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August 12, 1999

regarding

Financing of the Technical Assistance to the Philippine Petroleum Resource Assessment Project

WHEREAS, the Government of the Kingdom of Norway ("Norway'7) has been requested by the Government of the Republic of the Philippines ("The Philippines") for financing of technical assistance to the Philippine Petroleum Resource Assessment Project ("the Project");

WHEREAS, Norway has decided to comply with the request;

NOW, THEREFORE, Philippines and the Norway have reached the following understanding which shall constitute an Agreement between the Parties:

ARTICLE I
Scope and Objectives

1. This Agreement sets forth the terms and procedures for Norway's financing of the technical assistance for the implementation of the Project as set out in the Project Profile attached to this Agreement as Annex I.

The Project is further outlined in the draft Project Document Philippine Petroleum Resource Assessment Project, dated 28 January 1998.

2. The Goals of the Project are: a) to achieve a better understanding of the Philippines' petroleum resource potential in order to define internal and external energy-related policies and strategies with the aim to ensure optimal resource management without damaging the environment; and b) to support the poverty alleviation program of the Philippine Government with the anticipated growth and diversification of energy-related industries which transfers to better socio economic conditions for the country particularly for the host government units that acquire direct financial benefit from the development and production of petroleum field."

3. The Objectives of the Project are:

• To develop a petroleum resource classification system;
• To establish an inventory of the Philippines petroleum resources;
• To enhance the technical capability of the Philippine Department of Energy's Oil and Gas Division in petroleum resource assessment.

ARTICLE II
Implementing Arrangements

1. Philippines and Norway shall co-operate fully and maintain all communication lines open to ensure that the objectives of the Project are successfully attained.

2. In matters relating to the implementation of this Agreement, the Department of Energy ("DOE") and the Norwegian Agency for Development Cooperation ("NORAD") shall be competent to represent the Philippines and Norway; respectively.

3. NORAD shall assist the DOE in selecting a consulting company ("Consultant"); subject to the Norwegian tender process and consistent with the Project's requirements.

4. A contract, approved by NORAD, shall be entered into by DOE with the selected Consultant for implementing the Project.

ARTICLE III
Contributions and Obligations of Norway

1. Norway shall, subject to Parliamentary appropriations, and on the terms and procedures set out or referred to herein, provide a financial grant not exceeding NOK 5,548,000 (Norwegian kroner five-million-five-hundred-and-forty-eight-thousand) ("the Grant"), to be used exclusively to finance the Project.

2. Norway reserves the right to withhold disbursements at any time in case i.a.:

• substantial deviations from agreed plans and budgets occur;
• resources to be allocated by the Philippines are not provided as agreed;
• the documentation specified in Article VI below is not delivered as agreed;
• the Project develops unfavorably in relation to the Goals and Objectives.

Before withholding any disbursement from the Grant, the Parties shall consult with each other with the view to reaching a solution on the matter and, if necessary, refer also to Article IX.

3. Any funds from the Grant not fully utilized for one activity may, upon previous written agreement between the Parties, be utilized for other requirements of the Project.

4. The Government of Norway recognizes that all data/information obtained and generated by the Project belongs to the Government of the Philippines taking into consideration the Confidentiality Agreement entered into between the Consultant and the DOE.

ARTICLE IV
Contributions and Obligations of the Philippines

The Philippines, through the DOE shall:

1. Have the overall responsibility for the planning, administration and implementation of the Project, including all categories of works, repair and maintenance of equipment, spare parts, goods and materials made available under this Agreement;

2. Provide the necessary manpower, petroleum-related data and office space and equipment as reflected in Annex 1 .

3. Ensure that the Project is reflected in the plans, budgets and accounts of the DOE.

4. Seek exemption from any internal revenue tax of the Consultant payable under the laws of the Philippines in respect of the emoluments paid by Norway, in accordance with the Convention between the Government of the Republic of the Philippines and the Government of the Kingdom of Norway for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and on capital, signed in Manila in November 1997;

5. Grant and cover the cost of the issuance of work permits that may be required in connection with the implementation of the Project;

6. Defray or pay any cost, if any, of the customs duties, sales tax and other taxes, fees and levies on all equipment, materials and supplies financed by the Grant and imported into the Philippines for the benefit of the Project.

7. Furnish the Consultant, free of charge, with the relevant data and information necessary to ensure the successful implementation of the Project, subject to a Confidentiality Agreement between DOE and the Consultant.

8. Promptly inform Norway of any condition which interferes or threatens to interfere with the successful implementation of the Project.

9. In coordination with the DOE, the representatives of Norway may visit any part of the Philippines and examine any relevant records and documents for purposes related to this Agreement.

ARTICLE V
Disbursements

NORAD shall, upon written requests from the DOE, effect disbursements direct to the Consultant for services and procurement costs incurred under the Contract after appropriate coordination or consultations are made by and between the DOE and said Consultant. Such disbursements shall be made in accordance with the terms and procedures of the Contract and on receipt of invoices in original issued by the Consultant and certified by the DOE.

ARTICLE VI
Reports

1. The DOE shall submit to NORAD semi-annual progress reports on the implementation of the Project. A format for the report is given in Annex II of this Agreement.

The reports shall give information on actual output compared to planned outputs, targets, workplans and time schedules, use of inputs, problems encountered or foreseen and other information related to the implementation of the Project Objectives referred to in Annex I to this Agreement and an assessment of the efficiency of the Project.

2. The DOE shall submit to NORAD a final report within six months after completion of the Project. The report shall give a summary of the outputs and activities undertaken, accomplishments compared to the goals and objectives, and an assessment of the efficiency of the Project.

3. The DOE shall provide NORAD with a final expenditure report of the project, certified by the DOE's Accounting Division, subject to existing generally accepted accounting and auditing rules and procedures in accordance with Article IV.

4. The DOE shall provide NORAD with copies of any reports submitted to relevant authorities pertaining to the Project, including the reports from the Consultant.

5. NORAD shall, in connection with the last disbursement, submit a report to the DOE on the payments made by NORAD according to Article V above.

ARTICLE VII
Data Ownership

The Government of the Philippines shall have exclusive ownership and control of the data/information generated by the Project.

ARTICLE VIII
Project Review

The Governments of the Philippines and Norway may carry out joint review or evaluation of the Project with prior notice to the DOE as matter of routine when either party deems it necessary.

ARTICLE IX
Settlement of Disputes

Differences which may arise, relating to the interpretation and application of the provisions of this Agreement shall be settled by means of negotiations between the Government of the Philippines and the Government of Norway or in any other manner which may be mutually agreed upon.

ARTICLE X
Entry-into-Force

This Agreement shall enter into force on the date of the later notification by either Party, through diplomatic channels, indicating that the domestic requirements for its entry into force have been complied with.

Either Party may request in writing, through diplomatic channels, to amend this Agreement. Any amendment shall enter into force in accordance with paragraph 1 of this Article.

This agreement shall remain in force until both Parties have fulfilled all obligations arising therefrom. The determination of the fulfillment of these obligations shall be made in consultation between the Parties.

Notwithstanding the previous paragraph, either Party may terminate the present Agreement by giving three (3) months written notice to the other Party.

IN WITNESS WHEREOF, the undersigned, acting on behalf of their respective Governments, have signed the present Agreement in two originals in the English language.

Done on this 12th day of August 1999.