INTERNATIONAL JOINT OPERATING AGREEMENT
Between:
DUBLIN INTERNATIONAL PETROLEUM (EGYPT) LIMITED
- -and-
GHP EXPLORATION (WEST GHARIB) L TD. -and- DRUCKER PETROLEUM INC.
West Gharib Area Arab Republic of Egypt
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TABLE OF CONTENTS
ARTICLE I DEFINITIONS 1
ARTICLE II EFFECTIVE DATE AND TERM 7
ARTICLE III PARTICIPATING INTERESTS 8
ARTICLE IV OPERATOR 10
ARTICLE V OPERATING COMMITTEE 17
ARTICLE VI WORK PROGRAMS AND BUDGETS 21
ARTICLE VII OPERATIONS BY LESS THAN ALL PARTIES 28
ARTICLE VIII DEFAULT 38
ARTICLE IX DISPOSITION OF PRODUCTION 42
ARTICLE X ABANDONMENT OF WELLS 44
ARTICLE XI SURRENDER, EXTENSIONS AND RENEWALS 45
ARTICLE XII TRANSFER OF INTEREST OR RIGHTS 46
ARTICLE XIII WITHDRAWAL FROM AGREEMENT 48
ARTICLE XIV RELATIONSHIP OF PARTIES AND TAX 51
ARTICLE XV CONFIDENTIAL INFORMATION -PROPRIETARY TECHNOLOGY 52
ARTICLE XVI FORCE MAJEURE 54
ARTICLE XVII NOTICES 55
ARTICLE XVIII APPLICABLE LAW AND DISPUTE RESOLUTION 57
ARTICLE XIX ALLOCATION OF COST RECOVERY RIGHTS 59
ARTICLE XX GENERAL PROVISIONS 60
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INTERNATIONAL JOINT OPERATING AGREEMENT WEST GHARIB AREA
THIS AGREEMENT is made as of the Effective Date, AMONG:
DUBLIN INTERNATIONAL PETROLEUM (EGYPT) LIMITED, a body corporate organized
under the laws of the Republic of Ireland (hereinafter referred to as
"Dublin"); -and-
GHP EXPLORATION (WEST GHARIB) Ltd., a body corporate organized under the laws
of Bermuda (hereinafter referred to as "GHP"); -and-
DRUCKER PETROLEUM INC., a body corporate organized under the laws of the
British Virgin Islands (hereinafter referred to as "Drucker"). WITNESSETH:
WHEREAS, Dublin and Tanganyika Oil Company Ltd. ("Tanganyika") entered into
the Concession Agreement for Petroleum Exploration and Exploitation (the
"Concession") with the Government of the Arab Republic of Egypt and the
Egyptian General Petroleum Corporation ("EGPC") for the West Gharib Area,
Arab Republic of Egypt, a copy of which is attached hereto as Exhibit "B"; and
WHEREAS Tanganyika has transferred its entire right, title and interest in
the Concession to Dublin; and
WHEREAS Dublin and Drucker are parties to a Farmout Agreement dated Apri127,
1998, pursuant to which and subject to the terms thereof, Dublin agreed to
assign a Participating Interest to Drucker; and
WHEREAS Dublin and GHP are parties, or successors to the parties, to a
Farmout Agreement dated April 27, 1998, pursuant to which and subject to the
terms thereof, Dublin agreed to assign a Participating Interest to GHP; and
WHEREAS, the Parties desire to define their respective rights and obligations
with respect to their operations under the Concession.
NOW, THEREFORE, in consideration of the premises and the mutual covenants and
agreements and obligations set out below and to be performed, the Parties
agree as follows:
ARTICLE I DEFINITIONS
As used in this Agreement, the following words and terms shall have the meaning
ascribed to them below:
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1.1 "ACCOUNTING PROCEDURE" means the rules, provisions and conditions set
forth and contained in Exhibit "A" to this Agreement.
1.2 "AFE." means an authorization for expenditure pursuant to Article 6.6.
1.3 "AFFILIATE" means a company, partnership or other legal entity which
controls, or is controlled by, or which is controlled by an entity which
controls a Party. Control means the ownership or the right to cast or cause
to be cast, directly or indirectly, of fifty (50%) percent or more of the
shares or voting rights in a company, partnership or legal entity .
1.4 "AGREED INTEREST RATE" means interest compounded on a monthly basis, at
the rate per annum equal to the one (1) month term, LIBOR rate for U.S.
dollar deposits, as published by The Wall Street Journal or if not so
published, then by the Financial Times of London, plus five percent (5%),
applicable on the first Business Day prior to the due date of payment and
thereafter on the first Business Day of each succeeding one (1) month term.
If the aforesaid rate is contrary to any applicable usury law, the rate of
interest to be charged shall be the maximum rate permitted by such applicable
law.
1.5 "AGREEMENT" means this agreement, together with Exhibits "A" and "B"
attached to this agreement and forming a part hereof.
1.6 "APPRAISAL WELL" means any well whose purpose at the time of commencement
of drilling such well is the determination of the extent or the volume of
Hydrocarbon reserves contained in an existing Discovery.
1.7 "BOARD OF DIRECTORS" means the Board of Directors of the Operating
Company and "DIRECTOR" means a member of the Board of Directors.
1.8 "BUSINESS DAY" means a day on which the banks in Cairo, Egypt are
customarily open for business.
1.9 "CALENDAR QUARTER" means a period of three (3) months commencing with
January 1 and ending on the following March 31, a period of three (3) months
commencing with April 1 and ending on the following June 30, a period of
three (3) months commencing with July 1 and ending on the following September
30, or a period of three (3) months commencing with October 1 and ending on
the following December 31 according to the Gregorian Calendar.
1.10 "CALENDAR YEAR" means a period of twelve (12) months commencing with
January 1 and ending on the following December 31 according to the Gregorian
Calendar.
1.11 "CASH PREMIUM" means the payment made pursuant to Article 7.5(B) by a
Non-Consenting Party to reinstate its rights to participate in an Exclusive
Operation.
1.12 "COMMERCIAL DISCOVERY" shall have the meaning set out in Article
lII(c)(i) of the Concession.
1.13 "COMPLETION" means an operation intended to complete a well through the
Christmas tree as a producer of Hydrocarbons in one or more Zones, including,
but not limited to, the setting of production casing, perforating,
stimulating the well and production Testing conducted in such operation.
"COMPLETE" and other derivatives shall be construed accordingly.
1.14 "CONCESSION" means collectively the Concession Agreement authorized and
put in full force by Law 15 of 1998 of the Arab Republic of Egypt and which
agreement is attached as Exhibit "B" hereto, and any Development Leases or
other mineral rights which may be derived from the Concession Agreement
including any extension, renewal or amendment of any of the foregoing.
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1.15 "CONCESSION AREA" has the meaning ascribed to the term 'Area' in the
Concession as the same may be adjusted from time to time in accordance with
the terms thereof.
1.16 "CONSENTING PARTY" means a party who agrees to participate in and pay
its share of the cost of an Exclusive Operation.
1.17 "COST OIL" means that portion of the total production of Hydrocarbons
which is allocated to the Parties under the Concession for the recovery of
Petroleum Costs and referred to and defined as "Cost Recovery Petroleum" in
Article VII (a) l of the Concession.
1.18 "CRUDE OIL" has the meaning given to such term in the Concession.
1.19 "DAY" means a calendar day unless otherwise specifically provided.
1.20 "DEEPENING" means an operation whereby a well is drilled to an objective
Zone below the deepest Zone in which the well was previously drilled, or
below the deepest Zone proposed in the associated AFE, whichever is the
deeper. "DEEPEN" and other derivatives shall be construed accordingly.
1.21 "DEFAULTING PARTY" shall have the meaning ascribed in Article 8.1.
1.22 "DEVELOPMENT BLOCK" has the meaning given to such term in the Concession.
1.23 "DEVELOPMENT LEASE" has the meaning given to such term in the Concession.
1.24 "DEVELOPMENT PERIOD" has the meaning given to such term in Article III
(d) (iii) of the Concession.
1.25 "DEVELOPMENT PLAN" means the plan for the development of Hydrocarbons from
a Development Lease which shall include, inter alia:
A) Details of the proposed work to be undertaken, personnel required
and expenditures to be incurred, including the timing of same;
B) An estimated date for the commencement of production;
C) A delineation of the proposed Development Lease; and
D) Any other information requested by the Operating Committee.
1.26 "DEVELOPMENT WELL" means any well drilled for the production of
Hydrocarbons in the Development Period.
1.27 "DISCOVERY" means the discovery of an accumulation of Hydrocarbons whose
existence until that moment was unproven by drilling, and for greater
certainty, shall include a Commercial Oil Well and a Commercial Gas Well (as
those terms are defined in the Concession).
1.28 "DRUCKER FARMOUT AGREEMENT" means the Farmout Agreement between Dublin
and Drucker dated April 27, 1998 and any amendments and revisions thereto.
1.29 "EFFECTIVE DATE" means the date this Agreement comes into effect as
stated in Article II.
1.30 "EGPC" means the Egyptian General Petroleum Corporation.
1.31 "ENTITLEMENT" means a quantity of produced Hydrocarbons of which a Party
has the right and obligation to take delivery pursuant to the Concession or,
if applicable, an offtake agreement,
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which, subject to the terms of the GHP Farmout Agreement and the Drucker
Farmout Agreement, shall be derived in proportion to that Party's
Participating Interest in the Hydrocarbons produced after adjustment for
overlifts and underlifts.
1.32 "EXCESS COST OIL" has the meaning given to "Excess Cost Recovery
Petroleum" in Article VII (a)2 of the Concession.
1.33 "EXCLUSIVE OPERATIONS" means those operations and activities carried out
by Operator, pursuant to this Agreement, the costs of which are chargeable to
the account of less than all the Parties.
1.34 "EXCLUSIVE WELL" means a well drilled pursuant to an Exclusive Operation.
1.35 "EXPLORATION ADVISORY COMMITTEE" means the committee of that name
provided for in the Concession.
1.36 "EXPLORATION PERIOD" means any and all periods of exploration set out in
the Concession.
1.37 "EXPLORATION SUB-PERIOD" means one of the periods for exploration set
out in the Concession.
1.38 "EXPLORATION WELL" means any well drilled during the course of
exploration work other than an Appraisal Well or Development Well.
1.39 "FARMOUT AGREEMENTS" means the Drucker Farmout Agreement and the GHP
Farmout Agreement.
1.40 "FINANCIAL YEAR" has the meaning given to such term in the Concession.
1.41 "G & G DATA" means geological, geophysical and geochemical data and
other information that is not obtained through a wellbore.
1.42 "GHP FARMOUT AGREEMENT" means the Farmout Agreement between Dublin and
GHP dated April 27, 1998 and any amendments and revisions thereto.
1.43 "GOVERNMENT" means the Government of the Arab Republic of Egypt or any
agency thereof.
1.44 "GROSS NEGLIGENCE" means any act or failure to act (whether sole, joint
or concurrent) by a Party which was intended to cause, or which was in
reckless disregard of or wanton indifference to, harmful consequences such
Party knew, or should have known, such act or failure would have had on the
safety or property of another person or entity, or which was in reckless
disregard of or wanton indifference to the rights of another party or the
Government, but shall not include any error of judgement or mistake made by
such Party in the exercise in good faith of any function, authority or
discretion conferred on the Party employing such under this Agreement.
1.45 "HYDROCARBONS" means all substances including liquid and gaseous
hydrocarbons which are subject to and covered by the Concession.
1.46 "JOINT ACCOUNT" means the accounts and records established and
maintained by Operator for Joint Operations in accordance with the provisions
of this Agreement and of the Accounting Procedure.
1.47 "JOINT OPERATIONS" means those operations and activities carried out by
Operator pursuant to this Agreement, the costs of which are chargeable to all
Parties.
1.48 "JOINT PROPERTY" means, at any point in time and subject to the
Concession, all wells, facilities, equipment, materials, information, funds
and the property held for the Joint Account.
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1.49 "MANDATORY APPRAISAL WELL" means an Appraisal Well which, unless
otherwise agreed to by EGPC, is required pursuant to the terms of the
Concession to be drilled before notice of a Commercial Discovery may be
given, excepting any such well which would qualify as an obligatory well
under the Minimum Work Obligations for the then current Exploration Sub-
Period.
1.50 "MINIMUM WORK OBLIGATIONS" means the work and/or expenditure obligations
during the Exploration Period, as specified in the Concession, which must be
performed or expended in order to satisfy the obligations contained in the
Concession.
1.51 "NON-CONSENTING PARTY" means a Party who elects not to participate in an
Exclusive Operation.
1.52 "NON-OPERATOR(S)" means the Party or Parties to this Agreement other
than Operator.
1.53 "OPERATING COMMITTEE" means the committee constituted in accordance with
Article V.
1.54 "OPERATING COMPANY" means the company to be created to conduct
operations under the Concession after a Commercial Discovery.
1.55 "OPERATOR" means a Party to this Agreement designated as such in
accordance with this Agreement.
1.56 "PARTICIPATING: INTEREST" means the undivided percentage interest of
each Party in the rights and obligations derived from the Concession and this
Agreement.
1.57 "Party" means any of the entities named in the fIrst paragraph to this
Agreement and any respective successors or assigns in accordance with the
provisions of this Agreement.
1.58 "PETROLEUM COSTS" means costs and expenses incurred by the Parties and
allowed by EGPC to be recovered pursuant to the Concession.
1.59 "PLUGGING BACK" means a single operation whereby a deeper Zone is
abandoned in order to attempt a Completion in a shallower Zone. "PLUG BACK"
and other derivatives shall be construed accordingly.
1.60 "PRODUCTION SHARING OIL" means that portion of the total production of
Hydrocarbons, in excess of Cost Oil, which is allocated to the Parties under
the terms of Article VII(b) of the Concession and includes the Parties share
of Excess Cost Oil contemplated in Article VII(a)2 of the Concession.
1.61 "RECOMPLETION" means an operation whereby a Completion in one Zone is
abandoned in order to attempt a Completion in a different Zone within the
existing wellbore. "RECOMPLETE" and other derivatives shall be construed
accordingly.
1.62 "REWORKING" means an operation conducted in the wellbore of a well after
it is Completed to secure, restore, or improve production in a Zone which is
currently open to production in the wellbore. Such operations include, but
are not limited to, well stimulation operations, but exclude any routine
repair or maintenance work, or drilling, Sidetracking, Deepening, Completing,
Recompleting, or Plugging Back of a well. "REWORK" and other derivatives
shall be construed accordingly.
1.63 "SENIOR SUPERVISORY PERSONNEL" means with respect to a Party, any
individual who functions as such Party's senior resident manager, who directs
all operations and activities of such Party in the country or region in which
he is resident, and any individual who functions for such Party or one of its
Affiliates at a management level equivalent to or superior to the senior
resident manager, or any officer or director of such Party or one of its
Affiliates, but excluding all managers or supervisors who are responsible for
or in charge of installations or facilities, onsite drilling, construction or
production and related operations, or any other field operations.
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1.64 "SIDETRACKING" means the directional control and intentional deviation
of a well from vertical so as to change the bottom hole location unless done
to straighten the hole or to drill around junk in the hole or to overcome
other mechanical difficulties. "SIDE-TRACK" and other derivatives shall be
construed accordingly.
1.65 "TESTING" means an operation intended to evaluate the capacity of a Zone
to produce Hydrocarbons. "Test" and other derivatives shall be construed
accordingly.
1.66 "WORK PROGRAM AND BUDGET" means a work program for Joint Operations and
budget therefor as described and approved in accordance with Article VI.
1.67 "Zone" means a stratum of earth containing or thought to contain a
common accumulation of Hydrocarbons separately producible from any other
common accumulation of Hydrocarbons.
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ARTICLE II EFFECTIVE DATE AND TERM
2.1 Effective Date and Term
This Agreement shall have effect from the 27th Day of April, 1998 and shall,
subject always to the Parties' continuing obligations under Article XV,
continue in effect until the Concession terminates and thereafter until all
materials, equipment and personal property used in connection with the Joint
Operations have been removed and disposed of, and final settlement has been
made among the Parties.
For the avoidance of doubt, the portions of this Agreement described in (A),
(8) and (C) below shall remain in effect until:
A) all wells have been properly abandoned in accordance with Article X; and
B) all obligations, claims, arbitrations and lawsuits have been settled or
otherwise disposed of in accordance with Article 4.5 and Article XVIII; and
C) the time relating to the protection of confidential information and
proprietary technology has expired in accordance with Article XV.
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ARTICLE III PARTICIPATING INTERESTS
3.1 Scope
A) The purpose of this Agreement is to establish the respective rights and
obligations of the Parties with regard to operations under the Concession,
including without limitation, the joint exploration, appraisal, development
and production of Hydrocarbon reserves from the Concession Area.
