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