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 AMENDED AND RESTATED








PRODUCTION SHARING AGREEMENT








BETWEEN











THE KURDISTAN REGIONAL GOVER.VMEM








AND











SHAKAL PRODUCTION. LTD.


TRIE AX OIL LTD.


AND


PET01L PETROLEUM AND PETROLEUM PRODUCTS


INTERNATIONAL EXPLORATION AND PRODUCT! ION INC.








DATED











FEBRUARY 25. 2007


 TABLE OF CONTENTS





PREAMBLE





Article 1 DEFINITIONS


Article 2 SCOPE OF THE CONTRACT


Article 3 CONTRACT AREA


Article -1 GOVERNMENT PARTICIPATING INTEREST


Article 5 OPERATOR


Article 6 TERM OF THE CONTR ACT


Article 7 RELINQUISHMENTS


Article 8 M A NAGEM1 ;NT COMM ITTE E


Article 9 GUARANTEES


Article 10 MINIMUM EXPLORATION WORK OBLIGATIONS


Article 11 EXPLORATION WORK PROGRAMS AND BUDGETS


Article 12 DISCOVERY AND DEVELOPMENT


Article 13 DEVELOPMENT AND PRODUCTION WORK PROGRAMS


AND BUDGETS


Article 14 NATURAL GAS


Article 15 ACCOUN TING AND AUDITS


Article 16 CONTRACTOR'S RIGHTS AND OBLIGATIONS


Article 17 USE OF LAND AND EXISTING INFRASTRUCTURE


Article 18 ASSISTANCE FROM THE GOVERNMENT


Article 19 EQUIPMENT AND MATERIALS


Article 20 TITLE TO THE ASSETS


Article 21 USE OF THE ASSETS


Article 22 SUBCONTRACTING


Ks


 Article 23 PERSONNEL AND TRAINING





Article 24 ROYALTY


Article 25 RECOVERY OF PETROLEUM COSTS


Article 26 SHARING OT PROFIT PfcTROLEl \1


■Article 27 VALUATION AND METERING OF CRUDE OIL AND NA1T RAL GAS


.Ankle 28 DOMESTIC MARKET - SALE OF GOVERNMENT SHARI


.Article 29 FINANC IAL PROVISIONS


.Article 30 CUSTOMS PROVISIONS


.Article 31 TAX PROV ISIONS


Ankle 32 BONUSES


.Article 33 PIPELINES


Artkle 34 IJNTT1SAT ION


Ankle 35 LIABIUTV' AN D INSURANCE


Ankle 36 INFORMATION AND CONUDENTIAUTY


Article 37 ENVIRONMENTAL PROVISIONS


Article 38 DECOMMISSIONING


Article 39 ASSIGNMENT AND CHANGE OF CONTROL


Article 40 FORCE MAJEURE


Artkle 4| WAIVER OF SOV EREIGN IMMUNITY


Artkle 42 ARBITRATION AND EXPERT DETERV1INATION


.Article 43 GOVERNING LAW. FISCAL STABILITY AMENDMENTS AND


VALIDITY


Artkle 44 NOTICES


Artkle 45 TERMINATION


Article 46 APPLICATION OF CORRUPTION LAWS





Article 47 GOVERNMENT REVIEW





Article 48 EFFECTIVE DATE


Annex A CONTRACT AREA MAP AND LIST OF COORDINA ITS


Annex B ACCOUNTING PROCEDURE
























































4


Au.Q^h


 AMENDED AND RESTATED


PRODUCTION SHARING AGREEMENT





BETW ns








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


"GOVERNMENT”), duly represented by the Minuter of Natural Resources;


AND





SHAKAI, PRODUCTION, LTD., PEI'OII. PETROLEUM AND PI I KOLEI M


PRODUCrS INTERNATIONAL EXPLORATION AND PRODI'C IION INC......I


TRILAX OIL LTD..





WHEREAS.








(A) The GOVERNMENT wishes to develop tin: petroleum wealth of the Kurd Man Reg >n


(as defined m this Contract) in a way that achieves the highest benefit to the people of


the Kmdiuan Region and all of Iraq, using the most advanced techniques of market


piinciples and encouraging investment, consistent with Article 112 of the Constitution of


Iraq,


(B) In accordance with the Constitution of Iraq, the prevailing law of the Kurdistan Region is


the Kutdistan Region Law (as defined in this Contract), except with regard to a matter


wholly within the exclusive jurisdiction of the Government of Iraq.


(C) The GOVERNMENT has established, by Act of the Parliament of the Kurdistan


Region, n Ministry of Natural Resources in the Kurdistan Region, with responsibility


for all natural resources except for water, and forestry:




Kutdistan Region Petroleum Act (as defined in this Contract), to regulate Petroleum


Operations (as defined in this Contract), including production sharing contracts,


(I ) SHAKAI, PRODUCTION. LTD., PE FOIL PETROLEUM AND PEI KOLEUM


PRODIK IS INTERNATIONAL EXPLORATION AND PRODUCTION INC.,


and TRILAX OIL LTD. each is a company.





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


to carry out Petroleum Operations in the Contract Area (as defined in this


Contract) under the terms of this Contract,


(ii) having a record of compliance with the principles of good corporate citizenship,


and


Kj Ax





fTMn


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


thereby assisting the GOVERNMENT to develop the Kurdistan Region


petroleum industry, thereby promoting tlie economic development of the


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


(F) The Regional Government of Sulaimanivah of the Interim Joint Regional Administration


of Northern Iraq entered into a production sharing agreement (the “AGREEMENT" or


CONTRACT “) dated January 14. 2003 with Pet Oil Petroleum and Petroleum Products


International Exploration and Production Inc (“PctOil").


(G) By a Deed of Assignment and Support Agreement dated of even date and approved by


the GOVERNMENT, the rights of the CONTRACTOR are now owned by Shakal


Production. Ltd.. Trilax Oil. Ltd . and PetOil,


dll The CONTRACTOR has held discussions with the GOVERNMENT concerning the


reduction of the Contract Area and certain changes to tlie terms of the Contract, including


those discussions held in Ankara. Turkey, between April 3'*. 4*. and 5* of 2005


II) the CONTRACTOR desires to release, and docs hereby release, part of the lands


enginally covered by the Contract such that the lands covered by the .Agreement arc only


the lands within the Contract Area as lierein defined, and


(J) the Parties desire to amend and restate the Contract in its entiretv.





NOW, THERE PORE. THE PARTIES HAVE vC.RFFO AS FOLLOWS








ARTICLE I - DEFINITIONS





Capitalised terms and expressions in this Agreement shall have the following meaning,


unless otherwise specified:


Abroad means outside of the Kurdistan Region and other parts of Iraq





Accounting Procedure means the Accounting Procedure attached to this Contract as


Annex B and constituting an integral part of this Contract


Affiliated Company or Affiliate means, as regards any of the companies or entities


constituting the CONTRACTOR, a company or other legal entity which


(a) controls an entity constituting the CONTRACTOR; or


(b) is controlled by an entity constituting the CONTRACTOR; or


(c) controls or is controlled by a company or entity which controls an entity constituting


the CONTRACTOR

















2


For I he purpose of this definition, "control" means direct or indirect ownership or control of


the majority of the voting rights of the applicable entity at its shareholders’ meetings or their


equivalent


Appraisal Area means the area defined in Article 12 2





Appraisal Program is defined in Article 12 2


Appraisal Report is defined in Article 12 '1


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


of it geological feature or a geological structure in which Petroleum has been discovered


Arm's-l-ength Sales means sides of Petroleum in freely convertible currencies between


sellers and buyers having no direct or indirect relationship or common interest whatsoever


with each other that could reasonably influence the sales price Such Arm's-Length Sales


shall exclude


(a) sales between the CONTRACTOR and its Affiliates.


lb) stiles involving the GOVERNMENT or the Government oflraq.


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


practices.


Assets means all platforms, pipelines, plant, equipment, machinery, wells, facilities and all


other installations and structures and all Materials and Equipment


Associated Natural Gas means any Natural Gas dissolved in Crude Oil under reservoir


conditions


Available Associated Natural Gas is defined in Article 25 1





Available Crude Oil is defined in Article 25 |





Available Non-Associated Natural Gas is defined in Article 25 I.


Available Petroleum is defined in Article 25.1.


Barrel means a quantity of forty-two (42) US gallons as a unit to measure liquids, at a


temperature of sixty degrees (60") Fahrenheit and pressure of fourteen point seven (14 7) p«.i


Budgets means any budgets prepared by. or on behalf of. the CONTRACTOR pursuant to


this Contract and forming pan of an Exploration Work Program and Budget and’or an


Appraisal Work Program and Budget anflor a Gas Marketing Work Program and Budget


and'or a Development Work Program and Budget and/or a Production Work Program and


Budget


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


and ending on 31 December of the same year.


A





3


Commercial Discovery means a Discovery which is potentially commercial when taking


into account all technical, operational, commercial and financial data collected when carrying


out appraisal works or similar operations, including but not limited to recoverable reserves


of Petroleum, sustainable regular production levels and other material technical, operational,


commercial and financial parameters, all m accordance with standard practices in the


international petroleum industry


Commercial Production meant the production of Petroleum from the Production Area in


accordance wtth annual Production Work* Program and Budget


( onstitulnri of Iraq means the permanent constitution of Iraq approved by the people of Iraq


in the general leferendum of 15 October 2005.


Contract means this production sharing contract, including its Annexes A - B that are an


integral part hereof, as well at any extension, renewal, substitution or amendment of this


production sharing contract that may be agreed in writing by the Panics


Contract Area means the area dewnbed and defined in Annex \ attached to this Contract


and any modifications made to that Annex in accordance with the provisions of th* Contract


Contract Year means a period of twelve (12) consecutive Months waning from the


Effective Date or any anniversary of the said Effective Dale


CONTRACTOR means, eithei jointly or individually, Shakal Production. Lid. PctOii


Petroleum and Petroleum Products International Exploration and Production Inc , and Tula*


Oil Ltd. and Affiliates and/or any assignee of all or part of the rights and obligations under


this Contract of each in accordance with Article 39 of this Contract and. for the avoidance of


doubt, at any time when there is only one entity constituting the CONTRACTOR, any


reference made in this Contract to "the entities constituting the CONTRACTOR or the


CONTRACTOR entities" or similar reference, shall be deemed to mean "the entity


constituting the CONTRACTOR" ShakaI Petroleum. Ltd . PetOil Petroleum and Petroleum


Pioducts International Exploration and Production Inc . and Trilax Oil Ltd own the interest


of the Contractor in the follow ing percentages


Shaknl Production. Ltd 33 1/3 %


PctOii Petroleum and Petroleum Products


International Exploration and Production Inc 33 1/3 %


Trilax Oil Ltd 33 1/3%


Crude Oil means all liquid hydrocarbons in their unprocessed sutc or obtained from Natural Cias


by condensation or any other means of extraction





DecommissioniagCosts means all the costs, cxpendituic. liabilities and obligations incurred


by the CONTRACTOR when carrying out Decommissioning Operations


Decommissioning Operation* means any works, together with all related and auxiliary


activities, for decommissioning and/or removal and/or abandonment and making safe all of


the Assets and site restoration related thereto in relation to any Production Area














4


Decommissioning Reserve Fund is defined in Article 38 1 and includes all contributions paid


into such fund and all interest accumulated such fund


Delivery Point means the place after extraction, specified in the Development Plan foe a


Petroleum Field, at which the Crude Oil. Associated Natural Gas ardor Non*Associated


Natural Gas i« metered for the purposes of Article 27 7, valued for the purposes of Article 27 I


and ready to he taken and disposed of. consistent with intemanona. practice, and at which a


Party may acquire title m its share of Petroleum under this Contract or such other point which


may be agreed by the Panics


Development Costs means all the costs, expenditure, liabilities and obligations incurred by


the ( ON I RACTOR when carrying out Development Operation'


Development Operations means all development operations or works conducted in


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


Petroleum Field, including but not limited to drilling of wells, primary and subsequent


recovery protects and pressure maintenance, survey, engineering, building and erecting oi


laying of production plants and facilities (including but not limited to: separators:


compressors, generators, pumps and tankage, gathering lines pipelines and all facilities


required to he installed for production, pressure maintenance, and treatment storage and


transportation of Petroleum), obtaining of such materials, equipment, machinery, items and


supplies as may be required or expedient for the foregoing activities, and all auxiliary


operations and activities required or expedient for the production of Petroleum from the


Production Aren


Development Period is defined in Article 6 of this Contract


Development Plan means a plan for development defined in Article 12 8 of this Contract


Devdopment Well means any well drilled after the date of approval of the Development


Plan for the purpose of producing Petroleum, increasing or acceletating production of


Petroleum, including injection wells and dry holes Any well drilled within a Production Area


shall be deemed a Development Well


Devdopment Work Program and Budget means the development work program and


budget prepared pursuant to Article 13 2.


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


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


recoverable at the surface with a measurable ftow utilising techniques used in the


international petroleum industry


Dollar (USS) means the legal currency (dollar) of the United States of America (USA)


Effective Date means the date on which the conditions referred to in Article 48 of this


Contract have been fulfilled.


Equipment and Materials is defined in Article l‘> I














5


Exploration Costs means all the costs, expenditure, liabilities and obligations incurred by


the CONTRACTOR when carrying out Exploration Operations





Exploration Operations means any and all operations conducted with a vie" to discovering


Petroleum, including but not limited to any activities necessary to commerce operations; any


topographical, hydrographical, geological, geophysical, aerial and other surveys and


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


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


test holes, spud, drilling, testing, coting, logging and equipping of Exploration Wells or


Appraisal Wells, piocurement of such services material, equipment machinery, items and


supplies as may be required or expedient for the foregoing activities, and all auxilurv


operations and activities required or expedient for the conduct of the foregoing activities


Exploration Period is defined in Article 6 of this Contract


Exploration Well means mO drilled for the purpose of confirm inf a geological


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


CONTRACTOR


I iploration Work Program and Budget means the exploration work program and budget


prepared pursuant to Article 11 I


Export C rude Oil is defined m Article 24 2.


Export Noil-Associated Natural Gas '* defined in Article 2-1 2


hxpan Petroleum is defined in Article 24 2


First Exploration Well is defined in Article 10 2 (c)


First Production means the moment when Commercial Production of Crude Oil or Non-


Assooated Natural Gas (as the case may be) lust commences, by flowing at the rale forecast in


the Development Plan without interruption for a minimum of forty eight (48) hour*


Force Majeure is defined in Article 40 2


Gas Marketing Costs means all costs, expenditure, liabilities and obligations incurred by the


CONTRACTOR when earning out Gas Marketing Operations


Gas Marketing Operations lias moans any ami all oi the activities and operations


contemplated by Article 14 6


Gas Marketing Work Program and Budget means the marketing work p-ogram and budget


prepared pursuant to Article 14 8


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


office under the Constitution of Iraq


International Market Price is defined in Article 27 2 of this Contract











6


Joint Operating Agreement meant any agreement executed by the entities constituting the


CONTRACTOR at any lime for the purpose of regulating between such entities the terms


under which the Petroleum Operations will be conducted, which agreement shall be (a)


consistent with international standards in the petroleum industry. as between such


entities, supplementary to this Contract; and (c) consistent with the provisions of the


Contract


Kurdistan Region means the Kurdistan Region of Iraq recognised hy the Constitution of Iraq


and having the same meaning as in the Kurdistan Region Petroleum Act


Kurdistan Region law means all statutes, decrees, edicts, codes, orders, rules, otdmanccs


and iemulations of the GOVERNMENT or of any othet local, municipal, territorial,


provincial, or any other duly constituted governmental authority or agency in the Kutdistan


Region


Kurdistan Region Petroleum Act means the draft Kurdistan Region Petroleum Act to be


presented to the Parliament of the Kurdistan Region or. when tliat Act enters into force, the


Act


1.11 ss means all applicable laws Including without limitation the following constitutional law.


civil law. common law. international law. equity, treaties, statutes, decrees, edicts, codes,


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


provincial, federated, national or any other duly constituted governmental authority or


agency


LIBOR means the London Inter-Bank Offered Rate at which Dollar deposit' for one (I)


Month arc offeted in the inter-bank market m London, as quoted in the Financial Times of


loodon for the day in question In the event that such raie is not published in the Financial


Times, rt shall mean the London Inter-hank Offered Raie at which Dollar deposits for one


Month arc offered for the nearest day as quoted by National Westminster Bank pic


Management Committee is defined in Article 8 of this Contract


Minimum Exploration Obligations is defined in Article 10 I of this Contract


Month means a calendar month according to the Gregorian calendar


Natural Gas means all gaseous Petroleum and inerts


Non-Associatcd Natural Gas means any Natural Gas which is not dissolved in Crude Oil


under reservoir conditions





Operator means the entity designated by the CONTRACTOR pursuant to Article * of this


Contract which, in the name and on behalf of the CONTRACTOR, shall carry out ail


Petroleum Operations If at any time there exists more than one (!) Operator under this


Contract, anv reference herein to the term 'Operator' shall be to each Operator with respect »o


the pans of the Contract Aren in which such Operator conducts Petroleum Operations


Party or Parties means the GOVERNMENT and/or the CONTRACTOR





A





7


Permits means all licences, permits, comenu, authorisations or other permissions, as the


context requires


PetOil Petroleum and Petroleum Products International Exploration and Production


Inc. means the legal entity so named established in accordance with the laws of the 1'urkcv


Petroleum means





(a) any naturally occurring hydrocarbon in a gaseous or liquid Mate.


(b) any mixture of naturally occurring hydrocarbons in a gaseous or liquid state, or


(c) any Petroleum (as defined in paragraphs (a) and (b) above) that has been returned to a


Reservoir





Petroleum Cost* mean' all costs and expenditure incurred by the ( ON I M AC I OK for the


Petroleum Operations, and which the CONTRACTOR is entitled to recover under this


Contract and its Accounting Procedure attached to this Contract as Annex l» including those


Costs and expenses incurred the Contractoi and its predecessors in mtcicsi from January 14,


200J, to the Effective Dale





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


structure or stratigraphic unit from which Petroleum may be produced ami which has been


declared as a Commercial Discovery by the CONTRACTOR pursuant to Article 12 6 (a) or


Article M 5(a)


Petroleum Operations means all Exploration Operations, Gas Marketing Operations


Development Operations. Production Operations and Decommissioning Operations, as well


as any other activities or operations directly ot indirectly related or connected with ihc said


operations (including but not limited to health, safety and environmental operations and


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


Production Area means such areas within the Contract Area designated as a protection area


m an approved Development Plan prepared pursuant to Article 12 of this Contract For the


avoidance of doubt, all superjacent or subjacent strata of the Reservoir in winch a


Commercial Discovery is locaied are automatically included in the relevant Production Area


Production Costs means all the costs, expenditure, liabilities and obligations incutted by the


< ON l RACTOK in cairying out the Production Operations





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


for the production of Petroleum from the start of Commercial Production, including but not


limited to extraction, injection, stimulation, pumping, treatment, storage engineering,


operating’, servicing, repairing, and maintaining any weds, plants, equipment, pipelines,


terminals

operations, and storage and transportation of Petroleum from the Production Aica to the


Delivery Point





Prod actios Work Program and Budget shall the production work program and


budget prepared pursuant to Article 13 6


Profit Crude OH is defined in Article 26 I





Profit Natural Gas is defined in Article 26 I


Profit Petroleum is defined in Article 26 1


Public Officer means a civil servant, including a member or employee of a pAlic titty, a


member of the Parliament or a member of the Ciovernmeni.


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


the first day of January.


April. July or October respectively


Reservoir means a subsurface rock formation containing an individual and separate natural


accumulation of producible Petroleum characterised by a single natural pressure system


“R“ Factor is defined in Article 26 4


Royalty is defined in Article 24





Second Exploration W ell is defined in Article 10 3 (b)


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


oi July respectively


Sliaknl Production, I .Id. means the legal entity so named established in accordance with the


laws of the Cayman Islands


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


undertaking works relating to the Petroleum Operations under the overall supervision by. and


on behalf of. the CONTRACTOR.


Sub-Period and Sub-Periods arc defined in Article 6 2


Trial OH lad means the legal entity so named established in accordance with the laws of


the Cayman Islands


Work Program means any work program prepared by. or on behalf of the


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


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


Work Program and Budget andor a Development Work Program and Budget and/or a


Production Work Program and Budget


























9


 ARTICLE 2 - SCOPE OF THE CONTRACT





2 1 This Contract is a production-sharing arrangement with respect to the Contract Area,


whereby the GOVERNMENT, and hav the tight pursuant to the Constitution oT Iraq,


to regulate and oversee Petroleum Operations within the Contract Area


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


Panics and the terms and conditions undo which the CONTRACTOR shall carry


out all the Petroleum Operations


liy entering into this Agreement, the GOVERN MEM grants the CONTRACTOR


the exclusive right and authority to conduct ull Petroleum Operations in the Contract


Area as detailed in Article 3 below


2 2 Upon the CONTRACTORS request, the GOVERN NO N V shall provide all required


Permits relating to the Petroleum Operations required by the CONTRACTOR to


fulfil its obligations under this Contract, including those relating to an\ extension and


renewal periods and including those requited by the Government of Iraq The


(.ON I RNMENT (i) represents and warrants to die CONTRACTOR thai t • .i\ ml


done and las not omitted to do anything that would cause the cancellation or


suspension of this Contract or any Permit granted pursuant to this Contract, and (u)


covenants that it will not do. or omit to do, anything that would cause the cancellation


or suspension of this Contract or any Permit granted pursuant to this Contract


2 3. Ihc CON IR ACTOR shall conduct all Petroleum Operations within the C omiact \ica


at its sole cost, nsk and pcnl on behalf of the GOVERNMENT, pursuant to this


Contract, including but not limited to the following operations


(a) Technical Ser> ices


Implementation of all technical, human and mateml resources reasonably


required foe execution of the Petroleum Operations, in accordance with


standard practices prevailing in the inter national petroleum industrv


(b) Financial Services


The responsibility foe funding the Exploration Operations and. in the event of


a Commercial Discovery. Development. Production and Decommissioning


Operations, pursuant to this Contract


For the tunding of Petroleum Operations, each entity constituting the


CONTRACTOR shall be entitled to have recourse to external financing from


either its Affiliated Companies or from any third parties


(O Administrative Services


Implementation of all appropriate management and administration techniques


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


with standard practices prevailing in the international petroleum industry








K


10


2 4 During the term of this Contract, the CONTRACTOR shall be responsible to the


GOVERNMENT for the conduct of Petroleum Operations within the C ontract Area


pursuant to the teems of this Contract


2 5 Natural resources other than Petroleum shall be excluded from the scope of this


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


its obligations pursuant to this Contract


2 6 The CONTRACTOR shall only be entitled to recover Petroleum Costs incurred


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


Costs shall occur within the limits provided under Article 25 of this Contract


2 7 During the term of this Contract. Profit ( rode Oil and/or Profit Natural Gas produced


from Petroleum Operations shall be shared between the Parties in accordance with tlu


provisions of Article 26 of this Contract


2 8 hoi the said sharing of any Profit ( rude Oil and/or Profit Natural Gas, each entity


constituting the CONTRACTOR shall he irealod as a separate entity and shall act lor


its own account for income tax purposes


2 9 For the execution of Petroleum Operations under this Contract, the CONTRA( IOR


shall have the right to


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


associated with the Petroleum Operations wherever they mav be located


(b) freely use access roads located within the Contract Area and outside the


Contract Area foe the construction, installation, maintenance and removal of


pipelines and other facilities required for the Petroleum Operations.


(c> freely use sand, water, electricity and any other natural resource* located


inside or outside the Contract Area for the Petroleum Operations.


(d) use any qualified foreign and local personnel and or Subcontractors required


for the conduct of Petroleum Operation* in accordance with Article* 22 and 23


of this Contract Any foreign personnel working in the Kurdistan Region shall


require poor authorisation of the GOVERNMENT (such authorisation not to


be unreasonably delayed or withheld) and the GOVERNMENT shall obtain


any authorisation required by the Government of Iraq.


(e) import any goods, materials, equipment and/or services required for the


Petroleum Operations in accordance with Article* 19. 22 and 30. and


(0 freely use land or property belonging to the Kurdistan Region


2 10 The Government hereby unconditionally and irrevocably warrants to and lor the


benefit of Contractor


(a) that the Contract Area is available for the conduct of exclusive Petroleum


Operations by Contractor, and that no other non-governmental party has a





Kf


n


 claim or right (antecedent or extant) to conduct Petroleum Operations, or to


produce or to receive Petroleum in or from the Contract Area, and





(b) the Got eminent shall for the duration of this Agreement and subject 10


applicable Kurdistan petroleum law at the time take all appropriate measures


to upliold tlic cnforceabiliu of this Agreement m accordance with its terms as


a legal and binding instrument throu^soui the I ederal Region of Kurdistan


and the Republic of Iraq


2 11 The ( onimcior hereby unconditionally and irrevocably represents and warrants to and for


the benefit of the Government that it has not, to its knowledge, done and l»n> not omitted


to do anything that would cause the cancellation 01 suspension of this Agreement and


indemnifies and holds the Government harmless from am liability, costs claims or


damages that ihe Government may suffer as a result of live failure or macctr*' of am of


such warrants








ARTICLE 3-CONTRACT ARI \


The mitral Contract Area covers the area with the geographic location and co-ordinates





described in Annex A attached hereto and shown on the map in Annex A attached hereto and


extends five huitJicd twenty eight square kilometres (528 Lm ■ rrvxeorlet' and is delimited


by the following coordinates











CO,MS X COOHt) - EAST-] YCOOM «TM iat - north ~] Ton - e ast |


r---z--- ia --- 1 ---c- -1--.1 Vv


a DJ4UJ1.10 MyJJVO'-' tw 34 47 44- 4 7 44 19


B 492441 35 36S03fil 01 44 55 or


C 485027 95 3847006 24 34 4 5 a* 1 44 so ir


D 514676 16 3825'6> 52_ 34 34 04-__ 45 0» 36-


. • i


[±- 519630 OJ 3825073 21 34 34 00= ~ 4T12 51-1


523126 4/ ““iriTor"


* 3822338 08 34’ 32' 33* 45 17 30








The GOVERNMENT, by execution of this Contract hereby validates and approves the


foregoing co-ordinates of Ihe Contract Area


Hie total area of the Contract Area may be reduced only in accordance with the provisions of


this Contract








ARTICLE 4 - GOVERNMENT PARTICIPATING INTEREST


4 I The GOVERNMENT shall have the option of participating in this Contract, m





respect of the entire Contract Area, as a CONTRAC TOR entity, with an undivided


interest m the Petroleum Operations and all the othci rights, duties, obligations and











12


liabilities of the CONTRACTOR, under this Contract in respect of the Contract


Areti of twenty-five per cent (25%) (the "Government Interest"), such option bang


referred to herein as the “Option to Participate" The GOVERNMENT shall be


entitled to exercise the Option to Participate by notifying the CONTRACTOR in


writing of such election at any time in the period commencing on the Effective Date


and ending one hundred and eighty (180) days after the date on which


CONTRACTOR declares the first Commercial Discovery in the Contract Area


(which date of declaration is referred to herein as the "First Commercial


Declaration Date") If the GOVERNMENT does not notify the CON TRACTOR


of such election within such period, it shall be deemed to have waived its right to


exercise the Option to Participate and shall have no further rights wluitsocvci in


rcs|icct of any such participation.


