CRUDE OIL SALES AGREEMENT

Exhibit 10.24

*** indicates material has been omitted pursuant to a Confidential Treatment Request filed with the Securities and Exchange Commission. A complete copy of this agreement has been filed with the Securities and Exchange Commission.

 

CRUDE OIL SALES AGREEMENT

between

PDVSA-PETRÓLEO S.A.

and

LYONDELL-CITGO REFINING LP

dated

August 16, 2006

 

Table of Contents

 

 

-i-

 

-ii-

 

iii

CRUDE OIL SALES AGREEMENT

This CRUDE OIL SALES AGREEMENT (this “ Agreement ”) is dated August 16, 2006, by and between PDVSA-Petróleo S.A., a corporation organized under the laws of the Bolivarian Republic of Venezuela (“ Seller ”), represented by its Executive Director, Supply and Marketing, Mr. Asdrúbal Chávez, and LYONDELL-CITGO Refining LP, a limited partnership organized under the laws of the State of Delaware (“ Buyer ”), represented by its Vice President and General Manager, Mr. William F. Thompson. Seller and Buyer may sometimes hereinafter be referred to individually as a “Party”, and, collectively, as the “Parties”.

RECITALS

WHEREAS, Buyer owns and operates a refinery and related facilities located in Houston, Texas (“ Refinery ”);

WHEREAS, Seller’s affiliate, CITGO Petroleum Corporation (“ CITGO ”), has entered into a Sale and Purchase Agreement with Lyondell Chemical Company (“ Lyondell ”), dated as of July 31, 2006 (the “ SPA ”), for the sale by CITGO and purchase by Lyondell of the CITGO LCR Interest (as defined in the SPA); and

WHEREAS, Seller desires to sell and deliver to Buyer, and Buyer wishes to purchase and receive from Seller, crude oil for processing at the Refinery commencing on August 1, 2006, in accordance with the terms and conditions of this Agreement.

NOW, THEREFORE, in consideration of the premises and the mutual representations, covenants and conditions hereinafter set forth, the Parties hereby agree as follows:

PART I

DEFINITIONS AND CONSTRUCTION

Article 1

Definitions

1.1 Definitions . For purposes of this Agreement, the following terms, when capitalized, shall have the meanings indicated below:

 

(a)

“Agreed Loading Range” shall mean the three (3) Day range for the arrival of a tanker set forth in an Agreed Lifting Program determined pursuant to Article 9.1;

 

(b)

“Agreed Lifting Program” shall mean a final lifting program for a Month determined pursuant to Article 9.1;

 

(c)

“Agreement” shall mean this Crude Oil Sales Agreement, including this Part I, the Special Terms contained in Part II hereof, the Standard Terms contained in Part III hereof, and all Exhibits attached hereto, as the same may be amended, modified or supplemented from time to time;

(d)

“All Fast” shall mean such time as a tanker is completely moored at the cargo transfer point with gangway down and secured;

 

(e)

“Allowed Laytime” shall mean the period of time which Seller shall be allowed, in accordance with Article 10.3, to complete the loading of a tanker without incurring demurrage;

 

(f)

“API” shall mean the American Petroleum Institute;

 

(g)

“ASBA” shall mean the Association of Ship Brokers and Agents;

 

(h)

“ASTM” shall mean the American Society for Testing and Materials;

 

(i)

“Barrel” shall mean a unit of volume equivalent to forty-two (42) Gallons;

 

(j)

“BPD” means Barrels per Day;

 

(k)

“Banking Day” shall mean any Day other than Saturday, Sunday or a Day on which banking institutions in New York, New York are authorized or required by law to close;

 

(l)

“Business Day” shall mean any Day other than Saturday, Sunday or any national holiday in Venezuela;

 

(m)

“Buyer” shall have the meaning set forth in the Preamble to this Agreement;

 

(n)

“Calendar Quarter” shall mean any period of three (3) consecutive Months commencing January 1, April 1, July 1 or October 1;

 

(o)

“Cargo” shall mean a vessel containing a quantity of Oil to be sold by Seller and purchased by Buyer in any Lifting Month;

 

(p)

“CITGO” shall have the meaning set forth in the Recitals to this Agreement;

 

(q)

“Contract Quantity” shall have the meaning set forth in Article 3;

 

(r)

“Day” shall mean a calendar day;

 

(s)

“Defaulting Party” shall have the meaning set forth in Article 16.4;

 

(t)

“Disclosing Party” shall have the meaning set forth in Article 17;

 

(u)

“Effective Date” shall mean August 1, 2006;

 

-2-

(v)

