





 other resales or dispositions of said Crude Oil, based upon world market prices


determined in the manner specified in Article 11 7(b).





10.5 Ownership and risk of loss of all Crude Oil produced from the Contract Area


which is purchased, and all of its percentage Interest or other Crude Oil lifted,


by Contractor shall pass to Contractor at the outlet flange of the marine terminal


or other storage facility for loading into tankers or other transportation


equipment referred to in Article 11.1.


10.6 Subject to the provisions of Article 15 hereof, Contractor shall have the right


freely to export and dispose of all the Petroleum allocated and/or delivered to it


pursuant to this Article.





10.7 The Parties shall through consultation enter into supplementary agreements


concerning Crude Oil lifting procedures, lifting and tanker schedules, loading


conditions, Crude Oil metering, and the settlement of lifting imbalances, if any,


among the Parties at the end of each Calendar Year. The Crude Oil (o be


distributed or otherwise made available to the Parties in each Calendar Year in


accordance with the preceding provisions of this Article shall insofar as


oossible be in reasonably equal monthly quantities. 3'tT













































































41


Petroleum Agreement. MOE/GNPC/Hehcoma


 ARTICLE 11








MEASUREMENT AND PRICING OF CRUDE OIL


11.1 Crude Oil shall be delivered by Contractor to storage tanks constructed,


maintained and operated in accordance with applicable laws and good oilfield


practice. Crude Oil shall be metered or otherwise measured for quantity and


tested for quality in such storage tanks for all purposes of this Agreement. Any


Party may request that measurements and tests be done by an internationally


recognised inspection company. Contractor shall arrange and pay for the


conduct of any measurement, or test so requested provided, however, that in the


case of (1) a test requested for quality purposes and (2) a lest requested on


metering (or measurement) devices, where the test demonstrates that such


devices are accurate within acceptable tolerances, the Party requesting the test


shall reimburse Contractor for the costs associated with the test or tests.


11.2 GNPC or its authorised agent shall have the right;


a) to be present at and to observe such measurement of Crude Oil; and





b) to examine and test whatever appliances are used by Contractor therefor.





11.3 In the event that GNPC considers Contractor’s methods of measurement to be


inaccurate GNPC shall notify Contractor to this effect and the Parties shall meet


within ten (10) days of such notification to discuss the matter. Where after


thirty (30) days the Parties cannot agree over the issue they shall refer for


resolution under Article 24 the sole question of whether Contractor’s method of


measuring Crude Oil is accurate and reasonable. Retrospective adjustments to


measurements shall be made where necessary to give effect to the decision


rendered under Article 24.


11.4 If upon the examination or testing of appliances provided for in Article 11.2


any such appliances shall be discovered to be defective:


a) Contractor shall take immediate steps to repair or replace such appliance;


and





b) subject to the establishment of the contrary, such error shall be deemed to


have existed for three (3) months or since the date of the last examination


and testing, whichever occurred more recently.


11.5 In the event that Contractor desires to adjust, repair or replace any measuring


appliance, it shall give GNPC reasonable notice to enable GNPC or its


ed agent to be present.








Petroleum Agreement MOEjG NPOHehcoma


11.6 Contractor shall keep full and accurate accounts concerning all Petroleum


measured as aforesaid and provide GNPC with copies thereof oil a monthly


basis, not later than ten (10) days after the end of each Month.


11.7 The market price for Crude Oil delivered to Contractor hereunder shall be


established with respect to each lifting as follows:





a) On Crude Oil sold by Contractor in arm’s length commercial transactions,


the Market Price shall be the price actually realized by Contractor on such


sales. 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 U.S. Dollars or currencies convertible thereto, or


affected in whole or in part by considerations other than the usual economic


incentives for commercial arm’s length Crude Oil sales;


b) On other sales by Contractor, on exports by Contractor without sale and on


sales under Article 15.2, the Market Price shall be determined by reference


to world market prices of comparable Crude Oils sold in arm’s length


transactions for export in the major world petroleum markets, and adjusted


for oil quality, location and conditions of pricing, delivery and payment:


c) If the quality of various Crude Oils produced from the Contract Area is


different, segregated and sold separately, the Market Price shall be


determined separately for each type sold and/or exported by Contractor,


only to the extent that the different quality grades remain segregated


throughout to the point where they are sold.


However if grades of different quality are commingled into a common


stream, Contractor and GNPC shall agree on an equitable methodology for


assessing the relative value of each grade of Crude Oil comprising the


blend, and shall implement an equitable methodology to enable the


producer of a higher quality Crude Oil be reimbursed by the producer of a


lower quality Crude Oil.





d) The price of Crude Oil shall be expressed in U.S. Dollars per barrel, F.O.B.


the point of delivery by Contractor.


11.8 Contractor shall notify GNPC of the Market Price determined by it for its


respective lifting during each Quarter not later than thirty (30) days after the end


-At\














Petroleum Agreement, MOE/GNPOHeltcoriia 43





 11.9 If GNPC considers that the price notified by Contractor was not correctly


determined in accordance with the provisions of Article 11.7. it shall so notify


Contractor not later than thirty (30) days after notification by Contractor of such


price, and GNPC and Contractor shall meet not later than twenty (20) days


thereafter to agree on the correct market price.


11.10 In the event that GNPC and Contractor fail to agree upon the commencement of





meetings for the purpose described in Article 11.9 above, or cannot agree on


the correct Market Price pursuant to Article 11.9, the Market Price shall be


referred for determination in accordance with Article 24 of this Agreement..__


-4 V2-N











































































































Petmleum Agreement, MOFJGNPC/Heticoma 44





 ARTICLE 12








TAXATION AND OTHER IMPOSTS





12.1 No tax. duly, lee or other impost shall be imposed by the State or any political


subdivision on Contractor, its Subcontractors or its Affiliates in respect of


activities related to Petroleum Operations and to the sale and export of


Petroleum other than as provided in this Article.


12.2 Contractor shall be subject to the following:





i) Royalty as provided for in Article 10.1 (a);


ii) Income Tax in accordance with the Petroleum Income Tax Law 1987





(PNDC L. 188) levied at the rate of thirty-five percent (35%);


iii) Additional Oil Entitlement as provided for in Article 10.1(b);


iv) Payments for rental of Government property, public lands or for the





provisions Of specific services requested by Contractor from public


enterprises; provided, however, that the rates charged Contractor for such


rentals or services shall not exceed the rates charged to other members of


the public who receive similar services or rentals;


v) Surface rentals payable to the State pursuant to Section 18 of the Petroleum


Law per square kilometre of the area remaining at the beginning of each


Contract Year as part of the Contract Area, in the amounts as set forth


below.





Phase of Operation Surface Rentals Per Annum


Initial Exploration Period US $ 30 per sq. km.





1st Extension Period LIS $50 per sq. km.


2nd Extension Period US $ 75 per sq. km.





Development & Production Area US $100 per sq. km.





vi) Taxes, duties, fees or other imposts of a minor nature and amount insofar as


they do not relate to the stamping and registration of this (1) Agreement,


(2) any assignment of interest in this Agreement, or (3) any contract in


respect of Petroleum Operations between Contractor and any ^_


Siibcon tractor,








Petroleum Agreement MOE/GNPC/Hehcona 45


12.3 Save lor withholding tax at a rate of five percent (5%) from the aggregate


amount clue to any Subcontractor if and when required by Section 27 (1) of the


Petroleum Income Tax Law. Contractor shall not be obliged to withhold any


amount in respect of tax from any sum due from Contractor to any


Subcontractor.


J2.4 Contractor shall not be liable for any export tax on Petroleum exported from


Ghana and no duly or other charge shah be levied on such exports. Vessels or


other means of transport used in the export of Contractor's Petroleum from


Ghana shall not be liable for any tax, duty or other charge by reason of their use


for that purpose.


12.5 Subject to the local purchase obligations hereunder, Contractor and


Subcontractors may import into Ghana all plant, equipment and materials to be


used solely and exclusively in the conduct of Petroleum Operations without


payment of customs and other duties, taxes, fees and charges on imports save


minor administrative charges,


PROVIDED THAT:


a) GNPC shall have the right of first refusal to purchase any item imported


duty free under this Article which is later sold in Ghana; and


b) where GNPC does not exercise its right of purchase Contractor may sell to


any other person only subject to all import duty and taxes as if such items


were being imported at the time of such sale; provided, however, that no


duty or tax shall be levied if the purchaser could have imported the item


sold free of duty or tax under an exemption similar to Contractor's


hereunder.


12.6 Foreign National Employees of Contractor or its Affiliates, and of its


Subcontractors, shall be permitted to import into Ghana free of import duty'


their personal and household effects in accordance with Section 22.7 of


PNDCL 64; provided, however, that no property imported by such employee


shall be resold by such employee in Ghana except in accordance with Article


12.5.





12.7 Subject to GNPC’s rights under Article 19, Contractor, Subcontractors and


Foreign National Employees shall have the right to export from Ghana all


previously imported items as defined. Such exports shall be exempt from all


customs and other duties, taxes, fees and charges on exports save minor

















Petroleum Agreement MOEJCNPOHehcoaia 46


 12.8 The Ghana Income Tax law applicable generally to individuals who are not


employed in the petroleum industry shall apply in the same fashion and at the


same rates to employees of Contractor, its Affiliates and its Subcontractors;


provided, however, that Foreign National Employees of Contractor, its


Affiliates, and its Subcontractors shall be exempt from the income tax and


withholding tax liabilities if they arc resident in Ghana for thirty (30) days or


* - * - y Calendar Year. -r--









































































































































Petrvleum Agreement. MOF,'GNPC/Hehcoma


 ARTICLE 13





FOREIGN EXCHANGE TRANSACTIONS








13.1 Contractor shall for the purpose of this Agreement be entitled to receive, remit,


keep and utilise freely abroad all the foreign currency obtained from the sales of


the Petroleum assigned to it by this-Agreement or purchased hereunder, or from


transfers, as well as its own capital, receipts from loans and in general all assets


thereby acquired abroad. Upon making adequate arrangements with regard to


its commitment to conduct Petroleum Operations, Contractor shall be free to


dispose of this foreign currency or assets as it deems fit.





13.2 Contractor shall have the right to open and maintain in Ghana bank accounts in


foreign currency and Ghanaian currency. No restriction shall be made on the


import by Contractor in an authorised manner of funds assigned to the


performance of the Petroleum Operations and Contractor shall be entitled to


purchase Ghanaian currency through authorised means, without discrimination,


at the prevailing rate of exchange; provided, however, that such prevailing rate


applicable to Contractor hereunder for all transactions for convening Ghanaian


currency into U.S. Dollars, and vice versa, shall be at a buying or selling rale of


exchange, as the case may be, not less favourable to Contractor than that quoted


by the Slate or its foreign exchange control authority to any person or entity on


the dates of such conversion (excepting those special rates provided by the


State to discretely defined groups for special, limited purposes).





13.3 Contractor shall be entitled to convert in an authorised manner into foreign


currencies of its choice funds imported by Contractor for the Petroleum


Operations and held in Ghana which exceeds its local requirements at the


prevailing rate of exchange referred to in Article 13.2 and remit and retain such


foreign currencies outside Ghana.


13.4 In the event of resale by Contractor or its Affiliate of Crude Oil purchased from





the State or GNPC, the State or GNPC shall have the right to request payment


for such sales of its share of production to Contractor or its Affiliate to be held


in the foreign currency in which the resale transaction took place or in U.S.