B) Without limiting the generality of Article 3.1(A), the following
activities are outside of the scope of this Agreement and are not addressed
herein:
1) Construction, operations, maintenance, repair and removal of facilities
downstream from the point of delivery of the Parties' share of Hydrocarbons
under the offtake agreement provided for in Article 9.2;
2) Transportation of Hydrocarbons beyond the point of delivery of the
Parties' shares of Hydrocarbons under the offtake agreement provided for in
Article 9.2;
3) Marketing and sales of Hydrocarbons, except as expressly provided in
Articles 8.7 and in Article IX;
4) Acquisition of rights to explore for, appraise, develop or produce
Hydrocarbons outside of the Concession Area (other than as a consequence of
unitization with an adjoining area under the terms of the Concession); and
5) Exploration, appraisal, development or production of minerals other than
Hydrocarbons, whether inside or outside of the Concession Area.
3.2 Participating Interests
A) The Participating Interests of the Parties shall be as follows: Dublin 50%
GHP 30% Drucker 20%
B) If a Party transfers all or part of its Participating Interest pursuant to
the provisions of this Agreement and the Concession, the Participating
Interests of the Parties shall be revised accordingly.
3.3 Ownership, Obligations and Liabilities
A) Unless otherwise provided in this Agreement or either of the Farmout
Agreements, all the rights and interests in and under the Concession, all
Joint Property and any Hydrocarbons produced from the Concession Area shall,
subject to the terms of the Concession and any laws and regulations which may
be applicable, be owned by the Parties in accordance with their respective
Participating Interests.
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B) Unless otherwise provided in this Agreement or either of the Farmout
Agreements, the obligations of the Parties under the Concession and all
liabilities and expenses incurred by Operator in connection with Joint
Operations shall be charged to the Joint Account and all credits to the Joint
Account shall be shared by the Parties, as among themselves, in accordance
with their respective Participating Interests.
C) Subject to the terms of this Agreement and the Farmout Agreements, each
Party shall pay when due, in accordance with the Accounting Procedure, its
Participating Interest share of Joint Account expenses, including cash
advances and interest, accrued pursuant to this Agreement and the Accounting
Procedure shall govern the accrual and satisfaction of the respective
obligations, liabilities and credits among the Parties.
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ARTICLE IV OPERATOR
4.1 Designation of Operator
Dublin is designated as Operator and agrees to act in accordance with the
terms and conditions of the Concession and this Agreement, which terms and
conditions shall also apply to any successor Operator.
4.2 Rights and Duties of Operator
A) Subject to the terms and conditions of this Agreement, Operator shall have
exclusive charge of and shall conduct all Joint Operations. Operator may
employ independent contractors and/or agents (which may include Affiliates of
Operator) in such Joint Operations.
B) In the conduct of Joint Operations, Operator shall exercise its best
efforts to:
1) Perform Joint Operations in accordance with the provisions of the
Concession, this Agreement and the instructions of the Operating Committee
not IN conflict with this Agreement and in material compliance with
applicable laws, rules, regulations and decrees of the Arab Republic of Egypt;
2) Conduct all Joint Operations in a diligent, safe and efficient manner in
accordance with good and prudent oil field practices and conservation
principles generally followed by the international petroleum industry under
similar circumstances;
3) Subject to Article 4.6 and the Accounting Procedure, neither gain a profit
nor suffer a loss as a result of being the Operator in its conduct of Joint
Operations, provided that Operator may rely on Operating Committee approval
of specific accounting practices not in conflict with the Accounting
Procedure;
4) Perform the duties for the Operating Committee set out in Article V and
prepare and submit to the Operating Committee the proposed Work Programs and
Budgets and AFEs as provided in Article VI;
5) Acquire all licenses, permits, consents, approvals, surface or other
rights that may be required for or in connection with the conduct of Joint
Operations;
6) Upon receipt of reasonable advance notice, permit the representatives of
any of the Parties to have at all reasonable times and at their own risk and
expense reasonable access to the Joint Operations with the right to observe
all such Joint Operations and to inspect all Joint Property and to conduct
financial audits as provided in the Accounting Procedure;
7) Maintain the Concession IN full force and effect. Operator shall promptly
pay and discharge all liabilities and expenses incurred IN connection with
Joint Operations and use its reasonable efforts to keep and maintain the
Joint Property free from all liens, charges and encumbrances arising out of
Joint Operations;
8) Pay to the Government for the Joint Account, within the periods and in the
manner prescribed by the Concession and all applicable laws and regulations,
all
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periodic payments, royalties, taxes, fees and other payments pertaining to
Joint Operations, but excluding any taxes measured by the incomes of the
Parties;
9) Carry out the obligations of Contractor, as such term is defined in the
Concession, including, but not limited to, preparing and furnishing such
reports, records and information as may be required pursuant to the
Concession;
10) Have, in accordance with the decisions of the Operating Committee,
Article 5.14, and Article 6.3(C), the exclusive right and obligation to
represent the Parties in all dealings with the Government with respect to
matters arising under the Concession and Joint Operations. Operator shall
notify the other Parties as soon as possible of such meetings. Non-Operators
shall have the right to attend such meetings but only in the capacity of
observers. Nothing contained in this Agreement shall restrict any Party from
holding discussions with the Government with respect to any issue peculiar to
its particular business interests arising under this Agreement, but in such
event such Party shall promptly advise the Parties, if possible, before and
in any event promptly after such discussions, provided that such Party shall
not be required to divulge to the Parties any matters discussed to the extent
the same involve proprietary information on matters not affecting the
Parties; and
11) Take all necessary and proper measures for the protection of life,
health, the environment and property in the case of an emergency; provided,
however, that Operator shall immediately notify the Parties of the details of
such emergency and measures.
4.3 Employees of Operator
Subject to the Concession and this Agreement, Operator shall determine the
number of employees, the selection of such employees, the hours of work and
the compensation to be paid all such employees in connection with Joint
Operations and Exclusive Operations conducted by Operator under this
Agreement. Operator shall employ only such employees, agents and contractors
as are reasonably necessary to conduct Joint Operations.
4.4 Information Supplied by Operator
A) Operator shall provide each Non-Operator with one (1) paper copy of the
following data and reports as they are currently produced or compiled from
the Joint Operations:
1) Copies of all logs or surveys;
2) Daily drilling progress reports;
3) Copies of all tests and core analysis reports;
4) Copies of the plugging reports;
5) Copies of the final geological and geophysical maps and reports in seismic
digital format;
6) Engineering studies, development schedules and annual progress reports on
development projects;
7) Field and well performance reports, including reservoir studies and
reserve estimates;
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8) Copies of all reports relating to Joint Operations furnished by Operator
to the Government, except magnetic tapes which shall be stored by Operator
and made available for inspection and/or copying at the sole expense of the
Non-Operator requesting same;
9) Other reports as frequently as is justified by the activities or as
instructed by the Operating Committee; and
10) Subject to Article 15.3, such additional information for Non-Operators as
they or any of them may request, provided that the requesting party or
Parties pay the costs of preparation of such information and that the
preparation of such information will not unduly burden Operator's
administrative and technical personnel. Only Non-Operators who pay such costs
shall receive such additional information.
B) Operator shall give Non-Operators access at all reasonable times to all
other data acquired in the conduct of Joint Operations. Any Non-Operator may
make copies of such other data at its sole expense.
4.5 Settlement of Claims and Lawsuits
A) Operator shall promptly notify the Parties of any and all material claims
or suits and such other claims and suits as the Operating Committee may
direct which arise out of Joint Operations or relate in any way to Joint
Operations. Operator shall represent the Parties and defend or oppose or
settle the claim or suit. Operator may in its sole discretion compromise or
settle any such claim or suit or any related series of claims or suits for an
amount not to exceed the equivalent of one hundred thousand (U.S.$100,000)
Dollars (U.S.) inclusive of legal fees. Operator shall obtain the approval
and direction of the Operating Committee on amounts in excess of the above
stated amount. Each Non- Operator shall have the right to be represented by
its own counsel at its own expense in the settlement, compromise or defense
of such claims or suits.
B) Any Non-Operator shall promptly notify the other Parties of any claim made
against such Non-Operator by a third party which arises out of or which may
affect the Joint Operations and such Non-Operator shall defend or settle the
same in accordance with any directions given by the Operating Committee.
Those costs, expenses and damages incurred pursuant to such defense or
settlement which are attributable to Joint Operations shall be for the Joint
Account.
C) Notwithstanding Article 4.5(A) and Article 4.5(B), each Party shall have
the right to participate in any such suit, prosecution, defense or settlement
conducted in accordance with Article 4.5(A) and Article 4.5(B) at its sole
cost and expense; provided always that no Party may settle its Participating
Interest share of any claim without first satisfying the Operating Committee
that it can do so without prejudicing the interests of the Joint Operations.
4.6 Liability of Operator
A) Except as set out in this Article 4.6, neither the Party designated as
Operator nor any other Indemnitee (as defined below) shall bear (except as a
party to the extent of its Participating Interest share) any damage, loss,
cost, expense or liability resulting from performing ( or failing to perform)
the duties and functions of the Operator and the Indemnitees are hereby
released from liability to Non-Operators for any and all damages,
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losses, costs, expenses and liabilities arising out of, incident to or
resulting from such performance or failure to perform, even though caused in
whole or in part by a pre-existing defect, the negligence (sole, joint or
concurrent), Gross Negligence, strict liability or other legal fault of
Operator (or any such Indemnitee).
B) Except as set out in this Article 4.6, the Parties shall in proportion to
their Participating Interests defend and indemnify Operator and its
Affiliates, and their respective consultants, agents, employees, officers and
directors (the "Indemnitees"), from any and all damages, losses, costs,
expenses (including reasonable legal costs, expenses and attorneys' fees) and
liabilities incident to claims, demands or causes of action of every kind and
character brought by or on behalf of any person or entity, which claims,
demands or causes of action arise out of, are incident to or result from
Joint Operations regardless of the cause of such damage, loss, injury,
illness or death and even though caused in whole or in part by a pre-existing
defect, the negligence (whether sole, joint or concurrent), Gross Negligence,
strict liability or other legal fault of Operator (or any such Indemnitee).
C) Nothing in this Article 4.6 shall be deemed to relieve the Party
designated as Operator from its Participating Interest share of any damage,
loss, cost, expense or liability arising out of, incident to or resulting
from Joint Operations.
D) Notwithstanding Articles 4.6(A) and 4.6(B), if any Senior Supervisory
Personnel of Operator or its Affiliates engage in Gross Negligence that
proximately causes the Parties to incur damage, loss, cost, expense or
liability for claims, demands or causes of action referred to in Articles
4.6(A) or 4.6(B), Operator shall solely be responsible for the first five
million ($5,000,000) Dollars (U.S.) of such damages, losses, costs, expenses
and liabilities.
E) Notwithstanding the foregoing, under no circumstances shall any Indemnitee
(except as a Party to the extent of its Participating Interest) bear any
cost, expense or liability for environmental, consequential, punitive or any
other similar indirect damages or losses, including but not limited to, those
arising from business interruption, reservoir or formation damage, inability
to produce Hydrocarbons, loss of profits, pollution control and environmental
amelioration or rehabilitation.
4.7 Insurance Obtained by Operator
A) Operator shall procure and maintain or cause to be procured and maintained
for the Joint Account all insurance in the types and amounts required by the
Concession and applicable laws, rules and regulations.
B) Operator shall obtain for the Joint Account such further insurance, at
competitive rates, as the Operating Committee may from time to time require.
C) Any Party may elect not to participate in the insurance to be procured
under Article 4.7(B) provided such Party:
1) gives prompt written notice to that effect to Operator;
2) does nothing which may interfere with Operator's negotiations for such
insurance for the other Parties; and
3) obtains and maintains such insurance (in respect of which an annual
certificate of adequate coverage from a reputable insurance broker shall be
sufficient
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evidence) or other evidence of financial responsibility which fully covers
its Participating Interest share of the risks that would be covered by the
insurance procured under Article 4.7(B), and which the Operating Committee
may determine to be acceptable. No such determination of acceptability shall
in any way absolve a non-participating Party from its obligation to meet each
cash call, including any cash call in respect of damages and losses and/or
the costs of remedying the same, in accordance with the terms of this
Agreement. If such Party obtains other insurance, such insurance shall
contain a waiver of subrogation in favor of all the other Parties and the
Operator, but only in respect of their interests under this Agreement.
D) The cost of insurance in which all the Parties are participating shall be
for the Joint Account and the cost of insurance in which less than all the
Parties are participating shall be charged to the Parties participating in
proportion to their respective Participating Interests.
E) Operator shall, in respect of all insurance obtained pursuant to this
Article:
1) promptly inform the participating Parties when such insurance is obtained
and supply them with copies of the relevant policies when the same are issued;
2) arrange for the participating Parties, according to their respective
Participating Interests, to be named as co-insurers on the relevant policies
with waivers of subrogation in favor of all the Parties; and
3) duly file all claims and take all necessary and proper steps to collect
any proceeds and credit any proceeds to the participating Parties in
proportion to their respective Participating Interests.
F) Operator shall use its reasonable efforts to require all contractors
performing work in respect of Joint Operations to obtain and maintain any and
all insurance in the types and amounts required by any applicable laws, rules
and regulations or any decision of the Operating Committee and shall use its
reasonable efforts to require all such contractors to name the Parties as
additional insureds on contractors' insurance policies or to obtain from
their insurers waivers of all rights of recourse against Operator,
Non-Operators and their insurers.
4.8 Commingling of Funds
Operator may not commingle with Operator's own funds the monies which
Operator receives from or for the Joint Account pursuant to this Agreement.
4.9 Resignation of Operator
Subject to Article 4.11, Operator may resign as Operator at any time by so
notifying the other Parties at least one hundred and twenty (120) Days prior
to the effective date of such resignation. Operator shall continue to act as
such until a successor has taken over.
4.10 Removal of Operator
A) Subject to Article 4.11, Operator shall be removed upon receipt of notice
from any Non-Operator if:
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1) An order is made by a court or an effective resolution is passed for the
dissolution, liquidation, winding up or reorganization by creditors of
Operator;
2) Operator dissolves, liquidates or terminates its corporate existence;
3) Operator becomes insolvent, bankrupt or makes an assignment for the
benefit of creditors; or
4) A receiver is appointed for a substantial part of Operator's assets.
8) Subject to Article 4.11, Operator may be removed by the decision of the
Non-Operators if Operator has committed a material breach of this Agreement
and has either failed to commence to rectify the breach within thirty (30)
Days of receipt of a notice from Non-Operators detailing the alleged breach
or failed to diligently pursue such activities to completion. Any decision of
Non-Operators to give notice of breach to Operator or to remove Operator
under this Article 4.10(8) shall be made by the unanimous vote of all
Non-Operators.
C) If Operator together with any Affiliate of Operator is or becomes the
holder of a Participating Interest of less than twenty percent (20%), then
Operator shall be required to promptly notify the other Parties. The
Operating Committee shall then vote within thirty (30) Days of such
notification on whether or not a successor Operator should be named pursuant
to Article 4.11.
D) If there is a direct or indirect change in control of Operator (other than
a transfer of control to an Affiliate of Operator), Operator shall be
required to promptly notify the other Parties. Upon a Non-Operator's inquiry
in respect of a change of control, Operator shall reply within ten (10) Days
of receipt of such inquiry or of such change of control. The Operating
Committee shall vote within thirty (30) Days of receipt of such notice or
reply from Operator on whether or not a successor Operator should be
appointed pursuant to Article 4.11. For purposes of this Article, control
means the ownership directly or indirectly of fifty percent (50%) or more of
the shares or voting rights of Operator.
4.11 Appointment of Successor
When a change of Operator occurs pursuant to Article 4.9 or Article 4.10:
A) The Operating Committee shall meet as soon as possible to appoint a
successor Operator pursuant to the voting procedure of Article 5.9. However,
no Party may be appointed successor Operator against its will.
B) If the Operator disputes the commission of or failure to rectify a
material breach alleged pursuant to Article 4.10(B) and proceedings are
initiated pursuant to Article XVIII, no successor Operator may be appointed
pending the conclusion or abandonment of such proceedings and during the
period such proceedings are pending Operator shall continue to act as such,
subject to the terms of Article 8.3 with respect to Operator's breach of its
payment obligations.
C) If an Operator is removed, other than in the case of Article 4. 10(C) or
Article 4.10(D), neither Operator nor any Affiliate of Operator shall have
the right to vote for itself on the appointment of a successor Operator, nor
be considered as a candidate for the successor Operator.
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D) A resigning or removed Operator shall be compensated out of the Joint
Account for its reasonable expenses directly related to its resignation or
removal, except in the case of Article 4.10(B).
