NOTICE: The text below was created automatically and may contain errors and differences from the contract's original PDF file. Learn more here

 PRODUCTION SHARING CONTRACT


I1AWLER AREA


KURDISTAN REGION


BETWEEN


THE KURDISTAN REGIONAL GOVERNMENT OF IRAQ


AND





NORBEST LIMITED


TABLE OF CONTENTS





PREAMBLE





Article 1 DEFINITIONS


Article 2 SCOPE OF THE CUN TRACI


Article 3 CONTRACT AREA


Article 4 OPTIONS OF GOVERNMENT PARTTCIPATTGN AND THIRD PARTY


PARTICIPATION


Article 5 OPERATOR


Article 6 TERM QF THE CONT RACT


Article 7 RELINQUISHMENTS


Article 8 MANAGEMENT COMMITTEE


Article 9 GUARANTEES


Article 10 MINIMUM HXPIORATION WORK OBI l(SATIONS


Article 11 hXPlOKAIION WORK PRCXiRAMS AND BUDGETS


Article 12 DISCOVERY AND DEVELOPMENT


Article 13 DEVELOPMENT AND PRODUCTION WORK PROGRAMS AND


BUDGETS


Article 14 NATURAL GAS


Article 15 ACCOUNTING AND AUDITS


Article 16 CONTRACTOR'S RIGHTS AND OBLIGATIONS


Article 17 USE OF LAND AND EXISTING INTRASTRUCTl RE


Article 18 ASSISTANCE FROM THE GOVERNMENT


Article 19 EQUIPMENT AND MATERIALS


Article 20 TITLE TO THE ASSErS


Article 21 USE OF THE ASSETS


Article 22 SUBCONTRACTING


Article 23 PERSONNEL TRAINING ANDTECHNOLOGICAI. ASSISTANCE


Article 24 ROYALTY





2'11S


Article 25 RICO VERY OK PETROLEUM COSTS


Article 2(> SI IARJNO OK PROFIT PETROLEUM


Article 27 VALUATION AND METERING OF CRUDE Oil. ANI) NAIURAL GAS


Article 28 DOMESTIC MARKET - SALE OF GOVERNMENT SI IA RE


Article 29 FINANCIAL PROVISIONS


Article 30 CUSTOMS PROVISIONS


Article 31 TAX PROVISIONS


Article 32 BONUSES


Article 33 PIPELINES


Article 34 UNmSATION


Article 35 LIABILITY AND INSURANCE


Article 36 INFORMATION AND CONFIDENTIAL! 1Y


Article 37 ENVIRONMENTAL PROVISIONS


Article 38 DECOMMISSIONING


Article 39 ASSIGNMENT AND CHANGE OF CONTROL


Article 40 FORCE MAJEURL


Article 41 WAIVER OF SOVEREIGN IMMUNITY


Article 42 ARBITRATION AND EXPERT DETERMINATION


Article 43 GOVERNING LAW. FISC AL ST ABILITY, AMLNDMiiN TS AND VALID! IV


Article 44 NOTICES


.Article 45 TERMINATION


Article 46 APPLICATION OF CORRUPTION LAWS


Article 47 EFFECTIVE DATE


Annex A CONTRACT AREA MAP AND LIST OF COORD]N A EES


Annex U CONTRACT SUB-ARE AS MAP .AND LIST OI COORDINATES


Annex C COMPANY UUNDERTAKING


Annex D ACCOUNTING PROCEDURE








3/118





t*


 PRODUCTION SHARING C ONTRACT





BETWEEN


The KURDISTAN REGIONAL GOVERNMENT OF IRAQ (hereafter referred to as the


“GOVERNMENT). duly represented by the Minima of Niiturul Resources;


AND


NORBKST 1,1 \ll I'KI), ;i company established ami exist ini; umlcr tin laws of < yprus, whose





registered ofticc is at Themistokli Deni. 5 Elcnion Building. 1st door, I’.C. I06f* Nicosia,


Cyprus, an Affiliate of INK-BP Holding and duly represented by its Attorney Alexey


Kuzmichev,





(henafto, referred to as Hie •CONTRACTOR")


WHEREAS


(A) I lie GOVERNMENT wislics to develop the petroleum wealth of the Kurdistan


Region (us defined in this Contract) in u way that nchiovrs the highest benefit to (lie


people of the Kurdistan Region and all of Iraq, using the most ndvunml techniques of


murkd principles and encouraging investment, consistent with the Constitution of Iraq


including Article 112 thereof;


(It) In accordance with the Constitution of Imq, the prevailing lav. of the Kurdixiai


Region is the Kurdistan Region Law (as defined in this Contract), except with regard


to a matter wholly widan llic exclusive jurisdiction of the Government of Iraq;


(O The National Assembly of the Kurdistan Region approved the Oil and Gas Law of the


Kurdistan Region - Iraq (I aw No. 22 of 2007) which law regulates Petroleum


Operations, including production sharing contracts;


(D) The GOVERNMENT intends to present to the National Assembly of the Kurdistan


Region a law to authorise the GOVERNMENT, by contract or other authorisation, to


exempt investors in long terra projects relating to the conduct of petroleum operations


in the Kurdistan Region from Kurdistan Region taxation, to indemnify such holders


against liability lo pay such taxation, and.br to guarantee the stability of the applicable


legal, fiscal and economic conditions of such projects; and


iE) Each CONTRACTOR Entity is a company.


(i) with the financial capability, aid the technical knowledge and technical ability.


to cany otM Petroleum Operations in the Contract Area (as defined in this


Contract) under the terms of this Contract;


(ii) having a record of compliance with the principles of good corporaic citizenship;


and


(iii) willing to cooperate with the GOVERNMENT by entering into this Contract,


thereby assisting the GOVERNMENT to develop the Kurdistan Region





4/118


 petroleum industry, thereby promoting the economic development of the


Kurdistan Region and Iraq and the social wcllaic of its people.








NOW. THEREFORE, THE PARTIES HAW. AGREED AS FOLLOWS


ARTICLE 1 - DEFINITIONS


l.l ( iipituliscd terms and expressions in this Contract shall have the following meaning,


unless otherwise specified:


Abroad means outside of the Kurdistan Region and other pails of Iraq.


Access Authorisation is defined in Article 17.9.


Accounts is defined in Article 15.1.


Accounting Procedure means die Accounting Procedure attached to this Contract as


Annex D and constituting an integral part of this Contract.


Adjacent C'ontract Area is defined in Article *4 I.


Adjustment Dale is defined in Article 27.6.


Affiliated Company or Affiliate means, as regards any of the compuucs or entitio


constituting the CONTRACTOR, a ami|»my or other legal entity -shich:


(a) controls a < IONTKAC TOR Bntily; or


(b) is controlled by a < !ON I MAC TOR Entity; or


(c) controls or is controlled hv u company or entity which controls n


CONTRACTOR Entity ,


but shall not include the GOVERNMENT in respect of the Public Company. For the


purpose of this definition, “control” means direct or indirect ownership or control of


fifty per cent (50%) at more ol the voting rights, appointment of lire directors, or


assets upon liquidation of the applicable entity at its shareholders’ meetings or their


equivalent.


Agreed Terms is defined in Article 14.1 (Ha).


Appraisal Area means the area defined in Article 12.2.


Appraisal Work Program and Budget is defined in Article 12.2.


Appraisal Repor t is defined in Article 12.4.


Appraisal Well means a well drilled for the purpose of evaluating the commercial


potential of a geological feature or a geological structure in which Petroleum has been


discovered.


A mi's-Length Sale* mean* sales of Petroleum in freely convertible currencies


between sc I lets and buyers having mi direct or indirect relationship or common


interest wlintsocvcr with each other that could reasonably influence the soles price


Such Arm’s- Length Sales shall exclude:


in) sales between or among any of the CONTRACTOR Entities and their


respective Affiliates;


(b) sales involving the GOVERNMENT or die < iovernment oflraq; and


(c) sales involving exchanges and any transnelions not relating to normal


commercial practices.


Assets means nil land, platforniH. pipelines, plant, equipment, machinery, wells,


facilities and nil other installations and structures and ull Materials awl Equipment.


Associated Natural Gas means (i) any Natural Gas dissolved ui Crude Oil undci


reservoir conditions and (ii) any residue gas remaining utter the extraction of Crude


Oil from a reservoir.


Audit Request Period isdcllnotl in Article 15.3(a)


Available Associated Natural Cun is dofinixl in .Article 25. L


Available Crude Oil is defined in Article 25.1.


Available Non-Associated Natural (.'ns is defined in Article 25.1


Available Petroleum is defined in Article 25 I


Barrel means a quantity of f«*rt) two (4?) I S gallons as a unit to measure liquids, at a


temperature of sixtv degrees (60=) Fahrenheit and pressure of fourteen point seven


(14.7) psL


Radgets means any budgets prepared by. or on behalf of. the CONTRACTOR


pursuant hi this Contract and forming pun of an Exploration Work Program nnd


Budget iintbor .in Appraisal Work Program and Budget and or a Gas Marketing Work


Program and Budget aixPor a Dcvdoptiicnt Work Program and Budget awLor a


Production Work Program and Budget


Calendar Year means a period of twelve (12) consecutive .Months, commencing I


January and ending on 31 December of the same year.


Chairman is defined in Article R.l


Commercial Discovery means a Discovery which is potentially commercial when


taking into account all technical, operational, commercial and financial data collected


when carrying out appraisal works or similar operations, including recoverable


rewvrs of Petroleum, sustainable regular production levels and other material


technical, operational, commercial and financial parameters, all in accordance with


prudent international petroleum industry practice.





6(118


Commercial Production means the production of Petroleum front the Production


Aren in accordance with annual Production Woik Program and Budget.


Constitution of Iraq means die permanent constitution of Iraq approved by the people


of Iraq in the get tern I referendum of I 5 ()ctnhcar 2005.


Contract means this production sharing contract, including its Annexes A, B, C and


D that are an integral part hereof, ns well ns any extension, renewal, substitution or


amendment of this production sharing contract that may be agreed in writing by die


Parties in accordance with Article 13.7.


Contract Area means the area described and defined in Annex A attached to this


Contract and constituting an integral purl of this Contract, and any modifications


made to that Annex in accordance with the provisions of this Contract, through


amendments, surrender, withdrawal, exteasion or otherwise.


Contract Sub-area is defined in Article 3.


Contract Year means a period of twelve (l 2) consecutive Months starting from the


Effective Date or any anniversary of the mid KITcctive Date.


CONTRACTOR includes and comprises each and all CONTRACTOR Entities,


including any Public Company or third Party Participant nominated by the


GOVERNMENT pursuant to Article 4. and/or any assignee of all or part of the rights


and obligations under this Contract in accordance with Article 39.


CONTRACTOR Entity means any Person which is for the time bang a component ot


tlic CONTRACTOR, andfor any assignee of all or part of tftc rights and obligations of


such Person under this Contract in accordance with Article 39.


( rude Oil means all liquid hydrocarbons in their unprocessed «atc or obtained from


Natural Gas by condensation nr any »*thcr means of extraction


Dcconinruioninj; Casts means dll the costs and expenditures incurred by the


CONTRACTOR when carrying out Decommissioning Operations, including those


defined in the Accounting Procedure


Decommissioning Operations means any works, together with all related and


auxiliary activities. f«*r dccununisskming and/or removal and/or abandonment and


making safe all of the Assets and site restoration and remediation related thereto in


relation to any Production Area.


Decommtssnning Plan is defined in Article 38.7.


Decommissioning Reserve Fund is defined in Article >8.1 and includes nil


contributions paid into such fund and all interest accumulated such fond.


Deductible Amount is defined in Article 35.12.


Delivery Point means the point alter ccracbon. specified in the approved Development


Plan for a Production Area, at which the Crude Oil. Associated Natural Gas andor Norv


Associated Natural Gas is metered for the purpoics of Article 27.5. valued for the


7/118


purposes of Article 27,1 and ready to be taken and disposed of consistent with prudent


international petroleum industry practice, and at which a Party may acquiio title to its


sliure ol I’clmlcum under this Contract or such other point which may lie ngtvod by tite


Pnrtici


Development Costs means all the costs and expenditures incurred by tlie


CONTRACTOR when carrying out Development Operations, including those


dcliuoil hi the Accounting Procedure.


Development Operations means all development operations or works conducted in


accordance with a Development Plan up to the Delivery Point with a view to


developing a Production Area, including: drilling of wells: primary and subsequent


recovery projects and pressure maintenance; survey, engineering, building and


erecting or laying of production plants and facilities (including: separators;


compressors; generate is. pumps and tankage; gathering lines; pipelines and all


facilities required to be installed lor production, pressure maintenance, and treatment,


storage and transportation of Petroleum): obtaining of such materials, equipment,


machinery, items and supplies as may be required or expedient for the foregoing


activities, uml nil auxiliary operations ami activities required or expedient for the


production of Petroleum from the Production Area


Development Period in defined in Article 6.


Development Plan means n plnn for development dell nod in Article 12 K.


Development Well means tiny well drilled niter the d ue of approval of the


Development Plan for the purpose of producing Petroleum, increasing or accelerating


production of Petroleum, including injection wells and dn lxrfes. .Any well drilled


within a Production Area shall be deemed a Development Well.


Development Work Program and Budget means the development work program


and budget prepared pursuant to Article 13.2.


Discovery means a discovery of Petroleum within the limits of the Contract Area


resulting from Petroleum Operations carried out under this Contract, provided such


Petroleum is recoverable at the surface with a measurable flow utilising technique*


used in prudent international petroleum industry practice


Dispute is defined in Article 42.1.


Dollar (1'SS) means the legal currency (dollar) of the United Stales of America


(USA).


Effective Date means the date on which the conditions referred to in Article 47 have


been fulfilled.


Environment Fund is defined in Article 23.9.


Eqnipment and Material* is defined in Article 19.1.











S'1I8


 exploration Costs means all the costs and expenditure incurred by the


CON'I RACTOR when carrying oul Exploration Operations, including those defined


in the Accounting Procedure.


Exploration Operations means uny and all operations conducted with a view to





discovering Petroleum, including: nny activities necessary to commence operations;


any topographical, hydrographicol, geological, geophysical, aerial and other surveys


and activities (including interpretations, analyses and related studies) to investigate


the subsurface for the location of Petroleum; drilling of shot holes, core holes and


stratigraphic test holes; spud, drilling, testing, coring, logging and equipping of


Exploration Wells or Appraisal Wells; procurement of such services, miUeritd,


equipment, machinery, items and supplies as may be required or expedient for the


foregoing activities, and all auxiliary operations and activities required or expedient


for the conduct of the foregoing activities.


Exploration Period is defined in Article 6.


Exploration kenliil is defined in Article 6.3.


Exploration Well menus uny well drilled for the purpose of confirming a geological


structure or stratigraphic unit in which no Discovery has previously been made by the


CONTRACTOR.


Exploration Work Program and Budget means the exploration work program and


budget prepared pursuant to Article 11.1.





Export Crude Oil is defined m Article243.


Export Noo-Associated Natural Gas is defined in Article 243


Export I’d ndrum is defined in Article 24.2.





Kirat Commercial Declaration Date is defined in .Article 4.1.


First Exploration WclK is defined in Article 10.2 (c).





first Production means the moment wten Commercial Production of Crude Oil or


Non-Avneioted Natural Gas (as the ease may be) first commences, by flowing at the rale


forecast m the Development Plan without interruption for a minimum of forty eight (48)


hours.


Force Mnjeiirr is defined in Article 40.2.





Gas Development is defined in Article 14.10.


iim Marketing Costs means all costs and expenditure incuucd by die


CONTRACTOR when carrying nut (ins Marketing Operations, including those


defined in the Accounting Procedure.


(.as Marketing Operations means any and all of the activities and operations


umlcmplalcd by Article 14.6.





WIIX








\/


 Gas Marketing Work Program and Budget means the marketing work program and


budget prepared pur*uuntto Article 14.8.


Government Intern! is defined in .Article 4.1.


Government of Iraq means the Federal Government of the Republic of Iraq, which


hold* office under tlie Constitution of Iraq ami any minister, ministry, department,


subdivision, agency. authority, council, commnice, or other constituent element


thereof and shall, without limitation, include an> corporation owned and or controlled


by an> of the foregoing.


International Murkei Price is defined in Article 27.2.


Iraq means the entirely of the Republic of Iraq, including tlie Kurdistan Region.





Joint (>|ktsiting Agreement means any agreement executed by tlie


C'OMKAC' I'Uk entities at any time Tor the purpose of regulating between such


entities the terms under which the Petroleum Operations will be conducted, which


agreement shall be: (a) consistent with prudent international petroleum industry


practice; (b) as between such entities, supplementary to this Contract; and (c)


consistent with the provisions of the Contract.


Kurdistan Region means the Federal Region of Kurdistan recognised by tlie


Constitution of Iraq and having the same meaning as ‘Region’ as in the Kurdistan


Region Oil iindGus I nw.


Kurdistan Region Law menus all statutes, decrees, edicts, codes, orders, rules


ordinances ad regulations of the GOVFUNMLNT or of any other local, municipal,


territorial, provincial or any other duly constituted governmental authority nr agency


in the Kurdistan Region.


Kurdistan Region Oil and Gas Law menus the Oil und Cna law of the Kurdistan


Region - Iraq (Law \*o. 22 of2007) as the same may be amended


Ijiw means all applicable bus including the following: constitutional law. civil law.


common law. international law. equity, treanes. statutes, decrees, edicts, codes,


orders, judgements, rules, ordinances and regulations of any local, municipal,


territorial provincial federated, national or any other duly constituted governmental


authority or agency.


LCL\ is defined in Article 42.1(b).


LIBOR means tlie London Inter-Bank Offered Rate . which r>>ll.«r deposits f.» one


(I) month an? ottered in tlie inter-bank market in London, as quoted in the Finnnciul


Times of London for the day in question. In the event that such rate is not published in


the Financial Times, it shall mean the London lntcr-bank Offered Rule at which


Dollai deposits Ibr one month arc offered for the nearest day us quoted by Nulionnl


Westminster IJnnk pic.


Management C ommittee is defined in Article 8.





Maximum ICfllcicnl Rate (.V1LR) is defined in Article 16.12,





10/118


\L








Minimum Exploration Obligation!* is defined in Article 10.1


Minimum Financial Commitment means:


(a) in respect of the First Sub-Period, the total of the amounts set out in Articles


10.2(d) ami 10.2(e); and


(b) in respect of the Second Sub-Period, Hie amount act out in Article lU.3

Month means a calendar month according to the Gregorian calendar


Natural Gas means ull gaicouH IVMrolcum and inerts.


Non-Associated Natural Gas means any Natural (ins which is not any Associated


Natural Gas.


Notice of Dispute is defined in Article 42.1.


Operator means the entity designated hy the CONTRACTOR pursuant to Article 5


which, in the name und on behalf of the CONTRACTOR, ahull carry out ull


Petroleum Operations. II at any time tlicic exists inoio Hum one (I) Operutor under


this Contract. any leloicoce Intern to tin.' term ’Operator’ shall he to each Operator with


respect to the parts of the Contract Area in which such Operator conducts Petroleum


Operations.


Option of Government Participation is defined in Articled 1


Option of Third Party Participation is defined in Articled.?


Party or Parties means the GOVERNMENT and/or each CONTRACTOR Entity


andor the < CONTRACTOR


Permits meuns all licences, permits, consents, authorisations or other permissions, as


the context requires.


Person shall include natural and juristic persons (including corporations and


governmental agencies).


Petroleum means:


(a) ary natiffaDy occurring hydrocarbon in a gaseous or iiquai state;


(b) any mixture of naturally occurring hydrocarbons in a gaseous or liquid .'late; «h


(c) any Petroleum (as defined in paragraphs (a) and (b) above) th3i ha\ been


returned to a Reservoir.


Petroleum Cost* means all costs and expenditure incurred by the CON TR AC 'TOR


for the Petroleum Operations, and which the CONTRACTOR is entitled to recover


under this Contract and its Accounting Procedure, including Decommissioning Costs.


Development Costs, Exploration Tests, Gas Mart ding Costs and Production ( ostv








11/118


Petroleum Field means a Reservoir or group of Reservoirs within u common geological


structure or stratigraphic unit, which may Income part of a Production Aren pursuant to


a Development Plan.


Petroleum Operations means all Exploration Operations. Gns Marketing Operations.


Development Operations. Production Operations and Decommissioning < Iporationa,


.is well us any other activities or operations directly or indirectly related or connected


with the said operations (including health, safety and environmental operations and


activities) and authorised or contemplated by. or performed in accordance with, this


Contract.


Pipeline Costs is defined in Article 33.5


Production Aren means such areas within the Contract Area designated as a


production area in nn approved Development Plan prepared pursuant to Article 12.


For tire avoidance of doubt, ali superjacent or subjacent strata of the Reservoir in


which a Commercial Discovery is located lire automatically included in the relevant


Production Aren


Production Bonus means any bonus due pursuant to Article 32.3 or 32.4.


Production Costs means all the costs and expenditure incurred by the


CONTRACTOR in carrying out lire Production Operations, including those defined


in the Accounting Procedure.


Production Operations means any works, together with all related and auxiliary


activities, for the production ot Petroleum from the start of Commercial I “reduction,


including: extraction, injection, stimulation, pumping, treacnan. storage, engineering,


operating, servicing, repairing, aid maintaining any wells, plants, equipment,


pipelines, terminals and any other installations and facilities, and any related


operations and auxiliary operations, and storage and transportation of Petroleum from


the Production Area to the Delivery Point.


Production Rental i* defined in Article 13.10.


Production Work Prirgraa and Hud-cf shall mean the production wink program


and budget prepared pursuant to Article 13.6.


Profit Crude Ol is defined in Article 26.1.


Profit Natural Gas is defined m Article 26.1.


Profit Prlroleum is defined in Article 26.1.


Proposed Contract is defined in Article 14.10(a).


Public Company means u public company duly register**! and incorporated in the


Kurdistan Region and regulated by the GOVERNMENT under the Kurdistan Region


Oil and Oas Law.


Public Officer means a civil .servant, including a member or employee of a public entity,


a member of the Kurdistan National Assembly ur a member of the GOVERN Ml NT.





12/118


Quarter means a period of three (3) consecutive Months starting on the first day of


January. April. July or October respectively.


Reservoir means a subsurface ruck totmaiioii containin'’ an individual and separate


lutural accumulation of producible Petroleum characterised by a single natural prenuc


system.


“R” Factor is defined in .Article 26.4.


Royalty is defined in Article 24.


Second Exploration Wells is defined in Article 10.3 (b).


Semester means a period of six (6) consecutive Months starting from the first day of


January or July respectively.





Senior Representatives is defined in Article 42.1(a).


Subcontractor means any entity of any contracting tier providing services and/or


undertaking works relating to the Petroleum Operations directly or indirectly on


behalf or. the CONTRACTOR or any CONTRACTOR Entity.


Sub-Period and Sab-Period* arc defined in Article 6 2.


Taxes 11tears ail current or future levies, duties, payments, charges, impositions,


imposts, withholdings, fees, taxes (including value added tax or other sales or


transaction based tax, corporation rax. income tax. capital gams tax. stamp duty, land


tax. registration tax. capital and wealth tax. profit tax. dividend tax or withholdings,


transfer tax. customs duties branch or permanent establishment tax or withholdings,


tax on income from movable capiuil aixl fixed tax on transfers) or contributions


payable to or imposed by the GOVERNMENT.


Third Party Interest is defined in Article 4.8


Third Party Participant is defined in Article 4.9


Work Program moms any work program prepared by, or go behalf of, the


CONTRACTOR pursuant to this Contract and forming part of an Exploration Work


Program and Budget and/or an Appraisal Work Program and Budget and'or a Gas


Marketing \kork Program and Budget rnxl'or n Development Work Program and


Budget andor a Production Work Program and Budget.


Vice-Chairman is defined in Article 8.1.


In this Contract, unless the context otherwise requires or is specifically otherwise


stated:





(a) headings are to be ignored;


(b) “including" and similar words do not imply any limitations.





(c) singular incltnlcs plural and vice vena and





13/118


(d) reference to an “Article" is to nr article of this Contract and to a ParaGraph”


is to a paragraph in the Accounting Procedure.


au riCLB 2 scon: 01 tiii: contract


2.1 liiis Contract is a production-sharing arrangement with respect to the Contract Aren,


whereby the GOVERNMENT has iIk' right, pursuant to the Constitution of Iraq, to


regulate and oversee Petroleum Operations within the Contract Area.


I hr purpose of this Contract is to define the respective rights and obligations of the


Parties ami tlic terms and conditions under which Uk CONTRACTOR shall carry out


all the Petroleum Operations.


My entering into this < ’ontrucl, the GOVERNMENT grants the CONTRACTOR the


exclusive right -hkI authority to conduct all Petroleum Operations in the Contract Aren


as detailed in Article 3.


2.2 Upon the CONTRACTOR’, request, tlic GOVERNMENT shall provide and/or


procure all Permits relating to the Petroleum Operations required by the


CONTRACTOR to fulfil its obligations under this Contract, including those relating


to any extension and renewal periods and including those required by the Government


nl Iraq. I lie GOVERNMENT (i) represents and warrants to the CON TRACTOR


that it has not done mvl has not omitted to do anything that would cause the


cancellation or suspension of this Contract or any Permit granted under this Article


2.2 or pursuant to this Contract; and (ii) covenants that it will no; do. or omit to do,


anything that would cause the cancellation or suspension of this Contract or any


Permit granted under this Ankle 2.2 or pursuant to this Contract For tlic avoidance


of doubt, nothing in this Ankle shall affect the rights and obligations of tlie Ponies


pursuant to Article 43.


2.3 The CONTRACTOR shall conduct nil Petroleum Operations within the Contract


Area at its sole cost, risk and peril on behalf of the GOVERNMENT, pursuant to this


Contract, including ihe following operations


(a) Technical .Services


Implementation of all technical, human and material resources reason «M>


required for execution of the Petroleum Operations, in accordance with


prudent international petroleum industry practice.


(b) Financial Serv ice.


J]te responsibility lot funding tlic Exploration Operations and. in the event of


a Commercial Discovery, Development, Production and Decommissioning


Operations, pursuant to this Contract.


For the funding of Petroleum Operations, each CONTRACTOR I'.nlily shall


be entitled lo have recourse to external financing from either its Affiliated


Companies or from any third purties.








14/118


 (c) Administrative Services





Implementation of all appropriate management and administration livlimqucs


for execution of the Petroleum Operations under this Contract. in accordance


with prudent international petrol com industry practice.


2.4 During il* terra of this Contract, the CON PKACTOR shall he responsible to the


COVKMNMEN r for the conduct of Petroleum Operations within die Contract Area


pursuant to the terms of this Contract.


2.5 Notural resources other than Petroleum shall lie excluded from the *opc of this


Contract, even if the CONTRACTOR discovers any such resources when executing


its obligations pursuant to this Contract


2.6 I ho CONTRACTOR shall only be entitled to recover Petroleum Costs incurred


under this Contract in the event of a Commercial Discovery. Recovery of Petroleum


Costs shall occur within the limits provided under Article 25.


2.7 During the temi of this Contract. Profit Crude Oil und/nr Pnifit Natural Gas produced


Ifnm I'ctrolcum Operations shall be shared between the Parties in accordance with tin*


provisions of Article 26.


2.8 for the execution of Petroleum Operations under Ihiv ( ontract. the (’ONTRACTOR


slull have tlie right to;


(a) freely access and operate within the Contract Area, as well as any facilities


KODciukxl w ith the Retnilcun Operations, wherever they may be located.


(b) freely me arm roads located within the Contract Area and outside the


Contract Area for the construction, installation, maintenance. operation and


removal of ppdinos and other facilities required lor the Petroleum


Operations.


(c) freely use sand, water, electricity and any other natural tc»«iurv.e» located


inside or outside the Contract Area for the Petroleum Operation'.


use any qualified foreign and local personnel and’or Subcontractors required


for the conduct of Petroleum Operations in accordance with Articles 22 und


23. Any foreign personnel working in the Kurdistan Region shall require prior


authorisation of Hie GOVERNMENT (such authorisitkm not to he


■urowbly delayed or withheld) und the GOVERNMENT shall obtain any


authorisation required by the Govenanent of Iraq;


(e) imp.ir any goods, matcnalv equipment andor services required for the


Petroleum Operations in accordance with .Articles 19.22 and 3% and


If) freely use Und or property belonging to the Kurdistan Regan, and the


GOVERNMENT will rast the CONTRACTOR with facilrurm* the me hy


the CONI RACTOR of any private property in the Kurdistan Region











1*11*


 ARTICLE 3-CONTKAC I AREA AND SUB-AREAS





3.1 I'lie initial Contract Area covers the lluwldi nrwi mul extends ovci nil arid of unc


llnms'iml live hundred and thirty tivn si|iuirv kilometres (1532 km'l. as detailed and


indicated on ihc map attached in Annex A and is delimited by the following


coordinates:








Longitudo (dog Y(mN,


Latitudo (dog min X(mE)


■Mlm


A Sfet- 1C®


A *33032


B 362429 434120 382700 4030000


- {


fc 301805 435110 307000 4016000


D1 361706 440032 411000 4010000


r - ■ 301045 440930 424306 4004160


E


F 360?SO 435343 405000 3990005"


n a moo 1Q7QQ4 3991022


JDDOaD


360521 434318 364915 399450?


H l --------- ■***

1 360247 433708 375!>07 _ JM9979


I ■ i |


1 1 rut a 4035038


«# JOl VAy 433310 360010 400W88


K 361354


L 361146 433507 3/2800 4006700


* 361727 434125 362400 *017000


N 361646 433301 4019675


O 3C2225 433158 366376 ' 4026373








the UOVI RNMEVT, by execution of din Contract, hereby validates and nfprovts


I ho foregoing c««-ordinaies of the ( ontract Ami





The total area of the Contract Aresi may he reduced only in accordance with the


provisions of this Centra.--





3.2 The initial CuOraci Area comists ot four |4) Contract Sub-areas : I law lei. KhabaL


I hour Uagh. and Zab. Those C.miran Solvere*. :«e detailed oo the reap attached in


Annex B and those Contract SuK areas aw delimited by tft lodewing coordinate* :








Hawfcr:





Rom, I Xtmt Yt-tM)


I


ii


A 361708 440032 4110CO 4016000


361046 440930 424306 4004160


C 300256 435043 405000 3990000


r° 360653 435031 395807 4000982

















16/118


 d* Xtr.fi Y(*N)




--- 403378ft


433032
































DimirUaeb ■ j n B 5 B


Y(mN)


4017000


382400


A 361727 434125 m " A 405000 3000000


0 360259 i ‘IJvtnj 3H/H91 1981022


c 358825 4.15703


0 361146 | 433607 372600 4008/00











Z«b:


Point' (dog X(mE) V(mN>








A 3813C4 433310 JUjj < 7


B 361148“ 433507 ‘ 372600 4006TOO


C 360521 4S5iS 384815 9M4S82





~6~ 433705 * 375507 3909979


E 36*0^9 432733 361433 4009036








ARTICLE 4 OPTIONS OF GOVERNMENT PARTICIPATION AND THIRD


PARTY PAR nClPATlO.N











4.1 n«e GOVERNMENT shall have ihc option of part Kipling through a PuMn


C «T*f*> « ihn Comet. ■ respect of the enhrr ('unifact Ami. a» a


CONTR ACTOR F-arv. m* aa urvhvidrd interest ia die IVtmloar Operabooi mi


aU Jk other dutka. obiifauuns »d iiaMit.es of the CONTRACTOR (byc as


prvARkd m aiiJ ■d'od u» thia Article 4» under Has Contract in m**xt of Hie Contract


Area, of tip to thirty-five per cent 05%). and net less than five per cent <5%» (the


“Govern*eat Interest ). soch option being referred to herein as the "Option of


Government Parlkipatma''. I hc GOVERNMENT shall be entitled to exercise Ihc


Option of novemmmi Participation by notifying the CONTRACTOR in writing of


such election mid the size of tlic Government I merest-











17/118


4.2 The GOVERNMENT may exercise the Option of Government Pari ioipotion at any


lime in the ixsriod commencing on the Effective Dutc and ending one hundred and


eighty (1X0) days alter the dale on which CONTRACTOR declares the first


Commercial Discovery (which date of declaration is referred lo heroin iis ihc "First


t oinmercial Declaration Date”), by nominating to the CONTRACTOR, in writing.


ii Public Company. If the GOVERNMENT does not notify the CON I KACTOR of


such election within such period, the Option of Government Participation shall he


deemed to have been waived, save for in relation to any pre-emption rights to


participate that may be granted pursuant to Article 3d.2.





4.3 If the GOVERNMENT exercises the Option of Government Participation in


accordance with Articles 4.1 and 4.2:


(a) the effective date of such participation shall be the date of the notice by which


the GOVERNMENT exercises its Option of Government Participation or tire


First Commciciul Decimation Date, whichever is the earlier;


(b) the Public Contpuny shall iKirticipie .is a CONTRACTOR Entity under this


Contnici from such effective date, with all its rights, duties, obligations and


liabilities under this Contract, save as provided in and subject to the provisions


of Ibis Article 4;


(c) the Public Company sluill not huve any liability to the other CONTRACTOR


Entities to contribute its Government I merest share of all Petroleum Costs


incurred before the f irst Commercial Declaration Date and its Government


Interest sliurc ol Mich Petroleum Costs sluill be the responsibility of the other


CONTRACTOR Entities, provided always tlat such other CON I K At I OK


Entities sliall be entitled (through the CONTRACTOR) i<> inm-r .ill .i*l


Petroleum Costs in accordance with Article 25;


(d) if, pursuant to the terms of the Joint Operating Agreement, the Publ:«


Company participates in the development of tlie Coinmrtci i I >iwo\cry. ii


shall be liable to the other CONTRACTOR Entities lo contribute i .


t lovornineiit Interest share of all Petroleum Costs intuited on or after the first


Commercial Declaration Date, with the exception of the Production bonuses


referred to in Article 32. and shall be entitled (through the CONTRACTOR)


to recover all such Petroleum Costs in accordance with Article 25. including


the Petroleum Costs which it lias reimbursed pursuant lo Article -1.1 (e),


(c) if such Option or Government Participation is exercised on or alter the l iist


Commercial Declaration Date, the Public Company shall, within thirty (30)


days ol tlk' date on which the GOVERNMENT notified the


CONTRACTOR of its election, reimburse the other CONTRACTOR


Entities lor all Petroleum Costs for which it is liable pursuant to Article 4. 3(d)


ami which huve Ireen incurred by such other CONTRACTOR Entities on or


after live first Commercial Declaration Date but prior to and including the


date of the notice pursuant to which the GOVERNMENT exercises its Option


of Government Participation. From the date of such notice, the Public


Company sluill pay the Government Interest share of such Petroleum Costs


directly;








18/118


(f) if the GOVERNMFN l exercises ils Option of t lovemment Participation after


the First Commercial Declaration Date, llu* CONTRACTOR shall make


available to the Public Company u drawdown facility to cover the Government


Interest equity sluue of up lo the amount of three hundred million Dollars


(IISS 300,000.000) to cover the Government Interest share of


CONTRACTOR'S costs from the First Commercial Declaration Date. Cost


shall he recovered by the CON TRACIORn.s u Petroleum Cost; and




Government Intern so assigned shall he deemed to be held by the


GOVERNMENT and in accordance with the principle in Article 16.13. the


Public Company will he individually and separately liable (and not jointly and


severally liable with the other CONTRACTOR Entities) to lire


GOVERNMENT for its obligations, duties nnd liabilities under this Contract


ns a CONTRACTOR Entity and the provisions of Article 4.5 shall apply.


