EXHIBIT 10.58
Registration Number 1061 dated December 11, 2002
ADDENDUM No. 4
to the Contract for Exploration, Development and Production in Karakuduk Oil
Field in Mangistau Oblast of the Republic of Kazakhstan
between
Ministry of Oil and Gas Industries of the Republic of Kazakhstan
for and on behalf of the Government of the Republic of Kazakhstan
and
Joint Stock Company of Closed Type Karakuduk-Munay Joint Venture
dated August 30, 1995 (hereinafter referred to as the "Contract")
concluded between
the Ministry of Energy and Natural Resources of the Republic of Kazakhstan
(the "Competent Body")
and
Karakudukmunay Closed Joint Stock Company
(the "Contractor")
The Republic of Kazakhstan
2002
This ADDENDUM No. 4 to the Contract for Exploration, Development and Production
in Karakuduk Oil Field in Mangistau Oblast, concluded on August 30, 1995 between
the Ministry of Oil and Gas Industries of the Republic of Kazakhstan for and on
behalf of the Government of the Republic of Kazakhstan and JSC of Closed Type
Karakuduk-Munay JV, has been signed on December 11, 2002 by and between the
Ministry of Energy and Natural Resources of the Republic of Kazakhstan
(hereinafter referred to as the "Competent Body"), which is authorized to
negotiate, to determine terms and conditions and to sign contracts for subsoil
utilization on behalf of the Government of the Republic of Kazakhstan, and
Karakudukmunay Closed Joint Stock Company (hereinafter referred to as the
"Contractor").
PREAMBLE
WHEREAS, Clause 3) Article 9.3.1. of the Contract establishing that the
Government of the Republic of Kazakhstan expresses its absolute consent that any
amendments in the Republic Tax Legislation shall not affect the Contractor
Fiscal Liabilities, and in case of worsening the position of the Parties or
Investor as the result of the legislation amendment after signing of the
Contract or as the result of the applying provisions of international treaties
to be performed in the mandatory order, the Parties shall immediately negotiate
the correction of the affected Party or introduce relevant amendments to the
Contract for correction of the affected economic balance of the Parties and
Investor,
WHEREAS, obligations and guarantees of the Republic of Kazakhstan regarding
keeping of stability of the tax legislation for the Contractor as of the day of
the Contract signing,
WHEREAS, adoption of Law No 183-II On Amending the Law of the Republic of
Kazakhstan On Taxes and Other Mandatory Payments to the Budget dated May 3, 2001
has been adopted, which shall establish the Value Added Tax (VAT) at the rate of
sixteen percent (16%), and the Social Tax at the rate of twenty-one percent
(21%) from July 1, 2001,
WHEREAS, taking into account Clause 4-2 Article 179 of the Law On Taxes and
Other Mandatory Payments to the Budget as of the day of adoption of Law No
183-II dated May 3, 2001,
WHEREAS, taking into account Minutes No 17-11-4/I-336 of the Meeting at X. X.
Xxxxxxxx, the First Deputy Prime Minister of the Republic of Kazakhstan,
regarding the Issues of Clarifying Several Terms and Conditions of Subsoil Use
Contracts, dated April 10, 2001,
WHEREAS, taking into account the Minutes of the Meeting of Representatives for
the Competent Body and Contractor at B. M. Yelemanov, the First Vice Minister
for Energy and Natural Resources of the Republic of Kazakhstan, dated June 27,
2001,
WHEREAS, taking into account Decree No 507 of the President of the Republic of
Kazakhstan On Reorganization, Liquidation and Creation of Specific State
Authorities of the Republic of Kazakhstan dated December 13, 2000, subject to
which functions of the Competent Body of the Government of the Republic of
Kazakhstan on the issues of subsoil use shall be transferred to the Ministry of
Energy and Natural Resources of the Republic of Kazakhstan,
NOW, THEREFORE, the Parties have agreed to amend the Contract as follows:
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1. To replace the name of the Competent Body "Ministry of Oil and Gas Industry
of the Republic of Kazakhstan" by the "Ministry of Energy and Natural
Resources of the Republic of Kazakhstan" throughout the Contract.
2. To exclude words "hereinafter referred to as the "Kazakh Partners" in
Section "Subject Matter of the Contract".
3. To state Article 1.5 of the Contract as follows:
4. "Contractor" - Joint Venture Karakudukmunay Closed Joint Stock Company,
which shareholders shall be:
o "National Company "KazMunaiGas" Closed Joint Stock Company - 40%;
o Corporation "Mangistau Terra International" LLP - 10%;
o Central Asia Petroleum (Guernsey) Ltd. - 50%.