E) If requested by the resigning Operator or the successor Operator or any
Non-Operator, the Operating Committee shall arrange for the taking of an
independent inventory of all Joint Property and Hydrocarbons, and an audit of
the books and records of the removed Operator. Such inventory and audit shall
be completed, if possible, no later than the effective date of the change of
Operator. The liabilities and expenses of such inventory and audit shall be
charged to the Joint Account.
F) The resignation or removal of Operator and its replacement by the
successor Operator shall not become effective prior to receipt of any
necessary Government approvals.
(G) Upon the effective date of the resignation or removal, the successor
Operator shall succeed to all duties, rights and authority prescribed for
Operator. The former Operator shall transfer to the successor Operator
custody of all Joint Property, Hydrocarbons in storage or in transit, books
of account, records and other documents maintained by Operator pertaining to
the Concession and to Joint Operations. Upon delivery of the above-described
property and data, the former Operator shall be released and discharged from
all obligations and liabilities as Operator accruing after such date.
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ARTICLE V OPERATING COMMITTEE
5.1 Establishment of Operating Committee
To provide for the overall supervision and direction of Joint Operations,
there is established an Operating Committee composed of representatives of
each party holding a Participating Interest. Each Party shall appoint one (1)
representative and one (1) alternate representative to serve on the Operating
Committee. Each Party shall as soon as possible and in any event within
thirty (30) Days after the date of this Agreement give notice in writing to
the other Parties of the name and address of its representative and alternate
representative to serve on the Operating Committee. Each Party shall have the
right to change its representative and alternate at any time by giving proper
notice to such effect to the other Parties.
5.2 Powers and Duties of Operating Committee
The Operating Committee shall have power and duty to authorize and supervise
Joint Operations that are necessary or desirable to discharge the obligations
of the Parties under the Concession, any applicable laws and regulations and
to properly explore and exploit the Concession Area in accordance with this
Agreement and in a manner appropriate in the circumstances.
5.3 Authority to Vote
The representative of a Party, or in his absence his alternate
representative, shall be authorized to represent and bind such Party with
respect to any matter which is within the powers of the Operating Committee
and is properly brought before the Operating Committee. Each such
representative shall have a vote equal to the Participating Interest of the
Party such person represents. Each alternate representative shall be entitled
to attend all Operating Committee meetings but shall have no vote at such
meetings except in the absence of the representative for whom he is the
alternate. In addition to the representative and alternate representative,
each Party may also bring to any Operating Committee meetings such technical
and other advisors as it may deem appropriate.
5.4 Subcommittees The Operating Committee may establish such subcommittees,
including technical subcommittees, as the Operating Committee may deem
appropriate. The functions of such subcommittees shall be in an advisory
capacity or as otherwise determined unanimously by the Parties. Each
subcommittee shall appoint a chairman.
5.5 Notice of Meeting
A) Operator may call a meeting of the Operating Committee by giving notice to
the Parties at least fifteen (15) Days in advance of such meeting.
B) Any Non-Operator may request a meeting of the Operating Committee by
giving proper notice to all the other Parties. Upon receiving such request,
Operator shall call such meeting for a date not less than fifteen (15) Days
nor more than twenty (20) Days after receipt of the request.
C) The notice periods above may only be waived with the unanimous consent of
all the Parties.
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5.6 Contents of Meeting Notice
A) Each notice of a meeting of the Operating Committee as provided by
Operator shall contain:
1) The date, time and location of the meeting; and
2) An agenda of the matters and proposals to be considered and/or voted upon,
together with copies of all materials relating or relevant thereto or
reasonably necessary for the consideration thereof.
B) A Party, by notice to the other Parties given not less than seven (7) Days
prior to a meeting, may add additional matters to the agenda for a meeting.
C) On the request of a Party, and with the unanimous consent of all Parties,
the Operating Committee may consider at a meeting a proposal not contained in
such meeting agenda.
5.7 Location of Meetings
All meetings of the Operating Committee shall be held in Cairo, Arab Republic
of Egypt or elsewhere as may be decided by the Operating Committee.
5.8 Operator's Duties for Meetings
A) With respect to meetings of the Operating Committee and any subcommittee,
Operator's duties shall include, but not be limited to:
1) Timely preparation and distribution of the agenda;
2) Organization and conduct of the meeting; and
3) Preparation of a written record or minutes of each meeting.
B) Operator shall have the right to appoint the chairman of the Operating
Committee and all subcommittees.
5.9 Voting Procedure
Except as otherwise expressly provided in this Agreement, all decisions,
approvals and other actions of the Operating Committee on all proposals
coming before it under this Agreement shall be decided by the affirmative
vote of two (2) or more Parties, which are not Affiliates, then having
collectively at least sixty five percent (65%) of the Participating Interests.
5.10 Record of Votes
The chairman of the Operating Committee shall appoint a secretary who shall
make a record of each proposal voted on and the results of such voting at
each Operating Committee meeting. Each representative shall sign and be
provided a copy of such record at the end of such meeting and it shall be
considered the final record of the decisions of the Operating Committee.
5.11 Minutes
The secretary shall provide each Party with a copy of the minutes of the
Operating Committee meeting within seven (7) Days after the end of the
meeting. Each Party shall have fifteen (15)
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Days after receipt of such minutes to give notice of its objections to the
minutes to the secretary. Any objection to the minutes shall become an
agenda item for the next meeting unless earlier resolved. A failure to give
notice specifying objection to such minutes within said fifteen (15) Day
period shall be deemed to be approval of such minutes. In any event, the
votes recorded under Article 5.10 shall take precedence over the minutes
described above.
5.12 Voting by Notice
A) In lieu of a meeting, Operator may submit any proposal for a decision of
the Operating Committee by giving each representative proper notice
describing the proposal so submitted. Each party shall communicate its vote
by proper notice to Operator and the other Parties within the following time
periods after receipt of Operator's notice as is applicable thereto:
1) twenty four (24) hours in the case of operations which involve the use of
a drilling rig, service rig, well servicing equipment or seismic crew that is
standing by in the Concession Area; or
2) ten (10) Days in the case of all other proposals.
B) Except in the case of Article 5.12(A)(1), any Non-Operator may, by notice
delivered to all Parties within five (5) Days of receipt of Operator's
notice, request that the proposal be decided at a meeting rather than by
notice. In such an event, that proposal shall be decided at a meeting duly
called for that purpose.
C) Except as provided in Article X, any Party failing to communicate its vote
shall be deemed to have voted against such proposal.
D) If a meeting is not requested, then at the expiration of the appropriate
time period, Operator shall give each Party a confirmation notice stating the
tabulation and results of the vote.
5.13 Effect of Vote
All decisions taken by the Operating Committee pursuant to this Article,
shall be conclusive and binding on all the Parties, except that:
A) If pursuant to this Article, a Joint Operation, other than an operation to
fulfil the Minimum Work Obligations, has been properly proposed to the
Operating Committee and the Operating Committee has not approved such
proposal in a timely manner, then any Party shall have the right for the
appropriate period specified below to propose, in accordance with Article
VII, an Exclusive Operation involving operations essentially the same as
those proposed for such Joint Operation.
1) For proposals involving the use of a drilling rig that is standing by the
Concession Area, such right shall be exercisable for twenty-four (24) hours
after the time specified in Article 5.12(A)(1) has expired or after receipt
of Operator's notice given pursuant to Article 5.13(D), as applicable;
2) For proposals to develop a Discovery, such right shall be exercisable for
ten (10) Days after the date the Operating Committee was required to consider
such proposal pursuant to Article 5.6 or Article 5.12; or
3) For all other proposals, such right shall be exercisable for five (5) Days
after the date the Operating Committee was required to consider such proposal
pursuant to Article 5.6 or Article 5.12.
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B) If a party voted against any proposal which was approved by the Operating
Committee and which could be conducted as an Exclusive Operation pursuant to
Article VII, then such party shall have the right not to participate in the
operation contemplated by such approval. Any such party wishing to exercise
its right of non-consent must give notice of non-consent to all other Parties
within ten (10) Days (or within twenty-four (24) hours if the drilling rig,
service rig, well servicing equipment or seismic crew to be used in such
operation is standing by in the Concession Area) following Operating
Committee approval of such proposal. The Parties that were not entitled to
give or did not give notice of non-consent shall be Consenting Parties as to
the operation contemplated by the Operating Committee approval, and shall
conduct such operation as an Exclusive Operation under Article VII. Any Party
that gave notice of non-consent shall be a Non-Consenting Party as to such
Exclusive Operation.
C) If the Consenting Parties to an Exclusive Operation under Article 5.13(A)
or (B) concur, then the Operating Committee may, at any time, pursuant to
this Article, reconsider and approve, decide or take action on any proposal
that the Operating Committee declined to approve earlier, or modify or revoke
an earlier approval, decision or action.
D) Once a Joint Operation for the drilling, Deepening, Testing,
Side-tracking, Plugging Back, Completing, Recompletion, Reworking or plugging
of a well, has been approved and commenced, such operation shall not be
discontinued without the consent of the Operating Committee; provided,
however, that such operation may be discontinued, if:
1) an impenetrable substance or other condition in the hole is encountered
which in the reasonable judgement of Operator causes the continuation of such
operation to be impractical; or
2) other circumstances occur which in the reasonable judgement of Operator
causes the continuation of such operation to be unwarranted.
On the occurrence of either of the above, Operator shall promptly notify the
Parties that such operation is being discontinued pursuant to the foregoing,
and any Party shall have the right to propose, in accordance with Article
VII, an Exclusive Operation to continue such operation.
5.14 Representation of Non-Operators
A) Each of Dublin, GHP and Drucker shall have the right to appoint one (1)
representative to the Exploration Advisory Committee. This right is
assignable by any of such Parties to any other of such Parties, to an
Affiliate of any of such Parties and to a third party permitted assignee. The
Operator shall be entitled to appoint a representative to the Exploration
Advisory Committee if a Party fails or refuses to appoint its representative
or, without prejudice to Article 8.2, if a Party's Participating Interest is
transferred pursuant to Article 8.4.
B) Notwithstanding the appointment of a representative to the Exploration
Advisory Committee by one or more Non-Operators, and provided that the
Operator consults with and considers the input of the representative(s)
appointed by the Non-Operators, the Operator shall be the primary spokesman
for the Joint Operators on the Exploration Advisory Committee. The
respective Party's member to the Exploration Advisory Committee shall fully
support and vote in conformity with the decisions and instructions of the
Operating Committee with respect to matters brought before the Exploration
Advisory Committee, notwithstanding that such decision or instruction may
not have been approved unanimously by the Operating Committee.
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ARTICLE VI WORK PROGRAMS AND BUDGETS
6.1 Exploration and Appraisal
A) Immediately after the date of execution of this Agreement, Operator shall
deliver to the Parties a proposed Work Program and Budget detailing the Joint
Operations to be performed in the Concession Area for the remainder of the
current Financial Year and the next ensuing Financial Year. Within fifteen
(15) Days of such delivery, the Operating Committee shall meet to consider
and to endeavour to agree on a Work Program and Budget.
B) At least sixty (60) Days prior to the applicable deadline under Article
IV(c) of the Concession or such other deadline as may be agreed to by EGPC,
Operator shall deliver to the Parties a proposed Work Program and Budget
detailing the Joint Operations to be performed in the Concession Area for the
following Financial Year. Within thirty (30) Days of such delivery, the
Operating Committee shall meet to consider and to endeavour to agree on a
Work Program and Budget. Upon receipt of Operating Committee approval, such
Work Program and Budget shall be submitted to the Exploration Advisory
Committee as required by the Concession. The Operating Committee shall
further meet and consider any revisions to the Work Program and Budget
recommended by the Exploration Advisory Committee and make any such revisions
as may be agreeable prior to submission to the EGPC.
C) If a Discovery is made, Operator shall deliver any notice of Discovery
required under the Concession and shall as soon as possible or within such
time period as directed by the Operating Committee, submit to the Parties a
report containing available details concerning the Discovery and Operator's
recommendation as to whether the Discovery merits appraisal. If the Operating
Committee determines that the Discovery merits appraisal, Operator, within
ninety (90) Days, shall deliver to the Parties a proposed Work Program and
Budget for the appraisal of the Discovery. Within thirty (30) Days of such
delivery, or earlier if necessary to meet any applicable deadline under the
Concession, the Operating Committee shall meet to consider, modify and then
either approve or reject the appraisal Work Program and Budget. If the
appraisal Work Program and Budget is approved by the Operating Committee,
Operator shall take such steps as may be required under the Concession to
secure approval of the appraisal Work Program and Budget by EGPC. In the
event EGPC requires changes in the appraisal Work Program and Budget, the
matter shall be resubmitted to the Operating Committee for further
consideration.
D) In addition to the requirements of Article 6.1(C), if a Discovery is made
and the drilling of a Mandatory Appraisal Well or Wells is required under the
Concession in order to obtain a Development Lease in respect of the
Discovery, the Operating Committee shall consider the drilling of the
Mandatory Appraisal Well(s). Each of the Parties shall have the right not to
participate in the drilling of such Mandatory Appraisal Well in which case
the provisions of Article VII (and Article 7.4(C) in particular) shall apply.
E) The Work Program and Budget agreed pursuant to this Article shall include
the Minimum Work Obligations, or at least that part of such Minimum Work
Obligations required to be carried out during the Financial Year in question
under the terms of the Concession. If, within the time periods prescribed in
this Article, the Operating Committee is unable to agree on such Work Program
and Budget, then the proposal capable of satisfying the Minimum Work
Obligations for the Financial Year in question that receives the largest
Participating Interest vote (even if less than the applicable percentage
under Article 5.9) shall be deemed adopted as part of the annual Work Program
and Budget. If competing proposals receive equal votes, then Operator shall
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choose between those competing proposals. Any portion of a Work Program and
Budget adopted pursuant to this Article, instead of Article 5.9 shall include
only such operations for the Joint Account as are reasonably necessary to
maintain the Concession in full force and effect, including such operations
as are necessary to fulfill the Minimum Work Obligations required for the
given Financial Year.
F) Subject to Article 6.7, approval of any such Work Program and Budget,
which includes an Exploration or Appraisal Well, whether by drilling,
Deepening or Sidetracking, shall include approval for only expenditures
necessary for the drilling, Deepening, or Sidetracking, of such well, as
applicable. When an Exploration Well or Appraisal Well has reached its
authorized depth, all logs, cores and other approved Tests have been
conducted and the results furnished to the Parties, Operator shall submit to
the Parties in accordance with Article 5.12(A)(1) an election to participate
in an attempt to Complete or perform additional downhole operations for such
well. Operator shall include in such submission Operator's recommendation on
such Completion attempt and an AFE for such Completion costs. In the event
that less than all of the Parties elect to participate in such Completion,
the Completion may proceed as an Exclusive Operation under Article VII. Any
Party that gave notice of non-consent shall be a Non-Consenting Party as to
such Exclusive Operation.
6.2 Development
If, before or after the drilling of any Mandatory Appraisal Wells, the
Operating Committee determines that a Discovery may be a Commercial Discovery,
the Operator shall prepare and submit a Development Plan to the Operating
Committee for approval prior to providing notice of the Commercial Discovery
to EGPC. The Operating Committee shall meet to consider, modify and either
approve or reject the Development Plan. If the Development Plan is approved
by the Operating Committee, Operator shall, as soon as possible and in
accordance with the timing requirements set out in the Concession, provide
notice of the Commercial Discovery to EGPC.
Within sixty (60) Days following receipt of such notice by the Government and
EGPC, Operator and EGPC shall meet to review all appropriate data with a view
to agreeing on the existence of a Commercial Discovery. If EGPC or the
Government require changes in the Development Plan, Operator shall resubmit
the matter to the Operating Committee for review and approval. Upon EGPC's
agreement that the Discovery constitutes a Commercial Discovery under the
Concession the Operating Company contemplated in Article VI of the Concession
shall be formed for the purposes of conducting further operations and
activities under the Concession.
6.3 Operating Company
A) Upon formation of the Operating Company, as aforesaid, the Parties shall
meet to allocate duties and responsibilities between the Operating Company
and the Operator. To the extent that the Operator's duties and
responsibilities under this Agreement are assumed by the Operating Company,
the Operator shall be released from any further responsibility and liability
therefor.
B) Provided there are three (3) Parties and no more than three (3) Parties to
this Agreement, each Party that holds at least a twenty percent (20%)
Participating Interest shall be entitled to appoint one (1) Director to
represent Contractor on the Board of Directors of the Operating Company. In
all other cases, each Party shall be entitled to appoint one (1) Director to
the Board of Directors for each twenty-five percent (25%) Participating
Interest held by such Party. Parties having a Participating Interest less
than twenty-five percent (25%) shall be entitled to have a representative
attend Directors' meetings as an observer only. The Operator shall be
entitled to appoint representatives to fill any vacancy in the four (4)
positions allotted to Contractor on the Board of Directors.
