EXHIBIT 10.60
1
AGREEMENT No. DIJ-1207
SUPPLIER : ARGOSY ENERGY INTERNATIONAL and NEO
ENERGY, INC.
SUBJECT MATTER: SALE AND PURCHASE OF XXXXXXX CRUDE
TERM : FEBRUARY 1, 1997 TO DECEMBER 31, 1997
AMOUNT : INDEFINITE
The Parties hereto, on one hand EMPRESA COLOMBIANA DE PETROLEOS
"ECOPETROL", hereinafter referred to as ECOPETROL, an industrial an commercial
State-owned corporation, duly authorized under the Act 165, 1948, and governed
by its bay-laws approved by the Decree 1209/94, with headquarters in the city of
Santafe de Bogota, D.C., duly represented by XXXX XXXXXXX XXXXX G., of age,
bearing the Identity Card No. 19.125.070 issued in Bogota, domiciled in Bogota,
who herein states and declares: a. That he acts in his capacity as Vice
President and duly vested with legal powers and internal Ecopetrol standards.-
b. That the execution of this Agreement has been authorized as stated in the
Memorandum CGI-0217; an on the other hand, ARGOSY ENERGY INTERNATIONAL, a
corporation organized and existing under Utah State, United States of America,
domiciled in Salt Lake, Utah State, with branch office in Colombia, incorporated
under the Public Indenture No. 5323, executed in the Notary Seven in Bogota on
October
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25, 1983 and filed with the Chamber of Commerce of Bogota, Registry No.
200848, on November 23, 1983, duly represented by XXXXXXXX XXXXXXXX XXXXXX, of
age, bearing the ID # 5.584.373 from Barrancabermeja, and NEO ENERGY INC., a
corporation organized and existing under Texas State, United States of America,
domiciled in Dallas Tx., which branch office is established in Colombia,
incorporate under hhe Public Indenture No. 6.179 executed in the Notary Four in
Bogota, on October 23, 1986 and filed with the Chamber of Commerce of Bogota,
represented by XXXXX X. XXXXX, of age and bearing the Identity Card No. 126.688
from Bogota; above latter two companies hereinafter referred to as THE VENDOR,
who have entered into this Sale and Purchase Agreement of Xxxxxxx Crude,
governed by the clauses below: CLAUSE 1.- SUBJECT MATER AND AMOUNT. THE
VENDOR undertakes to sell and delivery ECOPETROL, under the condition hereunder,
crude oil produced under "Xxxxxxx" Joint Venture agreement, corresponding to
VENDOR, in the amount and quality determined pursuant to provision in Clause 2
hereunder, which ECOPETROL undertakes to receive it and pay up. PARAGRAPH 1:
"Xxxxxxx" Joint Venture Agreement was entered into on May 27, 1987, with
effective
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date on July 27, 1987, between and by ECOPETROL and ARGOSY ENERGY INTERNATIONAL
and NEO ENERGY, INC. PARAGRAPH 2: All and any purchase shall be made by
ECOPETROL according to crude purchasing preliminary scheduling agreed upon by
the parties hereto for six (6) month periods, which ECOPETROL may change by
giving written notice to VENDOR no less than thirty (30) days in advance.
PARAGRAPH 3: Crude amounts the VENDOR will sale ECOPETROL shall be invoiced
separately by ARGOSY ENERGY INTERNATIONAL and NEO ENERGY, INC., according to
their participation in the Joint Venture Agreement, as follows: ARGOSY ENERGY
INTERNATIONAL, fifty five percent (55%) and NEO ENERGY, INC. forty five percent
(45%). CLAUSE 2: QUALITY.- Crude Quality subject matter of this Agreement shall
have the following specifications: a) Crude gravidity shall be that with such
crude is obtained through the operations carried out to the production thereof.
b) Water and sediment contents in the crude shall not be higher than 0.5% in
volume and the determination thereof will be made by using the methods ASTM-D95
"water in bearing-oil products and bituminous materials by distillation", last
revision, and ASTM-D473 "sediments in crude and combustoil by
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extraction", last revision, respectively. c) Sulphur contents in crude shall be
that with which such crude is obtained through the operations carried out for
the production thereof; its determination will be made by using the ASTM-D2622
method, last revision "Ray-X sulphur analysis". d) Salt contents shall be > 20
-
lb/1000 crude oil barrels and the determination thereof will be made by the
ASTM-D3230 method, "salts in crude (electrometric method)", last revision.