"National Company "KazMunaiGas" Closed Joint Stock Company and
Corporation "Mangistau Terra International" LLP, hereinafter referred
to as the "Kazakhstan Partners" and/or "Kazakhstan Party".
5. To add Article 4.2.8. of the Contract as follows:
"The Contractor shall allocate funds for professional training of the
experts involved under the Contract, at the amount of at least one (1)
percent from the volume of the annual Work Program coordinated with the
Competent Body under the Contract. In case of exceeding funds on obligation
of training of the Kazakhstan personnel over the actual demand in training
of the personnel involved, the Contractor shall use the remaining funds for
financing of the priority tasks of the secondary education system in
accordance with the Agreement on Interaction between the Ministry of
Education and Science of the Republic of Kazakhstan and Ministry of Energy
and Natural Resources of the Republic of Kazakhstan. Information regarding
the remaining part of funds for the training shall be submitted to the
Competent Body after the approval of the annual work program and budget for
the next year of the Contract. Training may take place either in
educational institutions, or at the workplace. Funds transferred by the
Contractor in accordance with the Agreement on Interaction between the
Ministry of Education and Science of the Republic of Kazakhstan and
Ministry of Energy and Natural Resources of the Republic of Kazakhstan
shall be reckoned as the Kazakhstan personnel training. All costs for the
training shall be reimbursable".
6. To add Subsection 4.2 of the Contract "Obligations of the Contractor" with
Clause 4.2.15 as follows:
"To accept all xxxxx located on the Contractual Territory on the balance
sheet".
7. To add third Subclause Clause A) Article 9.3.1. of the Contract with the
following sentence:
"The Contractor shall pay VAT at the rate of sixteen percent (16%) from
July 1, 2001".
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8. To add Subclause "Royalty" Clause B) Article 9.3.1. of the Contract as
follows:
"The Royalty rate shall be eight point fourteen percent (8.14 %) of the
gross production of Crude Oil from July 1, 2001. This rate shall also apply
for the cases of agreement concerning royalty payment in kind. The royalty
will be based on the average weighted selling price of crude oil without
accounting of indirect taxes and actual cost of transportation to the point
of sale (shipping). At that average weighted price of oil will be
determined under the following formulation:
Clt = (BP-3th)/OP
where:
Clt - the average weighted price of crude oil;
BP - the Contractor's revenue from selling crude oil within accounting
period without indirect taxes (VAT, excise);
3th - sum of actual expenses of the Contractor for transportation of oil to
points of sale (without VAT, due to offset);
OP - volume of the sold oil, in tonns>>.
9. To state Clause D) Article 9.3.1. of the Contract as follows:
"D) The Contractor shall make the following payments and deductions:
o The Contractor shall withhold income tax from Kazakhstan and foreign
employees, according to the current legislation of the RK. The
Contractor foreign personnel shall be obliged to pay property tax for
individuals at the rate of zero point one percent (0.1%) in case of
purchase of property on the territory of the RK;
o payments for utilization of water and forest resources and payments
for the environment protection, according to the current legislation;
o from July 1, 2001, social tax at the rate of 21 (twenty one) percent
of stuff payroll. However, from January 1, 2002, the Contractor shall
pay the social tax for foreign engineers and managers at the rate of
11 (eleven) percent of foreign stuff payroll;
o other payments to be established by state institutions when rendering
special services provided that such payments shall be fixed on
equitable basis for all inhabitants and/or all enterprises".
10. To add after the second sentence of the Article 9.3.1. 3) of the Contract
with the sentence as follows:
In respect of this Article 9.3. "TAXES AND PAYMENTS" on all issues related
to payment of taxes and other mandatory payments, the current legislation
acknowledges the tax legislation valid as of the Date of entering into this
Contract, unless otherwise is specially provided in the Contract and
Appendices thereto".
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To add Paragraph 4 Article 9.5.1. of the Contract with the following sentence:
"Depreciation standards for the Contractor shall be determined:
A) for the period from January 1, 1999 until January 1, 2000 - by Law of the
RK "On Taxes and Other Mandatory Payments to the Budget" dated April 24,
1995, in wording as of January 1, 1999;
B) for the period from January 1, 2000 until July 1, 2001 - by Law Code of the
RK "On Taxes and Other Mandatory Payments to the Budget" dated April 24,
1995, in wording as of January 1, 2002;
C) for the period from July 1, 2001 until January 1, 2002 - by Law of the RK
"On Taxes and Other Mandatory Payments to the Budget" dated April 24, 1995,
in wording as of July 1, 2001 in wording as of July 1, 2001;
D) for the period from January 1, 2002 until the end of the Contract's
duration - by the "Code of the RK On Taxes and Other Mandatory Payments to
the Budget" (Tax Code) dated June 12, 2001, in wording as of the day of
adoption.