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C) Notwithstanding the formation of the Operating Company, the Operator shall
continue to represent the interests of the Parties in all matters that are
not specifically delegated to the Operating Company under the Concession and,
except for the appointment of Contractor's Directors to the Board of
Directors of the Operating Company as set forth in Article 6.3(B), shall
continue to satisfy the obligations of Contractor under the Concession on
behalf of the Non-Operators in accordance with the terms of this Agreement.
Without limiting the generality of the foregoing, Operator shall:
1) Review and provide recommendations to the Parties with respect to
proposals and recommendations submitted by the Operating Company to the Board
of Directors thereof, including, without limitation, proposed Work Programs
and Budgets, production schedules and estimated cash requirements;
2) Assist the Operating Company, by secondment of personnel or through a
service contract, in the conduct of the Operating Company's operations under
the Concession as agent for the Parties and EGPC;
3) Make reasonable efforts to cause the Operating Company to submit the
proposed Work Program and Budget to the Operating Committee within a
timeframe so as to allow for a reasonable period to conduct its review and
obtain its approval prior to submission to the Board of Directors; and
4) In the event that the Board of Directors require changes to any Work
Program and Budget, resubmit the matter to the Operating Committee for
approval.
D) In the meetings of the Board of Directors and of the shareholders of the
Operating Company, each Party's respective member(s) of the Board of
Directors and their respective representative(s) and the Party's
representatives at the shareholder meetings (and any proxy for them) and the
members of the Operating Company management appointed by the Operator, shall
fully support and vote in conformity with the decisions of the Operating
Committee previously made in accordance with the provisions of the Agreement
and any other resolution previously taken by the Parties under this
Agreement. If a Party will not have a representative present at a meeting of
either the Board of Directors or the shareholders of the Operating Company,
such Party shall, prior to such meeting, furnish the other Party a written
proxy for the votes to be taken at such meeting, consistent with the vote of
the Operating Committee. If an Exclusive Operation is to be conducted by the
Operating Company, the Parties shall agree upon procedures regarding decision
making within and governance of the Parties' interests in the Operating
Company in conducting such operations, including without limitation,
procedures for Board of Directors voting by the Parties, confidentiality and
allocation of the Exclusive Operations costs and expenses within the
Operating Company.
E) After formation of the Operating Company, certain of the Joint Operations
shall be carried out by Operating Company, pursuant to the Concession, as
agent on behalf of the shareholders of Operating Company, or where necessary
by Operator or through duly authorized agents or independent contractors
engaged by either Operator or Operating Company.
F) In the conduct of Joint Operations, Operator, under the direction and
supervision of the Operating Committee, shall use all reasonable efforts to
require that Operating Company shall:
1) Conduct diligently all Joint Operations in accordance with Operator's
standards and the practices generally followed by the petroleum industry in
the Arab Republic of Egypt under similar circumstances and conditions and in
conformance with good oilfield and engineering practices; perform all Joint
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Operations in an efficient and economic manner and in compliance with the
provisions of the Concession and all applicable laws and regulations;
2) Proceed with due diligence to acquire for the Joint Account any and all
surface rights that may be required for or in connection with the conduct of
the Joint Operations;
3) Keep the Joint Property free from liens, charges and encumbrances arising
out of the Joint Operations;
4) Pay all costs and expenses incurred by it in the Joint Operations promptly
and when due and payable;
5) Purchase and maintain in force any and all insurance required by law and
purchase or provide any additional insurance authorized by the Board of
Directors; and
6) Carry out each program of Joint Operations adopted by the Operating
Committee within the limits of the approved Operating Company budget and
shall not undertake any Joint Operations not included in an approved budget
or make any expenditures during a budget period in excess of the budgeted
amounts approved therefor except in compliance with the internal rules and
regulations of the Operating Company and subject to approval as may be
required under Articles 6.6 and 6.7 of this Agreement, as applicable.
6.4 Itemization of Expenditures
A) During the preparation of the proposed Work Programs and Budgets
contemplated in this Article, Operator shall consult with the Operating
Committee regarding the contents of such Work Programs and Budgets.
B) Each Work Program and Budget and Development Plan submitted by Operator
shall contain an itemized estimate of the costs of Joint Operations and all
other expenditures to be made for the Joint Account during the Calendar Year
in question and shall inter alia:
1) identify each work category in sufficient detail to afford the ready
identification of the nature, scope and duration of the activity in question;
2) include such reasonable information regarding Operator's allocation
procedures and estimated manpower costs as the Operating Committee may
determine; and
3) comply with the requirements of the Concession.
C) The Work Program and Budget shall designate the portion or portions of the
Concession Area in which Joint Operations itemized in such Work Program and
Budget are to be conducted and shall specify the kind and extent of such
operations in such detail as the Operating Committee may deem suitable.
6.5 Contract Awards
A) Operator shall award each contract for approved Joint Operations tendered
or placed by Operator on the following basis:
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1) For contracts in amounts less than or equal to two hundred thousand
($200,000) Dollars (U.S.) Operator shall award the contract to the best
qualified contractor as determined by cost and ability to perform the
contract without the obligation to tender and without informing or seeking
the approval of the Operating Committee, except that before entering into
contracts with Affiliates of the Operator, Operator shall obtain the approval
of the Operating Committee. If requested by any Party, Operator shall
circulate to the Parties a copy of the final version of the contract awarded.
2) For contracts anticipated to be in an amount greater than two hundred
thousand ($200,000) Dollars (U.S.) Operator shall:
(a) Provide the Parties with a list of the entities whom Operator proposes to
invite to tender for the said contract;
(b) Add to such list any entity whom a Party requests to be added within
fourteen (14) Days of receipt of such list;
(c) Prepare and dispatch the tender documents to the entities on the list as
aforesaid and to Non-Operators;
(d) After the expiration of the period allowed for tendering, consider and
analyze the details of all bids received;
(e) Prepare and circulate to the Parties a bid analysis, stating Operator's
determination as to the entity to whom the contract should be awarded, the
reasons therefore, and the technical, commercial and contractual terms to be
agreed upon; and
(1) Upon the request of a Party, provide such Party with a copy of the final
version of the contract.
3) For contracts in amounts greater than five hundred thousand ($500,000)
Dollars (U.S.), Operator shall obtain Operating Committee approval of its
award recommendation.
B) Notwithstanding the above, Operator shall comply with all applicable
rules, procedures, decrees and regulations regarding tendering for and
awarding of contracts, services and importation of equipment, materials and
consumables as required from time to time by EGPC. Approval of the Operating
Committee shall be required if Operator proposes to not comply with such EGPC
tender and award rules in respect of any contract, service or materials with
a value in excess of fifty thousand ($50,000) Dollars (U.S.).
C) Operator undertakes to use all reasonable efforts to require Operating
Company to submit contracts to tender in compliance with the internal rules
and regulations of the Operating Company and EGPC policies or practice.
Operator shall use all reasonable efforts to require the Operating Company to
competitively tender for all purchases of materials or equipment and hiring
of services or equipment with a value estimated to exceed fifty thousand
($50,000) Dollars (U.S.). In all purchases of materials or equipment and
hiring of services or equipment, it is understood that Operating Company or
Operator, as the case may be, are subject to the provisions regarding use of
local contractors and supplies set out in Article XXVI of the Concession. If
Operating Company estimates a contract value will exceed five hundred
thousand ($500,000) Dollars (U.S.), Operator shall provide each Party with a
list of the proposed bidders and each Party shall have the right to make
suggestions for inclusion on such list and this shall be conveyed to the
Operating Company. Upon the Operating Company's completion of its evaluation
and submission of same to Operator, Operator shall notify the Operating
Committee of the entity to whom the Operating Company proposes to award such
contract. Operator's notice shall be supported by a summary of the Operating
Company's analysis of the various bids
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received. For purposes of approval of any tender or contract in excess of
five hundred thousand ($500,000) Dollars (U.S.), Operating Committee shall
vote on the award in advance of the vote by the Board of Directors.
6.6 Authorization for Expenditure (" AFE") Procedure
Subject to the requirements of the Operating Company,
A) If a commitment or expenditure has been approved as part of a Work Program
and Budget, and if such commitment or expenditure is estimated to be in
excess of one hundred thousand ($100,000) Dollars (U.S.), or if the
expenditure or commitment is not included in an approved Work Program and
Budget, then prior to making such commitment or expenditure, Operator shall
send to each Non-Operator an AFE containing Operator's best estimate of the
total funds required to carry out such work, the estimated timing of
expenditures, and any other necessary supportive information.
B) If an AFE covers commitments or expenditures within the monetary amounts
set out in the Work Program and Budget, it is for informational purposes
only, unless:
1) the AFE costs exceed the costs for such operation in the approved budget
by more than ten percent (10%) of the applicable line item amount for such
operation or by more than five percent (5%) of the total Work Program and
Budget; or
2) the AFE is technically incorrect.
In the event that the circumstances in either Article 6.6(B)(1) or (2) occur,
the Operating Committee shall vote on the AFE. If such AFE is not approved by
the Operating Committee, the work in question shall immediately cease.
C) Each AFE proposed by the Operator shall:
1) Identify the operation by specific reference to the applicable line items
in the Work Program and Budget;
2) Describe the work in detail;
3) Contain Operator's best estimate of the total funds required to carry out
such work;
4) Outline the proposed work schedule;
5) Provide a timetable of expenditures, if known; and
6) Be accompanied by such other supporting information as is necessary for an
informed decision.
6.7 Overexpenditures of Work Programs and Budgets
Subject to the requirements of the Operating Company,
A) For expenditures on any line item of an approved Work Program and Budget,
Operator shall be entitled to incur without further approval of the Operating
Committee an overexpenditure for such line item up to ten percent (10%) of
the authorized amount for
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such line item; provided that the cumulative total of all expenditures for a
Calendar Year shall not exceed five percent (5%) of the total Work Program
and Budget in question.
B) At such time that Operator is certain that the limits of Article 6.7(A)
will be exceeded, Operator shall furnish a supplemental AFE for the estimated
overexpenditures to the Operating Committee for its approval and shall
provide the Parties with full details of such overexpenditures. Operator
shall promptly give notice of the amounts of overexpenditures when actually
incurred. Should the Operating Committee fail to approve the supplemental
AFE, all work in question shall immediately cease.
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ARTICLE VII OPERATIONS BY LESS THAN ALL PARTIES
7.1 Limitation on Applicability
A) No operations may be conducted in furtherance of the Concession except as
Joint Operations under Article V, or as Exclusive Operations under this
Article.
B) Operations which are required to fulfil the Minimum Work Obligations must
be proposed and conducted as Joint Operations under Article V and may not be
proposed or conducted as Exclusive Operations under this Article VII. Except
for Exclusive Operations relating to Deepening, Testing, Completing,
Sidetracking, Plugging Back, Recompletions or Reworking of a well drilled to
fulfil the Minimum Work Obligations or the drilling of any Mandatory
Appraisal Well, no Exclusive Operations may be proposed or conducted until
the Minimum Work Obligations for the then current Exploration Sub-Period are
fulfilled.
C) No Exclusive Operation shall be conducted:
1) until it has been proposed as a Joint Operation;
2) which conflicts or would interfere with a Joint Operation;
3) which relates to a Zone which the Parties have agreed to appraise or
develop under an approved Work Program and Budget;
4) which relates to a currently producing Zone or to any previously
discovered Zone which is capable of producing Hydrocarbons in commercial
quantities;
5) which relates to a Zone which is above the stratigraphic equivalent of the
deepest Zone producing or capable of producing Hydrocarbons in commercial
quantities; and
6) if a well proposed thereunder is to be drilled at substantially the same
location, to the same subsurface target or into the same Zone as a well
included in an approved Work Program and Budget.
D) No Party may propose or conduct an Exclusive Operation under this Article
unless and until such Party has properly exercised its right to propose an
Exclusive Operation pursuant to Article 5.l3 (A), or is entitled to conduct
an Exclusive Operation pursuant to Article 5.13(B), Article 6.1(D), Article
6.1(F), Article VII or Article 10.1(C).
E) Subject to this Article, any operation that may be proposed and conducted
as a Joint Operation may be proposed and conducted as an Exclusive Operation.
7.2 Procedure to Propose Exclusive Operations
A) Subject to Article 7.1, if any Party proposes to conduct an Exclusive
Operation, such Party shall give notice of the proposed operation to all
Parties, other than Non-Consenting Parties who have relinquished their
rights to participate in such operation and have no option to reinstate such
rights under Article 7.4(D). Such notice shall specify that such operation is
proposed as an Exclusive Operation, the work to be performed, the location,
the objectives, and estimated cost of such operation.
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B) Any party entitled to receive such notice shall have the right to
participate in the proposed operation in accordance with the following:
1) For proposals to Deepen, Test, Complete, Side-track, Plug Back, Recomplete
or Rework involving the use of a drilling rig, service rig, well servicing
equipment that is standing by in the Concession Area, or proposals to acquire
G & G Data where the seismic crew and equipment are standing by in the
Concession Area, any such Party wishing to exercise such right must so notify
Operator within twenty-four (24) hours after receipt of the notice proposing
the Exclusive Operation; or
2) For all other proposals, any such Party wishing to exercise such right
must so notify Operator within ten (10) Days after receipt of the notice
proposing the Exclusive Operation.
C) Failure of a Party to whom a proposal notice is delivered to properly
reply within the period specified above shall constitute an election by that
Party not to participate in the proposed operation.
D) If all Parties properly exercise their rights to participate, then the
proposed operation shall be conducted as a Joint Operation. The Operator
shall commence such Joint Operation as promptly as practicable and conduct it
with due diligence, provided that with respect to operations pursuant to
which a party has given a notice under Article 7.2(F), the Operator may
proceed with operations prior to the expiry of the applicable time period in
this Article 7.2.
E) If less than all Parties entitled to receive such proposal notice properly
exercise their rights to participate, then:
1) Immediately after the expiration of the applicable notice period set out
in Article 7.2(B), the Operator shall notify all Parties of the names of the
Consenting Parties and the recommendation of the proposing Party as to
whether the Consenting Parties should proceed with the Exclusive Operation.
2) Concurrently, Operator shall request the Consenting Parties to specify the
Participating Interest each Consenting Party is willing to bear in the
Exclusive Operation.
3) Within twenty-four (24) hours after receipt of such notice, each
Consenting Party shall respond to the Operator stating that it is willing to
bear a Participating Interest in such Exclusive Operation equal to:
(a) Only its Participating Interest;
(b) A fraction, the numerator of which is such Consenting Party's
Participating Interest and the denominator of which is the aggregate of the
Participating Interests of the Consenting Parties; or
(c) The total of its Participating Interest as contemplated by Article
7.2(E)(3)(b) plus all or any part of the difference between one hundred
percent (100%) and the total of the Participating Interests subscribed by
the other Consenting Parties.
4) Any Consenting Party failing to advise Operator within the response period
set out above shall be deemed to have elected to bear the Participating
Interest set out in Article 7.2(E)(3)(b) as to the Exclusive Operation.
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5) If within the response period set out above, the Consenting Parties
subscribe for less than one hundred percent (100%) of the Participating
Interest in the Exclusive Operation, the Party proposing such Exclusive
Operation shall be deemed to have withdrawn its proposal for the Exclusive
Operation, unless within twenty-four (24) hours of the expiry of the response
period set out in Article 7.2(E)(3), the proposing Party notifies the other
Consenting Parties that the proposing Party shall bear the unsubscribed
Participating Interest.
6) If one hundred percent (100%) subscription to the proposed Exclusive
Operation is obtained, Operator shall promptly notify the Consenting Parties
of their Participating Interests in the Exclusive Operation.
7) As soon as any Exclusive Operation is fully subscribed pursuant to Article
7.2(E)(6), Operator (subject to Article 7.8(G), shall commence such Exclusive
Operation as promptly as practicable and conduct it with due diligence in
accordance with this Agreement.
8) If such Exclusive Operation has not been commenced within One Hundred
Twenty (120) Days (excluding any extension specifically agreed by all Parties
or allowed by the force majeure provisions of Article XVI), the right to
conduct such Exclusive Operation shall terminate. If any Party still desires
to conduct such Exclusive Operation, written notice proposing such operation
must be resubmitted to the Parties in accordance with Article V, as if no
proposal to conduct an Exclusive Operation had been previously made.
F) In accordance with Article 6.1 (F), in the event that less than all of the
Parties elect to participate in the Completion or other downhole operations
referred to in Article 6.1 (F), such Completion or downhole operations
referred to in the election notice may be conducted as an Exclusive
Operation. In anticipation of such possibility, and notwithstanding anything
to the contrary in the provisions of Article 5.12, Article 5.13 and this
Article VII:
1) Should the Operator, at the time it submits the election to the Parties
pursuant to Article 6.1(F), be prepared to undertake such Completion or
downhole operations regardless of the election of the other Parties, the
Operator may, at the same time it submits the notice under Article 5.12(A) to
the other Parties, also provide a notice under Article 7.2(A) to conduct such
Completion or downhole operations as an Exclusive Operation. In such a case,
the time periods under Article 5.12(A) and 7.2(B) shall run concurrently and,
notwithstanding Article 5.13, Operator may proceed immediately with such
Completion or other downhole operations at the risk and expense of it and the
other Parties who elect to participate.