4.4 I lie Public Company may. ;ii its discretion, assign pail in all of its Government


Interest to a third party or parties which is another Public Company duly authorised


by the GOVERNMENT, provided that in no event shall a Irunsfer be made which


would result in the transferor or transferee holding less than a five per cent (5%)


participating interest.


In the event of such an assignment in another Public Company, for the purposes of


Article 37 of the Kurdistan Region Oil nnd Gas l aw. the Government Interest so


assigned shall deemed to be held by the GOVERNMENT and in accordance with the


principle in Article 16.13, the Public Company to which such Government Interest is


transferred will be individually and separately liable (mid not iointly m>J sever illy


liable with the oilier CONTRACTOR Entities) to lire GOVERNMENT for its


obligations, duties and liabilities under this Contract us n C'ONTR ACTOR (•'< uty an !


the provisions of Article 4.5 shall apply.


4.5 Any failure by the Public Company to perform any of its obligations or to vmsfy uu>


of its duties or liabilities under tliis Contract as a CONTRACTOR Entity shall not be


considered as a default of the other CONTRACTOR Entities and shall in no ease be


invoked by die GOVERNMENT to terminate this Contract or exercise any other


rights or remedies in respect of such default that may be available to it.


The capacity of a Public Company as a CONTRACTOR I mity. as it may arise


pursuant to the provisions of this Contract, shall in no event cancel or affect the rights


of the other CONTRACTOR Entities to seek to settle a dispute or to refer such


dispute to arbitration or expert determination in accordance with the provisions of


Article 42.


4.6 A Public Company may assign part or all of ils Government Interest to a third party or


parties (not being a Public Company) and for the avoidance of doubt flic provisions of


Articles 39.1. 39.2 and 39.3 shall not apply. Any such assignee shall be jointly and


severally liable with (lie other CON I KACTOR Entities.


For the avoidance of doubt, following any assignment by a Public Company of nil or


part or all of a Government Interest to a third parly which is not a Public Company* in








19/1 IK


accordance with the provisions ol this Article 4, the provisions of Ankles 39 I, 39.2


and 39 3 shall jpplv lo any suh-ojiaan assignment of such interest





4.7 Where a Joint Operating Agreement lias Urn executed by the COMUACTOK


Emilies prior to any exercise of the Option of Oovernmem Participation pursuant to


tins Article 4. ihc Public Compuny nominated by the GOVERNMENT shall hecumc


a pony to *uch agreement. with any amendment* necessary to be consistent with ihc


principles ol this Article 4. Where a Joint Operating Agreement is nor in place pfior


to the exercise of thr Option ol Government Participation puruant to this Article 4.


the Public Oenpanv and the other < OMR ACTOR Entities shall, within a


reasonable period of lime, negotiate in good fuilli and enter into u Joint Operating


Agreement and shall during live period between the exercising ol' the Option of


Government Participation and the execution ot the Joint Operating Agreement,


comply with Article 4 14(a) and (b) as tftbey were provisions of this Contract

















4.X I he GOVERNMENT shall have the option of nominating a third party, in respect of


cacti Contract Sub-on*. as a CONTRACTOR Entity, with an undivided interest in


I lie Petroleum Operations in respect of that Coninu-i Sub-area and all live nth. r rights,


duties, obligations and liabilities of tl»e CONTRACTOR (wvc us provided in and


subject to this Article 4). under this Contract in respect of the Contract Sub-area, of up


to, hut not including, /croper cent (0%) and ik»I less than zero per cent (0%) (the


“Third Party Interest-). such option being tdetrai to herein aa the Optica cf


Third Party Participation .


4 « The GOVERNMENT may exercise the Option of Thud Parly Participation for c*h


('unmet Sub-area m any time poor to the date twdvc (12) months following the


Effective IhMe by nominating to the CONTRACTOR in writing, the M/e of the


I hird Party Interest and a nominated enwp---y which h-t* adequate resources and


capacity to dmhage the ohiiy..ik«to of a CONTRACTOR Entity under this Cunttact


in respect of that Contract Sub-area and a Joint Operating Agreement in respect


thereof


He tore the expiry of a period of eight (X» months (such period c«H!imcnnng upon the


Effective Date) the Parties shall have caused to have commenced, and prior to the


expiry of the twelve (12) month period following the Effective Itoc. hove fullv


completed, an investigation earned out into such nominated company in respect of.


and K cordai.ec with, tlie standards and requirements of the United States Federal Law


Foreign Corrupt Practices Act of 1977 (as may he amended from time to time), ard


the Partin, acting reasonably, shall he fully satisfied with thr remits of such


investigation. In the event that the Parties are m. satisfied, the nominated company


shall be deemed the I hird Party Participant


For the avoidance of doubt, the GOVERNMENT may only exercise the Option ol


Third Party Participation once for each C ontract Sub-area, in respect of one Third


Party Participant only for each Contract Sub-area, and alter ash exercise the resulting


Third Party Interest mar not be increased under this Article 4. However, m the event








2011*


thal the r»*> na:cd company doc*. m*» loJfil the enk-ria set out in this Article 4.9. the


GOVERNMENT shall:


(a) hive the option, upon tlx.- formal rejection of a nomination, to nominate u


second company (such company not fo he an Affiliate of any previously


nominated compuny) and die criteria set out in this Article 4.9 shall be applied


to such Nexond company. provided tli.it tin- twelve (12) month period ret out in


this Article 4.9 shall continue to run Ifom the Effective Date and shall not be


[**sipencil, rt- started or in any other way altered: and


(b) in the event that such second company shill noi. in the opinion of the Parties


I acting reasonably) fulfil the criteria set out in this Article 4 9. nominate, and


the CONTRACTOR shall accept, n Ihiblic Company as tltc Third Party


Participant.


l or the avoidance ol ilouht. for the purposes of this Article 4 9. a Public Company


sliull be a wholly owned entity of the GOVERNMENT


4.10 If the GOVERNMENT nominates a Third Pany Participant pursuant to and in


accordance with Articles 4 K und 4.9, that I'hinl Party Partici|mnt sluill have the Third


Purty Interest.


4.11 II the GOVERNMENT does not nominate n Third Parly Fur ticipunt pursuant to and


in accordance with Articles 4.8 and 4 9 then the Option of Third Party Participation


shall be deemed to have been waived in respect of the relevant ('outran Sukarea.


4.12 U the Option of Third Parly Participation is cMtrd in accordance w ith Articles 4.8


and 4.9:


(a) the effective dale of such participation shall be the Effective Bare,


notwittenmhng that the exercise of the Option ol I bird Party Participator


under Article 4 8 occurs after such dale.


(h) the Third Party Partiapuni shall, upon signature of a binding and cnfcnxable


instrument of alignment and nuvuimo in respect of this Contract referred to in


Article 39.3. pay to the CON TRACTOR, bv wa> of cleared funds to a bark


•cam* nominated by the CONTRACTOR, an amount csuivafcnt to the


proportion of Petroleum Coats incurred b> lb. CONTRAC TOR in respect of


the relevant Contract Sub-ana up until the date of such payme« attributable k»


the Third Party interest;


(c) upon payment pursuant to ami in accordance with Article 4.12(b) nml the


execution or the instrument referred to in Article 4.12(b). the Third Party


Participant shall participate its o CONTRAC IOR I tilily under this Contract


in respect of the relevant Contract Sub-area ns if it lud ken u


CONTRACTOR Emily from the KfTeeme Date, with all its rights, duties,


obligations and liabilities under this Contiact in iv.spcct of the relevant


Contract Sub-area; uml


(cl) where a Joint Operating Agreement has been executed by the


CONTRAC TOR Entities in respect of the relevant Contract Sub-area prior to





21/118


nny exercise of tlic Option of Third Party Participation pursuant to Artick 4.8


and 4 •). the Hiird Party Participant xlmll. upon signature ol the instrument


retimed V»> in Article 4.12(b). become a port)- to such Joint Operating


Agreement on the terms thereof.


(c) If a Join! Operating Agreement is not in place prior to the GOVERNMENT


exertising the Option ol Hurd Party Paiticipaiion. then the Third Party


PHtkipaot and the other C CONTRACTOR Entities shall within a reasoniible


pend of lime, negotiate in good faith and enter into a Join! Operating


Ay reement and vhall during the period It. wren the exercising of the (tprioo of


Third Parly Participation and the execution ol the Joint Operating Agreement,


comply with Article 4 14(a) and (b» as if they were provisions of this Contract


Onler of ExereWnR Options


4.11 Notwithstanding Articles 4 8 to 4 12. if llw GOVERNMENT exercises the Option of


Govcinmcnt Participation:


(a) after the GOVERNMENT )»•' exercised the Option of Third Party


Participation, the Government Intcicst slutll be assigned under this Article 4 to


the Public Compuny by the CONTRACTOR Entities pro rata to their


respective participating interest' under this Crininat in respect of the relevant


Conlnict Sub-area; and


(b) prior to the GOVERNMENT exercising the Option of Third Pam


Participation, then the Third Putty I merest shall be reduced by a percentage so


as to put the other C ON 1 RAC!OR Entity (other than the Peru* holding


the Government Interact) and the Third Party Participant in the petition they


would have been in had the Option oflhird Party Porticipotion been exercised


before the < *ptic* of Government Parti ripaoor


Joint Operating Agreement PmOrioos


4.14 Any Joint Operating Agreement entered into in relation to this Contract dmll be


consistent with the principles of tht* Artick 4 and shall provide as follows:


(a) ail decisions of any operating committee established under such Joint


Operating Agreement shall require the affirmative vole of an agreed


percentage of participating interests held thereunder, which in am event shall


be not more than revolt* live per cent (75%); and


(b) in the event of a proposed transfer by any CONTRACTOR Entity of part of a


participating interest under soefc Joint Operating Agreement, including ary


Government Interest or Third Parly Interest:


(i) no transfer may he modo which would rwull in the transferor or


transferee holding l««s iluin a five pci cent (5%) participating interest;


(ii) the proposed thud |wrty assignee must demonstrate to tlic reasonable


satisfaction of each of the extant CONTRACTOR Entities that it lus


the liruncM capability to perform it* payment obligations under tlic


(‘ontrset and undo* tlw Joint Operating Agreement; and


22/118


 (iii) the proposed third party assignee shall enter inu> nn instrument


siillsfbctory to each of tlw extant CONTRACTOR Entities m. as to


assume and to perform the obligations of tire Ininxtcror.











ARTICLE 5 - OPERATOR


5.1 IV CONI KM TOR hereby designates Norbest Limited to act as the Operator on


behalf of the CONTRACTOR tor tin- execution of the Petroleum Operations. The


CONTRACTOR shall at any time base the right to appcirt another entit> k the


Operator, upon giving the GOVERNMENT not less than thin> (W) days prior


Witten notice of such appointment.


I he CONTRACTOR shall submit to the GOVERNMENT tor comment any agreement





regarding or regulating the Operator's appointment mid its conduct of Petroleum


Operations on behalf of the CONTRACTOR pursuant to this Contract prior to


execution of such agreement


5.3 In lire event of tk‘ occurrence of ciilier of the following, the COVERNMKN I may


require the CONTRACTOR to appoint another entity as Operator as soon as u»


reasonably practicable:


(a) if on order has been pn.vr.1 in court declaring the bankruptcy. liquidation, or


dissolution of the Operator, or


(h) if the Operator termnates the achvitm ureter this Contort delegated to it by the





CONTRACTOR or a material proportion thereof. «hL as a re ill the


CONTRACTOR fails to fulfil its obligations under the Contract.





ARTICLE 6 - TERM OF THE CONTRACT





6 I This Contract corrpnjes an Exploration Period and a Development Period, as defined


bdowt








6J IV bxpl. .ration Pcrkxl 'ball hr for an initial term of live (5) Contract Years.


xr\u viable on a yearly bu s (as provided in Articles 6.5 and 6.6) up to a maximum


period of wxen (7) Contract Year* Marling from the f ffectixe Date. IV initial term


.*f five (5) years shall be subdivided m rwj(2) sub-penock us follow*





(a) an initial sub-pern*! of three (3) Contract Year*- ("First Sab-Period”), and


tb) a second sub-period of two (2) Contract Yean (~See---d Sub-Period l.


each a "Sub-Period” and collectively Sab-Period'”





It is understood that the right of the CONTRACTOR to accede to the next Sub-Period


or any extension thereof shall be subject to fulfilment of the Minimum Exploration





23/118


Obligations or minimum work obligations applicable to Uk previous Sub-Period or


extension thereof (as the case iikis he).


6.3 U linin'

GOVERNMENT, «n arrears an annual surface rental for the Contract Area. as may


he reduced by rc'.inqurdunmt from Line In time pursuant to Article 7, of ten Doll**.


(USMO) per square kilometre per Contract Year (“Exploration Rental"). Such


Exploration Rental shall be considered as a Patmlcum Cost uikI sluilf he recovered by the


COM H \< TOR in accordiutce with the pm\ isiom of Articles I and 25


M If the ('< INTRACTOR divide* not to enter into the Second Sub-Period. it sliall notify


the GOVERNMENT at least lliirty (30) da>» pnoc to the expiry ol the First Sub^


Period and provided that the data from the Pint Exploration Wefl dcwnsualcs U>«


there is ikt reasonable technics case fix drilling the Second Exploration WeH in the


Contract Ana*, the I xptoraCun Period shall expire * the end of the Fb*i Sub-Period,


unless tie hint Sub-Period has favn extended pursuant to Article 6.5 and'ur Article 6.6.


6.5 If the < ON I RACTOll has t ui filled its Minimum Exploration Obligations for a Sub-


Plnod of the Exploration Period but considers that additional work is required prior.


(a) to deciding to submit nn Appraisal Work Program ami Hud get as provided


under Article 12.2 in respect of a Discovery, or


(b) to deciding to declare a Discovers as u Commercial Dixovciy in accordance


with Article 12.6(a) or 14.5(a). which additional work mny include the


picpiuution undtar execution of m Appvmsal Work Program and Budget as


provided untlcr Article 122 and'or Cm Marketing Operations.


the CONTRACTOR will auUnrtkally he entitled to extensions, each of one (I)


Contract Year, of the Dmi xirretu Sub-Period. up to tlie end of the maximum


Exploration Period of wen (7» Contract Years, (as provided in Article 6.2). The




deration shall te submitted in writing io the GOVTRNMINT at k-.«U thirty (30)


days prior to the end of the then current Sub-Period or the end of the then current


extenton (as the arr may be).


6.6 Without prejudice to Article 6.5. u***i expiry of the initial term of the Exploration


Period, if it consider* it has m4 ci.uiplrted its cxpkxafcon cvaiuaiian ol the Cuntrrwi


Area, the CONI RAtlOR du.ll he entitled to an extension of the Secood Sub-


Period. provided it notifies the GOVERN Ml N I in wtitrng at least thirty (30) days


prior to the end of such Sub IVnnd. U^ether with a proposal for a num.-nan work


obligation for such rxLxmon. Any such cxlennoo shall not exceed one (1) Contrml


Yew Upon the expiry of such extension, if it considers it has Sill not complete*! it*


evaluation of the Couturet Aieu. the t ONI RACTOR shall be entitled to a lurthci


exteuMoa of one(l) < ontrnct Year provided that it notifies the GOVERN MEN I in


wTtttrc at least thirty (30) days poor to the end of the wtgmal extenM.m The right of


the CONTRACTOR to accede to the lurthet c*tcrt*an shall N to fuKibnent


of the minimum wwi obligation applicable to the original extension.


6.7 Subtext to Article 6.4. at acv time during the Exploration Period, upon thirty (30) day s


jviw notice io the GOVERNMENT tfce CONTRACTOR shall have the right





24/118


 wiUxluw from this Cooua.i provided ihat the outstanding Minimum Exploration


Obligations relating to the then current Sub-Period have been completed in


uccoedmre v.-:* the Contract. or * has jxud n. the GOVERNMENT the ■mounts


specified in Article IOJ or Article 103. whichever is ifpiicabfc to the tbai current Suh-


Perxid





N * If no Commercial Discovery has been made M the end of the I xp 'romion Period


(including any extentom thereof) this Contract shall terminate.


6.9 If a Ducovery b made within the nwnimura Exploration Penod of seven (7) Con trait


Years (as provided in Article 6 2). and if the CONI H ACTOR caw cider* it has no*


had time to complete sufDch-nl Gas Marketing Operations (o declare die Discovery a


Commercial Discovery pursuant to Article 12.6(a) or 14.5(a), the CON IK ACTOR


dull he entitled to request an extenrion of the Explcaution Period (notwithstanding


the maximum pciiod provided in Article 6.2). provided it so requests the


GOVERNMENT in writing at least ihirt> (30) days prior to tlie end of tlic maximum


I xplorntion Period, logctlicr with a proposal for Cias Mnrketing Operations to lv


nndertaken during such extension. It granted by the GOVERNMENT, any such


extension shall not exceed two (2) < ontract Years. Upon the cxpir>' of such extension,


if it considers it lias still not completed it* (nu Marketing Operations relating to such


Discovery, tlic CONTRACTOR sluill he entitled to request a ftirtlwr extension of two


(21 Contract Years provided dial it <> requests tin- GOVERNMENT in writing at


least thirty (30) days prior to the end of the original extension, together with a


proposal for Gas Marketing Operations to he undertaken during such extension


iwvcfrBacai **ir»*j


610 If the C ONTRACTOK considers th.il a Discovery of Crude OH and any Associated


Naiwal Qaili (onuncrci.il I toon-cry. ibe CONTRACTOR shall have the


exclusive right to develop and produce axh Guranetaal Discovery, pursuant U) the


terms of this Cootract I he Devck>pmait Period foe a Coomarial Discovery of Crude


OH ard any Associated Natural (few Aril be twenty (20) yeses commencing on the


dccbr&ion of such Commercial Discovery b> CONTRACTOR. :n accordant with


.Article 126(a). with an uutonulic right lo a five (5) year externum.


611 If the CONTRACTOR a«dc»s that a Ihwflvery of Non-A scaled Natural (ias b


a Commercial Discovery, the CONTRACTOR shall have the exclusive right to


develop and produce such (ommcrvial Itoon.-ry. pursuant to the terms of ihb


Contract The Development Period tor a Commercial Discovery of Noo-Amcbled


NanrJ Gas doll tv twenty (20) yean enran---*tg on the deUarauai of roch


Commercial Discovery by (X)N TRACTOR. in accordance with Article 126(a) or


Article 143(a). with an autimssic right to a five (5) year extotsma.


6 12 If Commercial Production from a Production Area b still possible at the end of its


IVrvdoptneni Perkd as defined in Articles 6.10 o* 6.11 then, upon its request. the


CONTRACT OR dull be entitled lo an extension of such Development Period order


tlv me terms as thotv provided in this Contract. Such requeM Ail be nwlc in


writing by the CON TRACTOR at least six (6) Months before the end of live said


Devdotanent Period.





The term of any such extension of the Development Period shall be;





25/118


(u) five (5) Ycbim for Crude (hi and any Aaaucialed Natural (its, and/or


(b) five(5) Years forNia AawriMlJ Natural Gas


6.13 Hie CONTKACIOK shall have the right to terminate Production Operations tor any


Production Area at any time during the term of this Contract, subject to giving


notice to the GOVERNMENT of at least ninety (901 days Phis Contract shall


terminate on the expiry date of the last Production Arm or when Pinductioo


Operations for nil Production Arens have Icmiuuilcd.


ARTICLE7 - RK1JNQU1SILMEMN


7 1 Subject to the of Art* lev 7.2 aid 7.3. the CONI H \( TOR shall surrender


port"** *'l the Contract Aren as fallows;


(a) ;U the end of the initial tv mi of the Exploration Period referred to in Article


6-2. twenty five per cent (25*-%) of the net area detemuned Wy subtracting the


Production Areas from tlic initial C ontract Area;


(b) at the end of the first extension period entered into under this ( outrun niter the


end of the initial term of the Exploration Period referred to in Article 6.2, ui


additional twenty five pa cent (25%) of the net area determined by subtracting


the Production Areas from the remaining part of the Contract Arm; and


(c) at the end of the Exploration Period (including all extensions thereof), all of


the remaining area that ik not in a Production .Area.


12 for the plication of Article 7.1;


(a) any areas already relinquished pursuant to Ankle 7.4 diall be deducted from


areas to be surrendered; and


(b) the CONI RAfTOR dull have the right to determine the area, shape and


voik-n of the Cemet Area »o be kept, provided that such aareniaed portratei


of the Contract Area .dull he in corraguous Mocks.


73 It the relinquishment referred to in Article 7 I cun only be achieved by including part


of ar Appraisal Area, then theie percentages shall he reduced lo exclude such


Appraisal Area.


7.4 During the Exploration Period, the C < »NTK AC It »M may at the end of each Contract


Year surrender all or any |«n of the Contract Area by written notice «nt lo the


GOVERNMENT at tea* thirty (J0» days ui *Jvancc of the proposed date of


sanonfcr, subject to the provisions of this Article 7.4 Such voluntary surrenders


during the Exploration Pen. J iJv.ll be deemed cxjual to the obligah-y rebrvjuiv mom


referred to unJa Article 7.1. I his Contract shall terminate in the event of the surrender


of the entire Contract Area.


7.5 No surrender provided under Article 7.4 .dull exempt the CONTRACTOR from its


outstanding obligations inter this i ««uract In the event the ( OMRACTOK elects to


surrender the enure C'.mtnirt Area without having fulfilled the Minimum Exploration





26/1 IK


Obligations relating to the then ament Sub-Pcrkxl as provided in Article 10.2 or


Article 103. the CONTRACTOR shall pay 10 the GOVERNMENT the relevant


demanding amoirt as detailed in Article 10.2 or Article 10.3. as the case may be.


7.6 I he botmdarics of the portion of the Contract Area to be relinquished by the


CONTRACTOR shall be communicated to the GOVERNMENT by written notice at


least thirty (50) days in advance of the relevant date for relinquishment, pursuant to


Article 7.1-





ARTICLE 8 - MANAGEMENT COMMITTEE


8.1 A Management Committee -hall be established within thirty (30) days following the


HfTeetive Date l<*r the purpose of providing orderly direction of all matters pertaining


to the Petroleum Operations and the Work Programs. Within such period, each of the


GOVERNMENT and the CONTRACTOR shall b> written notice nominate it*


respective member* of the Management Committee and their deputies.


Tlic Management Committee shall comprise two (2) members designated by the


GOVERNM1 \ I and two (2) members designated by the CONTRACTOR.


Upon ten (10) days notice, each of the GOVERNMENT and the CONTRACTOR


may substitute uny ol ita members of the Management Committee. The churman of


the Mnnagcmenl Committee shall be ooe of the members designated h> the


GOVERNMENT (the “Chairman’’). The vice-chairman of the Mi .igei enl


Committee sluill lie one of the mcmheis designated by T <• CONTRACTOR (tlw


"Vlec-Chairmani'’). In the absence of the Chnirmnn. the Vice-Chairman shall chair


the meeting.


Each Party shall have the right to invite a reasonable number of observers as deemed


necessary to attend the meetings of the Management Committee ir a non-voting


capacity.


8.2 The Management Committee shall review, deliberate, decide and give advice,


suggestions and recommendations to the Parties regarding the following subject


matters:


(a) Work Programs and Budgets;


(b) tlie CONTRACTOR'S activity reports:


(c) production levels submiUcd by the CONTRACTOR, based on pruden:


international petroleum industry practice:


(d) Accounts ol Petroleum C osts:


(e) procurement procedures for potential Subcontractors, submitted by the


CONTRACTOR in accordance with Ankle 193;


(0 Development Plan and Budget for each Production Area;


(g) any matter having j material adverse affect on Petroleum Operations;





27/118


 (h) nny other subject mailer of a material nature I hr Humes arc willing to


consider.





8 1 Each of the GOVERNMENT and the (‘ON IR \

the Management Committee. Ihe Management Committee cannot validly deliberate


union each of the GOVERNMENT and die CONTRACTOR is represented by at


least one (1) of its member* or its deputy.


The Management Committee shall attempt to reach unanimous agreement on any


subject matter being submitted In the eveni ihe Management Committee cannot


reach unanimous agreement, a scomd meeting shall be bdd within fotaken (|4> day*





Except a* provided foe in Article 1.4 and Article 8.5. m the event that no agreement is





reached ut the second meeting, die Uiainnun Khali have the tie-breaking vole.





8.1 In tin- cvoiil dial, during ihe Exploration Period, no agreement is reached at tl»e mxnnd


mceiing of ihe Management Committee, us provided for in Ankle 8 l. or unanimous


approval is not obtained, as required pursuant to Artklc 8.5; then the proposal nude


by the < ONTRACTOR shall be deemed adopted by the Management ( ommitlcr


8.5 Nolwithwimding ihe provisions of Article 8.3. mid subject in Article 8.4. unanimous


approval of the Management Cummilloc sh nil be required for:


(a) approval of. and any material revision to. nny Exploration Work Program and


Budget prepared after ihe first Commercial Discovery m the Ptrxhaakm Area


reLnmg to such Ccnuncrcial I>jootc») .


(b) approval of. and any material revision to. the DevcUqimcni Plan, die


production sciicdule. lifting schedule and IVvclopmcnl and Pr«*duction Work


Progiani' and Budgets;


(c) establishment of rules of procedure for the Management <.-nmirtee;





(d)





«) ijipruv.il of. and any material revision to. [xecircmcnl pnaxdures for goods


anchor »ervk«. submitted by the CON IKACTCIR in irconlnnee with Arack


19J (unless such promises have »xvn ikemed approved by the Management


tfi Committee in antrdancc with Arock 19 tl;





appvoval of. ami any mmenal revision to. any fxv^a.-cd pipeline projixt.


vuhmiiuxJ by CONTRACTOR in accordance with Article 33.3;


<8>


approval of a first rare bonk in which to place the Ikcommivimmg Reserve


Find, in accordance with Axode 38.1.





(h) approval ot aaJ any material revision to. any proposed Dccnmmisaccmg Plan


submitted punumt to Artick 58.7 on any Deeommissiccinij Work Program and


Budget or Gas Marketing Wctk Program and Budget;








28MI8


 (i) any Term*. of Reference which it required u» be prepued and agrwxl lor the


|wrp«n« of expen detenu, rolx«. pur-auait lo Article 42.2;





(j) approval of any custs in excess of ten per cent (10%) above any Budget; and


ik) any nutter having a material aJime cftcct on Fctroleuni (>paautt.





1.6 Ordinary mcciinp of the Mn^nm C .armittec shall take place n the Ktadistan


Region. alternately at the offices of the GOVERNMENT and those of the


CO.M KACIOH or irt any other location ugrrod between Parties, .it least twin* n


Contniet Your prior to the date of the first Commercial Discovery and three times a


Contract Yew tliereafier.





X .7 Either the GOVERNMENT or the CONTRACTOR may call on extraordinary


meeting of the Management Committee to discus-, important issues or developments


related to Petroleum Operations, subject to giving reasonable prior notice, specifying


the matters to be disctmixl nt the meeting. to the other Party I he Management


Committee mny from time to time make decision* by correspondence provided all the


membem have indicated tltcir approval of such decisions in such correspondence.


8.8 l Inlets at least one (I) member or its deputy nfeneh of the GOVERNMENT .ind the





CON I RA

period not to exceed eight (8) days. The Party Ik mg pa-sent shall then notify the other


Party of the new date time and locution for tin* nxvtinp





8.9 I Ik* iigcndn for meetings of tlie Management ( otnmittce shall be pa-pared by the


CONTRACT OR in accordance with instructions of the Chairman and communicated


to the Parlies at least fifteen (15) days prior to the dale of the meet in* Ihe agenda


shall include any subject matter proposed b> citlteT the GOVERNMENT or ihe


CONTRACTOR. Dacisnin «»t the Mnnagrroect Committee will he m*Je ax the


meetings. Ihe CONTRACTOR shall be responsible for preparing and keep mg


minutes of the decision* made at the rmetingv Copies of such minutes shall be


forwarded lo each Party f* review and approval. Each Party dull review and


approve such minutes within ten (10) day* of receipt of tlie draft minute* A Party


who faib to notify in writing its approval or disapproval of such mini** within such


ten (10)days shall be donned to hove approved the minutes.





8.10 If required, the Management t '<>mntOce may request the creatwc of a techrocal w h-


committee or any other subcommittee to assist it. Any such auhommsltae dull he


composed of a reasonable number »»f experts from the GOVERNMENT and the


CONTRACTOR After each meeting, the technical subcommittee or my other stih


committee shall deliver a written report to the Management Committee





8.11 Any emb and expenditure acutcd by the CONTRACTOR for of die


Management Committee or any tevhncs or any


shall be considered as Petroleum Cm6 and shall be recovered by


CONI RAC TOR in accordance with the pros riiont of Articles *nd 25.

















29018


 AKI M If 9 - CUARANTERS





I nch CONTRACTOR Entity kIwiII provide- Ik- GOVERNMENT, if so required by


the laitci pursuant Hi written notice received hy the CONTRACTOR Emily within


thirty (30) duys of the l-'lUvtivc Dale, with a corporate guarantee in a form as shall he


agreed in good faith between Hr (JOVERNMKNT and each CONTRACTOR Entity


no* later than ninety (90) chi>» after the Lffcxlivc Date, provided that such corporate


giAirantci shall he given only in respect of the Minimum Financial Commitment for Ik


Fire Sub-Period and shall expire automatically upon completion of the performance of


the Minimum Exploration < thligations set out in Article 10.2(d) and (c) or expenditure ol


-arh Minimum Financial Commitment, whichever is the earlier..


Not later than sixty (60) days alter the commencement of the Second Sub Period. each


CONTRACTOR Entity shall provide tk- GOVERNMENT, if x> required by the


latter pursuant to written notice received b> tk CONTRACTOR I otity within thirty


(30) days of such commencement date, with a corporate guarantee in


(n) Uk form substantially agreed hetween (lie GOVEKNMEN1 and each


CONTRACTOR Entity for tk- Find Sub Period, if any. subject to making the


changes necessary in order lor the corporate guarantee to apply only to t‘ >


Second Sub-Period, nr


(b) if tlierc is no agreed form, in a ferrr as dull be agreed in good lakh between


the GOVERNMENT tuid each CONTRACTOR 1-jitit) not later Own ninety


(90) days after the GOVERN MEN I * notice.


und provided in each case tluit such corporate guarantee shall be given only in respect


of the Minimum Financial Commitment for the Second Sub-Period and that such


corporate guarantee shall expire automatically upon completion of Ik performance of


the Minimum Exploration Obligations set out in Article 10.3 (b) or expenditure of


such Minimum Financial Commitment, whichever is the earlier.


In the event of an assignment by a CONTRACTOR Entity in accordance with


Article 39, the relevant third party assignee shall provide the GOVERNMENT, if so


required hy the latter pursuant to written notice given to such assignee within thirty


(30) days of the Effective Dale, with a corporate guarantee in the form agreed


pur'iiani to Article 9.1 or 9 2. ax applicable to the then current Sub-Period or. in the


absence of any soch agreed form of corporate guarantee, in a form os shall be agreed in


good faith between die GOVKKNMKNI und such assignee not later dun ninety (9(1)


days after tk effective elute <»l tk assignment, provided dial such corporate guarantee


shall be given only in respect of die Minimum I mam ml (Commitment for tk then current


Sub-Period, and shall expire automatically upon completion of the performance of Ik-


Minimum Exploration ()hiigAliun« set out in Articles 10.2(d) and (e) or Article 10.3(b). ns


tk case may k. or expendit .re of such Minimum financial Commitment whichever it


the earlier.




















30T18


 ARTICLE 10-MINIMUM EXPLORATION WORK OBLIGATIONS


10.1 Thu CONTRACTOR duill nI.iii I xpkmtfion Operations within thirty (30) days of


Management Committee approval of the Exploration Work Program and Budget m


accordance with Anidc K I he CONTRACTOR shall perform geological,


geophysical and'or drillm}’ w«>rk» as provided under Articles Ift? to 10 J (the


“Minimum t xplorutiofl Obligations", If applicable. the said Minimum Exploration


OWigntioiw shall be perfonned during each Sub-Period in accordance with prudent


international petroleum industry pmclice.


10.2 During the Tint Sub-Period, the CONTRACTOR shall


(a)


carry out gEOtagiial and gciphysical studies, uxnprraq? ds: Mknsmg-


(i) the compilation of a technical database;


(ii) the performance of a remote sensing study:





(iii) a field visit to verify initial geological and geophysical work and


remote sensing results and plan lor two dimensional seismic


Acquisition; and


curry out n duta search for existing dntn specific to this Contract Area,


< 1*1


comprising die following;


well data, if available, for example, electric logs;





(ii) seismic data and gravity data, if available: and


(iii) reprocess seismic data, if available*,





(O perform field work c**mprising simciural. i





Id)


acquire, proc** and interpret one thousand (1000) I me kilometres of Iwo


dimension.!! seismic data within tlac Contract Area, onmnittiag for this


purpose a minimum financial umouni of five million Dollars (USS


5.000.000); and





(e» drill three (3) fcxplueaooo Weds (the F**l WHkT within


Contract Area, eocrratnng fer thj


■Uioo DoUora (USl I S^OOdJtlO).





10.3 During the Second Sub-Period, the COM RA< IC >K xlusll:


(a> acquire, process and .nk-ipret further sofanfc data (being either two





dimensional or three dimensional). it the CONTRACTOR comiders that the


results from die Rat Exploration Wells justify the ao|Usiti.Ki of further


seismic data; and


(b) drill two(2) Exploration Well* (the “Sccand Exploration Wilts") committing





for this piaposc a miiuiiaan financial amount of ten mills «i Ihdlars (USS





31/118


10.000.000), union die data from the HrM Exploration Wells demonstrate ilm


there is nut ■ reasonable technical case for drilling the Second Exploration


Wells in the Contract Area.