“ETA” shall mean estimated time of arrival;

 

(w)

“FOB” shall have the meaning set forth in Incoterms (2000 edition) published by the International Chamber of Commerce, provided , however , that in the event of any conflict between the provisions of the Incoterms definition and the definitions of this Agreement, the provisions of this Agreement shall prevail;

 

(x)

“Force Majeure” shall have the meaning set forth in Article 19.1;

 

(y)

“Gallon” shall mean a unit of volume equal to 231 cubic inches, 3.7853 liters or 0.003785 cubic meters, all measured at 60°F (equivalent to 15.56°C) and an absolute pressure of 29.92 inches of mercury;

 

(z)

“Guarantor” shall mean Lyondell;

 

(aa)

“ICC Rules” shall have the meaning set forth in Article 20.1;

 

(bb)

“Initial Term” shall mean a period beginning at 9:00 a.m. Central time on the Effective Date and ending at 11:59 p.m. Central Time on the last Day of the 60 th  Month after the Effective Date;

 

(cc)

“Insolvency Event” shall mean that an entity (i) is dissolved (other than pursuant to a consolidation, amalgamation or merger); (ii) becomes insolvent or is unable to pay its debts or fails or admits in writing its inability generally to pay its debts as they become due; (iii) makes a general assignment, arrangement or composition with or for the benefit of its creditors; (iv)(A) institutes or has instituted against it, by a regulator, supervisor or any similar official with primary insolvency, rehabilitative or regulatory jurisdiction over it in the jurisdiction of its incorporation or organization or the jurisdiction of its head or home office, a proceeding seeking a judgment of insolvency or bankruptcy or any other relief under any bankruptcy or insolvency law or other similar law affecting creditors’ rights, or a petition is presented for its winding-up or liquidation by it or such regulator, supervisor or similar official, or (B) has instituted against it a proceeding seeking a judgment of insolvency or bankruptcy or any other relief under any bankruptcy or insolvency law or other similar law affecting creditors’ rights, or a petition is presented for its winding-up or liquidation, and such proceeding or petition is instituted or presented by a person or entity not described in clause (A) above and either (1) results in a judgment of insolvency or bankruptcy or the entry of an order for relief or the making of an order for its winding-up or liquidation or (2) is not dismissed, discharged, stayed or restrained in each case within fifteen (15) Days of the institution or presentation thereof; (v) has a resolution passed for its winding-up, official management or liquidation (other than pursuant to a consolidation, amalgamation or merger); (vi) seeks or becomes subject to the appointment of an administrator, provisional liquidator,

 

-3-

conservator, receiver, trustee, custodian or other similar official for it or for all or substantially all its assets; (vii) has a secured party take possession of all or substantially all its assets or has a distress, execution, attachment, sequestration or other legal process levied, enforced or sued on or against all or substantially all its assets and such secured party maintains possession, or any such process is not dismissed, discharged, stayed or restrained, in each case within fifteen (15) Days thereafter; (viii) causes or is subject to any event with respect to it which, under the applicable laws of any jurisdiction, has an analogous effect to any of the events specified in clauses (i) to (vii) above (inclusive); or (ix) takes any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the foregoing acts;

 

(dd)

“ISPS Code” shall have the meaning set forth in Article 9.5.1(d);

 

(ee)

“Letter of Credit” shall have the meaning set forth in Article 7.3;

 

(ff)

“Lifting Month” shall mean the Month in which a Cargo is programmed for lifting;

 

(gg)

“Loading Port” shall mean one of the loading terminals for exports of Oil customarily used by Seller;

 

(hh)

“Lyondell” shall have the meaning set forth in the Recitals to this Agreement;

 

(ii)

“Lyondell Guarantee” means the guarantee by Lyondell of all of the obligations of Buyer under this Agreement which is executed and delivered on the date hereof in the form of Exhibit 4.

 

(jj)

“Ministry” shall mean the Ministry of Energy and Petroleum of Venezuela;

 

(kk)

“Month” shall mean a calendar month;

 

(ll)

“Non-Defaulting Party” shall have the meaning set forth in Article 16.4;

 

(mm)

“NOR” shall have the meaning set forth in Article 9.4;

 

(nn)

“Oil” shall mean Venezuelan crude oil of the BCF-17, Merey-16 and Mesa types, typically having the characteristics within the ranges specified in Exhibit 1;

 

(oo)

“Old CSA” shall have the meaning set forth in Article 8.3;

 

(pp)

“Party” shall have the meaning set forth in the Preamble to this Agreement.