2) Should a Non-Operator, at the time it makes its election pursuant to
Article 6.I(F), be prepared to undertake such Completion or downhole
operations regardless of the election of the other Parties, it may
immediately notify the other Parties of such by providing a notice under
Article 7.2(A). In such a case, the time periods under Article 5.12(A) and
7.2(B) shall run concurrently and upon receipt of such notice under Article
7.2(A), Operator may proceed immediately with such Completion or other
downhole operations at risk and expense of the Party giving such notice and
the other Parties electing to participate.
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Should less than all Parties elect to participate, then if a Party has given
a notice under Article 7.2(A), it shall be deemed to have elected to bear a
Participating Interest in such Exclusive Operation in accordance with Article
7.2(E)(3)(c).
7.3 Responsibility for Exclusive Operations
A) The Consenting Parties shall bear in accordance with the Participating
Interests agreed under Article 7.2(E) the entire cost and liability of
conducting an Exclusive Operation and shall indemnify the Non-Consenting
Parties from any and all costs and liabilities incurred incident to such
Exclusive Operation (including but not limited to all costs, expenses or
liabilities for environmental, consequential, punitive or any other similar
indirect damages or losses arising from business interruption, reservoir or
formation damage, inability to produce petroleum, loss of profits, pollution
control and environmental amelioration or rehabilitation) and shall keep the
Concession Area free and clear of all liens and encumbrances of every kind
created by or arising from such Exclusive Operation.
B) Notwithstanding Article 7.3(A), each Party shall continue to bear its
Participating Interest share of the cost and liability incident to the
operations in which it participated, including but not limited to plugging
and abandoning and restoring the surface location, but only to the extent
those costs were not increased by the Exclusive Operation.
7.4 Consequences of Exclusive Operations
A) With regard to any Exclusive Operation, other than an Exclusive Operation
which is a Mandatory Appraisal Well, for so long as a Non-Consenting Party
has the option to reinstate the rights it relinquished under Article 7.4(D)
below, such Non-Consenting Party shall be entitled to have access,
concurrently with the Consenting Parties, to all data and other information
relating to such Exclusive Operation, other than G & G Data obtained in an
Exclusive Operation. For the acquisition of G&G Data, if a Non- Consenting
Party desires to receive and acquire the right at any time to use all or part
of such G & G Data, then such Non-Consenting Party shall have the right to do
so by paying to the Consenting Parties the amount set out in Article 7.5(A)
and the Cash Premium set out in Article 7.5(B)(3).
B) With regard to any Exclusive Operation, other than an Exclusive Operation
which is a Mandatory Appraisal Well and subject to Articles 7.4(C) and (D)
below, each Non- Consenting Party shall be deemed to have relinquished to the
Consenting Parties, and the Consenting Parties shall be deemed to own, in
proportion to their respective Participating Interests in the Exclusive
Operation as determined in accordance with Article 7.2(E)(3):
1) All of each such Non-Consenting Party's right to participate in operations
for the acquisition of, and all rights to have access to, all G & G Data
obtained from such Exclusive Operation or in further operations in a well or
Deepened or Sidetracked portion of a well in which the Exclusive Operation
was conducted and in any Discovery made or appraised in the course of such
Exclusive Operation; and
2) All of each such Non-Consenting Party's right pursuant to the Concession
to take and dispose of Hydrocarbons produced and saved:
(a) From the well or Deepened or Sidetracked portion of a well in which such
Exclusive Operation was conducted, and
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(b) From any wells drilled to appraise or develop a Discovery made or
appraised in the course of such Exclusive Operation, and
(c) From the Development Lease containing the Discovery arising out of such
Exclusive Operation.
C) Where an Exclusive Operation is the drilling of a Mandatory Appraisal
Well, each Non-Consenting party in such Exclusive Operation shall be deemed
to have relinquished to the Consenting Parties, and the Consenting Parties
shall be deemed to own in proportion to their Participating Interest in such
Exclusive Operation as determined in accordance with Article 7.2(E)(3):
1) All of each such Non-Consenting Party's right to participate in further
operations in the Development Lease containing such Mandatory Appraisal Well;
and
2) All of each such Non-Consenting Party's right pursuant to the Concession
to take and dispose of Hydrocarbons produced and saved from the Development
Lease containing such Mandatory Appraisal Well.
In such case, a Non-Consenting Party shall have no option to reinstate such
relinquished rights and Article 7.4(D) shall not apply.
D) With the exception of the right to reinstate set out in Article 7.4(G), a
Non-Consenting Party shall have the following and only the following options
to reinstate the rights it relinquished pursuant to Article 7.4(B):
1) If the Consenting Parties decide to appraise a Discovery made in the
course of an Exclusive Operation, the Consenting Parties shall submit to each
Non-Consenting Party the approved appraisal program. For thirty (30) Days (or
forty-eight (48) hours if the drilling rig which is to be used in such
appraisal program is standing by in the Concession Area) from receipt of such
appraisal program, each Non-Consenting Party shall have the option to
reinstate the rights it relinquished pursuant to Article 7.4(B) and to
participate in such appraisal program. The Non-Consenting Party may exercise
such option by notifying Operator within the period specified above that such
Non-Consenting Party agrees to bear its Participating Interest share of the
expense and liability of such appraisal program, to pay the lump sum amount
as set out in Article 7.5(A) and to pay the Cash Premium as set out in
Article 7.5(B);
2) Without prejudice to Article 7.4(C), if the Consenting Parties decide to
develop a Discovery made or appraised in the course of an Exclusive
Operation, each Non-Consenting Party shall have the option, exercisable for a
period of sixty (60) Days from the receipt by the Non-Consenting Parties of
all information pertaining to the Discovery, including the proposed
Development Plan, to reinstate the rights it relinquished pursuant to Article
7.4(B) and to participate in such development. Each Non-Consenting Party may
exercise such option by notifying the Party proposing to act as Operator for
such development within the period specified above that such Non-Consenting
Party agrees to bear its Participating Interest share of the liability and
expense of such development and such future operating and production costs,
to pay the lump sum amount as set out in Article 7.5(A) and to pay the Cash
Premium as set out in Article 7.5(B).
3) If the Consenting Parties decide to Deepen, Test, Complete, Side-track,
Plug Back, Recomplete or Rework an Exclusive Well, other than a Mandatory
Appraisal Well, and such further operation was not included in the original
proposal for such Exclusive Well, the Consenting Parties shall submit to the
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Non-Consenting Parties the approved AFE for such further operation. For
thirty (30) Days (or forty-eight (48) hours if the drilling rig which is to
be used in such operation is standing by in the Concession Area) from receipt
of such AFE, each Non-Consenting Party shall have the option to reinstate the
rights it relinquished pursuant to Article 7.4(B) and to participate in such
operation. Each Non-Consenting Party may exercise such option by notifying
the Operator within the period specified above that such Non-Consenting Party
agrees to bear its Participating Interest share of the liability and expense
of such further operation, to pay the lump sum amount as set out in Article
7.5(A) and to pay the Cash Premium as set out in Article 7.5(B).
E) If a Non-Consenting Party does not properly and in a timely manner
exercise such option, including paying in a timely manner in accordance with
Article 7.5, all lump sum amounts and Cash Premiums, if any, due to the
Consenting Parties, such Non-Consenting Party shall have forfeited the
options as set out in Article 7.4(D) and the right to participate in the
proposed program, plan or operation, unless such program, plan or operation
is materially modified or expanded.
F) A Non-Consenting Party shall become a Consenting Party with regard to an
Exclusive Operation at such time as the Non-Consenting Party gives proper
notice pursuant to Article 7.4(D); provided that such Non-Consenting Party
shall in no way be deemed to be entitled to any lump sum amount or Cash
Premium paid incident to such Exclusive Operation. The Participating Interest
of such Non-Consenting Party in such Exclusive Operation shall be its
Participating Interest at the time the Non-Consenting Party elected not to
participate. The Consenting Parties who assumed a portion of the
Non-Consenting Party's Participating Interest in such Exclusive Operation
shall contribute the Participating Interest of the Non-Consenting Party
proportionately to their assumption of same. If all Parties participate in
the proposed operation, then such operation shall be conducted as a Joint
Operation pursuant to Article V.
G) If, after the expiry of the period in which a Non-Consenting Party may
exercise its option to participate in the development of a Discovery, the
Consenting Parties desire to proceed, Operator, or if Operator is a
Non-Consenting Party, the Party chosen by the Consenting Parties to act as
Operator, shall, subject to Article 6.2 hereof, give notice to EGPC under
Article lII(c)(iii) of the Concession that the Consenting Parties consider
the Discovery to be a Commercial Discovery. Conditional upon EGPC's agreement
that such Discovery constitutes a Commercial Discovery, the Parties and EGPC
shall meet to determine the extent of the area capable of production to be
covered by a Development Lease and shall submit such area to the Government
for approval in accordance with Article III(d)(i) of the Concession. Upon
written concurrence by EGPC of the Consenting Party's determination that the
Discovery is a Commercial Discovery and Government approval of the
Development Lease, each Non-Consenting Party in such Discovery shall forfeit
its right to reinstate its interest in the applicable Development Lease and
shall be deemed to have withdrawn from the Concession and this Agreement to
the extent that it relates to such Development Lease; provided, however, if
EGPC or the Government require revision or modification to the Development
Plan approved by the Consenting Parties, each Non-Consenting Party shall be
notified, provided with all requested revisions or modifications to the
Development Plan and shall have ten (10) Days in which to reinstate its right
as to the Development Lease. In the event that such Development Lease
represents the only interest of the Non-Consenting Party in the Concession
Area and as such the Non-Consenting Party is deemed to have withdrawn from
the entire Concession, then such Party shall also forfeit all of its shares
and voting rights in the Operating Company that were issued pursuant to the
Concession.
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7.5 Premium to Participate in Exclusive Operations
A) Within thirty (30) Days of the exercise of its option under Article
7.4(D), or with respect to G&G Data, within thirty (30) Days of its request
to acquire the right to use all or part of such G&G Data under Article
7.4(A), each such Non-Consenting Party shall pay in immediately available
funds to the Consenting Parties that took all or a portion of the cost
obligation of the Participating Interest of the Non-Consenting Party in such
Exclusive Operation proportionately to their assumption of such obligation, a
lump sum amount payable in the currency designated by such Consenting
Parties. Such lump sum amount shall be equal to such Non-Consenting Party's
Participating Interest share of all liabilities and expenses, including
overhead, that were incurred in every Exclusive Operation relating to the G&G
Data, Discovery or well, as the case may be, in which the Non-Consenting
Party desires to reinstate the rights it relinquished pursuant to Article
7.4(B), and that were not previously paid by such Non-Consenting Party.
B) In addition to Article 7.5(A), if a Cash Premium is due, then within
thirty (30) Days of the exercise of its option under Article 7.4(A) or 7.4(D)
each such Non-Consenting Party shall pay in immediately available funds, in
the currency designated by the Consenting Parties who took the risk of such
Exclusive Operations, to such Consenting Parties in proportion to their
assumption of such risk, a Cash Premium equal to the total of:
1) Six hundred percent (600%) of such Non-Consenting Party's Participating
Interest share of all liabilities and expenses, including overhead, that were
incurred in any Exclusive Operations relating to the drilling, Deepening,
Testing, Completing, Sidetracking, Plugging Back, Recompleting and Reworking
of the Exploration Well which made the Discovery in which the Non-Consenting
Party desires to reinstate the rights it relinquished pursuant to Article
7.4(B), and that were not previously paid by such Non-Consenting Party; plus
2) Four hundred percent (400%) of the Non-Consenting Party's Participating
Interest share of all liabilities and expenses, including overhead, that were
incurred in any Exclusive Operations relating to the drilling, Deepening,
Testing, Completing, Sidetracking, Plugging Back, Recompleting and Reworking
of the Appraisal Well(s) other than Mandatory Appraisal Well(s), which
delineated the Discovery made in the Exclusive Operations in which the
Non-Consenting Party desires to reinstate the rights it relinquished pursuant
to Article 7.4(B), and that were not previously paid by such Non-Consenting
Party; plus
3) One hundred percent (100%) of the Non-Consenting Party's Participating
Interest share of all liabilities and expenses, including overhead, that were
incurred by the Consenting Parties in any Exclusive Operation for the
acquisition of G&G Data in which the Non-Consenting Party desires to
reinstate the rights it relinquished pursuant to Article 7.4(B), and that
were not previously paid by such Non-Consenting Party.
7.6 Order of Preference of Operations
A) Except as otherwise specifically provided in this Agreement, if any Party
desires to propose the conduct of an operation that will conflict with an
existing proposal for an Exclusive Operation, such Party shall have the right
exercisable for five (5) Days, or twenty-four (24) hours if the drilling rig
to be used is standing by in the Concession Area, from receipt of the
proposal for the Exclusive Operation, to deliver to all Parties entitled to
participate in the proposed operation such Party's alternative proposal. Such
alternative proposal shall contain the information required under Article
7.2(A).
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B) Each party receiving such proposals shall elect by delivery of notice to
Operator within the appropriate response period set out in Article 7.2(B) to
participate in one of the competing proposals. Any party not notifying
Operator within the response period shall be deemed not to have voted.
C) The proposal receiving the largest aggregate Participating Interest vote
shall have priority over all other competing proposals. In the case of a tie
vote, the Operator shall choose among the proposals receiving the largest
aggregate Participating Interest vote. Operator shall deliver notice of such
result to all Parties entitled to participate in the operation within five
(5) Days of the end of the response period, or twenty-four (24) hours if the
drilling rig to be used is standing by in the Concession Area.
D) Each Party shall then have two (2) Days (or twenty-four (24) hours if the
drilling rig to be used is standing by in the Concession Area) from receipt
of such notice to elect by delivery of notice to Operator whether such Party
will participate in such Exclusive Operation, or will relinquish its interest
pursuant to Article 7.4(B). Failure by a Party to deliver such notice within
such period shall be deemed an election not to participate in the prevailing
proposal.
E) Notwithstanding the provisions of Article 7.4(B), if for reasons other
than the encountering of granite or other practically impenetrable substance
or any other condition in the hole rendering further operations
impracticable, a well drilled as an Exclusive Operation fails to reach the
deepest objective Zone described in the notice proposing such well, Operator
shall give notice of such failure to each Non-Consenting Party who submitted
or voted for an alternative proposal under this Article to drill such well to
a shallower Zone than the deepest objective Zone proposed in the notice under
which such well was drilled. Each such Non-Consenting Party shall have the
option exercisable for forty-eight (48) hours from receipt of such notice to
participate in the initial proposed Completion of such well. Each such
Non-Consenting Party may exercise such option by notifying the Operator that
it wishes to participate in such Completion and by paying its share of the
cost of drilling such well, calculated in the manner provided in Article
7.8(B), to its deepest depth drilled in the Zone in which it is Completed. If
any such Non-Consenting Party does not properly elect to participate in the
first Completion proposed for such well, the relinquishment provisions of
Article 7.4(B) shall continue to apply to such Non-Consenting Party's
interest.
7.7 Stand-By Costs
When an operation has been performed, all tests have been conducted and the
results of such tests furnished to the Parties, stand by costs incurred
pending response to any Party's notice proposing an Exclusive Operation for
Deepening, Testing, Sidetracking, Completing, Plugging Back, Recompleting,
Reworking or other further operation in such well (including the period
required under Article 7.6 to resolve competing proposals) shall be charged
and borne as part of the operation just completed. Stand by costs incurred
subsequent to all Parties responding, or expiration of the response time
permitted, whichever first occurs, shall be charged to and borne by the
Parties proposing the Exclusive Operation in proportion to their
Participating Interests, regardless of whether such Exclusive Operation is
actually conducted.
7.8 Miscellaneous
A) Each Exclusive Operation shall be carried out by the Consenting Parties
acting as the Operating Committee, subject to the provisions of this
Agreement applied mutatis mutandis to such Exclusive Operation and subject to
the terms and conditions of the Concession.
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B) The computation of liabilities and expenses incurred in Exclusive
Operations, including the liabilities and expenses of Operator for conducting
such operations, shall be made in accordance with the principles set out in
the Accounting Procedure.
C) Operator shall maintain separate books, financial records and accounts for
Exclusive Operations which shall be subject to the same rights of audit and
examination as the Joint Account and related records, all as provided in the
Accounting Procedure. Said rights of audit and examination shall extend to
each of the Consenting Parties and each of the Non-Consenting Parties so long
as the latter are, or may be, entitled to elect to reinstate its interest in
such operations.
