License Agreement between Republic of Latvia and AMOCO Latvia Petroleum Company, a company incorporated in the United States and Oljeprospektering AB

License Agreement between Republic of Latvia and AMOCO Latvia Petroleum Company, a company incorporated in the United States and Oljeprospektering AB (OPAB), a company incorporated in Sweden Uzmanību! Jūs lietojat neatbilstošu interneta pārlūkprogrammu. Lai varētu lietot visas Likumi.lv piedāvātās iespējas, piedāvājam BEZ MAKSAS ielādēt jaunāku pārlūkprogrammas versiju. Iesakām izmēģināt arī vietnes MOBILO VERSIJU - m.likumi.lv (piemērota arī mazāk jaudīgiem datoriem). nerādīt turpmāk šo paziņojumu Apstiprināt Paldies par viedokli!   Rādīt vēlāk LATVIJAS REPUBLIKAS TIESĪBU AKTI veidi tēmas visvairāk skatītie jaunākie LV  EN uz sākumu meklēt Izvērstā meklēšana Noklusējuma vērtības Izvērstā meklēšana Kā meklēt? Meklēt nosaukumā meklēt locījumos meklēt frāzi Meklēt tekstā meklēt locījumos meklēt frāzi Izdevējs Veids nemeklēt grozījumos Pieņemts Stājas spēkā Dokumenta Nr. līdz līdz Publicēts LV Zaudējis spēku Redakcija uz līdz līdz Statuss: spēkā esošs vēl nav spēkā zaudējis spēku meklēt notīrīt License Agreement between Republic of Latvia and AMOCO Latvia Petroleum Company, a company incorporated in the United States and Oljeprospektering AB (OPAB), a company incorporated in Sweden This License Agreement made the 3lst day of October, 1995 between the Republic of Latvia, represented by the Cabinet of Ministers of the Republic of Latvia (hereinafter" Government"), herein represented by the Minister of Environmental Protection and Regional Development, Mr. J.Iesalnieks, and the State Minister for Energy, Mr. J.Ozoli-§, of the first part: and AMOCO LATVIA PETROLEUM COMPANY, a company established under the laws of Delaware, U.S.A. (hereinafter "AMOCO"), and OLJEPROSPEKTERING AB (hereinafter "OPAB"), a company established under the laws of Sweden (AMOCO and OPAB hereinafter sometimes collectively referred to as "Companies" or individually as "Company"), of the second part; WITNESSETH WHEREAS, petroleum in its natural state in the economic zone of the Republic of Latvia is wholly the property of the Republic of Latvia and under the control of the Republic of Latvia; WHEREAS, the Republic of Latvia has the strategic long term goal of using its natural resources to promote Latvian economy and moving towards partial petroleum self -sufficiency; WHEREAS, the Companies wish to explore for and exploit petroleum reserves in the economic zone of the Republic of Latvia in the area specified in Schedule "A" to this License Agreement (hereinafter "License Area"), in accordance with the laws of the Republic of Latvia; WHEREAS, the Government and the Companies acknowledge that part of the License Area is the subject of a discussion between the Governments of Latvia and Lithuania and that only such area as is within Latvia shall be the subject of this License; WHEREAS, the Government wishes its controlled company (hereinafter "Government Owned Company" or "GOC") to participate with the Companies in the exploration for and the exploitation of petroleum reserves in the License Area; WHEREAS, the Republic of Latvia desires to continue to exercise its control of the petroleum reserves in the economic zone of the Republic of Latvia, subject to the terms of this License Agreement (hereinafter "License") with the Companies; WHEREAS, the Government and the Companies intend that the provisions of this License be carried out in a spirit of good faith and goodwill; WHEREAS, the Parties executed a Memorandum of Understanding memorializing the foregoing on the l7th day of May,1993 and amended and prolonged it on the l6th day of February,1995 and further amended and prolonged it on the 2-th day of May, 1995; WHEREAS, pursuant to the Law On the Continental Shelf and Economic Zone of the Republic of Latvia of February 2,1993, the Cabinet of Ministers of the Republic of Latvia has authorized the Minister of Environmental Protection and Regional Development, Mr. J.Iesalnieks, and the State Minister for Energy, Mr. J.Ozolins, to enter into this License with the Companies as a Licensee on behalf of the Republic of Latvia; WHEREAS, the Board of Directors of AMOCO by its decision as of August 14,1995 has authorized Mr. Valdis Budrevics, President of AMOCO, to enter in this License Agreement with the Government; WHEREAS, the Board of Directors of OPAB by its decision as of October 30,1995 has authorized Mr. Bjorn Inge Tonnessen, Project Manager of OPAB, to enter into this License Agreement with the Government; and WHEREAS, the Government has taken or will take all necessary steps to ensure the enforceability and validity of the rights granted the Companies hereunder. NOW THEREFORE, THE PARTIES hereto agree as follows: ARTICLE I DEFINITIONS Unless the context requires otherwise, the following terms when used in this License shall have the meaning ascribed to them hereunder. 1.1 "Affiliated Company" means with reference to a Company a company that directly or indirectly controls or is controlled by such Company, or a company which directly or indirectly controls or is controlled by a company which controls such Company, it being understood that "control" shall mean ownership by one company of more than fifty (50) percent of the voting rights of the other company. 1.2 "Appraisal Well" means an Exploratory Well drilled for the purpose of evaluating the commerciality of a geological trap in which Petroleum has been discovered. 1.3 "Associated Gas" means Natural Gas found in association with Crude Oil. 1.4 "Basement" means igneous rocks, metamorphic rocks or rocks of such nature which, or formations below which, could not contain Petroleum deposits in accordance with the knowledge generally accepted in the international petroleum industry in Western Europe and shall also include impenetrable rock substances such as salt domes and mud domes as well as any other rocks which make further drilling impracticable or economically unjustifiable by the modern drilling technology normally utilized in the international petroleum industry. "Blocks" means, subject to Article 24.2, the area as specified in Schedule "A". "Commercial Discovery" means reserves of petroleum discovered on a prospect by Exploration Operations which Licensees have declared to be commercial in accordance with Article IX. 1.7 "Commercial Production" means production of Crude Oil or Natural Gas or both and delivery of same at the relevant Measurement Point under a program of regular production and sale. 1.8 "Contract Year" means a period of twelve (12) consecutive months counted from the Effective Date or from the anniversary of the Effective Date. 1.9 "Crude Oil" means crude mineral oil, asphalt, ozokerite and all kinds of hydrocarbons and bitumens, both in solid and in liquid form, in their natural state or obtained from Natural Gas by condensation or extraction. 1.10 "Crude Oil Price" means the price of Crude Oil determined in accordance with the relevant provisions in Schedule "D". l.ll "Development Area" means that portion of the License Area reasonably determined by Licensee on the basis of the available seismic and well data to cover the horizontal extent of an accumulation of Petroleum constituting a Commercial Discovery, enlarged in area by an appropriate buffer zone, such enlargement to extend uniformly around the perimeter of such accumulation. 