AMENDMENT NO. 1
TO THE AGREEMENT FOR THE EXPLORATION AND
EXPLOITATION OF LIQUID HYDROCARBONS
BETWEEN SONATRACH AND ANADARKO
SIGNED OCTOBER 23, 1989
(Executed 6th March 1997 in Algiers)
Between,
The National Enterprise SONATRACH, whose head office is in
Algiers, 10 Rue du Sahara, Hydra (hereinafter referred to as
"SONATRACH") represented by Mr. Nazim Cherif-Eddine
Zouioueche, General Manager, acting by virtue of the powers
entrusted to him for the purpose of this Amendment,
and,
Anadarko Algeria Corporation, whose head office is 17001
Northchase Drive, Houston, Texas 77060, United Stated
(hereinafter referred to as "Anadarko") represented by Mr.
Robert J. Allison, Jr., Chairman of the Board of Directors and
Chief Executive Officer.
and,
LASMO OIL (Algeria) Limited, whose head office is 100
Liverpool Street, London, EC2M 2BB, United Kingdom
(hereinafter referred to as "LASMO") represented by Mr. Ian D.
Brown, Director, acting by virtue of the powers entrusted to
him for the purpose of this Amendment,
And,
MAERSK OLIE Algeriet A/S, whose head office is 50 Esplanaden DK-
1263, Copenhagen K, Denmark (hereinafter referred to as "MAERSK
Oil") represented by Mr. Kjeld Fjeldgaard, Administrator,
acting by virtue of the powers entrusted to him for the
purpose of this Amendment
- - Considering the Agreement for the Exploration and
Exploitation of Liquid Hydrocarbons entered into between
SONATRACH and Anadarko on October 23, 1989, ratified by
Executive Decree No. 90-08, dated January 1, 1990.
- - Considering law No. 91-12, dated September 7, 1991,
relative to the supplementary Finance Law for 1991,
particularly its Article 23 which modifies and completes
Article 39 of the above-mentioned law No. 86-14, dated
august 19, 1986.
- - Considering law no. 91-21, dated December 4, 1991,
modifying and completing law No. 86-14, dated August 19,
1986.
- - Considering Anadarko's request to modify certain
contractual provisions in order to adapt them to the
amendments to the above-mentioned Law no. 86-14.
- - Considering Anadarko's request to state in U.S. Dollars
the amounts set in the Agreement and in the Accounting
Procedure in Algerian Dinars, by applying the value in
exchange for Algerian Dinars/U.S. Dollars in effect at
the time of the signing of the Agreement.
The following has been agreed upon by the parties:
SECTION I: STATEMENT IN U.S. DOLLARS OF THE AMOUNTS SET IN
ALGERIAN DINARS IN THE AGREEMENT AND THE ACCOUNTING PROCEDURE
(ANNEX B)
ARTICLE 1
Article 5.8.C of the Agreement relative to the function of the
Operating Committee, is modified to read as follows:
"Review, discuss and approve draft contracts in respect
of Petroleum Operations which contemplate an expenditure
for the Joint Account in excess of one million
(1,000,000) U.S. Dollars."
ARTICLE 2
Article 15.5C of the Agreement relative to the function of the
Operator is modified as follows:
"Operator shall have no authority to use budgeted funds
for a particular item which will cost in excess of one
million (1,000,000) U.S. Dollars, without first having
obtained from the Operating Committee approval of an
authorization for expenditure covering that item."
ARTICLE 3
Articles 20.3 and 20.6 of the Agreement relative to the Goods-
Equipment-Fixed Assets and Services are modified as follows:
"20.3 All agreements for the purchase or rental of
any single item of Moveable Property or Immovable
Property for use in Joint Operations chargeable to
the Joint Account and whose anticipated costs exceed
one (1) million (1,000,000) U.S. Dollars, shall be
previously submitted to the Operating Committee for
approval.
20.6 All agreements to be entered into by the Operator
and its contractors which contemplate an expenditure
chargeable to the Joint Account greater than (1)
million (1,000,000) U.S. Dollars, shall be
previously submitted to the Operating Committee for
approval."
ARTICLE 4
Article 5.5.4, subparagraph 2 - Damages and Losses of Annex B
- - Accounting Procedure is modified as follows:
"The Operator shall give Notice to the Parties as soon as
possible of damages or losses exceeding ten thousand (10,000)
U.S. Dollars in each case."
ARTICLE 5
Article 5.5.12(a) Overhead of Annex B - Accounting Procedure
is replaced as follows:
(a) Exploration Phase
Overhead incurred by the parent company of the Operator under
the Agreement, shall be charged to the Joint Account in
proportion to the sum of costs incurred annually for direct
charges, and based on the following percentages:
- - Five percent (5%) of charges less than or equal to one
(1) million U.S. Dollars.