10.4 Notwviaaand ng thr pKNukus in Antics 102 to I0J. for tlic execution of the


Minimum Exploration Obligations under Articles 10.2 to 10.3, it is agreed as follows:


<;i) Minimum I xpkiration Obligations in Ihe Second Sub-Period shall only apply in


the event the CONTRACTOR h..s not elected to notify the (sOVKRNMENT


ib.it it will not enter into the Second Sub Period. in accordance with and


subject to Article 6.4.


(b) Subject to Article 10.4(a), the CONTRACTOR shall be required to meet its


Minimum Exploration Obligations lor tltc rqipliciihle Sub-Period, even if this


entails exceeding the Minimum financial C 'ommrtmcnl toe such Sub-Period If the


CONTRACTOR has sail'tin I its Minimum Exploration Obligations without


having spent the total Minimum f-uuncial Conunilment for such Sub-Period, it


vluill be deemed to have tstinlkd its Minimum Exploration Obligations for


such Sub-Period.


(c) l och Exploration Well shall he drilled to tl»c depth agreed by the Management


Committee unlem


(i) the formation is encountered at .i lesser depth than original!)


anticipated;


tii) basement u encountered at a lesser depth than originally anticipated;


(in) in the CONTRACTOR’S sole upiiuon continued drilling of the


relevant Exploration Well prcsrxas a hazard due to t'w pr^etacc of


abnormal or unforexen conditions;


liv) insurmountable technical problems arc encountered rendering it


impractical to cor, acne drilling with standard equipment; or


(v) petroleum formatoos are encountered whose penetration require*


laying protective casing that does not enable the depth *jwd by the


M.aii|Mi»ni Gnonincc to be reacted.


If drilling is stopped for any of the foregoing reasons, the Exploration Well


shall he deemed to have been drilled to Ihe depth agreed by the Management


Committee and (he CONTRACTOR shall be deemed to have satisfied its


Minimum Exploration Obligations in respect of the Exploration Well


Id) Any geological or geophysical work carried out or any ttmtnlc data acquired,


processed or interpreted or any Exploration Well drilled or any other work


performed in excess of the Minimum Exploration Obligations and/or any


amounts spent in excess of the total Minimum Fir-incul ( ooinmmini in any


given Sub-Period, stall be earned forward to Ihe next Sub-Period or any


extension period and shall he taken into account to satisfy the Minimum


Exploration Obligation? and/or the total Minimum Financial Commitnient for


such subsequent Sub-Period or extension period


32/IIS


 (i*) Tor the avoidance of doubt, if: (i) in the first Sub Period, the


CONTRACTOR perform* any of the Minimum Exploration Obligations


prescribed for the Second Sub-Period in Article 10-3; and (ii) the


CONTRAC TOR has not elected to notify the COVTRYMENT that it will


not alter into the Second Sub-1'cnod (in accordance with and subject to Article


6.4), the performance of such Minimum Exploration Obligations shall be


deemed lo wlixTy the anme Minimum Exploration Obligations for the Second


Sub-Period








ARTICLE 11 - KXPLOKA I ION WORK PROCRAMS AND BUDGETS


I l.l Within forty-live (45) days lollowing the Effective Dale, the CONTRACTOR shall


prepare and submit to the Management Committee a proposed work program «ind


budget relating to Exploration Operations (the Tiploration Work Pribram and


Budget") for Uve remainder of the Calendar Year. Thereafter. no later than I October


in each Calendar Year, the CONTRACTOR shall submit a proposed Exploration


Work Program and {fudge: to the Mmuigement Committee for the billowing Calendar


Year.


II 2 fnch Exploration Work Program and Budget shall include details of. but not be


limited to. the following:


(a) work to be undertaken;


(b) materials, goods and equipment to he acquired-.


IC) con csimalc of services Id be provided including services by third part*,


and or Affiliated Companies of ary CONTRACTOR Entity; and


Id I estimated expenditures, broken down by cost centre in accordance with the


Accounting Procedure.


11J The Management Committee shall meet w iihin sixty (60) day t following its receipt of


COKntALTOR i proposal to examine and approve the Fxplomian W.wk Program


and Budget


11.4 If the GOVFJtNMI N I requests any modification to the Exploration Work Program


and Budget, the Management Committee shall meet to discuss the Exploration Work


Program and Dudget und proposed modifications thereto within Uic sixty (60) day


period referred to in Article IU. The CONI RAC I OR shall communicate its


comments on any such requested modification* to the GOVERNMENT at the


meeting of the Management Committee or in writing prior to such meeting.


11.5 The CONTRACTOR shall be authorised to make expenditures not budgeted in un


approved Exploration Work Program and Budget provided that the aggregute amount


of such expenditures shall not exceed ten per cent (IIP*) ol the approved Exploration


Work Program and Budget in any Calendar Year and provided further that such


excess expenditures shall he reported as soon as is reasonably practicable m the


Management < Committee For the avoidance o( doubt all excess expenditure* shall be





33/111


 recovered I" the CONTRA* TOR h UOfteee with the provision* o1 Articles 1


und 25. provided tlui any ouww expenditures above the ten per cent (10%) limit shall


only be recovered with tin- unanimous approval ol the Management ( mnmillce.


I l.h In case* of emergency, the CONTRACTOR may incur such additional expenditures


as it deems necessary to protect life, environment or property. Such additional


expenditures shall be reported promptly to the Management Committee For the


avoidance of doubt such additional expenditure shall he considered Petroleum Costs


and shall he recovered by the CONTRACTOR in accordance with lire provisions of


Articles I and 25.





ARTICLE 12 - DISCOVERY AM) DEVELOPMENT





111 If the drilling of an Exploration Well results in a Discovery. the CONTRACTOR


shall notify the GOVERNMENT within lorty-eight (48) bourn ol completing tests


oonfliming the presumed existence of such Discovery or within such longer period as


(lie < 'ONTRACTOR reasonably requires to dotvnnine whether or not there is a


Discovery. Within thirty (30) dnya Following notification of the said Discovery, the


CONTRACTOR shall present to the Management Committee all technical data then


available together with its opinion on the commercial potential of the suid Discovery


(the *'Discovery Report”) The CON I RA< I OR shall provide in a timely inuncr such


other infunnatioo relating to the Discovery ax the GOVERNMEN T mny reasonably


request.








112 If. pursuant to Article 111. the CONTRACTOR amsuicr. that the Discovery has


conmcrcial potential it shall, withm ninety (90) days following acmfrcaCoo to the


GOVE K>MI N r of the Discovery. suborn an appraisal program m respect ol the


Discovery tthe ‘ Appraisal Work Program and lludgri' • to the Management


Committee. The Management Committee shall examine the Appraisal Work Program


and Budget within thirty (30) days of its receipt. If the GOVERNMENT requests any


modification to the Appraisal W'ort Program and Budget, the Management


Committee shall meet to diwuss the Appraisal Work Program and Budget and the


requested modifications thereto within sittv (60) days fruru its receipt of the prepused


.Appraisal Work Program and Budget. The CONTRAITOR shall communicate rtx


comments on any such requested modification! to the GOVERNMENT at the


meeting of the Management C ommitlce or in writing prior to such meeting.


The Appraisal Work Program iiihI Budget sliall include the following:





(a) an appraisal works program and budget, in accordance with prudent


international petroleum industry practice.





(h) an estimated time-frame for completion of apjauisil works: and


(u) the delimitation of the area to be evaluated, the surliice of which shall not





exceed twice (2 x) the surface of the geological structure or prospect to be


fl'asol (the “Appraisal Area").





34/118


PV6


12.3 If. following a Discover), a rig acceptable 10 ihc CON rRACTOR in available to dnll


a welL ihc CONTRACTOR inay drill a»> additional hxploration Well or am


Appraisal Well deemed necessary f»y the € OKI RACTOR before or during the


Mimpntcnl Cfl---illBt'i review of the Discovery Report provided in accordance


with Article III or its review of the Appraisal Work Pn^rarn and Budget.


Ihc CONTRACTOR shall he authorised lo incur expenditures not budgeted «n an


approved Appraisal Work Program and Budget provided that the aggregate amount of


such expenditures shall not exceed ten per cent (10%) of tlie uppimed Appraisal


Work Program and Budget in any Calendar Ycur ami provided further that such


excess expenditures shall be repotted bb »wii b.s is reasonably practicable to the


Management Committee. frn the iivoidancr of doubc all excew expenditures shall be


recovered by tlie C ON I RACTOR in accotdaucc with the proviriom of .Articles I


and 25. provided that any excess expenditure* above the ten per cent (10%) limit shall


only he recovered with the unuiiiinouK approval of the Management Committee.


\ppraisal Kcpyft


12.4 Ihc CONTRACTOR shall submit a detailed report relating to tlie Diwxivety (the


‘’Appraisal Report") to the Management Committee within ninety (90) days


following completion of the Appraisal Work Program und Budget


12.5 I lie Appmisol Report shall include tlie following


(a) geological conditions;


(b) physical properties of any liquids.


(c) sulphur, sediment and water content.


(d) type of substances obtained;


(f) production forecast per well: and


(g) a preliminary estimate of recoverable rcsen es.








12.6 Together with its Appraisal Report, the CONTRACTOR shall submit a written


statement to the Management Committee npccil'y ing that:


(a) the CONTRACTOR has determined that live Discovery is u Commercial


Dtscovciy;


(b) the CONTRACTOR has determined tin* the Discovery is not a Commercial


Discovery;


(c) the CONTRACTOR hns determined that the Discovery is a significant





Discovery, which may become a Coniiiioroinl Discovery subject to additional


exploration and/or appraisal works within or outside of the Appraisal Area, or





35/118


(d) tlic CONTRACTOR has determined that the Discovery is a Mgnificiini


Discovery ofNon-AsMKialal Natural tins, which may become n ( onimercinl


I >i wo very subject to tins Marketing Operations in accordance with


Article 14.5.


12.7 In cose the statement of the CONTRACTOR corresponds to Article 116(c). the


CONTRACTOR shall submit a Work Program and Budget to Uic Management


('•Nnmitlcc within thirt) (30) days following such statement. Any well drilled to


evaluate the said significant I >iscovcry shall ba considered an Exploration Well.








118 If the I JiKOvoy has hern declared a Commercial Discovery by the CONTR \CTOR


pursumU to Article 12.6(a) or Article 14 5(4). the CONTRACTOR dioll Mibmit a


proposed Development Plan to the Management Commiltee within one hundrod


eighty (180) days following such declaration. I he Devdopmeni Plan shall be in


iHvunliince with prudent iniernational petroleum indudry practice. Except with the


consent of the GOVERNMEN T, such Development Plan shall include details of the


following as applicable:


(a) the delimitation of ilk- Pnxluction Area, taking into account the results of the


Appraisal Report regording the importance of the Petroleum Field within the


Appraisal Area.


(b) drilling and completion of Development Wells;


(c) drilling and complcuor of water or Natural C»as injection wells.


(d) laving of gathering pipelines;


(e) insui lotion of separators, tanks, pumps and any other associated production


and injection facilities for the production:


(D treatment and transportation of Petroleum to the processing and storage


fueilmcs onshore or otTshorc;


«j) laving of export pipelines inadc or outside the Contract Area to the storage


facility or Delivery Point.







t i) plan for the utilisation of Associated Natural (>*s;


(j) training commitment in accordance with Article 23;





Ik) a preliminary decommissioning and site roturtf km plan;


(I) all contracts and arrangements made or lu be mude by the CONTRACTOR


for the sale of Natural this;


(tn) to the extent available, all contracts und arrangements made or to be made by





Persons in respect of that Natural Gas downstream of die point at which it is to





3^118


he sold by the C ONTRACTOR and which ure rdevnnt to the juice at which


(and other term* on which) it is to In- sold by the CONTRACTOR or me


otherwise idevinl to the detcrminotion of the value of it for the purposes of


this Contract, but not beyond the point at which it is fir* disposed of in an


Arm's I ength Sale;




(o) any oilier operations not expressly |>rovid«l for in this Contract but reasonably


necessary for Development Operations. l*roduction Operations and delivery of


Petroleum produced. In accordance with prudent international petroleum


iixkrtry j-eactice.


!29 fbe V4joeoinil Cornmincc shall use its best gfibns to approve the Development


Plan within sixty (60) days after its receipt of such plan. The Development Period for


each Commercial Discovery within a Development Plan dull be extended for the


number of days in excess of such sixty (60) .fcsv period that it takes for (he


Management Committee ht approve the Development PI®. The Development PI®


shall be considered apjHovul by the GOVERNMENT if the GOVERNMENT,


tlirouy.li its representatives on the Management Committee, indicates its approval in


writing.


12.10 If the GOVERNMENI rcx|ucsis any modificutlons to the Development Plan, then Ihc


Management Committee shall meet within sixty (60) days ol receipt b> the


CONTRACTOR of the GOVERNMEN IT written notification of requested


modifications accompanied by all the documents visit tying such request, ard slwli


discuss such request The COM k ACTOR shall communicate itaev nment* on my


such requited modifications to the GOVERNMENT at such meeting or in writing


pru* to such meeting. Any nmdilk .ition approved by the Management Committee at


such meeting or within a fiutltcr period of thirty (30) days from the date of such


meeting shall he inaxpofnicd ink) the Development Plan which shall then be deemed


approved and adopted.


12.11 If the CONTRACTOR makes several Commercial Discoveries within the Contract


Area each such C ommercial Discovery will have a separate Production Aren IK


CONTRACTOR shall be entitled to develop and to produce rnrh Commercial


Discovery and the GOVERNMENT shall provide the appropriate Permits covering


each Product n m Area In a»* the area covered by the Commercial Dimes cry extends


beyond the boundaries of the Contract Area, and to the extent such area outside the


Contract Area « not the subject of a Petroleum Contract (as defined in the Kunlwtin


Region Oil and tias law) with a third party, the prov isiorts of Article W 2 Anil apply





ARTICLE 13 - DEVELOPMENT AND PRODI

HIDCET


HI Upon the approval of the Development Plan by the Management Committee, the


CONTRACTOR shall start the Development Operati«TO for tK Commercial


[>iscovcry in accordance with the Development Plan and prudent international


petroleum industry practice





37/111


132 Within ninety (90) days following approval of the Developmenl Plan by the


Management Committee, the CONTRACTOR shall prepare and submit to tin-


Management Committee a proposed work program and budget for Development


Operations (the "Development Work Program and Budget") to be curried out in the


Production Area for the duration of the Development Operations I here a Per. no latei


than I October in each Calendar Year, the < ON’I RACTOR shall submit to the


Management Committee updates in respect of its Development Work Program and


Budget. To enable the Management Con mi it tee to forecast expenditures, cadi


Development Work Program tutd Budget slmll include details of (lie following:


(a) works to be carried out;


(b) material and equipment to be squired by main categories.


(e> type of services to be provided, distinguishing between third parties und


Affiliated Companies of any COM RAC TOR I ntity; and


(d) categories of general and administrative expenditure.


13.3 If any modification to the Development Work Program and Budget is requested by


the GOVERNMENT, the Management Committee slk.il meet to discuss the


Dcvel.ipm.iit Work Program and Budget and pi of-mod modifications thereto within


sixty (60) days from its receipt of the proposed Development Work Program and


Budget. Mu* CONTRACTOR shall communicate it* comments «»n any such


requested modification* to the GOVERNMENT ul the meeting of the Management


Committee or in wriung pea* to such imvtiny


134 The CONTRACTOR stall be authorised Id inew cxpovfinicj nrt budgeted in an


approved l^vekpnent Work l»ropram and Budget provided that (hr aggregate


amount of such expenditure Roll not exceed ten per cent (10%) of the proved


Development Work Program and Budget in any Calendar Year anJ provided further


that such excess expenditures shall he reported at toon as b reasonably practicable to


the Management Committee for the avoidance of doubt, all excess expenditures


shall be recovered by the < ONI M ACTOR in accordance with the pro visions or


Article* I and 25. provided that any cxccas expenditures above the ten per cent (10%)


limit shall only be recovered with the uturomo* approval of Ac Management


13.5 In cate* of emergency, the C ONI RAC KIR may incur -atch additional expenditures


as it deems necessary In protect life, environment or property. Such additional


expenditures shall he reported promptly to the Management Committee. For the


avoidance of doubt, such additional expenditure duill be considered Petroleum Costs


and shall be recovered by the CONTRACTOR in accordance with the provisions of


Articles 1 and 25.

















38/118


IV6 No later than 1 < fctobcr of the Calendar Year preceding thr estimated commencement


of production puraiani to an approved Development Plan and thereafter no later thnr


I October in each Calendar Year, the CONTRACTOR dull prepare and submit to


the Management (•miniitiec a proposed work program ml budget for Production


Operation* (the Production Work Program and Budget") for the following


Calendar Year. To enable the Manaj.-nert (omennee to facufl expenditure*. the


Production Work Program and Budget dull include detail- off the foil owing


(a) wab to he carried out;


(b) material and equipment to be acquired by main categoric;


«c) type of services to be provided, distinguishing between third pernios and


Affiliated Companicsofany CON I'KAt TOR Entity: nnd


(d) categories of general aod administrative expenditure


13.7 II any modification to the Production Work Program and Budget is requested by the


GOVERNMENT, the Management Committee shall meet to discuss live Production


Work Program and Budget an»l proposed modifications thereto within :

from in receipt of the proposed Pioduclion Work Program and Budget Hie


CONTRACTOR shall communicate its comments on any such requested


modifications to the GOVERN MEN r at the meeting of the Managemert Committee


or in writing prior to such meeting.


13 * The CONI H ACT OR shall be authorised to incur expenditure- no* budget cxI in an


approved Production Work Program and Budget provided that the aggregate amount


of such expenditure* .shill not exceed ten per ccm (10%) of tl*c ajiproved ProductMin


Work Program nnd Budget in any Calendar Year and provided further thm such


excess expenditures dial I he reported as soon an reasonably practicable to the


Management < •nominee Kor the avoidance ofdoutx. all execs expenditures shall he


recovered by the CONTRACTOR in accanhnce with the provide** of Article* I


«d 25. pro' »ded dial any cxcc«* expenditure above the ten per cent (10%) limit shall


only be recovered with the unanimous approval of the Management Committee


13 9 In eases of etra-igency, the CON TRACTOR may incur such additional expenditure


as it decna necessary to protect life environment or property. Such additional


expenditures shall be reported promptly to the Management Committee For the


avoidance of doufc. wish additMmal expenditure shall be considered Petroleum t «*sts


and shall he recovered by the CONTRACTOR n accordance with the provi-»«B of


Articles 1 and 25.


13 10 .After the commencement of Commcrcoal Product).m the CONTRACTOR shall pa'


to the GOVERNMENT, in arrears, an annual surface icnul for the Production Area,


of one hundred Dolton (US$100) per square kilometre per Contract Year


I Prodactioa RentaT)- Such Production Rental shall he considered as a Petroleum


Cos and shall he recovered by the CONTRACTOR in accordance with the


provisions of Articles I and 25.








3*118


 AH I in » 14 - NATURAL HAS











14.1 To laic account of spentic conditions relating to Natural Gat and to promote Ms


development it the Ktmfcflan Region, ’-he GOVERNMENT will giant qioafic


henefus to the CONTRACTOR on principles maicrially similar u» daw contained in


this Contract including, umsiMmi with the Kurdistan Region Oil and Gas Law. more


generous provisuim in respect of the recover) ol Petroleum Costs and Ihc during of


Profit Petroleum than in respect of Crude Oil.


14J> The CONrRACTOH may free*) me am Natural Ga> reared to, the Petroleum


Operations If Icclir .ally and «wk«ncaDy justified, the CON IK VfTOR shall in


priority use an) Natural Gas for the purpose of enhancing recovery of Crude Oil in


accordance with prudent international petroleum industry practice as follows.











14.J Any cxccn A »v erased Natural In* produced (hat is neither used in the Petroleum


Operations not develop*! nd sold by the CONTRACTOR dull, upon the


GOVERNMENT* written request, be transferred m the first practicable delivery


point as agreed between the Panics free of charge to the GOVERNMENT. In such


ease, the GOVERN M KM dull be solely responsible for colltxling, treating


compressing und tnnspnrting such Natural Gas from such agreed delivery point and


shall he solely liable for any jJd in nal direct .md indirect costs associated therewith


The cootinKtkm and operation of required facilities as wdl as the offtake ol such


cxcc-n Associated Natural Gas by the GOVERNMENT shall occur in accordance


with prudent international petroleum industry practice and shall not interfere with the


production, lifting and transportulion of Ihc Crude Oil by the CONTRACTOR. For


the avoidance of doubt, all expenditure inclined by the CONTRACTOR up to such


agreed delivery point shall be considered Petroleum Colts und shall be recovered by


tlK CONTRACTOR in accordance with ihc provisions of Articles I ami 23.


In the event the GOVERNMENT finds n mariet for Associated Natural Gas. it shall


piumptly give written notice to the C ON I KA< TOR. and the CONTRACTOR muv


elect to participate in supplying Mich AsMieiulod Natural C.hs wiihin ninety (90) days


following notification thereof by the GOVERNMENT. If the CONTRACTOR


elects to participate in supplying Associated Natural (ins to such market, all


expenditures associated with any necessary lacilitios shall be paid for by the


CONTRACTOR For the uvoiduncc of doubt, such expenditure incurred shnll be


considered Petroleum Costs and shall be recovered by the CONTRACTOR in


accordance with the provisions of Articles 1 and 25.





Non Associated Natural Gas


14 4 Until an approved Natural Gas sales contract i.x executed in respect of all volumes of


Natural Gas expected to be produced, the CONTRACTOR shall be entitled during


the Exploration Period and the Development Period to carry out <«* Marketing


Operations.











40/118


14.5 If, pursuant to Article 12.6(d). the CONTRACTOR hits determined that the Discovery


is u significant Discovery of Non-Associatcd Natural Gas. which muy become it


Commcroinl Discovery subject to C *iih Marketing Operations, it sltnll carry out Gas


Marketing Operations, at the end of which it shall submit a written vuttcnieiit to the


Stoupemeai Committee specifying tful


(a) the CONTRACTOR has Jeter mined that the Di«ovciy is a ( otnmercial


Discovery, or


lb) the CONTRACTOR lias determined that the Discovery is not u Commercial


Discovery.


14.6 Tor the purpose of this Contract. “Cm Marketing Operation*' means any activity


under this Contract relating to the marketing of Non-Atsocuicd Natural <«as.


including any evaluation to find a commercial market for such Ncrt-AsMicaaUsi


Natural Gas and’or to find a commercially viable technical means of extraction of


such Non-Associated Natural Gas and may include activiti.»related to evaluating tire


quantities of Non-Assocuicxi Natural Gas to be sold, its quality, the geographic


location of potential markets to be supplied as well ut evaluating the cost* of


production, transportation and distribution of the Non Associated Natural Gas Iron


the Delivery Point to the relevant market


14 7 All costs and expending incurred by the CONTRACTOR in the performance of the


Ktivhies in relation to the tins Marketing Operations shall he considered Petroleum


Costs.


14.8 No later Ihun I October of the Calendar Year preceding the Calendar Year m which


any Gas Marketing Operation* me due to occur, the CONTRACTOR shall prepare


and submit to the Management Committee its Gas Marketing Work Program ml


Budget for the following Calendar Yoar. To enable the Management Committee to


forecast expenditure*, the Gas Marketing Work Program and Budget shall include ihc


following:


(a) works to lie earned out;


(h) type of services to be provided, distinguishing between third panics and


Affiliated companies of any (OMR At I OK huMy; and


(c) categories of general aaj admimstraliv e cspenditiac


If any modification to the Gas Marketing Work Program and Budget is requeued hy


the GOVERNMENT, the Management Committee shall meet to discuss the Goa


Marketing Woik Program and Budget and proposed modifications thereto within sixty


(60» days from its receipt of the proposed Ga& Marketing Work Program and Budget.


The CONTRACTOR shall comnuaiK.aH' it> comment. m imy such requeued


modifications to the GOV ERNMENT at the mcctu* of the Management Committee


or in wniing prior to such meeting


14.9 Ihc COM HACTOR shall be aulhoibed to incur expenditure* not budgeted in an


approved Gas Marixtuig Work Program and Budget provided that the aggregate


amount of such expendixurc 'hull not exceed ten per cent (10%) of the approved (ns





41/111


Marketing Work Program nntl Budget in any Calcniliu Year ami provided further thut


such excess expenditures shall be reported as soon ns reasonably practicable to the


Management Committee. For the avoidance of doubt, all excess expenditures shall he


recovered by the CONTRACTOR in Accordance with the provisions of Articles I


and 25. provided that am excess expenditure above the len per cent (10%) limit shall


only he recovered with die unanimous approval ot the Management ( 'otnraiuee.


14.10 If any Non-Associated Natural (ias is discovered within the Contract Area, and the


CONTRACTOR reasonably considers th.it the Non-Associated Natural Gas


Discovery will only be n Commercial Discovery il certain terms of this Contract are


amended, it shall be entitled to request amewhiK'nls to this Contract with its realms


The GOVERNMENT dull in good faith give rca»waMe conaderarioB to the


CONTRACTOR'S prq*

faith attempt to agree on the necessary ame>ulm<

unable to agree on such amendments, and the Exploration Period expires without the


CONTRACTOR having declared such Discovery ui be a Commercial Discovery in


accordaixv with Article \2.6(*) or -Article 14 5(ak and subsequently within a period


of eight (I) yeas from the end of swh rxplarahon Period, the GOVERNMENT


reaches < pcrmenl with any third party to dock? *>ich D xovery (the “Gas


Dc\rUpm««r ». then the following provisions shell apply:


(a) either before or upon agreement in relation to the Gas Development having


been reached

prvxluction during and/or operating or other like agreement», hut bet ore such


agreement is signed (the “Proposed C •ulmrt ') (subject only to the rights of


each CON TRACTOR Entity to pre-empt such Proposed Contract pnranant to


Article 14.10(b) and such conditions as may he applicable), the


GOVERNMENT shall, as soon as lawoniibly practicable filler the occurrence


of such circumstances, serve on each of the CONTRACTOR Entities, ii


notice to that oftcct and ahull with such notice provide such information and


main terms of such agreement as the CONTRACTOR Entities may


reasonably request In determine if they will exercise their rights (the “Abroad


Terns"), including:


(i) the identity of such third party;


(ii) the effective date of the Proposed Contract;


(in) the applicable commercial terms, including bemuse*. royalties, awl


recovery, profit .sharing, taxation and any other similar terms: and


(iv) all and any material condition* to which the Proposed Contract il


subject.


(b) Upon a request from any C ON TRAC II >R Entity, the GOVERNMENT will


provide all the CONTRACTOR Entities with such further inlormatior onJ


terms as may be mmuM) requested by any CONTRACTOR Entity.


Within iuc hundred .md eighty days (ISO) days after receipt of a notice arJ


.an father information under Article I4.I0U) in rdatnei to a Proposed


extract each of the CONTRACTOR Hi*him shall elect either:





42'118


(i» to enter into the Proposed Contract on the snmc or substantially similar


u-nns to the Agreed Tciiiih, with the right to cost recover all Petroleum


Costs incurred under this Contract against all Petroleum revenues


received under the Proposed Contract up to any cost recovery limits


out therein; or


(ii) to waive the aforesaid tight of pre-emption in relation to the Proposed





Contract.


and shall serve notice accordingly upon the GOVERNMENT and nil the


CON I RAC row Entities and in default of receipt by the GOVERNMENT


of any such notice within such |

such CONI RAt TOR Entity ahull he deemed conclusively to have served a


notice electing to waive its aforesaid right of pre-emption in relation to the


Proposed Contract





(c) In the event that more than one of the CONTRACTOR Entities exercises its


rights under Article I4.l0(b)(i) in relation to the Proposed Contract, :hen the


GOVKRNMKN I shall transfer or grant each such < ONTRACTOR Entity


an interest in the Proponed Contract upon the Agreed Terms (in accordance


with Article !4.lO

percentage interests bear to the aggregate of their rosfwtive percentage


intervals under the relevant Joint Operating Agreement (a> it applied at the end


of the Exploration Period) or in such other proportions as such


( ON TKA< TOR Entities shall agree between them.


(d) In the event lliut one of the CONTRACTOR Enlitic* cm ci.w-n its rights


under Article !4.10(b)(i) in relation to the Proposed Contract then tlac


GOVERNMENT shall inmsfcr or grant the whole of the intero* in the


Proposed Contract upon the Agreed Tains (in accordance with 14 IO|h»(i)) lo


such CONTRACTOR EiHhy.


(c) In tlie event that none of the CONTRACTOR Entities exercises its rights


under Article I4.l0(b)(i) llien iIk* GOVERNMENT may enter into the


Proposed Contract on terms no more favourable lo its countei|»urty limn tlio


Agreed Terms and. in such ease, lire aforesaid rights of pre-emption shall


thereupon cease to apply in relation to the Proposed Contract.


I4|| If the pre-emption rights in Article 14 10 .in- not exercised and the GOVIRN.MEN I


enters into ihe Proposed Contract with the third party uoncemod. tin-


GOVERNMENT will use its best endeavours to avoid any effect which may hamper


the Petroleum Operations of tlie < < )NI KACTOK while producing Petroleum.


FlariBU





14 12 riortng of Natural <«s in the course of activities provided for under this Contract, is


pn4iibiied exivpt (i) short-lenn flaring tor a tlaring period of up lo twelve (12) Moiitlw


necessary lor lesnng or other opcrntionaJ or emergency reasons in accordance with


|inxknt international petroleum industry practice (which sfuill include the flaring of


Associated Niilunil (ins to the extent tlie CONTRACTOR considers that re-injecting


Associated Natural fins is not justified technically anti economically and provided the





43,118


tk. p.10





 GOVERN Ml N r decides not to take each Aranciatad Natural Gas), or (u> wdh the


prior ■ulfcnriMbon of the GOVERNM» > f. such .uthcrisaaor not to he nuwuhh


withheld or delayed. The CONI KACTOR shall submit Midi tv**-* to the


GOVERN Ml N I’, winch shall include an evaluation of raramahk alternatives to flaring


that have been considered along with infcwmnlian on the amount and quality of Natural


Gas involved and the duration of Itx1 requeued Haring





ARTICLE 15- \CC Ol MIX. AND ALDUS


15.1 The CONI KACTOR shall keep in •«' «•fliers m the Kiuduan Region copies of all


hooks and accounts of all revenues relating to the Petroleum Operations and nil


Petroleum Costs (tin- "Accounts"), except during tlie fvxplonition Period, when the


CONTRACTOR ahull be entitled to keep tlie Accounts ui hs headquarters Abroad. Tlte


Accounts slutll reded in detail expendlltnv incurred as n function of the quantities and


value of Petroleum produced. and thill he kept for a period of five (5) yenra. All


Accounts which are made available In the GOV IRNMENT in accordance with the


provisions of this t attract shall be prepared in the English language. The Accounts •itnll


be kept m aocmtnnoe with pnident international petroleum industry practice nnd in


accordance with the provisions of tin- Accounting Procedure. The Accounts slull he


kept in Dollars, which shall lie the rol'erenco currency for the purposes of this


Contract


15.2 Within ninety (90) days following the end of each Calendar Year, tlie


CONTRACTOR shall submit to tlie GOVERNMENT a summary statement of all


Petroleum Costs incurred during the -aid Calendar Yea TV -atrmaiy flakncni >i-a"


also include a profit caktanao puruant to the provisions of Artsle .*f>


IS? The GOVERNMENT shall have the right:


(a) to request an auJit of the Accounts with respect to each t dlcn Air Year within


a period of two (2) Calendar Years following the enJ .4 v*h Calendar Year


(the-Audit Request Period"! and




petroleum inJiKtry accounting practice to undertake or a»rd the


GOVERNMENT to undertake Uk audit.


Notwithstanding paragraphs (a) and

shall have the right to audit the Account* with respect to rack Calendar Year at any


time in die COR of manifest error or fraud


15.4 The luKorie cost of retaining am auditor pursuant to Article 15 J shall V home by


the < ONTRACTOR ^nd treated as a Petroleum Cost for the piaptne of coat recovery


under Articles 1 and 25.


15.5 During the Audit Request Period lor any Calendar Year Itul not thereafter, the


GOVERNMENT, noting reasonably iiiul in accordance with prudent iiileriuitional


petroleum industry practice, may request in writing nil nuMuuihly available


information and justifications for it1- audit of Petroleum Costs








44/118


15.6 Should ihc GOVERNMENT consider, on the haws of data and information available,


that llic CONTRACTOR made a material mistake or there is any irregularity in


respect of the Accounts and considers that any corrections, adjustments or


amendments Should be made, the GOVERNMENT shall make any audit exceptions


in writing and notified to the CONTRACTOR within six (6) Montiis of the date of


request referred to in Article 15.3. and tailire to give such written exception within


such time dull be deemed to be an acknowledgement of the cnTTCctnea of the


CONTRAC TOR S Accounts


15.7 In respect of any audit exception made by the GOVERNMENT in accordance with


Article 15.6. the CONTRACTOR shall then have sixty (60) days to moke necessary


corrections, adjustment' or amendments or to present its comments in writing or


request a meeting with the GOVERNMENT The GOVERNMENT shall within


thirty (30) da>T of the CONTRACTOR** response, notify the CONTRACTOR in


writing ot ito position on the corrections, affustmccu. amendments or uunanents. If


therrallrr them still exists a disagreement between the GOVERNMENT and the


CONTRACTOR, the dispute will he settled in accordance with Article 15.9.


15.8 In aklition to the annul statements of Petroleum Costs as provided in Article 15.2.


the CONTRACTOR shall provide the GOVERNMENT with such production


statements and reports, as required pursuant to Article 16.3


15.9 Any dispuic between the Parties under this Article 15 that cannot he willed amicably


within nxty (60> days of the GOVERNMENT** find iwricc into Artide 15.7, may be


submitted hi an expert on the request of either the GOVERNMENT or the


CON'I KACTOR in accordance with the proviNitmn of Article* 4?.1 Notwithstanding


the provisions of Article 42. in tins specific instance the decision of the expert sliall


not necessarily be final uml either Party ma> decide to submit the mailer to urbitrntion


in accordance with the provisions of Article 42.1.


