PETROLEUM EXPLORATION, DIEVELOPMENT AND

PRODUCTION

THE GO;VERNMENT ,OIF ITHE'REPUB,LIC OF UGANDA

PR·O·· .. ·,·D·.·U ... 'C··._TIO·· .. I SHARI' NG- A"G"RE-E'C'M" E' 'T

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FOR

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L .;: 23 JAN 2M7 ,'" .

1 P. n, tI ;: .• " , ~E;pUBLIC OF' UGANDA

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DIY AND BETWEEN

JNTHE

AND

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, ~

:ONTENTS

U1ide

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Di.EVoort(l~,S ---.._~

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- ,

. .,

AGRDMENr -~-....-

...

.,

REs.roNsm,J][.lTJES AND GRANT OF RIGHTS, ~-",=~-___",=,.--. U EXPIJOBA1l0N WORJK PROGRAMM:E~-~-__",-~__...·~ , .. ' ADVISORY COmrrTIEE -~__,""-~~..._........,_-~--~ 19

. !

WORK ,PROGRAMMES AND, BUDGETS ""r--~~ DifSCOVERY ~ DEVELOIIDNT' A.ND PJtIODUcrlON --"""""""--.",._ RECORDs.. KEPORTS~ DATA AND' INSPiECOUN ---=--.-----,- 28

24

SI.GNA.'fURE BONUS -- ..,._._...... ... -~_....---,._~---- 32

ROYAL,TV -I-~

PRODUCTION SHAlDNG'1,~,· .... · - ...... --- ...... --~--_.._----~"l"

- -- - .' J

'VALUATION AND MEASUREMENT OF PETROLEUM --..----- 410

PIPELINE 1l'RANSPORTAnON ~~_......---~-......._.-==.."AR.KE11NG AND ttFllN'G ~-~

1i

),:iajons ' .. i'_h Heritaqe IOIHand Gas Limh,e, Exploration Areal 3rA (,EA.aA) have, been c 3ttached map. The main elements of the

;')" t II

•. ', are: as \ O.~:OWS::' -

. I

. ,Heritage,' is be·ing granted an explor.e

'. " .oj

basir f

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Exploration curaflon is slx years" sub-c

• I 11 ~

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' .

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• iFirstExptoration Period

, ' ~

'. Secono Exploration Perjod

• Thi:rd Exploration Period

. I'

. ' I

'.. . I

D'uring the Frirst Exploration Period, He,1

data over an area of 150sqkm at ami all'so'drUI tw'o (2) firm w~Hs at a cost of t

, ' ' t

I

During, the Se100nd Explorafion Period"

tess thanUS,$ 16 ,mHrUon, whose. locafion

, '

The company wiUa,l:so have ,8 co'ntingt

less than IUS,$:6.00 miUUon and selsmic d

I·

. .

.D1uring'the' Third Exoloraton pp-rinri' ~.c

ST A 1'"1: PARHCIPIAJ~ON

Govemmel'li or its t~ominee shc;lll en'ie" .".- ;;;: ; - ;~~-€-- ,'.;r. Heritage thereby aLlofMng '~ar staie Pal1.ic;ipatbr! in II:: r...:::-t:' -- =.. • 5: - -~ '2;= ~~aH c;arry GovemMe!'ll'Or its Nominee unlillhe prOOLlcOO'" 0' '--s: C a-~'~ 2"-~:, costs shaU be r~ere:daliJf1Ig"'oIi~h Qlh€f cOSTS under fhe "Cost ROOJ',~r! - ~~ ce ffi'o 5-~:~

Ali ex:p!ora'tio,rn, de'ME!lop,mel"ll.prodl1Jctio:n end operaiing lexpeooitures irlcurred by Heritage st1a~ 'be recG\lered frem 60'% of gross 011 pUQdWlction and 10% of gross ga$ prodllJcoon aner diedllcli{)l'1 of royalty. lilissl1,a[1 incllide osmed roS'~s of Gmlemmenl or its Nami~e€l.

PR.ODUC1nOMI SHAR~N,~

After ~erjllctiQn or ~loyany and [he Coo~ Reoov,ery oUfor ihe ro~pany's inves.tment, ~he rema~lillg oU wililbe sh8~d b~tweell GDvemnnern and the Company as mOWUl b~OIl'/:

Gove-mmenl , P:uod1l1c-tlo!l1l ShPire

Lice11!sei~; P[IQdu~tk!n S~j1m

Where ~:rQd.IFic.tion does nO'tlt'llceed 5.000 46MJ

- I _ -

W'11ere lPaTodiuc:tiOlih ~slMg.h_$f.

than, S 000 b'l!1lt dloes DOt

exceed lO~{I00 ,418.5%

Whe[ie iPl!'o(ludio!l1 is higher than - 10.,000 but does

:mot eXJCeed 2'01000 53.-5%

I

(iv)

Wh~rre, prodiiluio.n isb~gher '~rn 20.000 but does IlO~

eJ(:ceed 30.,00<0 . 5:85%,

I '

41.5%

i('l.\r)1 Wh.ere pw!fiJuclion is hffigh~rt~~n '. 30.00(]1 but dodn,ort

ex~eed 4o~odo

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(lIi)\Vh~e :p~4uctio[l~is : higher th~ 4(1,;000

68.5%

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nus AGIil~EII'IENT i •• ,.do ""Ii ""'e" .. ;"11. 'hi' --<._ •••• <._-.J"y oJ' <0 '<0<

bY"nd bel"'.'n l~. Go¥e"""en;l of'ho Rcp"bli. ofU8-'O""'.""g l~rouglo ,,,< of E"elllY and Min".) """'"pm",". nf P,C) I30k n70 1(0'"1""., lJr~.,," (~. ",fc"~~) , ... "O".''''_n''') und Il,n">!w Oil ond G., Li"',ik,). " co",,,,

0'll"ni""" ond .".,i"1l """,,. 'he )" w , or 1,1<, of M.n of IJ";kd Ki"~J"", .,'" 11 ar ..,",· Vam, O'.Is ea n"rbo"',~.nd.n SIlVIO DXD, U"il«1 KinSdo", '~~i"." Ch.p,.. 1 W of ,~c La ws Qj Uga "". and F.n"1l:Y Aft;"" Ug""d, Li ,.i'e. of 5 Par

Sq"o .. , C ... l"' .. n, M. of"", u, IL9, ItA. """p'.y duly .'g;lni"d on'" """>Ii 'he '· wso r 1<1. of" Mo., tln;'ed Kingd" ... IId '~Gj" ... d "nd., Ch.p'",- 110.1',

ofUgtlmla (b~~fter n;::f~1 ~ojo"nU.Y<I:l: foe "'Liol1::ll;s:ee;'," '

WHItl!.EAS, 1'.I",r •• ", in or ,.de, ."Y I."d 6,' '",'Ie, i. Uganda is ,h. prope,,~ .l\tepu:g:!k: of Uga!U:da;

WIUQA$" th. p"""",,,,,, (E'plo"';O","d Prod''''~O"l 11.0' Chop,", 15~ of the .fUgollda 2000 m.kes I'lWi.io" wi~, '''-'1''''' '" "j)lQri"g fur "nd produCing.po" and ""'hori ses Ih. Milli.ier "'J>Onsl~i< {"'. "..,.,1 .... ""pl."'!ion and p,.d", tion , 1::"'1'1.,. "on ond """du.~o. Li."" es '0 .n y p."". <i. "",lily, ,,""j ect 10 cerra i. Ii.,i

and'~orn)djti(!ins~ ._. '". , .. '

",lfI!I'!EAS, &'00;"" 1 .flb. Ac, .".,1.,;,,,, 'he -Go>e"".co. '" ."'n ill'" an ogre, "0' '"oon'i,"'"" "';,h the A<l, wIll, .ny ~.",." 0" <mi,y '."<p<c, of, 'nle, 01;0, II" and! oO.lldiliOiIilI$ Qr:~h,tli gflilllU of a. Licen.oe tinder ttl!': ACf~

WIfIl,IUEAS, Li ce , , has ,,!,plied fO'.n E'plo,.tion Li " aVe,' Ih ""0' d"",;~

a.d ..... n on 'h " in A" ... A h.....,f ".d':!he "-I .. "t , in '.,o,,,","CO wjlb S"".

of the Act. rnn~el1:d!!Ji m gf:tliITI'l ~he s:.tlJl:d Li:C(:~lCC; .. fid.

WHKlmAS, Li ... see i';l<ooIs, 0', ""- •• d. ''''''diti"", 'ot 0., "ndor ,h'i. Agrc<m," h., "'I>'''''"'ed "" 1100,h. ,". 0, can .billi. ~""""'." to """"fI.ke 1'.",,_ Op· ea ""n. in 'he ..... fo"""ld ".d h", f •• 'h.t~.'l>.", III. qo«o •• ry n •• ncial <'P' technic,l .o~ot,"" •.. ,d pro"".i .11 •. 1 .kill 10 "'''Y 0,", sueh 01'."" i"",;

-- - ~--._--~-

3.1. Contcmporanoo'~sl:y .be'~~L~h. Licensee is sr:mucd 'lJndlea:~ and in accQrdi.lillilce lYi~h ~ ILhe Act,arnExp]om4olmh Licence in respect of the Cowb"ac.ifi: Area l~ the fi:O~ set flDftih in Af!n~ 'il'B_ ~" The said Explot - Lion UCC'l1ce 511. U h ve iiiI serm ;enOl exceedin.g two (2) years ("Hirst Exp.omlion Period"), counted from the Effective Date. Not less than ninety (90) days prior to the exphali,ol1 of !!he First Explo!l'Ition. Period, Licensee DI! II,Y ,a,pp]y to LI~:e Gevemmcm for renewal of' the Exploration Licence covering the Contract' Area, Such renewal shall be gran ted to Licensee subject to Licensee having (0 fulfiUed its obligations lunder the Act and ~h[~ Agrrecnlent. ~ncludin& its rel.i~UHlli!'is!lunent obHg;Uiom; under 'paragruph 3,.~,. d.llITiiili!: the' Fiest Exp]ota,thlo Period. and. (ii) Syb:.jtted with such (:I'pp·lmc:ati.,~ an _II UJlderit.El.k~IDg to, ctlmp~y W]IIih.tbe mlnmnml work and ezpenditure ohJiga:tioms: foT' . the Seoond gxplora1:ion Period specified in Article ~t A mtlJtim~ suoccssiVie !. ~ renewal'S of said .ExplomttQu Ucena: not exooedin.! two (2), ymrs each ("Second. iE:xplof"oHion Peried" ,;:uwd "11nJrd .iBxptO'rnRon. PerindJII), .shaU. subjec~, 11.01 the lrequiiremenlSof ii:e Act. be ,grnn~ed to . J(;eJIsee upon arpp]~clll~iorJiby Licensee to!

the Oo,vemment in the prescilibOOl manner .

