CONCESSION AGREEMENT FOR
PETROLEUM EXPLORATION AND EXPLOITATION
BETWEEN
THE ARAB REPUBLIC OF EGYPT AND
THE EGYPTIAN GENERAL PETROLEUM CORPORATION
AND
DUBLIN INTERNATIONAL PETROLEUM (EGYPT) LIMITED
AND TANGANYIKA OIL COMPANY LTD.
IN
WEST GHARIB AREA
EASTERN DESERT
A. R. E.
"W Gharib Concession 20-F"
INDEX
ARTICLE TITLE PAGE
- ------- ------ ------
I DEFINITIONS 2
II ANNEXES TO THE AGREEMENT 6
III GRANT OF RIGHTS AND TERM 8
IV WORK PROGRAM AND EXPENDITURES DURING EXPLORATION PERIOD 18
V MANDATORY AND VOLUNTARY RELINQUISHMENTS 25
VI OPERATIONS AFTER COMMERCIAL DISCOVERY 27
VLI RECOVERY OF COSTS AND EXPENSES AND PRODUCTION SHARING 30
VIII TITLE TO ASSETS 50
IX BONUSES 51
X OFFICE AND SERVICE OF NOTICES 52
XI SAVING OF PETROLEUM AND PREVENTION OF LOSS 53
XII CUSTOMS EXEMPTIONS 54
XIII BOOKS OF ACCOUNT: ACCOUNTING AND PAYMENTS 57
XIV RECORDS, REPORTS AND INSPECTION 58
XV RESPONSIBILITY FOR DAMAGES 60
XVI PRIVILEGES OF GOVERNMENT REPRESENTATIVES 60
XVII EMPLOYMENT RIGHTS AND TRAINING OF ARAB REPUBLIC OF EGYPT PERSONNEL 61
"W Gharib Concession 20-F"
INDEX
ARTICLE TITLE PAGE
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XVIII LAWS AND REGULATIONS 63
XIX STABILIZATION 64
XX RIGHT OF REQUISITION 65
XXI ASSIGNMENT 66
XXII BREACH OF AGREEMENT AND POWER TO CANCEL 67
XXIII FORCE MAJEURE 69
XXIV DISPUTES AND ARBITRATION 70
XXV STATUS OF PARTIES 72
XXVI LOCAL CONTRACTORS AND LOCALLY MANUFACTURED MATERIAL 72
XXVII ARABIC TEXT 73
XXVIII GENERAL 73
XXIX APPROVAL OF THE GOVERNMENT 74
ANNEXES TO THE CONCESSION AGREEMENT
ANNEX "A" BOUNDARY DESCRIPTION OF THE CONCESSION AREA 75
ANNEX "B" ILLUSTRATIVE MAP SHOWING AREA COVERED 78
ANNEX "C" LETTER OF GUARANTY 79
ANNEX "D" CHARTER OF OPERATING COMPANY 81
ANNEX "E" ACCOUNTING PROCEDURE 86
ANNEX "F" MAP OF THE NATIONAL GAS PIPELINE GRID SYSTEM 104
"W Gharib Concession 20-F"
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CONCESSION AGREEMENT FOR PETROLEUM
EXPLORATION AND EXPLOITATION
BETWEEN
THE ARAB REPUBLIC OF EGYPT
AND THE EGYPTIAN GENERAL PETROLEUM CORPORATION
AND
DUBLIN INTERNATIONAL PETROLEUM (EGYPT} LIMITED
AND
TANGANYIKA OIL COMPANY LTD.
IN
WEST GHARIB AREA
EASTERN DESERT
A.R.E.
This Agreement made and entered on this _____ day of ____________, 199__ , by
and between the ARAB REPUBLIC OF EGYPT (hereinafter referred to variously as"
A.R.E." or as the "GOVERNMENT"), the EGYPTIAN GENERAL PETROLEUM CORPORATION,
a legal entity created by Law No.167 of 1958 as amended (hereinafter referred
to as "EGPC") and DUBLIN INTERNATIONAL PETROLEUM (EGYPT) LIMITED., a company
organized and existing under the laws of the REPUBLIC OF IRELAND,
(hereinafter referred to as "DUBLIN") and TANGANYIKA OIL COMPANY LTD., a
company organized and existing under the laws of the province of British
Columbia, Canada (hereinafter referred to as "TANGANYIKA") (DUBLIN and
TANGANYIKA shall be hereinafter referred to collectively as "CONTRACTOR" and
individually as "CONTRACTOR MEMBER".
WITNESSETH
WHEREAS, all minerals including petroleum, existing in mines and quarries in
A.R.E., including the territorial waters, and in the seabed subject to its
jurisdiction and extending beyond the territorial waters, are the property of
the State; and
WHEREAS, EGPC has applied for an exclusive concession for the exploration and
exploitation of petroleum in and throughout the area referred to in Article
II, and described in Annex "A" and shown approximately on Annex "B", which
are attached hereto and made a part hereof (hereinafter referred to as the
"Area"); and
WHEREAS, "DUBLIN and TANGANYIKA" agree to undertake their obligations
provided hereinafter as a CONTRACTOR with respect to the exploration,
development and production of petroleum in West Gharib Area in Eastern
Desert; and
WHEREAS, the GOVERNMENT desires hereby to grant such Concession; and
WHEREAS, the Minister of Petroleum pursuant to the provisions of Law No.86 of
1956, may enter into a concession agreement with EGPC, and with DUBLIN and
TANGANYIKA as a contractor in the said Area.
"West Gharib Concession 20-F"
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NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
(a) "Exploration" shall include such geological, geophysical, aerial; and
other surveys as may be contained in the approved Work Programs and Budgets,
and the drilling of such shot holes, core holes, stratigraphic tests, holes
for the discovery of Petroleum or the appraisal of Petroleum discoveries and
other related holes and wells, and the purchase or acquisition of such
supplies, materials, services and equipment therefore, all as may be
contained in the approved Work Programs and Budgets. The verb "explore" means
the act of conducting Exploration.
(b) "Development" shall include, but not be limited to, all the operations
and activities pursuant to approved Work Programs and Budgets under this
Agreement with respect to:
(i) the drilling, plugging, deepening, side tracking, redrilling,
completing, equipping of development wells, the changing of the status
of a well, and
(ii) design, engineering, construction, installation, servicing and
maintenance of equipment, lines, systems facilities, plants and related
operations to produce and operate said development wells, taking,
saving, treating, handling, storing, transporting and delivering
petroleum, repressuring, recycling and other secondary recovery
projects, and
(iii) transportation, storage and any other work or activities
necessary or ancillary to the activities specified in (i) and {ii).
(c) "Petroleum" means liquid crude oil of various densities, asphalt, gas,
casinghead gas and all other hydrocarbon substances that may be found in, and
produced, or otherwise obtained and saved from the Area under this Agreement,
and all substances that may be extracted therefrom.
(d) "Liquid Crude Oil' or "Crude Oil" or "Oil" means any hydrocarbon produced
from the Area which is in a liquid state at the wellhead or lease separators
or which is extracted from the gas or casinghead gas in a plant. Such liquid
state shall exist at sixty degrees Fahrenheit (60(Deg.)F) and atmospheric
pressure of 14.65 PSIA. Such term includes distillate and condensate.
(e) "Gas" means natural gas both associated and non-associated, and all of
its constituent elements produced from any well in the Area (other than
Liquid Crude Oil) and all non-hydrocarbon substances therein. Said term shall
include residual gas, that Gas remaining after removal of LPG.
(f) "LPG" means liquefied petroleum gas, which is a mixture principally of
butane and propane liquefied by pressure and temperature.
(g) A "Barrel" shall consist of forty-two (42) United States gallons, liquid
measure, corrected to a temperature of sixty degrees Fahrenheit (60(Deg.)F)
at atmospheric pressure of 14.65 PSIA.
"West Gharib Concession 20-F"
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(h) (1) "Commercial Oil Well" means the first well on any geological
feature which after testing for a period of not more than thirty (30)
consecutive days where practical, but in any event in accordance with
sound and accepted industry production practices, and verified by EGPC,
is found to be capable of producing at the average rate of not less
than two thousand (2000) Barrels of oil per day (BOPD). The date of
discovery of a "Commercial Oil Well" is the date on which such well is
tested and completed according to the above.
(2) "Commercial Gas Well" means the first well on any geological
feature which after testing for a period of not more than thirty (30)
consecutive days where practical, but in any event in accordance with
sound and accepted industry production practices and verified by EGPC,
is found to be capable of producing at the average rate of not less
than fifteen million (15,000,000) standard cubic feet of Gas per day
(MMSCFD). The date of discovery of a "Commercial Gas Well" is the date
on which such well is tested and completed according to the above.
(i) "A.R.E." means ARAB REPUBLIC OF EGYPT.
(j) "Effective Date" means the date on which the text of this Agreement is
signed by the GOVERNMENT, EGPC and CONTRACTOR, after the relevant Law is issued.
(k) (1) "Year" means a period of twelve (12) months according to the
Gregorian Calendar.
(2) "Calendar Year" means a period of twelve (12) months according to
the Gregorian Calendar 1st January to 31st December.
(l) "Financial Year" means the GOVERNMENT's financial year according to the laws
and regulations of the A.R.E.
(m) "Tax Year" means the period of twelve (12) months according to the laws and
regulations of the A.R.E.
(n) An "Affiliated Company" means a company:
(i) of which the share capital, conferring a majority of votes at
stockholders' meetings of such company, is owned directly or indirectly
by a party hereto; or
(ii) which is the owner directly or indirectly of share capital
conferring a majority of votes at stockholders' meetings of a party
hereto; or
(iii) of which the share capital conferring a majority of votes at
stockholders' meetings of such company and the share capital conferring
a majority of votes at stockholders' meetings of a party hereto are
owned directly or indirectly by the same company.
(o) "Exploration Block" shall mean an area, the corner points of which have to
be coincident with three (3) minutes by three (3) minutes latitude and longitude
divisions, according to the International Grid System where possible or with the
existing boundaries of the Area covered by this Concession Agreement as set out
in Annex "A".
(p) "Development Block" shall mean an area, the corner points of which have to
be coincident with one (1) minute by one (1) minute latitude and longitude
divisions, according to the International Grid System where possible or with the
existing boundaries of the Area covered by this Concession Agreement as set out
in Annex "A".
"West Gharib Concession 20-F"
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(q) "Development Lease(s)" shall mean the Development Block or Blocks
covering the geological structure capable of production, the corner points of
which have to be coincident with one (1) minute by one (1) minute latitude
and longitude divisions according to the International Grid System where
possible or with the existing boundaries of the Area covered by this
Concession Agreement as set out in Annex "A".
(r) "Agreement" shall mean this Concession Agreement and its Annexes.
(s) "Gas Sales Agreement" shall mean a written agreement between EGPC and
CONTRACTOR (as sellers) and EGPC (as buyer), which contains the terms and
conditions for Gas sales from a Development Lease entered into pursuant to
Article VII (e).
(t) "Standard Cubic Foot" (SCF) is the amount of gas necessary to fill one
(1) cubic foot of space at atmospheric pressure of 14.65 PSIA at a base
temperature of sixty degrees Fahrenheit (60 F).
ARTICLE II
ANNEXES TO THE AGREEMENT
Annex "A" is a description of the area covered and affected by this
Agreement, hereinafter referred to as the "Area".
Annex "B" is a provisional illustrative map on the scale of approximately 1:
600 000 indicating the Area covered and affected by this Agreement and
described in Annex "A".
Annex "C" is the form of a Letter of Guarantee to be submitted by CONTRACTOR
to EGPC one (1) day before the time of signature by the Minister of Petroleum
of this Agreement, for the sum of five million (5,000,000) U.S. Dollars
guaranteeing the execution of CONTRACTOR's minimum Exploration obligations
hereunder for the initial three (3) year Exploration period. In case
CONTRACTOR extends the initial Exploration Period for two (2) additional
periods of three (3) years and of two (2) years respectively, each in
accordance with Article III(b) of this Agreement, similar Letters of
Guarantee shall be issued and be submitted by CONTRACTOR on the day the
CONTRACTOR exercises its option to extend. The first such Letter of Guarantee
shall be for the sum of four million (4,000,000) U.S. Dollars and the second
such Letter of Guarantee shall be for the sum of four million and five
hundred thousand {4,500,000) U.S. Dollars less in both instances any excess
expenditure of the preceding Exploration period permitted for carry forward
in accordance with Article IV (b) third paragraph of this Agreement. Each of
the three Letters of Guarantee shall remain effective for six (6) months
after the end of the Exploration period for which it has been issued except
as it may be released prior to that time in accordance with the terms thereof.
Annex "D" is the form of a Charter of the Operating Company to b e formed as
provided for in Article VI.
Annex "E" is the Accounting Procedure.
Annex "F" is a current map of the National Gas Pipeline Grid System
established by the Government. The point of delivery for gas shall be agreed
upon by EGPC and CONTRACTOR under a Gas Sales Agreement, which point of
delivery shall be located at the flange connecting the development lease
pipeline to the nearest point on the National Gas pipeline Grid System as
depicted in this Annex "F" or as otherwise agreed upon between EGPC and
CONTRACTOR .
"West Gharib Concession 20-F"
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Annexes "A", "B", "C", "D", "E", and "F" to this Agreement are hereby made
part hereof, and they shall be considered as having equal force and effect
with the provisions of this Agreement.
