This contract is a service contract entered into pursuant to Section 7 of the Act with all necessary technology and financing as well as the required services to be provided by the CONTRACTOR in accordance with the provisions contained herein. The CONTRACTOR shall perform and perform the petroleum operations contemplated herein under the full control and supervision of the SERVICE. CONTRACTOR shall be responsible to the DEPARTMENT for the performance of the Petroleum Operations in accordance with the terms of this Contract, and is hereby appointed and the exclusive party to conduct the Petroleum Operations on behalf of the Government.
During the term of this contract, the total production obtained during the conduct of the petroleum operations shall be accounted for between the parties in accordance with Section X hereof. Affiliate - means: (a) a corporation in which one of the corporations comprising CONTRACTOR directly or indirectly holds at least fifty percent (50%) of its outstanding voting stock; or, (b) a corporation that directly or indirectly owns at least fifty percent (50%) of the outstanding shares entitled to vote in any of the corporations comprising CONTRACTOR; or (c) a company in which at least fifty percent (50%) of its outstanding voting stock is owned by a company that directly or indirectly owns at least fifty percent (50%) of the outstanding voting stock in any of the companies that include CONTRACTOR. The Development Area automatically ceases to be in effect from the date of approval of the Production Area.
EFFECTIVITY
TERM
On or before the end of the First Sub-Stage, the CONTRACTOR shall relinquish twenty-five percent (25%) of the initial Contract Space. If the CONTRACTOR does not carry out the work program as approved by the DEPARTMENT in any Contract Year, the retained area will automatically be transferred to the DEPARTMENT. THE CONTRACTOR shall commence exploration work within six (6) months of the Contract Effective Date.
If the CONTRACTOR decides to terminate the Contract before the end of the exploration period and there are unfulfilled work obligations, the CONTRACTOR will pay the value of the unfulfilled balance of the minimum exploration work obligation for the subphase or subphases entered into in U.S.
CONTRACTOR
Be subject to Philippine income tax under the provisions of the National Internal Revenue Code and the Act, both as amended;. Oil required for domestic consumption by the ratio of the total amount of crude oil produced in the contract area to the entire Philippine crude oil production. CONTRACTOR, subject to the approval of the DEPARTMENT, which approval shall not be unreasonably withheld, shall be entitled to sell its share of such crude oil on the open market in the event that domestic purchasers of the.
The CONTRACTOR or its subcontractors shall sell, transfer or dispose of such machinery, equipment, spare parts and materials within the Philippines without the prior approval of the DEPARTMENT, the CONTRACTOR shall pay twice the tax exemption amount granted for the equipment sold. , transferred or removed; Provided further that the DEPARTMENT shall permit and approve the sale, transfer or disposition of said items within the Philippines free of tax if: (1) It is made to another contractor; (2) due to technical obsolescence; or (3) for exchange purposes to improve and/or expand CONTRACTOR's petroleum operations;. Within forty-five (45) days after receiving the annual work program and budget, the DEPARTMENT shall notify the CONTRACTOR in writing of its approval or propose changes to it with detailed reasons. For the efficient implementation of petroleum activities, the CONTRACTOR may, without the approval of the DEPARTMENT, carry out certain cases of emergency work, which are not included in the work program and budget, for the largest US expenditures, but the CONTRACTOR will report this in writing to the DEPARTMENT within fifteen (15) days after the occurrence of such expenditures.
If the aforementioned surplus is expected to exceed five percent (5%) of the annual budget, the CONTRACTOR shall present its reasons for this in writing to the DEPARTMENT and shall also meet with the DEPARTMENT to discuss expenditures for approval before such expenditures are incurred. For the discovery of crude oil, such evaluation work program shall be prepared and submitted by the CONTRACTOR to the DEPARTMENT no later than ninety (90) days from the date of the above determination made by the CONTRACTOR. The appraisal work program shall, as far as practicable, be based on the continuous execution of appraisal work with the aim of starting petroleum activities within one hundred and eighty (180) days from the date of the aforementioned decision made by the CONTRACTOR.
The overall development program shall include the maximum efficiency rate (MER) and expected duration of production determined in accordance with international petroleum industry practice. Prior to submission of the overall development program, the CONTRACTOR shall submit a report to the DEPARTMENT of Crude Oil and Natural Gas Reserves for review. The CONTRACTOR shall also submit the overall development program for the said oil field to be developed to the DEPARTMENT for approval.
