Document:

exv10w5

 

Exhibit 10.5

PRODUCTION SHARING CONTRACT

BETWEEN

THE GOVERNMENT OF INDIA

AND

GEOGLOBAL RESOURCES (BARBADOS) INC.

WITH RESPECT TO CONTRACT AREA

IDENTIFIED AS

BLOCK : DS-ONN-2003/1

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TABLE OF CONTENTS

	 	 	 	 	 
	ARTICLE	 	CONTENTS 	 	PAGE NO.
	 	 	Preamble
	 	1-2
	1	 	Definitions
	 	3-12
	2	 	Participating Interests
	 	13
	3	 	License and Exploration Period
	 	14-15
	4	 	Relinquishment
	 	16-17
	5	 	Work Programme
	 	18-20
	6	 	Management Committee
	 	21-25
	7	 	Operatorship, Operating Agreement and Operating Committee
	 	26
	8	 	General Rights and Obligations of the Parties
	 	27-29
	9	 	Government Assistance
	 	30
	10	 	Discovery, Development and Production
	 	31-35
	11	 	Petroleum Mining Lease
	 	36-37
	12	 	Unit Development
	 	38-39
	13	 	Measurement of Petroleum
	 	40-41
	14	 	Protection of the Environment
	 	42-46
	15	 	Recovery of Cost Petroleum
	 	47-49
	16	 	Production Sharing of Petroleum
	 	50-52
	17	 	Taxes, Royalties, Rentals, Duties etc.
	 	53-56
	18	 	Domestic Supply, Sale, Disposal and Export of Crude Oil
	 	 
	 	 	and Condensate
	 	57-58
	19	 	Valuation of Petroleum
	 	59-61
	20	 	Currency and Exchange Control Provisions
	 	62
	21	 	Natural Gas
	 	63-68
	22	 	Employment, Training and Transfer of Technology
	 	69
	23	 	Local Goods and Services
	 	70
	24	 	Insurance and Indemnification
	 	71
	25	 	Records, Reports, Accounts and Audit
	 	72

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	ARTICLE	 	CONTENTS	 	PAGE NO.
	26	 	Information, Data, Confidentiality, Inspection and Security
	 	73-75
	27	 	Title to Petroleum, Data and Assets
	 	76-77
	28	 	Assignment of Participating Interest
	 	78-80
	29	 	Guarantees
	 	81-83
	30	 	Term and Termination of the Contract
	 	84-86
	31	 	Force Majeure
	 	87-88
	32	 	Applicable Law and Language of the Contract
	 	89
	33	 	Sole Expert, Conciliation and Arbitration
	 	90-91
	34	 	Change of Status of Companies
	 	92
	35	 	Entire Agreement, Amendments and Waiver and miscellaneous
	 	93
	36	 	Certificates
	 	94
	37	 	Notices
	 	95-96

	 	 	 	 	 
	APPENDICES	 	CONTENTS 	 	PAGE NO.
	Appendix   A	 	Description of the Contract Area
	 	97
	Appendix  B	 	Map of the Contract Area
	 	98
	Appendix  C	 	Accounting Procedure to the Contract

	 	99-129
	Appendix  D	 	Calculation
of the Investment Multiple for Production Sharing purposes

	 	130-131
	Appendix  E1	 	Form of
Parent company Financial and Performance Guarantee

	 	132-133
	Appendix  E2	 	Form of
Company Financial and Performance Guarantee
	 	134-135
	Appendix-F	 	Procedure for acquisition of goods and services

	 	136-139
	Appendix-G	 	Performa of
Bank Guarantee to be provided pursuant to Article 29

	 	140-142
	Appendix-H	 	Itemized
cost break-up of bid cost estimates given by the Contractor
	 	143-153

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PRODUCTION SHARING CONTRACT

	 	 	This Contract made this 23rd day of September 2005 between:
	 
	1.	 	The President of India, acting through the Joint Secretary, Ministry of Petroleum and
Natural Gas (hereinafter referred to as “the Government”) of the FIRST PART;

AND

	 	 	GeoGlobal resources (Barbados) Inc., a Company incorporated under the laws of
Barbados, West Indies, (hereinafter referred to as “GGR”) having its
registered office at Chancery House, High Street, Bridgetown, Barbados, West
Indies, which expression shall include its successors and such assigns as are
permitted under Article 28 hereof, of the SECOND PART;

WITNESSETH:

WHEREAS

	(1)	 	The Oilfields (Regulation and Development) Act, 1948 (53 of 1948) (hereinafter
referred to as “the Act”) and the Petroleum and Natural Gas Rules, 1959, made
thereunder (hereinafter referred to as “the Rules”) make provisions, inter alia, for
the regulation of Petroleum Operations and grant of Licenses and Leases for
exploration, development and production of Petroleum in India;
	 
	(2)	 	The rules provide for the grant of Licenses and Leases in respect of land vested in a
State Government by that State Government with the prior approval of the Central
Government;
	 
	(3)	 	Rule 5 of the Rules provides for an agreement between the Government and the Licensee
or Lessee containing additional terms and conditions with respect to the License or
Lease;
	 
	(4)	 	The Government desires that the Petroleum resources which may exist in India be
discovered and exploited with the utmost expedition in the overall interest of India
and in accordance with modern oilfield and petroleum industry practices;
	 
	(5)	 	Companies have committed that they have, or will acquire and make available, the
necessary financial and technical resources and the technical and industrial
competence and experience necessary for proper discharge and/or performance of all
obligations required to be performed under this Contract in accordance with

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	 	 	modern oilfield and petroleum industry practices and will provide guarantees
as required in Article 29 for the due performance of its obligations
hereunder; and

	(6)	 	As a result of discussions between representatives of the Government and GGR, on the
proposal of GGR, the Government has agreed to enter into this Contract with GGR with
respect to the Contract Area identified as block DS-ONN-2003/1 and detailed in
Appendix A and Appendix B, on the terms and conditions herein set forth.
	 
	 	 	NOW, THEREFORE, in consideration of the premises and covenants and conditions
herein contained, IT IS HEREBY AGREED between the Parties as follows:

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ARTICLE 1

DEFINITIONS

	 	 	In this Contract, unless the context requires otherwise, the following
terms shall have the meaning ascribed to them hereunder:
	 
	1.1	 	“Accounting Procedure” means the principles and procedures of accounting set out in
Appendix C.
	 
	1.2	 	“Act” means Oilfields (Regulation and Development) Act, 1948 as amended from time to
time.
	 
	1.3	 	“Affiliate” means a company or a body;

	 	a)	 	which directly or indirectly controls or is controlled by
a Company which is a Party to this Contract; or
	 
	 	b)	 	which directly or indirectly controls or is controlled by
a company which directly or indirectly controls or is controlled by a
Company which is a Party to this Contract.

	 	 	For the purpose of this definition it is understood that “control” means:

	 	i)	 	ownership by one company of more than fifty percent(50%)
of the voting securities of the other company; or
	 
	 	ii)	 	the power to direct, administer and dictate policies of
the other company even where the voting securities held by such company
exercising such effective control in that other company is less than
fifty percent(50%) and the term “controlled” shall have a corresponding
meaning.

	1.4	 	“Appendix” means an Appendix attached to this Contract and made a part thereof.
	 
	1.5	 	“Appraisal Programme” means a programme, carried out following a Discovery in the
Contract Area for the purpose of appraising Discovery and delineating the Petroleum
Reservoirs to which the Discovery relates in terms of thickness and lateral extent and
determining the characteristics thereof and the quantity of recoverable Petroleum
therein.
	 
	1.6	 	“Appraisal Well” means a Well drilled pursuant to an Appraisal Programme.
	 
	1.7	 	“Approved Work Programme” and “Approved Budget” means a Work Programme or a Budget
that has been approved by the Management Committee pursuant to the provisions of this
Contract.

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	1.8	 	“Arms Length Sales” means sales made freely in the open market, in freely convertible
currencies, between willing and unrelated sellers and buyers and in which such buyers
and sellers have no contractual or other relationship, directly or indirectly, or any
common or joint interest as is reasonably likely to influence selling prices and
shall, inter alia, exclude sales (whether direct or indirect, through brokers or
otherwise) involving Affiliates, sales between Companies which are Parties to this
Contract, sales between governments and government-owned entities, counter trades,
restricted or distress sales, sales involving barter arrangements and generally any
transactions motivated in whole or in part by considerations other than normal
commercial practices.
	 
	1.9	 	“Article” means an article of this Contract and the term “Articles” means more than
one Article.
	 
	1.10	 	“Associated Natural Gas” or “ANG” means Natural Gas produced in association with
Crude Oil either as free gas or in solution, if such Crude Oil can by itself be
commercially produced.
	 
	1.11	 	“Barrel” means a quantity or unit equal to 158.9074 litres (forty two (42) United
States gallons) liquid measure, at a temperature of sixty (60) degrees Fahrenheit
(15.56 degrees Celsius) and under one atmosphere pressure (14.70 psia).
	 
	1.12	 	“Basement” means any igneous or metamorphic rock, or rocks or any stratum of such
nature, in and below which the geological structure or physical characteristics of the
rock sequence do not have the properties necessary for the accumulation of Petroleum
in commercial quantities and which reflects the maximum depth at which any such
accumulation can be reasonably expected in accordance with the knowledge generally
accepted in the international petroleum industry.
	 
	1.13	 	“Budget” means a budget formulated in relation to a Work Programme.
	 
	1.14	 	“Business Day” means any of the Calendar Day excluding holidays.
	 
	1.15	 	“Calendar Day” means any of the seven (7) days of a week.
	 
	1.16	 	“Calendar Month” means any of the twelve (12) months of the Calendar Year.
	 
	1.17	 	“Calendar Quarter” or “Quarter” means a period of three (3) consecutive Calendar
Months commencing on the first day of January, April, July and October of each
Calendar Year.
	 
	1.18	 	“Calendar Year” means a period of twelve (12) consecutive Months according to the
Gregorian calendar, commencing with the first (1st) day of January and
ending with the thirty-first (31st) day of December.

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	1.19	 	“Commercial Discovery” means a Discovery of Petroleum reserves which has been
declared as a Commercial Discovery in accordance with the provisions of Article 10
and/or Article 21.
	 
	1.20	 	“Commercial Production” means production of Crude Oil or Condensate or Natural Gas or
any combination of these from the Contract Area (excluding production for testing
purposes) and delivery of the same at the relevant Delivery Point under a programme of
regular production and sale.
	 
	1.21	 	“Company” for the purpose of this Contract means a company which is a Party to this
Contract and, where more than one Company is Party to the Contract, the term
“Companies” shall mean all such Companies collectively, including their respective
successors and permitted assigns under Article 28.
	 
	1.22	 	“Condensate” means those low vapour pressure hydrocarbons obtained from Natural Gas
through condensation or extraction and refers solely to those hydrocarbons that are
liquid at normal surface temperature and pressure conditions provided that in the
event Condensate is produced from a Development Area and is segregated and transported
separately to the Delivery Point, then the provisions of this Contract shall apply to
such Condensate as if it were Crude Oil.
	 
	1.23	 	“Contract” means this agreement and the Appendices mentioned herein and attached
hereto and made an integral part hereof and any amendments made thereto pursuant to
the terms hereof.
	 
	1.24	 	“Contract Area” means, on the Effective Date, the area described in Appendix-A and
delineated on the map attached as Appendix B or any portion of the said area remaining
after relinquishment or surrender from time to time pursuant to the terms of this
Contract (including any additional area as provided under Article 11.3).
	 
	1.25	 	“Contract Costs” means Exploration Costs, Development Costs and Production Costs as
provided in Section 2 of the Accounting Procedure and allowed to be cost recoverable
in terms of Section 3 of the Accounting Procedure.
	 
	1.26	 	“Contract Year” means a period of twelve (12) consecutive months counted from the
Effective Date or from the anniversary of the Effective Date.
	 
	1.27	 	“Contractor” means the Company(ies).
	 
	1.28	 	“Cost Petroleum” means, the portion of the total value of Petroleum Produced and
Saved from the Contract Area which the Contractor is entitled to take in a particular
period, for the recovery of Contract Costs as provided in Article 15.
	 
	1.29	 	“Crude Oil” or “Oil” or “Crude” means all kinds of hydrocarbons and bitumen, both in
solid and in liquid form, in their natural state or obtained from Natural Gas

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	 	 	by condensation or extraction, including distillate and Condensate when
commingled with the heavier hydrocarbons and delivered as a blend at the
Delivery Point but excluding Natural Gas.

	1.30	 	“Deepwater Area” (for deepwater blocks/areas) means area falling beyond four hundred
(400) metre isobath, provided, however, that for the purposes of this Contract, the
Contract Area as on Effective Date, as described in the Appendix-A and Appendix-B
shall be deemed to be Deepwater Area falling beyond four hundred (400) metre isobath.
	 
	1.31	 	“Delivery Point” means, except as otherwise herein provided or as may be otherwise
agreed between the Parties having regard to international practice, the point at which
Petroleum reaches the outlet flange of the delivery facility, either offshore or
onshore and different Delivery Point(s) may be established for purposes of sales.
Delivery Point(s) shall be approved by the Management Committee.
	 
	1.32	 	“Development Area” means part of the Contract Area which encompasses one or more
Commercial Discovery(ies) and any additional area that may be required for proper
development of such Commercial Discovery(ies) and established as such in accordance
with the provisions of the Contract.
	 
	1.33	 	“Development Costs” means those costs and expenditures incurred in carrying out
Development Operations, as classified and defined in Section 2 of the Accounting
Procedure and allowed to be recovered in terms of Section 3 thereof.
	 
	1.34	 	“Development Operations” means operations conducted in accordance with the
Development Plan and shall include, but not be limited to the purchase, shipment or
storage of equipment and materials used in developing Petroleum accumulations, the
drilling, completion and testing of Development Wells, the drilling and completion of
Wells for Gas or water injection, the laying of gathering lines, the installation of
offshore platforms and installations, the installation of separators, tankages, pumps,
artificial lift and other producing and injection facilities required to produce,
process and transport Petroleum into main Oil storage or Gas processing facilities,
either onshore or offshore, including the laying of pipelines within or outside the
Contract Area, storage at Delivery Point(s), the installation of said storage or Gas
processing facilities, the installation of export and loading facilities and other
facilities required for the development and production of the said Petroleum
accumulations and for the delivery of Crude Oil and/or Gas at the Delivery Point and
also including incidental operations not specifically referred to herein but required
for the most efficient and economic development and production of the said Petroleum
accumulations in accordance with modern oilfield and petroleum industry practices.

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	1.35	 	“Development Plan” means a plan submitted by the Contractor for the development of a
Commercial Discovery, which has been approved by the Management Committee or the
Government pursuant to Article 10 or Article 21.
	 
	1.36	 	“Development Well” means a Well drilled, deepened or completed after the date of
approval of the Development Plan pursuant to Development Operations or Production
Operations for the purposes of producing Petroleum, increasing production, sustaining
production or accelerating extraction of Petroleum including production Wells,
injection Wells and dry Wells.
	 
	1.37	 	“Directorate General of Hydrocarbons or DGH” means an organisation, including its
successors under the Ministry of Petroleum and Natural Gas.
	 
	1.38	 	“Discovery” means the finding, during Petroleum Operations, of a deposit of Petroleum
not previously known to have existed, which can be recovered at the surface in a flow
measurable by conventional petroleum industry testing methods.
	 
	1.39	 	“Discovery Area” means that part of the Contract Area about which, based upon
Discovery and the results obtained from a Well or Wells drilled in such part, the
Contractor is of the opinion that Petroleum exists and is likely to be produced in
commercial quantities.
	 
	1.40	 	“Effective Date” means the later of the date on which this Contract is executed by
the Parties or the date of issue of License or date from which License has been made
effective by the Central Government or State Government(s) as the case may be.
	 
	1.41	 	“Environmental Damage” means soil erosion, removal of vegetation, destruction of
wildlife, pollution of groundwater or surface water, land contamination, air
pollution, noise pollution, bush fire, disruption to water supplies to natural
drainage or natural flow of rivers or streams, damage to archaeological,
palaeontological and cultural sites and shall include any damage or injury to, or
destruction of, soil or water in their physical aspects together with vegetation
associated therewith, aquatic or terrestrial mammals, fish, avi-fauna or any plant or
animal life whether in the sea or in any other water or on, in or under land.
	 
	1.42	 	“Exploration Costs” means those costs and expenditures incurred in carrying out
Exploration Operations, as classified and defined in Section 2 of the Accounting
Procedure and allowed to be recovered in terms of Section 3 thereof.
	 
	1.43	 	“Exploration Operations” means operations conducted in the Contract Area pursuant to
this Contract in searching for Petroleum and in the course of an Appraisal Programme
and shall include but not be limited to aerial, geological, geophysical, geochemical,
palaeontological, palynological, topographical and seismic surveys, analysis, studies
and their interpretation, investigations relating to the subsurface geology including
structural test drilling, stratigraphic test

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	 	 	drilling, drilling of Exploration Wells and Appraisal Wells and other related
activities such as surveying, drill site preparation and all work necessarily
connected therewith that is conducted in connection with Petroleum
exploration.

	1.44	 	“Exploration Period” means the period mentioned in Article 3 during which Exploration
Operations may be carried out by the Contractor as provided in Article 3 hereof.
	 
	1.45	 	“Exploration Phase” or “Phase” means any of the periods specified in Article 3 in which the
Contractor is required to complete the Minimum Work Programme specified therein.
	 
	1.46	 	“Exploration Well” means a Well drilled for the purpose of searching for undiscovered
Petroleum accumulations on any geological entity (be it of structural, stratigraphic, facies
or pressure nature) to at least a depth or stratigraphic level specified in the Work
Programme.
	 
	1.47	 	“Field” means an Oil Field or a Gas Field or combination of both as the case may be.
	 
	1.48	 	“Financial Year” means the period from the first (1st) day of April to the
thirty-first (31st) day of March of the following Calendar Year.
	 
	1.49	 	“Foreign Company” means a Company within the meaning of Section 591 of the Companies Act,
1956.
	 
	1.50	 	“Frontier Area” means any area identified, demarcated and so notified by the Government or
its authorised agency(ies) for the purpose of exploration and exploitation of Oil and Gas,
which is logistically and technically difficult and lacks infrastructural and/or marketing
facilities, etc.
	 
	1.51	 	“Gas” means Natural Gas.
	 
	1.52	 	“Gas Field” means, within the Contract Area, a Natural Gas Reservoir or a group of Natural
Gas Reservoirs within a common geological structure or feature.
	 
	1.53	 	“Government” or “Central Government” means Government of India unless otherwise stated.
	 
	1.54	 	“Investment” shall have the meaning ascribed to that expression in paragraph 3 of Appendix D.

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	1.55	 	“Investment Multiple” means, the ratio of accumulated Net Cash Income to accumulated
Investment by the Contractor, as determined in accordance with Appendix D.
	 
	1.56	 	“Lease” means a petroleum mining lease referred to in the Rules and shall, unless
otherwise stated therein, exclude right for exploration and exploitation of coal/
lignite bed methane (CBM).
	 
	1.57	 	“Lessee” means the Contractor to whom a Lease is issued under the Rules for the
purpose of carrying out Petroleum Operations in a Development Area or Contract Area.
	 
	1.58	 	“LIBOR” means the London Inter-Bank Offer Rate for six-month maturates of United
States Dollars as quoted by the International Swaps and Derivative Association or such
other bank being a BBA LIBOR contributor panel bank as the Parties may agree.
	 
	1.59	 	“License” means a petroleum exploration license referred to in the Rules.
	 
	1.60	 	“Licensee” means the Contractor to whom a License is issued under the Rules for the
purpose of carrying out Petroleum Operations in the Contract Area.
	 
	1.61	 	“Minimum Work Programme” means with respect to each Exploration Phase, the Work
Programme specified in Article 5 with respect to such Phase.
	 
	1.62	 	“Management Committee” means the committee constituted pursuant to Article 6 hereof.
	 
	1.63	 	“Month” means Calendar Month.
	 
	1.64	 	“Natural Gas” means wet gas, dry gas, all other gaseous hydrocarbons, and all
substances contained therein, including sulphur, carbondioxide and nitrogen but
excluding extraction of helium, which are produced from Oil or Gas Wells, excluding
those condensed or extracted liquid hydrocarbons that are liquid at normal temperature
and pressure conditions, and including the residue gas remaining after the
condensation or extraction of liquid hydrocarbons from gas.
	 
	1.65	 	“Net Cash Income” shall have the meaning assigned in paragraph 2 of Appendix- D.
	 
	1.66	 	“Non Associated Natural Gas” or “NANG” means Natural Gas which is produced either
without association of Crude Oil or in association with such quantities of Crude Oil
which by itself cannot be commercially produced.
	 
	1.67	 	“Oil Field” means, within the Contract Area, an Oil Reservoir or a group of Oil
Reservoirs within a common geological structure or feature.

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	1.68	 	“Operator” means one of the Parties comprising the Contractor, appointed as the
Operator pursuant to Article 7.
	 
	1.69	 	“Operating Agreement” means the operating agreement entered by the constituents of
the Contractor in accordance with Article 7, with respect to conduct of Petroleum
Operations.
	 
	1.70	 	“Operating Committee” means the Committee established by that name in the Operating
Agreement pursuant to Article 7.
	 
	1.71	 	“Participating Interest” means, in respect of each Party constituting the Contractor, the
undivided share expressed as a percentage of such Party’s participation in the rights and
obligations under this Contract.
	 
	1.72	 	“Parties” means the parties signatory to this Contract including their successors and
permitted assigns under this Contract and the term “Party” means any of the Parties.
	 
	1.73	 	“Petroleum” means Crude Oil and/or Natural Gas existing in their natural condition but
excluding helium occurring in association with Petroleum or shale.
	 
	1.74	 	“Petroleum Operations” means, as the context may require, Exploration Operations, Development
Operations or Production Operations or any combination of two or more of such operations,
including construction, operation and maintenance of all necessary facilities, plugging and
abandonment of Wells, safety, environmental protection, transportation, storage, sale or
disposition of Petroleum to the Delivery Point, Site Restoration and any or all other
incidental operations or activities as may be necessary.
	 
	1.75	 	“Petroleum Produced and Saved” means gross Petroleum produced minus impurities such as water
or solids produced along with Petroleum, Petroleum recycled to the reservoir, Petroleum used
in Petroleum Operations or flared or otherwise unavoidably lost under the provisions of the
Contract.
	 
	1.76	 	“Production Costs” means those costs and expenditures incurred in carrying out Production
Operations as classified and defined in Section 2 of the Accounting Procedure and allowed to
be recovered in terms of Section 3 thereof.
	 
	1.77	 	“Production Operations” means all operations conducted for the purpose of producing Petroleum
from the Development Area after the commencement of production from the Development Area
including the operation and maintenance of all necessary facilities therefor.
	 
	1.78	 	“Profit Petroleum” means, the total value of Petroleum Produced and Saved from the Contract
Area in a particular period, as reduced by Cost Petroleum and calculated as provided in
Article 16.

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	1.79	 	“Recompletion” means an operation whereby a completion in one zone is abandoned in order to
attempt a completion in a different zone within an existing Well bore.
	 
	1.80	 	“Reservoir” means a naturally occurring discrete accumulation of Petroleum.
	 
	1.81	 	“Rules” means the Petroleum and Natural Gas Rules, 1959 and any amendments made thereto from
time to time.
	 
	1.82	 	“Section” means a section of the Accounting Procedure.
	 
	1.83	 	“Self-sufficiency” means, in relation to any Year, that the volume of Crude Oil and
Crude Oil equivalent of Petroleum products exported from India during that Year either
equals or exceeds the volume of Crude Oil and Crude Oil equivalent of Petroleum
products imported into India during the same Year, as determined by Government.
	 
	1.84	 	“Site Restoration” shall mean all activities required to return a site to its state
as of the Effective Date pursuant to the Contractor’s environmental impact study and
approved by the Government or to render a site compatible with its intended after-use
(to the extent reasonable) after cessation of Petroleum Operations in relation thereto
and shall include, where appropriate, proper abandonment of Wells or other facilities,
removal of equipment, structures and debris, establishment of compatible contours and
drainage, replacement of top soil, re-vegetation, slope stabilisation, in-filling of
excavations or any other appropriate actions in the circumstances.
	 
	1.85	 	“Statement” or “Statements” refers to the statements required to be furnished in
accordance with Appendix-C of this Contract.
	 
	1.86	 	“State Government” means any government of a state of the Union of India, which has
control over the Contract Area for the purpose of grant of Licenses/ Leases. In case
the Contract Area covers more than one state, the State Government shall include all
such governments of those states.
	 
	1.87	 	“Subcontractor “ means any company or person contracted by the Contractor or Operator
to provide goods or services with respect to Petroleum Operations.
	 
	1.88	 	“US $” or “USD” or “US Dollar” or “United States Dollar” means the currency of the
United States of America.
	 
	1.89	 	“Well” means a borehole, made by drilling in the course of Petroleum Operations, but
does not include a seismic shot hole.
	 
	1.90	 	“Work Programme” means a work programme formulated for the purpose of carrying out
Petroleum Operations.

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	1.91	 	“Year” means a Financial Year.

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ARTICLE 2

PARTICIPATING INTERESTS

	2.1	 	The initial Participating Interest of the Parties comprising the Contractor shall be
as follows:
	 
	 	 	GeoGlobal Resources (Barbados) Inc : 100% (One Hundred Percent)
	 
	2.2	 	Except as provided in this Article or elsewhere in this Contract, the rights and
obligations of the Parties comprising the Contractor shall include but not be limited
to:

	 	(a)	 	the right to take Cost Petroleum in accordance with the
provisions of Article 15;
	 
	 	(b)	 	the right to take its Participating Interest share of
Profit Petroleum in accordance with the provisions of Article 16;
	 
	 	(c)	 	the right to receive its Participating Interest share of
any incidental income and receipts arising from Petroleum Operations;
and
	 
	 	(d)	 	the obligation to contribute its Participating Interest
share of costs and expenses including Contract Costs.

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ARTICLE 3

LICENSE AND EXPLORATION PERIOD

	3.1	 	The Exploration Period shall begin on the Effective Date and shall consist of three
(3) Exploration Phases, each phase not exceeding three (3) Contract Years, for a total
period not exceeding seven (7) consecutive Contract Years unless extended pursuant to
the terms of this Contract.
	 
	3.2	 	Except as otherwise provided in this Contract, the term of the first Exploration
Phase shall not exceed three (3) consecutive Contract Years (hereinafter referred to
as the first Exploration Phase).
	 
	3.3	 	Except as otherwise provided in this Contract, the term of the second Exploration
Phase shall not exceed two (2) consecutive Contract Years from the end of the first
Exploration Phase (hereinafter referred to as the second Exploration Phase).
	 
	3.4	 	Except as otherwise provided in this Contract, the term of the third Exploration
Phase shall not exceed two (2) consecutive Contract Years from the end of the second
Exploration Phase (hereinafter referred to as the third Exploration Phase).
	 
	3.5	 	At the expiry of any Exploration Phase of the Exploration Period, provided that the
Contractor has completed the Minimum Work Programme for that Exploration Phase, the
Contractor shall have the option, exercisable by giving a written notice to the
Government at least thirty (30) days prior to the expiry of the relevant Phase,
either:

	 	(a)	 	to proceed to the next Exploration Phase on presentation
of the requisite guarantees as provided for in Article 29; or
	 
	 	(b)	 	to relinquish the entire Contract Area except for any
Discovery Area and any Development Area and to conduct Development
Operations and Production Operations in relation to any Commercial
Discovery in accordance with the terms of this Contract, and the
Contractor shall have no further obligation in respect of the Minimum
Work Programme under Article 5 for any subsequent Exploration Phases of
the Exploration Period.

	 	 	If neither of the options provided for in paragraphs (a) and (b) hereof is
exercised by the Contractor, this Contract shall terminate at the end of the
then current Exploration Phase and the License shall be automatically
cancelled.
	 
	3.6	 	If at the end of an Exploration Phase the Minimum Work Programme for that phase is
not completed, the time for completion of the said Minimum Work Programme shall be
extended for a period necessary to enable completion thereof but not exceeding six
(6) months, provided that the Contractor submits his request by giving a written
notice to the Government at least thirty (30) days prior to the expiry of the relevant
Phase and can show technical or other good reasons for

14

 

	 	 	non-completion of the Minimum Work Programme and the Management Committee
gives its consent to the said extension and provided further that the period
of such extension shall be subtracted from the next succeeding Exploration
Phase, if any. In case the Minimum Work Programme of any particular
Exploration Phase is completed before stipulated time as provided in the
Article 3.2 and 3.3, the time so saved will be added to the next Exploration
Phase, if so requested by the Contractor giving a notice in writing to the
Government thirty (30) days prior to such early completion of the Phase and
in that event the provision of the Article 3.5 (a) shall apply immediately
after such early completion of the Phase.

	3.7	 	If, at the end of an Exploration Phase, execution of any Work Programme is in
progress and which is in addition to the Minimum Work Programme, such Exploration
Phase shall be extended for a period not exceeding six (6) months to enable completion
thereof provided that the Minimum Work Programme for such Phase has been completed and
the Management Committee gives its consent to the said extension as provided in the
Article 3.6. In the event of an extension as provided for herein, the notice referred
to in Article 3.5 shall be given at least thirty (30) days prior to the expiry of the
relevant extension.
	 
	3.8	 	Where sufficient time is not available prior to the expiry of the Exploration Period
to complete an Appraisal Programme, at the request of the Contractor, the Government
shall extend the Exploration Period for such period, not exceeding eighteen (18)
months for onland and shallow water blocks and thirty (30) months for deepwater
blocks, as may be mutually agreed between the Parties for the Appraisal Programme to
be carried out and for the Contractor and the Management Committee, to comply with the
provisions of Article 10 and Article 21.
	 
	3.9	 	If no Commercial Discovery has been made in the Contract Area by the end of the
Exploration Period, the Contract shall terminate.
	 
	3.10	 	If this Contract is terminated in accordance with its terms, the License shall be
automatically cancelled.
	 
	3.11	 	If at the expiry of the Exploration Period a development plan for development of a
Commercial Discovery and an application for Lease is under consideration by the
Management Committee or Government, as the case may be, pursuant to Articles 10, 11
and 21 respectively, the License shall continue in force with respect to that part of
the Contract Area to which the application for the Lease relates, pending a decision
on the proposed development plan and the application for the Lease, but shall cease to
be in force and effect with respect to the remainder of the Contract Area.

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ARTICLE 4

RELINQUISHMENT

	4.1	 	If at the end of the first Exploration Phase, the Contractor elects, pursuant to
Article 3.5, to continue Exploration Operations in the Contract Area in the second
Exploration Phase, the Contractor shall retain upto seventy five percent (75%) of the
original Contract Area including any Development Area and Discovery Area in not more
than three (3) areas of simple geometrical shapes and relinquish the balance of the
Contract Area prior to the commencement of the second Exploration Phase.
Notwithstanding the provision of this Article 4.1, in the event the Development Areas
and Discovery Areas exceed seventy five percent (75%) of the original Contract Area,
the Contractor shall be entitled to retain to the extent of Development Areas and
Discovery Areas.
	 
	4.2	 	If at the end of the second Exploration Phase, the Contractor elects, pursuant to
Article 3.5, to continue Exploration Operations in the Contract Area in the third
Exploration Phase, the Contractor shall retain upto fifty percent (50%) of the
original Contract Area, including any Development Area and Discovery Area in not more
than three (3) areas of simple geometrical shapes and relinquish the balance of the
Contract Area prior to the commencement of the third Exploration Phase.
Notwithstanding the provision of this Article 4.2, in the event the Development Areas
and Discovery Areas exceed fifty percent (50%) of the original Contract Area, the
Contractor shall be entitled to retain to the extent of Development Areas and
Discovery Areas.
	 
	4.3	 	At the end of the third Exploration Phase, the Contractor shall retain only
Development Areas and Discovery Areas.
	 
	4.4	 	If the Contractor exercises the option provided for in paragraph (b) of Article 3.5,
the Contractor shall, after any Discovery Areas or Development Areas have been
designated, relinquish all of the Contract Area not included within the said Discovery
Areas or Development Areas.
	 
	4.5	 	As and when the Contract is terminated under the provisions of Article 3 or in
accordance with any other provisions of this Contract, the entire Contract Area
remaining with the Contractor shall be deemed to have been relinquished by the
Contractor as on the date on which the Contract is terminated.
	 
	4.6	 	Relinquishment of all or part of the Contract Area or termination of the Contract
shall not be construed as absolving the Contractor of any liability undertaken or
incurred by the Contractor in respect of the Contract Area during the period between
the Effective Date and the date of such relinquishment or termination.

16

 

	4.7	 	Subject to Article 14.9, the liability of the Contractor shall be limited to any
liability undertaken or incurred in respect of, relating to or connected with the
Contract, and/or any claim arising out of or in relation to the act of negligence,
misconduct, commission or omission in carrying out Petroleum Operations during the
period between the Effective Date and the date of relinquishment of the Contract Area
or termination or expiry of the Contract, as the case may be.

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ARTICLE 5

WORK PROGRAMME

	5.1	 	The Contractor shall commence Petroleum Operations not later than six (6) months from the
Effective Date.
	 
	5.2	 	During the currency of the first Exploration Phase, as per Article 3.2, the Contractor
shall complete the following Work Programme:

	 	(a)	(i)	    Gravity Magnetic Survey (API) of 2500 Stations;

	 	(ii)	 	Aero Magnetic Survey (API) of 12000 LKM;
	 
	 	(iii)	 	Geochemical Survey of 500 samples;
	 
	 	(iv)	 	Technical Assessment and Geological Modeling

	5.3	 	During the currency of the second Exploration Phase, as per Article 3.3, the Contractor
shall complete the following Work Programme:

	 	(a)	 	a seismic programme consisting of the acquisition, procession and
interpretation of 500 line kilometers of 2D seismic data in relation to the
exploration objectives; and
	 
	 	(b)	 	One (1) Exploration Well shall e drilled to at least one of the
following depths:

	 	(i)	 	1500 meter or 500 meter into sediment below Deccan
Traps;
	 
	 	(ii)	 	to Basement; and
	 
	 	(iii)	 	that point below which further drilling becomes
impracticable due to geological conditions encountered and drilling would
be abandoned by a reasonable prudent operator in the same or similar
circumstances. Abandonment of drilling under this provision by the
Contractor, would require unanimous approval of the Management Committee.

	5.4	 	During the currency of the third Exploration Phase, as per Article 3.4, the Contractor
shall complete the following Work Programme:

	 	(a)	 	a seismic programme consisting of the acquisition, procession and
interpretation of 250 sq. kms. of 3D seismic data in relation to the exploration
objectives; and
	 
	 	(b)	 	Two (2) Exploration Wells to the following depths:

	 	(i)	 	One (1) well – 2000 meters
	 
	 	 	 	One (1) well – 2500 meters
	 
	 	(ii)	 	to Basement; and
	 
	 	(iii)	 	that point below which further drilling becomes
impracticable due to geological conditions encountered and drilling would
be abandoned by a reasonable prudent operator in the same or similar
circumstances. Abandonment of drilling under this provision by the
Contractor, would require unanimous approval of the Management Committee.

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	5.5	 	Subject to Article 5.7, the actual depth objective for each of the Wells shall be
determined by the Contractor in the light of the advice of the Management Committee
before the commencement of the drilling. Each Well which reaches the geological
objective for which the depth objective was determined shall be deemed to have been
drilled to the depth objective or to actual total depth, whichever is greater. The
Contractor shall ensure that all relevant subsurface, geological, geochemical and
geophysical information necessary for the attainment of the exploration objectives in
accordance with modern oilfield and petroleum industry practices is obtained during
exploratory drilling.
	 
	5.6	 	If the depth/geological objective of the Well is not achieved for any reason, a
substitute Well shall be drilled of the same specifications as stipulated in and
subject to Articles 5.2, 5.3 and 5.4, as the case may be.
	 
	5.7	 	In the event that the Contractor is unable to complete the Minimum Work Programme as
provided herein under Articles 5.2 (a) & 5.2 (b) (i), 5.3 (a) & 5.3 (b) (i) and 5.4
(a) & 5.4 (b) (i) (hereinafter referred to as “Bid Commitments”) or it becomes
unnecessary to complete Bid Commitments in view of Articles 5.2 (b) (ii) and (iii),
5.3 (b) (ii) and (iii) and 5.4 (b) (ii) and (iii), as the case may be, the Contractor
shall be required to carry out and complete such additional, substituted or alternate
work programme as may be fixed by the Government on the recommendation of the
Management Committee, so as to match the Bid Commitments undertaken and committed
under the bid or in the alternative, the Contractor shall pay to the Government the
cost, as estimated by the Government on the recommendation of the Management
Committee for fulfilling such Bid Commitments of the Contractor. The management
committee shall give its recommendation, on additional, substituted or alternate work
programme or payment to the Government for unfinished work programme, to the
Government within sixty (60) days from the date of notice given by the Government of
non-fulfillment of the Minimum Work Programme. Failing any proposal from the
Management Committee within the time frame, the Government shall make a decision and
convey to the Contractor for compliance.
	 
	5.8	 	If the Minimum Work Programme for the third Exploration Phase has been completed
earlier than eighteen months from the end of the Phase, the Contractor shall meet
with the Government to discuss the possibility of early relinquishment, unless the
Contractor undertakes further work with the approval of the Management Committee.
	 
	5.9	 	In the event that the Contractor has carried out work in excess of the Minimum Work
Programme in any Exploration Phase, the excess exploration work done shall be set off
against the Minimum Work Programme for the following Exploration Phase.
	 
	5.10	 	As soon as possible after the Effective Date and thereafter within ninety (90) days
before commencement of each following Year, the Contractor shall submit to the

19

 

	 	 	Management Committee the Work Programmes and the Budgets relating to Petroleum
Operations to be carried out during the relevant Year. Work Programme and
Budgets for the Exploration Period shall include work sufficient to meet the
relevant Minimum Work Programme with respect to each Exploration Phase
specified in this Article 5.

	5.11	 	The Contractor may propose modifications or revisions to the details of a reviewed
or an approved Work Programme and Budget, as the case may be, in the light of the
then existing circumstances and shall submit to the Management Committee
modifications or revisions to the Work Programme and Budget referred to in Article
5.10.
	 
	5.12	 	Work Programmes and Budgets and any modifications or revisions thereto relating to
Exploration Operations shall be submitted to the Management Committee for review and
advice as provided in Article 6.5. Work Programmes and Budgets related to Development
Operations and Production Operations and any modifications or revisions thereto shall
be submitted for approval as provided in Article 10 and Article 21.

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ARTICLE 6

MANAGEMENT COMMITTEE

	6.1	 	There shall be constituted a committee to be called the Management Committee with
functions as stated herein below.
	 
	6.2	 	Government shall nominate two (2) members representing Government in the Management
Committee, whereas each Company constituting the Contractor shall nominate one (1)
member each to represent Company in the Management Committee provided that in case the
Contractor constitutes only one Company, that Company shall have two (2) members. The
Parties shall nominate the members to the Management Committee within thirty (30) days
of the Effective Date.
	 
	6.3	 	Each Party may nominate alternate members with full authority to act in the absence
and on behalf of the members nominated under Article 6.2 and may, at any time,
nominate another member or alternate member to replace any member nominated earlier by
notice to other members of the Management Committee.
	 
	6.4	 	One representative of the Government shall be designated as the Chairman of the
Management Committee and the second representative of the Government shall be
designated as the Deputy Chairman. The member of the Operator, or the member
designated by the Operator where Operator has two (2) members in the Management
Committee shall be designated as the Secretary of the Committee.
	 
	6.5	 	Operator on behalf of the Contractor with the approval of Operating Committee, if
constituted under the Article 7.4, or in case of a single Party constituting the
Contractor, then that Party shall submit following matters to the Management Committee
for review and it shall have advisory functions:

	 	(a)	 	the annual Work Programmes and Budgets in respect of
Exploration Operations and any revisions or modifications thereto;
	 
	 	(b)	 	annual work progress and costs incurred thereon;
	 
	 	(c)	 	proposals for surrender or relinquishment of any part of
the Contract Area by the Contractor;
	 
	 	(d)	 	proposals for an Appraisal Programme or revisions or
additions thereto and the declaration of a Discovery as a Commercial
Discovery;
	 
	 	(e)	 	any other matter required by the terms of this Contract
to be submitted to it for review or advice; and
	 
	 	(f)	 	any other matter which the Contractor decides to submit
for review or advice including matters concerning inter-Party
relationships.

	6.6	 	The following matters shall be submitted by Operator on behalf of the Contractor with
the approval of Operating Committee, if constituted under the Article 7.4, or

21

 

	 	 	in case of single Party constituting the Contractor, then by that Party to
the Management Committee for approval:

	 	(a)	 	Annual Work Programmes and Budgets in respect of
Development Operations and Production Operations and any modifications
or revisions thereto;
	 
	 	(b)	 	proposals for the approval of development plans as may be
required under this Contract, or modifications or revisions to a
Development Plan;
	 
	 	(c)	 	determination of a Development Area;
	 
	 	(d)	 	appointment of auditors along with scope of audit,
approval and adoption of audited report submitted under Article 25.4.3;
	 
	 	(e)	 	collaboration with licensees or contractors of other
areas;
	 
	 	(f)	 	claims or settlement of claims for or on behalf of or
against the Contractor in excess of limits fixed by the Management
Committee from time to time;
	 
	 	(g)	 	proposal about abandonment plan/Site Restoration as
required to be submitted under Article 14.10;
	 
	 	(h)	 	any other matter required by the terms of this Contract
to be submitted for the approval of the Management Committee;
	 
	 	(i)	 	any other matter which the Contractor decides to submit
to it; and
	 
	 	(j)	 	any matter, which Government refers to the Management
Committee for its consideration and reasoned opinion.

	6.7	 	Unless agreed otherwise by all the members of the Management Committee, the
Management Committee shall meet at least once every six (6) months during the
Exploration Period and thereafter at least once every three (3) months or more
frequently at the request of any member. The Secretary, with the approval of the
Chairman, shall convene each meeting by notifying the members twenty eight (28) days
prior to such a meeting (or a shorter period of notice if the members unanimously so
agree) of the time and place of such meeting and the purpose thereof and shall include
in such notice a provisional agenda for such meeting. The Chairman shall be
responsible for processing the final agenda for such meeting and the agenda shall
include all items of business requested by the members to be included, provided such
requests are received by the Secretary at least ten (10) days prior to the date fixed
for the meeting. The Secretary shall forward the agenda to the members at least seven
(7) Business Days prior to the date fixed for the meeting. Matters not included in the
agenda may be taken up at the meeting by any member with the unanimous consent of all
the members whether present or not present at the meeting.
	 
	6.8	 	The Chairman or the Deputy Chairman, as may be the case, shall preside over the
meetings of the Management Committee and, in their absence, any other member
representing Government and present shall preside over the meetings.
	 
	6.9	 	Secretary to the Management Committee shall be responsible, inter alia, for
preparation of the minutes of every meeting in the English language and provision to
every member of the Management Committee with two (2) copies of the

22

 

	 	 	minutes approved by the Chairman within three (3) Business Days of the
meeting. Unless agreed otherwise by all the members of the Management
Committee, the minutes of a meeting shall be finalised by the Management
Committee within three (3) Business Days thereafter. Members shall notify the
Chairman and the other members of their approval of the minutes by putting
their signatures on one copy of the minutes and returning the same to the
Chairman. Members may suggest any modification to the minutes while returning
the signed copy. Members may also communicate with the Chairman through
telex, cable, or facsimile or any other effective mode of communication
agreed by all the members of the Management Committee. If the Chairman or any
other member does not agree with the modification to the minutes suggested by
any member, the matter shall be brought to the attention of the other members
and resubmitted to the Management Committee at the next meeting and the
minutes shall stand approved as to all other matters. If a member fails to
respond within the aforesaid three (3) Business Day period, unless agreed
otherwise by the Management Committee as herein provided, the minutes shall
be deemed to be approved by such member.

	6.10	 	Any member shall be entitled, if either he/she or his/her alternate is unable to
attend a meeting, to cast his vote by telex, cable, facsimile transmission or any
other effective mode of communication agreed by all the members of the Management
Committee and received by the Chairman prior to the date on which the vote is taken in
the course of the meeting or by giving a prior written notice to all other members,
appoint a member, with his/her prior consent, representing another Party in the
Management Committee as its proxy to attend a meeting and to exercise the appointing
member’s right to vote at the meeting whether as directed by the appointing member or
otherwise. A member appointed as a proxy and attending a meeting shall be present in
two separate capacities and vote accordingly. All such votes shall have the same
effect as if that member had been present and so voted at the meeting.
	 
	6.11	 	In case of urgency, where Operating Committee has made a recommendation together with
reasons to the Chairman requiring consideration of a matter by the Management
Committee without delay, Chairman, after being satisfied may waive the requirements of
notice period for the meeting and circulation of agenda to such extent as would be
consistent with the urgency and consideration of the matter by the Management
Committee. Alternatively, Chairman may approve submission of notice and agenda to
members by telex or facsimile transmission or any other effective mode of
communication agreed by all the members of the Management Committee, receipt of which
shall be confirmed by telephone by the Chairman requiring the members to confirm their
decision by these modes of communication not later than three (3) Business Days from
confirmation of receipt of notice and agenda by the member. Any member failing to
convey the decision within the time limits of three (3) Business Days shall be deemed
to have voted in favour of the proposal. The result of any such vote shall be notified
by the Chairman to all the members.

23

 

	6.12	 	The meetings of the Management Committee shall be held in India, unless otherwise
mutually agreed by the members of the Management Committee. All expenses of the
members of the Management Committee attending meetings shall be borne by the
respective Party and shall in no event be cost recoverable.
	 
	6.13	 	All matters requiring the approval of the Management Committee shall be generally
approved by a unanimous vote of the members of the Management Committee present as
well as the views of the members received by some other mode of communication. In
case, unanimity is not achieved in decision making process within a reasonable period
as may be required under the circumstances, the decision of the Management Committee
shall be approved by the majority Participating Interest of seventy percent (70%) or
more with Government representative having a positive vote in favour of the decision.
	 
	6.14	 	There shall be a quorum of the Management Committee for holding a meeting and making
decisions with each Party to the Contract represented by at least one of its nominated
members in the Management Committee either present in person or represented as per
Article 6.10. If there is no quorum in a meeting, the meeting shall stand postponed to
the same day and time in the next week and if quorum is not present or represented
even in the next meeting and subject to a Government member being present, the members
present and represented will constitute the quorum and take decisions and decisions
taken by such quorum shall be final and binding to all the absenting Parties or
Parties not represented, notwithstanding the provisions of Article 6.13.
	 
	6.15	 	The Management Committee, if it considers necessary, may appoint legal, financial or
technical subcommittees comprised of such representatives as may be agreed by the
Management Committee to consider any matter requiring approval or decision of the
Management Committee. Such sub-committee expenses shall form part of Contract Cost
with relevant cost classification as decided by the Management Committee pursuant to
the Section 2 of the Accounting Procedure and will be cost recoverable.
	 
	6.16	 	In the event a Party to the Contract is not entitled to vote in the Operating
Committee meetings being in default under the Operating Agreement, and Operator
notifies Chairman of the default by the Party, then the issue of exercising voting
right by such defaulting Party in the Management Committee meetings shall be discussed
by the Management Committee. The Management Committee excluding the defaulting Party,
after duly hearing the views of the defaulting Party on the matter of their default
under Operating Agreement, shall take unanimous decision on exclusion or otherwise of
the defaulting Party from voting in the Management Committee meetings. For avoidance
of any doubt, it is clearly understood that unanimous decision by the Management
Committee referred to in this Article 6.16 excludes defaulting Party from such
decision. Accordingly, if the Management Committee decides to exclude the defaulting

24

 

	 	 	Party from voting in the Management Committee, then the said Party shall not
be entitled to vote in the meetings of the Management Committee under
Contract. In that event, notwithstanding the provisions of Article 6.13,
decisions of the Management Committee shall be made by vote of the members of
the Management Committee excluding the member appointed by the said Party in
default and any vote or purported vote by such member in the Management
Committee shall be ignored. The said Party in default shall be bound by all
decisions of the Management Committee. The non-defaulting Parties under the
Operating Agreement shall indemnify Government against any claims of
whatsoever nature which may arise due to exclusion of defaulting Party from
voting in the Management Committee.

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ARTICLE 7

OPERATORSHIP,
OPERATING AGREEMENT AND OPERATING COMMITTEE

	7.1	 	GGR shall be the Operator for the purpose of carrying out Petroleum Operations
pursuant to this Contract during the term of the Contract.
	 
	7.2	 	No change in the operatorship shall be effected without the consent of the Government
and such consent shall not be unreasonably withheld.
	 
	7.3	 	The functions required of the Contractor under this Contract shall be performed by
the Operator on behalf of all constituent(s) of the Contractor subject to, and in
accordance with, the terms and provisions of this Contract and generally accepted
modern oilfield and petroleum industry practices, provided, however, that this
provision shall not be construed as relieving the constituent(s) of the Contractor
from any of its obligations or liability under the Contract.
	 
	7.4	 	Within forty five (45) days of the Effective Date or such longer period as may be
agreed to by Government, the Companies constituting the Contractor shall execute an
Operating Agreement. The said agreement shall be consistent with the provisions of
this Contract and shall provide for, among other things:

	 	(a)	 	the appointment, resignation, removal and
responsibilities of the Operator;
	 
	 	(b)	 	the establishment of an Operating Committee comprising of
an agreed number of representatives of the Companies chaired by a
representative of the Operator;
	 
	 	(c)	 	functions of the said Operating Committee taking into
account the provisions of the Contract, procedures for decision making,
frequency and place of meetings; and
	 
	 	(d)	 	contribution to costs, default, sole risk, disposal of
Petroleum and assignment as between the Parties to the Operating
Agreement.

	7.4.1	 	Operator shall provide to the Government a copy of the duly executed Operating
Agreement within thirty (30) days of the Effective Date or such longer period as may
be agreed to by the Government.
	 
	7.4.2	 	In case a single Company constitutes the Contractor, the provisions of Article 7.4
and 7.4.1 shall not be applicable. However, in case of increase in the number of
constituents of the Contractor, the provisions of Article 7.4 and 7.4.1 shall apply
from the date of such increase in the number of the constituents.

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ARTICLE 8

GENERAL RIGHTS AND OBLIGATIONS OF THE PARTIES 

	8.1	 	Subject to the provisions of this Contract, the Contractor shall have the following
rights:

	 	(a)	 	subject to the provisions of Article 12, the exclusive
right to carry out Petroleum Operations to recover costs and expenses as
provided in this Contract. The right shall exclude exploitation of
coal/lignite bed methane (CBM) by the Contractor in the Contract Area;
	 
	 	(b)	 	the right to use, free of charge, such quantities of
Petroleum produced as are reasonably required for conducting Petroleum
Operations in the Contract Area in accordance with generally accepted
modern oilfield and petroleum industry practices;
	 
	 	(c)	 	the right to lay pipelines, build roads, construct
bridges, ferries, aerodromes, landing fields, radio telephones and
related communication and infrastructure facilities and exercise other
ancillary rights as may be reasonably necessary for the conduct of
Petroleum Operations subject to such approvals as may be required and
the applicable laws in force from time to time for the regulation and
control thereof;
	 
	 	(d)	 	the right to use all available technical data, seismic
and well information, maps, samples etc. of the Contract Area as on the
Effective Date, free of charge, subject to nominal copying/reproduction
costs for further Petroleum Operations. The Contractor shall submit the
list of all data required by them to Directorate General of Hydrocarbons
(DGH) based on the list of data provided in the information docket for
the block pertaining to the Contract Area as soon as possible but not
later than one hundred and eighty (180) days from the execution of the
Contract and the same, if available and reproducible, shall be made
available to the Contractor in the office of DGH within ninety (90) days
from the submission of such request for data by the Contractor, provided
the Effective Date of the Contract has commenced and the Contractor has
furnished relevant guarantees under Article 29 of the Contract.
	 
	 	(e)	 	such other rights as are specified in this Contract.

	8.2	 	The Government reserves the right to itself, or to grant to others the right, to
prospect for and mine minerals or substances other than Petroleum within the Contract
Area; provided, however, that if after the Effective Date, others are issued rights,
or the Government proceeds directly to prospect for and mine in the Contract Area any
minerals or substances other than Petroleum, the Contractor shall use its best efforts
to avoid obstruction to or interference with such operations within the Contract Area
and the third parties and/or the Government,

27

 

	 	 	as the case may be, shall use best efforts to ensure that operations carried
out do not obstruct or unduly interfere with Petroleum Operations in the
Contract Area.

	8.3	 	The Contractor shall having due regard to modern oilfield and petroleum industry
practices :

	 	(a)	 	except as otherwise expressly provided in this Contract,
conduct all Petroleum Operations at its sole risk, cost and expense and
provide all funds necessary for the conduct of Petroleum Operations
including funds for the purchase or lease of equipment, materials or
supplies required for Petroleum Operations as well as for making
payments to employees, agents and Subcontractors;
	 
	 	(b)	 	conduct all Petroleum Operations within the Contract Area
diligently, expeditiously, efficiently and in a safe and workmanlike
manner pursuant to the Work Programme formulated in accordance with
Contract;
	 
	 	(c)	 	ensure provision of all information, data, samples etc.
which may be required to be furnished under the applicable laws or under
this Contract;
	 
	 	(d)	 	ensure that all equipment, materials, supplies, plant and
installations used by the Contractor, the Operator, and Subcontractors
comply with generally accepted standards and are of proper construction
and kept in safe and good working order;
	 
	 	(e)	 	in the preparation and implementation of Work Programmes
and in the conduct of Petroleum Operations, follow modern oilfield and
petroleum industry practices with such degree of diligence and prudence
reasonably and ordinarily exercised by experienced parties engaged in a
similar activity under similar circumstances and conditions;
	 
	 	(f)	 	the procedure for acquisition of goods and services, as
of the Effective Date, shall be as per the Appendix-F of this Contract.
Based on economic considerations and generally accepted practices in the
international petroleum industry with the objective of ensuring cost and
operational efficiency in the conduct of Petroleum Operations, the
Appendix-F to this Contract may be modified or changed with the prior
approval of the Management Committee when circumstances so justify;
	 
	 	(g)	 	after the designation of a Development Area, pursuant to
this Contract, forthwith proceed to take all necessary action for prompt
and orderly development of the Development Area and for the production
of Petroleum in accordance with the terms of this Contract;
	 
	 	(h)	 	appoint a technically competent and sufficiently
experienced representative, and, in his absence, a suitably qualified
replacement therefor, who shall be resident in India and who shall have
full authority to take such steps as may be necessary to implement this
Contract and whose name(s) shall, on appointment within ninety (90) days
after commencement of the first Contract Year, be made known to the
Government;

28

 

	 	(i)	 	provide acceptable working conditions, living
accommodation and access to medical attention and nursing care for all
personnel employed in Petroleum Operations;
	 
	 	(j)	 	carry out such other obligations as are specified in
this Contract, in particular those specified in Article 14; and
	 
	 	(k)	 	be always mindful of the rights and interests of India in
the conduct of Petroleum Operations.

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ARTICLE 9

GOVERNMENT ASSISTANCE

	9.1	 	Upon application in the prescribed manner, and subject to compliance with applicable
laws and relevant procedures, the Government or its nominee will:

	 	(a)	 	use their good offices to provide the right of ingress
and egress from the Contract Area and any facilities used in Petroleum
Operations, wherever located, and which may be within their control;
	 
	 	(b)	 	use their good offices, when necessary, to assist the
Contractor in procurement or commissioning of facilities required for
execution of Work Programmes including necessary approvals, permits,
consents, authorisations, visas, work permits, Licenses including
Licenses and Leases, rights of way, easement, surface rights and
security protection at the Contractor’s cost, required pursuant to this
Contract and which may be available from resources within its control;
and
	 
	 	(c)	 	in the event that onshore facilities are required outside
the Contract Area for Petroleum Operations including, but not limited
to, storage, loading and processing facilities, pipelines and offices,
use their good offices in assisting the Contractor to obtain from the
authorities of the state in which such facilities are required, such
licenses, permits, authorizations, consents, security protection at the
Contractor’s cost, surface rights and easements as are required for the
construction and operation of the said facilities by the Contractor.

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ARTICLE 10

DISCOVERY, DEVELOPMENT AND PRODUCTION

	10.1	 	If and when a Discovery is made within the Contract Area, the Contractor shall:

	 	(a)	 	forthwith inform the Management Committee and Government
of the Discovery;
	 
	 	(b)	 	promptly thereafter, but in no event later than a period
of thirty (30) days from the date of the Discovery, furnish to the
Management Committee and Government particulars, in writing, of the
Discovery; and
	 
	 	(c)	 	promptly run tests to determine whether the Discovery is
of potential commercial interest and, within a period of sixty (60) days
after completion of such tests, submit a report to the Management
Committee containing data obtained from such tests and its analysis and
interpretation thereof, together with a written notification of whether,
in the Contractor’s opinion, such Discovery is of potential commercial
interest and merits appraisal.

	10.2	 	If the Contractor determines to conduct a drill stem or production test, in open hole
or through perforated casing, with regard to any Exploration Well, it shall notify the
Government of the time of such test at least forty eight (48) hours prior to the
proposed test, and the Government shall have the right to have a representative
present during such test.
	 
	10.3	 	If, pursuant to Article 10.1 (c), the Contractor notifies the Management Committee
that the Discovery is of potential commercial interest, the Contractor shall prepare
and submit to the Management Committee within one hundred and twenty (120) days of
such notification, a proposed Appraisal Programme with a Work Programme and Budget to
carry out an adequate and effective appraisal of such Discovery designed to achieve
both the following objectives: (i) determine without delay, and, in any event, within
the period specified in Article 10.5, whether such Discovery is a Commercial
Discovery and (ii) determine, with reasonable precision, the boundaries of the area to
be delineated as the Development Area.
	 
	10.4	 	The proposed Appraisal Programme shall be reviewed by the Management Committee within
thirty (30) days after submission thereof pursuant to Article 10.3. The said
Appraisal Programme, together with the Work Programme and Budget submitted by the
Contractor, which may be revised or modified or amended by the Contractor in light of
the Management Committee review, shall be adopted as the Appraisal Programme and the
Contractor shall promptly commence implementation thereof; and the annual Budget for
the Exploration Period, adopted pursuant to Article 5, shall be revised accordingly.

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	10.5	 	The Contractor shall in respect of a Discovery of Crude Oil advise the Management
Committee by notice in writing within a period of eighteen (18) months for onland and
shallow water blocks and thirty (30) months for deepwater blocks from the date on
which the notice provided for in Article 10.1 (c) was delivered, whether such
Discovery should be declared a Commercial Discovery or not. Such notice shall be
accompanied by a report on the Discovery setting forth all relevant technical and
economic data including estimated recoverable reserves, sustainable production levels,
estimated development and production expenditures, prevailing and forecasted prices,
and other pertinent technical and economic factors according to modern oilfield and
petroleum industry practices as well as all evaluations, interpretations and analyses
of such data and feasibility studies relating to the Discovery prepared by or for the
Contractor, with respect to the Discovery and any other relevant information. If the
Contractor is of the opinion that Crude Oil has been discovered in commercial
quantities, it shall submit the proposal to the Management Committee for review that
the Discovery be declared a Commercial Discovery. In the case of a Discovery of Gas,
the provisions of Article 21 shall apply.
	 
	10.6	 	The Management Committee shall, within forty (40) days of the date of the notice
referred to in Article 10.5, review the proposal of the Contractor and request any
other additional information it may reasonably require so as to complete the review of
the proposal made by the Contractor. The Contractor shall furnish the additional
information within thirty (30) days from the date of the request. The review by the
Management Committee shall be made and conveyed to the Contractor within the later of
(a) ninety (90) days from the date of notice referred to in Article 10.5 or (b) forty
(40) days of receipt of such other information as may be required under this Article.
	 
	10.7	 	If the Contractor declares the Discovery a Commercial Discovery after taking into
account the advice of the Management Committee as referred in the Article 10.6, within
two hundred (200) days of the declaration of the Discovery as a Commercial Discovery,
the Contractor shall submit to the Management Committee a comprehensive development
plan of the Commercial Discovery which shall:

	 	(a)	 	relate to the Discovery Area and contain a Reservoir or
part thereof and the boundaries of the proposed Development Area;
	 
	 	(b)	 	be designed to ensure the most efficient, beneficial and
timely use of the Petroleum resources discovered; and
	 
	 	(c)	 	be prepared in accordance with sound engineering,
economic, safety and environmental principles recognised in the
generally accepted modern oilfield and petroleum industry practices.

	 	 	Such plan shall contain detailed proposals by the Contractor for the
construction, establishment and operation of all facilities and services for
and incidental to the recovery, storage and transportation of the Petroleum
from the proposed

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	 	 	Development Area to the Delivery Point together with all data and supporting
information including but not limited to:

	 	(i)	 	description of the nature and characteristic of the
Reservoir, data, statistics, interpretations and conclusions on all
aspects of the geology, Reservoir evaluation, Petroleum engineering
factors, Reservoir models, estimates of reserve in place, possible
production magnitude, nature and ratio of Petroleum fluids and analysis
of producible Petroleum;
	 
	 	(ii)	 	outlines of the development project and/or alternative
development projects, if any, describing the production facilities to
be installed and the number of Wells to be drilled under such
development project and/or alternative development projects, if any;
	 
	 	(iii)	 	estimate of the rate of production to be established and
projection of the possible sustained rate of production in accordance
with modern oilfield and petroleum industry practices under such
development project and/or alternative development projects, if any,
which will ensure that the area does not suffer an excessive rate of
decline of production or an excessive loss of Reservoir pressure;
	 
	 	(iv)	 	estimates of Development Costs and Production Costs under
such development project and/or alternative development projects, if
any;
	 
	 	(v)	 	Contractor’s recommendations as to the particular project
that it would prefer;
	 
	 	(vi)	 	Work Programme and Budget for development proposals
relating to the proposed Development Area;
	 
	 	(vii)	 	anticipated adverse impact on the environment and
measures to be taken for prevention or minimisation thereof and for
general protection of the environment in conduct of operations;
	 
	 	(viii)	 	measures to be taken for the health and safety of persons employed in
Petroleum Operations;
	 
	 	(ix)	 	the information required in Article 21.

	10.8	 	A proposed development plan submitted by the Contractor pursuant to Article 10.7 may
be approved by the Management Committee within one hundred and ten (110) days of
submission thereof or eighty (80) days of receipt of any additional information
requested by the Management Committee. In case the Management Committee requires any
reasonable additional information, the same shall be requested by it within eighty
(80) days from the submission of the development plan. The Contractor shall provide
such additional information within thirty (30) days from the request by the Management
Committee. If, within a period of one hundred and ten (110) days after submission of a
proposed development plan or eighty (80) days from the receipt of any additional
information, where asked by the Management Committee, the Management Committee fails
to convey a decision to the Contractor, the Contractor shall have option to submit the
proposal to the Government. Also, where, the Management Committee rejects the
development plan of the Contractor, the Contractor can submit the development plan for
the approval of the Government. The Government shall respond on the

33

 

	 	 	proposed development plan submitted by the Contractor within one hundred and
ten (110) days. In case Government refuses to approve the proposed
development plan, it shall convey the reasons for such refusal and the
Contractor shall be given opportunity to make appropriate modifications to
meet concerns of Government and the provisions of the foregoing Article and
re-submit the plan within ninety (90) days from the date of receipt of
refusal from the Government.

	10.9	 	A Development Plan approved by the Management Committee or Government, as may be the
case, from time to time shall commit the Contractor to the obligations stipulated in
Articles 10.10 to 10.12.
	 
	10.10	 	Work Programmes and Budgets for Development and Production Operations shall be
submitted to the Management Committee as soon as possible after the approval of a
Development Plan under Article 10.8 and thereafter not later than 31st December each
Year in respect of the Year immediately following.
	 
	10.11	 	The Management Committee, when considering any Work Programme and Budget, may
require the Contractor to prepare an estimate of potential production to be achieved
through the implementation of the said Work Programme and Budget for each of the three
(3) Years following the Year to which the Work Programme and Budget relate. If major
changes in yearly estimates of potential production are required, these shall be based
on evidence necessitating such changes.
	 
	10.12	 	Not later than the fifteenth (15th) of January each Year, in respect of
the Year immediately following commencement of Commercial Production, the Contractor
shall determine the “Programme Quantity” with the approval of the Management
Committee. The Programme Quantity for any Year shall be the maximum quantity of
Petroleum based on Contractor’s estimates, as approved by the Management Committee,
which can be produced from a Development Area consistent with modern oilfield and
petroleum industry practices and minimising unit production cost, taking into account
the capacity of the producing Wells, gathering lines, separators, storage capacity and
other production facilities available for use during the relevant Year, as well as the
transportation facilities up to the Delivery Point.
	 
	10.13	 	Proposed revisions to the details of a Development Plan or an annual Work Programme
or Budget in respect of Development and Production Operations shall, for good cause
and if the circumstances so justify, be submitted for approval to the Management
Committee.
	 