 

-4-

(qq)

“Receiving Party” shall have the meaning set forth in Article 17;

 

(rr)

“Refinery” shall have the meaning set forth in the Recitals to this Agreement;

 

(ss)

“Renewal Term” shall have the meaning set forth in Article 8.2;

 

(tt)

“Security Regulations” shall have the meaning set forth in Article 9.5.1;

 

(uu)

“Seller” shall have the meaning set forth in the Preamble to this Agreement;

 

(vv)

“SPA” shall have the meaning set forth in the Recitals to this Agreement;

 

(ww)

“S & W” shall mean sediments and water;

 

(xx)

“Termination Agreement” shall mean that certain Termination Agreement entered into between Buyer and Seller relating to the termination of the Old CSA;

 

(yy)

“Termination Payment” shall have the meaning set forth in the Termination Agreement;

 

(zz)

“U.S. Dollars” or “U.S.$” and “cents” shall mean the lawful currency of the United States of America;

 

(aaa)

“Venezuela” shall mean the Bolivarian Republic of Venezuela; and

 

(bbb)

“Worldscale” shall mean, at any time under the Agreement, the most recent edition of the New Worldwide Tanker Nominal Freight Scale.

1.2 Construction . Terms defined in the singular have the corresponding meanings in the plural, and vice versa. All headings herein are for convenience only and shall not affect the construction or interpretation of the Agreement. Unless otherwise specified, all references herein to Articles and Exhibits are to the Articles and Exhibits of the Agreement.

PART II

SPECIAL TERMS

Article 2

Purchase and Sale

Subject to the terms and conditions of this Agreement, Buyer shall purchase Oil from Seller and Seller shall sell Oil to Buyer.

 

-5-

Article 3

Quantity

3.1 Contract Quantity . The total quantity of Oil to be sold by Seller and purchased by Buyer hereunder in any Month shall be equal to two hundred thirty thousand (230,000) Barrels times the number of Days in such Month, plus or minus five percent (5%), as determined in accordance with Article 9 (the “Contract Quantity”), provided , however , that the quantity of each type of Oil to be sold and purchased in any Month shall be as specified for such type in Exhibit 2.

3.2 Mesa Crude Quantity . During the first twelve (12) Months following the Effective Date of this Agreement, Buyer shall have the right, effective upon the giving of at least ninety (90) Days notice to Seller prior to any Month, to permanently terminate its obligation to purchase Oil of the Mesa type commencing as of the first Day of such Month and to replace such volume of Oil of the Mesa type with an identical volume of Oil of the BCF-17 type for the entire term of the Contract, such that the total Contract Quantity of Oil to be sold and purchased under the Agreement remains two hundred thirty thousand (230,000) Barrels per Day. If such right is not exercised during the first twelve (12) Months of this Agreement, Buyer shall have the additional right, effective upon the giving of at least ninety (90) Days notice to Seller prior to any Month, to terminate its obligation to purchase Oil of the Mesa type commencing as of the first Day of such Month and to reduce the Contract Quantity by the amount specified for such type of Oil in Exhibit 2.

Article 4

Destination

The Oil to be sold by Seller to Buyer shall be utilized exclusively at the Refinery, and Buyer shall not deliver any Cargo of Oil purchased from Seller hereunder to any other facility, except with the prior written consent of Seller. Upon Seller’s request, Buyer shall provide, for any Cargo of Oil delivered hereunder, a discharge certificate, which may consist of: (i) an independent inspector’s certificate of discharge, (ii) a customs fees receipt or other government document evidencing the port in which the Cargo of Oil was discharged, (iii) the exemption from customs fees at the port of discharge or (iv) any other document that Seller deems an appropriate substitute for the foregoing.

Article 5

Price; Adjustment of Price Mechanism

5.1 Price . The price for each type of Oil to be sold by Seller and purchased by Buyer hereunder shall be determined in accordance with the provisions of Exhibit 3.

5.2 Adjustment of Price Mechanism . Seller shall have the right at any time and from time to time, based on (i) discontinuance of the published market markers in the pricing formulas set forth in Exhibit 3, (ii) changes in circumstances which make the applicability of the published market markers in the pricing formula inconsistent with a competitive market-based pricing formula, or (iii) changes in the quality of one or more types of Oil, to notify Buyer that it wishes to adjust or amend the pricing provisions of Exhibit 3 with the objective of ensuring that

 

