Exhibit 10.65
DAYWORK DRILLING CONTRACT-LAND
This International Daywork Drilling Contract-Land (this "Contract"), dated the
10th day of October 1999, is made by and between Closed Type JSC Karakudukmunay,
residing at Microdistrict 3 Building 82 Aktau, Republic of Kazakhstan
(hereinafter referred to as "Operator") and Drilling Service Company "Kazakhoil
Drilling" Ltd., residing at 466412, Atyrau, Birlik village (hereinafter referred
to as "Contractor"). Hereinafter the Contractor and the Operator may
individually be referred to as a "Party" and collectively as "Parties."
RECITALS:
WHEREAS, Operator desires to have onshore wells drilled, produced or worked over
in the Mangistau region of the Republic of Kazakhstan, as specified by Operator
and to have performed or carried out all auxiliary operations and services as
detailed in the Appendices hereto or as Operator may require (hereinafter
referred to as "Work"); and
WHEREAS, Contractor is willing to furnish the land drilling rig which is a
Kremco 900 Rig (or a substantially similar land drilling rig), together with
drilling and other equipment (hereinafter called the "Drilling Unit"), insurance
and personnel, all as detailed in the Appendices hereto.
AGREEMENT:
NOW THEREFORE, in consideration of the premises and the covenants and agreements
herein, the Parties agree as follows:
ARTICLE I
INTERPRETATION
1.1 Definitions
In this Contract, unless the context otherwise requires:
(a) "Commencement Date" means the day and time within the nearest hour that
Operator's first well is spudded within the Operating Area.
(b) "Operator's Items" mean the equipment, material and services owned by
Operator or which are listed in Appendix D that are to be provided at the
expense of Operator.
(c) "Contractor's Items" mean the Drilling Unit, equipment, material and
services owned by Contractor or which are listed in Appendices B and D that are
to be provided at expense of Contractor.
(d) "Contractor's Personnel" meansF the personnel and subcontractors to be
provided by Contractor from time to time to conduct operations hereunder as
listed in Appendix C.
(e) "Operator's Personnel" means the personnel and other contractors to be
provided by Operator from time to time in connection with operations hereunder.
(f) "Operating Area" means the area specified in Appendix A.
(g) "Operating Base" means the place onshore designated by Operator and
specified in Appendix A.
(h) "Affiliated Company" means an entity owning fifty percent (50%) or more of
the voting stock or similar equity interests of Operator or Contractor, an
entity in which Operator or Contractor own fifty percent (50%) or more of its
voting stock or similar equity interests, or an entity fifty percent (50%) or
more of whose voting stock or similar equity interests is owned by the same
entity that owns fifty percent (50%) or more of the voting stock or similar
equity interests of Operator or Contractor.
1.2 Currency
In this Contract, all amounts expressed in dollars are United States dollar
amounts.
1.3 Conflicts
Appendices A, B, C, D, E and F attached hereto are incorporated herein by this
reference. If any provision of the Appendices conflicts with a provision in the
body of this Contract hereof, the body of this Contract shall prevail.
1.4 Headings
The paragraph headings shall not be considered in interpreting the text of this
Contract.
1.5 Further Assurances
Each Party shall perform the acts and execute and deliver the documents and give
the assurances necessary to give effect to the provisions of this Contract.
1.6 Contractor's Status
Contractor in performing its obligations hereunder shall be an independent
contractor. Operator may instruct and direct Contractor as to the results to be
obtained from Contractor's employees. None of Contractor's employees are, nor
shall be deemed to be, employees or agents of Operator; provided, however,
Operator's supervisory personnel shall be in charge of Contractor's Personnel
and Contractor's Personnel shall take their instructions and work assignments
solely from Operator's supervisory personnel.
1.7 Governing Law
This Contract shall be construed and relations between the Parties determined in
accordance with the law designated in Appendix A, not including, however, any of
its conflicts of law rules, which would direct or refer to the laws of another
jurisdiction. In the event any provision of this Contract is inconsistent with
or contrary to any applicable law, rule or regulations, said provision shall be
deemed to be modified to the extent required to comply with said law, rule or
regulation, and as so modified said provision and this Contract shall continue
in full force and effect. If this Contract is translated into another language,
the English version of this Contract shall be controlling for all purposes.
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ARTICLE II
TERM
2.1 Effective Date
The Parties shall be bound by this Contract from the date last signed by a Party
(hereinafter referred to as "Effective Date").
2.2 Duration
This Contract shall, subject to Paragraphs 2.3 and 2.4, be for the term
specified in Appendix A.
2.3 Termination
This Contract shall terminate:
(a) immediately if the Drilling Unit becomes a loss on the date Contractor's
insurance surveyor determines a constructive or arranged total loss to have
occurred;
(b) on the later of the date specified in Appendix A or, if operations are then
being conducted on a well, as soon thereafter as such operations are completed
and the Drilling Unit has been safely stacked at the demobilization location
specified in Appendix A, unless some other location or port is mutually agreed,
and all of Operator's Items have been off loaded;
(c) in accordance with Paragraph 3.5(b);
(d) in accordance with Paragraph 7.6; or
(e) in accordance with Paragraph 8.2.
2.4 Option to Extend
This Contract may be renewed by Operator beyond its initial term as specified in
Appendix A, provided that Operator and Contractor mutually agree upon the
appropriate rates, terms and conditions.
2.5 Continuing Obligations
The provisions of Article IX and Paragraphs 1.3, 1.6, 1.7, 2.3, 2.5, 2.6, 13.1,
13.4, 13.5, 13.6, 13.7, 13.9 and 13.11 shall survive the termination of this
Contract and the Parties shall continue to be bound thereby.
2.6 Return of Operator's Item
Upon termination of operations, Contractor shall return to Operator at the last
drilling location for the Drilling Unit under this Contract, or at any other
location as directed by Operator at the Operator's sole cost, any of Operator's
Items which are at the time in Contractor's possession. Operator's Items shall
be returned by Contractor in the same condition in which they were received by
Contractor, normal wear and tear excepted.
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ARTICLE III
CONTRACTOR'S PERSONNEL
3.1 Number, Selection, Hours of Labor and Remuneration
Except where herein otherwise provided, the number, selection, replacement,
hours of labor and remuneration of Contractor's Personnel shall be determined by
the Contractor upon the requisites of the Work. Such employees or subcontractors
shall be the employees or subcontractors solely of Contractor. Notwithstanding
the foregoing, minimum manning shall be as specified in Appendix C, and the
Contractor undertakes to provide personnel of first class international quality
who have an appropriate technical background and experience to perform the Work
and to provide Contractor's Personnel who have certification as required by
Kazakh laws. Contractor's Personnel shall be certified as required by Kazakh law
and have work permits as so required by Kazakh law.
3.2 Contractor's Representative
Contractor shall nominate one of Contractor's Personnel, if possible the office
manager of Contractor Aktau, as Contractor's representative who shall be in
charge of the remainder of Contractor's Personnel and who shall have full
authority to resolve all day-to-day matters which arise between Operator and
Contractor. Contractor shall inform the Operator in a written form, if such
representative is replaced. All matters that cannot be resolved by Contractor's
representative and Operator's representative will be resolved in accordance with
Paragraph 13.9.
3.3 Increase in Contractor's Personnel
Operator may, subject to mutual agreement of the Parties, require Contractor to
increase the number of Contractor's Personnel, subject to additional payment by
the Operator in accordance with the rates in Appendix F or as mutually agreed
between the Parties.
3.4 Replacement of Contractor's Personnel
Contractor will remove and replace at anytime any of Contractor's Personnel if
Operator so requests. Operator shall give to Contractor the reasons for any such
request.
3.5 Personnel Shortages
(a) If at any time during the term of this Contract, less than a full crew of
personnel as listed in Appendix C is utilized for any reason, the applicable day
rate payable to Contractor hereunder shall be reduced by an amount calculated by
multiplying the applicable day rate payable to Contractor hereunder by a
fraction, where the number of crew members absent from the Drilling Unit is the
numerator and the total number required crew members is the denominator. The
day-rate and hourly rates for the crew are defined in Appendix F.
(b) If at any time, in the Operator's opinion, Contractor's failure to provide a
full crew of personnel as established in this Contract is interfering with or
delaying the conduct of Operator's operations, and such failure continues for a
period of five (5) days after notice from Operator to Contractor, then in
addition to (i) a reduction in the applicable day rate as provided herein and
(ii) any other remedies the Operator may have under this Contract, the Operator
may terminate this Contract.
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3.6 Safety Measures
Contractor shall, at its sole expense, take all measures necessary or proper to
provide safe working conditions, proper safety clothing and supplies to its
personnel in accordance with international safety regulations and standards and
with all safety requirements of the Republic of Kazakhstan and general safety
measures applied by the Contractor in its other similar businesses. Contractor
shall give notice to all persons at the drill site of all safety regulations,
which apply to such personnel. Additionally, Contractor shall ensure that such
persons are fully informed of and comply with such regulations. The Contractor
shall set up and conduct weekly safety drills. Attendance at these meetings of
Contractor's Personnel shall be obligatory. Operator shall have the right to
hold additional meetings and best operations practices at its own discretion.
