Exhibit 10
Legend:
[C] - Confidential treatment requested for certain provisions pursuant to Rule
24b-2 under the Securities Exchange Act of 1934.
AGREEMENT FOR EXPLORATION
AND EXPLOITATION OF LIQUID
HYDROCARBONS
BETWEEN
SONATRACH
AND
ANADARKO ALGERIA CORPORATION
AGREEMENT FOR EXPLORATION AND EXPLOITATION
OF LIQUID HYDROCARBONS
BETWEEN, ON THE ONE HAND,
SONATRACH, National Enterprise (herein referred to as
"SONATRACH"), whose registered office is located in Algiers, 10
Rue du Sahara, Hydra, represented by Nadir Sekfali, Directeur
General Adjoint, for the purpose of this Agreement,
AND, ON THE OTHER HAND,
ANADARKO ALGERIA CORPORATION, a company incorporated and existing
under the laws of Delaware, U.S.A., whose corporate business
offices are located at 16855 Northchase Drive, Houston, Texas
77060, U.S.A., represented by Robert J. Allison, Jr., Chairman of
the Board of Directors and Chief Executive Officer of Anadarko
Algeria Corporation, for the purpose of this Agreement,
THE FOLLOWING HAS BEEN AGREED BY THE PARTIES:
ARTICLE 1
PURPOSE OF AGREEMENT
1.1 This Agreement, ruled by Law 86-14 of August 19, 1986 and
the regulations promulgated for its application, has as its
objective the Exploration and, if a commercially exploitable Pool
is discovered, the Exploitation of Liquid Hydrocarbons in the
Contract Area.
This Agreement also determines:
A. the conditions relating to the financing of the
Exploration and Exploitation works:
B. if Liquid Hydrocarbons are found, the conditions
under which ANADARKO shall receive a share of the
production of those Liquid Hydrocarbons as
reimbursement for its Exploration Costs incurred and
as its remuneration;
C. if a commercially exploitable Gas Pool is
discovered, the conditions for the reimbursement of
costs incurred by ANADARKO in respect of that Pool, the
conditions under which ANADARKO will receive a bonus
for the discovery, as well as the possibility of
creating a jointly held company ruled by Algerian law
to export Gas extracted from that Gas Pool;
D. the respective rights and obligations of each
Party during the Exploration and Exploitation Phases;
E. the terms for the execution of Petroleum
Operations;
F. the terms for the transfer by ANADARKO to
SONATRACH of its technology of Petroleum Operations
provided for in this Agreement and of the training of
SONATRACH'S personnel;
G. all other stipulations necessary to the
performance of this Agreement and prescribed by the
applicable Laws.
ARTICLE 2
DEFINITIONS
When used in this Agreement, the following terms and expressions
mean:
2.1(2.1) "Affiliate" means a juristic person that controls or is
controlled by a Party to this Agreement, or a juristic person
that controls or is controlled by a juristic person that controls
a Party to this Agreement. "Control" means ownership of at least
fifty one percent (51%) of the voting stock (if the other
juristic person is a corporation issuing stock) or the power to
control the management or the affairs of the other juristic
person (if the other juristic person is not a corporation).
"Non-Affiliate" means a juristic person which is not an Affiliate
of a Party to this Agreement.
2.2(2.13) "Agreement" means this document, any amendment hereof
agreed to by both Parties, and all of the Annexes.
2.3(2.2) "ANADARKO" means Anadarko Algeria Corporation, its
successors and transferees of portions of its rights and
obligations under this Agreement.
2.4(2.5) "Annex" means each document attached to and made an
integral part of this Agreement and labelled as such, namely:
A. Annex "A" - Geographical Coordinates of the Contract
Area;
B. Annex "B" - Accounting Procedure;
C. Annex "C" - Basin Evaluation;
D. Annex "D" - Seismic Processing Center;
E. Annex "E" - Taking Procedures.
2.5(2.20) "Basin Evaluation" means those basin evaluation efforts
of ANADARKO to be conducted in accordance with Annex "C".
2.6(2.9) "Budget" means the estimated sum to be expended in
conducting an approved Work Program.
2.7(2.3) "Calendar Year" means a period of twelve (12) months
commencing with January 1st and ending on the following December
3lst, according to the Gregorian Calendar.
2.8(2.61) "Calendar Quarter" means a period of three (3)
Gregorian calendar months commencing on January 1, April 1, July
1 or October 1 of any Calendar Year.
2.9(2.14) "Commencement Date" means the Effective Date or the
date of the granting to SONATRACH of the Exploration Licence
covering the Contract Area, whichever is later.
2.10(2.16) "Commercial Discovery" means a discovery of Liquid
Hydrocarbons which allows the Parties to obtain a net profit and
a level of return on invested funds which justifies the
Exploitation of that discovery.
2.11(2.7) "Competent Authority" means all Algerian public
authorities enabled by virtue of a legal text to make a decision
or to take an administrative or regulatory act.
2.12(2.41) "Contract Area" means the four (4) Blocks whose
geographical coordinates are defined in Annex "A". References to
the Contract Area shall mean those Blocks, or, as applicable and
pursuant to Article 8, those portions thereof remaining following
the reductions, the Substitute Area(s) or the Free Adjacent
Area(s) added which are covered by the Exploration Licence or, as
applicable, an Exploitation Licence.
2.13(2.4) "Contract Year" means the same as a Calendar Year,
except that the first Contract Year of the Exploration Phase
shall begin on the Commencement Date and end on December 31 of
the next succeeding Calendar Year, and the first Contract Year of
the Exploitation Phase of each Pool shall begin on the date of
the award of the Exploitation Licence in respect of that Pool and
end on December 31 of the next succeeding Calendar Year.
2.14(2.44) "Crude Oil" means any Liquid Hydrocarbon mixture
or any portion thereof which is in the liquid phase in the
Reservoir, removed from the Reservoir in such liquid phase, and
obtained at the surface as such.
2.15(2.19) "Customs Duties" means all taxes, royalties and
customs duties which are payable as a result of the importation
of property into Algeria.
2.16(2.30) "Day" means a period of twenty four (24) hours
commencing in Algeria at 0000 hours (midnight).
2.17(2.17) "Development" means Petroleum Operations (other
than Exploration) consisting of:
A. The Drilling of Development Wells;
B. The design, engineering, construction, and
installation of materials, the lines, production
facilities and plants and related equipment necessary
to produce and operate Wells, to process Natural Gas
Liquids, and to deliver Liquid Hydrocarbons to the
Point of Delivery;
C. Any other work or activities necessary or
ancillary to the operations mentioned above.
2.18(2.47) "Development Plan" means the plan for the
Development of a Pool.
2.19(2.23) "Drilling" means the work necessary to prepare
Well locations and the construction of access roads to the Well
locations, drilling, coring, casing, perforating, logging, the
determination of drilling fluid and mud programs, sidetracking,
deepening or reworking of any Well, including the reasonable
testing and evaluation of the Well being drilled and, as
appropriate, the plugging and abandoning of such Well, or the
temporary completion for permanent completion or abandonment
thereof at a later date. The term "Drilling" shall not include
the installation of permanent production equipment and pipelines.
2.20(2.32) "Economic Limit" means the time when all revenues
expected from sales of Liquid Hydrocarbons from a Pool do not
permit the Parties to obtain a net profit and a level of return
on invested funds which justify the continued Exploitation of
that Pool.
2.21(2.15) "Effective Date" means the date this Agreement and
the Protocol become effective by approval of decree published in
the Official Journal of the Algerian Republic.
2.22(2.54) "Enhanced Recovery" means the employment of
Secondary Recovery and/or Tertiary Recovery methods of recovering
Crude Oil Reserves. "Secondary Recovery" means extraction of
Crude Oil reserves beyond Primary Recovery volumes by means of
improved recovery processes such as gas injection for pressure
maintenance and/or waterflooding. "Tertiary Recovery" means
extraction of Crude Oil reserves beyond the capability of Primary
Recovery forces and Secondary Recovery processes by means of
either thermal, chemical, or miscible enhanced recovery methods.
"Primary Recovery" means extraction of Crude Oil reserves by
means of natural Reservoir forces or producing drive mechanisms.
2.23(2.8) "Exempt Property" means property which is exempted from
Customs Duties.
2.24(2.21) "Exploitation" means Petroleum Operations (other
than Exploration) consisting of:
A. Development;
B. The servicing and maintenance of equipment, lines,
production facilities, and related equipment necessary
to produce and operate Wells:
C. The producing, gathering, processing, storing,
transporting and delivering of Liquid Hydrocarbons to
the Point of Delivery;
D. The design, engineering, construction and
installation of equipment and facilities necessary for
Enhanced Recovery efforts;
E. Any other work or activities necessary or
ancillary to the operations mentioned above.
2.25(2.42) "Exploitation Licence" means each exploitation
licence ("permis d'exploitation") awarded to SONATRACH as the
result of a Commercial Discovery.
2.26(2.10) "Exploitation Operations Committee" means the
committee established under Paragraph 6.3 of this Agreement.
2.27(2.45) "Exploitation Phase" means the phase of
Exploitation, in respect of each Pool, specified in Article 14 of
this Agreement.
2.28(2.53) "Exploration" means work to be conducted by
ANADARKO pursuant to Article 10 of this Agreement, and the
construction and installation of facilities necessary to produce
Liquid Hydrocarbons under a Provisional Exploitation
Authorization.
2.29(2.43) "Exploration Licence" means the exploration
licence ("permis de recherche") awarded to SONATRACH which
granted to it the exclusive right to conduct Exploration on the
Contract Area, together with each amendment, extension and
renewal thereof.
2.30(2.46) "Exploration Phase" means the phase of Exploration
specified in Article 9 of this Agreement.
2.31(2.22) "FOB", in reference to the share of Liquid
Hydrocarbons in which ANADARKO is entitled hereunder, means the
title to Liquid Hydrocarbons delivered by SONATRACH (or by an
Affiliate of SONATRACH) at the Port of Loading shall be
transferred to ANADARKO free on board ship when such Liquid
Hydrocarbons pass through the loading flange of the marine
shipping vessel designated by ANADARKO, and may be exported from
Algeria free of any obligation to furnish Liquid Hydrocarbons to
the domestic market of Algeria, free of charges for the
Transportation of Liquid Hydrocarbons, terminalling and pump
fees, and exempt from all charges and taxes as well as all
petroleum related fiscal obligations, and free of any requirement
for the repatriation of funds received by ANADARKO from the sale
of Liquid Hydrocarbons.
2.32(2.18) "Foreign Exchange" means United States Dollars or
currency other than Algerian money which is accepted by the Party
requesting payment in a currency other than Algerian Dinars.
2.33(2.58) "Free Adjacent Area" means any adjacent area
situated outside the boundaries of the Contract Area on which
SONATRACH may conduct activities for the prospection, Exploration
and Exploitation of Liquid Hydrocarbons in association with a
foreign legal entity.
2.34(2.26) "Gas Pool" means the areal geographical extent of
a Reservoir(s) producing or capable of producing Non-Associated
Gas which is distinct and separate areally from another
Reservoir(s) by virtue of geologic and engineering
interpretations.
2.35(2.27) "Hydrocarbons" means Liquid Hydrocarbons and
Natural Gas.
2.36(2.36) "Joint Operations" means all Exploitation
operations conducted at the cost, risk and expense of the Parties
jointly.
2.37(2.34) "Laws" means Law 86-14 and other published laws,
ordinances, decrees and regulations published and in effect on
the Effective Date.
2.38(2.28) "Liquid Hydrocarbons" means Crude Oil, and all
kinds of Hydrocarbons in liquid form, in their natural state or
obtained from Natural Gas (as Natural Gas Liquids) by
condensation, extraction or processing.
2.39(2.59) "Maximum Efficient Rate" means the daily
production rate which (taking into account the nature of the
Reservoir or Reservoirs, standard accepted engineering practices
and the existing producing, storage and fluid flow, transporting,
loading and other facilities available) achieves the maximum
economic volumetric recovery of Liquid Hydrocarbons from a
Reservoir without causing physical damage to the Reservoir such
that a minimum of residual Liquid Hydrocarbon saturation will
remain at the time of depletion.
2.40(2.49) "Minimum Exploration Program" means the program of
Exploration specified in Paragraph 10.1 of this Agreement.
2.41(2.24) "Natural Gas" or "Gas" means all gaseous
Hydrocarbons produced from Wells, including wet gas and dry gas,
which may either be associated or non-associated with Liquid
Hydrocarbons, and residue gas remaining after the extraction of
Natural Gas Liquids from wet gas. The following Gas
classifications are used:
A. "Associated Gas" means gaseous Hydrocarbons
associated in any manner with a Reservoir containing
Liquid Hydrocarbons, whether occurring in a gas cap or
in solution;
B. "Dry Gas" means: (i) Natural Gas produced at the
wellhead which gas analysis shows to contain no Liquid
Hydrocarbons of any nature (whether Crude Oil or
extractable Natural Gas Liquids); and/or (ii) residue
gas remaining after the extraction of Natural Gas
Liquids from wet Gas, whether associated with Liquid
Hydrocarbons or non-associated;
C. "Non-Associated Gas" means all gaseous
Hydrocarbons, whether wet or dry, which: (i) are
produced at the wellhead without significant volumes of
associated Crude Oil or Natural Gas Liquids, and are
measured at more than one hundred (100) MCF (thousand
cubic feet) of Natural Gas to each barrel of Crude Oil
or Natural Gas Liquids produced from the Reservoir, or
(ii) are produced from a Reservoir qualified as bearing
Natural Gas only, even if encountered in a Well bore
through which Crude Oil also is produced through the
inside of another string of casing or tubing.
2.42(2.33) "Natural Gas Liquids" means Liquid Hydrocarbons
which may be found by gas analysis to exist at surface conditions
in produced Natural Gas and which may be extracted through Gas
processing techniques. Natural Gas Liquids include C2 plus
(including condensate).
2.43(2.11) "Operating Committee" means the committee
established under Article 5 of this Agreement.
2.44(2.35) "Operator" means the Party or Parties which will
be responsible for the conduct of Petroleum Operations conforming
to Article 6. "Non-Operator" means the Party who is not the
Operator.
2.45(2.40) "Party" means SONATRACH or ANADARKO, respectively,
or any other juristic person which becomes a party to this
Agreement. "Parties" means all such juristic persons
collectively.
2.46(2.39) "Percentage Interest" means, with respect to each
Party, that Party's percentage share of Liquid Hydrocarbons as
specified in Paragraph 4.3 A of this Agreement.
2.47(2.38) "Percentage Share of Financing" means, with
respect to each Party, the percentage share of Exploitation Costs
to be borne and paid by that Party, as specified in Paragraph 4.2
of this Agreement.
2.48(2.37) "Petroleum Operations" means all Exploration,
Exploitation of Liquid Hydrocarbons, and any other operations
contemplated under this Agreement in respect of the conduct of
the said Exploration and Exploitation operations, including
plugging and abandonment of any Well and dismantling and/or
removal of installations utilized in operations under this
Agreement and any other work necessary or ancillary to these
operations.
2.49(2.31) "Point of Delivery" means that point stated in
Paragraph 17.2 of this Agreement where the Operator shall deliver
Liquid Hydrocarbons to SONATRACH (or to an Affiliate of
SONATRACH) for Transportation to the Port of Loading.
2.50(2.25) "Pool" means the areal geographical extent of a
Reservoir(s) producing or capable of producing Liquid
Hydrocarbons which is distinct and separate areally from another
Reservoir(s) by virtue of geologic and engineering
interpretations.
2.51(2.48) "Port of Loading" means the location on the
Mediterranean Sea coast at which Liquid Hydrocarbons pass through
the inlet loading flange of the marine shipping vessel loading
Liquid Hydrocarbons to be exported.
2.52(2.51) "Protocol" means the agreement concluded between
The Algerian State and ANADARKO, as required by Article 21 of Law
86-14.
2.53(2.6) "Provisional Exploitation Authorization" means a
provisional exploitation authorization ("autorisation provisoire
d'exploiter") granted under Article 11 of Law 86-14.
2.54(2.56) "Reservoir" means that portion of a porous and
permeable geological formation which contains a naturally
occurring distinct accumulation of Hydrocarbons characterized by
a single reservoir pressure system so that production of
Hydrocarbons from one part of the reservoir affects the reservoir
pressure throughout its extent.
2.55(2.55) "Royalty" means the royalty required under Law
86-14.
2.56(2.57) "SONATRACH" means Sonatrach, or any substitute
company which legally succeeds Sonatrach as the holder of each
Exploration Licence, each Provisional Exploitation Authorization
and each Exploitation Licence awarded. It is understood that,
for the purpose of this Agreement, SONATRACH does not act as a
Competent Authority, but as a Party.
2.57(2.29) "Taxes" means all taxes on results, and other
duties or charges specified in Chapter VI of Law 86-14, together
with all other taxes, duties or other charges of a similar nature
which, subject to Paragraph 9 of the Protocol, are imposed in
Algeria by amendment to that Law or under any other Law on or
after the date the Parties sign this Agreement.
2.58(2.12) "Technical Advisory Committee" means the committee
established under Paragraph 5.15 of this Agreement.
2.59(2.60) "Third Party(ies)" means a natural or juristic
person which is not a party to this Agreement.
2.60(2.63) "Transportation" shall be as defined in Article 8
of Law 86-14.
2.61(2.52) "Well" means a hole in the subsoil (exclusive of a
seismic shothole) made by Drilling. For purposes hereof, the
following Well classifications are used:
A. "Exploration Well" means a Well drilled for the
purpose of establishing the location of Liquid
Hydrocarbons not previously discovered or confirmed;
B. "Delineation Well" means a Well drilled to
demarcate or appraise the size, productive capacity,
and potential recoverable reserves of Liquid
Hydrocarbons discovered by an Exploration Well and to
confirm whether that Exploration Well resulted in a
Commercial Discovery;
C. "Development Well" means a Well drilled after the
granting of the Exploitation Licence and within the
assumed limits of a Pool in order to confirm those
limits and to produce Liquid Hydrocarbons.
2.62(2.50) "Work Program" means a written plan or statement
itemizing specific Petroleum Operations to be conducted during a
Contract Year. For purposes of this Agreement, a Work Program
shall be one of the following programs which have been approved
or deemed approved by the Operating Committee:
- An Exploration Work Program;
- A Substitute Exploration Work Program;
- A Supplemental Exploration Work Program;
- An Evaluation Work Program;
- A Development Work Program;
- An Exploitation Work Program.
2.63(2.62) The terms "Exploration Costs", "Exploitation
Costs", "Joint Account", and "Overhead" shall be as defined in
Annex "B".
TITLE I
LEGAL NATURE OF THE AGREEMENT/PERCENTAGE SHARES
ARTICLE 3
LEGAL NATURE OF AGREEMENT
3.1 This Agreement is a production sharing type agreement
entered into pursuant to Paragraph 2 of Article 22 of Law 86-14
of August 19, 1986, and Paragraphs 3 and 8 C of Decree No. 87-159
of July 21, 1987.
3.2 This Agreement does not create a legal entity and shall not
be construed as creating a partnership, a joint venture of any
nature, a corporation or a trust. It is simply a juxtaposition
of Percentage Shares of Financing for the conduct of Exploration
work and the Exploitation of Liquid Hydrocarbons which may be
discovered, in accordance with the terms and conditions stated in
this Agreement. Each Party shall be responsible only for its
share of obligations specified in this Agreement.
ARTICLE 4
FINANCING AND PRODUCTION SHARING
4.1 Financing of Exploration. ANADARKO shall completely finance
the work, and furnish all the necessary services and technology,
required for conducting Exploration works. If no Commercial
Discovery is made, ANADARKO will not be entitled to be reimbursed
for funds invested in those efforts. ANADARKO shall have an
interest in the Liquid Hydrocarbons discovered and by-products as
a result of its Exploration work, conforming to the dispositions
of this Agreement.
