Exhibit 10.22
OIL EXPLORATION
AND
EXPLOITATION CONTRACT
DEEP OFFSHORE BLOCK 4
BETWEEN
THE GOVERNMENT OF THE REPUBLIC
OF BENIN
AND THE
ADDAX PETROLEUM - ABACAN BENIN
CONSORTIUM
TABLE OF CONTENTS
PAGE
PREAMBLE 1
I DEFINITIONS 2
II OBJECT OF THE CONTRACT 9
III TERM 10
IV OWNERSHIP OF ASSETS, DATA AND
HYDROCARBONS 13
V RELINQUISHMENTS 15
VI MINIMUM WORK OBLIGATIONS 16
VII TECHNICAL COMMITTEE 18
VIII COMPLETION OF OPERATIONS, WORK
PROGRAM, BUDGETS, REPORTS AND CONTROL 20
IX DECLARATION OF COMMERCIAL DISCOVERY
AND DESIGNATION OF THE DEVELOPMENT AREA 24
X SOLE RISK OPERATIONS 28
XI ANNUAL DEVELOPMENT AND PRODUCTION
PROGRAMS 30
XII GOVERNMENT PARTICIPATION 31
XIII COST RECOVERY AND PRODUCTION SHARING 33
XIV REQUIREMENTS OF DOMESTIC CONSUMPTION 35
XV TAX SYSTEM 00
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XXX XXXXXXXXXXX, XXXXXXXX, XXXXXXXXXX AND SALE
OF HYDROCARBONS 39
XVII NATURAL GAS 41
XVIII DAMAGES, ENVIRONMENTAL PROTECTION
AND SAFETY 44
XIX PROVISIONS REGARDING EXCHANGE 48
XX EMPLOYMENT AND TRAINING 49
XXI ACCOUNTING 50
XXII CONFIDENTIAL NATURE OF THE DATA 51
XXIII ASSIGNMENT OF RIGHTS 53
XXIV FORCE MAJEURE 54
XXV ARBITRATION AND EXPERT EVALUATION 55
XXVI TERMINATION 57
XXVII BANK GUARANTEE 59
XXVIII NOTIFICATION 60
XXIX APPLICABLE LEGISLATION AND 61
STABILIZATION
XXX INFRASTRUCTURE 62
XXXI GUARANTEE OF PARENT COMPANIES 63
XXXII FINAL PROVISIONS 64
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APPENDICES
APPENDIX A: COORDINATES OF THE CONTRACT AREA
APPENDIX B: MAP OF THE CONTRACT AREA
APPENDIX C: BANK GUARANTEE
APPENDIX D: ACCOUNTING
APPENDIX E: ABANDONMENT PROCEDURES
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PREAMBLE
WHEREAS:
In accordance with Ordinance No. 73-33 of April 13, 1973, concerning the
Petroleum Code of the Republic of Benin as well as the texts issued thereafter,
in particular Ordinance No. 73-34 of April 13, 1973, concerning oil taxation and
Decree No. 73-130 of April 13, 1973 concerning the application of the Petroleum
Code, the exploration, exploitation, stocking, transport and marketing of
Hydrocarbons in the territory and in the territorial waters of the Republic of
Benin and on the continental shelf adjacent thereto, shall be subject to the
provisions of said Ordinance which furthermore stipulates that the liquid and
gaseous Hydrocarbon fields belong to the State and constitute assignable mineral
substances.
In accordance with Article 10 of said Code, the State may undertake any
Petroleum Operations either solely, or in association with private capital; and
may as well assign to itself or to any department or public company with legal
status, the exploration and exploitation permits, the concessions and
provisional exploitation permits.
In accordance with Article 8 of the Code, the State of Benin may also grant
petroleum rights to physical or legal entities.
In accordance with Article 17 of the Code, prior to granting a Hydrocarbon
Exploration permit, the Minister in charge of Mines shall enter into a contract
with persons having the required technical and financial capabilities necessary
to undertake such activities, define the rights and obligations of the future
permit holder during the exploration and the exploitation periods.
Further to the above, the Government of the Republic of Benin has decided to
enter into the present Contract with the ADDAX PETROLEUM-ABACAN BENIN
Consortium, a company incorporated and registered under the laws of the Republic
of Benin, with a head office in Cotonou, Republic of Benin, for the purpose of
exploration and exploitation of Hydrocarbons in accordance with the articles and
provisions specified in the present Contract.
IN WITNESS WHEREOF:
The undersigned Parties represented, by MR. EMMANUEL GOLOU, MINISTER OF MINES,
ENERGY AND HYDRAULICS on one part and by MESSRS. XXXX XXXXXXXXX, PRESIDENT OF
ADDAX PETROLEUM BENIN AND XXXX XXXXXXXXX, PRESIDENT OF ABACAN RESOURCE LIMITED
(BENIN) agree as follows:
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ARTICLE 1
DEFINITIONS
The terms appearing hereinafter in the Contract shall be defined as follows,
unless specifically indicated otherwise, or unless the Parties mutually agree
otherwise. The definitions shall include the singular and the plural forms.
1.1 "Affiliate" or "AFFILIATED COMPANY" means a company or any other
entity which controls one or several entities forming the Contractor, or which
is controlled by one or several entities forming the Contractor, or which is
controlled by an entity which itself controls the Contractor. Control means
direct or indirect ownership of more than fifty percent (50 %) of the shares
making up the capital of the controlled Company, thereby granting the majority
of the voting rights in the controlled Company to the controlling Company.
1.2 "CALENDAR YEAR" means a period of twelve (12) consecutive months
beginning on January first and ending on the following December thirty-first.
1.3 "CONTRACT YEAR" means a period of twelve (12) consecutive months
from the Effective Date of the Contract or the anniversary of the date of
signature .
1.4 "APPENDIX" means an appendix to the Contract and forming an
integral part thereof. If there is a disagreement or a conflict between the
Contract and any of the appendixes, the provisions of the Contract shall
prevail.
1.5 "ACCOUNTING APPENDIX" means the accounting procedures and methods
established in Appendix "D".
1.6 "ARTICLE" means any numbered provision of the Contract, including
all its subdivisions, unless it is expressly indicated that it means an article
of the Code.
1.7 "BARREL" means U.S. Barrel, which is a quantity or unit of measure
of Crude oil equivalent to 158.9884 litres or 42 American gallons, measured at a
temperature of 15.5556 degrees Centigrade or 60 degrees Fahrenheit and at
atmospheric pressure.
1.8 "AVAILABLE CRUDE" means the quantity remaining after the losses
relating to the Petroleum Operations and the Government Royalty have been
subtracted from the Total Crude Production in the contract area in accordance
with Article 13.4 hereinafter.
1.9 "COST-OIL" means the volume of Crude dedicated to the recovery of
Petroleum Costs.
1.10 "PROFIT-OIL" means the Crude remaining each year after deduction
of the Cost Oil.
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1.11 "BUDGET" means the financial estimate of all petroleum activities
contained in an Annual Work Program.
1.12 "CODE" means Ordinance No. 73-34 of April 13, 1973 concerning the
Petroleum Code of the Republic of Benin as well as subsequent texts, in
particular Ordinance No. 73-34 of April 13, 1973 concerning the petroleum
taxes, and Decree No. 73-130 of April 13, 1973 concerning the application of the
Petroleum Code.
1.13 "CONTRACTOR" means the consortium ADDAX PETROLEUM-ABACAN BENIN and
their successors and/or any assignee granted any of their contractual rights ,
the assignment being in accordance with Article XXIII.
1.14 "CONTRACT" means the present document as originally drawn up, duly
signed including its Appendixes as well as any additions or any amendments
agreed by the Parties at a later date.
1.15 "PRODUCTION COSTS" means the costs and expenses resulting from
carrying out the Production Operations excluding new investments having
occurred during that phase.
1.16 "PETROLEUM COSTS" means all the costs and expenses related to
Petroleum Operations as specified in the Accounting Appendix and in accordance
with the Contract.
1.17 "EXPLORATION COSTS" means the costs and expenses related to the
Exploration operations.
1.18 "DEVELOPMENT COSTS" means the costs and expenses related to the
Development Operations.
1.19 "DATE OF START-UP OF COMMERCIAL PRODUCTION" means the date of the
first delivery of Hydrocarbons in commercial quantities to the delivery point in
Benin.
1.20 "EFFECTIVE DATE" means the date on which the present Contract is
signed by the authorized representatives of both Parties.
1.21 "DISCOVERY" means uncovering the presence of Hydrocarbons in a
reservoir or geologic structure where such Hydrocarbons had not been previously
identified, resulting from the Petroleum Operations in accordance with the
Contract, and when these Hydrocarbons are recoverable by conventional methods
used in the international oil industry. "COMMERCIAL DISCOVERY" means a Discovery
of Hydrocarbon reserves following Exploration Operations, which is deemed
commercial in accordance with the provisions of Article IX.
1.22 "CURRENCY" means any foreign currency freely convertible and
generally accepted by the international banking community.
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1.23 "DOLLARS" means the official currency of the United States of
America.
1.24 "FCFA" means the official currency of the Republic of Benin.
1.25 "DATA" means any document, report and information of a geological,
geophysical or petrophysical nature in the Contract Area.
1.26 "EXPATRIATE EMPLOYEE" means an employee of the Contractor or of a
subcontractor who has been recruited for that purpose and assigned to the
Petroleum Operations in Benin.
1.27 "STATE" means the Republic of Benin, its Government, its
administrative structures and any subdivisions and political institutions.
1.28 "EXPLORATION" means the planning, execution and evaluation of any
type of geological, geophysical, geochemical and other studies, as well as the
drilling of Exploration Xxxxx for the purpose of making a Hydrocarbon Discovery.
1.29 "ASSOCIATED GAS" means the Gas extracted from a well at the same
time as Crude Oil.
1.30 "NATURAL GAS" or "GAS" means the Hydrocarbons in the gaseous state
under normal atmospheric pressure and temperature, including but not limited to,
the wet gas, the dry gas, the wellhead gas and any other gaseous hydrocarbons,
including the residual gas after condensation or extraction of liquids, but not
including said condensates or extracted liquids.
1.31 "NON-ASSOCIATED GAS" means the Natural Gas which is not produced
at the same time as the Crude Oil or which exists jointly with Crude Oil which
cannot be commercially produced when said Natural Gas is commercially produced.
1.32 "GAS FIELD" means one or several accumulations of Natural Gas
superposed vertically in the Contract Area, having a commercial value
established in accordance with the Good Operating Practices of the Oil Industry.
1.33 "OIL FIELD" means an accumulation of Crude Oil, or several
accumulations of Crude Oil superposed vertically in the Contract Area and
having a commercial value established in accordance with Good Oilfield
Practices.
1.34 "GOVERNMENT" means the body including all the State Ministers. In
the present contract, this means the Government of the Republic of Benin, its
representatives or authorized agents.
1.35 "HYDROCARBONS" means Crude Oil and/or Natural Gas.
1.36 "WORKING DAY" means every working days from Monday to Friday,
except for the days declared in full or in part non-working days in Cotonou,
Benin, by the authorized government agencies.
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1.37 "MINISTER" means the Minister in charge of Hydrocarbons in the
Republic of Benin.
1.38 "EXPLORATION OPERATIONS" means the operations performed in
accordance with the Contract for the purpose of discovering Hydrocarbon
accumulations and evaluating the extent and the volume of these accumulations,
the Reservoirs characteristics and their probable behavior during production.
The Exploration Operations include geological, geophysical and geochemical
surveys, analyses and studies, the drilling, deepening, abandonment or workover
of the xxxxx and their evaluations as well as any operations relating thereto.
1.39 "DEVELOPMENT OPERATIONS" means any operations performed according
to the General Development Program for the purpose of producing the Hydrocarbon
accumulations in the subsurface of the Development Areas. These Operations
include:
- The drilling, completion and sampling of development xxxxx, the drilling
and completion of xxxxx for gas or water injection;
- The laying of gathering lines, the installation of separators, tanks,
pumps, compressors and other production and injection facilities required for
the production, treatment and transportation of Hydrocarbons to the Hydrocarbon
storage facilities or to the offshore or onshore gas processing facilities; and
- The pipe laying inside or outside the Contract Area towards the storage or
delivery points, the building of these Crude Oil storage facilities or Gas
processing facilities and all ancillary operations that are not specifically
indicated herein but which are necessary for the development and production of
these Hydrocarbon reserves and for the delivery of Crude Oil and/or of the Gas
to the Delivery Point, in accordance with the Good Operating Practices of the
Oil Industry.
1.40 "PETROLEUM OPERATIONS" means all operations authorized by the
Contract related to the exploration, development, production, separation and
processing, storage, transportation and sale or transfer of Hydrocarbons to the
exportation point or to the Delivery Point agreed to in Benin or to the delivery
point to a Benin refinery in accordance with the Contract; they cover the
Natural Gas processing operations but do not include the Crude Oil refining
operations.
1.41 "PRODUCTION OPERATIONS" means the operations undertaken in order
to produce the Hydrocarbons of the Contract Area such as extraction, injection,
stimulation, processing, storage, transportation to the Delivery Point(s),
loading, including the export of these Hydrocarbons as well as the maintenance
and abandonment of all the necessary facilities.
1.42 "PARTIES" means the Government and the Contractor.
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1.43 "TRANSITIONAL PERIOD" means the maximum period of three (3) months
from the date of signature of the Contract which is the Effective Date.
1.44 "CRUDE OIL" means the crude mineral oil, asphalt, ozokerite and
all other types of Hydrocarbons and bitumen in the solid or liquid form, in
their natural state or obtained from Natural Gas through condensation,
separation or extraction.
1.45 "DELIVERY POINT" means the final exit Point of the Flowlines
downstream of the storage facilities from where the Oil or Gas is delivered for
shipment. The location of the Delivery Point shall be agreed to between the two
(2) Parties.
1.46 "COMMERCIAL PRODUCTION" means the quantity of Crude Oil or Natural
Gas, or both, which may be delivered to the Delivery Point according to a
regular production and sale schedule.
1.47 "TOTAL CRUDE PRODUCTION" means the quantity of Crude extracted
from the Contract Area after extraction of the water, of foreign substances and
after deduction of the quantities used in the Petroleum Operations.
1.48 "WORK PROGRAM" means all plans prepared every year to carry
through the Petroleum Operations.
1.49 "GENERAL DEVELOPMENT PROGRAM" means a plan established for the
development of an Oil Field or a Gas Field agreed to between the Parties.
1.50 "EVALUATION WELL" means a well, other than an exploration well,
drilled in order to evaluate the commercial viability of a geologic trap where
hydrocarbons have been discovered.
1.51 "EXPLORATION WELL" means any well drilled within the framework of
the Exploration Operations including dry xxxxx and discovery xxxxx.
1.52 "DEVELOPMENT WELL" means a well drilled in order to produce
Hydrocarbons from a Reservoir which has been evaluated and tested, to maintain,
increase or accelerate the production, including the production and injection
xxxxx.
1.53 "CONTRACT AREA" means all the geographic area defined by the
perimeter for which the coordinates appear in Appendix "A" and which are drawn
on the map appearing in Appendix "B", with the exception of any part which the
Contractor has, from time to time, abandoned or relinquished according to the
Contract.
1.54 "GOOD OPERATING PRACTICES" means all good, safe, economic and
efficient practices generally accepted in the international oil industry.
1.55 "RESERVOIR" means the subsurface rock containing hydrocarbons in
its pores and having a common pressure system in its volume. This rock body
must be capable of producing hydrocarbons in measurable quantities.
