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EXHIBIT 10.5
PRODUCTION SHARING CONTRACT
BETWEEN
NIGERIAN NATIONAL PETROLEUM CORPORATION
AND
ASHLAND NIGERIA EXPLORATION UNLIMITED
2
C O N T E N T S
Page
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Recital/Preamble . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
CLAUSES
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CLAUSE 1 DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . 2
CLAUSE 2 BONUSES . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
CLAUSE 3 SCOPE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
CLAUSE 4 TERM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
CLAUSE 5 EXCLUSION OF AREAS . . . . . . . . . . . . . . . . . . . . . . 8
CLAUSE 6 WORK PROGRAMME AND EXPENDITURES . . . . . . . . . . . . . . . 8
CLAUSE 7 MANAGEMENT COMMITTEE . . . . . . . . . . . . . . . . . . . . . 10
CLAUSE 8 RIGHTS AND OBLIGATIONS OF THE PARTIES . . . . . . . . . . . . 17
CLAUSE 9 RECOVERY OF OPERATING COSTS AND CRUDE OIL ALLOCATION . . . . 21
CLAUSE 10 VALUATION OF AVAILABLE CRUDE OIL . . . . . . . . . . . . . . . 23
CLAUSE 11 SOLE RISK OPERATIONS . . . . . . . . . . . . . . . . . . . . . 25
CLAUSE 12 PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
CLAUSE 13 TITLE TO EQUIPMENT . . . . . . . . . . . . . . . . . . . . . . 31
CLAUSE 14 EMPLOYMENT AND TRAINING OF NIGERIAN PERSONNEL . . . . . . . . 32
CLAUSE 15 BOOKS AND ACCOUNTS, AUDITS AND OVERHEAD CHARGES . . . . . . . 33
CLAUSE 16 TAXES, ROYALTY, RATES AND DUTIES . . . . . . . . . . . . . . . 34
CLAUSE 17 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . 35
CLAUSE 18 CONFIDENTIALITY AND PUBLIC ANNOUNCEMENTS . . . . . . . . . . . 36
CLAUSE 19 FORCE MAJEURE . . . . . . . . . . . . . . . . . . . . . . . . 38
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CLAUSE 20 LAWS AND REGULATIONS . . . . . . . . . . . . . . . . . . . . . 38
CLAUSE 21 UTILISATION OF NATURAL GAS . . . . . . . . . . . . . . . . . . 39
CLAUSE 22 CONSULTATION AND ARBITRATION . . . . . . . . . . . . . . . . . 40
CLAUSE 23 EFFECTIVENESS . . . . . . . . . . . . . . . . . . . . . . . . 41
CLAUSE 24 OTHER PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . 41
CLAUSE 25 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
ANNEXES
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Annex A - Contract Area
Annex B - Accounting Procedure
Annex C - Allocation Procedure
Annex D - Nomination, Ship Scheduling, and Lifting Procedure
Annex E - Procurement and Project Implementation Procedures
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THIS PRODUCTION SHARING CONTRACT (this "Contract") is made and entered into
this 25th day of March, 1992 ("Effective Date") BETWEEN the Nigerian National
Petroleum Corporation (hereinafter called "NNPC" which expression shall, where
the context so admits, include its successors and assigns) of the one part, AND
Ashland Nigeria Exploration Unlimited, an unlimited company incorporated in
Nigeria under the Companies and Allied Xxxxxxx Xxx 0000 (hereinafter called
"Company" which expression shall, where the context so admits, include its
successors and assigns) of the other part.
WHEREAS, by virtue of Section 1 of the Xxxxxxxxx Xxx 0000 and its amendments,
the Federal Republic of Nigeria ("Nigeria") is vested with the entire ownership
and control of all petroleum in, under or upon any land which is in Nigeria or
under the territorial waters of Nigeria or forms part of the continental shelf
of Nigeria; and
WHEREAS, NNPC is the holder of the Oil Prospecting Licenses ("OPLs") 90 and 225
described in Annex A hereto; and
WHEREAS by virtue of the Nigerian National Petroleum Corporation Xxx 0000, NNPC
has the right, power and authority to enter into this Contract; and
WHEREAS, NNPC and an Affiliate of Company (Ashland Oil (Nigeria) Company)
entered into a Letter of Understanding dated 16th August, 1991 ("XXX") which
set forth terms and conditions under which Petroleum Operations would be
conducted in OPLs 90 and 225 with the intent that such terms and conditions
would be incorporated into a definitive production sharing contract which is
this Contract; and
WHEREAS, Company represents that it has assumed all the rights and obligations
of its said Affiliate under the said XXX and represents that it has the
technical competence to conduct Petroleum Operations and has the funds both
local and foreign and has agreed to conduct the said Operations.
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NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, it is hereby agreed as follows:
CLAUSE 1
DEFINITIONS
As used in this Contract, unless otherwise specified, the following terms shall
have the respective meaning here ascribed to them:
(a) "ACCOUNTING PROCEDURE" means the rules and procedures set forth in Annex
B and attached to and forming part of this Contract;
(b) "AFFILIATE" means a company or other entity that controls or is
controlled by a Party to this Contract, or a company or other entity
which controls or is controlled by a company or other entity which
controls a Party to this Contract, it being understood that control
shall mean ownership by one company or entity of at least 50% of:
(i) the voting stock, if the other company is a corporation issuing
stock or;
(ii) the controlling rights or interests, if the other entity is not a
corporation.
(c) "AVAILABLE CRUDE OIL" means the Crude Oil won and saved from the
Contract Area after deducting amounts used in Petroleum Operations.
(d) "BARREL" means a quantity or unit of Crude Oil, equal to forty-two (42)
United States gallons at the temperature of sixty degrees (60degrees)
Fahrenheit.
(e) "BUDGET" means the cost estimate of items included in a Work Programme.
(f) "COMMERCIAL QUANTITY" means the capability to produce at least 10,000
Barrels per day of Crude Oil from the Contract Area.
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(g) "CONCESSION RENTALS" means the rents payable on the OPLs or OMLs under
the Xxxxxxxxx Xxx 0000 and the Petroleum (Drilling and Production)
Regulations 1969.
(h) "CONTRACT AREA" means the Nigerian OPLs 90 and 225 as known to the
Parties hereto and which OPLs are shown and particularly described in
documents attached to and forming part of this Contract as Annex A,
and/or any subsequent Oil Mining Lease(s) ("OMLs") derived therefrom.
(i) "COST OIL" means the quantum of Available Crude Oil allocated to Company
to enable it to generate the Proceeds to recover all Operating Costs as
specified in the Accounting Procedure.
(j) "CRUDE OIL" means liquid petroleum which has been treated but not
refined and includes condensates but excludes water and sediments.
(k) "EFFECTIVE DATE" means the date first above written.
(1) "FOREIGN CURRENCY" means currency other than that of Nigeria but
acceptable to Government, to NNPC and to Company.
(m) "GOVERNMENT" means the government of the Federal Republic of Nigeria.
(n) "LIFTING PROCEDURE" means the rules and procedures set forth in Annex D
and attached to and forming part of this Contract.
(o) "NATURAL GAS" means all gaseous hydrocarbons produced in association
with Crude Oil or from reservoirs which produce mainly gaseous
hydrocarbons.
(p) "OIL MINING LEASE" ("OML") means a lease granted by the Minister of
Petroleum and Mineral Resources under the Xxxxxxxxx Xxx 0000, to a
lessee to search for, win, work, carry away and dispose of Petroleum.
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(q) "OIL PROSPECTING LICENSE" ("OPL") means a license granted by the
Minister of Petroleum and Mineral Resources under the Xxxxxxxxx Xxx
0000, to a licensee to prospect for Petroleum.
(r) "OPERATING COSTS" means expenditures made and obligations incurred in
carrying out Petroleum Operations as determined in accordance with the
Accounting Procedure.
(s) "PARTIES" means NNPC and Company.
(t) "PETROLEUM OPERATIONS" means the same as defined in the PPT Xxx 0000, as
amended.
(u) "PETROLEUM PROFITS TAX" OR "PPT" means the taxes pursuant to the
Petroleum Profits Tax Xxx 0000, as amended.
(v) "PROCEEDS" means the amount in U.S. Dollars determined by multiplying
the Realisable Price by the number of Barrels of Available Crude Oil
lifted by either Party.
(w) "PROFIT OIL" means the balance of Available Crude Oil after the
allocation of Royalty Oil, Tax Oil, and Cost Oil.
(x) "REALISABLE PRICE" means the price in U.S. Dollars per Barrel determined
pursuant to Clause 10.
(y) "ROYALTY" means the amount payable pursuant to the Xxxxxxxxx Xxx 0000
and Petroleum (Drilling and Production) Regulations 1969.
(z) "ROYALTY OIL" means the quantum of available Crude Oil allocated to NNPC
which will generate an amount of Proceeds equal to the actual payment of
Royalty and Concession Rentals.
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(aa) "TAX OIL" means the quantum of Available Crude Oil allocated to NNPC
which will generate an amount of Proceeds equal to the actual payment of
PPT.
(ab) "WORK PROGRAMME" means for the applicable period a statement itemizing
the Petroleum Operations to be carried out in the Contract Area.
(ac) "YEAR" means a period of twelve (12) months commencing with January 1
and ending the following December 31, according to the Gregorian
Calendar.
CLAUSE 2
BONUSES
2.1 SIGNATURE BONUS
Company shall pay to NNPC a Signature Bonus in the sum of two million
U.S. Dollars ($2,000,000) within thirty (30) days after the Effective
Date of this Contract which NNPC shall pay to the Government.
2.2 PRODUCTION BONUSES
Company shall pay NNPC the following Production Bonuses:
(a) the sum of two million U.S. Dollars ($2,000,000) within 30 days
after the cumulative production from the Contract Area reaches 20
million Barrels;
(b) the sum of two million U.S. Dollars ($2,000,000) within 30 days
after the cumulative production from the Contract Area reaches 30
million Barrels; and
(c) the sum of two million U.S. Dollars ($2,000,000) within 30 days
after the cumulative production from the Contract Area reaches 50
million Barrels.
2.3 The Signature Bonus and Production Bonuses provided for in this Clause 2
shall not be recoverable as Cost Oil.
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2.4 Except as provided in this Clause 2 or elsewhere in this Contract, there
shall be no other bonuses, fees, or premiums payable by Company.
CLAUSE 3
SCOPE
3.1 This Contract is a production sharing contract governed in accordance
with the terms and provisions hereof. Petroleum Operations and
provision of financing and technical requirements by Company in
accordance with the terms of this Contract shall be in consultation and
cooperation with NNPC. NNPC, as holder of all rights in and to the
Contract Area, hereby appoints and constitutes Company the exclusive
company to conduct Petroleum Operations in the Contract Area.
3.2 During the Term of this Contract the total Available Crude Oil shall be
allocated to the Parties in accordance with the provisions of Clause 9,
the Accounting Procedure (Annex B) and the Allocation Procedure (Annex
C).
3.3 Company shall carry the risk of Operating Costs required to carry out
Petroleum Operations and shall therefore have an economic interest in
development of Crude Oil deposits in the Contract Area.
3.4 Company is engaged in Petroleum Operations pursuant to the Petroleum
Profits Tax Xxx 0000 and its subsequent amendments ("PPT Act") and
accordingly the Companies Income Tax Xxx 0000, as amended, shall have no
application.
CLAUSE 4
TERM
4.1 The Term of this Contract, subject to paragraphs 4.2 and 4.3, shall be
twenty-five (25) years certain (including the exploration period) from
the Effective Date.
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4.2 This Contract may be terminated in its entirety at any time by:
(a) NNPC giving to Company not less than ninety (90) days prior
written notice of termination if Company has committed a material
breach of its obligations hereunder including the Work Programme
approved for any given period under the Contract and Company
fails to remedy such breach within (6) six months of the original
notification of such breach; or
(b) NNPC giving to Company not less than ninety (90) days written
notice of termination if Company is declared bankrupt and is
forced to make restitution to its creditors, or becomes
insolvent, or is found by a court having competent jurisdiction
to have willfully violated any Nigerian laws and regulations
governing Petroleum Operations, financial transactions and/or
commercial operations during the Term of the Contract; or
(c) Company giving to NNPC not less than ninety (90) days prior
written notice to that effect subject to the conditions in Clause
6.2.
4.3 If Crude Oil is not discovered in quantities which can be produced
commercially within the Contract Area within five (5) years from the
Effective Date, this Contract shall automatically terminate in its
entirety.
4.4 If Crude Oil is discovered in any portion of the Contract Area within
five (5) years from the Effective Date, which in the judgment of NNPC
and Company can be produced commercially based on consideration of all
pertinent operating and financial data, then as to that particular
portion of the Contract Area development will commence. In other
portions of the Contract Area which have not been excluded pursuant to
Clause 5, exploration may continue.
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CLAUSE 5
EXCLUSION OF AREAS
Not later than the end of three (3) years from the Effective Date twenty-five
percent (25%) of the acreage in the original Contract Area shall be excluded
from the Contract Area and not later than the end of five (5) years from the
Effective Date an additional twenty-five percent (25%) of the acreage in the
original Contract Area shall be excluded from the Contract Area. Such acreage
to be excluded from the Contract Area shall be agreed by both Parties and shall
not include any parts of the Contract Area corresponding to the surface areas
of any reservoir capable of producing Crude Oil.
CLAUSE 6
WORK PROGRAMME AND EXPENDITURES
6.1 Company shall within six (6) months after the Effective Date, unless
mutually extended by the Parties, commence seismic investigations in the
Contract Area and thereafter shall commence drilling operations in
accordance with sound international petroleum practices. Geologic
conditions warranting, drilling operations will be commenced not later
than eighteen (18) months after the Effective Date unless mutually
extended by the Parties.
6.2 Company shall conduct Petroleum Operations during the first five (5)
years following the Effective Date in accordance with the minimum Work
Programme provided in this Clause 6.2 which shall be conducted in two
phases as follows:
(a) For the first phase, during the initial three (3) year period
following the Effective Date, the minimum Work Programme shall
consist of 2,000 km of 2-D seismic, 200 sq km of 3-D seismic and
the drilling of three (3) xxxxx; provided however, that Company
shall have no obligation to expend more than twenty million U.S.
Dollars ($20,000,000) for Petroleum Operations during such period
with respect to this first phase even if the said minimum Work
Programme has not been accomplished. The minimum Work Programme
hereunder and the cost therefor shall include such work, if any,
incurred by the Company prior to the Effective Date pursuant to
Clause 15 of
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the Letter of Understanding between NNPC and an Affiliate of
Company dated 16th August, 1991.
(b) For the second phase, during the subsequent two (2) year period
the minimum Work Programme shall consist of three (3) additional
xxxxx; provided however, that Company shall have no obligation to
expend more than ten million U.S. Dollars ($10,000,000) for
Petroleum Operations during such two (2) year period with respect
to this second phase even if the said minimum Work Programme has
not been accomplished.
If at any time within the initial three (3) year period (the first phase
above) Company should terminate this Contract pursuant to Clause 4 prior
to fulfilling the minimum Work Programme outlined in Clause 6.2(a) then
Company shall pay to NNPC the difference between twenty million U.S.
Dollars ($20,000,000) and the actual amount expended. Should Company
terminate this Contract pursuant to Clause 4 within the subsequent two
(2) year period (the second phase above) prior to fulfilling the minimum
Work Programme outlined in Clause 6.2(b) then Company shall pay to NNPC
the difference between ten million U.S. Dollars ($10,000,000) and the
actual amount expended. Provided however, should the actual amount
expended with respect to the first phase exceed twenty million U.S.
Dollars ($20,000,000), such excess shall be applied against the
expenditure for the second phase, such that Company shall have no
obligation to expend in the aggregate more than thirty million U.S.
Dollars ($30,000,000) for Petroleum Operations during the first five (5)
year period from the Effective Date.