D) Operator, if it is not a Consenting Party and it is conducting an
Exclusive Operation for the Consenting Parties, shall be entitled to request
cash advances and shall not be required to use its own funds to pay any cost
and expense and shall not be obliged to commence or continue Exclusive
Operations until cash advances requested have been made, and the Accounting
Procedure shall apply to Operator in respect of any Exclusive Operations
conducted by it.
E) Should the Parties determine that a Discovery constitutes a Commercial
Discovery, and prior to notification of EGPC regarding such Commercial
Discovery, should any Party wish to drill an additional Appraisal Well other
than a Mandatory Appraisal Well, prior to development, then subject to
Article 7.1(B), the Party proposing such well as an Exclusive Operation
shall be entitled to proceed first, but without the right to future
reimbursement of costs or to any premium pursuant to Article 7.5. If, as the
result of drilling such well as an Exclusive Operation, the Parties proposing
to develop a Discovery decide to not develop the Discovery, then each
Non-Consenting Party who voted in favor of such development prior to the
drilling of such appraisal well shall pay to the Consenting Party the amount
such Non-Consenting Party would have paid had such appraisal well been
drilled as a Joint Operation.
F) In the case of any Exclusive Operation for Deepening, Testing, Completing,
Sidetracking, Plugging Back, Recompleting or Reworking, the Consenting
Parties shall be permitted to use, free of cost, all casing, tubing and other
equipment in the well, that is not needed for Joint Operations, but the
ownership of all such equipment shall remain unchanged. On abandonment of a
well after such Exclusive Operation, the Consenting Parties shall account for
all such equipment to the Parties who shall receive their respective
Participating Interest shares, in value, less cost of salvage.
G) If the Operator is a Non-Consenting Party to an Exclusive Operation to
develop a Discovery, then, subject to obtaining any necessary Government
approval, the Operator may resign, but in any event shall resign on the
request of the Consenting Parties, as Operator for the Development Lease for
such Discovery and the Consenting Parties shall select a Party to serve as
Operator for such Development Lease.
7.9 Production Bonuses
Production bonuses shall be charged to the Joint Account if there is no
production of Hydrocarbons from an Exclusive Operation at the time they are
incurred. If there is production of Hydrocarbons from one (1) or more
Exclusive Operations, then any production bonus which becomes payable under
the Concession shall be borne by each Development Lease in the proportion
that its average daily production of Hydrocarbons bears to the total average
daily production of Hydrocarbons from the Concession Area during the ninety
(90) Day period preceding the date on which the liability for the production
bonus was incurred.
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The Parties in a Development Lease shall bear the production bonus allocated
to that Development Lease in accordance with their Participating Interests in
the Development Lease as of the date on which liability for the production
bonus was incurred.
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ARTICLE VIII DEFAULT
8.1 Default and Notice
Any party that fails to pay when due its Participating Interest share of
Joint Account expenses, including cash advances and interest, incurred
pursuant to this Agreement (a "Defaulting Party") shall be in default under
this Agreement. Operator, or any non-defaulting Party in the case of the
default of Operator, shall promptly give written notice of such default to
the Defaulting Party and each of the non-defaulting Parties (the "Default
Notice"). The amount not paid by the Defaulting Party shall bear interest
from the date due until paid in full. Interest will be calculated using the
Agreed Interest Rate.
8.2 Operating Committee Meetings and Data
After any default has continued for ten (10) Days from the date of the
Default Notice and for as long thereafter as the Defaulting Party remains in
default on any payment due under this Agreement, the Defaulting Party shall
not be entitled to attend Operating Committee meetings or to vote on any
matter coming before the Operating Committee until all of its defaults have
been remedied (including payment of accrued interest). Further, the
Defaulting Party shall not be entitled to attend meetings of the Exploration
Advisory Committee, nor the Directors' Meetings of the Operating Company, nor
shall it have the right to vote in any meeting held by the Operating Company.
Unless agreed otherwise by the non-defaulting Parties, the voting interest of
each non-defaulting Party shall be in the proportion which its Participating
Interest bears to the total of the Participating Interests of all the
non-defaulting Parties. Any matters requiring unanimous vote of the Parties
shall not require the vote of the Defaulting Party. After the said ten (10)
Days and while the Defaulting Party remains in default as aforesaid, the
Defaulting Party shall not have access to any data or information relating to
Joint Operations, and non-defaulting Parties shall be entitled to trade data
without such Defaulting Party's consent and the Defaulting Party shall have
no right to any data received on such trade unless and until its default is
remedied in full. Notwithstanding the foregoing, the Defaulting Party shall
be deemed to have approved, and shall join with the non-defaulting Parties in
taking any action to maintain and preserve the Concession.
8.3 Allocation of Defaulted Accounts
A) The Party providing the Default Notice shall, either include in the
Default Notice or by separate notice, notify each non-defaulting Party of the
sum of money it is to pay as its portion (such portion being in the ratio
that each non-defaulting Party's Participating Interest bears to the
Participating Interests of all non-defaulting Parties) of such amount in
default (excluding interest). Each non-defaulting Party shall, if such
default continues, pay Operator, within five (5) Days after receipt of the
Default Notice, its share of the amount which the Defaulting Party failed to
pay. If any non-defaulting Party fails to pay its share of the amount in
default as aforesaid, such non-defaulting Party shall thereupon be in default
and shall be a Defaulting Party subject to the provisions of this Article.
The non-defaulting Parties which pay the amount owed by any Defaulting Party
shall be entitled to receive their respective share of the principal and
interest payable by such Defaulting Party pursuant to Article 8.1.
B) If Operator is a Defaulting Party, then all payments otherwise payable to
Operator for Joint Account costs pursuant to this Agreement shall be made to
the notifying Party instead, until the default is cured or a successor
Operator appointed. The notifying Party shall maintain such funds in a
segregated account separate from its own funds and shall apply such funds to
third party claims due and payable from the Joint Account of which it has
notice, to the extent Operator would be authorized to make such payments
under the terms of this Agreement. The notifying Party shall be entitled to
bill or cash call the
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other Parties in accordance with the Accounting Procedure for proper third
party charges that become due and payable during such period to the extent
sufficient funds are not available. When Operator has cured its default or a
successor Operator is appointed, the notifying Party shall turn over all
remaining funds in the account to Operator and shall provide Operator and the
other Parties with a detailed accounting of the funds received and expended
during this period. The notifying Party shall not be liable for damages,
losses, costs, expenses or liabilities arising as a result of its actions
under this Article 8.3(B) except to the extent Operator would be liable under
Article 4.6.
C) The total of all amounts paid by the non-defaulting Parties for the
Defaulting Party, together with interest accrued on such amounts, shall
constitute a debt due and owing by the Defaulting Party to the non-defaulting
Parties in proportion to such amounts paid. In addition, the non-defaulting
Parties may, in the manner contemplated by this Article, satisfy such debt
(together with interest) and may accrue an amount equal to the Defaulting
Party's Participating Interest share of the estimated cost to abandon any
Joint Property.
D) A Defaulting Party may remedy its default by paying to Operator the total
amount due, together with interest calculated as provided in Article 8.1, at
any time prior to transfer of its interest pursuant to Article 8.4, and upon
receipt of such payment Operator shall remit to each non-defaulting Party its
proportionate share of such amount.
E) The rights granted to each non-defaulting Party pursuant to this Article,
shall be in addition to, and not in substitution for any other rights or
remedies which each non-defaulting Party may have at law or equity or
pursuant to the other provisions of this Agreement.
8.4 Transfer of Interest
A) For thirty (30) Days after each failure by the Defaulting Party to remedy
its default by the thirtieth (30th) Day following the Defaulting Party's
receipt of the Default Notice, without prejudice to any other rights of the
non-defaulting Parties to recover the amounts paid for the Defaulting Party,
together with interest accrued on such amount, each non-defaulting Party
shall have the option to give notice to the Defaulting Party requiring the
Defaulting Party to transfer its Participating Interest to the non-defaulting
Parties. To that end if any of the non-defaulting Parties so elect, the
Defaulting Party shall be deemed to have transferred and to have empowered
the electing non-defaulting Parties to execute on said Defaulting Party's
behalf any documents required to effect a transfer, of all of its right,
title and beneficial interest in and under this Agreement and the Concession,
and in all wells and Joint Property to the electing non-defaulting Parties.
If requested, each Party shall execute a Power of Attorney in the form
prescribed by the Operating Committee. The Defaulting Party shall, without
delay following any request from the non-defaulting Parties, do any and all
acts required to be done by applicable law or regulation in order to render
such transfer legally valid, including, without limitation, the obtaining of
all Government consents and approvals, and shall execute any and all
documents and take such other actions as may be necessary in order to effect
prompt and valid transfer of the interests described above, free of all liens
and encumbrances. In the event all Government consents and approvals are not
timely obtained, the Defaulting Party shall hold its Participating Interest
in trust for such non-defaulting Parties who elected to assume such
Defaulting Party's Participating Interest.
8) In the absence of an agreement among the non-defaulting Parties to the
contrary, any such transfer to the non-defaulting Parties shall be in the
proportion that the non-defaulting Parties have paid the amounts due from
the Defaulting Party.
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C) Subject to Article 12.1(C), on the effective date of such transfer the
Defaulting Party shall forthwith cease to be a Party to this Agreement. The
acceptance or non-acceptance by a non-defaulting Party of any portion of a
Defaulting Party's Participating Interest shall be without prejudice to any
rights or remedies such non-defaulting Parties have to recover the
outstanding debts (including interest) owed by the Defaulting Party.
8.5 Continuation of Interest
If, within thirty (30) Days after each failure by the Defaulting Party to
remedy its default by the thirtieth (30th) Day following the Defaulting
Party's receipt of the Default Notice, the non-defaulting Parties fail to
elect to acquire the Defaulting Party's Participating Interest or elect not
to acquire the Defaulting Party's Participating Interest, as provided in
Article 8.4 and to continue to bear the Defaulting Party's Participating
Interest share of liabilities and expenses, then the non-defaulting Parties
shall either (a) abandon operations hereunder pursuant to Article 8.6, or (b)
accumulate all such liabilities and expenses as a debt pursuant to Article
VIII, but the Defaulting Party shall continue to be a Party subject to
Article 8.2 and Article 8.7. If Operator disposes of any Joint Property or
any other credit or adjustment is made to the Joint Account, or if Operator
sells any of the Defaulting Party's Participating Interest share of
Hydrocarbons, then, in respect of the Defaulting Party's Participating
Interest share of the proceeds of such disposal, credit or adjustment or
sale, Operator shall be entitled to retain and to set off the same against
all amounts, together with interest accrued on such amount, due and owing
from the Defaulting Party plus an accrued amount equal to the Defaulting
Party's Participating Interest share of the estimated cost to abandon any
Joint Property. Any surplus remaining after setting off the same as aforesaid
shall be paid promptly to the Defaulting Party.
8.6 Abandonment
If, within thirty (30) Days after the failure by the Defaulting Party to
remedy its default by the thirtieth (30th) Day as aforesaid, no
non-defaulting Party elects to acquire the Defaulting Party's Participating
Interest as provided in Article 8.4, or to bear the Defaulting Party's
Participating Interest share of liabilities and expenses as provided in
Article 8.5, then no transfer shall be made and Joint Operations shall be
abandoned subject to any necessary consents and notices being given, and each
Party, including the Defaulting Party, shall pay its Participating Interest
share of all costs of abandoning and relinquishing the Concession. If
abandonment occurs as aforesaid, all monies paid by the non-defaulting
Parties for the Defaulting Party pursuant to Article 8.3, together with
interest accrued on such amount, shall remain a debt due and owing by the
Defaulting Party.
8.7 Sale of Hydrocarbons
If a Party defaults after the commencement of commercial production and has
not remedied the default by the thirtieth (30th) Day as aforesaid, then,
during the continuance of such default, the Defaulting Party shall not be
entitled to its Entitlement which shall vest in and be the property of the
non-defaulting Parties, and Operator shall be authorized to sell such
Hydrocarbons at the best price obtainable under the circumstances and, after
deducting all costs, charges and expenses incurred by Operator in connection
with such sale, pay the proceeds proportionately to the non-defaulting
Parties which proceeds shall be credited against all monies advanced pursuant
to Article 8.3, together with interest accrued thereon. Any surplus remaining
shall be paid to the Defaulting Party, and any deficiency shall remain a debt
due from the Defaulting Party to the non-defaulting Parties. Notwithstanding
any such sales by Operator, the provisions of Article 8.4 shall continue to
apply.
8.8 No Right of Set Off
Each Party acknowledges and accepts that a fundamental principle of this
Agreement is that each Party pays its Participating Interest share of all
amounts due under this Agreement as and when
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required. Accordingly, any Party which becomes a Defaulting Party undertakes
that, in respect of either any exercise by the non-defaulting Parties of any
rights under or the application of any of the provisions of this Article,
such Party shall not raise by way of set off or invoke as a defense, whether
in law or equity, any failure to pay amounts due and owing under this
Agreement or any alleged or unliquidated claim that such Party may have
against Operator or any Non-Operator, whether such claim arises under this
Agreement or otherwise. Such Party further undertakes not to raise by way of
defense, whether in law or in equity, that the nature or the amount of the
remedies granted to the non-defaulting Parties is unreasonable or excessive.
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ARTICLE IX DISPOSITION OF PRODUCTION
9.1 Right and Obligation to Take in Kind
Except as otherwise provided in this Article 9 and Article 8.7, each party
shall have the right and obligation to own, take in kind and separately
dispose of its Participating Interest share of total production available to
the Parties pursuant to the Concession in such quantities and in accordance
with such procedures as may be set forth in the offtake agreement referred to
in Article 9.2 or in the special arrangements for natural gas referred to in
Article 9.3. If EGPC is party to the offtake agreement, then the Parties
shall endeavor to obtain its agreement to the principles set forth in this
Article 9. To the extent that a Party requires separate facilities to
exercise its rights under this Article 9.1, the costs of such separate
facilities will be borne solely by such Party.
9.2 Offtake Agreement for Crude Oil
If Crude Oil is to be produced from the Concession, the Operator shall submit
an offtake agreement for the Parties consideration, and the Parties shall in
good faith, and not less than three (3) months prior to first delivery of
Crude Oil, negotiate and conclude the terms of an agreement to cover the
offtake of Crude Oil produced under the Concession. EGPC may, if necessary
and practicable, also be party to the offtake agreement. This offtake
agreement shall, to the extent consistent with the Concession, make provision
for:
A) The delivery point, at which title and risk of loss of Participating
Interest shares of Crude Oil shall pass to the Parties interested (or as the
Parties may otherwise agree);
B) Operator's regular periodic advice to the Parties of estimates of total
available production for succeeding periods, Entitlements, and grades of
Crude Oil for as far ahead as is necessary for Operator and the Parties to
plan offtake arrangements. Such advice shall also cover for each grade of
Crude Oil total available production and deliveries for the preceding period,
inventory and overlifts and underlifts;
C) Nomination by the Parties to Operator of acceptance of their Entitlement
of total available production for the succeeding period. Such nominations
shall in anyone period be for each Party's entire Entitlement arising during
that period subject to operational tolerances and agreed minimum economic
cargo sizes or as the Parties may otherwise agree;
D) Elimination of overlifts and underlifts;
E) If offshore loading or a shore terminal for vessel loading is involved,
risks regarding acceptability of tankers, demurrage and (if applicable)
availability of berths;
F) Distribution to the Parties of Entitlements to ensure, to the extent
Parties take delivery of their Entitlements in proportion to the accrual of
such Entitlements, that each Party shall receive currently Entitlements of
grades, gravities and qualities of Hydrocarbons similar to Hydrocarbons
received by each other Party;
G) To the extent that distribution of Entitlements on such basis is
impracticable due to availability of facilities and minimum cargo sizes, a
method of making periodic adjustments; and
H) The option and the right of the other Parties to sell an Entitlement which
a Party fails to nominate for acceptance pursuant to Article 9.2(C) above or
of which a Party fails to take delivery, in accordance with applicable agreed
procedures, provided that such failure
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either constitutes a breach of Operator's or Parties' obligations under the
terms of the Concession, or is likely to result in the curtailment or shut-in
of production. Such sales shall be made only to the limited extent necessary
to avoid disruption in Joint Operations. Operator shall give all Parties as
much notice as is practicable of such situation and that a sale option has
arisen. Any sale shall be of the unnominated or undelivered Entitlement as
the case may be and for reasonable periods of time in no event to exceed
twelve (12) months. The right of sale shall be revocable at will subject to
any prior contractual commitments. Sales to non-affiliated third parties
shall be for the realized price f.o.b. the delivery point. Sales to any of
the Parties or their Affiliates shall be at current market value f.o.b. the
delivery point. The Party arranging the sale shall pay to the Party whose
Entitlement is involved the above price after deduction of all costs,
including storage costs, incurred in respect of such sale and a marketing fee
of an agreed percentage of the applicable price less deductions, reflecting
actual costs of disposal at immediate notice. Current market value shall be
the value of the Entitlement in international markets (unless the Entitlement
was required to be delivered into the Government's domestic market, in which
case it shall be the value therein) between a willing buyer and a willing
seller and shall be agreed between the two Parties concerned, or failing
agreement, determined by an expert to be appointed in accordance with
procedures set forth in the offtake agreement.
