CNPC contributes to cash advances worth $259.5 million to Government of Chad to cover oil transit fees, purchase of refined oil products to produce electricity, and equity contributions (Linked to Record ID#105382, #56285, #72355, #55744, #72356, #91918, #104610)

Cliveden Petroleum Co.

Ltd. and CNPC contribution to $259.5 million Cash advances to Government of Chad On February 23, 1999, Cliveden Petroleum Co.

Ltd. — a Swiss oil company — and the Government of Chad signed a Convention for Exploration, Exploitation and Transportation of Hydrocarbons.

Two years later, on March 16, 2001, the Government of Chad passed a decree (No. 160/PR/MMEP/2001), granting Cliveden Petroleum Co.

Ltd. a hydrocarbon exploration permit for Permit H Area, which is also known as Block H and includes acreage in the Bongor, Doseo, Doba, Salamat and Erdis basins as well as the less well-defined Lake Chad and Madiago basins. The Permit H Convention Agreement between the Government of Chad and Cliveden Petroleum Co.

Ltd. was signed on January 1, 2002. On February 26, 2002, Cliveden Petroleum Co.

Ltd. transferred a fifty percent (50%) participating interest in Permit H Area to AEC International (Chad) Ltd. (through a "Transfer Agreement” that was approved by the Minister of Mines, Energy and Petroleum of the Republic of Chad on February 26, 2002. Then, on April 19, 2002, AEC International Chad Ltd. was renamed EnCana International (Chad) Ltd.

On December 18, 2003, CNPC — through its CNODC subsidiary — purchased a 50% ownership stake in Cliveden Petroleum Co. Ltd. for $45 million (through a Stock Purchasing Agreement), which gave it exploration rights to the Permit H Area.

Research began in 2005 in the area of ​​Baobab and Rônier in the Bongor basin, which led to the 2014 discovery of a reserve of 100 million tons of oil in the hills of the Bongor basin (and the acquisition of an exclusive operating authorization on January 7, 2014).

On December 8, 2006, CNPC International (Chad) Ltd. (CNPCIL) also signed a share purchase agreement to acquire the entire share capital of EnCana International (Chad) Ltd., which held the remaining 50% participating interest in the Permit H Area. The acquisition was competed for $202.5 million and back-dated to October 1, 2006.

EnCana International (Chad) Ltd. was renamed CNPC International (Chad) Co., Ltd. (CNPCIC).

As of January 12, 2007, CNPC International (Chad) Ltd. (CNPCIL) indirectly held a 100% participating interest in Permit H Area. Cliveden Petroleum Co.

Ltd. and CNPC International (Chad) Co., Ltd. (CNPCIC) — two wholly-owed subsidiaries of CNPCIL, a CNPC company that is legally incorporated in the British Virgin Islands — had become the legal and beneficial owners of the entire participating interests in the Permit H Area (under the February 23, 1999 Convention Convention for Exploration, Exploitation and Transportation of Hydrocarbons and the January 1, 2002 Permit H Convention Agreement).

Cliveden Petroleum Co. Ltd. and CNPCIC each held a 50% participating interest in the Permit H Area.

They also became jointly responsible for the Rônier concession, the Mimosa concession, and the construction, operation, and maintenance of the oil transportation pipeline that runs from the oil field in the Bongor basin to the SRN's N'Djamena oil refinery in Djermaya. Then, on December 31, 2009, CNPCIL, Cliveden Petroleum Co.

Ltd, CNPCIC, the Government of Chad, and the Chadian state-owned oil company Société des Hydrocarbures du Tchad (SHT) signed a so-called “Assigned Interest Agreement” in which Cliveden Petroleum Co.

Ltd. agreed to (a) grant a 10% participating interest in the Permit H Area to SHT; and (b) fund, bear and pay for SHT's 10% participating interest share of certain costs, expenses and liabilities (under the February 23, 1999 Convention Convention for Exploration, Exploitation and Transportation of Hydrocarbons and the January 1, 2002 Permit H Convention Agreement), subject to the terms and conditions specified therein (the "Carry Agreement”).

At the same time, pursuant to the provisions of a Master Agreement, the Government of Chad, Cliveden Petroleum Co.

Ltd, CNPCIC, and SHT concluded an amendment to the January 1, 2002 Permit H Convention Agreement to, inter alia, acknowledge the inclusion of SHT as a member of the Permit H consortium.

Then, on November 26, 2011, Société de Raffinage de N'Djaména (SRN) SA (恩贾梅纳炼厂有限公司 or 恩贾梅纳炼油公司) — a special purpose vehicle that is jointly owned by CNPC International Ltd. (60% equity stake) and SHT (40% equity stake) and that is responsible for the N'Djamena Refinery — signed a crude oil supply agreement with the consortium consisting of Cliveden Petroleum Co.

Ltd, CNPCIC, and SHT.

