CONVENTION FOR
EXPLORATION, EXPLOITATION AND TRANSPORTATION
OF HYDROCARBONS IN CHAD
BETWEEN
THE GOVERNMENT OF THE THE REPUBLIC OF XXXX
AND
THE CONSORTIUM ORIENTAL ENERGY RESOURCES LIMITED - CARLTON ENERGY GROUP LLC. -
TRINITY GAS CORPORATION, INC.
PERMIT OF BASIN : ERDIS, XXXX XXXX AND XXXXX
TABLE OF CONTENTS
CHAPTER I - GENERAL DISPOSITIONS
ARTICLE 1 - DEFINITIONS
ARTICLE 2 - OBJECT AND TERM OF THE CONVENTION
ARTICLE 3 - RIGHTS OF THE CONSORTIUM IN TNE CONDUCT OF PETROLEUM OPERATIONS
ARTICLE 4 - GENERAL OBLIGATIONS OF THE CONSORTIUM
CHAPTER II - EXPLORATION
ARTICLE 5 - GRANT TERM AND RENEWALS OF THE EXPLORATION PERMIT
ARTICLE 6 - RELINQUISHMENTS AND ABANDONMENT
ARTICLE 7 - EXPLORATION WORK OBLIGATIONS
ARTICLE 8 - SURFACE AREA FEES
ARTICLE 9 - EVALUATION OF A DISCOERY
CHAPTER III - EXPLOITATION
ARTICLE 10 - APPLICATION, GRANT AND TERM OF A CONCESSION
ARTICLE 11 - PRODUCTION PROGRAMS
ARTICLE 12 - NATURAL GAS
ARTICLE 13 - MEASUREMENT OF HYDROCARBONS
ARTICLE 14 - TRANSPORTATION OF HYDROCARBONS
ARTICLE 15 - OBLIATION TO SUPPLY THE INTERNAL MARKET
CHAPTER IV - PROVISIONS APPLYING BOTH TO EXPLORATION AND TO EXPLOITATION
ARTICLE 16 - ANNUAL WORK PROGRAM
ARTICLE 17 - ADMIISTRATIVE SUPERVISION OF THE PETROLEUM OPERATIONS
ARTICLE 18 - INFORMATION AND REPORTS. CONFIDENTIALITY
ARTICLE 19 - PERSONNEL AND TRAINING
ARTICLE 20 - OWNERSHIP OF ASSETS
CHAPTER V - ECONOMIC AND FISCAL PROVISIONS
ARTICLE 21 - PRICE OF CRUDE OIL
ARTICLE 22 - ROYALTY ON PRODUCTION
ARTICLE 23 - FISCAL REGIME
ARTICLE 24 - FISCAL EXEMPTIONS
ARTICLE 25 - ACCOUNTS
ARTICLE 26 - AUDITS
ARTICLE 27 - IMPORTS AND EXPORTS
ARTICLE 28 - CONTROL OF FOREIGN EXCHANGE
ARTICLE 29 - PAYMENTS
CHAPTER VI - MISCELLANEOUS PROVISIONS
ARTICLE 30 - TRANSFER RIGHT AND CONTROL OF THE CONSORTIUM
ARTICLE 31 - CANCELLATION OF THE PERMIT, WITHDRAWAL OF THE CONCESSION AND
TERMINATION OF THE CONVENTION
ARTICLE 32 - FORCE MAJEURE
ARTICLE 33 - ARBITRATION
ARTICLE 34 - APPLICABLE LAW AND STABILITY OF CONDITIONS
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ARTICLE 35 - NOTICES
ARTICLE 36 - OTHER PROVISIONS
ANNEXES
I. Map and limitation of the contractual zone of the Permit.
II. Exploration work program and provisional expenditures.
III. Accounting procedure.
IV. Agreed List of taxe exempted items.
CONVENTION
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BETWEEN
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THE REPUBLIC OF XXXX, hereinafter called [the state] , represented by the
Minister of Mines, Energy and Petroleum,
of the first part,
AND
The Consortium, comprised of the following companies :
- Oriental Energy Resources Limited,
- Carlton Energy Group LLC.
- Trinity Gaz Corporation, Inc.
of the second part,
WHEREAS
- all fields and natural accumulations of Hydrocarbons existing in the
ground or subsoil of the territory of the Republic of Xxxx are the
property of the State ;
- the discovery and exploitation of Hydrocarbons in the Territory of the
Republic of Xxxx are important for the economic development of the
country and its inhabitants ;
- the Consortium declares that it has the technical and financial
capabilities to carry out successfully within the Contract Area the
Petroleum operations authotrized hereunder, and wishes to undertake
the said Petroleum Operations under a Convention setting out its rights
and obligations ;
- ordinance No. 7/PC/TP/MH of 3rd February 1962, relating to the
exploration, exploitation, transportation by pipeline of hydrocarbons,
and the fiscal regime of these activities within the territory of the
Republic of Xxxx, authorizes the grant of exploration permits and
Exploitation concessions subject to the conclusion of a Convention
with the State ;
THEREFORE, IT IS MUTUALLY AGREED AS FOLLOWS :
CHAPTER I
GENERAL PROVISIONS
ARTICLE 1- DEFINITIONS
The terms listed in this Article shall have the following meanings throughout
the Convention :
1.1. [Calendar Year] means a period of 12 consecutive months starting January
1 and ending the following December 31.
1.2. [Budget] means the detailed estimate of the cost of the petroleum
Operations as set out in Annual Work Program.
1.3. [Petroleum Code] is Ordinance No 7/PC/TP/MH of 3rd February 1962, as well
as Decree of 10 May 1967 specifying the conditions of application of this
Ordinance.
1.4. [Concession] means the exploitation concession for Hydrocarbons granted
by the State to the Consortium in respect of a Commercial Field discovered
within the Contract Area and covering the area of the said Field. The Minister
and the Consortium shall set the boundary of the Concession by mutual agreement
before the grant.
1.5. [Consortium] means, whether individually or collectively, the Consortium
comprised of the companies Oriental Energy Resources Limited, Carlton Energy
Group LLC. And Trinity Gaz Corporation, Inc. as well as any company to whom an
interest may be transferred in accordance with present convention, and to whom
an interest in the Permit or the Concessions may also be transferred. The term
[Consortium] is used for the purposes of convenience throught this Convention
and is not intended to indicate an intent on the part of the companies
comprising the Consortium to form a partnership, a company or any other legal
entity under the laws of any country or subdivision thereof.
1.6. Convention : means the present act and the annexes attached hereto
1.7. Effective Date means the date on which the present Convention enters into
effect.
1.8. Discovery means a discovery of Hydrocarbons whose existence until that
moment was unknown, provided an amount of Hydrocarbons measured in accordance
with production test methods of international petroleum industry has been
brought to surface.
1.9. Dollar means United States Dollar.
1.10. State means the Republic of Xxxx.
1.11. CFA Franc means the legal currency in circulation in Chad.
1.12.Exploration Well means any well drilled during the course of exploration
work other than an Evaluation Well.
1.13. Evaluation Well means any well drilled after a Discovery for the purpose
of evaluating the quantities of Hydrocarbons in the discovery reservoir.
1.14 Natural Gas means dry gas and wet gas produced by itself or in association
with Crude oil as well as all other gaseous components extracted from the xxxxx.
Associated Natural Gas means the Natural Gas in a reservoir dissolved in the
Crude Oil, or in the form of a gas cap in contact with the Crude Oil, and which
is produced or could be produced in association with the crude oil.
Non-associated Natural Gas means Natural Gas other than Associated Natural Gas.
1.15. Commercial Field means a geological entity impregnated with Hydrocarbons
which has been evaluated, and which IN VIEW OF THE CONSORTIUM can be
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economically developed and produced in accordance with the standards used
in the international petroleum industry.
1.16. Hydrocarbons means Crude Oil and Natural Gas.
1.17. Minister is the Minister who at the given moment is responsible for the
Petroleum Operations sector or the authorized representative ; on the date of
signature the Minister responsible is the Minister of Mines, Energy and
Petroleum.
1.18. Petroleum Operations means all the Operations of exploration and
exploitation, including WITHOUT LIMITATION exploring, evaluating, developing,
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producing, separating, any primary treating and/or liquifying, storing,
transporting, selling and transferring the Hydrocarbons, as far as the Delivery
point, as well as administrative activities necessary for the carrying out of
such operations, refinery operations and distribution of petroleum products
excluded.
1.19. Party(s) means the state and/or the Consortium.
1.20. Permit means exclusive exploration permit for the Hydrocarbons, called
Permit H, reference to which is made in the preamble to the Convention, issued
to the Consortium to authorize it to conduct exploration Petroleum Operations
in the Contract Area, including evaluation work on a discovery. The perimeter of
the Permit is defined in Annex I of this Convention.
1.21. Crude Oil means crude mineral oil, asphalt, ozokerite and all other liquid
hydrocarbons in their natural state or obtained by condensation or extraction,
including Condensates and Natural Gas liquids.
1.22. Delivery Point means the point of transfer of title of Hydrocarbons from
the Consortium to its purchasers, whether at the FOB loading point at port of
embarkation at the coast or any other point, within or outside Xxxx, set by
agreement of the parties.
1.23. Total Production means the Consortium's total production of Hydrocabons
obtained from all the Conncessions less :
- quantities lost or not used, and
- quantities which are reinjected, flared or used for the
requirments of exploitation operations, to the extent authorized
in accordance with the provisions of the Convention, measured at the
measurement point(s) refered to in Article 13 below.
1.24. Annual Work Program means the document describing the Petroleum Operations
to be peformed prepared in accordance with the provisions of Article 16 below.
1.25. Royalties means other royalties collected for services rendered to users
for maintenance of items necessary to the supply of such services.
1.26. Affiliated Company means :
a) any company which controls or is controlled directly or in directly by a
company which a party hereto ;
b) OR ANY COMPANY WHICH CONTROLS OR IS CONTROLLED BY A COMPANY DIRECTLY OR
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IN DIRECTLY CONTROLLING A COMPANY WHICH IS A PARTY HERETO.
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In this definition ''control'' means the direct or indirect ownership by a
company, or other entity, of a percentage of the shares or participation rights
which is sufficient to give the majority of the voting rights in general meeting
of another company or to give the power of decision making in the management of
this other company.
1.27. Taxes means all the taxes in the form of tariffs allocated to cover the
charges deriving from state, quasi-state or even private organizational
structures.
1.28. [Third Party] means a person not within the definition in Article 1.26
above.
1.29. [Quarter] means a period of three (3) conscutive months starting the
first day of January, April, July and october of each Calendar year.
1.30. [Contract] Area means the surface which means at any given time the
perimeter of the Permit, after subtracting the surface area relinquished by the
Consortium. The perimeter or perimeters of concessions shall be an integral part
of the Contract Area during their periods of validity.
Other words used in this convention shall have the meaning generally attributed
to them in the international petroleum industry.
ARTICLE 2 - OBJECT AND TERM OF THE CONVENTION
2.1. This Convention establishes the conditions under which the Consortium shall
conduct exploration and evaluation work on the whole of the Permit area (as well
as all areas for which the permit is renewed and within the perimeters of the
Concessions which may be granted to the Consortium), with the aim of confirming
the existence of Hydrocarbons capable of being commercially exploited and
ensuring their development as soon as possible, as well as the conditions that
will apply to the Concessions.
2.2. This Convention will remain in effect for twenty five (25) years beginning
the signarure date SO LONG AS the Consortium holds the Permit or a Concession ;
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however, the term of this Convention shall be extended automatically on the same
terms, if such extension is necessary in order to ensure that all Concessions
are covered by this Convention during their entire validity period.
2.3. At the end of the term of the permit including its renewal periods, if the
Consortium has not applied for a concession relating to a Commercial Field, this
Convention shall terminate. This termination shall not put an end to the rights
and obligations arising previously, including the right to resolve all disputes
related there to UNDER ARTICLE 33 BELOW.
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This provision shall also apply in case of cancellation or relinquishment of the
permit.
2.4. In so far as required, the rights and obligations provided for by this
Convention shall also apply to contractors and suppliers of goods or services or
other related activities, employed in the pursuit of the Petroleum Operations
for the account of the Consortium.
The application of this Article 2.4 shall be strictly limited to those
contractors who work for the account of the Consortium within the context of the
Petroleum Operations. In no case shall it apply to other activities undertaken
in Xxxx by such contractors or suppliers of services.
ARTICLE 3- RIGHTS OF THE CONSORTIUM IN THE CONDUCT OF PETROLEUM OPERATIONS
3.1. Subject to the laws and regulations in force, and in accordance with the
provisions of this Convention and of the Petroleum Code.
The Consortium shall have the right :
a) to explore for Hydrocarbons within the area of the Permit ;
b) to exploit (including in particular developing, producing, separating, any
primary treating and/or liquefying, storing, transporting, selling,
transferring and exporting) the Hydrocarbons, as well as ASSOCIATED
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SUBSTANCES AND/OR the products derived therefrom by separation or
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treatment, which originate from fields within the perimeters of Concessions
to which this Permit gives right ; refining in the strict sense of the word
is excluded, other than as strictly necessary for the conduct of the
petroleum operations and subject to the prior approval of the Minister,
which approval shall not be unreasonably withheld.
Title to Hydrocarbons produced to which the Consortium is entitled
hereunder shall pass to the Consortium at the point of production at the
wellhead. Each member company of the Consortium shall own and may
separately take and dispose of its part of the Hydrocarbons.
c) of access to the area of the Permit and the Concessions to which this
permit gives right for the purpose of carrying out the Petroleum Operations
provided for in this Convention ; d) to construct all installations and
carry out all work and, generally all acts and operations necessary for
conducting the Petroleum Operations ;
e) to carry out the administrative activities necessary for the conduct of
the operations set out in subparagraphs a) through d) above ;
f) to decide the way to carry out the Petroleum Operations, in accordance
with the standards of the international petroleum industry.
2.2. In accordance with the laws and regulations in force in the Republic of
Xxxx, the Consortium may, in particular :
a) use public installations needed for Petroleum Operations, including
airports, roads, waterwells, work camps and other such installations,
subject to paying the fees normally imposed for such use ;
b) use the water required for the Petroleum Operations, provided this
does not prejudice the water supply of the inhabitants and the water
holes for livestock ;
c) use the stones, sand, clay, gypsum, limestone and other similar
substances required for conducting the Petroleum Operations.
