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Petroleum Agreement

For the Development and Production of Petroleum in

Cakran-Mollaj Field

dated 8 August, 2007



- between -



Albpetrol Sh.A.



- and -



Stream Oil & Gas Limited



TABLE OF CONTENTS

Page

PREAMBLE ......................................................................................................................................................... 1

ARTICLE 1 DEFINITIONS................................................................................................................................ 3

ARTICLE 2 SCOPE OF AGREEMENT, ANNEXES TO THE AGREEMENT ........................................... 8

ARTICLE 3 TERM ............................................................................................................................................ 10

ARTICLE 4 RELINQUISHMENTS ................................................................................................................ 13

ARTICLE 5 CONDUCT OF OPERATIONS .................................................................................................. 14

ARTICLE 6 EVALUATION ............................................................................................................................. 16

ARTICLE 7 DEVELOPMENT AND PRODUCTION ................................................................................... 16

ARTICLE 8 ANNUAL PROGRAMS AND BUDGETS ................................................................................. 18

ARTICLE 9 ALBPETROL SHARE AND COST RECOVERY.................................................................... 19

ARTICLE 10 EMPLOYMENT, TRAINING AND BONUSES ..................................................................... 20

ARTICLE 11 TITLE TO ASSETS ................................................................................................................... 21

ARTICLE 12 RIGHTS AND OBLIGATIONS OF THE PARTIES.............................................................. 22

ARTICLE 13 TAXATION................................................................................................................................. 24

ARTICLE 14 IMPORTS AND EXPORTS ...................................................................................................... 25

ARTICLE 15 BOOKS OF ACCOUNT, CURRENCY, EXCHANGE CONTROL AND PAYMENTS..... 25

ARTICLE 16 ASSIGNMENT ........................................................................................................................... 26

ARTICLE 17 FORCE MAJEURE ................................................................................................................... 27

ARTICLE 18 GOVERNING LAW................................................................................................................... 28

ARTICLE 19 ARBITRATION ......................................................................................................................... 28

ARTICLE 20 ENVIRONMENTAL AND SAFETY MEASURES, PREVENTION OF LOSS .................. 30

ARTICLE 21 GOODS AND SERVICES ......................................................................................................... 31

ARTICLE 22 ABANDONMENT ...................................................................................................................... 31

ARTICLE 23 CONFIDENTIALITY ................................................................................................................ 32

ARTICLE 24 TERMINATION......................................................................................................................... 32

ARTICLE 25 AUDITS....................................................................................................................................... 33

ARTICLE 26 GENERAL PROVISIONS......................................................................................................... 34

ANNEX A .............................................................................................................................................................. 1

ANNEX B .............................................................................................................................................................. 1

ANNEX B .............................................................................................................................................................. 2

ARTICLE 1 GENERAL PROVISIONS............................................................................................................. 2

ARTICLE 2 PETROLEUM COSTS .................................................................................................................. 2

ARTICLE 3 CONTRACTOR'S REVENUES ................................................................................................... 8

ARTICLE 4 FINANCIAL REPORTS TO ALBPETROL ............................................................................... 8

ANNEX C ............................................................................................. ERROR! BOOKMARK NOT DEFINED.

ANNEX D .............................................................................................................................................................. 1

ANNEX E .............................................................................................................................................................. 1

ANNEX F .............................................................................................................................................................. 1



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This Petroleum Agreement is entered into and delivered at Tirana, Republic of Albania, this

___8__ day of _August_, 2007.

BETWEEN

Albpetrol Sh.A., a state company organised and existing under

the laws of the Republic of Albania (hereinafter referred to as

"Albpetrol")

ON THE ONE PART

- and Stream Oil & Gas Ltd., a company registered in Cayman

Islands and having a branch registered in the Republic of

Albania (hereinafter referred to as "Contractor")

ON THE OTHER PART

PREAMBLE

WHEREAS, petroleum operations in the Republic of Albania are governed by Petroleum

Law No.7746 dated 28.7.1993 as amended by Law No.7853 dated 29.7.1994 and by Law No.

8297 dated 04.03.1998 jointly cited as the Petroleum (Exploration and Production) Law

1993, by Decree No. 782 dated 22.2.1994 on the Fiscal System in the Petroleum Sector

(Exploration-Production) as amended by Law No.7811 dated 12.4.1994 on the Approval of

Decree No.782 on the Fiscal System in the Hydrocarbons Sector (Exploration-Production),

by Law No. 8297 dated 04.03.1998 as well as by Decision No.547 dated 09.08.2006 on

Setting Up the National Agency for Natural Resources (the aforementioned legal documents

are collectively referred to as "Petroleum Law"); and

WHEREAS, in the Republic of Albania the state is the only owner of all natural resources

within its territory and offshore areas and has the right to explore, develop, extract, exploit

and utilise natural resources; and

WHEREAS, the National Agency for Natural Resources (hereinafter referred to as "AKBN")

on behalf of the Ministry of Economy, Trading and Energy has the exclusive right to enter

into a License Agreement with Albpetrol to perform all the Petroleum Operations described

in this Agreement; and

WHEREAS, Albpetrol is a party to the Licence Agreement dated 08/06/2007; and

WHEREAS, Contractor, Albpetrol and the AKBN have executed the Instrument of Transfer,

conditional upon this Agreement becoming effective; and

WHEREAS, the Parties make this agreement to record the terms upon which Contractor will

join Albpetrol in the conduct of the Petroleum Operations and become a party to the above

mentioned Licence Agreement, and for related purposes; and

WHEREAS, Contractor has the adequate capital, technical and commercial capacity,

personnel and organizational capacity required to successfully complete the operations

specified below; and



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WHEREAS, Contractor agrees to undertake its obligations stipulated hereinafter as a

contractor with respect to Petroleum Operations as defined in this Agreement; and

WHEREAS, the Parties each have the right, power and authority to enter into this

Agreement; and

WHEREAS, Contractor and Albpetrol intend this Agreement to record the terms upon which

Contractor will join Albpetrol in the conduct of Petroleum Operations and become a party to

the Licence Agreement, and for related purposes,

NOW, THEREFORE, the Parties hereto agree as follows:



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Article 1

Definitions

In this Agreement, words in the singular include the plural and vice versa, and except where

the context otherwise requires the following terms shall have the meaning set out as follows:

1.1

"Abandonment" means the final abandonment through decommissioning, removal,

and/or disposal of wells and facilities used for Petroleum Operations and the rehabilitation of

the land in the immediate vicinity of an abandoned well to a condition not worse than its

condition as of the time immediately before commencement of Petroleum Operations in

respect of such well or facilities, and the term “to Abandon” shall have the corresponding

meaning.

1.2

"Abandonment Costs" means costs and expenditures (whether of a capital or

operational nature) incurred or to be incurred in connection with the Abandonment of

facilities or equipment.

1.3

"Abandonment Plan" means a plan prepared by Contractor or anyone designated by

and on behalf of Contractor for the Abandonment of the wells, facilities and equipment used

for the Petroleum Operations.

1.4

"Accounting Procedure" means the procedures and reporting requirements set forth in

Annex B to this Agreement which forms and integrated and indivisible part hereof.

1.5

"Affiliate" means a subsidiary company, a parent company or a sister company to a

Party or an entity comprising a Party. For the purposes of the foregoing definitions:

(a)

a subsidiary company is a company controlled by a Party or an entity

comprising a Party;

(b)

a parent company is a company that controls a Party or an entity comprising a

Party;

(c)

a sister company is a company that is controlled by the same Person as a Party

or an entity comprising a Party.

"Control" means that a Person owns share capital, either directly or through other

Persons, which confers upon it a majority of the votes at the stockholders’ meetings of the

company, which is controlled.

1.6

"Agreement" means this Petroleum Agreement together with Annexes as may be

amended from time to time by mutual agreement of the Parties and approval of the Council of

Ministers, for the evaluation, development and production of Petroleum in the Contract Area.

1.7

"Albpetrol Operations Zone" means that portion of the Contract Area which is outside

of the Project Area.

1.8



"Albpetrol Share" has the meaning given in Article 9.2.



1.9

"Annual Program" means an itemized statement of the Petroleum Operations to be

carried out within or with respect to the Project Area and the time schedule thereof.



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1.10 "Associated Gas" means Natural Gas found in association with Crude Oil if such

Crude Oil can by itself be commercially produced.

1.11 "Available Petroleum" means the amount of Petroleum (less any amount used in

Petroleum Operations, flared or injected, and less any Deemed Production to which Albpetrol

is entitled under this Agreement) produced, saved and metered from the Project Area at the

Measurement Point.

1.12 "Barrel" means a quantity of Crude Oil equal to 158.987 litres at standard

atmospheric pressure of 1.01325 bar and temperature of sixty degrees Fahrenheit (60°F).

1.13



"Baseline Study" has the meaning given in Article 20.4.



1.14 "Budget" means an estimate of revenues and expenditures in respect of an Evaluation

Program or an Annual Program.

1.15 "Calendar Quarter" means a period of three (3) consecutive Months beginning

January 1, April 1, July 1 or October 1 and ending March 31, June 30, September 30 or

December 31, respectively.

1.16 "Condensate" means blends mainly consisting of pentanes and heavier hydrocarbons,

directly recovered from the hydrocarbon reservoirs or obtained from gas conditioning, which

are liquid under ambient conditions of temperature and atmospheric pressure.

1.17 "Contractor" means Contractor and its respective successors or permitted assignees

according to Article 16.

1.18 "Contractor's Revenues" means the cash proceeds received by Contractor as a result

of the sale of Cost Recovery Petroleum and Profit Petroleum, as more fully described in the

Accounting Procedure.

1.19 "Contract Area" means the geographical area in Albania, which is more specifically

(horizontally and vertically) identified in Annex A.

1.20 "Contract Year" means a period of one year commencing with the Effective Date or

any anniversary of the Effective Date.

1.21 "Cost Account" means the set of accounts maintained by Contractor in accordance

with the provisions of the Accounting Procedure, showing the charges, credits and other

transactions accruing in respect of the Petroleum Operations.

1.22



"Cost Recovery Petroleum" has the meaning given in Article 9.2.



1.23



"Cost Recovery" has the meaning given in Article 9.3.



1.24



"Crude Oil" has the same meaning ascribed to this term in the Petroleum Law.



1.25



"Deemed Production" has the meaning given in Article 3.5.1.



1.26 "Delivery Point" means the following points agreed to by the Parties and approved by

the AKBN, or any other points which are agreed by the Parties and approved by AKBN:



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1.26.1 as to Crude Oil taken by Contractor for export sale, FOB the relevant Albanian

port,

1.26.2 as to Crude Oil taken by Contractor for sale to ARMO or otherwise (but not

for export sale), at the point of delivery under that crude oil sales contract, and

1.26.3 as to Crude Oil delivered to Albpetrol pursuant to Article 3.5 or Article 9.

1.27 "Development and Production Area" means the area as defined in the Development

Plan in accordance with Article 7.2.1 or a revised Development Plan. Once designated, the

Development and Production Area shall extend to 200m depth below the deepest oil water

contact within its lateral boundaries.

1.28 "Development and Production Period" means, in relation to the Development and

Production Area, the period specified in Article 3.

1.29 "Development Plan" means a plan, including the works, relevant activities, and the

budgets therefore setting forth the overall strategy for the development and production of

Petroleum from the Project Area prepared by Contractor and approved in accordance with

Article 7, including any amendments thereto.

1.30 "Effective Date" means the date on which the Council of Ministers in accordance with

the Petroleum Law issues a decision approving this Agreement.

1.31



"Environment" means the components of the earth and includes:

1.31.1 air, land and water;

1.31.2 all layers of the atmosphere;

1.31.3 all organic and inorganic matter and living organisms; and

1.31.4 the interacting natural systems that include components referred to in sections

1.31.1 to 1.31.3.



1.32 "Environmental Damages" means any and all loss, injury, death, damage or other

event of any kind whatsoever, and howsoever or whenever occurring, to or in relation to the

Environment (including but not limited to any loss or damage to real or personal property) in

respect of which any liability or obligation has accrued or may in the future accrue to

Contractor, its Affiliates, any predecessor to Contractor or its Affiliates or Subsidiaries, or

any of them, to incur any remediation, reclamation, clean-up or other expenses, or to

compensate any person or the estate of any individual, whether by reason of any equitable,

common law, statutory or civil liability or obligation or remedy available, whether applicable

by reason of the ownership of Contract Area or responsibility for any operations conducted

on or in respect thereof at any time in the past, present or future, and whether or not resulting

from negligence, nuisance or otherwise, which loss, injury or damages shall include but not

be limited to all damages, awards, expenses and costs (including legal costs on a solicitor and

its own client basis) incurred in any way relating to such matters.

1.33 "Evaluation Area" means either the entire Field if Contractor takes over all Wells in

the area or the square area 142.25 m North, East, South and West cantered on each selected



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Evaluation Well. In case of overlapping of wells Contractor and Albpetrol will discuss on the

case by case basis the status of such wells.

1.34 "Evaluation Period" means the period during which Contractor will conduct the

Evaluation Program, which period is described in Article 3.2.

1.35 "Evaluation Program" means a program of work to be performed by Contractor as

specified in Annex D.

1.36 "Evaluation Well" means any well in respect of which activity will be occurring

during the Evaluation Program.

1.37 "Existing Baseline Study" means the Full Environmental Benchmark Survey for the

Rehabilitation of the Cakran-Mollaj Oilfield and a Baseline Survey to be conducted by

Contractor.

1.38 "Expert" means an individual or an entity who is not a resident or citizen of Albania

nor has been employed by Contractor, Albpetrol or AKBN and who by training and extensive

experience, has highly developed knowledge in the technical area wherein lies the dispute or

disagreement which he or she is to resolve and who is appointed pursuant to the provision of

Article 19.10.

1.39 "Fiscal Year" means the period of twelve (12) consecutive months according to the

Gregorian calendar starting January 1st and ending December 31st, both dates inclusive.