6.3 Within two (2) months after the Effective Date and thereafter at least
three (3) months prior to the beginning of each Year, Company shall
prepare and submit for review and approval by the Management Committee,
pursuant to Clause 7, a Work Programme and Budget for the Contract Area
setting forth the Petroleum Operations which Company proposes to carry
out during the ensuing Year, or in the case of the first Work Programme
and Budget, during the remainder of the current Year. The Management
Committee shall review and approve such Work Programme and Budget in
accordance with Clause 7.4.
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CLAUSE 7
MANAGEMENT COMMITTEE
7.1 A Management Committee shall be established within thirty (30) days from
the date of execution of the Contract for the purpose of providing
orderly direction or all matters pertaining to the Petroleum Operations
and Work Programmes pursuant to Clause 6.3 of the Contract. The powers
and duties of the Management Committee shall include but not be limited
to the following:
(a) the review, revision, and approval of all proposed Work
Programmes and Budgets in accordance with Clause 7.3(e);
(b) the review, revision, and approval of any proposed
recommendations made by either Party or by any Sub-Committee,
pursuant to Clause 7.6 with respect to Petroleum Operations;
(c) ensuring that the Company carries out the decisions of the
Management Committee and conducts Petroleum Operations pursuant
to this Contract;
(d) the consideration and decision on matters relating to the
exclusion of areas in the Contract Area pursuant to Clause 5;
(e) settlement of claims and litigation in excess of three hundred
thousand Naira (N300,000) or the equivalent thereof in Foreign
Currency, or such other amount as may be approved by the
Management Committee insofar as such claims are not covered by
policies of insurance maintained under this Contract;
(f) consideration and approval of the sale or disposal of any items
or property relating to Petroleum Operations in accordance with
the provisions of the Contract except for items/properties of
historic costs less than one hundred thousand Naira (N100,000);
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(g) settlement of unresolved audit exceptions arising from audits as
provided for in Clause 15.2 of this Contract;
(h) ensuring that the Company implements the provisions of the
Accounting Procedure (Annex B), the Lifting Procedure (Annex D),
and the Procurement and Project Implementation Procedures (Annex
E) and all amendments and revisions thereto as agreed by the
Parties;
(i) any other matters relating to Petroleum Operations except:
(i) those matters under the sole discretion and control of the
Company in carrying out its duties and functions,
(ii) those matters elsewhere provided for in this Contract, or
(iii) those matters reserved to the Parties in their respective
rights pursuant to Clause 8;
(j) consideration and approval of the sale or disposal and exchange
of information to third parties other than routine exchange of
seismic data and other such data commonly exchanged within the
industry;
(k) consideration and determination of any other matter relating to
the Petroleum Operations which may be referred to it by any Party
(other than any proposal to amend this Contract) or which is
otherwise designated under this Contract for reference to it; and
(l) the consideration and determination of matters relating to Sole
Risk Operations except for those matters under the sole
discretion and control of the Sole Risk Party as provided for in
Clause 11 of this Contract.
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7.2 (a) The Management Committee shall consist of ten (10) persons
appointed by the Parties as follows:
NNPC - 5
Company - 5
(b) Each Party shall designate by notice in writing to the other
Party, the names of its representatives to serve as members of
the Management Committee as provided in Clause 7.2(a) hereof and
their respective alternates, which members or alternates shall be
authorized to represent that Party with respect to the decisions
of the Management Committee. Such notice shall give the names,
titles and addresses of the designated members and alternates.
Each member may nominate any other member or alternate to
represent such member at meetings of the Management Committee.
(c) At least fourteen (14) business days prior to each scheduled
Management Committee meeting, the Company shall provide an agenda
of matters, with briefs, to be considered during such meeting.
Any Party desiring to have other matters placed on the agenda
shall give notice to the other Party not less than seven (7)
business days prior to the scheduled meeting. No other matter
may be introduced into the agenda at the meeting for deliberation
unless mutually agreed by the Parties. No agenda shall be
required in the event of an emergency meeting called pursuant to
Clause 7.5(b).
(d) Either Party may change any of its respective members or
alternates as described in Clause 7.2 (b) from time to time by
notifying the other Party in writing not less than ten (10) days
in advance of the effective date of such change.
(e) NNPC shall appoint the Chairman of the Management Committee and
the Company shall appoint the Secretary. The Secretary shall not
be a member of the Management Committee but shall keep minutes of
all meetings and records of all decisions of the Management
Committee. Within fourteen (14) days after each meeting, the
Secretary
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shall forward drafts of the minutes to the Parties. Within
fourteen days thereafter each Party shall return the minutes with
its comments to the Secretary who shall within fourteen (14) days
thereafter forward the final draft to the other Party. The
minutes of each meeting shall be approved by the Management
Committee at the next meeting and copies thereof shall be
supplied to the Parties. In addition, the Secretary shall at
each meeting, prepare a written summary of any decisions made by
the Management Committee for approval and signature by the
Parties prior to adjournment.
7.3 (a) Not later than the 28th day of February of each Year, the
Chairman shall prepare and forward to the Parties, a calendar of
meetings as agreed by the Management Committee for that Year.
(b) Unless otherwise agreed by the Parties, the Management Committee
shall meet at the head office or the Company once every four (4)
calendar months, or at such other intervals or venue as may be
agreed by the Management Committee and, in addition, whenever
requested by either Party by giving at least twenty-one (21) days
notice in writing to other Party which notice shall specify the
matter or matters to be considered at the meeting; or, when
summoned by the Chairman or by the Company as an emergency
meeting for which no specified notice period shall be required.
(c) The quorum for any meeting of the Management Committee shall
consist of a minimum of three (3) representatives of NNPC and
three (3) representatives of the Company. The Chairman or his
alternate and the Company's Managing Director or his alternate
must be present at every Management Committee meeting for a
quorum to be formed. If no such quorum is present, the Chairman
shall call another meeting of the Management Committee giving at
least fourteen (14) days written notice of such meeting.
(d) The Secretary shall convene all meetings of the Management
Committee other than the emergency meetings.
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(e) Within eight (8) weeks after the submission of a Work Programme
and Budget by Company pursuant to Clause 6.3, the Management
Committee shall meet to consider and approve such submission.
Should NNPC wish to propose a revision as to certain specific
features of the said Work Programme and Budget, it shall within
six (6) weeks after receipt thereof so notify Company in writing
specifying in reasonable detail the changes requested and its
reasons therefor. The Management Committee will endeavor to
resolve the request for revisions proposed by NNPC. If NNPC has
not proposed any revisions in writing within six (6) weeks, then
the said Work Programme and Budget as submitted shall be approved
by resolution of the Management Committee. Any portion of a Work
Programme about which NNPC has not proposed a revision shall
insofar as possible be carried out as prescribed therein.
7.4 (a) Except as may be expressly provided for in this Contract, the
Management Committee shall determine and adopt rules to govern
its procedures.
(b) Members attending a meeting of the Management Committee may be
accompanied by advisers and experts to the extent reasonably
necessary to assist with the conduct of such meeting. Such
advisers and experts shall not vote or in any way participate in
decisions, but may contribute in a non-binding way to discussions
or debates of the Management Committee.
(c) At any Management Committee meeting where there is a quorum, the
Chairman or his alternate shall exercise the voting rights of
NNPC and the Managing Director of the Company or his alternate
shall exercise the voting rights of Company.
(d) Except as otherwise expressly provided in this Contract all
decisions of the Management Committee shall be made by the
unanimous vote of the Parties. If unanimity is not obtained on
any matter (including any matter pertaining to a Work Programme
or Budget proposed by Company) proposed to the Management
Committee, then the Management Committee shall meet again to
attempt to resolve
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such matter not later than fourteen (14) days after the meeting
in which the proposed matter was rejected by a negative vote.
Any portion of such proposal that is not rejected shall insofar
as possible be carried out. At least seven (7) days prior to
such second meeting, the Party casting the dissenting vote shall
provide to the other Party in writing in reasonable detail the
reasons for such dissenting vote. If such written reasons are
not provided at least (7) days prior to such second meeting, then
the proposal shall be deemed approved. In such second meeting
the agenda shall be comprised of such written reasons as provided
by the dissenting Party. If unanimity is not obtained in the
second meeting, then the Management Committee shall meet a third
time within fourteen (14) days after the second meeting. If
unanimity is not obtained in the third meeting then the
appropriate provisions of Clause 11 or 22 shall apply.
(e) Nothing in this Clause 7 shall be construed so as to give the
Management Committee the right to increase the minimum Work
Programme pursuant to Clauses 6.1 and 6.2.
(f) The Parties shall be bound by, and abide by, each decision of the
Management Committee duly made in accordance with the provisions
of this Contract.
7.5 Any matter which is within the powers and duties of the Management
Committee may be determined by the Management Committee without a
Management Committee meeting if such matter is submitted by either Party
to the other Party with due notice and with sufficient information
regarding the matter to be determined so as to enable the Parties to
make an informed decision with respect to such matter.
(a) Except for urgent matters referred to in Clause 7.5(b), each
Party shall cast its vote with respect to such matter within
twenty-one (21) days of receipt of such notice and such manner of
determination shall be followed unless a Party objects, within
fourteen (14) days of receipt of such notice, to having the
matter determined in such manner. If any Party fails to vote by
the expiry of the twenty-one (21) day period for voting, it shall
be deemed to have voted in the affirmative. The Secretary shall
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promptly advise the Parties of the results of such vote and the
Secretary shall draft a resolution to be signed as soon as
possible by the Parties.
(b) Each Party shall nominate one of its officers as its
representative from whom the other Party may seek binding
decisions on urgent matters, including, but not limited to
ongoing drilling operations, by telephone, telex or in person and
they shall advise each other in writing of the persons so
nominated and any changes therefor.
(c) In the event of an emergency requiring immediate operational
action, either Party may take all actions it deems proper or
advisable to protect its interests and those of its respective
employees and any costs so incurred shall be included in the
Operating Costs. Prompt notification of any such action taken by
a Party and the estimated cost shall be given to the other Party
within forty-eight (48) hours of the commencement of the event.
(d) The decisions made pursuant to this Clause 7.5 shall be recorded
in the minutes of the next scheduled meeting of the Management
Committee, and shall be binding upon the Parties to the same
extent as if the matter had been determined at a meeting of the
Management Committee.
7.6 The Management Committee shall establish Exploration and Technical
Sub-Committees and any other advisory Sub-Committees as it considers
necessary from time to time such as Finance and Budget, and
Legal/Services Sub-Committees:
(a) Each Sub-committee established pursuant to this Clause 7.6 shall
be given terms of reference and shall be subject to such
direction and procedures as the Management Committee may give or
determine.
(b) The Management Committee shall appoint the members of the
Sub-Committees which shall be comprised of equal representation
from the Parties. The chairmen of the Sub-Committees shall be
designated by Company.
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(c) The deliberations and recommendations of any Sub-Committee shall
be advisory only and shall become binding and effective upon
acceptance by the Management Committee.
CLAUSE 8
RIGHTS AND OBLIGATIONS OF THE PARTIES
8.1 In accordance with this Contract, Company shall:
(a) Provide all necessary funds for payment of Operating Costs
including, but not limited to, funds required to provide all
materials, equipment, supplies, and technical requirements
(including personnel) purchased, paid for or leased in Foreign
Currency;
(b) Furnish such other funds for the performance of Work Programmes
that require payment in Foreign Currency, including payments to
third parties who perform services as subcontractors;
(c) Prepare Work Programmes and Budgets and carry out approved Work
Programmes in a good and workmanlike manner and in accordance
with internationally acceptable petroleum industry practices and
standards with the object of avoiding waste and obtaining maximum
ultimate recovery of Crude Oil at minimum costs;
(d) Ensure that all leased property paid for in Foreign Currency and
brought into Nigeria for Petroleum Operations is treated in
accordance with the terms of the applicable leases;
(e) Have the right to sell, assign, transfer, convey or otherwise
dispose of any part of its rights and interests under this
Contract to other parties including Affiliates without any fee or
other costs with the prior written consent of NNPC which consent
shall not be unreasonably withheld;
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(f) Have the right of ingress to and egress from the Contract Area
and to and from facilities therein located at all times during
the Term of this Contract;
(g) Submit to NNPC for permanent custody copies of all geological,
geophysical, drilling, well production, operating and other data
and reports as it may compile during the Term hereof and at the
end of the Contract surrender all original data and reports to
NNPC;
(h) Prepare estimated and final PPT returns and submit same to NNPC
on a timely basis in accordance with the PPT Act;
(i) Prepare and carry out plans and programmes for industrial
training and education of Nigerians for all job classifications
with respect to Petroleum Operations in accordance with the
Xxxxxxxxx Xxx 0000;
(j) Have the right to lift in accordance with Annex D and freely
export and to retain abroad the receipts from the sale of
Available Crude Oil allocated to it hereunder:
(k) Employ only such personnel as are reasonably necessary to conduct
the Petroleum Operations and employ qualified Nigerian Nationals
to the maximum extent possible and in this respect:
(i) Company shall determine the qualifications and number of
positions required to conduct Petroleum Operations in a
prudent and cost effective manner.
(ii) Qualified Nigerians shall be employed in all non-
specialized positions.
(iii) Qualified Nigerians shall also be employed in specialized
positions such as those in exploration, drilling,
engineering, production, and finance. Company shall have
the right, subject to applicable laws, rules and
regulations, to employ non-Nigerians in such specialized
positions where qualified
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Nigerians are not available provided that Company shall
recruit and train Nigerians for such specialized positions
such that the number of non-Nigerian staff shall be kept
to a minimum.
(iv) Officials of NNPC shall be assigned to work with Company
from time to time by mutual consent of the Parties and
such officials and Company officials shall not be treated
differently with regard to salaries and other benefits
from other similar petroleum companies and their officials
engaged directly in similar Petroleum Operations in
Nigeria;
(l) Give preference to such goods which are available in Nigeria or
services rendered by Nigerian nationals, provided such goods meet
the industry standards and such services are of good quality and
are offered at competitive prices and are timely available;
(m) In respect of payment of customs duties and other like charges,
Company and its subcontractors shall not be treated differently
from any other companies and their subcontractors engaged
directly in similar Petroleum Operations in Nigeria;
(n) Indemnify and hold harmless NNPC from and against losses
(including legal fees and expenses) of whatever kind and nature
resulting from Company's negligence or willful misconduct in
carrying out Petroleum Operations and as a consequence of any
final decision given by Nigerian Court, except where such Losses
are shown to result from any action or failure to act on the part
or NNPC, provided however, that under no circumstances shall
Company be liable to NNPC for reservoir damage or pollution or
any consequential losses or damages whatsoever or howsoever
occurring including, but not limited to, lost production or lost
profits;
(o) Have the right to finance Petroleum Operations from external
sources under terms and conditions approved by NNPC; and
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(p) Not exercise all or any rights or authority over the Contract
Area in derogation of the rights of NNPC.
8.2 In accordance with this Contract, NNPC shall:
(a) Pay to the Government in a timely manner, all Bonuses, Royalties,
Concession Rentals and PPT accruing out of Petroleum Operations;
(b) With its professional staff assigned pursuant to Clause
8.1(k)(iv), work jointly with Company's professional staff in
Company's Exploration, Petroleum Engineering,
Facilities/Materials and Finance Departments;
(c) Otherwise assist and expedite Company's execution of Petroleum
Operations and Work Programmes including, but not limited to,
assistance in supplying or otherwise making available all
necessary visas, work permits, rights of way and easements as may
be requested by Company (Expenses incurred by NNPC at Company's
request in providing such assistance shall be reimbursed to NNPC
by Company in accordance with Clause 12.1. Company shall include
such reimbursements in the Operating Costs. Such reimbursements
will be made against NNPC's invoice and shall be in U.S. Dollars
computed at the rate of exchange published by the Central Bank of
Nigeria and/or the Federal Ministry of Finance);
(d) Have title to all original data resulting from the Petroleum
Operations including but not limited to geological, geophysical,
engineering, well logs, completion, production, operations,
status reports and any other data as Company may compile during
the Term hereof, provided however, Company shall retain and use
such original data during the Term of this Contract and NNPC
shall have access to such original data during the Term of this
Contract;
(e) Not exercise all or any of its right or authority over the
Contract Area in derogation of the rights of Company;
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(f) Take such action as may be required to convert OPLs 90 and 225 to
OMLs if a commercial discovery is made; and
(g) Have obtained any and all approvals from Government which are
necessary for the execution of this Contract.
