CONCESSION AGREEMENT FOR PETROLEUM
EXPLORATION AND EXPLOITATION
BETWEEN
THE ARAB REPUBLIC OF EGYPT
AND
THE EGYPTIAN GENERAL PETROLEUM CORPORATION
AND
NATIONAL EXPLORATION COMPANY
IN
CENTRAL SINAI AREA
A. R. E.
Central Sinai Concession
20-F
INDEX
ARTICLE TITLE PAGE
I Definitions 02
II Annexes to the Agreement 04
III Grant of Rights and Term 05
IV Work Program and Expenditures During Exploration Period 12
V Mandatory and Voluntary Relinquishments 16
VI Operations and Commercial Discovery 17
VII Recovery of Costs and Expenses and Production Sharing 19
VIII Title to Assets 32
IX Bonuses 33
X Office and Service of Notices 34
XI Saving of Petroleum and Prevention of Loss 34
XII Customs Exemptions 35
XIII Books of Account: Accounting and Payments 37
XIV Records, Reports and Inspection 38
XV Responsibility for Damages 39
XVI Privileges of Government Representatives 39
XVII Employment Rights and Training of Arab Republic of Egypt
Personnel 40
XVIII Laws and Regulations 41
XIX Stabilization 42
XX Right of Requisition 42
XXI Assignment 43
XXII Breach of Agreement and Power to Cancel 44
XXIII Force Majeure 45
XXIV Disputes and Arbitration 46
XXV Status of the Parties 47
XXVI Local Contractors and Locally Manufactured Material 48
XXVII Arabic Text 48
XXVIII General 48
XXIX Approval of the Government 49
ANNEXES TO THE CONCESSION AGREEMENT
ANNEX "A" Boundary Description of the Concession Area 50
ANNEX "B" Illustrative Map showing Area Covered 53
ANNEX "C" Letter of Guaranty 54
ANNEX "D" Charter of Operating Company 56
ANNEX "E" Accounting Procedure 59
ANNEX "F" Map of the National Gas Pipeline Grid System 72
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CONCESSION AGREEMENT FOR PETROLEUM
EXPLORATION AND EXPLOITATION
BETWEEN
THE ARAB REPUBLIC OF EGYPT
AND
THE EGYPTIAN GENERAL PETROLEUM CORPORATION
AND
NATIONAL EXPLORATION COMPANY
IN
CENTRAL SINAI AREA
A. R. E.
This Agreement made and entered on this __________day of _________1999 by and
between the ARAB REPUBLIC OF EGYPT (hereinafter referred to variously as
"A.R.E." or as "GOVERNMENT"), The EGYPTIAN GENERAL PETROLEUM CORPORATION, a
legal entity created by Law No.167 of 1958 as amended (hereinafter referred
to as " EGPC) and NATIONAL EXPLORATION COMPANY, a company organized and
existing under the laws of the Arab Republic of Egypt (hereinafter referred
to as "NAGECO" of "CONTRACTOR");
WITNESSETH
WHEREAS, all minerals including petroleum existing in mines and quarries in
A.R.E., including the territorial waters, and in the sea bed subject to its
jurisdiction and extending beyond the territorial waters, are the property of
the State; and
WHEREAS, EGPC has applied for an exclusive concession for the exploration and
exploitation of petroleum in and throughout the area referred to in Article
II, and described in Annex "A" and shown approximately on Annex "B", which
are attached hereto and made part hereof (hereinafter referred to as the
"Area" ); and
WHEREAS, NAGECO agrees to undertake its obligations provided hereinafter as
CONTRACTOR with respect to the exploration, development and production of
petroleum in Central Sinai Area; and
WHEREAS, the GOVERNMENT desires hereby to grant such Concession; and
WHEREAS, the Minister of Petroleum pursuant to the provisions of Law No.86 of
1956, may enter into a concession agreement with EGPC, and with NAGECO as
CONTRACTOR in the said Area;
NOW, THEREFORE, the parties hereto agree as follows:
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ARTICLE I
DEFINITIONS
(a) "Exploration" shall include such geological, geophysical, aerial and other
surveys as may be contained in the approved Work Programs and Budgets, and
the drilling of such shot holes, core holes, stratigraphic tests, holes for
the discovery of Petroleum or the appraisal of Petroleum discoveries and
other related holes and xxxxx, and the purchase or acquisition of such
supplies, materials, services and equipment therefor, all as may be
contained in the approved Work Programs and Budgets. The verb "explore"
means the act of conducting exploration.
(b) "Development" shall include, but not be limited to, all the operations and
activities pursuant to approved Work Programs and Budgets under this
Agreement with respect to:
(i) the drilling, plugging, deepening, side tracking, redrilling,
completing, equipping of development xxxxx, the changing of the status of
a well, and
(ii) design, engineering, construction, installation, servicing and
maintenance of equipment, lines, systems facilities, plants and related
operations to produce and operate said development xxxxx, taking, saving,
treating, handling, storing, transporting and delivering petroleum,
repressuring, recycling and other secondary recovery projects, and
(iii) transportation, storage and any other work or activities necessary or
ancillary to the activities specified in (i) and (ii).
(c) "Petroleum" means liquid crude oil of various densities, asphalt, gas,
casinghead gas and all other hydrocarbon substances that may be found in,
and produced, or otherwise obtained and saved from the Area under this
Agreement, and all substances that may be extracted therefrom.
(d) "Liquid Crude Oil" or "Crude Oil" or "Oil" means any hydrocarbon produced
from the Area which is in a liquid state at the wellhead or lease
separators or which is extracted from the gas or casinghead gas in a plant.
Such liquid state shall exist at sixty degrees Xxxxxxxxxx (00XXX. F) and
atmospheric pressure of 14.65 PSIA. Such term includes distillate and
condensate.
(e) " Gas" means natural gas both associated and non-associated, and all of its
constituent elements produced from any well in the Area (other than Liquid
Crude Oil) and all non-hydrocarbon substances therein. Said term shall
include residual gas, that gas remaining after removal of LPG.
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(f) "LPG" means liquefied petroleum gas, which is a mixture principally of
butane and propane liquefied by pressure and temperature.
(g) A "Barrel" shall consist of forty-two (42) United States gallons, liquid
measure, corrected to a temperature of sixty degrees Xxxxxxxxxx (00XXX. F)
at atmospheric pressure of 14.65 PSIA.
(h) (1) "Commercial Oil Well" means the first well on any geological feature
which after testing for a period of not more than thirty (30) consecutive
days where practical, but in any event in accordance with sound and
accepted industry production practices and verified by EGPC, is found to be
capable of producing at the average rate of not less than two thousand
(2000) Barrels of Oil per day (BOPD). The date of discovery of a
"Commercial Oil Well" is the date on which such well is tested and
completed according to the above.
(2) "Commercial Gas Well " means the first well on any geological feature
which after testing for a period of not more than thirty (30) consecutive
days where practical, but in any event in accordance with sound and
accepted industry production practices and verified by EGPC, is found to be
capable of producing at the average rate of not less than fifteen million
(15,000,000) standard cubic feet of Gas per day ("MMSCFD"). The date of
discovery of a "Commercial Gas Well" is the date on which such well is
tested and completed according to the above.
(i) "A.R.E." means ARAB REPUBLIC OF EGYPT.
(j) "Effective Date" means the date on which the text of this Agreement is
signed by the GOVERNMENT, EGPC and CONTRACTOR, after the relevant Law is
issued.
(k) (1) "Year" means a period of twelve (12) months according to the Gregorian
Calendar.
(2) "Calendar Year" means a period of twelve (12) months according to the
Gregorian Calendar being 1st January to 31st December.
(l) "Financial Year" means the GOVERNMENT's financial year according to the
laws and regulations of the A.R.E.
(m) "Tax Year" means the period of twelve (12) months according to the laws and
regulations of the A.R.E.
(n) An "Affiliated Company" means a company:
(i) of which the share capital, conferring a majority of votes at
stockholders' meetings of such company, is owned directly or
indirectly by a party hereto;
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(ii) which is the owner directly or indirectly of share capital conferring
a majority of votes at stockholders' meetings of a party hereto; or
(iii) of which the share capital conferring a majority of votes at
stockholders' meetings of such company and the share capital conferring a
majority of votes at stockholders' meetings of a party hereto are owned
directly or indirectly by the same company.
(o) "Exploration Block" shall mean an area, the corner points of which have
to be coincident with six (6) minutes by six (6) minutes latitude and
longitude divisions, according to the International Grid System where
possible or with the existing boundaries of the Area covered by this
Concession Agreement as set out in Annex "A".
(p) "Development Block" shall mean an area, the corner points of which have
to be coincident with one (1) minute by one (1) minute latitude and longitude
divisions, according to the International Grid System where possible or with
the existing boundaries of the Area covered by this Concession Agreement as
set out in Annex "A".
(q) "Development Lease(s)" shall mean the Development Block or Blocks
covering the geological structure capable of production, the corner points of
which have to be coincident with one (1) minute by one (1) minute latitude
and longitude divisions according to the International Grid System where
possible or with the existing boundaries of the Area covered by this
Concession Agreement as set out in Annex "A".
(r) "Agreement" shall mean this Concession Agreement and its Annexes.
(s) "Gas Sales Agreement" shall mean a written agreement between EGPC and
CONTRACTOR (as seller) and EGPC (as buyer), which contains the terms and
conditions for Gas sales from a Development Lease entered into pursuant to
Article VII (e).
(t) "Standard Cubic Foot" (SCF) is the amount of Gas necessary to fill one
(1) cubic foot of space atmospheric pressure of 14.65 PSIA at a base
temperature of sixty degrees Xxxxxxxxxx (00XXX. F).
ARTICLE II
ANNEXES TO THE AGREEMENT
Annex "A" is a description of the area covered and affected by this
Agreement, hereinafter referred to as the "Area".
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Annex "B" is a provisional illustrative map on the scale of approximately
1:3,000,000 indicating the Area covered and affected by this Agreement and
described in Annex "A".
Annex "C" is the form of a Letter of Guaranty to be submitted by CONTRACTOR
to EGPC one (1) day before the time of signature by the Minister of Petroleum
of this Agreement, for the sum of six million (6,000,000) U. S. Dollars
guaranteeing the execution of CONTRACTOR's minimum exploration obligations
for the initial three (3) year Exploration period. In case CONTRACTOR extends
the initial Exploration period for two (2) additional periods each of two (2)
years respectively each in accordance with Article III (b) of the Agreement,
a similar Letter of Guaranty shall be issued and be submitted by CONTRACTOR
on the day the CONTRACTOR exercises its option to extend. The first such
letter of Guaranty shall be for the sum of four million (4,000,000) U.S.
Dollars and the second such Letter of Guaranty shall be for the sum of five
million (5,000,000) U.S. Dollars less in both instances any excess
expenditures of the preceding Exploration period permitted for carry forward
in accordance with Article IV (b) third paragraph of this Agreement. Each of
the three Letters of Guaranty shall remain effective for six (6) months after
the end of the Exploration period for which it has been issued except as it
may be released prior to that time in accordance with the terms thereof.
Annex "D" is the form of a Charter of the Operating Company to be formed as
provided for in Article VI.
Annex "E" is the Accounting Procedure.
Annex "F" is a current map of the National Gas Pipeline Grid System
established by the GOVERNMENT. The point of delivery for gas shall be agreed
upon by EGPC and CONTRACTOR under a Gas Sales Agreement, which point of
delivery shall be located at the flange connecting the development lease
pipeline to the nearest point on the National Gas pipeline Grid System as
depicted in such Annex "F", or as otherwise agreed upon between EGPC and
CONTRACTOR.
Annexes "A", "B" , "C", "D", "E" and "F" to this Agreement are hereby made
part hereof, and they shall be considered as having equal force and effect
with the provisions of this Agreement.
ARTICLE III
GRANT OF RIGHTS AND TERM
The GOVERNMENT hereby grants EGPC and CONTRACTOR subject to the terms,
covenants and conditions set out in this Agreement, which insofar as they are
contrary to, or inconsistent with any provisions of Law No.66 of 1953, as
amended, shall have the force of Law, an exclusive concession in and to the
Area described in Annexes "A" and "B".
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(a) The GOVERNMENT shall own and be entitled, as hereinafter provided to a
royalty in cash or in kind of ten percent (10%) of the total quantity of
Petroleum produced and saved from the Area during the development period
including renewal. Said royalty shall be borne and paid by EGPC and shall not
be the obligation of CONTRACTOR. The payment of royalties by EGPC shall not
be deemed to result in income attributable to CONTRACTOR.
(b) An initial Exploration Period of three (3) years shall start from the
Effective Date. Two (2) successive extensions to the initial Exploration
Period, each of two (2) years respectively shall be granted to CONTRACTOR at
its option, upon not less than thirty (30) days prior written notice to EGPC,
such notice to be given not later than the end of the then current period, as
may be extended pursuant to the provisions of Article V (a), and subject only
to its having fulfilled its obligations hereunder for that period. This
Agreement shall be terminated if neither a Commercial Oil Discovery nor a
Commercial Gas Discovery is established by the end of the seventh (7th) year
of the Exploration Period, as may be extended pursuant to Article V (a). The
election by EGPC to undertake a sole risk venture under paragraph (c) below
shall not extend the Exploration Period nor affect the determination of this
Agreement as to CONTRACTOR.