1.40 "IOR/EOR Methods" means Petroleum Operations which aim at reaching the

Maximum Efficient Recovery from a Reservoir through improving its natural energy system

and its hydrocarbon drainage by applying, without being limited to, recompletion, reworking,

cold heavy oil production methods, steam-assisted gravity drainage methods, water injection,

repressuring, thermal heating, vertical and horizontal drilling and other enhanced production

methods.

1.41 "Licence Agreement" means the Licence Agreement dated 08/06/2007 granted by the

Ministry and the AKBN to Albpetrol governing Petroleum Operations in the Contract Area,

and to which Contractor will become a party upon execution and registration of the

Instrument of Transfer attached as Annex E.

1.42 "Losses and Liabilities" means, in relation to a party, all losses, costs, damages and

expenses which that party suffers, sustains or incurs, including but not limited to legal fees

and disbursements on a solicitor and its own client basis.

1.43 "Measurement Point" means the point mutually determined by AKBN and the Parties,

where appropriate equipment and facilities will be located for the purpose of performing all

volumetric measurements and other determinations, temperature and other adjustments,

determination of water and sediment content and other appropriate measurements, to

establish, for the various purposes of the License Agreement and this Agreement, the

volumes of Petroleum. The Measurement Point may or may not be the same as the Delivery

Point.

1.44 "Ministry" means the ministry in charge of petroleum activity in the Republic of

Albania.



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1.45 "Natural Gas" means any hydrocarbons or mixture of hydrocarbons consisting

essentially of methane in a gaseous state under normal conditions of pressure and

temperature, extracted from the subsoil separately or together with liquid hydrocarbons.

1.46



"New Evaluation Area" has the meaning set forth in Article 3.4.6.



1.47



"New Evaluation Program" has the meaning set forth in Article 3.4.6.



1.48 "AKBN" means the agency established by the Government of Albania responsible for

implementation of the Hydrocarbon Law, as defined in Decision No.547 dated 09.08.2006 by

the Council of Ministers.

1.49 "Operator" means Contractor or, if Contractor comprises more than one person, such

Person duly appointed by the Parties for executing and implementing the Petroleum

Operations in the name of, for the account of, and under the responsibility of Contractor.

1.50



"Party" or "Parties" means Albpetrol or Contractor or both of them.



1.51 "Person" means any individual, corporation, partnership, joint venture, association,

joint stock company, trust, unincorporated organization, Albanian governmental authority, or

other form of entity.

1.52



"Petroleum" means Crude Oil, Condensate or Natural Gas.



1.53 "Petroleum Operations" all or any of the operations including the Abandonment

aimed or authorized by Petroleum Agreement and the License Agreement and operated by

the Parties on or after the Effective Date, including without limitation the testing,

development, extraction, production, treatment, transportation and storage of Petroleum of or

from the Contract Area pursuant to this License Agreement.

1.54 "Petroleum Costs" means all of the costs and expenditures borne and incurred by

Contractor in or in connection with the conduct of Petroleum Operations pursuant to this

Agreement, determined and accounted for in accordance with the Accounting Procedure, but

does not include Taxes.

1.55



"Project Area" means:

1.55.1 during the Evaluation Period, that portion of the Contract Area which is

designated from time to time as the Evaluation Area;

1.55.2 during the Development and Production Period, that portion the Contract Area

which is designated from time to time as Development and Production Area; and

1.55.3 if Contractor undertakes a New Evaluation Program, that portion of the

Contract Area which is designated from time to time as the New Evaluation Area.



1.56



"Profit Petroleum" has the meaning given in Article 9.4.



1.57 "Taxes and Duties" means all taxes, duties, tariffs, fees and other payments of

whatever nature payable to the Albanian Government (or to any of its agencies) or to any of

its administrative sub-divisions (or agencies).



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1.58 "US $" or "US Dollars" means United States Dollars, being the legal currency of the

United States of America.

Article 2

Scope of Agreement, Annexes to the Agreement

2.1

This Agreement is an evaluation, development and production operations arrangement

and it shall cover Petroleum Operations in the Contract Area. The rights and obligations of

the Parties under this Agreement shall take effect from the Effective Date. Albpetrol shall

notify Contractor of the date of the approval of the Council of Ministers within five (5)

working days of its occurrence.

2.2

Subject to the terms and conditions of this Agreement and Article 2.3 and 2.4,

Albpetrol hereby irrevocably appoints and constitutes Contractor solely and exclusively to

conduct Petroleum Operations in the Project Area during the period specified herein, and to

expand the Project Area in accordance with this Agreement to include any lands within the

Contract Area.

2.3

In accordance with the Section 3.2 of the Licence Agreement, the Parties have the

exclusive right:

(a)



to conduct Petroleum Operations in the Contract Area;



(b)



to treat, store and transport the Petroleum extracted from the Contract Area;



(c)



to construct and install all facilities and equipment (including storage,

treatment, pipelines and other means of transportation) required for the

Petroleum Operations; and



(d)



to use for its own account, sell, exchange, export, realize or possess the

Petroleum extracted from the Contract Area, and take Profit from and title to

such extracted Petroleum subject to a right of requisition in the event of an

emergency to supply or contribute to the supply of local market at

international prices at the time of request.



In accordance with the Section 3.2 of the Licence Agreement, and notwithstanding Article

2.3(a), (b), (c), and (d), any other contractor may conduct petroleum operations for

development and production of Petroleum outside of the Contract Area in accordance with

any agreement reached between a contractor and AKBN. The Ministry, Albpetrol, AKBN

and the contractor shall ensure that those petroleum operations will not interfere and

unreasonably prevent the normal development of Petroleum Operations of the Contractor in

the Contract Area, nor shall Contractor unreasonably prevent or interfere with the petroleum

operations of such other contractor.

2.4

Albpetrol has the right to conduct petroleum operations for its own account on any

portion of the Contract Area which has not been designated as the Project Area until such

time as Contractor requires Albpetrol to cease such operations. Any part of the Contract Area

may be selected by Contractor to become the Evaluation Area, a New Evaluation Area or the

Development and Production Area in accordance with this Agreement, regardless of whether

Albpetrol is conducting petroleum operations in that area.



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2.5

Contractor shall be responsible for the execution of Petroleum Operations only in the

Project Area in accordance with the provisions of this Agreement, separately from Petroleum

Operations conducted by Albpetrol alone in Albpetrol Operations Zone, if any. Accordingly,

the rights, interests, obligations, liabilities and indemnities of the Parties in the Contract Area

shall be allocated as follows:

Party



Interest in Project Area



Albpetrol

Contractor



0%

100%



Interest in Albpetrol

Operated Zone

100%

0%



Without prejudice to Contractor's position as a contractor hereunder, the extent and character

of such work to be done by Contractor shall be subject to the review and approval of

Albpetrol to the extent provided for in this Agreement. Notwithstanding anything to the

contrary in the License Agreement or this Agreement:

2.5.1



each of the Parties is responsible severally and not jointly for the rights,

interests, obligations, liabilities and indemnities of LICENSEE as set forth in

this Agreement; and



2.5.2



Contractor shall be solely responsible under the License Agreement and this

Agreement for Petroleum Operations conducted in the Project Area and not

elsewhere, and Albpetrol shall be solely responsible under the License

Agreement and this Agreement for Petroleum Operations conducted in the

Albpetrol Operations Zone and not elsewhere, including without limitation:

2.5.2.1 obligations pertaining to Abandonment;

2.5.2.2 paying costs and expenses of Petroleum Operations;

2.5.2.3 indemnities;

2.5.2.4 the preparation of the Development Plan and Annual Programs and

Budgets;

2.5.2.5 the calculation and payment of Petroleum Profit Tax;

2.5.2.6 compliance with operational and environmental standards;

2.5.2.7 the preparation of baseline studies;

2.5.2.8 the preparation of books, records and accounts of Petroleum Costs,

Cost Recovery Petroleum and revenues;

2.5.2.9 force majeure and termination for force majeure; and

2.5.2.10 breach and termination provisions.

Contractor will indemnify Albpetrol, its Affiliates, directors, officers,

employees and agents from and against any Losses and Liabilities arising

from any breach by Contractor of this Article 2.5.2, and Albpetrol will

indemnify Contractor, its Affiliates, directors, officers, employees and agents



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from and against any Losses and Liabilities arising from any breach by

Albpetrol of this Article 2.5.2.

2.5.3



The Parties agree that:

2.5.3.1 any encumbrances granted by a Party may apply only in respect of its

interest in the Contract Area; and

2.5.3.2 the rights to free use of Petroleum produced from the Contract Area for

Petroleum Operations applies only to the Petroleum produced from and

Petroleum Operations conducted in respect of the Parties' respective

interests in the Contract Area.



2.6

In performing the Petroleum Operations, Contractor shall provide all technical and

financial requirements and employ the methods, procedures, technologies and equipment

generally accepted in the international petroleum industry.

2.7

Contractor shall carry out Petroleum Operations hereunder at its sole risk and cost,

unless this Agreement expressly provides otherwise.

2.8

Unless otherwise stated herein or otherwise agreed in writing, Contractor shall receive

no compensation for its services nor any reimbursement of expenditures under this

Agreement, except for the share of Petroleum from the Project Area to which it may become

entitled under Article 9.

2.9

During the term of this Agreement, all Petroleum production from the Evaluation

Area and any Development and Production Area shall be divided between Albpetrol and

Contractor in accordance with the provisions hereof.

2.10 This Agreement does not award Contractor ownership rights over Petroleum in situ in

the Project Area. However, Contractor shall have the right to receive in kind, dispose of and

export freely its share of Petroleum from the Project Area in accordance with the provisions

of this Agreement. Contractor shall become a party to the Licence Agreement by the

execution of the Instrument of Transfer, which has been executed by Albpetrol and

Contractor simultaneously with execution of this Agreement.

2.11 The Annexes A, B, C, D, E and F to this Agreement are hereby made a part of this

Agreement and they shall be considered as having equal force and effect with the provisions

of this Agreement. However, in the event of any conflict between the Annexes and the body

of this Agreement, the body of this Agreement shall prevail.

Article 3

Term

3.1

Unless sooner terminated in accordance with the terms hereof, this Agreement shall

remain in effect during the Evaluation Period and any Development and Production Period.

3.2

The Evaluation Period commences on the Effective Date and continues until the last

day of the month which is eighteen months following the Effective Date. Contractor shall

conduct the Evaluation Program during the Evaluation Period. If Contractor and Albpetrol

are of the opinion that a longer period is required to complete the Evaluation Program or

evaluate results of the activities and IOR/EOR Methods conducted in the Evaluation



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Program, then upon written request and approval of AKBN, the Evaluation Period shall be

extended for a further period of up to six months, which written request must be delivered at

least forty five (45) days prior to the expiration of the Evaluation Period.

3.3

Contractor may elect to terminate this Agreement upon completion of the Evaluation

Period, by written notice to Albpetrol, with a copy to AKBN. If Contractor so terminates this

Agreement, all wells, operations and assets (moveable and immoveable) will be returned to

AKBN or its nominee and Contractor shall be released from all liabilities associated with this

Agreement.

3.4



Development Plan.

3.4.1



At any time before the end of the Evaluation Period, Contractor may propose a

Development and Production Area for (i) the Evaluation Area, and (ii) such

other portion of the Contract Area which, based on the experience with the

Evaluation Program, Contractor believes may be capable of economic

Petroleum Operations. Contractor shall submit a Development Plan for the

Development and Production Area. The Development Plan shall be prepared

on the basis of sound engineering and economic principles in accordance with

generally accepted international petroleum industry practice.



3.4.2



The Development Plan shall be submitted to the AKBN for approval. The

AKBN may request changes to the Development Plan, and Contractor may

amend the Development Plan in response to such requests with the approval of

the Parties. The Development Plan shall commence on the date that the

Development and Production Program is approved and shall continue until the

expiration of twenty-five (25) years from the date of approval of such

program.



3.4.3



If the AKBN does not approve the Development Plan notwithstanding that it

reflects sound engineering and economic principles in accordance with

generally accepted international petroleum industry practice, either of the

Parties may submit the dispute for expert determination in accordance with the

provisions of the License Agreement.



3.4.4



During the period in which the Development Plan is waiting approval by the

AKBN or being revised by Contractor in response to requests of the AKBN,

Contractor may continue operations in the Evaluation Area and the proposed

Development and Production Area similar to those being conducted during the

Evaluation Program, provided that Contractor is not required to make any

capital expenditures in excess of its One Million Dollars ($1,000,000) capital

expenditure commitment under the Evaluation Program.



3.4.5



At any time during the implementation of the Development Plan, Contractor

may propose a revision to the Development Plan. Such revisions may include

an expansion of the Development and Production Area to include areas

contiguous to any part of the existing Development and Production Area to be

evaluated from time to time through IOR/EOR Methods which Contractor

proposes to undertake under the proposed revision to the Development Plan,

subject to the limitation that the Development and Production Area may not be

further expanded after the fifth anniversary of the initial approval of the



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Development Plan without the consent of Albpetrol and AKBN. Each

revision to the Development Plan shall be prepared on the basis of sound

engineering and economic principles in accordance with generally accepted

international petroleum industry practice, and shall follow an approval process

similar to those for the original Development Plan.

3.4.6



During the implementation of the Development Plan, Contractor may propose

and design for approval by the Advisory Committee new evaluation areas

within the Contract Area but outside of any existing Development and

Production Area for a new Evaluation Period, subject to the limitation that the

Project Area may not be further expanded after the fifth anniversary of the

initial approval of the Development Plan without the consent of Albpetrol and

AKBN. Upon AKBN approval, which approval will not be unreasonably

withheld, such new Evaluation Period will have an initial term of twenty four

(24) months from commencement, and shall involve a relevant evaluation

program (the "New Evaluation Program") involving a minimum work program

and capital expenditure commitments and an evaluation area (the "New

Evaluation Area") at Contractor's assessment. The New Evaluation Program

shall be appended to Annex D. The New Evaluation Area may include the

lands within the Contract Area where the new evaluation and subsequent

development and production activities may occur. After completion of each

new Evaluation Period, an addendum of the Development Plan must be

submitted or the New Evaluation Area relinquished.