Dollars.





13.5 Contractor shall have the right to make direct payments outside of Ghana from


its home offices and elsewhere, to its Foreign National Employees, and to those


of its Subcontractors and suppliers ‘not resident in Ghana’ (as that term is


defined in Section 160 of the Internal Revenue Act 2000 (Act 592) for wages,


salaries, purchases of goods and performance of services, whether imported


into Ghana or supplied or performed therein for Petroleum Operations carried


out hereunder, in accordance with the provisions of this Agreement, in respect





.a





Petroleum Agree'wnl MOE/GNPOHeltconv 48





 of services performed within the framework of this Agreement, and such


payments shall be considered as pan of the costs incurred in Petroleum


Operations.


13.6 In the event of any changes in the location of Operator’s home or other offices,


Operator shall so notify GNPC and the State.





13.7 All payments which this Agreement obligates Contractor to make to GNPC or


the State, including income taxes, shall be made in U.S. Dollars, except as


requested otherwise pursuant to Article 13.4 above. All payments shall be


made by the appropriate means of transfer, in immediately available funds to a


bank to be designated by GNPC or the State, and reasonably accessible to


Contractor by way of its being able to receive payments made by Contractor


and give a confirmation of receipt thereof, or in such other manner as may be


mutually agreed.





13.8 All payments, which this Agreement obligates GNPC or the State to make to


Contractor, shall be made in U.S. Dollars. All payments shall be made by the


appropriate means of transfer in immediately available funds to a commercial


bank to be designated by Contractor, and reasonably accessible to GNPC or the


State by way of its being able to receive payments made by GNPC or the State


and give confirmation of receipt thereof, or in such other manner as may be


■reed. ---r-




































































Petroleum Agreement. MOE/GNPQHeticoma 40


 ARTICLE 14








SPECIAL PROVISIONS FOR NATURAL GAS


PART I - GENERAL


14.1 Contractor shall have the right to use Natural Gas produced from any


Development and Production Area for Petroleum Operation within the Contract


Area such as reinjection lor pressure maintenance and/or power generation.


14.2 Contractor shall have the right to flare Natural Gas:


a) to the extent provided in an approved Development Plan;


b) during production testing operations, including extended well testing


operations with respect to crude oil;


c) when required for the safety of persons engaged in Petroleum Operations in


accordance with petroleum industry practice;


d) where reinjection is inadvisable from the point of view of good reservoir or


petroleum engineering practice; or


e) as otherwise authorised by the Minister.


14.3 Contractor shall have the right to extract condensate and Natural Gas liquids for


disposition under the provisions relating to Crude Oil. Residual Natural Gas


remaining after the extraction of condensate and Natural Gas liquids is subject


to the provisions of this Article.





PART II -ASSOCIATED GAS


14.4 Based on the principle of full utilisation of Associated Gas and without


substantial impediment to Crude Oil production, the Development Plan of each


Development and Production Area shall include a plan of utilisation for


Associated Gas.


14.5 If Contractor considers that production processing and utilisation of Associated


Gas from any Development and Production Area to be non-economic, GNPC


shall have the option to offtake such Associated Gas at the outlet flange of the











Petroleum Agreement MOE/GNPC/Hehcoma 50


 gas-oil separator at its Sole Risk for its own use and to that end the


Development Plan proposed by Contractor shall include:





a) a statement of the facilities necessary for the delivery to GNPC of such


Associated Gas: and


b) a plan for the reinjection of such Associated Gas into the reservoir.





14.6 If GNPC elects to offtake Associated Gas under Article 14.5 above, GNPC


shall pay for the cost of any additional facilities and any related production cost


required for the delivery of the gas to GNPC, provided that:


a) if Contractor subsequently wishes to participate in GNPC*s gas utilisation


programme, it shall reimburse GNPC for the costs of such facilities plus a


premium of two hundred percent (200%); or





b) if Contractor subsequently develops a gas utilisation programme and


requires the use of such facilities, Contractor shall pay GNPC an agreed fee


for such use.








PART 111 ■ NON-ASSOCIATED GAS


14.7 Contractor shall notify the Minister in writing as soon as any Discovery of Non-





Associated Gas is made in the Contract Area.





14.8 As soon as possible after the technical evaluation of the test results of such


Discovery is complete and in any event not later than one hundred eighty (180)


days from the date of Discovery, Contractor shall by a further notice in writing


to the Minister (the “Notice”) indicate whether in Contractor’s opinion the


Discovery' merits appraisal.





14.9 Where Contractor’s Notice indicates that the Discovery does not at that time


merit appraisal but may merit appraisal or additional evaluation at a later date


during the Exploration Period or during the initial period under a new


Agreement made pursuant to Article 14.18 below, then Contractor need not


submit a proposed Appraisal Programme at that time but instead shall indicate


what other studies or evaluations may be warranted before an Appraisal


Programme is undertaken. Where Contractor’s Notice indicates that the


Discovery will not merit appraisal at any time during the Exploration Period or


during the initial period under a new Agreement made pursuant to Article


14.18, then GNPC may by notice to Contractor require Contractor to relinquish


the^ rights to the Non-Associated Gas within that Discovery Area. ^

















Petroleum Agreement MOE/GNPC/Helicorua 51


 14.10 Where Contractor’s Notice indicates that the Discovery merits the drilling of


one or more Appraisal Wells at that time, Contractor shall prepare and submit


to the JMC the appropriate Appraisal Programme which shall he scheduled to


be completed within two (2) years of the submission of the Notice to the


Minister.


14.11 Not later than ninety (90) days from the date on which the Appraisal





Programme relating to a Discovery is concluded, Contractor shall submit to the


Minister a report containing the results of the Appraisal Programme. If the


report concludes that the Discovery merits commercial assessment. Contractor


shall notify the Minister within one hundred eighty (180) days from the date on


which the Appraisal Programme relating to the Discover)' was completed of a


programme of such assessment and shall conduct such programme during the


rest of the Exploration Period and, if applicable, during the initial period under


a new Agreement made pursuant to Article 14.18. Notwithstanding the above,


Contractor may also notify the Minister that commercial assessment of the


Discovery is not warranted at that time but the Discovery may merit such


assessment at a later date during the Exploration Period or during the initial


period referred to above. If Contractor so notifies the Minister, Contractor shall


also indicate what other studies or evaluation may be warranted before a


commercial assessment is undertaken.


14.12 The purpose of the commercial assessment shall be to study the uses to which


production from the Discovery Area, separately or together with any Associated


Gas can be devoted and whether involving exports or domestic utilisation. As


part of the assessment, the Parties shall also pursue discussions on the required


contractual arrangements for disposition of the Natural Gas to potential


purchasers and/or consumers of the Natural Gas.


14.13 Contractor may consult with the other Parties and may make appropriate





representations proposing changes in the fiscal and other provisions of this


Agreement which may, in the opinion of Contractor, affect the above


determinations made pursuant to Articles 14.10 and 14.11. The other Parties


may, where feasible and in the best interests of the Parties, agree to make such


changes or modifications in the existing arrangements.


14.14 Nothing in this Part III of Article 14 shall be read or construed as requiring





Contractor to relinquish any area


i) which constitutes or forms part of another Discovery Area in respect of


which Contractor has given to the Minister a separate notice confirming


that such Discovery merits confirmation or commercial assessment; or


anstitutes or forms part of a Development and Production Area.














Petroleum Agreement, MOEJGNFC/Hehcofva 52


 PART IV NATURAL GAS PROJECTS





14.15 If at any time during the commercial assessment Contractor informs the


Minister in writing that the Discovery can be produced commercially, it shall as


soon as reasonably possible thereafter submit to the Minister and to GNPC its


proposals tor an agreement relating to the development of the Discovery on the


principles set forth in this Part IV of Article 14. The State and GNPC


undertake on receipt of such notice to negotiate in good faith with Contractor


with a view to reaching agreement on terms for such production. Any such


agreement will be based on terms and fiscal requirements which shall be no


less favourable to Contractor than those provided for in Articles 10 and 11 and


which take full account of the legitimate interest of the State as the resource


owner.


14.16 If at any time during the commercial assessment Contractor has identified a


market in Ghana for the reserves of Associated Gas and/or Non-Associated Gas


or any part thereof that can be saved without prejudice to an export project, the


Parties shall proceed in good faith to negotiate the appropriate contractual


arrangements for the disposition of the gas. In the event that there is a


domestic market for such gas, Contractor shall receive for delivery onshore of


its share of the gas a price to be agreed between GNPC and Contractor taking


into account among other things the cost of developing the gas and the uses


which will be made of the gas.


14.17 In the event of a Discovery of Natural Gas in the Contract Area which is to be





developed and commercially produced, the provisions of this Agreement in


respect to interests, rights and obligations of the Parties regarding Crude Oil


shall apply to Natural Gas, with the necessary' changes in points of detail,


except with respect to specific provisions in this Agreement concerning Natural


Gas and different or additional provisions concerning Natural Gas which may


be agreed by the Parties in the future.


a) The system for the allocation of Natural Gas among the Parties shall follow





the same general format as Article 10.1 provides for Crude Oil, with the


exception that the royalty to be delivered to the State on Natural Gas shall


be at the rate of five percent (5%) of the annual Gross Production of


Natural Gas as an incentive to enhance the viability of a gas project on the


basis herein provided for.





b) The Parties recognise that projects for the Development and Production of


Natural Gas are generally long-term in nature for both the project


developers and the customers who purchase the Natural Gas. Substantial


investments and dedication of facilities require long-term commitments on


s. This Agreement, being for a specific term of years, may not











Petroleum Ag/eomenf, MOE/GNPC/Heticonia 53





 cover the length of time for which customers in given cases will require


commitments on the part of the Parties to this Agreement to deliver their


respective shares of the output. Accordingly the Parties agree to consider


undertaking such commitments where reasonably required lor the efficient


and viable development of a Natural Gas project, it is recognised that,


unless otherwise agreed by the Parties hereto, Contractor will have no right


or interest in the project or the Natural Gas produced and delivered after


the term of this Agreement has expired.





c) In the event that Contractor or an Affiliate decides to construct facilities to


receive Natural Gas from the Development and Production Area for further


processing or for use as a feedstock or fuel in order to convert such Natural


Gas into one or more commercially marketable products, the Contractor


shall be entitled to pay for such gas the price paid by the State or GNPC


under Article 14.16.


d) The Parties will consider collaboration in obtaining any common external





financing available for Natural Gas processing or Natural Gas utilisation


facilities, including project financing; however, each Party shall remain


free to finance externally its share of such facilities to the extent it prefers


to do so.