4 2 If the GOVERNMENT exercises the Option to Participate in accordance with


Article 4 I


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


the GOVERNMENT exercises its Option to Participate or the first


Commercial Declaration Date, whichever is the earlier.


(b) the GOVERNMENT shall participate as a CON I RACTOR entity undei tins


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


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


provisions of this Article 4;


|c) the GOVERNMENT shall not have any liability to the other


CONTRACTOR entities to contribute its Government Interest share of all


Petroleum Costs incurred before the First Commercial Declaration Date and


its Government Interest share of such Petroleum Costs shall be the


responsibility of the other CONTRACTOR entities, provided always that


such other CONTRACTOR entities shall be entitled to recover all such


Petroleum Costs in accordance with Article 25.


(d) if. pursuant to the terms of the Joint Operating Agreement, the


GOVERNMENT participates in the development of the Commercial


Discovery, it shall be liable to the other CONTRACTOR entities to


contribute its Government Interest sliarc of all Petroleum Costs incurred on or


after the First Commercial Declaration Date, with the exception of the


production bonuses referred to in Article 32 and shall be entitled to recover all


such Petroleum Costs in actotdance with Article 25. including the Petroleum


Costs which it has reimbursed pursuant to Article 4 2 (e>;


(e) if such Option to Participate is exercised on or after the First Commercial


Declaration Date, the GOVERNMENT shall, withirf thirty (30) days of the


date of so notify ing the CONTRACTOR of its election, reimburse the other


CONTRACTOR entities for all Petroleum Costs for which it is liable


pursuant to Article 4 2 (d) and which have been incurred by such other


CONTRACTOR entities on or after the First Commercial Declaration Date


but prior to and including the date of the notice pursuant to which it exercises











13


its Option to Participate From the date of such notice, the GOVERNMENT


shall pay the Government Interest share of such Petroleum Costs directly.


(1) the provisions of Article 16 13 shall apply in respect of any Government


Interest when held by the GOVERNMENT and the GOVERNMENT will


be individually and separately liable (and not jointly and severally liable with


the other CONTRACTOR entities) to the GOVERNMENT for its


obligations, duties and liabilities under this Contract as a CONTRACTOR


entity and the provisions of Article 4 4 shall apply.


4 3 The GOVERNMENT may. at its discretion, assign part or all of its Government


Interest to a third party or panics which is a public company regulated by the


GOVERNMENT under the Kurdistan Region Petroleum Act (a “Public


Conipnny"), provided that in the event of a transfer of pan of the Government


Interest, such Government Interest will not be less than live per cent (5%)


In the event of such an assignment to a Public Company, for the purposes of Article


39 oE the Kurdistan Region Petroleum Act. the Government Interest so assigned shall


deemed to he held by the GOVERNMENT and in accordance with the principle in


Article 16 13 of this Contract, the Public Company to which such Government


Interest is transferred will Ire individually and separately liable (and not jointly and


severally liable with the otliet CONTRACTOR entities) to the GOVERNMENT for


us obligations, duties and liabilities under this Contract as a CONTRACTOR entity


and the provisions of Article 4.4 shall apply





4 4 Any failure by the GOVERNMENT andor a Public Company to perform any of its


or their obligations or to satisfy any of its or their duties oi liabilities undet this


Contract as a CON IRACTOR entity shall not be considered as a default of the other


CONTRACTOR entities and shall in no case be invoked by the GOVERNMENI


to terminate this Contract


The capacity of the GOVERNMENT and'or a Public Company as a


C ON TRACTOR entity, as it may arise pursuant to the provisions of this Contract


shall in no event cancel or affect the rights of the other CONTRACTOR entities to


seek to settle a dispute or to refer such dispute to arbitration or expert determination


in accordance with the provisions of Article 42


4S The GOVERNMENT and/or a Public Company may assign part or all of its


Government Interest to a third party or parties (not being a Public Company), subject


to the provisions of Article 4 6 (and for the avoidance of doubt the provisions of


Ankles 39 I. 39 2 and 39 3 shall not apply)


For the avoidance of doubt, following any assignment by the GOVERNMENT


and/or a Public Company of all or pan or all of a Government Interest to a third party


which is not a Public Company, in accordance with the provisions of this Ankle 4.


the provisions of Ankles 39 1. 39 2 and 39 3 shall apply to any subsequent


assignment of such interest.


4 6 Where a Joint Operating Agreement has been executed by the CONTRACTOR


entities prior to any exercise of the Option to Pailicipatc pursuant to this Aniclc 4. the










GOVERNMENT shall become a party to such agreement, with any amendments


necessary to be consistent with the principles of this Article 4 Where a Joint


Operating Agreement is not in place prior to the exercise of the Option to Participate


pursuant to this Article 4, the GOVERNMENT and the other CONTRACTOR


entities shall, within a reasonable period of time, negotiate in good faith and enter into


.» Joint Operating Agreement and shall duiing the period between the exercising of


the Option to Participate and the execution of the Joint Operating Agreement, comply


with paragraphs (a) and (b) inclusive of Article 4 7 as if they were provisions of this


Conti act


4 7 Any Joint Operating Agreement entered into in relation to this Contract shall be


consistent with the principles of this Article 4 ami shall provide as follow s


in) all decisions of any operating committee established under such Joint


Opciatmg Agreement shall require the affirmative vote of an agreed


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


nor more than sixty-five percent.


ib) in the event of a proposed transfer by any CONTRACTOR entity of part of a


participating interest under such Joint Operating Agreement, including but not


limited to any Government Interest





li) the interest to be transferred will not be less than five per cent (5%).





ml the proposed third party assignee demonstrates to the reasonable


satisfaction of each of the entities constituting the CONTRACTOR


that it has the financial capability to perform us payment obligations


under the Contract and under the Joint Operating Agreement, and







reasonably satisfactory to each of the entities constituting the


CONTRACTOR to perform the obligations of the transferor





4 8 l or the avoidance of doubt, there shall be no right of assignment in respect of the


Opt Kin to Participate











ARTICLE 5-OPERATOR





s I Within thirty (30) days of the Effective Date, tlx* CONTRACTOR shall notify the


GOVERNMENT of the pany to act asOpcratoi Should the parties fail to so notify the


GOVERNMENT, the GOVERNMENT shall select one of the parties holding an


interest in tlx: Contract as Opeiator. The selection of Operator shall require the approval


of the GOVERNMENT, which approval shall not be unreasonably denied The


CONTRACTOR shall at any time have the right to appoint anothci entity as the


Operator subject to GOVERNMENT approval as aforesaid


5 2 The CONTRACTOR shall submit to the GOVERNMENT for comment any


agreement regarding or regulating the Operator’s appointment and its contfcici








15


 of Petroleum Operations on behalf of the CONTRACTOR pursuant to this


Conraci poor to execution of such agreement





5 3 In the e\ent of the occurrence of am of the following. the GOVERNMENT may require


the CONTRACTOR to appoint another entity as Operator as soon as is reasonably


practicable


(a) if an order has been passed in court declaring the bankruptcy, liquidation, or


dissolution of the Operator.


(b) if the Operator terminates its activities under this Contract or a materia!


proportion thereof, and as a result CONTRACTOR fails to fulfil its


obligations under the Contract.





\R IICLE 6 - TERM OK TIIE CONTRACT





0 I This Contract comprises an Expkiraiion Penod and a Development Period, as defined


below





I vploration Period


6 2 The Exploration Penod shall be tor an initial term of five (5) Contract Years,


extendable on a yearly basis (as provided m Article 6 5 and 66) up to a maximum


period of seven (7) Contract Years, starting from the EITective Date The initial tarn


of five (5) years shall be subdivided in two (2) sub-pa inds as follows


(a) an initial sub-period of three (3) Contract Years ("l ust Sub-Period"):


(b) a second sub-period of two (2) Contract Years ("Second Sub-Period">.


each a "Sub-Period" and collectively "Sub-Periods


It is understood that the right of the CONTRACTOR 10 accede 10 the next Suli-


Period shall be .subject to fulfilment of the Minimum Exploration Obligations


applicable to the previous Sub-Period


<>» During the Exploration Period, the CONTRACTOR shall pav to the GOV I RNMENT.


in arrears, an annual surface rental for the Contract Area, as may be reduced by


relinquishment from time to time pursuant to Article 7. of ter Dollars (US$ 10) per


square kilometre per Contract Year ("Exploration Rental ) Such Exploration Rental


shall be considered as a Petroleum Cost and shall be recovered by the ( ONTRACTOR


in accordance with the provisions of Articles I and 2$


6 4 If the CONTRACTOR decides not to enter into the Second Sub-Period, it shall


nolify the GOVERNMENT at least thirty (30) days prior to the expiry of the First


Sub-Period and. provided that the data from the First Exploration Well demonstrates that


there is no reasonable technical case for drilling the Second Exploration Well in the


Contract Arc®, ihc Exploration Period shall expire at the end of the I irsi Sub-Period,


unless the First Sub-Period has been extended pursuant to Article 6 5 and/or Article 6.6.











16


6.5 If ihe CONTRACTOR has fulfilled its Minimum Exploration Oblivions for a Sub-


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


(a) to deciding to submit an Appraisal Program as provided under Article 12 2 of


this Contract in respect of a Discovery, or


(b) to deciding to declare a Discovery as a Commercial Discovery in accordance


with Article 12.6 (a) or 14 5 (a), which additional work may include the


preparation and/or execution of an Appraisal Program as provided under


Article 12 2 of this Contract and'or Gas Marketing Operations.


the CONTRACTOR will automatically be entitled to extensions, each of one (I)


Contract Year, of the then current Sub-Period, up to the end of the maximum


Exploration Period of seven (7) Contract Years. (a\ provided in Article 6 2) I he


CONTRACTOR’S notification of such extension and its duration shall be submitted


in writing to the GOVERNMENT at least thirty (30) das s prior to the end of the then


current Sub-Period or the end of the then current extension (as the case may be)


6 6 Without prejudice to Article 6 5. upon expiry of the initial term of the Exploration


Period, if it considers it lias not completed its exploration evaluation of the Contract


Aica. the CONTRACTOR shall be entitled to an extension of the Second Sub-


Period provided it so requests the GOVERNMENT in wining at least thirty (30)


days pnoi to the end of Mich Sub-Period, together with a propovil lor a minimum


work obligation for such extension Any such extension shall not exceed one

Contract Year I'pon the expiry of such extension, if it considers it has still not


completed in evaluation of the Contract Area, the CON IRACTOR shall be entitled


to a further extension of one (I) Contract Year provided that it so requests the


GOVERNMENT in writing at least thirty (30) days poor to the end of the original


cxtcn&on


6 7 Subject to Article 6 4. at any time during the Exploration Period, upon thirty (30)


days poor notice to the GOVERNMENT, the CONTRACTOR shall have the right


to withdraw from this Contract provided that the out#andmg Minimum Exploration


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


accordance with the Contract, or it has paid to the GOVERNMENT the amounts


specified in Article 10 2 or Article 10 3 of this Contract, whichever is applicable to the


then current Sub Period


6 8 If no Commercial Discovery has been made within the Contract Area at the end of the


Exploration Period (including any extensions thereof) this Contract shall laminate


6 9 If a Discovers is made within the maximum Exploration Period of seven (7) Contract


Years (as provided in Article 6 2). and if the CONTRACTOR consider* it has not


had time to complete sufficient Gas Marketing Operations to declare the Discovery a


Commercial Discovery pursuant to Article 12 6 (a) or 14 5 (ak the CONTRACTOR


shall be entitled to request an extension of the Exploration Period (notwithstanding


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


GOVERNMENT in writing at least thirty (30) days poor to the end of the maximum


Exploration Paiod. together with a proposal for Gas Marketing Operations to be


undertaken during such extension If granted by the GOVERNMENT, any such








A.


17


 extension shall not exceed two (2) Contract Years l-'pon the expiry of such


extension, if it considers it has still not completed its Gas Marketing Operations


relating to such Discovery, the CONTRAC I OK shall be entitled to request a further


extension of two (2) Contract Yeais provided that it so requests the GOVERNMENT


in writing at least thirty (50) days prior to the end of the original extension, together


with a proposal for Gas Marketing Operations to be undertaken during such


extension.











6 10 If the CONTRACTOR considers that a Discovery of ( rude Oil and any Associated


Natural Gas is a Commercial Discovery, the CONTRACTOR shall have the


exclusive right to develop and pioducc such Commercial Discovery'- pursuant to the


terms of this Contract The Development Period for a Commercial Discovery of Cmdc


Oil and any Associated Nalmal Gas dull lx." twenty (20) years commencing on the


declaration of such Commercial Discovery by COM RACTOR in accordance with


Article 12 6 (a) of this Contract, with an automatic right to a five (5) year extension


(> 11 If the CONTRACTOR considers that a Discovery of Non-Associated Natural Gas is


a Commercial Discovery the CONTRACTOR 'hall have the exclusive right to


develop and produce such Commercial Discovery, pursuant to the terms o! this


Contract The Development Period for a Commercial Discovery of Non-Associated


Natural Gas shall be twenty (20) years, commencing on the declaration of such


Commercial Discovery by CONTRACTOR, ill accordance with Article 126 (a) or


Article 14 5 (a) of this Contract, with an automatic light lo a five (5) year extension


0.12 If Commercial Production from a Production Area is soil possible at the end of ill


Development Period as defined in Articles 6 10 or 6 11 above then, upon its request


the CONTRACTOR shall be era a led to an extension of such Development Period


under the same terms as those provided in this Contract Such request shall be nude in


writing by the CONTRACTOR at least six (6) Months before the end of the said


Development Period


The torn of any such extension of the Development Period shall be





(a) five (5) Years for Crude Oil and any Associated Natural Gas. and or





(b) fist: (5) Years for Non-Associated Natural Gas


Ml The CONTRACTOR shall have the right to terminate Production Operations for an\





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


notice to the GOVERNMENT of at least ninety (90) days rhis Contract shall


terminate on the expiry date of the last Production Area or when Production


Operations for all Production Areas have terminated








if

















18


 ARTICLE 7 - REIJNQITSIIMEN l>





7 I Suhjcct to the (vovwni of Artkfca 72 «d 73. the CON I K \< IOK shall surrender


portion* of the Contract Area a* follow*





la) twenty percent (25%) of the initial Contract Are* excluding any Prediction


Area*, at the end of the initial term of the Exploration Period leferred to in


Article 6 2. and


lb) .m additional twenty five percent (25%) of that pail of the C ontract Area


excluding any Production Areas, remaining at the end of each extension period


entered into under tin* Contract at the end of the initial terra of the Exploration


Period referred to in Article 6 2


7 2 For tile application of Article 7 I


(a) any areas already relinquished pursuant to Article 7 I Mow sli.ill be deducted





from areas to be surrendered;


(b) the CONTRACTOR shall have die right to determine the area, shape and


location of the Contract Area to be kepi, and


(c> areas relinquished under Article 7 1(a) shall be contiguous and areas relinquished


under Article 7 1(b) shall be contiguous


73 If the rrlinqurthmcvt referred to in Artide 7.1 can only be adaeved bv nclufrng pan of





the area of a Discovery. these percentages shall be reduced to exclude the Orson ex





7 4 During the Expiration Period. the CONTRACTOR may at the end of each Contract


Year surrender all or any part of the Contract Area by written notice sent to the


GOVERNMENT at lea« thirty (30) days in advance of the proposed date of surrender


subject to the provisions of ths Artide 7 4 Such voluntary surrenders during the


Exploration Period shall be deemed equal to the obligator* relinquish meres relerred to


under Article 7 I This Contract shall terminal in the event of total surrender of the


Contract Area


7 5 No surrender provided undo Artide 74 shall exempt the C ONTRACTOR from itv


outstanding obligations under this Contract In the event the CONTRACTOR elect* to


surrender the entee Contract Area without having fulfilled the Minimum Exploration


Obligations rdating to the then current Sub-Period as provided in Article 10 2 or Article


10 3. the CONTRACTOR shall pay to the GOVERNMENT the relevant outstanding


amour* as detailed m Article IP 2 or Artide 10 3. as the case may be


76 The boundaries of the pertain of the Contract Area to be relinquished by the





C ON TRAC ~l OR shall be commumcaed to the GO\ I.RNMI NT by -men notice at


lc*« thnty (30) days m advance of the retevar* date for relinquishment pursuant to


Article 7 I





¥


A





 AR 11C IK 8 - MANAGEMENT COMMITTEE





8 1 A Management Committee shall be established within thirty (50) days following the


Effective Date fot tlie purpose of providing orddlv direction of all matters pertaining


to the Petroleum Operations and Work Program


The Management Committee shall comprise an equal number of members designated


b> each Party two (2) members designated by the GOVERNMENT and two (2)


members designated by the CONTRACTOR


Upon ten (10) days notice, each Paitv may substitute any of its members of the


Management Committee The chairman of the Management Committee shall be one


of the members designated by the GOVERNMENT (the “Chairman**) The vice


chairman of the Management Committee shall be one of the members designated by


the CONTRACTOR (the “Vice-Chairman"). In the absence of the Chairman, the


Vice-Chairman shall chair the meeting


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


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


capacity


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


suggestions and recommendations to the Panies regarding the following subject


matters:


(a) Work Programs and Budgets.


(b) the ( ONTRA(TOR's activity reports;


(c) production levels submitted by the CONTRACTOR based on generally


accepted practice in the international petroleum industry .


(d) accounts of Petroleum Costs;


(c) procurement procedures for potential Subcontractors, with an estimated sub¬


contract value in excess of ten million Dollars (SI 0,000.000). submitted by the


CONTRACTOR in accordance with Article 19 3,


(t) Development Plan and Budget for each Petroleum Field


(g) any matter having a material adverse affect on Petroleum Operations.





(h) any other subject matter of a material nature that the Panics arc willing to


consider





8 3 Each Party shall have one (I) vote in the Management Committee The Management


Committee cannot validly deliberate unless each Party is represented by at least one


(I) of its members or its deputy











20


The Management Committee shall attempt to reach unanimous agreement on any subject


matter being submitted In the event tin* Management Committee cannot reach


unanimous agreement, a second meeting shall be held within fourteen (14) days to


discuss the same subject matter and attempt to reach a unanimous decision


Except as provided for in Article 8 4 and Article 8 *. in the event tlut no agreement is


reached at the second meeting, the Chairman shall ha\c the trc-breaking vote


8 4 In the event that, during the Exploration Period, no agreement is readied at the second


meeting of the Management Committee, as provided for in Article 8 3. or unanimous





CONTRACTOR shall he deemed adopted by the Management Committee


8 5 Notwithstanding rise provisions of Article 8 3. unanimous approval of the Management


Committee shall be requited for


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


Budget prepared alter the first Commercial Discovers in the Production Area


relating lo such Commercial Discovery' (unless such Exploiation Work Program


and Budget has been deemed approved by the Management Committee in


accordance with Article 11.4);


(b) approval of. ami any material revision to. the Development Plan the productwn


schedule, lifting schedule and Development and Pioduclioii Work Programs and


Budgets (unless such Development Plan has been deemed approved by the


Management Committee in accordance wiih Article 12 9 or Article 12 10).


(d) establishment of odes of procedure for the Management Committee.


(c) approval of, and any material revision to. procurement procedures for goods


and/or services, submitted by the CONTRACTOR in accordance with Article


19 3 (unless such procedures have been deemed approved by the Management


Committee in accordance wuh Article 19 3).


(0 approval of. and any material revision to. any proposed pipeline project,


submitted by CONTRACTOR in accordance with Article 33 3.


(g) approval of a first rate hank in which to place the Decommissioning Reserve


Fund, in accordance with Article 38 I


(h) approval of. and any material revision to. any proposed decommissioning and


site restoration plan.


(i) any terms of reference which are requited to be prepared and agreed for the


purposes of expert determination, pursuant to Article 42 3. and


(j) any matter having a matet ial adverse affect on Petroleum ()permions


8 6 Ordinary meetings of the Management Committee shall take place in the Kurdistan


Region, alternately at the offices of the GOVERNMENI and those











21


CONTRACTOR, or at any other location agreed between Parties, at least twice a


Contract Year prior to the date of the first Commercial Discovery and three times a


Contract Year thereafter


8 7 Cither Party may call an extraordinary meeting of the Management Committee to


discuss important issues or developments related to Petroleum Operations, subject to


giving reasonable prior notice, specifying the matters to be discussed at the meeting,


to the other Party The Management Committee may from time to time make


decisions by correspondence provided all the members have indicated their approval


of such decisions in such correspondence


8 X Unless at least one (I) member or its deputy of each Party is present, the Management


Committee shall be adjourned foi n period not to exceed eight (81 days The Party


being present sliall then notify the otlici Party of the new date time and location for


the meeting


8.9 I he agenda for meetings of the Management Committee shall be prepared by the


Operator in accordance with instructions of the Chairman and communicated to the


Parties at least fifteen (15) days print to the date of the meeting I he agenda shall


include any subject matter proposed by either Party The Operator shall be


responsible for preparing and keeping minutes of the meetings and decisions Copies


of such minutes shall be forwarded to each Party for review and approval Each Party


shall review and approve such minutes within ten (10) days of receipt of the dial)


minutes A Party who fails to notify in writing its approval or disapproval of such


minutes within such ter. (10) days shall be deemed lo base approved the ir notes


8 10 If required, the Management Committee may request the creation of a technical sub¬


committee or any other sub-committce to assist it Any such sub-cominee shall be


composed of a reasonable number of expens from the GOVERNMENT and the


CONTRACTOR After each meeting, the technical sub-committee or any other sub¬


committee shall deliver a written report to the Management Committee


8 11 Any costs and expenditure incuned by the CONTRACTOR fox meetings of the


Management Committee ot any technical sub-committee or any other sub-committee


shall be considered as Petroleum Costs and shall be recovered by the


( ON I RAC TOR in accordance with the provisions of Articles I and -5








ARTICLE 9 - GUARANTEES





9 I Each entity constituting the CON TRACTOR shall provide the GOVERNMENT, if so


required by the latter pursuant lo written notice received by the CONTRACTOR entity


within thirty (30) days of the Effective Date, with a corporate guarantee m a form as shall


be agreed in good faith between the GOVERNMENT and each CONTRACTOR entity


not later than ninety (90) days after the Effective Date provided that such corporate


guarantee shall be given only in respect of the Minimum Exploration Obligations for the


First Sub-Period up to the total amount of the minimum financial commitment for the


Minimum Exploration Obligations for the First Sub-Pcnod (as such details are provided


in Article 10 2) and shall expire automatically upon completion of the performance of





fCf





22


such Minimum Exploration Obligations or expenditure of such minimum financial


commitment, whichever is the earlier


9.2 Not later than sixty (60) days allcr the commencement of the Second Sub-Period, each


entity constituting the CONTRACTOR shall provide the GOVERNMENT, if so


required by the latter pursuant to written notice received by the CONTRACTOR entity


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


form substantially agreed between the GOVERNMENT and each CONTRAC EOR


entity for the First Sub-Period, subject to making the changes necessary in order for the


corporate guarantee to apply only to tire Second Period Minimum Exploration


Obligations up to the total amount of the minimum financial commitment for the


Minimum Exploration Obligations lor the Second Sub-Penod (as such details are


provided in Article 103). and provided that such corporate guarantee shall expire


automatically upon completion of the performance of such Minimum Exploration


Obligations or expenditure of such minimum financial commitment, whichever is the


earlier


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


Anicle 39. the relevant third party assignee shall provide the GOVERNMEN T, if so


inquired by the latter pursuant to written notice given to such assignee within thirty (30)


days of the Effective Date, with a corporate guarantee in the form agreed pursuant to


Article 9 I or 9.2, as applicable to the then current Sub-Period or in the absence of any


such agreed form of corporate guniantcc, in a form as shall be agreed in good faith


between the GOVERNMENT and such assignee not later than ninety (90) days after the


effective date of the assignment, provided that such corporate guarantee snali be given


only in rcs|>cct of the Minimum Exploration Obligations for the then ament Sub-Penod


up to the total amount of the minimum financial commitment for the Minimum


Exploration Obligations for such Sub-Period (as such details arc provided in Article 10 2


o* Article 10 3. as the case may be), and shall expire automatical!) upon completion of


the performance of such Minimum Exploration Obligations or expenditure of such


minimum financial commitment whichever is the earlier








ART 1C EE 10-MINIMUM EXPLORATION WORK OBI.IGA I IONS


101 The CONTRACTOR shall start Exploration Operations within thirl) (30) days of





Management Committee approval of the Exploration Work Program and Budget in


accordance with Article 8 of this Contract The CONTRACTOR shall perform


geological, geophysical and'or drilling works as provided under Articles 10 2 to 10 3


below (the Minimum Exploration Obligations' i If applicable, the said Minimum


Exploration Obligations shall be performed during each Sub-Penod in accordance with


good and prudent international oilfield practice








102 .During the Eirst Sub-Penod. the CONTRACTOR shall





(a) carry out geological and geophysical studies, composing the toUrMing





(i) the compilation of a technical database.