3.2 Notlvi1'hslandmng dte pmvisio'ns bf the prececl~ng p~mgraiPh and without pt"ejll.ild~ce to theprevlsions of pamgmph 3..4.2 •• u th.e event ill~Olt on 'the D!i!lileti~ d~ before the date oltliw~lieh all lE;!{pE@,ml-mon Lieeaee is. due to ,expire, Licensee is. in the pfiOO-~5 oh:lOnrnlph;thlg seisnlilc or driHi,Qg operations under this Agweemr.mt, or the processing 011 wnb;:qu:'etation. of datalOOsuIting therefN:m, and provitledlllllat said ,opemil:lons are ~:ing Il:im'ild'IlI~I~ drutigeliiltly and st~rti~g. in .~odl time s!I1d i~ -,accOfdi!:mce with OOQd Oil fi:eld Pta.ottces : Licensee may apply fg,r Ibe rerle\'I8it of aay Explootio[! Licence pursuant to, pamb'ap.b 3.1 before but .in no case later th~ fi Hem (15) d. ys pri or [0' the dal~ of ~.p iry of'the Ull:cn current period (D f validityof

said Lieenee, - ...

3.3 Li L nsee shau, sl!!bjec_l to the A(:t and R~gum3il.ions, and 'the terms !J!!1d eondinens herein set forth have ithe eA)dUls:~ v e right 'to' conduct Petrcleam Opeeations V ma,in the Con®nct A_rea fOF the t_ern'l! of the BXp]omdon Licenee ,and aD,}' .Pri)ductlon LiC~l1ce grnlJted h) it in accerdaecc \"oI']lh ~11 <>I~)pl~caoh~ ilegJIsliH10n and provisions of this Agreement,

lA L;con,.." 'n ~ ";"Il I. ILe 00"",",""", "0', 1o." I~'n ,ni,,,,,y (90) .loy, • 'I;~li li Ilg (tf-l e "'5 I 'l"t'rrde.r J1:oti(;~'i), 111;:ty; .

).4.2

J.4.1 SUn'<nd T i •• rigQl>; "'1>I .be. Leli ••• d 0; ii, obl,iga,jon, ill "''1'«, -, w~.l. ,,: 1110 c"n""", Are. if;,. mihi.""" ""'Ii< ',Id Iin'nol,1 OO,li '"'1<1" "', riele 4 he-roof [n "'pee t .nb....Iev.n, E.pl.,.~ on ['eei bee-nifii, j I mea iQ aacCl.rdalll:O~ wi I'~ Secti Ori .5 i (If Ule Ac!;

in ""pc, , of "'efuplo .. ,",,, Li<;,",. D,· '"J' """ ..... , 'h,,,,",: 01 SU"l'Ond,.,. its "'gln. i'''''pee, or ",. "hoi. of rhe CO"'",,, 11. .. , , rdi· •• d ofil. mioi .... ,. wo"", and I!.''''.,I ohligo'i"". '''''dor "''',ci< ~""I , ,r 'iI< ,,,,,," <.",colli'pl.roUoo Period "'ony Ii ... ""hi. 'ix~ d~ys (01 j,)wi[M,g (~e dQ:~e on w~~c,h, Licensee COl11pl'etes:

.) ,t,,, i·'01p>:e"'i"" of '';,."i'' ".,,", ""'oedi'l!i "."". Pro.i~.d u

r~ ragmph,4.2, ~ t~) lll'id!aCll!laUy being executed: ~~ the eNd O~ p ..:(:erJ~l:I,g E~P~Ol~~r'Of.!Period; 0.1"

h} 'i>. <Ior~li"& ;Ie."~ or plugging ~f any E.p.louUioli Well DC

b, jill! ..... ,"'" 011110 end of 'b.p ..... ~"'ll fuplornliolll'''''o< "'doh ,,~ .. I(.) ill. SII.,.""", NOli,. sh.li be 'od"«d 10 Ihiny cLys; and

3.5

lA.3 -., ,'"V ~" e a1i., id";':j;lir or ,1i~ EXpr~"6"" 1.;..".", ,,,,,,,,,dOl' 11', iii a.d "" ... ', ''''''' of its obl;ll"ti"". i. ""p"", of .oy block 0, blOck, fo"" .".... of II" 0'_1 A"", Pro.i""", howe."" Ib" no """""do. by Lic.n of;., <W, ,< "".''', .. y P .... 'orth. Con,," •• , A ...... 1,.11 roil;",,,, U"""".,

ohlit!alio" '0 "'islY ''''' "'o'n,.", I •• rk ."d r" .. ""j., ob"!!OIjOll. "'''''''' 10 in Ani, I. f bOl'oof;" "'''I'''''' onh~ Explorntioll Period ,d"";"~ ,vbi"" give.sthe :..: l.UTf1tider No~loc.

].5.1 IfU ~pli .. for, ren ew "'1 of Ibe E'ploOilioil I,;ce_ 0 n or bef."

'Il>o d of tbellint &,1.",,;,". Period, d,. Lice." e s holl in ""'.>don"

.... Ob .~" Pro.i "<>n. ,or S",,'jQ" 15 of the Act icli"q ",j,h ,hon",,,b.. c' bl.e"" coo. !i •• 6'11l j~ '0", I ._ 1101 "".red"," Ihirty P ...... , (3.0~) or th,

.Drligiti~~ CQ~]Jt[,nct: AJre<I; lIIdcss:

(jJ Li(·lI;frse(.'" pm'l.'ides 1.0 Go\,;:mmc.~t a ~.;uj .... r~,,-!DI") \l,-I,.rr'k IJ'rngramr:Jl"Ii!.e for (1I1::u areOl, {OF the pcl'iQ)j for ~'hlch n_"'lle'\Io. • .1 'is sought;

Plfo .... idb"d dl!~'t .tlctlv]ties fill OM ai'f;:l l",,~nL'i{!lt be :till 'i!.'lCIJSC fo'l" [mOl flllfiUing the ,olbl ig,a t~'~ns of 1.I1.e Work Progrannl1 L; .in ~ 5,. i (i) hereiPii~bove .

•

3,,).2 If Li'CeIDS~ a p;pJ'~es tor ~he second reF.i ewal 'fI r 111 e e.'lplor.aJ[!Qlt11 Licence Oil or before the end of the Second E sploration Periad, Liooo-5lOe • .,hail rd:inqIJi.s.h a1Jl ~ddhioi'i<:!!1 number of b~iOCik:S oonsliluli]~g il:l OOtal areanet more thOliirl rnrenty five pl;l[iCent (2:5%) of [he o:ri;ir!<l~ Co!'Urac,t. Ar,ea;. unless Licensee f~Uiil!> ml1lL;l oolllditioJlls in 3.5.1_ (j) (i:i) .a!Jo1Jlle.,

3 . .5.3 n~ Licl;'l!m!See sla~]~ re1jWiql!ll~s.bl lrum.d w,illin !he ~(ilntGl.Ot A~ so as to oo[l1ply Tho, Uu; satisfacliollof t~e Mi~~~'!!!e:r with ~h:<1: fol:lo1W1in,g re.ql.!jrememl\'!:~

;a) no :~]runq:ujshme:nttt 'ofa. p.m. l!I)fi~Y of ~ B.IIOCl sltlalll he' pe.tTnJ~Ued except ill! tbe C\~C' of sucm.p~n onDiy of iil! BI(ldc exjstingM Slrelit 'in the Contract ~;:

b) ,dl.c ~~{sJ '00 ire nU!ilqruisiloo shall 'oo:mISJst of a lI1!DJmber of contig!.ul1.1s Bloch so lil~goo tha~ so (.'IIr lis. [!)os~b1e.:

!Each Block: odr.er ~11 llite~locks dcfbllJi~g tm..e bouradai!Uciil of Sl!I(::h shU rile ooIni'§U(llJIS Qo]!I all ~ides 'nih otfuer HI!I}cb;

(0'1'1 11]7

The directiol!l of its "@~Iildtl;ries shoui.d: be:'iiou:gh]y !'lomh-south <'il'ld east".w~S:~;3m1d

(iv)

1~lo[l!§l.e;r rDoiumlaries sliouMn{Ii;1 be Ili1oro (han t1:IiX.:~ 'IilmC$ Jhele1lgth onts oIlhor:tcr hm..nd .. ries,

!2

----

3.5.4 Anyafe-a which Licensee elects to surrender PlU'NU.Ullt to p~mJ""..lr 1 ~ - §han be credited as:a~.!i~\ ~1~.1C: .'~r-ea __ which Lieensee i next rc'-lui_n.: relinquish pursuant tOo 'thispllrnUdjl'h 3.5. Licensee shaH not be requir re},i;nqr.dshp:ursIl3Qt to O~,is paragruph 3.5 any area \",,}li,ch c(ln.st~ utc Disc'overy or Development Areaor any part thereof and Ba; d Oisco\'c~ D\Cv<Hopme:!lt Area I'IbuU be s\llhiracl ~t from Ihe oriCi,tHd ('n!\h.u·t ,\n:a

tb'e pUlpose of calcuillirim'£ the area te be relimql.lisbl.u pursean pamgmph 3.5.1 ..

3.6 The Government r-eserves tihe right to gnll11l licences ito other togal persons r prospect for, explore for and mine mhleral~ \\'ithwn tile ConnOlet. Area, an fur'lht:"" reserves to> itself the rl.glllt to so prospect .. explore and mine d~rotjy .. Licens shaH use ~ts: best efforts to avoid obstmctio'1iI1 or lnte' fereflce witb sUlch Licensee" or Gov·ernment opeealions lln<h.imil~rly the Govemmaut. shan use 'liS best effons to ensure that its own opera:tiOltS. 01 those of ~hird parties do 1'1]10 obssruet or in:terfere with. Licensee's Petrol~'Ulm Opera'dons wit'tiin the Contract Aree,

3,7 IR the e'Vte'nt tbat Licensee dtiscov,ers minerols other than Pelroleum in (b;c ,Contract Area whi.ch may be of economic vft~ue~ it sha·n T~PO.rt such discovery to' the government within \thirty (30) days of the rna .ing of sy·eh disco~ ''fY and sban supply a sample of such minerals to !llle GOYe.mmelll.

... r"" ~ .... ~ .... .,.. ". ,.:' •

3.8 if:moro 'wan one person or eDltity eomertses Licensee, the dllties ~nd obHgations of the pernons or entities oonstiwting L~ce'fisee hereund~r shan be jO~IDt .and sevar3!l.