If an offtake agreement has not been entered into by the date of first
delivery of Crude Oil, the Parties shall be bound by the principles set forth
in this Article 9.2 until an offtake agreement has been entered into.
9.3 Separate Agreement for Natural Gas
The Parties recognize that if natural gas is discovered it may be necessary
for the Parties to enter into a long term Gas Sales Agreement as contemplated
in Article III (d)(ii) of the Concession. Failing such agreement, the Parties
shall negotiate special arrangements, including gas balancing, for the
disposal of same.
9.4 EGPC Preferential Right of Purchase
In the event EGPC exercises its preferential right to purchase Hydrocarbons
produced under the Concession, each Party shall contribute the quantity
required proportionately to its Entitlement thereof. Or, if EGPC requires
that Crude Oil from the Concession be sold to or with EGPC under a joint
marketing arrangement or otherwise, Operator shall use its best efforts to
obtain the unanimous agreement of the Operating Committee to the terms and
conditions of any such arrangement or agreement.
9.5 Government's Right of Requisition
In the event the Government requisitions Contractor's share of Hydrocarbons
produced under the Concession, each Party shall contribute the quantity
required proportionately to its Participating Interest share thereof.
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ARTICLE X ABANDONMENT OF WELLS
10.1 Abandonment of Wells Drilled as Joint Operations
A) Any well which has been drilled as a Joint Operation and which is proposed
to be plugged and abandoned shall not be plugged and abandoned without the
consent of all Parties, and in the event that the Operating Company has been
formed, the consent of EGPC.
B) Should any such Party fail to reply within the period prescribed in
Article 5.12(A)(1) or Article 5.12(A)(2), whichever is applicable, after
delivery of notice of the Operator's proposal to plug and abandon such well,
such Party shall be deemed to have consented to the proposed abandonment. If
all the Parties consent to abandonment, such well shall be plugged and
abandoned in accordance with applicable regulations and at the cost, risk and
expense of the Parties or the Consenting Parties, as applicable.
C) If all Parties do not agree to the abandonment of such well, those wishing
to continue operations shall assume financial responsibility over the well
and shall be deemed to be Consenting Parties conducting an Exclusive
Operation pursuant to Article VII. In the case of a producing well, the
Consenting Parties shall be entitled to continue producing only from the Zone
open to production at the time they assumed responsibility for the well.
D) Each Non-Consenting Party shall be deemed to have relinquished to the
Consenting Parties in proportion to their Participating Interests all of its
interest in the wellbore of a produced well and related equipment in
accordance with Article 7.4(B), insofar and only insofar as such interest
covers the right to obtain production from that wellbore in the Zone then
open to production.
E) Subject to Articles 6.3 and 7.8(G), Operator shall continue to operate a
produced well for the account of the Consenting Parties at the rates and
charges contemplated by this Agreement, plus any additional cost and charges
which may arise as the result of the separate allocation of interest in such
well.
10.2 Abandonment of Exclusive Operations
This Article shall apply mutatis mutandis to the abandonment of an Exclusive
Well or any well in which an Exclusive Operation has been conducted; provided
that no well shall be permanently plugged and abandoned unless and until all
Parties having the right to conduct further operations in such well have been
notified of the proposed abandonment and afforded the opportunity to elect to
take over the well in accordance with the provisions of this Article X.
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ARTICLE XI SURRENDER, EXTENSIONS AND RENEW ALS
11.1 Surrender
A) Operator shall advise the Operating Committee of any surrender requirement
under the Concession at least one hundred and twenty (120) Days in advance of
the earlier of the date for filing an irrevocable notice of such surrender or
the date of such surrender. Prior to the end of such period, the Operating
Committee shall determine, pursuant to Article V, the size and shape of the
surrendered area, consistent with the requirements of the Concession. If a
sufficient vote of the Operating Committee cannot be attained, then the
proposal supported by a simple majority of the Participating Interests shall
be adopted. If no proposal attains the support of a simple majority of the
Participating Interests, then the proposal receiving the largest aggregate
Participating Interest vote shall be adopted. In the event of a tie, the
Operator shall choose among the proposals receiving the largest aggregate
Participating Interest vote. The Parties shall execute any and all documents
and take such other actions as may be necessary to effect the surrender. Each
Party renounces all claims and causes of action against Operator and any
other Parties on account of any area surrendered in accordance with the
foregoing but against its recommendation if Hydrocarbons are subsequently
discovered under the surrendered area.
B) A surrender of all or any part of the Concession Area which is not
required by the Concession shall require the unanimous consent of the Parties.
11.2 Extension of the Term
A) A proposal by any Party to extend the term of the Exploration Period or
Development Period or any Exploration Sub-Period of the Concession, a
proposal to enter into a new phase of the Exploration Period, and a proposal
to extend the term of the Concession shall be brought before the Operating
Committee pursuant to Article V.
B) Any Party shall have the right to enter into or extend the term of the
Exploration Period or Development Period or any Exploration Sub-Period of the
Concession or extend the term of the Concession, regardless of the level of
support in the Operating Committee. If any Party or Parties take such action,
any Party not wishing to extend or enter into a new period shall have a right
to withdraw, subject to the requirements of Article XIII.
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ARTICLE XII TRANSFER OF INTEREST OR RIGHTS
12.1 Obligations
A) Subject always to the requirements of the Concession and subject to the
terms of transfer contained in Articles VIII or XIII, the transfer of all or
part of a Party's Participating Interest shall be effective only if it
satisfies the terms and conditions of this Article.
B) Except in the case of a Party transferring all of its Participating
Interest, no transfer shall be made by any Party which results in the
transferor or the transferee holding a Participating Interest of less than
five (5%) percent or holding any interest other than a Participating Interest
in the Concession and this Agreement.
C) The transferring Party shall, notwithstanding the transfer, be liable to
the other Parties for any obligations, financial or otherwise, which have
vested, matured or accrued under the provision of the Concession or this
Agreement prior to such transfer. Such obligations shall include, without
limitation, any proposed expenditure approved by the Operating Committee
prior to the transferring Party notifying the other Parties of its proposed
transfer.
D) The transferee shall have no rights in and under the Concession or this
Agreement unless and until it obtains any necessary Government approval and
expressly undertakes in writing to perform all obligations of the transferor
under the Concession and this Agreement in respect of the Participating
Interest being transferred, to the satisfaction of the Parties.
E) The transferee other than an Affiliate shall have no rights in and under
the Concession or this Agreement unless each Party has consented in writing
to such transfer, which consent shall be denied only if such transferee fails
to establish to the reasonable satisfaction of each Party its financial and
technical capability to perform its obligations under the Concession and this
Agreement. With respect to a transfer to an Affiliate, the transferring Party
shall provide each of the Parties with prior written notice of the transfer.
Notwithstanding such transfer, the transferring Party shall remain liable for
any and all obligations under this Agreement unless such Affiliate
establishes to the reasonable satisfaction of each Party its financial and
technical capability to perform its obligations under the Concession and this
Agreement.
F) Nothing contained in this Article shall prevent a Party from mortgaging,
pledging, charging or otherwise encumbering all or part of its interest in
the Concession and in this Agreement for the purpose of security relating to
a financing provided that:
1) such Party shall remain liable for all obligations relating to such
interest;
2) the encumbrance shall be subject to any necessary approval of the
Government and be expressly subordinated to the rights of the other Parties
under this Agreement;
3) such Party shall ensure that any such mortgage, pledge, charge or
encumbrance shall be expressed to be without prejudice to the provisions of
this Agreement; and
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4) such party shall advise the remaining Parties of the existence of any
financing, subject to said Party's right to disclosure under its financing
agreements and shall provide proof of compliance with Article 12.1(F)(3).
12.2 Rights
Each Party shall have the right, subject to the provisions of the Concession
and Article 12.1 hereof, to freely transfer its Participating Interest.
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ARTICLE XIII WITHDRAWAL FROM AGREEMENT
13.1 Right of Withdrawal
A) Subject to the provisions of this Article, any party may withdraw from
this Agreement and the Concession by giving notice to all other Parties
stating its decision to withdraw and specifying a proposed effective date of
withdrawal which shall be at least sixty (60) Days, but not more than one
hundred eighty (180) Days after the date of such notice. Such notice shall be
unconditional and irrevocable when given.
8) Notwithstanding Article 13.1(A), a Party shall not have the right to
withdraw from this Agreement and the Concession until the Minimum Work
Obligation for the then current Exploration Sub-Period set forth in the
Concession has been fulfilled. However, if the Operating Committee or any
Party decides to accept new Minimum Work Obligations by voluntarily extending
the current or entering into a new Exploration Sub-Period under the
Concession, a Party that voted against such decision shall not be prevented
from withdrawing; provided that such Party delivers notice of its withdrawal
to all Parties within thirty (30) Days of such vote pursuant to Article 11.2
and fully satisfies its Participating Interest share of the outstanding
Minimum Work Obligation for the then current Exploration Sub-Period, if any.
C) Subject to Articles 13.1(A) and (B), 13.5 and 13.9, the effective date of
withdrawal for a withdrawing Party shall be the end of the calendar month
following the calendar month in which notice of withdrawal is given.
D) Notwithstanding anything to the contrary contained herein, a Party that
elects to withdraw shall not, unless such Party otherwise agrees, be
considered to have withdrawn from this Agreement or the Concession as it
applies to a Development Lease in which such Party has a Participating
Interest.
13.2 Withdrawal by Some or All of the Parties
A) Within thirty (30) Days of receipt of each withdrawing Party's
notification, each of the other Parties may also give notice that it desires
to withdraw from this Agreement and the Concession. Should all Parties give
notice of withdrawal, the Parties shall proceed to abandon the Concession
Area and terminate the Concession and this Agreement in accordance with their
respective terms. If less than all of the Parties give such notice of
withdrawal, then the withdrawing Parties shall take all steps to withdraw
from the Concession and this Agreement on the earliest possible date and
execute and deliver all necessary instruments and documents to assign their
Participating Interest to the Parties that are not withdrawing, at its sole
cost and expense and without any compensation whatsoever, in accordance with
the provisions of Article 13.6.
8) If any part of the withdrawing Party's Participating Interest remains
unclaimed after sixty (60) Days from the date of the first notice of
withdrawal, the Parties shall be deemed to have decided to withdraw from the
Concession and this Agreement, unless at least one Party agrees to accept the
unclaimed Participating Interest.
C) Any Party withdrawing under Article 11.2(B) or under this Article XIII
shall, at its option,
1) withdraw from the entirety of the Concession Area; or
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2) withdraw only from all exploration activities under the Concession, but
not from any Development Lease made prior to such withdrawal.
A party withdrawing pursuant to this Article 13.2(C)(2) shall retain its
rights in the Joint Property, but only insofar as they relate to any such
Development Lease, and shall abandon all other rights in the Joint Property.
13.3 Rights of a Withdrawing Party
A withdrawing Party shall have the right to receive its Entitlement of
Hydrocarbons produced through the effective date of its withdrawal. The
withdrawing Party shall be entitled to receive all information to which such
Party is otherwise entitled under this Agreement until the effective date of
its withdrawal. After giving its notification of withdrawal, a Party shall
not be entitled to vote on any matters coming before the Operating Committee,
other than matters for which such Party continues to have financial
responsibility.
13.4 Obligations and Liabilities of a Withdrawing Party
A) A withdrawing Party shall, following its notification of withdrawal,
remain liable only for its share of the following:
1) Costs of Joint Operations, and Exclusive Operations in which it has agreed
to participate, that were approved by the Operating Committee or Consenting
Parties as part of a Work Program and Budget or AFE prior to such Party's
notification of withdrawal, regardless of when they are actually incurred;
2) Any Minimum Work Obligations for the current Exploration Sub-Period or
phase of the Concession, and for any subsequent period or phase which has
been approved pursuant to Article 11.2 and with respect to which such Party
has failed to give its notice of withdrawal within the time periods set out
in Article 13.4(8);
3) Emergency expenditures as described in Articles 4.2(B)(ii) and 13.5;
4) All other obligations and liabilities of the Parties or Consenting
Parties, as applicable, with respect to acts or omissions under this
Agreement which were incurred or are attributable to the period prior to the
effective date of such Party's withdrawal for which such Party would have
been liable, had it not withdrawn from this Agreement; and
5) In the case of a partially withdrawing Party, any costs and liabilities
with respect to Development Leases from which it has not withdrawn.
The obligations and liabilities for which a withdrawing Party remains liable
shall specifically include its share of any costs of plugging and abandoning
wells or portions of wells in which it participated (or was required to bear
a share of the costs pursuant to Article 13.4(A)(1)>>, to the extent such
costs of plugging and abandoning are payable by the Parties under the
Concession. Any liens, charges and other encumbrances which the withdrawing
Party placed on such Party's Participating Interest prior to its withdrawal
shall be fully satisfied or released, at the withdrawing Party's expense,
prior to its withdrawal. A Party's withdrawal shall not relieve it from
liability to the non- withdrawing Parties with respect to any obligations or
liabilities attributable to the withdrawing Party under this Article XIII
merely because they are not identified or identifiable at the time of
withdrawal.
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B) Notwithstanding the foregoing, a party shall not be liable for any
operations or expenditures it voted against (other than operations and
expenditures described in Article 13.4(A)(2) or 13.4(A)(3)) if it sends
notification of its withdrawal within five (5) Days (or within twenty-four
(24) hours if the drilling rig to be used in such operation is standing by on
the Concession Area) of the Operating Committee vote approving such operation
or expenditure. Likewise, a party voting against voluntarily entering into or
extending of an Exploration Sub-Period, Exploration Period or Development
Period or any phase of the Concession or voluntarily extending the Concession
shall not be liable for the Minimum Work Obligations associated therewith
provided that it sends notification of its withdrawal within the earlier of
thirty (30) Days of such vote pursuant to Article 11.2 or five (5) Days prior
to the last date upon which the Parties must give notice to EGPC pursuant to
the Concession in order to enter such period or obtain such extension.
13.5 Emergency
A Party's notification of withdrawal shall not become effective if prior to
the proposed effective date of withdrawal a well goes out of control or a
fire, blowout, sabotage or other emergency occurs. The notification of
withdrawal shall become effective only after the emergency has been contained
and the withdrawing Party has paid, or has provided, security satisfactory to
the Parties for its Participating Interest share of the costs of such
emergency.
13.6 Assignment
A withdrawing Party shall assign its Participating Interest to each of the
non-withdrawing Parties which shall be allocated to them in the proportion
which each of their Participating Interests (prior to the withdrawal) bears
to the total Participating Interests of all the non-withdrawing Parties
(prior to the withdrawal), unless the non-withdrawing Parties agree
otherwise. The expenses associated with the withdrawal and assignments shall
be borne by the withdrawing Party.
13.7 Approvals
A withdrawing Party shall promptly join in such actions as may be necessary
or desirable to obtain any Government approvals required in connection with
the withdrawal and assignments, and any penalties or expenses incurred by the
Parties in connection with such withdrawal shall be borne by the withdrawing
Party.
13.8 Abandonment Security
A withdrawing Party shall provide Security satisfactory to the other Parties
to satisfy any such obligations or liabilities which were approved or accrued
prior to notice of withdrawal, but which become due after its withdrawal,
including, without limitation, Security to cover the costs of an abandonment,
if applicable; provided that the withdrawing Party was participating or was
obligated to participate in the operations which gave rise to such
obligations or liabilities. "Security" means a standby letter of credit
issued by a bank or an on demand bond issued by a corporation, such bank or
corporation having a credit rating indicating it has sufficient worth to pay
its obligations in all reasonably foreseeable circumstances.
13.9 Withdrawal or Abandonment by all Parties
In the event all Parties decide to withdraw or are required to do so pursuant
to this Article, the Parties agree that they shall be bound by the terms and
conditions of this Agreement for so long as may be necessary to wind up the
affairs of the Parties with the Government, to satisfy any requirements of
applicable law or to facilitate the sale, disposition or abandonment of
property or interests held by the Joint Account.
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ARTICLE XIV RELATIONSHIP OF PARTIES AND TAX
14.1 Relationship of Parties
The rights, duties, obligations and liabilities of the Parties under this
Agreement shall be individual, not joint or collective. It is not the
intention of the Parties to create, nor shall this Agreement be deemed or
construed to create a mining or other partnership, joint venture, association
or trust, or as authorizing any Party to act as an agent, servant or employee
for any other Party for any purpose whatsoever except as explicitly set forth
in this Agreement. In their relations with each other under this Agreement,
the Parties shall not be considered fiduciaries except as expressly provided
in this Agreement.
