Exhibit 10.1
[AIPN LOGO]
JOINT OPERATING AGREEMENT
AMONG
A&T PETROLEUM COMPANY, LTD.
AND
HAWLER ENERGY, LTD.
COVERING:
XXXX XXXX PROSPECT
KURDISTAN AREA
REPUBLIC OF IRAQ
TABLE OF CONTENTS
ARTICLE 1 DEFINITIONS..........................................................................................1
ARTICLE 2 EFFECTIVE DATE AND TERM..............................................................................6
ARTICLE 3 SCOPE................................................................................................6
3.1 Scope...................................................................................................6
3.2 Participating Interest..................................................................................6
3.3 Ownership, Obligations and Liabilities..................................................................7
3.4 Government Participation................................................................................7
ARTICLE 4 OPERATOR.............................................................................................7
4.1 Designation of Operator.................................................................................7
4.2 Rights and Duties of Operator...........................................................................7
4.3 Operator Personnel......................................................................................9
4.4 Information Supplied by Operator.......................................................................12
4.5 Settlement of Claims and Lawsuits......................................................................13
4.6 Limitation on Liability of Operator....................................................................13
4.7 Insurance Obtained by Operator.........................................................................14
4.8 Commingling of Funds...................................................................................16
4.9 Resignation of Operator................................................................................17
4.10 Removal of Operator....................................................................................17
4.11 Appointment of Successor...............................................................................19
4.12 Health, Safety and Environment (HSE)...................................................................19
ARTICLE 5 OPERATING COMMITTEE.................................................................................21
5.1 Establishment of Operating Committee...................................................................21
5.2 Powers and Duties of Operating Committee...............................................................21
5.3 Authority to Vote......................................................................................21
5.4 Subcommittees..........................................................................................21
5.5 Notice of Meeting......................................................................................21
5.6 Contents of Meeting Notice.............................................................................21
5.7 Location of Meetings...................................................................................22
5.8 Operator's Duties for Meetings.........................................................................22
5.9 Voting Procedure.......................................................................................22
5.10 Record of Votes........................................................................................23
5.11 Minutes................................................................................................23
5.12 Voting by Notice.......................................................................................24
5.13 Effect of Vote.........................................................................................24
ARTICLE 6 WORK PROGRAMS AND BUDGETS...........................................................................26
6.1 Exploration and Appraisal..............................................................................26
6.2 Development............................................................................................27
6.3 Production.............................................................................................28
6.4 Itemization of Expenditures............................................................................28
6.5 Multi-Year Work Program and Budget.....................................................................29
6.6 Contract Awards........................................................................................29
6.7 Authorization for Expenditure (AFE) Procedure..........................................................31
6.8 Overexpenditures of Work Programs and Budgets..........................................................32
ARTICLE 7 OPERATIONS BY LESS THAN ALL PARTIES.................................................................33
7.1 Limitation on Applicability............................................................................33
7.2 Procedure to Propose Exclusive Operations..............................................................34
7.3 Responsibility for Exclusive Operations................................................................36
7.4 Consequences of Exclusive Operations...................................................................36
7.5 Premium to Participate in Exclusive Operations.........................................................39
7.6 Order of Preference of Operations......................................................................40
7.7 Stand-By Costs.........................................................................................41
7.8 Special Considerations Regarding Deepening and Sidetracking............................................42
7.9 Use of Property........................................................................................42
7.10 Lost Production........................................................................................44
7.11 Production Bonuses.....................................................................................44
7.12 Conduct of Exclusive Operations........................................................................45
ARTICLE 8 DEFAULT.............................................................................................46
8.1 Default and Notice.....................................................................................46
8.2 Operating Committee Meetings and Data..................................................................46
8.3 Allocation of Defaulted Accounts.......................................................................47
8.4 Remedies...............................................................................................48
8.5 Survival...............................................................................................52
8.6 No Right of Set Off....................................................................................53
ARTICLE 9 DISPOSITION OF PRODUCTION...........................................................................53
9.1 Right and Obligation to Take in Kind...................................................................53
9.2 Disposition of Crude Oil...............................................................................53
9.3 Disposition of Natural Gas.............................................................................55
9.4 Principles of Natural Gas Agreement(s) with Government.................................................57
ARTICLE 10 ABANDONMENT........................................................................................58
10.1 Abandonment of Xxxxx Drilled as Joint Operations.......................................................58
10.2 Abandonment of Exclusive Operations....................................................................59
10.3 Abandonment Security...................................................................................59
ARTICLE 11 SURRENDER, EXTENSIONS AND RENEWALS.................................................................60
11.1 Surrender..............................................................................................60
11.2 Extension of the Term..................................................................................60
ARTICLE 12 TRANSFER OF INTEREST OR RIGHTS AND CHANGES IN CONTROL..............................................60
12.1 Obligations............................................................................................60
12.2. Transfer...............................................................................................61
12.3 Change in Control......................................................................................66
ARTICLE 13 WITHDRAWAL FROM AGREEMENT..........................................................................70
13.1 Right of Withdrawal....................................................................................70
13.2 Partial or Complete Withdrawal.........................................................................70
13.3 Rights of a Withdrawing Party..........................................................................70
13.4 Obligations and Liabilities of a Withdrawing Party.....................................................71
13.5 Emergency..............................................................................................71
13.6 Assignment.............................................................................................72
13.7 Approvals..............................................................................................72
13.8 Security...............................................................................................72
13.9 Withdrawal or Abandonment by all Parties...............................................................72
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ARTICLE 14 RELATIONSHIP OF PARTIES AND TAX....................................................................72
14.1 Relationship of Parties................................................................................72
14.2 Tax....................................................................................................72
14.3 United States Tax Election.............................................................................73
ARTICLE 15 VENTURE INFORMATION - CONFIDENTIALITY - INTELLECTUAL PROPERTY.....................................74
15.1 Venture Information....................................................................................74
15.2 Confidentiality........................................................................................75
15.3 Intellectual Property..................................................................................76
15.4 Continuing Obligations.................................................................................77
15.5 Trades.................................................................................................77
ARTICLE 16 FORCE MAJEURE......................................................................................77
16.1 Obligations............................................................................................77
16.2 Definition of Force Majeure............................................................................77
ARTICLE 17 NOTICES............................................................................................78
ARTICLE 18 APPLICABLE LAW - DISPUTE RESOLUTION - WAIVER OF SOVEREIGN IMMUNITY................................78
18.1 Applicable Law.........................................................................................78
18.2 Dispute Resolution.....................................................................................79
18.3 Expert Determination...................................................................................83
18.4 Waiver of Sovereign Immunity...........................................................................83
ARTICLE 19 ALLOCATION OF COST & PROFIT HYDROCARBONS..........................................................84
19.1 Allocation of Total Production.........................................................................84
19.2 Allocation of Hydrocarbons to Parties..................................................................84
19.3 Use of Estimates.......................................................................................85
19.4 Principles.............................................................................................85
ARTICLE 20 GENERAL PROVISIONS.................................................................................86
20.1 Conduct of the Parties.................................................................................86
20.2 Conflicts of Interest..................................................................................86
20.3 Public Announcements...................................................................................86
20.4 Successors and Assigns.................................................................................87
20.5 Waiver.................................................................................................87
20.6 No Third Party Beneficiaries...........................................................................87
20.7 Joint Preparation......................................................................................87
20.8 Severance of Invalid Provisions........................................................................87
20.9 Modifications..........................................................................................88
20.10 Interpretation.........................................................................................88
20.11 Counterpart Execution..................................................................................88
20.12 Entirety...............................................................................................89
Exhibit A - .......Accounting Procedure
Exhibit B - .......Contract Area
[Exhibit C - .......Insurance]
[Exhibit D - Lifting Procedure [NOTE: A model Lifting Procedure may be acquired from the AIPN]]
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OPERATING AGREEMENT
THIS AGREEMENT is made as of the ______________ (the "Effective Date") among A&T
Petroleum Company, Ltd, a company existing under the laws of the Cayman Islands
(hereinafter referred to as "A&T") and Hawler Energy, Ltd., a company existing
under the laws of the Cayman Islands (hereinafter referred to as "Hawler"). The
companies named above, and their respective successors and assignees (if any),
may sometimes individually be referred to as "Party" and collectively as the
"Parties".
WITNESSETH:
WHEREAS, the Iraq Kurdistan Regional Government and the Republic of
Iraq (hereinafter referred to as the "Government"), A&T, and Hawler entered into
the Production Sharing Agreement ("Contract") dated March 29, 2005, covering
certain areas located in the Republic of Iraq (the "Contract"); and
WHEREAS, the Parties desire to define their respective rights and
obligations with respect to their operations under the Contract;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements and obligations set out below and to be performed, the
Parties agree as follows:
ARTICLE 1
DEFINITIONS
As used in this Agreement, the following words and terms shall have the
meaning ascribed to them below:
1.1 Accounting Procedure means the rules, provisions and conditions
contained in Exhibit A.
1.2 AFE means an authorization for expenditure pursuant to Article 6.7.
1.3 Affiliate means a legal entity which Controls, or is Controlled by,
or which is Controlled by an entity which Controls, a Party.
1.4 Agreed Interest Rate means interest compounded on a monthly basis, at
the rate per annum equal to the one (1) month term, London Interbank
Offered Rate (LIBOR rate) for U.S. dollar deposits, as published in
London by the Financial Times or if not published, then by The Wall
Street Journal, plus four (4%) percentage points, applicable on the
first Business Day prior to the due date of payment and thereafter on
the first Business Day of each succeeding calendar month. If the
aforesaid rate is contrary to any applicable usury law, the rate of
interest to be charged shall be the maximum rate permitted by such
applicable law.
1.5 Agreement means this agreement, together with the Exhibits attached to
this agreement, and any extension, renewal or amendment hereof agreed
to in writing by the Parties.
1.6 Appraisal Well means any well (other than an Exploration Well or a
Development Well) whose purpose at the time of commencement of drilling
such well is to appraise the extent or the volume of Hydrocarbon
reserves contained in an existing Discovery.
1.7 Business Day means a Day on which the banks in London, United Kingdom
are customarily open for business.
1.8 Calendar Quarter means a period of three (3) months commencing with
January 1 and ending on the following March 31, a period of three (3)
months commencing with April 1 and ending on the following June 30, a
period of three (3) months commencing with July 1 and ending on the
following September 30, or a period of three (3) months commencing with
October 1 and ending on the following December 31, all in accordance
with the Gregorian Calendar.
1.9 Calendar Year means a period of twelve (12) months commencing with
January 1 and ending on the following December 31 according to the
Gregorian Calendar.
1.10 Change in Control means any direct or indirect change in Control of a
Party (whether through merger, sale of shares or other equity
interests, or otherwise) through a single transaction or series of
related transactions, from one or more transferors to one or more
transferees.
1.11 Commercial Discovery means any Discovery that is sufficient to entitle
the Parties to apply for authorization from the Government to commence
exploitation.
1.12 Completion means an operation intended to complete a well through the
Christmas tree as a producer of Hydrocarbons in one or more Zones,
including the setting of production casing, perforating, stimulating
the well and production Testing conducted in such operation. "Complete"
and other derivatives shall be construed accordingly.
1.13 Consenting Party means a Party who agrees to participate in and
pay its share of the cost of an Exclusive Operation.
1.14 Consequential Loss means any loss, damages, costs, expenses or
liabilities caused (directly or indirectly) by any of the following
arising out of, relating to, or connected with this Agreement or the
operations carried out under this Agreement: (i) reservoir or formation
damage; (ii) inability to produce, use or dispose of Hydrocarbons;
(iii) loss or deferment of income; (iv) punitive damages; or (v) other
indirect damages or losses whether or not similar to the foregoing.
1.15 Contract means the instrument identified in the recitals to this
Agreement and any extension, renewal or amendment thereto.
1.16 Contract Area means as of the Effective Date the area that is described
in Exhibit B. The perimeter or perimeters of the Contract Area shall
correspond to that area covered by the Contract, as such area may vary
from time to time during the term of validity of the Contract.
1.17 Control means the ownership directly or indirectly of
Check one Alternative.
[ ] ALTERNATIVE NO. 1
-----------------
more than fifty (50) percent
[X ] ALTERNATIVE NO. 2
-----------------
fifty (50) percent or more
of the voting rights in a legal entity. "Controls", "Controlled
by" and other derivatives shall be construed accordingly.
1.18 Cost Hydrocarbons means that portion of the total production of
Hydrocarbons which is allocated to the Parties under the Contract and
this Agreement for the recovery of the costs and expenses incurred by
the Parties and allowed to be recovered pursuant to the Contract.
1.19 Crude Oil means all crude oils, condensates, and natural gas liquids at
atmospheric pressure which are subject to and covered by the Contract.
1.20 Day means a calendar day unless otherwise specifically provided.
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1.21 Deepening means an operation whereby a well is drilled to an objective
Zone below the deepest Zone in which the well was previously drilled,
or below the deepest Zone proposed in the associated AFE (if required),
whichever is the deeper. "Deepen" and other derivatives shall be
construed accordingly.
1.22 Development Plan means a plan for the development of Hydrocarbons from
an Exploitation Area.
1.23 Development Well means any well drilled for the production of
Hydrocarbons pursuant to a Development Plan.
1.24 Discovery means the discovery of an accumulation of Hydrocarbons whose
existence until that moment was unproven by drilling.
1.25 Dispute means any dispute, controversy or claim (of any and every kind
or type, whether based on contract, tort, statute, regulation, or
otherwise) arising out of, relating to, or connected with this
Agreement or the operations carried out under this Agreement, including
any dispute as to the construction, validity, interpretation,
enforceability or breach of this Agreement.
1.26 Entitlement means that quantity of Hydrocarbons (excluding all
quantities used or lost in Joint Operations) of which a Party has the
right and obligation to take delivery pursuant to the terms of this
Agreement and the Contract, as such rights and obligations may be
adjusted by the terms of any lifting, balancing and other disposition
agreements entered into pursuant to Article 9.
1.27 Environmental Loss means any loss, damages, costs, expenses or
liabilities (other than Consequential Loss) caused by a discharge of
Hydrocarbons, pollutants or other contaminants into or onto any medium
(such as land, surface water, ground water and/or air) arising out of,
relating to, or connected with this Agreement or the operations carried
out under this Agreement, including any of the following: (i) injury or
damage to, or destruction of, natural resources or real or personal
property; (ii) cost of pollution control, cleanup and removal; (iii)
cost of restoration of natural resources; and (iv) fines, penalties or
other assessments.
1.28 Exclusive Operation means those operations and activities carried out
pursuant to this Agreement, the costs of which are chargeable to the
account of less than all the Parties.
1.29 Exclusive Well means a well drilled pursuant to an Exclusive Operation.
1.30 Exploitation Area means that part of the Contract Area which is
established for development of a Commercial Discovery pursuant to the
Contract or, if the Contract does not establish an exploitation area,
then that part of the Contract Area which is delineated as the
exploitation area in a Development Plan approved as a Joint Operation
or as an Exclusive Operation.
1.31 Exploitation Period means any and all periods of exploitation during
which the production and removal of Hydrocarbons is permitted under the
Contract.
1.32 Exploration Period means any and all periods of exploration set out in
the Contract.
1.33 Exploration Well means any well the purpose of which at the time of the
commencement of drilling is to explore for an accumulation of
Hydrocarbons, which accumulation was at that time unproven by drilling.
1.34 G & G Data means only geological, geophysical and geochemical data and
other similar information that is not obtained through a well bore.
1.35 Government means any central, federal or regional government which has
sovereignty over the Contract Area and any political subdivision,
agency or instrumentality thereof, including the Government Oil & Gas
Company.
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1.36 Government Oil & Gas Company means any Government owned oil and gas
company participating under the Contract or having rights under the
Contract.
1.37 Gross Negligence / Willful Misconduct means any act or failure to act
(whether sole, joint or concurrent) by any person or entity which was
intended to cause, or which was in reckless disregard of or wanton
indifference to, harmful consequences such person or entity knew, or
should have known, such act or failure would have on the safety or
property of another person or entity.
1.38 Hydrocarbons means all substances which are subject to and covered by
the Contract, including Crude Oil and Natural Gas.
1.39 Joint Account means the accounts maintained by Operator in accordance
with the provisions of this Agreement, including the Accounting
Procedure.
1.40 Joint Operations means those operations and activities carried out by
Operator pursuant to this Agreement, the costs of which are chargeable
to all Parties.
1.41 Joint Property means, at any point in time, all xxxxx, facilities,
equipment, materials, information, funds and property (other than
Hydrocarbons) held for use in Joint Operations. [NOTE: This definition
should be reviewed in light of the Alternative chosen in Article 15
with regard to Venture Information.]
1.42 Laws / Regulations means those laws, statutes, rules and regulations
governing activities under the Contract.
1.43 Minimum Work Obligations means those work and/or expenditure
obligations specified in Article 5.1 of the Contract that must be
performed in order to satisfy the obligations of the Contract.
1.44 Natural Gas means all gaseous hydrocarbons (including wet gas, dry gas
and residue gas) which are subject to and covered by the Contract, but
excluding Crude Oil.
1.45 Non-Consenting Party means each Party who elects not to participate in
an Exclusive Operation.
1.46 Non-Operator means each Party to this Agreement other than Operator.
1.47 Operating Committee means the committee constituted in accordance with
Article 5.
1.48 Operator means a Party to this Agreement designated as such in
accordance with Articles 4 or 7.12(F).
1.49 Participating Interest means as to any Party, the undivided interest of
such Party (expressed as a percentage of the total interests of all
Parties) in the rights and obligations derived from the Parties'
interest in the Contract and this Agreement.
1.50 Plugging Back means a single operation whereby a deeper Zone is
abandoned in order to attempt a Completion in a shallower Zone. "Plug
Back" and other derivatives shall be construed accordingly.
1.51 Profit Hydrocarbons means that portion of the total production of
Hydrocarbons, in excess of Cost Hydrocarbons, which is allocated to the
Parties under the terms of the Contract.
1.52 Recompletion means an operation whereby a Completion in one Zone is
abandoned in order to attempt a Completion in a different Zone within
the existing wellbore. "Recomplete" and other derivatives shall be
construed accordingly.
1.53 Reworking means an operation conducted in the wellbore of a well after
it is Completed to secure, restore, or improve production in a Zone
which is currently open to production in the wellbore. Such operations
include well stimulation operations, but exclude any routine repair or
maintenance work, or drilling, Sidetracking, Deepening, Completing,
Recompleting, or Plugging Back of a well. "Rework" and other
derivatives shall be construed accordingly.
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1.54 Security means (i) a guarantee or standby letter of credit issued by a
bank; (ii) an on-demand bond issued by a surety corporation; (iii) a
corporate guarantee; (iv) any financial security required by the
Contract or this Agreement; and (v) any financial security agreed from
time to time by the Parties; provided, however, that the bank, surety
or corporation issuing the guarantee, standby letter of credit, bond or
other security (as applicable) has a credit rating indicating it has a
sufficient worth to pay its obligations in all reasonably foreseeable
circumstances.
1.55 Senior Supervisory Personnel means, with respect to a Party, any
individual who functions as:
Check one Alternative.
[X] ALTERNATIVE NO. 1 - Field Supervisor Tier
its designated manager or supervisor who is responsible for or
in charge of onsite drilling, construction or production and
related operations, or any other field operations;
[ ] ALTERNATIVE NO. 2 - Facility Manager Tier
its designated manager or supervisor of an onshore or offshore
installation or facility used for operations and activities of
such Party, but excluding all managers or supervisors who are
responsible for or in charge of onsite drilling, construction
or production and related operations or any other field
operations;
[ ] ALTERNATIVE NO. 3 - Resident Manager and Direct Managerial
Report Tier its senior resident manager who directs all
operations and activities of such Party in the country or
region in which he is resident, and any manager who directly
reports to such senior resident manager in such country or
region, but excluding all managers or supervisors who are
responsible for or in charge of installations or facilities,
onsite drilling, construction or production and related
operations, or any other field operations;
[ ] ALTERNATIVE NO. 4 - Resident Manager Tier
its senior resident manager who directs all operations and
activities of such Party in the country or region in which he
is resident, but excluding all managers or supervisors who are
responsible for or in charge of installations or facilities,
onsite drilling, construction or production and related
operations, or any other field operations;
and, in any of the above alternatives, any individual who functions for
such Party or one of its Affiliates at a management level equivalent to
or superior to the tier selected, or any officer or director of such
Party or one of its Affiliates.
1.56 Sidetracking means the directional control and intentional deviation of
a well from vertical so as to change the bottom hole location unless
done to straighten the hole or to drill around junk in the hole or to
overcome other mechanical difficulties. "Sidetrack" and other
derivatives shall be construed accordingly.
1.57 Testing means an operation intended to evaluate the capacity of a
Zone to produce Hydrocarbons. "Test" and other derivatives shall be
construed accordingly.
1.58 Urgent Operational Matters has the meaning ascribed to it in Article
5.12(A)(1).
1.59 Work Program and Budget means a work program for Joint Operations and
budget therefor as described and approved in accordance with Article 6.
1.60 Zone means a stratum of earth containing or thought to contain an
accumulation of Hydrocarbons separately producible from any other
accumulation of Hydrocarbons.
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ARTICLE 2
EFFECTIVE DATE AND TERM
This Agreement shall have effect from the Effective Date (as defined in
the preamble to this Agreement) and shall continue in effect until the following
occur in accordance with the terms of this Agreement: the Contract terminates;
all materials, equipment and personal property used in connection with Joint
Operations or Exclusive Operations have been disposed of or removed; and final
settlement (including settlement in relation to any financial audit carried out
pursuant to the Accounting Procedure) has been made. Notwithstanding the
preceding sentence: (i) Article 10 shall remain in effect until all abandonment
obligations under the Contract have been satisfied; and (ii) Article 4.5,
Article 8, Article 15.2, Article 18 and the indemnity obligation under Article
20.1 (A) shall remain in effect until all obligations have been extinguished and
all Disputes have been resolved. Termination of this Agreement shall be without
prejudice to any rights and obligations arising out of or in connection with
this Agreement which have vested, matured or accrued prior to such termination.
ARTICLE 3
SCOPE
3.1 Scope
(A) The purpose of this Agreement is to establish the respective
rights and obligations of the Parties with regard to
operations under the Contract, including the joint
exploration, appraisal, development, production and
disposition of Hydrocarbons from the Contract Area.
(B) For greater certainty, the Parties confirm that, except to the
extent expressly included in the Contract, the following
activities are outside of the scope of this Agreement and are
not addressed herein:
(1) construction, operation, ownership, maintenance,
repair and removal of facilities downstream from the
delivery point (as determined under Article 9) of the
Parties' Entitlements;
(2) transportation of the Parties' Entitlements
downstream from the delivery point (as determined
under Article 9);
(3) marketing and sales of Hydrocarbons, except as
expressly provided in Article 7.12(E), Article 8.4
and Article 9;
(4) acquisition of rights to explore for, appraise,
develop or produce Hydrocarbons outside of the
Contract Area (other than as a consequence of
unitization with an adjoining contract area under the
terms of the Contract); and
(5) exploration, appraisal, development or production of
minerals other than Hydrocarbons, whether inside or
outside of the Contract Area.
3.2 Participating Interest
(A) The Participating Interests of the Parties as of the Effective Date
are:
A&T 50.0%
Hawler 50.0%
(B) If a Party transfers all or part of its Participating Interest
pursuant to the provisions of this Agreement and the Contract,
the Participating Interests of the Parties shall be revised
accordingly.
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3.3 Ownership, Obligations and Liabilities
(A) Unless otherwise provided in this Agreement, all the rights
and interests of the Contractor (as defined in the Contract)
in and under the Contract, all Joint Property, and any
Hydrocarbons produced from the Contract Area shall, subject to
the terms of the Contract, be owned by the Parties in
accordance with their respective Participating Interests.
(B) Unless otherwise provided in this Agreement, the obligations
of the Parties under the Contract and all liabilities and
expenses incurred by Operator in connection with Joint
Operations shall be charged to the Joint Account and all
credits to the Joint Account shall be shared by the Parties,
in accordance with their respective Participating Interests.
(C) Each Party shall pay when due, in accordance with the
Accounting Procedure, its Participating Interest share of
Joint Account expenses, including cash advances and interest,
accrued pursuant to this Agreement. A Party's payment of any
charge under this Agreement shall be without prejudice to its
right to later contest the charge.
Check Article 3.4, if desired.
[X] OPTIONAL PROVISION
3.4 Government Participation
If Government Oil & Gas Company elects to participate in the
rights and obligations of Parties, the Parties shall
contribute, in proportion to their respective Participating
Interests, to the interest to be acquired by Government Oil &
Gas Company.
Check one alternative.
[ ] ALTERNATIVE NO. 1
The Parties shall execute such documents as may be
necessary to effect such transfer of interests and
the joinder of Government Oil & Gas Company as a
Party to this Agreement. All payments received for
the transfer of such interests shall be credited to
the Parties in proportion to their Participating
Interests.
[X] ALTERNATIVE NO. 2
The Parties shall execute such documents as may be
necessary to effect such transfer of interests. The
rights and obligations of the Parties with respect to
each other shall remain unchanged; however, they
shall enter into a separate operating agreement with
Government Oil & Gas Company with respect to the
rights and obligations of Government Oil & Gas
Company, on the one hand, and the Parties on the
other. All payments received for the transfer of such
interests shall be credited to the Parties in
proportion to their Participating Interests.
ARTICLE 4
OPERATOR
4.1 Designation of Operator
A&T is designated as Operator and agrees to act as such in accordance
with this Agreement.
4.2 Rights and Duties of Operator
(A) Subject to the terms and conditions of this Agreement,
Operator shall have all of the rights, functions and duties of
Operator under the Contract and shall have exclusive charge of
and shall conduct all Joint Operations. Operator may employ
independent contractors and agents (which independent
contractors and agents may include an Affiliate of Operator, a
Non-Operator, or an Affiliate of a Non-Operator) in such Joint
Operations.
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(B) In the conduct of Joint Operations Operator shall:
(1) perform Joint Operations in accordance with the
provisions of the Contract, the Laws / Regulations,
this Agreement, and the decisions of the Operating
Committee not in conflict with this Agreement;
(2) conduct all Joint Operations in a diligent, safe and
efficient manner in accordance with such good and
prudent petroleum industry practices and field
conservation principles as are generally followed by
the international petroleum industry under similar
circumstances;
(3) exercise due care with respect to the receipt,
payment and accounting of funds in accordance with
good and prudent practices as are generally followed
by the international petroleum industry under similar
circumstances;
(4) subject to Article 4.6 and the Accounting Procedure,
neither gain a profit nor suffer a loss as a result
of being the Operator in its conduct of Joint
Operations, provided that Operator may rely upon
Operating Committee approval of specific accounting
practices not in conflict with the Accounting
Procedure;
(5) perform the duties for the Operating Committee set
out in Article 5, and prepare and submit to the
Operating Committee proposed Work Programs and
Budgets and (if required) AFEs, as provided in
Article 6;
(6) acquire all permits, consents, approvals, and surface
or other rights that may be required for or in
connection with the conduct of Joint Operations;
(7) upon receipt of reasonable advance notice, permit the
representatives of any of the Parties to have at all
reasonable times during normal business hours and at
their own risk and expense reasonable access to the
Joint Operations with the right to observe all Joint
Operations and to inspect all Joint Property and to
conduct financial audits as provided in the
Accounting Procedure;
(8) undertake to maintain the Contract in full force and
effect in accordance with such good and prudent
petroleum industry practices as are generally
followed by the international petroleum industry
under similar circumstances. Operator shall timely
pay and discharge all liabilities and expenses
incurred in connection with Joint Operations and use
its reasonable endeavors to keep and maintain the
Joint Property free from all liens, charges and
encumbrances arising out of Joint Operations;
(9) pay to the Government for the Joint Account, within
the periods and in the manner prescribed by the
Contract and the Laws / Regulations, all periodic
payments, royalties, taxes, fees and other payments
pertaining to Joint Operations but excluding any
taxes measured by the incomes of the Parties;
(10) carry out the obligations of Operator pursuant to the
Contract, including preparing and furnishing such
reports, records and information as may be required
pursuant to the Contract;
(11) have, in accordance with any decisions of the
Operating Committee, the exclusive right and
obligation to represent the Parties in all dealings
with the Government with respect to matters arising
under the Contract and Joint Operations. Operator
shall notify the other Parties as soon as possible of
such meetings. Subject to the Contract and any
necessary Government approvals, Non-Operators shall
have the right to attend any meetings with the
Government with respect to such matters, but only in
the capacity of observers. Nothing contained in this
Agreement shall restrict any Party from holding
discussions with the Government with respect to any
issue peculiar to its particular business interests
arising under the Contract or this Agreement, but in
such event such Party shall promptly advise the
Parties, if possible, before and in any event
promptly after such discussions, provided that such
Party shall not be required to divulge to the Parties
any matters discussed to the extent the same involve
proprietary information or matters not affecting the
Parties;
8
(12) in accordance with Article 9.3 and any decisions of
the Operating Committee, assess (to the extent
lawful) alternatives for the disposition of Natural
Gas from a Discovery;
(13) in case of an emergency (including a significant
fire, explosion, Natural Gas release, Crude Oil
release, or sabotage; incident involving loss of
life, serious injury to an employee, contractor, or
third party, or serious property damage; strikes and
riots; or evacuations of Operator personnel): (i)
take all necessary and proper measures for the
protection of life, health, the environment and
property; and (ii) as soon as reasonably practicable,
report to Non-Operators the details of such event and
any measures Operator has taken or plans to take in
response thereto;
(14) establish and implement pursuant to Article 4.12 an
HSE plan to govern Joint Operations which is designed
to ensure compliance with applicable HSE laws, rules
and regulations and this Agreement;
(15) include, to the extent practical, in its contracts
with independent contractors and to the extent
lawful, provisions which:
(a) establish that such contractors can only
enforce their contracts against Operator;
(b) permit Operator, on behalf of itself and
Non-Operators, to enforce contractual
indemnities against, and recover losses and
damages suffered by them (insofar as
recovered under their contracts) from, such
contractors; and
(c) require such contractors to take insurance
required by Article 4.7(H).
