SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
(Amendment No. 1)
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) July 15, 1994
TRITON ENERGY CORPORATION
(Exact name of registrant as specified in its charter)
Texas 1-78644 75-1151855
(State or other jurisdiction of (Commission (IRS Employer
incorporation) File Number) Identification No.)
Registrant's telephone number, including area code (214) 691-5200
N/A
(Former name or former address, if changed since last report)
Reference is made to the Current Report on Form 8-K filed by
Triton Energy Corporation on August 2, 1994. There is hereby
added to the Form 8-K a new Item 5 to read in its entirety as
follows:
Item 5. Other Events.
Effective July 19, 1994, the Company's subsidiary Triton
Colombia, Inc., purchased from BP Exploration Company (Colombia)
Limited ("BP") and Total Exploratie En Produktie Maatschappij
B.V. ("TOTAL") undivided 1% and 11% interests, respectively, in
the Association Contract for Sector Rio Chitamena dated as of
February 1, 1991, by and between Empresa Colombiana de Petroleos
("Ecopetrol") and TOTAL. The consideration paid was $9,800,000,
the source of which was cash on hand. Additional consideration
of $1,100,000 is to be paid upon fifteen days prior written
demand when cumulated production reaches twenty thousand barrels
of oil production, provided that such payment, if any, shall not
be made before January 3, 1995. The consideration was
determined by negotiations between the parties based, from the
Company's point of view, on the costs invested by BP and TOTAL
and the value of the rights and reserves acquired. The period
of time during which the parties have secured the right to
produce oil and gas from the Rio Chitamena contract area
continues through 2015 or 2019 depending on contract
interpretation.
On July 19, 1994, the Company's subsidiary Triton Colombia,
Inc., BP, TOTAL and Ecopetrol entered into an Integral Plan for
the Unified Exploitation of the Cusiana Oil Structure in the
Santiago de las Atalayas ("SDLA"), Tauramena and Rio Chitamena
Association Contract Areas. Under the plan, the parties have
agreed to develop the Cusiana oil structure in a technically
efficient and cooperative manner during three consecutive
periods of time. During the initial period, petroleum produced
from the unified area will be owned by the parties according to
their respective undivided interests in each contract area. The
Company will have a net revenue interest of approximately 9.6%
after government royalties, and will be further reduced by 0.36%
pursuant to an agreement with a co-investor, subject to the
Company's being reimbursed for a proportionate share of
expenditures related to this area.
During the second period, effective from the expiration date of
the SDLA association contract in 2010, the interest of the
Company will be redetermined based upon certain tract factors to
be allocated to the SDLA, Tauramena and Rio Chitamena contract
areas. The Company's interest will be calculated based on the
tract factors for the latter two contract areas. The tract
factors will be based upon independent determinations of the
original barrels of oil equivalent of petroleum in place under
the unified area covering the Cusiana oil structure, and under
each contract area forming a part thereof. The interest of the
Company in production from the Cusiana oil structure will be
further reduced during the final period of time under the plan,
effective from the termination of the second association
contract to terminate, in accordance with the tract factor
applied to the remaining association contract.
Effective July 15, 1994, the Company's subsidiaries Triton
Colombia, Inc., and Triton Resources Colombia, Inc., entered
into revised letter agreements with the original co-investor in
Colombia relating to the timing of reimbursements by the
co-investor and potential adjustments to the amounts owed to it.
July 15, 1994, the Company's subsidiary Triton Colombia, Inc.,
executed a memorandum of understanding ("MOU") with Ecopetrol,
BP, TOTAL, TransCanada PipeLines Colombia Limited and IPL Energy
(Colombia) Ltd., regarding the proposed formation of a joint
stock company to finance and own a pipeline and port facilities
to be constructed and operated for the transport of crude oil
from the Cusiana and Cupiagua fields to the port of Covenas.
Triton's equity participation under this agreement would be
approximately 9.6%. Formation of the joint stock company is
subject to numerous conditions, including negotiation and
execution of definitive agreements and board approvals.
In July 1994, the Export-Import Bank of the United States
authorized a final commitment for a comprehensive guarantee of
approximately $35 million for certain financing related to
Triton's interest in initial field development of its Cusiana
project in Colombia. The guarantee covers financing of
qualified expenditures for oilfield equipment and other
machinery manufactured in the United States for export to the
Colombian project. The effective date for coverage is
retroactive for purchases made since March 3, 1993.
There is hereby added to the Form 8-K a new Item 7 to read in
its entirety as follows:
Item 7. Financial Statements and Exhibits.
Exhibit No. Description
99.1 Rio Chitamena Association Contract (1)
99.2 Rio Chitamena Purchase and Sale Agreement (1)
99.3 Integral Plan - Cusiana Oil Structure (1)
99.4 Letter Agreements with co-investor in Colombia (1)
99.5 Memorandum of Understanding (1)
99.6 Press Release dated July 27, 1994 (1)
(1) New exhibit refiled in its entirety.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.
TRITON ENERGY CORPORATION
Date: August 5, 1994 By: /s/ Robert B. Holland, III
Robert B. Holland, III, Senior Vice
President and General Counsel
Exhibit 99.6
EXIMBANK APPROVES $35 MILLION GUARANTEE TO TRITON
DALLAS--July 27, 1994--Triton Energy Corporation (NYSE: OIL)
today announced that the Export-Import Bank of the United States
has authorized a final commitment for a comprehensive guarantee
of approximately $35 million for certain financing related to
Triton's interest in initial field development of its Cusiana
project in Colombia. The guarantee covers expenditures for
oilfield equipment and other machinery manufactured in the
United States for export to the Colombian project. The
effective date for coverage is retroactive for purchases made
since March 3, 1993.
"Securing this guarantee is an integral part of Triton's overall
plan to finance its share of the Cusiana development," said
Peter Rugg, senior vice president and chief financial officer.
The early production phase includes wells, facilities and
existing pipeline upgrades to achieve initial production from
the Cusiana Field. Current development plans call for gross
production from the Cusiana Field to reach 90,000 barrels per
day (bpd) by year-end 1994 and to reach a level of up to
approximately 185,000 bpd by the beginning of 1996.
Triton holds a 12% working interest in the Cusiana and Cupiagua
Fields, which is equivalent to a 9.24% net revenue interest
after royalties and other interests.
Triton Energy, based in Dallas, is an international independent
oil and gas exploration and production company with oil and gas
interests in numerous countries around the world.
Contacts: W. Greg Dunlevy or Linda T. Covington (214) 691-5200
EXPLORATION AND EXPLOITATION CONTRACT FOR SECTOR SANTIAGO DE LA
ATALAYAS I ENTERED INTO BETWEEN THE EMPRESA COLOMBIANA DE
PETROLEOS AND TRITON COLOMBIA, INC.
Between the EMPRESA COLOMBIANA DE PETROLEOS, hereunder called
ECOPETROL, a commercial and industrial company of the State,
with its own juridical identity, created by Law 165 and 1948 and
presently governed by Decree No. 062 of 1970, represented by
Jose Fernando Osaza Delgado, of age, resident of this city,
bearer of citizenship certificate No. 17.143.307 issued in
Bogota, Colombia, who acts as its President and duly authorized
by the Board of Directors, as witnessed by instrument No. 1,504
dated the 21st day of April, 1982, for one party, and for the
other party, TRITON COLOMBIA, INC., hereinafter called "TRITON"
with a branch established in Bogota and represented by John P.
Tatum, of age, a citizen of the United States of America,
resident of Dallas, Texas, U.S.A., holder of passport #C1006930,
issued in Houston, Texas, U.S.A., who acts as its President,
duly authorized as its legal representative, a contract has been
entered into as described in the following clauses:
CHAPTER I. GENERAL PROVISIONS.
CLAUSE 1. OBJECT OF THIS CONTRACT
1.1 The object of this contract is the exploration of the
Contract Area and the exploitation of petroleum of National
Ownership which may be found in such area described in Clause 3.
1.2 In accordance with Article I of Decree 2310 of 1974, the
exploration and exploitation of State-owned hydrocarbons is
under the direction of ECOPETROL which may carry out these
activities directly or by means of contracts with private
parties. In accordance with this authority ECOPETROL has agreed
with TRITON to explore the Contract Area and exploit the
petroleum that may be found in it, in accordance with the terms
and provisions of this instrument.
1.3 Without prejudice to the stipulations of this Contract, it
is understood that TRITON shall have in the petroleum which may
be produced in the Contract Area and in its corresponding share,
the same rights and obligations observed by all those who
exploit State-owned petroleum - within the country in accordance
with Colombian Law.
1.4 ECOPETROL and TRITON agree that they carry out the work of
exploration and exploitation on the lands of the Contract Area,
that they will share the cost and risks of the same in the
proportions and under the terms provided for in this contract,
and that the properties they may acquire and the petroleum
produced and stored will belong to each party in the proportions
stipulated.
CLAUSE 2 - APPLICABILITY OF THE CONTRACT
This contract applies to the Contract Area, delineated in
Clause 3, or to the part of it, subject to the same terms, when
Clause 8 may have been applied.
CLAUSE 3 - CONTRACT AREA
An area of approximately 159,150 hectares, located in the
Municipality of Casanare in the Department of Boyaca, as
described below, and as it appears on the attached map as
Addendum "A", which forms a part of this contract, as well as
the respective set of calculations: take as the point of
reference the geodetic vertex Yopal-916 of the Agostin Codazzi
Geographic Institute and which Gauss-system coordinates based on
Bogota are: N 1,084,033.90 meters, E 1,183,699.03 meters and
whose geographic coordinates are: Latitude 5 degrees 21'24.174"
North of the Ecuator and longitude 72 degrees 25'25.767" West of
Greenwich. From this geodetic vertex, continue on a bearing of
217 degrees 42'18.77" West for a distance of 4,313.32 meters
until point "A", the starting point of the Santiago coordinate
grid of which the Gauss coordinates are: N 1.080,621.34 meters E
1,181,061.01 meters. From point "A" , bear 127 degrees
42'17.879" for a distance of 13,873.90 meters until arriving at
point "B" of which the Gauss coordinates are: N 1,072,136.07
meters E 1,192,037.59 meters. The line "AB" bordering in part
with the line "CB" of the Tame Association Contract with
Provincia. From point "B", bear 223 degrees 49'39.931" for a
distance of 16,820.45 meters until arriving at point "C" of
which the Gauss coordinates are: N 1,060,001.38 meters, E
1,180,389.55 meters. The line "BC" bordering in part with the
line "AN" of the Casanare A-1 Association Contract with Elf
Aquitaine. From Point "C", bear 134 degrees 31'29.374" for a
distance of 14,221.94 meters until arriving at point "D" at
which the Guass coordinates are: N 1,049,853.26 meters, E
1,190,353.44 meters. From point "D", bear 226 degrees
20'38.964" for a distance of 21,506.38 meters until arriving at
point "E" of which the Gauss coordinates are: N 1,035,006.87
meters, E 1,174,793.59 meters. Lines "CD" and "DE" are
coincident with the lines "NM" and "ML" of the Casanare A-1
Association Contract. From point "E", bear 136 degrees
20'56.981" for a distance of approximately 1,410.00 meters until
arriving at point "F" located on the right bank of the Rio
Cusiana and of which the Gauss coordinates are: N 1,033,986.65
meters, E 1,175,766.86 meters. From point "F", continue
upstream along the right bank of the Rio Cusiana until arriving
at point "G" located on the same right bank of the Rio Cusiana
and where the mouth of the Rio Caja enters into the Rio Cusiana
and of which the Gauss coordinates are: N 1,046,780 meters, E
1,153,620 meters. The straight line that connects "F" and "G"
has a bearing from point "F" of 300 degrees 00'47.873" and a
separation distance of 25,576.42 meters. From point "G",
continue upstream along the right bank of the Rio Cusiana until
arriving at point "H" located on the same right bank of the Rio
Cusiana and of which the Gauss coordinates are: N 1,059,259.92
meters, E 1,148,411.31 meters. The straight line that connects
"G" and "H" has a bearing of 337 degrees 20'45.668" and a
separation distance of 13,523.27 meters. From point "H",
continue upstream along the right bank of the Rio Cusiana until
arriving at point "J" located on the same right bank of the Rio
Cusiana and of which the Gauss coordinates are: N 1,084,962.50
meters, E 1,154,473.62 meters. The straight line that connects
"H" and "J" has a bearing of N 13 degrees 16'17".213" and a
separation distance of 26,407.84 meters. From point "J", bear N
49 degrees 00'35.778" for a distance of 13,080.00 meters until
arriving at point "K" of which the Gauss coordinates are: N
1,093,542.04 meters, E1,164,346.71 meters. From point "K", bear
127 degrees 42'17.879" for a distance of 21,126,10 meters until
arriving at point "A", starting point of the grid. The areal
closure of the Contract Area is 159,150 hectares 2,118 square
meters and is located in the Municipalities of Yopal and Aguazul
in the Province of Casanare and Municipality of Pajarito in the
Department of Boyaca.
Paragraph A. It is agreed that in the contract area there are
53,700 hectares of private mineral ownership in the sectors
known as Santiago de Atalayas and Pueblo Viejo de Cusiana; in
these sectors, ECOPETROL has the responsibility to negotiate
with the private mineral owners. TRITON will repay ECOPETROL
for the payments that it makes to the residents of Santiago de
Atalayas and Pueblo Viejo de Cusiana, at 16.00 Pesos per
hectare/annually according to each resident's quota under the
45% private mineral ownership. The first payment will be made
by ECOPETROL for the first two years of the option contract.
From then on a payment will be made equivalent to the sum paid
the past year + 30% of that payment. ECOPETROL will be
responsible for all claims and for the handling of relations
with the owners of the private property mentioned above and will
maintain all contracts made with the private owners during the
term of this Association Contract. If TRITON is presented with
any claim from any of the private mineral owners, TRITON should
give the corresponding information in writing to ECOPETROL
within 10 days following receipt of such claim to maintain this
clause in effect.
CLAUSE 4. DEFINITIONS
For the purpose of this contract, the terms listed below will
have the following meanings:
A. Contract Area: The lands defined in Clause 3 above, subject
to Clause 8.
B. Petroleum: The natural mixture of hydrocarbons in liquid or
gaseous state, as well as those substances accompanying or
derived from them except helium and rare gases.
C. Operator: The party designated by the parties who, for their
account, will directly conduct the necessary operations for the
exploitation of petroleum that may be found in the Contract Area.
D. Joint Account: The records maintained by means of
accounting journals, in accordance with Colombian Law, to credit
or charge the parties with their proportionate shares of the
joint operation.
E. Interest in the Operation: The participation in the
obligations and rights which each of the parties acquires in the
exploitation of the contract area.
F. Commercial Field: That portion of the Contract Area capable
of producing petroleum in such quantity and of such quality as
to make it commercially exploitable.
G. Budget: The investment and expense estimates for each
calendar year or portion of a calendar year or for a project.
H. Effective Date: The 1st day of July 1982.
I. Parties On the effective date, ECOPETROL and TRITON.
Thereafter and at any time, ECOPETROL on the one hand, and
TRITON or its assignees for the other party.
J. Exploration Period: The time available to TRITON to comply
with the obligations stipulated in Clause 5 of this Contract and
which will not be longer than six (6) years beginning with the
effective date, except in such cases as are contemplated in
Clauses 9.3 and 34.
K. Exploration Program: The operations conducted by TRITON
relating to the search and discovery of petroleum within the
Contract Area.
L. Period of Exploitation: The time beginning when the period
of exploration ends until the termination of this contract.
M. Exploratory Well: Is any well designated as such by TRITON
to be drilled or deepened for its account in the Contract Area
in the search for petroleum.
N. Development Well: Is any well previously programmed for the
Joint Operation and for production.
O. Joint Operation: The activities and work conducted or in
the process of being conducted in the name of the parties and
for their account.
P. Commercial Interest: The rate of interest that the Banco de
Bogota, in the case of pesos, charges commercial borrowers with
good credit rating on 180-day loans; in the case of United
States dollars, the prime rate fixed by CitiBank of New York.
CHAPTER II. EXPLORATION
CLAUSE 5. TERMS AND CONDITIONS
5.1a. TRITON agrees to conduct a seismic program of
approximately 150 kilometers during the first year starting with
the effective date of this contract, or before if ECOPETROL so
authorizes. During the second year, TRITON will be obligated to
drill the first exploration well, deep enough to penetrate
formations that can produce petroleum in the area. At the end
of the first year or at the end of such drilling, TRITON will
have the option to terminate the contract, only after having
complied with the above-mentioned obligations.
During the third year, TRITON agrees to drill a second
exploratory well to a depth required to reach producing
formations. Upon completion of this drilling, TRITON may
terminate the contract if it has complied with the
above-mentioned obligation.
5.2 If TRITON has satisfactorily complied with the obligations
stipulated in Clause 5, ECOPETROL, upon request by TRITON, will
extend the exploration period annually for up to three (3)
additional years; during each extension, TRITON will be
obligated to conduct exploration work in the area involving the
drilling of a minimum of two exploratory wells each year.
5.3 If during any year of the exploration period TRITON decides
to accelerate work corresponding to the following year's
commitments, TRITON may seek ECOPETROL's approval to undertake
such work. If the request is accepted by ECOPETROL, ECOPETROL
will decide in what form and amount the transfer of said work
will be effected.
5.4 During the term of this contract TRITON may conduct
exploration work in the areas it retains in accordance with
Clause 8, and TRITON will be solely responsible for the risks
and costs of such activities and therefore, will have complete
and exclusive control of same without modifying the term of the
contract.
CLAUSE 6. PROVISION OF INFORMATION DURING EXPLORATION
6.1 ECOPETROL will furnish TRITON with all the information it
possesses in the Contract Area when TRITON so requests. The
costs incurred in the reproduction and delivery of said
information will be borne by TRITON.
6.2 During the exploration period, TRITON will deliver to
ECOPETROL, as it obtains it, all geological and geophysical
information, edited magnetic tapes, processed seismic sections
and all supportive field information, magnetic and gravity
profiles, all in reproducible originals, copies of geophysical
reports, reproducible originals of all well logs of the wells
drilled by TRITON including a Final Composite Log of each well
and copies of the final drilling report, including core
analyses, results of production tests and any other information
related to the drilling, study or interpretation of any kind
performed by TRITON on the Contract Area, without limitation.
ECOPETROL has the right at all times to use procedures it
considers appropriate and/or necessary to witness all operations
and to verify all data listed above.
6.3 The Parties agree that all information obtained under this
contract is of a confidential nature during the term of such
contract. By agreement between the Parties, they may exchange
such information with companies that are or are not associated
with ECOPETROL. It is understood that all that is agreed to
herein is without prejudice to TRITON's obligation to submit to
the Ministry of Mines and Energy all information which the
latter may request, in accordance with all legal and regulatory
requirements now in force. It is understood and agreed that
TRITON may provide such information as it deems necessary for
its parent or affiliates, or to lending institutions in
connection with financing arrangements, and as required by any
competent authority with jurisdiction over TRITON or its parent,
or by the rules of any stock exchange in which the shares of
TRITON or related companies may be registered.
CLAUSE 7. BUDGET AND EXPLORATION PROGRAMS.
Under this contract, TRITON will have the responsibility to
prepare, the necessary programs and budgets to conduct
exploration of the Contract Area. Said budgets and programs
will be timely presented to ECOPETROL.
CLAUSE 8. RELINQUISHMENT OF AREAS.
8.1. Upon the termination of the initial exploration period or
extensions thereof, but no later than the 6th year. If a
commercial field has been discovered in the Contract Area, said
area will be reduced to fifty percent (50%) of the original
area; two (2) years later the Area will be reduced to
twenty-five percent (25%) of the original Area, and two (2)
years later the Area will be reduced to the area of the
commercial field or fields which are in production or
development plus a reserve zone of five kilometers wide around
each field. The commercial fields plus the zone surrounding
each field will be designated the exploitation area and this
will be the only portion of the Contract Area that will remain
subject to the terms of this contract.
8.2. TRITON will determine the areas it will relinquish to
ECOPETROL in lots with a minimum size of five thousand (5,000)
hectares each, unless TRITON can demonstrate that this is not
possible. Notwithstanding the obligation to relinquish the
areas discussed in Clause 8.1., TRITON will not be obligated to
relinquish areas under development or production, including the
reserve zones of five (5) kilometers wide surrounding such
areas, unless TRITON suspends its development and/or production
operations for more than one year, continuously, without just
cause. In such case, TRITON will return such areas to ECOPETROL
terminating the contract for such areas or part of an area.
CHAPTER III. EXPLOITATION
CLAUSE 9. TERMS AND CONDITIONS
9.1 To initiate the joint operation under the terms of this
contract, it is understood that exploitation work will begin
once both parties recognize the existence of a commercial field
or upon compliance with the provisions of Clause 9.5. The
existence of a commercial field will be determined by the
drilling, by TRITON, within the proposed commercial field, of a
sufficient number of wells to permit a reasonable assessment of
the Commerciality of the field. In this case, TRITON will
notify ECOPETROL, in writing, of the discovery of a commercial
field, furnishing the studies upon which it has based this
conclusion. ECOPETROL, within a period of sixty (60) calendar
days, counting from the day of said notification, may accept or
reject the existence of the commercial field.
9.2 If ECOPETROL accepts the existence of the commercial field,
it shall so advise TRITON within a period of sixty (60) days in
accordance with Clause 9.1. and shall commence participation,
within the terms of this contract, in the development of the
commercial field discovered by TRITON. ECOPETROL shall
reimburse TRITON for fifty percent (50%) of the cost of drilling
and completing the wells which, having been drilled by TRITON as
exploratory wells within the commercial field mentioned in
Clause 9.1. have proven commercially productive and have been
put on production by the Operator. Payment shall be made by
ECOPETROL to TRITON with the total amount of its participation
in the production of said wells in United States of America
dollars, or in petroleum at the option of ECOPETROL, deducting
the royalty mentioned in Clause 13, and said wells shall be
property of the Joint Account from the moment they are put on
production.
9.3 Should ECOPETROL not accept the existence of the commercial
field as mentioned in Clause 9.1., it may inform TRITON of the
additional work that it considers necessary to prove the
existence of a commercial field. The cost of said work may not
exceed US $1,000,000 nor may it require for its completion a
period in excess of one year, in which event, the period of
exploration for the Contract Area will be extended automatically
for a period equal to that which the parties have agreed to as
being necessary to conduct the additional work requested by
ECOPETROL in this clause but without prejudice to the
stipulation of Clause 8.1. regarding the reduction of areas.
9.4 If ECOPETROL accepts the existence of the commercial field
described in Clause 9.1., after the additional work has been
completed in accordance with Clause 9.3., it will begin to
participate in the development operations of the above-mentioned
field, under the terms of this contract, and will reimburse
TRITON in the manner stipulated in Clause 9.2 . for fifty
percent (50%) of the costs of the requested additional work
described in clause 9.3. plus a twelve percent (12%) annual
interest charge, after which time the finished work will become
the property of the Joint Account. Said interest will be
computed beginning with the date on which said expenses were
incurred and up to the date of their reimbursement.
9.5 If ECOPETROL does not accept the existence of a commercial
field after the additional work described in Clause 9.3. has
been completed, TRITON will have the right to conduct the work
it deems necessary for the exploitation of said field, and to
reimburse itself two hundred percent (200%) of the total cost of
the work done at its own risk and for its own account, from the
petroleum produced, less the royalties under Clause 13,
deducting the costs of production, gathering, transportation and
sale. For the purposes of this Clause, the value of each barrel
of petroleum produced in said field during a calendar month will
be the average price per barrel received by TRITON from the sale
of its share of such petroleum produced in the Contract Area
during the same month. When TRITON has recouped the percentage
established in this Clause, all wells drilled, the installations
and all the assets acquired by TRITON for the exploitation of
the field and paid for as indicated in this Clause, will become
the property of the Joint Account at no cost whatsoever.
9.6 ECOPETROL may, at any time, begin to participate in the
operation of the field discovered and developed by TRITON
without diminishing TRITON's right to reimburse itself for the
investment it may have made for its own account in the manner
and percentage stipulated in Clause 9.5. Once TRITON has
recouped this cost, ECOPETROL will begin participating in the
economic benefits of the wells developed for the exclusive
account of TRITON.
9.7 To delineate a commercial field, all the geological and
geophysical information and data from the wells drilled within
said field or which may have any connection with it will be
taken into consideration.
9.8 If at the end of the exploration period of six (6) years,
discussed in Clause 5.2., TRITON has drilled one or more
exploratory wells which indicate the possible existence of a
commercial field, ECOPETROL, upon request by TRITON, will extend
the exploration phase for a period not to exceed one year, so
that TRITON may have the opportunity to prove the existence of
said commercial field.
CLAUSE 10. TECHNICAL CONTROL OF THE OPERATIONS
10.1 The Parties agree that TRITON shall be the Operator and as
such, with the limitations provided for in this contract, will
have control of all the operations and activities that it
considers necessary for the technical, efficient, and economic
exploitation of the petroleum which may be found within the area
of the commercial field.
10.2 The Operator has the obligation to conduct all operations
of development and production in accordance with the known rules
and practices of the industry, utilizing for this purpose the
best technical methods and systems required for the economic and
efficient exploitation of petroleum, and to apply all legal
requirements and regulations pertaining to the matter.
10.3 The Operator will be considered a distinct entity for all
the purposes of this contract, as well as for the application of
civil, labor and administrative laws and its relationship to
personnel employed by it, in accordance with Clause 32.
10.4 The Operator will have the right to resign as such,
notifying the parties in writing six (6) months in advance of
the date on which it desires its resignation to become
effective. The Parties will designate a new Operator.
CLAUSE 11. EXPLOITATION PROGRAMS AND BUDGET
11.1 Within two (2) months following the acceptance of a
commercial field in the Contract Area, the Operator will present
to the Parties a program of activities and a budget for the rest
of the relevant calendar year. In case that less than six and a
half (6 1/2) months remain before the end of said year, the
Operator will prepare and present a budget and program for the
following calendar year, within two (2) months. Future budgets
and programs will be presented to the Parties no later than the
15th of August of the preceding year. Within twenty (20) days
following the receipt of such budgets and programs, the Parties
will inform the Operator in writing of any changes they wish to
propose. In such case, the Operator will take into account the
Parties' recommendations for changes in the budgets and programs
which will be re-submitted for final approval of the Executive
Committee at a meeting called for that purpose; such meeting
will take place on a date prior to the 15th of October of each
year, except in the event that less than six and a half (6 1/2)
months remain before the end of the year in which the existence
of the commercial field is recognized. In the event the total
budget has not been approved before the 15th of October, those
items of the budget for which agreement has been reached will be
approved by the Executive Committee, and those items not
approved will be submitted immediately to the Parties for later
study and final decision in the manner prescribed in Clause 20.
11.2 The Parties may suggest additions or revisions to budgets
and approved programs, but, except in cases of emergency, such
changes may not be proposed more frequently than every three (3)
months. The Executive Committee will decide on the proposed
additions and revisions at a meeting called within thirty (30)
days immediately following the receipt of said proposed changes.
11.3 The principal objectives of the programs and budgets are:
A. To determine the operations to be carried out during the
following calendar year; and
B. To determine expenses and investments which the Operator is
authorized to make.
11.4 The terms "Program" and "Budget" mean the outline work
program and the estimated expenses and investments which the
Operator will apply to the different items of the Operation,
such as:
A. Capital investment for production: reservoir development
drilling, reconditioning or workover of wells, specific
production facilities;
B. Equipment and General Installations: Industrial and field
installations, transportation and construction equipment,
drilling and production equipment. Other equipment and
installations;
C. Operating and maintenance expenses: Production, geological,
and administrative expenses;
D. Working capital requirements; and
E. Contingency fund.
11.5 The Operator will pay for all expenses and investments and
will carry out all the development and production operations in
accordance with the programs and budgets referred to in Clause
11.1., without exceeding ten percent (10%) of the total budget,
for each year, except with the other Parties' authorization in
special cases.
11.6 The Operator will not initiate any project on his own, nor
will he charge the Joint Account, for any expenses not approved
in the budget in excess of Ten Thousand Dollars (US$ 10,000.00)
or its equivalent in Colombian money for any project or in any
calendar quarter.
11.7 The Operator is fully authorized to pay expenses for the
Joint Account without prior authorization from the Executive
Committee when confronted with the following emergencies: acts
affecting the safety of the Parties' personnel or property;
destruction caused by fire, flood, storms or other disasters;
emergency expenses associated with the production and
maintenance of the property; emergency associated with the
operation and maintenance of the production facilities; all
maintenance required to keep the wells producing efficiently;
emergency expenses associated with the safety of the workers;
emergency expenses associated with the protection and
maintenance of materials and equipment necessary for the
operations. If any of the above emergencies should happen, the
Operator must call a special meeting of the Executive Committee
as soon as possible to obtain its approval to continue with the
emergency measures.
CLAUSE 12. PRODUCTION
12.1 Subject to the approval of the Executive Committee, the
Operator will determine every six months, or with the necessary
frequency, the Maximum Efficiency Rate (MER) for each commercial
field. This Maximum Efficiency Rate (MER) will be the sum of
the Maximum Efficiency Rate (MER) for each producing well based
on technical field reservoir data. The estimated production
must be decreased to compensate for actual or anticipate
conditions of the operation, such as non-producing wells under
repair, capacity limitations in gathering lines, pumps,
separators, tanks, or pipelines or other installations.
12.2 The Operator will determine, at least once a year, with
the approval of the Executive Committee, the area considered
capable of producing petroleum in commercial quantities in each
field and will propose a spacing and development drilling
program on the basis of economy and efficiency.
12.3 The Operator will prepare and deliver to each of the
Parties, at regular intervals of three (3) months, a forecast
indicating each Party's share of production, and another
indicating the share of production for each Party for the
following six (6) months. The production forecast will be based
on the Maximum Efficiency Rate (MER) as stipulated in Clause
12.1. and adjusted to the rights of each Party, in accordance
with this contract. The Production Sharing Forecast will be
based on the periodic request of each Party, and in accordance
with Clause 14.2. with the necessary corrections to ensure that
none of the Parties, entitled to petroleum, will receive less
than the amount it is entitled to in accordance with the
provisions of Clause 14, and without prejudice to the
stipulations of Clauses 21.2. and 22.5.
12.4 If any of the Parties foresee a reduction in its capacity
to lift Petroleum with respect to the forecast submitted to the
Operator, it must so inform him as soon as possible, and if such
reduction is due to an emergency situation, it will notify the
Operator within twelve (12) hours immediately following the
event causing the reduction. Said Party will then submit to the
Operator a new forecast delineating the revised quantity of
petroleum to be lifted.
12.5 The Operator may use the crude petroleum and gas in the
production operations of the Contract Area, and this consumption
will be exempt from the royalties referred to in Clause 13.1.
and 13.2.
CLAUSE 13. ROYALTIES.
13.1 During the exploitation of the Contract Area, the Operator
will deliver to ECOPTEROL as royalty or participation share
twenty percent (20%) of the production of liquid hydrocarbons in
said area. The Operator will tender the royalty on the basis of
the MER for the corresponding month. Within the first five (5)
days of the following month, the Operator will determine the
average production of the previous month and on the basis of
this average will make the necessary adjustments, delivering to
ECOPETROL, as soon as possible, the balance of the amount which
may not have been delivered during the previous month, or
reducing the necessary amount if an excess had been delivered
during said month. ECOPETROL, at its own cost and risk, will
take in kind from the tanks owned by the Joint Account the
percentage of production corresponding to the royalty.
13.2 The Operator will deliver to ECOPETROL twenty percent
(20%) of the gas production, as royalty or participation share.
13.3 From the percentage of production corresponding to the
royalty, ECOPETROL, will pay the Nation, Departments and
Municipalities, and private mineral owners the corresponding
royalties of the total production from the commercial field in
the manner and under the terms determined by Law. In no event
will TRITON be responsible for any payment to these entities in
this respect.
CLAUSE 14. DISTRIBUTION AND DISPOSAL OF THE PETROLEUM
14.1 The Petroleum produced, excepting that which may have been
used for the benefit of the operations covered by this contract,
and that which will inevitably be wasted in the operations, will
be transported to the jointly owned tanks of the Parties or to
other measuring installations that the Parties will have agreed
upon. The petroleum will be measured in accordance with the
standards and methods accepted in the petroleum industry, and
based on these measurements the percentage referred to in Clause
13 will be determined, and the remaining petroleum from this
moment becomes the property of each party in the proportions
specified by this contract.
14.2 After deducting the percentage corresponding to the
royalty, the rest of the petroleum and gas produced and
originating from the field is owned by the Parties in the
following proportions: ECOPETROL fifty percent (50%) and TRITON
fifty percent (50%).
14.3 Besides the tanks and other installations owned jointly,
each Party will have the right to build its own tanks, pipelines
and pumping stations in the Contract Area for its sole and
exclusive use, as long as the Parties comply with the legal
standards. The transportation and delivery of petroleum by each
Party to the pipeline or other type of storage which is not
owned jointly will be done at the sole risk and cost of the
Party receiving the petroleum.
14.4 In the event production is obtained in locations not
connected to public pipelines, the Parties may agree to the
construction of pipelines up to the point where the Petroleum
may be sold or to a point connecting with a pipeline for public
use. If the Parties agree to the construction of such
pipelines, they will enter into contracts which they deem
convenient for that purpose.
14.5 Each Party will be the owner of the petroleum produced,
stored and placed at its disposal as a result of the operations,
in accordance with the terms of this contract, and at its
expense must receive it in kind or sell it or dispose of it
separately, as provided for in Clause 14.3.
14.6 If any of the Parties, for any reason, cannot separately
dispose of, or take from the tanks of the Joint Account, all or
part of the petroleum belonging to it in accordance with this
Contract, the following conditions shall be observed:
A. If ECOPETROL is the Party which cannot take all or part of
its petroleum quota (participation plus royalty) in accordance
with Clause 12.3., the Operator may continue producing the field
and delivering to TRITON in addition to the share representing
the quota of TRITON in the operations on the basis of one
hundred percent (100%) of the MER, all that petroleum which
TRITON elects and is capable of taking up to a limit of one
hundred percent (100%) of the MER, crediting ECOPETROL for later
delivery with the volume of petroleum that ECOPETROL had the
right to take but did not take. But if petroleum not taken
corresponds in a month to ECOPETROL's royalty, TRITON upon
request by ECOPETROL shall pay (in U.S. currency) the difference
that may exist between the amount of petroleum it took and the
amount of petroleum belonging to it (ECOPETROL) as royalty, as
described in Clause 13.1. and 13.2., it being understood that
any taking of petroleum effected by ECOPETROL will be applied in
the first place to the payment in kind of the royalty, and that
once this is covered, additional taking of petroleum that it may
make will apply to the share belonging to it, in accordance with
Clause 14.2.
B. In the event that TRITON is the party which cannot take all
or part of its share designated under Clause 12.3., the Operator
will deliver to ECOPETROL on the basis of one hundred percent
(100%) of the MER, not only its (ECOPETROL's) own share and
quota but also all the petroleum that ECOPETROL is capable of
taking up to a limit of one hundred percent (100%) of the MER,
crediting TRITON for later delivery, with the portion that
corresponds to its (TRITON's) quota and that it (TRITON) had not
been able to take.
14.7 When both Parties are able to take the petroleum
designated in Clause 12.3., the Operator will deliver to the
party which had previously been unable to take its share of the
production, upon its request, and in addition to its
participation in the operation, a minimum of ten percent (10%)
per month of the production belonging to the other Party, and by
agreement until one hundred percent (100%) of the quota not
taken has been credited to the Party previously unable to take
its petroleum.
14.8 Without prejudice to the legal regulations, each Party
will be at liberty, at any time, to sell or export its share of
the petroleum obtained, according to this contract, or dispose
of same in any manner.
CLAUSE 15. GAS UTILIZATION
In the event that one or more oil fields with associated gas
are discovered and if within two (2) years of initial
production, and the Operator does not have plans to utilize the
natural gas for the benefit of the Joint Account, ECOPETROL may
take for its own account, freely, all the available gas, above
that is not required for the efficient exploitation of the field
at the end of the second year of exploitation. If the Operator
has plans to utilize the natural gas for the benefit of the
Joint Account, the Executive Committee will decide the timing
for execution of these plans.
CLAUSE 16. UNITIZATION
When an economically exploitable field extends continuously in
a structure located in the Contract Area and in other areas, the
Operator shall formulate, in agreement with ECOPETROL and with
the other interested parties, subject to the approval of the
Ministry of Mines and Energy, a unitary exploitation plan; which
conforms to accepted reservoir engineering technology practices.
CLAUSE 17. REPORTING OF INFORMATION AND INSPECTIONS
DURING THE EXPLOITATION PHASE
17.1 The Operator shall deliver to the Parties, as they are
obtained, reproducible originals (sepias), of the well drilling
logs, history, electric logs, radioactivity logs, sonic logs,
core analysis, production tests, and all routing data produced
or received in connection with the operations and activities
conducted in the Contract Area.
17.2 Each of the Parties, at its own risk, cost and expense,
shall have the right, through duly authorized representatives,
to inspect the wells and installations of the Contract Area and
all activities in connection with same. Such representatives
shall have the right to examine cores, samples, maps, drilling
records, surveys, books, and any other source of information
related to the activities of this contract.
17.3 In order that ECOPETROL may comply with the requirements
of Clause 29, the Operator shall prepare and deliver to
ECOPETROL the information required by the national government.
17.4 All information and data related to the work of
exploitation must be held as confidential under the same
conditions of those of Clause 6.3. of this Contract.
CHAPTER IV. EXECUTIVE COMMITTEE
CLAUSE 18. CONSTITUTION
18.1 Within the first thirty (30) calendar days following the
acceptance of a commercial field, each Party must name a
representative and his respective first and second alternates,
to form the Executive Committee and shall notify the other Party
in writing as to the names and addresses of its representatives
and alternates. The Parties may replace their representatives
or alternates at any time, but must so advise the other Party in
writing. The vote or decision of the representative of each
Party will be considered binding on that Party. If the
principal representative of one of the Parties should not be
able to attend a meeting of the Committee, he will designate in
writing an alternate who shall attend, and who will have the
same authority as his principal.
18.2 The Executive Committee shall meet for ordinary meetings
during the months of January, April, July and October, at which
the development program submitted by the Operator and the
immediate plans will be reviewed. Annually and during the month
of November, the Executive Committee shall meet for a special
meeting with the object of discussing and approving the annual
operating program and the expense and investment budget for the
next calendar year.
18.3 Any party and the Operator may request special meetings of
the Executive Committee to analyze specific operating
conditions. The Chairman of the Committee shall give notice ten
(10) calendar days in advance, of the date of the meeting and
the matters to be dealt with. Any matter which was not
announced in the notice of such meeting may be dealt with during
such meeting, if it is unanimously accepted by the
representatives of all of the Parties.
18.4 The representatives of each of the Parties shall have a
vote equivalent to fifty percent (50%) of the total interest in
the joint operation in all matters discussed by the Executive
Committee. Any resolution or decision made by the Executive
Committee must have for it to be valid the affirmative vote of
more than fifty percent (50%) of the total interest. The
decisions made by the Executive Committee in accordance with the
above-defined procedure, will be obligatory and definitive for
the Parties and for the Operator.
CLAUSE 19. FUNCTIONS
19.1 The representatives of the Parties shall constitute the
Executive Committee invested with full authority and
responsibility to set and adopt exploitation, development,
operating programs and budgets relative to this contract. A
representative of the Operator will preside over the Committee.
The representatives of the Parties shall alternatively preside
over the Executive Committee meetings.
19.2 The Executive Committee shall name the Secretary. The
Secretary shall maintain complete and detailed minutes and
instruments of all meetings, as well as notes of all the
discussions and decisions made by the Committee. The copies of
these intruments, to be valid, must be approved and signed by
the representatives of the Parties before the close of the
meeting and be delivered to the Parties as soon as possible.
19.3 The functions of the Executive Committee are, among
others, as follows:
A. Adopt its own regulations;
B. Designate the Operator in the event of a resignation;
C. Designate the External Auditor of the Joint Account;
D. Approve or disapprove the annual operating program and
budget as well as any modification or revision and to authorize
extraordinary expenses;
E. Determine the standards and policies for expenses;
F. Approve or disapprove any expense recommendation made by the
Operator which had not been included in the approved budget,
when such expense exceeds the amount of ten thousand dollars
(U.S. $10,000.00) or its equivalent in Colombian currency;
G. To give advice to the Operator and to decide upon the
matters submitted for the consideration of the Executive
Committee;
H. To create subcommittees and establish the functions these
subcommittees must perform under the direction of the Executive
Committee with respect to the Joint Account;
I. Define the type and frequency of the drilling, operating and
production reports, and any other information that must be
submitted by the Operator to the Parties with respect to the
Joint Account;
J. Supervise the work of the Joint Account;
K. Authorize the Operator to enter into contracts in the name
of the joint operations whose value of exceeds ten thousand
dollar (U.S.$ 10,000.00) or its equivalent in legal tender of
Colombia.
L. In general, to carry out all the functions authorized in
this contract, and which do not correspond to another entity or
person in a specific clause, or by legal statute or regulation.
CLAUSE 20. DECISION IN CASE OF DISAGREEMENT IN THE
OPERATIONS
20.1 Any project relating the operation which needs the
approval of the Executive Committee for its execution, as
established in this contract, and on which the representatives
of the Parties in said Committee do not agree, will be submitted
directly to the highest officer of each of the Parties, residing
in Colombia, so that they may make a joint decision.
20.2 If the Parties reach an agreement or decision on the
particular matter within sixty (60) calendar days after it was
submitted for consultation, they will so advise the Secretary of
the Executive Committee, who must call a meeting within fifteen
(15) calendar days following the receipt of such communication
and the members of said Committee will be obligated to adopt
this decision at that meeting.
20.3 If the Parties should not reach an agreement on this
difference within sixty (60) calendar days following the date it
was submitted for consultation, the operations may be carried
out in accordance with Clause 21.
CLAUSE 21. OPERATIONS FOR THE ACCOUNT OF ONE OF THE PARTIES
21.1 If at any time one of the Parties wishes to drill a
development well not approved in the operating program, it will
notify the other Party in writing, at least thirty (30) days
prior to the next meeting of the Executive Committee, of its
desire to drill such well and include such information as
location, drilling recommendation, depth and estimated cost.
The Operator will include such proposal among the items to be
considered at the next Executive Committee meeting. If said
proposal is approved by the Executive Committee, said well will
be drilled for the Joint Account. If such proposal is not
accepted by the Executive Committee, the Party wishing to drill
said well (who hereafter will be known as the Participating
Party), will have the right to drill, complete, produce or
abandon such well at its own exclusive risk and expense.
The Party not wishing to participate in the above-mentioned
operation will be known as the Non-Participating Party. The
Participating Party must commence the drilling of said well
within one hundred eighty (180) days following the rejection by
the Executive Committee. If drilling is not commenced within
this period, it must be submitted again for the consideration of
the Executive Committee. At the request of the Participating
Party, the Operator shall drill the aforementioned well at the
risk and expense of the Participating Party, provided that in
the judgment of the Operator such operation does not interfere
with the normal operation of the field, having the
Participanting Party advance to the Operator the amount which
the Operator estimates necessary to carry out said drilling. In
the event that said well cannot be drilled by the Operator
without interfering with the normal operation of the field, the
Participating Party will have the right to drill said well
itself or through a service company which is competent, and in
such event the Participating Party shall be responsible for such
operation, without interfering with the normal development of
the field operations.
21.2 If the well referred to in Clause 21.1. is completed as a
producer, it will be administered by the Operator and the
production from such well after deducting the royalties referred
to in Clause 13, will be the property of the Participating
Party, who will bear all costs of operating said well until the
net value of the production, after deducting production,
gathering, storage, transportation and similar expenses, and the
cost of sale, equals two hundred percent (200%) of the cost of
drilling and completing said well, which, from that moment and
for the purposes of this contract, will become the property of
the Joint Account as though it had been drilled with the
approval of the Executive Committee for the account of the
Parties. For the purpose of this clause, the value of each
barrel of oil produced from said well, during a calendar month,
before deducting the above-mentioned costs, will be the average
price per barrel received by the Participating Party from the
sale of its share in the oil produced in the Contract Area
during the same month.
21.3 If at any time one of the Parties wishes to recondition,
deepen, or plug a well which is not producing in commercial
quantities or a dry hole which was drilled for the Joint
Account, and if these operations have not been included in the
program approved by the Executive Committee, such Party must
notify the other Party of its intention to recondition, deepen
or plug such well. If there is no equipment on the site, the
procedure described in Clauses 21.1. and 21.2. will be followed.
If at the well site there is adequate equipment to conduct the
proposed operations, the Party receiving the notice of the
operations which the other Party wished to conduct will have a
period of forty-eight (48) hours beginning with the receipt of
the notice, within which to approve or disapprove of the
operation, and if during this time, no reply is received, it is
understood that the operation will be carried out at the cost
and expense of the Joint Account. If the proposed work is
carried out at the sole risk and expense of a Participating
Party, the well will be administered subject to Clause 21.2.
21.4 If at any time, one of the Parties wishes to build new
installations for the extraction of liquefied gas and for the
export and transportation of petroleum (which shall be called
additional installations), said Party will notify the other
Party in writing furnishing the following information:
A. General description, design, specification and estimated
cost of the additional installations;
B. Projected capacity;
C. Approximate date of commencement of the construction and
duration of the construction.
Within ninety (90) days beginning on the date of notification,
the other Party shall have the right to decide whether it will
participate in the projected additional installations, by giving
written notice. In the event that said Party elects not to
participate in the additional installations, or does not reply
to the Participating Party's proposal (who hereafter shall be
called the Construction Party), the latter will proceed with the
additional installations and will order the Operator to build,
operate and maintain said installations at the exclusive risk
and expense of the Construction Party, without prejudice to the
normal development of the joint operations. The Construction
Party will be able to negotiate with the other Party for the use
of said installations for the joint operations. During the time
the installations are operated at the risk and expense of the
Construction Party, the Operator will charge this Party will all
the operating and maintenance costs of the additional
installations in accordance with good accounting practices.
CHAPTER V. JOINT ACCOUNT.
CLAUSE 22. MANAGEMENT
22.1 Without prejudice to the stipulations of other clauses in
this contract, the expenses attributable to the work of
exploration will be for the risk and account of TRITON.
22.2 From the moment the Parties accept the existence of a
commercial field and subject to the provisions of Clauses 5.2.,
13.1., and 13.2., the ownership of the rights or interests in
the Contract Area will be divided as follows:
ECOPETROL - fifty percent (50%)
and
TRITON - fifty percent (50%)
From then on, all the expenses, payments, investments, costs
and obligations that are made and agreed upon for the
development of the operation, in accordance with this contract,
and the investments made by TRITON before and after the
recognition of a commercial field, in the drilling and
completion of the wells that have become producers in the field,
will be charged to the Joint Account. Except as provided in
Clauses 14.3 and 21, all the property acquired or used from then
on for the fulfillment of operating activities of the commercial
fields, will be paid for and belong to the Parties in the same
proportions described in this clause.
22.3 The Parties will tender to the Operator at the bank
designated by the Operator their proportionate shares in the
budget, as needed, within the first five (5) days of each month
in the same currency in which the expenses must be made, that is
to say, in Colombian pesos, or in United States dollars, as
requested by the Operator, in accordance with the programs and
budgets approved by the Executive Committee. When TRITON does
not have the necessary pesos to cover its portion of this
currency, ECOPETROL shall have the right to furnish such pesos
and be credited for the contribution that is to be made in
dollars, converted at the official rate for purchase of exchange
certificates by the Bank of the Republic on the date ECOPETROL
is to make its contributions, provided such transaction does not
violate and legal provision.
22.4 The Operator will present monthly to the Parties, and
within the thirty (30) calendar days following the end of each
month, a monthly statement showing the anticipated amounts, the
expenses made, outstanding obligations, and a report of all
charges and credits to the Joint Account. Such report will be
made in accordance with Addendum B. If the payments referred to
in Clause 22.3. are not made within the agreed term and the
Operator elects to make them, the delinquent Party shall pay the
commercial interest, in the same currency during the period of
delinquency.
22.5 If one of the Parties should fail to pay to the Joint
Account the amounts pertaining to it in due time, from that date
said party shall be considered a Delinquent Party and the other
Party the Performing Party. If the Performing Party should make
the payment belonging to the Delinquent Party, in addition to
its own, said Party shall have the right after sixty (60) days
of delinquency to have the Operator deliver to it the total of
the Delinquent Party's participation in the Contract Area
(excluding the percentage corresponding to the royalty), up to
such an amount of the production to give the Performing Party a
net income from the sales made equal to the amount the
Delinquent Part failed to pay, plus an annual interest of one
and one-half (1-1/2) times that of the commercial interest rate
beginning sixty (60) days after the initial date of the
delinquency. It is understood that "Net Income" will be the
difference between the sale price of the crude oil taken by the
Performing Party, less the cost of transportation, storage,
loading and other reasonable expenses incurred by the Performing
Party from the sale of products taken. The right of the
Performing Party may be exercised at any time after thirty (30)
days after notifying the Delinquent Party in writing of its
intention to take part or all of the production belonging to the
Delinquent Party.
22.6 Without consideration of the percentages of production
received by each of the Parties in the development of the
contract, all costs and expenses of the joint operation will be
charged to the Parties in the proportion of fifty percent (50%)
for each one.
22.7 The monthly statements referred to in Clause 22.4 may be
reviewed and objected to be either of the Parties up to a year
after the end of the calendar year to which they pertain,
clearly specifying the entries corrected or objected to and the
reason therefore. Any account which has not been corrected or
objected to within such period of time will be considered
correct and final.
22.8 The Operator will maintain accounting books, vouchers and
reports for the Joint Account in Colombian pesos in accordance
with Colombian Law and all charges and credits to the Joint
Account will be made following the accounting procedure
described in Addendum B which forms a part of this contract. In
the event of a discrepancy between the Accounting Procedure
designated as Addendum B and the provisions of this contract,
the provision of the latter will prevail.
22.9 The Operator may affect sales of materials or equipment
during the first twenty (20) years of the exploitation period
for the benefit of the Joint Account when the value of that
which is sold does not exceed five thousand dollars (U.S.$
5,000.00) or its equivalent in Colombian pesos; this type of
operation may not exceed the amount of fifty thousand dollars
(U.S.$ 50,000.00) or its equivalent in Colombian pesos for each
calendar year. These sales or the sale of fixed assets in
excess of these amounts must be approved by the Executive
Committee.
22.10 All the machinery, equipment or other assets or chattels
acquired by the Operator in the execution of this contract and
charged to the Joint Account, will be the property of the
Parties in equal shares. Nevertheless, in the event that one of
the Parties should decide to terminate its interest in the
contract before the end of the first seventeen (17) years of the
period of exploitation, except as foreseen in Clause 25, said
Party agrees to sell to the other Party, part or all of its
interest in said assets at a reasonable commercial price or
their book value, whichever is the lesser. In the event that
the other Party does not wish to buy such assets within ninety
(90) days following the offer to sell formally made to it, the
Party wishing to retire shall have the right to take and
withdraw its proportionate share of such machinery, equipment
and chattels. If TRITON decides to retire after seventeen (17)
years of the development period, its right in the joint
operations will pass freely to ECOPTEROL.
CHAPTER VI. DURATION OF THE CONTRACT
CLAUSE 23. MAXIMUM DURATION
This contract shall be in force beginning with its effective
date and shall have a maximum duration of not more than
twenty-eight (28) years divided as follows: Up to six (6) years
as of period of exploration in accordance with Clause 5, without
prejudice to the stipulation in Clauses 9.3. and 9.8., and
twenty-two (22) years as the period of exploitation beginning on
the date when the exploration period ends. It is understood
that in the events contemplated in this contract, in which the
exploration period is extended, the total term shall not be
extended beyond twenty-eight (28) years in any circumstance.
CLAUSE 24. TERMINATION
This contract shall terminate in any of the following instances:
24.1 At the end of the exploration period if TRITON has not
discovered a commercial field, except as provided in Clauses
9.5., 9.8. and 34.
24.2. When the contract expires under Clause 23.
24.3. At any time at the wish of TRITON after having complied
with its obligations referred to in Clause 5 and other
obligations acquired in accordance with this contract.
24.4 For the special reasons described in Clause 25.
CLAUSE 25. SPECIAL CAUSES FOR TERMINATION
25.1 ECOPETROL may unilaterally declare this contract
terminated at any time before the termination of the agreed upon
period in Clause 23 in any of the following cases:
A. Dissolution of TRITON and its transferees;
B. If TRITON or its transferees should transfer this contract,
totally or partially, without complying with the provisions of
Clauses 27.1 and 27.2.
