China - Karamay Petroleum Project : Loan 2426 - Project Agreement - Conformed

OFFCA DOCUNIENTS OAN NUMBER 2426 CHA Project Agreement (Karamay Petroleum Project) between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT and KARAMAY OIL-GAS EXPLORATION AND DEVELOPMENT CORPORATION Dated GW,..- cQ 1984 LOAN NUMBER 2426 CHA PROJECT AGREEMENT AGREEMENT, dated t cQ9 , 1984, between INTERNATIONAL BANK FOR RE STRUCTION AND DEVELOPMENT (herein- after called the Bank) d KARAMAY OIL-GAS EXPLORATION AND DEVELOPMENT CORPORATION (hereinafter called KOC). WHEREAS (A) by the Loan Agreement of even date herewith between the People's Republic of China (hereinafter called the Borrower) and the Bank, the Bank has agreed to make available to the Borrower an amount in various currencies equivalent to one hundred million three hundred thousand dollars ($100,300,000), on the terms and conditions set forth in the Loan Agreement, but only on condition that KOC agree to undertake such obligations toward the Bank as are hereinafter set forth; (B) by a subsidiary loan agreement to be entered into between the Borrower and KOC, part of the proceeds of the loan provided for under the Loan Agreement will be made available to KOC on the terms and conditions therein set forth; and WHEREAS KOC, in consideration of the Bank's entering into the Loan Agreement with the Borrower, has agreed to undertake the obligations hereinafter set forth; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I Definitions Section 1.01. Wherever used in this Agreement, unless the context shall otherwise require, the several terms defined in the Loan Agreement, the Preamble to this Agreement and the General Conditions (as so defined) have the respective meanings therein set forth and the term "Project records" means the records referred to in Section 2.05 (b) (i) of this Agreement. ARTICLE II Execution of the Project Section 2.01. KOC shall carry out Parts A through D of the Project, described in Schedule 2 to the Loan Agreement, with due diligence and efficiency and in conformity with appropriate -2- administrative, financial, engineering and petroleum indu3try practices. Section 2.02. In order to assist KOC in carrying out Part D of the Project and the studies referred to in Sections 2.08 through 2.12 of this Agreement, KOC shall employ, or cause to be employed, consultants and experts whose qualifications, expe- rience and terms and conditions of employment shall be satisfac- tory to the Bank, in accordance with principles and procedures satisfactory to the Bank on the basis of the "Guidelines for the Use of Consultants by World Bank Borrowers and by the World Bank as Executing Agency" published by the Bank in August 1981. Section 2.03. Except as the Bank shall otherwise agree, pro- curement of the goods and services required for the Project and to be financed out of the proceeds of the Loan shall be governed by the provisions of Schedule 4 to this Agreement. Section 2.04. (a) KOC undertakes to insure, or make adequate provision for the insurance of, the imported goods to be financed out of the proceeds of the Loan relent to it by the Borrower against hazards incident to the acquisition, transportation and delivery thereof to the place of use or installation, and for such insurance any indemnity shall be payable in a currency freely usable by KOC to replace or repair such goods. (b) KOC shall cause all goods and services financed out of the proceeds of the Loan relent to it by the Borrower to be used exclusively for the purposes of the Project. Section 2.05. (a) KOC shall furnish to the Bank, promptly upon their preparation, the plans, specifications, reports, contract documents and work and procurement schedules for Parts A through D of the Project, and any material modifications thereof or additions thereto, in such detail as the Bank shall reasonably request. (b) KOC shall: (i) maintain records and procedures adequate to record and monitor the progress for Parts A through D of the Project (including its cost and the benefits to be derived from it), to identify the goods and services financed out of the pro- ceeds of the Loan relent to it by the Borrower, and to disclose their use in the Project; (ii) enable the Bank's representatives to visit the facilities and construction sites included in Parts A through D of the Project and to examine the goods financed out - 3 - of the proceeds of the Loan and any relevant records and docu- ments; and (iii) furnish to the Bank ,t regular intervals all such information as the Bank shall reasonably request concerning Parts A through D of the Project, its cost and, where appro- priate, the benefits to be derived from it, the expenditure of the proceeds of the Loan and the goods and services financed out of such proceeds, including, without limitation to the foregoing, reports on the progress of the Project, in a form acceptable to the Bank, and at