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SOMALILAND: Government Terminates TOTAL Oil license Agreement

May 22, 2011   ·   2245940 Commentshttp%3A%2F%2Fsomalilandpress.com%2Fsomaliland-government-terminates-total-oil-license-agreement-22459SOMALILAND%3A+Government+Terminates+TOTAL+Oil+license+Agreement2011-05-23+02%3A26%3A35Mo+Guledhttp%3A%2F%2Fsomalilandpress.com%2F%3Fp%3D22459

HARGEISA (SomalilandPress)–According a press release from the office of the presidency, Somaliland government has suspended the license of the French foreign company Total Oil’s management of Berbera port’s oil storage facilities. This news came in the form of a press release from the office of the presidency signed by the present’s spokesman Mr. Abdullahi Mohamed Dahir (Cukuse) in which it details the termination of TOTAL’s license in Somaliland.

It was roughly eleven years ago when former president Mohamed Ibrahim Egal gave TOTAL Oil which at that time was called Total Red Sea full control of Berbera port’s fuel storage and import of fuel into the country. Ever since that day majority of Somalilanders were not happy with the form that was in which TOTAL Oil was awarded that contract. Total has had monopoly on the oil business in Somaliland for the past eleven years and today’s announcement that the French firm will no longer be managing the fuel storages facilities has been welcomed as pleasant news.

President Ahmed Mohamud (Siilaanyo) has appointed several ministers from his cabinet who will be managing the day to day operation of the fuel storage facilities until a permanent company is rewarded with the contract. An open bid auction is expected to take place before any firm is awarded this time around given that this contract is seen as lucrative contract because whoever wins will be managing the country’s only fuel storage facilities and the license to import oil into the country.

SomalilandPress was able to optain a copy of the original contract that Total signed with former president Mohamed Ibrahim Egal.

AGREEMENT FOR LEASE OF PETROLEUM PRODUCT STORAGES AND AIRCRAFT FUELLING FACILITIES BETWEEN-The REPUBUC OF SOMALILAND (hereinafter referred to as the “Government”) represented by the President, Mr Mohamed Ibrahim EGAL and fully empowered to sign on behalf of the GovernmentAND-TOTAL MER ROUGE (hereinafter referred to as “TOTAL”) a company organized and existing under the laws of France represented by its Chairman Mr Didier HAREL

- Whereas the Republic of Somaliland is the owner of petroleum products storage facilities in the port and airport of Berbera and in Hargeisa and wishes to rationalize the Supply and marketing of petroleum products.

- Whereas TOTAL has signed on May 8th 1998 with H.E. the President of Somaliland Republic a Memorandum of Understanding (“MOU’7 giving to TOTAL the sole right to secure the lease for the petroleum products facilities of Berbera and Hargeisa, Includrig aircraft facilities, for a duration of 50 years

- Whereas the Parties wish to define their rights and obligations with respect to the MOU principles and to the operations set out below and to be performed.The Parties hereby agree to sign the present Agreement and to act as follows: ARTICLE 1 – GRANT OF RIGHT EFFECTIVE DATE AND TERM

1.1. As of the Effective Date of the present Agreement the Government hereby grants to TOTAL a lease for the petroleum product facilities of Berbera and Hargeisa for a period of 50 years and the right to conduct all operations regarding petroleum products including the supply, storage and terminalling activities. bunkering and fueling of aircrafts. At the expiration of the lease1 TOTAL has a preferential right for lease renewal or to acquire the entirety of the assets. under consideration. TOTAL shall have the right to enter Into the distribution of petroleum products on the market under its own trademark.

The objective of TOTAL is to rehabilitate and operate the main terminal and aircraft facilities under the conditions defined in the present agreement.

1.2. The present Agreement shall have effect from its Effective Date which is the issuance date of a law or decree by the Government approving said Agreement arid giving the provisions hereof full force and effect. The present Agreement shall be binding upon the Parties as of this Effective Date failing which it becomes null arid void. As of its Effective Date it replaces and supersedes the previous MOU.

1.3 During the execution of the present Agreement, the Government shall warrant to TOTAL that neither third party may use any of the Berbera and Hargeisa Facilities even if they are not used by TOTAL itself without the prior written consent of TOTAL The forecasted utilisation of the main terminal in Berbera is detailed in Appendix.