	10.14	 	In the event the area encompassing the Commercial Discovery extends beyond the
Development Area designated in the Development Plan, either within the original
Contract Area but subsequently relinquished or, outside the original Contract Area,
the Management Committee may make recommendations to the Government concerning
enlargement of the Development Area, provided the same was not awarded to any other
company by the Government or is not held by any other party

34

 

	 	 	or not on offer by the Government and no application for a License or Lease
is pending with the Government. However, in case the area is held by any
other party or on offer by the Government or application for License or Lease
is pending with the Government, the Management Committee shall notify the
same to the Government for further action on the matter. Government may
consider such request for extension at its sole discretion and on terms and
conditions, which it may consider fit.

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 ARTICLE 11

PETROLEUM EXPLORATION LICENSE AND MINING LEASE

	11.1	 	The Contractor shall submit an application for grant of License in respect of the
Contract Area, as early as possible, but not later than fifteen (15) Business Days
from the date of execution of this Contract.
	 
	11.2	 	On submission of a development plan of a Commercial Discovery pursuant to Article
10.7, the Contractor shall submit an application for a Lease in respect of the
proposed Development Area to the relevant State Government(s).
	 
	11.3	 	Where a part of a Reservoir in respect of which a Commercial Discovery has been
declared extends beyond the Contract Area, subject to Article 10.14 such area may be
included in the proposed Development Area, in relation to which application for a
Lease is made, on terms and conditions as decided by the Central Government; provided
that such area is:

	 	(a)	 	not subject to a license or lease granted to any other person;
	 
	 	(b)	 	not the subject of negotiations/bidding or contract
awarded for a license or lease; and
	 
	 	(c)	 	available for licensing (i.e. is not an area over which
Petroleum Operations are excluded).

	11.4	 	Where a Development Plan has been approved pursuant to Article 10 and the Contractor
has complied with the terms and conditions of the License and this Contract and is not
in breach of any of the terms thereof, or the provisions of any law and subject to
normal Government clearances/approvals being obtained by the Contractor as applicable
before grant/issue of the Lease, the Central Government will assist the Contractor in
obtaining the Lease from the relevant State Government(s) over the Development Area as
agreed, subject to Article 11.5 to enable the Contractor to carry out Petroleum
Operations in the Development Area in accordance with the Development Plan.
	 
	11.5	 	The Lease shall be granted for an initial period of twenty (20) years from the date
of grant thereof subject to:

	 	(a)	 	cancellation in accordance with its terms or for
termination of this Contract in accordance with its terms;
	 
	 	(b)	 	extension by mutual agreement between the Parties for
five (5) years or such period as may be agreed after taking into account
the balance recoverable reserve and balance economic life of the
Field/Development Area from the expiry of the initial period provided
that in the event of a Commercial production of Non Associated Natural
Gas the extension may be for a period of ten (10) years or such period
as may be mutually agreed

36

 

	 	 	 	between the Parties after taking into account the balance recoverable
reserves and balance economic life of the Field/Development Area from
the date of expiry of the initial term; and
	 
	 	(c)	 	the terms of this Contract and other terms and conditions
as set forth in such Lease be consistent with this Contract and the
relevant legislation.

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ARTICLE 12

UNIT DEVELOPMENT

	12.1	 	If a Reservoir in a Discovery Area is situated partly within the Contract Area and
partly in an area in India over which other parties have a contract to conduct
petroleum operations and both parts of the Reservoir can be more efficiently developed
together on a commercial basis, on receiving information in writing from any party to
these contracts or any information on this from any bonafide source, the Government
may, for securing the more effective recovery of Petroleum from such Reservoir, by
notice in writing to the Contractor, require that the Contractor:

	 	(a)	 	collaborate and agree with such other parties on the
joint development of the Reservoir ;
	 
	 	(b)	 	submit such agreement between the Contractor and such
other parties to the Government for approval within one hundred and
eighty (180) days; and
	 
	 	(c)	 	prepare a plan for such joint development of the said
Reservoir, within one hundred and eighty (180) days of the approval of
the agreement referred to in (b) above.

	12.2	 	If no plan is submitted within the period specified in Article 12.1 (c) or such
longer period as the Government and the Contractor and the other parties referred to
in Article 12.1 may agree, or, if such plan as submitted is not acceptable to the
Government and the Parties cannot agree on amendments to the proposed joint
development plan, the Government may cause to be prepared, at the expense of the
Contractor and such other parties a plan for such joint development consistent with
generally accepted modern oilfield and petroleum industry practices which shall take
into consideration any plans and presentations made by the Contractor and the
aforementioned other parties.
	 
	12.3	 	If the parties are unable to agree on the proposed plan for joint development, the
Government may call for a joint development plan from an independent agency, which
agency, may make such a proposal after taking into account the position of the parties
in this regard. Such a development plan, if approved by Government, shall be binding
on the parties, notwithstanding their disagreement with the plan. However, the
Contractor may in case of any disagreement on the issue of joint development or the
proposed joint development plan, prepared in accordance with Article 12.2 or within
forty five (45) Business Days of the plan approval as aforesaid in this Article,
notify the Government that it elects to surrender its rights in the
Reservoir/Discovery in lieu of participation in a joint development.

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	12.4	 	If a proposed joint development plan is agreed and adopted by the parties, or adopted
following determination by the Government, the plan as finally adopted shall be the
approved joint development plan and the Contractor shall comply with the terms of the
said development plan as if the Commercial Discovery is established.
	 
	12.5	 	The provisions of Articles 12.1, 12.2 and Article 12.3 shall apply mutatis mutandis
to a Discovery of a Reservoir located partly within the Contract Area, which, although
not equivalent to a Commercial Discovery if developed alone, would be a Commercial
Discovery if developed together with that part of the Reservoir which extends outside
the Contract Area to the areas subject to contract for petroleum operations by other
parties.

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ARTICLE 13

MEASUREMENT OF PETROLEUM

	13.1	 	Petroleum used for internal consumption for Petroleum Operations, flared, saved and
sold from the Contract Area shall be measured by methods and appliances generally
accepted and customarily used in modern oilfield and petroleum industry practices and
approved by the Management Committee and the Government.
	 
	13.2	 	The Government may, at all reasonable times, inspect and test the appliances used for
measuring the volume and determining the quality of Petroleum, provided that any such
inspection or testing shall be carried out in such a manner so as not to unduly
interfere with Petroleum Operations.
	 
	13.3	 	Before commencement of production from the Contract Area, the Parties shall mutually
agree on:

	 	(a)	 	methods to be employed for measurement of volumes of
Petroleum production;
	 
	 	(b)	 	the point or points at which Petroleum shall be measured
and the respective shares allocated to the Parties in accordance with
the terms of this Contract;
	 
	 	(c)	 	the frequency of inspections and testing of measurement
appliances and relevant procedures relating thereto; and
	 
	 	(d)	 	the consequences of a determination of an error in
measurement.

	13.4	 	The Contractor shall undertake to measure the volume and quality of the Petroleum
Produced and Saved from the Contract Area at the agreed measurement point consistent
with generally accepted modern oilfield and petroleum industry practices with the
frequency and according to procedures agreed pursuant to Article 13.3. The Contractor
shall not make any alteration in the agreed method or procedures for measurement or to
any of the approved appliances used for that purpose without the written consent of
the Management Committee and the Government.
	 
	13.5	 	The Contractor shall give the Government timely notice of its intention to conduct
measuring operations or any agreed alteration for such operations and the

40

 

	 	 	Government shall have the right to be present at and supervise, either
directly or through authorised representatives, such operations.
	 
	13.6	 	The Contractor shall keep all the records of analysis and measurement of hydrocarbons
calibrations and proving of measurement system and make available to Government or its
authorized agency such records on request.

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ARTICLE 14

PROTECTION OF THE ENVIRONMENT

	14.1	 	The Government and the Contractor recognise that Petroleum Operations will cause some
impact on the environment in the Contract Area. Accordingly, in performance of the
Contract, the Contractor shall conduct its Petroleum Operations with due regard to
concerns with respect to protection of the environment and conservation of natural
resources and shall in particular;

	 	(a)	 	employ modern oilfield and petroleum industry practices
and standards including advanced techniques, practices and methods of
operation for the prevention of Environmental Damage in conducting its
Petroleum Operations;
	 
	 	(b)	 	take necessary and adequate steps to:

	 	(i)	 	prevent Environmental Damage and, where
some adverse impact on the environment is unavoidable, to
minimise such damage and the consequential effects thereof on
property and people;
	 
	 	(ii)	 	ensure adequate compensation for injury to
persons or damage to property caused by the effect of Petroleum
Operations; and

	 	(c)	 	comply with the requirements of applicable laws and the
reasonable requirements of the Government from time to time.

	14.2	 	If the Contractor fails to comply with the provisions of paragraph (b)(i) of Article
14.1 or contravenes any relevant law, and such failure or contravention results in any
Environmental Damage, the Contractor shall forthwith take all necessary and reasonable
measures to remedy the failure and the effects thereof.
	 
	14.3	 	If the Government in accordance with the laws has good reason to believe that any
works or installations erected by the Contractor or any operations conducted by the
Contractor are endangering or may endanger persons or any property of any person, or
are causing or may cause pollution, or are harming or may harm fauna or flora or the
environment to a degree which the Government deems unacceptable, the Government may
require the Contractor to take remedial measures within such reasonable period as may
be determined by the Government and to repair any such damage. If the Government deems
it necessary, it may also require the Contractor to discontinue Petroleum Operations
in whole or in part until the Contractor has taken such remedial measures or has
repaired any damage caused.

42

 

	14.4	 	The measures and methods to be used by the Contractor for the purpose of complying
with the terms of paragraph (b)(i) of Article 14.1 shall be determined in timely
consultation with the Government upon the commencement of Petroleum Operations or
whenever there is a significant change in the scope or method of conducting Petroleum
Operations and shall take into account the international standards applicable in
similar circumstances and the relevant environmental impact study carried out in
accordance with Article 14.5 below. The Contractor shall notify the Government, in
writing, of the measures and methods finally determined by the Contractor and shall
cause such measures and methods to be reviewed from time to time in the light of
prevailing circumstances.
	 
	14.5	 	The Contractor shall cause a person or persons with special knowledge on
environmental matters, to carry out two environmental impact studies in order:

	 	(a)	 	to determine at the time of the studies the prevailing
situation relating to the environment, human beings and local
communities, the flora and fauna in the Contract Area and in the
adjoining or neighbouring areas; and
	 
	 	(b)	 	to establish the likely effect on the environment, human
beings and local communities, the flora and fauna in the Contract Area
and in the adjoining or neighbouring areas in consequence of the
relevant phase of Petroleum Operations to be conducted under this
Contract, and to submit, for consideration by the Parties, methods and
measures contemplated in Article 14.4 for minimising Environmental
Damage and carrying out Site Restoration activities.

	14.5.1	 	The first of the aforementioned studies shall be carried out in two parts, namely, a
preliminary part which must be concluded before commencement of any field work
relating to a seismographic or other survey, and a final part relating to drilling in
the Exploration Period. The part of the study relating to drilling operations in the
Exploration Period shall be approved by Government before the commencement of such
drilling operations, it being understood that such approval shall not be unreasonably
withheld.
	 
	14.5.2	 	The second of the aforementioned studies shall be completed before commencement of
Development Operations and shall be submitted by the Contractor as part of the
Development Plan, with specific approval of Government being obtained before
commencement of Development Operations, it being understood that such approval shall
not be unreasonably withheld.
	 
	14.5.3	 	The studies mentioned in Article 14.5 above shall contain proposed environmental
guidelines to be followed in order to minimize Environmental Damage and shall include,
but not be limited to, the following, to the extent appropriate to the respective
study taking into account the phase of operations to which the study relates :

(a) proposed access cutting;

43

 

(b) clearing and timber salvage;

(c) wildlife and habitat protection;

(d) fuel storage and handling;

(e) use of explosives;

(f) camps and staging;

(g) liquid and solid waste disposal;

(h) cultural and archaeological sites;

(i) selection of drilling sites;

(j) terrain stabilization;

(k) protection of freshwater horizons;

(l) blowout prevention plan;

(m) flaring during completion and testing of Gas and Oil Wells;

(n) abandonment of Wells;

(o) rig dismantling and site completion;

(p) reclamation for abandonment;

(q) noise control;

(r) debris disposal; and

(s) protection of natural drainage and water flow.

Subject to the provision of all applicable laws and notifications on
protection of environment, any new project or expansion or modernization
projects for petroleum operations for which a proposal is submitted by the
Contractor, the Government shall compete the assessment of the project within
a period of ninety (90) days from the receipt of the requisite documents and
data from the project authorities and completion of public hearing. The
decision of the Government on the proposal of the Contractor for
environmental clearance shall be conveyed within thirty (30) days thereafter.

	14.6	 	The Contractor shall ensure that:

	 	(a)	 	Petroleum Operations are conducted in an environmentally
acceptable and safe manner consistent with modern oilfield and petroleum
industry practices and that such Petroleum Operations are properly
monitored;
	 
	 	(b)	 	the pertinent completed environmental impact studies are
made available to its employees and to its contractors and
Subcontractors to develop adequate and proper awareness of the measures
and methods of environmental protection to be used in carrying out the
Petroleum Operations; and
	 
	 	(c)	 	the contracts entered into between the Contractor and its
contractors and Subcontractors relating to its Petroleum Operations
shall include the provisions stipulated herein and any established
measures and methods for the implementation of the Contractor’s
obligations in relation to the environment under this Contract.

	14.7	 	The Contractor shall, prior to conducting any drilling activities, prepare and submit
for review by the Government contingency plans for dealing with Oil

44

 

	 	 	spills, fires, accidents and emergencies, designed to achieve rapid and
effective emergency response. The plans referred to above shall be discussed
with the Government and concerns expressed shall be taken into account.
	 
	14.7.1	 	In the event of an emergency, accident, Oil spill or fire arising from Petroleum
Operations affecting the environment, the Contractor shall forthwith notify the
Government and shall promptly implement the relevant contingency plan and perform such
Site Restoration as may be necessary in accordance with modern oilfield and petroleum
industry practices.
	 
	14.7.2	 	In the event of any other emergency or accident arising from the Petroleum
Operations affecting the environment, the Contractor shall take such action as may be
prudent and necessary in accordance with modern oilfield and petroleum industry
practices in such circumstances.
	 
	14.8	 	In the event that the Contractor fails to comply with any of the terms contained in
Article 14.7 within a period specified by the Government, the Government, after giving
the Contractor reasonable notice in the circumstances, may take any action which may
be necessary to ensure compliance with such terms and to recover from the Contractor,
immediately after having taken such action, all costs and expenditures incurred in
connection with such action together with such interest as may be determined in
accordance with Section 1.7 of Appendix C of this Contract.
	 
	14.9	 	On expiry or termination of this Contract or relinquishment of part of the Contract
Area, the Contractor shall:

	 	(a)	 	subject to Article 27, remove all equipment and
installations from the relinquished area or former Contract Area in a
manner agreed with the Government pursuant to an abandonment plan; and
	 
	 	(b)	 	perform all necessary Site Restoration in accordance with
modern oilfield and petroleum industry practices and take all other
action necessary to prevent hazards to human life or to the property of
others or the environment.

	14.10	 	The Contractor shall prepare a proposal for the restoration of site including
abandonment plan and requirement of funds for this and the annual contribution. This
will be submitted along with the annual Budget for the consideration and approval of
the Management Committee. The annual contribution shall be deposited by the Contractor
in the Site Restoration fund which will be established, in accordance with the scheme
notified by the Government.
	 
	14.11	 	Subject to Section 3.2 of Accounting Procedure, any Site Restoration fund scheme
formulated by Government and subject to provisions of this Contract, any and all costs
incurred by the Contractor pursuant to this Article shall be cost

45

 

	 	 	recoverable including but not limited to sinking funds established for
abandonment and restoration of the Contract Area.
	 
	14.12	 	In this Article, a reference to Government includes the State Government.
	 
	14.13	 	Where the Contract Area is partly located in areas forming part of certain national
parks, sanctuaries, mangroves, wetlands of national importance, biosphere reserves and
other biologically sensitive areas passage through these areas shall generally not be
permitted. However, if there is no passage, other than through these areas to reach a
particular point beyond these areas, permission of the appropriate authorities shall
be obtained.
	 
	14.14	 	The obligations and liability of the Contractor for the environment hereunder shall
be limited to damage to the environment which:

	 	(a)	 	occurs after the Effective Date; and
	 
	 	(b)	 	results from an act or omission of the Contractor.

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ARTICLE 15

RECOVERY OF COST PETROLEUM 

	15.1	 	The Contractor shall be entitled to recover Contract Costs out of a percentage of the
total value of Petroleum Produced and Saved from the Contract Area in the Year in
accordance with the provisions of this Article.
	 
	15.2	 	Exploration Costs incurred by the Contractor in the Contract Area upto the date of
first Commercial Production shall be aggregated, and the Contractor shall be entitled
to recover the aggregate of such Exploration Costs out of the Cost Petroleum at the
rate of one hundred percent (100%) per annum of such Exploration Costs beginning from
the date of such Commercial Production.
	 
	15.3	 	The Contractor shall be entitled to recover out of the Cost Petroleum from the
Contract Area the Exploration Costs which it has incurred in any Year after the date
of Commercial Production at the rate of one hundred percent (100%) per annum of such
Exploration Costs beginning from the date such Exploration Costs are incurred.
	 
	15.4	 	Development Costs incurred by the Contractor in the Contract Area upto the date of
first Commercial Production shall be aggregated, and the Contractor shall be entitled
to recover out of the Cost Petroleum the aggregate of such Development Costs at the
rate of one hundred percent (100%) per annum of such Development Costs beginning from
the date of such Commercial Production.
	 
	15.5	 	The Contractor shall be entitled to recover out of the Cost Petroleum from the
Contract Area the Development Costs which it has incurred after the date of first
Commercial Production at the rate of one hundred percent (100%) per annum of such
Development Costs beginning from the date such Development Costs are incurred.
	 
	15.6	 	The Contractor shall be entitled to recover in full during any Year the Production
Costs incurred in that Year out of the Cost Petroleum.
	 
	15.7	 	The Contractor shall be entitled to recover in full during any Year the royalty
payments to the Government/State Government(s) in that Year out of the Cost Petroleum.
	 
	15.8	 	If during any Year the Cost Petroleum is not sufficient to enable the Contractor to
recover in full the Contract Costs due for recovery in that Year in accordance with
the provisions of Articles 15.1 to 15.7 then, subject to the provisions of Article
15.12:

(a) recovery shall first be made of royalty payments; and

47

 

(b) recovery shall next be made of the Production Costs; and

(c) recovery shall next be made of the Exploration Costs; and

(d) recovery shall then be made of the Development Costs.

The unrecovered portions of Contract Costs shall be carried forward to the
following Year and the Contractor shall be entitled to recover such Contract
Costs in such Year or the subsequent Years as if such Contract Costs were due
for recovery in that Year, or the succeeding Years, until the unrecovered
Contract Costs have been fully recovered out of Cost Petroleum from the
Contract Area.

	15.9	 	The maximum amount of Cost Petroleum to which the Contractor shall be entitled, in
accordance with the provisions of this Article, shall be (to be taken from the
accepted bid) X percent (X%) of the total value of the Petroleum Produced and Saved
from the Contract Area.
	 
	15.10	 	For the purposes of this Article, as well as Article 16, costs, receipts and income
shall be converted into production unit equivalents, and vice versa viz both in
physical and monitory terms, using the relevant prices established pursuant to Article
19 for Crude Oil and Article 21 for Natural Gas.
	 
	15.11	 	Pending completion of the calculations required to establish definitively the
Contractor’s entitlement to Cost Petroleum from the Contract Area in any Year, the
Contractor shall take delivery, provisionally, of volumes of Crude Oil or Natural Gas
representing its estimated Cost Petroleum entitlement calculated with reference to
estimated production quantities, costs and prices as established by the Contractor and
approved by the Management Committee. Such provisional determination of Cost Petroleum
shall be made every Quarter on an accumulative basis. Within ninety (90) days of the
end of each Year, a final calculation of the Contractor’s entitlement to Cost
Petroleum, based on actual production quantities, costs and prices for the entire Year
as reflected in audited accounts under Article 25.4.3, shall be undertaken and any
necessary adjustments to the Cost Petroleum entitlement shall be agreed upon between
the Government and the Contractor within thirty (30) days and made within thirty (30)
days thereafter.
	 
	15.12	 	Where more than one Party constitutes the Contractor, the percentage of the total
Cost Petroleum from the Contract Area which shall be available to each such Party in
any Year for recovery of its share of Contract Costs shall be determined on the basis
of the respective Participating Interest of each such Party.
	 
	15.13	 	The Contractor acknowledges that the cost estimates for Minimum Work Programme are
the realistic estimate of expenditure. For the purposes of allowing cost recovery
under Article 15 herein read with Section 3 of the Accounting Procedure, the cost
estimates given by the Contractor in the bid documents towards the Minimum Work
Programme in all three Exploration Phases shall be taken as Bench Mark notwithstanding
any claims for higher actual cost. Any material increase over the Bench Mark shall not
be allowed for cost recovery

48

 

	 	 	unless the Government on the recommendation of the Management Committee
agrees that the cost increase is due to change in circumstances after the
Contract comes into effect.

For the above purpose, an itemized break-up provided by the Contractor of
cost estimates given in the bid documents is placed at Appendix – H to this
Contract.

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ARTICLE 16

PRODUCTION SHARING OF PETROLEUM 

	16.1	 	The Parties to this Contract shall share in the Profit Petroleum in each Year in
accordance with the provisions of this Article. A Party’s share of Profit Petroleum
in any Year, shall be calculated on the basis of the Investment Multiple actually
achieved by the Contractor at the end of the preceding Year for the Contract Area as
provided in Appendix-D.
	 
	16.2.1	 	When the Investment Multiple of the Contractor at the end of any Year is less than
one and one half (1.5), the Government shall be entitled to take and receive ten
percent (10%) and the Contractor shall be entitled to take and receive ninety percent
(90%) of the total Profit Petroleum from the Contract Area with effect from the start
of the succeeding Year.
	 
	16.2.2	 	When the Investment Multiple of the Contractor at the end of any Year is equal to or
more than one and one half (1.5) but is less than two (2.0) the Government shall be
entitled to take and receive fifteen percent (15%) and the Contractor shall be
entitled to take and receive eighty-five percent (85%) of the total Profit Petroleum
from the Contract Area with effect from the start of the succeeding Year.
	 
	16.2.3	 	When the Investment Multiple of the Contractor at the end of any Year is equal to or
more than two (2.0) but is less than two and one half (2.5), the Government shall be
entitled to take and receive twenty percent (20%) and the Contractor shall be entitled
to take and receive eighty percent (70%) of the total Profit Petroleum from the
Contract Area with effect from the start of the succeeding Year.
	 
	16.2.4	 	When the Investment Multiple of the Contractor at the end of any Year is equal to or
more than two and one half (2.5) but is less than three (3.0), the Government shall be
entitled to take and receive twenty percent (20%) and the Contractor shall be entitled
to take and receive eighty percent (80%) of the total Profit Petroleum from the
Contract Area with effect from the start of the succeeding Year.
	 
	16.2.5	 	When the Investment Multiple of the Contractor at the end of any Year is equal to or
more than three (3.0) but is less than three and one half (3.5), the Government shall
be entitled to take and receive twenty-five percent (25%) and the Contractor shall be
entitled to take and receive seventy-five percent (75%) of the total Profit Petroleum
from the Contract Area with effect from the start of the succeeding Year.
	 
	16.2.6	 	When the Investment Multiple of the Contractor at the end of any Year is equal to or
more than three and one half (3.5), the Government shall be entitled to take and

50

 

	 	 	receive thirty percent (30%) and the Contractor shall be entitled to take and
receive seventy percent (70%) of the total Profit Petroleum from the Contract
Area with effect from the start of the succeeding Year.
	 
	16.3	 	Any balance left to the credit of the Parties in any Site Restoration account, opened
pursuant to the provision of Article 14.10, after Site Restoration has been done by
the Contractor in accordance with the provisions of this Contract and the laws in this
regard, shall be shared between the Government and the Contractor as per the
Investment Multiple reached at the time of ceasing of production from the Contract
Area.
	 
	16.4.1	 	Other than “ANG” or “NANG”, the Government shall have the option to take its
entitlement to Profit Petroleum either in cash or in kind in any Year. In case of
“ANG” or “NANG”, as the case may be, the Government shall have the option to take its
entitlement to Profit Petroleum in cash or in kind and such option shall be exercised
at interval of every five (5) Years from the commencement of first Commercial
Production from the Contract Area.
	 
	16.4.2	 	In accordance with the Article 16.4.1, The Government shall exercise such option by
giving a written notice to the Contractor not later than thirtieth (30th)
June in the preceding Year in which the entitlement is due. Once the Government has
exercised its option, the same shall continue unless the Government informs the
Contractor otherwise.
	 
	16.4.3	 	Where the Government has informed the Contractor of its intention to take its share
in kind, the Parties shall mutually agree on a procedure for delivery of the
Government’s share of Profit Petroleum and, where relevant, the composition of the
Petroleum which is to be delivered.
	 
	16.5	 	The value of the Contractor’s Investment Multiple at the end of any Year in respect
of the Contract Area shall be calculated in the manner provided for, and on the basis
of the net cash flows specified in Appendix-D to this Contract. However, the amount
of Profit Petroleum to be shared between the Government and the Contractor shall be
determined for each Quarter on an accumulative basis. Pending finalisation of
accounts, Profit Petroleum shall be shared between the Government and the Contractor
on the basis of provisional estimated figures of Contract Costs, production, prices,
receipts, income and any other income or allowable deductions and on the basis of the
value of the Investment Multiple achieved at the end of the preceding Year. All such
provisional estimates shall be approved by the Management Committee. When it is
necessary to convert monetary units into physical units of production equivalents or
vice versa, the price or prices determined pursuant to Articles 19 and 21 for Crude
Oil, Condensate and Natural Gas respectively shall be used. Within ninety (90) days
of the end of each Year, a final calculation of Profit Petroleum based on actual

51

 

	 	 	costs, quantities, prices and income for the entire Year shall be completed
and any necessary adjustments to the sharing of Petroleum shall be agreed
upon between the Government and the Contractor within thirty (30) days and
made within thirty (30) days thereafter.

(Explanation: The Profit Petroleum due to the Government shall be deposited
with “Pay & Accounts officer or its successor, Ministry of Petroleum &
Natural Gas, Government of India, Shastri Bhavan, New Delhi by 10th of the
Month following each Quarter)
	 
	16.6	 	The Profit Petroleum due to the Contractor in any Year from the Contract Area shall
be divided amongst the Parties constituting the Contractor, in proportion to their
respective Participating Interest.

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ARTICLE 17

TAXES, ROYALTIES, RENTALS, DUTIES ETC.

	17.1	 	Companies, their employees, persons providing any materials, supplies, services or
facilities or supplying any ship, aircraft, machinery, equipment or plant (whether by
way of sale or hire) to the Companies for Petroleum Operations or for any other
purpose and the employees of such persons shall be subject to all fiscal legislation
in India except where, pursuant to any authority granted under any applicable law,
they are exempted wholly or partly from the application of the provisions of a
particular law or as otherwise provided herein.
	 
	17.2	 	Pursuant to the provisions of section 42 of the Income-tax Act, 1961, the allowances
specified herein shall apply in computing income tax payable by a Company on its
profits and gains from the business of Petroleum Operations in lieu of (and not in
addition to) corresponding allowances provided for under the heading “Profits and
Gains of Business or Profession” in the Income-tax Act, 1961. Any other allowance,
which are not specified herein, shall be treated in accordance with the provisions of
Income-tax Act, 1961.
	 
	17.2.1	 	Subject to the provisions herein below, deductions at the rate of one hundred
percent (100%) per annum shall be allowed for all expenditures, both capital and
revenue expenditures, incurred in respect of Exploration Operations and drilling
operations. The expenditure incurred in respect of Development Operations, other than
drilling operations, and Production Operations will be allowable as per the provisions
of the Income-tax Act, 1961. The expenses so incurred are subject to the following:

	 	(a)	 	where any expenditure is not solely incurred on Petroleum
Operations or is incurred as part of or in conjunction with any other
business, only that proportion of the total expenditure which can be
proved to the assessing officer to represent a fair proportionate part
thereof, having regard to all relevant facts and circumstances, shall be
allowed;
	 
	 	(b)	 	sections 40A and 44C of the Income-tax Act, 1961, shall
apply.

	17.2.2	 	A Company shall be entitled, for income tax purposes only, to deduct all its
unsuccessful Exploration Costs in contract areas covered by other contracts from the
aggregate value of Petroleum allocable to the Company from any Field(s) in the
Contract Area in the manner as follows:

	 	(a)	 	unsuccessful Exploration Costs incurred in contract areas
other than the Contract Area where a Commercial Discovery has been made
up to the date of commencement of Commercial Production shall be
aggregated and

53

 

	 	 	 	the Company shall be entitled to deduct such costs at the rate
of one hundred per cent (100%) per annum;
	 
	 	(b)	 	unsuccessful Exploration Costs incurred in contract areas
other than the Contract Area where a Commercial Discovery has been made,
after the commencement of Commercial Production, shall be deductible at
the rate of one hundred per cent (100%) per annum of such costs
beginning from the Year such costs are incurred.

	17.2.3	 	All allowable expenditure incurred prior to the Year in which Commercial Production
commences shall be aggregated and the assessed loss for that Year as well as the
assessed loss, if any, incurred in the assessment year relevant to the Year in which
Commercial Production commences, or in any subsequent assessment year, shall be
carried forward to succeeding assessment years and set off as provided in the
Income-tax Act, 1961.
	 
	17.2.4	 	For any or all accumulated expenditures incurred in respect of Exploration
Operations and drilling operations prior to the date of commercial production,
Company(ies) shall have option to amortize such expenditures over a period of ten (10)
years from the date of first commercial production.
	 
	17.2.5	 	The profits and gains of the business of the Parties comprising the Contractor
consisting of Petroleum Operations shall, for the purpose of levy of income tax under
the Income-tax Act, 1961, be computed on the basis of the value, determined in
accordance with Article 19, of its Participating Interest share of Crude Oil produced
and saved and sold, or otherwise disposed of, from the Contract Area and from any
revenue realised on the sale of Associated or Non Associated Natural Gas referred to
in Article 21 as well as any other gains or receipts from Petroleum Operations as
reduced by the deductions as specified herein, and, except as herein provided, all the
provisions of the Income-tax Act, 1961, shall apply.
	 
	17.2.6	 	Company(ies) shall be eligible for benefits available under section 80 IA of the
Income-tax Act, 1961 as applicable from time to time.
	 
	17.3	 	For the purposes of Article 17.2 and section 42 of the Income-tax Act, 1961:
	 
	17.3.1	 	The following terms used in section 42 of the Income-tax Act, 1961, shall have the
meanings corresponding to the terms used in this Contract and defined in Article 1 as
follows:

	 	(a)	 	“agreement” means this Contract as defined in Article 1;
	 
	 	(b)	 	“commercial production” shall have the meaning assigned
in Article 1.

	17.3.2	 	The terms “assessing officer”, “assessed loss”, and “assessment year” shall have the
meaning as defined in the Income-tax Act, 1961.

54

 

	17.3.3	 	The other terms used herein and defined in Article 1 shall have the meaning therein
ascribed.
	 
	17.4	 	Companies (Lessee) shall be required to pay royalty to the Government (Lessor) for
offshore areas at the rate of ten percent (10%) of the well-head value of Crude Oil
and Natural Gas. In case of an onshore area, Companies shall be required to pay to the
State Government(s) (Lessor) at the rate of twelve point five zero percent (12.5%) of
the well-head value of Crude Oil and ten percent (10%) of the well-head value of
Natural Gas. In case of an offshore area falling beyond four hundred (400) metre
isobath, the rate of royalty payable by Companies (Lessee) to the Government (Lessor)
shall be at the rate of five percent (5%) of the well-head value of Crude Oil and
Natural Gas for the first seven years from the date of commencement of Commercial
Production in the Field. The valuation of Crude Oil and Natural Gas shall be as per
the Article 19 and Article 21 respectively. The royalty amount due to
Government/State Government(s) shall be payable latest by the end of the succeeding
Month.
	 
	17.5	 	Machinery, plant, equipment, materials and supplies imported by the Contractor and
its Subcontractors solely and exclusively for use in Petroleum Operations under this
Contract or similar contracts with the Government where customs duty has been exempted
by the Government shall be exempt from customs duties and export duties or other
charges on re-exportation of the said items in accordance with applicable legislation.
	 
	17.6	 	The Government shall have the right to inspect the records and documents of the
physical item or items for which an exemption has been provided pursuant to Article
17.5 to determine that such item or items are being or have been imported solely and
exclusively for the purpose for which the exemption was granted. The Government shall
also be entitled to inspect such physical items wherever located to ensure that such
items are being used for the purpose herein specified and any item not being so used
shall immediately become liable to payment of the applicable customs duties.
	 
	17.7	 	Subject to Article 27, the Contractor and its Subcontractors may sell or otherwise
transfer in India all imported items which are no longer required for Petroleum
Operations, subject to applicable laws including rules, regulations, procedures,
notifications etc. governing customs duties and sale or disposal of such items.
	 
	17.8	 	Any sales tax or tax of similar nature payable on the sale(s) of Petroleum under this
Contract shall be borne/reimbursed by the buyer(s).
	 
	17.9	 	Subject to the provisions herein above provided, the Contractor shall be liable for
payment of:

	 	(a)	 	annual license charges and rental fees and other charges
under the Rules;

55

 

	 	(b)	 	charges payable by specified industries or in connection
with Petroleum Operations under applicable legislation;
	 
	 	(c)	 	payments for purchase, lease or rental of land or land
rights in connection with Petroleum Operations;
	 
	 	(d)	 	taxes, fees or charges for specific services rendered on
request or to the public generally;
	 
	 	(e)	 	customs duties, except for those items subject to
exemption as provided in Article 17, applicable at the rates specified
from time to time; and
	 
	 	(f)	 	stamp duties, registration fees, license fees, taxes such
as taxes on property or assets (not calculated by reference to income or
otherwise exempted) or other levies, fees or charges of a
non-discriminatory nature and generally applicable in India or in the
State where Petroleum Operations are being conducted.

	17.10	 	If any change in or to any Indian law, rule or regulation dealing with income tax or
other corporate tax, export/import tax, excise, customs duty or any other levies,
duties or taxes imposed on Petroleum or dependent upon the value of Petroleum results
in a material change to the expected economic benefits accruing to any of the Parties
after the date of execution of the Contract, the Parties shall consult promptly in
good faith to make necessary revisions and adjustments to the Contract in order to
maintain such expected economic benefits to each of the Parties, provided, however,
that the expected economic benefits to the Parties shall not be reduced as a result of
the operation of this Article.

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ARTICLE_18

DOMESTIC SUPPLY, SALE, DISPOSAL AND 

EXPORT OF CRUDE OIL AND CONDENSATE

	18.1	 	Until such time as the total availability to the Government of Crude Oil and
Condensate from all Petroleum production activities in India meets the total national
demand, each Company comprising the Contractor, shall be required to sell in the
domestic market in India all of the Company’s entitlement to Crude Oil and Condensate
from the Contract Area in order to assist in satisfying the national demand.
	 
	18.2	 	If, during any Year, India attains Self-sufficiency, the Government shall promptly
thereafter, but in no event later than the end of the first Quarter of the following
Year, so advise the Company(ies) by written notice. In such event, as from the end of
the second Quarter of the following Year, or such earlier date as the Parties may
mutually agree, domestic sale obligation shall be suspended and the Company shall have
the right to lift and export its Participating Interest share of Crude Oil and
Condensate until such time, if any, as Self-sufficiency shall have ceased to exist. If
Self-sufficiency ceases to exist during a Year, the Government shall recover its
position to ask Company(ies) under Article 18.1 in respect of the following Year by
giving ninety (90) days notice thereof to the Company(ies) to sell Crude Oil and
Condensate in the Indian domestic market.
	 
	18.3	 	Upon India achieving Self-sufficiency, the Company(ies) shall be entitled to freely
lift and export any Crude Oil and Condensate pursuant to this Article 18, subject to
Government’s generally applicable destination restrictions to countries with which the
Government, for policy reasons, has severed or restricted trade.
	 
	18.4	 	No later than sixty (60) days prior to the commencement of production in a Field, and
thereafter no less than sixty (60) days before the commencement of each Year, the
Contractor shall cause to be prepared and submitted to the Parties a production
forecast setting out the total quantity of Crude Oil that it estimates can be produced
from a Field during the succeeding Year, based on a maximum efficient rate of recovery
of Crude Oil from that Field in accordance with modern oilfield and petroleum industry
practices. No later than thirty (30) days prior to the commencement of each Quarter,
the Contractor shall inform its estimate of production for the succeeding Quarter and
shall endeavour to produce the forecast quantity for each Quarter.
	 
	18.5	 	Each Company comprising the Contractor shall, throughout the term of this Contract,
have the right to separately take in kind and dispose of all its share of Cost
Petroleum and Profit Petroleum and shall have the obligation to lift the said

57

 

	 	 	Petroleum on a current basis and in such quantities so as not to cause a
restriction of production or inconvenience to the other Company(ies).
	 
	18.6	 	The Government shall, throughout the term of this Contract, have the right to
separately take in kind and dispose of its share of Crude Oil and shall have the
obligation to lift the said Oil on a current basis and in such quantities so as not to
cause a restriction of production or inconvenience to the Contractor.
	 
	18.7	 	For the purpose of implementing the provisions of this Article, a Crude lifting
procedure and Crude sales agreement based on generally acceptable international terms
shall be agreed upon by the Contractor with buyer(s) no later than six (6) months or
such shorter period as may be mutually agreed between the Contractor and buyer(s) with
the consent of Government prior to the commencement of production in a Field. Such
lifting procedure shall be made available to all the Parties to this Contract.

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ARTICLE 19

VALUATION OF PETROLEUM

	19.1	 	For the purpose of this Contract, the value of Crude Oil, Condensate and Natural Gas
(refer Article 21) shall be based on the price determined as provided herein.
	 
	19.2	 	A price for Crude Oil shall be determined for each Month or such other period as the
Parties may agree (hereinafter referred to as “the Delivery Period”) in terms of
United States Dollars per Barrel, on import parity basis (with marine freight being
determined on the basis of nearest port to the Contract Area) for Crude Oil produced
and sold or otherwise disposed of from Contract Area, for each Delivery Period, in
accordance with the appropriate basis for that type of sale or disposal specified
below. Subject to the provisions of this Article 19, it is clearly understood that the
actual prices received by the Company(ies) from the sales will form the basis for the
purposes of cost recovery, Profit Petroleum sharing and payment of royalty as
provided in the Articles 15, 16 and 17 respectively. The basis of valuation given in
this Article for the purpose of Article 15,16 and 17 shall apply only where Government
is of the view that sale prices realised by the Company(ies) are not consistent with
the price realisable at Arms Length Sales.
	 
	19.3	 	In the event that some or all of a Company’s or Contractor’s total sales of Crude Oil
during a Delivery Period are made to third parties at Arms Length Sales, all sales so
made shall be valued at the weighted average of the prices actually received by a
Company, calculated by dividing the total receipts from all such sales at the Delivery
Point by the total number of Barrels of the Crude Oil sold in such sales.
	 
	19.3.1	 	Each Company constituting the Contractor shall separately submit to the designated
nominee of the Government, within fifteen (15) days of the end of each Delivery
Period, a report containing the actual prices obtained in their respective Arms Length
Sales for any Crude Oil. Such reports shall distinguish between term sales and spot
sales and itemize volumes, customers, prices received and credit terms, and a Company
shall allow the designated nominee(s) of the Government to examine the relevant sales
contracts.
	 
	19.4	 	For the purpose of determining price at Arms Length Sales, the price of the Crude Oil
at which sale takes place will generally be based on per Barrel of one or more crude
oils which, at the time of calculation, are being freely and actively traded in the
international market and are similar in characteristics and quality to the Crude Oil
in respect of which the price is being determined, selling price to be ascertained
from Platt’s Crude Oil Market Wire daily publication (“Platt’s”), or the spot market
for the same crude oils ascertained in the same manner, whichever price more truly
reflects the current value of such crude oils. For any Delivery

59

 

	 	 	Period in which sales take place, the price shall be the arithmetic average
price per Barrel determined by calculating the average for such Delivery
Period of the mean of the high and low FOB prices for each day of the crude
oils selected for comparison adjusted for differences in the Crude Oil and
the crude oils being compared for quality, transportation costs, delivery
time, quantity, payment terms and other contract terms to the extent known
and other relevant factors. In the event that Platt’s ceases to be published
or is not published for a period of thirty (30) consecutive days, the Parties
shall agree on an alternative daily publication. The Contractor shall make
available all the data pertaining to pricing of Crude to enable Government to
decide that the proposed sale price by the Contractor/each constituents of
the Contractor reflects a fair market price for the Crude.
	 
	19.4.1	 	In the event that, at the relevant time, no crude oils of similar quality to the
Crude Oil to be sold are being actively traded in the international markets where
prices can be ascertained by international publication, or the official FOB selling
prices and the international spot market price vary widely between producers, the
Parties shall meet in good faith to determine an appropriate pricing basis.
	 
	19.5	 	The Contractor shall determine the relevant prices in accordance with this Article
and the calculation, basis of calculation and the price determined shall be supplied
to the Government and shall be subject to agreement by the Government.
	 
	19.6	 	In the event that the Parties fail to reach agreement on any matter concerning
selection of the crude oils for comparison, the calculation, the basis of, or
mechanism for the calculation of the prices, the prices arrived at, the adjustment of
any price or generally about the manner in which the prices are determined according
to the provisions of this Article within thirty (30) days, or such longer period as
may be mutually agreed between the Parties, from the date of commencement of
Commercial Production or the end of each Delivery Period thereafter, any Party may
refer the matter or matters in issue for final determination by a sole expert or
arbitrator appointed as provided in Article 33.
	 
	19.6.1	 	If the matter is referred to the sole expert, within ten (10) days of the said
appointment, the Parties shall provide the expert with all information they deem
necessary or as the expert may reasonably require.
	 
	19.6.2	 	Within fifteen (15) days from the date of his appointment, the expert shall report
to the Parties on the issue(s) referred to him for determination, applying the
criteria or mechanism set forth herein and indicate his decision thereon to be
applicable for the relevant Delivery Period for Crude Oil and such decision shall be
accepted as final and binding by the Parties.
	 
	19.6.3	 	Any price or pricing mechanism agreed by the Parties pursuant to the provisions of
this Article shall not be changed retroactively.
	 
	19.7	 	In the event that all sales of Crude Oil in a Delivery Period by a Company
constituting the Contractor are to be made to an Affiliate, the Parties may agree

60

 

	 	 	on an alternative method of valuing the Crude Oil for the purposes of this
Contract, provided that such alternative method results in an internationally
competitive fair market valuation for that Delivery Period. In case of
disagreement, the decision of the Government on determining a Crude price in
case of sales to an Affiliate shall be final and binding.
	 
	19.8	 	In the event that in any Delivery Period there is more than one type of sales
referred to in Articles 19.3 and 19.7, then, for the purpose of calculating Cost
Petroleum and Profit Petroleum entitlement and royalty payments pursuant to Articles
15, 16 and 17 respectively, a single price per Barrel of Crude Oil for all the sales
for the relevant Delivery Period shall be used. Such single price shall be the
weighted average of the prices determined for each type of sale, weighted by the
respective volumes of Crude Oil sold in each type of sale in the relevant Delivery
Period.
	 
	19.9	 	The provisions specified above for the determination of the price of sales of Crude
Oil shall apply mutatis mutandis to Condensates.
	 
	19.10	 	The price of Natural Gas shall be determined as provided in Article 21.

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ARTICLE 20

CURRENCY AND EXCHANGE CONTROL PROVISIONS

	20.1	 	Subject to the provisions herein, and to compliance with the relevant provisions of
the laws of general application in India governing currency and foreign exchange and
related administrative instructions and procedures issued thereunder on a
non-discriminatory basis, each Foreign Company comprising the Contractor shall,
during the term of this Contract, have the right to:

	 	(a)	 	repatriate abroad, in United States Dollars or any
other freely convertible currency acceptable to the Government and
the Foreign Company, the net proceeds of sales of Petroleum in
India;
	 
	 	(b)	 	receive, retain and use abroad the proceeds of any
export sales of Petroleum under the Contract;
	 
	 	(c)	 	open, maintain and operate bank accounts with
reputable banks, both inside and outside India, for the purpose of
this Contract;
	 
	 	(d)	 	freely import, through normal banking channels,
funds necessary for carrying out the Petroleum Operations;
	 
	 	(e)	 	convert into foreign exchange and repatriate sums
imported pursuant to (d) above in excess (if any) of its
requirements; and
	 
	 	(f)	 	make payments outside of India for purchases,
services and loans obtained abroad without the requirement that funds
used in making such payments must come from or originate in India.
	 
	 	 	 	Provided, however, that repatriation pursuant to subparagraphs (a) and (e)
and payments pursuant to subparagraph (f) shall be subject to the
provisions of any treaties and bilateral arrangements between the
Government and any country with respect to payments to or from that
country.

	20.2	 	The rates of exchange for the purchase and sale of currency by the Companies shall
be the prevailing rates of general application determined by the Reserve Bank of
India or such other financial body as may be mutually agreed by the Parties and, for
accounting purposes under this Contract, these rates shall apply as provided in
Section 1.6 of Appendix-C.
	 
	20.3.	 	A Party other than a Foreign Company comprising the Contractor shall be governed by
the relevant currency and foreign exchange laws and related administrative
instructions and procedures issued thereunder.
	 
	20.4	 	Indian Companies shall have right to remit their portion of expenditure in foreign
currency(ies) in accordance with the exchange control provisions.

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ARTICLE 21

NATURAL GAS

	21.1	 	Subject to Article 21.2, the Indian domestic market shall have the first call on the
utilisation of Natural Gas discovered and produced from the Contract Area.
Accordingly, any proposal by the Contractor relating to Discovery and production of
Natural Gas from the Contract Area shall be made in the context of the Government’s
policy for the utilisation of Natural Gas and shall take into account the objectives
of the Government to develop its resources in the most efficient manner and to
promote conservation measures.
	 
	21.2	 	The Contractor shall have the right to use Natural Gas produced from the Contract
Area for the purpose of Petroleum Operations including reinjection for pressure
maintenance in Oil Fields, gas lifting and captive power generation required for
Petroleum Operations.
	 
	21.3	 	For the purpose of sales in the domestic market pursuant to this Article 21, the
Contractor shall have freedom to market the Gas and sell its entitlement.
	 
	21.4	 	Associated Natural Gas (ANG)
	 
	21.4.1	 	In the event that a Discovery of Crude Oil contains ANG, the Contractor shall
declare in the proposal for the declaration of the said Discovery as a Commercial
Discovery as specified in Article 10, whether (and by what amount) the estimated
production of ANG is anticipated to exceed the quantities of ANG which will be used
in accordance with Article 21.2 (such excess being hereinafter referred to as “the
Excess ANG”). In such an event the Contractor shall indicate whether, on the basis
of the available data and information, it has reasonable grounds for believing that
the Excess ANG could be commercially exploited in accordance with the terms of this
Contract along with the Commercial Production of the Crude Oil from the Contract
Area, and whether the Contractor intends to so exploit the Excess ANG.
	 
	21.4.2	 	Based on the principle of full utilisation and minimum flaring of ANG, a proposed
development plan for an Oil Discovery shall, to the extent practicable, include a
plan for utilisation of the ANG including estimated quantities to be flared,
reinjected, and to be
used for Petroleum Operations; and, if the Contractor proposes to
commercially exploit the Excess ANG for sale in the domestic market in
accordance with Government’s policy, or elsewhere, the proposed plans for
such exploitation.
	 
	21.4.3	 	If the Contractor wishes to exploit the Excess ANG, subject to Article 21.1, the
Contractor shall be free to explore markets for the commercial exploitation of the

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	 	 	said Excess ANG and submit its proposals for such exploitation to the Government in
accordance with Article 21.4.2.

	21.4.4	 	Where the Contractor is of the view that the Excess ANG cannot be commercially
exploited and chooses not to exploit the said Excess ANG, or is unable to find a
market for the Excess ANG pursuant to Article 21.4.3, the Government shall be
entitled to take and utilise such Excess ANG free of any cost/charge.
	 
	21.4.5	 	If the Government elects to take the Excess ANG as provided in Article 21.4.4:

	 	(a)	 	the Contractor shall deliver such Excess ANG to the
Government (or its nominee) free of any cost/charge, at the
downstream flange of the Gas/Oil separation facilities;
	 
	 	(b)	 	the Contractor shall, based on sound petroleum
engineering practices, install such facilities as would facilitate,
insofar as practicable, uninterrupted delivery of such Excess ANG to
the Government or its nominee;
	 
	 	(c)	 	the cost of all facilities installed pursuant to
paragraph (b) above shall be borne by the Government (or its
nominee);
	 
	 	(d)	 	the Government or its nominee shall bear all costs
including gathering, treating, processing and transporting costs
beyond the downstream flange of the Gas/Oil separation facilities;
and
	 
	 	(e)	 	the delivery of such Excess ANG shall be subject to
procedures to be agreed between the Government or its nominee and the
Contractor prior to such delivery, such procedures to include matters
relating to timing of off-take of such Excess ANG. Parties shall
endeavour that such procedures do not restrict Oil production.

	21.4.6	 	The Excess ANG which is not commercially exploited by the Contractor, or taken by
the Government or its nominee pursuant to this Article 21, shall be returned to the
subsurface structure or flared or otherwise disposed off as approved by the
Government in the context of the Development Plan, provided that flaring will be
resorted to only for small quantities and as a last resort.
	 
	21.4.7	 	As soon as practicable after the submission of the proposed development plan, the
Contractor and the Government or its nominee shall meet to discuss the sale and/or
disposal of any ANG discovered with a view to giving effect to the provisions of this
Article 21 in a timely manner.
	 
	21.5	 	Non Associated Natural Gas (NANG)
	 
	21.5.1	 	In the event of a Discovery of NANG in the Contract Area, the Contractor shall
promptly report such Discovery to the Management Committee and the Government and the
provisions of Articles 10.1 and 10.2 shall apply. The remaining provisions of Article
10 would apply to the Discovery and development of NANG only insofar as they are not
inconsistent with the

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	 	 	provisions of this Article. Notwithstanding the provisions of
Article 3, the Contractor shall be entitled to retain the Discovery Area subject to
the provisions of this Article 21.
	 
	21.5.2	 	If, pursuant to Article 10.1, the Contractor gives notification that the Discovery
is of potential commercial interest, the Contractor shall submit to the Management
Committee, within one (1) year from the date of notification of the above said
Discovery, the proposed Appraisal Programme, including a Work Programme and Budget to
carry out an adequate and effective appraisal of such Discovery, to determine (i)
without delay, whether such Discovery is a Commercial Discovery and (ii) with
reasonable precision, the boundaries of the area to be delineated as the Development
Area. Such proposed Appraisal Programme shall be supported by all relevant data
such as Well data, Contractor’s best estimate of reserve range and production
potential, and shall indicate the date of commencement of the proposed Appraisal
Programme.
	 
	21.5.3	 	The proposed Appraisal Programme together with the Work Programme and Budget
referred to in Article 21.5.2 shall be reviewed by the Management Committee within
sixty (60) days of its submission by the Contractor. The Management Committee shall
offer its comments within the said period. The said Appraisal Programme together with
the Work Programme and Budget submitted by the Contractor as revised or modified or
amended in light of the Management Committee review and advice, shall be adopted as
the Appraisal Programme and the Contractor shall promptly proceed with implementation
of the said Programme.
	 
	21.5.4	 	If on the basis of the results of the Appraisal Programme, the Contractor is of the
opinion that NANG has been discovered in
commercial quantities, it shall submit to the Management Committee as soon
as practicable but not later than three (3) years from the date of
notification of the aforementioned Discovery, a proposal for the
declaration of the Discovery as a Commercial Discovery. Such proposal
shall take into account the Government’s policies on Gas utilization and
propose alternative options, if any for use or consumption of the NANG and
be accompanied by a report on the Discovery supported by, inter alia,
technical and economic data, evaluations, interpretations and analyses of
such data and feasibility studies relating to the Discovery prepared by or
on behalf of the Contractor, and other relevant information. If no
proposal is submitted to the Management Committee by the Contractor within
three (3) years from the said Discovery, the Contractor shall relinquish
its rights to develop such Discovery and the area relating to such
Discovery shall be excluded from the Contract Area.
	 
	21.5.5	 	Where the Contractor has submitted a proposal for the declaration of a Discovery as
a Commercial Discovery, the Management Committee shall consider the proposal of the
Contractor with reference to commercial utilization or commercial development of the
NANG in the domestic market or elsewhere and in the context of Government’s policy on
Gas utilization and the chain of activities required to

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	 	 	bring the NANG from the
Delivery Point to potential consumers in the domestic market or elsewhere. The
Management Committee may, within eighty five (85) days of the submission of the said
proposal, request the Contractor to submit any additional information on the
Discovery, the anticipated markets or any other related matter, that may reasonably
be required to facilitate a review. The Contractor shall submit the required
information within thirty (30) days of the request by the Management Committee. The
Management Committee will advise the Contractor of its review within one hundred and
thirty five (135) days from the submission of proposal or within fifty five (55) days
from the receipt of additional information, as the case may be, on the proposal made
by the Contractor to declare the Discovery as a Commercial Discovery.
	 
	21.5.6	 	If the Contractor declares the Discovery a Commercial Discovery after taking into
account the advice of the Management Committee as referred to in the Article 21.5.5,
the Contractor shall, within one (1) year of the declaration of the Discovery as a
Commercial Discovery, submit a development plan for the development of the Discovery
to the Management Committee for approval. Such plan shall be supported by all
relevant information including, inter alia, the information required in Article 10.7.
	 
	21.5.7	 	Unless otherwise agreed by the Management Committee, it shall consider the proposed
development plan and give their approval within one hundred and sixty five (165) days
of submission thereof or eighty five (85) days from the receipt of the
clarifications/additional information from the Contractor. Any
clarification/additional information required by the Management Committee shall be
asked for within eighty five (85) days of receipt of the proposal from the
Contractor. The Contractor shall provide such additional information within thirty
(30) days from the receipt of request by the Management Committee. If the Management
Committee fails to convey its decision within one hundred and sixty five (165) days
from the submission of the development plan or eighty five (85) days from the receipt
of the clarifications/additional information, whichever is later, the Contractor may
submit the development plan for the approval of the Government. Also, where, the
Management Committee rejects the development plan of the Contractor, the Contractor
can submit the development plan for the approval of the Government.
	 
	21.5.8	 	Where the development plan is submitted to the Government for approval pursuant to
Article 21.5.7, the Government shall convey its decision within one hundred and
fifteen (115) days from the date of receipt of the proposal from the Contractor.
Government, where it considers necessary, may ask clarifications/additional
information from the Contractor within eighty five (85) days and shall convey its
decision within fifty five (55) days from the date of receipt of such
clarifications/additional information.
	 
	21.5.9	 	If the Government has failed to approve or disapproves the Contractor’s proposed
development plan, within one hundred and fifteen (115) days from receipt or

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	 	 	within
fifty five (55) days from the receipt of clarifications/ information from the
Contractor as mentioned in the Article 21.5.8, the Government shall advise the
Contractor, in writing, of the reasons for such failure or disapproval and the
Government and the Contractor shall meet to discuss the said development plan and the
reasons for the said failure to approve or disapproval, and use their best efforts to
agree on appropriate modifications thereto to meet the Government’s concerns or
objections. Thereafter, the Contractor shall have the right to resubmit, within
eighty five (85) days of communication from the Government, the proposed development
plan duly amended to meet the Government’s concerns. Such right of resubmission of
the proposed development plan shall be exercisable by the Contractor only once. The
Government will respond to the re-submitted plan within one hundred and fifteen
(115) days. If no such plan is submitted to the Government within the
above specified period, the Contractor shall relinquish its right to
develop such Gas Discovery and such Discovery shall be excluded from the
Contract Area.

	21.5.10	 	In the event that the Management Committee or Government, as may be the case,
approves the Contractor’s development plan for the development of such Commercial
Discovery, with such modifications and amendments as the Management Committee or
Government, as may be the case, may approve, the said Gas Discovery shall be promptly
developed by the Contractor in accordance with the approved plan which shall be the
Development Plan.
	 
	21.5.11	 	The Contractor will have a two (2) years period, from the date of approval of the
Development Plan by the Management Committee or Government, to tie-up the market(s)
for sale of Non-associated Natural Gas.
	 
	21.5.12	 	In the event the Contractor does not commence development of such Discovery within
ten (10) years from the date of the first Discovery Well, the Contractor shall
relinquish its right to develop such Discovery and the area relating to such
Discovery shall be excluded from the Contract Area.
	 
	21.6	 	Valuation of Natural Gas
	 
	21.6.1	 	The Contractor shall endeavour to sell all Natural Gas produced and saved from the
Contract Area at arms-length prices to the benefits of Parties to the Contract.
	 
	21.6.2	 	Notwithstanding the provision of Article 21.6.1, Natural Gas produced from the
Contract Area shall be valued for the purposes of this Contract as follows :

	 	(a)	 	Gas which is used as per Article 21.2 or flared with
the approval of the Government or re-injected or sold to the
Government pursuant to Article 21.4.5 shall be ascribed a zero value;
	 
	 	(b)	 	Gas which is sold to the Government or any other
Government nominee shall be valued on the terms and conditions
actually obtained including pricing formula and delivery; and

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	 	 	 	(Explanation : However, it is clarified that this provision would
apply only when the sale is made to the Government or Government
nominee under the provisions of the Contract)

	 	(c)	 	Gas which is sold or disposed of otherwise than in
accordance with paragraph (a) or (b) shall be valued on the basis of
competitive arms length sales in the region for similar sales under
similar conditions.

	21.7	 	The formula or basis on which the prices shall be determined pursuant to Article
21.6 shall be approved by the Government prior to the sale of Natural Gas to the
consumers/buyers, within sixty (60) Business Days from the receipt of proposal or
from the date of receipt of clarification/additional information, where asked for by
the Government. For granting this approval, Government shall take into account the
prevailing policy, if any, on pricing of Natural Gas including any linkages with
traded liquid fuels, and it may delegate or assign this function to a regulatory
authority as and when such an authority is in existence and in place.

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ARTICLE 22

EMPLOYMENT, TRAINING AND TRANSFER OF TECHNOLOGY

	22.1	 	Without prejudice to the right of the Contractor to select and employ such number of
personnel as, in the opinion of the Contractor, are required for carrying out
Petroleum Operations in a safe, cost effective and efficient manner, the Contractor
shall, to the maximum extent possible, employ, and require the Operator and
Subcontractors to employ, citizens of India having appropriate qualifications and
experience, taking into account experience required in the level and nature of the
Petroleum Operations.
	 
	22.2	 	The Operator shall offer a mutually agreed number of Indian nationals the
opportunity for on-the-job training and practical experience in Petroleum Operations
during the Exploration Period. Not later than six (6) months after approval of the
Development Plan, the Operator shall, in consultation with the Government, establish
and implement training programmes for staff positions in each phase and level of
Petroleum Operations including skilled, technical, executive and management
positions, with a view to ensuring employment of nationals of India and gradual and
progressive reduction of foreign personnel.
	 
	22.3	 	At the request of the Government, the Foreign Companies shall separately endeavour
to negotiate, in good faith, technical assistance agreements with the Government or
a company nominated by Government for this purpose setting forth the terms by which
each Foreign Company constituting the Contractor may render technical assistance and
make available commercially proven technical information of a proprietary nature for
use in India by the Government or the company nominated by Government. The issues to
be addressed in negotiating such technical assistance agreements shall include, but
not be limited to, licensing issues, royalty conditions, confidentiality
restrictions, liabilities, costs and method of payment.

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ARTICLE 23

LOCAL GOODS AND SERVICES

	23.1	 	In the conduct of Petroleum Operations, the Contractor shall:

	 	(a)	 	give preference to the purchase and use of goods
manufactured, produced or supplied in India provided that such goods
are available on terms equal to or better than imported goods with
respect to timing of delivery, quality and quantity required, price
and other terms;
	 
	 	(b)	 	employ Indian Subcontractors having the required
skills or expertise, to the maximum extent possible, insofar as their
services are available on comparable standards with those obtained
elsewhere and at competitive prices and on competitive terms;
provided that where no such Subcontractors are available, preference
shall be given to non-Indian Subcontractors who utilise Indian goods
to the maximum extent possible, subject, however, to the proviso in
paragraph (a) above; and
	 
	 	(c)	 	ensure that provisions in terms of paragraphs (a) to
(b) above are contained in contracts between the Operator and its
Subcontractors.
	 
	 	23.2	 	Subject to Article 8.3(f), the Contractor shall establish appropriate procedures,
including tender procedures, for the acquisition of goods and services which shall
ensure that suppliers and Subcontractors in India are given adequate opportunity to
compete for the supply of goods and services. The tender procedures shall include,
inter alia, the financial amounts or value of contracts which will be awarded on the
basis of selective bidding or open competitive bidding, the procedures for such
bidding, and the exceptions to bidding in cases of emergency, and shall be subject to
the approval of the Management Committee.
	 
	 	23.3	 	Within sixty (60) days after the end of each Year, the Contractor shall provide the
Government with a report outlining its achievements in utilising Indian resources
during that Year in accordance with Section 10 of Appendix C to this Contract.
	 
	 	23.4	 	In this Article “goods” means equipment, materials and supplies.

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ARTICLE 24

INSURANCE AND INDEMNIFICATION

	24.1	 	Insurance
	 
	24.1.1	 	The Contractor shall, during the term of this Contract, maintain and obtain
insurance coverage for and in relation to Petroleum Operations for such amounts and
against such risks as are customarily or prudently insured in the international
petroleum industry in accordance with modern oilfield and petroleum industry
practices, and shall furnish to the Government, certificates evidencing that such
coverage is in effect. Such insurance policies shall include the Government as
additional insured and shall waive subrogation against the Government. The said
insurance shall, without prejudice to the generality of the foregoing, cover:

	 	(a)	 	loss or damage to all installations, equipment and
other assets for so long as they are used in or in connection with
Petroleum Operations; provided, however, that if for any reason the
Contractor fails to insure any such installation, equipment or
assets, it shall replace any loss thereof or repair any damage caused
thereto;
	 
	 	(b)	 	loss, damage or injury caused by pollution in the
course of or as a result of Petroleum Operations;
	 
	 	(c)	 	loss of property or damage or bodily injury suffered
by any third party in the course of or as a result of Petroleum
Operations for which the Contractor may be liable;
	 
	 	(d)	 	any claim for which the Government may be liable
relating to the loss of property or damage or bodily injury suffered
by any third party in the course of or as a result of Petroleum
Operations for which the Contractor is liable to indemnify the
Government, or the State Government;
	 
	 	(e)	 	with respect to Petroleum Operations offshore, the
cost of removing wrecks and cleaning up operations following any
accident in the course of or as a result of Petroleum Operations; and
	 
	 	(f)	 	the Contractor’s and/or the Operator’s liability to
its employees engaged in Petroleum Operations.

	24.1.2	 	The Contractor shall require its Subcontractors to obtain and maintain insurance
against the risks referred to in Article 24.1.1 relating mutatis mutandis to such
Subcontractors.
	 
	24.2	 	Indemnity
	 
	 	 	Subject to Article 4.7, the Contractor shall indemnify, defend and
hold the Government and the State Government harmless against
all claims, losses and damages of any nature whatsoever, including,
without limitation, claims for loss or damage to property or injury or
death to persons caused by or resulting from any Petroleum Operations
conducted by or on behalf of the Contractor.

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ARTICLE 25

RECORDS, REPORTS, ACCOUNTS AND AUDIT

	25.1	 	The Contractor shall prepare and maintain in original at an office in India accurate
and current books, records, reports and accounts of its activities for and in
connection with Petroleum Operations so as to present a fair, clear and accurate
record of all its activities, expenditures and receipts.
	 
	25.2	 	Based on generally accepted and recognised accounting principles and modern
petroleum industry practices, record, books, accounts and accounting procedures in
respect of Petroleum Operations shall be maintained on behalf of the Contractor by
the Operator, at its business office in India, in accordance with the Accounting
Procedure to this Contract.
	 
	25.3	 	The Contractor shall submit to the Government regular Statements and reports
relating to Petroleum Operations as provided in Appendix-C.
	 
	25.4.1	 	The annual audit of accounts shall be carried out on behalf of the Contractor by a
qualified, independent firm of recognised chartered accountants, registered in India.
	 
	25.4.2	 	The appointment of auditor and the scope of audit should have prior approval of the
Management Committee.
	 
	25.4.3	 	The Contractor shall submit the audited accounts to the Management Committee for
approval within sixty (60) days from the end of the Year. The Management Committee
shall consider and approve the auditor’s report within thirty (30) days after the
submission of such report.
	 