(li) the performance of a remote sensing study.











23


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


sensing results and plan for two dimensional seismic acquisition; and


(b) carry out a data search for existing data specific to this Contract Area,


comprising the following


(i) well data, if available, for example, electric logs.


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


(iii) icproccss seismic data, if available


(c) perform field work comprising structural, stratigraphic and lithologic mapping


and sampling.


acquire, process and interpret three hundred (300) line kilometre* of two


dimensional seismic data, committing for this purpose ;i minimum financial


amount of three million Dollars (US$3,000,000). and


(e) drill one (I) Exploration Well (the “First Exploration Well'). committing lor


this purpose a minimum financial amount of seven and one half million Dollars


(USS7.500.000) including testing and coring as appropriate


103 During the Second Sub-Period, the < ONTRACrOR shall


(a) ncquiic process and interpret furilicr seismic data (being either two


dimensional or three dimensional), if the C ON IKACTOR consider* that the


results (tom the First Exploration Well justify the acquisition of further


seismic data, and


drill one (I) Exploration Well (the * Second Eiploration Well") committing


for this purpose a minimum financial amount of five million Dollars


(USS5.000.000) including testing and coring as appropriate, unless the dau


from the First Exploration Well demonstrates that there is not a reasonable


technical case for drilling the Second Exploration Well in the Contract .Area


10 4 Notwithstanding the provisions m Articles 10 2 to 10 J dwve. for the execution of the


Minimum Exploration Obligations undo Articles 10 2 to 10 ) above. * is agreed as follows


(a) Minimum Exploration Obligations in the Second Sub-Period shall only apply in


the event the CONTRACTOR has not elected to notify the GOVERNMENT


that a will not enter into the Second Sub-Penod. m accordance with and subject to


Article 6 4


il*» Subject to Article 10 4

Minimum Exploration Obligations for the applicable Sub-Penod. even if this


entails exceeding the minimum financial amount for such Sub-Penod If the


CONTRACTOR has satisfied its Minimum Exploration Obligation* without


having spent the total minimum financial amount for such Sub-Period, it shall


be deemed to have satisfied as Minimum Exploration Obligations for such


Sub-Penod








24


bach Exploration Well shall be drilled to the depth agreed by the Management


Committee unless





(i) the formation is encountered at a lesser depth than originally


anticipated.


(ii> basement is encountered at a lesser depth than originally anticipated.


(iii) in the CONTRACTOR'S sole opinion continued drilling of the


relevant Exploration Well presents a hazard due to the presence of


abnormal or unforeseen conditions.


(iv) rock formations are encountered rendering it impractical to continue


drilling with standard equipment.


(v) petroleum formations arc encountered whose penetration requires


laying protective casing that does not enable the depth agreed by the


Management Committee to be reached


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


shall be deemed to have been drilled to the depth agreed by rhe Management


Committee and the CON I R \< TOR shall be deemed to have satisfied its


Minimum Exploration Obligations in respect of the Exploration Well


Any geological or geophysical work carried out or any seism c data acquired,


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


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


amounts spent in excess of the total minimum financial amount in any given


Sub-Period, shall be carried forward to the next Sub-Period and shall be taken


into account to satisfy the Minimum Exploration Obligations and/or the total


minimum financial amount for such subsequent Sub-Period


For the avoidance of doubt, if (i> in the First Sub-Period, ( ONTKAt IOR


performs any of the Minimum Exploration Obligations prescribed for the


Second Sub-Period in Article 10.3. and (ii) CONTRACTOR has not elected


to notify the GOVERNMENT that it will not enter into the Second Sub-Period


(in accordance with and subject to Article 6.4). the performance of such


Minimum Exploration Obligations shall be deemed to satisfy the same


Minimum Exploration Obligations lor the Second Sub-Period


 ARTICLE 11 - EXPLORATION WORK PROGRAMS AND BUDGETS





11 I Within forty-five (45) days following the Effective Date, the CONTRACTOR shall


submit to the Management Committee a proposed work program and budget relating


to Exploration Operations (the "Exploration Work Program and Budget") for the


remainder of the Calendar Yeai Thereafter, no later than I Octobei in each Calendar


Year, the CONTRACTOR shall submit a proposed Exploration Work Program and


Budget to the Management Committee for the following Calendar Year


11 2 Each Exploration Work Program and Budget shall include details of. but not be


limited to. the following


(a) work to be undertaken.


(b) materials goods and equipment to be acquired.


(c) cost estimate of services to be provided including services by third parties


and/or Affiliated Companies of any entity constituting CONTRACTOR.


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


Accounting Procedure


11 3 The Management Committee shall meet within sixty (60) days following its receipt of


CONTRACTOR'S ptoposal to examine and. unless already deemed approved


pursuant to the provisions of Article 11 4 below approve the Fxploration Work


Program and Budget


11 4 Any modification to the Exploration Work Program and Budget requested by the


GOVERNMENT shall be subm.tted to the CONTRACTOR »Mhm thirty (30) days


following receipt of the proposed Exploration Work Program and Budget by ihe


Management Committee accompanied by all the documents justifying such request


If the GOVERNMENT does not request any modifications to the E xploration Work


Program and Budget within the above set timeframe the Exploration Work Program


and Budget shall be deemed approved by the Management Committee If the


GOVERNMENT does request am modifications to the Exploration Work Program


and Budget the CONTRACTOR shall communicate its comments on any such


requested modifications to the GOVERNMENT at the meeting of the Management


Committee or in writing prior to such meeting


115 The CONTRACTOR shall be authorised to make expenditures not budgeted in an


approved I vploration Work Program and Budget provided (hat the aggregate amount


of such expend it ui ex shall not exceed ten percent (10%) of the approved Exploration


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


' excess cxpendituics shall be reported as soon as is reasonably practicable to the


Management Committee Fix the avoidance of doubt, such excess expenditures shall


be considered Petroleum Costs and shall be recovered by the CONTRACTOR in


accordance with the provisions of .Articles I and 25


117 In cases of emergency, the CONTRACTOR may incur such additional expenditures


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








26


 expenditures shall be reported promptly to the Management Committee f or the


avoidance of doubt, such additional c\|>enditure shall lie considered Petroleum Costs


and shall be recovered by the CONTRACTOR in accordance with the provisions of


Articles I and 2S








AIM IC'I.K 12 - DISCOVERY AND DEVELOPMENT


12 I If the drilling of an Exploration Well results in a Discovery, the CONTRACTOR


shall notify tl»c GOVERNMENT within forty-eight (4S) hours of completing tests


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


CONTRACTOR reasonably requires to determine whether or not there is a


Discovery Within thirty (30) days following notification of the said Discovery, the


CONTRA< I’OR shall present to the Management Committee all technical data then


available together with its opinion on the commercial potential of tire said Discovery


(the ’Discovery Report") The CONTRACTOR shall provide in a timely manner such


other information relating to the Discovery as the GOVERNMENT may reasonably


request





AlHU'lMMl!. Program


12 2 If. pursuant to Article 12 I above, the CONTRACTOR considers that the Discovery


has commercial potential it shall, within ninety (90) days following notification to the


GOVERNMENT of the Discovery, submit an appraisal program in respect of the


Discovery (the 'Appraisal Program*) to the Management Committee The


Management Committee shall examine the Appraisal Program within thirty (30) days





Committee if it has not provided lire CONTRACTOR with its objections


accompanied by all the documents justifying such objection within thirty (30) days


following receipt of the said Appraisal Program If any such objection is made, the


Management Committee shall meet to discuss the Appraisal Program and such


objections thereto within sixty (60) days from its receipt of the proposed Appraisal


Progiaiti The CONTRACTOR shall communicate its comments on any such


objections to the GOVERNMENT at the meeting of the Management Committee or


in wntmg prior to such meeting





The Apptaisal Program shall include hut not be limited to the following


(a) an appraisal works program and budget,





(l>) an estimated time-frame for completion of appraisal works.





(c) the delimitation of the area to be evaluated, the surface of which shall not


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


appraised (the "Appraisal Area”)





12 3 If. following a Discovery, a ng acceptable to CO.NTR.ACTOR is available to drill a


well, the CONTRACTOR may drill any additional Exploration Well or any


Appraisal Well deemed necessary by the CONTRACTOR before or during the








A.


27


 Management Committee's review of the Discovery Report prodded in accordance


with Article 12 I or its review of the Appraisal Program





Vpnnmal Report


12 4 Ihe < ONTRACTOR shall submit a detailed report relating to the Discovery (the


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


following completion of the Appraisal Program


12 5 The Appraisal Repon shall include but not be limited to the following





(a) geological conditions.


th) physical properties of any liquids.







(d) type of substances obtained.


(e) Natural Gas composition.





(0 production forecast per well, and


(g) a preliminary estimate of recoverable reserves








12 6 Together with its .Appraisal Report, the CONTRACTOR shall submit a written


statement to the Management Committee specify ing that




Discovery, or


(b) the C ONTRACTOR has determined that the Discovers is not a Commercial


Discovery, or


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


Discovery, which may become a Commercial Discovery subject to additional


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


(d) the CONTRACTOR has determined that the Discovery is a significant


Discovery of Non-Associated Natural Gas. which may become a Commercial


Discovery subject to Gas Marketing Operations, in accordance with Article


145.


12 7 In case the statement of the CONTRACTOR corresponds to Article 12 6(c). the


CONTRACTOR shall submit a Wort Program and Budget to the Management


Committee within thirty (50) days following such statement Any well drilled to


evaluate the said significant Discovery shall be considered an Exploration Well











28


Development Plan





I? X If the Discovery has been declared a Commercial Discovery by the CONTRACTOR


pursuant to Article 12 6 (a) or Article 14.5 (a), the CONTRACTOR shall submit a


proposed Development Plan to the Management Committee within one hundred


eighty (IHO) days following the said declaration Such Development Plan shall


include details of. but not be limited to. the following:




Appraisal Report regarding the importance of the Petroleum Field to lie


developed within the Appraisal Area;


(b) drilling and completion of Development Wells;




Id) laying of gathering pipelines.





installation of separators, tanks, pumps and any other associated production


and injection facilities for the production.


(0 treatment and transportation of Petroleum to the processing and storage


facilities onshore cm offshore.





(g) laying of export pipelines inside or outside the Contract Area to the storage


facility or Delivery Point;




(i) plan for the utilisation of .Associated Natural Gas.


(j) training commitment in accordance with Article 2i of this Contract.


a preliminary decommissioning and site restoration plan, and


(I) any other operations not expressly provided for in this Contract but reasonably


necessary for Development Operations. Production Operations and delivery of


Petroleum produced, in accordance with generally accepted practice in the


international petroleum industry


120 The Development Plan shall be deemed approved by the Management Committee if


the GOVERNMENT, through its representatives on the Management Committee,


has not requested any modifications thereto within sixty (60) days after receipt of the


said Development Plan by the Management Committee





12.10 If the GOVERNMENT requests any modifications to the Development Plan, then


the Parlies shall meet within sixty (60) day s of receipt by the CONTRACTOR of the


GOVERNMENTS written notification of requested modifications accompanied by


all the documents justifying such request, and shall discuss such request The





AO


29


CONTRACTOR shall communicate its comments on any such requested


modifications 10 the GOVERNMKN1 at such meeting or in writing prior to such


meeting. Any modification approved by the Management Committee at such meeting


or within a fuithci petiod of thirty (.10) days from the date of Rich meeting shall be


incorporated into the Development Plan which shall then be deemed approved and


adopted.


12 11 If the CONTRAC I OK makes several Commercial Discoveries within the Contrast


Area each such Commercial Discovery will hast a separate Production Area The


CONTRAC FOR shall be entitled to develop and to produce each Commercial


Discovery and the GOVERNMENT shall provide the appropriate Permits covering


the Production Area In case the area covered by the Commercial Discovery extends


beyond the boundaries of the Contract Area, and to the extern such area outside the


Contract Area is not the subject of a Petroleum Contract (as defined m the Kurdistan


Region Petroleum Act) with a third party, the provisions of Article 14 2 shall apply








ARTICLE 13 - DEVELOPMENT AND


PRODUCTION WOKh PROGRAMS AND III IX.» I


131 Upon the approve! of the Development Plan bv the Management Committee the


CONTRACTOR shall start the Development Operations for the Commercial


Discovery in accordance with the Development Plan and the prices generally


accepted in the international petroleum industry


Approval ofAnniiJil Development Works Programs and Budget


13.2 Within ninety (90) days following approval of the Development Plan by the


Management Committee, the CONTRACTOR shall prepare and submit to the


Management Committee a proposed work program and budget lor Development


Operations (the 'Development Work Program and Budget’) to be carried Out in the


Production .Area during the following Calendar Year Thereafter, no later than 1


October in each Calendar Year, the CONTRACTOR 'lull submit to the


Management Committee its Development Work Program and Budget for the


following Calendar Year To enable the Management Committee to forecast


expenditures, each Development Work Program and Budget shall include details of.


but not be limited to, the following


(a) works to be carried out.


(b) material and equipment to be acquired by main categories.


(c) type of services to be provided, distinguishing between third panics and


Affiliated Companies of any entity constituting CONTRACTOR and


id) categories of general and administrative expenditure


13 3 If ihc GOVERNMENT has not requested any modifications to the Deselopmcnt


Work Program and Budget through its representatives in the Management Commitee


within thirty (30) days from receipt of such proposal, the Development Work


Program and Budget shall be deemed approved by the Management Committee


Any modification to the Development Work Program and Budget requested fc> tlie


GOVERNMENT shall be submitted to the CONTRACTOR within thirty (30. iavs


following receipt of the proposed Development Work Program and Budget t> the


Management Committee, accompanied by all the documents justifying such request


If any such modification is proposed, ihe Management Committee shall me-e: to


discuss the Development Work Program and Budget and proposed modifies: ons


thereto within sixty (60) days from its receipt of the proposed Development '■

Program and Budget The CONTRACTOR shall communicate its comments c~ any


such requested modifications to the GOVERNMENT at the meeting c: the


Management Committee or in writing prior to such meeting


13 4 The CONTRACTOR shall be authorised to incur expenditures not budgeted " an


approved Development Work Program and Budget provided that the aggregate


amount of such expenditures shall not exceed ten percent (P/%) of the appr.-ved


Development Work Program and Budget in any Calendar Year and provided f_".her


that such excess expenditures shall be reported as soon as is reasonablv practice e to


the Management Committee For the avoidance of doubt, such excess exper : :ure


shall be considered Petroleum Costs and shall be recovered by the CONTRACTOR


in accordance with the provisions of Articles I and 25


13 5 In cases of emergency, the CONTRACTOR may incur such additional expend ..res


as it deems necessary to protect life, environment or property Such add ■•. nal


expenditures shall be reported promptly to the Management Committee I the


avoidance of doubt, such additional expenditure shall be considered Petroleum 'is


and shall be recovered by the CONTRACTOR in accordance with the provist • > of


.Articles 1 and 25.


Approval of Annual Production Works Programs ami Budget


13.6 No later than I October of the Calendar Year preceding the estimated commence ~ ent


of production pursuant to an approved Development Plan and thereafter no late' tan


I October in each Calendar Year, the CONTRACTOR shall submit :: the


Management Committee a proposed work program and budget for Prod.- on


Operations (the "Production Work Program and Budget ) for the foil: • ng


Calendar Year To enable the Management Committee to forecast expenditure the


Production Work Program and Bridget shall include details of but not be limited to,


the following:


(a) works to be carried out.


(b) material ami equipment to be acquired by main categories.

















31


 (C> type of services to be provided, distinguishing between thud panics and


Affiliated Companies of any entity constituting CONTRACTOR, and


categories of general and administrative expenditure








13.7 If the GOVERNMENT has not requested any modifications to the Production Work


Program and Budget through its representatives in the Management Committee


within thirty (30) days from receipt of such proposal, the Production Work Program


and Budget shall lie deemed approved by the Management Committee








GOVERNMENT shall be submitted to the CONTRACTOR within thirty (30) days


following receipt of the proposed Production Work Program and Budget by the


Management Committee, accompanied by all the documents justifying such request


If any such modification is proposed, the Management Committee shall meet to


discuss the Production Woik Program and Budget and proposed modifications thereto


within sixty (60) days from its receipt of the proposed Production Work Program and


Budget The CONTRACTOR shall communicate its comments on any such


requested modifications to the GOVERNMENT at the meeting of the Management


Committee or in writing prior to such meeting


13 8 The CONTRACTOR 'hall be authorised to incur expenditures not budgeted in an


approved Production Wink Program and Budget provided that live aggregate amount


of such cxpcndiluies shall not exceed ten percent (10%) of the approved Production


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


excess expenditures shall be reported as soon as reasonably practicable to the


Management Committee For the avoidance of doubt such excess expenditure shall


be considcicd Petroleum Costs and shall be recovered bv the CONTRACTOR in


accordance with the provisions of Articles 1 and 25


13 9 In eases of omcigeney the ( ONTRAC'TOR may incur such additional expenditure


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


expenditures shall he reported promptly to the Management Committee. For the


avoidance of doubt, such additional expenditure shall be considered Petroleum Costs


and shall be recovered by the CONTRACTOR in accordance with the provisions of


Articles I and 25


13 10 After the commencement of Commercial Production the CONTRACTOR shall pay


to the GOVERNMENT, in arrears, an annual surface rental for the Production Area,


of ten Dollars (CSSIO) per square kilometre per Contract Year ('‘Production


Rental ) Such Production Rental shall be considered as a Petroleum Cost and shall


be recovered by the CONTRACTOR in accordance with the provisions of Articles I


and 25


























32


 ARTICLE 14 - NATURAL GAS





VLy.fo.i'Jlie.rftrtflvum Qiwiitiyn?


14 I To lake account of specific conditions relating to Natural Gas and to promote its


development in the Kurdistan Region, the GOVERNMENT will grant specific


benefits to the CONTRACTOR on principles materially similar to those contained in


this Contract, including, consistent with the Kurdistan Region Petroleum Act. more


generous provisions in respect of the lecovery of Petroleum Costs and the sharing of


Profit Petroleum


14 2 The CONTRACTOR may freely use any Natural Gas required for the Petroleum


Operations If technically and economically justified, the CONTRACTOR shall in


priority use any Natural Gas for the purpose of enhancing recovery of Crude Oil in


accordance with standard practices in the international petroleum industry as follows





Associated Natural Gas


14.3 Any excess Associated Natuial Gas produced that is neither used in the Petroleum


Operations nor developed and sold by the CONTRACTOR shall, upon the


GOVERNMENT'S written request, he transfcircd at a delivery point to be agreed


between the Parties free of charge to the GOVERNMENT In such case, the


GOVERNMENT shall be solely responsible for collecting, treating, compressing


and transporting such Natural Gas front such agreed delivery point and shall be solely


liable for any additional direct and indirect costs associated therewith Tlw


construction and operation of required facilities as well js tl»c offtake of such excess


Associated Natural Gas shall occur in accordance with best practice in the


international petroleum industry and shall not interfere with the production, lifting


and transportation of the Crude Oil by the CONTRACTOR For the avoidance of


doubt, all expenditure incurred by the CONTRACTOR up to such agreed delivery


point shall be considered Petroleum Costs and shall be recovered by the


CONTRACTOR in accordance with the provisions of Articles I and 25


In the event the GOVERNMENT finds a market for Associated Natural Gas. it shall


promptly give written notice to the CONTRACT OR and the CON IRACTOR may


elect to participate in supplying such Associated Natural Gas within ninety (90) days


following notification thereof by the GOVERNMENT If the CONTRACTOR


elects to participate in supplying Associated Natural Gas to such market, all


expenditures associated with any necessary facilities shall be paid for by the


CONTRACTOR For the avoidance of doubt, such expenditure incurred shall be


considered Petroleum Costs and shall be recovered by the CONTRACTOR in


accordance with the provisions of Articles I and 25.


Non Associated Gn*


14 4 The CONT RACTOR shall be entitled at any time during the Exploration Period and the


Development Period to carry out (ins Marketing Operations





14.5 If, pursuant to Article 12 6 (d), the CONTRACTOR has determined that the


Discovery is a significant Discovery of Non-Associatcd Natural Gas, which may











33


become a Commercial Discovery subject to Gas Marketing Operations, it shall cany


out Gas Marketing Operations, at the end of which it shall submit a written statement


to the Management Committee specifying that


(n) the CONTRACTOR has determined that the Discovery is a Commercial


Discovery, or


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


Discovery.


I-I 6 l or the purpose of this Agreement. "Gas Marketing Operations" means any activity


relating to the marketing of Non-Associated Natural Gas. including but not limited to any


evaluation to find « commercial market for such Non-Assodated Natural < ms and/or to


find a commercially viable technical means of extraction of such Non-Associated Natural


Gas and may include activities related to evaluating the quantities of Non-Associated


Natural (ins to be sold, its quality, the geographic location of potential markets to be


supplied as well as evaluating the costs of production, tiansportation and distribution


of the Non-Associated Natural Gas from the Delivery Point to the relev ant market


M 7 All costs ,iii(l expenditure incurred by rite CONTRACTOR in the performance of the


activities in relation to the Gas Marketing Operations shall be considered Petroleum


Costs


14 8 No later than I October of the Calendar Year preceding the Calendar Year in which


any Gas Marketing Operations are due to occur the CON TRAC I OR shall submit to


the Management Committee its Gas Marketing Work Program and Budget for I In-


following Calendar Year To enable the Management Committee to forecast


expenditures, the Gas Marketing Work Program and Budget shall include but not be


limited to the following


(a) works to be earned out.


(b) type of services to be provided, distinguishing between thud parties and


Affiliated companies of any entity constituting CONTRACTOR


(c) categories of general and administrate expenditure


If the GOVERNMENT has not requested any modifications to the Gas Marketing


Work Program and Budge; through its representatives in the Management Committee


within thirty (50) days from receipt of such proposal, the Gas Marketing Work


Program and Budget shall be deemed approved by the Management Committee


An\ modification to the Gas Marketing Work Program and Budget requested by the


GOVERNMENT shall be submitted to the CONTRACTOR within thirty (30) days


following receipt of the proposed Gas Marketing Work Program and Budget bv the


Management Committee, accompanied by all the documents justifying such request


If any such modification is proposed, the Management Committee shall meet to


discuss the Gas Marketing Work Program and Budget and proposed modifications


thereto within sixty (60) days from its receipt of the proposed Gas Marketing Work


Program and Budget The CONTRACTOR vhall communicate its comments on any


<6 m


 such requested modifications to the GOVERNMENT at the meeting of the


Management Committee or in writing prior to such meeting





14 9 The COM RAC'TOR shall be authorised to incur expenditures not budgeted in an


approved Gas Marketing Work Program and Budget provided that the aggregate


amount of such expenditure shall not exceed ten percent (10%) of the approved


Budget m any Calendar Year and provided further that such excess expenditures shall


be reported as soon as reasonably practicable to the Management Committee for the


avoidance of doubt, such excess cxpcndiiuic shall be considered Petroleum Costs and


shall be recovered by the CONTRACTOR in accordance with the provisions of


Articles I and 25


14 10 If any Non-Associated Natural Gas is discovered within the Contract Area, and the


CONTRACTOR reasonably considers that the Non-Associated Natural Gas


Discovery will only he a Commercial Discovery if certain terms of tilts Contract arc


amended, it shall be entitled to request an amendment to this Contract, with its


reason' The GOV I RNMI \ I shall in good faith give reasonable consideration to


the CONTRACTOR s proposed amendment and reasons. If the GOVT MM MEN I


rejects such request, and the I xploration Period expires without the CONTRAC T OR


laving declared such Discovery to be a Commercial Discovery in accordance with


Article 12 6 (a) or Article 14 5 (a), and subsequently within a period of ten (10) years


from the end of such Exploration Period, the GOVERNMENT reaches agreement


with any third party to develop such Discovery, (the "Gas Development") then the


following provisions shall apply


(a) either before or upon agreement having been reached (and whether or not such


agreement is recorded in a fully termed production sharing andor operating or


other like agreement) in relation to the Gas Development (the Proposed


Contract') (subject only to the nghts of the CONT RACTOR entities to pre¬


empt such Proposed Contract pursuant to Article 14 10(b) below and such


conditions as may be applicable) then the GOVERNMENT shall, as soon as


reasonably practicable after the occurrence of such circumstances serve on each


of the CONTR\CTOR entities, a notice to that effect and shall with such


notice provide such information and mam terms of such agreement (else


“Agreed Terms') and including


(i) the identity of such thud party, and


(u) the effective date of the Proposed Contract, and


(in) the applicable commercial terms, including but not limned to bonuses


royalties, cost recovery, profit sharing, taxation and am other similar


. terms, and





(hr) * all and any material conditions to which the Proposed Contract is


subject





(b) Within one hundred and eighty days (180) days after receipt of a notice under