ARTlCLE 2 PURPOSE

The Government grants the right to TOTAL to conduct all operations necessary to the main- Terminal and aircraft facilities and operations of distribution such as

2.1.Exclusive Storage terminal rehabilitation and operatorship of all activities for storage receipt and throughput. Exclusive Aircraft facilities rehabilitation and operatorship for all refuelling activities at the airports of Berbera and Hargeisa. Setting up of a network of service stations.Importing and exporting, providing and distributing petroleum products. Exclusive right to use and operate the jetty located at Berbera which remains the liability and the ownership of the Government under the duration of the lease

2.2. TOTAL may conclude any joint venture agreement with any person or entity of its choice for rehabilitating and operating the Facilities in order to share the costs. expenses and investments of the operations.

Nevertheless TOTAL shall,remain the sole representative towards the Repub!ic of Somaliland during the execution of the present Agreement.

ARTICLE 3 WARRANTIES OF THE GOVERNMENT

The Government gives the following undertakings:

3.l -to procure and grant promptly all permits, licences, authorizations and approvals required from the Government or any other official – national, regional and/or local – authority in Somaliland which are necessary to give effect to this Agreement and to keep valid the Execution of this Agreement.

3.2- not to enact any legislation, decree or take or Implement or permit any administrative action by any organ of the Government which would render the present Agreement or any obligation of.TOTAL either illegal or irnpossible to perform or which would otherwise prevent the terms or activities from being given full effect.

3.3- not to permit any third party to obtain similar rights as those granted to TOTAL during the execution of present Agreement.

3.4- to maintain in full force and effect the rights granted to TOTAL during the term of the lease and during the execution of this Agreement.

3.5- to accomplish all formalities necessary including enacting legislation to give legal force and effect to all the rights granted to TOTAL in Article 4.

3.6- to amend the foreign investment law project as requested by TOTAL herebelow attached in Exhibit 1.

3.7- to obtain visas for and provide access to all locations in Somaliland relevant to the scope of this Agreement, to all TOTAL personnel and TOTAL’s contractors personnel as are necessary to enable such personnel to fulfill their respective missions and duties in implementing the operations.

3.8- to assist with housing, office space, transportatiqn facilities and other logistical aspects to conduct the operations.

3.9 – to assist with the acquisition of and/or the allocation of the right to use land, buildings and facilities needed to conduct the operations and store goods, equipment, material and spare parts. 4.0- to notify at TOTAL’s request by prior written notice of three (3) months to the third parties using the land and premises concerned by this Agreement their withdrawal from such land and premises before the execution of the Agreement.

ARTICLE 4 – RIGHTS AND OBLIGATIONS

4.1.Financing

-TOTAL has paid on May 13, 1998 a lease bonus of two hundred thousand USD (200 000 USD) as sole lump sum to be borne as bonus.

- In exchange of the lease granted to TOTAL as per Article 1.1., TOTAL shall pay also an annual rent of thirty thousand U$D (36 000 USD) to the Government during the duration of such lease.

- TOTAL has paid on May 13, 1998 to the Government after signature of the MOU a part of Government’s expected revenues deriving from the depot rental and other revenues of four hundred fifty thousand USD (450 000 USD) and the Government undertakes to reimburse this sum of money within a period of two years as of the Effective Date. TOTAL will have the right to use partially any amount collected himself on behalf of the Government to reimburse the debt.

- TOTAL shall also receive as of first date of operation an annual management fee of 10% of the operating costs incurred per year which shall be included in the price structure.

4.2.Price Structure

-TOTAL shall advise the Government on the technical side in order to enable the Government to establish an official price structure including the components that shall be the constitutive elements of an official public pump price as per Exhibit 2 and including the main following items such as:

- CIF value – price in depot – throughput costs (operating costs. service fee, economic depreciation) -. stocks financing – importers margin – depot rental per volume – reconstruction tax per volume – ex depot price – custom duties – various taxes and levies (such as sales tax, municipal levies …) – transport cost – wholesale margin – retail margin – public retail pump price

4.3. Fiscal rights

a) During the whole period of Facilities rehabilitatior and settlement,TOTAL, its contractors and subcontractors shall be permitted to import and shall be exempted from customs duties and Import licence fees with respect to the importation of machinery. equipment vehicles for the operations and safety of the depots (workshop1 ambulance fire fighting towing of boats, refuellers etc) as well as one vehicle for the general manager, office and housing equipment and furniture including but not limited to.petroleum products, materials, supplies. consumable items1 movable property and spare parts to be used for the rehabilitations, setting up of offices and management houses.