1.12 "Development Operations" means operations conducted in accordance with the Overall Development Program with a view to the development of Petroleum accumulations underlying Development Areas. Development Operations include the drilling, completion and testing of Development Wells, the drilling and completion of wells for gas or water injection, the laying of gathering lines, the installation of offshore platforms and installations, the installation of separators, tankage, pumps, artificial lift and other producing and injection facilities required to produce, process and transport Petroleum into main oil storage or gas processing facilities either onshore or offshore, including the laying of pipelines within or outside the License Area to such storage and delivery points, the installation of said storage or gas processing facilities, and also including incidental operations not specifically referred to herein as required for the development and production of the said Petroleum accumulations, and for the delivery of the Crude Oil and/or Natural Gas at the Measurement Point, in accordance with practices generally accepted in the international petroleum industry. 1.13 "Development Well" means a well drilled under the Overall Development Program for the purposes of producing Petroleum, increasing production, sustaining production or accelerating extraction of Petroleum including production wells, injection wells and dry wells. 1.14 "Discovery" means the finding during Exploration Operations of a deposit of Petroleum which can be recovered at the surface in a flow measurable by conventional petroleum industry testing methods. 1.15 "Exploration Costs" means costs, expenditures and obligations incurred in carrying out Exploration Operations. 1.16 "Exploration Operations" means operations conducted pursuant to this License with a view to the discovery of Petroleum accumulations and to the appraisal of the extent and volume of such accumulations, the characteristics of the relevant reservoirs and their likely behavior when produced. Exploration Operations shall include geological, geophysical and geochemical surveys, analyses and studies, the drilling, abandonment or completion of wells, the testing of such wells and all operations incidental thereto. 1.17 "Exploratory Well" means any well drilled for the purposes specified in Article 1.16, including dry holes, discovery wells, and Appraisal Wells. 1.18 "Financial Year" means the period from the lst January to the following 3lst of December. 1.19 "Foreign Exchange" means U.S. dollars and/or other freely convertible foreign currency generally acceptable in the international banking community. 1.20 "Gas Field" means a Gas reservoir or multiple vertically overlapping Gas reservoirs within the License Area which have been determined to be of commercial value in accordance with Article XIII of this License. 1.21 "Government" means the Government as represented by the Cabinet of Ministers of the Republic of Latvia, including all its subdivisions, agencies and instrumentalities, acting in its capacity as the Government. 1.22 "License Area" means, subject to Article 24.2, the Blocks excluding any portion of the Block in respect of which Licensee's rights hereunder are from time to time relinquished or surrendered pursuant to this License. 1.23 "Licensee" means the entities designated in Article 2.1 and their successors and assigns as permitted under Article XVII hereof. 1.24 "Measurement Point" means, in respect of Crude Oil or Natural Gas, the point of the delivery facility at which Crude Oil or Natural Gas, as the case may be, reaches the measuring instrument (meter) connected with the outlet flange of the Crude Oil or Natural Gas delivery facility either offshore or onshore, as specified in the Overall Development Program~ 1.25 "Memorandum of Understanding" means the Memorandum of Understanding executed by the Parties on the l7th day of May,1993, as amended and prolonged on the l6th day of February, 1995, and further amended and prolonged on the 26th day of May, 1995. 1.26 "Natural Gas" or "Gas" means wet gas, dry gas, all other gaseous hydrocarbons carbon dioxide, and all substances contained therein, including sulphur and helium, which are produced from oil or gas wells, excluding condensed or extracted liquid hydrocarbons, and including the residue gas remaining after the condensation or extraction of liquid hydrocarbons from gas. 1.27 "Natural Gas Price" means the price of Natural Gas determined in accordance with the relevant provisions in Schedule "D". 1.28 "Non-Associated Gas" means Natural Gas found without association with Crude Oil or in association with Crude Oil which cannot be commercially produced. 1.29 "Oil Field" means a Crude Oil reservoir or multiple vertically overlapping Crude Oil reservoirs within the License Area which have been determined to have commercial value in accordance with Article IX of this License. 1.30 "Overall Development Program" means a plan adopted by the Licensee for the development of an Oil Field or Gas Field, and any amendment thereof. Such plan shall include, but shall not necessarily be limited to, recoverable reserves, the development well pattern, master design, production profile, economic analyses and time schedule of the Development Operations. 1.31 "Parties" means the Government and Licensee and "Party" means any of the Parties. 1.32 "Petroleum" means Crude Oil and Natural Gas. 1.33 "Petroleum Operations" means, as the context may require, Exploration Operations, Development Operations or Production Operations or any combination of two or more of such operations. 1.34 "Producible Area" means any part of the License Area covering the horizontal extent of the geological structure in which a discovery is made and from which, based upon the results obtained from the well or wells drilled in such part, Petroleum could possibly be produced in commercial quantities, including any Development Area. 1.35 "Producing Area" means any Development Area from which Petroleum is being produced in commercial quantities. 1.36 "Production Commencement Date" means the date upon which the permanent production facilities have been completed and Licensee commences regular deliveries of Petroleum in commercial quantities at the Measurement Point. 1.37 "Production Operations" means operations conducted with the intention of producing Petroleum in the License Area such as extraction, injection, stimulation, treatment, storage, transportation to the Measurement Point(s), lifting, etc., including the operation, maintenance and abandonment of all necessary facilities therefor. 1.38 "Royalty" means fee to be paid to the Government in accordance with Article XI. 1.39 "Quarter" means a period of three (3) successive months, beginning respectively, on the lst of January, the lst of April, the lst of July and the lst of October each Financial Year. 1.40 "Schedule" means a Schedule attached to this License and made a part hereof. In the event of any inconsistency or conflict between the provisions of this License and the provisions of any of the Schedules, the provisions of this License shall prevail. 