(c) Commercial Discovery:
(i) A Commercial Discovery- whether of Oil or Gas- may consist of one
producing reservoir or a group of producing reservoirs which is worthy of
being developed commercially. After discovery of a Commercial Oil or Gas
Well CONTRACTOR shall, unless otherwise agreed upon with EGPC, undertake as
part of its Exploration program the appraisal of the discovery by drilling
one or more appraisal xxxxx, to determine whether such discovery is worthy of
being developed commercially, taking into consideration the recoverable
reserves, production, pipeline, and terminal facilities required, estimated
Petroleum prices, and all other relevant technical and economic factors.
(ii) The provisions laid down herein postulate the unity and indivisibility
of the concepts of Commercial Discovery and Development Leases. They shall
apply uniformly to Oil and Gas unless otherwise specified.
(iii) CONTRACTOR shall give notice of a Commercial Discovery to EGPC
immediately after the discovery is considered by CONTRACTOR to be worthy of
commercial development, but in any event with respect to a Commercial Oil
Well not later than thirty (30) days following the completion of the second
appraisal well, or twelve (12) months following the date of the discovery of
the Commercial Oil Well, (unless EGPC agrees that such period may be
extended), whichever is earlier, or with respect to a Commercial Gas Well not
later than twenty-four (24) months following the date of the discovery of the
Commercial Gas Well (unless EGPC agrees that such period may be extended)
except that CONTRACTOR shall also have the right to give such notice of
Commercial Discovery with respect to any reservoir or reservoirs even if the
well or xxxxx thereon are not "Commercial" within the definition of the
"Commercial Well" if, in its opinion, a reservoir or a group of reservoirs,
considered collectively, could be worthy of commercial development.
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CONTRACTOR may also give a notice of Commercial Oil Discovery in the event it
wishes to undertake a Gas Recycling Project.
A notice of Commercial Gas Discovery shall contain all detailed particulars
of the discovery and especially the area of Gas reserves, the estimated
production potential and profile and field life.
Within sixty (60) days following receipt of a notice of a Commercial Oil or
Gas Discovery, EGPC and CONTRACTOR " shall meet and review all appropriate
data with a view to mutually agreeing upon the existence of a Commercial
Discovery. The date of a Commercial Discovery shall be the date EGPC and
CONTRACTOR jointly agree in writing that a Commercial Discovery exists.
(iv) If Crude Oil is discovered but is not deemed by CONTRACTOR to be a
Commercial Oil Discovery under the above provisions of this paragraph (c),
EGPC shall one (1) month after the expiration of the period specified above
within which CONTRACTOR can give notice of a Commercial Oil Discovery, or
thirteen (13) months after completion of a well not considered to be a
"Commercial Oil Well" have the right, following sixty (60) days notice in
writing to CONTRACTOR, at its sole cost, risk and expense, to develop,
produce, and dispose of all Crude Oil from the geological feature on which
the well has been drilled. Said notice shall state the specific area covering
said geological feature to be developed, the xxxxx to be drilled, the
production facilities to be installed and EGPC's estimated cost thereof.
Within thirty (30) days after receipt of said notice CONTRACTOR may, in
writing, elect to develop such area as provided for in the case of Commercial
Discovery hereunder. In such event all terms of this Agreement shall continue
to apply to the specified area.
If CONTRACTOR elects not to develop such area, the specific area covering
said geological feature shall be set aside for sole risk operations by EGPC,
such area to be mutually agreed upon by EGPC and CONTRACTOR on the basis of
good petroleum industry practice. EGPC shall be entitled to perform, or in
the event Operating Company has come into existence, to have Operating
Company perform such operations for the account of EGPC and at EGPC's sole
cost, risk and expense. When EGPC has recovered from the Crude Oil produced
from such specific area a quantity of Crude Oil equal in value to three
hundred percent (300%) of the cost it has incurred in carrying out the sole
risk operations, CONTRACTOR shall have the option, only in the event there
has been a separate Commercial Oil Discovery elsewhere within the Area, to
share in further development and production of that specific area upon paying
EGPC one hundred percent (100%) of such costs incurred by EGPC.
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Such one hundred percent (100%) payment shall not be recovered by CONTRACTOR.
Immediately following such payment the specific area shall either (i) revert
to the status of an ordinary Development Lease under this Agreement and
thereafter shall be operated in accordance with the terms hereof; or (ii)
alternatively, in the event that at such time EGPC or its Affiliated Company
is conducting Development operations in the area at its sole expense and EGPC
elects to continue operating, the area shall remain set aside and CONTRACTOR
shall only be entitled to its production sharing percentages of the Crude Oil
as specified in Article VII (b). The sole risk Crude Oil shall be valued in
the manner provided in Article VII (c). In the event of any termination of
this Agreement under the provisions of Article III(b), this Agreement shall
however, continue to apply to EGPC's operation of any sole risk venture
hereunder, although such Agreement shall have been terminated with respect to
CONTRACTOR pursuant to the provisions of Article III (b).
(d) Conversion to a Development Lease:
(i) Following a Commercial Oil Discovery or a Commercial Gas Discovery, the
extent of the whole area capable of production to be covered by a
Development Lease shall be mutually agreed upon by EGPC and CONTRACTOR and
be subject to the approval of the Minister of Petroleum. Such area shall be
converted automatically into a Development Lease without the issue of any
additional legal instrument or permission.
(ii) Following the conversion of an area to a Development Lease based on a
Commercial Gas Discovery (or upon the discovery of Gas in a Development
Lease granted following a Commercial Oil Discovery), EGPC shall endeavour
with diligence to find adequate local markets capable of absorbing the
production of Gas and shall advise CONTRACTOR of the potential outlets for
such Gas, and the expected annual schedule of demand. Thereafter, EGPC and
CONTRACTOR shall meet with a view to assessing whether the outlets for such
Gas and other relevant factors warrant the development and production of
the Gas and in case of agreement the Gas thus made available shall be
disposed of to EGPC under a long-term Gas Sales Agreement in accordance
with and subject to the conditions set forth in Article VII .
(iii) The Development period of each Development Lease shall be as follows:
(aa) In respect of a Commercial Oil Discovery, twenty (20) years from the
date of such Commercial Discovery plus the Optional Extension Period (as
defined below) provided that, in the event that, subsequent to the
conversion of a Commercial Oil Discovery into a Development Lease, Gas is
discovered in the same in Development Lease and is used or is capable of
being used locally or for export hereunder, the period of the Development
Lease shall be extended only with respect to such Gas, LPG extracted from
such Gas and Crude Oil in the form of condensate produced with such Gas for
twenty (20) years from the date of first deliveries of Gas locally or for
export plus the Optional Extension Period (as defined below) provided that,
the duration of such Development Lease based on a Commercial Oil Discovery
c may not be extended beyond thirty-five (35) years from the date of such
Commercial Oil Discovery unless otherwise agreed upon between EGPC and
CONTRACTOR and subject to the approval of the Minister of Petroleum
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CONTRACTOR shall immediately notify EGPC of any Gas Discovery but shall not
be required to apply for a new Development Lease in respect of such Gas.
(bb) In respect of a Commercial Gas Discovery, twenty (20) years from the
date of first deliveries of Gas locally or for export plus the Optional
Extension Period (as defined below) provided that, if subsequent to the
conversion of a Commercial Gas Discovery into a Development Lease, Crude
Oil is discovered in the same Development Lease, CONTRACTOR's share of such
Crude Oil from the Development Lease (except LPG extracted from Gas or
Crude Oil in the form of condensate produced with Gas) and Gas associated
with such Crude Oil shall revert entirely to EGPC upon the lapse of twenty
(20) years from the date of such Crude Oil Discovery plus the Optional
Extension Period (as defined below).
Notwithstanding, anything to the contrary under this Agreement, the
duration of a Development Lease based on a Commercial Gas Discovery shall
in no case exceed thirty-five (35) years from the date of such Commercial
Discovery, unless otherwise agreed upon between EGPC and CONTRACTOR and
subject to the approval of the Minister of Petroleum.
CONTRACTOR shall immediately notify EGPC of any Oil Discovery but shall not
be required to apply for a new Development Lease in respect of such Crude
Oil.
The "Optional Extension Period" shall mean a period of five (5) years which
may be elected by CONTRACTOR upon six (6) months written notice to EGPC
prior to the expiry of the "' relevant twenty (20) year period.
(e) Development operations shall upon the issuance of a Development Lease
granted following a Commercial Oil Discovery , be started promptly by
Operating Company and be conducted in accordance with good oil field
practices and accepted petroleum engineering principles, until the field is
considered to be fully developed, it being understood that if associated gas
is not utilized, EGPC and CONTRACTOR shall negotiate in good faith on the
best way to avoid impairing the production in the interests of the parties.
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In the event no Commercial Production of Oil in regular shipments is
established in any Development Block within four (4) years from the date of
the Commercial Oil Discovery, such Development Block shall immediately be
relinquished unless there is a Commercial Gas discovery on the Development
Lease.
Each Development Block in a Development Lease being partly within the radius
of drainage of any producing well in such Development Lease shall be
considered as participating in the Commercial Production referred to above.
Development operations in respect of Gas and Crude Oil in the form of
condensate or LPG to be produced with or extracted from such Gas shall, upon
the signature of a Gas Sales Agreement or commencement of a scheme to dispose
of the Gas, whether for export as referred to in Article VII or otherwise, be
started promptly by Operating Company and be conducted in accordance with
good gas field practices and accepted petroleum engineering principles and
the provisions of such agreement or scheme. In the event no Commercial
Production of Gas is established in accordance with such Gas Sales Agreement
or scheme, the Development Lease relating to such Gas shall be relinquished,
unless otherwise agreed upon by EGPC.
If upon application by CONTRACTOR it is recognized by EGPC that Crude Oil or
Gas is being drained from on Exploration Block under this Agreement into a
Development Block on an adjoining concession area held by CONTRACTOR, the
block being drained shall be considered as participating in the Commercial
Production of the Development Block in question and the Block being drained
shall be converted into a Development Lease with the ensuing allocation of
costs and production (calculated from the Effective Date or the date such
drainage occurs, whichever is later) between the two Concession Areas. The
allocation of such costs and production under each Concession Agreement shall
be in the same portion that the recoverable reserves in the drained
geological structure underlying each Concession Area bears to the total
recoverable reserves of such structure underlying both Concession Areas. The
production allocated to a Concession Area shall be priced according to the
Concession Agreement covering that concession area.
(f) CONTRACTOR shall bear and pay all the costs and expenses required in
carrying out all the operations under this Agreement but such costs and
expenses shall not include any interest on investment. CONTRACTOR shall look
only to the Petroleum to which it is entitled under this Agreement to recover
such costs and expenses. Such costs and expenses shall be recoverable as
provided in Article VII. During the term of this Agreement and its renewal,
the total production achieved in the conduct of such operations shall be
divided between EGPC and CONTRACTOR in accordance with the provisions of
Article VII.
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(g) 1. Unless otherwise provided, CONTRACTOR shall be subject to Egyptian
income tax laws and shall comply with the requirements of such laws with
respect to the filing of returns, the assessment of tax, and keeping and
showing of books and records.
2. CONTRACTOR's annual income for Egyptian income tax purposes under
this Agreement shall be an amount calculated as follows:
The total of the sums received by CONTRACTOR from the sale or other
disposition of all Petroleum acquired by CONTRACTOR pursuant to Article VII
(a) and Article VII (b);
reduced by:
(i) The costs and expenses of CONTRACTOR;
(ii) The value, as determined according to Article VII (c), of EGPC's share of
the Excess Cost Recovery Petroleum repaid to EGPC in cash or in kind, if
any,
Plus:
An amount equal to CONTRACTOR's Egyptian income taxes grossed up in the
manner shown in Annex "E" Article VI.
For purposes of above tax deductions in any Tax Year, Article VII (a) shall
apply only in respect of classification of costs and expenses and rates of
amortization, without regard to the percentage limitation referred to in the
first paragraph of Article VII (a) (1). All costs and expenses of CONTRACTOR
in conducting the operations under this Agreement which are not controlled by
Article VII (a) as above qualified shall be deductible in accordance with the
provisions of the Egyptian Income Tax Law.
3. EGPC shall assume, pay and discharge, in the name and on behalf of
CONTRACTOR, CONTRACTOR's Egyptian income tax out of EGPC's share of the
Petroleum produced and saved and not used in operations under Article VII.
All taxes paid by EGPC in the name and on behalf of CONTRACTOR shall be
considered income to CONTRACTOR,
4. EGPC shall furnish to CONTRACTOR the proper official receipts
evidencing the payment of CONTRACTOR's Egyptian income tax for each Tax Year
Within ninety (90) days following the receipt by EGPC of CONTRACTOR's tax
declaration for the preceding Tax Year. Such receipts shall be issued by the
proper Tax Authorities and shall state the amount and other particulars
customary for such receipts.