4.2 Financing of Exploitation. The Parties shall bear all costs
to be incurred for the conduct of Exploitation operations
according to the following Percentage Share of Financing:
SONATRACH 51.00%
ANADARKO 49.00%
Each Party shall arrange for its own sources of capital
financing in respect of its Percentage Share of Financing.
4.3 Production Sharing of Liquid Hydrocarbons.
A. Except as provided in Article 13 herein, all
Liquid Hydrocarbons produced during the term of this
Agreement and during each Provisional Exploitation
Authorization and each Exploitation License, which is
not used in Petroleum Operations, shall be distributed
between the Parties in the following percentages
(herein referred to as "Percentage Interests"):
Liquid Hydrocarbons SONATRACH ANADARKO
in barrels per day of total (100%) Percentage Percentage
production (quarterly average) Interest Interest
That portion up to 25,000 BPD [C] [C]
That portion in excess of [C] [C]
25,000 and up to 50,000 BPD
That portion in excess of [C] [C]
50,000 and up to 75,000 BPD
That portion in excess of [C] [C]
75,000 and up to 100,000 BPD
That portion in excess of [C] [C]
100,000 and up to 125,000 BPD
That portion in excess of [C] [C]
125,000 and up to 150,000 BPD
That portion in excess of [C] [C]
150,000 BPD and up to 200,000 BPD
That portion in excess of [C] [C]
200,000 BPD
B. As reimbursement for fifty one percent (51%) of
the Exploration Costs incurred by ANADARKO, ANADARKO
shall receive Cost Recovery Liquid Hydrocarbons in
accordance with Article 18 of this Agreement in an
amount equal to the difference between forty-nine
percent (49%) of the total (100%) Liquid Hydrocarbons
produced and the Percentage Interest share of Liquid
Hydrocarbons distributed to ANADARKO under Paragraph
4.3 A above.
4.4 This Agreement does not confer on ANADARKO any right of
ownership of quantities of Liquid Hydrocarbons which are owed to
ANADARKO by virtue of this Agreement prior to its receipt by
ANADARKO FOB at the Port of Loading. However, SONATRACH agrees
to deliver (or cause to be delivered) FOB at the Port of Loading,
and ANADARKO shall have the right to receive and export a
quantity of Liquid Hydrocarbons equal in value to ANADARKO'S
Percentage Interest share of Liquid Hydrocarbons stated in
Paragraph 4.3 A above, Cost Recovery Liquid Hydrocarbons under
Paragraph 4.3 B above, and, as the case may be, the reimbursement
and bonus payable under Article 19 hereafter.
TITLE II
MANAGEMENT AND CONDUCT OF PETROLEUM OPERATIONS
ARTICLE 5
MANAGEMENT OF PETROLEUM OPERATIONS
5.1 The Parties agree to render mutual assistance to one another
to the end of execution of this Agreement. The management of
Petroleum Operations is carried out by the Operating Committee.
The Operating Committee is assisted in its functions by the
Technical Advisory Committee. The conduct of Petroleum
Operations shall be carried out by the Operator.
OPERATING COMMITTEE
5.2 To provide for the orderly supervision and direction of
Petroleum Operations, there is hereby established an Operating
Committee which consists of six (6) members, three (3) appointed
by SONATRACH and three (3) by ANADARKO.
5.3 From among its three respective members, each Party shall
appoint one (1) member (herein called "Representative") who shall
have full power and authority to represent and bind that Party in
all matters and decisions to be taken by the Operating Committee
pursuant to this Agreement. The remaining two (2) members
appointed by each Party shall be designated as "Alternate
Representatives", in the order of "First Alternate
Representative" and "Second Alternate Representative". The First
Alternative Representative shall have full power and authority to
act only in the absence of that Party's Representative. The
Second Alternate Representative shall have full power and
authority to act only in the absence of that Party's
Representative and First Alternate Representative. All decisions
taken by a Representative (or in his absence, by his First
Alternate Representative, or Second Alternate Representative, as
applicable) shall be deemed to be the decision of the Party which
appointed him.
5.4 At meetings of the Operating Committee, a quorum shall exist
upon the attendance of two (2) members which consists of the
Representative (or, in his absence, one of the Alternate
Representatives in the order stated) of each Party.
5.5 Not later than thirty (30) Days following the Effective
Date, each Party shall deliver Notice to the other Party of the
names of its three (3) members appointed to serve on the
Operating Committee, and the names of its members appointed to
serve as its Representative, First Alternate Representative and
Second Alternate Representative.
5.6 At any time, a Party may replace and substitute any one or
more of its members on the Operating Committee, or redesignate
the order in which any one or more of its members may represent
it in respect of decisions to be taken by the Operating
Committee, by delivery of Notice to that effect to the other
Party. Such Notice shall state the name(s) of the person(s) who
shall serve on the Operating Committee, the capacity in which
each person shall serve, and the commencement date in which they
shall so serve.
5.7 The person who serves as the general manager of ANADARKO in
Algeria shall be appointed to serve as its Representative;
however, ANADARKO'S other two (2) members who serve on the
Operating Committee need not be residents of Algeria.
5.8 The function of the Operating Committee shall be to:
A. Review, discuss and approve Work Programs and
Budgets, and any amendments thereto;
B. Select the location of Wells to be drilled under
approved Work Programs according to the report
submitted by the Operator (herein referred to as the
"Well Authorization Report");
C. Review, discuss and approve draft contracts in
respect of Petroleum Operations which contemplate an
expenditure for the Joint Account in excess of Five
Million Dinars (5,000,000.00) or its equivalent in
Foreign Exchange;
D. Determine the shape, coordinates and surface
area(s) of the Contract Area in which reductions are
required under Article 8;
E. Review, discuss and approve all other areas to be
added to the Contract Area pursuant to Article 8;
F. Determine the extent, if any, to which a Well
should be tested, determine whether an attempt should
be made to complete a Well for production, and
determine whether a Well should be abandoned;
G. Determine whether a Well resulted in a discovery
of Liquid Hydrocarbons, and whether one or more
Delineation Wells should be drilled;
H. Decide whether an application should be submitted
for a Provisional Exploitation Authorization;
I. Determine whether a Commercial Discovery has been
established;
J. Review, discuss and approve Development Plans,
Budgets, and any acceptable amendments thereto;
K. Demarcate the boundaries of each Pool to be
submitted to the Competent Authority for the award of
Exploitation Licences;
L. Decide whether an application should be made for
an Exploitation Licence;
M. Review, discuss and approve expenditure
recommendations for Development of each Pool which
supersede those of the initial Development Plan,
including, but not limited to, proposals to implement
Enhanced Recovery;
N. Review, discuss and determine if the Economic
Limit has been reached as to each Pool in order to
decide on the second extension of the Exploitation
Phase;
O. Approve the sale of surplus material, equipment
and goods acquired at the expense of the Joint Account;
P. Establish the occurrence of a case of Force
Majeure, determine the action to be taken to relieve
its consequences and to establish its cessation;
Q. Determine the types and coverages of insurance to
be secured;
R. Appoint ad hoc subcommittees for such purposes as
it deems appropriate. Each Party shall have the right
to appoint the same number of members to any such
subcommittee as the other Party;
S. Review Operator's organization structure of
personnel to be engaged in conducting Petroleum
Operations and approve Operator's plans for the
training of personnel;
T. Examine such other matters which arise from this
Agreement.
MEETINGS OF THE OPERATING COMMITTEE
5.9 The Operating Committee shall meet at Operator's offices in
Algeria, or at such other place as may be agreed by the
Representatives:
A. On or before November 2 of each Calendar Year to
consider and approve the Work Program and Budget for
the following Calendar Year;
B. On or before May 2 of each Calendar Year to review
the progress of Petroleum Operations under the Work
Program and Budget approved for the current Calendar
Year;
C. At the time stated in Article 11 in respect of the
initial Exploration Work Program and in Article 12 in
respect of the Evaluation Work Program, Development
Plans and the initial Development Work Program and
Budget;
D. Whenever requested by a Party by giving at least
fifteen (15) Days (or such lesser period as the other
Party may agree) prior Notice to the other specifying
the matter to be considered at the meeting and
containing all data and information relating to such
matter;
Each Party may, by Notice to the other, advise of additional
matters which that Party desires to have considered by the
Operating Committee. Those matters shall be considered at the
meeting of the Operating Committee provided that such Notice is
given at least ten (10) Days prior to the date of the meeting and
data and information of the type referred to in the preceding
subparagraph is furnished by that Party.
5.10 Each Party shall be entitled to have present at each meeting
of the Operating Committee such reasonable number of technical
advisors as it may desire, none of whom, however, shall have any
binding authority on behalf of their principal.
5.11 Any proposal made by one of the Parties on a given matter
may be considered as a decision taken by the Operating Committee
without the holding of a meeting if the following conditions are
met:
A. This Party submits by Notice given to the other
the said matters and its proposal;
B. The other Party shall communicate its decision in
writing concerning the proposal within thirty (30) days
following receipt of the Notice. If the other Party
agrees with the proposal, it will be deemed a decision
of the Operating Committee and the exchanges of written
Notices will be included in the minutes of the
Operating Committee;
C. Where the matter presented for consideration by
its nature requires a decision in less than thirty (30)
days, the Notice must specify the period for answer and
the reasons justifying the lesser period. The Party to
whom the matter had been submitted shall advise of its
decision within the time specified in the Notice;
D. If the matter so submitted is not urgent, the
other Party may request that a meeting of the Operating
Committee be convened to make a decision on that
matter.
5.12 The Representative of SONATRACH shall serve as the Chairman
of the Operating Committee. The Chairman shall have no voting
rights other than his vote as a Representative. He will:
A. Take charge of the preparation and communication
of an agenda for Operating Committee meetings;
B. Preside over each meeting.
5.13 The Representative of ANADARKO shall serve as the Secretary
of meetings of the Operating Committee. The Secretary is
responsible for:
A. Preparation of a proposed report of all decisions
taken by the Operating Committee, including decisions
pursuant to subparagraphs 5.11 B or C, and its
submission to the Parties within seven (7) Days after
the Operating Committee has taken a decision, as well
as the preparation of a draft of proposed minutes of
each meeting and its submission to the Parties within
thirty (30) Days after the Operating Committee has
taken a decision. Each Party shall notify the other of
its approval or disapproval of the drafts mentioned
above within seven (7) Days from its receipt of the
report, and within thirty (30) Days from its receipt of
minutes.
A Party who fails to notify the other of its
disapproval within the required time will be deemed to
have approved the report or minutes;
B. Maintenance of a permanent file of all Operating
Committee meetings and decisions taken.
DECISIONS OF THE OPERATING COMMITTEE
5.14 Except as stated below in this Paragraph, all decisions to
be made by the Operating Committee shall be adopted unanimously.
If the Operating Committee fails to reach unanimity as to a
matter, that matter will be scheduled for reconsideration at a
second meeting which will be held no later than fifteen (15) Days
following the meeting during which there has been no unanimous
accord. If, after reconsideration, the Operating Committee still
fails to reach unanimity, that matter shall be resolved as
follows:
A. If the disagreement occurs during the Exploration
Phase and relates to the conduct of the Minimum
Exploration Program to be financed at the sole risk of
ANADARKO (notably, but without limitation, the manner
in which the Minimum Exploration Program is to be
conducted, and the choice of employees, contractors,
vendors of equipment, materials, products and
services), then ANADARKO'S decision on this matter
being the object of disagreement shall be deemed a
decision of the Operating Committee;
B. Without prejudice to the dispositions relating to
Article 13 herein, if the disagreement does not relate
to the conduct of the Minimum Exploration Program to be
financed at the sole risk of ANADARKO, then the
disagreement shall be resolved in conformance with
Article 26 of this Agreement.
TECHNICAL ADVISORY COMMITTEE
5.15 To assist the Operating Committee, an advisory subcommittee
is hereby created (herein referred to as the "Technical Advisory
Committee") consisting of four (4) members. Each Party shall
designate two (2) members charged with its representation. One
(1) of the delegates of SONATRACH shall be the Chairman, and one
(1) of the delegates of ANADARKO shall be the Secretary. During
the first meeting of the Operating Committee, each Representative
shall provide written communication of the names of its delegates
who will serve on the Technical Advisory Committee. At any time,
each Party shall have the right to replace any one or more of its
delegates and to substitute that person with another delegate of
its choice.
5.16 For meetings of the Technical Advisory Committee, a quorum
shall exist upon the attendance of two (2) members which consists
of one (1) of the delegates of each Party. With respect to
recommendations that the Technical Advisory Committee must make
to the Operating Committee, each Party shall have one (1) vote.
5.17 The responsibilities of the Chairman of the Technical
Advisory Committee shall consist of the notification in writing
of the time and place of meetings, the preparation and
communication of an agenda of each meeting, the organization and
conduct of each meeting, and the preparation and presentation to
the Operating Committee of reports and recommendations requested.
The responsibilities of the Secretary of the Technical Advisory
Committee shall be to prepare and communicate to each committee
member minutes of each meeting.
5.18 The Technical Advisory Committee shall:
A. Meet regularly, not less than fourteen (14) Days
prior to scheduled meetings of the Operating Committee,
to prepare and submit to the Operating Committee
reports and recommendations regarding the:
a. Petroleum Operations to be conducted
under proposed Work Programs and Development Plans
which Operator has submitted to the Operating
Committee for review and approval;
b. Amendments proposed to a Work Program
previously approved or to a proposed Work Program
or Development Plan;
B. Meet at such other times and for such purpose(s)
as specifically directed by the Operating Committee;
C. Report directly to the Operating Committee.
ARTICLE 6
CONDUCT OF OPERATIONS
6.1 Operator shall be principally responsible for initiating
recommendations to the Operating Committee and for preparing and
submitting to it proposed Work Programs, Budgets, reports, data
and other analyses.
6.2 During the Exploration Phase and for Petroleum Operations,
ANADARKO will be Operator, except for Exploitation operations to
be conducted as stated in Paragraph 6.3 hereafter.
6.3 Except if SONATRACH decides to allow ANADARKO to carry out
solely the role of Operator of one or more Pool(s) discovered,
the conduct of Exploitation operations on each Pool discovered
shall be operated jointly, beginning at the award of the
Exploitation Licence, by SONATRACH and ANADARKO who shall, for
that purpose, establish an Exploitation Operations Committee
according to the following provisions.
6.4 Between the dates Operator submits to the Operating
Committee a Discovery Report pursuant to Paragraph 12.1 and a
Development Work Program and Budget pursuant to Paragraph 12.9,
the Operating Committee shall commence discussions relative to a
plan of dual operatorship. The Operating Committee shall
endeavor to reach agreement for a plan of dual operatorship not
later than the date of the award of the Exploitation Licence
applicable to the first Pool to be developed. The agreement so
reached is herein called the "Dual Operatorship Plan". Unless
the Parties agree otherwise, no Exploitation operations shall be
undertaken until the Dual Operatorship Plan has been approved by
the Parties.
6.5 The Dual Operatorship Plan shall:
A. Be stated in a written agreement between the
Parties, being subject to all the terms and provisions
of this Agreement concerning the rights and obligations
of the Parties and the Operator;
B. Be limited in scope to Exploitation operations,
unless the Parties agree otherwise;
C. Contain a procedure for a phase-in of personnel
provided by SONATRACH, such that the dual operating
organization is staffed one-half (1/2) by ANADARKO and
one-half (1/2) by SONATRACH;
D. Remain in effect so long as this Agreement remains
in effect;
E. Conform to the provisions stated in Paragraph 6.6
below;
F. Be applicable to all Pools discovered, unless
SONATRACH requests ANADARKO to carry out solely the
role of Operator of a particular Pool;
G. Provide an equitable manner in which Overhead
stated in Annex "B" will be allocated between
Exploration and Exploitation operations so as to
minimize duplication of services and costs.
6.6 The following provisions shall regulate the Exploitation
Operations Committee:
A. To insure joint execution of Exploitation
operations, and within the framework of the Dual
Operatorship Plan, the Operating Committee shall reach
agreement as to the organization and structure of the
Exploitation Operations Committee;
B. During the time ANADARKO serves as the Operator,
the Technical Advisory Committee shall remain in
effect. Thereafter, the Operating Committee shall
determine whether to continue or discontinue that
committee, or to absorb its functions into the
functions of the Exploitation Operations Committee;
C. The Exploitation Operations Committee shall be
managed by two (2) Operations Managers, one (1) of whom
shall be designated by SONATRACH and the other by
ANADARKO. The two Operations Managers shall be jointly
responsible for managing the current affairs of the
Exploitation Operations Committee. However, their
respective responsibilities shall be as determined by
the Operating Committee;
D. The Exploitation Operations Committee shall not be
a juristic entity:
E. The Exploitation Operations Committee will act
solely for the account of both Parties on the
directives and under the control of the Operating
Committee;
F. The Exploitation Operations Committee shall be
subject to the same provisions stated in this Agreement
which are applicable to the Operator.
6.7 ANADARKO may resign from its duties as Operator during the
Exploration Phase and as a member of the Exploitation operations
Committee during the Exploitation Phase if six (6) months' Notice
is delivered to SONATRACH before the date of resignation.
ANADARKO may only resign from its duties as the Operator during
the Exploration Phase on the condition that it has fulfilled its
obligations relative to the Minimum Exploration Program.
6.8 Notwithstanding that resignation, ANADARKO'S responsibility
as Operator shall remain until the effective date of its
resignation.
6.9 SONATRACH, or the legal entity appointed to serve as
Operator or as a member of the Exploitation Operations Committee
upon ANADARKO'S resignation from its duties as Operator, shall
not be bound by the studies, technical and/or financial
conclusions of ANADARKO prior to its resignation.
6.10 SONATRACH will have the right to temporarily withdraw
ANADARKO'S status as Operator during the Exploration Phase and
during the Exploitation Phase in the case of a default in its
obligations as stipulated in Paragraphs 7.1 and 7.2 herein. To
this end SONATRACH will address to ANADARKO an advance Notice
asking it to remedy its default within the time which will be set
in the said advance Notice subject to the circumstances.
However, except for default which may cause loss of the
Exploration Licence, the stipulations of the foregoing paragraph
do not apply during the Exploration Phase in the case of the
conduct of Petroleum Operations financed at the sole risk of
ANADARKO.