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1.56 "BASEMENT" means on the one hand, the igneous, metamorphic or
other rocks which, by their nature, and in accordance with the knowledge
generally accepted in the international oil industry, cannot contain Hydrocarbon
accumulations, and on the other hand, the impenetrable rocky substances such as
salt and clay domes as well as any other rock which may render impracticable or
unjustifiable from an economic point of view the continuation of drilling
activities using modern drilling technology normally used in the international
oil industry.
1.57 "SUBCONTRACTOR" means any physical person or legal entity hired by
the Contractor to provide services related to the Contract.
1.58 "LIBOR RATE" means the interest rate at closing for the dollar
deposits for a period of six (6) months on the London interbank market as
published by the London branch of "The Bank of America" or by any other bank
agreed to between the Parties, on the date in question or on the banking day
immediately preceding if the day in question is not a banking workday in London.
1.59 "CONTRACT INTEREST RATE" is "LIBOR RATE" plus one percent.
1.60 "OIL PRODUCTION TAX" means the Royalty as defined in the Code, and
equals 12.5% of the Total Crude Production.
1.61 "QUARTER" means a period of three (3) consecutive months from
January first, April first, July first and October first respectively in each
Calendar Year.
1.62 "THIRD PARTIES SALES" means the sales of Hydrocarbons produced in
the Contract Area and fulfilling the following conditions:
(A) The agreed price shall be the sole consideration for the sale;
(B) The sale conditions shall not depend on any trade relation other than
that created by the actual sale Contract between the seller and the
buyer or any of their Affiliates;
(C) Neither the seller nor any of its Affiliates has a direct or indirect
interest in the resale or subsequent assignment of the Hydrocarbons or
of any derived product;
(D) These sales agreement must not include a processing, exchange or
barter agreement.
1.63 a) "DEVELOPMENT AREA" means the part of the Contract Area which,
following the seismic information and the well data available, is
reasonably deemed to cover the plan area of a Hydrocarbon accumulation
constituting a Commercial Discovery and designated as such in an
approved General Development Program. The Development Area includes
the depth corresponding to the reservoirs that have been evaluated and
tested between the surface and the basement.
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b) THE "BLOCK 4 AREA" OR "BLOCK 4" is defined by the area delimited by
the points MFON for which the geographic coordinates and a map are
shown in Appendix B, the 200 metres water depth being the northern
boundary, the border between Benin and Nigeria being the Eastern
boundary, the 3000 metres water depth being the southern boundary and
the border with Togo being the western boundary of said Block 4.
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ARTICLE II
OBJECT OF THE CONTRACT
2.1 By the present Contract, the Government grants to the Contractor
the exclusive right to carry out Petroleum Operations in the Contract Area for
the purpose of exploring, developing and producing Hydrocarbons in this area, in
accordance with the provisions of the Code and the Contract, and in accordance
with the laws and regulations in force in the Republic of Benin. The State
shall implement all administrative procedures required to enable the Contractor
to enjoy its rights and fulfill its obligations.
2.2 The Contractor declares having the technical and financial
capabilities required and undertakes to carry out all the Petroleum Operations
in accordance with the present Contract and with the Good Operating Practices
of the Oil Industry.
2.3 Once a General Development Program regarding a Hydrocarbon
Discovery has been approved in accordance with the terms of the Contract, the
Contractor shall have full rights to carry Development and Production
Operations and to enjoy the financial benefits resulting from these activities,
provided that its obligations under the Contract and the Code have been
fulfilled.
2.4 The Contractor shall provide all technical, financial, human and
economic resources required for the Petroleum Operations. Subject to the
possible proportional participation of the State, all costs and disbursements
incurred for the Petroleum Operations shall be the responsibility and the
exclusive charge of the Contractor. Furthermore, the Contractor is technically,
financially and economically responsible for the Petroleum Operations during the
validity period of the Contract.
2.5 The Minister, in his capacity as the Government representative,
shall be responsible for the supervision of the Petroleum Operations in order to
ensure that the Contractor fulfills its obligations in accordance with the
Contract. The Minister shall exercise this duty through its technical
departments at any reasonable time. The Contractor shall be required to provide
easy access to his facilities to the Minister's representatives in order to
enable them to discharge their duties. The costs related to these duties shall
be borne by the Government.
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ARTICLE III
TERM
3.1 The Contract shall be in effect starting from the date of its
signature and shall end on the date fixed hereinafter, subject to the provisions
of Article XXVI relating to its termination.
3.2 The period covered by the Contract is divided into two periods: an
exploration period and an exploitation period.
3.3 The exploration period shall be for an initial period of three (03)
years, with two (2) possible extension periods of two years each. These
extensions shall be granted by right, subject to the provisions relating to
relinquishments, provided that the Contractor has met all its work obligations,
expenditures and other substantial obligations relating to the preceding phase.
3.4 Provided it has fulfilled all the requirements relating to the
initial phase, the Contractor may request the Minister in writing for an
extension of the exploration period beyond the initial phase, at least sixty
(60) calendar days before the end of said phase. If this request has not been
submitted in time and if a commercial Discovery has not been made, the Contract
shall expire at the end of the initial phase of the exploration period.
3.5 Subject to the provisions relating to termination and or provided
no Hydrocarbon Discovery has been made during the exploration period, the
Contract shall expire at the end of this period. If at least one (1) Commercial
Discovery has taken place before the end of the exploration period, the Contract
shall remain in effect with regard to the corresponding Development Areas.
3.6 If, at the expiration date of the initial exploration period or of
one of the extension phases, an exploration well is in the process of drilling,
coring, casing, testing or abandonment, the Minister shall grant to the
Contractor a special extension in order to enable it to complete the drilling,
coring, casing, testing and/or the abandonment of the well in question, to
evaluate the results of these operations and to determine if they constitute a
Hydrocarbon Commercial Discovery. This special extension cannot, under any
circumstances, extend the total exploration period by more than six (6) months.
3.7 If at the date of expiration of the exploration period or of a
special extension period, the Contractor is in the process of:
- preparing a first report of discovery or a report detailing a Discovery
according to article 9.2
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- to execute an evaluation program in accordance with a schedule of activity
according to the article 9.3, the Minister will eventually grant to the
Contractor a special extension so that he can take to term the evaluation of the
Discovery and submit a detailed evaluation report. This special extension may
not exceed 3 months unless Parties decide otherwise.
3.8 If , at the date of expiration of the exploration period, or of a
special extension period, the Contractor submitted to the Minister a detailed
evaluation report justifying the commercial viability of the Discovery according
to article 9.3, the exploration period or if the case arises the special
extension period ends according to the date of approval of the Minister's
report according to article 9.5 of the Contract.
If at the date of expiration of the exploration period or a special
prolongation period, the Minister rejects the report of the Contractor
indicating that there is no viability of the Discovery and submits the question
to an Expert according to article 9.5 of the Contract, the exploration period,
if the case arises, the special prolongation period will be extended until:
i) the arrival date of the expert's decision confirming the opinion of
the Contractor
ii) Thirty (30) days after the decision of the expert where the decision
states that the Discovery is commercially viable.
3.9 If a Natural Gas Discovery occurs that the Contractor considers as
having the potential of being commercially viable, in addition to the procedures
and conditions specified herein, the Minister may grant to the Contractor a
special extension of the initial exploration phase for a minimum period of two
(2) years to allow the full evaluation of this Discovery. To this effect, the
Minister may ask the Contractor to carry out additional studies or works which
would reasonably appear necessary for the good evaluation of the Natural Gas
Discovery.
3.10 In the event of a Commercial Hydrocarbon Discovery, the
Government shall grant to the Contractor by right, at the request of the latter,
an exploitation permit covering the Development Area, the perimeter of which
will have been approved as part of a General Development Program in accordance
with Article IX. The duration of the exploitation permit during which the
Contractor shall be authorized to assume the production of each of the Oil
Fields and Gas Fields discovered shall be fixed at twenty-five (25) years from
the day on which the Discovery has been declared a Commercial Discovery in
accordance with the provisions of Article IX hereof.
Subject to Government approval, during the period of the Contract, the
Contractor may relinquish one or several Development Areas which are the object
of an exploitation permit.
3.11 If, at the expiration of the twenty-five (25) year exploitation
period defined above, a commercial exploitation remains possible, the Contractor
may be authorized, at its request, to continue the exploitation for a further
period of ten (10) years, provided that it has fulfilled all its contractual
obligations during the preceding exploitation period.
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3.12 At the expiration of the last exploitation permit granted to the
Contractor, the rights and obligations defined in the present Contract
concerning exploitation shall be null and void.
3.13 For the purpose of granting an exploitation permit, the
Contractor shall provide to the Government an exact delimitation of the
perimeter in such a manner that it includes all the presumed area of the
discovered Field.
3.14 If, during subsequent work, it appears that the field has an
extension greater than that initially anticipated according to the preceding
paragraph, the Government shall grant to the Contractor, under the exploitation
authorization already allocated, the additional area in such a way to cover the
whole of the field, provided that the above mentioned extension forms an
integral part of the Contract Area as defined at the time of said modification.
If the additional area is outside the Contract Area, the Minister shall grant to
the Contractor this additional area provided that it is not the subject of
mining rights already granted to a third party or of a request for such rights.
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ARTICLE IV
OWNERSHIP OF ASSETS, DATA AND HYDROCARBONS
4.1 OWNERSHIP OF ASSETS
4.1.1 The lands shall become the property of the State as soon as they are
acquired by the Contractor. The Minister must cooperate in order to complete
the procedures on behalf of the Contractor and at the written request of the
latter, for obtaining the licenses, permits, surface rights, easements, rights
of free access and exit from the Contract Area, the utilization of the waters
and any other types of encumbrances on any land or water expanse of public or
private nature to enable the Contractor to conduct Petroleum Operations on the
territory of Benin, in accordance with the laws in force in the country.
4.1.2 Notwithstanding the above provisions, the ownership of movable
and immovable properties acquired by the Contractor for the Petroleum Operations
shall be automatically transferred by the Contractor to the State as soon as
their cost has been fully amortized by the Contractor, or, otherwise, at the end
of the Contract. At the expiration of the Contract, the Contractor shall be
required to forward to the Beninese State, through the Minister and unencumbered
of any charges, the ownership of the lands, works, facilities, appurtenances and
permanent equipment which it shall have acquired during the performance of the
Petroleum Operations. The Contractor shall then be released from any obligation
including any obligations regarding abandonment and environmental restoration,
with regard to said properties in the event that field operations would
continue. During the period of validity of the Contract, the Contractor shall
keep and safeguard in a good condition the movable and immovable properties
acquired for the execution of the Operations.
4.1.3 The ownership of the properties rented or of the movable properties
leased and of intellectual property belonging to subcontractors or to Affiliates
and intellectual property belonging to third parties shall remain with said
Subcontractors, Affiliates or third parties.
4.1.4 During the period of the Contract, the Contractor shall be authorized
to use all movable and immovable properties acquired for the Petroleum
Operations under the Contract. The Contractor shall be authorized to transfer
or to sell said properties if they are no longer required for the Petroleum
Operations. The beneficiary of the revenues from the sale of these properties
shall be as follows:
. If the ownership of said properties has been transferred to the State,
the proceeds must be paid to the latter.
. The Contractor shall keep these revenues when the properties have not
been the subject of any amortization.
. In the event of partial amortization, the proceeds corresponding to
the amortization proportion must be paid to the State.
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The disposal or transfer of movable or immovable properties during the period of
the Contract must have the prior approval of the Minister.
4.2 OWNERSHIP OF DATA
The State is the owner of all the geological, geophysical and geochemical
information and of the data relating to the drilling, engineering, recording and
production of any other data, samples, logs, cores, tapes, maps,
interpretations, reports and any other support or information obtained as a
result of Petroleum Operations. However, the Contractor shall be authorized to
keep this information, at no cost, and to use same for the Petroleum Operations
subject to the obligations connected to their confidential nature.
4.3 OWNERSHIP OF HYDROCARBONS
All the Hydrocarbons contained in the Reservoirs of the subsurface of the
Contract Area or produced in the Contract Area belong to the State in accordance
with the Code and with the Constitution of the Republic of Benin. The Contract
does not confer any ownership right on the Contractor with regard to the Crude
Oil and/or Gas extracted from the Contract Area, which shall continue to be the
property of the State until they are measured at the Delivery Point. The
ownership rights of the Contractor with regard to the Crude Oil and/or to the
Gas in accordance with the provisions of the Contract shall be granted to it at
the appropriate Delivery Point.
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ARTICLE V
RELINQUISHMENTS OF SURFACE AREA
5.1 At the end of the first extension phase of the exploration period
or its extension and provided the Contractor has discharged all its obligations
corresponding to this phase, if the latter decides to continue with the
Exploration Operations in the Contract Area according to article 3.4, it shall
relinquish thirty percent (30%) of the remaining Contract Area, after deduction
of any Development Area.
5.2 At the end of the last extension phase of the exploration period,
the Contractor shall only keep the Development Area or Areas if any.
5.3 The Areas that have been relinquished by the Contractor must be
connected together and must be of an appropriate geometrical form which allows
the performance of Petroleum Operations by other entities. The Contractor must
notify the Minister in writing of the Area or Areas it intends to relinquish, no
later than sixty (60) days before the end of the period considered, and shall
include a map showing the geographic location and giving the coordinates of the
apexes of the boundary lines. Within thirty (30) days following the
notification date, the Minister must inform the Contractor of its decision and
the Contractor must comply therewith.
5.4 From the date of expiration of the Contract, the Contractor is
assumed to have transferred all of the Contract Area.
5.5 After two months following each relinquishment, the Contractor must
report to the Minister the surface areas to be returned and forward to him all
related documents and files as well as the facilities , with the possibility of
making copies of the documents and files subject to confidentiality conditions.
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ARTICLE VI
WORK OBLIGATIONS
6.1 The Contractor must commence the Petroleum Operations as of the
Effective Date of the present Contract.
To that end, the Contractor shall inform the Minister of the nominal
composition of the team responsible for the conduct and execution of the
Contract in Benin as well as the main terms of its agreement with its partner or
partners.
6.2 During the initial Phase of the exploration period of three (3)
years, the Contractor shall undertake to do the following tasks:
- Acquisition of 3000 km of 2D seismic lines.
- Reprocessing of 600 km of seismic lines(optional).
- Propose a drilling program to the Government.
6.3 During the first extension phase of two (2) years, the Contractor
must at least perform the following:
- Acquire fifteen hundred (1500) km of seismic or their 3D seismic
equivalent;
- Drilling of a well to a depth of 3500m TVD (true vertical depth)
6.4 During the second extension of the initial phase of the exploration
period, the Contractor must at least complete the following tasks:
- Acquisition of 1000 km of 2D seismic lines .
- Drilling of a well at a depth of 3500m TVD (True vertical depth)
6.5 Any Exploration Well drilled must at least be drilled to one of
the following depths:
(a) A geologic formation of lower Cretaceous age:
(b) The basement;
(c) Three thousand five hundred (3500) m TVD (True Vertical Depth)
(d) a depth below which any additional drilling becomes impracticable and
would not be carried out by a prudent and reasonable operator in
identical or similar conditions according to the Good Operating
Practices of the Oil Industry.
-16-
(e) at any other depth defined by the Parties by mutual agreement.
6.6 If during a phase of the exploration period the Contractor
undertakes tasks which exceed the minimum work obligations relating to this
phase, the excess shall be deducted from the work obligations of the following
phase.
6.7 The difficulties which shall occur during the implementation of the
provisions of this Article shall first be settled in accordance with the
provisions of Articles 8.2.2 and 9.9.