ARTICLE IV
CONTRACTOR'S ITEMS
4.1 Obligation to Supply
Contractor shall provide Contractor's Items and Personnel and perform the
services to be performed by it in accordance with Appendices B, C and D. Each of
Contractor's Items (including the Drilling Unit) shall be subject to inspection
and approval of Operator prior to such Items being placed into service.
4.2 Maintain Stocks
Contractor shall be responsible, at its cost, for maintaining adequate stock
levels of Contractor's Items and replenishing them as necessary.
4.3 Maintain and Repair Equipment
Contractor shall, subject to Paragraph 9.1, be responsible for the maintenance
and repair of all Contractor's Items (including the Drilling Unit) and shall
provide all spare parts and materials required therefor. Contractor shall, if
requested by Operator, also maintain or repair any of Operator's Items in the
Operating Area which Contractor is qualified to and can maintain or repair with
Contractor's normal complement of personnel and equipment at the drill site,
provided, however, that Operator shall at its cost provide all spare parts and
materials required to maintain or repair Operator's Items, and the basic
responsibility and the ability for furnishing and maintaining such items shall
remain with the Operator. In the event Contractor does not fully carry out its
maintenance and repair obligations set forth above on a timely basis, Operator
may elect to perform or have performed such maintenance and repair activities
and the costs incurred by Operator thereby may be deducted by Operator from any
amounts due to Contractor under this Contract or otherwise.
4.4 Additional Items
Contractor agrees and undertakes to provide additional equipment upon the
requirement of Operator. Such additional equipment shall be provided by the
Contractor on a cost basis plus handling charges, if applicable.
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ARTICLE V
CONTRACTOR'S GENERAL OBLIGATION
5.1 Contractor's Standard of Performance
Contractor shall carry out all its operations under this Contract on a daywork
basis. For purposes hereof the term "daywork basis" means Contractor shall
furnish equipment, labor and perform services as herein provided, for a
specified sum per day under the direction and supervision of Operator.
5.2 Operation of Drilling Unit
Contractor shall be responsible for the operation of the Drilling Unit,
including, supervising moving operations and positioning on drilling locations
as required by Operator. Operations under this Contract will be performed on a
twenty-four (24) hour per day, seven (7) days a week basis. Contractor warrants
that the Drilling Unit (without modification, upgrade or enhancement) will
operate efficiently and is physically capable of drilling wells to depths
specified in this Contract and complies fully with the technical documentation
described in Appendix B.
5.3 Compliance with Operator's Instructions
Contractor shall comply with all instructions of Operator consistent with the
provisions of this Contract, including, without limitation, drilling, well
control and safety instructions. Such instructions shall, if Contractor so
requires and time permits, be confirmed in writing by the authorised
representative of Operator. However, Operator shall not issue any instructions
which would be inconsistent with Contractor's rules, policies or procedures
pertaining to the safety of the Contractor's Personnel, the Operator's
Personnel, equipment or, the Drilling Unit, or require Contractor to exceed the
capacity of the Drilling Unit.
5.4 Adverse Weather
Contractor, in consultation with Operator, shall decide when, in the face of
impending adverse weather conditions, to institute precautionary measures in
order to safeguard the well, the well equipment, the Drilling Unit and
Contractor's Personnel or Operator's Personnel to the fullest possible extent.
Contractor and Operator shall each ensure that each respective senior
representative will not act unreasonably in the exercise of their discretion
under this Paragraph 5.4.
5.5 Drilling Fluids and Casing Program
Contractor shall follow any of Operator's instructions with respect to the
"Drilling Fluid and Casing Program" as may be specified by the Operator.
Operator shall provide Contractor with any such programs reasonably in advance
of the spud date of each well to be drilled under this Contract.
5.6 Difficulties during Drilling
In the event of any difficulty arising which precludes either drilling ahead
under reasonably normal procedures or the performance of any other operations
planned for a well, Contractor may suspend the work in progress and shall
immediately notify in writing the representative of Operator of the difficulty,
and during such period exert its best efforts to overcome the difficulty.
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5.7 Well Control Equipment
Subject to Article IX, Contractor shall maintain its well control equipment
listed in Appendices B and D in good condition at all times and shall use its
best efforts to prevent and control fires and blowouts and to protect the hole.
5.8 Inspection of Materials Furnished by Operator
Contractor agrees to visually inspect all materials furnished by Operator before
using same and notify Operator in writing of any apparent defects therein.
Contractor shall not be liable for any loss or damage resulting from the use of
materials furnished by Operator, unless Contractor fails to properly inspect the
materials in accordance with this Paragraph 5.8.
5.9 Cutting/Coring Program
Contractor shall save and identify cuttings and cores according to Operator's
instructions and place them in containers furnished by the Operator.
5.10 Records to be Kept by Contractor
Contractor shall keep and furnish to Operator an accurate record of the work
performed and formations drilled on the IADC-API Daily Drilling Report Form or
other form acceptable to Operator. A legible copy of said form signed by
Contractor's representatives shall be furnished by Contractor to Operator.
ARTICLE VI
OPERATOR'S RIGHTS AND OBLIGATIONS
6.1 Equipment and Personnel
Operator shall at its cost provide Operator's Items and Operator's Personnel and
perform the services to be provided or performed by it according to Appendix D.
In addition to providing the initial supply of Operator's Items, Operator shall
be responsible, at its cost, for maintaining adequate stock levels and
replenishing as necessary. When, at Operator's request and with Contractor's
agreement, the Contractor furnishes or subcontracts for certain items which
Operator is required herein to provide, for purposes of this Contract said items
or services shall be deemed to be Operator's Items, and Operator shall not be
relieved of any of its liabilities in connection therewith. For furnishing said
items and services, Operator shall reimburse Contractor its entire cost plus a
handling charge as specified in Appendix A.
6.2 Maintenance and Repair
Operator shall be responsible, at its cost, for the maintenance and repair of
all Operator's Items on the Drilling Unit which Contractor is not qualified to
or cannot maintain or repair with Contractor's normal complement of personnel
and the equipment at the drill site.
6.3 Operator's Employees
Operator shall designate a senior representative to resolve day-to-day matters
requiring decision by Operator who will be present at the drill site. Contractor
may treat Operator's senior representative for the time being at the drill site
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as being in charge of all Operator Personnel. Operator shall inform the
Contractor in a written form, in case such representative is replaced.
Operator's representative shall at all times have access to the Drilling Unit
and may, among other things, observe tests, check and control the implementation
of the mud program, examine cuttings and cores, inspect the Work or examine the
records kept on the Drilling Unit by Contractor.
6.4 Drilling Site and Access
Operator shall be responsible for providing access to the drilling location, as
well as selecting, surveying, marking and clearing the drilling locations as may
be reasonably required by Contractor for location approval. Contractor shall
obtain and provide all required certificates, Drilling Unit and expatriate
personnel permits and licenses required for the drilling operations and Drilling
Unit hereunder. Operator shall notify Contractor of any impediments or hazards
to operations at each drilling location or at any access routes to the drilling
locations of which it has actual knowledge. Notwithstanding any other provision
of this Contract, should there be obstructions at or within the area of the
drill site and these obstructions result in damage to the Drilling Unit,
Operator shall be responsible for and hold harmless and indemnify Contractor for
all resulting direct damage, including the payment of the applicable Standby
Rate during repairs, but Operator shall receive credit for any physical damage
insurance proceeds received by Contractor as a result of such damage.
6.5 Custom or Excise Duties, Taxes and Fees
(a) Contractor, with the help of the Operator, shall be responsible and hold
harmless and indemnify Operator for the current customs clearance and changes to
the "consignee" documentation to reflect the transfer of the Drilling Unit into
ownership of the Contractor in Kazakhstan. Thereafter the Contractor will be
responsible for importation of any subsequent Contractor Items into the
Operating Area as required, including but not limited to spare parts,
consumables, additional equipment and chemicals as needed for the operation of
the Drilling Unit.
(b) Notwithstanding anything mentioned in Paragraph 6.5(a), Operator shall be
solely responsible for all custom matters connected with Operator's contract
with Challenger Oil Services Plc.
(c) Notwithstanding any of the foregoing, Contractor shall pay all taxes that
may be assessed by the Republic of Kazakhstan against Contractor as a result of
the performance of this Contract inclusive of the payroll taxes for its
personnel, customs duties, local taxes and VAT excises, sales and other such
taxes as may arise in conducting Contractor's business.