intervals to be agreed upon. (c) Upon the award of any contract for goods, works or services to be financed out of the proceeds of the Loan, the Bank may publish a description thereof, the name and nationality of the party to whom the contract was awarded and the contract price. (d) Promptly after completion of the Project, but in any event not later than six months after the Closing Date or such later date as may be agreed for this purpose between KOC and the Bank, KOC, with the assistance of the Borrower, shall prepare and furnish to the Bank a report, of such scope and in such detail as the Bank shall reasonably request, on the execution and initial operation of the Project, its cost and the benefits derived and to be derived from it, the performance by KOC and the Bank of their respective obligations under the Project Agreement and the accomplishment of the purposes of the Loan. (e) KOC shall enable the Bank's representatives upon reasonable request to examine all plants, installations, sites, works, buildings, property and equipment and any relevant records and documents. Section 2.06. KOC shall duly perform all its obligations under the Subsidiary Loan Agreement. Except as the Bank shall otherwise agree, KOC shall not take or concur in any action which would have the effect of amending, abrogating, assigning or waiving the Subsidiary Loan Agreement or any provision thereof. Section 2.07. (a) KOC shall, at the request of the Bank, exchange views with the Bank with regard to the progress of Parts A through D of the Project, the performance of its obliga- tions under this Agreement and under the Subsidiary Loan Agree- ment, and other matters relating to the purposes of the Loan. (b) KOC shall promptly inform the Bank of any condition which interferes or threatens to interfere with the progress of Parts A through D of the Project, the accomplishment of the pur- poses of the Loan, or the performance by KOC of its obligations under this Agreement and under the Subsidiary Loan Agreement. Section 2.08. KOC shall by December 31, 1985, or such later date agreed by the Bank: (i) carry out under terms of reference satisfactory to the Bank, a study of reservoir engineering in Wuerhe area; (ii) review the results of such study with the Bank; and (iii) agree with the Bank on an action plan. Section 2.09. KOC shall by December 31, 1986, or such later date agreed by the Bank: (i) carry out under terms of reference satisfactory to the Bank, a regional sedimentological and struc- tural study to investigate the composition and distribution of reservoir bodies; (ii) review the results of such study with the Bank; and (iii) agree with the Bank on the consequent course of action. Section 2.10. KOC shall: (a) under terms of reference satis- factory to the Bank, carry out the study for the pilot projects under Part B (i) and the techno-economic study under Part B (ii) of the Project, and shall review the findings of such studies with the Bank: (i) by March 31, 1985 with respect to the study on the design of the pilot projects, and (ii) by December 31, 1986 with respect to the techno-economic study; and (b) agree with the Bank on the consequent action plan. Section 2.11. KOC shall carry out by March 31, 1986 or such later date agreed by the Bank, a study under terms of reference satisfactory to the Bank, of KOC's costing. Section 2.12. KOC shall carry out under terms of reference satisfactory to the Bank, a design of training methods for skilled workers and shall review the findings and agree with the Bank on the consequent action plan. The consultants to assist KOC in carrying out such a design shall be appointed by March 31, 1985, or such later date agreed by the Bank. Section 2.13. KOC shall exchange views periodically with the Bank on the results of the seismic program under Part A of the Project at Wuerhe-Hungchiba and Hongshanzui-Chepaizi areas, and agree with the Bank on the consequent impact on the design of the exploration program. - 5 - Section 2.14. KOC shall review periodically with the Bank the exploration program of KOC for the Project. ARTICLE III Management and Operations Section 3.01. KOC shall carry on its operations and conduct its affairs in accordance with sound administrative, financial, engineering and petroleum industry practices under the super- vision of qualified and experienced management assisted by competent staff in adequate numbers. Section 3.02. KOC shall at all times operate and maintain its plant, machinery, equipment and other property, and from time to time, promptly as needed, make all necessary repairs and renewals thereof, all in accordance with sound engineering, financial and petroleum practices. Section 3.03. KOC shall take out and maintain with respon- sible insurers, or make other provisions satisfactory to the Bank for, insurance against such risks and in such amounts as shall be consistent with appropriate practice. ARTICLE