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ARTICLE VII
TECHNICAL COMMITTEE
7.1 Within three (3) months following the Date of signature of the
Contract, the Parties shall form a Joint Technical Committee (JTC) composed of
six (6) members, three (3) representing the Minister and three (3) representing
the Contractor, including the General Manager.
7.2 Notwithstanding the provisions of Article 2 and the rights and
obligations of the Contractor relating to the daily management of the Petroleum
Operations, nor its other rights and obligations mentioned in the Contract, the
JTC shall have the main following objectives:
- To ensure the good communication and cooperation between the Parties.
- To review and to decide on the conduct and management of the Petroleum
Operations, in particular:
(i) the evaluation of the results of the drilling, geological,
geophysical and petroleum engineering programs,
(ii) the budgets and their implementation,
(iii) important modifications to the work programs,
(iv) allocation of markets relating to the work programs,
(v) any other matters submitted by the Parties.
On all the matters reviewed the JTC shall make and forward recommendations
to the Parties.
7.3 The JTC shall be chaired by one of the representatives designated
by the Minister. One of the representatives designated by the Contractor shall
act as Secretary. The Parties may send other representatives to the meetings of
the JTC as experts or substitute members.
7.4 The JTC shall hold an ordinary meeting at least once every six (6)
months or when the members decide to do so by mutual agreement. The Chairman
of the JTC may convene extraordinary meetings at the request of the Minister or
of the Contractor by giving to the members at least fifteen (15) days notice, or
a shorter notice if the Parties so decide. The corresponding notice must
indicate the date, the place and the agenda of the meeting.
7.5 The quorum for the meetings of the JTC shall be composed of four
(4) members including two (2) for each Party.
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7.6 The JCT shall submit the result of its meetings to the Parties. In
the event of disagreement between the Parties, they will react in accordance
with the provisions of the present Contract.
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ARTICLE VIII
COMPLETION OF THE OPERATIONS,
WORK PROGRAM, BUDGETS, REPORTS
AND CONTROL
8.1 COMPLETION OF THE OPERATIONS
8.1.1 During the period of the Contract, the Contractor shall carry out
directly the exploration and exploitation activities in the Contract Area. In
order to better undertake its activities, it shall be authorized to hire
specialized subcontractors. However, the Contractor shall keep the control and
the general responsibility of the operations or activities undertaken.
8.1.2 The Contractor must proceed diligently with the performance of the
Petroleum Operations in accordance with the Good Operating Practices of the Oil
Industry, taking into account the local conditions and other particular
conditions in the Contract Area.
8.1.3 The Contractor must notify in advance the Minister of all substantial
and planned Petroleum Operations such as, for example, the geological or
geophysical surveys and the start-up of well drilling activities. The
Contractor must also notify the Minister in writing of any suspension of
drilling or well abandonment. If this notification is impossible, the
Contractor must notify the Minister in writing of this suspension or abandonment
within twenty-four (24) hours.
8.2 WORK PROGRAM AND BUDGETS
8.2.1 Within ninety (90) days following the Effective Date of the Contract,
the Contractor must prepare the first Work Program and its budget. If the
Effective Date of the Contract occurs the first day of the month of July or
before, the first Program and its budget shall be prepared for the remainder of
the corresponding Calendar Year. If the Effective Date of the Contract occurs
after the first day of the month of July, this first Program and its budget
shall be prepared for the current Calendar Year as well as for the following
Calendar Year. The Contractor must submit the Work Program and its budget to
the Minister's approval. Subject to the above provisions, the Contractor shall,
no later than October 30 of each calendar year, prepare a Work Program and a
budget for the following calendar year and submit same for the Minister's
approval. Within the month following the date of receipt of the Work Program
and of the budget, the Minister shall approve same as proposed or shall suggest
amendments, failing which the Work Program and the budget shall be deemed
approved. The Work Programs during the exploration period must include the
minimum work program as stipulated in the present Contract.
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8.2.2 In the event that the Minister wishes to make amendments to the Work
Program and to the corresponding Budget, he must advise the Contractor thereof
in writing no later than fifteen (15) days following the receipt of the
documents mentioned above and the Parties shall meet and attempt to reach an
agreement on the proposed amendments. If the Contractor and the Minister do not
reach an agreement on the proposed amendments no later than two months after the
date of receipt of the Work Program and budget, an Expert shall be called upon
to settle the question in accordance with the provisions relating to arbitration
and expert evaluation.
8.2.3 The Contractor may, with the Minister's approval, revise the Work
Program during the Calendar Year in question in order to be able to take into
account newly acquired information, a revised evaluation of the existing
conditions, or any other valid reason.
8.3 REPORTS
8.3.1 Within the framework of the present Contract, the Contractor shall
prepare and keep up to date all the records relating to the Petroleum Operations
in the Contract Area.
8.3.2 Subject to its general rights and obligations, the Contractor shall:
(a) Register in an original or reproducible version of good quality, or
eventually on magnetic support, any geological and geophysical
information and any data related to the Contract Area and acquired by
the Contractor.
(b) Keep all the files containing all the details concerning the following
aspects:
i) The drilling, implementation, deepening, production tests,
plugging or abandonment of the xxxxx;
ii) The formations penetrated by the xxxxx;
iii) The casing laid in the xxxxx and any modification to said casing;
iv) Any hydrocarbons, water and other minerals of economic value or
dangerous substances encountered;
v) The areas in which geological or geophysical activities have been
carried out.
8.3.3 The well logs, maps, magnetic tapes, cores and samples, and other
geological and geophysical information obtained by the Contractor during the
Petroleum Operations belong to the Government, and shall be forwarded to it as
soon as they have been obtained or prepared, the Contractor having the right to
make copies of said documents and files, subject to the observance of the
confidentiality provisions.
8.3.4 During the execution of its contractual obligations, unless the
Parties otherwise agree, the Contractor may:
a) Keep copies of the material constituting the Data during the period of
the Contract.
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b) Keep the original data for a period required for Petroleum Operations,
with the Government approval, provided that said data can be
reproduced and that copies thereof have been provided to the Minister.
c) Export for processing, review or laboratory tests and for a period of
one year, the samples and any matters constituting the Petroleum Data,
provided that samples of equivalent dimensions and quality or, when
such data may be reproduced, copies of an equivalent quality have been
forwarded to the Minister.
8.3.5 The Contractor shall regularly inform the Minister of the major
developments occurring in the Petroleum Operations and shall provide him with
all available information, data, reports, evaluations and interpretations
relating to the Petroleum Operations. Furthermore, the Contractor shall:
a) Prepare daily drilling reports within the framework of its activities;
b) Prepare and forward to the Minister a monthly report within a period
of fifteen (15) days following the end of the month concerned, which
shall include a description of the activities covered during said
month with plans and maps indicating the sites where the tasks
described have been executed;
c) Prepare and forward to the Government a quarterly report, within
thirty (30) days after the end of each Calendar Quarter, which shall
include a description of the activities covered during said quarter
with plans and maps indicating the sites where the tasks described
have been executed;
d) Prepare and forward to the Government an annual report, within two (2)
months after the end of each Calendar Year, which will integrate and
develop if necessary the revised quarterly reports of the Calendar
Year considered.
8.4 The Minister shall assume his obligations under the present
Contract through the DIRECTION OF ENERGY (DEN) and the DEPARTMENT OF PETROLEUM
OPERATIONS (BOP).
8.4.1 The duties of THE DIRECTION OF ENERGY (DEN) shall be in particular:
- to ensure that the Petroleum Operations conducted by the Contractor or
other government entities comply with the petroleum policy of the
State and with appropriate laws and regulations;
- as much as feasible to bring to the Contractor any assistance required
in order to allow it to fulfill its obligations within the framework
of the present Contract;
- to ensure that the Contractor implements a true policy of
technological transfer and of training of Beninese nationals in the
field of Petroleum Operations.
8.4.2 The duties of THE DEPARTMENT OF PETROLEUM OPERATIONS (BOP) shall be in
particular:
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- to guarantee the financial settlements between the Contractor and the
State;
- to receive, value and market the State's Hydrocarbon share;
- to ensure that the cost accounting of the expenditures and the keeping
of the records and of the performance reports of the Petroleum
Operations are undertaken according to the present Contract and
according to the generally accepted accounting principles of the oil
industry.
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ARTICLE IX
DECLARATION OF COMMERCIAL DISCOVERY
AND DESIGNATION OF THE DEVELOPMENT AREA
9.1 As soon as a Discovery of Hydrocarbons is made in the Contract
Area, the Contractor must immediately report it to the Minister and the
provisions of the present Article shall then apply. In the event of a Gas
Discovery, the provisions of the relevant Article shall apply if there is a
conflict or a difference with the present Article with regard to this Discovery.
9.2 After the Discovery of Hydrocarbons and as soon as it is able to do
so, and in any case within thirty (30) days following said Discovery, the
Contractor must forward to the Minister a first report of Discovery.
No later than two (2) months following the Discovery, the Contractor shall
forward to the Minister a detailed report on the Discovery, indicating whether
this Discovery must be evaluated or not. If the Contractor deems that the
Discovery is worth being evaluated, the report must include an evaluation
program and a schedule of activities in order to implement an adequate and
efficient evaluation. The Contractor must carry through the evaluation program
submitted to the Minister during the exploration period in accordance with the
approved evaluation program and schedule of activities.
9.3 No later than ninety (90) days following the end of the evaluation
program, the Contractor shall submit to the Minister a detailed evaluation
report demonstrating the commercial viability of the proposed Development Area.
The present report must include:
- The description of the Development Area, in particular the structural
configuration, the physical properties and the extent of the reservoir
rocks, the areas, thicknesses and depths of the producing zones;
- An estimate of the initial and recoverable oil and gas reserves, the
characteristics of the recovery, the expected recovery rate for each
reservoir;
- An estimate of the number of xxxxx required for an efficient drainage
of the reserves, the fluid characteristics including, in the case of
Crude Oil, the density, the sulfur content, the sediment and water
content and the shrinkage characteristics of the product;
- The economic forecasts and the expected cash flows.
9.4 The Contractor must declare in the report whether the Discovery is
commercially viable, and in this case, it shall be entitled to develop same and
to produce the Hydrocarbons in accordance with the provisions of the present
Contract.
-24-
9.5 Within thirty (30) days following the date of submission of the
report in which the Contractor advises the Minister of its opinion that the
Discovery is commercially viable, the latter shall notify in writing his
approval to the Contractor, and the date of approval by the Minister is the
"Date of Commercial Discovery". At the time of notification of said approval
the Minister grants to the Contractor the Exploitation Permit required for the
exploitation of said discovery. If at the end of this thirty (30) day period,
the Minister has not notified said approval in writing, the Date of Commercial
Discovery shall be the day following the expiration of the thirty (30) days
mentioned above. The Minister shall then grant as quickly as possible the
exploitation permit to the Contractor if it requests it.
9.6 If the Contractor deems that the Discovery is not commercially
viable, it must advise the Minister of the reasons on which it has based its
decision. If the Minister questions the basis of the technical or financial
analysis of the Contractor leading to its evaluation of the non commercial
nature of the Discovery, or if for any other reason he deems that the Discovery
could be developed economically by the Contractor in accordance with the clauses
and provisions of the Contract, the Minister must then, within sixty (60) days
if he so wishes, submit the matter of the commercial viability to an Expert in
accordance with the Contract. If the Expert confirms that the Discovery is
commercial, the Contractor may, within thirty (30) days following the date of
receipt of the Expert's decision, either declare that the Discovery is a
commercial Discovery in accordance with the provisions of the Contract and the
date of that declaration shall become the Date of Commercial Discovery, or waive
its rights concerning the Discovery. In this case, the Minister shall have the
right to develop the area of the Discovery and to produce Hydrocarbons in
accordance with the provisions relating to sole risk operations. The Contract
shall remain in effect on the remaining part of the Contract Area.
9.7 Within ninety (90) days following the Date of Commercial Discovery,
the Contractor must submit to the Minister a General Development Program
indicating:
(a) the proposed Development Area;
(b) the Development Operations to be carried out, including any additional
delineation of the Development Area and the method of development of
the Associated Gas, if any;
(c) the Contractor's plans concerning the drilling and completion of the
xxxxx, the production, storage, transportation and delivery facilities
required for the production of Hydrocarbons. The plans must contain
the following information:
(i) the expected number of Development Xxxxx and their locations;
(ii) the details relating to the production equipment and to the
storage facilities;
(iii) the delivery points of Crude Oil and Natural Gas; and
(iv) the details of any other technical equipment required for the
Hydrocarbon Operations.
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(d) the estimated forecasts of Crude Oil and Natural Gas production
volumes from the Oil or Gas Fields, and the estimated commercial life
of said deposits;
(e) the cost estimates of the equipment and current expenses;
(f) the economic feasibility studies prepared by the Contractor and the
other methods, if any, devised for the development of the Discovery
taking into account:
(i) its location;
(ii) any pertinent meteorological condition;
(iii) expected investment costs and current expenses; and
(iv) any other information required for its evaluation.
(g) the safety measures to be adopted during the Development and
Production Operations, including the emergency measures;
(h) the measures to be adopted for the protection of the environment;
(i) the unforeseeable events that may affect the Contractor's capability
during the implementation of the General Development Program.
9.8 The General Development Program proposed by the Contractor must be
prepared according to the sound geological, engineering and financial principles
and according to the Good Operating Practices of the Oil Industry. Furthermore,
it must be conceived with a view to ensure the optimum recovery of Hydrocarbons
in the Development Area and to prevent their waste.
9.9 The General Development Program of the Contractor may be reviewed
by the Minister who shall give his approval if he deems that it has been
prepared according to the above provisions. If the Minister deems that the
General Development Program submitted by the Contractor has not been prepared
according to these provisions, he shall suggest that revisions be made and the
Contractor may amend same in reply. If within ninety (90) days following the
date of submission of the Program, the Minister and the Contractor cannot agree
on said Program, the matter or matters which are the subject of a disagreement
must be submitted to an Expert who shall settle same. In the event of
disagreement and submission to an expert, the exploitation period of 25 years
shall not include the period of arbitration (including procedural period)
-26-
9.10 During the course of the Development and Production Operations,
the Contractor may suggest additions or revisions to the General Development
Program. It shall then submit them to the Minister for review and approval,
using the procedures of article 9.9. If within the ninety (90) days that follow
the submission date of the additions and modifications the Minister and the
Contractor do not agree on said additions and modifications, the matter or
matters which are the subject of disagreement must be submitted mutadis mutandis
to an expert according to the procedure specified in article 9.9 and the
exploitation period of twenty-five (25) years will not include the length of
this procedure.
9.11 If the Contractor wishes to finance the Development Operations
with funds obtained from banks or other sources of financing, the Minister must
assist the Contractor by providing all the information that the banks or sources
of financing may reasonably request, provided that the Minister does not have to
assume any additional obligation of any type, whether financial or otherwise.
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ARTICLE X
SOLE RISK OPERATIONS
10.1 If during the exploration period, the Minister wishes to test
additional reservoirs at the final depth agreed upon, or deepen the well and
test deeper reservoirs than this final depth, the Government shall have the
right, subject to the provisions of Article 10.4, to request the Contractor, by
notification, to test certain additional reservoirs or to continue the drilling
and test new reservoirs, at the sole risk of the Government and on behalf of the
Government, until the Government's objectives have been reached as long as the
request of the Government does not delay, hinder or interfere with the
exploration and evaluation activities of the Contractor. The Government shall
notify the Contractor as soon as possible before or during the drilling but
under no circumstances after the Contractor has started the well completion or
abandonment activities.