The consortium agreed to supply the refinery with crude oil at a fixed priced of $68 a barrel (until June 30, 2015, when the price per barrel was revised downward to $46.85).

The agreement also (a) granted CNPCI or a CNPCI Affiliated Company the right to supply crude oil to the SRN refinery by withdrawal from the Permit H Area or any other oil fields held by CNPCI and/or its Affiliated Companies in the Republic of Chad, (b) specified that a share of the production royalty to be paid to the SHT would be transferred directly to the SRN refinery to then supply the power plant owned by CNPCI; and (c) purchase all electricity generated by the power plant to be built in connection with the SRN refinery (other than electricity consumed by the SRN refinery) on a take-or-pay basis for a volume specified in a electricity purchase contract (at a price which would guarantee to the company in charge of the project the making a profit on these sales).

By the end of November 2011, the consortium consisting of Cliveden Petroleum Co.

Ltd, CNPCIC, and SHT had begun to exploit the Mimosa and Ronier oil fields (which were expected at the time to produce 10,000 barrels of crude oil per day). However, disagreement over fuel prices led to a suspension of the SRN refinery’s activities in 2012.

Then, in August 2013, the Government of Chad suspended CNPC’s operations in Chad, accusing it of violating environmental standards at the company’s Rônier oilfield. Work resumed shortly thereafter but was halted again in May 2014, after CNPC refused to pay a $1.2 billion fine.

Preparing to take the dispute to international arbitration, the Government of Chad in October 2014 threatened to revoke and re-auction CNPC’s oil exploration licenses. The dispute was settled the same month when CNPC agreed to pay a $400 million fine.

On October 24, 2014, a transaction agreement protocol (‘protocole d’accord transactionnel’) was signed by the Government of Chad, SHT, Cliveden Petroleum Co. Ltd., and CNPCIC, in which Cliveden Petroleum Co.

Ltd., and CNPCIC agreed to provide cash advances to SHT for three purposes: to cover cost of oil transit fees, the purchase of refined oil products to produce electricity, and equity contributions.

SHT agreed to repay these debts — at an interest rate of 3-month LIBOR plus an unspecified margin and a default (penalty) interest rate of 3-month LIBOR plus a 3% margin — with the proceeds from future oil revenues (to which it is entitled under the December 31, 2009 Assigned Interest Agreement).

Shortly after the transaction agreement protocol was signed, Cliveden Petroleum Co. Ltd., CNPCIC, and SHT signed an oil production sharing contract (on November 7, 2014).

Under the terms of the November 7, 2014 contract, the parties were granted an exploration term of up to eight years and a development term of up to 35-years for the Permit H Area.

SHT was also granted the right to ‘back-in’ for a participating interest of up to 25 percent, paying its equity share of both past exploration costs and development costs. [Note: These exploration costs and development costs were not to be paid in cash but to be recovered out of ‘Cost Oil’, meaning that the costs would be effectively financed by SHT’s partners via ‘carry’ (with interest).] A 10% equity transfer agreement, which was executed on March 17, 2016, further specified that the cash advances were to be equally borne by Cliveden Petroleum Co.

Ltd. and CNPCIC (via shareholder loans). Record ID#104629 captures CNPCIC's cash advances, and Record ID#105382 captures Cliveden Petroleum Co. Ltd.'s cash advances.

It also specified that SHT’s portion ($333 million) of the total project cost was to be initially covered by Cliveden Petroleum Co. Ltd. and CNPCIC and SHT would subsequently repay Cliveden Petroleum Co. Ltd. and CNPCIC.

These financial commitments were codified in a shareholding transfer contract ('contrat de cession de participations') on March 29, 2017.

Under the terms of the contract, monthly interest payments were scheduled to commence -- via "cash call" deductions from SHT's share of the oil revenue generated from its joint venture with Cliveden Petroleum Co. Ltd. and CNPCIC -- on September 1, 2017. Then, on January 7, 2018, the Government of Chad, SHT, SRN, Cliveden Petroleum Co.

Ltd. and CNPCIC signed a memorandum of understanding (MOU).

The Government of Chad and SHT agreed to sell 3.8 to 4.3 million barrels of crude oil to the SRN refinery from January 1, 2018 until December 31, 2023 at a fixed price of $46.85 dollars.

The revenue from these crude oil sales was to be used by the Government of Chad to repay its debts to Cliveden Petroleum Co.

Ltd. and CNPCIC (resulting from advance payments that were made to cover the cost of oil transit fees and the purchase of refined oil products to produce electricity), with any residual revenues being remitted to the Chadian Treasury.

At the time that the MOU was signed, on January 7, 2018, the Government of Chad's outstanding debts to Cliveden Petroleum Co. Ltd. and CNPCIC amounted to $259.5 million.

They consisted of $209.5 million in SRN refined oil product debts, $41.8 million in oil transport tariff debts, and $8.2 million in debts related to shareholder loans secured by SHT.