	25.4.4	 	Copy of the auditors report shall be submitted to the Government within thirty (30)
days after the approval of the Management Committee.
	 
	25.5	 	The Government shall have the right to audit the accounting records of the
Contractor in respect of Petroleum Operations as provided in the Accounting
Procedure.
	 
	25.6	 	The accounting and auditing provisions and procedures specified in this Contract are
without prejudice to any other requirements imposed by any statute in India,
including, without limitation, any specific requirements of the statutes relating to
taxation of Companies.
	 
	25.7	 	For the purpose of any audit referred to in Articles 25.5, the Contractor shall make
available in original to the auditor all such books, records, accounts and other
documents and information as may be reasonably required by the auditor during normal
business hours.

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ARTICLE 26

INFORMATION, DATA, CONFIDENTIALITY,

INSPECTION AND SECURITY

	26.1	 	The Contractor shall, promptly after they become available in India, provide the
Government, free of cost, with all data obtained as a result of Petroleum Operations
under the Contract including, but not limited to, geological, geophysical,
geochemical, petrophysical, engineering, Well logs, maps, magnetic tapes, cores,
cuttings and production data as well as all interpretative and derivative data,
including reports, analyses, interpretations and evaluation prepared in respect of
Petroleum Operations (hereinafter referred to as “Data”). Data shall be the property
of the Government, provided, however, that the Contractor shall have the right to
make use of such Data, free of cost, for the purpose of Petroleum Operations under
this Contract as provided herein.
	 
	26.2	 	The Contractor may, for use in Petroleum Operations, retain copies or samples of
material or information constituting the Data and, with the approval of the
Government, original material, except that where such material is capable of
reproduction and copies have been supplied to the Government, the Contractor may,
subject to the right of inspection by the Government, export, subject to any
applicable regulations, samples or other original Data for processing or laboratory
examination or analysis, provided that representative samples equivalent in quality,
size and quantity, or, where such material is capable of reproduction, copies of
equivalent quality, have first been delivered to the Government.
	 
	26.3	 	The Contractor shall keep the Government currently advised of all developments
taking place during the course of Petroleum Operations and shall furnish the
Government with full and accurate information and progress reports relating to
Petroleum Operations (on a daily, Monthly, Yearly or other periodic basis) as
Government may reasonably require, provided that this obligation shall not extend to
proprietary technology. The Contractor shall meet with the Government at a mutually
convenient location in India to present the results of all geological and geophysical
work carried out as well as the results of all engineering and drilling operations as
soon as such Data becomes available to the Contractor.

	26.4	 	All Data, information and reports obtained or prepared by, for or on behalf of, the
Contractor pursuant to this Contract shall be treated as confidential and, subject to
the provisions herein below, the Parties shall not disclose the contents thereof to
any third party without the consent in writing of the other Parties.
	 
	26.5	 	The obligation specified in Article 26.4 shall not operate so as to prevent
disclosure:

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	 	(a)	 	to Affiliates, contractors, or Subcontractors for
the purpose of Petroleum Operations;
	 
	 	(b)	 	to employees, professional consultants, advisers,
data processing centres and laboratories, where required, for the
performance of functions in connection with Petroleum Operations for
any Party comprising the Contractor;
	 
	 	(c)	 	to banks or other financial institutions, in
connection with Petroleum Operations;
	 
	 	(d)	 	to bonafide intending assignees or transferees of a
Participating Interest of a Party comprising the Contractor or in
connection with a sale of the stock or shares of a Party comprising
the Contractor;
	 
	 	(e)	 	to the extent required by any applicable law or in
connection with any legal proceedings or by the regulations of any
stock exchange upon which the shares of a Party comprising the
Contractor are quoted;
	 
	 	(f)	 	to Government departments for, or in connection
with, the preparation by or on behalf of the Government of
statistical reports with respect to Petroleum Operations, or in
connection with the administration of this Contract or any relevant
law or for any purpose connected with Petroleum Operations; and
	 
	 	(g)	 	by a Party with respect to any Data or information
which, without disclosure by such Party, is generally known to the
public.

	26.6	 	Any Data, information or reports disclosed by the Parties comprising the Contractor
to any other person pursuant to Article 26.5 (a) to (d) shall be disclosed on the
terms that such Data, information or reports shall be treated as confidential by the
recipient. Prompt notice of disclosures made by Companies pursuant to Article 26.5
shall be given to the Government.
	 
	26.7	 	Any Data, information and reports relating to the Contract Area which, in the
opinion of the Government, might have significance in connection with offers by the
Government of acreages, may be disclosed by the Government for such purpose.
Government may also disclose such Data or information for any exploration
programme to be conducted by a third party in adjoining areas with the
consent of the Contractor, for better understanding of regional geological
set-up and such consent by the Contractor shall not be unreasonably
withheld.
	 
	26.8	 	Where an area ceases to be part of the Contract Area, the Contractor shall hand over
all the originals and copies of the Data and information with respect to that part to
the Government within a period of one (1) year from the date of relinquishment or
surrender. The Contractor shall, however, be allowed to retain one copy of the Data
in its possession for its own use, where required, and shall not use the Data for
sale or any other purposes. Subject to the provisions of this Article, the Contractor
shall keep all Data/information confidential.

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	26.9	 	The Government shall, at all reasonable times, through duly authorised
representatives, be entitled to observe Petroleum Operations and to inspect all
assets, books, records, reports, accounts, contracts, samples and Data kept by the
Contractor or the Operator in respect of Petroleum Operations in the Contract Area,
provided, however, that the Contractor shall not be required to disclose any
proprietary technology. The duly authorised representatives shall be given
reasonable assistance by the Contractor for such functions and the Contractor shall
afford such representatives reasonable use of all facilities and privileges afforded
to its own personnel in the field including the use of office space and housing for a
period not exceeding 30 man days in a Year and thereafter at the cost of Government.
The said representatives shall be entitled to make a reasonable number of surveys,
measurements, drawings, tests and copies of documents, take samples, and make
reasonable use of the equipment and instruments of the Contractor provided that such
functions shall not unduly interfere with the Contractor’s Petroleum Operations.
	 
	26.10	 	The Contractor shall give reasonable advance notice to the Government, or to any
other authority designated by the Government for such purpose, of its programme of
conducting surveys by aircraft or by ships, indicating, inter alia, the name of the
survey to be conducted, approximate extent of the area to be covered, the duration of
the survey, the commencement date, and the name of the airport or port from which the
survey aircraft or ship will commence its voyage.
	 
	26.11	 	The Government, or the authority designated by the Government for such purpose,
shall have the right to inspect any aircraft or ship
used by the Contractor or a Subcontractor carrying out any survey or other
operations in the Contract Area and shall have the right to put on board
such aircraft or ship, Government officers in such number as may
reasonably be necessary to ensure compliance by the Contractor or the
Subcontractor with the security requirements of India.

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ARTICLE 27

TITLE TO PETROLEUM, DATA AND ASSETS

	27.1	 	The Government is the sole owner of Petroleum underlying the Contract Area and shall
remain the sole owner of Petroleum produced pursuant to the provisions of this
Contract except as regards that part of Crude Oil, Condensate or Gas the title whereof
has passed to the Contractor or any other person in accordance with the provisions of
this Contract.
	 
	27.2	 	Title to Petroleum to which the Contractor is entitled under this Contract, and title
to Petroleum sold by the Companies shall pass to the relevant buyer party at the
Delivery Point. The Contractor shall be responsible for all costs and risks prior to
and including at the Delivery Point and each buyer party shall be responsible for all
costs and risks associated with such buyer party’s share after the Delivery Point.
	 
	27.3	 	Title to all Data specified in Article 26 shall be vested in the Government and the
Contractor shall have the right to use thereof as therein provided.
	 
	27.4	 	Assets purchased by the Contractor for use in Petroleum Operations shall be owned by
the Parties comprising the Contractor in proportion to their Participating Interest
provided that the Government shall have the right to require vesting of full title and
ownership in it, free of charge and encumbrances, of any or all assets, whether fixed
or movable, acquired and owned by the Contractor for use in Petroleum Operations
inside or outside the Contract Area, such right to be exercisable at the Government’s
option upon expiry or earlier termination of the Contract.
	 
	27.5	 	The Contractor shall be responsible for proper maintenance, insurance and safety of
all assets acquired for Petroleum Operations and for keeping them in good repair,
order and working condition at all times, and the costs thereof shall be recoverable
as Contract Costs in accordance with Appendix-C.
	 
	27.6	 	So long as this Contract remains in force, subject to Article 27.5, the Contractor
shall, free of any charge for the purpose of carrying out Petroleum Operations
hereunder, have the exclusive use of assets which have become the property of
Government.

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	27.7	 	Equipment and assets no longer required for Petroleum Operations during the term of
the Contract shall be sold, exchanged or otherwise disposed of by the Contractor,
provided however that the proceeds of sale shall be credited to Petroleum Operations
as provided in Appendix C, provided that prior written consent of the Management
Committee shall be obtained for each transaction in excess of US$ 50,000 (Fifty
thousand United States Dollars) or such other value as may be agreed from time to time
by the Management Committee. The consent of the Management Committee shall not be
unreasonably withheld.

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ARTICLE 28

ASSIGNMENT OF PARTICIPATING INTEREST

	28.1	 	Subject to the terms of this Article and other terms of this Contract, any Party
comprising the Contractor may assign, or transfer, a part or all of its Participating
Interest, with the prior written consent of the Government, which consent shall not be
unreasonably withheld, provided that the Government is satisfied that:

	 	(a)	 	the prospective assignee or transferee is of good
standing, has the capacity and ability to meet its obligations
hereunder, and is willing to provide an unconditional undertaking to the
Government to assume its Participating Interest share of obligations and
to provide guarantees in respect thereof as provided in the Contract;
	 
	 	(b)	 	the prospective assignee or transferee is not a company
incorporated in a country with which the Government, for policy reasons,
has restricted trade or business;
	 
	 	(c)	 	the prospective assignor or transferor and assignee or
transferee respectively are willing to comply with any reasonable
conditions of the Government as may be necessary in the circumstances
with a view to ensuring performance under the Contract; and
	 
	 	(d)	 	the assignment or transfer will not adversely affect the
performance or obligations under this Contract or be contrary to the
interests of India.

	28.1.1	 	Subject to Article 28.7, nothing in this Article 28 shall prevent a Party comprising
the Contractor from assigning or transferring a part or all of its Participating
Interest to an Affiliate, with the approval of the Management Committee, provided
that;

	 	a)	 	the assignee provides an irrevocable, unconditional bank
guarantee from a reputed bank of good standing in India, acceptable to
the Government, in favour of the Government, for the amount specified in
Article 29.2, in a form provided at Appendix-G;
	 
	 	b)	 	the assignee provides a parent financial and performance
guarantee issued by the guarantor which furnished the guarantee pursuant
to Article 29 in respect of the assignor Party’s obligations under this
Contract in favour of the Government, of the performance of such
Affiliate assignee of its obligations under this Contract;
	 
	 	c)	 	the prospective Affiliate is not a company incorporated
in a country with which the Government, for policy reason, has
restricted trade or business; and
	 
	 	d)	 	the assignment will not adversely affect the performance
or obligations under this Contract or be contrary to the interest of
India.

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	28.2	 	In case of any change in the status of a Company or its shareholding resulting in a
change in:

	 	a)	 	the control of the Company; or
	 
	 	b)	 	its relationship with the company(ies) providing the
guarantee under Article 29.1 (a) and 29.1 (b);

the Company shall seek the consent of the Government for assigning the
Participating Interest under the changed circumstances and the provisions of
this Article 28 shall apply, mutatis mutandis, to be obtaining of such
consent. For the purpose of this Article 28.2, control has the same meaning
as in Article 1.3.

	28.3	 	An application for consent to assign or transfer shall be accompanied by all relevant
information concerning the proposed assignment or transfer including detailed
information on the proposed assignee or transferee and its shareholding and corporate
structure, as was earlier required from the Companies constituting the Contractor, the
terms of the proposed assignment or transfer and the unconditional undertaking
referred to in Article.
	 
	28.4	 	The applicant shall also submit such information relating to the prospective assignee
or transferee of the assignment or transfer as the Government may reasonably require
to enable proper consideration and disposal of the application.
	 
	28.5	 	No assignment or transfer shall be effective until the approval of the Government is
received or deemed to have been received. Approval may be given by the Government on
such terms and conditions as it may deem fit. Provided that such terms and conditions
may not increase the obligations of the Parties comprising the Contractor. Upon
assignment or transfer of its interest in this Contract, the assignor or transferor
shall be released and discharged from its obligations hereunder only to the extent
that such obligations are assumed by the assignee or transferee with the approval of
the Government.
	 
	28.6	 	In the event that the Government does not give its consent or does not respond to a
request for assignment or transfer by a Party comprising the Contractor within one
hundred and twenty (120) days of such request and receipt of all information referred
to in Article 28.3 above, consent shall be deemed to have been given by the
Government.
	 
	28.7	 	An assignment or transfer shall not be made where the Participating Interest to be
retained by the proposed assignor or the percentage interest of assignee shall be less
than ten per cent (10%) of the total Participating Interest of all the constituents of
the Contractor, except where the Government, on the recommendations of the Management
Committee may, in special circumstances, so permit.

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	28.8	 	Nothing contained in this Article 28, shall prevent a Party comprising the Contractor
from mortgaging, pledging, charging or otherwise encumbering at its own risk and cost
all or part of its Participating Interest for the purposes of
security relating to finance to the extent required for performing its
obligation under the Contract, provided that:

	 	i)	 	such Party shall remain solely liable for all its
obligations relating to its Participating Interest to the exclusion of
the other participants thereto;
	 
	 	ii)	 	the encumbrance shall be expressly subordinated to the rights of the
other Parties under this Contract. The obligations occurring from the
said encumbrance shall be the sole responsibility of the original
Party and shall in no manner compromise the rights of other Parties
to the Contract;
	 
	 	iii)	 	such Party has given reasonable notice of such encumbrance and
furnishes to all other Parties (including, for the avoidance of
doubt, the Government) a certified copy of the executed instrument(s)
evidencing the encumbrances;
	 
	 	iv)	 	keeping in view the national interest of India, prior consent of the
Government shall be required (which consent shall not be unreasonably
withheld) of the list of potential lenders with whom such Party can
consider hypothecation;
	 
	 	v)	 	the Party creating the charge shall ensure that such
charge shall not in any way affect the interest of other Parties or
result in interference with joint operations. In the event of any
claims or liabilities imposed on other Parties because of the creation
of such charges, the Party having created charge on its Participating
Interest shall indemnify the other Parties; and
	 
	 	vi)	 	in case of foreclosure or default by a borrowing Party,
the mortgagee shall not be deemed to have acquired a right to carry on
either by itself or through an agent, the Petroleum Operation, without
the written consent of the Government of India.

	28.8.1	 	The Parties acknowledge that to obtain financing a Party (“Borrower”) will be
required to secure for a permitted chargee the right to receive a copy of any notice
served on the Borrower and the Parties agree that they shall serve a copy of any such
notice on any such permitted chargee in accordance with the provisions of Article 37
at the same time as such notice is served on the Borrower. For the purposes of
Article 37 the address for service of notices of the permitted chargee shall be that
specified in the instrument or instruments referred to in Article 28.8(iii).
	 
	28.8.2	 	In case lender elects to participate directly or through a company other than the
Borrower under the financing arrangement referred to above, the same shall be subject
to the rights of Government as contained in Article 28.1 of Contract and the
pre-emptive rights of the Parties as may be contained in Operating Agreement. Any
Party which wishes to exercise the said pre-emptive rights will explicitly assume the
obligation on the same terms and conditions as the Borrower.

ARTICLE 29

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GUARANTEES

	29.1	 	Subject to Article 29.1 (d), each of the Companies constituting the Contractor shall
procure and deliver to the Government within thirty (30) days from the Effective Date
of this Contract:

	 	(a)	 	an irrevocable, unconditional bank guarantee from a
reputed bank of good standing in India, acceptable to the Government,
in favour of the Government, for the amount specified in Article 29.2,
in a form provided at Appendix-G;
	 
	 	(b)	 	financial and performance guarantee in favour of the
Government from a parent company acceptable to the Government, in the
form and substance set out in Appendix-E1, or, where there is no such
parent company, the financial and performance guarantee from the Company
itself in the form and substance setout in Appendix-E2;
	 
	 	(c)	 	a legal opinion from its legal advisors, in a form
satisfactory to the Government, to the effect that the aforesaid
guarantees have been duly signed and delivered on behalf of the
guarantors with due authority and is legally valid and enforceable and
binding upon them;
	 
	 	(d)	 	Government Company(ies), as defined in the Companies Act
and Companies having a net worth of US$ Five Hundred (500) million or
more (as per the latest audited account) shall not be required to
furnish bank guarantee towards its Minimum Work Programme as specified
in Article 5 of this Contract;

	29.2	 	The amount of the guarantee referred to in Article 29.1 (a) above
shall be an amount equal to thirty five percent
(35%) of the Company’s Participating Interest share of
the total estimated annual expenditure in respect of
the Minimum Work Programme to be undertaken by the
Contractor in the Contract Area during the relevant
Year of a Phase, subject to Article 29.3.
	 
	29.3	 	The guarantee referred to in Article 29.2 shall provide that;

	 	(a)	 	at the end of each Year it shall be automatically renewed
for an amount equal to a Company’s Participating Interest share of
thirty five percent (35%) of the total estimated expenditure in respect
of the Minimum

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	 	 	 	Work Programme to be undertaken for the following Year of an
Exploration Phase, unless the Contractor has terminated the Contract
in accordance with the terms thereof. The guarantee shall be renewed
at the end of each Year positively thirty (30) days before the expiry
of the guarantee period.

	 	(b)	 	after the completion and due performance of the Minimum
Work Programme of a particular Exploration Phase, the guarantee will be
released in favour of the Company on presentation to the bank of a
certificate from the Government that the obligation of the Contractor
has been fulfilled and the guarantee may be released, subject to
Article 29.4.

	29.4	 	If the Contractor elects to proceed to the second and third Exploration Phase
respectively of the Exploration Period, a bank guarantee for the succeeding
Exploration Phase in terms of Articles 29.1 (a), 29.2 and 29.3 shall be delivered
to the Government with the notice of such election and if such guarantee is not so
delivered, the provisions of Article 29.5 shall apply.
	 
	29.5	 	If any of the documents referred to in Article 29.1 is not delivered within the
period specified herein, this Contract may be terminated by the Government upon
ninety (90) days written notice of its intention to do so.
	 
	29.6	 	Subject to Article 29.7, notwithstanding any change in the composition or
shareholding of the parent company furnishing a performance guarantee as provided
herein, it shall, not under any circumstances, be absolved of its obligations
contained in the guarantees provided pursuant to Article 29.1(b).
	 
	29.7	 	If :

	 	(a)	 	a Party (“Assignor”) assigns all or a part of its
Participating Interest to a third party (“Assignee”) in accordance with
Article 28;
	 
	 	(b)	 	the Assignee provides an irrevocable, unconditional
bank guarantee from a reputed bank of good standing in India, acceptable
to the Government, in favour of the Government, for an amount equal to
the assignee’s Participating Interest share of the estimated expenditure
of the Minimum Work Programme of the Exploration Phase current at the
Effective Date of the assignment;

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	 	(c)	 	the Assignee provides performance guarantee and legal
opinion in terms of this Article; and
	 
	 	(d)	 	the addendum to the Contract giving effect to the
assignment of Participating Interest is executed by all Parties;

then the Government shall release the guarantee given by the assignor under
Article 29.1 (a) to the extent of the amount of the guarantee provided by the
assignee and where relevant the guarantee under Article 29.1 (b).

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ARTICLE 30

TERM AND TERMINATION OF THE CONTRACT

	30.1	 	The term of this Contract shall be for the period of the License and any Lease
granted thereunder, unless the Contract is terminated earlier in accordance with its
terms, and shall be deemed to have been terminated, if for any reason, the Contractor
ceases to hold such License or Lease.
	 
	30.2	 	Subject to the provision of Articles 5, 14 and 30.6 and without prejudice to the
provisions of Article 30.7 or any other provisions of this Contract, the Contractor
shall have the right to terminate this Contract:

	 	(a)	 	with respect to any part of the Contract Area other than
a Development Area then producing, or that prior thereto had produced
Petroleum, upon giving ninety (90) days written notice of its intention
to do so; and
	 
	 	(b)	 	with respect to any Development Area in which Petroleum
is being produced, or that prior thereto had produced Petroleum, upon
giving at least one hundred and eighty (180) days written notice of its
intention to do so.

	30.3	 	This Contract may, subject to the provisions herein below and Article 31, be
terminated by the Government upon giving ninety (90) days written notice with reasons
to the other Parties of its intention to do so in the following circumstances, namely,
that the Contractor or a Party comprising the Contractor (“the Defaulting Party”)

	 	(a)	 	has knowingly submitted any false statement to the
Government in any manner which was a material consideration in the
execution of this Contract; or
	 
	 	(b)	 	has intentionally and knowingly extracted or authorised
the extraction of hydrocarbon not authorized to be extracted by the
Contract or without the authority of the Government except such
extractions as may be unavoidable as a result of operations conducted
hereunder in accordance with generally accepted modern oilfield and
petroleum industry practices which, when so extracted, were immediately
notified to the Government or
	 
	 	(c)	 	is adjudged bankrupt by a competent court or enters into
or scheme of composition with its creditors or takes advantage of any
law for the benefit of debtors; or
	 
	 	(d)	 	has passed a resolution to apply to a competent court for
liquidation of the Company unless the liquidation is for the purpose of
amalgamation or reconstruction of which the Government has been given
notice and the Government is satisfied that the Company’s performance
under this

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	 	 	 	Contract would not be adversely affected thereby and has given its
approval thereto; or

	 	(e)	 	has assigned any interest in the Contract without the
prior consent of the Government as provided in Article 28; or
	 
	 	(f)	 	has failed to make any monetary payment required by law
or under this Contract by the due date or within such further period
after the due date as may thereafter be specified by the Government; or
	 
	 	(g)	 	has failed to comply with or has contravened the
provisions of this Contract in a material particular; or
	 
	 	(h)	 	has failed to comply with any final determination or
award made by a sole expert or arbitrators subject to Article 33; or
	 
	 	(i)	 	has failed to carry out or observe any of the terms and
conditions of the License or Lease or the provisions of the Acts or
Rules in force thereunder, subject however, to Article 31.
	 
	 	(j)	 	on notice of termination as provided in Article 29.5.

PROVIDED THAT

where the Contractor comprises two or more Parties, the Government shall not
exercise its rights of termination pursuant to Article 30.3, on the
occurrence, in relation to one or more, but not all, of the Parties
comprising the Contractor, of an event entitling the Government to terminate
the Contract,

	 	(a)	 	if any other Party or Parties constituting the Contractor
(the non-Defaulting Party or Parties) satisfies the Government that it,
or they, is/are willing and would be able to carry out the obligations
of the Contractor.
	 
	 	(b)	 	where the non Defaulting Party or Parties with the
consent of the Government has/have acquired the Participating Interest
of the Defaulting Party pursuant to the provisions of the Operating
Agreement and has/have procured and delivered to the Government a
guarantee or guarantees as referred to in Article 29.1 in respect of the
Participating Interest of the Defaulting Party acquired by the non
Defaulting Party or Parties.

	30.4	 	This Contract may also be terminated by the Government on giving the requisite notice
specified above if the events specified in Article 30.3 (c) and (d) occur with respect
to a company which has given a performance guarantee pursuant to Article 29 subject
however to Article 30.5.
	 
	30.5	 	If the circumstance or circumstances that give rise to the right of termination under
Article 30.3(f) or (g) or (i) or Article 30.4 are remedied (whether by the Defaulting
Company or by another Party or Parties in its behalf) within the ninety (90) day
period, or such extended period as may be granted by the Government, following the
notice of the Government’s intention to terminate the Contract as aforesaid, such
termination shall not become effective.

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	30.6	 	On termination of this Contract, for any reason whatsoever, the rights and
obligations of the Contractor shall cease but such termination shall not affect any
rights of any Party which may have accrued or any obligations undertaken or incurred
including obligations under Article 5.7, by the Contractor or any Party comprising the
Contractor and not discharged prior to the date of termination.
	 
	30.7	 	In the event of termination pursuant to Articles 30.2, 30.3 or 30.4:

	 	(a)	 	the Government may require the Contractor, for a period
not exceeding one eighty (180) days from the date of termination, to
continue, for the account and at the cost of the Government, Crude Oil
or Natural Gas production activities until the right to continue such
production has been transferred to another entity;
	 
	 	(b)	 	a Foreign Company, which is a constituent of the
Contractor, shall have to remove and export all its property subject to
Article 27 and the provisions hereof provided that in the event that
ownership of any property is in doubt, or disputed, such property shall
not be exported unless and until the doubt or dispute has been settled
in favour of the Foreign Company.

	30.8	 	Within ninety (90) days after the termination of this Contract, pursuant to Article
30.2, 30.3, or 30.4, or such longer period as the Government may agree, the Contractor
shall comply with Article 14.9 and any reasonably necessary action as directed by the
Government to avoid Environmental Damage or hazards to human life or to the property
of others.

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ARTICLE 31

FORCE MAJEURE

	31.1	 	Any non-performance or delay in performance by any Party hereto of any of its
obligations under this Contract, or in fulfilling any condition of any License or
Lease granted to such Party, or in meeting any requirement of the Act, the Rules or
any License or Lease, shall, except for the payment of monies due under this Contract
or under the Act and the Rules or any law, be excused if, and to the extent that, such
non-performance or delay in performance under this Contract is caused by Force Majeure
as defined in this Article.
	 
	31.2	 	For the purpose of this Contract, the term Force Majeure means any cause or event,
other than the unavailability of funds, whether similar to or different from those
enumerated herein, lying beyond the reasonable control of, and unanticipated or
unforeseeable by, and not brought about at the instance of, the Party claiming to be
affected by such event, or which, if anticipated or foreseeable, could not be avoided
or provided for, and which has caused the non-performance or delay in performance.
Without limitation to the generality of the foregoing, the term Force Majeure shall
include natural phenomena or calamities, earthquakes, typhoons, fires, wars declared
or undeclared, hostilities, invasions, blockades, riots, strikes, insurrection and
civil disturbances but shall not include the unavailability of funds.
	 
	31.3	 	Where a Party is claiming suspension of its obligations on account of Force Majeure,
it shall promptly, but in no case later than seven (7) days after the occurrence of
the event of Force Majeure, notify the Management Committee in writing giving full
particulars of the Force Majeure, the estimated duration thereof, the obligations
affected and the reasons for its suspension.
	 
	31.4	 	A Party claiming Force Majeure shall exercise reasonable diligence to seek to
overcome the Force Majeure event and to mitigate the effects thereof on the
performance of its obligations under this Contract. The Party affected shall promptly
notify the Management Committee as soon as the Force Majeure event has been removed
and no longer prevents it from complying with the obligations which have been
suspended and shall thereafter resume compliance with such obligations as soon as
possible.
	 
	31.5	 	The Party asserting the claim of Force Majeure shall have the burden of proving that
the circumstances constitute valid grounds of Force Majeure under this Article and
that such Party has exercised reasonable diligence and efforts to remedy the cause of
any alleged Force Majeure.

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	31.6	 	Where a Party is prevented from exercising any rights or performing any obligations
under this Contract due to Force Majeure, the time for the
performance of the obligations affected thereby and for performance of any
obligation or the exercise of any right dependent thereon, and the term of
any Exploration Phase of the Exploration Period or this Contract, may be
extended to the extent of Force Majeure period or by such period as may be
agreed by the Management Committee.
	 
	31.7	 	Notwithstanding anything contained herein above, if an event of Force Majeure occurs
and is likely to continue for a period in excess of thirty (30) days, the Parties
shall meet to discuss the consequences of the Force Majeure and the course of action
to be taken to mitigate the effects thereof or to be adopted in the circumstances.

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ARTICLE 32

APPLICABLE LAW AND LANGUAGE OF THE CONTRACT

	32.1	 	This Contract shall be governed and interpreted in accordance with the laws of India.
	 
	32.2	 	Nothing in this Contract shall entitle the Contractor to exercise the rights,
privileges and powers conferred upon it by this Contract in a manner which will
contravene the laws of India.
	 
	32.3	 	The English language shall be the language of this Contract and shall be used in
arbitral proceedings. All communications, hearing or visual materials or documents
relating to this Contract shall be written or prepared in English.
	 
	32.4	 	The laws will also include amendments, revisions, modifications etc.

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ARTICLE 33

SOLE EXPERT, CONCILIATION AND ARBITRATION

	33.1	 	The Parties shall use their best efforts to settle amicably all disputes, differences
or claims arising out of or in connection with any of the terms and conditions of this
Contract or concerning the interpretation or performance thereof.
	 
	33.2	 	Matters which, by the terms of this Contract, the Parties have agreed to refer to a
sole expert and any other matter which the Parties may agree to so refer, may be
referred to a sole expert who shall be an independent and impartial person of
international standing with relevant qualifications and experience, appointed by
agreement between the Parties and who shall not, by virtue of nationality, personal
connection or commercial interest, have a conflict between his/her own interest and
his/her duty as a sole expert. In the event that the Parties fail or are unable to
agree on a sole expert within thirty (30) days or such longer period as may be
mutually agreed by Parties, the sole expert shall be appointed by a body or an
institution or an agency or a person, mutually agreed by Parties. In case, there is no
agreement on the body or an institution or an agency or a person for appointing sole
expert or such institution or agency or body fails to appoint a sole expert within
thirty (30) days or such longer period as may be mutually agreed by Parties, the
matter shall be referred to arbitration. Any sole expert appointed shall be acting as
an expert and not as an arbitrator and the decision of the sole expert on matters
referred to him/her shall be final and binding on the Parties and shall not be subject
to arbitration.
	 
	33.3	 	Subject to the provisions of this Contract, the Parties hereby agree that any
controversy, difference, disagreement or claim for damages, compensation or otherwise
(hereinafter in this Clause referred to as a “dispute”) arising between the Parties,
which cannot be settled amicably within ninety (90) days after the dispute arises, may
(except for those referred to in Article 33.2, which may be referred to a sole expert)
be submitted to conciliation or an arbitral tribunal for final decision as hereinafter
provided.
	 
	33.4	 	The arbitral tribunal shall consist of three arbitrators. Each Party to the dispute
shall appoint one arbitrator and the Party or Parties shall so advise the other
Parties. The two arbitrators appointed by the Parties shall appoint the third
arbitrator.
	 
	33.5	 	Any Party may, after appointing an arbitrator, request the other Party(ies) in
writing to appoint the second arbitrator. If such other Party fails to appoint an
arbitrator within thirty (30) days of receipt of the written request to do so, such
arbitrator may, at the request of the first Party, be appointed in accordance with
Arbitration and Conciliation Act, 1996.
	 
	33.6	 	If the two arbitrators appointed by or on behalf of the Parties fail to agree on the
appointment of the third arbitrator within thirty (30) days of the appointment of

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	 	 	the second arbitrator and if the Parties do not otherwise agree, at the request of
either Party, the third arbitrator shall be appointed in accordance with
Arbitration and Conciliation Act, 1996.

	33.7	 	If any of the arbitrators fails or is unable to act, his successor shall be appointed
by the Party or person who originally appointed such in the manner set out in this
Article as if he was the first appointment.
	 
	33.8	 	The decision of the arbitral tribunal shall be pronounced within four (4) months
unless otherwise extended by the Parties, and, in case of difference among the
arbitrators the decision of the majority shall be final and binding on the Parties.
	 
	33.9	 	The arbitration agreement contained in this Article 33 shall be governed by the
Arbitration and Conciliation Act, 1996 (Arbitration Act). Arbitration proceedings
shall be conducted in accordance with the rules for arbitration provided in
Arbitration Act.
	 
	33.10	 	The right to arbitrate disputes under this Contract shall survive expiry or the
termination of this Contract.
	 
	33.11	 	Prior to submitting a dispute to arbitration, the Parties may by mutual agreement
submit the matter for conciliation in accordance with Part III of the Arbitration and
Conciliation Act, 1996. No arbitration proceedings shall be instituted while
conciliation proceedings are pending provided that a Party may initiate arbitration
proceedings in the event that dispute has not been resolved by conciliation within
sixty (60) days of the date of agreement by the Parties to submit such dispute to
conciliation.
	 
	33.12	 	The venue of the sole expert, conciliation or arbitration proceedings pursuant to
this Article, unless the Parties agree otherwise, shall be New Delhi, India and shall
be conducted in the English language. Insofar as practicable, the Parties shall
continue to implement the terms of this Contract notwithstanding the initiation of
proceedings before a sole expert, conciliator or arbitral tribunal and any pending
claim or dispute.
	 
	33.13	 	The fees and expenses of a sole expert or conciliator appointed by the Parties shall
be borne equally by the Parties. The cost and expenses of arbitrator appointed by a
Party in accordance with the provision of this Article shall be borne by the
respective Party and the cost and expenses of third arbitrator and other incidental
expenditure in relation to arbitration and liability thereof shall be at the
discretion of the arbitrators.
	 
	33.14	 	Notwithstanding anything contrary contained herein above, in the event of dispute
among Government Company(ies) and with the Government, such disputes shall be settled
in accordance with guidelines issued on the subject by Government from time to time.

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ARTICLE 34

CHANGE OF STATUS OF COMPANIES

	34.1	 	The Parties comprising the Contractor shall notify the Government of any change in
the management or control of a Company(ies) or the relationship with any guarantor of
the Company(ies).

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ARTICLE 35

ENTIRE AGREEMENT, AMENDMENTS, WAIVER AND MISCELLANEOUS

	35.1	 	This Contract supersedes and replaces any previous agreement or understanding between
the Parties, whether oral or written, on the subject matter hereof, prior to the
execution date of this Contract.
	 
	35.2	 	This Contract shall not be amended, modified, varied or supplemented in any respect
except by an instrument in writing signed by all the Parties, which shall state the
date upon which the amendment or modification shall become effective.
	 
	35.3	 	No waiver by any Party of any one or more obligations or defaults by any other Party
in the performance of this Contract shall operate or be construed as a waiver of any
other obligations or defaults whether of a like or of a different character.
	 
	35.4	 	The provisions of this Contract shall inure to the benefit of and be binding upon the
Parties and their permitted assigns and successors in interest.
	 
	35.5	 	In the event of any conflict between any provisions in the main body of this Contract
and any provision in the Appendices, the provision in the main body shall prevail.
	 
	35.6	 	The headings of this Contract are for convenience of reference only and shall not be
taken into account in interpreting the terms of this Contract.
	 
	35.7	 	Reference to any law or regulation having the force of law includes a reference to
that law or regulation as from time to time may be amended, extended or re-enacted.
	 
	35.8	 	A reference in this Contract to the word “including” shall also mean “including but
not limited to”.

93

 

ARTICLE 36

CERTIFICATES

	36.1	 	A Company shall furnish, prior to execution of this Contract, a duly authorised copy
of a resolution properly and legally passed by the Board of Directors of the Company
authorising its President or any Vice-President or any other representative to execute
this Contract along with a certificate duly signed by the Secretary or an Assistant
Secretary of the Company under its seal in this regard and to the effect that the
Company has the power and authority to enter into this Contract and to perform its
obligations thereunder and has taken all necessary action to authorise the execution,
delivery and performance of the Contract.

94

 

ARTICLE 37

NOTICES

	37.1	 	All notices, statements, and other communications to be given, submitted or made
hereunder by any Party to another shall be sufficiently given if given in writing in
English language and sent by registered post, postage paid, or by telegram, telex,
facsimile, radio or cable, to the address or addresses of the other Party or Parties
as follows:

	 	(a)	 	If to the Government:

Secretary to the Government of India

Ministry of Petroleum and Natural Gas

Shastri Bhavan

Dr. Rajendra Prasad Marg,

New Delhi- 110001, INDIA

Facsimile No.: 91 11 3383585
	 
	 	(b)	 	President & CEO

c/o – 200, 630 – 4th Avenue SW

Calgary, Alberta, Canada, T2P 0J9

Facsimile No.: +1 403 777-9199

Telephone No.: +1 403 777-9250

E-mail          : -

	37.2	 	Notices when given in terms of Article 37.1 shall be effective when delivered if
offered at the address of the other Parties as under Article 37.1 during business
hours on working days and, if received outside business hours, on the next following
working day.
	 
	37.3	 	Any Party may, by reasonable notice as provided hereunder to the other Parties,
change its address and other particulars for notice purpose.

95

 

	 	 	IN WITNESS WHEREOF, the representatives of the Parties to this Contract being
duly authorised have hereunto set their hands and have executed these
presents this 23rd day of September, 2005.

	 	 	 	 	 
	Signed for and on
	 	 	 	 
	behalf of the

	 	Signature :
	 	/s/                                        
	President of India
	 	 	 	 
	 

	 	Name :
	 	<blank>
	 
	 	 	 	 
	 

	 	Designation :
	 	<blank>
	 
	 	 	 	 
	In presence of

	 	Signature :
	 	/s/                                        
	 
	 	 	 	 
	 

	 	Name :
	 	<blank>
	 
	 	 	 	 
	Signed for and on behalf
	 	 	 	 
	of GeoGlobal Resources (Barbados) Inc.
	 	 	 	 
	 

	 	Signature :
	 	/s/ Jean Paul Roy
	 
	 	 	 	 
	 

	 	Name :
	 	Jean Paul Roy
	 
	 	 	 	 
	 

	 	Designation :
	 	President and CEO
	 
	 	 	 	 
	In presence of:

	 	Signature :
	 	/s/ Allan J. Kent
	 
	 	 	 	 
	 

	 	Name :
	 	Allan J. Kent

96

 

APPENDIX A

DESCRIPTION OF THE CONTRACT AREA

The area comprising approximately 3155 Sq. Km., Onshore India identified as
Block DS-ONN-2003/1 herein and shown on the map attached as Appendix B.

Longitude and Latitude measurements commencing at points A, B, C, and D are
given below:

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Coordinates
	Longitude	 	Latitude
	Pt.	 	Deg.	 	Min.	 	Sec.	 	Deg.	 	Min.	 	Sec.
	A
	 	 	74	 	 	 	04	 	 	 	00	 	 	 	21	 	 	 	00	 	 	 	00	 
	B
	 	 	74	 	 	 	04	 	 	 	00	 	 	 	21	 	 	 	25	 	 	 	00	 
	C
	 	 	74	 	 	 	45	 	 	 	00	 	 	 	21	 	 	 	25	 	 	 	00	 
	D
	 	 	74	 	 	 	45	 	 	 	00	 	 	 	21	 	 	 	00	 	 	 	00	 
	E
	 	 	74	 	 	 	04	 	 	 	00	 	 	 	21	 	 	 	00	 	 	 	00	 

97

 

APPENDIX B

MAP OF THE CONTRACT AREA

98

 

APPENDIX C

ACCOUNTING PROCEDURE TO

THE CONTRACT

BETWEEN

THE GOVERNMENT OF INDIA

AND

GEOGLOBAL RESOURCES (BARBADOS) INC.

WITH RESPECT TO CONTRACT AREA

IDENTIFIED AS

BLOCK : DS-ONN-2003/1

99

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 	 	 
	Sections	 	Content
	 
	 	 	 	 	 	 	 	 
	Section 1:	 	General Provisions
	 
	 	 	 	 	 	 	 	 
	 	 	1.1 	 	Purpose
	 	 	1.2 	 	Definitions
	 	 	1.3 	 	Inconsistency
	 	 	1.4 	 	Documentation and Statements to be submitted by the Contractor
	 	 	1.5 	 	Language and units of account
	 	 	1.6 	 	Currency exchange rates
	 	 	1.7 	 	Payments
	 	 	1.8 	 	Arms length transactions
	 	 	1.9 	 	Audit and inspection rights of the Government
	 	 	1.10 	 	Revision of Accounting Procedure
	 
	 	 	 	 	 	 	 	 
	Section 2:	 	Classification, Definition and Allocation of Costs and Expenditures
	 
	 	 	 	 	 	 	 	 
	 	 	2.1 	 	Segregation of Costs
	 	 	2.2 	 	Exploration Costs
	 	 	2.3 	 	Development Costs
	 	 	2.4 	 	Production Costs
	 	 	2.5 	 	Service Costs
	 	 	2.6 	 	General and Administrative Costs
	 
	 	 	 	 	 	 	 	 
	Section 3:	 	Costs, Expenses, Expenditures and Incidental Income of the Contractor
	 
	 	 	 	 	 	 	 	 
	 	 	3.1 	 	Costs recoverable and allowable without further approval of the Government:
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	3.1.1 	 	Surface Rights
	 	 	 	 	3.1.2 	 	Labour and Associated Labour Costs
	 	 	 	 	3.1.3 	 	Transportation Costs
	 	 	 	 	3.1.4 	 	Charges for Services —  
	 

	 	 	 	 	 	(i)  Third Parties
	 

	 	 	 	 	 	(ii)  Affiliates of Contractor
	 	 	 	 	3.1.5 	 	Communications
	 	 	 	 	3.1.6 	 	Office, Shore Bases and Miscellaneous facilities
	 	 	 	 	3.1.7 	 	Environmental Studies and Protection
	 	 	 	 	3.1.8 	 	Materials and Equipments

100

 

	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	(i)  General
	 

	 	 	 	 	 	(ii) Warranty
	 

	 	 	 	 	 	(iii) Value of Materials charged to the accounts under the Contract
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	3.1.9    Duties, fees and other charges
	 	 	 	 	3.1.10  Insurance and Losses
	 	 	 	 	3.1.11  Legal expenses
	 	 	 	 	3.1.12  Training costs
	 	 	 	 	3.1.13  General and Administrative Costs
	 	 	 	 	3.1.14  Royalty, License fee, surface rentals etc.
	 
	 	 	 	 	 	 	 	 
	 	 	3.2  Costs not recoverable and not allowable under the Contract
	 	 	3.3  Other Costs recoverable and allowable only with Management Committee approval
	 	 	3.4  Incidental income and credits
	 	 	3.5  Non-duplication of charges and credits
	 
	 	 	 	 	 	 	 	 
	Section 4:	 	Records and Inventories of Assets
	 
	 	 	 	 	 	 	 	 
	 	 	4.1  Records
	 	 	4.2  Inventories
	 
	 	 	 	 	 	 	 	 
	Section 5:	 	Production Statement
	 
	 	 	 	 	 	 	 	 
	Section 6:	 	Value of Production and Pricing Statement
	 
	 	 	 	 	 	 	 	 
	Section 7:	 	Statement of Costs, Expenditures and Receipts
	 
	 	 	 	 	 	 	 	 
	Section 8:	 	Cost Recovery Statement
	 
	 	 	 	 	 	 	 	 
	Section 9:	 	Profit Sharing Statement
	 
	 	 	 	 	 	 	 	 
	Section 10:	 	Local Procurement Statement
	 
	 	 	 	 	 	 	 	 
	Section 11:	 	End of Year Statement
	 
	 	 	 	 	 	 	 	 
	Section 12:	 	Budget Statement

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ACCOUNTING PROCEDURE

SECTION 1

GENERAL PROVISIONS

	1.1	 	Purpose
	 
	 	 	Generally, the purpose of this Accounting Procedure is to set out
principles and procedures of accounting which will enable the
Government of India to monitor effectively the Contractor’s costs,
expenditures, production and income so that the Government’s
entitlement to Profit Petroleum can be accurately determined pursuant
to the terms of the Contract. More specifically, the purpose of the
Accounting Procedure is to:

	 	-	 	classify costs and expenditures and to define which costs
and expenditures shall be allowable for cost recovery and profit sharing
and participation purposes;
	 
	 	-	 	specify the manner in which the Contractor’s accounts
shall be prepared and approved; and
	 
	 	-	 	address numerous other accounting related matters.
	 
	 	 	 	This Accounting Procedure is intended to apply to the provisions of the
Contract and is without prejudice to the computation of income tax under
applicable provisions of the Income-Tax Act, 1961, as amended.

	1.2	 	Definitions

	 
	 	 	For purposes of this Accounting Procedure, the terms used herein which
are defined in the Contract shall have the same meaning when used in
this Accounting Procedure.
	 
	1.3	 	Inconsistency
	 
	 	 	In the event of any inconsistency or conflict between the provisions
of this Accounting Procedure and the other provisions of the Contract,
the other provisions of the Contract shall prevail.
	 
	1.4	 	Documentation and Statements to be submitted by the Contractor
	 
	1.4.1	 	Within ninety (90) days of the Effective Date of the Contract, the Contractor shall
submit to and discuss with the Government a proposed outline of charts of accounts,
operating records and reports, which outline shall reflect each of the categories and
sub-categories of costs and income specified in Sections 2 and 3

102

 

	 	 	and shall be in accordance with generally accepted standards and recognized
accounting systems and consistent with normal petroleum industry practice and
procedures for joint venture operations.
	 
	 	 	Within ninety (90) days of receiving the above submission, the Government
shall either provide written notification of its approval of the proposal or
request, in writing, revisions to the proposal.
	 
	 	 	Within one hundred and eighty (180) days from the Effective Date of the
Contract, the Contractor and the Government shall agree on the outline of
charts of accounts, records and reports which shall also describe the basis
of the accounting system and procedures to be developed and used under this
Contract. Following such agreement, the Contractor shall expeditiously
prepare and provide the Government with formal copies of the comprehensive
charts of accounts, records and reports and allow the Government to examine
the manuals and to review procedures which are, and shall be, observed under
the Contract.
	 
	1.4.2	 	Notwithstanding the generality of the foregoing, the Contractor shall make regular
Statements relating to the Petroleum Operations as follows:

	 	(i)	 	Production Statement (see Section 5 of this Accounting
Procedure).
	 
	 	(ii)	 	Value of Production and Pricing Statement (see Section 6
of this Accounting Procedure).
	 
	 	(iii)	 	Statement of Costs, Expenditures and Receipts (see
Section 7 of this Accounting Procedure).
	 
	 	(iv)	 	Cost Recovery Statement (see Section 8 of this Accounting
Procedure).
	 
	 	(v)	 	Profit Sharing Statement (see Section 9 of this
Accounting Procedure)
	 
	 	(vi)	 	Local Procurement Statement (see Section 10 of this
Accounting Procedure)
	 
	 	(vii)	 	End of Year Statement (see Section 11 of this Accounting
Procedure).
	 
	 	(viii)	 	Budget Statement (see Section 12 of this Accounting Procedure).

	1.4.3	 	All reports and Statements shall be prepared in accordance with the Contract and the
laws of India and, where there are no relevant provisions in either of these, in
accordance with generally accepted practices in the international petroleum industry.
	 
	1.4.4	 	Each of the entities constituting the Contractor shall be responsible for
maintaining its own accounting records in order to comply with all legal requirements
and to support all returns or any other accounting reports required by any Government
authority in relation to the Petroleum Operations. However, for the purposes of giving
effect to this Accounting Procedure, the Party constituting the Contractor who is the
Operator shall be responsible for maintaining, at its business office in India, on
behalf of the Contractor, all the

103

 

	 	 	accounts of the Petroleum Operations in accordance with the provisions of the
Accounting Procedure and the Contract.
	 
	1.5	 	Language and Units of Account
	 
	 	 	All accounts, records, books, reports and Statements shall be
maintained and prepared in the English language using mercantile basis
of accounting. The accounts shall be maintained in United States
Dollars, which shall be the controlling currency of account for cost
recovery, and profit sharing purposes. Metric units and Barrels shall
be employed for measurements required under the Contract. Where
necessary for clarification, the Contractor may also maintain accounts
and records in other languages, currencies and units.
	 
	1.6	 	Currency Exchange Rates
	 
	1.6.1	 	For conversion purposes between United States Dollars and Indian Rupees or any other
currency, the monthly average of the daily mean of the buying and selling rates of
exchange as quoted by the State Bank of India (or any other financial body as may be
mutually agreed by the Parties) for the Month in which the revenues, costs,
expenditures, receipts or income are recorded, shall be used. However, in the case of
any single non-US Dollar transaction in excess of the equivalent of fifty thousand
(50,000) US Dollars, the conversion into US Dollars shall be performed on the basis of
the average of the applicable exchange rates for the day on which the transaction
occurred.
	 
	1.6.2	 	Any realized or unrealized gains or losses from the exchange of currency in respect
of Petroleum Operations shall be credited or charged to the accounts. A record of the
exchange rates used in converting Indian Rupees or any other currencies into United
States Dollars as specified in Section 1.6.1 shall be maintained by the Contractor and
shall be identified in the relevant Statements required to be submitted by the
Contractor in accordance with Section 1.4.2.
	 
	1.7	 	Payments
	 
	1.7.1	 	Subject to Article 20.3 of the Contract and the foreign exchange laws and
regulations prevailing from time to time, all payments between the Parties shall,
unless otherwise agreed, be in United States Dollars and shall be made through a bank
designated by each receiving Party.
	 
	1.7.2	 	Unless otherwise specified, all sums due under the Contract shall be paid within
forty five (45) days from the date on which the obligation to pay was incurred.
	 
	1.7.3	 	All sums due by one Party to the other under the Contract during any Month shall,
for each day such sums are overdue during such Month, bear interest compounded daily
at the applicable LIBOR plus two (2) percentage points.

104

 

	1.8	 	Arms Length Transactions
	 
	 	 	Unless otherwise specifically provided for in the Contract, all
transactions giving rise to revenues, costs or expenditures which will
be credited or charged to the accounts prepared, maintained or
submitted hereunder shall be conducted at arms length or on such a
basis as will assure that all such revenues, costs or expenditures
will not be lower or higher, as the case may be, than would result
from a transaction conducted at arms length on a competitive basis
with third parties.
	 
	1.9	 	Audit and Inspection Rights of the Government
	 
	1.9.1	 	Without prejudice to statutory rights, the Government, upon at least twenty (20)
Business Days advance written notice to the Contractor, shall have the right to
inspect and audit, during normal business hours, all records and documents supporting
costs, expenditures, expenses, receipts and income, such as the Contractor’s accounts,
books, records, invoices, cash vouchers, debit notes, price lists or similar
documentation with respect to the Petroleum Operations conducted hereunder in each
Year, within two (2) years (or such longer period as may be required in exceptional
circumstances) from the end of such Year.
	 
	1.9.2	 	The Government may undertake the conduct of the audit either through its own
representatives or through a qualified firm of recognised chartered accountants,
registered in India or a reputed consulting firm, appointed for the purpose by the
Government and the costs of audit in case of Government auditor(s) shall be borne by
the Government, where as for outside auditor(s), this shall be borne by the Contractor
as a General and Administrative Cost.
	 
	1.9.3	 	In conducting the audit, the Government or its auditors shall be entitled to examine
and verify, at reasonable times, all charges and credits relating to the Contractor’s
activities under the Contract and all books of account, accounting entries, material
records and inventories, vouchers, payrolls, invoices and any other documents,
correspondence and records considered necessary by the Government to audit and verify
the charges and credits. The auditors shall also have the right, in connection with
such audit, to visit and inspect, at reasonable times, all sites, plants, facilities,
warehouses and offices of the Contractor directly or indirectly serving the Petroleum
Operations, and to physically examine other property, facilities and stocks used in
Petroleum Operations, wherever located and to question personnel associated with those
operations. Where the Government requires verification of charges made by an
Affiliate, the Government shall have the right to obtain an audit certificate from an
internationally recognized firm of public accountants acceptable to both the
Government and the Contractor, which may be the Contractor’s statutory auditor.
Submission of the audit certificate, shall in no way relieve or diminish the

105

 

	 	 	responsibility of the Contractor for the compliance with the obligations
under the Contract.
	 
	1.9.4	 	Any audit exceptions shall be made by the Government in writing and notified to the
Contractor within one hundred and twenty (120) days following completion of the audit
in question.
	 
	1.9.5	 	The Contractor shall answer any notice of exception under Section 1.9.4 within one
hundred and twenty (120) days of the receipt of such notice. Where the Contractor
has, after the said one hundred and twenty (120) days, failed to answer a notice of
exception, the exception shall prevail and deemed to have been agreed to by the
Contractor.
	 
	1.9.6	 	All agreed adjustments resulting from an audit and all adjustments required by
prevailing exceptions under Section 1.9.5 shall be promptly made in the Contractor’s
accounts and any consequential adjustments to the Government’s entitlement to
Petroleum shall be made within thirty (30) days therefrom.
	 
	1.9.7	 	Notwithstanding any reference to a Sole Expert or Arbitration in accordance with the
provisions of the Contract, in case any amount is claimed as due to the Government
resulting from the audit exception but not accepted or settled by the Contractor, then
the Contractor shall deposit such claimed amount in a escrow account to be opened with
a financial institution, failing mutually agreed agreement with State Bank of India
within thirty (30) days from the date when the amount is disputed by the Contractor.
The amount in escrow account shall be appropriated or adjusted in accordance with the
decision or award of the Sole Expert or Arbitral Tribunal as may be or otherwise as
mutually agreed to between the Parties.
	 
	1.9.8	 	If the Contractor and the Government are unable to reach final agreement on proposed
audit adjustments, either Party may refer any dispute thereon to a sole expert as
provided for in the Contract. So long as any issues are outstanding with respect to an
audit, the Contractor shall maintain the relevant documents and permit inspection
thereof until the issue is resolved.
	 
	1.10	 	Revision of the Accounting Procedure
	 
	 	 	By mutual agreement between the Government and the Contractor, this
Accounting Procedure may be revised from time to time, in writing,
signed by the Parties, stating the date upon which the amendments
shall become effective.

106

 

SECTION 2

CLASSIFICATION, DEFINITION AND ALLOCATION OF COSTS

AND EXPENDITURES

	2.1	 	Segregation of Costs
	 
	 	 	Costs shall be segregated in accordance with the purposes for which
such expenditures are made. All costs and expenditures allowable
under Section 3, relating to Petroleum Operations, shall be
classified, defined and allocated as set out below in this Section.
	 
	2.2	 	Exploration Costs
	 
	 	 	Exploration Costs are all direct and allocated indirect expenditures
incurred in the search for Petroleum in an area which is, or was at
the time when such costs were incurred, part of the Contract Area,
including expenditures incurred in respect of:
	 
	2.2.1	 	Aerial, geophysical, geochemical, palaeontological, geological, topographical and
seismic surveys, analysis and studies and their interpretation.
	 
	2.2.2	 	Core hole drilling and water Well drilling.
	 
	2.2.3	 	Labour, materials, supplies and services used in drilling Wells with the object of
finding Petroleum or in drilling Appraisal Wells provided that if such Wells are
completed as producing Wells or injection Well for enhancing Oil recovery, the costs
of completion thereof shall be classified as Development Costs.
	 
	2.2.4	 	Facilities used solely in support of the purposes described in Sections 2.2.1, 2.2.2
and 2.2.3 above, including access roads, all separately identified.
	 
	2.2.5	 	Any Service Costs and General and Administrative Costs directly incurred on
exploration activities and identifiable as such and a portion of the remaining Service
Costs and General and Administrative Costs allocated to Exploration Operations
determined by the proportionate share of total Contract Costs (excluding General and
Administrative Costs and Service Costs) represented by all other Exploration Costs.
	 
	2.2.6	 	Geological and geophysical information purchased or acquired in connection with
Exploration Operations.
	 
	2.2.7	 	Any other expenditures incurred in the search for Petroleum not covered under
Sections 2.3 or 2.4.

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	2.3	 	Development Costs
	 
	 	 	Development Costs are all direct and allocated indirect expenditures
incurred with respect to the development of discoveries within the
Contract Area including expenditures incurred on account of:
	 
	2.3.1	 	Geological and Geophysical information acquired in connection with Development
Operations.
	 
	2.3.2	 	Drilling Development Wells, whether these Wells are dry or producing and drilling
Wells for the injection of water or Gas to enhance recovery of Petroleum.
	 
	2.3.3	 	Completing of Exploration Wells by way of installation of casing or equipment or
otherwise or for the purpose of bringing a Well into use as a producing Well or as a
Well for the injection of water or Gas to enhance recovery of Petroleum.
	 
	2.3.4	 	Purchase, installation or construction of production, transport and storage
facilities for production of Petroleum, such as pipelines, flow lines, production and
treatment units, wellhead equipment, subsurface equipment, enhanced recovery systems,
offshore and onshore platforms, export terminals and piers, harbours and related
facilities and access roads for production activities.
	 
	2.3.5	 	Engineering and design studies for facilities referred to in Section 2.3.3.
	 
	2.3.6	 	Any Service Costs and General and Administrative Costs directly incurred in
Development Operations and identifiable as such and a portion of the remaining Service
Costs and General and Administrative Costs allocated to development activities,
determined by the proportionate share of total Contract Costs (excluding General and
Administrative Costs and Service Costs) represented by all other Development Costs.
	 
	2.4	 	Production Costs
	 
	 	 	Production Costs are expenditures incurred on Production Operations
after the start of production from the Field (which are other than
Exploration and Development Costs). The balance of General and
Administrative Costs and Service Costs not allocated to Exploration
Costs or Development Costs shall be allocated to Production Costs.
	 
	2.5	 	Service Costs
	 
	 	 	Service Costs are direct and indirect expenditures incurred in support
of Petroleum Operations in the Contract Area, including expenditures
on warehouses, piers, marine vessels, vehicles, motorized rolling
equipment, aircraft, fire and security stations, workshops, water and
sewerage plants, power plants, housing, community and recreational
facilities and furniture and tools and

108

 

	 	 	equipment used in these activities. Service Costs in any Year shall include
the costs incurred in such Year to purchase and/or construct the said
facilities as well as the annual costs of maintaining and operating the same,
each to be identified separately. All Service Costs shall be regularly
allocated as specified in Sections 2.2.5, 2.3.5 and 2.4 to Exploration Costs,
Development Costs and Production Costs and shall be separately shown under
each of these categories. Where Service Costs are made in respect of shared
facilities, the basis of allocation of costs to Petroleum Operations
hereunder shall be specified.
	 
	2.6	 	General and Administrative Costs
	 
	 	 	General and Administrative Costs are expenditures incurred on general
administration and management primarily and principally related to
Petroleum Operations in or in connection with the Contract Area, and
shall include:
	 
	2.6.1	 	main office, field office and general administrative expenditures in India including
supervisory, accounting and employee relations services;
	 
	2.6.2	 	an annual overhead charge for services rendered by the parent company or an
Affiliate to support and manage Petroleum Operations under the Contract, and for staff
advice and assistance including financial, legal, accounting and employee relations
services, but excluding any remuneration for services charged separately under this
Accounting Procedure, provided that:-

	 	(i)	 	for the period from the Effective Date until the date on
which the first Development Plan under the Contract is approved by the
Government, this annual charge shall be the Contractor’s verifiable
expenditure but shall in no event be greater than the following
percentages of the total Contract Costs incurred during the Contract
Year in or in connection with the Contract Area and qualifying for
recovery pursuant to Section 3:

	 	 	 	 	 
	 

	 	Contract costs in any

Contract year (in million US$)

0-2

Over 2-5

Over 5
	 	Annual overhead charge

3%

US $60,000 + 2% of Contract Costs in excess of US $2 million.

US $120,000 + 1% of Contract Costs in excess of US $5 million

	 	(ii)	 	from the date on which the first Development Plan is
approved, the charge shall be at an amount or rate to be agreed on
between the Parties and stated in the Development Plan.

	2.6.3	 	All General and Administrative Costs shall be regularly allocated as specified in
Sections 2.2.5, 2.3.5 and 2.4 to Exploration Costs, Development Costs and Production
Costs respectively, and shall be separately shown under each of these cost categories.

109

 

SECTION 3

COSTS, EXPENSES, EXPENDITURES AND INCIDENTAL INCOME

OF THE CONTRACTOR

	3.1	 	Costs Recoverable and Allowable Without Further Approval of the Government
	 
	 	 	Costs incurred by the Contractor on Petroleum Operations as per reviewed or
approved Work Programme and Budget by the Management Committee as the case
may be, pursuant to the Contract as classified under the headings referred to
in Section 2 shall be allowable for the purposes of the Contract except to
the extent provided in Section 3.2 or elsewhere in this Accounting Procedure,
and subject to audit, as referred to in Articles 25.4.1 to 25.4.4 and Article
25.5, as provided for herein. Further in case of variation in costs over the
reviewed/approved Work Programme and Budget, as the case may be, or
re-appropriation of costs, shall be submitted to the Management Committee for
review/approval, as the case may be, within thirty (30) days from end of the
relevant Financial Year and subject to the audit and other provisions of the
Contract, such costs shall be allowable for the purposes of the Contract.
	 
	3.1.1	 	Surface Rights
	 
	 	 	All direct costs necessary for the acquisition, renewal or
relinquishment of surface rights acquired and maintained in force
for the purposes of the Contract except as provided in Section
3.1.9.
	 
	3.1.2	 	Labour and Associated Labour Costs

	 	(a)	 	Contractor’s locally recruited employees based in India
	 
	 	 	 	Costs of all the Contractor’s locally recruited employees who are
directly engaged in the conduct of Petroleum Operations under the
Contract in India. Such costs shall include the costs of employee
benefits and Government benefits for employees and levies imposed on
the Contractor as an employer, transportation and relocation costs
within India of the employee and such members of the employee’s family
as per the personnel policy of the employer as required by law or
customary practice in India. If such employees are engaged in other
activities in India, in addition to Petroleum Operations, the cost of
such employees shall be apportioned on a time sheet basis according to
sound and acceptable accounting principles.

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	 	(b)	 	Assigned Personnel
	 
	 	 	 	Costs of salaries and wages, including bonuses, of the Contractor’s
employees directly and necessarily engaged in the conduct of the
Petroleum Operations under the Contract, whether temporarily or
permanently assigned, irrespective of the location of such employees,
it being understood that in the case of those personnel only a portion
of whose time is wholly dedicated to Petroleum Operations under the
Contract, only that pro rata portion of applicable salaries, wages,
and other costs, as specified in Sections 3.1.2(c), (d), (e), (f) and
(g), shall be charged and the basis of such pro rata allocation shall
be specified.
	 
	 	(c)	 	The Contractor’s costs regarding holiday, vacation,
sickness and disability benefits and living and housing and other
customary allowances applicable to the salaries and wages chargeable
under Section 3.1.2(b) above.
	 
	 	(d)	 	Expenses or contributions made pursuant to assessments or
obligations imposed under the laws of India which are applicable to the
Contractor’s cost of salaries and wages chargeable under Section
3.1.2(b) above.
	 
	 	(e)	 	The Contractor’s cost of established plans for employees’
group life insurance, hospitalization, pension, retirement and other
benefit plans of a like nature customarily granted to the Contractor’s
employees provided, however, that such costs are in accordance with
generally accepted standards in the international petroleum industry,
applicable to salaries and wages chargeable to Petroleum Operations
under Section 3.1.2(b) above.
	 
	 	(f)	 	Personal income taxes where and when they are paid by the
Contractor to the Government of India for the employee, in accordance
with the Contractor’s standard personnel policies.
	 
	 	(g)	 	Reasonable transportation and travel expenses of
employees of the Contractor, including those made for travel and
relocation of the expatriate employees, including their dependent family
and personal effects, assigned to India whose salaries and wages are
chargeable to Petroleum Operations under Section 3.1.2(b) above.
	 
	 	Transportation cost as used in this Section shall mean the cost of freight
and passenger service and any accountable incidental expenditures related to
transfer travel and authorized under the Contractor’s standard personnel
policies. The Contractor shall ensure that all expenditures related to
transportation costs are equitably allocated to the activities which have
benefited from the personnel concerned.

	3.1.3	 	Transportation Costs
	 
	 	 	The reasonable cost of transportation of equipment, materials and
supplies within India and from outside India to India necessary for
the conduct of Petroleum Operations under the Contract, including
directly related costs such as unloading charges, dock fees and
inland and ocean freight charges.
	 

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	3.1.4	 	Charges for Services

	 	(i)	 	Third Parties

The actual costs of contract services, services of professional consultants,
utilities and other services necessary for the conduct of Petroleum
Operations under the Contract performed by third parties other than an
Affiliate of the Contractor, provided that the transactions resulting in such
costs are undertaken pursuant to Section 1.8 of this Accounting Procedure.

	 	(ii)	 	Affiliates of Contractor
	 
	 	(a)	 	Professional and Administrative Services and Expenses
	 
	 	 	 	Cost of professional and administrative services provided by any
Affiliate for the direct benefit of Petroleum Operations, including,
but not limited to, services provided by the production, exploration,
legal, financial, insurance, accounting and computer services
divisions other than those covered by Section 3.1.4 (ii)(b) which the
Contractor may use in lieu of having its own employees. Charges shall
be equal to the actual cost of providing their services, shall not
include any element of profit and shall not be any higher than the
most favourable prices charged by the Affiliate to third parties for
comparable services under similar terms and conditions elsewhere and
will be fair and reasonable in the light of prevailing modern oilfield
and petroleum industry practices.
	 
