Exhibit 10.34
FARM-IN AGREEMENT
BETWEEN
(1) NINOTSMINDA OIL COMPANY LIMITED
AND
(2) GEORGIAN BRITISH OIL SERVICES COMPANY LIMITED
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COVERING: THE M11 WELL ON THE XXXXXX CRETACEOUS PROSPECT
WITHIN THE NINOTSMINDA PSC AREA
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Farm-In Agreement between NOC and GBOSC
AGREEMENT DATED 7TH SEPTEMBER 2003
between
(1) NINOTSMINDA OIL COMPANY LIMITED ("NOC") a company organised and existing
under the laws of Cyprus, (Ninotsminda Oil Company Limited, and its
successors and assignees, if any, will be referred to as the "NOC")
and
(2) GEORGIAN BRITISH OIL SERVICES COMPANY LIMITED, a company organised and
existing under the laws of Georgian (Georgian British Oil Services
Company Limited, and its successors and assignees, if any, will be
referred to as the "GBOSC")
NOC and GBOSC together being referred to as the "Parties" and "Party" shall be a
reference to either of them.
WHEREAS
(A) NOC is party to a Production Sharing Contract dated 15 February 1996 (the
"PSC") with The State Department Saknavtobi ("Georgian Oil") (both in its
capacity as representative of the Georgian State and as the State owned
oil department organised and existing as a legal entity under the laws of
Georgia). A copy of the PSC is annexed hereto as Appendix 1;
(B) NOC is the sole Contractor (as defined in the PSC) under the PSC and as
at today's date is entitled to 100% of the Contractor's rights
thereunder;
(C) NOC commenced exploration well M11 on the Xxxxxx Cretaceous prospect
within the Ninotsminda PSC area (the "Well") in 2001. The Well was
subsequently suspended and the GBOSC intends to enter into this Agreement
in order to participate in the completion of the Well;
NOW THEREFORE, in consideration of the promises and the mutual covenants and
conditions herein contained, it is hereby agreed as follows:
1 DEFINITIONS
Words and terms used in this Agreement shall unless otherwise expressly
specified in this Agreement have the meanings attributed to them in the
PSC:
"Contractor" has the meaning attributed thereto in the PSC;
"Petroleum" means Cost Recovery Crude Oil or Cost Recovery Natural Gas
and Profit Oil or Profit Natural Gas (as defined in the PSC);
"PSC" is defined in Recital A to this Agreement and a copy of which is
annexed hereto as Appendix 1;
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Farm-In Agreement between NOC and GBOSC
2 SCOPE OF CONTRACT
2.1 The purpose of the work is the penetration and evaluation of the Middle
Eocene and Cretaceous formations with the planned total depth of the Well
being 5,100 (five thousand one hundred) metres (the "Work").
2.2 The Work is estimated to cost US$663,000 (six hundred and sixty three
thousand US dollars) and will be funded US$213,000 (two hundred and
thirteen thousand US dollars) by NOC and US$450,000 (four hundred and
fifty thousand US dollars) by GBOSC through the provision of the specific
work items defined in the work programme and budget attached as
Appendix 2.
2.3 On completion of the Work for US$663,000 (six hundred and sixty three
thousand US dollars) or any lesser amount the Parties will share the
Contractor's share (as determined pursuant to the PSC) of Petroleum
produced from the Well on a 50:50 basis. GBOSC will not be a party to the
PSC nor is it entitled to participate in any other Petroleum produced
from any other well other than the Well.
2.4 If the operator is unable to continue drilling operations for technical
reasons and NOC decides that operations should be terminated and the Work
has not been completed there will be no obligation on either Party to
complete the Work.
2.5 The Parties shall not be obliged to spend more than their respective
shares of the US$663,000 (six hundred and sixty three thousand US
dollars) in total in implementing the Work, however in case the actual
depth is deeper than assumed or further work is considered necessary and
results in more than US$663,000 (six hundred and sixty three thousand US
dollars) being required for drilling and evaluating the Parties shall
meet within one (1) month and make a joint written decision on further
technical activities (if any). Such written decision shall form an Annex
to this Agreement and shall provide the basis for work costing over
US$663,000 (six hundred and sixty three thousand US dollars) to be
performed and each of the Parties shall pay fifty per centum (50%) of any
agreed excess costs.