1.41 "Sub-Contractor" means any legal entity or individual, not being an employee, contracted by or on behalf of Licensee to supply work or services related to this License and, for the avoidance of doubt, includes second and lower thier SubContractors contracted by or on behalf of other Sub-Contractors to supply services related to this License. 1.42 "Work Program" means all the plans formulated for the performance of the Petroleum Operations, including plans for Exploration, Development and Production Operations. ARTICLE II LICENSEE, GENERAL PROVISIONS, PERIODS AND DURATION 2.1 Licensee as of Effective Date shall have exclusive rights (license) to carry out Petroleum Operations and these rights are awarded to the following organizations comprising Licensee: 1. Amoco Latvia Petroleum Company (AMOCO), USA; 2. Oljeprospektering AB (OPAB), Sweden; Government Owned Company (GOC) (until the GOC is assigned the rights pursuant to Article 4.2, said rights will be held by the Republic of Latvia). 2.2 This License gives Licensee exclusive rights to carry out Petroleum Operations within the territory specified in Schedule "A". 2.3 AMOCO undertakes to carry out functions, rights and obligations of the operator and Government approves that. If AMOCO resigns, is abolished, or cannot perform functions of the operator because of reasons beyond its control, the Licensee shall appoint another operator, subject to the Government's approval, which approval shall not be unreasonably withheld. 2.4 The Exploration Period begins on the Effective Date of this License and shall consist of two (2) exploratory phases. a) The term of the first exploratory phase (hereinafter "First Exploratory Phase") shall be three (3) consecutive Contract Years. b) The term of the second exploratory phase (hereinafter "Second Exploratory Phase") shall be two (2) consecutive Contract Years. 2.5 At the end of the First Exploratory Phase, Licensee shall have the option: a) to relinquish the License Area as provided in Article V; or b) to obtain upon application to the Government an extension to the First Exploratory Phase for up to three years as is necessary to complete the drilling of the well already substantially commenced for that Phase or the appraisal work on a discovery; or c) to proceed into the Second Exploratory Phase, which shall be extended upon application to the Government for up to two years as is necessary to complete the drilling of the well already substantially commenced for that Phase or the appraisal work on a discovery. Licensee shall notify the Government of its election no less than thirty (30) days prior to the end of the First Exploratory Phase. If Licensee elects option b) above, it shall not thereafter have the right to proceed into the Second Exploratory Phase without prior notice to the Government on completion of the First Exploratory Phase and approval by the Government. 2.6 Any Exploratory Phase shall, upon the application to the Government, be extended by such period of time as is necessary to allow Licensee to obtain consent of the Government to a Development Plan submitted following a discovery of petroleum which Licensee deems to be commercial, and to commence production pursuant thereto. 2.7 The Production Period for each Development Area shall be twenty five (25) consecutive years from the Production Commencement Date. If at the end of the Production Period Licensee considers further production economic, Licensee may request that the Production Period be extended by five (5) years. ARTICLE III TITLE TO PETROLEUM ASSETS AND DATA 3.1 The Republic of Latvia is the sole owner of Petroleum underlying the License Area. 3.2 Licensee shall be entitled to use, free of charge, such quantities of Petroleum produced in the License Area, whether in the natural state or processed, as may be required for conducting Petroleum operations (including gas lift operations) in the License Area in accordance with practices generally accepted in the international petroleum industry in Western Europe. Any Petroleum so used shall not be considered as Petroleum produced and saved from the License Area. 3.3 Title to all original geological, geophysical, geochemical, drilling, engineering, well logs, production and other data obtained as a result of the Petroleum Operations shall be with the Government, subject to the provisions of Article 16.2. The Companies shall, however, be entitled to retain said original data and to make use of all such data, free of cost, for the purpose of Petroleum Operations under this License, and shall also be entitled to trade the data with any third party with the consent of the Government, which consent shall not be unreasonably withheld. If no written rejection of a proposed trade is issued by the Government within thirty (30) days after submission of a request by the Licensee for consent to such trade, then such consent shall be deemed given. 3.4 Title to Crude Oil and/or Gas to which Licensee is entitled under this License shall pass from the Government to Licensee at the relevant Measurement Point. 3.5 In the event that the Government elects to take its royalty payment in kind pursuant to Article 11.4, the Government's share of Crude Oil and/or Gas shall be delivered by Licensee to the Government or its nominee at the relevant Measurement Point. ARTICLE IV PARTICIPATING INTERESTS 4.1 The initial Participating Interests of the Licensee shall be as follows: AMOCO 45 % OPAB 45 % Republic of Latvia 10 % 4.2 The Republic of Latvia shall assign its ten percent (10%) Participating Interest to a Latvian company majority owned by the Government (GOC) within one year of the Effective Date hereof or said ten percent ( 10 % ) interest shall revert to AMOCO and OPAB in equal parts. The Companies shall bear the GOC's ten percent ( 10 % ) Participating Interest share of Licensee's costs in the License Area until the approval of the first Overall Development Program in accordance with Article IX. Thereafter, the GOC shall bear its full Participating Interest share of all costs in accordance with the Joint Operating Agreement ("JOA"). 4.3 In addition to the foregoing, the Government retains the right to assign a further ten percent (10 % ) Participating Interest either: a) to a third party company acceptable to the Companies or b) to the GOC (such company or the GOC being hereinafter "Designated Company" or "DC"). Such right may be exercised by the Government within thirty days after the Effective Date of this License by giving Licensee written notice of such exercise and the name and address of the DC. If the DC is not acceptable to the Companies, they shali so notify the Government and the Government shall thereafter have another sixty days in which to so designate another company. The foregoing procedure shall be followed until an acceptable company is designated. Should the Government timely exercise this right, each of the Companies shall assign a five percent (5 % ) Participating Interest to the DC such that the DC's Participating Interest is ten percent (10%). The DC shall bear such ten percent (10 %) Participating Interest share of all Licensee's costs related to this License including, but not limited to, those costs related to Articles VI and XXIII of this License. All costs and expenses related to the transfer shall be borne by the DC. ARTICLE V RELINQUISHMENT 5.1 If at the end of the First Exploratory Phase, Licensee does not elect to continue into the Second Exploratory Phase pursuant to Article 2.5 Licensee shall relinquish all of the License Area, except for such portion of the License Area as is included in a Development Plan approved by the Government, and shall have no further rights or obligations with regard thereto. 