	 	(b)	 	Scientific or Technical Personnel
	 
	 	 	 	Cost of scientific or technical personnel services provided by any
Affiliate of the Contractor for the direct benefit of Petroleum
Operations, which cost shall be charged on a cost of service basis.
Charges therefor shall not exceed charges for comparable services
currently provided by outside technical service organizations of
comparable qualifications. Unless the work to be done by such
personnel is covered by an Approved Budget and Work Programme, the
Contractor shall not authorize work by such personnel without approval
of the Management Committee.
	 
	 	(c)	 	Equipment, facilities and property owned and furnished by
the Contractor’s Affiliates, at rates commensurate with the cost of
ownership and operation provided, however, that such rates shall not
exceed those currently prevailing for the supply of like equipment,
facilities and property on comparable terms in the area where the
Petroleum Operations are being conducted. The equipment and facilities
referred to herein shall exclude major investment items such as (but not
limited to) drilling rigs, producing platforms, oil treating facilities,
oil and gas loading and

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	 	 	 	transportation systems, storage and terminal facilities and other
major facilities, rates for which shall be subject to separate
agreement with the Government.

	3.1.5	 	Communications
	 
	 	 	Cost of acquiring, leasing, installing, operating, repairing and
maintaining communication systems including radio, satellite link
and microwave facilities between the Contract Area and the
Contractor’s nearest base facility.
	 
	3.1.6	 	Office, Shore Bases and Miscellaneous Facilities
	 
	 	 	Net cost to the Contractor of establishing, maintaining and
operating any office, sub-office, shore base facility, warehouse,
housing or other facility directly serving the Petroleum
Operations. If any such facility services contract areas other than
the Contract Area, or any business other than Petroleum Operations,
the net costs thereof shall be allocated on an equitable and
consistent basis.
	 
	3.1.7	 	Environmental Studies and Protection
	 
	 	 	Costs incurred in conducting the environmental impact assessment
studies for the Contract Area, and in taking environmental
protection measures including abandonment cost or contribution to
abandonment funds as may be created for abandonment and Site
Restoration pursuant to the terms of the Contract.
	 
	3.1.8	 	Materials and equipment

	 	(i)	 	General
	 
	 	 	 	So far as is practicable and consistent with efficient and economical
operation, only such material shall be purchased or furnished by the
Contractor for use in the Petroleum Operations as may be required for
use in the reasonably foreseeable future and the accumulation of
surplus stocks shall be avoided. Material and equipment held in
inventory shall only be charged to the accounts when such material is
removed from inventory and used in Petroleum Operations. Costs shall
be charged to the accounting records and books based on the “First-in,
First-out method”.
	 
	 	(ii)	 	Warranty
	 
	 	 	 	In the case of defective material or equipment, any adjustment
received by the Contractor from the suppliers or manufacturers or
their agents in respect of any warranty on material or equipment
shall be credited to the accounts under the Contract.

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	 	(iii)	 	Value of materials charged to the accounts under the Contract

	 	(a)	 	Except as otherwise provided in subparagraph (b) below,
materials purchased by the Contractor for use in the Petroleum
Operations shall be valued to include invoice price less trade and cash
discounts, if any, purchase and procurement fees plus freight and
forwarding charges between point of supply and point of shipment,
freight to port of destination, insurance, taxes, custom duties,
consular fees, other items chargeable against imported material and,
where applicable, handling and transportation costs from point of
importation to warehouse or operating site, and these costs shall not
exceed those currently prevailing in normal arms length transactions on
the open market.
	 
	 	(b)	 	Material purchased from or sold to Affiliates or
transferred to or from activities of the Contractor other than Petroleum
Operations under the Contract:

	 	(aa)	 	new material (hereinafter referred to as
condition A) shall be valued at the current international price
which shall not exceed the price prevailing in normal arms length
transactions on the open market;
	 
	 	(bb)	 	used material which is in sound and
serviceable condition and is suitable for reuse without
reconditioning (hereinafter referred to as condition B) shall be
priced at not more than seventy five per cent (75%) of the
current price of the above mentioned new materials;
	 
	 	(cc)	 	used material which cannot be classified as
condition B, but which, after reconditioning, will be further
serviceable for original function as good second-hand condition B
material or is serviceable for original function, but
substantially not suitable for reconditioning (hereinafter
referred to as condition C) shall be priced at not more than
fifty per cent (50%) of the current price of the new material
referred to above as condition A.

The cost of reconditioning shall be charged to the reconditioned material,
provided that the condition C material value plus the cost of reconditioning
does not exceed the value of condition B material.

Material which cannot be classified as condition B or condition C shall be
priced at a value commensurate with its use.

Material involving erection expenditure shall be charged at the applicable
condition percentage (referred to above) of the current knocked-down price of
new material referred to above as condition A.

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When the use of material is temporary and its service to the
Petroleum Operations does not justify the reduction in price in
relation to materials referred to above as conditions B and C, such
material shall be priced on a basis that will result in a net
charge to the accounts under the Contract consistent with the value
of the service rendered.

	3.1.9	 	Duties, Fees and Other Charges
	 
	 	 	Any duties, levies, fees, charges and any other assessments levied
by any governmental or taxing authority in connection with the
Contractor’s activities under the Contract and paid directly by the
Contractor except corporate income tax payable by the constituents
of the Contractor.
	 
	3.1.10	 	Insurance and Losses
	 
	 	 	Insurance premia and costs incurred for insurance pursuant to
Article 24 of the Contract, provided that such insurance is
customary, affords prudent protection against risk and is at a
premium no higher than that charged on a competitive basis by
insurance companies which are not Affiliates. Except as provided in
Sections 3.2 (ix), Section 3.2(x) and Section 3.2(xi), actual costs
and losses incurred shall be allowable to the extent not made good
by insurance. Such costs may include, but are not limited to,
repair and replacement of property in the Contract Area resulting
from damages or losses incurred by fire, flood, storm, theft,
accident or such other cause.
	 
	3.1.11	 	Legal Expenses
	 
	 	 	All reasonable costs and expenses, except Section 3.2 (xi)
resulting from the handling, investigating, asserting, defending,
or settling of any claim or legal action necessary or expedient for
the procuring, perfecting, retention and protection of the Contract
Area and in defending or prosecuting lawsuits involving the
Contract Area or any third party claim arising out of Petroleum
Operations under the Contract, or sums paid in respect of legal
services necessary for the protection of the joint interest of
Government and the Contractor, shall be allowable. Such
expenditures shall include attorney’s fees, court costs, costs of
investigation and procurement of evidence and amounts paid in
settlement or satisfaction of any such litigation and claims
provided such costs are not covered elsewhere in the Accounting
Procedure. Where legal services are rendered in such matters by
salaried or regularly retained lawyers of the Contractor or an
Affiliate, such compensation shall be included instead under
Section 3.1.2 or 3.1.4 (ii) above as applicable.

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	3.1.12	 	Training Costs
	 
	 	 	All costs and expenses incurred by the Contractor in training
as is required under Article 22 of the Contract.
	 
	3.1.13	 	General and Administrative Costs
	 
	 	 	The costs described in Section 2.6.1 and the charge described
in Section 2.6.2 of this Accounting Procedure.
	 
	3.1.14	 	Royalty, License fee, surface rentals etc.
	 
	 	 	Royalty, License fee, surface rentals, dead rents and other
levies and taxes paid to the Government of India or State
Government or local Government bodies or authority or agency
except income tax paid to the Government.
	 
	3.2	 	Costs not recoverable and not allowable under the Contract
	 
	 	 	The following costs and expenses shall not be recoverable or
allowable (whether directly as such or indirectly as part of
any other charges or expense) for cost recovery and profit
sharing purposes under the Contract :

	 	(i)	 	costs and charges incurred before the Effective Date
including costs in respect of preparation, signature or ratification of
this Contract;
	 
	 	 	 	Explanatory Note : It is clarified that costs and expenditures,
incurred prior to the Effective Date but after the execution of the
Contract, for making statutory payments in connection with the
Petroleum Operations such as Petroleum Exploration License (PEL) fee
and application fee shall be allowed as Contract Cost and shall be
recoverable.
	 
	 	(ii)	 	expenditures in respect of any financial transaction to
negotiate, float or otherwise obtain or secure funds for Petroleum
Operations including, but not limited to, interest, commission,
brokerage and fees related to such transactions, as well as exchange
losses on loans or other financing, whether between Affiliates or
otherwise;
	 
	 	(iii)	 	costs of marketing or transportation of Petroleum beyond
the Delivery Point;
	 
	 	(iv)	 	expenditures incurred in obtaining, furnishing and
maintaining the guarantees required under the Contract and any other
amounts spent on indemnities with regard to non-fulfillment of
contractual obligations;
	 
	 	(v)	 	attorney’s fees and other costs and charges in connection
with arbitration proceedings and sole expert determination pursuant to
the Contract;
	 
	 	(vi)	 	fines, interest and penalties imposed by Courts of law
of the Republic of India;
	 
	 	(vii)	 	donations and contributions;
	 
	 	(viii)	 	expenditures on creation of any partnership or joint venture
arrangement;
	 
	 	(ix)	 	amounts paid with respect to non-fulfillment of
contractual obligations;

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	 	(x)	 	costs incurred as a result of failure to insure where
insurance is required pursuant to the Contract, or of failure to follow
procedures laid down by an insurance policy or where the Contractor has
elected to self insure, or has under-insured;
	 
	 	(xi)	 	costs and expenditures incurred as a result of misconduct
or negligence of the Contractor; and
	 
	 	(xii)	 	expenses of the members of the Management Committee as
per Article 6.12.

	3.3	 	Other costs recoverable and allowable only with Management Committee approval

Any other costs and expenditures not included in Section 3.1 or 3.2 of this
Accounting Procedure but which have been incurred by the Contractor for the
necessary and proper conduct of Petroleum Operations shall be allowed to be
recovered only with the express prior approval in writing of the Management
Committee.

	3.4	 	Incidental Income and Credits
	 
	 	 	All incidental income and proceeds received from Petroleum Operations
under the Contract, including but not limited to the items listed
below, shall be credited to the accounts under the Contract and shall
be taken into account for cost recovery, and Profit Petroleum sharing
purposes in the manner described in Articles 15 and 16 of the
Contract:-

	 	(i)	 	The proceeds of any insurance or claim or judicial awards
in connection with Petroleum Operations under the Contract or any assets
charged to the accounts under the Contract where such operations or
assets have been insured and the premia charged to the accounts under
the Contract;
	 
	 	(ii)	 	Revenue received from third parties for the use of
property or assets, the cost of which has been charged to the accounts
under the Contract;
	 
	 	(iii)	 	Any adjustment received by the Contractor from the
suppliers/manufacturers or their agents in connection with defective
material, the cost of which was previously charged by the Contractor to
the accounts under the Contract;
	 
	 	(iv)	 	Rentals, refunds or other credits received by the
Contractor which apply to any charge which has been made to the accounts
under the Contract;
	 
	 	(v)	 	Prices originally charged to the accounts under the
Contract for materials subsequently exported from the Republic of India
without being used in Petroleum Operations under the Contract;

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	 	(vi)	 	Proceeds from the sale or exchange by the Contractor of
assets, plant or facilities, the acquisition costs of which have been
charged to the accounts under the Contract;
	 
	 	(vii)	 	Legal costs charged to the accounts under Section 3.1.11
of this Accounting Procedure and subsequently recovered by the
Contractor.

	3.5	 	Non-Duplication of Charges and Credits
	 
	 	 	Notwithstanding any provision to the contrary in this Accounting
Procedure, it is the objective of the Parties that there shall be no
duplication of charges or credits to the accounts under the Contract.

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SECTION 4

RECORDS AND INVENTORIES OF ASSETS

	4.1	 	Records
	 
	4.1.1	 	The Contractor shall keep and maintain detailed records of property and assets in
use for or in connection with Petroleum Operations under the Contract in accordance
with normal practices in exploration and production activities of the international
petroleum industry. Such records shall include information on quantities, location and
condition of such property and assets, and whether such property or assets are leased
or owned.
	 
	4.2	 	Inventories
	 
	4.2.1	 	The Contractor shall:

	 	(a)	 	not less than once every twelve (12) Months with respect
to movable assets; and
	 
	 	(b)	 	not less than once every three (3) Years with respect to
immovable assets,

take an inventory of the assets used for or in connection with Petroleum
Operations in terms of the Contract and address and deliver such inventory
to the Government together with a written statement of the principles upon
which valuation of the assets mentioned in such inventory has been based.

	4.2.2	 	The Contractor shall give the Government at least thirty (30) days notice in writing
in the manner provided for in the Contract of its intention to take the inventory
referred to in Section 4.2.1 and the Government shall have the right to be represented
when such inventory is taken.
	 
	4.2.3	 	When an assignment of rights under the Contract takes place, a special inventory
shall be taken by the Contractor at the request of the assignee provided that the cost
of such inventory is borne by the assignee and paid to the Contractor.
	 
	4.2.4	 	In order to give effect to Article 27 of the Contract, the Contractor shall provide
the Government with a comprehensive list of all relevant assets when requested by the
Government to do so.

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SECTION 5

PRODUCTION STATEMENT

	5.1	 	From the date of first production of Petroleum from the Contract Area the Contractor
shall submit a monthly Production Statement to Government showing the following
information separately of each producing Field and in aggregate for the Contract Area:
	 
	5.1.1	 	The quantity of Crude Oil and Condensate produced and saved.
	 
	5.1.2	 	The quality and characteristics of such Crude Oil and Condensate produced and saved.
	 
	5.1.3	 	The quantity of Associated Natural Gas and Non Associated Natural Gas produced and
saved.
	 
	5.1.4	 	The quality, characteristics and composition of such Natural Gas produced and saved
separately.
	 
	5.1.5	 	The quantities of Crude Oil, Condensate and Natural Gas used for the purposes of
carrying on drilling and production operations and pumping to field storage, as well
as quantities re-injected.
	 
	5.1.6	 	The quantities of Crude Oil, Condensate and Natural Gas unavoidably lost.
	 
	5.1.7	 	The quantities of Natural Gas flared and vented.
	 
	5.1.8	 	The size of Petroleum stocks held on the first day of the Month in question.
	 
	5.1.9	 	The size of Petroleum stocks held on the last day of the Month in question.
	 
	5.1.10	 	The quantities of Natural Gas reinjected into the Petroleum Reservoir.
	 
	5.1.11	 	The number of days in the Month during which Petroleum was produced from each Field.
	 
	5.1.12	 	The Gas-Oil ratio for each Reservoir and Field for the relevant Month.
	 
	5.1.13	 	Water production, water injection and Reservoir pressure data for each Reservoir and
Field.

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	5.2	 	All quantities shown in this Statement shall be expressed in both volumetric terms
(barrels of Oil and cubic metres of Gas) and in the case of Oil in weight (metric
tonnes).
	 
	5.3	 	For the purpose of reporting Field production quantities pursuant to this Section,
the Contractor shall agree with the Management Committee on the exact area to be
designated as Development Area.
	 
	5.4	 	The Government may direct in writing that the Contractor include other reasonable
particulars relating to the production of Petroleum in its monthly Production
Statement, and the Contractor shall comply with such direction.
	 
	5.5	 	The Production Statement for each Month shall be submitted to Government no later
than fifteen (15) days after the end of such Month.

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SECTION 6

VALUE OF PRODUCTION AND PRICING STATEMENT

	6.1	 	The Contractor shall, for the purposes of Article 19 of the Contract, prepare a
Statement providing calculations of the value of Crude Oil and Condensate produced and
saved during each Month. This Statement shall contain the following information:
	 
	6.1.1	 	The quantities, prices and receipts realised therefor by the Contractor as a result
of sales of Crude Oil and Condensate to third parties made during the Month in
question.
	 
	6.1.2	 	The quantities, prices and receipts realised therefor by the Contractor as a result
of sales of Crude Oil and Condensate made during the Month in question, other than to
third parties, if any.
	 
	6.1.3	 	The quantities of Crude Oil and Condensate appropriated by the Contractor to
refining or other processing without otherwise being disposed of in the form of Crude
Oil or Condensate.
	 
	6.1.4	 	The value of stocks of Crude Oil and Condensate on the first day of the Month in
question.
	 
	6.1.5	 	The value of stocks of Crude Oil and Condensate on the last day of the Month in
question.
	 
	6.1.6	 	The percentage volume of total sales of Crude Oil and Condensate made by the
Contractor during the Month that are Arms Length Sales to third parties.
	 
	6.1.7	 	Information available to the Contractor, insofar as required for the purposes of
Article 19 of the Contract, concerning the prices of competitive crude oils produced
by the main petroleum producing and exporting countries including contract prices,
discounts and premia, and prices obtained on the spot markets.
	 
	6.2	 	The Contractor shall, for the purpose of Article 21 of the Contract, prepare a
Statement providing calculations of the value of Associated Natural Gas and Non
Associated Natural Gas produced, flared internally used, saved and sold during each
Month. This Statement shall contain all information of the type specified in Section
6.1 for Crude Oil as is applicable to Gas and such other relevant information as may
be required by Government.

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	6.3	 	The Statements required pursuant to Sections 6.1 and 6.2 shall include a detailed
breakdown of the calculation of the prices of Crude Oil, Condensate, Associated
Natural Gas and Non Associated Natural Gas pursuant to the provisions of Articles 19
and 21.
	 
	6.4	 	The Value of Production and Pricing Statement for each Month shall be submitted to
Government not later than thirty (30) days after the end of such Month.

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SECTION 7

STATEMENT OF COSTS, EXPENDITURES AND RECEIPTS

	7.1	 	The Contractor shall prepare with respect to each Quarter a Statement of Costs,
Expenditures and Receipts under the Contract using mercantile basis of accounting. The
Statement shall distinguish between Exploration Costs, Development Costs and
Production Costs and shall separately identify all significant items of costs and
expenditure as itemised in Section 3 of this Accounting Procedure within these
categories. The Statement of receipts shall distinguish between income from the sale
of Petroleum and incidental income of the sort itemised in Section 3.4 of this
Accounting Procedure. If the Government is not satisfied with the degree of
disaggregation within the categories, it shall be entitled to request a more detailed
breakdown. The Statement shall show the following:
	 
	7.1.1	 	Actual costs, expenditures and receipts for the Quarter in question.
	 
	7.1.2	 	Cumulative costs, expenditures and receipts for the Year in question.
	 
	7.1.3	 	Latest forecast of cumulative costs, expenditures and receipts at the Year end.
	 
	7.1.4	 	Variations between budget forecast and latest forecast and explanations thereof.
	 
	7.2	 	The Statement of Costs, Expenditures and Receipts of each Quarter shall be submitted
to Government not later than thirty (30) days after the end of such Quarter.

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SECTION 8

COST RECOVERY STATEMENT

	8.1	 	The Contractor shall prepare with respect to each Calendar Quarter a Cost Recovery
Statement containing the following information:
	 
	8.1.1	 	Unrecovered Contract Costs carried forward from the previous Quarter, if any.
	 
	8.1.2	 	Contract Costs for the Quarter in question.
	 
	8.1.3	 	Total Contract Costs for the Quarter in question (Section 8.1.1 plus Section 8.1.2).
	 
	8.1.4	 	Quantity and value of Cost Petroleum taken and disposed of by the Contractor for the
Quarter in question.
	 
	8.1.5	 	Contract Costs recovered during the Quarter in question as per Article 15.
	 
	8.1.6	 	Total cumulative amount of Contract Costs recovered up to the end of the Quarter in
question.
	 
	8.1.7	 	Amount of Contract Costs to be carried forward into the next Quarter.
	 
	8.2	 	The Cost Recovery Statement for each Quarter shall be submitted to Government not
later than thirty (30) days after the end of such Quarter.

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SECTION 9

PROFIT SHARING STATEMENT

	9.1	 	The Contractor shall prepare with respect to each Quarter a Profit Sharing Statement
containing the following information:
	 
	9.1.1	 	The calculation of the applicable net cash flows as defined in Appendix D for the
Quarter in question.
	 
	9.1.2	 	The value of the Investment Multiple applicable in the Quarter in question.
	 
	9.1.3	 	Based on Section 9.1.2 and Article 16, the appropriate percentages of Profit
Petroleum for the Government and the Contractor in the Quarter in question.
	 
	9.1.4	 	The total amount of Profit Petroleum to be shared between the Government and the
Contractor in the Quarter in question.
	 
	9.1.5	 	Based on Sections 9.1.3 and 9.1.4, the amount of Profit Petroleum due to the
Government and the Contractor as well as to each constituent of the Contractor in the
Quarter in question.
	 
	9.1.6	 	The actual amounts of Petroleum taken or payment received by Government and the
Contractor as well as by each constituent of the Contractor during the Quarter in
question to satisfy their entitlements pursuant to Section 9.1.5.
	 
	9.1.7	 	Adjustments to be made, if any, in future Quarters in the respective amounts of
Profit Petroleum due to the Government and the Contractor as well as to each
constituent of the Contractor on account of any differences between the amounts
specified in Sections 9.1.5 and 9.1.6, as well as any cumulative adjustments
outstanding from previous Quarters.
	 
	9.2	 	The Profit Sharing Statement shall be submitted to Government not later than thirty
(30) days after the end of such Quarter. Any amount due or adjustment required in
profit sharing among the Parties shall be made within thirty (30) days from the
submission of the Statement to the Government.

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SECTION 10

LOCAL PROCUREMENT STATEMENT

	10.1	 	In furtherance of the obligation in Article 23 of the Contract for the Contractor to
give preference to the procurement of Indian goods and services, the Contractor shall
prepare in respect of each Year a local procurement statement, containing the
following information:

	 	(a)	 	The amount of expenditure incurred by the Contractor
directly, or indirectly through its Subcontractors, on goods supplied,
produced or manufactured in India;
	 
	 	(b)	 	the amount of expenditure incurred by the Contractor
directly, or indirectly through its Subcontractors, on services provided
by Indian entities;
	 
	 	(c)	 	the respective percentages that the expenditures recorded
under items (a) and (b) above represent of the Contractor’s total
expenditures;
	 
	 	(d)	 	a detailed description of the procedures adopted during
the Year to identify and purchase goods and services from Indian
suppliers; and
	 
	 	(e)	 	a detailed exposition of how the local purchases for the
Year as recorded under items (a) and (b) above compared with the
projected purchases included in the budget statement for that Year
(pursuant to Section 12.1.3), with explanations for any significant
variations;

	10.2	 	The local procurement statement shall be submitted to the Government within sixty
(60) days after the end of each Year.

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SECTION 11

END OF YEAR STATEMENT

	11.1	 	The Contractor shall prepare a definitive End of Year Statement. The Statement shall
contain aggregated information in the same format as required in the Production
Statement, Value of Production and Pricing Statement, Statement of Costs, Expenditures
and Receipts, Cost Recovery Statement and Profit Sharing Statement, but shall be based
on actual quantities of Petroleum produced, income received and costs and expenditures
incurred. Based upon this Statement, any adjustments that are necessary shall be made
to the transactions concerned under the Contract.
	 
	 	 	[Explanation : End of year Statement shall further contain the item wise
justification for the variation between the actual costs and expenditure
incurred and included in the statement of costs, expenditure and receipts
vis-à-vis the Budgets for corresponding line items.]
	 
	11.2	 	The End of Year Statement for each Year shall be submitted to Government within
ninety (90) days of the end of such Year.

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SECTION 12

BUDGET STATEMENT

	12.1	 	The Contractor shall prepare a Budget Statement for each Year. This Statement shall
distinguish between budgeted Exploration Costs, Development Costs and Production Costs
and shall show the following:
	 
	12.1.1	 	Forecast costs, expenditures and receipts for the Year in question.
	 
	12.1.2	 	A schedule showing the most important individual items of total costs, expenditures
and receipts for the said Year.
	 
	12.1.3	 	Estimated amounts to be spent in the Year on procuring goods and services in India.
	 
	12.2	 	The Budget Statement shall be submitted to Government with respect to each Year not
less than ninety (90) days before the start of the said Year provided that in the case
of the Year in which the Effective Date falls, the Budget Statement shall be submitted
within ninety (90) days of the Effective Date.

129

 

APPENDIX-D

CALCULATION OF THE INVESTMENT MULTIPLE 

FOR PRODUCTION SHARING PURPOSES

	1.	 	In accordance with the provisions of Article 16, the share of the Government and the
Contractor respectively of Profit Petroleum from the Contract Area in any Year shall
be determined by the Investment Multiple earned by the Contractor from the then
Petroleum Operations at the end of the preceding Year. These measures of
profitability shall be calculated on the basis of the appropriate net cash flows as
specified in this Appendix D.
	 
	2.	 	The “Net Cash Income” of the Contractor from their Petroleum Operations in any
particular Year is the aggregate value for the Year of the following:

	 	(i)	 	Cost Petroleum entitlement of the Contractor as provided
in Article 15;
	 
	 	 	 	plus
	 
	 	(ii)	 	Profit Petroleum entitlement of the Contractor as
provided in Article 16;
	 
	 	 	 	plus
	 
	 	(iii)	 	the Contractor’s all incidental income (of the type
specified in section 3.4 of the Accounting Procedure) arising from
Petroleum Operations;
	 
	 	 	 	less
	 
	 	(iv)	 	the Contractor’s Production Costs and royalty payments
(Article 17) incurred on or in the Contract Area;

	3.	 	The “Investment” made by the Contractor in the Contract Area in any particular Year
is the aggregate value for the Year of:

	 	(i)	 	the Contractor’s Exploration Costs incurred on or in the
Contract Area pursuant to Article 15
	 
	 	 	 	plus
	 
	 	(ii)	 	the Contractor’s Development Costs incurred on or in the
Contract Area.

	4.	 	For the purposes of the calculation of the Investment Multiple, costs or expenditures
which are not allowable as provided in the Accounting Procedure shall be excluded from
Contract Costs and be disregarded.

130

 

	5.	 	The Investment Multiple ratio earned by the Contractor as at the end of any Year
shall be calculated by dividing the aggregate value of the addition of each of the
annual Net Cash Incomes (accumulated, without interest, up to and including that Year
starting from the Year in which Production Costs were first incurred or Production
first arose) by the aggregate value of the addition of each of the annual Investments
(accumulated, without interest, up to and including that Year starting from the Year
in which Exploration and Development Costs were first incurred).
	 
	6.	 	Profit Petroleum from the Contract Area in any Year shall be shared between the
Government and the Contractor in accordance with the value of the Investment Multiple
earned by the Contractor as at the end of the previous Year pursuant to Articles 16.2
to 16.5.

131

 

APPENDIX-E1

FORM OF PARENT COMPANY FINANCIAL AND PERFORMANCE GUARANTEE

(to be furnished pursuant to Article 29.1 (b) of the Contract)

	 	 	WHEREAS                                                                                 a company duly organised
and existing under the laws of                                         having its registered
office at                                        (hereinafter referred to as ‘the
Guarantor’ which expression shall include its successors and assigns) is [the
indirect owner of one hundred percent (100%) of the capital stock of XYZ
Company and direct owner of its parent company;] and
	 
	 	 	WHEREAS XYZ Company is signatory to a Production Sharing Contract in respect
of an (offshore) (onshore) area identified as Block
                                                             (hereinafter referred to as ‘the
Contract’) made between the Government of India (hereinafter referred to as
‘the Government’), and XYZ Company (hereinafter referred to as XYZ which
expression shall include its successors and permitted assigns); and
	 
	 	 	WHEREAS the Guarantor wishes to guarantee the performance of XYZ Company or
its Affiliate Assignee under the Contract as required by the terms of the
Contract;
	 
	 	 	NOW, THEREFORE this Deed hereby provides as follows:
	 
	1.	 	The Guarantor hereby unconditionally and irrevocably guarantees to the Government
that it will make available, or cause to be made available, to XYZ Company or any
other directly or indirectly owned Affiliate of XYZ Company to which any part or all
of XYZ Company’s rights or interest under the Contract may subsequently be assigned
(‘Affiliate Assignee’), financial, technical and other resources required to ensure
that XYZ Company or any Affiliate Assignee can carry out its obligations as set forth
in the Contract.
	 
	2.	 	The Guarantor further unconditionally and irrevocably guarantees to the Government
the due and punctual compliance by XYZ Company or any Affiliate Assignee, of any
obligations of XYZ Company or any Affiliate Assignee under the Contract.
	 
	3.	 	The Guarantor hereby undertakes to the Government that if XYZ Company, or any
Affiliate Assignee, shall, in any respect, fail to perform its obligations under the
Contract or commit any breach of such obligations, then the Guarantor shall fulfil or
cause to be fulfilled the said obligations in place of XYZ Company or any Affiliate
Assignee, and will indemnify the Government against all losses,

132

 

	 	 	damages, costs, expenses or otherwise which may result directly from such
failure to perform or breach on the part of XYZ Company.
	 
	4.	 	This guarantee shall take effect from the Effective Date and shall remain in full
force and effect for the duration of the said Contract and thereafter until no sum
remains payable by XYZ Company, or its Affiliate Assignee, under the Contract or as a
result of any decision or award made by any expert or arbitral tribunal thereunder.
	 
	5.	 	This guarantee shall not be affected by any change in the articles of association and
bye-laws of XYZ Company or the Guarantor or in any instrument establishing the Company
or Guarantor.
	 
	6.	 	The liabilities of the Guarantor shall not be discharged or affected by (a) any time
indulgence, waiver or consent given to XYZ Company; (b) any amendment to the Contract
or to any security or other guarantee or indemnity to which XYZ Company has agreed;
(c) the enforcement or waiver of any terms of the Contract or of any security, other
guarantee or indemnity; or (d) the dissolution, amalgamation, reconstruction or
reorganisation of XYZ Company.
	 
	7.	 	This guarantee shall be governed by and construed in accordance with the laws of
India.
	 
	 	 	IN WITNESS WHEREOF the Guarantor, through its duly authorised
representatives, has caused its seal to be duly affixed hereto and this
guarantee to be duly executed the                      day of                     
200_.

133

 

APPENDIX-E2

FORM OF COMPANY FINANCIAL AND PERFORMANCE GUARANTEE

(to be furnished pursuant to Article 29.1 (b) of the Contract)

	 	 	WHEREAS___XYZ Company                                                                                  duly organised
and existing under the laws of                                         having its registered
office at                                         (hereinafter referred to as ‘the
Guarantor’ which expression shall include its successors and assigns) is
signatory to a Production Sharing Contract in respect of an (offshore)
(onshore) area identified as Block                                         
(hereinafter referred to as ‘the Contract’) made between the Government of
India (hereinafter referred to as ‘the Government’), and XYZ Company
(hereinafter referred to as XYZ which expression shall include its successors
and permitted assigns); and
	 
	 	 	WHEREAS the Guarantor wishes to guarantee its performance under the Contract
as required by the terms of the Contract;
	 
	 	 	NOW, THEREFORE this Deed hereby provides as follows:
	 
	1.	 	The Guarantor hereby unconditionally and irrevocably guarantees to the Government
that it will make available, or cause to be made available, financial, technical and
other resources required to ensure that XYZ Company can carry out its obligations as
set forth in the Contract.
	 
	2.	 	The Guarantor further unconditionally and irrevocably guarantees to the Government
the due and punctual compliance by it of any obligations under the Contract.
	 
	3.	 	The Guarantor hereby undertakes to the Government that it shall fulfill or cause to
be fulfilled all its obligations under the Contract, and if it fails to perform its
obligations under the Contract or commits any breach of such obligations, then it
shall indemnify the Government against all losses, damages, costs, expenses or
otherwise which may result directly from such failure to perform or breach on its
part.
	 
	4.	 	This guarantee shall take effect from the Effective Date and shall remain in full
force and effect for the duration of the said Contract and thereafter until no sum
remains payable by XYZ Company, under the Contract or as a result of any decision or
award made by any expert or arbitral tribunal thereunder.

134

 

	5.	 	This guarantee shall not be affected by any change in the articles of association and
bye-laws of XYZ Company or in any instrument establishing the Company.
	 
	6.	 	The liabilities of the Guarantor shall not be discharged or affected by (a) any time
indulgence, waiver or consent given to XYZ Company; (b) any amendment to the Contract
or to any security or other guarantee or indemnity to which XYZ Company has agreed;
(c) the enforcement or waiver of any terms of the Contract or of any security, other
guarantee or indemnity.
	 
	7.	 	This guarantee shall be governed by and construed in accordance with the laws of
India.
	 
	 	 	IN WITNESS WHEREOF the Guarantor, through its duly authorised
representatives, has caused its seal to be duly affixed hereto and this
guarantee to be duly executed the                      day of                     
200___.

135

 

APPENDIX-F

PROCEDURE FOR ACQUISITION OF GOODS AND SERVICES

	I	 	OBJECTIVES

The objectives of these procedures are to:

	 	(a)	 	ensure that the goods and services acquired by the Operator for
carrying out the Petroleum Operations are acquired at the optimum cost taking
into consideration all relevant factors including price, quality, delivery time
and the reliability of potential suppliers.
	 
	 	(b)	 	ensure that goods and services are delivered in a timely manner taking
into consideration the consequences of delays in the acquisition of these goods
and services on the project as a whole.
	 
	 	(c)	 	ensure that the provisions of Article 23 of the Contract are
implemented.

	II	 	PRINCIPLES

The principles upon which these procedures are based are:

	 	(a)	 	The Parties must be satisfied that the Operator is working to an agreed
procedure for acquiring goods and services which is auditable and in accordance
with the provisions of the Contract.
	 
	 	(b)	 	The Operator must have the ability to acquire goods and services
expeditiously so that the project schedules in respect of Approved Work
Programmes are maintained.

	III	 	PROCEDURES

The procedures to be adopted by the Operator for the acquisition of
goods and services shall be as follows:

	 	 	 	 	 	 	 
	 	 	Procedure A	 	Procedure B	 	Procedure C
	Applicable to
Exploration,
Appraisal,
Development and
Production
operations

	 	$50,000 to less
than $200,000
	 	$200,000 to less
than $500,000
	 	Equal to or more
than $500,000

136

 

For contracts valued at less than US$ 5000

The Operator will be at liberty to determine the procurement procedures and methods
to procure goods and services valued at less than US Dollars five thousand
(US$5000).

For Contracts valued at US$ 5000 and above but less than US$ 50,000

The Operator will be at liberty to determine the preferred method of acquiring goods
and services valued at US Dollars five thousand (US$ 5000) and above but less than
US Dollars fifty thousand (US$ 50,000) provided that at least three (3) quotations
from selected suppliers (including at least one (1) Indian supplier) will be
obtained. For items valued at greater than US Dollars twenty thousand (US$ 20,000),
Operator is required to report to the Operating Committee if the quote accepted
exceed the lowest quote by more than twenty (20) percent. Operator will promptly
report to the Operating Committee the Operator’s reasons for not selecting the
lowest quote.

Procedure A:

Operator shall:

	 	(1)	 	provide the constituents of the Contractor with a list of all the
entities approved by the Operating Committee as per Appendix-F (V) for the
applicable category of the contract along with other entities, if any, from
whom the Operator proposes to invite tender;
	 
	 	(2)	 	add to such list the entities whom other Party requests for adding
within five (5) Business Days on receipt of such lists;
	 
	 	(3)	 	if and when any Party so requests, Operator shall evaluate any entity
listed in (1) and (2) above to assure that entity is qualified as based on the
qualification criteria agreed in accordance with Appendix-F(IV) to perform
under the contract;
	 
	 	(4)	 	complete the tendering process within a reasonable period of time;
	 
	 	(5)	 	circulate to all constituents of the Contractor a comparative bid
analysis stating Operator’s choice of the entity for award of contract.
Provide also reasons for such choice in case entity chosen is not the lowest
bidder;
	 
	 	(6)	 	inform all the constituents of the Contractor of the entities to whom
the contract has been awarded; and
	 
	 	(7)	 	upon the request of a Party, provide such Party with a copy of the
final version of the contract awarded.

Procedure B:

Operator shall:

	 	(1)	 	provide the Parties with a list of all the entities approved by the
Operating Committee as per Appendix-F (V) for the applicable category of the
contract,

137

 

	 	 	 	along with other entities, if any, from whom the Operator proposes to
invite tender;
	 
	 	(2)	 	add to such list the entities whom a Party requests for adding within
five (5) Business Days on receipt of such list;
	 
	 	(3)	 	if and when any Party so requests, Operator shall evaluate any entity
listed in (1) and (2) above to assure that entity is qualified as based on the
qualification criteria agreed in accordance with Appendix-F (IV), to perform
under the contract;
	 
	 	(4)	 	complete the tendering procedure within a reasonable period of time;
	 
	 	(5)	 	circulate to all constituents of the Contractor a comparative bid
analysis stating Operator’s choice of the entity for award of contract. Provide
also reasons for such choice in case the entity chosen is not the lowest
bidder. If the bid selected is not the lowest bid, obtain prior approval of the
Operating Committee for award of contract;
	 
	 	(6)	 	award the contract accordingly and inform all the members of the
Management Committee of the entities to whom the contract has been awarded; and
	 
	 	(7)	 	upon the request of a Party, provide such Party with a copy of the
final version of the contract awarded.

Procedure C:

Operator shall:

	 	(1)	 	publish invitations for parties to pre-qualify for the proposed
contract in at least three (3) daily national Indian newspaper. Provide to
Non-Operating Companies, a list of responding parties and an analysis of their
qualifications for the contract being contemplated to be awarded. Include those
who qualify, as per the prequalification criteria approved as per Appendix-F
(IV) in the list of entities from whom Operator proposes to invite tender for
the said contract;
	 
	 	(2)	 	provide the members of the Management Committee with a total list of
all the entities selected as (1) above and all the entities approved by the
Operating Committee as per Appendix-F(V) for the applicable category of the
contract, along with other entities, if any, from whom the Operator proposes to
invite tender;
	 
	 	(3)	 	add to such entities whom a Party requests for adding within five (5)
Business Days on receipt of such list;
	 
	 	(4)	 	if and when any Party so requests, Operator shall evaluate any entity
listed in (2) and (3) above to assure that entity is qualified as based on the
qualification criteria agreed in accordance with Appendix-F(IV), to perform
under the contract;
	 
	 	(5)	 	prepare and dispatch the tender documents to the entities as finally
listed and to Parties;
	 
	 	(6)	 	after the expiration of the period allowed for tendering, consider and
analyse the details of all bids received;
	 
	 	(7)	 	prepare and circulate to the constituents of the Contractor a
comparative bid analysis stating Operator’s recommendation as to the entity to
whom the contract

138

 

	 	 	 	should be awarded, the reasons therefor, and the technical, commercial and
contractual terms to be agreed upon;
	 
	 	(8)	 	obtain the approval of the Operating Committee to the recommended bid.
However, failing Operating Committee approval any Company may refer the issue
to the Management Committee for decision; and
	 
	 	(9)	 	award the contract accordingly and upon the request of a Party, provide
such Party with a copy of the final version of the contract;

	IV.	 	A set of vendor qualifications criteria for each major category contract/supply shall
be proposed by the Operator and approved by the Operating Committee within thirty (30)
days of its submission. In the event the Operating Committee fails to approve vendor
qualification criteria within thirty (30) days of the date the same is first submitted
by the Operator, the matter shall be referred to the Management Committee for
decision. The Operating Committee may revise the qualification criteria.
	 
	V.	 	It is anticipated that, in order to expedite joint operations, contracts will be
awarded to qualified vendors/contractors who are identified as approved vendors for
the specified activities. A list of such approved vendors shall first be established
as follows:

Operator shall:

	 	(1)	 	provide the constituents of the Contractor with a list of the entities
from whom Operator proposes to invite tender for contracts; and
	 
	 	(2)	 	add to such list entities whom a Company requests for adding within
fourteen (14) days on receipt of such list; and
	 
	 	(3)	 	obtain approval of the Operating Committee. Such list shall thereafter
be maintained by the Operator. The Operating Committee may add to or delete
vendors from such list.

139

 

APPENDIX-G

PERFORMA OF BANK GUARANTEE TO BE PROVIDED

PURSUANT TO ARTICLE 29

	1.	 	In consideration of Government of India (hereinafter referred to as “Government”)
having entered into a Production Sharing Contract for the block                     dated
                     (hereinafter referred to as “Contract”, which expression shall include all
the amendments agreed to between the Government and the Contractor, thereto), with M/s
                                         having its registered office at                      (hereinafter referred
to as                     , which expression unless repugnant to the context or meaning thereof
include all its successors, administrators, executors and assigns), which is a
constituent of the Contractor, and the Government have agreed that the                     
Company shall furnish to Government a bank guarantee (hereinafter referred to as
“Guarantee”) towards its obligations as provided in the Contract for US$(for Foreign
Companies)/US$ equivalent in Indian Rupees (for Indian Companies) for the performance
of its obligations under the Contract.
	 
	2.	 	We                     (name of the Bank) registered under the Law of                      and having its
registered office at                      (hereinafter referred to as “the Bank”, which
expression shall unless repugnant to the context or meaning thereof includes all its
successors, administrators, executors and assigns) do hereby guarantee and undertake
to pay immediately on the fist demand in writing and any/all money(s) to the extent of
Indian Rupees/US$                     (in figures) and (Indian Rupees/US$                      in words) without
any demur, reservation, contest or protest and/or without any reference to the
Company. Any such demand made by Government on the Bank by serving a written notice
shall be conclusive and binding, without any proof, on the Bank as regards the amount
due and payable, notwithstanding any dispute(s) pending before any court, tribunal,
arbitrator, sole expert, conciliator or any other authority and/or any other matter or
thing whatsoever, as liability under these presents being absolute and unequivocal. We
agree that the Guarantee herein contained shall be irrevocable and shall continue to
be enforceable until it is discharged by Government in writing. This Guarantee shall
not be determined, discharged or affected by the liquidation, winding up, dissolution
or insolvency of the Contractor and shall remain valid, binding and operative against
the Bank.
	 
	3.	 	The Bank also agree that Government at its option shall be entitled to enforce this
Guarantee against the Bank as a principal debtor, in the first instance, without
proceeding against the                      Company and notwithstanding any security or other
guarantee that Government may have in relation to the                      Company’s
liabilities.

140

 

	4.	 	The Bank further agree that Government shall have fullest liberty without our consent
and without affecting in any manner our obligations hereunder to vary any of the terms
and conditions of the said Contract or to extend time of performance by the said
                     Company from time to time or to postpone for any time or from time to time
exercise of any of the powers vested in Government against the said                     
Company and to forebear or enforce any of the terms and conditions relating to the
said Contract and we shall not be relieved from our liability by reason of any such
variation, or extension being granted to the said                      Company or for any
forbearance, act or omission on the part of Government or any indulgence by Government
to the said                      Company or any such matter or thing whatsoever which under the
law relating to sureties would, but for this provision, have effect of so relieving
us.
	 
	5.	 	The Bank further agree that the Guarantee herein contained shall remain in full force
during the period that is taken for the performance of the Contract and all dues of
Government under or by virtue of this Contract have been fully paid and its claim
satisfied or discharged or till Government discharges this Guarantee in writing,
whichever is earlier.
	 
	6.	 	This Guarantee shall not be discharged by any change in our constitution, in the
constitution of                      Company or that of the Contractor.
	 
	7.	 	The Bank confirm that this Guarantee has been issued with observance of appropriate
laws of the country of issue.
	 
	8.	 	The Bank also agree that this Guarantee shall be governed and construed in accordance
with Indian Laws and subject to the exclusive jurisdiction of Indian courts at
                    , India.
	 
	9.	 	Notwithstanding any thing contained herein above, our liabilities under this
Guarantee is limited to Indian Rupees/US$                     (in figures) Indian Rupees/US$
                                         (in words) and our Guarantee shall remain in force upto and including
sixty (60) days after the expiry date/extended date. Any claim under this Guarantee
must be received before the expiry of sixty (60) days or before the expiry of sixty
(60) days from the extended date if any. If no such claim has been received by us
within sixty (60) days after the said date/extended date the Government’s right under
this will cease. However, if such a claim has been received by us within and upto
sixty (60) days after the said date/extended date, all the Government’s rights under
this Guarantee shall be valid and shall not cease until we have satisfied that claim.

141

 

	 	 	In witness whereof, the Bank through its authorised officers has set its hand
and stamp on this                      day of                      200___at                     .
	 
	 	 	The seal of                                         was hereto duly affixed by                     
this                     day of                      200___in accordance with its bye-laws and this
Guarantee was duly signed by                     and                      as required
by the said bye-laws.

	 	 	 	 	 	 	 	 	 
	 

	 	 

Secretary
	 	 	 	 

President & Director
	 	 

Witness:

142

 

APPENDIX — H

ITEMIZED COST BREAK-UP

OF

BID COST ESTIMATES

GIVEN

BY

THE CONTRACTOR

143

 

Appendix — H

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Cost Estimates for Drilling Well	 	Dry hole costs	 	 	 	 	 	 	 	 	 	 
	 

	 	Phase
	 	 	 	1
	 	2

	 	3

	 

	 	Block: DS-ONN-2003/1	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	Well No
	 	 	 	 	 	 	1	 	 	 	2	 
	 

	 	Well Depth (meters)
	 	 	 	 	 	 	1500	 	 	 	2000	 
	 

	 	Water Depth (meters
	 	 	 	 	 	 	+50	 	 	 	+50	 
	 

	 	Rig Type
	 	 	 	 	 	Land
	 	Land double

	 

	 	No. of Days
	 	 	 	 	 	 	30	 	 	 	30	 
	 
	 

	 	 	 	 	 	 	 	 	 	 	 	 	(US$	)

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	S. No.	 	Description	 	Unit	 	Qty	 	Unit Rate	 	Total Cost
	1

	 	Location / Site Survey / Civil works cost
	 	per well
	 	 	1	 	 	 	50,000	 	 	 	50,000	 
	2

	 	Rib Mobilization
	 	Lumpsum
	 	 	1	 	 	 	150,000	 	 	 	150,000	 
	3

	 	Inter Location movement charges
	 	Lumpsum
	 	 	1	 	 	 	 	 	 	 	 	 
	4

	 	Rig Hire rate
	 	Day
	 	 	 	 	 	 	13,667	 	 	 	410,000	 
	5

	 	Rig Demobilization
	 	Lumpsum
	 	 	1	 	 	 	50,000	 	 	 	50,000	 
	6

	 	Manpower (Drilling, Geology Etc.)
	 	Day
	 	 	 	 	 	 	2,000	 	 	 	60,000	 
	7

	 	Cementing	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	- Services
	 	Month
	 	 	 	 	 	 	10,000	 	 	 	10,000	 
	 

	 	- Material
	 	per well
	 	 	 	 	 	 	40,000	 	 	 	40,000	 
	8

	 	Logging
	 	per well
	 	 	 	 	 	 	70,000	 	 	 	70,000	 
	9

	 	Mud Engineering	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	- Services
	 	Month
	 	 	 	 	 	 	10,000	 	 	 	10,000	 
	 

	 	- Material
	 	per well
	 	 	 	 	 	 	40,000	 	 	 	40,000	 
	10

	 	Mud Logging
	 	Day
	 	 	 	 	 	 	333	 	 	 	10,000	 
	11

	 	Air Logistics
	 	Month	 	 	 	 	 	 	 	 	 	 	 	 
	12

	 	OSV Logistics
	 	Day/boat	 	 	 	 	 	 	 	 	 	 	 	 
	13

	 	Land Logistics
	 	Month	 	 	 	 	 	 	 	 	 	 	 	 
	14

	 	MWD / LWD services
	 	Day	 	 	 	 	 	 	 	 	 	 	 	 
	15

	 	Directional drilling services
	 	Day	 	 	 	 	 	 	 	 	 	 	 	 
	16

	 	Coring services
	 	Day	 	 	 	 	 	 	 	 	 	 	 	 
	17

	 	Well Head services
	 	Day	 	 	 	 	 	 	 	 	 	 	 	 
	18

	 	Casing
	 	Surface
	 	 	 	 	 	 	50,000	 	 	 	50,000	 
	 

	 	Running Services
	 	Day	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	Material
	 	per well
	 	 	1	 	 	 	 	 	 	 	 	 
	19

	 	Bits
	 	per well
	 	 	1	 	 	 	20,000	 	 	 	20,000	 
	20

	 	Well Head / X-mas tree
	 	per well
	 	 	1	 	 	 	30,000	 	 	 	30,000	 
	21

	 	Water
	 	per day	 	 	 	 	 	 	 	 	 	 	 	 
	22

	 	HSD / Lube Oil
	 	per day	 	 	 	 	 	 	 	 	 	 	 	 
	23

	 	DST / Testing services
	 	Day	 	 	 	 	 	 	 	 	 	 	 	 
	24

	 	Miscellaneous / other drilling Expenses
	 	per well / day	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	Total
	 	 	 	 	 	 	 	 	 	 	 	 	1,000,000	 

Note:
Assumptions considered by the bidder while preparing the bid estimates may also be clearly spelt out

144

 

Appendix — H

Cost estimate for 2D API & 3D API

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	US$	 	 	 	 
	Block:	 	DS-ONN-2003/1	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	2D	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	3D	 	 	 	 	 	 	 	 	 	 	 	 	 
	Items	 	Acquisition	 	 	Processing	 	 	Interpretation	 	 	Reprocessing	 	 	Spl.Processing	 	 	Acquisition	 	 	Processing	 	 	Interpretation	 	 	Reprocessing	 	 	Spl.Processing	 
	Auantum LKM/Sq.KM
	 	 	500	 	 	 	500	 	 	 	500	 	 	 	 	 	 	 	 	 	 	 	250	 	 	 	250	 	 	 	250	 	 	 	 	 	 	 	 	 
	Technical Specification
in Brief
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Basic Rate for LKM/Sq.KM
	 	 	1500	 	 	 	250	 	 	 	250	 	 	 	 	 	 	 	 	 	 	 	10000	 	 	 	4000	 	 	 	2000	 	 	 	 	 	 	 	 	 
	Mob-Demob
	 	 	Inclusive	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	1MM	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Stand by day rates
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Infill Rates
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Others (like inter
block movement,
fisherman
compensation)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Total Cost (US$) MM
	 	 	0.75	 	 	 	0.125	 	 	 	0.125	 	 	 	 	 	 	 	 	 	 	 	3.5	 	 	 	1	 	 	 	0.5	 	 	 	 	 	 	 	 	 

Note: Assumptions considered by the bidder while preparing the bid estimates may also be clearly spelt out

Source: Truck mounted source / minor dynamite

Recievers :Minimum 24 BIT, Recording with compressionAC Geophones

145exv10w6

 

Exhibit 10.6

PRODUCTION SHARING CONTRACT

BETWEEN

THE GOVERNMENT OF INDIA

AND

GUJARAT STATE PETROLEUM CORPORATION LIMITED

AND

GAIL (INDIA) LIMITED

AND

JUBILANT CAPITAL PTV. LIMITED

AND

GEOGLOBAL RESOURCES (BARBADOS) INC.

WITH RESPECT TO CONTRACT AREA

IDENTIFIED AS

BLOCK : CB-ONN-2003/2

i

 

TABLE OF CONTENTS

	 	 	 	 	 
	ARTICLE	 	CONTENTS	 	PAGE NO.
	 
	 	Preamble	 	1-2
	1
	 	Definitions	 	3-11
	2
	 	Participating Interests	 	12
	3
	 	License and Exploration Period	 	13-14
	4
	 	Relinquishment	 	15
	5
	 	Work Programme	 	16-18
	6
	 	Management Committee	 	19-23
	7
	 	Operatorship, Operating Agreement and Operating Committee	 	24
	8
	 	General Rights and Obligations of the Parties	 	25-27
	9
	 	Government Assistance	 	28
	10
	 	Discovery, Development and Production	 	29-33
	11
	 	Petroleum Mining Lease	 	34-35
	12
	 	Unit Development	 	36-37
	13
	 	Measurement of Petroleum	 	38
	14
	 	Protection of the Environment	 	39-43
	15
	 	Recovery of Cost Petroleum	 	44-46
	16
	 	Production Sharing of Petroleum	 	47-49
	17
	 	Taxes, Royalties, Rentals, Duties etc.	 	50-53
	18
	 	Domestic Supply, Sale, Disposal and Export of Crude Oil and Condensate	 	54-55
	19
	 	Valuation of Petroleum	 	56-58
	20
	 	Currency and Exchange Control Provisions	 	59
	21
	 	Natural Gas	 	60-65
	22
	 	Employment, Training and Transfer of Technology	 	66
	23
	 	Local Goods and Services	 	67
	24
	 	Insurance and Indemnification	 	68
	25
	 	Records, Reports, Accounts and Audit	 	69
	26
	 	Information, Data, Confidentiality, Inspection and Security	 	70-72
	27
	 	Title to Petroleum, Data and Assets	 	73
	28
	 	Assignment of Participating Interest	 	74-76

ii

 

	 	 	 	 	 
	ARTICLE	 	CONTENTS	 	PAGE NO.
	29
	 	Guarantees	 	77-78
	30
	 	Term and Termination of the Contract	 	79-81
	31
	 	Force Majeure	 	82-83
	32
	 	Applicable Law and Language of the Contract	 	84
	33
	 	Sole Expert, Conciliation and Arbitration	 	85-86
	34
	 	Change of Status of Companies	 	87
	35
	 	Entire Agreement, Amendments and Waiver and miscellaneous	 	88
	36
	 	Certificates	 	89
	37
	 	Notices	 	90

	 	 	 	 	 
	APPENDICES	 	CONTENTS	 	PAGE NO.
	Appendix A
	 	Description of the Contract Area	 	94
	Appendix B
	 	Map of the Contract Area	 	95
	Appendix C
	 	Accounting Procedure to the Contract	 	96-125
	Appendix D
	 	Calculation of the Investment Multiple for Production Sharing purposes	 	126-127
	Appendix E1
	 	Form of Parent company Financial and Performance Guarantee	 	128-129
	Appendix E2
	 	Form of Company Financial and Performance Guarantee	 	130-131
	Appendix-F
	 	Procedure for acquisition of goods and services	 	132-135
	Appendix-G
	 	Performa of Bank Guarantee to be provided pursuant to Article 29	 	136-138
	Appendix-H
	 	Itemized cost break-up of bid cost estimates  given by the Contractor	 	139-147

iii

 

PRODUCTION SHARING CONTRACT

	 	 	This Contract made this 23rd day of September, 2005, between:
	 
	1.	 	The President of India, acting through the Joint Secretary, Ministry of Petroleum and Natural
Gas (hereinafter referred to as “the Government”) of the FIRST PART;

AND

	 	 	Gujarat State Petroleum Company, a Company incorporated under the Companies Act,
1956 (hereinafter referred to as “GSPC”) having its registered office at GSPC
Bhavan, behind Udyog Bhavan, Sector-11, Gandhinagar – 382011, Gujarat, India which
expression shall include its successors and such assigns as are permitted under
Article 28 hereof, of the SECOND PART;

AND

	 	 	Gail (India) Limited, a Company incorporated under the Companies Act, 1956
(hereinafter referred to as “GAIL”) having its registered office at 16, Bhikaji
Cama Place, New Delhi -110065, which expression shall include its successors and
such assigns as are permitted under Article 28 hereof, of the THIRD PART;

AND

	 	 	Jubilant Capital Pvt. Limited, a Company incorporated under the Companies Act ,
1956 (hereinafter referred to as “JCPL”) having its registered office at 2, Western
Avenue, Maharani Bagh, New Delhi – 110065, which expression shall include its
successors and such assigns as are permitted under Article 28 hereof, of the FOURTH
PART;

AND

	 	 	GeoGlobal Resources (Barbados) Inc., a Company incorporated under the laws of
Barbados, West Indies, (hereinafter referred to as “GGR”) having its registered
office at Chancery House, High Street, Bridgetown, Barbados, West Indies, which
expression shall include its successors and such assigns as are permitted under
Article 28 hereof, of the FIFTH PART;

1

 

WITNESSETH:

WHEREAS

	(1)	 	The Oilfields (Regulation and Development) Act, 1948 (53 of 1948) (hereinafter referred to as
“the Act”) and the Petroleum and Natural Gas Rules, 1959, made thereunder (hereinafter
referred to as “the Rules”) make provisions, inter alia, for the regulation of Petroleum
Operations and grant of Licenses and Leases for exploration, development and production of
Petroleum in India;
	 
	(2)	 	The rules provide for the grant of Licenses and Leases in respect of land vested in a State
Government by that State Government with the prior approval of the Central Government;
	 
	(3)	 	Rule 5 of the Rules provides for an agreement between the Government and the Licensee or
Lessee containing additional terms and conditions with respect to the License or Lease;
	 
	(4)	 	The Government desires that the Petroleum resources which may exist in India be discovered
and exploited with the utmost expedition in the overall interest of India and in accordance
with modern oilfield and petroleum industry practices;
	 
	(5)	 	Companies have committed that they have, or will acquire and make available, the necessary
financial and technical resources and the technical and industrial competence and experience
necessary for proper discharge and/or performance of all obligations required to be performed
under this Contract in accordance with modern oilfield and petroleum industry practices and
will provide guarantees as required in Article 29 for the due performance of its obligations
hereunder; and
	 
	(6)	 	As a result of discussions between representatives of the Government and GSPC-GAIL-JCPL-GGR
on the proposal of GSPC-GAIL-JCPL-GGR, the Government has agreed to enter into this Contract
with GSPC-GAIL-JCPL-GGR, with respect to the Contract Area identified as block CB-ONN-2003/2
and detailed in Appendix A and Appendix B, on the terms and conditions herein set forth.
	 
	 	 	NOW, THEREFORE, in consideration of the premises and covenants and conditions
herein contained, IT IS HEREBY AGREED between the Parties as follows:

2

 

ARTICLE 1

DEFINITIONS

	 	 	In this Contract, unless the context requires otherwise, the following terms shall have
the meaning ascribed to them hereunder:
	 
	1.1	 	“Accounting Procedure” means the principles and procedures of accounting set out in Appendix
C.
	 
	1.2	 	“Act” means Oilfields (Regulation and Development) Act, 1948 as amended from time to time.
	 
	1.3	 	“Affiliate” means a company or a body;

	 	a)	 	which directly or indirectly controls or is controlled by a Company
which is a Party to this Contract; or
	 
	 	b)	 	which directly or indirectly controls or is controlled by a company
which directly or indirectly controls or is controlled by a Company which is a
Party to this Contract.
	 
	 	 	 	For the purpose of this definition it is understood that “control” means:
	 
	 	i)	 	ownership by one company of more than fifty percent(50%) of the
voting securities of the other company; or
	 
	 	ii)	 	the power to direct, administer and dictate policies of the other
company even where the voting securities held by such company exercising such
effective control in that other company is less than fifty percent(50%) and the
term “controlled” shall have a corresponding meaning.

	1.4	 	“Appendix” means an Appendix attached to this Contract and made a part thereof.
	 
	1.5	 	“Appraisal Programme” means a programme, carried out following a Discovery in the Contract
Area for the purpose of appraising Discovery and delineating the Petroleum Reservoirs to which
the Discovery relates in terms of thickness and lateral extent and determining the
characteristics thereof and the quantity of recoverable Petroleum therein.
	 
	1.6	 	“Appraisal Well” means a Well drilled pursuant to an Appraisal Programme.
	 
	1.7	 	“Approved Work Programme” and “Approved Budget” means a Work Programme or a Budget that has
been approved by the Management Committee pursuant to the provisions of this Contract.

3

 

	1.8	 	“Arms Length Sales” means sales made freely in the open market, in freely convertible
currencies, between willing and unrelated sellers and buyers and in which such buyers and
sellers have no contractual or other relationship, directly or indirectly, or any common or
joint interest as is reasonably likely to influence selling prices and shall, inter alia,
exclude sales (whether direct or indirect, through brokers or otherwise) involving Affiliates,
sales between Companies which are Parties to this Contract, sales between governments and
government-owned entities, counter trades, restricted or distress sales, sales involving
barter arrangements and generally any transactions motivated in whole or in part by
considerations other than normal commercial practices.
	 
	1.9	 	“Article” means an article of this Contract and the term “Articles” means more than one
Article.
	 
	1.10	 	“Associated Natural Gas” or “ANG” means Natural Gas produced in association with Crude Oil
either as free gas or in solution, if such Crude Oil can by itself be commercially produced.
	 
	1.11	 	“Barrel” means a quantity or unit equal to 158.9074 litres (forty two (42) United States
gallons) liquid measure, at a temperature of sixty (60) degrees Fahrenheit (15.56 degrees
Celsius) and under one atmosphere pressure (14.70 psia).
	 
	1.12	 	“Basement” means any igneous or metamorphic rock, or rocks or any stratum of such nature, in
and below which the geological structure or physical characteristics of the rock sequence do
not have the properties necessary for the accumulation of Petroleum in commercial quantities
and which reflects the maximum depth at which any such accumulation can be reasonably expected
in accordance with the knowledge generally accepted in the international petroleum industry.
	 
	1.13	 	“Budget” means a budget formulated in relation to a Work Programme.
	 
	1.14	 	“Business Day” means any of the Calendar Day excluding holidays.
	 
	1.15	 	“Calendar Day” means any of the seven (7) days of a week.
	 
	1.16	 	“Calendar Month” means any of the twelve (12) months of the Calendar Year.
	 
	1.17	 	“Calendar Quarter” or “Quarter” means a period of three (3) consecutive Calendar Months
commencing on the first day of January, April, July and October of each Calendar Year.
	 
	1.18	 	“Calendar Year” means a period of twelve (12) consecutive Months according to the Gregorian
calendar, commencing with the first (1st) day of January and ending with the
thirty-first (31st) day of December.

4

 

	1.19	 	“Commercial Discovery” means a Discovery of Petroleum reserves which has been declared as a
Commercial Discovery in accordance with the provisions of Article 10 and/or Article 21.
	 
	1.20	 	“Commercial Production” means production of Crude Oil or Condensate or Natural Gas or any
combination of these from the Contract Area (excluding production for testing purposes) and
delivery of the same at the relevant Delivery Point under a programme of regular production
and sale.
	 
	1.21	 	“Company” for the purpose of this Contract means a company which is a Party to this Contract
and, where more than one Company is Party to the Contract, the term “Companies” shall mean all
such Companies collectively, including their respective successors and permitted assigns under
Article 28.
	 
	1.22	 	“Condensate” means those low vapour pressure hydrocarbons obtained from Natural Gas through
condensation or extraction and refers solely to those hydrocarbons that are liquid at normal
surface temperature and pressure conditions provided that in the event Condensate is produced
from a Development Area and is segregated and transported separately to the Delivery Point,
then the provisions of this Contract shall apply to such Condensate as if it were Crude Oil.
	 
	1.23	 	“Contract” means this agreement and the Appendices mentioned herein and attached hereto and
made an integral part hereof and any amendments made thereto pursuant to the terms hereof.
	 
	1.24	 	“Contract Area” means, on the Effective Date, the area described in Appendix-A and delineated
on the map attached as Appendix B or any portion of the said area remaining after
relinquishment or surrender from time to time pursuant to the terms of this Contract
(including any additional area as provided under Article 11.3).
	 
	1.25	 	“Contract Costs” means Exploration Costs, Development Costs and Production Costs as provided
in Section 2 of the Accounting Procedure and allowed to be cost recoverable in terms of
Section 3 of the Accounting Procedure.
	 
	1.26	 	“Contract Year” means a period of twelve (12) consecutive months counted from the Effective
Date or from the anniversary of the Effective Date.
	 
	1.27	 	“Contractor” means the Company(ies).
	 
	1.28	 	“Cost Petroleum” means, the portion of the total value of Petroleum Produced and Saved from
the Contract Area which the Contractor is entitled to take in a particular period, for the
recovery of Contract Costs as provided in Article 15.
	 
	1.29	 	“Crude Oil” or “Oil” or “Crude” means all kinds of hydrocarbons and bitumen, both in solid
and in liquid form, in their natural state or obtained from Natural Gas by

5

 

	 	 	condensation or extraction, including distillate and Condensate when commingled with
the heavier hydrocarbons and delivered as a blend at the Delivery Point but excluding
Natural Gas.
	 
	1.30	 	“Deepwater Area” (for deepwater blocks/areas) means area falling beyond four hundred (400)
metre isobath, provided, however, that for the purposes of this Contract, the Contract Area as
on Effective Date, as described in the Appendix-A and Appendix-B shall be deemed to be
Deepwater Area falling beyond four hundred (400) metre isobath.
	 
	1.31	 	“Delivery Point” means, except as otherwise herein provided or as may be otherwise agreed
between the Parties having regard to international practice, the point at which Petroleum
reaches the outlet flange of the delivery facility, either offshore or onshore and different
Delivery Point(s) may be established for purposes of sales. Delivery Point(s) shall be
approved by the Management Committee.
	 
	1.32	 	“Development Area” means part of the Contract Area which encompasses one or more Commercial
Discovery(ies) and any additional area that may be required for proper development of such
Commercial Discovery(ies) and established as such in accordance with the provisions of the
Contract.
	 
	1.33	 	“Development Costs” means those costs and expenditures incurred in carrying out Development
Operations, as classified and defined in Section 2 of the Accounting Procedure and allowed to
be recovered in terms of Section 3 thereof.
	 
