Page 165 - The Persian Gulf Historical Summaries (1907-1953) Vol III

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Article 6
Within one year from the dale of signature of this Agreement, the Company
agrees to commence actual exploratory work in the concession area and to proceed
diligently with such work. Before the expiry of five years from the date of
signature of this Agreement, the Company agrees to commence operations in
connection with the drilling ol a test well in the concession area and to proceed
diligently with such drilling until discovery or abandonment.
Article 7
After discovery of oil in commercial quantities in the concession area, the
Company agrees to develop diligently such area in accordance with good oilfield
practices, and further agrees to produce oil therefrom diligently in accordance with
good oilfield practices, subject only to it being able to sell the oil at prices repre­
senting a fair profit according to normal standards in the world oil industry.

Article 8
The Company will pay to the Ruler on all net crude oil produced, saved and
sold a royalty of one-fifth of the proceeds of such sales. The term “ proceeds
of sales ” means the field storage price of crude oil sold by the Company If sales
are made at a place other than field storage the price for the purpose of royalty
shall be appropriately adjusted to arrive at a field storage price.
If sales of crude oil are made to companies associated with the Company or to
a refinery owned or controlled by the Company or any such associated company
as aforesaid then the “ proceeds of sales ” shall be calculated by reference to the
average price during the three months’ accounting period on all other sales by
the Company of crude oil produced by it from the Persian Gulf of similar quality
and gravity and in comparable quantities. In the absence of such other sales in
comparable quantities the Company shall agree as and when necessary with the
Ruler on a fair value for such oil and in the event of disagreement the question
shall be referred to an independent expert to be agreed between the parties.
If they shall fail within 60 days to agree upon the selection of such expert then the
said question of value shall be referred to arbitration in accordance with the
provisions of Article 28 hereunder.

Article 9
The royalties due to the Ruler hereunder shall be paid by the Company within
sixty days following the expiration of each three months’ period commencing with
the date of the first production of oil in commercial quantities.
The Company shall pay the amount due from it to the Ruler hereunder either
in cash or to the Ruler’s account in a bank to be designated by the Ruler from time
to time. The receipt obtained from the bank shall be a full discharge for the
Company in respect of the amount stated in the bank’s receipt.

Article 10
Subject to the existing prior rights the Company shall have without hindrance
in the concessional oil area or elsewhere in Abu Dhabi all reasonable rights and
facilities for the purpose of its operations under this Agreement including (but not
limited to): —
(i) The right to build, construct, maintain, operate and use all sorts of
buildings, installations, communications and transport systems, and
engineering works of every description;
(ii) The right to construct new roads for motor and general traffic, and to
make use of existing roads or tracks free of charge or taxes of any kind;
(hi) To use free of all payments to the Ruler any stone, sand, gravel, lime,
gypsum, clay or water that may be available and may be required for
its operations provided always that the inhabitants of Abu Dhabi shall
not be deprived of their usual requirements of these materials, that
irrigation is not prejudiced, that no land, habitation or watering place
for animals is deprived of a reasonable supply of water and that the
water supply of the inhabitants is not endangered;
fiv) To use for any of the above purposes free of all payments to the Ruler
the surface of any vacant Government owned lands.