10.2 If during the exploration period, the Parties cannot agree on the
Government recommendation for the drilling of additional exploration xxxxx, the
Minister shall have the right after the initial period to request the Contractor
to drill in the Contract Area at the exclusive risk and expense of the
Government one (1) exploration well provided that this Operation does not delay,
hinder and disturb the exploration and evaluation activities of the Contractor.
In this case, the Minister shall have a maximum period of six (6) months in
which to provide the Contractor with a drilling plan indicating the drilling
details as well as the financing plan of said operation which will be
pre-financed.
10.3 If the operations described under Articles 9.3, 10.1 or 10.2 lead
to a Discovery or to a Commercial Discovery, the Government shall have the
right, at its exclusive expense, risk and benefit, to evaluate said Discovery
and/or to develop and produce the Oil from the reservoir corresponding to this
Discovery. The Contractor shall notify the Minister in writing, before the
beginning of the commercial production of the oil reservoir discovered within
the framework of said sole risk operations, if it wishes to be responsible for
the future development and/or production operations of said oil-bearing
reservoir according to the terms of the present Contract. In this case, the
Contractor shall pay in cash or in kind to the Minister, in addition to one
hundred percent (100%) of the exploration costs and the exploration stand by
costs, if any, incurred by the Minister with regard to the sole risk operations
and connected to the discovered oil-bearing reservoir, an additional amount
equal to three hundred percent (300%) of said exploration and stand by costs.
10.4 The conditions for the completion of the sole risk operations
shall be:
(a) The production tests of additional formations or the penetration and
the production tests of deeper formations or the drilling of
additional exploration xxxxx must be technically feasible, and must
not delay, hinder or interfere with the Contractors exploration and
evaluation activities;
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(b) The deepening of a well under the sole risk operations may not take
place if the well has already penetrated one or several producing
reservoirs;
(c) No sole risk exploration well may be drilled in an exploitation area
or on the site of a Commercial Discovery.
(d) The Minister may hire a third party for the performance of the sole
risk operations mentioned above. However, the Minister cannot hire a
third party for this purpose without having first offered to the
Contractor a preemption right for the completion on his behalf of said
sole risk operations under identical conditions to those acceptable by
the third party. If the Contractor does not accept to perform these
operations within sixty (60) days from the receipt of the Minister's
notice, the latter shall then be at liberty to hire the third party as
long as this party respects the clause of confidentiality towards the
reports, data and information held or prepared by the Contractor and
received by this third party as per the present article or according
to article IX and in accordance with article XXII.
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ARTICLE XI
ANNUAL DEVELOPMENT AND
PRODUCTION PROGRAMS
11.1 The Contractor shall be required to carry the Production and
Development Operations in all the Development Areas in accordance with the
General Development Programs and according to Good Operating Practices of the
Oil Industry.
11.2 The Work Program submitted for the Calendar Year during which a
Commercial Discovery occurs, must be modified by the Contractor within sixty
(60) days following the date of approval of the General Development Program in
order to comply with the latter.
11.3 The Work Programs and the budgets corresponding to the Development
Operations and Production Operations must have as objective the efficient and
economical exploitation of all the Development Areas according to the Good
Operating Practices of the Oil Industry. The Minister shall approve the Work
Programs and the budgets prepared and submitted in accordance with the
provisions of the present Contract.
Within thirty (30) days following the date of receipt of a Work Program and
a budget, the Minister shall approve them as proposed or shall suggest that
amendments be made; if no approval notice or suggestion of amendments has been
received within this thirty (30) days period, the Work Program and the budget
shall be deemed to be approved.
11.4 If the Minister wishes to amend the Work Program or the
corresponding budget, he must inform the Contractor in writing no later than
fifteen (15) days following the receipt of the documents mentioned above. The
Parties shall consult each other and attempt to reach an agreement on the
amendments suggested. If the Minister and the Contractor cannot agree on the
amendments suggested no later than two (2) months after the date of receipt of
the Work Program and the corresponding budget, an Expert shall be called to
settle the matter in accordance with the provisions relating to arbitration and
expert evaluation. The twenty-five (25) year exploitation period, or eventually
the additional period of ten (10) years shall not include the time spent
referring the matter to the expert (including the time of the procedure ).
11.5 The Contractor may, with the Minister's approval, revise the Work
Program and the budget during the Calendar Year in question in order to be able
to take into account newly acquired information, a revised evaluation of the
prevailing conditions, or any other valid reason.
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ARTICLE XII
GOVERNMENT PARTICIPATION
12.1 The Government shall have the option to acquire a maximum
participation of fifteen (15)% of the rights and obligations of the Contractor
relating to a discovery when the combined daily production of all the
discoveries of the Contract Area reach for the first time a level of 50,000
barrels during at least six (6) consecutive months.
12.2 The Government must exercise its option of participation by
written notification to the Contractor within thirty (30) days following the
last day of the 6th month of the production level of 50,000 barrels/day. In the
absence of a written notice during this period of thirty (30) days, the option
shall be deemed refused.
12.3 If the Government exercises its option of participation in
accordance with Article 12.1, the Contractor shall assign to the Government the
share requested. To that end, the Contractor shall propose a draft agreement
for the Minister's evaluation.
12.4 The Government Participation shall take effect from the date of
receipt by the Contractor of the written notification mentioned in Article 12.2.
The Government shall from then on pay its share of the Petroleum Costs, in
proportion to its participation, when said costs have been incurred by the
Contractor.
12.5 If the Government exercises its option of participation, it will
reimburse to the Contractor in proportion to said participation, its share of
the Petroleum Costs incurred by the Contractor with respect to the Contract Area
before the date on which its decision to participate has been notified to the
Contractor who shall assist at no cost in the search for necessary funds.
Said share of Petroleum Costs that is reimbursable to the Contractor shall
bear an interest from the date on which the Petroleum Costs have been incurred
until the actual date of participation by the Government, at the interest rate
of the Contract fixed the day before the settlement date.
12.6 The reimbursement mentioned in Article 12.5 shall be at the option
of the Minister and notified to the Contractor,
- either in cash by payment in Dollars within a period to be determined
by mutual agreement,
- or in kind through lifting by the Contractor of a portion of the
Hydrocarbon share stipulated in Article 13, to which the Government is
entitled, up to fifty percent (50%) of said share. The value of this
portion being calculated in accordance with the provisions of Article
16, and this share shall be equal in value to the amount due on the
date of notification mentioned in Article 12.2, plus the interests
related thereto calculated according to Article 12.5.
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12.7 If during the three (3) months following the due date for
reimbursement agreed to between the Parties, the Government does not pay to the
Contractor its share of the Petroleum Costs as stipulated in Article 12.5, the
Contractor shall have the right to retain fifty percent (50%) of the share of
Profit-Oil of the Government until total recovery of said costs.
12.8 If the Government exercises its option of participation, the
Minister shall establish as soon as possible with the Contractor, an operating
agreement in accordance with the international Petroleum Operations which shall
govern the rights and obligations of the Parties.
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ARTICLE XIII
COST RECOVERY AND
PRODUCTION SHARING
13.1 Subject to the provisions relating to participation, the
Contractor shall assume and pay all the Petroleum Costs incurred during the
execution of the Petroleum Operations, and it shall recover said costs according
to the procedures defined in Accounting Appendix D.
The costs directly attributable to the development and production of
Non-Associated Gas shall be subject to a specific agreement in accordance with
the provisions of the present Contract.
13.2 The Petroleum Costs, within the limits authorized by the
provisions of Appendix "D", shall be recovered from up to seventy-five percent
(75%) of the Available Crude, on a yearly basis for oil and eighty percent (80%)
for condensate. The cost recovery shall occur as follows:
(a) The recovery of the operating costs shall be made entirely during the
Year when such costs have been incurred;
(b) The recovery of the exploration costs shall be made from the start-up
Year of the first commercial production deriving from the Contract
Area;
(c) The development investments shall be amortized over five (5) years
from the start-up Year of the first production;
(d) The investments related to the exploitation phase shall be amortized
over five (5) Years from the date of their realization;
(e) Investments shall be recovered including an increased markup of
fifteen percent (15%);
(f) However when total production will have reached its Economic Limit
such as defined in Article 13.7 hereinunder, the Parties shall consult
to take a decision by consensus. This meeting will take place within
thirty (30) days from the date at which the written notification by
the Contractor was received by the Minister.
13.3 Inasmuch as the Petroleum Costs recoverable during a given Year
exceed the value of the Crude for Cost Recovery ("Cost-Oil") available this
Year, the recovery of the surplus shall be carried forward to the following
Years.
13.4 The Contractor shall deduct on behalf of the Government from the
total production of the Crude extracted from the discovery area, after deduction
of the losses and uses related to the Petroleum Operations, a portion equivalent
to the amount of the tax on oil production equal to 12.5% (twelve and a half
percent) for oil and 10% (ten percent) for condensate. The remaining quantity
of the crude shall be referred to as "Available Crude".
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13.5 The remainder of the Available Crude every year after deduction of
the recoverable Petroleum Costs, hereinafter called "Profit-Oil", shall be
shared between the Government and the Contractor, whether the Government shall
exercise or not its option of participation to the rights and obligations in
accordance with Article XII, according to the following progressive scale:
A) OIL
AVERAGE DAILY PRODUCTION GOVERNMENT SHARE CONTRACTOR SHARE
-------------------------- ----------------- -----------------
(BARRELS/DAY)
-------------
0 to 100,000 50% 50%
Over 100,000 55% 45%
B) CONDENSATE
AVERAGE DAILY PRODUCTION GOVERNMENT SHARE CONTRACTOR SHARE
-------------------------- ----------------- -----------------
(BARRELS/DAY)
-------------
0 to 100,000 45% 55%
Over 100,000 50% 50%
13.6 The parties agree that if the Economic Limit of a petroleum
reservoir will be reached (ie. if the petroleum costs incurred by the Contractor
exceed the cashflow resulting from the sale of the production in a way that
would cause production from the reservoir to stop prematurely), the parties will
discuss the details needed to make the appropriate changes to the Contract, more
specifically the recuperation of costs and the sharing of production in order to
prolong the life of the field.
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ARTICLE XIV
REQUIREMENTS OF
DOMESTIC CONSUMPTION
14.1 Three (3) years after the start up of the Production Operations,
the Government shall have the right to purchase and the Contractor shall be
under the obligation to sell, at a specified Delivery Point, a quantity of
Hydrocarbons either Crude or refined products, or gas equivalent as agreed
between parties, equivalent at most to fifty percent (50%) of the share of
Profit-Oil to which the Contractor is entitled in order to meet the domestic
consumption of Benin. The assignment of Crude Oil shall be made within this
framework in accordance with the provisions of Article 16.2.
If within a period not exceeding sixty (60) days from the date of delivery
of hydrocarbons, the Government has not paid his invoice, the Contractor may
obtain payment by lifting from the Government Profit-Oil share.
14.2 With regard to Crude Oil, the Contractor's obligation to sell
rests on the principle according to which all producers of Crude Oil or exporter
from Benin, including the Government, bring part of their production, at any
moment and in a proportional manner, to meet the requirements of domestic
consumption. In order to take advantage of its acquisition right, the Minister
must give a three (3) months written notice to the Contractor, indicating the
quantity of Crude Oil from the Contractor's remuneration that shall be acquired
during the three (3) calendar months following the above mentioned notice. The
monthly variation of this quantity cannot exceed a range of more or less ten
percent (10%).
14.3 If due to a case of Force Majeure, other contractors or the
Government cannot proportionally contribute to the requirements of the domestic
market, and that, consequently, the volume of participation of the Contractor
and of other contractors to domestic market sales must be increased, the
Contractor must sell the additional quantities required in accordance with the
above Articles and conditions until the Force Majeure has been resolved and
until the contribution intended to proportionally cover the requirement of the
domestic market has been reestablished. This additional obligation does not
include the volumes of production which have been the subject of an export
contract for which the loading period has been fixed within forty (40) working
days following the date on which the Contractor has received notification from
the Minister as to the case of Force Majeure.
14.4 With regard to Natural Gas, the Contractor's obligation to sell
must be established taking into account the criteria used to meet the
requirement of the domestic market stipulated hereinabove, and taking into
account the price of Natural Gas determined in accordance with the present
Contract.
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14.5 All payments made regarding the sale of the Contractor's
Hydrocarbon to the Government in accordance with the provisions of this Article
must be denominated in dollars and made by bank transfer to the bank account
designated by the Contractor outside Benin, within a period of thirty (30) days
from the date of delivery to the Delivery Point of the Hydrocarbons acquired by
the Government.
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ARTICLE XV
TAX SYSTEM
15.1 For the duration of the Contract and in accordance with the
legislation in force in the Republic of Benin, the Contractor shall be subject
to the tax system currently applied to companies in general, and to oil
activities in particular.
15.2 The Contractor shall be required to pay, under the conditions and
the due dates established by the Beninese tax legislation, all the taxes and
duties to which it is subject, in particular Income Tax equal to 55% (fifty-five
percent) of the taxable profit and the Export Tax at the rate of three point
twelve percent (3.12%) of the FOB value.
15.3 It is understood that in application of Article 15.2, the Minister
shall take from the Profit-Oil share to which the Government is entitled under
Article 13.5 an amount corresponding to the Income Tax and the Export Tax
mentioned in the Petroleum Code. It shall pay said tax to the institution
designated for this purpose on behalf of the Contractor and shall have delivered
to the Contractor the related receipts. The same applies for the Export Tax.
In this case, the Profit Oil share to which the Contractor is entitled under
Article 13.5 shall be considered free of tax. In other words, the Contractor is
free of all fiscal obligations, which are by definition, included in the Profit
Oil share of the Government as well as the Royalty on Petroleum Production also
collected by the Government.
15.4 The Contractor and its subcontractors shall be exempt from the
duties and taxes on the equipment, exploitation material and machines imported
by the Contractor and its subcontractors within the framework of the Petroleum
Operations. These goods and equipment may be re-exported at the end of their
use according to the temporary admission system.
15.5 The Contractor and its subcontractors shall be also exempt:
(a) from the Value Added Tax (VAT) on the activities strictly related to
the Petroleum Operations;
(b) from the Franchise Tax for a period of five (5) financial years;
(c) from the surface royalties mentioned in the Code; and
(d) for expatriate personnel, from contributions to the Social Security
Department of Benin (OBSS), from the employer's contribution (V.P),
and from the apprenticeship tax.
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15.6 The expatriate personnel employed by the Contractor and its
subcontractors may import free of duties and taxes with the exception of the
road tax, their personal effects which shall be used during the first six (6)
months of their move. They may also import one vehicle per household as
temporary import.
15.7 The Government shall agree to take into consideration any
modification to the fiscal conditions which the Contractor may request at any
time, provided that:
(a) Such modification does not negatively affect the overall economic
benefits and other advantages that the Government will derive from the
Petroleum Operations; and
(b) The only reason for proposing such modification shall be either to
permit any person forming the Contractor or any other Affiliated
Company to obtain in another country a tax credit relating to the
taxes paid in the Republic of Benin.
15.8 The Contractor shall be required to pay to the State the income
from the taxes and duties mentioned in the present Contract through a national
structure. The designation of the national structure in question shall occur
within one hundred and eighty (180) days following the Effective Date.
15.9 Within thirty (30) days following the date of payment, the
Government shall issue, a receipt in the Contractor's name for said payment.
