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Sample Business ContractsHome: Sample Business Contracts: Featured Drilling Agreements
Contract No.: KOZ/CON/001/04 Atyrau city, Republic of Kazakhstan August 16, 2004 SUBJECT THIS CONTRACT is made on August 6, 2004 BY AND BETWEEN KoZhaN LLP, hereinafter referred to as "CUSTOMER", registered according to the legislation of the Republic of Kazakhstan and having its head office at the following address: 1/1 Jandosov st. Almaty city, 480008, the Republic of Kazakhstan, Tel: +7 (3272) 509380, 509381 Tel\Fax: +7 (3272) 509382 and Precaspiburneft-Kazakhstan LLP, hereinafter as "CONTRACTOR", registered according to the legislation of the Republic of Kazakhstan and having its head office at the following address: Bld. 6, St. Kurmangazy, Atyrau city, 465027, the Republic of Kazakhstan, Tel: (3122) 21-96-30 Tel/Fax: (3122) 21-96-53 WHEREAS, (А) Customer intends to perform the construction and drilling of one (1) exploration well in their Morskoe Field with the option, but not the obligation, to construct and drill two (2) additional wells; (B) Contractor is ready to furnish the drilling unit named BU-1600/100ДГУ complete with drilling and auxiliary equipment as well as with the crew as per Appendix E to the Contract, to perform drilling operations on the pointed fields on Customer assignments (“Drilling Operations”); (С) Customer has the right to perform exploration and production of hydrocarbons from Morskoe field based on the Contract with an Authorized Body represented by the Ministry of Energy and Mineral Resources of Kazakhstan date February 17, 2003 (Act of State Registration of a Subsoil Use Contract No. 1103 dated February 17, 2003), besides, possesses a privilege on Value-Added Tax within the period of exploration according to Tax Legislation of the Republic of Kazakhstan (Clause 230 of the Tax Code of RK no 209-II of RK Law); (D) CONTRACTOR shall have a right to perform Drilling Operations on the basis State license # 0001478 dated January 15, 1999. Customer desires the Contractor, possessing the possibility and desire for that, to perform Drilling Operations on the wells of "Morskoe" field using the tax privilege herein. ARTICLE 1. GENERAL PROVISIONS 1. The following documents shall be deemed to form a part of this Contract and the importance of a preceding Contract appendix or provision is definitive (i.e. the following documents are arranged by their importance and significance): • Subject of Contract • Appendix A - General Conditions • Appendix B - Cost of Services • Appendix C - Parties Responsibilities Allocation • Appendix D - Effective Date of Contract. Management Rights Transfer and Payments Terms and Conditions • Appendix E - Term and Cancellation of Contract • Appendix F - Drilling Unit and Auxiliary Equipment List • Appendix G - Customerís Right to Provide Services and Materials The Customer shall make payments for Contractor services in accordance with Appendixes B, C, D. All the costs are given in national currency of the Republic of Kazakhstan - Tenge. This Contract shall come into force according to the procedures given in Appendix D and be effective up to a written notification by any of the Parties on its cancellation according to the procedures given in Appendix E. All notifications the need of which may arise out in connection with this Contract performance shall be deemed to be effective if they are given in a written form by a courier, registered letter or fax. All notifications should be send to another party to the address given bellow: Customer: KoZhaNLLP 1/1 Jandosov st. Almaty city, 480008 , the Republic of Kazakhstan, Tel\Fax: +7 (3272) 598903 Contractor: "Precaspiburneft-Kazakhstan" LLP Bld. 6, Str. Kurmangasy, Atyrau city, 465027, the Republic of Kazakhstan, Tel. +7 (3122) 21-96-30 Tel/Fax: +7 (3272) 21-96-53 This Contract is compiled in Russian and English languages, in two (2) copies for each language of equal juridical force. If any provisions of this Contract or Appendixes are completely or partly invalid or unfeasible, the effect of the rest provisions shall be deemed valid. The parties bind themselves to replace the invalid and unfeasible Contract or Appendices provisions with legal and feasible provisions ensuring achievement of the same legal and economic result. All questions not stipulated herein and in Annexes shall be resolved in accordance with the applicable legislation. DEFINITIONS In addition and terms, defined in the text of this Contraсt shall be the following definitions: "Affiliate" or "Affiliated" shall mean a company or other entity that controls or is controlled by a party to this Сontract or company or other entity which controls or is controlled by a company or other entity which controls a party to this Contract, it being understood that control shall mean ownership by one company or entity of at least (50%) fifty percent of: (i) The voting stock if the company is a corporation issuing stock; or (ii) The control rights or interests if the other entity is not a corporation issuing stock. "Managers group" means persons authorized by Contractor for successful performance of the present Contract provisions and submitted, in the form of