Article 14 10 (a) in relation to a Proposed Contract each of the


CONTRACTOR entities shall elect either











(i) to enter into the Proposed Contract on the same or substantially similar


terms to the Agreed Teims. with the right to cost recover all Petroleum


Costs incurred under this Contract against all Petroleum revenues


received under the Proposed Contract, up to any cost recovery limits


set out therein, or


(ii) to waive the afoicsaid light of pre-emption in relation to the Proposed


Contract,


and shall serve notice accordingly upon the GOVERNMENT and all the





CONTRACTOR entities and in default of receipt by the GOVERNMENT


of any such notice within such period of one hundred and eighty (180) days


such CONTRACTOR entity shall be deemed conclusively to have served a


notice electing to waive its aforesaid right of pre-emption in relation to the


Proposed Contract


(c) In the event that more than one of the CONTRACTOR entities exercises its


lights under Anicle 14 10(b) (i) m relation to the Proposed Contract then the


GOVERNMENT shall transfer tlic relevant interest upon the Agreed terms


tin accordance with 14 10 (b) (i)) to each of such CON TRACTOR entities so


exercising their rights, in the proportions in which then respective percentage


interests bear to the aggregate of their respective percentage interests under


the relevant Joint Operating Agreement (as it applied at the end of the


I xploration Period) or n such other proportions as such i ONTRACTOR


entities shall agree between them


(d) In the event that one of the CON TRACTOR entities exercises its nuhts undo


Anicle 14 10 (b) (i) in relation to the Proposed Contract then the


GOVERNMENT shall transfer the whole of the relevant interest upon the


Agreed Terms (in accordance with 14 10 (b) (i)> to such CON IK ACTOR


entity


(e) In the event that none of the CONTR ACTOR entities exercises us rights


under Anicle 14 10 (b) (i) then the aforesaid rights of pre-emption shall


thereupon cease to apply in relation to the Proposed Contract


(0 The provisions of this Anicle 14 10 shall survive any termination of this


Contract


14 11 If the pre-emption tights in .Anicle 14 10 arc not exercised and the GOVERN MEN I


enters into the Proposed Contract with live third party concerned, the GOVERNMENT


will use its best endeavours to avoid any clYecl which may hani|>cr the Petroleum


Operations of the CONTRACTOR while producing Petroleum

















A. (J#*








36


Haring





14 12 In the course of activities provided for under this Contract, flaring of Natural (ias. except


short-term flaring necessary few testing or other operational reasons in accordance with


practice generally accepted in the international petroleum industry (which shall include


the flaring of Associated Natural (ias to tlie extent the CONTRACTOR considers that


re-mjecting Associated Natural Ci.sx is not justified technically and economically and


provided the GOVERNMENT decides not to take such Associated Natural (ias). is


prohibited, except on prior authorisation of the GOVERNMENT, such nulhotiMtion not


to Ik unreasonably withheld ot delayed. The CONTRACTOR shall submit such request


to tire GOVERNMENT, which shall include an evaluation of reasonable alternatives to


Hating that have been considered along with information on the amount and quality of


Natural (ias involved and the duration of the tequestod flaring











ARTICLE 15- ACCOUNTING AND AUDITS





15 I The CONTRACTOR shall keep in its offices in the Kurdistan Region copies of all


books and accounts relating to the Petroleum Operations (hereinafter the


"Accounts"), except during the Exploration Period, when the CONTRACTOR shall be


entitled to keep the Accounts at its headquarters The Accounts shall reflect in detail


expenditure incurred in function ol the quantities and value of Petroleum produced


All books and accounts which are made available to the GOVERNMENT in accordance


with the provisions of this Contract shall be picparcd in the English language Tlie


Accounts shall be kept in accordance with generally accepted practice and procedures


in the international petroleum industry and in accordance with the provtsionv of the


Accounting Procedure (attached hereto as Annex B) The Accounts shall he kept in


Dollars, which shall be the reference currency for the purposes of Articles 25. 26. 2’


and 31 ot this Contract





15 2 Within ninety (90) days following the end of each Calendar Year, the


CON TRACTOR shall submit to the GOVERNMENT a summary statement of all


Petroleum Costs inclined during the said Calendar Year The report shall also include a


profit calculation pursuant to the provisions of Article 26 of this Contract The right of the


GOVERNMENT to examine, verify and audit the said statements of Petroleum


Costs shall be exercised within a period of four (4) Calendar Years following the end


of the said Calendar Year, failing which no adjustments shall be made later Subject


to tlie said timeframe, the GOVERNMENT, acting reasonably and in accordance


with generally accepted international petroleum industry practice, may request in


writing all reasonably available information and justifications for its audit of


Petroleum Costs








Should the GOVERNMENT consider, on the basis of data and information


available that the CONTRACTOR made a material mistake or there is any


irregularity and considers that any corrections, adjustments or amendments should be


made the GOVERNMENT shall notify the CON TRACTOR in writing within the


said required timeframe The CONTRACTOR shall then have sixty (60) days to


make necessary corrections, adjustments or amendments or to present its comments


in writing or request a meeting with the GOVERNMENT The GOVERNMENT


CKT








37


shall within thirty (30) dnys of CONTRACTOR'S response, notify the


CONTRACTOR in writing of its position on the corrections, adjustments,


amendments or comments If thereafter there still exists a disagreement between the


GOVERNMENT and the CONTRACTOR, the dispute will be settled in


accordance with Article IS 4 of this Contract


IS J In addition to the annual statements of Petroleum Costs as provided in Article IS 2


above, the CONTRACTOR shall provide the GOVERNMENT with such


production statements and report a, ns required pursuant to Article 16 3


IS 4 Any dispute between the Parties under this Article IS that cannot be settled amicably


may he submitted to an expert in accordance with the provisions of Article 42 3 of


this Contract Notwithstanding the provisions of Article 42, in this specific instance


the decision of the expert shall nor necessarily he linal and either Pans may decide to


submit the matter to arbitration in accordance with the provisions of Article 42.1 of


this Contract








Alt I ICI.E 16 - CONTRACTOR’S RIG Ill'S AND OBLIGATIONS


I6i PcrnnHitm KimtHBiaiivt


If not done already, within ninoty (90) days following the Effective Date, the


CON TRACTOR shall open an office and appoint a permanent representative in the


Kurdistan Region, who ma> be contacted by the GOVERN'I» NI with regard to any


matter relaiing to this Contract and will be entitled to receive any correspondence


addressed to the CON TRACTOR


16 2 Conduct Of Petrol earn Operations


The CON I RACTOR shall cany out all Petroleum Operations in accordance with


the provisions of this Contract, generally accepted practice in the international


petroleum industry and applicable Kurdistan Region law


The CONTRACTOR shall be responsible for the conduct, management, control and


administration of Petroleum Operations and shall be entitled to confect Petroleum


Operations in accordance with the provisions of this Contact In conducting its


Petroleum Operations, the CONTRACTOR shall have die right to use any Affiliate


of each entity constituting COM RACTOR its and their Subcontractors and the


employees, consultants, and agents of each of the foregoing The C OM R ACTOR


and all such persons shall at all times have free access to the Contract Aren and any


Production Areas for the purpose of carrying out Petroleum Operations


























38


16 3 information »»<*





The CONTRACTOR shall provide the GOVERNMENT with periodic data and


activity reports relating to Petroleum Operations. Said reports shall include details of.


but not be limited to. the following:


ta) information and data regarding all Exploration Operations, Development


Operations and Production Operations (as applicable) performed during the


Calendar Year, including any quantities of Petroleum produced and sold,


lb) data and information regarding any transportation facilities built and


operated by the < ON TRACTOR.


(c) a statement specifying the number of personnel, their title, their nationality


as well as a report on any medical services and equipment made available to


such personnel, and


id) a descriptive statement of nil capital assets acquired foi the Petroleum


Operations, indicating the date and price or cost of their acquisition


164 Requi.rjmt!».for 1‘vhblVMH. QpmliV'l)





The CONTRACTOR may freely use any Petroleum produced within the Contract


Area for the Petroleum Operations.


16 3 Suwmuon bv the GOVERNMENT





I he CON I RACTOR shall at all times provide reasonable assistance as may


reasonably be requested by the GOVERNMENT during its review and verification


of records and of any other information relating to Petroleum Operations at the


offices, worksites or any other facilities of the CONTRACTOR


Ipon giving reasonable prior notice to the CONTRACTOR, the GOVERNMENT





may send a reasonable number of representatives to the work-sites or any other


facilities of the CONTRACTOR in the Kurdistan Region to perform such reviews


and verifications The representatives of the GOVERNMENT shall at all times


comply with any safety regulations imposed by the CONTRACTOR and such


reviews and verifications shall not hinder the smooth progress of the Petroleum


Operations


16 6 AttOS 19 facMiff





For the performance of the Petroleum Operations, the CONTRACTOR, any Affiliate


of each entity constituting the CONTRACTOR its and their Subcontractors and the


employees, consultants and agents if each of the foregoing shall at all times be


granted free access to the Contract Area and to any facilities for the Petroleum


Operations located within or outside of the Contract Area or within or outside the


Production Area, for the purpose of carrying out the Petroleum Operations





A, l





39


16 7 Ise of Fat Hit in


The CONTRACTOR shall make available lo representatives of the


GOVFRNMEN I those facilities which are necessary to enable them to perform their


tasks including, in case of works to be performed on work sites, transportation,


accommodation and board, under the same conditions as those provided by the


CONTRACTOR for ns own personnel


lb* Loss or Damage


The CONTRACTOR shall be responsible for any loss or damage caused to thud


parties by its or its Subcontractors personnel so*dy and directly resulting from their


negligence, errors or omiiuom m accordance with applicable Kurdistan Region Law


If> 9 Intellectual I'ronrm Kn»ln%


In its Petroleum Operation*, the CONTRACTOR shall icvcci any patens (xi.'nvm


to third parties


If. 10 litigation


The CONTRACTOR shall as soon as reasonably practicable inform the


GOVERNMENT of any material litigation relating to tins Contract


16 II Safety


The CONTRACTOR shall implement a health, safely and cmironmcr.t program and


take necessary measures to ensure hygiene, health and safety of us personnel carrying


out Petroleum Operations in accordance with generally accepted practice in the


international petroleum industry


Said measures shall include but not be limited to the following





(a) supplying fust aid and safety equipment for each work area and maintaining a


healthy environment for personnel.


(b) reporting to the GOV I RS MI NT within seventy-two (72) hours any accident


where personnel has been injured while engaged in Petroleum Operations and


resulting in such personnel being unable to return to work.


(c) implementing a permit-to-work procedure around hazardous equipment and


installations.





(d) providing safe storage areas for explosives, detonators and any other


dangerous products used in the operations.





(e) supplying fire-extinguishing equipment in each work area














40




the environment or Petroleum Field, in accordance with generally accepted


practice in the international petroleum industry.




formations and production of Crude Oil and Natural Cias at rates that do not


conform to generally accepted practice in the international petroleum industry





16.12 Production Rates





Subject to Article 43.2 of this Contract, in the event the production rate of the


individual wells and Reservoir of a Petroleum Field is to be set below the Maximum


Efficient Rate (MER) for the Reservoir as provided for in the Development Plan as a


consequence of a decision by the GOVERNMENT -r any federal or international


regulator)1 body, the GOVERNMENT undertakes to allocate any such reduction


fairly and equitably among the various operators (including the GOVERNMENT)


then producing in the Kurdistan Region, pro rata their respective production rates In


such event the GOVERNMENT shall grant an extension ol the Development Period


of any Production Area so affected for a reasonable period of time in order to produce


the Petroleum which would otherwise have already been produced, had the MER for


the individual wells and Reservoir of the Petroleum Field been maintained


16 13 Lmi Stains





I he respective rights, duties, obligations and liabilities of the CONTRACTOR and


the GOVERNMENT under this Contract arc to be understood as being separate and


individual and not joint and several The Parties agree that this Contract shall not


create and shall not be deemed to have created a partnership or other form of


association between them





16 14 Lifting


The GOVERNMENT and each entity constituting the CONTRACTOR shall have


the right and the obligation to take in kind and separately sell or otherwise dispose of


their respective shares of Petroleum Upon approval of the Development Plan, the


Parties shall meet as soon as practicable to reach a detailed agreement governing the


lifting of Petroleum by each such entity constituting the CONTRACTOR Such


lifting agreement shall include, inter alia, the following





(a) the obligation of the GOVERNMENT and each entity constituting the


CONTRACTOR to lift, regularly throughout each Calendar Year, their share


of Petroleum produced from the Production Area.





(b) notification procedures by thd Operator to the GOVERNMENT and each


entity constituting the CONTRACTOR regarding entitlements and


availability of Petroleum for lifting by each Party during each lifting period


and nominations by each Party.





the right of the Parties to lift any available Petroleum not scheduled for lilting


and/’or not lifted by the other Party during each such lifting period.


4. ^











 The COYI RACTOR shall sell and transfer to the GOVERNMENT, upon written


request of the Ministry, any amounts of ( rude Oil that the GOVERNMENT shall


deem necessary to meet Kurdistan Region internal consumption requirements The


sales price of such Crude Oil shall he the International Market Price The


GOVERNMENT shall provide the CONTRACTOR with not less than six (6)


months' advance written notice of its intention to buy such Ciude Oil


Payments shall be made in US Dollars and otherwise on terms consistent with


international standards in the petroleum industry I he CONTRACTOR’S obligation


to sell Crude Oil to the GOVERNMENT shall be no greater than the obligation that


applies to another contractor, or otlier contractors in the Kurdistan Region





The provisions of this Article 16 15 shall not apply to Non-Associated Natural G*'











VIM l< IE 17 - USE OF LAND AND EX IS IING INI R VSTRt CTLRF


17 I The GOVERNMENT shall make available to Ik- C ON TRACTOR any land or


properly in tlx* Kurdistan Region required for the Petroleum Operations provided,


however, the CONTRACTOR shall not request to use any such land unless there is a


real need foi it The CONTRACTOR shall have the light to build and maintain,


above and below ground any facilities required for the Petroleum Operations


17 2 If it becomes necessary for conduct of the Petroleum Operation* to occupy and use


any land or property in the Kurdistan Region belonging to third parties, the


CONTRACTOR shall endeavour to reach amicable agreement with the owners of


such land If such amicable agreement cannot be reached the CON TRACT OR shall


notify’ the GOVERNMENT, on receipt of such notification the GOVERNMENT


shall determine the amount of compensation to be paid by the CONTRACTOR to


the owner if occupation will be for a short duration or the GOVERNMENT shall


expropriate the land or properly in accordance wkh applicable Kurdistan Region I j«


if such occupation will be long lasting or makes it henceforth impossible to resume


ongmal usage of such land or property The amount of such compensation shall be


fair and reasonable, in accordance with Article 37. Section I (a) (iii) of the Kurdistan


Region Petroleum Act. and shall lake into account the righis of the owixi and any


effective use of the land or property by its owner at the time of occupation by the


CONTRACTOR Any property rights shall be acquired by and recorded in the name


of the GOVERNMENT but the CONTRACTOR shall be entitled free use of the


land or property for the Petroleum Operations for the entire duration of this Contract


All reasonable costs, expenditure and lair and reasonable compensation (as required


pursuant to Article 37. Section I (a) (iii) of the Kurdistan Region Petroleum Act) which


results from such expropriation shall be borne by the CONTRACTOR For the


avoidance of doubt, such costs, expenses and compensation incurred by the


CONTRACTOR shall be considered Petroleum Costs and shall be recovered by the


CONTRACTOR in accordance with the provisions of Articles I and 25

















42


17 3 For its Petroleum Operations, the CONTRACTOR shall have the right in Iraq to use.


subject to applicable Law, any railway, tramway, road, airport, landing field, canal,


liver, bridge or waterway, any telecommunications network and any existing


pipelines or tiunspotiation infrastructure. on terms no less favourable than those offered


to other entities and. unless generally in force, to be mutually agreed


I 7 '1 Under national emergencies due to environmental catastrophe or disaster, or internal


or external war. the GOVERNMENT shall have the right to request to use any


transportation and communication facilities installed by the CONTRACTOR In


such cases, the request shall originate from the Minister for Natural Resources For the


avoidance of doubt, such costs, expenses or liabilities incurred by the


CONTRACTOR hereunder shall be considered Petroleum Costs and shall be


recovered by the CONTRACTOR in accordance with the provisions of Articles I


and 25


17 5 I oi its Petroleum Operations, the CONTRACTOR shall have the right in the


Kurdistan Region to clear land, excavate, drill, bore, construct, erect, place, procure,


operate, manage and maintain ditches, tanks, wells, trenches, access roads,


excavations, dams, canals, watet mains, plants, reservoirs, basins, storage facilities,


primary distillation units, extraction and processing units, separation units, sulphur


plants and any other facilities or installations for the Petroleum Operations, in


addition to pipelines, pumping stations, generators, power plants, high voltage lines,


telephone, radio and any other telecommunications systems, as well as warehouses,


offices, sheds, houses for personnel, hospitals, schools, premises, dikes, vehicles,


railways, roads, bridges, airlines, airports and any other transportation facilities


garages hangars, workshops, foundries, repair shops and any other auxiliary facilities


for the Petroleum Operations and. generally, everything which is required for us


performance of the Petroleum Operations The CONTRACTOR shall have the right


to select the location for these facilities


17 6 For its Petroleum Operations, the CONTRACTOR shall have the right in the


Kuidistan Region, subject to compliance with applicable Kurdistan Region Law. to


remove and use the topsoil, fully-grown timber, clay. sand. lime, gypsum, stones


(other than precious stones) and other similar substances as required for its Petroleum


Operations


The C ON TRACTOR shall have the nght in the Kurdistan Region to take or use any


water necessary for the Petroleum Operations provided it does not damage any


existing irrigation or navigation systems and that land, houses or watering points


belonging to third parties are not deprived of that use


17 7 The GOVERNMENT shall have the right in the Kurdistan Region to build, operate


and maintain roads, railways, airports, landing strips, canals, bridges, protection


dams, police stations, military installations, pipelines and telecommunications


networks in the Contract Area, provided this docs not increase the costs, or


compromise or have an adverse material effect on the performance of the Petroleum


Operations If the construction, operation and maintenance of such facilities by the


GOVERNMENT results in incfe^ed cost or expense for the COM RACTOR then,


for the avoidance of doubt, such cost and expense shall be considered Petroleum











43


 Cost* and shall be recovered by the CONTRACTOR in accordance with the


provisions of Articles I and 25





17 8 Upon request of the C ONTRACTOR the GOVERNMENT shall prohibit the


construction of residential or commercial buildings in the vicinity of facilities used


for the Petroleum Operations that may be declared dangerous due to the Petroleum


Operations and to prohibit any interference with the use of any facilities required for


the Petroleum Operations





179 Access to the Contract Area may be granted pursuant to an Access Authorisation, as


defined in. and consistent with the Kurdistan Region Petroleum Aa. to authored third


parties on reasonable terms and conditions (including coordination». including persons


authorised to construct, install and operate smxarcs. facilities and uralhnom. and to


cam out other writ*, provided that nothing in the Access Authorisation or in this Article


17 9 authorises the holder to dnll a Well or to perform any Petroleum Operations m


Contract Area


The GOVERNMENT 'lull not grant an Access Authonsation in respect of the Contract


Area until it lias taken into account any submissions nude by the CONTRACTOR in


such a way that there is no undue interference with the rights of CONTRACTOR








ARTICLE 18 - ASSISI AN< I FROM HIE GOVERNMENT


18 I To the extent allowed by Kurdistan Region Law and Iraqi law and at the specific





request of the C ONTRACTOR the GOVERNMENT shall take at: necessary steps


to assist the CON TRACTOR in. but not limited U» the following areas





(a) securing any necessary Permits for the use and installation of means of


transportation and communications.


(b) securing regulatory Permits in miners of customs or impon/export.





(cl securing entry and exit visas, wort and residence permits as well as any other


administrative Permits for CONTRACTOR’* and its Subcontractors' foreign


personnel (including their family members) working in the Kurdistan Region


and any other pan of Iraq during the implementation of this Cornua.


id) securing any necessary Permits to send Abroad documents, data or samples


for analysis or processing for the Petroleum Operations.


(e) relations with federal and local authorities and adnvni'tration*. including for


the purposes of the remainder of this Anicle 18 1.





(0 securing any necessary environmental Permits.


(g) obtaining any other Permits requested by the CONTRACTOR for the


Petroleum Operations.





fT


A?


44


(h) access to any existing data and information. including data and infcnWBOi


relating to the Contract Area held by previous operators or contractors. and





(i) providing all reasonably necessary security for Petroleum Operations


IS 2 Within the scope of services to be provided under this Article IS. reasonable ami duly





justified expenses incurred by the GOVERNMENT or paid to third parties shall be


charged to the CONTRACTOR and shall be considered Petroleum Costs and shall


be recovered by the CONTRAC TOR as Petroleum Costs in accordance with the


provisions of Articles I and 25








ARTICLE 19 - EQUIPMENT AND MATERIALS


l'» 1 The CONTRACTOR shall supply, or procure the supply of. all materials,


equipment, machinery, tools, spate parts and any other items or goods required for the


Petroleum Operations ("Equipment and Materials")


19.2 Said Equipment and Materials shall be provided by the CONTRACTOR in


accordance with the relevant Work Programs and Budgets.


19 3 As soon as possible after the Effective Date, the CONTRACTOR shall provide the


Management Committee w ith a copy of its procedures for procurement of Equipment


and Materials and/or services for the Petroleum Operations a\ required b> the


provisions of Article 8 2 (e). including the criteria for tender evaluation, which


procedures and criteria shall be in accordance with generally accepted standards in


the international petroleum industry. If the Management Committee does not request


any modifications to the procurement procedures within thins (30) days, the


procedures shall be deemed approved by the Management Committee


19 4 The CONTRACTOR shall give priority to Equipment and Materials that are readily


available in the Kurdistan Region and other pans of Iraq to the extent their price,


grade, quality, quantity, specifications, purchase, delivers and other commercial and


technical terms arc comparable in all material respects with those generally available in


the international petroleum industry








ARTICLE 20 - TITLE TO ASSETS


20 1 During the Exploration Period, any Assets acquired by the CONTRACTOR for the


Petroleum Operations shall remain the property of the CONTRACTOR or its


Subcontractors, as the case may be


20 2 During the Development Period, subject to Article 21, all Assets acquired by the


CONTRACTOR for the Petroleum Operations shall become the property of the


GOVERNMENT upon the completion of the recovery of their cost by the


CONTRACTOR, or the end of the Contract, whichever is the earlier


20 3 The provisions of this Article 20 2 shall not apply to anv Assets leased by the


CONTRACTOR or belonging to an Affiliated Company of a C ONTRACTOR


entity or belonging to its or then Subcontractors or its or their employees











ARTICLE 21 - USE Of IMF. ASSETS


21 I Each entity constituting the CONTRACTOR shall have the exclusive right to use.


ftec of any charge, all Assets described in Article 20 for the Petroleum Operations, as


well as for any petroleum operations under other agreements in the Kurdistan Region


to which it or any of its Affiliates is a party, provided that the Petroleum Operations


lake priority The GOVERNMENT agrees not to transfer or otherwise dispose of


any of such Assets without the COS TRACTORS poor written approval





21 2 The CONTRACTOR may freely move to the Contract Area any Assets from any


relinquished portion of the Contract Area, or from any other area in the Kirditfaa


Region








ARTICLE 22 ■ SUIlCONTRACTING


22 I I lie CONTRACTOR shall ensure that any Subcontractors it engages have all the


requilito experience and qualifications





22.2 I he ('ONTRACTOR shall give priority to Subcontractors from the kurdman Region


and otlier pails of Iraq to the extent their competence, rales, experience icputation.


qualifications, specialties, credit rating and terms of availably, delivery and other


commercial terms arc. in the CONTRACTOR’S sole opoton comparable in all


material respects with those provided by foreign companies operating m the


international petroleum industry Subcontractors must be bona tide Kurdistan


companies not related to am Public Officer, directly or indirectly, and must have all


necessary resources and capacay


22 3 Selection of Subcontractors shall take place in accordance with the procurement


procedures submitted by the CONTRACTOR to the Management Committee in


accordance wuh Article 19.3 and approved by the Management Committee


22 4 The CONI RACTOR shall provide the GOVERNMENT with copies of agreements


entered into with Subcontractors, where their amount exceeds the limit set by the


Management Committee from time to time




















r








46





 ARTICLE 23- PERSONNEL AND IKMMM.





1‘cnuinicl


23 I For the Petroleum Operation*, the CON I RACTOR shall give, and shall require its


Subcontractors to give, preference to personnel from the Kurdistan Region and other


parts of Iraq to the extent such personnel have, in the sole opinion of the


CON TRACTOR or the Subcontractor (as the case may l>c). the technical capability,


qualifications, competence and experience required to perform the work


21 2 Che CONTRACTOR shall give due consideration to the secondment of


GOVERNMENT personnel to the CONTRACTOR and of CONTRACTOR


personnel to the GOVERNMENT during the various phases of the Petroleum


Operations Terms and conditions for such secondment shall he mutually agreed b>


the Parties and any costs associated therewith shall he considered Petroleum Costs


and shall be recovered by the C ONTRAC I OK in accordance with the provisions of


Articles 1 and 25.