3.9

Tile Government shall in as far as is PCf)l:l'Ued by lile l{llw assist the t.k~nscc to Qhta~f!l rights of ingress itO' and egress fm.11l ~hc COilltratlt Areo 8.nd any p'lmi urn ·fucUifes. used in P;e\,wleumJ Operations and tOlobtain rigi"ils of way an.d rigins ro oonsl:fU.d rda.ted PetroteU!nl Operaticns faeinties as may be f~SOrtillibly f,eqlliroo by fhe Licensee:' Tiilc t .. Ieessee ·shan meet aU Ule associated ccsts .and expenses, .

..

• ' .'. ~s ....

,

_ ~,.,. u, exptoratlon wells and two (2) Ct)ntrHg~n \ _ wnOSe locations and depths Government l!md Licensee shaN agree 0 . ..,. ecquisition, 'pi~ceS'sing and interpretation of 200 Hne kHm,11cters of 2l 3Dcontingent,seismic data.

(il)

US$ 6.10 mHUQu

DriUing

Drilling (Contingent) Seismi,c Data (contingent)

US$ 6.0 million US$. 3.0 million US$ 1.5 m,iUion

.

4.2.3 Tbi,rd Exploration Pe~i()d.

•• ~ .... ..~ ... ~.., r'" r'O

Commencing on the day on whi.ch the Expima.Hol'i Licence hi, rCn01"YL"d pursua,nt to Article 3 hereof and terminating.on the second anniversary of such date.

_ 0)· Minimum Work Progra'unue:

A!c~)ruIsitio:tl) processing and interpretation of additional 2D or 3D seismic data and the drilling of two exploration wells whose location and depth Governmem and Licensee shaH agree on.

(Ul

Mioimum EX,p).oration ExpelldUure

USS 1.5 miUi()l't

Seismic data Drilling

U8$1.5 malion U3$ 6 . .0 minion

4 . .3

For the purpose of this Article" Exploration Wells shaH, except as provided in' . Article 4.2. be dri led ana location determined by Licensee and the 'G~vemment andto a depth necessary for the evaiuaJion of the sedimentary section established by the available data as the' deepest. objective formation and consistent with Good Oilfield Practices,. unless bS'fore·~oo,chiHg the aforementioned depth:

a) basem.ent i!!i encountered;

h)

..

further drming would present a foreseeable danger which cannot -_ fea~solu\\bty be contalaed;

'_', ;'~

,c) imp',enetra'b!e formations ate encountered;

d) .. iglllit~cal~1 hydreearbon-beari g f rrn re e c unter .. i which req\lirc

pi1,_}tcctin,~. thereby pn.:"'!;!ming:.; At! . m be Il~ reach ... .J, •

. ! ,

-ln such cireumstartces, the drilling of dn} Ij p'l ati~ 1'1 \ I;! I I molY b~ a.'rmn:lll<lledl 311 ,1)

'lesser d{_~p1~ and 51 .. da \lit!! hall, except wl1ere the circemsian I!{ described illJ 'sii~jparaYa~l'Is (!i). (b) and (c) immedialt]]r above occur oofo~r; ;UcerlSC~I~~5, ~ltai'Il:~d IWbUdrds of 1h,c target depth provided for in ihe dljHil1g pm~mme, re1al1Q"g (0 sach well~, he deemed to have satwsf'ied the min~mlJf!I ,ci!eptilcnleria pl)l!]Iv]ded for hereuIII,dt.'T'. In a,l] other circumstances in which a WI~U is 1:c.m'liI:'iIDIt'l,;.-d at

a Ie. er depth. Licensee shall have the option to ,t:irJicr I(i) drilt 3 SUbSlltllil'e J~xpioll'atjjoil WeU (l1(1" on p::JIj' 1.0 [he GovcmmerU fhe amount hy wlil,iell lhe drilling. I bLldget foll' 5~chl well 011 a dry boJle basis.. Plll:"SlHll1t to pitlirngraIph 41.2 exceeds ~ctual expenditares ]!1CU:1'Ji'OO irJ title drill~:irng thllreorf.

J<:orfbe',l!Lrp'O,5@ of tltlis paJr,a'~r1IJIli) 4a3, Ith.e 'erm ".Base>nu~ntB !ihi:1Jn m.ean UU! g~oliilli!ica~1 ~~i.iJ!i1tl1!h~ni'I' belol\'\1 "'bi,ch hydrncQlrboDS c~um(lt be f(l:UJRi1IIaJllId

pn!lduood. I

4! CO'mpffii,Bnce wlth 'Ilhe required muum11lliltl Exp~oratioo RX'J)eodi:tUNS i]t (illJilY lEx.plora:tion Period slhall not :rcllieve Li:ceoSGe of ~tsob)igati'on to CQlTlply wit]!1 the' required mimimum~ \V Oft '~rnJllG for such ExplornliQl1 Period nO:Jl sl!~U - I eomplianee wlidiJ. '!he required minimum Work P'ro,gnlmmf! for amy BXjp.I~tion Period ~ieve ~ ieensee of Its obligatiJon t'O comply wwtltl the 'required llI'I[n[iiiLlJlm EXpmOraliof) ExpendillUres fQ11" such Exp.lornLiJO:I11 Period.

The required liRirnimru.m Explornti£lll lE:xpeJlld~mllLrre stipulated in l3l!m1gnl,pJiI 4l.2 "foF each Exp,lollltiQO ,rmoo (Qlher than the Firse Exploration fWiod), s~ill' be adjusted ,a~ tJne end of (i) tire, fimt &p~orat~ofl. Period, :i~ the case (If lllc mil1imlJtn. Explonliion Expendli'lu:re!i fQi' the Secund Exph:)I,'atioii Period, (ii) fb~ Soon.dl Exploration ;P,eriod. 'iim the Icase: of tffite miinimtlm Exp,lorarliotl Expei!!dri~Uire.s for the

T,h~rdExpl(lmtr.olil leriod. as~fulilows: -

r ... LtR A

~' , mLnimum "fxvlorn.ti,on Expeitdity:teS for tJIiJ!c I, irilt E.xpknouiolfl reriod Of S,eooud and, Third, as 'Ilh.e case: iIJl1,31Y t..c;

-' .

I ". mnrnrrnU! I Exploration, . Expenditures g,tipuhl'tedin pa t!l£,mf)h 4.2 Ii.)r Ih\:

period iT' ,ue;stioi1~

A =- ·U....... IrldiUstritaT Ooods: Whotcs~llc IJrilcc index" as lin-II rct?lJH~d in

"'Inlem tjonal F"nancial Stltlst.ics" as p,lIolished b the International Monet' 'j fund :£'or tlie Catendar MQtf:Hh 0 f the Eflcctj,\,~ D~nc;

B ~ "U.S. industrial- Goods rWfiblemdc Price index" as first repm'ted iii

"'InternBLional Fh1'3Qcial Sl~tis'i s" 2cS published by the' lntemationa! Mo'nel.lry Fund of the Ctdend~ f Momh rA whidl the Jet.inti it'ti 'l1li'~'-Sliun eemmcnces.

--. -- 4K

The Exploratiun Licences issued to Licensee iliUrSll;\nt to Article 3 ,mil any' u!vaflable renewal ther:oof sllan be on (en1l1'S and. ,co~lditions relating (0 MinImum Wor1;; Prog.romme5and Ex-plo.rn.titlull .~penditYres which com:sp0:'ld .to' the obligations of Licensee under thIs Article !!lInd. 'it is, aocordingfy undct$(()oo and egreed that. any discharge by Licensee of its obligations IIllnder this Articte In re'SJ)6."Ct of any HKplo:ralio'R .Period wm disclmrge .for that period the .minimom wott and exrrndi,ture' obligations of Lieensee in respect of the Exp~o:rn.ti,Otn Licences iSfi,uedllUrslUU\I\ to Article 3 and tbe ,terms and ,condittClln& of slUcn Licences an.d anv renewal ther'CofsilaU be drawn accordingly,

4.7

(a) On Of hdore t'he E.ffec:ti e Date, tbe Licensee shall provide .an IlltSUmnce/Pefronnance Bond in the fulm set forth ,in Annex: D-I, .md amo:unJting to United Sm;tes Donar five hundfed (USn SC'O,·OO.(}O) wll~ch • shaUt inter lin. gt!ar1l!filtee the payment by Licensee of the sums. i r .any, d~-'

.and payable to -the"G'p.V~Olflwnt .puliSl1l1nl 10 paragfflph .7(b) pind (c) he.reu9der.

(b) 1£ uJxm tIl 1!xp,irauQfl' of the Explol':'J.tiu<fl Licences, or lltXlolli the dste r terminatio of this Ag,r-eenuml. or (II)(JI1 sn Ctld~f uf Ihl: entire Conh~cl Area by Llcensee plllirSuanl to pm'uglraph 3.4, whichevoCJ' first ccurs.> Licensee hiil!S not m;:pe:l\'ld~d. for Exploil'ation OpemtloliS sums (inchldi.ng any sums previou.st.y paid PUfsU-a\jiJlt to purugt'aph 4.7(c}) III least eq_i),al lq tile (,otaf .mi.nimum E p},o;rn.tion Ex.,pen.diture.s (as adjustted p'~lrsuant to paragraph 4.51,fiCq,uired hereunder for the ~erioo ill qu,es~inJl. the sll 'rtffiU

__________ ---- ~ ~'1

---

llli:.cm'('n: .D'~ve:i()ipm~rHl311d p'rndlnldiilU

• <, .- ~

. Wher~, ~ ars 1!I:llll!t to S!3ct~ 011 17 of the Act, notice - has ijetil) gilVC11 10 rhe - . GO~-I!c~~n~aI1rof a Vi .,Clover}! in -the COntrolC! A rea. L ieensee ~f~111 f(n1.rnwitlil, il~tiOlfm I!U! ;~oV'mu'l;l,cD'l[ of the steps it proposes to t.-.lh::' to-satisfy the r~riJircrnelnls of

Sttt~.mil 17(] )(a)Oli) ohhe Act -

Ul'lk~ s, fo'I:IQiwirill8; a Di:ro()V~f by Licensee illl die COt'ltrn.c{ ~., Licensee gives ~'l respect of such niSCO\fCl~ .<11 riI.(!:tioe '~O the Mi~is~el' for the pUf[J@~e of ])arn,grophi A of the pRl'!.IisiQ1ll 1;0 s&:~tOI'l .17 (1) f!» of the Act or IIlnhi!1l8 (he ])]lOV]:>iO'I)8 of

. p~ragrn,ph B of that Provi.~o <Ire' other;:l.!lsc tlpplicab]c, ECC[lS>ele. :sh.@~ I pronwdy afl:e.L· ihe 'fcc:.lmica1 evaluation of rhe tcs~, resu I !;j;rela;[1 ngto stlC1ill, Di!lcov,eryi'la~ I;)ccnCQlmplel'f;;',d. prepiSJi:'e aile! SiLIlb:mit for tMae: {lO"Il!lJidel'tlItiorru (lif the Ad¥~,5o'"ty

. ' I .