6.6 Take Over of Work
In the event any well drilled under this Contract should blow out, catch fire or
in any manner get out of control, Operator may assume complete control and
supervision of the Work of bringing the well under control, putting out the fire
and take such other measures as Operator deems appropriate. If Contractor (a) is
insolvent, (b) is on the verge of becoming insolvent or (c) fails to make timely
payments to Contractor's subcontractors as permitted under Paragraph 11.1 of
this Contract, Operator may (i) take over and continue the Work on the well to
completion or abandonment and (ii) make payments to third parties on behalf of
Contractor that Operator, in its sole discretion, deems necessary or
appropriate. In this context, Contractor will be deemed to be insolvent, or on
the verge of becoming insolvent, if a reasonable basis exists for Operator to
believe that Contractor is unable, or with the passage of time alone will be
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unable, to pay its bills or discharge its financial obligations as they come
due. If at any time in Operator's opinion, Contractor is failing to conduct its
operations under this Contract in a diligent, prudent, skillful and workmanlike
manner and in all respects in strict accordance with all applicable laws and
with accepted good oil field practices, standards, methods and such failure
continues for a period of ten (10) days (or in the event such failure results in
a significant safety hazard, if such failure continues for 96 hours) after
notice from Operator to Contractor, Operator may take over and continue the Work
on the well to completion or abandonment. In the event Operator takes over the
Work pursuant to this Paragraph 6.6, Operator shall have full use of
Contractor's Drilling Unit and other equipment, facilities, material, supplies
and personnel at the well location, which Contractor shall continue to insure in
accordance with this Contract, and Contractor shall continue to be paid the
applicable day rates provided for in this Contract less any payments made by
Operator on behalf of Contractor in accordance with this Paragraph 6.6. During
any such take over period the indemnities given by Contractor to Operator under
this Contract shall be suspended, excluding the due indemnifications until such
time and Contractor shall have no responsibility to Operator under such
circumstances. When such take over period has ended, Operator shall return the
Drilling Unit and all of Contractor's Items to Contractor in as good conditions
as when the take over began, normal wear and tear excepted.
6.7 Operator's Well Program
Operator shall provide Contractor with a well drilling program or programs,
which shall include, but not be limited to hole sizes, casing program, mud
control program and Operator's deviation policy. Operator may modify these
programs while drilling is in progress.
ARTICLE VII
RATES OF PAYMENT
7.1 Payment
Operator shall pay to Contractor during the term of this Contract the amounts
due on monthly basis as calculated to the nearest hour according to the rates of
payment herein set forth in accordance with Article VIII. No other payment shall
be due from Operator, unless specifically provided for in this Contract or
agreed to in writing by the Parties.
7.2 Mobilization/Demobilization Fee
(a) Operator shall pay Contractor the Mobilization Fee specified in Appendix A
on the Effective Date (the "Mobilization Fee") which shall be applied in
accordance with Paragraph 8.5(b).
(b) Operator shall pay Contractor a Demobilization Fee as specified in Appendix
A to cover all Contractor's costs of demobilizing the Drilling Unit. Operator
shall have no further demobilization obligations other than the payment of the
Demobilization Fee. Operator, however, shall provide to Contractor all export
documentation necessary to enable to freely export the Drilling Unit upon the
termination of this Contract. If Contractor is unable to export the Drilling
Unit from the Republic of Kazakhstan, due to any act or omission of Operator,
within thirty (30) days after termination of this Contract, then Operator shall
begin paying the Standby Rate Without Crews beginning on the thirty-first (31st)
day and continuing until the Drilling Unit is safely exported from the Republic
of Kazakhstan. The foregoing notwithstanding, the Demobilization Fee shall not
be payable (i) in the event of any breach of this Contract by Contractor or (ii)
the Drilling Unit is demobilized to any location other than directly to Poland
upon the termination of this Contract.
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7.3 Operating Rate
The Operating Rate specified in Appendix A will first become payable on the
Commencement Date. The Operating Rate shall continue to be payable during the
term of this Contract, except when some other rate herein provided applies.
However the Operator shall not continue to pay the Operating Rate in the case
that the Republic (of Kazakhstan) Technical Inspection Board shuts the Drilling
Unit for safety or similar reasons.
7.4 Standby Rate With Crews
The Standby Rate With Crews specified in Appendix A will be payable as follows:
(a) during any period of delay when Contractor is unable to perform its
obligations under this Contract because of adverse weather conditions or as a
direct result of an act, instructions or omission of Operator including, without
limitation, the failure of any of Operator's Items, or the failure of Operator
to issue instructions, provide Operator Items or furnish services;
(b) during any period when operations are being conducted hereinunder to redrill
or repair any well drilled hereunder which is lost or damaged as a result of
Operator's sole negligence; and
(c) during any period when operations are suspended or are being conducted due
to difficulties encountered as provided for in Paragraph 5.6.
(d) during any period after the Commencement Date that the Drilling Unit is
undergoing periodic inspections required for the maintenance of any
Certification or Classification Certificates. If the delay is of such length
that the drilling crew is demobilized, the Standby Rate Without Crew provided in
Paragraph 7.8 shall apply from such date of demobilization.
7.5 Rate During Repair
The Repair Rate specified in Appendix A will be payable during the first
twenty-four (24) hours per month during which operations are suspended to permit
necessary replacement, inspection, repair of maintenance of Contractor's Items.
Routine maintenance such as lubrication, packing of swivels, changing of pump
parts, slipping lines, drill string and certification inspections, shall not be
considered as maintenance for purposes of this Paragraph 7.5. Contractor will
use due diligence in effecting such repairs, replacements or maintenance in a
good and workmanlike manner and will use its best efforts to familiarize itself
with the location of rentable replacements for Contractor's Items.
7.6 Force Majeure Rate
The Force Majeure Rate specified in Appendix A will be payable during any period
in which operations are not being carried on because of Force Majeure as defined
in Paragraph 13.3, including periods required to repair damage caused by a Force
Majeure event. However, should an event of Force Majeure continue in existence
for a period of ninety (90) days, then no day rate shall be payable for the
period after such ninety (90) days and either Contractor or Operator shall have
the right to terminate this Contract at any time thereafter.
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7.7 Moving Rate
Contractor shall be paid a Moving Lump Sum amount as per Appendix A for each
move of the Drilling Unit from one well to another, provided that the well site
is prepared and ready and the following equipment is provided by Contractor to
assist in the Drilling Unit move: 2 cranes (minimum lifting capacity of 40 tons
each), 2 cranes (minimum lifting capacity of 16 tons each), 3 trailers of which
at least one has a minimum hauling capacity of 50 tons. In case this equipment
is not provided by Contractor, Operator shall procure the same, deduct any costs
and expenses associated therewith from the Moving Lump Sum, and pay the
remainder to Contractor for each move of the Drilling Unit from one well to
another. This clause applies to the first rig move from its current location to
the first well, as well as all subsequent rig moves.
7.8 Standby Rate Without Crews
The Standby Rate Without Crews shall be the rate so stated in Appendix A. The
Standby Rate Without Crews will be payable when:
(a) during any period after the Commencement Date that the Drilling Unit is
undergoing periodic inspections required for the maintenance of any
Certification or Classification Certificates, but only from the date the
drilling crew has been demobilized; and
(b) during any period when operations are suspended to repair the Drilling Unit
or other Contractor's Items due to blow out, fire, cratering, shifting or punch
through at a drilling location, obstacles or obstructions or the consequences
thereof, but only from the date the drilling crew has been demobilized.
7.9 Additional Equipment and Tools Rental Rates
As specified in Appendix D, Contractor shall provide fishing, casing handling,
and other tools and Operator shall pay to Contractor a daily rate when such
tools are used by Operator on a Standby or Operating Rate basis. The daily
Standby and Operating Rates are specified in Appendix A. Appendix D also
includes various additional items of equipment and rental tools to be provided
by Contractor and paid for by the Operator. The provision of such items is
subject to the written agreement of the Operator based upon quotations supplied
by the Contractor.
ARTICLE VIII
PAYMENTS
8.1 Monthly Invoices
Subject to Paragraph 8.5, Contractor shall bill Operator at the end of each
month, for all daily charges and other charges earned by Contractor during such
month. Billings for daily charges will reflect details of the time spent
(calculated to the nearest hour) and the rate charged for that time. Billings
for other charges will be accompanied by invoices and other documentation
supporting costs incurred for Operator or other substantiation as reasonably
required by Operator. The VAT shall be charged in accordance with the taxation
laws of the Republic of Kazakstan.
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8.2 Payment
Operator shall pay all invoices within thirty (30) days after the receipt
thereof except that if Operator disputes an item invoiced, Operator shall within
twenty (20) days after receipt of the invoice notify Contractor of the amount
disputed, specifying the reason therefor, and payment of the disputed amount may
be withheld until settlement of the dispute, but payment shall be made of any
undisputed portion. Contractor shall have the right, upon ten (10) days prior
written notice, to terminate this Contract if Operator fails or refuses to
timely pay Contractor undisputed amounts due and owing to Contractor. Such
termination by Contractor shall not change Operator's obligation to pay to
Contractor any amounts of money already due, as well as the appropriate
demobilization fee under this Contract.
8.3 Manner of Payment
All payments due by Operator to Contractor hereunder shall be made by wire
transfer or as otherwise agreed to Contractor's bank account which is specified
in Appendix A. Notwithstanding anything to the contrary in this Contract,
including this Article 8.3, Contractor may by written instruction direct
payments to be made by Operator pursuant to this Contract to third parties,
including, without limitation, Contractor's subcontractors.
8.4 Currency
All payments will be made in U.S. dollars, unless otherwise mutually agreed by
the Parties.
8.5 Payment Security
(a) Notwithstanding anything in Paragraphs 8.1 and 8.2 to the contrary, for a
period of one year after the Commencement Date, Contractor may bill Operator on
the first and fifteenth day of every month, for all daily charges and other
charges earned by Contractor during such period. Operator shall pay all such
bills within five (5) days after the receipt thereof except that if Operator
disputes an item billed, Operator shall within three (3) days after receipt of
the bill notify Contractor of the amount disputed, specifying the reason
therefor, and payment of the disputed amount may be withheld until settlement of
the dispute, but payment shall be made of any undisputed portion; provided,
however, any such charges billed above the operating rate (or applicable standby
rate) shall be subject to the standard thirty (30) day payment terms as set
forth in Paragraph 8.2.
