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PRODUCTION SHARING CONTRACT


BINA BAWI BLOCK



KURDISTAN REGION



BETWEEN



THE KURDISTAN REGIONAL GOVERNMENT OF IRAQ



AND



HAWLER ENERGY, LTD.,



AND



A&T PETROLEUM COMPANY, LTD.,



AND



OIL SEARCH (IRAQ) LIMITED

TABLE OF CONTENTS



PREAMBLE



Article 1 DEFINITIONS



Article 2 SCOPE OF THE CONTRACT



Article 3 CONTRACT AREA



Article 4 OPTIONS OF GOVERNMENT PARTICIPATION AND THIRD PARTY PARTICIPATION



Article 5 OPERATOR



Article 6 TERMS OF THE CONTRACT



Article 7 RELINQUISHMENTS



Article 8 MANAGEMENT COMMITTEE



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 ACCOUNTING 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



Article 23 PERSONNEL TRAINING AND TECHNOLOGICAL ASSISTANCE





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Article 24 ROYALTY



Article 25 RECOVERY OF PETROLEUM COSTS



Article 26 SHARING OF PROFIT PETROLEUM



Article 27 VALUATION AND METERING OF CRUDE OIL AND NATURAL GAS



Article 28 DOMESTIC MARKET-SALE OF GOVERNMENT SHARE



Article 29 FINANCIAL PROVISIONS



Article 30 CUSTOMS PROVISIONS



Article 31 TAX PROVISIONS



Article 32 BONUSES



Article 33 PIPELINES



Article 34 UNITISATION



Article 35 LIABILITY AND INSURANCE



Article 36 INFORMATION AND CONFIDENTIALITY



Article 37 ENVIRONMENTAL PROVISIONS



Article 38 DECOMMISSIONING



Article 39 ASSIGNMENT AND CHANGE OF CONTROL



Article 40 FORCE MAJEURE



Article 41 WAIVER OF SOVEREIGN IMMUNITY



Article 42 ARBITRATION AND EXPERT DETERMINATION



Article 43 GOVERNING LAW, FISCAL STABILITY, AMENDMENTS AND VALIDITY



Article 44 NOTICES



Article 45 TERMINATION



Article 46 APPLICATION OF CORRUPTION LAWS



Article 47 EFFECTIVE DATE



Annex A CONTRACT AREA MAP AND LIST OF COORDINATES



Annex B ACCOUNTING PROCEDURE



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PRODUCTION SHARING CONTRACT



BETWEEN



The KURDISTAN REGIONAL GOVERNMENT OF IRAQ (hereafter referred to as the "GOVERNMENT"), duly represented by the Minister of Natural Resources;



AND



HAWLER ENERGY, LTD., a company established and existing under the laws of the Cayman Islands, whose registered office is a Ugland House, South Church Street, George Town, Grand Cayman, Cayman Islands, duly represented by Jan Veldwijk;



AND



A&T PETROLEUM COMPANY, LTD., a company established and existing under the laws of the Cayman Islands, whose registered office is at Ugland House, South Church Street, George Town, Grand Cayman, Cayman Islands, duly represented by Mehmet Ali Ak;



AND



OIL SEARCH (IRAQ) LIMITED, a company established and existing under the laws of British Virgin Islands, whose registered office is at Level 27, Angel Place, 123 Pitt Street, Sydney Australia, duly represented by Mark Wilson;

(hereafter collectively referred to as the "CONTRACTOR")



WHEREAS



(A) The GOVERNMENT wishes to develop the petroleum wealth of the Kurdistan Region (as defined in this Contract) in a way that achieves the highest benefit to the people of the Kurdistan Region and all of Iraq, using the most advanced techniques of market principles and encouraging investment, consistent with the Constitution of Iraq including Article 112 thereof;



(B) In accordance with the Constitution of Iraq, the prevailing law of the Kurdistan Region is the Kurdistan Region Law (as defined in this Contract), except with regard to a matte wholly within the exclusive jurisdiction of the Government of Iraq;



(C) The GOVERNMENT concluded a production sharing contract dated 29 March 2006 with HAWLER ENERGY, LTD., and A&T PETROLEUM COMPANY, LTD., such production sharing contract having been amended and restated on dated 26 February 200 (hereafter referred to as the "Original Contract") for the exploration and development of Petroleum in the Contract Area (as defined in this Contract);



(D) The National Assembly of the Kurdistan Region approved the Oil and Gas Law of the Kurdistan Region - Iraq (Law No. 22 of 2007) which law regulates Petroleum Operations, including production sharing contracts entered into by the GOVERNMENT prior to the entry into force of that Law shall be subject to review by the Regional Council for the

PRODUCTION SHARING CONTRACT



BETWEEN



The KURDISTAN REGIONAL GOVERNMENT OF IRAQ (hereafter referred to as the "GOVERNMENT"), duly represented by the Minister of Natural Resources;



AND



HAWLER ENERGY, LTD., a company established and existing under the laws of the Cayman Islands, whose registered office is a Ugland House, South Church Street, George Town, Grand Cayman, Cayman Islands, duly represented by Jan Veldwijk;



AND



A&T PETROLEUM COMPANY, LTD., a company established and existing under the laws of the Cayman Islands, whose registered office is at Ugland House, South Church Street, George Town, Grand Cayman, Cayman Islands, duly represented by Mehmet Ali Ak;



AND



OIL SEARCH (IRAQ) LIMITED, a company established and existing under the laws of British Virgin Islands, whose registered office is at Level 27, Angel Place, 123 Pitt Street, Sydney Australia, duly represented by Mark Wilson;

(hereafter collectively referred to as the "CONTRACTOR")



WHEREAS



(A) The GOVERNMENT wishes to develop the petroleum wealth of the Kurdistan Region (as defined in this Contract) in a way that achieves the highest benefit to the people of the Kurdistan Region and all of Iraq, using the most advanced techniques of market principles and encouraging investment, consistent with the Constitution of Iraq including Article 112 thereof;



(B) In accordance with the Constitution of Iraq, the prevailing law of the Kurdistan Region is the Kurdistan Region Law (as defined in this Contract), except with regard to a matte wholly within the exclusive jurisdiction of the Government of Iraq;



(C) The GOVERNMENT concluded a production sharing contract dated 29 March 2006 with HAWLER ENERGY, LTD., and A&T PETROLEUM COMPANY, LTD., such production sharing contract having been amended and restated on dated 26 February 200 (hereafter referred to as the "Original Contract") for the exploration and development of Petroleum in the Contract Area (as defined in this Contract);



(D) The National Assembly of the Kurdistan Region approved the Oil and Gas Law of the Kurdistan Region - Iraq (Law No. 22 of 2007) which law regulates Petroleum Operations, including production sharing contracts entered into by the GOVERNMENT prior to the entry into force of that Law shall be subject to review by the Regional Council for the


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PRODUCTION SHARING CONTRACT



BETWEEN



The KURDISTAN REGIONAL GOVERNMENT OF IRAQ (hereafter referred to as the "GOVERNMENT"), duly represented by the Minister of Natural Resources;



AND



HAWLER ENERGY, LTD., a company established and existing under the laws of the Cayman Islands, whose registered office is a Ugland House, South Church Street, George Town, Grand Cayman, Cayman Islands, duly represented by Jan Veldwijk;



AND



A&T PETROLEUM COMPANY, LTD., a company established and existing under the laws of the Cayman Islands, whose registered office is at Ugland House, South Church Street, George Town, Grand Cayman, Cayman Islands, duly represented by Mehmet Ali Ak;



AND



OIL SEARCH (IRAQ) LIMITED, a company established and existing under the laws of British Virgin Islands, whose registered office is at Level 27, Angel Place, 123 Pitt Street, Sydney Australia, duly represented by Mark Wilson;

(hereafter collectively referred to as the "CONTRACTOR")



WHEREAS



(A) The GOVERNMENT wishes to develop the petroleum wealth of the Kurdistan Region (as defined in this Contract) in a way that achieves the highest benefit to the people of the Kurdistan Region and all of Iraq, using the most advanced techniques of market principles and encouraging investment, consistent with the Constitution of Iraq including Article 112 thereof;



(B) In accordance with the Constitution of Iraq, the prevailing law of the Kurdistan Region is the Kurdistan Region Law (as defined in this Contract), except with regard to a matte wholly within the exclusive jurisdiction of the Government of Iraq;



(C) The GOVERNMENT concluded a production sharing contract dated 29 March 2006 with HAWLER ENERGY, LTD., and A&T PETROLEUM COMPANY, LTD., such production sharing contract having been amended and restated on dated 26 February 200 (hereafter referred to as the "Original Contract") for the exploration and development of Petroleum in the Contract Area (as defined in this Contract);



(D) The National Assembly of the Kurdistan Region approved the Oil and Gas Law of the Kurdistan Region - Iraq (Law No. 22 of 2007) which law regulates Petroleum Operations, including production sharing contracts entered into by the GOVERNMENT prior to the entry into force of that Law shall be subject to review by the Regional Council for the


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PRODUCTION SHARING CONTRACT



BETWEEN



The KURDISTAN REGIONAL GOVERNMENT OF IRAQ (hereafter referred to as the "GOVERNMENT"), duly represented by the Minister of Natural Resources;



AND



HAWLER ENERGY, LTD., a company established and existing under the laws of the Cayman Islands, whose registered office is a Ugland House, South Church Street, George Town, Grand Cayman, Cayman Islands, duly represented by Jan Veldwijk;



AND



A&T PETROLEUM COMPANY, LTD., a company established and existing under the laws of the Cayman Islands, whose registered office is at Ugland House, South Church Street, George Town, Grand Cayman, Cayman Islands, duly represented by Mehmet Ali Ak;



AND



OIL SEARCH (IRAQ) LIMITED, a company established and existing under the laws of British Virgin Islands, whose registered office is at Level 27, Angel Place, 123 Pitt Street, Sydney Australia, duly represented by Mark Wilson;

(hereafter collectively referred to as the "CONTRACTOR")



WHEREAS



(A) The GOVERNMENT wishes to develop the petroleum wealth of the Kurdistan Region (as defined in this Contract) in a way that achieves the highest benefit to the people of the Kurdistan Region and all of Iraq, using the most advanced techniques of market principles and encouraging investment, consistent with the Constitution of Iraq including Article 112 thereof;



(B) In accordance with the Constitution of Iraq, the prevailing law of the Kurdistan Region is the Kurdistan Region Law (as defined in this Contract), except with regard to a matte wholly within the exclusive jurisdiction of the Government of Iraq;



(C) The GOVERNMENT concluded a production sharing contract dated 29 March 2006 with HAWLER ENERGY, LTD., and A&T PETROLEUM COMPANY, LTD., such production sharing contract having been amended and restated on dated 26 February 200 (hereafter referred to as the "Original Contract") for the exploration and development of Petroleum in the Contract Area (as defined in this Contract);



(D) The National Assembly of the Kurdistan Region approved the Oil and Gas Law of the Kurdistan Region - Iraq (Law No. 22 of 2007) which law regulates Petroleum Operations, including production sharing contracts entered into by the GOVERNMENT prior to the entry into force of that Law shall be subject to review by the Regional Council for the


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Contract Year means a period of twelve (12) consecutive Months starting from the Effective Date or any anniversary of the said Effective Date.



CONTRACTOR includes and comprises each and all CONTRACTOR Entities including any Third Party Participant an/or any Additional Interest Participant nominated by the GOVERNMENT pursuant to Article 4, and/or any assignee of all or part of the rights and obligations of a CONTRACTOR Entity under this Contract in accordance with Article 39, but not including any holder of the Government Interest.



CONTRACTOR Entity means any Person which is for the time being a component of the CONTRACTOR, and/or any assignee of all or part of the rights and obligations of such Person under this Contract in accordance with Article 39, but not including any holder of the Government Interest. For the avoidance of doubt at any time when there is only one entity consulting 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" Irrespective of the percentage participations that may have existed in relation to the Original Contract (including any subsequent versions or ratifications thereof) A&T Petroleum Company, Ltd., Hawler Energy, Ltd., Oil Search (Iraq) Limited and the GOVERNMENT (the GOVERNMENT owning the Third Party Interest until a whole or partial assignment of such Third Party Interest pursuant to Article 4) as the CONTRACTOR Entities as at the Effective Date, own an undivided interest in the Petroleum Operations in respect of the entire Contract Area in the following percentages at the Effective Date:



A&T Petroleum Company, Ltd. 20%

Hawler Energy, Ltd. 18%

Oil Search (Iraq) Limited 6%

GOVERNMENT (Third Party Interest) 20%

Additional Interest (Third Party Interest) 16%



The balance of the interest in Petroleum Operations in respect of the entire Contract Area, being twenty per cent (20%), is the Government Interest as defined in Article 4.1.



Crude Oil means all liquid hydrocarbons in the unprocessed state or obtained from Natural Gas by condensation or any other means of extraction



Decommissioning Costs means all the costs and expenditures incurred by the CONTRACTOR when carrying out Decommissioning Operations, including those defined in the Accounting Procedure



Decommissioning Operations means any works, together with all related and auxiliary activities, for decommissioning and/or removal and/or abandonment and making safe all of the Assets and site restoration and remediation related thereto in relation to any Production Area.



Decommissioning Plan is defined in Article 38.7.



8/122Contract Year means a period of twelve (12) consecutive Months starting from the Effective Date or any anniversary of the said Effective Date.



CONTRACTOR includes and comprises each and all CONTRACTOR Entities including any Third Party Participant an/or any Additional Interest Participant nominated by the GOVERNMENT pursuant to Article 4, and/or any assignee of all or part of the rights and obligations of a CONTRACTOR Entity under this Contract in accordance with Article 39, but not including any holder of the Government Interest.



CONTRACTOR Entity means any Person which is for the time being a component of the CONTRACTOR, and/or any assignee of all or part of the rights and obligations of such Person under this Contract in accordance with Article 39, but not including any holder of the Government Interest. For the avoidance of doubt at any time when there is only one entity consulting 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" Irrespective of the percentage participations that may have existed in relation to the Original Contract (including any subsequent versions or ratifications thereof) A&T Petroleum Company, Ltd., Hawler Energy, Ltd., Oil Search (Iraq) Limited and the GOVERNMENT (the GOVERNMENT owning the Third Party Interest until a whole or partial assignment of such Third Party Interest pursuant to Article 4) as the CONTRACTOR Entities as at the Effective Date, own an undivided interest in the Petroleum Operations in respect of the entire Contract Area in the following percentages at the Effective Date:



A&T Petroleum Company, Ltd. 20%

Hawler Energy, Ltd. 18%

Oil Search (Iraq) Limited 6%

GOVERNMENT (Third Party Interest) 20%

Additional Interest (Third Party Interest) 16%



The balance of the interest in Petroleum Operations in respect of the entire Contract Area, being twenty per cent (20%), is the Government Interest as defined in Article 4.1.



Crude Oil means all liquid hydrocarbons in the unprocessed state or obtained from Natural Gas by condensation or any other means of extraction



Decommissioning Costs means all the costs and expenditures incurred by the CONTRACTOR when carrying out Decommissioning Operations, including those defined in the Accounting Procedure



Decommissioning Operations means any works, together with all related and auxiliary activities, for decommissioning and/or removal and/or abandonment and making safe all of the Assets and site restoration and remediation related thereto in relation to any Production Area.



Decommissioning Plan is defined in Article 38.7.



8/122Contract Year means a period of twelve (12) consecutive Months starting from the Effective Date or any anniversary of the said Effective Date.



CONTRACTOR includes and comprises each and all CONTRACTOR Entities including any Third Party Participant an/or any Additional Interest Participant nominated by the GOVERNMENT pursuant to Article 4, and/or any assignee of all or part of the rights and obligations of a CONTRACTOR Entity under this Contract in accordance with Article 39, but not including any holder of the Government Interest.



CONTRACTOR Entity means any Person which is for the time being a component of the CONTRACTOR, and/or any assignee of all or part of the rights and obligations of such Person under this Contract in accordance with Article 39, but not including any holder of the Government Interest. For the avoidance of doubt at any time when there is only one entity consulting 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" Irrespective of the percentage participations that may have existed in relation to the Original Contract (including any subsequent versions or ratifications thereof) A&T Petroleum Company, Ltd., Hawler Energy, Ltd., Oil Search (Iraq) Limited and the GOVERNMENT (the GOVERNMENT owning the Third Party Interest until a whole or partial assignment of such Third Party Interest pursuant to Article 4) as the CONTRACTOR Entities as at the Effective Date, own an undivided interest in the Petroleum Operations in respect of the entire Contract Area in the following percentages at the Effective Date:



A&T Petroleum Company, Ltd. 20%

Hawler Energy, Ltd. 18%

Oil Search (Iraq) Limited 6%

GOVERNMENT (Third Party Interest) 20%

Additional Interest (Third Party Interest) 16%



The balance of the interest in Petroleum Operations in respect of the entire Contract Area, being twenty per cent (20%), is the Government Interest as defined in Article 4.1.