ARTICLE III
GRANT OF RIGHTS AND TERM
The GOVERNMENT hereby grants EGPC and CONTRACTOR subject to the terms,
covenants and conditions set out in this Agreement, which insofar as they are
contrary to, or inconsistent with any provisions of Law No.66 of 1953, as
amended, shall have the force of Law, an exclusive concession in and to the
Area described in Annexes "A" and "B".
(a) The GOVERNMENT shall own and be entitled, as hereinafter provided to a
royalty in cash or in kind of ten percent (10%) of the total quantity of
Petroleum produced and saved from the Area during the development period
including renewal. Said royalty shall be borne and paid by EGPC and shall not
be the obligation of CONTRACTOR. The payment of royalties by EGPC shall not
be deemed to result in income attributable to the CONTRACTOR.
(b) An initial Exploration Period of three (3) years shall start from the
Effective Date. Two (2) successive extensions to the initial Exploration
period of three (3) years and two (2) years respectively, shall be granted to
CONTRACTOR at its option, upon not less than thirty (30) days prior written
notice to EGPC, such notice to be given not later than the end of the then
current period, as may be extended pursuant to the provisions of Article V
(a), and subject only to its having fulfilled its obligations hereunder for
that period. This Agreement shall be terminated if neither a Commercial Oil
Discovery nor a Commercial Gas Discovery is established by the end of the
eighth (8th) year of the Exploration period, as may be extended pursuant to
Article V (a) The election by EGPC to undertake a sole risk venture under
paragraph (c) below shall not extend the Exploration Period nor affect the
termination of this Agreement as to CONTRACTOR.
(c) Commercial Discovery:
(i) A Commercial Discovery - whether of Oil or Gas - may consist of one
producing reservoir or a group of producing reservoirs which is worthy
of being developed commercially. After discovery of a Commercial Oil or
Gas Well CONTRACTOR shall, unless otherwise agreed upon with EGPC,
undertake as part of its Exploration program the appraisal of the
discovery by drilling one or more appraisal wells, to determine whether
such discovery is worthy of being developed commercially, taking into
consideration the recoverable reserves, production, pipelines and
terminal facilities required, estimated Petroleum prices, and all other
relevant technical and economic factors.
(ii) The provisions laid down herein postulate the unity and
indivisibility of the concepts of Commercial Discovery and Development
Lease. They shall apply uniformly to Oil and Gas unless otherwise
specified.
"West Gharib Concession 20-F"
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(iii) CONTRACTOR shall give notice of a Commercial Discovery to EGPC
immediately after the discovery is considered by CONTRACTOR to be
worthy of commercial development but in any event with respect to a
Commercial Oil Well not later than thirty (30) days following the
completion of the second appraisal well or twelve (12) months following
the date of the discovery of the Commercial Oil Well, whichever is
earlier or with respect to a Commercial Gas Well not later than twenty
four (24) months following the date of the discovery of the Commercial
Gas Well unless EGPC agrees that such period may be extended), except
that CONTRACTOR shall also have the right to give such notice of
Commercial Discovery with respect to any reservoir or reservoirs even
if the well or wells thereon are not "Commercial" within the definition
of the "Commercial Well" if, in its opinion, a reservoir or a group of
reservoirs, considered collectively, could be worthy of commercial
development.
CONTRACTOR may also give a notice of a Commercial Oil Discovery in the
event it wishes to undertake a gas recycling project.
A notice of Commercial Gas Discovery shall contain all detailed
particulars of the discovery and especially the area of Gas reserves,
the estimated production potential and profile and field life.
Within sixty (60) days following receipt of a notice of a Commercial
Oil or Gas Discovery, EGPC and CONTRACTOR shall meet and review all
appropriate data with a view to mutually agreeing upon the existence of
a Commercial. Discovery. The date of Commercial Discovery shall be the
date EGPC and CONTRACTOR jointly agree in writing that a Commercial
Discovery exists.
(iv) If Crude Oil is discovered but is not deemed by CONTRACTOR to be a
Commercial Oil Discovery under the above provisions of this paragraph (c),
EGPC shall one (1) month after the expiration of the period specified above
within which CONTRACTOR can give notice of a Commercial Oil Discovery, or
thirteen (13) months after the completion of a well not considered to be a
"Commercial Oil Well", have the right, following sixty (60) days notice in
writing to CONTRACTOR, at its sole cost, risk and expense, to develop,
produce and dispose of all Crude Oil from the geological feature on which the
well has been drilled. Said notice shall state the specific area covering
said geological feature to be developed, the wells to be drilled, the
production facilities to be installed and EGPC's estimated cost thereof.
Within thirty (30) days after receipt of said notice CONTRACTOR may, in
writing, elect to develop such area as provided for in the case of Commercial
Discovery hereunder. In such event all terms of this Agreement shall continue
to apply to the specified area.
If CONTRACTOR elects not to develop such area, the specific area covering
said geological feature shall be set aside for sole risk operations by EGPC,
such area to be mutually agreed upon by EGPC and CONTRACTOR on the basis of
good petroleum industry practice. EGPC shall be entitled to perform or in the
event Operating Company has come into existence, to have Operating Company
perform such operations for the account of EGPC and at EGPC's sole cost, risk
and expense. When EGPC has recovered from the Crude Oil produced from such
specific area a quantity of Crude Oil equal in value to three hundred percent
(300%) of the cost it has incurred in carrying out the sole risk operations,
CONTRACTOR shall have the option, only in the event there has been a separate
Commercial Oil Discovery, elsewhere within the Area, to share in further
development and production of that specific area upon paying EGPC one hundred
percent (100%) of such costs incurred by EGPC.
"West Gharib Concession 20-F"
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Such one hundred percent (100%) payment shall not be recovered by CONTRACTOR.
Immediately following such payment the specific area shall either (i) revert
to the status of an ordinary development Lease under this Agreement and
thereafter shall be operated in accordance with the terms hereof: or (ii)
alternatively, in the event that at such time EGPC or its Affiliated Company
is conducting Development operations in the area at its sole expense and EGPC
elects to continue operating, the area shall remain set aside and CONTRACTOR
shall only be entitled to its production sharing percentages of the Crude Oil
as specified in Article VII (b). The sole risk Crude Oil shall be valued in
the manner provided in Article VII (c). In the event of any termination of
this Agreement under the provisions of Article III (b), this Agreement
shall, however, continue to apply to EGPC's operations of any sole risk
venture hereunder, although such Agreement shall have been terminated with
respect to CONTRACTOR pursuant to the provisions of Article III (b)
(d) Conversion to a Development Lease:
(i) Following a Commercial Oil Discovery or a Commercial Gas Discovery
the extent of the whole area capable of production to be covered by a
Development Lease shall be, mutually agreed upon by EGPC and
CONTRACTOR and be subject to the approval of the Minister of Petroleum.
Such area shall be converted automatically into a Development Lease
without the issue of any additional legal instrument or permission.
(ii) Following the conversion of an area to a Development Lease based
on a Commercial Gas Discovery (or upon the discovery of Gas in a
Development Lease granted following a Commercial Oil Discovery), EGPC
shall endeavor with diligence to find adequate local markets capable of
absorbing the production of Gas and shall advise CONTRACTOR of the
potential outlets for such Gas, and the expected annual.schedule of
demand. Thereafter, EGPC and CONTRACTOR shall meet with a view to
assessing whether the outlets for such Gas and other relevant factors
warrant the development and production of the Gas and in case of
agreement the Gas thus made available shall be disposed of to EGPC
under a long-term Gas Sales Agreement in accordance with and subject to
the conditions set forth inn Article VII.
(iii) The Development period of each Development Lease shall be as
follows:
(aa) In respect of a Commercial Oil Discovery, twenty (20)
years from the date of such Commercial Discovery plus the
Optional Extension Period (as defined below) provided that, in
the event that, subsequent to the conversion of a Commercial
Oil Discovery into a Development Lease, Gas is discovered in
the same Development Lease and is used or is capable of being
used locally or for export hereunder, the period of the
Development Lease shall be extended only with respect to such
Gas, LPG extracted from such Gas and Crude Oil in the form of
condensate produced with such Gas for twenty (20) years from
the date of first deliveries of Gas locally or for export plus
the Optional Extension Period (as defined below) provided that
the duration of such Development Lease based on a Commercial
Oil Discovery may not be extended beyond thirty-five (35)
years from the date of such Commercial Oil Discovery, unless
otherwise agreed upon between EGPC and CONTRACTOR and subject
to the approval of the Minister of Petroleum.
CONTRACTOR shall immediately notify EGPC of any Gas Discovery
but shall not be required to apply for a new Development Lease
in respect of such Gas.
"West Gharib Concession 20-F"
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(bb) In respect of a Commercial Gas Discovery, twenty (20)
years from the date of first deliveries of Gas locally or for
export plus the Optional Extension Period (as defined below)
provided that if subsequent to the conversion of a Commercial
Gas Discovery into a Development Lease, Crude Oil is
discovered in the same Development Lease, CONTRACTOR's share
of such Crude Oil from the Development Lease (except LPG
extracted from Gas or Crude Oil in the form of condensate
produced with Gas) and Gas associated with such Crude Oil
shall revert entirely to EGPC upon the lapse of twenty (20)
years from the date of such Crude Oil Discovery plus the
Optional Extension Period (as defined below),
Notwithstanding, anything to the contrary under this
Agreement, the duration of a Development Lease based on a
Commercial Gas Discovery shall in no case exceed thirty-five
(35) years from the date of such, Commercial Gas Discovery,
unless otherwise agreed upon between EGPC and CONTRACTOR and
subject to the approval of the Minister of Petroleum.
CONTRACTOR shall immediately notify EGPC of any Oil Discovery
but shall not be required to apply for a new Development Lease
in respect of such Crude Oil.
The "Optional Extension Period" shall mean a period of five.
(5) years which may be elected by CONTRACTOR upon six (6)
months written notice to EGPC prior to the expiry of the
relevant twenty (20) year period.
(e) Development operations shall upon the issuance of a Development Lease
granted following a Commercial Oil Discovery, be promptly by Operating
Company and be conducted in accordance with good oil field practices and
accepted petroleum engineering principles, until the field is considered to
be fully developed, it being understood that if associated gas is not
utilized, EGPC and CONTRACTOR shall negotiate in good faith to determine the
best way to avoid impairing the production in the interest of the parties.
In the event no Commercial Production of Oil in regular shipments is
established in any Development Block within four (4) years from the date of
the Commercial Oil Discovery, such Development Block shall immediately be
relinquished, unless there is a Commercial Gas discovery on the Development
Lease. Each Development Block in a Development Lease being partly within the
radius of drainage of any producing well in such Development Lease shall be
considered as participating in the Commercial Production referred to above.
Development operations in respect of Gas and Crude Oil in the form of
condensate or LPG to be produced with or extracted from such Gas shall, upon
the signature of a Gas Sales Agreement or commencement of a scheme to dispose
of the Gas, whether for export as referred to in Article VII or otherwise, be
started promptly by Operating Company and be conducted in accordance with
good gas field practices and accepted petroleum engineering principles and
the provisions of such Gas Sales Agreement or scheme. In the event no
Commercial Production of Gas is established in accordance with such Gas Sales
Agreement or scheme, the Development Lease relating to such Gas shall be
relinquished, unless otherwise agreed upon by EGPC.
"West Gharib Concession 20-F"
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If, upon application by CONTRACTOR it is recognized by EGPC that Crude Oil or
Gas is being drained from an Exploration block under this Agreement into a
Development Block on an adjoining concession area herd by CONTRACTOR, the
Block being drained shall be considered as participating in the Commercial
Production of the Development Block in question and the Block being drained
shall be converted into a Development Lease with the ensuing allocation of
costs and production (calculated from the Effective Date or the date such
drainage occurs, whichever is later) between the two Concession Areas. The
allocation of such costs and production under each Concession Agreement shall
be in the same portion that the recoverable reserves in the drained
geological structure underlying each Concession Area bears to the total
recoverable reserves of such structure underlying both Concession Areas. The
production allocated to a concession area shall be priced according to the
concession agreement covering that concession area.
(f) CONTRACTOR shall bear and pay all the costs and expenses required in
carrying out all the operations under this Agreement but such costs and
expenses shall not include any interest on investment. CONTRACTOR shall look
only to the Petroleum to which it is entitled under this Agreement to recover
such costs and expenses. Such costs and expenses shall be recoverable as
provided in Article VII. During the term of this Agreement and its renewal,
the total production achieved in the conduct of such operations shall be
divided between EGPC and CONTRACTOR in accordance with the provisions of
Article VII.
(g) (1) Unless otherwise provided, CONTRACTOR shall be subject to Egyptian
income tax laws and shall comply with the requirements of such laws
with respect to the filing of returns, the assessment of tax, and
keeping and showing of books and records.
(2) CONTRACTOR's annual income for Egyptian income tax purposes under
this Agreement shall be an amount calculated as follows:
The total of the sums received by CONTRACTOR from the sale or other
disposition of all Petroleum acquired by CONTRACTOR pursuant to Article
VII (a) and Article VII (b);
Reduced by:
(i) The costs and expenses of CONTRACTOR;
(ii) The value as determined according to Article VII (c), of EGPC's
share of the Excess Cost Recovery Petroleum repaid to EGPC in cash or
in kind, if any,
"West Gharib Concession 20-F"
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Plus:
An amount equal to CONTRACTOR's Egyptian income taxes grossed up in the
manner shown in Annex "E" Article VI.
For purposes of above tax deductions in any Tax Year, Article VII (a)
shall apply only in respect of classification of costs and expenses and
rates of amortization, without regard to the percentage limitation
referred to in the first paragraph of Article VII (a) (1). All costs
and expenses of CONTRACTOR in conducting the operations under this
Agreement which are not controlled by Article VII (a) as above
qualified shall be deductible in accordance with the provisions of the
Egyptian Income Tax Law.