When any of above parameters is not met, or otherwise the specifications
above are not within the allowable range, ECOPETROL reserves the right to
reject crude oil. And, if ECOPETROL chooses to accept crude with salt
contents higher than the specifications hereto, oil price shall be penalized
according to table below:
SALT CONTENTS PENALIZATION CHARGE ON
lb/1000 BLS. USD/BARREL
20.1 30.0 0.160 VENDOR
30.1 40.0 0.180 VENDOR
40.1 60.0 0.200 VENDOR
60.1 80.0 0.220 VENDOR
80.1 100.0 0.240 VENDOR
It shall be understood that VENDOR shall make its best efforts to deliver crude
oil hereunder, bearing a salt contents lower than twenty (20) lb. per 1000
barrels crude
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oil. e) Any variance related to quality specifications hereinbelow referred to,
acceptable for the parties hereto, should be included in a Record signed by
ECOPETROL and the VENDOR representatives. CLAUSE 3: DELIVERY SITE AND TITLE.-
Crude oil, subject matter of this Agreement shall be delivered by the VENDOR to
ECOPETROL in Xxxxxxx Terminal, where Crude will be subsequently measured and
analyzed, from the standpoint above referred to, carried by ECOPETROL up to
Tumaco Terminal. The title to property and the risk will pass from the VENDOR to
ECOPETROL at the time when crude oil has passed through the outlet flange of the
measuring system located at Xxxxxxx terminal. PARAGRAPH 1: Should Xxxxxxx
Association will construct Xxxxxxx-Xxxxx Pipeline, measurement and transfer of
crude title shall be effective in Orito. Additionally, from such date on, crude
sale and purchase price will be changed, inasmuch as transportation rate from
Xxxxxxx-Xxxxx will be not taken into account, pursuant to Resolution 9035 of
February 18/94 from the Ministry of Mines and Energy. PARAGRAPH 2: Receipt
capacity of Xxxxxxx Crude will be limited to Xxxxxxx-Xxxxx pipeline capacity
existing in this time. CLAUSE 4: TERM.- The initial term of this Agreement shall
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be eleven (11) months from February 1, 1997 up to December 31, 1997 and may be
extended for one (1) year additional periods by written agreement between the
parties hereto, before the expiry date of this Agreement. CLAUSE 5: PRICE.- The
price ECOPETROL will pay the VENDOR for the Crude delivered in Xxxxxxx terminal
shall be defined as follows: Price = base price more or less adjustment for
quality less transportation, less handling and marketing. PARAGRAPH 1: Base
price will the weighted average of export shipments invoiced by ECOPETROL during
each month. PARAGRAPH 2: Adjustment for quality to be applied in this Agreement
will be for API Gravity and sulphur contents which shall be computed on a
monthly basis according to the method described in Exhibit 1 hereto. PARAGRAPH
3: Xxxxxxx-Tumaco carriage cost, as well as the relevant carriage tax shall
adhere the legal provisions then in force and will be subject to any amendment
of such provisions during the Agreement term. In line with provisions in
Resolution 9035 of February 18, 1994 from the Ministry of Mines and Energy,
Xxxxxxx-Tumaco carriage rate as of Dec. 31, 1996 accounts up to 1.2434 USD/Bl;
carriage tax amount shall correspond to two percent (2%) of rate,
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according provision in Sect. 17, Decree 2140/55, adopted as a permanent rule by
the Act. 10/61. Such tax shall be paid pursuant to privisioin in Act 141, 1994,
which as of January 31/97 is 0.0249 USE/Bl. Such rates, will be readjusted on a
yearly basis according to provisions in Resolution 9035 above referred to.