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5. As used herein, Egyptian Income Tax shall be inclusive of all income
taxes payable in the A.R E. (including tax on tax) such as the tax on income
from movable capital and the tax on profits from Commerce and industry, and
inclusive of taxes based on income or profits including all dividends,
withholding with respect to shareholders and other taxes imposed by the
GOVERNMENT on the distribution of income or profits by CONTRACTOR.
6. In calculating its A.R.E. income taxes, EGPC shall be entitled to
deduct all royalties paid by EGPC to the GOVERNMENT and, CONTRACTOR's
Egyptian income taxes paid by EGPC on, CONTRACTOR's behalf.
ARTICLE IV
WORK PROGRAM AND EXPENDITURES DURING
EXPLORATION PERIOD
(a) CONTRACTOR shall commence Exploration operations hereunder not later than
six (6) months after the Effective Date with a commitment of acquiring five
hundred (500) km seismic and two hundred (200) xx.xx 3D seismic. Not later
than the end of the twenty-four (24) months after the Effective Date,
CONTRACTOR shall start Exploratory drilling in the Area during the initial
Exploration period with a commitment of drilling four (4) xxxxx. EGPC shall
make available for CONTRACTOR's use all seismic xxxxx and other Exploration
data in EGPC's possession with respect to the Area as EGPC is entitled to do
so.
(b) The initial Exploration period shall be three (3) years. CONTRACTOR may
extend this Exploration period for two (2) successive extensions each of two
(2) years respectively in accordance with Article 1II(b), each of which upon
at least thirty (30) days prior written notice to EGPC subject to its
expenditure of its minimum Exploration obligations and of its fulfillment of
the drilling obligations hereunder, for the then current period.
CONTRACTOR shall spend a minimum of six million (6,000,000) U.S. Dollars on
Exploration operations and activities related thereto during the initial
three (3) year Exploration period; provided that CONTRACTOR shall drill four
(4) xxxxx and acquire five hundred (500) km seismic and two hundred (200)
xx.xx 3D seismic. For the first two (2) year extension period that CONTRACTOR
elects to extend beyond the initial Exploration period, CONTRACTOR shall
spend a minimum of four million (4,000,000) U.S.Dollars and for the second
two (2) year extension period that CONTRACTOR elects to extend beyond the two
(2) year first extension period, " CONTRACTOR shall also spend a minimum of
five million (5,000,000) U.S. Dollars. During the first and second extension
periods that CONTRACTOR elects to extend beyond the initial Exploration
period, CONTRACTOR elects to extend beyond the initial Exploration period,
CONTRACTOR shall drill three (3) xxxxx in the first extension and four (4)
xxxxx in the second extension.
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Should CONTRACTOR spend more than the minimum amount required to be expended
or drilled or acquire more seismic than the minimum required during the
initial three (3) year Exploration period, or during any period thereafter,
the excess may be subrtracted from the minimum amount of money required to be
expended by CONTRACTOR or minimum number of xxxxx required to be drilled or
minimum kilometers of seismic to be acquired during any succeeding
Exploration Period, or Periods, as the case may be.
In case CONTRACTOR surrenders its Exploration rights under this Agreement as
set forth above before or at the end of the third (3rd) year of the initial
Exploration period, having expended less than the total sum of six million
(6,000,000) U.S. Dollars On Exploration or in the event at he end of the
three (3) years, CONTRACTOR has expended less than said sum in the Arena, an
amount equal to the difference between the said six million (6,000,000) U.S.
Dollars and the amount actually spent on Exploration shall be paid by
CONTRACTOR to EGPC at the time of surrending or within three (3) months from
the end of the third (3rd) year of the initial Exploration period, as the
case may be. Any expenditure deficiency by CONTRACTOR to EGPC of such
deficiency. Provided this Agreement is still in force as to CONTRACTOR,
CONTRACTOR shall be entitled to recover any such payments as Exploration
expenditure in the manner provided for under Article VII in the event of
Commercial Production.
Without prejudice to Article III (b), in case no Commercial Oil Discovery is
established or no notice of Commercial Gas Discovery is given by the end of
the seventh (7th) year, as may be extended pursuant to Article V(a), or in
case CONTRACTOR surrenders the Area under this Agreement prior to such time,
EGPC shall not bear any of the aforesaid expenses spent by CONTRACTOR.
(c) At least four (4) months prior to the beginning of each Financial Year or
at such other times as may mutually be agreed to by EGPC and CONTRACTOR,
CONTRACTOR shall prepare an Exploration Work Program and Budget for the Area
setting forth the Exploration operations which CONTRACTOR proposes to carry
out during the ensuing year.
The Exploration Work Program and Budget shall be reviewed by a joint
committee to be established by EGPC and CONTRACTOR after the Effective Date
of this Agreement. This Committee, hereinafter referred to as the
"Exploration Advisory Committee, shall consist of six (6) members, three (3)
of whom shall be appointed by EGPC and three (3) by CONTRACTOR. The Chairman
of the Exploration Advisory Committee shall be designated by EGPC from among
the members appointed by it. The Exploration Advisory Committee shall review
and give such advice as it deems appropriate with respect to the proposed
Work Program and Budget. Following review by the Exploration Advisory
Committee, CONTRACTOR shall make such revisions as CONTRACTOR deems
appropriate and submit the Exploration Work Program and Budget to EGPC for
its approval.
Central Sinai Concession
20F
15
Following such approval, it is further agreed that:
(i) CONTRACTOR shall not substantially revise or modify said Work Program
and Budget nor reduce the approved budgeted expenditure without the
approval of EGPC;
(ii) In the event of emergencies involving danger or loss of lives or
property, CONTRACTOR may expend such additional unbudgeted amounts as may
be required to alleviate such danger. Such expenditure shall be considered
in all respects as Exploration expenditure and shall be recovered pursuant
to the provisions of Article VII.
(d) CONTRACTOR shall advance all necessary funds for all materials,
equipment, supplies, personnel administration and operations pursuant to the
Exploration Work Program and Budget and EGPC shall not be responsible to bear
or repay any of the aforesaid costs.
(e) CONTRACTOR shall be responsible for the preparation and performance of
the Exploration Work Program which shall be implemented in a workmanlike
manner and consistent with good industry practices.
Except as is appropriate for the processing of data, specialized laboratory
engineering and development studies thereon, to be made in specialized
centers outside the A.R.E., all geological and geophysical studies as well as
any other studies related to the performance of this Agreement, shall be made
in the A.R.E.
CONTRACTOR shall entrust the management of Exploration operations in the
A.R.E. to its technically competent General Manager and Deputy General
Manager. The names of such Manager and Deputy General Manager shall, upon
appointment, be forthwith notified to the GOVERNMENT and to EGPC. The General
Manager and, in his absence, the Deputy General Manager shall be entrusted by
CONTRACTOR with sufficient powers to carry out immediately all lawful written
directions given to them by the GOVERNMENT or its representative , under the
terms of this Agreement. All lawful regulations issued " or hereafter to be
issued which are applicable hereunder and not " in conflict with this
Agreement shall apply to CONTRACTOR.
(f) CONTRACTOR shall supply EGPC, within thirty (30) days from the end of
each calendar quarter, with a Statement of Exploration Activity, showing
costs incurred by CONTRACTOR during such quarter. CONTRACTOR's records and
necessary supporting documents shall be available for inspection by EGPC at
any time during regular working hours for three (3) months from the date of
receiving each Statement.
Central Sinai Concession
20F
16
Within the three (3) months from the date of receiving such Statement, EGPC
shall advise CONTRACTOR in writing if it considers:
(1) that the record of costs is not correct;
(2) that the costs of goods or services supplied are not in line with the
international market prices for goods or services of similar quality supplied
on similar terms prevailing at the time such goods or services were supplied,
provided however, that purchases made and services performed within the
A.R.E. shall be subject to Article XXVI;
(3) that the condition of the materials furnished by CONTRACTOR does not
tally with their prices; or
(4) that the costs incurred are not reasonably required for operations.
CONTRACTOR shall confer with EGPC in connection with the problem thus
presented, and the parties shall attempt to reach a settlement which is
mutually satisfactory.
Any reimbursement due to EGPC out of the Cost Recovery Petroleum as a result
of reaching agreement or of an arbitral award shall be promptly made in cash
to EGPC, plus simple interest at LIBOR plus two and one-half percent (2.5% )
per annum from the date on which the disputed amount(s) would have been paid
to EGPC according to Article VII (a) (2) and Annex "E" (i.e. the date of
rendition of the relevant Cost Recovery Statement) to the date of payment.
The LIBOR rate applicable shall be the average of the figure or figures
published by the Financial Times representing the mid-point of the rates (bid
and ask) applicable to one month U. S. Dollar deposits in the London
Interbank Eurocurrency Market on each fifteenth (15th) day of each month
occurring between the date on which the disputed amount (s) would have been
paid to EGPC and the date on which it is settled.
If the LIBOR rate is available on any fifteenth (15th) day but is not
published in the Financial Times in respect of such day for any reason, the
LIBOR rate chosen shall be that offered by Citibank N. A. to other leading
banks in the London Interbank Eurocurrency Market for one month U. S. Dollar
deposits.
If such fifteenth (15th) day is not a day on which LIBOR rates are quoted in
the London Interbank Eurocurrency Market, the LIBOR rate to be used shall be
that quoted on the next following day on which such rates are quoted.
If within the time limit of the three (3) month period provided for in this
paragraph, EGPC has not advised CONTRACTOR of its objection to any Statement,
such Statement shall be considered as approved.
Central Sinai Concession
20F
17
(g) CONTRACTOR shall supply all funds necessary for its operations in the
A.R.E. under this Agreement in freely convertible currency from abroad.
CONTRACTOR shall have the right to freely purchase Egyptian currency in the
amounts necessary for its operations in the A.R.E. from any bank or entity
authorized by the GOVERNMENT to conduct foreign currency exchanges.
(h) EGPC is authorized to advance to CONTRACTOR the Egyptian currency
required for the operations under this Agreement against receiving from
CONTRACTOR an equivalent amount of U .S. Dollars at the official A.R.E. rate
of exchange. Such amounts in U.S. Dollars shall be deposited in an EGPC
account abroad with a correspondent bank of the National Bank of Egypt,
Cairo. Withdrawals from said account shall be used for financing EGPC's and
its Affiliated Companies' foreign currency requirements subject to the
approval of the Minister of Petroleum.
ARTICLE V
MANDATORY AND VOLUNTARY RELINQUISHMENTS
(a) MANDATORY
At the end of the third (3rd) year after the Effective Date hereof,
CONTRACTOR shall relinquish to the GOVERNMENT a total of twenty-five percent
(25%) of the original Area not then converted to a Development Lease or
Leases. Such relinquishment shall be in units of whole Exploration Blocks or
parts of Exploration Blocks not converted to Development Leases so as to
enable the relinquishment requirements to be precisely fulfilled.
At the end of the fifth (5th) year after the Effective Date hereof,
CONTRACTOR shall relinquish to the GOVERNMENT an additional twenty-five
percent (25%) of the original Area not then converted to a Development
Lease or Leases. Such relinquishment shall be in units of whole Exploration
Blocks or parts of Exploration Blocks not converted to Development Leases so
as to enable the relinquishment requirements to be precisely fulfilled.
Without prejudice to Articles III and XXIII and the last three paragraphs of
this Article V (a), at the end of the seventh (7th) year of the Exploration
period, CONTRACTOR shall relinquish the remainder of the Area not then
converted to a Development Lease or Leases.
It is understood that at the time of any relinquishment the areas to be
converted into Development Leases and which are submitted to the Minister of
Petroleum for his approval, according to Article III (d) shall, subject to
such approval, be deemed converted to Development Leases.
Central Sinai Concession
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18
CONTRACTOR shall not be required to relinquish any Exploration Block or Blocks
on which a Commercial Oil or Gas Well is discovered before the period of time
referred to in Article III (c) given to CONTRACTOR to determine whether such
Well is a Commercial Discovery worthy of Development, or to relinquish an
Exploration Block in respect of which a notice of Commercial Gas Discovery has
been given to EGPC subject to EGPC's right to agree on the existence of a
Commercial Discovery pursuant to Article III(c), and without prejudice to the
requirements of Article III (e).
In the event at the end of the initial Exploration Period or either of the
two successive extensions of the initial Exploration Period, a well is
actually drilling or testing, CONTRACTOR shall be allowed up to six (6)
months to enable it to discover a Commercial Oil or Gas Well or to establish
a Commercial Discovery, as the case may be. However, any such extension of up
to six (6) months shall reduce the length of the next succeeding Exploration
Period, as applicable, by that amount.
(b) VOLUNTARY:
CONTRACTOR may, voluntarily, during any period relinquish all or any part of
the Area in whole Exploration Blocks or parts of Exploration Blocks provided
that at the time of such voluntary relinquishment its Exploration obligations
under Article IV (b) have been satisfied for such period.
Any relinquishments hereunder shall be credited toward the mandatory
provision of Article V(a) above.
Following Commercial Discovery, EGPC and CONTRACTOR shall mutually agree upon
any area to be relinquished thereafter, except for the relinquishment
provided for above at the end of the total Exploration period.