(3) EGPC shall assume, pay and discharge, in the name on behalf of
CONTRACTOR, CONTRACTOR's Egyptian income tax out of EGPC's share of the
Petroleum produced and saved and not used in operations under Article
VII. All taxes paid by EGPC in the name and on behalf of CONTRACTOR
shall be considered income to CONTRACTOR.
(4) EGPC shall furnish to CONTRACTOR the proper official receipts
evidencing the payment of CONTRACTOR's Egyptian income tax for each Tax
Year within ninety" (90) days following the receipt by EGPC of
CONTRACTOR's tax declaration for the preceding Tax Year. Such receipts
shall be issued by the proper Tax Authorities and shall state the
amount and other particulars customary for such receipts.
(5) As used herein. Egyptian Income Tax shall be inclusive of all
income taxes payable in the A.R.E. (including tax on tax) such as the
tax on income from movable capital and the tax on profits from commerce
and industry and inclusive of taxes based on income or profits
including all dividends. Withholding with respect to shareholders and
other taxes imposed by the GOVERNMENT on the distribution of income or
profits by CONTRACTOR.
(6) In calculating its A.R.E. income taxes, EGPC shall be entitled to
deduct all royalties paid by EGPC to the GOVERNMENT and CONTRACTOR's
Egyptian income taxes paid by EGPC on CONTRACTOR's behalf.
ARTICLE IV
WORK PROGRAM AND EXPENDITURES
DURING EXPLORATION PERIOD
(a) CONTRACTOR shall commence Exploration operations hereunder not later than
six (6) months after the Effective Date with a commitment of reprocessing
most of the existing seismic data, acquire and process three hundred (300) km
seismic survey and fifty (50) sq. km 3D seismic survey. Not later than the end
of the twelfth (12th) month after the Effective Date, CONTRACTOR shall start
Exploratory drilling in the Area during the initial Exploration period with a
commitment of drilling three (3) wells. EGPC shall make available for
CONTRACTOR's use all seismic wells and other Exploration data in EGPC's
possession with respect to the Area as EGPC is entitled to so do.
"West Gharib Concession 20-F"
11 a.
(b) The initial Exploration period shall be three (3) years. CONTRACTOR may
extend this Exploration period for two (2) successive extension periods of
three (3) years and two (2) years respectively, in accordance with Article
III (b), each of which upon at least thirty (30) days prior written notice to
EGPC, subject to its expenditure of its minimum Exploration obligations and
of its fulfillment of the drilling obligations hereunder, for the then
current period.
CONTRACTOR shall spend a minimum of five million (5,000.000) U.S. Dollars on
Exploration operations and activities related thereto during the initial
three (3) year Exploration period; provided that CONTRACTOR shall drill three
(3) wells and reprocessing most of the existing seismic data and acquire and
process three hundred (300) km. seismic survey and fifty (50) sq. km. 3D
seismic survey. For the first three (3) year extension period that CONTRACTOR
elects to extend beyond the initial Exploration period, CONTRACTOR shall
spend a minimum of four million (4,000,000) U.S. Dollars and acquire and
process two hundred (200) km seismic survey and fifty (50) sq. km 3D seismic
survey and for the second two (2) year extension period that CONTRACTOR
elects to extend beyond the three (3) year first extension period, CONTRACTOR
shall also spend a minimum of four million and five hundred thousand
(4,500,000) U.S. Dollars. During the first and second extension periods that
CONTRACTOR elects to extend beyond the initial Exploration period, CONTRACTOR
shall drill two (2) wells in the first extension and three (3) wells in the
second extension.
Should CONTRACTOR spend more than the minimum amount required to be expended
or drill more wells than the minimum required to be drilled or acquire more
seismic survey than the minimum required during the initial three (3) year
Exploration period or during any period thereafter the excess may be
subtracted from the minimum amount of money required to be expended by
CONTRACTOR or minimum number of wells required to be drilled or minimum
kilometres of seismic survey to be acquired during any succeeding Exploration
period(s) as the case may be.
In case CONTRACTOR surrenders its Exploration rights under this Agreement as
set forth above before or at the end of the third (3rd) year of the initial
Exploration period, having expended less than the total sum of five million
(5,000,000) U.S. Dollars, on Exploration or in the event at the end of the
three (3) years, of the initial Exploration period. CONTRACTOR has expended
less than said sum in the Area, an amount equal to the difference between the
said five million (5.000.000) U.S. Dollars and the amount actually spent on
Exploration shall be paid by CONTRACTOR to EGPC at the time of surrendering
or within three (3) months from the end of the third (3rd) year of the
initial Exploration period. as the case may be. Any expenditure deficiency by
CONTRACTOR at the end of any additional period for the reasons above noted
shall similarly result in a payment by CONTRACTOR to EGPC of such deficiency.
Provided this Agreement is still in force as to CONTRACTOR, CONTRACTOR shall
be entitled to recover any such payments as Exploration expenditure in the
manner provided for under Article VII in the event of Commercial Production.
Without prejudice to Article III (b), in case no Commercial Oil Discovery is
established or no notice of Commercial Gas Discovery is given by the end of
the eighth (8th) year, as may be extended pursuant to Article V (a) or in
case CONTRACTOR surrenders the Area under this Agreement prior to such time
EGPC shall not bear any of the aforesaid expenses spent by CONTRACTOR.
(c) At least four (4) months prior to the beginning of each Financial Year or
at such other times as may mutually be agreed to by EGPC and CONTRACTOR.
CONTRACTOR shall prepare an Exploration Work Program and Budget for the Area
setting forth the Exploration operations which CONTRACTOR proposes to carry
out during the ensuing Year.
The Exploration Work Program and Budget shall be reviewed by a joint
committee to be established by EGPC and CONTRACTOR after the Effective Date
of this Agreement. This Committee, hereinafter referred to as the
"Exploration Advisory Committee", shall consist of six (6) members, three (3)
of whom shall be appointed by EGPC and three (3) by CONTRACTOR. The Chairman
of the Exploration Advisory Committee shall be designated by EGPC from among
the members appointed by it. The Exploration Advisory Committee shall review
and give such advice as it deems appropriate with respect to the proposed
Work Program and Budget. Following review by the Exploration Advisory
Committee, CONTRACTOR shall make such revisions as CONTRACTOR deems
appropriate and submit the Exploration Work Program and Budget to EGPC for
its approval.
"West Gharib Concession 20-F"
- -12-
Following such approval, it is further agreed that:
(i) CONTRACTOR shall not substantially revise or modify said Work Program and
Budget nor reduce the approved budgeted expenditure without the approval of
EGPC;
(ii) In the event of emergencies involving danger of loss of lives or
property, CONTRACTOR may expend such additional unbudgeted amounts as may be
required to alleviate such danger. Such expenditure shall be considered in
all aspects as Exploration expenditure and shall be recovered pursuant to the
provisions of Article VII.
(d) CONTRACTOR shall advance all necessary funds for all materials,
equipment, supplies, personnel administration and operations pursuant to the
Exploration Work Program and Budget and EGPC shall not be responsible to bear
or repay any of the aforesaid costs.
(e) CONTRACTOR shall be responsible for the preparation and performance of
the Exploration Work Program which shall be implemented in a workmanlike
manner and consistent with good industry practices.
Except as is appropriate for the processing of data, specialized laboratory
engineering and development studies thereon, to be made in specialized
centers outside A.R.E. all geological and geophysical studies as well as any
other studies related to the performance of this Agreement shall be made in
the A.R.E.
CONTRACTOR shall entrust the management of Exploration operations in the
A.R.E. to its technically competent General Manager and Deputy General
Manager. The names of such manager and Deputy General Manager shall upon
appointment be forthwith notified to the GOVERNMENT and to EGPC. The General
Manager and, in his absence, the Deputy General Manager shall be entrusted by
CONTRACTOR with sufficient powers to carry out immediately all lawful written
directions given to them by the GOVERNMENT or its representative under the
terms of this Agreement. All lawful regulations issued or hereafter to be
issued which are applicable hereunder and not in conflict with this Agreement
shall apply to CONTRACTOR.
(f) CONTRACTOR shall supply EGPC, within thirty (30) days from the end of
each calendar quarter, with a Statement of Exploration activity showing costs
incurred by CONTRACTOR during such quarter. CONTRACTOR's records and
necessary supporting documents shall be available for inspection by EGPC at
any time during regular working hours for three (3) months from the date of
receiving each statement.
Within the three (3) months from the date of receiving such Statement. EGPC
shall advise CONTRACTOR in writing if it considers:
(1) that the record of costs is not correct;
(2) that the costs of goods or services supplied are not in line with the
international market prices for goods or services of similar quality supplied
on similar terms .prevailing at the time such goods or services were
supplied, provided however, that purchases made and services performed within
the A.R.E. shall be subject to Article XXVI;
(3) that the condition of the materials furnished by CONTRACTOR does not
tally with their prices; or
(4) that the costs incurred are not reasonably required for operations.
"West Gharib Concession 20-F"
- -13-
CONTRACTOR shall confer with EGPC in connection with the problem thus
presented, and the parties shall attempt to reach a settlement which is
mutually satisfactory.
Any reimbursement due to EGPC out of the Cost Recovery Petroleum as a result
of reaching agreement or of an arbitral award shall be promptly made in cash
to EGPC, plus simple interest at LIBOR plus two and half percent (2.5%) per
annum from the date on which the disputed amount(s) would have been paid to
EGPC according to Article VII (a) (2) and Annex "E" (i.e., the date of
rendition of the relevant Cost Recovery Statement) to the date of payment.
The LIBOR rate applicable shall be the average of the figure or figures
published by the Financial Times representing the mid-point of the rates (bid
and ask) applicable to one month U.S. Dollars deposits in the London Interbank
Eurocurrency Market on each fifteenth (15th) day of each month occurring
between the date on which the disputed amount(s) would have been paid to EGPC
and the date on which it is settled.
If the LIBOR rate is available on any fifteenth (15th) day but is not
published in the Financial Times in respect of such day for any reason, the
LIBOR rate chosen shall be that offered by Citibank N.A. to other leading
banks in the London Interbank Eurocurrency Market for one month U.S. Dollar
deposits.
If such fifteenth (15th) day is not a day on which LlBOR rates are quoted in
the London Interbank Eurocurrency Market, the LIBOR rate to be used shall be
that quoted on the next following day on which such rates are quoted.
If within the time limit of the three (3) month period provided for in this
paragraph, EGPC has not advised CONTRACTOR of its objection to any Statement,
such Statement shall be considered as approved.
(g) CONTRACTOR shall supply all funds necessary for its operations in the
A.R.E. under this Agreement in freely convertible currency from abroad.
CONTRACTOR shall have the right to freely purchase Egyptian currency in the
amounts necessary for its operations in the A.R.E. from any bank or entity
authorized by the GOVERNMENT to conduct foreign currency exchanges.
(h) EGPC is authorized to advance to CONTRACTOR the Egyptian currency
required for the operations under this Agreement against receiving from
CONTRACTOR an equivalent amount of U.S. Dollars at the official A.R.E. rate
of exchange. Such amount in U.S. Dollars shall be deposited in an EGPC
account abroad with a correspondent bank of the National Bank of Egypt,
Cairo. Withdrawals from said account shall be used for financing EGPC's and
its Affiliated Companies foreign currency requirements subject to the
approval of the Minister of Petroleum.
"West Gharib Concession 20-F"
- -14-
ARTICLE V
MANDATORY AND VOLUNTARY RELINQUISHMENTS
(a) MANDATORY:
At the end of the third (3rd) year after the Effective Date hereof,
CONTRACTOR shall relinquish to the GOVERNMENT a total of twenty five percent
(25%} of the original Area not then converted to a Development Lease or
leases. Such relinquishment shall be in units of whole Exploration Blocks or
parts of Exploration Blocks not converted to Development Leases so as to
enable the relinquishment requirements to be precisely fulfilled.
At the end of the sixth (6th) year after the Effective Date hereof,
CONTRACTOR shall relinquish to the GOVERNMENT an additional twenty-five
percent (25%) of the original Area not then converted to a Development Lease
or Leases. Such relinquishment shall be in units of whole Exploration Blocks
or parts of Exploration Blocks not converted to Development Leases so as to
enable the relinquishment requirements to be precisely fulfilled.
Without prejudice to Articles III and XXIII and the last three paragraphs of
this Article V (a), at the end of the eighth (8th) year of the Exploration
period, CONTRACTOR shall relinquish the remainder of the Area not then
converted to a Development Lease or Leases.
It is understood that at the time of any relinquishment the areas to be
converted into Development Leases and which are submitted to the Minister of
Petroleum for his approval according to Article III (d) shall, subject to
such approval, be deemed converted to Development Leases.
CONTRACTOR shall not be required to relinquish any Exploration Block or
Blocks on which a Commercial Oil or Gas, Well is discovered before the period
of time referred to in Article III (c) given to CONTRACTOR to determine
whether such Well is a Commercial Discovery worthy of Development or to
relinquish an Exploration Block in respect of which a notice of Commercial
Gas Discovery has been given to EGPC subject to EGPC's right to agree on the
existence of a Commercial Discovery pursuant to Article III (c), and without
prejudice to the requirements of Article III (e).
In the event at the end of the initial Exploration period or either of the
two successive extensions of the initial Exploration period, a well is
actually drilling or testing, CONTRACTOR shall be allowed up to six (6)
months to enable it to discover a Commercial Oil or Gas Well or to establish
a Commercial Discovery, as: the case may be. However, any such extension of
up to six (6) months shall reduce the length of the next succeeding
Exploration Period, as applicable, by that amount.