2.3. Subject to the authorizations provided for in the Petroleum Code, WHICH
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SHALL NOT BE UNREASONABLY WITHHELD, the Consortium will have the right to
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construct all installations which are necessary for the Petroleum
Operations such as, without limitation , roads, pipelines, storage
installations whether inside or outside the area of the Permit or of the
Concessions. Such approval may be conditional on use by Third Parties who
hold other permits H or Hydrocarbons exploitation concessions of the excess
capacity of the said installations, provided that such use does not
interfere with the Petroleum Operations and that such use by the said Third
parties shall be on the basis of conditions acceptable to the Consortium
including the payment of a fair and equitable compensation.
2.4. To this end and in accordance with the provisions and procedures set out in
the Petroleum Code, the Consortium shall have the right to occupy the land
necessary for the performance of the Petroleum Operations, and for the
housing of personnel employed on the job site.
3.5. The occupation referred to above shall be authorized in accordance with
the following procedure : after receipt of the request for occupancy assuming
such request is justified , a decree issued on the recommendation of the
Minister shall authorize the occupancy of the necessary lands and specify the
conditions of occupancy in accordance with the provisions of the Petroleum Code
and the State domain law.
In the absence of mutual agreement, occupancy shall be granted only :
a) after the landowners or those who hold real estate property rights under
customary law have been authorized to present their case through the
administrative channels within a period determined by local regulations.
b) for this purpose, the following shall be consulted :
- for land held by individual owners under the conditions provided for
by the Civil Code or the registration laws : the landowners.
- for land under real estate property rights under customary law : THE
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OLDERS OF SUCH RIGHTS OR their authorized representatives.
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- for land in the public domain : the authorized administration or
community, and the present tenant, if any.
In the event that for any reason whatever the above procedures of registration,
systematic investigation, verification of rights or consultation of landowners
or holders of real estate property rights under customary law are not completed
within a period of six (6) months from the date of publication of the above
decree, the Consortium may dispense with such procedures on the recommendations
of the Minister after payment to a designated public accountant of the following
provisionnal estimated indemnities determined by the government authorities.
- if occupancy is only temporary and if the land may be cultivated after
one year as before, the compensation shall be set at least at the net
yield of the land.
- in others cases, the compensation shall be estimated at a value at
least equal to the value of the land prior to the occupation.
3.6. The costs, the compensation and, in general, all expenses relating to the
application of Article 3.5 hereof shall be borne by the Consortium.
If the occupancy of the land deprives the landowner, or the holder of real
estate property rights under customary law of the use thereof for more than one
year, or if after completion of the works the land occupied is no longer
suitable for cultivation, the landowners or the holders of real estate property
rights under customary law may require the holder of the occupancy permit to
purchase the land. That part of the land which is too damaged or has
deteriorated over too great a part of its surface area must be purchased in its
entirety if the landowner or the holder of the real estate property rights under
customary law so demands. The land to be thus acquired shall in all cases be
assessed at a value at least equal to that it had before the occupation.
3.7. No surface works may be undertaken without the prior authorization of the
State, if they are located within fifthy meters of :
a) any property surrounded by walls or enclosures, villages, groups of
habitations, xxxxx, religious edifices, places of burial ; or places
considered sacred ;
b) lines of communication, water conduits and generally all public
utilities and public works.
3.7. The State shall take all necessary and reasonable measures to facilitate
the carrying out by the Consortium of the Petroleum Operations and to
protect the assets and rights of the Consortium, its employees and
contractors or suppliers of services in the national territory of the
Republic of Xxxx. On the justified request of the Consortium, the State may
prohibit the construction of houses or other buildings, whether for
dwelling or professional use, close to the Consortium's exploitation
installations.
ARTICLE 4 - GENERAL OBLIGATIONS OF THE CONSORTIUM IN THE CONDUCT OF PETROLEUM
OPERATIONS
4.1. The Consortium shall comply strictly with the provisions of this Convention
and shall respect the laws and regulations of the Republic of Xxxx to the
extent that this Convention does not provide otherwise.
4.2. The Consortium shall carry out all work which is necessary for the
performance of the Petroleum Operations with diligence in accordance with
the standards applied in international petroleum industry.
In particular, the Consortium shall take all reasonable measures in order to :
a) ensure that all of the installations and equipment used in the
Petroleum Operations are in good condition and properly maintained ;
b) safeguard the environment and avoid any wastage of, or pollution of
environnement by, the Hydocarbons and the mud or other products used
in the PETROLEUM Operations ;
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c) place the Hydrocarbons in the storage facilities constructed for this
purpose.
4.3. The Consortium shall compensate the State for any loss or damage which
the State may suffer resulting from the failure by the Consortium, its employees
or agents, its contractors or suppliers of services to carry out the obligations
under this Convention, or resulting from the non-respect by the Consortium of
the standards generally accepted in the international petroleum industry.
The Consortium shall compensate any person against any loss or damage which may
be caused to such person by the Petroleum Operations or which such person
suffers as a result of the actions of the Consortium's employees or agents its
contractors or suppliers of services during the course of or arising from the
said operations.
For the application of this paragraph, the State shall be deemed to be a person
in the case of loss or damage to public installations, buildings and other
constructions which it owns.
If the responsibility of the State is alleged, the Consortium shall indemnify
the State against all claims resulting from such loss or damage.
4.4. The Consortium shall obtain, and ensure that its contractors or
suppliers of services shall obtain, any insurance in use by the international
petroleum indusry, for an amount and in accordance with the usual practices of
the companies comprising the Consortium in their international petroleum
operations, which levels and practices shall be those generally accepted in the
international petroleum industry, including third party liability, PROPERTY
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DAMAGE, and the insurance required by the regulations in effect in the Republic
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of Xxxx.
The Consortium shall supply the Minister with certification of the said
insurance arrangements. All things being equal, the Consortium shall insure with
a Chadian insurance company.
4.5. If the Consortium is comprised of several entities, the obligations and
responsabilities of such entities under this Convention shall be joint and
several.
4.6. After the signature of the present Convention, the Consortium undertakes
to spend 500000 Dollars US in a infrastructure project in Chad. The nature of
the said infrastructure project will be convened with the Minister.
CHAPTER II
EXPLORATION
ARTICLE 5- GRANT TERM AND RENEWALS OF THE EXPLORATION PERMIT
5.1.The State will grant the Consortium a five (5) year exploration Permit from
the approval date of the present Convention.
5.2. The State will grant the Consortium a renewal of the Permit for a three
(3) year period (described in this convention as the first renewal period ) and
the right of renewal for a second three year period at the end of the first
renewal period ; the Consortium will be able to exercise this right by giving
advance written notice to the Minister, accompanied by the report, provided for
in Article 18.4 c) below, no less than three (3) months before the date of
expiry of the first renewal period, provided that the Consortium has fulfilled
its obligations for the first period.
5.3. The renewal of permit are conditioned by the respect of the work
obligations.
ARTICLES 6- RELINQUISHMENTS AND ABONDONMENT
6.1. The geographical coordinates of the initial surface area of the Permit, as
well as a map, are set out in Annex I of the present Convention. On the expiry
of the initial period of the Permit, the Consortium will relinquish 50% of the
initial surface area of the Permit and 25% of the initial surface at the end of
the first three year renewal period.
6.2. For the application of Article 6.1 above, it is understood that :
a) the areas to be relinquished shall be reduced by the surface areas
abandoned and the surface areas already covered by Concessions or over
which applications have been made in the proper manner before the expiry of
the Permit ;
b) the Consortium shall have the right to set the boundary, form and location
of the exploration perimeters which it intends to retain. However, the
parts relinquished shall be in a simple geometric form bound by north-south
and east-west lines.
c) A plan showing the exploration perimeter retained shall be attached to the
renewal notice referred to in Article 5 above.
6.3. On the expiry of the validity period of the Permit, the Consortium shall
relinquish the remaining surface area of the Permit other than the surface areas
already covered by Concessions or over which applications have been made in the
proper manner before the expiry of the Permit.
The Consortium may at any time abandon its rights to all or part of the Permit
during the first and second sub-periods, at the end of the third sub-period and
at the end of the fourth sub-period of exploration, and at any time during the
first and second renewal periods,once exploration work obligations under said
periods and sub-periods have been carried out.
In any event, no voluntary relinquishment during the course of a renewal period
shall reduce the work obligations of the said renewal period.
ARTICLE 7- OBLIGATIONS DES TRAVAUX DES RECHERCHES
Article 7-Exploration Work Obligations
7.1. The duration of the Permit is five years, renewable twice with a three year
validity period for each renewal.
7.2. During the initial five year period, the work commitments for period are
the following :
a) during the first 18 month sub-period, the Consortium should realize
1000 gravity stations or equivalent interpreted air-magnetic
survey,geological and geophysical studies as well as general and
administrative activities defined by the Operator ;
b) during the second 18 month sub-period, the Consortium should acquire
and treat 1250 kilometers of 2D seismic ;
c) during the third 12 month sub-period, the Consortium should drill an
exploration well to a sufficient depth in order to test the prospect,
either to reach a depth of 3000 meters or the basement ;
d) during the fourth 12 month sub-period, the Consortium should drill two
exploration xxxxx to a sufficient depth in order to test two
prospects, either to reach a depth of 3000 meters or the basement ;
During the third and fourth sub-periods, 1250 kilometers of 2D seismic should be
acquired in order to determine prospects to be drilled.
7.3. During the first three year renewal period, the Consortium agrees to do a
seismic survey and drill three exploration xxxxx to a sufficient depth in order
to test three distinct prospects, either to reach a depth of 3000 meters or the
basement
7.4. During the second renewal period, the Consortium agrees to do a seismic
survey and drill three exploration xxxxx to a sufficient depth in order to test
three distinct prospects, either to reach a depth of 3000 meters or the basement
7.5. The tentative plans corresponding to the work commitments and amounts to be
spent for the initial five year period are set out in Annex II of this
Convention.
The Consortium shall notify the State of any change which may become necessary
to this plan.
The obligation to drill a given well shall be considered satisfied when the well
has reached its geological objective or if Hydrocarbons in potentially
commercial quantities are encountered before having reached such geological
objective.
In case of exceptional circumstances encountered in the course of a drilling
which prevent, in accordance with international petroleum practice, the
countinuation of the said drilling, the parties shall meet to decide by mutual
agreement if the drilling obligation has been met by the drilled well.
7.6. If the Consortium during the course of the first renewal period of the
permit drills a number of xxxxx greater than the minimum drilling obligations
provided for in Articles 7.2, 7.3 and 7.4 above, the excees xxxxx shall not be
carried forward into the following renewal period and shall not reduce the
contractual obligations provided for in respect of such period.
7.7. If at the end of any renewal period, or in case of total relinquishment or
withdrawal of the permit during the course of such period, the work has not
reached the minimum obligations relating to such period under Article 7 above,
the Consortium shall within 30 days pay the State the amount of five million
Dollar (US$ 5,000,000) for each well not drilled and 9000 Dollars US for each
seismic kilometer not acquired.
7.8. Representatives of the Minister will, at the expense of the Consortium, be
associated with the programed work which is carried out within Xxxx, in
accordance with Article 17 below.
In this effect,the Consortium will handle the housing, the transportation, the
food, the medical cover and the perdiem corresponding to such stay.
ARTICLE 8- SURFACE AREA FEES
8.1. During the initial five year period of the Permit, the Consortium will
pay an annual fee of US$ 1 for each square kilometer of surface area held.
During the first 3 year renewal period of the Permit the annual fee shall
be US$2 per square kilometer.Then it will be exended to US$10 for each
kilometer during the second renewal 3 year period of the Permit.
8.2. As soon as Concession is granted, the annual fee for the first renewal
period which the validity is twenty-five (25) year will be US$100 per square
kilometer of surface area; this will be extended to US$200 for the second
renewal twenty five year period of production in accordance with Article 10.1
above.
8.3.The surface fee due in respect of any Calendar Year subsequent to the
Calendar year in which the decree confirming the grant of the Permit is signed
shall be paid in advance on the first working day of the Calendar Year in
question.
The payment relating to the period of grant of the Permit to the end of Calendar
Year in which the decree confirming the initial period of the Permit is signed,
shall be calculated prorata for the said Calendar Year, payment being made
within ten (10) days of the date of signature of the decree. This procedure
shall apply mutatis mutandis to the first payment the grant of Concessions, as
well as to the last payment relating to each renewal period of the Permit and to
each Concession.
ARTICLE 9- EVALUATION OF A DISCOVERY
9.1. If the Consortium makes a new discovery within the perimeter of the Permit,
it shall immediately notify the Minister.
9.2. The corsortium is required to persue with the maximum diligence the
evaluation (including delineation) of any Discovery which allows the existence
of a Commercial Field to be presumed.
The Annual Work Program, submitted under Article 16 below, shall include the
Consortium's detailed evaluation plans relating to each Discovery.
The term [evaluation] shall mean, thoughout this Convention, all drilling,
studies or other work necessary in the opinion of the Consortium to determine
the reserves and the commerciality of a Discovery in the context of a
Hydrocarbons export project. The elements taken into consideration by the
Consortium in deciding which work is necessary and the appropriate time for
carrying out such work will include in particular :
- the size of the Discovery ;
the geological and petrophysical characteristics of the field ;
- the location of the Discovery relative to any other Discovery and to
an existing or planned export pipeline,
- information already at the Consortium's disposal,
- The prevailing economic conditions.
9.3.THE COMMERCIAL CHARACTER OF A FIELD SHALL BE DETERMINED BY THE CONSORTIUM.
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If the Consortium considers that a field is commercial, it shall submit a
development and exploitation plan relating to the Commercial Field to the
Minister for approval. Such plan shall include in particular :
a) the precise boundary and the surface area of the Concession requested
for the Commercial Field in question within the area of the Permit in
force ;
b) an estimate of recoverable reserves and of the production profile ;
c) the description of the work necessary for the exploitation of the
Commercial Field such as the number of xxxxx, and the installations
required for production, treatment, storage, and transportation of the
Hydrocarbons ;
d) the program carrying out the work referred to above and the forecast
date for start of production;
e) an estimate of the corresponding capital expenditures and operating
costs.
Within the period of 60 days following receipt of the development and
exploitation plan, the Minister may propose revisions or modifications to the
said plan, provided that approval of this plan shall not be unreasonably
refused. The plan will be deemed to be approved if formal approval is not given
within this time limit.