-6-

the price of Oil reflects market conditions for similar crude oils. Seller’s notice shall state the proposed effective date thereof, which shall be no earlier than thirty (30) Days after the date of its notice; provided , however , that the succeeding provisions of this Article 5.2 shall only apply if such proposed adjustment or amendment is applicable to Seller’s publicly announced pricing formula for deliveries of Oil destined for ports in the U.S. Gulf Coast and the Caribbean and that the new price shall not apply to Oil already nominated by Buyer. Buyer shall then have thirty (30) Days in which to accept or reject such proposed changes. If Buyer accepts Seller’s proposal or does not notify Seller within such thirty (30) Day period that it rejects Seller’s proposal, then the provisions of Exhibit 3 shall be deemed amended in accordance with Seller’s proposal as of the effective date specified in Seller’s notice. If Buyer rejects Seller’s proposal, then the provisions of Exhibit 3 shall remain in effect and unchanged; provided , however , that Seller shall have the right to submit the matter to arbitration pursuant to Article 20. In such arbitration, each Party shall submit its proposed alternative pricing mechanism, and the arbitration panel shall determine the appropriate adjustments, if any, to be made to the pricing formulas as of the effective date specified in Seller’s notice.

Article 6

Underlifting

Buyer acknowledges that its commitment to purchase and Seller acknowledges that its commitment to deliver the Contract Quantity for each Month is of material importance to the Agreement. Except as otherwise provided in this Agreement and subject to the provisions of Article 9.1.4 and Article 19, if, in any Month, Buyer lifts or Seller delivers less than the Contract Quantity for such Month, the non-breaching Party shall have the right to recover its damages for the breaching Party’s breach of its lifting or delivery obligation, and in addition shall have the right, upon notice to the breaching Party given not later than ten (10) Days after the end of the underlifting or underdelivery Month, to reduce the Contract Quantity for subsequent Months by an amount per Day equal to the amount per Day not lifted or delivered in the under lifting or under delivery Month or to terminate the Agreement (it being understood that if the non-breaching Party does not exercise its right so to reduce or terminate, the breaching Party’s full obligation to purchase or sell hereunder shall remain in full force and effect).

Article 7

Payment Terms

7.1 Currency, Time and Place of Payment; Overdue Payments . Buyer shall make all payments required to be made by it hereunder in immediately available U.S. Dollars, without any discount or deduction whatsoever, by wire transfer to such account at such bank as may be designated by Seller from time to time. Payments in respect of Oil sold and delivered shall be made no later than thirty (30) Days after the date of the bill of lading therefor (bill of lading date excluded). All other payments to Seller shall be made thirty (30) Days after presentation by Seller of a written demand setting forth the provisions of the Agreement giving rise to the payment obligation, the nature of such obligation, and the amount thereof. If any payment hereunder is due on a Day which is not a Banking Day, such payment shall be due on the immediately preceding Banking Day. In the event that Buyer fails to make any payment when due, then, to the extent permitted by applicable law and without prejudice to the application of any other provision hereof or to any other remedy provided to Seller hereunder or otherwise

 

-7-

(including, without limitation, Articles 7.3 and 7.4), interest shall accrue daily on the amount of the overdue payment, commencing on the date such payment was due, at a rate per annum equal to two percent (2%) above the prime rate in effect from time to time as announced by Citibank, N.A. at its principal office in New York, New York; it being understood and agreed that each change in the prime rate shall take effect on the Day on which such change is announced by Citibank, N.A. Interest shall be computed for the actual number of Days elapsed on the basis of a year consisting of three hundred sixty (360) Days, payable on demand.

7.2 Payment Expenses . Buyer shall bear all expenses and bank charges in connection with any payments made to Seller under this Agreement, including, without limitation, any costs of establishing and obtaining confirmation of a Letter of Credit referred to in Article 7.3.

7.3 Security for Payment . If at any time (i) Buyer fails to make any payment required to be made by it hereunder when and as the same shall become due and payable; (ii) Buyer defaults in any of its material obligations under this Agreement; (iii) the Lyondell Guarantee fails to be in full force and effect; or (iv) in Seller’s judgment, a deterioration in the financial condition of Buyer or Guarantor warrants a change in credit terms, then Seller shall have the right to require Buyer to make all payments required hereunder (whether due in respect of the purchase of Oil or otherwise) in advance in immediately available funds or, at Buyer’s option, by posting of an irrevocable documentary or standby letter of credit (“ Letter of Credit ”). The amount of the advance payment or Letter of Credit shall be equal to Seller’s estimate of the value of Oil for which the advance payment or a Letter of Credit is provided (which may be, at Seller’s discretion, for a particular shipment or for some or all shipments in a Month, plus ten percent (10%)), and paid or posted not later than seven (7) Business Days prior to the first Day of the Agreed Loading Range. Any such Letter of Credit shall be opened or confirmed by a first-class international bank satisfactory to Seller and shall be otherwise satisfactory in form and substance to Seller.