5.2 At the end of the Second Exploratory Phase, Licensee shall relinquish all of the License Area, except for such portion of the License Area as is included in a proposed Development Plan approved by the Government. 5.3 Upon relinquishment, pursuant to Article 5.1 or 5.2, Licensee shall have no further rights or obligations as to such part of the License Area relinquished and the License shall terminate as to such Area except that Licensee shall deliver to the Government all geological and geophysical data and information (including cores of drilling of rock and samples, samples of oil and gas, if such are obtained) about the License Area acquired under the License and not previously provided to the Government, it being understood that Licensee can retain copies of such data. 5.4 On the date this License is terminated in accordance with the provisions of Article II, the License Area shall be deemed to have been relinquished by Licensee. ARTICLE VI WORK OBLIGATIONS 6.1 During the term of the First Exploratory Phase, Licensee shall complete the following Work Program having an estimated total cost of four million eight hundred fifty thousand U.S. dollars ($4,850,000): a) reprocess all of the seismic data from the License Area obtained pursuant to the Data Purchase License between the Government and the Companies dated June 30, 1992, and reprocess the 488 kilometers of seismic obtained pursuant to the Memorandum of Understanding, and submit the reprocessed data and a report concerning the prospectivity of License Area to the Government; b) drill one Exploratory Well in the License Area into the preCambrian basement and submit the resulting geological and geophysical data and information to the Government. It is recognized that some of the reprocessing and associated work hereunder may have been performed prior to the Effective Date of the License. 6.2 During the term of the Second Exploratory Phase, Licensee shall complete the following Work Program having an estimated total cost of five million U.S.dollars ($5,000,000): - drill one Exploratory Well in the License Area and submit the resulting geological and geophysical data and information to the Government. 6.3 In the event that Licensee has failed to fulfill the minimum Work Program specified in Article 6.1 or 6.2 by the end of the relevant Exploratory Phase, Companies shall pay to the Government of Latvia in U.S. dollars within sixty (60) days following the end of the subject phase an amount equal to the difference between the estimated cost of the minimum Work Program prescribed for the subject phase as specified in Article 6.1 or 6.2, as the case may be, and the amount of Exploration Costs associated with the License incurred by Companies in accordance with normal international petroleum industry practice prevailing in Western Europe during the subject phase and such payment shall fully satisfy Companies's work obligations under the aforesaid Articles for all purposes. In the event Licensee has carried out work during the first Exploratory Phase in excess of the work obligations set forth in Article 6.1, the excess work shall be set off against the work obligations for the Second Exploratory Phase. 6.5 Any Exploratory Well carried out in accordance with the Articles 6.1 or 6.2 shall be deemed as drilled if such well reaches its objective or that point below which further drilling becomes impracticable and drilling would be abandoned by a reasonable and prudent operator in the same or similar circumstances in accordance with practices generally accepted in the international petroleum industry in Western Europe. ARTICLE VII CONDUCT OF OPERATIONS 7.1 Subject to the provisions of this License, Licensee shall have the exclusive right to carry out Petroleum Operations in the License Area and shall be responsible for the conduct of said operations. In addition to the work obligations specified in Article VI, Licensee shall have the continuing right during the term of this License in accordance with good oil field practices in Western Europe to conduct Exploration Operations within the License Area, including but not limited to, the drilling or deepening of Exploratory Wells or Appraisal Wells and the deepening of Development Wells. 7.2 Petroleum Operations within the territory and/or economical zone of Latvia shall be conducted in accordance with the laws of the Republic of Latvia, including international conventions related to the environment which have been ratified or which are ratified in the future by the Republic of Latvia and made the law of the Republic of Latvia. In the event the laws of the Republic of Latvia conflict with the provisions of the Convention on the Protection of the Marine Environment of the Baltic Sea Area (including Recommendations adopted and approved by the Helsinki Commission) (hereinafter referred to as the "Helsinki Convention") which has been ratified by the Republic of Latvia, Licensee shall comply with the provisions of Helsinki Convention and shall not be subject to any penalties or taxes for doing so. All Petroleum Operations will be conducted in a safe manner in accordance with good international oil fleld practices prevailing in Western Europe and principles of environmental protection. In the event that Latvia does not have specific laws and regulations governing safety, construction and environmental and other issues pertaining to Petroleum Operations, the operations shall be conducted in accordance with the laws and regulations of Sweden, as far as they are not in contradiction with Latvian laws, and the Helsinki Convention. In performing Petroleum Operations Licensee will coordinate with appropriate Ministries and obtain such permits as may be required by the relevant Latvian laws or regulations. As between the entities comprising Licensee, the conduct of operations by Licensee under this License shall be governed by a Joint Operating Agreement ("JOA") agreed to by the Companies which shall be binding on all entities comprising Licensee. Each entity comprising Licensee shall have voting rights thereunder commensurate with its Participating Interest. The following decisions under the JOA shall require the unanimous vote of the Participating Interests: (i) approval of the annual Work Program and budget concerning exploration drilling beyond the work required to fulfill the work obligations contained in Article VI; (ii) execution of a unitization agreement relating to the exploration of deposits extending outside the License Area. AMOCO shall be the initial operator for the Licensee as regards conducting of Petroleum Operations in accordance with Article II. 7.4 The Licensee undertakes to provide Latvian companies with genuine opportunities, in competition with other companies, to obtain general contracts and sub-contracts, and to provide goods and services, connected with the performance of the activities under this License and shall give preference to such Latvian companies provided that such Latvian companies meet Licensee's established safety, engineering, and operational standards and specifications, and are competitive with those available from international suppliers in terms of price, quality, and ability to meet required schedules. Licensee shall require that its contractors, subcontractors .and any other party engaged by the Licensee for the performance of any activities in connection with this License comply with the foregoing. Licensee shall provide the Government with such information as may reasonably be required by the Government to monitor compliance with the foregoing, including information regarding invitations to tender, tender awards and contractual relationships. 