Crude Oil means all liquid hydrocarbons in the unprocessed state or obtained from Natural Gas by condensation or any other means of extraction



Decommissioning Costs means all the costs and expenditures incurred by the CONTRACTOR when carrying out Decommissioning Operations, including those defined in the Accounting Procedure



Decommissioning Operations means any works, together with all related and auxiliary activities, for decommissioning and/or removal and/or abandonment and making safe all of the Assets and site restoration and remediation related thereto in relation to any Production Area.



Decommissioning Plan is defined in Article 38.7.



8/122Gas Marketing Costs means all costs and expenditure incurred by the CONTRACTOR when carrying out Gas Marketing Operations, including those defined in the Accounting Procedure.



Gas Marketing Operations means any and all of the activities and operations contemplated by Article 14.6.



Gas Marketing Work Program and Budget means the marketing work program and budget prepared pursuant to Article 14.8.



Government Interest is defined in Article 4.1.



Government of Iraq means the Federal Government of the Republic of Iraq, which holds office under the Constitution of Iraq and any minister, ministry, department, sub-division, agency, authority, council, committee, or other constituent element thereof and shall, without limitation, include any corporation owned and/or controlled by any of the foregoing.



International Market Price is defined in Article 27.2.



Iraq means the entirety of the Republic of Iraq, including the Kurdistan Region.



Joint Operating Agreement means any agreement executed by the CONTRACTOR Entities at any time 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 prudent international petroleum industry practice; (b) as between such entities, supplementary to this Contract; and (c) consistent with the provisions of the Contract.



Kurdistan Region means the Federal Region of Kurdistan recognised by the Constitution of Iraq and having the same meaning as 'Region' in the Kurdistan Region Oil and Gas Law.



Kurdistan Region Law means all statutes, decrees, edicts, codes, orders, rules, ordinances and regulations of the GOVERNMENT or of any other local, municipal, territorial, provincial, or any other duly constituted governmental authority or agency in the Kurdistan Region.



Kurdistan Region Oil and Gas Law means the Oil and Gas Law of the Kurdistan Region - Iraq (Law No. 22 of 2007) as the same may be amended.



Law means all applicable laws including 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.



LCIA is defined in Article 42.1 (b).



LIBOR means the London Inter-Bank Offered Rate at which Dollar deposits for one (1) Month are offered in the inter-bank market in London, as quoted in the Financial

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Times of London for the day in question. In the event that such rate is not published in the Financial Times, it shall mean the London Inter-bank Offered Rate at which Dollar deposits for one (1) Month are offered for the nearest day as quoted by National Westminster Bank pic.



Management Committee is defined in Article 8.



Maximum Efficient Rate ("MER") is defined in Article 16.12.



Minimum Exploration Obligations is defined in Article 10.1.



Minimum Financial Commitment means:



(a) in respect of the First Sub-Period, the total of the amounts set out in Articles 10.2(d) and 10.2(c); and



(b) in respect of the Second Sub-Period, the amount set out in Article 10.3(b).



Month means a calendar month according to the Gregorian calendar.



Natural Gas means all gaseous Petroleum and inerts.



Non-Associated Natural Gas means any Natural Gas which is not any Associated Natural Gas.



Notice of Dispute is defined in Article 42.1.



Operator means the entity designated by the CONTRACTOR pursuant to Article 5 which, in the name and on behalf of the CONTRACTOR, shall carry out all Petroleum Operations. If at any time there exists more than one (1) Operator under this Contract, any reference herein to the term 'Operator' shall be to each Operator with respect to the parts of the Contract Area in which such Operator conducts Petroleum Operations.



Options of Additional Interest Participation is defined in Article 4.12.



Option of Government Participation is defined in Article 4.1.



Option of Third Party Participation is defined in Article 4.8.



Original Contract means the production sharing contract dated 29 March 2006 between the GOVERNMENT and HAWLER ENERGY, LTD., and A&T PETROLEUM COMPANY, LTD, as amended and restated on 26 February 2007 for the exploration and development of Petroleum in the Contract Area.



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



Permits means all licences, permits, consents, authorisations or other permissions, as the context requires

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Person shall include natural and juristic persons (including corporations and governmental agencies).



Petroleum means:

(a) any naturally occurring hydrocarbon in a gaseous or liquid state;

(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 Costs means all costs and expenditure incurred by the CONTRACTOR for the Petroleum Operations, and which the CONTRACTOR is entitled to recover under this Contract and its Accounting Procedure, including Decommissioning Costs, Development Costs, Exploration Costs, Gas Marketing Costs and Production Costs.



Petroleum Field means a Reservoir or group of Reservoirs within a common geological structure or stratigraphic unit, which may become part of a Production Area pursuant to a Development Plan.



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 or indirectly related or connected with the said operations (including health, safety and environmental operations and activities) and authorised or contemplated by, or performed in accordance with, this Contract.



Pipeline Costs is defined in Article 33.5.



Production Area means such areas within the Contract Area designated as a production area in an approved Development Plan prepared pursuant to Article 12. For the avoidance of doubt, all superjacent or subjacent strata of the Reservoir in which a Commercial Discovery is located are automatically included in the relevant Production Area.



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



Production Costs means all the costs and expenditure incurred by the CONTRACTOR in carrying out the Production Operations, including those defined in the Accounting Procedure.



Procedure Operations means any works, together with all related and auxiliary activities, for the production of Petroleum from the start of Commercial Production, including: extraction, injection, stimulation, pumping, treatment, storage, engineering, operating, servicing, repairing, and maintaining any wells, plants, equipment, pipelines, terminals and any other installations and facilities, and any related operations and auxiliary operations, and storage and transportation of Petroleum from the Production Area to the Delivery Point.

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Production Rental is defined in Article 13.10.



Production Work Program and Budget shall mean the production work program and budget prepared pursuant to Article 13.6.



Profit Crude Oil is defined in Article 26.1.



Profit Natural Gas is defined in Article 26.1.



Profit Petroleum is defined in Article 26.1.



Proposed Contract is defined in Article 14.10(a).



Public Company means a public company duly registered and incorporated in the Kurdistan Region and regulated by the GOVERNMENT under the Kurdistan Region Oil and Gas Law.



Public Officer means a civil servant, including a member or employee of a public entity, a member of the Kurdistan national Assembly or a member of the GOVERNMENT.



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 Wells is defined in Article 10.3 (b).



Semester means a period of six (6) consecutive Months starting from the first day of January or July respectively.



Senior Representatives is defined in Article 42.1(a).



Subcontractor means any entity of any contracting tier providing services and/or undertaking works relating to the Petroleum Operations directly or indirectly on behalf of, the CONTRACTOR or any CONTRACTOR Entity.



Sub-Period and Sub-Periods are defined in Article 6.2.



Tax or Taxes means all current or future levies, duties, payments, charges, impositions, imposts, withholdings, fees, taxes (including value added tax or other sales or transaction based tax, corporation tax, income tax, capital gains tax, stamp duty, land tax, registration tax, capital and wealth tax, profit tax, dividend tax or withholdings, transfer tax, customs duties, branch or permanent establishment tax or

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Production Rental is defined in Article 13.10.



Production Work Program and Budget shall mean the production work program and budget prepared pursuant to Article 13.6.



Profit Crude Oil is defined in Article 26.1.



Profit Natural Gas is defined in Article 26.1.



Profit Petroleum is defined in Article 26.1.



Proposed Contract is defined in Article 14.10(a).



Public Company means a public company duly registered and incorporated in the Kurdistan Region and regulated by the GOVERNMENT under the Kurdistan Region Oil and Gas Law.



Public Officer means a civil servant, including a member or employee of a public entity, a member of the Kurdistan national Assembly or a member of the GOVERNMENT.



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 Wells is defined in Article 10.3 (b).



Semester means a period of six (6) consecutive Months starting from the first day of January or July respectively.



Senior Representatives is defined in Article 42.1(a).



Subcontractor means any entity of any contracting tier providing services and/or undertaking works relating to the Petroleum Operations directly or indirectly on behalf of, the CONTRACTOR or any CONTRACTOR Entity.



Sub-Period and Sub-Periods are defined in Article 6.2.



Tax or Taxes means all current or future levies, duties, payments, charges, impositions, imposts, withholdings, fees, taxes (including value added tax or other sales or transaction based tax, corporation tax, income tax, capital gains tax, stamp duty, land tax, registration tax, capital and wealth tax, profit tax, dividend tax or withholdings, transfer tax, customs duties, branch or permanent establishment tax or

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Production Rental is defined in Article 13.10.



Production Work Program and Budget shall mean the production work program and budget prepared pursuant to Article 13.6.



Profit Crude Oil is defined in Article 26.1.



Profit Natural Gas is defined in Article 26.1.



Profit Petroleum is defined in Article 26.1.



Proposed Contract is defined in Article 14.10(a).



Public Company means a public company duly registered and incorporated in the Kurdistan Region and regulated by the GOVERNMENT under the Kurdistan Region Oil and Gas Law.



Public Officer means a civil servant, including a member or employee of a public entity, a member of the Kurdistan national Assembly or a member of the GOVERNMENT.



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 Wells is defined in Article 10.3 (b).



Semester means a period of six (6) consecutive Months starting from the first day of January or July respectively.



Senior Representatives is defined in Article 42.1(a).



Subcontractor means any entity of any contracting tier providing services and/or undertaking works relating to the Petroleum Operations directly or indirectly on behalf of, the CONTRACTOR or any CONTRACTOR Entity.



Sub-Period and Sub-Periods are defined in Article 6.2.



Tax or Taxes means all current or future levies, duties, payments, charges, impositions, imposts, withholdings, fees, taxes (including value added tax or other sales or transaction based tax, corporation tax, income tax, capital gains tax, stamp duty, land tax, registration tax, capital and wealth tax, profit tax, dividend tax or withholdings, transfer tax, customs duties, branch or permanent establishment tax or

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(a) freely access and operate within the Contract Area, as well as any facilities associated with the Petroleum Operations, wherever they may be located;



(b) freely use access toads located within the Contract Area and outside the Contract Area for the construction, installation, maintenance, operation and removal of pipelines and other facilities required for the Petroleum Operations;



(c) freely use sand, water, electricity and any other natural resources 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 Operations in accordance with Articles 22 and 23. Any foreign personnel working in the Kurdistan Region shall require prior authorisation of the GOVERNMENT (such as 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 Articles 19, 22 and 30; and



(f) freely use land or property belonging to the Kurdistan Region, and the GOVERNMENT will assist the CONTRACTOR with facilitating the use by the CONTRACTOR of any private property in the Kurdistan Region.





ARTICLE 3-CONTRACT AREA



The initial Contract Area covers the Bina Bawi Block and extends over an area of of two hundred forty seven square kilometres (247 km2), as detailed and indicated on the map attached in Annex A and is delimited by the following coordinates:

Points       Latitude (deg min sec)       Longitde (deg min sec)       X (mE)          Y (mN)
A               36 16 15                             44 18 01                             437 138        4014 203
B               36 16 41                             44 19 55                             440 000        4015 000
C               36 19 23                             44 20 36                             441 059        4019 967
D               36 13 11                             44 29 21                             454 088        4008 427
E               36 07 16                             44 35 48                             463 692        3997 443
F               36 05 53                             44 31 06                             456 640        3994 930
G               36 06 07                             44 25 44                             448 614        3999 114
H               36 10 39                             44 23 25                             445 172        4003 813
The GOVERNMENT, by execution of this Contract, hereby validates and approves the foregoing co-ordinates o the Contract Area.



The total area of the Contract Area may be reduced only in accordance with the provisions of this Contract.





ARTICLE 4-GOVERNMENT PARTICIPATION AND THIRD PARTY PARTICIPATION



Government Interest



4.1 The GOVERNMENT shall participate in this Contract through a Public Company, effective from the Effective Date in respect of the entire Contract Area with an undivided interest in the Petroleum Operations and all the other rights, duties, obligations and liabilities of the CONTRACTOR (save as provided in and subject to this Article 4) under this Contract in respect of the Contract Area, of twenty per cent (20%) (the "Government Interest")



4.2 The Public Company shall not have any liability to the CONTRACTOR to contribute its Government Interest share of all Petroleum Costs, whenever those Petroleum Costs may be incurred, and its Government Interest share of such Petroleum Costs shall be the responsibility of Hawler Energy Ltd., A&T Petroleum Company, Ltd., Oil Search (Iraq) Limited and the Additional Interest Participant (or Additional Interest Participants, as the case may be) for the duration of this Contract, (such responsibility to be held jointly and severally, and with the share attributable to the holder of the Additional Interest (or any part thereof) to the borne by Hawler Energy Ltd., A&T Petroleum Company, Ltd, Oil Search (Iraq) Limited) until the Option of Additional Interest Participation has been exercised by the GOVERNMENT in accordance with Article 4, and the share o such Petroleum Costs so borne by Hawler Energy Ltd., A&T Petroleum Company, Ltd, Oil Search (Iraq) Limited shall be repaid to such parties by the Additional Interest Participant pursuant to Article 4.16(b)) provided always that Hawler Energy Ltd, A&T Petroleum Company Ltd., Oil Search (Iraq) Limited and the Additional Interest Participants shall be entitled (through the CONTRACTOR) to recover all such Petroleum Costs in accordance with Article 25. For the avoidance of doubt, the Public Company shall contribute its share of Production Bonuses attributable to the Government Interest and payable pursuant to Article 32.3 and 32.4.



For the purposes of Article 37 of the Kurdistan Region Oil and Gas Law, the Government Interest shall be deemed to be held by the GOVERNMENT and in accordance with the principle in Article 16.13, the Public Company 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 and the provisions of Article 4 5 shall apply.

4.3 The Public Company may, at its discretion, assign part or all of its Government Interest to a third party or parties which is another Public Company duly authorized

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by the GOVERNMENT, provided that in no event shall a transfer be made which would result in the transferor or transferee holding less than a five per cent (5%) participating interest.



In the event of such an assignment to another Public Company, for the purposes of Article 37 of the Kurdistan Region Oil and Gas Law, the Government Interest so assigned shall be deemed to be held by the GOVERNMENT and in accordance with the principle in Article 16.13, the Public Company to which such Government Interest is transferred will be individually and separately liable (and not jointly and severally liable with the other CONTRACTOR Entities) to the GOVERNMENT for its obligations, duties and liabilities under this Contract and the provisions of Article 4.4 shall apply.



4.4 Any failure by the Public Company to perform any of its obligations or to satisfy any of its duties or liabilities under this Contract shall not be considered as a default of the CONTRACTOR Entities and shall in no case be invoked by the GOVERNMENT to terminate this Contract or exercise any other rights or remedies in respect of such default that may be available to it.



The capacity of a Public Company, as it may arise pursuant to the provisions of this Contract, shall in no event cancel or affect the rights of the 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.



A Public Company may assign part or all of its Government Interest to a third Party of parties (not being a Public Company) and for the avoidance of doubt the provisions of Articles 39.1, 392 and 393 shall not apply. Any such assignee shall have the same rights and responsibilities held by the Public Company prior to the assignment.



For the avoidance of doubt, following any assignment by a Public Company part of all of a Government Interest to a third party which is not a Public Company, in accordance with the provisions of this Article 4, the provisions of Articles 39.1, 39.2 and 39.3 shall apply to any subsequent assignment of such interest.



Third Party Interest



The GOVERNMENT shall have the option of assigning to a third party, or third parties, in respect of the Contract Area, as a CONTRACTOR Entity or CONTRACTOR Entities, an undivided interest in the Petroleum Operations in respect of the entire Contract Area and which option, when exercised, shall assign and novate all the other rights, duties, obligations and liabilities of the CONTRACTOR (save as provided in and subject to this Article 4), under this Contract, of an aggregate of twenty per cent (20%) (the "Third Party Interest"), such option being referred to herein as the "Option of Third Party Participation". Until the later of the exercise of the Option of Third Party Participation or the assignment by the GOVERNMENT of the Third Party Interest (or part thereof) to a Public Company in accordance with Article 4.9, or the expiry of the six (6) month period contemplated by Article 4.7. Hawler Energy Ltd, A&T Petroleum Company, Ltd. and Oil Search (Iraq) Limited



19/122by the GOVERNMENT, provided that in no event shall a transfer be made which would result in the transferor or transferee holding less than a five per cent (5%) participating interest.