7.4 Suspension of Deliveries . If Buyer fails to (i) make any payment required to be made by it hereunder when and as the same shall become due and payable or (ii) make an advance payment or post a Letter of Credit as required in accordance with Article 7.3, then (in addition to all other rights or remedies provided to Seller pursuant to Article 16 or otherwise) Seller shall have the right at its sole discretion to suspend further deliveries of Oil until Buyer makes the required payment, together with any accrued interest thereon, or posts a Letter of Credit as required by Seller in accordance with Article 7.3.

Article 8

Duration

8.1 Initial Term . The Parties agree that, notwithstanding the date on which this Agreement has been entered into, this Agreement shall, as between the Parties, have effect from and including the Effective Date and, unless earlier terminated in accordance with the provisions of this Agreement, shall remain in effect for the Initial Term. Notwithstanding anything in this Agreement that may be to the contrary, the Parties agree that a condition precedent to the effectiveness of this Agreement shall be the execution and delivery by the Parties of the Termination Agreement and the receipt by Seller of the Termination Payment as provided for therein.

 

-8-

8.2 Renewal . The Agreement shall be renewed annually for twelve (12) Month terms after the Initial Term (each, a “ Renewal Term ”) unless earlier terminated by a Party in accordance with the provisions of this Agreement. Either Party may terminate the Agreement at the end of the Initial Term or any Renewal Term by delivering written notice of termination at least one year prior to the last Day of the Initial Term or to the Renewal Term in question.

8.3 Transition Period . The Parties acknowledge that immediately prior to the Effective Date, Buyer and Seller were parties to a Crude Supply Agreement dated May 5, 1993, as amended (the “Old CSA”) for the purchase and sale of similar volumes of the types of Oil to be purchased and sold by Buyer and Seller under this Agreement. The Parties further acknowledge that (i) this Agreement contains certain nomination and operational procedures that differ from those contained in the Old CSA, (ii) the nomination procedures under the Old CSA required some Cargos scheduled for delivery after the Effective Date of this Agreement to be nominated under the Old CSA in advance of the Effective Date of this Agreement, and (iii) it will require a period of not less than ninety (90) Days following the Effective Date in order to make a full transition to the nomination and operational procedures contained in this Agreement from those contained in the Old CSA. The Parties agree that the nomination and operational procedures contained in the Old CSA shall continue to apply and be followed until there is sufficient time in advance of a delivery Month in order for both Parties to nominate Cargos for such Month in full compliance with the timing of nominations and other operational procedures contained in this Agreement. Notwithstanding the application of any nomination or operational procedures of the Old CSA as agreed upon above, the Parties agree that the pricing formulas and mechanisms contained in this Agreement shall be applied to all Cargos lifted and having a bill of lading date after the Effective Date of this Agreement.

PART III

STANDARD TERMS

Article 9

Arrival Procedures and Lifting

9.1 Lifting Program .

9.1.1 At least thirty-five (35) Days before the beginning of the next programmed Lifting Month, Buyer shall furnish Seller with a lifting program for that Lifting Month, specifying the following:

 

(a)

subject to Exhibit 2, the volumes of the types of Oil that Buyer desires to purchase during the applicable Lifting Month;

 

(b)

a three (3) Day range for the arrival of each tanker;

 

(c)

the approximate quantity of Oil to be lifted by each tanker;

 

-9-

(d)

the port of discharge of each Cargo (which may be “Houston, Texas or Texas City, Texas”);

 

(e)

in the case of the lifting program for the following Lifting Month, (i) the name, size and dimensions of tankers designated for lifting during such Lifting Month; (ii) the names of the tanker’s agent and Buyer’s representative; (iii) documentation instructions; (iv) the distribution of the Oil to be loaded (e.g., commingled or segregated); (v) the name of the proposed independent inspector; and (vi) for at least the last ten (10) loading operations for crude oil for each nominated tanker, the volume loaded as measured on shore in shore tanks or by flow meters and the corresponding volume loaded as measured on board, such volume to be evidenced by documentation (including ullage and innage reports and onboard quantity and slop certificates) satisfactory to Seller; and

 

(f)

an estimate of the volumes of the types of Oil that Buyer desires to purchase during the following three (3) Lifting Months.

If Buyer does not furnish Seller with a lifting program complying with the requirements of this Article 9.1.1 for the following Lifting Month within the period specified above, Buyer shall be required to accept the lifting program for such Lifting Month established by Seller. In any event, the tanker must be acceptable to Seller.