ARTICLE 16-C ONI RACTOR’S RIGHTS AND OBI.IGATIONS


PgrniaflviH Kviimvnlativc


16.1 If IVH done already, within ninety (90) dnva following the Effective Ode, each


CON TRACTOR Entity shall open an office and appoint a permanent representative


in the Kurdistan Region, who may be conlix led by the GOVERNMENT with regard


to any mailer relating to this Qmd and will be entitled to receive any


cornapoodonoe addressed to such CONTRACTOR Entity.








162 The CON TRACTOR shall carry out all Petroleum Operations in accordance wiih the


provisions of this Contract, pmdent internalwod pc1n4ciini industry (ROicc and


applicable Kurdrstan Region I aw.


The CONTRACTOR dull be responsible for tlx- conduct, management, control and


administration of Petroleum Operations and shull he entitled to conduct Pcinilctini


Operations in accordance with the provisions o( tins Contract. In conducting its


Petroleum Operation*, die CONTRACTOR dull have the right to use any Affiliate





45'118


 of each CONTRACTOR Tnliiy. its and their Subcontractors, and the employee*,


consultants, and agents of each of Hu- lorvuoing. The CONTRACTOR and all such


Persons shall ai all times have free access to the Contract Area and any Production


Areas for the purpose of carrying out Petroleum Operanonv








If* » The CONTRACTOR dull provide the GOVERNMENT with pcnodic data and


activity reports roluliug to Petroleum Operations. Said report* shall include detail* of


the following:


(a) information .uni data regarding nil Exploration Operations, Development


Operations and Production Operations (as applicable > performed during the


Calcixl.u Yenr, including an> quantities of Pebotcum produced and sold;




by the CONTRACTOR;


(c) a frtiilcmcnl specifying the nunilwt of personnel, their title, their nationality a*


well ax a report tut any medical services and equipment nude available to such


personnel; and


(d) a icwri|itive stulcmem of all capital assets acquired for the Petroleum


Operation*. indicating the date and jxicc or cost of their acquisition.





Operation*





It. I Ore CONTRACTOR may freely use any Pwmfcun pmdix.-d vodrn the Contract


Area for the Petroleum Operations.











If»\ The CONTRACTOR shall at all times provide rononahlc assistance as nuy


reasonably be requeued by the GOVERNMENT during its review and verification


of records and of any other information relating U> Petroleum t>pcrations nl the


offices, worksites or any other facilities of the < ONI RAC TOR


l pur giving reaxonable prior m*ic* to the CON TRACTOR the GOVERNMENT


may send a icasoruhle number of rvpmeinathes to the work sites or any other


facilities of thr CONTRACTOR in the Kurdistan Region to perfonn such reviews


and verifications Ike representatives of the GOVERNMENT shall at all times


comply with any ulety revolutions imposed by the CON IK ACTOR and such


reviews taxi verifications shall not hinder the smooth progress of the Petroleum


Operations





\cvcvsre_hacfttk.


16 6 For the performance of the Petroleum Operations, the CONTRACTOR, ary Affiliate


of each CON IKACTOR Entity, it' and their Subcontractors and the employees,


consultant* ami agents of each of the foregoing shall at all times he granted free


access to the Contract Area and to any facilities for the Petroleum Operations located





46AII


within (-I (»ulMile ul the Contract Area i»r wiiliin or outside the Production Area, for


the puriHiM’ of currying out the Petroleum Operations.


I ic of facililip


Id? Upon notice Horn the GOVERNMENT, the CONTRACTOR shall make available


to a reasonable numbei of representatives of t!»e GOVERN MKM' those of the


CONTRACTOR'S facilities which arc necessary to enable mkTs representatives to


perform Iheii tusks rduted to this Contract and the Kurdistun Region Oil and (ins I uw


including, in ease of works to he performed on work wles, transportation,


accommodation mid boon!, under the same conditions as those provided by tlic


CON TRACTOR for its own personnel.


Notwithstanding Article 168. the GOVERNMENT shall indemnify and hold


ItantilcHs each CONTRACTOR Entity Against nil losses, damages and liability


arising under any claim, demand, nction or proceeding brought or initialed against any


CONTRACTOR Entity by any representative of the GOVERNMENT in connection


with the access to or uae of tlie facilities by such representatives.








16X The CONTRACTOR shall l»c responsible for any loss or damage caused to Hard


parties by its or its Subcontractors personnel solely and directly resulting from their


negligent*), errors or omissions in accordance with applicable Kurdistan Region Law.





Intellectual Property Right*


U> <* In its tVtmlciim Operations. the CON TRACTOR shall rasped any fsticnts belonging


to third parties











1610 The CONTRACTOR shall as was as rewnahh practicable inform the


GOVERNMENT of any nutcral litigation retain* to this Contract.





Safety


1611 The CON I RACTOR shall implement a health. safety and environment program and


take ncvcNviry measures lo ensure hygiene, health and solely of its personnel carry ing


out lYlmlcum Operations in accordaace with prudrat irtcrnanonal petmletan iaJuflry


pfaciKC.


Said measures shall include fix- following:





(n) supplying first aid and safety equipment for each work urea and maintaining a


Ix-.ilihy environment for personnel;


(b) reporting to the GOVERNMENT within seventy-two (72) hours of such


accident. 3nv accident where personnel bits been injured while engaged in


Petroleum Operations and resulting in such personnel being unable to return to


work;








47/118


/10





 |c) implement!iif .1 pninil-to-wvk procedure around huudoos equipment and


installations:


Id) providing safe storage areas for explosives detonators and any other


dangerous products used in the operations;


(0) supplying fire-extinguishing equipment in each work area;





(0 tar the pcepoac <*f taking control of .my Mow i«*r or file which could damage


the environment or fVftofcw f ield, in accordance with prudent incm=iaco*l


petroleum industry practice: and





Ig) for the purpow: of preventing any involuntary uycetKin of Hinds in petroleum


formations and production of Crude Oil and Natural Gas at rates that do not


conform to prudent imcnmiional petroleum industry practice.








16 12 Subject to Article 43.2. m the event the production mtc of the individual wells und


Reservoir of a Petroleum field is to be set below the Maximum Efficient Rate


( MK.R-1 for the Reservoir, as provided far in the IXvolopmeni Plan, as a


consequence of a decision !*>• the GOVF.RNMFN I or any federal or international


regulatory body, the GOVERNMENT undertakes to allocate any such reduction


fairly and equitably among the various operators (including the GOVERNMENT)


then pioducing in the Kurdiwan Region, pro mtn their respective production rates. In


siu'li event, the GOVERNMENT shall grant an extension ol the Development Period


of ary Production Area so affected for a reasonable peimd of time in order to produce


the Petroleum which would otherwise have already been produced, had the MTR for


the indivkhni wells ami Reservoir of the Petroleum field hern nw ntuned








16.13 Ibe respective n»*fua. Jute*, ahligafcacs rod liabilities ol the CONI RAC TOR and


the GOVERNMENT under this Coctracl are m be underwood as being separate and


individual and not joint and several The Parties agree that this Contract shall not


create and shall not he deemed to have created a partnership or oilier form of


association between them





Lifting


1614 The GOVERNMENT and each CO.YIRAtTOK I ntity dull have the righrrod the


obligation to take in kind and *cjwalcly sell or otherwu* dispose of their respective


shares of Petroleum 1 Ipon iippmvul of the Development Plan, the Parties shall meet


as soon as practicable to reach a detailed agreement governing the lifting of Petroleum


by each such CONI KM IOK Entity. Such lilting agreement shall include the


following:


(a) tl*e obligation of (lu« GOVERNMENT und cuclt CONTRACT OK Entity to


lift, regularly Ihrougltout each Calendar Year, their share ol Petroleum


produced front the Production Area;








48.118


 (b) notification procedures l»v ihc Operator to the GOV I H.NMKNT and each


CONTRACTOR Entity regarding entitle menu und n variability of Petroleum


Im lilting bv ench Party during each lilting period und nominations by each


Party, and


the right of the Partial u> lift any Available Petroleum not *ticdu!cd for lifting


ard or not lifted by the other Party during each vjdi lifting period.








16.1$ The CONTRACTOR Entities shall sell and transfer to the GOV1 KNMENT. upon


written miuon of the GOVERNMENT, any amounts of Cnidc Oil that the


GOVERNMENT shall deem necessary to meet Kurdistan Region internal


consumption requirement* The sales price of such ( rude Oil shall be the


Inleniaiional Murker Price. The GOVERNMENT shall provide site


CONTRACTOR Entities with not h»s than six (6) Months' advance written notice


of its intention to buy such (’rude Oil.





Payments Khali be made in Dollars rand otherwise on terms consistent with prudent


inter niilioiml petroleum industry practice, und in n timely manner. The


CONTRACTOR Entities obligation to sell Crude Oil to the GOVERNMENT shall


be, with the other operators (including the GOVERNMENT) then producing in the


Kurdistan Region, pro rain to their respective production rmlcn.


I he provisions of this Article 16.15 shall not apply lo Non-Associated Natural Gas.








ARTKT.K 17-USE O* LAND AND EXISTING INFRASTRIK T I Kf


17.1 The GOVERNMENT shall make available to the CONTRACTOR any land or


property in the Kurferan Region required far the Petroleum Operation* provided,


however the CONTRACTOR dull nut request to use any sa* land unles there is


aiustifiaWc need for iL IV CONTRACTOR shall have the right to build and


maintain, above and below ground, any facilities require! I«*r the Petroleum


(>perntions.


17.2 If it becomes necessary for conduct of the Petroleum Operations to occupy and use


any land or property in the Kurdistan Region belonging to third parties, tlic


(TIN TRACTOR shall endeavour to reach amicable agreement with tlie owners of


such land 11 such amicable agiccment cannot be reached, tho CONTRACTOR shall


notify the GOVERN Ml! IS T <>n receipt of such notification:


(a) the GOVERNMEN T dull I determine the amount of compensation to be puid


by the CONTRACTOR to the owner, if occupation will he for n short


duration: or


(b) the GOVERNMENT shall expropriate the land or property in accordance


with applicable Kurdistan Region I .aw. if such occupation will be long lasting


or makes it henceforth impossible to resume original usage of such Innd or


property. Any properly rights shall he acquired by and recorded in the name


of the GOVERNMENT, bur the CON TRACTOR ihaJJ be entitled free uv





*>'118


 the land or property foi the Petroleum Operation* f»* tl*- enure duration of


this Contract





The aiikmin til Uic compensation in Article 17.2(a) shall In- liiir nnd reasonable, in


accordance With Article 29 of the KunJisUn Kepi on Oil uml Gm Law. and shall take


into account the rights of the owner and any effective use of the land or property by Its


owner at the time of occupation by the CONTRACTOR. All reasonable costs.


of liar Kiadi-aan Region Oil aid G» law) winch results from such expropriation shall


be borne b> the < OVTRACTOK hoc the avoidaiKC of douK, %uJ» co*s. expenses


and compensation incurred by the CONTRACTOR shnll hr considered Petroleum


Costs and shall be recovered by the CONTRACTOR in accordance with the


provisions of Articles 1 and 25.


17.3 Tor its Petroleum Operations, the CONTRACTOR shall hat* the right in the





kuidistun Region to use. subject to applicable law. any railway, tramway, road,


airport, landing field, canal, river, bodge or waterway, any telecommunications


network and any existing pipelines or transportation infrastructure. on terms no less


fimmmUlt tluin (hiiv offered to otlicr entities and, miles- gmemlly in force, to be


mutually agreed.





17 •! Under national emergencies due to environmental entustrophe or disaster, or internal


or exlern.il war. tlw COVKRNMENT shall have the righl to request to u*: any


Inmsportalion and communication facilities installed liy the CONTRACTOR In


such eases, the request shall originate from the Minister o! Natural Resources. For the


avoidance ol doubt, such costs, expenses oc labilities incurred by the


< OMKUTOk hereunder shall be COUMifcred Petroleum C«4* and shall be


recovered by the CONTRACTOR in accordance with the provisions of Ankles I


and 25.





17.5 For its Petroleum Operations, th. CONTRACTOR shall have the right in the


Kurdistan Rqtimi to clear land, excavate, drill, bore, construct, mvl. place, procure.








storage and diqnml facilities, pnmarv disallaton units <


units, separation units, sulphur plant* and any other facilities or iwullaticms for the


Petroleum Operations, in adifition to pipelines, pumping satioas. generators. r-wrr


plants, high voltage lines, telephone, radio and any other tel ccimmninRii rams system*,


as well as warehouse*, offices sheds, homes foe per*wind, hospitals, schools,


premises. dike*. vehicles, railways. ruwH. bridges, airlines, airports and any olltef


iransportatum facilities. garages, hangars. workshops foundries repair shops and anv


other auxiliary facilities fin the Petodeom Operations anl generally, everything


which is required tor its performance of the Petrolcian OperaUetv I he


CONTRACTOR Ml have the right to select the location for the** facilito


17.6 For its Petroleum Operations, the CONTRACTOR shall have the right in (he


Kurdistan Region, subject to compliance with applicable Kurdistan Region Ijw. to


remove and use the lOfwml. fully-grown timber, clay. sand. lime, gypsum, stone*


(other than precious stones) and other similar v id-stance- as required for its Petroleum











5ans


I :*• < (IVTRaCTOR shall lave the right in the Kurdistan Region lo toko or u*c im


wilier necessary for ihc Petroleum Operations provided ii does not damage any


existing irrigation or navigation systems tuul tlmi land, houses or watering points


belonging t<» third parties are not deprived oflhelr use.


17.7 The GOVERNMENT shall have the right in the Kurdistan Region to build, operate


uml maintain roads, railways, airports, landtag strips, canals, bridges. prrtrctiaa dams.


the ( 'onuacf Area, provided this does nra imru «• the costs, or comprutniMT or have a


material adverse effect on the performance of the Petroleum Operations If the


construction, operation juxI maintenance of such facilities by the GOVKRNMENI


results in increased cost or expense lor ihr I * >NIH M 'FOR then, for the avoidance


of doubt, such cost and cxjwnse •dalI he considered Petroleum Costs and dull he


recovered b> the CONTRACTOR id accordnc with the proviriniH of Articles I


and 25.


17.8 Upon icqucst of the CONTRACTOR. Ute GOVERNMENT shall prohibit tlic


construction of residential or commercial buildings in the vicinity of'facilities used for


the Petroleum Operations that may be declared dangerous due to the Petroleum


Operations and to prohibit any interference with tin use of any facilities required for


the Petroleum Operations.


17 9 Access to the Contract Area may be granted pui a unit to an Access Authorisation, as shall


be defined ia and consistent with, the Kurdistan Region Oil and Gas Law, to authorised


third parties on reasonable terms and conditions (including coordination), including


Persons authorised to construct. install and operate structures, facilities and mSiUatiom.


and to any >«a ahtr wkU provided that nothing in the Access Auth.wi'ution n* m this


Article 17 9 authorise* the holder to drill a Wdl or to perform uny Ktrolcum t Iperabons


■OnactAia


The GOVERNMENT sMI give the CONTRACTOR adequate odv«cc notice of


any Access Automation in respect of the Contract Area and shall rad grant any


Access Authorisation in respect of the Contract Area until it has t iken into account


any submissions made by the C ONTRACTOR nor in such a way that there is undue


interference with i* hindrance of the rights and activities of the CONTRACTOR


ARTICLE It - \SSIVI \NOI FROM THE GOVERNMENT


IX I To the extent allowed by Kurdistan Regain l aw and Iraqi law and at the specific


request of the CONTRACTOR, the GOVERNMENT shall take all necessary step-,


to avast the CONTRACTOR Entities in. but not limited to. the following ureas:


(a) securing any nccrna> Permits fur the use and installation of means of


(b) securing regulatory Permit* m matters of customs or irnpoa export:


(c) '•.curing entry and exit \ ivet. work and resideiK* permits os well as any other


administrative Permits for each CONTRACTOR Entity’s, its Affiliate-$ and


its Subcontractors' foreign personnel (including their family members)





51/118


working in I he Kin.liv.an Region and any other part of Iraq during the


iiiiplcmcn tattoo of this Contract:


anal)sis or processing for the Petroleum Operator*:


(e| relations uiih federal and local authorities and adnimbtratuiris. including for


the purposes of the remainder of this Ank le IS. I;


(0 securing any neccvary environmental Permits.


(pi obtaining any other Permits requested by my CONTRA*TOR Fnrity for the


Pe*nrieum < tperaunns:


(hi acccM hi any existing data and information, including data and information


relating to the Contract .Area held by previous operators or tout!actors; and


(i) pmviding all necessary security foe Petroleum Operations


IH.2 Within the rape of services to be provided under tins Article IS. reasonable and duly


justified expense* incurred b> the (iOYKRNMFYT or jaiJ to th.rd parties dull be


charged to lire CONTRACTOR and shall be considered Petr.rieum Costs and shall be


recovered by the CONTRACTOR as Petroleum Costs in accordance with the


provisions of .Ankles I ami 25


ARTICLE 19 - EQUIPMENT AND MAT» RlAl.*i


19.1 llic CONTRACTOR dull supply, or procun- the supply of. nil materials. equipment


machinery, tools, spate patLs ami nny other items or goods required for lltc Petroleum


Operations (”Ki|iiipim’nl aad Materials”).


19.2 Said Equipment and Materials shall be provided by the CONTRA (TOR in


accordance with the relevant Work l*rograin.s .umI Budgets


19.1 As soon as possible after the Effective Date, the CON I KAt'l tilt shall provide the


Management Committee wilh a copy of ils procedures tor procurement ol Equipment


and Materials tuid/or services l«r the Petroleum Operations .is required by the


provisions of /Article H.2 (e). including die criteria for lender evaluation, which


procedures and criteria .shall l*c in accord.incc with prudent international petroleum


industry practice. If the Management Committee docs not request any modification*


to the procuicrocnt procedures within thirty (30) dav s after receiving such procedures,


the proccdutcs slull be deemrd approved by the Management Committee,


19.4 The CONTRACTOR shall give priority to Equipment and Materials that arc readily


available in the Kurdistan Region and other parts of Iraq to the extent their price, grade,


quality, quantity, specifications, purchase, delivery and other commercial and


technical term* arc comparable in all material rejects with those generally available m


the interluimiuJ petmlcum mdtitfry.











52/118


 ARTICLE 20 - TITLE TO ASSETS





20.1 During the Exploration Period, any Avrl* iiujuircd by the < ONI RACTOR lor (he


I’cuolinini Operations shall remain tin- property of the CONTRACTOR, the


CON rKACTOR Entities. their AfffliulcNor their Subcontractors. as Ihc case may be


20.2 During the Development Period, subject to Article 21, all Assets acquired by the





C’O.N TRACTOR lor the Petroleum Operations shall become the property of the


GOVERNMENT upon the completion of ilic recovery or the costs ot all such assets


by (lie CONTRACTOR, or the end of the Contract, whichev er Ik the earlier.


20.1 Iho provisions of Article 20.2 shall not apply to any Assets leased by the





CONTRACTOR or belonging to an Affiliated Company of a CONTRACTOR


Crlity or belonging to its or their Subcontractors or its or their employees





ARTICLE 21 - I Sf OF I IIF. ASSETS


21.1 Each CONTRACTOR Entity shall have llic exclusive right to use, free of any


charge, all Assets described in Article 20. both before and alio recovery of the cost of


the same, lor the Petroleum Operations, tts well ns for any petroleum operations under


Other agreements in the Kurdistan Region to which it or any of its Affiliates is a party,


provided that the Petroleum Operations take priority. Ihc GOVERNMENT agrees


not in transfer or otherwise dispose of any of such Assets without the


CONTRACTOR’S prior written approval


21.2 The CONTRACTOR nay frrrly move to the Contract Aren any Assets from any


rriioquKiwO portion of the (ontraci Area, or from any other area in the KtadisMi


Region.








ARTICLE 22 - SUBCONTRACTING


22.1 The CONTRAC TOR shall craurr that any Subcontractor* it have all








22.2 The CONTKACTOR shall give priority lo Subcaxractarx from the Kunfcaan K*vnn


and other parts of lr*t lo the extent thru c««nprtence. rates. experience, reputation,


qualifications tfracadltcx. credit rating ami terras of availability. delivery aad other


commercial term* arc. in the CONTRACTOR'S sole opinion, comparable in nil


material respects widi those provided by foreign companies operating in the


international petroleum indtttfry Such Subcontractors must be bona fide KurdWai


Reukin companies not related to any Pubbe Officer, duvetiy or indirectly, and must have


all necessary resources and capacity


22.3 Selection of Subcontractors shall take place in accordance with the procurement


procedures submitted by tl»r CON TRACTOR to the Management Committee in


accordance with Article 19.3 and approved by the Management Committee.


22.4 The CONTRACTOR shall provide Iho GOVKRNMKN1 with copies of agreements


entered into with Subcontractors, where their timounl exceeds the limit set by the


Management Committee from time to lime


33/1 It





fjf


AK IICIV 2.3 PERSONNEL, TRAINING, AND TEC IINOLOCIC AL ASSISI ANC I


1'crvninrl


23.1 lor the Petroleum Operations. the CONTRACTOR shall give, ami shall require its


Subcontractors to give, preference to personnel from the Kunliojui Region and other


partii «*f Iraq to the extent such personnel have ilx- technical capability, qualifications,


competence and experience required to perform the work.


- 3.2 I he CONTRACTOR Entities shall give due consideration to the secondment of


GOVERNMENT personnel to the CONTRACTOR Entities and o! Use


CONTRACTOR Entities’ personnel to the GOVERNMENT duimg the various


phase* of the Petrolcuui Operations Terms and conditions for such secondment shall


be mutually agreed by the Panics and am costs associated therewith shall he


considered Petroloum Costs and shall I* recovered by the CONTRACTOR in


aoconlnncc with the provisions of Articles 1 and 25.


23.3 Each CONTRACTOR Fruity and its Affiliates and Subcontract!»rs shall have the


right to hire foreign per-wind whenever the personnel from the Kurdistan Region and


other parts of Iraq do not have the requisite technical aqiahiliry. quaiifxatioiK or


experience for positions to l*c lillud ns required pursuant to Article 23.1 In the event


any such foreign personnel and/or a member of their family engage in activities or


commit nets which breach Kurdi'Un Region Law. the CONTRACTOR shall, at the


request of the NLuugcmcr: (’ominitkv take the necessary step# lo repatriate such


tndividuaJ(s)


23.4 For the lira live (5) Contract Yews, the CONTRACTOR shall provide up to one


million Dollars (USSI.000.000) in advance <--*+ Contract Year to the


GOVERNMENT for the recruitment or •n. -m-nt of personnel, whether fr«»m tl •


Kurdistan Region oilier parts of Iraq or Abroad, to the Ministry ol N.imi Re- m -


The selection of such personnel shall be at the dmcrolHwi of tlx Minuter of Natural


Resources. Such cose shall he considered as Petroleum Costs and dudl he recovered m


accordance with the provisions of Articles I and 25.


Traltiim;


23.5 In a planned way, in accordance with the proviriorat of this Article 23.5 mid Articles 23.6


and 23.7. the CONTRACTOR shall tram all its |»cisonncl from tlx* Kurdistan Region


and other parts of Iraq directly or indirectly involved in the Petroleum Operations f«w


the puipinc of improving their knowledge and professional qualifications in order that


such personnel gradually reach the level of knowlcxlge and profcsakmal qualification


held by the CONTRAtTOR Entities’ foreign workers with un equivalent resume.


Such training dial I also include the transfer of knowledge of petroleum technology and


the necessary management experience so as to eiiuhlc the personnel bom the Kurdistan


Region and other parts of Iraq to apply advanced nnd appropriate technology in the


Petroleum Operations. to the extent permitted by applicable l aw and agreements with


third parties, and subject to appropriate confidentiality agreement*


2« ft In addition to the requirements of Article 23.1. tlic nxniiunent. integration and training of


the CONTRACTOR Entities' personnel from the Kurdistan Region and other parts


of Iraq shall be planned, which plans shall be submitted to the Management Committee





54'll 8


Ifar its approval. Ihc training plan dull take into consideration tic rtx|uireinmtaof Article


23.5 and may include training liir the GOVERNMENT* permnnul, (Spending on the


extent U» which llte amount allocated to the naming plan, ns prescribed h>' Article 23.7. is


available fitter Inking into consideration (he (ruining of the CON TRACTOR Entities'


Kurdistan Region mid other Iraqi personnel.


Within ninety

the Management Committee a proposed training plan for the remainder «l the


Calendar Year I hereafter, no later tluin I October in each ( alendur Year, the


CONTRACTOR sfiull submit a proposed training plan to tlx* Management


Committee for the following Calendar Year.


2.1,7 The training plan referred to in Article 23.6 duill provide for the allocation of the


amount of up to six hundred thousand Dollars (US$600,000) for each Contract Year


during the Exploration Period and up to one million two hundred thousand Dollars


(US$1,200,000) lor cnch Contract Year during the Development Period


2YK Each CONTRACTOR lintity shall be responsible for the training awe* which it may


incur in respect of the personnel it employs from the Kurdistan Region and other part* ol


Iraq. All such iciwmablo costs shall be considctcd as Petroleum Costs and shall be


recovered in accordance with the provisions of Articles I and 25. Costs incurred by


the CONTRACTOR for training programs far the GOVERNMENT’S personnel


shall be borne by the < ONTRACTOR only to the extent that they ore included in the


CONTRACTOR'S training plan, pursuant to Article 23.6 and shall also be considered


as Petroleum Costs and shall he recovered in accordance with the provisions of


Articles I and 23. IV* cost of all other training programs for the C.O\ KKNM1M \


penoand shall he the GOVERNMENT a re*po«v,bd*>











23.9 hram tlx- ,k*- of First Production from the Contract Ana. tl* (ON TRACTOR shall


contribute the amount of six hundred thranind Dollars (I ISSOOO.OOO) each Cootraet


Year during the Exploration Period and onr million two hundred thousand Dollar*


(US$1.200.000) for each Contract Ye* during the DcvdopMl Period into the


environment fund edaHHted b> the CJOVERNMi N T tor the hrncln of the n**al


environment of the Ktadislai Region, pursuant to the Kurdistan Region Oil and Ga»


hv* (the T nvironmcni Fund"). Such amounts shall be deemed 10 be Pttrukun


Costs and dull be recovered in Kconlaice with Aftkfca 1 and 25


23.10 Any expenditue incurred by the CONTRACTOR unifcr this Article 23 shall be


considered Petroleum Cods and dull be recovered in accordance with Articles I and 25.








23.11 Before the end of the fin* Contract Year, the CONTRACTOR dull provide to the


GOVERNMENT in kind technological and logistical assume to the Kurdisiiin


Region petroleum sector, including geological computing hardware and software and


such oilier equipment as tire Minister of Niitural Resources muy require, up lo the


value of four million Dollars (USS4.00D.tl00). The form of such ohm stance sluill In*


mutually agreed by the Parties and any certs associated llwrcwith .sluill he considered








SS/llt


 Petroleum Costs and shall he recovered by the CONTKACTOR « accordance with


the provisjonxof Articles 1 and 25.








ARTICLE 24 - ROYALTY


24.1 The CONTRACTOR shall pay totie GOV EKNMENT a portm of Pcsirkuin poxiuetd


and saved from the Contact Area, as provided n this Article 24 (the -Royalty'i


24.2 The Royalty dull be applied on all Petroleum produced and saved from the Contract


Area which i> Crude Oil or Non-Associated Natural Gas. except foe Petroleum used it


Petroleum Operations, re-injected in u Petroleum Field, lost flared tw for Pdndrum that


cannot be used or *ild tnd such Crude Oil and Non-Assnchtui N.iluml (!» (excluding the


excepted Petroleum) -hall be referred to collectively as “Espavt Petroleum and


s^orudy and respectively as Export Crude OtT and ' Export Noo-Vv-iriatcd





24J If payable m ur4i. trv araoux of the Royalty calculated by applying (he Royalty rates


provided under Article 24 4 shall be pod by the CONTRAC TOR as duectcd b* the


GOVERNMENT. in accord*** with Article 24.7.


If payable in kind, the quantity ofKixHt Petrolcan corresponding lo the Royalty and


calculated h> applying the Rovaltv rates provided under Article 24.4 stall be delivered


in kind by th: CONTRACTOR to the GOVERNMENI j the Delivery Point Title raid


risk of loss of the Royalty paid in krad dwll he tnmstcrred at the Delivery PoinL


Unless the GOVERNMENT iwjuirev the Royalty so be paid ui kind, by giving the


CONI KAC I OK not leas thnn ninety (90) days prior written notice prior to the


commencement of the relevant Quarter, the GOVKRNMF.NI dmll he deemed to


have elected to receive the Royulty in lull und in cash for the relevant Quarter.


24.4 The Royally due on any Lxpuit Petroleum produced and saved in the Contract Area


dull !*• determined daily by iipplyinp the following relevant Royally rule, to the


I-sport Crude Oil or to the Export Non-Associated Natural ( i.i> (i^ the cum.- may be)


produced and saved on tlul day;





(a) Far Export Crude Oil;


tl*- Royalty rale fot Export Crude Oil shall be ten per cent (I0%». which, for


the avoidance of doubt, .shall apply regardless of the gravity of the oil; and


(b) For Export Non Assm-iuted Natural Gas:


the Royalty rate for Export Non As*.crated Natural Gas shall be ten per cent


(I0H).


-M-5 Associated Natural Cms und any other Petroleum shall be exempt from any Royally





24.6 |f( pursuant to Article 24.1, the GOVERNMENT receives die Royally in kind, und


puraunnt lo Article 28. the GOVERNMENT request* awistance tor the sale of nil or


part of tile Royally received in kind. ouch COIVI KAC TOR Entity shall assist the


GOVERNMENT in selling ail or port of such Royalty received in kind (belonging to





56/111


the GO'TWNMEM » in consideration of a comnitadon per Burrel pm able lo such


CONTRACTOR Knlity. in nccordance with Ankle 2*


24.7 If. pursuant lo Article .’4.1. the GOVERNMENT receives the Royalty in cash:


(o> any Export Crude Oil shall b< valued at tlic International Market Price


obtained ut the Delivery Point, aadcliird in Ankle 27J;


(b) any Export Non Associated Natural (ms slmll he valued at the actual price


obtained at the Deliveiy Point under un iipprovcd contract, as provided in Article


27.3;


fc) the CONTRACTOR shall pay such Royalty cueh Quarter, in arrears, within


thirty ««)) dnyx of Ihe end of each Quarter, and shall calculate the payment


due tor the relevant Quarter by reference lo the price for the Import Petroleum


at the Delivery Point, determined in accordance with paragraphs tn) and (b)


above, iiihI the Royally due on the l-xport Petroleum, determined in


meordnnee with Article 24.4, for the said Quarter; and


(d) the CONTRACTOR Entities shall he entitled to export freely the volume of


Export PctriJenni corresp«*nding to the Royalty determined in accordance with


Article 24.4 for the purpose of paying the Royalty in cash


Alt riCT-i: 25 H M < »M:RV OF PETROLEUM COST S


25.1 All Export Crude Oil produced and wved from the Contract Area shall, after


deduction of any quantities of Export Crude Oil Joe for Royally pursuant to Article


24 he considered as ’AvaibMe < 'rode OiT


All Associated Natural Gas produced and -aved from the Contract Area, except for


Associated Natural Gas which iv tned in Petroleum Opaationx re-injected m a


Petroleum Kidd. laa. tlared or cannot be used or add. dull be considered us “AvaHs hie


A will ait (I Natural Gas".


AH Export Non-Associated Natural Gas produced .uid saved from the Contract Area


shall, after deduction of any qiaui Hus. of Export Noo-Associated Natural Gas due for


Rtiyahy pursuant to Article 24. be considered as ' Available Nan-Awacialed Natural


Gas"


*Available Petroleum" means Available Crude Oil. Available Awciaie.1 Natural Gas


and Available Non-Associated Natural (in*


25.2 Far the purpose of this Article 25


(a) any Available Crude (Kl dull he vahoad at the International Martel Price


cMained at the Delivery Point, as defined ir Article 272. and


(b) mi) Available Avmciated Nstural Gas and any Available Non A^ociated


Natural Gas shall be valued at ihe actual price obtained at the Delivery Point


under an approved contract. *. pnwidcd in Article 273.








57/11*


 25.3 Subject lo the provisions of this (oncract. from the First Production m the Contract


Aren, the CONTRACTOR shall nl all limes be entitled to recover all Petrokum


Costs incurred under this Onm. of up to forty per cent (40%) of Available (rink


Oil (which, for the avoidance of doubt, dull apply regardless of the gravity of the oil)


25.4 and Available Associated Natural Gas, produced and saved within any Calendar Year.


Available Grade Oil above this percentage or otherwise not used for the recovery of


Petroleum Costs shall be Profit Crude Oil.


Subject to the provisions of this Contract, from First Production in tlw Contract Aim


live CONTRACTOR shall at all times be entitled to recover nil Petroleum Costs


incurred under this Contract of up to fifty pc* cent (50%) of Available Noo-


Awnciuted Natural Gas produced and saved within any Calendar Year Available


25.5 Non-Associated Natural Cias above this percentage or otherwise not uaod for the


recovery of Petroleum Costs shall be Profit Natural (his,


For live application of Article 25.3 nnd 25.4. the CONTRACTOR shall keep u


detailed account of Petroleum Costs in accordnnoe with the provisions detailed in Iho


Accounting Procedure. Recovery of Petroleum Costs shall occur in the following


order:


(a) Production Costs:





(b) hxploration Costs (including appraisal costs and further exploration within the


Contract Area);


(c) Oas Marketing Costs;





(d) IN-vcioprr.em Coats; and







25.6 Total recovery of Petroleum Costs during any C alendar Year, expressed in quantities


of Petroleum, shall not exceed the relevant percentages indicated m Articles 253 and


25.4. If in any Calendar Year, the Available Crude Oil and/or Available Non-


AtMocmlod Natural Gas do not allow tlw CONTRACTOR to recover all its


Petroleum Costs pursuant to this Article 25. the amount of un-rccovcrcd Petroleum


25.7 Costs in nuclt Calendm Yam slmll be curried forward indefinitely to the subsequent


< .ilciiil.il Years until nil Petroleum Costs urc fully recovered, hut. save as provided in


Articles 14.10 and JX.4. in no other case after the termination of the Contract


fhc provisions of Articles 27 5 and 27.6 shall \v applied to determine the quantities ol


Available Crude Ol and/or Available Non-Associated Natural (ius due lo the


25.8 C ON I It AC TOR for the recovery of its Petroleum Costs.


rhe quantities of Petroleum corresponding to tlw share of Available Petroleum due to


the CONTRACTOR for tlsc recovery of its Petroleum Costs shall be delivered to the


CONTRACTOR at the Delivery Point lillc and risk of loss of such Available


Petroleum shall be transferred at the Delivery Point














srn*


V.