ARTICLE 7
EXECUTION OF PETROLEUM OPERATIONS
7.1 During the execution of Petroleum Operations, it shall be
the responsibility of Operator to:
A. Prepare and submit all proposed Work Programs and
Budgets, Well Authorization Reports, Discovery Reports,
Evaluation Reports, Commerciality Reports (as defined
in Article 12) and Development Plans for examination
and approval by the Operating Committee;
B. Conduct all Petroleum Operations in accordance
with Work Programs and Budgets, Development Plans, and
amendments to any of the foregoing, approved by the
Operating Committee;
C. Make advance cash calls to the Parties according
to the Annex "B" and, to the extent provided in an
approved Budget, pay all costs and expenses necessary
for the conduct of Petroleum Operations;
D. To communicate to the Non-Operator:
1. Daily Well progress reports which shall
consist of a brief description of the work
performed, the number of meters drilled, the type
and depth of the formation or formations
penetrated, the size and landed depth of any
casing landed, the type and results of any tests
made, and such other Well information or data as
the Operating Committee from time to time may
reasonably specify;
2. Monthly reports which shall consist of a
summary of all Petroleum Operations conducted
during the prior month;
3. Immediate Notice of special events of
importance to Petroleum Operations, such as a
discovery of Hydrocarbons, Well blowout or Force
Majeure events;
4. Cuttings and samples of Liquid
Hydrocarbons;
5. Copies of scientific data or information
obtained;
6. A reproducible composite electrical log
upon the completion of each Well, and copies of
any log runs made during Drilling and, if same are
made, any radioactivity log, acoustic log,
temperature survey, deviation or directional
survey, caliper log and any like information or
data;
7. Complete reports and/or analyses of all
cores, when and if analyses are made;
8. A copy of the plugging record in the
event a Well is abandoned as a dry hole or for
other reasons;
9. A copy of any final geological report
and the depth-time curve on all Wells;
10. Copies of geological and geophysical
records relating to work performed, except
magnetic tapes which shall be stored by Operator
and made available for use upon request;
11. Reservoir and Well performance data;
12. Detailed reports on a monthly basis of
all Liquid Hydrocarbons produced from each Pool
the prior month, the quantity thereof used or
consumed in conducting Petroleum Operations, the
quantity delivered into and out of the Parties'
joint tankage during that month, the quantity,
quality and grade of Liquid Hydrocarbons delivered
into SONATRACH'S (or its Affiliate's) pipeline at
the Point of Delivery, the quantity, quality and
grade of Liquid Hydrocarbons delivered by
SONATRACH (or its Affiliate) to, and received by,
ANADARKO at the Port of Loading;
E. Maintain full and accurate technical and
accounting records of all Petroleum Operations;
F. Notify Non-Operator immediately upon the
determination of each location for a Well and of the
date of commencement of Drilling;
G. Permit Non-Operator (upon prior notice) to have
access to all equipment and facilities in and related
to the Contract Area, and to observe all Petroleum
Operations;
H. Promptly give Notice to Non-Operator of any and
all losses and damages which are not covered by an
insurance policy;
I. Maintain all meters and measuring equipment in
good order;
J. Deliver to SONATRACH all cores, cuttings and
fluids collected by Operator in the execution of
Petroleum Operations. However, at all times, Operator
will be entitled to examine or analyze the said cores,
cuttings and fluids, and to take samples in reasonable
quantities and volume. Furthermore, with SONATRACH'S
approval, Operator will be entitled to export samples
of cores, cuttings and fluids that were collected.
Should it become necessary to conduct special whole
core analyses in a laboratory outside of Algeria and,
if SONATRACH agrees, Operator may export the core(s)
under its sole responsibility and control to the
designated laboratory;
K. Keep in Algeria the originals of magnetic tapes
and, at the end of their processing or analysis,
transfer the said tapes to SONATRACH. Copies of
magnetic tapes or any other technical data which
Operator desires to have processed or analyzed outside
Algeria may be exported;
L. Perform such other tasks relating to Petroleum
Operations as directed by the Operating Committee.
7.2 Operator endeavors to conduct Petroleum Operations in a
good, prudent and workman-like manner in accordance with sound
technical principles and good petroleum industry practice. In
the conduct of Petroleum Operations, SONATRACH acknowledges that
Operator does not guarantee that its efforts will result in a
Commercial Discovery, and that Operator will be responsible only
for providing the means to conduct and of conducting Petroleum
Operations.
7.3 In conducting Petroleum Operations, Operator will not be
liable to Non-Operator for anything done or omitted to be done by
it unless the act or omission causes a loss which is directly due
to Operator's gross negligence or willful misconduct.
7.4 SONATRACH'S ASSISTANCE
Within the scope of the conduct of Petroleum Operations,
SONATRACH shall, within legal and regulatory limits, give aid to
the Operator to:
Facilitate its personnel's rights of ingress to and egress
from the Contract Area and eventually, the surrounding
areas.
Accomplish the necessary formalities in obtaining, on the
one hand, entry and exit visas for its resident expatriate
personnel or personnel on business trips to Algeria and, on
the other hand, required authorizations to import into or
export from Algeria documents and/or materials used in the
execution of the said operations.
SONATRACH shall make available to the Operator, without
incurring any liability for exactness, documents, magnetic tapes,
and geological and geophysical information relating to the
Contract Area and that necessary for use in conducting Basin
Evaluation efforts. If ANADARKO asks SONATRACH to reproduce and
furnish to ANADARKO copies of any such data or information,
ANADARKO agrees to reimburse SONATRACH for its actual cost
incurred. ANADARKO agrees to use the documents, magnetic tapes,
and geological and geophysical information mentioned above only
for Petroleum Operations under this Agreement.
TITLE III
EXPLORATION PHASE
ARTICLE 8
CONTRACT AREA
8.1 The exclusive coordinates of the Contract Area which
comprise the four (4) Exploration Blocks are defined in Annex
"A".
8.2 SONATRACH undertakes that it will not waive, within the
framework of this Agreement, its rights to the Exploration
Licence, to any Provisional Exploitation Authorization or to any
Exploitation Licence awarded without ANADARKO's prior written
consent. The Parties agree that neither will fail to comply with
any obligation which will cause SONATRACH'S mining title to be
cancelled by the Competent Authority.
8.3 If during the Exploration Phase ANADARKO reasonably believes
that a portion of the Contract Area is not of sufficient economic
potential to justify that ANADARKO start an additional
Exploration Work Program on that portion, ANADARKO shall submit
to SONATRACH a detailed report containing technical and economic
data which supports its position. The report shall also
indicate, based upon Basin Evaluation efforts conducted by
ANADARKO, that parcel of land outside the Contract Area which,
provided this parcel is a free area under Article 12 of Law
86-14, may be appropriately substituted for the portion of the
Contract Area stated in ANADARKO'S report to enable ANADARKO to
complete its Minimum Exploration Program obligations. That
report shall include a substitute Exploration Work Program
(herein referred to as the "Substitute Exploration Work Program)
which ANADARKO proposes to undertake on the new parcel of land
(herein referred to as the "Substitute Area"). Within forty-five
(45) days following receipt by SONATRACH of that report, the
Operating Committee shall meet to consider, discuss and approve
such report and the Substitute Exploration Work Program proposed
by ANADARKO.
If SONATRACH agrees with ANADARKO'S report and the proposed
Substitute Exploration Work Program, then it will submit to the
Competent Authority a request for a new Exploration Licence
covering the Substitute Area and a request for a partial
relinquishment for the areas substituted conforming to the
regulatory provisions applicable for this matter. If the
Competent Authority accepts the request submitted by SONATRACH,
then the new Contract Area shall be made up of the portion of the
initial Contract Area remaining and the Substitute Area. If the
Competent Authority refuses the request submitted by SONATRACH
regarding the substitution of areas, ANADARKO shall be held to
pursue the Minimum Exploration Program as it committed to
pursuant to Article 10 herein. No Work Program approved by the
Operating Committee shall be suspended from execution based on
the submittal of a request as mentioned above, as long as the
Competent Authority has not ruled on the request.
If the request for substitution of an area mentioned above
is accepted by the Competent Authority, then ANADARKO shall have
no right to make other requests during the Exploration Phase. If
the request for substitution is refused by the Competent
Authority, then ANADARKO may make another request during the
Exploration Phase.
If SONATRACH does not agree with ANADARKO'S report or the
Substitute Exploration Work Program proposed, then ANADARKO'S
remaining obligations under the Minimum Exploration Program shall
be reduced by the amount of Exploration work which would have
been conducted for the Minimum Exploration Program on the portion
of the Contract Area which is the subject of the proposed
substitution. In that event, and without prejudice to the
provisions of Paragraphs 8.7 and 8.8, the portion of the Contract
Area stated above will be deleted from the Contract Area at the
time of disagreement.
8.4 Exploration Costs incurred with respect to areas
relinquished in compliance with this Article 8 shall be carried
forward and consolidated with Exploration Costs incurred on the
totality of the Contract Area. All costs incurred by ANADARKO
with respect to Basin Evaluation work which is exclusively
related to an area or areas added pursuant to Paragraphs 8.3 and
8.6 shall be included as Exploration Costs reimbursable to
ANADARKO according to the applicable provisions of this
Agreement.
8.5 Should Exploration works show a geological structure
overlapping an area adjacent to the Contract Area, SONATRACH will
request the Competent Authority to add this area to the Contract
Area if it is a Free Adjacent Area. If that parcel of land is
not a free area, the Parties shall endeavor to reach agreement
with the Third Party(ies) involved for the joint Exploitation of
the discovered Pool overlapping the Contract Area and the said
area, and for an equitable distribution of the Liquid
Hydrocarbons produced from that Pool.
8.6 If the Parties agree that the expansion of the Contract Area
would be advantageous for the conducting together of their
Exploration activities, SONATRACH agrees to request the competent
Authority to include those free areas in the Contract Area as
provided in Article 12 of Law 86-14.
8.7 Upon expiration of the First Exploration Period stated in
Paragraph 9.1 A the surface area of the Contract Area shall be
reduced by an amount equal to the greater of, whichever is
applicable:
A. Twenty five percent (25%) of the Contract Area; or
B. Twenty five percent (25%) of the Contract Area,
plus (if applicable) an additional five percent (5%)
for each of the six (6) Exploration Wells specified in
Paragraph 10.1 D in which Drilling has not commenced as
of that expiration date.
8.8 Upon expiration of the Second Exploration Period stated in
Paragraph 9.1 B:
A. If ANADARKO exercises the option stated in
Paragraph 8.9, the surface area of the Contract Area
shall be reduced by an amount which results in the
Contract Area containing a remaining surface area equal
to fifty percent (50%) of the size of the Contract Area
prior to reduction under Paragraph 8.7 above; or
B. If ANADARKO does not exercise the option stated in
Paragraph 8.9, the surface area of the Contract Area
shall be reduced:
1. To a size which contains only the full
extent of the area of the Pools in which Liquid
Hydrocarbons have been discovered, as provided in
Paragraph 8.10; or
2. Subject to Article 9, by one hundred
percent (100%) if ANADARKO elects to withdraw from
this Agreement.
8.9 Subject to the provisions of Paragraph 9.4 relative to the
extension of time, ANADARKO shall have the option to continue
Exploration works on the Contract Area after expiration of the
Second Exploration Period stated in Paragraph 9.1 by submitting
to SONATRACH, at least seven (7) months prior to expiration of
that period, a supplementary Exploration Work Program which is in
addition to the Minimum Exploration Program therein referred to
as the "Supplemental Exploration Work Program"). If SONATRACH
agrees to the Supplemental Exploration Work Program, the
reduction in the Contract Area shall be as specified in Paragraph
8.8 A above.
8.10 No reduction in the surface area of the Contract Area shall
be required in respect of the full extent of each Pool covered by
an Exploitation Licence. Reductions in the surface area of the
Contract Area scheduled to be made under either Paragraph 8.7 or
8.8 shall be deferred if either of the following events has
occurred and for a period of sixty (60) Days following expiration
of the applicable event:
A. Petroleum Operations are suspended by reason of
Force Majeure; or
B. An application for a Provisional Exploitation
Authorization or an Exploitation License has been
submitted to the Competent Authority, but the award is
pending; or
C. SONATRACH has been notified of the discovery of
Hydrocarbons, but the Operating Committee has not taken
a decision as to whether the discovery is commercially
exploitable.
8.11 ANADARKO shall notify SONATRACH seven (7) months in advance
of the date of its proposed reduction under Paragraphs 8.7 and
8.8 A of the portion of the Contract Area proposed to be reduced.
The advance Notice required for the reduction under Paragraph 8.8
B shall be thirty (30) days. So far as possible, the portions
reduced shall be of sufficient size and shape to enable Petroleum
Operations to be conducted thereon.
8.12 If with respect to any part of the Contract Area which has
been reduced under this Article 8, or if upon expiration of the
term of this Agreement, ANADARKO desires to make a request for
continued Petroleum Operations regarding one or more parts of the
original Contract Area, then, provided such parts of the Contract
Area are free areas under Article 12 of Law 86-14, SONATRACH
agrees to give sympathetic consideration to such request, in
priority to ANADARKO over Third Parties.
ARTICLE 9
TERM OF THE EXPLORATION PHASE
9.1 The term of the Exploration Phase shall include a First
Exploration Period and a Second Exploration Period and respective
extensions thereof:
A. The first period of the Exploration Phase shall
last for five (5) Contract Years (herein referred to as
the "First Exploration Period") beginning on the
Commencement Date.
The First Exploration Period shall be extended for
a period of one (1) Contract Year if necessary to
complete the Drilling of one or more of the six (6)
Exploration Wells stated in Paragraph 10.1.D.1.
ANADARKO shall notify its request for extension to
SONATRACH at least seven (7) months prior to the
expiration of the First Exploration Period and shall
attach thereto all necessary documents.
B. The second period of the Exploration Phase shall
last for three (3) Contract Years (herein referred to
as the "Second Exploration Period").
The Second Exploration Period will be extended
for:
1. One (1) Contract Year, if needed, to
enable ANADARKO to complete the Drilling of one or
more Delineation Wells; or
2. Two (2) additional Contract Years, if
ANADARKO exercises the option stated in Paragraph
8.9, and SONATRACH agrees to the Supplemental
Exploration Work Program submitted by ANADARKO.
With at least seven (7) months' Notice prior to expiration
of the then current Exploration Period and in the manner required
by Law, ANADARKO shall furnish to SONATRACH who will submit the
same to the Competent Authority all documents necessary for each
request of renewal of an Exploration Licence.
9.2 If at the expiration of the Exploration Phase (as extended
in accordance with Paragraph 9.1.B.2) no Commercial Discovery has
been established, then this Agreement shall terminate unless:
A. Petroleum Operations are then suspended by reason
of Force Majeure. In that event, this Agreement shall
continue for a period of time during which Petroleum
Operations were so suspended in accordance with Article
25; or
B. ANADARKO is engaged in Drilling operations. In
that event, this Agreement shall continue for a period
of six (6) months following completion of those
Drilling operations.
If, however, the Drilling operations (or Drilling operations
conducted during the period extended by reason of Force Majeure)
result in a discovery, this Agreement shall continue until a
determination is made whether or not that discovery is a
Commercial Discovery and whether an application should be
submitted for an Exploitation Licence. If a determination is
made that a Commercial Discovery has been made, then this
Agreement shall continue for the term of the Exploitation Phase.
9.3 With respect to those portions of the Contract Area released
under Article 8, ANADARKO shall not be entitled to any right or
interest arising from its prior Petroleum Operations on those
portions except as provided in Paragraphs 8.4 and 8.12 of this
Agreement.
9.4 The postponement of deadlines or extensions of the duration
of the Exploration Periods mentioned in Paragraphs 9.1 and 9.2
herein shall be effective only if approved by the Competent
Authority according to the provisions of Decree No. 88-34 of
February 16, 1988, relating to the granting and renewal of
Exploration Licences. SONATRACH will give Notice to ANADARKO of
all refusals or injunctions by the Competent Authority resulting
from a request to postpone the deadlines or to extend the
duration of an Exploration Period as mentioned above. If the
Competent Authority issues an injunction relating to the
execution of the Minimum Exploration Program, then ANADARKO may
either commit to take the necessary measures to comply with the
said injunctions within the time eventually prescribed by the
Competent Authority, or in the case where ANADARKO considers that
these injunctions are not justified or if it decides not to
comply with the injunctions it may withdraw from the Exploration
Licence under the condition, however, to pay SONATRACH, within
thirty (30) Days following, an amount equal to the difference
between the value of the Exploration works which had to be
performed during the period at the end of which it withdraws and
the Exploration Costs incurred at the date of its withdrawal. In
any case, the value of the Exploration works mentioned above for
the First Exploration Period cannot be less than U.S. $63.5
Million where U.S. $48 Million will be for Drilling.
ANADARKO will not have rights to any indemnification or
reimbursement of the sums stipulated above as penalty based on
the refusal of postponement of deadlines or extensions mentioned
above formulated by the Competent Authority taken at the end of
each period of the Exploration Phase. However, for Exploration
Costs incurred before the date where ANADARKO refused to conform
to the injunctions of the Competent Authority, the provisions of
Article 18 will be applied in the case of the Exploitation of a
Commercial Discovery.
Any withdrawal by ANADARKO pursuant to this Paragraph shall
be without prejudice to its rights of Exploitation derived from
any previous Commercial Discovery pursuant to Article 12.
ARTICLE 10
MINIMUM EXPLORATION PROGRAM
10.1 During the Exploration Phase, ANADARKO shall conduct, and
furnish all sums necessary to finance, a Minimum Exploration
Program consisting of:
A. Exploration which will include:
1. The study, processing or reprocessing,
interpretation and analysis of the information and
data furnished by SONATRACH under Paragraph 7.4 of
this Agreement which ANADARKO determines is
necessary for the evaluation of the prospective
potential of the Contract Area;
2. The conduct of geophysical exploration
through the acquisition of at least one thousand
(1,000) kilometers of new seismic data over the
Contract Area, together with the processing and
interpretation of that data;
B. Basin Evaluation efforts stated in Annex "C";
C. The installation, operation and maintenance of the
Seismic Processing Center pursuant to Annex "D";
D. The Drilling of ten (10) Exploration Wells on the
Contract Area:
1. Six (6) Exploration Wells will be
drilled during the First Exploration Period; and
2. Four (4) Exploration Wells will be
drilled during the Second Exploration Period.
If, during the First Exploration Period, ANADARKO
drills more than six (6) Exploration Wells, the excess
Exploration Wells drilled shall be credited against
Exploration Wells required to be drilled during the
Second Exploration Period.
E. If a discovery of Liquid Hydrocarbons is made, the
Drilling of up to two (2) Delineation Wells to confirm
whether that discovery is a Commercial Discovery,
unless the Operating Committee determines either that:
1. The discovery is a Commercial Discovery
and it is not necessary to drill one or more
Delineation Wells; or
2. The discovery can be adequately drained
by less than three (3) Wells; or
3. The provisions of Paragraph 12.4 are
applicable.
10.2 ANADARKO'S obligation to conduct the Minimum Exploration
Program shall be considered completely performed and satisfied
upon the first to occur of the following dates:
A. The date ANADARKO completes the Minimum
Exploration Program; or
B. If ANADARKO does not complete the Minimum
Exploration Program, the date ANADARKO has incurred
Exploration Costs equal in value to U.S. One Hundred
Million Dollars ($100,000,000.00), of which at least
the equivalent of U.S. Eighty Million Dollars
($80,000,000.00) in Exploration Costs has been incurred
for the Drilling of all or less than all the
Exploration Wells specified in Paragraph 10.1 D above;
or
C. To the dates and in the conditions mentioned in
Paragraph 9.4 above.
10.3 Upon the first to occur of the dates stated in Paragraph
10.2 above:
A. ANADARKO will be conclusively deemed to have
performed and satisfied all financial and work
commitments required of it in respect of the Minimum
Exploration Program;
B. Without prejudice to the foregoing subparagraph
and the provisions of Article 9, ANADARKO shall have
the right to continue Exploration efforts in an effort
to make a Commercial Discovery during the remainder of
the term of the Exploration Phase;
C. If no Commercial Discovery has been made, ANADARKO
shall have the option to withdraw from this Agreement.
10.4 If, upon expiration of the Second Exploration Period (as
possibly extended by Paragraph 9.1 B.1) ANADARKO has neither
completed the Minimum Exploration Program nor incurred
Exploration Costs equal to U.S. One Hundred Million Dollars
($100,000,000.00) for those portions of the Minimum Exploration
Program stated in subparagraphs 10.1 A, B, C, and D above, then
ANADARKO shall pay to SONATRACH a sum equal to the difference
between U.S. One Hundred Million Dollars ($100,000,000.00) and
the total sum of Exploration Costs incurred for those portions of
the Minimum Exploration Program specified above. Payment to
SONATRACH under this Paragraph shall be made not later than
thirty (30) days from the date of determination of the sum owed
by ANADARKO and in the manner directed by SONATRACH.
ARTICLE 11
EXPLORATION WORK PROGRAMS AND BUDGETS
11.1 Not later than thirty (30) Days following the Effective Date
of this Agreement, Operator shall prepare and submit to the
Operating Committee for its review the proposed initial
Exploration Work Program which it proposes to conduct during the
first Contract Year. The Operating Committee shall meet within
thirty (30) Days thereafter to review and decide on this program.