(b) VOLUNTARY:
CONTRACTOR may, voluntarily, during any period relinquish all or any part of
the Area in whole Exploration Block or parts of Exploration Blocks provided
that at the time of such voluntary relinquishment its Exploration obligations
under Article IV (b) have been satisfied for such period.
Any relinquishments hereunder shall be credited toward the mandatory
provisions of Article V (a) above.
"West Gharib Concession 20-F"
- -15-
Following Commercial Discovery, EGPC and CONTRACTOR shall mutually agree upon
any area to be relinquished thereafter, except for the relinquishment
provided for above at the end of the total Exploration period.
ARTICLE VI
OPERATIONS AFTER COMMERCIAL DISCOVERY
(a) On Commercial Discovery, EGPC and CONTRACTOR shall form in the A.R.E. an
operating company pursuant to Article VI (b) and Annex (D) (hereinafter
referred to as "Operating Company") which company shall be named by mutual
agreement between EGPC and CONTRACTOR and such name shall be subject to the
approval of the Minister of Petroleum. Said company shall be a private sector
company. Operating Company shall be subject to the laws and regulations in
force in the A.R.E. to the extent that such laws and regulations are not
inconsistent with the provisions of this Agreement or the Charter of
Operating Company.
However, Operating Company and CONTRACTOR shall, for the purpose of this
Agreement, be exempted from the following laws and regulations as now or
hereafter amended or substituted:
- - Law No.48 of 1978, on the employee regulations of public sector
companies;
- - Law No.159 of 1981, promulgating the law on joint stock Companies,
partnership limited by shares and liability companies;
- - Law No.97 of 1983 promulgating the law concerning public sector
organizations and companies;
- - Law No.203 of 1991 promulgating the law on public business sector
companies; and
- - Law No.38 of 1994, organizing dealings in foreign currencies.
(b) The Charter of Operating Company is hereto attached as Annex "D". Within
thirty (30) days after the date of Commercial Oil Discovery or within thirty
(30) days after signature of a Gas Sales Agreement or commencement of a
scheme to dispose of Gas (unless otherwise agreed upon by EGPC and
CONTRACTOR), the Charter shall take effect and Operating Company shall
automatically come into existence without any further procedures. The
Exploration Advisory Committee shall be dissolved forthwith upon the coming
into existence of the Operating Company.
"West Gharib Concession 20-F"
- -16-
(c) Ninety (90) days after the date Operating Company comes into existence in
accordance with paragraph (b) above, it shall prepare a Work Program and
Budget for further Exploration and Development for the remainder of the year
in which the Commercial Discovery is made; and not later than four (4) months
before the end of the current Financial Year (or such other date as may be
agreed upon by EGPC and CONTRACTOR) and four (4) months preceding the
commencement of each succeeding Financial Year thereafter (or such other date
as may be agreed upon by EGPC and CONTRACTOR), Operating Company shall
prepare an annual Production Schedule, Work Program and Budget for further
Exploration and Development for the succeeding Financial Year. The Production
Schedule, Work Program and Budget shall be submitted to the Board of
Directors for approval.
(d) No later than the twentieth (20th) day of each month, Operating Company
shall furnish to CONTRACTOR a written estimate of its total cash requirements
for expenditure for the first half and second half of the succeeding month
expressed in U.S. Dollars having regard to the approved Budget. Such estimate
shall take into consideration any cash expected to be on hand at month end.
Payment for the appropriate period of such month shall be made to the
correspondent bank designated in paragraph (e) below on the first (1st) day
and fifteenth (15th) day respectively, or the next following business day, if
such day is not a business day.
(e) Operating Company is authorized to keep at its own disposal abroad in an
account opened with a correspondent bank of the National Bank of Egypt. Cairo
the foreign funds advanced by CONTRACTOR. Withdrawals from said account shall
be used for payment for goods and services acquired abroad and for
transferring to a local bank in the A.R.E. the required amount to meet the
expenditures in Egyptian Pounds for Operating Company in connection with its
activities under this Agreement.
Within sixty (60) days after the end of each Financial Year, Operating
Company shall submit to the appropriate exchange control authorities in the
A.R.E. a statement, duly certified by a recognized firm of auditors, showing
the funds credited to that account, the disbursements made out of that
account and the balance outstanding at the end of the Year.
(f) If and for as long during the period of production operations there
exists an excess capacity in facilities which can not during the period of
such excess be used by the Operating Company, EGPC and CONTRACTOR will
consult together to find a mutually agreed formula whereby EGPC may use the
excess capacity if it operational disadvantage to the CONTRACTOR.
"West Gharib Concession 20-F"
- -17-
ARTICLE VII
RECOVERY OF COSTS AND EXPENSES AND PRODUCTION SHARING
(a)1. COST RECOVERY PETROLEUM:
Subject to the auditing provisions under this Agreement CONTRACTOR shall
recover quarterly all costs, expenses and expenditures in respect of all the
Exploration, Development and related operations under this Agreement to the
extent and out of thirty percent (30%) of all Petroleum produced and saved
from all Development Leases within the Area hereunder and not used in
Petroleum operations. Such Petroleum is hereinafter referred to as "Cost
Recovery Petroleum".
For the purpose of determining the classification of all costs, expenses and
expenditures for their recovery, the following terms shall apply:
1. "Exploration Expenditures" shall mean all costs and expenses for
Exploration and the related portion of indirect expenses and overheads.
2. "Development Expenditures" shall mean all costs and expenses for
Development (with the exception of Operating Expenses) and the related
portion of indirect expenses and overheads.
3. "Operating Expenses" shall mean all costs, expenses and expenditures made
after initial Commercial Production, which costs, expenses and expenditures
are not normally depreciable.
However, Operating Expenses small include workover, repair and maintenance of
assets buy shall not include any of the following sidetracking, redrilling
and changing of the status of a well, replacement of assets or part of an
asset. Additions, improvements renewals or major overhauling that extend the
life of the asset.
Exploration Expenditures. Development Expenditures and Operating Expenses
shall be recovered from Cost Recovery Petroleum in the following manner:
(i) Exploration Expenditures, including those accumulated prior to the
commencement of initial Commercial Production. which for the purposes
of this Agreement shall mean the date on which the first regular
shipment of Crude Oil or the first deliveries of Gas are made shall be
recoverable at the rate of twenty-five percent (25%) per annum starting
either in the Tax Year in which such expenditures are incurred and paid
or the Tax Year in which initial Commercial Production commences,
whichever is the later date.
(ii) Development Expenditures, including those accumulated prior to the
commencement of initial Commercial Production which for the purposes of
this Agreement shall mean the date on which the first regular shipment
of Crude Oil or the first deliveries of Gas are made, shall be
recoverable at the rate of twenty-five percent (25%) per annum
starting either in. the Tax Year in which such expenditures are
incurred and paid or the Tax Year in which initial Commercial
Production commences, whichever is the later date.
"West Gharib Concession 20-F"
- -18-
(iii) Operating Expenses, incurred and paid after the date of initial
Commercial Production, which for the purposes; of this Agreement shall
mean the date on which the first regular shipment of Crude Oil or the
first deliveries of Gas are made, shall be recoverable either in the
Tax Year in which such costs and expenses are incurred and paid or the
Tax Year in which initial Commercial Production occurs whichever is the
later date.
(iv) To the extent that, in a Tax Year, costs, expenses or expenditures
recoverable per paragraphs (i), (ii) and (iii) preceding, exceed the
value of all Cost Recovery Petroleum for such Tax Year, the excess
shall be carried forward for recovery in the next succeeding Tax
Year(s) until fully recovered, but in no case after the termination of
this, Agreement as to CONTRACTOR.
(v) The recovery of costs and expenses, based upon the rates referred
to above, shall be allocated to each quarter proportionately (one
fourth to each quarter). However, any recoverable costs and expenses
not recovered in one quarter as thus allocated shall be carried forward
for recovery in the next quarter.
2. Except as provided in Article VII (a) (3) and Article VII (e) (1),
CONTRACTOR shall each quarter be entitled to take and own all Cost Recovery
Petroleum, which shall be taken and disposed of in the manner determined
pursuant to Article VII (e). To the extent that the value of all Cost
Recovery Petroleum (as determined in Article VII (c>> exceeds the actual
recoverable costs and expenditures, including any carry forward under Article
VII (a) (1) (iv), to be recovered in that quarter, then the value of such
Excess Cost Recovery Petroleum shall be split as: Seventy percent (70%) for
EGPC and thirty percent (30%) for CONTRACTOR and EGPC's share shall be paid
by CONTRACTOR to EGPC either (i) in cash in the manner set forth in article
IV of the Accounting Procedure contained in Annex "E" or (ii) in kind in
accordance with Article VII(a) (3).
3. Ninety (90) days prior to the commencement of each Calendar Year, EGPC
shall be entitled to elect by notice in writing to CONTRACTOR to require
payment of up to one hundred percent (100%) of EGPC's share of Excess Cost
Recovery Petroleum in kind. Such payment will be in Crude Oil from the Area
F.O.B. export terminal or other agreed delivery point provided that the
amount of Crude Oil taken by EGPC in kind in a quarter shall not exceed the
value of Cost Recovery Crude Oil actually taken and separately disposed of by
CONTRACTOR from the Area during the previous quarter. If EGPC's entitlement
to receive payment of its share of Excess Cost Recovery Petroleum in kind is
limited by the foregoing provision. the balance of such entitlement shall be
paid in cash.
(b) PRODUCTION SHARING
1. The remaining seventy percent (70%) of the Petroleum shall be
divided between EGPC and CONTRACTOR according to the following shares:
Such shares shall be taken and disposed of pursuant to Article VII (e):
(i) Crude Oil
Crude Oil produced and saved under this Agreement and not used EGPC CONTRACTOR
in Petroleum operations. Barrels per day (BOPD) (quarterly average). SHARE SHARE
That portion of increment up to 5,000 BOPD. (seventy percent) (thirty percent)
(70%) (30%)
That portion of increment in excess of 5,000 (seventy-two & (twenty-seven &
BOPD and up to 10,000 BOPD. half percent) half percent)
(72.5%) (27.5%)
That portion of increment in excess of (seventy-five (twenty-five
10,000 BOPD and up to 15,000 BOPD percent) percent)
(75%) (25%)
"West Gharib Concession 20-F"
- -19-
That portion or increment in excess of (seventy-seven (twenty-two &
15,000 BOPD and up to 25,000 BOPD & half percent) half percent)
(77.5%) (22.5%)
That portion or increment in excess of (eighty (twenty
25,000 BOPD and up to 50,000 BOPD percent) percent)
(80%) (20%)
That portion or increment in excess of (eighty-two & (seventeen &
50,000 BOPD and up to 100,000 BOPD half percent) half percent)
(82.5%) (17.5%)
That portion or increment in excess of (eighty-five (fifteen
100,000 BOPD percent) percent)
(85%) (15%)
(ii) Gas and LPG:
Gas and LPG produced and saved under this Agreement and not used in petroleum
operations Barrels oil equivalent per day (BOEPD) (Quarterly average)
EGPC CONTRACTOR
SHARE SHARE
That portion or increment up to 5000 sixty-five percent thirty-five percent
BOEPD (65%) (35%)
That portion or increment in excess of seventy percent thirty percent
5000 BOEPD and up to 10,000 BOEPD (70%) (30%)
That portion or increment in excess of seventy-five percent twenty-five percent
10,000 BOEPD and up to 15,000 BOEPD (75%) (25%)
That portion or increment in excess of eighty percent twenty percent
15,000 BOEPD and up to 25,000 BOEPD (80%) (20%)
That portion or increment in excess of eighty-five percent fifteen percent
25,000 BOEPD (85%) (15%)
2. After the end of each contractual year during the term of any Gas Sales
Agreement entered into pursuant to Article VII (e), EGPC and CONTRACTOR (as
sellers) shall render to EGPC (as buyer) a statement for an amount of Gas. if
any, equal to the amount by which the quantity of Gas of which EGPC (as
buyer) has taken delivery falls below seventy five percent (75%) of the
Contract quantities of Gas as established by the applicable Gas Sales
Agreement (the "Shortfall"), provided the Gas is available. Within sixty (60)
days of receipt of the statement, EGPC (as buyer) shall pay EGPC and
CONTRACTOR (as sellers) for the amount of the Shortfall, if any. The
Shortfall shall be included in EGPC's and CONTRACTOR's entitlement to Gas
pursuant to Article VII (a) and Article VII (b) in the fourth (4th) quarter
of such contractual year.
Quantities of Gas not taken but to be paid for shall be recorded in a
separate "Take-or-Pay" account. Quantities of Gas ("Make Up Gas") which are
delivered in subsequent years in excess of seventy five percent (75%) of the
contract quantities of Gas as established by the applicable Gas Sales
Agreement, shall be set against and reduce quantities of Gas in the
("Take-or-Pay") account to the extent thereof and, to that extent, no payment
shall be due in respect of such Gas. Such Make Up Gas shall not be included
in CONTRACTOR's entitlement to Gas pursuant to Article VII (a) and Article
VII (b) Contractor shall have no rights to such "Make Up Gas".
The percentages set forth in Article VII (a) hereinabove and this Article VII
(b) in respect of LPG produced from a plant constructed and operated by or on
behalf of EGPC and CONTRACTOR shall apply to all LPG available for delivery.