b)All items referred in a) above may be exported. by TOTAL or its contractors or subcontractors at any time without the payment of any export duty. c)All exchange control approvals required on importation of Capital, Repatriation of Capital, Profits and Dividends shall be provided by the Government or its relevant. Official Authorities. d)TOTAL shall be exempted during the first three (3) years as of the Effective Date from the payment of the income tax and of the withholding tax on dividends and any other taxes whether now existing or hereinafter created by Government.

e) Any fiscal deficit incurred by TOTAL from its operations in the R.S during any year shall be carried forward over a period not exceeding five years

4.4. Trading

a)TOTAL shall have the necessary’ license to import, store and resell petroleum products to its own marketing organisation or to other customers and wholesalers

b)TOTAL shall be allowed to import. store and re export petroleum products to it’s customers or through its own organisation whether in SOMALILAND or abroad. In case of exports or transit, the products shall bear no taxes, levies or duties.

C)For customs purposes the products stored in the depot shall be stored inbound

ARTICLE 5- PROPERTY RIGHTS

5.1. Immediately upon the installation thereof, title to all fixed assets shall vest in the Government and the Government shall be deemed to be the owner thereof for all purposes under this Agreement 5.2. Title to movable assets shall remain the ownership of TOTAL as of the Effective Date until completion of the operations for all purposes of this Agreement.

5.3. TOTAL shall have the free use all assets, to which the Government has title during the execution of the present Agreement provided that the assets and the lands not used shall be considered as remaining assets of the Government.

5.4 At the expiration of the lease, TOTAL shall have either a first priority right to acquire all fixed assets of the Government within two months as of the expiration date of the lease at a fair price market value to be mutually agreed at this stage or a preferential right for lease renewal. The Parties may also mutually agree at any time on the transfer of part or all Government’s assets to the benefit of TOTAL at a fair market value.

The Parties also agree that during the lease all or part of the assets intended to be sold or otherwise transferred by the Government pursuant to a bona fide offer to any third party must first be offered to TOTAL which shall notify the Government in writing within thirty (30) days whether or not it chooses to purchase all or part of the assets concerned on the terms and conditions of the offer.

ARTICLE 6 OPERATING CONDITIONS

6.1. TOTAL Management rights TOTAL is designated as Operator and agrees to act in accordance with the terms oft he present Agreement. TOTAL shall have all the rights, functions and duties of Operator and the exclusive charge of and shall conduct all the Operations of the Facilities.

In the conduct of the Operations: -the Operator shall conduct all operations in a diligent, safe and efficient manner accordance with the principles followed by the international petroleum industry the Operator shall pay and discharge all liabilities and expenses incurred in connection with the Operations and pay to the Government all payments as due in the present Agreement.

- the Operator shall take all necessary and proper measures according to its standards for the protection of life, health environment and property in the case of emergency – the Operator shall allow the representatives of the Government to have at all reasonable times and at their own risk and expense access to the Operations with the right to observe all operations and to inspect the property (fixed assets)

6.2. Employment The Operator shall determine the number of the employees or workers as reasonably necessary’ to conduct the operations without minimum imposed by the Government and shall carry out their selection which shall be made as a matter of priority amongst Somaliland nationals of adequate skills and experience. The Operator shall carry out the establishment and the implementation of education and training programs far the local personnel of the local companies involved in the Operations. The selection of managerial staff shall be done freely by the operator.

6..3. Admission of any third party. The Operator shall establish qualifying criteria and admission procedures for and shall Examine and decide on the request of any proposed third party desiring admission to the Facilities including terms and conditions of such admission provided that the Government shall first approve the admission of the third party concerned.

ARTICLE 7- LIABILITIES

7.1. Liability in respect of claims arising out of death or injury to the TOTAL’s personnel employed in the operations shall be borne by the Operator.

- Liability in respect of claims arising out of damage or loss to the movable assets shall be borne by the Operator.

Liability in respect of claims arising out of damage or loss to the fixed assets shall be bornne by the Operator if its liability is due to is Wilful Misconduct in any operation executed in this Agreement. Wilful Misconduct shall mean an intentional and conscious or reckless disregard of any provision of this Agreement not justifiable by special circumstances.

7.2. Third parties liabilities in respect of third party claims shall be bornne by the Operator only if its liability is due to its wilful Misconduct.