C. Because of financial incapacity of TRITON and its
transferees, which will be assumed in the event of a bankruptcy
declaration or if a legal suit is brought against it by its
creditors.
D. When TRITON does not comply with the obligations acquired in
accordance with this contract.
25.2 In case of a declaration of determination, TRITON's rights
shall cease as expressed in this contract, not only as a Party
but as Operator, if at the time of the declaration of
determination TRITON occupies both capacities.
25.3 ECOPETROL may not declare this contact expired except
after sixty (60) days of having notified TRITON or its
transferees in writing, clearly specifying the causes invoked to
make such a declaration, and only if TRITON has not given
ECOPETROL satisfactory explanations of if TRITON has not
corrected the failure in the compliance of the contract, without
prejudice to the right of TRITON to avail itself of the legal
recourses in its favor which it deems expedient. Nevertheless,
if the correcting of the failure invoked by ECOPETROL as the
cause of the termination requires more than sixty (60) days and
TRITON is trying diligently to correct it, ECOPETROL will give
it the necessary time in accordance with good petroleum
practices, to make the aforesaid correction.
CLAUSE 26. OBLIGATIONS IN CASE OF TERMINATION
26.1 If the contract is terminated in accordance with Clause
24, during its period of exploration or exploitation, TRITON
shall leave in production those wells which on that date are
producing and will deliver the installations and other fixed
assets of the Joint Account that are located in the Contract
Area, all of which will pass freely to the ownership of
ECOPETROL with the rights of way and assets acquired for the
benefit of the contract, regardless of whether or not these
assets be located outside of the Contract Area.
26.2 If the contract is terminated for any reason after the
first seventeen (17) years of its exploitation period, all of
Triton's interest in the machinery, equipment or chattels
acquired by TRITON or by the Operator in the exercise of this
contract shall pass freely to ECOPETROL.
26.3 If the contract is terminated before the end of the
seventeen (17) years of the exploitation period, the conditions
of Clause 22.10. shall apply.
26.4 If the contract is terminated through a declaration of
determination at any time, all current assets and fixed assets
acquired for the exclusive benefit of the Joint Account, shall
pass freely to the ownership of ECOPETROL.
26.5 If the contract is terminated for any reason and at any
time, the Parties have the obligation to satisfactorily fulfill
their legal obligations to each other and to third Parties and
to those contracted under this contract.
CHAPTER VII. MISCELLANEOUS CONDITIONS
CLAUSE 27. RIGHT TO TRANSFER
27.1 TRITON shall have the right to transfer or convey all or
part of its interests, rights and obligations under this
contract, with prior written approval of ECOPETROL, to any
person, company or group with the economic and technical
capacity to fulfill the contract with the legal capacity to act
in Colombia.
27.2 If said transfer is partial, TRITON and the transferee
shall be jointly responsible to fulfill the obligations of this
contract.
27.3 If TRITON requests ECOPETROL's authorization to transfer
all or part of this contract, and if at the end of sixty (60)
calendar days after such request is received by ECOPETROL by
certified mail, no negative reply is received, it shall be
understood for all purposes, that the request had been accepted,
provided that in such request this Clause is invoked.
CLAUSE 28. DISAGREEMENTS
28.1 Disagreement between the Parties as to regulations
relating to the interpretation and performance of the contract,
which cannot be resolved amicably, shall be submitted for
examination and determination by the proper Colombian legal
public authority.
28.2 Any difference as to matters of a technical nature between
the Parties, relating to the interpretation, and/or the
application of this contract, which cannot be resolved amicably,
shall be submitted to arbitration in the following manner. Each
Party shall appoint an expert representative, one for each
Party, and a third mutually agreed upon expert will be
designated by Party's representative.
If the Parties cannot agree as to the naming of the third, the
Board of Directors of the "Colombian Society of Engineers", with
headquarters in Bogota, will choose the third candidate proposed
by either Party.
28.3 Any difference concerning the accounting which may arise
between the Parties by reason of the interpretation or
performance of this contract and which cannot be resolved
amicably, shall be submitted to arbitration. The arbitrators
shall be sworn Certified Public Accountants, and shall be named
in this manner: one by each of the Parties and a mutually agreed
upon third one by the two experts. Upon failure of the former
two to reach agreement and at the request of either of the
Parties, said third expert shall either be named by the Central
Board of Accountants in Bogota, or by the Colombia Society of
Engineers.
28.4 Both Parties agree that the decision of the experts shall
have the same effect as a transaction between themselves and
consequently, said decision will be binding.
28.5 In the event of a disagreement between the Parties
concerning the technical, accounting or legal aspect of the
contract, said disagreement shall be considered legal and Clause
28.1 shall apply.
CLAUSE 29. LEGAL REPRESENTATION
Without prejudice to the rights which TRITON may legally have a
consequence of legal regulations or pursuant to the provisions
of this contract, ECOPETROL shall represent the Parties before
the Colombian authorities with respect to the exploration and
exploitation of the Contract Area whenever it must do so, and it
shall submit to governmental officers and entities all the date
and information which may be legally required. The Operator
shall be obliged to prepare and furnish ECOPETROL with the
pertinent information. Any expense that ECOPETROL may incur
pursuant to any matter referred to herein, shall be at the
expense of the Joint Account and when such expenses exceed two
thousand five hundred dollars (U.S..$2,500.00) or its equivalent
in Colombian currency, the Operator's prior approval shall be
required.. The Parties declare that, insofar as any relation
with third Parties is concerned, neither the conditions of this
Clause nor of any other clause of the Contract, shall imply the
granting of a general power of attorney, or give the right for
the Parties to form a joint civil or commercial venture, or
allow the Parties to associate in any manner which would exempt
either Party from being responsible for the other's acts or
omissions with respect to the obligations stated in this
contract. The contract is concerned with operation within the
territory of the Republic of Colombia, and although ECOPETROL is
not a United States company, considering the TRITON is a company
established in the United States, the Parties agree that TRITON
may elect to be excluded from all the regulations of Subchapter
K, entitled Partners and Partnerships, of the Internal Revenue
Code of the United States: TRITON will make such an election in
its name in the proper manner.
CLAUSE 30. RESPONSIBILITIES
The responsibilities contracted by ECOPETROL and TRITON in
connection with this contract before third parties shall not be
joint liabilities, and consequently, each Party shall be solely
responsible for its share of the expenses, investments or
obligations which result as a consequence of such
responsibilities. The Operator shall conduct the operations
which are the subject of this contract in an adequate and
efficient manner and in accordance with the standard practices
for this type of operation, it being understood that at no time
shall it be responsible for errors in judgment, or for losses or
damages which are not the manifest result of the Operator's
gross negligence or willful misconduct. It is understood that
gross negligence in this case is limited to the lack of judgment
and care to by the Operator's poor judgment in appointing
qualified employees and contractors for the Joint Operation.
CLAUSE 31. TAXES, DUTIES AND OTHER
31.1 The taxes and duties imposed after the establishment of the
Joint Account and before the Parties receive their shares in
production, which may be imposed on the exploration of
Petroleum, will be charged to the Joint Account. The Colombian
income, patrimony and complementary taxes will be charged
individually to each of the Parties accordingly.
CLAUSE 32. PERSONNEL
32.1 TRITON shall appoint the Operator's Manager with prior
consultation with ECOPETROL.
32.2. In accordance with the terms of this contract and subject
to the established standards, the Operator shall have freedom to
appoint personnel that are required for the operations under
this contract, and shall have the authority to fix their
remuneration, functions, rank, number and conditions. The
Operator shall adequately and diligently train Colombian
personnel that are required to replace foreign personnel needed
for operations under this contract.
32.3 In any case, the Operator shall comply with the legal
provisions which set the proportion of national and foreign
employees and laborers.
32.4 TRITON during the period of exploration, and the Operator
during the period of exploitation, shall have the right to carry
out any work under with this contract through contractors,
provided the Executive Committee approves contracts which exceed
the amount of ten thousand dollars (U.S. $10,000.00) or its
equivalent in Colombian currency.
CLAUSE 33. INSURANCE
The Operator shall take out all the insurance required by
Colombian Law. It shall equally require of each contractor
performing any work under this contract that they obtain and
maintain in force the insurance that the Operator considers
necessary. The Operator shall also take out any other insurance
that the Executive Committee may deem necessary.
CLAUSE 34. FORCE MAJEURE
The obligations of this contract shall be suspended whenever
the Parties are not in a position to fulfill them wholly or
partially due to unforeseen events which constitute force
majeure or unexpected circumstances such as strikes, shut-downs,
war, earthquakes, floods or other catastrophes, laws or
government regulations or decrees which prevent obtaining the
necessary materials, and in general any non-financial reason
which actually prevents the work, also including any events not
described above which affect the Parties and are beyond their
control. If one of the Parties is not able, due to force
majeure, or unforeseen events, to fulfill its obligations under
this contract, it must promptly notify the other Party for its
consideration, specifying the causes of such impediment. In no
event shall the Force Majeure reasons extend or prolong the
total exploration and exploitation period beyond the
twenty-eight (28) calendar years beginning on the effective date
in accordance with the conditions of Clause 23, but any Force
Majeure impediment with a duration of more than thirty (30) days
during the six-year exploration period indicated in Clause 5,
shall extend such six-year period by the same length of time as
that impediment lasts.
CLAUSE 35. APPLICATION OF COLOMBIAN LAW.
For all the purposes of this contract, the Parties set as their
domicile the city of Bogota, Republic of Colombia. This
contract is in force under Colombian Law and TRITON is subject
to the jurisdiction of the Colombian Courts and renounces any
intention to make any claim through diplomatic channels with
respect to its rights and obligations arising under this
contract, except in the event of justice denied. It is
understood that justice will not be denied when TRITON in its
capacity of Party or Operator has exhausted all the recourses
and means of action that, according to Colombian law, may be
employed before the juridical branch of the public powers.
CLAUSE 36. NOTICES.
The notices or communications required by this contract or
occasioned by it shall require for their validity mention of the
pertinent Clause and shall be sent to the Parties at the
following addresses:
to ECOPETROL: Carrera 13 #36-24, Bogota, Colombia
to TRITON; 1400 One Energy Square, 4925 Greenville
Avenue, Dallas, Texas 75206
In case of a change of address, the other Party will be
notified in advance.
CLAUSE 37. VALUE OF THE PETROLEUM.
The reimbursements and payments referred to in Clauses 9.2,
9.4, and 22.5 shall be made in United States of America dollars,
or in Petroleum on the basis of the market price and the
limitations established under Colombian law for the sale of the
portion payable in dollars, of Petroleum or natural gas
originating in the Contract Area destined for a refinery in the
national territory.
CLAUSE 38. PRICE FOR CRUDE OIL.
38.1 TRITON's crude Petroleum share hereunder, destined for
domestic refining, pursuant to Resolution No. 50 of 1976, issued
by the Petroleum and Natural Gas Price Commission, and delivered
at the refineries where it is to be processed, shall be paid at
the international price CIF Cartagena for similar crude oils.
38.2 For purposes of this clause, the term "Similar Crude Oils"
is understood to be crude oil having the same API gravity and
similar physical and chemical properties.
38.3 To determine the price CIF Cartagena of similar crude oil,
the average sales price of crude oil FOB three export ports that
regularly supply significant volumes to the East Coast market of
the United States of America, shall be used. The price so
determined, and the average freight cost to Cartagena shall be
added to the determined price and such freight cost shall be
calculated according to the known method of monthly weighted
AFRA rates, or any other internationally accepted method.
38.4 The prices referred to above shall be determined quarterly
and shall be applied to subsequent period.
38.5 Any difference that could arise in the application of this
Clause will be reconciled according to the ways and means
established in this contract.
CLAUSE 39. AUTHENTICITY.
The authenticity of this contract will be subject to the
establishment of a branch by Triton in Colombia within ninety
(90) days from the date of the signing of this contract. Also
the granting of an irrevocable letter of credit to ECOPETORL for
$500,000 U.S. Dollars within thirty (30) days from the date of
this document, or as a substitute, the presentation of a
geophysical contract reflecting the seismic work to be performed
under Clause 5.
IN WITNESS WHEREOF, Signed in Bogota, before Witnesses, on the
11th day of June of Nineteen Hundred and eighty-two.
EMPRESA COLOMBIANA DE PETROLEOS
"Jose Fernando Isaza Delgado"
President
TRITON COLOMBIA, INC.
"John P. Tatum"
President
WITNESSES:
ANNEX "B"
Of the Contract by and between EMPRESA COLOMBIANA DE PETROLEOS
and TRITON COLOMBIA, INC., dated July 1, 1982, with regard to
the SANTIAGO DE LAS ATALAYAS I areas, hereinafter called "the
said Contract".
1.0. ACCOUNTING PROCEDURE
This procedure shall serve as the basis to effect the credits
and debits incurred between the Parties concerned, covering
operations in the properties defined by said Contract. The
terms used or defined in the said Contract shall have the same
meanings when used in this Accounting Procedure. The joint
activities shall be called hereinafter "Joint Operations", and
all charges shall be made to the Joint Account that will be
opened in accordance with the provisions of Clause 22 of the
said Contract. This Accounting Procedure may be revised by
means of written agreement between the Parties. The Parties
shall be called hereafter ECOPETROL and TRITON, and these terms
shall have the same meaning as attributed to them in the said
Contract.
The Joint Account defined in Clause 4-D of the said Contract
shall be divided into three (3) principal sections, as follows:
(a) Joint Account (Clarification, Charges and Entries)
This account shall reflect all the accounting entries as
specified hereinbelow, and all expenses shall be shared equally
on a monthly basis, fifty percent (50%) by ECOPETROL and fifty
percent (50%) by TRITON i.e., this account shall serve as the
basis for monthly invoicing, as established hereunder, each
month being ended with a zero balance (0). All the accounting
operations relating to the Joint Account shall be registered by
the Operator in Colombian pesos according to the laws of the
Republic of Colombia, but the Operator at the same time may
carry auxiliary records showing disbursements which occurred in
currency other than Colombian pesos.
(b) Joint Operation Current Account
This account shall carry the advances received from the
Parties and the debits or credits covering the invoices
submitted to the Parties, so that it will at any time show the
credit or debit balance of each Party, as applicable. This
account shall be divided into two sub-accounts depending on the
monetary currency of the transaction, i.e., pesos or U.S.
Dollars.
(c) Joint Properties Register
Operator shall carry a record of all assets acquired through
the Joint Account subject to inventory, specifying in detail the
type of asset, date of acquisition and original cost. The
account mentioned under (a), (b), and (c) shall be a part of the
Operator's official accounting records and should not be
combined or mixed with other accounting records not pertaining
to the Joint Account. The three will be subject to Section 6.6
referred to herein as "Auditing".
FIRST PART
2.0 ADVANCES, INVOICING AND ADJUSTMENTS
2.1 Advances. Notwithstanding the fact that Operator shall pay
and discharge first of all and any costs and expenses incurred
under the Contract, charging to each Party the percentage of its
participation, it is agreed that to finance such participation,
each Party shall, at Operator's request, as stipulated
hereinbelow, following the acceptance by all Parties of the
existence of a commercial reservoir and, by the first five (5)
calendar days of each month, advance to the Operator, its share
of the expenses estimated for the month's operations. The
request for advance must be accompanied by a detailed list
explaining how the advance had been calculated. These advances
shall be made in United States Dollars and in Colombian Pesos,
in accordance with the requirements shown in the budgets and in
the requests for funds prepared by Operator. The request for
funds shall be made by the Operator during the first twenty (20)
calendar days of the month immediately preceding the one in
which the contribution is to be made. If the Operator had to
make extraordinary expenditures not included in the monthly
advance, he should request in writing to all non-Operators
special advances covering their shares of said expenditures.
Each participant should advance his proportionate part during
the 15 calendar days following the Operator's request.
2.2 Invoicing.
(a) The Operator shall prepare an initial invoice for ECOPETROL
after the acceptance of a commercial reservoir, for fifty
percent (50%) of the costs and expenses of producing Exploratory
Wells. Said costs shall include all expenses incurred by
drilling, such as tests, completion, well equipment, as well as
flow lines, separators and other equipment required for
production. Said invoices shall likewise include fifty percent
(50%) of the cost of the additional operations referred to in
Clause 9.3 of the said Contract, and shall be paid as stipulated
in said Clause. The invoicing shall include a summary of the
costs, showing separately the currency in which they were
incurred, i.e., Colombian Pesos or U.S. dollars.
(b) From the date of the initial invoice onward, the Operator
shall bill the Parties, within thirty (30) calendar days from
the last day of each month, for their proportionate
participation in costs and expenses during that month. The
invoices shall include the usual accounting details that are
required in the Operator's accounting procedures, including
analysis of expenses, investments, inventories and other bills,
and separately show the costs and expenses incurred in pesos and
in dollars.
2.3 Adjustments.
The invoices shall be adjusted between Operator and the Parties
after the dollar and peso advances have been deducted. When the
advances made by either Party differ from its participation in
the actual costs, as determined for each period, the differences
in pesos and/or dollars shall be adjusted and reflected in the
following month's invoice.
2.4 Acceptance of Invoices.
Payment of invoices shall not affect the Parties' right to
protest or inquire into the accuracy of same within twelve (12)
months following the end of each calendar year to which the
invoice pertains.
SECOND PART
3.0 CHARGES
Subject to the limitations set forth hereinbelow, the Operator
shall charge to the Joint Account and invoice each Party, in
accordance with the established percentages (Section 1.(a) of
this Annex), the following expenses:
3.1 LABOR
3.1.1 Local and Foreign Employees:
(a) The salaries of Operator's employees or workers who are
working directly for the benefit of the Joint Operation,
including overtime, extra pay for night work, extra pay for
work on Sundays and holidays and the respective compensatory
rest and in general, any payment constituting salary.
(b) Social benefits, indemnification, insurance, subsidies,
allowances, bonuses, and in general, any benefit that is not
salary and that is granted to the workers and/or their family
members or dependents, whether granted individually or
collectively, and whether granted by virtue of labor contracts,
law, collective agreements and/or arbitration awards, with
exception of housing plans. Among the above, shall also be
enumerated the following: severance pay ("cesantia"),
vacations, retirement pensions or disability benefits, and
assistance originating from industrial or non-industrial illness
or accidents, service bonuses, life insurance, indemnity due to
termination of contract, labor union aid, any kind of
allowances, subsidies and assistance for savings, health,
education and, social security in general. Also, dues paid to
the ICBF, National Training Service, SENA, the Colombian Social
Security Institute - ICSS, and any other similar or analogous
entities established henceforth.
(c) All expenses incurred for the benefit of the Joint
Operation related to the maintenance and operation of its
office and its service facilities. These expenses include
but are not limited to the following, whether furnished
free of charge or on a remunerated basis, whether
furnished to the workers or theirdependents, and whether
provided on a voluntary or obligatory basis:
1. Medical, pharmaceutical, surgical and hospital services;
2. Camp and full services of same, including repairs and
improvements;
3. Training expenses;
4. Recreation of workers;
5. Maintenance of schools for workers, their families and
dependents;
6. Safety or social assistance programs and guard service for
the camp.
(d) It is understood that the expenses and services mentioned
under subsections (a), (b) and (c) above shall be charged
to the Joint Account when, by stipulations of the law,
or collective agreements and/or arbitration awards,
or voluntarily, they apply directly or severally to
the contractors, sub-contractors,intermediaries
and/or their workers who are working for the
benefit of the operation.
(e) Indirect labor expenses, referred to in subsection (b)
above, may be charged directly or prorated according to the
rates agreed upon between the Parties at periodic
intervals, and assigning to them a percentage of the
direct payroll referred to in (a) above. In this
case an invoice shall be prepared but
payment shall not be due until reimbursements are made.
With regard to retirement and disability pensions,
the Operator will account for 100% of this provision,
but will invoice ECOPETROL and any other Party for
their respective interests. This choice
shall be treated as a long-term debt and shall
vary according to the worker's length of employment
with the association.
The partners shall contribute according to their
interests in the joint operation, monies required to
establish a fund which shall be invested in the
most conservative and lucrative stocks
in the stock market (including insurance company programs).
This fund shall be managed by the Operator in conjunction
with guidance by the Executive Committee. The fund
will guarantee the future obligations in accordance
with the actual results calculated as of December 31 of
each period, and if the need arises to pay any retirement
benefits, these payments shall be charged directly to
the operation, in accordance with each
Party's respective interest. In the event an employee
working on behalf of the joint operation should retire,
one of the following situations could occur and should
be treated as follows:
a) By retiring, the retiree loses all pension rights, in
which case it will be deducted from the insurance actuary
study.
b) The withdrawal from operations by the Operator leaves some
future pension benefits, because at the moment of discharge,
none of the prerequisites for retirement have been meet. In
this case the pension due shall be charged to the joint
operation, in accordance with the proportionate time of
service.
c) The employee continues working for the Operator without
fulfilling his retirement prerequisites. In this case the
obligation owed by the joint operation shall be frozen,
and its value plus the interest it would have accrued in
the fund shall be delivered to the Operator only when the
payment matures. Once the money has been delivered, the
joint operation shall no longer be responsible.
d) There is no termination and the employee continues working
even after having met all of his retirement prerequisites.
In this case, the Operator will become responsible for the
individual's retirement immediately and the obligation
shall no longer be part of the joint operation.
e) Termination is caused by retirement. In this case the
pension benefits shall be charged to the joint account in
accordance with the proportionate length of service.
3.1.2 Specialized Consultants.
Qualified personnel who do not reside regularly in Colombia
and who may be required occasionally to perform services or
supervision for the Joint Operation, and whose services in part
or in whole have not been charged otherwise to the Joint
Account, shall be charged in an appropriate proportion and shall
include salaries, travel expenses, living expenses (as long as
they are residing in Colombia) and in general, any expenses
included under Clause 3.1.1.
3.2 Materials, Equipment and Supplies.
All materials, equipment and supplies acquired by the Operator
for the Joint Operation shall be charged directly to the Joint
Account. Any other materials, equipment and supplies necessary
for the performance of the Joint Operations, acquired and
controlled by TRITON or ECOPETROL, shall be charged to the Joint
Account at "Book Cost" as they leave TRITON's or ECOPETROL's
warehouse to be used in the Joint Operations. The units of
Capital Equipment will be charged directly to the Joint Account.
The "Book Cost" will be determined as follows:
3.2.1 "Book Cost"
It is understood that "Book Cost" means the last average
price of the stock in the warehouse based on the cost obtained
from the list of import quotes or the local cost, as follows:
(a) For imported materials, equipment and supplies, the book
cost will include the net invoice price from the manufacturer or
supplier (after deducting all of the discounts), purchase costs,
freight and delivery charges between the supply area and the
shipping port, freight to the delivery port, insurance, import
duty or whatever other tax, handling from the ship to the
customs warehouse and transpiration to the operations are.
(b) For materials, equipment and supplies acquired locally,
the "Book Cost" will include the net invoice of the seller
(after deducting all discounts), plus sales tax, purchase costs,
transportation, insurance and other similar costs paid to third
parties, from the place of purchase to the operations area.
(c) The materials will be charged to the Joint Account in
accordance with the monetary origin of the acquisition, thereby
charging each Party proportionately.
3.2.2 Return of Materials to the Joint Account's Warehouse.
The materials, equipment and supplies returned by the
operations to the Joint Operation's warehouse will be valued as
follows:
(a) New materials, at their book cost:
(b) Second-hand materials, in good condition and that may be
used, and equipment usable without repairs, may be returned by
the Operator to the Operator's warehouse at seventy-five percent
(75%) of their book cost, with the appropriate credit to the
Joint Account.
(c) Second hand materials and equipment that could be used
with repair may be returned by the Operator to the Operator's
warehouse at 50% off their book cost. Such materials on being
used again, shall be charged to the Joint Account at the new
book cost.
3.2.3 Sales by the Parties. The materials, equipment and
supplies sold by the Parties to the Joint Operation shall be
valued at the price of repossession agreed to by the Parties;
the cost of corresponding transportation shall be paid by the
Joint Operation.
3.2.4 Local Transportation of Materials.
(a) For materials sent by an outside carrier, the cost shall
be according to the invoice of the transport company.
(b) For materials transported by one of the parties, the cost
shall be the actual cost.
3.2.5 Materials for Projects Canceled, Postponed or Changed.
When an accumulation of stocks arises in the warehouse due to
a change, postponement or cancellation of projects approved by
the Parties, the cost of such materials shall be charged to the
Joint Account. These materials may be sold to third parties
according to conditions under Section 5.1. of this annex and
their value credited to the Joint Account.
3.3 Travel Expenses. All travel expenses incurred for the
benefit of the Joint Operation by local or foreign personnel,
such as transportation, hotels, food, etc.
3.4 Service Units and Facilities. Services performed by
equipment and facilities owned by any Party shall be charged to
the Joint Account at reasonable rates, as established in the
Sixth Part hereunder. The rates so established shall be used
until they are modified by mutual agreement.
3.5 Services. Services acquired from third parties for the
Joint Operation, including contractors, at their actual cost.
3.6 Repairs. Expenses for repairs made to either Party's
equipment or items destined to be used in the Joint Operation,
except if such costs had been charged already by way of leases
or otherwise.
3.7 Litigation. Expenses incurred for the Joint Operation
relating to threatened or actual litigation (including
investigation and securing of evidence), lifting of embargoes,
legal decisions and claims and processing of claims,
compensation for accidents, settlement for death and burial
expenses, provided these charges have not been paid by an
insurance company or covered by the proportional surcharges
mentioned under 3.1.1 above. When legal services are furnished
in these matters by employee attorneys or outside attorneys,
whose total or partial compensation is included in the
administrative surcharge, no additional charges shall be made
for such services, but the direct expenses incurred in such
legal proceedings shall be charged.
3.8 Loss and Damage of Joint Operation Property and Equipment.
Any costs or expenses necessary to replace or repair damage or
loss caused by fire, flood, storm, theft, accident or the like.
Operator shall advice the Parties in writing of the damage or
loss sustained, as soon as possible.
3.9 Taxes and Rentals. The amount of any taxes paid or accrued
for the benefit of the Joint Operation shall be charged to the
Joint Account. Also charged to the Joint Account shall be the
amount of any rentals, rights or way of indemnities for
improvements, land occupancy, etc.
3.10 Insurance.
(a) Premiums paid on insurance carried for the benefit of the
operations hereunder, together with any expenses and indemnities
accrued and paid, and any losses, claims, and other expenses not
covered by the insurance companies, including legal services as
mentioned under 3.7 hereinabove, shall be charged to the Joint
Account.
(b) When there is no insurance, the actual expenses incurred,
as mentioned in the preceding paragraph, and paid by Operator,
shall also be charged to the Joint Account.
3.11 Department Operation Charges. A proportionate part of the
salaries, social benefits and office expenses of the Operator
and other departments with assigned responsibilities to the
operation of the area hereunder, such as the Production and
Exploration Departments, Petroleum Engineering, Drilling, Land,
Geological and Geophysical Departments. Such charges shall be
based on the direct services rendered to the Joint Account by
the personnel of these offices and departments, whatever their
location to the said operations, in proportion to similar
services rendered to TRITON's solely-owned operations or to
operations of any third party to whom TRITON renders its
services. The work timesheets shall be taken as basis for these
charges.
3.12 Administrative Surcharges. Administrative services for the
Joint Operations, such as Accounting, Legal, Treasury,
Industrial Relations, Administrative Services, Medical
Department, Industrial Services and the like, shall be furnished
by TRITON. To pay for such services, the Operator shall make
the following administrative surcharges for the Joint Account
applicable to the investment budget and operations budget
approved by the Executive Committee as each budget is being
expended. The previous administrative surcharges shall be
revised and readjusted by the Parties to reflect an approximate
cost of those expenses and submitted for the Executive
Committee's approval., within the first year following the date
of acceptance of a commercial reservoir. Thereafter, said
administrative surcharges shall be revised and readjusted
annually to the value of actual costs.
3.13 Other Expenses. Any other appropriate expenses incurred by
the Operator for the development, maintenance and operation of
the Contract Area hereunder, including civic contribution.
THIRD PART
4.0 CREDITS
4.1 The Operator shall credit to the Joint Account for income
coming from:
(a) Collection of insurance in relation to the Joint Operation,
the premium on which had been charged to said operation.
(b) Sales of geological information, previously authorized by
the Parties, provided the costs of such information had been
charged to the Joint Operation;
(c) Sales of properties, plant, equipment and materials of the
Joint Operation;
(d) Rentals received, reimbursements under customs duties or
transport tax claims, etc. shall be credited to the Joint
Operation provided such rentals or reimbursements apply to same.
(e) Any other income from operations or contracts authorized by
the Executive Committee.
4.2 Guaranty. In the case of defective equipment, the credit
shall be made to the Joint Operation when Operator has received
the applicable readjustment from the manufacturer or his agents.
FOURTH PART
5.0 DISPOSAL OF CAPITAL EQUIPMENT AND MATERIALS.
5.1 Sales made by Operator to third parties of major materials
and capital equipment charged to the Joint Account shall be made
only with the Executive Committee's approval (Chapter V of the
said contract).
The proceeds shall be credited to the Joint Account. For this
purpose, only, major materials are defined as any assets having
an estimated sales value of over five thousand dollars (US
$5,000) or its equivalent in Colombian currency.
5.2 Minor materials charged to the Joint Account that are not
required in the operation or returned to warehouse may be sold
by the Operator and their proceeds credited to the Joint Account.
5.3 The Executive Committee's prior authorization is required to
abandon or dismantle any assets having a cost or estimated value
of five thousand dollars (US $5,000) or over, or its equivalent
in Colombian currency.
5.4 Neither Party is obligated to purchase the other Party's
interest in surplus material, whether new or second-hand.
Withdrawals of major items of surplus material, such as
derricks, tanks, motors, pump units and pipe, shall be subject
to the Executive Committee's approval; however, the Operator
shall have the right to discard the damaged or useless materials
in any way.
FIFTH PART
6.0 INVENTORIES AND AUDITING
6.1 At reasonable intervals, the Operator shall take inventories
of all of the Joint Operations assets.
6.2 The Operator shall give notice of its intention to take an
inventory, to the Parties in writing, one (1) month in advance
of the date of commencement of such inventory so that the
Parties may be represented at same. The absence of either Party
at such inventory taking shall not make the inventory so taken
by the Operator less valid or effective.
6.3 The Operator shall furnish the Parties with a copy of each
inventory, together with a copy of the reconciliation of same.
6.4 Inventory adjustments due to surpluses or missing items
shall be made known to the Executive Committee for its
consideration and approval of same.
6.5 At midnight of the last day of the 22 years of exploitation
the Parties shall make an inventory of the materials in the
warehouse that are owned by the Joint Account, as well as of the
products extracted that are in the gathering tanks, in the
pipelines leading from same to the storage tanks, and inside the
latter, within the areas of exploitation, and such inventories
shall be divided up between the Parties, after deducting the
royalty in the manner provided for in Clause 13 of the Contract.
6.6 Auditing. Subject to Clause 2.4 of the First Part of this
Part of this Accounting Procedure, the Parties may have their
own auditors examine and control the Operator's accounting
records relating to the Joint properties and joint operation.
However, to facilitate the review of expenditures and costs for
exploitation wells, considered under Section "2.2 Invoicing", at
the beginning of this annex, once the Operator advises the
non-operators of the termination date, provided previous
notification was given by the Operator, and inventory date of
any producing well will allow. ECOPETROL's auditors to review
periodically the invoices for drilling of wells, so that if a
field is declared as commercial, this review has already been
accomplished under the best weather and location conditions.
Besides the representatives of the Parties, representatives of
the "Contraloria General de la Republica" may take part in
Auditing revisions foreseen under this Annex, if considered
convenient by such entity. The costs and expenses of such
inspection shall be for the account of the Party concerned.
SIXTH PART
7.0 TABLE OF TARIFFS.
Subject to the limitations set forth hereinabove, services
rendered to the Joint Operation by facilities solely owned by
ECOPETROL and/or TRITON shall be charged to said operations at
the appropriate rates, so as to allow for the recovery of the
actual costs. Said costs shall include the normal costs of
labor, salaries, social benefits, depreciation and any other
operation expenses, bearing in mind the following:
(a) The rates of transport units, which are normally calculated
on the basis of time in operation, shall include the time spent
in loading and unloading, the time spent in waiting for the
loading and the time spent in waiting for the unloading to be
completed. The charges for transport units assigned to the
operation shall include Sunday and holidays, except when the
units are out of service for repairs.
(b) When the material for the aforementioned Operations is
transported together with other material by river or land units
solely owned by ECOPETROL or TRITON, the charge shall be based
on the tonnage transported, at rates no higher than commercial
rates.
IN FAITH WHEREOF, the Parties sign this Accounting Procedure
document in duplicate, on the 11th day of the month of June of
1982.
EMPRESSA COLOMBIANA DE PETROLEOS TRITON COLOMBIA, INC.
Jose Fernanda Isaza D., John P. Tatum
President President
Witnesses:
REPUBLIC OF COLOMBIA
(Official Seal)
NOTARY ELEVEN OF
THE DISTRICT OF BOTOGA
Carrera 7a. No. 35-11 Telephones 232 2670 - 232 0106 - 232 0625
- 232 1420
Third photocopy of Public Deed No. 3556
DATE: 7th December 1990
GRANTORS: TOTAL EXPLORATIE EN PRODUKTIE MAATSCHAPPIJ B.V.
CONTRACT: Official Registration of an Oil Association Contract
in the Rio Chitamena Sector
NESTOR HERNANDO PARRA E.
NOTARY ELEVEN
Public deed number: 3556 THREE THOUSAND FIVE HUNDRED FIFTY SIX
granted in notary eleven of Bogota. Granting date: seventh (7th)
December, nineteen ninety (1.990).
Type of Act: Official Registration of an Oil Association
Contract in the Rio Chitamena Sector.
Individuals participating in this Act: Jorge Lara Urbaneja,
acting as the legal Representative of TOTAL EXPLORATIE EN
PRODUKTIE MAATSCHAPPIJ B.V.
In the city of Bogota, Special District, Department of
Cundinamarca, Republic of Colombia, before me, NESTOR HERNANDO
PARRA ESCOBAR, the Notary Eleven of the District of Bogota, the
public deed consigned under the following terms has been
granted: Before me appeared JORGE LARA URBANEJA, identified
with Citizenship Card No. 17.104.450 of Bogota and holder of
Military License number B-626935 of Military District number 1,
resident of this vicinity, who acts as Legal Representative of
TOTAL EXPLORATIE EN PRODUKTIE MAATSCHAPPIJ B.V., in accordance
with the authority evidenced in the certificate of incorporation
and legal representation issued by the Chamber of Commerce of
Bogota, enclosed for the record. He equally manifested that he
submits the following documents for record in this notary: a)
Association Contract for the Rio Chitamena Sector, entered
between the EMPRESA COLOMBIANA DE PETROLEOS ECOPETROL and TOTAL
EXPLORATIE EN PRODUKTIE MAATSCHAPPIJ B.V., on 3rd. December
nineteen ninety (1.990). b) Drawing of Contract area and Gauss
coordinates chart, which constitute Exhibit A of the mentioned
Contract. c) Operation Agreement, which constitutes Exhibit B of
the said Contract.
GRANTING AND AUTHORIZATION
One (1) sheet of notarial paper - number AB-19783526 - was used
in this deed. The present deed read as per legal regulations
require, the appearing Party agreed to it, accepted it as it is
written and in witness of approval and consent, signs it with
myself, for which I in turn give faith and so authorize it.
Notarial duties $3.000
(signed)
JORGE LARA URBANEJA
I.D. 17.104.450 Bogota
M.L. No. B-626935 M.D. No. 1
(signed and sealed)
NOTARY ELEVEN
NESTOR HERNANDEZ PARRA ESCOBAR
BOGOTA CHAMBER OF COMMERCE
MAIN OFFICE
Date: Day 06 Month 12 Year 90 Time 14:05:07
Certifies:
Certificate of Incorporation and Legal Representation of branch
in Colombia of: "TOTAL EXPLORATIE EN PRODUKTIE MAATSCHAPPIJ B.V."
The Secretary of the Chamber of Commerce of Bogota, based on the
records and registers of the trading register, certifies:
Name: "TOTAL EXPLORATIE EN PRODUKTIE MAATSCHAPPIJ B.V."
Domicile: Bogota
CERTIFIES:
Trading register No. 287279
CERTIFIES:
Opening of a branch by way of Public Deed No. 600, Notary 11 of
Bogota - dated 11th March 1.987, inscribed on 16th March 1.987,
under number 6.696 of book VI, original copies of incorporation
of the society "TOTAL EXPLORATIE EN PRODUKTIE MAATSCHAPPIJ B.V."
with main domicile in Rotterdam, The Netherlands, its by-laws,
and the resolution agreeing the establishment of a branch in
Colombia.
CERTIFIES:
Reforms:
Public deed No. 1.652, Date 26-V-1.987, Notary Eleven (11)
Bogota, Registree 2-VI-1,987 No. 6986.
CERTIFIES:
Effectiveness: The Society has not been dissolved. Duration:
From March 11. 1.987, to March 11. 2.017.
CERTIFIES:
Social Objective: The exploration and exploitation of oil and
natural gas; to comply with this objective, acquire, possess,
impose and alienate any kind of goods and chattels or real
estate, enter any civil or commercial contracts related to such
objective; execute, render, accept, negotiate, discount and
charge any and all types of valuables and other civil and
commercial documents; acquire interest in other companies,
either as stock holder or founder; grant or take money on loan
with or without real or personal guarantees and, in general,
perform all type of acts or agreements required or convenient to
the main objective of the Colombian branch.
CERTIFIES:
Authorized Capital: $10.000.000.oo
CERTIFIES:
Attorney: The following individuals were granted power of
attorney as per the opening document referred to above:
Position Name Identity Document
Legal Representative
Manager Jorge Lara Urbaneja 17.104.450 Bta.
Deputee Antonio Duarte Amezquita 19.232.082 Bta.
Power of the Attorney: To exercise legal representation of the
Company in Colombia and perform on its behalf and
representation, perform such activities and paperwork as may be
necessary in relation to all legal and administrative matters,
having the authority to represent the Company before whichever
and all national, departmental, municipal or police authorities,
such appointee being invested with powers as could be necessary
or adequate to fulfill all requirements for the exercise of the
powers conferred upon him; to subscribe all and any documents
and petitions; to comply with the Company's tax obligations in
Colombia and to obtain the certificate of freedom of debt (paz y
salvo); take all necessary steps to set domicile and qualify the
Company so it can make business in Colombia, obtaining the
necessary permits for such purpose. Additionally, empowered
with equal authority is his substitute, doctor Antonio Duarte
Amezquita as appointee, of age and resident in Bogota, D.E., so
he may represent the principal during his absolute or temporary
absences. In all events in which the principal's substitute
acts in the name of the Company exercising the powers upon him
conferred, third parties shall presume that he acts during an
absolute or temporary absence of the principal.
CERTIFIES:
Statutory Auditor: The following individuals were granted power
of attorney as per the opening document referred to above:
Position Name Identity Document
Fiscal Auditor Pedro Bonilla 19.256.243 Bogota
Deputee Hugo Ospina 8.235.849 Medellin
CERTIFIES:
That as per Resolution No. EX-08171 26th June 1.987 from the
Superintendency of Corporations, registered 2nd July 1.987 under
No. 7129 of book VI, the definitive operation permit was
conceded to the society.
CERTIFIES:
That no registrations have been made after the above date which
would modify in full or in part the contents of this
certificate. Bogota, D.E. Date: Day 06 Month 12 Year 90
The Secretary of the Chamber of Commerce of Bogota
(signed and sealed)
Cost $285.oo
Does not require stamp tax
NATIONAL TAX ADMINISTRATION
872051288530
DECLARATION AND PAYMENT OF THE NATIONAL STAMP TAX
1) Tax Administration: Bogota Code: 03
2) Telephone: 2851400
3) Identification Document: NIT 860.536.185-9
4) Surname and Names of Social Name of the Parties (maximum 60
characters) TOTAL EXPLORATIE EN PRODUKTIE MAATSCHAPPIJ B.V.
5) NIT: 899.999.058-1
6) EMPRESA COLOMBIANA DE PETROLEOS ECOPETROL
7) Address of the person or entity identified in box 4: Calle
35 No. 7-25, piso 4 Municipality: Bogota Department:
Cundinamarca
8) Amount of documents: One
9) Concept (list the type(s) of document(s) noting number, date
and nature of transaction): Rio Chitamena Sector Oil
Association Contract, entered 3rd December 1.990. value:
undetermined.
Signature:
Individual responsible for the payment:
Name:
Id. 17.104.450 Bogota
Payment:
1. Tax Amount $ 2.000
2. Penalties: $ -0-
3. Interests on Delayed Payments: $ -0-
4. Total Payments (1+2+3): $ 2.000
Cash: $ 2.000
Bank payment receipt stamp
COLOMBIAN OIL COMPANY
E C O P E T R O L
ASSOCIATION CONTRACT
ASSOCIATED PARTY: TOTAL EXPLORATIE EN PRODUKTIE MAATSCHAPPIJ
B.V.
SECTOR: RIO CHITAMENA
DATE OF EFFECTIVENESS: FEBRUARY 1, 1.991
The Contracting parties: On one side, the Colombian Oil
Company, which hereinafter shall be called ECOPETROL, a State
industrial and commercial company created by Law 165 of 1948 and
ruled by Decree 062 of 1970, the domicile of which Home Office
is located in Santafe de Bogote, Special District, being
represented by ANDRES RESTREPO LONDONO, of age, identified with
Colombian citizenship card 8.235.895 issued in Medellin, having
permanent address in Bogota, who declares: 1. That in his
position as President of ECOPETROL, he acts in representation of
such Company, and 2. That he has been duly authorized by the
Board of Directors of ECOPETROL to enter into this present
Contract, as is evidenced in Minutes of the Meeting No. 1.926
dated 1st. October 1.990 and, on the other part TOTAL EXPLORATIE
EN PRODUKTIE MAATSCHAPPIJ B.V., a society organized under the
Laws of the Netherlands, having its main domicile in Rotterdam,
and which henceforth shall be referred to as THE ASSOCIATE,
which has a branch office established in Colombia such branch
having headquarters with domicile in Bogota, incorporated under
public deed number No. 600 dated 11th. March 1.987, issued by
Notary Eleven (11) of the District of Bogota, represented by
JORGE LARA URBANEJA, a Colombian citizen of age, identified with
Citizenship Card No. 17.104.450 issued in Bogota, who declares:
1) That in his position as Legal Representative, he acts in
representation of the company TOTAL EXPLORATIE EN PRODUKTIE
MAATSCHAPPIJ B.V. and 2) That he is fully authorized to enter
into this present contract as is evidenced in Certificate of
Incorporation and Legal Representation issued by the Chamber of
Commerce of Bogota. Under the conditions set forth hereinabove,
ECOPETROL and THE ASSOCIATE leave evidence that they have
entered the contract contained in the following Clauses:
CHAPTER I - GENERALITIES
CLAUSE 1 - OBJECT OF THIS CONTRACT
1.1 The object of this contract is the exploration of the
Contracted Area and the exploitation of Oil property of the
nation which would be found to exist in such area as described
in Clause 3 herein.
1.2 In accordance with article 1st. of Decree 2310 of 1974, the
exploration and exploitation of hydrocarbons property of the
nation shall be the responsibility of ECOPETROL, who in turn may
carry out such activities either directly or by way of contracts
with private parties. Based on such regulation, ECOPETROL has
agreed with the ASSOCIATE to explore the Contracted Area and
exploit the Oil that may be found to exist therein, under the
terms and conditions set forth herein this document, in Exhibit
"A" and Exhibit "B" (Operations Agreement) hereto, documents
which form integral part of this contract.
1.3 Without detriment of the contents of this contract, it is
understood that THE ASSOCIATE shall have on the Oil produced in
the Contracted Area and in whichever part thereof that would
correspond to it, equal rights and obligations as would have
before the Colombian law any party who within the national
territory exploits oil property of the nation.
1.4 ECOPETROL and THE ASSOCIATE agree that they shall carry
forward exploration and exploitation works in territories of the
Contracted Area, the costs and risks of which efforts shall be
divided between both parties in the proportion and under the
terms set forth herein this contract, and that the properties
acquired and the Oil produced and stored shall pertain to each
Party in the proportions provided for herein.
CLAUSE 2 - CONTRACT APPLICATION
This contract applies to the Contracted Area, the limits of
which are described in Clause 3, or to any part thereof, subject
to the terms of same wherever Clause 8 would have been applied.
CLAUSE 3 - CONTRACTED AREA
The Area Contracted is known as "RIO CHITAMENA", and comprises
an extension of four thousand six hundred eighty one (4.681)
hectares and two thousand three hundred ten (2.310) square
meters; it is located within the jurisdiction of the
Municipality of Tauramena in the Intendancy of Casanare.
This area is described herein as shown on the map attached under
Exhibit "A", which forms part of this Contract, as well as the
corresponding charts of calculations: the point of reference is
Geodesic Point MENA-910 as described by the "Agustin Codazzi"
Geographic Institute; the Gauss plain coordinates of same taken
with an origin in Bogota are: N-1.041.738,38 Mts. and
E-1.150.006,64 Mts. which correspond to geographical coordinates
Latitude 4deg.58'30.350" North of the Equator and Longitude
72deg.43'42.600" West of Greenwich. From this geodesic vertex, a
distance of 3.977,88 Mts. is measured in a straight line heading
S-5deg.40'30.281"-E, until reaching point "A", located on the
right margin downstream of the Chitamena river, which point
becomes the starting point for the boundaries of the surface
land of concern: such point "A" coordinates are: N-1.037.780,oo
Mts. & E-1.150.400,oo Mts. From this point "A", the line
continues downstream the right margin of the Chitamena river,
until reaching point "B", which is located on such margin, and
the coordinates of which are: N-1.035.000,oo Mts. and
E-1.158.900,oo Mts. The straight line joining point "A" to
point "B" is directed S-71deg.53'21.158"-E to a distance of
8.943,06 Mts. Throughout its full extension, line "A-B" is
adjacent to line "A-G" of Triton's "Tauramena" Association
Contract. From point "B", the line continues heading
S-6deg.23'12.122"-W to a distance of 4.081,33 Mts. until
reaching point "C" the coordinates of which are: N-1.030.944,oo
Mts. and E-1.156.446,oo Mts. From this point "C", the line
continues heading N-63deg.03'00.879"-W to a distance of 7.859.51
Mts. until reaching point "D" the coordinates of which are:
N-1.034.056,oo Mts. and E-1.151.44,oo Mts. From this point "D"
the line continues heading N-63deg.03'06.822"-W to a distance of
7.224,45 Mts. until reaching point "E" the coordinates of which
are: N-1.037.780,00 Mts. and E-1.145.000,00 Mts. Throughout its
full extension, line "D-E" is adjacent to line "B-A" of Lasmo's
"Upia" Block A1 Association Contract. From point "E" the line
continues heading N-69deg.02'06.976"-W to a distance of 5.086,74
Mts. until reaching point "F" the coordinates of which are:
N-1.039.600,oo Mts. and E-1.140.250,oo Mts. From this point "F"
the line continues heading N-24deg.15'48.927"-E to a distance of
2.236,oo Mts. until reaching point "G", located on the
downstream right margin of the Chitamena river, the coordinates
of which are: N-1.041.638.48 Mts. and E-1.141.168.85 Mts. Lines
"E-F" and "F-G" are adjacent in throughout their full extension
to line "C-B" and to the southern end of line "B-A" of Maxus's
"Recetor" (sic) Association Contract. From point "G" the line
continues downstream on the right margin of the Chitamena river
until reaching point "H", located on such margin, and the
coordinates of which are: N-1.038.750,oo Mts. and E-1.145.110,oo
Mts. The straight line joining point "G" with point "H" is
oriented S-53deg.45'43.940"-E to a distance of 4.886,31 Mts. In
the southeast, line "G-H" is adjacent in a straight line
extension of 4.678,31 Mts. with line "C-B" of Triton's
"Tauramena" Association Contract. From point "H" the line goes
downstream the right margin of the Chitamena river until
reaching point "A", which is the starting point for the surface
land boundary and the closing point for the polygon. The
straight line joining point "H" with point "A" heads
S-79deg.36'33.825"-E to a distance of 5.378,20 Mts. Throughout
its full extension, line "H-A" is adjacent to line "B-A" of
Triton's "Tauramena" Association Contract. The extension of the
area located inside the polygon described above, is 4.681
hectares and 2.310 square meters and is located within the
jurisdiction of the Municipality of Tauramena in the Intendency
of Casanare.
Paragraph One - Whenever any person should express any claim in
the presumption of being the holder of the proprietorship of the
subsoil within the Contracted Area, ECOPETROL will assume the
attention of the case and the obligations that could arise
thereof.
CLAUSE 4 - DEFINITIONS
To the effects of this contract, the terms hereunder described
shall be understood to mean the following:
4.1 Contracted Area: The terrain defined in Clause 3
hereinabove, subject to Clause 8 hereunder.
4.2 Commercial Field: That portion of the Contracted Area
capable of producing Oil in economically exploitable volumes and
quality.
4.3 Executive Committee: The body to be set up within thirty
(30) days after acknowledgment of the Commercial Field, to
oversee, control and approve all operations and actions that be
carried out during the effectiveness of this contract.
4.4 Direct Exploration Costs: Those currency-disbursements
incurred by THE ASSOCIATE for the drilling of the Exploration
Wells that would result in producer wells, as well as those
incurred in locations, terminations, equipment and testing of
such wells, flow lines and separators. Direct Exploration Costs
do not include Home Office administrative or technical support
nor those costs arising in Company's headquarters.
4.5 Joint Account: Records held in accounting books kept in
conformity with the Colombian legislation, to credit or debit
the Parties for their participation in the Joint Operation.
4.6 Budget Execution: Resources actually disbursed and/or
committed in each and all programmes/schedules and projects
approved for a specific calendar year.
4.7 Date of Effectiveness (Effective Date): Sixty (60) calendar
days taken as of the date this contract is signed, date which
will serve to calculate all agreed terms, subject to the
effectiveness of the selfsame contract.
4.8 Cash Flow: Physical movement of money (income and
disbursements) of the Joint Account to cover those obligations
acquired or contracted by the Association in the course of
normal operations.
4.9 Natural Gas: Mixture of hydrocarbons in gaseous state, made
up by the most volatile members of the hydrocarbon paraffin
series.
4.10 Direct Expenses: All disbursements chargeable to the Joint
Account under the heading of personnel expenses directly
connected with the Association, or for the purchase of material
and supplies, contracting of third-party services, and all other
general expenses required by the Joint Operation in the normal
course of activities.
4.11 Indirect Expenses: Those disbursements chargeable to the
Joint Account under the heading of technical and/or
administrative support, which would eventually be rendered by
the Operator of the Joint Operation with its own organization.
4.12 Commercial Interest: When dealing in pesos, the ordinary
interest for the corresponding period, as certified by the
Banking Superintendency; when dealing with U.S.A. dollars, the
New York CITY BANK prime rate.
4.13 Interest in the Operation: That participation in the
obligations and rights acquired by each of the Parties in the
exploration and exploitation of the Contracted Area.
4.14 Development Investments: They relate to the sum of money
invested in goods and equipments capitalized in assets of the
Joint Operation in a Commercial Field upon acceptance of the
existence of same by the Parties.
4.15 Production Objectives: Formations, layers (strata) or sand
possibly holding a hydrocarbon accumulation.
4.16 Joint Operation: Activities and works carried out by or
being executed on behalf of the Parties and on their account.
4.17 Operator: Individual appointed by the Parties to carry out
and complete in a direct manner and on their behalf in the
Contracted Area the operations required to explore and exploit
the existing Oil.
4.18 Parties: On the Date of Effectiveness, ECOPETROL and THE
ASSOCIATE. Subsequently and at any time thereafter, on the one
part, ECOPETROL, and on the other part, THE ASSOCIATE and/or its
assignees.
4.19 Exploration Period: Term available to THE ASSOCIATE to
comply with its obligations as stated in Clause 5th. herein this
contract, but not to exceed six (6) years as of the Date of
Effectiveness, with the exceptions noted in Clauses 9 (numerals
9.3 and 9.8) and 34.
4.20 Exploitation Period: Time elapsed as of the completion of
the Exploration Period, through the date of termination of this
contract.
4.21 Oil: Mixture of natural hydrocarbons in liquid or gaseous
state at normal conditions, along with the substances existing
alongside it or derivable of such, except for helium and
extraneous gas.
4.22 Exploration Well: Any well so designed by THE ASSOCIATE,
to be drilled or explored deeper in the Contracted Area in
search of Oil, at its account. To comply with the obligations
acquired under Clause 5 of this contract, the corresponding
Exploration Wells shall be classified as such jointly by
ECOPETROL and THE ASSOCIATE.
