GN PC TABLE OF CONTENTS ARTICLE PAGE 1. DEFINITIONS 2 2. SCOPE OF THE AGREEMENT, INTERESTS OF THE PARTIES AND CONTRACT AREA 8 3. EXPLORATION PERIOD 11 4. MINIMUM EXPLORATION PROGRAMME 14 5. RELINQUISHMENT 17 6. JOINT MANAGEMENT COMMITTEE 18 7. OBLIGATIONS OF CONTRACTOR AND GNPC; RIGHTS OF CONTRACTOR 22 8. COMMERCIALITY 25 9. SOLE RISK ACCOUNT 30 10. SHARING OF CRUDE OIL 33 11. MEASUREMENT AND PRICING OF CRUDE OIL 40 12. TAXATION AND OTHER IMPOSTS 42 13. FOREIGN EXCHANGE TRANSACTIONS 45 14. SPECIAL PROVISIONS FOR NATURAL GAS 47 15. DOMESTIC SUPPLY REQUIREMENT (CRUDE OIL) 53 16. INFORMATION AND REPORTS: CONFIDENTIALITY 54 17. INSPECTION, SAFETY AND ENVIRONMENTAL PROTECTION 57 18. ACCOUNTING AND AUDITING 59 19. TITLE TO AND CONTROL OF GOODS AND EQUIPMENT 61 20. PURCHASING AND PROCUREMENT 63 Model Petroleum Agreement of Ghana (17/8/2000) i ARTICLE PAGE 21. EMPLOYMENT AND TRAINING 64 22. FORCE MAJEURE 65 23. TERM AND TERMINATION 66 24. CONSULTATION, ARBITRATION AND INDEPENDENT EXPERT 69 25. ASSIGNMENT 71 26. MISCELLANEOUS 72 27. NOTICE 74 ANNEX 1 - CONTRACT AREA ANNEX 2 - ACCOUNTING GUIDE ANNEX 3 - CORPORATE GUARANTEE ANNEX 4 - LIST OF DATA Model Petroleum Agreement of Ghana (17/8/2000) ii THIS PETROLEUM AGREEMENT, made this .............. day of ............................................ 200__ by and among the Government of the Republic of Ghana (hereinafter referred to as "The State"), represented by the Minister of Energy (hereinafter referred to as the “Minister”), the Ghana National Petroleum Corporation, a public corporation established by Provisional National Defence Council Law 64 of 1983 (hereinafter referred to as “GNPC”), and ………………………………. hereinafter referred to as "Contractor") WITNESSETH: 1. All Petroleum existing in its natural state within Ghana is the property of the Republic of Ghana and held in trust by the State. 2. GNPC has by virtue of the Petroleum Law the right to undertake Exploration, Development and Production of Petroleum over all blocks declared by the Minister to be open for Petroleum Operations. 3. GNPC is further authorised to enter into association by means of a Petroleum Agreement with a contractor for the purpose of Exploration, Development and Production of Petroleum. 4. The Contract Area that is the subject matter of this Petroleum Agreement has been declared open for Petroleum Operations by the Minister and the Government of Ghana desires to encourage and promote Exploration, Development and Production within the said area. GNPC and the State have assured Contractor that all of said area is within the jurisdiction of Ghana. 5. Contractor, having the financial ability, technical competence and professional skills necessary for carrying out the Petroleum Operations herein described, desires to associate with GNPC in the Exploration for, and Development and Production of, the Petroleum resources of the said area. 6. The Parties recognise that Ghanaian nationals should as soon as reasonably possible be engaged in employment at all levels in the Petroleum industry, including technical, administrative and managerial positions, and that to achieve this objective an adequate programme of training must be established as an integral part of this Agreement. NOW THEREFORE, in consideration of the mutual covenants herein contained, it is hereby agreed and declared as follows: Model Petroleum Agreement of Ghana (17/8/2000) 1 ARTICLE 1 DEFINITIONS 1. In this Agreement: 1.1 “Accounting Guide” means the accounting guide which is attached hereto as Annex 2 and made a part hereof; 1.2 “Affiliate” means any person, whether a natural person, corporation, partnership, unincorporated association or other entity: a) in which one of the Parties hereto or one of the companies comprising Contractor directly or indirectly hold more than fifty percent (50%) of the share capital or voting rights; b) which holds directly or indirectly more than fifty percent (50%) of the share capital or voting rights in a Party hereto or of the companies comprising Contractor; c) in which the share capital or voting rights are directly or indirectly and to an extent more than fifty percent (50%) held by a company or companies holding directly or indirectly more than fifty percent (50%) of the share capital or voting rights in a Party hereto; or d) which holds directly five percent (5%) or more of the share capital or voting rights in Contractor. 1.3 “Agreement” means this Agreement between the State, GNPC and Contractor, and includes the Annexes attached hereto; 1.4 “Appraisal Programme” means a programme carried out following a Discovery of Petroleum for the purpose of delineating the accumulation of Petroleum to which that Discovery relates in terms of thickness and lateral extent and estimating the quantity of recoverable Petroleum therein; 1.5 “Appraisal Well” means a well drilled for the purposes of an Appraisal Programme; 1.6 “Associated Gas” means Natural Gas produced from a well in association with Crude Oil; Model Petroleum Agreement of Ghana (17/8/2000) 2 1.7 “Barrel” means a quantity or unit of Crude Oil equal to forty-two (42) United States gallons at a temperature of sixty (60) degrees Fahrenheit and at 14.65 psia pressure. 