11.2 On or before October 1 of each Calendar Year other than the
initial Contract Year, Operator shall submit to the Operating
Committee its proposed Exploration Work Program for the next
succeeding Calendar Year.
11.3 Each proposed Exploration Work Program shall be submitted to
and approved by the Operating Committee and:
A. Contain all information as is necessary to
describe fully Petroleum Operations to be conducted
during the period covered thereby;
B. Be satisfactory as to enable ANADARKO to conduct
Exploration in an orderly progression so that its
Minimum Exploration Program obligations can be timely
performed during the Exploration Phase.
All Exploration work to be conducted will be as consistent
as possible with the Exploration Work Program approved for the
applicable Contract Year. However, if, for a given period of the
Exploration Phase, Exploration work conducted during a Contract
Year exceeds that to be performed under an approved Exploration
Work Program, the excess shall be carried forward as a credit to
be applied against ANADARKO'S Exploration efforts to be conducted
by ANADARKO in the succeeding Contract Year. Should ANADARKO
fail to conduct Exploration scheduled to be conducted during a
Contract Year, that part of Exploration not conducted shall be
made up in the succeeding Contract Year.
11.4 In accordance with Annex "B", Operator shall keep complete
books and records of all Exploration Costs incurred.
TITLE IV
EXPLOITATION PHASE
ARTICLE 12
EVALUATION, DETERMINATION AND DEVELOPMENT PLAN
OF A COMMERCIAL DISCOVERY
2.1 If a Hydrocarbon Pool is discovered, Operator shall promptly
notify Non Operator and, within ninety (90) Days, submit a report
to the Operating Committee specifying all pertinent information
concerning the discovery (herein called "Discovery Report"),
together with Operator's recommendation as to whether the
discovery warrants evaluation by the Drilling of one or more
Delineation Wells.
12.2 If Operator concludes that one or more Delineation Wells
should be drilled, Operator shall include with its Discovery
Report a proposed Work Program and Budget for such evaluation
efforts (herein called the "Evaluation Work Program and Budget").
12.3 Within fifteen (15) Days after receipt of the Discovery
Report, the Operating Committee shall meet to consider Operator's
recommendations. Upon approval of an Evaluation Work Program and
Budget by the Operating Committee, Operator shall proceed with
the Drilling of those Delineation Wells contained therein, with
the understanding that all Delineation Wells (if any) in excess
of two (2) shall be considered Joint Operations.
12.4 If the Operating Committee concludes that the discovery does
not warrant or require the Drilling of any Delineation Well, or
if the discovery is a Non-Associated Gas discovery, then:
A. Operator shall not be obligated to drill any
Delineation Well concerning that discovery;
B. If SONATRACH disagrees with Operator's conclusion,
SONATRACH may drill such number of Delineation Wells as
it believes are necessary to evaluate that discovery
pursuant to the provisions of Article 13 hereof;
C. If the discovery is a Non-Associated Gas
discovery, all further Petroleum Operations associated
with that discovery shall be in accordance with Article
19 of this Agreement.
12.5 If the Operating Committee fails to approve the Evaluation
Work Program and Budget proposed by Operator (or any amendment
thereto proposed by Non Operator), that part of the Evaluation
Work Program and Budget for which approval was not received shall
be deferred for reconsideration at a second meeting of the
Operating Committee to be held within fifteen (15) Days following
the date of the first meeting. If, at the second meeting, the
Operating Committee fails to reach a decision, the Evaluation
Work Program and Budget proposed by Operator shall be deemed
approved by the Operating Committee if the works are to be
financed at ANADARKO'S sole risk.
12.6 If the approved Evaluation Work Program and Budget requires
a Provisional Exploitation Authorization to be obtained,
SONATRACH shall, within thirty (30) Days following the date of
approval of the Evaluation Work Program and Budget, submit an
application for a Provisional Exploitation Authorization for the
period determined by the Operating Committee and not exceeding
the maximum term authorized by Law.
12.7 Within thirty (30) Days following completion of the
Evaluation Work Program and Budget, Operator shall submit to the
Operating Committee a preliminary report (herein called the
"Evaluation Report") which sets forth all relevant available
technical and economic data, which shall include the geological
and geophysical information, thicknesses and depth of producing
zones, pressures, petro-physical properties of the Reservoir
rocks, results of analyses of fluids under pressure (PVT),
Hydrocarbon reserve estimates, anticipated drive mechanisms,
anticipated production performance for each Reservoir, relevant
characteristics and analyses of the Hydrocarbons discovered, and
other characteristics of the Reservoir and fluids contained
therein.
12.8 Within one hundred twenty (120) Days following the date
Operator submits the Evaluation Report, Operator shall submit to
the Operating Committee a second report (herein called the
"Commerciality Report") which states whether or not the discovery
is commercially exploitable.
12.9 If Operator concludes that the discovery is commercially
exploitable, Operator shall submit with the Commerciality Report
a proposed Development Plan and a proposed Work Program and
Budget (herein called the "Development Work Program and Budget")
which covers Exploitation operations to be conducted during the
balance of the year in which the Exploitation Licence is awarded
and the entire succeeding Calendar Year.
12.10 The proposed Development Plan shall be designed
following sound engineering and economic principles of the
petroleum industry, and:
A. It shall be designed to ensure that the Reservoir
does not suffer an excessive rate of decline of
production or an excessive loss of Reservoir energy;
and
B. It shall adopt the optimum economic Well spacing
for the project considered as a whole.
12.11 The Commerciality Report shall contain:
A. A copy of the Evaluation Report and a statement of
Petroleum Operations conducted pursuant to the
Evaluation Work Program;
B. An economic evaluation demonstrating whether the
discovery may or may not be exploited profitably;
C. Provisions relating to:
1. The Drilling of Development Wells;
2. The design, engineering, construction
and installation of equipment, lines, systems,
facilities, materials and related equipment
necessary to permit the production, collection,
storage, processing for removal of Natural Gas
Liquids, Transportation, delivery of Liquid
Hydrocarbons, and the reinjection of Natural Gas;
D. A forecast of Liquid Hydrocarbons that may be sold
during the Exploitation Phase from that discovery;
E. A forecast of the price that may be received from
the sale of Liquid Hydrocarbons on the international
market;
F. A statement of Exploration Costs incurred by
ANADARKO in respect of that discovery, together with:
1. A statement of all other unreimbursed
Exploration Costs; and
2. A forecast of Exploration Costs (if any)
to be incurred in respect of all further
Exploration efforts on the Contract Area.
G. A statement of Cost Recovery Liquid Hydrocarbons
to be delivered to ANADARKO from that Pool, based upon
the criteria stated in Article 18 hereof;
H. A forecast of Exploitation Costs, Taxes, Royalty
and Transportation charges;
I. A schedule of the time ANADARKO estimates will be
required to complete the Development Plan;
J. A plat showing the boundary of the parcel of land
to be demarcated as the area to be subject to an
Exploitation Licence; and
K. Recommendations concerning the obtaining of an
Exploitation Licence.
12.12 Within thirty (30) Days following receipt of the
Commerciality Report, the Operating Committee shall meet to
consider it. If a proposed Development Plan and a proposed
Development Work Program and Budget were prepared and submitted
with the Commerciality Report, the Operating Committee shall also
review, discuss and attempt to reach unanimous agreement as to
those matters.
12.13 It is the responsibility of the Operating Committee at
the meeting held pursuant to Paragraph 12.12 above to determine
whether or not a discovery of Liquid Hydrocarbons is commercially
exploitable and, if prepared and submitted by the Operator, to
approve a Development Plan and a Development Work Program and
Budget for that Pool. In that regard, the following provisions
shall be applicable:
A. If the Operating Committee unanimously agrees that
the discovery is a Commercial Discovery, and if the
proposed Development Plan and the proposed Development
Work Program and Budget are approved unanimously, they
shall be carried out after the granting of the
Exploitation Licence as stipulated in Paragraph 12.14
herein. If the Operating Committee fails to
unanimously approve the proposed Development Plan
and/or the proposed Development Work Program and
Budget, then those parts thereof which were not
approved shall be deferred for reconsideration at a
second meeting of the Operating Committee. This
meeting shall be held within thirty (30) Days following
the date of the meeting held pursuant to Paragraph
12.12 above. If, at the second meeting, the Operating
Committee fails to reach unanimous agreement as to
those parts of the proposed Development Plan and/or the
proposed Development Work Program and Budget, the
disagreement shall be resolved in accordance with the
procedure specified in Article 26 herein;
B. If the Operating Committee unanimously agrees that
the discovery is not a Commercial Discovery, then all
further operations in respect of that discovery shall
be suspended;
C. If SONATRACH notifies ANADARKO that it believes
the discovery is a Commercial Discovery, but ANADARKO
is not in agreement, SONATRACH, pursuant to the
provisions of subparagraph 13.1 B, shall conduct all
further Petroleum Operations which it believes are
necessary; and
D. If ANADARKO believes the discovery is a Commercial
Discovery, but SONATRACH is not in agreement, the
disagreement shall be resolved in accordance with the
procedure specified in Article 26 herein.
12.14 Within thirty (30) Days following the date of approval
of the Development Plan and the Development Work Program and
Budget applicable to each Commercial Discovery, SONATRACH shall
submit to the Competent Authority an application for an
Exploitation Licence. In other portions of the Contract Area,
Exploration may (or will, if ANADARKO has not satisfied its
obligations in respect of the Minimum Exploration Program)
continue concurrently with Development and Exploitation
operations.
ARTICLE 13
SOLE RISK OPERATIONS OF SONATRACH
13.1 The provisions of this Article are applicable if:
A. SONATRACH elects to drill one or more Delineation
Wells pursuant to subparagraph 12.4 B; or
B. SONATRACH elects to conduct further Petroleum
Operations pursuant to subparagraph 12.13 C; or
C. During the Drilling of an Exploration Well,
ANADARKO experiences mechanical difficulties or other
geological circumstances and notifies SONATRACH that
ANADARKO does not wish either to continue the Drilling
of that Well at that location or to drill another
Exploration Well in substitution of that Well, and
SONATRACH elects to take over those Drilling
operations; or
D. During the Drilling of an Exploration Well, and if
ANADARKO refuses to perform supplementary works
requested by SONATRACH, SONATRACH shall be able to
conduct at its sole risk and expense all Drilling and
coring operations or any other investigation for the
purpose of recognizing or evaluating a formation during
the Drilling of a Well. SONATRACH may have these
additional works conducted by the Operator, if it
agrees, at the time and in the manner deemed best by
the Operator taking into account the primary objectives
of the Drilling in question.
13.2 Should SONATRACH desire to conduct Drilling operations
pursuant to subparagraph 13.1 A above, it shall have the right to
do so at its sole risk and expense, provided that it commences
those Drilling operations within six (6) months from the date it
notifies ANADARKO of its election under subparagraph 12.4 B.
13.3 Before SONATRACH commences Drilling or other operations
under this Article, the Parties shall reach agreement as to the
boundary of the area in which Drilling or other operations at the
sole risk and expense of SONATRACH shall be conducted. If the
Drilling or other operations stated in subparagraphs 13.1 B and C
are conducted by SONATRACH, the area so determined shall be
reserved for SONATRACH'S exclusive use.
13.4 Upon completion of Drilling pursuant to subparagraph 13.1 A,
SONATRACH shall submit to the Operating Committee an Evaluation
Report and a Commerciality Report containing the information and
data stated in Article 12.
13.5 If the Commerciality Report with respect to Wells drilled
pursuant to subparagraph 13.1 A above confirms that the Liquid
Hydrocarbons are commercially exploitable, the Drilling of all
Development Wells and all further Petroleum Operations shall be
Joint Operations conducted at the expense of the Joint Account.
13.6 Liquid Hydrocarbons from each Pool developed pursuant to
Paragraph 13.5 above shall be divided as follows:
A. Liquid Hydrocarbons from Wells drilled at the sole
cost, risk and expense of SONATRACH shall be produced
solely for the account of SONATRACH until it has
received an amount equal in value to five hundred
percent (500%) of all costs and operating expenses
borne solely by SONATRACH for the Drilling and
equipping for production of the applicable Well(s);
B. Liquid Hydrocarbons from all Wells other than
those stated in subparagraph A above (and Liquid
Hydrocarbons from those Wells after recoupment by
SONATRACH of the penalty mentioned above) shall be
divided in accordance with Paragraph 4.3 above.
13.7 If SONATRACH elects to conduct further Petroleum Operations
not included in ANADARKO'S Work Program at its sole risk and
expense pursuant to subparagraph 13.1B, C or D above, and if a
Hydrocarbon Pool is consequently discovered, SONATRACH shall be
solely entitled to that discovery. SONATRACH shall send Notice
to ANADARKO of the discovery. ANADARKO shall have the option to
have its rights under this Agreement reinstated in that discovery
by paying cash, in the currency of SONATRACH'S choice, five (5)
times the total costs and expenses of works incurred by SONATRACH
at its sole cost, risk and expense. The reinstatement option of
ANADARKO shall remain in effect for six (6) months from the date
ANADARKO receives the foregoing Notice from SONATRACH. The sum
mentioned above shall be paid by ANADARKO within one (1) month
from the date it notifies SONATRACH of the exercise of its
reinstatement option. The sum paid by ANADARKO to SONATRACH in
consideration of its reinstatement shall not be subject to any
reimbursement obligation by SONATRACH.
13.8 Except as provided in Paragraph 13.7 above, ANADARKO will
have no rights to Liquid Hydrocarbons coming from Pools
established by SONATRACH under subparagraphs 13.1 B, C or D, nor
will ANADARKO be obligated to share in the Exploitation Costs of
those Pools.
ARTICLE 14
TERM OF THE EXPLOITATION PHASE
14.1 The initial term of the first period of the Exploitation
Phase of each Pool shall be fifteen (15) years from the date the
Exploitation Licence is awarded (herein referred to as the "First
Exploitation Period"). If, due to delays in the installation of
evacuation pipelines by Operator or SONATRACH (or its Affiliate),
ANADARKO does not receive its share of Liquid Hydrocarbons from
that Pool during the term of the Provisional Exploitation
Authorization, the term of the First Exploitation Period of that
Pool shall be extended for that period of time necessary for
ANADARKO to receive a volume of Liquid Hydrocarbons equal to the
volume it would have received if the production from the Pool
could have been delivered by SONATRACH.
14.2 The First Exploitation Period of each Pool shall be extended
in the following manner:
A. ANADARKO shall have the option to extend the First
Exploitation Period of each Pool for an additional
period of five (5) years (herein referred to as the
"Second Exploitation Period") by notifying SONATRACH of
its option to extend the First Exploitation Period at
least sixty (60) Days prior to expiration of the First
Exploitation Period;
B. Before expiration of the Second Exploitation
Period, and in order to determine if the term of the
Exploitation Phase of the Pool in question should be
extended for an additional period of five (5) years
(herein referred to as the "Third Exploitation
Period"), the Operating Committee shall determine if
the Economic Limit of that Pool has or has not been
reached. If the Operating Committee unanimously agrees
that the Pool in question has not reached its Economic
Limit, then the Exploitation Phase of that Pool shall
be automatically extended for the Third Exploitation
Period.
14.3 If the Operating Committee fails to reach unanimous
agreement as to the Third Exploitation Period stated in
subparagraph 14.2 B above, the impasse shall be resolved as
follows:
A. If ANADARKO is of the opinion that Economic Limit
has been reached as to a particular Pool, but SONATRACH
disagrees with ANADARKO's opinion, ANADARKO shall have
the option to withdraw from further participation in
that Pool by notifying SONATRACH to that effect; or
B. If SONATRACH is of the opinion that Economic Limit
has been reached as to that Pool, but ANADARKO
disagrees with SONATRACH's opinion, the impasse shall
be resolved in accordance with the procedure specified
in Article 26 below.
14.4 If ANADARKO and SONATRACH agree that Economic Limit has been
reached, all Petroleum Operations associated with that Pool shall
be discontinued and equipment from that Pool shall be salvaged as
directed by the Operating Committee.
14.5 Upon the date the Parties agree that Economic Limit has been
reached in respect of the last Pool under Exploitation under this
Agreement, or the date ANADARKO elects to withdraw from further
participation in all Petroleum Operations pursuant to Article 30
hereof, this Agreement shall terminate.
ARTICLE 15
EXPLOITATION WORK PROGRAMS AND BUDGETS
15.1 Operator shall prepare and submit to the Operating Committee
for consideration and approval the following documents relating
to the Joint Operations chargeable to the Joint Account:
A. Development Work Programs and Budgets, for which
the Operating Committee shall meet initially at the
time(s) stated in Paragraph 12.12 above, and thereafter
meet at the time stated in Paragraph 5.9;
B. Exploitation Work Programs and Budgets, for which
the Operating Committee shall meet at the times stated
in Paragraph S.9.
15.2 In respect of annual meetings to be held at the times stated
in Paragraph 5.9 A, Operator shall prepare and submit to the
Operating Committee, on or before October 1 of each Calendar
Year, a proposed Work Program and corresponding Budget for the
next succeeding Calendar Year.
15.3 Each Work Program and Budget shall contain such information
as is necessary to describe fully the Petroleum Operations to be
conducted during the period covered thereby and the currency or
currencies in which costs and expenses are anticipated.
15.4 Within the time stated in Annex "B", each Party shall pay to
the Operator, in Dinars or in convertible Foreign Exchange, its
share of Cash Calls required to cover expenses of conducting
Development and Exploitation Work Programs. Operator will not be
required to continue or to conduct such works, or to commit to
costs required therefor, if a Party has not paid its share of the
Cash Call due.
15.5 Except as otherwise provided:
A. With respect to specific projects within Budgets
approved by the Operating Committee, Operator shall not
be required to obtain any further approval of
over-expenditures which do not exceed fifteen percent
(15%) of the expenditure authorized for that project in
the Budget for a given Calendar Year. However, Notice
of the need for additional expenditures shall be given
to the Operating Committee as soon as the need becomes
apparent.
B. Operator shall have no authority to use funds
budgeted for a particular item for any other purpose;
and
C. Operator shall have no authority to use budgeted
funds for a particular item which will cost in excess
of Five Million Dinars (5,000,000.00) or its equivalent
in Foreign Exchange without first having obtained from
the Operating Committee approval of an authorization
for expenditure covering that particular item.
15.6 The authorization given by the Operating Committee for the
Drilling of any Well shall include approval of all necessary
expenditures required therefor and for completing, testing and
equipping that Well.
15.7 In an emergency, Operator shall have the right to incur
liabilities on behalf of the Parties without prior authorization
of the Operating Committee. In that event, Operator shall take
such steps and make such expenditures on behalf of the Parties as
are necessary to protect the interests of the Parties and their
respective employees. As promptly as possible, Operator shall
report such emergency and the action it has taken to the
Operating Committee.
15.8 No Well which is producing Hydrocarbons (or is capable of
but is not then producing Hydrocarbons) may be plugged and
abandoned without approval of the Operating Committee and the
Competent Authority. If approval of the Operating Committee and
the Competent Authority is received to plug and abandon a Well,
that Well shall be plugged and abandoned by Operator at the
expense of the Joint Account. However, if the Well was drilled
by SONATRACH pursuant to Article 13 and recoupment of penalty (if
applicable under Paragraph 13.6.A) has not been achieved, that
Well shall be abandoned at the sole cost and expense of
SONATRACH.
15.9 Except as provided in Article 13, all expenses, risks and
liabilities for Development and Exploitation of each Pool shall
be considered Joint Operations conducted at the joint expense of
the Parties in accordance with their Percentage Share of
Financing.
15.10 All payments which either Party is required to make
(except advances for cash calls of the Operator) shall be made
within thirty (30) Days following receipt of the invoice
requesting such payment.
15.11 In accordance with Annex "B", Operator shall keep
complete books and records of all Exploitation Costs incurred.