14.2 Tax
Operator shall provide each Party, in a timely manner and at such Party's
sole expense, with such information with respect to Joint Operations as such
party may reasonably request for preparation of its tax returns or responding
to any audit or other tax proceeding.
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ARTICLE XV CONFEDENTIAL INFORMATION -PROPRIETARY TECHNOLOGY
15.1 Confidential Information
A) Subject to the provisions of the Concession, the Parties agree that all
information and data acquired or obtained by any Party in respect of Joint
Operations shall be considered confidential and shall be kept confidential
and not be disclosed during the terms of the Concession and for a period of
two (2) years after expiration of the Concession to any person or entity not
a Party to this Agreement, except:
1) To an Affiliate, provided such Affiliate maintains confidentiality as
provided in this Article;
2) To a governmental agency or other entity when required by the Concession;
3) To the extent such data and information is required to be furnished in
compliance with any applicable laws or regulations, or pursuant to any legal
proceedings or because of any order of any court binding upon a Party;
4) Subject to Article 15.1(B), to potential contractors, contractors,
consultants and attorneys employed by any Party where disclosure of such data
or information is essential to such contractor's, consultant's or attorney's
work;
5) Subject to Article 15.1(B), to a bona fide prospective transferee of a
Party's Participating Interest (including an entity with whom a Party or its
Affiliates is conducting bona fide negotiations directed toward a merger,
consolidation or the sale of a majority of its or an Affiliate's shares);
6) Subject to Article 15.1(B), to a bank or other financial institution to
the extent appropriate to a Party arranging for funding for its obligations
under this Agreement;
7) To the extent such data and information must be disclosed pursuant to any
rules or requirements of any government or stock exchange having jurisdiction
over such Party, or its Affiliates; provided that if any Party desires to
disclose information in an annual or periodic report to its or its
Affiliates' shareholders and to the public and such disclosure is not
required pursuant to any rules or requirements of any government or stock
exchange, then such Party shall comply with Article 20.2;
8) To its respective employees for the purposes of Joint Operations, subject
to each Party taking customary precautions to ensure such data and
information is kept confidential; and
9) Where any data or information which, through no fault of a Party, becomes
a part of the public domain.
8) Disclosure as pursuant to Article 15. 1 (A)(4), (5), and (6) shall not be
made unless prior to such disclosure the disclosing Party has obtained a
written undertaking from the recipient party to keep the data and information
strictly confidential and not to use or disclose the data and information
except for the express purpose for which disclosure is to be made.
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15.2 Continuing Obligations
Any party ceasing to own a Participating Interest during the term of this
Agreement shall nonetheless remain bound the obligations of confidentiality
and any disputes shall be resolved in accordance with Article III.
15.3 Proprietary Technology
Nothing in this Agreement shal1 require a Party to divulge proprietary
technology to the other Parties; provided that where the cost of development
of proprietary technology has been charged to the Joint Account, such
proprietary technology shall be disclosed to all Parties bearing a portion of
such cost and may be used by such Party or its Affiliates in other operations.
15.4 Trades
Notwithstanding the foregoing provisions of this Article, Operator may, with
prior approval of the Operating Committee, make well trades and data trades
for the benefit of the Parties, with any data, the cost of which has been
charged to the Joint Account, so obtained to be furnished to all Parties.
Operator shall obtain an undertaking from the third party receiving such
information to keep such information confidential.
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ARTICLE XVI FORCE MAJEURE
16.1 Obligations
If as a result of Force Majeure any party is rendered unable, wholly or in
part, to carry out its obligations under this Agreement, other than the
obligation to pay any amounts due or to furnish security, then the
obligations of the party giving such notice, so far as and to the extent that
the obligations are affected by such Force Majeure, shall be suspended during
the continuance of any inability so caused, but for no longer period. The
party claiming Force Majeure shall notify the other Parties of the Force
Majeure situation within a reasonable time after the occurrence of the facts
relied on and shall keep all Parties informed of all significant
developments. Such notice shall give reasonably full particulars of said
Force Majeure, and also estimate the period of time which said Party will
probably require to remedy the Force Majeure. The affected Party shall use
all reasonable diligence to remove or overcome the Force Majeure situation as
quickly as possible in an economic manner, but shall not be obligated to
settle any labor dispute except on terms acceptable to it and all such
disputes shall be handled within the sole discretion of the affected Party.
16.2 Definition of Force Majeure For the purposes of this Agreement, "Force
Majeure" shall have the meaning as set forth in Article XXIIl (b) of the
Concession.
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ARTICLE XVII NOTICES
17.1 Notices
Except as otherwise specifically provided, all notices authorized or required
between the Parties by any of the provisions of this Agreement, shall be in
writing, in English and delivered in person or by registered mail or by
courier service or by any electronic means of transmitting written
communications which provides confirmation of complete transmission, and
addressed to such Parties as designated below. The originating notice given
under any provision of this Agreement shall be deemed delivered only when
received by the Party to whom such notice is directed, and the time for such
Party to deliver any notice in response to such originating notice shall run
from the date the originating notice is received. The second or any
responsive notice shall be deemed delivered when received. "Received" for
purposes of this Article with respect to written notice delivered pursuant to
this Agreement shall be actual delivery of the notice to the address of the
Party to be notified specified in accordance with this Article. Each Party
shall have the right to change its address at any time and/or designate that
copies of all such notices be directed to another person at another address,
by giving written notice thereof to all other Parties.
In the case of a notice to Dublin at:
Dublin International Petroleum (Egypt) Limited #52 Youssif Abbass Street Nasr
City, Cairo
Telephone: (202) 405-0002 Facsimile: (202) 405-0003
With a copy to:
Tanganyika Oil Company Ltd. 802- 1015- 4th Street S. W. Calgary , Alberta,
Canada T2R IJ4 Telephone: (403) 234-8199 Facsimile: (403) 234-8140
In the case of a notice to GHP at:
GHP Exploration (West Gharib) Ltd. 1900 W. Loop South, Suite 900 Houston, Texas
U.S.A .77027 Attention: Mr. Barry Lasker Telephone: (713) 626-9373
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Facsimile: (713) 626-9374
In the case of notice to Drucker:
Drucker Petroleum Inc.
#830, 789 West Fender Street
Vancouver, British Columbia V6C IH2
Telephone: (604) 689-4407 Facsimile: (604) 689-7654
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ARTICLE XVIII APPLICABLE LAW AND DISPUTE RESOLUTION
18.1 Applicable Law
This Agreement shall be governed by, construed, interpreted and applied in
accordance with the laws of Alberta, Canada, excluding any choice of law
rules which would refer the matter to the laws of another jurisdiction.
18.2 Dispute Resolution
A) Any dispute, controversy or claim arising out of or in relation to or in
connection with this Agreement or the operations carried out under this
Agreement, including without limitation any dispute as to the construction
validity, interpretation, enforceability or breach of this Agreement, shall
be exclusively and finally settled by arbitration, and any party may submit
such a dispute, controversy or claim to arbitration.
B) The arbitration shall be heard and determined by three (3) arbitrators. All
decisions and awards by the arbitration tribunal shall be made by majority
vote.
C) Unless otherwise expressly agreed in writing by the Parties to the
arbitration proceedings:
1) The arbitration proceedings shall be held in Calgary, Alberta;
2) The arbitration proceedings shall be conducted in the English language and
the arbitrators shall be fluent in the English language;
3) The arbitrators shall be and remain at all times wholly independent and
impartial;
4) The arbitration proceedings shall be conducted in accordance with the
UNCITRAL Model Law on International Commercial Arbitration, in effect upon
commencement of arbitration;
5) Any procedural issues not determined under the arbitral rules selected
pursuant to Article 18.2(C)(4) shall be determined by the law of the place of
arbitration, other than those laws which would refer the matter to another
jurisdiction;
6) The costs of the arbitration proceedings (including legal fees and costs)
shall be borne in the manner determined by the arbitrators;
7) The decision of the majority of the arbitrators, shall be reduced to
writing; final and binding without the right of appeal; the sole and
exclusive remedy regarding any claims, counterclaims, issues or accountings
presented to the arbitrator; made and promptly paid in U.S. dollars free of
any deduction or setoff (except if the Party is a Defaulting Party under
Article VIII) and any costs or fees incident to enforcing the award, shall to
the maximum extent permitted by law, be charged against the Party resisting
such enforcement;
8) Consequential, punitive or other similar damages shall not be allowed;
9) The award shall include interest from the date of any breach or violation
of this Agreement, as determined by the arbitral award, and from the date of
the award until paid in full, at the Agreed Interest Rate; and
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10) Judgement upon the award may be entered in any court having jurisdiction
over the person or the assets of the party. Application may also be made to
such court for a judicial acceptance of the award and an order of
enforcement, as the case may be.
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ARTICLE XIX ALLOCATION OF COST RECOVERY RIGHTS
19.1 Allocation of Total Production
For the purposes of recovery of Petroleum Costs, the total quantity of
Hydrocarbons which are produced and saved from all Development Leases in a
Calendar Quarter and to which the Parties are entitled under the Concession
shall be designated as either Cost Oil or Production Sharing Oil.
19.2 Allocation of Cost Oil
Subject to each of the Farmout Agreements and Article 19.4, Cost Oil shall be
allocated in accordance with the Parties' respective Participating Interests.
The allocation of Cost Oil shall be as required to recover, in the sequence
incurred, all Petroleum Costs and which are recoverable in such Calendar
Quarter.
19.3 Allocation of Production Sharing Oil
Production Sharing Oil shall be allocated among the Parties in proportion to
their respective Participating Interests.
19.4 Exclusive Operations and Extensions of the Exploration Period
Prior to the extension of the term of the Exploration Period or and
Exploration Sub-Period by less than all Parties or, where practicable, prior
to the conduct of an Exclusive Operation (or if not, as soon thereafter as is
practicable), the Parties shall meet to determine:
A) the allocation of Cost Oil and Production Sharing Oil between and
Development Leases in which the Parties have different Participating
Interests;
B) the allocation of Cost Oil and Production Sharing Oil between the Parties
where Petroleum Costs have been incurred but do not relate to Joint
Operations resulting in the creation of a Development Lease but which become
recoverable as a result of production from another Development Lease
elsewhere in the Concession Area, provided always that Petroleum Costs in
relation to a Development Lease shall be recovered first;
C) without prejudice to Article 7.9, the manner in which the bonuses
contemplated in Article IX of the Concession will be discharged; and
D) such other matters as the Parties may agree.
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ARTICLE XX GENERAL PROVISIONS
20.1 Warranties as to no Payments, Gifts and Loans
Each of the Parties warrants that neither it nor its affiliates has made or
will make, with respect to the matters provided for hereunder, any offer,
payment, promise to pay or authorization of the payment of any money, or any
offer, gift, promise to give or authorization of the giving of anything of
value, directly or indirectly, to or for the use or benefit of any official
or employee of the Government or EGPC or to or for the use or benefit of any
political party, official, or candidate for the purpose of influencing an
official act or decision of that person; inducing that person to do or omit
to do any act in violation of his or her lawful duty; or inducing that person
to use his or her influence with the Government or EGPC to affect or
influence any Government or EGPC decision; unless such offer, payment, gift,
promise or authorization is authorized by the written laws or regulations of
the Arab Republic of Egypt. Each of the Parties further warrants that neither
it nor its affiliates has made or will make any such offer, payment, gift,
promise or authorization to or for the use or benefit of any other person if
the Party knows, has a firm belief, or is aware that there is a high
probability that the other person would use such offer, payment, gift,
promise or authorization for any of the purposes described in the preceding
sentence. The foregoing warranties do not apply to any facilitating or
expediting payment to secure the performance of routine Government action.
Routine Government action, for purposes of this Article 20.1, shall not
include, among other things, Government action regarding the terms, award or
continuation of the Concession. Each Party shall respond promptly, and in
reasonable detail, to any notice from any other Party or its auditors
pertaining to the above stated warranty and representation and shall furnish
documentary support for such response upon request from such other Party.
20.2 Conflicts of lnterest
A) Each Party undertakes that it shall avoid any conflict of interest between
its own interests (including the interests of Affiliates) and the interests
of the other Parties in dealing with suppliers, customers and all other
organizations or individuals doing or seeking to do business with the Parties
in connection with activities contemplated under this Agreement.
B) The provisions of the preceding paragraph shall not apply to:
1) A Party's performance which is in accordance with the local preference
laws or policies of the Government; or
2) A Party's acquisition of products or services from an Affiliate, or the
sale thereof to an Affiliate, made in accordance with rules and procedures
established by the Operating Committee.
20.3 Public Announcements
A) Operator shall be responsible for the preparation and release of all
public announcements and statements regarding this Agreement and the Joint
Operations; provided that, no public announcement or statement shall be
issued or made unless prior to its release all the Parties have been
furnished with a copy of such statement or announcement and two (2) or more
Parties holding more than fifty percent (50%) of the Participating Interests
have approved the same. Where a public announcement or statement becomes
necessary or desirable because of danger to or loss of life, damage to
property or pollution as a
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result of activities arising under this Agreement, Operator is authorized to
issue and make such announcement or statement without prior approval of the
Parties, but shall promptly furnish all the Parties with a copy of such
announcement or statement.
B) If a Party wishes to issue or make any public announcement or statement
regarding this Agreement or the Joint Operations, it shall not do so unless
prior to its release, such Party furnishes all the Parties with a copy of
such announcement or statement, and obtains the approval of the Parties
holding fifty percent (50%) or more of the Participating Interests; provided
that, notwithstanding any failure to obtain such approval, no party shall be
prohibited from issuing or making any such public announcement or statement
if it is necessary to do so in order to comply with the applicable laws,
rules or regulations of any government, legal proceedings or stock exchange
having jurisdiction over such Party as set forth in Articles 15.1(A)(3) and
(7).
20.4 Successors and Assigns
Subject to the limitations on transfer contained in Article XII, this
Agreement shall inure to the benefit of and be binding upon the successors
and assigns of the Parties.
20.5 Waiver
No waiver by any Party of anyone or more defaults by another party in the
performance of this Agreement shall operate or be construed as a waiver of
any future default or defaults by the same Party, whether of a like or of a
different character. Except as expressly provided in this Agreement no party
shall be deemed to have waived, released or modified any of its rights under
this Agreement unless such Party has expressly stated, in writing, that it
does waive, release or modify such right.
20.6 Severance of Invalid Provisions
If and for so long as any provision of this Agreement shall be deemed to be
judged invalid for any reason whatsoever, such invalidity shall not affect
the validity or operation of any other provision of this Agreement except
only so far as shall be necessary to give effect to the construction of such
invalidity, and any such invalid provision shall be deemed severed from this
Agreement without affecting the validity of the balance of this Agreement.
20.7 Modifications
Except as is provided in Article 20.6, there shall be no modification of this
Agreement except by written consent of all Parties.
20.8 Headings
The topical headings used in this Agreement are for convenience only and
shall not be construed as having any substantive significance or as
indicating that all of the provisions of this Agreement relating to any topic
are to be bound in any particular Article.
20.9 Singular and Plural
Reference to the singular includes a reference to the plural and vice versa.
20.10 Gender
Reference to any gender includes a reference to all other genders.
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20.11 Counterpart Execution
This Agreement may be executed in any number of counterparts and each such
counterpart shall be deemed an original Agreement for all purposes; provided
no party shall be bound to this Agreement unless and until all Parties have
executed a counterpart. For purposes of assembling all counterparts into one
document, Operator is authorized to detach the signature page from one or
more counterparts and, after signature thereof by the respective Party,
attach each signed signature page to a counterpart.
20.12 Entirety and Conflict
This Agreement constitutes the entire agreement of the Parties and supersedes
all prior understandings and negotiations of the Parties, with the exception
of Article 2 of the GHP Farmout Agreement and Article 2 of the Drucker
Farmout Agreement. In the event of a conflict between Article 2 of the GHP
Farmout Agreement and this Agreement, as between GHP and Dublin, the terms of
Article 2 of the GHP Farmout Agreement shall govern to the extent of the
conflict. In the event of a conflict between Article 2 of the Drucker Farmout
Agreement and this Agreement, as between Drucker and Dublin, the terms of
Article 2 of the Drucker Farmout Agreement shall govern to the extent of the
conflict.
IN WITNESS of their agreement each Party has caused its duly authorized
representative to sign this instrument on the date indicated below such
representative's signature.
DUBLIN INTERNATIONAL PETROLEUM (EGYPT) LIMITED
BY:
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TITLE:
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DATE:
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GHP EXPLORATION (WEST GHARIB) LTD.
BY:
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TITLE:
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DATE:
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DRUCKER PETROLEUM INC.
BY:
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TITLE:
----------------------------
DATE:
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