14.18 a) Where Contractor has during the continuance of the Exploration Period





made a Discovery of Non-Associated Gas but has not before the end of the


Exploration Period declared that Discovery to be commercial, the State and


GNPC will, if Contractor so requests, enter into a new Petroleum


Agreement with Contractor in respect of the Discovery Area to which that


Discovery relates;


b) The State and GNPC shall not be under any obligation to enter into an





Agreement pursuant to Article 14.18(a) unless before the end of the


Exploration Period Contractor has carried out an Appraisal Programme in


respect of that Discovery pursuant to Article 14.10 and submitted to the


Minister a report thereon pursuant to Article 14.11, or has notified the


Minister of reasonable arrangements to undertake and complete such an


Appraisal Programme during the period provided for in Article 14.18 (c) (i)


below:


c) A Petroleum Agreement entered into pursuant to Article 14.18 (a):





i) shall unless the Discovery' in respect of which the Agreement has


been made is declared by Contractor to be commercial continue in


force for an initial period not exceeding five (5) years; _____---


•2W











54


Petroleum Agreement. MOE/GNPCMebconie


 ii) shall in the event that the Discovery is declared by Contractor to be


commercial





a) continue in force for an aggregate period not exceeding thirty


(30) years;


b) include, or be deemed to include, all the provisions which,


mutatis mutandis, would have applied to a commercial


Discovery of Non-Associated Gas if Contractor had declared


such Discovery to be commercial under this Agreement;


iii) shall contain in respect of the initial period or of any renewal period


details of the evaluations or studies which Contractor proposes to


undertake in order to determine or keep under review the


commerciality of the Discovery


iv) shall confer on GNPC preemptive rights in respect of the gas


contained in the reservoir to which the Discovery relates


substantially in the form of the provisions hereinafter set out in


Article 14.18 (e).


In the event that the Parties acting in good faith are unable to agree to the


detailed terms of the Petroleum Agreement contemplated in Article


14.18(a) and the Exploration Period expires, GNPC itself, or a third party


may, at its Sole Risk, complete the Appraisal Programme relating to the


Discovery and/or develop the Discovery, provided that Contractor shall


have the right of first refusal in respect of any transaction proposed by


GNPC or such third party for the development of the Discovery.


d) Where Contractor has not, before the end of the initial period referred to


in Article 14.18(c)(i), declared the Discovery to be commercial and the


Minister has in his discretion determined that further evaluation or studies


may be required before the Discovery can be declared commercial, the


right of Contractor to retain the Discovery Area shall continue for a


further period not exceeding in the aggregate five (5) years. The right of


Contractor to retain the Discovery Area aforesaid shall be secured by the


renewal of the Agreement referred to in Article 14.18 (a) or where


necessary by a new Agreement entered into by the Parties for that purpose.


e) i) Where Contractor has not declared the Discovery to be commercial,


if GNPC has identified a market for the gas contained in the


reservoir to which the Discovery relates, or any part thereof, it may


at any time during the initial period or the aggregate period referred


 particulars of the quantities of gas required to serve that market and


the purchase price offered;





ii) Within three (3) months from the receipt of the notice referred to in


Article 14.18(e)(1), Contractor may declare the Discovery to be


commercial and in accordance with the Agreement and the


Petroleum Law prepare and submit to the Minister a Development


Plan for the production of the gas in association with GNPC to serve


the market identified at the price offered;


iii) If Contractor has not, within the period of three (3) months





aforesaid, declared the Discovery to be commercial, GNPC may at


its Sole Risk develop the Discovery to the extent necessary to meet


the requirements of the market identified as aforesaid, and in that


event the Contractor shall cease to have any rights in respect of the


gas in the reservoir required for that purpose.


































































































Petroleum Agreement MO&GNPOHehccma


 ARTICLE 15











DOMESTIC SUPPLY REQUIREMENTS (CRUDE OIL)





15.1 Crude Oil for consumption in Ghana (in this Article called the “Domestic


Supply Requirement”) shall be supplied, to the extent possible, by the Stale and


GNPC from their respective entitlements under this Agreement and under any


other contract for the production of Crude Oil in Ghana.


15.2 In the event that Crude Oil available to the State pursuant to Article 15.1 is


insufficient to fulfill the Domestic Supply Requirements, Contractor shall be


obliged together with any third parties which produce Crude Oil in Ghana, to


supply a volume of Crude Oil to be used for such Domestic Supply


Requirements, calculated on the basis of the ratio of Contractor's entitlement to


Crude Oil under Article 10.1 (d) to the similar entitlements of all such third


parties and provided that Contractor’s obligation to supply Crude Oil for


purposes of meeting the Domestic Supply Requirement shall not exceed the


total of Contractor’s said entitlement under this Agreement. GNPC shall


purchase any Crude Oil supplied by Contractor pursuant to this Article at the


weighted average Market Price determined under Article 11.7 for the Month of


delivery, and GNPC shall pay such prices in accordance with Article 13.8


within thirty (30) days after receipt of invoice, failing which Contractor's


obligations in respect of the Domestic Supply Requirement under this Article


15 shall be suspended until payment is made good, at which time deliveries


shall be resumed subject to any alternative commitments that may have been


reasonably entered into by Contractor to dispose of the Domestic Supply


Requirement Crude Oil during the period of default in payment. „_ _ _ .






























































Petroleum Agreement. MOE/GHPCi'Heticorus 57





 ARTICLE 16





INFORMATION AND REPORTS: CONFIDENTIALITY


16.1 Contractor shall keep GNPC regularly and fully informed of operations being


carried out by Contractor and provide GNPC with all information, data, (film,


paper and digital forms), samples, interpretations and reports, (including


progress and completion reports) including but not limited to the following:


a) processed seismic data and interpretations thereof;


b) well data, including but not limited to electric logs and other wireline


surveys, and mud logging reports and logs, samples of cuttings and cores


and analyses made therefrom;


c) any reports prepared from drilling data or geological or geophysical data,


including maps or illustrations derived therefrom;


d) well testing and well completion reports;


e) repons dealing with location surveys, seabed conditions and seafloor


hazards and any other reports dealing with well, platform or pipeline


locations;


f) reservoir investigations and estimates regarding reserves, field limits and


economic evaluations relating to future operations;


g) daily, weekly, monthly and other regular reports on Petroleum Operations;


h) comprehensive final reports upon the completion of each specific project or


operation;


i) contingency programmes and reports on safety and accidents;





j) procurement plans, Subcontractors and contracts for the provision of


services to Contractor.


Data shall be provided on film, paper and in digital format. In respect of the


reports, including text and graphics, paper and digital copies shall be submitted.





16.2 Contractor shall have the right to retain for its own use in connection with the


conduct of Petroleum Operations under this Agreement copies of data, well











Petroleum Agreement MOE'GNPC/Hehconia


 portions of core samples and copies of reports, studies and analyses, referred to


in Article 16.1.





16J Not later than ninety (90) days following ihe end of each Calendar Year,


Contractor shall submit to GNPC a report covering Petroleum Operations


performed in the Contract Area during such Calendar Year. Such report shall


include, but not be limited to:





a) a statement of the number of Exploration Wells, Appraisal Wells and


• Development Wells drilled, the depth of each such well, and a map on


which drilling locations are indicated;


b) a statement of any Petroleum encountered during Petroleum Operations, as


well as a statement of any fresh water layers encountered and of any other


minerals discovered;


c) a statement of the quantity of Petroleum produced and of all other minerals


produced therewith from the same reservoir or deposit;


d) a summary of the nature and extent of all exploration activities in the


Contract Area;


e) a general summary of all Petroleum Operations in the Contract Area; and





f) a statement of the number of employees engaged in Petroleum Operations


in Ghana, identified as Ghanaian or non-Ghanaiari. Contractor will give


GNPC the details of the nationality of the personnel employed by


Contractor as required by GNPC.


16.4 All data, information and reports including interpretation and analysis supplied


by Contractor pursuant to this Agreement 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.


16.5 The provisions of Article 16.4 shall not prevent disclosure:





a) by GNPC or the State:





i) lo any agency of the State or to any adviser or consultant to GNPC


or the State; or


ii) for the purpose of obtaining a Petroleum Agreement from a third


party in respect of any acreage adjacent to the Contract Area


provided Contractor is notified concerning such disclosure and


’ r to approval of Contractor (not to be unreasonably withheld);











Petmleum Agreement, MOEJGNPC/Hehcomb 59


 b) by Contractor:





i) to its Affiliates, advisers or consultants;





ii) to a bona fide potential assignee of all or part of Contractor's


interest hereunder provided GNPC is notified concerning such


potential assignee, subject to approval of GNPC (not to be


unreasonably withheld);


iii) to banks or other lending institutions for the purpose of seeking


external financing of costs of the Petroleum Operations:


iv) to nan-Affiliates who are providing services for the Petroleum


Operations, including Subcontractors, vendors and other service


contractors, where this is essential for their provision of such


services, and provided GNPC is notified about such disclosure;


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, and


provided GNPC is notified about such disclosure; or


vi) to such persons and for such purposes as the Joint Management


Committee may permit from time to time.


c) by any Party:


i) to the extent necessary in any Arbitration Proceedings or proceedings


before a Sole Expert or in proceedings before any court;


ii) with respect to data, etc., which already through, no fault of the


disclosing Party is in the public domain.


16.6 Any Party disclosing information or providing data to any third party under this


Artjple shall require such persons to observe the confidentiality of such data.
































Petroleum Agreement MO&GNPOHehconia 60


 ARTICLE 17








INSPECTION. SAFETY AND ENVIRONMENTAL PROTECTION





17.1 GNPC shall have the right of access to all sites and offices of Contractor and


the right to inspect all buildings and installations used by Contractor relating to


Petroleum Operations. Such inspections and audits shall take place in


consultation with Contractor and at such times and in such manner as not


unduly to interfere with the normal operations of Contractor.


17.2 Contractor shall take all necessary steps, in accordance with accepted petroleum


industry practice, to perform activities pursuant to the Agreement in a safe


manner and shall comply with all requirements of governing law, including all


applicable labour, health and safety and environmental laws and regulations in


force from lime to time.


17.3 Contractor 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.





17.4 Contractor shall exercise its rights and carry out its responsibilities under this


Contract in accordance with accepted petroleum industry practice, and shall


take reasonable 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; and





I) avoid any actions which would endanger the health or safety' of persons.





17.5 If Contractor's failure to comply with the requirements of Article 17.4 results in


the release of Petroleum or other materials on the seabed, in the sea, on land or


in fresh water, or if Contractor’s operations result in any other form of pollution


or^qtherwise cause harm to fresh water, marine, plant or animal life, Contractor


a ^


y\


Petroleum Agreement. M OE/G NPQHehcwa 61





 shall, in accordance with accepted petroleum industry practice, promptly take


all necessary measures to control the pollution, to clean up Petroleum or other


released material, or to repair, to the maximum extent feasible, damage


resulting from any such circumstances. If such release or pollution results


directly from the Gross Negligence of Contractor, the cost of subcontract clean¬


up and repair activities shall be borne by Contractor and shall not be included


as Petroleum Costs under this Agreement.





17.6 Contractor shall notify GNPC immediately in the event of any emergency or


major accident and shall take such action as may be prescribed by GNPC's


emergency procedures and by accepted petroleum industry practices.





17.7 If Contractor does not act promptly so as to control, clean up or repair any


pollution or damage, GNPC may, after giving Contractor reasonable notice in


the circumstances, take any actions which are necessary, in accordance with


accepted petroleum industry practice and the reasonable costs and expenses of


such actions shall be borne by Contractor and shall, subject to Article 17.5 be


included as Petroleum Costs.

























































































52


Petroleum Agreement, MOE/GNPCMehcaam


 ARTICLE 18





ACCOUNTING AND AUDITING





18.1 Contractor shall maintain, at its offices in Ghana, books of account and


supporting records in the manner required by applicable law and generally


accepted accounting principles used in the international petroleum industry and


shall file reports, tax returns and any other documents and any other financial


returns which are required by applicable law.


18.2 In addition to the books and reports required by Article 18.1 Contractor shall


maintain, at its office in Ghana, a set of accounts and records relating to


Petroleum Operations under this Agreement. Such accounts shall be kept in


accordance with the requirements of the applicable law and generally accepted


accounting principles used in the petroleum industry.