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ARTICLE XVI
MEASUREMENT, DISPOSAL, EVALUATION
AND SALE OF HYDROCARBONS
16.1 The Contractor must measure all the Crude Oil and Natural Gas
produced in the Contract Area according to the Good Operating Practices of the
Oil Industry. The Contractor must keep full and accurate records of all the
measurements of Hydrocarbons produced in the Contract Area after extraction of
the water and of its foreign substances, and of all the Hydrocarbons that may be
marketed, which will allow by difference to determine the quantities that have
been used for the Operations and the unavoidable losses. The Minister's
representatives must have access to these records and measures.
The Minister shall have the right to examine and to test all the measures,
measuring equipment, graphics and any other measuring or testing equipment and
information.
If, at the end of an examination or test, it appears that measuring
equipment are not in working order, that they are damaged or badly adjusted, the
Contractor must put them in good working order or shall proceed with the
required adjustments immediately at its own cost.
If, within a reasonable period not exceeding thirty (30) days, the
Contractor does not assume this obligation, the Minister may take the necessary
measures so that said equipment be made operational or have the equipment
adjusted and may invoice to the Contractor the cost of this operation at the
interest rate of the Contract + 1%. If according to the Minister, the error
caused by the bad adjustment, or any other failure of a measuring equipment,
appears to be at the origin of a considerable difference in the production
measurement, the Parties shall consult each other for the purpose of examining
the appropriate measures to be taken. In the event of disagreement, the matter
may be submitted to an expert so that the latter can determine if a retroactive
adjustment of the production figures should be made. If the Contractor deems it
necessary to replace measuring devices or instruments, it must notify the
Minister for approval and give to the Minister's representatives the opportunity
to be present during the operation and to participate.
16.2 Under the present Contract, the price of Crude Oil for each
quarter shall be the weighted average of the FOB prices received by the
Contractor for sales to independent third parties during the corresponding
quarter.
If during a given quarter the Contractor does not sell at least forty
percent (40%) of the total production of Crude Oil of the Contract Area to third
parties which are not related to the Parties, the price of Crude Oil for that
quarter shall be the weighted average of the FOB prices established by
comparison with the Crude Oil Price on the international market taking into
account the quality, density and transportation differentials.
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In the absence of an agreement between the Parties within fifteen (15) days
following the end of the Quarter concerned, pending the opinion of an expert,
the sale price agreed to for the Quarter preceding the Quarter in question shall
apply temporarily subject to the retroactive adjustments which would be required
after expert evaluation. The expert evaluation mentioned in this Article shall
occur within a period not exceeding thirty (30) days after the end of the
Quarter concerned.
16.3 Within the framework of the present Contract, the price of Natural
Gas sold on the domestic market of Benin shall be the price received by the
Contractor for sales to third parties. Taking into account the fact that the
gas market is not well developed in Benin, the Minister must assist the
Contractor inasmuch as possible to find possible consumers for the Gas and to
negotiate reasonable sale prices. The Natural Gas price applicable to the Gas
sold to a public Beninese company or to a body whose capital with voting right
is the direct or indirect property of the State, is established by mutual
agreement between the Parties, it being understood that this price must reflect
the commercial value of the energy source that the Gas sold is deemed to
replace, according to the modern technology generally used and taking into
account the cost of the gas produced. The price that applies to the Natural Gas
exports shall be the price received by the Contractor for sales to third
parties, subject to the same conditions normally governing the sale of Crude.
16.4 The Contractor shall have the right to freely dispose of, load,
transport and export the Hydrocarbons to which it is entitled under the
Contract. The Minister may request the Contractor to sell all or part of the oil
to which the State is entitled in accordance with Article 13 and under the
market conditions stipulated in Article 16.2, and provided that the Parties have
agreed on the provisions concerning marketing.
16.5 No later than sixty (60) days before the Start up Date of the
Commercial Production in each Development Area, and thereafter at the beginning
of each Quarter, the Contractor must prepare and provide to the Minister a
forecast indicating the total quantity of Hydrocarbons which, according to the
Contractor, shall be produced during the following four (4) Quarters in the
corresponding Development Area, starting from a production rate mutually agreed
upon to optimize the recovery of Hydrocarbons in the Development Area according
to the Good Operating Practices of the Oil Industry. Each Quarter, the
Contractor shall make reasonable efforts to produce the quantity of Hydrocarbons
which it estimated . The Contractor shall be authorized to use, free of charge,
the quantities of Hydrocarbons produced in the Contract Area, in their natural
or processed state, required for the carrying out of the Petroleum Operations
(including the Operations of Gas loading) according to the Good Operating
Practices of the Oil Industry. Whatever the quantity of hydrocarbons used for
this purpose, it shall not be considered as being part of the Commercial
Production.
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ARTICLE XVII
NATURAL GAS
17.1 Benin's domestic market shall benefit from a preferential right
for the acquisition of the Natural Gas produced in any Development Area and
which is not required for the Petroleum Operations in accordance with this
Article, provided that the commercial proposals made are not less favorable than
those under which the gas in question could be exported. The Natural Gas not
sold on the domestic market may be exported.
In the event of discovery of a commercial accumulation of gas, a gas
purchase contract ("Take or Pay" contract) shall be discussed between the
Government and the Contractor as soon as possible. If the direct generation of
electricity would appear more favorable for the two Parties, they shall meet to
determine the conditions thereof.
17.2 ASSOCIATED NATURAL GAS
17.2.1 If a Crude Oil Discovery occurs that the Contractor considers to
be commercially viable under the present Contract and this discovery contains
Associated Gas, the Contractor must indicate in its evaluation report if it
anticipates that the estimated production of Associated Gas shall exceed the
quantities of Associated Gas required for the Crude Oil Production Operations
(this surplus shall be referred to hereinafter as "surplus Associated Gas") and
if the surplus Associated Gas can be produced in commercial quantities. If the
Contractor declares that this Associated Gas exists and that it can be produced
in commercial quantities, it shall indicate in the General Development Program
prepared for the Hydrocarbon Discovery the details relating to the gathering,
processing, compression and transportation facilities required to commercially
produce the surplus Associated Gas for commercial purposes, as well as the
corresponding costs.
17.2.2 Within ninety (90) days following the date of submission of the
General Development Program, the Minister may advise the Contractor that he
himself or any other public entity in Benin designated by him, wishes to dispose
of the surplus Associated Gas on the domestic market.
17.2.3 If, in accordance with this Article, the Minister advises that
he wishes to dispose of the surplus Associated Gas on the domestic market, the
Contractor may, by notice within ninety (90) days following the date of
notification of the Minister, participate in the costs of the facilities
required for the production of the surplus Associated Gas and the proceeds
deriving from the sale of said Gas.
17.2.4 If the Contractor decides to participate in accordance with the
above provisions:
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(a) It shall build gathering, processing, compression, transportation and
storage facilities required for the production and the delivery to the Delivery
Point of the surplus Associated Gas in accordance with the specifications of the
General Development Program.
(b) The price of the Associated Natural Gas is the price of Natural Gas
determined in accordance with the present Contract.
17.2.5 If the Contractor decides not to participate, it shall then
deliver to the Minister, or to the public Beninese company designated by the
Minister for this purpose, to a Delivery Point designated as "Exit door", and at
its expense, all the quantities of surplus Associated Gas produced, the costs
associated will be considered to be recoverable Petroleum Costs.
17.2.6 Subject to the provisions relating to the protection of the
environment, the Contractor may burn any surplus Associated Gas that has not
been used.
17.3 NON-ASSOCIATED GAS
17.3.1 If a Discovery of Non-Associated Gas occurs in the Contract
Area, the Contractor must submit a report in accordance with the provisions of
the present Contract. If the Contractor deems that the Discovery is worth being
evaluated, it must prepare an evaluation, including a reserve estimate, of the
production potential, the development costs and the production costs as well as
of the economic viability. In that report, the Contractor must also declare
whether the Discovery is commercially viable. If the Contractor deems that the
Discovery of Non-Associated Gas does not warrant being evaluated, the provisions
relating to Crude Oil shall apply mutatis mutandis.
17.3.2 If the Contractor deems that the Discovery can be commercially
viable, the Minister shall assist in the evaluation of the gas requirement on
the domestic market as well as in the transformation and marketing activities
required for its distribution to the final users of said market. Similarly, the
Contractor is at liberty to evaluate the viability of Gas export. During the
calendar year following the date of submission of the detailed evaluation report
of the Contractor, the Parties must meet in order to determine if the sale
points and other pertinent factors justify its development and production for
sale on the domestic market and/or if it is considered that this market is not
big enough and therefore the Gas must be exported.
17.3.3 If the Contractor deems that the development of the Discovery of
the Non-Associated Gas is justified, it must submit to the Minister a General
Development Program for said Discovery and the provisions relating to the
commercial discovery and those relating to the Government participation shall
apply to the development and production of said Gas as if it concerned Crude
Oil. If the Contractor deems that the development of the Discovery of
Non-Associated Gas is not justified, the provisions relating to the Crude Oil
shall then apply mutatis mutandis to the development and production of said Gas.
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17.3.4 If it has been determined that the Discovery of Non-Associated
Gas cannot be used on the domestic market while the Contractor considers that
said Discovery of Non-Associated Gas may be commercially viable for export, the
Contractor shall then be free to develop the Gas Field provided that it submits
to the Minister a General Development Program. If the Contractor begins the
Development Operations for export, the Minister shall take the necessary
measures to facilitate the construction of the appropriate facilities. The
provisions relating to the commercial Discovery and to the Government
participation shall apply mutatis mutandis to the development and production of
said Non-Associated Gas as if it concerned Crude Oil. Once the Contractor has
started up the Development Operations for export, the right granted to the
Contractor for exportation under the present Article shall remain in effect
during the entire period of the Contract unless the two Parties change the
procedures by mutual agreement.
17.3.5 Under the present Contract, the price of the Non-Associated Gas
produced by a Gas Field intended to be used in Benin shall correspond to the
price of Natural Gas determined in accordance with the provisions of the present
Contract.
17.3.6 Following the Minister approval, the Contractor shall have the
right to build facilities for the separation of gas for the purpose of producing
liquid gas and condensate with due regards to the safety and environment
protection standards,
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ARTICLE XVIII
DAMAGES, ENVIRONMENTAL PROTECTION
AND SAFETY
18.1 The Contractor shall be responsible for all damages and injuries
that may be caused to individuals or to the State as a result of its operations.
The Contractor shall be required to safeguard the Government against any damage
for which it may be responsible as a result of its activities under the Contract
or of any operation or activity deriving therefrom. To that end, the Contractor
must, at any time, release the Government from any responsibility against any
claim and obligation resulting from deaths, accidents or damages caused by its
activities, including those carried out under the Contract, or non-compliance by
the Contractor of the laws and regulations in force in Benin. The present
Contract shall not have any effect on claims by third parties against the
Contractor under the laws in force in Benin.
18.2 The Parties acknowledge that, due to their nature, the Petroleum
Operations may produce an ecological imbalance in the Contract Area as a result
of environmental pollution. Consequently, during the performance of the
Contract, the Contractor must adopt the necessary measures in order to prevent
or to reduce to a minimum the pollution of the ground, atmosphere and water, and
ensure that this pollution does not harm the plants and the wildlife and, in
general, prevent everything that could materially harm the environment. If the
Contractor cannot prevent the pollution of the environment, it must take the
necessary measures to reduce to a minimum its effects according to international
standards. These measures must be notified to the Minister for approval.
18.3 In order to reduce to a minimum or eliminate the pollution, the
Contractor must use adequate technical means, approved by the Minister.
18.4 In accordance with the Code, the Contractor is responsible for
damages caused to third parties as a result of environmental pollution.
18.5 The Contractor shall undertake to call on experts in this matter
in order to examine the probable impact of the Petroleum Operations on the
environment. This study must include:
(a) the condition of the environment and the level of pollution existing
in the Contract Area and in the neighboring areas before the petroleum
operations;
(b) the impact that the Petroleum Operations may have on the environment.
The study indicated in paragraph (a) must be twofold:
1) a preliminary study delivered by the Contractor to the Minister before
the seismic survey of the Contract Area and
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2) the final study applicable to all the exploration period and which
shall be submitted to the Minister before the drilling of the first
well. The study indicated in paragraph (b) must be carried out and
delivered to the Minister at least ninety (90) days prior to the
drilling of said well.
18.6 The studies listed above must include the procedures used to
eliminate or minimize, among other things, the wastes mentioned below as well
as the way to neutralize them:
(a) Drilling muds and Hydrocarbons resulting from the tests, completion,
workover and abandonment of the xxxxx;
(b) Polluted underground reservoirs;
(c) Solvents, lubricants and other products used during operations;
(d) Organic waste, detritus and unusable products from the work and camp
areas.
18.7 During the design and building of its facilities the Contractor
must endeavor to minimize the environmental pollution and must at least adopt
the following procedures on the drilling sites and the exploitation equipment
sites:
(a) Drainage/recovery system of spills of Crude Oil and other derivatives
as well as polluted waters;
(b) Waste recovery system.
18.8 The Contractor shall undertake to include the provisions of this
Article in all the contracts negotiated with third parties and related to the
Petroleum Operations.
18.9 If the Contractor does not comply with the provisions of this
Article and a spill of Crude Oil or of any other product occurs in the soil,
the sea bottom or in the sea, or if the Contractor's activities cause another
form of pollution or damage springs or the animal or plant life in any other
manner, the Contractor must take immediately all steps according to the Good
Operating Practices of the Oil Industry in order to control the pollution, clean
any spill of Crude Oil or of any other product, or repair as completely as
possible any damage caused.
18.10 If, as a result of the direct effect of a gross or deliberate
negligence on the part of the Contractor, a spill or an act of pollution occurs,
the cost of the control, cleaning and repair operations shall be borne by the
Contractor and shall not be considered Petroleum Costs under the present
Contract.
18.11 In the event of danger which may affect the environment, the
Contractor must immediately notify the Minister and take the measures prescribed
in the emergency procedures adopted by the Parties according to the Good
Operating Practices of the Oil Industry.
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18.12 At the end of the Contract, outside the abandonment case, the
Contractor must take measures according to the Good Operating Practices of the
Oil Industry to restore the environment and the sites where the Petroleum
Operations have been performed to their original condition on the Effective Date
of the Contract, taking into account the rules of the abandonment procedure.
At the time of submitting the General Development Program, the Contractor
must submit to the Minister for review and approval a schematic summary of the
environment restoration activities once the Petroleum Operations have been
completed, indicating the manner in which the corresponding costs shall be
financed, preferably through the opening of a special bank account for that
purpose. Each payment by the Contractor to the special account will be
recovered as Cost Oil. Thereafter and at the same time as the Work Program and
the Budgets, such schematic summary shall be submitted to the Minister for
review and approval.
18.13 The Contractor must take the necessary steps according to the
Good Operating Practices of the Oil Industry to carry the activities mentioned
in the Contract in all safety, and must comply with the laws and regulations of
Benin, including the regulations in force with regard to the work, environmental
protection, health and safety. The Contractor must refrain from any action
endangering the health or the safety of persons.
18.14 The Minister shall have the right to inspect all the sites,
buildings and facilities in the Contract Area. In order to have access to these
sites, the Minister must first inform the Contractor in advance.
18.15 The Contractor must supervise the sure and effective treatment of
the water and residual oil and the plugging of the xxxxx before abandoning them.
18.16 The Contractor shall clear and remove all platforms installed in
the Contract area .according to the abandonment procedures described in the
Appendix.
18.17 The removal, clearing, or abandonment of the facilities set up by
the Contractor shall take place according to the standards of the oil industry
generally accepted in the Gulf of Mexico. On the other hand, the facilities
underwater or others shall be left in such a state so as not to present an
obstacle to navigation.