25 Q Each CONTRACTOR Kniiiy shall be entitled In receive, take in kind and lu export


freely all Available Petroleum in which n is ami lied for recovery of ns Petroleum


(in accordance wilh ihe provisions of this Contract and to retain Abroad any


proceeds from the sale of nil such Available IVtiulcum. Petroleum Coals in each


Production Aren shall be recovered from Available Petroleum from the Contract Aren


25.10 Subject to Article 38.4. lor the avoidance of doubt. Petroleum Costs under this


Contract nre not recoverable against other contract areas hold b> ihe


CONTRACTOR.


ARTICLE 2b-SHARING OF PROFIT PETROLEUM


26.1 Under this Contract,


(a) "Profit Petroleum" means Profit Crude Oil and Prom Natural Gas;


(b) “Profit < 'rude Oil" means die quantities of Available Crude Oil and Available


Associated Natural Ga* produced from tin* Contract Area, after die recovery of


Petroleum Costs, in accordance wilh Articles 1 and 25; and


(c) Pndk Natural Gas“ moan. the quantities of Available Non-Asiociatcd Natural


Gas produced from ihe Contract Area, after the recovery of Petroleum Coats in


accordance wilh Articles 1 and 25.


26.2 From First Pioduclion and m and uhm Petroleum is being produced. the


CONTRACTOR shall he entitled to take a pmentago dare of Profit Crude Oil


sad or Profit Natural (ias in coirotk ration for ii» irvcsancnl in the Petroleum


Operations, which pcmmiape dvarr shall be determined in accordance with .Article


26.5.


26.3 To determine the percentage share of Profit Crude Oil and or Profit Natural Gas to


which the CONTRACTOR is emitted, the “K" Factor shall he calculated in


accordance with Article 26.4 ami dull be applied wrpiuiitcly to the Conti act Arca.


26.4 The -R* Factor shall be calculated as Mows


R = XA


where:


X: is equal to Cumulative Revenues actually received by the CONTR ACTOR;


Y is equal to Cumulative Cosu actually incurred by the i «Pfl RAC I OR. from


the dale of the of lias Contract


For the piapose of tins Article 26 4


Cumulative Revenue*" means total Revenum. as defined below, received by the


COffTRACTOR until the end of the relevant Semester, deternuned in accordance


with Article 26.7.





5*118


Kr» i*u«' mans the total amount actuals received by the CONTRACTOR for


recovery of its Petroleum (ots and it* 'hurc of Profit Petroleum in the Contract Area.


'Cumillative Costs' means all Petroleum Costs io the Contract Area, actually


incurred by the CONTRACTOR until the end of the relevant Semester. determined


ia accordance with Article 26.7.


Notwith'tanriiag the feeding provisions of tins Article 26 4. far the period from


Firx Production until the end of the Calcnd.ir Year m winch First Production ocean,


the “R? factor shall be deemed lobe leas llinn one (I).


26.5 I he share of Profit Petroleum to which the CONTRACTOR vhall he entitled from


First Production is:


(a) Ihr Profit Crude Oil. equal to the quint l ies of Petroleum rewilung from the


application of the relevant percentage as indicated bdow to the daily volume


of production of Profit Crude Oil within the < i hi tract Area at the corresponding


Delivery Point:


-R" factor CONTRACTORS % Share of Profit Crude Oil


R

1 < R

R -* 2 14%


und


(b) for Profit Natural Gju. equal to the quantities of Non-A»«ciaicd Natural Gas


resulting from the application of the relevant percentage as indicated below to


the daily volume of production of Profit Natural Gas within the Contract Area


in the corresponding Delivery Point:


-R" Factor CONTRACTOR’* % Share of Profit Natural Gas


R < or - 1 35%


I < or • 2.5 35- (35-18)•

R > 2.5 18%


.’6.6 I he ( ( »VI RAC *1 OK’s accounting shall account separately for all components for the


calculation of "X“ and **Y” values in the lormulu provided in Article 26.4.


26.7 For each Semester, starting from the I* of Janu.iry of the Calendar Year following the


Calendar Year in which I irM Production occurs, tlic CONTRACTOR shall calculate


Hie R" Factor applicable to the relevant Semester within thirty (30) duys of the


beginning of such Semester Hie "R" Factor to Ik* applied during n Semester shall be


that determined by applying tl*»* Cumulative Revenues actually received and the


Cumulative Cost* actually incurred up to and including the last Jay of the preceding


Semester.


6(V118


If ihc CONTRACTOR is unable lo calculate ilic ”R~ Factor lor Ihc relevant


Semester before an allocation of Profit Petroleum lor such Semester must l*c mode,


then the allocation of Profit Petroleum lor Ihc previous Semester shall he used for the


rolovnnt Semester. Upon (lie calculation of the "R" I actor for the rclcviuit Semester:


(a) if the allocation of Profit Petroleum in Uie previous Semester nn«l the relevant


Semester is the same, then do adjustment ahull he made: and


(b> if the allocation of the Profit Petroleum in tlw two Semesters is different, then


tin- CONTRACTOR shall make any adjustments to die Parties’ respective


shares of Profit Petroleum to restore them to the position flint tliey would have


been in had (he UR*' Factor for the relevant Semester been available from I lie


start of such Semester.


20.8 If at any time an error occurs in the calculation of the “R" Factor, resulting in a


change in the CONTRACTOR’S percentage dure of Profit Crude Oil and'or Profit


Natural Oav. the necessary correction shnll be made and unv adjustments shall apply


from the Semester in which the emir occuiml The Party having liciicfited from a


surplus of Profit Petroleum sliall surrender such surplus to die other Party, beginning


from the first day of the Semester following the Semester in which the error was


recognised. However, each lifting of Petroleum relating to such error by the Party


receiving die surplus shall not exceed twenty live per cent (25%) of die share of Profit


Petroleum to which such 'surrendering Party is entitled. For tlic avoidance of doubt, if


.it any time nn error occurs in the calculation ol the “K" Factor, which does not result


in a change in the CONTRACTOR’S percentage share of Profit Crude Oil and/or


Profit Natural Gas. nn correction shall be made.


26.9 The quantities of Profit Petroleum due to the CON TRACTOR shall he delivered lo


be CON IRACTOR Entities at the Delivery PmoL Title and risk of toss of such


Profit Petroleum dull he trurot erred In the CONTRACTOR Entities at (lie Delivery


Point


Each CON IRATTOR Knlily tdiall be entitled to receive, take in kind and to export


freely rt« share of Profit Petroleum in accordance with the provisions of this Contract


and to retain Abroad any proceeds from the sale of all such Profit Petroleum.


26.10 The share of the Profit Petroleum to which the GOVERNMENT is entitled in any


Calendar Year in accordance with Article 26.5 shall be deemed to include a portion


representing the corporate inoroe tax imposed upon and due by each


CONTRACTOR Entity. ai d which will he jxod dtrccrlv by the GOVERNMENT on


behalf of l« Midi entity representing the CON TRACTOR to the appropriate lux


authorities in accordance with Article 31.2. 11*c GOVERNMENT shall provide the


CONTRACTOR Entities with all written documentation and evidence reasonably


required by the CON I R ACK )H Entities to confirm that such corporate income tax


has been paid hy the GOVERNMENT


26.11 The quantities of Profit Petroleum due lo tl»e GOVERNMENT shall he delivered to


the GOVERNMENT at the Delivery Point. T itle and risk of lots of such Ptufll


Petroleum sltull be transferred at the Delivery Point.











•Mil


26.12 A! least twenty-one (21) Jays prior to CONTRACTORS estimated dale of First


Production and. subsequently, thirty (30) days prior to the beginning ol catch


Semester, the CONTRA! TOR shall prepare and deliver to the GOVERNMENT u


production program comprising the production forecast (or the next Semester and the


forwusl of the quantities of Crude Oil raid Natural (ins it* which each Party shall lx-


entitled during the said Semester.


2ft. M Within ninety (90) days following the end of each Calendar Year, the


CONTRACTOR shall prepare and deliver an annual production report to the


GOVERNMENT, stating the quantities of

l*arty is entitled, the quantities of Crude Oil and Natural Gu lifted by each Party and


the resulting over-lift or under-lift position of each Pony, purstwni to the lifting


agreement entered into pursuant to Article I ft. 14


20.14 Any costs or expenditure incurred by the CONTRACTOR, its Subcontractors or


suppliers relating to the lifting of the GOVERNMENT* shore of Petroleum by the


CONTRACTOR slutll not be considered PcUoleum Costs and shall be charged to the


GOVERNMENT according to terms to he mutuiilly agreed between the


CONTRACTOR and the GOVERNMENT





ARTIC LE 27 VALUATION AND METERING OF < RI lit OIL AND NA 11 RAL


GAS





Vnluation


27.1 for the purpose of tins Contract any Cnalc Oil produced in the Contract .Area dull be


valued at the end of each Quarter at the Delivery Point baaed or the ImcriMtuMul


Marie! Price, as defined in Ankle 27.2.


27.2 I be Intrraatioaal Market Price referred to m Article 27.1 duil be the wnghuxl


t'cragc price per Barrel. cxpreM*d in IXJ n, (>I ained bv the CONTRACTOR at


the Delivery point, by netback if nwesxarv. during the Quarter ending on the date of


valuati>«i for Arm's Length Sales of Crude Oi.


Ihe CONTRACTOR .hall provide evidence to the GOVERNMENT that the soles


of Crude Oil refened lo in Arlkle 272 are Arm’s I ength Sales. If the


GOVERNMENT cunadcrs that uny such sale of Crude Oil is not on the basis of an


Arm s Length Sale then the GOVERNMENT has the tight to refer the mutter to an


expert pursuant to Article 422.


In the event that there is on lifting of Crude Oil in the rekwant Quarter or no Arm's


Length Sakai, the applicable 'International Market Price ' foe such Quarter shall be


ihe weighted average pnee per Barrel obtained during that Quarter from Arm’s


Length Sulcs of Crude Oil of Use name or .on Inr gnirity and quality from other


production areas sold in nwirketn competing with Crude Oil produced from the


Contract Aren, taking into account gravity and quality differences and transportation


and other post Delivery Point costs


To determine such price, the Parties shall, prior to the commencement of Production,


agree on a basket of Crude Oil comparable to those produced in the Contract .Area and





62/118


v4d in the inicnu’Jciul maid. Pnco obtained shall be adjusted In account for my


variations nch as quality. specific gravity, sulpJiui t.mienl. transportation costs.


pcodiKt yield. ****nal variations in price and demand, general market trends .11*!


other term*; of sale.


27.3 I he pnee of Natural Gas shall he the adicil price obtained at the Delivery Point


(which may take into account quantities to be sokl. quality, pe-^mphic location of


uiaikct.v to he supplied as well as costs of production, transportation and distribution


of Natural Gas from the Delivery Point to the relevant market, in accordance with


standard international petroleum industry practice). Ihc hOVKKNMENT shall have


the right to res levs :md approve Natural Gas soles contracts.


AkippntinC Sjiiiyrnyiil


27.4 l„ accordance with this Article 27.4. tl»c GOVERNMEN I’ and the CONTRACTOR


shall establish a statement showing calculations of the value of Petroleum produced


and sold from the Contract Area. Such statement shall include following informalion:


(a) quantities of Crude Oil sold by the CONTRAC'IOK I otitics during the


preceding Month constituting Ann's Length Sulcs toy.ether with corresponding


sole prices;


(b) quantities of Crude Oil sold by die CONTRACTOR l;ntitics during live


preceding Month that do not Ini I in the category referred to in paragraph (n)


above, together with sale prices applied during such Month;


(c) inventory in storage belong.!* to the CONTRAITOK hnlilks at the


beginning and at the end ol the Month; and


(d) quantities of Naftoal Gas aold by the CONTRACTOR Entities and the


GOVERNMEN I" loveiher with snle prices realised











27 S AB Expert Petroleum dull he mrSered at the Delivery Point in accordance with


prudent intenuiiorul pctroleom industry practice and such meters shall be to ILwnl


me- er standards. All metering equipment shall be installed and operated by the


CONTRACTOR. Ihc GOVERNMENT shull. on receipt by the CONTRACTOR


of reasonable prior written notice, hiivc the right to inflect any such metering


equipment installed by the CON IK ACTOR, as well ns nil re lev not documents and


supporting information reasonably necessary to validate the accuracy of such


metering. All metering equipment dull be subject to periodic technical inspections in


accttfdancc with prudent international petroleum industry practice.


27.b If «,> metering equipment is defective. the CONTRA! T OK dull use all reasonable


endeavours to repair it within fifteen (15) days or. if deemed necessary by the


CONTRACTOR replace it at soon as reasonably practicable from the date the


defect became known. The "Adjustment Date dmll lv tin- last dale that the


metering equipment was known in np.nxd to )uivc been measuring correctly, or if not


known or agreed, the date that is midway between the dale die defect was discovered


and the Inst date the equipment was kin»wn to have measured correctly. The results





6VUK


Irani I he defective equipment slwill he disregarded foi tlie |htukI from the Adjustment


Date until tlic dale I hi defective equipment u. repaired or replaced and the


measurement for such period dial I he estimated'


(a> if check measuring equipment is installed and registering accurately, then by


using the measuu-n unis recorded by such check measuring equipment;


(b) if cheek measuring equipment is not installed or not registering, accurately,


then by correcting the error if the percentage of error is oscertainahle by


verification, calibration or mathematical calculation; or


(c) if neither method is feasible, then by estimating the volume and'or quantity


delivered based on deliveries during the preceding comparable period of time


when the metering equipment was registered accurately


27.7 Any disputes urising under this Article 27 shut) be settled by expert determination in


accordance with the provisions or Article 42 2.


ARTICLE 2ft SALK OF GOVERNMENT SHAKE


Upon the GOVLRNMENTs prior written notice of at least ninety (‘>0) days, each


CONTRACTOR Entity shall provide all rcumiuibly necessary assistance to (lie


GOVERNMENT for the sale of all

GOVERNMENT is entitled, in wmsidenttioo of a rales commission per Barrel to be


established in advance with reference to pie Jem international petroleum practice and to b<


mutually agreed upon between the Partxs.


ARTin.F. 29- FINANCIAL PROVISIONS


29.1 Any payment to he made by a CONTRACTOR h*.ty m the GOVERNMENT


pursuant to this Contract sail he in Dollars and dial! he off*l acaiiui any ootstaadmc


payments due by the GOVERNMENT to the CONTRACTOR I nuiy. or paid n*ui


the honk account duly designated by the GOV* KNMI M m wntmg and shall be


paid within thirty (30) days of the due date, alter which tmcrc* compounded mooihly


at the rate of I I BOR plus two (2) percentage poinU shall be applied


29.2 The GOVERNMENT may. at its sole discretion, direct the CONTRACTOR


bailies to pay:


(a) «i> Roy ally in cadi doe to the GOVTRNX ►NI purvuani to the provisions of


Article 24; and'or


(b) any proceeds from the sale undertaken l*v tin CONTRACTOR Entity on


behalf of the GOVERNMENT pursuant to Article 28 of any Crude Oil lo


which the GOV ERNMENT is entitled pursuant to Article 25; and'or


(c) any Production Bonus.


to a fund liir revenue sharing, which may in due course lx: established by legislation


consistent with the Constitution of Iraq, between the Government of Iraq and other





64118


regions (including (he Kurdistan Region) and govemnratev ol Iraq. Nothing in this


Ankle 29.2 shall be understood as implying any contractual relationship or other


relationship between the CONTRA* I OH and/or any CONTRACTOR Entity and


the Government of Iraq and/or the regions of Iraq (other than the Kurdistan Region)


and/or and govomorotes oflraq.


29.3 Any payment due by the GOVERNMENT to a CONTRACTOR nntity dull I*


offset against future payments due by such CONTRACTOR Entity to the


GOVERNMENT, o* paid in Dollars to the hank account designated by the


CONTRACTOR Entity in writing and shall he paid within thirty (30) days of the


dale of invoice, niter which interest compounded monthly nl the rate of LIB< >R plus


two (2) percentage points shall be applied.


79.-I Any currency conversion to he made under this Contract sluill I* at the exchange mle


of the Centra! Hunk of Iraq, provided such exchange rale applied to the


CON IRA* TOR I ntitics shall not be less favourable than the rate offered by other


private, commercial or industrial hunks in the international market In the absence of


the Central Honk of Iraq *n in the event that the Central Hank of Iraq is unable to


prmKlc the relevant cxcliangc rate, any currency conversion to be made under tins


Contract shall Iw at tlx- exchange rate ol a reputable commercial bunk carrying on


business in llie miomiitional market and approved by the Partica.


29,5 The CONTRACTOR shrill not renlioe uny gain or loss due to exchange rate


fluetuaii<*rvi and. consequently, any gam or loss reuniting from the exchange of


currency shall be citlx-r considered in revenue and credited to the Accounts or shall he


considered ax h Petroleum Cos and shall be recovered by the CON I RAfTOR in


accordance with Articles 1 and 25. as the case may be.


29 r» Each CONTRACTOR Entity shall at all times be entitled to freely convert into


Dollars or any other foreign currency an> Iraqi dinars received in the framework ol


the Petroleum Operations and lo frcch transfer the same Abroad Ihe conversion rate


dial! he os provided under Ankle 29.4.


29 7 Each CONTRACTOR Entity shall have the right to be paid, receive, keep, transfer


and use Abroad, x.tlxoit m> rwtncliun*. Jl proceeds of hs share of Petroleum.


29 S Each COM KA(T OR Eritity and its Subcontractors shall have the right to freely


open and maintain hank occ.miiits for Petroleum Operations within or outside Ihe


Kurdistan Region and other parts oflraq.


29 9 Each CONTRACTOR Entity shall have the right to pay in any free!) convertible


currency oil iU financial mjuiremrnM lor the Petroleum Operations and to convert


these currencies to Iraqi dinar, in any hank in the Kurdtsan Region or other parts of


Iraq, at the same exchange rale as provided under .Arack 29.4.


29 10 Each CONTRACTOR Emit) shall have the tight, without *>> restrictions, to freely


repatriate Abroad and to freely dfepuae of:


(a) any proceeds received in the Kunhsliai Region or other parts of Iraq horn the


Mik of Prtn4eum:








65-1 IS


(b) nm proceeds received from (4hcr operation* and activities carried out under


this Contract in the Kurdistan Region or otlirv puns of Iraq.


?9 11 Each CONTRACTOR Entity shall have the right (o pay in any foreign currency itv


ScbcwiUJCturs and fes expatriate personnel, either in the Kurdstai Region. other parti


of Iraq, or Abroad. Said SuhcmNraoari and expatriate peramnd shall be obliged to


transfer to the KurJefcai Riyh*i the amount of foreign currency required for their local


needs and they shall have the right to repntnale the proceeds of the sale of their


belongings in accordance with the regulations in force in the Kunli.-ton Region.


29.12 Each CONTRACTOR Polity 's Affiliates. SuhccotracUxs and their pasoimcl shall


equally benefit tram the siine rights as such «T)N|R\fTOR Eatity and its


personnel as regards this Art*ck 29.


29.13 for the firuuicing of Pcm4cu.n Opctatiot*. each CONTRACTOR Lnlity shall have


the right to have ice curve to cxU-rnul financing from tlurd parties or from its Affiliated


Companies Oft an arm's length basis.





AK n

30.1 All 'trviccv matenaL equipment, goods, consumables and products imported into the


KurdisLui Region and alhcr parts of Itaq by the CONTRACTOR, any


CONTR ACTOR Entity. h% Affiliate*, an) bubo umet*>r or any agent of any ot the


foregoing, for use or con' ini|4an in the Petroleum Operations snail be admitted free


and exempt from say and all luxes on import. Ihe CONTRACTOR, any


CONTRACTOR Entity, its Affiliates. »i> SubcooMor or any agent of any of the


foregoing shall have the light to re-export from the Kurdistan Region and other parts


of Iraq lice from all Taxes on export any material, equipment. good". consumables


and products tliut are no longer required for the Petroleum Operations, except where


title has passed to the GOVERNMENT in accordance with Article 20. in which case


re-export dull I be approved by the Management Commifloe


30.2 Ihe COM RAC TOR. any CONTRACTOR Entity, its Aflil .*cn uny Subcontractor


or any agent of any of the foregoing, and their pcr**nel or In.!mg their irmly


members) sliall have the right to freely import into the Kurdi.st.ai Region and other


parts of It:u| and re-export from the Kurdistan Region and otlvt pits ot Iraq iny


personal belongings and furniture free and exempt from inv T.ixct on import or


export. The sale in the Kurdrtan Rcgico and .kKt pri of Iraq of pcrvmal belonging'


and furniture of expatriate peranmd shall comply will kirdnaan Ke. ».*i 1j«w


30.3 Each CON I KACTOR Entity and its Affiliates shall be cot .led to Ir.vly exp-wt from


llui Kurdistan Region and other parts of Iraq, free of any I axes, any Petroleum to which


it b entitled pursuant to the provisions of this Cirtnxt


30.4 lb (,()V | RNMENT dull htamfy the CONTRACTOR, any CONTR ACTOR


Entity, its Affiliates, any Subcontractor or any a*cm of any of the foregoing, and their


personnel (including their family members) for any impart or expwt laves referral to in


Artick* 30.1. 302 or 30.3.








66T18


 ARTICLE 31 - TAX PROVISIONS





31.1 Except as exprevUv provided in this Ankle 31, and without prejudice lo the


exemptions expressly provided for in Article 30 and in this Artklc 51, eoch


t'ONTRACTOK Entity, its Affiliates and any Subcontractor -hall. for the entire


duration of this Contract, be exempt from all Taxes as a rrnilt of its income, asset* ami


activities umkr this Contract The GOVERNMENT shall indemnify tuch


CONTRACTOR Entity upon iktnnnd agninst any liability to pay any I’uxin usvosvcd or


imposed ii|K»n mk-Ii mtity which relate to any of tlx- exemptions granted by the


GOVERNMENT under this Article 31.1. and under Articles 31.4 through 31.11.


»1.2 bach CONTRACTOR Entity shall be jvubjcii to corporate income tax on its income In mu





Petroleum Operations un pnivukd in Artklc 31.3. which shall be deemed lo ho inch -4\c


and in full and total dre* targe of any Tax on income, receipts, mmu.'- gams or profits


of each such entity Payment of tlie snd oirparale income tax dull be made lor the


entire duration of this ( ontruit directly to the official Kurdistan Region lux authorities


by the GOVERNMENT, for the account of each CONTRACTOR Entity, from the


GOVERNMENT** share of tire Profit Petroleum received pursuant to Article 26.


bach CONTRACTOR Entity shall, within sixty (60) days alter the end of each tux





year, provide a statement to the appropriate Kurdistan Region lax authorities of its


profits which are subject to corporate income lax, together with u calculation of the


umount of corpomte income tax due on those profits.





I he GOVERNMENT shall, within ninety (90) days niter the end of each Ux >«.


provide to each CON I KACTOK l "lily CO the appropriate official tax nxdpto from


the appropriate Kurdistan Region ux authorities or other relevant authority certifying


the pnvmcw of its corporate income tav dUennmed m the -»! -eatemm. and that


such entity has met all its Tax obligation* in the preceding Ux year, and (ii) a copy of


ai> return or other filing made by the GOVERNMENT in respact of Us payment of


corporate iiKOtnc Ux on behalf of aich CON I MAC TOR b ratty.





5I.J For the purposes of .Ankle 31.2:


(a) I he rate of corporate income ux to be applied u* «“h CONTRACTOR





Entity shall be the generally up pi Ruble rale prescribed in the Lav* of Taxation


(lav* No. 5 of 1999), passed by the National Aawmhly of the Kurdistan


Region, as may be amended from time to lime or substituted m respect of


Pen oleum Operations (as defined under the Kurdistan Region Oil and (his


I :tw) by u petroleum operations taxation law for the Kurdistan Region, but in


no went in excess of forty per cent (40%). I lie Parties acknowledge nnd agree


that at the Effective Date ol this Contract, the corporate income tax rule is


forty per cent (40%) for all net taxable profits in excess of nine million Irmp


dinnr.


(b) I he GOVERNMENT and the C CONTRACTOR agree (hut corporate income


tax shall be calculated for each CONTRACTOR I ntity on iu net taxable


profits under tlie Contract, ns calculated in accordant* with the provisions


relating thereto in the Accounting Procedure.











67/118





V.





31.4 l *h CONTRACTOR Fntity. ns Affili*cs as «xll as my Subcontractors shall be


ncmpl from an withholding tax applicable or any payment* made to them or by


them to or from Affiliates or third parlies. wbethrr inside or ouBade the Kurd ' -«n


Region aotl’or Iraq, for the entire duration of this Contract


31.5 Path CONTRACTOR Polity and its Affiliate* shall be exempt from Additional


Profits lax. as referred to in Article 40 of the KurduOan Region Oil and Cure Law or


any successor Tax.


11.A Each C ONTRACTOR Lntity and its Affiliate** -JailI he exempt from Surface Tax. n.x


referred to in Article 40 of (lie Kurdistan Region Oil and (las T aw or any successor


I UK.


31.7 Koch < ONTRACTOR Fntity and its Affiliate* dull he exempt from Windfall Profits


Taxes, as referred to in Article 40 of Hw KuidWan Region Oil and Gas Law or any


successor l ax.


31.8 liach CONTRACTOR Polity and any Subcontractor shall be subject to die payment


or withholding of the personal income tax and unuil «evurity contributions fi» which


with entity or Subcontractor is liable lo pay *a withhold in respect of its employees who


arc li»|i nationals, pursuant to the law of Taxation (Law No. 4 of 1999) passed by die


Nulinna) Assembly of the Kurdistan Region, as may be anicixkxl from time to time, in tin*


.same manner as the same shall be generally u|iplie»l lo nil other industries, except that n


CONTRACTOR Kntity or Subcontractor shulI not be liable for such taxes or


contributions with respect to employees of another Person.


•> It IS acknowledged thnt double tax treaties will have effect to give relief from taxes to.


but not limited to. the CONTRACTOR, CONTRACTOR Entities. Subcontractors


and employee* and other IVrwns in mxotihuxx- with the provision* of such double tax


treaties, but dial I not impure an additional burden of taxation.


31.10 Any value added tax t“\’ATT *all be cotwdacd as a Petroleum Ccal and shall he art


recovered m acaxdmce with the pwvwins of Amdes I and 25.


31.11 Aav value aVied in CVAT”). not otherwise nxovenUe by the COS IRACTOR ds


VAT law. dal he amJad a a PWndoan lost arxl *aD be coa recovered in


31.12 S.*wTthaanfing any otfier previskei lo the contrary m this Contract the Parties


acknowledge and agree that the provisions of this Article 31 shall apply individually


ai>J separately to all C'ONTRACTOR hmitie. under this ( oniraei ami that there shall


he no joint and several liability in respect of any liability, diny or obligation refcticd


to in Uiis Article 31.








ARTICLE .32 --- RONUSES





>*i-n.«tii i« Kimiji*





32.1 A signature bonus of twenty live million Dollars (USS 25.000.000) ("Signature


llonua”) shall be payable to the GOVERNMENT by the CONTRACTOR within


thirty (30) days of the I ffcctivc I lute.


61b 118


raiwvilv HwiWi.ng Ifomt-





32.2 A capacity building bonus of one hundred and seventy five million Dollars (US$


175.000,000) (“< 'Hpnelty Building Bonus") shall be payable to the GOVERNMENT


by ihc CONTRACTOR within thirty (30) days of the Effootive Data


i*nut ucUsii nonuses


32.3 In ihc event of n Crude Oil Commercial Discovery, the CONTRACTOR ahull pay


the following relevant ('aide Oil Production Bonus to the GOVERNMENT within


thirty (30) duys of the following relevant occurrence for each of the Contract Sub¬


areas:


(a) two million five hundred thousand Dollars (US $2,500,000) when hirst


Production of Crude Oil from tl*? Contract Suh-area commences;


(b) five million Dollars (US $5,000,000) when production of Crude Oil from the


Contract Sub area readies a cumulative amount of ten million Barrels of Crude


OU(lOmmbo);


(c) ten million Dollars (US SI0.000.000) when production of Crude Oil front the


Contract Sub- area reaches a cumulative amount of twenty live million Barrels of


('rude < >il (25 mmho); and


(d) twenty million Dollar. (US $20.(100,000) when production of Crude Oil from


the Contract Sub-area reaches a cumulative amount of fifty million Baucis of


Crude Oil (50 mrnbo).


32.4 In the event of a Noo-Asweitfed Natural Gas Commercial Discovery, the


CONTRACTOR shall pay the following relevant Non-Aaaodaffld Natural (las


Production Bonus to the GOVERNMENT within thirty (30) days of the following


relevant occurrence for each of the Contract Sub-areas.


(a) two million five hundred thousand Dollars (US $2*500,000) when Tirst


Production of Non-Associated Natural Gas from the Contract Sub-urea


commences;


(b) five million Dollars (US $5,000,000) when production of Non-Associated


Natural (ias from the Contract Sub-area reaches a cumulative amount of ten


million barrels of oil equi valent (10 mmboe);


(c) ten million Dollars (US $10,000,000) when production of Non-Associated


Natural Gas from the Contract Sub-area reaches a cumulative anaunr of twenty


five million hands of oil equivalent (25 mmboe), and


twenty million Dollars (US $20,000,000) when production of Non-Associated


Natural Gas from the Contract Sub-area reaches a cumulative amount of fifty


million hands of oil equivalent (50 mmboe).


'15 For Ihc purposes of this .Article 31 a Commercial Discovery shall be declared by the


CONTRACTOR to be either a Crude Oil Commercial Discovery or a Non-


Aswicialed ( Mis Commercial Discovery and under no circumstances shall a Production





69-1IX


 ISonus he due in reaped or both Crude Oil and Non-Associated Nutunil (hw for the


Mane Ccunmorciid Discoverv.





recovery a*I payment


32.6 No bofRB due pirsuanl to this .Article 32 dull be deemed to he a IMroksan Cost


32.7 Payment b> the CONTRACTOR of am boo us due pursuant to this Article 32 shall


be made in Dollars by wire tram ter to a specified bank account of the


GOVERNMENT or by banker'* drat) and on receipt thereof the GOVERNMENT


shall forthwith issue a written receipt to the CONTRACTOR duly executed by the


Minister of Natural Resources of the GOVERNMENT or such other officer ol the


GOVERNMENT who shall he duly authorised to issue such receipt undet kurdiMan


Region law.


AKTICLK 33-PIPELINES


33.1 Ihc (GOVERNMENT sltill obtain uny required Permits for the transportation of


Potroleuin in the Kurdistan Region and in Iraq, as well us any necessary IVrmils and


casein cut rights for the construction of any pipelines and related facilities required for


the Petroleum Operations, as provided in Article 33.2.


33.2 Tlic GOVERNMENT undertakes to transfer to the CONTRACTOR its rights for


transportation of Petroleum by pipeline. I he CONTRACTOR shall luce tl>e nght hi


design, construct, operate and maintain pipelines and any related (online* Tor the


transportation of Petroleum produced under thi!» Contract


33.3 Prior to die construction of any pipeline and related facilities as provided in Article


33.2. the CONTRACTOR shall submit following information to the Management


Committee:


(n) proposed pipeline route and related facilities;


(b) forccnsced pipeline flow rate and capacity;


(c) estimate of financial investment and operating costs of the pipeline and ieluted


facilities;


(d) proposed financing schedule.


(e) construction schedule.


(f) general technical description of the pipeline and related facilities.


(g) construction plans and teals.


(h) preventive measures for damage to the cmirooment and third parties; and


(i) any other information relating »o the pipeline project








7

The Management Committee shall examine all the above information ami shall within


ninety (90) days, approve the proposed pipeline project in accordance with the


provisions of Article 8.5.


33.4 Subject to spare capacity being available and to their Petroleum being Compatible,


third parties shall he entitled to transport their Petroleum lluough any pipeline


constructed by the CONTRACTOR in accordance with this Article 33 on terms to be


agreed between the CONTRACTOR and such third party, rhosc terms shall I*


reasonable commercial terms and shall not discriminate among thin! party uwrs. The


t 'ON IKACTOR shall always have priority of access to such pipelines.


33.5 lo tIk? extent that they arc incurred upstream of the l>divcr> Point any costs


uwociuted with the design, construction, operation and maintenance of the pipeline**


and related facilities by CONTRACTOR under this Article 33 mpdiae C osta")


dull Iw considered Petroleum Costs and shall be recovered by the CONTRACTOR


in accordance with the provisions of Articles I and 25.


lift I he CONTRACTOR shall have the absolute right, without any exceptions and for


the entire duration of this Contract, to use. free of charge, any pipeline and related


facilities constructed by CONTRACTOR under this Article 33 and to transport


Petroleum produced from any Production Area and to operate and maintain any


pipeline and its related facilities, freely and without any additional costs.


33.7 To the extent related to transportation upstream of the Delivery Point, any tariffs


received from third parties for use of any pipeline and related facilities by


C ONTRACTOR ubJct thb Anick 33 stall be applied W Re recovery of Petroleum


Costs until all Pipeline CoMa huve heer fiilK rrrr vexed In the CONTRACTOR


pursuant lo the provWoM ol Articles 1 and 25 and shall not be included in income lor


corporate income tax purposes. The GO VERNMKNT dull be entitled fc> receive


such tariffs from thud part nr* f«»r tlicir u« of wadi pipeline and related facilities when


the said Pipeline Costs have hem fully recovered by the CONTRACTOR. The co*s


associated with providing such transportation services for thud parties up to the


Delivery Point shall be coaskfcftd Pipeline C-vsim ml therefor* Petroleum Costs and


shall be recovered by the CONTRACTOR in accordance with the provisions of


Articles I and 25.


33 * I pon recovery by the CONTRACTOR of all the Pipeline Costs, the operating and


maintenance costs of any pipeline and its related facilities shall be borne by the


< OYTRACTOR and shall be considered Petroleum Costs and shall be recovered by


the CONTRACTOR in accordance with the pros ms «*( Articles I and 25


33.9 I he GOVERNMENT shall have the same rights as the CONTRACTOR for me.


free of charge, of any pipeline and related facilities constructed by CONTRACTOR


under this Article 33 for the transportation of the share of Petroleum to which the


GOVERNMENT is entitled under this Contract up to the Delivery Point, provided that


where the GOVERNMENT is participating in its capacity as u CON TRACTOR Entity


pursuant to Article 4. it shall be liable for its share of Petroleum Costs.