3.4.7



During the new Evaluation Period the Contractor shall carry out the minimum

work program and capital expenditure commitments as described and detailed

in the New Evaluation Program and appended to Annex D, providing however

that if, at the expiration of the New Evaluation Period, or any extension

thereof, or upon termination of this License Agreement, whichever first

occurs, Contractor has failed to carry out in accordance with this Agreement,

in whole or in part, the minimum work program and capital expenditure

commitments as appended to Annex D, then Contractor shall pay to AKBN

and amount equal to the non fulfilled part of the minimum capital expenditure

commitment as appended to Annex D.



3.5

In conducting the Evaluation Program, the Development Plan and any New

Evaluation Program, Contractor shall be entitled to take over any existing wells, assets and

leases in the Project Area, without compensation where Albpetrol is entitled to such wells,

assets and leases, except as provided in this clause.

3.5.1



Any Albpetrol wells in the Contract Area may be taken over by Contractor in

accordance with the takeover procedure described in Annex F. Where

Contractor takes over any Albpetrol wells, Contractor shall deliver in kind to

Albpetrol the Deemed Production of such wells in the months subsequent to

the takeover. The "Deemed Production" shall be calculated as follows:

3.5.1.1 For any other wells taken over by Contractor, the Deemed Production

shall be 65% of the average net Petroleum production of the well in the

six Calendar Months preceding the month in which takeover occurs,

and declined each month after takeover on the basis of an exponential

10% production decline per year.



PA_SPG_CaMo



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3.5.2



If Contractor takes over any Albpetrol wells as contemplated in Article 3.5.1,

then Contractor may elect to direct Albpetrol to shutin any other wells in the

vicinity of the wells, as defined in 1.33, taken over by Contractor. Contractor

shall deliver in kind to Albpetrol the Deemed Production of any wells which

Contractor directs be shut in, calculated in the same manner as in Article 3.5.1.



3.5.3



Where Contractor takes over any existing wells, assets and leases and

Albpetrol is not entitled to same, Contractor shall be responsible for

compensation to third parties to obtain such rights.



3.6

Without limiting the rights of Parties under Error! Reference source not found., in

the event that Contractor is prevented or impeded from carrying on Petroleum Operations or

from gaining access to the Contract Area for reasons relating to the protection of personnel,

subcontractors, or property, or for problems of importing equipment and not within

Contractor’s control, Contractor's obligations hereunder shall be suspended from the time of

the commencement of such impairment until the impairment has been alleviated. As soon as

practicable thereafter, the Parties shall meet and agree upon a period of time which shall be

added to the Evaluation Period and any Development and Production Period, which period of

time shall be equivalent to the period of time necessary to restore Petroleum Operations to the

status which they occupied at the time of the impairment.

3.7

Contractor may elect to terminate this Agreement at any time during the Development

and Production Period, by written notice to AKBN. Termination shall take effect ninety days

after delivery of the notice. If Contractor so terminates this Agreement, all wells, operations

and assets (moveable and immoveable) will be returned to AKBN and Contractor shall be

released from all liabilities associated with this Agreement other than obligations under this

Agreement which have arisen prior to termination, including without limitation any

environmental and abandonment obligations under this Agreement and the License

Agreement. If Contractor cancels and surrenders the Petroleum Agreement during a Fiscal

Year of the Development and Production Period to which an approved Annual Program and

Budget applies, Contractor shall pay to AKBN the amount of any unexpended capital

expenditures contemplated under the Annual Program and Budget for that Fiscal Year.

3.8

Upon the expiration of the Development and Production Period, the Parties have the

right in accordance with the License Agreement to request from AKBN an extension of the

twenty five (25) year of the Development and Production Period for successive periods of

five (5) years each on the same conditions as provided for herein.

Article 4

Relinquishments

4.1

Contractor may at any time relinquish voluntarily its rights hereunder to conduct

Petroleum Operations in all or any part of the Contract Area. No relinquishment shall relieve

Contractor from its unfulfilled minimum commitments for an Evaluation Program and any

Annual Program and Budget under Article 3.7 and Article 6.1.

4.2

At least thirty (30) days in advance of the date of a relinquishment under Article 4.1,

the Parties shall notify AKBN of the portions of the Contract Area to be relinquished.



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4.3

Upon the date on which any relinquishment is to take effect upon AKBN's approval or

the termination of this Agreement, Contractor shall have no further rights or obligations in

regard to the relinquished area.

4.4

It is acknowledged that, as a result of relinquishments pursuant to this Article 4, the

Development and Production Area may consist of more than one non-contiguous area.

Article 5

Conduct of Operations

5.1



Advisory Committee

5.1.1



For the purpose of the proper implementation of this Agreement, the Parties

shall establish an advisory committee ("Advisory Committee") within fortyfive (45) days from the Effective Date. The Advisory Committee shall have

the tasks as set out in Article 5.1.5.



5.1.2



Albpetrol and Contractor shall each appoint three (3) representatives and

alternate representatives to form the Advisory Committee, and each Party shall

designate one of its representatives as a chief representative. All the aforesaid

representatives shall have the right to present their views on the proposals at

meetings held by the Advisory Committee and cast their votes when a decision

is to be made. The chairman of the Advisory Committee shall be the chief

representative designated by Contractor and the vice-chairman shall be the

chief representative of Albpetrol. The chairman of the Advisory Committee

shall preside over meetings of the Advisory Committee. Each representative

shall have one vote at all meetings of the Advisory Committee. The Parties

may, according to need, designate a reasonable number of additional attendees

who may attend but shall not be entitled to vote at the Advisory Committee

meetings. Each Party shall advise the other of the names of its representatives

within thirty (30) days of the Effective Date and shall give written notice of

replacement of any such representatives. Alternate representatives will

deputise for their principal representatives in the absence of the latter ones.



5.1.3



In order to be valid, any decisions required to be taken by the Advisory

Committee must have the affirmative vote of at least four (4) representatives

present at the meeting either in person or by conference telephone, it being

understood that no such decisions shall be valid unless at least two (2)

representatives of both Albpetrol and Contractor are present at the meeting,

either in person or by conference telephone. Decisions taken by the Advisory

Committee shall be recorded and signed on behalf of both Albpetrol and

Contractor at the end of any such meeting of the Advisory Committee.

Contractor shall prepare minutes of the meeting within thirty (30) days

thereof and dispatch it for approval to the Parties. Failure by a Party to

respond within twenty-one (21) days after receipt shall be deemed to be an

approval by such Party.



5.1.4



PA_SPG_CaMo



The Advisory Committee shall meet at least twice each Fiscal Year and

whenever required by Albpetrol or by Contractor, subject to a 15 days' prior

notice to its members, which notice shall include the agenda for the meeting.



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Decisions may be made by the Advisory Committee by way of written

resolution signed by all six representatives or their respective alternates.

5.1.5



The Advisory Committee shall have the following functions and

responsibilities under this Agreement:

5.1.5.1 to provide the opportunity for and to encourage the exchange of

information, views, ideas and suggestions regarding plans,

performance and results obtained under the Agreement;

5.1.5.2 to review principles established by Contractor from time to time

governing various aspects or activities of the Petroleum Operations and

to propose, for this purpose, procedures and guidelines as it may deem

necessary;

5.1.5.3 to review and approve Annual Programs and Budgets proposed by

Contractor for the Development and Production Period, and propose

revisions in accordance with Article 8.3;

5.1.5.4 to review Annual Programs and Budgets proposed by Contractor for

the Evaluation Period and any New Evaluation Period;

5.1.5.5 to review and approve Development and Production Areas and the

Development Plan that Contractor, on behalf of the Parties, plans to

propose to AKBN for its approval;

5.1.5.6 to cooperate towards implementation of the Annual Programs and

Budgets and Development Plan; and

5.1.5.7 such other functions as entrusted to it by the Parties.



5.1.6



However, it is hereby agreed among the Parties that the following decisions

are reserved and made solely by Contractor:

5.1.6.1 the location, drilling, testing, completion, take-over of wells for recompletion of any well, either for the production of Petroleum or for

other Petroleum Operations, including without limitation the programs,

methodology and technology to be utilised in carrying out the above

activities;

5.1.6.2 Annual Programs and Budgets during the Evaluation Period; and

5.1.6.3 the areas for relinquishment under the Agreement.



5.2



Operator

5.2.1



PA_SPG_CaMo



If Contractor comprises more than one Company, Contractor shall select one

Company to act as Operator which shall conduct Petroleum Operations in the

Project Area in accordance with good international oilfield practice. Where

the Contractor is comprised of a single entity, that entity is the Operator.



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5.2.2



The nomination of a successor Operator shall be subject to the prior approval

of Albpetrol which shall not be unreasonably withheld, provided that no such

approval is required and only written notification has to be given if the

successor Operator is a Company or is an Affiliate of a Company at such time.

Article 6

Evaluation



6.1

Contractor shall carry out the Evaluation Program. If, at the expiration of eighteen

months following the Effective Date, Contractor has failed to expend US$1,000,000 in

conducting the activities comprising the Evaluation Program, then Contractor shall pay to

AKBN an amount equal to the non-fulfilled part of the minimum financial commitment of the

Evaluation Program, as specified in Annex D.

In the event of delay in the payment of the indemnity to be paid to AKBN in application of

this Article 6.1, the amount owing in this respect will bear interest calculated from the final

date on which the indemnities should have been paid, and up to the time on which the

payment is done by Contractor, at the annual discount rate of the London Inter Bank Offered

Rate (LIBOR) plus one percent.

6.2

If Albpetrol agrees that Contractor may undertake work in respect of the Contract

Area prior to the Effective Date and with the approval of AKBN, such past costs so incurred

shall be treated as Petroleum Costs and the work shall be in (partial) fulfilment of

Contractor's obligations under Article 6.1.

6.3

Contractor has the right to spend more than US$1,000,000 and expand the Evaluation

Program to include additional activities and work over additional wells within the Project

Area if it elects to do so during the Evaluation Period.

Article 7

Development and Production

7.1

The Development Plan shall be prepared on the basis of sound engineering,

environmental and economic principles in accordance with generally accepted international

petroleum industry practice.

7.2



The Development Plan shall contain but not limited to:

7.2.1



details and the area extent of the proposed Development and Production Area;



7.2.2



proposals relating to the spacing, drilling and completion of wells, the

production and storage installations, and transportation and delivery facilities

required for the production, storage and transportation of Petroleum;



7.2.3



proposals relating to necessary infrastructure investments;



7.2.4



a production forecast and an estimate of the investment and expenses

involved;



7.2.5



an estimate of the time required to complete each phase of the Development

Plan;



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7.2.6



the proposed Delivery Point and Measurement Point.



Albpetrol may require Contractor to provide such further information as is readily

available and as AKBN may reasonably need to evaluate the Development Plan for

any Development and Production Area. Such request for information has to be made

within twenty (20) days after receipt of the Development Plan and Contractor shall

use reasonable efforts to respond within twenty (20) days.

7.3

If AKBN does not request in writing any changes to the Development Plan within

forty-five (45) days after submission of the Development Plan or revised Development Plan

as approved by the Parties, the Plan or amended Plan shall be deemed approved by AKBN.

7.4

If AKBN requests any changes to the Development Plan, then the Parties and AKBN

shall meet within fifteen (15) days of receipt by Contractor of AKBN's written notification as

to these requested changes to try in good faith to reach an agreement on the Development

Plan. Revision to the Development Plan, if agreed within a further period of thirty (30) days,

should be incorporated in the Development Plan which shall then be deemed approved by

AKBN.

If no agreement is reached, either Party may submit the dispute for expert determination in

accordance with the License Agreement.

If Contractor desires to materially amend the Development Plan as approved by AKBN, it

will provide AKBN with the proposed amendments pursuant to the procedures set forth in

this Article 7.4.

7.5

After the Development Plan has been approved, Contractor shall submit to Advisory

Committee at least ninety (90) days before the end of each Fiscal Year a detailed statement of

the Annual Program and Budget for the subsequent Fiscal Year in relation to the

Development and Production Area. For the first full Fiscal Year and the portion of the Fiscal

Year preceding the first full Fiscal Year, a detailed statement of the Annual Program and

Budget therefore shall be submitted to AKBN within sixty (60) days after the date of

approval of the Development Plan under Articles 7.3 or 7.4. Each such annual detailed

statement of the Annual Program and Budget therefore shall be consistent with the

Development Plan approved under Article 7.3 or as revised pursuant to Articles 7.4 and 7.6.

7.6

The Parties may at any time submit to AKBN for approval revisions to any

Development Plan or Annual Program and Budget. These revisions shall be consistent with

the provisions of Article 7.1 and shall in the case of revisions to the Development Plan be

subject to the approval procedure set forth in Articles 7.3 and 7.4, and in the case of the

Annual Program and Budget to the review set forth in Article 5.1.5.3.

7.7

Where Albpetrol and Contractor agree that a mutual economic benefit can be

achieved by constructing and operating common facilities (including, but not limited to,

roads, pipelines and other transportation, communication and storage facilities), Albpetrol

and Contractor shall use reasonable efforts to reach agreement with each other and if

necessary with other producers on the construction and operation of such common facilities,

investment recovery and charges to be paid.



PA_SPG_CaMo



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Article 8

Annual Programs and Budgets

8.1

Unless otherwise provided herein, Contractor shall commence the conduct of

Petroleum Operations for the wells described in Annex D clause 1 (iv) not later that sixty (60)

days after Albpetrol advises Contractor that the Petroleum Agreement has been approved by

the Council of Ministers. The procedure for transfer of assets, operations and responsibilities

associated with such wells and related facilities shall be as described in Annex F.

8.2

Within sixty (60) days after the Effective Date the Parties shall submit to AKBN an

Annual Program and Budget setting forth the Petroleum Operations which Contractor

proposes to conduct (or has already commenced conducting) during the Evaluation Period.