11. To add the Contract with Section 9-1 "Liquidation and Liquidation Funds" as
follows:
"9-1.1. For the complete financial provision of liquidation program, the
Contractor commencing January 1, 2003 shall create the Liquidation Fund
at the amount of USD 14,000. Money of the Liquidation Fund shall be
entered in a special deposit account to be opened by the Contractor
with any second level bank of the Republic of Kazakhstan. On money of
the Liquidation Fund entered in the special deposit account penalties
may not be imposed, and the Liquidation Fund money may not be withdrawn
from the special deposit account by any state body on no grounds,
including for paying off debts to the budget, payment of penalty
provisions, except for the purposes of liquidation of the Contractor's
activity consequences under the Contract.
9-1.2. The Contractor shall have the right to deduct amount of the Liquidation
Fund deductions from the aggregate annual income, as well as it shall
be entitled to deduct amounts actually spent for the liquidation and
restoration works during the preceding Reported Year from the aggregate
annual income. The Contractor shall not have obligations on further
deductions to the Liquidation Fund if the amount exceeding three
million USD (USD 3000000) is accumulated on the Liquidation Fund
account.
9-1.3. Liquidation and conservation of the activity shall be carried out in
accordance with the procedure established by the legislation of the
Republic of Kazakhstan. Liquidation, conservation of oil, gas and other
xxxxx shall be made in accordance with the requirements of "Regulations
on the Procedure of Well Conservation on Oil and Gas Fields,
Underground Gas Storage's (UGS) and Thermal Water Reservoirs",
"Regulations on the Procedure of Liquidation of Oil, Gas and Other
Xxxxx and Writing off expenses on their Construction".
9-1.4. The liquidation program shall provide for removal or liquidation of
constructions or equipment used in the process of the Contractor
activity on the Contractual Territory.
9-1.5. If actual liquidation costs exceed the Liquidation Fund amount, the
Contractor shall carry out the additional financing of the liquidation.
If actual liquidation costs turn out to be less than the Liquidation
Fund amount, then surplus of the money shall be transferred to the
Contractor and shall be subject to inclusion into the taxable income.
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9-1.6. If the State adopts decision on continuation of the operation of all or
part of constructions transferred to it by the Contractor after the
expiry of the Contract validity, under its responsibility, then the
Contractor shall not bear any responsibilities on carrying out the
liquidation program and shall transfer all rights to the actual
accumulated assets in the Liquidation Fund to the State".
12. To state Subclauses a) and b) of Article 11.11.1. of the Contract as
follows:
"a) Competent Body:
Ministry of Energy and Natural Resources of
the Republic of Xxxxxxxxxx
00 Xxxxxxxxxxxx Xxx., Astana 473000
Republic of Kazakhstan
b) Contractor:
Karakudukmunay CJSC
00, 0xx xxxxxxxxxxxxx, Xxxxx 000000,
Xxxxxxxx of Kazakhstan
CONCLUSIVE PROVISIONS
The Parties hereby agree that in the result of signing this Agreement, balance
of economic interests of the Parties under the Contract underwent a change as
the result of decreasing the VAT rate to sixteen (16) percent and social tax
rate to twenty one (21) percent, is reestablished.
In this connection, the Parties declare that they have no mutual claims in
respect of the reestablished balance of economic interests.
Terms and conditions of taxation determined by the Contract and this Agreement
shall be valid invariably until the expiry of the Contract validity, except for
the cases of subsequent introduction of amendments by a separate Agreement of
the Parties to the Contract.
This Agreement has been signed on December 11, 2002 and shall enter into force
from July 1, 2001.
COMPETENT BODY
Ministry of Energy and Natural Resources of the Republic of Xxxxxxxxxx
00 Xxxxxxxxxxxx Xxx.,
Xxxxxx 000000
Xxxxxxxx of Kazakhstan
/s/ Mr. N S. Ashimov
First Vice Minister for
Energy and Natural Resources
CONTRACTOR
Karakudukmunay CJSC
00, 0xx xxxxxxxxxxxxx
Xxxxx 000000,
Xxxxxxxx of Kazakhstan
/s/ Mr. N.D. Klinchev
General Director
and
/s/ Xx. X.X. Xxxxx
Finance Director
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