In case of failure to reach a joint decision on further technical
activities, each Party shall have the right within a further period of
one (1) month to independently fund at its sole risk further technical
operations in order to achieve the Work objective subject to the terms of
the PSC. Once the Work objective has been satisfied any further technical
activities in the Well including side track operations will be funded
either jointly by the Parties or on a sole risk basis by either Party
subject to the provisions of this Agreement and the PSC.
Following a sole risk operation, the Parties' entitlement to Petroleum
produced from the Well shall be determined as follows:
- Divide the additional sole risk costs by the total jointly funded
costs of the Work
- Calculate the percentage sole risked as a percentage of the total
costs of the Work ('X%')
- Increase the interest of the party which funded the sole risk by
X% and reduce the other non-sole risk funding party's share by
X%.
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Farm-In Agreement between NOC and GBOSC
For example:
EXAMPLE 1 FUNDING PARTY FUNDS A $1,000,000 SIDETRACK
Amount jointly funded $663,000
Sole risk funding $1,000,000
Total cost $1,663,000
Percentage sole risk 60.1%
Funding party Petroleum share 80.1%
Non funding Petroleum share 19.9%
EXAMPLE 2 FURTHER $200,000 JOINTLY FUNDED THEN FUNDING PARTY SOLE
RISKS $500,000
Amount jointly funded $863,000
Sole risk funding $500,000
Total cost $1,363,000
Percentage sole risk 36.7%
Funding party Petroleum share 68.3%
Non funding Petroleum share 31.7%
2.6 NOC shall be responsible for the implementation of the Work in accordance
with the provisions of the PSC.
3 CONTRACT TERM
3.1 The term of the Agreement shall be deemed to begin on the date hereof and
shall continue in accordance with its terms until the termination of the
PSC or if sooner until the Contractor has no entitlement to Petroleum
under the PSC.
4 OPERATOR RESPONSIBILITY
4.1 The parties agree that GBOC Ninotsminda shall act as the Operator for the
implementation of the Work.
4.2 GBOSC will provide the Operator with certain services on the basis of
properly executed service agreements in order meet its obligations as set
out in Clause 2.2 and Appendix 2 herein.
4.3 NOC shall provide GBOSC with copies of all relevant data and reports
pertaining to the Work which it receives from the Operator.
5 ALLOCATION OF PRODUCTION
5.1 The proceeds of sale actually realised by NOC from the sale of the
Contractor's Share of the Petroleum produced from the Well shall be
allocated between NOC and GBOSC in accordance with the provisions of
Clause 2 herein, over each Calendar Year:
For the avoidance of doubt (i) GBOSC shall have no claim over or any
interest in the proceeds of sale of any Petroleum produced from the
Xxxxxx Cretaceous or Middle Eocene prospects other than from the Well
(ii) GBOSC's entitlement hereunder is to share in the proceeds of sale by
NOC of the Contractor's Share of Petroleum produced through the Well
comprised within Profit Petroleum and Cost Recovery Petroleum.
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Farm-In Agreement between NOC and GBOSC
5.2 In accordance with the PSC NOC shall be responsible for the sale of the
Contractor's Share of Petroleum comprised in Cost Recovery Petroleum and
Profit Petroleum and shall account to and distribute to GBOSC its deemed
share of the proceeds under this Agreement less a pro rata share of the
costs and expenses incurred by NOC in the sale of the Petroleum.
5.3 The Parties acknowledge the fact that on the 19th July 2000 AES Gardabani
LLC ("AES") and NOC entered into a participation agreement in relation to
the exploration and development of certain oil and gas prospects in the
Sub Middle Eocene stratigraphic sequence ("SME") within the PSC area.
Having invested the total of US$7,439,000 (seven million four hundred and
thirty nine thousand US dollars) in drilling exploration xxxxx including
M11 prior to the agreement being terminated in 2002, AES has an
opportunity to recover those costs by way of a rebate of 15% being paid
to one of AES' associated companies, AES Georgia Gas Partner Ltd from
future SME gas sales where the gas was produced commercially from the
SME. The Parties agree that the rebate of 15% from future sales of gas
produced from SME (if any) will be paid to AES prior to the distribution
of gas sale proceeds between the Parties in accordance with the
provisions of this Agreement.
6 FORCE MAJEURE
6.1 For the purposes of this Agreement, "Force Majeure" shall mean a
circumstance which is irresistible or beyond the reasonable control of
the Party affected, any act of Georgia or any governmental or
administrative body therein, or any other hindrance of the affected
Party's performance not due to its fault or negligence.