9.4. If a Commercial field extends beyond the limits of the Permit, the Minister
may, as the case may be, require the Consortium to exploit the said field
jointly with the title holder of the adjacent permit in accordance with the
provisions of a unitization agreement.
The Consortium shall, within a period of twelve (12) months following such
requirement by the Minister, submit to the Minister for approval the development
and exploitation plan for the Commercial Field which has been agreed with the
title holder of the adjacent permit. Such period may be extended with the
approval of the Minister, SUCH APPROVAL NOT TO BE UNREASONABLY WITHHELD, in
----------------------------------------------
exceptionnal cases such as the size and complexity of the development in
question.
9.5. If a Commercial Field extends outside the permit area into an area which is
not yet covered by exclusive exploration or exploitation rights, the State may
include the said area within the perimeter of the Concession relating to the
said Field.
9.6. if the Consortium notifies the Minister that a field which it has
discovered is not a Commercial Field, the State shall have the option to have
such field developed by the Consortium on the basis of the State :
a) SUPPLYING the Consortium with all amounts required to cover the new
----------
capital expenditures and the operating costs relating to the said
exploitation ;
b) guaranteeing the Consortium depreciation, at the rates provided for in
Annex III of this Convention, of the installations belonging to the
Consortium which are used for the exploitation ;
c) paying the Consortium a net profit margin, exempt from all royalties,
taxes or fees provided for in this Convention and in the Petroleum
Code, equal to 3 % of the Ex-Field Market Price as defined in Article
21.
The Consortium's refusal so to carry out such development will result in the
transfer to the State of the right to develop the field. In such event, pipes,
wellhead equipment and all non-recoverable equipment directly associated with,
and within the geographical limits of, the field shall be transferred without
charge to the State in the condition required for continuing operations, taking
into consideration normal wear and tear.
The other site of installations not directly associated with the field or not
within its GEOGRAPHICAL limits may be transferred to the State at a mutually
------------
agreed price or at a price determined by an expert, subject to the application
of Article 20 below.
9.7. Unless they are exceptional circumstances, as agreed between the Minister
and the Consortium, the Minister may require the Consortium to abandon the
surface area which corresponds to a Discovery if the Consortium :
a) has not started evaluation work on the Discovery within a period of
two years after notification to the Minister of the said Discovery
under Article 9.2 above, provided that, until a pipeline is installed
in the vicinity of such Discovery, such two-year period shall not
begin to run as long as the Consortium is doing evaluation work on
other Discoveries which in its view is necessary, within the context
of the prevailing economic conditions, for the Consortium to make a
decision relating to such pipeline;
b) does not consider that the Discovery is commercial within a period of
12 months after the completion of the evaluation work, provided that
such 12-month period shall not begin to run so log as the Consortium
has not started installing an export pipeline in the vicinity of such
Discovery.
The areas to be relinquished under Article 6 above shall be reduced by the
area so relinquished, and the Consortium shall lose all right to the
Hydrocarbons which may be produced from the said Discovery.
CHAPTER III
EXPLORATION
ARTICLE 10 - APPLICATION, GRANT AND TERMS OF CONCESSION
10.1. If the Consortium considers a field is commercial in accordance with
Article 9.3, the Consortium shall, on the date of submission of the development
and exploitation plan for the commercial field in question, apply for and shall
have the right to obtain in respect of each commercial field, under the
procedure provided for Petroleum Code, a Concession covering the area of the
Commercial field in question inside the Permit area. This Concession shall be
granted for a period of 25 years, renewal only one time for the same validity
period under new terms defined with the State.
10.2. The Consortium shall start implementing the development and exploitation
plan relating to a Commercial Field in accordance with the program approved
under Article 9.3 above at the latest 3 months after the grant of the Concession
---
and shall continue such implementation with diligence. Changes to the
development and exploitation plan and the said program may be justified by the
results acquired during the course of carrying out the work or in other
circumstances. In this case, the Consortium may, after notifying the Minister,
make such changes provided that the basic objective of the plan are not
modified.
10.3. The Consortium shall, in accordance with the standards of the
International Petroleum industry, in particular ;
a) Apply the most appropriate methods to the exploitation of a Commercial
field in order to avoid losses of energy and industrial products ;
b) Ensure the conservation of the field and maximize the economic
production of Hydrocarbons ;
c) Initiate, as soon as practicable, studies for enhanced recovery and
use such procedures if they will result in an improvement in the
Hydrocarbons recovery rate on an economic basis.
10.4. The Consortium may at any time relinquish a Concession in whole or in
part. The relinquisment take effect from the date specified in the Consortium's
notification, provided that a minimum of 3 months'notice shall be given.
In case of relinquishment of a Concession, no penality will be applied against
the Consortium. However, any relinquishment, withdrawal or expiry shall not
relieve the Consorium of its obligations to make payments of sums due and owing
to the State under this Convention, which relate to the period before the
relinquishment, withdrawal or expiry, and its obligations to supply the State
with any information and reports under Article 18 below.
Upon relinquishment, withdrawal or expiry of a Concession, by agreement with the
Minister the Consortium shall perform at its expense all necessary activities to
terminate the exploitation or transfer it to the State , as the case may be, in
accordance with generally accepted practices in the international petroleum
industry. The Consortium shall take all necessary precautions to prevent all
danger to human life and to Third party property. If the State wishes to
continue exploitation of the field in question following the effective date of
the relinquishments, withdrawal or expiry, it may request the Consortium to
continue such exploitation for a maximum period of six months from such
effective date.
10.5. THE PRESENT CONVENTION CORRESPONDS TO THE [CONVENTION-TYPE] MENTIONED IN
--------------------------------------------------------------------------
THE PETROLEUM CODE , MADE REFERENCE TO IN ARTICLES 22, 25, 26, 27 AND 31 OF
--------------------------------------------------------------------------------
ORDONNANCE N*/PC/TP/MH OF FEBRUARY 3, 1962 CONCERNING CONCESSIONS GRANTED TO
--------------------------------------------------------------------------------
THE CONSORTIUM IN ACCORDANCE WITH THE PRESENT CONVENTION.
----------------------------------------------------------------
ARTICLE 11- PRODUCTION PROGRAMS
11.1. The Consortium agrees to produce reasonable quantities of Hydrocarbons
from each Commercial Field in accordance with the normal practice of the
international petroleum industry, taking into account in particular the metods
of good conservation of the fields and the optimum recovery of the Hydrocarbons
reserves on an economic basis.
11.2. During production, the Consortium shall before 1st November of every
Calendar year submit for approval to the Minister the production program for
each Commercial Field and the corresponding Budget set for the following
Calendar Year. Such approval shall be granted automatically if the program is in
accordance with the provisions of Article 11.1. above.
11.3. The Consortium shall use its best endeavors to produce during each
calendar Year the quantities estimated in the production program referred to
above.
ARTICLE 12- NATURAL GAS
12.1. The Consortium will have the right to use the Associated Natural Gas for
the requirements of the Petroleum Operations including for reinjection into the
Commercial Fields.
Any quantity of Associated Natural Gas which is not used for the requirements of
the Petroleum Operations, and whose treatment and use in the opinion of the
Consortium are not economic, shall (subject to the right of the State to take
and dispose of such Gas under the conditions set forth below) be reinjected into
subsoil or, when such reinjection is not required by the practice of the
international petroleum industry, may be flaired with the approval of the
Minister, SUCH APPROVAL NOT TO BE REFUSED IF THE FLARING OF THE GAS CONFORMS TO
---------------------------------------------------------------------
THE PRACTICES OF THE INTERNATIONAL PETROLEUM INDUSTRY.
------------------------------------------------------------
The Consortium shall, except in case of emergency, request this approval from
the Minister at least three (3) months in advance providing the necessary
justifications showing in particular that all or part of this Gas cannot be
usefully and economically used to improve the maximum economical re-injection
rate in accordance with the provisions of Article 10.3 above.
If the Consortium decides to treat and sell the Associated Natural Gas, the
Consortium shall notify the Minister of this fact ; the parties shall then meet
to discuss, as soon as possible, in order to arrive at an agreement concerning
the treatment and sale of the said Gas.
If the Consortium decides not to treat and sell the Associated Natural Gas which
is not required for the needs of the Petroleum Operations, the State may decide,
at any time, to offtake all or part of the said Gas at the exit point of the
installation for separating the Crude Oil and the Natural Gas. The above Gas
shall be placed at the disposal of the State without charge provided that the
State shall bear any additional costs which are necessary for treating and
offtaking the Gas beyond the point where it would have been flared.
12.2. If the Consortium makes a discovery of Non-Associated Natural Gas which it
considers potentially commercial, it shall notify the Minister as soon as
possible. The Parties shall then meet to decide on the basis of all information
available if the production and the sale of this Gas by the Consortium are
possible and if so which conditions shall apply.
If the Consortium considers that an Non-Associated Natural Gas Discovery is not
immediately commercial but at the same time foresees its commerciallity in the
future in view of the size of the discovery and in view of reasonable forecasts
of market development, the State shall grant the Consortium an extension to the
Permit within the surface area which corresponds to the said Discovery.
Notwithstanding Article 8.1 above, the surface fee relating to this extension
shall be US$ 100 per square kilometer per annum. The State and the Consortium
shall agree on the term of this extension which shall be set in light of the
inevitable waiting period before exploitation of the discovery can start. During
this extension, the State and the Consortium shall maintain close cooperation
with a view to studying the development of the market and accelerating the start
of exploitation of the Discovery as much as possible as soon as economic
conditions allow.
12.3.The price paid for the Natural Gas ([the Market Price]) shall be :
a) in the case of sales to independent purchasers, equal to net price
realized and obtained for the sale of this Natural Gas ;
b) in the case of sales other than to independent purchasers, set by
agreement between the State and the Consortium taking into account in
particular :
- the quantity and quality of the Natural Gas ;
- the prices of sales of Natural gas produced from other sources in
Xxxx and sold under comparable market conditions, if any ;
- the forecasat use for the Natural Gas ;
- the national and international market price for subtitute forms
of energy.
In order to determine the Ex-Field Market price for Natural Gas, this market
Price shall be adjusted back to the measurement point referred to under Article
13.1 by deducting transportation costs in the same way as provided for under
Article 21.3 in the case of Crude Oil.
ARTICLE 13- MEASUREMENT OF HYDROCARBONS
13.1. The Consortium shall measure, at the outlet flange of the collection tank
of each Concession, or in the case of Natural Gas, at the outlet of the gas
treatment plant or the separation or treatment facilities as the case may be, or
at any other point set by mutual agreement of the Parties, all the Hydrocarbons
produced from each Concession after extracting the water and associated
substances, using, after approval by the Minister, measuring apparatus and
procedures which conform to those used in the international petroleum industry.
The Minister will have the right to review such measuring apparatus and
procedures and to inspect the apparatus and procedures used.
13.2. Si au cours de l'exploitation, le Consortium desire modifier lesdits
appareils ou les procedures, il xxxxx obtenir l'approbation du Ministre. Le
Ministre peut exiger qu'aucune modification ne soit faite sans la pr sence de
son repr sentant dument mandate.
13.2. If during the course of exploitation, the Consortium wishes to modify the
said apparatus or procedures, it shall obtain the approval of the Minister. The
Minister may require that any modification be made only in the presence of his
duly authorized representative.
13.3. The Minister may, at any time, require the measurement apparatus be tested
or calibrated at dates or intervals or in ways as specified in his request, in
accordance with the standards of the international petroleum industry.
13.4. If the apparatus or procedures used result in an over or under estimation
of the quantities measured, the error shall be deemed to have existed since the
date of the previous calibration of the equipment, unless a more recent date can
be proved, and an appropriate adjustment shall be made for the corresponding
period.
13.5. If exceptional losses of Hydrocarbons have taken place, the Consortium
shall submit a report to the Minister, specifying the circumstances of the
losses and the quantity, if this can be estimated.
In the case of losses of Hydrocarbons resulting from the failure of the
Consortium to comply with the standards generally recognized by the
international petroleum industry, the Consortium shall take reponsibility, and
the Parties shall meet with a view to reducing or eliminating such losses.
ARTICLE 14- TRANSPORTATION OF HYDROCARBONS
14.1. In accordance with the Petroleum Code, the Consortium will have the right
to transport or HAVE TRANSPORTED,while retaining ownership therin, any
------------------
production to the storage, treatment, loading or wholesale consumption points,
or the Delivery Point.
14.2. The State will have an option to participate in an export pipeline
project, provided that the State always pay its share of the cost of the project
proportional to its eventual participation.
If agreements are reached between the State and neighboring states to allow or
facilitate the development of the principal export pipeline proposed by the
Consortium as well as the transportation by that pipeline of its Hydrocarbons
across the territory of such neighboring states, the State shall without
discrimination grant to Consortium all benefits arising from such agreements,
excluding the particular benefits granted specifically to the State in its
capacity as a user of the pipeline.
The Consortium and the State will negotiate the conditions which will apply to
the setting up and operation of the export pipeline with the governments of the
revelant neighboring State.
14.3. The transportation authorization is granted by right, on request, either
to Consortium or on an invidual basis to each of the entities comprising the
Consortium. The approval of a pipeline project as provided for in the Petroleum
Code may not be withheld if the project conforms to the regulations in force
and ensures the transportation of production extracted under the best technical
and economic conditions.
14.4. The rights specified in this Article 14 may be transferred individually or
jointly under the conditions set out in this Convention.
The transferees shall be subject to the conditions of this Convention concerning
the construction and operation of the installations and pipelines in question.
They shall also comply with the conditions imposed on the Consortium under this
Convention and the Petroleum Code whether from a legal point of view or in
relation to control of the company.
14.5. The Consortium or its transferees or other legal persons may CONCLUDE
--------
CONTRACTS OF ASSOCIATION or other similar contract with a view to joint
--------------------------
transportation of their production subject to the provisions of Article 14.6
below.
They may also conclude contracts with Third parties for construction and
operation of pipeline.
All agreements or contracts relating in particular to pipeline construction and
operation, sharing of costs, financial returns and, in the case of
discontinuance of the business, assets, shall be submitted for approval together
with any request for a transportation authorization.
If the consortium is bound by contracts to place part of its production at the
disposal of any other legal persons, it shall, on the request of such legal
persons, provide transportation of such production as if it was its own, under
the conditions specified in Article 14.8 below.