7.5 Upon termination of the work under the License, Licensee shall cause to be removed petroleum equipment placed on the continental shelf or on the shores of Latvia and used in the project, in a manner consistent with Western European international industry acceptable safety, environmental and work standards. The Government shall reserve the right to waive this requirement for any particular piece of the equipment, and upon mutual agreement to obtain title to such equipment. 7.6 Without limiting the rights of the Parties under Article XVIII, in the event that the Parties agree that Licensee is prevented or impeded from carrying on Petroleum Operations or from gaining access to the License Area for reasons relating to the protection of personnel, Sub-Contractors or property, Licensee's obligations hereunder and the running or the term of this License shall be suspended from the time of the commencement of such impairment until such time that the Parties agree that the impairment has been alleviated. When the Parties agree that the impairment has been alleviated, the term of this License shall resume from the point the suspension occurred; however a period of time shall be added to the Exploration Period and the Production Period, which period of time shall be equivalent to the amount of the time necessary to restore operations to the status which they occupied at the time of the impairment. 7.7 Licensee shall notify, reasonably in advance, to the Government or any other authority designated by the Government its program of conducting surveys over the License Area by aircraft indicating, inter alia, the name of the Sub-Contractor engaged to carry out the survey, the nature of the survey to be conducted, approximate extent of the area to be covered, the duration of the survey with the commencement date and name of the airport from which the survey aircraft will commence its flight. Flights are to be performed after approval of the appropriate Government authority as required by the laws of Latvia. 7.8 The Government or the authority designated by the Government for this purpose shall have the right at its own cost to inspect any aircraft or ship used by Licensee for carrying out any survey in the contract Area and to put on board in such aircraft or ship its representatives in such number as may reasonably be necessary to ensure compliance with the security requirements of the Government. 7.9 To the extent it does not unreasonably interfere with operations, the Licensee shall assist the appropriate Ministries in their efforts to make required inspections of operations by providing transportation to and from offshore facilities and providing accommodations while offshore on a space available basis to authorized Ministry personnel. Licensee will be given a minimum of two weeks written notice prior to said required inspections. The Government assumes sole liability for the health and safety of such personnel during said inspection. 7.10 The Licensee shall compensate the State Environment Impact Assessment Commission's non-staff experts for reasonable and customary expenses incurred while reviewing the environmental impact assessment documentation provided by Licensee for both the exploration environmental impact assessment and the Overall Development Program environmental impact assessment pursuant to Article 14 of the Latvian Law on State Environmental Impact Assessments (October 9, 1990). ARTICLE VIII OBLIGATIONS OF THE LICENSEE 8.1 Licensee shall provide all funds, technology and expertise necessary to conduct the Petroleum Operations. 8.2 Licensee shall conduct the Petroleum Operations diligently and as specified in Article 7.2; provided, however, that Licensee shall be liable for any acts or omissions, claims, damages, losses or expenses arising in connection with the Petroleum Operations only if resulting from Licensee's or its subcontractor's willful misconduct or negligence. 8.3 Licensee shall perform at the Measurement Point(s) all measurements on Petroleum produced from the License Area and not used in Petroleum Operations. The Government personnel may, at the Government's cost, observe these measurements and inspect the instruments used. If it is necessary or desirable to modify or replace these instruments, Licensee shall so inform the Government in advance, and the Government personnel may verify such modification or replacement. 8.4 Licensee shall provide current and timely information, data and reports to the Government regarding the Petroleum Operations. 8.5 The Licensee's capability to discharge its liability for damages shall be evidenced either: (i) by insurance which provides reasonable coverage, in light of the risks involved in the operation of the Licensee and the premiums to be paid; or (ii) by providing to the satisfaction of the Government reasonable evidence of financial capability to meet the liabilities involved, which evidence may include a parent company guarantee that such parent will provide the subsidiary with all means necessary to meet the subsidiary's obligations. If insurance is provided in accordance with (i) above, then at the end of each calendar year the Government shall be informed of the insurance then in force and of the principal terms thereof. ARTICLE IX DECLARATION OF COMMERCIAL DISCOVERY AND DESIGNATION OF DEVELOPMENT AREA 9.1 If any Petroleum Discovery is made within the License Area, Licensee shall promptly inform the Government of such Discovery, and shall act in accordance with the Articles XII and XIII. 9.2 As soon as practicable after a Petroleum Discovery, Licensee shall submit a report to the Government indicating whether or not such Discovery merits appraisal. If Licensee considers that the Discovery merits appraisal, the report shall include an appraisal program and timetable. Licensee shall carry out the appraisal program within the Exploration Period (including any extension thereof granted in accordance with Article II) and as indicated in the appraisal program and timetable submitted by Licensee. Any Appraisal Well shall be drilled at a location and to an objective depth determined by Licensee after consultation with the Government. 