(b) Six (6) months after the Commencement Date, the Mobilization Fee shall be
off-set and recovered from any invoices or billings delivered by Contractor
after such date. For the avoidance of doubt, all invoice and billings delivered
during such six month (6) period will be paid on a timely basis in accordance
with this Article VIII, and only after the expiration of said six (6) month
period will invoices and billings be off-set and recovered from the Mobilization
Fee.
(c) Nothing in this Paragraph 8.5 shall be construed or interpreted so as to
negate Operator's right to dispute all or any portion of any invoice or billing
delivered by Contractor under this Contract.
ARTICLE IX
LIABILITY
9.1 Equipment or Property
Except as specifically provided herein to the contrary, each Party hereto shall
at all times be responsible for and hold harmless and indemnify the other Party
from and against damage to or loss of its own and its subcontractor's equipment
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or property. Except to the extent that the proceeds from Contractor's insurance
as made available to Contractor do not compensate Contractor therefor, Operator
shall be responsible for and shall hold harmless and indemnify Contractor for
loss or destruction of or damage to Contractor's drill pipe, drill collars,
subs, reamers, bumper subs, stabilizers and other in-hole equipment when such
equipment is being used in the hole below the rotary table, normal wear
excepted. Abnormal wear and/or damage for which Operator shall be responsible
hereunder shall include, but not be limited to, wear and/or damage resulting
from the presence of H2S or other corrosive elements in the hole including those
introduced into the drilling fluid, excessive wear caused by sandcutting, damage
resulting from excessive or uncontrolled pressure such as those encountered
during testing, blow-out, or in a well out of control, excessive deviation of
the hole from vertical, dog-leg severity, fishing, cementing or testing
operations, and from any unusual drilling practices employed at Operator's
request. Operator's responsibility for such abnormal wear and/or damage as
referred to herein shall include abnormal wear and/or damage to Contractor's
choke hoses and manifolds, blow-out prevention and other appurtenant equipment.
Operator shall pay the cost of repairing damaged equipment if repairable. In the
case of equipment lost, destroyed or damaged beyond repair, Operator shall
reimburse Contractor an amount equal to the then current replacement cost of
such equipment delivered to the Drilling Unit.
9.2 The Hole
In the event a hole is lost or damaged from causes other than the gross
negligence of Contractor, Operator shall be responsible for and hold harmless
and indemnify Contractor from such damage to or loss of the hole, including all
downhole property therein.
9.3 Contractor's Personnel
Contractor shall be responsible for and hold harmless and indemnify Operator
from and against all claims, demands and causes of action of every kind and
character arising in connection herewith in favor of Contractor's employees, or
Contractor's subcontractors or their employees, or Contractor's invitees, on
account of bodily injury, death or damage to property.
9.4 Operator's Personnel
Operator shall be responsible for and hold harmless and indemnify Contractor
from and against all claims, demands, and causes of action of every kind and
character arising in connection herewith in favor of Operator's employees, or
Operator's other contractors (excluding Contractor hereunder) or their
employees, or Operator's invitees, on account of bodily injury, death or damage
to property.
9.5 Pollution and Contamination
Notwithstanding anything to the contrary contained herein, the responsibility
for pollution or contamination shall be as follows:
(a) Contractor shall be responsible for and hold harmless and indemnify Operator
for control and removal of pollution or contamination which originates above the
surface of the ground, including, without limitation, spills of fuels,
lubricants, motor oils, water base drilling fluid and attendant cuttings, pipe
dope, paints, solvents, ballast, bilge and garbage.
13
(b) Operator shall be responsible for and hold harmless and indemnify Contractor
against all claims, demands, and causes of action of every kind and character
(including control and removal of the pollutant involved) arising directly from
all pollution or contamination, other than that described in Paragraph 9.5 (a),
which may occur from the negligence of Contractor or as a result of operations
hereunder, including, but not limited to, that which may result from fire,
blow-out, cratering, seepage or any other uncontrolled flow of oil, gas, water
or other substance, as well as the use or disposition of lost circulation and
fish recovery materials and fluids, oil emulsion, oil base or chemically treated
drilling fluids other than water base drilling fluid.
(c) In the event a third party commits an act or omission which results in
pollution or contamination for which either the Contractor or Operator for whom
such Party is performing work is held to be legally liable, the responsibility
therefor shall be considered, as between the Contractor and Operator, to be the
same as if the Party for whom the work was performed had performed the same and
all of the obligations and limitations set forth in Paragraphs 9.5 (a) and (b),
shall be specifically applied.
9.6 Debris Removal and Cost of Control
Operator shall be responsible for and hold harmless and indemnify Contractor for
the cost of removal of debris including the Drilling Unit. Operator shall also
be responsible for and hold harmless and indemnify Contractor for the cost of
regaining control of any wild well, unless caused by gross negligence of the
Contractor, in which case the Contractor is fully responsible.
9.7 Underground Damage
Operator shall be responsible for and hold harmless and indemnify Contractor for
any and all claims resulting from operations under this Contract on account of
injury to, destruction of, or loss or impairment of production or any property
right in or to oil, gas or other mineral substance or water, if at the time of
the act or omission causing such injury, destruction, loss or impairment, said
substance had not been reduced to physical possession above the earth's surface,
and for any loss or damage to any formation, strata, or reservoir beneath the
earth's surface.
9.8 Consequential Damages
Neither Party shall be liable to the other for, and each Party shall hold
harmless and indemnify the other against, special, indirect of consequential
damages resulting from or arising out of this Contract, including, without
limitation, loss of profits, loss of use or business interruptions, however same
may be caused; provided, however, the forgoing limitations shall not apply to
any Party that breaches this Contract.
9.9 Indemnity Obligation
(a) The Parties intend and agree that the phrase "be responsible for and hold
harmless and indemnify" in Paragraphs 6.5 and this Article IX mean that the
indemnifying Party shall indemnify, hold harmless and defend (including payment
of reasonable attorney's fees and costs of litigation) the indemnified Party
from and against any and all claims, demands, causes of action, damages,
judgements and awards of any kind or character, without limit and without regard
to the cause or causes thereof, including pre-existing conditions, whether such
conditions be patent or latent, breach of warranty (express or implied), strict
liability, or the negligence of any person or persons, including that of the
indemnified Party, whether such negligence be sole, joint or concurrent, active
or passive.
14
(b) The indemnifying Party's obligations contained in this Contract shall also
extend to the indemnified Party and its Affiliated Companies and the officers,
directors, employees, agents, owners, shareholders and insurers of each and to
actions in rem or in personam.
(c) The terms and provisions of Paragraphs 6.5 and this Article IX shall have no
application to claims or causes of action asserted against Operator or
Contractor by reason of any agreement of indemnity with a person or entity not a
party hereto.
ARTICLE X
INSURANCE
10.1 Contractor's Insurance
Contractor shall carry and maintain insurance coverage of the type and in the
amounts set forth in Appendix E at the sole cost of Contractor. All references
in this Contract to "insurance" of Contractor shall mean such insurance as set
forth in Appendix E. Furthermore, Contractor will be liable for the statutory
insurance levied in the Republic of Kazakhstan and for the insurance premiums
for its personnel.
10.2 Certificates
Contractor will furnish Operator within ten (10) days after this Contract is
signed with certificates indicating that the required insurances is in full
force and effect and that the same shall not be cancelled or materially and
adversely changed without ten (10) days written notice to Operator.
10.3 Subrogation
For liabilities assumed hereunder by Contractor, its insurance shall be endorsed
to provide that the underwriters waive their right of subrogation against
Operator, Operator's client pursuant to any binding contract, agreement or
understanding between Operator and its client, and its or their Affiliated
Companies and co-venturers, representatives, agents, officers, directors and
employees of each of the foregoing.
10.4 Additional Insured
Contractor shall name Operator and Operator's client pursuant to any binding
contract, agreement or understanding between Operator and its client as an
additional insured, where permitted, under its policies of insurance, but only
with respect to liabilities assumed by Contractor under this Contract.
ARTICLE XI
SUBLETTING AND ASSIGMENT
11.1 Subcontracts
Operator may employ other contractors to perform any of the operations or
services to be provided or performed by it. Contractor may employ other
contractors to perform any of the operations or services to be provided or
15
performed by it with the prior written consent of Operator. Use of
subcontractors by Contractor shall not relieve Contractor from any liability or
obligation under this Contract.
11.2 Assignment
Neither Party may assign this Contract to anyone without the prior written
consent of the other Party, and prompt written notice of any such intent to
assign shall be given to the other Party. In the event of such assignment, the
assigning Party shall remain liable to the other Party as a guarantor of the
performance by the assignee of the terms of this Contract. If any assignment by
Operator is made that increases Contractors' financial burden, except for any
assignment by Contractor, Contractors' compensation shall be adjusted to give
effect to any increase in Contractors' operating costs or taxes.