Subject to Article 6.3, such Annual Program and Budget shall be consistent with the

Evaluation Program, but at Contractor's option, it may include a greater amount of activities

and capital budget than the Evaluation Program. The approval of neither Albpetrol nor the

Advisory Committee is required for any Annual Program and Budget during the Evaluation

Period. Contractor may require the amendment of the Annual Program and Budget during

the Evaluation Period so long as such revised Annual Program and Budget includes at least

the activities and capital budget of the Evaluation Program. A copy of each revised Annual

Program and Budget shall be given by Contractor to Albpetrol and AKBN.

8.3

At least ninety (90) days before the end of the first Fiscal Year after the approval of

the Development Plan and every Fiscal Year thereafter, or such other times as agreed by the

Parties, Contractor shall prepare and submit to the Advisory Committee for approval a

proposed Annual Program and Budget for the next succeeding Fiscal Year. Each Annual

Program and Budget shall be consistent with the Development Plan. Should the

representatives of Albpetrol in the Advisory Committee wish to propose a revision as to

certain specific features of the said Annual Program and Budget, it shall within twenty-one

(21) days after receipt by the Advisory Committee thereof so notify Contractor, specifying in

reasonable details its reasons therefore. Promptly thereafter, the Parties will meet and

endeavour to agree on the revision proposed by representatives of Albpetrol. Contractor shall

give due regard to the proposals of the representatives of Albpetrol, provided that Albpetrol

shall be required to approve any Annual Program and Budget that is consistent with the

Development Plan, and any revisions proposed to a Annual Program and Budget that are

inconsistent with the Development Plan need not be accepted by Contractor. In the event of a

dispute arising in respect of the approval of an Annual Program and Budget, the matter will

be referred for Expert determination in accordance with Article 19.10. Prior to the resolution

of any such dispute, Contractor's proposed Annual Program and Budget shall be deemed

approved for the purposes of interim operations pending resolution.

8.4

The Parties agree to direct the Advisory Committee to approve the Annual Program

and Budget in a timely fashion so as to allow the delivery of the proposed Annual Program

and Budget to the AKBN within the time period established in the License Agreement.

8.5

It is recognised by the Parties that the details of an Annual Program may require

changes in the light of existing circumstances and as such Contractor may make such changes

provided they do not change the general objective of the Annual Program. Any revision to

the Annual Program that involves an acceleration of the activities contemplated by the

Development Plan, or that expand the activities contemplated by the Development Plan, shall

be approved by the Advisory Committee. A copy of such revised Annual Program shall be

provided to AKBN for approval in accordance with the License Agreement.



PA_SPG_CaMo



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8.6

It is recognised by the Parties that the expenditures in the Budget may require changes

in light of existing circumstances and as such Contractor may make such changes provided

that the general objective of the Annual Program has not changed. Any revision to the

Budget that involves an acceleration of the activities contemplated by the Annual Program or

Development Plan, or that expand the activities contemplated by the Annual Program or

Development Plan, shall not require the approval of the Advisory Committee.

8.7

It is further recognised that in the event of emergency requiring immediate action,

Contractor may take all actions it deems appropriate to protect its interests and those of its

employees and any costs so incurred shall be included in the Petroleum Costs. An emergency

condition will exist when life, health, or property are endangered by existing conditions or

potential conditions such as blowouts, fires, explosions, collisions, severe weather conditions,

acts of war, vandalism or sabotage.

Article 9

Albpetrol Share and Cost Recovery

9.1

Contractor shall provide all funds required to conduct Petroleum Operations under

this Agreement. Contractor shall have the right to use free of charge Petroleum produced

from the Project Area to the extent it considers necessary for Petroleum Operations under this

Agreement.

9.2

Available Petroleum shall be measured at the Measurement Point and allocated as set

forth in this Agreement. Available Petroleum shall be allocated between Albpetrol (the

"Albpetrol Share") and Contractor ("Cost Recovery Petroleum") based on the R Factor as

defined below, as set forth in the following table:

R Factor

0.0 < R < 1.0000

1.0000 ≤ R < 1.5000

1.5000 ≤ R < 2.0000

2.0000 ≤ R



Albpetrol Share

2%

2.5%

4%

6%



Cost Recovery Petroleum

98%

97.5%

96%

94%



The Albpetrol Share shall be lifted in oil and delivered in kind and/or cash to Albpetrol in the

Contract Area.

The R Factor is calculated as follows:



RN =



AK

BK



where:

RN



means the R Factor for Calendar Quarter N.



AK



means the sum of Contractor's Revenues minus profit petroleum tax accrued in

Calendar Quarter N and all preceding Calendar Quarters following the Effective Date.



BK



means the sum of Petroleum Costs in Calendar Quarter N and all preceding Calendar

Quarters following the Effective Date.



PA_SPG_CaMo



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Any re-adjustment in entitlement for the current Calendar Quarter will be spread over the

remainder of the current Fiscal Year in a way that the Party which is entitled to additional

Available Petroleum for the current Calendar Quarter will lift the readjustment quantity in

equal monthly proportions in addition to its regular entitlements. If the production in any

month is insufficient to supply the re-adjustment quantity, then the unsupplied entitlement

shall be carried forward and spread equally over the remaining months of the current

Calendar Quarter.

The determination of the R Factor shall first be done for the first Calendar Quarter following

the Effective Date.

9.3

Contractor shall be entitled to the Cost Recovery Petroleum to recover all Petroleum

Costs borne by it inside or related to the Project Area ("Cost Recovery"). Petroleum Costs

shall be as described in Annex B.

To the extent that in a given Calendar Year the outstanding Petroleum Operations Costs

recoverable exceed the value of Cost Recovery Petroleum for such Calendar year, the excess

shall be carried forward for recovery in the next succeeding Calendar Year and in each

succeeding Calendar Year thereafter until fully recovered.

9.4

After Contractor has recovered all of its Petroleum Costs from the Cost Recovery

Petroleum, the remaining Cost Recovery Petroleum shall be "Profit Petroleum". The "Profit

Petroleum" will be split between Albpetrol and Contractor as follows:

Albpetrol:



1/5 of the corresponding calculated Albetrol % share based on Calendar

Quarter R, as described in 9.2 above



Contractor: 100% minus above profit share of Albpetrol



Article 10

Employment, Training and Bonuses

10.1 Contractor will select its management and employees according to its discretion, and

shall determine the conditions of employment and the number of employees to be used for

Petroleum Operations. However Contractor and its sub-contractors will, to the extent

available, employ qualified Albanians to carry out the Petroleum Operations, giving priority

to Albpetrol personnel, if their professional skills, knowledge and expertise fit with

operational requirements. Otherwise, Contractor shall be free to employ such expatriate

professionals as it deems necessary.

10.2 Contractor will spend a minimum of twenty thousand US Dollars (US$20,000) per

each contractual year for Albpetrol employees in respect of the Annual Training Bonus

(“ATB”) starting from the Effective Date.

10.3 Contractor shall within (30) thirty days after the Effective Date pay Albpetrol as a

signature bonus the amount of one hundred thousand US Dollars (US$100,000.00). The

signature bonus shall not be cost recoverable.



PA_SPG_CaMo



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Article 11

Title to Assets

11.1



Tangible Property

11.1.1 Title to assets in possession of Contractor in connection with the Petroleum

Operations shall, by virtue of the License Agreement, be transferred to AKBN

at the time the costs of such fixed and movable assets have been fully

recovered as Petroleum Costs, or at the time of termination or relinquishment

of Petroleum Operations, whichever first occurs, all such assets being in good

working order, normal wear and tear excepted. In any event, Contractor retains

the right to full and free use of the aforementioned assets during the term of

this Agreement, including those installed before the Effective Date.

Any movable asset may be sold to a third party with the prior approval of

AKBN, which approval shall not be unreasonably withheld. The proceeds

from the sale of any asset shall be used by Contractor as a recovery of

Petroleum Costs.

11.1.2 Notwithstanding Article 11.1.1 above, it is expressly agreed that any assets

belonging to a third party or to Affiliates and rented by Contractor for the

purpose of Petroleum Operations, and any assets owned by Contractor's

subcontractors or their Affiliates, will not become the property of AKBN.

11.1.3 Income resulting from the use by third parties of items which become the

property of AKBN pursuant to Article 11.1.1 shall be credited to the Cost

Account during the term of this Agreement.



11.2



Intangible Property

11.2.1 Original Data

Upon the termination of the License Agreement, Contractor will hand over to AKBN

all original data. All such original data (including but not limited to seismic,

geophysics, geologic, gravimetric, magnetometric, logging, drilling, production,

construction, design, etc.) will be the property of the Albanian Government.

Contractor shall supply Albpetrol this data on a current basis.

However, Contractor, or its assignees as defined by Article 1.17 and Article 16, will

be entitled to retain and freely use copies of such data, and consequently will be

granted a perpetual, non-exclusive and royalty-free licence to use and sub-licence the

use of said data.

11.2.2 Interpreted Data

Interpreted Data based on Original Data referred to in section 11.2.1 above, whether

created by Contractor, by its Affiliates or by third parties upon remuneration by

Contractor, shall remain the sole property of Contractor and shall be considered, as

confidential information as per Article 23 of the Agreement.



PA_SPG_CaMo



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However Albpetrol is entitled to receive copy of all the final reports concerning the

above data and to use it solely for its own needs.



Article 12

Rights and Obligations of the Parties

12.1



As of the Effective Date, Contractor will be entitled to use:

(a)



exclusively, free of charge, all the existing facilities and equipment in the

Contract Area for the performance of the Petroleum Operations for:

(i)



the implementation of the Evaluation Operations and the Development

and Production Operations;



(ii)



application of IOR/EOR Methods in the whole Contract Area and in

accordance with the conditions and terms of this Agreement; and



(iii)



Production of Petroleum in the Project Area,



but without materially adversely affecting the operations of Albpetrol outside

of the Project Area;

(b)



free of charge and for the performance of the Petroleum Operations, all other

assets, equipment, means and infrastructure (including roads, electricity power

lines and water, oil and gas pipelines) existing in the Contract Area or located

at the region around or close to the Contract Area on the Effective Date of this

Agreement, but (unless otherwise agreed with the supplier) subject to

payment, on a non-discriminatory basis, at reasonable cost for electricity,

water, oil and gas used;



(c)



under commercially reasonable terms and conditions, the pipelines that

transport the Petroleum produced in the Contract Area to the ports and

refineries in Albania and shall have the right to construct, lay and operate

pipelines within Albania subject to the requirement to provide access to excess

capacity, if available, to third parties on commercial terms; and



(d)



all technical data available to AKBN pertaining to the Contract Area provided

that Contractor shall reimburse AKBN for all reasonable cost incurred for the

preparation of such data transfer and the cost of copying such data.



12.2 Contractor shall have the right during the term hereof to freely lift, process, transport,

dispose of and export its share of Petroleum and retain abroad the proceeds obtained there

from. Provisions must be made so that the minimum gas supply required for the Ballsh

refinery is sustained based on the existing contract between Albpetrol and ARMO

12.3 Contractor shall provide all necessary funds and shall bear all costs and expenses

required in carrying out Petroleum Operations under this Agreement except to the extent as is

otherwise provided in this Agreement.



PA_SPG_CaMo



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12.4 Contractor shall endeavour to achieve the efficient use and safe development for and

production of Petroleum and optimise the ultimate economic recovery of Petroleum from the

Project Area. Contractor shall carry out Petroleum operations in compliance with Petroleum

Law, the legal provisions in effect on the “Environment Protection” and in compliance with

the Regulations made hereunder and in accordance with good practices of Oil Industry.

12.5 Contractor shall ensure that all materials, equipment and facilities used in Petroleum

Operations comply with generally accepted engineering norms, are of proper construction

and are kept in optimal working order.

12.6 Contractor shall purchase or lease all equipment, materials, services and supplies

required to be purchased or leased pursuant to the Annual Programs.

12.7 Contractor shall keep Albpetrol informed in the course of all activities to be

performed under this Agreement and provide Albpetrol:

(e)



with weekly reports of estimated Petroleum production;



(f)



monthly reports on the Petroleum production and Petroleum Operations; and



(g)



quarterly reports on Petroleum Costs.



12.8 Contractor shall permit representatives of Albpetrol to inspect at all reasonable times

(but upon reasonable notice) the Petroleum Operations under this Agreement, provided such

inspection does not unreasonably hinder the Petroleum Operations.

12.9 Contractor shall maintain full original records of all technical Petroleum Operations

under this Agreement in Albania for a period not less than twenty-four months. Costs so

incurred are fully chargeable as Petroleum Costs.

12.10 Albpetrol and AKBN shall ensure that Contractor has use of the railways, roads,

highways, water, land surface, timber, electricity, sanitary structures and other infrastructures

in Albania, at commercially reasonable rates and on a non-discriminatory basis, in conformity

with Albanian legislation, so as to be able:

(h)



to perform the Petroleum Operations in compliance with this Agreement; and



(i)



to produce, transport, export and sell Petroleum in or from Albania as

provided in this Agreement and the Petroleum Law.



12.11 Albpetrol and AKBN shall ensure that Contractor is granted, in accordance with

Articles 7 and 10 of the Petroleum Law, all the rights, permits, licenses, approvals and other

authorizations that it may reasonably require in order to perform the Petroleum Operations in

conformity with this Agreement, and that any compensation which Contractor may be

required to pay, pursuant to Article 10(2) of the Petroleum Law, shall be reasonable and nondiscriminatory.

12.12 Albpetrol and AKBN shall make available to Contractor all technical data available to

Albpetrol or AKBN pertaining to the Contract Area provided that Contractor shall reimburse

Albpetrol or AKBN for all reasonable cost incurred for the preparation of such data transfer

and the cost of copying such data.



PA_SPG_CaMo



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12.13 Contractor will reserve and retain every sample and sludge obtained from the drilling

of a well in the manner, place and time determined by AKBN with special regulations. All

samples obtained by Contractor for its own purposes will be considered subject to inspection

by AKBN at any time that AKBN requests, within the official working time. Subject to the

foregoing, Contractor shall be free to export cores and cuttings for analyses abroad. Unless

otherwise agreed with Albpetrol, Contractor shall keep samples of such cores and cuttings

equivalent in size and quality in Albania.