23 3 The CONTRACTOR and its Subcontractors shall have the right io hire foreign


personnel whenever the personnel from the Kurdivtan Region and other pans of Iraq


do not have the requisite technical capability, qualifications oi experience foi


positions to be filled us icquucd pursuant to Article 23 I In the event any such


foreign personnel and'or a member of then family engage in activities or commit acts


which breach Kurdistan Region l.nw. the (ONTRAC TOR 'I > it :1k- requevt of the


MANAGEMENT COMMITTEE, take the necessary steps to repatriate such


individual(s)





liaiimut





2*4 In a planned way. in accordance with the provisions of this Article 23 4 and Articles 23 5


and 23 6. the CONTRACTOR shall tram all its personnel from the Kurdistan Region


and other parts of Iraq directly or indirectly involved in the Petroleum Operation' for the


purpose of improving their knowledge and professional qualifications m order that sich


;

the CONTRACTOR’S foreign workers with an equivalent resunse Such training shall


also usdude the transfer of knowledge of petroleum techroiogy and the necessary


management experience so as to enable the personnel from the kurdsun Region and


other pans of Iraq to apply advanced and appropriate technology in use in the Petroleum


Operations, to the extent permitted by applicable Law and agreements with third panics,


and subject to appropriate confidentiality agreements





2.3 5 In addition to the requirements of Ankle 23 I. the recruitment, mtcgiaiion and training of


the CONTRACTOR'S personnel from the Kurdistan Region and other pans of Iraq shall


be planned, which plans shall be submitted to the Management Committee for its


approval The training plan shall take into consideration the requirements of Article 23 4


and may include training for GOVERNMENT personnel, depending on the extent to


which the amount allocated to the training plan, as prescribed by Article 23 6. is available


after taking into consideration the training of the CONTRACTOR’S Kurdistan and other


Iraqi personnel


V-S








47


Within ninety (90) days of the Effective Date, the CONTRACTOR shall submit to the


Management Committee a proposed training plan for the remainder of the Calendar Year


Thereafter, no later than I October in each Calendar Year, the CONTRACTOR shall


submit a proposed training plan to the Management Committee for tin following C alendar


Year


23.6 I'lte training plan referred to in Article 23 S shall provide for the allocation of the amoum


of seventy five thousand Dollars (USS75.000) for each Contract Year during the


Exploration Period and one hundred fifty thousand Dollars (US$150,000) for each


Contract Year during the Production Period











23 7 I'ltc CONTRACTOR shall be responsible for the training costs which


CONTRACTOR may incur in respect tlx: personnel it employs from the Kurdistan


Region and other pails of Iraq All such costs shall be considered as Pet i oleum Costs and


shall be recovered in accordance with the provisions of Articles I and 25 Costs incurred


by the ( ON TRACTOR for training programs for GOVERNMENT personnel shall be


borne by CONTRACTOR only to the extent that they are included in the


CONTRACTOR'S training plan, pursuant to Article 23.5 and shall also be considered as


Petroleum Costs and shall be recovered in accordance with the provisions of Articles I


and 25. The cost of all Other training programs for GOVERNMENT personnel shall be


the GOVERNMENTS responsibility


The Environment Fund


23.8 From the date of First Production from the Contta-t Area, the CONTRACTOR ■•hall


contribute the amount of fifty thousand Dollars (I S S^t.000) each Contract Year during


the Exploration Period and seventy five thousand Dollars (US$75,000) dunng the


Development Period into the Environment Fund established by the CON ERNME N I for


the benefit of the natural environment of the Kurdistan Region, pursuant to the Kurdistan


Region Petroleum Act Such amount shall be deemed to be a Petroleum Cost and dull be


recovered in accordance with Articles I and 25


23.8 Any expenditure incurred by the CONTRACTOR under this Article 23 shall be


considered Petroleum Costs and shall be recovered in accordance with Articles I and 25











ARTICLE 24-ROYALTY


24 I The CONTRACTOR shall pay to the GOVERNMENT a portion of Petroleum produced


and saved from the Contract Area, as provided in this Article 24 (the “Royalty").





24.2 . The Royalty shall be applied on all Petroleum produced and saved from the Contract


Area which is Crude Oil or Non-Associated Natural Gas, except for Petroleum used in


Petroleum Operations, re-injectcd in the Petroleum Field, lost, flared or for Petroleum that


cannot be used or sold and such Crude Oil atxl Non-Associated Natural Gas (excluding


[lie excepted Petroleum) shall be referred to collectively as “Export Petroleum" ami


separately and respectively as "Export Crude OH" and "Export Non-Associated








48


 Natural Gas"





243 If payable in cash, the amount of the Royalty calculated by applying the Royalty rates


provided under Article 24 4 shall be paid by the CONTRACTOR as directed by the


GOVERNMENT, in accordance with Article 24 7


If payable in kind, the quantity of Export Petroleum corresponding to the Royalty and


calculated by applying the Royalty rates prosided under Article 24 4 bdow. shall be


delivered in kind by the CONTRACTOR to the GOVERNMENT at the Delivery Point


Title and risk of loss of the Royalty paid in kind shall he transferred at the Delivery Point


Unless the GOVERNMENT requires the Royalty to be paid in kind, by giving the


CONTRACTOR not lev. than ninety (90) days prior written notice poor to the


commencement of the relevant Quarter, the GOVERNMENT shall be deemed to lusc


elected to receive the Royalty in full and in cash for the relevant Quarter


24 4 The Royally due on any Export Petroleum produced and saved in the Contract Area shall


be determined daily by applying the following teles ant Royalty rate, to the Export Crude


Oil or to the Export Non-Associated Natural Gas (as the case may he) produced and saved


on that dav


*


(a) For Export Crude Oil:


The Royalty rate for Export Crude Oil shall be ten percent (I0*»). which, for


live avoidance of doubt, shall apply regardless of the gravity of the oil


(h) For Export Non-Associated Natural Gas


The Royalty rate for Export Non-Associated Natural Gas shall be ten percent


(10%)


24 5 Associated Natural (ia$ and any other Petroleum shall be exempt from any Royally


24 6 If. pursuant to Article 24 3. the GOVERNMENT receives the Royalty in kind, and


pursuant to Article 28. the GOVERNMENT requests assistance for the sale of all or


part of the Royalty received in kind, the CONTRACTOR shall assist the


GOVERNMENT in selling all or pan of such Royalty received in kind (belonging to


the GOVERNMENT ) in consideration of a commission per barrel payable to the


CONTRACTOR, in accordance with Article 28


24 7 If. pursuant to Article 24 3. the GOVERNMENT receives the Royalty in cash


(a) any Export Crude Oil shall be valued at the Internationa! Market Price obtained


at the Delivery Point, as defined in Article 27 2.


(b) any Export Non-Associated Natural Gas shall be valued at the actual pnee


obtained at the Delivery Point, as prosided in Article 27 3.


(c) the CONTRACTOR shall pay such Royally each Quartet, in arrears, within


thirty- (30) days of the end of each Quarter, and shall calculate the payment


49


 due for ihe relevant Quarter by reference to the price for the I mport


Petroleum at the Delivery Point, detenrined m accordance with paragraphs


(a) and (b> above, and the Rovahv due on the Import Petroleum. determined


•a accordance with Article 24 4. for the satd Quarter and


Id) the C ON T RACTOR shall be entitled to heels the Rovahv due on





the I sport Petroleum determined m accordance »«h An*k 24 4 for the


purpwe of paying the Rovahv in cash











\KIK I I 25- RECOVERY OF PFTROI.I I M < OSIN


25 I All I’.spoil ( rude Oil produced and saved from the Contrite! Aica shall, aflci


deduction ol'niiy quantities of Export Crude Oil due tin Royaltv pursuant to Article 2-1


of tlilit C'ontrnct, lie considered as "Available Crude Oil"


All Associated Natural Gas produced and saved from the Contract \rca except lot


Associated Natural Gas which is used in Petroleum Operations. if-injected m the


Petroleum I icld. lost. Hared or cannot be used or wild, shall be considered as ’Available


Associated Natural Gat'.


All F. sport Non-Associated Natural Gas produced and saved from the Contract Area


shall, after deduction of any quantities of Export Non-Assocuted Natural Gas due for


Rovah> pursuant to An.de 24 of the Craarao. be tt-udered as UatlaM* \*n-


Associated Natnral Gtt”


'AtaUh Prtrnimm km Available Crude Od. Available W^KUSed Natural Gas





25 2 For the purpose of thiv Article 25


i a) am Available Crude Oil shall be valued at the International VlarVct Price


obtained at tin- Delivers Point, as defined in Article 27 2 .ind


(b> any Available Associated Natural Gas and any Available Non-Associated


Natural G«v shall lie valued at ite actual puce obtained At the Delivery Point,


av provided in Article 27 V


25 » Subject to the provisions of this Contract, from the I usl Production in the Contract


Area, the CONTRACTOR shall a: all tiroes be entitled to recover all Petroleum


Costs incuned under this Contract, of fon> percent (40*.) of Available Crude Oil


(which for the avoidance of doubt, shall apply regardlesv of I* mavitv of the od) and


Available Associated Natural (ias produced and waved within any Calendar Year


25 4 Subject to the provisions of this Certraa. from First Production in the Contract Aren. the


CONTRACTOR 'hall at all times be entitled to recover all Petroleum Costs incuned


under this Contract of the greater of fifty-five percera (55S) or the maximum cost


recovery percentage for Natural Gas permitted by the Kurdistan Re- on Petrokum


I aw produced and used within any Calendar Year











50


25 5 For the application of Article 25 3 and 25 4 of tins Contract, the CONTRACTOR


shall keep a detailed account of Petroleum Costs in accordance with the provisions


detailed in the Accounting Procedure attached to this Contract as Annex H Recovery


of Pc', i oleum Costs vital I occur in the following order


(a) Production Costs.


(b) Exploration Costs (including appraisal costs and further exploration within the


Contract Area),


(c) Gas Marketing Costs.


(d) Development Costs,


Decommissioning Contributions


it being agreed that priority within each category listed above will be given to capital


assets m the ordet of their acquisition ('first in, first out')


25 6 Total recovery o! Petroleum Costs during any Calendar Year, expressed hi quantities


of Petroleum, shall not exceed the relevant percentages indicated in Ankles 25 3 and


25 4 If in any C alendar Year, the Available ( aide Oil and/or Available Non-


Associated Natural Gas do not allow the CONTRACTOR to recover all ns


Petroleum Costs pursuant to this .Article 25. the amount of un-recosered Petroleum


Coss in such Calendar Yeai shall be earned forward indefinitely to the subsequent


Calendar Years until all Petroleum Costs arc fully recovered, but. save as provided in


.Ankle 14 10, in no other case after the termination of the Contract


25 7 The provisions of Articles 27 7 and 27 8 shall be upplied to determine the quantities of


Available Crude Oil and/or Available Non-Associated Natural Gas due to the


CONTRACTOR lor the recovery of its Petroleum Costs


25.8 The quantities of Petroleum corresponding to the share of Available Petroleum due to


the CONTRACTOR for the recovery of its Petroleum Costs shall be delivered to the


CONTRACTOR at the Delivery Point Title and risk of loss of such Available


Petroleum shall be transferred at the Delivery Point


25 9 The CONTRAC I OK 'hall be entitled to receive, lake in kind und to expon freely all


Available Petroleum to which it is entitled for recovery of its Petroleum Costs in


accordance with the provisions of this Contract and to retain Abroad any proceeds


from the sale of all such Available Petroleum


25 10- For ihe avoidance of any doubt, the CONTRACTOR shall be entitled to fully


recover under this Contract any costs incurred prior to the Effective Date for any work


and operations relating to the Contract Area undertaken m respect of this Contract,


from the date of signature of this Contract

















51


 ARTICLE 26 - SHAKING OF PROFIT PETROLEUM





26 I Under this Contract,


(a) "Profit Petroleum" means Profit Crude Oil and Profit Natural Gas,


(b) 'Profit Crude Oil” means the quantities of Available Crude Oil and Available


Associated Natural Gas produced from the Contract Area, after the recovery of


Petroleum Costs, in accordance with Articles I and 25. and


(c) “Profit Natural Gas ' means the quantities of Available Non-Associated Natural


Gas produced from the Contract Area, after the recovery of Petroleum Costs


in accordance with Articles I and 2>


262 From First Production and as and when Petroleum is being produced, the


CONTRACTOR shall be entitled to take a percentage share of Profit Crude Oil


and/or Profit Natural Gas, in consideration for its investment in the Petroleum


Operations, which percentage share shall be determined in accordance with Article-


26 5





26.3 To determine the percentage share of Profit ( rode Oil and/or Profit Natural Gas to


which the CONTRACTOR is entitled the R" Tacto* shall be calculated in


accordance w ith Ankle 26 4 and shall be applied to the Contiact Area


26 4 The ~R" Factor shall be calculated as follows





R = X/Y





where





X is equal to Cumulative Revenues actually received by the CONTRACTOR.


V is equal to Cumulative Costs actually incurred by the CONTRACTOR,





from the date of the signature of this Contract


For the purpose of this Article 26.4.





Cumulative Revenues means total Revenues, as defined below, received by the


CONTRACTOR until the end of the relevant Quarter, determined in accordance


with Article 26 7


Revenues means the total amount actually received by the CONTRACTOR for


recovery of its Petroleum Costs and its share of Profit Petroleum in the Contract Aiea


Cumulative Costs means all Petroleum Costs in the Contract Area, actually incurred


by the CONTRACTOR until the end of the relevant Quarter, determined in


accordance with Article 26 7











52


Notwithstanding the foregoing provisions of this Article 26 4. for the period from


hirst Production until the end of the Calendar Year in which First Production occurs,


the' R" factor shall be deemed to be less than one

case of gas)


26 S I he share of Profit Petroleum to which the C ON I RAC TOR shall be entitled front


First Production is.


In) for Profit Crude Oil. equal to the quantities of Petroleum resulting from I he


application of the relevant percentage as indicated below to the daily volume


of production of Profit Crude Oil within live Contraci Area at the


corresponding Delivery Point


"R” Factor CONTRACTOR'S % Slmrr of Profit Crude Oil





"R” Factor C ON I R \f lOR's % Share of Profit


Petroleum


0

1 0000




2 OOOCKR 15 0%





and


(b) for Profit Natural Gas. equal to the quantities of Non-Associated


Natural Gas resulting from the application of the relevant percentage as


indicated below to the daily volume of production of Profit Natural Gas


within the Contraci Area at the corresponding Delivery Point


R" Factor C ONTRACTORS % Share of Profit Natural Cm








"R" Faelor C ON I RACTOR's % Share of Profit


Petroleum


XR< 1.0000 40096





I 000(KR<2 0000 40% - «40% - 20%) x (R-1 0000))


2.000XR 200%











26 6 The CONTRACTOR'S accounting shall account separately for all components for the


calculation of’X* and "Y" values in the formula provided m Article 26 4 above











53


26 7 For each Quarter, tuning from the 1 * of January of ihc Calendar Year following the


Calendar Year in which Fir* Production occurs, the CONTRACTOR shall calculate


the 'R* factor applicable to the relevant Quarter within thirty (JO) days of the


beginning of such Quarter Ihc ’R" Factor to be applied during a Quartet shall be lhai


determined by applying the Cumulative Revenues actually received and the


Cumulative Costs actually incurred up to and including the last day of the preceding


Quarter


26 K If at any time an error occurs in the calculation of the *R" factor, resulting in a change


in the CONTRACTOR\ percentage share of Profit Crude Oil andor Profit Natural


Gas. the necessary correction shall be made and am adjustments shall apply from the


Quarter in which the error occurred The Party having benefited from a surplus of


Profit Petroleum shall surrender such surplus to the other Pans beginning from the


first day of the Quarter following the Quarter in which the error was recognised


However, each lifting of Petroleum relating to such error shall r t exceed twenty-fisc


percent (25%) of the share of Profit Petroleum to which such Mirrcndering Parts is


entitled for the avoidance of doubt, if at any time an error occurs in the calculator


of the "1C factor, which does not result in a change in the CONTRACTOR ■>


percentage share of Profit Crude Oil and/or Profit Natural Gas no correction shall K


made





26 0 The quantities of Profit Petroleum due to the CONTRACTOR »ha be delisered to


the (OM RAC I OR at the Delivery Point Title and risk of loss of such Profit


Petroleum shall be transferred to the CONTRACTOR at tlw Ddiscry Point


The CONTRACTOR shall be entitled to receive, take m kind and to export freely its


share of Profit Petroleum m accordance with the provisions of this Contract and to


retain Abroad any proceeds from the sale of all such Profit Petroleum





26 10 The share of the Profit Petroleum to which the GOVERNMENT is entitled m any


Calendar Year in accordance with Article 26 5 of this Contract shall be deemed to


include a portion representing the corporate income tax imposed upon and due by


each entity constituting the CONTRACTOR, and which will be paid directly by the


GOVERNMENT on behalf ol each such entity representing the < ON TRACTOR to


the appropriate tax authorities in accordance with Article II 2 of this Contract The


GOVERNMENT shall provide the CONTRACTOR with all written documentation


and evidence reasonably required by the C OM RAC TOR to confirm that such


corporate income tax has been paid by the GOVERN MINT


26 11 The quantities of Profit Petroleum due to the GOV ERN MEN T shall be delivered to


the GOVERNMENT at the Delivery Point Title and risk of loss of such Profit


Petroleum shall be transferred at the Delivery Point


26 12 At the latest twenty-one (21) days prior to CONTRACTOR s estimated date of First


Production and. subsequently, thirty (30) days prior to the beginning of each Quarter,


the CONTRACTOR shall prepare and delwer to the GOVERNMENT a production


program comprising the production forecast tor the next Quarter and the forecast of


the quantities of Crude Oil and Natural Gas to which each Party shall be entitled


(hiring the said Quarter











54


26 13 Within ninety (90) days following the end of each Calendar Year, the


CONTRACTOR shall deliver an annual production report to the GOVERNMENT,


slating the quantities of Ctude Oil and Natural Gas to which each Party is entakd. the


quantities of Crude Oil and Natural Gas lifted by each Party and the resulting over-lift


or under-lift position of each Party, pursuant to the lifting agreement entered into


pursuant to Article 16 14


Any costs or expenditure incurred by the (ONI RAC TOR us Subcontiactors or suppliers


relating to the lifting of the GOVERNMENTS share of Petroleum b\ the CON TRACTOR


shall not be considered Petroleum Costs and shall be charged to the GOVERNMENT


according to terms to be mutually agreed between the CONTRAt I OK and the


GOVERNMENT











ARTICLE 27





VALUATION AND METERING OE CRUM Oil AND N ATI R Al. C. AN











27 I Fot the purpose of this Contract, any Crude Oil produced in the Contract Area shall be


valued at the end of each Quarter at the Delivery Point based on the International


Market Pnce. as defined in Article 27 2.


27 2 The 'international Market Price* referred to in Article 27 1 shall be the average FOB


price per barrel, expressed in Dollars, obtained by the CONT RA* I OR at the


Delivery Point during the Quarter ending on the date of valuation for Aim’s Length


Sales of Ctude Oil


It is deemed that the CONTRACTOR will sell any Crude Oil on an Arm’s Length Sale If


the GOVERNMENT considers that any such vale of Crude Oil is not on the basis of an


Arm s Length Sale then the GOVERNMENT has the right to tefer tire matter to an


expert pursuant to Article 42 3


In tlie event that there is no lifting of Crude Oil in the televant Quarter, the applicable


"International Market Price” for such Quarter shall be the average FOB price per barrel


obtained during that Quarter from Arm's Length Sales of ( rude Oil of the same gravity


and quality from other production areas sold in markets competing with Crude Oil


produced from the Contract Area


To determine such price, the Parties shall, prior to the commencement of Production,


agree on a basket of Crude Oil comparable to those produced in the Contract Area and


sold in the international market Prices obtained shall be adjusted to account for any


variations such as quality, specific gravity, sulphur content, transportation costs, product


yield, seasonal variations in pnce and demand, general market trends and other terms of








27 3 The price of Natural Gas shall be the actual price obtained at the Delivery Point,


(which may take into account quantities to be sold, quality, geographic location of








55


 markets to he supplied ns well as costs of production, transportation and distribution


of Natural (ias from the Delivery- Point to the relevant market, in accordance with


standard practice in the International gas industry)





Accounting Statement





27 4 In accordance with this Article 27.4, the GOVERNMENT and the CONTKAC I OK


shall establish a statement showing calculations of the value of Ciude Oil produced


and sold from the Contract Area Such statement shall include following information


(a) quantities of Crude Oil sold by the CONTRACTOR during the preceding


Month constituting Arm’s Length Sales together with corresponding sale





pnees;





(b) quantities of Crude Oil sold by the CONTRACTOR during the preceding


Month (hat do not fall in the category referred to in paragraph (a) above,


together with sale prices applied during such Month.


(c) inventory in storage belonging to tbe CONTRACTOR at the beginning and





at the end of the Month; and


(d) quantities of Natural (ias sold by the CONTRACTOR and the





GOVERNMENT together with sale prices realised





>ki?rl»g





27 7 AH Export Petroleum shall be metered at the Delivery Point in accordance with


generally accepted practice in the international petroleum industry and such meters


shall be to fiscal meter standards All metering equipment shall be installed and


operated by the CONTRACTOR The GOVERN MEN f shall, on receipt by the


CON | K \< IOR of reasonable prior written notice, have the right to inspect am


such metering equipment installed by the CONTRACTOR as well as all relevant


documents and supporting information reasonably nccessaiy to validate the accuracy


«»f such mctcimu Ml metering equipment shall he subject to periodic technical


inspections in accordance with standard practice in the international petroleum


industry


27 8 If any Mcrag equipment is defective ibe CONTRACTOR shall use aU reasonable


endeavours to repair it within fifteen (15) days or. if deemed necessary by the


CONTRACTOR replace it as soon as reasonably practicable from the date the


defect became known Such defect shall be deemed to have occurred in the middle of


the period between last calibration of the equipment that led to normal results and the


calibration evidencing the defect


27 9 Any disputes arising undo this Article 27 shall be settled by expert determination in


accordance with the provisions of Article 42 ? of this Contract




















56


 ARTICLE 28 DOMESTIC MARKET - SALE OF GOVERNMENT SHARE


Upon I he GOVERNMENTS prior written notice of at least ninety (90) day*, the


COM RACIOR shall provide all reasonably necessary assistance to the GOVERNMENT


for the sale of all or pan of the quantities of Crude Oil to which the GOVERNMENT is


entitled, in consideration of a sales commission per band to be established with reference to


standard practice in the international petroleum business and to be mutually agreed upon


between the Paines








ARTICLE 2«>- FINANCIAL PROVISIONS


29 I Any payment to be made by the (ON I RAC I OR to the GOVERNMENT pursuant


10 this Contract sliall be in Dollars and paid into the bank account duly designated by


the GOVERNMENT in writing The GOVERNMENT may. at its sole discretion,


direct the CONTRACTOR to forward the Royally and/or proceeds of the sale of


quantities of Profit Petroleum due to the GOVERNMENT under this Contract to a


fund for revenue sharing with the Government of Iraq and oilier regions and


govcrnoiatcs in Iraq Nothing in this Article shall be understood as implying a


contractual or other relationship between the COM RACTOR and the Government


of Iraq


29 2 Any currency conversion to be made under this Contract shall be at the exchange rate


of the Central Hunk of Iraq presided such exchange rate applied to the


CONTRACTOR sliall not be less favourable than the rate offered h\ OthSf private,


commercial or industrial banks in the international marker In the absence of the


Central Bank of Iraq or in the event that the Central Bank of Iraq is unable to provide


the relevant exchange rate, any currency conversion to be made under this Contract


shall be at the exchange rale of a reputable commercial barn, carrying on buvness in


the international market and approved by the Parties The CONTRACTOR shall nut


realise any gain or loss due to exchange rate fluctuations and. consequently, any gam


or lots resulting from exchange rate fluctuations shall be either debited or credited to


the Petroleum Costs.