Commin:oo ruts pmrPo.sa]..; forlllil. Afp,r~i.8"] P~grn.mne ~Oi meetj:ts~ob~iWi(!)on~ ,0:18

Licensee iI!lFldet' the A-et, N:olwttihsm.llldi~g the f!.lTegoilln.g,in lie revC1nl~ I_t Ucems~e ncni r.;es ~he OQlvemmeml \V,i1ftl:im.thiirty (30) d~ys OO,UOIli!jl'~lIfiI,g tile date On wltich its l"eclndcarn ewalrua1:ion of tlilete&t f:lt5W;ts l;eI~<!:Mg loa. DisooV1~ ihas, boo~ S"ub:mljllted to '!hI! GO\'!Ilmm,e!lmil,. tie sp~dl IDisClf¥ety dI:~. not in and! Oi.fil~lfw,am:lIDu: i.mmedffia,UJ ~prai:!!al !"!!I1dprovides'rreasQm.a'li}],e jrus~rufi.cati(ln t1n,ere:f"Orr~ an eltemptiQIJ from the reqn~ro:meilll~S of SGet~QB ~1 (l)(iIJ) of tilile ACI mOllY be ~fil00 by li1me' Mil1isller, PUI'£IJj>llIIU lIt)p.\i!nI~p]~ B of ~if1:e PFo'riSQ ~Qr(hB{: SeQtlO:ml', for ScrIO(!1sdl~rcaf:l:BlT"iS Lice<n.ooeis earryiiJil,_g O:llJt ooiUinuo:Ji.lS uplo[<ltiollJ O~~ions [lll:llitC COintta>Cil Ar'e'll.

As won as the Adviso\ry"C"Qmmi~~eehas.jpurnlil-fiijjft 'k'IP~f]] 53.2, reviewed iIDI:lJdII (ljppm'vedall1.Api_m'lL811lP:oo,gmm~~ ~ubm~tted. b, UOetlflee as albreslll](I.'. Lioo~!8ee shaJ~ pTil)m~I~]y tie~fltiE oo:nm.menee: impirefijen~tiOT!l tffile:reof.

~ ~

If clJ~Qrillg tillt.e t~mi- o.l !lilly &p]onJiOf:lUCCRCe or re.~e\'il'i!i$ theroo f _g~1:1lted

cphl.rs!laflll ~l) this. A:gr.(;;emi:!llIJ~. Licensee makes aDi SCOWI)' 'of Pctrol.reHmin~the CQnlrncl: Area wll-iichaIo~u,·. Or in rconjurn::tiO'flI l!c'llilll. other diseoveeles, pl"levuioll,sl;r 1I1L8ide Hl 1rhfl Cnntl'<lc[ Ai'!l;"1Il [l]ig.Jil~ be develoiped! and brQL.lgbil ]nto . e"ldy pfo¢lil)1etiml with - a, view W $.Ol!tiSfYDl~lg lhe internal consUlmption l'tl{jtl irements ,of U ganda, 1fuJe Go'vemmem ~l.,ay n-o~:ify UCCtlSOC a.r;:OOrt1ingWy upon which[h~ PadiCl,S seU mee:t~@r ddenrnim: wheDh~r (he developm~rl of thc$;3id Oisc)o'l'ery or Discoveries would be eool]:on!lic-~JI)"8Jnd Uxlmk:ililliy f€3sible.

(ii) In, determining 'Whether the IJh;tovcry'llf Discc t.'ri'CH es l,bI- C .. SlI,; ~uay he j:-

e (are) cOliomiea'Uy aiitl' lCG'l{~ically feasllble, ltlc PiiU\lie shaH - cons!dcr wl ether an early production scheruC' '\'I)uld, in,e alia, jt:opartjise Ihe subsequent recovery' of Petl~.lclln' rom the P~'ltU)IC'um Rc~rvoit(s). create a health or ~fety risk or would otherwise inY~ h"e ~, dcpartur:e f'>Qm the standards ofOood Oilfie'ld Prac(~ce,

(iii) If! the ,event that :the Pa:rties dcl.Cnnine he Discovery OJ t)~ scoveries res the case may be to b.e ''Cl),nomicany IIlnd lechnic:alUy f -asiMc an j agree l~pon the' t~I1HS and. condwtions for tbe implenlentatiol1 or an early preauction scheme (induding offiake flITQngL'ff"B::nts), a i,lroduc~icm ~j~i.:ncc sila,U be groutoo to Liceasee in rcsp<;ct of the Discovery Area s}subjecl thetero and ~hereaftler Licensee. shaH complete the f2bciliti,es necessary for the Gove",lmen~ to take de)ivel.)" of producl1io.n from rhcsaid Discovery Are.a(s) ,ex~.fietd 8111:d ,aU costs asseclated liith \tl'H! taking, of deliver)" therefrom 51 aU be rOf tke Govemmera's aCCOUI1{,

ne production ~han be, soMalt M,lIJket Price as computed in 'a:cco1mance with Article r 5, ood payment 'sbaH be' made in Unite-d States OollQlts wilhirt 60 days following the ,end of the Calendar mOflth in which deliveries are

mad~" .' "',"., .. ,.-'

It is ulIlders,tool1 however; tbalt. Licensee sllaU 'na.r be required to produce ctUde oil at a :rate higher tlm~ the Maximum Efficient Rat in conneceion wi~h the scheme,

'i")

Any emde o~l production deUve.reo to tlle: Governmell{ pursuant to tbe provisions ,0'( ttl,is Article 1.4 l(iii) s,\13n serve to .fieduee Licensee's ' ohligation 10 oth:erv.~i.se supply crude oil fur tbe ;nlern'ft1 eonsu ptiOR fequttanents of Uganda pYfSUIUlt to Pn.rngt'aplrt ISJ and 11·' in not prcjudli"e' Licensee's, rights ulnde.r paragr:aph 7.8 Illlcr-eaftJer in respect f the ' subseqlllcntgnln:t ef'a ProduC'li'iln Licence in relatiun 110 l;1l wider OUI eovery Area(s) wlltcht i.ncltidcs ttle said Oisco'!;/ery Are-as), It is understoed, however~ thalt Icrude' oU production s.hall ,ooNtinue to be rnade a . ailable (,0' ~he Go- ernment in accordance witb the tem\is and ccaditions [lgfe~ to in 7.4 (iti) ahove.. '

,(v) _

Nothing In this Alticte sil~,n require Licensee tOl ~HUJI~ ,kl: the.! c(Jmprcli~n" onhe field facUities required foil" the e~dy prod Idioll scheme in the even' ' that Licensee rea (loaMy d~urrninc.s that s~ich schesnc (incblding the t,Cl'f;nS

._w ...... u • i ... 10; • = .. ' _r • .. -

25

--------------------------------

l.Hmd cunJili~'1I1:'i. filJ the imrl~m~m~f!On thereof} IS not '~roIl10I]~iC31T}' or ~cdnnicrJiI'y fe"lsiole_

7.5

Bcfor-e urpplyi:ng for II P:rodQJcli On i. _ICerK:1I1l P~Ii[£iU~!.Il~ ~.o SI.'Ct~JO\Oi 1'9 of!lile Al!)l. Licensee :sh~U consul] ".;'-i~ll~he l!.d'·iro:ry O:ul1miUr:::e li'i eennecrion wi'lh t~e' pl"'eparu1io]]1 of 01, nEl'i.'ciopin~IU ['i'lall-I.Q be su'~mwUed by Licensee 'ro :theMlrnig;~:ejj fill -

,~CCOlrn:l!!]J:oe' \V~th SecJ ion 20 of.lb e .Acl_ .

7_6 rr the' P=:nrtie~ are unable to settle ::!rnicablYilmly d~spme nr dif!ien=:neeiJ~ to whc(!lier !hc DcvcJopJ!ne.m 'rla:r:!11'Ice~'S the l'\XjlrimJ11CIJIl$ of Section 22 of '!he Act withil~ rwelve (12) c.."'~eriI:d,Zlr MO[l[hs of the d11l~ of the Mbnis:!er"s afor,et:;Olfd noct-rffucfl:~ioil1,

. . ~

eo] lher Party 111<i!)! refer Ule m~Uer to 1l! so Ie b':i:per1 pursuantto Article 26.

n:, as. ~ cO]lli!>eq~ence o.f (he ~id<!""r8JOO, Licensee d='~!Cmlrnilles, 1U~at[he devt=:]op'm.eJl]~ projoot (in E'espec't. of\'l"h~cl.l ~}le lI)ev6J:opmat .PJl1!n was SllLilbinllh~.ed) ceases to be camllU'tefCial:1ly a.U:ra;c[ive', Licensee may so n'!]~ifj; the G!D'V~m....meml~i I'! wr:itiil1!g 'l'rirf.h:iJIID six (6) Ca:!em,datrMO'l[th~ of th,e <il.ne of seid 1:u'ViI3iriJI,. wheill~:m;PQl.m. the Govm:uTIt:!i'U shal] gl;'e li:h:e f~gl:U to Iiequ][e T~kense.:: i~ rel~!I!Iqi!i.!:is.h ~itsrli~l:its w~tI~! ~pect ~ol'he Disli:Oil{lery Area1ii w;h~,eb <ire lmwe 8~I~ect o.f 'Sl!!.ch [)eve~ol"mejnt Ph!~ and to' [o:rfG:i~ irs rigJ1.~lo8n)r· Slll;h:!s~:l1ent pr:rn!l!!iCUiOIl 'therefi"wn.

7.7 Upon iSwli:l:uniss:1o:t!l! by LiC<ellS€¢ ol[a De1l'e:ll)p.meJilj pm:ll1l[h~l_ool~ iI::h:e req,.dreme;n~s of Sectkm.22 of ~lJe Act tog"etb:er with ~h~ app]['ca,tlcm :fo;r ,ill, P«adu(i~(lII!iiJ Uce;mc(;l, ~ne Mjmti:sfer sh<lll prompti'yissll!,!e to Licensee <li ProdUlc!io.l Licence ~I:l the (om auached 1iI~:o lilil Annex !!B~.I'!t oo~~rimlg the De'!l'el~pDl,en1.( Area foU:' Oil PGri:od ~o'[ e'Jr,jceedrilgl:w.t:lfi~yfive (2:5) ~ OOIilThledlhlm its daleofi,ssLmnoo.