IV Financial Covenants Section 4.01. (a) KOC shall maintain records and accounts adequate to reflect in accordance with consistently maintained appropriate accounting practices its operations and financial condition, including, without limitation to the foregoing, separate accounts reflecting all expenditures on account of which withdrawals are requested from the Loan Account on the basis of statements of expenditures. (b) KOC shall retain, until one year after the Closing Date, all records (contracts, orders, invoices, bills, receipts and other documents) evidencing the expenditures on account of which withdrawals are requested from the Loan Account on the basis of statements of expenditures, and shall enable the Bank's representatives to examine such records. Section 4.02. KOC shall: (a) have its accounts and financial statements (balance sheets, statements of income and - 6 - expenses and related statements) for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Bank; (b) furnish to the Bank as soon as available, but in any case not later than six months after the end of each such year: (i) certified copies of its financial statements for such year as so audited; and (ii) the report of such audit by said auditors of such scope and in such detail as the Bank shall have reasonably requested, including, without limitation to the foregoing, sepe- rate opinions by said auditors in respect of the expenditures and records referred to in Section 4.01 (b) of this Agreement, as to whether the proceeds of the Loan are made available to it and withdrawn from the Loan Account on the basis of statements of expenditures have been used for the purpose for which they were provided; and (c) furnish to the Bank such other information concerning said accounts, financial statements, records and expenditures, as well as the audit thereof, as the Bank shall from time to time reasonably request. Section 4.03. KOC shall: (a) by October 1 of each year, review with the Bank, KOC's current and future finances, includ- ing its trend of production costs, budget variance analysis, future investment program and related financing arrangements; and (b) submit to, and review annually with the Bank, as part of the review of KOC's finances referred to in (a) above, its financial statements based on the rolling five-year plans. ARTICLE V Effective Date; Termination; Cancellation and Suspension Section 5.01. This Agreement shall come into force and effect on the date upon which the Loan Agreement becomes effec- tive. Section 5.02. This Agreement and all obligations of the Bank and of KOC thereunder shall terminate on the date on which the Loan Agreement shall terminate in accordance with its terms, and the Bank shall promptly notify KOC thereof. Section 5.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any cancella- tion or suspension under the General Conditions. - 7 - ARTICLE VI Miscellaneous Provisions Section 6.01. Any notice or request required or permitted to be given or made under this Agreement and any agreement between the parties contemplated by this Agreement shall be in writing. Such notice or request shall be deemed to have been duly given or made when it shall be delivered by hand or by mail, telegram, cable, telex or radiogram to the party to which it is required or permitted to be given or made at such party's address hereinafter specified or at such other address as such party shall have designated by notice to the party giving such notice or making such request. The addresses so specified are: Foz 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) For KOC: Karamay Oil-Gas Exploration and Development Corporation Karamay, Xinjiang People's Republic of China Cable Address: KARAMAY 3111 CN Section 6.02. Any action required or permitted to be taken, and any document required or permitted to be executed, under this Agreement on behalf of KOC, or by KOC on behalf of the Borrower under the Loan Agreement, may be taken or executed by the -8- President of KOC or such other person or persons as the President shall designate in writing, and KOC shall furnish to the Bank sufficient evidence of the authority and the authenticated specimen signature of each such person. Section 6.03. This Agreement may be executed in several counterparts, each of which shall be an original, and all collectively but onc instrument. IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Agreement to be signed in their respective names in the District of Columbia, United States of America, as of the day and year first above written. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Regional Vice President East Asia and Pacific KARAMAY OIL-GAS EXPLORATION AND DEVELOPMENT CORPORATION Autho zed Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT CERTIFICATE I hereby certify that the 'oregoing 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 of Y, ,V 198 . FOR SECRETARY