1.8 “Block” means an area of approximately 685 square kilometres as depicted on the reference map prepared by the Minister in accordance with the provisions of the Petroleum Law; 1.9 “Calendar Year” means the period of twelve (12) months of the Gregorian calendar, commencing on January 1 and ending on the succeeding December 31; 1.10 “Carried Interest” means an interest held by GNPC in respect of which Contractor pays for the conduct of Petroleum Operations without any entitlement to reimbursement from GNPC; 1.11 “Commercial Discovery” means a Discovery which is determined to be commercial in accordance with the provisions of this Agreement; 1.12 “Commercial Production Period” means in respect of each Development and Production Area the period from the Date of Commencement of Commercial Production until the termination of this Agreement or earlier relinquishment of such Development and Production Area; 1.13 “Contract Area” means the area covered by this Agreement in which Contractor is authorised to explore for, develop and produce Petroleum, which is described in Annex 1 attached hereto and made a part of this Agreement, but excluding any portions of such area in respect of which Contractor's rights hereunder are from time to time relinquished or surrendered pursuant to this Agreement; 1.14 “Contractor” means …………. and its respective successors and assignees. 1.15 “Contract Year” means a period of twelve (12) calendar months, commencing on the Effective Date or any anniversary thereof; 1.16 “Crude Oil” means hydrocarbons which are liquid at 14.65 psia pressure and sixty (60) degrees Fahrenheit and includes condensates and distillates obtained from Natural Gas; 1.17 “Date of Commencement of Commercial Production” means, in respect of each Development and Production Area, the date on which production of Petroleum under a programme of regular production, lifting and sale commences; 1.18 “Date of Commercial Discovery” means the date referred to in Article 8.12; Model Petroleum Agreement of Ghana (17/8/2000) 3 1.19 “Development” or “Development Operations” means the preparation of a Development Plan, the building and installation of facilities for Production, and includes drilling of Development Wells, construction and installation of equipment, pipelines, facilities, plants and systems, in and outside the Contract Area, which are required for achieving Production, treatment, transport, storage and lifting of Petroleum, and preliminary Production and testing activities carried out prior to the Date of Commencement of Commercial Production, and includes all related planning and administrative work, and may also include the construction and installation of secondary and tertiary recovery systems; 1.20 “Development Costs” means Petroleum Costs incurred in Development Operations; 1.21 “Development and Production Area” means that portion of the Contract Area reasonably determined by Contractor (or by GNPC if a Sole Risk Operation pursuant to Article 9) on the basis of the available seismic and well data to cover the areal extent of an accumulation of Petroleum constituting a Commercial Discovery, enlarged in area by ten percent (10%), such enlargement to extend uniformly around the perimeter of such accumulation; 1.22 “Development Period” means in respect of each Development and Production Area, the period from the Date of Commercial Discovery until the Date of Commencement of Commercial Production; 1.23 “Development Plan” means the plan for development of a Commercial Discovery prepared by Contractor in consultation with the Joint Management Committee and approved by the Minister pursuant to Article 8; 1.24 “Development Well” means a well drilled in accordance with a Development Plan for producing Petroleum, for pressure maintenance or for increasing the Production rate; 1.25 “Discovery” means finding during Exploration Operations an accumulation of Petroleum which can be and is recovered at the surface in a flow measurable by conventional petroleum industry testing methods; 1.26 “Discovery Area” means that portion of the Contract Area, reasonably determined by Contractor (or by GNPC if a Sole Risk Operation pursuant to Article 9) on the basis of the available seismic and well data to cover the areal extent of the geological structure in which a Discovery is made. A Discovery Area may be modified at any time by Contractor (or by GNPC if applicable), if justified on the basis of new information, but may not be modified after the date of completion of the Appraisal Programme. 