India - Krishna - Godavari Petroleum Exploration Project : Loan 2205 - Loan Agreement - Conformed

OFFRCIAL LOAN NUMBER 2205 IN DONCUMRENTS Loan Agreement (Krishna - Godavari Petroleum Exploration Project) between INDIA and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Dated ,1982 LOAN NUMBER 2205 IN LOAN AGREEMENT AGREEMENT, dated As dA$ / , 1982, between INDIA, acting by its President (hereinafter called the Borrower) and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank). WHEREAS (A) the Borrower has requested the Bank to assist in the financing of the foreign exchange cost of the Project described in Schedule 2 to this Agreement by making the Loan as hereinafter provided; I (B) the Project will be carried out by the Borrower's Oil and Natural Gas Commission with the Borrower's assistance and, as part of such assistance, the Borrower will make available to the Oil and Natural Gas Commission the proceeds of the Loan as hereinafter provided; and WHEREAS the Bank has agreed, on the basis inter alia of the foregoing, to make the Loan available to the Borrower upon the terms and conditions set forth hereinafter and in the Project Agreement of even date herewith between the Bank and the Oil and Natural Gas Commission; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I General Conditions; Definitions Section 1.01. The parties to this Agreement accept all the provisions of the General Conditions Applicable to Loan and Guar- antee Agreements of the Bank, dated October 27, 1980, with the same force and effect as if they were fully set forth herein (said General Conditions Applicable to Loan and Guarantee Agree- ments of the Bank being hereinafter called the General Conditions). Section 1.02. Wherever used in this Agreement, unless the context otherwise requires, the several terms defined in the Gen- eral Conditions have the respective meanings therein set forth and the following additional terms have the following meanings: (a) "Commission" means the Oil and Natural Gas Commission established under the Oil and Natural Gas Commission Act, 1959 of the Borrower; - 2 - (b) "Project Agreement" means the agreement between the Bank and the Commission of even date herewith, as the same may be amended from time to time, and such term includes any schedule to the Project Agreement and any agreements supplemental to the Project Agreement; (c) "Subsidiary Loan Agreement" means the agreement to be entered into between the Borrower and the Commission pursuant to Section 3.01 (b) of this Agreement, as the same may be amended from time to time, and such term includes any schedule to the Subsidiazy Loan Agreement; (d) "Project Area" means an area of the Krishna - Godavari basin of about 17,000 km2, onshore and offshore, which is defined as set forth in Schedule 4 to this Agreement; (e) "inner shelf" means the section of the offshore Project Area between the shoreline and about the 165 m isobath line, and "outer shelf" means the remainder of the offshore Project Area; and (f) "Subsidiary" means any company of which a majority of the outstanding voting stock or other proprietary interest is owned or effectively controlled by the Commission or by any one or more Subsidiaries of the Commission or by the Commission and one or more of its Subsidiaries. ARTICLE II The Loan Section 2.01. The Bank agrees to lend to the Borrower, on the terms and conditions in the Loan Agreement set forth or referred to, an amount in various currencies equivalent to one hundred sixty-five million five hundred thousand dollars ($165,500,000). Section 2.02. The amount of the Loan may be withdrawn from the Loan Account in accordance with the provisions of Schedule 1 to this Agreement, as such Schedule may be amended from time to time by agreement between the Borrower and the Bank, for expendi- tures made (or, if the Bank shall so agree, to be made) in respect of the reasonable cost of goods and services required for the Project and to be financed out of the proceeds of the Loan. -3- Section 2.03. Except as the Bank shall otherwise agree, procurement of the goods and works (including technical services for seismic surveys and well drilling and analysis) required for the Project and to be financed out of the proceeds of the Loan shall be governed by the provisions of the Schedule to the Project Agreement. Section 2.04. The Closing Date shall be March 31, 1986 or such later date as the Bank shall establish. The Bank shall promptly notify the Borrower of such later date. Section 2.05. Not later than the Effective Date, the Bor- rower shall pay to the Bank a fee equivalent to two million four hundred forty-five thousand eight hundred thirteen dollars ($2,445,813). The fee shall be payable in such currency or currencies as the Bank shall specify. In the event that the Bank shall not have received full payment