18.18 The Contractor shall leave all pipelines and facilities free of
oil at the expiration of the Contract according to the normal oil practices.
18.19 Any change to this agreement with regard to the abandonment must
be agreed upon by the two Parties.
18.20 If laws or regulations relating to the environment in force on
the date of signature of the Contract are amended so as to substantially modify
the economic equilibrium of the Contract, the Parties shall refer to the
provisions of Article 29.2.
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ARTICLE XIX
PROVISIONS REGARDING EXCHANGE
Under the regulations in force in Benin, the Ministry shall guarantee that for
the duration of the Contract, the Contractor and the non-Beninese subcontractors
shall be authorized to:
(a) pay in foreign currency, in full or in part, the salaries,
reimbursements and other indemnities;
(b) open, keep and use bank accounts in foreign currency in Benin and
abroad and accounts in local currency in Benin;
(c) directly pay abroad, in foreign currency, foreign subcontractors for
the acquisition of equipment and supplies of services related to the
Petroleum Operations;
(d) receive, transfer and keep abroad and freely dispose of all the funds
including but not limited to, all payments received for the
exportation of Hydrocarbons and any payment received from the
Government;
(e) obtain from abroad all the loans required for the Petroleum
Operations;
(f) buy the local currencies required for the Petroleum Operations and
convert in foreign currency all local currencies in excess of the
immediate domestic needs in accredited banks or exchange bureaus;
(g) transfer abroad all foreign currencies in excess of the local
requirements of the Contractor. The rights given to the Contractor and
subcontractors under this Article shall also apply to expatriate
employees.
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ARTICLE XX
EMPLOYMENT AND TRAINING
20.1 EMPLOYMENT
In compliance with the labor Legislation in Benin, the Contractor shall be
free to hire the personnel and the subcontractors required to perform the
Petroleum Operations in accordance with the Contract.
However, with regard to the recruitment of employees and to the extent
where this is in accordance with an efficient and responsible exploitation of
the Petroleum Operations, the Contractor must give preference to citizens of
Benin qualified, through their training and experience, to perform the duties in
question. With regard to the selection of subcontractors for the performance of
the Petroleum Operations, the Contractor must give preference to Beninese
subcontractors to the extent where the latter are competitive with regard to
quality, costs and technical expertise to maintain the established schedules of
activities.
20.2 TRAINING
The Contractor shall undertake to offer adequate training to the Beninese
citizens employed for the Petroleum Operations during the entire period of
validity of the Contract.
To that end, within three (3) months following the Effective Date, a
training program relating to the Exploration period for a yearly amount of a
minimum of fifty thousand US dollars (US$50,000) shall be established and
submitted by the Contractor to the Minister. Within thirty (30) days following
the start-up of the Commercial Production, the Contractor shall also submit to
the Minister a training program relating to the Exploitation period for a yearly
amount of at least one hundred thousand US dollars (US$100,000).
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ARTICLE XXI
ACCOUNTING
21.1 The Contractor must keep its accounting as well as any financial
information, books and records concerning the Petroleum Operations, in national
currency and in the form required by the law in force in Benin.
21.2 The accounting procedures to be applied by the Contractor shall be
those established in the Accounting Appendix D.
21.3 The audited accounts of the Contractor must be submitted to the
Minister for approval no later than three (3) months after the end of the
Calendar Year.
21.4 The Minister may, by notifying the Contractor no later than six
(6) months following the date of submission of the financial accounts, submit
all financial accounts of the Contractor relating to the Calendar Year in
question to the auditing of an International Company of Chartered Accountants,
appointed by agreement between the Parties. The cost of this audit shall be
borne by the Government.
21.5 Unless the Parties find a solution by mutual agreement, the
Minister may submit any objection regarding the Contractor's accounts to an
expert decision. Before giving a decision in connection with the objection
submitted, the expert must take into account the results of the financial audit
made according to the provisions of this Article. If the Minister's objection
is not submitted to an expert within twelve (12) months following the receipt by
him of the accounts, the objection in question shall be null. If the Minister's
objection is validated by the Expert, the Contractor must correct the accounts
in question and bear the costs related to the audit and the expert evaluation
notwithstanding the above provisions.
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ARTICLE XXII
CONFIDENTIAL NATURE OF THE DATA
22.1 All the reports, data and information obtained or prepared by the
Contractor, to the extent that they relate to all or part of the Contract Area
shall be the full property of the Beninese State and shall be treated
confidentially. Each Party undertakes not to divulge same except to communicate
them, after the prior approval of the other Party, to:
(a) An Affiliated company or a subcontractor of the Contractor;
(b) A financial institution for the purpose of obtaining a loan;
(c) A stock exchange;
(d) Any potential assignee in application of Article 23.
This Article shall not prevent the Minister from communicating certain
information to any government entity and to any trustworthy person interested in
securing an exploration and exploitation right of Hydrocarbons in Benin.
22.2 All reports, data and information communicated by the Minister or
the Contractor to a third party in accordance with the above provisions, shall
be made according to agreements the terms of which shall guarantee that these
data, information or reports are treated by the recipient as strictly
confidential.
22.3 The reports, data and information relating the Contract Area and
considered as important by the Minister for the execution by a third party of an
exploration program in a bordering area, shall be communicated to it by the
Minister. In exchange, the Contractor shall have access to the data,
information and reports obtained by said third party concerning a bordering area
of a comparable exploratory potential. The confidentiality provisions shall
apply to this third party.
22.4 All the reports, data and information, including the
interpretations and evaluations relating to any area that no longer forms part
of the Contract Area following relinquishment of a surface area or expiration of
the present Contract, shall be treated by the Contractor as strictly
confidential for a period of five (5) years from the date on which said surface
area ceased to form an integral part of the Contract Area or from the date of
expiration of the present Contract.
22.5 Any failure to comply with the confidentiality Clauses mentioned
in this Article shall be reproved according to the regulations in force in Benin
regarding the divulging of professional secrets.
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22.6 Any press publication initiated by the Contractor and relating to
the results of operations conducted under the present Contract shall be subject
to the prior authorization of the Minister.
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ARTICLE XXIII
ASSIGNMENT OF RIGHTS
23.1 The Parties may assign all or part of their rights and obligations
deriving from the present Contract. If the Contractor intends to assign or
transfer its rights totally or partially, in accordance with the Contract, it
must immediately submit to the Minister a written authorization request, unless
the transfer is to an Affiliate in which case it must notify the Minister in
writing of its intention to transfer sixty (60) days prior to the Effective
Date, or at a later date agreed to with the Minister, following which the
transfer shall be effective without the need for an authorization from the
Minister. Any request must indicate the name, the address and any appropriate
information on the technical and financial capabilities of the assignee. Within
thirty (30) days following the receipt of the request, the Minister must decide
whether he approves or not the proposed assignment. Any disagreement by the
Minister must be based on reasonable grounds related to the technical and
financial capabilities of the proposed assignee.
23.2 If one of the Parties makes a partial assignment of its rights and
obligations deriving from the present Contract, the assignee shall be
responsible, jointly and severally, for the guarantees, responsibilities and
obligations of the assignor. If the assignment is total, the assignee shall be
solely responsible for said obligations and guarantees. Any assignee must
adhere to the bank guarantees and supply a guarantee from its parent company, if
applicable, as required by the present Contract.
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ARTICLE XXIV
FORCE MAJEURE
24.1 The Parties shall not be responsible in the event of failure or
delay in the fulfillment of their obligations resulting from the present
Contract provided this failure or delay is due to a case of Force Majeure.
24.2 A case of Force Majeure shall mean any act or event which does not
fall within the reasonable limits of control of the Parties, and which prevent
them indefinitely or temporarily from fulfilling their obligations under the
Contract. Thus, Force Majeure shall include, but not be limited to the
instances listed below: war or similar situations, embargoes, blockades,
earthquakes, floods, fire, strike or lock-out, terrorism act, riots, government
action.
24.3 The Party invoking the case of Force Majeure shall:
a) Advise the other Party as early as possible by any means and confirm
by registered letter with acknowledgment of receipt describing the
event in detail;
b) Take as far as possible all appropriate and legal provisions to
eliminate the cause of Force Majeure;
c) Inform the other Party in the manner indicated above as soon as the
Force Majeure has been eliminated and resume the execution of its
contractual obligations.
24.4 If the case of Force Majeure lasts for more than three (3) months,
the Parties to the Contract shall meet in order to determine the appropriate
action to be taken.
24.5 It is agreed that if for reasons of Force Majeure, a Party is
unable to fulfill an obligation or to exercise a right under the Contract, the
period granted to fulfill the obligation or to exercise the right, including any
subsequent obligations or rights, shall then be extended by a period equal to
the duration of the Force Majeure.
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ARTICLE XXV
ARBITRATION AND EXPERT EVALUATION
25.1 ARBITRATION
25.1.1 Subject to the provisions hereunder relating to expert evaluation,
any dispute or claim related to a matter or operation falling within the
Contract or connected therewith, including, but not limited to, any dispute or
claim relating to its validity, interpretation, execution or omission of
obligations which it claims cannot be amicably settled between the Parties, must
be finally and exclusively settled by arbitration at the initiative of one or
the other Party.
25.1.2 The arbitration procedure shall be implemented by three (3)
arbitrators in accordance with the rules of conciliation and arbitration of the
International Center for the Settlement of Investments Disputes (CIRDI) of the
World Bank Group.
25.1.3 Unless the Parties otherwise mutually agree in writing, the third
arbitrator appointed as indicated above must not be a citizen of Benin or a
person of the same nationality as the Contractor.
25.1.4 For any arbitration procedure in accordance with this Article:
(a) The procedure must take place in Paris, (France), unless the Parties
otherwise mutually agree;
(b) The French language shall be the official language in all respects;
and
(c) The parties shall be bound by the decision of the majority of the
arbitrators.
25.1.5 If an arbitration procedure has been instituted, the Parties
shall continue to fulfill their obligations under the Contract unless this has
been made impossible due to the case of Force Majeure.
25.1.6 The cost of the arbitration procedure must be borne according to the
methods defined by the arbitration tribunal.
25.1.7 Under this Article, the Parties shall waive any jurisdictional
immunity. For the execution of the judgments rendered by the arbitration
tribunal of CIRDI, the Parties shall waive the execution immunity with respect
to their property. The seizure and adjudication of property to which this
immunity may give rise includes, with regard to the Government, only those
accounts, income and property related to the Hydrocarbon field in the Contract
Area.
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25.2 EXPERT EVALUATION
25.2.1 Any Party wishing to submit a matter to the decision of an expert in
accordance with a provision of the Contract which provides for this procedure
including the Accounting Appendix, or any other matter that the Parties decide
to submit by joint agreement to the decision of an expert under this Article,
must notify it to the other Party. This notification must include a list of at
least three (3) proposed experts. The other Party must reply to this
notification within thirty (30) days following the date of receipt either by
accepting one (1) of the experts proposed or by proposing at least three (3)
other experts. In the latter case, the Party who has presented the initial
notification shall have thirty (30) days to accept one (1) expert or reject all
the experts proposed by the other Party. Non-notification shall constitute a
rejection of the experts proposed.
25.2.2 If the Parties do not reach an agreement with regard to the selection
of an expert within sixty (60) days following the date of the first notification
under the above paragraph, any of the Parties may request the Center of
technical experts of the International Chamber of Commerce (CCI), whose head
office is in Paris, to appoint an expert in accordance with its rules.
25.2.3 If the expert agreed to by the Parties or appointed in accordance
with the above provisions refuses the Parties' request, dies or, for any other
reason, is unable to act as an expert, the Parties must meet immediately in
order to appoint an replacement expert. If the Parties cannot reach an
agreement within thirty (30) days following the date on which it has been
established that the first expert could not act, any of the Parties may request
the Center of technical experts of the CCI to appoint another expert in
accordance with its rules.
25.2.4 The Parties shall be required to cooperate with the expert inasmuch
as possible and each Party must ensure the cooperation of its Affiliates. The
Parties must ensure access to the data and information which the Parties or
their Affiliates can provide and which, in the expert's opinion, may contribute
to his decision. The Parties' representatives shall have the right to consult
the expert and to provide him with written information but the expert can impose
reasonable limits to this right. He shall be at liberty to assess to what
extent any document and information submitted for his review is duly justified
or pertinent.
25.2.5 All costs related to the selection and utilization of the expert
shall be jointly and equally paid by the Parties.
25.2.6 Any decision rendered by the expert in accordance with this Article
under a provision of the Contract which expressly provides for this procedure
shall be final and enforceable for the Parties. No Party may submit the matter
which was the subject of an expert decision to an arbitration procedure such as
provided in the present Contract. By joint decision of the Parties, the matters
submitted to the decision of an expert may be subject to a final and definitive
decision through arbitration, if the Parties agree to accept it at the time a
decision was made to submit the matter to an expert.
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ARTICLE XXVI
TERMINATION
26.1 In case of non compliance by the Contractor with the provisions of
the present Contract, the Minister may terminate the Contract if the Contractor
does not rectify said non compliance.
26.2 If the Minister deems that the Contractor has not complied with
the provisions of the Contract and has thus given rise to a reason for
termination, he must notify the Contractor in writing by formal notice so that
the latter may rectify the situation within sixty (60) days following the
receipt of the notice, if the situation can be rectified. If, within this
period, the Contractor has not rectified the situation, the Minister may declare
the Contract terminated and claim any damages deriving from said failure.
26.3 During the exploitation period, the Contractor may terminate the
Contract, by written notification to the Minister at least sixty (60) days prior
to the date of termination, provided that the Contractor has fulfilled all its
contractual and tax obligations, as well as its obligations related to the
corresponding annual Work Program.
26.4 The Contract shall be automatically terminated by the Minister
through notice to the Contractor when the latter has committed a gross error,
resulting from a deliberate negligence, has issued false declarations in writing
when he should have known that they were false, has assigned any interest
whatsoever to a third party without complying with the provisions relating to
the assignment of rights or when it has been declared bankrupt by a competent
court.
26.5 The Contract may be automatically terminated by the Minister
through written notification to the Contractor in the following cases if within
sixty (60) days following the date of receipt of a notification the Contractor
has not taken the corrective measures:
a) when the Contractor does not respect the minimum work obligations;
b) when it does not execute the provisions of an arbitration award or the
decision of an expert.
26.6 If the Contract has been terminated in accordance with this
Article, the Contractor shall have the right to withdraw and export all the
goods used by it, for which the property title has not been transferred, in part
or in full, provided it settles all its debts toward the Government. The
Contractor shall lose any other right under the Contract. It shall not be
released from any of the obligations contracted before the effective date of
termination, whether they are the result of said termination or its object.
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26.7 If the Contractor challenges any of the events mentioned in this
Article or maintains that one of these events has occurred but it has rectified
same, the Contractor shall refer the matter to an arbitration procedure or to
decision by an expert within thirty (30) days following the date of receipt of
the termination notice from the Minister. This recourse shall not suspend the
termination.
26.8 Before leaving the Contract Area following termination, the
Contractor must ensure that all xxxxx are left in good condition in accordance
with the Good Operating Practices of the Oil Industry.
26.9 Termination of the Contract shall occur notwithstanding any other
right which may have been established in favor of the Parties, under the
Contract, before said termination.
-57-
ARTICLE XXVII
BANK GUARANTEE
27.1 In order to ensure the good performance of the minimum work
obligations provided in the present Contract, the Contractor must submit within
ninety (90) days following the Effective Date, an irrevocable bank guarantee in
accordance with the sample in Appendix C for an amount that is sufficient to
complete the work obligations during the initial phase of the exploration
period. Within forty-five (45) days before the beginning of each extension
phases of the exploration period of the Contract, the Contractor must submit an
irrevocable bank guarantee for an amount that is sufficient to complete the work
obligations for the phase considered.