18.3 The accounts required by Articles 18.1 and 18.2 shall be kept in United States


Dollars or such other currency as GNPC and Contractor may agree.


18.4 Contractor will provide GNPC with quarterly summaries of the Petroleum


Costs incurred under this Agreement.


18.5 GNPC shall review all financial statements submitted by the Contractor as


required by this Agreement, and shall signify its provisional approval or


disapproval of such statements in writing within ninety (90) days of receipt


failing which the financial statements as submitted by Contractor shall be


deemed approved by GNPC; in the event that GNPC indicates ils disapproval


of any such statement, the Parties shall meet within fifteen (15) days of


Contractor’s receipt of the notice of disapproval to review the matter.


18.6 Notwithstanding any provisional approval pursuant to Article 18.5 GNPC shall


have the right at its sole expense and upon giving reasonable notice in writing


to Contractor to audit the books and accounts of Contractor relating to


Petroleum Operations within two (2) years from the submission by Contractor


of any report of financial statement. GNPC shall not, in carrying out such


audii, interfere unreasonably with the conduct of Petroleum Operations. Any


such audit shall be undertaken by an independent international auditing firm


and shall be completed within nine (9) months after its commencement.


Contractor shall provide all necessary facilities for auditors appointed


hereunder by GNPC including working space and access to all relevant


personnel, records, files and other materials.





If GNPC desires verification of charges from an Affiliate, Contractor shall at


C's sole expense obtain for GNPC or its representatives an audit certificate


& '•*'*








Petroleum Agreement. MQEfGNPC/Hehconta 63





 to this purpose from the statutory auditors of the Affiliate concerned. Copies of


audit reports shall be provided to the Contractor and GNPC. Any unresolved


audit claim resulting from such audit, upon which Contractor and GNPC are


unable to agree shall be submitted to the JMC for decision which must be


unanimous. In the event that a unanimous decision is not reached in respect of


any audit claim, then such unresolved audit claim shall be submitted for


resolution in accordance with Article 24. Subject to any adjustments resulting


from such audits, Contractor’s accounts and financial statements shall be


considered to be correct on expiry of a period of two (2) years from the date of


their submission unless before the expiry of such two year period GNPC has


notified Contractor of any exceptions to such accounts and statements.


18.7 Nothing in this Article shall be read or construed as placing a limit on GNPC’s





access to Contractor’s books and accounts in respect of matters arising under


Article 23.4 (a). '3'tlV































































































Petroleum Agreement, MOE/GNPC/Heliconia 64





 ARTICLE 19








TITLE TO AND CONTROL OF GOODS AND EQUIPMENT


19.1 GNPC shall be the sole and unconditional owner of:


a) Petroleum produced and recovered as a result of Petroleum Operations,


except for such Petroleum as is distributed to the State and to Contractor


pursuant to Article 10 or 14 hereof;


b) all physical assets other than those to which Article 19.3 or 19.4 apply,


which are purchased, installed, constructed or used by Contractor in


Petroleum Operations as from the time that:





i) the full cost thereof has been recovered in accordance with the


, provisions of the Accounting Guide; or





ii) this Agreement is terminated and Contractor has not disposed of


such assets prior to such termination,


whichever occurs first.





19.2 Contractor shall have the use of the assets referred to in Article 19.1(b) for


purposes of its operations under this Agreement without payment provided that


Contractor shall remain liable for maintenance, insurance and other costs


associated with such use. Where Contractor has failed to keep any such asset in


good working condition (normal wear and tear excepted), GNPC shall have the


right to recover the cost of repair or replacement of such assets from


Contractor. Contractor shall indemnify GNPC against all losses, damages,


claims or legal action resulting from Contractor's use of such assets, if and in as


far as such losses, damages, claims or legal actions were directly caused by


Contractor’s Gross Negligence.


19.3 Equipment or any other assets rented or leased by Contractor which is/are


imported into Ghana for use in Petroleum Operations and subsequently


re-exported therefrom, which is of the type customarily leased for such use in


accordance with international petroleum industry practice or which is otherwise


not owned by Contractor shall not be transferred to GNPC. No equipment or


assets owned or leased by a Subcontractor shall by reason of the provisions of


this Article 19 be deemed to be transferred to GNPC.


19.4 All assets acquired by Contractor which are not affected by the provisions of


Article 19.1 (b) above may. be used by GNPC for further Petroleum


5. Where GNPC requires the use of Contractor’s asset. GNPC shall











Petroleum Agreement, MOE/GNPC/Heliconia 65


 make a written request to Contractor and Contractor shall respond to GNPC’s


request within thirty (30) days. Where GNPC is granted the use of Contractor’s


asset, GNPC shall be liable to pay a reasonable and mutually agreed fee for


such use. and shall bear the cost of repair or replacement upon failure to keep


such assets in good working condition (normal wear and tear excepted), and


further provided (hat Contractor does not require such assets for its Petroleum


Operations.


19.5 Upon the termination of Petroleum Operations in any Area, Contractor shall





give GNPC the option to acquire any movable and immovable assets used for


such Petroleum Operations and not affected by the provisions of Article 19.1


(b) at a reasonable and mutually agreed price, always provided that Contractor


does not require such assets for Contractor’s Petroleum Operations in the


Contract Area.





19.6 All assets which are not affected by Article 19.1 (b) nor subject to Article 19.4


or 19.5 above, and all Subcontractor equipment, may be freely exported by


Contractor o'r its Subcontractor, respectively, at its discretion. -r-




























































































Petroleum Agreement. MOE/GNPC/Heliconia 66





 ARTICLE 20








PURCHASING AND PROCUREMENT





20.1 In rhe acquisition of plant, equipment, services and supplies for Petroleum


Operations. Contractor shall give preference to materials, services and products


produced in Ghana including shipping services provided by vessels owned or


controlled by Ghanaian shipping companies if such materials, services and


products can be supplied at prices, grades, quantities, delivery dates and on


other commercial terms equivalent to or more favourable than those at which


such materials, services and products can be supplied from outside Ghana.


20.2 For the purposes of Article 20.1, price comparisons shall be made on a c.i.f.





Accra delivered basis.





20.3 The acquisition of plant, equipment, services (including those to be provided by


GNPC pursuant to Article 2.8) and supplies for Petroleum Operations shall be


approved by the JMC. ---r-






















































































Petroleum Agreement, UOEJG NPCJHehconie 67





 ARTICLE 21








EMPLOYMENT AND TRAINING


214 In order to establish programmes to train Ghanaian personnel for work in


Petroleum Operations and for the transfer of management and technical skills


required for the efficient conduct of Petroleum Operations, Contractor shall pay


to GNPC the sum of two hundred thousand US dollars (US $200,000) per year


from the Effective Date to maintain and implement such programmes.


21.2 Within the first Contract Year, the Contractor shall pay to GNPC a technology


support payment of two hundred thousand U.S. dollars (US $200,000) or its


equivalent in kind. The Contractor shall have no obligation to make any


additional technology support payment. Expenditures incurred under Article


21.1 above, and this Article 21.2 shall qualify for deduction against income tax


under the Petroleum Income Tax Law and shall be considered as Petroleum


Costs.


21.3 Where qualified Ghanaian personnel are available for employment in the


conduct of Petroleum Operations, Contractor shall ensure that in the


engagement of personnel it shall as far as reasonably possible provide


opportunities for the employment of such personnel. For this purpose,


Contractor shall submit to GNPC an employment plan with number of persons


and the required professions and technical capabilities prior to the performance


of Petroleum Operations. GNPC shall provide the qualified personnel


according to the said plan.


21.4 Contractor shall, if so requested by GNPC, provide opportunities for a mutually


agreed number of personnel nominated by GNPC to be seconded for on-the-job


training or attachment in all phases of its Petroleum Operations under a


mutually agreed secondment contract. Such secondment contract shall include


continuing education and short industry courses mutually identified as


beneficial to the secondee. Cost and other expenses connected with such


assignment of GNPC personnel shall be borne by the Contractor and considered


as Petroleum Costs.


21.5 Contractor shall regularly provide to GNPC information and data relating to


worldwide petroleum science and technology, petroleum economics and


engineering available to Contractor, and shall assist GNPC personnel to acquire


knowledge and skills in all aspects of the petroleum industry.

















Petroleum Agreement MOE'GNPC/Heliconia 68


 21.6 II is agreed that there will be no disclosure or transfer of any documents, data,





know-how. technology or other information owned or supplied by Contractor,


its Affiliates, or non-Affiliates. to third parlies without Contractor’s prior


written consent, and then only upon agreement by the recipients to retain such


information in strict confidence.















































































































































69


Petroleum Agreement. MOE/GNPC/Heliconia


 ARTICLE 22





FORCE MAJEURE


22.1 The failure of a Party to fulfill any term or condition of this Agreement, except


for the payment of monies, shall be excused if and to the extent that such failure


arises from Force Majeure, provided that, if the event is reasonably foreseeable


such party shall have prior thereto taken all appropriate precautions and all


reasonable alternative measures with the objective of carrying out the terms and


conditions of this Agreement. A Party affected by an event of Force Majeure


shall promptly give the other Parlies notice of such event and also of the


restoration of normal conditions.


22.2 A Party unable by an event of Force Majeure to perform any obligation


hereunder shall take all reasonable measures to remove its inability to fulfill the


terms and ..conditions of this Agreement with a minimum of delay, and the


Parties shall take all reasonable measures to minimise the consequences of any


event of Force Majeure.


22.3 Any period set herein for the completion by a Party of any act required or


permitted to be done hereunder, shall be extended for a period of time equal to


that during which such Party was unable to perform such actions as a result of


Force Majeure, together with such time as may be required for the resumption


of Petroleum Operations.


22.4 Except in the case of:


a) a law of general application which is not discriminatory;


b) an action taken in consequence of an emergency arising from a condition of


Force Majeure;


GNPC may not claim Force Majeure in respect of any action or provision of the


State or any agency of the State.



































Petroleum Agreement. MOE/GNPC/Helicoma 70


 ARTICLE 23








TERM AND TERMINATION


23.1 Subject to this Article the term of this Agreement shall be thirty (30) years


commencing from the Effective Date.


23.2 At the end of the term provided for in Article 23.1. provided that this


Agreement has not been terminated earlier, the Parties may negotiate


concerning the terms and conditions of a further agreement with respect to the


Contract Area or any part thereof, but no failure to enter any such further


agreement shall give rise to arbitration pursuant to Article 24 hereof.