	1.34	 	“Development Operations” means operations conducted in accordance with the Development Plan
and shall include, but not be limited to the purchase, shipment or storage of equipment and
materials used in developing Petroleum accumulations, the drilling, completion and testing of
Development Wells, the drilling and completion of Wells for Gas or water injection, the laying
of gathering lines, the installation of offshore platforms and installations, the installation
of separators, tankages, pumps, artificial lift and other producing and injection facilities
required to produce, process and transport Petroleum into main Oil storage or Gas processing
facilities, either onshore or offshore, including the laying of pipelines within or outside
the Contract Area, storage at Delivery Point(s), the installation of said storage or Gas
processing facilities, the installation of export and loading facilities and other facilities
required for the development and production of the said Petroleum accumulations and for the
delivery of Crude Oil and/or Gas at the Delivery Point and also including incidental
operations not specifically referred to herein but required for the most efficient and
economic development and production of the said Petroleum accumulations in accordance with
modern oilfield and petroleum industry practices.
	 
	1.35	 	“Development Plan” means a plan submitted by the Contractor for the development of a
Commercial Discovery, which has been approved by the Management Committee or the Government
pursuant to Article 10 or Article 21.

6

 

	1.36	 	“Development Well” means a Well drilled, deepened or completed after the date of approval of
the Development Plan pursuant to Development Operations or Production Operations for the
purposes of producing Petroleum, increasing production, sustaining production or accelerating
extraction of Petroleum including production Wells, injection Wells and dry Wells.
	 
	1.37	 	“Directorate General of Hydrocarbons or DGH” means an organisation, including its successors
under the Ministry of Petroleum and Natural Gas.
	 
	1.38	 	“Discovery” means the finding, during Petroleum Operations, of a deposit of Petroleum not
previously known to have existed, which can be recovered at the surface in a flow measurable
by conventional petroleum industry testing methods.
	 
	1.39	 	“Discovery Area” means that part of the Contract Area about which, based upon Discovery and
the results obtained from a Well or Wells drilled in such part, the Contractor is of the
opinion that Petroleum exists and is likely to be produced in commercial quantities.
	 
	1.40	 	“Effective Date” means the later of the date on which this Contract is executed by the
Parties or the date of issue of License or date from which License has been made effective by
the Central Government or State Government(s) as the case may be.
	 
	1.41	 	“Environmental Damage” means soil erosion, removal of vegetation, destruction of wildlife,
pollution of groundwater or surface water, land contamination, air pollution, noise pollution,
bush fire, disruption to water supplies to natural drainage or natural flow of rivers or
streams, damage to archaeological, palaeontological and cultural sites and shall include any
damage or injury to, or destruction of, soil or water in their physical aspects together with
vegetation associated therewith, aquatic or terrestrial mammals, fish, avi-fauna or any plant
or animal life whether in the sea or in any other water or on, in or under land.
	 
	1.42	 	“Exploration Costs” means those costs and expenditures incurred in carrying out Exploration
Operations, as classified and defined in Section 2 of the Accounting Procedure and allowed to
be recovered in terms of Section 3 thereof.
	 
	1.43	 	“Exploration Operations” means operations conducted in the Contract Area pursuant to this
Contract in searching for Petroleum and in the course of an Appraisal Programme and shall
include but not be limited to aerial, geological, geophysical, geochemical, palaeontological,
palynological, topographical and seismic surveys, analysis, studies and their interpretation,
investigations relating to the subsurface geology including structural test drilling,
stratigraphic test drilling, drilling of Exploration Wells and Appraisal
Wells and other related activities such as surveying, drill site preparation and all
work necessarily connected therewith that is conducted in connection with Petroleum
exploration.

7

 

	1.44	 	“Exploration Period” means the period mentioned in Article 3 during which Exploration
Operations may be carried out by the Contractor as provided in Article 3 hereof.
	 
	1.45	 	“Exploration Phase” or “Phase” means any of the periods specified in Article 3 in which the
Contractor is required to complete the Minimum Work Programme specified therein.
	 
	1.46	 	“Exploration Well” means a Well drilled for the purpose of searching for undiscovered
Petroleum accumulations on any geological entity (be it of structural, stratigraphic, facies
or pressure nature) to at least a depth or stratigraphic level specified in the Work
Programme.
	 
	1.47	 	“Field” means an Oil Field or a Gas Field or combination of both as the case may be.
	 
	1.48	 	“Financial Year” means the period from the first (1st) day of April to the
thirty-first (31st) day of March of the following Calendar Year.
	 
	1.49	 	“Foreign Company” means a Company within the meaning of Section 591 of the Companies Act,
1956.
	 
	1.50	 	“Frontier Area” means any area identified, demarcated and so notified by the Government or
its authorised agency(ies) for the purpose of exploration and exploitation of Oil and Gas,
which is logistically and technically difficult and lacks infrastructural and/or marketing
facilities, etc.
	 
	1.51	 	“Gas” means Natural Gas.
	 
	1.52	 	“Gas Field” means, within the Contract Area, a Natural Gas Reservoir or a group of Natural
Gas Reservoirs within a common geological structure or feature.
	 
	1.53	 	“Government” or “Central Government” means Government of India unless otherwise stated.
	 
	1.54	 	“Investment” shall have the meaning ascribed to that expression in paragraph 3 of Appendix D.
	 
	1.55	 	“Investment Multiple” means, the ratio of accumulated Net Cash Income to accumulated
Investment by the Contractor, as determined in accordance with Appendix D.
	 
	1.56	 	“Lease” means a petroleum mining lease referred to in the Rules and shall, unless otherwise
stated therein, exclude right for exploration and exploitation of coal/ lignite bed methane
(CBM).
	 
	1.57	 	“Lessee” means the Contractor to whom a Lease is issued under the Rules for the purpose of
carrying out Petroleum Operations in a Development Area or Contract Area.

8

 

	1.58	 	“LIBOR” means the London Inter-Bank Offer Rate for six-month maturates of United States
Dollars as quoted by the International Swaps and Derivative Association or such other bank
being a BBA LIBOR contributor panel bank as the Parties may agree.
	 
	1.59	 	“License” means a petroleum exploration license referred to in the Rules.
	 
	1.60	 	“Licensee” means the Contractor to whom a License is issued under the Rules for the purpose
of carrying out Petroleum Operations in the Contract Area.
	 
	1.61	 	“Minimum Work Programme” means with respect to each Exploration Phase, the Work Programme
specified in Article 5 with respect to such Phase.
	 
	1.62	 	“Management Committee” means the committee constituted pursuant to Article 6 hereof.
	 
	1.63	 	“Month” means Calendar Month.
	 
	1.64	 	“Natural Gas” means wet gas, dry gas, all other gaseous hydrocarbons, and all substances
contained therein, including sulphur, carbondioxide and nitrogen but excluding extraction of
helium, which are produced from Oil or Gas Wells, excluding those condensed or extracted
liquid hydrocarbons that are liquid at normal temperature and pressure conditions, and
including the residue gas remaining after the condensation or extraction of liquid
hydrocarbons from gas.
	 
	1.65	 	“Net Cash Income” shall have the meaning assigned in paragraph 2 of Appendix- D.
	 
	1.66	 	“Non Associated Natural Gas” or “NANG” means Natural Gas which is produced either without
association of Crude Oil or in association with such quantities of Crude Oil which by itself
cannot be commercially produced.
	 
	1.67	 	“Oil Field” means, within the Contract Area, an Oil Reservoir or a group of Oil Reservoirs
within a common geological structure or feature.
	 
	1.68	 	“Operator” means one of the Parties comprising the Contractor, appointed as the Operator
pursuant to Article 7.
	 
	1.69	 	“Operating Agreement” means the operating agreement entered by the constituents of the
Contractor in accordance with Article 7, with respect to conduct of Petroleum Operations.
	 
	1.70	 	“Operating Committee” means the Committee established by that name in the Operating Agreement
pursuant to Article 7.

9

 

	1.71	 	“Participating Interest” means, in respect of each Party constituting the Contractor, the
undivided share expressed as a percentage of such Party’s participation in the rights and
obligations under this Contract.
	 
	1.72	 	“Parties” means the parties signatory to this Contract including their successors and
permitted assigns under this Contract and the term “Party” means any of the Parties.
	 
	1.73	 	“Petroleum” means Crude Oil and/or Natural Gas existing in their natural condition but
excluding helium occurring in association with Petroleum or shale.
	 
	1.74	 	“Petroleum Operations” means, as the context may require, Exploration Operations, Development
Operations or Production Operations or any combination of two or more of such operations,
including construction, operation and maintenance of all necessary facilities, plugging and
abandonment of Wells, safety, environmental protection, transportation, storage, sale or
disposition of Petroleum to the Delivery Point, Site Restoration and any or all other
incidental operations or activities as may be necessary.
	 
	1.75	 	“Petroleum Produced and Saved” means gross Petroleum produced minus impurities such as water
or solids produced along with Petroleum, Petroleum recycled to the reservoir, Petroleum used
in Petroleum Operations or flared or otherwise unavoidably lost under the provisions of the
Contract.
	 
	1.76	 	“Production Costs” means those costs and expenditures incurred in carrying out Production
Operations as classified and defined in Section 2 of the Accounting Procedure and allowed to
be recovered in terms of Section 3 thereof.
	 
	1.77	 	“Production Operations” means all operations conducted for the purpose of producing Petroleum
from the Development Area after the commencement of production from the Development Area
including the operation and maintenance of all necessary facilities therefor.
	 
	1.78	 	“Profit Petroleum” means, the total value of Petroleum Produced and Saved from the Contract
Area in a particular period, as reduced by Cost Petroleum and calculated as provided in
Article 16.
	 
	1.79	 	“Recompletion” means an operation whereby a completion in one zone is abandoned in order to
attempt a completion in a different zone within an existing Well bore.
	 
	1.80	 	“Reservoir” means a naturally occurring discrete accumulation of Petroleum.
	 
	1.81	 	“Rules” means the Petroleum and Natural Gas Rules, 1959 and any amendments made thereto from
time to time.
	 
	1.82	 	“Section” means a section of the Accounting Procedure.

10

 

	1.83	 	“Self-sufficiency” means, in relation to any Year, that the volume of Crude Oil and Crude Oil
equivalent of Petroleum products exported from India during that Year either equals or exceeds
the volume of Crude Oil and Crude Oil equivalent of Petroleum products imported into India
during the same Year, as determined by Government.
	 
	1.84	 	“Site Restoration” shall mean all activities required to return a site to its state as of the
Effective Date pursuant to the Contractor’s environmental impact study and approved by the
Government or to render a site compatible with its intended after-use (to the extent
reasonable) after cessation of Petroleum Operations in relation thereto and shall include,
where appropriate, proper abandonment of Wells or other facilities, removal of equipment,
structures and debris, establishment of compatible contours and drainage, replacement of top
soil, re-vegetation, slope stabilisation, in-filling of excavations or any other appropriate
actions in the circumstances.
	 
	1.85	 	“Statement” or “Statements” refers to the statements required to be furnished in accordance
with Appendix-C of this Contract.
	 
	1.86	 	“State Government” means any government of a state of the Union of India, which has control
over the Contract Area for the purpose of grant of Licenses/ Leases. In case the Contract
Area covers more than one state, the State Government shall include all such governments of
those states.
	 
	1.87	 	“Subcontractor” means any company or person contracted by the Contractor or Operator to
provide goods or services with respect to Petroleum Operations.
	 
	1.88	 	“US $” or “USD” or “US Dollar” or “United States Dollar” means the currency of the United
States of America.
	 
	1.89	 	“Well” means a borehole, made by drilling in the course of Petroleum Operations, but does not
include a seismic shot hole.
	 
	1.90	 	“Work Programme” means a work programme formulated for the purpose of carrying out Petroleum
Operations.
	 
	1.91	 	“Year” means a Financial Year.

11

 

ARTICLE 2

PARTICIPATING INTERESTS

	2.1	 	The initial Participating Interest of the Parties comprising the Contractor shall be as
follows:

GSPC          :          50%  (Fifty Percent)

GAIL          :          20%  (Twenty Percent)

JCPL          :          20%  (Twenty Percent)

GGR          :          10%  (Ten Percent)

	2.2	 	Except as provided in this Article or elsewhere in this Contract, the rights and obligations
of the Parties comprising the Contractor shall include but not be limited to:

	 	(a)	 	the right to take Cost Petroleum in accordance with the
provisions of Article 15;
	 
	 	(b)	 	the right to take its Participating Interest share of Profit
Petroleum in accordance with the provisions of Article 16;
	 
	 	(c)	 	the right to receive its Participating Interest share of any
incidental income and receipts arising from Petroleum Operations; and
	 
	 	(d)	 	the obligation to contribute its Participating Interest share
of costs and expenses including Contract Costs.

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ARTICLE 3

LICENSE AND EXPLORATION PERIOD

	3.1	 	The Exploration Period shall begin on the Effective Date and shall consist of three (3)
Exploration Phases, each phase not exceeding three (3) Contract Years, for a total period not
exceeding seven (7) consecutive Contract Years unless extended pursuant to the terms of this
Contract.
	 
	3.2	 	Except as otherwise provided in this Contract, the term of the first Exploration Phase shall
not exceed three (3) consecutive Contract Years (hereinafter referred to as the first
Exploration Phase).
	 
	3.3	 	Except as otherwise provided in this Contract, the term of the second Exploration Phase shall
not exceed three (3) consecutive Contract Years from the end of the first Exploration Phase
(hereinafter referred to as the second Exploration Phase).
	 
	3.4	 	Except as otherwise provided in this Contract, the term of the third Exploration Phase shall
not exceed one (1) consecutive Contract Years from the end of the second Exploration Phase
(hereinafter referred to as the third Exploration Phase).
	 
	3.5	 	At the expiry of any Exploration Phase of the Exploration Period, provided that the
Contractor has completed the Minimum Work Programme for that Exploration Phase, the Contractor
shall have the option, exercisable by giving a written notice to the Government at least
thirty (30) days prior to the expiry of the relevant Phase, either:

	 	(a)	 	to proceed to the next Exploration Phase on presentation of the
requisite guarantees as provided for in Article 29; or
	 
	 	(b)	 	to relinquish the entire Contract Area except for any Discovery
Area and any Development Area and to conduct Development Operations and
Production Operations in relation to any Commercial Discovery in accordance
with the terms of this Contract, and the Contractor shall have no further
obligation in respect of the Minimum Work Programme under Article 5 for any
subsequent Exploration Phases of the Exploration Period.

If neither of the options provided for in paragraphs (a) and (b) hereof is exercised
by the Contractor, this Contract shall terminate at the end of the then current
Exploration Phase and the License shall be automatically cancelled.

	3.6	 	If at the end of an Exploration Phase the Minimum Work Programme for that phase is not
completed, the time for completion of the said Minimum Work Programme shall be extended for a
period necessary to enable completion thereof but not exceeding six (6) months, provided that
the Contractor submits his request by giving a written notice to the Government at least
thirty (30) days prior to the

13

 

	 	 	expiry of the relevant Phase and can show technical or other good reasons for non-completion of the
Minimum Work Programme and the Management Committee gives its consent to the said extension
and provided further that the period of such extension shall be subtracted from the next
succeeding Exploration Phase, if any. In case the Minimum Work Programme of any particular
Exploration Phase is completed before stipulated time as provided in the Article 3.2 and 3.3,
the time so saved will be added to the next Exploration Phase, if so requested by the
Contractor giving a notice in writing to the Government thirty (30) days prior to such early
completion of the Phase and in that event the provision of the Article 3.5 (a) shall apply
immediately after such early completion of the Phase.

	3.7	 	If, at the end of an Exploration Phase, execution of any Work Programme is in progress and
which is in addition to the Minimum Work Programme, such Exploration Phase shall be extended
for a period not exceeding six (6) months to enable completion thereof provided that the
Minimum Work Programme for such Phase has been completed and the Management Committee gives
its consent to the said extension as provided in the Article 3.6. In the event of an extension
as provided for herein, the notice referred to in Article 3.5 shall be given at least thirty
(30) days prior to the expiry of the relevant extension.
	 
	3.8	 	Where sufficient time is not available prior to the expiry of the Exploration Period to
complete an Appraisal Programme, at the request of the Contractor, the Government shall extend
the Exploration Period for such period, not exceeding eighteen (18) months for onland and
shallow water blocks and thirty (30) months for deepwater blocks, as may be mutually agreed
between the Parties for the Appraisal Programme to be carried out and for the Contractor and
the Management Committee, to comply with the provisions of Article 10 and Article 21.
	 
	3.9	 	If no Commercial Discovery has been made in the Contract Area by the end of the Exploration
Period, the Contract shall terminate.
	 
	3.10	 	If this Contract is terminated in accordance with its terms, the License shall be
automatically cancelled.
	 
	3.11	 	If at the expiry of the Exploration Period a development plan for development of a Commercial
Discovery and an application for Lease is under consideration by the Management Committee or
Government, as the case may be, pursuant to Articles 10, 11 and 21 respectively, the License
shall continue in force with respect to that part of the Contract Area to which the
application for the Lease relates, pending a decision on the proposed development plan and the
application for the Lease, but shall cease to be in force and effect with respect to the
remainder of the Contract Area.

14

 

ARTICLE 4

RELINQUISHMENT

	4.1	 	If at the end of the first Exploration Phase, the Contractor elects, pursuant to Article 3.5,
to continue Exploration Operations in the Contract Area in the second Exploration Phase, the
Contractor shall retain upto seventy five percent (75%) of the original Contract Area
including any Development Area and Discovery Area in not more than three (3) areas of simple
geometrical shapes and relinquish the balance of the Contract Area prior to the commencement
of the second Exploration Phase. Notwithstanding the provision of this Article 4.1, in the
event the Development Areas and Discovery Areas exceed seventy five percent (75%) of the
original Contract Area, the Contractor shall be entitled to retain to the extent of
Development Areas and Discovery Areas.
	 
	4.2	 	If at the end of the second Exploration Phase, the Contractor elects, pursuant to Article
3.5, to continue Exploration Operations in the Contract Area in the third Exploration Phase,
the Contractor shall retain upto fifty percent (50%) of the original Contract Area, including
any Development Area and Discovery Area in not more than three (3) areas of simple geometrical
shapes and relinquish the balance of the Contract Area prior to the commencement of the third
Exploration Phase. Notwithstanding the provision of this Article 4.2, in the event the
Development Areas and Discovery Areas exceed fifty percent (50%) of the original Contract
Area, the Contractor shall be entitled to retain to the extent of Development Areas and
Discovery Areas.
	 
	4.3	 	At the end of the third Exploration Phase, the Contractor shall retain only Development Areas
and Discovery Areas.
	 
	4.4	 	If the Contractor exercises the option provided for in paragraph (b) of Article 3.5, the
Contractor shall, after any Discovery Areas or Development Areas have been designated,
relinquish all of the Contract Area not included within the said Discovery Areas or
Development Areas.
	 
	4.5	 	As and when the Contract is terminated under the provisions of Article 3 or in accordance
with any other provisions of this Contract, the entire Contract Area remaining with the
Contractor shall be deemed to have been relinquished by the Contractor as on the date on which
the Contract is terminated.
	 
	4.6	 	Relinquishment of all or part of the Contract Area or termination of the Contract shall not
be construed as absolving the Contractor of any liability undertaken or incurred by the
Contractor in respect of the Contract Area during the period between the Effective Date and
the date of such relinquishment or termination.
	 
	4.7	 	Subject to Article 14.9, the liability of the Contractor shall be limited to any liability
undertaken or incurred in respect of, relating to or connected with the Contract, and/or any
claim arising out of or in relation to the act of negligence, misconduct, commission or
omission in carrying out Petroleum Operations during the period between the Effective Date and
the date of relinquishment of the Contract Area or termination or expiry of the Contract, as
the case may be.

15

 

ARTICLE 5

WORK PROGRAMME

	 	 	 	 	 	 	 
	5.1	 	The Contractor shall commence Petroleum Operations not later than six (6) months from
the Effective Date.
	 
	 	 	 	 	 	 
	5.2	 	During the currency of the first Exploration Phase, as per Article 3.2, the
Contractor shall complete the following Work Programme:
	 
	 	 	 	 	 	 
	 

	 	(a)
	 	(i)
	 	A seismic programme consisting of the acquisition, processing and
interpretation of 448 sq. kms. of 3D seismic data in relation to the
exploration objectives; and
	 
	 	 	 	 	 	 
	 

	 	 	 	(ii)
	 	Reprocessing of 650 LKM of 2 D seismic;
	 
	 	 	 	 	 	 
	 

	 	 	 	(iii)
	 	 Geochemical survey of 500 samples; and
	 
	 	 	 	 	 	 
	 

	 	 	 	(iv)
	 	Technical Assessment and Geological Modeling
	 
	 	 	 	 	 	 
	 	 	(b)	 	Fourteen (14) Exploration Wells shall be drilled to at least one of the
following depths :
	 
	 

	 	 	 	(i)
	 	Six (6) wells – 1500 m. each,
	 

	 	 	 	 	 	Three (3) wells – 2000 m. each,
	 

	 	 	 	 	 	
Five (5) wells – 2500 m. each,
	 
	 

	 	 	 	(ii)
	 	to Basement; and
	 
	 

	 	 	 	(iii)
	 	that point below which further drilling becomes
impracticable due to geological conditions encountered and drilling
would be abandoned by a reasonable prudent operator in the same or
similar circumstances. Abandonment of drilling under this provision by
the Contractor would require unanimous approval of the Management
Committee.

	 	 	 	 	 	 	 
	5.3	 	During the currency of the second Exploration Phase, as per Article 3.3, the
Contractor shall complete the following Work Programme:
	 
	 	 	 	 	 	 
	 

	 	(a)
	 	Technical Assessment and Geological Modeling
	 
	 	 	(b)	 	Four (4) Exploration Wells shall be drilled to at least one of the
following depths:
	 
	 

	 	 	 	(i)
	 	Two (2) wells – 2500 m. each,
	 

	 	 	 	 	 	Two (2) wells – 3500 m. each,
	 
	 

	 	 	 	(ii)	 	to Basement; and
	 
	 

	 	 	 	(iii)
	 	that point below which further drilling becomes
impracticable due to geological conditions encountered and drilling
would be abandoned by a reasonable prudent operator in the same or
similar circumstances. Abandonment of drilling under this provision by
the Contractor, would require unanimous approval of the Management
Committee.

16

 

	 	 	 	 	 	 	 
	5.4	 	During the currency of the third Exploration Phase, as per Article 3.4, the
Contractor shall complete the following Work Programme:
	 
	 

	 	(a)
	 	Technical
	 	Assessment and Geological Modeling
	 	 	(b)	 	Six (6) Exploration Wells shall be drilled to at least one of the
following depths:
	 
	 

	 	 	 	(i)
	 	Three (3) wells – 2500 m. each,
	 

	 	 	 	 	 	Three (3) wells – 3500 m. each,
	 
	 

	 	 	 	ii)
	 	to Basement; and
	 
	 

	 	 	 	iii)
	 	that point below which further drilling becomes
impracticable due to geological conditions encountered and drilling
would be abandoned by a reasonable prudent operator in the same or
similar circumstances. Abandonment of drilling under this provision by
the Contractor, would require unanimous approval of the Management
Committee.

	5.5	 	The actual depth objective for each of the Wells shall be determined by the
Contractor in the light of the advice of the Management Committee before the
commencement of the drilling. Each Well which reaches the geological objective for
which the depth objective was determined shall be deemed to have been drilled to the
depth objective or to actual total depth, whichever is greater. The Contractor shall
ensure that all relevant subsurface, geological, geochemical and geophysical
information necessary for the attainment of the exploration objectives in accordance
with modern oilfield and petroleum industry practices is obtained during exploratory
drilling.
	 
	5.6	 	If the depth/geological objective of the Well is not achieved for any reason, a
substitute Well shall be drilled of the same specifications as stipulated in and
subject to Articles 5.2, 5.3 and 5.4, as the case may be.
	 
	5.7	 	In the event that the Contractor is unable to complete the Minimum Work Programme as
provided herein under Articles 5.2 (a) & 5.2 (b) (i), 5.3 (a) & 5.3 (b) (i) and 5.4
(a) & 5.4 (b) (i) (hereinafter referred to as “Bid Commitments”) or it becomes
unnecessary to complete Bid Commitments in view of Articles 5.2 (b) (ii) and (iii),
5.3 (b) (ii) and (iii) and 5.4 (b) (ii) and (iii), as the case may be, the Contractor
shall be required to carry out and complete such additional, substituted or alternate
work programme as may be fixed by the Government on the recommendation of the
Management Committee, so as to match the Bid Commitments undertaken and committed
under the bid or in the alternative, the Contractor shall pay to the Government the
cost, as estimated by the Government on the recommendation of the Management Committee
for fulfilling such Bid Commitments of the Contractor. The Management Committee shall
give its recommendation, on additional, substituted or alternate work programme or
payment to the Government for unfinished work programme, to the Government

17

 

	 	 	within sixty (60) days from the date of notice given by the Government of
non-fulfillment of the Minimum Work Programme. Failing any proposal from the
Management Committee within the time frame, the Government shall make a decision and
convey to the Contractor for compliance.

	5.8	 	If the Minimum Work Programme for the third Exploration Phase has been completed
earlier than eighteen months from the end of the Phase, the Contractor shall meet with
the Government to discuss the possibility of early relinquishment, unless the
Contractor undertakes further work with the approval of the Management Committee.
	 
	5.9	 	In the event that the Contractor has carried out work in excess of the Minimum Work
Programme in any Exploration Phase, the excess exploration work done shall be set off
against the Minimum Work Programme for the following Exploration Phase.
	 
	5.10	 	As soon as possible after the Effective Date and thereafter within ninety (90) days
before commencement of each following Year, the Contractor shall submit to the
Management Committee the Work Programmes and the Budgets relating to Petroleum
Operations to be carried out during the relevant Year. Work Programme and Budgets for
the Exploration Period shall include work sufficient to meet the relevant Minimum Work
Programme with respect to each Exploration Phase specified in this Article 5.
	 
	5.11	 	The Contractor may propose modifications or revisions to the details of a reviewed or
an approved Work Programme and Budget, as the case may be, in the light of the then
existing circumstances and shall submit to the Management Committee modifications or
revisions to the Work Programme and Budget referred to in Article 5.10.
	 
	5.12	 	Work Programmes and Budgets and any modifications or revisions thereto relating to
Exploration Operations shall be submitted to the Management Committee for review and
advice as provided in Article 6.5. Work Programmes and Budgets related to Development
Operations and Production Operations and any modifications or revisions thereto shall
be submitted for approval as provided in Article 10 and Article 21.

18

 

ARTICLE 6

MANAGEMENT COMMITTEE

	6.1	 	There shall be constituted a committee to be called the Management Committee with
functions as stated herein below.
	 
	6.2	 	Government shall nominate two (2) members representing Government in the Management
Committee, whereas each Company constituting the Contractor shall nominate one (1)
member each to represent Company in the Management Committee provided that in case the
Contractor constitutes only one Company, that Company shall have two (2) members. The
Parties shall nominate the members to the Management Committee within thirty (30) days
of the Effective Date.
	 
	6.3	 	Each Party may nominate alternate members with full authority to act in the absence
and on behalf of the members nominated under Article 6.2 and may, at any time,
nominate another member or alternate member to replace any member nominated earlier by
notice to other members of the Management Committee.
	 
	6.4	 	One representative of the Government shall be designated as the Chairman of the
Management Committee and the second representative of the Government shall be
designated as the Deputy Chairman. The member of the Operator, or the member
designated by the Operator where Operator has two (2) members in the Management
Committee shall be designated as the Secretary of the Committee.
	 
	6.5	 	Operator on behalf of the Contractor with the approval of Operating Committee, if
constituted under the Article 7.4, or in case of a single Party constituting the
Contractor, then that Party shall submit following matters to the Management Committee
for review and it shall have advisory functions:

	 	(a)	 	the annual Work Programmes and Budgets in respect of Exploration
Operations and any revisions or modifications thereto;
	 
	 	(b)	 	annual work progress and costs incurred thereon;
	 
	 	(c)	 	proposals for surrender or relinquishment of any part of the Contract
Area by the Contractor;
	 
	 	(d)	 	proposals for an Appraisal Programme or revisions or additions thereto
and the declaration of a Discovery as a Commercial Discovery;
	 
	 	(e)	 	any other matter required by the terms of this Contract to be submitted
to it for review or advice; and
	 
	 	(f)	 	any other matter which the Contractor decides to submit for review or
advice including matters concerning inter-Party relationships.

19

 

	6.6	 	The following matters shall be submitted by Operator on behalf of the Contractor with
the approval of Operating Committee, if constituted under the Article 7.4, or in case
of single Party constituting the Contractor, then by that Party to the Management
Committee for approval:

	 	(a)	 	Annual Work Programmes and Budgets in respect of Development Operations
and Production Operations and any modifications or revisions thereto;
	 
	 	(b)	 	proposals for the approval of development plans as may be required
under this Contract, or modifications or revisions to a Development Plan;
	 
	 	(c)	 	determination of a Development Area;
	 
	 	(d)	 	appointment of auditors along with scope of audit, approval and
adoption of audited report submitted under Article 25.4.3;
	 
	 	(e)	 	collaboration with licensees or contractors of other areas;
	 
	 	(f)	 	claims or settlement of claims for or on behalf of or against the
Contractor in excess of limits fixed by the Management Committee from time to
time;
	 
	 	(g)	 	proposal about abandonment plan/Site Restoration as required to be
submitted under Article 14.10;
	 
	 	(h)	 	any other matter required by the terms of this Contract to be submitted
for the approval of the Management Committee;
	 
	 	(i)	 	any other matter which the Contractor decides to submit to it; and
	 
	 	(j)	 	any matter, which Government refers to the Management Committee for its
consideration and reasoned opinion.

	6.7	 	Unless agreed otherwise by all the members of the Management Committee, the
Management Committee shall meet at least once every six (6) months during the
Exploration Period and thereafter at least once every three (3) months or more
frequently at the request of any member. The Secretary, with the approval of the
Chairman, shall convene each meeting by notifying the members twenty eight (28) days
prior to such a meeting (or a shorter period of notice if the members unanimously so
agree) of the time and place of such meeting and the purpose thereof and shall include
in such notice a provisional agenda for such meeting. The Chairman shall be
responsible for processing the final agenda for such meeting and the agenda shall
include all items of business requested by the members to be included, provided such
requests are received by the Secretary at least ten (10) days prior to the date fixed
for the meeting. The Secretary shall forward the agenda to the members at least seven
(7) Business Days prior to the date fixed for the meeting. Matters not included in the
agenda may be taken up at the meeting by any member with the unanimous consent of all
the members whether present or not present at the meeting.
	 
	6.8	 	The Chairman or the Deputy Chairman, as may be the case, shall preside over the
meetings of the Management Committee and, in their absence, any other member
representing Government and present shall preside over the meetings.

20

 

	6.9	 	Secretary to the Management Committee shall be responsible, inter alia, for
preparation of the minutes of every meeting in the English language and provision to
every member of the Management Committee with two (2) copies of the minutes approved
by the Chairman within three (3) Business Days of the meeting. Unless agreed otherwise
by all the members of the Management Committee, the minutes of a meeting shall be
finalised by the Management Committee within three (3) Business Days thereafter.
Members shall notify the Chairman and the other members of their approval of the
minutes by putting their signatures on one copy of the minutes and returning the same
to the Chairman. Members may suggest any modification to the minutes while returning
the signed copy. Members may also communicate with the Chairman through telex, cable,
or facsimile or any other effective mode of communication agreed by all the members of
the Management Committee. If the Chairman or any other member does not agree with the
modification to the minutes suggested by any member, the matter shall be brought to
the attention of the other members and resubmitted to the Management Committee at the
next meeting and the minutes shall stand approved as to all other matters. If a member
fails to respond within the aforesaid three (3) Business Day period, unless agreed
otherwise by the Management Committee as herein provided, the minutes shall be deemed
to be approved by such member.
	 
	6.10	 	Any member shall be entitled, if either he/she or his/her alternate is unable to
attend a meeting, to cast his vote by telex, cable, facsimile transmission or any
other effective mode of communication agreed by all the members of the Management
Committee and received by the Chairman prior to the date on which the vote is taken in
the course of the meeting or by giving a prior written notice to all other members,
appoint a member, with his/her prior consent, representing another Party in the
Management Committee as its proxy to attend a meeting and to exercise the appointing
member’s right to vote at the meeting whether as directed by the appointing member or
otherwise. A member appointed as a proxy and attending a meeting shall be present in
two separate capacities and vote accordingly. All such votes shall have the same
effect as if that member had been present and so voted at the meeting.
	 
	6.11	 	In case of urgency, where Operating Committee has made a recommendation together with
reasons to the Chairman requiring consideration of a matter by the Management
Committee without delay, Chairman, after being satisfied may waive the requirements of
notice period for the meeting and circulation of agenda to such extent as would be
consistent with the urgency and consideration of the matter by the Management
Committee. Alternatively, Chairman may approve submission of notice and agenda to
members by telex or facsimile transmission or any other effective mode of
communication agreed by all the members of the Management Committee, receipt of which
shall be confirmed by telephone by the Chairman requiring the members to confirm their
decision by these modes of communication not later than three (3) Business Days from
confirmation of

21

 

	 	 	receipt of notice and agenda by the member. Any member failing to convey the
decision within the time limits of three (3) Business Days shall be deemed to have
voted in favour of the proposal. The result of any such vote shall be notified by
the Chairman to all the members.

	6.12	 	The meetings of the Management Committee shall be held in India, unless otherwise
mutually agreed by the members of the Management Committee. All expenses of the
members of the Management Committee attending meetings shall be borne by the
respective Party and shall in no event be cost recoverable.
	 
	6.13	 	All matters requiring the approval of the Management Committee shall be generally
approved by a unanimous vote of the members of the Management Committee present as
well as the views of the members received by some other mode of communication. In
case, unanimity is not achieved in decision making process within a reasonable period
as may be required under the circumstances, the decision of the Management Committee
shall be approved by the majority Participating Interest of seventy percent (70%) or
more with Government representative having a positive vote in favour of the decision.
	 
	6.14	 	There shall be a quorum of the Management Committee for holding a meeting and making
decisions with each Party to the Contract represented by at least one of its nominated
members in the Management Committee either present in person or represented as per
Article 6.10. If there is no quorum in a meeting, the meeting shall stand postponed to
the same day and time in the next week and if quorum is not present or represented
even in the next meeting and subject to a Government member being present, the members
present and represented will constitute the quorum and take decisions and decisions
taken by such quorum shall be final and binding to all the absenting Parties or
Parties not represented, notwithstanding the provisions of Article 6.13.
	 
	6.15	 	The Management Committee, if it considers necessary, may appoint legal, financial or
technical subcommittees comprised of such representatives as may be agreed by the
Management Committee to consider any matter requiring approval or decision of the
Management Committee. Such sub-committee expenses shall form part of Contract Cost
with relevant cost classification as decided by the Management Committee pursuant to
the Section 2 of the Accounting Procedure and will be cost recoverable.
	 
	6.16	 	In the event a Party to the Contract is not entitled to vote in the Operating
Committee meetings being in default under the Operating Agreement, and Operator
notifies Chairman of the default by the Party, then the issue of exercising voting
right by such defaulting Party in the Management Committee meetings shall be discussed
by the Management Committee. The Management Committee excluding the defaulting Party,
after duly hearing the views of the defaulting Party on the matter of their default
under Operating Agreement, shall

22

 

	 	 	take unanimous decision on exclusion or otherwise of the defaulting Party from
voting in the Management Committee meetings. For avoidance of any doubt, it is
clearly understood that unanimous decision by the Management Committee referred to
in this Article 6.16 excludes defaulting Party from such decision. Accordingly, if
the Management Committee decides to exclude the defaulting Party from voting in the
Management Committee, then the said Party shall not be entitled to vote in the
meetings of the Management Committee under Contract. In that event, notwithstanding
the provisions of Article 6.13, decisions of the Management Committee shall be made
by vote of the members of the Management Committee excluding the member appointed by
the said Party in default and any vote or purported vote by such member in the
Management Committee shall be ignored. The said Party in default shall be bound by
all decisions of the Management Committee. The non-defaulting Parties under the
Operating Agreement shall indemnify Government against any claims of whatsoever
nature which may arise due to exclusion of defaulting Party from voting in the
Management Committee.

23

 

ARTICLE 7

OPERATORSHIP, OPERATING AGREEMENTAND OPERATING COMMITTEE

	7.1	 	GSPC shall be the Operator for the purpose of carrying out Petroleum Operations
pursuant to this Contract during the term of the Contract.
	 
	7.2	 	No change in the operatorship shall be effected without the consent of the Government
and such consent shall not be unreasonably withheld.
	 
	7.3	 	The functions required of the Contractor under this Contract shall be performed by
the Operator on behalf of all constituent(s) of the Contractor subject to, and in
accordance with, the terms and provisions of this Contract and generally accepted
modern oilfield and petroleum industry practices, provided, however, that this
provision shall not be construed as relieving the constituent(s) of the Contractor
from any of its obligations or liability under the Contract.
	 
	7.4	 	Within forty five (45) days of the Effective Date or such longer period as may be
agreed to by Government, the Companies constituting the Contractor shall execute an
Operating Agreement. The said agreement shall be consistent with the provisions of
this Contract and shall provide for, among other things:

	 	(a)	 	the appointment, resignation, removal and responsibilities of the
Operator;
	 
	 	(b)	 	the establishment of an Operating Committee comprising of an agreed
number of representatives of the Companies chaired by a representative of the
Operator;
	 
	 	(c)	 	functions of the said Operating Committee taking into account the
provisions of the Contract, procedures for decision making, frequency and place
of meetings; and
	 
	 	(d)	 	contribution to costs, default, sole risk, disposal of Petroleum and
assignment as between the Parties to the Operating Agreement.

	7.4.1	 	Operator shall provide to the Government a copy of the duly executed Operating
Agreement within thirty (30) days of the Effective Date or such longer period as may
be agreed to by the Government.
	 
	7.4.2	 	In case a single Company constitutes the Contractor, the provisions of Article 7.4
and 7.4.1 shall not be applicable. However, in case of increase in the number of
constituents of the Contractor, the provisions of Article 7.4 and 7.4.1 shall apply
from the date of such increase in the number of the constituents.

24

 

ARTICLE 8

GENERAL RIGHTS AND OBLIGATIONS OF THE PARTIES 

	8.1	 	Subject to the provisions of this Contract, the Contractor shall have the following
rights:

	 	(a)	 	subject to the provisions of Article 12, the exclusive right to carry
out Petroleum Operations to recover costs and expenses as provided in this
Contract. The right shall exclude exploitation of coal/lignite bed methane
(CBM) by the Contractor in the Contract Area;
	 
	 	(b)	 	the right to use, free of charge, such quantities of Petroleum produced
as are reasonably required for conducting Petroleum Operations in the Contract
Area in accordance with generally accepted modern oilfield and petroleum
industry practices;
	 
	 	(c)	 	the right to lay pipelines, build roads, construct bridges, ferries,
aerodromes, landing fields, radio telephones and related communication and
infrastructure facilities and exercise other ancillary rights as may be
reasonably necessary for the conduct of Petroleum Operations subject to such
approvals as may be required and the applicable laws in force from time to time
for the regulation and control thereof;
	 
	 	(d)	 	the right to use all available technical data, seismic and well
information, maps, samples etc. of the Contract Area as on the Effective Date,
free of charge, subject to nominal copying/reproduction costs for further
Petroleum Operations. The Contractor shall submit the list of all data required
by them to Directorate General of Hydrocarbons (DGH) based on the list of data
provided in the information docket for the block pertaining to the Contract
Area as soon as possible but not later than one hundred and eighty (180) days
from the execution of the Contract and the same, if available and reproducible,
shall be made available to the Contractor in the office of DGH within ninety
(90) days from the submission of such request for data by the Contractor,
provided the Effective Date of the Contract has commenced and the Contractor
has furnished relevant guarantees under Article 29 of the Contract.
	 
	 	(e)	 	such other rights as are specified in this Contract.

	8.2	 	The Government reserves the right to itself, or to grant to others the right, to
prospect for and mine minerals or substances other than Petroleum within the Contract
Area; provided, however, that if after the Effective Date, others are issued rights,
or the Government proceeds directly to prospect for and mine in the Contract Area any
minerals or substances other than Petroleum, the Contractor shall use its best efforts
to avoid obstruction to or interference with such operations within the Contract Area
and the third parties and/or the Government,

25

 

	 	 	as the case may be, shall use best efforts to ensure that operations carried out do
not obstruct or unduly interfere with Petroleum Operations in the Contract Area.

	8.3	 	The Contractor shall having due regard to modern oilfield and petroleum industry
practices :

	 	(a)	 	except as otherwise expressly provided in this Contract, conduct all
Petroleum Operations at its sole risk, cost and expense and provide all funds
necessary for the conduct of Petroleum Operations including funds for the
purchase or lease of equipment, materials or supplies required for Petroleum
Operations as well as for making payments to employees, agents and
Subcontractors;
	 
	 	(b)	 	conduct all Petroleum Operations within the Contract Area diligently,
expeditiously, efficiently and in a safe and workmanlike manner pursuant to the
Work Programme formulated in accordance with Contract;
	 
	 	(c)	 	ensure provision of all information, data, samples etc. which may be
required to be furnished under the applicable laws or under this Contract;
	 
	 	(d)	 	ensure that all equipment, materials, supplies, plant and installations
used by the Contractor, the Operator, and Subcontractors comply with generally
accepted standards and are of proper construction and kept in safe and good
working order;
	 
	 	(e)	 	in the preparation and implementation of Work Programmes and in the
conduct of Petroleum Operations, follow modern oilfield and petroleum industry
practices with such degree of diligence and prudence reasonably and ordinarily
exercised by experienced parties engaged in a similar activity under similar
circumstances and conditions;
	 
	 	(f)	 	the procedure for acquisition of goods and services, as of the
Effective Date, shall be as per the Appendix-F of this Contract. Based on
economic considerations and generally accepted practices in the international
petroleum industry with the objective of ensuring cost and operational
efficiency in the conduct of Petroleum Operations, the Appendix-F to this
Contract may be modified or changed with the prior approval of the Management
Committee when circumstances so justify;
	 
	 	(g)	 	after the designation of a Development Area, pursuant to this Contract,
forthwith proceed to take all necessary action for prompt and orderly
development of the Development Area and for the production of Petroleum in
accordance with the terms of this Contract;
	 
	 	(h)	 	appoint a technically competent and sufficiently experienced
representative, and, in his absence, a suitably qualified replacement therefor,
who shall be resident in India and who shall have full authority to take such
steps as may be necessary to implement this Contract and whose name(s) shall,
on appointment within ninety (90) days after commencement of the first Contract
Year, be made known to the Government;

26

 

	 	(i)	 	provide acceptable working conditions, living accommodation and access
to medical attention and nursing care for all personnel employed in Petroleum
Operations;
	 
	 	(j)	 	carry out such other obligations as are specified in this Contract, in
particular those specified in Article 14; and
	 
	 	(k)	 	be always mindful of the rights and interests of India in the conduct
of Petroleum Operations.

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ARTICLE 9

GOVERNMENT ASSISTANCE

	9.1	 	Upon application in the prescribed manner, and subject to compliance with applicable
laws and relevant procedures, the Government or its nominee will:

	 	(a)	 	use their good offices to provide the right of ingress and egress from
the Contract Area and any facilities used in Petroleum Operations, wherever
located, and which may be within their control;
	 
	 	(b)	 	use their good offices, when necessary, to assist the Contractor in
procurement or commissioning of facilities required for execution of Work
Programmes including necessary approvals, permits, consents, authorisations,
visas, work permits, Licenses including Licenses and Leases, rights of way,
easement, surface rights and security protection at the Contractor’s cost,
required pursuant to this Contract and which may be available from resources
within its control; and
	 
	 	(c)	 	in the event that onshore facilities are required outside the Contract
Area for Petroleum Operations including, but not limited to, storage, loading
and processing facilities, pipelines and offices, use their good offices in
assisting the Contractor to obtain from the authorities of the state in which
such facilities are required, such licenses, permits, authorizations, consents,
security protection at the Contractor’s cost, surface rights and easements as
are required for the construction and operation of the said facilities by the
Contractor.

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ARTICLE 10

DISCOVERY, DEVELOPMENT AND PRODUCTION

	10.1	 	If and when a Discovery is made within the Contract Area, the Contractor shall:

	 	(a)	 	forthwith inform the Management Committee and Government of the
Discovery;
	 
	 	(b)	 	promptly thereafter, but in no event later than a period of thirty (30)
days from the date of the Discovery, furnish to the Management Committee and
Government particulars, in writing, of the Discovery; and
	 
	 	(c)	 	promptly run tests to determine whether the Discovery is of potential
commercial interest and, within a period of sixty (60) days after completion of
such tests, submit a report to the Management Committee containing data
obtained from such tests and its analysis and interpretation thereof, together
with a written notification of whether, in the Contractor’s opinion, such
Discovery is of potential commercial interest and merits appraisal.

	10.2	 	If the Contractor determines to conduct a drill stem or production test, in open hole
or through perforated casing, with regard to any Exploration Well, it shall notify the
Government of the time of such test at least forty eight (48) hours prior to the
proposed test, and the Government shall have the right to have a representative
present during such test.
	 
	10.3	 	If, pursuant to Article 10.1 (c), the Contractor notifies the Management Committee
that the Discovery is of potential commercial interest, the Contractor shall prepare
and submit to the Management Committee within one hundred and twenty (120) days of
such notification, a proposed Appraisal Programme with a Work Programme and Budget to
carry out an adequate and effective appraisal of such Discovery designed to achieve
both the following objectives: (i) determine without delay, and, in any event, within
the period specified in Article 10.5, whether such Discovery is a Commercial
Discovery and (ii) determine, with reasonable precision, the boundaries of the area to
be delineated as the Development Area.
	 
	10.4	 	The proposed Appraisal Programme shall be reviewed by the Management Committee within
thirty (30) days after submission thereof pursuant to Article 10.3. The said
Appraisal Programme, together with the Work Programme and Budget submitted by the
Contractor, which may be revised or modified or amended by the Contractor in light of
the Management Committee review, shall be adopted as the Appraisal Programme and the
Contractor shall promptly commence implementation thereof; and the annual Budget for
the Exploration Period, adopted pursuant to Article 5, shall be revised accordingly.

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	10.5	 	The Contractor shall in respect of a Discovery of Crude Oil advise the Management
Committee by notice in writing within a period of eighteen (18) months for onland and
shallow water blocks and thirty (30) months for deepwater blocks from the date on
which the notice provided for in Article 10.1 (c) was delivered, whether such
Discovery should be declared a Commercial Discovery or not. Such notice shall be
accompanied by a report on the Discovery setting forth all relevant technical and
economic data including estimated recoverable reserves, sustainable production levels,
estimated development and production expenditures, prevailing and forecasted prices,
and other pertinent technical and economic factors according to modern oilfield and
petroleum industry practices as well as all evaluations, interpretations and analyses
of such data and feasibility studies relating to the Discovery prepared by or for the
Contractor, with respect to the Discovery and any other relevant information. If the
Contractor is of the opinion that Crude Oil has been discovered in commercial
quantities, it shall submit the proposal to the Management Committee for review that
the Discovery be declared a Commercial Discovery. In the case of a Discovery of Gas,
the provisions of Article 21 shall apply.
	 
	10.6	 	The Management Committee shall, within forty (40) days of the date of the notice
referred to in Article 10.5, review the proposal of the Contractor and request any
other additional information it may reasonably require so as to complete the review of
the proposal made by the Contractor. The Contractor shall furnish the additional
information within thirty (30) days from the date of the request. The review by the
Management Committee shall be made and conveyed to the Contractor within the later of
(a) ninety (90) days from the date of notice referred to in Article 10.5 or (b) forty
(40) days of receipt of such other information as may be required under this Article.
	 
	10.7	 	If the Contractor declares the Discovery a Commercial Discovery after taking into
account the advice of the Management Committee as referred in the Article 10.6, within
two hundred (200) days of the declaration of the Discovery as a Commercial Discovery,
the Contractor shall submit to the Management Committee a comprehensive development
plan of the Commercial Discovery which shall:

	 	(a)	 	relate to the Discovery Area and contain a Reservoir or part thereof
and the boundaries of the proposed Development Area;
	 
	 	(b)	 	be designed to ensure the most efficient, beneficial and timely use of
the Petroleum resources discovered; and
	 
	 	(c)	 	be prepared in accordance with sound engineering, economic, safety and
environmental principles recognised in the generally accepted modern oilfield
and petroleum industry practices.

Such plan shall contain detailed proposals by the Contractor for the construction,
establishment and operation of all facilities and services for and incidental to the
recovery, storage and transportation of the Petroleum from the proposed

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Development Area to the Delivery Point together with all data and supporting
information including but not limited to:

	 	(i)	 	description of the nature and characteristic of the Reservoir, data,
statistics, interpretations and conclusions on all aspects of the geology,
Reservoir evaluation, Petroleum engineering factors, Reservoir models,
estimates of reserve in place, possible production magnitude, nature and ratio
of Petroleum fluids and analysis of producible Petroleum;
	 
	 	(ii)	 	outlines of the development project and/or alternative development
projects, if any, describing the production facilities to be installed and the
number of Wells to be drilled under such development project and/or
alternative development projects, if any;
	 
	 	(iii)	 	estimate of the rate of production to be established and projection of
the possible sustained rate of production in accordance with modern oilfield
and petroleum industry practices under such development project and/or
alternative development projects, if any, which will ensure that the area does
not suffer an excessive rate of decline of production or an excessive loss of
Reservoir pressure;
	 
	 	(iv)	 	estimates of Development Costs and Production Costs under such
development project and/or alternative development projects, if any;
	 
	 	(v)	 	Contractor’s recommendations as to the particular project that it would
prefer;
	 
	 	(vi)	 	Work Programme and Budget for development proposals relating to the
proposed Development Area;
	 
	 	(vii)	 	anticipated adverse impact on the environment and measures to be
taken for prevention or minimisation thereof and for general protection of
the environment in conduct of operations;
	 
	 	(viii)	 	measures to be taken for the health and safety of persons employed in
Petroleum Operations;
	 
	 	(ix)	 	the information required in Article 21.

	10.8	 	A proposed development plan submitted by the Contractor pursuant to Article 10.7 may
be approved by the Management Committee within one hundred and ten (110) days of
submission thereof or eighty (80) days of receipt of any additional information
requested by the Management Committee. In case the Management Committee requires any
reasonable additional information, the same shall be requested by it within eighty
(80) days from the submission of the development plan. The Contractor shall provide
such additional information within thirty (30) days from the request by the Management
Committee. If, within a period of one hundred and ten (110) days after submission of a
proposed development plan or eighty (80) days from the receipt of any additional
information, where asked by the Management Committee, the Management Committee fails
to convey a decision to the Contractor, the Contractor shall have option to submit the
proposal to the Government. Also, where, the Management Committee rejects the
development plan of the Contractor, the Contractor can submit the development

31

 

	 	 	plan for the approval of the Government. The Government shall respond on the
proposed development plan submitted by the Contractor within one hundred and ten
(110) days. In case Government refuses to approve the proposed development plan, it
shall convey the reasons for such refusal and the Contractor shall be given
opportunity to make appropriate modifications to meet concerns of Government and the
provisions of the foregoing Article and re-submit the plan within ninety (90) days
from the date of receipt of refusal from the Government.

	10.9	 	A Development Plan approved by the Management Committee or Government, as may be the
case, from time to time shall commit the Contractor to the obligations stipulated in
Articles 10.10 to 10.12.
	 
	10.10	 	Work Programmes and Budgets for Development and Production Operations shall be
submitted to the Management Committee as soon as possible after the approval of a
Development Plan under Article 10.8 and thereafter not later than 31st December each
Year in respect of the Year immediately following.
	 
	10.11	 	The Management Committee, when considering any Work Programme and Budget, may
require the Contractor to prepare an estimate of potential production to be achieved
through the implementation of the said Work Programme and Budget for each of the three
(3) Years following the Year to which the Work Programme and Budget relate. If major
changes in yearly estimates of potential production are required, these shall be based
on evidence necessitating such changes.
	 
	10.12	 	Not later than the fifteenth (15th) of January each Year, in respect of
the Year immediately following commencement of Commercial Production, the Contractor
shall determine the “Programme Quantity” with the approval of the Management
Committee. The Programme Quantity for any Year shall be the maximum quantity of
Petroleum based on Contractor’s estimates, as approved by the Management Committee,
which can be produced from a Development Area consistent with modern oilfield and
petroleum industry practices and minimising unit production cost, taking into account
the capacity of the producing Wells, gathering lines, separators, storage capacity and
other production facilities available for use during the relevant Year, as well as the
transportation facilities up to the Delivery Point.
	 
	10.13	 	Proposed revisions to the details of a Development Plan or an annual Work Programme
or Budget in respect of Development and Production Operations shall, for good cause
and if the circumstances so justify, be submitted for approval to the Management
Committee.
	 
	10.14	 	In the event the area encompassing the Commercial Discovery extends beyond the
Development Area designated in the Development Plan, either within the original
Contract Area but subsequently relinquished or, outside the original Contract Area,
the Management Committee may make recommendations to the Government

32

 

	 	 	concerning enlargement of the Development Area, provided the same was not awarded to
any other company by the Government or is not held by any other party or not on
offer by the Government and no application for a License or Lease is pending with
the Government. However, in case the area is held by any other party or on offer by
the Government or application for License or Lease is pending with the Government,
the Management Committee shall notify the same to the Government for further action
on the matter. Government may consider such request for extension at its sole
discretion and on terms and conditions, which it may consider fit.

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 ARTICLE 11

PETROLEUM EXPLORATION LICENSE AND MINING LEASE

	11.1	 	The Contractor shall submit an application for grant of License in respect of the
Contract Area, as early as possible, but not later than fifteen (15) Business Days
from the date of execution of this Contract.
	 
	11.2	 	On submission of a development plan of a Commercial Discovery pursuant to Article
10.7, the Contractor shall submit an application for a Lease in respect of the
proposed Development Area to the relevant State Government(s).
	 
	11.3	 	Where a part of a Reservoir in respect of which a Commercial Discovery has been
declared extends beyond the Contract Area, subject to Article 10.14 such area may be
included in the proposed Development Area, in relation to which application for a
Lease is made, on terms and conditions as decided by the Central Government; provided
that such area is:

	 	(a)	 	not subject to a license or lease granted to any other person;
	 
	 	(b)	 	not the subject of negotiations/bidding or contract awarded for a
license or lease; and
	 
	 	(c)	 	available for licensing (i.e. is not an area over which Petroleum
Operations are excluded).

	11.4	 	Where a Development Plan has been approved pursuant to Article 10 and the Contractor
has complied with the terms and conditions of the License and this Contract and is not
in breach of any of the terms thereof, or the provisions of any law and subject to
normal Government clearances/approvals being obtained by the Contractor as applicable
before grant/issue of the Lease, the Central Government will assist the Contractor in
obtaining the Lease from the relevant State Government(s) over the Development Area as
agreed, subject to Article 11.5 to enable the Contractor to carry out Petroleum
Operations in the Development Area in accordance with the Development Plan.
	 
	11.5	 	The Lease shall be granted for an initial period of twenty (20) years from the date
of grant thereof subject to:

	 	(a)	 	cancellation in accordance with its terms or for termination of this
Contract in accordance with its terms;
	 
	 	(b)	 	extension by mutual agreement between the Parties for five (5) years or
such period as may be agreed after taking into account the balance recoverable
reserve and balance economic life of the Field/Development Area from the expiry
of the initial period provided that in the event of a Commercial production of
Non Associated Natural Gas the extension may

34

 

	 	 	 	be for a period of ten (10) years or such period as may be mutually agreed
between the Parties after taking into account the balance recoverable
reserves and balance economic life of the Field/Development Area from the
date of expiry of the initial term; and
	 
	 	(c)	 	the terms of this Contract and other terms and conditions as set forth
in such Lease be consistent with this Contract and the relevant legislation.

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ARTICLE 12

UNIT DEVELOPMENT

	12.1	 	If a Reservoir in a Discovery Area is situated partly within the Contract Area and
partly in an area in India over which other parties have a contract to conduct
petroleum operations and both parts of the Reservoir can be more efficiently developed
together on a commercial basis, on receiving information in writing from any party to
these contracts or any information on this from any bonafide source, the Government
may, for securing the more effective recovery of Petroleum from such Reservoir, by
notice in writing to the Contractor, require that the Contractor:

	 	(a)	 	collaborate and agree with such other parties on the joint development
of the Reservoir ;
	 
	 	(b)	 	submit such agreement between the Contractor and such other parties to
the Government for approval within one hundred and eighty (180) days; and
	 
	 	(c)	 	prepare a plan for such joint development of the said Reservoir, within
one hundred and eighty (180) days of the approval of the agreement referred to
in (b) above.

	12.2	 	If no plan is submitted within the period specified in Article 12.1 (c) or such
longer period as the Government and the Contractor and the other parties referred to
in Article 12.1 may agree, or, if such plan as submitted is not acceptable to the
Government and the Parties cannot agree on amendments to the proposed joint
development plan, the Government may cause to be prepared, at the expense of the
Contractor and such other parties a plan for such joint development consistent with
generally accepted modern oilfield and petroleum industry practices which shall take
into consideration any plans and presentations made by the Contractor and the
aforementioned other parties.
	 
	12.3	 	If the parties are unable to agree on the proposed plan for joint development, the
Government may call for a joint development plan from an independent agency, which
agency, may make such a proposal after taking into account the position of the parties
in this regard. Such a development plan, if approved by Government, shall be binding
on the parties, notwithstanding their disagreement with the plan. However, the
Contractor may in case of any disagreement on the issue of joint development or the
proposed joint development plan, prepared in accordance with Article 12.2 or within
forty five (45) Business Days of the plan approval as aforesaid in this Article,
notify the Government that it elects to surrender its rights in the
Reservoir/Discovery in lieu of participation in a joint development.

36

 

	12.4	 	If a proposed joint development plan is agreed and adopted by the parties, or adopted
following determination by the Government, the plan as finally adopted shall be the
approved joint development plan and the Contractor shall comply with the terms of the
said development plan as if the Commercial Discovery is established.
	 
	12.5	 	The provisions of Articles 12.1, 12.2 and Article 12.3 shall apply mutatis mutandis
to a Discovery of a Reservoir located partly within the Contract Area, which, although
not equivalent to a Commercial Discovery if developed alone, would be a Commercial
Discovery if developed together with that part of the Reservoir which extends outside
the Contract Area to the areas subject to contract for petroleum operations by other
parties.

37

 

ARTICLE 13

MEASUREMENT OF PETROLEUM

	13.1	 	Petroleum used for internal consumption for Petroleum Operations, flared, saved and
sold from the Contract Area shall be measured by methods and appliances generally
accepted and customarily used in modern oilfield and petroleum industry practices and
approved by the Management Committee and the Government.
	 
	13.2	 	The Government may, at all reasonable times, inspect and test the appliances used for
measuring the volume and determining the quality of Petroleum, provided that any such
inspection or testing shall be carried out in such a manner so as not to unduly
interfere with Petroleum Operations.

	13.3	 	Before commencement of production from the Contract Area, the Parties shall mutually
agree on:

	 	(a)	 	methods to be employed for measurement of volumes of Petroleum
production;
	 
	 	(b)	 	the point or points at which Petroleum shall be measured and the
respective shares allocated to the Parties in accordance with the terms of this
Contract;
	 
	 	(c)	 	the frequency of inspections and testing of measurement appliances and
relevant procedures relating thereto; and
	 
	 	(d)	 	the consequences of a determination of an error in measurement.

	13.4	 	The Contractor shall undertake to measure the volume and quality of the Petroleum
Produced and Saved from the Contract Area at the agreed measurement point consistent
with generally accepted modern oilfield and petroleum industry practices with the
frequency and according to procedures agreed pursuant to Article 13.3. The Contractor
shall not make any alteration in the agreed method or procedures for measurement or to
any of the approved appliances used for that purpose without the written consent of
the Management Committee and the Government.
	 
	13.5	 	The Contractor shall give the Government timely notice of its intention to conduct
measuring operations or any agreed alteration for such operations and the Government
shall have the right to be present at and supervise, either directly or through
authorised representatives, such operations.
	 
	13.6	 	The Contractor shall keep all the records of analysis and measurement of hydrocarbons
calibrations and proving of measurement system and make available to Government or its
authorized agency such records on request.

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ARTICLE 14

PROTECTION OF THE ENVIRONMENT

	14.1	 	The Government and the Contractor recognise that Petroleum Operations will cause some
impact on the environment in the Contract Area. Accordingly, in performance of the
Contract, the Contractor shall conduct its Petroleum Operations with due regard to
concerns with respect to protection of the environment and conservation of natural
resources and shall in particular;

	 	(a)	 	employ modern oilfield and petroleum industry practices and standards
including advanced techniques, practices and methods of operation for the
prevention of Environmental Damage in conducting its Petroleum Operations;
	 
	 	(b)	 	take necessary and adequate steps to:

	 	(i)	 	prevent Environmental Damage and, where some adverse
impact on the environment is unavoidable, to minimise such damage and
the consequential effects thereof on property and people;
	 
	 	(ii)	 	ensure adequate compensation for injury to persons or
damage to property caused by the effect of Petroleum Operations; and

	 	(c)	 	comply with the requirements of applicable laws and the reasonable
requirements of the Government from time to time.

	14.2	 	If the Contractor fails to comply with the provisions of paragraph (b)(i) of Article
14.1 or contravenes any relevant law, and such failure or contravention results in any
Environmental Damage, the Contractor shall forthwith take all necessary and reasonable
measures to remedy the failure and the effects thereof.
	 
	14.3	 	If the Government in accordance with the laws has good reason to believe that any
works or installations erected by the Contractor or any operations conducted by the
Contractor are endangering or may endanger persons or any property of any person, or
are causing or may cause pollution, or are harming or may harm fauna or flora or the
environment to a degree which the Government deems unacceptable, the Government may
require the Contractor to take remedial measures within such reasonable period as may
be determined by the Government and to repair any such damage. If the Government deems
it necessary, it may also require the Contractor to discontinue Petroleum Operations
in whole or in part until the Contractor has taken such remedial measures or has
repaired any damage caused.

39

 

	14.4	 	The measures and methods to be used by the Contractor for the purpose of complying
with the terms of paragraph (b)(i) of Article 14.1 shall be determined in timely
consultation with the Government upon the commencement of Petroleum Operations or
whenever there is a significant change in the scope or method of conducting Petroleum
Operations and shall take into account the international standards applicable in
similar circumstances and the relevant environmental impact study carried out in
accordance with Article 14.5 below. The Contractor shall notify the Government, in
writing, of the measures and methods finally determined by the Contractor and shall
cause such measures and methods to be reviewed from time to time in the light of
prevailing circumstances.
	 
	14.5	 	The Contractor shall cause a person or persons with special knowledge on
environmental matters, to carry out two environmental impact studies in order:

	 	(a)	 	to determine at the time of the studies the prevailing situation
relating to the environment, human beings and local communities, the flora and
fauna in the Contract Area and in the adjoining or neighbouring areas; and
	 
	 	(b)	 	to establish the likely effect on the environment, human beings and
local communities, the flora and fauna in the Contract Area and in the
adjoining or neighbouring areas in consequence of the relevant phase of
Petroleum Operations to be conducted under this Contract, and to submit, for
consideration by the Parties, methods and measures contemplated in Article 14.4
for minimising Environmental Damage and carrying out Site Restoration
activities.

	14.5.1	 	The first of the aforementioned studies shall be carried out in two parts, namely,
a preliminary part which must be concluded before commencement of any field work
relating to a seismographic or other survey, and a final part relating to drilling in
the Exploration Period. The part of the study relating to drilling operations in the
Exploration Period shall be approved by Government before the commencement of such
drilling operations, it being understood that such approval shall not be unreasonably
withheld.
	 
	14.5.2	 	The second of the aforementioned studies shall be completed before commencement of
Development Operations and shall be submitted by the Contractor as part of the
Development Plan, with specific approval of Government being obtained before
commencement of Development Operations, it being understood that such approval shall
not be unreasonably withheld.
	 
	14.5.3	 	The studies mentioned in Article 14.5 above shall contain proposed environmental
guidelines to be followed in order to minimize Environmental Damage and shall include,
but not be limited to, the following, to the extent appropriate to the respective
study taking into account the phase of operations to which the study relates :

40

 

(a) proposed access cutting;

(b) clearing and timber salvage;

(c) wildlife and habitat protection;

(d) fuel storage and handling;

(e) use of explosives;

(f) camps and staging;

(g) liquid and solid waste disposal;

(h) cultural and archaeological sites;

(i) selection of drilling sites;

(j) terrain stabilization;

(k) protection of freshwater horizons;

(l) blowout prevention plan;

(m) flaring during completion and testing of Gas and Oil Wells;

(n) abandonment of Wells;

(o) rig dismantling and site completion;

(p) reclamation for abandonment;

(q) noise control;

(r) debris disposal; and

(s) protection of natural drainage and water flow.