4.23 Exploitation Well (or Development Well): Any well within
the Commercial Area programmed for Oil production by the
Executive Committee.
4.24 Budget: Basic planning instrument by which resources are
assigned to specific projects to be applied within a calendar
year or parts thereof, aiming to attain the goals and objectives
proposed by THE ASSOCIATE or the Operator.
4.25 Extensive Production Tests: Operations carried forward in
one or several producer Exploration Wells, aiming to evaluate
production conditions and field behavior.
4.26 Reimbursement: The proportional payment corresponding to
ECOPETROL on account of Direct Exploration Costs (incurred by
THE ASSOCIATE) in the Exploration Wells that would have resulted
producers.
4.27 Exploration Works: Those operations carried out by THE
ASSOCIATE related to the search and discovery of hydrocarbons
within the contracted area.
CHAPTER II - EXPLORATION
CLAUSE 5 - TERMS AND CONDITIONS
5.1.1 During the first year taken as of the Date of
Effectiveness of this contract, THE ASSOCIATE commits itself to
attain a program of new seismic of minimum twenty-five (25)
kilometers. During the second year, THE ASSOCIATE shall drill
one (1) Exploratory Well until reaching the formations which
could be oil-bearing structures. At the end of each year, THE
ASSOCIATE shall have the option to relinquish the Contract, if
and when having complied with the said obligations.
5.1.2 During the third year, THE ASSOCIATE shall drill one (1)
Exploratory Well until reaching the formations which could be
oil-bearing structures. At the end of this year the contract
shall terminate if its extension has not been requested and
authorized in accordance with numeral 5.2 of this Clause or if
no Commercial Field has been found to exist.
5.2 If THE ASSOCIATE has satisfactorily complied with the
obligations set forth in Clause 5, ECOPETROL - at the request of
THE ASSOCIATE - shall extend the Exploration Period by periods
of one-year each during a maximum of three (3) additional years;
during each one-year extension THE ASSOCIATE shall be committed
to perform Exploration Works in the Contracted Area, which
consist in drilling a minimum of one (1) Exploration Well per
year until penetrating the formations which in the area could be
oil-bearing structures.
5.3 During any year of the Exploration Period, THE ASSOCIATE may
decide to carry out the work commitment of the subsequent year;
should this be the case, then it may request ECOPETROL for
approval to perform such works. Should ECOPETROL accept such
request, ECOPETROL shall determine the way and amount of the
transference of the said obligations.
5.4 During the effectiveness of this contract, THE ASSOCIATE may
perform Exploration Works in the areas retained by it in
accordance with Clause 8; in such cases, THE ASSOCIATE shall be
the sole party responsible for the risks and costs of such
activities, therefore holding full and exclusive control on
same; however, the maximum terms of duration of this contract
shall not be modified for such reasons.
CLAUSE 6 - INFORMATION TO BE PROVIDED DURING EXPLORATION
6.1 ECOPETROL shall provide THE ASSOCIATE, whenever the latter
so requests, all information available for the Contracted Area.
The costs incurred in the reproduction or provision of such
information shall be on the account of THE ASSOCIATE.
6.2 During the Exploration Period, THE ASSOCIATE shall render
ECOPETROL - whenever the former obtains it - all the geological
and geophysical information - delivered in originals that may be
duplicated - edited magnetic tapes, processed seismic sections,
and all the field information supporting same; magnetic and
gravimetric profiles; copies of the geophysical reports;
originals that may be duplicated of all logs/surveys/records of
the wells drilled by THE ASSOCIATE, including each well's final
compounded graphic; and copies of the final drilling report,
including core samples analysis, production tests results and
any other information related to the drilling, study or
interpretation of any nature whatsoever that be performed by THE
ASSOCIATE for the Contracted Area, with no limitation
whatsoever, ECOPETROL has the right, at any time, and by
whatever procedures it deems appropriate, to witness all
operations and verify the afore-listed information.
6.3 The Parties agree that during the effectiveness of this
contract, all information obtained in the course of same shall
be of a confidential nature. In this same manner, the Parties
agree that in each case they shall be able to make exchange of
information with companies associated or not with ECOPETROL. It
is understood that this agreement shall be effective with no
impairment of the obligation of providing the Ministry of Mines
and Energy all information requested in accordance with legal
rulings and the legislation in force. However, it is also
understood, and so agreed, that THE ASSOCIATE may provide to its
sole discretion the information required by its affiliated
companies, consulting parties, contractors and financial
entities: or which would be required by the corresponding
authorities having jurisdiction over THE ASSOCIATE or its
affiliates; or by the regulations of any stock exchange wherein
THE ASSOCIATE or any related corporation would have registered
shares.
CLAUSE 7 - EXPLORATION BUDGET AND SCHEDULES/PROGRAMMES
THE ASSOCIATE shall bear the obligation of preparing all
programmes or schedules and budgets required by the terms of
this contract, in connection with the exploration of the
Contracted Area. Such Budgets and Schedules shall be submitted
in due time to ECOPETROL.
CLAUSE 8 - REDEMPTION OF AREAS
8.1 At the end of the initial exploration period, or the
extensions thereof obtained by THE ASSOCIATE, but no later than
the termination of the sixth (6th.) year when a Commercial Field
has been discovered in the Contracted Area - such area shall be
reduced to fifty percent (50%) of its original size; after two
(2) additional years, the area shall be further reduced to an
extension equal to twenty-five percent (25%) of the initially
Contracted Area; and after two (2) supplementary years, at the
latest, such area shall be furthermore reduced to the Commercial
Field or Fields that be in production or under development, plus
a five (5)-kilometer wide zone reserved around each field. The
Commercial Field(s) plus the zone(s) around each field shall be
called the exploitation area and shall be the only part of the
Contracted Area to remain subject to the terms of this contract.
8.2 THE ASSOCIATE shall determine the areas to be returned to
ECOPETROL in plots of land of at least five thousand (5.000)
hectares each, unless THE ASSOCIATE demonstrates that this would
not be possible. Notwithstanding the obligation of returning
the areas as set forth in Clause 8 (numeral 8.1), THE ASSOCIATE
is not obliged to return areas that be under development or in
production, including the five-kilometer-wide zone withheld
around such areas, unless when - by clauses traceable to THE
ASSOCIATE - such development or production operations undergo
stoppage without just cause during one (1) uninterrupted year or
more, in which case THE ASSOCIATE shall return to ECOPETROL such
areas, and the contract for such areas or partial areas shall
terminate. This provision is equally valid to exploitation
carried forward under the sole-risk method.
CHAPTER III - EXPLOITATION
CLAUSE 9 - TERMS AND CONDITIONS
9.1 To start the Joint Operation under the terms of this
contract, it is understood that the exploitation works start on
the date that the parties acknowledge the existence of a
Commercial Field, or whenever the provision of Clause 9 (numeral
9.5) be fulfilled. The existence of a Commercial Field shall be
determined by THE ASSOCIATE drilling within the proposed
Commercial Field a sufficient amount of wells to allow for a
reasonable definition of the field and the commerciality of such
field. In this case, THE ASSOCIATE shall inform in writing to
ECOPETROL of said discovery of a Commercial Field, providing the
studies on which such conclusion is based. Within ninety (90)
calendar days as of the date in which THE ASSOCIATE renders the
whole amount of supporting information, ECOPETROL shall accept
or disapprove the existence of the Commercial Field. Within
thirty (30) days after the date of submittal of the first
supporting information, ECOPETROL may request whatever
additional information is considered necessary.
9.2.1 If ECOPETROL accepts the existence of a Commercial Field,
it shall so advise THE ASSOCIATE within the ninety (90) calendar
days stated in Clause 9 (numeral 9.1) and shall begin to
participate - as stipulated whereunder this contract - in the
development of the Commercial Field discovered by THE ASSOCIATE.
9.2.2 ECOPETROL shall reimburse THE ASSOCIATE fifty percent
(50%) of the Direct Exploration Costs incurred in the wells
which, having been drilled by THE ASSOCIATE as Exploration Wells
within the Commercial Field described in Clause 9 (numeral 9.1),
would have resulted in commercially producing fields.
9.2.3 The amount of these costs shall be defined in U.S.A.
dollars: the date of reference shall be that date in which
ECOPETROL advises THE ASSOCIATE of its acknowledgment
(acceptance) of the existence of a Commercial Field; therefore,
costs incurred in Colombian pesos shall be determined at the
official exchange rate of the Central Bank (Banco de la
Republica) effective on the said date.
9.2.4 ECOPETROL shall reimburse THE ASSOCIATE for the proportion
corresponding to it in the costs of each well, by way of
whatever figure in dollars would correspond to it under the
heading of its direct participation in the production of the
corresponding well.
9.3 If ECOPETROL does not acknowledge the existence of the
Commercial Field as noted in Clause 9 (numeral 9.1), it may
advise THE ASSOCIATE of the additional work deemed necessary to
demonstrate such existence; however, the cost of such efforts
may not exceed TWO MILLION U.S. DOLLARS (U.S. $2.000.000) and
may not require a length of time longer than one (1) year; in
this case, the Exploration Period for the Contracted Area shall
automatically be extended by a term equal to that period of time
agreed by the Parties as the needed amount of time for the
execution of the additional efforts requested by ECOPETROL in
this clause, but without impairment of the conditions as to
reduction of areas per Clause 8 (numeral 8.1).
9.4 Should ECOPETROL - upon completion of the additional works
requested per Clause 9 (numeral 9.3) - acknowledge the existence
of the Commercial Field described in Clause 9 (numeral 9.1), it
will begin to participate in the operations for the development
of the aforementioned field in accordance with this contract
and, per Clause 9 (numeral 9.2.2), will reimburse THE ASSOCIATE
fifty percent (50%) of the costs related to the additional works
requested in Clause 9 (numeral 9.3); the works so carried out
shall become part of the Joint Account.
9.5 Should ECOPETROL - upon completion of the additional works
requested per Clause 9 (numeral 9.3) - determine the
non-approval of the existence of a Commercial Field, then THE
ASSOCIATE has the right to carry out whatever works it deems
necessary to exploit such field and to reimburse itself two
hundred percent (200%) of the total costs of the works performed
on its sole risk and account; to fulfill this clause, the
reimbursement may be by way of the value of the oil produced
less the royalty set forth in Clause 13. deducting the costs of
production, collection, transportation and sale. To determine
the value in dollars of the disbursements made in pesos, the
amount shall be translated at the exchange rate effective on the
date ECOPETROL advises THE ASSOCIATE about the non-existence of
the Commercial Field. To the purposes of this clause, each
barrel of oil produced in such field during a calendar month
shall have the average price per barrel received by THE
ASSOCIATE for the sales of the volume of oil corresponding to
its participation in the production of the Contracted Area
during the same monthly period. When THE ASSOCIATE has
reimbursed itself with the percentage established hereinabove
and upon acknowledgment by ECOPETROL of its participation in the
development of the said field, then all wells drilled,
installations constructed and goods procured by THE ASSOCIATE
for the exploitation of the field, paid as herein stated, shall
become - at zero cost - the property of the Joint Account.
9.6 At any time ECOPETROL may come to participate in the
operation of the field discovered and developed by THE
ASSOCIATE, without detriment of the right held by THE ASSOCIATE
to reimburse itself for investments made at its own account, in
the way and percentages stated in Clause 9 (numeral 9.5). Upon
completion of the recovery by THE ASSOCIATE, ECOPETROL shall
begin to participate in the economic results of the wells
developed under THE ASSOCIATE's sole account.
9.7 To set the boundaries of a Commercial Field, all the
geological and geophysical information and the information from
the wells drilled within said field or having any connection
with same, shall be taken into consideration.
9.8 If at the end of the six-(6)-year Exploration Period noted
in Clause 5 (numeral 5.2), THE ASSOCIATE has drilled one or
several Exploration Wells which indicate the probable
existence of a Commercial Field, ECOPETROL - at the request of
THE ASSOCIATE - shall extend the Exploration Period as required
but not to exceed one (1) year, to allow THE ASSOCIATE the
opportunity of demonstrating such existence, without detriment
of the stipulations in Clause 8.
CLAUSE 10 - TECHNICAL CONTROL ON THE OPERATIONS
10.1 The parties agree that THE ASSOCIATE is the Operator and
that - except for the restrictions anticipated herein this
contract - the Operator shall hold control on all operations and
activities it deems necessary to achieve a technical, efficient
and economic exploitation of the Oil encountered within the
Commercial Field.
10.2 The Operator is obliged to carry out all development and
production operations in compliance with the rules and standards
practiced by the industry, using the best technical methods and
systems to achieve an economic and efficient oil exploitation,
and applying all legal and regulative engagements on the subject
matter.
10.3 For all aspects of this contract, the Operator shall be
considered an entity separate from the Parties, difference also
applicable to the civil, labor and administrative legislation
and to the personnel employed by the Operator per Clause 32.
10.4 The Operator shall have the right to relinquish being the
Operator, by way of written notice to the Parties with a
six-month anticipation to the date it wishes to make its
resignation valid. The Executive Committee shall appoint the
new Operator in conformity with Clause 19 (numeral 19.3.2).
CLAUSE 11 - EXPLOITATION SCHEDULES AND BUDGETS
11.1 Within the three(3)-months following the acknowledgment of
a Commercial Field in the Contracted Area, the Operator shall
submit the Parties a schedule of activities and a budget for the
remaining part of the calendar year. If less than 6.5 months
are left before the end of that year, the Operator shall -
within the said 3-month term - prepare and submit a Budget and
schedules for the subsequent calendar year. Future budgets and
schedules shall be submitted to the parties during the Executive
Committee's ordinary meeting, expected for July of the
immediately preceding year to the budgeted year. Within twenty
(20) days after receipt of the Budgets and schedules, the
parties shall advise the Operator in writing of the changes
proposed. The Operator shall take into consideration the
observations and proposed modifications submitted by the parties
and shall prepare the Budget and the schedules to be presented
for final approval of the Executive committee in the ordinary
meeting of November each year, except for the case when the
acknowledgment of the commercial Field occurs within less than
6.5 months before year-end. If the total budget is not agreed
by November each year, the budget aspects on which an agreement
has been reached shall be approved by the Executive Committee,
while those not agreed upon shall immediately be submitted for
further study of the Parties, who will make a final decision on
same as anticipated in Clause 20.
11.2 The parties may propose additions or revisions of the
approved Budget and schedules; however, except in the case of an
emergency, they should be stated at intervals of three (3) or
more months. The Executive Committee shall decide on proposed
additions and revisions in a meeting which shall be summoned for
a date within the thirty (30) days following the presentation of
same.
11.3 The main objectives of schedules and budgets are:
11.3.1 To determine the operations to be performed during the
next calendar year, and
11.3.2 To decide expenses and investments which the Operator is
authorized to incur.
11.4 The terms Schedule and Budget mean the work plan designed
and the expenses and investments estimated to be made by
Operator during the different stages of the operation, as are:
11.4.1 Investments in operating capital: drilling for the
development of reservoirs, well recondition or overhaul, and
specific production constructions.
11.4.2 General construction and equipments; industrial
facilities and camps, transportation and construction equipment,
drilling and production equipment. Other constructions and
equipment.
11.4.3 Maintenance and operation expenses: production expenses,
geological expenses and administrative expenses for the
operation.
11.4.4 Working capital requirements.
11.4.5 Funds for incidental expenses.
11.5 The Operator shall disburse all expenses and investments
and shall complete the development and production operations as
per the schedules and budgets referred to in Clause 11 (numeral
11.1), but shall not go beyond total budget in more than ten
percent (10%) each year, except under authorization of the
Parties for special cases.
11.6 The Operator shall not start any project at its sole
discretion nor shall it acquire commitments for the Joint
Account when lacking Budget approval of same if they exceed by
project or by quarter the figure of Forty Thousand Dollars (US$
40.000) or its equivalent in Colombian currency.
11.7 The Operator is authorized to disburse expenses chargeable
to the Joint Account without prior consent of the Executive
Committee, when same be associated with emergencies ordained to
safeguard party's personnel and property, emergency expenses
originated by fire, flood, storms and other disasters; emergency
expenses vital to production, including maintenance of wells to
attain maximum production efficiency; emergency expenses
essential for the protection and conservation of material and
equipment needed for the operations. In these cases the
Operator must summon a special meeting of the Executive
Committee at the earliest possible date, to obtain final
approval to continue with such emergency measures.
CLAUSE 12 - PRODUCTION
12.1 As frequent as it be necessary, the Operator - with the
approval of the Executive Committee - shall determine each
Commercial Field's MER (Maximum Productive Efficiency Rate).
Such MER shall be the maximum rate of oil production that may be
obtained from a reservoir, so as to achieve a maximum final
recovery of the reserves. Estimated production shall be reduced
wherever necessary to compensate for real or anticipated
operation conditions, such as wells that be undergoing repair
and which not be in production, restrictions of the capacity of
collector lines, of the pumps, of the separators, of the tanks,
of the pipelines and of other facilities.
12.2 Periodically but at least once a year, the Operator - with
the approval of the Executive Committee - shall determine in
each field the area considered to be oil-producing in commercial
volumes, and shall propose Exploration Wells spacing and
drilling schedules, based on economy and efficiency factors.
12.3 The Operator shall prepare and deliver to each of the
parties, at 3-month regular intervals, a schedule of
participation in the production plus a schedule of production
distribution by Parties for the subsequent six (6) months. The
production forecast shall be based on the MER (Maximum
Productivity Efficiency Rate) as described in Clause 12 (numeral
12.1), to be adjusted to each Party's rights per this contract.
The production distribution schedule shall be determined on the
basis of periodic requests made by each Party in accordance with
Clause 14 (numeral 14.2), along with whatever corrections be
needed to ensure that, when being able to draw-out, none of the
parties will receive a volume lower than that to which it is
entitled as per Clause 14, without impairment of Clauses 21
(numeral 21.2) and 22 (numeral 22.5).
12.4 If any of the Parties anticipates a reduction of its
capacity to receive oil per the forecast provided by the
Operator, it should so advise the latter at the earliest
possible date and, if such reduction is due to an emergency
situation, the Operator must be notified within the twelve (12)
hours following the occurrence of the situation which originated
the reduction. Thus such Party shall provide the Operator with
a new receiving schedule which accounts for the corresponding
reduction.
12.5 The Operator may use the crude oil and gas consumed in the
development of production operations in the Contracted Area and
such consumption shall be exonerated from the royalties
discussed in Clause 13 (numerals 13.1 and 13.2).
CLAUSE 13 - ROYALTIES
13.1 During the exploitation of the Contracted Area and before
the production is distributed to the Parties, the Operator shall
deliver to ECOPETROL a royalty in kind consisting in twenty
percent (20%) of the liquid hydrocarbons supervised production
volume in such area. ECOPETROL at its own risk and account,
shall take, in kind from the Joint Account tanks, such
production percentage which corresponds to the royalty.
13.2 The Operator shall deliver a royalty to ECOPETROL
consisting in twenty percent (20%) of the gas production.
13.3 Out of the production percentage corresponding to the
royalty, ECOPETROL shall pay the royalties on the total
production of the Commercial Field, as be payable to the Nation,
the Departments and the Municipalities in accordance with the
terms set forward by the laws; in no way shall THE ASSOCIATE be
responsible for any payment to such entities or individuals on
said headings.
CLAUSE 14 - OIL DISTRIBUTION AND AVAILABILITY
14.1 Except for the oil volumes used for the operations
hereunder this contract and the volume that is inevitably wasted
in such operations, the oil shall be transported to the tanks
property of both Parties or to any other measuring facilities
agreed by the Parties. The Oil shall be measured in accordance
with the standards and methods accepted in the oil industry and,
based upon such measurement, the percentages referred to in
Clause 13 shall be determined. As from such moment, the
remaining oil becomes the property of each Party in the
proportions set forth in this contract.
14.2 Sealer Distribution of the Production. After deduction of
the royalty percentage, the rest of the oil and the gas produced
proceeding from the field becomes the property of the Parties in
the following proportion:
Total Accumulated Production
(Barrels) (%) ECOPETROL (%) Associate
From 0 to 60.000.000 50 50
From 60.000.001 to 90.000.000 55 45
From 90.000.001 to 120.000.000 60 40
From 120.000.000 to 150.000.000 65 35
From 150.000.001 and onwards 70 30
14.2.1 For all purposes of this clause, a field is understood to
be any hydrocarbon accumulation stored within an area
acknowledged as commercial, including the five-kilometer wide
reserve zone around such field as stated in Clause 8 (numeral
8.1) of this contract.
14.2.2 Whenever during the development of this contract several
commercial fields be discovered within a selfsame block, the
production distribution percentage to be applied to the field
holding the largest total accumulated production shall be also
applied to the distribution of the production of all the
remaining Commercial Fields within the Contracted Area.
14.2.3 When a field produces crude oil and gas at the same time,
the total accumulated production that would apply for the
purposes of the afore distribution chart, will be the one
corresponding to the main hydrocarbon as per the authorization
granted by the Ministry of Mines and Energy for the exploitation
of said field. To determine total accumulated production, the
equivalent gas measure is 7.000 standard cubic feet of gas per
barrel of oil.
14.3 In addition to the tanks and other facilities of joint
property, each Party shall have the right to construct its own
production facilities in the Contracted Area for its sole and
exclusive use, after compliance with legal regulations to the
effect. Transportation and delivery of each Party's oil to the
pipeline and other deposits which are not the joint property of
the parties, shall be made on the sole account and risk of the
Party receiving the Oil.
14.4 Should production be obtained at locations not connected to
pipelines, the Parties may agree to make expenditures chargeable
to the Joint Account to install pipelines to those points where
the oil can be sold or to a site that would connect to the
pipelines. If the Parties agree to the construction of such
pipelines they shall enter into the contracts deemed convenient
to the effect and shall appoint the Operator in accordance with
the legal regulations in force.
14.5 Each party shall be the owner of the oil produced and
stored as a result of the Operation and which be made available
to it per the clauses of this contract, and it shall receive
same in kind at its expense or sell it or dispose of it
separately as stipulated in Clause 14 (numeral 14.3).
14.6 If any of the Parties, for any reason whatsoever, cannot
separately dispose or draw-out from the tanks of the Joint
Account all or part of the oil belonging to it per this
contract, then the following procedure shall be followed:
14.6.1 If ECOPETROL is the Party that cannot draw-out in full or
in part its oil share (participation plus royalty) in accordance
with Clause 12 (numeral 12.3), the Operator may continue
producing in the field and delivering to THE ASSOCIATE, in
addition to THE ASSOCIATE's proportion of the production in the
operation based on one hundred percent (100%) of the MER, all
the amount of oil that THE ASSOCIATE would elect to receive and
be in capacity to draw-out, up to a limit of one hundred percent
(100%) of MER, crediting ECOPETROL accordingly for future
delivery, that amount of Oil which ECOPETROL had the right to
draw-out but didn't. However, regarding the volume of oil not
drawn-out during a monthly period and which would correspond to
the royalties payable to ECOPETROL, at the request of ECOPETROL
can be paid by THE ASSOCIATE to ECOPETROL in dollars of the
United States, by calculating the difference between the volume
of oil drawn-out by it and the volume of oil which would
correspond under the heading of royalties as noted in Clause 13
(numerals 13.1 and 13.2); it is understood that any oil
drawn-out by ECOPETROL shall be applied in first instance to the
payment in kind of the royalty and that only after such royalty
is fully covered, shall any additional withdrawals of oil made
by ECOPETROL by applied to its participation in the production
as set forth in Clause 14 (#14.2).
14.6.2 In the event that THE ASSOCIATE be the Party that cannot
draw-out in full or in part its proportion of oil as defined
under Clause 12 (numeral 12.3), the Operator shall deliver to
ECOPETROL - based on one hundred percent (100%) of MER - not
only the participation and the share that belongs to it, but
also the oil that ECOPETROL could be able to draw-out, up to a
limit of one hundred percent (100%) of MER, crediting to THE
ASSOCIATE for future delivery, that part which was not drawn-out
by THE ASSOCIATE and which corresponds to its participation.
14.7 When both Parties regain capacity to receive the oil
belonging to each per Clause 12 (numeral 12.3), then the
Operator shall deliver oil to that Party which before was unable
to receive its share of production and, at the request of same,
in addition to its participation in the operation, and by joint
agreement of the parties, a minimum of ten percent (10%) per
month of the production which on a monthly basis corresponds to
the other Party, until such time as one hundred percent (100%)
of the volume corresponding to the unreceived share be credited
(canceled) to the Party previously unable to receive its oil.
14.8 Without detriment of the legal stipulations on the matter
and in conformity with this contract, each Party shall be free
at all times to sell or export their shares of oil obtained or
to dispose of such oil in any way.
CLAUSE 15 - GAS UTILIZATION
Should one or more fields be discovered to have liquid oil along
with associated gas, the Operator - within the two (2) years
following the start-out of the commercial production of the
field - shall submit a project to take advantage of the Natural
Gas in benefit of the Joint Account. The Executive Committee
shall approve the project and shall define the execution
schedule thereof. Should the Operator not submit such project
within a period of two (2) years or should it not carry out the
project approved within the terms set forth by the Executive
Committee, ECOPETROL may take for itself - free of all costs -
all available gas in the development reservoirs, less the
amounts required for the efficient exploitation of the field.
CLAUSE 16 - UNIFICATION
Whenever an economically exploitable reservoir extends
continuously to a structure located within the Contracted Area
plus other area(s), the Operator - by agreement with ECOPETROL
and all other interested parties and upon approval by the
Ministry of Mines and Energy - shall put into practice a unified
development plan, which shall adjust to the Oil development
engineering techniques.
CLAUSE 17 - PROVISION OF INFORMATION AND INSPECTION DURING
EXPLOITATION
17.1 The operator shall deliver the Parties - upon procurement
of same by or to it - originals that may be copied (sepia) and
copies, of the electric, radioactive and sound logs of the wells
drilled, records, core analysis, production tests, and all
routine reports produced or received in connection with the
operations and activities developed in the Contracted Area.
17.2 Each of the Parties, at their sole account and risk, shall
have the right, by way of authorized representatives, to inspect
the wells and the installations of the Contracted Area and all
related activities. Such representatives will be empowered to
examine cores, samples, maps and logs of the drilled wells,
survey and mappings, books of all types and any and all other
sources of information connected with the development of this
contract.
17.3 In order for ECOPETROL to comply with the agreements in
Clause 29 hereunder, the Operator shall prepare and submit to
ECOPETROL all reports required by the National Government.
17.4 The information and records regarding exploitation works
shall be kept as confidential material in equal manner as stated
in Clause 6 (numeral 6.3) of this contract.
CHAPTER IV - EXECUTIVE COMMITTEE
CLAUSE 18 - CONSTITUTION
18.1 Within the thirty (30) calendar days following the
acknowledgment of a Commercial Field, each Party shall appoint a
representative and his corresponding first and second delegates,
to set up the Executive Committee, and shall advise in writing
to the other Party the names and addresses of such
representative and his delegates. The Parties may at any time
change their representative or his delegates but when doing so,
must advise the other Party in writing. Each Party's
Representative vote or decision will commit such Party. When a
representative cannot attend a Committee Meeting, he shall in
writing appoint the delegate who will attend on his behalf and
who will be invested with equal authority as himself.
18.2 The Executive Committee shall hold ordinary meetings in
March, July and November; such meetings shall review the
Operator-executed exploitation schedules, along with the
immediate-future programme. On a yearly basis and during the
July ordinary meeting, the Operator shall submit to the
Executive Committee the annual operating schedule/programme and
the Expenses and Investment Budget for the subsequent calendar
year, which shall be studied and approved during each year's
November ordinary meeting.
18.3 The Parties and the Operator may request that extraordinary
meetings of the Executive Committee be summoned to study
specific operation conditions. The President of such Committee
shall notify within at least ten (10) days anticipation, the
date of the meeting and the proposed agenda. Any matter not
included in the agenda may be discussed after consensus to the
effect is obtained from the representatives of the Parties to
the Committee.
18.4 The representative of each of the Parties shall have in all
matters discussed by the Executive Committee, a vote equal to
the percentage of its total interests in the Joint Operation.
To be valid, any and all resolutions or decisions made by the
Executive Committee must be approved by affirmative vote of more
than fifty percent (50%) of the total Interest. As per this
procedure, all decisions made by the Executive Committee shall
be binding to and final for the Parties and for the Operator.
CLAUSE 19 - DUTIES
19.1 The representatives of the Parties shall make part of the
Executive Committee endowed with full authority and
responsibility to set forward and adopt exploitation,
development and operation Schedules/Programmes and Budgets
related to this present contract. One representative of the
Operator shall attend the Executive Committee meetings.
19.2 The Executive Committee shall name a Secretary. The
secretary shall keep full and detailed minutes and records of
all meetings as well as notes of all discussions and all
decisions made by the Committee. To be valid, the copies of
such minutes must be approved and signed by the representatives
of the Parties within the five (5) work days following the end
of the meeting and therefore shall be submitted for their
signature at the earliest possible time.
19.3 The following are, amongst others, Executive Committee's
duties:
19.3.1 To adopt its own regulations.
19.3.2 To appoint the Operator in case of resignation or
dismissal.
19.3.3 To appoint the External Auditor to the Joint Account.
19.3.4 To approve or disapprove the annual operations (or
programme), and the expense budget and any modifications or
revisions thereof, and to authorize extraordinary expenses.
19.3.5 To set forward expense rules and policies.
19.3.6 To approve or disapprove any expense recommendation made
by the Operator (not included in the approved Budget), when such
expenses exceed Forty Thousand U.S. Dollars (U.S.$ 40.000) or
its equivalent in Colombian currency.
19.3.7 To advise the Operator and decide on matters brought to
its consideration.
19.3.8 To create the sub-committees deemed necessary and to set
forward the duties of same, which shall be developed under its
direction and chargeable to the Joint Account.
19.3.10 To overview the operation of the Joint Account.
19.3.11 To authorize the Operator to enter into contracts on
behalf of the Joint Operation when their value does not exceed
U.S. $40.000 (Forty Thousand Dollars) or its equivalent in
Colombian currency, and
19.3.12 In general, to perform all duties authorized in this
contract when the responsibility for same would not fall on
another entity or individual by express clause or legal or
regulatory stipulation.
CLAUSE 20 - DECISIONS IN THE EVENT OF DISAGREEMENT BETWEEN
PARTIES
20.1 Any project related to the Joint Operation, which is to be
executed should require the approval of the Executive Committee
as per this contract and over which no agreement would have been
reached by the representatives of the Parties to such Committee,
shall be presented to each of the Parties' chief executive
officer resident in Colombia, for them to make a joint decision.
If the Parties reach an agreement or make a decision on the
matter within sixty (60) calendar days as of the date of
submittal of the query, they shall so advise the Secretary for
the Executive Committee, who shall summon a meeting of such body
within fifteen (15) calendar days after the receipt of said
notice; the members of the Committee are obliged to ratify in
such meeting said agreement or decision.
20.2 If the parties do not reach an agreement on the difference
within sixty (60) calendar days after the query is submitted,
then the operations may be executed in accordance with Clause 21.
CLAUSE 21 - OPERATIONS AT THE SOLE RISK OF ONE OF THE PARTIES
21.1 Should at any moment in time one of the Parties wish to
drill an Exploration Well not approved in the schedule of
operations, it shall in writing advise the other Party, with at
least thirty (30) calendar days anticipation to the next meeting
of the Executive Committee, of its intention to drill such well;
such advise must include information as to location,
recommendations to drill, depth and an estimate of costs. The
Operator shall include such proposal in the Agenda for the
following Executive Committee Meeting. Should the proposal be
approved by the Executive Committee, such well shall be drilled
chargeable to the Joint Account. Should the Executive Committee
not approve such proposal, then the Party who wishes to drill
said well - which hereinafter shall be called the Partaker -
shall have the right to drill, complete, produce and abandon
such well at its sole cost and exclusive risk. The Party that
does not wish to participate in the aforesaid operation shall be
called the Non-Partaker. Partaker shall commence drilling such
well within one hundred and eighty (180) days following the
decline of the proposal by the Executive Committee. Should
drilling not be started within such time frame, it shall again
be taken to the consideration of the Executive Committee. At
Partaker's request, the Operator shall drill said well, on the
sole account and risk of Partaker, if and when in Operator's
opinion such operation would not interfere with the normal field
operations developed by the Operator, but only after Partaker
makes advanced payment in favor of the Operator of those amounts
of money Operator would consider necessary to satisfy drilling
efforts. Should the Operator be unable to drill such well
without interfering with the normal course of operations, then
Partaker shall be entitled to drill the well directly or through
a qualified service company, in which case the Partaker shall be
responsible for said operation, without interference of the
normal course of field operations.
21.2 Should well completion as specified in Clause 21 (numeral
21.1) render a producing well, same shall be managed by the
Operator of the production of said well - after deducting the
royalty stated in Clause 13 - shall be the property of the
Partaker, who shall reimburse itself for all operation costs of
the well until such time as the net value of production - after
deducting production, collection, storage and transportation
costs, and similar cost, and the cost of sale - be equal to two
hundred percent (200%) of said well's drilling and completion
costs; thenceforth and to the purposes of this present contract,
the well shall become the Joint Account's property, just as if
it would have been drilled under approval of the Executive
Committee and on account of both Parties. To the effects of
this Clause, the value of each barrel of Oil produced in said
well during a calendar month - prior to the deduction of the
aforelisted costs - shall be the average price per barrel of oil
that the Partaker would receive during said month for the sale
of its portion in the Oil produced in the Contracted Area.
21.3 Should at any time any one of the Parties wish to
recondition, deepen or cap a well which at such time is not a
commercially producing well or if it is a dry hole drilled by
the Joint Account, and when such operations would not have been
included in the schedule approved by the Executive Committee,
then such Party must advise the other Party of its intention to
recondition, deepen or cap the said well. When no equipment
exists at such location, the procedure set forth in Clause 21
(numerals 21.1 and 21.2) shall be applied. When equipments
exist at the well location which be adequate to carry forward
the proposed operations, then within a term not to exceed forty
eight (48) hours as of the moment of receipt of the notice, the
Party who receives such notice about the operations intended by
the other Party, must present its approval or disapproval to
such actions; should no answer be received during that term, it
will then be understood that the operations to be executed shall
be performed on the account and risk of the Joint Operation. If
the proposed work is executed on the sole account and risk of
the Partaker, the well shall be managed in accordance with
Clause 21 (numeral 21.2).
21.4 If any Party at any given time wishes to construct new
facilities for the extraction (lift) of liquids from gas and for
transportation and export of the oil - which henceforth shall be
called additional facilities - such Party shall notify the other
in writing with the following information:
21.4.1 General description, design, specifications and estimated
costs for the additional facilities.
21.4.2 Projected capacity.
21.4.3 Approximate date of initiation of construction and
duration of same. Within ninety (90) days taken as of the date
of notice, the other Party, by way of written advice, has the
right to decide whether or not it will participate in the
projected additional installations. Should such Party decide
not to participate in the additional installations, or should it
omit surrendering a response to the Partaker's proposal - which
as of that moment shall be called the Constructing Party - the
latter shall be able to proceed ahead with the additional
facilities and may order the Operator the construction,
operation and maintenance of said facilities, at the sole
account and exclusive risk of the Constructing Party, without
impairment of the normal development of the Joint Operations.
The Constructing Party may negotiate with the other Party the
use of such facilities for the Joint Operation. During the
period of time in which the facilities be operated at the sole
account and risk of the Constructing Party, the Operator shall
debit same with all operation and maintenance costs of the
additional installations based on generally accepted accounting
principles.
CHAPTER V - JOINT ACCOUNT
CLAUSE 22 - MANAGEMENT
22.1. Without detriment of other Clauses in this contract,
Exploration Work expenses shall be on the account and risk of
THE ASSOCIATE.
22.2 As from the date on which the Parties acknowledge the
existence of a Commercial Field and subject to the terms of
Clause 5 (numeral 5.2) and Clause 13 (numerals 13.1 and 13.2),
the property of the rights or Interest in the Operation of the
Contracted Area, shall be divided as follows: ECOPETROL fifty
percent (50%) and THE ASSOCIATE fifty percent (50%).
Thenceforward, all expenses, payments, investments, costs and
obligations made or committed for the development of operations,
as per this contract, and all investments made by THE ASSOCIATE
before and after the acknowledgment of the Commercial Field, in
the drilling and conclusion of the wells that would have
resulted produced wells within the field, shall be debited to
the Joint Account. Except for those set forth in Clauses 14
(numeral 14.3) and 21, all properties procured or used
thenceforth to comply with the operation activities in the
Commercial Field, shall be paid by and belong to the Parties in
equal proportion as described in this Clause.
22.3 During the first five (5) days of each month the Parties
shall provide the Operator, in the bank same would designate,
the share of the Budget corresponding to each in accordance with
the needs and in the currency in which the expenses must be
disbursed, this is, in Colombian pesos or in U.S.A. dollars, as
the Operator would have requested in accordance with the
schedules and budgets approved by the Executive Committee.
Whenever THE ASSOCIATE would lack to have the Colombian pesos
needed to cover that portion corresponding to its share in such
currency, ECOPETROL will be able to provide such pesos and to
receive the corresponding credit for them by way of credit to
the contributions the latter must make in dollars, translated at
the official purchase rate of the Central Bank's (Banco de la
Republica) exchange certificates on the day ECOPETROL must make
the correlative contribution, if and when such transaction be
allowed by law.
22.4 The Operator shall submit on a monthly basis to the
Parties, within thirty (30) calendar days following each monthly
end, a monthly statement of accounts showing figures
anticipated, expenses incurred, pending obligations and a report
of all debits and credits made to the Joint Account, report
which shall be prepared in accordance with Exhibit "B"
hereunder. If the payments considered in Clause 22 (numeral
22.3) are not made under the terms anticipated, and in the event
that the Operator would decide to cancel them, the debtor Party
shall pay the former - on such sum and in the same currency as
the payment made - the Commercial Interest incurred during the
term of the delay.
22.5 Should any of the Parties, on the due date omit payment to
the Joint Account of those sums of money which would correspond
to it, as of that date such Party shall be considered a
Delinquent Party and the other Party the Compliant Party.
Should sixty (60) days of delayed payment elapse, the Compliant
Party can make the deposit which would otherwise correspond to
the Delinquent Party, and the former would then be entitled to
have the Operator deliver to it, besides its own corresponding
share, the full amount of the Delinquent Party's total
participation in the Contracted Area (less the royalty
percentage), up to a production volume such to allow the
Compliant Party a net income on sales made equivalent to the
volume not paid by the Delinquent Party, plus an annual interest
equal to the Commercial Interest as of the sixty (60) days
following the date on which the delayed payment has started.
"Net income" shall mean the difference between the price of sale
of the crude drawn-out by the Compliant Party, less
transportation, storage, loading and other reasonable expenses
made by the Compliant Party for the sale of the products
drawn-out. The right of the Compliant Party may be exercised at
any time after thirty (30) days of having notified the Debtor
Party in writing about the former's intention to draw-out all or
part of the production which corresponds to the Debtor Party.
22.6.1 Regardless of the production percentages received by each
of the Parties in the development of this contract, all Direct
Expenses of the Joint Operation shall be debited to the parties
in the following proportion:
Total Accumulated Production
(Barrels) ECOPETROL (%) Associate(%)
From 0 to 60.000.000 50 50
From 60.000.001 to 90.000.000 55 45
From 90.000.001 to 120.000.000 60 40
From 120.000.001 to 150.000.000 65 35
From 150.000.001 and onwards 70 30
22.6.2 Indirect Expenses shall be debited to the Parties in the
same proportion as set forward for Direct Expenses in numeral
22.6.1 of this clause. The amount of these expenses shall
result from taking the total annual value of investments and
expenses (less technical and administrative support), and
applying the formula "a+m (X-b)" where "X" is the total value of
annual investments and expenses, and "a", "m" and "b" are
constant figures, the values of which are shown in the following
chart, as they relate to the amount of the annual investments
and expenses.
This formula shall apply only once for each year, in each case
with the value of the constants which correspond to the total
value of annual investments and expenses.
<TABLE>
<CAPTION>
AMOUNT OF INVESTMENT AND EXPENSES CONSTANT VALUES
"m"
"x" (US$) "a" (US$) (fraction) "b"
(US$)
<C> <C> <C> <C> <C> <C> <C>
1 0 to 25.000.000 0 0.10 0
2 25.000.001 to 50.000.000 2.500.000 0.08 25.000.000
3 50.000.001 to 100.000.000 4.500.000 0.07 50.000.000
4 100.000.001 to 200.000.000 8.000.000 0.06 100.000.000
5 200.000.001 to 300.000.000 14.000.000 0.04 200.000.000
6 300.000.001 to 400.000.000 18.000.000 0.02 300.000.000
7 400.000.001 and onwards 20.000.000 0.01 400.000.000
</TABLE>
The equation shall be applied only once per year in each case
with the constant value corresponding to the total amount of
annual investments and expenditures.
22.7 Monthly statements of account as described in clause 22
(numeral 22.4) may be revised or reprobated by any of the
Parties as from the moment they are received by that Party up to
a term of two (2) years after corresponding calendar year-end,
with clear specification as to the entries corrected or
disapproved and the corresponding reasons for such actions. Any
account not corrected or disapproved within such period, shall
be deemed final and correct.
22.8 The Operator shall keep Joint Account's records, vouchers
and reports in Colombian pesos per the Colombian regulations and
all debits and credits to the Joint Account shall be made
following the accounting procedures set forth in Exhibit "B",
which forms part of this contract. Should differences arise
between such accounting procedures and the terms of this
contract, the latter shall prevail.
22.9 The Operator may perform sales of materials or equipment
during the first twenty (20) years of the Exploitation Period if
they benefit the Joint Account and when the value of the goods
sold does not exceed Five Thousand U.S. dollars (US$ 5.000) or
its equivalent in Colombian currency. Such type of operations,
by calendar year, cannot surpass the figure of Fifty Thousand
U.S. Dollars (US$ 50.000) or its equivalent in Colombian
currency. Sales above such amounts or sales of real estate,
must be approved by the Executive Committee. Sale of such
materials or equipment shall be made at a reasonable commercial
price per such goods usage conditions.
22.10 All machinery, equipment and other movable property
acquired by the Operator for the execution of this contract and
debited to the Joint Account, shall be the property of the
Parties in equal amounts. However, if one of the Parties would
have decided to terminate its interest in the contract before
the first seventeen (17) years of the Exploitation Period -
except for the cases set forth in Clause 25 - such Party commits
itself to sale to the other one, all or part of its Interest in
such elements at a reasonable commercial price or at its book
value, whichever be lower. If the other party expresses no
desire to buy them within ninety (90) days following the formal
offer of sale presented to it, then the Party that wishes to
relinquish will have the right to assign to a third party its
interests in those machinery, equipment and elements. Should
THE ASSOCIATE decide to relinquish after the first 17 years of
the Exploitation Period. THE ASSOCIATE's rights in the Joint
Operation shall become ECOPETROL's rights, at zero cost for the
latter.
CHAPTER VI - CONTRACT TERM
CLAUSE 23 - MAXIMUM DURATION
This contract shall have a maximum duration of twenty eight (28)
years taken as of its Date of Effectiveness, to be distributed
as follows: six (6) years Exploration Period as per Clause 5,
without impairment of the terms of Clause 9 (numeral 9.3 and
9.8); and twenty-two (22) years Exploitation Period taken as of
the date of termination of the Exploration Period. It is
understood that whenever the Exploration Period is extended in
consideration with the terms of this contract, such extension
shall in no way imply an extension of the maximum duration of
the contract, which shall remain being a term of twenty-eight
(28) years maximum duration.
CLAUSE 24 - CONTRACT TERMINATION
This contract shall terminate in any of the following cases:
24.1 Completion of the Exploration Period without THE ASSOCIATE
having discovered a Commercial Field, except for the terms of
Clauses 9 (numerals 9.5 and 9.8) and 34.
24.2 Whenever the term of the contract as set forth in Clause
23, would have elapsed.
24.3 At any time, by decision of THE ASSOCIATE, after complying
with the obligations noted in Clause 5 and all others committed
in accordance with this contract.
24.4 Due to the special causes set forth in Clause 25.
CLAUSE 25 - CAUSES FOR UNILATERAL CONTRACT TERMINATION
25.1 ECOPETROL may call this contract terminated by unilateral
decision at any time before the term agreed in Clause 23 is
completed, on the following grounds:
25.1.1 Dissolution or liquidation of THE ASSOCIATE and its
assignee.
25.1.2 Should THE ASSOCIATE or its assignees assign this
contract without having complied with Clause 27.
25.1.3 Due to financial incompetency of THE ASSOCIATE or its
assignees, understood to exist when a meeting of creditors is
summoned or if bankruptcy proceedings are judicially opened.
25.1.4 Due to a lack of compliance on the part of THE ASSOCIATE,
of its obligation as herein contracted.
25.2 Should unilateral termination be called for, THE
ASSOCIATE's rights set forward in this contract shall cease to
exist for both conditions: as Party to the contract and Operator
of the project, when at such termination THE ASSOCIATE would
hold both positions.
25.3 ECOPETROL may call for unilateral termination of this
contract only after sixty (60) days of written notice to THE
ASSOCIATE and its assignees, clearly explaining the causes
alleged, should the latter fail to submit satisfactory
explanations to ECOPETROL or should THE ASSOCIATE neglect
correction of the fault incurred in contract compliance - all
the above without impairment of THE ASSOCIATE's right to
interpose the legal resources considered convenient. However,
should the fault alleged by ECOPETROL as termination cause
require for its correction more than sixty (60) days and should
THE ASSOCIATE be diligently setting remedy to it, then ECOPETROL
shall allow sufficient time for the execution of such emendatory
actions, which shall observe suitable oil standards and
procedures.
CLAUSE 26 - OBLIGATIONS IN THE EVENT OF CONTRACT TERMINATION
26.1 Whenever this contract be terminated as per Clause 24,
during its Exploration, Exploitation or - if applicable -
Development Period(s), THE ASSOCIATE shall leave in production
those wells which on such date be productive wells and shall
deliver the facilities, pipelines transference lines and all
other Joint Account real estate (located in the Contracted
Area), all of which shall gratuitously become the property of
ECOPETROL, along with the rights-of-way and goods acquired
profitable to the contract, even whenever they be located
outside the perimeter of the Contracted Area.
26.2 Should this contract be terminated on any grounds after
the first 17 years of the Exploitation Period have elapsed, all
Interests held by THE ASSOCIATE in the machinery, equipment and
other goods and movable elements used or acquired by THE
ASSOCIATE or by the Operator for contract performance, shall
become the property of ECOPETROL at zero cost to same.
26.3 Should this contract terminate before the first 17 years of
the Exploitation Period have elapsed, then the terms of Clause
22 (numeral 22.10) shall apply.
26.4 Should this contract at any time terminate by unilateral
termination cause, all real estate and movable goods acquired
for the exclusive benefit of the Joint Account, shall become the
property of ECOPETROL at zero cost to same.
26.5 Should this contract terminate on any grounds and at any
time, the Parties are anyhow obliged to satisfactorily comply
with the legal obligations between themselves and before third
parties, plus those contracted hereunder this contract.
CHAPTER VIII - GENERAL PROVISIONS
CLAUSE 27 - ASSIGNMENT RIGHTS.
THE ASSOCIATE holds the right to assign or transfer its
interests, rights and obligations in this association contract,
in full or in part, to another individual, company or group,
after approval to the effect obtained from the Ministry of Mines
and Energy and from the president of the Colombian Oil Company
ECOPETROL.
27.1 Thus, any project which implies a total or partial
assignment or transference of interests, rights and obligations
in the contract shall be taken to the attention of the Ministry
of Mines and Energy and the President of the Colombian Oil
Company ECOPETROL, by way of certified document written by THE
ASSOCIATE and containing the essential negotiation elements,
such as assignee, amount, interests, rights and obligations to
be assigned, scope of the operation, etc. Within the thirty
(30) work days following such notice, the Ministry of Mines and
Energy and the President of ECOPETROL shall exercise their
discretionary right to study the possible assignees'
qualifications; they shall thereafter take their decision,
without obligation to disclose the reasons for it. In any case,
the criterion of the Ministry of Mines and Energy shall prevail.
27.2 Should more than thirty (30) work days elapse as of the
date of receipt of the request by the Ministry of Mines without
THE ASSOCIATE having received a response thereto, the request
shall be understood to be approved for all effect.
27.3 Assignments made during the Exploration Period between
companies legally incorporated in Colombia, shall not be subject
to the aforesaid paperwork but shall become official by way of
written approval from the Colombian Oil Company ECOPETROL and
the signing of the corresponding document.
27.4 All changes or modifications in the contractual
relationship between THE ASSOCIATE and ECOPETROL as a
consequence of total or partial negotiation of THE ASSOCIATE's
interests, participations or shares, shall also be subject to
approval by the Ministry of Mines and Energy and the President
of the Colombian Oil Company ECOPETROL.
27.5 Notwithstanding the above, such changes or modifications
shall not require the approval of the Ministry of Mines and
Energy and the Colombian Oil Company in the following events:
1) Whenever the negotiations be made in the stock exchange or
free stock market.
2) When the assignment or transfer occurs as a result of events
out of the control of THE ASSOCIATE or of the control of those
companies controlling the latter, such as government decisions,
judicial sentences, apportionment and/or adjudgement or
allotment of goods and auctions.
3) Whenever the negotiations are made directly by the
company(ies) controlling or governing THE ASSOCIATE, or branch
offices or subsidiaries thereof, or between companies that from
a selfsame economic group - in which cases it will be sufficient
to advise in due time the Ministry of Mines and Energy and the
Colombian Oil Company ECOPETROL about such assignment or
transference.
27.6 Except for those cases mentioned above, any and all
assignments, transfers, negotiations, transactions or operations
mentioned in this clause, whenever made without prior written
consent or approval from the Ministry of Mines and Energy and
the President of the Colombian Oil Company ECOPETROL, whenever
required - shall give way to the exercise of the terms of Clause
25 of the association contract.
27.7 Transactions executed as per this clause and which be
subject to Colombian tax laws, shall pay the corresponding taxes.
CLAUSE 28 - DISAGREEMENTS
28.1 Whenever discrepancies or contradictions arise in the
interpretation of the clauses of this Contract as they relate to
those contained in Exhibit "B" of the "Operation Agreement", the
former shall prevail.
28.2 All disagreements arising between the Parties on matters of
law related to the interpretation and execution of the contract
and which cannot be agreed by amicable means, shall be subject
to the decision of the Colombian judiciary.
28.3 All factual or technical differences between the Parties
arising in the interpretation or application of this contract
and which cannot be agreed by amicable means, shall be subject
to the final decision of arbitrators appointed as follows: one
for each of the Parties and a third one by joint agreement of
both. Should they not reach an agreement as to the third
arbitrator, same shall then be appointed - upon request of the
Parties - by the Board of Directors of the Colombian Engineering
Society.
28.4 All accounting differences between the Parties, arising
from contract interpretation or performance and which cannot be
agreed by amicable means, shall be subject to the decision of
arbitrators, who shall be certified public accountants appointed
as follows: one by each of the Parties and a third one appointed
by both; should the two principal arbitrators be unable to reach
agreement as to the third individual, at the request of any of
the Parties the third one shall be appointed by the Bogota
Central Board of Accountants.
28.5 Both Parties declare that the arbitrators' decision shall
have the effect of a negotiation between both parties and that
therefore, such decision will be considered final.
28.6 If the Parties have conflict as to the technical,
accounting or legal quality of the disagreement, same shall be
considered of a legal nature and Clause 28 (numeral 28.2) shall
apply.
CLAUSE 29 - LEGAL REPRESENTATION
Without impairment of the legal rights held by THE ASSOCIATE as
a consequence of the legal stipulations or the Clauses to this
contract, ECOPETROL shall represent the Parties before the
Colombian authorities in all matters related to the exploitation
of the Contracted Area, whenever such representation be needed,
and shall provide the governmental bodies and the officers
thereto whatever reports and information could legally be
required. The Operator shall be obliged to prepare and provide
ECOPETROL with the corresponding reports. The expenses incurred
by ECOPETROL to cover any matter referred to in this Clause,
shall be debited to the Joint Account; the Operator's prior
approval shall be required when such expenses exceed the amount
of two thousand five hundred U.S.A. dollars (US$ 2.500) or its
equivalent in Colombian currency. The Parties declare that in
any relationship with third parties, neither the terms of this
Clause nor any other stipulation anywhere else in this subject
contract, imply the granting of a general power of attorney, nor
that the Parties would have become civil or commercial
partnership or society, nor any other relationship under which
any of the Parties could be considered jointly responsible for
the acts or omissions of the other Party, nor to hold authority
or power of attorney that could commit the other Party as to any
obligation. This contact refers to operations within the
territory of the Republic of Colombia, and although ECOPETROL is
an industrial and commercial enterprise of the Colombian
government, the parties agree that THE ASSOCIATE - should the
case come to exist - may choose to be excluded from the
application of the terms of the U.S.A. Internal Revenue Code,
subchapter "K", entitled Partners and Partnerships. THE
ASSOCIATE shall make such selection in adequate manner and on
its own behalf.