ARTICLE XII
NOTICES
12.1 Notices
Notices, reports and other communications required by this Contract to be given
or sent by one Party to the other shall be delivered by hand, mailed, telexed,
or telecopied to the address as specified in Appendix A. Either Party may by
notice to the other Party change its address. Notice shall be effective upon
receipt.
ARTICLE XIII
GENERAL
13.1 Confidential Information
Upon written request of Operator, all information relating to the well obtained
by Contractor in the conduct of operations hereunder shall be held confidential
by Contractor who will use the same degree of care it uses in safeguarding its
own confidential information.
13.2 Attorney's Fees
If this Contract is placed in the hands of attorney for collection of any sums
due hereunder, or suit is brought on same, or sums due hereunder are collected
through bankruptcy or arbitration proceedings, then the winning Party shall be
entitled to recover reasonable attorney's fees and costs.
13.3 Force Majeure
Except as otherwise provided in this Paragraph 13.3, each Party to this Contract
shall be excused from complying with the terms of this Contract, except for the
payment of monies when due and the honoring of indemnities, if and for so long
as such compliance is hindered or prevented by riots, strikes, wars (declared or
undeclared), insurrection, rebellions, terrorist acts, civil disturbances,
dispositions or order or injunctions of any governmental authority, whether such
authority be actual or assumed, acts of God or adverse weather conditions,
inability to obtain equipment, supplies or fuel, or by any act or cause (other
than financial distress or inability to pay debts when due) which is reasonably
beyond the control of such Party, such cause being herein sometimes called
"Force Majeure." In the event that either Party hereto is rendered unable,
wholly or in part, by any of these causes to carry out its obligations under
this Contract, such Party shall give notice and details of Force Majeure in
16
writing to the other Party as promptly as possible after occurrence. In such
cases, the obligations of the Party giving notice shall be suspended during the
continuance of any inability so caused except that Operator shall be obliged to
pay to Contractor the Force Majeure Rate provided for in Paragraph 7.6.
13.4 Right to Audit
For a period of three years from termination of the Contract, Contractor shall
keep proper books, records and accounts of operation hereunder and shall permit
Operator at all reasonable times to inspect the portions thereof related to any
variation of the rates hereunder and charges for reimbursable items.
13.5 Compliance with Laws
Each Party hereto agrees that all conventions, treaties, laws, statutes, rules,
regulations and ordinances of any foreign, federal, state or local government or
quasi-governmental authority which are now or may become applicable to that
Party's operations covered by or arising out of the performance of this Contract
will apply. In the event any provision of this Contract is inconsistent with or
contrary to any applicable treaty law, rule, regulation or ordinance, said
provision shall be modified to the extent required to comply with said treaty
law, rule, regulation or ordinance upon mutual signing of the Parties, and as so
modified said provision and this Contract shall continue is full force and
effect. If any act or omission by Contractor in response to Operator's explicit
instruction violates such law, Operator shall indemnify Contractor for any
consequences thereof. In no event however, will either Contractor or Operator be
requested or required to violate any treaty law, rule, regulation or ordinance
of their respective countries of incorporation or organisation.
13.6 Waivers
It is fully understood and agreed that none of the requirements of this Contract
shall be considered as waived by either Party unless the same is done by
writing, and then only by the persons executing this Contract, or other duly
authorised agent or representative of the Party.
13.7 Entire Agreement
This Contract supersedes and replaces any oral or written communications
heretofore made between the Parties relating to the subject matter hereof.
13.8 Inurement
This Contract shall inure to the benefit of and be binding upon the successors
and assignees of the Parties.
13.9 Resolution of the Disputes
Any dispute, controversy or claim arising out of or in relation to or in
connection with this Contract, including, without limitation, any dispute as to
the construction, interpretation, enforceability, validity or breach of this
Contract shall be executed and finally settled by arbitration, and any Party
must submit such a dispute, controversy, or claim to arbitration.
Any single arbitrator shall be appointed by unanimous consent of the Parties, if
the Parties, however cannot reach an agreement on an arbitrator within thirty
(30) days of the submission of a Notice of Arbitration, the appointing authority
17
shall be the International Chamber of Commerce, London, the United Kingdom,
which shall appoint an independent arbitrator who does not have any financial
interest in the dispute, controversy or claim. Unless otherwise expressly agreed
in writing by the Parties to the arbitration proceedings:
(a) the arbitration proceedings shall be held in London, the United Kingdom;
(b) the arbitrator shall be and remain all times wholly and impartial; and
(c) the arbitration proceedings shall be conducted in accordance with the
International Chamber of Commerce procedural rules then in effect.
(d) Any procedural issues not determined under the arbitral rules selected
pursuant to this Contract shall be determined by the laws of England, other
than those laws which would refer the matter to another jurisdiction.
(e) Each Party shall be responsible for its own costs of the arbitration
proceedings (including attorney fees and costs).
(f) Judgement upon the award rendered by the arbitrator may be entered in any
court having jurisdiction hereof.
13.10 Labor Practices/Health and Safety Guidelines
Contractor shall not take any actions to prevent its employees from lawfully
exercising their right of association and their right to organize and bargain
collectively. Contractor shall not interfere with or coerce any of its employees
on the basis of trade union activities or membership. Contractor shall not take
any action on the basis of such activities or membership which may result in the
termination, suspension, demotion, or transfer of said employee. Contractor
shall perform all Work in accordance with occupational health and safety
standards that meet or exceed the World Bank Environment, Health and Safety
Guidelines for Onshore Oil and Gas Development, dated May 12, 1994 ("World Bank
Guidelines"). Contractor shall allow its employees to avoid or remove themselves
from dangerous work situations without jeopardy to continued employment.
Contractor shall observe applicable laws relating to a minimum age for
employment of children, acceptable conditions of work with respect to minimum
wages, hours of work, and occupational health and safety, and not to use forced
labor.
13.11 Environmental Compliance
Contractor represents and warrants that the Work shall be performed in
compliance, in all material respects, with the more stringent of the regulations
of the Republic of Kazakhstan or the World Bank Guidelines. In addition,
Contractor shall:
(a) deliver to Operator, within forty five (45) days following the end of any
well drilled hereunder, reports summarizing the environmental performance of all
Work pertaining to such well. Such reports shall provide Operator with
sufficient information to evaluate the performance of such Work with respect to
environmental protection and shall include summaries of the following:
18
(i) the result of environmental monitoring or sampling activity,
(ii) accidents impacting the environment or resulting in the loss of life, and
(iii) environmental deficiencies identified by the local environmental
regulatory authorities and any remedial actions taken;
(b) comply and cause all subcontractors and other authorized persons performing
Work or having access to the drill site to comply with and implement, in all
material respects, the wellfield practices and mitigation measures specified in
the "Environmental Impact Assessment," dated October 30, 1995, which will be
provided by Operator to the Contractor; and
(c) submit to Operator any material environmental reports or documents
concerning the Work that are prepared under the Contractor's direction. The
environmental reports submitted to Operator under this requirement shall
include, but shall not be limited to the following:
(i) results of any environmental audits,
(ii) a final version of the emergency response/spill contingency plans, and
(iii) any supplemental environmental studies completed in order to satisfy the
regulatory requirements of the Republic of Kazakhstan.
IN WITNESS THEREOF THE PARTIES HAVE EXECUTED THIS CONTRACT ON THE DAY AND YEAR
FIRST ABOVE WRITTEN.
OPERATOR:
CLOSED TYPE JSC KARAKUDUKMUNAY
WITNESS:
/s/ Richard J. Moore
---------------------------------------
BY: /s/ Nikolai D. Klinchev
---------------------------------------
TITLE: General Director
19
CONTRACTOR:
DRILLING SERVICE COMPANY "KAZAKHOIL DRILLING" LTD.
WITNESS:
- -----------------------------------------
BY: Amangeldy Tlegenov
-----------------------------------------
TITLE:
20
APPENDIX A
Para Nos.:
1.1(f) Operating Area: Mangistau Region, Republic of Kazakhstan
1.1(g) Operating Base: Mangistau Region, Republic of Kazakhstan
1.7 Governing Law: The Laws of England.
2.2 Duration: Two (2) years from Commencement Date under this Contract.
2.3(a) Termination: Two (2) years from Commencement Date under this Contract or
on completion of any well in progress on that date.
2.3(b) Demobilization Location: Operator's last well location in the Operating
Area.
2.4 Option Term: Well-by-well or yearly basis, at the agreement of the
Operator and the Contractor.
Renewal Notice: Ninety (90) days before termination of the initial term
Deadline for Mutual Agreement: Forty Five (45) days before termination of
initial term
5.3 Maximum Well Depth: 3,200 meters with 41/2 inch drill pipe; provided,
however, deeper wells can be drilled using 3 1/2 inch drill pipe.
6.1 Handling Charge: Seven and a half (7.5%) Percent, payable with respect
to equipment only
7.2(a) Mobilization Fee: $ 200,000
7.2(b) Demobilization Fee: $ 250,000
7.3 Operating Rate: $ 12,100 per day
7.4 Standby Rates With Crews: $ 12,100 per day
7.5 Repair Rate: $ 12,100 per day, payable for the first 24 hrs, only
in any month in which the Drilling Rig is being repaired
7.6 Force Majeure Rate: $ 9,000 per day
7.7 Moving Lump Sum Amount $ 40,000
7.8 Standby Rates Without Crews: $ 5,000 per day up to 60 days
$ 7,500 per day from 60 to 120 days.