4.3 Operator Personnel
Check one Alternative
[ ] ALTERNATIVE NO. 1
Operator shall engage or retain only such employees,
contractors, consultants and agents as are reasonably
necessary to conduct Joint Operations. Subject to the Contract
and this Agreement, Operator shall determine the number of
employees, contractors, consultants and agents, the selection
of such persons, their hours of work, and the compensation to
be paid to all such persons in connection with Joint
Operations.
[X] ALTERNATIVE NO. 2
Operator shall engage or retain only such employees,
secondees, contractors, consultants and agents as are
reasonably necessary to conduct Joint Operations. Subject to
the Contract and this Agreement, Operator shall determine the
number of employees, secondees, contractors, consultants and
other persons, the selection of such persons, their hours of
work, and (except for secondees) the compensation to be paid
to all such persons in connection with Joint Operations.
9
[ ] ALTERNATIVE NO. 3 - (from Paragraph (A) to (F))
(A) Operator shall engage or retain only such employees,
Secondees, contractors, consultants and agents as
are reasonably necessary to conduct Joint
Operations. For the purposes of this Article 4.3,
"Secondee" means an employee of a Non-Operator (or
its Affiliate) who is seconded to Operator to
provide services under a secondment agreement to be
negotiated and entered into between Operator and
such Non-Operator; and "Secondment" means placement
within Operator's organization in accordance with
this Article 4.3 of one or more persons who are
employed by a Non-Operator or an Affiliate.
(B) Subject to the Contract and this Agreement, Operator
shall determine the number of employees, Secondees,
contractors, consultants and agents, the selection of
such persons, their hours of work, and (except for
Secondees) the compensation to be paid to all such
persons in connection with Joint Operations.
(C) No Secondment may be implemented except (i) in
situations requiring particular expertise or
involving projects of a technical, operational or
economically challenging nature; and (ii) in the
manner set out in paragraphs (1) to (7) below.
(1) Any Party may propose Secondment for a
designated purpose related to Joint
Operations. Any proposal for Secondment must
include the:
(a) designated purpose and scope of
Secondment, including duties,
responsibilities, and deliverables;
(b) duration of the Secondment;
(c) number of Secondees and minimum
expertise, qualifications and
experience required;
(d) work location and position within
Operator's organization of each
Secondee; and
(e) estimated costs of the Secondment.
(2) In relation to a proposed Secondment meeting
the requirements of Article 4.3(C)(1),
Operator shall as soon as reasonably
practicable:
Check one Alternative.
[ ] ALTERNATIVE NO. 1
approve or reject any Secondment
proposed by a Non-Operator, in
Operator's sole discretion.
10
[ ] ALTERNATIVE NO. 2
approve (such approval to not be
unreasonably withheld) or reject any
Secondment proposed by a
Non-Operator. Without prejudice to
Operator's right to conduct Joint
Operations in accordance with this
Agreement and the Contract, Operator
shall consider such Secondment
proposal in light of the: (i)
expertise and experience required
for the relevant Joint Operations;
(ii) expertise and experience of
Operator's personnel; and (iii)
potential benefits of such
Secondment to the conduct of Joint
Operations.
(3) Any proposal for one or more Secondment
positions approved by Operator is subject
to: (i) the Operating Committee's
authorization of an appropriate budget for
such Secondment positions; and (ii)
Non-Operators continuing to make available
to Operator Secondees qualified to fulfill
the designated purpose and scope of such
Secondment.
(4) As to each approved and authorized
Secondment position, Operator shall request
Non-Operators to nominate, by a specified
date, qualified personnel to be the Secondee
for such position. Each Non-Operator has the
right (but not the obligation) to nominate
for each Secondment position one or more
proposed Secondees who such Non-Operator
considers reasonably qualified to fulfill
the designated purpose and scope of such
Secondment.
(5) Following the deadline for submitting
nominations, Operator shall consider the
expertise and experience of each such
nominee in light of the expertise and
experience required for the approved and
authorized Secondment position, and shall:
Check one Alternative.
[ ] ALTERNATIVE NO. 1
select or reject any nominee in
Operator's sole discretion.
[ ] ALTERNATIVE NO. 2
select from the nominees the best
qualified person, unless Operator
reasonably demonstrates that no
nominee is qualified to fulfill the
designated purpose and scope of such
Secondment.
(6) Operator shall have the right to terminate
the Secondment for cause in accordance with
the secondment agreement provided for under
Article 4.3(D).
(7) Although each Secondee shall report to and
be directed by Operator, each Secondee shall
remain at all times the employee of the
Party (or its Affiliate) nominating such
Secondee.
(D) Any Secondment under this Agreement shall be in
accordance with a separate secondment agreement to be
negotiated and entered into between Operator and the
employer of the Secondee, which agreement shall be
consistent with this Article 4.3. [NOTE: A model
Secondment Agreement may be acquired through the
AIPN]
(E) All costs related to Secondment and Secondees that
are within the Work Program and Budget related to
such Secondment position shall be charged to the
Joint Account.
(F) If any Secondee acting as the Senior Supervisory
Personnel of Operator or its Affiliates engages in
Gross Negligence / Willful Misconduct which
proximately causes the Parties to incur damage, loss,
cost, expense or liability for claims, demands or
causes of action referred to in Articles 4.6(A) or
4.6(B), then all such damages, losses, costs,
expenses and liabilities shall be allocated to:
11
Check one Alternative.
[ ] ALTERNATIVE NO. 1
the Joint Account notwithstanding the
provisions of Article 4.6.
[ ] ALTERNATIVE NO. 2
Operator, in accordance with Article 4.6.
[ ] ALTERNATIVE NO. 3
the Non-Operator who nominated such
Secondee, in an equivalent manner and to the
same extent liability for Gross Negligence /
Willful Misconduct is allocated to Operator
pursuant to Article 4.6.
4.4 Information Supplied by Operator
(A) Operator shall provide Non-Operators with the following data
and reports (to the extent to be charged to the Joint Account)
as they are currently produced or compiled from Joint
Operations:
(1) copies of all logs or surveys, including in digitally
recorded format if such exists;
(2) daily drilling reports;
(3) copies of all Tests and core data and analysis
reports;
(4) final well recap report;
(5) copies of plugging reports;
(6) copies of final geological and geophysical maps,
seismic sections and shot point location maps;
(7) engineering studies, development schedules and
[quarterly/annual] progress reports on development
projects;
(8) field and well performance reports, including
reservoir studies and reserve estimates;
(9) as requested by a Non-Operator, (i) copies of all
material reports relating to Joint Operations or the
Contract Area furnished by Operator to the
Government; and (ii) other material studies and
reports relating to Joint Operations;
(10) gas balancing reports under agreements provided for
in Article 9.3;
(11) such additional information as a Non-Operator may
reasonably request, provided that the requesting
Party or Parties pay the costs of preparation of such
information and that the preparation of such
information will not unduly burden Operator's
administrative and technical personnel. Only
Non-Operators who pay such costs will receive such
additional information; and
(12) other reports as directed by the Operating Committee.
12
(B) Operator shall give Non-Operators access at all reasonable
times during normal business hours to all data and reports
(other than data and reports provided to Non-Operators in
accordance with Article 4.4(A)) acquired in the conduct of
Joint Operations, which a Non-Operator may reasonably request.
Any Non-Operator may make copies of such other data at its
sole expense.
4.5 Settlement of Claims and Lawsuits
(A) Operator shall promptly notify the Parties of any and all
material claims or suits that relate in any way to Joint
Operations. Operator shall represent the Parties and defend or
oppose the claim or suit. Operator may in its sole discretion
compromise or settle any such claim or suit or any related series
of claims or suits for an amount not to exceed the equivalent of
Fifty Thousand U.S. dollars ($50,000 USD) exclusive of legal
fees. Operator shall obtain the approval and direction of the
Operating Committee on amounts in excess of the above-stated
amount. Without prejudice to the foregoing, each Non-Operator
shall have the right to be represented by its own counsel at its
own expense in the settlement, compromise or defense of such
claims or suits.
(B) Any Non-Operator shall promptly notify the other Parties of any
claim made against such Non-Operator by a third party that arises
out of or may affect the Joint Operations, and such Non-Operator
shall defend or settle the same in accordance with any directions
given by the Operating Committee. Those costs, expenses and
damages incurred pursuant to such defense or settlement which are
attributable to Joint Operations shall be for the Joint Account.
(C) Notwithstanding Article 4.5(A) and Article 4.5(B), each Party
shall have the right to participate in any such suit,
prosecution, defense or settlement conducted in accordance with
Article 4.5(A) and Article 4.5(B), at its sole cost and expense;
provided always that no Party may settle its Participating
Interest share of any claim without first satisfying the
Operating Committee that it can do so without prejudicing the
interests of the Joint Operations.
4.6 Limitation on Liability of Operator
(A) Except as set out in Article 4.6(C), neither Operator nor any
other Indemnitee (as defined below) shall bear (except as a Party
to the extent of its Participating Interest share) any damage,
loss, cost, expense or liability resulting from performing (or
failing to perform) the duties and functions of Operator, and the
Indemnitees are hereby released from liability to Non-Operators
for any and all damages, losses, costs, expenses and liabilities
arising out of, incident to or resulting from such performance or
failure to perform, even though caused in whole or in part by a
pre-existing defect, or the negligence (whether sole, joint or
concurrent), gross negligence, willful misconduct, strict
liability or other legal fault of Operator (or any such
Indemnitee).
(B) Except as set out in Article 4.6(C), the Parties shall (in
proportion to their Participating Interests) defend and indemnify
Operator and its Affiliates, and their respective directors,
officers, and employees (collectively, the "Indemnitees"), from
any and all damages, losses, costs, expenses (including
reasonable legal costs, expenses and attorneys' fees) and
liabilities incident to claims, demands or causes of action
brought by or on behalf of any person or entity, which claims,
demands or causes of action arise out of, are incident to or
result from Joint Operations, even though caused in whole or in
part by a pre-existing defect, or the negligence (whether sole,
joint or concurrent), gross negligence, willful misconduct,
strict liability or other legal fault of Operator (or any such
Indemnitee).
Check Paragraph (C), if desired. Renumber following paragraph if
Paragraph (C) is not selected.
[X] OPTIONAL PROVISION
(C) Notwithstanding Articles 4.6(A) or 4.6(B), if the
Operator fails to take the necessary precautions to
prevent any Senior Supervisory Personnel of Operator
or its Affiliates from engaging in Gross Negligence /
Willful Misconduct which proximately causes the
Parties to incur damage, loss, cost, expense or
liability for claims, demands or causes of action
referred to in Articles 4.6(A) or 4.6(B), then, in
addition to its Participating Interest share:
13
Check one Alternative.
[X] ALTERNATIVE NO. 1 - No Limitation
Operator shall bear all such damages,
losses, costs, expenses and liabilities.
[ ] ALTERNATIVE NO. 2 - Joint Property
Limitation Operator shall bear only the
actual damage, loss, cost, expense and
liability to repair, replace and/or remove
Joint Property so
damaged or lost, if any.
[ ] ALTERNATIVE NO. 3 - Financial Limitation
Operator shall bear only the first
[__________ U.S. dollars] of such damages,
losses, costs, expenses and liabilities.
[NOTE: Consider whether the amount stated
as a financial limitation should be
adjusted in accordance with an inflation or
other index.]
Notwithstanding the foregoing, under no circumstances
shall Operator (except as a Party to the extent of
its Participating Interest) or any other Indemnitee
bear any Consequential Loss or Environmental Loss.
(D) Nothing in this Article 4.6 shall be deemed to relieve
Operator from its Participating Interest share of any damage,
loss, cost, expense or liability arising out of, incident to,
or resulting from Joint Operations.
[NOTE: Consider whether under applicable law the indemnification portions of
Article 4.6, Article 7.3 and Article 7.9 must be set out in conspicuous language
or meet other legal requirements in order to be enforceable.]
4.7 Insurance Obtained by Operator
(A) Operator shall procure and maintain for the Joint Account all
insurance in the types and amounts required by the Contract or
the Laws / Regulations.
(B) Operator shall procure and maintain any further insurance, at
reasonable rates, as the Operating Committee may from time to
time require. In the event that such further insurance is, in
Operator's reasonable opinion, unavailable or available only
at an unreasonable cost, Operator shall promptly notify the
Non-Operators in order to allow the Operating Committee to
reconsider such further insurance.
(C) Each Party will be provided the opportunity to underwrite any
or all of the insurance to be obtained by Operator under
Articles 4.7(A) and 4.7(B), through such Party's Affiliate
insurance company or, if such direct insurance is not so
permitted, through reinsurance policies to such Party's
Affiliate insurance company; provided that the security and
creditworthiness of such insurance arrangements are
satisfactory to Operator, and that such arrangements will not
result in any part of the premiums for such insurance not
being recoverable under the Contract, or being significantly
higher than the market rate.
(D) Subject to the Contract and the Laws / Regulations, any Party
may elect not to participate in the insurance to be procured
under:
14
Check one Alternative.
[X] ALTERNATIVE NO. 1
Articles 4.7(A) and 4.7(B) provided such
Party:
[ ] ALTERNATIVE NO. 2
Article 4.7(B) provided such Party:
(1) gives prompt written notice to that effect to
Operator;
(2) does nothing which may interfere with Operator's
negotiations for such insurance for the other
Parties;
(3) obtains insurance prior to or concurrent with the
commencement of relevant operations and maintains
such insurance (in respect of which a current
certificate of adequate coverage, provided at least
once a year, shall be sufficient evidence) or other
evidence of financial responsibility which fully
covers its Participating Interest share of the risks
that would be covered by the insurance to be procured
under Article 4.7(A) and/or Article 4.7(B), as
applicable, and which the Operating Committee
determines to be acceptable. No such determination of
acceptability shall in any way absolve a
non-participating Party from its obligation to meet
each cash call (except, in accordance with Article
4.7(F), as regards the costs of the insurance policy
in which such Party has elected not to participate)
including any cash call with respect to damages and
losses and/or the costs of remedying the same in
accordance with the terms of this Agreement, the
Contract and the Laws / Regulations. If such Party
obtains other insurance, such insurance shall (a)
contain a waiver of subrogation in favor of all the
other Parties, the Operator and their insurers but
only with respect to their interests under this
Agreement; (b) provide that thirty (30) days written
notice be given to Operator prior to any material
change in, or cancellation of, such insurance policy;
(c) be primary to, and receive no contribution from,
any other insurance maintained by or on behalf of, or
benefiting Operator or the other Parties; and (d)
contain adequate territorial extensions and coverage
in the location of the Joint Operations; and
(4) is responsible for all deductibles, coinsurance
payments, self-insured exposures, uninsured or
underinsured exposures relating to its interests
under this Agreement.
Check Paragraph (E), if desired. Renumber following paragraphs if
Paragraph (E) is not selected.
[X] OPTIONAL PROVISION
(E) In the event Operator elects, to the extent permitted
by the Contract and Laws / Regulations, to self-insure
all or part of the coverage to be procured under
Articles 4.7(A) and/or 4.7(B), Operator shall so notify
the Operating Committee and provide a qualified
self-insurance letter stating what coverages Operator
is self-insuring. Any risk to be covered by insurance
to be procured in accordance with Articles 4.7(A) and
4.7(B), that is not identified in the self-insurance
letter shall be covered by insurance and supported by a
current certificate of adequate coverage. If requested
by the Operating Committee from time to time, Operator
shall provide evidence of financial responsibility,
acceptable to the Operating Committee, which fully
covers the risks that would be covered by the insurance
to be procured under Articles 4.7(A) and 4.7(B).
(F) The cost of insurance in which all the Parties are
participating shall be for the Joint Account and the cost of
insurance in which less than all the Parties are participating
shall be charged to the Parties participating in proportion to
their respective Participating Interests. Subject to the
preceding sentence, the cost of insurance with respect to an
Exclusive Operation shall be charged to the Consenting
Parties.
15
(G) Operator shall, with respect to all insurance obtained under
this Article 4.7:
(1) use reasonable endeavors to procure or cause to be
procured such insurance prior to or concurrent with,
the commencement of relevant operations and maintain
or cause to be maintained such insurance during the
term of the relevant operations or any longer term
required under the Contract or the Laws /
Regulations;
(2) promptly inform the participating Parties when such
insurance is obtained and supply them with
certificates of insurance or copies of the relevant
policies when the same are issued;
(3) arrange for the participating Parties, according to
their respective Participating Interests, to be named
as co-insureds on the relevant policies with waivers
of subrogation in favor of all the Parties but only
with respect to their interests under this Agreement;
(4) use reasonable endeavors to ensure that each policy
shall survive the default or bankruptcy of the
insured for claims arising out of an event before
such default or bankruptcy and that all rights of the
insured shall revert to the Parties not in default or
bankruptcy; and
(5) duly file all claims and take all necessary and
proper steps to collect any proceeds and credit any
proceeds to the participating Parties in proportion
to their respective Participating Interests.
(H) Operator shall use its reasonable endeavors to require all
contractors performing work with respect to Joint Operations
to:
(1) obtain and maintain any and all insurance in the
types and amounts required by the Contract, the Laws
/ Regulations or any decision of the Operating
Committee;
(2) name the Parties as additional insureds on the
contractor's insurance policies and obtain from their
insurers waivers of all rights of recourse against
Operator, Non-Operators and their insurers; and
(3) provide Operator with certificates reflecting such
insurance prior to the commencement of their
services.
4.8 Commingling of Funds
Check one Alternative.
[X] ALTERNATIVE NO. 1
Operator may not commingle with Operator's own funds the
monies which Operator receives from or for the Joint Account
pursuant to this Agreement. However, Operator reserves the
right to make future proposals to the Operating Committee with
respect to the commingling of funds to achieve financial
efficiency.
[ ] ALTERNATIVE NO. 2
Operator may commingle with its own funds the monies which it
receives from or for the Joint Account pursuant to this
Agreement. Notwithstanding that monies of a Non-Operator have
been commingled with Operator's funds, Operator shall account
to the Non-Operators for the monies of a Non-Operator advanced
or paid to Operator, whether for the conduct of Joint
Operations or as proceeds from the sale of Hydrocarbons or
Joint Property under this Agreement. Such monies shall be
applied only to their intended use and shall in no way be
deemed to be funds belonging to Operator.
16
Check if desired, in relation to Alternative No. 2
[ ] OPTIONAL PROVISION
Notwithstanding the foregoing, the Operating
Committee shall have the right to require Operator to
segregate from Operator's own funds the monies which
Operator receives:
Check one alternative.
[ ] ALTERNATIVE NO. 2-1
from or for the Joint Account pursuant to
this Agreement.
[ ] ALTERNATIVE NO. 2-2
from the Parties in connection with
operations on each Exploitation Area.
Check if desired.
[ ] OPTIONAL PROVISION - Interest Bearing Account
The Operating Committee may decide that monies Operator
receives for the Joint Account shall be deposited in an
interest-bearing account
Check one alternative.
[ ] ALTERNATIVE NO. 1
at any time.
[ ] ALTERNATIVE NO. 2
after the approval of the Development Plan.
Interest earned shall be allocated among the Parties on an
equitable basis taking into account the date of the funding by
each Party and its share of the Joint Account monies. Operator
shall apply such earned interest to the next succeeding cash
call or, if directed by the Operating Committee, pay it to the
Parties.
4.9 Resignation of Operator
Subject to Article 4.11, Operator may resign as Operator at any time by
so notifying the other Parties at least one hundred and twenty (120)
Days prior to the effective date of such resignation.
4.10 Removal of Operator
(A) Subject to Article 4.11, Operator shall be removed upon
receipt of notice from any Non-Operator if:
(1) Operator becomes insolvent or bankrupt, or makes an
assignment for the benefit of creditors; or
(2) an order is made by a court or an effective
resolution is passed for the reorganization under any
bankruptcy law, dissolution, liquidation, or winding
up of Operator; or
(3) a receiver is appointed for a substantial part of
Operator's assets; or
(4) Operator dissolves, liquidates, is wound up, or
otherwise terminates its existence; or
(5) the Kurdistan Regional Government of Iraq states in
writing that the Operator is not acceptable to it as
a party to act as "Operator" under the Contract; or
17
(6) a senior manager of Operator is changed without first
obtaining the approval of each Non-Operator holding a
Participating Interest of thirty percent (30%) or
more and replaced by a person who is not acceptable
to at least one (1) such Non-Operator.
(B) Subject to Article 4.11, Operator may be removed by the
decision of the Non-Operators if Operator has committed a
material breach of this Agreement and has either failed to
commence to cure that breach within thirty (30) Days of
receipt of a notice from Non-Operators detailing the alleged
breach or failed to diligently pursue the cure to
completion. Any decision of Non-Operators to give notice of
breach to Operator or to remove Operator under this Article
4.10(B) shall be made by an affirmative vote of one (1) or
more of the total number of Non-Operators holding a combined
Participating Interest of at least forty percent (40%).
However, if Operator disputes such alleged commission of or
failure to cure a material breach and dispute resolution
proceedings are initiated pursuant to Article 18.2 in
relation to such breach, then Operator shall remain
appointed and no successor Operator may be appointed pending
the conclusion or abandonment of such proceedings, subject
to the terms of Article 8.3 with respect to Operator's
breach of its payment obligations.
Check Paragraph (C), if desired. Renumber following paragraphs if
Paragraph (C) is not selected.
[X] OPTIONAL PROVISION
(C) If Operator together with any Affiliates of Operator
is or becomes the holder of a Participating Interest
of less than thirty percent (30%), then Operator
shall be required to promptly notify the other
Parties. The Operating Committee shall then vote
within thirty (30) Days of such notification on
whether or not a successor Operator should be named
pursuant to Article 4.11.
Check Paragraph (D), if desired. Renumber following paragraph if
Paragraph (D) is not selected.
[X] OPTIONAL PROVISION
(D) If there is a direct or indirect Change in Control of
Operator (other than a transfer of Control to an
Affiliate of Operator), Operator shall be required to
promptly notify the other Parties. The Operating
Committee shall vote within thirty (30) Days of such
notification on whether or not a successor Operator
should be named pursuant to Article 4.11.
Check Paragraph (E), if desired.
[X] OPTIONAL PROVISION
(E) Subject to Article 4.11, Operator may be removed at
any time without cause by the affirmative vote of one
(1) or more of the total number of Non-Operators
holding a combined Participating Interest of at least
sixty percent (60%), upon such Non-Operators giving
one hundred and eighty (180) days prior written
notice to Operator.
(F) If actual expenses for the prior calendar year exceed
by 10% the Budget for the annual Work Program
approved by the Joint Steering Committee under the
Contract (as it may be amended from time to time
pursuant to its terms), then, provided that the prior
written approval of the Operating Committee has not
been obtained by Operator with respect to such excess
expenditures, the Operating Committee may by ninety
(90) days prior written notice remove the Operator
4.11 Appointment of Successor
18
When a change of Operator occurs pursuant to Article 4.9 or Article
4.10(A)-(E):
(A) The Operating Committee shall meet as soon as possible to
appoint a successor Operator pursuant to the voting procedure
of Article 5.9. No Party may be appointed successor Operator
against its will.
(B) If Operator is removed, [other than in the case of Article
4.10(C) or Article 4.10(D)], neither Operator nor any
Affiliate of Operator shall have the right to be considered as
a candidate for the successor Operator.
(C) The resigning or removed Operator shall be compensated out of
the Joint Account for its reasonable expenses directly related
to its resignation or removal, except in the case of Article
4.10(B).
(D) The resigning or removed Operator and the successor Operator
shall arrange for the taking of an inventory of all Joint
Property and Hydrocarbons, and an audit of the books and
records of the removed Operator. Such inventory and audit
shall be completed, if possible, no later than the effective
date of the change of Operator and shall be subject to the
approval of the Operating Committee. The liabilities and
expenses of such inventory and audit shall be charged to the
Joint Account.
(E) The resignation or removal of Operator and its replacement by
the successor Operator shall not become effective prior to
receipt of any necessary Government approvals.
(F) Upon the effective date of the resignation or removal, the
successor Operator shall succeed to all duties, rights and
authority prescribed for Operator. The former Operator shall
transfer to the successor Operator custody of all Joint
Property, books of account, records and other documents
maintained by Operator pertaining to the Contract Area and to
Joint Operations. Upon delivery of the above-described
property and data, the former Operator shall be released and
discharged from all obligations and liabilities as Operator
accruing after such date.
When a change of Operator occurs pursuant to Article 4.10(F), then the
Party which owns a Participating Interest which is equal to or greater
than the Participating Interest of the Operator, and which has the
largest Participating Interest owned by a Non-Operator may designate
itself or another holder of a Participating Interest as the Operator.
4.12 Health, Safety and Environment ("HSE")
(A) With the goal of achieving safe and reliable operations in
compliance with applicable HSE laws, rules and regulations
(including avoiding significant and unintended impact on the
safety or health of people, on property, or on the
environment), Operator shall in the conduct of Joint
Operations:
(1) establish and implement an HSE plan in a manner
consistent with standards and procedures generally
followed in the international petroleum industry
under similar circumstances;
(2) design and operate Joint Property consistent with the
HSE plan; and
(3) conform with locally applicable HSE laws, rules and
regulations and other HSE-related statutory
requirements that may apply.
(B) The Operating Committee shall:
Check one Alternative.
19
[X] ALTERNATIVE NO. 1
from time to time review details of Operator's HSE
plan and Operator's implementation thereof.
[ ] ALTERNATIVE NO. 2
be provided by Operator, on an annual basis, with an
HSE letter of assurance providing adequate evidence
that an HSE plan is in place and that any major HSE
issues have been brought to the attention of the
Operating Committee and are being properly managed.
(C) In the conduct of Joint Operations, Operator shall:
Check one Alternative.
[X] ALTERNATIVE NO. 1
establish and implement a program for regular HSE
assessments. The purpose of such assessments is to
periodically review HSE systems and procedures,
including actual practice and performance, to verify
that the HSE plan is being implemented in accordance
with the policies and standards of the HSE plan.
Operator shall, at a minimum, conduct such an
assessment before entering into significant new Joint
Operations and before undertaking any major changes
to existing Joint Operations. Upon reasonable notice
given to Operator, Non-Operators shall have the right
to participate in such HSE assessments.
[ ] ALTERNATIVE NO. 2
establish an annual audit program whereby independent
auditors review and verify the effectiveness of the
HSE plan.
(D) Operator shall require its contractors, consultants and agents
undertaking activities for the Joint Account to manage HSE
risks in a manner consistent with the requirements of this
Article 4.12.
(E) Operator shall establish and enforce rules consistent with
those generally followed in the international petroleum
industry under similar circumstances that, at a minimum,
prohibit within the Contract Area the following:
(1) possession, use, distribution or sale of firearms,
explosives, or other weapons without the prior
written approval of senior management of Operator;
(2) possession, use, distribution or sale of alcoholic
beverages without the prior written approval of
senior management of Operator; and
(3) possession, use, distribution or sale of illicit or
non-prescribed controlled substances and the misuse
of prescribed drugs.
Check if desired.
[X] OPTIONAL PROVISION
(F) Without prejudice to a Party's rights under Article 4.2(B)(7),
with reasonable advance notice, Operator shall permit each
Non-Operator to have at all reasonable times during normal
business hours (and at its own risk and expense) the right to
conduct its own HSE audit.
20
ARTICLE 5
OPERATING COMMITTEE
5.1 Establishment of Operating Committee
To provide for the overall supervision and direction of Joint
Operations, there is established an Operating Committee composed of
representatives of each Party holding a Participating Interest. Each
Party shall appoint one (1) representative and one (1) alternate
representative to serve on the Operating Committee. Each Party shall as
soon as possible after the date of this Agreement give notice in
writing to the other Parties of the name and address of its
representative and alternate representative to serve on the Operating
Committee. Each Party shall have the right to change its representative
and alternate at any time by giving notice of such change to the other
Parties.
5.2 Powers and Duties of Operating Committee
The Operating Committee shall have power and duty to authorize and
supervise Joint Operations that are necessary or desirable to fulfill
the Contract and properly explore and exploit the Contract Area in
accordance with this Agreement and in a manner appropriate in the
circumstances.
5.3 Authority to Vote
The representative of a Party, or in his absence his alternate
representative, shall be authorized to represent and bind such Party
with respect to any matter which is within the powers of the Operating
Committee and is properly brought before the Operating Committee. Each
such representative shall have a vote equal to the Participating
Interest of the Party such person represents. Each alternate
representative shall be entitled to attend all Operating Committee
meetings but shall have no vote at such meetings except in the absence
of the representative for whom he is the alternate. In addition to the
representative and alternate representative, each Party may also bring
to any Operating Committee meetings such technical and other advisors
as it may deem appropriate.
5.4 Subcommittees
The Operating Committee may establish such subcommittees, including
technical subcommittees, as the Operating Committee may deem
appropriate. The functions of such subcommittees shall be in an
advisory capacity or as otherwise determined unanimously by the
Parties. Each Party shall have the right to appoint a representative to
each subcommittee.
5.5 Notice of Meeting
(A) Operator may call a meeting of the Operating Committee by
giving notice to the Parties at least fifteen (15) Days in
advance of such meeting.
(B) Any Non-Operator may request a meeting of the Operating
Committee by giving notice to all the other Parties. Upon
receiving such request, Operator shall call such meeting for a
date not less than fifteen (15) Days nor more than twenty (20)
Days after receipt of the request.
(C) The notice periods above may only be waived with the unanimous
consent of all the Parties.
5.6 Contents of Meeting Notice
(A) Each notice of a meeting of the Operating Committee as provided by
Operator shall contain:
(1) the date, time and location of the meeting;
(2) an agenda of the matters and proposals to be
considered and/or voted upon; and
21
(3) copies of all proposals to be considered at the
meeting (including all appropriate supporting
information not previously distributed to the
Parties).
(B) A Party, by notice to the other Parties given not less than
seven (7) Days prior to a meeting, may add additional matters
to the agenda for a meeting.
(C) On the request of a Party, and with the unanimous consent of
all Parties, the Operating Committee may consider at a meeting
a proposal not contained in such meeting agenda.
5.7 Location of Meetings
All meetings of the Operating Committee shall be held in London, United
Kingdom, or elsewhere as the Operating Committee may decide.
5.8 Operator's Duties for Meetings
(A) With respect to meetings of the Operating Committee and any
subcommittee, Operator's duties shall include:
(1) timely preparation and distribution of the agenda;
(2) organization and conduct of the meeting; and
(3) preparation of a written record or minutes of each
meeting.