CLAUSE 30 - RESPONSIBILITIES
30.1 The Operator shall perform the operations of this contract
in an efficient and adequate manner and shall to the effect
follow the practices of the oil industry as they are accepted
for this type of operations; it is understood that the Operator
shall not at any time, be responsible for errors of discernment
or for loss or damages which not be the result of the Operator's
serious fault or negligence.
30.2 The responsibilities acquired by ECOPETROL and THE
ASSOCIATE related to this contract before third parties, shall
not be joint responsibilities; therefore, each Party shall be
separately responsible for its share of the expenses,
investments and obligations as they would result in the
consequence of same.
30.3 Whenever expenses incurred and contracts entered into by
the Operator exceed the authorized amount of Forty Thousand U.S.
Dollars (US$ 40.000) or their equivalent in Colombian pesos,
without such disbursement having been in due time authorized by
the Executive Committee - and except for those events
anticipated in Clause 11 (numeral 11.7) - the only responsible
party before third parties shall be the Operator, who shall
therefore assume the entirety of corresponding value. Whenever
the expense be accepted by the Executive Committee, the Operator
shall be reimbursed with the amount of the work, survey or
purchase, in accordance with rules to be defined by the
Executive Committee. Should the expense or the good not be
accepted by the Executive Committee, the Operator - if possible
- - - may withdraw the subject good, reimbursing the partners for
any costs that such withdrawal could cause to the operation.
Whenever the Operator be unable to withdraw such goods, or when
it declines doing so, the profit thereof or the resulting
patrimony increase resulting from such expenses or contracts,
shall thereafter belong to the parties in a proportion equal to
their interest in the operation.
30.4 Environmental Control. THE ASSOCIATE, when carrying out
all contract activities, shall comply with the terms of the
National Code for Natural Replaceable Resources and
Environmental Protection, and with all legal stipulations on the
matter. To do so, THE ASSOCIATE obliges itself to execute a
permanent prevention plan to ensure the preservation and
replacement of natural resources within the areas where
exploration, exploitation and transportation works be performed
under this contract.
Such plans and programs must be communicated by THE ASSOCIATE to
the communities and to the national and regional entities
related to or with said subject matter.
In the same fashion, specific contingency plans must be prepared
to respond to emergencies that could arise and to perform
whatever actions be needed to set remedy to same. To this
purpose, THE ASSOCIATE must coordinate such plans and actions
with the entitier adequate thereof.
The corresponding schedules and budgets must be prepared by THE
ASSOCIATE in accordance with the corresponding clauses hereunder
this contact.
All expenses incurred shall be on the account of THE ASSOCIATE
during the Exploration Period and chargeable to the Joint
Account during Exploitation.
CLAUSE 31 - TAXES, DUTIES AND OTHERS
Duties and rates that be created after the Joint Account is
established but before the Parties receive their participation
in the production, and that be chargeable to the Oil
exploitation, shall be charged to the Joint Account. Income
tax, patrimony tax and complementary taxes, shall be on the
exclusive account of each of the parties as would to each
correspond.
CLAUSE 32 - PERSONNEL
32.1 THE ASSOCIATE shall consult with ECOPETROL and appoint the
Operator's Manager.
32.2 Pursuant to the terms of this contract and subject to the
rules set forth, the Operator shall be autonomous to appoint the
personnel required for the operations referred to in this
contract and shall be free to determine the amount of their
compensation, their duties, categories, number of employees and
conditions. The Operator shall give adequate and timely
training to the Colombian personnel required to replace
expatriate personnel whenever the Operator deems
such replacement are needed for the execution of the operations
under this contract.
In any case, the Operator must comply with legal regulations as
to the proportion of national and expatriate officers and
employees.
32.3 Transfer of Technology. THE ASSOCIATE obliges itself to
carry forward at its expense, a training program oriented to
ECOPETROL professionals in areas related to contract
development. To comply with this obligation during the
Exploration Period, oriented training may be - amongst others -
in the areas of geology, geophysics and related matters, reserve
evaluation and reservoir characteristics, drilling and
production. Oriented training shall take place during the whole
of the initial exploration period and all of its extensions, by
way of the integration of ECOPETROL professionals appointed to
THE ASSOCIATE's work team assigned to the Contracted Area, or to
other ASSOCIATE's related activities.
To select the relinquishment as expressed in Clause 5 of this
contract, THE ASSOCIATE must have complied in anticipation with
the training programs herein expected.
During the Exploitation Period, the scope, duration, place,
participants and conditions of the training, as well as all
other aspects, shall be set forth by the Association's Executive
Committee. All costs associated to oriented training, except
for labor costs of those professionals receiving such training,
shall be assumed by THE ASSOCIATE during the Exploration Period
and by both Parties by debit to the Joint Account, during the
Exploitation Period.
Paragraph: THE ASSOCIATE shall comply with the oriented
training programme to be rendered during the Exploration Period
as follows: During the first year of the Exploration Period, THE
ASSOCIATE binds itself to incorporate during a period of at
least two (2) months, one ECOPETROL geophysics to its Home
Office work team working in the seismic interpretation of the
Area. For the second and third year of the Exploration Period
and in case this is extended, the oriented training shall
contain programmes similar to the one provided for above, on
subject matters to be agreed upon by the Parties.
32.4 Pursuant to this contract, during the Exploration Period
the Operator shall be entitled to carry forward works by way of
subcontracts, subject to the authority held by the Executive
Committee of approving contracts over Forty Thousand U.S.
Dollars (US$ 40.000) or its equivalent in Colombian currency.
CLAUSE 33 - INSURANCE
The Operator shall open all insurance policies required by the
Colombian law and it will demand from any subcontractor working
on matters related to this contract, to obtain and keep
effective all insurance policies the Operator could consider
adequate. In this same manner, the Operator shall open the
Insurance Policies that the Executive Committee would deem
convenient.
CLAUSE 34 - FORCE MAJEURE OR FORTUITOUS EVENT
The obligations set forth and contained in this contract shall
cease to exist during those periods of time when the Parties be
impeded to comply with same in full or in part due to events
that fall under the categories of Force Majeure or Fortuitous
Event, such as strikes, shut-down, wars, earthquakes, floods and
other natural disasters, government laws or rulings or decrees
that would hinder procurement of essential materials and, in
general terms, any reason outside the scope of finances that
would truly impede the works, even when the cause is different
to those listed hereinabove, but having an effect upon Parties
and being outside their control. Should one of the Parties be
unable to comply with this contract's obligations on the grounds
of force majeure or fortuitous events, it must so immediately
notify the other party for its consideration, explaining the
reasons for such impediment. The total contract term taken as
of the Date of Effectiveness stated in Clause 23, may in no
event be extended due to force majeure or fortuitous event,
above the twenty-eight (28) year term. However, any impediment
on the grounds of force majeure or fortuitous events during the
six (6) year exploration period set forth in Clause 5, the
duration of which be greater than thirty (30) calendar days,
shall extend such six-year period for a term equal to the time
of the impediment.
CLAUSE 35 - COLOMBIAN LEGISLATION
Pursuant to compliance of this contract, the Parties agree that
the domicile of same is the city of Bogota, Republic of
Colombia. This contract shall be ruled in all its parts by the
Colombian law and THE ASSOCIATE subdues itself to the
jurisdiction of Colombia courts, waiving any attempt to allegate
diplomatic claim wherever related to its rights and obligations
as acquired under this contract, except whenever denial of
justice would occur. Denial of Justice will not exist as long
as THE ASSOCIATE - either as the Party to the Contract or as the
Operator to the project - would have access to all means of
action and resources which per the Colombian legislation may be
used in the Colombian judiciary.
CLAUSE 36 - NOTICES
To be effective, all notices or communications between Parties
regarding aspects of this contract must bear reference to the
corresponding contract Clauses, and must be sent to the Parties
at the following addresses: ECOPETROL: Carrera 13 Nr. 36-24
Bogota, Colombia. THE ASSOCIATE PARTY: Calle 35 Nr. 7-25,
Bogota, Colombia. Any change of address shall be notified to
the other Party in due anticipation.
CLAUSE 37 - OIL VALUATION
The payments or reimbursements called for in Clauses 9 (numerals
9.2 and 9.4) and 22 (numeral 22.5) shall be made in dollars of
the U.S.A. or based on oil volumes at the effective rate and
under the restrictions set forth in the Colombian legislation
for the sale of the portion paid in dollars, of Oil and Gas
coming from the Contracted Area and destined to refining within
Colombia.
CLAUSE 38 - OIL PRICES
38.1 Oil that would correspond to THE ASSOCIATE in development
of this contract and that be destined to refining or local
consumption, shall be paid at the refinery where it will be
processed or at the collection station that the Parties agree,
as follows:
38.1.1 Gas shall be paid in accordance with Resolution number 61
of 1983 of the Oil and Natural Gas Price Commission and Decree
number 196 of 17 January 1986, issued by the President of
Colombia, or in accordance with any other government superseding
same.
38.1.2 Crude oil shall be paid in accordance with Resolution
number 60 of 21st January 1986, issued by the Ministry of Mines
and Energy, and Decree 196 of 17 January 1986, issued by the
President of Colombia, or any government regulations that would
supersede them, for similar type oils international F.O.B. price
shipping port.
38.2 To all purposes of this Clause, it will be understood that
similar type oils are those having similar API gravity and
similar physical and chemical characteristics.
38.3 To determine the FOB price shipping port of a similar
crude-oil, a mean shall be established by taking the average
sale price of a set of crudes coming from the western hemisphere
and from the North of Africa, set which shall be agreed by the
parties but made up by at least three crudes; such average shall
be applied to a six-month period and shall be extensive to equal
amounts of time.
38.4 The above item's values shall be determined on a monthly
basis and applied during the course of the month following that
month during which the decision was taken.
38.5 Any differences arising from the application of this Clause
shall be cleared as stated in this contract.
CLAUSE 39 - EFFECTIVENESS
To be effective, this contract requires the approval of the
Ministry of Mines and Energy.
In witness whereof this contract is signed with witnesses on the
third (3rd) day of December nineteen-ninety (1990).
THE COLOMBIAN OIL COMPANY TOTAL EXPLORATIE EN PRODUKTIE
ECOPETROL MAATSCHAPPIJ B.V.
(Signed) (Signed)
ANDRES RESTREPO LONDORO JORGE LARA URBANEJA
President Legal Representative
Witnesses: (Signed) (Signed)
EXHIBIT B
OPERATION AGREEMENT <F1>1
ATTACHMENT TO THE CHITAMENA RIVER SECTOR ASSOCIATION CONTRACT
Entered into between the "Empresa Colombiana de Petroleos -
ECOPETROL" and "TOTAL EXPLORATIE EN PRODUKTIE MAATSCHAPPIJ B.V."
with Date of Effectiveness, First (1st) of February, nineteen
ninety one (1991), which hereinafter will be called the Contract.
PART I - TECHNICAL ASPECTS
Section One - Exploration
CLAUSE 1 - PROVISION OF INFORMATION DURING EXPLORATION.
The geological and geophysical information to be delivered by
THE ASSOCIATE to ECOPETROL, must be provided under international
industry standards, compatible with standards used by ECOPETROL.
To allow regional appraisals of sedimentary river basins. To
complement Clause 6 (number 6.2) of The Contract the Operator
will send ECOPETROL, as it be obtained by the former, the
following information regarding exploratory activities carried
out by THE ASSOCIATE.
1.1 Schedules and Budgets to be developed, prior to their
execution.
1.2 Processed seismic sections for each line, obtained in two
scales, along with an interpretation report containing:
information used, background seismic programs, and geological
information.
1.3 Two (2) sets of magnetic tapes corresponding to seismic
lines one with demultiplexed information and the other with
stack information, along with their supporting information and
processing report. In case of vibrators, a copy of the field
tape should be supplied instead of the demultiplexed one.
1.4 Shooting points map for seismic programs, in copying sepia
and a copy, with coordinates and elevations information. This
information must also be delivered in magnetic tapes.
1.5 Magnetic and gravimetric profiles and residual maps in
copying originals, their copies and magnetic tapes holding all
supporting information generated.
1.6 Seismic, gravimetric and magnetometrical interpretation
report, along with all construed sections, profiles and maps,
submitted according to the standards that for this purpose
ECOPETROL has established.
1.7 Geological, structural, isophacous, isolithos, of facies,
seismic, etc. maps of The Contract area, in copying sepias and
copies of the scales established by ECOPETROL for each basin.
1.8 For well drilling: before starting well drilling: drilling
intention (form 4CR), drilling schedule, well location map and
geological prognosis, duly approved by the Ministry of Mines and
Energy. Exploration Wells location should be related to seismic
maps which were used to define the prospect. At each
Exploration or Stratigraphic Well drilled in The Contract Area,
a satellite obtained geodesic precision point, along with its
corresponding azimuth line, which be accepted by the Agustin
Codazzi Geographical Institute - "IGAC", should be materialized.
1.9 Daily drilling reports. These reports should be sent
preferably by telex and they will include well basic
information, drilling conditions, drilling fluidal properties,
results being obtained and daily and accrued cost.
1.10 Copy of fortnightly reports sent to the Ministry of Mines
and Energy (form 5CR).
1.11 Daily geology reports. Will be received by the Exploration
Geology Department on a daily basis, and may be reported on the
telephone or via telex.
1.12 Final geology report. This report is obligatory for every
well drilled in the country whether exploratory, stratigraphic
or developmental, and it should be submitted in Spanish, by a
registered Geologist, not later than ninety (90) days after the
date of well termination or abandonment; it should include the
following information by chapters:
1.12.1 Summary of all activities carried out during drilling.
1.12.2 Well location and 1:250,000 scale maps.
1.12.3 Stratigraphy: it should include a stratigraphic column,
environment determination and age of each formation drilled.
1.12.4 Biostratigraphy: it should submit dispersion maps,
analysis performed and possible corelations.
1.12.5 Geochemical: It should include all analysis performed
both to trench sample and to each core recovered.
1.12.6 Electrical Logs: They should include all calculations
performed for RW, SW determination. Speed registry analysis
should be included in this chapter.
1.12.7 Formation tests: They should present all the results
obtained from each test performed, as well as the results of
water and crude analysis carried out in the laboratories.
1.12.8 The report should include the following annexes:
Annex A: Description of trench samples taken each ten (10) feet.
Annex B: Detailed description of wall cores and samples that
have been recovered.
Annex C: All laboratory analysis made to wall cores and samples.
Annex D: Composed graphic registry, in reproducible sepia and
copies at 1:500 scale. For different lithologies included in
composed graphic registry, symbols used in these cases by the
American Association of Petroleum Geologists (AAPG) should be
employed.
Annex E: Final report of the company that performed "Logging" in
the well, including "Grapholog" registry.
1.13 Reproducible sepias and copies of all and each registry run
in the well, including speed registry, in 1:200 and 1:500 scale.
Besides that, magnetic tapes of all registries, accompanied by
computer tabulates in formats established by ECOPETROL for this
case, must be delivered.
1.14 Report on formation and/or production tests performed,
including bottom pressure analysis (open and close well).
1.15 A set of unwashed trench samples taken each ten (10) feet
should be delivered to ECOPETROL with their detailed
lithological description.
1.16 Coring report, when it is performed, including its detailed
description, as well as all analysis made. Together with this
report THE ASSOCIATE must send ECOPETROL pictures and fifty
percent (50%) of the core.
1.17 Report of all material used during drilling.
1.18 Biostratigraphic analysis with its dispersion map. These
analysis should be made in Exploration and Stratigraphic Wells,
because this information defines sedimentation environments and
agent of each formation drilled. This kind of analysis will
also be made to different cores recovered.
1.19 Geochemical analysis made to trench, wall and core samples.
1.20 Official report on well's completion, plugging or
abandonment (form 6CR or 10CR).
1.21 Final well report. It should include all engineering
information and a summary of final geological report. Should be
submitted in Spanish, not later than ninety (90) days after the
date of well termination or abandonment, bearing the approval of
a duly registered petroleum engineer.
1.22 While first contractual year is over, a quarterly report on
geology and geophysics operations performed and programmed, work
estimates at short and long term, as well as executed and
programmed budget.
1.23 A copy of yearly technical report submitted to the Ministry
of Mines and Energy, with its respective supports.
1.24 At the end of each calendar year, total amount of
investments and Direct Expenses incurred, allotted by concepts
of seismic, geology and well drilled.
1.25 Any engineering or geology study performed.
CLAUSE 2 - REDEMPTION OF AREAS.
To ease delimitation of borders, without damaging commercial
territories, the areas that THE ASSOCIATE will restitute to
ECOPETROL in parcels having a minimum extension of five thousand
(5,000) hectares each, should, if possible, be regular polygonal
lots.
Second Section - Exploitation
CLAUSE 3 - EXTENSIVE PRODUCTION TESTS.
The following is the procedure established to handle the crude
for and to perform extensive production tests, before a field is
accepted as a hydrocarbon commercially producer field.
3.1 For handling and transfer of volumes obtained, tests should
count with respective permit from the Ministry of Mines and
Energy, as well as with ECOPETROL's acceptance.
3.2 Production obtained during tests will be distributed
according to proportions established in The Contract, Clause 14
(number 14.2), after a twenty percent (20%) is discounted for
royalty fund; ECOPETROL will pay these royalties.
3.3 Volumes produced in these tests will be the volumes
recovered from the well during maximum test time approved on
respective permit by the Ministry of Mines and Energy,
discounting any volume of crude used as consumption in
operations.
3.4 THE ASSOCIATE will be a hundred percent (100%) responsible
for disbursements incurred during production test. Should this
test prove positive for commerciality, ECOPETROL will reimburse
THE ASSOCIATE fifty percent (50%) of all expenses, including
those of production tests along with production percentage
corresponding to it. It is understood that reimbursement of
costs paid in Colombian Pesos with production, will be applied
in dollars, at the official exchange rate in effect on the date
ECOPETROL declares commerciality (Clause 9, numbers 9.2.3 and
9.2.4 of The Contract.)
3.5 THE ASSOCIATE or the Operator, should enter into the
necessary agreements with the carrier for the transportation of
the crude for extensive tests, up to Barrancabermeja or
Cartagena refineries, or reception place agreed.
Transportation of crude corresponding to ECOPETROL, plus
royalties, will be paid by ECOPETROL once it receives
corresponding invoices with respective supports.
3.6 ECOPETROL must have knowledge in advance of the project
agreement for transportation of crude and must approve it before
initiation of production tests.
3.7 THE ASSOCIATE or the Operator, should opportunely inform
ECOPETROL about the development of production tests program and
send permits granted by the Ministry of Mines and Energy, as
well as any other information, as they be obtained.
3.8 In the event that Reimbursement be made in crude Oil,
invoicing will be monthly submitted, starting at the initiation
of well operation.
CLAUSE 4 - COMMERCIAL FIELD.
4.1 THE ASSOCIATE, once obtained enough information related to
development of the field, should make a study to define criteria
on petrophysical parameters, best delimitation of productive
area and, reserve calculation. The study must be carried out by
THE ASSOCIATE using technical methods available in or out of the
country; pertinent reviews will be carried out when
circumstances demand them.
4.2 For new facilities, enlargements or modifications, basic
production and detailed engineering designs will be submitted to
Technical Subcommittee consideration.
4.3 Engineering for production facilities must be contracted
with national companies, unless, Technical Sub-Committee's
opinion determines its technological complexity requires the
concurrence of a foreign company, preferably in consortium with
a national company.
4.4 Final mechanical completion of the wells that become
property of Joint Account should be agreed by Technical
Committee and this will be an obligatory requirement for the
well to enter in optimum production. For Exploration Wells,
reimbursement of this completion will be made as it reads in
Clause 9 (number 9.2.2, 9.2.3 and 9.2.4) of The Contract.
CLAUSE 5 - SINGLE RISK MODALITY.
5.1 Reimbursement of two hundred percent (200%) of investment
corresponds only to investment directly linked to each producer
well and production facilities to which Clause 9 (number 91.5)
of The Contract refers. ECOPETROL will practice an audit that
will determine the amount of reimbursable investments.
5.2 In proportion to the development of any field under the
Single Risk Clause, the Operator should send ECOPETROL all
technical, economic, legal and administrative information, such
as entering and execution of contracts, completion of wells,
flow lines, production facilities, measurement systems, storage
capacity, wells in production, restriction holes, production
reports, economic studies, etc. It is understood that different
Contract clauses and explanations to this document, have total
applicability in the case of Clause 21 of The Contract. -
Operations Under the Risk of One Party - regarding timely
information, technical control of reserves and other
administrative aspects.
CLAUSE 6 - OPERATION INSPECTION.
For inspection and controllership of Commercial Fields,
ECOPETROL will be able to send there its representatives.
Operator should provide the official appointed by ECOPETROL,
inasmuch as possible, equal lodging conditions to those offered
to for its engineers.
CLAUSE 7 - PRODUCTION.
7.1 The Operator should also render the Parties any information
about production technical improvements that he develops during
Exploitation Period.
7.2 For Oil loss control and prevention of environment damages,
the Operator and ECOPETROL will take the appropriate steps, with
Oil industry generally accepted methods, in order to avoid Oil
loss or spills of any kind during drilling, production,
transportation and storage.
7.3 The Operator should keep a daily control of crude Oil
consumption for operation and it will submit a monthly report on
them.
CLAUSE 8 - OIL DISTRIBUTION AND AVAILABILITY.
In accord with Clause 14 (number 14.1) of the Contract,
measuring of crude Oil will be carried out as follows:
8.1 Corrections for temperature and pressure.
Crude volumes will be determined at sixty Fahrenheit degrees
(60deg.F) and at atmospheric pressure, whichever be the temperature
and pressure to which it is measured. To make the corrections,
tables called Petroleum Measurement Tables Volume Correction
Volume I Table 5A Generalized Crude Oils Correction of Observed
API Gravity to API Gravity at 60deg.F (ATSM D-1250-80) and Table 6A
Generalized Crude Oils Correction of Volume to 60deg.F, against API
Gravity at 60deg. will be used. To make the correction of crude
oils pressure, Table No. 2 Compressibility Factors per Pound per
Square Inch of the API Standard 1101, will be used.
8.2 Measurement:
The volumes of crude oils the Operator accepts to transport,
will be determined by gauges that for such purpose the Operator
will have installed at the reception stations or delivery points
and, in their absence, by direct measurement of the level of
respective tanks, in accord with the gauging approved by the
Ministry of Mines and Energy, and the API Standard 1101. For
the liquidation of net volumes of crude oils received and
delivered, the Operator will practice the analysis of water and
sediment contents, using the Water by Distillation (ATSM D-95)
(API 2560) method for water contents and, to determine the
contents of sediments, the Sediment by Extraction procedure,
ASTM D-473 method, last review, according to what is provided in
Resolution No. 002297 dated October 21st, 1983, issued by the
Ministry of Mines and Energy, will be used.
CLAUSE 9 - SUPPLY OF CRUDE OILS FOR EXPORT
For effects of Clause 14 of The Contract, to proceed to the
export of crude oils THE ASSOCIATE will have as priority the
internal necessities of the country before making any export of
crude oils, in accordance with legal provisions which govern on
this matter.
PART II - COUNTABLE AND FINANCIAL ASPECTS
Section One - Schedules and Budgets
CLAUSE 10 - EXPLORATION BUDGET AND SCHEDULES
10.1 Before the initiation of each calendar year, THE ASSOCIATE
must submit the Budgets and Schedules of exploration,
discriminated in: geology, seismics and drilling of Exploration
Wells, with an indication of the currency in which work cost
will be incurred.
10.2 THE ASSOCIATE must submit quarterly a comparison between
Budget and real execution.
CLAUSE 11 - EXPLOITATION SCHEDULES AND BUDGETS
11.1 For the effects of Clause 11 of The Contract, the Operator
must submit a development plan, and budget and schedule of the
works open by quarters to ease the execution of different
controls.
11.2 THE ASSOCIATE must submit to ECOPETROL an organizational
letter for the operation of Commercial Field and this letter
must be agreed at Technical Sub-Committee level and, approved by
the Executive Committee.
CLAUSE 12 - BUDGET MANUAL
The standards and procedures expressed below constitute the
manual of budget applicable in the preparation, presentation and
control of Budgets that the development of The Contract demand.
This manual includes three (3) parts, namely:
12.1 Income budget
12.2 Expense budget
12.3 Other provisions
CLAUSE 13 - INCOME BUDGET
This Budget is divided also in two (2) sections: the budget of
current income and capital contributions.
13.1 Current income:
This is all the money caused in a current way on behalf of Joint
Account and which can be foreseen by the Operator. It includes
the following concepts, when acceptable:
13.1.1 Sale of Products:
This is an income from crude or gas sales made by Operator to
one of the Parties or to third parties on behalf of the
Association (it should be understood that these sales are
different from those made as share in the Association by each
one of the Parties).
13.1.2 Services Rendered
They include all services the Operator renders to one of the
Parties or to third parties, in accordance with the tariffs
established Sub-committees and approved by Executive Committee.
13.1.3 Selling out of assets or materials
It includes sales made by the Operator, to the Parties or to
third parties, of equipment and materials, in accordance to
provisions of Clause 20 (number 20.2) of this Agreement.
13.1.4 Other income
It includes all money received by the Operator with destination
Joint Account under the head of returns on transitory
investments.
13.2 Capital contributions:
This is all the money received by Operator in reason of advances
made by each one of the partners in accordance with their
participation in the Budget approved by the Association. This
income is called cash call or advances and will be managed in
accordance with procedures established in Clause 15 (number
15.5) of this Agreement.
CLAUSE 14 - BUDGET OF DISBURSEMENTS.
The budget of disbursements or appropriations is composed by
operation expenses and investment budget. Each one of these
budgets will be prepared in accordance with monetary origin of
its disbursement in Colombian Pesos and Dollars, and it will be
submitted classified in schedules and projects. The schedules
in numerical order - within each Budget - will represent
different groups of homogeneous activities the Association will
execute through the Operator. The projects in numerical and
continuous order within each schedule will present the very
purpose of the expense and will be duly supported and explained.
14.1 Budget of operation expenses.
The budget of operation expenses will be prepared by the
Operator in accordance with the policies that on this subject
the Executive Committee of the Association fixes (Clause 19 of
the Contract) and on the basis of the economical parameters and
indicators the Association had defined as the most
representative for budget life.
projects in numerical and continuous order within each program
will show the purpose of the expense and will be duly supported
and explained.
14.1.1 Preparation procedure.
The Operator will submit the budget of operation expenses
identifying the necessities of the Association and will
discriminate the heads of expenses in accordance with
classification mentioned in Clause 14 (number 14.1.2) of this
Agreement.
The factors of cost for the appraisal of different activities
scheduled to be carried out in the year to which Budget refers,
will correspond to real figures known at the moment of its
preparation, or to the best available information.
In every case, the budget of operation expenses will be
calculated having into account the costs demanded by the
dependencies which in a direct way render their services to
Joint Operation and which, therefore, should be assumed by Joint
Account in a one hundred percent (100%) and that will be charged
to the Parties in accordance with the proportion mentioned in
Clause 22 (number 22.6.1 of the Contract). The overheads that
must be assumed by Joint Account will be charged to the Parties
and will be determined in accordance with the provisions of
Clause 22 (number 22.6.2) of the Contract. The appraisal of
operation expenses will be carried out in the currency in which
disbursement is projected (Dollars from the United States of
America or Colombian Pesos). For control purposes, the Budget
will be submitted in three columns, namely:
Dollars origin causation
Pesos origin causation and
Consolidated statement in dollars using projection of exchange
rate for respective year
14.1.2 Classification per head of expenses
14.1.2.1 Organigram of personnel expenses
Salaries
Social Benefits
14.1.2.2 Materials and supplies
Repairs and maintenance
Tools
Other materials and supplies
14.1.2.3 Services from third parties
Technical services for the field
Utility services
Other services
14.1.2.4 Overheads
Equipment and office rent
Other overheads
14.1.2.5 Services from the Operator
Overheads
Other services rendered by the Operator
14.1.2.6 Other disbursements
Housing loans
Community assistance
14.1.3 Calculation basis
The budget of operation expenses will have the following basis
for calculation:
The budget of salaries and social benefits will be calculated in
accordance with organizational charts approved for the
Association and its estimation will be carried out in accordance
with the provisions of Clause 18 (number 18.1.1) of this
Agreement.
The calculation of salaries, social benefits and other
extralegal and special benefits originated by national and
foreign personnel will be submitted apart, in accordance with
disbursement origin, to be known by the Sub-Committees of the
Association and the Executive Committee.
Cost estimation of the materials and supplies will be made on
the basis of real prices or updated quotations, and in general,
using the best available information.
Import expenses will have as calculation basis the FOB prices of
materials and/or equipment that will be imported and in its
preparation the following factors should be considered:
freights, insurances, "Puertos de Colombia" taxes, import taxes
and other import expenses.
The cost of maintenance and operation service cost, will be
estimated in accordance with contracts legalized or to be
legalized that the Association has in the moment of preparing
the Budget.
The Overheads that must be assumed by Joint Account under the
head of services the Operator renders or can render, will be
calculated in accordance with the procedure established in
Clause 22 (number 22.6.2 of The Contract).
General expenses will be calculated having into account concrete
necessities demanded by Joint Operation in the normal
development of its activities. Community assistance will be
budgeted in accordance with interested people requests and
fulfilling the policies for that such purpose the Executive
Committee determines. In special situations that deserve it,
the Operator will be able to attend the request in accordance
with his procedures, previous notification to both Parties.
14.1.4 Execution of the Budget
Budget execution of operation expenses will be carried out in
accordance with the following considerations:
14.1.4.1 All the services, purchases or contracts that be
charged to Joint Account, under the head of operation expenses
must be budgeted and totally justified.
14.1.4.2 When a service or an act to be contracted doesn't imply
a disbursement higher than the limits established for the
Association, the Operator will have complete autonomy to
contract, in accordance with internal procedures of
responsibility and authority.
14.1.4.3 Purchases, contracts or any other act that implies in a
partial or global way a cost higher than the limits established
must be submitted before the Technical Sub-Committee of the
Association for its study and recommendation.
14.1.5 Control of budget execution.
The Operator will be in charge of the control of expense budget
execution, and he must watch the correct assignment of the
expenses.
The Operator will prepare a quarterly budget report explaining
the results of its execution, and it will contain:
14.1.5.1 Accrued expenses to the date, detailed according to
concept of expenses showed in Clause 14 (number 14.1.2).
14.1.5.2 Special comments to those headings whose execution
presents significant deviations with respect to budgetary
average or quarterly estimate.
14.1.5.3 Projection of estimated expenses to be disbursed by
quarter or for the rest of the year.
14.1.5.4 Justification of possible budgetary additions,
adjustments or transfers the Operator considers convenient or
are proposed by one Party.
14.2 Budget of investments.
It is a basic planning, execution and control tool of each one
of the investment schedules and projects that Joint Operation
can plan to carry out, and it acts as a mean to estimate the
funds required in the execution of the different programs
approved by Executive Committee.
As a previous step to its preparation, the Executive Committee
through respective Sub-Committees will establish the general
policies and parameters that must be contemplated by the plan of
investments.
14.2.1 The budget of investments will be formed by entries
appropriated for the following headings:
14.2.1.1 Acquisition of lasting goods, materials and services
needed for the execution of the different projects established
by the Association.
14.2.1.2 Acquisition of major maintenance equipment and tools
bound for Association workshops, in order to guarantee the
normal development of operations.
14.2.1.3 Equipping of social services, and other constructions
and/or enlargement of buildings demanded by the operation,
including facilities bound for Joint Account workers.
14.2.2 Classification of Investment Budget
For all submitting effects the budget of investments will be
grouped in schedules and projects in the following way:
Development wells, production facilities, civil works, other
assets, special studies, warehouse and other projects. These
will also be sub-divided in projects as follows:
14.2.2.1 Development Wells
Pumping or surface equipment and recompletings
Production wells
Locations
14.2.2.2 Production Facilities
Crude oils collection system
Storage system
Crude oils treatment system
Improved recovery system
Pumping stations
This page is intentionally missing.
** EMPRESA COLOMBIANA DE PETROLEOS **
EXPLORATION GROUP - GEOLOGY GROUP
PROGRAM EX-012
GAUSS COORDINATE CALCULATION FROM DATE (ILLEGIBLE) AND DISTANCE
AND AREAS CALCULATION FROM COORDINATES
BOGOTA ORIGIN
TABLE OF DATA AND RESULTS
FROM RIO CHITAMENA JOINT VENTURE SUPPLY
TAURAMENA MUNICIPALITIES
CASANARE DEPARTMENT
VERTEX COURSE DIST. MTS. LAT. DIFF. LON. DIFF.
COORDINATE VERTEX N. LAT E. LAT
(TRANSLATOR'S NOTE: SEVERAL FIGURES APPEAR HERE - SEE ORIGINAL.
THERE IS ALSO A MAP).
-----------------------------
At this point contained in the document is the division of
exploration which is in Spanish; therefore, it is not filed
within. Also contained is a map of the sector of Rio Chitamena,
which is also not filed.
Transfer lines
Others
14.2.2.3 Civil works
Roads
Bridges
Constructions (camp, workshops, warehouses and offices)
14.2.2.4 Other assets
Automotive equipment
Fire equipment
Communication equipment
Office equipment
Equipment for electromechanical maintenance
Major tools
Cleaning or workover equipment
14.2.2.5 Special studies
Environmental impact
Studies of deposits
Simulation studies
Interference tests
14.2.2.6 Warehouses
Fluctuation of material stock
14.2.2.7
Each one of these projects can be divided in as many
sub-projects as necessary, keeping always a uniform
identification and its final submitting will be made by project,
in accordance with previous classification and using for such
purpose, the forms two (2) and four (4) which can be adapted as
agreed between the Parties, through the Financial Sub-Committee.
In order to attain a greater clearness in preparation and
making the budget of investments, the following considerations
must be taken into account:
14.2.2.7.1 Maintenance Projects
They correspond to all those investments in equipment, materials
and constructions bound for the maintenance of the facilities in
efficient operation conditions, maintaining the limits of
original capacity and performance.
14.2.2.7.2 Enlargement projects
Those investments whose objective is to increase the capacity of
facilities, to increase authorized supply of automotive, office
equipment, etc. will be called so.
14.2.2.7.3 Special projects
They will include all those projects which due to their cost,
their importance in industrial activities or its impact at
social or ecological level deserve to be classified as special.
14.2.3 Budget preparation and submitting
All and each one of the projects included in the budget of
investments must be completely justified and analyzed before
being included in general budget. For this purpose, the
Operator must prepare an investment first draft containing the
following general information:
Analysis of necessities
Justification of the project
General description of the project
Investment estimated sum
Time of execution
Economical appraisal
The first draft with above mentioned information, plus any other
one considered necessary for its appraisal, will be studied in
conjoint by Association Sub-Committees, which will recommend or
object the project feasibility according to the policies
designed by the Executive Committee.
Once said Sub-Committee recommends the carrying out of a
determined project, this will be included in the general budget
to be approved by the Executive Committee of the Association.
All general information submitted to justify each project will
constitute a technical-financial Annex that will serve as
support in the presentation and approval of the budget by the
Executive Committee.
14.2.4 Budget of investments consolidation
Once the necessities of Joint Operation are determined, the
Operator will consolidate the budget of investments in
accordance with classification of Clause 14 of this Annex
(number 14.2.2) and will submit it to the Executive Committee of
the Association for its definitive approval. The budget of
expenses as well as the one of investments at schedule level,
will be submitted in three columns, that will contain dollars
origin causation, pesos origin causation and consolidated in
dollars.
Additionally, the Operator will prepare with informative
character, a disbursement chronogram, which shows cash
necessities by quarter and by currency origin, at schedule level
for the case of investment and of total of expenses for
operation expenses.
14.2.5 Budget execution
The execution of the budget of investments will be carried out
by Operator through its different dependences, and in accordance
with execution chronograms previously established.
Appropriations assigned to each project will be identified with
a previously defined code, which will be used in all documents
originated in the transaction of their Budgetary Execution.
14.2.6 Budgetary control
The Operator will be responsible for carrying out each one of
the schedules and projects of investment, and it will be liable
for their execution inside the conditions in which they were
approved.
In the same way, it will be responsible to verify that the
procedures related to project execution be carried out properly
and timely. In case of finding any obstacle which prevents the
normal development of the projects, the Operator should inform
immediately and in writing to each one of the Parties in order
to start solving the difficulty presented.
The Operator, as responsible of the projects, will prepare the
quarterly reports related to budgetary and technical progress of
the same, which it should send to both Parties in advance to the
date foreseen for the ordinary meeting of the Executive
Committee.
Quarterly report that must be prepared by the Operator through
its dependences, will contain the following information.
Period covered by the report
Project code and description
Project total budget
Financial progress from its initiation up to date of closing
Investments by project in current year accrued up to the date
Technical progress of the work
Projection of the works to be carried out quarterly in the rest
of the year, with informative character.
CLAUSE 15 - OTHER PROVISION
15.1 Budgetary additions
In all the cases the Operator is authorized to make all the
operation expenses and investments demanded by Joint Operation
in accordance with approved Budget, without exceeding the ten
percent (10%) of appropriations assigned to each project for
respective effect (Clause 11, number 11.5 of the Contract).
However, when during the execution of the Budget it is necessary
to increase the cost of appropriations approved by the Executive
Committee, corresponding modifications can be requested.
Each time the Executive Committee has its ordinary meetings the
requests of budgetary transfers or additions for expenses and
investments can be submitted, studied and approved. However,
Executive Committee can meet extraordinarily to treat budgetary
matters every time that a special situation deserves it.
Therefore, each time a budgetary review is requested, the
Operator must start, reasonably advance, the corresponding
procedures, submitting the requests to respective Sub-committee
for its study and recommendation to the Executive Committee.
In any case, budgetary addition requests must be completely
justified, explaining the reasons that gave rise to variation of
appropriated entries, with their respective technical and
financial annexes contemplated in Clause 14 (number 14.2.3) of
this Agreement.
15.2 Budgetary transfers.
Funds movements carried out from one year to the next, as a
result of those projects which couldn't be completed during the
term for which they were budgeted (due to reasons such as lack
of equipment availability, import procedures, bad weather, etc.)
will be considered as budgetary transfers.
The cost of the project not executed in its wholeness will
become part of the budget of next immediate year and will be
subjected to Executive Committee ratification. The submitting
of these projects inside the Budget will be done in an express
way and it will be taken into account in preparing the
disbursement chronogram mentioned in Clause 15 (number 15.4) of
this Agreement. Additionally, the budgetary transfers or
projects in transit ("carry-over") will give rise to an annex
in which budgetary transfer cause and way in which they will be
executed in next term.
If a project wasn't executed in more than 80% during a
determined term, it should be included again in the Budget and
its treatment will be similar to the one for a new project and,
therefore, it must be accompanied by the information
contemplated in Clause 14 (number 14.2.3) of this Annex.
15.3 Approvals
The Executive Committee will be the body in charge of approving
the budget recommended by the Sub-Committees of the Association
and authorizing the Operator to purchase or contract on behalf
of the Association all those goods and services demanded by
Joint Operation.
15.4 Chronogram of disbursements
Along with the Budget recommended by the Sub-Committees of the
Association, the Executive Committee will approve quarterly
budget submitted by Operator and it will constitute the basis on
which monthly advances of funds will be calculated.
15.5 Advance of funds
The requests of advances of funds will be formulated by the
Operator to each one of the Parties based on the obligations
contracted by the Association for the month immediately next to
the one of the request, consulting for this purpose, the Budget
approved by the Executive Committee for the Flow of Funds
projected. The following requirements must be fulfilled in
preparing and submitting the request:
15.5.1 Preparation
Based on approved budget and obligations contracted by the
Association for next month, the Operator will prepare the
requests of advances having into account the following
conditions:
15.5.1.1 The request will be made by the Operator in a separate
format for expenses and investments and, each one of them, will
give rise to pesos and dollars in accordance with the origin in
which the disbursement is projected.
15.5.1.2 The request must come open by schedules and projects in
the case of investments, and, by center of cost and detail of
expense, in case of expenses, in the same way it appears in the
Budget approved by the Executive Committee.
15.5.1.3 For each one of the projects listed in the request of
advances can be considered, it should appear in the Budget;
otherwise, total requested amount will be discounted.
15.5.1.4 Projects should count with a sufficient Budget.
However, in special cases, appropriated amount for the term can
be exceeded in a ten percent (10%), in accordance with Clause 11
(number 11.5) of The Contract.
15.5.2 Submitting
Every request of advance must be submitted for its processing in
the format previously agreed by the Parties at the Financial
Sub-Committee and it will show current and estimated advances of
investments and expenses, and it will be composed by the
following documents:
15.5.2.1 Letter of request
15.5.2.2 Request format showing financial condition of each
project or program on the date in which the request is made.
15.5.2.3 General comments of technical character that identify
destination of requested funds, when considered necessary.
Section Two
Accounting Procedure
CLAUSE 16 - ACCOUNTING PROCEDURE
The basis to effect credits and charges incurred between the
interested Parties, which cover operations related with
properties that were defined in the Contract are detailed below.
All charges will be made to Joint Account which will be
initiated in accordance with provisions of Clause 22 of The
Contract. The Joint Account defined in Clause 4 (number 4.5)
of The Contract will be divided in three main registries, as
follows:
16.1 Joint Account (explanation, charges and entries). This
account will be affected with all movements, as it is detailed
below and, it will be distributed monthly in its wholeness in a
proportion of a fifty percent (50%) for ECOPETROL and a fifty
percent (50%) for THE ASSOCIATE, in what corresponds to
investments, and in the proportion mentioned in Clause 22
(numbers 22.6.1 and 22.62) of The Contract for direct expenses,
and overheads, it means, that it will serve as the basis for
monthly invoicing, as it is established in this procedure,
ending all the months with a zero (0) balance. All countable
operations related with Joint Account, will be registered by the
Operator in Colombian Pesos, in accordance with the laws of the
Republic of Colombia, and the Operator will also be able to keep
auxiliary records where disbursements in which he incurs in any
currency different from Colombian Pesos, will appear.
16.2 Joint current account of operation. In this account the
advances received from the Parties and the charges or credits
corresponding to invoicing of the same will be kept, and at
every moment it will show a balance on favor or against each one
of the Parties as it is the case. This account will be divided
into two sub-accounts, in accordance with monetary origin of
transaction, it is, Pesos and Dollars.
16.3 Registry of joint property. Through the Joint Account, the
Operator will keep a record of all acquired property, subjected
to inventory, detailing kind of asset, date of acquisition, and
its original cost. The accounts mentioned in Clause 16 (numbers
16.1, 16.2 and 16.3) of this Agreement, will be part of
Operator's countable official registries, and they will be
different from Joint Account. The three sub-accounts will be
subjected to Clause 22 of this Agreement.
CLAUSE 17 - ADVANCES, INVOICES AND ADJUSTMENTS.
17.1 Advances. Although Operator will in first term pay and
discharge all costs and expenses incurred in accordance with The
Contract, charging each one of the Parties with the percentage
of its share, it is agreed that in order to finance said share,
each Party, at Operator's request and as it is provided later,
will advance the Operator, beginning with the acceptance by the
Parties of the existence of a Commercial Field and, no later
than within the first five (5) calendar days of each month, the
proportion of the expenses that were estimated for the
operations of respective month. Advance request must be
accompanied by a detail according to provisions of Clause
15.5.1.2 of this Annex. These advances will be made in dollars
of the United States of America and in Colombian pesos, in
accordance with the necessities registered in the budgets and in
the requests of funds prepared by the Operator. The request of
funds will be made by the Operator within first twenty (20)
calendar days of the month immediately previous to that in which
contribution must be made. If the Operator had to make
extraordinary disbursements, not contemplated when requesting
monthly advance of funds, he must request in writing to no
operators, special advances covering the participation of such
disbursements. Each participant will advance its proportional
part within the fifteen (15) calendar days following Operator's
request.
17.2 Invoicing. The Operator will prepare an initial invoice
for ECOPETROL after the acceptance of a Commercial Field, for a
fifty percent (50%) of expenses and cost of Exploration Wells
that had resulted producers. These costs will include all
expenses caused by drilling, such as the tests, the completion
and the equipment of the well, as well as flow lines, separators
and cost of extensive production tests. Said invoice will also
include a fifty percent (50%) of the cost of additional works
referred in Clause 9 (number 9.3) of The Contract and it will be
paid in accordance with said clause. This invoicing will
include a summary of the costs expressing separately the
currency in which investments and expenses were made, it is, in
Colombian pesos or in dollars of the United States of America.
17.2.2 Beginning in the date of initial invoice, the Operator
will invoice the Parties within thirty (30) calendar days
following the last day of each month, its proportional share in
the costs and expenses for that month. Invoices will show the
details used by Operator's countable procedures, including a
detailed summary of accounts, expressing separately the costs
and expenses originated in pesos and those originated in dollars.
17.3 Adjustments. The invoices will be adjusted between the
Operator and the Parties after deducting the advances in dollars
and in pesos.
When advances made by any of the Parties differ from their
participation in effective costs determined for each period, the
difference in pesos and/or dollars will be adjusted to next
month invoices.
17.4 Invoice Acceptance. The payment of the invoices will not
affect the right of the Parties to protest or inquire on the
accuracy of the same in accordance with the terms of Clause 22
(number 22.7 of The Contract).
CLAUSE 18 - CHARGES
Subjected to limitations described below, the Operator will
charge Joint Account and will invoice each Party, according to
percentages established in Clause 16 (number 16.1) of this
Agreement, the following expenses:
18.1 Labor
18.1.1 National and Foreign employees
18.1.1.1 The salaries of Operator's employees or workers who
were directly working in benefit of Joint Operation, including
overtime payment, night extra charge, Sundays and holidays
payment and their respective compensatory rests and, in general,
every payment that constitutes salary.
18.1.1.2 Social benefits, indemnities, insurance, subsidies,
bonus and, in general, any benefit that is not considered salary
and that is granted to workers and/or their relatives or
dependents, whether granted in an individual or collective way,
or that are granted in virtue of a work contract, the law, or
arbitral sentences or conventions, except housing plans, in
relation to which a special agreement will be necessary. Among
above listed benefits we can mention as a simple list, the
following: severance payment, vacation, retirement and
invalidity pensions, benefits to retired people and their
relatives, benefits and assistance caused by professional or no
professional diseases and accidents, service premium, life
insurance, indemnities for contract cancellation, union
benefits, all kind of bonus, subventions and helps for health,
savings, education and, in general, every social security.
Besides that, payments to Colombian Institute of Family Welfare
(ICBF), Learning National Service (SENA), Institute of Social
Security (ISS) and other similar ones that can be established.
18.1.1.3 All expenses incurred in benefit of Joint Operation in
relation to maintenance and operation of the camp, its offices
and its service facilities in the field. Among these expenses
there are also included, not in a limitative way, but
enumerative, those that will be shown later, whether the
services be rendered in a free or paid way, or whether they are
for the workers, their dependents or relatives, or that the
services are rendered in a voluntary or obligatory way.
Among these services are:
18.1.1.3.1 Medical, pharmaceutical, surgical and hospital.
18.1.1.3.2 Camp and all its services, including its repair and
sanitation.
18.1.1.3.3 Training and qualifying expenses.
18.1.3.3.4 Worker's recreation.
18.1.3.3.5 Maintenance of schools for workers, their children
and dependent relatives.
18.1.1.3.6 Security or social assistance plans and camp
vigilance.
18.1.1.4 It is understood that expenses and services noted in
Clause 18 (number 18.1.1.1, 18.1.1.2, and 18.1.1.3), before
mentioned, will be on account of Joint Account, when by
provision of the law, of collective conventions and/or arbitral
sentences or voluntarily, are applied in a direct or solidary
way to contractors, subcontractors, intermediaries and/or their
workers who are working in benefit of the operation.
18.1.1.5 With regard to Retirement pensions and the Invalidity
Aid, once Operator's recommendation is hear, the Executive
Committee is totally authorized to decide among affiliating the
workers to the Social Security Institute, an insurance company
or a body legally authorized to assume these risks, or to
constitute a fund that will be directly managed by the Operator
under the control of Executive Committee. The Operator will
make the contributions in a hundred percent to selected entity
or to the fund, according to the case, and respective sums will
be charged to Joint Account, without damage if health service is
directly assumed by the Operator.
18.2 Materials, equipment and supplies.
The necessary materials and supplies for the development of the
operations will be charged to Joint Account. The materials and
supplies will be acquired for warehouse stocks when it is
convenient for the operation and will be credited to it, at the
cost in books as they leave the warehouse to be used. The units
of Capital equipment will be directly charged to Joint Account.
The cost in books is determined below:
18.2.1 Cost in books
It is understood that cost in books means the lst average price
of stock in warehouse based on cost obtained from import
liquidation sheets or local cost, as follows:
18.2.1.1 For import materials, equipment and supplies, the cost
in books will include net price of manufacturer or supplier
invoices (after deducting every discount), cost of purchases,
freights and delivery charges between supply place and shipping
point, freights to entrance port, insurances, import duties or
any other tax, handling from the ship to customs warehouse and
transportation to operation site.
18.2.1.2 For materials, equipment and supplies locally acquired,
the cost in books will include seller net invoice (after
deducting all discounts), plus sales taxes, purchase expenses,
transportation, insurance and other similar costs paid to third
parties, from purchase place to operation place.
18.2.1.3 The materials will be charged to Joint Account in
accordance with the monetary origin of its acquisition, for
them, in the same way, to be charged to each Party.
18.2.2 Return of materials to the warehouse of Joint Operation.
The materials, equipment and supplies return by operations to
the warehouse of Joint Operation will be valued as follows:
18.2.2.1 New materials, at cost in books:
18.2.2.2 Second hand materials, in good condition, that can
render any service and the equipment that can be used later
without repairs, can be reincorporated to The Association
warehouse by the Operator at seventy-five percent (75%) of their
cost in books, giving credit to respective project of Joint
Account.
18.2.2.3 Second hand materials and equipment that, once
repaired, can be used, will be reincorporated by the Operator to
warehouse of The Association for the fifty percent (50%) of
their cost in books.
These materials, when used again, will be charged at their new
cost in books.
18.2.3 Sales made by the Parties. Materials, equipment and
supplies sold by the Parties to Joint Operation will be valued
at replacement price agreed by the Parties. Corresponding cost
of transportation will be on account of Joint Operation. In the
cases of sale from Joint Operation to one of the Parties, above
mentioned items will items will be valued at the replacement
price agreed by the Parties, and transportation cost will be on
account of purchasing Party.
18.2.4 Local Transportation of Materials.
18.2.4.1 For materials shipped through an external carrier, at
cost, according to carrier's company invoice.
18.2.4.2 For materials dispatched in transportation units owned
by the Parties at tariffs calculated to cover real costs,
according to procedure established in Clauses 18 (number 18.4)
and 23 (number 23.1.1) of this Annex.
18.2.5 Materials of canceled, postponed or changed projects.
When a stock accumulation is produced in warehouse caused by
change, postponing or canceling of projects approved by the
Parties, the cost of such materials will be charged to warehouse
account. These materials can be sold to third parties according
to what is provided in Clause 20 (number 20.2.1) of this
Agreement and yield will be credited to Joint Account.
18.3 Travel expenses.
All travel expenses incurred for the benefit of Joint Operation
by national or foreign personnel, such as transportation,
hotels, food, etc.
18.4 Service units and installations.
Cost of services rendered by equipment and installations owned
by any of the Parties will be charged to Joint Account at
reasonable rates as established in Clause 23 of this Annex.
Rates fixed must be applied up to when modified by mutual
agreement.
18.5 Service
Services supplied by third parties for Joint Operation,
including contractors, to their real costs.
18.6 Repairs
The expenses for repairs performed to equipment or elements of
any of the Parties, destined to the use of Joint Operation,
except that these costs have already been charged by means of
rents or in other way.
18.7 Lawsuits
The expenses to Joint Operation regarding threats from effective
lawsuits (including investigation and obtaining of proofs),
releasing of attachments, judgments or sentences, legal claims
and claim procedures, accident compensation, settlement for
death or funeral expenses, provided that these charges hadn't
been recognized by an insurance company or covered by
proportional extra charges mentioned in Clause 18 (number
18.1.1) of this Agreement. When legal services be supplied on
such matters by permanent or external lawyers whose total or
partial fees be included in overheads, no extra charges will be
made for their services, but they will be charged to General
Expenses incurred in such procedures.