CLAUSE 9
RECOVERY OF OPERATING COSTS AND CRUDE OIL ALLOCATION
9.1 The allocation of Available Crude Oil shall be in accordance with the
Accounting Procedure (Annex B), the Allocation Procedure (Annex C) and
this Clause 9 as follows:
(a) Royalty Oil shall be allocated to NNPC in the quantum which will
generate an amount of Proceeds to pay the actual Royalty payable
during each month and the Concession Rental payable annually;
(b) Tax Oil shall be allocated to NNPC in the quantum which will
generate an amount of Proceeds to pay the actual PPT liability
payable during each month;
(c) Cost Oil shall be allocated to Company in the quantum which will
generate an amount of Proceeds for recovery of Operating Costs;
and
(d) Profit Oil, being the balance of available Crude Oil after
deducting Royalty Oil, Tax Oil, and Cost Oil, shall be allocated
to each Party pursuant to Schedule B-2 of the Accounting
Procedure (Annex B) as follows:
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Monthly Average Profit Oil
MBOPD From Contract Area Percentages
---------------------------------------- ---------------------
NNPC Company
---- -------
0 to 40 30 70
Greater than 40 but less than 75 40 60
Greater than 75 but less than 100 45 55
100 and above 60 40
9.2 The quantum of Available Crude Oil to be allocated to each Party under
this Contract shall be determined at the fiscalisation point.
9.3 Each Party shall take in kind, lift and dispose of its allocation of
Available Crude Oil in accordance with the Lifting Procedure (Annex D).
9.4 Allocation of Royalty Oil and Tax Oil to NNPC shall be applied towards
the liabilities of Company and NNPC for Royalty, Concession Rentals, and
PPT and the Proceeds therefrom shall be paid to the Government by NNPC
on behalf of both Parties.
9.5 Should either Party lift the other Party's allocation of Available Crude
Oil pursuant to Clause 10, the purchasers of such Crude Oil shall be
instructed to pay the receipts from such Available Crude Oil sales
directly into the lifting Party's account and the lifting Party shall
within seven (7) days transfer to the account designated by the
non-lifting Party, the receipt of such portion of the Proceeds to which
the non-lifting Party is so entitled.
9.6 If NNPC agrees, Company may purchase any portion of NNPC's allocation of
Available Crude Oil from the Contract Area under NNPC's terms and
conditions including valuation and pricing of the Crude Oil as
applicable to other third party buyers of NNPC's Crude Oil.
9.7 Both Parties shall meet on a monthly/quarterly basis to reconcile all
Crude Oil allocated and lifted during the period as per Article III 7 of
Annex D.
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CLAUSE 10
VALUATION OF AVAILABLE CRUDE OIL
10.1 Available Crude Oil allocated to each Party shall be valued in
accordance with the following procedures:
(a) On the attainment of commercial production, the Parties shall
engage the services of at least two independent laboratories to
determine the assay of the new Crude Oil.
(b) When a new Crude Oil stream is produced, a trial marketing period
shall be designated which shall extend for the first six (6)
month period during which such new stream is lifted or for the
period of time required for the first ten (10) liftings,
whichever is longer. During the trial marketing period the
Parties shall:
(i) Collect samples of the new Crude Oil upon which the assays
shall be performed as provided in Clause 10.l(a) above;
(ii) Determine the approximate quality of the new Crude Oil by
estimating the yield values from refinery modelling;
(iii) Share in the marketing such that each Party markets
approximately an equal amount of the new Crude Oil and to
the extent that one Party lifts the other Party's
allocation of Available Crude Oil, payments therefor shall
be made in accordance with Clause 9.5;
(iv) Exchange information regarding the marketing of the new
Crude Oil including documents which verify the sales price
and terms of each lifting;
(v) Apply the actual f.o.b. sales price to determine the value
for each lifting which f.o.b. sales pricing for each
lifting shall continue after the trial marketing period
until the Parties agree to a valuation of the new Crude
Oil
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but in no event longer than ninety (90) days after
conclusion of the trial marketing period.
(c) As soon as practicable but in no event not later than sixty (60)
days after the end of the trial marketing period, the Parties
shall meet to review the assay, yield, and actual sales data.
Each Party may present a proposal for the valuation of the new
Crude Oil. A valuation method shall be established for
determining the price for each lifting of Available Crude Oil.
Such valuation method shall be in accordance with the Realisable
Price provisions set forth in the Memorandum of Understanding
pursuant to Clause 16.6 of this Contract. It is the intent of
the Parties that such prices shall reflect the true market value
of the new Crude Oil. The valuation method determined hereunder
(including the product yield values) shall be mutually agreed
within thirty (30) days from the aforementioned meeting failing
which, determination of such valuation shall be referred to the
Management Committee for resolution pursuant to Clause 7.
(d) Upon the conclusion of the trial marketing period, the Parties
shall be entitled to lift their allocation of Available Crude Oil
pursuant to Clause 9 and the Lifting Procedure.
10.2 If in the opinion of either Party an agreed price valuation method fails
to reflect the market value of a Crude Oil produced in the Contract
Area, then such Party may propose to the other Party modifications to
such valuation method once in every six (6) months but in no event more
than twice in any year. The Parties shall then meet within thirty (30)
days of such proposal and mutually agree on any modifications to such
valuation within thirty (30) days from such meeting failing which,
determination of such valuation shall be referred to the Management
Committee for resolution pursuant to Clause 7.
10.3 Segregation of Crude Oils for different quality and/or grade shall be by
agreement of the Parties taking into consideration, among other things,
the operational practicality of
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segregation and the cost benefit analysis thereof. If the Parties agree
on such segregation the following provisions shall apply:
(a) Any and all provisions of the Contract concerning valuation of
Crude Oil shall separately apply to each segregated Crude Oil
produced;
(b) Each grade or quality of Crude Oil produced and segregated in a
given Year shall contribute its proportionate share to the total
quantity designated in such Year as Royalty Oil, Tax Oil, Cost
Oil and Profit Oil.
CLAUSE 11
SOLE RISK OPERATIONS
11.1 For the purpose of this Clause 11:
(a) "Common Cost" means overhead expenses in respect of operating and
maintenance charges and depreciation on common user assets which
are shared by Sole Risk Operations and Petroleum Operations.
(b) "Exploratory Well" means:
(i) a well drilled in the Contract Area in an area lying
outside the interpreted closure of any structural or
stratigraphic trap on which closure a well has been
drilled which is capable of producing Crude Oil, or
(ii) a well in the Contract area in any area lying inside the
interpreted closure of any structural or stratigraphic
trap, to the extent such well is deepened or plugged back
to a stratigraphic level different from that to which it
had previously been drilled and found capable of producing
Crude Oil; or
(iii) any well that has been agreed by the Parties to be an
Exploratory Well.
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(c) "Non-Sole Risk Party" means a Party who does not join in the
proposal for, nor participate in a Sole Risk Operation;
(d) "Production Facilities" means drilling and/or production
platforms and/or Crude Oil storage and transportation facilities
required to produce and deliver any Crude Oil that may be
discovered from an Exploratory Well;
(e) "Sole Risk Exploratory Well" means an Exploratory Well drilled by
a Sole Risk Party pursuant to this Clause 11;
(f) "Sole Risk Notice" - means a notice given pursuant to Clause 11.4
herein of a Party's intention to conduct a Sole Risk Operation;
(g) "Sole Risk Operation" - means an operation conducted for only one
of the Parties in the Contract Area in accordance with the
provisions of this Clause 11.
(h) "Sole Risk Party" - means the Party who proposes and/or
undertakes a Sole Risk Operation pursuant to this Clause 11.
11.2 Subject to Clause 11.3, Sole Risk Operations shall only include and be
undertaken in the Contract Area in respect of any one or more of the
following activities:
(a) the deepening, sidetracking or plugging back of an Exploratory
Well;
(b) the drilling of an Exploratory Well including testing and coring
programmes;
(c) the drilling of appraisal and development xxxxx and the
installation of Production Facilities to develop a discovery made
by a Sole Risk Exploratory Well;
(d) any other activity or project agreed by the Parties to be
undertaken as a Sole Risk Operation.
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11.3 (a) No Sole Risk Operation may be conducted if it would adversely
affect any other Petroleum Operations or conflict with all or any
part of any current Work Programme.
(b) No Sole Risk Operation shall be undertaken until:
(i) The Sole Risk Operation shall first have been proposed in
writing to the Management Committee which proposal shall
specify appropriate details of the said operations such as
location of proposed well, scope of geological and
geophysical programmes, proposed depth, itemized estimate
of the costs thereof, economic analysis, expected dates of
commencement and completion; and
(ii) The Management Committee shall have disapproved or be
deemed to have disapproved the proposal.
(c) A Sole Risk Operation for the deepening or sidetracking of an
Exploratory Well which is in the course of drilling may be
proposed only if such well has not encountered a discovery and
the Parties have decided to abandon the well following their
receipt of all drilling and test results. The Parties shall make
any decision relating to the abandonment of such well as
expeditiously as possible.
11.4 Within 12 months after the Management Committee rejects a proposal for
any of the Petroleum Operations described in Clause 11.2 or, in the case
of Clause 11.3 (c), within 48 hours after a decision of the Parties to
abandon an Exploratory Well, either Party may give to the other Party a
Sole Risk Notice in writing. The Non-Sole Risk Party shall have sixty
(60) days after the receipt of the Sole Risk Notice within which to
notify the Sole Risk Party that said Non-Sole Risk Party elects to
participate in the costs of such Sole Risk Operation, ("Participation
Notice"); provided, however, that in the case of a Sole Risk activity
pursuant to Clause 11.3 (c) the period in which the Participation Notice
may be given shall be forty-eight (48) hours.
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11.5 If the Non-Sole Risk Party elects to participate in a proposed Sole Risk
Operation within the applicable period specified in Clause 11.4, such
Sole Risk Operation shall be carried out by the Company as a Petroleum
Operation and the current Work Programme shall be deemed to be amended
accordingly.
11.6 In the event the Non-Sole Risk Party does not elect, within the
applicable period specified in Clause 11.4 to participate in a proposed
Sole Risk Operation, the Sole Risk Party shall be entitled to carry out
the Sole Risk Operation at its sole risk, cost and expenditure. Costs
and expenses of the Sole Risk Operation incurred by the Sole Risk Party
shall be computed in accordance with the principles set out in the
Accounting Procedure.
11.7 (a) Notwithstanding that the Company may not be the Sole Risk Party,
the Sole Risk Operation shall, subject to Clauses 11.7(e) and
11.8, be carried out promptly and diligently by the Company for
the sole account and benefit of the Sole Risk Party.
(b) Any Sole Risk Operation shall be carried out at the sole risk,
and under the overall supervision and control of the Sole Risk
Party but otherwise pursuant to this Contract.
(c) The cost and expense of any Sole Risk Operation shall be entirely
for the account of the Sole Risk Party and shall not be
chargeable as Operating Costs under this Contract nor shall in
any way alter the Cost Oil and/or Profit Oil which may be due to
the Non-Sole Risk Party from other Petroleum Operations conducted
hereunder. However, such cost and expense shall be deductible
for PPT purposes pursuant to the Accounting Procedure and any
benefit from such deductions shall accrue entirely to the Sole
Risk Party.
(d) The Company shall keep and maintain separate books, records, and
accounts (including bank accounts) with respect to the Sole Risk
Operations, including the Sole Risk portion of all Common Costs
in connection therewith, which shall be subject to the right of
examination and audit by the Sole Risk Party.
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(e) The Sole Risk Party shall be obligated to advance the estimated
expenditure for the Sole Risk Operation to the Company within
fifteen (15) days after receipt of the Company's request
therefor. The Company, if not the Sole Risk Party, shall not
use, or be required to use, its own funds for the purpose of
paying the costs and expenses of the Sole Risk Operation.
11.8 It is hereby understood and agreed that the Sole Risk Party shall do all
things necessary to enable the Company on its behalf to commence the
Sole Risk Operation within one hundred and eighty (180) days after
expiry of the period specified in Clause 11.4 for giving a Participation
Notice in the case of a Sole Risk Operation under Clause 11.2; or within
48 hours after expiry of the period specified in Clause 11.4 for giving
a Participation Notice in case of projects under Clause 11.3(c). If the
Sole Risk Operation specified in the Sole Risk Notice is not commenced
within the period specified in this Clause 11.8 for reasons attributable
to the Sole Risk Party, then the right of the Sole Risk Party to carry
out the Sole Risk Operation shall lapse.
11.9 The Company shall, in relation to the Sole Risk Operation, furnish to
NNPC all information and data which the Company is obligated to give
NNPC under the Terms of this Contract.
11.10 The Non-Sole Risk Party may at any time, elect to participate in a Sole
Risk Operation by paying to the Sole Risk Party an amount equal to two
hundred percent (200%) of the cumulative cost and expenditure of the
Sole Risk Operation incurred as of the date of such election, being
hereinafter referred to as the "Re-entry Penalty". The whole or any
part of the Re-entry Penalty shall be paid in cash in the currency in
which the Sole Risk costs have been incurred or in kind or both as may
be mutually agreed by the Parties. Following an election and payment as
aforesaid, such operations shall be carried out as Petroleum Operations.
11.11 The Sole Risk Party shall be entitled to use property purchased for the
Petroleum Operation and personnel of the Company for Sole Risk Operation
upon terms and conditions agreed by the Parties; provided however, that
it is understood that at all times the Petroleum Operations
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shall take precedence over the Sole Risk Operation in such use of
Petroleum Operation property and Company personnel.
11.12 The Sole Risk Party shall indemnify and hold harmless the Non-Sole Risk
Party from all suits, claims, liens, liabilities, damages, costs, losses
and expenses whatsoever directly or indirectly caused to third parties
or incurred by the Non-Sole Risk Party as a result of anything done or
omitted to be done in the course of carrying out the Sole Risk
Operation.
11.13 (a) Subject to Clause 11.10, all property acquired through a Sole
Risk Operation, including data and information shall be wholly
owned by the Sole Risk Party.
(b) In case of a Sole Risk Operation under Clause 11.2 (c) the
relevant Production Facilities as well as any Crude Oil produced
therefrom, shall be owned by the Sole Risk Party until such time
as the Non-Sole Risk Party has elected to participate in further
work under the Sole Risk Operation pursuant to Clause 11.10 and
paid the Re-entry Penalty.
(c) Notwithstanding the election of the Non-Sole Risk Party to
participate in a Sole Risk Operation involving production of
Crude Oil discovered as the result of a Sole Risk Exploratory
Well, and the payment by the Non-Sole Risk Party of the Re-entry
Penalty pursuant to Clause 11.10, the Non-Sole Risk Party shall
not be entitled to receive any payment in kind or cash or credit
for any Crude Oil which was produced as a result of a discovery
from such Exploratory Well prior to the date of such election and
payment. Upon such election and payment however the Non-Sole
Risk Party shall be entitled to its Profit Oil Share of Crude Oil
produced as a result of a discovery from such Exploratory Well
following such election and payment.
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CLAUSE 12
PAYMENTS
12.1 The method of payment of any sum due from Company to NNPC and vice versa
shall be in accordance with the prevailing guidelines of the Federal
Ministry of Finance of Nigeria, the Central Bank of Nigeria and in
accordance with the Accounting Procedure, Annex B.
12.2 Unless otherwise provided herein, any payments which NNPC is required to
make to Company or which Company is required to make to NNPC pursuant to
this Contract shall be made within thirty (30) days following the end of
the month in which the obligation to make such payments occurs. Overdue
payments shall bear interest at the annual rate of one (1) month LIBOR
plus 2%
12.3 Each Party shall have the right to set off against sums due and payable
to the other Party under this Contract agreed sums past due under this
Clause.