In the event of such an assignment to another Public Company, for the purposes of Article 37 of the Kurdistan Region Oil and Gas Law, the Government Interest so assigned shall be deemed to be held by the GOVERNMENT and in accordance with the principle in Article 16.13, the Public Company to which such Government Interest is transferred will be individually and separately liable (and not jointly and severally liable with the other CONTRACTOR Entities) to the GOVERNMENT for its obligations, duties and liabilities under this Contract and the provisions of Article 4.4 shall apply.



4.4 Any failure by the Public Company to perform any of its obligations or to satisfy any of its duties or liabilities under this Contract shall not be considered as a default of the CONTRACTOR Entities and shall in no case be invoked by the GOVERNMENT to terminate this Contract or exercise any other rights or remedies in respect of such default that may be available to it.



The capacity of a Public Company, as it may arise pursuant to the provisions of this Contract, shall in no event cancel or affect the rights of the 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.



A Public Company may assign part or all of its Government Interest to a third Party of parties (not being a Public Company) and for the avoidance of doubt the provisions of Articles 39.1, 392 and 393 shall not apply. Any such assignee shall have the same rights and responsibilities held by the Public Company prior to the assignment.



For the avoidance of doubt, following any assignment by a Public Company part of all of a Government Interest to a third party which is not a Public Company, in accordance with the provisions of this Article 4, the provisions of Articles 39.1, 39.2 and 39.3 shall apply to any subsequent assignment of such interest.



Third Party Interest



The GOVERNMENT shall have the option of assigning to a third party, or third parties, in respect of the Contract Area, as a CONTRACTOR Entity or CONTRACTOR Entities, an undivided interest in the Petroleum Operations in respect of the entire Contract Area and which option, when exercised, shall assign and novate all the other rights, duties, obligations and liabilities of the CONTRACTOR (save as provided in and subject to this Article 4), under this Contract, of an aggregate of twenty per cent (20%) (the "Third Party Interest"), such option being referred to herein as the "Option of Third Party Participation". Until the later of the exercise of the Option of Third Party Participation or the assignment by the GOVERNMENT of the Third Party Interest (or part thereof) to a Public Company in accordance with Article 4.9, or the expiry of the six (6) month period contemplated by Article 4.7. Hawler Energy Ltd, A&T Petroleum Company, Ltd. and Oil Search (Iraq) Limited



19/122by the GOVERNMENT, provided that in no event shall a transfer be made which would result in the transferor or transferee holding less than a five per cent (5%) participating interest.



In the event of such an assignment to another Public Company, for the purposes of Article 37 of the Kurdistan Region Oil and Gas Law, the Government Interest so assigned shall be deemed to be held by the GOVERNMENT and in accordance with the principle in Article 16.13, the Public Company to which such Government Interest is transferred will be individually and separately liable (and not jointly and severally liable with the other CONTRACTOR Entities) to the GOVERNMENT for its obligations, duties and liabilities under this Contract and the provisions of Article 4.4 shall apply.



4.4 Any failure by the Public Company to perform any of its obligations or to satisfy any of its duties or liabilities under this Contract shall not be considered as a default of the CONTRACTOR Entities and shall in no case be invoked by the GOVERNMENT to terminate this Contract or exercise any other rights or remedies in respect of such default that may be available to it.



The capacity of a Public Company, as it may arise pursuant to the provisions of this Contract, shall in no event cancel or affect the rights of the 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.



A Public Company may assign part or all of its Government Interest to a third Party of parties (not being a Public Company) and for the avoidance of doubt the provisions of Articles 39.1, 392 and 393 shall not apply. Any such assignee shall have the same rights and responsibilities held by the Public Company prior to the assignment.



For the avoidance of doubt, following any assignment by a Public Company part of all of a Government Interest to a third party which is not a Public Company, in accordance with the provisions of this Article 4, the provisions of Articles 39.1, 39.2 and 39.3 shall apply to any subsequent assignment of such interest.



Third Party Interest



The GOVERNMENT shall have the option of assigning to a third party, or third parties, in respect of the Contract Area, as a CONTRACTOR Entity or CONTRACTOR Entities, an undivided interest in the Petroleum Operations in respect of the entire Contract Area and which option, when exercised, shall assign and novate all the other rights, duties, obligations and liabilities of the CONTRACTOR (save as provided in and subject to this Article 4), under this Contract, of an aggregate of twenty per cent (20%) (the "Third Party Interest"), such option being referred to herein as the "Option of Third Party Participation". Until the later of the exercise of the Option of Third Party Participation or the assignment by the GOVERNMENT of the Third Party Interest (or part thereof) to a Public Company in accordance with Article 4.9, or the expiry of the six (6) month period contemplated by Article 4.7. Hawler Energy Ltd, A&T Petroleum Company, Ltd. and Oil Search (Iraq) Limited



19/122Agreement and shall during the period between the exercising of the Option of Third Party Participation and the execution of the Joint Operating Agreement, comply with Article 4.18 (a) and (b) as if they were provisions of this Contract.



4.11 If the Public Company shall hold all or part of the Third Party Interest under Article 4.9, and shall fail to make the payment referred to in Article 4.10 (b) by the due date of payment, or if the GOVERNMENT and the Public Company have not completed the assignment of all or part of the Third Party Interest under Article 4.9 within ninety (90) days of the expiry of the six (6) Month period contemplated by Article 4.6, then upon the day following that date, the GOVERNMENT will with immediate effect therefrom take all contractual and procedural measures (enforceable under applicable law) to procure that:



(a) fifty per cent (50%) of the interest so held by the Public Company holding such Third Party Interest shall, notwithstanding any other Article in this Contract, be automatically deemed to be assigned and be assigned by such Public Company to the extant CONTRACTOR Entities; and



(b) fifty per cent (50%) of the interest so held by the Public Company holding such Third Party Interest shall, notwithstanding the provision of Article 39.2 or any other Article in this Contract, be automatically deemed to be assigned and be assigned to that Public Company which holds the Government Interest pursuant to Article 4.1, and shall for the purposes of this Article 4 be part of the Government Interest and shall be subject to the rights and obligations of Article 4.2 and the other provisions of this Contract relating to the Government Interest.



Additional Interest (Third Party Interest)



4.12 The GOVERNMENT shall have the option of assigning to a third party, or third parties, in respect of the Contract Area, as a CONTRACTOR Entity or CONTRACTOR Entities, an undivided interest in the Petroleum Operations in respect of the entire Contract Area and which option, when exercised, shall assign and novate all other rights, duties, obligations and liabilities of the CONTRACTOR (save as provided in and subject to this Article 4), under this Contract, of an aggregate of sixteen per cent (16%)(the "Additional Interest"), such option being referred to herein as the "Option of Additional Interest Participation". Until the later of the exercise of the Option of Additional Interest Participation or the assignment by the GOVERNMENT of the Additional Interest (or part thereof) to a Public Company in accordance with Article 4.15, or the expiry of the six (6) month period contemplated by Article 4.13, Hawler Energy Ltd., A&T Petroleum Company Ltd. and Oil Search (Iraq) Limited shall undertake all necessary work under this Contract, provided always that Hawler Energy Ltd., A&T Petroleum Company Ltd. and Oil Search (Iraq) Limited shall be entitled (through the CONTRACTOR) to recover all such Petroleum Costs in accordance with Article 25.



22/122by the GOVERNMENT, provided that in no event shall a transfer be made which would result in the transferor or transferee holding less than a five per cent (5%) participating interest.



In the event of such an assignment to another Public Company, for the purposes of Article 37 of the Kurdistan Region Oil and Gas Law, the Government Interest so assigned shall be deemed to be held by the GOVERNMENT and in accordance with the principle in Article 16.13, the Public Company to which such Government Interest is transferred will be individually and separately liable (and not jointly and severally liable with the other CONTRACTOR Entities) to the GOVERNMENT for its obligations, duties and liabilities under this Contract and the provisions of Article 4.4 shall apply.



4.4 Any failure by the Public Company to perform any of its obligations or to satisfy any of its duties or liabilities under this Contract shall not be considered as a default of the CONTRACTOR Entities and shall in no case be invoked by the GOVERNMENT to terminate this Contract or exercise any other rights or remedies in respect of such default that may be available to it.



The capacity of a Public Company, as it may arise pursuant to the provisions of this Contract, shall in no event cancel or affect the rights of the 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.



A Public Company may assign part or all of its Government Interest to a third Party of parties (not being a Public Company) and for the avoidance of doubt the provisions of Articles 39.1, 392 and 393 shall not apply. Any such assignee shall have the same rights and responsibilities held by the Public Company prior to the assignment.



For the avoidance of doubt, following any assignment by a Public Company part of all of a Government Interest to a third party which is not a Public Company, in accordance with the provisions of this Article 4, the provisions of Articles 39.1, 39.2 and 39.3 shall apply to any subsequent assignment of such interest.



Third Party Interest



The GOVERNMENT shall have the option of assigning to a third party, or third parties, in respect of the Contract Area, as a CONTRACTOR Entity or CONTRACTOR Entities, an undivided interest in the Petroleum Operations in respect of the entire Contract Area and which option, when exercised, shall assign and novate all the other rights, duties, obligations and liabilities of the CONTRACTOR (save as provided in and subject to this Article 4), under this Contract, of an aggregate of twenty per cent (20%) (the "Third Party Interest"), such option being referred to herein as the "Option of Third Party Participation". Until the later of the exercise of the Option of Third Party Participation or the assignment by the GOVERNMENT of the Third Party Interest (or part thereof) to a Public Company in accordance with Article 4.9, or the expiry of the six (6) month period contemplated by Article 4.7. Hawler Energy Ltd, A&T Petroleum Company, Ltd. and Oil Search (Iraq) Limited



19/122by the GOVERNMENT, provided that in no event shall a transfer be made which would result in the transferor or transferee holding less than a five per cent (5%) participating interest.



In the event of such an assignment to another Public Company, for the purposes of Article 37 of the Kurdistan Region Oil and Gas Law, the Government Interest so assigned shall be deemed to be held by the GOVERNMENT and in accordance with the principle in Article 16.13, the Public Company to which such Government Interest is transferred will be individually and separately liable (and not jointly and severally liable with the other CONTRACTOR Entities) to the GOVERNMENT for its obligations, duties and liabilities under this Contract and the provisions of Article 4.4 shall apply.



4.4 Any failure by the Public Company to perform any of its obligations or to satisfy any of its duties or liabilities under this Contract shall not be considered as a default of the CONTRACTOR Entities and shall in no case be invoked by the GOVERNMENT to terminate this Contract or exercise any other rights or remedies in respect of such default that may be available to it.



The capacity of a Public Company, as it may arise pursuant to the provisions of this Contract, shall in no event cancel or affect the rights of the 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.



A Public Company may assign part or all of its Government Interest to a third Party of parties (not being a Public Company) and for the avoidance of doubt the provisions of Articles 39.1, 392 and 393 shall not apply. Any such assignee shall have the same rights and responsibilities held by the Public Company prior to the assignment.



For the avoidance of doubt, following any assignment by a Public Company part of all of a Government Interest to a third party which is not a Public Company, in accordance with the provisions of this Article 4, the provisions of Articles 39.1, 39.2 and 39.3 shall apply to any subsequent assignment of such interest.



Third Party Interest



The GOVERNMENT shall have the option of assigning to a third party, or third parties, in respect of the Contract Area, as a CONTRACTOR Entity or CONTRACTOR Entities, an undivided interest in the Petroleum Operations in respect of the entire Contract Area and which option, when exercised, shall assign and novate all the other rights, duties, obligations and liabilities of the CONTRACTOR (save as provided in and subject to this Article 4), under this Contract, of an aggregate of twenty per cent (20%) (the "Third Party Interest"), such option being referred to herein as the "Option of Third Party Participation". Until the later of the exercise of the Option of Third Party Participation or the assignment by the GOVERNMENT of the Third Party Interest (or part thereof) to a Public Company in accordance with Article 4.9, or the expiry of the six (6) month period contemplated by Article 4.7. Hawler Energy Ltd, A&T Petroleum Company, Ltd. and Oil Search (Iraq) Limited



19/122 (ii) if the Public Company holds all or part of the Additional Interest under Article 4.9, the payment of the amount due in accordance with this Article 4.10(b) shall be made by the Public Company to the CONTRACTOR within sixty (60) days of the Public Company acquiring the Additional Interest Interest under Article 4.15;



(c) upon payment pursuant to and in accordance with Article 4.16(b) and the execution of the instrument referred to in Article 4.16(b) an Additional interest Participant shall participate as a CONTRACTOR Entity (or, where a Additional Interest Participant constitutes a group of companies, as CONTRACTOR Entities) under this Contract as if it had been a CONTRACTOR Entity (or as if they had been CONTRACTOR Entities) from the Effective Date, with all the rights, duties, obligations and liabilities under this Contract, including the obligation to pay the relevant pro rate share of any and all Production Bonuses due at any time under the Contract, and a Additional Interest Participant shall not become a CONTRACTOR Entity until payment pursuant to and in accordance with Article 4.16(b) and the execution of the instrument referred to in Article 4.16(b) has been completed;



(d) where a Joint Operating Agreement has been executed by the CONTRACTOR Entities prior to any exercise of the Option of Additional Interest Participation pursuant to Articles 4.12 and 4.13, an Additional Interest Participant shall, upon signature of the instrument referred to in Article 4.16(b), become a party or parties to such Joint Operating Agreement on the terms thereof; and



(e) if a Joint Operating Agreement is not in place prior to the GOVERNMENT exercising the Option of Additional Interest Participation, then a Additional Interest Participant and the other CONTRACTOR Entities shall, within a reasonable period of time, negotiate in good faith and enter into a Joint Operating Agreement and shall during the period between the exercising of the Option of Additional Interest Participation and the execution of the Joint Operating Agreement, comply with Article 4.18(a) and (b) as if they were provisions of this Contract.



4.17

If the Public Company shall hold all or part of the Additional Interest under Article 4.15, and shall fail to make the payment referred to in Article 4.16(b) by the due date of payment, or if the GOVERNMENT and the Public Company have not completed the assignment of all or part of the Additional Interest Interest under Article 4.15 within ninety (90) days of the expiry of the six (6) Month period contemplated by Article 4.12, then upon the day following that date the GOVERNMENT will with immediate effect therefrom take all contractual and procedural measures (enforceable under applicable law) to procure that:



(a) fifty per cent (50%) of the interest so held by the Public Company holding such Additional Interest shall, notwithstanding any other Article in this Contract, be automatically deemed to be assigned and be assigned by such Public Company to the extant CONTRACTOR Entities; and

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(ii) if the Public Company holds all or part of the Additional Interest under Article 4.9, the payment of the amount due in accordance with this Article 4.10(b) shall be made by the Public Company to the CONTRACTOR within sixty (60) days of the Public Company acquiring the Additional Interest Interest under Article 4.15;



(c) upon payment pursuant to and in accordance with Article 4.16(b) and the execution of the instrument referred to in Article 4.16(b) an Additional interest Participant shall participate as a CONTRACTOR Entity (or, where a Additional Interest Participant constitutes a group of companies, as CONTRACTOR Entities) under this Contract as if it had been a CONTRACTOR Entity (or as if they had been CONTRACTOR Entities) from the Effective Date, with all the rights, duties, obligations and liabilities under this Contract, including the obligation to pay the relevant pro rate share of any and all Production Bonuses due at any time under the Contract, and a Additional Interest Participant shall not become a CONTRACTOR Entity until payment pursuant to and in accordance with Article 4.16(b) and the execution of the instrument referred to in Article 4.16(b) has been completed;



(d) where a Joint Operating Agreement has been executed by the CONTRACTOR Entities prior to any exercise of the Option of Additional Interest Participation pursuant to Articles 4.12 and 4.13, an Additional Interest Participant shall, upon signature of the instrument referred to in Article 4.16(b), become a party or parties to such Joint Operating Agreement on the terms thereof; and



(e) if a Joint Operating Agreement is not in place prior to the GOVERNMENT exercising the Option of Additional Interest Participation, then a Additional Interest Participant and the other CONTRACTOR Entities shall, within a reasonable period of time, negotiate in good faith and enter into a Joint Operating Agreement and shall during the period between the exercising of the Option of Additional Interest Participation and the execution of the Joint Operating Agreement, comply with Article 4.18(a) and (b) as if they were provisions of this Contract.