33.10 I he CONTRACTOR Tuill hear the co*J of operation and maintenance of any pipeline


ami related facilities constructed by CONTRACTOR under this Article 33 and ail








71/118


risks of accidemal loss or damage to such pipeline ;uid related facilities while tlwy ure


required for Petroleum Operations.


33.11 The GOVERNMENT shall use best endeavours to ensure lliul the (XINTRACT*)R shall


be invited to participate in any services agreement or pip»*linc syndicates.


ARTICLE 34 - ONITISAI ION


34.1 In the event a Reservoir extends beyond the Contract Area into an adjacent area which


is the subject of another Petroleum Contract (ns defined by the Kurdistan Region Oil


mid (ins l.uw) (an “Adjacent Contract Area”), or in the event a Reservoir of un


Adjacent Contract Area extends into the Contract Area, the provisions of Article 47,


Paragraph Second of the Kurdistan Region Oil and Ous Law shall apply and the


GOVERNMENT shall require the CONTRACTOR and the contractor of the


Adjacent Contract Area to agree upon a schedule for reaching agreement of the terms


of the unitisulion of the Reservoir, which terms shall he based on reliable technical,


operational and economical parameters, all in accordance with prudent international


petroleum industry practice. In the event that the Minister of Natural Resources


decides the iniilisaiion pursuant to Article 47. Paragraph Third of the Kurdistan


Region Oil and Gas Law. and if the CONTRACTOR docs not agree with the decision


of the Minister of Natural Resources, the CON TRACTOR shall be entitled to


arbitration pursuant to the provisions of Article 42.1


34.2 For clarification and the avoidance of doubt and notwithstanding Ankle 47 oi if,-


Kurdistan Region Oil and Gas Law. in the event that a Reservoir extends beyond the


boundaries of the Contract Area into an adjacent area which is not the subject of


another Petroleum Contract (as defined by the Kurdistan Region Oil and Gas Law),


the GOVERNMENT shall, upon the CONTRACTOR'S request, lake the necessary


steps to extend the boundaries of Contract Area so as to include the entire Reservoir


within the Contract Area, provided that the CONTRACTOR car offer the


GOVERNMENT a competitive minimum work program for such adjacent area.


ARTICLE 35 - LIABILITY AND INSURANCE





I iiihititv


35.1 Subject to the other provisions of this Contract, the CONTRACTOR, in its capacity


as the entity responsible for the execution of the Petroleum Operations within the


Contract Area, shall he liable to third paries to the extent provided under applicable


law for ary losses and damage it may cau.se to them in conducting the Petroleum


Operations, aid shill defend, indemnify and hold harmless the GOVERNMENT with


respect to all claims for such loss or damage.


35.2 Notwithstanding die other provisions of tins Contract the CONTRACTOR and the


CONTRACTOR Entities shall not he liable to die GOVERNMENT or d* Public


Comfucy or other government agencies, authorities or bodies, courts or political


subdivisions for my damage cr loss or claims of any kind resulting from its eonduci of the


Petroleum Operations unless such damage or loss is the resuh of wilful misconduct or a


material failure to conduct Petroleum Operations in accordance with the terms of this.


Contract; provided, however, that such liability cnnnoi result in the event of any


omissions, errors or mistakes committed in good faith by the CONTRACTOR in the


exercise of the powers ami authorisations conferred ii|Hin the CONTRACTOR bv


virtue of this Contract, and further provided thnt in no event shall the


CONTRACTOR and the CONTRACTOR Entities be liable for any indirect or


consequential loss or damage wiuilsocvcr or any lost, damages, costs, expenses or


liabilities caused (directly or indirectly) by any of the following arising out of. relating


to. or connected with this Contract or the Petroleum Operations carried out under this


Contract: (i) reservoir or formation damage; (ii) inability to produce, use or dispose of


Petroleum; (iii) loss or deferment of income; (iv) special or punitive damages; or (v)


other indirect damages or losses whether or not similar to the foregoing.


35.3 The CONTRACTOR shall indemnity- and hold harmless the GOVERNMENT


against all losses, damages and liability arising under any claim, demand, action or


proceeding brought or instituted ngamst the GOVERNMENT by any employee of the


CONTRACTOR or of any Subcontractor or by any dependent thereof, tor personal


injuries, industrial illness, death «>r damage to pcrMuutl property sustained in connection


with, related to or arising out of the performance or non-performance of this Contract


regardless of the fault or negligence in whole or in party of any entity or individual.


35.4 Notwithstanding Article 35.1. the GOVERNMENT sluill indemnity and hold harmless


the CONTRAC TOR and the CONTRACTOR Entities against all losses, damages and


liability arising under any eluim, dutniiikl, action or proceeding brought or instituted


against the CONTRACTOR or any CON TRACTOR Entity by any employee of the


GOVERNMENT or of any Public Company or of any aibcontractor of the foregoing or


by any dependent of any such employee, lor pereonal injuries. industrial illness, death or


damage to personal property sustained in connection with, related to or nr -my out «•! lie


performance nr non-performance of this Contract regardless of the fault or negligence


in whole or in part of any entity or individual.


35.5 The CON III ACTOR shall take all necessary slops to respond to. and shall promptly


notify (lie GOVERNMENT o£ all emergency and other events (including explosions,


links and spills), occurring in relation to the Petroleum Operations which arc causing


or likely to cause material envirunmenlal damage or materia! risk to health and salcty.


Such notice shall include n summary description of the circumstances »nd -u ps Aon


and planned by the CONTRACTOR to control and remedy the dtutuion. The


CONTRACTOR sluill provide such additional reports to the GOVERNMENT as arc


reasonably necessary in respect of the effects of such events and tlie court* of all


actions taken to |>rcvcnt further loss and to mitigate deleterious effects.


35.6 In tlie event of emergency situations as set out in Article 35.4. at the request of the


CONTRACTOR, the GOVERNMENT, without prejudice and in addition to uny


indemnification obligations the GOVERNMENT may have, sluill assist tlie


CONTRAC TOR, to the extent possible, in any emergency response, remedial or repair


effort by making available any labour, materials and equipment in reasonable quantities


requested by the CONTRACTOR which are not otherwise readily available to tie


(X)NTRA< .'TOR and by facilitating the measures taken by the CONTRACTOR to bring


inro the Kurdistan Region personnel, materials and equipment to be used in any such


emergency response or remedial or repair effort. The CONTRACTOR dial I reimburse


Ok- GOVERNMENTS reasonable and necessary costs incurred in stich efforts, which





73/1IX


rdmbwcd amounts shall be con^dcred Petroleum Costs and -itill he recovered by the


CONTRACTOR inaccoidance with the provisions of Articles I and 25


35.7 1 he GOVERNMENT shall indemnify and hold harmlen the CONTRACTOR and





each CONTRACTOR Entity from and against all costs (including legal costs)


expenses, losses damages and liability which such Pcrvxi m.iy suffer or incur, or


"fci> result front such Person being denied, hindered or prevented fmm fully


exercising its rights or taking the full bene tit of Articles 29.4. and 29.6 to 29.11.








35.8 In accordance with prudent international petroleum industry practice, each


CONTRACTOR Entity shall maintain acy insurance required by applicable Kurdistan


Rapon I *w. ip. vwdl as any irr*inave approved by lie Management Committee.


Such insurance policies may cover


(a) loss of and damage to material and equipment used in the Petroleum


Operations; and


(b) personal injury, damage to thiril parties and rishs of pollution associated with


Petroleum Operations for reasonable amounts, within the limits approved by


the Management Committee.


35.9 Any insurance policy relating to this Contract dull name the GOVERNMENT as an


additional insured party and shall include a waiver of subrogation protecting the


GOVERNMENT against any claim, loss and d.ra*c reddling from any Petroleum


Operation conducted by or on behalf of the CONTRACTOR under this Contract to


the extent that the CON I K At TOR is liable for such claim. Ioks or dumage under Uiis


Contract. The CONTRACTOR sluill not he liable lor nnd font) not purchase insurance


cover for any claims arising fiom negligence or wilful misconduct of the


GOVERNMENT or of any Public < ompany or of any of its

any personnel of any of die foregoing.


35.10 Upon its written request, the GOVERNMENT sluill In- provided with insurance


certificates, including necessary details, for any insurance policy maintained by the


CONTRACTOR which relutes to this Contract.


35.11 Each CONTRACTOR Entity shall be responsible lor the filing ol all claims made


under any insurance |x>licy maintained by such CONTRACTOR Entity which relates


to this Contract. Any premiums and payments relating to such insurance policies shall


fcc considered Petroleum Costs and shall be recovvnxl by the CONTRACTOR in


accordance with foe provisions of Articles I and 25.


35.12 In any insurance policy maintained by a CONTRAC TOR Emily which relates to this


Contract, the amount for which the CONTRACTOR itself is liable (the Deductible


Amount") shall be reasonably determines! between the CON TRACTOR Entity and


the insurer and such Deductible Amount shall in tlx- event ol any insurance claim be


considered a Petroleum Cost and shall be recovered by the CONTRAC I OR in


accordance with the provisions of Articles I and 25.








74/118


 ARTICLE 36 - INFORMATION AND CONFIDENTIALITY





36.1 llu CONTRACTOR shall keep all records. dam and information relating to the


Petroleum Operations in accordance with tlie Kurdistan Region Oil and (i;ts l aw and


prudent international petroleum industry practice. In addition, it shall provide the


GOVERNMENT with such information and data as it is obliged to provide under


this Contract.


36.2 Upon the GOVERNMENTS written request, the CONTRACTOR shall provide the


GOVERNMENT with suniples of any rocks or any other items extracted during the


Petroleum Operations.


36.3 I he GOVERNMENT shall have title to all data and information, whether raw. derived,


processed, interpreted or analysed, obtained pursuant to this Contract


36.4 Each CONTRACTOR Entity shall have the right, without any limitation, to send Abroad


copies ol all reports and technical data, magnetic tapes and other data relating to the


Petroleum Operations. Magnetic tapes or other data, the original ol which must be


analysed and processed Abroad, may be transported out of tbc Kurdistan Region.


36.5 Any representatives authorised by the GOVERNMENT and notified to the


CONTRACTOR shall, upon reasonable prior written notice, have reasonable access


to any information and data relating to the Contract Area in the possession of the


CONTRACTOR which the CONTRACTOR is obliged to provide to the


GOVERNMENT pursuant to this Contract. It is understood that, when exercising


such right, the GOVERNMENT shall ensure it does not unduly interfere with or


hinder the CONTRACTOR'S rights and activities.


36.6 Tbc CONTRACTOR shall provide the GOVERNMENT upon the


GOVERNMENT'S written request any analysis information, reports, tapes or other


data (geological, geophysical. logs, interpretations, drilling reports, etc.) related to the


Petroleum Operations in the possession of the CONTRACTOR. All available


originals of such data dull be transferred to the GOVERNMENT at the end of this


Contract


36.7 Apart from the exceptions staled in this Artkk 36. lire Parties undertake to keep all


data and information relating to this Contract and the Petroleum Operation.'


confidential during the entire term of this Contraci and not to divulge or disekwe such


data or information to third parties without the specific consent of the oilier Parties,


such consent not to be unreasonably withheld or delayed. Ihe foregoing


confidentiality obligation shall not apply to informalion or data which





(a) is or. through no fault of any Party. becomes pan of the public domain;


(b) is known to the recipient at the date of disclosure;





(c) is required to be furnished in compliance with any applicable I aw. by a


government agency having jurisdiction ever a CONTRACTOR Entity, by a


court order or any other legal proceedings; or











7*118


(d) i* required lo he disclosed pursuant lo the rules cx rcgulminns of any


government or recognised stock exchange taxing jurisdiction over a


CONTRACTOR Entity.


36-1 NotwithflaiKfcng the foregoing in Article 36.7. in accordance with prudent


internalkxwI petroleum industry practice, such data and inlormaOon nu) he dbclo*ed


to:


(a) Affiliates of each CONTRACTOR Entity;


(b) employees, ttflicen and directors of each CONrHWTOR Entity and their


respective Affiliated Companies for the purpose of the Petroleum Operations,


subject to each such entity taking customary precautions to ensure such


information is kept confidential:


(c) consultaiix or agents retained by any CONTRACTOR lintity or its Affiliates


for the purpose of analysing or evaluating information or dam.


(d) hanks or financial institutions retained by any TON IKAtTOR Entity «x it'


Affiliate with a view to financing Petroleum Operations, including any


professional consultants retained by such hank or financial institution:


(c) bona fide prospective assignees of a parucifuting ntrrot under this Contract


(including any entity with whom a CONTRACTOR Entity author its Affiliates


aru oanlueting honafidc negotiali^is Greeted towards a merger. oon*>h datum •*


(he rale of a mawnul pinion of its cc an Affiliates sharest.


(0 prospective or actual SuKr.rtrttorx and vpplici* engaged by a Pany where


disclosure of such infonnatioo b esamC J to axk or M^iplicr's


wvxk for such Party, aid


(g) any other Person or entity, upon the prior written approval of the non-


diackumg Parties.


provided that disclosure shall not he made purxuanl to paragraphs (c). (d). (c) and (f).


unless such third party has entered into a confidentiality undertaking


36.9 Any data and information relating lo relinquished »x surimdcred areas under this


Contnet shall become the exclusive property of the GOVE RNMENT, who shall


have the npht to use same for any purpose, in particular for the purpose of promoting


«kJ areas I .ach CONTRACTOR Entity sha! I be- entitled to keep coprcs of such data


an J mli rmalion and lo use such dau and information for any purpoor.


“6 10 Subject to the provision* of this Article 36. the COWTRAt TOR may not sell nor


exchange my data related to the Petroleum Operations without the approval of the


GOVERNMENT, which approval stall not hr unreavauNy withheld or delayed


where, in the CONTRACTOR'S reasonable opia .av *uch wic i* eactange would


benefit the Petroleum Ope ran.ns














76'IIR


 ARTICLE 37 EN VIRONMENTAL PROVISIONS





37.1 I luring ihe performance of the Petroleum Operations, the CONTRACTOR shall take


reasonable measures to ensure that it, the Operator, its Subcontractors aiul agents


attend to the protection of the environment and prevention of pollution, in accordance


with prudent international petroleum industry- practice in similar physical and


ecological environments and any then applicable Kurdistan Region 1 uiw.


37.2 Prior to surrendering a portion of the Contract Area, the CONTRACTOR shall take


reasonable measures to abandon the area to be surrendered in accordance with prudent


international petroleum industry practice in similar physical and ecological


environments. Such measures shall include removal or closure in place of facilities,


material and equipment together with reasonable measures necessary for the


preservation of fauna, flora and ecosystems, all in accordance with prudent


international petroleum industry practice in similar physical and ecological


environments. The CONTRACTOR shall only be responsible for site restoration or


environmental damage to the extent the same pertains solely and directly to Petroleum


Operations conducted pursuant to this Contract.


37.3 The CONTRACTOR shall take reasonable precautions and measures in accordance


with prudent international petroleum industry practice in similar physical and


ecological environments to prevent any pollution which may arise directly us a result


of the Petroleum Operations and to protect the environment (fauna and flora), water


sources and any other natural resources when carrying out Petroleum Operations.


37/1 'Ihe CONTRACTOR shall, in accordance with patient international petroleum


industry practice in similar physical and ecological environments, respect the


preservation of property, agricultural areas, and fish cries, when carrying out


Petroleum Operation*


37.5 The CONTRAO < >K shall conduct and submit an environmental impact assessment


to the GOVERNMENT within *ix (6) months after the Effective Date.


National Parks and Naf rr Reserve Arras


37.6 The rOMRAt'lOK \hall take reasonable mexMKcrs to minimise any advert


material impact on national parks and nature reserves which m«> arise directly as a


result of the Petroleum Operations, in accordance with prudent international


petroleum industry practice in similar physical anJ ecological environments.


>7.7 The GOVERNMI NT: (i> represents and warrants that, on the Effective Date, there


are no national parks, nature reserves or other protected .treax located in whole or in


part within the GiKract Area where the CONTRACTOR shall not be entitled to


carry out Petroleum Operations and

Contract will not designate or create or permit the creation of any national parks


nature reserves or other protecud areas, located in whole or in pan within the


Contract Area.

















77/118


 37.8 Any reasonable expenditure incurred by the CONTRACTOR in relation with this


Article 37 shall be deemed Petroleum Cost' and shall he recovered by the


COM K ACTOR in accordance with the provisions of Articles I and 25








37.9 Ihc CONTRACTOR is not responsible lor any pre-existing environmental


conditions or am acts of unrelated third panics.








ART 1C1.K 38 - DfiCOMM ISSIONING


38.1 lo civil tie the COM RACTOR to recover the costs associated with future Contract


Area Decommissioning Operations under this Contract, the CONTRACTOR shall


have Ihc right to establish a rejcrvc fund foe future decommissioning and vile


restoration (a Decora missioning Reserve Fund”) The Decommit toning Reserve


Fund may be established at any time during the final ten C IO) Calendar Years of the


term of lira Production Operations of a Production Area but. upon the reasonable


mines! by the CONTRACTOR, the GOVERNMENT shall allow the


CONTRACTOR to establish such tund over n onger period. Once established, the


CONTRACTOR sltall make regular contributions to the Decommissioning Reserve


Fund bused ii|N)ii estimated Petroleum Field ikcommisaonirg and site restoration


costs in accordance with prudent international petroleum industry practice, and taking


into account interest received and future interest expected to be earned on the


Decommissioning Reserve I in. Any contributions b' tl »* C ON IKA< TOR in tl


Decommissioning Reserve Fund shall be made in l>ollnr and shall he .UvttkxI


Petroleum Costs when paid into the reserve fund, and shall be recovered by the


CONTRACTOR in accordance with the provisions of Article.' I and 25.


Contributions to the Decommissioning Reserve Fund shall he placed with n lirsr rate


bank approved by the Management Committee in accordance with Article 8.5.





*82 If. at the end of the term of the Producuon Operations of the Production Area, the


COVFJCN\iENT decide' to take over production opera!ions in the Production Area.


(a) the GOVERNMENT rirall become liable for its future Decommissioning


Operations:





(b) the contributions and any interest accumulated in the Decommi'Momng


Reserve Fund, lo the extent that such contributions have been recovered nv


Petroleum Costs, vluill be paid lo the GOVERNMENT; and


(c) the GOVERNMENT shall rekra.se the CONTRACTOR and the


CONTRACTOR Emilies from any obligations relating to Decommissioning


Operitkms and shall indemnify the CONTRACTOR and ihc


CONTRACTOR Entities for any costs, liabilities, expenses, claim* or


obligations associated therewith.


38.3 If the CONTRACTOR undertakes the Production Area IXcuramissioning Operations,





Uie contributions and any interest accumulated in the Decommissioning Reserve Fund


shall be raid to the COVI KA< TOR and shali be used for the Decommissioning





78/118


u


 Operations. The CONTRACTOR shall undertake any such Decommissioning


Operations in accordance with prudent international petroleum industry practice in


similar physical and ecological environments.


38.4 If the Decommissioning Reserve Fund is paid to the CONTRACTOR and the


Decommissioning Reserve Fund is not sufficient to cover all Decommissioning Costs


for the Contract Area, the balance shall be paid by the CONTRACTOR and may be


recovered, if applicable, by the CONTRACTOR Entities or any of their Affiliates


Irani any other area which is the subject of another Petroleum Contract (as defined by


the Kurdistan Region Oil and (ias Law) anywhere in the Kurdistan Region and, to the


extent the hihuice is not recoverable as aforesaid, such remaining balance shall be paid


by the GOVERNMENT to the C ONTRACTOR


38.5 If ilie IVcomnnssammy Reserve Fund is paid to the CONTRACTOR and the


Decommissioning Reserve fund exceeds all Decoiimissioning Costs for the Contract


Area, the balance shall be transferred to the GOVERNMENT.


3X6 Any expenditure incurred by tlw COPfTRAC TOR in relation with this Article 38.





including any contributions to the Dccommi*f,ioning Reserve Fund, shall be deemed


Petroleum Costs and shall be recovered by the CONTRACTOR in accordance with


the provisions of Articles I and 25.


38.7 The CON IKAOTOK shall submit to the Management Committee for approval in


accordance with Article 8.5 a detailed plan f *r decommissioning the Contract Area


facilities and site restoration (the "Decora mission rag Plan”). such Decommissioning


I’lun to bo submitted no later than twenty four (24) Months prior to the date estimated


by the CONTRACTOR for tlw end of Commercial Pr»U« lion from the Contract


Area. Tlie Management Committee shall provide comments, if any. on tin-


Decommissioning Plan within ninety (90) days after receipt. The CONTRACTOR'S


completion of tlw Decommissioning Operations in accordance, In all material


respects, with tlw Decommissioning Plan for a Production Ami approved by the


Management Committee shall satisfy all of the CONTRACTOR** obligations with


respect to the performance of Decommissioning Operations for such Production Aiea,


In the event (lie GOVERNMENT does not agree tlwt Decommissioning Oporulions


lor a Production Area were carried out in accordance with the approved


Decommissioning Plan, it must advise the CONTRACTOR within six (6) month* of


CONTRACTOR'S completion of such operations.








ARTICLE 39 ASSIGNMENT AND CHANGE OF CON'I KOI.








39.1 Bach CONTRACTOR Entity shall be free to sell, assign, transfer or otherwise


dispose of ull or part of its rights, obligations and interests under this Contract to an


Affiliated Company or to another CONTRACTOR Entity with the prior consent of


the GOVERNMENT, which consent shall not he unreasonably delayed or withheld.


Assignment to Hurd fHlIiva


39.2 Each CONTRACTOR Entity shall have the right to sell, assign. trnnsler or otherwise


dispose of all or part of its rights and interests under this Contract or in the normal








L 70/118








course of project financing to am third party (not being an Affiliated Company or


another CONTRACTOR Entity) with the prior consent of GOVERNMENT. and


each other CONTRACTOR Entity (if any) which consent shall not he unreasonably


delayed or wilhlicld. Any CONTRACTOR Entity proposing to sdl, assign, transfer


or otherwise dispose of all or part of its rights and interests under this Contract to any


such third party dull request such consent in writing, which request shall be


accompanied by reasonable evidence of the technical and financial capability of the


proposed third party assignee, unless such sale, assignment, transfer or other disposal


is in the normal course of project financing, in which ease the requirement for


reasonable evidence of technical and financial capability dull be automatically


waived. In the event that the Third Party Participant with a Third Party Interest


subject to Article 4.8 proposes to sdl. assign, transfer or otherwise dispose of all or


part of such Ihird Party Interest to a Person that is not an Affiliate, such Ihird Party


Participial shall first oiler to both the other CONTRA! I OR E ntity (or. it


applicable. CONTRACTOR Entities) and to the GOVERNMENT pre-emption


rights in reljlkm to such Hurd Party Interest, or part thereof. Such pre-emption rights


shall he offered on terms that arc at least as favourable as die terms upon which the


Third Party Interest (or part thereon has been offered to the interested Person Any


option by the GOVERNMENT to utilise such pre-emption rights > mil be subject to


the maximum participation limit imposed upon a Government Interest by Article 4 1.


ruithcmiorc. any sale, alignment, transfer or other disposal by the Third Party


Participant shall be subject to the minimum participation requirements imposed upon


the I hird Party Participant by Article 4.8. unless such sak. assignment, transfer or


other disposal is of the entire Third Party Interest taken pursuant to Article 4 X hor


the uvtiidunoc ol doubt, any sale, assignment, transfer or other disposal is in the


normal course of project financing h ill * t trigger any rights ol first oiler and shall


not he subject to any minimum participation requirement'


39.3 In order for any deed of sale, assignon-m. tr .m-.ler i-r oilier disposal as provided Ulster


.Articles 39.1 or 392 to be effective, the Parties and the relevant third pony, it any.


shall enter into a binding and enforceable instrument of assignment and novation,


which shall include an undcTtaLing by the transferee or assignee to fulfil the


obligations under this Contract which cocrcqwnd to the ini ere j irancfixrvd or nvagned


39.4 By way of clarification, and not in limitation of the foregoing provisions of this


Ankle 39. the GOVERNMENT shall not be considered to be acting unreasonably in


withholding consent to any such assignment if the assignment to such proposed


assignee is deemed contrary to the GOVERNMENT* interests, as evidenced in


writing to that effect sigard by the duly authorised representative of the


GOVERNMENT below.


39.5 In the event a CONTRACTOR Entity assigns or in any other way transfer* its rights


and interests under this Contract, including through the exercise of the Option of


Government Participation or the Option of Third Party Participation, whether in


whole or in part such assignment or transfer shall not give rise to ;tny I ax. including


on the consideration paid or received or on the income or gain therefrom


39.6 The GOVERNMENT may not at any time transfer any or all its rights and


obligations under this Contract to any Person, including to a Public Company or any


other company or entity. except in accordance with Article 4.











80/118


Change of CttlUfttl





39.7 Change nf Control" for the purpose of this Article 39.7 means am direct or indirect


change of the identity to the Person who Controls a CONTRACTOR Entity (whether


through merger, sale of shares or of other equity interests, or otherwise) through a


single transaction or senes of transactions, from one or more transferors to one or


more transferee's in which the market value of such entity’s participating interest


(which shall be as specified in the Joint Operating Agreement relating to this


Contract, or where tlicrc is only one CONTRACTOR Fntity, one hundred per tent


(100%) in this Contract represent* more than seventy live per cent (75%) ol the


aggregate market value of the assets of such entity and its Affiliates that arc subject to


the Change in Control. 1 or the purpose of this definition: "C ontrol means the direct


or indirect ownership or control of the majority of the voting righto of the applicable


entity at its shareholders' meetings or their equivalent: and market talar" shall be


determined hated upon the amount in cash a walling buyer would pay a willing seller


in an Arm's lamglh transaction.


Each CONTRAC TOR Hntity which in or anticipates with 4 reasonable degree of


certainty that it will be subject to a Change in Control, other than lo an Affiliated


Company or a CONTRACTOR Entity, dull notify the GOVERNMENT as soon as


practicable after it heroines aware of the Change in Control or anticipated Change in


Control and request the consent of GOVERNMENT, which consent shall not be


unreasonably delayed 01 withheld.


A Change in Control shall not give rise to any Tax including on the consideration paid


or received or on Hie income or gain therefrom.


ARTICLE 40 - FORCE MAJEURF.


4(1.1 No delay, delault. breach or omission of the CONTRACTOR in the execution of nny


of Its obligations under litis Contract shall be considered a failure to perform this


Contract or be the subject of 11 dispute if such delay, default, breach «>i omission is due


lo a ease of Forte MajCurc. In such event the CONTRACTOR shall promptly notify


the GOVERNMENT in writing and take all reasonably appropriate measures to


perform its obligations under this Contract to the extent possible. The time reMilting


front any such delay or curtailment in the execution of such obligation-, mere-used by


the time ncvewiry to repair any damage resulting from or occurred during such delay


or curtailment, vhnll be added lo any time period provided under this Contract


(including the Fjtploraiion Period and any extension thereto, any Sub lVnod and any


extension thereto and any IX-vel««pincm Period and any extension thereto). l*c Panics


shall meet as soon as possible after the notification of Force Majeurc w ith a view to


using reasonable endeavours to mitigate the effects thereof.


10.2 For die purpose of this Contract. "Force Majearr- means nny event that is


iirforvraxxihle. insurmountable and irresistible, not d*r to any error or omission by the


CONTRACTOR but due to circumstances beyond its control, winch prevents or


impedes execution of all or part of it* obligations under thin Contract. Sue* event>


vhnll include the folhming:











8 I/I 18


(a) war, whether declared or not. civil war, insurrection, riots, civil commotion,


terrorism, uny oilier hostile acts, whether internal or external:


(b) strikes or other labour conflicts;


(c) accidents or blowouts;


(d) quarantine restrictions or epidemics;




but without limitation. Hexyls, storms, cyclones, fires, lightning, or


earthquakes;


11) environmental restrictions, which the GOVKKNMKNT has not notified to the


CONTRACTOR;


(g) except in respect of the GOVERNMENT and/or any Public Company which


may I* a CONTRACTOR Entity, any acts or orders of the


GOVERNMENT, any minister, mininUy, department, sub-division, agency,


authority, council, committee, or other constituent dement thereof, any


corporation owned and/or controlled by the any of the foregoing; and


(h) any acts 01 orders of any oilier government churning or asserting jurisdiction


over the subject matter ol this Contract, uny minister, ministry, department,


sub-division, agency, authority, council, committee, or other constitixii


element tlicicof. or any corporation owned and/or controlled by any of the


foregoing.


40 3 I he intention of the Parties is that Force Majeure shall receive the interpretation that


complies most with prudent international petroleum industry practice. Force Majeure


allotting a C ONTRACTOR Entity or an Affiliated Company of a CON TRACTOR


Entity shall be deemed Force Majeure affecting the CONTRACTOR if tl»c


consequence of such Force Majeure prevents the performance of any of the


CONTRACTOR’S obligations under this Contract.


ARTICLE 41 --- WAIVER OF SOVEREIGN 1MMIIMI Y


The GOVERNMENT and any Public C ompany which may he a COM RAC FOR Entity at


,tny time hereby fully and irrevocably waives any claim to immunity for itself or any of its


asset s.


Ihi* waiver includes any claim to immunity from:


(n) any expert determination, mediation, or arbitration proceedings commenced pursuant


to Article 42;


(b) any judicial, administrative or other proceedings to uid the expert determination


mediation, or arbitration proceedings commenced pursuant to Article 42: and


(c) any effort to confirm, enforce or execute any decision, seitlemunt, award, judgment,


service of process, execution order or attachment (including pre-judgment attachment)


82/1 IS


thal results from an expert determination, mediation, arbitration or any judicial,


administrative or other proceedings commenced pursuant to this ContrncL





ARTICLE 42 - ARBITRATION AND EXPERT DETERMINATION











For the purpose of this Article 42.1, “Dispute” shall mean any dispute, controversy or


claim (of any ami every kind or type, whether based on contract, tort, statute,


regulation or otherwise) arising out of, relating to, or connected with this Contract or


the operations carried out under this Contract, including any dispute as die


construction, existence, validity, interpretation, enforceability, breach or termination


of this Contract, which raises between the Parties (or between any one or more


entities constituting the CONTRACTOR and the GOVERNMENT).


In the event of a Dispute, the parties to the Dispute shall use their reasonable


endeavours to negotiate promptly in good faith a mutually acceptable resolution of


such Dispute.


Subject to the provisions of Article 42.2. a Party who desires to submit n Dispute for


resolution which has not been promptly resolved as aforesaid shall commence the


dispute resolution process by providing the other parties to the Dispute written notice


of the Dispute ("Notice of Dispute”). The Notice of Dispute shall identify the praties


to tlur Dlsjnilc, shall contain a brief statement of the nature of the Dispute and the


relief requested and shall request negotiations among Senior Representatives.


(a) In the event that any Notice of Dispute ix given in accordance with this Article


42.1, the parlies to the Dispute shall first see*, settlement of the dispute by


negotiation between Senior Representatives. Senior Representative” means


any individual who has authority to negotiate the settlement of the Dispute for a


party to the Dispute, which for the CiOVKRNM) N f shall m«m the Minister of


Natural Resources. Wkbh thirty (30) days after the date of delivery of the


Notice of Dispute, the Senior Representatives representing the parties to the


Dispute .dial! meet at a mutually acceptable date, time raid place to exchange


relevant information in an anempt to resolve the Dispute If a Senior


Representative intends to be accompanied .a the meeting by a legal adviser, each


other party shall be given written notice of such intention raid its Senior


Representative may also be accompunicd at the meeting by o legal adviser.


(b) If the Dispuic cannot be resolved by negotiation in accordance with Article 42.1


(a) within sixty (60) (in s after the dale of tie icvcipt by e*;h party to the Dispute


of the Notice of Dispute or such farther period as the puties to the Dispute may


agree in writing, any party to the Dispute may seek wttkmcot of the dispute by


niediation in accordance with the London Court of International Arbitration


(/‘LC1A”) Mediation Procedure, which Procedure shall be deemed to be


incorporated by reference into this Article. nnJ the piriies to such Dispute


shall submit to such mediation procedure.


(c) If the Dispute is not settled within the earlier of (A) sixiv (60) days of the


appointment of the mediator, or such further period as the parties to the





*3'1IH


 Dispute may otherwise agree in writing under the mediation procedure under


Article 42.1 (b). and (B) one hundred niid twenty (120) days after the delivery of


the Dispute Notice, any party to the Dispute may refer the Dispute to, and seek,


final resolution by, arbitration under tlwr LC'IA Rules, which Rules shall l>c


deemed to he incorporated by re I ere nee into this Article.


(i) Any aibitralion slmll If conducted by three (3) arbitrators.





(ii) If the parties to iIk Dispute me tlm GOVERNMENT and all the


CONTRACTOR Entities, the GOVERNMENT and the


CONTRACTOR shall each a|»|H*int one (I) arbitrator. If Uie parlies to


tire Dispute are the GOVERNMENT and more than one, but not all


the CONTRACTOR Entities, the GOVERNMENT shall appoint


one (1) arbitrator uikI such CONTRACTOR Entities shall appoint one


(I) arbitrator. II the turtles to the Depute are the GOVERN MEN!


and one CONTRACTOR Entity, the GOVERNMENT and such


(XJNTRACTOK Entity shall each appoint one (1) arbitrator.


(iii) In any event, the two arbitrators so appointed shall, in good faith, use


all reasonable endeavours to agree on the appointment of the third


arbitrator, who will cliinr tlh- urbitrnl tribunal In c,i.e of failure to


appoint an arbitrator or to agree on the appointment of the third


arbitrator. Rules ol the I .CIA shall apply,


(vi) Arbitration slmll Hike place hi I oiition, England. IIk language to he


used in tiny prior negotiation, mcdiulUm and i 1* uilmrotnMi 'hall Ik


English. During the arbitration procedure and until the arbitral


decision, the Parties slmll continue to perform their obligations and take


no actions that would impair tlx Contract. The arbitral award may be


enforced by any court of competent jurisdiction, including in the


Kurdistan Region. Any award shall be expressed in Dollars.


(v) I he Fait1agree tlut the arbitral award shall be final and not subject


to any appeal. including to the Courts or England on issues of Law.


(vi) With respect to tiny matter referred to arbitration under Article 43.4,


Uk arbitral triburtal shall have the authority to .-mend this Contract to


restore the economic posit ton referred to in Article 43.3.