9.3 No later than one hundred and eighty ( 180) days following completion of the appraisal program and in any event prior to the end of Exploration Period (including any extension thereof granted in accordance with Article II), Licensee shall submit to the Government a detailed evaluation report which shall include all available technical data relevant to a determination of commerciality and relevant to the description of the Producible Area, including, but not limited to, geological and geophysical conditions, such as structural configuration, physical properties and the extent of reservoir rocks, areas, thickness and depth of pay zones, pressure, volume and temperature analysis of the reservoir fluids, Crude Oil and Natural Gas reserve estimates, recovery drive characteristics, anticipated production performance per reservoir and per well, fluid characteristics, including in the case of Crude Oil, gravity, sulphur percentage, sediment and water percentage and product yield pattern. Licensee shall declare in this report whether or not the Discovery is commercial. If Licensee declares the Discovery to be commercial, the report shall contain a description of the Producible Area, and the date on which the report is submitted to the Government shall be the Date of Commercial Discovery. Within two hundred (200) days following the Date of Commercial Discovery, Licensee shall adopt and furnish to the Government an Overall Development Program which shall describe: a) the Development Area; b) the Development Operations to be carried out, including the further delineation of the Development Area and the method for the disposal of Associated Gas; c) Licensee's plans for the spacing, drilling and completion of wells , the production and storage installation and transport and delivery facilities required for the production, storage and transport of Petroleum, and such plans shall include the following information; (i) the estimated number of Development Wells; (ii) the particulars of production equipment and storage facilities; (iii) the Measurement Points for Crude Oil and Natural Gas; (iv) the particulars of other technical equipment required for Petroleum Operations; d) the estimated production profiles for Crude Oil and Natural Gas from the Oil or Gas Fields, and the estimated commercial life of said Fields; e) the cost estimates of capital and recurrent expenditure; f) the economic feasibility studies carried out by or for the Licensee in respect of alternative methods for development of the Discovery, if any, taking into account: (i) the location; (ii) the. meteorological conditions; (iii) the cost estimates of capital and recurrent expenditures; and (iv) any other relevant data and evaluation thereof; g) the safety measures to be adopted in the course of the Development and Production Operations including measures to deal with emergencies; h) the necessary measures to be taken for the protection of the environment which will include the plan of environmental assessment and its timetable; contingencies which may affect Licensee's ability to implement the Overall Development Program; and j) any proposed unitization agreement. 9.5 Licensee's Overall Development Program shall be prepared on sound engineering and economic principles in accordance with accepted standards prevailing in the international petroleum industry in Western Europe and shall be designed with the objective of optimizing economic recovery of Petroleum resources from the Development Area. 9.6 At the Government's request, Licensee shall provide reasonable additional information ` or data as may be necessary to evaluate the Overall Development Program. The Government may reject the Overall Development Program and/or the revisions to the Overall Development Program as submitted to the Government pursuant to Article 9.4 only if it fails to conform with sound engineering and economic principles in accordance with the accepted standards prevailing in the international petroleum industry in Western Europe. If no written rejection of the Development Plan or the specific revisions to the Overall Development Program defined in Article 9.4 is issued within 60 days of submission thereof, or within 60 days of receipt of the above referenced additional data and information requested by the Government, the Development Plan shall be deemed approved. The foregoing 60 days shall be extended for so long as is necessary for Licensee to obtain any necessary consent from any applicable governments to any aspect of unitization, as well as for Licensee to perform ecologic expertise. 9.7 In the event the Government objects to the Development Plan, Licensee may submit such Development Plan to an independent expert mutually agreeable to both sides for a determination as to whether the Development Plan provides for optimal economic recovery of petroleum from the Development Area and conformance with sound engineering and economic principles in accordance with accepted standards prevailing in the international petroleum industry in Western Europe. In the case of determination of conformity the Government shall approve the Development Plan. The expertise procedure set forth in Article XIX shall apply. If the expert rules that it does not meet such criteria, the expert shall specify in what ways the Overall Development Program does not meet such criteria and Licensee may revise the Overall Development Program so as to meet expert's objections. If Licensee is not willing to revise the Overall Development Program so as to meet the expert's objections, Licensee shall withdraw its declaration of Commercial Discovery with respect to the Discovery in question, and the Discovery then shall be treated as though Licensee had initially not considered the Discovery to be commercial in the evaluation report submitted pursuant to Article 9.3. 9.8 Licensee may in the course of the Development Operations, make revisions or additions to the Overall Development Program initially adopted; provided, however, that the following revisions or additions shall require the prior approval of the Government; a) if the estimated production profiles specified in Article 9.4 d) will experience a twenty percent (20 % ) change in the approved estimated annual average production profile for a period in excess of eighteen months and/or; b) if the approved total cost estimates of capital and recurrent expenditures specified in Article 9.4 e) will experience a twenty percent (20 % ) change; and/or c) if significant changes to approved safety and environmental protection measures specified in Article 9.4 g) and h) will be necessary. Licensee shall follow the procedure specified in Article 9.6. A copy of all revisions or additions shall be provided to the Government. 9.9 In the event Licensee seeks to finance development with funds from banks or other financial institutions, the Government shall assist Licensee in doing so by providing any information and recommendations requested by such banks or financial institutions which are in accordance with the laws of Latvia. ARTICLE X DEVELOPMENT AND PRODUCTION PLANS 10.1 Licensee shall conduct Development Operations and Production Operations in respect of any Development Area in accordance with the Overall Development Program consistent with practices generally accepted in the international petroleum industry in Western Europe. 10.2 Annual plans and budgets for Development and Production Operations consistent with the Overall Development Program shall be provided to the Government as soon as possible after the designation of a Development Area and thereafter not later than 3lst December each year in respect of the Financial Year immediately following. ARTICLE XI ROYALTY 1 l.1 Each entity comprising Licensee shall pay to the Government as to such entity's share of the Petroleum produced and saved from the License Area a royalty equal to eleven percent ( 11 % ) of the market value of such Petroleum. 