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EXHIBIT 10(B)
PAPUA NEW GUINEA PPL 77 AGREEMENT
THIS AGREEMENT is made and entered into this 27th day of April, 1995,
by, between and among Garnet PNG Corporation, 000 Xxxx Xxxxxx, Xxxxx 0000,
Xxxxxxx, Xxxxx 00000 ("Garnet"), Niugini Energy Pty Limited, 0000 Xxxxx Xxxxxx
Xxxxxx, Xxxxx 000, Xxxxxx, Xxxxxxxx 00000 ("Niugini Energy"), and Occidental
International Exploration and Production Company, X.X. Xxx 00000, Xxxxxxxxxxx,
Xxxxxxxxxx 00000 ("Oxy").
1. BACKGROUND. Garnet and Niugini Energy together own Petroleum
Prospecting License 77 ("PPL 77") in Papua New Guinea, originally issued by the
Minister for Minerals and Energy on December 1, 1986, and now covering 45
graticular blocks. Oxy wishes to explore the lands covered by PPL 77, which, by
Direction S.96 dated December 3, 1992, has been extended for a period of twelve
months from the date a Petroleum Agreement is executed by the PNG Government and
the Licensees. Such a Petroleum Agreement was executed by the Government on
December 21, 1994 and by the Licensees on January 30, 1995.
In order to secure the greater time and certainty necessary to
identify drillable locations and to drill exploration xxxxx within the license
area in a responsible fashion, the parties have agreed that Garnet and Niugini
Energy will seek to surrender PPL 77, so that Garnet, Niugini Energy and Oxy
may jointly apply to the PNG Government for a new license covering all of the
lands now within PPL 77.
2. LICENSE SURRENDER AND APPLICATION; ALTERNATIVE MECHANISMS. The
parties agree that within 30 days after the date of this agreement, Garnet and
Niugini Energy shall formally seek to surrender and relinquish PPL 77 in its
entirety, conditioned upon the grant of a new petroleum prospecting license to
Garnet, Niugini Energy and Oxy's subsidiary to be named later ("Occidental")
covering the same lands. At that same time, Garnet, Niugini Energy and
Occidental shall formally apply for such a new license (the "New License")
covering all of the lands now within PPL 77. This New License will be applied
for and, if issued, held by Garnet (6%), Niugini Energy (6%), and Occidental
(88%).
The parties' principal objective is to secure, for their
collective benefit, a new license allowing responsible exploration and
development of the lands covered by PPL 77. If at any time it appears that
another alternative, such as seeking a variance and extension of PPL 77 or some
other arrangement, might more easily accomplish this objective, the parties
may, by unanimous agreement, pursue such alternative path.
3. OCCIDENTAL PROMISES. PPL 77 is currently owned 40% by Garnet
and 60% by Niugini Energy. The conditional surrender and New License
application contemplated by this agreement will substantially reduce their
interests, yet Garnet and Niugini Energy hereby agree to seek the conditional
surrender and to allow Occidental an 88% interest in the New License in
consideration of Occidental's promises that:
3.1 Occidental will drill and complete a new test well on lands
covered by the New License satisfactory to the Department of Minerals and
Petroleum within the first two years of the New License term;
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3.2 Occidental will pay 100% of all security deposits, bonds,
bonuses, rentals, stamp duties, exploration costs, and other costs of every type
and nature in connection with the New License and all activities thereon until
this new test well has been drilled and completed (either as a dry hole or as a
producer), although Garnet and Niugini Energy will bear their own travel, legal,
and other expenses which they may incur in connection with the surrender of PPL
77; and
3.3 Oxy and Occidental will not seek or accept any interest in
any license covering lands now within PPL 77 prior to December 31, 1996, unless
it first allows Garnet and Niugini Energy each to participate in such interest
on the terms and conditions contemplated by this agreement.
4. OPERATING AGREEMENT. The parties agree that when the New License is
issued, the parties shall enter into a unanimously agreed operating agreement
covering the New License, which shall include terms and conditions normally
found in joint operating agreements in the international petroleum industry,
including designation of Occidental as operator and providing that each party
shall pay its proportionate share of all expenses incurred after the new test
well has been drilled and completed. Before the new test well is completed, all
decisions concerning the nature, scope and timing of the exploration work and
the drilling and completion of the new test well will be made solely by
Occidental, after an opportunity for comment by Garnet and Niugini Energy.
5. NO LIABILITY. The parties recognize that the success of the
contemplated surrender of PPL 77 and issuance of the New License is entirely
dependent upon the discretion of the Department of Minerals and Petroleum, and
the parties hereby expressly release each other, absent conduct by a party in
bad faith, from any liability associated with the conditional surrender, the
denial of the New License, or any other consequences of an action undertaken in
furtherance of this agreement.
GARNET PNG CORPORATION NIUGINI ENERGY PTY LIMITED
By: /s/ ILLEGIBLE By: /s/ ILLEGIBLE
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Title: Vice President Title: Managing Director
OCCIDENTAL INTERNATIONAL EXPLORATION
AND PRODUCTION COMPANY
By: /s/ ILLEGIBLE
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Title: Vice President Expl Operations
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