CLAUSE 13
TITLE TO EQUIPMENT
13.1 Company shall finance the cost of purchasing all equipment to be used in
Petroleum Operations in the Contract Area pursuant to the Work
Programmes and such equipment shall become the property of NNPC on
arrival in Nigeria. Company and NNPC shall have the right to use such
equipment exclusively for Petroleum Operations in the Contract Area
during the Term of this Contract. Should NNPC desire to use such
equipment outside the Contract Area, such use shall be subject to terms
and conditions agreed by the Parties provided that it is understood
Petroleum Operations hereunder shall take precedence over such use by
NNPC.
13.2 Company's right to use such purchased equipment shall cease with the
termination or expiration (whichever is earlier) of this Contract.
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13.3 The provisions of Clause 13.1 with respect to the title of property
passing to NNPC shall not apply to leased equipment belonging to foreign
third parties, and such equipment may be freely exported from Nigeria in
accordance with the terms of the applicable lease.
13.4 Title to all lands purchased or otherwise acquired by Company for the
purposes of Petroleum Operations and all movable property utilised in
the Contract Area and incorporated permanently in any premises,
locations and structures for the purposes of Petroleum Operations
hereunder shall be in the name of NNPC and Company. Upon termination
of this Contract pursuant to Clause 4, NNPC shall take possession of
such lands and property and Company shall hand over such lands and
property within a reasonable period of time.
13.5 Subject to Clause 13.3 hereof, all fixed assets purchased or otherwise
acquired by Company for the purposes of Petroleum Operations hereunder
shall become the property of NNPC. Upon termination of this Contract
pursuant to Clause 4, Company shall hand over possession of such fixed
assets to NNPC.
13.6 During the Term of this Contract, any agreed sale of equipment, lands,
fixed assets, materials and machinery acquired for the purpose of the
Petroleum Operations hereunder shall be conducted by Company on the
basis of the highest price obtainable and the proceeds of such sale
shall be credited to the Petroleum Operations.
CLAUSE 14
EMPLOYMENT AND TRAINING OF NIGERIAN PERSONNEL
14.1 Each Year, Company shall submit a detailed programme for recruitment
and training for the following Year in respect of its Nigerian personnel
in accordance with the Xxxxxxxxx Xxx 0000 and its amendment.
14.2 Costs and expenses incurred in the recruitment and training of Nigerian
personnel shall be included in Operating Costs.
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CLAUSE 15
BOOKS AND ACCOUNTS, AUDITS
AND OVERHEAD CHARGES
15.1 BOOKS AND ACCOUNTS
Company shall be responsible for keeping complete books of accounts
consistent with modern petroleum industry and accounting practices and
procedures. The statutory books and accounts shall be kept in Naira.
All other books of accounts shall be made up both in Nigerian currency
and U.S. Dollars. Officials of NNPC and Company shall have access to
such books and accounts and officials of NNPC assigned to Company
pursuant to Clause 8.1(k)(iv) shall participate in the preparation of
same.
15.2 AUDITS
NNPC shall have the right to inspect and audit the books and accounts
relating to this Contract for any Year by giving thirty (30) days
written notice to Company and Company shall facilitate the work of such
inspection and auditing; provided however, that the costs of such
inspection and auditing shall be met by NNPC, and provided also that if
such inspection and auditing have not been so carried out within one (1)
Year following the end of the Year in question, the books and accounts
relating to such Year shall be deemed to be accepted by the Parties as
satisfactory. Any exception must be made in writing ninety (90) days
following the end of such audit and failure to give such written notice
within such time shall establish the correctness of the books and
accounts.
15.3 OVERHEAD CHARGES
Company shall include as Operating Cost overhead charges equal to two
and one-half percent (2-1/2%) of the aggregate amount of expenditures
for geologic and geophysical studies/surveys, exploration and appraisal
drilling, intangible drilling costs and Capital Cost (as defined in the
Accounting Procedure) including development drilling costs.
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CLAUSE 16
TAXES, ROYALTY, RATES AND DUTIES
16.1 In accordance with applicable laws and regulations all sums the
liability for which was incurred by the Company to the Federal
Government of Nigeria by way of Custom or Excise duty or other like
charges levied in respect of plant, storage tanks, pipelines, tools,
machinery and equipment essential for use in the Company's Petroleum
Operations shall be charged to Operating Cost.
16.2 All sums the liability for which was incurred by the Company to the
Federal Government of Nigeria or to any State or Local Government
Council in Nigeria by way of duty (other than customs and excise duties
under 16.1 above) rates, stamp duty, penalties on gas flared, bank
commissions levied by the Central Bank of Nigeria, fees and charges
shall be charged to Operating Cost.
16.3 NNPC shall pay all Royalty, Concession Rentals and PPT on behalf of
itself and Company out of Available Crude Oil allocated to it under
Clause 9.1 of this Contract.
16.4 The PPT rate shall be in accordance with the PPT Act and shall be 65.75%
for the first five (5) years of production from each field developed in
the Contract Area commencing from the first day of the month of first
sale therefrom and 85% thereafter, provided that if other rates are
offered to other producing companies in Nigeria, the same shall apply to
this Contract.
16.5 Within a reasonable period of time following the Effective Date of this
Contract, the Government shall establish and execute a Memorandum of
Understanding on Incentives for Encouraging Investments in Exploration
and Development Activities and Enhancing Crude Oil Exports (hereinafter
called the Memorandum of Understanding) with NNPC and Company which
shall be applied when determining the Royalty and PPT payable pursuant
to the Petroleum Operations hereunder. The Memorandum of Understanding
shall provide to the Parties the incentives extended to other oil
companies producing in Nigeria under
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those certain Memorandum of Understanding agreements between the
Government and such other companies effective 1st January, 1991
including any amendments or successor documents. The Memorandum of
Understanding shall include those provisions set forth in Article III
Paragraph 3 of the Accounting Procedure.
16.6 The Memorandum of Understanding shall include provisions to establish
the Realisable Price for the purpose or determining the payments of
Royalty and PPT in respect of Crude Oil produced and lifted pursuant to
this Contract. Such provisions shall be in accordance with the
Realisable Price provisions contained in those certain Memorandum of
Understanding agreements effective 1st January, 1991 between the
Government and the other oil companies producing in Nigeria. The
parameters for new Crude Oil streams produced from the Contract Area
shall be determined in accordance with provisions of Clause 10 of the
Contract.
16.7 NNPC shall make available to Company copies of receipts bearing the
names of both Parties for the payments made for PPT, Royalty and
Concession Rentals.
CLAUSE 17
INSURANCE
17.1 All property obtained under the provisions of this Contract shall be
adequately insured by Company in consultation with NNPC, in its name and
that of NNPC with limits of liability not less than those required by
Nigerian laws and regulations. The premia for such policies shall be
included in operating Costs. All policies shall name NNPC as a
co-insured with a waiver of subrogation rights in favor of NNPC.
17.2 In case of loss of or damage to property, indemnifications paid by the
insurance companies shall be entirely received by Company for Petroleum
Operations. Company shall determine whether the lost or damaged
property should be repaired, replaced or abandoned. If the decision is
to repair or replace, Company will immediately replace or repair such
lost or damaged property. Any excess cost of repair or replacement
above the amount reimbursed
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by the insurance companies shall be regarded as Operating Costs. If the
decision is to neither repair nor replace then the proceeds of any
coverage shall be credited to Operating Costs.
17.3 Company shall take out and maintain an insurance policy covering any and
all damages caused to third parties as a direct or indirect result of
Company's Petroleum Operations. Company shall defend and hold NNPC
harmless from damages and losses caused to third parties in consequence
of Company's gross negligence or willful misconduct in the performance
of this Contract.
17.4 All insurance policies under this Clause 17 shall be based on good
international petroleum industry practice, and shall be taken out in the
Nigerian insurance market except for those concerning risks for which
Company cannot obtain coverage in Nigeria which shall be taken out
abroad through the Nigerian Reinsurance Corporation, to the extent
required by law.
17.5 Company shall not be exempted from obligations arising from this Clause
17 even when the obligations of this Contract are performed by Company's
agents.
17.6 Company shall maintain other insurance policies required under Nigerian
law.
CLAUSE 18
CONFIDENTIALITY AND PUBLIC ANNOUNCEMENTS
18.1 Company shall keep information furnished to it by NNPC and all plans,
maps, drawings, designs, data, scientific, technical and financial
reports and other data and information of any kind or nature relating to
Petroleum Operations including any discovery of Petroleum as strictly
confidential, for all times, and shall ensure that their entire or
partial contents shall under no circumstances be disclosed by Company in
any announcement to the public or to any third party without the prior
written consent of NNPC.
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The provisions of this Clause 18 shall not apply to disclosure to:
(a) Subcontractors, affiliates, assignees, auditors, legal advisers,
provided that such disclosures are required for the effective
performance of the aforementioned recipients' duties related to
Petroleum Operations;
(b) Financial institutions involved in the funding of Petroleum
Operations hereunder, provided, in all cases, that the recipients
of such data and information agree in writing to keep such data
and information strictly confidential; and
(c) Comply with statutory obligation or the requirements of any
governmental agency in which event Company will notify NNPC of
any information so disclosed.
18.2 Company shall take necessary measures in order to make its employees,
agents, representatives, proxies and subcontractors comply with the same
obligation of confidentiality provided for in this Clause 18.
18.3 The provisions of this Clause 18 shall not be voided by the expiry or
termination of this Contract on any grounds whatsoever and these
provisions constitute a continuing obligation, and accordingly the
restrictions arising therefrom shall be in force at all times.
18.4 Company shall use its best endeavors to ensure that Company's servants,
employees, agents and subcontractors shall not make any reference in
public or publish any notes in newspapers, periodicals or books nor
divulge, by any other means whatsoever, any information on the
activities under Company's responsibility, or any reports, data or any
facts and documents that may come to their knowledge by virtue of this
Contract, without the prior written consent of NNPC.
18.5 Company shall submit to NNPC all statutory reports and information for
submission to Government and other statutory bodies.
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CLAUSE 19
FORCE MAJEURE
19.1 Any failure or delay on the part of either Party in the performance of
its obligations or duties under this Contract shall be excused to the
extent attributable to force majeure. A force majeure situation
includes delays, defaults or inability to perform under this Contract
due to any event beyond the reasonable control of either Party. Such
event may be, but is not limited to, any act, event, happening, or
occurrence due to natural causes; and acts or perils of navigation,
fire, hostilities, war (declared or undeclared), blockade, labour
disturbances, strikes, riots, insurrection, civil commotion, quarantine
restrictions, epidemics, storms, floods, earthquakes, accidents,
blowouts, lightning, and acts of or orders of Government.
19.2 If operations are delayed, curtailed or prevented by force majeure, then
the time for carrying out the obligation and duties thereby affected,
and obligations hereunder, shall be extended for a period equal to the
period thus involved.
19.3 The Party whose ability to perform its obligations is so affected shall
promptly notify the other Party thereof not later than twenty-four (24)
hours after the establishment of the start of force majeure stating the
cause, and both Parties shall do all that is reasonably within their
powers to remove such cause.
19.4 Company's failure or inability to find Crude Oil in Commercial Quantity
for reasons other than as specified in Clause 19.1 hereof shall not be
deemed force majeure.
CLAUSE 20
LAWS AND REGULATIONS
20.1 This Contract shall be governed by and construed in accordance with the
Laws of the Federation of Nigeria, and any dispute arising therefrom
shall be determined in accordance with such laws.
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20.2 No Term or provision of this Contract including the agreement of the
Parties to submit to arbitration hereunder, shall prevent or limit the
Government from exercising its sovereign rights.
20.3 In the event that any enactment of or change in the laws or regulations
of Nigeria or any rules, procedures, guidelines, instructions,
directives, or policies, pertaining to the Contract introduced by any
Government department or Government parastatals or agencies occurs
subsequent to the Effective Date of this Contract which materially and
adversely affects the rights and obligations or the economic benefits of
Company, the Parties shall use their best efforts to agree to such
modifications to this Contract as will compensate for the effect of such
changes. If the Parties fail to agree on such modifications within a
period of ninety days (90) following the date on which the change in
question took effect, the matter shall thereafter be referred at the
option of either Party to arbitration under Article 22 hereof.
Following arbitrator's determination, this Contract shall be deemed
forthwith modified in accordance with that determination.
20.4 All affairs related to this Contract shall be conducted in the language
in which this Contract was drawn up.
CLAUSE 21
UTILISATION OF NATURAL GAS
21.1 All Natural Gas discovered in the Contract Area shall be the sole
property of Government.
21.2 If Company discovers a commercially viable non-associated gas field,
NNPC shall require Company to investigate and submit proposals for the
commercial development of the gas field for NNPC's consideration
provided that any cost in respect of such proposals or investigation
shall be included in Operating Cost. For the commercial development of
the non-associated natural gas field, the funding arrangements and
participation by the Company in the project shall be the subject of
another agreement and Company shall have the right to participate in
such development project.
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21.3 Notwithstanding the provisions of Clause 21 hereof, Company shall have
the right to use, at no cost to Company, the associated Natural Gas
produced with Crude Oil as fuel for production operations; gas
recycling, secondary recovery by gas injection, gas lift, or any other
economical secondary recovery schemes, stimulation of xxxxx or
artificial lifts necessary in the commercial field discovered and
developed by the Company but only with the prior written consent of
NNPC, which consent shall not be unreasonably withheld. The objective
of maximum technical and economic recovery of Crude Oil shall always be
paramount. However, not later than five (5) years after the
commencement of production of Crude Oil from the Contract Area, the
Company shall submit to the Minister, a programme for the utilisation of
any Natural Gas whether associated with Crude Oil or not which has been
discovered from the Contract Area.
CLAUSE 22
CONSULTATION AND ARBITRATION
If a difference or dispute arises between NNPC and Company, concerning the
interpretation or performance of this Contract, and if the parties hereto fail
to settle such difference or dispute by amicable agreement, then either Party
may serve on the other a demand for arbitration. Within thirty (30) days of
such demand being served, each Party shall appoint an arbitrator and the two
arbitrators thus appointed shall within a further thirty (30) days appoint a
third arbitrator and if the arbitrators do not agree on the appointment of such
third arbitrator, or if either Party fails to appoint the arbitrator to be
appointed by it, such arbitrator shall be appointed by a High Court of Nigeria
in accordance with the provisions of the Arbitration and Conciliation Act, Cap
19, Laws of the Federation of Nigeria 1990 (notice of the intention to apply to
the Court having been duly given in writing by the applicant Party to the other
Party) and when appointed the third arbitrator shall convene meetings and act
as chairman thereat. If an arbitrator fails or is unable to act, a successor
shall be appointed by the respective Party or by the arbitrators in the event
the chairman must be succeeded. The arbitration award shall be binding upon
the Parties and the expenses of the arbitration shall be borne by the Parties
in such proportion and manner as may be provided in the award. The Nigerian
Arbitration and Conciliation Act, Cap 19, Laws of the Federation of Nigeria
1990 shall apply. The venue of the arbitration shall be anywhere in Nigeria as
agreed by the Parties.
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CLAUSE 23
EFFECTIVENESS
23.1 This Contract shall come into force and effect on the Effective Date.
23.2 This Contract shall not be amended or modified in any respect except by
mutual consent, in writing, of the Parties hereto.
CLAUSE 24
OTHER PROVISIONS
Should the Government grant fiscal terms to NNPC in respect of other oil
companies' production sharing contracts or NNPC grant contract terms to other
oil companies operating production sharing contracts in Nigeria more favorable
than the terms provided herein, the Parties shall meet and mutually agree on
revisions to this Contract which will give to Company the economic benefit of
such more favorable terms.