A PrOO~~(IDO'i'l Licence 8ffilill~lr ~c: 1'e!:l!3w.abl\e. upon a;(lp:.lic1Jitkm, by Li.oi3nsee iliJ the p~ribed mmlt~f, lw:a term eql!l~lto 1me pe<rioo betiYeeJil lh~ mili,!)] gl'UI~ o-fsuch ~ .. PJrod;~tj'On LfficeRoe and tile ODmlD11l£fJ!Cm1'1"mt of rOomlfi;:e['iCia~, Prodl~tf!i)l1, b'tj1 in 110 f

evemil e7l1oot"J.J!IIlg, five (5»)'C-ars. llrue MilDis,1~f'S:!aa:llriot impose oonditioF!s for the gm~Jtillg Or[ :fleNe\V8Jl of I!l! relro]gym l'rodUClioll UCmUiCC 'rlll,nde:i" Sections 21 (a) and ' 27 of the ACI which <Ire :iiFIcomsi8(:en~ wil][ Ihc i[e:trrrj s of this J\gr,eemen[ orthe req UI irernents of the' Act

r.8 Uc~:nsee s.h'ol!1i. use its best Cff'OJl1Slo p;roti.i)Jce Cnu:.le~ 0]] [tom each De'l-'eJ'Opliif1enl A Tea. at '!he Ma.lti;1ii:i!1LI1I11 Efl"ic~e~lt Rate, Tile Ma:.\]nlllUitI Effi.cierJ!l Rat'~ of production flOr Crude OjJ:!Im:t<ifJ.e.p:vmlu~'~:iol1 m.t'e fur N(I\~.assoc£f1:t£d G1i$ 5111.1.1.1 be e.:odm.aled III II:heDeve~opmeI111 ,P~a:a\Ii FO"!' each .suclui area,

- 26

.i

S""h",1es 'hall b: re~i''''ed ann •• I'll' ·.1 II,. Ii",. Ofoul""'i ss io~ by Li""", ee of Ih oon"o' Wad, I'T ·"''''mo."" B"<lIl~1 10 I·he Advisory C""'.'iuee 1''1'"".", i po.agrapll S.3.3 •. d RVi...a, if".;o""".I)', by "'''hi.' ag""""'.nI.

7.9 NO'1 I .. ~ Ill an oi Iy (60) day, pli'.F 10 IIlo b~l!in~iJlg or oach Co'ond,,,. y~.

rOU"",jnglh,e GO" "''''''''''' •• 1 'of CO"''''e,..." Prod~"li"n, Lic ....... IIall "repare and ful"l>i.~ 10 0" GoV·""'llsnl :fOt ;to ,,;,view and app.-ova' (wh"iclJ approval "'.11 nQI ~o 1IIlr~'''''D':'ly willtheld) • "'"" cas , 'Ia'o"'''''t S<lning funl, Ily Calendar Q ... rI.,.,lIlo to,",' ( "."liIy .. f'e"I<l •. Oil·(bY'I"ill;I" g''''''' ""d graYity) ,ond N.t.,~.1

Go. th.i tie~ ns e, ""m....le;; "". b. Prod"""", '''.«1 "n'dlra.sported ~.re"M", fro", """" DovelOi·olent A ..... d~ring $.el, Colondo. "'.,. in '."'"''''.''ce with Good Oillield I' .... t; ees , Li;"'n_ .h.1I ~""""vo" r 10' prod., ee in ea ,.Il (".Iondo .. l( "0, !Ioe forrec.ast q U!8;utify,

7. M 1m 110. 0V<mllha, u ~''''''wi''l<''' to "''''Mi .1, 3 ret; "elY to ",rlllG tho Crude Oil and ·Natu"" e as """ f,. U""".oe , .. limol ..... bOl'oodlleed; 'Clo ........ en! may gr..! the Licon..,. Ih er i_ hi Ix> ..r.blisl, .,,01, refl,,"'Y .

• "111"';11' 11;-

'.

, ' .. ' .

fiANDA

Aft. t LE HI

!. ..... ' ... ~. .~,.

PI f~Sp«'t of the requiremerue of Section 46, , r the A t, Licensee shaH pay to , JovemIllle.l1't the following Roya.llty 01'\ the Gw&S Tot I Daily fwcliluction in Barrels ,r Qil 1",:1 day (BOPD) (or eaeh CQ~tract Area, su,ch Gress To,ta.l Da~fy Produetion lefined as Ut~ total 'Q,ullput of crude on (includiRlg liqtf,d petroleum ~s) (,css ,aU V1l!t'ef ilJnd sediments produced Blnd an amounts, of hydrocarbons roc-injected in '0

- -

hl!' P'elroleum R~sel~jf.

Whe.re the production does not exceed 2.50'0

5%

Where tbe production is .

m,gher'than 2,500 but does not . , exceed 5,,000'

7.5%

.' I ,.- i .. I ~ •• ~

-

'Vllcr,e ~jle p':roduction is h.igh.ef

than 5.000 buil' does ilot ex.ceed' 7,500.

-, -

v) Wh:Gfie the production exceeds 1,.506

12.5%

.he Royalty stip/liIIeted in pamgraplll 10.l shaU be recelved by govemmeli1t on ;Ill OlJthly 'basis Yihether I~ kind or ill: cash depcndi~ 01\ GClIVemmmfs preference, OVlcmment shan have thcerigi1( to receive Ro,y.dty III cash DQUars" on a Mon.thJy Isis, Bo.tifyin..! dIe Li1cmlsee of its tko'ice 30 days in ,3ci'nnce. If such notHic"8Ition. not Made by Government., the R.oyalty shalt be collected by GlI ernment in kind

- ithe po,int Q!coUec tion.

oyalty slla~l be e letulated Ion .a daily ba:sil$ on ,an ~ncrement J basisand not OWl ' , tl~. daily produc in ..

, '

_ !

G~lI;'>C'mU1~elll t!~ its ]\;OmiIH,;e m:ty elect to CJil~~' -'i:rJ!~!Q a J~~~lt Ven~U:IJe' A_ggieemeT!l~ ~:vi:~h Licensee ~h,erebj' aI,lh)\\·ifl.§ for S~.::dcfll:lttidp.n io:nfo~ no more than fli!lteEll~ l< P.ef-t:lillt {15%JI and. Govemmcm sllail lllliFoITlil Li:censJ~ of lIs deci:::iiolJil ]llw,l'idrlg \'I.·i:tliJli~ 12:0 day,'! of .Il-.e n:ceipl' af~heapplic1Bi~io]] 'f~JI' il Productlon Licence,

., CiO\l'e1l1]mem or i.l.~, NOnllLnOC shall be' e1.HiUet.ll!o p.OI!'licipQ'~e ~11lI De\l'clQpmeJ~t Area by Devdop:rUCTit.Art:.a_ Licensee agrees '[0 C3rF)" the costs. of GO\,,~lf!Ijl'mc~n or ~IIS J\;1011]lneC lllfOUgh de'\·.e~oprntlTit 10 prodUCtiODl_ These '~O:$lS areroco,!lSQ!hle l~lcludiligim:e:reS[~l the LOlldoJl Ii!iI!er BaliK Offer !tale (U.BrOI:t) queted 'Ill orr ~:bm!t 1 ~ :00 1iI1111 on itJlJe dlait'f next to w!len.rfitley. wEru·ililcmrnOO, by rn.lC' Licensee. These tOOS~:!l: wi'! I be Tepa ld Q~[ of the Licoo~'s c.oot feC{)'Ve'zy !I)~]. IGm,remn:-U;lllt \,"·~U i!le~lIIis]bJe rOlf ~Ily ~"!it!!.~S a.r~sf.f'i,g OiIU of ills shs:re of ~he JQ:iiEl~ VeT!IJtulle.

(a)l~or P~II'p05es g(lhi,s: pmViisinn tI'l:~ VCnllil,lW\c A$.rr;e:t:s: aJltribuUl.ble mo a De:vclopmem Afea. '~m.1e:iinafter q;a~~edlill1~ ;'Joitil Vm~me Assets") are:

W In 'C;JSr,!; (If the 1IintP:n:uj~:cUQ'n U~oe ,~inl.1:ed,w~ Pirod;tI.cti:on Li\')etJoo aad any maJ1 .or pmQliLaJrp~ope~ whenwer the S<lJnu~· ma.y be !'l~tU!!liteill,a[;qllili~ :fu:r (hie'

,

pu:rpoiSeofC<m}iog ~ Joi11Yl Oper.U·ioms fnlhe Deve~o:pllleJ[[

Area subject th~to or OIcqllllired fo[ 1hepurrposiJ' o.f C.tll]lying g Pel:mJ,et~m (~e,r;!!it~o.rns. in the COnlTaC!l A~,e.a, wh@'e stich pmperly W&iS ooqu!:red befo:ue the ~rn!t; of the ftrs~ PmduClio:n Lioooce;

(II)

. rrn th.e: C<I&e ,of a :sei}Qlil:d 0:[" 8!U1ibsoqjl!iie:!ilit P~crion iLice.!D;ce g~mIl.OO •. 1hl~Pl100Ii,JGI:i!:)ll liceliQe mld. ,:!I!!ly mll]nrpefSOliUl!i~p,ro;peJ.llyae~lil~,ned f:or: the ptgrpo~ of I(:anying OJ1 Joi~1 Open:tt~Jons in.. [hal Dev~i!opmm1t Area or ~cq tIIired fOil" the· 'p"llJrnpose" ·of car.ryii:ilg (In Pch;olel1m O~er.a/tiofls £II" Jeinr O,p®nltiol1s. jill the COn(raCI~ Area w~~~re st8ch pliOpC~ was ,1.IGqlclliN;'"d: a firer the date on which 11 PrOO!.lclkm Lieeece was I~S'~: grillfil:!;e(l and befor1e tJm grant (If ~h.e S~cOil]d er, as ~·!IDe'cas-e maybe ~le n~\'oiil: subs!){J,!I.leru PmdlJ(;tiO"!l Licence,

34

J

THE REl'UBL!C OF UG DA

(h Imm~ltlaleryonO'tVlng the !l.1~11'1i or each P'rodtU,;tiollill Lic-ence, Un'Uls~!I.'. r each cnlll)' comprisin.g Licensee a,i 111al film~. wiH

prol'!l pdy lake SllllCh ~Iclion 'U; JI1.:iy be ncces 'l1ry to <Jssi~1! En the Nominee of the Government, an undivided propertionme share ~n tihe Vcntur .ASSielS equaij to the Nomifie'C of U~e Govemmenrs PiilJrticipGitjng Percent~ge Imerest w~:th effect t~lt:lt ilhel~l.ftcL

icensee, or each. such emit. sh3lH hlll ,e an interest ill 'l"'e Jo.inl Venture .Assets (bereinafr.er I fen-cd 'to as it'S !~Jloi11t Venture Inmerest") eq1Uaf to,' its P~I!!lIc.ipar:in,g Interest in those A5selt~ jlmmt?dia~,ely"beforethe grant of snch PI' duction Licence reduced by 'tihe p.rod~ct..,!)r thAt .irneres and the Joint Ventur hn"r~st ,3'C'Quired by the NOl1iu!I'ICC o f the Go. ernment,

I

I ~.3 !liPartic~pa!iorJ: Share of Pmdil1C'tion" mens n. \pfopol1.ion oHhe iP erolenm produ~d ulltci saved from the COIllract Ar"CD nd not used or "om iln J'Qlin1 Oper.alioJ1!s and such proportion IIlnniJtutabf,eto Licensee and the Nomi!,H:e of the Government sil;)!11 be' equl to their resp~tive' Joint V,enture Int rests i.n Jo.i:nt Venture Asset'S,

,

.. ",;.-,. ;. ..... ,' ....