Eincrt Dctcrminnti.ini


42.2 Any disagreement between the Parlies relating to Articles 15.9. 27.2 and 27.7. ns well


as any disagreement tho Parties agreo in ruler to mi expert, shall be submitted to an


expert. Die .Management Committee shall prepare nnd agree appropriate terms of


reference lo he submitted to the expert, in accordance with Article 8.5 (“Terms of


Reference''), ns soon as possible nflei Ihu I fleet ivc Date.


(a) Hie disagreement shall he submitted to .in expert appointed by mutual


agreement of the Panics within thirty (30) days following the date of


preparation and agreement M iIk I emu of Reference by the Management


Committee If the Parties ca u- agree on da- choice of the expert uilhin such





84/111





r- i


 thirty (30) day period, at the request of either Party, the expert shall lie


appointed by the President nl the Energy Institute in London. England. Any


expert appointed must have the necessary qualifications lor reviewing and


deciding on the subject matte* of the disagreement.


(b) The duties ot the expert shall be staled in Lite I enns ol Reference prepared and


agreed by the Management Committee. Nr* Management Committer shall


promptly provide the expert with the agreed Terms of Reference relating to the


disagreement. Each Party shall have the right to give to the expert in writing


any information which it considers useful, provided it does so within forty-five


(45) days after the expert's appointment. Such information shall be provided


to the other Party at the same time and such oilier Party shall be entitled to


provide comments on such information to the first Party ami the expert within


thirty (30) days after receiving such information. Hie expert sluill have the


right to review and verify any information he deems useful to assist him in his


review of lire? disagreement


(e) The expert sluill render his decision within forty-five (45) days of his receipt





of the Terms of Reference and the information referred to in Article 42.2.


Subject to the provisions of Article 15.9. any decision of the expert shall be


final and shall not be subject to any appeal, except in the ease of manifest


error, fraud or malpractice. Any costs and expenses associated with the expert


determination sluill be .shared equally between the Parties.








42.3 No negotiation, mediation, arbitration or expert determination procedure unJer this


Article 42 shall exempt the Parties from fulfilling their respective legal and'or


corn actual obligations.


ARTICLE 4J covi rning I .aw, fiscal stability and AMENDMENTS


Governing l aw


43.1 This Contract, including any dispute arising therefrom, thereunder or in relation


thereto and the agreement to arbitrate in Article 42. shall be governed by English law


(except any rule of English law w+tich would refer the matter to another jurisdiction),


together with any relevant nilcN customs and practices of international law. as well as


by principles and practice generally accepted in petroleum producing countries and in


the international petroleum industry.


Fiscal .Stability


43.2 Ihe obligations of the CONTRACTOR in respect of this Contract shall not be


changed by the GOVERNMENT and die general and overall equilibrium between


the Parties under this Contract shall tan he affected m a substantial and lasting


manner.


43.3 I he GOVERNMENT guarantees to the CONTRACTOR, for da- entire duration of


this Contract that it will mainiain the stability of the legal, fiscal and economic


cooditioru of this Contract as they result from tins Contract and as they result from


*5/1IX


The laws and regulations in force on the dale of signature of this Contract. The


CON l‘K ACIOK tan entered into lhi« Contract on the basis of the legaL fiscal and


cconi'nrc framework prevailing at the Effective Dale If. at any lime after Ihe


Effective l>alc, llcrc is any change in the legal, fiscal uixl/or economic framework


under ihe Kurdistan Region Law or other I aw applicable in or to the Kurdistan Region


which dctrimcr.ully affects the CONTRACTOR, the CONTRACTOR Entities or


any otltci Pci sun entitled to benefits under this Contract, ihe lerms and conditions of


the Contract shall be altered so as 10 restore ihe CONTRACTOR, the


CONTRACTOR Entities and any oilier Person entitled to benefits under thi>


Contract to the same overall economic position (taking into account home country


taxes) as llial which such Person would have been in. had no such chance in the legal,


fiscal and or ceoaomic framework occurred.


43 4 If the CONTRACTOR believes that its economic position, or the economic position


of a CONTRACTOR Entity or an> other Person entitled to benefits under this


Contract, has been detrimentally affected as provided in Article 43.3. upon the


CONTRACTOR'S written request the Panics shall meet to agree on any necessity


measures or making any appropriate amendments to the terms of this Contract to re¬


establishing the equilibrium between the Italics and restoring the CONTRACTOR,


the CONTRACTOR Entities or any other Person entitled to benefits under this


Contract to the position (taking ink* account Ixunc country taxes) H was in prior to the


occurrence of the change having such detrimental effcci Sh. uU! the Parties be unable


to agree on the merit of amending this Contract and/or on an> .imendments to be made


to this Contract within ninety (VO) days of die i

period as may be agreed by the Parties), llic CONTRACTOR may refer the matter in


dispute to arbitration as provided in Article 42.1, without the necessity of first referring


llic mutter to negotiation and mediation.


43.5 Without prejudice to the generality of the foregoing, the CONTRACT OK shall be


entitled to the benefit of any future changes to the petroleum legislation or any other


legislation complementing, amending or replacing it.


43.6 The Parties agree to cooperate in all possible ways with a view to fully achieving ihe


objectives of this Contract. The GOVERNMENT shall facilitate the performance of


the Petroleum Operations by promptly granting to Ihe CONTRACTOR any


necessary authorisation, permit, licence or access right and making available any


existing facilities and services with a view to the Parties obtaining maximum mutual


benefit from the Contract


Amendments


43.7 .Any amendment to this Contract shall be the subject of a formal amendment, duly


approved in writing by the Parties and subject to the same conditions of validity a-,


this Contract Notwithstanding the foregoing, the GOVERNMENT has the right and


authority to waive the application of the provisions of this Contract on a case-b)-care


basis without having to fulfil the conditions of validity of this Contract.


43 X 1 his Contract constitutes the entire agreement of the Panics and Miperedes any and


all prior understandings or agreements in respect of the subject matter of this Contract











86'! 18


43.9 Unless otherwise expressly stilted elsewhere in this Conlriict. ih> failure or delay of


any Party to exercise any right, power or remedy under this Contrail shall operate ns a


waiver thereof; nor shall any single or partial exercise of any such right, power or


remedy preclude any other or future exercise thereof or the exercise of any oilier right,


power or remedy.


Validity


43.10 As signatories to this Contract for and on bdvilf of the GOVERNMENT. the Ministry


of \diiir.il RestHirees in the Kurdistan Region and the Regional Council for the Oil


and Gas Affairs of the Kurdistan Region - Iraq hereby represent that they agree am!


approve this Contract foe the purposes of the Kurdistan Region Oil and Gas 1 .aw


ARTICLE 44 - NO 11CHS


44.1 All notices, demands, instructions. waivers, consents or other communications to be


provided pursuant to this Contract shall be in writing in English, shall be effective


upon receipt, und shall be sent by receipted hand delivery or by email (followed by


delivery by reputable international air courier company with an establishment in Lrbii


in the Kurdistan Region) to the following addresws:


To the GOVERNMENT:


Attention:


His Excellency the Minister of Natural Resources


Address:


Ministry ol Niitnrnl Resources


KtirdisUin Regional Government


I*rhil, Kurdistan


Fan nil: mnrUhigoil.com








I'o the CONTRACTOR:








Attention: Alexey kii/miohcv


Address:





fhemistokli Dervi


5 Elenion Building





1st floor, P.C. 1066





H7/IIX


 Nicosia. Cyprus





Email: alfudlrhWsgarnelru


A notice delivered by email (followed by air courier) shall, save for manifest error, be


deemed to have been delivered upon its transmission by emiiil


44.2 l ire above address and/or designated representative of any of the Parties may lie


changed on giving ten (10) days prior notice to the oilier Party delivered pursuant to


Article 44.1.





ARTICLE 45 - TERMINATION


45.1 Subject lo the provisions of Article 45.5, the GOVERNMENT slid I have the right to


terminate this Contract in the event the CONTRACTOR:


(a) fails to meet a material financial obligation expressly staled in this Contract: or


(b) during the First Sub-Period docs not carry out drilling and seismic acquisition,


as detailed in Article 10.2 or, during lire Second Sub-Period tor earlier), docs


not earn out drilling and seismic acquisition, as detailed in Article 10.1; or


«c) interrupts Production tor a period or more than ninety (90) consecutive days with


no cause or justification acceptable in accordance with this Contract or under


prudent international petroleum industry practice, it being recognised that horce


Ma cure is ai acceptable justification far \urii interruptions; or


(i) intentionally extracts or produces any mineral wtikh ts not covered by the object


of this Contract, unless such extraction or production is expre^dy authorised or


unavoidable as a result of operations earned out in accordance with prudent


international petroleum industry practice.


(c) irthe CONTRACTOR compos M-lcly one entity, is declared bankrupt in


accordance with applicable lam: or


(0 wilfully refuses to abide by regotianon. mediation, nrbiir.uian or expert decision





under Article 42.


4 52 I he GOVERNMENT may also terminate the Contract only in respect of one





CONTRACTOR Entity if such entity is subject lo a Change of Control for which the


GOVERNMENT has not given its authorisation in acnmhnrc with ArtiJc *9.7.


45.3 At any time prior to the Development Period, the CON TRACTOR shall have the


right to terminate this Contract by surrendering the entire Contract Area in accordance


with the provisions of Article 7.


45.4 During the Development Period, the

terminate this Conirnct at any time by surrendering all Production Areas, provided its


then current obligations have been satisfied in accordance with this Contract





88/118





L.





45.5 If the (JOVI R.NMEN T intends l«* exercise its right lo terminate this Contract


pursuant to Article 45 I it shall firu comply with the following provisions





(a) The GOVERNMENT shall notify the CON TRACTOR of its intention to


termtr.dtc this Contract stating the rcAv.ns for such termination and requesting


the latter:


(i) to remedy Uie default; «*





(it) to propose accc|Xiihlc compensation.


(b) If. within three (3) Months after the notice rclcnvd to in Article 45.5(n>. the





CONTRACTOR has not remedied the situation complained of by llie


GOVERNMENT to its satisfaction or offered compensation acceptable to the


GOVERNMENT in each wise acting rctisonubly, the GOVERNMENT shall


notify the CONTACTOR in writing that the Contract shall be terminated


from the termination date detailed in such notice. 'I his Contract shrill terminate


on such termination date unless the CONTRACTOR issues a notice ol


dispute as provided under Article 42, in which case this Contract shall remain


in force until a final settlement of the dispute lias been reached in accordance


with the dispute resolution provisions of Article 42,


I lie foregoing provisions of this Article 45.5 lire subject to the proviso that, in case of


a dispute where there has been breach of this Contract which has been submitted to


dispute resolution pursuant to Article 42. the GOVERNMENT shall not be entitled to


exercise its right to terminate this Contract prior to u linul determination under Article


42 in favour of the GOVERNMENT





45 6 If the GOVERNMENT terminates this Conrract pursuant to the provisions of Articles


45.1 and 45.5. the CONTRACTOR shall lose all its rights and interests under this


Contract. Notwithstanding the loregmng. the provisions of Articles 14.10. 16.7. 30.


31. 35.1, 35.3. 35.4. 35 7. 36. 38 2(c), 41, 47. 43.1 to 43.6 shall survive the


termination or expiry of this Contract.


45.7 If a CONTRACTOR Entity breaches Article 46.1 or 46.2 the GOVERNMENT or


another CONTRACTOR Entity may terminate this Contract in respect of the firal


C ONTRACTOR Entity.


45.8 If the Contract is lerminafax! under Article 45.2 or 45.7. the insen-a of the relevant


CONTRACTOR Entity shall be transferred to the other CONTRACTOR Entities in the


proportions in which their respective percentage interests bear to the aggregate of


their respective percentage interests under the relevant Joint Operating Agreement or


in such other proportions as such CONTRACTOR Entities shall agree between them


fix lie nurict value thereof (as Midi term » defined in Article 39.7). Such transfer shall


not give nc to any lax including on the consideration paid or received or on the


income or gam therefrom.




















89/118


 ARTICLE 4* - AFFLK'AHOA €>► CORRUPTION LAWS





46 1 If this Contract is rcasoTLibtv proven to have hern obtained in violation of Kurdistan


Rev ton Lav* concerning comjpcion. this Contract ii void ad job*


46.2 Each CONTRACTOR Fitk\ *rrw-rtwt if it u. ■ any taK- reason*h proven to be in


haa* of Kurdistan Region Law concerning corruption the provisiaaa at Article 4S 7


«pp*y-











ARTICLE 47 - EFFECTIVE l>A IE





Thb Contract shall become effective and be binding on the Patties upon the signature of the


Comiact by the duly authorised representative* of the GOVERNMENT and the


i ONER ACTOR. as provided below.











































































































9WI1X


 original* in Brfnl. the Kurd, si an Kagioa <« 10


1-nlcTvJ ii*«» m three |3)


2007


Far the Kl’KIMSTA* REGIONAL GOVERNMENT



























































l or each CONTRACTOR > «ihy











NORBT-NT LIMITED


ode Easting Northing I Longitude Latitude


A 366 358 4033 785 43 30 3? 36 26 24





B 382 700 4030 000 43 41 30 36 24 2 9


397 000 4018 000 43 51 10 36 18 05 43 43 "8 38 65*


D 411 000 4016 000 44 00 32 36 17 06 3989 979 43 37 05


E ~ 395 807 4000 982 43 50 31 36 08 53





E 382 400 4017 000 43 41 25 36 17 27


0 369 860 4019 675 43 33 01 36 18 48


H_ 368 376 4026 3781 43 31 58 36 22 25

































































Easting Northing Longitude Latitude





ode Eastmg I Northing Longitude Latitude | 382 400 4017 000 43 41 25 36 17 27


r 411 000 14016 000 44 00 32 36 17 06


405 000 3990 000 43 56 43 36 02 59


B 424 308 4004 160 44 09 30 36 10 45


c 405 000 3990 000 43 56 43 36 02 59


0 395 807 |4D00 982 43 50 31 36 08 531





 TNK-OP t lotting


00 <>ty*4> Mi Tiw.nfrrnr


LVrtl. U\W OUfifct F4» • • to*; in 7/ia>


T^unmn IIo|mi.M*»70 +/+*> 7fl/i*ion


F.iiM mh.4^v»» ♦ Uiftwn


#s*'r+


,ooJi-m]&’#t,ty


0 3 HOH 2007











Ministry ofNatural Resources


Council of Ministers


Kurdistan Regional Government


Hit>il. KurdiMan-Iraq








I)utc:8 October 2007








i)au Sir%








ANNEX C; COM PAM I q.(kflskj«g





fR0l>lCTI9NSHAKjNGC ONj RAC TJUWI


GIVEN PI;RSI'ANT I<-> Ml lO.!', !>





A Production Sharing Contract hereafta ~C >»: r.a ' ! in respect o: Petroleum Opcraiiors relating 10


It loci lluwlcr Arc . in Kurdistan was executed in November 2007 between the Kurdistan Regional


Government of Iraq thereafter 'GOVERNMENT"), represented by the Minister of Natural


Resources, aii.l the Contractor, a company established and existing under the laws of Cyprus


» »ose registered office is at 5 Themiv.oclcs Dervis Street. Nicosia, with the registration number


300<40 (hereafter referred to as “the CONTRACTOR ).





1 Thu Is to confirm that, for the purposes of the Contract. J»e CONTRACTOR is an


Affiliated Company of TNK-BP Holding, a company incorporated under the laws of the


Russian Federation and having its registered office at bid.60 Oktyabrskaya Street, village


Uvat. Uvatskiy rayon. Tun ten region. Russian Federal win 6?6I70. rc/i^mioa number


10472 00 153 770 (hereinafter referral to as the “COMPANY").


2 The COMPANY, subject to accessary contracts und permits, undertakes to provide the





CONTRACTOR with full u> hnicol support necesmry for the CONTRACTOR to fulfil its


obligations under the Contract


.1. Hie Undertaking shall enter into force as of the l-'lToctive Date (as denned In the Contract)


and shall remain in force until the earlier of (a) termination of the Contract, lb) 7.032. or (c)


the Companies ceasing to be Afftliutod Companies





4. Terms defined in the Contract shall have the same meanings in this l Indcrtaking


5. This Undertaking shall be governed by. subject, to and construed uui intaptCted in





accordance with the substantive laws of England





n<





 6. Any dispute between die GOVERNMENT and the COMPANY regarding this


Undertaking which cannot Jxr settled amicably between them within three months shall be


submitted to and linally settled by arbitration in accordance with the Contract, mat at is


mutandis.














TNK-BP Holding,





Name:


Position:








Signature





 ANNEX p


A( ( Ol'MING I’RWlDllkl











PARAGRAPH I (MI NERAL PROVISIONS





1.1 Purpose


To classify expenditures, define l urilici Petroleum Costs (in addition to those defined


as such in the Articles of the Contract), ami prescribe the manner in which the


CONTRACTOR'S Accounts shall lx- prepared and approved.


1.2 Definitions


Words nnd phrases to which a meaning lias been assigned in Article I or other


Articles of the Contract shall have the same meaning when used in this Annex.


1.3 Inconsistency


In the event ol uny inconsistency or confiict between the provisions of this Annex mid


the other provisions of the Contract, then the other provisions of the Contract shall


prevail.


1.4 Acconntiag Records and Reports


1.4.1 The CONTRACTOR shall maintain the Accounts in accordance with Ankle 15.1


and in accordance with this Accounting Procedure, including m .icconlancc with the


charts of A cc* Hints agreed under Paragraph 1.4.2


1.42 Within sixty (60> days of the Effective Date. the CONTRA**1 OK dull submit to and


discuss with the GOV kKNMENT a proposed outline of charts of Accounts, which


outline shall be in accordance with generally accepted standards and recognized


accounting systems and consistent with normal petroleum industry practice and


procedures. Within ninety (90) days of receiving the above submission, the


GOVERNMENT shall either provide written notification of it*, approval of the


proposal or re^cesi in writing revisions to the proposal Within one hundred and


eighty (180) days alter the Effective Date, the CONTRACTOR and the


GOVERNMENT shall agree on tile outline of charts ol Accounts which shall


describe tlic basis of the accounting system and procedures to bo developed nnd used


under this Contract. Following such agreement, the CONTRACTOR shall


expeditiously prepare and provide the GOVERNMENT with formal copies of Ihe


coniinebensrve charts of Accounts mid manuals related to tlx- accounting, recording


und reporting functions, and procedures which arc. and shall be. observed under the


Contract.


1.4.3 Notwithstanding the generality’ of Ihe f«*regoing. the CONTRACTOR dull make


regular Statement* relating to the Petroleum Operations Ihem Statements arc as


shown;





95/118


(n) Production Statement (as indicated in Paragraph 6).




(c) < lost Recovery and Share Account Statement (as indicated in Paragraph K)


(d) Statement of hxpenditures and Receipts (as indicated in Pnmgrnph 9).


(c) Pinal Hnd-of-Year Statement (as indicated in Paragraph It)).


(Q Mudgct Statement (as indicated in Paragraph 12).


1.4.4 All reports and statements shall he prepared in accordance with the Contract,


Kurdistan Region Law. and where there are no relevant provisions of either of these,


in accordance with prudent international petroleum industry practice.


1.5 Language and Units of Account


All Accounts shall be maintained and prepared in the I nglish language and shall be


recorded in Dollars. Where necessary for clarification, tire COM RAC I OR may


also maintain Accounts in other currencies


1.6 Audit and Inspection Rights of the GOVERNMKN I


In addition to the provisions of .Articles 153 >* 15 7 fiJ 15.9. the following


provisions shall apply to any audit carried out in accordance with Articles 15'* to


15.7:


1.6.1 lor puiposcs of auditing, tlic GOV KKNMI .M. acting reasonably and in accordance


with prudent intemnlionnl petroleum industry practice, may examine and verify*, at


reasonable times upon reasonable prior written notice to the CONTRACTOR. ali


charges und credits relating to tlvc Petroleum Operations, such as books of account,


accounting entries, material records and inventories, vouchers, payrolls, invoices and


any other documents, correspondence nnd records including electronic records


reasonably considered necessary by the GOVERNMENT to audit and verify the


charges and credits, values and Iroulmwilh.


1.6.2 furthermore. the auditors shall have the right in connection with such audit, to visit


and inspect at reasonable times, all sites, plants, facilities, warehouses and offices <>i


the CONTRACTOR directly or indirectly serving the Petroleum Operations und to


question personnel associated with those Petroleum Operations,


I 63 Where the GOVERNMKN'I requires verification of charges mode by on Affiliated


Company of the CONTRACTOR, ihc GOVERNMENT shall have the right to


obtain an audit certificate for such cliungcs from an internationally recognized firm of


public accountants acceptable to both the GOVERNMENT and the


CONTRACTOR, which may be the CONTRACTOR’S statutory auditor.


1.6.4 All agreed adjustments resulting from an audit shall be promptly made in the


C ON TRACTOR'S Accounts and any consequential adjustments to payments due to


the CON’I RACTOR or to the GOVKRNMENT, as the case may Ic, shall be made


promptly.





96/11X


1.6.4 When issues are outstanding with respect to an audit, die CONTRACTOR .linll


maintain ilic relevant documents mill permit inspection tlnmxif until the issue is


resolved.


1.7 Payments


Unless as otherwise provided in Article 24. Article 29 or other Articles oi' the


Contract:


1.7.1 All payments between the Parties shall, unless otherwise agreed, be in Dollars and be


made through n bank designated in writing by each receiving party; and all sums due


under the Contract shall be paid within thirty (30) days following the end of the


Month in which the obligation to make such |>aymcnt occurred.


1.7.2 All sums due by one party to the other under the Contract shall, for each day such


sums arc overdue, bear interest compounded monthly at I.IHOK plus two per cent


(2%).


1.8 Currency Exchange Rales


In addition to the provisions of Article 29. the following provisions shall apply to any


exchanges of currency carried out in accordance with Article 29:


1.8.1 Amounts received and Petroleum Costs incurred, shall Ik- converted from other


currencies into Dollars in accordance with die CONTRACTOR’S usual accounting


procedures which shall reflect generally accepted accounting practices in t'ic


international petroleum industry , and with reference to exchange rates obtained in


accordance with Article 29.


1.9 Accrual Basts Cash Flow Ba*» and Report*


All books and Accounts shall he prepared on an accrual basis in accordance with


generally accepted accounting principles uwd in the international petroleum industry.


1.10 Values and Trmtments


Values and treatments proposed by the CONTRACTOR relating to all Petroleum


Costs shall be subject to challenge by the GOVERNMENT in the course of audit to


ensure that they are in accordance with the provisions of this Accounting Procedure.


PARAGRAPH 2-CLASSIFICATION. DEFINITION AND ALLOCATION OF


COSTS AND EXPENSES


2.1 Segregation of Costs and Expenses


Petroleum Costs shall be segregated in accordance with the purposes for which such


Petroleum Costs are made. The purposes winch shall qualify arc:


(a) there which have been included in the approved Work l*rogram ami Budget


for the year in which the Costs and Expenditures arc made;








97'IIS


(b> expenditures incurred in cure* of emergency ns set out in Am* lev 11.7, 13.5.


13.9 3S.S. 35.6 and any other Ankles of the Contract,


(c) any wild purposes agreed in tlx- Article* of the Contract, and


(d) oilier items which have ham agreed by the Parties from time lo time.


All Petroleum Costs recoverable under Paragraph 3 relating* to Petroleum Operations


shall b* classified, defined and allocated us set mu below.


2.2. Ksplorution Costs


l:\plmuiioo Cose are all direct anil allocated indirect costs and expenditures incurred


in carrying out the Exploration Operations, including all direct and allocated inducti


costs and exjxmditurcs incurred in tlx* ■eiireh tor Petroleum in an area vsliivh or was


ai the time when such costs and expenses were incurred, port of tlx- Contract Area


including:


2.2.1 Aerinl, geophysical, geochemical, puleonhilugieal. geological. topographical and


seismic surveys and studies and lltoir mterpretmion and purchased geological and


geophysical information.


2.2.2 Stratigraphic test hole drilling and water well drilling.


2.2 3 I ahmir materials. supplies, and services used in drilling and hxnuili.ni testing of


wells with the object of finding Petroleum or Apprairal Wells ciclial w any cofl* of


22.4 Facilities to the extent um*1 in support of the purposes described in Paragraphs 2 2.1.


22.2 and 2.2.3. including access roads


2.2 5 I hat portion of all service expenditures and that portion of all general and


administrative expenditures directly attributable to Exploration (lists or allocated


thereto on a consistent and equitable h*uv


22.6 Any other expenditures incurred in the •coreh for and appraisal of Petroleum after the


hflectiw IXiic urxl not otherwise covered under this Paragrap* 22.


2J <;•« MarkHMg < ovtv


(k Marin if QMS are ail direct and allocated indirect costs and cxpciditurcs


incurred in carrying out Ga> Marketing Operations and include that portnm ot all


tcrvicc expenditures and that portion of all general and administrative expend lures


directly atUibutablc lo Gas Murielirif Cost* or allocated thereto on a comiUcnl and


equitable basis


2.4 Ih-vdopmcnt ( o«.


IXnetopmcnf Cost* arc all direct and allocated indirect costs and expenditure*


incurred in carrying out Development Operation* including all direct and alWx.ncd


indirect cuds and expenditures incurred in








«*U1«


2.4.1 Drilling wells which arc completed as producing w«lb anil drilling wells for purposes


o:' producing from a Petroleum reservoir, whether these wells are dn or producing


and drilling wells for the injection of water or gas to enhance recovery of Petroleum.





2.42 Completing wells by way of installation of casing or equipment or otherwise after a


well has been drilled for the purpose of bringing the well into use us a producing well


or ns a well for the injection of water or gas to enhance recovery of Petroleum.


2.4.3 I’hc costs of Petroleum production, transport and storage futilities such as pipelines,


flow lines, production ami treatment units, wellhead equipment, subsurface


equipment, enhanced recovery systems. Petroleum storage facilities. and access roads


for production activities.


2.4.4 Engineering and design studies for |Ik; wells and facilities referred to in Paragraphs


2.4.1. 2.4.2 and 2.4.3.


And including that portion of all service expenditures and that portion of all general


ami administrative expenditures directly attributable to Development Costs or


allocated thereto on a consistent and equitable basis; and any other expenditure


incurred in the Development Operations nnd not otherwise covered under


Paragraph 2.3.


2.5 Production Costs


Production Costs arc all direct and allocated indirect costs and expenditures incurred


in carrying out Production Operations, including all direct and allocated indirect costs


and expenses incurred in Petroleum Operations after First Production which arc other


than Exploration Costs. Gas Marketing Costs. Development Costs and


Decommissioning Costs. Production Costs include that portion of all service


expenditures and that portion of all general and administraiive expenditures directly


anribtnahlc to Production Costs or allocated thereto on a consistent and equitable


basis


2.6 Deconimi"iomn” C tab


Decommissioning Costs arc all direct and allocated indirect costs and expenditures


incurred in carrying out I kr

service expenditures and that portion of all general and administrative expenditures


directly attributable to Decommissioning Costs or .illocatcxl thereto on a consistent


and equitable basis. and the Decommissioning Reserve Fund shall be determined on


such basis, in advance of incurring such costs, as provided in Article 38 and. for the


purposes of com recovery, the contributions to the Decommissioning Reserve Fund


shall be recovered in accordance with Article 3S.


2.7 Service F.xpraditurc*


Service expenditures are expenditures in support ol Petroleum Operations including


warehouses, vehicles, motorized rolling equipment, aircraft, lire nnd security stations,


workshops, writer und sewerage plants, power plants, housing, community and


recreational facilities und lurminrc, tools and equipment used in these activities


Service expenditures in nny Calendar Year shall include the costs incurred in such








99/1IX


year lo purchase and/or construct the said liicililics ns well us the annual cosis of


maintaining and operating the same. All service expenditures shall Ik: regularly


allocnled ns specified in Paragraphs 2.2.5, 2.3, 2.4, 2.5 and 2.<» to l'!xplor»tinn Costs,


Gas Marketing Costs, Development Costs. Production Costs iiikI Decommissioning


Costs respectively and shall lie separately shown under each of these categories.


Where service expenditures arc made in res|»cci of sliuicd facilities, the husis of


allocation of costs to Petroleum Operations shall lie consistent and equitable nnd shall


be specified.


2.8 General and Administrative Expenditures


Genet al and administrative expenditures are:


2.8.1 All main office, field olfice iind general administrative expenditures in the Kurdistan


Region including supervisory, accounting, procurement and employee relations


services.


2.8 2 Where the CONTRACTOR is an Affiliate of a group of companies whose


ho-Hltiuarlors is Abroad (a “Foreign CONTRACTOR”), an annual overhead charge


shall be made for services rendered (excluding the direct expenditures as referred in


Paragraph 3.l.2.(b)) by any Affiliate of the Foreign CONTRACTOR outside the


Kurdistan Region to support and manage Petroleum Operations under the Contract, or


Where the CONTRACTOR, not being a Foreign CONTRACTOR draws upon the


services of an Affiliate within the Kurdistan Region, an annual overhead charge diall


be made for services rendered (excluding the direct expenditures as referred in


Paragraphs .1.1.2.U) ar.d (b)) by such Affiliate to support and manage Petroleum


Operations under die Contract ("Parent C ompass Overhead”).


Parent Company Overhead will be deemed to cover the actual cost (being salaries,


wages and labour burden, employee benefits, travel, hotel and other normally


reimbursable expenses paid by the Affiliate of a CONTRACTOR in accordance with


its standard personnel policy in force in the relevant period, provision of office


accommodation and provision of services reasonably rccc'>*ry tor operation and


maintaining such staff offices) incurred for services rendered by those functions of


CON TRACT OR's Affiliate, such as. but not limited to. international production


headquarters, intentional exploration headquarters. treusury, payroll, taxation,


insurance, legal, communications, computer rcrviccs, controllers, personnel,


cxeculivc administrative management, research and development central engineering


;uh! process engineering which:


(a) cannot without unreasonable effort andu* expenditure or without the release


of confidential data proprietary to an> of the CONTRACTOR’S Affiliates, he


. barged under any other section of this Annex; and


(b) arc properly allocable to Petroleum Operations under the Contract It is


undergood, however, that services performed by he departments listed above


nnd other corporate departments which directly benefit Petroleum Operations


under the Contract shall be charged as direct costs in accordance with


Puragraph 3.











toon is


In respect of the coxts of the CONTRACTOR'S Parent Company Overltend, as


described above. Uic CON I RAC“1 OK shall charge monthly to Petroleum Operations


an amount equal to the total of the following:


2.8.2.1 Exploration Overhead


The CONTRACTOR shall be entitled to an annual charge based on a sliding scale


percentage and charged monthly to Petroleum Operations. The basis for applying this


percentage shall l>c the total ol Exploration Costs ami Gas Marketing Costs during


each Calendar Year (exclusive of this Exploration Overhead) or traction thereof less


expenditures which have been subjected to ilie two (2) per cent fee. referral to in


Paragraph 3.1.8(b). I he sliding scale percentage shall be the following:


For the first four million Dollars (US$4,000,000) four per cent (4%)


For the next four million Dollars (US$4,000,000) three per cent (3%)


Over eight million Dollurs (US$8,000,000) two per cent (2%)


The foregoing percentages may lx- reviewed hut not more often than annually, and


nny approved appropriate adjustment shall be made, if necessary, prospectively.


2.8.2 2 Development. Production mul Decommissioning Operations Overhead


The overhead rules applicable to Development, Production and Decommissioning


Operations shall be agreed between the Parties in due course and shall incorporate the


following guidelines:


(a) The CONTRACTOR'S charges must be charged as direct charges whenever


possible. Overhead charges ex- 4 only to com peltate the CON fRACTOR’s


Affiliates tor costs winch are property allocable to Petroleum Operations


under the Contract but which cannot, without unreasonable effort and-or


release of confidential data proprietary to the < OM KA< TOR'S Affiliates,


be charged under any other section Overhead ecus nre billed monthly


Overhead must be commensurate with services tendered and based on actual


cost studies but may not exceed :ui amount calculated ;r* u percentage of


certain annual expenditures excluding Exploration Costs and


(b) That percentage as well as the ty pes of expenditures w hich affect overhead


and those, which do not. shall be agreed among the Parties.


(c> The maximum percentage rare- may be revised by mutual agreement not more


often than annually. The initial maximum percentage rate* and the types of


expenditures to which they apply shall he agreed as soon as the Parties possess


reasonably reliable cost estimates for the relevant Production Area.


(d) Overhead charges arc not subject to audit by GOVERN ME N T.


(e) The CONTRACTOR shall upon request furnish at the end of each relevant


Calendar Year to the GOVERNMENT a confirmation by its statutory auditor


that the overhead costs actually charged do not duplicate any other charges


and that the method used in allocating overhead to Petroleum Operations





101/1 IS


 hereunder as opposed to other activities is reasonable and in accordance with


generally accepted accountiii|! practices





( 0 I lie CONTRACTOR must hudgat lor overhead charges,





2.K.3 All general and administrative expenditures sludl be regularly allocated as specified in


Pnnigrnplw 2.2.5, 2.3. 2.4. 2.5 nnd 2.6 to Exploration Costs. Gas Marketing CoatH,


Development Costs, Production Costs and Decommissioning Costs respectively and


shall he se|mutely shown under each of these categories.





PAII ACiR AIM I 3 - COSTS, EXPENSES, EXPENDITURES AND CREDITS OF THE


CONTRACTOR





3.1 Coats Recoverable Without Further Approval of the GOVERNMENT


Petroleum Costs incurred by tire CONTRACTOR pursuant to the Contract as


clnsnitled under the headings referred to in Paragraph 2 shall be recoverable for the


purpose of Article 25 of the Contract (except to the extent provided in I'uragraph 4 or


elsewhere in this Annex) without further approval of the GOVERN MEN I’, subject to


midil as provided for in Article 15 and in Paragraph 1.6.


3.1.1 Surface Righhf





All direct costs necessary for the acquisition, renewal or relinquishment of surface


rights acquired and maintained in force for the purposes of the Contract





3.1.2 Labour and Associated Labour Co as


(a) The CONTRACTOR % locally recruited employees based m the Kurdistan


Region: Costs of all CONTRACTOR’S locally recruited employees who are


directly engiged in the conduct «>l Petroleum Operations under the Contract in


the Kurdistan Region. Such costs shall include the costs of salaries, wages,


bonuses, overtime, employee benefits and GOVERNMENT benefits for


employee'' and levies imposed on the CONTRACTOR as an employer,


transportation and relocation arsis within the Kurdistan Region of the


employee and such members of the employee's family (limited to spouse and


dependent children) as required by law or customary practice in the Kurdistan


Region. If such employees arc engaged in other activities in the Kurdistan


Region, in addition to Petroleum Operations, the cost of such employees shall


he apportioned on a time sheet basis according to sound and acceptable


accounting principles.