7.3. Under no circumstances shall the Operator bear any cost, expense or liability for environmental, consequential or any other similar indirect damages or losses.

ARTICLE 8 – INSURANCES

The Operator shall procure and maintain all insurance in the types and amounts required by the Agreement and applicable local law and regulations. It shall exert its reasonable efforts to require all contractors performing work in respect of the Operations to obtain and maintain any insurance policies required.

ART:CLE 9 -FORCE MAJEURE

9.1. Force Majeure shall mean circumstances which are unpredictable. irresistible or beyond the reasonable control of the Party concerned.

9.2. In the event of Force Majeure such as war, natural disaster or other extraordinary circurnstances1 the Government has the right to requisition part of the petroleum products stored in the Facilities provided that the Government guarantees TOTAL compensation for the product: in monetary compensation at world market prices in force during the event of Force Majeure.

The Government shall also compensate at world market prices in force during the Force Majeure, the customers of TOTAL and any third party signatory of a throughput agreement with TOTAL for using the Facilities.

9.3. If as a result of Force Majeure any Party is rendered unable to carry out its obligations under this MOU, then the obligations of such Party shall be suspended during the continuance of Force Majeure. Beyond a period of one (1) year and unless otherwise agreed any Party may notify the cancellation of this Agreement upon prior written notice.

ARTICLE 10- CONFIDENTIALITY

The Parties agree that all information and data acquired or obtained by any Party in respect of Operations shall be considered confidential and shall be kept confidential and not be disclosed during the term of this Agreement unless written mutual approval.

ARTICLE 11 – EQUITY

If during the term of this Agreement the general economic situation existing at the time of signature of the Agreement is significantly altered, or if the economic circumstances on which the Participants based their action at the time of signature develop in such a way that one of the Participants finds itself in an Inequitable and unfavourable position. then the Participants will meet at the request of either of them to discuss in good faith how to remedy the situation and if necessary to modify this Agreement to take account of such changed circumstances.

If the participants fail to reach such an agreement within 90 days of the date of the notice whereby this clause was invoked, TOTAL shall have the right to terminate this Agreement upon notice to the Government.

APPENDIX ONE TO LEASE AGREEMENT

List of modifications to be made to the Investment Law project. The principles of the thus modified investment Law shall be the principles which shall be applicable to the project of depots rehabilitation and operations, object of the present lease agreement, except if otherwise specified In this said agreement.

Article 10 In article 10.1, 2nd line, the terms “as soon as (shall be replaced by “with in 30 days after)

Article l3 In article 13.1 3rd line the duration of ( five years ) shall be replaced by ( 3 years)

In article 13.4, 4thline, after the terms (transfer abroad ), the terms (in freely convertible currency, through currency exchanges conducted and warranted by the Somaliland Central Bank) shall be Inserted.

Article 15 Investment incentives The following amendments are to be made:

(Imported machinery, equipment, installations and any other outfits as well as raw materials, supplies and components imported for production purposes are exempted from import custom duties)

(Foreign investment is exempted from payment of tax on profit for a period of three years from commencing operations. In addition, after the expiry of the initial tax holiday period, foreign investors shall be entitled to a 50% reduction of the tax due for the profits reinvested)Article 18 Guarantees for foreign investment In article 18.3, 3rd and 4th lines, the terms (freely transferable) shall be replaced By( freely transferable)

Article 19 Setlement of disputes.

In the second paragrap, last line, the terms ( the President of the Supreme court of Somaliland ) shall be replaced with ( in first instance the President of the Supreme court of Somaliland and in case of appeal then the Arbitral Court of the International Chamber of Commerce)

BUILD UP OF PRICE STRUCTURE EXHIBIT TO LEASE AGREEMENT

The price structure shall be built up in US dollars as follows: The revision shall be done monthly by the operator, to be effective on the first day of the current month with the datas of the previous month. In case of several receipts, the cost shall be weight averaged.