4.17

If the Public Company shall hold all or part of the Additional Interest under Article 4.15, and shall fail to make the payment referred to in Article 4.16(b) by the due date of payment, or if the GOVERNMENT and the Public Company have not completed the assignment of all or part of the Additional Interest Interest under Article 4.15 within ninety (90) days of the expiry of the six (6) Month period contemplated by Article 4.12, then upon the day following that date the GOVERNMENT will with immediate effect therefrom take all contractual and procedural measures (enforceable under applicable law) to procure that:



(a) fifty per cent (50%) of the interest so held by the Public Company holding such Additional Interest shall, notwithstanding any other Article in this Contract, be automatically deemed to be assigned and be assigned by such Public Company to the extant CONTRACTOR Entities; and

25/122
(ii) if the Public Company holds all or part of the Additional Interest under Article 4.9, the payment of the amount due in accordance with this Article 4.10(b) shall be made by the Public Company to the CONTRACTOR within sixty (60) days of the Public Company acquiring the Additional Interest Interest under Article 4.15;



(c) upon payment pursuant to and in accordance with Article 4.16(b) and the execution of the instrument referred to in Article 4.16(b) an Additional interest Participant shall participate as a CONTRACTOR Entity (or, where a Additional Interest Participant constitutes a group of companies, as CONTRACTOR Entities) under this Contract as if it had been a CONTRACTOR Entity (or as if they had been CONTRACTOR Entities) from the Effective Date, with all the rights, duties, obligations and liabilities under this Contract, including the obligation to pay the relevant pro rate share of any and all Production Bonuses due at any time under the Contract, and a Additional Interest Participant shall not become a CONTRACTOR Entity until payment pursuant to and in accordance with Article 4.16(b) and the execution of the instrument referred to in Article 4.16(b) has been completed;



(d) where a Joint Operating Agreement has been executed by the CONTRACTOR Entities prior to any exercise of the Option of Additional Interest Participation pursuant to Articles 4.12 and 4.13, an Additional Interest Participant shall, upon signature of the instrument referred to in Article 4.16(b), become a party or parties to such Joint Operating Agreement on the terms thereof; and



(e) if a Joint Operating Agreement is not in place prior to the GOVERNMENT exercising the Option of Additional Interest Participation, then a Additional Interest Participant and the other CONTRACTOR Entities shall, within a reasonable period of time, negotiate in good faith and enter into a Joint Operating Agreement and shall during the period between the exercising of the Option of Additional Interest Participation and the execution of the Joint Operating Agreement, comply with Article 4.18(a) and (b) as if they were provisions of this Contract.



4.17

If the Public Company shall hold all or part of the Additional Interest under Article 4.15, and shall fail to make the payment referred to in Article 4.16(b) by the due date of payment, or if the GOVERNMENT and the Public Company have not completed the assignment of all or part of the Additional Interest Interest under Article 4.15 within ninety (90) days of the expiry of the six (6) Month period contemplated by Article 4.12, then upon the day following that date the GOVERNMENT will with immediate effect therefrom take all contractual and procedural measures (enforceable under applicable law) to procure that:



(a) fifty per cent (50%) of the interest so held by the Public Company holding such Additional Interest shall, notwithstanding any other Article in this Contract, be automatically deemed to be assigned and be assigned by such Public Company to the extant CONTRACTOR Entities; and

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Period, unless the First Sub-Period has been extended pursuant to Article 6.5 and/or Article 6.6



6.5 If the CONTRACTOR has fulfilled its Minimum Exploration Obligations for a Sub-Period of the Exploration Period but considers that additional work is required prior:



(a) to deciding to submit ab Appraisal Work program and Budget as provided under Article 12.2 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 Work Program and Budget as provided under Article 12.2 and/or Gas Marketing Operations.



the CONTRACTOR will automatically be entitled to extensions, each of one (1) Contract Year, of the then current Sub-Period, up to the end of the maximum Exploration Period of seven(7) Contract Years, (as provided in Article 6.2). The CONTRACTOR's notification of its intention to exercise such extension and its duration shall be submitted in writing to the GOVERNMENT at least thirty (30) days prior to the end of the then current Sub-Period or the end of the ten 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 has not completed its exploration evaluation of the Contract Area, the CONTRACTOR shall be entitled to an extension of the Second Sub-Period, provided it notifies the GOVERNMENT in writing at least thirty (30) days prior to the end of such Sub-Period, together with a proposal for a minimum work obligation for such extension. Any such extension shall not exceed one (1) Contract Year. Upon the expiry of such extension, if it considers it has still not completed its evaluation of the Contract Area, the CONTRACTOR shall be entitled to a further extension of one (1) Contract Year provided that it notifies the GOVERNMENT in writing at least thirty (30) days prior to the end of the original extension. The right of the CONTRACTOR to accede to the further extension shall be subject to fulfillment of the minimum work obligations applicable to the original extension.


6.7 Subject to Article 6.4 at any time during the Exploration Period, upon thirty (30) days prior notice to the GOVERNMENT, the CONTRACTOR shall have the right to withdraw from this Contract provided that the outstanding 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, whichever is applicable to the then current Sub-Period.


6.8 If no Commercial Discovery has been made at the end of the Exploration Period (including any extensions thereof) this Contract shall terminate.


6.9 If a Discovery is made within the maximum Exploration period of seven(7) Contract Years (as provided in Article 6.2), and if the CONTRACTOR considers 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(a), the CONTRACTOR

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Period, unless the First Sub-Period has been extended pursuant to Article 6.5 and/or Article 6.6



6.5 If the CONTRACTOR has fulfilled its Minimum Exploration Obligations for a Sub-Period of the Exploration Period but considers that additional work is required prior:



(a) to deciding to submit ab Appraisal Work program and Budget as provided under Article 12.2 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 Work Program and Budget as provided under Article 12.2 and/or Gas Marketing Operations.



the CONTRACTOR will automatically be entitled to extensions, each of one (1) Contract Year, of the then current Sub-Period, up to the end of the maximum Exploration Period of seven(7) Contract Years, (as provided in Article 6.2). The CONTRACTOR's notification of its intention to exercise such extension and its duration shall be submitted in writing to the GOVERNMENT at least thirty (30) days prior to the end of the then current Sub-Period or the end of the ten 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 has not completed its exploration evaluation of the Contract Area, the CONTRACTOR shall be entitled to an extension of the Second Sub-Period, provided it notifies the GOVERNMENT in writing at least thirty (30) days prior to the end of such Sub-Period, together with a proposal for a minimum work obligation for such extension. Any such extension shall not exceed one (1) Contract Year. Upon the expiry of such extension, if it considers it has still not completed its evaluation of the Contract Area, the CONTRACTOR shall be entitled to a further extension of one (1) Contract Year provided that it notifies the GOVERNMENT in writing at least thirty (30) days prior to the end of the original extension. The right of the CONTRACTOR to accede to the further extension shall be subject to fulfillment of the minimum work obligations applicable to the original extension.


6.7 Subject to Article 6.4 at any time during the Exploration Period, upon thirty (30) days prior notice to the GOVERNMENT, the CONTRACTOR shall have the right to withdraw from this Contract provided that the outstanding 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, whichever is applicable to the then current Sub-Period.


6.8 If no Commercial Discovery has been made at the end of the Exploration Period (including any extensions thereof) this Contract shall terminate.


6.9 If a Discovery is made within the maximum Exploration period of seven(7) Contract Years (as provided in Article 6.2), and if the CONTRACTOR considers 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(a), the CONTRACTOR

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ARTICLE 7 - RELINQUISHMENTS



7.1 Subject to the provisions of Articles 7.2 and 7.3, the CONTRACTOR shall surrender portions of the Contract Area as follows:



(a) at the end of the initial term of the Exploration Period referred to in Article 6.2, twenty five per cent (25%) of the net area determined by subtracting the Production Areas from the initial Contract Area:





(b) at the end of the first extension period entered into under this Contract after the end of the initial term of the Exploration Period referred to in Article 6.2, an additional twenty five per cent (25%) of the net area determined by subtracting the Production Areas from the remaining part of the Contract Area; aпd



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

the remaining area that is not in a Production Area



7.2 For the application of Article 7.1:



(a) any areas already relinquished pursuant to Article 7.4 shall be deducted from

areas to be surrendered; and



(b) the CONTRACTOR shall have the right to determine the area, shape and location of the Contract Area to be kept, provided that such surrendered portions of the Contract Area shall be in contiguous blocks



7.3 If the relinquishment referred to in Article 7.1 can only be achieved by including part of an Appraisal Area, then these percentages shall be reduced to exclude such Appraisal Area.



7.4 During the Exploration Period, the CONTRACTOR may at the eld of each Contract Year surrender all or any part of the Contract Area by written notice sent to the

GOVERNMENT at least thirty (30) days in advance of the proposed date of

surrender, subject to the provisions of this Article 7.4. Such voluntary surrenders during the Exploration Period shall be deemed equal to the obligatory relinquishments referred to under Article 7.1. This Contract shall terminate in the event of the surrender of the entire Contract Area.



7.5 No surrender provided under Article 7.4 shall exempt the CONTRACTOR from its outstanding obligations under this Contract. In the event the CONTRACTOR elects to surrender the entire Contiact Area without having fulfilled the Minimum Exploration Obligations relating 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 amount as detailed in Article 10.2 or Article 10.3, as the case may b.



7.6 The boundaries of the portion of the Contract Area to be relinquished by the CONTRACTOR shall be communicated to the GOVERNMENT by written notice



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at least thirty (30) days in advance of the relevant date for relinquishment, pursuant to Article 7.1.



ARTICLE 8 - MANAGEMENT COMMITTEE



8.1 A Management Committee shall be established within thirty (30) days following the Effective Date for the purpose of providing orderly direction of all matters pertaining to the Petroleum Operations and the Work Programs, Within such period, each of the GOVERNMENT and the CONTRACTOR shall by written notice nominate its respective members of the Management Committee and their deputies.



The Management Committee shall comprise two (2) members designated by the GOVERNMENT and two (2) members designated by the CONTRACTOR.



Upon ten (10) days notice, each of the GOVERNMENT and the CONTRACTOR 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 Party shall have the right to invite a reasonable number of observers as deemed necessary to attend the meetings of the Management Committee in a non-voting capacity.



8.2 The Management Committee shall review, deliberate, decide and give advice, suggestions and recommendations to the parties regarding the following subject matters:



(a) Work Programs and Budgets;

(b) the CONTRACTOR's activity reports;

(c) production levels submitted by the CONTRACTOR, based on prudent international petroleum industry practice;

(d) Accounts of Petroleum Costs;

(e) procurement procedures for potential Subcontractors, with an estimated sub-contract value in excess of one million Dollars ($1,000,000), submitted by the CONTRACTOR in accordance with Article 19.3;

(f) Development Plan and Budget for each Production Area;

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

(h) any other subject matter of a material nature that the Parties are willing to consider.


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at least thirty (30) days in advance of the relevant date for relinquishment, pursuant to Article 7.1.



ARTICLE 8 - MANAGEMENT COMMITTEE



8.1 A Management Committee shall be established within thirty (30) days following the Effective Date for the purpose of providing orderly direction of all matters pertaining to the Petroleum Operations and the Work Programs, Within such period, each of the GOVERNMENT and the CONTRACTOR shall by written notice nominate its respective members of the Management Committee and their deputies.



The Management Committee shall comprise two (2) members designated by the GOVERNMENT and two (2) members designated by the CONTRACTOR.



Upon ten (10) days notice, each of the GOVERNMENT and the CONTRACTOR 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 Party shall have the right to invite a reasonable number of observers as deemed necessary to attend the meetings of the Management Committee in a non-voting capacity.



8.2 The Management Committee shall review, deliberate, decide and give advice, suggestions and recommendations to the parties regarding the following subject matters:



(a) Work Programs and Budgets;

(b) the CONTRACTOR's activity reports;

(c) production levels submitted by the CONTRACTOR, based on prudent international petroleum industry practice;

(d) Accounts of Petroleum Costs;

(e) procurement procedures for potential Subcontractors, with an estimated sub-contract value in excess of one million Dollars ($1,000,000), submitted by the CONTRACTOR in accordance with Article 19.3;

(f) Development Plan and Budget for each Production Area;

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

(h) any other subject matter of a material nature that the Parties are willing to consider.


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

(k) any matter having a material adverse effect on Petroleum Operations.



8.6

Ordinary meetings of the Management Committee shall take place in the Kurdistan Region, alternately at the offices of the GOVERNMENT and those of the 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

Either the GOVERNMENT or the CONTRACTOR 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.



8.8

Unless at least one (1) member or its deputy of each of the GOVERNMENT and the CONTRACTOR is present, the Management Committee shall be adjourned for a period not to exceed eight (8) days. The Party being present shall then notify the other Party of the new date, time and location for the meeting.



8.9

The agenda for meetings of the Management Committee shall be prepared by the CONTRACTOR in accordance with instructions of the Chairman and communicated to the Parties at least fifteen (15) days prior to the date of the meeting. The agenda shall include any subject matter proposed by either the GOVERNMENT or the CONTRACTOR. Decisions of the Management Committee will be made at the meetings. The CONTRACTOR shall be responsible for preparing and keeping minutes of the decisions made at the meetings. 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 draft minutes. A Party who fails to notify in writing its approval of disapproval of such minutes within such ten (10) days shall be deemed to have approved the minutes.



8.10

If required, the Management Committee may request the creation of a technical sub-committee or any other sub-committee to assist it. Any sub sub-committee shall be composed of a reasonable number of experts 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 incurred by the CONTRACTOR for meetings of the Management Committee or any technical sub-committee or any other sub-committee shall be considered as Petroleum Costs and shall be recovered by the CONTRACTOR in accordance with the provisions of Articles 1 and 25. 

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ARTICLE 9 - GUARANTEES



9.1 Each CONTRACTOR Entity shall provide the GOVERNMENT, if so required by the latter pursuant to written notice received by the CONTRACTOR Entity within thirty (30) days of the Effective Date, with a corporate guarantee in 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 Financial Commitment for the First Sub-Period and shall expire automatically upon completion of the performance of the Minimum Exploration obligations set out in Article 10.2(d) and (e) or expenditure of such Minimum Financial Commitment, whichever is the earlier.



9.2 Not later than sixty (60) days after the commencement of the Second Sub-Period, each CONTRACTOR Entity 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:

(a) the form substantially agreed between the GOVERNMENT and each CONTRACTOR Entity for the First Sub-Period, if any, subject to making the changes necessary in order for the corporate guarantee to apply only to the Second Sub-Period, or

(b) if there is no agreed form, in a form as shall be agreed in good faith between the GOVERNMENT and each CONTRACTOR Entity not later than ninety (90) days after the GOVERNMENT's notice,



and provided in each case that such corporate guarantee shall be given only in respect of the Minimum Financial Commitment for the Second Sub-Period and that such corporate guarantee shall expire automatically upon completion of the performance of the Minimum Exploration Obligations set out in Article 10.3 (b) or expenditure of such Minimum Financial Commitment, whichever is the earlier.



9.3 In the event of an assignment by a CONTRACTOR Entity in accordance with Article 39, the relevant third party assignee shall provide the GOVERNMENT, is so required 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 9.1 or 9.2, as applicable to the then current Sub-Period or, in the absence of any such agreed form of corporate guarantee, 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 shall be given only in respect of the Minimum Financial Commitment for the then current Sub-Period,k and shall expire automatically upon completion of the performance of the Minimum Exploration Obligations set out in Articles 10.2(d) and (c) or Article 10.3(b), as the case may be, or expenditure of such Minimum Financial Commitment, whichever is the earlier.

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ARTICLE 10 - MINIMUM EXPLORATION WORK OBLIGATIONS



10.1

The CONTRACTOR shall start Exploration Operations within thirty (30) days of Management Committee approval of the Exploration Work Program and Budget in accordance with Article 8. The CONTRACTOR shall perform geological, geophysical and/or drilling works as provided under Articles 10.2 to 10.3 (the "Minimum Exploration Obligations"). If applicable, the said Minimum Exploration Obligations shall be performed during each Sub-Period in accordance with prudent international petroleum industry practice.



10.2

During the First Sub-Period, the CONTRACTOR shall:



(a) carry out geological and geophysical studies, comprising the following:

(i) the compilation of a technical database;

(ii) the performance of a remote sensing study;

(iii) a field visit to verify initial geological and geophysical work and remote sensing results and plan 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) reprocess seismic data, if available;



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



(d) acquire, process and interpret two hundred (200) line kilometres of two dimensional seismic data, committing for this purpose a minimum financial amount of two million Dollars (US$2,000,000), or one hundred (100) square kilometres of three dimensional seismic data, committing for this purpose a minimum financial amount of two million dollars (US$2,000,000); and



(e) drill one (1) Exploration Well (the "First Exploration Well"), committing for this purpose a minimum financial amount of seven million five hundred thousand Dollars (US$7,500,000) including testing and coring as appropriate. For the avoidance of doubt, the exploration well which has, as of October 2007, been drilled and tested, and named 'Bina Bawi - 1' qualifies as the First Exploration Well.