6.2 If as a result of Force Majeure, either Party is rendered unable, wholly
or in part, to carry out its obligations under this Agreement, other than
the obligation to pay any amounts due, then the obligations of that
Party, so far as and to the extent that the obligations are affected by
such Force Majeure, shall be suspended during the continuance of any
inability so caused, but for no longer period.
7 ASSIGNMENTS AND TRANSFERS
7.1 Neither party may assign its rights or obligations hereunder without the
prior written consent of the other, not to be unreasonably withheld or
delayed.
8 GOVERNING LAW
8.1 This Agreement shall be governed by and construed in accordance with the
law of England.
8.2 The parties hereto submit to the non-exclusive jurisdiction of the
English courts as regards any claim, dispute or matter arising out of or
relating to this Agreement and its implementation or effect.
9 DISPUTE RESOLUTION
9.1 If any dispute or difference arises between the Parties in connection
with this Agreement then either Party may at any time give notice to the
other Party of its intention to refer such dispute or difference to
international arbitration in Stockholm, Sweden.
10 NOTICES AND CONFIDENTIALITY
10.1 Except as otherwise specifically provided, all notices authorised or
required between the Parties by any of the provisions of this Agreement,
shall be in writing in English and delivered in person or by registered
mail or by courier service or by any electronic means of
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Farm-In Agreement between NOC and GBOSC
transmitting written communications which provides confirmation of
complete transmission, and addressed to such Parties as designated below.
The addresses for service of notices on each of the parties is as
follows:-
NOC:
Ninotsminda Oil Company
00 Xxxxxxxxxxxx
Xxxx Xxxxx
0xx Xxxxx
Xxxxxxx
Xxxxxx P O Box 20048
(Attention: Company Secretary)
with a copy to
X X Xxx 000
Xx Xxxxx Xxxx
Xxxxxxxx XX0 0XX
(Attention: President)
Telephone x00 0000 000000
Facsimile x00 0000 000000
GBOSC:
Georgian British Oil Services Company
00 Xxxxxxx Xxxxxx
Xxxxxxx
Xxxxxxx 000000
Telephone x00 000 00000
Facsimile x00 000 00000
11 TERMINATION AND BREACH
11.1 This Agreement shall terminate on termination of the PSC.
11.2 Neither Party may terminate this Agreement unilaterally save that in the
event GBOSC fails to perform its funding obligations hereunder within six
months NOC may give not less than one month notice of termination.
11.3 Termination shall be without prejudice to the prior rights of either
Party.
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Farm-In Agreement between NOC and GBOSC
IN WITNESS WHEREOF this Agreement has been duly executed on behalf of each of
the parties on the day and year first before written
SIGNED by SIGNED by
on behalf of NINOTSMINDA OIL COMPANY LIMITED on behalf of GEORGIAN BRITISH OIL SERVICES COMPANY LIMITED
............................................ ...............................................
Name /s/ Dr Xxxxx Xxxxxx ................. Name /s/Mr Shalva Bakhthdze...................
Position President......................... Position General Direcor.......................
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Farm-In Agreement between NOC and GBOSC
Appendix 1
The PSC
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Farm-In Agreement between NOC and GBOSC
Appendix 2
Work Programme and Budget
Well M11
DRILLING AND EVALUATION OF WELL TO 5,100 METRES
No testing included
ESTIMATED COSTS IN US$ BUDGET
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PROVIDED BY
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ACTIVITY CODE NOC GBOSC TOTAL
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Location-Site Preparation, roads, pits 000-00 00,000 -- 10,000
Rig Transportation - Erection, Removal, other Transport 000-00 00,000 -- 50,000
Rig Day Rate 000-00 00,000 -- 60,000
Drilling Tools - Bits, Reamers, Tools 125-04 -- 130,000 130,000
Fuel, Power, Water 000-00 00,000 -- 45,000
Mud & Additives 125-06 -- 140,000 140,000
Evaluation-Logs 125-09 -- 60,000 60,000
Other Drilling Supplies 000-00 00,000 -- 20,000
Cementing 125-12 -- 10,000 10,000
Environmental & Safety 000-00 00,000 -- 20,000
Labour 125-15 -- 90,000 90,000
Base Facilities - Communication, Catering 125-16 -- 16,000 16,000
Transportation 125-17 8,000 4,000 12,000
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213,000 450,000 663,000
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Actual Cash requirement from NOC 83,000
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Farm-In Agreement between NOC and GBOSC