PARAGRAPH 4: Handling and marketing cost will be 0.515 USD/Bl. PARAGRAPH 5: If
during any month or consecutive months there is no crude export, the prior month
price will be applied. Such price will be adjusted the next month according to
new price computed for exports. Xxxxxxx Crude volume received during the
corresponding month will be taken and the adjustment for quality will be
computed by using the average of quotations of basket crude corresponding to the
three months prior to the adjusted month. PARAGRAPH 6. If crude blend Tumaco
cabotages will occur (South Blend) to Cartagena Refinery sale and price
conditions ECOPETROL shall recognize to VENDOR, will the same obtained by the
International Manager Office, for crude blend received by Cartagena Refinery,
plus or minus the adjustment for quality, plus or minus the Xxxxxxx-Tumaco
carriage cost and the relevant tax, less Tumaco-Cartagena carriage (value
8
invoiced by ECOPETROL), less handling and marketing (USD 0.415/Bl). For such
case, ECOPETROL shall adivise the VENDOR the mechanism to be used for price
reckoning agreed on with Cartagena Refinery.
CLAUSE 6: INVOICING AND PAYMENT CONDITIONS. VENDOR shall invoice ECOPETROL at
its office in Bogota, within ten (10) first days of each month, the VENDOR-owned
crude oil delivered to ECOPETROL during the latter month, after deducing the
volume corresponding to royalties, contributions, and participation. Within
seven (7) days of the term above referred to, ECOPETROL shall provide the VENDOR
with the data required by the VENDOR to make the relevant invoicing. Payment
shall be made on a monthly basis thirty (30) days following the date of the
invoice receipt by ECOPETROL, after making the appropriate legal withholding, if
any. Twenty five percent (25%) of the value shall be paid in Colombian currency
and seventy five percent (75%) shall be paid in US Dollars. Invoicing shall be
make upon the basis of net volume, water and sediment free, corrected at 60
degrees F. For Colombian currency portion the relevant market exchange rate
shall be used, as certificated by Bank Superintendency, computed as the
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arithmetic average corresponding to Crude deliveries. PARAGRAPH 1: In the
event of arrears to pay the portion payable in dollars, over invoices not timely
challenged by ECOPETROL, ECOPETROL shall pay VENDOR, as interest payable in USD,
the rate equivalent to "Prime Rate" as stated by Chase Manhattan Bank of New
York, during the days of the effective arrears plus 2.0%. In the event of
arrears to pay the portion payable in Colombian currency, over the respective
amount in Col$, ECOPETROL shall pay the maximum interest, according to a
certificate from Bank Superintendency. Invoices to collect dollars or pesos
interest shall be paid within ten (10) days following the receipt of the invoice
by ECOPETROL. PARAGRAPH: Should ECOPETROL has not USD available and of free
disposal, or otherwise cannot obtain USD from the Colombian Government or the
authorized agencies thereof, to pay oil purchases hereunder, ECOPETROL shall
timely notice the VENDOR, without prejudice of the conditions set forth in
Paragraph 1, hereinabove, and the parties hereto shall have available thirty
(30) calendar days, from ECOPETROL notice, to mutually agree upon to reach to
and agreement. PARAGRAPH 3: ECOPETROL shall have fifteen (15) business days to
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review, amend or otherwise challenge the invoices submitted by the VENDOR. Any
invoice which has not been challenged within such term shall be deemed as
conclusive and correct. Any adjustment or amendment to be made to the invoice
shall become the valid date the effective date of the amendment or adjustment
before ECOPETROL. ECOPETROL shall, within the provided term, advise the VENDOR
about any invoice challenged, for it to be adjusted and amended, clearly
specifying the items to be amended or corrected, and the reasons thereof. CLAUSE
7: INSPECTION AND MEASURING.- For the purposes set forth in Clause 2 hereto,
determination of quality shall be made as per operative procedures mutually set
forth by the parties hereto according to a written Record. Either party may,
from time to time, appoint an independent inspector for him/her to certify both
quantity and quality, make tank appraisal or volume instruments gauging. Cost
shall be fifty-fifty borne by ECOPETROL and the VENDOR. CLAUSE 8: TERMINATION.