	14.5.4	 	Subject to the provision of all applicable laws and notifications on protection of
environment, any new project or expansion or modernization projects for petroleum
operations for which a proposal is submitted by the Contractor, the Government shall
compete the assessment of the project within a period of ninety (90) days from the
receipt of the requisite documents and data from the project authorities and
completion of public hearing. The decision of the Government on the proposal of the
Contractor for environmental clearance shall be conveyed within thirty (30) days
thereafter.

	14.6	 	The Contractor shall ensure that:

	 	(a)	 	Petroleum Operations are conducted in an environmentally acceptable and
safe manner consistent with modern oilfield and petroleum industry practices
and that such Petroleum Operations are properly monitored;
	 
	 	(b)	 	the pertinent completed environmental impact studies are made available
to its employees and to its contractors and Subcontractors to develop adequate
and proper awareness of the measures and methods of environmental protection to
be used in carrying out the Petroleum Operations; and
	 
	 	(c)	 	the contracts entered into between the Contractor and its contractors
and Subcontractors relating to its Petroleum Operations shall include the
provisions stipulated herein and any established measures and methods for the
implementation of the Contractor’s obligations in relation to the environment
under this Contract.

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	14.7	 	The Contractor shall, prior to conducting any drilling activities, prepare and submit
for review by the Government contingency plans for dealing with Oil spills, fires,
accidents and emergencies, designed to achieve rapid and effective emergency response.
The plans referred to above shall be discussed with the Government and concerns
expressed shall be taken into account.
	 
	14.7.1	 	In the event of an emergency, accident, Oil spill or fire arising from Petroleum
Operations affecting the environment, the Contractor shall forthwith notify the
Government and shall promptly implement the relevant contingency plan and perform such
Site Restoration as may be necessary in accordance with modern oilfield and petroleum
industry practices.
	 
	14.7.2	 	In the event of any other emergency or accident arising from the Petroleum
Operations affecting the environment, the Contractor shall take such action as may be
prudent and necessary in accordance with modern oilfield and petroleum industry
practices in such circumstances.
	 
	14.8	 	In the event that the Contractor fails to comply with any of the terms contained in
Article 14.7 within a period specified by the Government, the Government, after giving
the Contractor reasonable notice in the circumstances, may take any action which may
be necessary to ensure compliance with such terms and to recover from the Contractor,
immediately after having taken such action, all costs and expenditures incurred in
connection with such action together with such interest as may be determined in
accordance with Section 1.7 of Appendix C of this Contract.
	 
	14.9	 	On expiry or termination of this Contract or relinquishment of part of the Contract
Area, the Contractor shall:

	 	(a)	 	subject to Article 27, remove all equipment and installations from the
relinquished area or former Contract Area in a manner agreed with the
Government pursuant to an abandonment plan; and
	 
	 	(b)	 	perform all necessary Site Restoration in accordance with modern
oilfield and petroleum industry practices and take all other action necessary
to prevent hazards to human life or to the property of others or the
environment.

	14.10	 	The Contractor shall prepare a proposal for the restoration of site including
abandonment plan and requirement of funds for this and the annual contribution. This
will be submitted along with the annual Budget for the consideration and approval of
the Management Committee. The annual contribution shall be deposited by the Contractor
in the Site Restoration fund which will be established, in accordance with the scheme
notified by the Government.

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	14.11	 	Subject to Section 3.2 of Accounting Procedure, any Site Restoration fund scheme
formulated by Government and subject to provisions of this Contract, any and all costs
incurred by the Contractor pursuant to this Article shall be cost recoverable
including but not limited to sinking funds established for abandonment and restoration
of the Contract Area.
	 
	14.12	 	In this Article, a reference to Government includes the State Government.
	 
	14.13	 	Where the Contract Area is partly located in areas forming part of certain national
parks, sanctuaries, mangroves, wetlands of national importance, biosphere reserves and
other biologically sensitive areas passage through these areas shall generally not be
permitted. However, if there is no passage, other than through these areas to reach a
particular point beyond these areas, permission of the appropriate authorities shall
be obtained.
	 
	14.14	 	The obligations and liability of the Contractor for the environment hereunder shall
be limited to damage to the environment which:

	 	(a)	 	occurs after the Effective Date; and
	 
	 	(b)	 	results from an act or omission of the Contractor.

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ARTICLE 15

RECOVERY OF COST PETROLEUM 

	15.1	 	The Contractor shall be entitled to recover Contract Costs out of a percentage of the
total value of Petroleum Produced and Saved from the Contract Area in the Year in
accordance with the provisions of this Article.
	 
	15.2	 	Exploration Costs incurred by the Contractor in the Contract Area upto the date of
first Commercial Production shall be aggregated, and the Contractor shall be entitled
to recover the aggregate of such Exploration Costs out of the Cost Petroleum at the
rate of one hundred percent (100%) per annum of such Exploration Costs beginning from
the date of such Commercial Production.
	 
	15.3	 	The Contractor shall be entitled to recover out of the Cost Petroleum from the
Contract Area the Exploration Costs which it has incurred in any Year after the date
of Commercial Production at the rate of one hundred percent (100%) per annum of such
Exploration Costs beginning from the date such Exploration Costs are incurred.
	 
	15.4	 	Development Costs incurred by the Contractor in the Contract Area upto the date of
first Commercial Production shall be aggregated, and the Contractor shall be entitled
to recover out of the Cost Petroleum the aggregate of such Development Costs at the
rate of one hundred percent (100%) per annum of such Development Costs beginning from
the date of such Commercial Production.
	 
	15.5	 	The Contractor shall be entitled to recover out of the Cost Petroleum from the
Contract Area the Development Costs which it has incurred after the date of first
Commercial Production at the rate of one hundred percent (100%) per annum of such
Development Costs beginning from the date such Development Costs are incurred.
	 
	15.6	 	The Contractor shall be entitled to recover in full during any Year the Production
Costs incurred in that Year out of the Cost Petroleum.
	 
	15.7	 	The Contractor shall be entitled to recover in full during any Year the royalty
payments to the Government/State Government(s) in that Year out of the Cost Petroleum.
	 
	15.8	 	If during any Year the Cost Petroleum is not sufficient to enable the Contractor to
recover in full the Contract Costs due for recovery in that Year in accordance with
the provisions of Articles 15.1 to 15.7 then, subject to the provisions of Article
15.12:

44

 

(a) recovery shall first be made of royalty payments; and

(b) recovery shall next be made of the Production Costs; and

(c) recovery shall next be made of the Exploration Costs; and

(d) recovery shall then be made of the Development Costs.

The unrecovered portions of Contract Costs shall be carried forward to the following
Year and the Contractor shall be entitled to recover such Contract Costs in such
Year or the subsequent Years as if such Contract Costs were due for recovery in that
Year, or the succeeding Years, until the unrecovered Contract Costs have been fully
recovered out of Cost Petroleum from the Contract Area.

	15.9	 	The maximum amount of Cost Petroleum to which the Contractor shall be entitled, in
accordance with the provisions of this Article, shall be (to be taken from the
accepted bid) X percent (X%) of the total value of the Petroleum Produced and Saved
from the Contract Area.
	 
	15.10	 	For the purposes of this Article, as well as Article 16, costs, receipts and income
shall be converted into production unit equivalents, and vice versa viz both in
physical and monitory terms, using the relevant prices established pursuant to Article
19 for Crude Oil and Article 21 for Natural Gas.
	 
	15.11	 	Pending completion of the calculations required to establish definitively the
Contractor’s entitlement to Cost Petroleum from the Contract Area in any Year, the
Contractor shall take delivery, provisionally, of volumes of Crude Oil or Natural Gas
representing its estimated Cost Petroleum entitlement calculated with reference to
estimated production quantities, costs and prices as established by the Contractor and
approved by the Management Committee. Such provisional determination of Cost Petroleum
shall be made every Quarter on an accumulative basis. Within ninety (90) days of the
end of each Year, a final calculation of the Contractor’s entitlement to Cost
Petroleum, based on actual production quantities, costs and prices for the entire Year
as reflected in audited accounts under Article 25.4.3, shall be undertaken and any
necessary adjustments to the Cost Petroleum entitlement shall be agreed upon between
the Government and the Contractor within thirty (30) days and made within thirty (30)
days thereafter.
	 
	15.12	 	Where more than one Party constitutes the Contractor, the percentage of the total
Cost Petroleum from the Contract Area which shall be available to each such Party in
any Year for recovery of its share of Contract Costs shall be determined on the basis
of the respective Participating Interest of each such Party.
	 
	15.13	 	The Contractor acknowledges that the cost estimates for Minimum Work Programme are
the realistic estimate of expenditure. For the purposes of allowing cost recovery
under Article 15 herein read with Section 3 of the Accounting Procedure, the cost
estimates given by the Contractor in the bid documents towards the Minimum Work
Programme in all three Exploration Phases shall be

45

 

	 	 	taken as Bench Mark notwithstanding any claims for higher actual cost. Any material
increase over the Bench Mark shall not be allowed for cost recovery unless the
Government on the recommendation of the Management Committee agrees that the cost
increase is due to change in circumstances after the Contract comes into effect.
	 
	 	 	For the above purpose, an itemized break-up provided by the Contractor of cost
estimates given in the bid documents is placed at Appendix – H to this Contract.

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ARTICLE 16

PRODUCTION SHARING OF PETROLEUM 

	16.1	 	The Parties to this Contract shall share in the Profit Petroleum in each Year in
accordance with the provisions of this Article. A Party’s share of Profit Petroleum
in any Year, shall be calculated on the basis of the Investment Multiple actually
achieved by the Contractor at the end of the preceding Year for the Contract Area as
provided in Appendix-D.
	 
	16.2.1	 	When the Investment Multiple of the Contractor at the end of any Year is less than
one and one half (1.5), the Government shall be entitled to take and receive twenty
percent (20%) and the Contractor shall be entitled to take and receive eighty percent
(80%) of the total Profit Petroleum from the Contract Area with effect from the start
of the succeeding Year.
	 
	16.2.2	 	When the Investment Multiple of the Contractor at the end of any Year is equal to
or more than one and one half (1.5) but is less than two (2.0) the Government shall be
entitled to take and receive twenty-five percent (25%) and the Contractor shall be
entitled to take and receive seventy-five percent (75%) of the total Profit Petroleum
from the Contract Area with effect from the start of the succeeding Year.
	 
	16.2.3	 	When the Investment Multiple of the Contractor at the end of any Year is equal to
or more than two (2.0) but is less than two and one half (2.5), the Government shall
be entitled to take and receive thirty percent (30%) and the Contractor shall be
entitled to take and receive seventy percent (70%) of the total Profit Petroleum from
the Contract Area with effect from the start of the succeeding Year.
	 
	16.2.4	 	When the Investment Multiple of the Contractor at the end of any Year is equal to or
more than two and one half (2.5) but is less than three (3.0), the Government shall be
entitled to take and receive thirty percent (30%) and the Contractor shall be entitled
to take and receive seventy percent (70%) of the total Profit Petroleum from the
Contract Area with effect from the start of the succeeding Year.
	 
	16.2.5	 	When the Investment Multiple of the Contractor at the end of any Year is equal to
or more than three (3.0) but is less than three and one half (3.5), the Government
shall be entitled to take and receive thirty-five percent (35%) and the Contractor
shall be entitled to take and receive sixty-five percent (65%) of the total Profit
Petroleum from the Contract Area with effect from the start of the succeeding Year.
	 
	16.2.6	 	When the Investment Multiple of the Contractor at the end of any Year is equal to or
more than three and one half (3.5), the Government shall be entitled to take and
receive forty percent (40%) and the Contractor shall be entitled to take and receive
sixty percent (60%) of the total Profit Petroleum from the Contract Area with effect
from the start of the succeeding Year.

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	16.3	 	Any balance left to the credit of the Parties in any Site Restoration account, opened
pursuant to the provision of Article 14.10, after Site Restoration has been done by
the Contractor in accordance with the provisions of this Contract and the laws in this
regard, shall be shared between the Government and the Contractor as per the
Investment Multiple reached at the time of ceasing of production from the Contract
Area.
	 
	16.4.1	 	Other than “ANG” or “NANG” , the Government shall have the option to take its entitlement to
Profit Petroleum either in cash or in kind in any Year. In case of “ANG” or “NANG”, as the
case may be, the Government shall have the option to take its entitlement to Profit Petroleum
in cash or in kind and such option shall be exercised at interval of every five (5) Years from
the commencement of first Commercial Production from the Contract Area.
	 
	16.4.2	 	In accordance with the Article 16.4.1, The Government shall exercise such option by
giving a written notice to the Contractor not later than thirtieth (30th)
June in the preceding Year in which the entitlement is due. Once the Government has
exercised its option, the same shall continue unless the Government informs the
Contractor otherwise.
	 
	16.4.3	 	Where the Government has informed the Contractor of its intention to take its share
in kind, the Parties shall mutually agree on a procedure for delivery of the
Government’s share of Profit Petroleum and, where relevant, the composition of the
Petroleum which is to be delivered.
	 
	16.5	 	The value of the Contractor’s Investment Multiple at the end of any Year in respect
of the Contract Area shall be calculated in the manner provided for, and on the basis
of the net cash flows specified in Appendix-D to this Contract. However, the amount
of Profit Petroleum to be shared between the Government and the Contractor shall be
determined for each Quarter on an accumulative basis. Pending finalisation of
accounts, Profit Petroleum shall be shared between the Government and the Contractor
on the basis of provisional estimated figures of Contract Costs, production, prices,
receipts, income and any other income or allowable deductions and on the basis of the
value of the Investment Multiple achieved at the end of the preceding Year. All such
provisional estimates shall be approved by the Management Committee. When it is
necessary to convert monetary units into physical units of production equivalents or
vice versa, the price or prices determined pursuant to Articles 19 and 21 for Crude
Oil, Condensate and Natural Gas respectively shall be used. Within ninety (90) days

48

 

	 	 	of the end of each Year, a final calculation of Profit Petroleum based on actual
costs, quantities, prices and income for the entire Year shall be completed and any
necessary adjustments to the sharing of Petroleum shall be agreed upon between the
Government and the Contractor within thirty (30) days and made within thirty (30)
days thereafter.

(Explanation: The Profit Petroleum due to the Government shall be deposited with
“Pay & Accounts officer or its successor, Ministry of Petroleum & Natural Gas,
Government of India, Shastri Bhavan, New Delhi by 10th of the Month following each
Quarter)
	 
	16.6	 	The Profit Petroleum due to the Contractor in any Year from the Contract Area shall
be divided amongst the Parties constituting the Contractor, in proportion to their
respective Participating Interest.

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ARTICLE 17

TAXES, ROYALTIES, RENTALS, DUTIES ETC.

	17.1	 	Companies, their employees, persons providing any materials, supplies, services or
facilities or supplying any ship, aircraft, machinery, equipment or plant (whether by
way of sale or hire) to the Companies for Petroleum Operations or for any other
purpose and the employees of such persons shall be subject to all fiscal legislation
in India except where, pursuant to any authority granted under any applicable law,
they are exempted wholly or partly from the application of the provisions of a
particular law or as otherwise provided herein.
	 
	17.2	 	Pursuant to the provisions of section 42 of the Income-tax Act, 1961, the allowances
specified herein shall apply in computing income tax payable by a Company on its
profits and gains from the business of Petroleum Operations in lieu of (and not in
addition to) corresponding allowances provided for under the heading “Profits and
Gains of Business or Profession” in the Income-tax Act, 1961. Any other allowance,
which are not specified herein, shall be treated in accordance with the provisions of
Income-tax Act, 1961.
	 
	17.2.1	 	Subject to the provisions herein below, deductions at the rate of one hundred
percent (100%) per annum shall be allowed for all expenditures, both capital and
revenue expenditures, incurred in respect of Exploration Operations and drilling
operations. The expenditure incurred in respect of Development Operations, other than
drilling operations, and Production Operations will be allowable as per the provisions
of the Income-tax Act, 1961. The expenses so incurred are subject to the following:

	 	(a)	 	where any expenditure is not solely incurred on Petroleum Operations or
is incurred as part of or in conjunction with any other business, only that
proportion of the total expenditure which can be proved to the assessing
officer to represent a fair proportionate part thereof, having regard to all
relevant facts and circumstances, shall be allowed;
	 
	 	(b)	 	sections 40A and 44C of the Income-tax Act, 1961, shall apply.

	17.2.2	 	A Company shall be entitled, for income tax purposes only, to deduct all its
unsuccessful Exploration Costs in contract areas covered by other contracts from the
aggregate value of Petroleum allocable to the Company from any Field(s) in the
Contract Area in the manner as follows:

	 	(a)	 	unsuccessful Exploration Costs incurred in contract areas other than
the Contract Area where a Commercial Discovery has been made up to the date of
commencement of Commercial Production shall be aggregated and

50

 

	 	 	 	the Company shall be entitled to deduct such costs at the rate of one
hundred per cent (100%) per annum;
	 
	 	(b)	 	unsuccessful Exploration Costs incurred in contract areas other than
the Contract Area where a Commercial Discovery has been made, after the
commencement of Commercial Production, shall be deductible at the rate of one
hundred per cent (100%) per annum of such costs beginning from the Year such
costs are incurred.

	17.2.3	 	All allowable expenditure incurred prior to the Year in which Commercial Production
commences shall be aggregated and the assessed loss for that Year as well as the
assessed loss, if any, incurred in the assessment year relevant to the Year in which
Commercial Production commences, or in any subsequent assessment year, shall be
carried forward to succeeding assessment years and set off as provided in the
Income-tax Act, 1961.

	17.2.4	 	For any or all accumulated expenditures incurred in respect of Exploration
Operations and drilling operations prior to the date of commercial production,
Company(ies) shall have option to amortize such expenditures over a period of ten (10)
years from the date of first commercial production.

	17.2.5	 	The profits and gains of the business of the Parties comprising the Contractor
consisting of Petroleum Operations shall, for the purpose of levy of income tax under
the Income-tax Act, 1961, be computed on the basis of the value, determined in
accordance with Article 19, of its Participating Interest share of Crude Oil produced
and saved and sold, or otherwise disposed of, from the Contract Area and from any
revenue realised on the sale of Associated or Non Associated Natural Gas referred to
in Article 21 as well as any other gains or receipts from Petroleum Operations as
reduced by the deductions as specified herein, and, except as herein provided, all the
provisions of the Income-tax Act, 1961, shall apply.

	17.2.6	 	Company(ies) shall be eligible for benefits available under section 80 IA of the
Income-tax Act, 1961 as applicable from time to time.

	17.3   	 	For the purposes of Article 17.2 and section 42 of the Income-tax Act, 1961:

	17.3.1	 	The following terms used in section 42 of the Income-tax Act, 1961, shall have the
meanings corresponding to the terms used in this Contract and defined in Article 1 as
follows:

	 	(a)	 	“agreement” means this Contract as defined in Article 1;
	 
	 	(b)	 	“commercial production” shall have the meaning assigned in Article 1.

	17.3.2	 	The terms “assessing officer”, “assessed loss”, and “assessment year” shall have the
meaning as defined in the Income-tax Act, 1961.

51

 

	17.3.3	 	The other terms used herein and defined in Article 1 shall have the meaning therein
ascribed.
	 
	17.4	 	Companies (Lessee) shall be required to pay royalty to the Government (Lessor) for
offshore areas at the rate of ten percent (10%) of the well-head value of Crude Oil
and Natural Gas. In case of an onshore area, Companies shall be required to pay to the
State Government(s) (Lessor) at the rate of twelve point five zero percent (12.5%) of
the well-head value of Crude Oil and ten percent (10%) of the well-head value of
Natural Gas. In case of an offshore area falling beyond four hundred (400) metre
isobath, the rate of royalty payable by Companies (Lessee) to the Government (Lessor)
shall be at the rate of five percent (5%) of the well-head value of Crude Oil and
Natural Gas for the first seven years from the date of commencement of Commercial
Production in the Field. The valuation of Crude Oil and Natural Gas shall be as per
the Article 19 and Article 21 respectively. The royalty amount due to
Government/State Government(s) shall be payable latest by the end of the succeeding
Month.
	 
	17.5	 	Machinery, plant, equipment, materials and supplies imported by the Contractor and
its Subcontractors solely and exclusively for use in Petroleum Operations under this
Contract or similar contracts with the Government where customs duty has been exempted
by the Government shall be exempt from customs duties and export duties or other
charges on re-exportation of the said items in accordance with applicable legislation.
	 
	17.6	 	The Government shall have the right to inspect the records and documents of the
physical item or items for which an exemption has been provided pursuant to Article
17.5 to determine that such item or items are being or have been imported solely and
exclusively for the purpose for which the exemption was granted. The Government shall
also be entitled to inspect such physical items wherever located to ensure that such
items are being used for the purpose herein specified and any item not being so used
shall immediately become liable to payment of the applicable customs duties.
	 
	17.7	 	Subject to Article 27, the Contractor and its Subcontractors may sell or otherwise
transfer in India all imported items which are no longer required for Petroleum
Operations, subject to applicable laws including rules, regulations, procedures,
notifications etc. governing customs duties and sale or disposal of such items.
	 
	17.8	 	Any sales tax or tax of similar nature payable on the sale(s) of Petroleum under this
Contract shall be borne/reimbursed by the buyer(s).
	 
	17.9	 	Subject to the provisions herein above provided, the Contractor shall be liable for
payment of:

	 	(a)	 	annual license charges and rental fees and other charges under the
Rules;

52

 

	 	(b)	 	charges payable by specified industries or in connection with Petroleum
Operations under applicable legislation;
	 
	 	(c)	 	payments for purchase, lease or rental of land or land rights in
connection with Petroleum Operations;
	 
	 	(d)	 	taxes, fees or charges for specific services rendered on request or to
the public generally;
	 
	 	(e)	 	customs duties, except for those items subject to exemption as
provided in Article 17, applicable at the rates specified from time to time;
and
	 
	 	(f)	 	stamp duties, registration fees, license fees, taxes such as taxes on
property or assets (not calculated by reference to income or otherwise
exempted) or other levies, fees or charges of a non-discriminatory nature and
generally applicable in India or in the State where Petroleum Operations are
being conducted.

	17.10	 	If any change in or to any Indian law, rule or regulation dealing with income tax or
other corporate tax, export/import tax, excise, customs duty or any other levies,
duties or taxes imposed on Petroleum or dependent upon the value of Petroleum results
in a material change to the expected economic benefits accruing to any of the Parties
after the date of execution of the Contract, the Parties shall consult promptly in
good faith to make necessary revisions and adjustments to the Contract in order to
maintain such expected economic benefits to each of the Parties, provided, however,
that the expected economic benefits to the Parties shall not be reduced as a result of
the operation of this Article.

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ARTICLE_18

DOMESTIC SUPPLY, SALE, DISPOSAL AND 

EXPORT OF CRUDE OIL AND CONDENSATE

	18.1	 	Until such time as the total availability to the Government of Crude Oil and
Condensate from all Petroleum production activities in India meets the total national
demand, each Company comprising the Contractor, shall be required to sell in the
domestic market in India all of the Company’s entitlement to Crude Oil and Condensate
from the Contract Area in order to assist in satisfying the national demand.
	 
	18.2	 	If, during any Year, India attains Self-sufficiency, the Government shall promptly
thereafter, but in no event later than the end of the first Quarter of the following
Year, so advise the Company(ies) by written notice. In such event, as from the end of
the second Quarter of the following Year, or such earlier date as the Parties may
mutually agree, domestic sale obligation shall be suspended and the Company shall have
the right to lift and export its Participating Interest share of Crude Oil and
Condensate until such time, if any, as Self-sufficiency shall have ceased to exist. If
Self-sufficiency ceases to exist during a Year, the Government shall recover its
position to ask Company(ies) under Article 18.1 in respect of the following Year by
giving ninety (90) days notice thereof to the Company(ies) to sell Crude Oil and
Condensate in the Indian domestic market.
	 
	18.3	 	Upon India achieving Self-sufficiency, the Company(ies) shall be entitled to freely
lift and export any Crude Oil and Condensate pursuant to this Article 18, subject to
Government’s generally applicable destination restrictions to countries with which the
Government, for policy reasons, has severed or restricted trade.
	 
	18.4	 	No later than sixty (60) days prior to the commencement of production in a Field, and
thereafter no less than sixty (60) days before the commencement of each Year, the
Contractor shall cause to be prepared and submitted to the Parties a production
forecast setting out the total quantity of Crude Oil that it estimates can be produced
from a Field during the succeeding Year, based on a maximum efficient rate of recovery
of Crude Oil from that Field in accordance with modern oilfield and petroleum industry
practices. No later than thirty (30) days prior to the commencement of each Quarter,
the Contractor shall inform its estimate of production for the succeeding Quarter and
shall endeavour to produce the forecast quantity for each Quarter.
	 
	18.5	 	Each Company comprising the Contractor shall, throughout the term of this Contract,
have the right to separately take in kind and dispose of all its share of Cost
Petroleum and Profit Petroleum and shall have the obligation to lift the said

54

 

	 	 	Petroleum on a current basis and in such quantities so as not to cause a restriction
of production or inconvenience to the other Company(ies).
	 
	18.6	 	The Government shall, throughout the term of this Contract, have the right to
separately take in kind and dispose of its share of Crude Oil and shall have the
obligation to lift the said Oil on a current basis and in such quantities so as not to
cause a restriction of production or inconvenience to the Contractor.
	 
	18.7	 	For the purpose of implementing the provisions of this Article, a Crude lifting
procedure and Crude sales agreement based on generally acceptable international terms
shall be agreed upon by the Contractor with buyer(s) no later than six (6) months or
such shorter period as may be mutually agreed between the Contractor and buyer(s) with
the consent of Government prior to the commencement of production in a Field. Such
lifting procedure shall be made available to all the Parties to this Contract.

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ARTICLE 19

VALUATION OF PETROLEUM

	19.1	 	For the purpose of this Contract, the value of Crude Oil, Condensate and Natural Gas
(refer Article 21) shall be based on the price determined as provided herein.
	 
	19.2	 	A price for Crude Oil shall be determined for each Month or such other period as the
Parties may agree (hereinafter referred to as “the Delivery Period”) in terms of
United States Dollars per Barrel, on import parity basis (with marine freight being
determined on the basis of nearest port to the Contract Area) for Crude Oil produced
and sold or otherwise disposed of from Contract Area, for each Delivery Period, in
accordance with the appropriate basis for that type of sale or disposal specified
below. Subject to the provisions of this Article 19, it is clearly understood that the
actual prices received by the Company(ies) from the sales will form the basis for the
purposes of cost recovery, Profit Petroleum sharing and payment of royalty as
provided in the Articles 15, 16 and 17 respectively. The basis of valuation given in
this Article for the purpose of Article 15,16 and 17 shall apply only where Government
is of the view that sale prices realised by the Company(ies) are not consistent with
the price realisable at Arms Length Sales.
	 
	19.3	 	In the event that some or all of a Company’s or Contractor’s total sales of Crude Oil
during a Delivery Period are made to third parties at Arms Length Sales, all sales so
made shall be valued at the weighted average of the prices actually received by a
Company, calculated by dividing the total receipts from all such sales at the Delivery
Point by the total number of Barrels of the Crude Oil sold in such sales.
	 
	19.3.1	 	Each Company constituting the Contractor shall separately submit to the designated
nominee of the Government, within fifteen (15) days of the end of each Delivery
Period, a report containing the actual prices obtained in their respective Arms Length
Sales for any Crude Oil. Such reports shall distinguish between term sales and spot
sales and itemize volumes, customers, prices received and credit terms, and a Company
shall allow the designated nominee(s) of the Government to examine the relevant sales
contracts.
	 
	19.4	 	For the purpose of determining price at Arms Length Sales, the price of the Crude Oil
at which sale takes place will generally be based on per Barrel of one or more crude
oils which, at the time of calculation, are being freely and actively traded in the
international market and are similar in characteristics and quality to the Crude Oil
in respect of which the price is being determined, selling price to be ascertained
from Platt’s Crude Oil Market Wire daily publication (“Platt’s”), or the spot market
for the same crude oils ascertained in the same manner, whichever

56

 

	 	 	price more truly reflects the current value of such crude oils. For any Delivery
Period in which sales take place, the price shall be the arithmetic average price
per Barrel determined by calculating the average for such Delivery Period of the
mean of the high and low FOB prices for each day of the crude oils selected for
comparison adjusted for differences in the Crude Oil and the crude oils being
compared for quality, transportation costs, delivery time, quantity, payment terms
and other contract terms to the extent known and other relevant factors. In the
event that Platt’s ceases to be published or is not published for a period of thirty
(30) consecutive days, the Parties shall agree on an alternative daily publication.
The Contractor shall make available all the data pertaining to pricing of Crude to
enable Government to decide that the proposed sale price by the Contractor/each
constituents of the Contractor reflects a fair market price for the Crude.
	 
	19.4.1	 	In the event that, at the relevant time, no crude oils of similar quality to the
Crude Oil to be sold are being actively traded in the international markets where
prices can be ascertained by international publication, or the official FOB selling
prices and the international spot market price vary widely between producers, the
Parties shall meet in good faith to determine an appropriate pricing basis.
	 
	19.5	 	The Contractor shall determine the relevant prices in accordance with this Article
and the calculation, basis of calculation and the price determined shall be supplied
to the Government and shall be subject to agreement by the Government.
	 
	19.6	 	In the event that the Parties fail to reach agreement on any matter concerning
selection of the crude oils for comparison, the calculation, the basis of, or
mechanism for the calculation of the prices, the prices arrived at, the adjustment of
any price or generally about the manner in which the prices are determined according
to the provisions of this Article within thirty (30) days, or such longer period as
may be mutually agreed between the Parties, from the date of commencement of
Commercial Production or the end of each Delivery Period thereafter, any Party may
refer the matter or matters in issue for final determination by a sole expert or
arbitrator appointed as provided in Article 33.
	 
	19.6.1	 	If the matter is referred to the sole expert, within ten (10) days of the said
appointment, the Parties shall provide the expert with all information they deem
necessary or as the expert may reasonably require.
	 
	19.6.2	 	Within fifteen (15) days from the date of his appointment, the expert shall report
to the Parties on the issue(s) referred to him for determination, applying the
criteria or mechanism set forth herein and indicate his decision thereon to be
applicable for the relevant Delivery Period for Crude Oil and such decision shall be
accepted as final and binding by the Parties.
	 
	19.6.3	 	Any price or pricing mechanism agreed by the Parties pursuant to the provisions of
this Article shall not be changed retroactively.

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	19.7	 	In the event that all sales of Crude Oil in a Delivery Period by a Company
constituting the Contractor are to be made to an Affiliate, the Parties may agree on
an alternative method of valuing the Crude Oil for the purposes of this Contract,
provided that such alternative method results in an internationally competitive fair
market valuation for that Delivery Period. In case of disagreement, the decision of
the Government on determining a Crude price in case of sales to an Affiliate shall be
final and binding.
	 
	19.8	 	In the event that in any Delivery Period there is more than one type of sales
referred to in Articles 19.3 and 19.7, then, for the purpose of calculating Cost
Petroleum and Profit Petroleum entitlement and royalty payments pursuant to Articles
15, 16 and 17 respectively, a single price per Barrel of Crude Oil for all the sales
for the relevant Delivery Period shall be used. Such single price shall be the
weighted average of the prices determined for each type of sale, weighted by the
respective volumes of Crude Oil sold in each type of sale in the relevant Delivery
Period.
	 
	19.9	 	The provisions specified above for the determination of the price of sales of Crude
Oil shall apply mutatis mutandis to Condensates.
	 
	19.10	 	The price of Natural Gas shall be determined as provided in Article 21.

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ARTICLE 20

CURRENCY AND EXCHANGE CONTROL PROVISIONS

	20.1	 	Subject to the provisions herein, and to compliance with the relevant provisions of
the laws of general application in India governing currency and foreign exchange and
related administrative instructions and procedures issued thereunder on a
non-discriminatory basis, each Foreign Company comprising the Contractor shall, during
the term of this Contract, have the right to:

	 	(a)	 	repatriate abroad, in United States Dollars or any other freely
convertible currency acceptable to the Government and the Foreign Company, the
net proceeds of sales of Petroleum in India;
	 
	 	(b)	 	receive, retain and use abroad the proceeds of any export sales of
Petroleum under the Contract;
	 
	 	(c)	 	open, maintain and operate bank accounts with reputable banks, both
inside and outside India, for the purpose of this Contract;
	 
	 	(d)	 	freely import, through normal banking channels, funds necessary for
carrying out the Petroleum Operations;
	 
	 	(e)	 	convert into foreign exchange and repatriate sums imported pursuant to
(d) above in excess (if any) of its requirements; and
	 
	 	(f)	 	make payments outside of India for purchases, services and loans
obtained abroad without the requirement that funds used in making such payments
must come from or originate in India.

Provided, however, that repatriation pursuant to subparagraphs (a) and (e) and
payments pursuant to subparagraph (f) shall be subject to the provisions of any
treaties and bilateral arrangements between the Government and any country with
respect to payments to or from that country.

	20.2	 	The rates of exchange for the purchase and sale of currency by the Companies shall be
the prevailing rates of general application determined by the Reserve Bank of India or
such other financial body as may be mutually agreed by the Parties and, for accounting
purposes under this Contract, these rates shall apply as provided in Section 1.6 of
Appendix-C.
	 
	20.3.	 	A Party other than a Foreign Company comprising the Contractor shall be governed by
the relevant currency and foreign exchange laws and related administrative
instructions and procedures issued thereunder.
	 
	20.4	 	Indian Companies shall have right to remit their portion of expenditure in foreign
currency(ies) in accordance with the exchange control provisions.

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ARTICLE 21

NATURAL GAS

	21.1	 	Subject to Article 21.2, the Indian domestic market shall have the first call on the
utilisation of Natural Gas discovered and produced from the Contract Area.
Accordingly, any proposal by the Contractor relating to Discovery and production of
Natural Gas from the Contract Area shall be made in the context of the Government’s
policy for the utilisation of Natural Gas and shall take into account the objectives
of the Government to develop its resources in the most efficient manner and to promote
conservation measures.
	 
	21.2	 	The Contractor shall have the right to use Natural Gas produced from the Contract
Area for the purpose of Petroleum Operations including reinjection for pressure
maintenance in Oil Fields, gas lifting and captive power generation required for
Petroleum Operations.
	 
	21.3	 	For the purpose of sales in the domestic market pursuant to this Article 21, the
Contractor shall have freedom to market the Gas and sell its entitlement.
	 
	21.4	 	Associated Natural Gas (ANG)
	 
	21.4.1	 	In the event that a Discovery of Crude Oil contains ANG, the Contractor shall
declare in the proposal for the declaration of the said Discovery as a Commercial
Discovery as specified in Article 10, whether (and by what amount) the estimated
production of ANG is anticipated to exceed the quantities of ANG which will be used in
accordance with Article 21.2 (such excess being hereinafter referred to as “the Excess
ANG”). In such an event the Contractor shall indicate whether, on the basis of the
available data and information, it has reasonable grounds for believing that the
Excess ANG could be commercially exploited in accordance with the terms of this
Contract along with the Commercial Production of the Crude Oil from the Contract Area,
and whether the Contractor intends to so exploit the Excess ANG.
	 
	21.4.2	 	Based on the principle of full utilisation and minimum flaring of ANG, a proposed
development plan for an Oil Discovery shall, to the extent practicable, include a plan
for utilisation of the ANG including estimated quantities to be flared, reinjected,
and to be used for Petroleum Operations; and, if the Contractor proposes to
commercially exploit the Excess ANG for sale in the domestic market in accordance with
Government’s policy, or elsewhere, the proposed plans for such exploitation.

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	21.4.3	 	If the Contractor wishes to exploit the Excess ANG, subject to Article 21.1, the
Contractor shall be free to explore markets for the commercial exploitation of the
said Excess ANG and submit its proposals for such exploitation to the Government in
accordance with Article 21.4.2.
	 
	21.4.4	 	Where the Contractor is of the view that the Excess ANG cannot be commercially
exploited and chooses not to exploit the said Excess ANG, or is unable to find a
market for the Excess ANG pursuant to Article 21.4.3, the Government shall be entitled
to take and utilise such Excess ANG free of any cost/charge.
	 
	21.4.5	 	If the Government elects to take the Excess ANG as provided in Article 21.4.4:

	 	(a)	 	the Contractor shall deliver such Excess ANG to the Government (or its
nominee) free of any cost/charge, at the downstream flange of the Gas/Oil
separation facilities;
	 
	 	(b)	 	the Contractor shall, based on sound petroleum engineering practices,
install such facilities as would facilitate, insofar as practicable,
uninterrupted delivery of such Excess ANG to the Government or its nominee;
	 
	 	(c)	 	the cost of all facilities installed pursuant to paragraph (b) above
shall be borne by the Government (or its nominee);
	 
	 	(d)	 	the Government or its nominee shall bear all costs including gathering,
treating, processing and transporting costs beyond the downstream flange of the
Gas/Oil separation facilities; and
	 
	 	(e)	 	the delivery of such Excess ANG shall be subject to procedures to be
agreed between the Government or its nominee and the Contractor prior to such
delivery, such procedures to include matters relating to timing of off-take of
such Excess ANG. Parties shall endeavour that such procedures do not restrict
Oil production.

	21.4.6	 	The Excess ANG which is not commercially exploited by the Contractor, or taken by
the Government or its nominee pursuant to this Article 21, shall be returned to the
subsurface structure or flared or otherwise disposed off as approved by the Government
in the context of the Development Plan, provided that flaring will be resorted to only
for small quantities and as a last resort.
	 
	21.4.7	 	As soon as practicable after the submission of the proposed development plan, the
Contractor and the Government or its nominee shall meet to discuss the sale and/or
disposal of any ANG discovered with a view to giving effect to the provisions of this
Article 21 in a timely manner.
	 
	21.5	 	Non Associated Natural Gas (NANG)
	 
	21.5.1	 	In the event of a Discovery of NANG in the Contract Area, the Contractor shall
promptly report such Discovery to the Management Committee and the

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	 	 	Government and the provisions of Articles 10.1 and 10.2 shall apply. The remaining
provisions of Article 10 would apply to the Discovery and development of NANG only
insofar as they are not inconsistent with the provisions of this Article.
Notwithstanding the provisions of Article 3, the Contractor shall be entitled to
retain the Discovery Area subject to the provisions of this Article 21.
	 
	21.5.2	 	If, pursuant to Article 10.1, the Contractor gives notification that the Discovery
is of potential commercial interest, the Contractor shall submit to the Management
Committee, within one (1) year from the date of notification of the above said
Discovery, the proposed Appraisal Programme, including a Work Programme and Budget to
carry out an adequate and effective appraisal of such Discovery, to determine (i)
without delay, whether such Discovery is a Commercial Discovery and (ii) with
reasonable precision, the boundaries of the area to be delineated as the Development
Area. Such proposed Appraisal Programme shall be supported by all relevant data
such as Well data, Contractor’s best estimate of reserve range and production
potential, and shall indicate the date of commencement of the proposed Appraisal
Programme.
	 
	21.5.3	 	The proposed Appraisal Programme together with the Work Programme and Budget
referred to in Article 21.5.2 shall be reviewed by the Management Committee within
sixty (60) days of its submission by the Contractor. The Management Committee shall
offer its comments within the said period. The said Appraisal Programme together with
the Work Programme and Budget submitted by the Contractor as revised or modified or
amended in light of the Management Committee review and advice, shall be adopted as
the Appraisal Programme and the Contractor shall promptly proceed with implementation
of the said Programme.
	 
	21.5.4	 	If on the basis of the results of the Appraisal Programme, the Contractor is of the
opinion that NANG has been discovered in commercial quantities, it shall submit to the
Management Committee as soon as practicable but not later than three (3) years from
the date of notification of the aforementioned Discovery, a proposal for the
declaration of the Discovery as a Commercial Discovery. Such proposal shall take into
account the Government’s policies on Gas utilization and propose alternative options,
if any for use or consumption of the NANG and be accompanied by a report on the
Discovery supported by, inter alia, technical and economic data, evaluations,
interpretations and analyses of such data and feasibility studies relating to the
Discovery prepared by or on behalf of the Contractor, and other relevant information.
If no proposal is submitted to the Management Committee by the Contractor within three
(3) years from the said Discovery, the Contractor shall relinquish its rights to
develop such Discovery and the area relating to such Discovery shall be excluded from
the Contract Area.

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	21.5.5	 	Where the Contractor has submitted a proposal for the declaration of a Discovery as
a Commercial Discovery, the Management Committee shall consider the proposal of the
Contractor with reference to commercial utilization or commercial development of the
NANG in the domestic market or elsewhere and in the context of Government’s policy on
Gas utilization and the chain of activities required to bring the NANG from the
Delivery Point to potential consumers in the domestic market or elsewhere. The
Management Committee may, within eighty five (85) days of the submission of the said
proposal, request the Contractor to submit any additional information on the
Discovery, the anticipated markets or any other related matter, that may reasonably be
required to facilitate a review. The Contractor shall submit the required information
within thirty (30) days of the request by the Management Committee. The Management
Committee will advise the Contractor of its review within one hundred and thirty five
(135) days from the submission of proposal or within fifty five (55) days from the
receipt of additional information, as the case may be, on the proposal made by the
Contractor to declare the Discovery as a Commercial Discovery.
	 
	21.5.6	 	If the Contractor declares the Discovery a Commercial Discovery after taking into
account the advice of the Management Committee as referred to in the Article 21.5.5,
the Contractor shall, within one (1) year of the declaration of the Discovery as a
Commercial Discovery, submit a development plan for the development of the Discovery
to the Management Committee for approval. Such plan shall be supported by all relevant
information including, inter alia, the information required in Article 10.7.
	 
	21.5.7	 	Unless otherwise agreed by the Management Committee, it shall consider the
proposed development plan and give their approval within one hundred and sixty five
(165) days of submission thereof or eighty five (85) days from the receipt of the
clarifications/additional information from the Contractor. Any
clarification/additional information required by the Management Committee shall be
asked for within eighty five (85) days of receipt of the proposal from the Contractor.
The Contractor shall provide such additional information within thirty (30) days from
the receipt of request by the Management Committee. If the Management Committee fails
to convey its decision within one hundred and sixty five (165) days from the
submission of the development plan or eighty five (85) days from the receipt of the
clarifications/additional information, whichever is later, the Contractor may submit
the development plan for the approval of the Government. Also, where, the Management
Committee rejects the development plan of the Contractor, the Contractor can submit
the development plan for the approval of the Government.
	 
	21.5.8	 	Where the development plan is submitted to the Government for approval pursuant to
Article 21.5.7, the Government shall convey its decision within one hundred and
fifteen (115) days from the date of receipt of the proposal from the Contractor.
Government, where it considers necessary, may ask

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	 	 	clarifications/additional information from the Contractor within eighty five (85)
days and shall convey its decision within fifty five (55) days from the date of
receipt of such clarifications/additional information.
	 
	21.5.9	 	If the Government has failed to approve or disapproves the Contractor’s proposed
development plan, within one hundred and fifteen (115) days from receipt or within
fifty five (55) days from the receipt of clarifications/ information from the
Contractor as mentioned in the Article 21.5.8, the Government shall advise the
Contractor, in writing, of the reasons for such failure or disapproval and the
Government and the Contractor shall meet to discuss the said development plan and the
reasons for the said failure to approve or disapproval, and use their best efforts to
agree on appropriate modifications thereto to meet the Government’s concerns or
objections. Thereafter, the Contractor shall have the right to resubmit, within eighty
five (85) days of communication from the Government, the proposed development plan
duly amended to meet the Government’s concerns. Such right of resubmission of the
proposed development plan shall be exercisable by the Contractor only once. The
Government will respond to the re-submitted plan within one hundred and fifteen (115)
days. If no such plan is submitted to the Government within the above specified
period, the Contractor shall relinquish its right to develop such Gas Discovery and
such Discovery shall be excluded from the Contract Area.
	 
	21.5.10	 	In the event that the Management Committee or Government, as may be the case,
approves the Contractor’s development plan for the development of such Commercial
Discovery, with such modifications and amendments as the Management Committee or
Government, as may be the case, may approve, the said Gas Discovery shall be promptly
developed by the Contractor in accordance with the approved plan which shall be the
Development Plan.
	 
	21.5.11	 	The Contractor will have a two (2) years period, from the date of approval of the
Development Plan by the Management Committee or Government, to tie-up the market(s)
for sale of Non-associated Natural Gas.
	 
	21.5.12	 	In the event the Contractor does not commence development of such Discovery within
ten (10) years from the date of the first Discovery Well, the Contractor shall
relinquish its right to develop such Discovery and the area relating to such Discovery
shall be excluded from the Contract Area.
	 
	21.6	 	Valuation of Natural Gas
	 
	21.6.1	 	The Contractor shall endeavour to sell all Natural Gas produced and saved from the
Contract Area at arms-length prices to the benefits of Parties to the Contract.
	 
	21.6.2	 	Notwithstanding the provision of Article 21.6.1, Natural Gas produced from the
Contract Area shall be valued for the purposes of this Contract as follows :

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	 	(a)	 	Gas which is used as per Article 21.2 or flared with the approval of
the Government or re-injected or sold to the Government pursuant to Article
21.4.5 shall be ascribed a zero value;
	 
	 	(b)	 	Gas which is sold to the Government or any other Government nominee
shall be valued on the terms and conditions actually obtained including pricing
formula and delivery; and
	 
	 	 	 	(Explanation : However, it is clarified that this provision would apply only
when the sale is made to the Government or Government nominee under the
provisions of the Contract)
	 
	 	(c)	 	Gas which is sold or disposed of otherwise than in accordance with
paragraph (a) or (b) shall be valued on the basis of competitive arms length
sales in the region for similar sales under similar conditions.

	21.7	 	The formula or basis on which the prices shall be determined pursuant to Article 21.6
shall be approved by the Government prior to the sale of Natural Gas to the
consumers/buyers, within sixty (60) Business Days from the receipt of proposal or from
the date of receipt of clarification/additional information, where asked for by the
Government. For granting this approval, Government shall take into account the
prevailing policy, if any, on pricing of Natural Gas including any linkages with
traded liquid fuels, and it may delegate or assign this function to a regulatory
authority as and when such an authority is in existence and in place.

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ARTICLE 22

EMPLOYMENT, TRAINING AND TRANSFER OF TECHNOLOGY

	22.1	 	Without prejudice to the right of the Contractor to select and employ such number of
personnel as, in the opinion of the Contractor, are required for carrying out
Petroleum Operations in a safe, cost effective and efficient manner, the Contractor
shall, to the maximum extent possible, employ, and require the Operator and
Subcontractors to employ, citizens of India having appropriate qualifications and
experience, taking into account experience required in the level and nature of the
Petroleum Operations.
	 
	22.2	 	The Operator shall offer a mutually agreed number of Indian nationals the opportunity
for on-the-job training and practical experience in Petroleum Operations during the
Exploration Period. Not later than six (6) months after approval of the Development
Plan, the Operator shall, in consultation with the Government, establish and implement
training programmes for staff positions in each phase and level of Petroleum
Operations including skilled, technical, executive and management positions, with a
view to ensuring employment of nationals of India and gradual and progressive
reduction of foreign personnel.
	 
	22.3	 	At the request of the Government, the Foreign Companies shall separately endeavour to
negotiate, in good faith, technical assistance agreements with the Government or a
company nominated by Government for this purpose setting forth the terms by which each
Foreign Company constituting the Contractor may render technical assistance and make
available commercially proven technical information of a proprietary nature for use in
India by the Government or the company nominated by Government. The issues to be
addressed in negotiating such technical assistance agreements shall include, but not
be limited to, licensing issues, royalty conditions, confidentiality restrictions,
liabilities, costs and method of payment.

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ARTICLE 23

LOCAL GOODS AND SERVICES

	23.1	 	In the conduct of Petroleum Operations, the Contractor shall:

	 	(a)	 	give preference to the purchase and use of goods manufactured, produced
or supplied in India provided that such goods are available on terms equal to
or better than imported goods with respect to timing of delivery, quality and
quantity required, price and other terms;
	 
	 	(b)	 	employ Indian Subcontractors having the required skills or expertise,
to the maximum extent possible, insofar as their services are available on
comparable standards with those obtained elsewhere and at competitive prices
and on competitive terms; provided that where no such Subcontractors are
available, preference shall be given to non-Indian Subcontractors who utilise
Indian goods to the maximum extent possible, subject, however, to the proviso
in paragraph (a) above; and
	 
	 	(c)	 	ensure that provisions in terms of paragraphs (a) to (b) above are
contained in contracts between the Operator and its Subcontractors.

	23.2	 	Subject to Article 8.3(f), the Contractor shall establish appropriate procedures,
including tender procedures, for the acquisition of goods and services which shall
ensure that suppliers and Subcontractors in India are given adequate opportunity to
compete for the supply of goods and services. The tender procedures shall include,
inter alia, the financial amounts or value of contracts which will be awarded on the
basis of selective bidding or open competitive bidding, the procedures for such
bidding, and the exceptions to bidding in cases of emergency, and shall be subject to
the approval of the Management Committee.
	 
	23.3	 	Within sixty (60) days after the end of each Year, the Contractor shall provide the
Government with a report outlining its achievements in utilising Indian resources
during that Year in accordance with Section 10 of Appendix C to this Contract.
	 
	23.4	 	In this Article “goods” means equipment, materials and supplies.

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ARTICLE 24

INSURANCE AND INDEMNIFICATION

	24.1	 	Insurance

	24.1.1	 	The Contractor shall, during the term of this Contract, maintain and obtain
insurance coverage for and in relation to Petroleum Operations for such amounts and
against such risks as are customarily or prudently insured in the international
petroleum industry in accordance with modern oilfield and petroleum industry
practices, and shall furnish to the Government, certificates evidencing that such
coverage is in effect. Such insurance policies shall include the Government as
additional insured and shall waive subrogation against the Government. The said
insurance shall, without prejudice to the generality of the foregoing, cover:

	 	(a)	 	loss or damage to all installations, equipment and other assets for so
long as they are used in or in connection with Petroleum Operations; provided,
however, that if for any reason the Contractor fails to insure any such
installation, equipment or assets, it shall replace any loss thereof or repair
any damage caused thereto;
	 
	 	(b)	 	loss, damage or injury caused by pollution in the course of or as a
result of Petroleum Operations;
	 
	 	(c)	 	loss of property or damage or bodily injury suffered by any third party
in the course of or as a result of Petroleum Operations for which the
Contractor may be liable;
	 
	 	(d)	 	any claim for which the Government may be liable relating to the loss
of property or damage or bodily injury suffered by any third party in the
course of or as a result of Petroleum Operations for which the Contractor is
liable to indemnify the Government, or the State Government;
	 
	 	(e)	 	with respect to Petroleum Operations offshore, the cost of removing
wrecks and cleaning up operations following any accident in the course of or as
a result of Petroleum Operations; and
	 
	 	(f)	 	the Contractor’s and/or the Operator’s liability to its employees
engaged in Petroleum Operations.

	24.1.2	 	The Contractor shall require its Subcontractors to obtain and maintain insurance
against the risks referred to in Article 24.1.1 relating mutatis mutandis to such
Subcontractors.

	24.2	 	Indemnity

Subject to Article 4.7, the Contractor shall indemnify, defend and
hold the Government and the State Government harmless against all
claims, losses and damages of any nature whatsoever, including,
without limitation, claims for loss or damage to property or injury
or death to persons caused by or resulting from any Petroleum
Operations conducted by or on behalf of the Contractor.

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ARTICLE 25

RECORDS, REPORTS, ACCOUNTS AND AUDIT

	25.1	 	The Contractor shall prepare and maintain in original at an office in India accurate
and current books, records, reports and accounts of its activities for and in
connection with Petroleum Operations so as to present a fair, clear and accurate
record of all its activities, expenditures and receipts.
	 
	25.2	 	Based on generally accepted and recognised accounting principles and modern petroleum
industry practices, record, books, accounts and accounting procedures in respect of
Petroleum Operations shall be maintained on behalf of the Contractor by the Operator,
at its business office in India, in accordance with the Accounting Procedure to this
Contract.
	 
	25.3	 	The Contractor shall submit to the Government regular Statements and reports relating
to Petroleum Operations as provided in Appendix-C.
	 
	25.4.1	 	The annual audit of accounts shall be carried out on behalf of the Contractor by a
qualified, independent firm of recognised chartered accountants, registered in India.
	 
	25.4.2	 	The appointment of auditor and the scope of audit should have prior approval of the
Management Committee.
	 
	25.4.3	 	The Contractor shall submit the audited accounts to the Management Committee for
approval within sixty (60) days from the end of the Year. The Management Committee
shall consider and approve the auditor’s report within thirty (30) days after the
submission of such report.
	 
	25.4.4	 	Copy of the auditors report shall be submitted to the Government within thirty (30)
days after the approval of the Management Committee.
	 
	25.5	 	The Government shall have the right to audit the accounting records of the Contractor
in respect of Petroleum Operations as provided in the Accounting Procedure.
	 
	25.6	 	The accounting and auditing provisions and procedures specified in this Contract are
without prejudice to any other requirements imposed by any statute in India,
including, without limitation, any specific requirements of the statutes relating to
taxation of Companies.
	 
	25.7	 	For the purpose of any audit referred to in Articles 25.5, the Contractor shall make
available in original to the auditor all such books, records, accounts and other
documents and information as may be reasonably required by the auditor during normal
business hours.

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ARTICLE 26

INFORMATION, DATA, CONFIDENTIALITY,

INSPECTION AND SECURITY

	26.1	 	The Contractor shall, promptly after they become available in India, provide the
Government, free of cost, with all data obtained as a result of Petroleum Operations
under the Contract including, but not limited to, geological, geophysical,
geochemical, petrophysical, engineering, Well logs, maps, magnetic tapes, cores,
cuttings and production data as well as all interpretative and derivative data,
including reports, analyses, interpretations and evaluation prepared in respect of
Petroleum Operations (hereinafter referred to as “Data”). Data shall be the property
of the Government, provided, however, that the Contractor shall have the right to make
use of such Data, free of cost, for the purpose of Petroleum Operations under this
Contract as provided herein.
	 
	26.2	 	The Contractor may, for use in Petroleum Operations, retain copies or samples of
material or information constituting the Data and, with the approval of the
Government, original material, except that where such material is capable of
reproduction and copies have been supplied to the Government, the Contractor may,
subject to the right of inspection by the Government, export, subject to any
applicable regulations, samples or other original Data for processing or laboratory
examination or analysis, provided that representative samples equivalent in quality,
size and quantity, or, where such material is capable of reproduction, copies of
equivalent quality, have first been delivered to the Government.
	 
	26.3	 	The Contractor shall keep the Government currently advised of all developments taking
place during the course of Petroleum Operations and shall furnish the Government with
full and accurate information and progress reports relating to Petroleum Operations
(on a daily, Monthly, Yearly or other periodic basis) as Government may reasonably
require, provided that this obligation shall not extend to proprietary technology. The
Contractor shall meet with the Government at a mutually convenient location in India
to present the results of all geological and geophysical work carried out as well as
the results of all engineering and drilling operations as soon as such Data becomes
available to the Contractor.
	 
	26.4	 	All Data, information and reports obtained or prepared by, for or on behalf of, the
Contractor pursuant to this Contract shall be treated as confidential and, subject to
the provisions herein below, the Parties shall not disclose the contents thereof to
any third party without the consent in writing of the other Parties.
	 
	26.5	 	The obligation specified in Article 26.4 shall not operate so as to prevent
disclosure:

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	 	(a)	 	to Affiliates, contractors, or Subcontractors for the purpose of
Petroleum Operations;
	 
	 	(b)	 	to employees, professional consultants, advisers, data processing
centres and laboratories, where required, for the performance of functions in
connection with Petroleum Operations for any Party comprising the Contractor;
	 
	 	(c)	 	to banks or other financial institutions, in connection with Petroleum
Operations;
	 
	 	(d)	 	to bonafide intending assignees or transferees of a Participating
Interest of a Party comprising the Contractor or in connection with a sale of
the stock or shares of a Party comprising the Contractor;
	 
	 	(e)	 	to the extent required by any applicable law or in connection with any
legal proceedings or by the regulations of any stock exchange upon
which the shares of a Party comprising the Contractor are quoted;
	 
	 	(f)	 	to Government departments for, or in connection with, the preparation
by or on behalf of the Government of statistical reports with respect to
Petroleum Operations, or in connection with the administration of this Contract
or any relevant law or for any purpose connected with Petroleum Operations; and
	 
	 	(g)	 	by a Party with respect to any Data or information which, without
disclosure by such Party, is generally known to the public.

	26.6	 	Any Data, information or reports disclosed by the Parties comprising the Contractor
to any other person pursuant to Article 26.5 (a) to (d) shall be disclosed on the
terms that such Data, information or reports shall be treated as confidential by the
recipient. Prompt notice of disclosures made by Companies pursuant to Article 26.5
shall be given to the Government.
	 
	26.7	 	Any Data, information and reports relating to the Contract Area which, in the opinion
of the Government, might have significance in connection with offers by the Government
of acreages, may be disclosed by the Government for such purpose. Government may also
disclose such Data or information for any exploration programme to be conducted by a
third party in adjoining areas with the consent of the Contractor, for better
understanding of regional geological set-up and such consent by the Contractor shall
not be unreasonably withheld.
	 
	26.8	 	Where an area ceases to be part of the Contract Area, the Contractor shall hand over
all the originals and copies of the Data and information with respect to that part to
the Government within a period of one (1) year from the date of relinquishment or
surrender. The Contractor shall, however, be allowed to retain one copy of the Data in
its possession for its own use, where required, and shall not use the Data for sale or
any other purposes. Subject to the provisions of this Article, the Contractor shall
keep all Data/information confidential.

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	26.9	 	The Government shall, at all reasonable times, through duly authorised
representatives, be entitled to observe Petroleum Operations and to inspect all
assets, books, records, reports, accounts, contracts, samples and Data kept by the
Contractor or the Operator in respect of Petroleum Operations in the Contract Area,
provided, however, that the Contractor shall not be required to disclose any
proprietary technology. The duly authorised representatives shall be given reasonable
assistance by the Contractor for such functions and the Contractor shall afford such
representatives reasonable use of all facilities and privileges afforded to its own
personnel in the field including the use of office space and housing for a period not
exceeding 30 mandays in a Year and thereafter at the cost of Government. The said
representatives shall be entitled to make a reasonable number of surveys,
measurements, drawings, tests and copies of documents, take samples, and make
reasonable use of the equipment and instruments of the Contractor provided that such
functions shall not unduly interfere with the Contractor’s Petroleum Operations.
	 
	26.10	 	The Contractor shall give reasonable advance notice to the Government, or to any
other authority designated by the Government for such purpose, of its programme of
conducting surveys by aircraft or by ships, indicating, inter alia, the name of the
survey to be conducted, approximate extent of the area to be covered, the duration of
the survey, the commencement date, and the name of the airport or port from which the
survey aircraft or ship will commence its voyage.
	 
	26.11	 	The Government, or the authority designated by the Government for such purpose,
shall have the right to inspect any aircraft or ship used by the Contractor or a
Subcontractor carrying out any survey or other operations in the Contract Area and
shall have the right to put on board such aircraft or ship, Government officers in
such number as may reasonably be necessary to ensure compliance by the Contractor or
the Subcontractor with the security requirements of India.

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ARTICLE 27

TITLE TO PETROLEUM, DATA AND ASSETS

	27.1	 	The Government is the sole owner of Petroleum underlying the Contract Area and shall
remain the sole owner of Petroleum produced pursuant to the provisions of this
Contract except as regards that part of Crude Oil, Condensate or Gas the title whereof
has passed to the Contractor or any other person in accordance with the provisions of
this Contract.

	27.2	 	Title to Petroleum to which the Contractor is entitled under this Contract, and title
to Petroleum sold by the Companies shall pass to the relevant buyer party at the
Delivery Point. The Contractor shall be responsible for all costs and risks prior to
and including at the Delivery Point and each buyer party shall be responsible for all
costs and risks associated with such buyer party’s share after the Delivery Point.

	27.3	 	Title to all Data specified in Article 26 shall be vested in the Government and the
Contractor shall have the right to use thereof as therein provided.

	27.4	 	Assets purchased by the Contractor for use in Petroleum Operations shall be owned by
the Parties comprising the Contractor in proportion to their Participating Interest
provided that the Government shall have the right to require vesting of full title and
ownership in it, free of charge and encumbrances, of any or all assets, whether fixed
or movable, acquired and owned by the Contractor for use in Petroleum Operations
inside or outside the Contract Area, such right to be exercisable at the Government’s
option upon expiry or earlier termination of the Contract.

	27.5	 	The Contractor shall be responsible for proper maintenance, insurance and safety of
all assets acquired for Petroleum Operations and for keeping them in good repair,
order and working condition at all times, and the costs thereof shall be recoverable
as Contract Costs in accordance with Appendix-C.

	27.6	 	So long as this Contract remains in force, subject to Article 27.5, the Contractor
shall, free of any charge for the purpose of carrying out Petroleum Operations
hereunder, have the exclusive use of assets which have become the property of
Government.

	27.7	 	Equipment and assets no longer required for Petroleum Operations during the term of
the Contract shall be sold, exchanged or otherwise disposed of by the Contractor,
provided however that the proceeds of sale shall be credited to Petroleum Operations
as provided in Appendix C, provided that prior written consent of the Management
Committee shall be obtained for each transaction in excess of US$ 50,000 (Fifty
thousand United States Dollars) or such other value as may be agreed from time to time
by the Management Committee. The consent of the Management Committee shall not be
unreasonably withheld.

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ARTICLE 28

ASSIGNMENT OF PARTICIPATING INTEREST

	28.1	 	Subject to the terms of this Article and other terms of this Contract, any Party
comprising the Contractor may assign, or transfer, a part or all of its Participating
Interest, with the prior written consent of the Government, which consent shall not be
unreasonably withheld, provided that the Government is satisfied that:

	 	(a)	 	the prospective assignee or transferee is of good standing, has the
capacity and ability to meet its obligations hereunder, and is willing to
provide an unconditional undertaking to the Government to assume its
Participating Interest share of obligations and to provide guarantees in
respect thereof as provided in the Contract;
	 
	 	(b)	 	the prospective assignee or transferee is not a company incorporated in
a country with which the Government, for policy reasons, has restricted trade
or business;
	 
	 	(c)	 	the prospective assignor or transferor and assignee or transferee
respectively are willing to comply with any reasonable conditions of the
Government as may be necessary in the circumstances with a view to ensuring
performance under the Contract; and
	 
	 	(d)	 	the assignment or transfer will not adversely affect the performance or
obligations under this Contract or be contrary to the interests of India.

	28.1.1	 	Subject to Article 28.7, nothing in this Article 28 shall prevent a Party comprising
the Contractor from assigning or transferring a part or all of its Participating
Interest to an Affiliate, with the approval of the Management Committee, provided
that;

	 	a)	 	the assignee provides an irrevocable, unconditional bank guarantee from
a reputed bank of good standing in India, acceptable to the Government, in
favour of the Government, for the amount specified in Article 29.2, in a form
provided at Appendix-G;
	 
	 	b)	 	the assignee provides a parent financial and performance guarantee
issued by the guarantor which furnished the guarantee pursuant to Article 29 in
respect of the assignor Party’s obligations under this Contract in favour of
the Government, of the performance of such Affiliate assignee of its
obligations under this Contract;
	 
	 	c)	 	the prospective Affiliate is not a company incorporated in a country
with which the Government, for policy reason, has restricted trade or business;
and
	 
	 	d)	 	the assignment will not adversely affect the performance or obligations
under this Contract or be contrary to the interest of India.

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	28.2	 	In case of any change in the status of a Company or its shareholding resulting in a change
in:

	 	      a)	 	the control of the Company; or
	 
	 	      b)	 	its relationship with the company(ies) providing the guarantee under
Article 29.1 (a) and 29.1 (b);

	 	 	the Company shall seek the consent of the Government for assigning the Participating
Interest under the changed circumstances and the provisions of this Article 28 shall
apply, mutatis mutandis, to be obtaining of such consent. For the purpose of this
Article 28.2, control has the same meaning as in Article 1.3.
	 
	28.3	 	An application for consent to assign or transfer shall be accompanied by all relevant
information concerning the proposed assignment or transfer including detailed
information on the proposed assignee or transferee and its shareholding and corporate
structure, as was earlier required from the Companies constituting the Contractor, the
terms of the proposed assignment or transfer and the unconditional undertaking
referred to in Article.
	 
	28.4	 	The applicant shall also submit such information relating to the prospective assignee
or transferee of the assignment or transfer as the Government may reasonably require
to enable proper consideration and disposal of the application.
	 
	28.5	 	No assignment or transfer shall be effective until the approval of the Government is
received or deemed to have been received. Approval may be given by the Government on
such terms and conditions as it may deem fit. Provided that such terms and conditions
may not increase the obligations of the Parties comprising the Contractor. Upon
assignment or transfer of its interest in this Contract, the assignor or transferor
shall be released and discharged from its obligations hereunder only to the extent
that such obligations are assumed by the assignee or transferee with the approval of
the Government.
	 