23.3 Subject to Article 22, Termination of this Agreement shall result upon the


occurrence,of any of the following:


a) the failure of Contractor through any cause other than Force Majeure, to


commence Exploration Operations sixty (60) days after the Effective Date,


pursuant to Article 4.1;


b) the relinquishment or surrender of the entire Contract Area;


c) the termination of the Exploration Period including extensions pursuant to


Article 3 without notification by Contractor of commerciality pursuani to


Article 8 in respect of a Discovery of Petroleum in the Contract Area,


provided however Termination shall not occur while Contractor has the


right to evaluate a Discovery for appraisal or commerciality and/or propose


a Development Plan pursuant to Articles 8 or 14, or once a Development


Plan has been approved, nor when the provisions of Articles 8.13 through


8.19 are applicable;


d) if, following a notice that a Discovery is commercial the Exploration Period


terminates under Article 3 without a Development Plan being approved,


provided however that Termination shall not occur when the provisions of


Articles 8.13 through 8.19 are applicable;


e) the failure of Contractor through any cause other than Force Majeure, to


commence preparations with respect to Development Operations pursuant


to Article 8.11; or


23.4 Subject to Article 22 and pursuant to procedures described in Article 23.5


below GNPC and/or the State may terminate this Agreement upon the


uncorrected occurrence of any of the events (or failures to act listed) below:








Petroleum Agreement. MOE/GNPC'Helicorva n


 a) the submission by Contractor to GNPC of a written statement which


C'ontractor knows or should have known, to be false, in a material


particular; provided that in the event of intent on the part of Contractor to


cause serious damage to GNPC or the State, a period for remedy of such


false statement shall not be given;


b) the assignment or purported assignment by Contractor of this Agreement


contrary to the provisions of Article 25 hereof;





c) the insolvency or bankruptcy of Contractor, the entry by Contractor into


any agreements or composition with its creditors, taking advantage of any


law for the benefit of debtors or Contractor’s entry into liquidation, or


receivership, whether compulsory or voluntary, and there is thereby


justifiable anticipation that the obligations of Contractor hereunder will not


be performed;





d) the intentional extraction by Contractor of any material of potential


economic value other than as authorised under this Agreement, or any


applicable law except for such extraction as may be unavoidable as a result


of Petroleum Operations conducted in accordance with accepted petroleum


industry practice;


e) failure by Contractor:


i) to fulfill its minimum work obligations pursuant to Article 4.3;


saveWhere the Minister has waived the default; or


ii) to carry out an approved Appraisal Programme undertaken by


Contractor pursuant to Article 8, unless Contractor notifies GNPC


and the Minister that the Appraisal Programme should be


amended and submits said amendment to the JMC for its review;


f) substantial and material failure by Contractor to comply with any of its


obligations pursuant to Article 7.1 hereof;


g) failure by Contractor to make any payment of any sum which ts due to


GNPC or the State pursuant to this Agreement within thirty (30) days after


receiving notice that such payment is due; or


h) failure by Contractor to comply with any decisions reached as a result of


any arbitration proceedings conducted pursuant to Article 24 hereof.


23.5 If GNPC and/or the State believe an event or failure to act as described in


Article 23,4 above has occurred, a written notice shall be given to Contractor


describing the event or failure. Contractor shall have thirty (30) days from








Petroleum Agreement, MOE/GNPC/Heliconia 72


receipt of said notice to commence and pursue remedy of the event or failure


cited in the notice. If after said thirty (30) days' Contractor has failed to


commence appropriate remedial action, CiNPC and/or the State may then issue


a written notice of Termination to Contractor which shall become effective


thirty (30) days from receipt of said notice by Contractor unless Contractor has


referred the matter to arbitration. In the event that Contractor disputes whether


an event specified in Article 23.3 or Article 23.4 has occurred or been


remedied, Contractor may, any time up to the effective date of any notice of


Termination refer the dispute to arbitration pursuant to Article 24 hereof. If so


referred, GNPC and/or the State may not terminate this Agreement in respect of


such event except in accordance with the terms of any resulting arbitration


award.


23.6 Upon Termination of this Agreement, all rights of Contractor hereunder shall


cease, except for such rights as may at such lime have accrued, and without


prejudice to any obligation or liability imposed or incurred under this


Agreement prior to Termination and to such rights and obligations as the


Parties may have under applicable law.


23.7 Upon Termination of this Agreement or in the event of an assignment of all the


rights of Contractor, all wells and associated facilities shall be left in a state of


good repair in accordance with accepted petroleum industry practice. ______ _







































































Petroieum Agreement. MOE/GNPOHebconia 73





 ARTICLE 24








CONSULTATION. ARBITRATION AND INDEPENDENT EXPERT


24.1 Except in the cases specified in Article 26.4 any dispute or difference arising


between the State and GNPC or either of them on one hand and Contractor on


the other hand in relation to or in connection with or arising out of any terms


and conditions of this Agreement shall be resolved by consultation and


negotiation. In the event that no agreement is reached within thirty (30) days


after the date when cither Party notifies the other that a dispute or difference


exists within the meaning of this Article or such longer period specifically


agreed to by the Parties, any Party shall have the right subject to Article 24.8 to


have such dispute or difference settled through international arbitration under


the auspices of the Arbitration Institute of the Stockholm Chamber of


Commerce Stockholm, Sweden.





24.2 The tribunal shall consist of three (3) arbitrators. Each Party to the dispute


shall appoint one (1) arbitrator and those so appointed shall designate an umpire


arbitrator. If a Party's arbitrator and/or the umpire arbitrator is not appointed


within the periods provided in the rules referred to in Article 24.5 below, such


Party's arbitrator and/or the umpire arbitrator shall at the request of any Party to


the dispute be appointed by the Arbitration Institute of the Stockholm Chamber


of Commerce.








24.3 No arbitrator shall be a citizen of the home country of any Party hereto, and


shall not have any economic interest or relationship with any such Party.





24.4 The arbitration proceedings shall be conducted in Stockholm, Sweden, or at


such other location as selected by the arbitrators unanimously. The proceedings


shall be conducted in the English language.





24.5 The arbitration tribunal shall conduct the arbitration in accordance with the


arbitration rules of the United Nations Commission on International Trade Law


("UNCITRAL") of December 15, 1976, except as provided in this Article. For


purposes of Article 33.1 of said UNCITRAL rules, the arbitration tribunal shall


apply the governing law and the provisions of this Agreement in determining


the dispute.





24.6 If the opinions of the arbitrators are divided on issues put before the tribunal,


the decision of the majority of the arbitrators shall be detenuinative. The award


of the tribunal shall be final and binding upon the Parties.





24.7 The right to arbitrate disputes arising out of this Agreement shall survive the


^termination of this Agreement. ^VCLT





w


Petroleum Agreement. MOE'GNPC/Heliconia 74





 24.8 In lieu of resorting to arbitration, the Parties to a dispute arising under this


Agreement, including the Accounting Guide, may by mutual agreement refer


the dispute for determination to a Sole Expert to be appointed by the Parties. In


such case, the Parties shall agree on the relevant qualifications of the Sole


Expert, the terms of reference for such proceeding, the schedule of presentation


of evidence and testimony of witnesses, and other procedural matters. The


decision of the Sole Expert shall be final and binding upon the Parties. The Sole


Expert shall have ninety (90) days after his appointment to decide the case,


subject to any extensions mutually agreed to by the Parties to the dispute. Upon


failure of the Sole Expert to decide the matter within the ninety (90) day period


(or any extension thereof), any Party may call for arbitration under Article 24.1


above.


24.9 Each Parly to a dispute shall pay its own counsel and other costs; however,





costs of the arbitration tribunal shall be allocated in accordance with the


decision of the tribunal. The costs and fees of the Sole Expert shall be borne


equally by the Parties to the dispute. ■. ^ ,

























































































Petroleum Agreement MOE/GNPC'Heliconia 75





 ARTICLE 25








ASSIGNMENT





25.1 This Agreement shall not be assigned by Contractor directly or indirectly in


whole or in part, without the prior written consent of GNPC, and the Minister,


which consent shall not be unreasonably withheld or delayed. GNPC and/or the


Minister may impose reasonable conditions upon the giving of consent under


this Article.





25.2 Any assignment of this Agreement shall bind the assignee as a Party to this


Agreement to all the terms and conditions hereof unless otherwise agreed and


as a condition to any assignment Contractor shall provide an unconditional


undertaking by the assignee to assume all obligations assigned by Contractor


under this Agreement.


25.3 Where in consequence of an assignment hereunder Contractor is more than one


person:


a) any agreement made between the persons who now constitute Contractor


relating to the Petroleum Operations hereunder shall be disclosed to GNPC


and the Minister and it shall not be inconsistent with the provisions of this


Agreement;


b) an operating agreement shall be established by the JMC to regulate the


conduct of Petroleum Operations thereafter, including cash-calls and the


limits of authority;


c) no change in the scope of the operations may take place without the prior


approval in writing of GNPC, which approval shall not be unreasonably


delayed or withheld; and


d) the duties and obligations of Contractor hereunder shall be joint and several


except those relating to the payment of income tax pursuant to Article 12


which shall be the several obligation of each such person.





25.4 GNPC's acquisition of Additional Interest under Article 2 or a Sole Risk


interest pursuant to Article 9 shall not be deemed to be an assignment within


the meaning of this Article. 0^ V








Vvu














Petroleum Agreement. MOE/GNPC/Hehcoma 76





 ARTICLE 26








MISCELLANEOUS





26.1 This Agreement and the relationship between the State and GNPC on one hand


and Contractor on the other shall be governed by and construed in accordance


with the laws of the Republic of Ghana consistent with such rules of


international law as may be applicable, including rules and principles as have


been applied by international tribunals.





26.2 The State, its departments and agencies, shall support this Agreement and shall


take no action which prevents or impedes the due exercise and performance of


rights and obligations of the Parties hereunder. As of the Effective Dale of this


Agreement and throughout its term, the State guarantees Contractor the stability


of the terms and conditions of this Agreement as well as the fiscal and


contractual framework hereof specifically including those terms and conditions


and that framework that are based upon or subject to the provisions of the laws


and regulations of Ghana (and any interpretations thereof) including, without


limitation, the Petroleum Income Tax Law, the Petroleum Law, the GNPC Law


and those other laws, regulations and decrees that are applicable hereto. This


Agreement and the rights and obligations specified herein may not be modified,


amended, altered or supplemented except upon the execution and delivery of a


written agreement executed by the Parties. Any legislative or administrative act


of the State or any of its agencies or subdivisions which purports to vary any


such right or obligation shall, to the extent sought to be applied to this


Agreement, constitute a breach of this Agreement by the State.


26.3 Where a Party considers that a significant change in the circumstances


prevailing at the time the Agreement was entered into, has occurred affecting


the economic balance of the Agreement, the Party affected hereby shall notify


the other Parties in writing of the claimed change with a statement of how the.


claimed change has affected the relations between the Parties.


26.4 The other Parties shall indicate in writing their reaction to such notification


referred to in Clause 26.3 within a period of three (3) months of receipt of such


notification and if such significant changes arc established by the Parties to


have occurred, the Parties shall meet to engage in negotiations and shall effect


such changes in, or rectification of, these provisions as they may agree are


necessary.





26.5 No waiver by any Party of any of its rights hereunder shall be construed or


implied, but a waiver shall be binding on such Party only if it is made


specifically, expressly and in writing. -r














Petroleum Agreement, MOE/GNPOHehconia 77





26.6 Except lor payment obligations arising under the Petroleum Income Tax Law.


any Part) failing to pay any amounts payable by it under this Agreement


(including the provisions of Annex 2) on the respective dales on which such


amounts are payable by such Party hereunder shall be obligated to pay interest


on such unpaid amounts to the Party to which such amounts are payable. The


rate of such interest with respect to each day of delay during the period of such


nonpayment shall be the rate which the Bank of England, London, certifies to


be the London Interbank offered rate (LIBOR) in the London Interbank


Eurodollar market on thirty (30) day deposits, in effect on the last business day


of the respective preceding Month, plus three percent (3%). Such interest shall


accrue from the respective dates such amounts are payable until the amounts


are duly paid. The Party to whom any such amount is payable may give notice


of nonpayment to the Party in default and if such amount is not paid within


fifteen (15) days after such notice, the Party to which the amount is owed may,


in addition to the interest referred to above, seek remedies available pursuant to


Article 24.