14.6. The route and specifications of pipelines shall be set so as to ensure the
transportation and disposal of the production from the fields in the best
technical and economic conditions possible, and in particular so as to ensure
that, on an overall basis, the value of such production at the field departure
points will be maximized.
In order to ensure compliance with the provisions of the preceding paragraph, in
the case of discoveries by Third Parties of other exploitable fields in the same
geographic area, the Minister may in particular, in the absence of mutual
agreement, oblige the holders of mining titles or the transferees referred to in
Article 14.4 above to combine with other producers with a view to joint
construction or use of the installations and pipelines in respect of all or part
of the production of such fields. In the case of disagreement between the
parties in question in relation to such joint activity, the Minister shall
submit the dispute to arbitration in accordance with a procedure such as the one
set out in this Convention.
14.7. The approval of a pipeline project by decree of the Council of Ministers
shall confer on such project the status of [public utility].
In addition, approval of a pipeline project shall give the Consortium or the
pipeline company the right to construct installations and pipelines on land
burdened by right of ways.The owners OF THE ABOVE MENTIONED LAND shall not
---------------------------
commit any act that might hinder the proper operation of the installations and
pipelines.
If the installations or pipelines interfere with the normal use of the land, the
owner(s) can have THE CONSORTIUM purchase the land by mere request. The value
--------------
of the land shall, in the absence of mutual agreement, be stablished in
accordance with the same procedure as for expropriation.
Except in cases of force majeure or other cases validly justifying delay, the
Consortium or its partners or transferees referred to in Article 14.4 above
shall be required to start, or have started on their behalf, the proposed work
within two years following the approval of the project, failing which such
approval may be withdrawn.
14.8. The company operating the pipeline constructed in accordance with Article
14.1, 14.2 and 14.4 above may be obliged by decision of the Mimnister, failing
mutual agreement, to accept, in addition to its own production and up to the
limits of capacity of the pipeline, production from exploitation operations
other than those in relation to which the project was approved.
Production of the same quality transported at the same rate shall be subject to
the same tariff.
ANY DISPUTE ARISING OUT OF THE APPLICATION OF THE PROVISIONS OF THIS ARTICLE
--------------------------------------------------------------------------------
4.18 SHALL BE SUBJECT TO ARBITRATION IN ACCORDANCE WITH A PROCEDURE SUCH AS THE
--------------------------------------------------------------------------------
ONE SET OUT IN ARTICLE 33 BELOW OF THIS CONVENTION.
------------------------------------------------------------
14.9. The transportation tariff shall be set by the companies responsible for
the transportation. The tariff shall be subject to the approval of the Minister.
To this end, this tariff shall be submitted to the Minister two months before
the start of operations. Notice of any subsequent change shall be given to the
Minister with any appropriate explanations one month before the effective date.
During such notice period, the Minister may raise objection to the tariff
proposed.
This tariff shall in particular :
- include a usage factor for the installations.
- take into account the depreciation of the installations and pipeline.
- Take into account distances involved.
- Allow a profit margin comparable to that customarily accepted in the
international petroleum industry for comparable installations
operating under similar conditions.
In case of significant changes to any of the components of the tariff, a new
tariff will be set and approved in accordance with above procedures, on request
of the Minister, taking such changes into account.
14.10. Any legal person transporting Hydrocarbons in Xxxx shall, in relation to
the installations and operation of the facilities and pipeline, be subject to
the obligations set out in the present Convention.
14.11. The provisions of this Article 14 shall not apply to installations and
pipeline constructed within a concession. Occupancy of land necessary for such
installations and pipeline shall be arranged in accordance with the procedure
set forth in this Convention.
ARTICLE 15 - OBLIGATION TO SUPPLY THE INTERNAL MARKET
15.1. If the State is unable to satisfy the Chadian internal consumption
requirments for Crude Oil from all internally produced Crude Oils available to
it, the Consortium agrees to sell to the State on a prioity basis, the portion
necessary to satisfy the internal consumption needs of the country, equal up to
the percentage represented by the total production in comparison to the total
quantity of Crude Oil produced in the Republic of Xxxx.
15.2. The Minister shall give written notice, at the latest on the first of
October, of the quantity of Crude Oil to be purchased over the following
Calender Year in accordance with this Article.
15.3. The Crude Oil sold under this Article to the State, or to the person
designated by the State for this purpose, shall be paid for in CFA FRANCS, and
----------
the per barrel price paid shall be the ex-field cost price of the Crude, plus
the cost of transportation to the place of delivery, plus thirty United States
cents (US$ 0.30) per barrel, except if the parties otherwise agree. These
deliveries shall not be subject to any royalty or profits tax. This Crude Oil
shall be delivered to the State, unless otherwise agreed by parties, at the exit
point of the principle collection centers of the producing fields (where the
Consortium shall provide storage for this Crude Oil for a period of at least 2
months, for the account of the Consortium for the first thirty days of such
period, thereafter for the account of the State). The deliveries shall be made
in accordance with procedures set by agreement of the parties.
15.4. All sums due to the Consortium under this Article shall be payable to the
Consortium in currency legally used in Xxxx(CFA FRANCS). At the start of each
------------
month the Consortium shall invoice the State for deliveries made in the
preceding month. The State shall pay within 60 days . The conversion between
Dollars and the currency legally used in Xxxx(CFA FRANCS)shall be made on the
-----------
basis of the average of the daily rate quoted by the foreign exchange market in
Paris at the closing of each working day during the month of delivery.
CHAPTER IV PROVISIONS APPLYING TO EXPLORATION AND TO EXPLOITATION
ARTICLE 16- ANNUAL WORK PROGRAM
16.1. The Consortium will submit to the Minister within thirty days following
the effective Date of the Convention the Annual Work Program and the
corresponding Budget for the current Calendar Year.
Two month before the end of each subsequent Calendar Year, The Consortium shall
submit the Annual Work Program and corresponding Budget for the following
Calendar Year to the Minister.
The Annual Work Program and the Budget shall specify the different activities of
exploration, evaluation, development, production and transportation.
16.2. The Minister may not unreasonably refuse the Annual Work Program and
corresponding Budget. However, the Minister may propose revisions or
modifications to the Annual Work Program, by notice to the Consortium within a
period of thirty days following the receipt of this Program.
In this event, the Minister and the Consortium shall meet as soon as possible to
study the requested revisions or modifications and to establish, by mutual
agreement, the final form of the Annual Work Program, in accordance with good
oil-field practices as generally recognized in the international petroleum
industry.
IF THE MINISTER DOES NOT NOTIFY THE CONSORTIUM OF HIS WISH TO MAKE REVISIONS OR
--------------------------------------------------------------------------------
MODIFICATIONS WITHIN THE ABOVE MMENTIONED THIRTY-DAY PERIOD, THE SAID ANNUAL
--------------------------------------------------------------------------------
WORK PROGRAM AND THE CORRESPONDING BUDGET SHALL BE DEEMED TO BE APPROVED BY THE
--------------------------------------------------------------------------------
MINISTER AT THE END OF SUCH PERIOD
----------------------------------------
16.3. Changes to the Annual Work Program may be justified by the results
acquired during the course of carrying out the work or in other circumstances.
In this case, the Consortium may, after notifying the Minister, make such
changes provided that the basic objectives of the said Annual Work Program are
not modified.
16.4. Any Annual Work Program and corresponding Budget submitted to the Minister
during the Permit renewal periods in relation to exploration work shall be
approved automatically on the condition that they conform to the work
obligations provided for in Article 7 above.
ARTICLE 17-ADMINISTRATIVE SUPERVISION OF PETROPEUM OPERATIONS
17.1. The Petroleum Operations are subject to technical and adminitrative
supervision by representatives from the Minitry. The duly authorized
representatives shall have the right to oversee the Petroleum Operations, and to
inspect, at reasonable intervals, the facilities, equipment, machinery, recorded
data, and records relating to the Petroleum Operations.
17.2. The Consortium shall give advance notice to the Minister of all Petroleum
Operations, such as geological or geophysical campaigns, drillings, and well
tests, in order to enable the representatives of the Minister to be present
without causing delay to the normal carrying out of the operations.
If the Consortium decides to abandon a well it shall notify the Minister if the
case arises two (2) days before the abandonment, or twenty (20) days in the case
of the abandonment of production xxxxx.
17.3. The Minister or his duly designed representative, may request the
Consortium to carry out, at the Consortium's expense, any work judged necessary
to ensure normal safety and hygiene during the Petroleum Operations, in
accordance with the practices of the international petroleum industry.
17.4. In carrying out the Petroleum Operations, the Consortium shall observe all
written notices given by the Minister in accordance with the Petroleum Code, as
well as any written notices, requirements or order given by a duly authorized
agent. However, no notice, requirement or orders shall be given if it is does
not comply with the provisions of this Convention or with the standards of the
international petroleum industry. If the Consortium refuses such notices,
requirements or orders if they are not reasonable nor comply with this
Convention or with the standards of the international petroleum industry, the
dispute may be submitted to arbritation under Article 33 below.
17.5. The State will ensure that all its representatives shall strictly observe
any instuctions given by the representatives of the Consortium relating to the
safety of persons and of the site, and that any inspection shall be made in such
a way as to interfere as litle as possible with the operations of the
Consortium.
ARTICLE 18- INFORMATION AND REPORT
18.1. In accordance with the Petroleum Code, the Consortium shall maintain at
all times reports and records on all its Petroleum Operations in Xxxx.
18.2. The well-logs, maps, magnetic tapes, drilling cutting, cores, samples and
all other geological and geophysical information and data obtained by the
Consortium during the course of Petroleum Operations (hereafter referred to as
[Petroleum Data]) are the property of the State and shall be provided to the
Minister as soon as possible after they are obtained or prepared, unless
otherwise provided for hereunder, and may not be published, reproduced or be the
subject of any transaction without the authorization of the Minister.
18.3. The Consortium may:
a) retain for the needs of the Petroleum Operations copies of the
documents which comprise the petroleum Data ;
b) with the authorization of the Ministry, which shall not be
unreasonably refused or delayed, retain for the needs of the Petroleum
Operations the original documents which comprise the Petroleum Data,
subject to providing the Minister with copies if such documents can be
reproduced ;
c) export freely for treatment, analysis or laboratory examination, the
Petroleum Data, subject to providing the Minister, if practicable,
with sample of equivalent size and quality or, in the case of
reproductible documents, copies of equivalent quality.
In particular, the Consortium shall as soon as possible supply the Minister with
a copy of the final versions of measurement reports, geophysical
interpretations, geological reports, well-logs and drilling reports.
All maps, sections, profiles and all other geophysical and geological documents
shall be supplied to the Minister on transparent paper which is adequate for
further reproduction.
The Consortium shall supply the Minister or his representative with a
representative part of cores, cuttings and samples of fluid produced during
production tests.
At the expiry or on the relinquishment or termination of this Convention, the
original documents including magnetic tapes, if requested, shall be transferred
to the Minister.
18.4.The Consortium shall supply the Minister with periodic reports in French
and in English as follows :
a) a daily report on drilling progress and production, as well as weekly
report on geophysical works being carryied out ;
b) within thirty (30) days following the end of each Quarter, a report
relating to the Petroleum Operations carried out during that Quarter ;
c) within sixty (60) days following the end of each Calendar Year, a
summary report relating to the Petroleum Operations carried out during
that Calendar Year, indicating among other things :
- discoveries made by bassin, with reserve estimates by individual
field,
- the evaluation activities carried out during the course of that
Calendar Year and the evaluation activities planned for the
current Calendar Year, with the reasons supporting the
Consortium's determination concerning the work necessary in
accordance with Article 9.2 above.
- The geological and petrophysical characteristics and the
estimated delineation of each field, and the results of any
production tests carried out,
- The detailed technical-economic analysis of the commerciality of
the total reserves, with an indication of investments, costs,
production, hypothetical sequence of development of the fields,
- The conditions relating to the economic viability of an export
project and recommendations on future exploration and evaluation
work,
- A detailed estimate of amounts spent and a list of personnel
employed by the Consortium.
The Consortium agrees to present this report annually to official
representaticves of the State, at a location mutually agreed, and agrees to
reimburse actual expenditures, up to a maximum of US$ seventy-five thousand
(75,000) for travel and reasonable living costs incurred by such
representatives.
18.5.This Convention, as well as all information marked [confidential] which is
supplied by one Party to the other by reason of this Convention, shall be
considered confidential until the relinquishment of the surface area to
which the information relates, except :
- for the petroleum Data (it being understood that for the purposes of this
paragraph, this term does not include either interpretations or
interpretative reports) which shall remain confidential only for a period
of five years from the time the Data is obtained ; and
- for the convention, which will reamin confidential for its term.
However, each Party may disclose this information to any person employed by it
or working on its behalf provided such person agrees to treat it as
confidential.
The Consortium may also communicate such information (including the Convention)
to Affiliated Companies, any professional consultants and legal counsel, any
third parties who have a bona fide interest in becoming a member company of the
Consortium, any accountants, underwriters and lenders, and to such
representatives of governments which need to be made aware thereof or have the
right to require disclosure. The Consortium will also have the right to make
data trades with third parties in accordance with normal practices of the
international petroleum industry, subject to Consortium keeping the State
informed of such data trades. The Consortium will obtain from any relevant Third
party a written undertaking to maintain the confidentiality of information so
exchanged.
In addition, The Minister may use the information supplied by the Consortium for
the purpose of preparing and publishing any report required by law, as well as
any report and study of general interest.
18.6. Notwithstanding the provisions of Article 18.5 above, the Minister may
introduce into the public domain any information relating to an area over which
the Consortium no longer has rights following expiry, relinquishment, withdrawal
or termination of the Convention over the said area.
18.7. The intention of the Parties is not to apply the provisions of this
Article 18 in a way that abnormally overburdens the administration of the
Consortium. If, in the opinion of the Consotium, the application of any
provision whatsoever of Article 18 has this effect, the Parties shall meet to
agree an appropriate change to the relevant obligation.
18.8. Notwithstanding any provision to the contrary in this Convention, the
Consortium will not be required to disclose to the State any of its proprietary
technology or that of its Affiliated Companies.
ARTICLE 19- PERSONNEL TRAINING AND MACHINERY
19.1. The Consortium shall, from the start of Petroleum Operations, ensure that
it employs Chadian citizens preferentially, PROVIDED THEIR QUALIFICATION ARE THE
------------------------------------
SAME, and to play a part in the training of such employees so as to allow them
-----
to accede to all work force, supervisory, professional and managerial position.