(c) VALUATION OF PETROLEUM:
"West Gharib Concession 20-F"
- -20-
1. CRUDE OIL:
(i) The Cost Recovery Crude Oil to which CONTRACTOR is entitled
hereunder shall be valued by EGPC and CONTRACTOR at "Market Price" for
each calendar quarter.
(ii)"Market Price" shall mean the weighted average prices realized from
sales by EGPC or CONTRACTOR during the quarter, whichever is higher,
provided that the sales to be used in arriving at the weighted
average(s) shall be sales of comparable quantities on comparable credit
terms in freely convertible currency from F.O.B. point of export sales
to non-affiliated companies at arm's length under all Crude Oil sales
contracts then in effect, but excluding Crude Oil sales contracts
involving barter and,
(1) Sales, whether direct or indirect, through brokers or
otherwise, of EGPC or CONTRACTOR to any Affiliated Company.
(2) Sales involving a quid pro quo other than payment in a
freely convertible currency or motivated in whole or in part
by considerations other than the usual economic incentives for
commercial arm's length crude oil sales.
(iii) It is understood that in the case of C.I.F. sales, appropriate
deductions shall be made for transport and insurance charges to
calculate the F.O.B. point of export price; and always taking into
account the appropriate adjustment for quality of Crude Oil freight
advantage or disadvantage of port of loading and other appropriate
adjustments. Market Price shall be determined separately for each Crude
Oil or Crude Oil mix, and for each port of loading.
(iv) If during any calendar quarter, there are no such sales by EGPC
and/or CONTRACTOR under the Crude Oil sales contracts in effect, EGPC
and CONTRACTOR shall mutually agree upon the Market Price of the barrel
of Crude Oil to be used for such quarter, and shall be guided by all
relevant and available evidence including current prices in freely
convertible currency of leading crude oils produced by major oil
producing countries (in the Arabian Gulf or the Mediterranean Area),
which are regularly sold in the open market according to actual sales
contracts terms but excluding paper sales and sales promises where no
crude oil is delivered, to the extent that such sales are effected
under such terms and conditions (excluding the price) not significantly
different from those under which the crude oil to be valued, was sold,
and always taking into consideration appropriate adjustments for crude
oil quality, freight advantage or disadvantage of port of loading and
other appropriate adjustments, as the case may be, for differences in
gravity, sulphur, and other factors generally recognized by sellers
and purchasers, as reflected in crude prices, transportation ninety
(90) days insurance premiums, unusual fees borne by the seller, and for
credit terms in excess of sixty (60) days, and the cost of loans or
guarantees granted for the benefit of the sellers at prevailing
interest rates.
It is the intent of the Parties that the value of the Cost Recovery
Crude Oil shall reflect the prevailing market price for such Crude Oil.
(v) If either EGPC or CONTRACTOR considers that the Market Price as
determined under sub-paragraph (ii) above does not reflect the
prevailing Market Price or in the event EGPC and CONTRACTOR fail to
agree on Market Price for any Crude Oil produced under this Agreement
for any quarter within fifteen (15) days after the end thereof, any
party may elect at any time thereafter to submit to a single arbitrator
the question, what single price per barrel, in the arbitrator's
judgment, best represents for the pertinent quarter the Market Price
for the Crude Oil In question. The arbitrator shall make his
determination as soon as possible following the quarter in question.
His determination shall be final and binding upon all the parties. The
arbitrator shall be selected in the manner described below.
"West Gharib Concession 20-F"
- -21-
In the event EGPC and CONTRACTOR fail to agree on the arbitrator within
thirty (30) days from the date any party notifies the other that it has
decided to submit the determination of the Market Price to an
arbitrator, such arbitrator shall be chosen by the appointing authority
designated in accordance with Article XXIV (e), or such other
appointing authority with access to such expertise as may be agreed to
between EGPC and CONTRACTOR, with regard to the qualifications for
arbitrators set forth below, upon written application of one or both of
EGPC and CONTRACTOR. Copies of such application by one of them shall be
promptly sent to the other.
The arbitrator shall be as nearly as possible a person with an
established reputation in the international petroleum industry as an
expert in pricing and marketing crude oil in international commerce.
The arbitrator shall not be a citizen of a country which does not have
diplomatic relations with both the A.R.E., the REPUBLIC OF IRELAND and
CANADA. He may not be at the time of selection, employed by, or an
arbitrator or consultant on a continuing or frequent basis to the
American Petroleum Institute, the Organization of the Petroleum
Exporting Countries or the Organization of Arab Petroleum Exporting
Countries or a consultant on a continuing basis to EGPC, CONTRACTOR or
an Affiliated Company of either, but past occasional consultation with
such companies, with other petroleum companies, governmental agencies
or organizations shall not be a ground for disqualification. He may not
have been at any time during the two (2) years before selection, an
employee of any petroleum company or of any governmental agency or
organization.
Should a selected person decline or be unable to serve as arbitrator
or should the position of arbitrator fall vacant prior to the decision
called for, another person shall be chosen in the same manner provided
in this paragraph. EGPC and CONTRACTOR shall share equally the expenses
of the arbitrator.
The arbitrator shall make his determination in accordance with the
provisions of this paragraph, based on the best evidence available to
him. He will review oil sales contracts as well as other sales data and
information but shall be free to evaluate the extent, to which any
contracts, data or information is substantiated or pertinent.
Representatives of EGPC and CONTRACTOR shall have the right to consult
with the arbitrator and furnish him written materials provided the
arbitrator may impose reasonable limitations on this right. EGPC and
CONTRACTOR each shall cooperate with the arbitrator to the fullest
extent and each shall insure such cooperation of trading companies. The
arbitrator shall be provided access to crude oil sales contracts and
related data and information which EGPC and CONTRACTOR or their trading
companies are able to make available and which in the judgment of the
arbitrator might aid the arbitrator in making a valid determination.
(vi) Pending Market Price agreement by EGPC and CONTRACTOR or
determination by the arbitrator, as applicable, the Market Price agreed
for the quarter preceding the quarter in question shall remain
temporarily in effect. In the event either EGPC or CONTRACTOR should
incur a loss by virtue of the temporary continuation of the Market
Price of the previous quarter, it shall promptly be reimbursed such
loss by the other party plus simple interest at the LIBOR plus two and
one-half percent (2.5%) per annum rate provided for in Article IV (f)
from the date on which the disputed amount(s) should have been paid to
the date of payment.
2. Gas and LPG
(i) The Cost Recovery and Production Shares of Gas subject to a Gas Sales
Agreement between EGPC and CONTRACTOR (as sellers) and EGPC (as buyer) entered
into pursuant to Article VII (e) shall be valued, delivered to and purchased by
EGPC at a price determined monthly according to the following formula:
PG = 0.85 X F X H
----------------
42.96 X 106
Where:
"West Gharib Concession 20-F"
- -22-
PG = the value of the Gas in U.S. Dollars per thousand Standard cubic feet
(MSCF).
F = a value In U.S. Dollars per metric ton of the crude oil of Gulf of Suez
Blend "FOB Ras Shukheir" A.R.E. calculated by
referring to "Platt's Oilgram Price Report" during a month under the heading
"Spot Crude Price Assessment for Suez Blend". This value reflects the total
averages of the published low and high values for a Barrel during such month
divided by the number of days in such month for which such values were quoted.
The value per metric ton shall be calculated on the basis of a conversion factor
to be agreed upon annually between EGPC and CONTRACTOR.
H = the number of British Thermal Units (BTU's) per thousand standard cubic feet
(MSCF) of the Gas, based on gross calorific value.
In the event that the value of F cannot be determined because Platt's Oilgram
Price Report is not published at all during a month, EGPC and CONTRACTOR
shall meet and agree the value of F by reference to other published sources.
In the event that there are no such published sources or if the value of F
cannot be determined pursuant to the foregoing for any other reason, EGPC and
CONTRACTOR shall meet and agree to a value of F. Such evaluation of Gas under
a formula providing for a fifteen percent (15%) discount is based upon
delivery at the delivery point specified in Article II and Article VII (e) 2
(ii) hereinafter, and is to enable EGPC to finance and maintain the portions
of the pipeline distribution system to be provided by EGPC.
(ii) The Cost Recovery and Production Shares of LPG produced from a plant
constructed and operated by or on behalf of EGPC and CONTRACTOR shall be
separately valued for Propane and Butane at the outlet of such LPG plant
according to the following formula (unless otherwise agreed between EGPC and
CONTRACTOR):
PLPG = 0.95 PR - (J X 0.85 X ________F__________)
42.96 X 10(6)
Where
PLPG = LPG price (separately determined for Propane and Butane) in U.S.
Dollars per metric ton.
PR = The average over a period of a month of the figures representing the
mid-point between the high and low prices in U.S. Dollars per metric
ton quoted in "Platt's LPGaswire" during such month for Propane and
Butane FOB Ex-Ref/Stor. West Mediterranean
J = BTU's removed from the Gas stream by the LPG plant per metric ton of LPG
produced.
F = the same value as F under sub-paragraph (i) above.
In the event that Platt's LPGaswire is issued on certain day during a month
but not on others, the value of PR shall be calculated using only those
issues which are published during such month. In the event that the value of
PR can not be determined because Platt's LPGaswire is not published at all
during a month, EGPC and CONTRACTOR shall meet and agree to the value of PR
by reference to other published sources. In the event that there are no such
other published sources or if the value of PR cannot be determined pursuant
to the foregoing for any other reason EGPC and CONTRACTOR shall meet and
agree to the value of PA by reference to the value of LPG (Propane and
Butane) delivered FOB from the Mediterranean Area.
Such valuation of LPG is based upon delivery at the delivery point specified
in Article VII (e) 2 (iii) hereinafter.
(iii) The prices of Gas and LPG 30 calculated shall apply during the same month
"West Gharib Concession 20-F"
- -23-
(iv) The Cost Recovery and Production Shares of Gas and LPG disposed of by
EGPC and CONTRACTOR other than to EGPC pursuant to Article VII (e)
hereinafter shall be valued at their actual realized price.
(d) FORECASTS:
Operating Company shall prepare (not less than ninety (90) days prior to the
beginning of each calendar semester following first regular production) and
furnish in writing to CONTRACTOR and EGPC a forecast setting out a total
quantity of Petroleum that Operating Company estimates can be produced, saved
and transported hereunder during such calendar semester in accordance with
good oil and gas industry practices.
Operating Company shall endeavor to produce each calendar semester the
forecast quantity. The Crude Oil shall be run to storage tanks or offshore
loading facilities constructed, maintained and operated according to
Government Regulations, by Operating Company in which said Crude Oil shall be
metered or otherwise measured for royalty, and other purposes required by
this Agreement. Gas shall be handled by Operating Company in accordance with
the provisions at Article VII (e).
(e) DISPOSITION OF PETROLEUM:
(1) EGPC and CONTRACTOR shall have the right and the obligation to separately
take and freely export or otherwise dispose of, currently all of the Crude
Oil to which each is entitled under Article VII (a) and Article VII (b).
Subject to payment of sums due to EGPC under Article VII (a) (2) and Article
IX, CONTRACTOR shall have the right to remit and retain abroad all funds
acquired by including the proceeds from the sale of its share of Petroleum.
Notwithstanding anything to the contrary under this Agreement priority shall
be given to meet the requirements of the A.R.E. market from CONTRACTOR's
share under Article VII (b) of the Crude Oil produced from the Area and EGPC
shall have the preferential right to purchase such Crude Oil at a price to be
determined pursuant to Article VII (c). The amount of Crude Oil so purchased
shall be a portion of CONTRACTOR's share under Article VII (b). Such amount
shall be proportional to CONTRACTOR's share of the total production of crude
oil from the concession areas in the A.R.E. that are also subject to EGPC's
preferential right to purchase. The payment for such purchased amount shall b
e made by EGPC in U.S. Dollars or in any other freely convertible currency
remittable by CONTRACTOR abroad.
It is agreed upon that EGPC shall notify CONTRACTOR, at least forty-five (45)
days prior to the beginning of the Calendar Semester, of the amount to be
purchased during such semester under this Article VII (e) (1).
(2) With respect to Gas and LPG produced from the Area:
(i) Priority shall be given to meet the requirements of the local
market as determined by EGPC.
(ii) In the event that EGPC is to be the buyer of Gas, the disposition
of Gas to the local markets as indicated above shall be by virtue of
long term Gas Sales Agreements to be entered into between EGPC and
CONTRACTOR (as sellers) and EGPC (as buyer).
"West Gharib Concession 20-F"
- -24-
EGPC and CONTRACTOR (as sellers) shall have the obligation to deliver
Gas to the following point where such Gas shall be metered for sales,
royalty, and other purposes required by this Agreement:
(a) In the event no LPG plant is constructed to process such Gas the
delivery point shall be at the flange connecting the Lease pipeline
to the nearest point on the National Gas Pipeline Grid System as
depicted in Annex "F" hereto, or as otherwise agreed by EGPC and
CONTRACTOR.
(b) In the event an LPG plant is constructed to process such Gas, such
Gas shall, for the purposes of valuation and sales, be metered at
the inlet to such LPG Plant. However, notwithstanding the fact that
the metering shall take place at the LPG Plant inlet, CONTRACTOR
shall through the Operating Company build a pipeline suitable for
transport of the processed Gas from the LPG Plant outlet to the
nearest point on the National Gas Pipeline Grid System as depicted
in Annex "F" hereto, or as otherwise agreed by EGPC and CONTRACTOR.
Such pipeline shall be owned in accordance with Article VIII (a) by
EGPC, and its cost shall be financed and recovered by CONTRACTOR as
Development Expenditures pursuant to Article VII.