1. FOB Calculated with actual FOB prices, including the premium paid to the supplier during the past month; In case of several reciepts, the weighted average shall be taken into consideration as per the bill of ladding figures. If no imports has been done during the past month,, the figures shall be reconducted for the current month. If the operator has no stocks of a product and the marketing is done by a third party the FOB element shall be the ones of the third party evidenced by B/L and invoices

2. FREIGHT Actual freight paid including demurrage if any on the same principle as for the FOB calculation.

3. INSURANCES Actual cost of insurances for the products and for the vessel if it is the case. A provisional percentage of 3.5% of the FOB plus Freight costs can be utilised

4 .CIF VALUE The CIF value is the sum of these three costs unless the product is invoiced by the supplier on a C.I.F basis in which case this later figure shall be taken into consideration

5. LOSSES DURING TRANSPORT AT SEA A percentage of 0.5% of the loaded quantities shall be applied using the CIF costs

6. PORT CHARGES Shall be the actual port charges paid by the importer of products as per the official applicable rates.

7.PRICE IN DEPOT Is the sum of 4+5+6

8. DEPOT LOSSES A fixed percentage of 0.5% shall be applied on the In Depot cost 9. THROUGHPUT COSTS Is the addition of the following costs: operating costs including inter alia salaries, energy, maintenance, insurances,technical assistance, fixed rentals etc. Such costs shall be the actual ones supported for the previous year corrected by the inflation cost index and divided by the previous year’s throughput for internal market in order to come to a cost per M3.

For the start of the operations, a provisional figure of 30 US$ per M3 for the operating costs shall be applied, to which shall be added the fixed rentals elements. A service fee of 10% of the above costs shall be added to the operating costs. Depreciation which is to be the economic depreciation of the operator’s investment. The depreciation is to be calculated on the sum of the investments made by the operator including the goodwill paid but excluding the rentals paid in advance. The depreciation shall be of 2O% plus 1O%of the investments as remuneration plus Linear deprecation respectively ,divided by the previous year’s throughput. This depreciation element of the structure is net of income taxes for the operator. For the start of the operations, a provisional figure of 2 I USD per M3 free of taxes shall be applicable.

10. STOCKS FINANCING Cost of maintaining an average of 45 days stocks at an interest rate of LIBOR plus 2 Prevailing at the date of receipt or weight averaged, applied on the IN DEPOT cost ( itemN07).

11. IMPORTERS MARGIN The importers shall be allowed a maximum of 10% gross margin calculated on the 7 to10 items.

12. DEPOT RENTAL A variable element of US 9$ per M3 applicable on quantities issued for the National Consumption. only This amount is collected by the operator and paid to theAuthorities at 30 days end of month. It shall initially be retained by the operator untill full reimbursement of the advance payments

13. RECONSTRUCTION TAX A variable element of USD 7$ per M3 applicable on quantities issued for the National consumption only. This amount is collected by the operator and paid to the Authorities at 30 days end of mopth.

14. EX DEPOT PRICE excluding taxes Sum of 7 to 13

15. CUSTOM DUTIES As per the official rates applicable on the CIF price These duties are not payable on products sold to the aircrafts,to the vessels calling at Berbera or to the products re-exported or in transit. These duties shall be payable by each importer to the custom authorities 60 days after the end of the month when the products left the depot.

16. EX DEPOT PRICE taxes included 14+15 I7.LEVY MINISTER OF COMMERCE Paid by the marketers on the quantities taken ex depot for national consumption. as per the official rates: US D $3 per M3

l8. MUNCIPAL SALES TAX Paid by the marketers on the quantities taken ex depot for national consumption.

19.TRANSPORT COST This is the cost of transportation of the products by road tankers from the depot to the point of delivery. It is revised quarterly as per the transporters approved tarifcations

20.WHOLESALE MARGIN A fixed margin is allowed for the wholesalers. This margin is of USD 16$ per M3

21.LOSSES IN TRANSPORT To cover the losses incurred during the transport its is 0.5% of the value of the product 16+17+18+19.

22.MUNICIPAL LEVIES As per the actual amounts officially paid to the municipalities

23. PRICE TO RETAII£R Sum of items 16to22

24. RETAIL MARGIN A margin of USD 16$ per M3 is allowed to the retailers. 25. ROAD TAXES An amount collected by the retailers and paid to the authorities. A provision is made for $1.5 USD per M3

26 .PUBUC RETAIL PUMP PRICE Price paid by the customers at the retail service stations: 23+24+25. The retailers shall pay in National Currency according to the prevailing exchange rates. For taxes and levies in items 17 to 25, the State will publish ,when applicable, the monthly exchange rates to be applied for the conversion from US to national currency

TOTAL MER ROUGE,

Source: SomalilandPress| 23 May, 2011

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By Mo Guled

Tags: Somaliland president, Somalilandpress, Total Oil