15.12 A Party shall be in default if it fails to advance to
Operator its Percentage Share of Financing of cash calls within
the time stated in Annex "B", or fails to pay when due its
Percentage Share of Financing of costs of the Joint Account.
That Party shall remedy its default by paying all amounts due,
plus interest thereon from the date such amount was due and
payable at the rate specified in Annex "B".
ARTICLE 16
VALUATION OF LIQUID HYDROCARBONS
16.1 The quantities of Liquid Hydrocarbons delivered to ANADARKO
as Cost Recovery Liquid Hydrocarbons under Article 18 shall be
valued solely at the sales price of Liquid Hydrocarbons of
identical quality received by SONATRACH on the international
market (hereinafter referred to as the "Sales Price").
16.2 The calculation of the Sales Price applicable for each
Calendar Quarter shall be made on the basis of the average price
received by SONATRACH from sales of Liquid Hydrocarbons during
the three (3) months preceding the month in which the Notice
required by Paragraph 16.3 is made. The sales to be taken into
consideration in the determination of the Sales Price shall be in
Foreign Exchange FOB at the Port of Loading and shall concern
comparable quantities of Liquid Hydrocarbons, after taking into
consideration adjustments for quality. No "spot" sales or
contracts involving barter shall be used in the calculation of
the Sales Price.
16.3 The Sales Price referred to in Paragraph 16.2 above shall be
stated for a Calendar Quarter in a Notice delivered by SONATRACH
to ANADARKO at the latest within the first ten (10) Days of the
month preceding such Calendar Quarter. The Sales Price thus
stated shall apply to Liquid Hydrocarbons taken in the Calendar
Quarter in question. If such Notice is not delivered within that
time limit, the applicable price shall be that previously
calculated. However, the Operating Committee may decide to
retain the Market Price applicable for the same period as
stipulated in Paragraph 16.4 herein. If the new Sales Price
which should have been applied for the said Calendar Quarter is
set after the time limit, an adjustment to the valuation shall be
made by adjusting the quantity of Liquid Hydrocarbons to be taken
during the next Calendar Quarter.
16.4 If one Party believes that the Sales Price referred to in
Paragraph 16.2 differs in a significant manner and for a
significant period of time from the average of a basket of prices
of Liquid Hydrocarbons of the same quality as those Liquid
Hydrocarbons to be taken by ANADARKO (hereinafter referred to as
the "Market Price"), the Operating Committee shall determine the
price to be used for the valuation of Liquid Hydrocarbons. For
the purpose of the composition of the basket of prices stated
above, and before Liquid Hydrocarbons are taken, the Operating
Committee shall select at least five (5) Liquid Hydrocarbons of
the same quality to determine the Market Price.
16.5 The quantities of Liquid Hydrocarbons to be taken by
ANADARKO during a given Calendar Year shall be calculated on a
provisional basis during the first fifteen (15) days of the month
of December preceding the applicable Calendar Year on the basis
of the elements agreed by the Parties under Paragraph 4.3 B.
Before the end of each Calendar Quarter of the Calendar Year in
question, these quantities shall be adjusted on the basis of
actual data supplied and arrived at by the Parties. Before the
end of the first Calendar Quarter of the Calendar Year following
the Calendar Year in question, the quantities due to ANADARKO for
that Calendar Year shall be definitely determined. Any
adjustments made shall apply to quantities of Liquid Hydrocarbons
to be taken during the following Calendar Quarter.
ARTICLE 17
DISPOSITION OF LIQUID HYDROCARBONS
17.1 During the term of this Agreement, each Party shall have the
right to take, receive, export from Algeria, sell, dispose of,
and carry away all its share as stated in Paragraph 4.3 of all
Liquid Hydrocarbons produced and saved from each Pool.
17.2 As part of Joint Operations, Operator shall construct such
Liquid Hydrocarbon storage and handling facilities and evacuation
pipelines which are necessary to connect the respective delivery
facilities of each Pool to the main pipeline(s) of SONATRACH (or
its Affiliate). All these facilities shall be approved
beforehand by the Operating Committee. The outlet flange of each
evacuation pipeline at the main pipeline shall be the Point of
Delivery.
17.3 Costs and expenses necessary pursuant to Paragraph 17.2, and
those necessary for the maintenance and operation of those
pipelines and metering stations located upstream from the Point
of Delivery, shall be Joint Account expenses.
17.4 If quantities of Liquid Hydrocarbons as to which ANADARKO is
entitled from a discovered Pool do not have the same
characteristics as those to be delivered to ANADARKO at the Port
of Loading, then, before deliveries commence, the Parties shall
reach agreement as to the characteristics and quantities of
Liquid Hydrocarbons to be delivered by SONATRACH to ANADARKO in
substitution of those ANADARKO should be delivered. The
quantities of Liquid Hydrocarbons stated above shall be
determined in accordance with an evaluation formula determined by
the Operating Committee. That formula shall take into
consideration the difference in quality between the Liquid
Hydrocarbons from the Pools discovered and the Liquid
Hydrocarbons to be delivered by SONATRACH to ANADARKO.
17.5 If controls relating to production quotas are imposed such
that the Pools are restricted from being able to produce at their
Maximum Efficient Rate of production, SONATRACH agrees that the
reduction in the production of Liquid Hydrocarbons from said
Pools will not be greater than that imposed on the total
production of Liquid Hydrocarbon Pools of the same kind in
Algeria. However, should the imposition of quotas for the
conservation of the production result in the said Pools being
produced at a rate below their Economic Limit, the Parties agree
to make every effort to ensure that such Pools are produced at
their Maximum Efficient Rate of production.
ARTICLE 18
REIMBURSEMENT OF THE FIFTY ONE PERCENT SHARE
OF EXPLORATION COSTS
18.1 As reimbursement for fifty one percent (51%) of Exploration
Costs incurred, ANADARKO shall receive and SONATRACH commits
itself to deliver (or cause to be delivered) to ANADARKO, FOB at
the Port of Loading, a quantity of Liquid Hydrocarbons valued in
accordance with Article 16 and determined by application of the
provisions of subparagraph 4.3 B (herein referred to as "Cost
Recovery Liquid Hydrocarbons").
18.2 Deliveries of Cost Recovery Liquid Hydrocarbons shall be
made, subject to Paragraphs 18.3 and 18.4 below, from one or more
Pools developed and exploited jointly until ANADARKO has been
reimbursed fully for fifty one percent (51%) of all Exploration
Costs incurred.
18.3 The quantity of Cost Recovery Liquid Hydrocarbons shall be
determined by taking into consideration the legal amortization
rate specified in Article 54 of Law 86-14.
18.4 In determining the quantity of Cost Recovery Liquid
Hydrocarbons, the Parties agree as follows:
A. If the Operating Committee determines that a Pool
would be commercially exploitable if fifty one percent
(51%) of all Exploration Costs which (i) have not been
reimbursed to ANADARKO at that time (herein referred to
as "Unreimbursed Exploration Costs"); and (ii) are
projected to be incurred by ANADARKO thereafter (herein
referred to as "Projected Exploration Costs"), were
charged as a burden against SONATRACH'S share of Liquid
Hydrocarbons from that Pool, then the Cost Recovery
Liquid Hydrocarbons shall be equal in value to:
1. Unreimbursed Exploration Costs; and
2. Projected Exploration Costs (subject,
however, to adjustment based upon the sum of
actual Exploration Costs incurred in the future),
even if no further Commercial Discovery is
achieved; or
B. If the Operating Committee determines that the
Pool would be commercially exploitable only if
Unreimbursed Exploration Costs and a portion of
Projected Exploration Costs were charged as a burden
against SONATRACH'S share of Liquid Hydrocarbons from
that Pool, then Cost Recovery Liquid Hydrocarbons shall
be equal in value to:
1. Unreimbursed Exploration Costs; and
2. The agreed portion of Projected
Exploration Costs (subject, however, to adjustment
based upon the sum of actual Exploration Costs
incurred in the future).
That portion of Exploration Costs not reimbursed
out of Liquid Hydrocarbons from that Pool shall be
carried forward for reimbursement as stated in
subparagraph 18.4 F below; or
C. If the Operating Committee determines that the
Pool would be commercially exploitable if all or a
portion of Unreimbursed Exploration Costs, but none of
the Projected Exploration Costs, were charged as a
burden against SONATRACH'S share of Liquid Hydrocarbons
from that Pool, then the Cost Recovery Liquid
Hydrocarbons shall be equal in value to the agreed
portion of Unreimbursed Exploration Costs. That
portion of Exploration Costs not reimbursed out of
Liquid Hydrocarbons from that Pool shall be carried
forward for reimbursement as stated in subparagraph
18.4 F below; or
D. If the Operating Committee determines that the
Pool is commercially exploitable if only fifty one
percent (51%) of Exploration Costs incurred in respect
of that Pool were charged as a burden against
SONATRACH'S share of Liquid Hydrocarbons, then the Cost
Recovery Liquid Hydrocarbons from that Pool shall be
equal in value to fifty one percent (51%) of
Exploration Costs incurred in respect of that Pool
only. That portion of Unreimbursed Exploration Costs
from that Pool shall be carried forward for
reimbursement as stated in subparagraph 18.4. F below;
or
E. If the Operating Committee determines that a
particular discovery of Liquid Hydrocarbons is
commercially exploitable only if not burdened by
charging SONATRACH'S share of Liquid Hydrocarbons from
that Pool with a reimbursement obligation, then
Unreimbursed Exploration Costs and Projected
Exploration Costs which otherwise would be reimbursable
to ANADARKO out of Liquid Hydrocarbons from that Pool
shall be carried forward for reimbursement in the
manner stated in subparagraph 18.4 F below; and
F. The following provisions shall be applicable to
Exploration Costs which have not been reimbursed to
ANADARKO from SONATRACH'S share of Liquid Hydrocarbons
from one or more Pools:
1. Until ANADARKO has received full
reimbursement for fifty one percent (51%) of all
Exploration Costs incurred, Exploration Costs
which have not been reimbursed to ANADARKO when a
new Pool is determined to be commercially
exploitable shall be carried forward and
consolidated for reimbursement to ANADARKO out of
Liquid Hydrocarbons from that Pool and each Pool
subsequently established; and
2. During each annual meeting stated in
subparagraph 5.9 A which occurs after the granting
of the first Exploitation Licence, the Operating
Committee shall make a determination as to whether
the Pool(s) then under production (based upon the
production performance of that or those Pools, the
Sales Price or, if appropriate, the applicable
Market Price of the Hydrocarbon reserves remaining
in place, production rates greater than
anticipated in the Development Plan for that or
those Pools, and other economic factors) would
remain commercially exploitable if the
Unreimbursed Exploration Costs are reallocated and
charged to SONATRACH'S share of Liquid
Hydrocarbons from that or those Pools. If the
Operating Committee determines that a Pool(s)
would remain commercially exploitable under the
conditions stated above, the Operating Committee
shall reach agreement as to the additional
quantity of Cost Recovery Liquid Hydrocarbons.
This method of reallocating Exploration Costs will
also apply when the Operating Committee determines
that a Pool's (or Pools') actual production
performance is less than that which was estimated
in the initial determination of its commerciality.
18.5 If the Representatives fail to reach unanimous agreement as
to any of the matters stated in Article 18, then the impasse
shall be resolved in accordance with Article 26.
TITLE V
NATURAL GAS
ARTICLE 19
PROVISIONS RELATING TO GASEOUS HYDROCARBONS
19.1 Associated Gas or Non-Associated Gas shall be used
preferentially for Petroleum Operations relating to the optimum
recovery of Liquid Hydrocarbons in the Pool discovered. These
uses are to be reviewed and evaluated as a part of the
Development Plan established for each Pool discovered.
Associated or Non-Associated Gas shall have priority use for
Petroleum Operations in Pools discovered anywhere on the Contract
Area, for the purpose of Gas injection to improve production of
Liquid Hydrocarbons, or to produce or conserve Reservoir energy
necessary for Exploitation of Reservoirs.
19.2 If Natural Gas is discovered in quantities sufficient to
lead ANADARKO to believe that such discovery is or may be
commercially exploitable within the framework of Petroleum
Operations and/or for the extraction of Natural Gas Liquids
and/or for the export of surplus Natural Gas, ANADARKO shall
submit a Discovery Report to the Operating Committee. Following
review of the Discovery Report, the Operating Committee shall
instruct the Technical Advisory Committee to study ANADARKO'S
proposals and report to it all possible economic alternatives
concerning that discovery.
19.3 Upon receipt of the Technical Advisory Committee's report,
the Operating Committee shall reach agreement as to whether a
commercially exploitable Pool has been discovered. A Natural Gas
Pool shall be deemed to be commercially exploitable if the
proceeds of sale of the volume of Natural Gas that can be
produced are sufficient to cover Exploration and Exploitation
Costs, Transportation charges, Royalty, Taxes, the Bonus owed to
ANADARKO under Paragraph 19.4 A, and still yield a net profit.
19.4 If the Operating Committee agrees that a commercially
exploitable Gas Pool has been discovered, then:
A. SONATRACH shall deliver to ANADARKO, FOB at the
Port of Loading, a quantity of Liquid Hydrocarbons
equal in value to all Exploration Costs of ANADARKO in
respect of that Natural Gas discovery, together with an
additional volume of Liquid Hydrocarbons equal in value
to a Bonus of one hundred and fifty percent (150%) of
those Exploration Costs (herein referred to as
"Bonus"). The delivery of Liquid Hydrocarbons to
ANADARKO under this subparagraph shall be made within
one (1) year following the date deliveries of Gas from
the Gas Pool commence at the Point of Delivery. The
reimbursement of Exploration Costs to ANADARKO under
this subparagraph will be made provided that the
Exploration Costs associated with the Gas discovery
were not added to reimbursable Exploration Costs under
Article 18 of this Agreement; and
B. Natural Gas Liquids from the said discovered Pool
and resulting from Hydrocarbons processing by the
Parties on the site of said Pool or on another site
agreed by the Parties shall be distributed under the
provisions of Paragraph 4.3 of this Agreement.
l9.5 If the Parties further agree to jointly export the surplus
Natural Gas, they shall enter into a protocol agreement under
which a jointly held company ("societe d'economie mixte") ruled
by Algerian law will be created, of which ANADARKO shall have a
participation of forty-nine percent (49%) and SONATRACH will have
a participation of fifty-one percent (51%).
TITLE VI
ACQUISITION OF PROPERTY - CONTRACTORS
ARTICLE 20
GOODS/EQUIPMENT/FIXED ASSETS AND SERVICES
20.1 In order to implement Work Programs and Development Plans
approved by the Operating Committee, Operator, in its own name,
shall have the right to purchase or rent, or import:
A. All equipment, materials, goods and supplies of a
movable nature (herein referred to as "Movable
Property") which it determines is necessary in
conducting Petroleum Operations; and
B. All temporary or permanent buildings needed to
house personnel engaged in Petroleum Operations, to
store or protect Movable Property from environmental
elements, and offices and housing for Operator's
personnel (herein referred to as "Immovable Property").
20.2 The purchase of Immovable Property situated in Algeria shall
be subject to the requirements of applicable Laws.
20.3 All agreements for the purchase or rental of any single item
of Movable Property or Immovable Property for use in Joint
Operations chargeable to the Joint Account and whose anticipated
cost will exceed Five Million Dinars (5,000,000.00), or its
equivalent in Foreign Exchange, shall be previously submitted to
the Operating Committee for approval.
20.4 In the purchase or rental of Movable Property for use in
Algeria, Operator shall give preference to Algerian manufactured
Movable Property, provided:
A. The quality of the particular product is
acceptable based upon standards and codes recognized in
Algeria and internationally which will be as strict as
those set or established by the American Petroleum
Institute (API):
B. The cost of the particular product is competitive
with the prevailing rates for Movable Property
delivered in Algeria and proposed by Non-Algerian
suppliers; and
C. The Algerian supplier can deliver the particular
product by the time and in the quantity required by
Operator in comparison with the time and quantities
proposed by non-Algerian suppliers.
20.5 Operator is authorized to select, in accordance with the
criteria stated in Paragraph 20.7, engage and entrust to
contractors the execution of works within Petroleum Operations.
20.6 All agreements to be entered into by Operator and its
contractors which contemplate an expenditure chargeable to the
Joint Account greater than Five Million Dinars (5,000,000.00), or
its equivalent in Foreign Exchange, shall be previously submitted
to the Operating Committee for approval.
20.7 Operator shall, in selecting contractors, give preference to
SONATRACH and its Affiliates, and to Algerian business persons or
entities, provided that in each instance operator is reasonably
satisfied with their ability to perform the work entrusted to
them and provided that their fees, time, terms and conditions are
competitive with those of other contractors who submit tenders
for such work. Particularly, the competitive criteria include
the contractor's experience, the condition and availability of
its equipment, the unique capabilities of the contractor's
service and/or equipment and the contractor's compliance with
equipment specifications and performance standards recognized in
the petroleum industry.
20.8 The fixed assets resulting from Petroleum Operations shall
be owned exclusively by SONATRACH, except for the Movable
Property and Immovable Property rented or purchased and imported
by ANADARKO in its own name or by its contractors in their name.
ANADARKO shall have free use of the foregoing property, without
cost, which property shall be under its responsibility as long as
ANADARKO conducts Petroleum Operations under this Agreement.
20.9 The Movable Property purchased and/or imported into Algeria
by ANADARKO in SONATRACH'S name and which it uses in conducting
Petroleum Operations shall pass to SONATRACH when purchased or,
if applicable, when imported into Algeria. ANADARKO shall have
free use of the foregoing property, without cost, which property
shall be under its responsibility as long as ANADARKO conducts
Petroleum Operations under this Agreement.
TITLE VII
ADMINISTRATIVE PROVISIONS
ARTICLE 21
PERSONNEL AND TRAINING
21.1 The number of employees engaged by Operator shall be the
minimum determined by Operator as necessary for the efficient
performance of its obligations.
21.2 All employees engaged by Operator, except those of
Non-Operator who are assigned to assist in Petroleum Operations,
shall be considered the employees of Operator.
21.3 All employees shall be selected solely on the basis of their
ability, experience, education and training, and other factors
determined by Operator which are related to the particular jobs.
21.4 In the selection of employees of various nationalities, the
Parties agree that the efficiency of conducting Petroleum
Operations shall be given first consideration. Operator shall,
as far as it determines is consistent with the efficient
performance of Petroleum Operations and its undertakings under
this Agreement, give priority to Algerian nationals who meet the
qualifications stated in Paragraph 21.3 above.
21.5 At the first meeting of the Operating Committee, Operator
shall submit for the Operating committee's approval its intended
organization structure, together with a list of its intended
employees in Algeria, their intended positions and the
anticipated direct and indirect costs of those employees.
21.6 Upon request of Operator, SONATRACH agrees to use its best
efforts to furnish the broadest technical assistance,
particularly in making qualified personnel available to assist in
Exploration and Drilling operations. The form of this technical
assistance and the conditions and compensation under which
SONATRACH'S personnel shall be made available shall be the
subject of a special agreement between the Parties.
21.7 SONATRACH agrees to assist Operator in obtaining all
employee quotas determined by Operator to be necessary in
conducting the Exploration Program. SONATRACH also undertakes to
assist Operator in obtaining visas, work permits or
authorizations, and exemptions from Customs Duties provided for
by regulations for the expatriate employees employed by Operator,
its contractors (and the immediate families of each).
21.8 During the Exploration Phase, the Operating Committee shall
determine an agreed number of employees of SONATRACH who shall be
given the opportunity to attend and participate in training
programs ANADARKO establishes for its employees, or training in
association with on-the-job performance of Petroleum Operations,
particularly those related to the Seismic Processing Center,
Exploration and Drilling, and to the Exploitation techniques for
Pools, so long as the training does not impair efficient or safe
operations.