(b) Assigned Personnel: Costs of salaries and wages including bonuses of the


CONTRACTOR'S employees directly engaged in the conduct of the


Petroleum Operation* under die Contract whether tcmpiHuiily or permanently


assigned, irrespective of the location of such employees, it being underfund


that in the case of tlawc personnel only a portion of whose tune is wholly


dedicated to Petroleum Operations under the Contract, only that pns-iata


portion of applicable salaries, wages, and other costs as deli neared in


Paragraphs 3.1.2(0. (d). (c). (f) and (gX shall be cliaxgcd and the basis of such


pro-rata allot itim shall he specified.


102/118


L-.


 The CONTRACTOR'* costs regarding holiday, vacation, sickness and


disability benefit* aul Using and housing and other customary allowance*


applicable to the salaries and wages chargeable under Paragraph 3.1.2(b)





(d) Kxpemes or contributions made pursuant to assessment' or obligations


imposed under I aw which air applkablc to the CONTRACTOR'S cost of





I he CONTRACTOR*! cost of caablishcd plans for employees’ group life


Cc)


insurance. ix*spiuluJlK>n. pension, sock purchases, savings bonus, and other


benefit plans of i like nature customarily granted to the CONTRACTOR'S


employees, provided however that such ant' arc in accordance with generally


accepted >~3od.ird.« in the international petroleum industry. applicable to


salaries and wage* chargeable to Petroleum Operations under


Paragraph 3.1 2tb)







including those made for travel and relocation of the expatriate employ ees,


including their families and personal effects, assigned to the Kurdistan Region


whose salaries and wages are charge.!Sto to Petroleum Operations under








Actual truBportabor expenses of expatriate pcrwncl transferred to Petrokum


Operations from their country of origin shall be charged to the Petroleum Operation'.


Transportation expenses of personnel transferred from Petroleum Operations to a


country other than the cinintiy of then origin siuill not he charged to the Petroleum


Operations. Transportation cost us used in this section shall mean the cost of freight


ami passenger service, meals, hotels, insurance and other expenditure* related to


vacation and transfer travel and authorized under the CONTRACTOR'* standard


personnel policies. The CON fRACTOR dvill ensure that all expcndituirv related Us


inmspmt.it it hi costs arc equitably allocaied to die *. tivities. which hove benefited


from the personnel concerned.


(g) Reasonable personal expenses of personnel wlmse salaries and wuges arc


chargeable to Petroleum Operations under Paragraph 3.1.2(b) and for which


expends such personnel arc reimbui'ed under the CONTRACTOR'S


standard personnel policies. In the event such expenses are not wholly


attributable to Petroleum Operations, the Petroleum Operations shall be


charged with only the applicable portion thereof, which shall bo determined on


an equitable basis.


*1.3 Transportation and Employee Relocation Costs





The cost of transportation of employees, equipment, materials and supplies other than


as provided in Paragraph 3.1.2(0 neoesaray for the conduct of the Petroleum


Operations under the Contract along with other related cost* such as. Ixit not limited


to. import duties, customs feel, unloading charge*, dock fees, and inland and ocean


freight charges.














103/118


1.1.4 (3ygg&.f?r Sen ices


(a) Third Parties


l>*c actual cosh of contract services, unices of professional conujlUri*


ulilitkv anJ other *rvices necessary for the conduct of the Petroleum


Operations under the Contract performed h> third parties other than an


Affiliate of the CONTRACTOR


(b) Affiliates of the CONTRACTOR


<•> Professional and Administrative Services Exposes cost of


pcufcs&iunal and aCminisrratrve services provided b> any Affiliate' «»f


the CONTRACTOR for the direct benefit of Petroleum Operatiom


uvljdng services provided by the production, exploration. legal,


procurement, financial, insurance, accounting and computer service'


div 1*401> other than those covered by paragraph.' 3.1.4 (b> (h). 3.1.6


and 3 1.8 (b) which CONTRACTOR may use in beu of having its


own employees Such charges shall retket the market cost of


providing their services. Such charges shall not include any element «»r


profit and shall be no more or lew favourable than similar charges for


other operation* earned on by the CONTR ACTOR and its Affiliate'.


I he chargcout rate shall include all coats incurred by Affiliates


incidental to the employ mer; of such personnel including all Labour


and A vwciafcd labour Costs and the cost of maintaining and operating


office* and providing all support services for such personnel. Coes of


travel of such personnel in respect of Petroleum Optwrinm will be


directly charged Ihe charge* for such services shall not exceed those


prevailing if performed by non-Aftihated third partus, taking into


account the quality and availability ol mm h w-rvices Where the wort is


perfonnod mil Hide the Ihhiio olficc base of such personnel the daily


rate shall I*' dutrged from the date such personnel leave the home


office base wlieie ll»cy usually work up In lltoir return thereto,


including days which are not working days in the location where the


work is performed, excluding any holiday entitlements derived h> such


personnel from their employment at ilteir home office huso.


(ii) Scientific or Technical Persoanrl cost ol •dnitific or technical


personnel services piovkled by luiy Allilmto of the CONTRACTOR


lor the direct benefit of Petroleum Operations. which cost shall be


charged on a cost of service basis and 'Imil not include any element of


proliL I he charge*>ut rate shall iiK'ltule all costs incutrcd by Affiliates


incidental to tin* employment of such personnel including all I ahnjr


and Associated Labour Costs and tin- cunt of llliiilltiiining ami operating


offices and providing all support wervicon lor -mch personnel costs of


travel of such personnel in respect of Petroleum Operations will be


directly cliarged. The charges fur such services diall not exceed those


prevailing if performed by non nllilinted third parties, taking into





to be done by such personnel is covered by an proved W ort Program





lOt'HS


 and Budget, the CONTRACTOR shall not authors work by such


personnel v% T nil .ipprmd of the GOV'ERNMENI


(iii> Equipment and rarilitk* use of cquipaKOl and facilities o«iml and


furnished by the CONTRACTOR'S Affiliates. at rules enmmensurate


with the cost of ownership and operation: provided, however, tlul such


iales shall mx exceed those currently prevailing for Use supply of like


equipment ami facilities ori comparable terms in tl»e nrvn where the


Petroleum Operations are heing conducted and shall he on on ami’s


length Ixisis tin the request of the GOVERNMENT, the


CONTRACTOR shall provide tlxe GOVERNMENT' with evidence


of such rates being on an ami's length basis. (If the GOVT RNMENT


considers lluil miy such rule is not on an arm's length basis (lien the


GOVERNMENT has tin- right to refer the mallei to an ex|H-ri pursuant


to Article 42.2 of die Contract). T he equipment ami facilities referred to


licrcin shall exclude major investment hems such as (but not limited


to) drilling rigs, producing platforms, oil treating facilities, oil and gas


loading and transportation systems Storage and tcrminnl facilities and


other major fudluicv. rate* for which shall be subject to *puaic


agreement with the GOVERNMENT.








("oil of inquiring, leasing, installing, operating, repairing and maintaining


communication systems including radio und microwave facilities within and between


the Comma Area und the (ONI RAC TOR'S nearest base facility.











Net cost to the CONTRACTOR «»f .-stdilishirg. maintaining and operating any


office. sulvoflice- warehouse. housing or other facility directly serving the Petroleum


Operations. If any such facility services more than one contract area the nrt coNs


thereof dull be allocated an an equitable havv in accordance with prudent


international peSrokrum indium- practice


3.1.7 !• ixihigic.il and KnvirommtU


(n) (fesls incurred in the (Vintfuct Arc® as a result of legislation for archoooloffka]


and geophysical surveys relating to identification and protection of culliirul


sites or resources,


Costs incurred in environmental nr ecological surveys required hy regulatory


authorities, including an environmental impact assessment commissioned


pursuant to /Article 37.5 of the Contract and any other costs incurred in


complying with the requirement'' of Article 17;


(«) Costs to provide or have available pollution containment ami removal


equipment;











105/1IX


 (d) Costs of actual control and cleanup of oil spills, and of such further


responsibilities resulting therefrom as may be required by applicable laws and


regulations;







approved scheme prepared in nccortlanou with Article 38 of the Contract;


(f) Any costs incurred for the decommissioning of facilities and site restoration,


including any related activity required by the GOVERNMENT or oilier


competent authority or by the Contract; und


(I!) Any contributions made by the CONTRACTOR to the Decommissioning





Reserve fund in accordance with Article 38. when such contributions are


made.





3.1.8 luiwadlluslif





Co,Ms of materials and supplies, equipment, machines, tools and any other goods of a


simllur nature used or consumed in Petroleum 0|*rations subject to the following:


(a| Acquisition - the CONTRACTOR shall only supply or purchase materials


for use in Petroleum Operations that may be used in the foreseeable future.


I he accumulation of surplus stocks und inventory shall be avoided so far as is


reasonably practical and consistent with efficient and economical operations.


Inventory levels shall, however, lake into account the time lag for


replacement, emergency needs, weather conditions affecting operations and


similar considerations.





(b) Components of costs, arm's length transaction* - except as otherwise


provided in paragraph 3.1.8(d) . material puicha.'oi by the CONTRACTOR


in arm's length transactions in the open market for use in the Fetroknim


Operations under the Contract shall be valued to include invoice price less


trade and cash discounts (if any). licence fees purchase and procurement fees


plus freight and forwarding charges between point of supply and point of


shipment, freight to port of destination, insurance, taxes, customs duties,


consular fees, excise taxes, other items chargeable against imported materials


und. where applicable, handling and transportation expen^-s from point of


importation to warehouse or operating she. Where an Affiliate of the


CONTRACTOR has arranged the purchase, coordinated the forwarding and


expediting effort its costs should not exceed those currently prevailing in


normal arm’s length transactions on the open market and in any ease shall Dot


exceed a fee equal to two per cert (2%) of the value of the materials added to


the cost of the materials purchased.


(c) Accounting - such material costs shall be charged to the accounting records





and books in accordance with the First in. First Out” (FIFO) method;


(J) Material purchaxrd from or sold to Affiliates of the CONTRACTOR or


transfericd from other activities of the CONTRACTOR to or from Petroleum


Operations under this Contract shall be valued and charged or credited at the


prices specified in Paragraphs 3.1 J(dX0.3.1.8(dXii) aid 3.1.8(d)(iii):





106,'! 18





I


r


i i) New material. including used new material moved from inventory


(Condition ‘'A”), shall be valued at the ouiTcnt international net price


which .shall not exceed the price prevailing in normal arm's length


imnsnctions in the open market.


(ii) Used material (Conditions "D’\ “C" and *’D”;


(A) Material which is in sound and serviceable couditum and if.


suitable for re use without reconditioning shall be classified as


Condition “B“ and priced at wvenly five per cent (75%) of the


current price of new material defined in Paragraph 3.l.8(d)(i);


t B) Material which cannot he classified 3s Condition "B“ but which


after reconditioning will be further serviceable for its original


function shall be classified ns Condition “C* and priced at not


more than fifty pet cent (50%) of the current price of new


material as defined in Paragraph 3.l.8(d>(i). The cost of


reconditioning dmll he charged to the reconditioned material


provided that the value of Condition “C" material plus the cost


of reconditioning do not exceed the value of Condition “B”


material;


(C) Material which cannot hi* classified as Condition “B” or


Condition "C“ shall ho classified as Condition “D” and priced


at a value commensurate with its use by the CONTRACTOR.


If material is not tit for use by the CONTRACTOR il shall be


disposed of as junk.


(iii) Material involving erection costs >HhI1 he charged at the applicable


condition percentage of the current knocked-down price of new


material * defined in Paragraph 3.1 X

(iv) When the m* of material is temporary and its service U» the Petroleum


Operations under the Contract does not justify the reduction in price as


provided for in paragraph 3.1.$.(d)tiiKb). >ueh material dull be priced


on a basis dial will result in a net charge to the accounts under the


Contract consistent with the value of the service rendered


(v) Premium price* - whenever material is not readily obtainable at


published or listed prices because of national emergencies, strikes or


other unuMul cause' over which the CONIKACTOK lias no control,


the CONTRACTOR may chary.c* Petroleum Operations for the


required material at the CONTRACTOR'S actual cost incurred in


providing such material. in making it suitable for use. and in moving it


to the Contract Area; provided notice in writing i% furnished to the


GOVERNMENT of the proposed charge prior to charging Petroleum


Operations for Midi material and the GOVERNMENT shall have the


right to challenge the transaction on audit.


(vi) Warranty of material furnished by the CONTRACTOR - the


CONTRACTOR docs not warrant the material furnished. In case of





107/118


 defective material, credit shall not be passed to Petroleum Operations


until adjustment lias been received by (lie CONTRACTOR from the


manufacturers of the material or their agents.


(vii | Ad justments arising from material inventories conducted in accordance


with Paragraph 5.2.


(c) Equipment of the CONTRACTOR charged at rates not to exceed the average





commercial rates of non-nffiliatixl third parties for equipment, facilities,


installations and utilities for use in the area where the same arc used. On


request, the CONTRACTOR shall furnish a list of rates ami the basis of


application. Such rates shall he revised when found to he either excessive or


insufficient, but not more than once every six (6) Months.





Drilling tools and oilier equipment lost in the hole or damaged beyond repair


may he charged at replacement cost less depreciation plus transportation costs


(o deliver like equipment to the location where used.


(f) Use of leased or hired machinery and/or equipment in the Petroleum





Operations shall he charged at full cost to the CONTRACTOR This may


include mobilisation and de-mobilisation charges, lease and hire fees, as well


as other contractual costs.











All rentals of every kind ami nature levied by any GOVERNMENT and all Taxes


imposed :n connection with the CONI RAC TOR s assets. income or activities under


the Contract and paid directly by the CONTRACTOR or any CONTRACTOR


Entity (save where the contrary is expressly provided in the Contract) with the


exception of Taxes described in Article 31.2) and bonus payments made unde* Article


32.





If the CONTRACTOR, any CONTRACTOR Entity or any o| its Affiliated


Companies is subject to income or withholding tax as a result of services performed at


cost for the Petroleum Operations under the Contract, its charges for such services


may be increased by the amount required to cover such laves (grossed up) including


taxes on such gross up





3 1.10





Insurance premiums and costs incuned for insurance carried for the benefit of the


Petroleum Operations provided that such insurance ix customary, affords prudent


protection against risk and i» at a premium no higher than dial charged on a


competitive basis by insurance companies which are not Affiliated Companies of the


C ONI RAC TOR Except m cases of failure to insure where insurance coverage is


required pursuant to the Contract, actual costs and lows incurred chill he recoverable


to the extent not made good by insurance unless such loascs result solely from an act


of wilful misconduct by the CONTRACTOR. Such costs may include repair and


replacement of property in the Contract Area resulting from damages or lows


incuned by fire, flood, storm, theft, accident or such other cause.








IIIX.IIX


3.1.11 Legal l.xrcnso





All reasonable coots and expenses resulting from ilie handling, investigating,


asserting, defending, or settling of any claim or legal action necessary or expedient for


the procuring. perfecting, retention and protection of the Contract Area, and m


defending or prosecuting lawsuits involving die Contract Area <*r any third party


claim arising out of the Petroleum Operations under the Contrncl. or sunn paid in


respect of legal services necessary for the protection of the joint interest of the


GOVERNMKN I and the CONTRACTOR shall be recoverable. Such expenditures


shall include attorney's fees, court costs, arbitration cosl\ cists of investigation, arid


procurement of evidence and amounts paid in settlement or satisfaction of any such


litigation and cl lints provided such costs arc not coveted elsewhere in the Annex


Where Irynl services are rendered in such matters by salaried or regularly retained


lawyers of the CONTRACTOR or an Affiliated Company of the CONTRACTOR,


such compensation sludl be included instead under Paragraph 3.1.2 or 3.1.4(b) as


applicable.


3.1.12 Claims


Expenditures made in iIk settlement or satisfaction of any loss, claim, damage,


judgement or other expense arising out of or reluting to Petroleum Operations, except


as may otlierwisr be covered elsewhere in the Annex.





3.1.13 I g Costs





All costs and expenses incurred b> the CONTRACTOR in the of its








3.1.14 (ieneral apd AdmiristnOV^Coas


I he costs described in Paragraph 2.8 I and the charge described in Paragraph 2.8.2.


3.1.15 Banking Charges and (im'nc) I ttbnnge Losses


Charges and levs by the banks tor money transfers, pavmcms ard foreign exchange


transactions. as well as currency exchange kxwes irKurrod by the

conned:oc with the Petroleum Operations





3.1.16





Other reasonable expendhurcs not covered or dealt with m the foregoing provisions of


Paragraph 3 which arc necessarily incjrred by the CONTRACTOR for the proper,


economical and cflic tent conduct of Petroleum OpciatKmv


.3.2 Credit Under the Contract


The proceeds, other than the proceeds from the sale of Petroleum received from


Petroleum Operations under the Contract, including the items listed below shall he


credited to the Accounts tmder dv Contract for the purposes of Aniclc 25 of the


Contract:











109/118


3.2.1 The proceeds of any insurance or cluim or judicial awards in connection with


Petroleum Operations under the Contrnci or any assets charged to live Accounts under


the Contract where such operations or assets have been insured and the premia


charged to the Accounts under the Contract.


3.2.2 Legal costs charged to the accounts under Paragraph 3 111 and subsequently


recov ered by die CONTRA f TOR.


3.2.3 Revenue received from llnrd parties for the use of properly or assets the cost of which


has been dunged to the Accounts under the Conti ac t


3.2.4 Any adiiMmenl received by the CONTRACTOR from the suitplicrs/manufacCurers


or their nponts in connection with a defective mater ml tin* cost of which was


previously charged hy the CONTRACTOR to the Accounts tiiMlcr the Contract.


3.2.5 Rentals, refunds, including refunds of taxes |>nid, or oilier credits received by the


CON TRACTOR which apply to any charge which has Iwcti made to the Accounts


tiiKlcr the Contract, hut excluding any award granted to the CONTRACTOR under


arbitvation or expert proceedings.


3.2.6 Costs originally charged to the Accounts under the ('ontruci for materials


subsequently exported from the Kurdistan Region or transferred to another Contract


Area within the Kurdistan Region


3.2 7 Proceeds from the sale or exchange by the CONTRACTOR of plant or facilities used


in Petroleum Operations the acquisition costs of which have hren charged us the


Accounts under the Contract.


3.2 tt Proceed* derived Oran the sale or iirrmr of any ini. led u <1 property the development


coats of which were incurred pursuant to and arc recoverable under the Contract


3.2 9 Proceeds derived from the sale, exchange. Rare. lure, trsrofcr or dup>«l in on?


manna whatsoever of any other item the costs of which have been charged to


Petroleum Operations


-*J Dapliralion of ( harges and Credits


Not withstanding any provision to the contrary in this Accounting Procedure. there


shall be no duplication of charges or credits to the Accounts under the Contract.








PARAGRAPH 4 - COSTS AND EXPENSES MU TO B» I RE.\ I ED AS


RECOVERABLE


The folk*mrg costs and expenditures dull not he included in the Petroleum Costs


recoverable under Artxie 25:


4.1. Taxes on income or profit paid to my GOVERNMENT authority except taxes and


duties that may he included in the costs of material and equipment purchavd for the








110/11 *


4.2. Any payment made to the GOVERNMENT by reason of il>e failure of the


CONTKAC IX)K to Iiillll its Minimum Exploration Obligations in respect of tl»c


relevant Sub-Period under the Contract


4.3. I he oust of any letter of pnarantce. if any, required under the Contract;


4.4 I he bonuses set out in Article 32 of the Contract;


4.5. ( osts ol marketing or transportation of Petroleum beyond the Delivery Point


(excluding Gas Marketing Costs);


4.6. Attorney’s fees and other costs of proceedings in connection with arbitration under


Article 42 of the Contract or intornnlionnlly recognised independent expert


determination as provided in the Contract or this Accounting Procedure;


4.7 Any interests, lees, costs and expenses paid by the CONTRACTOR for loans and


any other form of financing or advances for the financing of the Petroleum Costs


entered into by the < .'ONTRACTOR with third parties or Affiliated Companies;


4.8 Any accounting provision for depreciation and/or amortisation, excluding any


adjustments in value pursuant to Paragraph 3.1.8;


4.0 Dividends, repayment of equity or repayment of intercompany loans:


4.10 Finos and penalties Imposed under Law.


PARAGRAPH 5- RECORDS AM) VALUATION Of \SSKTS


5.1 Records


The CONTRACTOR shall maintain detailed records of property in use for


Petroleum Operations under the Contract in accordance with prudent international


petroleum industry practice for exploration and production activities


5.2 Inventories


Inventories of property in use in Petroleum Operations shall be taken at reasonable


intervals but at least once a year with respect to movable assets and once every three


(3) years with respect to immovable assets. The CONTRACTOR shall give the


GOVERNMENT at least thirty (30) days written notice of its intention to take such


inventory and the GOVERNMENT shall base the right to be represented when such


inventory is taken.


Failure of the GOVERNMENT to be represented at an inventory shall bind the


GOVERNMENT to accept the inventory taken by the CONTRACTOR


The CONTRACTOR shall dearly inform GOVERNMENT about the principles


upon which valuation of the inventory has been based. The CONTRACTOR shall


make every effort to provide to the GOVERNMENT a full report on such inventory


within thirty (30) days of the raking of the inventory. When ar. astigrrnent of rights


under the Contract takes place the CONTRACTOR may. at the request of the





111/118


 assignee, take a special inventory provided that the costs o I such inventory tiro borne


by the assignee.





PARAGRAPH 6-PRODUCTION STAI'KMKN I


6.1 (’reduction Information


Without prejudice to the rights and obligations of the Parlies under Article 16 of the





Contract, from the date of First Production from the Contract Aren the


CONTRACTOR shall submit a monthly production statement to the


GOVERNMENT showing the following information separately for each producing


Development Area and in aggregate for the Contract Aren


6.1.1 The quantity of Crude Oil produced and saved.


6.1.2 fhc quality characteristics of such Crude Oil produced and saved


6.1.3 I he quantity of Natural Gas produced and saved.


6.1.4 I lie quality characteristics of such Natural Gas produced and reived.





6.1.5 The quantities of Crude Oil and Natural Gas used for the purposes of carrying on


drilling and production operations and pumping to field storage.


6.1.6 I lie quantities of Crude Oil and Natural Gas unavoidably lost.


6.1.7 The quantities of Natural

6.1.8 The size of Petroleum stocks held at the heginning of die calendar Month in question





6.1.9 I he sizc of Petroleum stocks held at the end of (lie calendar Month in question


6.1.10 The quantities of Natural Gas reinjected into the Reservoir.


6.1.11 In respect of the Contract .Area as a whole, die quantities of Petroleum transferred at


the Measurement Point All qunntiiun shown in this Statement shall be expressed in


both volumetric terms (Barrels of oil and cubic meters of gas) and in weight (metric


tonnes).


6.2 Submission of Production Statement


fhc Production Statement for each calendar Month shall be submitted to die


GOVERNMENT no later Hum ten (10) days idler the end of such calendar Month.





PARAGRAPH 7- VALUE OF PRODUCTION AND PRICING STATEMENT


Value of Production and Pricing Statement Information


I he CONTRACTOR shall, for the purposes of .Ankle 25 of the Contract, prepare a


statement providing calculations of the value nl Crude (»il produced and saved during


each Quarter





112/118


r*


 This "Value of Production and Pricing Statement** dull contain the following


information:





7.1.1 I lie quantities and prices rcnli/cd therefor by tin* ( OM KACTOR in respect of


miles of Natural (Ins and Crude Oil delivered to third patios made during the Quarter


in question.





7.1.2 I he quantities ami prices raili/ml therefor by the CONTRACTOR in respect of wit*


of Natural (ins and (’rude Oil delivered during the Quarter in question, other than to


Ihird Parties





7.2 Sahmlnvion of Value of Production and Pricing SlHtrmrnt


I lie Value ot Production nnd Pricing Statement I nr wiclt Quarter shall he submitted to


the GOVERNMENT not later than twenty-one days after the end of such


Quarter.





PARAGRAPH •- COST RECOVERY AM) SHARE ACCOUNT STATEMENT


8.1 Coat Recovery Statement





The CONTRACTOR shall prepare with respect to each Quarter a Cost Recovery


Sutcinetii containing tin* following information:-


8.1.1 Recoverable Petroleum Costs carried forward from the previous Quarter, if any.


8.1.2 Recoverable Petroleum Cirtl foe the Quarter in question


8.1J Credits under the Contract fur the Quarter in question





8.1.4 Iota! Recoverable Petroleum Grft for the Quarter in question (Paragraph 1.1.1 pius


Paragraph l li net of Paragraph 8.1J ).


I.U Quantity and value of Petroleum applied locost recovery pursuant to Article 25 taken


h> the CONTRACTOR for the Quarter in quertMHi


1 1.6 Amount of recoverable Petroleum Costs to l»e carried forward into the neat Quarter


(Paragraph 8.1.4 net of Paragraph K. I $).


8J. CoaiBlalive Production Stt---mt


The CONTRACTOR dull prepare with raped to each Quarter a C umulative


Production Statement containing the following information:


8.2.1 Ihe cumulative production pnation at the end of the Quarter preceding the Quarter in





question.


8.2.2 Production of Export Petroleum for the Quarter in question


8.2 4 The cumulative production position at the end of the Quarter in queMion.








I1M18


< ? ' n»»- n-.HJBT of Petroleum applied hi Royalty puraur! to Article 24. c<»H re.ovrry


pursuant to Article 25 and Profit Petroleum pursuant u» Article 26 taken In the


GOVERNMENT and by the CONTRACTOR, respectively, during the Quarter w








*26 I he forecast of prcducooc and the dear of Petroleum applied to Royalty pursuant to


Article 24. cost recovery punuatt u» Article 25 and Profit Oil puraiunt lo Article 26


slue to the GOVERNMENT and to the CONTRACTOR, reaped ively, tor the ncxl


xuccoorling Quarter.


K.t Prr|ianttion and Submission nl Coal Recovery and Cumulative Production


Statements


H \ I Provisional Cost Recovery and Cuimiliiiivc Production Statements, containing


cnlimuted informatioo where necessary. slull be submitted by the CON TRACTOR


on the last day of each Quarter for tlwr purposes ol Article 25 of the Contract


X 1.2 I'inil quarterly Cost Recovery and < Timiil.itivv Production Statement* shall be


submitted within thirty (30) day s of the end of the Quarter in question.


8.4 Annual Statement


Jor the purposes of Article 25 of Ik Contract, nn Annual Cost recovery and


( iiiniilutive Production Statement shall he submitted within ninety (90l days ol the


end of each Year. The Annual Statement skill contain the categories of informnlJon


listed in Paragraphs 8.1 and 8.2 for tin- Your m question separated into the Quarters


of the Year in question and showing the cumulative positions at the end of the Year in


question with respect to cumulative uraccovered Petroleum CWn and Cumulative


Production.


PARAGRAPH 4 - STATEMENT OF EXPENDITURE AND KLCKIPIN


9.1 The CObfTRACTOR dull prepate with respect lo adi Quarter a Man-meat of


Expenditure and Receipt* under the Contract The Statement will dbtmguirfi between


Exploration CM*. Gat Marl cling Con*. Development Costs. Production C<**t» and


Decommissioning Co** and will identify m^or items of expenditmt* withm the*


categories. Ihe Statement will show the following:


9.1.1 Actual expenditures and iciciplk lor llie Quarter in question.


9.1.2 0emulative expenditure and racvfpts lo* ll»e budget t aleodar Year in question


9.1J Latest forecast c jmulalive expenditure* at the Calendar Year end


9.1.4 Variations between budget forecast and latest forecast aid explanations thereof


92 The Statement of Expcafctiae and Receipts of each Quarter shall he submitted to the


GOVERNMENT no later thrni thirty (*» day* after the end of such Quarter











114/11*


 PARAGRAPH 10-FINAL END-OF-YEAR STATEMENT





The

contain information ns provided in the Production Statement, Value of Production and


Pricing Statement. Cost Recovery and Cumulative Production Statements and Statement of


Expenditures and Receipts hut will be based on actual quantities of Petroleum produced and


expenses incurred. I his Statement will he used to make any adjustments that arc necessary to


the payments made by die CONTRACTOR under the Contract. The Final End-of-Yeai


Statement of ciieh < alnidiir Year shall be submitted lo the GOVERNMENT within ninety


(90) days of the end of such Calendar Year.


PARAGRAPH II AUDITS


Eacli such icpnit ami Mntement provided lor in Paragraph 6 through 10 sliall 1* considered


true ami correct, unless the GOVERNMENT raises tui exception thereto within the


timeframe and under the process set out in Article 15 ol the Contract.


PARAGRAPH 12 - ANNUAL WORK PROGRAM AND BUDGET


11.1 Inch nnnual Work Program and Budget to he prepared in accordance with Articles


II. 12 and 14 of the Contract in respect ol Exploration Casts, Gas Marketing Costs.


Development Costs and Production Costs respectively will show the following:


11.1.1 Forecast expenditures for the budget ( aloudnr Year m question including a quarterly


classification ol such expenditures.


11.1.2 Cumulative expenditures to the end of said budget Calendar Year.


11.1.3 A schedule showing the most important individual items of Development Costs (if


applicable) for said budget Year.





PARAGRAPH 13 CON TRACTOR ENTITY INCOME TAX COMPUTATION


13.1 For the purpose of Article 31.3(b) of the Contract, the net taxable profits of each


CONTRACTOR Entity from all the Petroleum Operations carried out under this


Contract, shall be calculated in accordance u itb rhis Paragraph.


13.2 Each CONTRACTOR Entity shall maintain for each Calendar Year separate


Accounts with respect to the Petroleum Operations which shall he used, inter alia, to


establish a profit and loss account and a balance sheet which will show the results of


the Petroleum Operations carried out in such Calendar Year as well as the u.vd' and


liabilities assigned or directly related thereto. The profit and loss account will he


maintained under the accrual method of accounting


13-3 For purposes of determining the net taxable profits of each CONTRACTOR Entity


for corporate income tax purposes:


13.3.1 the profit and loss account of such CONTRACTOR Entity sluill he credited w ith the


following:





115/1 Iff


(a) if the Royalty is paid in cash pursuant to Article 24, revenues arising from the


disposal of Royalty volumes as recorded in such entity's Accounts and


determined in accordance with the provisions of Article 24;


(b) revenues arising from the disposal of any Available Petroleum to which such


entity is entitled lor recovery of its Petroleum Costs ns recorded in its


Accounts and determined in accordance with the provisions of Article 25;


(c) revenues from the disposal of any Profit Petroleum to which such entity is


entitled under Article 26 as is recorded in its Accounts and determined in


accordance with the provisions of Article 26;


(d) any other revenues or proceeds directly connected to the Petroleum Operations


including those arising from the disposal of minted Petroleum substances, or


from the treatment, storage and trans|X>rtatiun of products for third parties;


(e) any exchange gains realised or other financial income earned by such entity in


connection with the Petroleum Operations;


13.3.2 the profit and loss account lor such ( ON IKACTOK I ntity dial he debited with ail


charges incurred for the purposes of the Petroleum Operations whether incurred inside


or outside the Kurdistan Region, which charges shall include the following:


fii) in addition to the charges specifically set forth below in this Paragraph, ail


oilier Petroleum Costs, including the aN‘ of supplies, personnel and


manpower expenses, aiul (lie cost of services provided to the


CONTRACTOR in connection with the Petroleum Costs;


(b) if the Royalty is paid in cash pursuant to Article 24. Royally payments mule


and as recorded in such entity's Accounts and determined in accordance with


the provisions of Article 24;


(c) General and administrative expenditures related to the Petroleum Operations


performed under this Contract;


(

provisions:


(i) capital expenditures incurred by the CON TRACTOR for the purposes


of the Petroleum Operations shall be depreciated on a reducing balance


basis;


(ii) the depreciation rates, which shall be applicable from the Calendar


Year during which such capital expenditures arc incurred, or from the


Calendar Year during which tire assets corresponding to said capital


expenditures are put into normal service, whichever is Inter, for the


first Calendar Year in question and for each subsequent Calendar Year,


me ns follows:











116/1 IK


 Nature of the capita! asset tu lie depreciated Annual depreciation Rate











Permanent buildings 10.0%


Temporary buildings 20.0%





Office and home furniture and fixtures 20.0%


Productive wells 20.0%





Production and delivery equipment 20.0%


Drilling equipment 20.0%





Pipelines 20.0%





Automotive equipment 20.0%


Mariik and aviation equipment 20.0%





All other capital assets 20.0%








(c) Exploration Costs (which for the avoidance nt doubt nclu.lo npprasal


cx|Kiiditures) shall be deductible on a reducing balance basis at the rate o)


20% per annum.


(I) interest and fees paid to creditors of the CONTRACTOR, for their actual


amount;


tg) losses of Assets resulting from destruction or damage, assets which are


renounced or abandoned during the year, assets which are transferred under


Article 20.2, bad debts, indemnifies paid to third parties as compensation for


damage;


(h) any other costs, expenses, losses or charges directly related to the Petroleum


<)|)cratiom. including exchange losses realised in connection with the


Petroleum Operations as well as the bonuses provided in Article 32, the


Exploration Rental provided in Article 6.3, the Production Rental provided in


Article 13.10. the allocation to training, provided in Article 23.7 and the


allocution to the Environment bund provided in Article 23.9. the costs


specified in Articles 23.11. 38.1 and 38.6 and transportation and marketing


costs l*yond the Delivery Point:


(i) die amount of non-offset losses relating to the previous Calendar Years, which


shall be cniriod forward for an indefinite period until full settlement of said


loss?' or termination of this Contract;








117/118


13.3.3. the net profit of such CONTRACTOR Entity vital: he equal to ihr dffiacaoe


hdwwx all the amounts credited and all the ammunt dr hi led in the pro til and loss


account: and


(l) il this amount is negative. it shall constitute n low


(b) if the* amount is positive, il nIuiII be gnmxl up to tuke account of the (act that


such entity’s corporate income tax is being settled out ol the


GOVERNMENT’S share of the Profit Petroleum in accordance with Article


31 2. by applying the following formula in order to provide such entity’s net


taxable profits for corporate income tax purposes:


Net I iubb Net Profitv' QOO - Applicable Rate of Corporate Income L±Yj


Profits 100





13.4 For purposes of determining each CONTRACTOR Entity’s liability to corporxe


income tax for a lax year in respect ol the Petroleum Operations carried out under this


« untract. the net taxable protits (it ary) for such tax year shall be multiplied by the


applicable rate of corporate income tax. ux provided in .Article 31.3(a).



















































































IIR/I1S