12.14 Contractor shall be free to export originals of technical data records abroad, subject to

AKBN approval, and provided a monitor or a comparable record is maintained by Contractor

or Albpetrol in Albania.

12.15 Any Associated Gas produced in association with Crude Oil from the Project Area

shall be available to Contractor for use in Petroleum Operations, free of charge. Any such

quantities not taken by Contractor will be available to Albpetrol, and if Albpetrol refuses to

take it, it may be flared.

12.16 Any Associated Gas produced from the Project Area, to the extent not used in

Petroleum Operations hereunder, may be flared if the processing or utilization thereof is not

economical and is not technically and commercially viable to re-inject Associated Gas. Such

flaring shall be permitted to the extent that gas is not required to effect the economic recovery

of Crude Oil by secondary recovery operations, including re-pressuring and recycling.

12.17 The parties acknowledge that the nature of their respective rights and obligations under

this Agreement with respect to the Contract Area is such that unitization of areas that are

entirely within the Contract Area is not required to protect the respective rights of the Parties

or to preserve or optimize the recovery of Hydrocarbons from the Contract Area.

Article 13

Taxation

13.1 Contractor shall be liable to tax on Profit in conformity with Law No.7811, date

12.04.1994 “On approval of decree No.782, date 22.2.1994 “On the fiscal system in the

hydrocarbons sector (Exploration-Production)”, and amended by Law No.8297, date

04.03.1998, and in conformity with the License Agreement.

13.2 Expatriate employees of Contractor will not be subject to Taxes and Duties on any

income or profit realized by them, directly or indirectly, from their work in the Petroleum

Operations, nor on the import or re-export of their personal or household belongings, which

items may be freely imported and subsequently exported.



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Article 14

Imports and Exports

14.1 Contractor and its subcontractors engaged in carrying out Petroleum Operations under

this Agreement shall be permitted to import, and shall be exempt (with the exception of

normal port and warehouse charges of general application in Albania for actual services

rendered to LICENSEE) from import obligations as for the equipments, machineries,

materials, etc, to be used in carrying out Petroleum Operations under this License Agreement.

14.2 The same exemption is valid even for the articles of personal use of the foreign

employees of the contractor and its subcontractors, having relations with the Petroleum

Operations.

14.3 Nevertheless Contractor and its sub-contractors shall give priority to the goods and

materials produced in Albania if these goods and materials are being offered under equally

favourable conditions regarding the quality, price and availability, and in the quantities

required.

Article 15

Books of Account, Currency, Exchange Control and Payments

15.1 Contractor shall maintain at its office in Albania books of account in accordance with

the Accounting Procedure and with accounting practices generally used in the international

petroleum industry and in conformity with Albanian Law, and such other books and records

as may be necessary to show the work performed under this Agreement, including the

amount of all Available Petroleum.

15.2 Contractor shall keep its books of account and accounting records including the Cost

Account in Albanian Leke and US Dollars.

15.3 Contractor shall maintain a US $ bank account and a bank account in Albanian Leke.

All payments from the US $ account made in Currencies other than the US $ shall be

recorded in the books in US $ at the exchange rate in effect at the time of transaction.

Valuation made in currencies other than the US $ shall be recorded in the books in US $ at

the exchange rates in effect at the time the valuation was made. The rate of exchange for

such valuations shall be established by using the average of the buying and selling rates of the

currency for the day on which the transaction occurred as quoted in the Financial Times

(London Edition) or such other quoted rates as may be mutually agreed. For transactions

occurring on dates when there is no exchange rate published, the exchange rate shall be

established by reference to the rate published on the immediately preceding publishing date.

All Albanian Leke payments shall be translated to US $ at the average official buying rate as

issued by the Central Bank of Albania for the month in which the expenses/credits are

recorded in the books.

Neither Albpetrol nor Contractor shall experience an exchange gain or loss at the expense of,

or to the benefit of the other Party. Any currency exchange losses or gains resulting from the

differences between exchange rates for accounting purposes as mentioned above and the



PA_SPG_CaMo



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actual exchange rates when buying the corresponding non- US $ currency for the purpose of

payment shall be continuously charged or credited to the Cost Account.

15.4 Any payments which Albpetrol is required to make to Contractor or which Contractor

is required to make to Albpetrol shall be paid in US $, not later than thirty (30) days

following the end of the month in which the obligation to make such payment occurs.

15.5



For the purposes of this Agreement, Contractor shall have complete freedom to:

15.5.1 open, operate and maintain bank accounts both inside and outside Albania;

15.5.2 receive and retain outside Albania and freely dispose of foreign currency

received by it outside Albania, including the proceeds of sales of Petroleum

hereunder, and Contractor shall not be obligated to remit such proceeds to

Albania with the exception of those proceeds as may be needed, in

Contractor's judgement, to meet its expenses in Albania;

15.5.3 pay directly outside of Albania for purchase of goods and services necessary

to carry out Petroleum Operations hereunder;

15.5.4 pay its expatriate Employees working in Albania in foreign currencies outside

of Albania, such expatriate employees shall only be required to bring into

Albania such foreign currency as may be required to meet their personal living

expenses;

15.5.5 fully repatriate abroad all Contractor's proceeds from the Petroleum

Operations in Albania, including but not limited to the proceeds from the sale

of Petroleum;

15.5.6 freely import and export foreign exchange and maintain inside Albania foreign

currency accounts.



15.6 In the event a Party fails to make payment hereunder on the due date, interest shall be

charged on any amounts in default. The applicable interest rate shall be the 3 months LIBOR

for US Dollar deposits taken on the first day of default plus 2.5 percentage points, as

published by the National Westminster Bank Limited, London, at 11 a.m.

Article 16

Assignment

16.1 Contractor will not transfer to any Person, fully or partly, any of its rights, privileges,

duties and obligations under this Agreement without the prior written approval by Albpetrol,

which approval shall not be unreasonably withheld or delayed. Any Person to whom such

rights, privileges, duties and obligations are transferred shall be competent technically and

financially, and such transfer shall otherwise comply with the requirements of Article 16.3.

16.2 Notwithstanding Article 16.1, but subject to the requirements of Article 16.3,

Contractor will be free to transfer its rights, privileges, duties and obligations under this

Agreement to an Affiliate following the expiration of sixty (60) days’ prior written

notification to Albpetrol of such transfer, provided that Contractor provides a written

guarantee of the full performance by such Affiliate of all duties and obligations under this

Agreement which are to be transferred. At any time subsequent to such transfer, the former



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Contractor which has made the transfer may request that Albpetrol no longer require the

foregoing guarantee, and such request shall not be unreasonably refused or delayed by

Albpetrol upon a showing that the Affiliate to which the transfer has been made

independently possesses the technical and financial competence to fully perform the duties

and obligations which have been transferred to it. Any transfer by Contractor to an Affiliate

without the foregoing written guarantee from Contractor shall be subject to the requirements

of Article 16.1.

16.3 With respect to the transfer of LICENSEE's rights, privileges, duties and obligations

under this License Agreement, the following conditions shall be met:

(a)



Contractor's duties and obligations shall be properly fulfilled until the date

when the request for approval is made, or Contractor shall guarantee, jointly or

independently, the accomplishment of any obligation of which has not been

fulfilled as of such date;



(b)



the Person to whom the transfer is to be made shall provide to Albpetrol

reasonable evidence of its financial and/or technical competence; and



(c)



the instrument of transfer should include provisions which clearly state that

the Contractor is held responsible for all the commitments contained in this

Agreement and every written modification or amendment that may be effected

until the date of transfer, and should further declare that Contractor does not

have any claims for change of the terms of this Agreement as a condition for

the transfer. The instrument of transfer shall be subject to review and approval

by Albpetrol, and Albpetrol shall not unreasonably withhold or delay such

approval.



16.4 Contractor may encumber its rights under this Agreement for the purpose of

increasing of the financing of the Petroleum Operations, with the prior written consent by

Albpetrol (which consent shall not be unreasonably withheld or delayed).

16.5 Upon transfer of all of its rights, privileges, duties and obligations to another Person

in accordance with this Article 16, Contractor making the transfer shall cease to have any

rights under or interest in this Agreement as Contractor.

Article 17

Force Majeure

17.1 The failure of any Party to perform any obligation under this Agreement, if

occasioned by act of God or the public enemy, fire, explosion, perils of the sea, flood,

drought, war, riot, hostilities not amounting to war, sabotage, accident, embargo, government

priority, requisition or allocation, or other action of any government authority, or by

interruption of or delay in transportation, shortage or failure of supply of materials or

equipment from normal sources, labour strikes, or by compliance with any order or request of

any governmental authority or any officer, department, agency, or committee thereof, or any

other circumstance of like character beyond the reasonable control of a Party (herein, “Force

Majeure”), shall not subject such Party to any liability to the other Party. In such event, the

Party subject to the event of Force Majeure shall use its reasonable efforts to minimize the

effects of such event and to overcome such event as soon as practicable.



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17.2 Except as otherwise provided herein, in the event that by Force Majeure a Party is

rendered unable to carry out its obligations under this Agreement, the Party shall give notice

and all particulars of such event of Force Majeure in writing to the other Party within ten (10)

days after the occurrence of the cause relied upon, and the obligations of each Party, so far as

the same are affected by such Force Majeure, shall be suspended during the continuance of

such event of Force Majeure.

17.3 In the event that, for an uninterrupted period of two (2) years following, and as a

result of, an event of Force Majeure, any Party is unable to perform its obligations under this

Agreement, as a result of such event of Force Majeure and not of a breach of its obligations

hereunder that is unaffected by such event of Force Majeure, this Agreement may be

terminated on the second anniversary of such event of Force Majeure by either Party.

Article 18

Governing Law

18.1



(a)



Subject to Article 18.1(b), the activities of Contractor in performing the

Petroleum Operations shall be governed by and conducted in accordance with

the requirements of the Albanian Law.



(b)



All questions with respect to the interpretation or enforcement of, or the rights

and obligations of the Parties under, this Agreement and which are the subject

of arbitration in accordance with Article 19 shall be governed by the laws of

England.



18.2 Albpetrol acknowledges that Contractor has entered in this Agreement in reliance on

the laws, rules and regulations of Albania as they exist on the Effective Date of this

Agreement, and Albpetrol hereby confirms that all rights granted to Contractor hereunder are

in conformity with such laws, rules and regulations.

18.3 If, as a result of any change in the laws, rules and regulations of Albania, any right or

benefit granted (or which is intended to be granted) to Contractor under this Agreement or

the License Agreement is infringed in some way, a greater obligation or responsibility shall

be imposed onto Contractor or, in whatever other way the economic benefits accruing to

Contractor from this Agreement or the License Agreement are negatively influenced by any

change in the laws, rules and regulations of Albania, and such an event is not provided for

herein, the Parties will immediately amend this Agreement and License Agreement, and

Albpetrol, AKBN and the Ministry will immediately undertake other necessary actions to

eliminate the negative economic effect on the Contractor.

Article 19

Arbitration

19.1 Any dispute, controversy, claim or difference of opinion including any purported

termination under Article 22, arising out of or relating to this Agreement or the breach,

termination or validity thereof, or to the Petroleum Operations carried out hereunder, shall be

finally and conclusively settled by arbitration in accordance with the UNCITRAL Arbitration

Rules ("Rules").



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19.2 With respect to the foregoing, the appointing authority under the Rules shall be the

President of the Court of International Arbitration of the International Chamber of Commerce

in Paris, France.

19.3 The number of arbitrators shall be three. The Party instituting the arbitration shall

appoint one arbitrator and the Party, responding shall appoint another arbitrator, and upon

failure of such responding Party to so appoint an arbitrator within thirty (30) days the Party

instituting the arbitration may request the appointing authority to appoint such second

arbitrator in accordance with the Rules. The two (2) arbitrators thus appointed shall choose

the third arbitrator who will act as the presiding arbitrator of the tribunal.

19.4 If, within thirty (30) days of appointment of the second arbitrator to be appointed, the

two (2) appointed arbitrators cannot agree upon the third arbitrator, either Party may request

the appointing authority to appoint the third arbitrator.

19.5 The arbitration shall take place in Zurich, Switzerland. The language to be used in the

arbitration proceedings shall be English. The Parties expressly waive any right to appeal an

arbitral award to any court whatsoever, and the arbitral award shall be final and binding upon

the Parties.

19.6 The arbitral award shall contain the reasons upon which the award is based and an

award of costs.

19.7 The right to arbitrate under this Article 19 shall survive the termination of this

Agreement.

19.8 Albpetrol expressly waives any right to claim sovereign immunity in connection will

any proceeding instituted pursuant to this Article 19, any proceeding to compel enforcement

of this Article 19, or any proceeding to enforce any award made by arbitration under this

Article 19.

19.9 Judgement on the award rendered may be entered in any Court having jurisdiction or

application may be made to such Court for a judicial acceptance of the award and an order of

enforcement, as the case may be.

19.10 Any matter in dispute between Albpetrol and Contractor which in terms of this

Agreement is to be referred to an Expert, or for any dispute relating to a failure of the

Advisory Committee to approve a request or proposal of Contractor, shall be referred for

determination by a sole expert. The Expert shall be given terms of reference which shall be

mutually agreed between the Parties. The Expert shall be appointed by agreement between

Albpetrol and Contractor. If Albpetrol and Contractor fail to appoint the expert within thirty

(30) days after agreement on the terms of reference has been reached, either Party may apply

to the International Chamber of Commerce Centre for Technical Expertise, Paris, France, for

appointment of an expert in accordance with its Rules. The Expert shall make his

determination in accordance with the provisions contained herein based on the best evidence

available to him. Representatives of Albpetrol and Contractor shall have the right to consult

with the Expert and furnish him with data and information, provided the Expert may impose

reasonable limitations on this right. Any such data and information has to be submitted to the

other Party to the dispute at the same time. The Expert shall be free to evaluate the extent to

which any data, information or other evidence is substantiated or pertinent. The Expert's fees

and expenses, and the costs associated with an appointment, if any, made by the International



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Chamber of Commerce Centre for Technical Expertise, shall be borne equally by Albpetrol

and Contractor. The Expert's determination shall be final and binding upon the Parties,

subject to any manifest error in his determination.