of the fee by the Effective Date, the Bank shall, on behalf of the Borrower, withdraw from the Loan Account and pay to itself te amount required for the full payment of the fee in the currency or currencies specified for the purpose. Section 2.06. The Borrower shall pay to the Bank a commit- -ment charge at the rate of three-fourths of one per cent (3/4 of 1%) per annum on the principal amount of the Loan not withdrawn from time to time. Section 2.07. The Borrower shall pay interest at the rate of eleven and three-fifths per cent (11-3/5%) per annum on the principal amount of the Loan withdrawn and outstanding from time to time. Section 2.08. Interest and other charges shall be payable semiannually on February 1 and August 1 in each year. Section 2.09. The Borrower shall repay the principal amount of the Loan in accordance with the amortization schedule set forth in Schedule 3 to this Agreement. ARTICLE III Execution of the Project Section 3.01. (a) Without any limitation or restriction upon any of its other obligations under the Loan Agreement, the -4- Borrower shall cause the Commission to perform in accordance with the provisions of the Project Agreement all the obligations of the Commission therein set forth, shall take or cause to be taken all action, including the provision of funds, facilities, services and other resources, necessary or,appropriate to enable the Commission to perform such obligations, and shall not take or permit to be taken any action which would prevent or interfere with such performance. (b) The Borrower shall relend the equivalent of the pro- ceeds of the Loan in its currency to the Commission under a sub- sidiary loan agreement to be entered into between the Borrower and the Commission, on teims and conditions which shall have been approved by the Bank and which shall include, inter alia, that the Commission shall: (i) pay interest on the principal amount so relenL and withdrawn and outstanding from time to time at a rate of 12% per annum; and (ii) repay the principal amount so relent over a period of twenty years, including five years of grace. (c) The Borrower shall exercise its rights under the Sub- sidiary Loan Agreement in such manner as to protect the interests of the Borrower and the Bank and to. accomplish the purposes of the Loan, and, except as the Bank shall otherwise agree, the Bor- rower shall not assign, amend, abrogate or waive the Subsidiary Loan Agreement or any provision thereof. Section 3.02. Without limitation or restriction upon the provisions of Section 3.01 (a) of this Agreement, the Borrower specifically undertakes, whenever there is reasonable cause to believe that the funds available to the Commission will be inade- quate to meet the estimated expenditures required for the carrying out of the Project, to make arrangements, satisfactory to the Bank, promptly to provide the Commission or cause the Commission to be provided with such funds as are needed to meet such expendiuares. ARTICLE IV Other Covenants Section 4.01. (a) It is the policy of the Bank, in making loans to, or with the guarantee of, its members not to seek, in normal circumstances, special security from the member concerned but to ensure that no other external debt shall have priority over its loans in the allocation, realization or distribution of foreign exchange held under the control or for the benefit of such member. To that end, if any lien shall be created on any public assets (as hereinafter defined), as security for any external debt, which will or might result in a priority for the benefit of the creditor of such external debt in the allocation, realization or distribution of foreign exchange, such lien shall, unless the Bank shall otherwise agree, ipso facto and at no cost to the Bank, equally and ratably secure the principal of, and interest and other charges on, the Loan, and the Borrower, in creating or permitting the creation of such lien, shall make express provision to that effect; provided, however, that, if for any constitutional or other legal reason such provision cannot be made with respect to any lien created on assets of any of its political or administrative subdivisions, the Borrower shall promptly and at no cost to the Bank secure the principal of, and interest and other charges on, the Loan by an equivalent lien on other public assets satisfactory to the Bank. (b) The foregoing undertaking shall not apply to: (i) any lien created on property, at the time of purchase thereof, solely as security for payment of the purchase price of such property or as security for the payment of debt incurred for the purpose of financing the purchase of such property; and (ii) any lien arising in the ordinary course of banking transactions and securing a debt maturing not more than one year after its date. (c) As used in this Section, the