(B) Operator shall have the right to appoint the chairman of the
Operating Committee and all subcommittees.
5.9 Voting Procedure
Check one Alternative.
[X] ALTERNATIVE NO. 1
Except as otherwise expressly provided in this Agreement, all
decisions, approvals and other actions of the Operating
Committee on all proposals coming before it shall be decided
by the affirmative vote of one (1) or more Parties which are
not Affiliates then having collectively at least sixty percent
(60%) of the Participating Interests.
[ ] ALTERNATIVE NO. 2 (From Paragraph (A) to (C))
Except as otherwise expressly provided in this Agreement,
decisions, approvals and other actions of the Operating
Committee on all proposals coming before it shall be decided
as follows.
(A) All decisions, approvals and other actions for which
column (A) below is checked shall require the
affirmative vote of __________________ (_______) or
more Parties which are not Affiliates then having
collectively at least ______________ percent (____%)
of the Participating Interests.
(B) All decisions, approvals and other actions for which
column (B) below is checked shall require the
affirmative vote of _________________ (________) or
more Parties which are not Affiliates then having
collectively at least _________ percent (____%) of
the Participating Interests.
(C) All decisions, approvals and other actions for which
column (C) below is checked shall require the
affirmative vote of _______________ (_________) or
more Parties which are not Affiliates then having
collectively at least _________ percent (____%) of
the Participating Interests.
22
--------- ------------------------------------------------------------- ------- ------- ------
Matter (A) (B) (C)
------
--------- ------------------------------------------------------------- ------- ------- ------
(1) Minimum Work Programs.
--------- ------------------------------------------------------------- ------- ------- ------
(2) Drilling, Deepening, Testing, Sidetracking,
Plugging Back, Recompleting or Reworking
Exploration Xxxxx. [NOTE: This list may be split in
order to allow different levels of
approval]
--------- ------------------------------------------------------------- ------- ------- ------
(3) Drilling, Deepening, Testing, Sidetracking,
Plugging Back, Recompleting or Reworking Appraisal
Xxxxx. [NOTE: This list may be split in order to
allow different levels of approval]
--------- ------------------------------------------------------------- ------- ------- ------
(4) Development Plans.
--------- ------------------------------------------------------------- ------- ------- ------
(5) Production programs.
--------- ------------------------------------------------------------- ------- ------- ------
(6) Completion of a well.
--------- ------------------------------------------------------------- ------- ------- ------
(7) Plugging and abandoning a well.
--------- ------------------------------------------------------------- ------- ------- ------
(8) Acquisition of G & G Data.
--------- ------------------------------------------------------------- ------- ------- ------
(9) Construction of processing, treatment, compression,
gathering, transportation and other downstream
facilities.
--------- ------------------------------------------------------------- ------- ------- ------
(10) Contract awards (if approval is required).
--------- ------------------------------------------------------------- ------- ------- ------
(11) Determination that a Discovery is a Commercial Discovery.
--------- ------------------------------------------------------------- ------- ------- ------
(12) Unitization under the terms of the Contract with an
adjoining contract area.
--------- ------------------------------------------------------------- ------- ------- ------
(13) Establishment of an interest bearing account for
Joint Account monies.
--------- ------------------------------------------------------------- ------- ------- ------
(14) Acquisition and development of Venture Information
under terms other than as specified in Article 15.
--------- ------------------------------------------------------------- ------- ------- ------
(15) ..................
--------- ------------------------------------------------------------- ------- ------- ------
(16) All other matters within the Operating Committee's
authority.
--------- ------------------------------------------------------------- ------- ------- ------
5.10 Record of Votes
The chairman of the Operating Committee shall appoint a secretary who
shall make a record of each proposal voted on and the results of such
voting at each Operating Committee meeting. Each representative shall
sign and be provided a copy of such record at the end of such meeting,
and it shall be considered the final record of the decisions of the
Operating Committee.
5.11 Minutes
23
The secretary shall provide each Party with a copy of the minutes of
the Operating Committee meeting within fifteen (15) Business Days after
the end of the meeting. Each Party shall have fifteen (15) Days after
receipt of such minutes to give notice to the secretary of its
objections to the minutes. A failure to give notice specifying
objection to such minutes within said fifteen (15) Day period shall be
deemed to be approval of such minutes. In any event, the votes recorded
under Article 5.10 shall take precedence over the minutes described
above.
5.12 Voting by Notice
(A) In lieu of a meeting, any Party may submit any proposal to the
Operating Committee for a vote by notice. The proposing Party
or Parties shall notify Operator who shall give each Party's
representative notice describing the proposal so submitted and
whether Operator considers such operational matter to require
urgent determination. Operator shall include with such notice
adequate documentation in connection with such proposal to
enable the Parties to make a decision. Each Party shall
communicate its vote by notice to Operator and the other
Parties within one of the following appropriate time periods
after receipt of Operator's notice:
(1) 48 hours in the case of operations which involve the
use of a drilling rig that is standing by in the
Contract Area and such other operational matters
reasonably considered by Operator to require by their
nature urgent determination (such operations and
matters being referred to as "Urgent Operational
Matters"); and
(2) 10 Days in the case of all other proposals.
(B) Except in the case of Article 5.12(A)(1), any Party may, by
notice delivered to all Parties within three (3) Days of
receipt of Operator's notice, request that the proposal be
decided at a meeting rather than by notice. In such an event,
that proposal shall be decided at a meeting duly called for
that purpose.
(C) Except as provided in Article 10, any Party failing to
communicate its vote in a timely manner shall be deemed to
have voted against such proposal.
(D) If a meeting is not requested, then at the expiration of the
appropriate time period, Operator shall give each Party a
confirmation notice stating the tabulation and results of the
vote.
5.13 Effect of Vote
All decisions taken by the Operating Committee pursuant to this Article
5 shall be conclusive and binding on all the Parties, except in the
following cases.
(A) If pursuant to this Article 5, a Joint Operation has been
properly proposed to the Operating Committee and the Operating
Committee has not approved such proposal in a timely manner,
then any Party that voted in favor of such proposal shall have
the right for the appropriate period specified below to
propose, in accordance with Article 7, an Exclusive Operation
involving operations essentially the same as those proposed
for such Joint Operation.
(1) For proposals related to Urgent Operational Matters,
such right shall be exercisable for twenty-four (24)
hours after the time specified in Article 5.12(A)(1)
has expired or after receipt of Operator's notice
given to the Parties pursuant to Article [5.13(D)],
as applicable.
(2) For proposals to develop a Discovery, such right
shall be exercisable for ten (10) Days after the date
the Operating Committee was required to consider such
proposal pursuant to Article 5.6 or Article 5.12.
24
(3) For all other proposals, such right shall be
exercisable for five (5) Days after the date the
Operating Committee was required to consider such
proposal pursuant to Article 5.6 or Article 5.12.
Check Paragraph (B) if desired. Renumber following paragraphs if
Paragraph (B) is not selected.
[X] OPTIONAL PROVISION (Paragraph (B))
(B) If a Party voted against any proposal which was
approved by the Operating Committee and which could be
conducted as an Exclusive Operation pursuant to Article
7, then such Party shall have the right not to
participate in the operation contemplated by such
approval. Any such Party wishing to exercise its right
of non-consent must give notice of non-consent to all
other Parties within five (5) Days (or twenty-four (24)
hours for Urgent Operational Matters) following
Operating Committee approval of such proposal. If a
Party exercises its right of non-consent, the Parties
who were not entitled to give or did not give notice of
non-consent shall be Consenting Parties as to the
operation contemplated by the Operating Committee
approval, and shall conduct such operation as an
Exclusive Operation under Article 7; provided, however,
that any such Party who was not entitled to give or did
not give notice of non-consent may, by notice provided
to the other Parties within five (5) Days (or
twenty-four (24) hours for Urgent Operational Matters)
following the notice of non-consent given by any
non-consenting Party, require that the Operating
Committee vote again on the proposal in question. Only
the Parties which were not entitled to or have not
exercised their right of non-consent with respect to
the contemplated operation shall participate in such
second vote of the Operating Committee, with voting
rights proportional to their respective Participating
Interest. If the Operating Committee approves again the
contemplated operation, any Party which voted against
the contemplated operation in such second vote may
elect to be a Non-Consenting Party with respect to such
operation, by notice of non-consent provided to all
other Parties within five (5) Days (or twenty-four (24)
hours for Urgent Operational Matters) following the
Operating Committee's second approval of such
contemplated operation.
(C) If the Consenting Parties to an Exclusive Operation under
Article 5.13(A) [or Article 5.13(B)] concur, then the
Operating Committee may, at any time, pursuant to this Article
5, reconsider and approve, decide or take action on any
proposal that the Operating Committee declined to approve
earlier, or modify or revoke an earlier approval, decision or
action.
(D) Once a Joint Operation for the drilling, Deepening, Testing,
Sidetracking, Plugging Back, Completing, Recompleting,
Reworking, or plugging of a well has been approved and
commenced, such operation shall not be discontinued without
the consent of the Operating Committee; provided, however,
that such operation may be discontinued if:
(1) an impenetrable substance or other condition in the
hole is encountered which in the reasonable judgment
of Operator causes the continuation of such operation
to be impractical; or
(2) other circumstances occur which in the reasonable
judgment of Operator cause the continuation of such
operation to be unwarranted and the Operating
Committee, within the period required under Article
5.12(A)(1) after receipt of Operator's notice,
approves discontinuing such operation.
On the occurrence of either of the above, Operator shall
promptly notify the Parties that such operation is being
discontinued pursuant to the foregoing, and any Party shall
have the right to propose in accordance with Article 7 an
Exclusive Operation to continue such operation.
25
ARTICLE 6
WORK PROGRAMS AND BUDGETS
6.1 Exploration and Appraisal
(A) Upon the signing of this agreement, Operator delivered to the
Parties a proposed Work Program and Budget detailing the Joint
Operations to be performed for the remainder of the current
Calendar Year. The Operating Committee has met and approved such
Work Program and Budget.
(B) On or before the 30th Day of September of each Calendar Year,
Operator shall deliver to the Parties a proposed Work Program and
Budget detailing the Joint Operations to be performed for the
following Calendar Year. Within thirty (30) Days of such
delivery, the Operating Committee shall meet to consider and to
endeavor to agree on a Work Program and Budget.
(C) If a Discovery is made, Operator shall deliver any notice of
Discovery required under the Contract and shall as soon as
possible submit to the Parties a report containing available
details concerning the Discovery and Operator's recommendation as
to whether the Discovery merits appraisal. If the Operating
Committee determines that the Discovery merits appraisal,
Operator within sixty (60) Days shall deliver to the Parties a
proposed Work Program and Budget for the appraisal of the
Discovery. Within sixty (60) Days of such delivery, or earlier if
necessary to meet any applicable deadline under the Contract, the
Operating Committee shall meet to consider, modify and then
either approve or reject the appraisal Work Program and Budget.
If the appraisal Work Program and Budget is approved by the
Operating Committee, Operator shall take such steps as may be
required under the Contract to secure approval of the appraisal
Work Program and Budget by the Government. In the event the
Government requires changes in the appraisal Work Program and
Budget, the matter shall be resubmitted to the Operating
Committee for further consideration.
(D) The Work Program and Budget agreed pursuant to this Article shall
include at least that part of the Minimum Work Obligations
required to be carried out during the Calendar Year in question
under the terms of the Contract. If within the time periods
prescribed in this Article 6.1 the Operating Committee is unable
to agree on such a Work Program and Budget, then the proposal
capable of satisfying the Minimum Work Obligations for the
Calendar Year in question that receives the largest Participating
Interest vote (even if less than the applicable percentage under
Article 5.9) shall be deemed adopted as part of the annual Work
Program and Budget. If competing proposals receive equal votes,
then Operator shall choose between those competing proposals. Any
portion of a Work Program and Budget adopted pursuant to this
Article 6.1(D) instead of Article 5.9 shall contain only such
operations for the Joint Account as are necessary to maintain the
Contract in full force and effect, including such operations as
are necessary to fulfill the Minimum Work Obligations required
for the given Calendar Year.
(E) Any approved Work Program and Budget may be revised by the
Operating Committee from time to time. To the extent such
revisions are approved by the Operating Committee, the Work
Program and Budget shall be amended accordingly. Operator shall
prepare and submit a corresponding work program and budget
amendment to the Government if required by the Contract.
(F) Subject to Article 6.8, approval of any such Work Program and
Budget which includes:
(1) an Exploration Well, whether by drilling, Deepening
or Sidetracking, shall include approval for:
Check one Alternative.
26
[ ] ALTERNATIVE NO. 1 - No Casing Point Election all
expenditures necessary for drilling, Deepening or
Sidetracking, as applicable, and Testing and Completing
an Exploration Well.
[X] XXXXXXXXXXX XX. 0 - Xxxxxx Xxxxx Election - (This
alternative shall not apply where Minimum Work
Obligations require Testing or Completing of a well.)
only expenditures necessary for the drilling, Deepening
or Sidetracking of such Exploration Well, as
applicable. When an Exploration Well has reached its
authorized depth, all logs, cores and other approved
Tests have been conducted and the results furnished to
the Parties, Operator shall submit to the Parties in
accordance with Article 5.12(A)(1) an election to
participate in an attempt to Complete such Exploration
Well. Operator shall include in such submission
Operator's recommendation on such Completion attempt
and an AFE for such Completion costs.
(2) an Appraisal Well, whether by drilling, Deepening or
Sidetracking, shall include approval for:
Check one Alternative.
[ ] ALTERNATIVE NO. 1 - No Casing Point Election all
expenditures necessary for drilling, Deepening or
Sidetracking, as applicable, and Testing and Completing
such Appraisal Well.
[X] XXXXXXXXXXX XX. 0 - Xxxxxx Xxxxx Election - (This
alternative shall not apply where Minimum Work
Obligations require Testing or Completing of an
Appraisal Well.) only expenditures necessary for the
drilling, Deepening or Sidetracking of such Appraisal
Well, as applicable. When an Appraisal Well has reached
its authorized depth, all logs, cores and other
approved Tests have been conducted and the results
furnished to the Parties, Operator shall submit to the
Parties in accordance with Article 5.12(A)(1) an
election to participate in an attempt to Complete such
Appraisal Well. Operator shall include in such
submission Operator's recommendation on such Completion
attempt and an AFE for such Completion costs.
(G) Any Party desiring to propose a Completion attempt, or an
alternative Completion attempt, must do so within the time
period provided in Article 5.12(A)(1) by notifying all other
Parties. Any such proposal shall include an AFE for such
Completion costs.
6.2 Development
(A) If the Operating Committee determines that a Discovery may be
a Commercial Discovery, Operator shall, as soon as
practicable, deliver to the Parties a Development Plan
together with the first annual Work Program and Budget (or a
multi-year Work Program and Budget pursuant to Article 6.5)
and provisional Work Programs and Budgets for the remainder of
the development of the Discovery, which shall contain, inter
alia:
(1) details of the proposed work to be undertaken,
personnel required and expenditures to be incurred,
including the timing of same, on a Calendar Year
basis;
(2) an estimated date for the commencement of production;
(3) a delineation of the proposed Exploitation Area; and
27
(4) any other information requested by the Operating
Committee.
(B) After receipt of the Development Plan and prior to any applicable
deadline under the Contract, the Operating Committee shall meet
to consider, modify and then either approve or reject the
Development Plan and the first annual Work Program and Budget for
the development of a Discovery, as submitted by Operator. If the
Operating Committee determines that the Discovery is a Commercial
Discovery and approves the corresponding Development Plan,
Operator shall, as soon as possible, deliver any notice of
Commercial Discovery required under the Contract and take such
other steps as may be required under the Contract to secure
approval of the Development Plan by the Government. In the event
the Government requires changes in the Development Plan, the
matter shall be resubmitted to the Operating Committee for
further consideration.
(C) If the Development Plan is approved, such work shall be
incorporated into and form part of annual Work Programs and
Budgets, and Operator shall, on or before the 30th Day of
September of each Calendar Year submit a Work Program and Budget
for the Exploitation Area, for the following Calendar Year.
Subject to Article 6.5, within thirty (30) Days after such
submittal, the Operating Committee shall endeavor to agree to
such Work Program and Budget, including any necessary or
appropriate revisions to the Work Program and Budget for the
approved Development Plan.
6.3 Production
On or before the 30th day of September of each Calendar Year, Operator
shall deliver to the Parties a proposed production Work Program and
Budget detailing the Joint Operations to be performed in the
Exploitation Area and the projected production schedule for the
following Calendar Year. Within thirty (30) Days of such delivery, the
Operating Committee shall agree upon a production Work Program and
Budget, failing which the provisions of Article 6.1(D) shall be applied
mutatis mutandis.
6.4 Itemization of Expenditures
(A) During the preparation of the proposed Work Programs and
Budgets and Development Plans contemplated in this Article 6,
Operator shall consult with the Operating Committee or the
appropriate subcommittees regarding the contents of such Work
Programs and Budgets and Development Plans.
(B) Each Work Program and Budget and Development Plan submitted by
Operator shall contain an itemized estimate of the costs of
Joint Operations and all other expenditures to be made for the
Joint Account during the Calendar Year in question and shall,
inter alia:
(1) identify each work category in sufficient detail to
afford the ready identification of the nature, scope
and duration of the activity in question;
(2) include such reasonable information regarding
Operator's allocation procedures and estimated
manpower costs as the Operating Committee may
determine;
(3) comply with the requirements of the Contract;
Check (4), if desired. Renumber following paragraph if (4) is
not selected.
[X] OPTIONAL PROVISION
(4) contain an estimate of funds to be expended by
Calendar Quarter; and
Check (5), if desired.
28
[X] OPTIONAL PROVISION
(5) during the Exploration Period, provide a
forecast of annual expenditures and
activities through the end of the
Exploration Period.
(C) The Work Program and Budget shall designate the portion or
portions of the Contract Area in which Joint Operations
itemized in such Work Program and Budget are to be conducted
and shall specify the kind and extent of such operations in
such detail as the Operating Committee may deem suitable.
6.5 Multi-Year Work Program and Budget
Any work that cannot be efficiently completed within a single Calendar
Year may be proposed in a multi-year Work Program and Budget. Upon
approval by the Operating Committee, such multi-year Work Program and
Budget shall, subject only to revisions approved by the Operating
Committee thereafter: (i) remain in effect as between the Parties (and
the associated cost estimate shall be a binding pro-rata obligation of
each Party) through the completion of the work; and (ii) be reflected
in each annual Work Program and Budget. If the Contract requires that
Work Programs and Budgets be submitted to the Government for approval,
such multi-year Work Program and Budget shall be submitted to the
Government either in a single request for a multi-year approval or as
part of the annual approval process, according to the terms of the
Contract.
6.6 Contract Awards
Check one Alternative.
[X] ALTERNATIVE NO. 1
Subject to the Contract, Operator shall award the contract to
the best qualified contractor as determined by cost and
ability to perform the contract without the obligation to
tender and without informing or seeking the approval of the
Operating Committee, except that before entering into
contracts with Affiliates of Operator exceeding Fifty Thousand
U.S. dollars ($50,000), Operator shall obtain the approval of
the Operating Committee.
[ ] ALTERNATIVE NO. 2 (From Paragraph (A) to (C))
Subject to the Contract, Operator shall award each contract
for Joint Operations on the following basis (the amounts
stated are in thousands of U.S. dollars):
Procedure A Procedure B Procedure C
Exploration and Appraisal 0 to _______ to >
-------- ------- ---- ------
Operations
Development Operations 0 to to >
-------- -------- ------ ------
Production Operations 0 to to >
-------- -------- ------- ------
Procedure A
(A) Operator shall award the contract to the best
qualified contractor as determined by cost and
ability to perform the contract without the
obligation to tender and without informing or seeking
the approval of the Operating Committee, except that
before entering into contracts with Affiliates of
Operator exceeding [__________ U.S. dollars],
Operator shall obtain the approval of the Operating
Committee.
29
Procedure B
(B) Operator shall:
(1) provide the Parties with a list of the
entities whom Operator proposes to invite to
tender for the said contract;
(2) add to such list any entity whom a Party
reasonably requests to be added within
fourteen (14) Days of receipt of such list;
(3) complete the tendering process within a
reasonable period of time;
(4) inform the Parties of the entities to whom
the contract has been awarded, provided that
before awarding contracts to Affiliates of
Operator which exceed [__________ U.S.
dollars], Operator shall obtain the approval
of the Operating Committee;
(5) circulate to the Parties a competitive bid
analysis stating the reasons for the choice
made; and
(6) upon the request of a Party, provide such
Party with a copy of the final version of
the contract.
Procedure C
(C) Operator shall:
(1) provide the Parties with a list of the
entities whom Operator proposes to invite to
tender for the said contract;
(2) add to such list any entity whom a Party
reasonably requests to be added within
fourteen (14) Days of receipt of such list;
(3) prepare and dispatch the tender documents to
the entities on the list as aforesaid and to
Non-Operators;
(4) after the expiration of the period allowed
for tendering, consider and analyze the
details of all bids received;
(5) prepare and circulate to the Parties a
competitive bid analysis, stating Operator's
recommendation as to the entity to whom the
contract should be awarded, the reasons
therefor, and the technical, commercial and
contractual terms to be agreed upon;
(6) obtain the approval of the Operating
Committee to the recommended bid; and
(7) upon the request of a Party, provide such
Party with a copy of the final version of
the contract.
30
Check Article 6.7, if desired. Renumber following article if Article 6.7 is not
selected.
[X] OPTIONAL PROVISION
[NOTE: If Article 6.7 is not checked, the definition of an AFE in
Article 1.2 and all references to AFEs in Articles 1.20, 4.2(B)(5),
6.1(F), 6.1(G), 6.8(B), 7.4(C), and 13.4(A) are to be removed.]
6.7 Authorization for Expenditure ("AFE") Procedure
(A) Prior to incurring any commitment or expenditure for
the Joint Account, which is estimated to be:
(1) in excess of Two Hundred Thousand U.S.
dollars ($200,000) in an exploration or
appraisal Work Program and Budget;
(2) in excess of Two Hundred Thousand U.S.
dollars ($200,000) in a development
Work Program and Budget; and
(3) in excess of Two Hundred Thousand U.S.
dollars ($200,000) in a production Work
Program and Budget,
Operator shall send to each Non-Operator an AFE as
described in Article 6.7(C). Notwithstanding the
above, Operator shall not be obliged to furnish an
AFE to the Parties with respect to any Minimum Work
Obligations, workovers of xxxxx and general and
administrative costs that are listed as separate line
items in an approved Work Program and Budget.
Check one Alternative for Paragraph (B).
[X] ALTERNATIVE NO. 1
(B) Notwithstanding any other provision of this
Agreement, all AFEs shall be for
informational purposes only. Approval of an
operation in the current Work Program and
Budget shall authorize Operator to conduct
the operation (subject to Article 6.8)
without further authorization from the
Operating Committee.
[ ] ALTERNATIVE NO. 2
(B) Prior to making any expenditures or incurring any
commitments for work subject to the AFE procedure in
Article 6.7(A), Operator shall obtain the approval of
the Operating Committee. If the Operating Committee
approves an AFE for the operation within the applicable
time period under Article 5.12(A), Operator shall be
authorized to conduct the operation under the terms of
this Agreement. If the Operating Committee fails to
approve an AFE for the operation within the applicable
time period, the operation shall be deemed rejected.
Operator shall promptly notify the Parties if the
operation has been rejected, and, subject to Article 7,
any Party may thereafter propose to conduct the
operation as an Exclusive Operation under Article 7.
When an operation is rejected under this Article 6.7(B)
or an operation is approved for differing amounts than
those provided for in the applicable line items of the
approved Work Program and Budget, the Work Program and
Budget shall be deemed to be revised accordingly.
31
[ ] ALTERNATIVE NO. 3
(B) Prior to making any expenditures or incurring any
commitments for work subject to the AFE procedure in
Article 6.7(A), Operator shall obtain the approval of
the Operating Committee to an AFE for cost and
technical control purposes. A Party may vote to
disapprove an AFE issued in furtherance of an approved
Work Program and Budget only if (i) some or all of the
costs described in the AFE exceed the line items in the
approved Work Program and Budget by more than is
permitted under Article 6.8; (ii) the proposed terms of
any third party contract described in the AFE do not
approximate fair market terms; or (iii) in such Party's
good faith opinion, any material technical
specifications contained in the AFE that are not in the
approved Work Program and Budget are imprudent or are
not supported by the known data about the formations
being drilled. A Party's vote shall be considered a
vote to approve the AFE unless the Party specifically
describes one or more of the three reasons listed above
as the basis for its vote of disapproval. If the
Operating Committee approves an AFE for the operation
within the applicable time period under Article
5.12(A), Operator shall be authorized to conduct the
operation under the terms of this Agreement. If the
Operating Committee fails to approve an AFE for the
operation within the applicable time period, the
operation shall be deemed rejected. Operator shall
promptly notify the Parties if the operation has been
rejected, and, subject to Article 7, any Party may
thereafter propose to conduct the operation as an
Exclusive Operation under Article 7. When an operation
is rejected under this Article 6.7(B) or an operation
is approved for differing amounts than those provided
for in the applicable line items of the approved Work
Program and Budget, the Work Program and Budget shall
be deemed to be revised accordingly.
(C) Each AFE proposed by Operator shall:
(1) identify the operation by specific reference
to the applicable line items in the Work
Program and Budget;
(2) describe the work in detail;
(3) contain Operator's best estimate of the
total funds required to carry out such work;
(4) outline the proposed work schedule;
(5) provide a timetable of expenditures, if
known; and
(6) be accompanied by such other supporting
information as is necessary for an informed
decision.
6.8 Overexpenditures of Work Programs and Budgets
(A) For expenditures on any line item of an approved Work Program
and Budget, Operator shall be entitled to incur without
further approval of the Operating Committee an overexpenditure
for such line item up to ten percent (10%) of the authorized
amount for such line item; provided that the cumulative total
of all overexpenditures for a Calendar Year shall not exceed
five percent (5%) of the total annual Work Program and Budget
in question.
(B) At such time Operator reasonably anticipates the limits of
Article 6.8(A) will be exceeded, Operator shall furnish to the
Operating Committee:
32
Check one Alternative.
[X] ALTERNATIVE NO. 1 - Informational AFE System
a reasonably detailed estimate for the Operating
Committee's approval. The Work Program and Budget
shall be revised accordingly and the overexpenditures
permitted in Article 6.8(A) shall be based on the
revised Work Program and Budget. Operator shall
promptly give notice of the amounts of
overexpenditures when actually incurred.
[ ] ALTERNATIVE NO. 2 - Operational AFE System
a supplemental AFE for the estimated expenditures for
the Operating Committee's approval, and Operator
shall provide reasonable details of such
overexpenditures. The Work Program and Budget shall
be revised accordingly and the overexpenditures
permitted in Article 6.8(A) shall be based on the
revised Work Program and Budget. Operator shall
promptly give notice of the amounts of
overexpenditures when actually incurred.
(C) The restrictions contained in this Article 6 shall be without
prejudice to Operator's rights to make expenditures for Urgent
Operational Matters and measures set out in Article 13.5
without the Operating Committee's approval.
ARTICLE 7
OPERATIONS BY LESS THAN ALL PARTIES
7.1 Limitation on Applicability
(A) No operations may be conducted in furtherance of the Contract
except as Joint Operations under Article 5 or as Exclusive
Operations under this Article 7. No Exclusive Operation shall
be conducted (other than the tie-in of Exclusive Operation
facilities with existing production facilities pursuant to
Article 7.10) which conflicts with a previously approved Joint
Operation or with a previously approved Exclusive Operation.
(B) Operations which are required to fulfill the Minimum Work
Obligations must be proposed and conducted as Joint Operations
under Article 5, and may not be proposed or conducted as
Exclusive Operations under this Article 7.
Check if desired.
[X] OPTIONAL PROVISION
Except for Exclusive Operations relating to
Deepening, Testing, Completing, Sidetracking,
Plugging Back, Recompletions or Reworking of a well
originally drilled to fulfill the Minimum Work
Obligations, no Exclusive Operations may be proposed
or conducted until the Minimum Work Obligations are
fulfilled.
(C) No Party may propose or conduct an Exclusive Operation under
this Article 7 unless and until such Party has properly
exercised its right to propose an Exclusive Operation pursuant
to Article 5.13, or is entitled to conduct an Exclusive
Operation pursuant to Article 10.
Check one Alternative for Paragraph (D).
[X] ALTERNATIVE NO. 1
(D) Any operation that may be proposed and conducted as a
Joint Operation, other than operations pursuant to an
approved Development Plan, may be proposed and
conducted as an Exclusive Operation, subject to the
terms of this Article 7.
33
[ ] ALTERNATIVE NO. 2
(D) The following operations may be proposed and
conducted as Exclusive Operations, subject to the
terms of this Article 7:
(1) drilling and/or Testing of Exploration Xxxxx
and Appraisal Xxxxx;
(2) Completion of Exploration Xxxxx and
Appraisal Xxxxx not then Completed as
productive of Hydrocarbons;
(3) Deepening, Sidetracking, Plugging Back
and/or Recompletion of Exploration Xxxxx and
Appraisal Xxxxx;
(4) development of a Commercial Discovery;
(5) acquisition of G & G Data;
(6) any operations specifically authorized to be
undertaken as an Exclusive Operation under
Article 10; and
(7) _______________________________.
No other type of operation may be proposed or
conducted as an Exclusive Operation.
7.2 Procedure to Propose Exclusive Operations
(A) Subject to Article 7.1, if any Party proposes to conduct an
Exclusive Operation, such Party shall give notice of the
proposed operation to all Parties, other than Non-Consenting
Parties who have relinquished their rights to participate in
such operation pursuant to Article 7.4(B) or Article 7.4(F)
and have no option to reinstate such rights under Article
7.4(C). Such notice shall specify that such operation is
proposed as an Exclusive Operation and include the work to be
performed, the location, the objectives, and estimated cost of
such operation.
(B) Any Party entitled to receive such notice shall have the right
to participate in the proposed operation.
(1) For proposals to Deepen, Test, Complete, Sidetrack,
Plug Back, Recomplete or Rework related to Urgent
Operational Matters, any such Party wishing to
exercise such right must so notify the proposing
Party and Operator within twenty-four (24) hours
after receipt of the notice proposing the Exclusive
Operation.