CLAUSE 25
NOTICES
25.1 Any notices required to be given by either Party to the other shall be
in writing and shall be deemed to have been duly given if sent and
received by mail or telegram or cable (confirmed by mail) or registered
post to, or hand delivered at the following registered offices:
NNPC: THE GROUP EXECUTIVE DIRECTOR, NAPIMS
NIGERIAN NATIONAL PETROLEUM CORPORATION
0, XXXX XXXXXXX XXXXXX
XXXXXXXX XXXXXX,
XXXXX.
CABLE: NAPETCOR
TELEX: 21126 NG
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COMPANY: THE MANAGING DIRECTOR
ASHLAND NIGERIA EXPLORATION UNLIMITED
00, XXXXXX XXXXXXX-XXXX XX.
XXXXXXXX XXXXXX
XXXXX
TELEX: 961-211023 ASHOIL NG
25.2 Either Party shall notify the other promptly of any change in the above
address.
SIGNED AND DELIVERED FOR AND ON BEHALF OF
NIGERIAN NATIONAL PETROLEUM CORPORATION
BY: /s/ OWELLE G. P. O. CHIKELU
-----------------------------------
Name: OWELLE G. P. O. CHIKELU
Designation: CHAIRMAN, NNPC BOARD OF DIRECTORS
IN THE PRESENCE OF:
Name: XX. X. X. XXXX
-----------------------------------
Signature: /s/ Xx. X. X. XXXX
Designation: GROUP MANAGING DIRECTOR
Address: NNPC HQ, LAGOS.
SIGNED AND DELIVERED FOR AND ON BEHALF OF
ASHLAND NIGERIA EXPLORATION UNLIMITED
BY: /s/ XX. X. X. XXXXXXX
-----------------------------------
Name: XX. X. X. XXXXXXX
Designation: GENERAL MANAGER AND MANAGING DIRECTOR
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IN THE PRESENCE OF:
Name: Xxxxxx X. Xxx
-----------------------------------
Signature: /s/ Xxxxxx X. Xxx
-----------------------------------
Designation: Secretary
-----------------------------------
Address: 00 Xxxxxx Xxxxxxx Xxxx Xxxxxx
-----------------------------------
Xxxxxxxx Xxxxxx, Xxxxx
-----------------------------------
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ANNEX A
TO THAT CERTAIN PRODUCTION SHARING
CONTRACT BETWEEN NNPC AND COMPANY
DATED 25TH MARCH 1992
[Map of Nigerian Mid Belt Coordinates]
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ANNEX B
TO THAT CERTAIN PRODUCTION SHARING CONTRACT
BETWEEN NNPC AND COMPANY DATED 25 MARCH 1992
ACCOUNTING PROCEDURE
ARTICLE I
GENERAL PROVISIONS
1. DEFINITIONS
This Accounting Procedure attached to and forming a part of the Contract
is to be followed and observed in the performance of either Party's
obligations thereunder. The defined terms appearing herein shall have
the same meaning as is ascribed to them in the Contract.
2. ACCOUNTS AND STATEMENTS
Company's accounting records and books shall be kept as provided under
Clause 15.1 of the Contract in accordance with generally accepted and
recognized accounting standards, consistent with modern petroleum
industry practices and procedures. All original books of accounts
together with original supporting documentation shall be kept and
maintained in Nigeria in compliance with all Nigerian laws and
regulations.
3. OTHER
In the event of a conflict of the terms of this Procedure and the
Contract the terms of the Contract shall apply.
ARTICLE II
OPERATING COSTS
Operating Costs shall be defined as all costs, expenses and obligations
incurred by Company in carrying out Petroleum Operations and shall consist of
(1) Non-Capital Costs, and (2) Capital Costs.
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1. NON-CAPITAL COSTS
Non-Capital Costs mean those Operating Costs incurred that are
chargeable to the current Year's operations. Non-Capital Costs
include, but are not limited to the following:
(a) General office expense - office, services and general
administration services pertaining to Petroleum Operations
including but not limited to, services of legal, financial,
purchasing, insurance, accounting, computer, and personnel
departments; transportation, rental of specialized equipment,
scholarships, charitable contributions and educational awards.
(b) Labour and related costs - salaries and wages, including bonuses,
of employees of Company who are directly engaged in the conduct
of Petroleum Operations, whether temporarily or permanently
assigned, irrespective of the location of such employees
including, but not limited to, the costs of employee benefits,
customary allowances and personal expenses incurred under
Company's practice and policy, and amounts imposed by applicable
Governmental authorities which are applicable to such employees.
These costs and expenses shall include:
(i) Cost of established plans for employee group life
insurance, hospitalization, pension, retirement, savings
and other benefits plan;
(ii) Cost of holidays, vacations, sickness and disability
benefits;
(iii) Cost of living, housing and other customary allowances;
(iv) Reasonable personal expenses which are reimbursable under
Company's standard personnel policies;
(v) Obligations imposed by Governmental authorities:
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(vi) Cost of transportation of employees, other than as
provided in paragraph (c) below, as required in the
conduct of Petroleum Operations; and
(vii) Charges in respect of employees temporarily engaged in
Petroleum Operations shall be calculated to reflect the
actual costs thereto during the period or periods of such
engagement.
(c) Employee relocation costs - costs for relocation, transportation
and transfer of employees of Company engaged in Petroleum
Operations pursuant to Clause 8.1(k) of this Contract including,
but not limited to the cost of freight and passenger service of
such employees' families and their personal and household effects
together with meals, hotel and other expenditures related to such
transfer incurred with respect to:
(i) employees of the Company within Nigeria, including
expatriate employees, engaged in Petroleum Operation;
(ii) transfers to Nigeria for engagement in Petroleum
Operations;
(iii) final repatriation or transfer of Company's expatriate
employees and families in the case of such employees'
retirement, relocation/reassignment or separation from the
Company; and
(iv) Nigerian employees on training assignments outside the
Contract Area.
(d) Services provided by third parties - cost of professional,
technical, consultation, utilities and other services procured
from third party sources pursuant to any contract or other
arrangements between such third parties and Company for the
purpose of Petroleum Operations.
(e) Legal expenses - All costs or expenses of handling,
investigating, asserting, defending, and settling litigation or
claims arising out of or relating to Petroleum
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Operations or necessary to protect or recover property used in
Petroleum Operations including, but not limited to, legal fees,
court costs, arbitration costs, cost of investigation or
procuring evidence and amounts paid in settlement or satisfaction
of any such litigation, arbitration or claims in accordance with
the provisions of this Contract.
(f) Services provided by Affiliates of Company - professional,
administrative, scientific and technical services for the direct
benefit of Petroleum Operations including, but not limited to,
services provided by the exploration, production, legal,
financial, purchasing, insurance, accounting and computer
services departments of such Affiliates. Charges for providing
these services shall reflect the actual cost only of providing
such services and shall not include any element of profit.
(g) Head Office overhead charge - parent company overhead in the
amount specified in Clause 15.3 of the Contract.
(h) A charge equal to four percent (4%) of the f.o.b. value of
materials for which Company or its Affiliates has arranged to
purchase and coordinate the forwarding and expediting effort.
(i) Interest - interest on loans used to finance Petroleum Operations
provided the terms of such loans were approved by NNPC.
(j) Insurance premiums and settlements - premium paid for insurance
normally required to be carried for the Petroleum Operations
together with all expenditures incurred and paid in settlement of
any and all losses, claims, damages, judgments, and other
expenses, including fees and deductibles relating to Company's
performance under the Contract.
(k) Duties and taxes - all duties and taxes, fees and any Government
assessments, including but not limited to, gas flare charges,
license fees, customs duties, and any
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other payments to the Government other than Royalties, PPT and
Concession Rentals.
(1) Operating expenses - labour, materials and services used in day
to day oil well operations, oil field production facilities
operations, secondary recovery operations; storage,
transportation, delivery and marketing operations; and other
operating activities, including repairs, well workovers,
maintenance and related leasing or rental of all materials,
equipment and supplies.
(m) Geologic and geophysical surveys - labour, materials and services
used in aerial, geological, topographical, geophysical and
seismic surveys incurred in connection with exploration excluding
however the purchase of data from NNPC prior to 1st January,
1991.
(n) Intangible drilling costs - expenditures for labour, fuel,
repairs, maintenance, hauling, and supplies and materials (not
including, casing or other well fixtures) which are for or
incidental to drilling, cleaning, deepening or completing xxxxx
or the preparation thereof incurred in respect of:
(i) determination of well locations, geological, geophysical,
topographical and geographical surveys for site evaluation
preparatory to drilling including the determination of
near surface and near sea bed hazards,
(ii) cleaning, draining and leveling land, road-building and
the laying of foundations,
(iii) drilling, shooting, testing and cleaning xxxxx,
(iv) erection of rigs and tankage assembly and installation of
pipelines and other plant and equipment required in the
preparation or drilling of xxxxx producing Crude Oil.
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(o) Exploration and appraisal drilling - all expenditures incurred in
connection with exploration drilling, and the drilling of the
first two appraisal xxxxx in a particular field, and the drilling
of development xxxxx which are dry, including costs incurred in
respect of casing, well cement and well fixtures.
(p) Abandonment - all expenditures incurred in connection with the
plugging of xxxxx; the removal and disposal of equipment and
facilities including wellheads, processing and storage
facilities, platforms, pipelines, transport and export
facilities, roads, buildings, wharves, plants, machinery,
fixtures; the restoration of sites and structures including the
payment of damages to property lessors.
2. CAPITAL COSTS
Capital Costs means, without limitation, expenditures which are subject
to a Capital Allowance under the PPT Act. Such expenditures normally
have a useful life beyond the year incurred and include but are not
limited to the following:
(a) Plant expenditures - expenditures in connection with the design,
construction, and installation of plant facilities (including
machinery, fixtures, and appurtenances) associated with the
production, treating, and processing of Crude Oil (except such
costs properly allocable to intangible drilling costs) including
offshore platforms, secondary or enhanced recovery systems, gas
injection, water disposal; expenditures for equipment, machinery,
and fixtures purchased to conduct Petroleum Operations such as
office furniture and fixtures, office equipment, barges, floating
craft, automotive equipment, aircraft, construction equipment,
miscellaneous equipment, and furniture and fixtures related to
employee housing and recreational facilities.
(b) Pipeline and storage expenditures - expenditures in connection
with the design, installation, and construction of pipeline,
transportation, storage, and terminal facilities associated with
Petroleum Operations including tanks, metering, and export lines.
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(c) Building expenditure - expenditures incurred in connection with
the construction of buildings, structures or works of a permanent
nature including workshops, warehouses, offices, roads, wharves,
employee housing and recreational facilities and other tangible
property incidental to construction.
(d) Drilling expenditures - expenditures for tangible goods in
connection with drilling xxxxx such as casing, tubing, surface
and sub-surface production equipment, flow lines, instruments;
costs incurred in connection with the acquisition of rights over
the Contract Area pursuant to paragraph l(d)i of the Second
Schedule of the PPT Act except any bonuses paid under Clause 2 of
the Contract.
(e) Pre-Production expenditures - all costs (including those
otherwise falling within Non-Capital Costs described in paragraph
2 of this Article II) incurred before the first PPT accounting
period.
(f) Material inventory - cost of materials purchased and maintained
as inventory items solely for Petroleum Operations subject to the
following provisions:
(i) Company shall supply or purchase any materials required
for the Petroleum Operations, including those required in
the foreseeable future. Inventory stock levels shall take
account of the time necessary to provide the replacement,
emergency needs and similar considerations.
(ii) Materials purchased by Company for use in the Petroleum
Operations shall be valued so as to include invoice price
(less prepayment discounts, cash discounts, and other
discounts if any) plus freight and forwarding charges
between point of supply and point of destination but not
included in the invoice price, inspection costs,
insurance, customs fees and taxes, on imported materials
required for this Contract.
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(iii) Materials not available in Nigeria supplied by Company or
from its Affiliate's stocks shall be valued at the current
competitive cost in the international market.
(iv) Company shall maintain physical and accounting controls of
materials in stock in accordance with general practice in
the international petroleum industry. Company shall make
a total inventory at least once a year to be observed by
NNPC and its external auditors. NNPC may however carry
out partial or total inventories at its own expense,
whenever it considers necessary, provided such exercise
does not disrupt Petroleum Operations.
ARTICLE III
COMPUTATION OF ROYALTY, CONCESSION RENTALS AND PPT
1. Company shall compute the amount of Royalty and Concession Rentals
payable by NNPC pursuant to Clause 8.2 of the Contract. Such amounts
shall be computed as provided under the Xxxxxxxxx Xxx 0000 and the
prevailing fiscal laws and regulations. For purposes of Article IV
hereof, Company shall compute the Royalty payment for remittance in a
given month based on the prevailing fiscal value of the Crude Oil
produced during the second preceding month. Annual Concession Rental
payments shall be taken into account when such payments are remitted.
NNPC shall remit all required payments of Royalty and Concession Rentals
to the Government.
2. Company shall compute the PPT payable by NNPC pursuant to Clause 8.2(a)
of the Contract in accordance with the provisions of the PPT Act and the
Memorandum of Understanding including, but not limited to, such
provisions pertaining to deductions, capital allowance, and any credits
which offset PPT liability. The applicable PPT rate shall be in
accordance with the PPT Act and shall be 65.75% for the first five years
of production from each field developed in the Contract Area commencing
for each field from the first day of the month of first sale therefrom.
Specifically, and not by way of limitation, the Reserve Addition Bonus,
if any, described under paragraph 3 of this Article III shall be applied
in computing
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the PPT payable. NNPC shall make all required PPT payments to the
Federal Inland Revenue Department. Company shall prepare all returns
required under the PPT Act and timely file them with NNPC. The monthly
PPT payable will be determined from such PPT returns.
3. The Memorandum Of Understanding shall be applied when calculating the
PPT. This shall include the application of the Guaranteed Notional
Margin, Revised Government Take, Reserve Addition Bonus, and the tax
offset for Capital Investment Costs. The Reserve Addition Bonus in
respect of reserves found prior to the first year of production shall be
the lesser of the annual average amount expended on Work Programmes
prior to such first year or the amount determined in accordance with the
following:
Reserves Found Prior Reserve Addition Bonus
to First Year of Rate Applied To The
Production Respective Tranche
Million Barrels ($/BBL)
-------------------- ----------------------
Less than 40 nil
40-60 $0.25
60-90 $0.30
Greater than 90 $0.50
4. In the event that there is more than one field producing in the Contract
Area and different PPT rates (i.e. either 65.75% or 85%) apply to such
fields, the Chargeable Profit (as defined under the PPT Act) shall be
allocated to each field in the proportion that the fiscal values from
each field during the accounting Year bear to the total fiscal values
from the Contract Area during the accounting Year. The applicable PPT
rate will then be applied to the appropriate Chargeable Profit allocated
to each field.
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ARTICLE IV
ACCOUNTING ANALYSES
1. A monthly accounting analysis in the form of Schedule B-1 attached to
this Accounting Procedure shall be prepared by Company and furnished to
NNPC within sixty (60) days of the end of the period covered by such
analysis.
2. The Realisable Price and the quantities actually lifted by the Parties
shall be used to compute the Proceeds as reflected in Section A of each
Schedule X-x and the allocation of such Proceeds in the categories
described under Clause 9.1 of the Contract shall be reflected in Section
B thereof.
3. The allocation of the quantity of Available Crude Oil to each Party
pursuant to Clause 9 of the Contract shall be according to and governed
by provisions of the Allocation Procedure.
4. The priority of allocation of the total Proceeds for each Period shall
be as follows:
(a) Royalty Oil,
(b) Tax Oil,
(c) Cost Oil, and
(d) Profit Oil.
5. The amount chargeable to and recoverable from Royalty Oil, Tax Oil and
Cost Oil to be entered in Section B of Schedule X-x shall be determined
as follows:
(a) Royalty Oil - The sum of royalties payable during such month,
and, where applicable, the annual amount of Concession Rentals as
provided under Article III 1 for purposes of Royalty Oil.