$ 9,500 per day from and after 121 days
A-1
7.9 Fishing Tools Daily Rate: Standby Rate $100 per day; Operating Rate
$250 per day
Other tools and equipment including but not limited to Spider, Elevators, spare
slips and ECCEL Tong Daily Rate according to the list agreed upon by the Parties
8.2 Interest Rate on Late Payments LIBOR plus 2%.
8.3 Address for Payment Account No. 467677
RNN 151000018644
MFO 191201601
Corresponding account 600641101
Code 600164601
Narodny Bank, Atyrau
12.1 Address for Notices:
Operator: JSC KARAKUDUKMUNAY Microdistrict
3 Building 82 Aktau, Republic of Kazakhstan
Contractor: Drilling Service Company "Kazakhoil Drilling" Ltd.,
466412, Atyrau, Birlik village
13.5 Country of Legal Jurisdiction: England
13.10 Value of Contractor's Unit and equipment: U.S.$ 5,500,000
A-2
APPENDIX B
DRILLING UNIT AND EQUIPMENT TO BE PROVIDED BY CONTRACTOR
1. GENERAL
1.1. DRAWWORKS
Make KREMCO
Nominal Rating 900 hp
Depth rating 10,500' (4 1/2 D.P.)
Drilling Line 1-1/8"
Sandline NIL
Drive (2) CATERPILLAR 3408
Catheads VARCO
Auxiliary Brake DRECO SR 23
Brake Cooling System Closed loop with antifreeze fluid
Crown Saver Yes
Automatic Driller NIL
1.2. ENGINE GENERATOR
Quantity 2
Make CATERPILLAR
Model 3412
Horsepower Rating 950 hp
Speed 1,500 rpm
B-1
1.3. AC GENERATOR
Quantity 2
Make CATERPILLAR (KATO)
Model SR-4
Amperes 1162 A
Voltage 600 V
KW, per unit 350 kW
1.4. MAST
Make KREMCO
Model K-1 18-370
Height 118 ft
Base Height 10 ft
Rated Hook Load 370,000 Ibs on 10 lines
Casing Stabbing Board Yes
Wireline Anchor DRECO D45
Racking Boards Height 54'
1.5. CROWNBLOCK
Make KREMCO
Model 5407-1034
Capacity 370,000 Ibs on 10 lines
No. Of Sheaves x Dia. 5x30" - 1 x36" - 1 x20"
Grooved for Line 1-1/8"
B-2
1.6. SUBSTRUCTURE
Make KREMCO
Model 16-370
Nominal Height 16'
Casing Capacity 350,000 lbs.
Setback Capacity 350,000 IBS
1.7. HOOK BLOCKS
Make NATIONAL OILWELL
Model 540-G-250-8C
Load Rating 250 ton
No. Of Sheaves x Dia. 5x40"
Grooved for Line 1-1/8"
1.8. CARIER
Make KREMCO
Model K-1000
Drive (2) CATERPILLAR 3408 diesel engine
Transmission (2) ALLISON CLT -5961
Leveling Jacks (2) Hydraulic
1.9. ROTARY TABLE
Make NATIONAL OILWELL
Model C-275
B-3
Static Load rating 500 ton
Table opening 27-1/2"
Max. Rec. Table Speed 150 RPM
1.10. KELLY BUSHING
Make VARCO
Model square
Size 4 1 /4"
Kelly 4 1 /4"
1.11. SWIVEL
Make NATIONAL
Model P-200
Comparative Bead Load rating 200 ton
Maximum W. P. 5,000 psi
1.12. KELLY SPINNER
Make WEATHERFORD
Model KS 1500 AB
Continuous Torque 825 ft - Ibs
Speed 160 rpm
1.13. PIPE SPINNER
Make WEATHERFORD
Model 550A (pneumatic)
Max. Torque 600 - 1250 ft - Ibs
B-4
1.14. WATER TANK
Quantity 1
Capacity 300 bbl
Pumps (2) MISSION MAGNUM 3x2x13 (13")
1.15. FUEL TANK
Quantity 1
Capacity 12,000 gal
Pumps (2) HALCO
1.16. AIR COMPRESSORS
Quantity 2
Make INERSOLL - RAND
Model 300/30T
Working Pressure 120 PSI
Powered by 50 hp electronic motor
1.17. AIR COMPRESSOR (COLD START)
Quantity 1
Make INERSOLL - RAND
Model 7100/30T
Working Pressure 120 PSI
Powered by LISTER - PETTER diesel motor
B-5
2. MUD SYSTEM
2.1. SHALE SHAKER TANK
Dimensions LxWxH 36'x9'x6.6'
Capacity 315 bbl
Agitators (2) BRANDT MA-15
Driven by 15 hp electric motor
2.2 INTERMEDIATE TANK
Dimensions LxWxH 36'x9'x6.6'
Capacity 315 bbl
Agitators (3) BRANDT MA-15
Driven by 15 hp electric motor
2.3. SUCTION TANK
Dimensions LxWxH 36'x9'x6.6'
Capacity 315 bbl
Agitators (2) BRANDT MA-15
Driven by 15 hp electric motor
B-6
2.4. TRIP TANK
Dimensions LxWxH 16'x8'x5'
Capacity 120 bbl
Pump (1) MISSION MAGNUM 3x2x13
2.5. SHALE SHAKER
Quantity 1
Make BRANDT
Model DUAL TANDEM
Screens set
2.6. DESANDER
Quantity 1
Make BRANDT
Model SRC-2
Cones 2x12"
2.7. MUD CLEANER
Quantity 1
Make BRANDT
Model MC-12
Cones 12X4"
2.8. DEGASSER
Make BRANDT
Model DG-10
B-7
2.9. MUD PUMPS
Quantity 2
Make NATIONAL OILWELL
Model A-850 PT
Nominal Rating 850 hp
Type Triplex
Liner Size 5" - 7 3/4"
Stroke 9" - 150 SPM max
Pulsation Dampener HYDRIL K20-5000
Working Pressure 5,000 psi
Relief Valve OTECO 2"
Pumps Supercharge (2) MISSION MAGNUM 6x5x14 (11-1/2")
Pump Drive (2) CATERPILLAR 3512 diesel engine
2.10. MUD LINES HIGH PRESSURE
Discharge
Vibrator Hose TAURUS 4"
Kelly Hose 3"
Standpipe Manifold (1)
Working Pressure 5,000
Test Pressure 7,500
B-8
2.11. MUD MIX SKID
Location
Mixers 2
Pumps (2) MISSION MAGNUM 6x5x14
2.12. TUBULARS
4 1/2" drill string 450 JTS (350 jts G + 100 jts E)
5" HWDP 8 JTS
9 1/2" D.C. 6 ea.
8" D.C. 12 ea.
6 1/2" D.C. 40 ea.
2.13. CROSS OVERS
4" I F x box 4 1 /2" I F 5
6 5/8" Reg x box 4" I F 3
7 5/8" Reg x box 6 5/8" Reg 3
7 5/8" Reg x box 7 5/8" Reg 3
6 5/8" Reg x box 6 5/8" Reg 3
4 1 /2" Reg x box 4" I F 3
4 1/2" IFxbox4"IF 2
6 5/8" Reg x box 4 1 /2" I F 2
4"IFxbox4"IF 2
B-9
2.14. ELEVATORS
4 1 /2' D P. 3 sets
6 1 /2" DC 3 sets
8" DC 2 sets
9 1 /2" DC 2 sets
2.15. SLIPS
4 1/2' DP 3 sets
6 1 /2" DC 3 sets
8" DC 2 sets
9 1 /2" DC 2 sets
2.16. FISHING TOOLS
Complimentary of over shots according to specification 2.20.
INSIDE BOP
Full opening x 4 1/2" DP 2
Float Type x 4 1/2" DP 2
2.17. BOP EQUIPMENT
Annular preventer 13 5/8 x 5000 PSI
Double RAM (Pipe & Blind) 13 5/8 x 5000 PSI
Mud Cross 13 5/8 x 5000 PSI
Choke Line w/HCR valve
B-10
Manual valve F/Choke Line
Manual valve F/Kill Line
Closing Unit (6 station)
Choke manifold
2.19.