35

--------------------~----------

1:2, ~ fm.- pLiirpOIS€S of (0'.-,&1 Recovery, ri~lg fal.ci.ng around each Contract Area shall IlIPP~Y. ~1ilI the event t~at a Licensee ~as more than {!IlJiC CmHn~t Area, tile CO'ilcl!Jirna~ruO!1S :sIM<lH bl;; done on - a C~IIIimCl by contract basis. There shal.m be no con so I id3ftiof.lll.

1.2_2 AI[ Exploirati():r~. Developlnen~, rmdLlct~rDi'I !Hud Opc:i.llling cxpenditeres, [IS defined 1101 Ai!111eX C, incurred bylhc Licensee shaH be recovered frem 6:()O4 of gro!l:~oill produerion ~1)tl100A [01" gas an~[" dOOUCli,<m of [he Roya.llJ speeifiedin ]lJ!mgmph 10.] .

- 2 .. 3 The Licensee sl1~1 i, c::a!fi1i' fornfard t.o< :s,Ili,b~ ImB~1 y!:lflrfS. all unrecovered COSIS until rbn reecveryis eompleted

2.4 NO'l '1.1f:8:!'l t'haill~ th~litty (30) 'd!ayspri,o:r ~'O th~: b(lg~~if!l~~g: (If ~cb Ca!lI,:m.dar Y~ajf~ Ljcoosee ,~'baU prepare: and film.:i.sh w ~,e (TolV!fnlmemut foOr aJppJ:O~3i~~!ivhich ,000pp.ooval .shaH ~1:ot be llIru,easo:r.aa'bly \V:ia!hht:l~d" g ~t'_ak lOy iQ!!I9!tilrn, for the fMl'ioo,ming Calendar Y'l-atr(l:f (w)aJll C'omlract Rev'~:mJes ~,1W CQ~mi.ct iB')I:penses h) ·Heincumed" I(ii) lneome Tax ef Lieensee ~Ol cam Clllil}r OO~iiI,l~ui,8iDg Llcensee, as the ease :lfnay be) in :reS'pec~( ort~~,!;;),bl~ l~comedml;l'ecl!oomLPet~o~en!imJ ()iP~f'ditig.Ti!5 carried out h.e[\e~mder" fO'I SllIc.ffiru ICal.e'[ldar Ylear. ~h.l!!::!I'ru es!l.imatie shall looooml~i:siel!lt with the f;oFCCiI'!IS~ sl:a.oom.,enrt fru.:m:'II]sned iPl!I!:5a!!3JJ]I~opO\'rn.gl'ap11 1.8 and tile ,llll1lil.Hd Work Prognulilme Bm~set~rQlVed by ~he Ady~sory 'Co._mr~.ee~un'Uool[:Q A!i.lti.c]e :5~a:I'I.dl shall set 'Fon.hi 1Jle otlier ~ll!mptions Mid pwj,eclions !.llPon 'Y!i'ht~ci1ID ~t i~ '1billsed. QUa!I.1erly uJld:Slies of !1l~lch '~(l~(~ ~hall be ~'U!b~i~ed by tio~_~~ t~ ~ltie; (jol\N~nime:ru: fotaJlPPwv,il (wlhi;[;]m apPliOval S'h_a]~ 0(0'1 be ~.Me~md)LY\ll":ilhJldd)

";,ltl'irill thimty (30) days ·aHem' (Ltc end ef eacl:'t IQI!I8trOOr.. t -

"

A nl'r ('J . r. j 3.

,

All er -Ihe cos, '~oov.ry. ."""ili'<l .; n . P""~ ra p!r 12.2, 'I'e Rm"'"itlg o"~·I'Ii""'"lf!.io,,,,,,,,, 'pli. Will apply ,0" ",.,,,,,,.il1i.g '0011 d.ily P"'!"<Ii,", (P.illfil" Om,

..

~dl~C~IOIl &Qr~~

Wh'cre P'rod~ICUf)1ii d0C;S .ra:O[ exc:eeti 5"O{l(g 46%

Gn:""'eil11~J loL;lll ~ fwdlr.C!·ioll ShID:!,:

1 J:t'~u ~~'l~'~~ .

PI"ij)d !I c: [ iill:!,..!,S!m n;::

(ii) W'lerc prod,u:c'!jon is Ihig.h~I :!hail 5(100 Ol!!lt does: I'jQ~

exceed .~ 0,1000 48.5%

3J.5%

(i:~i)t Wile:reprod!nJ:c;tion

i~ illigher IO!i1l

10,000 b~H dloe,s.

no~ e.1t(:e~d 20,00CI 5:.tS%

\\'here P!nVJduct:iOl!i -ltS h;gfler ~ha~

201jOooi blH ,d'Q'e~ l1lO~. aC>eed 3'O,OO{i'

". I. I: •• ;.~ " >-. _ .... r.

5"8.5%

Wh~r~ P~dUlcHon is f1lgber (halll

30,000 bhl!t dQ(ls not e:"X(leed 4(1,000

63.5%

(vi) WJ1ert: prud:ucdbn i~ h!lSher than ~~ 0,100-0

68.5%

31.5%

GO~"'""'en. '~.11 "."" Ihe ,",Sh. to· !'.«'vo iI, .1,.", or I'm.lil Oil ill , ... " 11",,",,, •.. en • 0'"",.., 1> • sis ~oljf)1"g !II. Uoollse, or us ,hoi"". 30 d.!'> i. ud.",,,,, II' ""<h

,

-

rUE Im,rq 1m W OF ,I Jr ~,' 11.:" r )/\

All 00_1, discri 'I,d",; II; '''''''''e , mun '<;!"II .. ,,~ olhct /",., 'd",ill;"'~lors' qr ut .. x es , d.ti",. "'"i .. 0' .!iI,,, low(ol i"'l'O,<i!ion, 'pplic.,blc' 10 Lio""",,, .h.11 be paid 111,. Li """ ... in 'OOllI'll,""" witblh. I .... ofUIl",nd. in' • ti",oly r. 'hion .

. ~ •. ~~ . -'! i" : • .- • .1, ,.'

I

•• • ' • I I • 1.. ..,/' _ ~., ..

15.1 Crude Oil sflJJH, for all plirlmse-s of {his Agn:cm,unl,. be 'valuedl 31 ~he end of eaeh Mmnh fils foUows:

15. U £lI!.C'Cp~ as provided in pa~gmph 15.1.2, the lllilliFket price ("M<J:rket Jlli'ce") II ed 10 vatne Crude Oil shall. when: arm's length, sales t-rnm;.a.cticm:s; in !Teely C'(I.nve,l1ibl~ c~I"i\:ndcs or nude Oil to lhird parties have been made du.rin~ [he pn; eJillg mOI.lI11. be [he 'weighlkld ~ve[age of the per BDrre! !'let realised price ohlailned FOB I~e Se9ibrnnrd l"c:I1l1limll or any ol~l(:,r POillill' of export for such antt'~ lengih third pallty sates less .. in the e ~rt that a s(.-parale plip.e~ine C(lli11pamy is. formed pernnont to parngra'ph 16.2 the Olv,erage ron II cl1arge per Barrel for such mon:tirn imrpolScd 'by till; ,Pllpdine vomnrpamy for 'IramSJ)Qnlmag the oi.1 &om the [)~ive.ry Poim LO- the S~boam 1~ermlir'ial or a:nu;y other po;ilFl~. or CItPOI.ll.

IS ... L2 If ~e.ss tmlll fifty peroellil (500.4). ib'Y volume, of Crude Ojl sales &on1lhe 1Qi.:ntmct Area dUllifllJ! such month fa]] n!der rtMqnq)h ~ S.l.]. 'Iihe Malfket Pd!te foT' sucb mOli1!tft shaR be the sim(pl,ei a:ri'l1l1'lflettcal a,vera__ge of the prevaUing [pur BGm::l relliJll,g prioes: in such qtl8rter of a. basket 'oflh~' Ithree (3) 11!"10iU s'~m~]M inrema~iolU!il'Jy t~ed1 ,omde eils rniist6-d. by 'lb~ AliIlIeriCOiJIl Petroleum Insdtute(APill) iliJiiId chosen CrQJiIiI the major crude oil producing ·I}ODnlrie.s ~n the A:m~.ip;B11 Gu]f and! Affica. tilki~lg into aOC'QWn difterieDces in point of sale, qliIDJity, grade, grrovity ,or sulFl~n.i:r conrest and aD)' s'pooia~ t'G:1!DI.S il!l1d ,oofld~~lilDl1 rela.l:in~ ~,O, tliJe sale of su:~!h crude oils, less, in tbe eV'clIlt tflat a separ.ate pl]pi::li:ne o('lllIipany is fmJl]e4 pl:U"SliUinl -10 pa:mgra:ph 1,6,.:Z.lhe av.erng,e mriff ,clilarge p~r Bartel fo:r~'h8lt m;o;I'!:th imposed -by the pipe:line: oompOlny for ~~e tJr,u<sportatiol!l (If Crude OJ I herellln:der hIll tlm.e Dd~veJY POljnt ~c tbe FOB Seaboaro 'temlrirlla]~r any other poinl!. of e.x1)0J:1.

15.1. For the plllrrpos~s of" ootel1J1irling !l1c Mal' ct Prtce as described above, flO aOOQ'l!lllt ShfiU be talkcn or Cnr.cle Or~1 sales ro ACfilillll:la. ("o.[I'I~llic.!!i or restricted or (liIstr(''Sslfam''lClions- or ,!!!iI11lY ~rnIJlSllct~ons nor ,a~ ami's leng,lh includilllg government ~o govemmeru, harter or discoll!nt deal ,

THE R£P'UBU.C OF UGA NDA

15.] A The Market Price shall be determined at tho end of each month in

_ States Dollars in ~;conrdft~.ccJ~li'tb .p{ll:rl~;raph i:5. t.