21.9 Not later than six (6) months following the date of the
award of the first Exploitation Licence, ANADARKO shall propose a
training program for a number of SONATRACH'S employees, agreed to
y the Parties, and/or other persons, which will provide the
candidates selected on-the-job training and actual work
experience leading to requisite qualifications to:
A. Fulfill position requirements of various levels of
employment in Petroleum Operations, including
administrative, professional and technical positions;
and
B. Give employees with the requisite potential the
possibility of being promoted to more senior positions
in Petroleum Operations.
21.10 ANADARKO'S annual costs of training programs shall be
included in Exploration Costs or Joint Account expenses, as
applicable.
ARTICLE 22
LITIGATION/RISKS/LIABILITY
22.1 The defense of litigation filed by Third Parties against the
Operator in respect of Petroleum Operations hereunder shall be
approved by the Operating Committee. All costs and expenses
related to the defense of litigation, and sums paid to discharge
claims and judgments (to the extent not covered by insurance),
shall be included as Exploration Costs or Exploitation Costs,
depending upon the type of Petroleum Operation which gave rise to
the claim or litigation. However, litigation which results from
the willful misconduct or gross negligence of Operator shall be
its sole responsibility.
22.2 All risks and liabilities incurred in conducting
Exploitation operations shall be borne by the Parties in
proportion to their Percentage Share of Financing. However, each
Party shall assume the risks and liabilities resulting from its
gross negligence or willful misconduct.
ARTICLE 23
CONFIDENTIALITY/PRESS RELEASES
23.1 This Agreement, and all plans, maps, drawings, designs,
scientific and technical reports and other data and information
of any kind or nature, relating to the Contract Area and
Petroleum Operations under this Agreement, shall be treated as
strictly confidential and shall not be disclosed to Third parties
without the prior consent of the other Party.
23.2 The provisions of Paragraph 23.1 shall not apply to
disclosure to Affiliates, to contractors, auditors, accounting or
petroleum engineering firms, legal advisers, to finance
institutions involved in the provision of finances for the
Petroleum Operations hereunder, as well as those persons
intervening in resolving disputes, provided that they agree in
writing to keep confidential this Agreement and/or such data and
information stipulated in Paragraph 23.1. Disclosure shall also
be permitted to authorized stock exchanges and to governments,
when such disclosure is required by applicable law.
23.3 No Party shall issue any press release or other formal
statement concerning this Agreement or Petroleum Operations
without the prior consent of the other Party, which consent shall
not be unreasonably withheld. The foregoing prohibition shall
not apply to a statement made by a Party or its Affiliate in
order to comply with a statutory obligation or the requirements
of a governmental agency or of an established stock exchange. A
copy of the intended statement shall be furnished to the other
Party at least forty-eight (48) hours before it is released.
TITLE VIII
LEGAL PROVISIONS
ARTICLE 24
TRANSFERS
24.1 ANADARKO shall have the right to transfer all or part of its
rights and obligations to:
A. An Affiliate without the prior written approval of
SONATRACH or the Competent Authority being required;
B. One or more Non-Affiliates, provided that
SONATRACH does not exercise its right of preemption
according to the procedure provided in Paragraph 24.3
below.
If SONATRACH does not exercise its right of
preemption, a transfer by ANADARKO to a Non-Affiliate
shall be subject to receipt of SONATRACH'S and the
Competent Authority's prior written approvals.
SONATRACH and the Competent Authority shall take their
respective decision on the basis of the documents
furnished to them which relate to elements concerning
the control of the transferee company(ies).
24.2 Transfers by ANADARKO shall be made in compliance with
Decree No. 87-158.
24.3 The Parties agree that SONATRACH'S right of preemption under
Decree No. 87-158 in respect of contemplated transfers by
ANADARKO to Non-Affiliates shall be implemented according to the
following procedure:
A. ANADARKO shall give notice to SONATRACH of its
desire to make the transfer, stating the name of the
Non-Affiliate(s), the price and a summary of all other
terms and conditions acceptable to ANADARKO;
B. Within ninety (90) Days of receipt of the Notice
mentioned in Paragraph A above, SONATRACH shall give
Notice to ANADARKO indicating whether it wishes to
exercise its preemption right based upon the price and
the other conditions contained in the Notice mentioned
in Paragraph A above, and whether or not the Competent
Authority will approve the preemption purchase by
SONATRACH;
C. If SONATRACH exercises its preemption right then:
1. It will be deemed that the Competent
Authority has approved the transfer to SONATRACH
from ANADARKO; and
2. Not later than thirty (30) Days from the
date ANADARKO receives SONATRACH'S Notice, the
Parties shall enter into such agreements as are
necessary to finalize the transfer; and
D. If SONATRACH does not exercise its preemption
right, ANADARKO shall have the right to transfer to the
Non-Affiliates all or part of ANADARKO'S rights and
obligations stated in its Notice, on terms and
conditions no less favorable to ANADARKO as the terms
and conditions offered to SONATRACH.
24.4 If a transfer is made, the transferee shall succeed to the
rights and obligations of ANADARKO, to the extent of the portion
of the Percentage Share of Financing and Percentage Interest
received. No such transfer shall modify the rights and
obligations of SONATRACH.
ANADARKO and its transferees shall be jointly and severally
responsible to SONATRACH for all obligations arising from this
Agreement. It is agreed that SONATRACH shall only have to deal
with ANADARKO who shall represent each of the transferees and
that ANADARKO alone shall be responsible for the execution of all
obligations arising under this Agreement. Each of the
transferees shall, to that effect, appoint ANADARKO as its
representative with SONATRACH and shall grant to it powers to
take all measures necessary to the execution of this Agreement.
24.5 The substitution or total or partial transfers by SONATRACH
of its rights and obligations under this Agreement to one of its
Affiliates shall not modify or prejudice the rights and
obligations of the other Party to this Agreement.
ARTICLE 25
FORCE MAJEURE
25.1 All events which delay or prevent the performance by a Party
of its obligations under this Agreement shall be considered Force
Majeure if the conditions stated in Paragraph 25.2 are met.
25.2 The term "Force Majeure" means the occurrence of any event
or circumstance (except the inability of a Party to timely meet
its financial obligations hereunder) which is:
A. Irresistible;
B. Unforeseeable; and
C. Independent of the will of the Party invoking Force
Majeure.
Exceptionally an extraordinary or supernatural event
irresistible and independent of the will of the invoking Party
but foreseeable may constitute a case of Force Majeure. The
Party invoking such a case will bring proof that it took, before
the occurrence of the said event, all necessary measures to
foresee this event and remedy its consequences.
25.3 In the event of Force Majeure:
A. The period of the Force Majeure event, together
with the period necessary to restore any damage done by
such event, shall be added to the time given herein for
the performance of the affected obligation and/or to
the corresponding term of the phases or periods
provided for in this Agreement;
B. The other Party shall have no right to damages for
default of this Agreement;
C. The Party invoking Force Majeure shall give Notice
promptly to the other Party of the Force Majeure event.
If the Force Majeure event continues for thirty (30)
Days, Operator shall call a meeting of the Operating
Committee which will determine what action (if any) may
be taken to relieve that situation; and
D. The Party invoking Force Majeure shall use all
reasonable means to diligently remedy and bring to an
end the consequences of the Force Majeure event.
ARTICLE 26
SETTLEMENT OF DISPUTES
26.1 Any dispute arising out of the performance and/or
interpretation of this Agreement shall, in accordance with the
provisions of Article 63 of Law 86-14, be submitted to the
competent Algerian jurisdiction.
26.2 Prior to recourse to said jurisdiction, the Parties, if they
have failed to resolve the dispute between themselves within
sixty (60) Days of its inception, agree to submit the dispute to
a Conciliation Board according to the following terms and
conditions:
A. The Party wishing to have recourse to Conciliation
(herein referred to as "Claimant") shall give Notice to
the other Party (herein referred to as "Respondent") of
its request by registered letter, return receipt
requested, which will state explicitly the subject
matter of the request, the claims and the
justifications which support them and which shall
explicitly state the last and first names,
qualifications and address of its appointed
Conciliator;
B. Within thirty (30) Days from receipt of the
foregoing request, the Respondent shall:
1. Appoint a Conciliator, give Notice to
the other Party and the Conciliator appointed by
the Claimant of the last and first names,
qualifications and address of the Conciliator thus
appointed; and
2. Notify the Claimant of its observations
upon the request for Conciliation and the claims
which are contained therein.
C. The Conciliators appointed by the Parties shall,
within thirty (30) Days from the Notice of the
appointment of the second one, proceed to the
appointment of a third Conciliator who shall act as the
Chairman of the Conciliation Board (herein referred to
as "Chairman");
D. If, at the expiration of the thirty (30) Days
stated in Paragraph 26.2 B above, the Respondent has
not proceeded to the appointment and Notice provided
for in Paragraph 26.2 B.1 above, the Claimant shall
submit the matter to the Secretary General of the
United Nations Commission on International Trade
(UNCITRAL) so that he may appoint, or cause to be
appointed, the Conciliator within forty-five (45) Days;
E. If, at the expiration of the thirty (30) Days
stated in Paragraph 26.2 C above, the two Conciliators
have not reached an agreement on the appointment of the
Chairman, the Parties shall have thirty (30) Days to
agree, with the assistance of both Conciliators, upon
the appointment of the Chairman. If they fail to
agree, the most diligent Party shall submit the matter
to the Secretary General of the United Nations
Commission on International Trade (UNCITRAL) so that he
may appoint, or cause to be appointed, the Chairman,
according to the following terms and conditions:
1. In any case and regardless of the
designation procedure, the Chairman shall:
- have no present or past
economic interest in, nor be dependent upon,
either of the Parties or their Affiliates;
- be of a nationality other than
the nationalities of the Parties;
- be of a nationality of a
country which has diplomatic relations with
the countries of the Parties;
- be internationally recognized
as being competent in the petroleum industry;
and
- have a good understanding of
the language of this Agreement.
2. The Chairman shall be appointed within
forty-five (45) Days from a list of two candidates
remaining on a common list prepared from lists
provided by each Party according to the following
procedure:
a) Each Party shall submit to the
other Party a list of five (5) names, stating
qualifications and addresses;
b) The Parties shall meet at the
latest forty-eight (48) hours after the
exchange of lists in order to prepare a
single list of two names. In order to
establish this list, each Party will propose
one name and have the right to challenge all
candidates proposed by the other Party, with
the exception of one only;
c) The single list to be
submitted to the Secretary General of the
UNCITRAL shall be composed of the two
remaining names, in alphabetical order and
without stating the Party who proposed the
names;
d) If one of the Parties does not
comply with the obligations of subparagraphs
1 and/or 2 above, the most diligent Party
shall have the right to submit to the
Secretary General of the UNCITRAL a list of
three (3) persons meeting the criteria listed
in Paragraph 26.2 E.1, for the purposes of
appointing the Chairman; and
e) The Chairman thus appointed
cannot be challenged.
F. If, in the course of the Conciliation, one of the
Conciliators does not fulfill his appointment, dies,
resigns or is unable to continue to participate in it,
the Party who appointed that Conciliator shall be
entitled to appoint his successor within fifteen (15)
Days. Failing that, his successor shall be appointed
according to the procedure specified in Paragraph 26.2
D above; and
G. If, in the course of the Conciliation, the
Chairman does not accept his appointment, dies, resigns
or is unable to continue to participate in it, his
successor shall be appointed according to the procedure
specified in Paragraphs 26.2 C and E above.
26.3 The Conciliation Board sits at Algiers, Algeria, but may
hold hearings in any other place which might be more appropriate.
The Conciliation Board shall decide upon the procedure to follow
for the requirements of its proceedings. It especially sees to
it that each Party be given the full opportunity of pressing its
claims, rights and justifications and that all memoranda or
information be provided simultaneously to the other Party. The
Conciliation Board is specially empowered to:
A. Visit any place it deems necessary for the purpose
of its proceedings;
B. Require the Parties to produce all relevant
documents, records and account books related to the
performance of this Agreement;
C. Proceed to the hearing of the Parties, witnesses
and any other Third Party involved; and
D. Take all other reasonable measures of preliminary
investigation it deems necessary and especially appoint
one or several experts, give them their assignment, and
determine a time limit for the delivery of their
report(s).
26.4 The Parties agree, during the Conciliation proceedings, to:
A. Furnish to the Conciliation Board, upon its
request and within the time limit it specifies, all
memoranda and data necessary for its proceedings and,
in a general way, to participate to the Conciliation
proceedings;
B. Keep confidential the proceedings and all
documents produced in the framework of the
Conciliation;
C. Pay in equal parts the expenses and fees of the
members of the Conciliation Board as set and justified
by the Board and notified by the Chairman who will be
able to make a call for funds; and
D. Not cause any interruption in the performance of
obligations under this Agreement for the sole reasons
of the Conciliation process.
26.5 In order to carry out the assignment with which it has been
entrusted, the Conciliation Board must take into account:
A. Algerian Laws and regulations in effect on the
date of the execution of this Agreement;
B. Provisions of this Agreement and its Annexes; and
C. Practices, customs and rules of the international
petroleum industry.
26.6 Within six (6) months from the appointment of its Chairman,
except when there is an extension by the Conciliation Board made
necessary by a measure of preliminary investigation, the
Conciliation Board must complete its proceedings and address its
recommendation to the Parties.
26.7 The recommendation given to the Parties shall include
reasons explaining the recommendation and its motive.
A. If both Parties accept the recommendation, they
will implement the means which will enable them to
comply with it. The dispute is, then, deemed settled.
B. If one of the Parties rejects the recommendation,
that Party shall notify the Chairman so that the
Conciliation Board may give official notice to the
Parties that the attempt of Conciliation has failed.
C. It shall be possible to submit the dispute to the
competent Algerian jurisdiction according to Article 63
of Law 86-14, if, at the expiration of sixty (60) Days
from the recommendation, the recommendation has not
been expressly accepted by the Parties.
26.8 The recommendation of the Conciliation Board is of a
confidential nature and it cannot be released, produced nor
published by one of the Parties without the specific consent of
the other Party or by a Third Party without the specific consent
of all Parties to this Agreement. The confidential nature of the
recommendation cannot be asserted if the competent jurisdiction
requests its production.
ARTICLE 27
LAWS AND REGULATIONS
27.1 This Agreement shall be subject to Law 86-14 and to its
application decrees, and to the legislations and regulations in
force on the Effective date of this Agreement.
In case of modification of Law 86-14, and any of its
application texts which substantially affect the interest of
either Party, the Parties shall meet and renegotiate in good
faith the eventual modifications to be brought to the contractual
terms in order to reestablish the equilibrium of the respective
interests of the Parties.
In case of an agreement on such modifications, they will be
the object of an amendment of the present Agreement which will be
submitted for approval in the form required by the Competent
Authority.
ARTICLE 28
INSURANCE
28.1 Operator (and its contractors) shall obtain and maintain all
such insurance required by applicable Laws and all other
insurance which the Operating Committee determines should be
obtained.
28.2 Operator, on condition of the respect of applicable Laws and
regulations in effect:
A. May designate claims adjusters, brokers,
underwriters and insurers, process all claims, and take
all reasonable measures to receive indemnities and/or
to obtain reparation for losses; and
B. May have the right to reinsure all insurance
policies with or by its brokers and underwriters.
28.3 Proceeds paid to ANADARKO from insurance for losses
sustained in respect of the conduct of the Minimum Exploration
Program shall be deducted from Exploration Costs to be reimbursed
to ANADARKO.
ARTICLE 29
IMPORTATION/EXPORTATION OF GOODS, MATERIALS AND EQUIPMENT
29.1 The Parties recognize that ANADARKO, its contractors and
their respective expatriate employees who are engaged in
conducting Petroleum Operations under this Agreement, will seek
to be permitted to import temporarily into and to then export
from Algeria, and to be exempted from all Customs Duties with
respect to all types of Exempt Property specified in the Law.
29.2 So as to facilitate the granting to ANADARKO of import
authorizations under Paragraph a) of Article 11 of Law 88-29
dated July 19, 1988, as such right is authorized under Article 27
of Law 86-14, SONATRACH shall assist ANADARKO in order to fulfill
the following formalities:
A. The importation of goods, equipment and material
to be used for the Prospection, Exploration and
Exploitation of Hydrocarbon Pools and the export of
goods, equipment and materials of such nature which was
imported on a temporary basis under the Algerian tax
and customs laws in force; and
B. To request the exemption from Customs Duties of
goods, equipment and materials mentioned above in
accordance with the conditions stated in Law 86-14 of
August 19, 1986.
29.3 However, with respect to the assistance to be furnished by
SONATRACH, SONATRACH shall not be responsible in any way:
A. If ANADARKO fails to furnish the necessary
declarations required under the tax and customs laws;
B. For any false declaration or partial declaration
made by ANADARKO to tax or custom authorities;
C. For the non-payment by ANADARKO of any Custom
Duties imposed or for the partial payment of Custom
Duties; or
D. For the payment of any penalty or indemnity owing
by ANADARKO to tax or custom authorities.
ARTICLE 30
TERMINATION
30.1 Unless the Parties agree otherwise, this Agreement will
terminate upon the occurrence of one of the following events:
A. Withdrawal by ANADARKO pursuant to Paragraph 10.3;
or
B. Expiration of the Exploitation Phase in respect of
all Pools jointly exploited by SONATRACH and ANADARKO
pursuant to this Agreement.
30.2 The responsibility for the consequences resulting from each
Party's acts or omissions up to the date of termination shall
survive this Agreement. Any obligations of such Party then
remaining shall be fulfilled by it within six (6) months of the
date of termination.
ARTICLE 31
NOTICES
31.1 All notices, reports, statements, invoices, cash calls,
requests, demands and other communications (herein referred to as
"Notice") required to be given by one Party to another hereunder
must, in order to be valid, be made in writing and delivered to
the other Party at the address stated below, or to any address
the Party in question may indicate by Notice to the other Party.
FOR SONATRACH 10 rue du Sahara
HYDRA - ALGIERS, ALGERIA 16035
Telephone: 2132-60-61-22
Telex: 62.103 SHDG, 62.104 SHDG
Telecopy: 213-2-60-70-37
FOR ANADARKO 16855 Northchase Drive
HOUSTON, Texas 77060, U.S.A.
Telephone: 1-(713) 875-1101
Telex: 765353
Telecopy: 1-(713) 874-3523 or 875-2287
The date of validity of the Notice shall be considered to be
the date of its reception.
ARTICLE 32
LANGUAGE OF AGREEMENT
32.1 The language of this Agreement is French and all Notices
stated in Article 31 above shall be in the French language.
ARTICLE 33
FINAL PROVISIONS
33.1 This Agreement is comprised of this document and its Annexes
which form an integral part of it.
33.2 In case of discrepancy between the provisions of the
Agreement and the provisions of the Annexes, the provisions of
the Agreement shall prevail.
ARTICLE 34
EFFECTIVENESS
34.1 This Agreement will take effect upon its approval by the
Competent Authority in the forms required by the regulations in
force and as soon as the Protocol takes force.
EXECUTED in Algiers in 6 original copies the 23rd of
October, 1989.
FOR: FOR:
The National Company Anadarko AlgeriaCorporation
SONATRACH
By: /s/ Nadir Sekfali By: /s/ Robert J.Allison. Jr.
Le Directeur General Adjoint Chairman of the Board of Directors and
Chief Executive Officer
ANNEX "B"
ACCOUNTING PROCEDURE
ARTICLE 1 - GENERAL PROVISIONS
1.1 Object and Duration
The purposes of this Accounting Procedure (herein referred
to as the "Accounting Procedure"), is to establish the rules
and procedures concerning:
- the preparation of Budgets.
- the accounting rules.
- the financing of Petroleum Operations.
- the reimbursement of Exploration Costs to
ANADARKO.