ARTICLE VI
OPERATIONS AFTER COMMERCIAL DISCOVERY
(a) On Commercial Discovery, EGPC and CONTRACTOR shall form in the A. R. E.
an operating company pursuant to Article VI (b) and Annex (D) (hereinafter
referred to as "Operating Company") which Company shall be named by mutual
agreement between EGPC and CONTRACTOR and such name shall be subject to the
approval of the Minister of Petroleum. Said Company shall be a private sector
company. Operating Company shall be subject to the laws and regulations in
force in the A.R.E. to the extent that such laws and regulations are not
inconsistent with the provisions of this Agreement or the Charter of
Operating Company.
Central Sinai Concession
20F
19
However, Operating Company and CONTRACTOR shall, for the purpose of this
Agreement, be exempted from the following laws and regulations as now or
hereafter amended or substituted:
-Law No.48 of 1978, on the employee regulations of public sector companies;
-Law No.159 of 1981, promulgating the law on joint stock companies,
partnership limited by shares and limited liability companies;
-Law No.97 of 1983, promulgating the law concerning public sector
Organizations and companies.
-Law No.203 of 1991, promulgating the law on public business sector
companies; and
-Law No.38 of 1994, organizing dealings in foreign currencies.
(b) The Charter of Operating Company is hereto attached as Annex 'D". Within
thirty (30) days after the date of Commercial Oil Discovery or within thirty
(30) days after the signature of a Gas Sales Agreement or commencement of a
scheme to dispose of Gas (unless otherwise agreed upon by EGPC and
CONTRACTOR), the Charter shall take effect and Operating Company shall
automatically come into existence without any further procedures. The
Exploration Advisory Committee shall be dissolved forthwith upon the coming
into existence of the Operating Company.
(c) Ninety (90) days after the date Operating Company comes into existence in
accordance with paragraph (b) above, it shall prepare a Work Program and
Budget for further Exploration and Development for the remainder of the year
in which the Commercial Discovery is made; and not later than four (4) months
before the end of the current Financial Year (or such other date as may be
agreed upon by EGPC and CONTRACTOR) and four (4) months preceding the
commencement of each succeeding Financial Year thereafter (or such other date
as may be agreed upon by EGPC and CONTRACTOR), Operating Company shall
prepare an annual Production Schedule, Work Program and Budget for further
Exploration and Development for the succeeding Financial Year. The Production
Schedule, Work Program and Budget shall be submitted to the Board of
Directors for approval.
(d) Not later than the twentieth (20th) day of each month, Operating Company
shall furnish to CONTRACTOR a written estimate of its total cash requirements
for expenditure for the first half and the second half of the succeeding
month expressed in U .S. Dollars having regard to the approved budget. Such
estimate shall take into consideration any cash expected to be on hand at
month end.
Payment for the appropriate period of such month shall be made to the
correspondent bank designated in paragraph (e) below on the first (lst) day
and fifteenth (15th) day respectively, or the next following business day, if
such day is not a business day.
20
Central Sinai Concession
20-F
(e) Operating Company is authorized to keep at its own disposal abroad in an
account opened with a correspondent bank of the. National Bank of Egypt,
Cairo, the foreign funds advanced by CONTRACTOR. Withdrawals from said
account shall be used for payment for goods and services acquired abroad and
for transferring to a local bank in the A.R.E. the required amount to meet
the expenditures in Egyptian Pounds for Operating Company in connection with
its activities under this Agreement.
Within sixty (60) days after the end of each Financial Year, Operating
Company shall submit to the appropriate exchange control authorities in the
A.R.E. a statement, duly certified by a recognized firm of auditors, showing
the funds credited to that account, the disbursements made out of that
account and the balance outstanding at the end of the year.
(f) If and for as long during the period of production operations there
exists an excess capacity in facilities which cannot during the period of
such excess be used by the Operating Company, EGPC and CONTRACTOR will
consult together to find a mutually agreed formula whereby EGPC may use the
excess capacity if it so desires without any unreasonable financial or
unreasonable operational disadvantage to the CONTRACTOR.
ARTICLE VII
RECOVERY OF COSTS AND EXPENSES AND PRODUCTION SHARING
(a) 1. COST RECOVERY PETROLEUM:
Subject to the auditing provisions under this Concession Agreement,
CONTRACTOR shall recover quarterly all costs, expenses and expenditures in
respect of all the Exploration, Development and related operations under this
Agreement to the extent and out of thirty-five percent (35%) of all Petroleum
produced and saved from all; Development Leases within the Area hereunder and
not used in Petroleum operations. Such Petroleum is hereinafter referred to
as "Cost Recovery Petroleum".
For the purpose of determining the classification of all costs, expenses and
expenditures for their recovery, the following terms shall apply:
1. "Exploration Expenditures" shall mean all costs and expenses for
Exploration and the related portion of indirect expenses and overheads.
21
Central Sinai Concession
20-F
2. "Development Expenditures" shall mean all costs and expenses for
Development (with the exception of Operating Expenses) and the related
portion of indirect expenses and overheads.
3. "Operating Expenses" shall mean all costs, expenses and expenditures made
after initial commercial production, which costs, expenses and expenditures
are not normally depreciable.
However, Operating Expenses shall include workover, repair and maintenance of
assets but shall not include any of the following: sidetracking, redrilling
and changing of the status of a well, replacement of assets or part of an
asset, additions, improvements, renewals or major overhauling that extend the
life of the asset.
Exploration Expenditures, Development Expenditures and Operating Expenses
shall be recovered from Cost Recovery Petroleum in the following manner:
(i) Exploration Expenditures including those accumulated prior to the
commencement of initial commercial production, which for the purposes of this
Agreement shall mean the date on which the first regular shipment of Crude
Oil or the first deliveries of Gas are made, shall be recoverable at the rate
of twenty-five percent (25%) per annum starting either in the Tax Year in
which such expenditures are incurred and paid or the Tax Year in which
initial commercial production commences, whichever is the later date.
(ii) Development Expenditures, including those accumulated prior to the
commencement of initial commercial production which for the purposes of this
Agreement shall mean the date on which the first regular shipment of Crude
Oil or the first deliveries of Gas "are made, shall be recoverable at the
rate of twenty percent (20%) per annum starting either in the Tax Year in
which such expenditures are incurred and paid or the Tax Year in which
initial commercial production commences, whichever is the later date.
(iii) Operating Expenses, incurred and paid after the date of initial
commercial production which for the purposes of this Agree- ment shall mean
the date on which the first regular shipment of Crude Oil or the first
deliveries of Gas are made, shall be recoverable either in the Tax Year in
which such costs and expenses are incurred and paid or the Tax Year in which
initial commercial production occurs, whichever is the later date.
(iv) To the extent that, in a Tax Year, costs, expenses or expenditures
recoverable per paragraphs (i), (ii) and (iii) above, exceed the value of all
Cost Recovery Petroleum for such Tax Year , the excess shall be carried
forward for recovery in the next succeeding Tax Year or years until fully
recovered, but in no case after the termination of this Agreement,
CONTRACTOR.
22
Central Sinai Concession
20-F
(v) The recovery of costs and expenses, based upon the rates referred to
above, shall be allocated to each quarter proportionately (one fourth to each
quarter). However, any recoverable costs and expenses not recovered in one
quarter as thus allocated, shall be carried forward for recovery in the next
quarter.
(2) Except as provided in Article VII (a) 3 and Article VII (e) 1 ,
CONTRACTOR shall each quarter be entitled to take and own all Cost Recovery
Petroleum, which shall be taken and disposed of in the manner determined
pursuant to Article VII (e). To the extent that the value of all Cost
Recovery Petroleum (as determined in Article VII (c)) exceeds the actual
recoverable costs and expenditures, including any carry forward under Article
VII (a) 1 (iv), to be recovered in that quarter, then the value of such
Excess Cost Recovery Petroleum, shall be divided between EGPC and CONTRACTOR
in accordance with the percentages specified in Article VII (b) 1 and EGPC's
share shall be paid by CONTRACTOR to EGPC either (i) in cash in the manner
set forth in Article IV of the Accounting Procedure contained in Annex "E" or
(ii) in kind in accordance with Article VII (a) (3).
(3) Ninety (90) days prior to the commencement of each Calendar Year EGPC
shall be entitled to elect by notice in writing to CONTRACTOR to require
payment of up to one hundred percent (100%) of EGPC's share of Excess Cost
Recovery Petroleum in kind. Such payment will be in Crude Oil from the Area
F.O.B. export terminal or other agreed delivery point provided that the
amount of Crude Oil taken by EGPC in kind in a quarter shall not exceed the
value of Cost Recovery Crude Oil actually taken and separately disposed of by
CONTRACTOR from the Area during the previous quarter. If EGPC's entitlement
to receive payment of its share of the Excess Cost Recovery Petroleum in kind
is limited by the foregoing provision, the balance of such entitlement shall
be paid in cash.
(b) PRODUCTION SHARING
(1) The remaining sixty-five percent (65%) of the Petroleum, shall be divided
between EGPC and CONTRACTOR according to the following shares. Such shares
shall be taken and disposed of pursuant to Article VII (e):
(i) Crude Oil
EGPC CONTRACTOR
SHARE SHARE
Crude Oil produced and saved under this
Agreement and not used in Petroleum Operations.
Barrels per day (BOPD) (quarterly average):
That portion or increment up to (74%) (26%)
5,000 BOPD. Seventy-four percent twenty-six percent
23
Central Sinai Concession
20-F
That portion or increment in (76%) (24%)
excess of 5,000 BOPD seventy-six percent twenty-four percent
and up to 10,000 BOPD.
That portion or increment in (78%) (22%)
excess of 10,000 BOPD seventy-eight percent twenty-two percent
and up to 20,000 BOPD.
That portion or increment in (81%) (19%)
excess of 20,000 BOPD eighty-one percent nineteen percent
and up to 40,000 BOPD.
That portion or increment in (83%) (17%)
excess of 40,000 BOPD eighty-three percent seventeen percent
and up to 50,OOOBOPD.
That portion or increment in (85%) (15%)
excess of 50,000 BOPD eighty-five percent fifteen percent
(ii) Gas and LPG:
Gas and LPG produced and saved under this Agreement and not used in Petroleum
Operations by MMSCFD (quarterly average).
EGPC share: seventy-five percent (75%)
CONTRACTOR share: twenty-five percent (25% )
(2) After the end of each contractual year during the term of any Gas Sales
Agreement entered into pursuant to Article VII {e), EGPC and CONTRACTOR (as
sellers) shall render to EGPC (as buyer) a statement for an amount of Gas, if
any, equal to the amount by which the quantity of Gas of which EGPC (as
buyer) , has taken delivery falls below seventy five percent (75%) of the
contract quantities of Gas as established by the applicable Gas Sales
Agreement (the "Shortfall"), provided the Gas is available. Within sixty (60)
days of receipt of the statement, EGPC (as buyer) shall pay EGPC and
CONTRACTOR (as sellers) for the amount of the "shortfall", if any. The
Shortfall shall be included in EGPC's and CONTRACTOR 's entitlement to Gas
pursuant to Article VII (a) and Article VII (b) in the fourth (4th) quarter
of such contractual year.
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Central Sinai Concession
20-F
Quantities of Gas not taken but to be paid for shall be recorded in a
separate " Take-or-Pay Account". Quantities of Gas ("Make Up Gas") which are
delivered in subsequent years in excess of seventy five percent (75%) of the
contract quantities of Gas as established by the applicable Gas Sales
Agreement, shall be set against and. reduce quantities of Gas in the
Take-or-Pay account to the extent thereof and, to that extent, no payment
shall be due in respect of such Gas. Such Make Up Gas shall not be included
in CONTRACTOR's entitlements to Gas pursuant to Article VII (a) and Article
VII (b). CONTRACTOR shall have no rights to such Make Up Gas.
The percentages set forth in Article VII (a) hereinabove and this Article VII
(b) in respect of LPG produced from a plant constructed and operated by or on
behalf of EGPC and CONTRACTOR shall apply to all LPG available for delivery .
(c) VALUATION OF PETROLEUM :
1. CRUDE OIL :
(i) The Cost Recovery Crude Oil to which CONTRACTOR is entitled hereunder
shall be valued by EGPC and CONTRACTOR at "Market Price" for each calendar
quarter.
(ii) "Market Price" shall mean the weighted average prices realized from
sales by EGPC or CONTRACTOR during the quarter, whichever is higher, provided
that the sales to be used in arriving at the weighted average (s) shall be
sales of comparable quantities on comparable credit terms in freely
convertible currency from F. 0. B. point of export sales to non-affiliated
companies at arm's length under all Crude Oil sales contracts then in effect,
but excluding Crude Oil sales contracts involving barter and:
(1) Sales, whether direct or indirect, through brokers or otherwise, of EGPC
or CONTRACTOR to any Affiliated Company.
(2) Sales involving a quid pro quo other than payment in a freely convertible
currency or motivated in whole or in part by considerations other than the
usual economic incentives for commercial arm's length crude oil sales.