15.2 Any disagreement concerning the determination of Mrtrkt:t Price under pa ] 5.1 shan be iirs'r consideeed by a pridng committee composed of repr,esental~ves from 'the Government and two (2)reprcset'll.artives from Li In the event the pfi.chllg committee cannot reach u unanimous decision thirty (30) days of the. end of the relevant month, either party may refer [he for determination by an expert in accordance with paragraph 26.2. Durin referral, which shan in rio event takelonger dum thirty ((0) days, the Mark for the preceding month ~ihan apply and adjustrnents, if any. shan be made

fQUo,wlng month based on the decision oftlle expert '

15.3 Natural Gas shan be valued in accordance with 'the provisions of paragraph •

15.5 Licensee sball undertake to measure the volume and qaality -of the Petrol prodlilced and. savedhereunder, consistent with generally accepted practices n internaJtio.nal petroleum. 'industry, Wftll the frequency and according to proced whioh shain be approved by the Government, which approval sha\rno~ unreasonably withheld or delayed"

I I

15.4 Licensee shan instaU~'opefate and maintainat the 'Delivery Pointequipm measuring the volume and ;quf"H~y of the Petroleum produced and save here inc~uding gr,~vi~y~ d:e:nsity~ temperatureendpreaaure measuring devices a.1 other devices that may be required. for the purposes, of ~mplementin .... Agreement, All measurement equipment and devices S:han~ prior to instaUMion or usage:" be approved by the Gevernment, which approvalshall 1.moo3lS"o.naoly withheld "or'" delaye:d:- . -'The Government 01' ~ts anthc repr-esentatives, at its own. expense and risk. (save where injury or damage from! the Gross Negligence or WIllful Misconduct of Licensee), shall hal, right to inspect and. require Licensee to test In its presence such equipment devices at ,aU rea,s,onabh;) times. The equipment and devices used or ins

. pllrSUl'll]ll~ 'to. th~,s para.graph shan not be replaced! or altered without 'the . 3lppit'-oval.of the Government, whilen approval' shaUnot be unreasonably 'witl: cr d~~ayed; provided, 1uiOw,ever~ that in the case of urgency or so as to prevet - iuieri-upition' of ongoing producdon~ Licensee may proceed with such replac - or alteration withouttbeprtorapproval of the Government but shall immedi theeeafteenotify the Government .or sucb replacement or ~lhcr3timl.

.,.

4.l

--------~--------------~-,----;

!HE {{Efum.le OF IKiA t _

f6.r Uceusee shaH have tho I"gh(~fi take and trol1spm1 ~o an oCeDr' po { ur Qlhl,:i' p'i~~'r of loading for ex.port. an P.etrof ~um to which ~I is entitled herelil1d~r and. in colmection therewitb', shaUhave' ~he right to ccnstruet, operate ~11I1 .mail1(uin an ,export p~pcnn~e. i>Ulmp~fig statiens, storaBc and .rclawd Se~lbQnrtl Terminal or ,oIlH~r f-acif:i(ies.. The riOvCffU11ent s.haB as 'is;1 UCCI1'!-Ic' onmattcrs il1' v oh·ing rights or wlly.fice11Oe5 or other sutbori~fol\sn.~uh'ed l!II1Jer Ugandn h,w iJl ~onn(:Ct.iUli with such tbc.iHties and shall assist, L~eJ1s e i~ i,ts negotiations ~ ilh ne.ighbo 'ny . c'OUtl1(ri~, regarding f1ghls of way and (Hher·co!_dir.ions relllt~llg 10 ,the onsuucuon. opefll~Qnand malu.tena:OO~.Qf~ll: fp~ilities in such countries

16.,2

it is under-stood by the Parties, hereto dUH he c(Jl'I'StnlciIiQ~l" nn3nci~u~. operation and. maintMIU'ie¢ ,of an export pipc,Irno, p:umpii1l!!; .sWtiOIl-S and f,eta'cd ~lbQlint Te.rmifl,al o,r other facilities 'shall be carried on 'Ihrough a sep-arate pipeline company ("the P~pe1ine Company")1 which shall be- resporui' le for ~lie hUlfudliog' Md ttansport~tiOH. of PetroleURll fronl the Delivery POi'.ill in UgtU1dn 10 Ute ocean " port or oth~ point of'loading. In swell ve,l1lt the opemtions of the PipcUne Company \ViU Dot be included wi;thim ,ule meaiili~g of PetroWellfil Operations untie!' thi.s Agreement, and any related Licences.

16.3 Any Development Pia. submi\t'tOO to fhe Mi,nisttlr hy I ,icensec pursu~nt to See-lion 20 of Ote Act shall include' Ucefi.see's proposal' with reg:l:l!l'd (O the aIT'angemcnts for the 1h'a,l1iSpOfttl,(io:n to the rennma\ 0'1' each ,of the P.B!tli"es' productiO'n mlUtleme.nlS hereunder.

fA 'the eVeD't the said t.mmsportation anantem.~tits inl'" I'Ve tbe formation. of aI

- eparnle .Pipeline Company P'Ul'SIHtot :0 pflrogmph 16.2,. such plropos~ls .haU, • 1IJ1IIt,ess ol'hen.1irisC' agreed. be consistent\. i'th lhe tbUowbilg princip\es~

(a)

- enth Party shan . a~Y:riI~' Mil ~y toe 'trl1lltSPOi1,;;litiOiD .tlilrim charged by the P~pefine' Company related to tlheir respective' &hares ,of th.e Petroleunl transpc!lfted. w,hiich otl.igaltioli'i m81)'. ,in the (\3 c of ,Ihe NOI1\,iMC orlhe GO'll"enune111;- 00 discharged by each of tile QmaGee and tb~ Government furegO'dng in rav'C)\llIf ef the Il'~peline COIupuny a pO!"tio,ij of th·eir rospe~tive ' production en.ti;t'ehumts so tr.1nsptJlii(oo eqllal in va'ue ~o the -.{uri{(s due in respec: of tb,e tmnspol1i,ti,o.1l' of sue'll pmductwon ,cnfUClnents: [rom tlw Oelivezy Point 10 the .FOB seaboard lefmilila~ J}fI~t1t of export;

__ ~ ~43 _

, !

'j,bp""",,~ "' sua <flgr '''''',"0:> 'jq'''''" e a q ,0. I,oq".!o,jr "'''''!I''(! 0"" pou.c.q pau'!>"1 .... , ~ .. p"" ·,,".dlU.;) ""!ra"!" ''Il JO -~'.ilp", ""'1<".dso •. ,.1

'J:aPtJnOOQ~ s~d):3 :IO~Im(Q ~rGl~JtIOnl! ~ II'" lur"<l "'''!IOO"'l1 .. 'UIld""O ".",,"II;.{ "'tI)0 ,.l!J .. 1" liP" """''''''''."'.1

·~PI!lI1I!E\J<lq UO~Jt'~OOsuJllI:j J<Jj:l,!'Qir!!:rrnlj,~ ~q QS~.ru:l:n!lO pr!il~ q;)!lI;!tI.\ "@!lOnprud )0 ~!I" .. b 1"'''1 0Ip o''''''q ,u"""PPIIO '''';l''''p",d .,Ao'd

'I'·' ~I°!'l'" ""'UOdoal .q t u , "r"lId "II " .... oq "",.q •• q n'~' .'!'''''' d'llqenll..t~ ~fi;;)~~li!d !,!::ms JO ~~IDUJ~'m,~!U9 'D.f.O~I:Jfllpowd a.!'l~I,:JOO~d:,lI ~[Jl, Jj,odStll;U,)

P'" '/P"'q .."" !'!IIn,,,! .q PI'''''IS .,~ !I!''lf ~,.. JO ",!'.doo lildopm""q, 'q, ''''" II '.0 ,. JI '"",V """1010:> "II '''''J "'.,"" "'!"".{ II' j"', """"II !n .. OO!"·POJ<! p.",.,,,, >ql ',orM ,c,',iI/OP "'q,o '" '."!"""1. ,"""qe,s

01" 0, "00,."" PU"'P"'q 0, "1,00.", 0"""1> '"""~J"" JO me ""!I!'"J

. 1">'"''" PU" '"I"d,d .~" ''''II ~"'D' 1I.'ls SlllSo<lntd ~"'''' '."~Iod!d ;tlod""

.~, ,10 11°'""'"""'0' I"II!U! "~, 'OJ '''''>on .cq 'I."ldrud JO "'" .~, ur ('J

pUiil ~Paiinlb<t! ,)j1L' se S"pll~U ~IJi'iS' ~l.J!iI;Ul.1.JiQqJO. ~r!10;) alj~ puv ·>lIII!""J q'",. )O""O""III!;"" P"" ""!',",>oo ''''''1>''1<""" ''Il "OJ "''''j .~, WIIIA·II11. "! h""'J'''"J' '\"11'.1<1 "u JO ""p,"q",",," -'q pO"""""l<" 0Ip OJ PJ ~:a-! rI't! !,'\;rn~l P;)U, !.(u~I:'Ip ~tl rE. n ILl rli~.J t!.j.Jl" : U(I.,."UEI t~ I tUnl:\! ::Jlqt!!..Iosl!!",n

" 'I'IM J;)'I''''''' "!I!~"'I PO"'OI I'" ,>u'I"",d IJt'<i,.> "ql ~O,"!.,,,,,,,, 1''''' ~"".,"d" 'il'",,"~,~ ':I"!","",,,o, J" 'I' " "'I' ",'UJ J1!." '(",,""'0,) ""!iod) •. "II 'P!~," ,.). '"' • '" "'" "'I • , I' 'OW", .q. 'U!IU"""p '" "1'1' OJ. HIOA>y ""'." ,",, ,ml' '."',"' .'q, n ' ,,:,"1" u., "oncu"cl,,,,", ""

ARTll I.E

GA OA

I .I Ou of the t01a.1 q'll.tH'I!thy ef Crude Oil production to which, the Licensee is ,e-utili

In each alcndBlf Qm~ner, the Govemmem may efl\tC! to t3lke at quantity of" it Oil. of the gravity, grade and quality of ilts "boice, that,lhe Gevemment requires s;Jlisi) the Icqllirc.lrn.:nl.~i 0 intemai consumption in Uganda (01' such Calc;ml

\ ~(lr., T~,C (JoycrmHl.:lli shaU f"':lmbul'Se; tihe . icensee for such QiU3lnllil. 1" Unit SL~te!i DClUars nt the price as calcYlate.d p\!1rsUlIl11lt l() paJ.atgraph IS. II hereof widai thirty (30) days after l·be cnd'oftlln Ode uiar Mornlli in which sucb deUvet)' lal<. place. \m~e.s~ otherwis as,reed between 'the parties. TIlt: maxsnam qlwmtit.r 0 Crude 0" th l the GovelTlIi1ilent may tniretc) udsfy he '·ntemaJ ooBSumptio roquiremcn~s of the com}',~ry shall be ell clIlIlatoo by InoJtiplying the rotal Qll1Ullllity 0 Crude Oil predeccd fi~l'I!l the CQfitract Areal during the period under ,coliil~i'deril!tiQI1 .. less consurepuon of elude Oil inci.d'~l1tnl 'to Petroleum Opeta(ion:s~ by a fmGtion~ lh~ numerator of which is tI e intemalcot1iSUlm..p:ti'O'll! requirelillcnts of - g, nda d.uring the peri d and the denomirn~rorf of wbich Is the vo,iume of erode Oil ,m}{]~Lcd i[~ Uganda by aU Licensees (including .LiQ·eris(!e). Any Cwde Oi PllOductiorID dedlicatL-d to an early prochi:ctiog, ~c\he<me in aOty such Cal,endar ¥e~1.r ·porsml!l1t to paragraph 7.4 sh~n he' deducted. :from the maxilmUnJ quantity so determined fcr sw;h Caf.endllilr Year.