10.3

During the Second Sub-Period, the CONTRACTOR shall:

(a) acquire, process and interpret further seismic data being either two dimensional or three dimensional), if the CONTRACTOR considers that the

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results from the First Exploration Well justify the acquisition of further seismic data; and



(b) drill one (1) Exploration Well (the "Second Exploration Well") committing for this purpose a minimum financial amount of five million Dollars (US$5,000,000) including testing and coring as appropriate, unless the data from the First Exploration Well demonstrates that there is not a reasonable technical case for drilling the Second Exploration Wells in the Contract Area



10.4 Notwithstanding the provisions in Articles 10.2 to 10.3, for the3 ececution of the Minimum Exploration Obligations under Articles 10.2 to 10.3, it 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 it will not enter into the Second Sub-Period, in accordance with and subject to Article 6.4



(b) Subject to Article 10.4(a), the CONTRACTOR shall be required to meet its Minimum Exploration Obligations for the Sub-Period, even if this entails exceeding the Minimum Financial Commitment for such Sub-Period. If the CONTRACTOR has satisfied its Minimum Exploration Obligations Period, it shall be deemed to have satisfied its Minimum Exploration Obligations for such Sub-Period.



(c) Each Exploration Well shall be drilled so the depth agreed by the Management Committee unless:



(i) the formation is encountered at a lesser depth that 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) insurmountable technical problems are encountered rendering it impractical to continue drilling with standard equipment; or



(v) petroleum formations are 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 and of the foregoing reasons, the Exploration Well shall be deemed to have been drilled to the depth agreed by the Management Committee and the CONTRACTOR shall be deemed to have satisfied its Minimum Exploration Obligations in respect of the Exploration Well



(d) Any geological or geophysical work carried out or any seismic data acquired, processes or interjected or any Exploration Well drilled or any other work

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results from the First Exploration Well justify the acquisition of further seismic data; and



(b) drill one (1) Exploration Well (the "Second Exploration Well") committing for this purpose a minimum financial amount of five million Dollars (US$5,000,000) including testing and coring as appropriate, unless the data from the First Exploration Well demonstrates that there is not a reasonable technical case for drilling the Second Exploration Wells in the Contract Area



10.4 Notwithstanding the provisions in Articles 10.2 to 10.3, for the3 ececution of the Minimum Exploration Obligations under Articles 10.2 to 10.3, it 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 it will not enter into the Second Sub-Period, in accordance with and subject to Article 6.4



(b) Subject to Article 10.4(a), the CONTRACTOR shall be required to meet its Minimum Exploration Obligations for the Sub-Period, even if this entails exceeding the Minimum Financial Commitment for such Sub-Period. If the CONTRACTOR has satisfied its Minimum Exploration Obligations Period, it shall be deemed to have satisfied its Minimum Exploration Obligations for such Sub-Period.



(c) Each Exploration Well shall be drilled so the depth agreed by the Management Committee unless:



(i) the formation is encountered at a lesser depth that 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) insurmountable technical problems are encountered rendering it impractical to continue drilling with standard equipment; or



(v) petroleum formations are 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 and of the foregoing reasons, the Exploration Well shall be deemed to have been drilled to the depth agreed by the Management Committee and the CONTRACTOR shall be deemed to have satisfied its Minimum Exploration Obligations in respect of the Exploration Well



(d) Any geological or geophysical work carried out or any seismic data acquired, processes or interjected or any Exploration Well drilled or any other work

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results from the First Exploration Well justify the acquisition of further seismic data; and



(b) drill one (1) Exploration Well (the "Second Exploration Well") committing for this purpose a minimum financial amount of five million Dollars (US$5,000,000) including testing and coring as appropriate, unless the data from the First Exploration Well demonstrates that there is not a reasonable technical case for drilling the Second Exploration Wells in the Contract Area



10.4 Notwithstanding the provisions in Articles 10.2 to 10.3, for the3 ececution of the Minimum Exploration Obligations under Articles 10.2 to 10.3, it 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 it will not enter into the Second Sub-Period, in accordance with and subject to Article 6.4



(b) Subject to Article 10.4(a), the CONTRACTOR shall be required to meet its Minimum Exploration Obligations for the Sub-Period, even if this entails exceeding the Minimum Financial Commitment for such Sub-Period. If the CONTRACTOR has satisfied its Minimum Exploration Obligations Period, it shall be deemed to have satisfied its Minimum Exploration Obligations for such Sub-Period.



(c) Each Exploration Well shall be drilled so the depth agreed by the Management Committee unless:



(i) the formation is encountered at a lesser depth that 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) insurmountable technical problems are encountered rendering it impractical to continue drilling with standard equipment; or



(v) petroleum formations are 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 and of the foregoing reasons, the Exploration Well shall be deemed to have been drilled to the depth agreed by the Management Committee and the CONTRACTOR shall be deemed to have satisfied its Minimum Exploration Obligations in respect of the Exploration Well



(d) Any geological or geophysical work carried out or any seismic data acquired, processes or interjected or any Exploration Well drilled or any other work

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(b) an estimated time-frame for completion of appraisal works; and

(c) the delimitation of the area to be evaluated, the surface of which shall not exceed twice (2x) the surface of the geological structure or prospect to be appraised (the "Appraisal Area").



12.3

If, following a Discovery, a rig acceptable to the CONTRACTOR 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 Management Committee's review of the Discovery Report provided in accordance with Article 12.1 or its review of the Appraisal Work Program and Budget.



The CONTRACTOR shall be authorised to incur expenditures not budgeted in an approved Appraisal Work program and Budget provided that the aggregate amount of such expenditures shall not exceed ten per cent (10%) of the approved Appraisal Work Program and Budget in any Calendar Year and provided further that such excess expenditures shall be reported as soon as is reasonably practicable to the Management Committee. For the avoidance of doubt, all excess expenditures shall be recovered by the CONTRACTOR in accordance with the provisions of Articles 1 and 25, provided that any excess expenditures above the ten per cent (10%) limit shall only be recovered with the unanimous approval of the Management Committee.



Appraisal Report



12.4

The CONTRACTOR 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 Work Program and Budget.



12.5

The Appraisal Report shall include the following:

(a) geological conditions;

(b) physical properties of any liquids;

(c) sulphur, sediment and water content;

(d) type of substances obtained;

(e) Natural Gas composition;

(f) production forecast per well; and

(g) a preliminary estimate of recoverable reserves.



Declaration of Commercial Discovery



12.6

Together with its Appraisal Report, the CONTRACTOR shall submit a written statement to the Management Committee specifying that:



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

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(b) an estimated time-frame for completion of appraisal works; and

(c) the delimitation of the area to be evaluated, the surface of which shall not exceed twice (2x) the surface of the geological structure or prospect to be appraised (the "Appraisal Area").



12.3

If, following a Discovery, a rig acceptable to the CONTRACTOR 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 Management Committee's review of the Discovery Report provided in accordance with Article 12.1 or its review of the Appraisal Work Program and Budget.



The CONTRACTOR shall be authorised to incur expenditures not budgeted in an approved Appraisal Work program and Budget provided that the aggregate amount of such expenditures shall not exceed ten per cent (10%) of the approved Appraisal Work Program and Budget in any Calendar Year and provided further that such excess expenditures shall be reported as soon as is reasonably practicable to the Management Committee. For the avoidance of doubt, all excess expenditures shall be recovered by the CONTRACTOR in accordance with the provisions of Articles 1 and 25, provided that any excess expenditures above the ten per cent (10%) limit shall only be recovered with the unanimous approval of the Management Committee.



Appraisal Report



12.4

The CONTRACTOR 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 Work Program and Budget.



12.5

The Appraisal Report shall include the following:

(a) geological conditions;

(b) physical properties of any liquids;

(c) sulphur, sediment and water content;

(d) type of substances obtained;

(e) Natural Gas composition;

(f) production forecast per well; and

(g) a preliminary estimate of recoverable reserves.



Declaration of Commercial Discovery



12.6

Together with its Appraisal Report, the CONTRACTOR shall submit a written statement to the Management Committee specifying that:



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

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(k) a preliminary decommissioning and site restoration plan;



(I) all contracts and arrangements made of to be made by the CONTRACTOR

for the sale of Natural Gas;



(m) to the extent available, all contracts and arrangements made or to be made by Persons in respect of that Natural Gas downstream of the point at which it is to be sold by the CONTRACTOR and which are relevant to the price at which (and other terms on which) it is to be sold by the CONTRACTOR or are otherwise relevant to the determination of the value of it for the purposes of this Contract, but not beyond the point at which it is first disposed of in an Arm's Length Sale;



(n) each CONTRACTOR Entity's plans for financing its interest, if any; and



(o) any other operations not expressly provided for in this Contract but seasonably necessary for Development Operations, Production Operations and delivery of Petroleum produced, in accordance with prudent international petroleum industry practice.



12.9 The Management Committee shall use its best efforts to approve the Development Plan within sixty (60) days after its receipt of such plan The Development Period for each Commercial Discovery within a Development Plan shall be extended for the number of days in excess of such sixty (60) day period that it takes for the Management Committee to approve the Development Plan. The Development Plan shall be considered approved by the GOVERNMENT if the GOVERNMENT, through its representatives on the Management Committee, indicates its approval in writing.



12.10 If the GOVERNMENT requests any modifications to the Development Plan, then the Management Committee shall meet within sixty (60) days of receipt by the CONTRACTOR of the GOVERNMENT's written notification of requested modifications accompanied by all the documents justifying such request, and shall discuss such request. The CONTRACTOR shall communicate its comments on any such requested modifications to the GOVERNMENT at such meeting or in writing prior to such meeting. Any modification approved by the Management Committee at such meeting or within a further period of thirty (30) days from the date of such meeting shall be incorporated into the Development Plan which shall then be deemed approved and adopted.



12.11 If the CONTRACTOR makes several Commercial Discoveries within the Contract Area each such Commercial Discovery will have a separate Production Area. The CONTRACTOR shall be entitled to develop and to produce each Commercial Discovery and the GOVERNMENT shall provide the appropriate Permits covering each Production Area. In case the area covered by the Commercial Discovery extends beyond the boundaries of the Contract Area, and to the extent such area outside the Contract Area is not the subject of a Petroleum Contract (as defined in the Kurdistan Region Oil and Gas Law) with a third party, the provisions of Article 34.2 shall apply.



41/122ARTICLE 13 - DEVELOPMENT AND PRODUCTION WORK PROGRAMS AND BUDGET



13.1

Upon the approval of the Development Plan by the Management Committee, the CONTRACTOR shall start the Development Operations for the Commercial Discovery in accordance with the Development Plan and prudent international petroleum industry practice.



Approval of Development Works Program 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 for Development Operations (the "Development Work Program and Budget") to be carried out in the Production Area for the duration of the Development Operations. Thereafter, no later than 1 October in each Calendar Year, the CONTRACTOR shall submit to the Management Committee updates in respect of its Development Work Program and Budget. To enable the Management Committee to forecast expenditures, each Development Work Program and Budget shall include details of 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 parties and Affiliated Companies of any CONTRACTOR Entity; and

(d) categories of general and administrative expenditure.



13.3

If any modification to the Development Work Program and Budget is requested by the GOVERNMENT, the Management Committee shall meet to discuss the Development Work Program and Budget and proposed modifications thereto within sixty (60) days from its receipt of the proposed Development 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.



13.4

The CONTRACTOR shall be authorised to incur expenditures not budgeted in an approved Development Work Program and Budget provided that the aggregate amount of such expenditures shall not exceed ten per cent (10%) of the approved Development Work Program and Budget in any Calendar Year and provided further that such excess expenditures shall be reported as soon as is reasonably practicable to the Management Committee. For the avoidance of doubt, all excess expenditures shall be recovered by the CONTRACTOR in accordance with the provisions of Articles 1 and 25, provided that any excess expenditures above the ten per cent (10%) limit shall only be recovered with the unanimous approval of the Management Committee.

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13.5

In cases of emergency, the CONTRACTOR may incur such additional expenditures as it deems necessary to protect life, environment or property. Such additional expenditures shall be reported promptly to the Management Committee. For the avoidance of doubt, such additional expenditure shall be considered Petroleum Costs and shall be recovered by the CONTRACTOR in accordance with the provisions of Articles 1 and 25.



Approval of Annual Production Works Programs and Budget



13.6

No later than 1 October of the Calendar Year preceding the estimated commencement of production pursuant to an approved Development Plan and thereafter no later than 1 October in each Calendar Year, the CONTRACTOR shall prepare and submit to the Management Committee a proposed work program and budget for Production Operations (the "Production Work Program and Budget") for the following Calendar year. To enable the Management Committee to forecast expenditures, the Production Work Program and Budget shall include details of the following:

(a) works to be carried out;

(b) materials and equipment to be acquired by main categories;

(c) type of services to be provided, distinguishing between third parties and Affiliated Companies of any CONTRACTOR Entity; and

(d) categories of general and administrative expenditure.



13.7

If any modification to the Production Work Program and Budget is requested by the GOVERNMENT, the Management Committee shall meet to discuss the Production Work 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 shall be authorised to incur expenditures not budgeted in an approved Production Work Program and Budget provided that the aggregate amount of such expenditures shall not exceed ten per cent (10%) of the approved Production Work Program 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, all excess expenditures shall be recovered by the CONTRACTOR in accordance with the provisions of Articles 1 and 25, provided that any excess expenditure above the ten per cent (10%) limit shall only recovered with the unanimous approval of the Management Committee.



13.9

In cases of emergency, the CONTRACTOR may incur such additional expenditure as it deems necessary to protect life, environment or property. Such additional expenditures shall be reported promptly to the Management Committee. For the avoidance of doubt, such additional expenditure shall be considered Petroleum Costs and shall be recovered by the CONTRACTOR in accordance with the provisions of Articles 1 and 25.

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13.5

In cases of emergency, the CONTRACTOR may incur such additional expenditures as it deems necessary to protect life, environment or property. Such additional expenditures shall be reported promptly to the Management Committee. For the avoidance of doubt, such additional expenditure shall be considered Petroleum Costs and shall be recovered by the CONTRACTOR in accordance with the provisions of Articles 1 and 25.



Approval of Annual Production Works Programs and Budget



13.6

No later than 1 October of the Calendar Year preceding the estimated commencement of production pursuant to an approved Development Plan and thereafter no later than 1 October in each Calendar Year, the CONTRACTOR shall prepare and submit to the Management Committee a proposed work program and budget for Production Operations (the "Production Work Program and Budget") for the following Calendar year. To enable the Management Committee to forecast expenditures, the Production Work Program and Budget shall include details of the following:

(a) works to be carried out;

(b) materials and equipment to be acquired by main categories;

(c) type of services to be provided, distinguishing between third parties and Affiliated Companies of any CONTRACTOR Entity; and

(d) categories of general and administrative expenditure.



13.7

If any modification to the Production Work Program and Budget is requested by the GOVERNMENT, the Management Committee shall meet to discuss the Production Work 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 shall be authorised to incur expenditures not budgeted in an approved Production Work Program and Budget provided that the aggregate amount of such expenditures shall not exceed ten per cent (10%) of the approved Production Work Program 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, all excess expenditures shall be recovered by the CONTRACTOR in accordance with the provisions of Articles 1 and 25, provided that any excess expenditure above the ten per cent (10%) limit shall only recovered with the unanimous approval of the Management Committee.



13.9

In cases of emergency, the CONTRACTOR may incur such additional expenditure as it deems necessary to protect life, environment or property. Such additional expenditures shall be reported promptly to the Management Committee. For the avoidance of doubt, such additional expenditure shall be considered Petroleum Costs and shall be recovered by the CONTRACTOR in accordance with the provisions of Articles 1 and 25.

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13.5

In cases of emergency, the CONTRACTOR may incur such additional expenditures as it deems necessary to protect life, environment or property. Such additional expenditures shall be reported promptly to the Management Committee. For the avoidance of doubt, such additional expenditure shall be considered Petroleum Costs and shall be recovered by the CONTRACTOR in accordance with the provisions of Articles 1 and 25.



Approval of Annual Production Works Programs and Budget



13.6

No later than 1 October of the Calendar Year preceding the estimated commencement of production pursuant to an approved Development Plan and thereafter no later than 1 October in each Calendar Year, the CONTRACTOR shall prepare and submit to the Management Committee a proposed work program and budget for Production Operations (the "Production Work Program and Budget") for the following Calendar year. To enable the Management Committee to forecast expenditures, the Production Work Program and Budget shall include details of the following:

(a) works to be carried out;

(b) materials and equipment to be acquired by main categories;

(c) type of services to be provided, distinguishing between third parties and Affiliated Companies of any CONTRACTOR Entity; and

(d) categories of general and administrative expenditure.