9.1.2 If the name of a tanker is not known at the time the lifting program for the following Lifting Month is furnished to Seller, Buyer shall notify Seller of such name and the other data referred to in Article 9.1.1 as soon as possible, but in any event not later than seven (7) Business Days prior to the first Day of the Agreed Loading Range for the unspecified tanker. Seller shall have the right to reject Buyer’s tanker nomination, in which case Buyer shall take immediate action to nominate another tanker acceptable to Seller. If the Parties do not reach agreement on nomination of another tanker at least five (5) Business Days prior to the first Day of the Agreed Loading Range, loading of the tanker shall be subject to berth, jetty, buoy, loading platform and loading system availability, as applicable.

9.1.3 Seller shall be deemed to have accepted Buyer’s lifting program for the following Lifting Month unless Seller has notified Buyer of alterations at least fifteen (15) Days prior to the beginning of such Lifting Month; provided , however , that any such alterations by Seller shall not affect the volume or type of Oil nominated by Buyer (subject to operational tolerance). Seller shall in any event notify Buyer within such time period of the Loading Ports to be used by Buyer’s tankers (subject to adjustment as provided in Article 9.1.5) and the name(s) of the independent inspector(s) proposed by Buyer and accepted by Seller for purposes of Articles 11 and 12. If Seller timely so notifies Buyer of alterations to the lifting program, Buyer shall be deemed to have agreed to those alterations unless, within five (5) Days after Buyer’s receipt of Seller’s notice, Buyer requests Seller to reconsider such alterations. Seller’s decision following any such reconsideration shall be final and binding on both Parties. If Seller notifies Buyer that it objects to an independent inspector nominated by Buyer, the Parties shall designate another independent inspector by mutual agreement. The lifting program as finally determined pursuant to the provisions of Article 9.1 for any Lifting Month is referred to herein as the

 

-10-

“Agreed Lifting Program” for such Lifting Month, and the three (3) Day range for the arrival of any tanker contained in any Agreed Lifting Program is referred to herein as the “Agreed Loading Range” for such tanker.

9.1.4 In working toward each Agreed Lifting Program, the Parties shall cooperate with one another and exercise commercially reasonable efforts to achieve the objective that Oil be nominated, delivered and lifted on a ratable basis, taking into consideration turnarounds, planned and unplanned maintenance, and other operational considerations at the Loading Ports and the Refinery. The Parties expressly agree that Buyer shall have the right to reduce Oil nominations during scheduled maintenance turnarounds to volumes consistent with the reduced processing capacity of the Refinery as a result of such scheduled maintenance turnaround; provided that Buyer gives Seller not less than ninety (90) Days prior written notice of such scheduled maintenance turnaround. The Parties will cooperate in good faith to make up the deliveries of Oil not purchased by Buyer during the turnaround period, provided that Seller shall have no obligation to make up the volumes of Oil not purchased and delivered during such turnaround period.

9.1.5 Seller may notify Buyer that any tanker scheduled in an Agreed Lifting Program shall load the Oil at a Loading Port different from (but along the route that would otherwise have been used by Buyer to, or on the same coast as) the Loading Port previously specified pursuant to Article 9.1.3 or shall load the Oil at two (2) Loading Ports, provided that such notice is given by Seller (i) at least seventy-two (72) hours prior to the ETA of such tanker, if Buyer has notified Seller of an ETA falling within or after its Agreed Loading Range, or (ii) at least seventy-two (72) hours prior to the first Day of the Agreed Loading Range, if Buyer has notified Seller of an ETA which is earlier than the first Day of the Agreed Loading Range. Seller shall not be liable for any charges or expenses incurred by Buyer as a result of a shift from one Loading Port to another, or the specification of two (2) Loading Ports, as provided above.

9.1.6 Any deadfreight incurred as a result of Buyer’s nomination of a tanker whose dimensions are larger than those required to transport the Cargo it is scheduled to lift shall be for the sole account of Buyer, and Seller shall have no liability therefor by reason of its acceptance of Buyer’s nomination.

9.2 Substitution of Tankers . Buyer shall be entitled to substitute another tanker for any tanker designated in an Agreed Lifting Program; provided , however , that the substitute tanker shall have substantially the same characteristics (including carrying capacity) as the tanker previously nominated and accepted pursuant to Article 9.1 and shall meet the requirements for vessels loading at the particular Loading Port involved; and provided , further, that Buyer shall give Seller notice of the substitution not less than seventy-two (72) hours prior to the first Day of the Agreed Loading Range for the substituted tanker. In the event that Buyer substitutes a tanker other than in accordance with the provisions of this Article 9.2, Seller may in its sole discretion refuse to load such tanker, or it may load such tanker at any Loading Port on any Day it may specify, whether or not within the Agreed Loading Range for such tanker, and Seller shall in no event be liable for demurrage, deadfreight or any other charges with respect to the loading of any such tanker.