18.8 Damages and losses to Joint Operation properties and
equipment. All costs and expenses necessary to replace or
repair damages or losses caused by fire, flood, storm, robbery,
accident or any other similar fact. The Operator will
communicate in writing to the Parties the damages or losses
occurred, as soon as possible.
18.9 Tax and rents
Cost of all taxes paid or caused in the development of Joint
Operation, will be charged to Joint Account. This account will
also be charged with cost of rents, easements and indemnities
for improvements, ground occupation, etc.
18.10 Insurances
18.10.1 Premiums paid for insurances taken in benefit of the
operations to which The Contract refers, together with all
expenses and indemnities caused and paid, and all losses, claims
and other expenses that hadn't been covered by insurer
companies, including legal services mentioned in Clause 18
(number 18.7) of this Agreement, will be charged to Joint
Account.
18.10.2 When there is no insurance, the real expenses incurred,
previously mentioned and, paid by the Operator, will be also
charged to Joint Account.
CLAUSE 19 - CREDITS
19.1 The Operator will credit to Joint Account the income from
the following headings:
19.1.1 Insurance collection regarding Joint Operations, whose
premiums had been charged to said operation.
19.1.2 The sales of geological information, previously
authorized by the Parties, provided that collections related to
them had been charged to Joint Operation.
19.1.3 Sale of Joint Operation properties, plants, equipment and
materials.
19.1.4 Rents received, returns from custom taxes or
transportation claims, etc., must be credited to Joint
Operation, if such rents or returns belong to said operation.
19.1.5 Any other income from operation or contracts authorized
by the Executive Committee.
19.2 Warranty
In case of defective equipment, when Operator had received
respective adjustment from the manufacturer or his agents, this
warranty must be credited to Joint Operation.
CLAUSE 20 - DISPOSAL OF REMAINING MATERIALS AND EQUIPMENT.
20,1 Remaining materials and equipment.
The Operator will inform ECOPETROL in writing about the
remaining materials and equipment from Joint Operation. Each
one of the Parties will appoint a representative to review their
condition and determine which materials or equipment can be
sold. First purchasing option of usable materials or equipment
will be for ECOPETROL and the second one for THE ASSOCIATE;
these options must be exercised within next sixty (60) days
following notice date. In case that ECOPETROL or THE ASSOCIATE
don't exercise this right, the Operator will inform it in
writing and goods will be sold in auction.
20.2 Disposal of materials and capital equipment
20.2.1 Sales - from Operator to third parties - of major
materials and capital equipment that had been charged to Joint
Account will be made only with approval from Executive
Committee. This yield will be credited to Joint Account. Only
for this purpose, major materials are defined as any asset whose
estimate sale price is higher than five thousand dollars of the
United States of America (US$5,000) or its equivalent in
Colombian currency.
20.2.2 Minor materials charged to Joint Account which aren't
required in the operation or reincorporated to warehouse, can be
sold by Operator and their yield credited to Joint Account.
20.2.3 For any abandonment or dismantling of the assets that
have an estimated cost or value of five thousand dollars of the
United States of America, or more, or its equivalent in
Colombian currency, a previous authorization from the Executive
Committee is required.
20.2.4 No one of the parties will be obliged to purchase the
interest of the other one in remaining materials, being it new
or second handed. Withdrawals from major lines of remaining
materials, such as towers, tanks, engines, pumping units and
pipe lines will be subjected to approval from the Executive
Committee. However, the Operator will have the right to cast
aside in any way those damaged or useless materials.
CLAUSE 21 - INVENTORY
By request of ECOPETROL, the Operator will submit the necessary
information in order to carry out inventory analysis in
warehouses and the Parties will agree on joint participation for
inventory control. The Operator must supply everything
ECOPETROL requires to perform a physical taking up of fixed
assets at the facilities of The Association, previous agreement
at the Financial Subcommittee, on the date, time and number of
people who will carry out the inventory.
21.1 Inventory and audit
The Operator must practice at reasonable intervals, the
inventories of all Joint Operation assets.
21.2 The Operator will give written notice to the Parties of his
intention to carry out an inventory, one (1) month in advance to
the date in which it will start, for them to appear. But non
attendance of one of the Parties to inventory taking, will not
reduce the validity or effectiveness of the inventory in this
way taken by the Operator.
21.3 The Operator will supply the Parties with a copy of each
inventory, and a copy of its reconciliation.
21.4 Inventory adjustments for remainings or missings will be
informed to Executive Committee for their consideration and
approval.
21.5 At last day's midnight of the twenty-two years (22) term of
Exploitation Period, the Parties will take up inventories of the
materials found in warehouse, and which are owned by Joint
Account, as well as of extracted products found in recollection
batteries, in pipe lines which go from there to storage tanks or
in storage tanks, all this inside operation terrains, and said
inventories will be distributed between the Parties, after
deducting royalties, in the same way foreseen in Clause 13 of
The Contract.
CLAUSE 22 - AUDIT
Subjected to Clause 17 (number 17.4) of this Agreement, the
Parties will be able to examine and control through their own
Auditors, the Operator records related to joint properties and
their operation. However, in order to facilitate the review of
cost and expenses of Exploration Wells mentioned in Clause 17
(number 17.2) of this Agreement, once the Operator advises the
non operator the date of inventory termination of any producer
well, the Operator will allow that, previous timely notice,
ECOPETROL's auditors examine periodically the drilling accounts
of the wells in such a way that when a Commercial Field is
declared, mentioned review had already been practiced in best
conditions of time and place. During audit reviews foreseen in
this Agreement, besides representatives from the Parties,
representatives from General Controllership of the Republic can
also be present, if said body esteems it convenient. Expenses
and cost of such review will be on account of interested Party.--
CLAUSE 23 - TARRIF TABLES
23.1 Subjected to limitations previously described, services
rendered to Joint Operation by facilities exclusively owned by
ECOPETROL or THE ASSOCIATE, will be charged at respective
tariffs, in order to allow the recovery of real cost. Said cost
should include normal cost of work, salaries, social benefits,
depreciation and other operation expenses, having the following
into account:
23.1.1 The tariff of transportation units that is normally
calculated on the basis of operation time, must include time
used in loading and unloading, time elapsed waiting for loading
and waiting time while unloading is being carried out. Charges
for transportation units allotted to operation will include
Sundays and Holidays, except when they are out of service for
repairs.
23.1.2 When the material for mentioned operations is transported
along with any other material by fluvial or land fleet
exclusively owned by ECOPETROL or THE ASSOCIATE, the charge must
be made based on transported tons, at tariffs not greater than
commercial ones.
23.2 Tariffs for rent of equipment and tools.
The procedure to calculate the tariff of rent for equipment and
tools owned by the Parties, including drilling equipment and
major equipment whose tariffs must be figured separately and
approved by Executive Committee will include a depreciation cost
plus a maintenance cost, and procedure will be as follows:
23.2.1 Equipment description, model, number, purchase date and
original cost.
23.2.2 Place where equipment will be used, reasons for its rent
and, estimated time of use.
23.2.3 Cost of equipment annual depreciation, calculated on the
basis of the sum depreciated in books and its estimated
remaining useful life (minimum sum considered in books will be a
ten percent (10%) of original cost, it is salvage sum).
23.2.4 Maintenance annual cost will be a percentage of original
cost which will vary from a five percent (5%) for new equipment
up to a fifteen percent (15%) for depreciated equipment,
depending upon depreciation time; for example:
Equipment A: (Five years (5) useful life)
Time (years) 1, 2, 3, 4, 5: a one hundred percent (100%)
depreciated equipment.
Maintenance: 5, 6, 7 8, 9: 15%
Equipment B: (Ten (10) years useful life)
Time (years) 1, 2, 3, 4, 5, 6, 7, 8, 9, 10: One hundred percent
(100%) depreciated equipment.
Maintenance: 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15,: 15%.
Note: Time of useful life and depreciation will be established
by countable techniques applicable to oil operation.
23.2.5 Annual rent tariff is equal to cost stipulated in Clause
23 (number 23.2.3) of this Agreement plus cost fixed in number
23.2.4 of this same clause.
23.2.6 Equipment monthly or daily rent tariff will be equal to
that established in Clause 23 (number 23.2.5) divided by 12 or
365, according to the case.
23.2.7 There will be no rent charged for "stand by", but it will
be charged to any third party.
23.2.8 Previous rent tariffs don't include transportation,
installation, operation, lubricants and fuels costs, which will
be charged to the operation to which equipment is bound.
23.2.9 Previous rent tariffs will be applied to eventual use of
operation equipment or tools, one hundred percent (100%) of THE
ASSOCIATE or operator or vice versa.
23.2.10 In each case, Technical Sub-Committee will recommend
Executive Committee the necessity of using rented equipment,
Financial Subcommittee will be able to apply the tariff system
herein recommended.
23.3 Warehouses and fixed assets tariff.
To calculate rent tariff of warehouses owned by one of the
Parties or by Joint Operation for a total or partial use, a
procedure that will be agreed at the Financial Subcommittee will
be followed.
CLAUSE 24 - CONTRIBUTIONS IN KIND.
ECOPETROL or THE ASSOCIATE will contribute, in kind, those
materials it considers convenient according to agreements
entered into by the Parties.
PART III - ADMINISTRATIVE ASPECTS AND OTHER PROVISION
Section One - Executive Committee
CLAUSE 25 - OPERATION CONDITIONS
To exercise its duties the Executive Committee must fulfill the
conditions foreseen in Clause 19 of The Contract, as it is
explained below:
25.1 Executive Committee will be presided alternatively by the
Parties, starting with ECOPETROL.
25.2 The Executive Committee will appoint its Secretary with
alternation of the people appointed by ECOPETROL and THE
ASSOCIATE. The same Party should provide President and
Secretary.
25.3 The Executive Committee will have ordinary meetings during
the months of March, July and November and extraordinary ones,
each time the Parties and/or the Operator consider it necessary.
In said meetings, exploitation schedule developed by the
Operator, and plan to be followed will be reviewed. This
Executive Committee can be attended by the advisors each one of
the Parties consider convenient, being understood that each
company will take the smallest possible number of people.
25.4 For Executive Committee ordinary meetings, the
representative who will be in charge of presiding next meeting
will advise the other Party representatives (principal and his
deputies) and the Operator, ten (10) calendar days prior to the
meeting date, the meeting date, place and issues to be treated
(agenda).
25.5 In development of Clause 18 (number 18.3) of The Contract,
both for Executive Committee's ordinary and extraordinary
meetings, those issues to be treated that hadn't been included
in the agenda, must have been previously accepted by Parties'
representatives through the Sub-Committees.
SECTION TWO - SUB COMMITTEES
CLAUSE 26 - SUB COMMITTEES CREATION. In development of the duty
foreseen in Clause 19 (number 19.3.8) of The Contract, the
Executive Committee will be able to create the advising
sub-committees it considers necessary. In any case, the
Executive Committee will appoint a Technical Sub-committee and a
Financial Sub-committee.
These sub-committees will be the bodies established to control
and define the technical, financial and juridical
recommendations of The Contract before the Executive Committee
and they must be governed by The Contract and this Agreement.
Each sub committee must establish its own internal regulation
approved by the Executive Committee.
Section Three - Operator
CLAUSE 27 - RIGHTS AND OBLIGATIONS
27.1 In accordance with this Agreement, the Operator has the
right to conduct the Joint Operations by itself or, through its
contractors, under the general direction of the Executive
Committee. In any case, the Operator remains responsible of
Joint Operation, in accordance with provisions of The Contract.
27.2 Among Operator's obligations there are the following:
27.2.1 Preparation, presentation and implementation of
exploration and exploitation budgets and schedules, as well as
the approval of expenses (AFES).
27.2.2 To direct and control all statistical and accounting
services.
27.2.3 To plan and obtain all the services and materials
required for the good development of Joint Operation.
27.2.4 To provide all techniques and advisorship necessary for
an efficient development of Joint Operation.
27.3 The Operator can't constitute any lien on Joint Operation's
properties.
27.4 Operator's resign or dismissal should be made without
damage or any right, obligation or responsibility acquired
during the time the Operator performed as such; if Operator
resigns or is dismissed before fulfilling obligations
established in The Contract, it will not be able to charge Joint
Account with costs and expenses it incurred by reason of the
change. But if Executive Committee approves them, these costs
and expenses can be charged to Joint Account.
27.5 Once the Operator is noticed of its dismissal or its resign
is accepted, for the transference of responsibilities, ECOPETROL
will audit Joint Account and will carry out an inventory of all
Joint Operation properties. Such inventory will be used for
return and bookkeeping effects of said responsibility transfer
procedure. All costs and expenses incurred in relation to such
inventory and audit will be charges to Joint Account.
27.6 The Operator will not be responsible for any loss or damage
caused by Joint Operation, unless such losses or damages result
from:
27.6.1 Operator's serious fault.
27.6.2 Operator's failure in the obtaining and keeping of any
one of the insurances required by Clause 33 of The Contract,
except when Operator had compromised all its will to obtain and
keep them and results of these efforts had been fruitless, a
fact about which it must inform previously to the Parties in
writing.
Section Fourth - Contracting Procedure
CLAUSE 28 - REGISTRY OF SUPPLIERS AND CONTRACTORS.
28.1 The Operator must keep a registry of suppliers and
contractors classified by the different activities required by
oil exploration, exploitation and transportation.
28.2 ECOPETROL will know suppliers and contractors list and will
inform the Operator its justified remarks, if any.
28.3 Registry review will be annually performed, and it will not
prevent- with THE ASSOCIATE's consent - the dropping out from
the list of those people or entities that had given any
justified motive to adopt such determination.
28.4 In every case implying a quotation request to buy or
contract, respective registry will be consulted, certifying it
on respective document.
28.5 People or entities included in the registry of contractors
or suppliers must credit their technical, moral and economical
solvency, besides their sufficient experience to attend the
necessities of Joint Operation. It is considered as company
experience that of the partners and those technicians linked to
it on a permanent basis.
CLAUSE 29 - PURCHASE PROCEDURE
29.1 The Operator will prepare a purchase list, after verifying
items nonexistence in storages and warehouses created for Joint
Account.
29.2 The Operator will submit to Technical Sub Committee, for
their study and recommendation, and reasonably in advance, the
analysis of different purchase requests, including among other
aspects, the following:
If they correspond to warehouse or to immediate consumption
Budgetary heading and entry
Payment currency and offered warranties
Possible financing
Invitation to three (3) suppliers minimum
Cost center or investment authorization (AFE)
29.3 Awarding will generally occur through a system of three (3)
quotations system, except in the cases determined by Technical
Subcommittee.
29.4 Purchase requisitions must be presented with all supports
and justifications, duly signed.
29.5 Studied and approved requisitions, as well as those
postponed with a certificate of their postponement, will appear
on meeting record.
29.6 Those requisitions whose cost is higher than forty thousand
(US$ 40,000) dollars of the United States of America or its
equivalent in Colombian Pesos, will be submitted to Executive
Committee for their approval.
29.7 In every ordinary meeting of Executive Committee,
requisitions recommended by Technical Subcommittee will be
informed for their ratification.
Purchase bids will also be governed by procedures established in
Clause 29 (number 29.4) of This Agreement.
CLAUSE 3O - PROCEDURE TO CONTRACT WORKS AND SERVICES.
30.1 Technical Sub-committee will appoint a proposal appraisal
commission, if considers it pertinent.
30.2 Technical Sub-Committee will study award reports and
recommendations in accordance with their importance within the
limits of established authorizations.
30.3 For each work or services to be contracted, a Budget will
be prepared following each one of following modalities:
Delegated administration
Lump sum
Prices per work unit
Prices per time unit
Rates established by entities or professional unionizations
Key in hand
30.4 Contracting of works and services whose cost exceeds forty
thousand dollars of the United States of America (US$40,000),
will be carried out through a minimum of three (3) written
quotations from bidders duly qualified and registered on
Operator's registry. In case that the three (3) proposals can't
be obtained, a minor number will be accepted, certifying
justification on recommendation report from Technical
Sub-committee.
30.5 Original proposals must be kept in Operator's files for
later review effects.
30.6 A contracting request should be declared deserted, whenever
the Technical Sub-committee finds reasons to justify such
decision and whenever the offers stand aside from real costs
considered by Technical Sub-Committee.
30.7 If a modification arises which changes the price in a
percentage higher than a twenty percent (20%), all bidders will
be informed to give them a chance to review their offers and it
will be handled as a new offer request.
30.8 Award result will be communicated in writing.
CLAUSE 31 - PROCEDURE OF OFFER REQUEST.
31.1 Technical Sub-committee will recommend the cases in which
it is convenient to carry out an offer request, and the people
it considers can be invited to present offers.
31.2 Foreign firms invited must be legally established in the
country.
31.3 The Operator will prepare bidding forms and will submit
them to Technical Committee consideration.
31.4 Once proposals are received, those submitted after term
fixed for that effect, will not be taken into account.
31.5 The offers will be appraised in a conjoint way, in
accordance with criteria established on the forms of offer
request.
31.6 Any explanation or widening of technical information, will
be requested to bidders in offer requests, preferably by telex.
Besides that, these requests must be sent to all bidders in case
that it is a general explanation. Any explanation requires
timely knowledge of both Parties.
31.7 The Operator will submit its award recommendation in
writing to the consideration of Technical Subcommittee,
supported by communications and respective documentation,
including a comparative chart of the offers.
CLAUSE 32 - INSURANCES
For effects of Clause 33 of The Contract, as for Insurances it
refers, the Operator must deliver the Vice Presidency of
Associate Operations of ECOPETROL the following information for
it to insure a fifty percent (50%) of assets corresponding to
Commercial Field:
32.1 Description of assets, discriminated as possible in the
following way:
32.1.1 Offices, camps and other non-industrial assets.
32.1.2 Collection stations, specifying tanks (number and
capacity) and other equipment.
32.1.3 Various warehouses and other facilities.
Note: External oil pipe lines and wells aren't insured under
fire policy, because in this case ECOPETROL assumes the risk
directly.
32.3 Assets value, mentioning only the value of the part owned
by ECOPETROL and showing corresponding percentage of total value.
32.3 Geographical location.
32.4 Reception date, from which risk passes to Joint Operation.
CLAUSE 33 - FORCE MAJEURE OR FORTUITOUS EVENTS.
Clause 34 of the Contract only suspends the fulfillment of
specific obligations, whose execution becomes impossible due to
facts constituting force majeure or fortuitous events. Equally,
it only interrupts obligations on goods, properties, production
facilities, etc. that be affected by said circumstance. The
Operator must notify termination of force majeure, detailing the
magnitude of damages and corrective actions that affect the
system.
CLAUSE 34 - REVIEW OF OPERATION AGREEMENT
This Operation Agreement can be reviewed when the Parties
consider it convenient by request of any of them; the Executive
Committee is fully authorized to review and modify it. This
Operation Agreement will be in effect up to the occurrence of
any one of the following events:
34.1 Contract Termination.
34.2 Written agreement between the Parties.
34.3 Signature of a new Agreement
In witness whereof the Parties sign this Operation Agreement, on
ECOPETROL contracting paper, on the third (3rd) day of December
of nineteen ninety (1990).
EMPRESSA COLOMBIANA DE PETROLEOS TOTAL EXPLORATIE EN PRODUKTIE
ECOPETROL MAATSCHAPPIJ B.V.
ANDRES RESTREPO LONDONO JORGE LARA URBANEJA
(SIGNED) (SIGNED)
President Legal Representative.
WITNESSES: (Three Illegible signatures).
Annex: (Signed Illegible).
<F1> Translator's Note: The terms "Contract" or "Agreement" have
been used for "Contrato" or "Acuerdo" respectively.
PURCHASE AND SALE AGREEMENT
dated
June 1, 1994
BP EXPLORATION COMPANY (COLOMBIA) LTD.
and
TOTAL EXPLORATIE EN PRODUKTIE MIJ B.V.
as
Sellers
and
TRITON COLOMBIA, INC.
as
Buyer
Association Contract for Sector Rio Chitamena, Republic of Colombia
TABLE OF CONTENTS
ARTICLE I: PURCHASE AND SALE Page
Section 1.01: Purchase and Sale ........................ 1
Section 1.02: Interests .............................. 1
Section 1.03: Effective Time ........................... 2
ARTICLE II: PURCHASE PRICE
Section 2.01: Purchase Price .......................... 2
ARTICLE III: REPRESENTATIONS
Section 3.01: Representations of Sellers .............. 2
Section 3.02: Representations of Buyer ................ 3
ARTICLE IV: COVENANTS AND AGREEMENTS
Section 4.01: Covenants and Agreements of Sellers .... 4
Section 4.02: Covenants and Agreements of Buyer ...... 5
ARTICLE V: TITLE MATTERS
Section 5.01:Title.................................... 6
Section 5.02: Casualty Loss .......................... 6
Section 5.03:Preferential Rights and Consents ...... 7
ARTICLE VI: CONDITIONS TO CLOSING
Section 6.01: Sellers' Conditions ...................... 7
Section 6.02: Buyer's Conditions ...................... 7
ARTICLE VII: CLOSING
Section 7.01:Date of Closing ........................... 8
Section 7.02: Closing Obligations ..................... 8
- i -
ARTICLE VIII: OBLIGATIONS AFTER CLOSING Page
Section 8.01: Files and Records ........................ 8
Section 8.02: Stamp Taxes .............................. 8
Section 8.03: Further Assurances ....................... 9
Section 8.04: Indemnification .......................... 9
Section 8.05: Reimbursement of Certain Pre-Closing Expenses ... 9
Section 8.06: Ecopetrol Reimbursement ......................... 10
Section 8.07: Other Credits and Adjustments .................. 10
Section 8.08: Survival and Limitation of Liability .......... 10
ARTICLE IX: TERMINATION OF AGREEMENT
Section 9.01: Termination ...................................... 11
ARTICLE X: MISCELLANEOUS
Section 10.01: Exhibits ......................................... 11
Section 10.02: Expenses ......................................... 11
Section 10.03: Notices ........................................ 11
Section 10.04: Announcements .................................. 12
Section 10.05: Amendments ...................................... 12
Section 10.06: Headings ....................................... 13
Section 10.07: Counterparts ................................... 13
Section 10.08: References ...................................... 13
Section 10.09: Governing Law and Arbitration .................. 13
Section 10.10: Entire Agreement ............................... 13
Section 10.11: Parties in Interest ............................ 13
EXHIBITS
Exhibit Description Referenced In
A Description of Lands covered by the Association Contract 1.02(a)
B Title Percentages 5.01(a)
C Assignment 7.02(a)
- ii -
DEFINED TERMS
Term Defined In
Agreement ............................................... Preamble
Association Contract .................................... Section 1.02(a)
BP ...................................................... Preamble
Buyer ................................................... Preamble
Closing ................................................. Section 7.01
Closing Date ............................................ Section 7.01
Closing Payment ......................................... Section 2.01(a)
Conditional Payment ..................................... Section 2.01(b)
Confidentiality Agreement ............................... Section 4.02(b)
Ecopetrol ............................................... Section 1.02(a)
Ecopetrol Reimbursements ................................ Section 8.06
Effective Time .......................................... Section 1.03
Interests ............................................... Section 1.02
JOA ..................................................... Section 7.02(b)
Permitted Encumbrances .................................. Section 5.01(b)
Purchase Price .......................................... Section 2.01
Sellers ................................................. Preamble
Subject Expenses ........................................ Section 8.05
TOTAL ................................................... Preamble
Well .................................................... Section 1.02(d)
- iii -
PURCHASE AND SALE AGREEMENT
This Purchase and Sale Agreement (this "Agreement") dated June
1, 1994, to be effective as of the Effective Time, is between BP
EXPLORATION COMPANY (COLOMBIA) LTD. ("BP"), a company
established under the Laws of England and TOTAL EXPLORATIE EN
PRODUKTIE MIJ B.V. ("TOTAL"), a company established under the
Laws of the Netherlands (collectively, "Sellers"), and TRITON
COLOMBIA, INC., a company incorporated under the laws of the
State of Delaware, U.S.A. ("Buyer").
In consideration of the mutual promises contained herein, the
benefits to be derived by each party hereunder and other good
and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Buyer and Sellers agree as follows:
ARTICLE I
PURCHASE AND SALE
1.01 Purchase and Sale. Sellers agree to sell and convey and
Buyer agrees to purchase and pay for the Interests (as defined
in Section 1.02 below), subject to the terms and conditions of
this Agreement.
1.02 Interests. All of Sellers' respective right, title and
interest in and to the following shall herein be called the
"Interests":
(a) As to BP: An undivided one percent (1%) interest in
that certain Association Contract for Sector Rio Chitamena dated
effective as of February 1, 1991, between Empresa Colombiana de
Petroleos ("Ecopetrol") and TOTAL covering the lands more
particularly described on Exhibit A attached hereto (the
"Association Contract");
(b) As to TOTAL: An undivided eleven percent (11%) interest
in the Association Contract;
(c) All the property and rights incident to such undivided
interests in the Association Contract, including, to the extent
existing and transferable (or hereinafter acquired by operation
of law or otherwise), all agreements, surface leases, well,
equipment leases, permits, rights-of-way, easements, licenses,
farmouts and farmins, options, orders and all other agreements
relating thereto;
(d) Such undivided interests in the well described as the Rio
Chitamena-1 Well located at E1,149,360 and N1,037,058,
Department of Casanare, Republic of Colombia (the "Well"),
together with all oil and natural gas production therefrom as
provided for in the Association Contract; and
(e) All of Sellers' interest in the personal property,
fixtures and improvements appurtenant to the interests,
property, rights and the Well described in (a), (b), (c) and (d)
above, or used or obtained in connection with the operation of
same or with the production, treatment, sale or disposal of
hydrocarbons or water produced therefrom or attributable thereto
as of the Effective Time.
1.03 Effective Time. The purchase and sale of the Interests
shall be effective as of March 29, 1994, at 7:00 A.M., local
time where the Interests are located ("Effective Time").
ARTICLE II
PURCHASE PRICE
2.01 Purchase Price. The purchase price (the "Purchase
Price") for the Interests shall be paid as follows:
(a) Nine Million Eight Hundred Thousand and No/100 US Dollars
(US$9,800,000.00), to be paid at Closing (the "Closing Payment")
as follows:
(1) Buyer to pay BP Eight Hundred Sixteen Thousand, Six
Hundred Sixty-Six and 67/100 US Dollars (US$816,666.67); and
(2) Buyer to pay TOTAL Eight Million Nine Hundred Eighty-Three Thousand,
Three Hundred Thirty-Three and 33/100 US Dollars (US$8,983,333.33);
and
(b) One Million One Hundred Thousand and No/100 US Dollars
(US$1,100,000.00) to be paid, upon fifteen (15) days prior
written demand with payment instructions from Sellers to Buyer
if and when cumulated production reaches twenty thousand
(20,000) barrels of oil production, provided that such payment,
if any, shall not be made before January 3, 1995 (the
"Conditional Payment"):
(1) Buyer to pay BP One Hundred Thousand and No/100 US
Dollars (US$100,000.00); and
(2) Buyer to pay TOTAL One Million and No/100 US Dollars
(US$1,000,000.00).
(c) Buyer shall withhold for tax purposes the appropriate
percentage of the Closing Payment and Conditional Payment as
required by the laws of the Republic of Colombia.
ARTICLE III
REPRESENTATIONS
3.01 Representations of Sellers. Each Seller represents to
Buyer as follows:
(a) It is a corporation duly organized, validly existing and
in good standing under the laws of its respective country of
establishment, and is duly qualified to carry on its business in
the Republic of Colombia;
(b) It has all requisite corporate authority to carry on its
business as presently conducted, to enter into this Agreement,
and to perform its obligations under this Agreement. The
consummation of the transactions contemplated by this Agreement
will not violate, or be in conflict with, any material provision
of its articles of incorporation or bylaws, or any material
provision of any agreement or instrument to which it is a party
or by which it is bound, noncompliance with which would have a
materially adverse effect upon Buyer or upon Buyer's ownership
or the operation of the Interests after the Closing Date (except
any provision in any agreement relating to any governmental
approvals contemplated herein), or upon any of the transactions
contemplated by this Agreement or, to its knowledge, any
judgment, decree, order, statute, rule or regulation applicable
to it;
(c) The execution, delivery and performance of this Agreement
and the transactions contemplated hereby have been duly and
validly authorized by all requisite corporate action on its part;
(d) This Agreement has been duly executed and delivered on its
behalf. This Agreement constitutes its legal, valid and binding
obligation, enforceable in accordance with its terms, subject,
however, to the effects of bankruptcy, insolvency,
reorganization, moratorium and other laws for the protection of
creditors, as well as to general principles of equity,
regardless of whether such enforceability is considered in a
proceeding in equity or a law;
(e) No suit, action or other proceeding has been filed or if
not filed, to the best of its knowledge, is pending before any
court, arbitration or governmental agency as of the date of this
Agreement that might result in substantial impairment or loss of
its title to any material part of the Interests or that might
materially hinder or impede the operation of the Association
Contract and the Well;
(f) It had all requisite corporate authority to enter into
each contract or agreement pertaining to the Interests at the
time it entered into such contract or agreement, and it is not
in default in the observance or performance of any material
obligation thereunder, which lack of authority or which default
would have a materially adverse effect upon Buyer's ownership of
the Interests; and
(g) It has complied with the provisions and requirements of
all laws, orders, regulations and rules issued or promulgated by
all governmental authorities having jurisdiction over the
Interests and has filed for and obtained issuance of all
necessary governmental certificates, consents, permits or
authorizations with regard thereto, noncompliance with which or
the failure to file for and obtain issuance of which would have
a materially adverse effect upon Buyer's ownership or the
operation of the Interests.
3.02 Representations of Buyer. Buyer represents to Sellers
as follows:
(a) Buyer is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware,
and Buyer is duly qualified to carry on its business in the
Republic of Colombia;
(b) Buyer has all requisite corporate power and authority to
carry on its business as presently conducted, to enter into this
Agreement, to purchase the Interests on the terms described in
this Agreement and to perform Buyer's other obligations under
this Agreement. The consummation of the transactions
contemplated by this Agreement will not violate, or be in
conflict with, any material provision of Buyer's articles of
incorporation or bylaws or any material provision of any
agreement or instrument to which it is a party or by which it is
bound, noncompliance with which would have a materially adverse
effect upon Sellers or upon Buyer's acquisition or ownership of
the Interests or upon any of the transactions contemplated by
this Agreement, or, to Buyer's knowledge, any judgment, decree,
order, statute, rule or regulation applicable to Buyer;
(c) The execution, delivery and performance of this Agreement
and the transactions contemplated hereby have been duly and
validly authorized by all requisite corporate action on Buyer's
part; and
(d) This Agreement has been duly executed and delivered on
Buyer's behalf. This Agreement constitutes Buyer's legal, valid
and binding obligation, enforceable in accordance with its
terms, subject, however, to the effects of bankruptcy,
insolvency, reorganization, moratorium and similar laws, as well
as to general principles of equity, regardless of whether such
enforceability is considered in a proceeding in equity or at law.
ARTICLE IV
COVENANTS AND AGREEMENTS
4.01 Covenants and Agreements of Sellers. Sellers covenant
and agree with Buyer as follows:
(a) Pursuant to the Confidentiality Agreement, Sellers have
and will make available to Buyer for examination title,
production and other information relating to the Interests,
including the following, insofar as the same are in Sellers'
possession and will cooperate with Buyer in Buyer's efforts to
obtain, at Buyer's expense, such additional information relating
to the Interests as Buyer may reasonably desire:
(1) Title documents and reports, if any, pertaining to the
Interests;
(2) Copies of the Association Contract and the instruments
relating to the Interests (including, without
limitation, the applicable Commerciality
Declaration), prior conveyances of the Interests, operating
agreements, and other instruments affecting the
Interests;
(3) Records relating to the payments made and other
payments due under the Association Contract;
(4) Records relating to the payment of property,
production, severance, excise, war and similar taxes
and assessments based on or measured by the
ownership of the Interests or the production of hydrocarbons
or the receipt of proceeds therefrom;
(5) Accounting and other records relating to the payment of
expenses and receipt of revenues attributable to the
Interests;
(6) Ownership maps and surveys relating to the Interests;
(7) Copies of all purchase, sale, processing and
transportation agreements and governmental filings
and reports made in relation thereto relating to the
Interests or production therefrom;
(8) Copies of all agreements, leases, permits, easements,
licenses and orders relating to the Interests;
(9) Production records relating to the Interests and all
production-related filings with governmental
agencies; and
(10) Engineering, technical, geological and geophysical data
relating to the Interests.
Sellers shall either provide copies of such information and
records or permit Buyer to inspect such information and records
at any reasonable time during the term of this Agreement at
Sellers' offices in Bogota, Colombia. Buyer shall also be
provided access to such additional information relating to the
Interests as Buyer may desire to inspect and which is maintained
in Sellers' other offices;
(b) Each Seller shall use all reasonable efforts to maintain
its corporate status from the date hereof until Closing and to
assure that as of the Closing Date it will not be under any
material corporate, legal or contractual restriction that would
prohibit or delay the timely consummation of such transactions;
(c) Sellers shall promptly notify Buyer if, between the date
hereof and the Closing Date, Sellers receive actual notice of
any claim, suit, action or other proceeding of the type referred
to in Section 3.01(e); and
(d) Each Seller makes no representations or warranties
whatsoever to Buyer as to the amount of oil and natural gas
reserves attributable to the Interests or any geological,
geophysical, engineering, economic or other interpretation,
forecast or evolution in connection with the Association
Contract.
4.02 Covenants and Agreements of Buyer. Buyer covenants and
agrees with Sellers that:
(a) Buyer shall use all reasonable efforts to maintain its
corporate status and to assure that as of the Closing Date it
will not be under any material corporate, legal or contractual
restriction that would prohibit or delay the timely consummation
of such transactions; and
(b) Buyer shall comply in all respects with the
confidentiality agreement between Buyer and Sellers, dated
January 21, 1994 (the "Confidentiality Agreement"), the terms
and provisions of which are incorporated herein by reference.
ARTICLE V
TITLE MATTERS
5.01 Title.
(a) Except for and subject to the Permitted Encumbrances,
title to the Interests:
(1) entitles Sellers to receive as to production from the
Association Contract, not less than the "Net Revenue
Interest" set forth in Exhibit B in the oil, gas and
associated liquid and gaseous hydrocarbons produced,
saved and marketed from the lands covered by the
Association Contract;
(2) obligates Sellers to bear costs and expenses relating
to the exploration, maintenance, development and
operation of the Association Contract in an amount
not greater than the "Gross Working Interest" set
forth in Exhibit B with respect to the Interests; and
(3) is free and clear of material encumbrances, liens and
defects.
(b) The term "Permitted Encumbrances," as used herein, shall
mean:
(1) Royalty in favor of the Republic of Colombia;
(2) All rights to consent by, required notices to, filings
with, or other actions by governmental entities in
connection with the sale or conveyance of the Association
Contract; and
(3) The terms and conditions of all routine agreements,
orders, instruments, documents and other matters
relating to the Interests, provided that the operating
agreement between BP and TOTAL covering the Association
Contract shall be terminated at Closing.
5.02 Casualty Loss. If, between the Effective Time and
Closing, all or any portion of the Interests is destroyed by
fire or other casualty, Buyer shall purchase such Interest
notwithstanding any such destruction, and the Purchase Price
shall not be adjusted. Sellers shall, at Closing, pay to Buyer
all sums paid to Sellers by third parties by reason of the
destruction of such Interests to be assigned to Buyer, and shall
assign, transfer and set over unto Buyer all of the right, title
and interest of Sellers in and to any unpaid awards or other
payments from third parties arising out of the destruction to
such Interests to be conveyed to Buyer, but in no event shall
the total amount paid or payable to Buyer thereunder exceed the
Purchase Price. Sellers shall not voluntarily compromise,
settle or adjust any material amounts payable by reason of any
material destruction, as to the Interests to be conveyed by
Buyer without first obtaining the written consent of Buyer.
5.03 Preferential Rights and Consents. The Interests are not
subject to preferential rights to purchase in favor of third
parties or third party consents to assignment and notices of
sale except the approvals required by Ecopetrol and the Ministry
of Mines and Energy of the Republic of Colombia. A request for
approval of the transfer of the Interests to Buyer shall be
submitted by the parties to Ecopetrol prior to Closing.
ARTICLE VI
CONDITIONS TO CLOSING
6.01 Sellers' Conditions. The obligations of Sellers at
Closing are subject to the satisfaction at or prior to Closing
of the condition that all representations of Buyer contained in
this Agreement shall be true in all material respects and deemed
to be repeated at and as of Closing as if such representations
were made at and as of Closing, and Buyer shall have performed
and satisfied all material agreements in all material respects
required by this Agreement to be performed and satisfied by
Buyer at or prior to Closing.
6.02 Buyer's Conditions. The obligations of Buyer at Closing
are subject to the satisfaction at or prior to such Closing of
the following conditions:
(a) All representations of Sellers contained in this Agreement
shall be true in all material respects and deemed to be repeated
at and as of closing as if such representations were made at and
as of Closing, and Sellers shall have performed and satisfied
all material agreements in all material respects required by
this Agreement to be performed and satisfied by Sellers at or
prior to Closing;
(b) No order shall have been entered by any court or
governmental agency having jurisdiction over the parties or the
subject matter of this contract that restrains or prohibits the
purchase and sale contemplated by this Agreement and which
remains in effect at the time of Closing; and
(c) Buyer has completed its due diligence process finding no
material defects in Sellers' title, in the reserve calculations
for the Interests, in the condition of the personal property,
the Well and fixtures located on the Association Contract area
or in the status of the operations conducted pursuant to the
Association Contract.
ARTICLE VII
CLOSING
7.01 Date of Closing. Unless the parties hereto mutually
agree otherwise in writing, and subject to the conditions stated
in this Agreement, the consummation of the transactions
contemplated hereby (herein called the "Closing") shall be held
on or before June 8, 1994; provided, however that the date of
Closing may be extended up to thirty (30) days by the parties
if the conditions set forth in Sections 6.01 or 6.02 above have
not been satisfied. The date the Closing actually occurs is
herein called the "Closing Date."
7.02 Closing Obligations. At Closing the following events
shall occur, each being a condition precedent to the others and
each being deemed to have occurred simultaneously with the
others:
(a) Sellers shall execute, acknowledge and deliver to Buyer an
Assignment (in sufficient counterparts to facilitate recording)
in form and substance as set forth in Exhibit C hereto conveying
to Buyer the Interests, which Assignment Buyer shall execute at
Closing. Within five (5) days following Closing, Sellers and
Buyer shall submit the Assignment to Ecopetrol for its execution
and approval;
(b) Sellers and Buyer shall execute an amendment or revised
joint operating agreement to that certain Joint Operating
Agreement for the Santiago De Las Atalayas-1 and the Tauramena
Association Contract Areas dated July 7, 1993, by and between
the parties (the "JOA"), which shall amend and supplement the
JOA to add the Association Contract and extend all rights and
obligations of the parties under the JOA to the Association
Contract;
(c) Buyer shall deliver Sellers' respective shares of the
Closing Payment by check in Colombian pesos at the market's
representative exchange rate effective on the date of Closing;
and
(d) Sellers shall deliver to Buyer exclusive possession of
the Interests, subject only to the approval of Ecopetrol and the
Ministry of Mines and Energy of the Republic of Colombia.
ARTICLE VIII
OBLIGATIONS AFTER CLOSING
8.01 Files and Records. After Closing, Sellers shall deliver
to Buyer from time to time at Buyer's expense originals or
copies of all files and records described in Section 4.01(a)
relating to the Interests conveyed as Buyer may reasonably
request, including land, geological, environmental, production,
engineering and accounting files and records.
8.02 Stamp Taxes. Parties shall pay in equal shares all
stamp taxes occasioned by the sale of the Interests and all
other documentary, filing and recording fees required in
connection with the filing and recording of the assignment.
8.03 Further Assurances. After Closing, Sellers and Buyer
shall execute, acknowledge and deliver or cause to be executed,
acknowledged and delivered such instruments, and shall take such
other action as may be necessary or advisable to carry out their
obligations under this Agreement and under any document,
certificate or other instrument delivered pursuant hereto.
8.04 Indemnification. From and after the Closing Date, Buyer
and Sellers shall indemnify each other as follows:
(a) Sellers shall defend, indemnify and save and hold harmless
Buyer, its officers, directors, employees and agents, against
all losses, damages, claims, demands, suits, costs, expenses,
liabilities and sanctions of every kind and character, including
without limitation reasonable attorneys' fees, court costs and
costs of investigation, which arise from or in connection with
all claims, costs, expenses, liabilities and obligations
accruing or relating to the owning, developing, exploring,
operating and maintaining of the Interests conveyed to Buyer and
relating to periods prior to the Effective Time, including
without limitation all obligations arising under operating
agreements and the other agreements covering or relating to the
Interests; and
(b) Buyer shall defend, indemnify and save and hold harmless
Sellers against all losses, damages, claims, demands, suits,
costs, expenses, liabilities and sanctions of every kind and
character, including without limitation reasonable attorneys'
fees, court costs and costs of investigation, which arise from
or in connection with all claims, costs, expenses, liabilities
and obligations accruing or relating to the owning, developing,
exploring, operating and maintaining of the Interests conveyed
to Buyer and relating to periods from and after the Effective
Time, including without limitation all obligations arising under
operating agreements, product sales agreements and the other
agreements covering or relating to the Interests in accordance
with the terms of the JOA as amended under Section 7.03(b).
8.05 Reimbursement of Certain Pre-Closing Expenses. Buyer
will reimburse to Sellers at Closing the amount of cash calls
and expenses (the "Subject Expenses") incurred and actually paid
after the Effective Time and up to the Closing by Sellers with
respect to the Interests pursuant to the Work Program and Budget
(as defined in the JOA) for the Association Contract. Sellers
shall provide to Buyer no later than five (5) days prior to
Closing satisfactory evidence of the Subject Expenses. Buyer
shall reimburse such expenses by check in Colombian pesos at
Closing. Thirty (30) days after the Closing Date, BP on behalf
of Sellers shall prepare and deliver to Buyer, in accordance
with this Agreement, a final settlement statement setting forth
each adjustment, if any, or payment, if any, relating to the
Subject Expenses that was not finally determined as of the
Closing Date, showing the calculation of such adjustments and
containing written evidence of same. The parties shall
undertake to agree with respect to the amounts due pursuant to
such statement no later than fifteen (15) days after Buyer's
receipt thereof. Upon agreement of the parties to the final
settlement statement for the Subject Expenses, in the event the
payment by Buyer to Sellers on the Closing Date for the Subject
Expenses exceeds the amount on such statement, then Sellers
shall pay the amount of such difference to Buyer; in the event
the payment by Buyer to Sellers on the Closing Date for the
Subject Expenses is less than the amount on such statement, then
Buyer shall pay the amount of such difference to Sellers. The
payment owed by Sellers or Buyer pursuant to the final
settlement statement, as the case may be, shall be made by check
in Colombian pesos to the appropriate party or parties.
8.06 Ecopetrol Reimbursement. Buyer agrees that Sellers
shall be entitled to all reimbursements or any other credits due
from Ecopetrol to the "Associate" (as defined in the Association
Contract) in connection with Clause 9.2 of the Association
Contract (the "Ecopetrol Reimbursements"), as made from time to
time, with respect to the Interests, insofar and only insofar as
such reimbursements relate to work and services performed or
costs and expenses incurred by Sellers prior to the Effective
Time. Sellers agree that Buyer shall be entitled to all
Ecopetrol Reimbursements with respect to the Interests that
relate to work and services performed or costs and expenses
incurred by Buyer on or after the Effective Time, including
without limitation the Subject Expenses. Any such
reimbursements or other credits due from Ecopetrol to the
parties as provided in this Section 8.06 shall accrue to the
benefit of each party in proportion to the expenses previously
borne by that party relative to the reimbursement or credit in
question.
8.07 Other Credits and Adjustments. Any credits and adjustments
to expenditures arising from or related to the Interests
incurred by Sellers prior to the Effective Time shall be solely
for the accounts of Sellers, including without limitation any
credits or adjustments made with regard to the use of the H&P
136 drilling rig for the drilling of the Well.
8.08 Survival and Limitation of Liability.
(a) The respective representations, covenants and indemnities
of Sellers and Buyer shall not survive the Closing, except that
the respective covenants and indemnities of the parties that by
their terms require performance subsequent to the Closing shall
survive the Closing for such period of time as is necessary to
fulfill such obligations, subject to any express limitations
stated therein as to duration;
(b) If Closing occurs, all conditions of Closing shall be
deemed to have been satisfied or waived, and after Closing, no
party shall have any liability whatsoever to the others arising
out of, resulting from or attributable to any such conditions of
Closing, regardless of whether such conditions of Closing were,
in fact, satisfied or waived;
(c) No party shall have any liability after Closing whatsoever
to the other parties arising out of or related to Sellers'
original acquisition of the Association Contract;
(d) No party shall be able to claim that any fact or matter
constitutes a breach of the representations to the other parties
to the extent that such fact or matter is referred to herein or
in the Association Contract or is known to such other party
prior to its execution of this Agreement or has been disclosed
in writing by Sellers prior to Closing.
(e) No claim for breach of any representation or warranty by
Buyer or Sellers in or pursuant to this Agreement shall be made
more than twelve (12) months after Closing unless, prior to
expiry of such twelve (12) month period, written notice of the
matter complained of (giving such details of such matter as
shall then be reasonably practicable) shall have been given by
or on behalf of Buyer to Sellers or, as the case may be, by or
on behalf of Sellers to Buyer. The maximum aggregate amount
recoverable by Sellers, collectively, and Buyer, individually,
for breach of any representation or warranty shall be the
Purchase Price plus interest accrued as of the date such
recovery is realized at the LIBOR Eurodollar rate plus three
percent (3%) per annum from the Effective Time calculated at the
rate quoted by the Financial Times, London, on March 29, 1994.
(f) The rights, duties, obligations, and liabilities of the
Sellers hereunder shall be several, and not jointly or
collectively, in proportion to their share shown below of the
Purchase Price:
BP 8.33% (one twelfth)
TOTAL 91.67% (eleven twelfths)
100.00%
ARTICLE IX
TERMINATION OF AGREEMENT
9.01 Termination. This Agreement and the transactions
contemplated hereby may be terminated in the following instances:
(a) By Sellers if any of the conditions set forth in Section
6.01 are not satisfied in all material respects or waived as of
the Closing Date;
(b) By Buyer if any of the conditions set forth in Section
6.02 are not satisfied in all material respects or waived as of
the Closing Date;
(c) At any time by the mutual written agreement of Buyer and
Sellers; and
(d) By failure of Ecopetrol or the Ministry of Mines and
Energy of the Republic of Colombia to approve this transaction,
if said event should occur after the Closing, then the Sellers
shall return to Buyer the Closing Payment with interest at the
LIBOR Eurodollar rate (as quoted from time to time by the
Financial Times, London) plus three percent (3%) per annum in
immediately available funds within five (5) days of such event
to Buyer's account (which Buyer shall provide to Sellers),
whereupon this Agreement shall terminate and Buyer shall have no
obligation to make the Conditional Payment.
ARTICLE X
MISCELLANEOUS
10.01 Exhibits. The Exhibits referred to in this Agreement
are hereby incorporated in this Agreement by reference and
constitute a part of this Agreement.
10.02 Expenses. Except as otherwise specifically provided,
all fees, costs and expenses incurred by Buyer or Sellers in
negotiating this Agreement or in consummating the transactions
contemplated by this Agreement shall be paid by the party
incurring same, including, without limitation, legal and
accounting fees, costs and expenses.
10.03 Notices. All notices and communications required or
permitted under this Agreement shall be in writing and any
communication or delivery hereunder shall be deemed to have been
duly made when personally delivered to the individual indicated
below, or if mailed, when received by the party charged with
such notice, or if sent by facsimile, when receipt is
acknowledged if requested or the working day at the place of
receipt next following the date of transmission, whichever is
earlier; and addressed as follows:
If to Sellers:
BP EXPLORATION COMPANY (COLOMBIA) LTD.
Edificio Seguros del Comercio
Carrera 9A No. 99-02, Piso 4
Apartado Aereo 59824
Santafe de Bogota, D.C. - Colombia
Telecopy: 571-611-1127 or 571-618-2847
Attention: Richard C. Campbell, President
and
TOTAL EXPLORATIE EN PRODUKTIE MIJ B.V.
Calle 72 No. 10-03, Piso 8
Apartado Aereo 251375
Santafe de Bogota, D.C. - Colombia
Telecopy: 571-235-8453
Attention: Jacques de Boisseson, General Manager
If to Buyer:
TRITON COLOMBIA, INC.
Carrera 9A No. 99-02, Oficina 407
Apartado Aereo 30277
Santafe de Bogota, D.C. - Colombia
Telecopy: 571-618-2553
Attention: Ivan Fajardo, General Manager
Any party may, by written notice so delivered to the other
parties, change the address or individual to which delivery
shall thereafter be made.
10.04 Announcements. Neither Buyer nor Sellers shall make
any announcement or disclosure with regard to the terms of this
Agreement unless prior thereto it furnishes the other parties
with a copy of such announcement in full and obtains the prior
written consent of the other parties as to such announcement or
disclosure (such consent not to be unreasonably withheld or
delayed) except to the extent required by law or the
requirements of any recognized stock exchange in compliance with
its rules and regulations.
10.05 Amendments. This Agreement may not be amended nor any
rights hereunder waived except by an instrument in writing
signed by the party to be charged with such amendment or waiver
and delivered by such party to the party claiming the benefit of
such amendment or waiver.
10.06 Headings. The headings of the articles and sections of
this Agreement are for guidance and convenience of reference
only and shall not limit or otherwise affect any of the terms or
provisions of this Agreement.
10.07 Counterparts. This Agreement may be executed by Buyer
and Sellers in any number of counterparts, each of which shall
be deemed an original instrument, but all of which together
shall constitute but one and the same instrument.
10.08 References. References made in this Agreement,
including use of a pronoun, shall be deemed to include where
applicable, masculine, feminine, singular or plural,
individuals, partnerships or corporations. As used in this
Agreement, "person" shall mean any natural person, corporation,
partnership, trust, estate or other entity.
10.09 Governing Law and Arbitration. This Agreement and the
transactions contemplated hereby shall be construed in
accordance with, and governed by, the laws of the State of New
York, U.S.A. Any dispute which may arise between the parties
under or in relation to this Agreement shall be referred to
arbitration in accordance with the rules then obtaining in the
International Chamber of Commerce before a board of three (3)
arbitrators appointed in accordance with the said rules. The
arbitration proceedings shall take place in the city of
Brussels, Belgium, and conducted in the English language. The
arbitration decision shall be final and binding upon the parties
and shall not be subject to further judgment or arbitration.
The costs of the arbitration, including attorney's fees and
costs, shall be determined by the arbitrators.
10.10 Entire Agreement. This Agreement (including the
Exhibits hereto) constitutes the entire understanding between
the parties with respect to the subject matter hereof,
superseding all negotiations, prior discussions and prior
agreements and understandings relating to such subject matter;
provided, however, that the terms and conditions of the
Confidentiality Agreement shall remain in full force and effect
in accordance with its terms.
10.11 Parties in Interest. This Agreement shall be binding
upon, and shall inure to the benefit of, the parties hereto and
their respective successors and assigns. Nothing contained in
this Agreement, express or implied, is intended to confer upon
any other person or entity any benefits, rights or remedies.
EXECUTED as of the date first above mentioned.
SELLERS:
BP EXPLORATION COMPANY (COLOMBIA) LTD.
By: /s/ Richard C. Campbell
Richard C. Campbell
President
TOTAL EXPLORATIE EN PRODUKTIE MIJ B.V.
By: /s/ Jean-Claude Breton
Jean-Claude Breton
Managing Director
BUYER:
TRITON COLOMBIA, INC.
By: /s/ Thomas G. Finck
Thomas G. Finck
President
EXHIBIT A
Description of the Lands covered by the Association Contract
for Sector Rio Chitamena dated effective as of February 1, 1991,
between Ecopetrol and TOTAL
The area contracted known as "RIO CHITAMENA" comprises an
extension of four thousand six hundred eighty one (4.681)
hectares and two thousand three hundred ten (2.310) square
meters; it is located within the jurisdiction of the
Municipality of Tauramena in the Department of Casanare.