13.7

If any modification to the Production Work Program and Budget is requested by the GOVERNMENT, the Management Committee shall meet to discuss the Production Work 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 shall be authorised to incur expenditures not budgeted in an approved Production Work Program and Budget provided that the aggregate amount of such expenditures shall not exceed ten per cent (10%) of the approved Production Work Program 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, all excess expenditures shall be recovered by the CONTRACTOR in accordance with the provisions of Articles 1 and 25, provided that any excess expenditure above the ten per cent (10%) limit shall only recovered with the unanimous approval of the Management Committee.



13.9

In cases of emergency, the CONTRACTOR may incur such additional expenditure as it deems necessary to protect life, environment or property. Such additional expenditures shall be reported promptly to the Management Committee. For the avoidance of doubt, such additional expenditure shall be considered Petroleum Costs and shall be recovered by the CONTRACTOR in accordance with the provisions of Articles 1 and 25.

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(60) days from its receipt of the proposed Gas Marketing 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.



14.9

The CONTRACTOR 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 per cent (10%) of the approved Gas marketing Work program 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, all excess expenditures shall be recovered by the CONTRACTOR in accordance with the provisions of Articles 1 and 25, provided that any excess expenditure above the ten per cent (10%) limit shall only be recovered with the unanimous approval of the Management Committee.



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 be a Commercial Discovery if certain terms of this Contract are amended, it shall be entitles to request amendments to this Contract, with its reasons. The GOVERNMENT shall in good faith give reasonable consideration to the CONTRACTOR's proposed amendment and reasons and the Parties shall in good faith attempt to agree on the necessary amendments to the Contract. If the Parties are unable to agree on such amendments, and the Exploration Period expires without the CONTRACTOR having 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 eight (8) 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 in relation to the Gas Development having been reached and whether or not such agreement is recorded in a fully termed production sharing and/or operating or other like agreement), but before such agreement is signed (the "Proposed Contract") (subject only to the rights of each CONTRACTOR Entity to pre-empt such Proposed Contract pursuant to Article 14.10(b) and such conditions as may be applicable), the GOVERNMENT shall, as soon as reasonably practicable after the occurrence of such circumstances, serve on each of the CONTRACTOR Entities, a notice to that effect and shall with such notice provide such information and main terms of such agreement as the CONTRACTOR Entities may reasonably request to determine if they will exercise their rights (the "Agreed Terms"), including:



(i) the identity of such third party;

(ii) the effective date of the Proposed Contract;

(iii) the applicable commercial terms, including bonuses, royalties, cost recovery, profit sharing, taxation and any other similar terms; and

46/122
(60) days from its receipt of the proposed Gas Marketing 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.



14.9

The CONTRACTOR 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 per cent (10%) of the approved Gas marketing Work program 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, all excess expenditures shall be recovered by the CONTRACTOR in accordance with the provisions of Articles 1 and 25, provided that any excess expenditure above the ten per cent (10%) limit shall only be recovered with the unanimous approval of the Management Committee.



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 be a Commercial Discovery if certain terms of this Contract are amended, it shall be entitles to request amendments to this Contract, with its reasons. The GOVERNMENT shall in good faith give reasonable consideration to the CONTRACTOR's proposed amendment and reasons and the Parties shall in good faith attempt to agree on the necessary amendments to the Contract. If the Parties are unable to agree on such amendments, and the Exploration Period expires without the CONTRACTOR having 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 eight (8) 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 in relation to the Gas Development having been reached and whether or not such agreement is recorded in a fully termed production sharing and/or operating or other like agreement), but before such agreement is signed (the "Proposed Contract") (subject only to the rights of each CONTRACTOR Entity to pre-empt such Proposed Contract pursuant to Article 14.10(b) and such conditions as may be applicable), the GOVERNMENT shall, as soon as reasonably practicable after the occurrence of such circumstances, serve on each of the CONTRACTOR Entities, a notice to that effect and shall with such notice provide such information and main terms of such agreement as the CONTRACTOR Entities may reasonably request to determine if they will exercise their rights (the "Agreed Terms"), including:



(i) the identity of such third party;

(ii) the effective date of the Proposed Contract;

(iii) the applicable commercial terms, including bonuses, royalties, cost recovery, profit sharing, taxation and any other similar terms; and

46/122
GOVERNMENT will use its best endeavours to avoid any effect which may hamper the Petroleum operations of the CONTRACTOR while producing Petroleum.



Flaring

14.12 Flaring of Natural Gas in the course of activities provided for under this Contract, is prohibited except (i) short-term flaring up to twelve (12) Months necessary for testing or other operational reasons in accordance with prudent international petroleum industry practice (which shall include the flaring of Associated Natural Gas to the extent the CONTRACTOR considers that re-injecting Associated Natural Gas is not justified technically and economically and provided the GOVERNMENT decides not to take such Associated Natural Gas), or (ii) with the prior authorisation of the GOVERNMENT, such authorisation not to be unreasonably withheld or delayed. The CONTRACTOR shall submit such request to the GOVERNMENT, which shall include an evaluation of reasonable alternatives to flaring that have been considered along with information on the amount and quality of Natural Gas involved and the duration of the requested flaring.



ARTICLE 15 - ACCOUNTING AND AUDITS



15.1 The CONTRACTOR shall keep in its offices in the Kurdistan Region copies of all books and accounts of all revenues relating to the Petroleum Operations and all Petroleum Costs (the "Accounts"), except during the Exploration Period, when the CONTRACTOR shall be entitled to keep the Accounts at its headquarters Abroad. The Accounts shall reflect in detail expenditure incurred as a function of the quantities and value of Petroleum produced, and shall be kept for a period of five (5) years. All Accounts which are made available to the GOVERNMENT in accordance with the provisions of this Contract shall be prepared in the English language. The Accounts shall be kept in accordance with prudent international petroleum industry practice and in accordance with the provisions of the Accounting Procedure. The Accounts shall be kept in Dollars, which shall be the reference currency for the purposes of this Contract.



15.2 Within ninety (90) days following the end of each Calendar Year, the CONTRACTOR shall submit to the GOVERNMENT a summary statement of all Petroleum Costs incurred during the said Calendar Year. The summary statement shall also include a profit calculation pursuant to the provisions of Article 26.



15.3 The GOVERNMENT shall have the right:

(a) to request an audit of the Accounts with respect to each Calendar Year within

a period of two (2) Calendar Years following the end of such Calendar Year (the "Audit Request Period"); and



48/122(b) to retain an auditor of international standing familiar with international petroleum industry accounting practice to undertake or assist the GOVERNMENT to undertake the audit.



Notwithstanding paragraphs (a) and (b) of the Article 15.3, the GOVERNMENT shall have the right to audit the Accounts with respect to each Calendar Year at any time in the case of manifest error or fraud.



15.4 The reasonable cost of retaining an auditor pursuant to Article 15.3 shall be borne by the CONTRACTOR and treated as a Petroleum Cost for the purpose of cost recovery under Articles 1 and 25.



15.5 During the Audit Request Period for any Calendar Year but not thereafter, the GOVERNMENT, acting reasonably and in accordance with prudent international petroleum industry practice, may request in writing all reasonably available information and justifications for its audit of Petroleum Costs.



15.6 Should the GOVERNMENT consider, on the basis of data and information available, that the CONTRACTOR made a material mistake or there is any irregularity in respect of the Accounts and considers that any corrections, adjustments or amendments should be made, the GOVERNMENT shall make any audit exceptions in writing and notified to the CONTRACTOR within six (6) Months of the date of request referred to in Article 15.3, and failure to give such written exception within such time shall be deemed to be an acknowledgement of the correctness of the CONTRACTOR's Accounts.



15.7 In respect of any audit exception made by the GOVERNMENT in accordance with Article 15.6, the CONTRACTOR shall then have sixty (60) days to make necessary corrections, adjustments or amendments or to present its comments in writing or request a meeting with the GOVERNMENT. The GOVERNMENT shall within thirty (30) days of the CONTRACTOR's response, notify the CONTRACTOR in writing of its position on the corrections, adjustments, amendments or comments. If thereafter there still exits a disagreement between the GOVERNMENT and the CONTRACTOR, the dispute will be settled in accordance with Article 15.9.



15.8 In addition to the annual statements of Petroleum Costs as provided in Article 15.2, the CONTRACTOR shall provide the GOVERNMENT with such production statements and reports, as required pursuant to Article 16.3.



15.9 Any dispute between the Parties under this Article 15 that cannot be settled amicably within sixty (60) days of the GOVERNMENT's final notice under Article 15.7, may be submitted to an expert on the request of either the GOVERNMENT or the CONTRACTOR in accordance with the provisions of Article 42.2. Notwithstanding the provisions of Article 42, in this specific instance the decision of the expert shall not necessarily be final and either Party may decided to submit the matter to arbitration in accordance with the provisions of Article 42.1.

49/122
ARTICLE 16 - CONTRACTOR'S RIGHTS AND OBLIGATIONS



Permanent Representative



16.1 If not done already, within ninety (90) days following the Effective Date, each CONTRACTOR Entity shall open an office and appoint a permanent representative in the Kurdistan Region, who may be contacted by the GOVERNMENT with regard to any matter relating to this Contract and will be entitled to receive any correspondence addressed to such CONTRACTOR Entity.



Conduct of Petroleum Operations



16.2 The CONTRACTOR shall carry out all Petroleum Operations in accordance with the provisions of this Contract, prudent international petroleum industry practice 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 conduct Petroleum Operations in accordance with the provisions of this Contract. In conducting its Petroleum Operations, the CONTRACTOR shall have the right to use any Affiliate of each CONTRACTOR Entity, its and their Subcontractors, and the employees, consultants, and agents of each of the foregoing. The CONTRACTOR and all such Persons shall at all times have free access to the Contract Area and any Production Areas for the purpose of carrying out Petroleum Operations.



Information and Reports



16.3 The CONTRACTOR shall provide the GOVERNMENT with periodic data and activity reports relating to Petroleum Operations. Said reports shall include details of the following:



(a) 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;



(b) data and information regarding any transportation facilities built and operated

by the CONTRACTOR:



(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



(d) a descriptive statement of all capital assets acquired for the Petroleum

Operations, indicating the date and price or cost of their acquisition



Requirement for Petroleum Operations



16.4 The CONTRACTOR may freely use any Petroleum produced within the Contract Area for the Petroleum Operations.



50/122ARTICLE 16 - CONTRACTOR'S RIGHTS AND OBLIGATIONS



Permanent Representative



16.1 If not done already, within ninety (90) days following the Effective Date, each CONTRACTOR Entity shall open an office and appoint a permanent representative in the Kurdistan Region, who may be contacted by the GOVERNMENT with regard to any matter relating to this Contract and will be entitled to receive any correspondence addressed to such CONTRACTOR Entity.



Conduct of Petroleum Operations



16.2 The CONTRACTOR shall carry out all Petroleum Operations in accordance with the provisions of this Contract, prudent international petroleum industry practice 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 conduct Petroleum Operations in accordance with the provisions of this Contract. In conducting its Petroleum Operations, the CONTRACTOR shall have the right to use any Affiliate of each CONTRACTOR Entity, its and their Subcontractors, and the employees, consultants, and agents of each of the foregoing. The CONTRACTOR and all such Persons shall at all times have free access to the Contract Area and any Production Areas for the purpose of carrying out Petroleum Operations.



Information and Reports



16.3 The CONTRACTOR shall provide the GOVERNMENT with periodic data and activity reports relating to Petroleum Operations. Said reports shall include details of the following:



(a) 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;



(b) data and information regarding any transportation facilities built and operated

by the CONTRACTOR:



(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



(d) a descriptive statement of all capital assets acquired for the Petroleum

Operations, indicating the date and price or cost of their acquisition



Requirement for Petroleum Operations



16.4 The CONTRACTOR may freely use any Petroleum produced within the Contract Area for the Petroleum Operations.



50/122Litigation

16.10 The CONTRACTOR shall as soon as reasonably practicable inform the GOVERNMENT of any material litigation regarding this Contract.

Safety

16.11 The CONTRACTOR shall implement a health, safety and environment program and take necessary measures to ensure hygiene, health and safety of its personnel carrying out Petroleum Operations in accordance with prudent international petroleum industry practice.

Said measures shall include the following:

(a) supplying first aid and safety equipment for each work area and maintaining a healthy environment for personnel;

(b) reporting to the GOVERNMENT within seventy-two (72) hours of such accident, 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;

(f) for the purpose of taking control of any blow out or fire which could damage the environment or Petroleum Field, in accordance with prudent international petroleum practice; and

(g) for the purpose of preventing any involuntary injection of fluids in petroleum formations and production of Crude Oil and Natural Gas at rates that do not conform to prudent international petroleum industry practice.

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Litigation

16.10 The CONTRACTOR shall as soon as reasonably practicable inform the GOVERNMENT of any material litigation regarding this Contract.

Safety

16.11 The CONTRACTOR shall implement a health, safety and environment program and take necessary measures to ensure hygiene, health and safety of its personnel carrying out Petroleum Operations in accordance with prudent international petroleum industry practice.

Said measures shall include the following:

(a) supplying first aid and safety equipment for each work area and maintaining a healthy environment for personnel;

(b) reporting to the GOVERNMENT within seventy-two (72) hours of such accident, 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;

(f) for the purpose of taking control of any blow out or fire which could damage the environment or Petroleum Field, in accordance with prudent international petroleum practice; and

(g) for the purpose of preventing any involuntary injection of fluids in petroleum formations and production of Crude Oil and Natural Gas at rates that do not conform to prudent international petroleum industry practice.

52/122
CONTRACTOR Entities with not less than six (6) Months' advance written notice of its intention to buy such Crude Oil.



Payments shall be made in Dollars and otherwise on terms consistent with prudent international petroleum industry practice. The CONTRACTOR Entities' obligation to sell Crude Oil to the GOVERNMENT shall be, with the other operators (including the GOVERNMENT) then producing in the Kurdistan Region, pro rata to their respective production rates.



The provisions of this Article 16.15 shall not apply to Non-Associated Natural Gas



ARTICLE 17 - USE OF LAND AND EXISTING INFRASTRUCTURE



17.1 The GOVERNMENT shall make available to the CONTRACTOR any land or property in the 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 for it. The CONTRACTOR shall have the right 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 Operations 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 CONTRACTOR shall notify the GOVERNMENT. On receipt of such notification:



(a) 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



(b) the GOVERNMENT shall expropriate the land or property in accordance with applicable Kurdistan Region Law, if such occupation will be long lasting or makes it henceforth impossible to resume original usage of such land or property. 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.



The amount of the compensation in Article 17.2(a) shall be fair and seasonable, in accordance with Article 29 of the Kurdistan Region Oil and Gas Law, and shall take into account the rights of the owner and any effective use of the land of property by its owner at the time of occupation by the CONTRACTOR. All reasonable costs, expenditures and fair and reasonable compensation (as required pursuant to Article 29 of the Kurdistan Region Oil and Gas Law) 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 1 and 25.



54/122CONTRACTOR Entities with not less than six (6) Months' advance written notice of its intention to buy such Crude Oil.



Payments shall be made in Dollars and otherwise on terms consistent with prudent international petroleum industry practice. The CONTRACTOR Entities' obligation to sell Crude Oil to the GOVERNMENT shall be, with the other operators (including the GOVERNMENT) then producing in the Kurdistan Region, pro rata to their respective production rates.



The provisions of this Article 16.15 shall not apply to Non-Associated Natural Gas



ARTICLE 17 - USE OF LAND AND EXISTING INFRASTRUCTURE



17.1 The GOVERNMENT shall make available to the CONTRACTOR any land or property in the 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 for it. The CONTRACTOR shall have the right 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 Operations 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 CONTRACTOR shall notify the GOVERNMENT. On receipt of such notification:



(a) 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



(b) the GOVERNMENT shall expropriate the land or property in accordance with applicable Kurdistan Region Law, if such occupation will be long lasting or makes it henceforth impossible to resume original usage of such land or property. 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.



The amount of the compensation in Article 17.2(a) shall be fair and seasonable, in accordance with Article 29 of the Kurdistan Region Oil and Gas Law, and shall take into account the rights of the owner and any effective use of the land of property by its owner at the time of occupation by the CONTRACTOR. All reasonable costs, expenditures and fair and reasonable compensation (as required pursuant to Article 29 of the Kurdistan Region Oil and Gas Law) 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 1 and 25.



54/122of doubt, such cost and expense shall be considered Petroleum Costs and shall be recovered by the CONTRACTOR in accordance with the provisions of Articles 1 and 25



17.8 Upon request of the CONTRACTOR, 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.



17.9 Access to the Contract Area may be granted pursuant to an Access Authorisation, as shall be defined in, and consistent with, the Kurdistan Region Oil and Gas Law, to authorised third parties on reasonable terms and conditions (including coordination), including Persons authorised to construct, install and operate structures, facilities and installations, and to carry out other works, provided that nothing in the Access Authorisation or in this Article 17.9 authorises the holder to drill a Well or to perform any Petroleum Operations in Contract Area.