(2) For proposals to develop a Discovery, any Party
wishing to exercise such right must so notify
Operator and the Party proposing to develop within
sixty (60) Days after receipt of the notice proposing
the Exclusive Operation.
(3) For all other proposals, any such Party wishing to
exercise such right must so notify the proposing
Party and Operator within ten (10) Days after receipt
of the notice proposing the Exclusive Operation.
(C) Failure of a Party to whom a proposal notice is delivered to
properly reply within the period specified above shall
constitute an election by that Party not to participate in the
proposed operation.
34
(D) If all Parties properly exercise their rights to participate,
then the proposed operation shall be conducted as a Joint
Operation. Operator shall commence such Joint Operation as
promptly as practicable and conduct it with due diligence.
(E) If less than all Parties entitled to receive such proposal
notice properly exercise their rights to participate, then:
Check one Alternative.
[ ] ALTERNATIVE NO. 1 (From Paragraph (1) to (3))
(1) The Party proposing the Exclusive Operation,
together with any other Consenting Parties,
shall have the right exercisable for the
applicable notice period set out in Article
7.2(B), to instruct Operator (subject to
Article 7.12(F)) to conduct the Exclusive
Operation.
(2) If the Exclusive Operation is conducted, the
Consenting Parties shall bear a
Participating Interest in such Exclusive
Operation, the numerator of which is such
Consenting Party's Participating Interest as
stated in Article 3.2(A) and the denominator
of which is the aggregate of the
Participating Interests of the Consenting
Parties as stated in Article 3.2(A), or as
the Consenting Parties may otherwise agree.
(3) If such Exclusive Operation has not been
commenced within ____________ (________)
Days (excluding any extension specifically
agreed by all Parties or allowed by the
force majeure provisions of Article 16)
after the date of the instruction given to
Operator under Article 7.2(E)(1), the right
to conduct such Exclusive Operation shall
terminate. If any Party still desires to
conduct such Exclusive Operation, notice
proposing such operation must be resubmitted
to the Parties in accordance with Article 5,
as if no proposal to conduct an Exclusive
Operation had been previously made.
[X] ALTERNATIVE NO. 2 (From Paragraph (1) to (8))
(1) Immediately after the expiration of the
applicable notice period set out in Article
7.2(B), Operator shall notify all Parties of
the names of the Consenting Parties and the
recommendation of the proposing Party as to
whether the Consenting Parties should
proceed with the Exclusive Operation.
(2) Concurrently, Operator shall request the
Consenting Parties to specify the
Participating Interest each Consenting Party
is willing to bear in the Exclusive
Operation.
(3) Within twenty-four (24) hours after receipt
of such notice, each Consenting Party shall
respond to Operator stating that it is
willing to bear a Participating Interest in
such Exclusive Operation equal to:
(a) only its Participating Interest as
stated in Article 3.2(A);
(b) a fraction, the numerator of which
is such Consenting Party's
Participating Interest as stated in
Article 3.2(A) and the denominator
of which is the aggregate of the
Participating Interests of the
Consenting Parties as stated in
Article 3.2(A); or
35
(c) the Participating Interest as
contemplated by Article 7.2(E)(3)(b)
plus all or any part of the
difference between one hundred
percent (100%) and the total of the
Participating Interests subscribed
by the other Consenting Parties. Any
portion of such difference claimed
by more than one Party shall be
distributed to each claimant on a
pro-rata basis.
(4) Any Consenting Party failing to advise
Operator within the response period set out
above shall be deemed to have elected to
bear the Participating Interest set out in
Article 7.2(E)(3)(b) as to the Exclusive
Operation.
(5) If, within the response period set out
above, the Consenting Parties subscribe less
than one hundred percent (100%) of the
Participating Interest in the Exclusive
Operation, the Party proposing such
Exclusive Operation shall be deemed to have
withdrawn its proposal for the Exclusive
Operation, unless within twenty-four (24)
hours of the expiry of the response period
set out in Article 7.2(E)(3), the proposing
Party notifies the other Consenting Parties
that the proposing Party shall bear the
unsubscribed Participating Interest.
(6) If one hundred percent (100%) subscription
to the proposed Exclusive Operation is
obtained, Operator shall promptly notify the
Consenting Parties of their Participating
Interests in the Exclusive Operation.
(7) As soon as any Exclusive Operation is fully
subscribed pursuant to Article 7.2(E)(6),
Operator, subject to Article 7.12(F), shall
commence such Exclusive Operation as
promptly as practicable and conduct it with
due diligence in accordance with this
Agreement.
(8) If such Exclusive Operation has not been
commenced within two hundred ten (210) Days
(excluding any extension specifically agreed
by all Parties or allowed by the force
majeure provisions of Article 16) after the
date of the notice given by Operator under
Article 7.2(E)(6), the right to conduct such
Exclusive Operation shall terminate. If any
Party still desires to conduct such
Exclusive Operation, notice proposing such
operation must be resubmitted to the Parties
in accordance with Article 5, as if no
proposal to conduct an Exclusive Operation
had been previously made.
7.3 Responsibility for Exclusive Operations
(A) The Consenting Parties shall bear in accordance with the
Participating Interests agreed under Article 7.2(E) the entire
cost and liability of conducting an Exclusive Operation and
shall indemnify the Non-Consenting Parties from any and all
costs and liabilities incurred incident to such Exclusive
Operation (including Consequential Loss and Environmental
Loss) and shall keep the Contract Area free and clear of all
liens and encumbrances of every kind created by or arising
from such Exclusive Operation.
(B) Notwithstanding Article 7.3(A), each Party shall continue to
bear its Participating Interest share of the cost and
liability incident to the operations in which it participated,
including plugging and abandoning and restoring the surface
location, but only to the extent those costs were not
increased by the Exclusive Operation.
7.4 Consequences of Exclusive Operations
(A) With regard to any Exclusive Operation, for so long as a
Non-Consenting Party has the option under Article 7.4(C) to
reinstate the rights it relinquished under Article 7.4(B), such
Non-Consenting Party shall be entitled to have access
concurrently with the Consenting Parties to all data and other
information relating to such Exclusive Operation, other than data
obtained in an Exclusive Operation for the purpose of acquiring G
& G Data. If a Non-Consenting Party desires to receive and
acquire the right to use such G & G Data, then such
Non-Consenting Party shall have the right to do so by paying to
the Consenting Parties its Participating Interest share as set
out in Article 3.2(A) of the cost incurred in obtaining such G &
G Data.
36
(B) Subject to Article 7.4(C) [and Articles 7.6(E) and 7.8, if
selected], each Non-Consenting Party shall be deemed to have
relinquished to the Consenting Parties, and the Consenting
Parties shall be deemed to own, in proportion to their respective
Participating Interests in any Exclusive Operation:
(1) all of each such Non-Consenting Party's right to
participate in further operations in the well or
Deepened or Sidetracked portion of a well in which
the Exclusive Operation was conducted and on any
Discovery made or appraised in the course of such
Exclusive Operation; and
(2) all of each such Non-Consenting Party's right
pursuant to the Contract to take and dispose of
Hydrocarbons produced and saved:
(a) from the well or Deepened or Sidetracked
portion of a well in which such Exclusive
Operation was conducted; and
(b) from any xxxxx drilled to appraise or
develop a Discovery made or appraised in the
course of such Exclusive Operation.
(C) A Non-Consenting Party shall have only the following options
to reinstate the rights it relinquished pursuant to Article
7.4(B):
(1) If the Consenting Parties decide to appraise a
Discovery made in the course of an Exclusive
Operation, the Consenting Parties shall submit to
each Non-Consenting Party the approved appraisal
program. For thirty (30) Days (or forty-eight (48)
hours for Urgent Operational Matters) from receipt of
such appraisal program, each Non-Consenting Party
shall have the option to reinstate the rights it
relinquished pursuant to Article 7.4(B) and to
participate in such appraisal program. The
Non-Consenting Party may exercise such option by
notifying Operator within the period specified above
that such Non-Consenting Party agrees to bear its
Participating Interest share of the expense and
liability of such appraisal program, and to pay such
amounts as set out in Articles 7.5(A) and 7.5(B).
(2) If the Consenting Parties decide to develop a
Discovery made or appraised in the course of an
Exclusive Operation, the Consenting Parties shall
submit to the Non-Consenting Parties a Development
Plan substantially in the form intended to be
submitted to the Government under the Contract. For
sixty (60) Days from receipt of such Development Plan
or such lesser period of time prescribed by the
Contract, each Non-Consenting Party shall have the
option to reinstate the rights it relinquished
pursuant to Article 7.4(B) and to participate in such
Development Plan. The Non-Consenting Party may
exercise such option by notifying Operator within the
period specified above that such Non-Consenting Party
agrees to bear its Participating Interest share of
the liability and expense of such Development Plan
and such future operating and producing costs, and to
pay the amounts as set out in Articles 7.5(A) and
7.5(B).
(3) If the Consenting Parties decide to Deepen, Complete,
Sidetrack, Plug Back or Recomplete an Exclusive Well
and such further operation was not included in the
original proposal for such Exclusive Well, the
Consenting Parties shall submit to the Non-Consenting
Parties the approved AFE for such further operation.
For thirty (30) Days (or forty-eight (48) hours for
Urgent Operational Matters) from receipt of such AFE,
each Non-Consenting Party shall have the option to
reinstate the rights it relinquished pursuant to
Article 7.4(B) and to participate in such operation.
The Non-Consenting Party may exercise such option by
notifying Operator within the period specified above
that such Non-Consenting Party agrees to bear its
Participating Interest share of the liability and
expense of such further operation, and to pay the
amounts as set out in Articles 7.5(A) and 7.5(B).
37
A Non-Consenting Party shall not be entitled to reinstate its
rights in any other type of operation.
(D) If a Non-Consenting Party does not properly and in a timely
manner exercise its option under Article 7.4(C), including paying
all amounts due in accordance with Articles 7.5(A) and 7.5(B),
such Non-Consenting Party shall have forfeited the options as set
out in Article 7.4(C) and the right to participate in the
proposed program, unless such program, plan or operation is
materially modified or expanded (in which case a new notice and
option shall be given to such Non-Consenting Party under Article
7.4(C)).
(E) A Non-Consenting Party exercising its option under Article 7.4(C)
shall notify the other Parties that it agrees to bear its share
of the liability and expense of such further operation and to
reimburse the amounts set out in Articles 7.5(A) and 7.5(B) that
such Non-Consenting Party had not previously paid. Such
Non-Consenting Party shall in no way be deemed to be entitled to
any amounts paid pursuant to Articles 7.5(A) and 7.5(B) incident
to such Exclusive Operations. The Participating Interest of such
Non-Consenting Party in such Exclusive Operation shall be its
Participating Interest set out in Article 3.2(A). The Consenting
Parties shall contribute to the Participating Interest of the
Non-Consenting Party in proportion to the excess Participating
Interest that each received under Article 7.2(E). If all Parties
participate in the proposed operation, then such operation shall
be conducted as a Joint Operation pursuant to Article 5.
(F) If after the expiry of the period in which a Non-Consenting Party
may exercise its option to participate in a Development Plan the
Consenting Parties desire to proceed, Operator shall give notice
to the Government under the appropriate provision of the Contract
requesting a meeting to advise the Government that the Consenting
Parties consider the Discovery to be a Commercial Discovery.
Following such meeting such Operator for such development shall
apply for an Exploitation Area (if applicable in the Contract).
Unless the Development Plan is materially modified or expanded
prior to the commencement of operations under such plan (in which
case a new notice and option shall be given to the Non-Consenting
Parties under Article 7.4(C)), each Non-Consenting Party to such
Development Plan shall:
(1) if the Contract so allows, elect not to apply for an
Exploitation Area covering such development and
forfeit all interest in such Exploitation Area, or
(2) if the Contract does not so allow, be deemed to have:
(a) elected not to apply for an Exploitation
Area covering such development;
(b) forfeited all economic interest in such
Exploitation Area; and
(c) assumed a fiduciary duty to exercise its
legal interest in such Exploitation Area for
the benefit of the Consenting Parties.
In either case such Non-Consenting Party shall be deemed to
have withdrawn from this Agreement to the extent it relates to
such Exploitation Area, even if the Development Plan is
modified or expanded subsequent to the commencement of
operations under such Development Plan and shall be further
deemed to have forfeited any right to participate in the
construction and ownership of facilities outside such
Exploitation Area designed solely for the use of such
Exploitation Area.
38
7.5 Premium to Participate in Exclusive Operations
(A) Each such Non-Consenting Party shall:
Check one Alternative.
[X] ALTERNATIVE NO. 1
within thirty (30) Days of the exercise of its option
under Article 7.4(C), pay in immediately available
funds to the Consenting Parties in proportion to
their respective Participating Interests in such
Exclusive Operations a lump sum amount payable in the
currency designated by such Consenting Parties. Such
lump sum amount shall be equal to such Non-Consenting
Party's Participating Interest share of all
liabilities and expenses that were incurred in every
Exclusive Operation relating to the Discovery (or
Exclusive Well, as the case may be) in which the
Non-Consenting Party desires to reinstate the rights
it relinquished pursuant to Article 7.4(B), and that
were not previously paid by such Non-Consenting
Party.
[ ] ALTERNATIVE NO. 2
immediately upon the exercise of its option under
Article 7.4(C), begin to bear one hundred percent
(100%) of the cash calls made on each Consenting
Party in respect of both Joint Operations and
Exclusive Operations until such Non-Consenting Party
has reimbursed the original Consenting Parties (in
proportion to their respective Participating Interest
in the Exclusive Operations in which such
Non-Consenting Party is reinstating its rights) an
amount equal to such Non-Consenting Party's
Participating Interest share of all liabilities and
expenses that were incurred in every Exclusive
Operation relating to the Discovery (or Exclusive
Well, as the case may be) in which the Non-Consenting
Party desires to reinstate the rights it relinquished
pursuant to Article 7.4(B) and that were not
previously paid by such Non-Consenting Party.
(B) In addition to the payment required under Article 7.5(A),
immediately following the exercise of its option under Article
7.4(C) each such Non-Consenting Party shall be liable to
reimburse the Consenting Parties who took the risk of such
Exclusive Operations (in proportion to their respective
Participating Interests) an amount equal to the total of:
(1) Six Hundred percent (600%) of such Non-Consenting
Party's Participating Interest share of all
liabilities and expenses that were incurred in any
Exclusive Operation relating to the obtaining of the
portion of the G & G Data which pertains to the
Discovery, and that were not previously paid by such
Non-Consenting Party; plus
(2) Six Hundred percent (600%) of such Non-Consenting
Party's Participating Interest share of all
liabilities and expenses that were incurred in any
Exclusive Operation relating to the drilling,
Deepening, Testing, Completing, Sidetracking,
Plugging Back, Recompleting and Reworking of the
Exploration Well which made the Discovery in which
the Non-Consenting Party desires to reinstate the
rights it relinquished pursuant to Article 7.4(B),
and that were not previously paid by such
Non-Consenting Party; plus
(3) Six Hundred percent (600%) of the Non-Consenting
Party's Participating Interest share of all
liabilities and expenses that were incurred in any
Exclusive Operation relating to the drilling,
Deepening, Testing, Completing, Sidetracking,
Plugging Back, Recompleting and Reworking of the
Appraisal Well(s) which delineated the Discovery in
which the Non-Consenting Party desires to reinstate
the rights it relinquished pursuant to Article
7.4(B), and that were not previously paid by such
Non-Consenting Party.
39
(C) Each such Non-Consenting Party who is liable for the amounts
set out in Article 7.5(B) shall:
Check one Alternative.
[X] ALTERNATIVE NO. 1
within thirty (30) Days of the exercise of its option
under Article 7.4(C), pay in immediately available
funds the full amount due from it under Article
7.5(B) to such Consenting Parties, in the currency
designated by such Consenting Parties.
[ ] ALTERNATIVE NO. 2
bear one hundred percent (100%) of the cash calls
made on each Consenting Party in respect of both
Joint Operations and Exclusive Operations until each
Non-Consenting Party has reimbursed the full amount
due from it under Article 7.5(B). Unless otherwise
agreed, any balance remaining unreimbursed at the end
of, or upon a Party's withdrawal from, the subject
Exploration Period will be reimbursed by cash payment
in the currency designated by the Consenting Parties
who took the risk of such Exclusive Operations. The
due date for any such payment shall be fifteen (15)
Days after notice from Operator of the balance
remaining unreimbursed. Unpaid amounts shall accrue
interest at the Agreed Interest Rate from the due
date until timely paid in full. With respect to
Parties who are participants in an on-going
Exploitation Period, any balance remaining
unreimbursed after twenty-four (24) months from the
date of the notice under Article 7.4(C) shall be
settled through allocation from the Non-Consenting
Parties to the Consenting Parties of an additional
share of Profit Hydrocarbons, such allocation timed
to enable the reimbursement to be completed in not
more than thirty (30) months from the date of the
notice under Article 7.4(C).
(D) The Non-Consenting Party exercising its option under Article
7.4(C) shall, in accordance with Article 19, be entitled to
all Cost Hydrocarbons derived from reimbursements made under
Article 7.5(A). Such Non-Consenting Party shall not be
entitled to Cost Hydrocarbons associated with payments made
under Article 7.5(B), unless the Contract or any Laws /
Regulations require otherwise. Each Consenting Party shall
have the right to refuse to accept all or any portion of its
share of amounts paid under Articles 7.5(A) and 7.5(B). In
such case the refused amount shall be distributed to each
non-refusing Consenting Party on a pro-rata basis.
7.6 Order of Preference of Operations
(A) Except as otherwise specifically provided in this Agreement,
if any Party desires to propose the conduct of an operation
that will conflict with an existing proposal for an Exclusive
Operation, such Party shall have the right exercisable for
five (5) Days (or twenty-four (24) hours for Urgent
Operational Matters) from receipt of the proposal for the
Exclusive Operation, to deliver such Party's alternative
proposal to all Parties entitled to participate in the
proposed operation. Such alternative proposal shall contain
the information required under Article 7.2(A).
(B) Each Party receiving such proposals shall elect by delivery of
notice to Operator and to the proposing Parties within the
appropriate response period set out in Article 7.2(B) to
participate in one of the competing proposals. Any Party not
notifying Operator and the proposing Parties within the
response period shall be deemed to have voted against the
proposals.
(C) The proposal receiving the largest aggregate Participating
Interest vote shall have priority over all other competing
proposals. In the case of a tie vote, Operator shall choose
among the proposals receiving the largest aggregate
Participating Interest vote. Operator shall deliver notice of
such result to all Parties entitled to participate in the
operation within five (5) Days (or twenty-four (24) hours for
Urgent Operational Matters).
40
(D) Each Party shall then have two (2) Days (or twenty-four (24)
hours for Urgent Operational Matters) from receipt of such
notice to elect by delivery of notice to Operator and the
proposing Parties whether such Party will participate in such
Exclusive Operation, or will relinquish its interest pursuant
to Article 7.4(B). Failure by a Party to deliver such notice
within such period shall be deemed an election not to
participate in the prevailing proposal.
Check Paragraph (E), if desired.
[X] OPTIONAL PROVISION
(E) Notwithstanding the provisions of Article 7.4(B), if for reasons
other than the encountering of granite or other practically
impenetrable substance or any other condition in the hole
rendering further operations impracticable, a well drilled as an
Exclusive Operation fails to reach the deepest objective Zone
described in the notice proposing such well, Operator shall give
notice of such failure to each Non-Consenting Party who submitted
or voted for an alternative proposal under this Article 7.6 to
drill such well to a shallower Zone than the deepest objective
Zone proposed in the notice under which such well was drilled.
Each such Non-Consenting Party shall have the option exercisable
for forty-eight (48) hours from receipt of such notice to
participate for its Participating Interest share in the initial
proposed Completion of such well. Each such Non-Consenting Party
may exercise such option by notifying Operator that it wishes to
participate in such Completion and by paying its Participating
Interest share of the cost of drilling such well to its deepest
depth drilled in the Zone in which it is Completed. All
liabilities and expenses for drilling and Testing the Exclusive
Well below that depth shall be for the sole account of the
Consenting Parties. If any such Non-Consenting Party does not
properly elect to participate in the first Completion proposed
for such well, the relinquishment provisions of Article 7.4(B)
shall continue to apply to such Non-Consenting Party's interest.
7.7 Stand-By Costs
(A) When an operation has been performed, all tests have been
conducted and the results of such tests furnished to the Parties,
stand by costs incurred pending response to any Party's notice
proposing an Exclusive Operation for Deepening, Testing,
Sidetracking, Completing, Plugging Back, Recompleting, Reworking
or other further operation in such well (including the period
required under Article 7.6 to resolve competing proposals) shall
be charged and borne as part of the operation just completed.
Stand by costs incurred subsequent to all Parties responding, or
expiration of the response time permitted, whichever first
occurs, shall be charged to and borne by the Parties proposing
the Exclusive Operation in proportion to their Participating
Interests, regardless of whether such Exclusive Operation is
actually conducted.
(B) If a further operation related to Urgent Operational Matters is
proposed while the drilling rig to be utilized is on location,
any Party may request and receive up to five (5) additional Days
after expiration of the applicable response period specified in
Article 7.2(B)(1) within which to respond by notifying Operator
that such Party agrees to bear all stand by costs and other costs
incurred during such extended response period. Operator may
require such Party to pay the estimated stand by costs in advance
as a condition to extending the response period. If more than one
Party requests such additional time to respond to the notice,
stand by costs shall be allocated between such Parties on a
Day-to-Day basis in proportion to their Participating Interests.
41
Check Article 7.8, if desired. Renumber following articles if Article 7.8 is not
selected.
[ ] OPTIONAL PROVISION
7.8 Special Considerations Regarding Deepening and Sidetracking
(A) An Exclusive Well shall not be Deepened or Sidetracked
without first affording the Non-Consenting Parties in
accordance with this Article 7.8 the opportunity to
participate in such operation.
(B) In the event any Consenting Party desires to Deepen or
Sidetrack an Exclusive Well, such Party shall initiate
the procedure contemplated by Article 7.2. If a
Deepening or Sidetracking operation is approved
pursuant to such provisions, and if any Non-Consenting
Party to the Exclusive Well elects to participate in
such Deepening or Sidetracking operation, such
Non-Consenting Party shall not owe amounts pursuant to
Article 7.5(B), and such Non-Consenting Party's payment
pursuant to Article 7.5(A) shall be such Non-Consenting
Party's Participating Interest share of the liabilities
and expenses incurred in connection with drilling the
Exclusive Well from the surface to the depth previously
drilled which such Non-Consenting Party would have paid
had such Non-Consenting Party agreed to participate in
such Exclusive Well; provided, however, all liabilities
and expenses for Testing and Completing or attempting
Completion of the well incurred by Consenting Parties
prior to the commencement of actual operations to
Deepen or Sidetrack beyond the depth previously drilled
shall be for the sole account of the Consenting
Parties.
7.9 Use of Property
(A) The Parties participating in any Deepening, Testing, Completing,
Sidetracking, Plugging Back, Recompleting or Reworking of any
well drilled under this Agreement shall be permitted to use (free
of cost) all casing, tubing and other equipment in the well that
is not needed for operations by the owners of the wellbore, but
the ownership of all such equipment shall remain unchanged. On
abandonment of a well in which operations with differing
participation have been conducted, the Parties abandoning the
well shall account for all equipment in the well to the Parties
owning such equipment by tendering to them their respective
Participating Interest shares of the value of such equipment less
the cost of salvage.
Check Paragraph (B), if desired. Renumber following paragraphs if
Paragraph (B) is not selected.
[ ] OPTIONAL PROVISION
(B) Any Party (whether owning interests in the platform or
not) shall be permitted to use spare slots in a
platform constructed pursuant to this Agreement for
purposes of drilling Exploration Xxxxx and/or Appraisal
Xxxxx and running tests in the Contract Area. No Party
except an owner of a platform may drill Development
Xxxxx or run production from a well (except production
resulting from initial well tests) from the platform
without the prior written consent of all platform
owners. If all owners of the platform participate in
the drilling of a well, then no fee shall be payable
under this Article 7.9(B). Otherwise, each time a well
is drilled from a platform, the Consenting Parties in
the well shall pay to the owners of the platform until
all xxxxx drilled by such Parties have been plugged and
abandoned a monthly fee equal to (1) that portion of
the total cost of the platform (including costs of
material, fabrication, transportation and
installation), divided by the number of months of
useful life established for the platform under the tax
law of the host country, that one well slot bears to
the total number of slots on the platform plus (2) that
proportionate part of the monthly cost of operating,
maintaining and financing the platform that the well
drilled under this Article 7.9(B) bears to the total
number of xxxxx served by such platform. Consenting
Parties who have paid to drill a well from a platform
under this Article 7.9(B) shall be entitled to Deepen
or Sidetrack that well for no additional charge if done
prior to moving the drilling rig off of location.
42
Check Paragraph (C), if desired. Renumber following paragraphs if
Paragraph (C) is not selected.
[X] OPTIONAL PROVISION
(C) Spare capacity in equipment that is constructed
pursuant to this Agreement and used for processing or
transporting Crude Oil and Natural Gas after it has
passed through primary separators and dehydrators
(including treatment facilities, gas processing plants
and pipelines) shall be available for use by any Party
for Hydrocarbon production from the Contract Area on
the terms set forth below. All Parties desiring to use
such equipment shall nominate capacity in such
equipment on a monthly basis by notice to Operator at
least ten (10) Days prior to the beginning of each
month. Operator may nominate capacity for the owners of
the equipment if they so elect. If at any time the
capacity nominated exceeds the total capacity of the
equipment, the capacity of the equipment shall be
allocated in the following priority: (1) first, to the
owners of the equipment up to their respective
Participating Interest shares of total capacity, (2)
second, to owners of the equipment desiring to use
capacity in excess of their Participating Interest
shares, in proportion to the Participating Interest of
each such Party and (3) third, to Parties not owning
interests in the equipment, in proportion to their
Participating Interests in the Agreement. Owners of the
equipment shall be entitled to use up to their
Participating Interest share of total capacity without
payment of a fee under this Article 7.9(C). Otherwise,
each Party using equipment pursuant to this Article
7.9(C) shall pay to the owners of the equipment monthly
throughout the period of use an arm's-length fee based
upon third party charges for similar services in the
vicinity of the Contract Area. If no arm's-length rates
for such services are available, then the Party
desiring to use equipment pursuant to this Article
7.9(C) shall pay to the owners of the equipment a
monthly fee equal to (1) that portion of the total cost
of the equipment, divided by the number of months of
useful life established for such equipment under the
tax law of the host country, that the capacity made
available to such Party on a fee basis under this
Article 7.9(C) bears to the total capacity of the
equipment plus (2) that portion of the monthly cost of
maintaining, operating and financing the equipment that
the capacity made available to such Party on a fee
basis under this Article 7.9(C) bears to the total
capacity of the equipment.
Check, if desired, Paragraph (D) in conjunction with Paragraph (B) or
(C). Renumber following paragraph if Paragraph (D) is not selected.
[X] OPTIONAL PROVISION
(D) Payment for the use of a platform under Article
7.9(B) or the use of equipment under Article 7.9(C)
shall not result in an acquisition of any additional
interest in the equipment or platform by the paying
Parties. However, such payments shall be included in
the costs which the paying Parties are entitled to
recoup under Article 7.5.
Check, if desired, Paragraph (E) in conjunction with Paragraph (C) or
(D).
[X] OPTIONAL PROVISION
(E) Parties electing to use spare capacity on platforms
or in equipment pursuant to Article 7.9(B) or Article
7.9(C) shall indemnify the owners of the equipment or
platform against any and all costs and liabilities
incurred as a result of such use (including any
Consequential Loss and Environmental Loss) but
excluding costs and liabilities for which Operator is
solely responsible under Article 4.6.
43
7.10 Lost Production During Tie-In of Exclusive Operation Facilities
If, during the tie-in of Exclusive Operation facilities with the
existing production facilities of another operation, the production of
Hydrocarbons from such other pre-existing operations is temporarily
lessened as a result, then the Consenting Parties shall compensate the
parties to such existing operation for such loss of production in the
following manner. Operator shall determine the amount by which each
Day's production during the tie-in of Exclusive Operation facilities
falls below the previous month's average daily production from the
existing production facilities of such operation. The so-determined
amount of lost production shall be recovered by all Parties who
experienced such loss in proportion to their respective Participating
Interest. Upon completion of the tie-in, such lost production shall be
recovered in full by Operator deducting up to one hundred percent
(100%) of the production from the Exclusive Operation, prior to the
Consenting Parties being entitled to receive any such production.
Check Article 7.11, if desired. Renumber following article if Article 7.11 is
not selected.
[ X] OPTIONAL PROVISION:
7.11 Production Bonuses
The bonus payable by the Parties under Section 10.4(b) of the Contract
("Production Bonus") shall be charged to the Joint Account if there is
no Hydrocarbon production from an Exclusive Operation at the time they
are incurred. If there is Hydrocarbon production from one or more
Exclusive Operations, then any Production Bonus which becomes payable
under the Contract shall be borne
Check one Alternative.
[ ] ALTERNATIVE NO. 1
totally by the Exploitation Area(s) in which the
average daily commercial production of Hydrocarbons
during the ____ Day period preceding the date on
which liability for the Production Bonus is incurred
exceeded their average daily production of
Hydrocarbons during the immediately preceding ____
Day period, in proportion to the amount of the
increase for each such Exploitation Area.
[ ] ALTERNATIVE NO. 2
by each Exploitation Area, in the proportion that its
average daily production of Hydrocarbons bears to the
total average daily production of Hydrocarbons from
the Contract Area during the ____ Day period
preceding the date on which liability for the
Production Bonus is incurred.
[ X] ALTERNATIVE NO. 3
by each Exploitation Area that produced Hydrocarbons
during the 365 Day period preceding the date on which
liability for the Production Bonus is incurred, in
the proportion that its cumulative production of
Hydrocarbons through that date bears to the total
cumulative production of Hydrocarbons through that
date from all Exploitation Areas liable for the
Production Bonus.
[ ] ALTERNATIVE NO. 4
by the Parties in accordance with their Participating
Interests.
The Parties in an Exploitation Area shall bear the Production
Bonus allocated to that Exploitation Area in accordance with
their Participating Interests in that Exploitation Area as of
the date on which liability for the Production Bonus was
incurred. Only types, grades and qualities of Hydrocarbons
used for the determination of the Production Bonus under the
Contract shall be utilized in the calculations in this Article
7.11.