This area is described as follows: the point of reference is
Geodesic Point MENA-910 as described by the "Agustin Codazzi"
Geographic Institute; the Gauss plain coordinates of same taken
with an origin in Bogota are: N-1.041.738,38 Mts. and
E-1.150.006,64 Mts. which correspond to geographical coordinates
Latitude 4deg.58'30.350" North of the Equator and Longitude
72deg.43'42.600" West of Greenwich. From this geodesic vertex, a
distance of 3.977,88 Mts. is measured in a straight line heading
S-5deg.40'30.281"-E, until reaching point "A", located on the right
margin downstream of the Chitamena river, which point becomes
the starting point for the boundaries of the surface land of
concern: such point "A" coordinates are N-1.037.780,00 Mts. &
E-1.150.400,00 Mts. From this point "A", the line continues
downstream the right margin of the Chitamena river, until
reaching point "B", which is located on such margin, and the
coordinates of which are : N-1.035.000,00 Mts. and
E-1.158.900,00 Mts. The straight line joining point "A" to
point "B" is directed S-71deg.53'21.158"-E to a distance of
8.943,06 Mts. Throughout its full extension, line "A-B" is
adjacent to line "A-G" of Triton's "Tauramena" Association
Contract. From point "B", the line continues heading
S-6deg.23'12.122"-W to a distance of 4.081,33 Mts. until reaching
point "C" the coordinates of which are: N-1.030.944,00 Mts. and
E-1.156.446,00 Mts. From this point "C", the line continues
heading N-63deg.03'00.879"-W to a distance of 7.859,51 Mts. until
reaching point "D" the coordinates of which are: N-1.034.056,00
Mts. and E-1.151.44,00 Mts. From this point "D" the line
continues heading N-63deg.03'06.822"-W to a distance of 7.224,45
Mts. until reaching point "E" the coordinates of which are:
N-1.037.780,00 Mts. and E-1.145.000,00 Mts. Throughout its full
extension, line "D-E" is adjacent to line "B-A" of Lasmo's
"Upia" Block A1 Association Contract. From point "E" the line
continues heading N-69deg.02'06.976" -W to a distance of 5.086,74
Mts. until reaching point "F" the coordinates of which are:
N-1.039.600,00 Mts. and E-1.140.250,00 Mts. From this point "F"
the line continues heading N-24deg.15'48.927"-E to a distance of
2.236,00 Mts. until reaching point "G", located on the
downstream right margin of the Chitamena river, the coordinates
of which are: N-1.041.638.48 Mts. and E-1.141.168.85 Mts. Lines
"E-F" and "F-G" are adjacent in throughout their full extension
to line "C-B" and to the southern end of line "B-A" of Maxus's
"Recetor" (sic) Association Contract. From point "G" the line
continues downstream on the right margin of the Chitamena river
until reaching point "H", located on such margin, and the
coordinates of which are: N-1.038.750,00 Mts. and
E-1.145.110,00 Mts. The straight line joining point "G" with
point "H" is oriented S-53deg.45'43.940"-E to a distance of
4.886,31 Mts. In the southeast, line "G-H" is adjacent in a
straight line extension of 4.678,31 Mts. with line "C-B" of
Triton's "Tauramena" Association Contract. From point "H" the
line goes downstream the right margin of the Chitamena river
until reaching point "A", which is the starting point for the
surface land boundary and the closing point for the polygon.
The straight line joining point "H" with point "A" heads
S-79deg.36'33.825"-E to a distance of 5.378,20 Mts. Throughout its
full extension, line "H-A" is adjacent to line "B-A" of Triton's
"Tauramena" Association Contract. The extension of the area
located inside the polygon described above, is 4.681 hectares
and 2.310 square meters and is located within the jurisdiction
of the Municipality of Tauramena in the Department of Casanare.
EXHIBIT B
Title Percentages
GROSS WORKING INTEREST
BP: 1.00%
TOTAL: 11.00%
NET REVENUE INTEREST
BP: 0.80%
TOTAL: 8.80%
EXHIBIT C
Spanish version of the proposed Assignment.
INTEGRAL PLAN
FOR THE
UNIFIED EXPLOITATION
OF THE
CUSIANA OIL STRUCTURE
IN THE
SDLA, TAURAMENA AND
RIO CHITAMENA
ASSOCIATION CONTRACT AREAS
____________________________________
DEPARTMENT OF CASANARE
REPUBLIC OF COLOMBIA
____________________________________
BY AND AMONG
EMPRESA COLOMBIANA DE PETROLEOS
BP EXPLORATION COMPANY (COLOMBIA) LIMITED
TOTAL EXPLORATIE EN PRODUKTIE MIJ B.V.
AND TRITON COLOMBIA, INC.
DATED JULY 15, 1994
_______________________________________
TABLE OF CONTENTS
Page
RECITALS 1
ARTICLE 1: DEFINITIONS AND INTERPRETATION 2
ARTICLE 2: EFFECTIVE DATE AND TERM 4
ARTICLE 3: NATURE AND PURPOSE OF AGREEMENT 4
ARTICLE 4: ENLARGEMENT OF UNIFIED AREA 4
ARTICLE 5: DEVELOPMENT AND PRODUCTION OF 5
PETROLEUM
ARTICLE 6: INTERESTS IN OPERATIONS AND PETROLEUM 5
DURING THE INITIAL PERIOD
ARTICLE 7: INTERESTS IN OPERATIONS AND PETROLEUM 6
FOLLOWING THE INITIAL PERIOD
ARTICLE 8: CONDUCT OF OPERATIONS IN THE UNIFIED AREA 8
ARTICLE 9: RELATIONSHIP OF THE PARTIES 8
ARTICLE 10: SETTLEMENT OF DISPUTES 9
ARTICLE 11: NOTICES 9
ARTICLE 12: GOVERNING LAW 10
ARTICLE 13: GENERAL 10
SIGNATURES 10
ANNEX A CALCULATION OF UNIFIED AREA INTERESTS
FOLLOWING THE INITIAL PERIOD
THIS AGREEMENT made as of the 15th day of July, 1994, by and
among:
EMPRESA COLOMBIANA DE PETROLEOS - ECOPETROL, hereafter
ECOPETROL, an industrial and commercial company of the State,
authorized by Law 165 of 1948, presently governed by Decree No.
062 of 1970, represented by its President, JUAN MARIA RENDON
GUTIERREZ, of majority age, a resident of Santafe de Bogota,
identified by cedula No. 17,125,100 issued in Santafe de Bogota
D.C.; and BP EXPLORATION COMPANY (COLOMBIA) LIMITED, hereafter
BP, a corporation formed in accordance with the laws of England,
with a branch properly established in Colombia through Public
Deed No. 3775 of October 30, 1959, granted by the First Notary
of Santafe de Bogota, represented by RICHARD C. CAMPBELL, of
majority age, a resident of Santafe de Bogota, identified by
cedula de extranjerea No. 248,326 issued in Santafe de Bogota,
who acts as its Legal Representative; and TOTAL EXPLORATIE EN
PRODUKTIE MAATSCHAPPIJ B.V., hereafter TOTAL, a corporation
formed in accordance with the laws of the Netherlands, with a
branch properly established in Colombia through Public Deed No.
600 of March 11, 1987, granted by the Eleventh Notary of Santafe
de Bogota, represented by ASHLEY S. DODD, of majority age, a
resident of Santafe de Bogota, identified by cedula de
extranjeria No. 256,098 issued in Santafe de Bogota, who acts as
its Legal Representative; and TRITON COLOMBIA, INC., hereafter
TRITON, a corporation formed in accordance with the laws of the
State of Delaware, the United States of America, with a branch
properly established in Colombia through Public Deed No. 2979 of
July 8, 1982, granted by the Sixth Notary of Santafe de Bogota,
represented by IVAN FAJARDO, of majority age, a resident of
Santafe de Bogota, identified by cedula de extranjeria No.
167,669 issued in Santafe de Bogota, who acts as its Legal
Representative.
WITNESSETH:
WHEREAS, BP, TOTAL and TRITON own undivided interests as
Associate in that certain Association Contract for permit
Santiago de las Atalayas-1 effective as of July 1, 1982 (the
"SDLA Association Contract"); and
WHEREAS, BP, TOTAL and TRITON own undivided interests as
Associate in that certain Association Contract for sector
Tauramena effective as of July 4, 1988 (the "Tauramena
Association Contract"); and
WHEREAS, BP, TOTAL and TRITON own undivided interest as
Associate in that certain Association Contract for sector Rio
Chitamena effective February 1, 1991 (the "Rio Chitamena
Association Contract"); and
WHEREAS, on June 29, 1993, ECOPETROL approved a Declaration of
Commerciality submitted by the Associate for that part of the
Cusiana Oil Structure underlying the areas covered by the SDLA
and Tauramena Association Contracts; and
WHEREAS, on October 7, 1993, ECOPETROL approved a Declaration
of Commerciality submitted by the Associate for that part of the
Cusiana Oil Structure underlying the area covered by the Rio
Chitamena Association Contract; and
WHEREAS, the Ministry of Mines and Energy, by its Resolution
Number 7-010 of January 19, 1994, which modified its earlier
Resolution Number 7-172 of July 22, 1993, (collectively the
"Resolution"), has required BP, as Operator of the SDLA,
Tauramena and Rio Chitamena Association Contracts, to submit by
July 22, 1994, with the approval of all Parties, an "Integral
Plan for the Unified Exploitation of the Cusiana Oil Structure"
which shall include the areas covered by the SDLA, Tauramena and
Rio Chitamena Association Contracts; and
WHEREAS, the Parties own the following undivided interests in
the SDLA, Tauramena and Rio Chitamena Association Contracts:
ECOPETROL 50%
BP 19%
TOTAL 19%
TRITON 12%; and
WHEREAS, the Parties wish to conserve natural resources,
preserve the environment, prevent waste, maximize economic
recovery and develop the hydrocarbon reservoirs underlying the
Unified Area (as defined below) in a technically efficient and
cooperative manner in accordance with generally accepted
practices in the international Petroleum industry.
NOW, THEREFORE, for and in consideration of these premises, the
mutual convenants, representations, and obligations of the
Parties herein contained, and for other good and valuable
consideration, the Parties agree as follows:
ARTICLE 1 - DEFINITIONS AND INTERPRETATION
1.1 In addition to the terms defined in the recitals and
elsewhere in this Agreement, the terms set out below shall have
the following meanings:
"Agreement" shall mean Articles 1 through 13 inclusive and
Annex "A" of this Integral Plan for the Unified Exploitation of
the Cusiana Oil Structure in the SDLA, Tauramena and Rio
Chitamena Association Contract Areas, as the same may be amended
from time to time.
"Associate" or "Associates" shall mean TOTAL, TRITON and/or BP
as the case may be, or their successors or assignees, as the
context permits.
"Association Contract" or "Association Contracts" shall mean
the SDLA Association Contract, the Tauramena Association
Contract and/or the Rio Chitamena Association Contract, as the
context permits, including all amendments thereto, which are
defined in the recitals to this Agreement.
"Cusiana Technical Development Plan" shall mean that certain
Cusiana Technical Development Plan prepared by the Operator
dated July 15, 1994, and all attachments and enclosures thereto,
which has been approved by the Parties.
"Cusiana Oil Structure" shall mean those reservoirs containing
hydrocarbon accumulations which underlie and are common to the
Association Contracts, as more particularly described in the
Resolution, and such other hydrocarbon accumulations as may be
determined by the Parties and approved by the Ministry of Mines
and Energy.
"Final Period" shall mean the period of time from the
expiration of the second to expire Association Contract up to
the Termination Date of this Agreement.
"Initial Period" shall mean the period of time from the
Effective Date of this Agreement up to the SDLA Expiration Date.
"Ministry of Mines and Energy" shall mean the Ministry of Mines
and Energy for the Republic of Colombia.
"Operator" shall mean BP, or such other Party that may be
appointed from time to time under the Association Contracts or
Article 8.1 hereunder, which is authorized to conduct operations
in the Unified Area when acting in its capacity as Operator.
"Party" or "Parties" shall mean ECOPETROL, TOTAL, TRITON and/or
BP as the case may be, or their successors or assignees, as the
context permits.
"Petroleum" shall mean the natural mixture of hydrocarbons in
liquid or gaseous state as well as any other substances included
therein or derived therefrom, with the exception of helium and
rare gases. Petroleum shall include crude oil, natural gas and
condensate.
"Rio Chitamena Expiration Date" shall mean the date on which
the Rio Chitamena Association Contract expires and the interests
of the Associate thereunder revert to ECOPETROL.
"SDLA Expiration Date" shall mean the date on which the SDLA
Association Contract expires and the interests of the Associate
thereunder revert to ECOPETROL (July 1, 2010, as provided for in
the Resolution).
"Second Period" shall mean the period of time from the SDLA
Expiration Date up to the expiration date of the second to
expire Association Contract.
"Tauramena Expiration Date" shall mean the date on which the
Tauramena Association Contract expires and the interests of the
Associate thereunder revert to ECOPETROL (July 4, 2016, as
provided for in the Resolution).
"Unified Area" shall mean the lands subject to the SDLA,
Tauramena and Rio Chitamena Association Contracts which are
underlain by the Cusiana Oil Structure.
"Unified Area Interest" shall mean at any particular time and
in relation to a Party the undivided interest expressed as a
percentage which that Party has at that time in and to the whole
of the Unified Area and the Petroleum produced and saved from
the Cusiana Oil Structure as determined by this Agreement.
1.2 Except to the extent that the context or the express
provisions of this Agreement otherwise require:
a.) words importing the singular shall included the plural and
vice versa;
b.) headings are for convenience or reference only and shall
not affect the construction of this Agreement;
c.) all references to Articles shall be construed as references
to articles of this Agreement;
d.) all references to documents or other instruments shall
include all amendments and replacements thereof and all
supplements thereto;
e.) all references to persons shall include their successors,
transferees and assigns.
ARTICLE 2 - EFFECTIVE DATE AND TERM
2.1 This Agreement shall be effective upon the date of approval
by the Ministry of Mines and Energy (The "Effective Date"), and
shall remain in force for so long as the Associate owns an
interest in any part of the Unified Area. This Agreement will
terminate when the last of the Association Contracts expires and
the whole of the Unified Area reverts to the sole ownership and
control of ECOPETROL ( the "Termination Date").
ARTICLE 3 - NATURE AND PURPOSE OF AGREEMENT
3.1 The purpose of this Agreement is to provide for the
conservation of natural resources, the preservation of the
environment, the prevention of waste and the maximum economic
recovery to all Parties in developing the Cusiana Oil Structure
in a technically efficient and cooperative manner according to
generally accepted practices in the Petroleum industry.
3.2 Each Party reserves all rights that it has or may have under
each of the Association Contracts, and each of the Association
Contracts shall remain unmodified and in full force and effect
except as specifically provided for in this Agreement. The
execution of this Agreement does not constitute a conveyance or
cross-conveyance by the Parties of any interests in the Unified
Area or in any of the Association Contracts.
3.3 This Agreement, when approved by the Ministry of Mines and
Energy, shall be deemed to have satisfied all the requirements
of Article 31 of the Petroleum Code, Article 76 of Decree 1895
of 1973, Clause 16 of the Association Contracts and Resolution
Number 7-010 of January 19, 1994, by the Ministry of Mines and
Energy regarding the adoption of an integral plan for the
exploitation of the Cusiana Oil Structure.
ARTICLE 4 - ENLARGEMENT OF UNIFIED AREA
4.1 In the event that the Ministry of Mines and Energy
determines that the Cusiana Oil Structure extends into areas
outside the Unified Area, then this Agreement and the Unified
Area may be amended to include such additional areas and parties
as may be necessary to satisfy the objectives of this Agreement
as provided for in Article 3.
4.2 Any such amendment of this Agreement and enlargement of the
Unified Area shall require the consent of all Parties and the
consent of any additional parties who may own interests in areas
to be included within the amended Unified Area. Such amendments
shall be effective upon approval of the Ministry of Mines and
Energy.
4.3 Unless all Parties agree otherwise, no amendment of this
Agreement or enlargement of the Unified Area shall require the
retroactive adjustments of costs, investments or shares of
Petroleum among the Parties.
4.4 Unless all Parties agree otherwise, the Unified Area shall
not be reduced in size during the term of this Agreement.
ARTICLE 5 - DEVELOPMENT AND PRODUCTION OF PETROLEUM
5.1 In order to comply with the requirements of Colombian law,
and specifically Article 165 of the Petroleum Code, and in order
to meet the objectives set out in Article 3 of this Agreement,
the Parties agree to develop the Cusiana Oil Structure in
accordance with the technical requirements and provisions of the
Cusiana Technical Development Plan, which is incorporated in and
made a part of this Agreement for all purposes by this reference.
5.2 The Cusiana Technical Development Plan may be revised from
time to time by the agreement of all Parties, subject to the
approval of the Ministry of Mines and Energy, and any such
approved revision of the Cusiana Technical Development Plan
shall be binding on the Parties and shall become a part of this
Agreement as provided for in Article 5.1.
5.3 Any operation conducted for the sole benefit or account of a
Party shall not hinder, interfere or prejudice the exploitation
of the Cusiana Oil Structure provided for hereunder or the
interests of the other Parties hereunder.
5.4 Notwithstanding the provisions in Article 31 of the
Petroleum code, the Parties may drill wells in the Unified Area
less than 100 meters from the boundaries of any of the
Association Contracts.
ARTICLE 6 - INTERESTS IN OPERATIONS AND PETROLEUM
DURING THE INITIAL PERIOD
6.1 During the Initial Period:
a.) Save as provided for in Article 7.5, the costs of approved
operations and investments in the Unified Area shall be borne
and made by the Parties according to their Unified Area
Interests irrespective of the Association Contract in which such
operations are conducted or such investments are made.
b.) Petroleum produced, except that which has been used or lost
in operations in each Association Contract, shall be separately
metered and shall, after delivery of the royalty share, be owned
by the Parties to each Association Contract in which such
Petroleum is produced according to the undivided interests of
the Parties in each such Association Contract, at the time;
provided, however, that Petroleum produced and saved from any
part of the Unified Area shall be deemed for purposes of this
Agreement and the Association Contracts to have been produced
and saved from all of the Association Contracts.
6.2 Based on the undivided interests of the Parties in the
Association Contracts as of the Effective Date, the Unified Area
Interests of the Parties during the Initial Period are as
follows:
Unified Area
Party Interests
ECOPETROL 50.00%
BP 19.00%
TOTAL 19.00%
TRITON 12.00%
100.00%
6.3 For the purpose of maintaining uniformity of the Unified
Area Interests during the Initial Period, the Parties agree not
to sell, transfer, assign, withdraw or make any other
disposition of their interests in any of the Association
Contracts unless such disposition covers either:
a.) the entire interest of the Party in the Unified Area; or
b.) an equal undivided interest in the entire Unified Area.
Every such sale, transfer, assignment, withdrawal or other
disposition of a Party's interest in the Unified Area shall be
made expressly subject to this Agreement.
6.4 If, during the Initial Period, the interests of any Party in
the Association Contracts should increase or decrease in
compliance with the provisions of Article 6.3, then the Unified
Area Interest of such Party shall be adjusted correspondingly
effective upon such increase or decrease, with the result that
there shall be no retroactive adjustment of the Unified Area
Interests of the Parties.
ARTICLE 7 - INTERESTS IN OPERATIONS AND PETROLEUM
FOLLOWING THE INITIAL PERIOD
7.1 Effective from the SDLA Expiration Date, the Unified Area
Interests of the Parties for the Second and Final Periods shall
be redetermined in accordance with the following procedures:
a.) Within the first quarter of the year 2005, the Parties
shall, by unanimous agreement, appoint two internationally
recognized reservoir engineering firms to make independent
determinations of the original barrels of oil equivalent
("BOEs") of Petroleum in place under the Unified Area, and under
each Association Contract forming a part thereof. For the
purposes of this Agreement, 5.8 mcf gas shall equal 1 BOE. In
the event that the Parties cannot unanimously agree on the
appointment of such firms within the first quarter of the year
2005, then the president of the Society of Petroleum Engineers
(the "SPE") at his sole discretion shall appoint such firms
within thirty days following a request by the Operator. Such
firms shall complete their determinations and issue a final
report within ninety days of their appointment.
b.) If the determinations of the two firms are within five
percent (5%) of each other with respect to the original BOEs of
Petroleum in place under the Association Contracts in the
Unified Area, then the arithmetical mean of the two
determinations shall be used.
c.) If the determinations of the two firms vary by more than
five percent (5%) of each other with respect to the original
BOEs of Petroleum in place under the Association Contracts in
the Unified Area, then the president of the SPE, within thirty
days following a request by the Operator, shall appoint a third
internationally recognized reservoir engineering firm at his
sole discretion to make an independent determination of the
original BOEs of Petroleum in place under each Association
Contract in the Unified Area. Such firm shall complete its
determination and issue a final report within ninety days of its
appointment. The arithmetical mean of the three determinations
shall then be used for the Association Contracts in the Unified
Area.
d.) As a result of these determinations, a "Tract Factor" shall
be calculated for each Association Contract which shall be the
amount of original BOEs of Petroleum in place under each
Association Contract as a percentage of the total original BOEs
of Petroleum in place under the Unified Area. Once established,
these Tract Factors shall remain effective and unmodified for
the Second and Final Periods.
e.) Each Party's Unified Area Interest during the Second and
Final Periods shall be the aggregate of that Party's interest in
each Association Contract applicable during such period
multiplied by the Tract Factor for each such Association
Contract. Tables showing how these Unified Area Interests will
be calculated are included in Annex "A", which is attached
hereto and made a part hereof.
f.) The Parties agree that the determinations made in
accordance with the foregoing procedures shall be final and
binding on each of them.
7.2 During the Second and Final Periods:
a.) Save as provided for in Article 7.5, the costs of approved
operations and investments in the Unified Area shall be borne
and made by the Parties according to their Unified Area
Interests, applicable at the time as determined above,
irrespective of the Association Contract in which such
operations are conducted or such investments are made.
b.) Petroleum produced, except that which has been used or lost
in operations in the Unified Area, shall be allocated to each of
the Association Contracts according to the respective Tract
Factors of each and shall, after delivery of the royalty share,
be owned by the Parties to each Association Contract to which
such Petroleum is allocated according to the undivided interests
of the Parties in each such Association Contract applicable at
the time; provided, however, that Petroleum produced and saved
from any part of the Unified Area shall be deemed for purposes
of this Agreement and the Association Contracts to have been
produced and saved from all of the Association Contracts.
7.3 If, during the Second and Final Periods, the interests of
any Party in any of the Association Contracts should increase or
decrease, then the Unified Area Interest of such Party shall be
adjusted correspondingly effective upon such increase or
decrease, with the result that there shall be no retroactive
adjustment of the Unified Area Interests of the Parties.
7.4 Unless all of the Parties agree otherwise, the
redetermination of the Unified Area Interests as provided for
above shall be prospective in application for the Second and
Final Periods only, as applicable. There shall be no
retroactive adjustments of costs, investments or shares of
Petroleum among the Parties as a result of such redeterminations.
7.5 The Parties recognize that there is an inherent disincentive
to the Associates against making new capital investments in the
Unified Area prior to the scheduled expiration of an Association
Contract when the Associates will only benefit from such new
capital investments at their reduced Unified Area Interests
following the expiration of the Association Contract.
Therefore, in order to promote the continuous and efficient
development of the Cusiana Oil Structure in the whole of the
Unified Area during the entire term of this Agreement, in
accordance with the objectives set out in Article 3, the Parties
agree, notwithstanding the provisions of Articles 6.1 (a) and
7.2 (a) to the contrary, that new capital investments in the
Unified Area approved during the five years prior to the
expiration of an Association Contract shall be borne and paid by
the Parties according to a sliding scale taking into
consideration the timing of such capital investments, the
Unified Area Interests of the Parties in effect before and after
the expiration of the Association Contract and the relative
benefits that will be realized by the Parties as a result of
making such capital investments.
ARTICLE 8 - CONDUCT OF OPERATIONS IN THE UNIFIED AREA
8.1 The Parties hereby confirm the appointment of BP as Operator
of the Unified Area for the Initial Period and BP agrees so to
act in accordance with the terms and conditions of this
Agreement and the Association Contracts. Following the
expiration of each Association Contract and the reversion of
interests therein to ECOPETROL during the Second and Final
Periods, ECOPETROL shall be appointed Operator of that part of
the Unified Area that was formerly covered by that Association
Contract and BP will operate that part of the Unified Area that
is covered by the remaining effective Association Contracts.
ECOPETROL and BP shall cooperate with each other in conducting
all operations in the Unified Area during the Second and Final
Periods in accordance with the terms and provisions of this
Agreement, the Association Contracts and the Cusiana Technical
Development Plan.
8.2 Except as specifically provided for in this Agreement,
operations in the Unified Area shall be conducted pursuant to
the terms and provisions of the Association Contracts and, with
respect to the Associates, those certain operating agreements
which have been entered into by them relating to the Unified
Area, all of which agreements shall remain in full force and
effect.
ARTICLE 9 - RELATIONSHIP OF THE PARTIES
9.1 The rights, duties, obligations, and liabilities of the
Parties under this Agreement and in the Unified Area, in any
Petroleum produced therefrom and in any operations conducted
therein, shall be several in proportion to their Unified Area
Interests, and shall not be joint or collective. The execution
of this Agreement does not create any corporation, partnership
or association in any form.
9.2 Each Party agrees to the extent of its Unified Area Interest
to indemnify each other Party against any and all losses,
injuries, claims or damages of any kind suffered by any person
(including any legal costs or expenses or other disbursements
whatsoever paid in compromise or settlement of any claim) in
connection with or arising out of this Agreement or the
relationships or activities of the Parties hereunder.
9.3 This Agreement is not intended and shall not be construed to
provide, directly or indirectly, for any joint financing
arrangements, or any cooperative refining, joint sale or joint
marketing of Petroleum.
ARTICLE 10 - SETTLEMENT OF DISPUTES
10.1 Any differences of a legal nature arising between the
Parties regarding the interpretation and/or implementation of
this Agreement that cannot be settled amicably shall be referred
for a final decision to the Colombian courts having jurisdiction
over the subject matter in dispute.
10.2 Any differences of a technical nature arising between the
Parties regarding the interpretation and/or implementation of
this Agreement that cannot be settled amicably shall be referred
for a final decision to experts designated as follows: one by
each Party to the dispute and an additional one or umpire
appointed by mutual agreement of the experts so designated.
Should an agreement not be reached as to the appointment of the
additional expert, the latter shall be appointed, upon the
request of any Party to the dispute, by the Board of Directors
of the Colombian Association of Petroleum Engineers (ACIPET)
which has its headquarters in Bogota.
10.3 Any differences of an accounting nature arising between the
Parties regarding the interpretation and/or implementation of
this Agreement that cannot be settled amicably shall be referred
for a final decision to experts, who shall be certified public
accountants, designated as follows: one by each Party to the
dispute and an additional one or umpire appointed by the experts
so designated. Should an agreement not be reached as to the
appointment of the additional expert, the latter shall be
appointed, upon the request of any Party to the dispute, by the
Central Board of Accountants (Junta Central de Contadores) which
has its headquarters in Bogota.
10.4 The Parties to a dispute who refer a matter to experts for
a final decision, as provided for in Articles 10.2 and 10.3,
hereby agree that the experts' decision shall have the full
effect of a settlement between them, and such decision shall be
final and binding on each of them.
10.5 In the case of disagreement between the Parties as to
whether a dispute is technical, accounting or legal in nature,
the dispute shall be considered to be legal, and Article 10.1
shall apply.
ARTICLE 11 - NOTICES
11.1 All notices and other communications between the Parties in
relation to this Agreement shall be in writing and shall be sent
by facsimile or by hand delivery to the Parties at the following
addresses:
EMPRESA COLOMBIANA DE PETROLEOS
Carrera 13 No. 36-24
Santafe de Bogota, D.C. - Colombia
Telefax: (571) 287-0041
Attention: President
BP EXPLORATION COMPANY (COLOMBIA) LTD.
Carrera 9A No. 99-02, Piso 4
Apartado Aereo 59824
Santafe de Bogota, D.C. - Colombia
Telefax: (571) 618-2847 / 611-1127
Attention: R. Campbell
TOTAL EXPLORATIE EN PRODUKTIE MIJ B.V.
Calle 72 No. 10-03, Piso 8
Apartado Aereo 251375
Santafe de Bogota, D.C. - Colombia
Telefax: (571) 235-8453
Attention: J. de Boisseson
TRITON COLOMBIA, INC.
Carrera 9A No. 99-02
Oficina 407
Santafe de Bogota, D.C. - Colombia
Telefax: (571) 618-2553
Attention: I. Fajardo
11.2 A Party may change its address for notice by notice to the
other Parties.
11.3 Notices by facsimile shall be presumed received on the
working day at the place of receipt next following the date of
transmission unless receipt of the notice is acknowledged
earlier. Each Party shall immediately acknowledge receipt of
any notice by facsimile when requested to do so by the sender.
ARTICLE 12 - GOVERNING LAW
12.1 The construction, validity and performance of this
Agreement shall be governed by and interpreted in accordance
with the laws of the Republic of Colombia.
ARTICLE 13 - GENERAL
13.1 If any one or more of the provisions of this Agreement or
any part or parts thereof shall be declared or adjudged to be
illegal, invalid or unenforceable under any applicable laws,
such illegality, invalidity or unenforceability shall not
vitiate the remainder of this Agreement, and this Agreement
shall be construed as if such illegal, invalid or unenforceable
passages were omitted.
13.2 This Agreement represents the entire agreement of the
Parties and may only be amended by an instrument in writing
signed by all Parties.
13.3 In the event of any conflict or ambiguity between this
Agreement and the Association Contracts, this Agreement will
prevail.
IN WITNESS WHEREOF, the Parties have executed this Agreement by
their respective authorized representatives.
EMPRESA COLOMBIANA TOTAL EXPLORATIE EN
DE PETROLEOS PRODUKTIE MIJ B.V.
By: Juan Maria Rendon By: Ashley S. Dodd
Title: President Title: Legal Representative
BP EXPLORATION COMPANY TRITON COLOMBIA, INC.
(COLOMBIA) LIMITED
By: Richard C. Campbell By: Ivan Fajardo
Title: Legal Representative Title: Legal Representative
ANNEX "A"
INTEGRAL PLAN
FOR THE
UNIFIED EXPLOITATION
OF THE
CUSIANA OIL STRUCTURE
IN THE
SDLA, TAURAMENA AND
RIO CHITAMENA
ASSOCIATION CONTRACT AREAS
DATED JULY 15, 1994
CALCULATION OF UNIFIED AREA INTERESTS
FOLLOWING THE INITIAL PERIOD
1. Calculation of Tract Factors applicable for both the Second
and Final Periods
Original
Association Contract BOE's in Place Tract Factor (%)
SDLA x x/T
2nd to expire y y/T
last to expire z z/T
T 100.00%
2. Calculation of Unified Area Interests applicable for the
Second Period
a.) SDLA Tract Interest
Undivided Interest in SDLA SDLA
Association Contract Tract Factor Tract Interest
ECOPETROL 100.00% x/T 1.00 * x/T
BP -0- x/T -0-
TOTAL -0- x/T -0-
TRITON -0- x/T -0-
100.00% 1.00 * x/T
b.) 2nd to Expire Association Contract Tract Interest
Undivided Interest in
Association Contract Tract Factor Tract Interest
ECOPETROL 50.00% y/T .50 * y/T
BP 19.00% y/T .19 * y/T
TOTAL 19.00% y/T .19 * y/T
TRITON 12.00% y/T .12 * y/T
100.00% 1.00 * y/T
c.) Last to Expire Association Contract Tract Interest
Undivided Interest in
Association Contract Tract Factor Tract Interest
ECOPETROL 50.00% z/T .50 * z/T
BP 19.00% z/T .19 * z/T
TOTAL 19.00% z/T .19 * z/T
TRITON 12.00% z/T .12 * z/T
100.00% 1.00 * z/T
d.) Unified Area Interests
(1) (2) (3) (4)
SDLA 2nd to Expire Last to Expire Unified Area
Tract Interest Tract Interest Tract Interest Interests
ECOPETROL 1.00 * x/T .50 * y/T .50 * z/T (1) + (2) +(3)
BP -0- .19 * y/T .19 * z/T (1) + (2)+ (3)
TOTAL -0- .19 * y/T .19 * z/T (1) +(2) + (3)
TRITON -0- .12 * y/T .12 * z/T (1)+ (2) + (3)
1.00 * x/T 1.00 * y/T 1.00 * z/T 100.00%
3. Calculation of Unified Area Interests applicable for the
Final Period
a.) SDLA Tract Interest
Undivided Interest in SDLA SDLA
Association Contract Tract Factor Tract Interest
ECOPETROL 100.00% x/T 1.00 * x/T
BP -0- x/T -0-
TOTAL -0- x/T -0-
TRITON -0- x/T -0-
100.00% 1.00 * x/T
b.) 2nd to Expire Association Contract Tract Interest
Undivided Interest in
Association Contract Tract Factor Tract Interest
ECOPETROL 100.00% y/T 1.00 * y/T
BP -0- y/T -0-
TOTAL -0- y/T -0-
TRITON -0- y/T -0-
100.00% 1.00 * y/T
c.) Last to Expire Association Contract Tract Interest
Undivided Interest in
Association Contract Tract Factor Tract Interest
ECOPETROL 50.00% z/T .50 * z/T
BP 19.00% z/T .19 * z/T
TOTAL 19.00% z/T .19 * z/T
TRITON 12.00% z/T .12 * z/T
100.00% 1.00 * z/T
d.) Unified Area Interests
(1) (2) (3) (4)
SDLA 2nd to Expire Last to Expire Unified Area
Tract Interest Tract Interest Tract Interest Interests
ECOPETROL 1.00 * x/T 1.00 * y/T .50 * z/T (1) + (2) +(3)
BP -0- -0- .19 * z/T (1) + (2) +(3)
TOTAL -0- -0- .19 * z/T (1) + (2) +(3)
TRITON -0- -0- .12 * z/T (1) + (2) +(3)
1.00 * x/T 1.00 * y/T 1.00 * z/T 100.00%
NOTE: The interests shown in this Annex "A" are based on the
undivided interests of the Parties in the Association Contracts
as of the Effective Date of the Agreement and are subject to
modification after the Effective Date in accordance with
Articles 6.4 and 7.3.
TRITON COLOMBIA, INC.
6688 N. Central Expressway, Suite 1400
Dallas, Texas 75206
July 15, 1994
Mooreland Corporation N.V.
Cra. 9 No. 74-08, Piso 7
Bogota, D.E.
Re: Sharing of expenditures and proceeds in connection with
those certain Exploration and Exploitation Contracts for the
Santiago de Las Atalayas I, Tauramena, and Rio Chitamena,
Colombia, Association Contract Areas
Dear Sirs:
Reference is made to the letter agreements (the "Original
Agreement") dated July 6, 1984 and December 13, 1988, between
Triton Colombia, Inc. (together with its successors and assigns,
"TCI") and Urbe Panama S.A. ("Urbe") pursuant to which (a) Urbe
agreed to (i) pay to TCI an amount equal to 3.75% of TCI's past
unreimbursed expenditures incurred in connection with the
Exploration and Exploitation Contracts for the Santiago de Las
Atalayas I and Tauramena, Colombia, Association Contract Areas
(the "SDLA Association Contracts") and (ii) pay to TCI an amount
equal to 3.75% of TCI's future expenditures incurred in
connection with the SDLA Association Contracts, and (b) TCI
agreed to pay to Urbe an amount equal to 3.75% of the net
proceeds ultimately received by TCI from the SDLA Association
Contracts, all as more fully described in the Original
Agreement. Urbe has since assigned all of its interest in the
Original Agreement to Mooreland Corporation N.V., incorporated
in the British Virgin Islands ("Mooreland"). Additionally, the
area covered by the SDLA Association Contracts has been unified
with the area covered by that certain Purchase and Sale
Agreement, dated June 1, 1994, by and between BP Exploration
Company (Colombia) Ltd. and Total Exploratie En Produktie MIJ
B.V., as sellers, and TCI, as purchaser, covering the Rio
Chitamena, Colombia Association Contract Area (the "Rio
Chitamena Contract") (the Rio Chitamena Contract and the SDLA
Association Contracts are collectively herein called the
"Association Contracts").
TCI and Mooreland are entering into this letter agreement (this
"Agreement") to reconfirm and more fully and accurately document
the sharing arrangement set forth in the Original Agreement.
In consideration of the promises contained in the Original
Agreement and other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged by the parties
hereto, TCI and Mooreland hereby agree as follows:
1. Definitions. As used herein, the following terms shall have
the following meanings:
"Available Proceeds" shall mean Revenues minus the sum of (a)
Expenditures plus (b) the Unitization Costs plus (c) the amount
of taxes payable or to be paid by or on behalf of TCI with
respect to the Revenues (net of applicable deductions, including
depreciation) at the effective Colombian income tax rate, if
such computation produces a positive number.
"Capital Requirements" shall mean all costs incurred by TCI
related to wells, facilities and pipelines required (as
determined by TCI) for the exploration, development, production,
processing, and transportation of oil, gas and other
hydrocarbons from the fields located in the Contract Area,
including, without limitation, the amount of any cash calls or
other payments made by TCI to any operator related to any past
or future costs similar to those costs above described.
"Contract Area" shall mean the areas which are the subject of
the SDLA Tauramena Contracts and, if the areas which are the
subject of the SDLA Tauramena Contracts are individually or
collectively pooled or unitized with other areas, the aggregate
areas so pooled or unitized.
"Cost of Funds" shall mean a per annum rate of interest equal
to the greater of (a) 12.0% or (b) the average cost of borrowing
incurred by Triton Energy Corporation (or its successor as the
ultimate parent of TCI) during the applicable quarter (as
reasonably determined by Triton Energy Corporation and disclosed
to TCI) plus 3.0%.
"Deficit Amount" shall mean Revenues minus the sum of (a)
Expenditures plus (b) the Unitization Costs plus (c) the amount
of taxes payable or to be paid by or on behalf of TCI with
respect to the Revenues (net of applicable deductions, including
depreciation) at the effective Colombian income tax rate, if
such computation produces a negative number, and the term
"Deficit Amounts" shall mean the Deficit Amount for more than
one applicable period.
"El Pinal Agreement" shall mean the letter agreement dated as
of February 25, 1991, between TCI and Urbe pursuant to which (a)
Urbe agreed to (i) pay to TCI an amount equal to 3.75% of TCI's
past unreimbursed expenditures in connection with the El Pinal
Contract (as defined in the El Pinal Agreement) and (ii) pay to
TCI an amount equal to 3.75% of future expenditures in
connection with the El Pinal Contract, and (b) TCI agreed to pay
to Urbe an amount equal to 3.75% of the proceeds ultimately
received by TCI from the El Pital Contract, all as more fully
described therein. Urbe's interest in the El Pital Agreement
has been transferred to Mooreland. TCI's interest in the El
Pinal Contract has been transferred to Triton Resources
Colombia, Inc. ("TRC"). TRC and Mooreland have modified the
referenced letter agreement on the date hereof.
"Expenditures" shall mean the sum of Capital Requirements plus
Operating and Sales Costs.
"Mooreland's Percentage" shall mean 3.75%.
"Operating and Sales Costs" shall mean the sum of all
production and other costs and taxes, transportation tariffs,
loading and storage costs, marketing and other commercialization
costs, insurance and ocean freight (if applicable) incurred by
or on behalf of TCI, a $10,000 monthly administrative fee to
TCI, and the general and administrative expenses of TCI related
or allocated by TCI to activities under or pursuant to the
Association Contracts and in the Contract Area, including,
without limitation, the amount of any cash calls or other
payments made by TCI and any operator related to any past or
future costs similar to those above described or otherwise (but
without duplication of any amounts included as Capital
Requirements).
"Revenues" shall mean the revenues received by TCI from the
sale of oil, gas and other hydrocarbons (net of governmental
royalties, but including oil and gas received from Ecopetrol in
reimbursement of eligible precommerciality costs) from the
Contract Area, including, without limitation, any amounts
received pursuant to the TCI Working Interest.
"TCI Return" shall have the meaning set forth in paragraph 2
hereof.
"TCI Working Interest" shall mean the working interest of TCI
in the Association Contracts, which working interest is
currently 12%.
"Unitization Costs" shall mean all costs incurred by TCI
related to the pooling or unitization individually or
collectively of the areas which are the subject of the
Association Contracts with any other area, including without
limitation all costs incurred by TCI in connection with its
purchase of any interest in the Rio Chitamena Contract.
"Unpaid Mooreland Obligations" shall have the meaning defined
in Paragraph 2 hereof.
2. Agreement to Share. Mooreland hereby agrees (a) to pay to
TCI within fifteen (15) days after the date hereof an amount
equal to Mooreland's Percentage times the unreimbursed Deficit
Amount incurred prior to the date hereof as previously disclosed
to Urbe by notice sent by TCI on February 28, 1994, and (b)
within fifteen (15) days of written notice from TCI, to pay to
TCI an amount equal to Mooreland's Percentage times any future
Deficit Amounts. If Mooreland fails to pay to TCI the amounts
above described, whether past or future, the amount not paid by
Mooreland within the time period above provided shall be
referred to as the "Unpaid Mooreland Obligations". Any amounts
required to be paid to Mooreland under Paragraph 2 hereof shall
be automatically reduced by any Unpaid Mooreland Obligations
together with a return thereon to TCI (the "TCI Return") in an
amount equal to the Cost of Funds (calculated on a monthly
basis) multiplied by the aggregate amount of the Unpaid
Mooreland Obligations, compounded monthly, the Cost of Funds to
be adjusted automatically upon any change in Triton Energy
Corporation's (or its successor's as the ultimate parent of TCI)
average cost of borrowings. The manner of such reimbursement
and payment is more fully described in paragraph 4 below. After
the date hereof the Deficit Amount incurred shall be computed by
TCI on a quarter-annual basis as of the last day of each such
quarter and TCI shall maintain an accounting of the Unpaid
Mooreland Obligations and the TCI Return. TCI shall mail to
Mooreland after each quarter a statement showing the Deficit
Amount for the immediately preceding quarter and a summary of
the Unpaid Mooreland Obligations and the aggregate TCI Return as
of the last day of the immediately preceding quarter. The
accounting maintained by TCI shall, in the absence of manifest
error, be conclusive and binding on the parties hereto.
3. Mooreland's Interest. Mooreland shall be entitled to
receive an amount equal to Mooreland's Percentage times the
Available Proceeds in accordance with the distribution schedule
contained in paragraph 4 hereof, the termination provisions set
forth in paragraph 8 hereof and the other terms and conditions
contained in this Agreement. Mooreland acknowledges and agrees
that the TCI Working Interest is subject to change and,
therefore, the amount of the Available Proceeds is subject to
change. For example, if the Contract Area, or any portion
thereof, is pooled or unitized with other areas, the TCI Working
Interest may be modified.
4. Payments from Available Proceeds. If TCI receives Available
Proceeds which are not subject to forfeiture, discount or other
claim, then TCI shall use such proceeds to pay any amounts which
may be owed Mooreland under this Agreement subject, however, to
the following distribution schedule:
(a) TCI shall retain an amount equal to the product of (i) a
percentage equal to 100% minus Mooreland's Percentage times (ii)
the Available Proceeds;
(b) TCI shall retain an amount equal to the Unpaid Mooreland
Obligations remaining unpaid;
(c) TCI shall retain an amount equal to the TCI Return which
has been earned as of such date and not paid; and
(d) Mooreland shall be entitled to any remaining Available
Proceeds (but not exceeding the product of Mooreland's
Percentage times the Available Proceeds).
The Available Proceeds shall be distributed as often as TCI
shall deem advisable but no less frequently than quarterly.
Prior to making any distribution of Available Proceeds, TCI
shall be entitled to reserve such portion thereof as TCI shall
deem prudent to pay for anticipated future Expenditures.
5. No Ownership Rights. Neither Mooreland, nor any assignee of
Mooreland's rights under this Agreement, shall (i) have a direct
or beneficial interest in the Association Contracts or in the
Contract Area, (ii) have a direct or beneficial interest in TCI
or any affiliate thereof, or (iii) participate in any decision
regarding operations conducted by TCI or any other person in the
Contract Area or marketing of petroleum produced from the
Contract Area, including, without limitation, decisions
regarding withdrawal or relinquishment. Without limitation, TCI
shall have the right in its sole and absolute discretion to do
any one or more of the following at any time:
(a) Decide whether or not to withdraw from the Association
Contracts, or either of them;
(b) Decide whether or not to participate in drilling prospects
within the Contract Area on a prospect-by-prospect basis;
(c) Assign or farm-out all or a portion of the TCI Working
Interest; and
(d) Pool or unitize the Contract Area, or any portion thereof,
with other areas, to the extent permitted or required under the
Association Contracts or the laws of the Republic of Colombia.
6. Right of First Refusal. TCI shall have a right of first
refusal on any sale or assignment contemplated by Mooreland of
all or any part of the amounts which Urbe is entitled
to receive under this Agreement. Mooreland shall provide
written notice (by registered or certified mail) of the agreed
upon terms and conditions of a proposed sale or assignment and
the name of the proposed transferee to Mr. Thomas G. Finck,
President of TCI or his successor at 6688 North Central
Expressway, Suite 1400, Dallas, Texas 75206 U.S.A. If within
thirty (30) days of TCI's receipt of such written notice TCI
accepts such terms and conditions of such sale or assignment in
principle, then TCI shall have the right (but not the
obligation) to acquire the amounts which Mooreland is entitled
to receive under this Agreement from Mooreland on terms and
conditions no more or less favorable to TCI than those set forth
in such written notice. If TCI does not exercise the foregoing
right of first refusal at such time, Mooreland may consummate
such sale or assignment to such proposed transferee under terms
and conditions no more favorable to such transferee than those
set forth in such written notice to TCI and within sixty (60)
days from the date of such written notice.
In the event that the amounts which Mooreland is entitled to
receive under this Agreement are sold, assigned or otherwise
transferred to one or more persons, TCI shall be entitled to
make all demands for Urbe's payment of amounts which Mooreland
is required to pay under this Agreement and all payments which
Mooreland is entitled to receive under this Agreement in
Mooreland's name, or in the name of Mooreland's nominee, in
trust for such parties and to otherwise and in all respects deal
with and be solely responsible to Mooreland as agent and trustee
for such parties.
7. Representations, Warranties and Agreements. To induce TCI
to enter into this Agreement, Mooreland and Urbe represent and
warrant to, and agree with, TCI that:
(a) Mooreland is a corporation duly organized and existing and
in good standing under the laws of the British Virgin Islands,
and is duly registered and qualified as a foreign company and is
in good standing under the laws of all other countries in which
it is doing business, and has the corporate power and authority
to own its properties and assets and to transact the business in
which it is engaged;
(b) Mooreland has duly adopted this Agreement and each other
instrument contemplated to be furnished by Mooreland pursuant
hereto, has authorized the execution, delivery and consummation
of this Agreement and each other such instruments in accordance
with its respective terms and conditions, and, when executed by
Mooreland, this Agreement and each other such instruments will
be binding obligations of Mooreland;
(c) Mooreland is not in default under or in violation of any
law or regulation, any order of any court or governmental
agency, wherever located, and there are no claims, actions,
suits or proceedings instituted, filed or threatened against or
affecting Mooreland;
(d) Urbe has assigned all of its rights and delegated all of
its liabilities and obligations under the Original Agreement,
this Agreement and the El Pinal Agreement to Mooreland and
Mooreland has accepted such assignment and assumed such
liabilities and obligations; provided, however, that Urbe
acknowledges in favor of TCI that Urbe remains jointly and
severally liable for all liabilities and obligations of Urbe and
Mooreland under the Original Agreement, this Agreement and the
El Pinal Agreement;
(e) The shareholders and directors of Mooreland are identical
to those of Urbe; and
(f) To the best knowledge, information and belief of the
officers, employees and directors of Mooreland and Urbe:
(i) No investor or shareholder of Mooreland or Urbe is or was
an officer or employee of the government of the Republic of
Colombia or of any department, agency or instrumentality thereof
or of a person acting in an official capacity for or on behalf
of the government of the Republic of Colombia, or any
department, agency or instrumentality thereof, at the same time
that such person was an investor or shareholder;
(ii) No investor or shareholder of Mooreland or Urbe is or
was an official of any political party in the Republic of
Colombia or a candidate for political office in the Republic of
Colombia at the time that such person was an investor or
shareholder;
(iii) No person acting on behalf of TCI, Mooreland or Urbe
has made a payment, promise to pay, authorization of payment,
gift, offer or promise to give anything of value to any officer
or employee of the government of the Republic of Colombia, or
any department, agency or instrumentality thereof, or to any
person acting in an official capacity for or on behalf of the
government of the Republic of Colombia, or any department,
agency or instrumentality thereof, corruptly for the purpose of
influencing any act or decision by such person in his official
capacity in order to assist TCI in obtaining or retaining
business in the Republic of Colombia;
(iv) No person acting on behalf of TCI, Mooreland or Urbe has
made a payment, promise to pay, authorization of payment, gift,
offer or promise to give anything of value to any political
party of the Republic of Colombia or official of same, or to any
candidate for political office in the Republic of Colombia,
corruptly for the purpose of influencing any act or decision by
said party or person in such official capacity in order to
assist TCI in obtaining or retaining business in the Republic of
Colombia;
(v) No investor or shareholder of Mooreland or Urbe has made
a payment, promise to pay, authorization of payment, gift, offer
or promise to give anything of value to any officer or employee
of the government of the Republic of Colombia, or any
department, agency or instrumentality thereof, corruptly for the
purpose of influencing any act or decision by said party or
person in such official capacity in order to assist TCI in
obtaining or retaining business in the Republic of Colombia; and
(vi) No investor or shareholder of Mooreland or Urbe has made
a payment, promise to pay, authorization of payment, gift, offer
or promise to give anything of value to any political party of
the Republic of Colombia or official of same, or to any
candidate for political office in the Republic of Colombia,
corruptly for the purpose of influencing any act or decision by
said party or person in such official capacity in order to
assist TCI in obtaining or retaining business in the Republic of
Colombia.
Mooreland and Urbe agree that all representations, warranties
and agreements by Mooreland and Urbe herein shall survive
delivery of this Agreement and each other instrument
contemplated to be furnished by Mooreland pursuant hereto.
8. Termination of Agreement. Mooreland's rights and interests
under this Agreement shall terminate automatically and without
notice upon the occurrence of any of the following events:
(a) The failure of Mooreland to fully perform, observe or keep
any covenant, agreement or condition contained in this Agreement;
(b) Any representation or warranty of Mooreland or Urbe in this
Agreement is presently or in the future proves to be false,
fraudulent, misleading or erroneous in any material respect;
(c) If the El Pinal Agreement is terminated due to the failure
of Mooreland to pay any precommerciality costs or Unitization
Costs (as defined in the El Pinal Agreement) as may be required
to be paid from time to time under paragraph 2 of the El Pinal
Agreement; or
(d) TCI shall no longer own any interest in the Association
Contracts.
In the event of a termination of this Agreement pursuant to
this Paragraph 8, neither TCI nor Mooreland shall have any
further obligation to the other under this Agreement or related
to the Association Contracts or the Contract Area other than the
obligation of Mooreland and Urbe to pay any Unpaid Mooreland
Obligations together with the accumulated TCI Return thereon
which has not been recovered by TCI pursuant to the distribution
procedure outlined in Paragraph 4 hereof. The obligation of
Mooreland and Urbe to pay the above amounts shall constitute a
demand obligation owing by Mooreland and Urbe to TCI and TCI
shall be entitled to receive, in addition, interest thereon
until paid at a rate per annum equal to the lesser of (i) the
Cost of Funds and (ii) the maximum rate of interest allowed by
applicable law.
9. Confidentiality. Mooreland and Urbe each agree that the
terms and provisions of this Agreement and all information and
data acquired or obtained by it with respect to this Agreement
and the Association Contracts shall be considered confidential
and shall be kept confidential and not disclosed during the term
of this Agreement and for a period of five (5) years thereafter
to any person or entity, except:
(a) To the extent the terms and provisions of this Agreement or
such data and information are required to be furnished in
compliance with any applicable laws or regulations or pursuant
to any legal proceedings or because of any order of any court
binding upon Mooreland or Urbe;
(b) To a bona fide prospective purchaser or assignee of all or
any part of the amounts which Mooreland is entitled to receive
under this Agreement;
(c) To a bank or other financial institution to the extent
appropriate to assist Mooreland in arranging for funding of its
obligations under this Agreement; and
(d) Where any such data or information which, through no fault
of Mooreland or Urbe, becomes a part of the public domain.
Provided that disclosure as provided in Paragraph 9(b) and (c)
shall not be made unless prior thereto Mooreland has obtained a
written undertaking from the disclosee to keep confidential any
such terms, provisions, data or information so disclosed and not
to use the same except for the express purpose for which
disclosure is to be made.