The GOVERNMENT shall give the CONTRACTOR adequate advance notice of any Access Authorisation in respect of the Contract Area and shall not grant any Access Authorisation in respect of the Contract Area until it has taken into account any submissions made by the CONTRACTOR nor in such a way that there is undue interference with or hindrance of the rights and activities of the CONTRACTOR.



ARTICLE 18 - ASSISTANCE FROM THE GOVERNMENT



18.1 To the extent allowed by Kurdistan Region Law and Iraqi law and at the specific request of the CONTRACTOR, the GOVERNMENT shall take all necessary steps to assist the CONTRACTOR Entities in, but not limited to, the following areas:



(a) securing any necessary Permits for the use and installation of means of

transportation and communications;



(b) securing regulatory Permits in matters of customs or import/export;



(c) securing entry and exit visas, work and residence permits as well as any other administrative Permits for each CONTRACTOR Entity's, its Affiliate's and its Subcontractors' foreign personnel (including their family members) working in the Kurdistan Region and any other part of Iraq during the implementation of this Contract,



(d) 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 administrations, including for

the purposes of the remainder of this Article 18.1;



(f) securing any necessary environmental Permits;



56/122of doubt, such cost and expense shall be considered Petroleum Costs and shall be recovered by the CONTRACTOR in accordance with the provisions of Articles 1 and 25



17.8 Upon request of the CONTRACTOR, 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.



17.9 Access to the Contract Area may be granted pursuant to an Access Authorisation, as shall be defined in, and consistent with, the Kurdistan Region Oil and Gas Law, to authorised third parties on reasonable terms and conditions (including coordination), including Persons authorised to construct, install and operate structures, facilities and installations, and to carry out other works, provided that nothing in the Access Authorisation or in this Article 17.9 authorises the holder to drill a Well or to perform any Petroleum Operations in Contract Area.



The GOVERNMENT shall give the CONTRACTOR adequate advance notice of any Access Authorisation in respect of the Contract Area and shall not grant any Access Authorisation in respect of the Contract Area until it has taken into account any submissions made by the CONTRACTOR nor in such a way that there is undue interference with or hindrance of the rights and activities of the CONTRACTOR.



ARTICLE 18 - ASSISTANCE FROM THE GOVERNMENT



18.1 To the extent allowed by Kurdistan Region Law and Iraqi law and at the specific request of the CONTRACTOR, the GOVERNMENT shall take all necessary steps to assist the CONTRACTOR Entities in, but not limited to, the following areas:



(a) securing any necessary Permits for the use and installation of means of

transportation and communications;



(b) securing regulatory Permits in matters of customs or import/export;



(c) securing entry and exit visas, work and residence permits as well as any other administrative Permits for each CONTRACTOR Entity's, its Affiliate's and its Subcontractors' foreign personnel (including their family members) working in the Kurdistan Region and any other part of Iraq during the implementation of this Contract,



(d) 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 administrations, including for

the purposes of the remainder of this Article 18.1;



(f) securing any necessary environmental Permits;



56/122of doubt, such cost and expense shall be considered Petroleum Costs and shall be recovered by the CONTRACTOR in accordance with the provisions of Articles 1 and 25



17.8 Upon request of the CONTRACTOR, 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.



17.9 Access to the Contract Area may be granted pursuant to an Access Authorisation, as shall be defined in, and consistent with, the Kurdistan Region Oil and Gas Law, to authorised third parties on reasonable terms and conditions (including coordination), including Persons authorised to construct, install and operate structures, facilities and installations, and to carry out other works, provided that nothing in the Access Authorisation or in this Article 17.9 authorises the holder to drill a Well or to perform any Petroleum Operations in Contract Area.



The GOVERNMENT shall give the CONTRACTOR adequate advance notice of any Access Authorisation in respect of the Contract Area and shall not grant any Access Authorisation in respect of the Contract Area until it has taken into account any submissions made by the CONTRACTOR nor in such a way that there is undue interference with or hindrance of the rights and activities of the CONTRACTOR.



ARTICLE 18 - ASSISTANCE FROM THE GOVERNMENT



18.1 To the extent allowed by Kurdistan Region Law and Iraqi law and at the specific request of the CONTRACTOR, the GOVERNMENT shall take all necessary steps to assist the CONTRACTOR Entities in, but not limited to, the following areas:



(a) securing any necessary Permits for the use and installation of means of

transportation and communications;



(b) securing regulatory Permits in matters of customs or import/export;



(c) securing entry and exit visas, work and residence permits as well as any other administrative Permits for each CONTRACTOR Entity's, its Affiliate's and its Subcontractors' foreign personnel (including their family members) working in the Kurdistan Region and any other part of Iraq during the implementation of this Contract,



(d) 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 administrations, including for

the purposes of the remainder of this Article 18.1;



(f) securing any necessary environmental Permits;



56/12223.2

The CONTRACTOR Entities shall give due consideration to the secondment of GOVERNMENT personnel to the CONTRACTOR Entities and of the CONTRACTOR Entities' personnel to the GOVERNMENT during the various phases of the Petroleum Operations. Terms and conditions for such secondment shall be mutually agreed by the Parties and any costs associated therewith shall be considered petroleum Costs and shall be recovered by the CONTRACTOR in accordance with the provisions of Articles 1 and 25.



23.3

Each CONTRACTOR Entity and its Affiliates and Subcontractors shall have the right to hire foreign personnel whenever the personnel from the Kurdistan Region and other parts of Iraq do not have the requisite technical capability, qualifications or experience for positions to be filled as required pursuant to Article 23.1. In the event any such foreign personnel and/or a member of their family engage in activities or commit acts which breach Kurdistan Region Law, the CONTRACTOR shall, at the request of the Management Committee, take the necessary steps to repatriate such individual(s).



23.4

For the first five (5) Contract Years, the CONTRACTOR shall provide up to Two Hundred Fifty Thousand Dollars (US$250,000) in advance each Contract Year to the GOVERNMENT for the recruitment or secondment of personnel, whether from the Kurdistan Region other parts of Iraq or Abroad, to the Ministry of Natural Resources. The selection of such personnel shall be at the discretion of the Minister of Natural Resources. Such costs shall be considered as Petroleum Costs and shall be recovered in accordance with the provisions of Articles 1 and 25.



Training



23.5

In a planned way, in accordance with the provisions of this Article 23.5 and Articles 23.6 and 23.7, the CONTRACTOR shall train all its personnel from the Kurdistan Region and other parts of Iraq directly or indirectly involved in the Petroleum Operations for the purpose of improving their knowledge and professional qualifications in order that such personnel gradually reach the level of knowledge and professional qualification held by the CONTRACTOR Entities' foreign workers with an equivalent résumé. Such training shall also include the transfer of knowledge of petroleum technology and the necessary management experience so as to enable the personnel from the Kurdistan Region and other parts of Iraq to apply advanced and appropriate technology in the Petroleum Operations, to the extent permitted by applicable Law and agreement with third parties, and subject to appropriate confidentiality agreements. 



23.6

In addition to the requirements of Article 23.1, the recruitment, integration and training of the CONTRACTOR Entities' personnel from the Kurdistan Region and other parts of Iraq shall be planned, which plans shall be submitted to the Management Committee for its approval. The training plan shall take into consideration the requirements of Article 23.5 and may include training for the GOVERNMENT's personnel, depending on the extent to which the amount allocated to the training plan, as prescribed by Article 23.7, is available after taking into consideration the training of the CONTRACTOR Entities' Kurdistan Region and other Iraqi personnel.

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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 1 October in each Calendar Year, the CONTRACTOR shall submit a proposed training plan to the Management Committee for the following Calendar year.



23.7

The training plan referred to in Article 23.6 shall provide for the allocation to the GOVERNMENT of the amount of one hundred and fifty thousand Dollars (US$150,000) in advance for each Contract year during the Exploration Period and three hundred thousand Dollars (US$ 300,000) in advance for each Contract year during the Development Period.



23.8

Each CONTRACTOR Entity shall be responsible for the training costs which it may incur in respect of the personnel it employs from the Kurdistan Region and other parts of Iraq. All such reasonable costs shall be considered as Petroleum Costs and shall be recovered in accordance with the provisions of Articles 1 and 25. Costs incurred by the CONTRACTOR for training programs for the GOVERNMENT's personnel shall be borne by the CONTRACTOR only to the extent that they are included in the CONTRACTOR's training plan, pursuant to Article 23.6 and shall also be considered as petroleum Costs and shall be recovered in accordance with the provisions of Articles 1 and 25. The cost of all other training programs for the GOVERNMENT's personnel shall be the GOVERNMENT's responsibility.



The Environment Fund



23.9

The CONTRACTOR shall contribute the amount of one hundred and fifty thousand Dollars (US$150,000) in advance each Contract Year during the Exploration Period and three hundred thousand Dollars (US$300,000) in advance for each Contract year during the Development Period into the environment fund established by the GOVERNMENT for the benefit of the natural environment of the Kurdistan Region, pursuant to the Kurdistan Region Oil and Gas Law (the "Environment Fund"). Such amounts shall be deemed to be Petroleum Costs and shall be recovered in accordance with Articles 1 and 25.



23.10

Any expenditure incurred by the CONTRACTOR under this Article 23 shall be considered Petroleum Costs and shall be recovered in accordance with Articles 1 and 25.



Technological and logistical assistance

23.11

Before the end of the first Contract Year, the CONTRACTOR shall provide to the GOVERNMENT in kind technological and logistical assistance to the Kurdistan Region petroleum sector, including geological computing hardware and software and such other equipment as the Minister of Natural Resources may require, up to the value of five hundred thousand Dollars (US$500,000). The form of such assistance shall be mutually agreed by the Parties and any costs associated therewith shall be considered petroleum Costs and shall be recovered by the CONTRACTOR in accordance with the provisions of Articles 1 and 25.

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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 1 October in each Calendar Year, the CONTRACTOR shall submit a proposed training plan to the Management Committee for the following Calendar year.



23.7

The training plan referred to in Article 23.6 shall provide for the allocation to the GOVERNMENT of the amount of one hundred and fifty thousand Dollars (US$150,000) in advance for each Contract year during the Exploration Period and three hundred thousand Dollars (US$ 300,000) in advance for each Contract year during the Development Period.



23.8

Each CONTRACTOR Entity shall be responsible for the training costs which it may incur in respect of the personnel it employs from the Kurdistan Region and other parts of Iraq. All such reasonable costs shall be considered as Petroleum Costs and shall be recovered in accordance with the provisions of Articles 1 and 25. Costs incurred by the CONTRACTOR for training programs for the GOVERNMENT's personnel shall be borne by the CONTRACTOR only to the extent that they are included in the CONTRACTOR's training plan, pursuant to Article 23.6 and shall also be considered as petroleum Costs and shall be recovered in accordance with the provisions of Articles 1 and 25. The cost of all other training programs for the GOVERNMENT's personnel shall be the GOVERNMENT's responsibility.



The Environment Fund



23.9

The CONTRACTOR shall contribute the amount of one hundred and fifty thousand Dollars (US$150,000) in advance each Contract Year during the Exploration Period and three hundred thousand Dollars (US$300,000) in advance for each Contract year during the Development Period into the environment fund established by the GOVERNMENT for the benefit of the natural environment of the Kurdistan Region, pursuant to the Kurdistan Region Oil and Gas Law (the "Environment Fund"). Such amounts shall be deemed to be Petroleum Costs and shall be recovered in accordance with Articles 1 and 25.



23.10

Any expenditure incurred by the CONTRACTOR under this Article 23 shall be considered Petroleum Costs and shall be recovered in accordance with Articles 1 and 25.



Technological and logistical assistance

23.11

Before the end of the first Contract Year, the CONTRACTOR shall provide to the GOVERNMENT in kind technological and logistical assistance to the Kurdistan Region petroleum sector, including geological computing hardware and software and such other equipment as the Minister of Natural Resources may require, up to the value of five hundred thousand Dollars (US$500,000). The form of such assistance shall be mutually agreed by the Parties and any costs associated therewith shall be considered petroleum Costs and shall be recovered by the CONTRACTOR in accordance with the provisions of Articles 1 and 25.

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part of the Royalty received in kind, each CONTRACTOR Entity shall assist the GOVERNMENT in selling all or part of such Royalty received in kind (belonging to the GOVERNMENT) in consideration of a commission per Barrel payable to such CONTRACTOR Entity, 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 International 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 price obtained at the Delivery Point under an approved contract, as provided in Article 27.3;



(c) the CONTRACTOR shall pay such Royalty each Quarter, in arrears, within thirty (30) days of the end of each Quarter, and shall calculate the payment due for the relevant Quarter by reference to the price for the Export Petroleum at the Delivery Point, determined in accordance with paragraphs (a) and (b) above, and the Royalty due on the Export Petroleum, determined in accordance with Article 24.4, for the said Quarter; and



(d) the CONTRACTOR Entities shall be entitled to export freely the volume of

Export Petroleum corresponding to the Royalty determined in accordance with Article 24.4 for the purpose of paying the Royalty in cash.



ARTICLE 25 - RECOVERY OF PETROLEUM COSTS



25.1 All Export Crude Oil produced and saved from the Contract Area shall, after deduction of any quantities of Export Crude Oil due for Royalty pursuant to Article 24, be considered as "Available Crude Oil".



All Associated Natural Gas produced and saved from the Contract Area, except for Associated Natural Gas which is used in Petroleum Operations, re-injected in a Petroleum Field, lost, flared or cannot be used or sold, shall be considered as "Available Associated Natural Gas".



All Export Non-Associated Natural Gas produced and saved from the Contract Area shall, after deduction of any quantities of Export Non-Associated Natural Gas due for Royalty pursuant to Article 24, be considered as "Available Non-Associated Natural Gas".


"Available Petroleum" means Available Crude Oil, Available Associated Natural Gas and Available Non-Associated Natural Gas.



25.2 For the purpose of this Article 25:



(a) any Available Crude Oil shall be valued at the International Market Price

obtained at the Delivery Point, as defined in Article 27.2; and



62/122part of the Royalty received in kind, each CONTRACTOR Entity shall assist the GOVERNMENT in selling all or part of such Royalty received in kind (belonging to the GOVERNMENT) in consideration of a commission per Barrel payable to such CONTRACTOR Entity, 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 International 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 price obtained at the Delivery Point under an approved contract, as provided in Article 27.3;



(c) the CONTRACTOR shall pay such Royalty each Quarter, in arrears, within thirty (30) days of the end of each Quarter, and shall calculate the payment due for the relevant Quarter by reference to the price for the Export Petroleum at the Delivery Point, determined in accordance with paragraphs (a) and (b) above, and the Royalty due on the Export Petroleum, determined in accordance with Article 24.4, for the said Quarter; and



(d) the CONTRACTOR Entities shall be entitled to export freely the volume of

Export Petroleum corresponding to the Royalty determined in accordance with Article 24.4 for the purpose of paying the Royalty in cash.



ARTICLE 25 - RECOVERY OF PETROLEUM COSTS



25.1 All Export Crude Oil produced and saved from the Contract Area shall, after deduction of any quantities of Export Crude Oil due for Royalty pursuant to Article 24, be considered as "Available Crude Oil".



All Associated Natural Gas produced and saved from the Contract Area, except for Associated Natural Gas which is used in Petroleum Operations, re-injected in a Petroleum Field, lost, flared or cannot be used or sold, shall be considered as "Available Associated Natural Gas".



All Export Non-Associated Natural Gas produced and saved from the Contract Area shall, after deduction of any quantities of Export Non-Associated Natural Gas due for Royalty pursuant to Article 24, be considered as "Available Non-Associated Natural Gas".


"Available Petroleum" means Available Crude Oil, Available Associated Natural Gas and Available Non-Associated Natural Gas.



25.2 For the purpose of this Article 25:



(a) any Available Crude Oil shall be valued at the International Market Price

obtained at the Delivery Point, as defined in Article 27.2; and



62/122part of the Royalty received in kind, each CONTRACTOR Entity shall assist the GOVERNMENT in selling all or part of such Royalty received in kind (belonging to the GOVERNMENT) in consideration of a commission per Barrel payable to such CONTRACTOR Entity, 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 International 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 price obtained at the Delivery Point under an approved contract, as provided in Article 27.3;



(c) the CONTRACTOR shall pay such Royalty each Quarter, in arrears, within thirty (30) days of the end of each Quarter, and shall calculate the payment due for the relevant Quarter by reference to the price for the Export Petroleum at the Delivery Point, determined in accordance with paragraphs (a) and (b) above, and the Royalty due on the Export Petroleum, determined in accordance with Article 24.4, for the said Quarter; and



(d) the CONTRACTOR Entities shall be entitled to export freely the volume of

Export Petroleum corresponding to the Royalty determined in accordance with Article 24.4 for the purpose of paying the Royalty in cash.



