Conformed Copy - L2904 IN- Western Gas Development Project - Project Agreement

Page 1 CONFORMED COPY LOAN NUMBER 2904 IN Project Agreement (Western Gas Development Project) between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT and OIL AND NATURAL GAS COMMISSION Dated April 21, 1988 LOAN NUMBER 2904 IN PROJECT AGREEMENT AGREEMENT, dated April 21, 1988, between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (the Bank) and OIL AND NATURAL GAS COMMISSION (the Commission). WHEREAS (A) by the Loan Agreement of even date herewith between India, acting by its President (the Borrower) and the Bank, the Bank has agreed to make available to the Borrower an amount in various currencies equivalent to two hundred ninety-five million dollars ($295,000,000), on the terms and conditions set forth in the Loan Agreement, but only on condition that the Commission agree to undertake such obligations toward the Bank as are set forth in this Agreement; (B) by a subsidiary loan agreement to be entered into between the Borrower and the Commission, the proceeds of the loan provided for under the Loan Agreement will be made available to the Commission on the terms and conditions set forth in said subsidiary loan agreement; and WHEREAS the Commission, in consideration of the Bank's entering into the Loan Agreement with the Borrower, has agreed to undertake the obligations set forth in this Agreement; NOW THEREFORE the parties hereto hereby agree as follows: Page 2 ARTICLE I Definitions Section 1.01. Unless the context otherwise requires, 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. ARTICLE II Execution of the Project Section 2.01. The Commission declares its commitment to the objectives of the Project as set forth in Schedule 2 to the Loan Agreement, and, to this end, shall carry out the Project with due diligence and efficiency and in conformity with appropriate administrative, financial, and gas engineering and exploration practices, and shall provide, or cause to be provided, promptly as needed, the funds, facilities, services and other resources required for the Project. Section 2.02. Except as the Bank shall otherwise agree, procurement of the goods, works and consultants' services 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 this Agreement. Section 2.03. The Commission shall carry out the obligations set forth in Sections 9.04, 9.05, 9.06, 9.07, 9.08 and 9.09 of the General Conditions (relating to insurance, use of goods and services, plans and schedules, records and reports, maintenance and land acquisition, respectively) in respect of the Project Agreement. Section 2.04. The Commission shall duly perform all its obligations under the Subsidiary Loan Agreement. Except as the Bank shall otherwise agree, the Commission 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 2.05. (a) The Commission shall, at the request of the Bank, exchange views with the Bank with regard to the progress of the Project, the performance of its obligations under this Agreement and under the Subsidiary Loan Agreement, and other matters relating to the purposes of the Loan. (b) The Commission shall promptly inform the Bank of any condition which interferes or threatens to interfere with the progress of the Project, the accomplishment of the purposes of Loan, or the performance by the Commission of its obligations under this Agreement and under the Subsidiary Loan Agreement. ARTICLE III Management and Operations of the Commission Section 3.01. The Commission shall carry on its operations and conduct its affairs in accordance with sound administrative, financial and gas engineering and exploration practices under the supervision of qualified and experienced management assisted by competent staff in adequate numbers. Section 3.02. The Commission shall at all times operate and maintain its plant, machinery, equipment and Page 3 other property, and from time to time, promptly as needed, make all necessary repairs and renewals thereof, all in accordance with sound gas engineering and financial practices. Section 3.03. The Commission shall take out and maintain with responsible insurers, or make other provision satisfactory to the Bank for, insurance against such risks and in such amounts as shall be consistent with appropriate practice. Section 3.04. (a) The Commission shall at all times take all steps necessary to maintain its corporate existence and the right to carry on its operations, and shall take all action necessary to acquire and to retain such land, interests in land and properties, and to acquire, maintain and renew such powers, privileges, licenses, franchises or other rights as may be necessary or useful for the conduct of its business and the execution of the Project. (b) Unless the Bank shall otherwise agree, the Commission shall not sell, lease, transfer or otherwise dispose of any of its property or assets required for the efficient operation of the Project, except in the ordinary course of business. ARTICLE IV Financial Covenants Section 4.01. (a) The Commission shall maintain records and accounts adequate to reflect in accordance with sound accounting practices its operations and financial condition. (b) The Commission shall: (i) have its records, accounts and financial statements (balance sheets, statements of income and expenses and related statements) for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Bank; (ii) furnish to the Bank as soon as available, but in any case not later than nine months after the end of each such year, (A) certified copies of its financial statements for such year as so audited, and (B) the report of such audit by said auditors of such scope and in such detail as the Bank shall have reasonably requested; and (iii) furnish to the Bank such other information concerning said records, accounts and financial statements as well as the audit thereof, as the Bank shall from time to time reasonably request. Section 4.02. (a) Except as the Bank shall otherwise agree, the Commission shall: (i) take all steps within its power necessary to ensure that at all times its internal cash generation for each year shall be at least 1.5 times the debt service requirements of its debt for that year; Page 4 (ii) not incur any debt, if after the incurrence of such debt, the aggregate principal amount of the debt then incurred and outstanding would be greater than 1.5 times the equity; and (iii) maintain, at all times, a ratio of current assets to current liabilities of not less than 1.2 times. (b) For the purposes of this Section: (i) The term debt means any indebtedness of the Commission maturing by its terms, more than one year after the date on which it is originally incurred. (ii) Debt shall be deemed to be incurred under: (A) a loan contract, or agreement or other instrument providing for such debt or for the modification of its terms of payment, on the date, and to the extent, the amount of such debt has become outstanding pursuant to such contract, agreement or instrument; and (B) a guarantee agreement, on the date the agreement providing for such guarantee has been entered into but only to the extent that the guaranteed debt shall be outstanding. (iii) The term "equity means the aggregate amount of the total unimpaired paid-up capital, retained earnings and reserves not allocated to cover specific liabilities of the Commission. (iv) The term "current assets" means cash, accounts receivable due within twelve months, marketable securities, pre-paid expenses properly chargeable to operating expenses within the next twelve months following the date in which such pre-paid expenses were made, and all other assets which could, in the ordinary course of business, be converted into cash within twelve months. (v) The term "current liabilities" means accounts payable within twelve months, income taxes dividends, bonuses and all other liabilities (including debt) which, pursuant to their terms, will become due and payable or could under circumstances then existing be called for payment within twelve months. (vi) The term "internal cash generation" means the aggregate amount of the gross revenues of the Commission from all sources, less the aggregate amount of the operating expenses of the Commission, including expenses accountable to administration, maintenance and taxes (or payments in lieu of taxes), but before provision for depreciation of assets and interest and other charges on debt. (vii) The term "debt service requirement" Page 5 means the aggregate amount of amortization (including sinking fund payments, if any) of, and interest and other charges on, debt. (viii)Whenever for the purposes of this Section it shall be necessary to value, in terms of currency of the Borrower, debt payable in another currency, such valuation shall be made on the basis of the prevailing lawful rate of exchange at which such other currency is, at the time of such valuation, obtainable for the purposes of servicing such debt, or, with absence of such rate, on the basis of a rate of exchange acceptable to the Bank. 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 effective. Section 5.02. This Agreement and all obligations of the Bank and of the Commission thereunder shall terminate on the date on which the Loan Agreement shall terminate in accordance with its terms, and the Bank shall promptly notify the commission thereof. Section 5.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any cancellation or suspension under the General Conditions. 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: 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) For the Commission: Page 6 Oil and Natural Gas Commission Tel Bhavan Dehradun 248003, India Cable address: Telex: COMONG 0595-206 DEHRADUN 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 the Commission may be taken or executed by the Chairman or such other person or persons; as the Commission shall designate in writing, and the Commission 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 one instrument. IN WITNESS WHEREOF, the parties hereto, acting through their duly authorized representatives, 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 By /s/ A. Karaosmanoglu Regional Vice President Asia OIL AND NATURAL GAS COMMISSION By /s/ N. Misra Authorized Representative SCHEDULE Procurement and Consultants' Services Section I: Procurement of Goods and Works Part A: International Competitive Bidding Except as provided in Part D hereof, goods and works shall be procured under contracts awarded in accordance with procedures consistent with those set forth in Sections I and II of the Guidelines for Procurement under IBRD Loans and IDA Credits published by the Bank in May 1985 (the Guidelines). Part B: Preference for Domestic Manufacturers Page 7 In the procurement of goods in accordance with the procedures described in Part A hereof, goods manufactured in India may be granted a margin of preference in accordance with, and subject to, the provisions of paragraphs 2.55 and 2.56 of the Guidelines and paragraphs 1 through 4 of Appendix 2 thereto. Part C: Preference for Domestic Contractors In the procurement of works in accordance with the procedures described in Part A hereof, the commission may grant a margin of preference to domestic contractors in accordance with, and subject to, the provisions of paragraphs 2.55 and 2.56 of the Guidelines and paragraph 5 of Appendix 2 thereto. Part D: Other Procurement Procedures 1. Contracts estimated to cost the equivalent of $1,000,000 each or less for well services and drilling materials required for special operations and time-critical contracts may be procured through limited international bidding procedures on the basis of evaluations and comparison of bids invited from a list of at least three qualified suppliers eligible under the Guidelines and in accordance with paragraph 3.2 thereof. 2. Contracts for equipment and spare parts of a proprietary nature or which are required to ensure standardization and compatibility with existing equipment and facilities may be procured by direct contracting with known suppliers. Such contracts shall require prior approval by the Bank. 3. Contracts procured in accordance with the provisions of paragraphs 1 and 2 of this Part C shall not exceed an aggregate amount of $25 million equivalent. 4. Appraisal drilling of about 40 wells in Gandhar field may be carried out by the Commission by force account. Part E: Review by the Bank of Procurement Decisions 1. Review of invitations to bid and of proposed awards and final contracts: (a) With respect to each contract estimated to cost the equivalent of $1,000,000 or more, the procedures set forth in paragraphs 2 and 4 of Appendix 1 to the Guidelines shall apply. Where payments for such contract are to be made out of the Special Account, such procedures shall be modified to ensure that the two conformed copies of the contract required to be furnished to the Bank pursuant to said paragraph 2 (d) shall be furnished to the Bank prior to the making of the first payment out of the Special Account in respect of such contract. (b) With respect to each contract not governed by the preceding paragraph, the procedures set forth in paragraphs 3 and 4 of Appendix 1 to the Guidelines shall apply. Where payments for such contract are to be made out of the Special Account, such procedures shall be modified to ensure that the two conformed copies of the contract together with the other information required to be furnished to the Bank pursuant to said paragraph 3 shall be furnished to the Bank as part of the evidence to be furnished pursuant to paragraph 4 of Schedule 4 to the Loan Agreement. (c) The provisions of the preceding subparagraphs (a) and (b) shall not apply to contracts on account of Page 8 which the Bank has authorized withdrawals from the Loan Account on the basis of statements of expenditure. Such contracts shall be retained in accordance with Section 4.01 (a) (ii) of the Loan agreement. 2. The figure of 15% is hereby specified for purposes of paragraph 4 of Appendix 1 to the Guidelines. Section II: Employment of Consultants In order to assist the Commission in carrying out the Project, the Commission shall as and when needed employ consultants whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Bank. Such consultants shall be selected 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.