At the end of each Calendar Year, the consortium will prepare, in agreement with
the Minister, a recruitment and training plan with a view to an ever increasing
participation by Chadian personnel in the Petroleum Operations.
19.2. In order in particular to facilitate the employment of Chadian personnel,
the Consortium, in satisfying its needs, will provide for the training and
perfecting the qualifications of personnel employed for the Petroleum
Operations. The Consortium shall also use its best endeavors to train and
perfect the qualifications of the representatives of the Ministry of Mines,
Energy and Petroleum.
The Consortium shall organize such training under a plan established by
agreement with the Minister, either within its own organization or within other
organizations, by means of training assignments or exchange of personnel,
whether in Xxxx or abroad.
To this end, the consortium shall dedicate the following to the training plan
for Chadian personnel :
a) from the approval date of the present Convention, the Consortium agrees to
spend up to US$ 75000 per annum for the reinforcement of national capacity
and the purchasing of equipment for the Ministry of Mines, Energy and
Petroleum.
b) Upon the grant to the Consortium of its first Concession, this yearly
amount allocated for the training and machinery will be increased to
US$200000.
19.3. The foreign personnel employed by the Consortium, as well as by its
-----
contractors, for the requirements of the Petroleum Operations will be authorized
to enter the Republic of Xxxx. The Minister will facilitate the issue and
renewal of the administrative documents necessary for the entry and stay in Xxxx
of the said personnel and their families.
In no way shall the previous paragraph be interpreted as a waiver of the
legislation IN FORCE concerning entry to or exit from the territory of the
---------
Republic of Xxxx, provided that such legislation is applied without
discrimination to all persons entering or leaving the Republic of Xxxx.
ARTICLE 20-OWNERSHIP OF ASSETS
20.1. All assets, whether movable and immovable, acquired and owned by the
Consortium will become the property of the State without compensation on the
date of expiry or termination of the Convention or a Concession or, in the case
of relinquishment, on the date of relinquishment, for those assets not required
for Petroleum Operations within other areas, other than those relinquished. If,
at the date of such expiry, termination or relinquishment, the Consortium is not
a title-holder of any Concession, this obligation will apply only to immovable
assets.
If the Minister decides not to use the said assets, he may request the
Consortium to remove them at its expense, such request to be made before the
date of the expiry, termination or relinquishment.
The Consortium may not remove or sell, out of the Contract Area, any asset which
may be transferable to the State under this Article except with the approval of
the Minister, other than in the case of replacement of asset which is required
in the normal course of the Petroleum Operations.
20.2. Within sixty days following expiry, relinquishment or withdrawal of a
Concession, the Consortium shall transfer to the State , without compensation,
all xxxxx then producing which have been drilled by the Consortium within the
perimeter of the said Concession, in good working order (normal wear and tear
excepted) for the continuance of the exploitation, except if the Minister
requires their abandonment or if these xxxxx have already been abandoned.
20.3. During the term of the Permit and the Concessions, the xxxxx which cannot,
by agreement, be used for the pursuit of exploration or exploitation, may be
taken by the State without cost and converted to water xxxxx. The Consortium
shall be required to leave the tubing in place at the requested level, as well
as any wellhead, and to carry out at its expense at the time of the operation of
abandoning such well and to the extent possible from a technical and economic
point of view, the completion of the well in the water zone as may be requested.
CHAPTER V
ECONOMIC AND FISCAL PROVISIONS
Article 21 Price of Crude Oil
21.1. The unit sale price of Crude Oil, taken into account for the calculation
of the direct tax on profits and royalty, shall be the Market Price at the
Delivery Point [The Market Price] expressed in Dollars per barrel as
determined below :
a) At the end of each Quarter, from the start of commercial production of
Crude Oil, a Market Price of each type or blend of Crude Oil sold
shall be determined.
b) If sales to independent purchasers represent fifty percent or more of
the Crude Oil from the Contract Area, sold by the Consortium at the
Delivery point during the course of the quarter, the Market Prices
applicable for that Quarter will be equal to the weighted average of
the prices obtained during the said Quarter by the consortium, for the
Crude Oil from the Contract Area, under sales contracts with
independent purchasers.
c) If sales to independent purchasers represent less than fifty percent
of the Crude Oil from the Contract Area, sold by the Consortium at the
Delivery Point during the course of the Quarter, the Market Price
applicable for the Quarter shall be the weighted average of :
1. the weighted average of the prices obtained from independent
purchasers during the Quarter in question if there have been such
sales of Crude Oil from the Contract Area by the Consortium ;and
2. the average of the prices for which Crude Oils of similar density
and quality to the Crude Oil from the Contract Area were sold
during the course of the Quarter in question under comparable
commercial conditions by independent sellers to independent
buyers. The prices of reference Crude Oils shall be adjusted to
take account of differences in quality, quantity, transportation
and commercial conditions.
The above-mentioned weighted average shall be determined on the basis
of the percentage by volume represented by the total of sales from the
Contract Area under subparagraph 1 above to independent purchasers and
those made under subparagraph 2, respectively.
d) Within the meaning of this article, sales to independent
purchasers shall exclude the following transactions :
- sales under which the purchaser is an Affiliated Company of
the seller, as well as sales between entities which comprise
the Consortium ;
- sales to the internal Chadian market ;
- sales involving any consideration other than payment in
currency (such as exchange contracts, sales between
governments) and sales the reasons for which, in whole or in
part, are considerations other than the normal economic
practices in sales of Crude Oil on the international market.
e) All the above prices shall be adjusted to the actual points of
loading of the Consortium.
f) For the purposes of this Article, sales to the internal Chadian
market under Article 15 shall be excluded from the calculation of
Market Price.
21.2. Within thirty days following the end of each Quarter, the Consortium
will determine, in accordance with Article 21.1 above, the Market Price of the
Crude Oil produced applicable to the preceding Quarter, and will submit this
determination to the Minister.
If within thirty days following this submission, the Minister does not accept
the Consortium's determination of the market price, the Consortium and Minister
will meet to reach agreement on the determination of the market price. If the
parties have not reach agreement on the determination of the market price within
ninety days following the end of the quarter, the Consortium or the Minister may
immediatelly submit the determination of the market price to an expert. In this
case the market price shall be determined finally by an expert of international
repute, appointed by agreement between the parties, or failing agreement,
appointed by the International Center of Technical Expertise of the
International Chamber of Commerce in accordance with the technical expertise
Regulation.
The expert shall determine the Market Price in accordance with the provisions of
Article 21.1 within a period of twenty one days after his appointment. The
expenses of the expert will be for the account of the Consortium and will be
included in its costs.
21.3. For the purposes of determining the value of royalty under Article 22.4
below, an Ex-Field Market price will be calculated for each quarter. Within
thirty of the final determination of the Market price relating to the quarter in
question, the Consortium will make this calculation in the following manner and
will notify the result to the Minister :
It will determine in the first place the value of the total quantities of Crude
Oil from the Contract Area, sold by the Consortium at the Delivery point during
such quarter, using this Market price, the quantities sold for internal
consumption needs under Article 15.3 above being excluded ;
If will subtract therefrom the costs of transportation incurred by the
Consortium during such quarter between the measurement point specified in
Article 13 above and the Delivery points ;
It will divide the result by the Total production of Crude Oil, after having
deducted the quatities sold during that quarter to satisfy the internal
consumption needs under Article 15.3 above as well as the quantities of royalty
payable in kind in respect of the quarter in question and the lost quantities or
used for the Field exploitation needs.
The costs of transportation referred to above will include all transportation,
handling, storage, loading, and, where applicable, treatment and all other costs
which are incurred in respect of the Crude Oil between the measurement point
specified in Article 13.1 above up to the Delivery Points, including all costs,
tariffs, duties, and other charges of whatever nature resulting from
transportation through the Republic of Xxxx and any neighboring countries.
ARTICLE 22 - ROYALTY ON PRODUCTION
22.1. The Consortium shall pay to the State a Royalty on the Total Production of
Hydrocarbons (after deducting the quantities referred to in this Article) at
rate of 12.5% in the case of Crude Oil and 5% in case of Natural Gas.
22.2. The Royalty on the Crude will be payable, in whole or part, either in cash
or kind. The Royalty on Natural Gas is always payable in cash.
The choice of the method of payment of Royalty on Crude Oil will be notified by
the Minister to the Consortium at least three months before the start of
commercial production.
This choice will remain valid until the Consortium receives a new notification
from the Minister which must be given with at least three months advance notice.
If no notification has been made within the period provided, all the Royalty
will be paid in cash.
22.3. Before tenth of each month, the Consortium will submit to the Minister,
with all necessary supporting documentation, a statement of the Total Production
of the preceding month, divided into the following three categories :
a) the quantities sold during the course of the preceding month in
satisfaction of the needs of internal consumption under Article 15.3
above,
b) the quantities of royalty to be paid in kind in respect of the
previous months, and,
c) the balance, being the quantities intended for export.
The statement shall specify separately the quantities of Crude Oil and Natural
Gas.
22.4. When the royalty is payable in cash, it will be paid monthly on a
provisional basis and quarterly on a final basis.
The Consortium will pay the provisional amount within seven (7) days following
the submission of the statement, on the basis of the quantities referred to in
Article 22.3 c) above multiplied by the Ex-Field Market Price calculated in
accordance with Articles 12.3 and 21.3 above.
In the case of Crude Oil :
- until the calculation of the Ex-Field Market Price for given Quarter,
the provisional Ex-Field Market Price applicable to the Quarter will
be the most recent Ex-Field Market Price ;
- following the notification to the Minister, in accordance with Article
21.3 above, of the calculation of the ex-Field Market Price for the
Quarter in question, the Minister will notify the Consortium of the
final amount of royalty payable, after deduction of amounts payable on
a provisional basis, and the Consortium will pay the royalty on a
final basis. If the balance is negative, the amount will be deducted
from the amount of royalty for which the Consortium is liable
subsequently until the amount is exhausted. If the balance is
positive, the Consortium will pay the amount within thirty (30) days.
In case, where the calculation of the Ex-Field Market Price for a
given Quarter corresponds to a negative value, then the Ex-Field
Market Price deemed to be zero. If the losses extend on a long period,
the Parties will to find an issue.
22.5. When the royalty is payable in kind, it will be paid monthly.
Unless otherwise agreed between the parties , the Consortium will, at the
earliest the fifteenth of each month, make available to the State quantities of
Crude oil payable as royalty in respect of the preceding month at the
measurement points specified in Article 13 above at a rate agreed with the
Minister. If the Minister requests and if the Consortium has the necessary
installations, and the necessary capacity in such installations, the Consortium
will transport and deliver the said quantities for the State at the expense of
the State.
The State will have a period of sixty (60) days from the time the Consortium
makes the product available during which to carry out its offstake ; during this
time the Consortium is obliged to store this Crude Oil at no charge. If all the
monthly royalty has not been taken at the end of this period, the Consortium ,
may freely dispose of this amount of Crude Oil subject to paying to the State
the royalty in cash for the corresponding quantities in accordance with Article
22.4 above.
ARTICLE 23 - FISCAL REGIME
23.1. The Consortium is, by virtue of its Petroleum Operations, subject to
direct tax on profits provided for in this Convention, in accordance with
Article 1.6.1 of Annex III, and in the General Tax Code as well as the Petroleum
Code, subject to any contrary provisions in this Convention.
23.2. The net profits that the Consortium makes from the whole of its petroleum
Operations in the territory of the Republic of Xxxx are subject to a direct tax
of 50 %, CALCULATED ON THE SAID NET PROFITS, AS PROVIDED IN THE PETROLEUM CODE.
----------------------------------------------------------------------
THE OTHER PROVISIONS OF ARTICLE 65 OF THE PETROLEUM CODE ARE NOT APPLICABLE by
-----------------------------------------------------------------------------
reason of the methods of determining the direct tax set out below, the royalty
on production being considered as a deductible exploitation cost and not as a
credit against tax.
The Consortium shall keep by Calendar Year, in conformity with the regulations
in force in Xxxx and the provisions of this Convention, separate accounts for
the Petroleum Operations which allow a general exploitation account, a profit
and loss account and a balance sheet to be kept setting out both the results of
the said operations and the assets and liabilities relating thereto or linked
directly thereto.
23.3. In order to determine the net profits of the Consortium, the following
shall be credited to the general exploitation account and the profit and loss
account :
a) the value of the total quantities of Hydrocarbons from the Contract
Area, sold by the Consortium at the Delivery Point, determined on the
basis of the market Price dtermined in accordance with Articles 12 and
21 above, the quantities sold for internal consumption needs under
Article 15.3 above being excluded.
b) If applicable, the value of the share of production paid by way of
royalty in kind determined in accordance with the procedures set out
in Article 22 above.
c) THE SHARE OF THE CAPITAL GAINS TAXES DERIVING FROM THE ASSIGNMENT OR
----------------------------------------------------------------------
THE TRANSFER OF ANY ASSET ITEM WHATSOEVER IN ACCORDANCE WITH THE TAX
----------------------------------------------------------------------
REGIME CONCERNING THE CAPITAL GAIN ON ASSIGNMENT.
------------------------------------------------
d) Any other income or revenue directly linked to the Petroleum
Operations, in particular, from the sale of associated substances, and
from treatment, storage and transportation of Hydrocarbons for Third
Parties.
e) Foreign exchange profits resulting from the Petroleum Operations.