The payment corresponding to the first cancellation or delivery of the calendar year includes any government share adjustments for the previous calendar quarter.
INCOME TAXES
PAYMENTS
All such payments will be converted at the applicable exchange rate as defined in the Accounting Procedures attached hereto as Exhibit "B".
NATURAL GAS
If CONTRACTOR participates in the installation and operation of such pipeline(s), the installation and operation of such pipeline(s) shall be included in the Overall Development Program and Petroleum Operations under this Contract. b) If a Third Party provides Natural Gas Pipeline Transportation Services to CONTRACTOR, the rates charged to CONTRACTOR for such services shall be fair and reasonable based on the investment and shall be appropriate for pipeline infrastructure projects in the Philippines. Charges to the Petroleum Operations Account for the use of such equipment will be made as provided in Annexure “B” - Accounting Procedures. However, all other materials, equipment and facilities that the DEPARTMENT does not choose to retain shall be removed and disposed of by the CONTRACTOR within one (1) year of the termination of this Contract, or within the period agreed upon by the Parties.
If either party fails to appoint an arbitrator within thirty (30) days of receipt of a written request from the other Party to do so, such arbitrator shall, at the request of the other Party, be appointed by the President of the International Chamber of Commerce. If the first two arbitrators appointed as aforesaid do not agree on a third arbitrator within thirty (30) days of receiving a written request from the other Party to do so, such third arbitrator will be appointed at the request of either party is by the president of the International Chamber of Commerce. Unless the parties agree otherwise, the place of the arbitration proceedings shall be the Philippines.
All materials for the hearing, claim or defence, judgment and reasons supporting them must be written in English. The costs and expenses of training Filipino/foreign personnel for the CONTRACTOR's own employment and assisting in the training of DEPARTMENT personnel shall be included as operating expenses in the work program and budget in Section VIII of this Agreement. The CONTRACTOR shall be responsible for maintaining complete books of account in US and Philippine currencies reflecting all transactions related to petroleum activities in accordance with Annex “B” – Accounting Procedures.
If such cost or expense is subsequently determined to be properly included in CONTRACTOR's statement of operating expenses, either by mutual agreement or arbitration, then CONTRACTOR's actual statement of operating expenses shall be increased by the amount of such cost or expense. The CONTRACTOR shall comply with the circulars of the DEPARTMENT, rules and regulations for petroleum issued by the DEPARTMENT. In the first instance to be produced and sold from the Contract Area either twenty-five thousand (25,000) barrels of crude oil and/or Casinghead Petroleum Spirit per day (BPD) or two hundred fifty million cubic feet of natural gas per day (CFGD) at an average rate for sixty (60) consecutive days, CONTRACTOR shall, within sixty (60) days after the expiration of said sixty (60) day period, pay to the DEPARTMENT the total sum of five hundred thousand U.S. dollars (Provided that the U.S. , it is understood that CONTRACTOR, in order to maintain said rate of twenty-five thousand (25,000) BPD of Crude Oil and/or Casinghead Petroleum Spirit or two hundred and fifty million CFGD for said sixty (60) day period, shall not life is required to operate the Contract Area except as a reasonably prudent operator following sound oil and/or gas field practice prevalent in the international oil industry.
On the first occasion on which to produce and sell from the Contract Area either fifty thousand (50,000) BPD of Crude Oil and/or Casinghead Petroleum Spirit or five hundred million CFGD at an average rate for sixty (60) consecutive days, the CONTRACTOR shall, within sixty (60) days after the expiration of said sixty (60) day period, pay to the DEPARTMENT the aggregate sum of one million United States dollars (US Provided, it is understood that the CONTRACTOR, in order to maintain said rate of fifty thousand (50,000 ) BPD of Crude Oil and/or Casinghead Petroleum Spirit or five hundred million CFGD for said sixty (60) day period, shall not be required to operate the Contract Area other than as a reasonably prudent operator following sound oil and/or gas field practices prevalent in the international oil industry.
STABILIZATION
INSURANCE
During the period of confidentiality, the DEPARTMENT shall maintain the confidentiality obligations of the Confidential Information. However, the DEPARTMENT has the right to provide to any Third Party the following original information and data or interpretation thereof relating to the Contract Area. A potential beneficiary or beneficiaries to whom the rights and obligations under the contract are intended to be assigned.
The CONTRACTOR shall make all reasonable efforts applicable to promptly eliminate and minimize the consequences of any contamination occurring during the performance of the Petroleum Activities.
FORCE MAJEURE