Article 20

Environmental and Safety Measures, Prevention of Loss

20.1 Contractor shall conduct Petroleum Operations in a safe and proper manner in

accordance with generally accepted international petroleum industry practice and shall cause

as little damage as reasonably practicable to the general environment, including, inter alia,

the surface, air, lakes, rivers, sea, animal life, plant life, crops, other natural resources and

property.

20.2 In the event of a blow-out, accident or other emergency, Contractor shall take all

immediate steps to bring the emergency situation under control and protect against loss of life

and loss of or damage to property and prevent harm to natural resources and the general

environment.

20.3 In the event Albpetrol reasonably determines that any work or installations erected by

Contractor (but not those works or installations which were in place prior to the Effective

Date or are transferred to Contractor after the Effective Date) endanger or may endanger

persons or third party property or cause pollution or harm the environment to an unacceptable

degree, Albpetrol may require Contractor to take remedial measures within a reasonable

period and to repair any damage to the environment.

In the event that Contractor fails to take the remedial measures required by Albpetrol within

the time period established therefore, Albpetrol may carry out such remedial measures for

Contractor's account.

Any remedial measures required to be undertaken by environmental authorities of the

Government of Albania in respect of those works or installations in the Contract Area which

were in place prior to the Effective Date or were transferred to Contractor after the Effective

Date shall be for Albpetrol's account.

20.4 The parties acknowledge that the Existing Baseline Study identifies the status of the

environmental condition of portions of the Contract Area during periods prior to and as at the

Effective Date. Contractor shall as soon as reasonably possible after the Effective Date

submit for the approval from the relevant environmental authority a report (the "Baseline

Study") on the environmental baseline status of the Project Area as at the Effective Date.

With each expansion of the Project Area or take over of a new well, as the case may be,

Contractor shall submit for the approval from the Environmental Authority a Baseline Study

on the environmental baseline status of the expanded portion of the Project Area or newly

taken over well, as the case may be, as at the relevant date.

20.5 Contractor shall not be liable for any Environmental Damages incurred prior to the

date of approval of the Baseline Study, as established by the Existing Baseline Study and

each subsequent Baseline Study. Albpetrol shall indemnify and hold harmless Contractor

from and against any and all Losses and Liabilities suffered or incurred by Contractor and

pertaining to Environmental Damages applicable to the Contract Area, except to the extent

that it can be demonstrated that the Petroleum Operations conducted by Contractor in the

Project Area after the Effective Date were the sole cause of the Environmental Damages.



PA_SPG_CaMo



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20.6 Contractor shall take all reasonable measures within its control according to generally

accepted standards in the international petroleum industry to prevent the loss or waste of

Petroleum above or under the ground during the performance of Petroleum Operations.

Article 21

Goods and Services

21.1 Contractor, its contractors and subcontractors shall give priority to goods and

materials produced in Albania if these goods and materials are being offered under equally

favourable conditions regarding the quality, price and availability, and in the quantities

required. Contractor shall give priority to services performed by Albanian sub-contractors if

such services are offered under equally favourable conditions regarding the quality, price and

availability they may be offered by foreign sub-contractors

For the above purposes, prices for locally manufactured materials, equipment, machinery and

consumables and for services of local contractors shall be compared with the prices of goods

and services in the international market after transportation and insurance costs have been

added.

21.2 Contractor shall solicit competitive bids for any services performed pursuant to items

included in an Annual Program and Budget, if such services are expected to exceed One

million US Dollars (US$ 1,000,000.00). Albpetrol may attend the opening of bids for all

such tenders.

Article 22

Abandonment

22.1 All equipment and facilities (including wells) used exclusively in the Petroleum

Operations will be Abandoned, upon AKBN approval, in conformity with the generally

accepted practices of the international petroleum industry. However, nothing contained in this

Agreement will oblige Contractor to Abandon the unused equipment or facilities in the

Petroleum Operations, and Albpetrol, AKBN and the Ministry will protect, indemnify and

hold Contractor harmless against costs and claims based on such obligations.

22.2 The Abandonment Costs will be included in the Petroleum Costs. In order to enable

the Contractor to recover the Abandonment Costs, and in accordance with the License

Agreement, five years prior to the date set by the Contractor to Abandon all the Petroleum

Operations in the Project Area (or at such earlier times as may be reasonable to obtain such a

recovery), the Abandonment Costs estimated by the Contractor and the time of their recovery

in compliance with the following paragraph of this Article 22.2 shall be included in an

Abandonment Plan and shall be submitted to AKBN for approval. AKBN will immediately

consider the estimation of the LICENSEE and will not unreasonably delay or withhold its

approval. If, after ninety (90) days of receipt of the LICENSEE's estimate, AKBN has failed

to forward comments to the LICENSEE in writing, the estimated Abandonment Costs

proposed by the LICENSEE will be deemed to have been approved by AKBN.

22.3 Upon approval of the estimate by AKBN, the estimated Abandonment Costs will be

included in Petroleum Costs and recovered in accordance with this Agreement and at the time

provided in the estimate. However, amounts equal to the estimated Abandonment Costs will

be deposited in an interest bearing escrow account in a mutually accepted international

financial institution in London, England, or in such other location as AKBN and Contractor



PA_SPG_CaMo



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may agree. Once the Abandonment Costs are covered, Contractor will withdraw its

Abandonment Costs from the escrow account. Upon the termination of the Abandonment,

any surplus funds in the escrow account after payment of the Abandonment Costs shall be

released to Contractor.

Article 23

Confidentiality

23.1 Except as otherwise specified under this Agreement, all information acquired or

received under this Agreement shall be maintained by the Parties as strictly confidential and

shall not be divulged without the prior written consent of the other Party while this

Agreement remains in force, except to the extent required to comply with laws, rules or

regulations of any stock exchange to which Contractor may be subject unless such

information becomes part of the public domain through sources other than Contractor.

Furthermore, Contractor shall be bound by these obligations of confidentiality for a period of

five (5) years following termination of this Agreement.

23.2 Albpetrol and Contractor may disclose any such information to its employees,

Affiliates, consultants or subcontractors to the extent required for the efficient conduct of

Petroleum Operations provided that in the case of disclosure to employees and Affiliates it

ensures adequately the protection of the confidential nature of the information concerned, and

in the case of disclosure to consultants or subcontractors provided that the intended recipients

have first entered into a confidentiality undertaking.

23.3 For purposes of obtaining new offers on relinquished portions of the Contract Area or

on areas adjacent to the Contract Area, Albpetrol may show any other entity data on such

relinquished portions in uninterpreted and basic form during the term of this Agreement.

23.4 Subject to obtaining confidentiality undertakings as provided in Article 23.2 above,

either Party may disclose such information obtained pursuant to this Agreement as required

by financing institutions from which the disclosing Party is seeking finance for the purposes

of carrying out its obligations hereunder.

23.5 Subject to obtaining a confidentiality agreement, Contractor may show any such

information to bona fide potential assignees who have an interest in the petroleum rights

granted to Contractor under this Agreement.

Article 24

Termination

24.1 This Agreement may be terminated by Contractor by giving not less than ninety (90)

days written notice to Albpetrol, provided that such termination shall not relieve Contractor

from any unfulfilled commitment or other obligation under this Agreement accrued prior to

such termination.

24.2 This Agreement may be terminated by Albpetrol by giving not less than one hundred

and twenty (120) days written notice to Contractor in the following events:

24.2.1 if Contractor has repeatedly committed a material breach of its fundamental

duties and obligations under this Agreement and has been advised by

Albpetrol of Albpetrol's intention to terminate this Agreement. Such notice of



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termination by Albpetrol shall only be given if Contractor upon receiving

notice from Albpetrol that it is in material breach and does not rectify or has

not commenced to substantially rectify such breach within six (6) months; or

24.2.2 if Contractor does not substantially comply with any final decision resulting

from an arbitration procedure pursuant to Article 19 hereof; or

24.2.3 if Contractor is adjudged bankrupt by a competent court or, if there is more

than one entity constituting Contractor, any of them has been declared

bankrupt without the other entities or entity taking appropriate action to

remedy the situation with regard to this Agreement.

Termination by Albpetrol pursuant to this Article 24.2 shall not relieve Contractor from any

unfulfilled commitment or other obligation under this Agreement accrued prior to such

termination, including without limitation payment of monetary obligations for unfulfilled

work commitments, surface restoration, environmental remediation and abandonment.

24.3 Subject to earlier termination pursuant to Articles 24.1 or 24.2, this Agreement shall

automatically terminate in its entirety if all of the Contract Area has been relinquished or the

Development and Production Period or any subsequent extension has lapsed pursuant to

Articles 3.4 and 3.7.

Article 25

Audits

Albpetrol shall have a period of twelve (12) months from receipt of each Cost Account

statement pursuant to the Accounting Procedure in which to audit and raise objections as to

any such Cost Account statement, provided that Albpetrol shall not be entitled to conduct

more than two audits of Contractor's books, records and accounts in any Fiscal Year.

Albpetrol and Contractor shall agree on any required adjustments. Supporting documents

and accounts will be available to Albpetrol during said twelve (12) month period. If within

the time limit of the three (3) months period following the lapse of the above twelve (12)

month period Albpetrol has not advised Contractor of its exception to such statement, such

statement shall be considered as approved.



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Article 26

General Provisions

26.1



Notices

(a)



Notices and other communications required or permitted to be given under this

Agreement shall be deemed given when delivered and received in writing,

either by hand or through the mall or by fax transmission, appropriately

addressed as follows:

to Albpetrol:

Albpetrol SH. A.

Lagja "29 Marsi"

Patos, Albania

Attention:

Executive Director

Facsimile:



+355 381 3662 or +355 34 220 52



to Contractor:

Stream Oil & Gas Ltd.

32 Kifisias Ave.,

Maroussi 15125

Athens, Greece

Attention:

President & CEO

Facsimile:



+30 210 6826455



copy to

Stream Oil & Gas Ltd.

Rruga e Kavajes Karburanti

Tirana, Albania

Attention:

Resident Manager

Facsimile:



+355 4232095



Albpetrol and Contractor may change their address or addresses by

giving notice of the change to each other.

(b)

26.2



Notices to be given by Albpetrol to Contractor shall be deemed given if given

to Contractor's office in Tirana.



Liability

26.2.1 Contractor shall not be liable to Albpetrol except where Contractor's senior

supervisory personnel is grossly negligent in performing the Petroleum

Operations.



PA_SPG_CaMo



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26.2.2 Under no circumstances shall Contractor be liable for consequential or indirect

damages such as loss of profit or loss of production.

26.2.3 In case of any damage for which Contractor is held liable pursuant to Article

26.2.1, Contractor shall endeavour to promptly and diligently take the

necessary measures in accordance with international industry practices, to

mitigate the damage and to restore normal operations. Contractor shall pay

the appropriate compensatory damages for which it is finally declared liable.

26.2.4 Contractor shall indemnify the Albanian Government, Albpetrol and their

employees, officials, directors and respective agents for all claims by third

parties for personal damage or property damage resulting from the

performance of Petroleum Operations conducted by or on behalf of

Contractor, including without limitation, reasonable solicitor's fees and costs

of defence, provided Contractor shall not be held responsible under this

Article 26.2.4 for any loss, claims, damage or injured caused by or resulting

from any negligent action of the Albanian Government, Albpetrol and their

employees, officials, directors and respective agents.

26.3



Insurance



Contractor shall, as part of Petroleum Operations, maintain insurance which a reasonable and

prudent operator in the Petroleum industry would maintain in connection with its operations.

26.4



Language of Text



This Agreement is made and entered into in both the English language and the Albanian

language. In the event of a conflict between the English language version and the Albanian

language version, the English version will prevail.

26.5



Effectiveness



This Agreement is legally binding on and from the Effective Date.

26.6



Entire Agreement



This Agreement (together with any documents referred to in it) constitutes the whole

agreement between the Parties and supersedes any previous agreements, understandings,

arrangements, representation, undertakings and warranties between the Parties relating to the

subject matter of this Agreement, including without limitation the terms of the bid for the

Contract Area submitted to AKBN.

26.7



Bank Guarantee



Contractor shall provide AKBN within sixty (60) days from the Effective Date with a Bank

Guarantee for the corresponding Work Program financial commitment.

26.8



Annexes



Annexes A, B, C, D, E and F are made hereby an integral part of this Agreement and shall be

considered as having equal force and effect with the provisions of the main body of this



PA_SPG_CaMo



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Agreement. However, in the event of a conflict between the main body and any of the

Annexes, the provisions of the main body shall prevail.

26.9



Variation



No variations to this Agreement shall be effective unless made in writing and signed by the

Parties.

26.10 Waivers

The failure of any Party to exercise or enforce any right concerned by this Agreement shall

not be or be deemed to be a waiver of any such right.

26.11 Sovereign Immunity

Any Party that now or hereafter has a right to claim sovereign immunity for itself or any of its

assets hereby waives any such immunity to the fullest extent permitted by the laws of any

applicable jurisdiction. This waiver includes immunity from (i) any expert determination,

mediation, or arbitration proceeding commenced pursuant to this Agreement; (ii) any judicial,

administrative or other proceedings to aid the expert determination, mediation, or arbitration

commenced pursuant to this Agreement; and (iii) any effort to confirm, enforce, or execute

any decision, settlement, award, judgment, service of process, execution order or attachment

(including pre-judgment attachment) that results from an expert determination, mediation,

arbitration or any judicial or administrative proceedings commenced pursuant to this

Agreement. Each Party acknowledges that its rights and obligations hereunder are of a

commercial and not a governmental nature.

26.12 Authority

Each entity which is a signatory to this Agreement warrants to the other that it has full power

and authority to enter this Agreement and that this Agreement constitutes a legal, valid and

binding obligation on it.