29 3 Any payment due by the GOVERNMENT to the CONTRACTOR shall he paid in


Dollars to the bank account designated by the CONTRACTOR within thirty (•<>)


days of the dale of invoice, after which interest at the rate of LIBOR plus two <2)


percentage points shall be applied


29 4 The CONTRACTOR shall at all times be entitled to freely convert into Dollars or


any other foreign currency any Iraqi dinars received in the framework of the


Petroleum Operations and to freely transfer the same Abroad The conversion rate


shall be as provided under Article 29.2


29 5 The CONI RACTOR shall have the right to be paid, receive, keep transfer and use


Abroad, without any restrictions, all proceeds of its share of Petroleum














A


57


29.6 I he CONTRACTOR and its Subcontractors shall have the right to freely open and


maintain bank accounts for Petroleum Operations within or outside the Kurdistan


Region and other parts of Iraq


29 7 The CONTRACTOR shall have the right to pay in any freely convertible currency


all its financial requirements for the Petroleum Operations and to convert those


currencies to Iraqi dinars in any bank in the Kurdistan Region or other parts of Iraq, at


the same exchange rate as provided under Article 29 2


29 x The CONTRACTOR shall have the right, without any restrictions, to freely


repatriate Abroad and to freely dispose of:


ia) any proceeds received in ihe Kurdistan Region or other |\uts of Iraq from the


sale of Petroleum;


lb) any proceeds received from other operations and activities tarried out under


this Contract in the Kurdistan Region oi other parts of Iraq


29 9 The CONTRACTOR shall have the right to pa\ in an-, foreign currency its


Subcontractors and its expatriate personnel, either in the Kurdistar Region oilier parts


of Iraq, oi Abroad Said Subcontractors and expatriate personnel shall be obliged to


transfer to the Kurdistan Region the amount of foreign currency required for their local


needs and they shall have the right to repatriate the proceeds of the sale of their


belongings in accordance with the regulations in force in the Kurdistan Region


29 10 I he CONTRACTOR s Subcontractors and their personnel shall et;.;.illv benefit from


the same rights as the ( ONTRACTOR and its personnel as regards this Article 29


29 11 For the financing of Petroleum Operations, the CONTRACTOR shall have the right


to have recourse to external financing from third parties or from its Affiliated


Companies on an arm's length basis Any interests, costs and financial charges, as


well as any exchange losses associated with such financing, shall not Ik* considered


Petroleum Costs and shall not be recoverable in accordance with the provisions of


Articles 25








AIM K I K 30 - < USTOMS PROVISIONS


30 I All services, material, equipment, goods, consumables and products imported into


Kurdistan and other parts of Iraq by the CONTRAC TOR or its Subcontractors for use


or consumption in the Petroleum Operations shall be admitted (ice and exempt from


any and all customs or other duties, import taxes and any other charges or impositions


on import The CONTRACTOR and its Subcontractors shall have the right to re¬


export from Kurdistan and other parts of Iraq free from all export taxes, customs oi


other duties or any other charges or impositions on export any material, equipment,


goods, consumables and products that arc no longer required for the Petroleum


Operations














58


30 2 The CONTRA! TOR And its Subconi rectors ami iheii personnel shall have ihc right


lo ftedy import into the Kurdistan Region and other parts of Iraq and te-expon from


ihc Kurdistan Region and other pans of Iraq any personal belongings and furniture free


and exempt from any customs or other duties, import and export taxes and any other


charges or impositions on import or export 1 he sale in the Kurdistan Region and other


parts of Iraq of personal belongings and furniture of expatnate personnel shall comply


with Kurdistan Region Law





30 1 fach entity constituting the CONTRACTOR shall be entitled to freely export from


the Kurdistan Region and other parts of Iraq, free of any taxes, customs or other Ames


and other impositions or charges whatsoever, any Petroleum to which it is entitled


pursuant to the provisions of this Contract





30 4 rhe GOVERNMENT shall indemnify the CONTRACTOR for any customs duties


rcfeiTed to in Articles 30.1. 302 <»t 30 3 that may he levied by the Kurdistan Region oi


Government of Iraq or any other government body or court with jurisdiction in any part


of Iraq











ARTI( I.E .31 - I \X PROVISIONS





31.1 Except as expressly provided for in this Article 31, the CONTRACTOR shall be


exempt from all other taxes and impositions generally applicable to all other


industries or otherwise in the Kurdistan Regum


31 2 Each entity constituting the CONTRACTOR shall be subject to income tax


provided m Article 31 3 beta*. wh;ch shall be deemed to be inclusive and in full and


total discharge of any corporate income tax. any taxes on income from movable


capital, any taxes on capita! gains, any fixed taxes on transfery any taxes on windfall


profits or additional profits as well as all othei current or future Kurdistan Region and


Iraqi taxes based or assessed on income of any kind (whether State, provincial,


religious, tribal or local) ("Tax") Apart from the said Tax no other taxes, levies,


charges, impositions or withholdings that are based or assessed on income shall be


due by the entities constituting tbe CONTRACTOR Us Subcontractors, their


representatives, agents or employees to the GOVERNMENT or the Government of


Iraq or any of the subdivisions or administrations of cither such government as a


result of their activities under this Contract Payment of the said Tax shall be made


directly to the appropriate Kurdistan Region and. if applicable Iraqi lax authorities by


tbe GOVERNMENT, for the account of each entity constituting the


CON I RACTOR from its share of the Profit Petroleum received pursuant to Article


26 of this Conrad The GOVERNMENT shall, within ninety t90) days after the end


of each tax year, provide the appropriate tax icccipts to each entity constituting the


CONTRACTOR certifying the pavmcrt of us Tax and that it has met all us fiscal


obligations in the preceding tax year


31 3 For the purposes of Article 31 2

















59


(a) The rate of corporate income tax to be applied to each ertity commuting the


CONTRACTOR shall be the applicable talc prescribed in the Law of Taxation,


law No 4 of 1999. passed by the parliament of the Kurdistan Region, as may be


amended from tune to time or substituted in respect of Petroleum Operations (as


defined under the Kurdisan Region Petroleum Act) b> a Petroleum Operations


Taxation Ac: (as defined under the Kixdistan Region Petroleum Act)


(b) The GOVERNMENT and the CONTRACTOR agree that corporate income


tax shall be calculated for each entity constituting the CON TRACTOR on its


net taxable profits under the Contract a\ calculated ia accordance with the


provisions relating thereto in the Accounting Procedure


5! 4 Each entity constituting the CONTRACTOR shall be exempt from payment of any


income tax. duties and other impositions on constitutive and modifying acts of


corporations for the entire duration of this Contract


31.5 The C ONTRACTOR as wdl as its Subcontracts shall be exempt from any


withholding tax applicable on any payments made to them or by them to or from


Affiliates or third parties, whether inside or outside Kurdistan and o* Iraq


316 The CONTRACTOR shall be exempt from Windfall Profits laxes and /Additional


Profits Tax. as referred to in Article 44 of the Kurdistan Region Petroleum Ad


317 The CON 1RACTOR shall be exempt from Stance Tax as irtened to in Amdc 44 of


the Kurdistan Region Petroleum Act


318 Each entity constituting the COM RAC TOR and any Subcontract* shall lie subject to


the payment of the personal income tax and social security contributions for which •><»)


entity ot Subcontractoi is liable lo pay in respect of its employees, pursuant to the I aw of


Taxation, Law No 4 of 1999. passed by the parliament of the Kurdistan Region, in the


same manner as generally applied to all other industries


319 It is acknowledged that Double Tax Treaties will have effect to give relief from taxes to.


but not limited to. the CONTRACTOR, contractor panics, foreign subcontractors and


expatriate employees in accordance with the provisions of such Double Tax Treaties, but


shall not impose an additional burden of taxation


31 10 The CONTRACTOR has the light to offset any value added tax ( VAT > or other tax not


settled by the GOVERNMENT again* any liabilny to tax under Article 31








ARTICLE 32 - BONUSES


Signature Bonus and local a»i)i»nwib capacity building fund


32 I A signature bonus of live million Dollars

deemed to have been paid to the GOVERNMENT by the CONTRACTOR in


recognition of the costs Contractor incurred prior to the Effective Date


? .


32.2 A local capacity building fund (“Capacity Building Fund**) of two million Dollars


(US$2,000,000) shall be payable to the GOVERNMENT by the CONTRACTOR in


two (2) instalments, the first instalment payable thirty (30) days from the date the


Contract is signed by the CONTRACTOR and the GOVERNMENT to coincide


with the Contract ratification by the GOVERNMENT, and the second instalment


payable thirty (30) days after the review period under Article 47.2. The payments due


pursuant to this Article 32.2 shall be deemed to be u Petroleum Cost.





Production Bonuses


32.3 In the event of a Crude Oil Commercial Discovery, the CONTRACTOR dull pay the


following relevant Crude Oil production bonus to the GOVERNMENT within thirty (30)


days of the following relevant occurrence:


(a) One million Dollars (USSI ,000,000) when First Production of Crude Oil from the


Contract .Area commences:


(h) Two and one half million Dollars (US $2,500,000) when production of Crude (>il


from the Contract Area reaches a cumulative amount of ten million bands of


Ciude Oil (10 mmbo);


(c) Five million Dollars (US $5,000,000) when production of ( rude Oil from the


Contract Area reaches a cumulative amount of twenty five million hands ol


Crude Oil (25 mmbo); and


(d) Ten million Dollars (US $10,000,000) when produrtior. of Crude Oil from the


Contract Area reaches a cumulative amount of fifty million bands of Crude Oil


<50mmboi


32.4 In the event of a Noo-Associated Natural Gas Commercial Discovery, the


C ONTRACTOR shall pay the following relevant Noo-Ax*»aaied Natural (as production


Ixwis to the GOVERNMENT within ihirty (30) days of the following relevant





(u) One million Dollars (US$1,000,000) when First Piwhoion of Non-Associated


Natural Gas from the Contract Area commences;


(h) Two and one half million Dollars (US $2^00.000) when production of Non-


Associated Natural

ten million bands of Crude Oil (10 mmbo) equivalent;


Ic) Five million Dollars (US $5,000,000) when production of Non-Associated Natiaal





Gas from the Contract Area reaches a cumulative amount of twenty five million


bands of Crude Oil (25 mmbo) equivalent: and





(d) Ten million Dollars (US $10,000,000) when production of Non-Associated


Natural Gas from the Contract Area reaches a cvanubnvc amount of m.ll w*


bands of Crude Oil (50 mmbo) equivalent








61


CONTRACTOR to be either a Crude Oil Commercial Discovery or a Nun-Associated


Gat Commercial Discovery’ and under no circumstances shall a production bonus be due


in respect of both Crude Oil and Nan-Associated Natural Gas for the same Commercial


Discovery


32 6 No production bonus due pursuant to Article 32 3 or Article 32 4 shall be deemed to be a


Petroleum ('on











ARTICLE 13-PI PRUNES





33 I The GOVERNMENT shall obtain any required Permits for the traiiqioitnlion of


Petroleum in the Kurdistan Region and in Iraq, as well as any necessary Pci mils and


casement rights for the construction of any pipelines and related facilities required lor the


Petroleum 0|>eralions. as provided in Article 33.2.


33 2 The GOVERNMENT undertakes to transfer to the CONTRA! I OK its rights for


transportation of Petroleum by pipeline The CONTRACTOR shall have the light to


design, construct, operate and maintain pipelines and any related facilities for the


transportation of Pelt oleum pioduced under this Contract


33 3 Prior to the construction of any pipeline and related facilities as provided in Amclc


33 2. the CONTRACTOR shall submit following information to the Management


Committee


(a) proposed pipeline route and related facilities.


(b) forecasted ptpd me flow rate and capacny.


(c) estimate of financial investment and operating costs of the pipeline and related


facilities.


(d) proposed financing schedule.


(e) construction schedule.


(0 general technical description of the pipeline and related facilities.


construction plans and tests.





(hi preventive measures for damage to the environment and thud parlies, and





proposed Delivery Point and any other information relating to the pipeline





protect





TV Management Committee shall examine all tV above information and shall with.n


ninety (*») days, approve tV proposed pipeline protect in accordance with the


provisions of Article 8 5 of this Conrad











62


33 4 Subject to spare capacity being available and to their Petroleum being compatible,


third parties shall be entitled to transport their Petroleum through any pipeline


constructed by the CONTRACTOR in accordance with this Article 33 on terms to


lie agreed between the CONTRACTOR and such third party Those terms shall be


reasonable commercial terms and shall not discriminate among third party users The


CON TRACTOR shall always have priority of access to such pipelines


V' 5 Any costs associated with the design, construction, operation arid maintenance of the


pipelines and related facilities by CONTRACTOR under this Article 33. including


financing costs ("Pipeline Costs' ) shall be considered Petroleum Costs and shall be


recovered by the CONTRACTOR in accordance with the provisions of Articles I


and 25


33 6 I he CON TRACTOR shall have the absolute right, without any exceptions and for


the entire duration of this Contract, to use. free of charge, any pipeline and related


facilities committed by CONTRACTOR under this Article 33 and to transport


Petroleum produced from any Production Area and to operate and maintain any


pipeline and its related facilities, freely and without any additional costs


33.7 Any tariffs received from third parlies for use of any pipeline and related facilities by


CON TRACTOR under this Article 33 shall be applied to the recovery of Petroleum


Costs until all Pipeline Costs have been fully recovered by the CONTRAC TOR


pursuant to the provisions of Articles 1 and 25 of this Comma I he


GOVERNMENT shall he entitled to receive any tariffs from third parties for then


use of such pipeline and related facilities when the said Pipeline Costs have been fulls


recovered by the CONTRACTOR The costs associated with providing such


transportation services for third parties shall be considered Pipeline Costs and


therefore Petroleum Costs and shall be recovered by the CONTRACTOR in


accordance with the provisions of Articles I and 2S


33 8 Upon recovery by the CON TRACTOR of all live Pipeline Coos of rhe pipdinc and


related facilities, the operating and maintenance costs of any pipeline and its related


facilities shall be home by the CONTRACTOR and shall be considered Petroleum


Costs and shall be recovered by the CONTRACTOR in accordance with the


provisions of Articles I and 25


33 9 The GOVERNMENT shall have the same rights as the CONTRACTOR for use.


free of charge, of any pipeline and related facilities constructed by CONTRACTOR


under this Article 33 for the transportation of the share of Petroleum to which the


GOVERNMENT is entitled under this Contract, provided that where the


GOVERNMEN T is participating in its capacity as a CONTRACTOR entity puisuant


to Article 4. it shill Ik* liable few its share of Petroleum Costs


33.10 The CONTRA( TOR shall bear the custody and maintenance of any pipeline and related


facilities constructed by CONTRACTOR, under this Article 33 and all risks of


accidental low or damage to such pipeline and related facilities while they me tequired


for Petroleum Operations











A








63


 ARTICLE 34 - UNITISATION





J4 I In the event a Reservoir extends beyond the Contract Area into an adjacent area


which is the subject of another Petroleum Contract (as defined by the Kurdistan


Region Petroleum Act) (an "Adjacent Contract Aren"), or in the event a Reservoir


of an Adjacent Contract Area extends into the Contract Area, the provisions of Article


58, Section 3 of the Kurdistan Region Petroleum Act shall apply and the


GOVERNMENT shall require tin.- CONTRACTOR and the Contractor of the


Adjacent Contract Area to agree upon a schedule foi t eaching agreement of the terms


of the unitisation of the Reservoir, which terms shall he based on reliable technical,


operational and economical parameters, all m accordance with standard practice in


the international petroleum industry In the event that the Minister decides the


unitisation pursuant to Article 58. Section (b) of the Kurdistan Petroleum Act, and if


the CONTRACTOR docs not agree with the Minister's decision, the


CONTRACTOR shall be entitled to arbitration pursuant to the provisions of Article


42 I


*4 2 In the event that a Reser voir extends beyond the boundaries of the Contract Area into


adjacent an area which is not the subject of another Petroleum Contract (as defined by


the Kurdistan Region Petroleum Act), the GOVERNMENT shall, upon the


CONTRACTOR’S request, take the necessary steps to extend the boundaries of


Contract Area so as to include the entire Reservoir within the Contract Area, provided


that the CONTRACTOR can offer the COVERNMTS I « competitive minimum


work program foe such adjacent area











ARTICLE 35 - LIABILITY AND INST RAM J








Liability





15 I Subject to the other provisions of this Contract, the CON I R AC TOR. in its capacity' as


the entity responsible for the execution of the Petroleum Operations within the Contract


Area, shall be liable to third parties to the extent provided under applicable Law for any


losses and damage it may cause to them in conducting the Petroleum Operations, and


shall defend, indemnity and hold harmless the GOVERNMENT with respect to all


claims for such loss or damage





35 2 The C ONTRACTOR shall not be liable to the GOVERNMENT for am damage or lots


or claims of any kind resulting from its conduct of the Petroleum Operations


, unless such damage or loss is the result of wilful misconduct or a


material failure to conduct Petroleum Operations in accordance with the terms of this


• Contract; provided, however, that such liability cannot result in the event of any


omissions, errors or mistakes committed in good faith by the C ON IKACTOR in the


exercise of the powers and authorisations conferred upon the C ONTRACTOR by


virtue of this Contract, and further provided that in no event shall the


CONTRACTOR be liable for any indirect or consequential loss or damage


whatsoever or any loss, damages, costs, expenses ot liabilities caused (directly or











64


indirectly) by any of the following aiising out of. relating to. or connected w ith this


Contract or the Petroleum Operations carried out under this Contract (i) reservoir or


formation damage, (ii) inability to produce, use or dispose of Petroleum, (iii) loss or


deferment of income, (iv) special or punitive damages, or (v) other indirect damages


or losses whether or not similar to the foregoing


35 3 The CONTRACTOR shall indemnify and hold harmless the GOVERNMENT against





all losses, damages and liability arising under any claim demand, action o* proceeding


brought or instituted against the GOVERNMENT by am employee of the


CONTRACTOR or of any Subcontractor or b\ am dependent thereof, for personal


injuries, industrial illness, death or damage to personal properly sustained in connection


With, related to or arising out of the performance or non-performance of this Contract


regardless of the lault or negligence in whole or in party of any entity or individual.


35 4 Notwithstanding Article 35.1, the GOVERNMENT shall indemnify and hold harmless





the CONTRACTOR against all losses, damages and liability arising under any claim,


demand, action or proceeding brought or instituted against the CONTRACTOR by any


employee of the GOVERNMENT or of any Public Company or of any subcontractor of


the foregoing or by any dependent of any such employee, for personal injuries, industrial


illness, death or damage to personal property sustained in connection with, related to or


arising out of the performance or non-performance of this Contract regardless of the fault


or negligence in whole or in party of any entity or individual





35 5 The CONTRACTOR shall take all necessary steps to respond to. and shall promptly


notify the GOVERNMENT of. all emergency and other events (including


explosions, leaks and spills), occurring in relation to the Petroleum Operations which


arc causing or likely to cause material environmental damage or material risk to


health and safely Such notice shall include a summary description of the


circumstances and steps taken and planned by the CONTRACTOR to control and


remedy lire situation The CONTRACTOR shall provide such additional reports to


the GOVERNMENT as are necessary in respect of the effect* of such events and the


course of all actions taken ro prevent further loss and to mitigate deleterious effects





35 6 In the event of emergency situations as set out in Article 35 4 abov c. at the request of the


CONTRACTOR, the GOVERNMENT, without prejudice and in addition to any


indemnification obligations the GOVERNMENT may have, shall assivr the


CONTRACTOR to the extent possible, in any emergency response, remedial or


repair effort by making available any labour, materials and equipment in reasonable


quantities requested by the CONTRACTOR which arc not otherwise readily available to


the CONTRACTOR and by facilitating the measures taken by the CONTRACTOR to


bring into the Kurdistan Region pervmnd. materials and equipment to be used in any


such emergency response or remedial or repair effort The CONTRACTOR shall


reimburse the GOVERNMENTS reasonable and necessary costs incurred in such


efforts, which reimbursed amounts shall be considered Petroleum Costs and shall be


recovered by the CON TRACTOR in accordance with the provisions of .•Articles I and 25


of this Contract














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65 • w


 Imurmcf





35 7 In accoidaiicv wilh standard practice in i»k- international petroleum induRi}’- tire


CONTRACTOR shall maintain any insurance requirod by applicable Kurdistan Region


l.aw, as well as any insurance approved by lire Management Committee


Such insurance policies may cover


(a) loss of and damage to material and equipment used in the Petroleum


Operations,


(b) personal injury, damage to third panics and risks of pollution associated with


Petroleum Operations for reasonable amounts,


within the limits approved by the Management Committee


35 R Any insurance policy relating to tins Contract shall name the GOVERNMENT ns an


additional insured paity and shall include a waiver of subrogation protecting the


GOVERNMENT against any claim, loss and damage resulting from any Petroleum


Operation conducted by ot on behalf of the CON’I RAC IOR under this Contract, to the


extent that the CONTRACTOR is liable for such claim loss or damage under this


Contract The CONTRACTOR shall not be liable for and shall not purchase insurance


cover for any claims arising from negligence or wilful misconduct of the


GOVERNMENT or of any Public Company or of any of us or their subcontractors or of


any personnel of any of the foregoing


35 9 Upon ns written request the GOVERNMENT sha!! be presided with insurance


certificates, including necessan details, for a ns insurance polio maintained bs the


C ONTR ACTOR winch relates to this Contract


35 10 The CONTRACTOR shall be responsible for the filing of all claims made under any


insurance policy maintained by CONTRACTOR which relates to this Contract Any


premiums and payments relating to such insurance policies shall be considered Petroleum


Costs and shall be recovered by the CON IKACTOR in accordance with the provisions


of Articles I and 25 of this Contract


35 11 In am insurance pokey maintained by the CONTRACTOR wtach (dates to this


Contract the amount fix whkh the CONTRACTOR asdf is liable (the IkrductiMr


\mount I shall be reasonably determined between the CONTRACTOR and the msurer


and such Deductible .Amount shall m the event of any insurance claim be


considered a Petroleum Cost and shall be recosered by the CONTRACTOR in


accordance with the provisions of Articles I I and 25 of this Contract





























66


 ARTICLE 36- INFORMATION \NI) CONFIDKNTI \I.IT\





56 I The CONTRACTOR shall keep all i©colds, data and information relation to the


Petroleum Operations in accordance with the Kurdistan Region Petroleum Act and


standard practice in the international petroleum industry. In addition, it shall provide


the GOVERNMENT with such information and data as it is obliged to provide under


this Contract





56 2 Upon the GOVERNMENTS written request, the < ONTRAC I OR shall provide the


GOVERNMENT with samples of any rocks or any other items extracted during the


Petroleum Operations


56 5 The GOVERNMENT shall have title to all data and information, whether raw. derived,





processed, interpreted or analysed, obtained pursuant to a Contract


36 •) The CONTRACTOR shall have the right, without any limitation, to send Abroad copies


of all reports and technical data, magnetic tapes and oilier data relating to the Petroleum


Operations Magnetic tapes or other data, the original of which must he analysed and


processed Abroad, may be transported out of the Kurdistan Region


56 S Any representatives authorised by the GOVERNMENT and notified to the





CONTRACTOR shall, upon reasonable prior written notice, have reasonable access


to any information and data relating to the Contract Area in ibe possession of the


CONTRACTOR which the CONTRACTOR is obliged to prosidc to the


GOVERNMENT pursuant to this Contract It is understood that, when exercising


such right, the GOVERNMENT shall ensure it does noi unduly interfere with or


hinder CONTRACTOR'S activities


366 The CONTRACTOR shall provide the GOVERNMENT upon the





GOVERNMENT’S written request with analysis information, reports, tapes or other


data (geological, geophysical, logs, interpretations, drilling reports, etc ) related to the


Petroleum Operations All available originals shall be tiansfened to the


GOVERNMENT at the end of this Contract





36 7 Apart from the exceptions stated in this Article 36. the Panics undertake to keep all


data and information relating to this Contract anil the Petroleum Operations


confidential during the enure term of this Contract and not to disulgc or disclose such


d2ta or information to third parties without the specific consent of the other Party,


such consent not to be unreasonably withheld or delayed The foregoing


confidentiality obligation shall not apply to information or data which


(a) is or. through no fault of cither Party, becomes part of the public domain.





(b) is known to the receiving Party at the date of disclosure, or





(c) is required to be furnished in compliance with any applicable Law. by a


government agency having jurisdiction over the entity constituting the


CONTRACTOR, by a court order or any other legal proceedings, or








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67


(d) is required to be disclosed pursuant to the rules or regulations of any


government or recognised stock exchange having jurisdiction over the entitv


constituting the CONTRACTOR


'<> N Notwithstanding the foregoing in Article 36 7. in accordance with standard practice in


Ihc international petroleum industry, such dam and information may be disclosed to


(a) Affiliates of each entity constituting CONTRACTOR;


(b) employees, officers and directors of each entity constituting the


CONTRACTOR and their respective Affiliated Companies for the purpose


of the Petroleum Operations, subject to each such entity taking customary


precautions to ensure such information is kept confidential;


(C) consultants or agents retained by any entity constituting the COM RACTOR


or its Affiliate for the purpose of analysing or evaluating information or daia.


(d) hanks or financial institutions retained by any entity constituting the


( OM RACTOR with a view to financing Petroleum Operations, including


any professional consultants retained b> such bank or financial institution.


(c) hiuia fu!e prospective assignees of a participating interest under this Contract


(including any entity with whom an entity constituting CONTRACTOR and/or


its Affiliates are conducting Inhui fide negotiations directed towards a merger,


consolidation or lire sale of a majority of its or an Affiliates shares).


(ft prospective or actual Subcontractors and suppliers engaged by a Party where


disclosure of such information is essential to such Subcontractor's or supplier's


work for such Parly, and


(g) any other person or entity, upon the poor written approval of the norv


disclosing Party.


provided that disclosure shall not be made pursuant to paragraphs

unless such third pans has entered into a confidentiality undertaking


36 9 Any data and information relating to relinquished or surrendered areas under this


Contract shall become the exclusive property of the GOVERNMENT, who shall


have the right to use same for any purpose, in particular for the purpose of promoting


said areas The CONTRACTOR shall be entitled to keep copies of such data anti


information and to use such data and information for any purpose


36 10 Subject to the provisions of this Article 36. the CONTRACTOR may not sell nor


exchange any data related to the Petroleum Operations w ithout the approval of the


GOVERNMENT, which approval shall not be unreasonably withheld or delayed


where, in CONTRACTOR’S reasonable opinion, such sale or exchange would


benefit the Petroleum Operations

















68


 ARTICLE 37 - ENVIRONMENTAL PROVISIONS





37 I During ihe performance of the Petroleum Operations, the CONTRACTOR shall take


necessary measures to ensure that it, the Operator, its Subcontractors and agents


attend to the protection of the environment and prevention of pollution, in accordance


with standard practice in the international petroleum industry and any applicable


Kurdistan Region Law.


37 2 Prior to surrendering a portion of the Contract Area, the CONTRACTOR shall take


reasonable measures to clean the area to be surrendered in accordance with standard


piactice in the international petroleum industry Such measures shall include, inter


aim. removal of facilities, material and equipment together with icasonnble measures


necessary for the preservation of fauna, flora and ecosystems, all in accordance with


generally accepted practice in the international petroleum industry The


CONTRACTOR shall only be responsible for site restoration or environmental


damage to the extent the same pertains solely and directly to Petroleum Operations


pursuant to this Contract


37 3 fhe CONTRACTOR shall take reasonable precautions and measures to prevent any


pollution which may arise directly as a result of the Petroleum Operations and to


protect the environment (fauna and flora), water sources and any other natural


resources when carrying out Petroleum Operations


37 -I The CONTRACTOR shall respect the preservation of property, agricultural areas


and fisheries, when earning out Petroleum Operations


37 5 Before starting Exploration Operations within the Contract Area, the


CONTRACTOR shall conduct and submit an environmental impact assessment


National Parks and Nature Reserve Vreas


37 6 The CONTRACTOR shall take all ica.sonable measures to minimise any adverse


material impact on national parks and nature reserves which may arise directly as a


tesult of the Petroleum Operations, in accordance with generally accepted


envifonmenta! practices in the international petroleum industry


37 7 The GOVERNMENT (i) represents and warrants that, on the Effective Date, there


arc no national parks, nature reserves or other protected areas located in whole or in


part within the Contract Area where the CONTRACTOR shall not be entitled to


carry out Petroleum Operations and (ii) covenants that during the term ol this


C'ontract will not designate or create or permit the creation of any national parks,


nature reserves or other protected areas, located in whole ot in pan within the


Contract Area, where the CONTRACTOR is entitled to cany (Hit Petroleum


Operations


Expenditures


37 8 Any expenditure incurred by the CONTRACTOR in relation with this Article 37


shall be deemed Petroleum Costs and 'lull be recovered by the CON I RACTOR in


accordance with the provisions of Articles I and 25.


ks „ ^cm


 ARTICLE 38 - DECOMMISSIONING





38 I To enable the CONTRACTOR lo recover the costs associated with future Petroleum


Field decommissioning and site restoration and any otltcr similar expenditure to be


borne by the CONTRACTOR under this Contract, the CONTRACTOR shall have


the right to establish a reserve fund for future decommissioning and site restoration (a


“Decommissioning Reserve Fund") The Decommissioning Reserve Fund may be


established at any time during the final ten (10) Calendar Yeats of the term of the


Production Operations of a Petroleum Field but. upon the reasonable request by the


CONTRACTOR, the GOVERNMENT shall allow the CONTRACTOR to


establish such fund over a longer period Once established, the CONTRACTOR


shall make regular contributions to the Decommissioning Reserve Fund based upon


estimated Petroleum Field decommissioning and site restoration cost.' m accordance


with standard principles and technical norms generally accepted in the international


petroleum industry. Any contributions by the CONTRACTOR to the


Decommissioning Reserve Fund shall be made in Dollars and shall be deemed


Petroleum Costs and tax deductible, in each case when paid into the reserve fund, and


shall be recovered by the CONTRACTOR in accordance with the provisions of


Articles I and 25 Contributions to the Decommissioning Reserve Fund shall he


placed with a first rate bank approved by the Management Committee in accordance


with Article 8.5.