44
7.12 Conduct of Exclusive Operations
(A) Each Exclusive Operation shall be carried out by the Consenting
Parties acting as the Operating Committee, subject to the
provisions of this Agreement applied mutatis mutandis to such
Exclusive Operation and subject to the terms and conditions of
the Contract.
(B) The computation of liabilities and expenses incurred in Exclusive
Operations, including the liabilities and expenses of Operator
for conducting such operations, shall be made in accordance with
the principles set out in the Accounting Procedure.
(C) Operator shall maintain separate books, financial records and
accounts for Exclusive Operations which shall be subject to the
same rights of audit and examination as the Joint Account and
related records, all as provided in the Accounting Procedure.
Said rights of audit and examination shall extend to each of the
Consenting Parties and each of the Non-Consenting Parties so long
as the latter are, or may be, entitled to elect to participate in
such Exclusive Operations.
(D) Operator, if it is conducting an Exclusive Operation for the
Consenting Parties, regardless of whether it is participating in
that Exclusive Operation, shall be entitled to request cash
advances and shall not be required to use its own funds to pay
any cost and expense and shall not be obliged to commence or
continue Exclusive Operations until cash advances requested have
been made, and the Accounting Procedure shall apply to Operator
in respect of any Exclusive Operations conducted by it.
(E) Should the submission of a Development Plan be approved in
accordance with Article 6.2, or should any Party propose (but not
yet have the right to commence) a development in accordance with
this Article 7 where neither the Development Plan nor the
development proposal call for the conduct of additional appraisal
drilling, and should any Party wish to drill an additional
Appraisal Well prior to development, then the Party proposing the
Appraisal Well as an Exclusive Operation shall be entitled to
proceed first, but without the right (subject to the following
sentence) to future reimbursement pursuant to Article 7.5. If
such an Appraisal Well is produced, any Consenting Party shall
own and have the right to take in kind and separately dispose of
all of the Non-Consenting Party's Entitlement from such Appraisal
Well until the value received in sales to purchasers in
arm-length transactions equals one hundred percent (100%) of such
Non-Consenting Party's Participating Interest shares of all
liabilities and expenses that were incurred in any Exclusive
Operations relating to the Appraisal Well. Following the
completion of drilling such Appraisal Well as an Exclusive
Operation, the Parties may proceed with the Development Plan
approved pursuant to Article 5.9, or (if applicable) the Parties
may complete the procedures to propose an Exclusive Operation to
develop a Discovery. If, as the result of drilling such Appraisal
Well as an Exclusive Operation, the Party or Parties proposing to
develop the Discovery decide(s) not to do so, then each
Non-Consenting Party who voted in favor of such Development Plan
prior to the drilling of such Appraisal Well shall pay to the
Consenting Party the amount such Non-Consenting Party would have
paid had such Appraisal Well been drilled as a Joint Operation.
45
(F) If Operator is a Non-Consenting Party to an Exclusive Operation,
then Operator
Check one Alternative.
[X] ALTERNATIVE NO. 1
may resign, but in any event shall resign on the
unanimous request of the Consenting Parties, as
Operator for such Exclusive Operation, and the
Consenting Parties shall select a Consenting Party to
serve as Operator for such Exclusive Operation only.
[ ] ALTERNATIVE NO. 2
may resign as Operator for the Exploitation Area for
such Discovery. If Operator so resigns, the
Consenting Parties shall select a Consenting Party to
serve as Operator for such Exclusive Operation only.
ARTICLE 8
DEFAULT
8.1 Default and Notice
(A) Any Party that fails to:
(1) pay when due its share of Joint Account expenses
(including cash advances and interest); or
(2) obtain and maintain any Security required of such
Party under the Contract or this Agreement;
shall be in default under this Agreement (a "Defaulting
Party"). Operator, or any non-defaulting Party in case
Operator is the Defaulting Party, shall promptly give notice
of such default (the "Default Notice") to the Defaulting Party
and each of the non-defaulting Parties.
(B) For the purposes of this Article 8, "Default Period" means the
period beginning five (5) Business Days from the date that the
Default Notice is issued in accordance with this Article 8.1
and ending when all the Defaulting Party's defaults pursuant
to this Article 8.1 have been remedied in full.
8.2 Operating Committee Meetings and Data
(A) Notwithstanding any other provision of this Agreement, the
Defaulting Party shall have no right, during the Default
Period, to:
(1) call or attend Operating Committee or subcommittee
meetings;
(2) vote on any matter coming before the Operating
Committee or any subcommittee;
(3) access any data or information relating to any
operations under this Agreement;
(4) consent to or reject data trades between the Parties
and third parties, nor access any data received in
such data trades;
(5) consent to or reject any Transfer (as defined in
Article 12.1) or otherwise exercise any other rights
in respect of Transfers under this Article 8 or under
Article 12;
(6) receive its Entitlement in accordance with Article
8.4;
(7) withdraw from this Agreement under Article 13; or
46
(8) take assignment of any portion of another Party's
Participating Interest in the event such other Party
is either in default or withdrawing from this
Agreement and the Contract.
(B) Notwithstanding any other provisions in this Agreement, during the
Default Period:
(1) unless agreed otherwise by the non-defaulting
Parties, the voting interest of each non-defaulting
Party shall be equal to the ratio such non-defaulting
Party's Participating Interest bears to the total
Participating Interests of the non-defaulting
Parties;
(2) any matters requiring a unanimous vote or approval of
the Parties shall not require the vote or approval of
the Defaulting Party;
(3) the Defaulting Party shall be deemed to have elected
not to participate in any operations that are voted
upon during the Default Period, to the extent such an
election would be permitted by Article 5.13 and
Article 7; and
(4) the Defaulting Party shall be deemed to have
approved, and shall join with the non-defaulting
Parties in taking, any other actions voted on during
the Default Period.
8.3 Allocation of Defaulted Accounts
(A) The Party providing the Default Notice pursuant to Article 8.1
shall include in the Default Notice to each non-defaulting Party
a statement of: (i) the sum of money that the non-defaulting
Party shall pay as its portion of the Amount in Default; and (ii)
if the Defaulting Party has failed to obtain or maintain any
Security required of such Party in order to maintain the Contract
in full force and effect, the type and amount of the Security the
non-defaulting Parties shall post or the funds they shall pay in
order to allow Operator, or (if Operator is in default) the
notifying Party, to post and maintain such Security. Unless
otherwise agreed, the obligations for which the Defaulting Party
is in default shall be satisfied by the non-defaulting Parties in
proportion to the ratio that each non-defaulting Party's
Participating Interest bears to the Participating Interests of
all non-defaulting Parties. For the purposes of this Article 8:
"Amount in Default" means the Defaulting Party's share of
Joint Account expenses which the Defaulting Party has failed
to pay when due pursuant to the terms of this Agreement (but
excluding any interest owed on such amount); and
"Total Amount in Default" means the following amounts: (i) the
Amount in Default; (ii) third-party costs of obtaining and
maintaining any Security incurred by the non-defaulting
Parties or the funds paid by such Parties in order to allow
Operator to obtain or maintain Security, in accordance with
Article 8.3(A)(ii); plus (iii) any interest at the Agreed
Interest Rate accrued on the amount under (i) from the date
this amount is due by the Defaulting Party until paid in full
by the Defaulting Party and on the amount under (ii) from the
date this amount is incurred by the non-defaulting Parties
until paid in full by the Defaulting Party.
(B) If the Defaulting Party remedies its default in full before the
Default Period commences, the notifying Party shall promptly
notify each non-defaulting Party by facsimile or telephone and by
email, and the non-defaulting Parties shall be relieved of their
obligations under Article 8.3(A). Otherwise, each non-defaulting
Party shall satisfy its obligations under Article 8.3(A)(i)
before the Default Period commences and its obligations under
Article 8.3(A)(ii) within ten (10) Days following the Default
Notice. If any non-defaulting Party fails to timely satisfy such
obligations, such Party shall thereupon be a Defaulting Party
subject to the provisions of this Article 8. The non-defaulting
Parties shall be entitled to receive their respective shares of
the Total Amount in Default payable by such Defaulting Party
pursuant to this Article 8.
47
(C) If Operator is a Defaulting Party, then all payments otherwise
payable to Operator for Joint Account costs pursuant to this
Agreement shall be made to the notifying Party instead until the
default is cured or a successor Operator appointed. The notifying
Party shall maintain such funds in a segregated account separate
from its own funds and shall apply such funds to third party
claims due and payable from the Joint Account of which it has
notice, to the extent Operator would be authorized to make such
payments under the terms of this Agreement. The notifying Party
shall be entitled to xxxx or cash call the other Parties in
accordance with the Accounting Procedure for proper third party
charges that become due and payable during such period to the
extent sufficient funds are not available. When Operator has
cured its default or a successor Operator is appointed, the
notifying Party shall turn over all remaining funds in the
account to Operator and shall provide Operator and the other
Parties with a detailed accounting of the funds received and
expended during this period. The notifying Party shall not be
liable for damages, losses, costs, expenses or liabilities
arising as a result of its actions under this Article 8.3(C),
except to the extent Operator would be liable under Article 4.6.
8.4 Remedies
[NOTE: Default remedies must be considered and modified in the
context of the requirements of the Contract and applicable laws and
regulations of the host country.]
(A) During the Default Period, the Defaulting Party shall not have a
right to its Entitlement, which shall vest in and be the property
of the non-defaulting Parties. Operator (or the notifying Party
if Operator is a Defaulting Party) shall be authorized to sell
such Entitlement in an arm's-length sale on terms that are
commercially reasonable under the circumstances and, after
deducting all costs, charges and expenses incurred in connection
with such sale, pay the net proceeds to the non-defaulting
Parties in proportion to the amounts they are owed by the
Defaulting Party as a part of the Total Amount in Default (in
payment of first the interest and then the principal) and apply
such net proceeds toward the establishment of the Reserve Fund
(as defined in Article 8.4(C)), if applicable, until all such
Total Amount in Default is recovered and such Reserve Fund is
established. Any surplus remaining shall be paid to the
Defaulting Party, and any deficiency shall remain a debt due from
the Defaulting Party to the non-defaulting Parties. When making
sales under this Article 8.4(A), the non-defaulting Parties shall
have no obligation to share any existing market or obtain a price
equal to the price at which their own production is sold.
(B) If Operator disposes of any Joint Property or if any other credit
or adjustment is made to the Joint Account during the Default
Period, Operator (or the notifying Party if Operator is a
Defaulting Party) shall be entitled to apply the Defaulting
Party's Participating Interest share of the proceeds of such
disposal, credit or adjustment against the Total Amount in
Default (against first the interest and then the principal) and
toward the establishment of the Reserve Fund (as defined in
Article 8.4(C)), if applicable. Any surplus remaining shall be
paid to the Defaulting Party, and any deficiency shall remain a
debt due from the Defaulting Party to the non-defaulting Parties.
(C) The non-defaulting Parties shall be entitled to apply the net
proceeds received under Articles 8.4(A) and 8.4(B) toward the
creation of a reserve fund (the "Reserve Fund") in an amount
equal to the Defaulting Party's Participating Interest share of:
(i) the estimated cost to abandon any xxxxx and other property in
which the Defaulting Party participated; (ii) the estimated cost
of severance benefits for local employees upon cessation of
operations; and (iii) any other identifiable costs that the
non-defaulting Parties anticipate will be incurred in connection
with the cessation of operations. Upon the conclusion of the
Default Period, all amounts held in the Reserve Fund shall be
returned to the Party previously in Default.
Check one Alternative for Paragraph (D).
[X] ALTERNATIVE 1 - Forfeiture
48
(D) (1) If a Defaulting Party fails to fully remedy all
its defaults by the one hundred and eightieth (180th)
Day following the date of the Default Notice, then,
without prejudice to any other rights available to
each non-defaulting Party to recover its portion of
the Total Amount in Default,
Check one Alternative.
[ ] ALTERNATIVE 1-1
each non-defaulting Party
[X] ALTERNATIVE NO. 1-2
a majority in interest of the
non-defaulting Parties (after excluding
Affiliates of the Defaulting Party)
shall have the option, exercisable at anytime
thereafter during the Default Period, to require that
the Defaulting Party completely withdraw from this
Agreement and the Contract. Such option shall be
exercised by notice to the Defaulting Party and each
non-defaulting Party. If such option is exercised,
the Defaulting Party shall be deemed to have
transferred, pursuant to Article 13.6, effective on
the date of the non-defaulting Party's or Parties'
notice, its Participating Interest to the
non-defaulting Parties. Notwithstanding the terms of
Article 13, in the absence of an agreement among the
non-defaulting Parties to the contrary, any transfer
to the non-defaulting Parties following a withdrawal
pursuant to this Article 8.4(D)(1) shall be in
proportion to the Participating Interests of the
non-defaulting Parties.
Check if desired in conjunction with Alternative 1.
[X] OPTIONAL PROVISION - Expedited Forfeiture for
Subsequent Default
(2) A Party which is held in default
under this Agreement (and
subsequently cures such default)
shall be subject to the provisions
of this Article 8.4(D)(2) for a
period of seven hundred thirty (730)
Days following the last Day of the
Default Period associated with such
initial occurrence of default. If
such Party fails to remedy a
subsequent default by the ninetieth
(90th) Day following the date of the
Default Notice associated with such
subsequent occasion of default (a
"Repeat Defaulting Party"), then,
without prejudice to any other
rights available to each
non-defaulting Party to recover its
portion of the Total Amount in
Default,
Check one Alternative.
[ ] ALTERNATIVE NO. 1
each non-defaulting Party
[X] ALTERNATIVE NO. 2
a majority in interest of
the non-defaulting Parties
(after excluding Affiliates
of the Repeat Defaulting
Party)
shall have the option, exercisable
at any time thereafter until the
Repeat Defaulting Party has
completely cured its defaults, to
require that the Repeat Defaulting
Party completely withdraw from this
Agreement and the Contract. Such
option shall be exercised by notice
to the Repeat Defaulting Party and
each non-defaulting Party. If such
option is exercised, the Repeat
Defaulting Party shall be deemed to
have transferred, pursuant to
Article 13.6, effective on the date
of the non-defaulting Party's or
Parties' notice, its Participating
Interest to the non-defaulting
Parties. Notwithstanding the terms
of Article 13, in the absence of an
agreement among the non-defaulting
Parties to the contrary, any
transfer to the non-defaulting
Parties following a withdrawal
pursuant to this Article 8.4(D)(2)
shall be in proportion to the
Participating Interests of the
non-defaulting Parties
49
[ ] ALTERNATIVE NO. 2 - Buy-Out of Defaulting Party's
Participating Interest
(D) Each Party grants to each of the other Parties the
right and option to acquire (the "Buy-Out Option") all
of its Participating Interest for a value (the
"Appraised Value") as determined in this Article 8.4(D)
in the event that such Party becomes a Defaulting Party
and fails to fully remedy all its defaults by the
thirtieth (30th) Day following the date of the Default
Notice. If a Defaulting Party fails to remedy its
default by the thirtieth (30th) Day following the date
of the Default Notice, then, without prejudice to any
other rights available to each non-defaulting Party to
recover its portion of the Total Amount in Default,
Check one Alternative.
[ ] ALTERNATIVE NO. 2-1
each non-defaulting Party may, but shall not
be obligated to, exercise such Buy-Out
Option by notice to the Defaulting Party and
each non-defaulting Party (the "Option
Notice"). The Defaulting Party shall be
obligated to transfer, pursuant to Article
13.6, effective on the date of the Option
Notice, its Participating Interest to the
non-defaulting Parties having exercised the
Buy-Out Option (each, an "Acquiring Party").
If, within thirty (30) Days after the
Buy-Out Option is first exercised by an
Acquiring Party, other non-defaulting
Parties become an Acquiring Party, each
Acquiring Party shall acquire a proportion
of the Participating Interest of the
Defaulting Party equal to the ratio of its
own Participating Interest to the total
Participating Interests of all Acquiring
Parties and pay such proportion of the
Appraised Value (as defined below), unless
they otherwise agree. Each Acquiring Party
shall specify in its Option Notice a value
for the Defaulting Party's Participating
Interest. Within five (5) Days of the Option
Notice, the Defaulting Party shall (i)
notify the Acquiring Parties that it
accepts, with respect to each Acquiring
Party, the value specified by such Acquiring
Party in its Option Notice (in which case
this value is, with respect to such
Acquiring Party, the "Appraised Value"); or
(ii) refer the Dispute to an independent
expert pursuant to Article 18.3 for
determination of the value of its
Participating Interest (in which case the
value determined by such expert shall be
deemed the "Appraised Value"). If the
Defaulting Party fails to so notify the
Acquiring Parties, then the Defaulting Party
shall be deemed to have accepted, with
respect to each Acquiring Party, such
Acquiring Party's proposed value as the
Appraised Value.
[ ] ALTERNATIVE NO. 2-2
a majority in interest of the non-defaulting
Parties (after excluding Affiliates of the
Defaulting Party) may, but shall not be
obligated to, exercise such Buy-Out Option
by notice to the Defaulting Party and each
non-defaulting Party (the "Option Notice").
If more than one non-defaulting Party elects
to exercise the Buy-Out Option, each
electing non-defaulting Party (collectively,
the "Acquiring Parties") shall acquire a
proportion of the Participating Interest of
the Defaulting Party equal to the ratio of
its own Participating Interest to the total
Participating Interests of all Acquiring
Parties and pay such proportion of the
Appraised Value (as defined below), unless
they otherwise agree. The Defaulting Party
shall be obligated to transfer, pursuant to
Article 13.6, effective on the date of the
Option Notice, its Participating Interest to
the Acquiring Parties in consideration of
the payment to the Defaulting Party of the
Appraised Value. In the Option Notice the
Acquiring Parties shall specify a value for
the Defaulting Party's Participating
Interest. Within five (5) Days of the Option
Notice, the Defaulting Party shall (i)
notify the Acquiring Parties that it accepts
the value specified in the Option Notice (in
which case such value is the "Appraised
Value"); or (ii) refer the Dispute to an
independent expert pursuant to Article 18.3
for determination of the value of its
Participating Interest (in which case the
value determined by such expert shall be
deemed the "Appraised Value"). If the
Defaulting Party fails to so notify the
Acquiring Parties, the Defaulting Party
shall be deemed to have accepted the
Acquiring Parties' value as the Appraised
Value.
50
If the valuation of the Defaulting Party's
Participating Interest is referred to an expert, such
expert shall determine the Appraised Value which
shall be equal to the fair market value of the
Defaulting Party's Participating Interest, less the
following: (i) the Total Amount in Default; (ii) all
costs, including the costs of the expert, to obtain
such valuation; and (iii) ___ percent (__%) of the
fair market value of the Defaulting Party's
Participating Interest.
The Appraised Value shall be paid to the Defaulting
Party in four (4) installments, each equal to 25% of
the Appraised Value as follows:
(1) the first installment shall be due and
payable to the Defaulting Party within [15
Days] after the date on which the Defaulting
Party's Participating Interest is
effectively transferred to the Acquiring
Parties (the "Transfer Date");
(2) the second installment shall be due and
payable to the Defaulting Party within [180
Days] after the Transfer Date;
(3) the third installment shall be due and
payable to the Defaulting Party within [365
Days] after the Transfer Date; and
(4) the fourth installment shall be due and
payable to the Defaulting Party within [545
Days] after the Transfer Date.
Check Paragraph (E), if desired. Renumber following paragraphs if
Paragraph (E) is not selected.
[ ] OPTIONAL PROVISION- Security Interest
(E) In addition to the other remedies available to the
non-defaulting Parties under this Article 8 and any
other rights available to each non-defaulting Party
to recover its portion of the Total Amount in
Default, in the event a Defaulting Party fails to
remedy its default within thirty (30) Days of the
Default Notice, the non-Defaulting Parties may elect
to enforce a mortgage and security interest on the
Defaulting Party's Participating Interest as set
forth below, subject to the Contract and the Laws /
Regulations.
(1) Each Party grants to each of the other
Parties, in pro rata shares based on their
relative Participating Interests, a mortgage
and security interest on its Participating
Interest, whether now owned or hereafter
acquired, together with all products and
proceeds derived from that Participating
Interest (collectively, the "Collateral") as
security for (i) the payment of all amounts
owing by such Party (including interest and
costs of collection) under this Agreement;
and (ii) any Security which such Party is
required to provide under the Contract.
51
(2) Should a Defaulting Party fail to remedy its
default by the thirtieth (30th) Day
following the date of the Default Notice,
then, each non-defaulting Party shall have
the option, exercisable at any time
thereafter during the Default Period, to
foreclose its mortgage and security interest
against its prorata share of the Collateral
by any means permitted under the Contract
and the Laws / Regulations and to sell all
or any part of that Collateral in public or
private sale after providing the Defaulting
Party and other creditors with any notice
required by the Contract or the Laws /
Regulations, and subject to the provisions
of Article 12. Except as may be prohibited
by the Contract or the Laws / Regulations,
the non-defaulting Party that forecloses its
mortgage and security interest shall be
entitled to become the purchaser of the
Collateral sold and shall have the right to
credit toward the purchase price the amount
to which it is entitled under Article 8.4.
Any deficiency in the amounts received by
the foreclosing party shall remain a debt
due by the Defaulting Party. The foreclosure
of mortgages and security interests by one
non-defaulting Party shall neither affect
the amounts owed by the Defaulting Party to
the other non-defaulting Parties nor in any
way limit the rights or remedies available
to them. Each Party agrees that, should it
become a Defaulting Party, it waives the
benefit of any appraisal, valuation, stay,
extension or redemption law and any other
debtor protection law that otherwise could
be invoked to prevent or hinder the
enforcement of the mortgage and security
interest granted above.
(3) Each Party agrees to execute such memoranda,
financing statements and other documents,
and make such filings and registrations, as
may be reasonably necessary to perfect,
validate and provide notice of the mortgages
and security interests granted by this
Article 8.4(E).
(F) For purposes of [Articles 8.4(D) and 8.4(E), as elected], the
Defaulting Party shall, without delay following any request from
the non-defaulting Parties, do any act required to be done by the
Laws / Regulations and any other applicable laws in order to
render the transfer of its Participating Interest legally valid,
including obtaining all governmental consents and approvals, and
shall execute any document and take such other actions as may be
necessary in order to effect a prompt and valid transfer. The
Defaulting Party shall be obligated to promptly remove any liens
and encumbrances which may exist on its assigned Participating
Interests. In the event all Government approvals are not timely
obtained, the Defaulting Party shall hold the assigned
Participating Interest in trust for the non-defaulting Parties
who are entitled to receive it. Each Party constitutes and
appoints each other Party its true and lawful attorney to execute
such instruments and make such filings and applications as may be
necessary to make such transfer legally effective and to obtain
any necessary consents of the Government. Actions under this
power of attorney may be taken by any Party individually without
the joinder of the others. This power of attorney is irrevocable
for the term of this Agreement and is coupled with an interest.
If requested, each Party shall execute a form prescribed by the
Operating Committee setting forth this power of attorney in more
detail.
(G) The non-defaulting Parties shall be entitled to recover from the
Defaulting Party all reasonable attorneys' fees and all other
reasonable costs sustained in the collection of amounts owing by
the Defaulting Party.
(H) The rights and remedies granted to the non-defaulting Parties in
this Article 8 shall be cumulative, not exclusive, and shall be
in addition to any other rights and remedies that may be
available to the non-defaulting Parties, whether at law, in
equity or otherwise. Each right and remedy available to the
non-defaulting Parties may be exercised from time to time and so
often and in such order as may be considered expedient by the
non-defaulting Parties in their sole discretion.
8.5 Survival
52
The obligations of the Defaulting Party and the rights of the
non-defaulting Parties shall survive the surrender of the Contract,
abandonment of Joint Operations and termination of this Agreement.
8.6 No Right of Set Off
Each Party acknowledges and accepts that a fundamental principle of
this Agreement is that each Party pays its Participating Interest share
of all amounts due under this Agreement as and when required.
Accordingly, any Party which becomes a Defaulting Party undertakes
that, in respect of either any exercise by the non-defaulting Parties
of any rights under or the application of any of the provisions of this
Article 8, such Party hereby waives any right to raise by way of set
off or invoke as a defense, whether in law or equity, any failure by
any other Party to pay amounts due and owing under this Agreement or
any alleged claim that such Party may have against Operator or any
Non-Operator, whether such claim arises under this Agreement or
otherwise. Each Party further agrees that the nature and the amount of
the remedies granted to the non-defaulting Parties hereunder are
reasonable and appropriate in the circumstances.
ARTICLE 9
DISPOSITION OF PRODUCTION
9.1 Right and Obligation to Take in Kind
Except as otherwise provided in this Article 9 or in Article 8, each
Party shall have the right and obligation to own, take in kind and
separately dispose of its Entitlement.
9.2 Disposition of Crude Oil
Check one Alternative.
[ ] ALTERNATIVE NO. 1
Crude Oil to be produced from an Exploitation Area shall be
taken and disposed of in accordance with the rules and
procedures set forth in Exhibit D.
[ ] ALTERNATIVE NO. 2
If Crude Oil is to be produced from an Exploitation Area, the
Parties shall in good faith, and not less than three (3)
months prior to the anticipated first delivery of Crude Oil,
as promptly notified by Operator, negotiate and conclude the
terms of a lifting agreement to cover the offtake of Crude Oil
produced under the Contract. The lifting procedure shall be
based on the AIPN Model Form Lifting Procedure and shall
contain all such terms as may be negotiated and agreed by the
Parties, consistent with the Development Plan and subject to
the terms of the Contract. The Government Oil & Gas Company
may, if necessary and practicable, also be party to the
lifting agreement; if the Government Oil & Gas Company is a
party to the lifting agreement, then the Parties shall
endeavor to obtain its agreement to the principles set forth
in this Article 9.2. If a lifting agreement has not been
entered into by the date of first delivery of Crude Oil, the
Parties shall nonetheless be obligated to take and separately
dispose of such Crude Oil as provided in Article 9.1 and in
addition shall be bound by the terms set forth in the AIPN
Model Form Lifting Procedure until a lifting agreement is
executed by the Parties.
[ ] ALTERNATIVE NO. 3
If Crude Oil is to be produced from an Exploitation Area, the
Parties shall in good faith, and not less than three (3)
months prior to the anticipated first delivery of Crude Oil,
as promptly notified by Operator, negotiate and conclude the
terms of a lifting agreement to cover the offtake of Crude Oil
produced under the Contract. The Government Oil & Gas Company
may, if necessary and practicable, also be party to the
lifting agreement; if the Government Oil & Gas Company is
party to the lifting agreement, then the Parties shall
endeavor to obtain its agreement to the principles set forth
in this Article 9.2. The lifting agreement shall, to the
extent consistent with the Development Plan and subject to the
terms of the Contract, make provision for:
53
(a) the delivery point at which title and risk of loss of
each Party's Entitlement of Crude Oil shall pass to
such Party;
(b) Operator's regular periodic advice to the Parties of
estimates of total available production for succeeding
periods, quantities of each type and/or grade of Crude
Oil and each Party's Entitlement for as far ahead as is
necessary for Operator and the Parties to plan lifting
arrangements. Such advice shall also cover, for each
type and/or grade of Crude Oil, the total available
production and deliveries for the preceding period, and
overlifts and underlifts;
(c) nomination by the Parties to Operator of acceptance of
their shares of total available production for the
succeeding period. Such nominations shall in any one
period be for each Party's entire Entitlement of
available production during that period, subject to
operational tolerances and agreed minimum economic
cargo sizes or as the Parties may otherwise agree;
(d) timely mitigation of the effects of overlifts and
underlifts and any related re-allocation of Cost
Hydrocarbons and Profit Hydrocarbons;
(e) if offshore loading or a shore terminal for vessel
loading is involved, risks regarding acceptability of
tankers, demurrage and (if applicable) availability of
berths;
(f) distribution to the Parties of available grades,
gravities and qualities of Crude Oil to ensure, to the
extent Parties take delivery of their Entitlements as
they accrue, that each Party shall receive in each
period Entitlements of grades, gravities and qualities
of Crude Oil from each Exploitation Area in which it
participates similar to the grades, gravities and
qualities of Crude Oil received by each other Party
from that Exploitation Area in that period;
(g) to the extent that distribution of Entitlements on such
basis is impracticable due to availability of
facilities and minimum cargo sizes, a method of making
periodic adjustments; and
(h) the right of the other Parties to sell an Entitlement
which a Party fails to nominate for acceptance pursuant
to (c) above or of which a Party fails to take
delivery, in accordance with applicable agreed
procedures, provided that such failure either
constitutes a breach of Operator's or such Party's
obligations under the terms of the Contract, or is
likely to result in the curtailment or shut-in of
production. Such sales shall be made only to the
limited extent necessary to avoid disruption in Joint
Operations. Operator shall give all Parties as much
notice as is practicable of such situation and that a
right of sale option has arisen. Any sale shall be of
the unnominated or undelivered Entitlement (as the case
may be) and for reasonable periods of time (in no event
to exceed twelve (12) months). Payment terms for
production sold under this option shall be established
in the lifting agreement.
If a lifting agreement has not been entered into by the date
of first delivery of Crude Oil, the Parties shall nonetheless
be obligated to take and separately dispose of such Crude Oil
as provided in Article 9.1 and in addition shall be bound by
the principles set forth in this Article 9.2 until a lifting
agreement is executed by the Parties.
54
[X] ALTERNATIVE NO. 4
The Parties shall in good faith, and not less than three (3)
months prior to the anticipated first delivery of Crude Oil,
as promptly notified by Operator, negotiate and endeavor to
conclude the terms of a lifting agreement to cover the offtake
of Crude Oil produced under the Contract.
9.3 Disposition of Natural Gas
Check one Alternative.