26.7 a) The rights and obligations under this Agreement of the State and GNPC on


the one hand and Contractor on the other shall be separate and proportional


and not joint. This Agreement shall not be consumed as creating a


partnership or joint venture, nor an association or trust (under any law other


than the Petroleum Law), or as authorising any Party to act as agent, servant


or employee for any other Party for any purpose whatsoever except as


provided in Article 10.3;


b) The duties and obligations of each Party constituting Contractor hereunder


shall be joint and several and it is recognised that each such Party shall own


and be responsible for its undivided interest in the rights and obligations of


Contractor hereunder, provided, however, that the following payments shall


be the separate obligation of and shall be made by each Party which


constitutes the Contractor:


i) Payments under the Petroleum Income Tax Law;


ii) Payments of royalty taken in cash under the provisions of Article


10.1(a); and


iii) AOE share under the provisions of Article 10.1(h). ----





























Petroleum Agreement. MOE/GNPC/Hebcoma


 26.8 This Agreement shall not take effect unless and until it has been executed by


the Parties and has been ratified by the Parliament of Ghana whichever occurs


later (the Effective Date). If this Agreement is not ratified within six (6) months


of the execution of the Agreement by the Parties, then Contractor shall have the


right to withdraw from this Agreement at any time thereafter, and, upon such


withdrawal, all rights and obligations of all Parties hereunder shall cease and


' ninate. •--- ~ ---






































































































































Petroleum Agreement, MO&GNPC/Hehcoma 79





 ARTICLE 27








NOTICE





27.1 Any notice, application, request, agreement, consent, approval, instruction,


delegation, waiver or other communication required or permitted to be given


hereunder shall be in writing addressed and marked for the attention of the


State, GNPC or the Contractor as appropriate, and must be left at the address of


the addressee or sent by facsimile or by an appropriate electronic means to the


addressee specified below:








FOR THE STATE.


MINISTER OF ENERGY


MINISTRY OF ENERGY


PRIVATE MAIL BAG


MINISTRY POST OFFICE


ACCRA. GHANA





Telephone: 233 21 661151 - 3


Telefax: 233 21 668262








FOR GHANA NATIONAL PETROLEUM CORPORATION:


THE MANAGING DIRECTOR





GHANA NATIONAL PETROLEUM CORPORATION


PETROLEUM HOUSE


HARBOUR ROAD


PRIVATE MAIL BAG


TEM4


GHANA





Telephone: 233-22-204726


Telefax: 233-22-202854 ___.____





























80


 FOR CONTRACTOR:





THE MANAGING DIRECTOR


HEUCONIA ENERGY GHANA LIMITED


NO. 5, 2nd WEST STREET


WEST AIRPORT RESIDENTIAL AREA


P. O. BOX 30414


KIA, ACCRA


GHANA


Telephone: 233-21-781124/5





Fax: 233-21-785689/781126


27.2 Any communication referred to in Article 27.1 shall take effect from the time it is





received. A notice is deemed to be received upon acknowledgement of receipt by


the recipient. A notice sent by facsimile is deemed to be received upon


production of a transmission report from the machine from which the facsimile


was sent in its entirety to the recipient’s facsimile number, and the recipient


confirms such receipt.








IN WITNESS WHEREOF the Parties have caused this Agreement to be executed by their


duly authorized representatives as of the date first written above.








FOR THE STATE Witnessed:



































FOR GHANA NATIONAL PETROLEUM


Witnessed:
































Petroleum Agreement. MOE/GNPC/Hehcoriia


 ANNEX 1











CONTRACT AREA





The Contract Area of 2080 square kilometres shall be the area described by the


following coordinates:





1. 2° 37’ 30"W 4° 50*00"N


2. 2° 15*00" W 4° 50* 00"N


3. 2° 15*00” W 4° 25* 00" N





4. 2° 20’ 00" W 4° 25*00"N


5. 2° 20' 00" W 4° 22* 09.73" N


2° 37’ 30” W 4° 22* 09.73” N


 FOR CONTRACTOR


HEUCONIA ENERGY GHANA LIMITED Witnessed:














to








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Petroleum Agicemmi MOVGNPC/Helicom 82


HELICONIA CONTRACT AREA annex 1



































































































































r


 ANNEX 2








ACCOUNTING GUIDE








The purpose of this Accounting Guide is to establish equitable methods as between the


Parties for determining charges and credits applicable to operations under the


Agreement. Principles established by this Accounting Guide shall truly? reflect the


Contractor's actual cost. _


N
































































































































Petroleum Agreement. MOE/GNPC/HeHconia ■ Annexes 2





 SECTION 1








1.1 GENERAL PROVISIONS





1.1.1 Words and terms appearing in this Annex shall have the same meaning


as in Lhe Agreement and to that end shall be defined in accordance with


Article 1 of the Agreement.





1.1.2 I his Annex may be amended by a unanimous decision of the JMC.


1.1.3 In the event of a conflict between the provisions of the Accounting





Guide and the provisions of the Agreement, the provisions of the


Agreement shall prevail.


1.2 STATEMENTS REQUIRED TO BE SUBMITTED BY CONTRACTOR





1.2.1 Within sixty (60) days from the Effective Date, Contractor shall propose


to GNPC an outline of the chart of accounts, operating records and


reports to be prepared and maintained, which shall describe the basis of


the accounting principles and procedures to be used during the term of


the Agreement, and shall be consistent with normal practice of the


international petroleum industry.





1.2.2 Within ninety (90) days of the receipt of such proposal GNPC shall


either accept it or request such revisions as GNPC deems necessary.


Failure to notify Contractor of any requested revisions within a ninety


(90) day period of receipt of such proposal shall be deemed acceptance


of such proposal.


1.2.3 Within one hundred and eighty (180) days from the Effective Date, the


Parlies shall either agree on such outline or submit any outstanding


issue for determination by a Sole Expert pursuant to the provisions of


Article 24.





1.2.4 Following agreement over the outline Contractor shall prepare and


submit to GNPC formal copies of the chart of accounts relating to the


accounting, recording and reporting functions listed in such outline.


Contractor shall also permit GNPC to inspect its manuals and to review


all procedures which are to be followed under the Agreement.





1.2.5 Without prejudice to the generality of the foregoing, Contractor shall


make separate statements relating to Petroleum Operations for each


'evelopment and Production Area as follows; .--- .---


4 t v








Petroleum Agreement. MOE'GNPC/Hehcorva - Annexes


 a) Cash Call Statement (see Section 5)


b) Production Statement (see Section 6)


c) Value of Production Statement (see Section 7)


d) Cost Statement (see Section 8)


e) Statement of Expenditures and Receipts (sec Section 9)


0 Final End-of-Year Statement (sec Section 10)


g) Budget Statement (see Section 11)


h) Long Range Plan and Forecast (see Section 12)





1.3 LANGUAGE, MEASUREMENT. AND UNITS OF ACCOUNTS





1.3.1 The U.S. Dollar being the currency unit for investments and


compensation hereunder shall therefore be the unit of currency for all


bookkeeping and reporting under the Agreement. When transactions for


an asset or liability are in Ghana Cedis or currency other than the U.S.


Dollar, the respective accounts shall be kept in such other currency as


well as the U.S. Dollar.





1.3.2 Measurement required under this Annex shall be in the metric system


and Barrels.


1.3.3 The English language shall be employed.








1.3.4 Where necessary for purposes of clarification, Contractor may also


prepare financial reports in other languages, units of measurement and


currencies





1.3.5 It is the intent of the Parties that no Party shall experience any gain or


loss at the expense of or to the benefit of the other as a result of


exchange of currency. Where any such gain or loss arises it shall be


charged or credited to the accounts under the Agreement.





1.3.6 The rate of exchange for the conversion of currency shall be the rate


quoted by the Bank of Ghana, or, where buying and selling rates are


quoted, the arithmetic average of those rates, at a close of business on


the date of such currency conversion.


aft.





VtA^





























Petroleum Agreement MOE/GNPC/Hehcoma ■ Annexes


 1.3.7 Current assets and liabilities shall be translated at the rate prevailing on


the date of settlement of the account.


1.3.8 To translate revenue received and expenditures made in Ghana Cedis or





in U.S. Dollars, the average of the monthly rate between the currencies


shall be used.


made in Ghana Cedis or in U.S. Dollars in respect of


1.3.9 Expenditures


capital items shall be translated at the rate prevailing at the date of


acquisition.


































































































5


Petroleum Agreement. MQE/GNPC/Heltconia -Annexes


 SECTION 2








2.0 CLASSIFICATION AND ALLOTMENT OF COSTS AND EXPENDITURE


2.1 All expenditure relating to Petroleum Operations shall be classified, as follows:





a) Exploration Expenditure;


b) Development Expenditure;


c) Production Expenditure;


d) Service Costs; and


e) General and Administrative expenses


and shall be defined and allotted as herein below provided.


2.2 EXPLORATION EXPENDITURE


Exploration Expenditure shall consist of all direct, indirect and allotted costs


incurred in the search for Petroleum in the Contract Area, including but not


limited to expenditure on:


a) aerial, geographical, geochemical, paleontological, geological,


topographical and seismic surveys, and studies and their interpretation;


b) borehole drilling and water drilling;


c) labour, materials and services used in drilling wells with the objective of


finding new Petroleum reservoirs or for the purpose of appraising


Petroleum reservoirs already discovered, provided such wells are not


completed as producing wells;


d) facilities used solely for Exploration Operations, including access roads,


where applicable, and purchased geological and geophysical


information;


e) all service costs allotted to the Exploration Operations on an equitable


basis;


0 all General and Administrative Expenses allotted to Exploration


Operations based on the percentage share of projected budget


expenditure which will be adjusted to actual expenditure at the end of














Petroleum Agreement, MOE/GNPC/Helicoma - Annexes


2.3 DEVELOPMENT EXPENDITURE





Development Expenditure shall consist of all expenditure incurred in


Development Operations, including but not limited to expenditure on:


a) drilling wells which are completed as producing wells and drilling wells


for purposes of producing a Petroleum reservoir already discovered,


whether these w'ells are dry or producing:


b) completing wells by way of installation of casing or equipment or


otherwise after a well has been drilled for the purpose of bringing such


well into use as a producing well;


c) intangible drilling costs such as labour, consumable material and





services having no salvage value which are incurred in drilling and


deepening of wells for producing purposes;





d) Held facilities such as pipelines, flow lines, production and treatment


units, wellhead equipment, subsurface equipment, enhanced recover)'


systems, offshore platforms, Petroleum storage facilities and access


roads for production activities;





e) engineering and design studies for field facilities;


0 all service costs allotted to Development Operations on an equitable


basis;





g) all General and Administrative Expenses allotted to Development


Operations based on the percentage projected budget expenditure which


will be adjusted to actual expenditure as the end of the year.


2.4 PRODUCTION EXPENDITURE


Production Expenditure shall consist of but not limited to all expenditure


incurred in Petroleum Operations after the Date of Commencement of


Commercial Production, such expenditure being other than Exploration


Expenditure. Development Expenditure, General and Administrative Expenses


and Service Costs. The balance of General and Administrative Expenses and


Service Costs not allotted to Exploration Operations or to Development


Operations under Section 2.2 and 2.3 shall be allotted to Production


\




















Petroleum Agreement. MOE/GNPOHehconia Annexes


2.5 SERVICE COSTS





2.5.1 Service Costs shall consist of but not be limited to all direct and


indirect expenditure incurred in support of Petroleum Operations,


including the construction or installation of warehouses* piers, marine


vessels, vehicles, motorised rolling equipment, aircraft, fire security


stations, workshops, water and sewerage plants, power plants, housing


community and recreational facilities and furniture, tools land,


equipment used in such construction or installation.