term "public assets" means assets of the Borrower, of any political or administrative sub- division thereof and of any entity owned or controlled by, or operating for the account or benefit of, the Borrower or any such subdivision, including gold and foreign exchange assets held by any institution performing the functions of a central bank or exchange stabilization fund, or similar functions, for the Borrower. Section 4.02. The Borrower shall from time to time carry out a review of the price of crude oil and natural gas paid to the Commission and, on the basis of such review, shall set such prices at the level required to enable the Commission to earn, under conditions of efficient operation, revenues sufficient (i) to meet its operating expenses and tax liabilities; and (ii) to produce, for each fiscal year of the Commission, a return -6- after taxes on its assets employed in operations which, together with the amount allocated for depreciation charges for such year, permits the Commission to meet its debt service requirements, to maintain adequate working capital and to finance a substantial portion of its proposed capital investments. ARTICLE V Remedies of the Bank Section 5.01. For the purposes of Section 6.02 of the Gen- eral Conditions, the following additional events are specified pursuant to paragraph (k) thereof: (a) The Commission shall have failed to perform any of its obligations under the Project Agreement. (b) As a result of events which have occured after the date of the Loan Agreement, an extraordinary situation shall have arisen which shall make it improbable that the Commission will be able to perform its obligations under the Project Agreement. (c) The Act referred to in Section 1.02 (a) of this Agree- ment shall have been amended, suspended, abrogated, repealed or waived so as to affect materially and adversely the ability of the Commission to perform any of its obligations under the Pro- ject Agreement. (d) The Borrower or any other authority having jurisdiction shall have taken any action for the dissolution or disestablish- ment of the Commission or for the suspension of its operations. (e) A Subsidiary shall have been created or acquired by the Commission, if such creation or acquisition will affect materially and adversely the conduct of the Commission's business or its financial condition or the performance of its obligations under the Project Agreement. Section 5.02. For the purposes of Section 7.01 of the Gen- eral Conditions, the following additional events are specified pursuant to paragraph (h) thereof: (a) Any event specified in paragraphs (a) and (e) of Section 5.01 of this Agreement shall occur and shall continue for a period of sixty days after notice thereof shall have been given by the Bank to the Borrower and the Commission. (b) Any event specified in paragraphs (c) and (d) of Section 5.01 of this Agreement shall occur. -7- ARTICLE VI Effective Date; Termination Section 6.01. The following event is specified as an additional condition to the effectiveness of the Loan Agreement within the meaning of Section 12.01 (c) of the General Conditions, namely, that the Subsidiary Loan Agreement has been executed on behalf of the Borrower and the Commission. Section 6.02. The following are specified as additional matters, within the meaning of Section 12.02 (c) of the General Conditions, to be included in the opinion or opinions to be furnished to the Bank: (a) that the Project Agreement has been duly authorized or ratified by the Commission, and is legally binding upon the Commission in accordance with its terms; and (b) that the Subsidiary Loan Agreement has been duly authorized or ratified by the Borrower and the Commission and is legally binding upon the Borrower and the Commission in accordance with its term. Section 6.03. The date is hereby specified for the purposes of Section 12.04 of the General Conditions ARTICLE VII Representatives of the Borrower; Addresses Section 7.01. Any Secretary, Additional Secretary, Joint Secretary, Director, Deputy Secretary or Under Secretary in the Department of Economic Affairs of the Ministry of Finance of the Borrower is designated as representative of the Borrower for the purposes of Section 11.03 of the General Conditions. Section 7.