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
ARTICLE 4 - RIGHTS AND OBLIGATIONS
-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
-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
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
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
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
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
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
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
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
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
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
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 $3 per M3
l8. MUNCIPAL SALES TAX Paid by the marketers on the quantities taken ex depot for
19.TRANSPORT COST This is the cost of transportation of the products by road tankers
from the depot to the point of delivery. It is revised quarterly as per the transporters
20.WHOLESALE MARGIN A fixed margin is allowed for the wholesalers. This margin is of
USD 16$ 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