[X] ALTERNATIVE NO. 1 (From Paragraph (A) to (B))
(A) Natural Gas to be produced from an Exploitation Area
shall be taken and disposed of in accordance with the
rules and procedures set forth in this Article 9.3. The
Parties recognize that, in the event of individual
disposition of Natural Gas, imbalances may arise with
the result being that a Party will temporarily have
disposed of more than its Participating Interest share
of production of Natural Gas. Accordingly, if Natural
Gas is to be produced from an Exploitation Area, the
Parties shall, in good faith and no later than the date
on which the Development Plan for Natural Gas
production is approved by the Operating Committee,
negotiate and conclude the terms of a balancing
agreement to cover the disposition of Natural Gas
produced under the Contract, regardless of whether all
of the Parties have entered into a sales arrangement or
sales contract for their respective Entitlement of
Natural Gas. The Natural Gas balancing agreement shall,
subject to the terms of the Contract, make provision
for:
(1) the right of a Party not in default to take
delivery of Natural Gas (and to thereby use
all relevant facilities) in excess of its
Participating Interest share of production,
subject to the right of an under-taking
Party to take later delivery of make-up
Natural Gas; provided that, such make-up
Natural Gas shall in no month exceed fifty
percent of total Natural Gas production
produced monthly from the Exploitation Area,
and further provided the such under-taking
Party shall lose its right to such make-up
Natural Gas if it has not taken delivery of
the make-up Natural Gas within thirty-six
months after the excess Natural Gas was
originally taken;
Check if desired.
[ ] OPTIONAL PROVISION
and further provided that in the
event any Party takes delivery of
Natural Gas in excess of its
Participating Interest share of
production, such overproduction
shall in no month exceed ______
percent of such Party's
Participating Interest share of
production;
(2) balancing of overproduction and
underproduction on a gross calorific value
basis, determined by comparison of the
Natural Gas taken by a Party with that
Party's Participating Interest share of
production for the period of time;
(3) Natural Gas taken by a Party being regarded
as Natural Gas taken and owned exclusively
for its own account with title thereto being
in such Party, regardless of whether such
Natural Gas is (i) attributable to such
Party's Participating Interest share of
production; (ii) taken as overproduction; or
(iii) taken as make-up for past
underproduction;
55
(4) unless otherwise agreed, no agency
relationship or other relationship of trust
and confidence being created between the
Parties in regard to disposition of Natural
Gas;
(5) unless otherwise agreed, the delivery point
(at which title and risk of loss of
Entitlements of Natural Gas shall pass to
the Party taking delivery of such Natural
Gas) being the point where fiscal
calculations are made consistent with the
Contract;
(6) each Party's provision to Operator of such
information respecting such Party's
arrangements for the disposition of its
Entitlement of Natural Gas production as
Operator may reasonably require in order to
conduct Joint Operations in accordance with
Article 4.2;
(7) each Party's regular periodic nominations to
Operator of the amount of such Party's
Entitlement of total available Natural Gas
production which it wishes to accept during
a defined future period, along with
Operator's regular periodic advice to the
Parties of estimates of total Natural Gas
production (as reasonably in advance as
practicable in order to assist the Parties
to plan Natural Gas disposition
arrangements); provided, however, that the
Parties recognize that Operator's estimates
may vary from the actual Natural Gas volumes
produced and that the Parties may rely upon
any such information at their own risk; and
(8) the allocation of Cost Hydrocarbons and
Profit Hydrocarbons in relation to such
individual Natural Gas disposition.
If such balancing agreement has not been entered into
by the date of first delivery of Natural Gas, the
Parties shall nonetheless be bound by the principles
set forth in this Article 9.3(A) until a Natural Gas
balancing agreement has been entered into between the
Parties in accordance with this Agreement.
(B) Unless prohibited by the Laws / Regulations, the
Parties may, by unanimous execution of a multiparty
Natural Gas disposition agreement, agree to dispose
of Natural Gas produced under the Contract on a
multiparty basis to a common purchaser or purchasers.
The multiparty Natural Gas disposition agreement
shall, subject to the Contract, make provision for:
(1) the terms of sale or disposition of Natural
Gas on a multiparty basis;
(2) the Parties' rights and obligations with
respect to the disposition of Natural Gas on
a multiparty basis, including the extent to
which Operator is designated as the Parties'
authorized representative for the purpose of
conducting marketing studies, designing and
constructing necessary facilities,
investigating financing opportunities, and
negotiating sales agreements;
(3) the managerial structure for making
decisions governing the multiparty disposal
venture;
(4) the scope and duration of the multiparty
disposal venture;
(5) the extent, if any, to which the costs of
the multiparty disposal venture are
chargeable to the Joint Account;
(6) the obligation of the Parties to participate
in all Natural Gas infrastructure necessary
for such multiparty Natural Gas disposal,
and the multiparty disposition venture
governing only such Natural Gas
infrastructure as is necessary to deliver
Natural Gas to the point where fiscal
calculations are made for the purposes of
the Contract;
(7) the extent to which a Party shall have, or
shall be permitted to hold itself out as
having, the authority to create any
obligation on behalf of the multiparty
disposal venture;
56
(8) confirmation that the relationship among the
Parties shall be contractual only and shall
not be construed as creating a partnership
or other recognized association;
(9) confirmation that formation of the
multiparty disposal venture shall not create
any rights in any persons not a party
thereto; and
(10) the allocation of Cost Hydrocarbons and
Profit Hydrocarbons in relation to the
multiparty Natural Gas disposal.
[ ] ALTERNATIVE NO. 2
The Parties recognize that if Natural Gas is discovered it may
be necessary for the Parties to enter into special
arrangements for the disposal of the Natural Gas, which are
consistent with the Development Plan and subject to the terms
of the Contract.
9.4 Principles of Natural Gas Agreement(s) with the Government
[NOTE: To be revised or deleted if Alternative No. 2 to Article 9.3 is
selected.]
(A) The Government Oil & Gas Company may, if necessary and
practicable, also be party to the balancing agreement under
Article 9.3(A) and/or the multiparty disposition venture under
Article 9.3(B). If the Government Oil & Gas Company is party
to the balancing agreement, then the Parties shall endeavor to
obtain its agreement to the principles set forth in Article
9.3(A). Furthermore, if the Government Oil & Gas Company is
party to the multiparty disposition venture, then the Parties
shall endeavor to obtain its agreement to the principles set
forth in Article 9.3(B).
(B) In addition, the Parties shall endeavor to include in the
Contract, and in any other agreement with the Government Oil &
Gas Company in relation to the disposition of Natural Gas, the
following principles:
(1) assured access to a fair share of the available
Natural Gas market, including suitable assurances for
Government controlled sales;
(2) the right to market Natural Gas, including purchase
of the Government's share, to the highest value
outlets (domestic or export) and the right to export
the Parties' Entitlements of Natural Gas;
(3) a minimum contractual term which provides a
reasonable period to develop a Natural Gas market and
enables Natural Gas reserves to be produced for their
full economic life; and
(4) assured access to infrastructure for the purposes of
processing and/or transporting Natural Gas at a
competitive tariff.
57
ARTICLE 10
ABANDONMENT
10.1 Abandonment of Xxxxx Drilled as Joint Operations
(A) A decision to plug and abandon any well which has been drilled
as a Joint Operation shall require the approval of the
Operating Committee.
(B) Should any Party fail to reply within the period prescribed in
Article 5.12(A)(1) or Article 5.12(A)(2), whichever is
applicable, after delivery of notice of Operator's proposal to
plug and abandon such well, such Party shall be deemed to have
consented to the proposed abandonment.
(C) If the Operating Committee approves a decision to plug and
abandon an Exploration Well or Appraisal Well, subject to the
Laws / Regulations, any Party voting against such decision may
propose (within the time periods allowed by Article 5.13(A))
to conduct an alternate Exclusive Operation in the wellbore.
If no Exclusive Operation is timely proposed, or if an
Exclusive Operation is timely proposed but is not commenced
within the applicable time periods under Article 7.2, such
well shall be plugged and abandoned.
(D) Any well plugged and abandoned under this Agreement shall be
plugged and abandoned in accordance with the Laws /
Regulations and at the cost, risk and expense of the Parties
who participated in the cost of drilling such well.
Check Paragraph (E), if desired.
[X] OPTIONAL PROVISION
(E) Notwithstanding anything to the contrary in this Article
10.1:
(1) If the Operating Committee approves a
decision to plug and abandon a well from
which Hydrocarbons have been produced and
sold, subject to the Laws / Regulations, any
Party voting against the decision may
propose (within five (5) Days after the time
specified in Article 5.6, Article 5.12(A)(1)
or Article 5.12(A)(2), whichever is
applicable, has expired) to take over the
entire well as an Exclusive Operation. Any
Party originally participating in the well
shall be entitled to participate in the
operation of the well as an Exclusive
Operation by response notice within ten (10)
Days after receipt of the notice proposing
the Exclusive Operation.
Check one Alternative.
[ ] ALTERNATIVE NO. 1
In such event, the Consenting
Parties shall be entitled to
continue producing only from the
Zone open to production at the time
they assumed responsibility for the
well and shall not be entitled to
drill a substitute well in the event
that the well taken over becomes
impaired or fails.
[X] ALTERNATIVE NO. 2
In such event, the Consenting
Parties shall be entitled to conduct
an Exclusive Operation in the well;
provided that the proposed operation
may not be in the same Zone from
which production was previously
obtained nor be in a Zone which is
produced by any other Joint
Operation xxxxx.
58
(2) Each Non-Consenting Party shall be deemed to
have relinquished free of cost to the
Consenting Parties in proportion to their
Participating Interests all of its interest
in the wellbore of a produced well and
related equipment in accordance with Article
7.4(B). The Consenting Parties shall
thereafter bear all cost and liability of
plugging and abandoning such well in
accordance with the Laws / Regulations, to
the extent the Parties are or become
obligated to contribute to such costs and
liabilities, and shall indemnify the
Non-Consenting Parties against all such
costs and liabilities.
(3) Subject to Article 7.12(F), Operator shall
continue to operate a produced well for the
account of the Consenting Parties at the
rates and charges contemplated by this
Agreement, plus any additional cost and
charges which may arise as the result of the
separate allocation of interest in such
well.
10.2 Abandonment of Exclusive Operations
This Article 10 shall apply mutatis mutandis to the abandonment of an
Exclusive Well or any well in which an Exclusive Operation has been
conducted (in which event all Parties having the right to conduct
further operations in such well shall be notified and have the
opportunity to conduct Exclusive Operations in the well in accordance
with the provisions of this Article 10).
Check Article 10.3, if desired.
[ ] OPTIONAL PROVISION
10.3 Abandonment Security
If under the Contract or the Laws / Regulations, the Parties
are or become obliged to pay or contribute to the cost of
ceasing operations, then during preparation of a Development
Plan, the Parties shall negotiate a security agreement, which
shall be completed and executed by all Parties participating
in such Development Plan prior to application for an
Exploitation Area. The security agreement shall incorporate
the following principles:
(A) a Security shall be provided by each such Party for
each Calendar Year commencing with the Calendar Year
in which the Discounted Net Value equals____ percent
(____%) of the Discounted Net Cost; and
(B) the amount of the Security required to be provided by
each such Party in any Calendar Year (including any
security previously provided which will still be
current throughout such Calendar Year) shall be equal
to the amount by which ____ percent (____%) of the
Discounted Net Cost exceeds the Discounted Net Value.
"Discounted Net Cost" means that portion of each Party's
anticipated before tax cost of ceasing operations in
accordance with the Laws / Regulations which remains after
deduction of salvage value. Such portion should be calculated
at the anticipated time of ceasing operations and discounted
at the Discount Rate to December 31 of the Calendar Year in
question.
"Discounted Net Value" means the value of each Party's
estimated Entitlement which remains after payment of estimated
liabilities and expenses required to win, save and transport
such production to the delivery point and after deduction of
estimated applicable taxes, royalties, imposts and levies on
such production. Such Entitlement shall be calculated using
estimated market prices and including taxes on income,
discounted at the Discount Rate to December 31 of the Calendar
Year in question. No account shall be taken of tax allowances
expected to be available in respect of the costs of ceasing
operations.
59
"Discount Rate" means the rate per annum equal to the one (1)
month term, London Interbank Offered Rate (LIBOR rate) for
U.S. dollar deposits applicable to the date falling thirty
(30) Business Days prior to the start of a Calendar Year as
published in London by the Financial Times or if not published
then by The Wall Street Journal.
ARTICLE 11
SURRENDER, EXTENSIONS AND RENEWALS
11.1 Surrender
(A) If the Contract requires the Parties to surrender any portion of
the Contract Area, Operator shall advise the Operating Committee
of such requirement at least one hundred and twenty (120) Days in
advance of the earlier of the date for filing irrevocable notice
of such surrender or the date of such surrender. Prior to the end
of such period, the Operating Committee shall determine pursuant
to Article 5 the size and shape of the surrendered area,
consistent with the requirements of the Contract. If a sufficient
vote of the Operating Committee cannot be attained, then the
proposal supported by a simple majority of the Participating
Interests shall be adopted. If no proposal attains the support of
a simple majority of the Participating Interests, then the
proposal receiving the largest aggregate Participating Interest
vote shall be adopted. In the event of a tie, Operator shall
choose among the proposals receiving the largest aggregate
Participating Interest vote. The Parties shall execute any and
all documents and take such other actions as may be necessary to
effect the surrender. Each Party renounces all claims and causes
of action against Operator and any other Parties on account of
any area surrendered in accordance with the foregoing but against
its recommendation if Hydrocarbons are subsequently discovered
under the surrendered area.
(B) A surrender of all or any part of the Contract Area which is not
required by the Contract shall require the unanimous consent of
the Parties.
11.2 Extension of the Term
(A) A proposal by any Party to enter into or extend the term of
any Exploration or Exploitation Period or any phase of the
Contract, or a proposal to extend the term of the Contract,
shall be brought before the Operating Committee pursuant to
Article 5.
(B) Any Party shall have the right to enter into or extend the
term of any Exploration or Exploitation Period or any phase of
the Contract or to extend the term of the Contract, regardless
of the level of support in the Operating Committee. If any
Party takes such action, any Party not wishing to extend shall
have a right to withdraw, subject to the requirements of
Article 13.
ARTICLE 12
TRANSFER OF INTEREST OR RIGHTS AND CHANGES IN CONTROL
[NOTE: Transfer provisions must be considered and modified in the context
of the requirements of the Contract and applicable laws and regulations of the
host country.]
12.1 Obligations
(A) Subject to the requirements of the Contract,
(i) any Transfer (except Transfers pursuant to Article 7,
Article 8 or Article 13) shall be effective only if
it satisfies the terms and conditions of Article
12.2; and
(ii) a Party subject to a Change in Control must satisfy
the terms and conditions of Article 12.3.
60
Should a Transfer subject to this Article or a Change in
Control occur without satisfaction (in all material respects)
by the transferor or the Party subject to the Change in
Control, as applicable, of the requirements hereof, then:
Check one Alternative.
[X] ALTERNATIVE NO. 1
each other Party shall be entitled to enforce
specific performance of the terms of this Article, in
addition to any other remedies (including damages) to
which it may be entitled. Each Party agrees that
monetary damages alone would not be an adequate
remedy for the breach of any Party's obligations
under this Article.
[ ] ALTERNATIVE NO. 2
the transferor or Party subject to the Change in
Control shall pay to the other Parties in proportion
to their Participating Interests, as their exclusive
remedy, liquidated damages in an amount equal to
_____ percent (___%) of the Cash Value of the
Participating Interest that is the subject of the
Transfer or Change in Control. The Parties agree that
it would be difficult if not impossible to determine
accurately the actual amount of damages suffered by
the other Parties as a result of the failure to
comply with the terms of this Article 12 and that
these liquidated damages constitute a reasonable
approximation of the damages that would be suffered
by such other Parties.
(B) For purposes of this Agreement:
"Cash Transfer" means any Transfer where the sole
consideration (other than the assumption of obligations
relating to the transferred Participating Interest) takes the
form of cash, cash equivalents, promissory notes or retained
interests (such as production payments) in the Participating
Interest being transferred; and
"Cash Value" means
Check one Alternative.
[ ] ALTERNATIVE NO. 1
the portion of the total monetary value
(expressed in U.S. dollars) of the
consideration being offered by the proposed
transferee (including any cash, other
assets, and tax savings to the transferor
from a non-cash deal) that reasonably should
be allocated to the Participating Interest
subject to the proposed Transfer or Change
in Control.
[X] ALTERNATIVE NO. 2
the market value (expressed in U.S. dollars)
of the Participating Interest subject to the
proposed Transfer or Change in Control,
based upon the amount in cash a willing
buyer would pay a willing seller in an arm's
length transaction.
"Encumbrance" means a mortgage, lien, pledge, charge or other
encumbrance. "Encumber" and other derivatives shall be
construed accordingly.
"Transfer" means any sale, assignment, Encumbrance or other
disposition by a Party of any rights or obligations derived
from the Contract or this Agreement (including its
Participating Interest), other than its Entitlement and its
rights to any credits, refunds or payments under this
Agreement, and excluding any direct or indirect change in
Control of a Party.
12.2. Transfer
61
(A) Except in the case of a Party transferring all of its
Participating Interest, no Transfer shall be made by any Party
which results in the transferor or the transferee holding a
Participating Interest of less than ten percent (10%) or any
interest other than a Participating Interest in the Contract and
this Agreement.
(B) Subject to the terms of Articles 4.9 and 4.10, the Party serving
as Operator shall remain Operator following Transfer of a portion
of its Participating Interest. In the event of a Transfer of all
of its Participating Interest, except to an Affiliate, the Party
serving as Operator shall be deemed to have resigned as Operator,
effective on the date the Transfer becomes effective under this
Article 12, in which event a successor Operator shall be
appointed in accordance with Article 4.11. If Operator transfers
all of its Participating Interest to an Affiliate, that Affiliate
shall automatically become the successor Operator, provided that
the transferring Operator shall remain liable for its Affiliate's
performance of its obligations.
(C) Both the transferee, and, notwithstanding the Transfer, the
transferring Party, shall be liable to the other Parties for the
transferring Party's Participating Interest share of any
obligations (financial or otherwise) which have vested, matured
or accrued under the provisions of the Contract or this Agreement
prior to such Transfer. Such obligations, shall include any
proposed expenditure approved by the Operating Committee prior to
the transferring Party notifying the other Parties of its
proposed Transfer
Check one alternative
[ ] ALTERNATIVE NO. 1
and shall also include
[X] ALTERNATIVE NO. 2 but shall not include
costs of plugging and abandoning xxxxx or portions of xxxxx
and decommissioning facilities in which the transferring Party
participated (or with respect to which it was required to bear
a share of the costs pursuant to this sentence) to the extent
such costs are payable by the Parties under the Contract.
(D) A transferee shall have no rights in the Contract or this
Agreement (except any notice and cure rights or similar rights
that may be provided to a Lien Holder (as defined in Article
12.2(E)) by separate instrument signed by all Parties) unless
and until:
(1) it expressly undertakes in an instrument reasonably
satisfactory to the other Parties to perform the
obligations of the transferor under the Contract and
this Agreement in respect of the Participating
Interest being transferred and obtains any necessary
Government approval for the Transfer and furnishes
any guarantees required by the Government or the
Contract on or before the applicable deadlines; and
(2) except in the case of a Transfer to an Affiliate,
each Party has consented in writing to such Transfer,
which consent shall be denied only if the transferee
fails to establish to the reasonable satisfaction of
each Party
Check one alternative
[X] ALTERNATIVE NO. 1
its financial capability to perform its
payment obligations under the Contract and
this Agreement.
62
[ ] ALTERNATIVE NO. 2
its financial capability to perform its
payment obligations under the Contract and
this Agreement and its technical capability
to contribute to the planning and conduct of
Joint Operations.
No consent shall be required under this Article
12.2(D)(2) for a Transfer to an Affiliate if the
transferring Party agrees in an instrument reasonably
satisfactory to the other Parties to remain liable
for its Affiliate's performance of its obligations.
(E) Nothing contained in this Article 12 shall prevent a Party
from Encumbering all or any undivided share of its
Participating Interest to a third party (a "Lien Holder") for
the purpose of security relating to finance, provided that:
(1) such Party shall remain liable for all obligations
relating to such interest;
(2) the Encumbrance shall be subject to any necessary
approval of the Government and be expressly
subordinated to the rights of the other Parties under
this Agreement;
(3) such Party shall ensure that any Encumbrance shall be
expressed to be without prejudice to the provisions
of this Agreement; [and]
Check paragraph (4), if desired.
[ ] OPTIONAL PROVISION
(4) the Lien Holder shall first enter into and
deliver a subordination agreement in favor
of the other Parties, substantially in the
form attached to this Agreement as Exhibit
___. [NOTE: If possible, the Parties should
agree in advance to the form of such
subordination agreement and attach such form
as an Exhibit to this Agreement ]
Check one Optional Alternative for Paragraph (F), if desired.
[ ] OPTIONAL ALTERNATIVE NO. 1 - Preemptive Rights
(F) Any Transfer of all or a portion of a Party's
Participating Interest, other than a Transfer to an
Affiliate or the granting of an Encumbrance as
provided in Article 12.2(E), shall be subject to the
following procedure.
(1) Once the final terms and conditions of a
Transfer have been fully negotiated, the
transferor shall disclose all such final
terms and conditions as are relevant to the
acquisition of the Participating Interest
(and, if applicable, the determination of
the Cash Value of the Participating
Interest) in a notice to the other Parties,
which notice shall be accompanied by a copy
of all instruments or relevant portions of
instruments establishing such terms and
conditions. Each other Party shall have the
right to acquire the Participating Interest
subject to the proposed Transfer from the
transferor on the terms and conditions
described in Article 12.2(F)(3) if, within
thirty (30) Days of the transferor's notice,
such Party delivers to all other Parties a
counter-notification that it accepts such
terms and conditions without reservations or
conditions (subject to Articles 12.2(F)(3)
and 12.2(F)(4), where applicable). If no
Party delivers such counter-notification,
the Transfer to the proposed transferee may
be made, subject to the other provisions of
this Article 12, under terms and conditions
no more favorable to the transferee than
those set forth in the notice to the
Parties, provided that the Transfer shall be
concluded within one hundred eighty (180)
Days from the date of the notice plus such
additional period as may be required to
secure governmental approvals. No Party
shall have a right under this Article
12.2(F) to acquire any asset other than a
Participating Interest, nor may any Party be
required to acquire any asset other than a
Participating Interest, regardless of
whether other properties are included in the
Transfer.
63
(2) If more than one Party counter-notifies that
it intends to acquire the Participating
Interest subject to the proposed Transfer,
then each such Party shall acquire a
proportion of the Participating Interest to
be transferred equal to the ratio of its own
Participating Interest to the total
Participating Interests of all the
counter-notifying Parties, unless the
counter-notifying Parties otherwise agree.
(3) In the event of a Cash Transfer that does
not involve other properties as part of a
wider transaction, each other Party shall
have a right to acquire the Participating
Interest subject to the proposed Transfer on
the same final terms and conditions as were
negotiated with the proposed transferee. In
the event of a Transfer that is not a Cash
Transfer or involves other properties
included in a wider transaction (package
deal), the transferor shall include in its
notification to the other Parties a
statement of the Cash Value of the
Participating Interest subject to the
proposed Transfer, and each other Party
shall have a right to acquire such
Participating Interest on the same final
terms and conditions as were negotiated with
the proposed transferee except that it shall
pay the Cash Value in immediately available
funds at the closing of the Transfer in lieu
of the consideration payable in the third
party offer, and the terms and conditions of
the applicable instruments shall be modified
as necessary to reflect the acquisition of a
Participating Interest for cash. In the case
of a package sale, no Party may acquire the
Participating Interest subject to the
proposed package sale unless and until the
completion of the wider transaction (as
modified by the exclusion of properties
subject to preemptive rights or excluded for
other reasons) with the package sale
transferee. If for any reason the package
sale terminates without completion, the
other Parties' rights to acquire the
Participating Interest subject to the
proposed package sale shall also terminate.
(4) For purposes of Article 12.2(F)(3), the Cash
Value proposed by the transferor in its
notice shall be conclusively deemed correct
unless any Party (each a "Disagreeing
Party") gives notice to the transferor with
a copy to the other Parties within ten (10)
Days of receipt of the transferor's notice
stating that it does not agree with the
transferor's statement of the Cash Value,
stating the Cash Value it believes is
correct, and providing any supporting
information that it believes is helpful. In
such event, the transferor and the
Disagreeing Parties shall have fifteen (15)
Days in which to attempt to negotiate an
agreement on the applicable Cash Value. If
no agreement has been reached by the end of
such fifteen (15) Day period, either the
transferor or any Disagreeing Party shall be
entitled to refer the matter to an
independent expert as provided in Article
18.3 for determination of the Cash Value.
(5) If the determination of the Cash Value is
referred to an independent expert and the
value submitted by the transferor is no more
than five percent (5%) above the Cash Value
determined by the independent expert, the
transferor's value shall be used for the
Cash Value and the Disagreeing Parties shall
pay all costs of the expert. If the value
submitted by the transferor is more than
five percent (5%) above the Cash Value
determined by the independent expert, the
independent expert's value shall be used for
the Cash Value and the transferor shall pay
all costs of the expert. Subject to the
independent expert's value being final and
binding in accordance with Article 18.3, the
Cash Value determined by the procedure shall
be final and binding on all Parties.
64
(6) Once the Cash Value is determined under
Article 12.2(F)(5), Operator shall provide
notice of such Cash Value to all Parties and
Check one Alternative.
[ ] ALTERNATIVE NO. 1
the transferor shall be obligated to
sell and the Parties which provided
notice of their intention to
purchase the transferor's
Participating Interest pursuant to
Article 12.2(F)(1) shall be
obligated to buy the Participating
Interest at said value.
[ ] ALTERNATIVE NO. 2
if the Cash Value that was submitted
to the independent expert by the
transferor is more than five percent
(5%) above the Cash Value determined
by the independent expert, the
transferor may elect to terminate
its proposed Transfer by notice to
all other Parties within five (5)
Days after notice to the Parties of
the final Cash Value. Similarly, if
the Cash Value that was determined
by the independent expert is more
than five percent (5%) above the
Cash Value submitted to the
independent expert by a Disagreeing
Party (or, in the case of a Party
that is not a Disagreeing Party, is
more than five percent (5%) above
the Cash Value originally proposed
by the transferor), such Party may
elect to revoke its notice of
intention to purchase the
transferor's Participating Interest
pursuant to Article 12.2(F)(1). If
the transferor does not properly
terminate the proposed Transfer and
one or more Parties which provided
notices of their intention to
purchase the transferor's
Participating Interest pursuant to
Article 12.2(F)(1) have not properly
revoked their notices of such
intention, then the transferor shall
be obligated to sell and such
Parties shall be obligated to buy
the Participating Interest at the
Cash Value as determined in
accordance with Article 12.2(F)(5).
If all Parties which provided notice
of their intention to purchase the
transferor's Participating Interest
pursuant to Article 12.2(F)(1)
properly revoke their notices of
such intention, the transferor shall
be free to sell the interest to the
third party at the determined Cash
Value or a higher value and under
conditions not more favorable to the
transferee than those set forth in
the notice of Transfer sent by the
transferor to the other Parties,
provided that the Transfer shall be
concluded within one hundred eighty
(180) Days from the date of the
determination plus such additional
period as may be required to secure
governmental approvals.
[ ] OPTIONAL ALTERNATIVE NO. 2 - Right of First Negotiation
(F) Any Transfer (other than a Transfer to an Affiliate
and the granting of an Encumbrance as provided in
Article 12.2(E)) shall be subject to the following
procedure.
(1) In the event that a Party wishes to transfer
any part or all of its Participating
Interest, prior to the transferor entering
into a written agreement providing for such
a Transfer (whether or not such agreement is
binding) the transferor shall send the other
Parties notice of its intention and invite
them to submit offers for the Participating
Interest subject to the Transfer. The other
Parties shall have thirty (30) Days from the
date of such notification to deliver a
counter-notification with a binding offer in
accordance with Article 12.2(F)(3). If the
transferor notifies the offering Party or
Parties that the binding offer presents an
acceptable basis for negotiating a Transfer
agreement, the transferor and that offering
Party or Parties shall have the next sixty
(60) Days in which to negotiate in good
faith and execute the terms and conditions
of a mutually acceptable Transfer agreement.
If the transferor does not find that any
Party's offer presents an acceptable basis
for negotiating a Transfer agreement, or if
the above sixty (60) Days elapse and the
transferor in its sole discretion believes
that a fully negotiated agreement based on
the offer deemed acceptable by the
transferor with all offering Parties is not
imminent, the transferor shall be entitled
for a period of one hundred eighty (180)
Days from the expiration of the thirty (30)
Day offer period or the sixty (60) Day
negotiation period, respectively, plus such
additional period as may be necessary to
secure governmental approvals, to Transfer
all or such portion of its Participating
Interest to a third party, subject to the
obligations set forth in this Article 12,
56
Check if desired.
[ ] OPTIONAL PROVISION
provided that the terms and
conditions of any such Transfer must
be more favorable to the transferor
than the best terms and conditions
offered by any Party.
(2) If more than one Party counter-notifies the
transferor that it intends to acquire the
Participating Interest subject to the
proposed Transfer, then each such Party
shall acquire a proportion of the
Participating Interest to be transferred
equal to the ratio of its own Participating
Interest to the total Participating
Interests of all the counter-notifying
Parties, unless the counter-notifying
Parties otherwise agree.
(3) All Parties desiring to give such a
counter-notice shall meet to formulate a
joint offer. Each such Party shall make
known to the other Parties the highest price
or value that it is willing to offer to the
transferor. The proposal with the highest
price or value shall be offered to the
transferor as the joint proposal of the
Parties still willing to participate in such
offer under the provisions of Article
12.2(F)(1) above.
Check Paragraph (G), if desired, in conjunction with Paragraph (F).
[ ] OPTIONAL PROVISION
(G) Notwithstanding anything to the contrary contained
therein, the terms of Article 12.2(F) shall only
apply to Cash Transfers and shall not apply to
Transfers that are not Cash Transfers.
12.3 Change in Control
(A) A Party subject to a Change in Control shall obtain any
necessary Government approval with respect to the Change in
Control and furnish any replacement Security required by the
Government or the Contract on or before the applicable
deadlines.
Check Paragraph (B), if desired. Renumber following paragraphs if
Paragraph (B) is not selected.
[X] OPTIONAL PROVISION
(B) A Party subject to a Change in Control shall provide
evidence reasonably satisfactory to the other Parties that
following the Change in Control such Party shall continue to
have the financial capability to satisfy its payment
obligations under the Contract and this Agreement. Should
the Party that is subject to the Change in Control fail to
provide such evidence, any other Party, by notice to such
Party, may require such Party to provide Security
satisfactory to the other Parties with respect to its
Participating Interest share of any obligations or
liabilities which the Parties may reasonably be expected to
incur under the Contract and this Agreement during the
then-current Exploration or Exploitation Period or phase of
the Contract.