VENDOR or ECOPETROL may terminate this Sale and Purchase Agreement by giving
notice with sixty (60) days before expiry term of Xxxxxxx Crude Export
Agreement. If VENDOR makes the decision to directly export its Xxxxxxx Crude, it
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shall advise in writing the PURCHASER, sixty (60) days in advance, and within
such term ECOPETROL and VENDOR may terminate this Agreement. CLAUSE 9:
DESTINATION -ECOPETROL may give crude oil purchased the destination as it deems
suitable to its interests, provided however such destination will be allowed by
the legal in force provisions applicable in that time. CLAUSE 10: ASSIGNMENT.-
Neither Party hereto may assign, sell, or otherwise transfer the entire or any
portion of their rights or obligations hereunder, to a third party, without
prior and written consent of the other party. CLAUSE 11: FORCE MAJEURE.- Neither
ECOPETROL nor the VENDOR will be liable of unfulfillment of all or any of the
obligations hereunder, if such unfulfillment results from any event of force
majeure or casus fortuitus duly documented. Force majeure shall not release
ECOPETROL the obligation to pay the VENDOR those invoices on account of crude
sale already delivered by VENDOR to ECOPETROL, as provided in Clause 7
hereunder. CLAUSE 12: COLOMBIAN LAWS GOVERNING THIS AGREEMENT.- For any and all
purposes of this Agreement, parties hereto assign as domicile the city of
Santafe de Bogota, D.C., Republic of Colombia. This Agreement shall
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be governed by the Colombian laws, and the parties hereto shall subject to
Colombian Courts venue and waive to any diplomatic claim concerning their rights
and obligations hereunder, with the exception of justice denial. For all and any
effects of this Agreement, it shall be understood incorporated in this
Agreement, the provisions of Sect. 25, Act 40/93, and Chap. 2, Title III, Act
104/93, as amended. CLAUSE 13.- NOTICES.- Any notice related to, or connected
with this Agreement shall make reference to this Clause and to the appropriate
Clause. Such notices shall be forwarded via registered mail, telex, or otherwise
delivered in the address below, and shall be considered received in the
appropriate address in the date appearing in the letter receipt or otherwise in
the date the telex was sent:
If to Empresa Colombiana de Petroleos -ECOPETROL:
Xxxxxxx 00 # 00-00, A.A. 59-38, Telex No. 44787
Attn. Vicepresidencia de Comercio Internacional y Gas
If to VENDOR:
ARGOSY ENERGY INTERNATIONAL
Xxxxxxx 00 (Xxxxxxxxx Xxxxx) Xx. 000-00 Piso 4-5
Facsimile: 6195480, Santafe de Bogota, D.C.
Attn. Xxxxxxxx Xxxxxxxx A., President
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and
NEO ENERGY, INC
Xxxxxxx 00 (Xxxxxxxxx Xxxxx) # 000-00 Xxxx 0-0
Xxxxxxx xx Xxxxxx, X.X.
Attn.: Xxxxx X. Xxxxx, Legal Representative.
Any address change shall be advised in writing and in advance to the other
party. CLAUSE 14.- TAX AND EXPENSES.- Any tax and expenses incurred in for this
Agreement execution and extensions/amendments thereof, shall be borne only by
the VENDOR. CLAUSE 15: DISCREPANCIES: A) Should any discrepancy between the
parties hereto will arise related to construction and performance of this
Agreement, which cannot amicably settle, shall be subject to jurisdictional
branch of the public Colombian power. B) Any in fact of technical in nature
discrepancy which may arise between the parties hereto, by reason of
construction or application of this Agreement, which cannot settle by mutual
agreement, shall be subject to an arbitration award appointed as follows: One
arbiter appointed by each party and the third arbiter appointed by mutual
agreement by the two arbiters mutually appointed by the parties hereto. If the
two arbiters do not reach to an agreement to appoint the third arbiter,
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then the third arbiter shall be appointed, at the request of either party, by
the Board of Director of the Sociedad Colombiana de Ingenieros, with
headquarters in Santafe de Bogota, D.C. C) Any accounting in nature discrepancy
which may arise among the parties by reason of construction and performance of
this Agreement, which cannot amicably settled, shall be subject to arbiter
award, who shall be Registered Accountants, as follows: One (1) appointed by
each party, and the third arbiter appointed by the two arbiters appointed by the
parties. In default of agreement between the two arbiters, and at the request of
either party hereto, such third arbiter shall be appointed by the Junta Central
de Contadores de Bogota, and in default thereof, by Sociedad Colombiana de
Ingenieros. D) Both parties hereto declare and accept that arbiters' award shall
have all and any effect of a transaction between the parties hereto, and hence,
such award shall be conclusive. E) If any discrepancy will arise between the
parties hereto, concerning technical, accounting, or legal nature of the
dispute, such discrepancy shall be considered as legal and literal A) of this
Clause shall be applied. The agreement reached by the parties as provided in
this Clause
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shall be understood without prejudice of the special procedures provided in this
Agreement.