	28.6	 	In the event that the Government does not give its consent or does not respond to a
request for assignment or transfer by a Party comprising the Contractor within one
hundred and twenty (120) days of such request and receipt of all information referred
to in Article 28.3 above, consent shall be deemed to have been given by the
Government.
	 
	28.7	 	An assignment or transfer shall not be made where the Participating Interest to be
retained by the proposed assignor or the percentage interest of assignee shall be less
than ten per cent (10%) of the total Participating Interest of all the constituents of
the Contractor, except where the Government, on the recommendations of the Management
Committee may, in special circumstances, so permit.

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	28.8	 	Nothing contained in this Article 28, shall prevent a Party comprising the Contractor
from mortgaging, pledging, charging or otherwise encumbering at its own risk and cost
all or part of its Participating Interest for the purposes of security relating to
finance to the extent required for performing its obligation under the Contract,
provided that:

	 	i)	 	such Party shall remain solely liable for all its obligations relating
to its Participating Interest to the exclusion of the other participants
thereto;
	 
	 	ii)	 	the encumbrance shall be expressly subordinated to the rights of the
other Parties under this Contract. The obligations occurring from the said
encumbrance shall be the sole responsibility of the original Party and shall in
no manner compromise the rights of other Parties to the Contract;
	 
	 	iii)	 	such Party has given reasonable notice of such encumbrance and
furnishes to all other Parties (including, for the avoidance of doubt, the
Government) a certified copy of the executed instrument(s) evidencing the
encumbrances;
	 
	 	iv)	 	keeping in view the national interest of India, prior consent of the
Government shall be required (which consent shall not be unreasonably withheld)
of the list of potential lenders with whom such Party can consider
hypothecation;
	 
	 	v)	 	the Party creating the charge shall ensure that such charge shall not
in any way affect the interest of other Parties or result in interference with
joint operations. In the event of any claims or liabilities imposed on other
Parties because of the creation of such charges, the Party having created
charge on its Participating Interest shall indemnify the other Parties; and
	 
	 	vi)	 	in case of foreclosure or default by a borrowing Party, the mortgagee
shall not be deemed to have acquired a right to carry on either by itself or
through an agent, the Petroleum Operation, without the written consent of the
Government of India.

	28.8.1	 	The Parties acknowledge that to obtain financing a Party (“Borrower”) will be
required to secure for a permitted chargee the right to receive a copy of any notice
served on the Borrower and the Parties agree that they shall serve a copy of any such
notice on any such permitted chargee in accordance with the provisions of Article 37
at the same time as such notice is served on the Borrower. For the purposes of
Article 37 the address for service of notices of the permitted chargee shall be that
specified in the instrument or instruments referred to in Article 28.8(iii).

	28.8.2	 	In case lender elects to participate directly or through a company other than the
Borrower under the financing arrangement referred to above, the same shall be subject
to the rights of Government as contained in Article 28.1 of Contract and the
pre-emptive rights of the Parties as may be contained in Operating Agreement. Any
Party which wishes to exercise the said pre-emptive rights will explicitly assume the
obligation on the same terms and conditions as the Borrower.

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ARTICLE 29

GUARANTEES

	29.1	 	Subject to Article 29.1 (d), each of the Companies constituting the Contractor shall
procure and deliver to the Government within thirty (30) days from the Effective Date
of this Contract:

	 	(a)	 	an irrevocable, unconditional bank guarantee from a reputed bank of
good standing in India, acceptable to the Government, in favour of the
Government, for the amount specified in Article 29.2, in a form provided at
Appendix-G;
	 
	 	(b)	 	financial and performance guarantee in favour of the Government from a
parent company acceptable to the Government, in the form and substance set out
in Appendix-E1, or, where there is no such parent company, the financial and
performance guarantee from the Company itself in the form and substance setout
in Appendix-E2;
	 
	 	(c)	 	a legal opinion from its legal advisors, in a form satisfactory to
the Government, to the effect that the aforesaid guarantees have been duly
signed and delivered on behalf of the guarantors with due authority and is
legally valid and enforceable and binding upon them;
	 
	 	(d)	 	Government Company(ies), as defined in the Companies Act and Companies
having a net worth of US$ Five Hundred (500) million or more (as per the latest
audited account) shall not be required to furnish bank guarantee towards its
Minimum Work Programme as specified in Article 5 of this Contract;

	29.2	 	The amount of the guarantee referred to in Article 29.1 (a)
above shall be an amount equal to thirty five percent
(35%) of the Company’s Participating Interest share of
the total estimated annual expenditure in respect of
the Minimum Work Programme to be undertaken by the
Contractor in the Contract Area during the relevant
Year of a Phase, subject to Article 29.3.
	 
	29.3	 	The guarantee referred to in Article 29.2 shall provide that;

	 	(a)	 	at the end of each Year it shall be automatically renewed for an amount
equal to a Company’s Participating Interest share of thirty five percent (35%)
of the total estimated expenditure in respect of the Minimum Work Programme to
be undertaken for the following Year of an Exploration Phase, unless the
Contractor has terminated the Contract in accordance with the terms thereof.
The guarantee shall be renewed at the end of each Year positively thirty (30)
days before the expiry of the guarantee period.

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	 	(b)	 	after the completion and due performance of the Minimum Work Programme
of a particular Exploration Phase, the guarantee will be released in favour of
the Company on presentation to the bank of a certificate from the Government
that the obligation of the Contractor has been fulfilled and the guarantee may
be released, subject to Article 29.4.

	29.4	 	If the Contractor elects to proceed to the second and third Exploration Phase
respectively of the Exploration Period, a bank guarantee for the succeeding
Exploration Phase in terms of Articles 29.1 (a), 29.2 and 29.3 shall be delivered to
the Government with the notice of such election and if such guarantee is not so
delivered, the provisions of Article 29.5 shall apply.

	29.5	 	If any of the documents referred to in Article 29.1 is not delivered within the
period specified herein, this Contract may be terminated by the Government upon ninety
(90) days written notice of its intention to do so.

	29.6	 	Subject to Article 29.7, notwithstanding any change in the composition or
shareholding of the parent company furnishing a performance guarantee as provided
herein, it shall, not under any circumstances, be absolved of its obligations
contained in the guarantees provided pursuant to Article 29.1(b).

	29.7	 	If :

	 	(a)	 	a Party (“Assignor”) assigns all or a part of its Participating
Interest to a third party (“Assignee”) in accordance with Article 28;
	 
	 	(b)	 	the Assignee provides an irrevocable, unconditional bank guarantee from
a reputed bank of good standing in India, acceptable to the Government, in
favour of the Government, for an amount equal to the assignee’s Participating
Interest share of the estimated expenditure of the Minimum Work Programme of
the Exploration Phase current at the Effective Date of the assignment;
	 
	 	(c)	 	the Assignee provides performance guarantee and legal opinion in terms
of this Article; and
	 
	 	(d)	 	the addendum to the Contract giving effect to the assignment of
Participating Interest is executed by all Parties;

	 	 	then the Government shall release the guarantee given by the assignor under Article
29.1 (a) to the extent of the amount of the guarantee provided by the assignee and
where relevant the guarantee under Article 29.1 (b).

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ARTICLE 30

TERM AND TERMINATION OF THE CONTRACT

	30.1	 	The term of this Contract shall be for the period of the License and any Lease
granted thereunder, unless the Contract is terminated earlier in accordance with its
terms, and shall be deemed to have been terminated, if for any reason, the Contractor
ceases to hold such License or Lease.

	30.2	 	Subject to the provision of Articles 5, 14 and 30.6 and without prejudice to the
provisions of Article 30.7 or any other provisions of this Contract, the Contractor
shall have the right to terminate this Contract:

	 	(a)	 	with respect to any part of the Contract Area other than a Development
Area then producing, or that prior thereto had produced Petroleum, upon giving
ninety (90) days written notice of its intention to do so; and
	 
	 	(b)	 	with respect to any Development Area in which Petroleum is being
produced, or that prior thereto had produced Petroleum, upon giving at least
one hundred and eighty (180) days written notice of its intention to do so.

	30.3	 	This Contract may, subject to the provisions herein below and Article 31, be
terminated by the Government upon giving ninety (90) days written notice with reasons
to the other Parties of its intention to do so in the following circumstances, namely,
that the Contractor or a Party comprising the Contractor (“the Defaulting Party”)

	 	(a)	 	has knowingly submitted any false statement to the Government in any
manner which was a material consideration in the execution of this Contract; or
	 
	 	(b)	 	has intentionally and knowingly extracted or authorised the extraction
of hydrocarbon not authorized to be extracted by the Contract or without the
authority of the Government except such extractions as may be unavoidable as a
result of operations conducted hereunder in accordance with generally accepted
modern oilfield and petroleum industry practices which, when so extracted, were
immediately notified to the Government or
	 
	 	(c)	 	is adjudged bankrupt by a competent court or enters into or scheme of
composition with its creditors or takes advantage of any law for the benefit of
debtors; or
	 
	 	(d)	 	has passed a resolution to apply to a competent court for liquidation
of the Company unless the liquidation is for the purpose of amalgamation or
reconstruction of which the Government has been given notice and the

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	 	 	 	Government is satisfied that the Company’s performance under this Contract
would not be adversely affected thereby and has given its approval thereto;
or
	 
	 	(e)	 	has assigned any interest in the Contract without the prior consent of
the Government as provided in Article 28; or
	 
	 	(f)	 	has failed to make any monetary payment required by law or under this
Contract by the due date or within such further period after the due date as
may thereafter be specified by the Government; or
	 
	 	(g)	 	has failed to comply with or has contravened the provisions of this
Contract in a material particular; or
	 
	 	(h)	 	has failed to comply with any final determination or award made by a
sole expert or arbitrators subject to Article 33; or
	 
	 	(i)	 	has failed to carry out or observe any of the terms and conditions of
the License or Lease or the provisions of the Acts or Rules in force
thereunder, subject however, to Article 31.
	 
	 	(j)	 	on notice of termination as provided in Article 29.5.

	 	 	PROVIDED THAT
	 
	 	 	where the Contractor comprises two or more Parties, the Government shall not
exercise its rights of termination pursuant to Article 30.3, on the occurrence, in
relation to one or more, but not all, of the Parties comprising the Contractor, of
an event entitling the Government to terminate the Contract,

	 	(a)	 	if any other Party or Parties constituting the Contractor (the
non-Defaulting Party or Parties) satisfies the Government that it, or they,
is/are willing and would be able to carry out the obligations of the
Contractor.
	 
	 	(b)	 	where the non Defaulting Party or Parties with the consent of the
Government has/have acquired the Participating Interest of the Defaulting Party
pursuant to the provisions of the Operating Agreement and has/have procured and
delivered to the Government a guarantee or guarantees as referred to in Article
29.1 in respect of the Participating Interest of the Defaulting Party acquired
by the non Defaulting Party or Parties.

	30.4	 	This Contract may also be terminated by the Government on giving the requisite notice
specified above if the events specified in Article 30.3 (c) and (d) occur with respect
to a company which has given a performance guarantee pursuant to Article 29 subject
however to Article 30.5.

	30.5	 	If the circumstance or circumstances that give rise to the right of termination under
Article 30.3(f) or (g) or (i) or Article 30.4 are remedied (whether by the Defaulting
Company or by another Party or Parties in its behalf) within the ninety (90) day
period, or such extended period as may be granted by the Government, following the
notice of the Government’s intention to terminate the Contract as aforesaid, such
termination shall not become effective.

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	30.6	 	On termination of this Contract, for any reason whatsoever, the rights and
obligations of the Contractor shall cease but such termination shall not affect any
rights of any Party which may have accrued or any obligations undertaken or incurred
including obligations under Article 5.7, by the Contractor or any Party comprising the
Contractor and not discharged prior to the date of termination.
	 
	30.7	 	
In the event of termination pursuant to Articles 30.2, 30.3 or 30.4:

	 	(a)	 	the Government may require the Contractor, for a period not exceeding
one eighty (180) days from the date of termination, to continue, for the
account and at the cost of the Government, Crude Oil or Natural Gas production
activities until the right to continue such production has been transferred to
another entity;
	 
	 	(b)	 	a Foreign Company, which is a constituent of the Contractor, shall have
to remove and export all its property subject to Article 27 and the provisions
hereof provided that in the event that ownership of any property is in doubt,
or disputed, such property shall not be exported unless and until the doubt or
dispute has been settled in favour of the Foreign Company.

	30.8	 	Within ninety (90) days after the termination of this Contract, pursuant to Article
30.2, 30.3, or 30.4, or such longer period as the Government may agree, the Contractor
shall comply with Article 14.9 and any reasonably necessary action as directed by the
Government to avoid Environmental Damage or hazards to human life or to the property
of others.

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ARTICLE 31

FORCE MAJEURE

	31.1	 	Any non-performance or delay in performance by any Party hereto of any of its
obligations under this Contract, or in fulfilling any condition of any License or
Lease granted to such Party, or in meeting any requirement of the Act, the Rules or
any License or Lease, shall, except for the payment of monies due under this Contract
or under the Act and the Rules or any law, be excused if, and to the extent that, such
non-performance or delay in performance under this Contract is caused by Force Majeure
as defined in this Article.

	31.2	 	For the purpose of this Contract, the term Force Majeure means any cause or event,
other than the unavailability of funds, whether similar to or different from those
enumerated herein, lying beyond the reasonable control of, and unanticipated or
unforeseeable by, and not brought about at the instance of, the Party claiming to be
affected by such event, or which, if anticipated or foreseeable, could not be avoided
or provided for, and which has caused the non-performance or delay in performance.
Without limitation to the generality of the foregoing, the term Force Majeure shall
include natural phenomena or calamities, earthquakes, typhoons, fires, wars declared
or undeclared, hostilities, invasions, blockades, riots, strikes, insurrection and
civil disturbances but shall not include the unavailability of funds.

	31.3	 	Where a Party is claiming suspension of its obligations on account of Force Majeure,
it shall promptly, but in no case later than seven (7) days after the occurrence of
the event of Force Majeure, notify the Management Committee in writing giving full
particulars of the Force Majeure, the estimated duration thereof, the obligations
affected and the reasons for its suspension.

	31.4	 	A Party claiming Force Majeure shall exercise reasonable diligence to seek to
overcome the Force Majeure event and to mitigate the effects thereof on the
performance of its obligations under this Contract. The Party affected shall promptly
notify the Management Committee as soon as the Force Majeure event has been removed
and no longer prevents it from complying with the obligations which have been
suspended and shall thereafter resume compliance with such obligations as soon as
possible.

	31.5	 	The Party asserting the claim of Force Majeure shall have the burden of proving that
the circumstances constitute valid grounds of Force Majeure under this Article and
that such Party has exercised reasonable diligence and efforts to remedy the cause of
any alleged Force Majeure.

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	31.6	 	Where a Party is prevented from exercising any rights or performing any obligations
under this Contract due to Force Majeure, the time for the performance of the
obligations affected thereby and for performance of any obligation or the exercise of
any right dependent thereon, and the term of any Exploration Phase of the Exploration
Period or this Contract, may be extended to the extent of Force Majeure period or by
such period as may be agreed by the Management Committee.

	31.7	 	Notwithstanding anything contained herein above, if an event of Force Majeure occurs
and is likely to continue for a period in excess of thirty (30) days, the Parties
shall meet to discuss the consequences of the Force Majeure and the course of action
to be taken to mitigate the effects thereof or to be adopted in the circumstances.

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ARTICLE 32

APPLICABLE LAW AND LANGUAGE OF THE CONTRACT

	32.1	 	This Contract shall be governed and interpreted in accordance with the laws of India.

	32.2	 	Nothing in this Contract shall entitle the Contractor to exercise the rights,
privileges and powers conferred upon it by this Contract in a manner which will
contravene the laws of India.

	32.3	 	The English language shall be the language of this Contract and shall be used in
arbitral proceedings. All communications, hearing or visual materials or documents
relating to this Contract shall be written or prepared in English.

	32.4	 	The laws will also include amendments, revisions, modifications etc.

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ARTICLE 33

SOLE EXPERT, CONCILIATION AND ARBITRATION

	33.1	 	The Parties shall use their best efforts to settle amicably all disputes, differences
or claims arising out of or in connection with any of the terms and conditions of this
Contract or concerning the interpretation or performance thereof.

	33.2	 	Matters which, by the terms of this Contract, the Parties have agreed to refer to a
sole expert and any other matter which the Parties may agree to so refer, may be
referred to a sole expert who shall be an independent and impartial person of
international standing with relevant qualifications and experience, appointed by
agreement between the Parties and who shall not, by virtue of nationality, personal
connection or commercial interest, have a conflict between his/her own interest and
his/her duty as a sole expert. In the event that the Parties fail or are unable to
agree on a sole expert within thirty (30) days or such longer period as may be
mutually agreed by Parties, the sole expert shall be appointed by a body or an
institution or an agency or a person, mutually agreed by Parties. In case, there is no
agreement on the body or an institution or an agency or a person for appointing sole
expert or such institution or agency or body fails to appoint a sole expert within
thirty (30) days or such longer period as may be mutually agreed by Parties, the
matter shall be referred to arbitration. Any sole expert appointed shall be acting as
an expert and not as an arbitrator and the decision of the sole expert on matters
referred to him/her shall be final and binding on the Parties and shall not be subject
to arbitration.

	33.3	 	Subject to the provisions of this Contract, the Parties hereby agree that any
controversy, difference, disagreement or claim for damages, compensation or otherwise
(hereinafter in this Clause referred to as a “dispute”) arising between the Parties,
which cannot be settled amicably within ninety (90) days after the dispute arises, may
(except for those referred to in Article 33.2, which may be referred to a sole expert)
be submitted to conciliation or an arbitral tribunal for final decision as hereinafter
provided.

	33.4	 	The arbitral tribunal shall consist of three arbitrators. Each Party to the dispute
shall appoint one arbitrator and the Party or Parties shall so advise the other
Parties. The two arbitrators appointed by the Parties shall appoint the third
arbitrator.

	33.5	 	Any Party may, after appointing an arbitrator, request the other Party(ies) in
writing to appoint the second arbitrator. If such other Party fails to appoint an
arbitrator within thirty (30) days of receipt of the written request to do so, such
arbitrator may, at the request of the first Party, be appointed in accordance with
Arbitration and Conciliation Act, 1996.

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	33.6	 	If the two arbitrators appointed by or on behalf of the Parties fail to agree on the
appointment of the third arbitrator within thirty (30) days of the appointment of the
second arbitrator and if the Parties do not otherwise agree, at the request of either
Party, the third arbitrator shall be appointed in accordance with Arbitration and
Conciliation Act, 1996.

	33.7	 	If any of the arbitrators fails or is unable to act, his successor shall be appointed
by the Party or person who originally appointed such in the manner set out in this
Article as if he was the first appointment.

	33.8	 	The decision of the arbitral tribunal shall be pronounced within four (4) months
unless otherwise extended by the Parties, and, in case of difference among the
arbitrators the decision of the majority shall be final and binding on the Parties.

	33.9	 	The arbitration agreement contained in this Article 33 shall be governed by the
Arbitration and Conciliation Act, 1996 (Arbitration Act). Arbitration proceedings
shall be conducted in accordance with the rules for arbitration provided in
Arbitration Act.

	33.10	 	The right to arbitrate disputes under this Contract shall survive expiry or the
termination of this Contract.

	33.11	 	Prior to submitting a dispute to arbitration, the Parties may by mutual agreement
submit the matter for conciliation in accordance with Part III of the Arbitration and
Conciliation Act, 1996. No arbitration proceedings shall be instituted while
conciliation proceedings are pending provided that a Party may initiate arbitration
proceedings in the event that dispute has not been resolved by conciliation within
sixty (60) days of the date of agreement by the Parties to submit such dispute to
conciliation.

	33.12	 	The venue of the sole expert, conciliation or arbitration proceedings pursuant to
this Article, unless the Parties agree otherwise, shall be New Delhi, India and shall
be conducted in the English language. Insofar as practicable, the Parties shall
continue to implement the terms of this Contract notwithstanding the initiation of
proceedings before a sole expert, conciliator or arbitral tribunal and any pending
claim or dispute.

	33.13	 	The fees and expenses of a sole expert or conciliator appointed by the Parties shall
be borne equally by the Parties. The cost and expenses of arbitrator appointed by a
Party in accordance with the provision of this Article shall be borne by the
respective Party and the cost and expenses of third arbitrator and other incidental
expenditure in relation to arbitration and liability thereof shall be at the
discretion of the arbitrators.

	33.14	 	Notwithstanding anything contrary contained herein above, in the event of dispute
among Government Company(ies) and with the Government, such disputes shall be settled
in accordance with guidelines issued on the subject by Government from time to time.

86

 

ARTICLE 34

CHANGE OF STATUS OF COMPANIES

	34.1	 	The Parties comprising the Contractor shall notify the Government of any change in
the management or control of a Company(ies) or the relationship with any guarantor of
the Company(ies).

87

 

ARTICLE 35

ENTIRE AGREEMENT, AMENDMENTS, WAIVER AND MISCELLANEOUS

	35.1	 	This Contract supersedes and replaces any previous agreement or understanding between
the Parties, whether oral or written, on the subject matter hereof, prior to the
execution date of this Contract.

	35.2	 	This Contract shall not be amended, modified, varied or supplemented in any respect
except by an instrument in writing signed by all the Parties, which shall state the
date upon which the amendment or modification shall become effective.

	35.3	 	No waiver by any Party of any one or more obligations or defaults by any other Party
in the performance of this Contract shall operate or be construed as a waiver of any
other obligations or defaults whether of a like or of a different character.

	35.4	 	The provisions of this Contract shall inure to the benefit of and be binding upon the
Parties and their permitted assigns and successors in interest.

	35.5	 	In the event of any conflict between any provisions in the main body of this Contract
and any provision in the Appendices, the provision in the main body shall prevail.

	35.6	 	The headings of this Contract are for convenience of reference only and shall not be
taken into account in interpreting the terms of this Contract.

	35.7	 	Reference to any law or regulation having the force of law includes a reference to
that law or regulation as from time to time may be amended, extended or re-enacted.

	35.8	 	A reference in this Contract to the word “including” shall also mean “including but
not limited to”.

88

 

ARTICLE 36

CERTIFICATES

	36.1	 	A Company shall furnish, prior to execution of this Contract, a duly authorised copy
of a resolution properly and legally passed by the Board of Directors of the Company
authorising its President or any Vice-President or any other representative to execute
this Contract along with a certificate duly signed by the Secretary or an Assistant
Secretary of the Company under its seal in this regard and to the effect that the
Company has the power and authority to enter into this Contract and to perform its
obligations thereunder and has taken all necessary action to authorise the execution,
delivery and performance of the Contract.

89

 

ARTICLE 37

NOTICES

	37.1	 	All notices, statements, and other communications to be given, submitted or made
hereunder by any Party to another shall be sufficiently given if given in writing in
English language and sent by registered post, postage paid, or by telegram, telex,
facsimile, radio or cable, to the address or addresses of the other Party or Parties
as follows:

	 	(a)	 	If to the Government:

Secretary to the Government of India

Ministry of Petroleum and Natural Gas

Shastri Bhavan

Dr. Rajendra Prasad Marg,

New Delhi- 110001, INDIA

Facsimile No.: 91 11 3383585

	 	(b)	 	Dy. General Manager (Projects)

Gujarat State Petroleum Corporation Ltd.

GSPC Bhavan, behind Udyog Bhavan,

Sector-11, Gandhinagar – 382001, Gujarat

Facsimile No.: 079-23236375 / 55701399

Telephone No. : 079-23238651 / 55701309

	 	(c)	 	General Manager (E&P)

GAIL (India) Limited

16, Bhikaji Cama Place,

New Delhi -110066

Facsimile No. : 011-26185941 Extn. 2037#

Telephone No. : 011-26190944

	 	(d)	 	Authorised Representative

Jubilant Capital Pvt. Limited

Plot No. 1-A, Sector – 16A

Institutional Area, Noida — 201301

Facsimile No. : 0120 — 2511004

Telephone No. : 0120 – 2511001

	 	(e)	 	President & CEO

c/o – 200, 630 – 4th Avenue SW

Calgary, Alberta, Canada, T2P 0J9

Facsimile No.: +1 403 777-9199

Telephone No.: +1 403 777-9251 (Canada), 982531-9456 (India)

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	37.2	 	Notices when given in terms of Article 37.1 shall be effective when delivered if
offered at the address of the other Parties as under Article 37.1 during business
hours on working days and, if received outside business hours, on the next following
working day.

	37.3	 	Any Party may, by reasonable notice as provided hereunder to the other Parties,
change its address and other particulars for notice purpose.

91

 

IN WITNESS WHEREOF, the representatives of the Parties to this Contract being duly
authorised have hereunto set their hands and have executed these presents this 23rd
day of September, 2005.

	 	 	 	 	 	 	 	 	 
	Signed for and on
	 	 	 	 	 	 	 	 
	behalf of the
	 	 	 	 	 	 	 	 
	President of India
	 	 	 	 	 	 	 	 
	 

	 	Signature :
	 	/s/	 	 	 	 
	 

	 	 	 	 	 	 

	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	Name :	 	<blank>	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	Designation :	 	<blank>	 	 
	 
	 	 	 	 	 	 	 	 
	In presence of

	 	Signature :
	 	/s/	 	 	 	 
	 

	 	 	 	 	 	 

	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	Name :	 	<blank>	 	 
	 
	 	 	 	 	 	 	 	 
	Signed for and on behalf
	 	 	 	 	 	 	 	 
	of GSPC	 	Signature :	 	/s/ M.Y. Farooqui	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	Name :	 	M.Y. Farooqui	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	Designation :	 	DGM (POD)	 	 
	 
	 	 	 	 	 	 	 	 
	In presence of	 	Signature :	 	/s/ Mohapatra, B.	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	Name :	 	B. Mohapatra	 	 
	 
	 	 	 	 	 	 	 	 
	Signed for and on behalf
	 	 	 	 	 	 	 	 
	of GAIL	 	Signature :	 	/s/ B.S. Negi	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	Name :	 	B.S. Negi	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	Designation :	 	Director (Bus Dev)	 	 
	 
	 	 	 	 	 	 	 	 
	In presence of	 	Signature :	 	/s/ Prabhat Singh	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	Name :	 	Prabhat Singh	 	 

92

 

	 	 	 	 	 	 	 	 	 
	Signed for and on behalf
of JCPL
	 	 	 	 	 	 	 	 
	 	 	Signature :	 	/s/ Dr. R.K. Mallick	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	Name :	 	Dr. R.K. Mallick	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	Designation :	 	DY	 	 
	 
	 	 	 	 	 	 	 	 
	In presence of	 	Signature :	 	/s/ A.N. Singh	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	Name :	 	A.N. Singh	 	 
	 
	 	 	 	 	 	 	 	 
	Signed for and on behalf
	 	 	 	 	 	 	 	 
	of GGR	 	Signature :	 	/s/ Jean Roy	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	Name :	 	Jean Roy	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	Designation :	 	President and CEO	 	 
	 
	 	 	 	 	 	 	 	 
	In presence of:	 	Signature :	 	/s/ Allan Kent	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	Name :	 	Allan Kent	 	 

93

 

APPENDIX A

DESCRIPTION OF THE CONTRACT AREA

The area comprising approximately 448 Sq. Km., Onshore India identified as Block
CB-ONN-2003/2 herein and shown on the map attached as Appendix B.

Longitude and Latitude measurements commencing at points A,B,C,D,E,F,G,H,I,J,K, and L & Excluded part A, B, C, & D are given below :

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Coordinates
	 	 	Longitude	 	Latitude
	 	 	Pt.	 	Deg.	 	Min.	 	Sec.	 	Deg.	 	Min.	 	Sec.
	 

	 	A
	 	 	73	 	 	 	11	 	 	 	50.93	 	 	 	21	 	 	 	46	 	 	 	52.80	 
	 

	 	B
	 	 	73	 	 	 	15	 	 	 	0.00	 	 	 	21	 	 	 	41	 	 	 	0.00	 
	 

	 	C
	 	 	73	 	 	 	12	 	 	 	12.05	 	 	 	21	 	 	 	35	 	 	 	48.00	 
	 

	 	D
	 	 	73	 	 	 	01	 	 	 	0.800	 	 	 	21	 	 	 	35	 	 	 	48.00	 
	 

	 	E
	 	 	73	 	 	 	00	 	 	 	39.00	 	 	 	21	 	 	 	37	 	 	 	04.00	 
	 

	 	F
	 	 	72	 	 	 	53	 	 	 	15.00	 	 	 	21	 	 	 	35	 	 	 	54.00	 
	 

	 	G
	 	 	72	 	 	 	50	 	 	 	18.00	 	 	 	21	 	 	 	34	 	 	 	07.00	 
	 

	 	H
	 	 	72	 	 	 	48	 	 	 	0.500	 	 	 	21	 	 	 	36	 	 	 	15.00	 
	 

	 	I
	 	 	72	 	 	 	48	 	 	 	05.00	 	 	 	21	 	 	 	38	 	 	 	16.98	 
	 

	 	J
	 	 	72	 	 	 	59	 	 	 	34.17	 	 	 	21	 	 	 	40	 	 	 	54.78	 
	 

	 	K
	 	 	72	 	 	 	59	 	 	 	30.00	 	 	 	21	 	 	 	39	 	 	 	06.00	 
	 

	 	L
	 	 	73	 	 	 	05	 	 	 	16.00	 	 	 	21	 	 	 	42	 	 	 	45.00	 
	 

	 	A
	 	 	73	 	 	 	11	 	 	 	50.93	 	 	 	21	 	 	 	46	 	 	 	52.80	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Excluded Part

	 	A
	 	 	73	 	 	 	02	 	 	 	30	 	 	 	21	 	 	 	38	 	 	 	40	 
	 

	 	B
	 	 	73	 	 	 	01	 	 	 	15	 	 	 	21	 	 	 	38	 	 	 	40	 
	 

	 	C
	 	 	73	 	 	 	01	 	 	 	15	 	 	 	21	 	 	 	39	 	 	 	54	 
	 

	 	D
	 	 	73	 	 	 	02	 	 	 	30	 	 	 	21	 	 	 	39	 	 	 	54	 
	 

	 	A
	 	 	73	 	 	 	02	 	 	 	30	 	 	 	21	 	 	 	38	 	 	 	40	 

94

 

APPENDIX B

MAP OF THE CONTRACT AREA

95

 

APPENDIX C

ACCOUNTING PROCEDURE TO 

THE CONTRACT

BETWEEN

THE GOVERNMENT OF INDIA

AND 

GUJARAT STATE PETROLEUM CORPORATION LIMITED

AND

GAIL (INDIA) LIMITED

AND

JUBILANT CAPITAL PTV. LIMITED

AND

GEOGLOBAL RESOURCES (BARBADOS) INC.

WITH RESPECT TO CONTRACT AREA

IDENTIFIED AS

BLOCK : CB-ONN-2003/2

96

 

TABLE OF CONTENTS

	 	 	 	 	 
	Sections	 	Content	 
	Section 1:	 	General Provisions

	 	 	 	 	 

	 	 	 	 	1.1 Purpose

	 	 	 	 	1.2 Definitions

	 	 	 	 	1.3 Inconsistency

	 	 	 	 	1.4 Documentation and Statements to be
submitted by the Contractor

	 	 	 	 	1.5 Language and units of account

	 	 	 	 	1.6 Currency exchange rates

	 	 	 	 	1.7 Payments

	 	 	 	 	1.8 Arms length transactions

	 	 	 	 	1.9 Audit and inspection rights of the
Government

	 	 	 	 	1.10 Revision of Accounting Procedure

	 	 	 	 	 

	Section 2:	 	Classification, Definition and Allocation of Costs and Expenditures

	 	 	 	 	 

	 	 	 	 	2.1 Segregation of Costs

	 	 	 	 	2.2 Exploration Costs

	 	 	 	 	2.3 Development Costs

	 	 	 	 	2.4 Production Costs

	 	 	 	 	2.5 Service Costs

	 	 	 	 	2.6 General and Administrative Costs

	 	 	 	 	 

	Section 3:	 	Costs, Expenses, Expenditures and Incidental Income of the Contractor

	 	 	 	 	 

	 	 	 	 	3.1 Costs recoverable and allowable without
further approval of the Government:

	 	 	 	 	 

	 	 	 	 	3.1.1 Surface Rights

	 	 	 	 	3.1.2 Labour and Associated Labour Costs

	 	 	 	 	3.1.3 Transportation Costs

	 	 	 	 	3.1.4 Charges for Services -

	 	 	 	 	(i) Third Parties

	 	 	 	 	(ii) Affiliates of Contractor

	 	 	 	 	3.1.5 Communications

	 	 	 	 	3.1.6 Office, Shore Bases and
Miscellaneous facilities

	 	 	 	 	3.1.7 Environmental Studies and Protection

	 	 	 	 	3.1.8 Materials and Equipments

	 	 	 	 	(i) General

97

 

	 	 	 	 	 
	Sections	 	Content	 
	 	 	 	 	(ii) Warranty

	 	 	 	 	(iii) Value of Materials charged to the accounts under the Contract

	 	 	 	 	3.1.9 Duties, fees and other charges

	 	 	 	 	3.1.10 Insurance and Losses

	 	 	 	 	3.1.11 Legal expenses

	 	 	 	 	3.1.12 Training costs

	 	 	 	 	3.1.13 General and Administrative
Costs

	 	 	 	 	3.1.14 Royalty, License fee, surface rentals etc.

	 	 	 	 	3.2 Costs not recoverable and not allowable
under the Contract

	 	 	 	 	3.3 Other Costs recoverable and allowable
only with Management Committee approval

	 	 	 	 	3.4 Incidental income and credits

	 	 	 	 	3.5 Non-duplication of charges and credits

	 	 	 	 	 

	Section 4:	 	Records and Inventories of Assets

	 	 	 	 	 

	 	 	 	 	4.1 Records

	 	 	 	 	4.2 Inventories

	 	 	 	 	 

	Section 5:	 	Production Statement

	 	 	 	 	 

	Section 6:	 	Value of Production and Pricing Statement

	 	 	 	 	 

	Section 7:	 	Statement of Costs, Expenditures and Receipts

	 	 	 	 	 

	Section 8:	 	Cost Recovery Statement

	 	 	 	 	 

	Section 9:	 	Profit Sharing Statement

	 	 	 	 	 

	Section 10:	 	Local Procurement Statement

	 	 	 	 	 

	Section 11:	 	End of Year Statement

	 	 	 	 	 

	Section 12:	 	Budget Statement

98

 

ACCOUNTING PROCEDURE

SECTION 1

GENERAL PROVISIONS

	1.1	 	Purpose
	 
	 	 	Generally, the purpose of this Accounting Procedure is to set out
principles and procedures of accounting which will enable the
Government of India to monitor effectively the Contractor’s costs,
expenditures, production and income so that the Government’s
entitlement to Profit Petroleum can be accurately determined pursuant
to the terms of the Contract. More specifically, the purpose of the
Accounting Procedure is to:

	 	-	 	classify costs and expenditures and to define which costs and
expenditures shall be allowable for cost recovery and profit sharing and
participation purposes;
	 
	 	-	 	specify the manner in which the Contractor’s accounts shall be prepared
and approved; and
	 
	 	-	 	address numerous other accounting related matters.

	 	 	This Accounting Procedure is intended to apply to the provisions of the Contract and
is without prejudice to the computation of income tax under applicable provisions of
the Income-Tax Act, 1961, as amended.
	 
	1.2	 	Definitions
	 
	 	 	For purposes of this Accounting Procedure, the terms used herein which
are defined in the Contract shall have the same meaning when used in
this Accounting Procedure.
	 
	1.3	 	Inconsistency
	 
	 	 	In the event of any inconsistency or conflict between the provisions
of this Accounting Procedure and the other provisions of the Contract,
the other provisions of the Contract shall prevail.
	 
	1.4	 	Documentation and Statements to be submitted by the Contractor
	 
	1.4.1	 	Within ninety (90) days of the Effective Date of the Contract, the Contractor shall
submit to and discuss with the Government a proposed outline of charts of accounts,
operating records and reports, which outline shall reflect each of the

99

 

	 	 	categories and sub-categories of costs and income specified in Sections 2 and 3 and
shall be in accordance with generally accepted standards and recognized accounting
systems and consistent with normal petroleum industry practice and procedures for
joint venture operations.
	 
	 	 	Within ninety (90) days of receiving the above submission, the Government shall
either provide written notification of its approval of the proposal or request, in
writing, revisions to the proposal.
	 
	 	 	Within one hundred and eighty (180) days from the Effective Date of the Contract,
the Contractor and the Government shall agree on the outline of charts of accounts,
records and reports which shall also describe the basis of the accounting system and
procedures to be developed and used under this Contract. Following such agreement,
the Contractor shall expeditiously prepare and provide the Government with formal
copies of the comprehensive charts of accounts, records and reports and allow the
Government to examine the manuals and to review procedures which are, and shall be,
observed under the Contract.
	 
	1.4.2	 	Notwithstanding the generality of the foregoing, the Contractor shall make regular
Statements relating to the Petroleum Operations as follows:

	 	(i)	 	Production Statement (see Section 5 of this Accounting Procedure).
	 
	 	(ii)	 	Value of Production and Pricing Statement (see Section 6 of this
Accounting Procedure).
	 
	 	(iii)	 	Statement of Costs, Expenditures and Receipts (see Section 7 of this
Accounting Procedure).
	 
	 	(iv)	 	Cost Recovery Statement (see Section 8 of this Accounting Procedure).

	 
	 	(v)	 	Profit Sharing Statement (see Section 9 of this Accounting Procedure)
	 
	 	(vi)	 	Local Procurement Statement (see Section 10 of this Accounting
Procedure)
	 
	 	(vii)	 	End of Year Statement (see Section 11 of this Accounting Procedure).

	 
	 	(viii)	 	Budget Statement (see Section 12 of this Accounting Procedure).

	1.4.3	 	All reports and Statements shall be prepared in accordance with the Contract and the
laws of India and, where there are no relevant provisions in either of these, in
accordance with generally accepted practices in the international petroleum industry.

	1.4.4	 	Each of the entities constituting the Contractor shall be responsible for
maintaining its own accounting records in order to comply with all legal requirements
and to support all returns or any other accounting reports required by any Government
authority in relation to the Petroleum Operations. However, for the purposes of giving
effect to this Accounting Procedure, the Party constituting the Contractor who is the
Operator shall be responsible for maintaining, at its business office in India, on
behalf of the Contractor, all the

100

 

	 	 	      accounts of the Petroleum Operations in accordance with the provisions of the
Accounting Procedure and the Contract.

	1.5	 	Language and Units of Account
	 
	 	 	All accounts, records, books, reports and Statements shall be
maintained and prepared in the English language using mercantile basis
of accounting. The accounts shall be maintained in United States
Dollars, which shall be the controlling currency of account for cost
recovery, and profit sharing purposes. Metric units and Barrels shall
be employed for measurements required under the Contract. Where
necessary for clarification, the Contractor may also maintain accounts
and records in other languages, currencies and units.
	 
	1.6	 	Currency Exchange Rates
	 
	1.6.1	 	For conversion purposes between United States Dollars and Indian Rupees or any other
currency, the monthly average of the daily mean of the buying and selling rates of
exchange as quoted by the State Bank of India (or any other financial body as may be
mutually agreed by the Parties) for the Month in which the revenues, costs,
expenditures, receipts or income are recorded, shall be used. However, in the case of
any single non-US Dollar transaction in excess of the equivalent of fifty thousand
(50,000) US Dollars, the conversion into US Dollars shall be performed on the basis of
the average of the applicable exchange rates for the day on which the transaction
occurred.
	 
	1.6.2	 	Any realized or unrealized gains or losses from the exchange of currency in respect
of Petroleum Operations shall be credited or charged to the accounts. A record of the
exchange rates used in converting Indian Rupees or any other currencies into United
States Dollars as specified in Section 1.6.1 shall be maintained by the Contractor and
shall be identified in the relevant Statements required to be submitted by the
Contractor in accordance with Section 1.4.2.
	 
	1.7	 	Payments
	 
	1.7.1	 	Subject to Article 20.3 of the Contract and the foreign exchange laws and
regulations prevailing from time to time, all payments between the Parties shall,
unless otherwise agreed, be in United States Dollars and shall be made through a bank
designated by each receiving Party.
	 
	1.7.2	 	Unless otherwise specified, all sums due under the Contract shall be paid within
forty five (45) days from the date on which the obligation to pay was incurred.
	 
	1.7.3	 	All sums due by one Party to the other under the Contract during any Month shall,
for each day such sums are overdue during such Month, bear interest compounded daily
at the applicable LIBOR plus two (2) percentage points.

101

 

	1.8	 	Arms Length Transactions
	 
	 	 	Unless otherwise specifically provided for in the Contract, all
transactions giving rise to revenues, costs or expenditures which will
be credited or charged to the accounts prepared, maintained or
submitted hereunder shall be conducted at arms length or on such a
basis as will assure that all such revenues, costs or expenditures
will not be lower or higher, as the case may be, than would result
from a transaction conducted at arms length on a competitive basis
with third parties.
	 
	1.9	 	Audit and Inspection Rights of the Government
	 
	1.9.1	 	Without prejudice to statutory rights, the Government, upon at least twenty (20)
Business Days advance written notice to the Contractor, shall have the right to
inspect and audit, during normal business hours, all records and documents supporting
costs, expenditures, expenses, receipts and income, such as the Contractor’s accounts,
books, records, invoices, cash vouchers, debit notes, price lists or similar
documentation with respect to the Petroleum Operations conducted hereunder in each
Year, within two (2) years (or such longer period as may be required in exceptional
circumstances) from the end of such Year.

	1.9.2	 	The Government may undertake the conduct of the audit either through its own
representatives or through a qualified firm of recognised chartered accountants,
registered in India or a reputed consulting firm, appointed for the purpose by the
Government and the costs of audit in case of Government auditor(s) shall be borne by
the Government, where as for outside auditor(s), this shall be borne by the Contractor
as a General and Administrative Cost.

	1.9.3	 	In conducting the audit, the Government or its auditors shall be entitled to examine
and verify, at reasonable times, all charges and credits relating to the Contractor’s
activities under the Contract and all books of account, accounting entries, material
records and inventories, vouchers, payrolls, invoices and any other documents,
correspondence and records considered necessary by the Government to audit and verify
the charges and credits. The auditors shall also have the right, in connection with
such audit, to visit and inspect, at reasonable times, all sites, plants, facilities,
warehouses and offices of the Contractor directly or indirectly serving the Petroleum
Operations, and to physically examine other property, facilities and stocks used in
Petroleum Operations, wherever located and to question personnel associated with those
operations. Where the Government requires verification of charges made by an
Affiliate, the Government shall have the right to obtain an audit certificate from an
internationally recognized firm of public accountants acceptable to both the
Government and the Contractor, which may be the Contractor’s statutory auditor.
Submission of the audit certificate, shall in no way relieve or diminish the

102

 

	 	 	      responsibility of the Contractor for the compliance with the obligations under the
Contract.

	1.9.4	 	Any audit exceptions shall be made by the Government in writing and notified to the
Contractor within one hundred and twenty (120) days following completion of the audit
in question.

	1.9.5	 	The Contractor shall answer any notice of exception under Section 1.9.4 within one
hundred and twenty (120) days of the receipt of such notice. Where the Contractor
has, after the said one hundred and twenty (120) days, failed to answer a notice of
exception, the exception shall prevail and deemed to have been agreed to by the
Contractor.

	1.9.6	 	All agreed adjustments resulting from an audit and all adjustments required by
prevailing exceptions under Section 1.9.5 shall be promptly made in the Contractor’s
accounts and any consequential adjustments to the Government’s entitlement to
Petroleum shall be made within thirty (30) days therefrom.

	1.9.7	 	Notwithstanding any reference to a Sole Expert or Arbitration in accordance with the
provisions of the Contract, in case any amount is claimed as due to the Government
resulting from the audit exception but not accepted or settled by the Contractor, then
the Contractor shall deposit such claimed amount in a escrow account to be opened with
a financial institution, failing mutually agreed agreement with State Bank of India
within thirty (30) days from the date when the amount is disputed by the Contractor.
The amount in escrow account shall be appropriated or adjusted in accordance with the
decision or award of the Sole Expert or Arbitral Tribunal as may be or otherwise as
mutually agreed to between the Parties.

	1.9.8	 	If the Contractor and the Government are unable to reach final agreement on proposed
audit adjustments, either Party may refer any dispute thereon to a sole expert as
provided for in the Contract. So long as any issues are outstanding with respect to an
audit, the Contractor shall maintain the relevant documents and permit inspection
thereof until the issue is resolved.

	1.10	 	Revision of the Accounting Procedure
	 
	 	 	By mutual agreement between the Government and the Contractor, this
Accounting Procedure may be revised from time to time, in writing,
signed by the Parties, stating the date upon which the amendments
shall become effective.

103

 

SECTION 2

CLASSIFICATION, DEFINITION AND ALLOCATION OF COSTS

AND EXPENDITURES

	2.1	 	Segregation of Costs

	 
	 	 	
Costs shall be segregated in accordance with the purposes for which
such expenditures are made. All costs and expenditures allowable
under Section 3, relating to Petroleum Operations, shall be
classified, defined and allocated as set out below in this Section.
	 
	2.2	 	Exploration Costs
	 
	 	 	

Exploration Costs are all direct and allocated indirect expenditures
incurred in the search for Petroleum in an area which is, or was at
the time when such costs were incurred, part of the Contract Area,
including expenditures incurred in respect of:
	 
	2.2.1	 	Aerial, geophysical, geochemical, palaeontological, geological, topographical and
seismic surveys, analysis and studies and their interpretation.
	 
	2.2.2	 	Core hole drilling and water Well drilling.
	 
	2.2.3	 	Labour, materials, supplies and services used in drilling Wells with the object of
finding Petroleum or in drilling Appraisal Wells provided that if such Wells are
completed as producing Wells or injection Well for enhancing Oil recovery, the costs
of completion thereof shall be classified as Development Costs.
	 
	2.2.4	 	Facilities used solely in support of the purposes described in Sections 2.2.1, 2.2.2
and 2.2.3 above, including access roads, all separately identified.
	 
	2.2.5	 	Any Service Costs and General and Administrative Costs directly incurred on
exploration activities and identifiable as such and a portion of the remaining Service
Costs and General and Administrative Costs allocated to Exploration Operations
determined by the proportionate share of total Contract Costs (excluding General and
Administrative Costs and Service Costs) represented by all other Exploration Costs.
	 
	2.2.6	 	Geological and geophysical information purchased or acquired in connection with
Exploration Operations.
	 
	2.2.7	 	Any other expenditures incurred in the search for Petroleum not covered under
Sections 2.3 or 2.4.

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	2.3	 	Development Costs
	 
	 	 	

Development Costs are all direct and allocated indirect expenditures
incurred with respect to the development of discoveries within the
Contract Area including expenditures incurred on account of:
	 
	2.3.1	 	Geological and Geophysical information acquired in connection with Development
Operations.
	 
	2.3.2	 	Drilling Development Wells, whether these Wells are dry or producing and drilling
Wells for the injection of water or Gas to enhance recovery of Petroleum.
	 
	2.3.3	 	Completing of Exploration Wells by way of installation of casing or equipment or
otherwise or for the purpose of bringing a Well into use as a producing Well or as a
Well for the injection of water or Gas to enhance recovery of Petroleum.
	 
	2.3.4	 	Purchase, installation or construction of production, transport and storage
facilities for production of Petroleum, such as pipelines, flow lines, production and
treatment units, wellhead equipment, subsurface equipment, enhanced recovery systems,
offshore and onshore platforms, export terminals and piers, harbours and related
facilities and access roads for production activities.
	 
	2.3.5	 	Engineering and design studies for facilities referred to in Section 2.3.3.
	 
	2.3.6	 	Any Service Costs and General and Administrative Costs directly incurred in
Development Operations and identifiable as such and a portion of the remaining Service
Costs and General and Administrative Costs allocated to development activities,
determined by the proportionate share of total Contract Costs (excluding General and
Administrative Costs and Service Costs) represented by all other Development Costs.
	 
	2.4	 	 Production Costs
	 
	 	 	

Production Costs are expenditures incurred on Production Operations
after the start of production from the Field (which are other than
Exploration and Development Costs). The balance of General and
Administrative Costs and Service Costs not allocated to Exploration
Costs or Development Costs shall be allocated to Production Costs.
	 
	2.5	 	Service Costs
	 
	 	 	

Service Costs are direct and indirect expenditures incurred in support
of Petroleum Operations in the Contract Area, including expenditures
on warehouses, piers, marine vessels, vehicles, motorized rolling
equipment, aircraft, fire and security stations, workshops, water and
sewerage plants, power plants, housing, community and recreational
facilities and furniture and tools and

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	 	 	equipment used in these activities. Service Costs in any Year shall include the
costs incurred in such Year to purchase and/or construct the said facilities as well
as the annual costs of maintaining and operating the same, each to be identified
separately. All Service Costs shall be regularly allocated as specified in Sections
2.2.5, 2.3.5 and 2.4 to Exploration Costs, Development Costs and Production Costs
and shall be separately shown under each of these categories. Where Service Costs
are made in respect of shared facilities, the basis of allocation of costs to
Petroleum Operations hereunder shall be specified.
	 
	2.6	 	General and Administrative Costs
	 
	 	 	

General and Administrative Costs are expenditures incurred on general
administration and management primarily and principally related to
Petroleum Operations in or in connection with the Contract Area, and
shall include:
	 
	2.6.1	 	main office, field office and general administrative expenditures in India including
supervisory, accounting and employee relations services;
	 
	2.6.2	 	an annual overhead charge for services rendered by the parent company or an
Affiliate to support and manage Petroleum Operations under the Contract, and for staff
advice and assistance including financial, legal, accounting and employee relations
services, but excluding any remuneration for services charged separately under this
Accounting Procedure, provided that:-

	 	(i)	 	for the period from the Effective Date until the date on which the
first Development Plan under the Contract is approved by the Government, this
annual charge shall be the Contractor’s verifiable expenditure but shall in no
event be greater than the following percentages of the total Contract Costs
incurred during the Contract Year in or in connection with the Contract Area
and qualifying for recovery pursuant to Section 3:

	 	 	 	 	 
	Contract costs in any	 	 
	Contract year (in million US$)	 	Annual overhead charge
	0-2

	 	3%
	Over 2-5

	 	US $60,000 + 2% of Contract Costs
in excess of US $2 million.

	Over 5

	 	US $120,000 + 1% of Contract
Costs in excess of US $5 million

	 	(ii)	 	from the date on which the first Development Plan is approved, the
charge shall be at an amount or rate to be agreed on between the Parties and
stated in the Development Plan.

	2.6.3	 	All General and Administrative Costs shall be regularly allocated as specified in
Sections 2.2.5, 2.3.5 and 2.4 to Exploration Costs, Development Costs and Production
Costs respectively, and shall be separately shown under each of these cost categories.

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SECTION 3

COSTS, EXPENSES, EXPENDITURES AND INCIDENTAL INCOME

OF THE CONTRACTOR

	3.1	 	Costs Recoverable and Allowable Without Further Approval of the Government
	 
	 	 	Costs incurred by the Contractor on Petroleum Operations as per reviewed or approved
Work Programme and Budget by the Management Committee as the case may be, pursuant
to the Contract as classified under the headings referred to in Section 2 shall be
allowable for the purposes of the Contract except to the extent provided in Section
3.2 or elsewhere in this Accounting Procedure, and subject to audit, as referred to
in Articles 25.4.1 to 25.4.4 and Article 25.5, as provided for herein. Further in
case of variation in costs over the reviewed/approved Work Programme and Budget, as
the case may be, or re-appropriation of costs, shall be submitted to the Management
Committee for review/approval, as the case may be, within thirty (30) days from end
of the relevant Financial Year and subject to the audit and other provisions of the
Contract, such costs shall be allowable for the purposes of the Contract.
	 
	3.1.1	 	Surface Rights
	 
	 	 	

All direct costs necessary for the acquisition, renewal or
relinquishment of surface rights acquired and maintained in force
for the purposes of the Contract except as provided in Section
3.1.9.
	 
	3.1.2	 	Labour and Associated Labour Costs

	 	(a)	 	Contractor’s locally recruited employees based in India
	 
	 	 	 	Costs of all the Contractor’s locally recruited employees who are directly
engaged in the conduct of Petroleum Operations under the Contract in India.
Such costs shall include the costs of employee benefits and Government
benefits for employees and levies imposed on the Contractor as an employer,
transportation and relocation costs within India of the employee and such
members of the employee’s family as per the personnel policy of the employer
as required by law or customary practice in India. If such employees are
engaged in other activities in India, in addition to Petroleum Operations,
the cost of such employees shall be apportioned on a time sheet basis
according to sound and acceptable accounting principles.
	 
	 	(b)	 	Assigned Personnel

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	 	 	 	Costs of salaries and wages, including bonuses, of the Contractor’s
employees directly and necessarily engaged in the conduct of the Petroleum
Operations under the Contract, whether temporarily or permanently assigned,
irrespective of the location of such employees, it being understood that in
the case of those personnel only a portion of whose time is wholly dedicated
to Petroleum Operations under the Contract, only that pro rata portion of
applicable salaries, wages, and other costs, as specified in Sections
3.1.2(c), (d), (e), (f) and (g), shall be charged and the basis of such pro
rata allocation shall be specified.
	 
	 	(c)	 	The Contractor’s costs regarding holiday, vacation, sickness and
disability benefits and living and housing and other customary allowances
applicable to the salaries and wages chargeable under Section 3.1.2(b) above.
	 
	 	(d)	 	Expenses or contributions made pursuant to assessments or obligations
imposed under the laws of India which are applicable to the Contractor’s cost
of salaries and wages chargeable under Section 3.1.2(b) above.
	 
	 	(e)	 	The Contractor’s cost of established plans for employees’ group life
insurance, hospitalization, pension, retirement and other benefit plans of a
like nature customarily granted to the Contractor’s employees provided,
however, that such costs are in accordance with generally accepted standards
in the international petroleum industry, applicable to salaries and wages
chargeable to Petroleum Operations under Section 3.1.2(b) above.
	 
	 	(f)	 	Personal income taxes where and when they are paid by the Contractor to
the Government of India for the employee, in accordance with the Contractor’s
standard personnel policies.
	 
	 	(g)	 	Reasonable transportation and travel expenses of employees of the
Contractor, including those made for travel and relocation of the expatriate
employees, including their dependent family and personal effects, assigned to
India whose salaries and wages are chargeable to Petroleum Operations under
Section 3.1.2(b) above.

	 	 	Transportation cost as used in this Section shall mean the cost of freight and
passenger service and any accountable incidental expenditures related to transfer
travel and authorized under the Contractor’s standard personnel policies. The
Contractor shall ensure that all expenditures related to transportation costs are
equitably allocated to the activities which have benefited from the personnel
concerned.

	3.1.3	 	Transportation Costs
	 
	 	 	

The reasonable cost of transportation of equipment, materials and
supplies within India and from outside India to India necessary for
the conduct of Petroleum Operations under the Contract, including
directly related costs such as unloading charges, dock fees and
inland and ocean freight charges.

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	3.1.4	 	Charges for Services

(i) Third Parties

The actual costs of contract services, services of professional consultants,
utilities and other services necessary for the conduct of Petroleum Operations under
the Contract performed by third parties other than an Affiliate of the Contractor,
provided that the transactions resulting in such costs are undertaken pursuant to
Section 1.8 of this Accounting Procedure.

	 	(ii)	 	Affiliates of Contractor
	 
	 	(a)	 	Professional and Administrative Services and Expenses
	 
	 	 	 	Cost of professional and administrative services provided by any Affiliate
for the direct benefit of Petroleum Operations, including, but not limited
to, services provided by the production, exploration, legal, financial,
insurance, accounting and computer services divisions other than those
covered by Section 3.1.4 (ii)(b) which the Contractor may use in lieu of
having its own employees. Charges shall be equal to the actual cost of
providing their services, shall not include any element of profit and shall
not be any higher than the most favourable prices charged by the Affiliate
to third parties for comparable services under similar terms and conditions
elsewhere and will be fair and reasonable in the light of prevailing modern
oilfield and petroleum industry practices.
	 
	 	(b)	 	Scientific or Technical Personnel
	 
	 	 	 	Cost of scientific or technical personnel services provided by any Affiliate
of the Contractor for the direct benefit of Petroleum Operations, which cost
shall be charged on a cost of service basis. Charges therefor shall not
exceed charges for comparable services currently provided by outside
technical service organizations of comparable qualifications. Unless the
work to be done by such personnel is covered by an Approved Budget and Work
Programme, the Contractor shall not authorize work by such personnel without
approval of the Management Committee.
	 
	 	(c)	 	Equipment, facilities and property owned and furnished by the
Contractor’s Affiliates, at rates commensurate with the cost of ownership and
operation provided, however, that such rates shall not exceed those currently
prevailing for the supply of like equipment, facilities and property on
comparable terms in the area where the Petroleum Operations are being
conducted. The equipment and facilities referred to herein shall exclude major
investment items such as (but not limited to) drilling rigs, producing
platforms, oil treating facilities, oil and gas loading and transportation
systems, storage and terminal facilities and other major

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	 	 	 	facilities, rates for which shall be subject to separate agreement with the
Government.

	3.1.5	 	 Communications
	 
	 	 	

Cost of acquiring, leasing, installing, operating, repairing and
maintaining communication systems including radio, satellite link
and microwave facilities between the Contract Area and the
Contractor’s nearest base facility.
	 
	3.1.6	 	Office, Shore Bases and Miscellaneous
Facilities
	 
	 	 	

Net cost to the Contractor of establishing, maintaining and
operating any office, sub-office, shore base facility, warehouse,
housing or other facility directly serving the Petroleum
Operations. If any such facility services contract areas other than
the Contract Area, or any business other than Petroleum Operations,
the net costs thereof shall be allocated on an equitable and
consistent basis.
	 
	3.1.7	 	Environmental Studies and Protection
	 
	 	 	

Costs incurred in conducting the environmental impact assessment
studies for the Contract Area, and in taking environmental
protection measures including abandonment cost or contribution to
abandonment funds as may be created for abandonment and Site
Restoration pursuant to the terms of the Contract.
	 
	3.1.8	 	Materials and equipment

	 	(i)	 	General
	 
	 	 	 	So far as is practicable and consistent with efficient and economical
operation, only such material shall be purchased or furnished by the
Contractor for use in the Petroleum Operations as may be required for use in
the reasonably foreseeable future and the accumulation of surplus stocks
shall be avoided. Material and equipment held in inventory shall only be
charged to the accounts when such material is removed from inventory and
used in Petroleum Operations. Costs shall be charged to the accounting
records and books based on the “First-in, First-out method”.
	 
	 	(ii)	 	Warranty
	 
	 	 	 	In the case of defective material or equipment, any adjustment received by
the Contractor from the suppliers or manufacturers or their agents in
respect of any warranty on material or equipment shall be credited to the
accounts under the Contract.
	 
	 	(iii)	 	Value of materials charged to the accounts under the Contract

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	 	(a)	 	Except as otherwise provided in subparagraph (b) below, materials
purchased by the Contractor for use in the Petroleum Operations shall be valued
to include invoice price less trade and cash discounts, if any, purchase and
procurement fees plus freight and forwarding charges between point of supply
and point of shipment, freight to port of destination, insurance, taxes, custom
duties, consular fees, other items chargeable against imported material and,
where applicable, handling and transportation costs from point of importation
to warehouse or operating site, and these costs shall not exceed those
currently prevailing in normal arms length transactions on the open market.
	 
	 	(b)	 	Material purchased from or sold to Affiliates or transferred to or from
activities of the Contractor other than Petroleum Operations under the
Contract:

	 	(aa)	 	new material (hereinafter referred to as condition A)
shall be valued at the current international price which shall not
exceed the price prevailing in normal arms length transactions on the
open market;
	 
	 	(bb)	 	used material which is in sound and serviceable
condition and is suitable for reuse without reconditioning (hereinafter
referred to as condition B) shall be priced at not more than seventy
five per cent (75%) of the current price of the above mentioned new
materials;
	 
	 	(cc)	 	used material which cannot be classified as condition
B, but which, after reconditioning, will be further serviceable for
original function as good second-hand condition B material or is
serviceable for original function, but substantially not suitable for
reconditioning (hereinafter referred to as condition C) shall be priced
at not more than fifty per cent (50%) of the current price of the new
material referred to above as condition A.

The cost of reconditioning shall be charged to the reconditioned material, provided
that the condition C material value plus the cost of reconditioning does not exceed
the value of condition B material.

Material which cannot be classified as condition B or condition C shall be priced at
a value commensurate with its use.

Material involving erection expenditure shall be charged at the applicable condition
percentage (referred to above) of the current knocked-down price of new material
referred to above as condition A.

When the use of material is temporary and its service to the
Petroleum Operations does not justify the reduction in price in
relation to materials referred to above as conditions B and C, such
material shall be priced on a basis that will result in a

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net charge to the accounts under the Contract consistent with the value
of the service rendered.

	 
	3.1.9	 	Duties, Fees and Other Charges
	 
	 	 	

Any duties, levies, fees, charges and any other assessments levied
by any governmental or taxing authority in connection with the
Contractor’s activities under the Contract and paid directly by the
Contractor except corporate income tax payable by the constituents
of the Contractor.
	 
	3.1.10	 	Insurance and Losses
	 
	 	 	Insurance premia and costs incurred for insurance pursuant to
Article 24 of the Contract, provided that such insurance is
customary, affords prudent protection against risk and is at a
premium no higher than that charged on a competitive basis by
insurance companies which are not Affiliates. Except as provided in
Sections 3.2 (ix), Section 3.2(x) and Section 3.2(xi), actual costs
and losses incurred shall be allowable to the extent not made good
by insurance. Such costs may include, but are not limited to,
repair and replacement of property in the Contract Area resulting
from damages or losses incurred by fire, flood, storm, theft,
accident or such other cause.
	 
	3.1.11	 	Legal Expenses
	 
	 	 	All reasonable costs and expenses, except Section 3.2 (xi)
resulting from the handling, investigating, asserting, defending,
or settling of any claim or legal action necessary or expedient for
the procuring, perfecting, retention and protection of the Contract
Area and in defending or prosecuting lawsuits involving the
Contract Area or any third party claim arising out of Petroleum
Operations under the Contract, or sums paid in respect of legal
services necessary for the protection of the joint interest of
Government and the Contractor, shall be allowable. Such
expenditures shall include attorney’s fees, court costs, costs of
investigation and procurement of evidence and amounts paid in
settlement or satisfaction of any such litigation and claims
provided such costs are not covered elsewhere in the Accounting
Procedure. Where legal services are rendered in such matters by
salaried or regularly retained lawyers of the Contractor or an
Affiliate, such compensation shall be included instead under
Section 3.1.2 or 3.1.4 (ii) above as applicable.
	 
	3.1.12	 	Training Costs
	 
	 	 	All costs and expenses incurred by the Contractor in training as is
required under Article 22 of the Contract.
	 
	3.1.13	 	General and Administrative Costs
	 
	 	 	The costs described in Section 2.6.1 and the charge described in
Section 2.6.2 of this Accounting Procedure.
	 
	3.1.14	 	Royalty, License fee, surface rentals etc.

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	 	 	Royalty, License fee, surface rentals, dead rents and other levies
and taxes paid to the Government of India or State Government or
local Government bodies or authority or agency except income tax
paid to the Government.
	 
	3.2	 	Costs not recoverable and not allowable under the Contract
	 
	 	 	The following costs and expenses shall not be recoverable or
allowable (whether directly as such or indirectly as part of any
other charges or expense) for cost recovery and profit sharing
purposes under the Contract :

	 	(i)	 	costs and charges incurred before the Effective Date including
costs in respect of preparation, signature or ratification of this Contract;
	 
	 	 	 	Explanatory Note: It is clarified that costs and expenditures, incurred
prior to the Effective Date but after the execution of the Contract, for
making statutory payments in connection with the Petroleum Operations such
as Petroleum Exploration License (PEL) fee and application fee shall be
allowed as Contract Cost and shall be cost recoverable.
	 