66
Check one Optional Alternative for Paragraph (C), if desired.
[ ] OPTIONAL ALTERNATIVE NO. 1 - Preemptive Rights
(C) Any Change in Control of a Party, other than one which results
in ongoing Control by an Affiliate, shall be subject to the
following procedure. For purposes of this Article 12.3, the
term "acquired Party" shall refer to the Party that is subject
to a Change in Control and the term "acquiror" shall refer to
the Party or third party proposing to acquire Control in a
Change in Control.
(1) Once the final terms and conditions of a
Change in Control have been fully
negotiated, the acquired Party shall
disclose all such final terms and conditions
as are relevant to the acquisition of such
Party's Participating Interest and the
determination of the Cash Value of that
Participating Interest in a notice to the
other Parties, which notice shall be
accompanied by a copy of all instruments or
relevant portions of instruments
establishing such terms and conditions. Each
other Party shall have the right to acquire
the acquired Party's Participating Interest
on the terms and conditions described in
Article 12.3(C)(3) if, within thirty (30)
Days of the acquired Party's notice, such
Party delivers to all other Parties a
counter-notification that it accepts such
terms and conditions without reservations or
conditions (subject to Articles 12.3(C)(3)
and 12.3(C)(4), where applicable). If no
Party delivers such counter-notification,
the Change in Control may proceed without
further notice, subject to the other
provisions of this Article 12, under terms
and conditions no more favorable to the
acquiror than those set forth in the notice
to the Parties, provided that the Change in
Control shall be concluded within one
hundred eighty (180) Days from the date of
the notice plus such additional period as
may be required to secure governmental
approvals. No Party shall have a right under
this Article 12.3(C) to acquire any asset
other than a Participating Interest, nor may
any Party be required to acquire any asset
other than a Participating Interest,
regardless of whether other properties are
subject to the Change in Control.
(2) If more than one Party counter-notifies that
it intends to acquire the Participating
Interest subject to the proposed Change in
Control, then each such Party shall acquire
a proportion of that Participating Interest
equal to the ratio of its own Participating
Interest to the total Participating
Interests of all the counter-notifying
Parties, unless the counter-notifying
Parties otherwise agree.
(3) The acquired Party shall include in its
notification to the other Parties a
statement of the Cash Value of the
Participating Interest subject to the
proposed Change in Control, and each other
Party shall have a right to acquire such
Participating Interest for the Cash Value,
on the final terms and conditions negotiated
with the proposed acquiror that are relevant
to the acquisition of a Participating
Interest for cash. No Party may acquire the
acquired Party's Participating Interest
pursuant to this Article 12.3(C) unless and
until completion of the Change in Control.
If for any reason the Change in Control
agreement terminates without completion, the
other Parties' rights to acquire the
Participating Interest subject to the
proposed Change in Control shall also
terminate.
67
(4) For purposes of Article 12.3(C)(3), the Cash
Value proposed by the acquired Party in its
notice shall be conclusively deemed correct
unless any Party (each a "Disagreeing
Party") gives notice to the acquired Party
with a copy to the other Parties within ten
(10) Days of receipt of the acquired Party's
notice stating that it does not agree with
the acquired Party's statement of the Cash
Value, stating the Cash Value it believes is
correct, and providing any supporting
information that it believes is helpful. In
such event, the acquired Party and the
Disagreeing Parties shall have fifteen (15)
Days in which to attempt to negotiate an
agreement on the applicable Cash Value. If
no agreement has been reached by the end of
such fifteen (15) Day period, either the
acquired Party or any Disagreeing Party
shall be entitled to refer the matter to an
independent expert as provided in Article
18.3 for determination of the Cash Value.
(5) If the determination of Cash Value is
referred to an independent expert, and the
value submitted by the acquired Party is no
more than five percent (5%) above the Cash
Value determined by the independent expert,
the acquired Party's value shall be used for
the Cash Value and the Disagreeing Parties
shall pay all costs of the expert. If the
value submitted by the acquired Party is
more than five percent (5%) above the Cash
Value determined by the independent expert,
the independent expert's value shall be used
for the Cash Value and the acquired Party
shall pay all costs of the expert. Subject
to the independent expert's value being
final and binding in accordance with Article
18.3, the Cash Value determined by the
procedure shall be final and binding on all
Parties.
(6) Once the Cash Value is determined under
Article 12.3(C)(4), Operator shall provide
notice of such Cash Value to all Parties and
Check one Alternative.
[ ] ALTERNATIVE NO. 1
the acquired Party shall be
obligated to sell and the Parties
which provided notice of their
intention to purchase the acquired
Party's Participating Interest
pursuant to Article 12.3(C)(1) shall
be obligated to buy the
Participating Interest at said
value.
[ ] ALTERNATIVE NO. 2
if the Cash Value that was submitted
by the acquired Party to the
independent expert is more than five
percent (5%) above the Cash Value
determined by the independent
expert, the acquired Party and its
Affiliates may elect to terminate
the proposed Change in Control by
notice to all other Parties within
five (5) Days after notice to the
Parties of the final Cash Value.
Similarly, if the Cash Value that
was determined by the independent
expert is more than five percent
(5%) above the Cash Value submitted
to the independent expert by a
Disagreeing Party (or, in the case
of a Party that is not a Disagreeing
Party, is more than five percent
(5%) above the Cash Value originally
proposed by the acquiror), such
Party may elect to revoke its notice
of intention to purchase the
acquired Party's Participating
Interest pursuant to Article
12.3(C)(1). If the acquired Party
and its Affiliates do not properly
terminate the proposed Change in
Control and one or more Parties
which provided notices of their
intention to purchase the acquired
Party's Participating Interest
pursuant to Article 12.3(C)(1) have
not properly revoked their notices
of such intention, then the acquired
Party shall be obligated to sell and
such Parties shall be obligated to
buy the Participating Interest at
the Cash Value as determined in
accordance with Article 12.3(C)(5).
If all Parties which provided notice
of their intention to purchase the
acquired Party's Participating
Interest pursuant to Article
12.3(C)(1) properly revoke their
notices of such intention, the
Change in Control may proceed
without further notice, under terms
and conditions no more favorable to
the acquiror than those in effect at
the time of the determination,
provided that the Change in Control
shall be concluded within one
hundred eighty (180) Days from the
date of the determination plus such
additional period as may be required
to secure governmental approvals.
68
[ ] OPTIONAL ALTERNATIVE NO. 2 - Right of First Negotiation
(C) Any Change in Control of a Party, other than to an Affiliate,
shall be subject to the following procedure. For purposes of
this 12.3, the term "acquired Party" shall refer to the Party
that is subject to the Change in Control.
(1) In the event that the Affiliates of a Party
wish to enter into a transaction that will
result in a Change in Control of the Party,
prior to such Affiliates entering into a
written agreement (whether or not such
agreement is binding) the acquired Party
shall send the other Parties notice of its
Affiliates' intention and invite them to
submit offers for the Participating Interest
subject to the Change in Control. The other
Parties shall have thirty (30) Days from the
date of such notification to deliver a
counter-notification with a binding offer in
accordance with Article 12.3(C)(3). If the
acquired Party notifies an offering Party or
Parties that their binding offer presents an
acceptable basis for negotiating a transfer
agreement, the acquired Party and the
offering Party or Parties shall have the
next sixty (60) Days in which to negotiate
in good faith and execute the terms and
conditions of a mutually acceptable transfer
agreement. If the acquired Party does not
find that any Party's offer presents an
acceptable basis for negotiating a transfer
agreement, or if the above sixty (60) Days
elapse and the acquired Party in its sole
discretion believes that a fully negotiated
agreement with an offering Party or Parties
is not imminent, the Change in Control may
proceed without further notice, subject to
the obligations set forth in this Article
12, provided that the Change in Control
shall be concluded within one hundred eighty
(180) Days from the expiration of the thirty
(30) Day offer period or the sixty (60) Day
negotiation period, respectively, plus such
additional period as may be necessary to
secure governmental approvals.
(2) If more than one Party counter-notifies the
acquired Party that it intends to acquire
the Participating Interest subject to the
proposed Change in Control, then each such
Party shall acquire a proportion of the
Participating Interest equal to the ratio of
its own Participating Interest to the total
Participating Interests of all the
counter-notifying Parties, unless the
counter-notifying Parties otherwise agree.
(3) All Parties desiring to give such a
counter-notice shall meet to formulate a
joint offer. Each such Party shall make
known to the other Parties the highest price
or value which it is willing to offer to the
acquired Party. The proposal with the
highest price or value shall be offered to
the acquired Party as the joint proposal of
the Parties still willing to participate in
such offer under the provisions of Article
12.3(C)(1) above.
69
ARTICLE 13
WITHDRAWAL FROM AGREEMENT
13.1 Right of Withdrawal
(A) Subject to the provisions of this Article 13 and the Contract,
any Party not in default may at its option withdraw from this
Agreement and the Contract by giving notice to all other
Parties stating its decision to withdraw. Such notice shall be
unconditional and irrevocable when given, except as may be
provided in Article 13.7.
(B) The effective date of withdrawal for a withdrawing Party shall
be the end of the calendar month following the calendar month
in which the notice of withdrawal is given, provided that if
all Parties elect to withdraw, the effective date of
withdrawal for each Party shall be the date determined by
Article 13.9.
13.2 Partial or Complete Withdrawal
(A) Within thirty (30) Days of receipt of each withdrawing Party's
notification, each of the other Parties may also give notice that
it desires to withdraw from this Agreement and the Contract.
Should all Parties give notice of withdrawal, the Parties shall
proceed to abandon the Contract Area and terminate the Contract
and this Agreement. If less than all of the Parties give such
notice of withdrawal, then the withdrawing Parties shall take all
steps to withdraw from the Contract and this Agreement on the
earliest possible date and execute and deliver all necessary
instruments and documents to assign their Participating Interest
to the Parties which are not withdrawing, without any
compensation whatsoever, in accordance with the provisions of
Article 13.6.
(B) Any Party withdrawing under Article 11.2 or under this Article 13
shall
Check one Alternative
[ ] ALTERNATIVE NO. 1
withdraw from the entirety of the Contract Area,
including all Exploitation Areas and all Discoveries
made prior to such withdrawal, and thus abandon to
the other Parties not joining in its withdrawal all
its rights to Cost Hydrocarbons and Profit
Hydrocarbons generated by operations after the
effective date of such withdrawal and all rights in
associated Joint Property.
[X] ALTERNATIVE NO. 2
at its option, (1) withdraw from the entirety of the
Contract Area, or (2) withdraw only from all
exploration activities under the Contract, but not
from any Exploitation Area, Commercial Discovery, or
Discovery (whether appraised or not) made prior to
such withdrawal. Such withdrawing Party shall retain
its rights in Joint Property, but only insofar as
they relate to any such Exploitation Area, Commercial
Discovery or Discovery, and shall abandon all other
rights in Joint Property.
13.3 Rights of a Withdrawing Party
A withdrawing Party shall have the right to receive its Entitlement
produced through the effective date of its withdrawal. The withdrawing
Party shall be entitled to receive all information to which such Party
is otherwise entitled under this Agreement until the effective date of
its withdrawal. After giving its notification of withdrawal, a Party
shall not be entitled to vote on any matters coming before the
Operating Committee, other than matters for which such Party has
financial responsibility.
70
13.4 Obligations and Liabilities of a Withdrawing Party
(A) A withdrawing Party shall, following its notification of
withdrawal, remain liable only for its share of the following:
(1) costs of Joint Operations, and Exclusive Operations
in which it has agreed to participate, that were
approved by the Operating Committee or Consenting
Parties as part of a Work Program and Budget
(including a multi-year Work Program and Budget under
Article 6.5) or AFE prior to such Party's
notification of withdrawal, regardless of when they
are incurred;
(2) any Minimum Work Obligations for the current period
or phase of the Contract, and for any subsequent
period or phase which has been approved pursuant to
Article 11.2 and with respect to which such Party has
failed to timely withdraw under Article 13.4(B);
(3) expenditures described in Articles 4.2(B)(13) and
13.5 related to an emergency occurring prior to the
effective date of a Party's withdrawal, regardless of
when such expenditures are incurred;
(4) all other obligations and liabilities of the Parties
or Consenting Parties, as applicable, with respect to
acts or omissions under this Agreement prior to the
effective date of such Party's withdrawal for which
such Party would have been liable, had it not
withdrawn from this Agreement; and
(5) in the case of a partially withdrawing Party, any
costs and liabilities with respect to Exploitation
Areas, Commercial Discoveries and Discoveries from
which it has not withdrawn.
The obligations and liabilities for which a withdrawing Party
remains liable shall specifically include its share of any
costs of plugging and abandoning xxxxx or portions of xxxxx in
which it participated (or was required to bear a share of the
costs pursuant to Article 13.4(A)(1)) to the extent such costs
of plugging and abandoning are payable by the Parties under
the Contract. Any mortgages, liens, pledges, charges or other
encumbrances which were placed on the withdrawing Party's
Participating Interest prior to such Party's withdrawal shall
be fully satisfied or released, at the withdrawing Party's
expense, prior to its withdrawal. A Party's withdrawal shall
not relieve it from liability to the non-withdrawing Parties
with respect to any obligations or liabilities attributable to
the withdrawing Party under this Article 13 merely because
they are not identified or identifiable at the time of
withdrawal.
(B) Notwithstanding the foregoing, a Party shall not be liable for
any operations or expenditures it voted against (other than
operations and expenditures described in Article 13.4(A)(2) or
Article 13.4(A)(3)) if it sends notification of its withdrawal
within five (5) Days (or within twenty-four (24) hours for Urgent
Operational Matters) of the Operating Committee vote approving
such operation or expenditure. Likewise, a Party voting against
voluntarily entering into or extending of an Exploration Period
or Exploitation Period or any phase of the Contract or
voluntarily extending the Contract shall not be liable for the
Minimum Work Obligations associated therewith provided that it
sends notification of its withdrawal within thirty (30) Days of
such vote pursuant to Article 11.2.
13.5 Emergency
If a well goes out of control or a fire, blow out, sabotage or other
emergency occurs prior to the effective date of a Party's withdrawal,
the withdrawing Party shall remain liable for its Participating
Interest share of the costs of such emergency, regardless of when they
are incurred.
71
13.6 Assignment
A withdrawing Party shall assign its Participating Interest free of
cost to each of the non-withdrawing Parties in the proportion which
each of their Participating Interests (prior to the withdrawal) bears
to the total Participating Interests of all the non-withdrawing Parties
(prior to the withdrawal), unless the non-withdrawing Parties agree
otherwise. The expenses associated with the withdrawal and assignments
shall be borne by the withdrawing Party.
13.7 Approvals
A withdrawing Party shall promptly join in such actions as may be
necessary or desirable to obtain any Government approvals required in
connection with the withdrawal and assignments. The non-withdrawing
Parties shall use reasonable endeavors to assist the withdrawing Party
in obtaining such approvals. Any penalties or expenses incurred by the
Parties in connection with such withdrawal shall be borne by the
withdrawing Party. If the Government does not approve a Party's
withdrawal and assignment to the other Parties, then the withdrawing
Party shall at its option either (1) retract its notice of withdrawal
by notice to the other Parties and remain a Party as if such notice of
withdrawal had never been sent, or (2) hold its Participating Interest
in trust for the sole and exclusive benefit of the non-withdrawing
Parties with the right to be reimbursed by the non-withdrawing Parties
for any subsequent costs and liabilities incurred by it for which it
would not have been liable, had it successfully withdrawn.
13.8 Security
A Party withdrawing from this Agreement and the Contract pursuant to
this Article 13 shall provide Security satisfactory to the other
Parties to satisfy any obligations or liabilities for which the
withdrawing Party remains liable in accordance with Article 13.4, but
which become due after its withdrawal, including Security to cover the
costs of an abandonment, if applicable.
13.9 Withdrawal or Abandonment by All Parties
In the event all Parties decide to withdraw, the Parties agree that
they shall be bound by the terms and conditions of this Agreement for
so long as may be necessary to wind up the affairs of the Parties with
the Government, to satisfy any requirements of the Laws / Regulations
and to facilitate the sale, disposition or abandonment of property or
interests held by the Joint Account, all in accordance with Article 2.
ARTICLE 14
RELATIONSHIP OF PARTIES AND TAX
14.1 Relationship of Parties
The rights, duties, obligations and liabilities of the Parties under
this Agreement shall be individual, not joint or collective. It is not
the intention of the Parties to create, nor shall this Agreement be
deemed or construed to create, a mining or other partnership, joint
venture or association or (except as explicitly provided in this
Agreement) a trust. This Agreement shall not be deemed or construed to
authorize any Party to act as an agent, servant or employee for any
other Party for any purpose whatsoever except as explicitly set forth
in this Agreement. In their relations with each other under this
Agreement, the Parties shall not be considered fiduciaries except as
expressly provided in this Agreement.
14.2 Tax
Each Party shall be responsible for reporting and discharging its own
tax measured by the profit or income of the Party and the satisfaction
of such Party's share of all contract obligations under the Contract
and under this Agreement. Each Party shall protect, defend and
indemnify each other Party from any and all loss, cost or liability
arising from the indemnifying Party's failure to report and discharge
such taxes or satisfy such obligations. The Parties intend that all
income and all tax benefits (including deductions, depreciation,
credits and capitalization) with respect to the expenditures made by
the Parties hereunder will be allocated by the Government tax
authorities to the Parties based on the share of each tax item actually
received or borne by each Party. If such allocation is not accomplished
due to the application of the Laws / Regulations or other Government
action, the Parties shall attempt to adopt mutually agreeable
arrangements that will allow the Parties to achieve the financial
results intended. Operator shall provide each Party, in a timely manner
and at such Party's sole expense, with such information with respect to
Joint Operations as such Party may reasonably request for preparation
of its tax returns or responding to any audit or other tax proceeding.
72
Check Article 14.3, if desired.
[X] OPTIONAL PROVISION
14.3 United States Tax Election
(A) If, for United States federal income tax purposes, this Agreement
and the operations under this Agreement are regarded as a
partnership and if the Parties have not agreed to form a tax
partnership, each U.S. Party elects to be excluded from the
application of all of the provisions of Subchapter "K", Chapter
1, Subtitle "A" of the United States Internal Revenue Code of
1986, as amended (the "Code"), to the extent permitted and
authorized by Section 761(a) of the Code and the regulations
promulgated under the Code. Operator, if it is a U.S. Party, is
authorized and directed to execute and file for each U.S. Party
such evidence of this election as may be required by the Internal
Revenue Service, including all of the returns, statements, and
data required by United States Treasury Regulations Sections
1.761-2 and 1.6031(a)-1(b)(5) and shall provide a copy thereof to
each U.S. Party. However, if Operator is not a U.S. Party, the
Party who holds the greatest Participating Interest among the
U.S. Parties shall fulfill the obligations of Operator under this
Article 14.3. Should there be any requirement that any U.S. Party
give further evidence of this election, each U.S. Party shall
execute such documents and furnish such other evidence as may be
required by the Internal Revenue Service or as may be necessary
to evidence this election.
(B) No Party shall give any notice or take any other action
inconsistent with the foregoing election. If any income tax laws
of any state or other political subdivision of the United States
or any future income tax laws of the United States or any such
political subdivision contain provisions similar to those in
Subchapter "K", Chapter 1, Subtitle "A" of the Code, under which
an election similar to that provided by Section 761(a) of the
Code is permitted, each U.S. Party shall make such election as
may be permitted or required by such laws. In making the
foregoing election or elections, each U.S. Party states that the
income derived by it from operations under this Agreement can be
adequately determined without the computation of partnership
taxable income.
(C) Unless approved by every Non-U.S. Party, no activity shall be
conducted under this Agreement that would cause any Non-U.S.
Party to be deemed to be engaged in a trade or business within
the United States under United States income tax laws and
regulations.
(D) A Non-U.S. Party shall not be required to do any act or execute
any instrument which might subject it to the taxation
jurisdiction of the United States.
(E) For the purposes of this Article 14.3, "U.S. Party" shall mean
any Party that is subject to the income tax law of the United
States in respect with operations under this Agreement. "Non-U.S.
Party" shall mean any Party that is not subject to such income
tax law.
73
ARTICLE 15
VENTURE INFORMATION - CONFIDENTIALITY - INTELLECTUAL PROPERTY
15.1 Venture Information
Check one Alternative for Paragraph (A).
[X] ALTERNATIVE NO. 1
(A) Except as otherwise provided in this Article 15 or in Articles
4.4 and 8.4(A), each Party will be entitled to receive all
Venture Information related to operations in which such party is
a participant. "Venture Information" means any information and
results developed or acquired as a result of Joint Operations and
shall be Joint Property, unless provided otherwise in accordance
with this Agreement and the Contract. Each Party shall have the
right to use all Venture Information it receives without
accounting to any other Party, subject to any applicable patents
and any limitations set forth in this Agreement and the Contract.
For purposes of this Article 15, such right to use shall include,
the rights to copy, prepare derivative works, disclose, license,
distribute, and sell.
[ ] ALTERNATIVE NO. 2
(A) Each Party may use all information it receives under Article
4.4(A) (the "Venture Information") without the approval of any
other Party, subject to any applicable restrictions and
limitations set forth in this Article 15, the Agreement and the
Contract. For purposes of this Article 15, the right to use shall
entail the right to copy and prepare derivative works.
(B) Each Party may, subject to any applicable restrictions and
limitations set forth in the Contract, extend the right to use
Venture Information to each of its Affiliates which are obligated
to terms not less restrictive that this Article 15.
Check if desired.
[X] OPTIONAL PROVISION
Except as otherwise provided in the Contract, each
Party may extend the right to use Venture Information
to members of joint ventures or production sharing
arrangements in which such Party or its Affiliates
have an ownership or equity interest, or to an
assignee of all or a fraction of a Participating
Interest, provided that each such member agrees in
writing to keep the Venture Information in confidence
at least to the same extent as required in Article
15.2 and to use the Venture Information only for the
benefit of that joint venture or production sharing
arrangement.
(C) The acquisition or development of Venture Information under terms
other than as specified in this Article 15 shall require the
approval of the Operating Committee. The request for approval
submitted by a Party shall be accompanied by a description of,
and summary of the use and disclosure restrictions which would be
applicable to, the Venture Information, and any such Party will
be obligated to use all reasonable efforts to arrange for rights
to use which are not less restrictive than specified in this
Article 15.
(D) All Venture Information received by a Party under this Agreement
is received on an "as is" basis without warranties, express or
implied, of any kind. Any use of such Venture Information by a
Party shall be at such Party's sole risk.
74
15.2 Confidentiality
(A) Subject to the provisions of the Contract and this Article 15,
the Parties agree that all information in relation with Joint
Operations or Exclusive Operations shall be considered
confidential and shall be kept confidential and not be
disclosed during the term of the Contract and for a period of
five (5) years thereafter to any person or entity not a Party
to this Agreement, except:
(1) to an Affiliate pursuant to Article 15.1(B);
(2) to a governmental agency or other entity when
required by the Contract;
(3) to the extent such information is required to be
furnished in compliance with the applicable law or
regulations, or pursuant to any legal proceedings or
because of any order of any court binding upon a
Party;
(4) to prospective or actual attorneys engaged by any
Party where disclosure of such information is
essential to such attorney's work for such Party;
(5) to prospective or actual contractors and consultants
engaged by any Party where disclosure of such
information is essential to such contractor's or
consultant's work for such Party;
(6) to a bona fide prospective transferee of a Party's
Participating Interest to the extent appropriate in
order to allow the assessment of such Participating
Interest (including an entity with whom a Party
and/or its Affiliates are conducting bona fide
negotiations directed toward a merger, consolidation
or the sale of a majority of its or an Affiliate's
shares);
(7) to a bank or other financial institution to the
extent appropriate to a Party arranging for funding;
(8) to the extent such information must be disclosed
pursuant to any rules or requirements of any
government or stock exchange having jurisdiction over
such Party, or its Affiliates; provided that if any
Party desires to disclose information in an annual or
periodic report to its or its Affiliates'
shareholders and to the public and such disclosure is
not required pursuant to any rules or requirements of
any government or stock exchange, then such Party
shall comply with Article 20.3;
(9) to its respective employees for the purposes of Joint
Operations or Exclusive Operations as the case may
be, subject to each Party taking customary
precautions to ensure such information is kept
confidential; and
(10) any information which, through no fault of a Party,
becomes a part of the public domain.
(B) Disclosure as pursuant to Articles 15.2(A)(5), (6), and (7)
shall not be made unless prior to such disclosure the
disclosing Party has obtained a written undertaking from the
recipient party to keep the information strictly confidential
for at least five (5) years and to use the information for the
sole purpose described in Articles 15.2(A)(5), (6), and (7),
whichever is applicable, with respect to the disclosing Party.
75
15.3 Intellectual Property
Check one Alternative for Paragraph (A).
[X] ALTERNATIVE NO. 1
(A) Subject to Articles 15.3(C) and 15.5 and unless provided
otherwise in the Contract, all intellectual property rights
in the Venture Information shall be Joint Property. Each
Party and its Affiliates have the right to use all such
intellectual property rights in their own operations
(including joint operations or a production sharing
arrangement in which the Party or its Affiliates has an
ownership or equity interest) without the approval of any
other Party. Decisions regarding obtaining, maintaining and
licensing such intellectual property rights shall be made by
the Operating Committee, and the costs thereof shall be for
the Joint Account. Upon unanimous consent of the Operating
Committee as to ownership, licensing rights, and income
distribution, the ownership of intellectual property rights
in the Venture Information may be assigned to the Operator
or to a Party.
[ ] ALTERNATIVE NO. 2
(A) Subject to Articles 15.3(C) and 15.5, all intellectual
property rights in the Venture Information shall be owned by
Operator unless provided otherwise in the Contract. Each
Party and its Affiliates shall have a perpetual,
royalty-free, irrevocable license to use, all such
intellectual property rights in their own operations
(including joint venture operations or a production sharing
arrangement in which such Party has an ownership or equity
interest) without the approval of any other Party. If any
Venture Information amounts to a patentable invention,
Operator shall be entitled to seek patent protection for
such invention. If Operator does not intend to seek patent
protection, Operator shall offer its rights to such
invention for assignment to the other Parties and shall
assign such rights to any requesting Party or Parties. In
case of the granting of a license under such rights to a
third party other than Affiliates of a Party, the license
income shall be shared among the Parties in proportion to
their respective Participating Interest. The Party granting
any such license shall (i) be entitled to deduct its
reasonable costs incurred in registering and maintaining the
rights licensed prior to the aforementioned sharing among
the Parties; (ii) keep records of any license income
received for any such license; and (iii) if requested,
provide each Party with a statement, certified by its
statutory auditor to be correct and in accordance with this
Article 15.3, regarding such income received.
(B) Nothing in this Agreement shall be deemed to require a Party
to (i) divulge proprietary technology to any of the other
Parties; or (ii) grant a license or other rights under any
intellectual property rights owned or controlled by such
Party or its Affiliates to any of the other Parties.
Check one Alternative for Paragraph (C).
[X] ALTERNATIVE NO. 1
(C) If a Party or an Affiliate of a Party has proprietary
technology applicable to activities carried out under this
Agreement which the Party or its Affiliate desires to make
available on terms and conditions other than as specified in
Article 15.3(A), the Party or Affiliate may, with the prior
approval of the Operating Committee, make the proprietary
technology available on terms to be agreed. If the
proprietary technology is so made available, then any
inventions, discoveries, or improvements which relate to
such proprietary technology and which result from Joint
Account expenditures shall belong to such Party or
Affiliate. In such case, each other Party shall have a
perpetual, royalty-free, irrevocable license to practice
such inventions, discoveries, or improvements, but only in
connection with the Joint Operations.
76
[ ] ALTERNATIVE NO. 2
(C) If in the course of carrying out activities charged to
the Joint Account, a Party or an Affiliate of a Party
makes or conceives any inventions, discoveries, or
improvements which primarily relate to or are primarily
based on the proprietary technology of such Party or
its Affiliates, then all intellectual property rights
to such inventions, discoveries, or improvements shall
vest exclusively in such Party and each other Party
shall have a perpetual, royalty-free, irrevocable
license to use such inventions, discoveries, or
improvements, but only in connection with the Joint
Operations.
(D) Subject to Article 4.6(B), all costs and expenses of
defending, settling or otherwise handling any claim which is
based on the actual or alleged infringement of any
intellectual property right shall be for the account of the
operation from which the claim arose, whether Joint Operations
or Exclusive Operations.
15.4 Continuing Obligations
Any Party ceasing to own a Participating Interest during the term of
this Agreement shall nonetheless remain bound by the obligations of
confidentiality in Article 15.2, and any disputes in relation thereto
shall be resolved in accordance with Article 18.2.
15.5 Trades
Operator may, with approval of the Operating Committee, make well
trades and data trades for the benefit of the Parties, with any data so
obtained to be furnished to all Parties who participated in the cost of
the data that was traded. Operator shall cause any third party to such
trade to enter into an undertaking to keep the traded data
confidential.
ARTICLE 16
FORCE MAJEURE
16.1 Obligations
If as a result of Force Majeure any Party is rendered unable, wholly or
in part, to carry out its obligations under this Agreement, other than
the obligation to pay any amounts due or to furnish Security, then the
obligations of the Party giving such notice, so far as and to the
extent that the obligations are affected by such Force Majeure, shall
be suspended during the continuance of any inability so caused and for
such reasonable period thereafter as may be necessary for the Party to
put itself in the same position that it occupied prior to the Force
Majeure, but for no longer period. The Party claiming Force Majeure
shall notify the other Parties of the Force Majeure within a reasonable
time after the occurrence of the facts relied on and shall keep all
Parties informed of all significant developments. Such notice shall
give reasonably full particulars of the Force Majeure and also estimate
the period of time which the Party will probably require to remedy the
Force Majeure. The affected Party shall use all reasonable diligence to
remove or overcome the Force Majeure situation as quickly as possible
in an economic manner but shall not be obligated to settle any labor
dispute except on terms acceptable to it, and all such disputes shall
be handled within the sole discretion of the affected Party.
16.2 Definition of Force Majeure
Check one Alternative.