(iii) EGPC and CONTRACTOR shall consult together to determine whether
to build an LPG plant for recovering LPG from any Gas produced
hereunder. In the event EGPC and CONTRACTOR decide to build such a
plant, the plant shall, as is appropriate, be in the vicinity of the
point of delivery as determined in Article II and Article VII (e)2(ii)
.above. The delivery of LPG for, royalty and other purposes required by
this Agreement shall be at the outlet of the LPG plant. The costs of
any such LPG plant shall be recoverable in accordance with the
provisions of this Agreement unless the Minister of Petroleum agrees to
accelerated recovery.
(iv) EGPC (as buyer) shall have the option to elect, by ninety (90)
days prior written notice to EGPC and CONTRACTOR (as sellers), whether
payment for the Gas which is subject to a Gas Sales Agreement between
EGPC and CONTRACTOR (as sellers) and EGPC (as buyer) and LPG produced
from a plant constructed and operated by or on behalf of EGPC
CONTRACTOR. as valued in accordance with Article VII (c), and to which
CONTRACTOR is entitled under the Cost Recovery and Production Sharing
provisions of Article VII, shall be made 1) in cash or 2) in kind.
Payments in cash shall be made by EGPC (as buyer), at intervals
provided for in the relevant Gas Sales Agreement in U.S. Dollars,
remittable by CONTRACTOR abroad.
Payments in kind shall be calculated by converting the value of Gas and
LPG to which CONTRACTOR is entitled into equivalent barrels of Crude
Oil to be taken concurrently by CONTRACTOR from the Area or to the
extent that such Crude Oil is insufficient, Crude Oil from CONTRACTOR's
other concession areas or such other areas as may be agreed. Such Crude
Oil shall be added to the Crude Oil that CONTRACTOR is otherwise
entitled to lift under this Agreement. Such equivalent barrels shall be
calculated on the basis of the provisions of Article VII (c) relating
to the valuation of Cost Recovery Crude Oil.
Provided that:
(aa) Payment of the value of Gas and LPG shall always be made in cash
in U.S. Dollars remittable by CONTRACTOR abroad to the extent that
there is insufficient Crude Oil available for conversion as provided
for above;
(bb) payment of the value of Gas and LPG shall always be made in kind
as provided for above to the extent that payments in cash are not made
by EGPC.
Payments to CONTRACTOR (whether in cash or kind), when related to
CONTRACTOR's Cost Recovery Petroleum, shall be included in CONTRACTOR's
Statement of Recovery of Costs and of Cost Recovery Petroleum referred
to in Article IV of Annex "E" of this Agreement.
"West Gharib Concession 20-F"
- -25-
(v) Should EGPC (as buyer) fail to enter into a long-term Gas Sales
Agreement with EGPC and CONTRACTOR (as sellers) within five (5) years
(unless otherwise agreed) from a notice of Commercial Gas Discovery
pursuant to Article III, EGPC and CONTRACTOR shall have the right to
take and freely dispose of the quantity of Gas and LPG in respect of
which the notice of Commercial Discovery is given by exporting such Gas
and LPG.
(vi) The proceeds of sale of CONTRACTOR's share of Gas and LPG disposed
of pursuant to the above sub-paragraph (v) may be freely remitted or
retained abroad by CONTRACTOR.
(vii) In the event EGPC and CONTRACTOR agree to accept new Gas and LPG
producers to join in an ongoing export project such producers shall
have to contribute a fair and equitable share of the investment made.
(viii) (aa) Upon the expiration of the five (5) year period referred
to in Article VII (e) (2) (v) above. CONTRACTOR shall have the
obligation to exert its reasonable efforts to find an export
market for Gas reserves.
(bb) In the event at the end of the five (5) year period
referred to under Article VII (e) (2) (v)above. CONTRACTOR and
EGPC have not entered into a Gas Sales Agreement. CONTRACTOR
shall retain its rights to such Gas reserves for a further
period of up to seven (7) years, subject to Article VII (e)
(2) (viii) (cc) below, during which period EGPC shall attempt
to find a market for the Gas reserves.
(cc) In the event that CONTRACTOR is not exporting the Gas and
CONTRACTOR has not entered into a Gas Sales Agreement pursuant
to Article VII (e) (2) prior to the expiry of twelve (12)
years from CONTRACTOR's notice of Commercial Gas Discovery,
CONTRACTOR shall surrender the Gas reserves in respect of
which such notice has been given. It being understood that
CONTRACTOR shall, at any time prior to the expiry of such
twelve (12) year period, surrender the Gas reserves, if
CONTRACTOR is not exporting the Gas and CONTRACTOR does not
accept an offer of a Gas Sales Agreement from EGPC within six
(6) months from the date such offer is made provided that the
Gas Sales Agreement offered to CONTRACTOR shall take into
consideration the relevant technical and economic factors to
enable a commercial contract including:
-A sufficient delivery rate.
-Delivery pressure to enter the National Gas
Pipeline Grid System at the point of delivery.
-Delivered Gas quality specifications not more
stringent than those imposed or required for the
National Gas Pipeline Grid System.
-The Gas prices as specified in this Agreement.
(ix) CONTRACTOR shall not be obligated to surrender a Development Lease
based on a Commercial Gas Discovery, if Crude Oil has been discovered
in commercial quantities in the same Development Lease and vice versa.
(f) OPERATIONS:
If following the reversion to EGPC of any rights to Crude Oil hereunder,
CONTRACTOR retains rights to Gas in the same Development Lease, or if,
following surrender of rights to Gas hereunder, CONTRACTOR retains rights to
Crude Oil in the same Development Lease, operations to explore for or exploit
the Petroleum, the rights to which have reverted or been surrendered (Oil or
Gas as the case may be) may only be carried out by Operating Company which
shall act on behalf of EGPC alone, unless CONTRACTOR and EGPC agree otherwise.
(g) TANKER SCHEDULING:
At a reasonable time prior to the commencement of Commercial Production EGPC and
CONTRACTOR shall meet and agree upon a procedure for scheduling tanker liftings
from the agreed upon point of export.
"West Gharib Concession 20-F"
- -26-
ARTICLE VIII
TITLE TO ASSETS
(a) EGPC shall become the owner of all CONTRACTOR acquired and owned assets
which assets were charged to Cost Recovery by CONTRACTOR in connection
with the operations carried out by CONTRACTOR or Operating Company in
accordance with the following:
(1) Land shall become the property of EGPC as soon as it is purchased.
(2) Title to fixed and moveable assets shall be transferred
automatically and gradually from CONTRACTOR to EGPC as they become
subject to recovery in accordance with the provisions of Article VII;
however the full title to fixed and movable assets shall be transferred
automatically from CONTRACTOR to EGPC when its total cost has been
recovered by CONTRACTOR in accordance with the provisions of Article
VII or at the time of termination of this Agreement with respect to all
assets chargeable to the operations whether recovered or not, whichever
first occurs.
The book value of the assets created during each calendar quarter shall be
communicated by CONTRACTOR to EGPC or by Operating Company to EGPC and
CONTRACTOR within thirty (30) days of the end of each quarter.
(b) During the term of this Agreement and the renewal period EGPC, CONTRACTOR
and Operating Company are entitled to the full use and enjoyment of all fixed
and movable assets referred to above in connection with operations hereunder or
under any other Petroleum concession agreement entered into by the Parties.
Proper accounting adjustment shall be made. CONTRACTOR and EGPC shall not
dispose of the same except with agreement of the other.
(c) CONTRACT0R and Operating Company may freely import into the A.R.E. use
therein and freely export at the end of such use, machinery and equipment
which they either rent or lease in accordance with good industry practices,
including but not limited to the lease of computer hardware and software.
ARTICLE IX
BONUSES
(a) CONTRACTOR shall pay to EGPC as a signature bonus the sum of seven hundred
and fifty thousand (750,000) U.S. Dollars on the Effective Date.
(b) CONTRACTOR shall pay to EGPC the sum of two million (2,000.000) U.S. Dollars
as a production bonus when the total average daily production from the Area
first reaches the rate of twenty five thousand (25,000) Barrels per day for a
period of thirty (30) consecutive producing days. Payment will be made within
fifteen (15) days thereafter.
(c) CONTRACTOR shall also pay to EGPC the additional sum of three million
(3,000,000) U.S. Dollars as a production bonus when the total average daily
production from the Area first reaches the rate of fifty thousand (50,000)
barrels per day for a period of thirty (30) consecutive producing days.
Payment will be made within fifteen (15) days thereafter.
(d) CONTRACTOR shall also pay to EGPC the additional sum of five million
(5,000,000) U.S. Dollars as a production bonus when the total average daily
production from the Area first reaches the rate of one-hundred thousand
(100,000) barrels per day for a period of thirty (30) consecutive producing
days. Payment
"West Gharib Concession 20-F"
- -27-
will be made within fifteen (15) days thereafter.
(e) All the above mentioned bonuses shall in no event be recovered by
CONTRACTOR.
(f) In the event that EGPC elects to develop any part of the Area pursuant to
the sole risk provisions of Article III (c) (iv), production from such sole
risk area shall be considered for the purposes of this Article IX only if
CONTRACTOR exercises its option to share in such production, and only from
the initial date of sharing.
(g) Gas shall be taken into account for the purposes of determining the total
average daily production from the Area under Article IX (b-d) by converting
daily Gas delivered into equivalent barrels of daily Crude Oil production in
accordance with the following formula:
MSCF x H x 0.136 = equivalent barrels of Crude Oil
where
MSCF = one thousand Standard Cubic Feet of Gas.
H = the number of million British Thermal Units (BTU's per MSCF).
ARTICLE X
OFFICE AND SERVICE OF NOTICES
CONTRACTOR shall maintain an office in A.R.E. at which notices shall be
validly served.
The General Manager and Deputy General Manager shall be entrusted by
CONTRACTOR with sufficient power to carry out immediately all local written
directions given to them by the Government or its representatives under the
terms of this Agreement. All lawful regulations issued or hereafter to be
issued which are applicable here under and not in conflict with this
Agreement shall pay to the duties and. activities of the General Manager and
Deputy General Manager.
All matters and notices shall be deemed to be validly served which are
delivered to the office of the General Manager or which are sent to him by
registered mail to CONTRACTOR's office in the A.R.E.
All matters and notices shall be deemed to be validly served which are
delivered to the office of the Chairman of EGPC or which are sent to him by
registered mail at EGPC's main office in Cairo.
ARTICLE XI
SAVING OF PETROLEUM AND PREVENTION OF LOSS
(a) Operating Company shall take all proper measures, according to generally
accepted methods in use in the oil and gas industry to prevent loss or waste
of Petroleum above or under the ground in any form during drilling,
producing, gathering, and distributing or storage operations. The GOVERNMENT
has the right to prevent any operation on any well that it might reasonably
expect would result in loss or damage to the well or the Oil or Gas field.
(b) Upon completion of the drilling of a productive well, Operating Company
shall inform the GOVERNMENT or its representative of the time when the well
will be tested and the production rate ascertained.
"West Gharib Concession 20-F"
- -28-
(c) Except in instances where multiple producing formations in the same well
can only be produced economically through a single tubing string, Petroleum
shall not be produced from multiple oil bearing zones through one string of
tubing at the same time, except with the prior approval of the GOVERNMENT or
its representatives which shall not be unreasonably withheld.
(d) Operating Company shall record data regarding the quantities of Petroleum
and water produced monthly from each Development Lease. Such data shall be
sent to the GOVERNMENT or its representative on the special forms provided
for that purpose within thirty (30) days after the data are obtained. Daily
or weekly statistics regarding the production from the Area shall be
available at all reasonable times for examination by authorized
representatives of the GOVERNMENT.
(e) Daily drilling records and the graphic logs of wells must show the
quantity and type of cement and the amount of any other materials used in the
well for the purpose of protecting Petroleum, gas bearing or fresh water
strata.
(f) Any substantial change of mechanical conditions of the well after its
completion shall be subject to the approval of the representative of the
GOVERNMENT.
ARTICLE XII
CUSTOMS EXEMPTIONS
(a) EGPC, CONTRACTOR, and Operating Company shall be permitted to import and
shall be exempted from customs duties, any taxes, levies or fees (including
fees imposed by Ministerial Decision No. 254 of 1993 issued by the Minister
of Finance, as now or hereafter amended or substituted) of any nature (except
where an actual service has been rendered to CONTRACTOR by a competent
authority), and from the importation rules with respect to the importation of
machinery, equipment, appliances, materials, items, means of transport and
transportation (the exemption from taxes and duties for cars shall only apply
to cars to be used in operations), electric appliances, air conditioners for
offices, field housing and facilities, electronic appliances, computer
hardware and software as well as spare parts required for any of the imported
items all subject to a duly approved certificate issued by the responsible
representative nominated by EGPC for such purpose, which states that the
imported items are required for conducting the operations pursuant to this
Agreement. Such certificate shall be final and binding and shall
automatically result in the importation and the exemption without any further
approval, delay or procedure.
(b) Machinery, equipment, appliances and means of transport and
transportation imported by EGPC's, CONTRACTOR's and Operating Company's
contractors and sub-contractors temporarily engaged in any activity pursuant
to the operations which are the subject of this Agreement, shall be cleared
under the "Temporary Release System" without payment of customs duties, any
taxes, levies or fees (including fees imposed by Ministerial Decision No. 254
of 1993 issued by the Minister of Finance, as now or hereafter amended or
substituted) of any nature (except where an actual service has been rendered
to CONTRACTOR by a competent authority), upon presentation of a duly approved
certificate issued by an EGPC responsible representative nominated by EGPC
for such purpose which states, that the imported items are required for
conducting the operations pursuant to this Agreement. Items (excluding cars
not to be used in operations) set out in Article XII (a) imported by EGPC's,
CONTRACTOR's and Operating Company's contractors and sub-contractors for the
aforesaid operations, in order to be installed or used permanently or
consumed shall meet the conditions for exemption set forth in Article XII (a)
after being duly certified by an EGPC responsible representative to be used
for conducting operations pursuant to this Agreement.