Company Man Office - 40' 1
Toolpusher Office - 40' 1
Shift Changing Room - 20' 1
B-11
2.20 LIST OF FISHING TOOLS
- --------------------------------------------------------------------------------
No FISHING TOOLS
- --------------------------------------------------------------------------------
1 BOWEN Overshot 7-3/4" OD, w/c 4-1/2" IF 1 set
With:
6-3/8" OD Spiral Grapples 1 pc
6-3/8" OD Type A Packers 1 pc
6-5/8" OD Spiral Grapples 1 pc
6-5/8" OD Type A Packers 1 pc
6-1/2" OD Spiral Grapples 1 pc
6-1/2" OD Type A Packers 1 pc
6-1/4" OD Spiral Grapples 1 pc
6-1/4" OD Type A Packers 1 pc
Spiral Grapple Controls 1 pc
5" OD Basket Grapples 1 pc
5" OD Mill Control Panel 1 pc
5" Inner Seal 1 pc
5" Outer Seal 1 pc
4-1/2" OD Basket Grapples 1 pc
4-1/2" OD Mill Control Panel 1 pc
4-1/2" Inner Seal 1 pc
4-1/2" Outer Seal 1 pc
2 BOWEN Oil Jar,,Z" 6-1/4" OD, w/c 4-1/2 IF 1 pc
3 BOWEN Intensifire 6-1/4" OD, w/c 4-1/2 IF 1 pc
4 BOWEN Fishing Bumper Sub 6-1/4" OD, w/c 4-1/2 IF 1 pc
5 Junk Basket for 12-1/4" well, w/c 6-5/8" Reg 1 pc
6 Junk Basket for 7-7/8" well, w/c 4-1/2" IF 1 pc
7 Taper Tap 3" - 4-3/4" OD, w/c 6-5/8" Reg 1 pc
8 Taper Tap 3-1/4" - 4-3/4" OD w/c 4-1/2" IF 1 pc
9 Taper Tap 2-3/16" - 3-11/16" OD, w/c 3-1/2" IF 1 pc
10 Junk Mill for 7-7/8" well, w/c 4-1/2" Reg 1 pc
11 Junk Mill for 12-1/4" well, w/c 6-5/8" Reg 1 pc
12 Junk Mill for 17-1/2" well, w/c 6-5/8" Reg 1 pc
- --------------------------------------------------------------------------------
B-12
2.21 FORKLIFT
Made CATERPILLAR
Capacity 20 000 Ibs
B-13
APPENDIX C
PERSONNEL TO BE PROVIDED BY CONTRACTOR
POSITION NATIONALITY ON/OFF TOTAL ROTATION
Rig or office Manager Ex-Pat 1/1 2 35/35
Tool pusher Ex-Pat 1/1 2 35/35
Tower pusher Ex-Pat 1/1 2 35/35
Driller Ex-Pat 2/2 4 35/35
Mechanic Ex-Pat 1/1 2 35/35
Electrician Ex-Pat 1/1 2 35/35
Office Personnel Kazakstan as necessary
- ----------------------------------------------------- -------------- -----------
Position Nationality On/Off Total Rotation
- --------------------------------------------------------------------------------
KO-D Representative Kazakstan 1/1 2 16/16
- --------------------------------------------------------------------------------
Assistant Driller Kazakstan 4/4 8 16/16
- --------------------------------------------------------------------------------
Derrick Man Kazakstan 2/2 4 16/16
- --------------------------------------------------------------------------------
Floor Man Kazakstan 2/2 4 16/16
- --------------------------------------------------------------------------------
Roustabout Kazakstan 4/4 8 16/16
- --------------------------------------------------------------------------------
Forklift Operator Kazakstan 1/1 2 16/16
- --------------------------------------------------------------------------------
Mechanic Kazakstan 1/1 2 16/16
- --------------------------------------------------------------------------------
Motor Man Kazakstan 2/2 4 16/16
- --------------------------------------------------------------------------------
Electrician Kazakstan 1/1 2 16/16
- --------------------------------------------------------------------------------
Welder Kazakstan 1/1 2 16/16
- --------------------------------------------------------------------------------
TOTAL 19/19 38
- -------------------------------------------------------------------------------
Please note: Job descriptions are for guidance. All rig workers will be deployed
to assist in rig operations as necessary and as designated by the Drilling
Manager of KKM.
C-1
APPENDIX D
EQUIPMENT, CONSUMABLES, SERVICES AND PERSONNEL
FURNISHED BY CONTRACTOR OR OPERATOR
The equipment, machinery, tools, materials supplies, instruments, services and
labor listed as follows and designated with the following numbers, denote which
party to contract shall provide such items on location and at their expense.
Category
Provided by CONTRACTOR; paid for by CONTRACTOR 1
Provided by CONTRACTOR; paid for by OPERATOR plus handling charge 2
(Handling charge is schedule in Appendix A
Provided by CONTRACTOR; paid for by OPERATOR without handling charge 3
Provided by OPERATOR paid for by OPERATOR 4
Items provided by Contractor at the expense of Operator shall be reimbursed at
landed costs on location, upon receipt at Contractor's warehouse plus the
handling charge where applicable. The provision of such items are subject to the
written agreement of the Operator based upon quotations supplied by the
Contractor.
- ---------- ------------------------------------------------------------------------------------------ ---------------
Description Supplied by
Item
- ---------- ------------------------------------------------------------------------------------------ ---------------
1 Contractor's Equipment as set forth in Appendix B 1
- ---------- ------------------------------------------------------------------------------------------ ---------------
2 Except as otherwise specified, maintenance and repair, including repair and including 1
repair parts, of Contractor's Equipment
- ---------- ------------------------------------------------------------------------------------------ ---------------
3 Blow-out preventer spare parts and consumable rubber products 3*
- ---------- ------------------------------------------------------------------------------------------ ---------------
4 Choke manifold spare parts and consumable rubber products 3*
- ---------- ------------------------------------------------------------------------------------------ ---------------
5 Shale shaker screens 3*
- ---------- ------------------------------------------------------------------------------------------ ---------------
6 Fishing tools and replacements 3*
- ---------- ------------------------------------------------------------------------------------------ ---------------
7 Desander consumables 3*
- ---------- ------------------------------------------------------------------------------------------ ---------------
8 Desilter consumables 3*
- ---------- ------------------------------------------------------------------------------------------ ---------------
9 Required licenses, permits and clearances to enter upon and depart from Area of 4
Operations.
- ---------- ------------------------------------------------------------------------------------------ ---------------
10 Fuel for Contractor's and Operator's equipment 4
- ---------- ------------------------------------------------------------------------------------------ ---------------
11a Grease, cleaning solvents, and hydraulic fluid for Contractor's equipment 1
- ---------- ------------------------------------------------------------------------------------------ ---------------
11b Lubricants and Oil. 4
- ---------- ------------------------------------------------------------------------------------------ ---------------
12 Casing & tubing thread lubricants, oils, greases, lubricants and hydraulic fluid for 4
Operator's equipment
- ---------- ------------------------------------------------------------------------------------------ ---------------
13 Drill pipe thread dope BOP control fluid 1
- ---------- ------------------------------------------------------------------------------------------ ---------------
14 Rubber drill pipe casing protectors, if required by the Operator 4
- ---------- ------------------------------------------------------------------------------------------ ---------------
15 Drill pipe wipers 1
- ---------- ------------------------------------------------------------------------------------------ ---------------
D-1
16 Drilling bits 4
- ---------- ------------------------------------------------------------------------------------------ ---------------
17 Reamer and H.O. Cutter and Stabilizer blades, drilling safety joints, drilling jars, 4
including replacement parts
- ---------- ------------------------------------------------------------------------------------------ ---------------
18 Core heads, core barrels, handling tools and coring services 4
- ---------- ------------------------------------------------------------------------------------------ ---------------
19 Swab rubbers and swab tubing 4
- ---------- ------------------------------------------------------------------------------------------ ---------------
20 Cement and additives 4
- ---------- ------------------------------------------------------------------------------------------ ---------------
21 Mud products 4
- ---------- ------------------------------------------------------------------------------------------ ---------------
22 Chemicals 4
- ---------- ------------------------------------------------------------------------------------------ ---------------
23 Storage house items 20,21 and 22 4
- ---------- ------------------------------------------------------------------------------------------ ---------------
24 a Additional equipment like casing, handling equipment for 2-7/8 inch
tubing, cementing 2/4** heads for casing program , power tong
- ---------- ------------------------------------------------------------------------------------------ ---------------
24 b Welding consumables as used on Contractor's equipment 1
- ---------- ------------------------------------------------------------------------------------------ ---------------
25 Casing, liner, accessories and casing running services 4
- ---------- ------------------------------------------------------------------------------------------ ---------------
26 Tubing and accessories 4
- ---------- ------------------------------------------------------------------------------------------ ---------------
27 Drinking water. 4
- ---------- ------------------------------------------------------------------------------------------ ---------------
28 Drill the water well for industrial water and water lines including required permits. 4
- ---------- ------------------------------------------------------------------------------------------ ---------------
29 Maintenance of water well and pump, if required 4
- ---------- ------------------------------------------------------------------------------------------ ---------------
30 Other material specifically required by th Operator 4
- ---------- ------------------------------------------------------------------------------------------ ---------------
31 Routine loading/unloading of Contractor's equipment and consumables at Worksite. 4
- ---------- ------------------------------------------------------------------------------------------ ---------------
32 Transport of Operator's equipment and consumables within the Karakuduk Field... 4
- ---------- ------------------------------------------------------------------------------------------ ---------------
33 Transport of Contractor's equipment and consumables from suppliers to Aktau 3
- ---------- ------------------------------------------------------------------------------------------ ---------------
34 Transportation from Contractor's Warehouse to Worksite 3
- ---------- ------------------------------------------------------------------------------------------ ---------------
35 Transport of Operator's personnel and personnel of Operator's other Contractors between 4
Aktau and well location
- ---------- ------------------------------------------------------------------------------------------ ---------------
36 Transport of Contractor's personnel, equipment, spare parts, and
consumables between 1 point of origin and Aktau, after initial
mobilization period
- ---------- ------------------------------------------------------------------------------------------ ---------------
37 Transportation for all rig moves within the Operating Area by Contractor. 1
- ---------- ------------------------------------------------------------------------------------------ ---------------
38 Operator's office at the location. 4
- ---------- ------------------------------------------------------------------------------------------ ---------------
39 Contractor's operation base in the Operating Area 4
- ---------- ------------------------------------------------------------------------------------------ ---------------
40 Surveying service to mark drilling location 4
- ---------- ------------------------------------------------------------------------------------------ ---------------
41 Leveling, earthwork, foundations for camp and drilling rigs. 4
- ---------- ------------------------------------------------------------------------------------------ ---------------
42 Construct and maintain access roads and locations. 4
- ---------- ------------------------------------------------------------------------------------------ ---------------
43 Restore road and location 4
- ---------- ------------------------------------------------------------------------------------------ ---------------
44 Dispose of drilling fluid, cuttings, refill and reserve pit. 4
- --------- ------------------------------------------------------------------------------------------ ---------------
45 Site preparation 4
- ---------- ------------------------------------------------------------------------------------------ ---------------
46 Contractors radio communication services and telephone at Operator's Operation Base and 4
drilling unit.