Service Costs in any Calendar Year shall include the total costs incurred





in such year to purchase and construct or install such facilities as well


as the annual costs of maintaining and operating such facilities.


2.5.2 All Service Costs will be regularly allotted on an equitable basis to





Exploration Expenditure, Development Expenditure and Production


Expenditure.





2.6 GENERAL AND ADMINISTRATIVE EXPENSES


General and Administrative Expenses shall consist of:





2.6.1 All main office, field and general administrative costs, in the Republic of


Ghana, including but not limited to supervisory, accounting and


employee relations services;


2.6.2 An overhead charge of 1.5% of the actual cost of services rendered


outside the Republic of Ghana by Contractor and its Affiliates for


managing Petroleum Operations and for staff advice and assistance,


including but not limited to financial, legal, accounting and employee


relations services.


2.6.3 All general and administrative expenses will be regularly allotted as


specified in subsections 2.2 (f), 2.3 (g) and 2.4 to Exploration


Expenditure, Development Expenditure and Production Expenditure.





























Petroleum Agreement, MOE/GNPC/Helicoma ■ Annexes 8


 SECTION 3





3.0 COSTS, EXPENSES, EXPENDITURES AND CREDITS OF CONTRACTOR


3.1 Contractor for the purpose of this Agreement shall charge the following


allowable costs to the accounts.


a) costs of acquiring surface rights;


b) labour and associated costs;


c) transportation costs;


d) charges for services;


e) material costs;


0 rentals, duties and other assessments;


g) insurance and losses;


h) legal expenses;


i) training expenses and the technology support payment;


j) general and administrative expenses;


k) utility costs;


l) office facility charges;


m) communication charges;


n) ecological and environmental charges;


o) abandonment cost;


p) pre-Agreement costs of US $200,000: and


q) such other costs necessary for the Petroleum Operations.


3.2 COST OF ACQUIRING SURFACE RIGHTS AND RELINQUISHMENT


Cost of acquiring surface rights shall consist of all direct costs attributable to


the acquisition, renewal or relinquishment of surface rights acquired and


maintained in force over the Contract Area.


3.3 LABOUR AND ASSOCIATED LABOUR COSTS


Labour and associated labour costs shall include but not be limited to:


a) gross salaries and wages including bonuses of those employees of


Contractor and of its Affiliates engaged in Petroleum Operations who


are permanently or temporarily assigned to Ghana;


b) costs regarding holidays, vacation, sickness and disability payments


applicable to the salaries and wages chargeable under (a);














Petroleum Agreement. MOE'GNPC/Helicorua - Annexes


c) expenses or contributions made pursuant to assessments or obligations


imposed under the laws of the Republic of Ghana which are applicable


to cost of salaries and wages chargeable under (a);


d) cost of established plans for employees' life insurance, hospitalisation,


pensions and other benefits of a like nature customarily granted to


employees: and


e) reasonable travel and personal expenses of employees and families,


including those made for travel and relocation of the personnel, all of


which shall be in accordance with usual practice of the Contractor.


3.4 TRANSPORTATION COSTS





Transportation costs and other related costs of transportation of employees,


equipment, materials and supplies necessary for the conduct of Petroleum


Operations.'


3.5 CHARGES FOR SERVICES


3.5.1 Charges for services shall include:





a) the costs of third party contracts which are the actual costs of


contracts for technical and other services entered into by Contractor


for Petroleum Operations made with ihird parties other than


Affiliates of Contractor, provided that the prices paid by Contractor


are no higher than the prevailing rates for such services in the world


market;


b) technical and other services of personnel assigned by the Contractor


and its Affiliates when performing management, engineering,


geological, geophysical, administrative, legal, accounting, treasury,


tax, employee relations, computer services, purchasing, and all other


functions for the direct benefit of Petroleum Operations; and


c) general services, including, but not without limitation, professional


consultants and others who perform services for the direct benefits


of Petroleum Operations.


3.5.2 Services furnished by Contractor and its Affiliates shall be charged at


rates commensurate with those currently prevailing for such services in


the world market. _ ---


vi \














Petroleum Agreement, MOE/GNPC/Hehconia Annexes 10





c


3.6 RENTALS, DUTIES AND OTHER ASSESSMENTS


All rentals, taxes, duties, levies, charges, fees, contributions and any other


assessments and charges levied by the Government in connection with


Petroleum Operations or paid for the benefit of Petroleum Operations, with the


exception of the income tax specified in the Article 12.2 (iii).


3.7 INSURANCE AND LOSSES


a) insurance is wholly or partly placed with an Affiliate of Contractor, such


premia and costs shall be recoverable only to the extent not in excess of


those generally charged by competitive insurance companies other than


Affiliate;


b) costs and losses incurred as a consequence of events, which are, insofar


as not made good by insurance, allowable under 17 of the Agreement;


and


c) costs or expenses necessary for the repair or replacement of property


resulting from damage or losses incurred.


3.8 LEGAL EXPENSES


All costs and expenses of litigation and legal or related services necessary or


expedient for the procuring, perfecting, retaining and protecting the rights


hereunder and in defending or prosecuting lawsuits involving the Contract Area


or any third party claim arising out of activities under the Agreement, or sums


paid in respect of legal services necessary' or expedient for the protection of the


joint interest of GNPC and Contractor, provided that where legal services are


rendered in such matters by salaried or regularly retained lawyers of Contractor


or an Affiliate of Contractor, such compensation will be included instead under


either Section 3.3 or 3.5, as applicable.


3.9 TRAINING COSTS AND THE TECHNOLOGY SUPPORT PAYMENT


All costs and expenses incurred by Contractor in training of its employees and


nominees of GNPC to the extent that such training is attributable to Petroleum


Operations under the Agreement and the payment by Contractor of the


technology support payment.


3.10 GENERAL AND ADMINISTRATIVE EXPENSES


General and Administrative Expenses shall consist of the costs described in


Subsection 2.6.1 and the charge described in Subsection 2.6.2. --- -











Petroleum Agreement, MOE/GNPC/Helicoma - Annexes


3.11 UTILITY COSTS





Any water, electricity, heating, fuel or other energy and utility costs used and


consumed for the Petroleum Operations.


3.12 OFFICE FACILITY CHARGES





The cost and expenses of constructing, establishing, maintaining and operating


offices, camps, housing and any other facilities necessary to the conduct of


Petroleum Operations. The cost of constructing or otherwise establishing any


operating facility which may be used at any time in operations of more than one


field shall be charged initially to the field or fields for which the facility is first


used. Costs incurred, thereafter shall be allocated in a reasonable manner,


consistent with international accounting practice, to the fields for which the


facility is used.


J


3.13 COMMUNICATION CHARGES





The costs of acquiring, leasing, installing, operating, repairing and maintaining


communication systems, including radio and microwave facilities.


3.14 ECOLOGICAL AND ENVIRONMENTAL CHARGES


All charges for environmental protection and safety measures conducted in the


Contract Area in accordance with Article 17 of the Agreement.


3.15 ABANDONMENT COST





Cost relating to the decommissioning and abandonment of operations and


facilities, site restoration and other associated operations accrued from a


reasonable date in advance based on estimate of such cost.


3.16 OTHER COSTS





Any other costs not covered or dealt with in the foregoing provisions which are


incurred and not mentioned in Section 3.16 for the necessary and proper


conduct of Petroleum Operations.


3.17 COSTS NOT ALLOWABLE UNDER THE AGREEMENT





The following costs shall not be allowable under the Agreement:





a) commission paid to intermediaries bv Contractor; --- *r


n<











Petroleum Agreement. MOE/GNPCJHehcorva ■ Annexes


b) charitable donations and contributions, except where prior approval has


been obtained from GNPC;


e) interest incurred on loans raised by the Contractor;


d) petroleum marketing costs or costs of transporting petroleum beyond the


delivery point;


e) the costs of any bank guarantee under the -Agreement and any other


amounts spent on indemnities with regard to nonfulfilment of


contractual obligations;


1) premium paid as a result of GNPC exercising a Sole Risk option under


Article 9 of this Agreement;


g) cost of arbitration under Article 24 of the Agreement or dispute


settlement by any independent expert under the terms of the Agreement;


h) fines and penalties imposed by a competent Court of Law except where


such fines or penalties relate to acts not caused by Contractor’s Gross


Negligence; and


i) costs incurred as a result of Gross Negligence chargeable to Contractor


or the Operator under the terms of the Agreement.


3.18 ALLOWABLE AND DEDUCTIBILITY


The costs and expenses set forth herein shall be for the purpose of determining


allowable or non-allowable costs and expenses only and shall have no bearing


on Contractor’s eligibility or otherwise for deductions in computing


Contractor’s net income from Petroleum Operations for income tax purposes


under the Agreement,


3.19 CREDITS UNDER THE AGREEMENT





The net proceeds of the following transactions will be credited to the accounts


under the Agreement:


a) the net proceeds of any insurance or claim in connection with Petroleum


Operations or any assets charged to the accounts under the Agreements


when such operations or assets were insured and the premia charged to


the accounts under the Agreement;


b) revenue received from third parties for the use of property or assets


charged to the accounts under this Agreement; 'ZS ^ T











Petroleum Agreement. MOE/GNPC'Hehcoma Annexes


c) any adjustment from the suppliers or manufacturers or Iheir agents in


connection with a defective equipment or material (he cost of which was


previously charged to the account under the Agreement;


d) tlie proceeds received for inventory materials previously charged to the


account under the Agreement and subsequently exported from the


Republic of Ghana or transferred or sold to third parties without being


used in the Petroleum Operations:





e) rentals . refunds or other credits received which apply to any charge


which has been made to the account under the Agreement, but excluding


any award granted under arbitration or Sole lixpert proceedings;


f) the proceeds from the sale or exchange of plant or facilities from the


Development and Production Area or plant or facilities the acquisition


costs of which have been deducted in the computation of FA„, SAn, TAn


and ZAn for the relevant Development and Production Area;


g) the proceeds derived from the sale or issue of any intellectual property





the development costs of which were incurred pursuant to this


Agreement; and


h) the proceeds from the sale of any petroleum information derived from





Petroleum Operations under this Agreement.


3.20 DUPLICATION OF CHARGES AND CREDITS


Notwithstanding any provision to the contrary in this Annex, it is the intention


that there shall be no duplication of charges or credits in the accounts under the


Agreement.









































Petroleum Agreement MOE/GNPQHehcoiva - Annexes 14


 SECTION 4








4.0 MATERIAL


4.1 VALUE OF MATERIAL CHARGED TO THE ACCOUNTS UNDER


THE AGREEMENT


Material purchased, leased or rented by Contractor lor use in Petroleum





Operations shall be valued at the actual net cost incurred by Contractor. The


net cost shall include invoice price less trade and cash discounts, if any,


purchase and procurement fees plus freight and forwarding charges between


point of supply and point of shipment, freight to port of destination, insurance,


taxes, customs duties, consular fees, other items chargeable against imported


material, and any other related costs actually paid.