	 	(ii)	 	expenditures in respect of any financial transaction to negotiate,
float or otherwise obtain or secure funds for Petroleum Operations including,
but not limited to, interest, commission, brokerage and fees related to such
transactions, as well as exchange losses on loans or other financing, whether
between Affiliates or otherwise;
	 
	 	(iii)	 	costs of marketing or transportation of Petroleum beyond the Delivery
Point;
	 
	 	(iv)	 	expenditures incurred in obtaining, furnishing and maintaining the
guarantees required under the Contract and any other amounts spent on
indemnities with regard to non-fulfillment of contractual obligations;
	 
	 	(v)	 	attorney’s fees and other costs and charges in connection with
arbitration proceedings and sole expert determination pursuant to the Contract;
	 
	 	(vi)	 	fines, interest and penalties imposed by Courts of law of the Republic
of India;
	 
	 	(vii)	 	donations and contributions;
	 
	 	(viii)	 	expenditures on creation of any partnership or joint venture arrangement;
	 
	 	(ix)	 	amounts paid with respect to non-fulfillment of contractual
obligations;
	 
	 	(x)	 	costs incurred as a result of failure to insure where insurance is
required pursuant to the Contract, or of failure to follow procedures laid down
by an insurance policy or where the Contractor has elected to self insure, or
has under-insured;
	 
	 	(xi)	 	costs and expenditures incurred as a result of misconduct or
negligence of the Contractor; and
	 
	 	(xii)	 	expenses of the members of the Management Committee as per Article
6.12.

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	3.3	 	Other costs recoverable and allowable only with Management Committee approval
	 
	 	 	Any other costs and expenditures not included in Section 3.1 or 3.2 of this
Accounting Procedure but which have been incurred by the Contractor for the
necessary and proper conduct of Petroleum Operations shall be allowed to be
recovered only with the express prior approval in writing of the Management
Committee.
	 
	3.4	 	Incidental Income and Credits
	 
	 	 	

All incidental income and proceeds received from Petroleum Operations
under the Contract, including but not limited to the items listed
below, shall be credited to the accounts under the Contract and shall
be taken into account for cost recovery, and Profit Petroleum sharing
purposes in the manner described in Articles 15 and 16 of the
Contract:-

	 	(i)	 	The proceeds of any insurance or claim or judicial awards in connection
with Petroleum Operations under the Contract or any assets charged to the
accounts under the Contract where such operations or assets have been insured
and the premia charged to the accounts under the Contract;
	 
	 	(ii)	 	Revenue received from third parties for the use of property or assets,
the cost of which has been charged to the accounts under the Contract;
	 
	 	(iii)	 	Any adjustment received by the Contractor from the
suppliers/manufacturers or their agents in connection with defective material,
the cost of which was previously charged by the Contractor to the accounts
under the Contract;
	 
	 	(iv)	 	Rentals, refunds or other credits received by the Contractor which
apply to any charge which has been made to the accounts under the Contract;
	 
	 	(v)	 	Prices originally charged to the accounts under the Contract for
materials subsequently exported from the Republic of India without being used
in Petroleum Operations under the Contract;
	 
	 	(vi)	 	Proceeds from the sale or exchange by the Contractor of assets, plant
or facilities, the acquisition costs of which have been charged to the accounts
under the Contract;
	 
	 	(vii)	 	Legal costs charged to the accounts under Section 3.1.11 of this
Accounting Procedure and subsequently recovered by the Contractor.

	3.5	 	Non-Duplication of Charges and Credits
	 
	 	 	

Notwithstanding any provision to the contrary in this Accounting
Procedure, it is the objective of the Parties that there shall be no
duplication of charges or credits to the accounts under the Contract.

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SECTION 4

RECORDS AND INVENTORIES OF ASSETS

	4.1	 	Records
	 
	4.1.1	 	The Contractor shall keep and maintain detailed records of property and assets in
use for or in connection with Petroleum Operations under the Contract in accordance
with normal practices in exploration and production activities of the international
petroleum industry. Such records shall include information on quantities, location and
condition of such property and assets, and whether such property or assets are leased
or owned.
	 
	4.2	 	Inventories
	 
	4.2.1	 	The Contractor shall:

	 	(a)	 	not less than once every twelve (12) Months with respect to movable
assets; and
	 
	 	(b)	 	not less than once every three (3) Years with respect to immovable
assets,

	 	 	take an inventory of the assets used for or in connection with Petroleum Operations
in terms of the Contract and address and deliver such inventory to the Government
together with a written statement of the principles upon which valuation of the
assets mentioned in such inventory has been based.

	4.2.2	 	The Contractor shall give the Government at least thirty (30) days notice in writing
in the manner provided for in the Contract of its intention to take the inventory
referred to in Section 4.2.1 and the Government shall have the right to be represented
when such inventory is taken.
	 
	4.2.3	 	When an assignment of rights under the Contract takes place, a special inventory
shall be taken by the Contractor at the request of the assignee provided that the cost
of such inventory is borne by the assignee and paid to the Contractor.
	 
	4.2.4	 	In order to give effect to Article 27 of the Contract, the Contractor shall provide
the Government with a comprehensive list of all relevant assets when requested by the
Government to do so.

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SECTION 5

PRODUCTION STATEMENT

	5.1	 	From the date of first production of Petroleum from the Contract Area the Contractor
shall submit a monthly Production Statement to Government showing the following
information separately of each producing Field and in aggregate for the Contract Area:
	 
	5.1.1	 	The quantity of Crude Oil and Condensate produced and saved.
	 
	5.1.2	 	The quality and characteristics of such Crude Oil and Condensate produced and saved.
	 
	5.1.3	 	The quantity of Associated Natural Gas and Non Associated Natural Gas produced and
saved.
	 
	5.1.4	 	The quality, characteristics and composition of such Natural Gas produced and saved
separately.
	 
	5.1.5	 	The quantities of Crude Oil, Condensate and Natural Gas used for the purposes of
carrying on drilling and production operations and pumping to field storage, as well
as quantities re-injected.
	 
	5.1.6	 	The quantities of Crude Oil, Condensate and Natural Gas unavoidably lost.
	 
	5.1.7	 	The quantities of Natural Gas flared and vented.
	 
	5.1.8	 	The size of Petroleum stocks held on the first day of the Month in question.
	 
	5.1.9	 	The size of Petroleum stocks held on the last day of the Month in question.
	 
	5.1.10	 	The quantities of Natural Gas reinjected into the Petroleum Reservoir.
	 
	5.1.11	 	The number of days in the Month during which Petroleum was produced from each Field.
	 
	5.1.12	 	The Gas-Oil ratio for each Reservoir and Field for the relevant Month.
	 
	5.1.13	 	Water production, water injection and Reservoir pressure data for each Reservoir and
Field.

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	5.2	 	All quantities shown in this Statement shall be expressed in both volumetric terms
(barrels of Oil and cubic metres of Gas) and in the case of Oil in weight (metric
tonnes).
	 
	5.3	 	For the purpose of reporting Field production quantities pursuant to this Section,
the Contractor shall agree with the Management Committee on the exact area to be
designated as Development Area.
	 
	5.4	 	The Government may direct in writing that the Contractor include other reasonable
particulars relating to the production of Petroleum in its monthly Production
Statement, and the Contractor shall comply with such direction.
	 
	5.5	 	The Production Statement for each Month shall be submitted to Government no later
than fifteen (15) days after the end of such Month.

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SECTION 6

VALUE OF PRODUCTION AND PRICING STATEMENT

	6.1	 	The Contractor shall, for the purposes of Article 19 of the Contract, prepare a
Statement providing calculations of the value of Crude Oil and Condensate produced and
saved during each Month. This Statement shall contain the following information:
	 
	6.1.1	 	The quantities, prices and receipts realised therefor by the Contractor as a result
of sales of Crude Oil and Condensate to third parties made during the Month in
question.
	 
	6.1.2	 	The quantities, prices and receipts realised therefor by the Contractor as a result
of sales of Crude Oil and Condensate made during the Month in question, other than to
third parties, if any.
	 
	6.1.3	 	The quantities of Crude Oil and Condensate appropriated by the Contractor to
refining or other processing without otherwise being disposed of in the form of Crude
Oil or Condensate.
	 
	6.1.4	 	The value of stocks of Crude Oil and Condensate on the first day of the Month in
question.
	 
	6.1.5	 	The value of stocks of Crude Oil and Condensate on the last day of the Month in
question.
	 
	6.1.6	 	The percentage volume of total sales of Crude Oil and Condensate made by the
Contractor during the Month that are Arms Length Sales to third parties.
	 
	6.1.7	 	Information available to the Contractor, insofar as required for the purposes of
Article 19 of the Contract, concerning the prices of competitive crude oils produced
by the main petroleum producing and exporting countries including contract prices,
discounts and premia, and prices obtained on the spot markets.
	 
	6.2	 	The Contractor shall, for the purpose of Article 21 of the Contract, prepare a
Statement providing calculations of the value of Associated Natural Gas and Non
Associated Natural Gas produced, flared internally used, saved and sold during each
Month. This Statement shall contain all information of the type specified in Section
6.1 for Crude Oil as is applicable to Gas and such other relevant information as may
be required by Government.

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	6.3	 	The Statements required pursuant to Sections 6.1 and 6.2 shall include a detailed
breakdown of the calculation of the prices of Crude Oil, Condensate, Associated
Natural Gas and Non Associated Natural Gas pursuant to the provisions of Articles 19
and 21.
	 
	6.4	 	The Value of Production and Pricing Statement for each Month shall be submitted to
Government not later than thirty (30) days after the end of such Month.

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SECTION 7

STATEMENT OF COSTS, EXPENDITURES AND RECEIPTS

	7.1	 	The Contractor shall prepare with respect to each Quarter a Statement of Costs,
Expenditures and Receipts under the Contract using mercantile basis of accounting. The
Statement shall distinguish between Exploration Costs, Development Costs and
Production Costs and shall separately identify all significant items of costs and
expenditure as itemised in Section 3 of this Accounting Procedure within these
categories. The Statement of receipts shall distinguish between income from the sale
of Petroleum and incidental income of the sort itemised in Section 3.4 of this
Accounting Procedure. If the Government is not satisfied with the degree of
disaggregation within the categories, it shall be entitled to request a more detailed
breakdown. The Statement shall show the following:
	 
	7.1.1	 	Actual costs, expenditures and receipts for the Quarter in question.
	 
	7.1.2	 	Cumulative costs, expenditures and receipts for the Year in question.
	 
	7.1.3	 	Latest forecast of cumulative costs, expenditures and receipts at the Year end.
	 
	7.1.4	 	Variations between budget forecast and latest forecast and explanations thereof.
	 
	7.2	 	The Statement of Costs, Expenditures and Receipts of each Quarter shall be submitted
to Government not later than thirty (30) days after the end of such Quarter.

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SECTION 8

COST RECOVERY STATEMENT

	8.1	 	The Contractor shall prepare with respect to each Calendar Quarter a Cost Recovery
Statement containing the following information:
	 
	8.1.1	 	Unrecovered Contract Costs carried forward from the previous Quarter, if any.
	 
	8.1.2	 	Contract Costs for the Quarter in question.
	 
	8.1.3	 	Total Contract Costs for the Quarter in question (Section 8.1.1 plus Section 8.1.2).
	 
	8.1.4	 	Quantity and value of Cost Petroleum taken and disposed of by the Contractor for the
Quarter in question.
	 
	8.1.5	 	Contract Costs recovered during the Quarter in question as per Article 15.
	 
	8.1.6	 	Total cumulative amount of Contract Costs recovered up to the end of the Quarter in
question.
	 
	8.1.7	 	Amount of Contract Costs to be carried forward into the next Quarter.
	 
	8.2	 	The Cost Recovery Statement for each Quarter shall be submitted to Government not
later than thirty (30) days after the end of such Quarter.

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SECTION 9

PROFIT SHARING STATEMENT

	9.1	 	The Contractor shall prepare with respect to each Quarter a Profit Sharing Statement
containing the following information:
	 
	9.1.1	 	The calculation of the applicable net cash flows as defined in Appendix D for the
Quarter in question.
	 
	9.1.2	 	The value of the Investment Multiple applicable in the Quarter in question.
	 
	9.1.3	 	Based on Section 9.1.2 and Article 16, the appropriate percentages of Profit
Petroleum for the Government and the Contractor in the Quarter in question.
	 
	9.1.4	 	The total amount of Profit Petroleum to be shared between the Government and the
Contractor in the Quarter in question.
	 
	9.1.5	 	Based on Sections 9.1.3 and 9.1.4, the amount of Profit Petroleum due to the
Government and the Contractor as well as to each constituent of the Contractor in the
Quarter in question.
	 
	9.1.6	 	The actual amounts of Petroleum taken or payment received by Government and the
Contractor as well as by each constituent of the Contractor during the Quarter in
question to satisfy their entitlements pursuant to Section 9.1.5.
	 
	9.1.7	 	Adjustments to be made, if any, in future Quarters in the respective amounts of
Profit Petroleum due to the Government and the Contractor as well as to each
constituent of the Contractor on account of any differences between the amounts
specified in Sections 9.1.5 and 9.1.6, as well as any cumulative adjustments
outstanding from previous Quarters.
	 
	9.2	 	The Profit Sharing Statement shall be submitted to Government not later than thirty
(30) days after the end of such Quarter. Any amount due or adjustment required in
profit sharing among the Parties shall be made within thirty (30) days from the
submission of the Statement to the Government.

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SECTION 10

LOCAL PROCUREMENT STATEMENT

	10.1	 	In furtherance of the obligation in Article 23 of the Contract for the Contractor to
give preference to the procurement of Indian goods and services, the Contractor shall
prepare in respect of each Year a local procurement statement, containing the
following information:

	 	(a)	 	The amount of expenditure incurred by the Contractor directly, or
indirectly through its Subcontractors, on goods supplied, produced or
manufactured in India;
	 
	 	(b)	 	the amount of expenditure incurred by the Contractor directly, or
indirectly through its Subcontractors, on services provided by Indian entities;
	 
	 	(c)	 	the respective percentages that the expenditures recorded under items
(a) and (b) above represent of the Contractor’s total expenditures;
	 
	 	(d)	 	a detailed description of the procedures adopted during the Year to
identify and purchase goods and services from Indian suppliers; and
	 
	 	(e)	 	a detailed exposition of how the local purchases for the Year as
recorded under items (a) and (b) above compared with the projected purchases
included in the budget statement for that Year (pursuant to Section 12.1.3),
with explanations for any significant variations;

	10.2	 	The local procurement statement shall be submitted to the Government within sixty
(60) days after the end of each Year.

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SECTION 11

END OF YEAR STATEMENT

	11.1	 	The Contractor shall prepare a definitive End of Year Statement. The Statement shall
contain aggregated information in the same format as required in the Production
Statement, Value of Production and Pricing Statement, Statement of Costs, Expenditures
and Receipts, Cost Recovery Statement and Profit Sharing Statement, but shall be based
on actual quantities of Petroleum produced, income received and costs and expenditures
incurred. Based upon this Statement, any adjustments that are necessary shall be made
to the transactions concerned under the Contract.
	 
	 	 	[Explanation : End of year Statement shall further contain the item wise
justification for the variation between the actual costs and expenditure incurred
and included in the statement of costs, expenditure and receipts vis-à-vis the
Budgets for corresponding line items.]

	11.2	 	The End of Year Statement for each Year shall be submitted to Government within
ninety (90) days of the end of such Year.

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SECTION 12

BUDGET STATEMENT

	12.1	 	The Contractor shall prepare a Budget Statement for each Year. This Statement shall
distinguish between budgeted Exploration Costs, Development Costs and Production Costs
and shall show the following:
	 
	12.1.1	 	Forecast costs, expenditures and receipts for the Year in question.
	 
	12.1.2	 	A schedule showing the most important individual items of total costs, expenditures
and receipts for the said Year.
	 
	12.1.3	 	Estimated amounts to be spent in the Year on procuring goods and services in India.
	 
	12.2	 	The Budget Statement shall be submitted to Government with respect to each Year not
less than ninety (90) days before the start of the said Year provided that in the case
of the Year in which the Effective Date falls, the Budget Statement shall be submitted
within ninety (90) days of the Effective Date.

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APPENDIX-D

CALCULATION OF THE INVESTMENT MULTIPLE 

FOR PRODUCTION SHARING PURPOSES

	1.	 	In accordance with the provisions of Article 16, the share of the Government and the
Contractor respectively of Profit Petroleum from the Contract Area in any Year shall
be determined by the Investment Multiple earned by the Contractor from the then
Petroleum Operations at the end of the preceding Year. These measures of
profitability shall be calculated on the basis of the appropriate net cash flows as
specified in this Appendix D.
	 
	2.	 	The “Net Cash Income” of the Contractor from their Petroleum Operations in any
particular Year is the aggregate value for the Year of the following:

	 	(i)	 	Cost Petroleum entitlement of the Contractor as provided in Article 15;
	 
	 	 	 	plus
	 
	 	(ii)	 	Profit Petroleum entitlement of the Contractor as provided in Article
16;
	 
	 	 	 	plus
	 
	 	(iii)	 	the Contractor’s all incidental income (of the type specified in
section 3.4 of the Accounting Procedure) arising from Petroleum Operations;
	 
	 	 	 	less
	 
	 	(iv)	 	the Contractor’s Production Costs and royalty payments (Article 17)
incurred on or in the Contract Area;

	3.	 	The “Investment” made by the Contractor in the Contract Area in any particular Year
is the aggregate value for the Year of:

	 	(i)	 	the Contractor’s Exploration Costs incurred on or in the Contract Area
pursuant to Article 15
	 
	 	 	 	plus
	 
	 	(ii)	 	the Contractor’s Development Costs incurred on or in the Contract Area.

	4.	 	For the purposes of the calculation of the Investment Multiple, costs or expenditures
which are not allowable as provided in the Accounting Procedure shall be excluded from
Contract Costs and be disregarded.

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	5.	 	The Investment Multiple ratio earned by the Contractor as at the end of any Year
shall be calculated by dividing the aggregate value of the addition of each of the
annual Net Cash Incomes (accumulated, without interest, up to and including that Year
starting from the Year in which Production Costs were first incurred or Production
first arose) by the aggregate value of the addition of each of the annual Investments
(accumulated, without interest, up to and including that Year starting from the Year
in which Exploration and Development Costs were first incurred).
	 
	6.	 	Profit Petroleum from the Contract Area in any Year shall be shared between the
Government and the Contractor in accordance with the value of the Investment Multiple
earned by the Contractor as at the end of the previous Year pursuant to Articles 16.2
to 16.5.

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APPENDIX-E1

FORM OF PARENT COMPANY FINANCIAL AND PERFORMANCE GUARANTEE

(to be furnished pursuant to Article 29.1 (b) of the Contract)

	 	 	WHEREAS                                                             a company duly organised and existing
under the laws of                                         having its registered office
at                                         (hereinafter referred to as ‘the Guarantor’ which
expression shall include its successors and assigns) is [the indirect owner of one
hundred percent (100%) of the capital stock of XYZ Company and direct owner of its
parent company;] and
	 
	 	 	WHEREAS XYZ Company is signatory to a Production Sharing Contract in respect of an
(offshore) (onshore) area identified as Block                                                             
(hereinafter referred to as ‘the Contract’) made between the Government of India
(hereinafter referred to as ‘the Government’), and XYZ Company (hereinafter
referred to as XYZ which expression shall include its successors and permitted
assigns); and
	 
	 	 	WHEREAS the Guarantor wishes to guarantee the performance of XYZ Company or its
Affiliate Assignee under the Contract as required by the terms of the Contract;
	 
	 	 	NOW, THEREFORE this Deed hereby provides as follows:
	 
	1.	 	The Guarantor hereby unconditionally and irrevocably guarantees to the Government that
it will make available, or cause to be made available, to XYZ Company or any other
directly or indirectly owned Affiliate of XYZ Company to which any part or all of XYZ
Company’s rights or interest under the Contract may subsequently be assigned (‘Affiliate
Assignee’), financial, technical and other resources required to ensure that XYZ Company
or any Affiliate Assignee can carry out its obligations as set forth in the Contract.
	 
	2.	 	The Guarantor further unconditionally and irrevocably guarantees to the Government the
due and punctual compliance by XYZ Company or any Affiliate Assignee, of any obligations
of XYZ Company or any Affiliate Assignee under the Contract.
	 
	3.	 	The Guarantor hereby undertakes to the Government that if XYZ Company, or any Affiliate
Assignee, shall, in any respect, fail to perform its obligations under the Contract or
commit any breach of such obligations, then the Guarantor shall fulfil or cause to be
fulfilled the said obligations in place of XYZ Company or any Affiliate Assignee, and
will indemnify the Government against all losses,

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	 	 	damages, costs, expenses or otherwise which may result directly from such failure
to perform or breach on the part of XYZ Company.

	4.	 	This guarantee shall take effect from the Effective Date and shall remain in full force
and effect for the duration of the said Contract and thereafter until no sum remains
payable by XYZ Company, or its Affiliate Assignee, under the Contract or as a result of
any decision or award made by any expert or arbitral tribunal thereunder.
	 
	5.	 	This guarantee shall not be affected by any change in the articles of association and
bye-laws of XYZ Company or the Guarantor or in any instrument establishing the Company
or Guarantor.
	 
	6.	 	The liabilities of the Guarantor shall not be discharged or affected by (a) any time
indulgence, waiver or consent given to XYZ Company; (b) any amendment to the Contract or
to any security or other guarantee or indemnity to which XYZ Company has agreed; (c) the
enforcement or waiver of any terms of the Contract or of any security, other guarantee
or indemnity; or (d) the dissolution, amalgamation, reconstruction or reorganisation of
XYZ Company.
	 
	7.	 	This guarantee shall be governed by and construed in accordance with the laws of India.
	 
	 	 	IN WITNESS WHEREOF the Guarantor, through its duly authorised representatives, has
caused its seal to be duly affixed hereto and this guarantee to be duly executed
the                      day of                                          200_.

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APPENDIX-E2

FORM OF COMPANY FINANCIAL AND PERFORMANCE GUARANTEE

(to be furnished pursuant to Article 29.1 (b) of the Contract)

	 	 	WHEREAS___XYZ Company                                                              duly organised and
existing under the laws of                     having its registered office
at                                         (hereinafter referred to as ‘the Guarantor’ which
expression shall include its successors and assigns) is signatory to a Production
Sharing Contract in respect of an (offshore) (onshore) area identified as Block
                                                             (hereinafter referred to as ‘the Contract’)
made between the Government of India (hereinafter referred to as ‘the
Government’), and XYZ Company (hereinafter referred to as XYZ which expression
shall include its successors and permitted assigns); and
	 
	 	 	WHEREAS the Guarantor wishes to guarantee its performance under the Contract as
required by the terms of the Contract;
	 
	 	 	NOW, THEREFORE this Deed hereby provides as follows:
	 
	1.	 	The Guarantor hereby unconditionally and irrevocably guarantees to the Government that
it will make available, or cause to be made available, financial, technical and other
resources required to ensure that XYZ Company can carry out its obligations as set forth
in the Contract.
	 
	2.	 	The Guarantor further unconditionally and irrevocably guarantees to the Government the
due and punctual compliance by it of any obligations under the Contract.
	 
	3.	 	The Guarantor hereby undertakes to the Government that it shall fulfill or cause to be
fulfilled all its obligations under the Contract, and if it fails to perform its
obligations under the Contract or commits any breach of such obligations, then it shall
indemnify the Government against all losses, damages, costs, expenses or otherwise which
may result directly from such failure to perform or breach on its part.
	 
	4.	 	This guarantee shall take effect from the Effective Date and shall remain in full force
and effect for the duration of the said Contract and thereafter until no sum remains
payable by XYZ Company, under the Contract or as a result of any decision or award made
by any expert or arbitral tribunal thereunder.

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	5.	 	This guarantee shall not be affected by any change in the articles of association and
bye-laws of XYZ Company or in any instrument establishing the Company.
	 
	6.	 	The liabilities of the Guarantor shall not be discharged or affected by (a) any time
indulgence, waiver or consent given to XYZ Company; (b) any amendment to the Contract or
to any security or other guarantee or indemnity to which XYZ Company has agreed; (c) the
enforcement or waiver of any terms of the Contract or of any security, other guarantee
or indemnity.
	 
	7.	 	This guarantee shall be governed by and construed in accordance with the laws of India.
	 
	 	 	IN WITNESS WHEREOF the Guarantor, through its duly authorised representatives, has
caused its seal to be duly affixed hereto and this guarantee to be duly executed
the                      day of                                          200___.

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APPENDIX-F

PROCEDURE FOR ACQUISITION OF GOODS AND SERVICES

	 	 	I OBJECTIVES
	 
	 	 	The objectives of these procedures are to:

	 	(a)	 	ensure that the goods and services acquired by the Operator for carrying out the
Petroleum Operations are acquired at the optimum cost taking into consideration all
relevant factors including price, quality, delivery time and the reliability of
potential suppliers.
	 
	 	(b)	 	ensure that goods and services are delivered in a timely manner taking into
consideration the consequences of delays in the acquisition of these goods and
services on the project as a whole.
	 
	 	(c)	 	ensure that the provisions of Article 23 of the Contract are implemented.

	 	 	II PRINCIPLES
	 
	 	 	The principles upon which these procedures are based are:

	 	(a)	 	The Parties must be satisfied that the Operator is working to an agreed procedure
for acquiring goods and services which is auditable and in accordance with the
provisions of the Contract.
	 
	 	(b)	 	The Operator must have the ability to acquire goods and services expeditiously so
that the project schedules in respect of Approved Work Programmes are maintained.

	 	 	III PROCEDURES
	 
	 	 	The procedures to be adopted by the Operator for the acquisition of
goods and services shall be as follows:

	 	 	 	 	 	 	 
	 	 	Procedure A	 	Procedure B	 	Procedure C
	Applicable to
Exploration,
Appraisal,
Development and
Production
operations

	 	$50,000 to less
than $200,000
	 	$200,000 to less
than $500,000
	 	Equal to or more
than $500,000

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For contracts valued at less than US$ 5000

The Operator will be at liberty to determine the procurement procedures and methods to
procure goods and services valued at less than US Dollars five thousand (US$5000).

For Contracts valued at US$ 5000 and above but less than US$ 50,000

The Operator will be at liberty to determine the preferred method of acquiring goods and
services valued at US Dollars five thousand (US$ 5000) and above but less than US Dollars
fifty thousand (US$ 50,000) provided that at least three (3) quotations from selected
suppliers (including at least one (1) Indian supplier) will be obtained. For items valued
at greater than US Dollars twenty thousand (US$ 20,000), Operator is required to report to
the Operating Committee if the quote accepted exceed the lowest quote by more than twenty
(20) percent. Operator will promptly report to the Operating Committee the Operator’s
reasons for not selecting the lowest quote.

Procedure A:

Operator shall:

	 	(1)	 	provide the constituents of the Contractor with a list of all the entities
approved by the Operating Committee as per Appendix-F (V) for the applicable category
of the contract along with other entities, if any, from whom the Operator proposes to
invite tender;
	 
	 	(2)	 	add to such list the entities whom other Party requests for adding within five
(5) Business Days on receipt of such lists;
	 
	 	(3)	 	if and when any Party so requests, Operator shall evaluate any entity listed in
(1) and (2) above to assure that entity is qualified as based on the qualification
criteria agreed in accordance with Appendix-F(IV) to perform under the contract;
	 
	 	(4)	 	complete the tendering process within a reasonable period of time;
	 
	 	(5)	 	circulate to all constituents of the Contractor a comparative bid analysis
stating Operator’s choice of the entity for award of contract. Provide also reasons
for such choice in case entity chosen is not the lowest bidder;
	 
	 	(6)	 	inform all the constituents of the Contractor of the entities to whom the
contract has been awarded; and
	 
	 	(7)	 	upon the request of a Party, provide such Party with a copy of the final version
of the contract awarded.

Procedure B:

Operator shall:

	 	(1)	 	provide the Parties with a list of all the entities approved by the Operating
Committee as per Appendix-F (V) for the applicable category of the contract, along
with other entities, if any, from whom the Operator proposes to invite tender;

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	 	(2)	 	add to such list the entities whom a Party requests for adding within five (5)
Business Days on receipt of such list;
	 
	 	(3)	 	if and when any Party so requests, Operator shall evaluate any entity listed in
(1) and (2) above to assure that entity is qualified as based on the qualification
criteria agreed in accordance with Appendix-F (IV), to perform under the contract;
	 
	 	(4)	 	complete the tendering procedure within a reasonable period of time;
	 
	 	(5)	 	circulate to all constituents of the Contractor a comparative bid analysis
stating Operator’s choice of the entity for award of contract. Provide also reasons
for such choice in case the entity chosen is not the lowest bidder. If the bid
selected is not the lowest bid, obtain prior approval of the Operating Committee for
award of contract;
	 
	 	(6)	 	award the contract accordingly and inform all the members of the Management
Committee of the entities to whom the contract has been awarded; and
	 
	 	(7)	 	upon the request of a Party, provide such Party with a copy of the final version
of the contract awarded.

Procedure C:

Operator shall:

	 	(1)	 	publish invitations for parties to pre-qualify for the proposed contract in at
least three (3) daily national Indian newspaper. Provide to Non-Operating Companies,
a list of responding parties and an analysis of their qualifications for the contract
being contemplated to be awarded. Include those who qualify, as per the
prequalification criteria approved as per Appendix-F (IV) in the list of entities
from whom Operator proposes to invite tender for the said contract;
	 
	 	(2)	 	provide the members of the Management Committee with a total list of all the
entities selected as (1) above and all the entities approved by the Operating
Committee as per Appendix-F(V) for the applicable category of the contract, along
with other entities, if any, from whom the Operator proposes to invite tender;
	 
	 	(3)	 	add to such entities whom a Party requests for adding within five (5) Business
Days on receipt of such list;
	 
	 	(4)	 	if and when any Party so requests, Operator shall evaluate any entity listed in
(2) and (3) above to assure that entity is qualified as based on the qualification
criteria agreed in accordance with Appendix-F(IV), to perform under the contract;
	 
	 	(5)	 	prepare and dispatch the tender documents to the entities as finally listed and
to Parties;
	 
	 	(6)	 	after the expiration of the period allowed for tendering, consider and analyse
the details of all bids received;
	 
	 	(7)	 	prepare and circulate to the constituents of the Contractor a comparative bid
analysis stating Operator’s recommendation as to the entity to whom the contract

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	 	 	 	should be awarded, the reasons therefor, and the technical, commercial and contractual
terms to be agreed upon;
	 
	 	(8)	 	obtain the approval of the Operating Committee to the recommended bid. However,
failing Operating Committee approval any Company may refer the issue to the
Management Committee for decision; and
	 
	 	(9)	 	award the contract accordingly and upon the request of a Party, provide such
Party with a copy of the final version of the contract;

	IV.	 	A set of vendor qualifications criteria for each major category contract/supply shall
be proposed by the Operator and approved by the Operating Committee within thirty (30)
days of its submission. In the event the Operating Committee fails to approve vendor
qualification criteria within thirty (30) days of the date the same is first submitted
by the Operator, the matter shall be referred to the Management Committee for decision.
The Operating Committee may revise the qualification criteria.
	 
	V.	 	It is anticipated that, in order to expedite joint operations, contracts will be
awarded to qualified vendors/contractors who are identified as approved vendors for the
specified activities. A list of such approved vendors shall first be established as
follows:

Operator shall:

	 	(1)	 	provide the constituents of the Contractor with a list of the entities from whom
Operator proposes to invite tender for contracts; and
	 
	 	(2)	 	add to such list entities whom a Company requests for adding within fourteen (14)
days on receipt of such list; and
	 
	 	(3)	 	obtain approval of the Operating Committee. Such list shall thereafter be
maintained by the Operator. The Operating Committee may add to or delete vendors from
such list.

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APPENDIX-G

PERFORMA OF BANK GUARANTEE TO BE PROVIDED

PURSUANT TO ARTICLE 29

	1.	 	In consideration of Government of India (hereinafter referred to as “Government”)
having entered into a Production Sharing Contract for the block                     dated                     
(hereinafter referred to as “Contract”, which expression shall include all the
amendments agreed to between the Government and the Contractor, thereto), with M/s
                                         having its registered office at                      (hereinafter referred
to as                     , which expression unless repugnant to the context or meaning thereof
include all its successors, administrators, executors and assigns), which is a
constituent of the Contractor, and the Government have agreed that the                     
Company shall furnish to Government a bank guarantee (hereinafter referred to as
“Guarantee”) towards its obligations as provided in the Contract for US$(for Foreign
Companies)/US$ equivalent in Indian Rupees (for Indian Companies) for the performance of
its obligations under the Contract.
	 
	2.	 	We                     (name of the Bank) registered under the Law of                      and having its
registered office at                      (hereinafter referred to as “the Bank”, which
expression shall unless repugnant to the context or meaning thereof includes all its
successors, administrators, executors and assigns) do hereby guarantee and undertake to
pay immediately on the fist demand in writing and any/all money(s) to the extent of
Indian Rupees/US$ ___(in figures) and (Indian Rupees/US$ ___in words) without
any demur, reservation, contest or protest and/or without any reference to the Company.
Any such demand made by Government on the Bank by serving a written notice shall be
conclusive and binding, without any proof, on the Bank as regards the amount due and
payable, notwithstanding any dispute(s) pending before any court, tribunal, arbitrator,
sole expert, conciliator or any other authority and/or any other matter or thing
whatsoever, as liability under these presents being absolute and unequivocal. We agree
that the Guarantee herein contained shall be irrevocable and shall continue to be
enforceable until it is discharged by Government in writing. This Guarantee shall not be
determined, discharged or affected by the liquidation, winding up, dissolution or
insolvency of the Contractor and shall remain valid, binding and operative against the
Bank.
	 
	3.	 	The Bank also agree that Government at its option shall be entitled to enforce this
Guarantee against the Bank as a principal debtor, in the first instance, without
proceeding against the                      Company and notwithstanding any security or other
guarantee that Government may have in relation to the                      Company’s
liabilities.

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	4.	 	The Bank further agree that Government shall have fullest liberty without our consent
and without affecting in any manner our obligations hereunder to vary any of the terms
and conditions of the said Contract or to extend time of performance by the said
                     Company from time to time or to postpone for any time or from time to time
exercise of any of the powers vested in Government against the said                      Company
and to forebear or enforce any of the terms and conditions relating to the said Contract
and we shall not be relieved from our liability by reason of any such variation, or
extension being granted to the said                      Company or for any forbearance, act or
omission on the part of Government or any indulgence by Government to the said
                     Company or any such matter or thing whatsoever which under the law relating
to sureties would, but for this provision, have effect of so relieving us.
	 
	5.	 	The Bank further agree that the Guarantee herein contained shall remain in full force
during the period that is taken for the performance of the Contract and all dues of
Government under or by virtue of this Contract have been fully paid and its claim
satisfied or discharged or till Government discharges this Guarantee in writing,
whichever is earlier.
	 
	6.	 	This Guarantee shall not be discharged by any change in our constitution, in the
constitution of                      Company or that of the Contractor.
	 
	7.	 	The Bank confirm that this Guarantee has been issued with observance of appropriate
laws of the country of issue.
	 
	8.	 	The Bank also agree that this Guarantee shall be governed and construed in accordance
with Indian Laws and subject to the exclusive jurisdiction of Indian courts at
                    , India.
	 
	9.	 	Notwithstanding any thing contained herein above, our liabilities under this Guarantee
is limited to Indian Rupees/US$                     (in figures) Indian Rupees/US$
                                         (in words) and our Guarantee shall remain in force upto and including
sixty (60) days after the expiry date/extended date. Any claim under this Guarantee
must be received before the expiry of sixty (60) days or before the expiry of sixty (60)
days from the extended date if any. If no such claim has been received by us within
sixty (60) days after the said date/extended date the Government’s right under this will
cease. However, if such a claim has been received by us within and upto sixty (60) days
after the said date/extended date, all the Government’s rights under this Guarantee
shall be valid and shall not cease until we have satisfied that claim.

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	 	 	In witness whereof, the Bank through its authorised officers has set its hand and
stamp on this                      day of                      200___at                     .
	 
	 	 	The seal of                                         was hereto duly affixed by                     this                    
day of                     200___in accordance with its bye-laws and this Guarantee was duly
signed by                     and                      as required by the said bye-laws.

	 	 	 	 	 	 	 	 	 
	 

	 	 

Secretary
	 	 
	 	 

President & Director
	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	Witness:	 	 	 	 	 	 

138

 

APPENDIX – H

ITEMIZED COST BREAK-UP

OF

BID COST ESTIMATES

GIVEN

BY

THE CONTRACTOR

139

 

			
	Block : CB-ONN-2003/2

Cost Estimates for 2D API & 3D API
	 	Appendix-II

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	(US$)
	 	 	2D	 	 	 	3D
	 	 	Acquisition	 	Processing	 	Interpretation	 	Reprocessing	 	Spl.Processing	 	Acquisition	 	Processing	 	Interpretation	 	Reprocessing	 	Spl.Processing
	 	 	(US$)	 	 	 	 	 	(US$)	 	 	 	(US$)	 	(US$)	 	(US$)	 	 	 	 
	Quantum lkm/sq.km.

	 	 	 	 	 	 	 	650 Lkm.
	 	 	 	448 Sq.kms.
	 	448 Sq.kms.
	 	448 Sq.kms.	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Technical Specification in Brief

	 	 	 	 	 	 	 	Reprocessing

Of 2D Seismic

Data
	 	 	 	3D Seismic

Data

Acquisition
	 	3D Seismic Data

Processing
	 	3D Seismic Data

Interpretation	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Basic Rate for Lkm/Sq.KM

	 	 	 	 	 	 	 	US$513 per

Lkm.
	 	 	 	US$7850 per
Sq.Km.
	 	US$500 per
sq.km.
	 	US$150 per
sq.km.	 	 	 	 
	Mob-Demob
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Standby day rates
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Infill Rates
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Others (like interblock

movement, Fishermen

Compensation)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Total Cost (US$)

	 	—
	 	—
	 	—
	 	 333,450.00
	 	—
	 	3,516,800.00
	 	224,000.00
	 	67,200.00
	 	—
	 	—
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	3,808,000	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Total Costs of 3D API(US$)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 

140

 

	 	 	 	 	 
	Block: CB-ONN-2003/2

	 	 	 	Appendix-H
	Cost Estimates for Drilling Wells
	 	 	 	 
	Phase-I
	 	 	 	 
	     Block

	 	CB-ONN-2003/2	 	 
	     Well No.

	 	Total 6 Wells	 	 
	     Well Depth

	 	1500 Meters	 	 
	     Water Depth

	 	N.A.	 	 
	     Rig Type

	 	Mobile Truck Mounled Rotary Drilling Rig	 	 
	     No. of Days

	 	20 Days	 	 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	(In MM US$)	 
	 
	S. NO.	 	 	Description	 	Unit	 	Qty	 	Unit Rate	 	Total Cost
	 
	 	1	 	 	Location/Site Survey/Civil Works Cost
	 	Per Well	 	 	1	 	 	 	 	 	 	 	0.01	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	2	 	 	Rig Mobilisation
	 	Lumpsum	 	 	1	 	 	 	10,000	 	 	 	0.01	 
	 	3	 	 	Inter Location Movement Charges
	 	Lumpsum	 	 	1	 	 	 	 	 	 	 	 	 
	 	4	 	 	Rig Hire Rate
	 	Day	 	 	20	 	 	 	10,000	 	 	 	0.20	 
	 	5	 	 	Rig Demobilisation
	 	Lumpsum	 	 	1	 	 	 	10,000	 	 	 	0.01	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	6	 	 	Manpower (Drilling, Geology etc.)
	 	Day	 	 	20	 	 	 	700	 	 	 	0.01	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	7	 	 	Cementing
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	- Services (Includes various personnel)
	 	Month	 	 	0.67	 	 	 	20,000	 	 	 	0.01	 
	 	 	 	 	- Materials
	 	Per Well	 	 	 	 	 	 	 	 	 	 	0.01	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	8	 	 	Logging
	 	Per Well	 	 	 	 	 	 	 	 	 	 	0.02	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	9	 	 	Mud Engineering (Drilling Fluid)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	- Services (Includes various personnel)
	 	Month	 	 	0.67	 	 	 	40,000	 	 	 	0.03	 
	 	 	 	 	- Materials
	 	Per Well	 	 	 	 	 	 	 	 	 	 	0.01	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	10	 	 	Mud Logging (Personnel and Unit)
	 	Day	 	 	20	 	 	 	350	 	 	 	0.01	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	11	 	 	Air Logistics
	 	Month	 	 	 	 	 	 	N.A.	 	 	 	—	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	12	 	 	OSV Logistics
	 	Day/boat	 	 	 	 	 	 	N.A.	 	 	 	—	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	13	 	 	Land Logistics
	 	Month	 	 	 	 	 	 	 	 	 	 	0.01	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	14	 	 	MWD/LWD Services
	 	Day	 	 	 	 	 	 	N.C.	*	 	 	—	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	15	 	 	Directional Drilling Services
	 	Day	 	 	 	 	 	 	N.C.	*	 	 	—	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	16	 	 	Coring Services
	 	Day	 	 	 	 	 	 	N.C.	*	 	 	—	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	17	 	 	Well Head Services
	 	Day	 	 	 	 	 	 	 	 	 	 	—	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	18	 	 	Casing Running Services
	 	Day	 	 	 	 	 	 	 	 	 	 	—	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	19	 	 	Bits/Casing Costs
	 	Per Well	 	 	 	 	 	 	 	 	 	 	0.04	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	20	 	 	Well Head/X-mas Tree
	 	Per Well	 	 	 	 	 	 	 	 	 	 	0.01	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	21	 	 	Water
	 	Day	 	 	 	 	 	 	 	 	 	 	0.01	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	22	 	 	HSD/Lube Oil
	 	Day	 	 	 	 	 	 	 	 	 	 	0.01	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	23	 	 	DST/Testing Services
	 	Day	 	 	 	 	 	 	N.C.	*	 	 	—	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	24	 	 	Miscellaneous/Other Drilling Expenses
	 	Per Well Day	 	 	 	 	 	 	 	 	 	 	0.01	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	Total
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	0.40	 
	 

			
	*	 	Not Considered in the Well Cost Estimates.

Notes:

	 	1	 	The above Well Cost Estimates are prepared based on Dry Trouble Free Hole Costs Basis and
includes Drilling, Logging and Abandonment (DL&A) Costs.
	 
	 	2	 	It includes the Costs till 9 5/8* Casing Lowering. The Costs after this stage is dependent upon
the progress of Drilling Operations
	 
	 	3	 	The Costs of MWD/LWD Services, Directional Drilling Services,
Advanced Logging, Coring Services and DST/Testing Services are not considered in the above
Well Cost Estimates because they are Contingent upon the progress and results of Drilling
Operations.

141

 

	 	 	 	 	 
	Block: CB-ONN-2003/2

	 	 	 	Appendix-H
	Cost
Estimates for Drilling Wells
	 	 	 	 
	Phase-I
	 	 	 	 
	     Block

	 	CB-ONN-2003/2	 	 
	     Well No

	 	Total 3 Wells	 	 
	     Well Depth

	 	2000 Meters	 	 
	     Water Depth

	 	N.A.	 	 
	     Rig Type

	 	Mobile Truck Mounted Rotary Drilling Rig	 	 
	     No. of Days

	 	25 Days	 	 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	(In MM US$)
	 
	Sr. No.	 	 	Description	 	Unit	 	Qty	 	Unit Rate	 	Total Cost
	 
	 	1	 	 	Location/Site Survey/Civil Works Cost
	 	Per Well	 	 	1	 	 	 	 	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	2	 	 	Rig Mobilisation
	 	Lumpsum	 	 	1	 	 	 	10,000	 	 	 	0.01	 
	 	3	 	 	Inter Location Movement Charges
	 	Lumpsum	 	 	1	 	 	 	 	 	 	 	 	 
	 	4	 	 	Rig Hire Rate
	 	Day	 	 	25	 	 	 	10,000	 	 	 	0.25	 
	 	5	 	 	Rig Demobilisation
	 	Lumpsum	 	 	1	 	 	 	10,000	 	 	 	0.01	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	6	 	 	Manpower
(Drilling, Geology etc.)
	 	Day	 	 	25	 	 	 	700	 	 	 	0.02	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	7	 	 	Cementing
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	-
Services (Includes various personnel)
	 	Month	 	 	0.83	 	 	 	20,000	 	 	 	0.02	 
	 	 	 	 	- Materials
	 	Per Well	 	 	 	 	 	 	 	 	 	 	0.01	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	8	 	 	Logging
	 	Per Well	 	 	 	 	 	 	 	 	 	 	0.02	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	9	 	 	Mud
Engineering (Drilling Fluid)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	- Services (Includes various personnel)
	 	Month	 	 	0.83	 	 	 	40,000	 	 	 	0.03	 
	 	 	 	 	- Materials
	 	Per Well	 	 	 	 	 	 	—	 	 	 	0.01	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	10	 	 	Mud Logging (Personnel and Unit)
	 	Day	 	 	25	 	 	 	350	 	 	 	0.01	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	11	 	 	Air Logistics
	 	Month	 	 	 	 	 	 	N.A.	 	 	 	—	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	12	 	 	OSV Logistics
	 	Day/boat	 	 	 	 	 	 	N.A.	 	 	 	—	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	13	 	 	Land Logistics
	 	Month	 	 	 	 	 	 	 	 	 	 	—	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	14	 	 	MWD/LWD
Services
	 	Day	 	 	 	 	 	 	N.C.	*	 	 	—	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	15	 	 	Directional Drilling Services
	 	Day	 	 	 	 	 	 	N.C.	*	 	 	—	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	16	 	 	Coring Services
	 	Day	 	 	 	 	 	 	N.C.	*	 	 	—	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	17	 	 	Well Head Services
	 	Day	 	 	 	 	 	 	—	 	 	 	—	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	18	 	 	Casing Running Services
	 	Day	 	 	 	 	 	 	 	 	 	 	—	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	19	 	 	Bits/Casing Costs
	 	Per Well	 	 	 	 	 	 	 	 	 	 	0.03	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	20	 	 	Well
Head/X-Mas Tree
	 	Per Well	 	 	 	 	 	 	 	 	 	 	0.01	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	21	 	 	Water
	 	Day	 	 	 	 	 	 	 	 	 	 	0.01	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	22	 	 	HSD/Lube Oil
	 	Day	 	 	 	 	 	 	 	 	 	 	0.01	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	23	 	 	DST/Testing Services
	 	Day	 	 	 	 	 	 	N.C.	*	 	 	—	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	24	 	 	Miscellaneous/Other Drilling Expenses
	 	Per Well Day	 	 	 	 	 	 	 	 	 	 	—	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	Total
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	0.43	 
	 

			
	*	 	Not Considered in the Well Cost Estimates.

Notes:

	 	1	 	The above Well Cost Estimates are prepared based on Dry Trouble Free Hole Costs Basis and
includes Drilling, Logging and Abandonment(DL&A) Costs.
	 
	 	2	 	It includes the Costs till 9 5/8” Casing Lowering. The Costs after this stage is dependent
upon the progress of Drilling Operations.
	 
	 	3	 	The Costs of MWD/LWD Services, Directional
Drilling Services, Advanced Logging, Coring Services and DST/Testing Services are not
considered in the above Well Cost Estimates because they are Contingent upon the
progress and results of Drilling Operations.

142

 

	 	 	 	 	 
	Block: CB-ONN-2003/2

	 	 	 	Appendix-H
	Cost
Estimates for Drilling Wells
	 	 	 	 
	Phase-I
	 	 	 	 
	     Block

	 	CB-ONN-2003/2	 	 
	     Well No.

	 	Total 5 Wells	 	 
	     Well Depth

	 	2500 Meters	 	 
	     Water Depth

	 	N.A.	 	 
	     Rig Type

	 	Mobile Truck Mounted Rotary Drilling Rig	 	 
	     No. of Days

	 	30 Days	 	 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	(in MM US$)	 
	 
	Sr. No.	 	 	Description	 	Unit	 	Qty	 	Unit Rate	 	Total Cost
	 
	 	1	 	 	Location/Site Survey/Civil Works Cost
	 	Per Well	 	 	1	 	 	 	 	 	 	 	—	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	2	 	 	Rig Mobilisation
	 	Lumpsum	 	 	1	 	 	 	10,000	 	 	 	0.01	 
	 	3	 	 	Inter Location Movement Charges
	 	Lumpsum	 	 	1	 	 	 	 	 	 	 	 	 
	 	4	 	 	Rig Hire Rate
	 	Day	 	 	30	 	 	 	10,000	 	 	 	0.30	 
	 	5	 	 	Rig Demobilisation
	 	Lumpsum	 	 	1	 	 	 	10,000	 	 	 	0.01	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	6	 	 	Manpower
(Drilling, Geology etc.)
	 	Day	 	 	30	 	 	 	700	 	 	 	0.02	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	7	 	 	Cementing
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	- Services (Includes various personnel)
	 	Month	 	 	1	 	 	 	20,000	 	 	 	0.02	 
	 	 	 	 	- Materials
	 	Per Well	 	 	 	 	 	 	 	 	 	 	0.01	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	8	 	 	Logging
	 	Per Well	 	 	 	 	 	 	 	 	 	 	0.02	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	9	 	 	Mud Engineering (Drilling Fluid)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	- Services (Includes various personnel)
	 	Month	 	 	1	 	 	 	40,000	 	 	 	0.04	 
	 	 	 	 	- Materials
	 	Per Well	 	 	 	 	 	 	 	 	 	 	0.01	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	10	 	 	Mud Logging (Personnel and Unit)
	 	Day	 	 	30	 	 	 	350	 	 	 	0.01	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	11	 	 	Air Logistics
	 	Month	 	 	 	 	 	 	N.A.	 	 	 	—	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	12	 	 	OSV Logistics
	 	Day/boat	 	 	 	 	 	 	N.A.	 	 	 	—	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	13	 	 	Land Logistics
	 	Month	 	 	 	 	 	 	 	 	 	 	—	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	14	 	 	MWD/LWD Services
	 	Day	 	 	 	 	 	 	N.C.	*	 	 	—	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	15	 	 	Directional Drilling Services
	 	Day	 	 	 	 	 	 	N.C.	*	 	 	—	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	16	 	 	Coring Services
	 	Day	 	 	 	 	 	 	N.C.	*	 	 	—	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	17	 	 	Well Head Services
	 	Day	 	 	 	 	 	 	—	 	 	 	—	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	18	 	 	Casing Running Services
	 	Day	 	 	 	 	 	 	 	 	 	 	—	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	19	 	 	Bits/Casing Costs
	 	Per Well	 	 	 	 	 	 	 	 	 	 	0.03	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	20	 	 	Well Head/X-mas Tree
	 	Per Well	 	 	 	 	 	 	 	 	 	 	0.01	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	21	 	 	Water
	 	Day	 	 	 	 	 	 	 	 	 	 	0.01	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	22	 	 	HSD/Lube Oil
	 	Day	 	 	 	 	 	 	 	 	 	 	0.01	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	23	 	 	DST/Testing Services
	 	Day	 	 	 	 	 	 	N.C.	*	 	 	—	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	24	 	 	Miscellaneous/Other Drilling Expenses
	 	Per Well/Day	 	 	 	 	 	 	 	 	 	 	0.01	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	Total
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	0.50	 
	 

			
	*	 	Not Considered in the Well Cost Estimates.

Notes:

	 	1	 	The above Well Cost Estimates are prepared based on Dry Trouble Free Hole Costs
Basis and includes Drilling, Logging and Abandonment (DL&A) Costs.
	 
	 	2	 	It includes the Costs till 9 5/8* Casing Lowering. The costs after this stage
is dependent upon the progress of Drilling Operations.
	 
	 	3	 	The Costs of MWD/LWD Services, Directional Drilling Services Advanced Logging.
Coring Services and DST/Testing Services are not considered in the above Well Cost
Estimates because they are Contingent upon the progress and results of Drilling
Operations.

143

 

	 	 	 	 	 
	Block: CB-ONN-2003/2

	 	 	 	Appendix-H
	Cost
Estimates for Drilling Wells
	 	 	 	 
	Phase-II
	 	 	 	 
	     Block

	 	CB-ONN-2003/2	 	 
	     Well No.

	 	Total 2 Wells	 	 
	     Well Depth

	 	2500 Meters	 	 
	     Water Depth

	 	N.A.	 	 
	     Rig Type

	 	Mobile Truck Mounted Rotary
Drilling Rig
	 	 
	     No. of Days

	 	30 Days	 	 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	(In MM US$)
	 
	Sr. No.	 	 	Description	 	Unit	 	Qty	 	Unit Rate	 	Total Cost
	 
	 	1	 	 	Location/Site Survey/Civil Works Cost
	 	Per Well	 	 	1	 	 	 	 	 	 	 	—	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	2	 	 	Rig Mobilisation
	 	Lumpsum	 	 	1	 	 	 	10,000	 	 	 	0.01	 
	 	3	 	 	Inter
Location Movement Charges
	 	Lumpsum	 	 	1	 	 	 	 	 	 	 	 	 
	 	4	 	 	Rig Hire Rate
	 	Day	 	 	30	 	 	 	10,000	 	 	 	0.30	 
	 	5	 	 	Rig Demobilisation
	 	Lumpsum	 	 	1	 	 	 	10,000	 	 	 	0.01	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	6	 	 	Manpower (Drilling, Geology etc.)
	 	Day	 	 	30	 	 	 	700	 	 	 	0.02	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	7	 	 	Cementing
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	- Services (Includes various personnel)
	 	Month	 	 	1	 	 	 	20,000	 	 	 	0.02	 
	 	 	 	 	- Materials
	 	Per Well	 	 	 	 	 	 	 	 	 	 	0.01	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	8	 	 	Logging
	 	Per Well	 	 	 	 	 	 	 	 	 	 	0.02	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	9	 	 	Mud Engineering (Drilling Fluid)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	- Services (Includes various personnel)
	 	Month	 	 	1	 	 	 	40,000	 	 	 	0.04	 
	 	 	 	 	- Materials
	 	Per Well	 	 	 	 	 	 	 	 	 	 	0.01	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	10	 	 	Mud Logging (Personnel and Unit)
	 	Day	 	 	30	 	 	 	350	 	 	 	0.01	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	11	 	 	Air Logistics
	 	Month	 	 	 	 	 	 	N.A.	 	 	 	—	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	12	 	 	OSV Logistics
	 	Day/boat	 	 	 	 	 	 	N.A.	 	 	 	—	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	13	 	 	Land Logistics
	 	Month	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	14	 	 	MWD/LWD Services
	 	Day	 	 	 	 	 	 	N.C.	*	 	 	—	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	15	 	 	Directional Drilling Services
	 	Day	 	 	 	 	 	 	N.C.	*	 	 	—	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	16	 	 	Coring Services
	 	Day	 	 	 	 	 	 	N.C.	*	 	 	—	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	17	 	 	Well Head Services
	 	Day	 	 	 	 	 	 	—	 	 	 	—	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	18	 	 	Casing Running Services
	 	Day	 	 	 	 	 	 	 	 	 	 	—	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	19	 	 	Bits/Casing Costs
	 	Per Well	 	 	 	 	 	 	 	 	 	 	0.03	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	20	 	 	Well Head/X-mas Tree
	 	Per Well	 	 	 	 	 	 	 	 	 	 	0.01	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	21	 	 	Water
	 	Day	 	 	 	 	 	 	 	 	 	 	0.01	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	22	 	 	HSD/Lube Oil
	 	Day	 	 	 	 	 	 	 	 	 	 	0.01	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	23	 	 	DST/Testing Services
	 	Day	 	 	 	 	 	 	N.C.	*	 	 	—	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	24	 	 	Miscellaneous/Other Drilling Expenses
	 	Per Well/Day	 	 	 	 	 	 	 	 	 	 	0.01	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	Total
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	0.50	 
	 

			
	*	 	Not Considered in the Well Cost Estimates.

Notes:

	 	1	 	The above Well Cost Estimates are prepared based on Dry Trouble Free Hole Costs
Basis and includes Drilling, Logging and Abandonment (DL&A) Costs.
	 
	 	2	 	It includes the Costs till 9 5/8* Casing Lowering. The costs after this stage
is dependent upon the progress of Drilling Operations.
	 
	 	3	 	The Costs of MWD/LWD Services, Directional Drilling Services Advanced Logging,
Coring Services and DST/Testing Services are not considered in the above Well Cost Estimates because they are Contingent upon the progress and
results of Drilling Operations.

144

 

	 	 	 	 	 
	Block: CB-ONN-2003/2

	 	 	 	Appendix-H
	Cost
Estimates for Drilling Wells
	 	 	 	 
	Phase-I
	 	 	 	 
	     Block

	 	CB-ONN-2003/2	 	 
	     Well No.

	 	Total 2 Wells	 	 
	     Well Depth

	 	3000 Meters	 	 
	     Water Depth

	 	N.A.	 	 
	     Rig Type

	 	Mobile Truck Mounted Rotary
Drilling Rig	 	 
	     No. of Days

	 	35 Days	 	 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	(in MM US$)	 
	 
	Sr. No.	 	 	Description	 	Unit	 	 	Qty	 	 	Unit Rate	 	 	Total Cost	 
	 
	 	1	 	 	Location/Site Survey /Civil Works Cost
	 	Per Well	 	 	1	 	 	 	 	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	2	 	 	Rig Mobilisation
	 	Lumpsum	 	 	1	 	 	 	10,000	 	 	 	0.01	 
	 	3	 	 	Inter Location Movement Charges
	 	Lumpsum	 	 	1	 	 	 	 	 	 	 	 	 
	 	4	 	 	Rig Hire Rate
	 	Day	 	 	35	 	 	 	10,000	 	 	 	0.35	 
	 	5	 	 	Rig Demobilisation
	 	Lumpsum	 	 	1	 	 	 	10,000	 	 	 	0.01	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	6	 	 	Manpower (Drilling Geology etc.)
	 	Day	 	 	35	 	 	 	700	 	 	 	0.02	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	7	 	 	Sermenting
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	—	 
	 	 	 	 	- Services (Includes various personnel)
	 	Month	 	 	1.17	 	 	 	20,000	 	 	 	0.02	 
	 	 	 	 	- Materials
	 	Per Well	 	 	 	 	 	 	 	 	 	 	0.01	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	8	 	 	Logging
	 	Per Well	 	 	 	 	 	 	 	 	 	 	0.02	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	9	 	 	Mud Engineering (Drilling Fluid)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	- Services (Includes various personnel)
	 	Month	 	 	1.17	 	 	 	40,000	 	 	 	0.05	 
	 	 	 	 	- Materials
	 	Per Well	 	 	 	 	 	 	 	 	 	 	0.01	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	10	 	 	Mud Logging (Personnel and Unit)
	 	Day	 	 	35	 	 	 	350	 	 	 	0.01	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	11	 	 	Air Logistics
	 	Month	 	 	 	 	 	 	N.A.	 	 	 	—	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	12	 	 	OSV Logistics
	 	Day/boat	 	 	 	 	 	 	N.A.	 	 	 	—	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	13	 	 	Land Logistic
	 	Month	 	 	 	 	 	 	 	 	 	 	—	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	14	 	 	MWD/LWD Services
	 	Day	 	 	 	 	 	 	N.C.	*	 	 	—	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	15	 	 	Directional Drilling Services
	 	Day	 	 	 	 	 	 	N.C.	*	 	 	—	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	16	 	 	Coring Services
	 	Day	 	 	 	 	 	 	N.C.	*	 	 	—	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	17	 	 	Well Head Services
	 	Day	 	 	 	 	 	 	 	 	 	 	—	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	18	 	 	Casing Running Services
	 	Day	 	 	 	 	 	 	 	 	 	 	—	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	19	 	 	Bits/Casing Costs
	 	Per Well	 	 	 	 	 	 	 	 	 	 	0.02	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	20	 	 	Well Head/X-mas Tree
	 	Per Well	 	 	 	 	 	 	 	 	 	 	0.01	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	21	 	 	Water
	 	Day	 	 	 	 	 	 	 	 	 	 	0.01	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	22	 	 	HSD/Tube Oil
	 	Day	 	 	 	 	 	 	 	 	 	 	0.01	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	23	 	 	DST/Testing Services
	 	Day	 	 	 	 	 	 	N.C.	*	 	 	—	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	24	 	 	Miscellaneous/Other Drilling Expenses
	 	Per Well/Day	 	 	 	 	 	 	 	 	 	 	—	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	Total
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	0.55	 
	 

			
	*	 	Not Considered in the Well Cost Estimates.

Notes:

	 	1	 	The above Well Cost Estimates are prepared based on Dry
Trouble Free Hole Costs Basis and
includes Drilling, Logging and
Abandonment(DL&A) Costs.
	 
	 	2	 	It includes the Costs at 9 5/8* Casing Lowering. The costs
after this stage is
dependent upon the progress of Drilling Operations.
	 
	 	3	 	The Costs of MWD/LWD Services, Directional Drilling Services, Advanced
Logging, Coring Services and DST/Testing Services are not considered in the above Well
Cost Estimates because they are Contingent upon the progress and results of Drilling
Operations.

145

 

	 	 	 	 	 
	Block: CB-ONN-2003/2

	 	 	 	Appendix-H
	Cost Estimates for Drilling Wells
	 	 	 	 
	Phase-III
	 	 	 	 
	     Block

	 	CB-ONN-2003/2	 	 
	     Well No.

	 	Total 3 Wells	 	 
	     Well Depth

	 	2500 Meters	 	 
	     Water Depth

	 	N.A.	 	 
	     Rig Type

	 	Mobile Truck Mounted Rotary Drilling Rig
	 	 
	     No. of Days

	 	30 Days	 	 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	(in MM US$)	 
	 
	Sr. No.	 	 	Description	 	Unit	 	 	Qty	 	 	Unit Rate	 	 	Total Cost	 
	 
	 	1	 	 	Location/Site Survey/Civil Works Cost
	 	Per Well	 	 	1	 	 	 	 	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	2	 	 	Rig Mobilisation
	 	Lumpsum	 	 	1	 	 	 	10,000	 	 	 	0.01	 
	 	3	 	 	Inter Location Movement Charges
	 	Lumpsum	 	 	1	 	 	 	 	 	 	 	 	 
	 	4	 	 	Rig Hire Rate
	 	Day	 	 	30	 	 	 	10,000	 	 	 	0.03	 
	 	5	 	 	Rig Demobilisation
	 	Lumpsum	 	 	1	 	 	 	10,000	 	 	 	0.01	 
	 
	 	6	 	 	Manpower(Drilling Geology etc.)
	 	Day	 	 	30	 	 	 	700	 	 	 	0.02	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	7	 	 	Cementing
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	– Services(includes various personnel)
	 	Month	 	 	1	 	 	 	20,000	 	 	 	0.02	 
	 	 	 	 	– Materials
	 	Per Well	 	 	 	 	 	 	 	 	 	 	0.01	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	8	 	 	Logging
	 	Per Well	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	9	 	 	Mud Engineering (Drilling Fluid)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	– Services(includes various personnel)
	 	Month	 	 	1	 	 	 	40,000	 	 	 	0.04	 
	 	 	 	 	– Materials
	 	Per Well	 	 	 	 	 	 	 	 	 	 	0.01	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	10	 	 	Mud Logging(Personnel and Unit)
	 	Day	 	 	30	 	 	 	350	 	 	 	0.01	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	11	 	 	Air Logistics
	 	Month	 	 	 	 	 	 	N.A.	 	 	 	—	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	12	 	 	OSV Logistics
	 	Day/boat	 	 	 	 	 	 	N.A.	 	 	 	—	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	13	 	 	Land Logistics
	 	Month	 	 	 	 	 	 	 	 	 	 	—	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	14	 	 	MWD/LWD Services
	 	Day	 	 	 	 	 	 	N.C.	*	 	 	—	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	15	 	 	Directional Drilling Services
	 	Day	 	 	 	 	 	 	N.C.	*	 	 	—	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	16	 	 	Coring Services
	 	Day	 	 	 	 	 	 	N.C.	*	 	 	—	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	17	 	 	Well Head Services
	 	Day	 	 	 	 	 	 	—	 	 	 	—	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	18	 	 	Casing Running Services
	 	Day	 	 	 	 	 	 	 	 	 	 	—	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	19	 	 	Bilts/Casing Costs
	 	Per Well	 	 	 	 	 	 	 	 	 	 	0.03	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	20	 	 	Well Head/X-mas Tree
	 	Per Well	 	 	 	 	 	 	 	 	 	 	0.01	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	21	 	 	Water
	 	Day	 	 	 	 	 	 	 	 	 	 	0.01	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	22	 	 	HSD/Lube Oil
	 	Day	 	 	 	 	 	 	 	 	 	 	0.01	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	23	 	 	DST/Testing Services
	 	Day	 	 	 	 	 	 	N.C.	*	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	24	 	 	Miscellaneous/Other Drilling Expenses
	 	Per Well Day	 	 	 	 	 	 	 	 	 	 	0.01	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	Total
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	0.50	 
	 

			
	*	 	Not Considered in the Well Cost Estimates.

Notes:

	 	1	 	The above Well Cost Estimates are prepared based on Dry Trouble Free Hole Cost Basis and includes Drilling, Logging
 and Abandonment(DL&A) Costs.
	 
	 	2	 	It includes the Costs 9 5/8* Casing Lowering. The costs after this stage is dependent upon the progress of Drilling
Operations.
	 
	 	3	 	The Costs of MWD/LWD Services, Directional Drilling Services, Advanced Logging, Coring Services and DST/Testing Services
are not considered in the above Well Cost Estimates because they are Contingent upon the progress and results of Drilling
Operations.

146

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00093-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00093-of-00352.parquet"}]]