"West Gharib Concession 20-F"
- -29-
(c) The expatriate employees of CONTRACTOR, Operating Company and their
contractors and sub-contractors shall not be entitled to any exemptions from
customs duties and other ancillary taxes and charges except within the limits
of the provisions of the laws and regulations applicable in the A.R.E.
However, personal household goods and furniture (including one (1) car) for
each expatriate employee of CONTRACTOR and/or Operating company shall be
cleared under the "Temporary Release System" (without payment of any customs
duties and other ancillary taxes) upon presentation of a letter to the
appropriate customs authorities by CONTRACTOR or Operating Company approved
by an EGPC responsible representative that the imported items are imported
for the sole use of the expatriate employee and his family, and that such
imported items shall be re-exported outside the A.R.E. upon the repatriation
of the concerned expatriate employee.
(d) Items imported into the A.R.E. whether exempt or not exempt from customs
duties and other ancillary taxes and charges hereunder, may be exported by
the importing party at any time after obtaining EGPC's approval, which
approval shall not be unreasonably withheld, without any export duties, taxes
or charges or any taxes or charges from which such items have been already
exempt, being applicable. Such items may be sold within the A.R.E. after
obtaining the approval of EGPC which approval shall not be unreasonably
withheld. In this event, the purchaser of such items shall pay all applicable
customs duties and other ancillary taxes and charges according to the
condition and value of such items and the tariff applicable on the date of
sale, unless such items have already been sold to an Affiliated Company of
C0NTRACTOR, if any, or EGPC, having the same exemption, or unless title to
such items (excluding cars not used in operations) has passed to EGPC. In the
event of any such sale under this paragraph (d), the proceeds from such sale
shall be divided in the following manner:
CONTRACTOR shall be entitled to reimbursement of its unrecovered cost if any,
in such items and the excess, if any, shall be paid to EGPC.
(e) The exemption provided for in Article XII (a) shall not apply to any
imported items when items of the same kind and quality are manufactured
locally meeting CONTRACTOR's and/or Operating Company's specifications for
quality and safety and are available for timely purchase and delivery in the
A.R.E. at a price not higher than ten percent (10%) of the cost of the
imported item, before customs duties but after freight and insurance costs,
if any, have been added.
(f) CONTRACTOR, EGPC and their respective buyers shall have the right to
freely export the Petroleum produced from the Area pursuant to this
Agreement; no license shall be required, and such petroleum shall be exempted
from any customs duties, any taxes, levies or any other imposts in respect of
the export of Petroleum hereunder.
ARTICLE XIII
BOOKS OF ACCOUNT: ACCOUNTING AND PAYMENTS
(a) EGPC, CONTRACTOR and Operating Company shall each maintain at their
business offices in the A.R.E. books of account, in accordance with the
Accounting Procedure in Annex "E" and accepted accounting practices
generally used in the petroleum industry, and such other books and
records as may be necessary to show the work performed under this
Agreement, including the amount and value of all Petroleum produced and
saved hereunder. CONTRACTOR and Operating Company shall keep their
books of: account and accounting records in United States Dollars.
Operating Company shall furnish to the GOVERNMENT or its representatives
monthly returns showing the amount of Petroleum produced and saved
hereunder. Such returns shall be prepared in the form required by the
GOVERNMENT; or its representative and shall be signed by the General
Manager or by the Deputy General Manager or a duly designated deputy and
delivered to the Government, or its representative within thirty (30) days
after the end of the month covered in the return.
"West Gharib Concession 20-F"
- -30-
(b) The aforesaid books of account and other books and records referred to
above shall be available at all reasonable times for inspection by duly
authorized representatives of the GOVERNMENT.
(c) CONTRACTOR shall submit to EGPC a Profit and Loss Statement of its Tax Year
not later than four (4) months after the commencement of the following Tax
Year to show its net profit or loss from the Petroleum operations under
this Agreement for such Tax Year.
(d) CONTRACTOR shall at the same time submit a year-end Balance Sheet for the
same Tax Year to EGPC. The Balance Sheet and financial statements shall be
certified by an Egyptian certified accounting firm.
ARTICLE XIV
RECORDS, REPORTS AND INSPECTION
(a) CONTRACTOR and/or Operating Company shall prepare and, at all times while
this Agreement is in force, maintain accurate and current records of its
operations in the Area. CONTRACTOR and/or Operating Company shall furnish the
GOVERNMENT or its representative, in conformity with applicable regulations
or as the GOVERNMENT or its representative may reasonably require information
and data concerning its operations under this Agreement. Operating Company
will perform the functions indicated in this Article XIV in accordance with
its respective role as specified in Article VI.
(b) CONTRACTOR and/or Operating Company shall save and keep for a reasonable
period of time a representative portion of each sample of cores and cuttings
taken from., drilling wells, to be disposed of, or forwarded to the
GOVERNMENT or its representative in the manner directed by the GOVERNMENT.
All samples acquired by CONTRACTOR and/or Operating Company for their own
purposes shall be considered available for inspection at any reasonable time
by the GOVERNMENT or its representatives.
(c) Unless otherwise agreed to by EGPC in case of exporting any rock samples
outside A.R.E. samples equivalent in size and quality shall, before such
exportation, be delivered to EGPC as representative of the GOVERNMENT.
(d) Originals of records can only be exported with the permission of EGPC;
provided, however, that magnetic tapes and any other data which must be
processed or analyzed outside the A.R.E. may be exported if a monitor or a
comparable record, if available, is maintained in the A.R.E. and provided
that such exports shall be repatriated to A.R.E. promptly following such
processing or analysis on the understanding that they belong to EGPC.
(e) During the period CONTRACTOR is conducting the Exploration operations,
EGPC's duly authorized representatives or employees shall have the right to
full and complete access to the Area at all reasonable times with the right
to observe the operations being conducted and to inspect all assets, records
and data kept by CONTRACTOR. EGPC's representative, in exercising its rights
under the preceding sentence of this paragraph (e), shall not interfere with
CONTRACTOR's operations. CONTRACTOR shall provide EGPC with copies of any and
all data (including, but not limited to, geological and geophysical reports,
logs and well surveys) information and interpretation of such data and other
information in CONTRACTOR's possession.
"West Gharib Concession 20-F"
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For the purpose of obtaining new offers the GOVERNMENT and/or EGPC may, after
the eighth (8th) year of the Exploration period or the date of termination of
this Agreement, whichever is the earlier, show any other party uninterpreted
basic geophysical and geological data (such data to be not less than one (1)
year old unless CONTRACTOR agrees to a shorter period, which agreement shall
not be unreasonably withheld) with respect to the Area, provided that the
GOVERNMENT and/or EGPC may at any time show another party such data directly
obtained over or acquired from those parts of the Area which CONTRACTOR has
relinquished as long as such data is at least one (1) year old.
ARTICLE XV
RESPONSIBILITY FOR DAMAGES
CONTRACTOR shall entirely and solely be responsible in law toward third parties
for any damage caused by CONTRACTOR's Exploration operations and shall indemnify
the GOVERNMENT and/or EGPC against all damages for which they may be held liable
on account of any such operations.
ARTICLE XVI
PRIVILEGES OF GOVERNMENT REPRESENTATIVES
Duly authorized representatives of the GOVERNMENT shall have access to the
Area covered by this Agreement and to the Operations conducted thereon. Such
representatives may examine the books, registers and records of EGPC,
CONTRACTOR and Operating Company and make a reasonable number of surveys,
drawings and tests for the purpose of enforcing this Agreement. They shall,
for this purpose, be entitled to make reasonable use of the machinery and
instruments of CONTRACTOR or Operating Company on the condition that no
danger or impediment to the operations hereunder shall arise directly or
indirectly from such use. Such representatives shall be given reasonable
assistance by the agents and employees of CONTRACTOR or Operating Company so
that none of the activities shall endanger or hinder the safety or efficiency
of the operations. CONTRACTOR or Operating Company shall offer such
representatives all privileges and facilities accorded to its own employees
in the field and shall provide them, free of charge, the use of reasonable
office space and of adequately furnished housing while they are in the field
for the purpose of facilitating the objectives of this Article. Without
prejudice to Article XIV (e) any and all information obtained by the
GOVERNMENT or its representatives under this Article XVI shall be kept
confidential with respect to the Area.
ARTICLE XVII
EMPLOYMENT RIGHTS AND TRAINING OF
ARAB REPUBLIC OF EGYPT PERSONNEL
(a) It is the desire of EGPC and CONTRACTOR that operations hereunder be
conducted in a business-like and efficient manner.
"West Gharib Concession 20-F"
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(1) The expatriate administrative, professional and technical personnel
employed by CONTRACTOR or Operating Company and the personnel of its
contractors for the conduct of. the operations hereunder, shall be
granted a residence as provided for in Law No.89 of 1960 as amended and
Ministerial Order No. 280 of 1981 as amended, and CONTRACTOR agrees
that all immigration, passport, visa and employment regulations of the
A.R.E., shall be applicable to all alien employees of CONTRACTOR
working in the A.R.E.
(2) A minimum of twenty-five percent (25%) of the combined salaries and
wages of each of the expatriate administrative, professional and
technical personnel employed by CONTRACTOR or Operating Company shall
be paid monthly in Egyptian Currency.
(b) CONTRACTOR and Operating Company shall each select its employees and
determine the number thereof, to be used for operations hereunder.
(c) CONTRACTOR, shall after consultation with EGPC, prepare and carry out
specialized training programs for all its A.R.E. employees engaged in
operations hereunder with respect to applicable aspects of the petroleum
industry. CONTRACTOR and Operating Company undertake to replace gradually
their non-executive expatriate staff by qualified nationals as they a re
available.
(d) During any of the Exploration phases, CONTRACTOR shall give mutually
agreed numbers of EGPC employees an opportunity to attend and participate in
CONTRACTOR's and CONTRACTOR's Affiliated Companies training programs relating
to Exploration and Development operations. In the event that the total cost
of such programs is less than fifty thousand (50,000) United States Dollars
in any Financial Year during such period, CONTRACTOR shall pay EGPC the
amount of the shortfall within thirty (30) days following the end of such
Financial Year. However, EGPC shall have the right that said amount (U.S.
$50,000) allocated for training, be paid directly to EGPC for such purpose.
ARTICLE XVIII
LAWS AND REGULATIONS
(a) CONTRACTOR and Operating Company shall be subject to Law No. 66 of 1953
(excluding Article 37 thereof) as amended by Law No. 86 of 1956 and the
regulations issued for the implementation thereof, including the
regulations for the safe and efficient performance of operations carried
out for the execution of this Agreement and for the conservation of the
petroleum resources of the A.R.E. provided that no regulations, or
modification or interpretation thereof, shall be contrary to or
inconsistent with the provisions of this Agreement.
(b) Except as provided in Article III (g) for Income Taxes, EGPC, CONTRACTOR
and Operating Company shall be exempted from all taxes and duties, whether
imposed by the GOVERNMENT or municipalities including among others, Sales
Tax, Value Added Tax and Taxes on the Exploration, Development, extracting,
producing, exporting or transporting of Petroleum and LPG as well as any
and all withholding taxes that might otherwise be imposed on dividends,
interest, technical service fees, patent and trademark royalties, and
similar items. CONTRACTOR shall also be exempted from any tax on the
liquidation of CONTRACTOR, or distributions of any income to the
shareholders of CONTRACTOR, and from any tax on capital.
"West Gharib Concession 20-F"
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(c) The rights and, obligations of EGPC and CONTRACTOR under, and for the
effective term of this Agreement shall be governed by and in accordance
with the provisions of this Agreement and can only be altered or amended by
the written mutual agreement of the said contracting parties.
(d) The contractors and sub-contractors of CONTRACTOR and Operating Company
shall be subject to the provisions of this Agreement which affect them.
Insofar as all regulations which are duly issued by the GOVERNMENT apply
from time to time and are not in accord with the provisions of this
Agreement, such regulations shall not apply to CONTRACTOR, Operating
Company and their respective contractors and sub-contractors, as the case
may be.
(e) EGPC, CONTRACTOR, Operating Company and their respective contractors and
sub-contractors shall for the purposes of this Agreement be exempted from
all professional stamp duties, imposts and levies imposed by syndical laws
with respect to their documents and activities hereunder.
(f) All the exemptions from the application of the A.R.E. laws or regulations
granted to EGPC, CONTRACTOR, the Operating Company, their contractors and
sub-contractors under this Agreement shall include such laws and
regulations as presently in effect or hereafter amended or substituted.
ARTICLE XIX
STABILIZATION
In case of changes in existing legislation or regulations applicable to the
conduct of Exploration, Development and production of Petroleum, which take
place after the Effective Date, and which significantly affect the economic
interest of this Agreement to the detriment of CONTRACTOR or which imposes on
CONTRACTOR an obligation to remit to the A.R.E. the proceeds from sales of
CONTRACTOR's Petroleum, CONTRACTOR shall notify EGPC of the subject
legislative or regulatory measure. In such case, the Parties shall negotiate
possible modifications to this Agreement designed to restore the economic
balance thereof which existed on the Effective Date.
The Parties shall use their best efforts to agree on amendments to this
Agreement within (90) days from aforesaid notice.