The provisions of this Accounting Procedure shall be
applicable until the final settlement of the accounts kept
within the framework of the Agreement. The joint accounting
shall be finally settled and balanced by whatever cash
payments between the Parties are necessary following
presentation by Operator to the Parties of a final statement
of costs, and after a potential Audit.
1.2 Definitions
Definitions stated in the Agreement are applicable to the
Accounting Procedure. Definitions and provisions of the
Accounting Procedure have the same validity and effect as
the definitions and provisions stated in the Agreement.
Certain terms and expressions used both in the Agreement and
in this Accounting Procedure are defined hereunder:
1.2.1 Audit means an audit of Accounting Documents
which is conducted within the period stipulated in
Article 6 herein.
1.2.2 Seismic Processing Center means the computer
equipment and corresponding software as well as the
ancillary equipment listed in Annex D of the Agreement.
1.2.3 Joint Account means that part of the Joint
Accounting System in which Operator shall record:
1. Exploitation Costs incurred realizing
Joint Operations.
2. Cash Calls and other payments paid by
the Parties.
1.2.4 Contractor means any Algerian (including
SONATRACH and an Affiliate of SONATRACH) and
non-Algerian (and any Affiliate of ANADARKO) contractor
engaged by the Operator in the framework of the conduct
of Petroleum Operations.
1.2.5 Seismic Processing Center Costs means the
costs and expenditures incurred by ANADARKO for the
needs of the Seismic Processing Center, less any
potential revenues inherent in services rendered by the
Seismic Processing Center.
1.2.6 Sonatrach Assistance Costs means the cost of
SONATRACH'S assistance furnished to ANADARKO by
SONATRACH.
1.2.7 Training Costs means the costs and expenses
incurred in conducting the training programs covered in
Article 21 of the Agreement.
1.2.8 Exploitation Costs means costs incurred for
Development and Exploitation.
1.2.9 Basin Evaluation Costs means those costs and
expenditures incurred by ANADARKO in conducting the
Basin Evaluation.
1.2.10 Exploration Costs means the total cost
incurred for Exploration and related Overhead by
ANADARKO.
1.2.11 Overhead means general and administrative
costs and expenses listed in Paragraph 5.5.12 herein.
1.2.12 Accrual Method means the accounting method
which recognizes revenue when earned and recognizes
expenses in the accounting period as incurred, without
regard to the date of receipt or payment.
1.2.13 Accounting Documents means statements,
invoices and other accounting records as well as all
other accounting files maintained by Operator with
respect to Petroleum Operations.
1.2.14 Total Cost ("Cost Price" or "Gross Cost")
shall include all costs related to services, equipment,
material or to any identified activity.
Elements of costs making up this Total Cost shall
meet the following conditions:
a. relate to Petroleum Operations
b. be truly incumbent upon the Petroleum
Operations
c. be necessary and required for the proper
functioning of Joint Operations.
d. be sufficiently detailed and supported
by justifying evidence permitting an efficient
control of application of Paragraphs a, b and c
above.
1.2.15 Joint Accounting System means the system of
accounting records approved by the Operating Committee
and maintained by Operator, pursuant to Article 4
herein in which Operator shall record Exploration Costs
and Exploitation Costs.
ARTICLE 2 - BUDGETARY PROVISIONS
2.1 Annual Budgets for Exploration and Exploitation shall
present sufficiently detailed headings to be perfectly
consistent with the cost system accounts and to facilitate
budgetary control.
2.2 Work Programs and Budgets shall be prepared and approved as
defined in the Agreement.
2.3 Once approved by the Operating Committee, Work Programs and
Budgets become executable upon the initiative of the
Operator.
2.3 Before November 2nd of each Calendar Year, Operator shall
submit to the Operating Committee the detailed Work Program
and Budget for the following Calendar Year.
At the latest by November 30th, after verification and any
modification, and potential additions are made, the Budget
shall be definitively adopted by the Operating Committee.
ARTICLE 3 - FINANCIAL PROVISIONS
3.1 Financing of Petroleum Operations
3.1.1 The financing necessary for the execution of
the Work Programs and Budgets approved by the Operating
Committee are assured by the Parties, in accordance
with the provisions of the Agreement.
3.1.2 ANADARKO shall integrally assure the
financing of Exploration work in conformity with
Article 4.1 of the Agreement. Operator shall prepare
quarterly provisional settlements of accounts to be
delivered to the other Party at the latest forty-five
(45) Days after the Calendar Quarter in question
3.1.3 Neither Party shall have the right to use the
Agreement as a vehicle to gain or lose money at the
expense of the other by profiting from variations in
Foreign Exchange rates.
3.1.4 Financial costs of loans, credits,
overdrafts, and other long, medium and short term
financing means to which each of the Parties have
resorted shall be borne solely by each Party and shall
not be, in any case, chargeable to the other Party.
3.2 Cash Calls
3.2.1 Operator shall make quarterly Cash Calls to
the Parties for funds necessary for settling
expenditures relative to jointly financed Petroleum
Operations taking into account the estimation for the
period covered by the current Work Program and the
Budget and the Percentage Share of Financing of each
Party.
The first Cash Call in respect of a Work Program
and Budget shall be for the remainder of the Calendar
Quarter in progress upon the date the Work Program and
Budget are approved. Monthly Cash Calls and the
Procedures for monthly Cash Calls may be adopted by
approval of the Operating Committee.
3.2.2 Except as stated in Paragraph 3.2.1 above
with respect to the period of the first Cash Call, each
Cash Call shall be:
a. equal to Operator's estimate of funds
required to conduct Petroleum Operations during
the succeeding Calendar Quarter under the approved
Work Program and Budget.
b. requested by sending each Party a Notice
not later than the fifteenth (15th) of the month
preceding the Calendar Quarter when the expenses
are to be incurred.
c. in accordance with the remittance
instructions stated in the Cash Call Notice and
paid by the Parties, based upon their respective
Percentage Share of Financing, not later than the
first business Day of the Calendar Quarter for
which the funds are required.
d. sufficiently detailed to permit
appropriate reference to Petroleum Operations to
be conducted at the expense of the Joint Account
under the Work Program and Budget.
e. accompanied by a statement of Operator's
estimate of Cash Calls required for the subsequent
Calendar Quarter.
3.2.3 Within thirty (30) Days following expiration
of each Calendar Quarter, Operator shall deliver to the
Parties a written statement which indicates the balance
(if any) of Cash Calls in the Joint Account upon
expiration of said Calendar Quarter. If the balance is
below or equal to ten percent (10%), an adjustment
shall be made in the Cash Call for the next Calendar
Quarter. If it is in excess by ten percent (10%), an
adjustment shall be made, on the basis of the U.S.
Dollars, within fifteen (15) Days of receipt of the
statement.
3.2.4 If any Party fails to pay Operator its
Percentage Share of Financing of sums due under this
Article, that Party shall be in default, and must pay
the Operator all amounts in default, plus interest on
the amount in default, calculated annually based on the
actual number of Days late, as follows:
- at the London Interbank Offered Rate
("LIBOR"), plus two (2) percentage points,
compounded on a monthly basis. The calculation
shall be based on the rate of the last working Day
of the month preceding the period concerned as
published in the "International Herald Tribune".
- it is understood, however, that if
during a given Calendar Year LIBOR plus two points
is less than ten percent (10%), the retained rate
shall be ten percent (10%).
3.2.5 Notwithstanding the provisions of Article 4
of the Agreement and, independently of the provisions
in the above articles, the Parties may, if they deem it
necessary, mutually agree in respect with laws and
regulations in effect concerning Foreign Exchange
control and transfer, to specific financial conditions
concerning, particularly, the taking over by ANADARKO
of all Foreign Exchange payments and the taking over by
SONATRACH of all Dinar payments for Petroleum
Operations. The above provision shall not in any case
penalize either Party.
ARTICLE 4 - ACCOUNTING PROVISIONS
4.1 All entries and accounting records shall be established in
French.
4.2 The accounting system of Petroleum Operations shall be
prepared by Operator in accordance with the provisions of
the National Accounting Plan, the Agreement and the
Accounting Procedure.
The accounting system shall be established taking into
account the following principles:
- operator shall keep accounting books and vouchers
up to date and according to the rules, in accordance
with the Accounting Procedure in order that an
inspection may be made during business hours and
subject to prior Notice of thirty (30) Days.
- this accounting method shall be based on the
double entry accounting system and transactions shall
be recorded under the Accrual Method.
4.3 Currency of account and exchange procedure
4.3.1 - The Algerian Dinar shall constitute
the currency of accounts; however, during the
Exploration Phase, the account shall be kept in
both Algerian Dinars and U.S. Dollars. Any
Foreign Exchange other than the U.S. Dollar will
be converted into U.S. Dollars, based upon the
exchange rate of this currency as quoted in the
"International Herald Tribune" of the last working
Day of the month of recording.
- To determine if the date provided by
Paragraph 10.2.B of the Agreement has been reached
and to determine the quantities of Liquid
Hydrocarbons as reimbursement provided by Article
18 of the Agreement, the Parties will refer to the
U.S. Dollar accounts
4 3.2 The conversion from U.S. Dollars to Algerian
Dinars shall be based on the monthly average buying
rate of the Central Bank of Algeria (B.C.A.) for the
preceding month, to three decimal places, rounded down
if it is under the number five and up if it is over
that number.
4.4 All Accounting Documents shall be kept available by the
Operator. It is understood that SONATRACH is the sole owner
of all the Accounting Documents and that, upon SONATRACH'S
request, the Accounting Documents shall be handed over to
SONATRACH against a written receipt.
4.5 Operator shall prepare an accounting system and shall submit
it for approval to the Operating Committee. This system
includes a general accounting and an analytical accounting
constituting the Joint Accounting System
4.5.1 The general accounting, in which are recorded
the costs and proceeds of Petroleum Operations, shall
be held by the Operator in accordance with the
provisions of Laws in effect in Algeria, especially
those in the National Accounting Plan (Decree 75-36 of
April 29, 1975 and the application text of June 23,
1975 containing the National Accounting Plan).
4.5.2 Analytical accounting shall permit the
calculation of chargeable Total Cost and facilitate
management control as well as budgetary controls.
This accounting will group together, in collective
analytical accounts, expenditures relating to Petroleum
Operations, thus determining the costs and Total Cost
of:
- investments during Exploration Phase.
- investments during Exploitation Phase.
- Exploitation Costs.
It is understood that appropriate accounts shall
be created to identify and separate expenditures
relating to:
- Basin Evaluation studies.
- Seismic Processing Center.
4.5.3 The collective analytical accounts referred
to above shall be subdivided as follows:
a) Investments during the Exploration
Phase:
- Total Cost of studies and
Exploration work for each type of study or
work and by Exploration block.
- Total Cost of Pools discovered
by type and by Pool in accordance with
Article 18 of the Agreement.
b) Investments during the Exploitation Phase:
- Total Cost of Drilling (by
Well and by Pool)
- Total Cost of studies and of
fixed and specialized installations for
Exploitation (by study or by installation and
by Pool).
c) Exploitation Costs:
The cost for production operations
including all Exploitation Costs by Pool or by
Block up to the Point of Delivery. This
collective account shall be subdivided into
subaccounts in accordance with the Operator's
analytical plan.
d) Basin Evaluation Costs.
e) Costs and expenditures incurred for the
Seismic Processing Center.
4.5.4 The Operator will make sure that the Total
Cost includes all expenses relative to Petroleum
Operations. The Operator will assure particularly
that:
- all charges incurred and unpaid at the
end of the fiscal year are incorporated in the
Total Cost.
- provisions are created and charged to
Total Cost of work and services actually supplied.
- charges paid in advance which have not
been used at the end of the fiscal year are
excluded from the Total Cost.
In order to facilitate analysis, the principal
cost categories shall be clearly indicated in the
analytical accounts.
4.6 All accounting entries shall be substantiated by the
appropriate supporting Accounting Documents particularly:
- contracts and duly approved invoices for external
expenses.
- employment contracts, activity reports, timesheets
for personnel services.
- order forms, purchasing orders, delivery orders,
receiving vouchers, exit forms, invoices and other
orders for the movement of stocks.
4.6.1 All Accounting Documents shall be kept
available by the Operator for the Parties for a period
of twenty-four (24) months from the end of the fiscal
year concerned.
It is understood that SONATRACH shall be the sole
owner of the said Accounting Documents as well as all
supporting documents and that the said documents shall
be handed over to SONATRACH at the end of the
above-mentioned time period.
This period shall be six (6) months in case of
termination by ANADARKO or in case of expiration of the
Agreement.
4.6.2 In order to enable SONATRACH to fulfill its
tax obligations under Law 86-14, at the latest February
28th of each Calendar Year, Operator shall deliver to
SONATRACH all documents and information needed to
prepare the tax return for the preceding year.
It is understood that any penalties or indemnities
caused by delays in the delivery of the above mentioned
documents or information shall be borne solely by the
Operator.
4.7 In addition to accounts necessary for the correct
maintenance of the accounting for Petroleum Operations, each
Party shall keep current accounts where it shall record and
follow expenses financed or paid by each Party. The said
current accounts shall be subdivided as follows:
- current accounts for investments during the
Exploration Phase.
current accounts for investments during the
Exploitation Phase.
- current accounts for Exploitation Costs.
- current accounts for Seismic Processing Center
Costs.
- current accounts for Basin Evaluation Costs.
4.7.1 Operator shall establish and transmit to the
Parties on a quarterly basis, within thirty (30) Days
after the end of the considered Calendar Quarter:
- provisional statements of costs financed
or paid by each Party.
- provisional estimates of Total Cost
compared with the corresponding Budgets which
permit following the progress of Petroleum
Operations.
- a statement of each Party's current
account in accordance with the models to be agreed
to between the Parties.
ARTICLE 5 - CHARGEABLE EXPENSES
5.1 Expenses incurred for the execution of Petroleum Operations
shall be chargeable to the Parties, pursuant to the
Agreement and to the Accounting Procedure. They shall be
sufficiently detailed and substantiated by appropriate
supporting documents.
5.2 Expenses shall be chargeable as they are incurred and shall
be charged according to their nature.
5.3 Investment cost shall include among others:
- Drilling.
- gathering and distribution systems including
pipelines, storage installations, separation and
processing units for Hydrocarbons.
- permanent and prefabricated buildings for
industrial, administrative or dwelling usage, water
conveyance and electrical production systems.
- stocks of spare parts supplied by the contractors.
All costs not included in the category of investment costs
shall be considered as expense.
5.4 Services rendered by Third Parties shall be charged at net
cost billed by the suppliers and to this shall be added the
cost of transportation to the warehouse on the site.
5.5 The rules governing the charging of different costs and
expenses under the categories of Exploration Costs and
Exploitation Costs are as follows:
5.5.1 Personnel Costs:
a) Exploration Phase
During the Exploration Phase the cost of personnel
employed by ANADARKO for the execution of the Petroleum
Operations shall be charged by ANADARKO at their actual
cost.
b) Exploitation Phase
During the Exploitation Phase costs of permanent
employees engaged in the execution of Petroleum
Operations, particularly salaries, benefits,
contributions and expatriation costs, shall be
recovered by the Operator through flat fees determined
on a man-per-day basis for the applicable categories of
personnel.
After their approval by the Operating Committee,
the flat fees shall be charged to the Joint Account.
To readjust the costs actually incurred, each
Party may ask the Operating Committee to update these
flat fees.
5.5.2 Cost of Material
Material that is purchased shall be charged to the
Total Cost, after deduction of all discounts and
reductions owed or received; however, it will include
particularly, transportation and insurance costs and
all other costs concerning the said purchase.
The material supplied by Operator and/or its
Affiliates or by one of the Parties and/or Affiliates
shall in any case be charged at its Total Cost as
provided for in the paragraph above.
5.5.3 Services
The Total Cost of services rendered by Third
Parties shall be charged at the invoice price.
The Total Cost of services rendered by either
Party shall be charged at agreed prices which, in any
case, will not be higher than those which SONATRACH or
ANADARKO would bill to their Affiliates and/or Third
Parties for similar services.
The use of services of the Parties and/or the
Affiliates must be submitted for the prior agreement of
the Parties.
5.5.4 Damage and Losses
The following are chargeable to the Damages and
Losses account:
- All costs and expenses necessary to the
repair or replacement of goods acquired for
Petroleum Operations because of damages or losses
due to fire, eruptions, storm, theft, accident or
any other cause. The Operator shall give Notice
to the Parties as soon as possible of the damages
and losses exceeding fifty thousand (50,000)
Algerian Dinars (or the equivalent in Foreign
Exchange) in each case.
5.5.5 Insurance and Settlement of Damages
- As regards the insurance premiums paid
by the Operator for the Petroleum Operations.
- the amounts received from an insurer to
settle a claim.
- the expenses incurred to settle all
losses, claims, damages and all other similar
expenses incurred for the execution of Petroleum
Operations.
It is understood that such costs and expenditures
shall not be a consequence of the Operator's gross
negligence or willful misconduct.
5.5.6 Legal Costs
- as regards legal expenses resulting from
disputes ensuing from Petroleum Operations.
- attorney fees.
- appraiser expenses.
- sums due as damages resulting from
disputes ensuing from the conduct of Petroleum
Operations.
It is understood that these disputes shall not be
caused by the Operator's gross negligence or willful
misconduct.
5.5.7 Taxes
All taxes related to effecting Petroleum
Operations with the exception of the oil Royalty and
tax on results borne by SONATRACH.
5.5.8 Offices, Camps and Miscellaneous
Installations
- operation and maintenance expenses of
all offices, camps, warehouses, dwellings and
other installations used directly for Petroleum
Operations.
Operation and maintenance expenses shall especially
include:
- operation costs such as, workshops,
transportation services, civil engineering and
utilities.
- expenses for the purchase, rental,
operation, repair and maintenance of radio and
microwave communication systems between the
Contract Area and Operator's installations.
- expenses inherent in all measures taken
for the personnel's safety and well-being,
including all measures taken to preserve the
environment by virtue of the Laws and regulations
in effect.
5.5.9 Training Costs
The costs which are chargeable for the training of personnel
according to Article 21 of the Agreement.
5.5.10 Transportation Expenses
Expenses incurred due to transportation of material, other
than the expenses already included in the purchase cost of
these goods, in accordance with Paragraph 5.5.2 above.
5.5.11 Other Expenses
Any other expenses incurred to meet the needs of Petroleum
Operations that are not included in the expense headings
mentioned above.
5.5.12 Overhead
a) Exploration Phase
Overhead incurred by the parent company of the
Operator provided by the Agreement will be charged to
the Joint Account in proportion to the sum of costs
incurred annually for direct charges, based on the
following percentages:
- Five percent (5%) of Direct Charges
which are equal to or less than ten million
(10,000,000) Algerian Dinars.
- Three percent (3%) of Direct Charges
which are in excess of ten million (10,000)
Algerian Dinars but less than fifteen million
(15,000) Algerian Dinars.
- One percent (1%) of direct Charges which
are equal to or exceed Fifteen Million
(15,000,000) Algerian Dinars.
The overhead charges for services performed by the
whole general organization of the Operator covers the
following functions:
- Management.
- Administrative, Financing, and
Accounting Services.
- Budget, personnel.
- General and continual technical services
from and control by parent company.
- Internal Audit.
- Tax and legal services, research and
development public relations.
- Etc.
b) During the Exploitation Phase
The overhead related to the whole organization in
Algeria will be charged at actual cost to the Joint
Account by the Operator.
However, each Party shall support on their
Percentage Interest of Liquid Hydrocarbons the cost of
technical and administrative assistance made by their
own central departments or Affiliates.
ARTICLE 6 - INSPECTIONS AND ADJUSTMENTS
6.1 All Accounting Documents, especially settlements of accounts
and statements submitted by the Operator to the Parties for
a given fiscal year, shall be deemed to be exact and correct
after the expiration of twelve (12) months from the end of
that fiscal year, unless, within that period, one of the
Parties raises a written objection.