23.4.The following may be debited to the general exploitation account and to the
profit and loss account.
a) cost of materials, supplies and energy used or consumed, salaries of
personnel and related charges, cost of services provided to the
Consortium by Third Party or Affiliated Companies, provided that in
this case the cost of supplies, personnel, and services provided by
Affiliated Companies shall not exceed those normally charged by Third
Parties for similar services in the international petroleum industry.
b) The depreciation actually charged by the consortium up to the limit of
the rates set out in Annex III of this Convention. This depreciation
will commence on the date of use of the equipment and will continue
until the equipment is wholly depreciated.
c) Genenral costs related to the Petroleum Operations including costs of
starting up business, cost of renting movable and immovable assets,
insurance premiums, and an amount relating to overhead costs from
abroad as defined in Article 2.6 of Annex III of this Convention.
d) The actual amount of interest and other charges on debts contracted by
the Consotium within the limits set in Article 2.7 of Annex III of
this Convention. It is understood that no interest will be deductible
in respect to loans made by Affiliated Companies concerning
exploration expenses.
e) After following for depreciation already charged, the value of
materials or assets destroyed or damaged, and the value of assets
which the enterprise has written off or which will be abandonned
during the course of the year, as well as unrecoverable debts and
compensation to third parties for damage.
f) The total amount of royalty on the production paid in cash, and the
value of the share of the amount of production paid by way of royalty
in kind determined in accordance with the procedures set out in
Article 22 above.
g) Reasonable reserves created for clearly specifies future losses or
charges and which current events render probable, excluding all
contributions to the fund for reconstituting the fields.
h) Any other losses or charges directly relating to the Petroleum
Operations including foreign exchange losses arising therefrom, with
the exception of the amount of direct profits tax determined in
accordance with the provisions of the present article.
i) All other losses which the Consortium has to bear for the
transportation of Hydrocarbons between the measurement points
specified in Article 13.1 and the Delivery Points, including all
costs, tariffs, duties and other charges of whatever nature arising
from the transportation of the Hydrocarbons through the republic of
Xxxx and through neighboring countries, to the extent that such costs
are not already included by virtue of paragraphs a) to h) above.
23.5. Subject to other provisions to the contrary agreed between the
parties, direct profits tax will be paid under a system of quartely payments
with annual settlement after declaration of the financial results for the
Calendar year in question. These advances shall be paid before the end of each
Quarter and shall be equal to one-quarter of the direct profits tax actually
paid during the course of the preceding Calendar year. The payment of the
balance of the direct of the direct profits tax for a Calendar Year shall be
made at the latest on the 1st of April of the following Calendar Year. If the
Consortium has paid advances which are greater than the amount of tax for which
it is liable in respect of a given Calendar Year, the excess shall constitute an
amount to be debited from the amount of advance payments due in the future.
ARTICLE 24 - FISCAL EXEMPTIONS
24.1. The Consortium, ITS SHAREHOLDERS, AND AFFILIATED COMPANIESshall benefit
------------------------------------------
from the fiscal advantages provided for IN ARTICLE 65 of the petroleum Code.
-------------
Except for royalty on production and direct profits tax, the Consortium is
exepmpt :
a) from all other direct tax on revenue relating to the results of the
-- Petroleum Operations, the profits, and distribution of the profits,
MOVABLE ASSETS REVENUE TAX
--------------------------
b) From all taxes, duties or contributions of any nature whatsoever on
the production or sale of the Hydrocarbons and any related revenue,
and payable on the Petroleum Operations, or on the setting up and
operation of the Consortium, INCLUDING [LICENCE FEES] (LA PATENTE)
-----------------------------------
The above exemption also applies to all transfers of funds, purchases and
transportation of Hydrocarbons intented for export, SERVICES RENDERED and more
-----------------
generally to all revenue and activities of the Consortium, provided that in each
of these cases this is required for the Petroleum Operations.
As an exception to the previous provisions, [real estate taxes] (les impots
fonciers) and [additional fees] (les taxes additionnelles) are payable, on the
basis provided under the general law, on buildings intended for habitation.
In addition, the exemptions set out in this Article do not apply to. [fees
levied by way of remuneration of services rendered] (taxes ou redevances
percues en remuneration des services particuliers rendus), and generally, to all
[advance payments of non-fiscal nature] (les prelevements autres que ceux a
caractere fiscal).
24.2. In addition, the Consortium shall be exempt for any 'turnover tax' (taxe
sur xx xxxxxxx d'affaires) in respect of all acquisitions of assets or services
strictly and directly necessary to the carrying out of the Petroleum Operations.
ARTICLE 25 - ACCOUNTS
25.1. The Consortium shall keep accounts in conformity with regulations in force
and in accordance with the provisions of the Accounting procedure set out in
Annex III which is an integral part of this Convention.
25.2. The records and books of accounts shall be kept in Dollars. These records
will be used to determine the gross revenue, the exploitation expenses, the net
profits and for the preparation of the declaration of accounting results of the
Consortium.
For information purposes, the general exploitation and the profit and loss
accounts and the balance sheets shall also be kept IN CFA FRANCS.
---------------
25.3. The records and books of accounts will be supported by detailed vouchers
proving the expenses and revenues of the Consortium in accordance with the
rights and obligations of the Convention.
ARTICLE 26 - AUDITS
26.1. The State will have the right to examine and verify, by its
representatives or the auditors, the records and books of accounts relating to
the Petroleum Operations and will have a period of five (5) years following the
end of the accounting period in question to carry out this examination or
verification and to present to the Consortium its objections in respect of all
inconsistencies or mistakes noted at the time of the examination or
verification.
For purposes of such verification the Consortium will place at the disposal of
the representatives of the State and the Auditors during working hours all
records, books. Other documents and information that these representatives and
auditors may request.
26.2.Failure by the State to make any claim within the five year period
referrred to above shall terminate the right of the State to object or make
any claim in respect of the accounting period in question.
ARTICLE 27 - IMPORTS AND EXPORTS
27.1. The Consortium will have the right to import into the Republic of Xxxx for
its own account or for the account of its contractors, under conditions set out
below, all plant, equipment, machines, appliances, vehicles, cars, airplanes,
spare parts and consumable materials necessary for the petroleum Operations.
The foreign employees and their families working in the Republic of Xxxx for the
Consortium or its contractors will have the right to import their personal
effects into the republic of Xxxx free from all taxes and customs duties, except
for personal vehicles currently in use, in accordance with the provisions of the
Customs Code in force. Local purchases will be made on a tax-included basis.
The merchandise referred to above will be imported by the Consortium exempt from
all taxes and customs duties, except for 'fees levied for services rendered'
(des taxes percues pour services rendus) under the following conditions :
a) the materials intended exclusively for petroleum exploration and
exploitation will be exempt from all taxes and customs duties ;
b) equipment-merchandise and appliances-intended for the petroleum
exploration and exploitation work sites will be placed under 'NORMAL
------
temporary admission regime' (le regime de l'admission temporaire
normal) ;
c) Work site vehicles, specialized or not, will be placed under the
temporary admission regime ; the Company vehicles and vehicles for
personal use will be subject to the general legal regime '(regime du
droit commun) wihout exemption ; airplanes and their spare parts,
consumable materials required for petroleum exploration and
exploitation ,as listed in Annex , will be exempt from all taxes and
customs duties.
27.2. The Consortium and its contractors agree to effect the imports defined
above only to the extent that the said merchandise is not available in the
Republic of Xxxx in equivalent quantities, quality, price, time period and
payment conditions,except in the case of particular technical requirements or
emergencies presented by the Consortium or its contractors.
The Consortium and its contractors agree to give preference to Chadian
entreprises for all contracts of construction, supply or services on the basis
of equivalent terms relating to quantities,quality,price, time period and
payment conditions.
27.3. The Consortium and its contractors, sa well as their foreign employees and
their families, will have the right to reexport out the Republic of Xxxx, free
of all exit tariffs and duties, the merchandise which has been imported under
Article 27.1 above, and which is no longer necessary for the Petroleum
Operations, subject to Article 20 above.
27.4. The Consortium and its contractors will have the right to sell in the
Republic of Xxxx the merchandise which they have imported when no longer needed
for the Petroleum Operations, subject to Article 20 above, provided that the
Minister is informed in advance. It is understood that, in this case, the seller
will comply with all the formalities provided for by the regulation in force and
will pay all taxes and duties which apply on the date of the transaction, except
if the above mentioned merchandise is transferred to entities which are arrying
out Petroleum Operations in the Republic of Xxxx.
27.5. During the term of this Convention and subject to the conditions of
Article 15 above, the Consortium will have the right to export freely to any
destination, free of all exit taxes and duties, the share of Hydrocarbons to
which the Consortium is entitled under the term of the Convention. However, the
Consortium agrees, on the demand of the State, not to sell Hydrocarbons to
countries which are declared hostile to the Republic of Xxxx.
27.6. All imports and exports under this Convention will be subject to the
formalities required by the regulation in force.
At the request of the Consortium and after agreement of the competent Chadian
authorities, materials and supplies may be extended as Petroleum Operatipons are
carried out.
Article 28 Foreign Exchange
28.1. The Consortium will be subject to the regulations of the Republic of Xxxx
concerning foreign exchange and transfers. In any event, it is understood that
the State agrees, for the term of this Convention, to maintain for the
Consortium and its contractors the benefit of the following guarantees for the
operations carried out within the framework of this Convention :
a) the right to acquire abroad loans or other means of financing necessary for
the conduct of the Petroleum Operations, receive and to maintain abroad all
funds acquired or borrowed abroad including income from sales, and to
dispose therof freely in so far as such funds exceed the requirements of
their operations in Chad and of their fiscal and contractual obligations ;
b) free movement of funds belonging to them free of all taxes and duties,
between Chad and any other country ;
c) the right to repatriate capital invested within the framework of this
Convention and to transfer income from such capital, in particular interest
and dividends, although the State shall have no obligation to provide
foreign currency ;
d) free transfer of amounts payable, as well as free right to receive amounts
of whatever nature which are payable to them, subject to making the
declarations required by the regulation in force ;
e) the right of direct payment abroad to foreign suppliers for supplies and
services required for the Petroleum Operations.
28.2. For the performance of the Petroleum Operations, the Consortium will be
authorized to exchange national currency against convertible foreign currencies
at rates of exchange which are no less favorable for the Consortium than the
daily rate, or the rates generally applied in the Republic of Xxxx to other
firms, on the day of the exchange transaction.
28.3. Within thirty days following the end of each Quarter, the Consortium shall
supply the Minister of Finance with a report on the movement of funds relating
to the Petroleum Operations during that Quarter.
28.4. The expatriate emplyees of the Consortium will have the right, in
accordance with the regulations in force in the Republic of Xxxx, of free
exchange and free transfer to their countries of origin of savings from salaries
and contributions to pension funds and savings accounts made by thrmselves or on
their behalf, provided they have paid their taxes in the Republic of Xxxx.
ARTICLE 29 - PAYMENTS
29.1. Unless otherwise provided for in this Convention, all sums due to the
State or to the Consortium will be payable in Dollars or in any convertible
currency chosen by agreement between the Parties.
29.2. In case of late payment, sums due from the Consortium shall bear interest
at rate of LIBOR plus four and half percent per annum from the day when they
should have been paid.
CHAPTER VI MISCELLANEOUS PROVISION
ARTICLE 30- TRANSFER RIGHTS AND CONTROL OF THE CONSORTIUM
30.1. In accordance with the provisions of the Petroleum Code, the joint and
several rights and obligations arising under this Convention may not be
transferred in whole or in a part by any of the entities comprising the
Consortium without the prior approval of the Minister, other than in case of
transfers to Affiliated Companies.
A transfer will be deemed to be approved by the Minister if, within sixty days
of sending the notice and a copy of the draft transfer deed to the Minister, the
Minister has not refused his approval. Such approval shall not be unreasonably
withheld.
Each of the companies comprising the Consortium shall have the right to transfer
all or part of any of its rights granted under this Convention or under the
Permit or under any Concession to any Affiliated Company. Such transfers will
not be subject to the prior approval of the Minister. However the Consortium
will inform the Minister of any transfer made under this terms of the paragraph
within one month following the signature of the transfer document. No transfer
shall be such as to affect adversely the interests of the State and the
Petroleum Operations, nor to reduce technical and financial capacity of the
Consortium.
Except in the case of transfers provided for in Article 14.4 above,
transferee(s) will become part of the Consortium and shall satisfy the
obligations imposed on the Consortium by the Petroleum Code and by this
Convention, to which they shall become a party.
TRANSFERS MADE IN ACCORDANCE WITH THE ABOVE PROVISIONS WILL BE EXEMPT FROM ALL
--------------------------------------------------------------------------------
REGISTRATION AND STAMP DUTIES OTHERWISE LEVIABLE THERON.
--------------------------------------------------------------
30.2. If the Consortium is comprised of several entities, it shall supply the
Minister as soon as possible with a copy of its Joint Venture Agreement binding
the entities constituting the Consortium.
30.3. The Consortium shall submit, for the Minster's approval, any change of
person or any proposal which could lead, in particular by way of a
re-distribution of shares, to a change in the control of the Consortium, other
than in the case of transfers between Affiliated Companies.
The proposals referred to in this Article 30.3 will be notified to the Minister.
If within a period of 60 days following the said notification the Minister has
not notified the Consortium of his refusal to approve the said proposals (such
approval not to be unreasonbly withheld), the proposals will be deemed approved.
ARTICLE 31 - CANCELLATION OF THE PERMIT, WITHDRAWAL OF THE CONCESSION AND
TERMINATION OF THE CONVENTION
31.1. The Permit or, the case arising any Concession may be cancelled or
wihdrawn, in whole or in part, without any compensation, in the cases and in
accordance with the procedures provided for in the Petroleum Code.
31.2. For the purposes of applying such procedures, the Minister will give
notice to the Consortium, by registered letter with proof of receipt, to comply
within the periods provided for in the Petroleum Code or within four months if
no such periods are provided.
If the Consortium fails to comply within the time limit provided, the
cancellation of the Permit or withdrawal of the Concession shall be declared and
this Convention will automatically terminate to the extent that this Convention
applies to the Permit or the said Concession.
31.3. Any dispute relating to the cancellation of the Permit or withdrawal of a
Concession and the termination of the Convention may be referred to arbitration
under Article 33 below.
ARTICLE 32 - FORCE MAJEURE
32.1. In the case of non-performance by any Party of its contractual
obligations, other than in the case of payments for which such Party is liable,
the non-performance or delay will not be considered a breach of this Convention
if resulting from Force Majeure, provided however there is a cause and effect
link between the impediment and the Force Majeure reason which is relied on.
The Parties may submit to arbitration any dispute concerning the type of failure
involved and its effect on the contractual obligations of the Party concerned.
32.2. Under this Convention the following shall be understood as being cases of
Force Majeure, all events which are unforeseeable and independent of the will of
a Party, such as natural causes, epidemics, earthquakes, fires, floods, strikes,
riots, insurrections, civil disturbances, sabotage, the effects of war or
situations attributable to war. The intention of the Parties is that the term
Force Majeure shall be interpreted in accordance with the principles and
practices of international law.