(iii) It is understood that in the case of C.I.F. sales, appropriate
deductions shall be made for transport and insurance charges to calculate the
F.O.B. point of export price; and always taking into account the appropriate
adjustment for quality of Crude Oil, freight advantage or disadvantage of
port of loading and other appropriate adjustments. Market Price shall be
determined separately for each Crude Oil or Crude Oil mix, and for each port
of loading.
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Central Sinai Concession
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(iv) If during any calendar quarter, there are no such sales by EGPC and/or
CONTRACTOR under the Crude Oil sales contracts in effect, EGPC and CONTRACTOR
shall mutually agree upon the Market Price of the barrel of Crude Oil to be
used for such quarter, and shall be guided by all relevant and available
evidence including current prices in freely convertible currency of leading
crude oils produced by major oil producing countries (in the Arabian Gulf/at
the Mediterranean Area), which are regularly sold in the open market
according to actual sales contracts but excluding paper sales and sales
promises where no crude oil is delivered, to the extent that such sales are
effected under such terms and conditions (excluding the price) not
significantly different from those under which the Crude Oil to be valued,
was sold, and always taking into consideration appropriate adjustments for
Crude Oil quality, freight advantages or disadvantages of port of loading and
other appropriate adjustments, as the case may be, for differences in
gravity, sulphur, and other factors generally recognized by sellers and
purchasers, as reflected in crude prices, transportation ninety (90) days
insurance premiums, unusual fees borne by the seller, and for credit terms in
excess of sixty ( 60) days, and the cost of loans or guarantees granted for
the benefit of the sellers at prevailing interest rates. It is the intent of
the parties that the value of the Cost Recovery Crude Oil shall reflect the
prevailing market price for such Crude Oil.
(v) If either EGPC or CONTRACTOR considers that the Market, Price as
determined under sub-paragraph (ii) above does not reflect the prevailing
market price or in the event EGPC and CONTRACTOR fail to agree on Market
Price for any Crude Oil produced under this Agreement for any quarter within
fifteen (15) days after the end thereof, any party may elect at any time
thereafter to submit to a single arbitrator the question, what single price
per barrel, in the arbitrator's judgment, best represents for the pertinent
quarter the Market Price for the Crude Oil in question. The arbitrator shall
make his determination as soon as possible following the quarter in question.
His determination shall be final and binding upon all the parties. The
arbitrator shall be selected in the manner described below.
In the event EGPC and CONTRACTOR fail to agree on the arbitrator within
thirty (30) days from the date any party notifies the other that it has
decided to submit the determination of the Market Price to an arbitrator,
such arbitrator shall be chosen by the appointing authority designated in
accordance with Article XXIV (e), or such other appointing authority with
access to such expertise as may be agreed to between EGPC and CONTRACTOR,
with regard to the qualifications for arbitrators set forth below, upon
written application of one or both of EGPC and CONTRACTOR. Copies of such
application by one of them shall be promptly sent to the other.
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Central Sinai Concession
20-F
The arbitrator shall be as nearly as possible a person with an established
reputation in the international petroleum industry as an expert in pricing
and marketing crude oil in international commerce.
The arbitrator shall not be a citizen of a country which does not have
diplomatic relations with both the A.R.E., and the country of CONTRACTOR. He
may not be, at the time of selection, employed by, or an arbitrator or
consultant on a continuing or frequent basis to, the American Petroleum
Institute, the Organization of the Petroleum Exporting Countries or the
Organization of Arab Petroleum Exporting Countries, or a consultant on a
continuing basis to EGPC, CONTRACTOR or an Affiliated Company of either, but
past occasional consultation with such companies, with other petroleum
companies, with governmental agencies or organizations shall not be a ground
for disqualification. He may not have been, at any time during the two (2)
years before selection, an employee of any petroleum company or of any
government agency or organization.
Should a selected person decline or be unable to serve as arbitrator or
should the position of arbitrator fall vacant prior to the decision called
for, another person shall be chosen in the same manner provided in this
paragraph. EGPC and CONTRACTOR shall share equally the expenses of the
arbitrator.
The arbitrator shall make his determination in accordance with the provisions
of this paragraph, based on the best evidence available to him. He will
review oil sales contracts as well as other sales data and information, but
shall be free to evaluate the extent to which any contracts, data or
information is substantiated or pertinent. Representatives of EGPC and
CONTRACTOR shall have the right to consult with the arbitrator and furnish
him written materials provided the arbitrator may impose reasonable
limitations on this right. EGPC and CONTRACTOR each shall cooperate with the
arbitrator to the fullest extent and each shall insure such cooperation of
its trading companies. The arbitrator shall be provided access to crude oil
sales contracts and related data and information which EGPC and CONTRACTOR or
their trading companies are able to make available and which in the judgement
of the arbitrator might aid the arbitrator in making a valid determination.
(vi) Pending Market Price agreement by EGPC and CONTRACTOR or determination
by the arbitrator, as applicable, the Market Price agreed for the quarter
preceding the quarter in question shall remain temporarily in effect. In the
event either EGPC or CONTRACTOR should incur a loss by virtue of the
temporary continuation of the Market Price of the previous quarter, it shall
promptly be reimbursed such loss by the other party plus simple interest at
the LIBOR plus two and one-half percent (2.5%) per annum rate provided for in
Article IV (f) from the date on which the disputed amount(s) should have been
paid to the date of payment.
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Central Sinai Concession
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(2) GAS AND LPG
(i) The Cost Recovery and Production Shares of Gas subject to a Gas Sales
Agreement between EGPC and CONTRACTOR (as sellers) and EGPC (as buyer) entered
into pursuant to Article VII (e) shall be valued, delivered to and purchased by
EGPC at a price determined monthly according to the following formula:
F X H
-----------
PG = 0.85 X 42.96 X 106
Where:
PG = the value of the Gas in U.S. Dollars per thousand standard cubic feet
(MSCF).
F = a value in U .S. Dollars per metric ton of the Crude of Gulf of Suez
blend priced "FOB Ras Shukheir" calculated by referring to "Xxxxx'x Oilgram
Price Report" during a month under the heading "Spot Crude Price Assessment
for Suez Blend". This value reflects the total averages of the published high
and low values for a Barrel during such month divided by the number of days
in such month for which such values were quoted. The value per metric ton
shall be calculated on the basis of a conversion factor to be agreed upon
annually between EGPC and CONTRACTOR.
H = the number of British Thermal Units (BTU's) per thousand standard cubic
feet (MSCF) of the Gas based on gross calorific value.
In the event that the value of F cannot be determined because Xxxxx'x Oilgram
Price Report is not published at all during a month, EGPC and CONTRACTOR
shall meet and agree the value of F by reference to other published sources.
In the event that there are no such published sources or if the value of F
cannot be determined pursuant to the foregoing for any other reason, EGPC and
CONTRACTOR shall meet and agree to a value of F.
Such evaluation of Gas under a formula providing for a fifteen percent (15%)
discount is based upon delivery at the delivery point specified in Article
VII (e) (2) (ii) hereinafter and is to enable EGPC to finance and maintain
the portions of the pipeline distribution system to be provided by EGPC.
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Central Sinai Concession
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(ii) The Cost Recovery and Production Shares of LPG produced from a plant
constructed and operated by or on behalf of EGPC and CONTRACTOR shall be
separately valued for Propane and Butane at the outlet of such LPG plant
according to the following formula (unless otherwise agreed between EGPC and
CONTRACTOR):
PLPG = 0.95 PR - ( J X 0.85 X F )
------------
42.96 X 10(6)
Where:
PLPG = LPG price (separately determined for Propane and Butane) in U.S.
Dollars per metric ton.
PR = the average over a period of a month of the figures representing the
mid-point between the high and low prices in U.S. Dollars per metric ton
quoted in "Xxxxx'x LPGaswire" during such month for Propane and Butane FOB
Ex-Ref/Stor. West Mediterranean.
J = BTU's removed from the Gas Stream by the LPG plant per metric ton of LPG
produced.
F = the same value as F under sub-paragraph (i) above.
In the event that Xxxxx'x LPGaswire is issued on certain days during a month
but not on others, the value of PR shall be calculated using only those
issues which are published during such month. In the event that the value of
PR cannot be determined because Xxxxx'x LPGaswire is not published at all
during a month, EGPC and CONTRACTOR shall meet and agree to the value of PR
by reference to other published sources. In the event that there are no such
other published sources or if the value of PR cannot be determined pursuant
to the foregoing for any other reason, EGPC and CONTRACTOR shall meet and
agree to the value of PR by reference to the value of LPG (Propane and
Butane) delivered FOB from the Mediterranean Area.
Such valuation of LPG is based upon delivery at the delivery point specified
in Article VII (e) (2) (iii) hereinafter.
(iii) The prices of Gas and LPG so calculated shall apply during the same
month.
(iv) The Cost Recovery and production shares of Gas and LPG disposed of by
EGPC and CONTRACTOR other than to EGPC pursuant to Article VII (e)
hereinafter shall be valued at their actual realized price.
29
Central Sinai Concession
20-F
(d) FORECASTS
Operating Company shall prepare (not less than ninety (90) days prior to the
beginning of each calendar semester following first regular production) and
furnish in writing to CONTRACTOR and EGPC a forecast setting out a total
quantity of Petroleum that Operating Company estimates can be produced, saved
and transported hereunder during such calendar semester in accordance with
good oil and gas industry practices.
Operating Company shall endeavor to produce each calendar semester the
forecast quantity. The Crude Oil shall be run to storage tanks or offshore
loading facilities constructed, maintained and operated according to
GOVERNMENT regulations, by Operating Company in which said Crude Oil shall be
metered or otherwise measured for royalty, and the other purposes required by
this Agreement. Gas shall be handled by Operating Company in accordance with
the provisions of Article VII(e).
(f) DISPOSITION OF PETROLEUM
(1) EGPC and CONTRACTOR shall have the right and the obligation to separately
take and freely export or otherwise dispose of currently all of the Crude Oil
to which each is entitled under Article VII (a) and Article VII (b). Subject
to payment of sums due to EGPC under Article VII (a) 2 and Article IX,
CONTRACTOR shall have the right to remit and retain abroad all funds acquired
by it including the proceeds from the sales of its share of Petroleum.
Notwithstanding anything to the contrary under this Agreement priority shall
be given to meet the requirements of the A.R.E. market from CONTRACTOR's
share under Article VII (b) of the Crude Oil produced from the Area and EGPC
shall have the preferential right to purchase such Crude Oil at a price to be
determined pursuant to Article VII (c). The amount of Crude Oil so purchased
shall be a portion of CONTRACTOR's share under Article VII (b). Such amount
shall be proportional to CONTRACTOR's share of the total production of crude
oil from the concession areas in the A.R.E. that are also subject to EGPC's
preferential right to purchase. The payment for such purchased amount shall
be made by EGPC in U.S. Dollars or in any other freely convertible currency
remittable by CONTRACTOR abroad.
It is agreed upon that EGPC shall notify CONTRACTOR, at least forty-five (45)
days prior to the beginning of the calendar semester, of the amount to be
purchased during such semester under this Article VII (e) (1).
(2) With respect to Gas and LPG produced from the Area:
(i) Priority shall be given to meet the requirements of the local market as
determined by EGPC.
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Central Sinai Concession
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(ii) In the event that EGPC is to be the buyer of Gas, the disposition of Gas
to the local market as indicated above shall be by virtue of long term Gas
Sales Agreements to be entered into between EGPC and CONTRACTOR (as sellers)
and EGPC (as buyer). EGPC and CONTRACTOR (as sellers) shall have the
obligation to deliver Gas to the following point where such Gas shall be
metered for sales, royalty, and other purposes required by this Agreement.
(a) In the event no LPG Plant is constructed to process such Gas, the
delivery point shall be the flange connecting the lease pipeline to the
nearest point on the National Gas Pipeline Grid System as depicted in Annex
"F" or as otherwise agreed by EGPC and CONTRACTOR.
(b) In the event an LPG Plant is constructed to process such Gas, such Gas
shall, for the purpose of valuation and sales, be metered at the inlet to
such LPG Plant. However, notwithstanding the fact that the metering shall
take place at the LPG Plant inlet, CONTRACTOR shall through the Operating
Company build a pipeline suitable for transport of the processed Gas from
the LPG Plant outlet to the nearest point on the National as Pipeline Grid
System as depicted in Annex "F", or as otherwise agreed by EGPC and
CONTRACTOR. Such pipeline shall be owned in accordance with Article VIII
(a) by EGPC, and its cost shall be financed and recovered by CONTRACTOR as
Development Expenditures pursuant to Article VII.
(iii) EGPC and CONTRACTOR shall consult together to determine whether to
build an LPG plant for recovering LPG from any Gas produced hereunder. In the
event EGPC and CONTRACTOR decide to build such a plant, the plant shall, as
is appropriate, be in the vicinity of the point of delivery as determined in
Article VII (e) 2 (ii) above Delivery of LPG for royalty and other purposes
required by this Agreement shall be at the outlet of the LPG plant. The costs
of any such LPG plant shall be recoverable in accordance with the provisions
of this Agreement unless the Minister of Petroleum agrees to accelerated
recovery.