[X] ALTERNATIVE NO. 1
For the purposes of this Agreement, "Force Majeure" shall have
the same meaning as is set out in the Contract.
77
[ ] ALTERNATIVE NO. 2
For the purposes of this Agreement, "Force Majeure" shall mean
circumstances which were beyond the reasonable control of the
Party concerned and shall include strikes, lockouts and other
industrial disturbances even if they were not "beyond the
reasonable control" of the Party.
ARTICLE 17
NOTICES
Except as otherwise specifically provided, all notices authorized or
required between the Parties by any of the provisions of this Agreement shall be
in writing (in English) and delivered in person or by courier service or by any
electronic means of transmitting written communications which provides written
confirmation of complete transmission, and addressed to such Parties. Oral
communication does not constitute notice for purposes of this Agreement, and
e-mail addresses and telephone numbers for the Parties are listed below as a
matter of convenience only. A notice given under any provision of this Agreement
shall be deemed delivered only when received by the Party to whom such notice is
directed, and the time for such Party to deliver any notice in response to such
originating notice shall run from the date the originating notice is received.
"Received" for purposes of this Article 17 shall mean actual delivery of the
notice to the address of the Party specified hereunder or to be thereafter
notified in accordance with this Article 17. Each Party shall have the right to
change its address at any time and/or designate that copies of all such notices
be directed to another person at another address, by giving written notice
thereof to all other Parties.
A&T Petroleum Company, Ltd. Hawler Energy, Ltd.
----------------------------------------------------- -------------------------
Xxxx Sokak No:43, GOP 0000 Xxxx Xxxx Xxxx., Xxxxx 0000
----------------------------------------------------- --------------------------------------------
06700 Ankara, Turkey Xxxxxxx, XX 00000, XXX
----------------------------------------------------- ----------------------
Attention: X. Xxx AK Attention: W. Xxxxxxx Xxxxxxxx
--------------------------------- --------------
Fax: x00 000 000 0000 / 000 0000 Fax: x0-000-000 3200
-------------------- ------------------------
Email: xx@xxxxxx.xxx.xx Email: xxxxxxxxx@xxxxxxxx.xxx
----------------------------- ---------------
Telephone: x00 000 0000000 Telephone: x0-000-000 3210
--------------------------- ------------------
Attention: Attention:
------------------------------------------- ----------------------------------
Fax: Fax:
------------------------------------------------- ----------------------------------------
Email: Email:
----------------------------------------------- --------------------------------------
Telephone: Telephone:
------------------------------------------- ----------------------------------
ARTICLE 18
APPLICABLE LAW - DISPUTE RESOLUTION - WAIVER OF SOVEREIGN IMMUNITY
18.1 Applicable Law
[NOTE: The provisions of this Agreement must be analyzed taking into
consideration the law chosen in this Article 18.1 and any other applicable law.]
Check one Alternative.
[X] ALTERNATIVE NO. 1
The substantive laws of England, exclusive of any conflicts of
laws principles that could require the application of any
other law, shall govern this Agreement for all purposes,
including the resolution of all Disputes between or among
Parties.
78
[ ] ALTERNATIVE NO. 2
The laws of ______________, to the extent consistent with
international law, shall govern this Agreement for all
purposes, including the resolution of all Disputes between or
among Parties. To the extent the laws of ______________ are
not consistent with international law, then international law
shall prevail.
18.2 Dispute Resolution
Check Paragraph (A) if Paragraphs 18.2 (B) or (C) are selected.
Renumber following paragraphs if Paragraph (A) is not selected.
[X ] OPTIONAL PROVISION - Notification
(A) Notification. A Party who desires to submit a Dispute
for resolution shall commence the dispute resolution
process by providing the other parties to the Dispute
written notice of the Dispute ("Notice of Dispute").
The Notice of Dispute shall identify the parties to
the Dispute and contain a brief statement of the
nature of the Dispute and the relief requested. The
submission of a Notice of Dispute shall toll any
applicable statutes of limitation related to the
Dispute, pending the conclusion or abandonment of
dispute resolution proceedings under this Article 18.
Check Paragraph (B), if desired. Renumber following paragraphs if
Paragraph (B) is not selected.
[X] OPTIONAL PROVISION - Senior Executive Negotiations
(B) Negotiations. The parties to the Dispute shall seek to
resolve any Dispute by negotiation between Senior
Executives. A "Senior Executive" means any individual who
has authority to negotiate the settlement of the Dispute for
a Party. Within thirty (30) Days after the date of the
receipt by each party to the Dispute of the Notice of
Dispute (which notice shall request negotiations among
Senior Executives), the Senior Executives representing the
parties to the Dispute shall meet at a mutually acceptable
time and place to exchange relevant information in an
attempt to resolve the Dispute. If a Senior Executive
intends to be accompanied at the meeting by an attorney,
each other party's Senior Executive shall be given written
notice of such intention at least three (3) Days in advance
and may also be accompanied at the meeting by an attorney.
Notwithstanding the above, any Party may initiate
arbitration proceedings pursuant to Article 18.2 (D)
concerning such Dispute within thirty (30) Days after the
date of receipt of the Notice of Dispute.
Check Paragraph (C), if desired. Renumber following paragraphs if
Paragraph (C) is not selected.
[ ] OPTIONAL PROVISION - Mediation
(C) Mediation. [Subject to the requirements of negotiation
between Senior Executives pursuant to Article 18(B)], [t]he
parties to the Dispute shall seek to resolve the Dispute by
mediation. Within thirty (30) Days after the date of the
receipt by each party to the Dispute of the Notice of
Dispute [NOTE: Alternative, if paragraph (B) is selected:
thirty (30) Days after the date of the first negotiation
meeting among Senior Executives pursuant to Article 18(B)],
any party to the Dispute may initiate such mediation
pursuant to the [_________ mediation rules then in effect,
as modified herein] by sending all other parties to the
Dispute a written request that the Dispute be mediated. The
Parties receiving such written request will promptly respond
to the requesting Party so that all parties to the Dispute
may jointly select a neutral mediator and schedule the
mediation session. The mediator shall meet with the parties
to the Dispute to mediate the Dispute within thirty (30)
Days after the date of receipt of the written request for
mediation. Notwithstanding the above, any Party may initiate
arbitration proceedings pursuant to Article 18.2 (D)
concerning such Dispute within thirty (30) Days after the
date of receipt of the Notice of Dispute [NOTE: Alternative,
if paragraph (B) is selected: within sixty (60) Days after
the date of receipt of the Notice of Dispute].
[NOTE: To govern mediation under Article 18.2(C) consider
choosing the mediation rules of the institution chosen below
for purposes of conducting any arbitration]
79
(D) Arbitration. Any Dispute [not finally resolved by alternative
dispute resolution procedures set forth in Article 18.2(B)]
shall be exclusively and definitively resolved through final
and binding arbitration, it being the intention of the Parties
that this is a broad form arbitration agreement designed to
encompass all possible disputes.
(1) Rules. The arbitration shall be conducted in
accordance with the following arbitration rules (as
then in effect) (the "Rules"):
Check one Alternative.
[X] ALTERNATIVE NO. 1
Rules of Arbitration of the International
Chamber of Commerce (ICC).
[ ] ALTERNATIVE NO. 2
Arbitration Rules of the London Court of
International Arbitration (LCIA).
[ ] ALTERNATIVE NO. 3
International Arbitration Rules of the
American Arbitration Association (AAA).
[ ] ALTERNATIVE NO. 4
Arbitration Rules of the Singapore
International Arbitration Centre (SIAC).
[ ] ALTERNATIVE NO. 5
Arbitration Rules of the Institute of the
Stockholm Chamber of Commerce (SCC
Institute).
[ ] ALTERNATIVE NO. 6
United Nations Commission of International
Trade Law (UNCITRAL) Arbitration
Rules. The appointing authority shall be
[____________ Arbitral Institution].
[NOTE: If the Host Government is a Party to this
Agreement, consider whether the Rules of Procedure
for Arbitration of the International Center for
Settlement of Investment Disputes (ICSID) would be
appropriate and, if so, whether an alternative
arbitral institution should also be selected for
disputes for which ICSID may lack
jurisdiction.]
[NOTE: Verify the consistency of this Article 18.2
with the Rules selected.]
(2) Number of Arbitrators. The arbitration shall be conducted by
three arbitrators, unless all parties to the Dispute agree to
a sole arbitrator within thirty (30) Days after the filing of
the arbitration. For greater certainty, for purposes of this
Article 18.2(D), the filing of the arbitration means the date
on which the claimant's request for arbitration is received by
the other parties to the Dispute.
(3) Method of Appointment of the Arbitrators. If the arbitration
is to be conducted by a sole arbitrator, then the arbitrator
will be jointly selected by the parties to the Dispute. If the
parties to the Dispute fail to agree on the arbitrator within
thirty (30) Days after the filing of the arbitration, then the
ICC shall appoint the arbitrator.
80
If the arbitration is to be conducted by three arbitrators and
there are only two parties to the Dispute, then each party to
the Dispute shall appoint one arbitrator within thirty (30)
Days of the filing of the arbitration, and the two arbitrators
so appointed shall select the presiding arbitrator within
thirty (30) Days after the latter of the two arbitrators has
been appointed by the parties to the Dispute. If a party to
the Dispute fails to appoint its party-appointed arbitrator or
if the two party-appointed arbitrators cannot reach an
agreement on the presiding arbitrator within the applicable
time period, then the ICC shall appoint the remainder of the
three arbitrators not yet appointed.
If the arbitration is to be conducted by three arbitrators and
there are more than two parties to the Dispute, then within
thirty (30) Days of the filing of the arbitration, all
claimants shall jointly appoint one arbitrator and all
respondents shall jointly appoint one arbitrator, and the two
arbitrators so appointed shall select the presiding arbitrator
within thirty (30) Days after the latter of the two
arbitrators has been appointed by the parties to the Dispute.
If either all claimants or all respondents fail to make a
joint appointment of an arbitrator or if the party-appointed
arbitrators cannot reach an agreement on the presiding
arbitrator within the applicable time period, then the ICC
shall appoint
Check one Alternative.
[ ] ALTERNATIVE NO. 1
all three arbitrators.
[X] ALTERNATIVE NO. 2
the remainder of the three arbitrators not yet
appointed.
[NOTE: If the laws of France (and possibly other jurisdictions
that have not yet addressed the "Dutco" problem) are
applicable to the arbitration, Alternative 2 may result in an
unenforceable arbitral award.]
Check Paragraph (4), if desired. Renumber following paragraphs
if Paragraph (4) is not selected.
[X] OPTIONAL PROVISION (Paragraph (4))
(4) Consolidation. If the Parties initiate
multiple arbitration proceedings, the
subject matters of which are related by
common questions of law or fact and which
could result in conflicting awards or
obligations, then all such proceedings may
be consolidated into a single arbitral
proceeding.
(5) Place of Arbitration. Unless otherwise agreed by all
parties to the Dispute, the place of arbitration
shall be London, England.
(6) Language. The arbitration proceedings shall be
conducted in the English language and the
arbitrator(s) shall be fluent in the English
language.
(7) Entry of Judgment. The award of the arbitral tribunal
shall be final and binding. Judgment on the award of
the arbitral tribunal may be entered and enforced by
any court of competent jurisdiction.
(8) Notice. All notices required for any arbitration
proceeding shall be deemed properly given if sent in
accordance with Article 17.
(9) Qualifications and Conduct of the Arbitrators. All
arbitrators shall be and remain at all times wholly
impartial, and, once appointed, no arbitrator shall
have any ex parte communications with any of the
parties to the Dispute concerning the arbitration or
the underlying Dispute other than communications
directly concerning the selection of the presiding
arbitrator, where applicable.
81
Check if desired.
[X ] OPTIONAL PROVISION
Whenever the parties to the Dispute are of
more than one nationality, the single
arbitrator or the presiding arbitrator (as
the case may be) shall not be of the same
nationality as any of the parties or their
ultimate parent entities, unless the parties
to the Dispute otherwise agree.
(10) Interim Measures. [Notwithstanding any requirements
for alternative dispute resolution procedures as set
forth in Article 18(B)], [a]ny party to the Dispute
may apply to a court for interim measures (i) prior
to the constitution of the arbitral tribunal (and
thereafter as necessary to enforce the arbitral
tribunal's rulings); or (ii) in the absence of the
jurisdiction of the arbitral tribunal to rule on
interim measures in a given jurisdiction. The Parties
agree that seeking and obtaining such interim
measures shall not waive the right to arbitration.
The arbitrators (or in an emergency the presiding
arbitrator acting alone in the event one or more of
the other arbitrators is unable to be involved in a
timely fashion) may grant interim measures including
injunctions, attachments and conservation orders in
appropriate circumstances, which measures may be
immediately enforced by court order. Hearings on
requests for interim measures may be held in person,
by telephone, by video conference or by other means
that permit the parties to the Dispute to present
evidence and arguments.
Check if desired.
[X] OPTIONAL PROVISION
Without limiting the generality of the
foregoing, any party to the Dispute may have
recourse to and shall be bound by the
Pre-arbitral Referee Procedure of the
International Chamber of Commerce in
accordance with its rules then in effect.
(11) Costs and Attorneys' Fees. The arbitral tribunal is
authorized to award costs and attorneys' fees and to
allocate them between the parties to the Dispute. The
costs of the arbitration proceedings, including
attorneys' fees, shall be borne in the manner
determined by the arbitral tribunal.
(12) Interest. The award shall include interest, as
determined by the arbitral award, from the date of
any default or other breach of this Agreement until
the arbitral award is paid in full. Interest shall be
awarded at the Agreed Interest Rate.
(14) Currency of Award. The arbitral award shall be made
and payable in United States dollars, free of any tax
or other deduction.
(15) Exemplary Damages. The Parties waive their rights to
claim or recover, and the arbitral tribunal shall not
award, any punitive, multiple, or other exemplary
damages (whether statutory or common law) except to
the extent such damages have been awarded to a third
party and are subject to allocation between or among
the parties to the Dispute.
(16) Waiver of Challenge to Decision or Award. To the
extent permitted by law, any right to appeal or
challenge any arbitral decision or award, or to
oppose enforcement of any such decision or award
before a court or any governmental authority, is
hereby waived by the Parties except with respect to
the limited grounds for modification or
non-enforcement provided by any applicable
arbitration statute or treaty.
82
Check Paragraph (E), if desired.
[ ] OPTIONAL PROVISION
(E) Confidentiality. All negotiations, mediation, arbitration,
and expert determinations relating to a Dispute (including a
settlement resulting from negotiation or mediation, an
arbitral award, documents exchanged or produced during a
mediation or arbitration proceeding, and memorials, briefs
or other documents prepared for the arbitration) are
confidential and may not be disclosed by the Parties, their
employees, officers, directors, counsel, consultants, and
expert witnesses, except (in accordance with Article 15.2)
to the extent necessary to enforce this Article 18 or any
arbitration award, to enforce other rights of a Party, or as
required by law; provided, however, that breach of this
confidentiality provision shall not void any settlement,
expert determination or award.
Check Article 18.3, if any of Article 8.4 - Alternative No. 2, Article
12.2(F) - Alternative No. 2, or Article 12.3(C) - Alternative No. 2 is selected.
Renumber following article if Article 18.3 is not selected.
[ ] OPTIONAL PROVISION (Article 18.3)
18.3 Expert Determination
For any decision referred to an expert under Articles [8.4,
12.2 or 12.3], the Parties hereby agree that such decision
shall be conducted expeditiously by an expert selected
unanimously by the parties to the Dispute. The expert is not
an arbitrator of the Dispute and shall not be deemed to be
acting in an arbitral capacity. The Party desiring an expert
determination shall give the other parties to the Dispute
written notice of the request for such determination. If the
parties to the Dispute are unable to agree upon an expert
within ten (10) Days after receipt of the notice of request
for an expert determination, then, upon the request of any of
the parties to the Dispute, the International Centre for
Expertise of the International Chamber of Commerce (ICC) shall
appoint such expert and shall administer such expert
determination through the ICC's Rules for Expertise. The
expert, once appointed, shall have no ex parte communications
with any of the parties to the Dispute concerning the expert
determination or the underlying Dispute. All Parties agree to
cooperate fully in the expeditious conduct of such expert
determination and to provide the expert with access to all
facilities, books, records, documents, information and
personnel necessary to make a fully informed decision in an
expeditious manner. Before issuing his final decision, the
expert shall issue a draft report and allow the parties to the
Dispute to comment on it. The expert shall endeavor to resolve
the Dispute within thirty (30) Days (but no later than sixty
(60) Days) after his appointment, taking into account the
circumstances requiring an expeditious resolution of the
matter in dispute. The expert's decision shall be final and
binding on the parties to the Dispute unless challenged in an
arbitration pursuant to Article 18.2(D) within sixty (60) Days
of the date the expert's final decision is received by the
parties to the Dispute and until replaced by such subsequent
arbitral award. In such arbitration (i) the expert
determination on the specific matter under Articles [8.4, 12.2
or 12.3] shall be entitled to a rebuttable presumption of
correctness; and (ii) the expert shall not (without the
written consent of the parties to the Dispute) be appointed to
act as an arbitrator or as adviser to the parties to the
Dispute.
18.4 Waiver of Sovereign Immunity
[NOTE: Confirm the authority of each Party to waive its sovereign
immunity under applicable local laws.]
Any Party that now or hereafter has a right to claim sovereign immunity
for itself or any of its assets hereby waives any such immunity to the
fullest extent permitted by the laws of any applicable jurisdiction.
This waiver includes immunity from (i) any expert determination,
mediation, or arbitration proceeding commenced pursuant to this
Agreement; (ii) any judicial, administrative or other proceedings to
aid the expert determination, mediation, or arbitration commenced
pursuant to this Agreement; and (iii) any effort to confirm, enforce,
or execute any decision, settlement, award, judgment, service of
process, execution order or attachment (including pre-judgment
attachment) that results from an expert determination, mediation,
arbitration or any judicial or administrative proceedings commenced
pursuant to this Agreement. Each Party acknowledges that its rights and
obligations hereunder are of a commercial and not a governmental
nature.
83
ARTICLE 19
ALLOCATION OF COST & PROFIT HYDROCARBONS
[NOTE: Article 19 must be analyzed taking into consideration the Contract and
Laws / Regulations.]
Check one Alternative for Articles 19.1 and 19.2.
[X] ALTERNATIVE NO. 1 (Article 19.1 and Article 19.2) - Allocation by
Exploitation Area
19.1 Allocation of Total Production
(A) The total quantity of Hydrocarbons produced and
measured at the delivery point (as determined in
accordance with Article 9) from each Exploitation
Area and to which the Parties are collectively
entitled under the Contract shall be composed of Cost
Hydrocarbons and Profit Hydrocarbons in accordance
with the provisions of the Contract.
(B) Operator shall develop and the Operating Committee
shall approve procedures for allocating such Cost
Hydrocarbons and Profit Hydrocarbons during each
Calendar Quarter among the individual Exploitation
Areas based upon the following principles.
(1) Cost Hydrocarbons and Profit Hydrocarbons
shall first be allocated to Exploitation
Areas based on the principle that an earlier
established operation shall not be enhanced
or impaired in any way through the
subsequent establishment of any Exploitation
Area, whether the subsequently established
Exploitation Areas are Exclusive Operations
or Joint Operations.
(2) All allocations made pursuant to this
Article 19 shall incorporate adjustments to
reflect differences in value if different
qualities of Hydrocarbons are produced.
19.2 Allocation of Hydrocarbons to Parties
(A) Cost Hydrocarbons and Profit Hydrocarbons allocated to
Exploitation Areas pursuant to Article 19.1 shall be
allocated to the Parties in proportion to their
Participating Interests in each such Exploitation Area.
(B) Notwithstanding anything to the contrary contained in this
Article 19, and to the extent allowed under the Contract,
Cost Hydrocarbons which are not specifically attributable to
an Exploitation Area, if any, shall be allocated to the
Parties in proportion to their respective participation in
the operations which underlie any such Cost Hydrocarbons,
provided, however, that the rights of a Party to Cost
Hydrocarbons or Profit Hydrocarbons from an Exploitation
Area to which it is a participant shall not be impaired by
the rights of any other Party to recover Cost Hydrocarbons
which are not specifically attributable to such Exploitation
Area.
84
[ ] ALTERNATIVE NO. 2 (Article 19.1 and Article 19.2) - Allocation by Type
of Operation
19.1 Allocation of Total Production
(A) The total quantity of Hydrocarbons produced and
measured at the delivery point (as determined in
accordance with Article 9) from each Exploitation
Area and to which the Parties are collectively
entitled under the Contract shall be composed of Cost
Hydrocarbons and Profit Hydrocarbons in accordance
with the provisions of the Contract.
(B) Operator shall develop and the Operating Committee
shall approve procedures for allocating such Cost
Hydrocarbons and Profit Hydrocarbons during each
Calendar Quarter among the individual operations
based upon the following principles.
(1) Cost Hydrocarbons and Profit Hydrocarbons
shall first be allocated to Joint Operations
based on the principle that Joint Operations
shall not be enhanced or impaired in any way
by the execution of any Exclusive
Operations. Any remaining Cost Hydrocarbons
and Profit Hydrocarbons shall be allocated
to Exclusive Operations based on the
principle that an earlier executed Exclusive
Operation shall not be enhanced or impaired
in any way by the subsequent execution of
another Exclusive Operation.
(2) All allocations made pursuant to this
Article 19 shall incorporate adjustments to
reflect differences in value if different
qualities of Hydrocarbons are produced.
19.2 Allocation of Hydrocarbons to Parties
(A) Cost Hydrocarbons and Profit Hydrocarbons allocated to
Joint Operations or Exclusive Operations pursuant to
Article 19.1 shall be allocated to the Parties in
proportion to their respective Participating Interests
in such operations.
(B) Notwithstanding anything to the contrary contained in
this Article 19, and to the extent allowed under the
Contract, Cost Hydrocarbons which are not specifically
attributable to an operation, if any, shall be
allocated to the Parties in proportion to their
respective participation in the operations which
underlie any such Cost Hydrocarbons, provided, however,
that the rights of a Party to Cost Hydrocarbons or
Profit Hydrocarbons from an operation to which it is a
participant shall not be impaired by the rights of any
other Party to recover Cost Hydrocarbons which are not
specifically attributable to an operation.
19.3 Use of Estimates
Initial distribution of Hydrocarbons pursuant to this Article 19 shall
be based upon estimates furnished by Operator pursuant to Article 9,
with adjustments for actual figures to be made in kind within
forty-five (45) Days after the end of the Calendar Quarter and at any
later date when adjustments must be made with the Government under the
Contract.
19.4 Principles
If no allocation procedure is approved by the Operating Committee in
accordance with Article 19.1, the Parties shall nonetheless be bound by
the principles set forth in this Article 19 with regard to the
allocation of Cost Hydrocarbons and Profit Hydrocarbons.
85
ARTICLE 20
GENERAL PROVISIONS
20.1 Conduct of the Parties
(A) Each Party warrants that it and its Affiliates have not made,
offered, or authorized and will not make, offer, or authorize
with respect to the matters which are the subject of this
Agreement, any payment, gift, promise or other advantage, whether
directly or through any other person or entity, to or for the use
or benefit of any public official (i.e., any person holding a
legislative, administrative or judicial office, including any
person employed by or acting on behalf of a public agency, a
public enterprise or a public international organization) or any
political party or political party official or candidate for
office, where such payment, gift, promise or advantage would
violate (i) the applicable laws of [(host country)]; (ii) the
laws of the country of incorporation of such Party or such
Party's ultimate parent company and of the principal place of
business of such ultimate parent company; or (iii) the principles
described in the Convention on Combating Bribery of Foreign
Public Officials in International Business Transactions, signed
in Paris on December 17, 1997, which entered into force on
February 15, 1999, and the Convention's Commentaries. Each Party
shall defend, indemnify and hold the other Parties harmless from
and against any and all claims, damages, losses, penalties, costs
and expenses arising from or related to, any breach by such first
Party of such warranty. Such indemnity obligation shall survive
termination or expiration of this Agreement. [Each Party shall in
good time (i) respond in reasonable detail to any notice from any
other Party reasonably connected with the above-stated warranty;
and (ii) furnish applicable documentary support for such response
upon request from such other Party.]
(B) Each Party agrees to (i) maintain adequate internal controls;
(ii) properly record and report all transactions; and (iii)
comply with the laws applicable to it. Each Party must rely on
the other Parties' system of internal controls, and on the
adequacy of full disclosure of the facts, and of financial and
other data regarding the Joint Operations undertaken under this
Agreement. No Party is in any way authorized to take any action
on behalf of another Party that would result in an inadequate or
inaccurate recording and reporting of assets, liabilities or any
other transaction, or which would put such Party in violation of
its obligations under the laws applicable to the operations under
this Agreement.
20.2 Conflicts of Interest
(A) Operator undertakes that it shall avoid any conflict of
interest between its own interests (including the interests of
Affiliates) and the interests of the other Parties in dealing
with suppliers, customers and all other organizations or
individuals doing or seeking to do business with the Parties
in connection with activities contemplated under this
Agreement.
(B) The provisions of the preceding paragraph shall not apply to:
(1) Operator's performance which is in accordance with the
local preference laws or policies of the Government; or (2)
Operator's acquisition of products or services from an
Affiliate, or the sale thereof to an Affiliate, made in
accordance with the terms of this Agreement.
(C) Unless otherwise agreed, the Parties and their Affiliates are
free to engage or invest (directly or indirectly) in an
unlimited number of activities or businesses, any one or more
of which may be related to or in competition with the business
activities contemplated under this Agreement, without having
or incurring any obligation to offer any interest in such
business activities to any Party.
20.3 Public Announcements
(A) Operator shall be responsible for the preparation and release of
all public announcements and statements regarding this Agreement
or the Joint Operations; provided that no public announcement or
statement shall be issued or made unless, prior to its release,
all the Parties have been furnished with a copy of such statement
or announcement and the approval of at least one (1) Party which
is not an Affiliate of Operator holding fifty percent (50%) or
more of the Participating Interests not held by Operator or its
Affiliates has been obtained. Where a public announcement or
statement becomes necessary or desirable because of danger to or
loss of life, damage to property or pollution as a result of
activities arising under this Agreement, Operator is authorized
to issue and make such announcement or statement without prior
approval of the Parties, but shall promptly furnish all the
Parties with a copy of such announcement or statement.
86
(B) If a Party wishes to issue or make any public announcement or
statement regarding this Agreement or the Joint Operations, it
shall not do so unless, prior to the release of the public
announcement or statement, such Party furnishes all the Parties
with a copy of such announcement or statement, and obtains the
approval of at least two (2) Parties which are not Affiliates
holding fifty percent (50%) or more of the Participating
Interests not held by such announcing Party or its Affiliates;
provided that, notwithstanding any failure to obtain such
approval, no Party shall be prohibited from issuing or making any
such public announcement or statement if it is necessary to do so
in order to comply with the applicable laws, rules or regulations
of any government, legal proceedings or stock exchange having
jurisdiction over such Party or its Affiliates as set forth in
Article 15.2.
20.4 Successors and Assigns
Subject to the limitations on Transfer contained in Article 12, this
Agreement shall inure to the benefit of and be binding upon the
successors and assigns of the Parties.
20.5 Waiver
No waiver by any Party of any one or more defaults by another Party in
the performance of any provision of this Agreement shall operate or be
construed as a waiver of any future default or defaults by the same
Party, whether of a like or of a different character. Except as
expressly provided in this Agreement no Party shall be deemed to have
waived, released or modified any of its rights under this Agreement
unless such Party has expressly stated, in writing, that it does waive,
release or modify such right.
20.6 No Third Party Beneficiaries
Except as provided under Article 4.6 (B), the interpretation of this
Agreement shall exclude any rights under legislative provisions
conferring rights under a contract to persons not a party to that
contract.
[NOTE: If English Law is the law chosen, consider whether an express
reference should be made to the Contracts (Right of Third Parties) Act
1999.]
20.7 Joint Preparation
Each provision of this Agreement shall be construed as though all
Parties participated equally in the drafting of the same. Consequently,
the Parties acknowledge and agree that any rule of construction that a
document is to be construed against the drafting party shall not be
applicable to this Agreement.
20.8 Severance of Invalid Provisions
If and for so long as any provision of this Agreement shall be deemed
to be judged invalid for any reason whatsoever, such invalidity shall
not affect the validity or operation of any other provision of this
Agreement except only so far as shall be necessary to give effect to
the construction of such invalidity, and any such invalid provision
shall be deemed severed from this Agreement without affecting the
validity of the balance of this Agreement.
87
20.9 Modifications
Except as is provided in Articles 11.2(B) and 20.8, there shall be no
modification of this Agreement or the Contract except by written
consent of all Parties.
20.10 Interpretation
(A) Headings. The topical headings used in this Agreement are for
convenience only and shall not be construed as having any
substantive significance or as indicating that all of the
provisions of this Agreement relating to any topic are to be
found in any particular Article.
(B) Singular and Plural. Reference to the singular includes a
reference to the plural and vice versa.
(C) Gender. Reference to any gender includes a reference to all
other genders.
(D) Article. Unless otherwise provided, reference to any Article
or an Exhibit means an Article or Exhibit of this Agreement.
(E) Include. "include" and "including" shall mean include or
including without limiting the generality of the description
preceding such term and are used in an illustrative sense and
not a limiting sense.
20.11 Counterpart Execution
This Agreement may be executed in any number of counterparts and each
such counterpart shall be deemed an original Agreement for all
purposes; provided that no Party shall be bound to this Agreement
unless and until all Parties have executed a counterpart. For purposes
of assembling all counterparts into one document, Operator is
authorized to detach the signature page from one or more counterparts
and, after signature thereof by the respective Party, attach each
signed signature page to a counterpart.
20.12 Entirety
With respect to the subject matter contained herein, this Agreement (i)
is the entire agreement of the Parties; and (ii) supersedes all prior
understandings and negotiations of the Parties.
88
IN WITNESS of their agreement each Party has caused its duly authorized
representative to sign this instrument on the date indicated below such
representative's signature.
A&T PETROLEUM COMPANY, LTD.
By:
-----------------------------------------
(Print or type name)
Title:
---------------------------------
Date:
-------------------------------
HAWLER ENERGY, LTD.
By:
-----------------------------------------
(Print or type name)
Title:
------------------------------------
Date:
-------------------------------------
89