 

-11-

9.3 Advice of ETA . Buyer shall arrange for each tanker to advise the Loading Port operator and the vessel agent (with a copy to Seller delivered by e-mail or facsimile) of its ETA at each of the following times:

 

(a)

immediately upon the tanker’s leaving its last port of call before the Loading Port or ninety-six (96) hours before ETA, whichever is later;

 

(b)

seventy-two (72) hours before ETA;

 

(c)

forty-eight (48) hours before ETA;

 

(d)

twenty-four (24) hours before ETA; and

 

(e)

immediately upon learning of any material change in its ETA.

Seller shall not be liable for demurrage, deadfreight or any other charges in respect of any delay in loading attributable to the failure of a tanker to give notice of its ETA at any of the times enumerated above.

9.4 Notice of Readiness . The Buyer, its representative or the master of the tanker (who shall be deemed to be acting on Buyer’s behalf) shall give notice of readiness of the tanker to load (“ NOR ”) to the vessel agent and the Loading Port operator (with a copy to Seller delivered by e-mail or facsimile). NOR shall not be given until the tanker (i) has anchored at the customary anchorage area at the Loading Port, (ii) has been granted free pratique, (iii) has received the necessary clearance by customs and all other governmental authorities and (iv) is ready in all other respects to load; provided , however , that NOR may be given before the conditions specified in clauses (ii) and (iii) above have been satisfied if, in accordance with the practice at the Loading Port, such conditions may be satisfied only after the tanker has been brought to the loading point. If, notwithstanding having tendered NOR, the tanker is found not to be ready to load, such NOR will be disregarded and Buyer shall be obligated to give a new NOR when it is in fact ready to load.

9.5 Vessel Requirements; Security Regulations .

9.5.1 Buyer represents and warrants, and covenants, that each vessel used for loading Oil under this Agreement:

 

(a)

shall be owned or demised-chartered by a member of the International Tanker Owners Pollution Federation Limited (ITOPF), carry on board a certificate of insurance as described in the Civil Liability Convention for Oil Pollution Damage, (CLC certificate) issued to it by a signatory state, and comply with the International Safety Management (ISM) code;

 

(b)

shall be covered, without expense by Seller, by insurance protecting against any and all liabilities from pollution issued by an internationally recognized protection and indemnity club and international recognized insurers in an amount not less than one billion U.S. Dollars (U.S.$1,000,000,000), or such greater amounts as may become available in the insurance market and generally obtained by prudent owners of similar vessels;

 

-12-

(c)

shall have a policy on drug and alcohol abuse which meets or exceeds the standards in the Oil Company International Marine Forum Guidelines, dated June 1995, and take proper measures to ensure compliance therewith; and

 

(d)

shall comply with the International Code for Security of Ships and of Port Facilities (“ ISPS Code ”) and relevant amendments to Chapter XI of the International Convention for the Safety of Life at Sea, and similar laws and regulations pertaining to the security of ports, terminals and facilities (“ Security Regulations ”), and provide to Seller, prior to loading, a copy of the vessel’s International Ship Security Certificate according to the ISPS Code.

9.5.2 Buyer shall be responsible for any costs or expenses in respect of the vessel (including any demurrage, retention, delay or other charges, fees or duties) imposed at the Loading Port resulting directly from the vessel agent’s or vessel’s failure to comply with the Security Regulations or the imposition of special security measures, inspections or other actions by authorities at the Loading Port based on the vessel’s ten (10) prior ports of call, as established in the ISPS Code, and shall reimburse Seller for any such costs or expenses actually incurred by Seller. Notwithstanding any prior acceptance of the vessel by Seller, if at any time the vessel ceases to comply with the requirements of the ISPS Code, (i) Seller shall have the right not to berth the nominated vessel (and any demurrage shall be for the account of Buyer), and (ii) Buyer shall be obligated to substitute a vessel in compliance with the ISPS Code.

9.5.3 Seller shall procure that the Loading Port complies with the requirements of the Security Regulations. Prior to loading of the vessel, Seller shall provide Buyer with a copy of the International Port Security Certificate in accordance to the ISPS Code. Seller shall be responsible for any costs or expenses in respect of the vessel (including any demurrage, retention, delay or other charges, fees or duties) resulting directly from the failure of the Loading Port to comply with the Security Regulations, and shall reimburse Buyer for any such costs or expenses actually incurred by Buyer.