32.3. When a Party considers it is prevented from complying with its obligation
because of Force Majeure, it shall immediately notify the other Party of such
impediment giving reasons.
It shall also take all useful steps to ensure normal resumption of compliance
with the obligations affected as soon as possible after the event of Force
Majeure has ceased.
The obligations, other than those affected by Force Majeure, shall continue to
be complied with in accordance with the provisions of this Convention.
When a case of Force Majeure lasts for longer than one (1) year, the Parties
may, by mutual agreement, agree to terminate this Convention.
32.4. If, following a case of Force Majeure, execution of obligations under this
Convention is delayed, the period provided under this Convention for carrying
out such obligation shall be increased by the period of the delay and also by
the period necessary for the repair of any damage resulting from such delay. The
term of this Convention shall also be extended, but only in respect of the area
affected by the event of Force Majeure.
33.1. In case of dispute arising between the State and the Consortium concerning
the interpretation or execution of this Convention or of any of its provisions,
the Parties shall use their best endeavors to resolve the dispute amicably.
If the Parties do not resolve the dispute amicably within a period of three (3)
months, the dispute shall be decided by arbitration before three (3) arbitrators
in accordance with the arbitration rules of the International Chamber of
Commerce. Awards shall be final and binding on the parties from the date they
are made, and judgment upon the award may be entered in any court having
jurisdiction.
33.2. The arbitration shall take place in Paris (France). The procedure shall be
conducted in French language.
33.3. The arbitrors shall decide all questions on the basis of :
a) the provisions of this Convention,
b) subject to Article 34 below, the provisions of the Petroleum Code,
c) subject to Article 34 below, the other laws and regulations of Chad
supplemented where necessary by the general principles of law applied
internationally.
33.4. Recourse to arbitration shall suspend the obligation to perform the matter
in dispute. On other hand, execution by the parties of their other obligations
under this Convention shall not be suspended during the period of arbitration.
ARTICLE 34 - APPLICABLE LAW AND STABILIZATION OF CONDITIONS
----------------------------------
34.1. The Petroleum Operations undertaken within the framework of this
Convention are governed by this Convention and the Petroleum Code and other
laws and regulations in force in Chad;HOWEVER, IN CASE OF CONTRADICTION OR
------------------------------------
INCONSISTENCY BETWEEN THE PROVISIONS OF THIS CONVENTION AND THE PETROLEUM CODE,
--------------------------------------------------------------------------------
THE PROVISIONS OF THIS CONVENTION WILL PREVAIL.
-----------------------------------------------------
34.2. The Consortium shall respect the laws and regulations of the Republic of
Xxxx.Any reference to these laws and regulations, throughout this Convention,
shall not in any way be interpreted to increase, either directly or indirectly,
the obligations imposed on or the amounts payable by the Consortium under this
Convention nor to adversely affect the rights and economic benefits of the
Consortium as provided for in this Convention.
34.3. In case of contradiction or inconsistency between this Convention and the
laws and regulations of the Republic of Xxxx, the provisions of this Convention
shall prevail, except if the Parties decide otherwise.
34.4 DURING THE TERM OF THIS CONVENTION THE STATE GARANTEES THAT NO
---- -----------------------------------------------------------------------
GOVERNMENTAL ACT WILL BE TAKING IN THE FUTURE, WTHOUT PRIOR AGREEMENT BETWEEN
--------------------------------------------------------------------------------
THE PARIES, AGAINST THE CONSORTIUM WHICH HAS THE EFFECT EITHER DIRECTLY OR
--------------------------------------------------------------------------------
INDIRECTLY OF INCREASING THE OBLIGATIONS OR AMOUNTS PAYABLE BY THE CONSORTIUM
--------------------------------------------------------------------------------
UNDER THIS CONVENTION OR WHICH ADVERSELY AFFECTS THE RIGHT AND ECONOMIC BENEFITS
--------------------------------------------------------------------------------
OF THE CONSORTIUM PROVIDED BY THIS CONVENTION. THIS WILL APPLY IN PARTICULAR, TO
--------------------------------------------------------------------------------
THE FOLLOWING :
-----------------
A) EXEMPTION FROM TAXES, FEES AND DUTIES ;
----------------------------------------------------
B) OBLIGATIONS RELATING TO ROYALTY AND PROFITS TAX ;
--------------------------------------------------------------
C) RIGHT TO RETAIN ABROAD AND TO REPATRIATE TO FOREIGN COUNTRIES ANY FUNDS
-------------------------------------------------------------------------------
AND FOREIGN CURRENCIES ;
---------------------------
D) NON-DISCRIMINATION INRESPECT OF CHARGES MADE BY THE STATE FOR SERVICES
--------------------------------------------------------------------------------
RENDERED, COMPARED WITH CHARGES MADE BY THE STATE FOR SIMILAR SERVICES SUPPLIED
--------------------------------------------------------------------------------
IN THE PUBLIC DOMAIN.
------------------------
IF SUCH CHANGE ARE MADE BY THE GOVERNMENT OF THE REPUBLIC OF XXXX WITHOUT THE
--------------------------------------------------------------------------------
PRIOR AGREEMENT OF THE CONSORTIUM, THE PARTIES SHALL AGREE THE NECESSARY
--------------------------------------------------------------------------------
MODIFICATIONS TO INSURE THAT THE CONSORTIUM IS SUBJECT TO THE SAME FINANCIAL
--------------------------------------------------------------------------------
CONDITIONS, OBLIGATIONS AND AMOUNTS, AS WELL AS THE SAME RELATIVE ECONOMIC
--------------------------------------------------------------------------------
RIGHTS AND BENEFITS, AS EXISTED BEFORE THE SAID TOOK PLACE.
--------------------------------------------------------------------
ARTICLE 35 - NOTICES
35.1. All notices and other communications relating to this Convention shall be
addressed in writing and shall be considered as having been delivered as soon as
they are carried or delivered by registered mail, with confirmation of receipt,
or addressed by telex, telefax, to the address shown below :
a) for the State or the Minister :
Minister of Mines, Energy and Petroleum
XX XXX 00 X'Xxxxxxx
Xxxxxxxx of Xxxx
Telefax : (235) 52.25.65
(235) 52.42.48
b) for the Consortium
Trinity Energy Resources Xxxx LTD
Xx Xxx 0000 X'XxxxxxX
Xxxxxxxx of Xxxx
Telephone (235) 52.44.98
Telefax (235) 52.44.96
35.2. The State and the Consortium may at any time after notice to the other
Party change their authorized representative or amend the chosen address set out
above.
ARTICLE 36 - OTHERS PROVISIONS
36.1. The headings of this Convention are inserted for convenience and reference
only and in no way define, limit or describe the effect or the purpose of the
Convention nor of any of its clauses.
36.2. The Annexes I ,II.III and IV attached are in integral part of this
Convention.
36.3. This Convention may be modified only in writing by mutual agreement of the
Parties.
36.4. Any waiver by the State of the execution of any obligation by the
Consortium shall be in writing signed by the Minister. No waiver may be
considered as a precedent if the Minister waives his reliance on any of his
rights under this Convention.
36.5. If no time limit is specified in a particular case under this Convention
where the Minister's approval is required, the Parties shall agree upon a
reasonable time limit, it being understood that the intent of the Parties is to
cooperate in all possible ways to achieve the purposes of this Convention. The
approval will be deemed to have been given if express approval is not given
within the time limit stipulated or agreed.
36.6. The Effective Date from which this Convention shall be binding on the
Parties will be the date of its approval by Decree. The validity of this
Convention will not be affected by any delay whatsoever in the signature of any
decrees confirming the grant or the renewal of the permit or any Concessions.
36.7. This Convention abrogates the Memorandum of Understanding, signed by the
Republic of Xxxx and the Consortium on July 31,1998.
IN WITNESS WHEREOF, the Parties have signed this Convention in four
(4 )copies
In N'Djamena on .....................
FOR THE REPUBLIC OF XXXX FOR ORIENTAL ENERGY RESOURCES
THE MINISTER OF MINES, ENERGY FOR CARLTON ENERGY GROUP
AND PETROLEUM
FOR TRINITY GAS CORPORATION, INC
ANNEX I
-------
BOUNDARIES OF THE CONTRACT AREA OF THE PERMIT
POINTS LONGITUDE LATITUDE
------- ---------- ----------
1 fronti re avec le Cameroun 10 30'00"N
2 fronti re avec la R.C.A. 10
30'00"N
Le long de la fronti re avec la R.C.A. jusqu'
3 20 01'15"E fronti re avec la R.C.A.
4 20 01'15"E 09 40'00"N
---------- ----------
5 20 17'30"E 09 40'00"N
---------- -----------
6 20 17'30"E 09 47'30"N
7 20 00'00"E 09 47'30"N
8 20 00'00"E 09 45'00"N
9 19 55'45"E 09 26'15"N
10 19 55'45"E 09 26'15"N
11 19 44'45"E 09 26'15"N
12 19 44'45"E 09 21'30"N
13 19 40'30"E 09 21'30"N
14 19 40'30"E 09 18'00"N
15 19 27'30"E 09 18'00"N
16 19 27'30"E 09 21'30"N
17 19 20'30"E 09 21'30"N
18 19 20'30"E 09 33'00"N
19 19 14'15"E 09 33'00"N
20 19 14'15"E 09 29'00"N
21 19 08'00"E 09 29'00"N
22 19 08'00"E 09 25'15"N
23 18 57'15"E 09 25'15"N
24 18 57'30"E 09 21'15"N
---------- -----------
25 18 51'15"E 09 21'15"N
26 18 51'15"E 09 18'00"N
27 18 43'30"E 09 18'00"N
28 18 43'30"E 09 16'00"N
29 18 32'45"E 09 16'00"N
30 18 32'45"E 09 13'00"N
31 18 28'00"E 09 13'00"N
32 19 28'00"E 09 08'15"N
33 18 19'30"E 09 08'15"N
34 18 19'30"E 09 05'45"N
35 18 10'45"E 09 05'45"N
36 18 10'45"E 09 03'15"N
37 18 07'00"E 09 03'15"N
38 18 07'00"E 09 01'30"N
39 18 05'15"E 09 01'30"N
40 18 05'15"E 09 03'30"N
41 17 57'00"E 09 03'30"N
42 17 57'00"E 08 59'15"N
43 17 50'00"E 08 59'15"N
44 17 50'00"E 08 57'00"N
45 17 31'15"E 08 57'00"N
46 17 31'15"E 08 50'30"N
47 17 22'15"E 08 50'30"N
48 17 22'15"E 08 52'15"N
49 17 08'45"E 08 52'15"N
50 17 08'45"E 08 57'00"N
51 16 12'15"E 08 57'00"N
52 16 12'15"E 09 10'45"N
53 16 09'15"E 09 10'45"N
54 16 09'15"E 09 13'30"N
55 16 00'15"E 09 13'30"N
56 16 00'15"E 09 11'00"N
57 15 49'45"E 09 11'00"N
58 15 49'45"E 09 07'45"N
59 15 48'15"E 09 07'45"N
60 15 48'15"E 09 06'30"N
61 15 42'45"E 09 06'30"N
62 15 42'45"E 09 07'15"N
63 15 28'15"E 09 07'15"N
64 15 28'15"E 08 59'45"N
65 15 35'00"E 08 59'45"N
66 15 35'00"E 08 49'15"N
67 15 37'00"E 08 49'15"N
68 15 37'00"E 08 34'15"N
69 15 39'45"E 08 34'15"N
70 15 39'45"E 08 32'30"N
71 16 02'45"E 08 32'30"N
72 16 02'45"E 08 23'30"N
73 16 07'30"E 08 23'30"N
74 16 07'30"E 08 18'00"N
75 16 12'30"E 08 18'00"N
76 16 12'30"E 08 11'45"N
77 16 16'45"E 08 11'45"N
78 16 16'45"E 08 08'15"N
79 16 34'45"E 09 08'15"N
80 16 34'45"E 08 09'15"N
81 16 45'30"E 08 09'15"N
82 16 45'30"E 08 07'30"N
83 17 30'00"E 08 07'30"N
84 17 30'00"E 08 15'00"N
85 17 37'30"E 08 15'00"N
86 17 37'30"E 08 22'30"N
87 18 07'30"E 08 22'30"N
88 18 07'30"E 08 30'00"N
89 18 30'00"E 08 30'00"N
90 18 30'00"E 08 37'30"N
91 18 37'30"E 08 37'30"N
92 18 37'30"E 08 42'30"N
93 19 00'00"E 08 42'30"N
94 19 00'00"E fronti re avec la R.C.A
Le long de la fronti re avec la R.C.A jusqu'ala frontiere avec le Cameroun
,ensuite, le long de la fronti re avec le Cameroun jusqu'au point
95 fronti re avec le Cameroun 10 30'00"N(identique
au point N 1)
Voir la Carte se rapportant aux coordonnees g ographiques des points qui
figurent al'Annexe N(o) I.
ANNEX II
EXPLORATION WORK PLANS AND ESTIMATED COST
IN(US$)
Initial Period of five (5)years
First sub period : (18) months
Aero-magnettic Survey, Geological and Geopgysical study as defined by the
Operator ; evaluation of Seismic data and aero-magnetic existing. 500 000
Administration and general activities 200 000
SUB TOTAL 700 000
Second sub Period (18) months
1250 Km of Seismic acquisition 5 000 000
Administration and general activities 300 000
SUB TOTAL 5 300 000
Third sub Period (12) months
1250Km of Seismic acquisition 5 000 000
Drilling of (1) Exploration well 5 000 000
Administration and general activies 300 000
SUB TOTAL 10 300 000
Fourth sub Period (12) months
Drilling of (2) Exploration Well 10 000 000
Administration and general activities 300 000
SUB TOTAL 10 300 000
TOTAL 26 000 000
Summary of provisional expenditures of Exploration in categories
Aero-magnetic Survey 500 000
2500 Seismic acquisition of 2D or 3D 10 000 000
Three (3) Exploration Well 15 000 000
Costs of administration and general activities 1 100 000
TOTAL 26 000 000
ANNEX III
ACCOUNTING PROCEDURE
ARTICLE 1. GENERAL PROVISIONS
1.1. Purpose
This Accounting procedure will apply to the performance of the ovligations
under the Convention.