},.2 ~f ~hc Government elect te exercise its rigI ts :wl..der PQr'dgr.lphI8.1.~ it shalt notify Licensee in \\flltin,g not less ttl\ian ninety (00) days pliorto the CO:fnl1:m:encement of escb six (6) C~iI:';:Jld~r Months of ea..oh Calendar Y~r speci:fyin,g the· qlUa.ntity, and designating U e grade and qllahty, that .it cdOO1S to. tat...ke in k~nd. ibftsed upon the production . forecasts aud anl1lll,~d and quarterly estimates. .furnished to the 00 ~mRTenlt pursuant to paragralphs 7.·8 9!fIld IS.S. Any adjusting paynllr.mrs 01'" f. flUnrls shaH be made o;ll,ithj~.nioelY. (9?).~ys ef'the end ofqacl] Calendar Year (II) l.he basis o.f actual qunnt"t:ies,

_____ 41_~-

~

N 3t~~~i11 G~s

1' .. 1 Licensee shall l'la,,'e thtnght to use Asoocil.l'ted Gas fur J1ci'l'Oleum O~ralti,cms. iTII:clud~~g.ln.111iIO(~IQmiicd to, rei:liljectjon f:or pressure mairaenance, aad ]mpH;lViJitg ~he reco .... 'erj of Petmleum, power generaticn ,find f,ccyding: o:pe~il:ions, The qual'iti~:iC\S .c;fAs:\i()ciated Gas used i'll li1is 1O\I',3Y Shoiil!U 'llOot be s~lb.iicc:[cd te any tax, fee

Of Ie J of:<ll'ly'kind. "

:19.2 ,Wbere Non-aoS. odan:d Gas. h~ls lbet:1il. diacevered m the 'Con.lrnci Area and Licensee has nom p'!!IfSUaiitto, pmagrnph 7.2 giv~.I1 ~n resped of the Di~oov'eliJ a n01tioe to. mhe Mnm~stcr for Uu,1,; rUlI'po5e of p~r~ph A {[If ~h~ prcvisote Sectien 17( {)(I» of Lhe Act the P~[ties sh<al~I, unless the IProvisi,oJihS, of JRlIragTai,ph B of s\i'c:hi pcoviw, are odu:rnise applicalD~e. as, 8()6~ as possib e ~Oer romplet:icb"I'I by Licensee of:3JI:i1 appmiisal progmmrn1l.'Ii!, (If sceaer ~r so ~J me~t oolgc,1iler 'will~ II view' ~o L;each.ing BiiiI agreeeient em, ti1£ d4;lvelopmcnl, ,lJl.'iOdm;:mio'1lt, processj~g ,~nd sale of sl!!Ic.h ga.s.

1 St3 Associar~ed Gas whh::h is: R@:t used in :re1ool:~ulD Qpemtiio:l1s.rurud tll.e processing alJ1d ytiUsauO!IL ofwhicb~ m. 1he fOOOMbL:e opinilolll oif Licensee is not e!(';(lnomic~t shaH be :retumed Ito !he HbSl.lrfuc'e s~fl,lctgre', 0 mt.l~y:be thud wiirm, (he' ,e~n~etil~ ,o;f 'l1te Uovemment .. wllic!b consent: shan oot be u.n:reaS!OniiJIldy withheld or delayed. In ~lt.e ~'Il'ent dtftl Lieensee c;:l\ioos;es to prooess anodl ~dm Associ'aled, Gas, Lieensee :sban Ilo~ify 'lh~ Gov,emmoot of 1ihe same and upon such Illotifiicalio.n. the Govemmelll O'lind Lio@tIisee shall, as SOOD as pmctiltafuf.e IlheKaftw, :meet together widl l:Ii v:iew 11:0 reaching 6!_m agn;emeJ1ll em :Iile 'I'JOOeiisirng and sale of ,,511.ID.h gas. In ike evenE Uce:nsee chooses 11101: toprooess, and s:e~m A5SOCi:a~oo Gas, mffil~ GO'v~mnul'iill may eject to offtake ,Il~ tbe o!Jtliet .fb_Qge of thega_s~ii. Sepln:ror and use such As.socia:Loo. Gas whi~h i5 oot rnq.~oof(!ir Pe:bio.tetlM Opern,tlom5. in Vr hi'ch evet!lt. Licensee mil}' Hare sudlg~ lIntlil j;;nchtmre as die fllCiUlies aee 'in 'place to enable the Gl(!iI'Ii"emment (.0' ~ili deUverj 1}U:tof. There shJ.I:I:I be ne cbar.ge to the Go'VeI:11I1le«l for such A!i~0C;i<ue4 Gas" pro\i'ided th!lt the cost 1'1 gather such AssQcia~ed Uil1.l 31t tae point ofboing flared and. 10 process <lind utilize it shallbe for [he aCCOI.m t or the 00- ertlmClwt

19-4.1 forarm's ~e-.nIg'l11 !ia!e8 lei 'I'him parties 00 le(juaJ ~o th.; net realised price OblOl!inedlilr such Natural (ins, ~t the Delivery Poin~;

48

THE REtf'UllUC O~ UGANDA,

19.4.2 ,;". ,"Ie-, ",h,·, ,.10." ., .n.··. 1.,'1:' ,,, >I',i,,1 1"''';0 s, b e . delCm"I;"oJ

'Ml'C""OCIiI be,,, CO" [/,. a,,'''''"",o., '"d [j," us ee, P"'W;d,d. howe.". In such {"'ricl,;' lH' ~'ahle sh:aH rcJfkX::1 rhe foUoWiUIg:

Ille pJiJil;lC 81 whi:ch IIrrns renglih'srde;s of N;}lil~~~G;)S fw uUu.'Jr i'>~II~I~~ hi I!Jg!.!~ldli. ifanY,{i1V ti'lclil ~~h~ JU!ld!L,1;

(iii)

~~e,,)ri:s~ ~t \'iI';l;iic:h_a~s ~eJ\g~~i S<:IIes, Jf-";,my, ,ofN:a:~UI1lI G~~ impQnod jllto Ug,u;J:cl~ are tieing m~de;

(v)

UH: !mer:n~~io.n1'a~ lrt1<irket prier£;! {'iif cornpetiIIlgQ~' ,aherlill9iruVC' fb~Js orfredsllO~k5~

19.4.3 AI'll1', ICl1!l1h 'Ilim P"'iy .. I .. 01 .. 11 ,." i"<lod, ,.1., 10 Allili.'.d Com""";",, or u"' .... '0, 10 lb. G •• ,,,,rnen"'ml' Ul!Oo<io" public ''''iloril, "" "ny a.h"" •• Iily conn .. !lod dimoUy or iru.li"",ay by .h. GI}\~einn~e~~t_

" I ;r~... ... •

ARTICI

._.- " ' __ , : ..

Tra~nIn,c and Empfo

2 U Licensee agrees to train and employ l)\l!lita5Iy quaUf.h~d Ugandan dtizens :

PeUOleUrfl Operaaons and. following the .eommeseemeat of I omm iJI'Qcluctj·on. 'IQ undertake the sehool'iug lI'1lrl. :training of Ugandan citizens for J,ositiolls. ill 'l\IIding tldmil1):)trari YC BInd exeeuti",,· managerncnr posil Licensee wiln also ruquire its Sublicensees to do the same, Licensee underrak g . dlJally repfa, e its expatriate staff wHh suitably qualifIed ~nd, experie Ugandan citizens us arc thit:n "ursiblblc but mf tIle Ucen ee satisfies 'tlH~ Ad i

'OIllu~lmUcc that no suitcably qliAalified !lind «perieneoo Ugandan citizens available 'wl~ arc al)1able of fining key senior manag,efil!ent Of technicalpo-siti Lic nsee shan eruploy expatria,te staff in sueh posi~ions. An annual progra 'ocr training and p.rn-sin!! in of Ugandan cmtizens s~alt be' estabU.s!loo by licen a~d shaN he ~ IIbl~itted t70f' l'lpp.ro'Va! 10 th,e AdvisoQ' Cormnittee, ,along with annual Work Programmes a'nd Bud~s :referred til)) ~n Ar:t1de 6. Within tl1i1t'ty (J days r the end of eaeh Calclldar Yeal'J ticeJ1Siee s.haUsuhr:nil a. written report the Govcmmcnl d,e&c,ribj~s: the number of persoune~ enlploryed~ tI!:e.ir natiolf]'8h their positions and ,the status of training p,rogmmmGs for Ug31n&Dl cimizens.

-

2'.2 Licensee shan abo be ~c''l'uir~ m es.f:ahlis'h_ ftllU O\oDU'a,llll'f1:Jgrnmme, rui11:iSfuctOt)'

th", Go'- ,emmen L. ',to tra.iiIi1! personnel of the Gov«Mlen:t to undertake skiUed an technical jobs in. Petroleum Op~l'i'!\!t;io.l'ls,

'2i.3 Licensee shan deposit wid! govemllil(~nt" or its o,mJllee:, on\tbe Effective D~'e OJ! e-a.d~ anni' ersary ,ct the Effective Da(iethereaft,er~ the' foUQ'Willlg amounts for traw~\in,g of Go,v'emmenlpcrsonnel selec~ed by the Govemment llnd other associated costs for each :twelve (2) Calendar MODtlns period"

Fin.l Ex,plQlQlaQJil' Period

econd Exp.1 ra lilOll. Period

Third 'xpiomtion P'elicod' foUowillg the .gfll>n~ or 0.11 pClrol,r.;um p eduction license

us s 15 000 per 12 months, US'$ 75,,000 per 12 «lQntI,s. US $ 75,000 per 12 mOt}ths.

11,4 Subj(..'Ct to rhc I 1,), .... istons tJf paragr-dph '2 '1.1" Licensee shain be: free to employ r reign llllliullah;: t the Cxl~n that su.itably qual.ifi,ed .u~d ex.per'c.ncoo' Ugandan ~la!'io,n a ls cannot be fOl!l'1d 10 flU a position .

. f·" ... ":

51

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