9.5.4 If the maritime security is affected by any event or circumstance, as defined in the ISPS Code, which is not imputable to either Party, and special security measures or actions are required to be taken by the port authorities or the vessel, any cost or expense for demurrage, retention or delay shall be shared equally by Buyer and Seller.

Article 10

Loading Conditions; Demurrage

10.1 Berthing of Tankers; Commencement of Laytime

10.1.1 Subject to the provisions of Articles 10.1.2 and 10.1.3, Seller shall provide a safe loading point at the Loading Port for each tanker designated in accordance with the provisions of Article 9, which loading point may be a berth, dock, anchorage, sea terminal, sea

 

-13-

buoy mooring, submarine loading line or other place, including alongside lighters, or other vessels, at which the tanker may at all times lie safely afloat. In the event that a tanker arrives within its Agreed Loading Range, then laytime shall commence at the earlier of (i) six (6) hours after NOR or (ii) when the tanker is All Fast; provided , however , that any NOR given within the last two (2) hours in which the Loading Port is open shall be deemed given when the Loading Port next opens.

10.1.2 Seller shall not be obligated to provide a loading point for any tanker arriving after the last Day of its Agreed Loading Range. Notwithstanding the foregoing, in the event that a tanker arrives after the last Day of its Agreed Loading Range, Seller will make reasonable efforts to receive the tanker as soon as possible; provided , however , that if so received, laytime shall begin at the commencement of loading, and Seller shall be liable only for demurrage, and in no event shall Seller be liable for deadfreight or other charges in connection with loading.

10.1.3 Seller shall not be obligated to provide any tanker arriving prior to its Agreed Loading Range with a loading point until the first Day of its Agreed Loading Range. If Seller does provide a loading point prior to the first Day of its Agreed Loading Range, then laytime shall commence at the earlier of (i) six (6) hours after the Loading Port opens on the first Day of the Agreed Loading Range for such tanker and (ii) commencement of loading.

10.2 Shifting Loading Point of Tankers . Seller shall have the right to shift tankers at the Loading Port from one berth to another, provided that all expenses incurred in connection therewith shall be borne by Seller and all time expended in such shifting of tankers shall count as laytime. Notwithstanding the provisions of the preceding sentence, the expenses incurred in connection with a shifting of any tanker which is attributable to one of the events referred to in Article 10.4 shall be borne by Buyer, the time consumed during such shifting shall not count as laytime, and Seller shall not be obligated to provide such tanker with a loading point until a loading point becomes available.

10.3 Allowed Laytime . Except as otherwise agreed in writing, Seller shall have an Allowed Laytime of thirty-six (36) hours to complete the loading of the quantity of Oil nominated and accepted. In the event that an Agreed Lifting Program provides for loading of Buyer’s tanker at two (2) Loading Ports, or Seller notifies Buyer pursuant to Article 9.1.5 that loading shall be at two (2) Loading Ports, the Allowed Laytime shall be increased twelve (12) hours per each additional Loading Port, and laytime shall commence at each additional port at NOR plus six (6) hours or when the vessel is All Fast, whichever occurs first. The Allowed Laytime shall be further increased by two (2) hours for each additional grade of Oil loaded at a Loading Port. Laytime shall cease upon the disconnection of delivery hoses after the completion of loading, provided that there shall not be counted as laytime in any such case the time consumed from the time at which delivery hoses are disconnected at the first Loading Port until the time that laytime would commence at the second Loading Port pursuant to the provisions of Article 10.1. Notwithstanding the foregoing, the Parties agree that laytime shall re-start if Cargo documentation has not been delivered to the Buyer’s vessel within four (4) hours after disconnection of hoses.

 

-14-

10.4 Adjustments to Laytime . In the event that the loading of any tanker is delayed, directly or indirectly, for any of the following reasons, whether occurring prior to, during or after the berthing or commencement of loading of the tanker:

 

(a)

regulations or decisions of Buyer, or of the owner or operator of the tanker, prohibiting or restricting loading at any time;

 

(b)

lightering at Buyer’s request;

 

(c)

delay or suspension in loading due to failure of Buyer to comply with any provision of the Agreement;

 

(d)

more than one stoppage in loading as a result of Buyer’s instructions as to distribution of the Oil in the tanker;

 

(e)

the condition or facilities of the tanker, or any other reason attributable to or within the reasonable control of Buyer or the tanker;

 

(f)

regulations of the Loading Port operator, port authorities or the Government of Venezuela or any politi