6.2 For a period of twelve months following the date of the end
of that fiscal year, upon thirty (30) Days prior Notice to
the Operator, the Non Operator shall have the right, at its
own costs, to Audit yearly the accounts concerning that
fiscal year and related Accounting Documents for the entire
fiscal year or part thereof.
The said right of Audit shall not extend the time limit
applicable to contest the accounts and claim redress as
provided above.
6.3 In order to keep to a minimum disruption of the Operator's
activities, the Parties shall endeavor, as far as possible,
to conduct the said Audits jointly or simultaneously.
6.4 At the latest sixty (60) Days after the date of the Audit
provided under this Accounting Procedure, the concerned
Party shall send to the Operator its written audit report,
as well as any exceptions raised.
Operator shall respond in writing to the exceptions within
sixty (60) Days after the Notice.
If the exceptions are not withdrawn, the Operator and the
other Party shall have thirty (30) Days to attempt to settle
the controversy.
After the expiration of this period, if no solution is
found, the Parties shall refer the matter to the Operating
Committee.
6.5 At least once a year, Operator shall be bound to take a
physical inventory. The physical and accounting inventories
shall be compared, and any difference shall, upon approval
by the Operating Committee, be the subject of a possible
readjustment of accounts. Operator shall give each Party
written notice at least thirty (30) Days prior to the
commencement of such operations of his intention to take the
physical inventory.
6.6 Each time there is a change of Operator, a physical
inventory shall be taken with duly authorized
representatives of the Parties present. A report of their
inventory will be prepared and signed by the two Operators
in which all related details shall be noted.
ANNEX "C"
BASIN EVALUATION
1. The objective of the Basin Evaluation is to identify free
areas located outside the Contract Area in which may show to
exist economically profitable prospects for Exploration of
Liquid Hydrocarbons.
2. ANADARKO will undertake a regional Basin Evaluation study
dealing with the Hydrocarbon potential of the eight (8)
Exploration Districts shown on the map attached as Annex
C-1, with particular emphasis on Districts 1, 3, 4, 6, 7,
and 8 including the offshore continental shelf.
3. This study will be an integral part of the Minimum
Exploration Program performed during the Exploration Phase.
Periodic reports, technical reviews and recommendations will
be presented to the Operating Committee.
4. Based upon the recommendations of the Basin Evaluation
technical group, the Operating Committee will determine
those free areas for which will be requested either new
Exploration Licences or new prospection authorizations or
either the adding to one or many areas already covered by an
Exploration Licence.
5. To conduct Basin Evaluation, ANADARKO will provide a group
of geologists and geophysicists. This group shall work in
association with SONATRACH to review all existing data of
SONATRACH, which will form the initial database for the
study.
6. In addition to the options of the Parties pursuant to
Paragraphs 8.3 and 8.6 of the Agreement which result from
Basin Evaluation, the Parties may elect to conclude a new
agreement between the Parties for the conducting of
petroleum operations.
7. The Basin Evaluation study, the technical information, and
all reports derived from this study are the exclusive
property of SONATRACH. However, ANADARKO will keep a copy
of that study and the technical information and reports
which it agrees to hold in confidence in accordance with
Article 23 of the Agreement.
8. Costs incurred by ANADARKO in conducting Basin Evaluation
are not included in determining whether ANADARKO has
satisfied its financial obligations stated in Paragraph 10.2
of the Agreement. However, a portion of those expenditures
will be considered Exploration Costs reimbursable to
ANADARKO, conforming to Paragraph 8.4 of the Agreement.
9. In order to conduct Basin Evaluation, the following types of
studies are envisioned:
A. Compilation and review of all available published
and unpublished reports on the subject;
B. Compilation and review of existing SONATRACH data,
including:
1. Base maps (Wells, seismic coverage,
topography, etc.);
2. Well logs, formation tops and test data;
3. Interpreted maps (structure, isopach and
others);
4. Production data;
5. All seismic, gravity and magnetic data
already collected; and
6. Biostratigraphic data and correlations;
C. Construction of regional cross-sections;
D. Regional lithologic descriptions of potential
Reservoir and source rocks (measured sections, core and
cutting descriptions);
E. Outcrop studies/field mapping when necessary,
assisted by satellite imagery interpretation;
F. Interpretation of existing regional geophysical
data and their seismic reprocessing if necessary; and
G. Interpretation of tectonic history and timing of
trap development and its relation to Hydrocarbon
generation and migration.
ANNEX "D"
SEISMIC PROCESSING CENTER
Conditioned upon the signing of an agreement (hereafter
called the "Seismic Processing Center Agreement") between
ANADARKO and SONATRACH, and without prejudice to the provisions
of Paragraph 13 hereof, ANADARKO agrees to purchase, have
installed, and then, for an initial period of three (3) years of
operation, manage, operate and maintain the computer hardware and
software (hereinafter collectively referred to as the "Seismic
Processing Center").
In priority order, the Seismic Processing Center will be
used to:
A. Process and/or reprocess by ANADARKO, SONATRACH'S
available seismic data over the Contract Area;
B. Process the seismic data acquired by ANADARKO on
the Contract Area; and
C. Reprocess seismic data belonging to SONATRACH
necessary for ANADARKO to conduct the Basin Evaluation
work stated in Annex "C" of the Agreement.
The specific terms and provisions concerning the Seismic
Processing Center will be stated in the Seismic Processing Center
Agreement to be entered into between SONATRACH and ANADARKO not
later than three (3) months from the Effective Date. This
agreement must include the following specific provisions:
1. ANADARKO shall operate and manage the Seismic
Processing Center during the first three (3) years of
operation and, with the exception stated in Paragraph 2
below, shall have the exclusive use of the Seismic
Processing Center for the work which will be performed
on the Contract Area and in Basin Evaluation. The
period of the first three (3) years of operation begins
when the Seismic Processing Center is fully installed
and operational in Algeria.
2. During the first three (3) years of operation,
SONATRACH may utilize the Seismic Processing Center to
process its own data, for a minimum of 15% of the
monthly operating time, or more when computer time
becomes available. For this work, SONATRACH will
reimburse ANADARKO on a cost basis, with no profit or
loss to ANADARKO.
3. ANADARKO will provide, at its own cost and
expense, the computer hardware and software necessary
to process approximately 2000 kilometers of data per
month, as well as all the auxiliary equipment such as
furniture, air conditioning equipment, backup
electrical power, power boosters and transformers.
These costs and expenses include, notably, the expense
of purchase of equipment, delivery, importation and
installation of the Seismic Processing Center in
Algeria. These costs and expenses will constitute
Exploration Costs and therefore will be reimbursable in
accordance with the Agreement.
4. During the first three (3) years of operation of
the Seismic Processing Center, ANADARKO will provide
all required maintenance, spare parts, supplies,
equipment, expatriate technicians, and training for
Algerian personnel. These costs and expenses will
constitute Exploration Costs and will be able to be
reimbursed in accordance with the Agreement.
5. During that period, SONATRACH will provide, at its
sole cost and expense, building and office space in
Boumerdes for the Seismic Processing Center and its
related facilities, such as electrical power, water,
gas and telephone lines, as well as all the Algerian
staff deemed necessary by ANADARKO, with SONATRACH'S
agreement, for the operation of the Seismic Processing
Center, with no financial obligation to ANADARKO.
6. During the first three (3) years of operation,
ANADARKO shall have the sole authority concerning the
management, supervision and training of the Algerian
personnel furnished by SONATRACH.
7. The Seismic Processing Center Agreement between
ANADARKO and SONATRACH will contain detailed provisions
relating to the selection, supervision and training of
the Algerian staff to be called to work at the Seismic
Processing Center and provided by SONATRACH, in
accordance with Paragraphs 4 and 6 above.
8. After the Seismic Processing Center has been in
operation for three (3) years, SONATRACH will operate
and manage the Seismic Processing Center and will bear
solely all costs and expenses related to that activity.
SONATRACH will, at this point, have priority usage of
the Seismic Processing Center. ANADARKO, nevertheless,
will have the right to continue to process its data, on
a time available basis, and if ANADARKO determines it
necessary, ANADARKO will have access to the Seismic
Processing Center to copy seismic digital tapes. All
costs relative to the usage of the Seismic Processing
Center by ANADARKO will be billed to ANADARKO on a cost
basis, with no profit or loss to SONATRACH. ANADARKO'S
rights mentioned in this paragraph will continue as
long as ANADARKO executes Petroleum Operations in
Algeria under the Agreement.
9. From the moment it is imported or at the latest
when it is installed, the title to the Seismic
Processing Center shall be held by SONATRACH. The
transfer of ownership, however, will be without
prejudice to ANADARKO'S rights to be reimbursed by
SONATRACH for fifty-one percent (51%) of costs relative
to the Seismic Processing Center, which costs shall
also include Customs Duties (if any) paid by ANADARKO
for the importation of the Seismic Processing Center.
10. The agreement mentioned above will include a
detailed description of all the hardware and software,
as well as all the auxiliary equipment.
11. The agreement mentioned above will contain further
details concerning the installation, management,
operation, priorities and procedures for usage and
maintenance of the Seismic Processing Center in
Algeria.
12. If the Seismic Processing Center is not imported
and operational in Algeria within six (6) months
following the Effective Date of the Agreement, ANADARKO
will, within ten (10) Days from expiration of that
period, call a meeting of the Operating Committee to
seek a solution to the problem causing the delay.
Provided the Operating Committee reaches agreement as
to a solution, ANADARKO shall have a maximum time of
three (3) months from the date of that meeting within
which to import and make the Seismic Processing Center
operational.
13. In the case one of the two following situations occurs:
A. Three (3) months after the Effective Date of the
Agreement SONATRACH and ANADARKO fail to reach final
agreement as to the specific terms and provisions
concerning the Seismic Processing Center Agreement and
the Operating Committee agrees that all possible means
of reaching final agreement have been exhausted and the
principles contained in this Annex have not been
violated by either Party; or
B. ANADARKO fails to import and have the Seismic
Processing Center operational pursuant to Paragraph 12
above, whichever event first occurs, then ANADARKO
shall advance the sums necessary for SONATRACH to
execute, for ANADARKO'S account, the obligations stated
in Paragraph 3 above which ANADARKO is unable to
perform as part of the initial Exploration Work Program
approved by the Operating Committee.
ANNEX "E"
TAKING PROCEDURE
ARTICLE 1
LOADING LIABILITY
SONATRACH shall be liable to ANADARKO for due execution of all
ship loading operations for which it is responsible under the
Agreement and this Annex. On the other hand, all other purely
port operations shall be the direct responsibility of the partner
or his representatives.
ARTICLE 2
QUARTERLY LOADING PROGRAM AND APPORTIONMENT
On the basis of the estimated quantities of Liquid
Hydrocarbons which are expected to be at ANADARKO'S disposal,
eighty-five (8) days before the beginning of each Calendar
Quarter, ANADARKO shall give Notice to SONATRACH of the monthly
quantities it expects to take during each Calendar Quarter.
Within fifteen (15) days of the receipt of the above
mentioned Notice, SONATRACH shall notify ANADARKO either of its
agreement or of the amendments SONATRACH wishes to include in the
program proposed by ANADARKO.
ARTICLE 3
MONTHLY LOADING PROGRAM AND NOMINATION OF SHIPS
3.1 Thirty (30) days before the beginning of each month of the
quarterly loading program, ANADARKO shall notify SONATRACH
of the loading program it wishes to follow during that
month. That Notice shall indicate the quantity of Liquid
Hydrocarbons to be loaded-within ten percent (10%)-onto each
ship and the Expected Time of Arrival ("ETA") for each ship.
Within five (5) days following receipt of that Notice,
SONATRACH shall inform ANADARKO if it can or cannot accept
the ETA proposed by ANADARKO. In the event of
non-acceptance, SONATRACH shall set loading dates as close
as possible to the ones proposed by ANADARKO.
3.2 ANADARKO shall notify SONATRACH ten (10) days in advance of
the firm date ("Firm Date") of the ship's arrival, of its
name, principle dimensions, cargo load capacity, the port(s)
of discharge of cargo and the distribution of the usual
loading documents.
Unless the Parties agree otherwise, the Firm Date so
announced must not be postponed more than two (2) days from
the date previously set in the monthly loading program
established in accordance with the provisions of Paragraph
3.1 of this ANNEX.
3.3 ANADARKO shall take measures to ensure that the captain of
its ship notifies SONATRACH'S representative at the Port of
Loading of the ship's ETA at the Port of Loading, as
follows:
A. A first Notice shall be sent either as soon as the
ship casts off from the last port of call, if that port
is no more than seventy-two (72) hours away from the
Port of Loading (which will have been determined by
SONATRACH) or, if it is not the case, seventy-two (72)
hours prior to the ship's ETA; then
B. A second Notice shall be sent forty-eight (48)
hours prior to the ship's ETA; and finally,
C. A third Notice shall be sent twenty-four (24)
hours prior to the ship's ETA.
3.4 ANADARKO may substitute a ship previously nominated
according to the provisions of this Article for another ship
of the similar type and capacity.
ANADARKO shall notify SONATRACH of any substitution as soon
as possible, and at least seventy-two (72) hours prior to
the ETA of the ship initially nominated.
3.5 Subject to thirty (30) days' prior Notice, SONATRACH
reserves the right to request the taking of Liquid
Hydrocarbons as soon as the volumes in storage which are due
to ANADARKO have reached 50,000 metric tons.
ARTICLE 4
LOADING
4.1 SONATRACH'S representative will load the ship at the berth
assigned to it. The berth shall be free upon the ship's
arrival and shall permit the ship to enter, exit and anchor
in security.
4.2 When the ship arrives at a Port of Loading or in a zone
outside the port, the ship's captain shall notify
SONATRACH'S representative by letter, telex, or radio that
the ship is ready to receive the quantity of Liquid
Hydrocarbons scheduled for that ship, whether the berth is
free or not.
4.3 If, upon the ship's arrival, the ship is led without delay
to the berth, the Notice specified in Paragraph 4.2 above
shall be deemed to have been given as soon as the ship has
completed mooring.
4.4 If the ship arrives at the Port of Loading within twelve
(12) hours prior to or after the Firm Date, the lay day
period shall start either six (6) hours following receipt of
the Notice, or at the start of loading operations, provided
it begins before the end of this six (6) hour period. Any
other delay caused by the ship shall be added to that six
(6) hour period.
4.5 If the ship arrives at the Port of Loading more than twelve
(12) hours prior to the Firm Date, SONATRACH'S
representative shall cause the loading operations to proceed
as soon as possible, taking into consideration the
requirements of the overall loading program of other ships.
In no case shall SONATRACH'S representative be bound to
accept the Notice more than six (6) hours prior to the
expected loading time. The lay days shall be calculated
according to the provisions of Paragraph 4.4 above.
4.6 If the ship arrives at the Port of Loading more than twelve
(12) hours after the Firm Date, SONATRACH'S representative
shall proceed to the loading operations as soon as possible,
taking into consideration the overall loading programs for
other ships and its available supply of Liquid Hydrocarbons.
The lay day period shall start at the first of the following
hours:
A. Either six (6) hours after the Notice given under
Paragraph 4.2 above has been declared acceptable by
SONATRACH'S representative; or
B. At the start of loading operations, if loading
begins less than six (6) hours after acceptance of that
Notice.
4.7 The lay days shall cease when the loading hose pipes are
disconnected and the necessary documents are received on
board.
4.8 The time allotted for the loading shall be equal to one-half
(1/2) the time stated in the latest edition of the WORLDWIDE
TANKER NOMINAL FREIGHT SCALE (hereafter referred to as
"WORLDSCALE") in effect on the day loading is completed, for
ships of similar type and capacity.
4.9 The ship shall leave its berth upon completion of the
loading operations. Any loss or damage suffered by
SONATRACH or its representative due to the ship's failure to
quickly leave its assigned berth, including delays suffered
by other ships waiting for their turn to load, shall be the
responsibility of ANADARKO.
4.10 All piloting, mooring, "lamanage," and deballasting costs
shall be borne by the ship. If, upon SONATRACH'S
representative's request, there is a change of berth during
loading operations, the costs corresponding to that change
shall be borne by SONATRACH.
ARTICLE 5
DEMURRAGE
5.1 Subject to compliance with the Notice provisions of
Paragraphs 3.2 and 3.3, SONATRACH will pay ANADARKO, for any
ship not loaded within the lay day period determined
according to the provisions of Article 4 above, demurrage
for the number of hours or portions thereof in excess these
periods.
5.2 The amount of demurrage shall be calculated at the rate in
effect as stated in the latest edition of WORLDSCALE, for a
ship of the same type and capacity transporting the same
type of Liquid Hydrocarbons. This rate shall be modified by
the Average Freight Rate Assessment percentage (hereafter
referred to as "AFRA") in effect on the day of completion of
loading operations and applicable to that same category of
ship.
5.3 If ANADARKO presents a ship for loading whose size and
Liquid Hydrocarbon tonnage capacity is greater than agreed,
the demurrage shall be calculated at the Worldscale rate
corresponding to the said tonnage to which a five percent
(5%) allowance in respect of fuel and consumables shall be
added. The resulting rate shall be modified by the AFRA
percentage in effect on the date of completion of loading
operations and applicable to the category of ship with the
agreed tonnage, to which the said five percent (5%)
allowance shall be added.
5.4 No demurrage shall be paid by SONATRACH to ANADARKO if the
difficulty or delay in delivering Liquid Hydrocarbons is due
to Force Majeure.
5.5 All claims by ANADARKO for the payment of demurrage must be
received by SONATRACH within three (3) months after the date
of the bill of lading. The claim shall include, in addition
to all the other documents in support of the claim, an
original invoice and four duplicate copies. Beyond this
deadline, the claim shall not be taken into consideration.
ARTICLE 6
DELIVERY AND LOADING CONDITIONS
Liquid Hydrocarbons shall be delivered by SONATRACH and
taken by ANADARKO FOB port of loading.
The features of the ports of loading shall be communicated
to ANADARKO before taking begins.
ARTICLE 7
FREIGHT CONTROL
7.1 The quantity of Liquid Hydrocarbons delivered to ANADARKO
will be volumetrically determined during loading operations
based on measurements of the onshore tanks used to load the
ship. The volumes will be corrected to a temperature of 15
C using appropriate conversions, the deduction being made
for possible BSW.
7.2 ANADARKO will be able to designate, on condition of first
obtaining SONATRACH'S agreement (which agreement will not be
unreasonably withheld), a representative to witness the
inspection of the quantity of Liquid Hydrocarbons during
loading operations of each ship. To that end, SONATRACH
shall place at ANADARKO's representative's disposal a copy
of the quantity calculations and any other information
relating to Liquid Hydrocarbons delivered to ANADARKO. In
this case, the quantity of Liquid Hydrocarbons received
which will appear on the bill of lading will be that which
was determined jointly by SONATRACH and ANADARKO's
representative.
7.3 SONATRACH shall give to ANADARKO a certificate indicating
the quantity of Liquid Hydrocarbons delivered to ANADARKO.
The certificate shall not be contestable after thirty (30)
days following the date of the bill of lading.
7.4 In case of objection by ANADARKO within the time period
stated in Paragraph 7.3 above, Article 26 of the Agreement
will be applied.
7.5 The quality of the Liquid Hydrocarbons shall be determined
from representative samples taken from the onshore tanks.
One of these samples shall be sealed and put on board the
ship for ANADARKO'S use. Another sealed sample shall be
kept by SONATRACH for thirty (30) days from the date of the
bill of lading.
7.6 The quality testing of samples shall take place, except if
otherwise agreed by the Parties, according to the most
recent methods of the American Society for Testing Materials
(ASTM). The sulfur content and water and sediment content
(BSW) will be determined according to ASTM-D-129 and
ASTM-D-96 respectively.