personal list, to Contractor within three (3) Days from the moment of this Contract signing "Day" means working day in the Republic of Kazakhstan. "Customer Equipment" means Customer equipment, property, materials, stocks and products temporarily delivered to Contractor management for the present Contract performance. "Contractor Equipment" means Contractor equipment, property, materials, stocks and products mobilized and used by Contractor for the present Contract provisions successful performance. "Personnel" means employees, officers, directors, agents invited by Contractor on the one hand and Customer- on the other hand. "Formation fluid" means all the hydrocarbons, accompanying substances and formation water recovered from the field bowels to the surface at normal atmospheric pressure and temperature. "Representative/Representatives of Customer" means persons authorized by Customer to supervise the performance of the present Contract provisions and submitted, in the form of personal list, to Contractor within three (3) Days from the moment of this Contract signing. "Project" Technical project on the wells construction in "Morskoe" field, located in Atyrau oblast, approved and valid on the date of the services commencement. "Handing the well over "on turn-key" basis" The well was drilled to the depth of not more than 1300 m. The well was cased with production string D = 168 mm, after cementing the string CNL (compensated neutron log) was gauged with tubing string with a gauge (reinforced cross) and artificial bottom was determined. Production string cement bond log was run. The tubing string was run into a hole. Wellhead is connected with string head on which X-mas tree was mounted. Production string together with wellhead equipment was leakage tested with water. "Parties, Party" Participants or participant of this Contract, together or separately correspondingly, i. e. Customer and Contractor. "Management" means all Contractor operations related to the use of Customer Equipment for Services performance. "Tripartite commission" Commission formed of representatives of Customer, Contractor and the Third Independent Party competent in the field of oil activities. The commission gets together to evaluate Contractor or Customer actions in the case of dubious situations related to Contractorís performance under this Contract. ARTICLE 1 1.1. Customer charges and Contractor undertakes to construct one (1) exploratory well with the option of additional infield production wells on a Turn-key basis according to technical project and geological-technical order ("GTO") requirements for each separate well, and for the cost given in Appendixe B (cost only for first well). In the event Customer desires to alter the period of Contractor services performance or the scope of Contractor services (different from those defined in Appendix B of this Contract), the auxiliary services cost will be defined by Contractor daily rates or by other defined in Appendix B. 1.2. Before commencement of Drilling Operations the parties shall develop and agree the Work program on each well drilled and tested based on passed technical project for each of the wellís construction in the Morskoe Field. 1.3. 30 days prior to the first well drilling commencement Customer shall provide the Contractor with all necessary technical documentation on the wells including: - Technical Project on well construction in "Morskoe" field, - GTO, - geological order. ARTICLE 2 2.1. Either while performing services on the Contract area and, if necessary, outside its borders Contractor in the name of its Managers Group shall keep strict discipline and order among its personnel, not admit to operations unsuitably skilled and inexperienced persons. 2.2. If Customer presents substantiated written claim to remove from operations any member of Contractor personnel, as his further presence may cause damage to high-quality Services performance then Contractor shall make appropriate substitute within three (3) Days. 2.3. The order of moving of Contractor machinery over Contract area, its basing places and Equipment and materials stocking points shall be agreed between Contractor and Customerís representatives. 2.4. Contractor shall bear full responsibility for implicit obedience to all regulations of competent state supervision bodies of the Republic of Kazakhstan in strict compliance with the legislation in force. ARTICLE 3. CONTRACTOR PERSONNEL 3.1. Contractor shall employ local manpower and only in exclusive cases take foreign labor power in strict compliance with legislation of the Republic of Kazakhstan. ARTICLE 4. CUSTOMER REPRESENTATIVE 4.1. Customer representative shall have unlimited access to the Drilling Unit with the aim of supervision and inspection of the operations performed by Contractor. The representative or representatives shall have corresponding authorities to make decisions on behalf of Customer on all the issues concerning Contractor activities while the operations performance. Contractor shall commit to co-operate with and render assistance to Customer personnel or personnel of other Contractors involved by Customer in the performance of any operations related to the given Contract