4.2 VALUE OF MATERIAL PURCHASED FROM AN AFFILIATE


Contractor shall notify GNPC of any goods supplied by an Affiliate of


Contractor. Materials purchased from Affiliate of Contractor shall be charged


at the prices specified in Sections 4.2.1, 4.2.2 and 4.2,3.


4.2.1 New Material (Condition “A”)





New material shall be classified as Condition “A’’. Such material shall


be valued at the prevailing market price, plus expenses incurred in


procuring such new materials, and in moving such materials to the


locations where the material shall be used.


4.2.2 Used Material (Condition “B”)


Used material shall be classified as Condition “B” provided that it is in


sound and serviceable condition and is suitable for reuse without


reconditioning. Such material shall be valued at not more than seventy


five percent (75%) of the curreni price of new material valued according


to Section 4.2.1 above.


4.2.3 Used Material (Condition “C”)


Used material which is serviceable for original function as good second





hand material after reconditioning and cannot be classified as Condition


“B" shall be classified as Condition “C’\ Such material shall be valued


at not more than fifty percent (50%) of the current price of new material


valued according to Section 4.2.1 above. T he cost of reconditioning








Petroleum Agreement. MOE/GNPOHelicoma Anrrnes 15


shall be charged to the reconditioned material provided that that the


value of such Condition “C” material plus the cost of reconditioning


does not exceed the value of Condition “B” material.


4.3 CLASSIFICATION OF MATERIALS


Material costs shall be charged to the respective Exploration Expenditure,


Development Expenditure, Operating Expenditure accounts at the lime the


material is acquired and on the basis of the intended use of the material. Should


such material subsequently be used other than as intended, the relevant charge


will be transferred to the appropriate account.


4.4 DISPOSAL OF MATERIALS





Sales of property shall be recorded at the net amount collected by the


Contractor from the purchaser.


4.5 WARRANTY OF MATERIALS





In the case of defective material or equipment, any adjustment received by


Contractor from the suppliers or manufacturers of such materials or their agents


will be credited to the accounts under the Agreement.





4.6 CONTROLLABLE MATERIALS


4.6.1 The Contractor shall control the acquisition, location, storage and


disposition of materials which are subject to accounting record control,


physical inventory and adjustment for overages and shortages


(hereinafter referred to as Controllable Material).





4.6.2 Unless additional inventories are scheduled by the JMC, Contractor shall


conduct one physical inventory of the Controllable Material each


Calendar Year which shall be completed prior to the end of the year.


The Contractor shall conduct said inventory on a date to be approved by


the JMC. Failure on the part of GNPC to participate in a JMC schedule


or approved physical inventory shall be regarded as approval of the


results of the physical inventory as conducted by the Contractor.





4.6.3 The gain or loss resulting from the physical inventory shall be reflected


in the slock records of Controllable Materials. The Contractor shall


compile a reconciliation of the inventory with a reasonable explanation


for such gains or losses. Failure on the part of GNPC to object to


Contractor's reconciliation within thirty (30) days of compilation of said


reconciliation shall he regarded as approval by GNPC. ---





•1








Petroleum Agreement MOE/GNPC/Heliconia ■ Annexes


 SECTION 5








5.0 CASH CALL STATEMENT


5.1 Contractor shall at least fifteen (15) days prior to the commencement of any


Month submit a Cash Call Statement to GNPC in respect of:


i) the Additional Interests Costs to be paid by GNPC; and


ii) costs relating to Sole Risk operations where Contractor conducts Sole Risk


operations for GNPC's account.


Such Cash Call Statement shall include the following information:


0


a) due date;


b) payment instructions;


e) the balance prior to the Cash Call being issued;


d) amount of US Dollars due: and


e) an estimation of the amounts of US Dollars required from GNPC for the


following month.


5.2 Not later than the twenty-fifth day of each Month, Contractor will furnish


GNPC a statement reflecting for the previous Month;


a) payments;


b) the nature of such payments by appropriate classifications; and


c) the balance due to or from GNPC.


5.3 Contractor may in the case where a large unforeseen expenditure becomes


necessary issue a special Cash Call Statement requiring GNPC to meet such


Cash Call within ten (10) days of receipt of such Statement.



































Petroleum Agreement. MOE GNPC/Hehcoma - Annexes


 SECTION 6








6.0 PRODUCTION STATEMENT


6.1 Subsequent to the Date of Commencement of Commercial Production from the


Contract Area, Contractor shall submit a monthly production statement to


GNPC showing the following information for each Development and


Production Area as appropriate:


a) the quantity of Crude Oil produced and saved;


b) the quantity of Natural Gas produced ami saved;


c) the quantities of Petroleum used for the purpose of conducting drilling


and Production Operations, pumping to Held storage and reinjections;


d) the quantities of Natural Gas flared;


e) the size of Petroleum stocks held at the beginning of the Month;


f) the size of Petroleum stocks held at the end of the Month.


6.2 The Production Statement of each Calendar Month shall be submitted to GNPC


not later than ten (10) days after the end of such Month.















































Petroleum Agreement, MOE/GNPC/Hekconta Annexes


 SECTION 7








7.0 VALUE OF PRODUCTION STATEMENT


7.1 Contractor shall prepare a statement providing calculations of the value of





Crude Oil produced and saved during each Quarter based on the Market Price


established under Article 11 of the Agreement as well as the amounts of ('rude


Oil allocated to each of the Parties during that Quarter. Such Statement shall be


submitted to the Minister and to GNPC not later than thirty (30) days following


the determination, notification and acceptance of the Market Price to GNPC


according to Article 11 of the Agreement. _ -


-A\~ \





'

























































































Petroleum Agreement MO&GNPC/Heticarvs - Annexes 19


 SECTION 8





8 ° COST STATEMENT


o .


'1 Contractor shall prepare with respect to each Quarter, a Cost Statement


containing the following information:





a) total Petroleum Costs in previous Quarters, if any;


b) Petroleum Costs lor the Quarter in question:


c) total Petroleum Costs as of the end of the Quarter in question





(subsection 8.1 (a) plus subsection 8.1 (b);


d) Petroleum Costs for Development Operations advanced in the Quarter in


respect of GNPC’s participating interest pursuant to Article 2.8 of the


Agreement;


e) Costs as specified in (d) above which have been recovered during the


Quarter pursuant to Article 10.2 (e) of the Agreement and the balance, if


any, of such costs unrccovered and carried forward for recovery in a


later period.





Petroleum Costs for Exploration. Development and Production Operations as


detailed above shall be separately identified for each Development and


Production Area. Petroleum Costs for Exploration Operations not directly


attributable to a specific Development Area shall be shown separately.


I he Cost Statement of each Quarter shall be submitted to GNPC no later than


thirty (30) days after the end of such Quarter. .r_




















I











Bum Agreement. MOBG NPC/Helicoma ■ Annexes


 SECTION 9








9.0 STATEMENT OF EXPENDITURES AND RECEIPTS


9.1 Subsequent to Lite Dale of Commencement of Commercial Production from the


Contract Area, Contractor shall prepare with respect to each Quarter a


Statement of Expenditures and Receipts. The Statement will distinguish


between Exploration Expenditure and Development Expenditure and


Production Expenditure and will identify major items of expenditure within


these categories. The statement will show the following:


a) actual expenditures and receipts for the Quarter in question;


9


b) cumulative expenditure and receipts for the budget year in question;


e) latest forecast of cumulative expenditures at the year end; and


d) variations between budget forecast and latest forecast and explanations


therefor.





9.2 The Statement of Expenditures and Receipts of each Calendar Quarter shall be


submitted to GNPC not later than thirty (30) days after the end of such Quarter


lor provisional approval by GNPC. •---r ---



























































Petroleum Agreement MOE'GNPC/Hehconia - Annexes


 SECTION 10











10.0 FINAL ENP-OF-YEAR STATEMENT


10.1 The Contractor will prepare a Final End-of-Year Statement. The Statement will


contain information as provided in the Production Statement, Value of


Production Statements. Cost Statement and Statements of Expenditures and


Receipts, as appropriate. The final end-of-year Statement of each Calendar Year


shall be submitted to GNPC within ninety (90) days of the end of such Calendar


Year. Any necessary subsequent adjustments shall be reported promptly to


































































































Petroleum Agreement MO&GNPC/Hehconta - Annexes


 SECTION 11





11.0 BUDGET STATEMENT


11.1 The Contractor shall prepare an annual budget statement. This will distinguish


between Exploration Expenditure, Development Expenditure and Production


Expenditure and will show the following;


a) forecast expenditures and receipts for the budget year under the


Agreement;


b) cumulative expenditures and receipts to the end of said budget year: and


/


c) the most important individual items of Exploration, Development and


Production Expenditures for said budget year.


11.1.1 The budget may include a budget line or lines for unforeseen


expenditures which, however, shall not exceed ten percent (10%) of


the total budgetary expenditure.


11.2 The Budget Statement shall be submitted to GNPC and JMC with respect to


each budget year no less than ninety (90) days before the start of such year


except in the case of the first year of the Agreement when the Budget Statement


shall be submitted within sixty (60) days of the Effective Date.


11.3 Where Contractor foresees that during the budget period expenditures have to





be made in excess of the ten percent (10%) pursuant to Section 11.1.1 hereof,


Contractor shall submit a revision of the budget to GNPC. *---






































Petroleum Agreement, MOE/'GNP&Helicoma - Annexes 23


 SECTION 12








12.0 LONG RANGE PLAN AND FORECAST


12.1 Contractor shall prepare and submit to GNPC the following:


a) During Exploration Period, an Exploration Plan for each year


commencing as of the Effective Date which shall contain the following


information:


i) Estimated Exploration Costs showing outlays for each of the years


or the number of years agreed and covered by the plan:


f


ii) details of seismic operations for each such year;


iii) details of drilling activities planned for each such yean and





iv) details of infrastructure utilisation and requirements.


The Exploration Plan shall be revised on each anniversary of the


Effective Date. Contractor shall prepare and submit to GNPC the first


Exploration Plan for the Initial Exploration Period of two (2) years


within sixty (60) days of the Effective Date and thereafter shall prepare


and submit to GNPC no later than forty five (45) days before each


anniversary of the Effective Date a revised Exploration Plan.


b) In the event of a Development Plan being approved, the Contractor shall


prepare a Development Forecast for each calendar year of the


Development Period, which shall contain the following information:


i) forecast of capital expenditure portions of Development and


Production expenditures for each Calendar Year of the


Development Period;


ii) forecast of operating costs for each Calendar Year:


iii) forecast of Petroleum production for each Calendar year:


iv) forecast of number and types of personnel employed in the


Petroleum Operations in the Republic of Ghana;


of proposed Petroleum marketing arrangements;


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Petroleum Agreement MOE/GNPQHeliconia Annexes


vi) description of main technologies employed; and


vii) description of the working relationship of Contractor to GNPC.


c) The Development forecast shall be revised at the beginning of each


Calendar Year commencing as of the second year of the first


Development forecast Contractor shall prepare and submit to GNPC the


first Development forecast within one hundred and twenty (120) days of


the date when the first Development Plan is approved by the Minister


and Contractor commences the implementation of such plan and


thereafter shall prepare and submit a revised Development Forecast to


GNPC no later than forty five (45) days before each Calendar Year


commencing as of the second year of the first Development forecast.


12.2 CHANGES OF PLAN AND FORECAST


It is recognised by Contractor and GNPC 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 the foregoing the said Plan and Forecast may be


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Petroleum Agreement MOE/GN PC/He!icoma - Annexes