10. Entire Agreement. TCI, Mooreland and Urbe agree and
acknowledge that the terms and conditions set forth herein
constitute the entire understanding and agreement of the parties
hereto with respect to the Association Contracts, Mooreland's or
Urbe's right to receive payments out of the Available Proceeds
and the transactions contemplated hereby and is intended to
supersede any prior agreements or communications between TCI,
Mooreland and Urbe in connection herewith, including, without
limitation, the Original Agreement. TCI, Mooreland and Urbe
further acknowledge and agree that this Agreement and the El
Pinal Agreement constitute the only agreements between TCI, TRC,
Mooreland and Urbe related to any existing or future
transactions of any kind and there are no oral or written
agreements between TRC or TCI (and any related party) and
Mooreland or Urbe (and any related party) concerning any areas
other than the areas covered by the Association Contracts and
the El Pinal Contract. Nothing in this Agreement or otherwise
is intended to create any partnership, joint venture, area of
interest or other association between Mooreland and TCI and any
inferences to the contrary are hereby negated.
11. Governing Law and Jurisdiction. THE TERMS AND CONDITIONS
OF THIS AGREEMENT SHALL BE SUBJECT TO, AND GOVERNED BY THE LAWS
OF THE STATE OF TEXAS, U.S.A., WITHOUT REFERENCE TO THE CHOICE
OF LAW RULES OF SUCH STATE AND THE PARTIES HERETO CONSENT TO THE
EXCLUSIVE JURISDICTION OF THE FEDERAL AND STATE COURTS OF THE
STATE OF TEXAS, U.S.A.<PAGE>
Please indicate your acceptance of this Agreement and you
agreement to be bound by all of the terms and conditions of this
Agreement by signing in the space provided below.
Sincerely yours,
TRITON COLOMBIA, INC.
By:
Name:
Title:
ACCEPTED AND AGREED TO:
MOORELAND CORPORATION N.V.
By:
Name:
Title:
URBE PANAMA S.A.
By:
Name:
Title:
TRITON RESOURCES COLOMBIA, INC.
6688 North Central Expressway, Suite 1400
Dallas, Texas 75206
July 15, 1994
Mooreland Corporation N.V.
Cra. 9 No. 74-08, Piso 7
Bogota, D.E.
Re: Sharing of expenditures and proceeds in connection with
that certain Exploration and Exploitation Contract for the El
Pinal, Colombia, Association Contract Area (the "El Pinal
Contract")
Dear Sirs:
Reference is made to the letter agreement (the "Original
Agreement") dated February 25, 1991, between Triton Colombia,
Inc. (together with its successors and assigns, "TCI") and Urbe
Panama S.A. ("Urbe") pursuant to which (a) Urbe agreed to (i)
pay to TCI an amount equal to 3.75% of TCI's past unreimbursed
expenditures incurred in connection with the El Pinal Contract
and (ii) pay to TCI an amount equal to 3.75% of TCI's future
expenditures incurred in connection with the El Pinal Contract,
and (b) TCI agreed to pay to Urbe an amount equal to 3.75% of
the net proceeds ultimately received by TCI from the El Pinal
Contract, all as more fully described in the Original Agreement.
TCI has since assigned all of its interest in the El Pinal
Contract to its affiliate, Triton Resources Colombia, Inc.
(together with its successors and assigns, "TRC"). Urbe has
since assigned all of its interest in the Original Agreement to
Mooreland Corporation N.V., incorporated in the British Virgin
Islands ("Mooreland").
TRC and Mooreland are entering into this letter agreement (this
"Agreement") to reconfirm and more fully and accurately document
the sharing arrangement set forth in the Original Agreement.
In consideration of the promises contained in the Original
Agreement and other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged by the parties
hereto, TRC and Mooreland hereby agree as follows:
1. Definitions. As used herein, the following terms shall have
the following meanings:
"Available Proceeds" shall mean Revenues minus the sum of (a)
Expenditures plus (b) the Unitization Costs plus (c) the amount
of taxes payable or to be paid by or on behalf of TRC with
respect to the Revenues (net of applicable deductions, including
depreciation) at the effective Colombian income tax rate, if
such computation produces a positive number.
"Capital Requirements" shall mean all costs incurred by TRC
related to wells, facilities and pipelines required (as
determined by TRC) for the exploration, development, production,
processing, and transportation of oil, gas and other
hydrocarbons from the fields located in the Contract Area.
"Contract Area" shall mean the area which is the subject of the
El Pinal Contract and, if the area which is the subject of the
El Pinal Contract is pooled or unitized with other areas, the
aggregate area so pooled or unitized.
"Cost of Funds" shall mean a per annum rate of interest equal
to the greater of (a) 12.0% or (b) the average cost of borrowing
incurred by Triton Energy Corporation (or its successor as the
ultimate parent of TRC) during the applicable calendar month (as
reasonably determined by Triton Energy Corporation and disclosed
to TRC) plus 3.0%.
"Deficit Amount" shall mean Revenues minus the sum of (a)
Expenditures plus (b) the Unitization Costs plus (c) the amount
of taxes payable or to be paid by or on behalf of TRC with
respect to the Revenues (net of applicable deductions, including
depreciation) at the effective Colombian income tax rate, if
such computation produces a negative number, and the term
"Deficit Amounts" shall mean the Deficit Amount for more than
one applicable period.
"Expenditures" shall mean the sum of Capital Requirements plus
Operating and Sales Costs.
"Mooreland's Percentage" shall mean 3.75%.
"Operating and Sales Costs" shall mean the sum of all
production and other costs and taxes, transportation tariffs,
loading and storage costs, marketing and other commercialization
costs, insurance and ocean freight (if applicable) incurred by
or on behalf of TRC, and the general and administrative expenses
of TRC, related or allocated by TRC to activities under or
pursuant to the El Pinal Contract and in the Contract Area.
"Revenues" shall mean the revenues received by TRC from the
sale of oil, gas and other hydrocarbons (net of governmental and
overriding royalties, but including oil and gas received from
Ecopetrol in reimbursement of eligible precommerciality costs)
from the Contract Area, including, without limitation, any
amounts received pursuant to the TRC Working Interest.
"SDLA/Tauramena/Rio Chitamena Agreement" shall mean the letter
agreements dated as of July 6, 1984 and December 31, 1988,
between TCI and Urbe pursuant to which (a) Urbe agreed to (i)
pay to TCI an amount equal to 3.75% of TCI's past unreimbursed
expenditures in connection with the SDLA Association Contracts
(as defined in the SDLA/Tauramena/Rio Chitamena Agreement) and
(ii) pay to TCI an amount equal to 3.75% of future expenditures
in connection with the SDLA Association Contracts, and (b) TCI
agreed to pay to Urbe an amount equal to 3.75% of the proceeds
ultimately received by TCI from the SDLA Association Contracts,
all as more fully described therein. Urbe's interest in the
SDLA/Tauramena/Rio Chitamena Agreement has been tranferred to
Mooreland. TCI and Mooreland have modified the referenced
letter agreement on the date hereof to, among other things,
acknowledge that it additionally covers the area described in
the Rio Chitamena Contract (as defined in the SDLA/Tauramena/Rio
Chitamena Agreement).
"TRC Working Interest" shall mean the working interest of TRC
as operator of the El Pinal Contract, which working interest is
currently 100%.
"Unitization Costs" shall mean all costs incurred by TRC
related to the pooling or unitization of the area which is the
subject of the El Pital Contract with any other area.
"Unpaid Mooreland Obligations" shall have the meaning defined
in Paragraph 2 hereof.
2. Agreement to Share. Mooreland hereby agrees (a) to pay to
TRC within fifteen (15) days after the date hereof an amount
equal to Mooreland's Percentage times the unreimbursed Deficit
Amount incurred prior to the date hereof as previously disclosed
to Urbe by notice sent by TRC on February 28, 1994, and (b)
within fifteen (15) days of written notice from TRC, to pay to
TRC an amount equal to Mooreland's Percentage times any future
Deficit Amounts. If Mooreland fails to pay to TRC the amounts
above described, whether past or future, TRC shall be entitled,
subject to the provisions of Paragraph 8(a) hereof, to terminate
this Agreement in which event Mooreland's right to receive any
amounts under Paragraph 3 hereof shall be terminated and neither
TRC nor Mooreland shall have any further obligation to the other
under this Agreement or related to the El Pital Contract or the
Contract Area other than Mooreland's obligation to pay the
amounts above described which have not been paid as of the date
of termination (such unpaid amounts being referred to as the
"Unpaid Mooreland Obligations"). Notwithstanding the
termination of this Agreement, the Unpaid Mooreland
Obligations shall be a demand obligation owing by Mooreland to
TRC and shall accrue interest thereon until paid at a rate per
annum equal to the lesser of (i) the Cost of Funds and (ii) the
maximum rate of interest allowed by applicable law. The Deficit
Amount incurred and the amount which Mooreland is required to
pay pursuant to this Paragraph 2 shall be computed by TRC on a
quarter-annual basis as of the last day of each such quarter and
TRC shall mail to Mooreland after each quarter a statement
showing the Deficit Amount so owed by Mooreland.
3. Mooreland's Interest. Mooreland shall be entitled to
receive an amount equal to Mooreland's Percentage times the
Available Proceeds in accordance with the distribution schedule
contained in paragraph 4 hereof, the termination provisions set
forth in paragraphs 2 and 8 hereof and the other terms and
conditions contained in this Agreement. Mooreland acknowledges
and agrees that the TRC Working Interest is subject to change
and, therefore, the amount of the Available Proceeds is subject
to change. For example, if a commercial field is discovered in
the Contract Area and if Ecopetrol exercises its contractual
right to acquire 50% of the TRC Working Interest, the TRC
Working Interest will be proportionately reduced. In addition,
upon the pooling or unitization of the Contract Area, or any
portion thereof, with other areas, the TRC Working Interest may
be further modified.
4. Payments from Available Proceeds. If TRC receives Available
Proceeds which are not subject to forfeiture, discount or other
claim, then TRC shall pay to Mooreland from such Available
Proceeds, as often as TRC shall deem advisable but no less
frequently than quarterly, the amount which Mooreland is
entitled to receive pursuant to Paragraph 3 above.
Prior to making any such payments, TRC shall be entitled to
reserve from the Available Proceeds any portion thereof as TRC
shall deem prudent to pay for anticipated future Expenditures.
5. No Ownership Rights. Neither Mooreland, nor any assignee of
Mooreland's rights under this Agreement, shall (i) have a direct
or beneficial interest in the El Pinal Contract or in the
Contract Area, (ii) have a direct or beneficial interest in TRC,
TCI or any affiliate thereof, or (iii) participate in any
decision regarding operations conducted by TRC or any other
person in the Contract Area or marketing of petroleum produced
from the Contract Area, including, without limitation, decisions
regarding withdrawal or relinquishment. Without limitation, TRC
shall have the right in its sole and absolute discretion to do
any one or more of the following at any time:
(a) Decide whether or not to withdraw from the El Pinal
Contract;
(b) Decide whether or not to participate in drilling prospects
within the Contract Area on a prospect-by-prospect basis;
(c) Assign or farm-out all or a portion of the TRC Working
Interest; and
(d) Pool or unitize the Contract Area, or any portion thereof,
with other areas, to the extent permitted or required under the
El Pinal Contract or the laws of the Republic of Colombia.
6. Right of First Refusal. TRC shall have a right of first
refusal on any sale or assignment contemplated by Mooreland of
all or any part of the amounts which Mooreland is entitled to
receive under this Agreement. Mooreland shall provide written
notice (by registered or certified mail) of the agreed upon
terms and conditions of a proposed sale or assignment and the
name of the proposed transferee to Mr. Thomas G. Finck,
President of TRC or his successor at 6688 North Central
Expressway, Suite 1400, Dallas, Texas 75206 U.S.A. If within
thirty (30) days of TRC's receipt of such written notice TRC
accepts such terms and conditions of such sale or assignment in
principle, then TRC shall have the right (but not the
obligation) to acquire the amounts which Mooreland is entitled
to receive under this Agreement from Mooreland on terms and
conditions no more or less favorable to TRC than those set forth
in such written notice. If TRC does not exercise the foregoing
right of first refusal at such time, Mooreland may consummate
such sale or assignment to such proposed transferee under terms
and conditions no more favorable to such transferee than those
set forth in such written notice to TRC and within sixty (60)
days from the date of such written notice.
In the event that the amounts which Mooreland is entitled to
receive under this Agreement are sold, assigned or otherwise
transferred to one or more persons, TRC shall be entitled to
make all demands for Mooreland's payment of amounts which
Mooreland is required to pay under this Agreement and all
payments which Mooreland is entitled to receive under this
Agreement in Mooreland's name, or in the name of Mooreland's
nominee, in trust for such parties and to otherwise and in all
respects deal with and be solely responsible to Mooreland as
agent and trustee for such parties.
7. Representations, Warranties and Agreements. To induce TRC
to enter into this Agreement, Mooreland and Urbe represent and
warrant to, and agree with, TRC that:
(a) Mooreland is a corporation duly organized and existing and
in good standing under the laws of the British Virgin Islands,
is duly registered and qualified as a foreign company and is in
good standing under the laws of the British Virgin Islands and
in all other countries in which it is doing business, and has
the corporate power and authority to own its properties and
assets and to transact the business in which it is engaged;
(b) Mooreland has duly adopted this Agreement and each other
instrument contemplated to be furnished by Mooreland pursuant
hereto, has authorized the execution, delivery and consummation
of this Agreement and each other such instruments in accordance
with its respective terms and conditions, and, when executed by
Mooreland, this Agreement and each other such instruments will
be binding obligations of Mooreland;
(c) Mooreland is not in default under or in violation of any
law or regulation, any order of any court or governmental
agency, wherever located, and there are no claims, actions,
suits or proceedings instituted, filed or threatened against or
affecting Mooreland;
(d) Urbe has assigned all of its rights and delegated all of
its liabilities and obligations under the Original Agreement,
this Agreement and the SDLA/Tauramena/Rio Chitamena Agreement to
Mooreland and Mooreland has accepted such assignment and assumed
such liabilities and obligations; provided, however, that Urbe
acknowledges in favor of TRC that Urbe remains jointly and
severally liable for all liabilities and obligations of Urbe and
Mooreland under the Original Agreement, this Agreement and the
SDLA/Tauramena/Rio Chitamena Agreement;
(e) The shareholders and directors of Mooreland are identical
to those of Urbe; and
(f) To the best knowledge, information and belief of the
officers, employees and directors of Mooreland and Urbe:
(i) No investor or shareholder of Mooreland or Urbe is or was
an officer or employee of the government of the Republic of
Colombia or of any department, agency or instrumentality thereof
or of a person acting in an official capacity for or on behalf
of the government of the Republic of Colombia, or any
department, agency or instrumentality thereof, at the same time
that such person was an investor or shareholder;
(ii) No investor or shareholder of Mooreland or Urbe is or
was an official of any political party in the Republic of
Colombia or a candidate for political office in the Republic of
Colombia at the time that such person was an investor or
shareholder;
(iii) No person acting on behalf of TCI, TRC, Mooreland or
Urbe has made a payment, promise to pay, authorization of
payment, gift, offer or promise to give anything of value to any
officer or employee of the government of the Republic of
Colombia, or any department, agency or instrumentality thereof,
or to any person acting in an official capacity for or on behalf
of the government of the Republic of Colombia, or any
department, agency or instrumentality thereof, corruptly for the
purpose of influencing any act or decision by such person in his
official capacity in order to assist TCI or TRC in obtaining or
retaining business in the Republic of Colombia;
(iv) No person acting on behalf of TCI, TRC, Mooreland or
Urbe has made a payment, promise to pay, authorization of
payment, gift, offer or promise to give anything of value to any
political party of the Republic of Colombia or official of same,
or to any candidate for political office in the Republic of
Colombia, corruptly for the purpose of influencing any act or
decision by said party or person in such official capacity in
order to assist TCI or TRC in obtaining or retaining business in
the Republic of Colombia;
(v) No investor or shareholder of Mooreland or Urbe has made
a payment, promise to pay, authorization of payment, gift, offer
or promise to give anything of value to any officer or employee
of the government of the Republic of Colombia, or any
department, agency or instrumentality thereof, corruptly for the
purpose of influencing any act or decision by said party or
person in such official capacity in order to assist TCI or TRC
in obtaining or retaining business in the Republic of Colombia;
and
(vi) No investor or shareholder of Mooreland or Urbe has made
a payment, promise to pay, authorization of payment, gift, offer
or promise to give anything of value to any political party of
the Republic of Colombia or official of same, or to any
candidate for political office in the Republic of Colombia,
corruptly for the purpose of influencing any act or decision by
said party or person in such official capacity in order to
assist TCI or TRC in obtaining or retaining business in the
Republic of Colombia.
Mooreland and Urbe agree that all representations, warranties
and agreements by Mooreland and Urbe herein shall survive
delivery of this Agreement and each other instrument
contemplated to be furnished by Mooreland pursuant hereto.
8. Termination of Agreement. Mooreland's rights and interests
under this Agreement shall terminate automatically and without
notice upon the occurrence of any of the following events:
(a) The failure of Mooreland to fully perform, observe or keep
any covenant, agreement or condition contained in this Agreement
and, with respect to Mooreland's failure to pay the amounts
required under Paragraph 2 hereof, the continuance of such
failure for thirty (30) days after notice of such failure to pay
is given by TRC to Mooreland at the address for Mooreland set
forth on the first page hereof;
(b) Any representation or warranty of Mooreland or Urbe in this
Agreement is presently or in the future proves to be false,
fraudulent, misleading or erroneous in any material respect;
(c) The occurrence of one or more events under paragraph 8 of
the SDLA/Tauramena/Rio Chitamena Agreement other than as a
result of TRC no longer owning any interest in the Association
Contracts (as defined in the SDLA/Tauramena/Rio Chitamena
Agreement); or
(d) TRC shall no longer own any interest in the El Pinal
Contract.
In the event of a termination of this Agreement pursuant to
this Paragraph 8, neither TRC nor Mooreland shall have any
further obligation to the other under this Agreement or related
to the El Pinal Contract or the Contract Area other than
Mooreland's on-going obligation to pay the Unpaid Mooreland
Obligations and interest thereon as provided in Paragraph 2
hereof.
9. Confidentiality. Mooreland and Urbe each agree that the
terms and provisions of this Agreement and all information and
data acquired or obtained by it with respect to this Agreement
and the El Pinal Contract shall be considered confidential and
shall be kept confidential and not disclosed during the term of
this Agreement and for a period of five (5) years thereafter to
any person or entity, except:
(a) To the extent the terms and provisions of this Agreement or
such data and information are required to be furnished in
compliance with any applicable laws or regulations or pursuant
to any legal proceedings or because of any order of any court
binding upon Mooreland or Urbe;
(b) To a bona fide prospective purchaser or assignee of all or
any part of the amounts which Mooreland is entitled to receive
under this Agreement;
(c) To a bank or other financial institution to the extent
appropriate to assist Mooreland in arranging for funding of its
obligations under this Agreement; and
(d) Where any such data or information which, through no fault
of Mooreland or Urbe, becomes a part of the public domain.
Provided that disclosure as provided in Paragraph 9(b) and (c)
shall not be made unless prior thereto Mooreland has obtained a
written undertaking from the disclosee to keep confidential any
such terms, provisions, data or information so disclosed and not
to use the same except for the express purpose for which
disclosure is to be made.
10. Entire Agreement. TRC, Mooreland and Urbe agree and
acknowledge that the terms and conditions set forth herein
constitute the entire understanding and agreement of the parties
hereto with respect to the El Pinal Contract, Mooreland's or
Urbe's right to receive payments out of the Available Proceeds
and the transactions contemplated hereby and is intended to
supersede any prior agreements or communications between TCI,
TRC, Mooreland and Urbe in connection herewith, including,
without limitation, the Original Agreement. TRC, Mooreland and
Urbe further acknowledge and agree that this Agreement and the
SDLA/Tauramena/Rio Chitamena Agreement constitute the only
agreements between TRC, TCI, Mooreland and Urbe related to any
existing or future transactions of any kind and there are no
oral or written agreements between TRC or TCI (and any related
party) and Mooreland or Urbe (and any related entity) concerning
any areas other than the areas covered by the El Pinal Contract
and the Association Contracts. Nothing in this Agreement or
otherwise is intended to create any partnership, joint venture,
area of interest or other association between Mooreland and TRC
or TCI and any inferences to the contrary are hereby negated.
11. Governing Law and Jurisdiction. THE TERMS AND CONDITIONS
OF THIS AGREEMENT SHALL BE SUBJECT TO, AND GOVERNED BY THE LAWS
OF THE STATE OF TEXAS, U.S.A., WITHOUT REFERENCE TO THE CHOICE
OF LAW RULES OF SUCH STATE AND THE PARTIES HERETO CONSENT TO THE
EXCLUSIVE JURISDICTION OF THE FEDERAL AND STATE COURTS OF THE
STATE OF TEXAS, U.S.A.
Please indicate your acceptance of this Agreement and your
agreement to be bound by all of the terms and conditions of this
Agreement by signing in the space provided below.
Sincerely yours,
TRITON RESOURCES COLOMBIA,INC.
By:
Name:
Title:
ACCEPTED AND AGREED TO:
MOORELAND CORPORATION N.V.
By:
Name:
Title:
URBE PANAMA S.A.
By:
Name:
Title:
<PAGE>
JULY 15, 1994
REVISED
MEMORANDUM OF
UNDERSTANDING
OLEODUCTO DE CUSIANA
(CUSIANA PIPELINE)
<PAGE>
REVISED MEMORANDUM OF UNDERSTANDING
THIS AGREEMENT made as of the 15th day of July, 1994, by and among:
EMPRESA COLOMBIANA DE PETROLEOS - ECOPETROL (hereinafter referred to as
"ECOPETROL");
BP EXPLORATION COMPANY (COLOMBIA) LIMITED (hereinafter referred to as "BP"), a
corporation existing under the laws of England;
TOTAL EXPLORATIE EN PRODUKTIE MIJ B.V. (hereinafter referred to as "TOTAL"), a
corporation existing under the laws of the Netherlands;
TRITON COLOMBIA, INC. (hereinafter referred to as "TRITON"), a corporation
existing under the laws of the State of Delaware, United States of America; and
TRANSCANADA PIPELINES COLOMBIA LIMITED (hereinafter referred to as "TCPL"), a
corporation existing under the laws of Alberta, Canada; and
IPL ENERGY (COLOMBIA) LTD. (hereinafter referred to as "IPL"), a corporation
existing under the laws of Alberta, Canada;
(TCPL and IPL hereinafter collectively referred to as the "Canadian Group")
(Ecopetrol, BP, Total, Triton and the Canadian Group collectively called "the
Parties").
WITNESSETH:
WHEREAS, Ecopetrol, BP, Total and Triton (together referred to as the "Initial
Shippers") own interests in the Association Contracts for Santiago de las
Atalayas ("SDLA"), Rio Chitamena and Tauramena (the "Associations"),
particularly in the Cusiana and Cupiagua Fields located within the jurisdiction
of the Department of Casanare, Republic of Colombia ("the Fields");
WHEREAS, certain of the Initial Shippers, and other third parties, own interests
in the operation of other fields in the Republic of Colombia (collectively with
the Fields "the Production Centers");
WHEREAS, in order to transport crude oil to market, the Parties intend to invest
in: (i) existing and new pipeline transport systems from the Production Centers
to the Port of Covenas, and (ii) upgrading the Port's facilities (together
referred to as "the Project");
<PAGE>
WHEREAS, pursuant to the terms of a Memorandum of Understanding dated March 16,
1994 made between the Initial Shippers and the terms of a Letter of Intent (the
"Letter of Intent") dated April 12, 1994 made between the Parties, the Parties
have started to carry out certain activities in relation to the Project;
WHEREAS, the Parties wish to enter into this further Agreement to govern
operations INTER SE relating to the Initial Stage and the Construction Stage
from the effective date of this Agreement;
WHEREAS, the Initial Shippers intend that the Canadian Group will act as
operator of the Project facilities following construction; and
NOW, THEREFORE, for and in consideration of these premises, and the mutual
obligations of the Parties herein contained, and for other good and valuable
consideration, the Parties agree as follows:
FIRST: CONDITION PRECEDENT:
This agreement shall have no effect or validity unless and until Ecopetrol
notifies the other Parties that the board of directors of Ecopetrol has ratified
this Agreement. Articles Second to Tenth inclusive, Article Twelfth and Section
15.1 of this Agreement shall have no effect unless and until the Canadian Group
notifies the Initial Shippers that the respective main boards of directors of
the ultimate parent companies of IPL and TCPL have ratified this Agreement and
the ultimate parent companies of TCPL and IPL shall have provided the guarantees
referred to in 3.1(d)(i)E to each of the other Parties in a form acceptable to
the other Parties. Unless all the foregoing conditions have been satisfied on
or before August 17, 1994 this Agreement shall terminate on that date and,
subject to the provisions of Section 3.4, which the Canadian Group represents
and warrants that it has full authority as at the date first above written to
agree to and be bound by, the Parties shall have no further obligations to one
another in respect to this Agreement. The Canadian Group shall be entitled to
send observers to any meeting of the Steering Committee prior to August 17,
1994.
SECOND: OBJECTIVE:
The Parties commit to carry out technical and economic analyses, to perform the
studies and designs, to determine the technical specifications related to the
Project, to commence activities to incorporate a stock company "Sociedad
Anonima", or any other similar entity to which the Parties may agree (the "SA"),
and to order materials and place contracts for front end engineering work in
connection with certain parts of the Project (batching, as referenced in Section
3.1(a)(iv), and the "Bridge Case", as specified in Section 3.1(c)) (all together
referred to as the "Preliminary Activities"), and if they find the Project
feasible and agree to proceed with the Project, to order the construction and/or
upgrade of the Project, incorporating an SA subject to the conditions set forth
below to such end.
<PAGE>
THIRD: INITIAL STAGE:
3.1 In accordance with the above objective, the Parties commit to conduct the
following Preliminary Activities during the Initial Stage (the "Initial
Stage" shall mean the period of time commencing on the date hereof and
ending on the Decision Date, as defined in Article Eighth):
(a) TECHNICAL STUDIES: Arrange for technical studies which shall
contain, but not be limited to:
(i) Conceptual and preliminary engineering to the extent deemed
necessary by the Parties;
(ii) Studies regarding routing, permits and rights of way (ROW);
(iii) Environmental studies as required by Colombian law and which
may include spill contingency plans and pipeline and port
environmental and socioeconomic impact assessment; and
(iv) Batching.
(b) ECONOMIC STUDIES: Arrange for economic studies which shall
contain cost estimates and yearly cash flow projections over
the Project life and the SA financial projections.
(c) BRIDGE CASE: Develop the bridge case which shall consist of
the work and assets in the pipeline required to handle an
increase in production from the Fields from 150,000 barrels per
day to 185,000 barrels per day intended to take place by the
end of 1995.
(d) FINANCING STRUCTURE: The Parties shall identify and agree to
financing objectives and the design of a financing structure,
all of which shall be in compliance with Article Fifteenth and
that shall serve as a basis for the development of the Project.
As part of the activity which comprises the definition of the
Financing Structure, the following will be carried out:
(i) Identify possible lenders and potential investors as
described in Section 15.3 and produce a financing plan to
include the sources and type of funding, currencies,
debt-equity ratios and timing of debt and equity finance
which will ensure the financing of the Project (the
"Financing Plan"), without materially jeopardizing each
Initial Shipper's ability to raise
<PAGE>
funds for present and future upstream development operations
related to the Fields and, conversely, financing of the
upstream development should not materially jeopardize the
financing of the Project. More specifically, the Parties
agree that the Financing Plan include but not be limited to
the following aspects:
A. EQUITY PARTICIPATION: The Parties agree that the Canadian
Group will provide 40% of the equity such that the
holdings (subject to the following, "Equity
Participation") will be approximately:
Ecopetrol 20.0%
BP 15.2%
Total 15.2%
Triton 9.6%
Canadian Group 40.0%
------
100.0%
Should Canadian Group equity be provided in a percentage
above 40%, the Parties shall unanimously agree on how to
accommodate such additional Canadian Group equity. If the
Initial Shippers elect to have other potential investors
as described in Section 15.3 they shall notify the
Canadian Group of the adjustments to Equity Participations
agreed among the Initial Shippers.
It is understood that the return on funds invested in the
Project by the Canadian Group, together with the operating
fee to be received by the Canadian Group in the year 1998
and following, will be capped at approximately 14.5%
nominal after all Colombian taxes and not including
incentive bonuses on a basis to be agreed.
B. THROUGHPUT AND DEFICIENCY AGREEMENTS: The Initial
Shippers shall individually enter into throughput and
deficiency agreements (the "Throughput and Deficiency
Agreements") with the SA in the proportion that each
Initial Shipper is entitled to market its oil production.
These throughput interests (the "Throughput Interests")
are currently defined as follows:
Ecopetrol 60.0%
BP 15.2%
Total 15.2%
Triton 9.6%
------
100.0%
It is understood that these Throughput Interests are
commensurate with the evacuation requirements of the
Fields.
<PAGE>
These Throughput Interests are derived from the Initial
Shippers' interests in the Associations. It is envisaged
that other associations will have an interest in
participating to transport oil and, if agreed, these
Throughput Interest percentages will be amended
accordingly. It is intended that the SA will pledge
solely to senior debt lenders the Throughput and
Deficiency Agreements entered into by the Initial
Shippers.
C. TRANSPORTATION AGREEMENTS: Each Initial Shipper, as a
member of the Associations or other relevant associations
or other sources of production, and the SA shall enter
into Transportation Agreements to define their respective
rights and obligations in connection with transportation
services. The Parties intend that the tariffs will
provide an agreed return on the funds invested by the
Parties. The Parties will work before the formation of
the SA to define an efficient manner in which to achieve
this objective. Annexes A and B provide details of the
current intentions of the Parties in this regard.
D. NON RECOURSE: As equity investors, the Canadian Group
will have no obligation to raise nor guarantee any senior
debt. The senior debt raised by the SA will be
non-recourse to the Canadian Group other than to its
equity investment. It is the intention that whatever the
final covenant structure of the SA may be, the SA could
pledge only the Throughput and Deficiency Agreement.
E. PARENTAL GUARANTEE: TCPL and IPL will arrange for their
respective parent corporations to guarantee the equity
funding obligations of TCPL and IPL, respectively, under
this Agreement.
F. FINANCIAL TERMS: The Parties agree that the tariff will
provide, inter alia, for the following:
(a) a return on the funds invested by the Canadian Group
not to exceed 14% (on a cumulative internal rate of
return basis) in US dollars after the payment of all
Colombian taxes including withholding and remittance
tax subject to audit by the SA. Subject to (d)
below, a minimum return of 14% after Colombian tax
will be built into the tariffs each year;
(b) an annual payment in nominal US dollars to the
Canadian Group as pipeline operator and for the
provision of technical services, assistance or
benefits commencing January 1,1996:
(i) during 1996 and 1997 of $2.5 million per annum:
<PAGE>
(ii) during 1998 and 1999 of $2.5 million per annum
plus an incentive bonus that could provide an
additional return after Colombian tax of 1.5%
on the capital invested by the Canadian Group;
and
(iii) in 2000 and thereafter until termination of the
Pipeline Operating Agreement a payment of $2.5
million plus an incentive bonus that could
provide an additional return after Colombian
tax of 2.5% on the capital investment of the
Canadian Group.
In determining the above incentive bonuses,
consideration will be given to, inter alia,
revenue from third party shippers and
overutilizers, community relations, and
environment and safety matters, all related to
benefits realized currently or realizable in the
future by the Initial Shippers. Should the
benefits to the Initial Shippers be greater than
reasonably envisaged at this time, the total
return after Colombian tax ceiling in each year
may be breached based on a "profit sharing" type
of principle to be negotiated at the time.
The $2.5 million portion of the annual payment
referred to in (i), (ii) and (iii) above is
pre-tax and, at the election of the Initial
Shippers made on or before December 31, 1995, may
be composed of any combination of cash and/or
return on securities. If compensation includes
return on securities, such return will be derived
from a class of securities of the SA without any
voting rights. The principal amount of such
securities will be added to the balance of the
Canadian Group investment and will earn a return
of 14% nominal after all Colombian tax and be
amortized in the same manner as the remainder of
the Canadian Group investment.
During the Construction Stage the above fees
shall be capitalized. However, the Canadian
Group shall receive currently an amount equal to
any cash taxes on such fees.
(c) the Canadian Group's investment will accrue interest
during the Construction Stage at a 14% nominal
pre-tax rate;
(d) to an extent reduced by any obligation of the
Canadian Group to pay related cash taxes on any
deferral, in a limited number of years to be
agreed following start up of operations, a minimum
<PAGE>
of a 14% pre-tax return and cash taxes related to the
deferral would be built into the tariff each year
with the remainder of the Canadian Group's return in
circumstances and under terms to be agreed
capitalized on a basis to be agreed;
(e) the foregoing returns, payments and fees may be
deferred and capitalized to the extent that cash is
not available to pay them in circumstances and upon
terms to be agreed;
(f) the intention of the Parties that 96.67% of the
equity equivalent funds invested by the Parties will
be amortized. Such amortization will commence not
earlier than 2003, will be done on a straight-line
basis over ten years (except that the Parties will
negotiate a mechanism whereby any amortization
beginning in 2003 to 2007 may have a termination
date not later than 2017). If the SA meets a certain
test (which is to be negotiated) in any year, the
commencement of amortization may be postponed or
suspended until the following year. In any case,
amortization must commence not later than 2012
unless otherwise agreed by the Canadian Group. Once
the commencement of amortization has started, if new
information about new potential throughput becomes
available, the Parties may agree to extend the then
remaining amortization over a new ten year period.
In any case, sufficient documentation must be in
place to support the amortization schedule. In
addition, amortization is triggered over a ten year
period if the Canadian Group's contract is not
extended by its terms. If the Canadian Group is
otherwise terminated as operator by the SA pursuant
to the Pipeline Operating Agreement, amortization
will be made on the basis set forth above in this
paragraph;
(g) before the Decision Date and formation of the SA and
from time to time thereafter, the Parties shall
examine whether mutually advantageous opportunities
exist:
(i) to share the upside in the future earnings
potential of the pipeline from, for example,
earnings from third party or overutilizer
throughput and operator improvements or
efficiencies;
(ii) to change the balance of risk profile between
the Initial Shippers and the Canadian Group;
<PAGE>
such that agreement can be reached to
substitute the incentive fees referred to in
clause (b) by an arrangement based on sharing
this upside amongst equity owners and/or
revising the risk profile between the Parties;
(h) for the avoidance of doubt, at any time any Party may
offer value added services to the SA, and that this
is not limited to the Canadian Group.
(i) for greater clarity, any capitalized amounts
under (c) shall be compounded at 14% pre-tax to
the date of first amortization of the Canadian
Group's investment at which time the yield
shall be grossed up for all Colombian taxes
payable and added to the outstanding accrued
amount for amortization annually. Capitalized
amounts under (d) could also be added to the
outstanding balance of the Canadian Group's
investment or repaid on other terms to be
agreed.
(ii) Identify the Parties that intend to make
in-kind contributions and agree upon
preliminary appraisals and/or methods to carry
them out.
(iii) Cooperate in supplying all necessary
information to the Project financing entities,
including but not limited to export credit
agencies, multilateral agencies, commercial
banks, lessors and potential equity investors.
(iv) The Parties intend to optimize export credit
financing and to limit recourse by the senior
lenders to the said Throughput and Deficiency
Agreements. The Initial Shippers' obligations
arising from these Throughput and Deficiency
Agreements with the SA will be on a several,
not joint, basis in proportion to their
Throughput Interests. Any Initial Shipper may
at its own discretion elect to provide its
share of debt funding from its own resources.
In addition, the Parties are considering proposals
relating to asset transfers by the Initial Shippers
to the SA, which could have the effect of altering
the intended debt/equity ratio (70:30) of the SA
after completion of construction of the Project ("D:E
Ratio"), or the equity ownership percentages of
Ecopetrol and the Canadian Group set forth in
subparagraph (A) above. The Parties will have no
obligation to consider any such proposals that would
have the effect of altering the D:E Ratio so that the
proportion of equity exceeds 40%, or would have the
effect of reducing the percentage of the Equity
Participation by the
<PAGE>
Canadian Group to below 35%. Until this issue is
resolved, the cash calls referred to in Article Sixth
shall be met by the Canadian Group on the basis set
forth in the last sentence of Article Sixth, with
appropriate adjustments to be made after a decision
has been made regarding the proposals. In
circumstances where the cost of the Project
increases to a level such that the equity
contribution of Ecopetrol exceeds the value of the
assets contributed to the SA by Ecopetrol, and
provided that the D:E Ratio is not affected, the
Canadian Group will have the option to purchase
equity from Ecopetrol up to such amount that will
permit the Canadian Group to increase its Equity
Participation to up to 40%.
(e) DOCUMENTS: The agreements necessary for the pipeline's
construction, operation, exploitation and maintenance will be
prepared, discussed and drafted in final versions as a
Preliminary Activity. Said documents will include documents
(i) through (v) below and may include, among others, documents
(vi) and (vii) below:
(i) Construction Agreement;
(ii) Throughput and Deficiency Agreements and Transportation
Agreements;
(iii) Pipeline Operating Agreement;
(iv) Shareholders' Agreement;
(v) By-Laws;
(vi) Information memorandum; and
(vii) Environmental liability agreement, including but not
limited to damages arising from disruption of Public
Order.
3.2 The technical and economic Studies (the "Studies") and financing
structure and documents described in Sections 3.1(a), 3.1(b), 3.1(d) and
3.1(e), respectively, as well as the Shareholders' Agreement, By-Laws,
Throughput and Deficiency Agreements and Transportation Agreements.
These documents shall be completed to the satisfaction of all Parties as
a prerequisite to forming an SA.
3.3 The Parties currently intend that the Project and SA shall substantially
conform with the provision of Annexes A, B, C, D, E and H, however these
Annexes shall not be binding on the Parties.
3.4 EXCLUSIVE USE: While this Agreement is in full force and effect, none of
the Parties may use for the benefit of third parties or for its own
benefit, the information, data or documents which are obtained or which
result from the Preliminary Activities, without the express consent of
the other Parties. Upon termination of this Agreement for any reason,
all such information, data and documents shall vest in the Initial
Shippers who shall be free to use the same as they see fit without the
express consent of the Canadian Group, and thereafter the Canadian Group
shall not make use of (for the benefit of third parties or its own
benefit) the same or disclose the same to any third party except to the
extent that the said information, data or documents were contributed by
the Canadian Group in which
<PAGE>
case the Canadian Group (as well as the Initial Shippers) shall be free
to use the same as they think fit.
FOURTH: STEERING COMMITTEE:
In order to conduct the Preliminary Activities during the Initial Stage, the
Parties will appoint a committee consisting of one representative of each
Initial Shipper and two representatives of the Canadian Group (the "Steering
Committee"). The Canadian Group representatives shall together have one vote.
The Steering Committee shall determine the governing rules for the performance
of the Preliminary Activities. Those rules shall contain, among others,
provisions for the work program, budget, joint account, cash calls, in-kind
contributions, and default, as set out in the Accounting and Financial
Procedures referred to in Annex G. The decisions of the Steering Committee
shall be made by the affirmative votes of at least four of the five Parties
prior to the Decision Date and by unanimous vote thereafter, except as otherwise
specified herein. The Steering Committee will be superseded by a similarly
tasked body set up under the Articles of Incorporation and the By-laws of the
SA.
FIFTH: COORDINATOR:
During the Initial Stage, BP shall act as coordinator (the "Coordinator") in
conducting the Preliminary Activities with the mandate of the Parties and under
the direction of the Steering Committee. The Coordinator will be authorized
under the terms and conditions approved by the Steering Committee to hire the
services of third parties for the conduct of the Preliminary Activities,
except that the Coordinator shall not have any authority to bind the Parties
to financial, tax or legal mandates all of which must be signed by each
of the Parties.
SIXTH: BUDGET AND PAYMENTS:
The expenditures necessary for the conduct of Preliminary Activities are
described in the initial budget, attached hereto as Annex F, which is hereby
approved by the Parties. Cash calls (as referred to in Annex G) or in-kind
contributions (as referred to in Annex E) will be made by the Parties in
proportion to their Equity Participation (as specified in the Article Third
above), and shall be paid pursuant to the terms of the rules adopted by the
Steering Committee as provided for in the Article Fourth above. Immediately on
this Agreement coming into full effect pursuant to Article First above, the
Canadian Group will assume responsibility in all future cash calls for
Ecopetrol's Equity Participation share of Project costs until such time as the
Canadian Group have paid for 40% of all the costs incurred up to that time under
the Memorandum of Understanding referred to in the fourth recital to this
Agreement.
<PAGE>
SEVENTH: ADVANCED PAYMENTS:
While Preliminary Activities are being carried out, any disbursement, advanced
payment or expense incurred shall be charged to the Parties in proportion to
their respective Equity Participation (as specified in the Article Third above).
When and if such SA is formed, the total amount of such disbursements shall
either be transferred by the Parties to the SA or shall be contributed to the SA
as Equity Participation or shareholder loans.
EIGHTH: CONSTRUCTION STAGE:
Upon completion of the Preliminary Activities to the unanimous satisfaction of
the Initial Shippers, but not necessarily after the formation of the SA, the
Initial Shippers shall select a date (the "Decision Date") on which the Initial
Shippers shall decide whether or not to commence the procurement and
construction of the Project facilities. The decision to commence construction
of the Project facilities shall commence the construction phase (the
"Construction Stage"). Such decision shall require the unanimous agreement of
the Initial Shippers.
If the Initial Shippers determine to proceed with the Construction Stage, this
Agreement shall continue in full force and effect until superseded by the
By-laws of the SA and by other agreements finally agreed pursuant to Section
3.1(e) above. If the Initial Shippers do not unanimously agree to proceed with
the Construction Stage, this Agreement shall be terminated and the provisions of
Sections 3.4 and 12.5 will apply.
NINTH: OTHER INVESTMENTS:
This Agreement shall not prevent some or all of the Parties from independently
or collectively carrying out studies and concluding agreements for the
construction of and/or upgrading of other pipeline transportation facilities or
extensions in the Republic of Colombia, including those at the Port of Covenas,
and other installations, that may be required for the progressive increase of
the evacuation capacity of the Fields.
TENTH: LIABILITIES AND INDEMNITIES:
The Coordinator shall be liable only to the extent of its Equity Participation
(as specified in Article Third above) in respect of, and each Party shall to the
extent of its Equity Participation indemnify the Coordinator against, any loss,
injury or damage of any kind whatsoever and suffered by any person whomsoever
(including any legal costs or expenses or other disbursements whatsoever made in
compromise or settlement of any claim) in connection with or arising out of this
Agreement or the relationship or activities of the Parties hereunder
notwithstanding that such loss, injury or damage shall arise out of the acts,
faults or omissions of the Coordinator, its employees, servants, affiliates or
sub-contractors in the performance or nonperformance of the Coordinator's
obligations hereunder except in cases of the willful misconduct or gross
negligence of the Coordinator or by any of the Coordinator's corporate officers
or regular salaried staff.
The Coordinator shall indemnify the other Parties against any loss, injury or
damage of any kind whatsoever and suffered by any person whomsoever (including
any legal costs or expenses or
<PAGE>
other disbursements whatsoever made in compromise or settlement of any claim) in
connection with or arising out of this Agreement or the relationship or
activities of the Parties hereunder, which shall arise out of the willful
misconduct or gross negligence of the Coordinator or of any of the Coordinator's
corporate officers or regular salaried staff provided always that the
Coordinator shall not be liable for loss of throughput (or loss of production
resulting from loss of throughput), loss of profits or opportunity or any other
consequential losses in excess of the value of its Equity Participation share.
Subject to the above provisions of this Article Tenth, each Party agrees to the
extent of its Equity Participation to indemnify each other Party in respect of
any and all actions, costs, claims, damages and demands, arising out of or in
connection with any claim against, or liability of, the latter where such claim
is made by, or the liability is to, any third party and arises out of or in
connection with this Agreement or any activities conducted pursuant to this
Agreement.
In accordance with Annex G, if any Party defaults in paying any monies due
pursuant to Articles Sixth and Seventh above or the foregoing provisions of this
Article Tenth then the Parties other than the defaulting Party shall assume
liability for and shall pay the total shortfall in proportion to what their
respective Equity Participation shares bear to the total amount of the
non-defaulting Parties' Equity Participation shares of such monies to the Party
to which the monies are due, and shall be entitled to recover the same from the
defaulting Party, together with interest thereon at 5% per annum above the prime
interest rate as quoted from time to time by Morgan Guaranty Trust Company of
New York. For the period that any Party is in default as aforesaid it shall
have no vote in the Steering Committee.
ELEVENTH: TRANSFER OF INTEREST:
11.1 No Party shall transfer its respective interest, or any part of its
respective interest, under this Agreement without the unanimous consent
of the Parties, which shall not be unreasonably withheld.
Notwithstanding the foregoing sentence, any Party may transfer its
interest to another entity that is wholly owned by it or wholly owned
(directly or indirectly) by the ultimate parent of such Party provided
that the transferee is of at least comparable credit quality as the
transferor or is guaranteed by an entity of at least comparable credit
quality. TCPL and IPL may also transfer their interests under this
Agreement to an entity jointly owned (directly or indirectly) by TCPL and
IPL, provided that by means of guarantees or otherwise such entity is of
credit quality comparable to TCPL or IPL.
11.2 If either of the boards of directors of IPL and TCPL ratifies this
Agreement (the "Ratifying Party") and the board of directors of the other
Canadian Group company does not ratify this Agreement then the Ratifying
Party may by notice to the Initial Shippers
<PAGE>
before August 17, 1994 elect to participate in the Project to the full
extent of the Canadian Group and to assume all the rights, duties,
obligations and liabilities of the Canadian Group under this Agreement.
However, in such event the Initial Shippers reserve the right to
terminate this Agreement pursuant to Section 12.1.
TWELFTH: TERMINATION:
12.1 At any time prior to the incorporation of the SA, the Initial Shippers
voting unanimously may terminate this Agreement, provided that the
Initial Shippers shall not exercise such right capriciously.
12.2 At any time prior to the incorporation of the SA, or the Decision Date if
earlier, the Canadian Group may terminate this Agreement by giving notice
to the other Parties if any of the following conditions has been
satisfied:
(a) the Initial Shippers decide not to appoint the Canadian Group
as post-completion operator (which appointment may be in any
form that is in substance contemplated in Annex C);
(b) the financial arrangements are not in accordance with Section
3.1(d)(i)F, Financial Terms;
(c) the Parties are unable to agree on the sharing of risks in
relation to environmental liabilities identified from the
environmental studies and environmental damage resulting from
terrorist activity;
(d) the current cost estimate for Phase II construction work of US
$1.6 billion in 1994 money and excluding capitalized interest,
as shown in Annex A part III, is increased by 40% or more;
(e) the current cost estimate for existing assets and Phase I
constructed facilities referred to in Annex E (which excludes
the ODC pipeline assets) to be transferred to the SA of not
more than US $0.3 billion is increased by 30% or more;
(f) there is no realistic possibility (as determined by the
unanimous decision of the Parties) of the SA/Project being
financed without the portion of the capital structure funded by
participating subordinated debt and/or common equity exceeding
40%; or
(g) on the basis of the economics of the Project agreed by the
Initial Shippers, the Canadian Group cash investment
obligations in the Project are less than US $200 million in
1994 dollars.
<PAGE>
12.3 At any time prior to the incorporation of the SA, the Canadian Group may
terminate this Agreement by giving notice to the other Parties (a) if the
Project is downsized from that envisaged by Annex D so that the total
Project cost (including the value of contributed assets) is less than US
$1.2 billion or (b) if the studies and/or documents referred to in
Section 3.2 are not completed to the satisfaction of the Canadian Group.
12.4 On termination of this Agreement pursuant to any of the above provisions
of this Article Twelfth or Article Eighth, Ecopetrol shall assume (i) all
the rights of the Canadian Group under this Agreement in so far as such
rights correspond to Ecopetrol's then existing rights hereunder (any
other rights of the Canadian Group then being extinguished), and (ii) all
the obligations of the Canadian Group that had arisen under this
Agreement insofar as such obligations correspond to Ecopetrol's
obligations hereunder. At the same time, any property interest acquired
by the Canadian Group pursuant to this Agreement shall vest immediately
in Ecopetrol and/or any other Party that has transferred an interest to
the Canadian Group, so that the Initial Shippers shall own such interests
in the following proportions:
Ecopetrol 60.0%
BP 15.2%
Total 15.2%
Triton 9.6%
12.5 If this Agreement is terminated pursuant to Article Eighth or Sections
12.1, 12.2 or 12.3(b), then in consideration of the assumption of rights
and obligations and the vesting of interests referred to in Section 12.4,
Ecopetrol, and/or any other Party that has transferred an interest to the
Canadian Group, shall promptly repay all monies contributed by the
Canadian Group under this Agreement. Such repayment shall be made
without interest and shall be in the currency of the original
contribution. If this Agreement is terminated pursuant to Section 12.3,
(a) the Canadian Group shall not be entitled to any repayment of monies
they have contributed.
12.6 Save as provided above in this Article Twelfth and Section 3.4 no Party
shall have any liability to any other Party as a result of the
termination of this Agreement.
THIRTEENTH: NOTICES:
13.1 All notices and other communications between the Parties in relation to
this Agreement, in order to be valid, shall be in writing and shall be sent by
facsimile or by hand delivery to the Parties at the following addresses:
EMPRESA COLOMBIANA DE PETROLEOS
Carrera 13 No. 36 - 24
Santafe de Bogota, D.C. - Colombia
Telefax: (571) 287-0041
ATTENTION: Juan Maria Rendon
<PAGE>
BP EXPLORATION COMPANY (COLOMBIA) LTD.
Edificio Seguros del Comercio
Carrera 9A No. 99 - 02
Post Office Box 59824
Santafe de Bogota, D.C. - Colombia
Telefax: (571) 618-2847/611-1127
ATTENTION: Nicholas P. Connolly
TOTAL EXPLORATIE EN PRODUKTIE MIJ B.V.
Calle 72 No. 10 - 03
Piso 8
Apartado Aereo 251375
Santafe de Bogota, D.C. - Colombia
Telefax: (571) 235-8453
ATTENTION: Jacques de Boisseson
TRITON COLOMBIA, INC. copied to TRITON COLOMBIA, INC.
Carrera 9A No. 99 - 02 6688 North Central Expressway
Oficina 407 Suite 1400
Santafe de Bogota, D.C. - Colombia Dallas, Texas 75206
Telefax: (571) 618-2553 Telefax: (214) 691-0355
ATTENTION: Ivan Fajardo ATTENTION: Thomas Finck
TRANSCANADA PIPELNES COLOMBIA LIMITED
c/o TransCanada PipeLines Limited
TransCanada PipeLines Tower
111 Fifth Avenue S.W.
P. O. Box 1000, Station M
Calgary, Alberta, Canada T2P 4K5
Telefax: (403) 267-2668
ATTENTION: A.J. Epp
IPL ENERGY (COLOMBIA) LTD.
31st Floor Bow Valley Square 2
205 - 5th Avenue S.W.
Calgary, Alberta, Canada T2P 2V7
Telefax: (403) 231-3920
ATTENTION: Benny J. Phillips
13.2 A Party may change its address for notice by providing notice to the
other Parties.
13.3 Notices by facsimile shall be presumed received on the working day at the
place of receipt next following the date of transmission unless receipt
of the notice is acknowledged earlier. Each Party shall immediately
acknowledge receipt of any notice by facsimile when requested to do so by
the sender.
<PAGE>
FOURTEENTH: GOVERNING LAW:
The construction, validity and performance of this Agreement shall be governed
by and interpreted in accordance with the laws of the State of New York, United
States of America, except for the conflict of laws principles thereof.
FIFTEENTH: GENERAL:
15.1 (a) The rights, duties, obligations, and liabilities of the Parties
under this Agreement shall be several in proportion to their
Equity Participation and not joint or collective. The
execution of this Agreement does not create any corporation,
partnership, or an association in any form. The performance of
the works during the Initial Stage does not imply the
establishment and/or exploitation of commercial enterprise or
of any other type of enterprise.
(b) This Agreement is not intended and shall not be construed to
provide, directly or indirectly, for any joint sale or joint
marketing of petroleum.
(c) The intent of the Parties is that the Canadian Group shall
operate in the Project through a single vehicle owned jointly
by the members of the Canadian Group.
15.2 The consent of the Parties to any noncompliance, in whole or in part, of
the obligations provided for under this Agreement shall only be effective
when made expressly in writing, and only with respect to the obligations
which are specifically referred to.