(iv) EGPC (as buyer) shall have the option to elect, by ninety (90) days
prior written notice to EGPC and CONTRACTOR (as sellers), whether payment for
the Gas which is subject to a Gas Sales Agreement between EGPC and CONTRACTOR
(as sellers) and EGPC (as buyer) and LPG produced from a plant constructed
and operated by or on behalf of EGPC and CONTRACTOR, as valued in accordance
with Article vn (c), and to which CONTRACTOR is entitled under the Cost
Recovery and Production Sharing provisions of Article vn herein, shall be
made I) in cash or 2) in kind.
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Central Sinai Concession
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Payments in cash shall be made by EGPC (as buyer) at intervals provided for
in the relevant Gas Sales Agreement in U.S. Dollars, remittable by CONTRACTOR
abroad.
Payments in kind shall be calculated by converting the value of Gas and LPG
to which CONTRACTOR is entitled into equivalent barrels of Crude Oil to be
taken concurrently by CONTRACTOR from the Area, or to the extent that such
Crude Oil is insufficient, Crude Oil from CONTRACTOR 's other concession
areas or such other areas as may be agreed. Such Crude Oil shall be added to
the Crude Oil that CONTRACTOR is otherwise entitled to lift under this
Agreement. Such equivalent barrels shall be calculated on the basis of the
provisions of Article VII (c) relating to the valuation of Cost Recovery
Crude Oil,
PROVIDED THAT:
(aa) Payment of the value of Gas and LPG shall always be made in cash in
U.S. Dollars remittable by CONTRACTOR abroad to the extent that there is
insufficient Crude Oil available for conversion as provided for above;
(bb) Payment of the value of Gas and LPG shall always be made in kind as
provided for above to the extent that payments n cash are not made by EGPC.
Payments, to CONTRACTOR (whether in cash or kind), when related to
CONTRACTOR's Cost Recovery Petroleum, shall be included in CONTRACTOR's
Statement of Recovery of Costs and of Cost Recovery Petroleum referred to
in Article IV of Annex "E" of this Agreement.
(v) Should EGPC (as buyer) fail to enter into a long-term Gas Sales Agreement
with EGPC and CONTRACTOR (as sellers) within five (5) years (unless otherwise
agreed) from a notice of Commercial Gas Discovery pursuant to Article III,
EGPC and CONTRACTOR shall have the right to take and freely dispose of the
quantity of Gas and LPG in respect of which the notice of Commercial
Discovery is given by exporting such Gas and LPG.
(vi) The proceeds of sale of CONTRACTOR's share of Gas and LPG disposed of
pursuant to the above sub-paragraph (v) may be freely remitted or retained
abroad by CONTRACTOR.
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Central Sinai Concession
20-F
(vii) In the event EGPC and CONTRACTOR agree to accept new Gas and LPG
producers to join in an ongoing export project, such producers shall have to
contribute a fair and equitable share of the investment made.
(viii) (aa) Upon the expiration of the five (5) year period referred to
in Article VII (e) 2 (v) above, CONTRACTOR shall have the obligation
to exert its reasonable efforts to find an export market for Gas
reserves.
(bb) In the event, at the end of the five (5) year period referred to
under Article VII (e) 2 (v) above, CONTRACTOR and EGPC have not
entered into a Gas Sales Agreement, CONTRACTOR shall retain its rights
to such Gas reserves for a further period of up to seven (7) years,
subject to Article VII (e) 2 (viii) (cc) below, during which period
EGPC shall attempt to find a market for the Gas reserves.
(cc) CONTRACTOR shall, at any time prior to the expiry of such further
seven (7) year period, surrender the Gas reserves, if CONTRACTOR does
not accept an offer from EGPC of a Gas Sales Agreement within six (6)
months from the date such offer is made, provided, that in such Gas
Sales Agreement or Gas disposal scheme offered to CONTRACTOR, the
relevant technical and economic factors to enable a commercial
contract or scheme are taken into consideration, including:
- A sufficient delivery rate.
- Delivery pressure to enter the National Gas Pipeline Grid System
at a mutually accepted point of delivery .
- Delivered Gas quality specifications not more stringent than
those imposed or required for the National Gas Pipeline Grid
System; and
- The Gas prices specified in this Agreement.
(dd) In the event that CONTRACTOR is not exporting the Gas and
CONTRACTOR has not entered a Gas Sales Agreement pursuant to Article
VII (e) (2) prior to the expiry of twelve (12) years from
"CONTRACTOR's notice of Commercial Discovery of Gas, CONTRACTOR shall
surrender the Gas reserves in respect of which such notice has been
given.
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Central Sinai Concession
20-F
(ix) CONTRACTOR shall not be obligated to surrender a Development Lease based
on a Commercial Gas Discovery, if Crude Oil has been discovered in commercial
quantities in the same Development Lease and vice versa.
(f) OPERATIONS
If following the reversion to EGPC of any rights to Crude Oil hereunder,
CONTRACTOR retains rights to Gas in the same Development Lease, or if,
following surrender of rights to Gas hereunder, CONTRACTOR retains rights to
Crude Oil in the same Development Lease, operations to explore for or exploit
the Petroleum, the rights to which have reverted or been surrendered (Oil or
Gas as the case may be) may only be carried out by Operating Company which
shall act on behalf of EGPC alone, unless CONTRACTOR and EGPC agree
otherwise.
(g) TANKER SCHEDULING
At a reasonable time prior to the commencement of Commercial Production EGPC
and CONTRACTOR shall meet and agree upon a procedure for scheduling tanker
liftings from the agreed upon point of export.
ARTICLE VIII
TITLE TO ASSETS
(a) EGPC shall become the owner of all CONTRACTOR acquired and owned assets
which assets were charged to Cost Recovery by CONTRACTOR in connection with
the operations carried out by CONTRACTOR or Operating Company in accordance
with the following:
(1) Land shall become the property of EGPC as soon as it is purchased.
(2) Title to fixed and moveable assets shall be transferred automatically
and gradually from CONTRACTOR to EGPC as they become subject to recovery in
accordance with the provisions of Article VII; however the full title to
fixed and movable assets shall be transferred automatically from CONTRACTOR
to EGPC when its total cost has been recovered by CONTRACTOR in accordance
with the provisions of Article VII or at the time of termination of this
Agreement with respect to all assets chargeable to tJ1e operations whether
recovered or not, whichever first occurs.
The book value of the assets created during each calendar quarter shall be
communicated by CONTRACTOR to EGPC or by Operating Company to EGPC and
CONTRACTOR within thirty (30) days of the end of each quarter.
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Central Sinai Concession
20-F
(b) During the term of this Agreement and the renewal period EGPC, CONTRACTOR
and Operating Company are entitled to the full use and enjoyment of all fixed
and movable assets referred to above in connection with operations hereunder
or under any other Petroleum concession agreement entered into by the
parties. Proper accounting adjustment shall be made. CONTRACTQR and EGPC
shall not dispose of the same except with agreement of the other.
(c) CONTRACTOR and Operating Company may freely import into the A.R.E., use
therein and freely export at the end of such use, machinery and equipment
which they either rent or lease in accordance with good industry practices,
including but not limited to the lease of computer hardware and software.
ARTICLE IX
BONUSES
(a) CONTRACTOR shall pay to EGPC as a signature bonus the sum of one million
(1,000,000) U.S. Dollars on the Effective Date.
(b) CONTRACTOR shall pay to EGPC the sum of two million (2,000,000) U .S.
Dollars as a production bonus when the total average daily production from
the Area first reaches the rate of twenty-five thousand (25,000) barrels per
day for a period of thirty (30) consecutive producing days. Payment will be
made within fifteen (15) days thereafter.
(c) CONTRACTOR shall also pay to EGPC the additional sum of four million
(4,000,000) U.S. Dollars as a production bonus when the total average daily
production from the Area first reaches the rate of fifty thousand (50,000)
barrels per day for a period of thirty (30) consecutive producing days.
Payment will be made within fifteen (15) days thereafter.
(d) CONTRACTOR shall also pay to EGPC the additional sum of eight million
(8,000,000) U.S. Dollars as a production bonus when the total average daily
production from the Area first reaches the rate of one-hundred thousand
(100,000) barrels per day for a period of thirty (30) consecutive producing
days. Payment will be made within fifteen (15) days thereafter.
(e) All the abovementioned bonuses shall in no event be recovered by
CONTRACTOR.
(f) In the event that EGPC elects to develop any part of the Area pursuant to
the sole risk provisions of Article III (c) (iv), production from such sole
risk Area shall be considered for the purposes of this Article IX only if
CONTRACTOR exercises its option to share in such production, and only from
the initial date of sharing.
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Central Sinai Concession
20-F
(g) Gas shall be taken into account for purposes of determining the total
average daily production from the Area under Article IX (b)-(d) by converting
daily Gas delivered into equivalent barrels of daily Crude Oil production in
accordance with the following formula:
MSCF x H x 0.136 = equivalent barrels of Crude Oil
Where
MSCF = one thousand standard cubic feet of Gas.
H = the number of million British Thermal Units (BTU's) per MSCF.
ARTICLE X
OFFICE AND SERVICE OF NOTICES
CONTRACTOR shall maintain an office in the A.R.E. at which notices shall be
validly served.
The General Manager and Deputy General Manager shall be entrusted by
CONTRACTOR with sufficient power to carry out immediately all local written
directions given to them by the GOVERNMENT or its representatives under the
terms of this Agreement. All lawful regulations issued or hereafter to be
issued which are applicable hereunder and not in conflict with this Agreement
shall apply to the duties and activities of the General Manager and Deputy
General Manager.
All matters and notices shall be deemed to be validly served which are
delivered to the office of the General Manager or which are sent to him by
registered mail to CONTRACTOR's office in the A.R.E.
All matters and notices shall be deemed to be validly served which are
delivered to the office of the Chairman of EGPC or which are sent to him by
registered mail at EGPC's main office in Cairo.
ARTICLE XI
SAVING OF PETROLEUM AND PREVENTION OF LOSS
(a) Operating Company shall take all proper measures, according to generally
accepted methods in use in the Oil and Gas industry to prevent loss or waste
of Petroleum above or under the ground in any form during drilling,
producing, gathering and distributing or storage operations. The GOVERNMENT
has the right to prevent any operation on any well that it might reasonably
expect would result in loss or damage to the well or the Crude Oil or Gas
field.
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Central Sinai Concession
20F
(b) Upon completion of the drilling of a productive well, Operating Company
shall inform the GOVERNMENT or its representative of the time when the well
will be tested and the production rate ascertained.
(c) Except in instances where multiple producing formations in the same well
can only be produced economically through a single tubing string, Petroleum
shall not be produced from multiple oil bearing zones through one string of
tubing at the same time, except with the prior approval of the GOVERNMENT or
its representative, which shall not be unreasonably withheld.
(d) Operating Company shall record data regarding the quantities of Petroleum
and water produced monthly from each Development Lease. Such data shall be
sent to the GOVERNMENT or its representative on the special forms provided
for that purpose within thirty (30) days after the data are obtained. Daily
or weekly statistics regarding the production from the Area shall be
available at all reasonable times for examination by authorized
representatives of the GOVERNMENT.
(e) Daily drilling records and the graphic logs of xxxxx must show the
quantity and type of cement and the amount of any other materials used in the
well for the purpose of protecting Petroleum, gas bearing or fresh water
strata.
Any substantial change of mechanical conditions of the well after its
completion shall be subject to the approval of the representative of the
GOVERNMENT.
ARTICLE XII
CUSTOMS EXEMPTIONS
(a) EGPC, CONTRACTOR, and Operating Company shall be permitted to import and
shall be exempted from customs duties, any taxes, levies or fees (including
fees imposed by Ministerial Decision No.254 of 1993 issued by the Minister of
Finance, as now or hereafter amended or substituted) of any nature (except
where an actual service has been rendered to CONTRACTOR by a competent
authority), and from the importation rules with respect to the importation of
machinery, equipment, appliances, materials, items, means of transport and
transportation (the exemption from taxes and duties for cars shall only apply
to cars to be used in operations), electric appliances, air conditioners for
offices, field housing and facilities, electronic appliances, computer
hardware and software, as well as spare parts required for any of the
imported items, all subject to a duly approved certificate issued by the
responsible representative nominated by EGPC for such purpose, which states
that the imported items are required for conducting the operations pursuant
to this Agreement. Such certificate shall be final and binding and shall
automatically result in the importation and the exemption without any further
approval, delay or procedure.
37
Central Sinai Concession
20F
(b) Machinery, equipment, appliances and means of transport and
transportation imported by EGPC's, CONTRACTOR's and Operating Company's
contractors and sub-contractors temporarily engaged in any activity pursuant
to the operations which are the subject of this Agreement, shall be cleared
under the "Temporary Release System" without payment of custom duties, any
taxes, levies or fees (including fees imposed by Ministerial Decision No. 254
of 1993 issued by the Minister of Finance, as now or hereafter amended or
substituted) of any nature (except where an actual service has been rendered
to CONTRACTOR by a competent authority), upon presentation of a duly approved
certificate issued by an EGPC responsible representative nominated by EGPC
for such purpose which states, that the imported items are required for
conducting the operations pursuant to this Agreement. Items (excluding cars
not to be used in operations) set out in Article XII (a) imported by EGPC's,
CONTRACTOR's and Operating Company's contractors and sub-contractors for the
aforesaid operations, in order to be installed or used permanently or
consumed shall meet the conditions for exemption set forth in Article XII (a)
after being duly certified by an EGPC responsible representative to be used
for conducting operations pursuant to this Agreement.