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(b) Tax Oil - The sum of the PPT payable for such month as provided
under Article III 2, 3, and 4 for purposes of Tax Oil.
(c) Cost Oil - The Operating Costs applicable to such month for
purposes of Cost Oil as follows:
(i) Non-Capital Costs shall be the amount recorded in the
books and accounts of Company for such month in accordance
with this Accounting Procedure.
(ii) Capital Costs recorded in the books and accounts of
Company shall be recoverable in full and chargeable in
equal installments over a five (5) year period or the
remaining life of the Contract, whichever is less.
Amortization of such costs shall be in accordance with the
method prescribed under the Second Schedule of the PPT
Act, or over the remaining life of the contract, whichever
is less.
(d) Any carryover from previous months as provided under paragraph 6
of this Article.
6. Any amounts chargeable and recoverable in excess of the allocation of
Proceeds for the month to Royalty Oil, Tax Oil and Cost Oil shall be
carried forward to subsequent months. Carryovers shall be determined as
follows:
(a) A Royalty Oil value carryover results when the Proceeds for such
month are insufficient for recovery of the Royalty Oil due for
the month.
(b) A Tax Oil value carryover results when the Proceeds remaining
after allocating a portion of the Proceeds to Royalty Oil are
insufficient for recovery of the Tax Oil due for the month.
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(c) A Cost Oil value carryover results when the Proceeds remaining
after allocating a portion of the Proceeds to Royalty Oil and Tax
Oil are insufficient for recovery of Cost Oil due for the month.
7. Profit Oil results where Proceeds remain after allocations to Royalty
Oil, Tax Oil and Cost Oil pursuant to paragraph 5 of this Article IV.
Profit Oil shall be allocated to the Parties according to the following
percentages:
Monthly Average Profit Oil
MBOPD From Contract Area Percentages
---------------------------------------- ----------------------
NNPC COMPANY
---- -------
0 to 40 30 70
Greater than 40 but less than 75 40 60
Greater than 75 but less than 100 45 55
100 and above 60 40
A computation of Profit Oil shares in the form of Schedule B-2 attached
to this Accounting Procedure shall be submitted monthly in conjunction
with Schedule B-1.
ARTICLE V
OTHER PROVISIONS
1. Company shall open and keep bank accounts in Nigeria in Naira where all
funds remitted from abroad shall be deposited for the purpose of meeting
local expenditures. For purposes of keeping the books of accounts, any
Foreign Currency remitted by Company into Nigeria shall be converted
into Naira at the monthly exchange rates advised by the Central Bank of
Nigeria.
2. Company shall prepare financial accounting and budget statements in
accordance with NNPC's prescribed reporting format.
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3. Financial accounting and budget statements, in accordance with NNPC's
prescribed reporting format, shall be prepared quarterly, by Company, in
respect of Sole Risk Operations.
4. With respect to any agreed sum arising out of this Contract owing
between the Parties that is past due, any set-off pursuant to Clause
12.3 shall be exercised by giving the other Party written notice thereof
accompanied by sufficient descriptions of the offsetting sums to allow
the Parties to properly account therefor.
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SCHEDULE B-1
MONTHLY ACCOUNTING ANALYSIS
MONTHLY OF _____________, ____________
SECTION A - LIFTING SUMMARY
============================================================================================================
Proceeds Received By:
--------------------------
Lifting Date Crude Type RP Volume Proceeds NNPC ANEU
US$/Bbl Bbls US$
------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------
============================================================================================================
Totals
========================================================================
SECTION B - ALLOCATION OF PROCEEDS - EXPRESSED IN U.S. DOLLARS
==============================================================================================================
ALLOCATION OF
PRIOR CURRENT RECOVERABLE PROCEEDS:
MONTH MONTH THIS ---------------
CATEGORY CARRYOVER CHARGES MONTH NNPC ANEU CARRY-OVER
--------------------------------------------------------------------------------------------------------------
Royalty Oil
--------------------------------------------------------------------------------------------------------------
Tax Oil
--------------------------------------------------------------------------------------------------------------
Cost Oil
--------------------------------------------------------------------------------------------------------------
NNPC Profit Oil
--------------------------------------------------------------------------------------------------------------
ANEU Profit Oil
==============================================================================================================
Totals
==============================================================================================================
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SCHEDULE B-2
PROFIT OIL SHARES
MONTH OF _________, ______
SECTION A - TOTAL PRODUCTION FOR THE MONTH
==============================================================
Field Total Net Barrels
--------------------------------------------------------------
--------------------------------------------------------------
--------------------------------------------------------------
--------------------------------------------------------------
==============================================================
==============================================================
SECTION B - TOTAL PROFIT OIL FOR THE MONTH
==============================================================
Category US$
--------------------------------------------------------------
Proceeds
--------------------------------------------------------------
Royalty Oil
--------------------------------------------------------------
Tax Oil
--------------------------------------------------------------
Cost Oil
--------------------------------------------------------------
Profit Oil
==============================================================
SECTION C - CALCULATION OF PROFIT OIL SHARES
========================================================================================================================
Monthly % Of Total Monthly Profit NNPC Profit NNPC's ANEU's
Barrels/Day Produced Production Monthly By Tranch, US $ Share By Profit, Profit,
For The Month By Tranch, Barrels Production Tranch US $ US $
------------------------------------------------------------------------------------------------------------------------
First 40,000 Bbls/Day 0.30
------------------------------------------------------------------------------------------------------------------------
Next 35,000 Bbls/Day 0.40
------------------------------------------------------------------------------------------------------------------------
Next 25,000 Bbls/Day 0.45
------------------------------------------------------------------------------------------------------------------------
Over 100,000 Bbls, Day 0.60
------------------------------------------------------------------------------------------------------------------------
Total Monthly
Production
========================================================================================================================
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ANNEX C
TO THAT CERTAIN PRODUCTION SHARING CONTRACT
BETWEEN NNPC AND THE COMPANY DATED 25 MARCH 1992
ALLOCATION PROCEDURE
ARTICLE I
APPLICATION
1. This Allocation Procedure ("this Procedure") sets out the methods for
the allocation of Available Crude Oil from the Contract Area and the
Parties shall allocate all liftings of Available Crude Oil in accordance
with this Procedure and the Contract.
2. In the event that the production of Available Crude Oil is segregated
into two or more types of grades, the provisions of this Procedure shall
apply separately to each such type or grade. To the extent that
distribution on such a basis is impracticable, a separate method for the
allocation of such Available Crude Oil shall be agreed upon by the
Parties.
3. In the event of a conflict between the terms of this Procedure and the
Contract, the terms of the Contract shall prevail.
4. The procedures set forth herein may be amended from time to time by
mutual agreement of the Parties.
ARTICLE II
DEFINITIONS
1. The words and expressions defined in the Contract when used herein,
shall have the meaning ascribed to them in the Contract. In addition,
the following words shall have the meanings set forth below:
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(a) "CURRENT QUARTER" means the calendar quarter within which the
relevant Schedules are prepared and submitted;
(b) "FORECAST QUARTER" means the first calendar quarter succeeding
the Current Quarter;
(c) "LIFTING ALLOCATION" means the quantity of Available Crude Oil
which each Party has the right to take in kind, lift and dispose
of in accordance with Clause 9 of the Contract;
(d) "PRIMARY NOMINATION" means written statement issued by each
Party to the other at least twenty-five (25) days prior to the
commencement of each quarter declaring the volume by grade of its
estimated Lifting Allocation which the Party desires to lift
during the Forecast Quarter;
(e) "PROCEEDS" means the amount in U.S. Dollars determined by
multiplying the Realisable Price by the number of Barrels of
Available Crude Oil lifted by either Party; and
(f) "PROCEEDS IMBALANCE" means the difference between each Party's
Proceeds to which it is entitled and the Proceeds which each
Party has actually received, as reflected in each quarter's
Schedule C-2 of this Procedure.
ARTICLE III
LIFTING ALLOCATION
1. On or before September 30 of every year, Company shall advise the
Parties of its forecast of the Available Crude Oil to be produced by
grades during each month of the first six (6) months of the next ensuing
Year.
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2. On or before March 31 of every year, Company shall advise NNPC of its
forecast of Available Crude Oil to be produced by grades during each
month of the six (6) months commencing July 1, of the Year.
3. Thirty-five (35) days before commencement of production from the
Contract Area and thereafter thirty-five (35) days prior to the
beginning of the Forecast Quarter, Company shall notify NNPC of the
estimated Lifting Allocation which can be produced and made available
for disposal during the Forecast Quarter. Such estimated Lifting
Allocation shall take into account any Proceeds Imbalance for the
quarter first preceding the Current Quarter and any estimated Proceeds
Imbalance for the Current Quarter computed in accordance with paragraph
3 of Article IV. Such notice shall be in the form of Schedule C-l
attached hereto indicating the estimated quantities of Royalty Oil, Tax
Oil, Cost Oil and Profit Oil, each Party's estimated Lifting Allocation
and the estimated Realisable Price used to prepare such estimated
Lifting Allocations.
4. Twenty-five (25) days before the commencement of production from the
Contract Area and thereafter not later than twenty-five (25) days before
the beginning of Forecast Quarter, each Party shall notify the other of
its Primary Nomination of Available Crude Oil which it intend(s) to lift
during the Forecast Quarter which shall not exceed its estimated Lifting
Allocation. Such notice shall include the information described in
Article V, paragraph 1 of Annex D - Nomination, Ship Scheduling and
Lifting Procedure.
5. The estimated Realisable Price to be used by Company to prepare Schedule
C-l (Estimated Quarterly Lifting Allocation) shall be the Realisable
Price of the first month of the Current Quarter.
6. Each Party shall be obligated to lift its own Lifting Allocation in
accordance with the Nomination, Ship Scheduling and Lifting Procedure
(Annex D). In the event that one Party lifts the other Party's Lifting
Allocation, the lifting Party shall pay to the non-Lifting Party the
applicable Proceeds pursuant to Clause 9.5 of the Contract. In such
case, the non-lifting
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Party shall be treated for all other purposes under this Contract as
though it had made such lifting itself.
ARTICLE IV
ADJUSTMENTS OF LIFTING ALLOCATION
1. On or before thirty-five (35) days prior to the last day of the Current
Quarter, the Lifting Allocation for the first preceding quarter thereto
shall be computed and the Proceeds Imbalance determined and notified to
NNPC in the form of Schedule C-2 attached hereto. Section A of such
Schedule C-2 shall be based on the actual liftings made by the Parties
and the Proceeds therefrom. Section B of such Schedule C-2 shall be
prepared from the Schedule X-x's (of the Accounting Procedure) for the
months in the quarter.
2. On or before thirty-five (35) days prior to the last day of the Current
Quarter, the Proceeds Imbalance for the Current Quarter shall be
estimated, taking into account the actual Proceeds Imbalance computed
for the first preceding quarter under paragraph 1 of this Article IV.
3. The Proceeds Imbalance for the first preceding quarter computed under
paragraph 1 above and the estimated Proceeds Imbalance for the Current
Quarter computed under paragraph 2 above shall be taken into account by
the Parties by debiting or crediting such Proceeds Imbalances to each
Party's share of the estimated Lifting Allocation reflected in Schedule
C-1 for the Forecast Quarter filed in accordance with paragraph 3 of
Article III.
4. Notwithstanding the reports required to be kept by Company pursuant to
Article IV in Annex D, Company shall keep complete records of all
liftings. At the end of each quarter, the Parties will meet to
reconcile the Lifting Allocations and the actual liftings with a view to
making adjustments as appropriate. If any disagreement arises with
respect to such reconciliation, the area of disagreement shall be
mutually resolved by the Parties.
5. All Lifting Allocations and actual liftings shall be audited at the end
of each calendar year by a mutually acceptable independent auditor.
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SCHEDULE C-1
ESTIMATED QUARTERLY LIFTING ALLOCATION
_____ QUARTER (_____-_____), ______
SECTION A - ESTIMATED TOTAL PROCEEDS
================================================================================
Estimated Estimated Estimated
Crude Lifting RP Proceeds
Type Volume Bbls US$/Bbl US$
--------------------------------------------------------------------------------
================================================================================
Totals
================================================================================
SECTION B - ALLOCATION OF ESTIMATED PROCEEDS - EXPRESSED IN U.S. DOLLARS
=============================================================================================================
Allocation of Estimated
Prior Estimated Recoverable Proceeds To:
Month Quarter This ----------------------
Category Carryover Charges Quarter NNPC ANEU
-------------------------------------------------------------------------------------------------------------
Royalty Oil
-------------------------------------------------------------------------------------------------------------
Tax Oil
-------------------------------------------------------------------------------------------------------------
Cost Oil
-------------------------------------------------------------------------------------------------------------
NNPC Profit Oil
-------------------------------------------------------------------------------------------------------------
ANEU Profit Oil
=============================================================================================================
Totals
=============================================================================================================
Prior Quarter's Proceeds Imbalance
(Over) /Under
---------------------------------------------------------------------------
Current Quarter's Estimated Proceeds Imbalance
(Over) / Under
---------------------------------------------------------------------------
Estimated Proceeds Allocation For Quarter
===========================================================================
SECTION C - ESTIMATED LIFTING ALLOCATION
=========================================================================================================
NNPC Allocation ANEU Allocation
Crude --------------------------------------------------------------------------------
Type Proceeds Bbls Proceeds Bbls
---------------------------------------------------------------------------------------------------------
=========================================================================================================
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SCHEDULE C-2
ACTUAL QUARTERLY LIFTING ALLOCATION
________ QUARTER (_____-_____), _______
SECTION A - LIFTING SUMMARY
=========================================================================================================
Proceeds Received By:
Crude Volume Proceeds RP --------------------------
Type Bbls US$ US$/Bbl NNPC ANEU
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
=========================================================================================================
Totals
=========================================================================================================
SECTION B - ALLOCATION OF PROCEEDS - EXPRESSED IN U.S. DOLLARS
==============================================================================================================
NNPC: ANEU:
---------------------------------------------------------
Category Sum of Allocation Lifting Allocation Lifting
Monthly of Proceeds of Proceeds
Allocation Proceeds Received Proceeds Received
==============================================================================================================
Royalty Oil
--------------------------------------------------------------------------------------------------------------
Tax Oil
--------------------------------------------------------------------------------------------------------------
Cost Oil
--------------------------------------------------------------------------------------------------------------
NNPC Profit Oil
--------------------------------------------------------------------------------------------------------------
ANEU Profit Oil
==============================================================================================================
Totals
==============================================================================================================
Quarter (Over)/Under
----------------------------------------------------------------------------------------
Prior Quarter (Over)/Under
Proceeds ----------------------------------------------------------------------------------------
Imbalance Total (Over)/Under
==============================================================================================================
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ANNEX D
UNIFORM NOMINATION, SHIP SCHEDULING AND LIFTING PROCEDURE
PREAMBLE
This Annex D attached to and forming part of the Production Sharing Contract
made between NIGERIAN NATIONAL PETROLEUM CORPORATION AND ASHLAND NIGERIA
EXPLORATION UNLIMITED dated the 25th day of March, 1992 (CONTRACT).
ARTICLE I
APPLICATION
1. This Annex D sets out the procedure for the nomination, ship scheduling
and lifting of Available Crude Oil from the Contract Area.
2. Pursuant to Clause 9 of the Contract NNPC and Company have the rights to
nominate, lift and separately dispose of their agreed allocation of
Available Crude Oil produced and saved from the Contract Area.
3. The procedures set herein may be amended from time to time by the mutual
agreement of the parties.
4. In the event of a conflict between the terms of this Annex D and the
Contract, the terms of the Contract shall apply.
ARTICLE II
DEFINITION AND TERMINOLOGY
1. Words and expressions in this Annex shall have the meaning ascribed to
them in the Contract. In addition, the following words shall have the
following meanings:
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(a) "AVAILABLE PRODUCTION" means the quantity of Petroleum which can
be efficiently and economically produced and saved from the
producing xxxxx subject to any limitations imposed by government
authority or other technical limitations resulting from
Operations.