- - Three percent (3%) of charges exceeding one (1) million
U.S. Dollars and less than or equal to two (2) million
U.S. Dollars.
- - One percent (1%) of charges exceeding two (2) million
U.S. Dollars.
The overhead charges represent all charges directly associated
with the whole general organization of the Operator covering
the following functions:
- - Management
- - Administrative, Financing and Accounting Services
- - Budget, Personnel
- - General and continual assistance and technical
supervision by the parent company
- - Internal audit
- - Tax and legal services, research and development, public
relations
- - Etc.
SECTION II: SETTLEMENT OF DISPUTES
ARTICLE 6
Article 26 of the Agreement relative to the settlement of
disputes is amended and completed as follows:
"26.1 If any dispute arising out of the performance
and/or interpretation of this Agreement cannot be
settled by the Parties themselves within sixty (60)
Days of its inception, it shall be subject to a
mandatory conciliation, according to the following
terms and conditions:
A. The Party wishing to have recourse to
conciliation (hereinafter referred to as
"Claimant") shall give notice to the other
Party (hereinafter referred to as "Respondent")
of its request, by registered letter with
return receipt requested, which will state
explicitly the subject matter of the request,
the claims and justifications which support
them, and which will explicitly state the last
and first names, qualifications and address of
its appointed conciliator.
B. Within thirty (30) Days from the receipt of the
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
notification of the appointment of the second
one, take steps to appoint a third conciliator
who shall act as Chairman of the conciliation
board (hereinafter referred to as "the
Chairman").
D. If, upon expiration of the thirty (30) Days
stated in Article 26.1B hereinabove, the
Respondent has not proceeded with the
appointment and notice provided for in Article
26.1.B.1 hereinabove, 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, within forty-five (45)
Days, the conciliator of the Respondent, who
may not, on any account, decline.
E. If, upon expiration of the thirty (30) Days
stated in Article 26.1.C hereinabove, the two
(2) 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
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 appointment
procedure, the Chairman shall:
(a) have no present or past interest in, nor
be dependant upon or subordinate to,
either of the Parties or their Affiliates,
(b) be of a nationality other than the
nationalities of the Parties,
(c) be of a nationality of a country which has
diplomatic relations with the countries of
the Parties,
(d) be internationally recognized as being
competent in the petroleum industry,
(e) 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 (2)
candidates remaining on a common list prepared
from the lists submitted by the two (2) Parties
according to the following procedure:
(a) Each Party shall submit to the other Party
a list of five (5) names, stating their
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 (2) names, in order to establish this
list, each Party will 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 two (2) 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 the subparagraphs (a)
and/or (b) hereinabove, 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 Article 26.1.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 accept his
appointment, is not able to participate,
resigns or dies, 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 Article
26.1.D hereinabove.
G. If, in the course of the conciliation, the
Chairman does not accept his appointment, is
not able to participate, resigns or dies, his
successor shall be appointed according to the
procedure specified in Article 26.1.C and
26.1.E hereinabove.
26.2 The conciliation board sits in Algiers (Algeria),
but may hold hearings in any other place which might
appear to 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 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 location 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.
D. Take measures of preliminary investigation it
deems appropriate and, especially appoint one
or several experts, give them their
assignments, and determine a time limit for the
delivery of their report(s).
26.3 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 to its
proceedings, and, in general, to participate in
the conciliation proceedings,
B. Keep confidential the proceeding 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.
D. Not cause any interruption in the performance
of obligations under this Agreement by reason
of the conciliation being in progress.
26.4 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 force at the
date of signing this Agreement.
B. Provisions of this Agreement and its Annexes.
C. Practices, customs and rules of the
international petroleum industry.
26.5 Within six (6) months from the appointment of its
Chairman, and except when there is an agreement
between the Parties or an extension by the
conciliation board, made necessary by a measure of
investigation, the conciliation board must complete
its proceedings and address a recommendation to the
Parties.
26.6 The recommendation given to the Parties shall
include the reasons explaining and justifying the
recommendation.
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. The dispute may be submitted to arbitration if,
at the expiration of sixty (60) Days from the
recommendation, the recommendation has not been
expressly accepted by the Parties.
26.7 Regardless of its outcome, the recommendation is of
a confidential nature and cannot be released,
produced or 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.
26.8 If the conciliation process fails to resolve the
dispute, the dispute shall be submitted to an
arbitration proceeding, pursuant to the regulations
of CNUDCI (UNCITRAL).