Non-submission of the bank guarantee within the period required shall
constitute a failure to the provisions of the Contract and shall lead de facto
to its termination by the Minister in accordance with the provisions relating to
termination.
27.2 The amount due in accordance with the bank guarantee mentioned
above shall be progressively reduced as the minimum work obligations for the
year concerned are completed. For the purpose of this reduction, the Contractor
may, at any time, submit for the Minister's approval a declaration establishing
the level of completion of the work obligations. This approval shall take place
within reasonable periods.
27.3 In order to render the above mentioned reduction effective, the
Minister must notify its approval to the bank issuing the bank guarantee within
a period of thirty (30) days from the date of receipt of the Contractor's
request.
27.4 If the Contractor considers that the Minister's approval mentioned
above has been unduly delayed or if the Minister deems that the Contractor has
not satisfactorily executed a minimum work obligation according to the Good
Operating Practices of the Oil Industry, any of the Parties may submit the
matter to the decision of an expert.
27.5 The guarantees to be submitted by the Contractor under this
Article must be approved by the Minister. The Contractor shall forward to the
Minister the original guarantees to enable him to review and keep them.
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ARTICLE XXVIII
NOTIFICATION
28.1 In order to be considered valid, any letter or notification
relating to the Contract must be submitted on a working day or received by
registered letter, cable, telex or fax to the addressees at the following
addresses:
THE GOVERNMENT:
represented by
THE MINISTER OF MINES, ENERGY AND HYDRAULICS
04 Postal Box: 0000
Xxxxxxx (Xxxxxxxx of Benin)
Fax (229) 31.35.46 Telex: 5237 MINERH
THE CONTRACTOR
ADDAX PETROLEUM BENIN LIMITED
c/o Addax Management Services SA
0, xxx xx Xxxxxx
XX 0000 Xxxxxx Xxxxxxxxxxx
Fax: 00 00 00 000 00 00
and:
ABACAN RESOURCE (BENIN) LTD.
c/o Abacan Resource Corp.
1750 - 000 0xx Xxxxxx XX
Xxxxxxx, Xxxxxxx X0X 0X0 Xxxxxx
Fax: 000 000 000 0000
28.2 The Parties shall have the right to change address for the purpose
of notification and communication by notifying same in writing to the other
Party at least five (5) days before the date of actual change.
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ARTICLE XXIX
APPLICABLE LEGISLATION, STABILIZATION
AND COMPENSATION
29.1 The present Contract shall be governed and interpreted in
accordance with the laws and regulations in force in the Republic of Benin.
29.2 If the laws or regulations of Benin in force on the date of
signature and applicable for the execution or the interpretation of the Contract
or to the economic rights of the Parties are amended so as to substantially
modify the economic equilibrium existing between the Parties on the date of
signature, the latter must meet to discuss any additional agreement which, by
mutual agreement, would reestablish said equilibrium. Any additional agreement
jointly adopted by the Parties must take into account the most probable
technical and commercial parameters in case of future development in the field
of Hydrocarbons. If the parties cannot agree on the parameters to be used for
these calculations, or on the additional agreements which would reestablish the
economic equilibrium existing on the date of signature, the dispute or disputes
must be submitted to the decision of an expert.
If no appropriate rules exist in the Code or in the regulations in force in
Benin, concerning the dispute regarding the contract or related to it, the
customs and practices of the international oil industry and the principles of
law applicable in this regard in the oil countries shall be used.
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ARTICLE XXX
INFRASTRUCTURE
30.1 The Government shall facilitate to the Contractor, for the
performance of the Petroleum Operations, the use of any roads, storage tanks and
other structures for storage and processing, piers and other loading and
shipment structures, railway lines, pipelines and other transportation
infrastructures existing in Benin and which are not exclusively used for other
activities including other petroleum activities.
30.2 The Contractor shall pay passage rights and other reasonable fees
for the use of such infrastructures in accordance with the regulations in force
in Benin and article 30.1. The costs incurred within this framework shall be
considered as Petroleum Costs and may be recovered by the Contractor but must
not exceed those paid by the public in general or by other parties in the same
situation as the Contractor.
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ARTICLE XXXI
GUARANTEE OF PARENT COMPANIES
31. The Contractor undertakes to produce on the Effective Date of the
Contract a letter from the parent companies guaranteeing the performance of the
ADDAX PETROLEUM-ABACAN BENIN Consortium with regard to all the obligations
described or mentioned in the Contract.
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ARTICLE XXXII
FINAL PROVISIONS
32.1 If on one or several occasions, the Minister or the Contractor
omits to invoke or to emphasize the execution of one of the provisions of the
Contract, the latter must not be interpreted as a renunciation to the future
application of the provision or of the right in question.
32.2 All matters which are not expressly provided for in the present
Contract shall be governed by the Code and other laws and regulations of the
Republic of Benin.
32.3 If a provision of the Contract is declared null or invalid for any
reason whatsoever, this does not imply that the Contract or any other of its
provisions may be declared null or invalid, except if the Contract or these
other provisions are affected by this nullity.
32.4 The Contract may not be amended without the unequivocal and
written consent of the Parties, but the Minister may, however, extend the period
during which the Contractor must fulfill any obligation under the present
Contract and each Party, or both Parties together, may freely exercise,
implicitly or explicitly, any rights granted to them hereunder.
32.5 The purpose of the headings used in the Contract is to facilitate
its reading and cannot be interpreted as having a special meaning.
32.6 Any reference to the singular shall include the plural and vice
versa.
32.7 Any reference to the masculine gender shall include the feminine
gender and vice versa.
32.8 The Contract shall constitute the full agreement of the Parties
and shall replace any agreements and results of negotiations conducted between
the Parties before the date of signature.
32.9 Once the Contract has been signed by the Parties, it shall be
published in the Official Gazette of the Republic of Benin and anywhere else as
required.
32.10 The present Contract has been signed in two (2) originals.
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MADE IN COTONOU, THE 1ST DAY OF FEBRUARY, 1997
FOR THE GOVERNMENT OF FOR THE CONTRACTOR
THE REPUBLIC OF BENIN
/s/ Mr. Emmanuael Golou /s/ Xx. Xxxx Xxxxxxxxx
Minister of Mines, Energy and Hydraulics President of Addax
Petroleum
Benin Limited
/s/ Xx. Xxxx Xxxxxx Xxxxxx
President of the Addax and
Oryx Group
/s/ Xx. Xxxx Cherwayko
President of Abacan Resource
Limited (Benin)
-64-
APPENDIX "A"
------------
COORDINATE REGION CONTRACT
--------------------------
TOTAL AREA OF BLOCK 4: 9953 Km3
1-M) 6 05' 00" North 1 40' 00" East
2-F) 6 05' 00" 2 44' 12"
3-O) 5 28' 21" 2 49' 04"
4-N) 5 28' 21" 1 49' 04"
-65-
APPENDIX "B"
------------
MAP OF BENIN
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APPENDIX "C"
------------
FORM OF BANK GUARANTEE
----------------------
-67-
APPENDIX "D"
------------
ACCOUNTING AND FINANCIAL PROCEDURES
-----------------------------------
The present Appendix is attached and is made part of the Contract of
exploration and exploitation.
Dated
_________________________________________
Between THE GOVERNMENT OF THE REPUBLIC OF BENIN
and THE SYNDICATE ADDAX PETROLEUM - ABACAN BENIN S.A.
-68-
TABLE OF CONTENTS
-------------------
PAGES
CHAPTER 1: General arrangements
CHAPTER 2: Classifications, Distribution of costs and expenditures
CHAPTER 3: Method of recuperation of Contractor's costs
CHAPTER 4: Inventory and evaluation of assets
CHAPTER 5: Report of activities during the Period of exploration
CHAPTER 6: Production Report
CHAPTER 7: Report on the value of the Production
CHAPTER 8: Report on recoverable costs
CHAPTER 9: Statement of expense and receipts
CHAPTER 10: Yearly report
CHAPTER 11: Yearly budget
CHAPTER 12: Forecasts and long term plans
CHAPTER 13: Procedures of accounting and financial revisions
CHAPTER 14: Disagreement with the Contract
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CHAPTER 1: GENERAL ARRANGEMENTS
The present Appendix has for a main objective, to establish rules and accounting
procedures allowing the determination of investments, expenses, costs of
exploitation and receipts of the Contractor.
1.1 DEFINITIONS
Terms used in the present Appendix have the same meaning as terms used in the
Contract.
1.2 REPORTS THAT THE CONTRACTOR SHALL PRESENT:
a) Within the thirty (30) days that follow the Date of commencement of
the Contract, the Contractor will submit for the Minister's approval
the general lines of one project of accounting procedures, of
operational registries. These procedures should be compliant to norms
in Benin and compatible with those of the International Oil industry.
Within the sixty (60) days following the receipt of the above
documents, the Minister will either have to approve or ask for their
revision. Within ninety (90) days after the Minister's approval, the
Contractor, on the basis of the recommendations that are made will
revise the manuals and the accounting procedures which will be in
force during the length of the Contract.
b) The reports relating to the Oil Operations that the Contractor should
regularly produce are those that are stipulated in the Contract, In
the present Appendix and those that might make the object of an
agreement subsequently between Parties or that could be required by
the Beninese legislation.
1.3 ACCOUNTING SYSTEM
The Oil operations accounting system is prepared by the Contractor
according to the terms of the Contract and of the National Accounting Plan. The
whole cost (CCE) method of Capitalization will be used.
1.4 LANGUAGES AND UNITS OF AMOUNT TO BE USED:
a) Amounts will be held in the local currency of Benin. Metric units and
Barrels will be measures concerned by the present Appendix. The
language of use will be French.
b) Rules of accounting and financial procedures are directed so that
neither the Minister nor the Contractor undergo exchange gains or
losses at the expense of either Party. However, if an exchange gain or
a loss is produced, it would be credited or debited to accounts
foreseen by this Contract.
i) Receipts and expenses in Francs CFA or in American dollars will be
converted on the basis of the average between the exchange rate for
the sale and the exchange rate for the purchase of currencies in
question, as published the last day of the previous month by the
specialized magazines of the BCEAO or of the IMF.
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ii) If an increase or reduction - isolated or cumulative -, of ten percent
(10%) or more occurs in the exchange rate between the CFA Francs and
American Dollars, during the course of any one month, the exchange
rate to use would be the following:
(1) For the period from the first day of the month until the day when such
increase or reduction occurs for the first time, the average of the
official exchange rate for the purchase and the sale between the
American Dollar and the CFA franc as published the last day of the
previous month;
(2) For the period going from the day when this increase or reduction
occurs for the first time until the end of the Month, the mean of the
official exchange rate for the purchase and the sale between the
American Dollar and the CFA Franc published the day when such an
increase or reduction would take -place.
1.5 PAYMENTS
a) All payments between Parties, except if stated otherwise, will be made
according to the Contract and by the intermediary of a bank that will
be designated by each of the Parties.
b) All the moneys due by one of the Parties, in virtue of the Contract,
during any one Month, will be subjected at the time of the payment,
for every day of the Month following their deadline, to a daily
compound interest corresponding to the rate of the Contract + 1
CHAPTER 2: COST AND EXPENDITURES
All expenses concerning the Oil Operations will be classified, and
distributed as follows:
2.1 Costs of exploration including all direct costs and indirect charges for
the oil exploration in the Contract Area, before obtaining the exploration
Permit, notably:
a) The geophysical studies, geochemical, paleontological, geological,
topographic and seismic studies and their respective interpretations.
b) The drilling and the coring of Exploration Xxxxx and Appraisal Xxxxx
under the condition that these are not transformed into Development
xxxxx.
c) The manpower, and the material used for the drilling of Exploration
Xxxxx mentioned below including services there pertaining.
d) Facilities used exclusively for this goal including access roads.
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e) The service costs relative to operations as described in the Section
2.4 of the present Chapter and agreed upon between the Minister and
the Contractor.
f) The administrative and general expenses relative to Exploration
Operations as described in the Section 2.5 of this Chapter, and agreed
upon between the Minister and the Contractor.
g) All other contractual costs engaged before the beginning of the
commercial production and that would not have been foreign in Section
2.2.
2.2 Investments for Production development including all expenses during the
Operations of Development and Production, notably:
a) The drilling of Production Xxxxx from a reservoir already discovered,
whether these xxxxx are dry or in production.
b) The completion of xxxxx for the purpose of production.
c) The intangible costs of drilling such as the manpower, the
consumables, and the services relative to the drilling and the
deepening of xxxxx for the purpose of production.
d) Costs of development facilities such as pipelines, flexables, units of
production and treatment, wellhead and bottom hole equipment of xxxxx,
systems for improved recovery, drilling platforms, facilities for the
storage of hydrocarbons, terminals and jetties for exportation,
harbors and their equipments and access roads for production
activities.
e) Studies of engineering and design of installations for the field.
f) The service costs relative to Production Operations, described in
Section 2.4 of this Chapter and as agreed upon between the Minister
and the Contractor.
g) The administrative and general expenses relative to the operations
described in Section 2.5 of the present Chapter and as agreed upon
between the Minister and the Contractor.
h) All other Developmental expenses incurred before the beginning of the
commercial production.
2.3 Operating costs including the expenses undertaken for the functioning of
the Field, after the beginning of commercial production. These include notably:
Costs of electric energy supplies to power the Xxxxx.
Expenses of upkeep and repair of machines, equipments and facilities.
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Costs of treatment, transport and storage of the Raw Oil or of the Gas.
Costs of the production -- production control laboratory.
Cost of transportation on the ground, by sea and by air of personal and
equipment.
Costs related to safety, to the security and the surveillance.
Costs of Well reconditioning.
Costs of insurance and certification
2.4 Costs of services representing the direct, or indirect expenses of
support services to the Oil Operations notably warehouses, jetties, ships,
vehicles, rolling motorized transports, aerial transports, safety stations and
fire stations, shops, water and sewers facilities, electric plants, lodgings,
recreational and communal facilities as well as the furniture, tools and
facilities used for these activities. Costs for one Calendar Year will include
the totality of the costs committed in the said year for the rental, purchase
and/or the building of such facilities as well as the committed yearly costs for
their operation and upkeep. The totality of service costs will be distributed
regularly, as stipulated above.
2.5 Administrative and general expenses abroad including:
a) all administrative and general expenses of the head office and offices
including personnel costs.
b) expenses of services provided by the head office outside of Benin.
The totality of administrative and general expenses, distributed as
stipulated above, will be defined every month of the Calendar Year by a Oil Cost
percentage accumulated during said Calendar Year according to the following
scale:
of 0 to 10,000,000 of dollars - 3%
subsequent 10,000,000 dollars - 2%
in excess of 20,000,000 dollars - 1%
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CHAPTER 3: METHOD OF RECUPERATION OF THE CONTRACTOR COSTS
By virtue of the arrangements of the Contract, the Contractor shall take to
his account all costs and expenses concerning the Oil Operations. They will be
recoverable by the Contractor according to arrangements following:
3.1 Recoverable costs without approval of the Minister to operations
previously programmed by the Contractor and approved by the Minister according
to arrangements of the Contract.
They include: costs of exploration, costs of development, operating costs,
costs of services and the general administrative expenses described respectively
in sections 2.1; 2.2; 2.3; 2.4 and 2.5 hereinabove.
a) WITH REGARD TO PERSONNEL
The costs of the Contractor's employees affected to Benin and directly
employed in conducting Oil Operations of temporary ' or permanent nature are
taken in consideration under the following conditions:
(i) the total cost of salaries and wages.