performance. ARTICLE 5. CUSTOMER DIRECTIONS 5.1. Contractor shall commit to follow all the directions of Customer, which donít contradict the provisions of this Contract. ARTICLE 6. CONFIDENTIALITY 6.1. The Parties undertake and agree to keep confidentiality of this Contract provisions, documentation, knowledge, experience, any joint documents, materials, any other information i.e. of organizational, technical, economical, financial and of any other kind the Parties possess and provide each other when performing this Contract. This Clause provisions shall remain in their effect after the termination of the Contract as well. ARTICLE 7. PARTIES RESPONSIBILITY 7.1. The parties sustain juridical and property responsibility for non-execution or poor execution of the obligations taken under this Contract in compliance with the active legislation of the Republic of Kazakhstan. Contractor is obliged to use the money received from Customer for the operations related to the Contract performance only. 7.2. Contractor shall ensure 24-hour operations. 7.3. Should the Parties cannot resolve a dispute within 30 (thirty) calendar days after written notification given by one Party to the other Party on dispute subject, the Parties shall have the right to refer to economic disputes resolution board in the Republic of Kazakhstan. 7.4. Should any Party infringes this Contract conditions causing the other Party property damage the latter may claim the damage reimbursement from the Party that infringed this Contract conditions and in the case of failure to settle the claim the suffered Party reserves the right to appeal to judicial bodies for reimbursement the damage from the Party that infringed this Contract conditions. 7.5. In such a case this Contract conditions are the grounds for claiming the damage reimbursement either independently or together with other Contracts, protocols and agreements directly concerning the main aim constituting the base of this Contract. 1.1. Jamming or damaging of the equipment in the well: (i) Contractor shall be responsible for jamming or damaging of the equipment in the well in case it happens through the use of faulty equipment, its unsatisfactory maintenance as well as a result of any breach of Contractor and its Subcontractors: а) negligence; b) intentional offence; с) slip (including but not limited to: duty instructions infringement by Contractor personnel, appliance of impermissible operational methods, infringement of operational instructions and united technical rules in OGI (Oil and Gas Industry). In such a case Contractor shall extract the stuck equipment at its expense. (ii) Should the equipment stuck in the hole is not caused by any of aforesaid in item 7.6 (i) Contractor shall try, as per Customer instructions, to correct the situation aiming to restore operations to the state immediately prior the equipment jamming. When performing the aforesaid fishing operations and restoring the former equipment operation routine Contractor services payment is performed by "operational daily rate" defined in Appendix B at complete reimbursement of Contractor expenses for necessary materials acquisition. 7.7. Initial hole loss (i) In case of hole damage due to any of Contractor breaches defined in 7.6(i) Contractor shall restore the situation and for initial hole restoring period the operations are performed at Contractor charge. In case the hole is lost due to the same causes Contractor shall be obliged to re-drill or drill a new well at its own expense. (ii) In cases when hole loss or damage is not caused by any of Contractor breaches defined in 7.6(i) Contractor by Customer instructions re-drills the well or drills a new one in return for the former one. Such re-drilling is performed in compliance with this Contract conditions and Contractor services payment is performed by "operational daily rate" defined in Appendix B at complete reimbursement of Contractor expenses for necessary materials acquisition. 7.8. Should itís impossible to get the equipment stuck in the hole according to 7.6(i) successfully Contractor by Customer instructions abandons or closes the initial borehole and re-drills or drills a new borehole in the well or drills a new borehole in exchange of the former one in compliance with provisions of this Contract. The operations on abandoning\closing and the well borehole restoration to the initial depth (before the tool jamming) are performed by Contractor at its own expense. 7.9. Should itís impossible to recover the equipment stuck in the hole according to 7.7(ii) successfully Contractor by Customer instructions re-drills or drills a new hole in the well or drills a new hole in exchange of the former one in compliance with the provisions of this Contract; Contractor services payment is performed by "operational daily rate" defined in Appendix B at complete reimbursement of Contractor expenses for necessary materials acquisition. 