11.2 The market value of the Petroleum shall be determined in accordance with Schedule "D" hereto. 11.3 Royalty payments shall be made to the Government within sixty (60) days after the transfer of the title to the Petroleum from the Licensee to the purchaser. Late payments shall be subject to interest compounded on a daily basis at the rate of LIBOR ("the London Interbank Offering Rate") plus three percent (3 % ) per annum. 11.4 The Government shall reserve the right to receive production from the License Area in payment of the royalty in lieu of a cash payment. Should the Government elect to receive production in lieu of a cash payment of royalty, the Government shall provide Licensee with no less than six (6) months notice, which election shall be effective for a minimum of one (1) year. ARTICLE XII DISPOSAL AND SALE OF CRUDE OIL 12.1 No later than sixty (60) days prior to the Production Commencement Date in respect of each Producing Area and thereafter at the beginning of each Quarter, the Licensee shall prepare and furnish to the Government a production forecast setting out the total quantity of Crude Oil that it estimates can be produced from the subject Producing Area during each of the next four (4) Quarters, based on a production rate designed to optimize economic recovery of Crude Oil from that Production Area in accordance with practices generally accepted in the international petroleum industry in Western Europe. The Licensee shall endeavor to produce each Quarter the forecast quantity. 12.2 Each entity comprising the Licensee shall, throughout the terms of this License, have the right to freely lift, separately take in kind, dispose of and export all of its share of Crude Oil produced in the License Area without further license or permit from the Government. 12.3 The Government shall have the right to purchase for the Latvian domestic market up to and including twenty five percent (25 % ) of the Crude Oil produced from any Producing Area and not used in the Petroleum Operations in accordance with Article 3.2, provided that a mutually acceptable sales agreement has been concluded which contains commercial terms which are no less favorable to the Licensee than those available if the Crude Oil were sold to a third party and/or exported. Such sales agreement must provide for payment by the Government to the Licensee abroad in convertible currency within forty five (45) days from each delivery of Crude Oil so purchased by the Government at the Measurement Point. Any amounts unpaid by the Government on the due date shall from the due date bear interest calculated on a daily basis at the LIBOR rate plus three percent (3 % ) from the due date until paid. If full payment is not received by Licensee within forty five (45) days from any such delivery as aforesaid, and such default is not remedied within five (5) days from the date Licensee gives to the Government appropriate notice of such default, Licensee shall have the right, but shall not be required: a) to suspend the Government's right to purchase under this Article 12.3; and b) if payment plus interest is not received by Licensee by one hundred ( 100) days from the day such payment was due, Licensee shall be entitled to receive and keep the Government's royalty entitlement (or production in lieu thereof) pursuant to Article 11.4 until such time as the Government has paid all amounts due plus interest, or until the value based on the Crude Oil Price as determined in Schedule "D" of the royalty or production so received and sold is equal to all amounts due hereunder plus interest, whichever first occurs. The Government shall exercise this option to purchase by written notice co Licensee, such notice to be given not later than one hundred and eighty (180) days prior to the first day of the calendar year for which such option is to be exercised and such exercise shall be final and binding for a minimum of one (1) year. ARTICLE XIII NATURAL GAS 13.1 The Government shall have the right to purchase for the Latvian domestic market up to one hundred percent ( 100 % ) of the Natural Gas produced from any Producing Area and not used in the Petroleum Operations in accordance with Article 3.2, provided that a mutually acceptable sales agreement has been concluded which contains commercial terms which are no less favorable to the Licensee than those available if the Natural Gas were exported and which provides for payment by the Government to the Companies abroad in convertible currency. Gas not required for the domestic market shall be exportable without Eurther license or permit from the Government. Each party shall have the right to participate in all discussions and negotiations with respect to all dispositions and sales of Natural Gas by any other Party from the License Area, to the extent of and in the ratio of its pro-rata interest in the License Area. 13.2 ASSOCIATED NATURAL GAS 13.2.1 In the event a Crude Oil Discovery which Licensee has declared commercial in accordance with Article 9.3 contains Associated Gas, Licensee shall declare in the detailed evaluation report specified in Article 9.3 whether the estimated production of Associated Gas is anticipated to exceed the quantities of Associated Gas which will be required in accordance with Article 3.2 for the Crude Oil Production Operations (such excess being hereinafter referred to as "Excess Associated Gas") and whether the excess Associated Gas may be produced in commercial quantities. If Licensee declares that such Excess Associated Gas exists and may be produced in commercial quantities, Licensee shall indicate in the Overall Development Program prepared for the Crude Oil Discovery pursuant to Article 9.4 the particulars of the gathering, treating, compressing and transporting facilities required to use the Excess Associated Gas for commercial purposes, together with the estimated cost thereof. 13.2.2 If Licensee declares that the Excess Associated Gas may be produced in commercial quantities, then within ninety (90) days following the date of Licensee's adoption of the Overall Development Program, the Government shall notify Licensee whether it wishes to purchase the Excess Associated Gas for domestic purposes. 13.2.3 If the Government elects to purchase the Excess Associated Gas in accordance with Article 13.2.2, then: (i) Licensee shall construct the gathering, treating, compressing, transporting and processing facilities required for the production and delivery to the Measurement Point of the Excess Associated Gas, as specified in the Overall Development Program; and (ii) the price of the Excess Associated Gas shall, for all purposes under this License, be the Natural Gas Price determined in accordance with the principles set out in Schedule "D". Any Gas Sales contract to be entered into shall be negotiated on the basis of the pricing principles set out in Schedule "D". 