(ii) the reasonable costs incurred by the Contractor for sickness leave,
disability benefits, living and lodging allowances, travel, bonuses
and other generally applicable benefits to the salaries and wages as
direct costs in the framework of the present Appendix, as well as the
proportional costs relating to the benefits in employee favor such as,
among others, life insurance and sickness-insurance, union,
hospitalization, retirement, bonus and other similar benefits.
(iii)expenses or contributions made regarding charges imposed by a public
organism in favor of said employees.
(iv) expenses for the transportation of employees, of equipment, of
materials and of the necessary elements for the realization of the Oil
Operations.
(v) costs incurred by the Contractor for the relocation of employees to or
from the Region of the Contract or in its neighborhood, whether they
are affected in a permanent or temporary manner to the Oil operations.
When an employee is affected to other activities, other than that of the
Oil Operations, costs of relocation must be imputed according to solid and
generally accepted accounting principles .
The costs of relocation of employees and their family, the move of the
personal effects and of the domestic articles of employees and their family and
all other expenses according to practices of the oil industry.
-74-
Costs of relocation from the Region of the Contract or its neighborhood,
toward another foreign place are not recoverable unless the foreign site is the
usual place of residence of the employees.
b) WITH REGARD TO OFFICES, EQUIPMENTS AND VARIOUS FACILITIES:
i) Costs caused by the utilization of offices, dependences, camps,
storage depot, lodgings and other facilities of the Contractor in
Benin and serving directly to the Oil Operations. If these facilities
serve to other operations than the Oil Operations, and that it is not
possible to define expenses as direct expenses tied to the Oil
operations for which the service has been given, costs must be imputed
to facilities to which the service has been given, in a systematic and
reasonable manner.
ii) Costs caused by the acquisition, the rental, the installation, the
exploitation, the repair and the maintenance of systems of
communications, including the radio and VHF facilities used directly
for operations.
c) WITH REGARD TO PROVISION OF SERVICES
i) Costs and expenses incurred regarding Consultants used for technical
services and those of all other nature directly bound to the Oil
operations including, among others, laboratory analyses, the
industrial drawings, the geophysical and geological interpretations,
the engineering and the processing of data, obtained from external
sources.
ii) The costs invoiced for services provided by Affiliated companies must
be competitive with services of the same quality provided by third
parties.
d) WITH REGARD TO THE MATERIAL AND EQUIPMENTS OF THE CONTRACTOR
For the assessment of the material and equipment provided by the Contractor
from its own inventory or one of its Affiliated members, the values -"All," B"
or "C" must be taken in consideration, according to the case, being understood
that any value exceeding the just price of the market in Benin is not
recognized:
- Material and new Equipments (Category "A")
The material and the new equipments are valued at the price of the
corresponding commercial invoice increased by the supplementary costs of import,
if the case arises, and of the other costs generally admitted by accounting
techniques and practices.
- Material and used equipments (Category "B" and "C") . Are considered
in the "B" category the material and facilities that are not new but that can be
used without having to be refurbished; this material and these facilities are
valued to seventy-five percent (75%) of the price of the new material and
equipments.
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Are considered in the "C" category facilities and the material which can be
used for their initial function after an appropriate refurbishing. These
equipments and materials are valued at fifty percent (50%) of the price of new
equipments and materials.
1-E) With regard to the acquisition of goods and equipments
i) The cost of acquisition of goods and equipments from third parties
must include expenses of custom agents, of transport, of loading and
unloading and procedures of purchase, export or import duties and
expenses caused by obtaining licenses as well as losses of equipments
and goods in transit if these are not covered by an insurance. The
accumulation of excess stocks must be reduced to the minimum, taking
into account the localization of sources of provisioning and the
necessary time for the delivery of goods and equipments from distant
locations.
ii) All material bought by the Contractor in the conducting of Oil
Operations will be inspected by the Government diligence before their
use according to the regulations in force.
iii) The Contractor not guaranteeing the material beyond the guarantee of
the supplier or the manufacturer, any sums received by the Contractor
from the suppliers, manufacturers or of their representatives in
compensation for deficient materials or equipments will be written to
the credit of the Contractor under the terms of the Contract and will
be deducted from recoverable costs.
f) WITH REGARD TO INSURANCE COSTS
This means costs incurred by the Contractor or by an Affiliated Company to
subscribe to an ins ice policy in the framework of the, Operations and this on a
competitive basis.
g) WITH REGARD TO TRAINING COSTS
This means expenses incurred by the Contractor for the training of its
employees and for all other necessary training according to the Contract.
h) RENTAL COSTS ACCORDING TO ARTICLE 4 OF THE CONTRACT
3.2 RECOVERABLE COSTS UNDER RESERVE OF THE MINISTER'S APPROVAL
These are:
a) Research and development costs for new equipment, materials and
techniques intended for exploration, development and the production of
Oil which are not included in the work program approved by the
Minister.
b) Of costs and expenses not mentioned in the present Appendix and that
are incurred during the Petroleum Operations.
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c) Of interest charges incurred on loans received by the Contractor for
the financing of the Petroleum Operations. All interest rates conform
to the international financial market and agreed upon by both Parties
are recoverable.
d) Rents, Charges and other taxes:
Rents, excluding the residences of the Contractor, taxes, contributions, duties,
subscriptions and all other taxes and charges levied by the State concerning the
Petroleum Operations and paid directly or indirectly by the Contractor,
according to the clauses of the Contract.
e) Of costs and losses incurred as a consequence of events that are not
foreseen by insurance as defined in the Contract, except in the case
where costs and losses would be the exclusive result of a mistake or
an act of gross carelessness by the Contractor or an Affiliated
Company or one of its subcontractors.
f) Of legal costs and expenses relative to the Petroleum Operations.
3.3 NON RECOVERABLE COSTS
These are:
a) Fines, supplements and adjustments for delay in the payment of duties
or taxes prevailing in the country or adjustments for incorrect
payment of these taxes provided that such a delay or incorrect payment
is attributable to the Contractor.
b) Of import duties of goods and equipment not proving necessary to the
Petroleum Operations, and for housing of non necessary personnel.
c) Of all costs and expenses incurred before the starting date of the
Contract.
d) Of expenses pertaining to interests on credit for receivable.
e) Expenses made due to non fulfillment of the Contract obligations.
f) Of expenses pertaining to Petroleum Operations which are badly
executed as a result of a major technical error by the Contractor or
any of its subcontractors.
g) Of costs and expenses of all banking guarantee tied to the Contract.
h) Of grants in general.
i) Of advertisement expenses.
j) The costs of inventory taking in case of the Contractor rights
transfer according to the Contract.
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k) The commercialization costs of the Crude or its transport beyond the
Delivery point.
l) The costs of appraisals and arbitrations described in the Contract.
m) Of the additional sum of 300% tied to Operations in Sole risks.
n) Of Commissions paid by the Contractor to intermediaries.
o) Of costs and expenses without accounting receipts.
p) Of costs and expenses of goods or services exceeding the price of
similar goodsor services in the area of West Africa at the moment of
their acquisition if circumstances didn't justify such costs and
expense surplus.
CHAPTER 4: INVENTORIES AND ASSESSMENT OF ASSETS
4.1 The Contractor must hold the licences of real estate possessions and
other assets used in the Petroleum Operations according to the normal accounting
practices of the country and the International Oil industry.
4.2 At reasonable intervals, but at least once per year pertaining to mobile
assets and at least every three (3) years for the case of real estate assets,
the Contractor will make an inventory of the goods concerned by the Contract. At
least thirty (30) days in advance, the Contractor will communicate in writing to
the Minister its intention to make the said inventory; the Minister will be
represented during the realization of this inventory. The Contractor will
clearly express the
principles used for the valuation of stocks.
4.3 The Minister can ask the Contractor for information on its assets at any
time he judges necessary.
CHAPTER 5: REPORT OF ACTIVITIES DURING THE EXPLORATION PERIOD
5.1 During the exploration period, the Contractor will prepare for every
trimester, a report of activities which includes:
the list with a detailed description of activities achieved during the aforesaid
trimester. This report will be based on plans, maps, cross sections and all
other data indicating the level of completion of the work being performed. the
costs relative to the different activities mentioned above.
5.2 The activity report will be submitted to the Minister for approval
within a time limit of thirty (30) days after the end of the trimester
considered.
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CHAPTER 6: PRODUCTION REPORT
6.1 Once the commercial production begins in the Contract Area, the
Contractor shall prepare for every Trimester a production report for each
exploitation zone which will include the following data;
a) The quantity of Crude oil produced and stored during the Trimester.
b) The quantity of Crude Oil used for Petroleum Operations during the
Trimester.
c) The quantity of Crude Available at the end of the Trimester concerned.
d) Parameters and performances of the reservoir; recordings of the logs
and well tests and their interpretations; analyses of the fluids
produced.
6.2 The production report for every Trimester will be submitted to the
Minister for approval within the thirty (30) days following the end of the
Trimester considered.
CHAPTER 7: REPORT ON THE VALUE OF THE PRODUCTION
7.1 The Contractor shall prepare a report on the precise determination of
the market value of the Crude produced and stored after losses relative to the
Petroleum Operations during each Trimester. This report will contain the
following data:
a) The quantities sold and prices received by the Contractor as a result
of its sales of Crude to third parties during the Trimester
considered.
b) Information obtained by the Contractor concerning the prices of Crude
produced by the main producers and exporting countries including
contract prices, discounts and bonuses, as well as the prices received
on the spot markets.
7.2 The report on the value of the production, will be presented to the
Minister for approval within the thirty (30) days following the Trimester.
CHAPTER 8: RECOVERABLE COSTS REPORT
8.1 The Contractor should prepare, for every Quarter, a report concerning
the recoverable costs, a report which will contain the following information,:
a) The recoverable Petroleum Costs, carried over if necessary, from the
previous Quarter.
b) The recoverable Petroleum Costs of the Quarter considered.
c) The total amount of the recoverable Petroleum Costs for the Quarter
considered described in the paragraphs above.
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d) The quantity and the total value of the Crude Oil calculated by the
Contractor for the Cost Oil during the Quarter.
e) The Petroleum Costs recovered during the Quarter considered .
f) The cumulative amount of Petroleum Costs recovered until the end of
the Quarter considered.
g) The amount of recoverable Petroleum Costs which must be reported to
the next Quarter.
8.2 The report of the recoverable costs for each Quarter will be submitted
to the Minister for approval within thirty (30) days following the end of each
Quarter.
8.3 In spite of the obligation that it has to keep accounts in Francs CFA,
the Contractor will keep a separate account in US Dollars for the determination
of the Cost Oil.
CHAPTER 9: STATEMENTS OF EXPENSES AND REVENUES
9.1 The Contractor should prepare for every Quarter, a statement of expenses
and revenues made in the framework of the Contract. This statement will make the
distinction between Exploration Costs, investment expenses, development and
exploitation expenses, and Operating Costs, and it will identify the main
categories of expenses corresponding to these. It will show notably:
a) Real expenses and revenues for the Quarter considered.
b) Cumulative expenses and revenues for the budget of the year
considered.
c) The latest forecast of cumulative expenses till the end of the year.
d) Discrepancies between the estimated budget and realizations and their
explanation.
9.2 The statement of expenses and revenues for every Quarter will be
submitted to the Minister for approval within thirty (30) days following the end
of the Quarter considered.
CHAPTER 10: YEARLY REPORT
The Contractor should prepare a yearly report that will be the synthesis of
informations relating to the production, to costs recovery of costs, to revenues
and expenses. Said report will be based on the real volumes of Oil produced and
of the incurred expenses. From this report, any necessary adjustment will be
done to payments made to the Parties according to the Contract. The yearly
report for each Civil Year will be submitted to the Minister for approval within
sixty (60) days after the end of said Year.
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CHAPTER 11: YEARLY BUDGET
11.1 The Contractor shall prepare a yearly Budget that will make the
distinction between Exploration Costs, Development and Exploitation Investment
and Operating Costs to outline the following:
a) Forecast of expenses and revenues for the budgetary year according to
the Contract.
b) Cumulative expenses and revenues to the end of said budgetary Year.
c) Program showing the most important categories of expenses of
development and exploitation investment for said budgetary Year.
d) For a budgetary item and provided that he respects the General program
of the approved tasks, the Contractor is allowed to commit overrun
expenses to the limit of ten percent (10%) of said item and said
expenses must be justified. If this limit is exceeded, the Contractor
will take all necessary arrangements to inform the Minister and to
justify all overrun of expenses within thirty (30) days following its
execution.
11.2 The yearly Budget will be presented to the Minister within a time limit
of ninety (90) days before the beginning of the year considered except for the
first Year of the Contract where the aforesaid Budget will be submitted within a
time limit of thirty (30) days after the Date of Commencement of the Contract.
CHAPTER 12: FORECASTS AND LONGTERM PLANS
The Contractor should prepare and should submit to the Minister the two (2)
following long term plans:
12.1 PROGRAM OF EXPLORATION
During phases of Exploration, the Contractor will prepare a Program of
Exploration for every phase starting from the Commencement Date of the Contract,
program that will contain the following information:
a) Evaluations of Exploration Costs showing expenses for each of the
Years of the program.
b) Seismic operation details for each Year.
c) Details of drilling activities programmed for each Year.
d) Details of the utilization and requirements for infrastructure for
each Year.
The program of exploration will be reviewed each Year. The Contractor will
prepare and will submit to the Minister, the first program of exploration within
the sixty (60) days following the Commencement Date of the Contract. It will do
thus each Year, within a time limit of forty-five (45) days, before the end of
the Civil Year.
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12.2 DEVELOPMENT FORECASTS
The Contractor shall prepare triennial Development forecasts beginning the
first day of January after the date of the first program of assessment has been
approved by the Minister. The Contractor will prepare and will submit to the
Minister development forecasts reviewed at least forty-five thus (45) days
before each civil Year, as long as required by the Contract or by common
agreement between Parties.
12.3 CHANGES IN PROGRAMS AND FORECASTS
The Minister and the Contractor agree that details of the Exploration
Program and Forecasts of Development may require changes due to changing
circumstances and results acquired. In this spirit, a revision of said programs
and forecasts may be done annually.
CHAPTER 13: PROCEDURES FOR ACCOUNTING & FINANCIAL REVISIONS
The terms of accounting and financial procedures may be amended by
agreement of both Parties. Amendments will be made in writing and will specify
the date to which they will come into effect.
CHAPTER 14 DISAGREEMENT WITH THE CONTRACT
In the case of a difference between terms of the present Appendix and those
of the Contract, those of the Contract will prevail.
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Appendix "E"Abandonment Procedure
The following procedure of dismantling of the offshore facilities indicates the
steps to be implemented for the removal of the steel structures in water depths
from 85 to 150 feet ( 26m to 46m).
I.MOBILIZATION
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1. Obtain all approvals and authorizations pertaining to the abandonment of
the facilities, and dump the structures into a deep water site.
2. Plug and abandon each well. Cut the guide tubular of each well 15 feet
under the mud line.
3. Evacuate all hydrocarbons out of the tanks and reservoirs, and clean up
with water all surface pipes, evacuation flowlines and pipelines.
II. DISMANTLING
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1. Unhook and remove the mobile equipments and facilities.
2. Cut the feet and displace the bridge of the structure.
3. Cut the feet under the mudline and displace the jacket of the structure.
4. Drive back the jacket to an approved water depth.
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