The applicable law shall be the Algerian law,
notably Law 86-14 of August 19, 1986, as amended and
modified, and the regulations for its
implementation.
Arbitration shall take place in Geneva, Switzerland.
The language of arbitration shall be French.
SECTION III: TAX ON REMUNERATION
ARTICLE 7
Annex B - Accounting Procedure is completed by the following
provisions:
"ARTICLE 7 - TAX ON REMUNERATION
7.1 In accordance with the provisions of Article 34 of law
No. 86-14 of August 19, 1986, and Article 23 of law No.
91-12 of September 7, 1991, amended and completing
Article 39 of law No. 86-14 of August 19, 1986, ANADARKO
ALGERIA CORPORATION and each of its transferees
("ANADARKO ") are separately subject to the tax on
remuneration.
7.2 ANADARKO shall calculate for each fiscal year the amount
of the tax on its remuneration, at the standard rate in
force for corporate income tax as set out in the Direct
Tax and Similar Taxes Code.
7.3 The calculation of ANADARKO'S taxable remuneration is as
follows:
R = (Pa+Pb) Pv x Tch + Ii-(Ee + Aei + Aeii + C1)
1-Tn
For any fiscal year for which the sum of expenses and
amortization exceeds the value of ANADARKO'S production
share, the excess shall be carried forward as a deduction
from the taxable remuneration for the following fiscal
years, in accordance with the legislation in force.
To apply the above-mentioned formula:
R = ANADARKO'S remuneration;
Pa = ANADARKO'S production share as defined in
Article 4.3.A of the Agreement;
Pb = ANADARKO'S production share as defined in Articles
4.3.B and 18.3 of the Agreement;
Pv = Base price as defined in Article 44.1 of law No. 86-
14;
Tch = Exchange rate in Algerian dinars as defined in
by Article 44.2 of law No. 86-14;
Ii = Additional tax on the remuneration, if any, paid by
SONATRACH on behalf of ANADARKO, in accordance with
Article 7.12 hereafter;
Ee = Share of the exploitation expenses borne by
Anadarko, being 49% of the total amount of the
operating costs, transportation costs, overhead
costs, etc.
Aei = Amortization of 100% of the Exploration Costs,
determined by taking into consideration the maximum
legal amortization rates specified in Article 54 of
law No. 86-14, dated August 19, 1986;
C1 = Excess of expenses and amortization over the value
of production in previous fiscal years;
Tn = The Rate in force for the tax on remuneration (i.e.
the corporate income tax rate as set out in the
Direct Tax and Similar Taxes Code).
7.4 ANADARKO shall submit to the taxation authorities tax
returns accompanied by all required documents, no later
than the deadline set for the filing of the annual
return.
7.5 ANADARKO shall submit to SONATRACH a copy of the tax
returns as well as all the documents necessary for the
payment of the tax, at least fifteen (15) Days prior to
the deadline set for the filing of the annual return.
7.6 SONATRACH shall pay, in ANADARKO's name and on behalf of
ANADARKO, the amount stated on the tax returns submitted
to the taxation authorities by ANADARKO, after deducting
the amount of provisional instalments already paid for
the said fiscal year, no later than the deadline set for
the filing of the annual return.
7.7 For any fiscal year, the tax on remuneration is due and
payable in twelve (12) provisional monthly instalments.
These instalments shall be paid by SONATRACH and deducted
from the tax on remuneration due for the said fiscal
year.
7.8 Consequently, ANADARKO shall notify SONATRACH ten (10)
Days before the 25th of the month following the month for
which the instalment payment is due, of the amount of the
instalment which must be paid for the said month.
7.9 SONATRACH shall submit to ANADARKO, within thirty (30)
Days following the date of payment, the original receipts
issued by the taxation authorities in the name of
ANADARKO, attesting to the payment of the tax on
remuneration.
7.10 ANADARKO shall be responsible for any delay in filing or
failure to produce the tax returns. ANADARKO shall also
be responsible for any delay in payment or failure to
make payment of the tax on remuneration by SONATRACH on
its behalf.
7.11 It is understood that any penalty established by the
taxation authorities, as a result of any delay in filing,
non-production of the tax returns, mistakes or omissions
in tax returns, will be charged to ANADARKO and paid by
ANADARKO.
In the event that, as a result of SONATRACH's late
payment or failure to make payment, for reasons
attributable to SONATRACH, of all or part of the tax on
remuneration, penalties would be imposed on ANADARKO by
the taxation authorities, SONATRACH shall pay any such
penalties. However, if such penalties are paid by
ANADARKO, SONATRACH will reimburse ANADARKO within
thirty (30) Days following receipt of a demand for
payment issued by ANADARKO.