13.2.4 If Licensee declares that the Excess Associated Gas may not be produced in commercial quantities, then: (i) Licensee shall deliver, free of cost, to the Government at the initial Gas/Crude Oil separation facilities in the Development Area, such quantities of Excess Associated Gas as the Government wishes to lift, and shall install such facilities at the separation facilities as will permit the delivery as aforesaid; (ii) in the case indicated in sub-article (i) the Government shall be responsible for the gathering at the separation facilities, treating, compressing, transporting and processing of said Excess Associated Gas, and shall bear all costs related thereto; (iii) any receipt and disposition of Excess Associated Gas by the Government shall be carried out in accordance with sound international petroleum industry practices in Western Europe, in a manner which will not interfere with the production of Crude Oil by Licensee or with the Licensee's Crude Oil transport facilities; and (iv) no royalty shall be due from Licensee on the Excess Associated Gas taken by the Government pursuant to this Article 13.2.4. 13.2.5 Licensee shall have the right to flare any Excess Associated Gas not used in accordance with Article 13.2.3 or 13.2.4 after co-ordination with the Ministry of Environmental Protection and Regional Development of the Republic of Latvia or institution appointed by it. 13.3 NON-ASSOCIATED GAS l3.3.1 In the event a Non-Associated Gas Discovery is made within the License Area, Licensee shall submit a detailed evaluation report in accordance with Article 9.3, including Licensee's estimate of reserves, production potential, estimate of Development Costs and Production Cost and economic viability. Licensee shall also declare in this report whether the Discovery is potentially commercial. 13.3.2 In the event the Discovery is declared potentially commercial by the Licensee as per Article 13.3.1, a Gas development committee composed of an equal number of representatives of the Government and Licensee shall be established for purposes of jointly evaluating the use of such Gas in the domestic market and the chain of downstream activities required to bring the Gas to the end consumers in said market. Simultaneously, Licensee shall be free to evaluate the viability of exporting the gas. Within one (1) year from the date of the Licensee's evaluating report, the Parties shall meet with a view to assessing whether the outlets for such Gas and other relevant factors warrant the development and production of the Gas for sale to the domestic market, and/or, if such market was found not to be capable of absorbing the Gas production, for export. In the event Licensee considers that outlets for such Natural Gas and other relevant factors preclude the development and production for sale to the domestic market, and/or the export market, and notwithstanding the provisions of this Article and Articles II, V and IX, the Licensee shall have the right to retain the area of the potentially commercial Discovery for a period of time, not to exceed five (5) years from the date of the Licensee's evaluation report as per Article 13.3.1. During such period, Licensee shall work towards establishing an economically viable domestic and/or export market and shall be free at any time to declare that development of the Non-Associated Gas Discovery is warranted and proceed in accordance with Article 13.3.3. 13.3.3 In the event Licensee considers that the development of the Non-Associated Gas Discovery is warranted, Licensee shall adopt and furnish to the Government in accordance with Article 9.4 an Overall Development program for said Discovery. 13.3.4 In the event the Government determines that the said Discovery cannot be used for the domestic market, but Licensee considers said Non-Associated Gas Discovery to be commercial if the Natural Gas produced is exported after treatment, Licensee shall be free to develop the Gas Field subject to the submission of an Overall Development Program to the Government in accordance with Article 9.4. In case Licensee begins the Development Operations for export purposes, the Government shall assist Licensee in developing the necessary facilities in Latvia. 13.3.5 The price of Non-Associated Natural Gas produced from a Gas Field purchased by the Government for use in Latvia shall, for all purposes under this License, be the Natural Gas Price determined in accordance with the provisions in Schedule "D". ARTICLE XIV TAXES AND DUTIES 14.1 The taxation of each Company, their Affiliates and Subcontractors shall be subject to the taxation laws of the Republic of Latvia and to effective treaties for the avoidance of double taxation, and the provisions of this Article XIV. 14.2 Notwithstanding the provisions of Latvian taxation laws the following provisions shall apply for the purposes of computing the taxable income of each Company under this License Agreement: a) A Company's gross income shall mean the total proceeds received by such Company from its share of Petroleum produced and sold under this License, plus any other realized income (other than income that is exempt pursuant to Latvian tax laws or regulations, effective double taxation treaties, or this License) arising from Petroleum Operations under this License. Any income other than income arising from Petroleum Operations shall be subject to generally applicable taxation laws and effective double taxation treaties. In the event of a sale of Petroleum that is not an Arm'sLength Sale (as defined in Schedule "D"), the total proceeds from such sale shall be deemed to be based on the price of the Petroleum for the month of sale, as determined in accordance with Schedule "D". b) A Company's taxable income shall be computed by subtracting from gross income all the costs and expenses of such Company incurred in respect of Petroleum Operations under this License. The costs and expenses deductible from gross income are enumerated in Schedule "E" attached hereto. c) If the calculation of taxable income results in a loss for a given Financial Year, the amount of such loss shall be carried forward to the following Financial Year and to subsequent Financial Years, one year at a time in chronological order, for a period that expires at the end of the tenth Financial Year after the Financial Year of the loss, and shall offset such Company's taxable income in such Financial Year(s), until such time as the loss is wholly offset against such Company's taxable income. The losses that are eligible to be carried forward to a given Financial Year shall reduce taxable income in the order of Financial Years from which such losses are carried forward, beginning with the loss from the earliest Financial Year. If tax laws subsequently enacted by the Government allow for a longer carry-forward period than provided herein, each Company shall have the benefit of that longer period. d) Except as provided in sub-paragraph e), each Company's taxable income shall be subject to the income tax at rate of twenty-five percent (25 % ). e) Each Company shall be exempt from income tax for a period of three Financial Years, beginning with the first Financial Year that such Company has positive taxable income (computed after the offset of any applicable loss carry-forward pursuant to Article 14.2 c) from Petroleum Operations). After the three year period has elapsed, each Company shall be subject to tax at rate equal to one -half of the tax rate otherwise applicable in sub-paragraph d) for the subsequent two Financial Years. f) Each Company's income tax liability shall be computed and assessed using U.S. dollars and taxes shall be paid in lats and santims. The exchange rate shall be the rate quoted by the Bank of Latvia, which is eff …