IN WITNESS WHEREOF, this Agreement have been signed up this 10th day of
February, 1997, in documentary paper of ECOPETROL, which sheets bear the numbers
0003188 and 0003195 for original and counterparts thereof.
EMPRESA COLOMBIANA DE PETROLEOS -ECOPETROL
/s/ XXXX XXXXXXX XXXXX G.
Vice-President
ARGOSY ENERGY INTERNATIONAL NEO ENERGY, INC
/s/ XXXXXXXX XXXXXXXX XXXXXX /s/ XXXXX X. XXXXX
Legal Representative Legal Representative
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EXHIBIT 1
COMPUTATION ADJUSTMENT FOR QUALITY COMPENSATION
Adjustment procedure for quality shall be applied on a monthly basis for
deliveries of the prior month, according to the method below.
DATA REQUIRED:
. Regression Equation to compute reference prices according to information
example furnished at the end of the current month.
. Volume and quality (API and %wtS) of crude blend shipment(s) taken out
Tumaco Terminal to be exported.
. Volume and quality (API and %wtS) of Xxxxxxx Crude delivered in Xxxxxxx
terminal, as well as the volume of deliveries in Mary, Miraflor, Toroyaco
and Xxxxx xxxxxx.
. Value of base price crude blend delilvered in Tumaco, to be exported.
PROCEDURE
1. To reckon reference prices of crude blend taken away from Tumaco and
Xxxxxxx crude delivered in Xxxxxxx
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Terminal, by using regression equation
according to the relevant quality.
2. With volumes of crude blend taken away in Tumaco and Xxxxxxx crude
delivered in Xxxxxxx terminal, and the reference prices prior calculated,
calculate value in USD of each.
3. Calculate fraction of Xxxxxxx crude in crude blend dividing USD of Xxxxxxx
crude by USD crude blend.
4. Calculate Xxxxxxx crude volume compensated, multiplying crude blend volume
taken away in Tumaco by the fraction value of Xxxxxxx crude.
5. Calculate compensation factor of Xxxxxxx crude dividing compensated value
of Xxxxxxx crude by Xxxxxxx crude volume delivered in Xxxxxxx terminal.
6. Calculate compensation value as follows:
Compensation value=base price*(compensation factor less 1) Base price shall be
export value of crude blend FOB Tumaco. Example: All information given below is
by way of example.
Information required:
1. Regression equation: Price = Bo + B1* SG + B2* %wtS
-----------------------------------------------
B2 = -0.7995 B1 = -3.8822 Bo = 20.1712
-----------------------------------------------
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Where:
Bo = Independent term
B1 = Regression coefficient associated to specific gravidity
SGR = Crude specific gravity
B2 = Regression coefficient associated to percent of sulphur weight
%wtS = Percent of crude sulphur weight
2. Crude blend taken away in Tumaco terminal:
Volume: 400.000 net barrels
Quality: 28.90(degrees)API (0.882 SGR), 0.790 %S
Base price of crude blend delivered in Tumaco: 16.0000 USD/barrel
3. Xxxxxxx Crude delivered in Xxxxxxx terminal:
Volume: 150.000 net barrels
Quality: 26.50(degrees)API (0.896 SGR)
Sulphur contents is derived as the average of sulphur contents in crude of
Xxxx, Xxxxxxxx, Xxxxx, and Toroyaco fields weighted by the volume delivered
per field, as follows:
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-----------------------------------------------------------------
CRUDE % WEIGHT OF S FIELD DELIVERIES
(FIELDS) Barrels
-----------------------------------------------------------------
XXXX 0.579 81.661
-----------------------------------------------------------------
XXXXXXXX 0.644 13.454
-----------------------------------------------------------------
XXXXX 0.481 3.766
-----------------------------------------------------------------
TOROYACO 0.527 60.164
-----------------------------------------------------------------
TOTAL DELIVERIES 159.045
-----------------------------------------------------------------
WEIGHTED SULPHUR CONTENTS 0.550
-----------------------------------------------------------------
Sulphur quality: 0.550 %S
Note: Sulphur contents of the several different fields is that supplied by
Ecopetrol Technical Division, which, for such purposes will hire an
independent inspection firm and the expenses shall be borne fifty-
fifty Ecopetrol and the VENDOR.