These amendments to this Agreement shall not in any event diminish or
increase the rights and obligations of CONTRACTOR as these were agreed on the
Effective Date.
Failing agreement between the Parties during the period referred to above in
this Article XIX, the dispute may be submitted to arbitration, as provided in
Article XXIV of this Agreement.
ARTICLE XX
RIGHT OF REQUISITION
(a) In case of national emergency due to war or imminent expectation of war or
internal causes. the GOVERNMENT may requisition all or part of the
production from the Area obtained hereunder and require Operating Company
to increase such production to the utmost possible maximum. The GOVERNMENT
may also requisition the Oil and/or Gas field itself and, if necessary,
related facilities.
(b) In any such case, such requisition shall not be effected except after
inviting EGPC and CONTRACTOR or their representative by registered letter,
with acknowledgement of receipt, to express their views with respect to
such requisition.
"West Gharib Concession 20-F"
- -34-
(c) The requisition of production shall be effected by Ministerial Order. Any
requisition of an Oil and/or Gas field, or any related facilities shall be
effected by a Presidential Decree duly notified to EGPC and CONTRACTOR.
(d) In the event of any requisition as provided above, the GOVERNMENT shall
indemnify in full EGPC and CONTRACTOR for the period during which the
requisition is maintained, including:
(1) All damages which result from such requisition; and
(2) Full repayment each month for all Petroleum extracted by the GOVERNMENT
less the royalty share of such production.
However, any damage resulting from enemy attack is not within the meaning of
this paragraph
(d). Payment hereunder shall be made to CONTRACTOR in U.S. Dollars remittable
abroad. The price paid to CONTRACTOR for Petroleum taken shall be calculated in
accordance with Article VII (c).
ARTICLE XXI
ASSIGNMENT
(a) Neither EGPC nor CONTRACTOR may assign to a person, firm or corporation, in
whole or in part, any of its rights, privileges, duties or obligations under
this Agreement without the written consent of the GOVERNMENT.
(b) To enable consideration to be given to any request for such consent, the
following conditions must be fulfilled:
(1) The obligations of the assignor deriving from this Agreement must
have been duly fulfilled as of the date such request is made.
(2) The instrument, of assignment must include provisions stating
precisely that the assignee is bound by all covenants contained in this
Agreement and any modifications or additions in writing that up to such
time may have been made. A draft of such instrument of assignment shall
be submitted to EGPC for review and approval before being formally
executed.
(c) Notwithstanding the provisions of Article XXI (a), CONTRACTOR may assign
all or any of its rights, privileges, duties or obligations under this
Agreement to an Affiliated Company, provided that CONTRACTOR shall advise the
GOVERNMENT and EGPC in writing of the assignment.
(d) Any assignment, sale, transfer or other such conveyance made pursuant to
the provisions of this Article XXI shall be free of any transfer, capital
gains taxes or related taxes, charges or fees including without limitation
all Income Tax. Sales Tax, Value Added Tax, Stamp Duty, or other Taxes or
similar payments.
(e) As long as the assignor shall hold any Interest under this Agreement. the
assignor together with the assignee shall be jointly and severally liable for
all duties and obligations of CONTRACTOR under this Agreement.
"West Gharib Concession 20-F"
- -35-
ARTICLE XXII
BREACH OF AGREEMENT AND POWER TO CANCEL
(a) The GOVERNMENT shall have the right to cancel this Agreement by Order or
Presidential Decree, with respect to CONTRACTOR, in the following instances:
(1) If it knowingly has submitted any false statements to the
GOVERNMENT which were of a material consideration for the execution of
this Agreement;
(2) If it assigns any interest hereunder contrary to the provisions of
article XXI;
(3) if it is adjusted bankrupt by a court of a competent jurisdiction;
(4) If it does not comply with any final decision reached as the result
of court proceedings conducted under Article XXIV(a);
(5) If it intentionally extracts any mineral other than Petroleum not
authorized by this Agreement or without the authority of the
GOVERNMENT, except such extractions as may be unavoidable as the result
of the operations conducted hereunder in accordance with accepted
petroleum industry practice and which shall be notified to the
GOVERNMENT or its representative as soon as possible; and
(6) If it commits any material breach of this Agreement or of the
provisions of Law No.66 of 1953, as amended by Law No. 86 of 1956,
which are not contradicted by the provisions of this Agreement.
Such cancellation shall take place without prejudice to any rights
which may have accrued to the GOVERNMENT against CONTRACTOR in
accordance with the provisions of this Agreement, and, in the event of
such cancellation, CONTRACTOR, shall have the right to remove from the
Area all its personal property.
(b) If the GOVERNMENT deems that one of the aforesaid causes (other than a
force majeure cause referred to in Article XXIII) hereof exists to cancel
this Agreement, the GOVERNMENT shall give CONTRACTOR ninety (90) days written
notice personally served on CONTRACTOR's General Manager in the legally
official manner and receipt of which is acknowledged by him or by his legal
agents, to remedy and remove such cause; but if for any; reason such service
is impossible due to unotified change of address, publication in the Official
Journal of the GOVERNMENT of such notice shall be considered as valid service
upon CONTRACTOR. If at the end of the said ninety (90) day notice period
such cause has not remedied and removed, this Agreement may be canceled
forthwith by Order or Presidential Decree as aforesaid: provided however,
that if such cause, or the failure to remedy or remove such cause, results
from any act or omission of one party, cancellation of this Agreement shall
be effective only against that party and not a s against any other party
hereto.
ARTICLE XXIII
FORCE MAJEURE
(a) The nonperformance or delay in performance by EGPC and CONTRACTOR, or
either of them of any obligation under this Agreement shall be excused if,
and to the extent that, such non-performance or delay is caused by force
majeure. The period of any such non-performance or delay, together with
such period as may be necessary for the restoration of any damage done
during such delay, shall be added to the time given in this Agreement for
the performance of such obligation and for the performance of any
obligation dependent thereon and consequently, to the term of this
Agreement, but only with respect to the block or blocks affected.
"West Gharib Concession 20-F"
- -36-
(b) "Force Majeure" within the meaning of this Article XXIII, shall be any
order, regulation or direction of the GOVERNMENT of the ARAB REPUBLIC OF
EGYPT, or the Government of the REPBULIC OF IRELAND or the government of
CANADA, with respect to CONTRACTOR whether promulgated in the form of a law
or otherwise or any act of God, insurrection, riot, war, strike, and other
labor disturbance, fires, floods or any cause not due to .the fault or
negligence of EGPC and CONTRACTOR or either of them, whether or not similar
to the foregoing, provided that any such cause is beyond the reasonable
control of EGPC and CONTRACTOR or either of them.
(c) Without prejudice to the above and except as may be otherwise provided
herein, the GOVERNMENT shall incur no responsibility whatsoever to EGPC and
CONTRACTOR, or either of them for any damages, restrictions or loss arising
in consequence of such case of force majeure except a force majeure caused
by the order, regulations or direction of the GOVERNMENT.
(d) If the force majeure event occurs during the initial Exploration period or
any extension thereof and continues in effect for a period of six (6)
months CONTRACTOR shall have the option upon ninety (90) days prior written
notice to EGPC to terminate its obligations hereunder without further
liability of any kind.
ARTICLE XXIV
DISPUTES AND ARBITRATION
(a) Any dispute, controversy or claim arising out of or relating to this
Agreement or the breach, termination or invalidity thereof, between the
GOVERNMENT and the parties shall be referred to the jurisdiction of the
appropriate A.R.E. Courts and shall b e finally settled by such Courts.
(b) Any dispute, controversy or claim arising out of or relating to this,
Agreement, or breach, termination or invalidity thereof between EGPC and
CONTRACTOR shall be settled by arbitration in accordance with the
Arbitration Rules. of the- Cairo Regional Center for International
Commercial Arbitration (the Center) in effect on the date of this
Concession Agreement. The award of the arbitrators shall be final and
binding on the parties.
(c) The number of arbitrators shall be three (3).
(d) Each party shall appoint one arbitrator. If, within thirty (30) days after
receipt of the claimant's notification of the appointment of an arbitrator
the respondent has not notified the claimant in writing of the name of the
arbitrator he appoints, the claimant may request the Center to appoint the
second arbitrator.
(e) The two arbitrators thus appointed shall choose the third arbitrator who
will act as the presiding arbitrator of the tribunal. If within thirty (30)
days after the appointment of the second arbitrator, the two arbitrators
have not agreed upon the choice of the presiding arbitrator, then either
party may request the Secretary General of the Permanent Court of
Arbitration at the Hague to designate the appointing authority. Such
appointing authority shall appoint the presiding arbitrator in the same way
as a sole arbitrator would be appointed under Article 6.3 of the UNCITRAL
Arbitration Rules. Such presiding arbitrator shall be a person of a
nationality other than the A.R.E. or IRELAND or Canada and of a country
which has diplomatic relations with the A.R.E. IRELAND and Canada, and who
shall have no economic interests in the Petroleum business of the
signatures hereto.
"West Gharib Concession 20-F"
- -37-
(f) Unless otherwise agreed by the parties to the arbitration, the arbitration,
including the making of the award, shall take place in Cairo, A.R.E.
(g) The decision of a majority of the arbitrators shall be final and binding
upon the Parties and the arbitral award rendered shall be final and
conclusive. Judgment on the arbitral award rendered, may be entered in any
court having Jurisdiction or application may be made in such court for a
judicial acceptance of the award and for enforcement, as the case may be.
(h) Egyptian Law shall apply to the dispute except that in the event of any
conflict between Egyptian Laws and this Agreement the provisions of this
Agreement (including the arbitration provision) shall prevail. The
arbitration shall be conducted in the English language.
(i) EGPC AND CONTRACTOR agree that if, for whatever reason, arbitration, in
accordance with the above procedure cannot take piece, or is likely to take
place under circumstances for CONTRACTOR which could prejudice CONTRACTOR'S
RIGHT TO fair arbitration, all disputes, controversies, or claims arising
out of or relating to this Agreement or the breach, termination or
invalidity thereof shall be settled by ad hoc arbitration in accordance
with the UNCITRAL Rules in effect on the Effective Date.
ARTICLE XXV
STATUS OF PARTIES
(a) The rights, duties, obligations and liabilities in respect of EGPC and
CONTRACTOR hereunder shall be several and not joint or collective, it being
understood that this Agreement shall not be construed as constituting an
association or corporation or partnership.
(b) Each CONTRACTOR MEMBER shall be subject to the laws of the place where it
is incorporated regarding its legal status or creation, organization,
charter and by-laws, shareholding, and, ownership. Each CONTRACTOR MEMBER's
shares of capital which are entirely held abroad shall not be negotiable in
the A.R.E. and shall not be offered for public subscription nor shall be
subject to the stamp tax on capital shares nor any tax or duty in the
A.R.E. CONTRACTOR shall be exempted from the application of Law No.159 of
1981 as amended.
(c) All CONTRACTOR MEMBERS shall be jointly and severally liable for the
performance of the obligations of CONTRACTOR under this Agreement.
ARTICLE XXVI
LOCAL CONTRACTORS AND
LOCALLY MANUFACTURED MATERIAL
CONTRACTOR or Operating Company, as the case may be, and their contractors
shall:
(a) Give priority to local contractors and sub contractors including EGPC's
Affiliated Companies as long as their performance is comparable with
international performance and the prices of their services are not higher
than the prices of other contractors and sub-contractors by more than ten
percent (10%).
"West Gharib Concession 20-F"
- -38-
(b) Give preference to locally manufactured material, equipment, machinery
and consumables so long as their quality and time of delivery are comparable
to internationally available material, equipment, machinery and consumables.
However, such material, equipment, machinery and consumables may be imported
for operations conducted hereunder if the local price of such items at
CONTRACTOR's or Operating Company's operating base in A.R.E. is more than ten
percent (10%) higher than the price of such imported items before customs
duties, but after transportation and insurance costs have been added.
ARTICLE XXVII
ARABIC TEXT
The Arabic version of this Agreement shall, before the courts of A.R.E. be
referred to in construing or interpreting this Agreement; provided however,
that in any arbitration pursuant to Article XXIV herein between EGPC and
CONTRACTOR the English and Arabic versions shall both be referred to as
having equal force in construing or interpreting the Agreement.
ARTICLE XXVIII
GENERAL
The headings or titles to each of the Articles to this Agreement are solely
for the convenience of the parties hereto and shall not be used with respect
to the interpretation of said Articles.
Nothing in this Agreement shall be constructed as constituting any
relationship to any petroleum concession agreement heretofore entered into by
the parties and each of these agreements shall be treated separately and
independently in all respects, including but not limited to royalties, taxes
and the computation of the net profits of EGPC, DUBLIN, AND TANGANYIKA
respectively, except where this Agreement expressly provides to the contrary.
ARTICLE XXIX
APPROVAL OF THE GOVERNMENT
This Agreement shall not be binding upon any of the parties hereto unless and
until a law is issued by the competent authorities of the A.R.E. authorizing
the Minister of Petroleum to sign this Agreement and giving this Agreement
full force and effect of law notwithstanding any countervailing Governmental
enactment, and the Agreement is signed by the GOVERNMENT, EGPC, and
CONTRACTOR.
DUBLIN INTERNATIONAL PETROLEUM (EGYPT) LIMITED
BY:
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TANGANYIKA OIL COMPANY LTD.
BY:
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EGYPTIAN GENERAL PETROLEUM CORPORATION
BY:
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ARAB REPUBLIC OF EGYPT
BY:
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DATE
"West Gharib Concession 20-F"