7.10. Well control (i) In the case of well control loss (uncontrollable oil, gas, water shows) caused by any of Contractor breaches defined in 7.6(i) Contractor shall correct the situation at its own expense. (ii) In the case the well control loss isnít caused by any of Contractor breaches defined in 7.6(i) Contractor shall correct the situation in such a way that operation routine could restore to the state and conditions immediately prior to the well control loss. Aforesaid well control operations shall be performed in compliance with provisions of this Contract. Contractor services payment in such a case is performed by "operational daily rate" defined in Appendix B at complete reimbursement of Contractor expenses for necessary materials acquisition. 7.11. Complications Complication - a borehole state caused by geological conditions (disparity between projected data and actual bed depths, cavities, abnormal low and high formation pressure) that doesnít allow to perform operations in compliance with the Project and this Contract provisions and require expenditures of time and materials additional to those stipulated in this Contract and Project. Contractor confirms its readiness to perform any jobs on Complications elimination and shall perform them as if they were planned in the Project. Despite of aforesaid the cost of Complication elimination operation is not included in contractual job cost and shall be paid by Customer additionally as indicated in Appendix B. 7.12. The Partiesí responsibility level is evaluated by the tripartite commission while examining the circumstances of emergency and well control loss origin. 7.13. Customer has the right to conclude agreements on performing separate jobs under this Contract with other persons. In such a case the persons defined bear responsibility for non-performance or poor job performance directly in the face of Customer. 7.14. For poor job quality Contractor, according to "Oil and Gas Industry Safety Rules" requirements shall, on Customer choice: a. eliminate shortcomings in reasonable time free of charge; or b. lower the set job cost in proportion; or c. reimburse Customer expenses for shortcomings elimination. ARTICLE 8. TAXES AND OTHER LEVIES 8.1. Contractor shall be responsible, not involving Customer herein, for paying of any kinds of taxes and levies, penalties directly or indirectly imposed upon Contractor or its Subcontractors, personnel or agents while Contract performance. ARTICLE 9. ENVIRONMENT PROTECTION 9.1. Contractor shall be responsible for all the claims and penalties as well as compensations for the environment contamination caused by leaks of fuel, oil or any other chemical agents at the Drilling Unit or other equipment belonging to Contractor. ARTICLE 10. INSURANCE 10.1. Contractor shall be obliged to acquire or provide, under the present Contract, an insurance coverage in conformity with the requirements of the Law of the Rebublic of Kszskhstn for the period of the operations performance. Prior to the operations commencement Contractor shall also commit to submit Customer the copies of the insurance policies it has. ARTICLE 11. DOCUMENTATION TO BE FURNISHED BY CONTRACTOR 11.1. Upon the completion of operations on the wells construction Contractor shall be obliged to furnish Customer with the following well documentation: - Well file; - Geological and technological record books; - Daily drilling reports with drilling graphs; Object test statements in case of the wells test performance by Contractor. ARTICLE 12. FORCE MAJEURE 12.1. Neither of the Parties shell be liable for non-performance of its obligations under the present Contract, except paying sums upon time of payment coming, if obligations execution under this Contract is impossible, made difficult or postponed due to riots, strikes, wars (declared or undeclared), insurrections, rebellions, terrorist acts, civil disturbances, regulations and orders of state bodies, regardless of whether their power is official or self-styled, acts of God (except unfavorable weather conditions) or by act or causes (except unsatisfactory state of finances and inability to pay debts on terms) which are reasonably beyond the control of that Party including conditions and circumstances which solely by Contractor account threaten Personnel safety. If any of the Parties is unable by any of aforesaid reasons fully or partially execute its obligations under the present Contract such a Party shall furnish the other Party with a written notification with detailed description of force majeure in the shortest time after its occurrence. ARTICLE 13. INDEMNITY 13.1. Contractor agrees to release, indemnify, hold harmless, and defend Customer from and against any claim, including any third party claim, demands, cause of action, loss, expense including legal expenses, or any liabilities whatsoever arising from or relating to the conducting of Drilling Operations. 13.2. Contractor agrees to release, indemnify, hold harmless, and defend Customer from and against any claim, including any third party claim, demands, cause of action, loss, expense including legal expenses, or any liabilities whatsoever arising from or relating to the conducting of Drilling Operations. 