38.2 If. at the end Of the term of the Production Operations of the Petroleum Field the


GOVERNMENT decides to take over production operations m the Petroleum Field





(i) the GOVERNMENT shall become liable for its future decommissioning and


site restoration,


(ii) the contributions and any interest accumulated in the Decommissioning





Reserve Fund, to the extent that such contributions have been recovered as


Petroleum Costs, shall be paid to the GOVERNMENT, and


(iii) the GOVERNMENT shall release the CONTRACTOR from any


obligations relating to decommissioning and site restoration and shall


indemnify the CONTRACTOR for any costs, liabilities expenses, claims or


obligations associated therewith





38 3 If the CONTRACTOR undertakes the Petroleum Field decommissioning and site


restoration works, the contributions and any interest accumulated in the


Decommissioning Reserve Fund shall be paid to the CONTRACTOR and shall be


used for the Petroleum Field Decommissioning Operations The CONTRACTOR


shall undertake any such Decommissioning Operations in accordance with standaid


practice in the international petroleum indust/y.


3X4 If that the Decommissioning Reserve Fund paid to the CONTRACTOR is not


sufficient to cover all Decommissioning Costs for the Petroleum Field, the balance


shall be paid by the CONTRACTOR and may be recovered as Petroleum Costs from


any other Production .Areas or. if applicable, from any other area which is the subject








KS cjr>


70


of another Petroleum Contract (as defined by the Kurdistan Region Petroleum Act) of


the CON I’R ACTOR or any of its Affiliates anywhere in the Kurdistan Region and. to


the extent the balance is not recoverable as aforesaid, such remaining balance shall be


paid by the GOVERNMENT


38 5 If that the Decommissioning Reserve Fund paid to the CONTRACTOR exceeds all


Decommissioning Costs for the Petroleum Field, the balance shall be allocated as


follows





(a) to the extent that it has been recovciod as Petroleum Costs, that amount shall


be transferred to the GOVERNMENT, and


(b) to the extent that it has not been recovered as Petroleum Costs, that amount





shall be re paid to the CONTRACTOR.


38 6 Any expenditure incurred by the CONT RACTOR in relation with this Article 18.





including but not limited to any contributions to the Decommissioning Reserve Fund,


shall be deemed Petroleum Costs and shall be recovered by the CONTRACTOR in


accordance with the provisions of Articles I and 25











ARTICLE 39-ASSIGNMENT and CHANGE OF CONTROL











39 I Fach entity constituting the COM RACTOR shall be free to sell, assign, transfer or


otherwise dispose of all or pan of its rights, obligations and interests under this


Contract to an Affiliated Company or to another entity constituting the


CONTRACTOR with the prior convert of GOVERNMENT, which consent shall not


be unreasonably delayed or withheld Such comer* stall be deemed having been


received if. after thirty (30) days from the dale of such request, the GOVERNMENT


has not made any objections m writing





Assignment to Third Parties





39 2 Each entity constituting the CONTRACTOR stall have the right to sell, assign


transfer or otherwise dispose of all ot pan of itv rights and interests under tins


Contract to any third party (not being an Affiliated Company oi another entity


constituting CONT RACTOR) with the prior consent of GOVERNMENT', which


consent shall not be unreasonably delayed oi withheld Any entity constituting


CONTRACTOR pioposing to sell, assign, transfer or otherwise dispose of all or part


of its rights and interests under this Contract to any such third party shall request such


• consent in writing, which request shall be accompanied by reasonable evidence of the


technical and financial capability of the proposed third party assignee Such consent


’ shall be deemed having been received if. after thirty (30) days from the date of such


request the GOVERNMENT has not made anv objections in writing





39 3 To be effective, any deed of sale. or other disposal as provided


under Articles 39 I or 39 2. the Parties a deed of assignment, which


¥





AL


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71


shall include an undertaking by such third party to fulfil any obligations under this


Contract


39 4 In the event an entity constituting the CONTRACTOR assigns or in any other way





tiansfcis its rights and interests under this Contract, whether in whole or in part, such


assignment or transfer shall not give rise to any tax. imposition or payment


whatsoever in the Kurdistan Region, whether currently existing or which may become


applicable in future





39 5 The GOVERNMENT may not at any time transfer all its rights and obligation'


under this Contract to a Public Company or any other company or entity one hundred


percent (100%) owned by the GOVERNMENT or otherwise, except in respect of Us


Gosemment Share (upon exercise of its Option to Participate) in accordance with


Article 4


Chany of Control





39 6 ( hang* of C ontrol” for the purpose of this Article 39 6 means any direct or indirect


Change of Control of an entity constituting CONTRACTOR (whether through


merger, sale of shares or of other equity interests, or otherwise) through a single


transaction or series of transactions, from one or more transferors to one or more


transferees, in which the market value of such entity's participating interest in this


<_ ontiact (which shall be as specified in the Joint Operating Agreement relating to this


Contract, oi whcic there is only one entity constituting CON I KA< I OK one


hundred (100%) percent) represents more than seventy five percent (100%-xx%


initial Government Interest) of the aggregate market value of the ,i'\ctsofsuch entity


and its Affiliates that arc subject to the change in Control For the purpose of this


definition "Control” means the means direct or indirect ownership or control of the


majority of the voting rights of the applicable entity at its shareholders’ meetings or


their equivalent, and "market value" shall be determined based upon the amount in


cash a willing buyer would pay a willing seller in an arm’s length transaction


Each entity constituting the CONTRACTOR which is subject to a Change in Control


ocher than to an Affiliated Company or an entity constituting CON rRACTOR must


obtain the prior consent of GOVERNMENT, which consent shall not be


unreasonably delayed or withheld Such consent shall be deemed having been


received if. affer thirty (30) days from the date of such request, the GOVERNMENT


has not made any objections in writing


A Change in Control shall not give rise to any tax. imposition or payment whatsoescr


in the Kurdistan Region, whether currently existing or which may become applicable


in future











ARI ICLE 40 - FORCE MAJEHRE





40 1 No delay, default, breach or omission of the CONTRACTOR in the execution of any


of its obligations under this Contract shall be considered a failure to perform this


Contract or be the subject of a dispute if such delay, default, breach or omission is due





n








lo a case of Force Majeurc In such event the C ONTR ACTOR shall promptly notify


the GOVERNMENT in writing and take all reasonably appropriate measures to


perform its obligations under this Contract to the extent possible The time resulting


from any such delay or curtailment in the execution of such obligations, increased b>


the lime necessary to repair any damage resulting from or occurred during such dclav


or curtailment, shall be added to any time period provided under this Contract


(including without limitation the Exploration Period and any extension thereto, any Sub-


Period and any extension thereto and any Development Period and any extension


tlmcto) The Panics shall meet av soon

Majeurc with a view to using reasonable endeavours to mitigate the effects thereof


40 2 For the purpose of this Contract. “Force Majeure’ means any event that is


unforeseeable, insurmountable and irresistible, not due to any error or omission by the


CONTRACTOR but due to circumstance* beyond its control, which prevents


execution of 2ll or part of its obligations under this Contract Such events shall


include but not be limited to following





(a) war. whether declared or not. civil war. insurrection, riots, civil commotion


terrorism, any other hostile acts, whether internal or external.


(hi Strikes or other labour conflict'.





(c) accidents or blowouts.










(e) any act. event, happening or occurrence due to natural causes, in particular


floods, storms, cyclones, tires, lightning, or earthquakes.





<0 environmental restrictions, which the GOVI RN.MF.NT has no* notified to the


CONTRACTOR, ad





any acts or order of GOVERNMENT





Thei mention of the Panics is that Force Majeurc shall receive the intcrprctatio a that


complies most with general principles and practice prevailing in the international


petroleum industry Force Majeure affecting an Affiliated Company of an entity


constituting the CONTRACTOR shall be deemed Force Majeure affecting such


entity constituting the CONTRACTOR if the consequence of such Force Majeurc


prevents the performance of any of CONTRACTOR’S obligations under this


Contract











AM IICLE 41 - WAIVER OK SOVEREIGN IMMUNITY


The GOVERNMENT and anv Public Company w4*ch may be an enwy constituting


CONTRACTOR at any nine hereby fully and irrevocably waives any claim to immunity for


itsdfor any of as assets














73


This waiver includes any claim 10 immunity from





(a) any expert deteimination, mediation, or arbitration proceedings commenced


pursuant to Article 42 this Contract,


(b) any judicial, administrative or other proceedings to aid the expert


determination, mediation, or arbitration proceedings commenced pursuant to


Article 42 of this Contract;


(c) 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, administrative or other proceedings commenced


pursuant to this Contract














ARTICLE 42 - ARBITRATION AND EXPERT I>E'TERMINATION


NvaHilUi»». .Mediation pud Arbitration


42 I For the purpose of this Article 42 I. "Dispute" shall mean any dispute, controversy or


claim (of any and every kind or type, whether based on contract, ton statute


regulation or otherwise) arising out of. relating to. or connected with this Contract or


the operations carried out under this Contract, including without limitation any


dispute as the construction, existence, validity, interpretation, enforceability, breach


or termination of this Contract, which arises between the Panics (or between any one


or more entities constituting the C ON I RAC TOR and the GOVERNMENT)


Subject to the provisions of Article 42 3 of this Contract, a Party who desires to


submit a Dispute for resolution shall commence lire dispute resolution process by


providing the other parties to the Dispute wthten notice of the Dispute (“Notice of


Dispute") The Notice of Dispute shall identif) the parties to the Dispute, shall


contain a brief satement of the nature of the Dispute and the relief requested and


shall request negotiations among Senior Representatives


(a) In the event that any Notice of Dispute is given in accordance with Article


42 2. the parties to the Dispute shall first seek settlement of the dispute by


negotiation between Senior Representatives Senior Representative" means


any individual who has authority to negotiate the settlement of the Dispute for a


party to the Dispute Within thirty (30) days afler the date of the receipt by each


party tp the Dispute of the Notice of Dispute, the Senior Representatives


representing the parties to the Dispute shall meet at a mutually acceptable date,


time and place to exchange relevant information in an attempt to resolve the


Dispute If a Senior Representative intends to be accompanied at the meeting by


a legal adviser, each other party shall be given written notice of such Intention


and its Senior Representative may also lie accompanied hi the meeting by a legal


adviser








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74


(b) If the Dispute cannot be resolved by neeooatior m accordance w*h Article 42 3


w«hm sixty (60) days after the date of the receipt by each party to the Disjxac of


the Notice of Dispute or such further period as the parties to the Dispute may


agree in writing any party to the Dispute may seek settlement of the dispuie by


mediation in accordance with the London Court of International Arbitration


(LCIA) Mediation Procedure, which Procedure sluill he deemed to he


incorporated by reference into this Article, and the parties to such Dispute


shall submit to such mediation procedure


(c) If the Dispute is not settled by mediation within sixty (60) days of the


appointment of the mediator, or such further period as the parties to the


Dispute may otherwise agree in writing, any party to tlie Dispute may refer the


Dispute to. and seek final resolution by. arbitration under the LCIA Rules,


which Rules shall be deemed to be incorporated by reference into this Article


(i) Any arbitration shall be conducted by three (3) aibitralors


(ii) If the parties to the Dispute are the GOVERNMENT and all the


entities constituting the CONTRACTOR the GOVERNMKM and


the CONTRACTOR shall each appoint one (I) arbitrator If the


parties to the Dispute are the GOVERNMENT and more than one.


but not all the entities constituting the CONTRACTOR, the


GOVERNMENT shall appoint one (I) arbitrator and such


CON I R ACTOR entities shall appoint one (I) aibitrator If the panics


to the Dispute are the GOVERNMENT and one e*4y constituting


the CONTRACTOR. the GOVERNMENT and such


CONTRACTOR entity shall each appoint one < I) arbitrator


(in) In any event, the two arbitrators so appointed shall, in good faith, use


al! reasonable cndcasouis to agree on the appointment of the third


arbitrator, who will chair the arbitral tribunal In case of failure to


appoint an arbitrator or to agree on the appointment of the third


aibitrator. Rules of the LCIA shall applv


(vi) Arbitration shall take place in London. England The language to be


used in any prior negotiation, mediation and m the arbitration shall be


English During rhe arbitration procedure and until the arbitral


decision, no Parts or CONTRACTOR entity shall act in a manner


that may affect the rights of the other Party or other CONTRACTOR


entities under this Contract The arbitral award may be enforced by any


court of competent jurisdiction, including the Kurdistan Region Any


award shall be expressed in Dollars


(v) The Parties agree that the arbitral award shall be final and not subject


to any’appeal


4- 2 No negotiation, mediation, arbitration or expert determination procedure under this


Article 42 shall exempt the Parties from fulfilling their respective legal andoc


contractual obligations


Any disagreement between the Parties relating to Articles 15 4. 27 2 and 27 9 of this


Contract, as well as any disagreement the Panics agree to refer to an expert, shall be


submitted to an expen The Management Committee shall prepare and agree


appropnate terms of reference relating to the disagreement to be submitted to the


expen. in accordance with Article 8 5 (Terms of Reference I


(a) The disagreement shall be submitted to an expert appointed by mutual


agreement of the Parties within thirty (30) days following the date of


preparation and agreement of the terms of reference mentioned in Article


•12 10 by the Management Committee ll the Ponies cannot agree on the


choice of the expen within such thirty (30) day period, at the request of either


Party, the expert shall be appointed by the President of the Energy Institute in


London. England Any expert appointed must have the necessary


quulillcnikins fot reviewing and deciding on the subject matte* of live


disagreement


> The duties of the expert shall be stated in the terms of reference piepaicd and


agreed by the Management Committee The Management Committee shall


piomptly provide the expen with the agreed terms of reference relating to the


disagicement Each Party shall have the tight to give to the expert m writing


my information which it considers useful The expert shall have the right to


review and verify any information lie deems useful to assist him in his review


of the disagreement


The expert shall tender his decision within forty-five (45) davs of his receipt


of (he terms of reference and the information referred to in Article 42 12


Subject to the provisions of Article 15 4 of this Contract, any decision of the


expert shall be final and shall not be subject to any appeal, except in the ease


of manifest error, fraud oi malpractice Any costs and expenses asxxiatcd


with the expert determination shall be shared equally between the Parties.



























































76


 ARTICLE 43-GOVERNING I AW. FISCAL STABILITY AND AMENDMENTS





Governing L«w


43 I This Contract. including any dispute arising therefrom, thereunder or in relation





thereto, shall be governed by English law (except any rule of English law which


would refer the inattei to another jurisdiction), together with any relevant rules,


customs and practices of international law, as well as by principles and practice


generally accepted in petroleum producing countries and in the international


petroleum industry





43 2 The obligations of the CONTRACTOR resulting from this Contract shall not be





aggravated by the GOVERNMENT and the general and overall equilibrium between


the Carries under this Contract shall not be affected in a substantial and lasting


manner





43 .1 The GOVERNMENT gumantccs to the CON I RA( I OR for the entire duration of


this Contract, that it will maintain the stability of the fiscal and economic conditions


of this Contract, as they result from this Contract and as they result from the laws and


regulations in force on the date of signature of this Contract I he < OM RAC I OK


has entered into this Contract on the basis of tlie legal, fiscal and economic framework


prevailing at the Effective Date If. at any lime alter the I (Teelive Date, there is any


change in the legal, fiscal and'or economic framework under tlie Kurdistan Region


Law or other Law applicable in the Kurdistan Region which demmetmlK affects the


CONTRACTOR, the terms and conditions of the Contract shall be altered so as to


restore the CONTRACTOR to the same overall economic position as that which


CONTRACTOR would have been in. had no such change in the legal fiscal and or


economic framework occurred


43 4 If the CONTRACTOR believes tlut its economic position has been detrimentally


affected as provided in Article 43 3. upon the CONTRACTOR’S written request, the


Parties shall meet to agree on any necessary measures or making any appropriate


amendments to the terms of this Contraa with a view to re-establishing the economic


equilibrium between the Parties and resionng the CONTRACTOR to the position u


was in poor to the occurrence of the change having such detrimental effect Should


the Panics be unable to agree on the ment of amending this Ceramet and or on any


amendments to be made to this Contraa wr.hn ninety (90) days of CONTRACTOR s


request (or such other period at may be agreed by the Panics) the CONTRACTOR


may refer the matter in dispute to arbitration as provided in Article 42 I


43 5 Without prejudice to the generality of the foregoing, the CONTR ACTOR shall be


entitled to request the’benefit of any future change* to the petroleum legislation or


any other legislation complementing, amending or replacing it











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77


43 6 The Panics agree to cooperate in all possible ways with a view to fully achieving the


objectives of this Contract The GOVERNMENT shall facilitate the performance of


the Petroleum Operations by promptly granting to the CONTRACTOR any


necessary authorisation, permit, licence or access right and making available any


existing facilities and services with a view to the Parties obtaining maximum mutual


benefit from the Contract


Amendments


43 7 Except as provided in Article 47, any amendment to this Contract shall be the subject


of a formal amendment, duly approved in writing by the Parties and subject to the


same conditions of validity as this Contract


43 8 This Contract constitutes the entire agreement of the Parties and supersedes any and


all prior understandings or agreements in respect of the subject matter of this


Contract


43 9 Unless otherwise expressly stated elsewhere in this Contract, no failure or delay of


any Party to exercise any right, power ot remedy under tins Contract shall operate as


a waiver thereof, noi shall any single ot partial exercise of any such right, power oi


remedy preclude any other or fttture exercise thereof ot the exercise of any other


right, power or remedy


Validity


43 10 As signatory to this Contract for and on behalf of the GOVERN.'! I! N I. tire Ministry of


Natural Resources in the Kurdistan Region hereby represents that it approves this


Contract foe the purposes of the Kurdistan Region Petroleum Act. when it enters into


force











ARTICLE 44 - NOTICES


44 I To be valid, any correspondence, written communication or notice between the Parlies


'lull be in writing and may be delivered by hand or transmitted by electronic mail or


fax. at sender's option and expense, and (unless delivered by hand or acknow ledged or


otherwise agreed by the receiving Party) shall be confirmed by registered mail with


acknowledgement of receipt and shall become effective once received by the first of


these means of transmission These communications shall be addressed as follows





For the GOVERNMENT





Attention: Ashti A. Haw rami


Minister


Address: Council of Ministers


Kurdistan Regional Government


Erbil, Kurdistan - Iraq


Email: aslni.liawramiftfkrg.oig











78


 For the CONTRACTOR








Shakal Production. Ltd.


Address 2500 City West Blvd


Suite 1750


Houston. TX 77042. USA


Phone -I 713-953 3210


Facsimile *1 713-953 3200


E-mail i ander

Com act person W Richard Anderson








PetOil Petroleum and Petroleum


Products International Ftploralion and


Production Inc.


Address: Koza Sokak No 43. (K)P


06700 Ankara. Turlev


Phone


•90 312 4408482


Facsimile •90 312 441 6026 4416027


E-mail alupetod cosk.m


Contact person M Ali Ak. General Manager











Trilai Oil Ltd


Address 15322 Chinabcriy Street


Ph

+ 1 757 945-9203


Facsimile * I 202 478-5216





E-mail |i mcgiii.re 19l9&;carthlmk.ncl


Contact person John R McGuire. Dircctoi





44 2 I he above address and/or designated representative of any of the Parties may he


changed on giving ten (10) days prior notice to the other Pans











ARTIC IE 45 - TERMINATION





45 l Subject to the provisions of Article 45.5. the GOVERNMENT shall have the right to


terminate this Contract in the event the CONTRACTOR


(a) fails to meet a material financial obligation expressly stated in this Contract,


or





(b) during the Fust Sub-Period does not carry out drilling and seismic acquisition,


as detailed in Article 10.2 of. during the Second Sub-Pcnod (or earlier), does


not carry out drilling and seismic acquisition, as detailed in Article 10.3; or











79


(c) interrupts Production for a period of more llun ninety (90) consecutive days with


no cause or justification acceptable in accordance with this Contract (including


force Majeure)or under normal international petroleum industry practice. «m


(

object of this Contract, unless such extraction or production is expressly


authorised or unavoidable as n result of operations carried out in accordance


with accepted international petroleum industry practice, or


(c) if the CONTRACTOR comprises vilely one entity, is declared bankrupt in


accordance with applicable l aw. or


(0 wilfully refuses to abide by negotiation. mediation, arbitration or expert decision


under Anidc 42 of tins Contract


45 2 The GOVERNMENT may also terminate the Contract only in respect of one


( OM KA< I OR entity if such entity is subject to a C hange of Control which has been


completed without having obtained the prior required authorisation from the


(.ON I RNMKN T (deemed or otherwise) in accordance with Article 396.


45 3 At any lime prior to the Development Period the CON TRACTOR shall have the light


to terminate this Contract by surrendering the entire Contract Area in accordance with the


provisions of Article 7 of this Contract


•15 4 During the Development Period, the CONTRACTOR shall have the right to


terminate this Contract at any time by surrendering all Product:on .Areas, provided its


then current obligations have been satisfied in accordance with this Contract


45 5 If the GOVERNMENT intends to exercise us right to terminate this Contrail


pursuant to Article 45.1, it shall fust comply with the following provisions


(a) The GOVERNMENT shall notify the CONTRACTOR of us intention to


terminate this Contract stating the reasons for such termination and requeuing


the latter


(i) to remedy the default within three (3) months: or


(li) to propose acceptable compensation


(b) If. by then end of the said three (3) month period referred to in Ankle 45 4


(a), the GOVERNMENT is not satisfied, it shall notify the CONTACTOR


in wilting that the Contract shall be terminated from the termination date


detailed in such notice This Contract shall terminate on such termination date


unless the CON TRACTOR issues a notice of dispute as provided under


At tide 41 of this Contract, in which ease this Contract shall remain in force


until a final settlement of the dispute has been reached in accordance with the


dispute resolution provisions of Article 41 of this Contract


The foregoing provisions of this Article 45 4 arc subject to the proviso that, in case of


a dispute where there has been breach of this Contract which has been subr'---~' •*»





Kf


80


 arbitration pursuant to Article 41 of this Contract, the GOVERNMENT shall not be


entitled to exercise its right to terminate this Contract prior to a decision regarding the


dispute having been rendered by the arbitration tribunal





45 6 If the GOVERNMENT terminates this Contract pursuant to the provisions of Articles


45 I and 45 5. the CON I KACTOR shall lose all us rights and interests under this


Contract











ARTICLE 46- APPLICATION OKORRl PTION I.AWS





46 I If this Contract is reasonably proven to have been obtained in violation of Kurdistan


Region Law concerning corruption, this Contract is void

46 2 If the CONTRACTOR is at any time reasonably proven to be in breach of Kurdistan





Region Law concerning corruption, the CONI It ACTOR may lose this Contract or pail


of the Contract








ARTICLE 47 GOVERNMENT REVIEW





47.1 This Contract may be reviewed by the GOVERNMENT and amended by the


GOVERNMENT to the extent necessity to ensure that there is no material


inconsistency between this Contract and such reasonable cr«ena of probity and


commcrcialify which the GOVERNMENT may agree, m any petroleum iaw or other


instrument, shall apply to the existing petroleum contracts in the Kurdistan Region


47 2 Such review may take place within six months of the cntiy into force of any new





applicable petroleum law or instrument establishing those entena Such review will be


done only one time and shall be with respect to the applicable petroleum law under


discussion on the Effective Date


47 3 The CONTRACTOR may. within thirty (30) days of receiving such a notification,


respond to the proposed amendments The GOVERNMENT shall consider any such


response and shall, within sixty (60) days of the notification, further notify the


CON 1 RACTOR m writing of any decision to amend the contract or decision not to


amend This Contract shall be deemed to have been so amended on the date of


notification of the GOVERNMENTS decision to amend the Contract








ART ICLE 48- EFFECT IVE DATE





This Conrad shall become effective and be binding oo the Parties when both of the


following conditions have been satisfied -


(a) upon its signature by the duly authorised representatives of the GOVERNMENT and ihc


CONTRACTOR;














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l the • jpacnx UtukSnv fund pa\mcnt t*\


(O'IKU I OK under Article ?Z Z











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I or (io'cnntirni


Miimlrs of Nmural kc'nune'























Witness Win \ Hjmuiiii


Munster




















W it lie.''











For Coiitrurtor


Mi*k*l l*rintuition. I lit























W Richard \mier-u>n


OlKVIiU














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PriOil Petroleum and Petroleum


Products International I xploralion


and Prod nr linn Inc.