1.27 “Effective Date” shall have the meaning ascribed to it in Article 26.8; Model Petroleum Agreement of Ghana (17/8/2000) 4 1.28 “Exploration” or “Exploration Operations” means the search for Petroleum by geological, geophysical and other methods and the drilling of Exploration Well(s) and includes any activity in connection therewith or in preparation thereof and any relevant processing and appraisal work, including technical and economic feasibility studies, that may be carried out to determine whether a Discovery of Petroleum constitutes a Commercial Discovery; 1.29 “Exploration Period” means the period commencing on the Effective Date and continuing during the time provided for in Article 3.1 within which Contractor is authorised to carry out Exploration Operations and shall include any periods of extensions provided for in this Agreement. The period shall terminate with respect to any Discovery Area on the Date of Commercial Discovery in respect of such Discovery Area; 1.30 “Exploration Well” means a well drilled in the course of Exploration Operations conducted hereunder during the Exploration Period, but does not include an Appraisal Well; 1.31 “Force Majeure” means any event beyond the reasonable control of the Party claiming to be affected by such event which has not been brought about at its instance, including, but not limited to, earthquake, storm, flood, lightning or other adverse weather conditions, war, embargo, blockade, riot or civil disorder; 1.32 “Foreign National Employee” means an expatriate employee of Contractor, its Affiliates, or its Sub-contractors who is not a citizen of Ghana; 1.33 “Ghana” means the territory of the Republic of Ghana and includes the sea, seabed and subsoil, the continental shelf and all other areas within the jurisdiction of the Republic of Ghana; 1.34 “Gross Production” means the total amount of Petroleum produced and saved from a Development and Production Area during Production Operations which is not used by Contractor in Petroleum Operations and is available for distribution to the Parties in accordance with Article 10; 1.35 “Joint Management Committee (JMC)” means the committee established pursuant to Article 6.1 hereof; 1.36 “Minister” means Minister of Energy; 1.37 “Month” means a month of the Calendar Year Model Petroleum Agreement of Ghana (17/8/2000) 5 1.38 “Natural Gas” means all hydrocarbons which are gaseous at 14.65 psia pressure and sixty (60) degrees Fahrenheit temperature and includes wet gas, dry gas and residue gas remaining after the extraction of liquid hydrocarbons from wet gas; 1.39 “Non-Associated Gas” means Natural Gas produced from a well other than in association with Crude Oil; 1.40 “Operator” means ……….. or such other Party as may be appointed by Contractor with the approval of GNPC and the State, which approval shall not be unreasonably withheld. 1.41 “Party” means the State, GNPC or Contractor, as the case may be; 1.42 “Paying Interest” means an interest held by GNPC in respect of which GNPC pays for the conduct of Petroleum Operations; 1.43 “Petroleum” means Crude Oil or Natural Gas or a combination of both; 1.44 “Petroleum Costs” means all expenditures made and costs incurred in conducting Petroleum Operations hereunder determined in accordance with the Accounting Guide attached hereto as Annex 2; 1.45 “Petroleum Income Tax Law” means the Petroleum Income Tax Law, 1987 (PNDCL 188); 1.46 “Petroleum Law” means the Petroleum (Exploration and Production) Law, 1984 (PNDCL 84); 1.47 “Petroleum Operations” means all activities, both in and outside Ghana, relating to the Exploration for, Development, Production, handling and transportation of Petroleum contemplated under this Agreement and includes Exploration Operations, Development Operations and Production Operations and all activities in connection therewith; 1.48 “Petroleum Product” means any product derived from Petroleum by any refining or other process; 1.49 “Production” or “Production Operations” means activities not being Development Operations undertaken in order to extract, save, treat, measure, handle, store and transport Petroleum to storage and/or loading points and to carry out any type of primary and secondary operations, including recycling, recompression, maintenance of pressure and water flooding and all related activities such as planning and administrative work and shall also include maintenance, repair and replacement of facilities, and well workovers, conducted Model Petroleum Agreement of Ghana (17/8/2000) 6 after the Date of Commencement of Commercial Production of the respective Development and Production Area; 1.50 “Production Costs” means Petroleum Costs incurred in Production Operations; 1.51 “Quarter” means a Calendar Quarter, commencing January 1, April 1, July 1 or October 1; 1.52 “Sole Risk” means an operation conducted at the sole cost, risk and expense of GNPC referred to in Article 9; 1.53 “Specified Rate” means the rate which the ................. Bank, London, certifies to be the London Interbank offered rate (LIBOR) in the London Interbank Eurodollar market on thirty (30) day deposits, in effect on the last business day of the last respective preceding month, plus one per cent (1%); 1.54 “Standard Cubic Foot” or “SCF” means the quantity of gas that occupies one (1) cubic foot at 14.65 psia pressure and sixty (60) degrees Fahrenheit temperature; 1.55 “State” means the Government of the Republic of Ghana; 1.56 “Subcontractor” has the meaning assigned to that term in the Petroleum Income Tax Law; 1.57 “Termination” means termination of this Agreement pursuant to Article 23 hereof; 1.58 “Work Programme” means the annual plan for the conduct of Petroleum Operations prepared pursuant to Articles 6.4 and 6.5. Model Petroleum Agreement of Ghana (17/8/2000) 7