(b) "TECHNICAL ALLOWABLE PRODUCTION" means the quantity of petroleum
from time to time determined by the Department of Petroleum
Resources as being the quantity that may be produced from the
Contract Area on a well by well basis for a particular period.
(c) "COMMERCIAL PRODUCTION QUOTA" means the quantity of petroleum
from time to time fixed or advised by National Petroleum
Investment Management Services (NAPIMS) on behalf of the
Honorable Minister of Petroleum Resources as the permissible
quantity that may be produced from the Contract Area on a crude
stream basis for a particular month/quarter.
(d) "ACTUAL PRODUCTION" means the quantity of petroleum which is
produced from the Contract Area on a monthly/quarterly basis.
(e) "AVAILABLE MONTHLY SCHEDULING QUANTITY" means each Party's
allocation of the Available Production for the calendar month
plus Opening Stock.
(f) "COMBINED LIFTING SCHEDULE" means the lifting programmes of the
Parties for a given calendar month/quarter as prepared by the
Company and agreed to by the Parties.
(g) "OPENING STOCK" means the quantity of crude oil that each Party
may carry forward to the succeeding month, recognizing the
difficulty in lifting precisely the Available Monthly Scheduling
Quantity. This quantity which excludes unpumpable dead stock,
should not be such as to cause a production shut-in through
reaching maximum stock
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levels where of course the provisions of Article V will apply.
The quantity also includes credits/debits accruing after
reconciliation with Available crude.
(h) "PRIMARY NOMINATION" means a written statement issued by each
Party to the Contractor at least twenty-five (25) days prior to
the commencement of each calendar month of its production
nominations based on its allocation of the Commercial Production
Quota Crude Oil by grade, which it desires to take during the
particular calendar month plus Opening Stock.
ARTICLE III
PRODUCTION/NOTICE OF AVAILABILITY
1. Company shall endeavor to produce the aggregate volume of oil nominated
by the Parties as provided in this Contract.
2. In the event that Available Crude Oil is segregated into two or more
grades the provisions of this Annex D shall apply separately to each
such grade. To the extent that distribution on such a basis is
impracticable, separate arrangement for sharing of such Available Crude
Oil shall be agreed upon by the Parties.
3. On or before September 30 of every year, Company shall advise the
Parties of its forecast of the Available Production to be produced by
grades during each month of the first six (6) months of the next ensuing
year.
4. On or before March 31 of every year, Company shall advise NNPC of its
forecast of the Available Production to be produced by grades during
each month of six months commencing July 1, of the year.
5. Where for operational reasons the Company cannot exactly produce at the
anticipated Commercial Production Quota, the company shall notify NNPC
promptly of any required changes exceeding 2% of the quantities
originally notified. In any event, when actual
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production for the month/quarter is known each Party's allocation will
be re-calculated and the differences between Actual Production and
Commercial Production Quota will be credited/debited to each Party, and
shall form the Party's entitlement for the following month or quarter
except in the case of production shut-ins where the provisions of
Section 6 will apply.
6. Twenty-Five (25) days before the commencement of Production from the
Contract Area and thereafter not later than twenty-five (25) days before
the beginning of each month, each Party shall notify the company of its
Primary Nomination of Available Crude Oil which it intend(s) to lift
during the ensuing month, which shall not exceed its monthly allocation
of Commercial Production Quota plus Opening Stock.
7. At the end of each month/quarter, Parties will meet to reconcile
Available Monthly Scheduling Quantities with actual Available Crude
lifted and adjustments made where necessary. All entitlements shall be
audited at the end of each calendar year by mutually acceptable
independent auditor.
8. Company shall keep complete records of all liftings and advise the NNPC
in accordance with Article III & IV of this Annex D.
ARTICLE IV
COMPANY'S REPORTS
1. The Company shall, not more than fifteen (15) working days after the end
of each calendar month, and quarter, prepare and furnish to NNPC written
statement showing in respect of the month and quarter respectively:
(a) Production Quota: each party's allocation of Commercial
Production Quota;
(b) Lifting against Available Crude Oil;.
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(c) Each Party's allocations of Available Crude Oil;
(d) Quantity of Crude Oil in Stock for each Party at the end of the
said calendar month or quarter; and
(e) Any production losses attributable to crude oil used in Petroleum
Operations.
2. In the event NNPC disagrees with any of the Company's reports, the area
of disagreement shall be mutually resolved by the Company and NNPC.
Company shall thereafter prepare a revised report to reflect the changes
agreed.
3. Company must also endeavor to send consistent statistical data to the
different reporting bodies and should adhere to agreed formats of
reporting.
ARTICLE V
SCHEDULING DETAILS
1. SCHEDULING NOTIFICATION - At least twenty-five (25) days prior to the
beginning of a calendar month, NNPC shall notify the Company of its
proposed tanker schedule for that calendar month specifying the
following:
(a) A loading date range of ten (10) days for each tanker lifting;
(b) The desired parcel size for each lifting in Barrels, subject
always to change within a range of plus or minus five percent
(5%) by the Party so nominating;
(c) The tanker's name or To Be Named (TBN) for each tanker lifting.
Tanker nominations made as TBN shall be replaced at least five
(5) working days prior to the accepted date range, unless a
shorter time is acceptable to the Company; and
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(d) Documentation instructions shall be given for each lifting not
later than four (4) days prior to the first day of the accepted
date range for the tanker in question.
2. TANKER SUBSTITUTION - Either Party may substitute another tanker to lift
its nominated volume of Crude Oil, provided such substituted tanker has
the same arrival date range as the originally scheduled tanker and all
other provisions of this Annex D are complied with.
3. OVERLAPPING DATE RANGES - In the event the Combined Lifting Schedule
contains overlapping accepted date ranges, the tanker which gives its
Notice of Readiness (NOR) and has provided all documentation and
obtained clearances first within such accepted date ranges shall be
loaded first, unless urgent operational requirements dictate otherwise
in which case, demurrage shall be borne by Petroleum Operations and
charged to Operating cost.
4. CONFIRMATION OF LIFTING SCHEDULES - At least fifteen (15) days prior to
the beginning of a calendar month, the Company shall either confirm the
feasibility of the proposed monthly lifting schedules or, alternatively,
advise necessary modifications to such schedules. Such confirmation
which shall be in the form of combined lifting schedule, should include
a loading date range of three (3) days for each lifting, the first day
being the earliest date of arrival and the 3rd day being the latest date
of arrival.
5. OPERATIONAL DELAYS - The Parties recognize that occasionally environment
and technical problem in the Contract Area may cause delays and/or
disruptions in the Combined Lifting Schedule. The Company shall
promptly notify NNPC of such delays and/or disruptions, and the
projected termination of each of such delays and/or disruptions and
advise NNPC of the revised Combined Lifting Schedule. In the event such
notification does not allow for a revised Combined Lifting Schedule on
the part of NNPC, then any resultant costs will be charged to Operating
Cost.
6. ESTIMATED DELAYED ARRIVAL OF A TANKER - Whenever it becomes apparent
that a tanker will not be available as scheduled or will be delayed, the
party utilising such tanker shall notify
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the other Party of the circumstances and expected duration of the
delays. Upon assessing the impact that the delay will have upon the
Combined Lifting Schedule and Production during the current and/or next
month, the Company shall make appropriate revision(s) to the Combined
Lifting Schedule to avoid disruption in production. In the event that
any Party fails to lift its Nominated Share of Production in any
month/quarter due to circumstances beyond the Party's Control or
difficulties in maintaining the lifting schedule, that party shall have
the right during the following quarter/month to lift the unlifted
quantities.
7. TANKER STANDARDS - All Tankers nominated for lifting by any Party
pursuant to this Annex D shall conform to the international regulations
and standards concerning size, equipment, safety, maintenance and the
like adopted by the Company for the Terminal in question and by the
appropriate government authority. Failure of a tanker to meet such
standards shall not excuse the nominating Party from the applicable
consequences provided in the Contract. Company shall keep NNPC advised
as to the current Regulations and standards in use at the terminals
operated by the Company.
ARTICLE VI
PRODUCTION DECREASES/INCREASES SUBSEQUENT TO NOMINATION
1. Production decreases occurring after lifting nominations have been
scheduled and not resulting from the fault of either Party shall be
shared by the Parties in proportion to their respective nominations.
2. Production increases occurring after lifting nominations have been
confirmed by the Company shall be shared by the Parties, in proportion
to their respective agreed allocation.
3. To the extent that field operations permit, a Party shall have the right
to adjust its nomination during a month following confirmation of
lifting schedule provided that the nominations, entitlement and lifting
of the other Party are not affected thereby without their express
written consent. Adjusted nomination shall always be within the limits
of the Party's allocated portion of the Commercial Production Quota,
plus Opening Stock.
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4. Any production decrease caused by or resulting directly from the actions
of one Party shall not affect the availability or entitlement of the
other Party. Company will, to the greatest extent possible, endeavor
not to affect the lifting of the other Party.
5. For the avoidance of doubt each Party's agreed allocations shall be
based on Actual Production.
ARTICLE VII
DELIVERY TERMS AND CONDITIONS
1. TANKER NOTIFICATION - The Parties shall report, or cause the tankers
nominated for lifting pursuant to this Annex D to report, by radio/telex
to Company of each tanker's Schedule arrival date and hour as follows:
(a) Seven (7) days before estimated arrival, or upon clearing at last
port if there is less than seven (7) days steaming time before
estimated arrival;
(b) Seventy-two (72) hours before estimated arrival;
(c) Forty-Eight (48) hours before estimated arrival;
(d) Twenty-four (24) hours before estimated arrival; and
(e) At any other time(s) between the seventy-two (72) hours notice,
forty-eight (48) hours notice and twenty-four (24) hours notice
when estimated arrival is to be revised by more than twelve (12)
hours from that most recently notified or after that revised by
more than one-half hour.
Parties shall also cause such tanker so nominated, or their agent, to
report by radio/telex to the Nigerian Government Port Head Official at
the port at least seventy-two (72) hours before each tanker's scheduled
arrival date giving the tanker's name, call sign, ETA at the
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port(s), cargo tonnage to be loaded, number of crew health status,
whether or not a doctor is on board and a request for "Free Pratique."
2. NOTICE OF READINESS - Upon arrival at the designated safe anchorage at
the Port or upon the time of boarding of the Mooring master, whichever
is earlier, the Master of the tanker shall give the Company a Notice Of
Readiness (NOR) by radio or by letter, as appropriate, confirming that
the tanker is ready to load cargo, berth or no berth. Laytime, as
herein provided, shall commence upon the expiration of six (6) running
hours after receipt by the Loading Terminal of such notice, upon the
tanker's completion of mooring at the sea loading terminal, whichever
first occurs. However, where delay is caused to the tanker getting into
berth after giving NOR for any reason over which neither Company nor the
loading Terminal has control, such delay shall not count as used
laytime. In addition time used by tanker while proceeding to berth or
awaiting entry and Free Pratique by customs after the expiration of six
(6) running hours free time, shall not count as used laytime.
3. EARLY TANKER ARRIVAL - Notwithstanding the provisions of Article VII 2
above, if the tanker arrives and tenders NOR to load prior to its agreed
date range, Company shall endeavor to load tanker on arrival or as soon
thereafter as possible and laytime shall only commence when loading
commences. If, however, Company is unable to accept tanker for loading
prior to the agreed date range, laytime shall commence at 0600 hours,
local time on the first day of the agreed date range or when loading
commences, whichever occurs first.
4. LATE TANKER ARRIVAL - If tanker arrives and tenders NOR to load after
its accepted date range and other tankers (having arrived during their
accepted date-range), are either loading or waiting to load the loading
tanker shall be governed by the earliest availability of crude and
loading slot, and laytime shall commence only when loading commences.
5. LAYTIME - Company shall be allowed laytime in running hours equal to one
half of the voyage laytime permitted under Worldscale, or such other
freight scale that is issued in replacement thereof, for loading a full
cargo and pro rata thereof for a part cargo, with a minimum of eighteen
(18) hours, Sundays and Holidays included, any delay due to the fault
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of the tanker or its facilities to load cargo within the time allowed
shall not count as used laytime. If rules of the Owner of the vessel or
Regulations of Government or appropriate Government Agencies prohibit
loading of the cargo at any time, the time so lost shall not count as
used laytime. Time consumed loading or discharging ballast or
discharging slops shall not count as used laytime. Laytime shall
continue until hoses have disconnected.
Laytime allowed for loading a full cargo is "36 Running Hours" with a
provision for pro-rating the laytime in the case of vessels loading part
cargo. When a vessel is loading one parcel only and operations commence
ahead of the acceptance date there is no demurrage involved unless the
vessel completes cargo after the permissible laytime, commencing 0001
hours on the agreed acceptance date. In cases where a vessel loads more
than one parcel and more than one acceptance date is awarded, then
demurrage will not count unless the total loading is completed after the
expiry of the permissible laytime for the last parcel, counting 0001
hours on the last acceptance date.
6. DEMURRAGE - If the Company is unable to load within the time allowed,
the Company shall apply demurrage per running hour (pro rata for a part
thereof) for laytime exceeding the allowed laytime as specified herein.
The rate of demurrage will be calculated by multiplying the time by the
Average Freight Rate Assessment (AFRA) as determined by the London
Tanker Brokers Panel. In the event such determination is no longer
available, a freight rate assessment shall be mutually agreed by the
Parties; which rate shall be appropriate in relation to the size of the
tanker and in demurrage rate according to tanker size as specified in
the Worldwide Tanker Nominal Freight Scale or such other freight scale
that is issued in replacement thereof. If however, demurrage shall be
incurred by reason of fire, storm, explosion, or by strike, picketing,
lockout, stoppage or restraint or labour difficulties, or disturbances
or by breakdown of machinery or equipment in or about the Loading
Terminal, the rate of demurrage as calculated in accordance with the
above shall be governed by Force Majeure and shall not attract any
demurrage. Demurrage claims must be notified within ninety (90) days
from Xxxx of Lading date.
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7. CHANGE OF BERTH - Company shall have the right to shift any vessel from
one berth to another. Charges of running lines on arrival at and leaving
the berth, wharfage and dockage charges at that berth, and any other
extra port charges or port expenses incurred by reason of such shifting
at the Company's request shall be borne by the Company and shall count
as used laytime. If, however, it is necessary to shift the vessel from
the berth because of breakdown machinery of other deficiency of the
vessel or its crew, the resulting expenses shall be borne by the Party
whose Crude Oil is being lifted. The time consumed in such
circumstances, shall not count as used laytime. However, the vessel
shall lose its regular turn in berth. When the vessel is ready to
recommence loading, it shall so advise Company and await its turn for
reberthing and such time after notice is given shall not count as used
laytime.
8. TANKER DEPARTURE - Tanker shall vacate the berth as soon as loading is
complete. The Party that scheduled such tanker shall indemnify Company
for any direct loss or damage incurred as a result of tanker's failure
to vacate the berth promptly including such loss or damage as may be
incurred due to resulting delay in the docking of the tanker awaiting
the next turn to load at such berth.
9. LOADING HOSES - Hoses for loading shall be furnished by the Company and
shall be connected and disconnected by the tanker's crew under the
supervision of a suitable qualified Ship's Officer acting on the advise
of the Operator's Mooring Master.
10. PARTIAL CARGO - Should Company supply less than full cargo, for any
reasons the tanker shall not be required to proceed to sea until all of
her tanks are filled with a combination of cargo and ballast as will
place her in a seaworthy condition.
ARTICLE VIII
CRUDE OIL QUANTITY AND MEASUREMENT
1. CERTIFICATION - The quantity and origin of each shipment of Crude Oil
shall be determined by the appropriate Government authority at the
loading Terminal and set forth in standard
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Certificates of Quantity, Quality and Origin. Each Party shall have the
right to designate a representative at its own expenses, who shall have
the right to witness the determination of Quantity, Quality and Origin.