15.3 The Memorandum of Understanding referred to in the fourth recital to this
Agreement shall continue in force until this Agreement comes into full
effect pursuant to Article First above, whereupon it shall be superseded
by this Agreement.
The Letter of Intent shall be terminated and superseded by this
Agreement. The Initial Shippers have agreed to progress discussions
exclusively with the Canadian Group so long as this Agreement is in
effect except that the Initial Shippers shall continue discussions with
potential investors linked to supply of materials or services.
If this Agreement terminates pursuant to Article First, then the
Memorandum of Understanding shall continue in force between the Initial
Shippers. If this Agreement terminates pursuant to Article Twelfth
above, then the Memorandum of Understanding shall automatically be
reinstated as between the Initial Shippers.
15.4 FOREIGN CORRUPT PRACTICES
(a) The Parties are all fully aware of the provisions of the United
States Foreign Corrupt Practices Act of 1977, as amended (the
"Act"), and will take no action and make no payment in
violation of, or which might cause any Party, or their
subsidiaries or affiliates, to be charged with violation of
such Act.
<PAGE>
b) No Party will make, directly or indirectly, any payment loan or
gift, or any offer, promise or authorization of such payment,
loan or gift of money or anything of value, directly or
indirectly, to or for the use or benefit of:
(i) any Foreign Official (as defined in the Act),
(ii) any political party in any foreign country, or
(iii) any other person under circumstances in which the Party knows
or has reason to know that all or any portion of such money
or thing of value will be offered, given or promised, directly
or indirectly, to any such Foreign Official or political party.
As used herein the term "foreign" means outside the United
States.
Each Party shall respond promptly, and in reasonable detail, to any
notice from any other Party or its auditors pertaining to the
above-stated warranty and representation and shall furnish documentary
support for such response upon request from such other Party.
15.5 The content and timing of any press release and announcements regarding
any of the matters provided for in this Agreement shall require the prior
written approval of each of the Parties. The foregoing shall not prevent
any Party making any announcement which it is required to make by an
applicable law of competent judicial, governmental or other authority or
in accordance with the requirements of any recognized stock exchange or,
in the case of the Coordinator/operator, relating to an operational
emergency, provided that, in any such case, a copy of the announcement
shall be furnished to the other Parties prior to publication.
15.6 ARBITRATION
(a) Subject to subparagraph (e) below, any dispute, controversy or
claim arising out of or relating to this Agreement, or the
breach, termination or invalidity thereof shall be settled by
arbitration in accordance with the UNCITRAL Arbitration Rules
in effect on the date of this Agreement. The arbitration shall
be the sole and exclusive forum for resolution of the dispute
or controversy, and the award shall be final and binding.
Judgment thereon may be entered by any court having
jurisdiction.
(b) The number of arbitrators shall be three, each of whom shall be
disinterested in the dispute or controversy and shall have no
connection with any Party. Should the services of an
appointing authority be necessary, the appointing authority
shall be the American Arbitration Association. The Parties and
the appointing authority may appoint from among the nationals
of any country, whether or not a Party is a national of that
country.
<PAGE>
(c) The place of arbitration shall be New York, New York. The
arbitration shall be conducted in the English language and any
foreign-language documents presented at such arbitration shall
be accompanied by an English translation thereof.
(d) The Parties consent that the United States District Court for
the Southern District of New York shall have jurisdiction with
respect to all aspects of the enforcement of the arbitration
provisions of this Agreement.
(e) Any matter expressed in this Agreement to be a matter for
future agreement of the Parties or any of them shall not, in
the event of failure of decision or agreement, constitute a
dispute or difference to be referred to or settled by
arbitration proceedings.
15.7 In case any provision of this Agreement shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
15.8 This Agreement shall extend to, be binding upon, and enure to the benefit
of the Parties and their respective successors and permitted assigns.
15.9 TCPL and IPL intend that their respective interests in the Project will
ultimately be held by a corporation or corporations to be incorporated in
Colombia.
15.10 The Parties, except Ecopetrol, acknowledge that their activities pursuant
to this Agreement will be substantially performed outside of Colombia.
15.11 The Agreement is written and executed in both the Spanish and English
languages.
15.12 This Agreement represents the entire agreement of the Parties and may
only be amended by an instrument in writing signed by all the Parties.
<PAGE>
IN WITNESS WHEREOF, the Parties have caused this instrument to be duly executed
by their respective authorized officer effective as of the date first above
written.
EMPRESA COLOMBIANA DE PETROLEOS
/S/ Juan M. Rendon
-------------------------------------------------------
By: Juan Maria Rendon
Title: President
BP EXPLORATION COMPANY (COLOMBIA) LIMITED
/S/ Nicholas P. Connolly
-------------------------------------------------------
By: Nicholas P. Connolly
Title: Legal Representative
TOTAL EXPLORATIE EN PRODUKTIE MIJ B.V.
/S/ Ashley S. Dodd
-------------------------------------------------------
By: Ashley S. Dodd
Title: Alternate Legal Representative
TRITON COLOMBIA, INC.
/S/ Ivan Fajardo
-------------------------------------------------------
By: Ivan Fajardo
Title: General Manager
TRANSCANADA PIPELINES COLOMBIA LIMITED
/S/ A. J. Epp
-------------------------------------------------------
By: A.J. Epp
Title: Vice President
/S/ M. Durnin
-------------------------------------------------------
By: M. Durnin
Title: Vice President
IPL ENERGY (COLOMBIA) LTD.
/S/ Benny J. Phillips
-------------------------------------------------------
By: Benny J. Phillips
Title: President
/S/ Brian T. Vaasjo
-------------------------------------------------------
By: Brian T. Vaasjo
Title: Vice President
<PAGE>
ANNEX A - THE SA
PART 1 - STRUCTURE AND FINANCING
1. General
If the Initial Shippers decide to proceed with the Project the Parties
shall, as soon as is reasonably practicable, establish the SA to design,
finance, construct, own and operate the Project assets. The Parties
intend that the following provisions of Annex A shall apply to the SA but
acknowledge that it may be impossible or impracticable to comply with
some of the provisions as a result of finance market conditions or for
other reasons. In such event, the Parties shall substitute alternative
provisions which, as far as possible, carry into effect the intent of
this Annex A.
It is the clear intent of the Parties that the obligations of the Initial
Shippers with regard to their Throughput and Deficiency Agreement (TDA)
obligations be entirely several.
The Initial Shippers continue to evaluate various credit structures for
financing of the SA. The financing of the SA should not jeopardize the
existing and or future financing raised by the Initial Shippers with
respect to the upstream and, conversely, the financing of the upstream
should not materially jeopardize the existing and/or future financing
raised by the Initial Shippers with respect to the Project.
2. Ownership
The SA shall be a Sociedad Anonima incorporated under Colombian law.
Initially, the shares will be held by the following companies (or by
other companies that are direct or indirect wholly owned subsidiaries of
the ultimate holding companies thereof) in the approximate percentages
below.
%
---
Ecopetrol 20.0
BP 15.2
Total 15.2
Triton 9.6
Canadian Group 40.0
-----
100.0
<PAGE>
It is expected that the ownership percentages will be based on (i) the
initial proportionate capacity reservations of the Initial Shippers (see
Annex B) which will take into account, amongst other things, the sources
of production listed below, (ii) the projected cost of each pipeline
segment and (iii) assets transferred into the SA. With respect to (i)
above, the aggregate ownership percentages of Ecopetrol and the Canadian
Group shall be based on Ecopetrol's TDA. In any event the ownership
percentage of the Canadian Group shall be at least 35% and in certain
cases could reach 40%.
Assumed Required
Source of Production Throughput (mb/d)
-------------------- -----------------
Cusiana/Cupiagua 500
Other Fields from the Llanos 56
---------------------------- ---
Total 556
3. Capitalization
The SA shall be capitalized as follows:
%
---
Senior Debt 70
Subordinated Financing 30*
---
100
* Equity and subordinated debt including possibly participating
subordinated debt.
However the Parties reserve the right to alter the capital structure to a
minimum of 60% Senior Debt and a maximum of 40% Subordinated Financing.
4. Senior Debt
The Parties shall endeavor to raise the senior debt of the SA as a
combination of export credit agency ("ECA") financing, bank financing,
capital markets bond financing and loans from the Initial Shippers. The
precise allocation of senior debt will be a function of (i) market
conditions at the time; (ii) the availability and terms and conditions of
ECA financing; (iii) the availability of financing provided by the
Initial Shippers and their affiliates or any other entity; (iv) the
ultimate throughput capacity of the Project and the level of proven
reserves in the Fields; and (v) the terms and conditions of the TDA to be
entered into by the Initial Shippers and the SA in accordance with Annex
B. The senior debt financing shall be secured solely by the TDA executed
by the Initial Shippers with no recourse to any other assets of the SA or
the SA itself.
<PAGE>
The Initial Shippers shall optimize the amount and term of ECA financing
and might request the assistance of the Canadian Group to that end. As
soon as a reasonable estimate of the availability of ECA financing can be
established, the Initial Shippers shall put in place the remainder of the
financing with the intention that the pipeline shall be built a date
certain. The senior debt, including capital markets financing, loans by
the Initial Shippers or their affiliates or any entity acting on their
behalf and ECA/bank financing, shall in aggregate represent 70% of the
capital costs.
[The Initial Shippers shall accept an obligation to commence tariff
payments in a minimum amount adequate to cover operating costs, cash tax
obligations and senior debt principal and interest on a date certain,
regardless of whether the pipeline has been completed or the upstream
development finalized.] [It is the position of the Canadian Group that
its obligations with respect to funding shortfalls associated with
completion risk are limited to the limit of its equity funding
obligation. In addition, the Parties are still discussing methods of
addressing completion risk.]
5. Subordinated Debt ("SD"):
It is intended that 29.0% of the capitalization shall be composed of SD
provided in the same proportions as the ownership of the SA as referenced
above.
The Parties shall optimize the precise structure of the SD so as:
(i) to provide for the repayment to the Canadian Group, over an
initial term of approximately 17-18 years (extendible based on
a trigger mechanism to be negotiated), of the SD which it
contributes together with a return not to exceed 14% (after
local Colombian taxes but including a return of capital) on the
aggregate of such SD and the common equity contributed by the
Canadian Group, such return to include any dividends or other
distributions on common equity;
(ii) to minimize the amount of cash "trapped" in the SA as a result
of the provisions of Colombian Tax and Accounting guidelines;
and
(iii) to ensure that the terms of the SD are such that, for purpose
of holders of senior debt, the SD will be viewed as the
equivalent of equity.
*7. Interest During Construction Period:
[Until the completion of construction (defined as the completed
construction and asset transfers, as defined in Annex D), the
subordinated debt will be capitalized.]
- - ------------------------------
* [sic.]
<PAGE>
*6. Common Equity:
Equity ownership shall at the discretion of the Initial Shippers be
divided into two or more classes of stock with different voting rights.
*7. Parity:
The ownership share of common equity of each of the Parties shall always
be equal to its ownership share of SD (except to the extent that the
Initial Shippers choose to exercise their right to make certain payments
for operating services, intellectual property and technical services with
the issuance of SD to the Canadian Group).
*8. Contribution of Equity and SD:
Each of the Initial Shippers may contribute all or some of their share of
common equity and SD in the form of existing assets. It is the intention
of the Initial Shippers to contribute their interests in the Cusiana pump
station and Cusiana to El Porvenir pipeline, and Ecopetrol shall
contribute its unencumbered interest in the 30" La Belleza to Vasconia
pipeline.
Assets funded under the Revised Memorandum of Understanding by all the
Parties shall be contributed.
- - -------------------------
* [sic.]
<PAGE>
ANNEX A
PART 2 - GOVERNANCE
The Parties shall work together prior to incorporation of the SA to develop the
governance rules of the SA. The following key principles for governance rules
are intended by the Parties to reflect their current thinking on the subject.
It is acknowledged that the details of governance are of vital importance to
each of the Parties and sufficient time and consideration must be given to their
development. It is anticipated that the governance rules will be contained in
the by-laws of the SA and in a shareholders' agreement made among all the
Parties and will, subject to the provisions described below, give effect to
voting in proportion to each shareholder's interest in the SA. Voting will take
place at the board and/or shareholder level in order to give effect to the
provisions described below. Amendments to the bylaws and shareholders'
agreement will require the consent of each of the Parties. It is currently
expected that the board will consist of six directors, one for each of the
Initial Shippers and two for the Canadian Group (who will vote together as a
block).
1. Subsequent to the formation of the SA referred to in Article Second of
the Revised Memorandum of Understanding ("MoU"), all of the following
decisions will require the approval of all of the directors or 91% of the
voting shares of the SA:
a. Capital program and related budget [and operating budget(1) ](2);
b. Major financing beyond the initial construction financing of the SA
itself as set forth in Annex A. Part 2;
c. Change in business objective of the SA;
d. Disposal of material part of the business by the SA;
e. Pledging, leasing, sale or disposal of material assets by the SA;
f. Winding up or major restructuring of the SA;
g. Merger or acquisition involving the SA;
h. Change to dividend/SD interest/cash distribution/amortization policy;
i. Authorization by SA of agreements and structures referred to in
Article 3.1 of the MOU, and approval of amendments thereto or
terminations thereof and SD, if any;
j. Adoption of the SA's pipeline regulations for transportation, which
are to be agreed and incorporated into transportation agreements, and
approval of material amendments thereto.
- - -------------------------
(1) Bracketed text reflects Canadian Group concerns.
(2) The Parties intend to address the question of expansion/upgrade and the
financing thereof in the case where not all Parties wish to participate.
<PAGE>
2. Other decisions, [including the adoption and amendment of the operating
budget and routine annual capital program matters,](3) will require the
approval of four of the six directors.
3. Whether before or after completion, removal of the construction operator
and the pipeline operator may only occur in accordance with the terms of
the Construction Agreement and the Pipeline Operating Agreement, and the
decision will require the approval of three of four of the non-interested
directors.
4. Subject to 1 and 3 above:
a. In the negotiation of the incentive arrangements between the SA and
the pipeline operator, the decisions of the SA will require the
approval of 2/3 of the non-interested directors.
b. Adoption of any SA policy with regard to government or community
affairs and any dealings with government and regulatory bodies (other
than dealings consistent with SA policy) will require the approval of
four of the six(4) directors.
c. The execution/amendment/waiver of any terms of/termination of any
material contract between the SA and a shareholder or any affiliate of
a shareholder will require the approval of 2/3 of the non-interested
directors.
5. The Parties are considering the inclusion of a second class of non-voting
equity to accommodate possible future sales of equity to non-Party
investors.
6. The governance rules set forth in the by-laws and shareholders' agreement
will be in accord with Colombian law.
- - -------------------------
(3) Canadian Group concern: this should require a positive vote by the
Canadian Group
(4) The Canadian Group wishes this to be a Major Decision
<PAGE>
ANNEX A
PART 3 - CAPITAL REQUIREMENTS OF PROJECT
The estimated projected costs in US $ millions (up to December 31, 1994 in MOD;
beyond January 1, 1995 in $94 real) of the Project are as follows:
<TABLE>
<CAPTION>
1994 1995 1996 1997 Total
---- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C>
Existing Assets 273* 273
Bridge 6 13 19
Batching 5 7 12
PHASE II 16 778 718 89 1601
----- ----- ---- ---- ----
Total 300 798 718 89 1905
</TABLE>
The above figures are based on the 500 mb/d Cusiana/Cupiagua case and are
preliminary estimates, subject to change based on further engineering.
The above estimated costs in MOD and including capitalized interest are:
<TABLE>
<CAPTION>
1994 1995 1996 1997 Total
---- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C>
Existing Assets 273* 273
Bridge 6 13 19
Batching 5 7 12
Phase II 16 798 756 96 1666
Sub Total 300 818 756 96 1970
CAPITALIZED INTEREST 0 72 167 243 482
---- ---- ---- ---- ----
Total 300 890 923 339 2452
<FN>
* Asset Transfers
</TABLE>
<PAGE>
ANNEX A
PART 4 - FINANCE PLAN PRINCIPLES
DURING REVISED MOU
From August 17, 1994, the Canadian Group picks up 40% of the cash calls plus
Ecopetrol cash calls until Ecopetrol is reimbursed for 2/3 of costs prior to
August.
POST SA
INITIAL SHIPPERS
Initial Shippers contribute (or sell for equity and SD) the Central Llanos
upgrade assets, the Cusiana to El Porvenir line,
and the tanks and pumps at Cusiana, for a total value of approximately $272
million.
Initial Shippers commit irrevocably to provide (if necessary) additional cash to
reach 30% equity. This cash will be provided to the SA only after raising
senior debt.
CANADIAN GROUP
Canadian Group is obligated to contribute approximately $120 million against
Initial Shippers' asset contribution/sale. This amount will be paid in cash
over time according to the cash call demands forecast in the Finance Plan. The
Canadian Group will commit irrevocably to provide the rest of its equity share
in cash to the SA after raising senior debt.
BOND FINANCING
Up to $600 million of bond/bank financing to be raised during 1995 and 1996.
Initial Shippers not opting for bond financing may provide shareholder loans or
bank financing up to their pro rata share.
EXPORT CREDITS
Up to 30% of all costs funded by export credits from 3Q 1995 through to end
1996. Initial Shippers opting instead to provide shareholder loans will provide
their pro rata share of funds as ECA credits are drawn down.
<PAGE>
<TABLE>
<CAPTION>
Annex A - Exhibit 1
SOURCES AND USES OF FUNDS
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1994 1995 1996 1997 1998
4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q
USES OF FUNDS
Purchase of Phase 1 assets 273 273
Main expenditure 27 27
Equipment and Construction 81 202 257 277 243 228 149 136 88 6 0 0 1,670
1,971
Senior debt Interest at 9.0% 0 0 6 10 16 22 28 31 32 32 33 34 244
PSD Interest at 14.0% 11 14 15 16 17 17 18 19 24 28 29 30 237
debt service reserve 481
total 301 91 216 278 303 276 267 195 186 144 66 62 64 0 2,452
cumulative 301 392 608 887 1,190 1,466 1,733 1,927 2,113 2,258 2,324 2,388 2,452 2,452
SOURCES OF FUNDS 2,807 301 393 733 888 1,191 1,468 1,734 1,926 2,115 2,261 2,322 2,384 2,450 2,450
Senior debt 1,476
bonds 200 100 0 300
ECA 115 113 207 193 110 0 0 0 738
Shareholder loans 44 20 42 37 35 20 0 0 0 197
accrued interest 0 0 6 10 18 22 28 31 32 32 33 34 0 244
ECP asset surplus 0 0
bank debt 44 22 0 66
Equity and PSD 831 907
CG assets 11 11
33.3% cash 81 39 10 50 41 0 0 1 222
accrued interest 0 0 3 5 5 5 5 5 6 6 10 10 10 73
ECP assets 158 158
26.3% cash 0
accrued interest 0 6 6 6 6 6 7 7 7 7 8 8 8 81
EP assets 50 50
15.2% cash 3 33 19 0 0 0 55
accrued interest 0 2 2 2 2 2 2 2 2 4 4 5 5 33
Total assets 50 50
15.2% cash 3 33 19 0 0 0 55
accrued interest 0 2 2 2 2 2 2 2 2 4 4 5 5 33
Triton assets 92 92
9.6% cash 2 21 12 34
accrued interest 0 1 1 1 1 1 1 1 1 2 3 3 3 21
total 37.0% 967
301 92 340 155 303 277 267 193 187 146 61 63 66 0
cumulative 301 393 733 888 1,191 1,468 1,734 1,926 2,115 2,261 2,322 2,384 2,450 2,450
surplus/deficit 1 1 125 1 1 2 2 0 1 3 -4 -4 -2 -2
</TABLE>
The figures shown in this table are indicative and do not represent a
commitment of the parties at this stage.
<PAGE>
ANNEX B - TRANSPORTATION AGREEMENTS
Introduction
It is the intention of the Parties to design and build the Project such that the
whole of the design capacity is reserved to the Initial Shippers. Such reserved
capacity shall be used for the transportation of oil owned by the Initial
Shippers. The Initial Shippers will also accommodate within their reserved
capacity in the El Porvenir to Vasconia segment of the pipeline other production
with an annual average of 56 mb/d.
Throughput And Deficiency Agreements
The Initial Shippers shall severally enter into Throughput and Deficiency
Agreements ("TDA") with the SA.
By means of the TDA, the Initial Shippers shall assure that if all the SA
revenues (after the payment of operating costs, maintenance capital and cash
taxes) are not sufficient to cover the payments of senior debt principal and
interest, then the Initial Shippers will be severally liable for their
Throughput Interest shares of the difference (the "Deficiency"), provided that
such difference is not caused by a partial or complete failure on the part of
one or more of the Initial Shippers to pay tariff to the SA.
Any payments to cover a Deficiency shall be considered as advance tariffs
payments.
A specific Clause shall be included in the TDA to cover situations under which
the Deficiency is due in whole or in part to the failure of an Initial Shipper
to pay the tariff due to the SA and such Clause must ensure several liability.
The TDA can be pledged by the SA, and can be used as security to raise SA
funding. The TDA shall have a term that will be at least as long as the term of
the underlying senior debt.(1)
It is the clear intent of the Parties that the obligations of the Initial
Shippers with regard to their TDA be entirely several.
It is an objective of the finance plan to schedule debt repayments to commence
after such time as the SA is reasonably expected to be receiving sufficient
tariff income from operations to cover such debt payments.
- - -------------------------
(1) Canadian Group is concerned about liquidity after senior debt is paid
<PAGE>
Transportation Agreements
Each Initial Shipper, as a member of the SDLA/Tauramena/Rio Chitamena
Associations or other relevant Associations or other sources of production, and
the SA shall enter into Transportation Agreements to define their respective
rights and obligations in connection with transportation services. There may be
separate Transportation Agreements for each segment of the Project. The
Transportation Agreements shall have a duration with respect to each Initial
Shipper that shall terminate upon the termination of such Initial Shipper's
right to produce petroleum from the Fields or permanent cessation of production
from the Fields, whichever is the earlier. The Transportation Agreements are
intended not to burden, impair or limit the rights of the Initial Shippers under
the Association Contracts in any way. The Transportation Agreements shall
include the following terms.
- the Initial Shippers shall dedicate certain production to use the
Project facilities;
- the Initial Shippers shall periodically nominate their best estimates
of the quantities of oil they wish to have transported through the
Project facilities;
- each Initial Shipper shall pay a tariff in respect of its oil
transported through the Project facilities, and cash or other
adjustments shall subsequently be made between the SA and the Initial
Shippers to ensure that the full operating expenses of the Project
facilities (including cash taxes) and maintenance capital are borne by
the Initial Shippers. Any revenues from third parties or
overutilizers will accrue to the Initial Shippers in proportions to be
agreed, and
- other terms usual in pipeline transportation contracts, as agreed
between the SA and the Initial Shippers.
A specific Clause shall be included in the Transportation Agreements to cover
situations where an Initial Shipper defaults on payment of tariff to the SA.
Such clause will specify the recourse of the SA against the defaulting shipper.
Third Parties and Overutilizers will enter into Transportation Agreements with
the SA on similar terms, but these shippers will pay pre-established Third Party
and Overutilizer tariffs for transportation.
Capacity Reservations
The reservations below, expressed in thousands of barrels per day, are based on
the main planning case, which includes 500 mb/d annual average plateau rate from
the Fields and production from other Llanos basin oil flowing from El Porvenir
to Vasconia. A similar table could be derived for the planning alternative of
350 mb/d. The Initial Shippers are working to establish the final capacity
reservation. The following table contains figures that should be considered as
indicative and do not represent the Initial Shippers commitment at this stage.
<PAGE>
<TABLE>
<CAPTION>
Project Segment Ecopetrol BP Total Triton Other Sum
- - --------------- --------- -- ----- ------ ----- ---
<S> <C> <C> <C> <C> <C> <C>
Cusiana to El Porvenir 300.0 76.0 76.0 48.0 500.0
El Porvenir to Vasconia
Cusiana/Cupiagua 300.0 76.0 76.0 48.0 0.0 500.0
OTHER FIELDS (NOTE A) 34.0 2.5 2.5 1.5 15.6 56.1
--- --- --- --- --- ---
Total 334.0 78.5 78.5 49.5 15.6 556.1
Vasconia to Covenas
SA Loop (note B) 174.0 44.1 31.0 27.8 13.1 290.0
SA Covenas Facilities 60.0% 15.2% 15.2% 9.6% 0 100%
</TABLE>
Note A - The Initial Shippers intend to reserve capacity from El Porvenir to
Vasconia, pro rata to their Throughput Interests, to accommodate other existing
Llanos oil production. The SA shall enter into Third Party Transportation
Agreements with such non-Initial Shippers.
Note B - The preliminary engineering activities currently agreed by the Initial
Shippers provide for a new loop from Vasconia to Covenas with a capacity of 290
mb/d or 266.5 mb/d (after allowing for the service factor). The Initial
Shippers will use capacity in the ODC only to bring the total throughput from
Vasconia to Covenas up to 500 mb/d. The Initial Shippers are working to
establish the final design capacity.
It is Ecopetrol's intention to reserve no more than 60% of the Project capacity
in each of the segments. Additionally, Ecopetrol, BP and Triton would like to
see 23.5 mb/d of square capacity in the Vasconia to Covenas system.
Tariffs
Detailed Tariff Principles shall be included in an agreement among the Parties,
which will be in the Shareholders Agreement.
The SA will charge transportation tariffs on Project segments, or part thereof,
commencing from the date they are in operation under the control of the SA,
meaning that the investments and the operating costs will have to be allocated
to the segments for tariff purposes.
The annual expenditure budget of the SA shall be based on anticipated operating
expenses, debt service obligations (principal and interest), cash tax
requirements, the agreed return to investors, and maintenance level capex. The
Initial Shippers shall pay a tariff that shall cover at least the expenditure
budget and, if the amount of debt service is lower than the capex depreciation,
the difference between debt service and capex depreciation.
<PAGE>
The tariff structure shall make efficient use of tax depreciation allowances
and shall minimize cash held in the SA from time to time.
The tariff may(2) include for each segment two parts:
a) An operating costs element covering the costs incurred during the year
by the SA. Ordinary fixed and variable operating costs shall be
covered proportionally to throughput. The Initial Shippers shall
consider provisions to cover specific operating costs such as drag
reducing agent.
b) A capital cost element that will include elements such as:
- the greater of depreciation or debt repayment (however, the
Initial Shippers agree to consider the concept of advanced
depreciation payment bearing interest to ensure the coverage of
senior debt)
- the interest linked to senior debt
- the remuneration on and repayment of subordinated debt (subject
to a corresponding adjustment to the depreciation amount(3))
and return on equity
It is intended that tariffs will be set annually unless otherwise agreed.
The Parties accept that there may be circumstances where their investment, their
return thereon, or any fees payable to them, may not be repaid. These may
include expropriation of the Project and destruction where it is uneconomic to
rebuild.
For periods when the sum of the throughput nominations are less than Available
Capacity, the SA may sell the excess capacity to Overutilizers and Third
Parties.
Currently, Third Party tariffs need to be approved by the Ministry of Mines and
Energy. The Parties intend that, for any given period, an Overutilizer's tariff
per barrel shall not be lower than the Initial Shippers' tariff per barrel and a
Third Party tariff per barrel shall not be lower than the Overutilizer tariff
per barrel.
For existing Project segments taken over by the SA, the SA will endeavor to keep
Third Party tariff levels equal or lower, in real terms, to existing Third Party
tariffs for the same segment.
- - -------------------------
(2) Canadian Group wishes to insert "will"
(3) Canadian Group is concerned over Initial Shipper position regarding the
amortization charge
<PAGE>
Further Provisions
The Initial Shippers are still considering a number of matters related to the
subject matter of this Annex including but not limited to:
- the rights of the Initial Shippers
- the apportionment of tariffs by Project segment and the charging of
tariff elements in relation to Throughput Interest shares, throughput
nominations and actual throughput; and
- the allocation of the capital cost element of the tariff
- the definition of Overutilizer
- the sharing of tariff income from Overutilizers and Third Parties.
These and other matters shall be fully addressed in the documents referred to in
the main body of this Agreement.
<PAGE>
ANNEX C - PROJECT CONSTRUCTION MANAGEMENT
AND OPERATING AGREEMENTS
1. Following incorporation of the SA, the SA shall enter into various
contracts with engineering, procurement and construction ("EPC")
contractors. The SA will also appoint a Project Construction Management
Team ("PCMT") made up of representatives of Ecopetrol, BP, Total, Triton,
the Canadian Group, and the engineering group in charge of the
preliminary engineering (Brown & Root). The PCMT will supervise the
implementation of such contracts.
It is currently envisaged that the PCMT will be led by Ed Truett (a BP
employee) who will also lead a team charged with the project construction
management of the Fields. Ed Truett will be assisted by a submanager(1)
who will be recommended by the PCMT and who will devote 100% of his/her
time to the Project Construction Management of the pipeline. The SA will
enter into a technical services agreement ("TSA") with Brown & Root under
which Brown & Root shall provide EPC support and expertise including the
services of their representative on the PCMT. The SA will also enter
into one or more Manpower Agreements with Ecopetrol, BP, Total, Triton,
and the Canadian Group to cover any personnel seconded into the PCMT.
2. The SA shall appoint the Canadian Group as operator for the operations
phase of the Project, either under the terms of a Pipeline Operating
Agreement made between the SA and the Canadian Group or under some other
arrangement. The Pipeline Operating Agreement or other arrangement shall
contain those terms commonly found in agreements or arrangements of a
similar nature which inter alia will provide the Canadian Group with the
autonomy and accountability necessary to ensure that the system is
operated in an efficient, safe and environmentally sound manner. More
specifically, the Canadian Group as operator would be responsible for:
A. Budgets
- preparation of annual capital and operating budgets for
approval of the SA;
- authority to execute the approved budgets;
- preparation of accounting information and maintenance of
accounting books;
- authority for emergency expenditures for unapproved budget
items;
- - -------------------------
(1) The Canadian Group wishes the sub-manager to be a Canadian Group
employee, acceptable to the PCMT
<PAGE>
B. Operations of the Project
- developing and implementing materials and operations
performance standards and all related quality control programs;
- developing and ensuring implementation of operations and
maintenance procedures, including safety and environmental
standards (subject to the participation of the Initial Shippers
as referred to below);
- responsibility for oil movements and scheduling;
- responsibility for equipment and right-of-way maintenance.
C. Human Resources (within SA Board approved budgets and manpower plans)
- organization structure and number of staff for operations
entity, but the Senior Manager and direct reports will be
nominated by the Operator to the Board of the SA for their
approval;
- developing and specifying qualifications for staff positions
and training standards of operations entity;
- hiring and terminating staff of operations entity.
In addition to these terms commonly found in agreements or arrangements
of a similar nature, the Pipeline Operating Agreement or other
arrangement shall provide for:
- optimization of Colombian content;
- the sub-contracting to Ecopetrol of certain day-to-day
operations as detailed in Exhibit C/1.
The Parties agree that the pipeline will be constructed, operated and
maintained in accordance with applicable regulations, codes and standards
and that expenditures necessary to meet these standards will be approved
as required.
Standards for environmental compliance, emergency and spill response
(both onshore and offshore) and spill clean-up procedures shall be
established jointly by the Initial Shippers and the Canadian Group. The
Initial Shippers shall have powers to ensure that the Canadian Group as
operator complies with such standards and procedures.
It is intended that the Canadian Group's appointment as operator will be
for an initial term of 15 years commencing in 1995, with options to
extend this term by not more than two additional five year periods plus
such additional periods required to cover the amortization of the
Canadian Group's investment. Each such option shall be deemed to have
been exercised unless the Initial Shippers, acting by a decision of three
of four Initial Shippers(2), decide not to exercise it and give the
Canadian Group one year's notice of their decision.
- - -------------------------
(2) The Canadian Group wishes this decision to require unanimity of the
Initial Shippers
<PAGE>
If the Initial Shippers fail to exercise any such option, the Canadian
Group shall be entitled to their reasonable demobilization costs and, in
addition, amortization of the Canadian Group's investment in accordance
with the Revised MoU will commence on the expiry of the term of the
operatorship.
Notwithstanding the foregoing, the Initial Shippers shall be entitled(3)
(but not obliged) to terminate the Canadian Group's appointment as
operator at any time if any of the following conditions is satisfied:
(i) insolvency(4) (to be defined in the Pipeline Operating
Agreement) of the operating company or either ultimate parent
of the Canadian Group;
(ii) gross negligence or willful misconduct of the Canadian Group
with respect to the Pipeline Operating Agreement or other
arrangement as referred to above, determined in the sole
discretion of the Initial Shippers;
(iii) non-performance or a materially sub-standard performance by the
Canadian Group, determined in the sole discretion of the
Initial Shippers, which is not remedied within a reasonable
time of the Initial Shippers giving notice to the Canadian
Group requiring it to be remedied.
The Canadian Group shall be entitled to resign as operator on at least
one year's notice.
Termination of the Canadian Group's appointment as operator pursuant to
either of the preceding paragraphs will not entitle the Canadian Group to
any reimbursement of demobilization costs or indemnity, nor will such
termination alter any schedule for amortization of the Canadian Group's
investment that may be in effect.
3. Responsibility for operating both currently existing and planned Project
assets shall be transferred from BP and Ecopetrol, so far as practicable
in accordance with Exhibit C/1.
4. The Parties recognize certain advantages in having (a) the Oleoducto de
Colombia and (b) all operations at Covenas operated by the same operator
as the Project assets, and will endeavor to achieve this.
5. The precise operating structure of the SA is still to be agreed between
the Parties. Their currently preferred structure is shown in Exhibit
C/2.
6. The Parties acknowledge Colombian content as a key element of the SA and
intend that as many management positions as possible should be filled by
Colombian nationals, while recognizing the need for certain positions to
be filled by secondees of the Canadian Group. Colombian content also
refers to maximizing the SA's use of Colombian Contractors and Suppliers.
- - -------------------------
(3) The Canadian Group wishes to say "shall be ONLY entitled . . ."
(4) Total wants the definition of "insolvency" to be wider than technical
bankruptcy
<PAGE>
7. The arrangements between the SA and the Canadian Group shall provide for
the Canadian Group to be reimbursed for their costs subject to incentives
and disincentives related to their performance as operator. The precise
framework for such incentives and disincentives has yet to be developed
but it is envisioned that incentives would be based on a "sharing of
benefits" of optimal performance, the benefits being improved profits of
the SA, or optimal and continuously improving service and cost to the
Initial Shippers, or both. The framework and mechanisms of these
incentives and disincentives will be unanimously agreed amongst all
Parties and, in recognition of the Canadian Group's position as a world
class operator. In light of this objective, the SA would seek to link
the Canadian Group's reimbursement to their level of performance, as
measured by comparing each year's achievements against agreed targets and
continuous improvement.
The criteria for measuring performance will evolve over time and will
include, wherever possible, comparison with performance of other world
class operators (both inside and outside Colombia) and continuous
improvement of performance year on year. Initially the criteria may
include targets based on:
- profitability;
- reduced tariffs;
- optimized and continuously improving service provided to Initial
Shippers;
- long term technical integrity;
- environmental compliance/spill response.
The ranking and weighting of these targets will be negotiated
periodically having regard to the interests from time to time of those
shippers who are providing Throughput and Deficiency Agreements and/or
are both shippers and holders of common equity in the SA.
The Parties may consider the use of an independent assessor to assist in
determining the selection, ranking and weighting of the above criteria
should they so unanimously agree.
The Parties anticipate that it may not be practicable to establish an
incentivization framework incorporating the above principles until
approximately two years after completion of the project (as described in
Annex D and envisioned today as being end 1997). The Parties will,
however, give consideration to providing for incentivization until such
time on some other basis to be agreed.
<PAGE>
ANNEX C - EXHIBIT C/1
CG OPERATIONS
PHASED APPROACH
Phase Approach Bar Chart for years 1994 through 1997. Has undecipherable graph.
Not reproduced here.
<PAGE>
<TABLE>
<CAPTION>
ANNEX C - EXHIBIT C/1
CG OPERATIONS
1995 1996 1997
<S> <C> <C>
- - - Cusiana - El Porvenir (direct /1H'95) ODC - Loops (direct) ODC - Loops (direct)
- - - ODC - Pipleine - Vasconia (direct / 3Q'95)(3) Central Llanos Loops (direct) Central Llanos Loops (direct)
- - - ODC - Caucasia (direct / commissioning)(3) Covenas - New TLU (direct) Covenas Marine Ops. (direct)(1)
- - - Covenas - ODC Tank Farm(3) Covenas - ODC Tank Farm(3) ODC - Tank Farm(3)
(subcontract DCC / 3Q'95) (subcontract DCC) (direct)
- - - Central Llanos - 30" Pipeline
(direct / 1Q'95)
- - - Central Llanos - El Porvenir
(subcontract ECP / 3Q'95)
- - - Central Llanos - Miraflores
(subcontract ECP / 3Q'95)
- - - Operational Control of Cusiana -
Covenas System (year-end 1995)
<CAPTION>
SUBCONTRACTS REMAINING WITH ECOPETROL
- - - Covenas - ODC Tank Farm(3) Covenas - Marine Ops.(1) Central Llanos - El Porvenir
- - - Central Llanos 20"(2) Central Llanos - El Porvenir Central Llanos - Miraflores
- - - Central Llanos - El Porvenir Central Llanos - Miraflores
- - - Central Llanos - Miraflores Central Llanos 20"(2)
<FN>
(1) Subject to agreement by Cravo Norte
(2) Rented (tariff) to the JSC by Ecopetrol
(3) Subject to agreement by ODC
</TABLE>
<PAGE>
ANNEX C - EXHIBIT C/2
DISTRIBUTION OF RESPONSIBILITIES
Organizational Chart for JSC Board of Directors. Has undecipherable text. Not
reproduced here.
<PAGE>
ANNEX D - PROJECT DESCRIPTION
The Project consists of a 793 km pipeline system from the Production Centers to
the Port of Covenas. With the exception of the new 35 km pipeline from Cusiana
to El Porvenir, the system generally follows the route of and loops two existing
pipelines, the Central Llanos pipeline from El Porvenir to Vasconia and the
Oleoducto de Colombia (ODC) which runs from Vasconia to Covenas.
Construction of a part of the system has already been completed (the 35 km
Cusiana to El Porvenir pipeline) and another 93 km part from La Belleza to
Vasconia is expected to be completed by 4Q 1994. These assets, together with
ongoing investment in the pump stations at El Porvenir and Miraflores, will be
transferred to the SA at its incorporation (Annex E further describes the
planned asset transfers). The construction of the remainder of the system is
projected to be completed by the end of 1997.
DESIGN CAPACITY:
1. Cusiana to El Porvenir: the system will have an annual average design
capacity of 500 mb/d.
2. El Porvenir to Vasconia: the system will have an annual average design
capacity of 556 mb/d.
3. Vasconia to Covenas: a new loop will be added such that the
combined capacity of the existing ODC and the
new loop will have an annual average design
capacity of either 500 mb/d or 476.5 mb/d.
Specifically, the loop will have a design
capacity of either 290 mb/d or 266.5 mb/d.
The existing ODC line will be utilized to
provide the additional capacity.
The designed service factor for the pipeline system is 85%. Where capacities
are expressed in mb/d in this Annex, these are design capacities incorporating
the service factor and not peak rates. This service factor is for design
purposes only and would not form the basis of any incentives for the operator as
contemplated in Annex C.
SA assets at project completion: Exhibits D/1, D/2 and D/3 illustrate the
development of the SA's pipeline system asset base at the beginning of 1995, at
the end of 1996 and at the end of construction at year end 1997.
These exhibits are based on a first design case (500 mb/d from Cusiana and
Cupiagua). Furthermore, the diameters of the different sections are subject to
an optimization following the ongoing engineering studies. A second design
currently under study provides for a phased construction, with a first step
sufficient to transport 350 mb/d of Cusiana/Cupiagua production and further
expansion to allow 500 mb/d from Cusiana/Cupiagua.
<PAGE>
At the end of 1997, it is anticipated that the SA will own the following assets:
1. Cusiana to El Porvenir:
a) 35 km of 20" pipeline
b) 35 km of 24" pipeline
2. El Porvenir to Miraflores:
a) 52 km of 30" pipeline
3. Miraflores to Vasconia:
a) 135 km of 36" pipeline from Miraflores to La Belleza
b) 93 km of 30" pipeline from La Belleza to Vasconia
4. Vasconia to Covenas:
a) 478 km of 30" pipeline
5. Cusiana pump station equipment and tanks
6. El Porvenir pump station equipment and lease of other equipment
7. Miraflores pump station equipment and lease of other equipment
8. Port of Covenas tanks and tanker loading equipment (subject to
agreement with Cravo Norte)
9. La Belleza pressure reduction equipment
LAND AND RIGHTS OF WAY: The SA will acquire right of ways and/or land for the
pipeline system. In some locations, the SA will co-locate with the two existing
pipeline systems described above. In particular, the SA will obtain access to
existing pump station sites and will co-locate equipment. In other places, the
new system will utilize existing right of ways to the extent possible.
Contracts for Access: (a) The new system will contract with the Cravo Norte
Association for use of their export terminal facilities at Covenas. (b) There
will be a transportation agreement until completion of the Project with
Ecopetrol for access to their 20" Central Llanos pipeline. (c) There may be a
transportation agreement with ODC.
RENTAL: The SA shall enter into two long term agreements for renting for
existing Ecopetrol pump station equipment and facilities at El Porvenir and
Miraflores.
<PAGE>
EXHIBIT D/1
JSC PIPELINE SYSTEM
1995 PIPE AND PUMP STATIONS
1. Covenas to Caucasia: 192 km of 24" pipeline
2. Caucasia to Vasconia: 286 km of 24" pipeline
3. Vasconia to La Belleza: 93 km of 30" pipeline
4. La Belleza to Miraflores: 135 km of 20" pipeline
5. Miraflores to El Porvenir: 52 km of 20" pipeline
6. El Porvenir to Cusiana: 35 km of 20" pipeline
<PAGE>
EXHIBIT D/2
JSC PIPELINE SYSTEM
END 1996 PIPE AND PUMP STATIONS
1. Covenas to Caucasia: 66 km of 30" pipeline
2. Caucasia to Vasconia:
3. Vasconia to La Belleza:
4. La Belleza to Miraflores: 55 km of 36" pipeline
5. Miraflores to El Porvenir: 52 km of 30" pipeline
6. El Porvenir to Cusiana: 35 km of 20" pipeline
<PAGE>
EXHIBIT D/3
JSC PIPELINE SYSTEM
END 1997 PIPE AND PUMP STATIONS
1. Covenas to Caucasia to Vasconia: 478 km of 30" pipeline
2. Vasconia to La Belleza:
3. La Belleza to Miraflores: 135 km of 36" pipeline
4. Miraflores to El Porvenir:
5. El Porvenir to Cusiana: 35 km of 24" pipeline
<PAGE>
ANNEX E - TRANSFER OF ASSETS
The Initial Shippers have decided to transfer the Phase I pipeline assets to the
SA. They will endeavor to do this using a method which allows maximum
flexibility in deciding the appropriate level of equity in exchange for assets.
The Parties will agree(1) later on a mechanism to assess the value of the
assets to be transferred. Attachment E/1 shows the current estimated book
values of the assets and the proposed allocation of such values amongst the
Initial Shippers in accordance with their ownership interests. Currently, the
Initial Shippers are considering a method to include, inter alia, current peso
book values converted to dollars at the historical exchange rate and the
dollars inflated to the transfer date.
The documents transferring the assets referred to in this Annex will include
indemnities from the relevant transferors in favor the SA holding the SA
harmless in respect of (a) defects in title and (b) all and any liabilities
(including, without limitation, environmental liabilities) arising out of or in
connection with the existence of the assets prior to the date of transfer. The
Parties will arrange for appropriate audits to be carried out at the time of
transfer to verify, inter alia, the existence and book value of the assets.
CUSIANA TANKS AND PUMPS
These assets consist of pumps, meters and tanks that are currently located
within the Central Processing Facility at Cusiana. It is expected that these
items will be transferred to the SA, subject to operating agreements between
both the field and pipeline operators. The value estimate could be
approximately $24 million.
CUSIANA TO EL PORVENIR PIPELINE
The Cusiana to El Porvenir pipeline is approximately 35 km of 20" pipeline and
its associated infrastructure. The assets included are engineering and
drafting, pipeline construction and pipe and fittings. Final value is expected
to be approximately $28 million. Mechanical acceptance of the asset was in June
of 1994.
CENTRAL LLANOS PIPELINE
This asset consists of two separate assets, the existing Central Llanos (CL) and
the upgrade to the CL that is scheduled to be completed by 3Q 1994.
- - -------------------------
(1) The Canadian Group wishes to insert "unanimously"
<PAGE>
Existing CL Assets
The existing assets are owned by Ecopetrol and consist primarily of land, tanks
and pump station sites at Miraflores and El Porvenir. The assets are primarily
peripheral in nature and are mainly support units such as fire shacks, offices,
control rooms and tanks. Pumps currently lying within Miraflores and El
Porvenir that are not part of the CL Upgrade will not be leased nor used by the
SA. The existing assets will not be transferred to the SA but will be leased to
the SA on a long term basis with the idea that an eventual transfer is possible.
The existing approximately 200 km of 20" pipe will not be transferred but will
remain with Ecopetrol up to and including the conversion of the line form oil to
gas. A separate agreement will specify the operatorship and tariff arrangement
of this line.
Central Llanos Upgrade
The total asset value is expected to be about $220 million, including
Ecopetrol's contribution of approximately $30 million worth of 30" pipe. The
upgrade consists of:
- Engineering and Drafting
- 30" Pipe
- Other Pipe and Fittings
- Pumps and Drivers
- Pipeline Construction
Ecopetrol currently owns all of the CL pipeline, including the upgrade. BP,
Total and Triton loaned Ecopetrol 50% of the cost of the upgrade, or
approximately $95 million. It is anticipated that Ecopetrol will transfer (or
some other method) 100% of their interest to the SA or will first discharge the
loan by transferring their interest in the upgrade to BP, Total and Triton.
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT E/1
ESTIMATED VALUE OF ASSIGNED ASSETS
Allocation
Gross Cost Private Partners Ecopetrol
---------- ---------------- ---------
<S> <C> <C> <C>
PHASE I
Cusiana to El Porvenir 28 14 14
Central Llanos Upgrade 187 94 94
PRELIMINARY / CONCEPTUAL ENG 1 0 0
- - -
Sub Total 216 108 108
PHASE II
PRELIMINARY / CONCEPTUAL ENG 3 1 1
- - -
Sub Total 219 109 109
ADDITIONAL ITEMS
Pumps & Tanks (CPF) 24 12 12
Capitalised Interest* * * *
30" PIPE FOR CL UPGRADE 30 30
-- --
Sub Total 54 12 42
TOTAL CONTRIBUTED VALUE 273 121 151
<FN>
* Capitalised interest to be determined at time of transfer.
</TABLE>
<PAGE>
ANNEX F - PROGRAM AND BUDGET
The 1994 Cusiana pipeline budget as approved by the Steering Committee under the
Memorandum of Understanding on April 25, 1994 and the Coordinator's proposed
update thereof are shown in Exhibit F/1.
The 1994 approved budget does not include the intended transfer by year end 1994
of approximately $272 million of existing assets and assets currently under
construction.
Exhibit F/2 shows the proposed scheduling of cash payments by the Parties in
1994, with the Canadian Group assuming liability for Ecopetrol's share of cash
calls in accordance with Article Sixth of this Agreement.
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT F/1
MOU 1994 BUDGET
Current Proposed*
Firm Approved Update
- - ---- -------- --------
<S> <C> <C>
1. PHASE II PIPELINES
- Work from 16 March 1994 (old AFEs) 1.7 1.7
- Project Team (Bogota/USA) 5.0 5.0
- Engineering Contractor 7.3 9.0
- Covenas Land 1.0 1.0
2. CENTRAL LLANOS PIPELINE (BRIDGE)
- Pumps & DRA 6.0 6.0
3. ODC DRA (BRIDGE)
- Engineering Studies - 0.2
4. BATCHING - 5.0
5. DIRECT EXPENSES - 1.1
6. INDIRECT EXPENSES - 0.6
----- -----
TOTAL FIRM 21.0 29.6
<FN>
* As per N. P. Connolly memo to Initial Shippers of 6 July, 1994
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT F/1
MOU 1994 BUDGET
Contingent Current Proposed*
- - ---------- Approved Update
-------- ------
<S> <C> <C>
- - - Contract Engineering 2.0 -
- - - ROW 2.7 2.7
- - - Pipe Order/Inspector 9.5 9.5
- - - Tax 1.7 1.7
- - - Other 0.4 0.4
------- -------
TOTAL CONTINGENT 16.3 14.3
------- -------
TOTAL BUDGET 37.3 43.9
------- -------
------- -------
<FN>
* As per N.P. Connolly memo to Initial Shippers of 6 July, 1994
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT F/2
Revised MoU 1994 Cash Payment Schedule
1994
1Q 2Q July Aug Sept Oct Nov Dec 1994
----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CG 1.1 1.1 3.7 2.5 2.5
ECP 0.4 1.4 1.1 0.1 1.3 1.3
BP 0.1 0.3 0.3 0.3 0.3 1.0 1.0 1.0 4.2
Total 0.1 0.3 0.3 0.3 0.3 1.0 1.0 1.0 4.2
Triton 0.1 0.2 0.2 0.2 0.2 0.2 0.6 0.6 2.6
Total 0.7 2.3 1.8 1.8 1.8 6.3 6.3 6.3 27.4
</TABLE>
Note: Assumes Canadian Group participation begins in August
Corresponds to 1994 Revised MoU proposed budget of
$43.9 m ($29.6 m Firm and $14.3 m Contingent)
<PAGE>
ANNEX G - ACCOUNTING AND FINANCIAL PROCEDURES
A separate document identified as "Accounting and Financial
Procedures" (AFP) has been developed and is made part of the
Revised MoU as Exhibit G/1. The AFP will become effective when
the Revised MoU becomes fully effective pursuant to Article First
thereof and the Steering Committee, voting unanimously, approves
the AFP(1).
- - -------------------------
(1) This wording is subject to confirmation by Triton. If Triton
does not confirm, Annex G will be rediscussed by the Parties.
<PAGE>
EXHIBIT G/1
Attached to and Made a Part of that Certain
Revised Memorandum of Understanding (Revised MOU)
Dated July _____, 1994, by and among
ECOPETROL,
BP, TOTAL, TRITON
and the
CANADIAN GROUP
-------------------------------------------------
-------------------------------------------------
ACCOUNTING AND FINANCIAL PROCEDURES
-------------------------------------------------
-------------------------------------------------
CONTENTS:
ARTICLE 1: Definitions
ARTICLE 2: Contracting Provisions
ARTICLE 3: Insurance
ARTICLE 4: Work Programs and Budgets
ARTICLE 5: AFE Procedures
ARTICLE 6: Costs, Expenses and Advances
ARTICLE 7: Default
ARTICLE 8: Accounting Procedure
ARTICLE 1 - DEFINITIONS
1.1 The definitions set out in the Revised MOU to which this Annex "G" is
attached is a part of, are deemed to apply equally herein. In addition, the
following definitions will apply:
"ACCOUNTING PROCEDURE" shall mean the rules, provisions, and conditions set
forth and contained in Article 8 hereof.
<PAGE>
ANNEX H: LIABILITIES AND INSURANCE
The SA will take out appropriate insurance in so far as such insurance is
available on reasonable terms. The costs (premiums and deductibles) of this
insurance will be considered as an operating expense and will be recovered
through the tariff. The events and circumstances covered by such insurance
shall include but not be limited to acts of God, accidents, sabotage, civil
disturbance, terrorism, curtailment of utilities and, in so far as insurance is
available, curtailment of supplies of materials and services. Such events and
circumstances shall not include shortage of labor, strike, lockout, picketing or
other industrial disturbances or disputes.
In so far as such events are not insurable, then resulting operating and capital
expenditures approved by the SA in accordance with procedures of Annex A Part 2
shall be recovered by the SA through the tariff mechanisms set out in
Annex B(1).
To the extent that any loss as a result of force majeure is increased by reason
of willful misconduct and or gross negligence of the operator, the operator will
indemnify the SA.
The SA will approach the Colombian Government in connection with terrorist
related damage and propose that:
1) the Government should contribute to the costs of repair and cleanup, and
2) following cleanup, the Government should certify the sufficiency of the
actions taken at the time and the government should assume liability for
any subsequent additional remedial actions.
- - -------------------------
(1) The Canadian Group wishes to insert "and/or funding by the Initial Shippers,
if necessary".