13.3. Contractor shall be liable for any damages caused to Customerís property or any third party personnel or equipment, during provision of Drilling Operations in accordance with the laws of the Republic of Kazakhstan. Further Contractor agrees to notify Customer of any such damage within three (3) Days after such damage is made. 13.4 Subject to the laws of the Republic of Kazakhstan the release, defense and indemnity obligations of the Parties as set forth in this Article shall apply to all such losses and claims (and all costs associated therewith) however caused and regardless of the active, passive, sole or concurrent negligence, or any other liability in contract, tort under statute or otherwise, of any Party to be released, defended or indemnified thereunder and regardless of whether liability without fault or negligence per se is imposed or sought to be imposed on one or more of the Parties to be released, defended or indemnified. ARTICLE 14. APPLICABLE LAW AND DISPUTE RESOLUTION 14.1 This contract shall be governed by, interpreted and construed in accordance with the laws of Kazakhstan. 14.2 The parties agree to make every effort, upon request, to settle any dispute, controversy or claim arising out of this Contract or in connection with the Contract or the breach, termination or invalidity of this Contract by way of negotiations (the "Dispute"). 14.3 If after sixty (60) business days following a partyís request to commence such negotiations the parties have failed to reach binding settlement of the Dispute, any party is entitled to seek settlement of the Dispute through arbitration. Any such arbitration proceeding shall be handled by the International Arbitration Court "IUS" in Saint-Petersburg, Russia, and shall be governed by the rules and procedures of the International Arbitration Court "IUS". The arbitration commission shall consist of three (3) independent arbitrators. Each Party shall designate one arbitrator and the designated arbitrators shall appoint the third arbitrator. 14.4 An award issued by the arbitration board ("Award") with regard to a Dispute shall be final, non-appealable and binding upon both parties. 14.5 In case a party fails to voluntarily fulfil the Award, it shall be enforced in a manner stipulated by the laws of Kazakhstan. 14.6 The costs for any arbitration proceeding shall be compensated by the party which lost it.
APPENDIX A 1. GENERAL CONDITIONS 1.1. Contractor mobilization start is planned on August 10, 2004. 1.2. Mobilization start conditions - transfer by Customer a sum of money to the tune of 47 279 536 ($337 711) (forty seven million two hundred seventy nine thousand five hundred thirty six) Tenge as an advance payment according to the stipulated in Table B.2, Appendix B. 1.3. The operations shall include construction of 1 (one) "turn-key" wells on "Morskoe" field with the depth of not more than 1300 m. 1.4. Planned duration of separate operations performance is given in Table A.2. 1.5. Drilling unit type - "BU 1600/100DGU". 1.6. Well drilling commencement day planned is October, 1 2004. a.1. Well construction supposed: Table A.1
2. List of the operations to be performed by Contractor: Table A.2 №
APPENDIX B OPERATIONS COST ARTICLE 1. DRILLING SERVICES COST (all cost is given in Tenge, excluding VAT). 1.1. The Parties agreed that all Contractor Services cost and Contractor separate operations rates to be paid by Customer under the present Contract are stated in this Appendix. The amount of the rates and the financing order are given in Table B.1 and Table B.2. №
1.2. REPAIR DAY RATE. The Repair Day Rate shall apply during suspension of operations when a daily rate is being applied (not related to "turn-key" Operations) to permit repair, replacement, inspection, or non scheduled maintenance of the Drilling Unit and/or Contractor's other equipment (hereinafter referred to as "Downtime"). Customer will pay Contractor for downtime at the Repair Day Rate up to a maximum of twenty four (24) hours accumulated total in one calendar month. After such period of time stated in Contractor shall neither earn nor receive compensation for downtime as defined in this Appendix B, Article 1, 1.1. Provided, however, that downtime for the following causes shall not be considered as repair time, and such time shall be paid at the Operating Day Rate: (a) Routine inspection of drilling equipment, lubrication, repacking swivel, slipping and/or cutting of drilling line, and similar operations; and (b) time during which major spare parts which are not normally stored on the Drilling Unit and are required for repairs on the Drilling Unit are located at the Operating Base and are waiting for transportation to the Drilling Unit. It is expressly understood that, with regard to such movements of major spare parts, only the time spent waiting at the Operating Base will be considered as operating time, and the time spent in transit from the Operating Base to the Drilling Unit will be considered as repair time. 1.3. The cost of the move from one well site to another well site was calculated on the condition that the distance between the wells would not exceed three (3) km and assuming there wouldnít be a need in additional road making. In case the distance of the move exceeds three (3) km the move cost would be paid according to an additional agreement between Customer and Contractor. 1.4. The Parties agreed that Contractor services cost would be paid as defined in table B.2. Table B.2.