IN WITNESS HEREOF, the Parties have entered into this Agreement on the date first above

written.

Albpetrol Sh.A.

By :______________________________________

Name and Title : Ylli Gjoni, General Director

Stream Oil & Gas Ltd.

By:_____________________________________

Name and Title : Dr Sotiris Kapotas, President & CEO



PA_SPG_CaMo



ANNEX A

CONTRACT AREA

Map and Geodetic Coordinates of Contract Area



PA_SPG_CaMo



-2-



ANNEX B

ACCOUNTING PROCEDURE

Article 1

General Provisions

This Accounting Procedure applies to and shall be observed in the establishment, keeping and

control of all accounts, books and records of accounts under the Agreement.

The Agreement and this Accounting Procedure are intended to be correlative and mutually

explanatory. Should, however, any discrepancy arises, then the provisions of the Agreement

shall prevail.

1.1



Definitions

1.1.1 The terms used in this Accounting Procedure have the same meanings as set

out for the same terms in the Agreement.

1.1.2 "Controllable Material" means Material which Contractor subjects to record

control and inventory in accordance with good international petroleum

industry practice.

1.1.3 "Material" means any equipment, machinery, materials, articles, supplies and

consumables either purchased, or leased, or rented, or transferred by

Contractor and used in the Petroleum Operations.



1.2



Books and records



Books and records of accounts, including tax returns, will be kept in accordance with

generally accepted and recognised international accounting principles consistent with

Albanian law, and consistent with modern petroleum industry practices and procedures to the

extent that such practices and procedures do not conflict with Albanian law. Books and

records of account shall be in the English language and US Dollars.

1.3



Revision of Accounting Procedure



By mutual agreement between Albpetrol and Contractor, this Accounting Procedure may be

revised from time to time in the light of future arrangements.

Article 2

Petroleum Costs

2.1



Petroleum Costs



Contractor shall maintain a Cost Account in which there shall be reflected all Petroleum

Costs.

Such Petroleum Costs shall be used in the calculation of the Albpetrol Share in Article 9.

Without limiting the generality of the foregoing, the costs and expenditures considered in

Annex B Articles 2.2 to 2.23 hereafter are included in Petroleum Costs. Petroleum Costs

including all those accumulated prior to the approval of the first Development Plan shall be



PA_SPG_CaMo



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fully included without amortisation commencing in the Calendar Quarter in which such costs

are incurred. It is understood that neither the Albpetrol Share nor the Deemed Production

shall be treated as Petroleum Costs, but the costs of Contractor in producing and delivering to

Albpetrol the Albpetrol Share and the Deemed Production are Petroleum Costs.

2.2



2.3



Labour and related costs

2.2.1



The actual costs of all Contractor's employees and the costs of personnel

assigned or temporarily assigned or loaned to Contractor. Such costs shall

include but not be limited to:



(a)



gross salaries and premiums or wages;



(b)



cost of overtime, holiday, vacation, sickness, disability benefits and other

customary allowances applicable to the salaries and wages chargeable under

(a) hereof;



(c)



expenses, taxes and other charges, if any, made pursuant to assessments or

obligations imposed by ministerial authority which are applicable to the cost

of salaries and wages chargeable under (a) hereof;



(d)



cost of established plans for employees' life insurance, hospitalisation,

pensions, saving and other benefit plans of like nature applicable to the

salaries and wages chargeable under (a) hereof;



(e)



transportation and relocation costs and costs of transportation of the employee

and such employee's family (limited to spouse and dependent children) and

household as statutory or customary for Contractor;



(f)



all travel and relocation costs of employees and their families to and from the

employee’s country or point of origin during the time of employment;



(g)



accommodation costs for employees;



(h)



premiums, overtime, customary allowances and benefits which will be

applicable to national employees in the Republic of Albania, all as chargeable

under (a) hereof.



Employees training expenses



Training expenses for Contractor's employees or assigned or temporarily assigned or loaned

to Contractor.

2.4



Material

2.4.1



The cost of Material shall be charged to the Cost Account on the basis set

forth below. Contractor does not guarantee Material. The only guarantees are

the guarantees given by the manufacturers or the vendors, as long as they are

in force.

2.4.1.1 Except as otherwise provided in Subpart 2.4.1.2 below, Material shall

be charged at the actual net cost incurred by Contractor as the vendor's



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net invoice price, packaging, transportation, loading and unloading

expenses, insurance costs, duties, fees and applicable taxes if any less

all discounts actually received.

2.4.1.2 Material supplied by Contractor from its own warehouse shall be

charged at the price specified herein below:



2.4.2



(a)



New Material (Condition "A") shall be valued at the current

international net invoiced cost which shall not exceed the price

prevailing in normal arm's length transactions on the open market.



(b)



Used Material (Conditions "B", "C" and "D" and junk Material):

(i)



Material which is in sound and serviceable condition and is

suitable for re-use without reconditioning shall be classified as

Condition "B" and priced at seventy-five percent (75%) of the

current price of new Material defined in (a) above.



(ii)



Material which cannot be classified as Condition "B" but which

after reconditioning will be further serviceable for its original

function shall be classified as Condition "C" and priced at fifty

percent (50%) of the current price of new Material as defined in

(a) above. The cost of reconditioning shall be 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.



(iii)



Material which has a value yet cannot be used in its original

function and which therefore cannot be classified as Condition

"B" or Condition "C" shall be classified as Condition "D" and

priced at a value commensurate with its use.



(iv)



Material which is usable and which cannot be classified as

Condition "B" or Condition "C" or Condition "D" shall be

classified as junk and shall be considered as having no value.



Inventories



At reasonable intervals, at least annually, inventories shall be taken by Contractor of all

Controllable Material, and following each inventory, books and records shall be adjusted to

reflect the results of the inventory. Contractor shall give thirty (30) days written notice of the

intention to take such inventories to allow Albpetrol to choose whether to be represented

when the inventory is taken, or not to be represented.

2.5



Indirect Expenses



Base overhead and facilities such as shore base, warehouses, water systems, road systems,

salaries and expenses of field supervisory personnel, field clerks, assistants, and other general

employees indirectly serving the Project Area.

Commissions and marketing or brokerage fees related to sale of Petroleum.



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2.6



Transportation



Transportation of Material and other related costs, including but not limited to origin

services, expediting, crating, dock charges, forwarder's charges, surface and air freight, and

customs clearance and other destination services.

Transportation of Petroleum to the

relevant Delivery Point, including without limitation pipeline charges (both fixed and

variable) and trucking costs.

2.7



Services

2.7.1 The actual costs of contract service, professional consultants, and other

services performed by third parties.

2.7.2 Costs of use of facilities and equipment located inside or outside the Republic

of Albania for the direct benefit of the Petroleum Operations, furnished by

Contractor or its Affiliated Companies or third parties at rates corresponding

with the cost of ownership, or rental, and the cost of operation thereof.



2.8



Administrative and General Expenses in the Republic of Albania



While Contractor is conducting activities under the Agreement, cost of staff and maintaining

Contractor's head office in the Republic of Albania, and/or other offices established in the

Republic of Albania shall be charged to Petroleum Costs.

In the event such personnel and office costs of Contractor or Contractor's Affiliates for the

purpose of this Agreement are not fully attributable to the Petroleum Operations then such

costs shall be charged on an equitable basis.

Costs of travel and accommodation related to Advisory Committee meetings shall be charged

to Petroleum Costs, whether such meetings occur inside or outside of the Republic of

Albania.

2.9



Administrative Overheads



Contractor's parent company administrative overheads outside the Republic of Albania

applicable to the operations under this Agreement shall be charged each year in accordance

with the following rates:

Contractor's parent company personnel who are involved in administering Contractor

activities related to the Petroleum Operations shall record the time spent on matters related to

such administration. There shall be a charge to Petroleum Costs for the time spent by each of

those personnel, calculated as follows: such personnel's time spent in each month on

administration of the Petroleum Operations shall be divided by such personnel's total working

time spent on all matters in that month, and the fraction shall be multiplied by the sum of the

salary costs and benefit costs of such personnel.

In no case may the amount charged to Petroleum Costs under this Article 2.9 exceed

$350,000 in the ________ Calendar Year, and in any subsequent Calendar Year, $350,000

adjusted for inflation using the U.S. Consumer Price Index.



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2.10



Taxes



All taxes, duties or levies paid in the Republic of Albania by Contractor with respect to this

Agreement other than those covered by Article 13.1 of the Agreement, if any.

2.11



Surface Rights



All direct costs attributable to the acquisition, renewal or relinquishment of surface rights

acquired and maintained in force for the Area.

2.12



Damages and Losses to Material and Facilities



Subject to Article 26.2 of the Agreement, all costs or expenses necessary for the repair or

replacement of Material and facilities resulting from damages or losses incurred by fire,

flood, storm, theft, accident, or any other cause beyond the reasonable control of Contractor.

2.13



Insurance and Claims

2.13.1 Premiums paid for insurance to cover the risks related to Petroleum

Operations according to Contractor's practice or any of its employees and/or

outsiders, which is in compliance with international petroleum practice or

which is required by law.

2.13.2 Subject to Article 26.2 of the Agreement, actual expenditure incurred in the

settlement of all losses, claims, damages, judgements, and other expenses

(including legal expenses as set out below) for the benefit of the Petroleum

Operations.



2.14



Legal Expenses



All costs or expenses of litigation or legal services to protect Contractor's interest in the

Contract Area under or pursuant to the Agreement and otherwise necessary or expedient

including but not limited to legal counsel's fees, arbitration costs, court costs, cost of

investigation or procuring evidence and amounts paid in settlement or satisfaction of any

such litigation or claims. These services may be performed by Contractor's legal staff and/or

an outside firm as necessary, provided these costs are not originating from Contractor's

unsuccessful disputes with Albpetrol.

2.15



Charges and Fees



All charges and fees which have been paid by Contractor with respect to the Agreement.

2.16



Offices, Camps and Miscellaneous Facilities



Cost of establishing, maintaining and operating any offices, sub-offices, camps, warehouses,

housing and other facilities such as recreational facilities for employees. If these facilities

service more than one (1) contract area the costs thereof shall be allocated on an equitable

basis.



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2.17



Service Agreement Expense



Expenditures under any service agreement entered into between Contractor and any of its

Affiliated Companies.

2.18



Environment



Costs incurred for any of the operations foreseen in Article 20.

2.19



Abandonment



Costs incurred or amount accrued in accordance with Article 22.

2.20



Other Expenditures



Subject to Albpetrol approval which shall not be unreasonably withheld any reasonable

expenditures not covered or dealt with in the foregoing provisions which are incurred by

Contractor for the necessary and proper performance of the Petroleum Operations and the

carrying out of its obligations under the Agreement or related thereto.

2.21



Currency Gains or Losses



Currency losses incurred by Contractor shall be charged to Petroleum Costs, and currency

gains incurred by Contractor shall be credited to Petroleum Costs.

2.22



Credits under the Contract



The net proceeds of the following transactions will be credited to the accounts under the

Contract:

(a)



the net proceeds of any insurance if the premium was cost recoverable or claim in

connection with the Petroleum Operations or any assets charged to the accounts under

the Contract;



(b)



revenue received from outsiders for the use of property or assets charged to the

accounts under the Agreement which have become surplus to Petroleum Operations

and have been leased or sold;



(c)



any adjustment received by Contractor from the suppliers/ manufacturers or their

agents in connection with defective equipment or material the cost of which was

previously charged by Contractor under the Contract;



(d)



rentals, refunds or other credits received by Contractor which applies to any charge

which has been made to the accounts under the Contract;



(e)



proceeds from all sales of surplus Material charged to the account under the

Agreement, at the net amount actually collected.



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2.23



No Duplication of Charges and Credits



Notwithstanding any provision to the contrary in this Accounting Procedure, it is the

intention that there shall be no duplication of charges or credits in the accounts under the

Agreement.

Article 3

Contractor's Revenues

3.1

Contractor's Revenues shall be determined on a cash basis based on sales at the

Delivery Point. Costs upstream of the Delivery Point are included in Petroleum Costs under

Article 2 above.

Article 4

Financial Reports to Albpetrol

4.1

The reporting obligation provided for in this Part shall apply to Contractor and shall

be in the manner indicated hereunder.

4.2

Contractor shall submit to Albpetrol within forty-five (45) days of the end of each

Calendar Quarter:

4.2.1



A report of expenditure and receipts under the Agreement analysed by budget

item showing:



(a)



actual expenditure and receipts for the Calendar Quarter in question;



(b)



actual cumulative expenditure to date;



(c)



variances between budget expenditure and actual expenditure, and

explanations thereof.



4.2.2



A Cost Account statement containing the following information:



(a)



Petroleum Costs brought forward from the previous Calendar Quarter, if any;



(b)



Petroleum Costs incurred during the Calendar Quarter;



(c)



total Petroleum Costs for the Calendar Quarter (a) plus (b) above;



(d)



amount of Petroleum produced for the Calendar Quarter, the amount of

Petroleum sold for the Calendar Quarter, and the amount of Contractor's

Revenue for the Calendar Quarter;



(e)



calculation of the R Factor for the Calendar Quarter; and



(f)



amount of Petroleum Costs to be carried forward into the next Calendar

Quarter, if any.



4.3

After the commencement of production Contractor shall, within thirty (30) days after

the end of each Calendar Quarter, submit a production report to Albpetrol showing for the



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Development and Production Area the quantity of Petroleum, expressed in tonnes, cubic

meters and barrels:

(a)



held in stocks at the beginning of the month;



(b)



produced during the month;



(c)



lifted, and by whom;



(d)



lost and consumed in Petroleum Operations, and



(e)



held in stocks at the end of the month.



PA_SPG_CaMo



ANNEX C

FORM OF BANK GUARANTEE

TO

NATIONAL AGENCY OF NATURAL RESOURCES

We have been informed that Stream Oil & Gas Ltd has entered into a Petroleum Agreement

for the Albanian Oilfield Cakran - Mollaj with the company Albpetrol Sh.a effective

from_________ ( hereafter the “PA”) and understand that, according to the provisions of the

PA a Bank Guarantee is required.