(c) The expatriate employees of CONTRACTOR, Operating Company and their
contractors and sub-contractors shall not be entitled to any exemptions from
custom duties and other ancillary taxes and charges except within the limits
of the provisions of the laws and regulations applicable in the A.R.E.
However, personal household goods and furniture (including one (1) car) for
each expatriate employee of CONTRACTOR and/or Operating Company shall be
cleared under the "Temporary Release System (without payment of any customs
duties and other ancillary taxes) upon presentation of a letter to the
appropriate customs authorities by CONTRACTOR or Operating Company approved
by an EGPC responsible representative that the imported items are imported
for the sole use of the expatriate employee and his family, and that such
imported items shall be re-exported outside the A.R.E. upon the repatriation
of the concerned expatriate employee.
(d) Items imported into the A.R.E. whether exempt or not exempt from customs
duties and other ancillary taxes and charges hereunder, may be exported by
the importing party at any time after obtaining EGPC's approval, which
approval shall not be unreasonably withheld, without any export duties, taxes
or charges or any taxes or charges from which such items have been already
exempt, being applicable. Such items may be sold within the A.R.E. after
obtaining the approval of EGPC which approval shall not be unreasonably
withheld. In this event the purchaser of such items shall pay all applicable
customs duties and other ancillary taxes and charges according to the
condition and value of such items and the tariff applicable on the date of
sale, unless such items have already been sold to an Affiliated Company of
CONTRACTOR, if any, or EGPC, having the same exemption, or unless title to
such items (excluding cars not used in operations) has passed to EGPC.
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Central Sinai Concession
20F
In the event of any such sale under this paragraph (d), the proceeds from
such sale shall be divided in the following manner:
CONTRACTOR shall be entitled to reimbursement of its unrecovered cost, if
any, in such items and the excess, if any, shall be paid to EGPC.
(e) The exemption provided for in Article XII (a) shall not apply to any
imported items when items of the same or substantially the same kind and
quality are manufactured locally meeting CONTRACTOR's and/or Operating
Company's specifications for quality and safety and are available for timely
purchase and delivery in the A.R.E. at a price not higher than ten percent
(10%) of the cost of the imported item, before customs duties but after
freight and insurance costs, if any, have been added.
(f) CONTRACTOR, EGPC and their respective buyers shall have the right to
freely export the Petroleum produced from the Area pursuant to this
Agreement. No license shall be required, and such petroleum shall be exempted
from any customs duties, any taxes, levies or any other imposts in respect of
the export of Petroleum hereunder.
ARTICLE XIII
BOOKS OF ACCOUNT: ACCOUNTING AND PAYMENTS
(a) EGPC, CONTRACTOR and Operating Company shall each maintain at their
business offices in the A.R.E. books of accounts, in accordance with the
Accounting Procedure in Annex "E" and accepted accounting practices generally
used in the petroleum industry, and such other books and records as may be
necessary to show the work performed under this Agreement, including the
amount and value of all Petroleum produced and saved hereunder. CONTRACTOR
and Operating Company shall keep their books of account and accounting
records in United States Dollars.
Operating Company shall furnish to the GOVERNMENT or its representative
monthly returns showing the amount of Petroleum produced and saved hereunder.
Such returns shall be prepared in the form required by the GOVERNMENT, or its
representative and shall be signed by the General Manager or by the Deputy
General Manager or a duly designated deputy, and delivered to the GOVERNMENT
or its representative within thirty (30) days after the end of the month
covered in the return.
(b) The aforesaid books of account and other books and records referred to
above shall be available at all reasonable times for inspection by duly
authorized representatives of the GOVERNMENT.
39
Central Sinai Concession
20F
(c) CONTRACTOR shall submit to EGPC a profit and loss Statement of its Tax
Year not later than four ( 4) months after the commencement of the following
Tax Year to show its net profit or loss from the Petroleum operations under
this Agreement for such Tax Year.
CONTRACTOR shall at the same time submit a year-end Balance Sheet for the
same Tax Year to EGPC. The Balance Sheet and financial Statements shall be
certified by an Egyptian certified accounting firm.
ARTICLE XIV
RECORDS, REPORTS AND INSPECTION
(a) CONTRACTOR and/or Operating Company shall prepare and, at all times while
this Agreement is in force, maintain accurate and current records of its
operations in the Area. CONTRACTOR and/or Operating Company shall furnish the
GOVERNMENT or its representative, in conformity with applicable regulations
or as the GOVERNMENT or its representative may reasonably require information
and data concerning its operations under this Agreement. Operating Company
will perform the functions indicated in this Article XIV in accordance with
its respective role as specified in Article VI.
(b) CONTRACTOR and/or Operating Company shall save and keep for a reasonable
period of time a representative portion of each sample of cores and cuttings
taken from drilling xxxxx, to be disposed of, or forwarded to the GOVERNMENT
or its representative in the manner directed by the GOVERNMENT. All samples
acquired by CONTRACTOR and/or Operating Company for their own purposes shall
be considered available for inspection at any reasonable time by the
GOVERNMENT or its representatives.
(c) Unless otherwise agreed to by EGPC, in case of exporting any rock samples
outside the A.R.E., samples equivalent in size and quality shall, before such
exportation, be delivered to EGPC as representative of the GOVERNMENT.
(d) Originals of records can only be exported with the permission of EGPC;
provided, however, that magnetic tapes and any other data which must be
processed or analyzed outside the A.R.E. may be exported if a monitor or a
comparable record, if available, is maintained in the A.R.E. and provided
that such exports shall be repatriated to the A.R.E. promptly following such
processing or analysis on the understanding that they belong to EGPC.
(e) During the period CONTRACTOR is conducting the Exploration operations,
EGPC's duly authorized representatives or employees shall have the right to
full and complete access to the Area at all reasonable times with the right
to observe the operations being conducted and to inspect all assets, records
and data kept by CONTRACTOR. EGPC's representative, in exercising its rights
under the preceding sentence of this paragraph (e), shall not interfere with
CONTRACTOR's operations. CONTRACTOR shall provide EGPC with copies of any and
all data (including, but not limited to, geological and geophysical reports,
logs and well surveys) information and interpretation of such data, and other
information in CONTRACTOR's possession.
40
Central Sinai Concession
20F
For the purpose of obtaining new offers, the GOVERNMENT and/or EGPC may,
after the seventh (7th) year of the Exploration period or the date of
termination of this Agreement, whichever is the earlier, show any other party
uninterpreted, basic geophysical and geological data (such data to be not
less than one (I) year old unless CONTRACTOR agrees to a shorter period,
which agreement shall not be unreasonably withheld) with respect to the Area,
provided that the GOVERNMENT and/or EGPC may at any time show another party
such data directly obtained over or acquired from those parts of the Area
which CONTRACTOR has relinquished as long as such data is at least one (1)
year old.
ARTICLE XV
RESPONSIBILITY FOR DAMAGES
CONTRACTOR shall entirely and solely be responsible in law toward third
parties for any damage caused by CONTRACTOR's Exploration operations and
shall indemnify the GOVERNMENT and/or EGPC against all damages for which they
may be held liable on account of any such operations.
ARTICLE XVI
PRIVILEGES OF GOVERNMENT REPRESENTATIVES
Duly authorized representatives of the GOVERNMENT shall have access to the
Area covered by this Agreement and to the operations conducted thereon. Such
representatives may examine the books, registers and records of EGPC,
CONTRACTOR and Operating Company and make a reasonable number of surveys,
drawings and tests for the purpose of enforcing this Agreement. They shall,
for this purpose, be entitled to make reasonable use of the machinery and
instruments of CONTRACTOR or Operating Company on the condition that no
danger or impediment to the operations hereunder shall arise directly or
indirectly from such use. Such representatives shall be given reasonable
assistance by the agents and employees ,of CONTRACTOR or Operating Company so
that none of the activities shall endanger or hinder the safety or efficiency
of the operations. CONTRACTOR or Operating Company shall offer such
representatives all privileges and facilities accorded to its own employees
in the field and shall provide them, free of charge, the use of reasonable
office space and of adequately furnished housing while they are in the field
for the purpose of facilitating the objectives of this Article. Without
prejudice to Article XIV (e), any and all information obtained by the
GOVERNMENT or its representatives under this Article XVI shall be kept
confidential with respect to the Area.
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ARTICLE XVII
EMPLOYMENT RIGHTS AND TRAINING OF
ARAB REPUBLIC OF EGYPT PERSONNEL
(a) It is the desire of EGPC and CONTRACTOR that operations hereunder be
conducted in a business-like and efficient manner.
(1) The expatriate administrative, professional and technical personnel
employed by CONTRACTOR or Operating Company and the personnel of its
contractors for the conduct of the operations hereunder, shall be granted a
residence as provided for in Law No.89 of 1960 as amended and Ministerial
Order N0. 280 of 1981 as amended, and CONTRACTOR agrees that all
immigration, passport, visa and employment regulations of the A.R.E. shall
be applicable to all alien employees of CONTRACTOR working in the A.R.E.
(2) A minimum of twenty-five percent (25%) of the combined salaries and
wages of each of the expatriate administrative, professional and technical
personnel employed by CONTRACTOR or Operating Company shall be paid monthly
in Egyptian currency.
(b) CONTRACTOR and Operating Company shall each select its employees and
determine the number thereof, to be used for operations hereunder.
(c) CONTRACTOR shall, after consultation with EGPC, prepare and carry out
specialized training programs for all its A.R.E. employees engaged in
operations hereunder with respect to applicable aspects of the petroleum
industry. CONTRACTOR and Operating Company undertake to replace gradually
their non-executive expatriate staff by qualified nationals as they are
available.
(d) During any of the Exploration phases, CONTRACTOR shall give mutually
agreed numbers of EGPC employees an opportunity to attend and participate in
CONTRACTOR's and CONTRACTOR 's Affiliated Companies training programs
relating to Exploration and Development operations. In the event that the
total cost of such programs is less than fifty thousand (50,000) u.s. Dollars
in any Financial Year during such period, CONTRACTOR shall pay EGPC the
amount of the shortfall within thirty (30) days following the end of such
Financial Year. However, EGPC shall have the right that said amount (U.S.
$50,000) allocated for training, be paid directly to EGPC for such purpose.
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ARTICLE XVM
LAWS AND REGULATIONS
(a) CONTRACTOR and Operating Company shall be subject to Law No.66 of 1953
(excluding Article 37 thereof) as amended by Law No.86 of 1956 and the
regulations issued for the implementation thereof, including the regulations
for the safe and efficient performance of operations carried out for the
execution of this Agreement and for the conservation of the petroleum
resources of the A.R.E. provided that no regulations, modification or
interpretation thereof, shall be contrary to or inconsistent with the
provisions of this Agreement.
(b) Except as provided in Article III (g) for income taxes, EGPC, CONTRACTOR
and Operating Company shall be exempted from all taxes and duties, whether
imposed by the GOVERNMENT or municipalities including among others, Sales
Tax, Value Added Tax and Taxes on the Exploration, Development, extracting,
producing, exporting or transporting of Petroleum and LPG as well as any and
all withholding taxes that might otherwise be imposed on dividends, interest,
technical service fees, patent and trademark royalties, and similar items.
CONTRACTOR shall also be exempted from any tax on the liquidation of
CONTRACTOR, or distributions of any income to the shareholders of CONTRACTOR,
and from any tax on capital.
(c) The rights and obligations of EGPC and CONTRACTOR under, and for the
effective term of this Agreement shall be governed by and in accordance with
the provisions of this Agreement and can only be altered or amended by the
written mutual agreement of the said contracting parties.
(d) The contractors and sub-contractors of CONTRACTOR and Operating Company
shall be subject to the provisions of this Agreement which affect them.
Insofar as all regulations which are duly issued by the GOVERNMENT apply from
time to time and are not in accord with the provisions of this Agreement,
such regulations shall not apply to CONTRACTOR, Operating Company and their
respective contractors and sub-contractors, as the case may be.
(e) EGPC, CONTRACTOR, Operating Company and their respective contractors and
sub-contractors shall for the purposes of this Agreement be exempted from all
professional stamp duties, imposts and levies imposed by syndical laws with
respect to their documents and activities hereunder.
(f) All the exemptions from the application of A.R.E. laws or regulations
granted to EGPC, CONTRACTOR, the Operating Company, their contractors and
sub-contractors under this. Agreement shall include such laws and
regulations as presently in effect or hereafter amended or substituted.