The purpose of this Accounting Procedure is to establish the accounting
standards and methods for determining the costs which, in accordance with the
practices of the international petroleum industry, are necessary for the
Consortium to incur in the conduct of the Petroleum Operations (hereafter
referred to as [Petroleum Costs]).
1.2. Interpretation
The definitions set out in Article 1 of the Convention shall apply to this
Annex.
IN THE CASE OF CONFLICT BETWEEN THE PROVISIONS OF THIS ACCOUNTING PROCEDURE AND
--------------------------------------------------------------------------------
THE CONVENTION, THE PROVISIONS OF THE CONVENTION SHALL APPLY.
---------------------------------------------------------------------
1.3. Amendements
This Accounting Procedure may be amended by agreement between the Parties.
The Parties agree that, if any of the provisions of this Accounting Procedure
becomes inequitable for one of the Parties, they will in good faith amend the
provision in question.
1.4. Accounts and statements
a) the Consortium will set up and maintain, in its office in Xxxx, the
complete accounts, book and statements of all income, costs and
expenses relating to the Petroleum Operations, in conformity with
regulations in force and the practices and procedures used in the
international petroleum industry.
These accounts, books, statements and reports shall be made available, to
the State and its representatives to allow them to exercise their right of
inspection, verification and supervision provided for in Article 26.1 fo
the Convention.
b) Within twelve (12) months following the Effective Date, the Consortium
will submit to the Minister a draft accounting plan relating to the
accounts, books, statements and reports of the organization. This plan
will conform with generally recognized and accepted accounting methods
and compatible with the practices and procedures of the modern
PETROLEUM industry.
---------
Within six (6) months following receipt of this draft plan, the
Consortium and the Minister will agree the final accounting plan which
will describe in detail the bases of the accounting system and the
procedures to be used under the Convention and a list of the accounts
to be kept in the French language. Following this agreement, the
Consortium shall diligently set up, and supply the Minister with
formal copies of the detailed accounting plans and manuals relating to
the accounts, books and the form of presentation of the accounts, and
the procedures to be observed in the performance of the Convention.
c) All reports and statements will be prepared in accordance with the
provisions of the Convention, and the regulations of the Republic of
Xxxx, and, failing such provisions , in accordance with the methods
generally accepted in the international petroleum industry.
1.5. Currency
All accounts, books, statements and reports will be expressed in Dollars
unless otherwise provided for or agreed by the Parties.
1.6. Accounting principles
The principles relating to the tax accounts will include the following :
1.6.1 Taxable parties
If the Consortium is comprised of more than one company, the direct profits
tax relating to each Calendar Year will be assessed on the basis of the net
taxable profits of each company, and for this purpose a separate Market
Price will be calculated for each company under Article 21 of the
Convention.
However, payments of the royalty provided for in Article 22 of the
convention will in all cases be calculated and valued on the basis of the
total production of all the companies comprising the Consortium.
1.6.2 Carry forward of losses
Starting from the Calendar Year during which the first commercial
production takes place all deductibles charges relating to the Petroleum
Operations which are used in determining the direct profits tax which
cannot be recovered will be considered as an exploitation loss and will be
carried forward as a deduction for the following Calendar year until the
end of the fifth (5th) Calendar year. In case of exceptional circumstances,
the Minister and the Consortium may agree on an appropriate extension of
this period.
1.7. Accounting on an accrual basis
All books, accounts and statements will be prepared on an accrual basis (as
opposed to a cash basis). Revenues will be attributed to the accounting
period in which they are earned, and costs and expenses to the accounting
period in which they are incurred, without the need to specify when the
amount is received or disbursed in connection with a particular
transaction. Costs and expenses will be deemed to have been incurred :
- In the case of physical items, in the accounting period when title
thereto passes ;
- In the case of services, in the accounting period when such services
are performed.
The accounting basis may be changed by agreement between the Parties if the
Consortium demonstrates both that such change is equitable and is also in
accordance with the practices of the international petroleum industry.
1.8. Definitions of Capital Expenditures and Operating Costs
The Petroleum Costs shall consist of Capital Expenditures and Operating
Costs.
1.8.1 Capital Expenditures
Capital Expenditures represent the Petroleum Costs of assets that have
a useful life extending behing the year in which the asset wasa required,
including all exploration costs and expenditures and all development
expenditures defined in subparagraphs 1.8.1 a) through h) below.
Capital Expenditures include, but are not limited to, the acquisition
costs of the following assets and services :
a) Buildings, installations and associated equipment, such as
installations for producing water and electricity, warehouses and
access roads, installations for Crude Oil treatment and related
equipment, secondary recovery systems, Natural Gas treatment plants
and systems for producing steam.
b) Construction of houses, facilities and leisure for employees and other
property relating to such construction.
c) Production installations such as production rigs (including the costs
of labor, fuel, transportation and supplies for the fabrication,
installation and erecting in place of the rigs and the cost of
installing pipelines), wellhead equipment, sub-surface lifting
equipment, tubing, sucker rods, surface pumps, flow-lines, gathering
equipment, delivery lines and storage facilities.
d) Movable property such as surface or sub-surface production and
drilling tools, equipment abd instruments, barges and floating craft,
automotive equipment, aircraft, construction equipment, furniture,
office equipment, miscellaneous equipment.
e) Development and production xxxxx, including labor, materials services
used, as well as redrilling, deepening, and restoring production of
such xxxxx, and access roads, if any, leading directly to these xxxxx.
f) Exploration Xxxxx and Evaluation Xxxxx, including labor, materials and
services used, as well as access roads, if any, leading directly to
these xxxxx.
g) Surveys, including labor, materials and services used for aerial,
geological, topographic, geophysical and seismic surveys, as well as
core drilling.
h) Other exploration expenses, such as auxiliary or temporary
installations with a useful life not exceeding one year used in
exploration, and exploration to acquire geophysical or geological
information.
1.8.2 Operating Costs
Operating Costs are all petroleum Costs other than Capital Expenditures
defined above.
1.9 Depreciation
Capital Expenditures as defined in Article 1.8 of this Annex will be
depreciated for the purposes of calculating direct profi tax. In order to
determine the amount of depreciation which is allowed as a deduction from
taxable net profit in each Calendar Year, the following principles will apply :
1.9.1 Capital Expenditures will be amortized on a straight xxxx basis at
the following annual rates :
- all exploration work, all xxxxx, both productive and non-productive,
and all access ways at the rate of 100 %.
- Surface pipelines at the rate of 10 %.
- Buried pipelines at the rate of 20 %.
- Permanent buildings at the rate of 5 %.
- All other Capital Expenditures at the rate of 20 %.
1.9.2 The depreciation in respect of the first Calendar Year for which
depreciation is allowable will be made on aproportional basis and not for
the whole year.
1.9.3 Depreciation of Capital Expenditures will be allowed with effect from
:
- the Calendar Year during which the asset is placed in service or, if
the Capital Expenditure does not relate to an asset having a period of
use exceeding the year in which it is placed in service, from the
calendar Year during which the Capital Expenditure is incurred ;
- or the Calendar Year during which the first commercial production
takes place if this year is later.
1.10. Valuation of transactions
Unless otherwise agreed in writing by the Minster and the Consortium, all
transactions resulting in income, costs or expenses to be credited or debited to
the books, accounts, statements and reports prepared, maintained or submitted
under this Convention will be made on an arm's length basis or on a basis such
that such income, costs or expenses will neither be less than nor more than, as
the case may be, the amounts which would have resulted if the transactions had
been made on an arm's length basis as mentioned above.
1.11. Non-deductible expenses
The following expenses will not be included in the Petroleum Costs :
a) Costs relating to the marketing and transportation of the Hydrocarbons
beyond the Delivery Point ;
b) Contributions and donations except those approved by the State ;
c) Gifts or rebates to suppliers and gifts or commissions to
intermediaries used for service or supply contracts ;
d) Any interests, fines, monetary adjustments or increases in expenses
due to the failure of the Consortium to comply with the obligations
under the Convention or to respect applicable law or contracts with
Third Parties ; and
e) All other expenses which are not directly necessary for the carrying
out of the Petroleum Operations, and expenses which are excluded by
provisions of the Convention and of this Accounting Procedure and by
regulations in force in the Republic of Xxxx.
1.12. Exchange rates
For the purposes of conversion between the legal currency of Xxxx or any other
currency, the average of the purchase and sale exchange rates will be used. This
average will be based on the rates quoted on the foreign exchange market in
Paris on the closing of the first day of the month during which the income,
costs or expenses are booked, except for depreciation for purposes of
calculating direct profits tax which will be converted at the rate in force on
the date of acquiring asset by the Consortium or the date the service was
performed, as the case may be.
Any exchange profit or loss will be debited or credited to the Petroleum Costs.
A statement of the exchange rates used for converting the legal currency of Xxxx
or any other currency into Dollars will be kept by the Consortium.
ARTICLE 2 ACCOUNTING METHODS AND PRINCIPLES FOR IMPUTING PETROLEUM COSTS
2.1. Personnel expenses
The amount of wages and salaries of the Consortium's employees directly
assigned to working in the Republic of Xxxx on the Petroleum Operations
performed under this Convention, including the costs of holidays, vacations,
sick leave, living and housing allowances, travel time, bonuses and other
benefits customarily granted to the employees of the Consortium and their
families in similar ventures.
2.2. Materials and equipment
The cost of equipment, materials, machines, tools and any other articles of
a similar nature used or consumed for the requirements of the Petroleum
Operations subject to the following :
a) Acquisition
The consortium will only supply or purchase materials which are
required for the foreseeable needs of the Petroleum Operations. The
Consortium will avoid the accumulation of surplus stocks.
However, stocks must be sufficient to take into account the time
needed for replacements, emergency needs and similar considerations.
b) Components of costs
The costs of materials and equipment acquired by the Consortium for
the needs of the petroleum Operations may include, in addition to the
invoice price(after deduction of any discount given) freight and
transportation costs between the supply point and the delivery point
(provided that such costs are not already included in the invoiced
price), insurance costs, and other related expenses which may be
charged to the materials and the equipment imported into or bought in
the Republic of Xxxx .
c) Accounting
The costs of such materials and equipment will be debited in the
accounts on an costs basis.
d) Supply of materials and equipment by Affiliated Companies
The materials and equipment supplied by the Affiliated Companies of
the consartium will be debited in the accounts at a level not
exceeding that which would be charged by independent suppliers on an
arm's length basis. This criterion will apply both the new and used
materials.
e) Inventories
The consortium will maintain permanent inventories by quantity Nd
value of all materials in stock in accordance with the generally
accepted practices of the international petroleum industry. The
Consortium will make a physical inventory of all materials at least
once in any Contract Year. The State may carry out complete or partial
inventory verifications when it considers them necessary. The cost of
non-capital merchandise in stock will be debited to the profit and
loss account at the time such merchandise is taken out of stock for
use.
2.3. Cost of technical services
The cost of technical services required for the Petroleum Operations
will be assessed as follow :
a) in the case of technical services performed by Third Parties who are
direct contractors including consultants, contractors and public
utilities, the price paid by the Consortium provided that this price
is no higher than prices normally charged by other firms for the same
or comparable work or services ; and
b) in the case of technical services performed by the Consortium or its
Affiliated Companies, the price invoiced by the Consortium or its
Affiliated Companies, provided that this price is no higher than the
most favorable price proposed to other Affiliated Companies of the
Consortium or to Third parties for the same or comparable services, in
accordance with a methods of distribution of costs to be agreed in the
accounting plan referred to in Article 1.4 b) of this Annex
2.4. Insurance and claims
The premiums paid for insurance which, in the normal course of events, is
required for the Petroleum Oerations, provided such premiums relate to prudent
coverage of risks and that they are no greater than those charged on a
competitive basis by insurance companies which are not Affiliated Companies of
the Consortium. The indemnities received from any insurance or any claims will
be credited against Petroleum Costs.
If no insurance, or sufficient insurance, is taken out to cover a particular
risk, all the costs incurred by the consortium relating to any loss, claim,
damage or judgment, including legal services, related to such risks will be
considered as petroleum Costs provided such costs do not result from the
Contractors'gross negligence.
2.5. Legal and litigation costs
Costs of litigation and legal or related services necessary or
expedient for the protection of the Contract Area. Any damages or
compensations received will be credited against the Petroleum Costs.
Costs incurred by the Consortium in the course of an arbitration under
Article 33 of the Convention will not be included in the Petroleum
Costs except to the extent that awards may be made in favor of the
Consortium.
2.6. Overhead Costs
General costs and the costs of centrally provided services (hereafter called
[Overhead Costs] ) other than direct costs will include in particular :
a) costs incurred for services and Consortium's personnel outside the
Republic of Xxxx relating to administration, legal, accounting,
finance, audit, tax, planning, personnel management, purchasinh and
other functions required for Petroleum Operations under this
Convention ; and
b) reasonable travel expenses for the Consortium's personnel in general
and adminitrative categories set out in paragraph a) incurred for the
purpose of inspecting and supervising the Petroleum Operations in the
Republic of Xxxx.
c) These Overhead Costs will be imputed to the Petroleum Costs in
accordance with methods applied by the international petroleum
industry and in accordance with the accounting plan.
The overhead costs incurred outside the Republic of Xxxx in each Calendar Year
will not exceed the percentage rate of the Petroleum Costs which is the same as
that charged by the operating company of the Consortium to the other member
companies of the Consortium for the recovery of the said costs. Any change shall
be notified to the Minister.
2.7. Interest and fees
Interset, fees and other financing charges may be imputed to deductible
Petroleum Costs for the determination of the direct profits tax, provided
they do not exceed the commercial rates used in similar situations and they
relate to loans and credits obtained by the Consortium under this
Convention which are required for the purposes of financing development
operations of a Commercial Field, excluding exploration (which includes
evaluation) operations.
The details of the financing plans and the level of financing will be
included in each Annual Work Plan and Budget for information purposes only.
2.8. Office cost in Republic of Xxxx
Personnel costs and maintenance costs for the main offices of the Consortium in
the Republic of Xxxx including rent, expenses for telephone, telex, fax and
radio and expenses for installations such as bases, warehouses, water, power and
communications system, roads and bridges.
2.9. Miscellaneous expenditures
All other expenditures, other than those which are covered and dealt with by the
foregoing provisions of this Annex, incurred by the Consortium and necessary for
the conduct of Petroleum Operations, including expenses of training personnel
provided for under Article 19 of the Convention, expenses under Article 18.4,
and surface fees referred to in Article 8.