CALCULATION METHOD:
1. Replacing in the regression equation the quality of each crude.
Crude blend price = 20.1712 + (-3.8822)* 0.882 +
(-0.7995)* 0.790 = 16.1155 USD/Bl.
Xxxxxxx Crude price = 20.1712 + (-3.8822)* 0.896
+ (-0.7995)* 0.550 = 16.2530 USD/Bl.
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2. Value in USD each crude
Crude blend = Volume* Price = 400.000 Bls* 16.1155 USD/Bl = USD6.446.200.00.
Xxxxxxx Crude = Volume* Price = 150.000 Barrels* 16.2530 USD/Bl =
USD2.437.950,00.
3. Xxxxxxx crude fraction in crude blend.
2.437.950,00/6.446.200,00 = 0.3782
4. Xxxxxxx Crude compensated volume
400.000 Bls* 0.3782 = 151.250 Bls.
5. Xxxxxxx Crude compensation factor
151.280.00 Bls/150.000,00 Bls = 1.0085
6. Compensation value = 16.00 USD/Bl* (1.0085 -1)
= 0.1360 USD/Bl.
INFORMATION ON REGRESSION EQUATION
To calculate regression equation the table below of 14 international crude is
used. Prices of such crude correspond to arithmetic average of the quotation in
the three months prior to quality compensation appraisal. Such information,
both of price and quality, shall be derived from the public monthly report
issued by Xxxxx'x, and named as follows: "PLATTs OIL GRAM PRICE REPORT". Table
of 14 international crude is as follows:
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PRICE
(USD/Bl
--------------------------------------------------------------
CRUDE API SGR %wts MONTH X
YEAR X
--------------------------------------------------------------
FATAH 30.70 0.8724 1.90 21.50
--------------------------------------------------------------
ARAB LIGHT 33.40 0.8581 0.17 22.53
--------------------------------------------------------------
ARAB 28.50 0.8844 2.85 21.55
MEDIUM
--------------------------------------------------------------
ARAB HEAVY 27.40 0.8905 2.80 20.79
--------------------------------------------------------------
XXXXX 38.00 0.8348 0.30 24.04
BLEND
--------------------------------------------------------------
BONNY 35.70 0.8463 0.14 24.01
LIGHT
--------------------------------------------------------------
XXXX XXXXX 29.50 0.8789 0.45 24.45
--------------------------------------------------------------
FORCADOS 31.00 0.8708 0.20 24.06
--------------------------------------------------------------
FLOTA 36.00 0.8448 1.20 23.49
BLEND
--------------------------------------------------------------
ISTHMUS 33.00 0.8602 1.30 23.16
--------------------------------------------------------------
KUWAIT 31.40 0.8686 2.52 21.26
--------------------------------------------------------------
MANDJI 30.50 0.8735 1.10 22.08
--------------------------------------------------------------
MAYA 22.00 0.9218 3.40 19.83
--------------------------------------------------------------
EAST 29.50 0.8789 0.90 22.06
--------------------------------------------------------------
Above international crude basket can be changed by mutual agreement between the
parties hereto.
NOTA 1:
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When crude quality of the basket will vary during any month, the average of the
three quality values corresponding to the same months where quotations shall be
taken.
NOTA 2:
When in some month there is no quotation of any crude of the basket, the average
of the two prior months shall be taken instead of the three quotations taken for
price calculation of that month, and between the parties shall agree on in
writing if basket will definitely be reduced or by which other crude will be
replaced to calculate the price for the next price.
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This is a fair and accurate English translation of the original document which
is in the Colombian language.
/s/ Xxxxx X. Xxxxx
--------------------------------
Xxxxx X. Xxxxx
Secretary and Treasurer
of Aviva Petroleum Inc.