Notes to Table B.2 Payments dates are conventional and will be defined by condition of Contractor operations stages performance under this Contract as shown in Table B.2 column 6 "Notes". 1.5 In case of operations volume correction towards decreasing of the number of wells taking into account that when estimating contractual cost the Contractor profit was evenly distributed among all the three wells Customer shall pay Contractor, besides due sums, additional sum to the tune of Tenge 1,400,000 for each well not drilled, to maximum of Tengi 2,800,000, which represents the 2 optional wells as mentioned herein, assuming the first well is drilled and completed. 1.6. In the case Customer decides to decrease the volume of Contractor services, i.e.: a. to drill well to the depth less than 1300 m; b. not to run casing string or run it to the depth less than 1300 m; c. not to install tubing string head and X-mas tree, then the cost of Contractor services performed shall be decreased only by the value of the cost of 1 meter of well drilling (excluding the materials). All non-used materials (casing, floating equipment, tubing, casing head, X-mas trees, submersible pumps) are passed by Act to Customer at well site or are used by Contractor at the following wells under the Contract. The cost of 1 meter penetration for re-calculation of the well cost in case of the depth change - 24 032 Tenge (excluding the cost of the returned materials aforesaid). 1.7 Contractor invoices for the jobs performed in National currency Republic of Kazakhstan, Tengi, at the rates fixed under the contract using coificient to the amount to be paid calculated as a Dollar ratio dated the issuance of the invoice (according sing job tickets) and the Dollar exchange rate accepted by the parties at the date of contractor signature which for simplicity shall equal to Tengi 140 = 1 US$Dollar Calculation fo the invoice sum must be made utilizing the following formula: Ccalc = KS/140 x Ccont Where: Ccalc - Value of Tengi, fixed on invoice Ccont - Value of Tengi, fixed in the Contract Ks - Dollar rate to Tengi at the date of invoicing. ARTICLE 2. TAXES AND OTHER DUTIES. INSURANCE. LEGISLATION CHANGE. 2.1.All the rates and cost stipulated in this Appendix and the Contract as a whole do not include VAT. a.1 Customer will endow Contractor with, exclusively on operations performed under this Contract, the existing privileges on tax payment release, which it enjoys in the Republic of Kazakhstan according to the provisions of the Contract with an Authorized Body. a.2 Customer makes that or other kind of insurance as is required by the terms and conditions of this contract. Contractor shall maintain, personnel insurance, Contractor motor transport insurance and equipment insurance and is made by Contractor itself at its account. Contractor must observe the acting Law of the Republic of Kazakhstan related to compulsory kinds of personnel insurance.
APPENDIX C PARTIES RESPONSIBILITIES ALLOCATION 1. This Appendix determines the Parties responsibility for the provision of the operations performed under this Contract with materials, technical and transport means, equipment, personnel, production-technical documentation and all necessary services defined in table C.1. 2. Columns 3 and 4 of the table define Partiesí degree of responsibility marked with numbers meaning the following accordingly: 1. Contractor bears responsibility at the expense of Contractor, that is of sums entered into the estimate (contractual cost); 2. Contractor bears responsibility at the expense of Customer, that is of sums not entered into the estimate (contractual cost); 3. Customer bears responsibility at the expense of Customer, that is of sums not entered into the estimate (contractual cost); 4. Customer bears responsibility at the expense of Contractor, that is of sums entered into the estimate (contractual cost);
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