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ARTICLE XIX
STABILIZATION
In case of changes in existing legislation or regulations applicable to the
conduct of Exploration, Development and production of Petroleum, which take
place after the Effective Date, and which significantly affect the economic
interest of this Agreement to the detriment of CONTRACTOR or which imposes on
CONTRACTOR an obligation to remit to the A.R.E. the proceeds from sales of
CONTRACTOR's Petroleum, CONTRACTOR shall notify EGPC of the subject
legislative or regulatory measure. In such case, the Parties shall negotiate
possible modifications to this Agreement designed to restore the economic
balance thereof which existed on the Effective Date.
The Parties shall use their best efforts to agree on amendments to this
Agreement within ninety (90) days from aforesaid notice.
These amendments to this Agreement shall not in any event diminish or
increase the rights and obligations of CONTRACTOR as these were agreed on the
Effective Date.
Failing agreement between the Parties during the period referred to above in
this Article XIX, the dispute may be submitted to arbitration, as provided in
Article XXIV of this Agreement.
ARTICLE XX
RIGHT OF REQUISITION
(a) In case of national emergency due to war or imminent expectation of war
or internal causes, the GOVERNMENT may requisition all or part of the
production from the Area obtained hereunder and require Operating Company to
increase such production to the utmost possible maximum. The GOVERNMENT may
also requisition the Oil and/or Gas field itself and, if necessary, related
facilities.
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(b) In any such case, such requisition shall not be effected except after
inviting EGPC and CONTRACTOR or their representative by registered letter,
with acknowledgment of receipt, to express their views with respect to such
requisition.
(c) The requisition of production shall be effected by Ministerial Order. Any
acquisition of an Oil and/or Gas field, or any related facilities shall be
effected by a Presidential Decree duly notified to EGPC and CONTRACTOR.
(d) In the event of any requisition as provided above, the GOVERNMENT shall
indemnify in full EGPC and CONTRACTOR for the period during which the
requisition is maintained, including:
(1) All damages which result from such requisition; and
(2) Full repayment each month for all Petroleum extracted by the GOVERNMENT
less the royalty share of such production.
However, any damage resulting from enemy attack is not within the meaning
of this paragraph (d). Payment hereunder shall be made to CONTRACTOR in
U.S. Dollars remittable abroad. The price paid to CONTRACTOR for Petroleum
taken shall be calculated in accordance with Article VII (c).
ARTICLE XXI
ASSIGNMENT
(a) Neither EGPC nor CONTRACTOR may assign to a person, firm or corporation,
in whole or in part, any of its rights, privileges, duties or obligations
under this Agreement without the written consent of the GOVERNMENT.
(b) To enable consideration to be given to any request for such consent, the
following conditions must be fulfilled:
(1) The obligations of the assignor deriving from this Agreement must have
been duly fulfilled as of the date such request is made.
(2) The instrument of assignment must include provisions stating precisely
that the assignee is bound by all covenants contained in this Agreement
and any modifications or additions in writing that up to such time may have
been made. A draft of such instrument of assignment shall be submitted to
EGPC for review and approval before being formally executed.
(c) Notwithstanding the provisions of Article XXI(a), CONTRACTOR may assign
all or any of its rights, privileges, duties or obligations under this
Agreement to an Affiliated Company, provided that CONTRACTOR shall advise the
GOVERNMENT and EGPC in writing of the assignment.
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(d) Any assignment, sale, transfer or other such conveyance made pursuant to
the provisions of this Article XXI shall be free of any transfer, capital
gains taxes or related taxes, charges or fees including without limitation,
all income tax, sales tax, value added tax, stamp duty, or other taxes or
similar payments.
(e) As long as the assignor shall hold any interest under this Agreement the
assignor together with the assignee shall be jointly and severally liable for
all duties and obligations of CONTRACTOR under this Agreement.
ARTICLE XXII
BREACH OF AGREEMENT AND POWER TO CANCEL
The GOVERNMENT shall have the right to cancel this Agreement by Order or
Presidential Decree, with respect to CONTRACTOR, in the following instances:
(1) If it knowingly has submitted any false statements to the GOVERNMENT
which were of a material consideration for the execution of this
Agreement;
(2) If it assigns any interest hereunder contrary to the provisions of
Article XXI;
(3) If it is adjudicated bankrupt by a court of a competent jurisdiction;
(4) If it does not comply with any final decision reached as the result of
a court proceedings conducted under Article XXIV (a);
(5) If it intentionally extracts any mineral other than Petroleum not
authorized by this Agreement or without the authority of the
GOVERNMENT, except such extractions as may be unavoidable as the
result of operations conducted hereunder in accordance with accepted
petroleum industry practice and which shall be notified to the
GOVERNMENT or its representative as soon as possible; and
(6) If it commits any material breach of this Agreement or of the
provisions of Law No.66 of 1953, as amended by Law No. 86 of 1956,
which are not contradicted by the provisions of this Agreement.
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Such cancellation shall take place without prejudice to any rights which
may have accrued to the GOVERNMENT against CONTRACTOR in accordance with
the provisions of this Agreement, and, in the event of such cancellation,
CONTRACTOR, shall have the right to remove from the Area all its personal
property.
(b) If the GOVERNMENT deems that one of the aforesaid causes (other than a
force majeure cause referred to in Article XXIII hereof) exists to cancel
this Agreement, the GOVERNMENT shall give CONTRACTOR ninety (90) days
written notice personally served on CONTRACTOR IS General Manager in the
legally official manner and receipt of which is acknowledged by him or by
his legal agents, to remedy and remove such cause; but if for any reason
such service is impossible due to unnotified change of address, publication
in the Official Journal of the GOVERNMENT of such notice shall be
considered as validly served upon CONTRACTOR. If at the end of the said
ninety (90) day notice period such cause has not been remedied and removed,
this Agreement may be cancelled forthwith by Order or Presidential Decree
as aforesaid; provided, however, that if such cause, or the failure to
remedy or remove such cause results from any act or omission of one party,
cancellation of this Agreement shall be effective only against that party
and not as against any other party hereto.
ARTICLE XXIII
FORCE MAJEURE
(a) The non-performance or delay in performance by EGPC and CONTRACTOR, or
either of them of any obligation under this Agreement shall be excused if,
and to the extent that, such non- performance or delay is caused by force
majeure. The period of any such non-performance or delay, together with such
period as may be necessary for the restoration of any damage done during such
delay, shall be added to the time given in this Agreement for the performance
of such obligation and for the performance of any obligation dependent
thereon and consequently, to the term of this Agreement, but only with
respect to the block or blocks affected.
(b) "Force Majeure", within the meaning of this Article XXIII, shall be any
order, regulation or direction of the GOVERNMENT with respect to CONTRACTOR
whether promulgated in the form of a law or otherwise or any act of God,
insurrection, riot, war, strike, and other labor disturbance, fires, floods
or any cause not due to the fault or negligence of EGPC and CONTRACTOR or
either of them, whether or not similar to the foregoing, provided that any
such cause is beyond the reasonable control of EGPC and CONTRACTOR, or either
of them.
(c) Without prejudice to the above and except as may be otherwise provided
herein, the GOVERNMENT shall incur no responsibility whatsoever to EGPC and
CONTRACTOR, or either of them for any damages, restrictions or loss arising
in consequence of such case of force majeure except a force majeure caused by
the order, regulations or direction of the GOVERNMENT.
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(d) If the force majeure event occurs during the initial Exploration Period
or any extension thereof and continues in effect for a period of six (6)
months CONTRACTOR shall have the option upon ninety (90) days prior written
notice to EGPC to terminate its obligations hereunder without further
liability of any kind.
ARTICLE XXIV
DISPUTES AND ARBITRATION
(a) Any dispute, controversy or claim arising out of or relating to this
Agreement or the breach, termination or invalidity thereof, between the
GOVERNMENT and the parties hereto shall be referred to the jurisdiction of
the appropriate A. R. E. Courts and shall be finally settled by such Courts.
(b) Any dispute, controversy or claim arising out of or relating to this
Agreement, or the breach, termination or invalidity thereof, between
CONTRACTOR and EGPC shall be settled by, arbitration in accordance with the
Arbitration Rules of the Cairo Regional Centre for International Commercial
Arbitration (the Centre) in effect on the date of the Concession Agreement.
The award of the arbitrators shall be final and binding on the parties.
(c) The number of arbitrators shall be three (3).
(d) Each party shall appoint one arbitrator. If, within thirty (30) days
after receipt of the claimant's notification of the appointment of an
arbitrator, the respondent has not notified the claimant in writing of the
name of the arbitrator he appoints, the claimant may request the Centre to
appoint the second arbitrator.
(e) The two arbitrators thus appointed shall choose the third arbitrator who
will act as the presiding arbitrator of the tribunal. If within thirty (30)
days after the appointment of the second arbitrator, the two arbitrators have
not agreed upon the choice of the presiding arbitrator, then either party may
request the Secretary General of the Permanent Court of Arbitration at the
Hague to designate the appointing authority. Such appointing authority shall
appoint the presiding arbitrator in the same way as a sole arbitrator would
be appointed under Article 6.3 of the UNCITRAL Arbitration Rules. Such
presiding arbitrator shall be a person of a country which has diplomatic
relations with the A.R.E., and who shall have no economic interest in the
Petroleum business of the signatories hereto.
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(f) Unless otherwise agreed by the parties to the arbitration, the
arbitration, including the making of the award, shall take place in Cairo,
A.R.E.
(g) The decisions of a majority of the arbitrators shall be final and binding
upon the Parties and the arbitral award rendered shall be final and
conclusive. Judgment on the arbitral award rendered may be entered in any
court having jurisdiction or application may be made in such court for a
judicial acceptance of the award and for enforcement, as the case may be.
(h) Egyptian Law shall apply to the dispute except that in the event of any
conflict between Egyptian Laws and this Agreement the provisions of this
Agreement (including the arbitration provision) shall prevail. The
arbitration shall be conducted in the English Language.
(i) EGPC and CONTRACTOR agree that if, for whatever reason, arbitration in
accordance with the above procedure cannot take place, or is likely to take
place under circumstances for CONTRACTOR which could prejudice CONTRACTOR's
right to fair arbitration, all disputes, controversies or claims arising out
of or relating to this Agreement or the breach, termination or invalidity
thereof shall be settled by ad hoc arbitration in accordance with the
UNCITRAL Rules in effect on the Effective Date.
ARTICLE XXV
STATUS OF THE PARTIES
(a) The rights, duties, obligations and liabilities in respect of EGPC and
CONTRACTOR hereunder shall be several and not joint or collective, it being
understood that this Agreement shall not be construed as constituting an
association or corporation or partnership.
(b) CONTRACTOR shall be subject to the laws of the place where it is
incorporated regarding its legal status or creation, organization, charter
and by-laws, shareholding, and ownership. CONTRACTOR shares of capital which
are entirely held abroad shall not be negotiable in the A.R.E. and shall not
be offered for public subscription nor shall they be subject to the stamp tax
on capital shares nor any tax or duty in the A.R.E. CONTRACTOR shall be
exempted from the application of Law No.159 of 1981 as amended.
(c) CONTRACTOR shall be jointly and severally liable for the performance of
the obligations of CONTRACTOR under this Agreement.
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ARTICLE XXVI
LOCAL CONTRACTORS AND LOCALLY
MANUFACTURED MATERIAL
CONTRACTOR or Operating Company, as the case may be, and their contractors
shall:
(a) Give priority to local contractors and sub-contractors, including EGPC's
Affiliated Companies as long as their performance is comparable with
international performance and the prices of their services are not higher
than the prices of other contractors and sub-contractors by more than ten
percent (10%).
(b ) Give preference to locally manufactured material, equipment, machinery and
consumables so long as their quality and time of delivery are comparable to
internationally available material, 0equipment, machinery and consumables.
However, such material, equipment, machinery and consumables may be
imported for operations conducted hereunder if the local price of such
items at CONTRACTOR's or Operating Company's operating base in the A. R. E.
is more than ten percent (10%) higher than the price of such imported items
before customs duties, but after transportation and insurance costs have
been added.
ARTICLE XXVII
ARABIC TEXT
The Arabic version of this Agreement shall, before the Courts of the A.R.E.,
be referred to in construing or interpreting this Agreement, provided
however, that in any arbitration pursuant to Article XXIV herein between EGPC
and CONTRACTOR the English and Arabic version shall both be referred to as
having equal force in construing or interpreting the Agreement.
ARTICLE XXVIII GENERAL
The headings or titles to each of the Articles to this Agreement are solely
for the convenience of the parties hereto and shall not be used with respect
to the interpretation of said Articles.
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ARTICLE XXIX
APPROVAL OF THE GOVERNMENT
This Agreement shall not be binding upon any of the parties hereto unless and
until a law is issued by the competent authorities of the A.R.E. authorizing
the Minister of Petroleum to sign this Agreement and F giving this Agreement
full force and effect of law, notwithstanding any countervailing governmental
enactment, and the Agreement is signed by the GOVERNMENT, EGPC, and
CONTRACTOR.
NATIONAL EXPLORATION COMPANY
BY:
--------------------------------
EGYPTIAN GENERAL PETROLEUM CORPORATION
BY:
--------------------------------
ARAB REPUBLIC OF EGYPT
BY:
--------------------------------
DATE:
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