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Borrower: The Secretary to the Goverament of India Ministry of Finance Department of Economic Affairs New Delhi 110001, India -8- Cable address: Telex: ECOFAIRS 953-31354 New Delhi For the Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INTBAFRAD 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI) IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Agreement to be signed in thcir respective names in the District of Columbia, United States of America, as of the day and year first above written. INDIA By// Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By /4 iZpIL '$V Regional Vice President South Asia -9- SCHEDULE 1 Withdrawal of the Proceeds of the Loan 1. The table below sets forth the Categories of items to be financed out of the proceeds of the Loan, the allocation ot amounts of the Loan to each Category and the percentage of expenditures for items so to be financed in each Category: Amount of the Loan Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (1) Technical 23,000,000 100% of foreign services for expendiZ-ures seismic surveys under Parts A (i), B (i) and B (ii) of the Project (2) Technical well 22,000,000 100% of foreign services expenditures (3) Drilling materials 38,000,000 100% of foreign and supplies for expenditures wells under Parts A and 100% of (iii) (a) and B local expendi- (iii) of the Project tures ex-fac- tory (4) Materials and 3,000,000 100% of foreign equipment for expenditures completion of wells and 100% of under Parts A (iii) local expendi- (a) and (b) of the tures ex-fac- Project tory (5) Drilling con- 28,000,000 100% of foreign tractors' services expenditures (rig-hire charges) under Part A (iii) (a) of the Project (6) Drilling con- 33,000,000 25% of foreign tractors' services expenditures (rig-hire charges) under Part B (iii) of the Project - 10 - Amount of the Loan Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (7) Fee 2,445,813 Amount due (8) Unallocated 16,054,187 TOTAL 165,500,000 2. For the purposes of this Schedule: (a) the term "foreign expenditures" means expenditures in the currency of any country other than the Borrower and for goods or services supplied from the territory of any country other than the Borrower; (b) the term "local expenditures" means expenditures in the currency of the Borrower or for goods or services supplied from the territory of the Borrower; (c) the term "drilling materials and supplies" means casings, well-heads, drill bits, cement, chemicals and drilling mud; and (d) the term "technical well services" means specialized contractors' services for core analysis, mud-engineering, logging, mud-logging, cementing, diving, production testing and completion of wells. 3. The disbursement percentages have been calculated in com- pliance with the policy of the Bank that no proceeds of the Loan shall be disbursed on account of payments for taxes levied by, or in the territory of, the Borrower on goods or services, or on the importation, manufacture, procurement or supply thereof; to that end, if the amount of any such taxes levied on or in respect of any item to be financed out of the proceeds of the Loan decreases or increases, the Bank may, by notice to the Borrower, increase or decrease the disbursement percentage then applicable to such item as required to be consistent with the aforementioned policy of the Bank. - 11 - 4. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made in respect of payments made for expenditures prior to the date of this Agreement, except that withdrawals, in an aggregate amount not exceeding the equivalent of $6,000,000, may be made in respect of Categories (1) and (6) on account of payments made for such expenditures before that date but after May 1, 1982. 5. Notwithstanding the allocation of an amount of the Loan or the disbursement percentages set forth in the table in paragraph 1 above, if the Bank has reasonably estimated that the amount of the Loan then allocated to any Category will be insufficient to finance the agreed percentage of all expenditures in that Cate- gory, the Bank may, by notice to the Borrower: (i) reallocate to such Category, to the extent required to meet the estimated shortfall, proceeds of the Loan which are then allocated to another Category and which _n the opinion of the Bank are not needed to meet other expenditures, and (ii) if such reallocation cannot fully meet the estimated shortfall, reduce the disburse- ment percentage then applicable to such expenditures in order that further withdrawals under such Category may continue until all expenditures thereunder shall have been made. 6. If the Bank shall have reasonably determined that the pro- curement of any item in any Category is inconsistent with the procedures set forth or referred to in this Agreement, no expenditures for such item shall be financed out of the proceeds of the Loan and the Bank may, without in any way restricting or limiting any other right, power or remedy of the Bank under the Loan Agreement, by notice to the Borrower, cancel such amount of the Loan as, in the Bank's reasonable opinion, represents the amount of such expenditures which would otherwise have been eligible for financing out of the proceeds of the Loan. - 12 - SCHEDULE 2 Description of the Project 1. The Project represents the Commission's 1982/83 - 1985/86 hydrocarbon exploration program in the Project