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 ANNEX A


CONTRACT AHI \














































































































Projection: i IM 7anc: «H\ Dilum: \W.S84














POINTS X COORD - EAST V COORD NORTH I AT- NORTH ION - EAST





1 ■ ^ »4i |


A 534031 75 3832686 29 34 38 08 45 77 15*


B 492441 35 3650381 Or


34'4r *4- 44 55 02*


c *85027 95 3847006 24 3*' 45 55' 4* 50 i r


0 ‘ 5146*6 16 3825161 52 34 34'04- 45 09 36*


» --- ---»«--- • ■ -»»»--- ' ■ - ■ 4 34' 37 30* ' 45 12*51*


E 519630 02 382223/41





F 523126 47 38250/3 21 • 34 3< 00' 45 15 or


0 526768 36 3822338 08 34' 32 33 45 17*30*





















































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 ANNEX“B"





ACCOUNTING rROCF.Dl RL


Attached 10 and made pari of the Amended and Restated Production Sharing Agreement,





hereinafter called the “Agreement." effective February 25. 2007. by and between the


Kurdistan Regional Government and Shakal Production. Ltd. PctOil Petroleum and


Petroleum Products International Exploration and Production Inc . and Trilax Oil Ltd


SEC TION I





provisions





Li Ptiruou:


1.1.1 I lie |Hir|K>ke of this Accounting Procedure is to establish equitable methods


lor determining charges and credits applicable to operations under the


Agreement which idled the costs of Petroleum Operations to the end that no


Paiiy shall gain oi lose in relation to other Panics


It is intended dial approval of the Work Program and Budget as provided in


the Agi cement shall constitute approval of the rates and allocation methods


used iheicin to curicntly cliatgc the Petroleum Operations Accoum but


subject to verification by audit at a later date as provided in the Accounting


Procedure





1.1.2 The Parties agree, however, that if the methods prove unfair or inequitable to


Operator or Non-Operators, the Pames shall meet »:d .:i good faith endeavour


to agree on changes in methods deemed necessary to cortex: jov unfairness o:


inequity





1.2 Conflict with Agreement In the event of a conflict between the provisions of this


Accounting Procedure and the provisions of the Agreement to which this Accounting


Procedure is attached, the provisions of the Agreement shall prevail


1.3 Definition* I he definitions contained in Article I of the Agteement to which this


Accounting Procedure is attached shall apply to this Accounting Procedure and have


the same meanings when used herein Certain terms used heicm arc defined as


follows





“Country of Operation*" shall mean Iraq


“Material” shall mean personal properly (including, but not limited to. equipment


and supplies) acquired and held for use in Petroleum Operations








1.4.1 Operator shall at all limes maintain and keep true and correct records of the


production and disposition of all Petroleum, and of all costs and expenditures


under the Agreement, as well as other data necessary or proper for the tr


settlement of accounts between the Parties hereto in connection with their





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 rights and obligations under the Agreement and to enable Parties to comply


with their respective applicable income tax and other laws


1.4.2 Operator shall maintain accounting records pertaining to Petroleum Operations


in accordance with generally accepted accounting practices used in the


international petroleum industry and any applicable statutory obligations of


the Country of Operations as well as the provisions of the Agreement


1.4.3 Petroleum Operations Account records shall be maintained by Operntor in the


English language and in United States of America (••US”) currency and in


such other language and currency as may be required by the laws of the


Country of Operations Conversions of currency shall be recorded at the rate


actually experienced in that conversion Currency translations for


expenditures and receipts shall be recorded at the arithmetic average buying


and selling exchange rates for the New Iraqi Diner, and the United States


Dollars of the preceding month as determined by the local market


1.4.4 Any currency exchange gam or losses shall be credited or charged to the


Petroleum Operations Account, except as otherwise specified in this


Accounting Procedure


1.4.5 I lie accrual basis for accounting shall be used in preparing accounts


concerning the Petroleum Operations If a "cash" basis for accounting is used.


Operator shall show accruals as memorandum items


and BilUngs


1.5


1.5.1 l nless otherwise agreed by the Parties. Opcratot shil submit monthly to each





Party, on or before the 10* * Day of each month, statements of the costs and


expenditures incurred during the poor month, indicating by appropriate


classification the nature thereof the corresponding budget category. *nd the


portion of such costs charged to each of the Panto


These statements, as a minimum, shall contain the following information





• advances of funds setting forth the auiencies received from each Pam


• the vharc of each Party in total expenditures





• summary of costs, credits, and expenditures on a current month, year-


to-date and inception-to-date basis or other periodic basis, as agreed


by Panics


• details of unusual charges and credas in excess of US dollars SIO.OOO





(USS ten thousand t


1.5.2 Operator shall, upon request, furnish ti description of the accounting


classifications used by it





1.5.3 Amounts included in the statements and billings shall be expressed in US


currency and reconciled to the currencies advanced 4








2





1.5.4 Each Party shall be responsible for preparing its own accounting and tax


reports to meet the requirements of the Country of Operations and of all other


countries to which it may be subject Operator, to the extent that the


information is reasonably available from the Petroleum Operations Account


records, shall provide Non-Operators in n timely manner with the necessary


statements to facilitate the discharge of such responsibility


1.6 Payments and Advances Upon approval of any Work Program and Budget the


Contractor will provide nil required estimated cash requirements for the succeeding


month's operations


1.7 Audits


1.7.1 A Non-Operator, upon at least sixty (60) Days advance notice in wning to


Opcraioi and all other Non-Operators, shall have the right to audit the


Petroleum Operations Accounts and records of Operator relating to the


accounting hereunder for any Calertdai Year within the twenty-four (24)


month period following the end of such Calendar Year The cost of each such


audit shall be borne by Non-Operators conducting the audit It is provided,


however, that Non-Operators must take written exception to and make claim


upon the Operator for all discrepancies disclosed by said audit within said


twenty-four (24) month period Where there are two or more Non-Operators,


the Non-Opciutors shall make every reasonable effort to conduct joint or


simultaneous audits in a manner, which will result in a minimum of


inconvenience to the Operator Operator and Non-Operators shall make even


effort to resolve any claim resulting from an audit within a reasonable period


of time


A Non-Operator may audit the records of an Affiliate of Operator relating to


that Affiliate’s charges The provisions of this Accounting Procedure shall


apply mutans mu Hindu to such audits


f.7.2 Any information obtained by a Non-Operator under the provisions of this


Section I $ which does not relate directly to the Petroleum Operations shall be


kept confidential and shall not be disclosed to any party, except as would


otherwise be permitted by the Agreement.


1.7.3 In the event that the Operator is required by law to employ a public accounting


firm to audit the Petroleum Operations Account and records of Operator


relating to the accounting hereunder, the cost thereof shall be a charge against


the Petroleum Operations Account, and a copy of the audit shall be furnished


to each Party


1.8 Allocations If it becomes necessary tq allocate any costs or expenditures to or


between Petroleum Operations and any other operations, such allocation shall be


made on an equitable basis Upon request,.Operator shall furnish a description of its


allocation procedures pertaining to these costs and expenditures


 SECTION II








IHKIKT ( IIAKOES





Operator shall charge the Petroleum Operation! Account with nil costs and expenditures


incurred in connection with Petroleum Operations It is also understood that cluuges I'oi


services iioimally provided by an operator such ns those contemplated in Section 2 7 2 which


are provided l>y Operator's Affiliates shall reflect the cost to tire Affiliate excluding profit,


for performing such services, except as otherwise provided in Section 2 6. Section 2 7 I. and


Section 2 ' I if selected





The costs and expenditures shall be recorded as required for the settlement of accounts


between the Parties hereto in connection with the rights and obligations under this Agicement





and for purposes of complying with the tax laws of the Country of Operations and of such


other countries io which any of the Parties may he subject Without in any way limiting the


generality of the foregoing, chargeable costs and expenditures shall include


2.1 I iccuses. Permits. Etc All costs, if any. attributable to the acquisition, maintenance,


renewal or relinquishment of licenses, penults lontiactual and/OT surface lights


acquired for Petroleum Operations when paid by Operator in accordance with the





provisions of the Agreement





2.2 Salfliisii





2.2.1 1 tie employees of Operator and tts Affiliates in the Country of Operations


directly engaged in Petroleum Operations whether Temporarily or permanently


assigned





2.2.2 The employees of Operator and ns Affiliates outside the Country of


Operations directly engaged in Petroleum Operations whether temporarily or


permanently assigned, and not otherwise covered in Sea ion 2 7 2





2.2.3 Salaries and wages, including everything constituting the employees total


compensation To the extent not included in salaries and wages, the Petroleum


Operations Account shall also be charged with the cos to Operator of holiday,


vacation, sickness, disability benefits, living and housing allowances, travel


time, bonuses, and other customary allowances applicable to the salaries and


wages chargeable hereunder as well as costs to Operator for employee


benefits, including but not limited to employee group life insurance, group


medical insurance, hospitalization, retirement, and ex her benefit plans of a like


nature applicable to labor costs of Operator Operator’s employees


participating in Country of Operations benefit plans may be charged at a


percentage rate to reflect payments or accruals made by Operator applicable to


such employees Such acctuals for Country of Operations benefit plans shall


not be paid by Non-Operators unless otherwise approved by the Co¬


ordination Committee, until the same ate due and payable to the employee,


upon withdrawal of a Party pursuant to the Agreement, or upon termination of


the Agreement, whichever occurs fust








4











4





2.2.4 Expenditures or contributions made pursuant to assessments imposed by


governmental authority for payments with respect thereto or on account of


such employees.


2.2.5 Salaries and wages charged in accordance with Operator's usual practice,


when and as paid or accrued, or on a basis of the Operator's average cost per


employee for each job category, and the rates to be charged shall be reviewed


at least annually. In determining the average cost per employee for each job


category, expatriate and national employee salaries and wages shall be


calculated separately. During a given period of time it is understood that some


costs for salaries and wages may be charged on an actual basis while the


remaining -costs for salaries and wages arc charged at a rate based upon the


above described average cost


2.2.<» Reasonable expenses (including related travel costs) of those employees


whose salaries and wages are chargeable to the Petroleum Operations Account


under Sections 2.2 I and 2.2.2 of this Section II and for which expenses the


employees arc reimbursed under the usual practice of Operator


2.2.7 If employees are engaged in other activities in addition to the Petroleum


Operations, the cost of such employees shall be allocated on an equitable


basis.


2.3 Employee Relocation Costs


2.3.1 Except as provided in Section 2 > >. Operators cost of employees' relocation


to or from the Agreement Area vicinity or location where the employees will


reside or work, whether permanently or temporarily assigned to the Petroleum


Operations If such employee works on other activities in addition to


Petroleum Operations, such relocation costs shall be allocated on an equitable


basis


2.3.2 Such relocation costs shall include transportation of employees, families,


personal and household effects of the employee and family, transit expenses,


and all other related costs in accordance with Operator s usual practice


2.3.3 Relocation costs from the vicinity of the Agreement Area to another location


classified as a foreign location by Operator shall not be chargeable to the


Petroleum Operations Account unless such foreign location is the point of


origin of the employee


2.4 Offices, Camps, and Miscellaneous Facilities Cost of maintaining any offices, sub¬


offices. camps, warehouses, housing, and other facilities of the Operator andior


Affiliates directly serving the Petroleum Operations If such facilities serve


operations in addition to the Petroleum Operations the costs shall be allocated to the


properties served on an equitable basis


2.5 Material Cost, net of discounts taken by Operator, of Material purchased or


furnished by Operator Such costs shall include, but are not limited to. export


brokers' fees, transportation charges, loading, unloading fees, export and import


duties and license fees associated with the procurement of Material and in-transi^^


losses, if any. not covered by insurance So far as il is reasonably practical and


consistent with efficient and economical operation, only such Material shall be


purchased for. and the cost thereof charged to, the Petroleum Operations Account as


may be required for immediate use


2.5.1 Purchasing fee When economical to do so. and required for the benefit of


the Petroleum Operations. Operator may request its Affiliates to provide


purchasing, expediting and traffic coordination services. Charges to the


Petroleum Operations Account for the provision of these purchasing services


shall be based on the Affiliate’s standard purchasing fee currently set at 6% on


the amount of each purchase order.


The fee shall be reviewed periodically by Operator's Affiliates and future


changes shall be made upward or downward as indicated by the Affiliate’s


cost experience for the provision of these purchasing service* Any changes


affecting the charges to the Petroleum Operations Account shall be subject to


notification by Operator and approval by the Co-ordination Committee. Such


charges shall be in lieu of any charges for the same 01 similar services


provided herein


2.6 Exclusively Owned Equipment and Facilities of Operator and Affiliates


Charges for exclusively owned equipment, facilities, and utilities of Operator and its


Affiliates at talcs not to exceed the average commercial late* of non affiliated third


panics then pievailing for like equipment, facilities, anc utilities foi use m the area


where the same are used hereunder On request Operator shall furnish Son-


Operators a list of rates and the basis of application Such rates shall be revised from


time to time if found to be cither excessive or insufficient, but not more than once


every six months


Drilling tools and other equipment lost in the hole or damaged beyond repair may be


charged at replacement cos: less depreciation plus transport at Kin costs to deliver like


equipment to the location where used


2.7 Services


2.7.1 The cost of services provided by third parties including Affiliates of Operator


other than those services covered by Section 2 7 2 Such charges for services


by Operator s Affiliates shall not exceed those currently prevailing if


performed by non-affiliated third parlies, considering qualus and availability


of services


2.7.2 The cost of services performed by Operator s Affiliates technical and


professional staffs not located within the Country of Operation


2.7.3 The charges for such services shall not exceed those currently prevailing if


performed by non-affiliated third panics, considering the quality and


availability of such services


Examples of such services include, but arc not limited to. the following


¥





46f 6


 Geologic Studies and Interpretation


Seismic Data Processing





Well Log Analysis Correlation and Interpretation


Laboratory Services





Well Site Geology


Project Engineering





Source Rock Analysis


Petrophysical Analysis





Geochemical Analysis


Drilling Supervision





Development evaluation


Accounting and Professional Services





Otlici Data Processing





Costs shall include salaries and wages of such technical and professional personnel,


lost time, governmental assessments, employee benefits, and reasonable expenses


Costs shall also include all support costs necessary for such technical and professional


personnel to perform such services, such as. but not limited to. rent, utilities, support


staff, drafting, telephone and other communications expenses, computer support,


supplies, and depreciation


2.* Insurance Premiums paid few insurance required by law or lire Agreement to be


carried for the benefit of the Petroleum Operations





2.9 to Property.


2.9.1 All costs or expenditures necessary to replace or repair damages or losses





incurred by fire, flood, storm, theft', accident, or an\ other cause Operator


shall furnish Non-Operators written notice of damages or losses incurred in


excess of Twenty Five thousand US dollars (US S 25.000) as soon as practical


after report of the same has been received by Operator All losses in excess of


ten thousand US dollars (US S 10.000) shall be listed separately in the


monthly statement of costs and expenditures


2.9.2 Credits for settlements received from insurance earned for the benefit of


Petroleum Operations and from others tor losses or damages to Joint Property


or Materials Each Party shall be credited with its Participating Interest share


thereof except where such receipts are derived from insurance purchased by


Operator for less than all Parties in which event such proceeds shall be


w





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ciedited lo those Parties for whom the insurance was purchased in the


proportion of then respective contributions toward the insurance coverage


2.9.3 F.xpenditures incurred in the settlement of all losses, claims, damages,


judgments, and other expenses for the account of Petroleum Operations.





2.10 Litigation wtnl l.rmil Lxncnxcs The costs and expenses of litigation and legal


services necessary for the protection of the Petroleum Operations under this


Agreement as follows


2.10.1 l^gal set vices necessary or expedient foi the protection of the Petroleum


Operations, and all costs and expenses of litigation, arbitration or oilier


alternative dispute resolution procedure, including reasonable attorneys’ fees


and expenses, together with all judgments obtained against the Parties or ary


of them arising from the Petroleum Operations





2.10.2 If the Parties hereunder shall so agree, actions or claims affecting the


Petroleum Operations heieunder may hr handled by the legal staff of one or


any of the Parties hereto, and a charge commensurate with the reasonable


costs of providing and furnishing such services rendered may be made by the


Party providing such service to Operator for the Petroleum Operations


Account, hut no such charges shall be made until approved by the Parties


2.11 faxes and Duties All taxes, duties assessments and governmental charges, of every


kind and nature, assessed or levied upon or in connection with the Petroleum


Operations, other than any that are measured by or based upon the revenues, income


and net worth of a Party


If Operator or an Affiliate it subject to income or withholding tax as a result of


services performed at cost for the operations under the Agreement, its charges for


such services may be increased by the amount of such taxes incurred (grossed up)





2.12 Other Expenditures Any other costs and expenditures incurred by Operator for the


necessary and proper conduct of the Petroleum Operations in accordance with


approved Work Programs and Budgets and not coveted m this Section II or in Section


III


SECTION III


INDIRECT CHARGES





3.1 Purpose Operator shall charge the Petroleum Operations Account monthly for the


cost of mdiiect services and related office costs of Operator and its Affiliates not


otherwise provided in this Accounting Procedure Indirect costs chargeable under this


Section III represent the cost of general counselling and support services provided lo


Operator by it* Affiliate These costs arc such that it is not practical to identify or


associate them with specific projects but are for services which provide Operator with


needed and necessary resources which Operator requires and provide a real benefit to


Petroleum Operations No cost or expenditure included under Section II V


included or duplicated under this Section III








I AL


(pfM





Amount The charge for the period beginning with the Calendar N ear through the


end of the period covered by Operator's invoice (“Ycar-to-Date") under Section 3 I


above shall be a percentage of the Year-to-Datc expenditures, calculated on the


following scale (US Dollars)


Annual Expenditures





SO to SI.000.000 of expenditures 1%





Next S5.000.000 of expenditures ■ 3 *•


Excess above S 5.000.000 of expenditures 2





Exclusionv The expenditures used to calculate the monthly indirect charge shall not


include the indirect charge (calculated either as a percentage of expenditures or as a


minimum monthly charge), rentals on surface rights acquired and maintained for the


Petroleum Operations Account, guarantee deposits, pipeline tariffs concession


acquisition costs and Taxes paid under the Agreement expenditures associated with


major consliuction protects for which a separate indirect charge is established


hereunder, pavmcnts to third parties in settlement of claims, and other similar items


Credits arising from any government subsidy payments, disposition of Material, and


receipts from third parties for settlement of claims shall not be deducted from total


expenditures in determining such indirect charge





Indirect Charge for Projects As to major construction projects tsuch as ;ut not


limited to, pipelines, gas reprocessing and processing plants, and final loading and


tcrminalling facilities) when the estimated cost of each project amounts to more than


US S 15.000.000. a separate indirect charge for such project shall be set by the


Co-ordination Committee at the time of approval of the project








SECTION IV





ACQUISITION OF MATERIAL





Acquisitions Materials purchased for the Petroleum Operations Account shall be


charged at net cost paid by the Operator The price of Materials purchased shall


include, but shall not l>c limited to export broker's fees, insurance, transportation


charges, loading and unloading fees, import duties, license fees, and demurrage


(retention charges) associated with the procurement of Materials, and applicable


taxes, less all discounts taken





Materials Furnished by Operator Materials required for operations shall be


purchased for direct charge to the Petroleum Operations Account whenever


practicable, except the Operator may furnish such Materials from its stock under the


following conditions





4.2.1 New Materials (Condition "I") New Materials transferred from the


warehouse or other properties of Operator shall be priced at net cost


r





y


 determined in accordance with Section 4 I above, as if Operator had


purchased such new Material just prior to nv transfer





Such net costs shall in no event exceed the then current market poce





4.2.2 Ised





4.2.2.1 Material which is in sound and serviceable condition and vnuhlc


for use without repair or reconditioning sliall be classed as


Condition ~2“ and priced at seventy-five percent (75%) of such


new purchase net cost at the tunc of ttansfer





4.2.2.2 Materials not meeting the requirements of Section 4 2 2 1 above,


but which can be made suitable for use after being repaired or


reconditioned, shall be cl.i"

percent (50%) of such new purchase net cost at the time of transfer


The cost of reconditioning shall also be charged to the Petroleum


Operations Account provided the Condition “3“ price, plus cost of


reconditioning, does no: exceed the Condition ~2~ price and


provided that Material so classified meet the requirements foi


Condition “2“ Material upon being repaired or reconditioned





4.2.2.3 Material which cannot be classified as Condition “2** ot


Condition “3". shall he priced at a value commensurate with its


use





4.2.2.4 Tanks, derricks, buildings, and Other items of Material involving


erection costs, if transferred in Icnocked-down condition, shall be


graded as to condition as provided in this Section 4 2 2 of Section


IV





4.2.2.5 Material including drill pipe, casing and tubing, which is no longer


use-able for its original purpose but is useable for some other


purpose, sliall lie graded as to condition as provided in this Section


4.2.2 of Section IV Such Material shall be priced on (he basis of


the current price of items normally used for such other purpose if


sold to third parties





4,3 Premium Prices. Whenever Material is not readily obtainable at prices specified in


Sections 4.1 ami 4.2 of this Section IV because of national emergencies, strikes ot


other unusual causes over which Operator has no control. Operator may charge the


Petroleum Opctations Account foi the required Material at Operator s actual cost


incurred procuring such Material, in making it suitable for use. and moving it to the


Agreement Area.,provided that notice in writing, including a detailed description of


the Matcnal required and the requited delivery date, is turnished to Non-Operators of


the proposed charge at least 15 Days (or such shorter period as may be specified by


Operator) before the Material in projected to lie needed for operations and prior to


billing Non-Operators for such Material the cost of which exceeds One Hundred


thousand US dollars (US S 100,000) Kach Non-Operator shall have the right, by so *° /


electing and notifying Operator within 10 Days (ot such shorter period as may


specified by Operator) after receiving notice from Operator, to furnish in kind all ”\





10





part of his share of such Material per the terms of the notice which is suitable for use


and acceptable to Operatoi both as to quality and time of delivery Such acceptance


by Operator shall not be unreasonably withheld. If Material furnished is deemed


unsuitable for use by Operator, all costs incurred in disposing of such Material or


returning Material to owner shall be borne by the Non-Operator furnishing the same


unless otherwise agreed by the Parties If a Non-Operator fails to properly submit an


election notification within the designated period. Operator s not required to accept


Material furnished in kind by that Non-Operator If Operator fails to submit proper


notification prior to billing Non-Operators for such Material. Operatoi shall only


charge the Petroleum Operations Account on the basis of the price allowed during a


“normal" pricing period in effect at time of movement.


Warranty of Material Furnished by Operator. Operatoi does not wairant the


Material furnished In case of defective Material, credit shall not he passed to the


Petroleum Operations Account until adjustment has been received bv Operator from


the manufacturers or their agents








SECTION V


DISPOSAL OF MATERIALS


Disposal Operator shall be under no obligation to purchase the merest of Nor-


Operators in new or used surplus Materials Operator shall have the right to dispose


of Materials but shall advise and secure prior agreement of the Co-ordination


Committee of any proposed disposition of Materials having an original cost to the


Petroleum Operations Account either individually or in the aggregate of One Hundred


Thousand US Dollars (US SIOO.OOO) or more W hen Petroleum Operations arc


relieved of Material charged to the Petroleum Operations Account Operator shall


advise each Non-Operator of the original cost of vuch Material to the Petroleum


Operations Account so that the Parties may eliminate such costs from their asset


records Credits for Material sold by Operator shall be made to the Petroleum


Operations Account in the month in which payment is received for t!*c Material Any


Material sold or disposed of under this Section shall be on an “as is. w here is" basis


without guarantees or warranties of any kind or nature Costs and expenditures


incurred by Operator in the disposition of Materials shall be charged to the Petroleum


Operations Account.


Mnlrrinl Purchased by a Party or Affiliate Material purchased from the Joint


Property by a Party or an Affiliate thereof shall be credited by Operator to the


Petroleum Operations Account, with new Material valued in the same manner as new


Material under Section 4 2 I and used Material valued in the same manner as used


Material under Section 4 2 2, unless otherwise agreed by the Co-ordination


Committee





Division In Kind Division of Material in kind, if made between the Parties, shall be


in proportion to their respective interests in such Material. Ivach Partv will thereupon


be charged individually with the value (determined in accordance


set forth in Section 5 2) of the Material received or receivable by it








II


Sales lo Third Parties Material purchased from the Joint Property by third parties


shall be credited by Operator to the Petroleum Operations Account at the net amount


collected by Operator from the buyer If the sales price is less than that determined in


accordance with the procedure set forth in Section 5 2. then approval by the Co¬


ordination Committee shall be required prior to flic sale Any claims by the buyer for


defective materials or otherwise shall be changed back to the Petroleum Operations


Account if and when paid by Operator











SECTION VI


INVENTORIES


Periodic Inventories - Notice and Representation At reasonable intervals, but at


least annually, inventories shall be taken by Operator of all Material on which detailed


accounting records are normally maintained The expense of conducting periodic


inventories shall be charged to the Petroleum Operations Account Operator shall


give Non Operators written nonce at least thins Das s (30) in advance of its intention


to take inventory, and Non-Operators, at their sole cost and expense, shall each be


entitled to hase a representative present The failure of any Non-Operator to be


represented at such inventory shall bind such Non-Operator to accept the inventory


taken by Operator who shall in that event furnish each Non-Operator with a


reconciliation of overages and shortages Inventory adjustments to the Petroleum


Operations Account shall be made for overages and shortages Any adjustment


equivalent to Filly Thousand US Dollars (USS 50,000) or more shall be brought to the


attention of the Co-ordination Committee


Special Inventories Whenever theie is a sale or change of interest in the Agreement,


a special inventory may be taken by the Operator provided the seller and/or purchaser


of such interest agrees to bear all of the expense thereof In such cases, both the seller


and the purchaser shall be entitled to be represented and shall be governed by the


inventory so taken
























































17


 SECTION VII





NON-RECOVERABI.E COSTS


7 Non-Rrcosrrable costs. Except as specifically provided in the Agreement. the


following costs shall nor be recoverable by the Contractor as Petroleum Costs


7.1 I Inter cm


7 1 2 Depreciation and amortisation


7 I 3 Dividends, repayment of equity or repayment of intcr-compam loans





7 I 4 Dccormssioning costs actually paid in excess of decommissioning fund


balance


7 1 5 l.'nless spcxificall> provided in an approsed Hud vet or otherwise specifically


approved by the Government, costs relating to leasing and hiring of structure' or facilities



























































A








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