We have been further informed that pursuant to the terms of the PA Stream Oil & Gas Ltd

has undertaken during the Evaluation Period to carry out a Work Program in the Contract

Area (all as described in the PA) and in so doing spend an amount of United States Dollars

One Million (1,000,000.00) .

At the request of Stream Oil & Gas Ltd, we, the___________ (name and address of the

Bank) hereby guarantee and undertake to pay you any amount or amounts not exceeding the

sum of US $ One Million (1,000,000.00), upon receipt by us of your first demand made in

accordance with the claim procedure detailed below.

Your demand must be submitted by a letter, and must be accompanied by:

• A copy of your notice to Stream Oil & Gas Ltd (dated at least thirty (30) days prior to

the date of your demand), informing Stream Oil & Gas Ltd of a breach of its Work

Program obligations under the PA, the nature and the quantum of the breach and of

your intention to demand payment under this Guarantee if the breach is not

remedied within fifteen (15) days from the date of your notice; and

• Your signed declaration stating that Stream Oil & Gas Ltd has failed to remedy the

breach detailed in your notice by the date specified.

Any demand hereunder and the documents specified above must be received by us at our

above address in accordance with the aforesaid claim procedure on or before the date of

expiry of this Guarantee as described below, after which date this Guarantee will be of no

effect whatsoever.

A demand submitted by facsimile will not be accepted.

This Guarantee shall enter into force sixty (60) days after the effective date of the PA and

shall remain valid until the earlier of (a) six (6) months after the termination of the

Evaluation Period and (b) the date when the total amount of this guarantee has been drawn or

reduced as set out in the next following paragraph.

The amount of this Guarantee shall be reduced every quarter during the Evaluation Period by

an amount equal to the sum spent by Stream Oil & Gas Ltd on its Work Program obligations

during such quarter, such reductions to be effected in accordance with quarterly written

statements issued by the National Agency of Natural Resources to Stream Oil & Gas Ltd.



PA_SPG_CaMo



-2-



This Guarantee is personal to yourselves and is not transferable or assignable (except with

our written consent which is not to be unreasonably withheld).

This Guarantee is subject to the Uniform Rules for Demand Guarantees, ICC Publication No.

458, and to the extend not inconsistent therewith, shall be governed by and construed in

accordance with__________ (country) Law, place of jurisdiction is_________

(place)______,(country)

THE BANK



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ANNEX D

EVALUATION PROGRAM

1.



Evaluation Wells. Contractor will:

(i)



select at least two wells from the Contract Area for reactivation or recompletion in the Cakran-Mollaj reservoir;



and

(ii)



maintain the right for take over from the remaining existing producing

or non producing wells in the Contract Area, according the procedures

in Annex F.



The above wells are the "Evaluation Wells".

2.



Evaluation Program. The following program of work (the "Evaluation Program")

shall be conducted on the Evaluation Wells and the Evaluation Area during the

Evaluation Period:

(i)



conduct reactivation or re-completion activity according to a program

of Contractor's choosing that could include the following possible

tasks:

Fracturing,

Acidization,

and

Side track or horizontal drilling based on fracture orientation

microseismic studies;



(ii)



maintain existing operational and HSE standards in the Contract Area;



(iii)



evaluate performance of the Evaluation Wells, from an engineering

and economic basis;



(iv)



evaluate requirements for additional water disposal capacity and

increase capacity as required;



(v)



prepare a production, reserves and reservoir performance report.



3.



Expenditure Commitment. Contractor commits to expend at least US$1,000,000 in

capital expenditures during the first eighteen months after the Effective Date in

conducting the Evaluation Program and adding the water disposal well contemplated

in clause 4(iv). If the cost of the capital expenditures for the Evaluation Program and

the water disposal well are less than US$1,000,000, Contractor may elect to expand

the activities of the Evaluation Program by selecting additional wells for reactivation

or re-completion.



4.



Other Activities During Evaluation Period. Contractor shall also conduct the

following activities during the Evaluation Period:



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PA_SPG_CaMo



(i)



carry out an update of the reserves evaluation of the Contract Area to a

level of detail determined by Contractor;



(ii)



evaluate existing and future infrastructure for development and

commercialisation of product for internal and export markets;



(iii)



review gas conservation and utilisation within the Evaluation Area;

and



(iv)



develop truck offloading options at either Fier or Ballsh refineries for

crude oil sales delivery of production.



ANNEX E

INSTRUMENT OF TRANSFER



THIS INSTRUMENT OF TRANSFER is made the day of 8 August, 2007

BETWEEN:

(1)

ALBPETROL SH.A. ("Albpetrol") an Albanian State Company, whose principal

place of business is at Patos, Albania;

(2)

STREAM OIL & GAS LTD. ("Stream"); a CAYMAN ISLANDS company, with a

branch registered in the Republic of Albania; and

(3)

AGJENSISE KOMBETARE E BURIMENE NATYRORE (“AKBN”) a legal entity

authorized by Decision No. 547, dated August 9, 2006, of the Government of the Republic of

Albania.

WHEREAS:

Albpetrol is a party to a Licence Agreement made the [

] day of [

] 2007 with the

Ministry of Economy, Trading and Energy as represented by AKBN and Stream wish to join

with Albpetrol in the conduct of Petroleum Operations (as therein defined).

NOW THIS INSTRUMENT WITNESSES that in consideration of and subject to Stream

entering into a Petroleum Agreement (as defined in the said Licence Agreement) with

Albpetrol:

(1)

Albpetrol hereby transfers all its rights, privileges and obligations under the Licence

Agreement mentioned above to Stream subject to said Petroleum Agreement.

(2)

Albpetrol and Stream agree that they will jointly and severally be liable to the

Ministry under the said Licence Agreement for all duties and obligations of the Licensee

subject only as specifically provided in the said Licence Agreement.

(3)

By its execution of this Instrument of Transfer, the AKBN confirms that it has given

its prior written approval to this transfer, that Stream has handed to the AKBN reasonable

evidence of their financial and/or technical competence and that the AKBN was not asked in

an unreasonable or unfair way not to refuse its consent and that they accept that Albpetrol and

Stream are parties to the said Licence Agreement as the Licensee.

(4)

This Instrument of Transfer is conditional upon Albpetrol and Stream entering into

the said Petroleum Agreement and the approval of the Council of Ministers to that Petroleum

Agreement.

(5)

Following execution of this Instrument of Transfer, the interests of Stream and

Albpetrol shall be as defined in the said Petroleum Agreement.

IN WITNESS WHEREOF, the parties have executed this Instrument of Transfer the day and

year first above written:



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SIGNED by

duly authorised for and

on behalf of

"Albpetrol"



(…………………………………………………)



SIGNED by

duly authorised for and

on behalf of

"STREAM"



(…………………………………………………)



SIGNED by

duly authorised for and

on behalf of

"AKBN"



PA_SPG_CaMo



(…………………………………………………)



ANNEX F

TAKEOVER PROCEDURE

A.



General Take Over Procedures



Promptly after the Effective Date, Albpetrol and Contractor shall undertake a transfer of

operating responsibilities for the Project Area. This includes, without limitation, the transfer

and delivery to Contractor by AKBN, Albpetrol and any of their Affiliates of the following

assets, rights, documents and materials located in the Contract Area or at ____________, and

used or useful in connection with activities in the Project Area. The assets, rights, documents

and materials will be substantially the same as those described in the License Agreement and

this Agreement.

B.



Well Take Over Procedures

1. Contractor Responsibilities

a. Contractor Notice:

i. Contractor will provide Albpetrol with a preliminary list of wells

intended for take over for each Calendar Quarter, within thirty days of

the start of that Calendar Quarter. This preliminary list may be revised

after well file information and well and casing condition are verified.

ii. Two weeks notice will be provided prior to required take-over date.

iii. If Contractor elects to perform preliminary casing verification work

utilising Albpetrol tractor rig and services, the take over is not official

until Contractor has provided written notice of its acceptance of well

conditions. For the purposes of calculating Deemed Production of a

particular well, the effective date of the well take over will be

retroactive to the date the preliminary casing verification work

commenced.

iv. If Contractor elects to add additional wells not provided in the

preliminary list for that Calendar Quarter, Albpetrol will not

unreasonably withhold or delay such approval.

b. Well Data and Services for Wellbore Integrity

i. Contractor will make request for required information either with the

notice delivered two weeks prior to the Calendar Quarter or at any

other time.

ii. Contractor will submit program requirements for well casing

verification to Albpetrol and the other requested services Albpetrol is

required to provide. It is Contractor's intent to only take over wells

which do not exhibit significant down hole casing or well bore

integrity problems. Should a well be found to have such damage,



PA_SPG_CaMo



-2Contractor will have Albpetrol re-run equipment as to the condition

prior to servicing at Contractor's cost, and Contractor will have no

further liabilities associated with such well. Only with final take-over

of the well does Contractor take on liabilities for any well (provided

that liability for conditions prior to take over remain with Albpetrol as

per the Petroleum Agreement).

iii. Contractor may request Albpetrol to carry out tractor rig services to

verify casing integrity and other wellbore cleanout work as required by

Contractor's program. Contractor and Albpetrol will agree to a Service

Agreement outlining conditions and costs for Albpetrol's services on

terms similar to those available from arm's length third parties. A

Request for Services (RFS) will be submitted by Contractor with the

program should it require Albpetrol's services.

c.



Lease Construction

i. Contractor will remove Albpetrol’s derrick and equipment to

Albpetrol’s designated location within the Contract Area at

Contractor's cost when the well is being taken over for production

operations and not in situation where it is taken over only for

suspension of Albpetrol’s operations within designated reservoir area

or for monitoring purposes.

ii. Contractor will remove contamination to Albpetrol’s designated

contaminated soil site at Contractor's cost. Environmental Damages for

removed material remains with Albpetrol as being a pre-existing

condition.

iii. Contractor may request Albpetrol to carry out removal of contaminated

soils, removal of derrick and equipment and possibly construction of

new lease. Such requests will be made through a Request For Services

(“RFS”) and be carried out in accordance with an agreed Service

Agreement.

iv. Contractor will reconstruct lease to its standards and as per

Environmental permit and regulations.



d. Takeover Wells for Monitoring

i. Contractor may take over wells but not place on active production for

reasons of monitoring reservoir conditions and for optimal reservoir

recovery and spacing requirements.

ii. Liability for future operations on these wells will be limited to the

wellbore and any fluids released from them. Contractor will not be

required to remove Albpetrol’s equipment from these leases, nor

remove any contamination. Should equipment be required by Albpetrol

(except for down hole tubing which may be required to remain in the

hole), Albpetrol is entitled to remove it at its cost and in its current



Pa_SPG_CaMo



-3condition. Wellhead will remain secured and locked, and power to site

de-activated.

iii. The only inventory recorded for transfer will be related to the wellhead

and downhole.

iv. Contractor will have free access to this site.

e. Inventory

i. On prior day to official take-over Contractor representatives will meet

at site to take an inventory of equipment to be taken over by

Contractor.

ii. Inventory will be included in a take-over release form to be signed by

both Albpetrol and Contractor representatives. This will include preexisting liabilities for Albpetrol and assumption of lease by Contractor

at these conditions.

iii. It should be noted that inventory taken over may not be available in the

future due to operations consumption and deterioration, and Contractor

is not liable in any way to return such.

f. Pre-Existing

i. Pre-Existing production will be calculated based on formula in the

Petroleum Agreement and based upon production data supplied by

Albpetrol. Contractor has the right to review in details such

calculations and methods for past calculation. Once accepted by both

Parties this production will be the basis for future pre-existing

calculations.

2. Albpetrol Responsibilities

a. Handover Well Site

i. Albpetrol will provide well and site to Contractor within two weeks.

b. Well Data

i. Albpetrol will provide by the 15th day of each subsequent month

production data (net oil, water, and producing hours) for all wells

within the Contract Area that are Operated by Albpetrol.

ii. Albpetrol will provide well file information (either copy of original)

within one week of request from Contractor, whether for a take-over

well or otherwise.

c. Pre-Existing Conditions

i. Pre-existing conditions will remain the liability of Albpetrol.

Contaminated materials removed from the site prior to the take-over



Pa_SPG_CaMo



-4date will go to Albpetrol’s designated storage and remediation site and

remain Albpetrol’s liability.

ii. As per the Petroleum Agreement, a Baseline Study will be performed

on each well prior to take-over to identify pre-existing conditions.

Albpetrol will cooperate with any such study. No further activities will

occur on these sites once this has been completed and Contractor has

taken over the well (whether for monitoring or for production).

iii. Any activities by Albpetrol on well sites taken over will result in

immediate default by Albpetrol of previous and future pre-existing

production obligations by Contractor, with all liabilities passed to

Albpetrol, unless Contractor accepts Albpetrol's cessation of such

activities and resumption of take over responsibilities.

d. Well Site Services & Lease Construction

i. It is Contractors intent to utilise Albpetrol’s tractor rig for casing

integrity verification well services prior to accepting some leases.

Albpetrol will offer if available a tractor rig unit for Contractor within

notice period and as per agreed Service Agreement.

ii. For well bores only which are taken over (not wellsite) by Contractor,

Albpetrol will provide free access to Contractor. Albpetrol will ensure

wellsite power is deactivated. All surface equipment and lease

conditions will remain Albpetrol’s responsibility. Any removal of

surface equipment will be at Albpetrol’s discretion and cost.

e. Inventory & Release

i. On the day prior to official take-over Contractor representatives will

meet at site to take an inventory of equipment to be taken over by

Contractor.

ii. Inventory will be included in a take-over release form to be signed by

both Albpetrol and Contractor representatives. This will include preexisting liabilities (except environmental liabilities) for Albpetrol and

assumption of lease by Contractor at these conditions.

iii. It should be noted that inventory taken over may not be available in the

future due to normal wear and tear and consumption of consumable

material, and Contractor is not liable in any way to return inventory in

the condition in which it was delivered to Contractor.



Pa_SPG_CaMo