All reasonable facilities shall be supplied by the Company as necessary,
to such Party's representatives at the Port to enable such
representatives to witness the measurements taken at the Loading
Terminal and the taking of the sample to be used supplied to the
Representative of the Party.
2. ACCEPTANCE OF CERTIFICATE - If the Party in question does not appoint a
representative, or if such representative appointed as aforesaid agrees
with the Certificate of Quantity, Quality and Origin of a shipment of
Crude Oil (in which event he shall so indicate by signing the
Certificate of Quantity, Quality and Origin), such determinations shall
be final and binding on the Parties.
3. REFUSAL OF CERTIFICATE - If the determination of Quantity, Quality and
Origin by Company have not been approved by such a representative in
accordance with Article VIII 2 above and dispute arises concerning the
Quantity, Quality and Origin of Crude Oil, recourse shall be had to an
independent expert to resolve the dispute on the basis of his expertise.
Claims about Quantity and Quality of Crude Oil delivered shall be
notified within forty-five (45) days from Xxxx of Lading date. The
expert shall be selected on the basis of his special knowledge of the
subject matter in this regard and shall be appointed by mutual agreement
of the Parties provided however, that the documentation shall
nevertheless be prepared in accordance with the Company's
determinations. Such expert shall file his conclusions within thirty
(30) days after his date of appointment. Any conclusions of such expert
shall be binding upon Parties. Pending the determination of the
dispute, the tanker may sail, unless the Parties agree otherwise.
4. QUANTITY DETERMINATION - The quantity of Crude Oil lifted shall be
determined at the time of loading on the basis of gauging the terminal
tanks before and after the lifting of such Crude Oil, or otherwise by
meter readings installed on the loading line from the tanks, if approved
by appropriate Government Authority. The quantity in Barrels of Crude
Oil determined pursuant to the foregoing procedure shall be corrected to
a temperature of sixty
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degrees Fahrenheit (60 degrees F) in accordance with the most currently
published ASTM-IP Petroleum Measurement Tables. A copy of the
concession calculation, if any, shall be submitted to the Lifting Party
through its representative. In addition, the Basic Sediment and Water
("BS&W") content, determined in accordance with Article VII 5 hereof,
shall be deducted from the quantity loaded, for purposes of preparing
the Xxxx of Lading for such shipment and for purposes of substantiating
claims about Quantity and Quality. Any substantiated loss of Crude Oil
occurring in transit between the point of such determination and
delivery point shall be borne by the Parties as cost of operation
provided such losses do not result due to differences in method of
determining BS&W between the loading and discharge terminals. For
differences occurring where same method of determination at both points
are used, provisions of Article VIII 3 above shall apply. The retained
sample shall be used in determining such loss claims.
5. QUALITY DETERMINATION - The determination of API Gravity and BS&W
content shall be made of each shipment of Crude Oil. BS&W content and
API Gravity shall be determined according to standard international
practices acceptable to the relevant Government authorities.
6. SAMPLES - A sample of each shipment of Crude Oil shall be taken. The
sample shall be sealed and retained by Company for a maximum of ninety
(90) days. The lifting party or its representative shall have the right
to receive one (1) gallon sealed sample of the Crude Oil loaded which
shall be placed on board the tanker, if so requested.
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ANNEX E
TO THAT CERTAIN PRODUCTION SHARING CONTRACT
BETWEEN NNPC AND COMPANY DATED 25 MARCH, 1992
PROCUREMENT AND PROJECT IMPLEMENTATION PROCEDURES
ARTICLE I
APPLICATION
1.1 These Procurement and Project Implementation Procedures ("Procedures")
shall be followed and observed in the performance of either Party's
obligations under the Contract. Words and expressions defined under the
Contract, when used herein, shall have the meanings ascribed to them in
the Contract. In the event of a conflict between the terms of these
Procedures and the Contract, the terms of the Contract shall prevail.
1.2 These Procedures shall be applicable to all contracts and purchase
orders which values exceed the respective limits set forth in Article
1.3 and which, pursuant thereto, require the prior concurrence of NNPC.
These Procedures may be amended from time to time by the Parties.
1.3 The Company shall have the authority, subject to any limitations or
restrictions established by the Management Committee, to enter into any
contract or place any purchase order in its own name for the performance
of services or the procurement of facilities, equipment, materials or
supplies, provided that:
(a) Prior approval of NNPC will be obtained for all foreign contracts
and foreign purchase orders awarded to third parties where the
cost exceeds one hundred thousand U.S. Dollars ($100,000);
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(b) Prior approval of NNPC will be obtained for all local contracts
and purchase orders where the cost exceeds one million Naira
(N1,000,000);
(c) The amounts set forth in Article 1.3 (a), (b), and (h) will be
reviewed by the Management Committee whenever it becomes apparent
to either Party that such limits create unreasonable constraints
on the Petroleum Operations. In the event of a significant
change in the exchange rate of Naira to U.S. Dollar compared to
that which existed on the Effective Date, the Management
Committee shall review the limits set forth in Article 1.3 (a),
(b) and (h);
(d) Such contracts shall be entered into, and such purchase orders
shall be placed with third parties, which in Company's opinion
are technically and financially able to properly perform their
obligations;
(e) Procedures customary in the oil industry for securing competitive
prices shall prevail unless compelling reasons to the contrary
exist;
(f) Company shall give preference to contractors that are companies
organized under the laws of Nigeria to the maximum extent
possible, provided there is no significant difference in price,
quality, or availability between such contractor and other
contractors;
(g) Company shall give preference to such goods which are
manufactured or produced in Nigeria or services rendered by
Nigerians, provided such goods and services are of required
quality, are offered at competitive prices, and are timely
available; and
(h) The above limits and these Procedures shall not apply to
purchases made for warehouses replenishment stock not exceeding
one hundred thousand U.S. Dollars ($100,000) or one million Naira
(N1,000,000) nor shall they apply to the purchase of tubulars of
less than two hundred thousand U.S. Dollars ($200,000) or two
million Naira (N2,000,000) made in furtherance of planned
drilling programmes. Where
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there are Naira and U.S. Dollar components of such purchases, the
total shall not exceed two hundred thousand U.S. Dollars
($200,000) or the equivalent of two million Naira (N2,000,000.)
ARTICLE II
PROJECT IMPLEMENTATION PROCEDURE
2.1 Company realizing the need for a project or contract to which these
Procedures apply pursuant to Article 1.3 herein above, shall introduce
it as part of the proposed Work Programmes and Budgets to be developed
and submitted by the Company to the Management Committee pursuant to
Clause 6.3 of this Contract.
(a) Company shall provide adequate information with respect to the
project including, without limitation, the following:
(i) A clear definition of the necessity and objectives of the
project;
(ii) Scope of the project; and
(iii) Cost estimate thereof.
(b) Company shall transmit the project proposal along with all
related documentation to NNPC for consideration.
(c) NNPC may make recommendations in writing to the Company regarding
the selection, scope and timing of the project. The Management
Committee shall consider the proposal and the recommendations of
NNPC and shall determine the matter in accordance with Clause 7
of the Contract. Any disputed issues shall be resolved by the
Management Committee pursuant to Clause 7.4(d) of the Contract.
If NNPC does not submit any recommendations in writing to Company
within fifteen (15) working days of the submittal of the project,
the project as proposed by
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Company shall be deemed approved by the Management Committee and
shall be so noted in the minutes of the next meeting.
2.2 The project as approved pursuant to Article 2.1 above shall form part of
the Work Programme and Budget of the Petroleum Operations. Such
approval shall also constitute authorizations by the Management
Committee to the Company to initiate contracts and purchases relevant to
the project proposal, subject to the provisions of Article 1.3.
2.3 The resources for the project design, supervision, and management shall
first be drawn from the Company's available in-house expertise. If the
Management Committee approves, such may be performed by the Company's
Affiliate under the approved budget for the project. Competent Nigerian
Engineering/Design companies may also be considered by the Management
Committee for such projects. NNPC staff who shall be seconded pursuant
to Clause 8.2 (b) of the Contract shall be fully involved in the project
design, supervision and management.
2.4 After approval of the project/budget, Company shall prepare and transmit
to NNPC complete details of the project including, without limitation,
the following:
(a) Project definition;
(b) Project specification;
(c) Flow diagrams;
(d) Projects implementation schedule showing all phases of the
project including, without limitation, engineering design,
material/equipment procurement, inspection, transportation,
fabrication/construction, installation, testing and commissioning;
(e) Major equipment specifications;
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(f) Cost estimate of the project;
(g) An activity status report; and
(h) Copies of all approved Company's AFEs.
ARTICLE III
CONTRACT TENDER PROCEDURE
3.1 The following tender procedure shall apply to work/service/supply not
directly undertaken by the Company or by the Company's Affiliate:
(a) Company shall maintain a list of approved contractors for the
purposes of contracts for the Petroleum Operations, (the
"Approved Contractors' List"). NNPC shall have the right to
propose contractors to be included/deleted in the list. Company
shall be responsible for prequalifying any contractor to be
included in the Approved Contractors' List.
(b) Contractors included in the Approved Contractors' List shall be
both local and/or overseas contractors or entities. Where
regulations require, they shall be registered with the Petroleum
Resources Department of the Ministry of Petroleum and Mineral
Resources.
(c) When a contract is to be bid, Company shall present a list of
proposed bidders to NNPC for concurrence not less than fifteen
(15) working days before the issuance of invitations to bid to
prospective contractors. NNPC may propose additional names to be
included in the list of proposed bidders or the deletion of any
one thereof. Contract specifications shall be in English and in
a recognized format used in the international petroleum industry.
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(d) If NNPC has not responded within fifteen (15) working days from
the date of the official receipt following the presentation of
the list of proposed bidders as aforesaid, the list shall be
deemed to have been approved.
3.2 Company shall establish a Tender Committee who shall be responsible for
pre-qualifying bidders, sending out bid invitations, receiving and
evaluating bids and determining successful bidders to whom contracts
shall be awarded.
3.3 Analyses and recommendations of bids received and opened by the Tender
Committee shall be sent by Company to NNPC for concurrence before a
contract is signed with the selected contractor. NNPC shall respond
within fifteen (15) working days from the date of official receipt.
Approval of Company's recommendations shall be deemed to have been given
if NNPC has not responded within the said period.
3.4 Prospective vendors/contractors for work estimated in excess of one
hundred thousand U.S. Dollars ($100,000) shall submit the commercial
summary of their bids to Company in two properly sealed envelopes, one
addressed to Company and one addressed to NNPC. Company shall retain
one and send one to NNPC, properly enveloped, sealed and addressed to
NNPC.
3.5. In all cases in which an offshore contractor or its Nigerian Affiliate
is invited to bid, Company shall make full disclosure to NNPC of its
relationship, if any, with such contractors.
3.6 These Procedures may be waived and Company may negotiate directly with
the contractor and promptly inform NNPC of the outcome of such
negotiations in the following cases:
(a) emergency situations; and
(b) in work requiring specialized skills, or when special
circumstances warrant, upon the approval of NNPC.
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ARTICLE IV
GENERAL CONDITIONS OF CONTRACTS
4.1 The payment terms shall provide, without limitation, that:
(a) A minimum of 10% of contract price shall be held as a retention
payment until after the end of a guarantee period agreed with the
contractor which shall vary between six months and twelve months,
depending on the project, with the exception of drilling and
seismic data acquisition, well surveys and other such services;
provided that, a contractor may be given the option to provide
other guarantee equivalent to the 10% retention such as Letter of
Credit or Performance Bond; and
(b) Provisions shall be made for appropriate withholding tax as may
be applicable.
4.2 The language of all contracts shall be English.
4.3 (a) The governing law of all agreements signed with contractors shall
be Nigerian law for work to be conducted in Nigeria and to the
extent feasible, for work outside Nigeria.
(b) Nigerian law shall apply to contractors performing in Nigeria
and, as far as practicable, they shall use indigenous human and
material resources.
(c) All contracts shall include a provision whereby the contractor
shall hold Company harmless and indemnify Company from and
against all liabilities, losses, damages and claims resulting
from claims and suits by third parties.
4.4. Each contract shall provide for early termination upon notice and
Company shall use all reasonable endeavors to obtain a termination
provision with minimal penalty.
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4.5 Contracts shall provide, in the case of a foreign contractor, that the
local part of the work, where practicable, shall be performed by
contractor's local subsidiary.
ARTICLE V
MATERIALS AND EQUIPMENT PROCUREMENT
5.1. Company may, through own in-house or parent company procure materials
and equipment subject to conditions set forth in this Article 5.
5.2 The provisions of this Article 5 shall not apply to lump sum or turnkey
contracts/projects.
5.3 In ordering the equipment/materials, Company shall obtain from
vendors/manufacturers such rebates/discounts and such
warranties/guarantees that such vendors/manufacturers normally offer,
and all rebates, discounts, guarantees and all other grants and
responsibilities shall be for the benefit of the Petroleum Operations.
5.4 Company shall:
(a) By means of established policies and procedures ensure that its
procurement efforts provide the best total value, with proper
consideration of quality, service, price, delivery and Operating
Costs to the benefit of the Petroleum Operations;
(b) Maintain appropriate records, which shall be kept up to date,
clearly documenting procurement activities;
(c) Provide quarterly and annual inventory of materials in stock.
(d) Provide a quarterly listing of excess materials in its stock list
to NNPC; and
(e) Check the excess material listings from other companies, to
identify materials available in the country prior to initiating
any foreign purchase order.
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5.5 Company shall initiate and maintain policies and practices which provide
a competitive environment/climate amongst local and/or overseas
suppliers. Competitive quotation processes shall be employed for all
local procurement where the estimated value exceeds the equivalent of
thirty thousand U.S. Dollars ($30,000.)
(a) Fabrication, wherever practicable shall be done locally provided
standards are not jeopardized. To this effect, the Petroleum
Operations recognize and shall accommodate local offers at a
premium not exceeding 3%.
(b) Subject to Article 3.1 (a), Company shall give preference to
Nigerian indigenous contractors in the award of contracts
provided such companies possess the requisite skills and offer
competitive terms. Contracts within the agreed financial limit
of the Company shall be awarded to only competent Nigerian
indigenous contractors provided such contractors meet the
required quality, offer competitive prices and deliver on a
timely basis. Where there are no Nigerian indigenous contractors
possessing the required skill/capability for the execution of
such contracts, the Company shall notify NNPC accordingly.
5.6 Analyses and recommendations of competitive quotations of a value
exceeding the limits established in Article 1.3 shall be transmitted to
NNPC for approval before a purchase order is issued to the selected
vendor/manufacturer. Approval shall be deemed to have been given if a
response has not been received from NNPC within fifteen (15) working
days of receipt by NNPC of the said analyses and recommendations.
5.7 Pre-inspection of rig, equipment/stock materials of reasonable value
shall be jointly carried out at factory site and quay before shipment at
the request of either Party.
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ARTICLE VI
PROJECT MONITORING
6.1 Company shall provide a project report monthly to NNPC.
6.2 For major projects exceeding two hundred thousand U.S. Dollars
($200,000) or equivalent, Company shall provide to NNPC a detailed
quarterly report which shall include:
(a) Approved budget total for each project;
(b) Expenditure on each project;
(c) Variances and explanations;
(d) Number and value of construction change orders;
(e) Bar chart of schedule showing work in progress and work already
completed and schedule of mile-stones and significant events; and
(f) Summary of progress during the reporting period, summary of
existing problems, if any, and proposed remedial action,
anticipated problems, and percentage of completion.
6.3 In the case of an increase in cost in excess of 10% on the project,
Company shall promptly notify NNPC and obtain necessary budget approval.
6.4 Not later than six (6) months following the physical completion of any
major project whose cost exceeds two hundred thousand U.S. Dollars
($200,000) or equivalent, Company shall prepare and deliver to NNPC a
project completion report which shall include the following:
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(a) Cost performance of the project in accordance with the work
breakdown at the commencement of the project;
(b) Significant variations in any item or sub-items;
(c) Summary of problems and unexpected events encountered during the
project; and
(d) List of excess project materials.
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