Area, located in the Krishna - Godavari basin. The overall objective of the Project is to establish the commercial potential of hydrocarbon reserves in that basin, and to test the more promising structures in the Project Area for oil and gas. This purpose is to be achieved through: (i) improvement of the definition of known hydrocarbon prospects and identification of new prospects in the Project Area, both onshore and offshore; (ii) acceleration of the drilling program on the hydrocarbon prospects identified in the Project Area, both onshore and offshore; and (iii) strengthening of the Commission's continuing efforts to further develop its capacity for designing hydrocarbon exploration programs and drilling structures under difficult geological and environmental conditions. 2. The Project consists of the following Parts: Part A: Onshore Project Area (i) High resolution seismic surveys totaling about 1,000 line km, designed to produce a better definition of the deeper prospects in the onshore Project Area. (ii) Completion of the ongoing conventional seismic program totaling about 2,400 line km, designed to identify other prospects in the"onshore Project Area. (iii) Drilling of new exploratory wells, as follows: (a) about five wells on deep gas prospects, with an average target depth of 4,500 m; (b) about four wells to explore the upper portion of the cretaceous layer, with an average target depth of 4,000 m; and (c) about three wells with an average target depth of 3,250 m. - 13 - Part B: Offshore Project Area (i) Special seismic surveys totaling about 3,500 line km in the shallow water area (to about the 12 m isobath line), designed to permit an integrated interpretation of the geology of the onshore and offshore portions of the Project Area and to identify prospects on the inner shelf section of the offshore Project Area. (ii) Infill seismic surveys totaling up to about 4,000 line km required for a better definition of the prospects in the offshore Project Area not covered under Part B (i) of the Project. (iii) Drilling of exploratory wells, as follows: (a) about eleven wells on prospects on the inner shelf, with an average target depth of 4,000 m; and (b) about five wells on prospects on the outer shelf, with an average target depth of 3,500 m. Part C: Strengthening of the Commission Continued development of the Commission's capacity to plan and supervise the exploration programs to be carried out under Parts A and B of the Project and to evaluate the results thereof. * * * * The Project is expected to be completed by December 31, 1985. - 14 - SCHEDULE 3 Amortization Schedule Payment of Principal Date of Payment Due (Expressed in dollars)* On each February 1 and August 1 beginning February 1, 1988 through February 1, 2002 5,515,000 On August 1, 2002 5,565,000 * The figures in this column represent dollar equivalents determined as of the respective dates of withdrawal; see General Conditions, Section 3.04. - 15 - Premiums on Prepayment The following percentages are specified as the premiums payable on repayment in advance of maturity of any portion of the principal amount of the Loan pursuant to Section 3.04 (b) of the General Conditions: Time of Prepayment Premium Not more than three years before maturity 1.75% More than three years but not more than six years before maturity 3.50% More than six years but not more than eleven years before maturity 6.40% More than eleven years but not more than sixteen years before maturity 9.30% More than sixteen years but not more than eighteen years before maturity 10.45% More than eighteen years before maturity 11.60% - 16 - SCHEDULE 4 Definition of the Project Area (Section 1.02 (d) of the Loan Agreement) The Project Area is the area within a line joining the following sequential points: Latitude (N) Longitude (E) A. 160 52' 820 36' B. 160 52' 800 50' C. 150 40' 800 501 D. 150 40' 810 04' E. 150 42' 810 04' F. 150 42' about 810 09' (intersection of 150 42' latitude with 300 m isobath) G. about 160 07' 810 43' (intersection of 300 m isobath with 810 431 longitude) H. 160 08' 810 43' I. 160 08' 820 00' J. 160 10' 820 00' K. 16' 14' 820 06' L. about 160 13' 820 06' (intersection of 820 06' longitude with 300 m isobath) M. 160 34' about 820 28' (intersection of 300 m isobath with 160 34' latitude) N. 160 34' 820 26' 0. 160 47' 820 36' P. 160 52' 820 36' These points are joined by straight lines, except between points F and G and points L and M where the line follows the 300 m isobath line. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT CERTIFICATE I hereby certify that the foregoing is a true copy of the original in the archives of the Interna- tional Bank for Reconstruction and Develop- ment. In witness whereof I have signed this Certifi- cate and affixed the Seal of the Bank thereunto this - day ofj , 198 . FOR SECRETARY