7.12 In the event that the taxation authorities would reject
the amount of tax on remuneration submitted by ANADARKO,
SONATRACH shall pay immediately, on behalf of ANADARKO,
the total amount of required tax included the requested
additional tax, as well as any penalty or fine relating
thereto.
The required additional tax on remuneration paid by
SONATRACH shall be considered as the amount Ii for the
calculation of the remuneration as provided for by
Article 7.3 hereinabove, only if the additional tax on
remuneration is due on ANADARKO's remuneration.
It is understood that any penalty or fine related thereto
paid by SONATRACH shall be charged to ANADARKO, and
reimbursed by ANADARKO to SONATRACH.
SONATRACH shall also have the right to request from
ANADARKO reimbursement of penalties paid to Algerian tax
authorities and ANADARKO shall reimburse these amounts
within thirty (30) days of the receipt of the request by
SONATRACH.
7.13 SONATRACH shall submit to ANADARKO the original of the
receipts issued by the taxation authorities for these
additional amounts of tax on remuneration, within fifteen
(15) Days from the date of payment.
Within the same period of time, SONATRACH shall submit to
ANADARKO the documents issued by the taxation authorities
for all reimbursements or tax exemptions granted in its
name.
7.14 SONATRACH's payment of the tax on remuneration, on behalf
of ANADARKO, within the framework of the legal provisions
in effect, including, if any, the payment of possible
penalties mentioned in Article 7.11 hereinabove, due to
the delay or failure to pay this tax for reasons strictly
attributable to SONATRACH, shall not be deducted from the
share of Liquid Hydrocarbons going to ANADARKO under the
Agreement.
In the event that, or if in breach of its obligations,
SONATRACH does not pay, within the time limit allowed,
for reasons attributable to SONATRACH, all sums due as
tax on remuneration and penalties, if any, as mentioned
in paragraph 2 of Article 7.11 and ANADARKO pays these
sums pursuant to the taxation authorities' demand,
ANADARKO shall have the right to demand from SONATRACH
the reimbursement of all sums paid to the Algerian
taxation authorities in the currency of origin, and
SONATRACH shall reimburse ANADARKO within 30 Days after
receipt of the request of ANADARKO.
7.15 The Party who suffers a loss because of the failure of
the other Party to reimburse any sums due within the time
periods specified in this Article will be entitled to go
before the Operating Committee, in accordance with
Article 5 of the Agreement."
SECTION IV: LASMO AND MARSK OIL STATUS AS SONATRACH'S PARTNERS
ARTICLE 8
Upon the effective date of this Amendment LASMO is given the
status of Party to the Agreement dated October 23, 1989 and
partner of SONATRACH, with a participation interest of twenty-
five per cent (25%) of ANADARKO's rights, interests and
obligations under this Agreement.
LASMO shall, in proportion with its participation interest,
succeed to ANADARKO in all ANADARKO's rights and obligations
under the Agreement of October 23, 1989. LASMO agrees to
respect all provisions of that Agreement.
ARTICLE 9
Upon the effective date of this Amendment MAERSK Oil is given
the status of Party to the Agreement dated October 23, 1989
and partner of SONATRACH, with a participation interest of
twenty-five per cent (25%) of ANADARKO's rights, interests and
obligations under this Agreement.
MAERSK Oil shall, in proportion with its participation
interest, succeed to ANADARKO in all ANADARKO's rights and
obligations under the Agreement of October 23, 1989. MAERSK
Oil agrees to respect all provisions of that Agreement.
ARTICLE 10
ANADARKO, LASMO and MAERSK Oil shall be jointly and severally
responsible to SONATRACH for all obligations arising from the
Agreement dated October 23, 1989.
SECTION V: GENERAL PROVISIONS
ARTICLE 11
All the provisions of the Agreement dated October 23, 1989
which have not been expressly modified for this Amendment
remain applicable.
ARTICLE 12
This Amendment shall become effective upon being approved by
the Competent Authority, according to the procedures required
pursuant to the legislation and regulation in effect.
Made in Algiers on ________________ in eight (8) originals.
For Sonatrach For Anadarko
Le Directeur General Chairman of the Board of
Directors and Chief Executive
Officer
______________________________
Nazim Cherif-Eddine Zouioueche- ______________________________
___
Robert J. Allison Jr.
For Lasmo For Maersk Oil
Director President
______________________________ ______________________________
Ian D. Brown ___
Kjeld Fjeldgaard