- ---------- ------------------------------------------------------------------------------------------ ---------------
47 Permits for Contractor's radio communication services and telephone at Operation Base 4
and drilling unit.
- ---------- ------------------------------------------------------------------------------------------ ---------------
48 Wellhead installation services 1
- ---------- ------------------------------------------------------------------------------------------ ---------------
49 Welding 1
- ---------- ------------------------------------------------------------------------------------------ ---------------
50 Welding of Casing Head 2,4
- ---------- ------------------------------------------------------------------------------------------ ---------------
51 Contractor's personnel, as set forth in Schedule C, including
replacement, subsistence, 1 insurance, wages, benefits and all other
costs included taxes related hereto.
- ---------- ------------------------------------------------------------------------------------------ ---------------
D-2
- ---------- ------------------------------------------------------------------------------------------ ---------------
52 Extra personnel in excess of the complement of personnel set forth in Schedule C when 3
requested in writing by Operator.
- ---------- ------------------------------------------------------------------------------------------ ---------------
53 Overtime, beyond normal work schedule for Contractor's personnel when requested in 3
writing by Operator
- ---------- ------------------------------------------------------------------------------------------ ---------------
54 Food and Lodging for the Contractor's personnel included as part of the day rate 4
- ---------- ------------------------------------------------------------------------------------------ ---------------
55 Handling of all items on the Worksite limited to the equipment
Contractor has available 1,4 at the well location.
- ---------- ------------------------------------------------------------------------------------------ ---------------
56 Electrical supply for Contractor's equipment at the well location. 1
- ---------- ------------------------------------------------------------------------------------------ ---------------
57 Initial inspection of Contractor's drill pipe, drill collars and other in -hole 1
equipment according to API-IADCRP-7G standards
- ---------- ------------------------------------------------------------------------------------------ ---------------
58 Inspection of Contractor's drill pipe, drill collars and other in-hole equipment 3
according to API-IADCRP-7G standards, after operation commence under
this Contract at reasonable intervals requested by Operator.
- ---------- ------------------------------------------------------------------------------------------ ---------------
59 Inclination surveys equipment and services during vertical drilling (TOTCO). 1
- ---------- ------------------------------------------------------------------------------------------ ---------------
60 Mud logging unit with related equipment and services 4
- ---------- ------------------------------------------------------------------------------------------ ---------------
61 Wireline logging unit with related equipment services. 4
- ---------- ------------------------------------------------------------------------------------------ ---------------
62 Drilling jars Supply and services 4
- ---------- ------------------------------------------------------------------------------------------ ---------------
63 Drill stem test equipment and services. 4
- ---------- ------------------------------------------------------------------------------------------ ---------------
64 Wireline formation testing and wall sampling equipment and services 4
- ---------- ------------------------------------------------------------------------------------------ ---------------
65 Cementing unit and services 4
- ---------- ------------------------------------------------------------------------------------------ ---------------
66 Geological Laboratory with related equipment and services 4
- ---------- ------------------------------------------------------------------------------------------ ---------------
67 Mud laboratory unit with related equipment and services 4
- --------- ------------------------------------------------------------------------------------------ ---------------
68 Distribution networks for above units, limited to Contractor's items as provided in 4
Contractor's Equipment Inventory:
- Potable water (all units)
- Industrial water (where applicable)
- Fuel (all units)
- Intercoms (all units)
- mud (unit 1)
- ---------- ------------------------------------------------------------------------------------------ ---------------
69 Trucking and transportation of equipment from Operator's storage yard to the Operation 4
Area
- ---------- ------------------------------------------------------------------------------------------ ---------------
70 Drill pad or well site island 4
- ---------- ------------------------------------------------------------------------------------------ ---------------
71 Meals and accommodations for Contractor's personnel. 4
- ---------- ------------------------------------------------------------------------------------------ ---------------
72 On site Doctor. 4
- ---------- ------------------------------------------------------------------------------------------ ---------------
73 Communication facilities in the Field 4
- ---------- ------------------------------------------------------------------------------------------ ---------------
74 Diesel fuel for rig and moving equipment 4
- ---------- ------------------------------------------------------------------------------------------ ---------------
75 Drill water. 4
- ---------- ------------------------------------------------------------------------------------------ ---------------
76 Left blank deliberately.
D-3
- ---------- ------------------------------------------------------------------------------------------ ---------------
77 Temporary accommodation in Aktau, for rig crew due to flight or any other operational 4
necessities.
- ---------- ------------------------------------------------------------------------------------------ ---------------
78 Equipment inspections requested by Operator. 4
- ---------- ------------------------------------------------------------------------------------------ ---------------
79 Covered warehouse for Contractor's spare parts. 4
- ---------- ------------------------------------------------------------------------------------------ ---------------
80 All export documentation for rig at contract termination. 4
- ---------- ------------------------------------------------------------------------------------------ ---------------
81 Rotation cost for all expatriate personnel to Aktau airport. 1
- ---------- ------------------------------------------------------------------------------------------ ---------------
82 All payroll taxes benefits and personnel insurance including Medivac for Contractor's 1
personnel in Kazakhstan.
- ---------- ------------------------------------------------------------------------------------------ ---------------
83 Rig supply and repairs 1
- ---------- ------------------------------------------------------------------------------------------ ---------------
84 Air freight on parts and supplies to Aktau airport or port. 1
- ---------- ------------------------------------------------------------------------------------------ ---------------
85 Rotation cost for all Kazakh personnel 4
- ---------- ------------------------------------------------------------------------------------------ ---------------
86 Rig insurance. 1
- ---------- ------------------------------------------------------------------------------------------ ---------------
87 One 40-ton crane and one 16-ton crane provided by Operator, additional rig move 4
equipment
- ---------- ------------------------------------------------------------------------------------------ ---------------
88 Lubricants for rig. 4
- ---------- ------------------------------------------------------------------------------------------ ---------------
89 Lubricants for Contractor's trucks. 1
- ---------- ------------------------------------------------------------------------------------------ ---------------
90 All communication and administration expenses in Contractor's office 1
- ---------- ------------------------------------------------------------------------------------------ ---------------
91 All Contractor's personnel travelling/rotation expenses 1
- ---------- ------------------------------------------------------------------------------------------ ---------------
* After initial inspection by Operator
** Prices shall be agreed upon by the Parties
D-4
APPENDIX E
CONTRACTOR'S INSURANCE REQUIREMENTS
1. Worker's Compensation and Employer's Liability Insurance
Worker's compensation and labor liability insurance covering all Contractor's
employees in accordance with statutory requirements of the country in which the
work is to be performed and the country of hire. The Employer's liability
insurance shall have a limit of $1,000,000 USD per occurrence.
2. Comprehensive General Liability
Comprehensive General Liability insurance with contractual liability, products
and completed operations and broad form property damage coverage including,
providing for a combination single limit of $1,000,000 USD for personal injury,
death or property damage resulting from each occurrence and covering all of
Contractor's operations under this Contract. The aforesaid insurance shall
cover, but not be limited to loss or damage to the Contractor's Equipment and
Personnel.
3. Umbrella Liability Insurance
Umbrella Liability insurance coverage in excess of the primary coverage with the
limit of no less than five million US dollars per occurrence including all areas
involved in operations under this contract.
4. War, Expropriation, Nationalization, and Confiscation Insurance
5. Contractor shall arrange for, or cause to be provided, insurance throughout
the term of this Contract, covering the risks of war, expropriation,
nationalization, and confiscation, if the exportation of the Drilling Unit is
effectively prohibited from leaving Kazakhstan as the result of an action by the
government of the Republic of Kazakhstan. Such insurance shall have limits of
$5,500,000 and shall name Operator and others as required by written contract,
as additional assured. Further, such insurance shall provide a waiver of
subrogation in favor of operator and others as required by written contract.
E-2
APPENDIX F
PERSONNEL CREW RATES
Position Day rate ($) Overtime rate ($)
- ------------------------ ------------------------- -----------------------------
Toolpusher 300 37
Towerpusher 280 35
Driller 250 30
Mechanic 250 30
Electrician 250 30
F-1