ARTICLE 25 - RECOVERY OF PETROLEUM COSTS



25.1 All Export Crude Oil produced and saved from the Contract Area shall, after deduction of any quantities of Export Crude Oil due for Royalty pursuant to Article 24, be considered as "Available Crude Oil".



All Associated Natural Gas produced and saved from the Contract Area, except for Associated Natural Gas which is used in Petroleum Operations, re-injected in a Petroleum Field, lost, flared or cannot be used or sold, shall be considered as "Available Associated Natural Gas".



All Export Non-Associated Natural Gas produced and saved from the Contract Area shall, after deduction of any quantities of Export Non-Associated Natural Gas due for Royalty pursuant to Article 24, be considered as "Available Non-Associated Natural Gas".


"Available Petroleum" means Available Crude Oil, Available Associated Natural Gas and Available Non-Associated Natural Gas.



25.2 For the purpose of this Article 25:



(a) any Available Crude Oil shall be valued at the International Market Price

obtained at the Delivery Point, as defined in Article 27.2; and



62/122For 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 Semester, 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 Area.


"Cumulative Costs" means all Petroleum Costs in the Contract Area, actually incurred by the CONTRACTOR until the end of the relevant Semester, determined in accordance with Article 26.7



Notwithstanding the foregoing provisions of this Article 26.4, for the period from First Production until the end of the Calendar Year in which First Production occurs, the "R" Factor shall he deemed to be less than one (1.)



26.5 The share of Profit Petroleum to which the CONTRACTOR shall be entitled from First Production is:



(a) for Profit Crude Oil, cqual to the quantities of Petroleum resulting from the application of the relevant percentage as indicated below to the daily volume of production of Profit Crude Oil within the Contract Area at the

corresponding Delivery Point:


"R" Factor CONTRACTOR's %, Share of Profit Crude Oil



R < or = 1 30%



1 <R< or = 2 30%-((30%-15%)x(R-1)



R > 2 15%



(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 Contract Area

at the corresponding Delivery Point:



*R" Factor CONTRACTOR's % Share of Profit Natural Gas



R < or = 1 40%



1 <R< or = 2 40%-((40%-20%)x(R-1.0000))



R >2 20%



26.6 The CONTRACTOR's accounting shall account separately for all components for the calculation of "X"and "Y" values in the formula provided in Article 26.4.



65/12226.7 For each Semester, starting from the 1st of January of the Calendar Year following the Calendar Year in which First Production occurs, the CONTRACTOR shall calculate the "R" Factor applicable to the relevant Semester within thirty (30) days of the beginning of such Semester. The "R" Factor to be applied during a Semester shall be that determined by applying the Cumulative Revenues actually received and the Cumulative Costs actually incurred up to and including the last day of the preceding Semester.



If the CONTRACTOR is unable to calculate the "R" Factor for the relevant Semester before an allocation of Profit Petroleum for such Semester must be made, then the allocation of Profit Petroleum for the previous Semester shall be used for the relevant Semester. Upon the calculation of the "R" Factor for the relevant Semester:



(a) if the allocation of Profit Petroleum in the previous Semester and the relevant

Semester is the same, then no adjustment shall be made; and



(b) if the allocation of the Profit Petroleum in the two Semesters is different, then the CONTRACTOR shall make any adjustments to the Parties' respective shares of Profit Petroleum to restore them to the position that they would have been in had the "R" Factor for the relevant Semester been available from the start of such Semester.



26.8 If at any time an error occurs in the calculation of the "R" Factor, resulting in a change in the CONTRACTOR's percentage share of Profit Crude Oil and/or Profit Natural Gas, the necessary correction shall be made and any adjustments shall apply from the Semester in which the error occurred. The Party having benefited from a surplus of Profit Petroleum shall surrender such surplus to the other Party, beginning from the first day of the Semester following the Semester in which the error was recognised. However, each lifting of Petroleum relating to such error by the Party receiving the surplus shall not exceed twenty-five per cent (25%) of the share of Profit Petroleum to which such surrendering Party is entitled. For the avoidance of doubt, if at any time an error occurs in the calculation of the "R" Factor, which does not result in a change in the CONTRACTOR's percentage share of Profit Crude Oil and/or Profit Natural Gas, no correction shall be made.



26.9 The quantities of Profit Petroleum due to the CONTRACTOR shall be delivered to the CONTRACTOR Entities at the Delivery Point. Title and risk of loss of such Profit Petroleum shall be transferred to the CONTRACTOR Entities at the Delivery Point.



Each CONTRACTOR Entity shall be entitled to receive, take in kind and to export freely its share of Profit Petroleum in accordance with the provisions of this Contract and to retain Abroad any proceeds from the sale of all such Profit Petroleum.



26.10 The share of the Profit Petroleum to which the GOVERNMENT is entitled in any Calendar Year in accordance with Article 26.5 shall be deemed to include a portion representing the corporate income tax imposed upon and due by each CONTRACTOR Entity, and which will be paid directly by the GOVERNMENT on behalf of each such entity representing the CONTRACTOR to the appropriate tax authorities in accordance with Article 31.2. The GOVERNMENT shall provide the



66/122CONTRACTOR Entities with all written documentation and evidence reasonably required by the CONTRACTOR Entities to confirm that such corporate income tax has been paid by the GOVERNMENT.



26.11 The quantities of Profit Petroleum due to the GOVERNMENT 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 least twenty-one (21) days prior to CONTRACTOR's estimated date of First Production and, subsequently, thirty (30) days prior to the beginning of each Semester, the CONTRACTOR shall prepare and deliver to the GOVERNMENT a production program comprising the production forecast for the next Semester and the forecast of the quantities of Crude Oil and Natural Gas to which each Party shall be entitled during the said Semester.



26.13 Within ninety (90) days following the end of each Calendar Year, the CONTRACTOR shall prepare and deliver an annual production report to the GOVERNMENT, stating the quantities of Crude Oil and Natural Gas to which each Party is entitled, 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.



26.14 Any costs or expenditure incurred by the CONTRACTOR, its Subcontractors of suppliers relating to the lifting of the GOVERNMENT's share of Petroleum by the CONTRACTOR shall not be considered Petroleum Costs and shall be charged to the GOVERNMENT according to terms to be mutually agreed between the CONTRACTOR and the GOVERNMENT.



ARTICLE 27-VALUATION AND METERING OF CRUDE OIL AND NATURAL GAS



Valuation



27.1 For 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 Price, as defined in Article 27.2.



27.2 The "International Market Price" referred to in Article 27.1 shall be the weighted average price per Barrel, expressed in Dollars, obtained by the CONTRACTOR at the Delivery Point, by netback if necessary, during the Quarter ending on the date of valuation for Arm's Length Sales of Crude Oil.



The CONTRACTOR shall provide evidence to the GOVERNMENT that the sales of Crude Oil referred to in Article 27.2 are Arm's Length Sales. If the GOVERNMENT considers that any such sale of Crude Oil is not on the basis of an Arm's Length Sale then the GOVERNMENT has the right to refer the matter to an expert pursuant to Article 42.2



67/122In the event that there is no lifting of Crude Oil in the relevant Quarter or no Arm's Length Sales of Crude Oil of the same or similar gravity and quality from other production areas sold in markets competing with Crude Oil produced from the Contract Area, taking into account gravity and quality differences and transportation and other post Delivery Point costs.



To determine such price, the Parties shall, prior to the commencement of Production, agree on a basket of Crude Oil comparable to those produced in the Contract Area and sold in the international market. Prices obtained shall be adjusted to account for any product yield, seasonal variations in price and demand, general market trends and other terms of sale.



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 markets to be supplied as well as costs of production, transportation and distribution of Natural Gas from the Delivery Point to the relevant market, in accordance with standard international petroleum industry practice). The GOVERNMENT shall have the right review and approve Natural Gas sales contracts.



Accounting Statement



27.4 In accordance with this Article 27.4, the GOVERNMENT and the CONTRACTOR shall establish a statement showing calculations of the value of Petroleum produced and sold from the Contract Area. Such statement shall include following information:



(a) quantities of Crude Oil sold by the CONTRACTOR Entities during the preceding Month constituting Arm's Length Sales together with corresponding sale prices;



(b) quantities of Crude Oil sold by the CONTRACTOR Entities during the preceding Month do not fill in the category referred to in paragraph (a) above, together with sale prices applied during such Month;



(c) inventory in storage belonging to the CONTRACTOR Entities at the beginning and at the end of the Month; and



(d) quantities of Natural Gas sold by the CONTRACTOR Entities and the GOVERNMENT together with sale prices realised.



Metering



27.5 All Export Petroleum shall be metered at the Delivery Point in accordance with prudent international petroleum industry practice and such meters shall be fiscal meter standards. All metering equipment shall be installed and operated by the CONTRACTOR the GOVERNMENT shall, on receipt by the CONTRACTOR of reasonable prior written notice, have the right to inspect any such metering equipment installed by the CONTRACTOR, as well as all relevant documents and


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In the event that there is no lifting of Crude Oil in the relevant Quarter or no Arm's Length Sales of Crude Oil of the same or similar gravity and quality from other production areas sold in markets competing with Crude Oil produced from the Contract Area, taking into account gravity and quality differences and transportation and other post Delivery Point costs.



To determine such price, the Parties shall, prior to the commencement of Production, agree on a basket of Crude Oil comparable to those produced in the Contract Area and sold in the international market. Prices obtained shall be adjusted to account for any product yield, seasonal variations in price and demand, general market trends and other terms of sale.



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 markets to be supplied as well as costs of production, transportation and distribution of Natural Gas from the Delivery Point to the relevant market, in accordance with standard international petroleum industry practice). The GOVERNMENT shall have the right review and approve Natural Gas sales contracts.



Accounting Statement



27.4 In accordance with this Article 27.4, the GOVERNMENT and the CONTRACTOR shall establish a statement showing calculations of the value of Petroleum produced and sold from the Contract Area. Such statement shall include following information:



(a) quantities of Crude Oil sold by the CONTRACTOR Entities during the preceding Month constituting Arm's Length Sales together with corresponding sale prices;



(b) quantities of Crude Oil sold by the CONTRACTOR Entities during the preceding Month do not fill in the category referred to in paragraph (a) above, together with sale prices applied during such Month;



(c) inventory in storage belonging to the CONTRACTOR Entities at the beginning and at the end of the Month; and



(d) quantities of Natural Gas sold by the CONTRACTOR Entities and the GOVERNMENT together with sale prices realised.



Metering



27.5 All Export Petroleum shall be metered at the Delivery Point in accordance with prudent international petroleum industry practice and such meters shall be fiscal meter standards. All metering equipment shall be installed and operated by the CONTRACTOR the GOVERNMENT shall, on receipt by the CONTRACTOR of reasonable prior written notice, have the right to inspect any such metering equipment installed by the CONTRACTOR, as well as all relevant documents and


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(a) any Royalty in cash due to the GOVERNMENT pursuant to the provisions of Article 24; and/or



(b) any proceeds from the sales undertaken by the CONTRACTOR Entity on behalf of the GOVERNMENT pursuant to Article 28 of any Crude Oil to which the GOVERNMENT is entitled pursuant to Article 25; and/or



(c) any Production Bonus,



to a fund for revenue sharing, which may in due course be established by legislation consistent with the Constitution of Iraq, between the Government of Iraq and other regions (including the Kurdistan Region) and governorates of Iraq. Nothing in this Article 29.2 shall be understood as implying any contractual relationship or other relationship between the CONTRACTOR and/or any CONTRACTOR Entity and the Government of Iraq and/or the regions of Iraq (other than the Kurdistan Region) and/or and governorates of Iraq.



29.3 Any payment due by the GOVERNMENT to a CONTRACTOR Entity shall be offset against future payments due by such CONTRACTOR Entity to the GOVERNMENT, or paid in Dollars to the bank account designated by the CONTRACTOR Entity in writing and shall be paid within thirty (30) days of the date of invoice, after which interest compounded monthly at the rate of LIBOR plus two (2) percentage points shall be applied.



29.4 Any currency conversion to be made under this Contract shall be at the exchange rate of the Central Bank of Iraq, provided such exchange rate applied to the CONTRACTOR Entities shall not be less favourable than the rate offered by other private, commercial or industrial banks in the international market. 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 rate of a reputable commercial bank carrying on business in the international market and approved by the Parties.



29.5 The CONTRACTOR shall not realise any gain or loss due to exchange rate fluctuations and, consequently, any gain or loss due to exchange of currency shall be either considered as revenue and credited to the Accounts or shall be considered as a Petroleum Cost and shall be recovered by the CONTRACTOR in accordance with Articles 1 and 25, as the case may be.



29.6 Each CONTRACTOR Entity 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 29.4.



29.7 Each CONTRACTOR Entity shall have the right to be paid, receive, keep, transfer and use Abroad, without any restrictions, all proceeds of its share of Petroleum.



29.8 Each CONTRACTOR Entity 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.

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(a) any Royalty in cash due to the GOVERNMENT pursuant to the provisions of Article 24; and/or



(b) any proceeds from the sales undertaken by the CONTRACTOR Entity on behalf of the GOVERNMENT pursuant to Article 28 of any Crude Oil to which the GOVERNMENT is entitled pursuant to Article 25; and/or



(c) any Production Bonus,



to a fund for revenue sharing, which may in due course be established by legislation consistent with the Constitution of Iraq, between the Government of Iraq and other regions (including the Kurdistan Region) and governorates of Iraq. Nothing in this Article 29.2 shall be understood as implying any contractual relationship or other relationship between the CONTRACTOR and/or any CONTRACTOR Entity and the Government of Iraq and/or the regions of Iraq (other than the Kurdistan Region) and/or and governorates of Iraq.



29.3 Any payment due by the GOVERNMENT to a CONTRACTOR Entity shall be offset against future payments due by such CONTRACTOR Entity to the GOVERNMENT, or paid in Dollars to the bank account designated by the CONTRACTOR Entity in writing and shall be paid within thirty (30) days of the date of invoice, after which interest compounded monthly at the rate of LIBOR plus two (2) percentage points shall be applied.



29.4 Any currency conversion to be made under this Contract shall be at the exchange rate of the Central Bank of Iraq, provided such exchange rate applied to the CONTRACTOR Entities shall not be less favourable than the rate offered by other private, commercial or industrial banks in the international market. 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 rate of a reputable commercial bank carrying on business in the international market and approved by the Parties.



29.5 The CONTRACTOR shall not realise any gain or loss due to exchange rate fluctuations and, consequently, any gain or loss due to exchange of currency shall be either considered as revenue and credited to the Accounts or shall be considered as a Petroleum Cost and shall be recovered by the CONTRACTOR in accordance with Articles 1 and 25, as the case may be.



29.6 Each CONTRACTOR Entity 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 29.4.



29.7 Each CONTRACTOR Entity shall have the right to be paid, receive, keep, transfer and use Abroad, without any restrictions, all proceeds of its share of Petroleum.



29.8 Each CONTRACTOR Entity 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.

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belonging and furniture of expatriate personnel shall comply with Kurdistan Region Law



30.3 Each CONTRACTOR Entity and its Affiliates shall be entitled to freely from the Kurdistan Region and other parts of Iraq, free of any Taxes, any Petroleum to which it is entitled pursuant to the provisions of this Contract.



30.4 The GOVERNMENT shall indemnify the CONTRACTOR, any CONTRACTOR Entity, its Affiliates, any Subcontractor or any agent of any of the foregoing, and their personnel (including their family members) for any import or export Taxes referred to in Article 30.1, 30.2 or 30.3



ARTICLE 31 - TAX PROVISIONS



31.1 Except as expressly provided in this Article 31, and without prejudice to the exemptions expressly provided for in Article 30 and in this Article 31, each CONTRACTOR Entity, its Affiliates and any Subcontractor shall, for the entire duration of this Contract, be exempt from all Taxes as a result of its income, assets and activities under the Contract. The GOVERNMENT shall indemnify each CONTRACTOR Entity upon demand against any liability to pay any Taxes assessed or imposed upon such entity which relate to any of the exemptions granted by the GOVERNMENT under this Article 31.1, and under Articles 31.4 to 31.11.



31.2 Each CONTRACTOR Entity shall be subject to corporate income tax on its income from Petroleum Operations as provided in Article 31.3, which shall be deemed to be inclusive and in full and total discharge of any Tax of income, receipts, revenues, gains or profits of each such entity. Payment of the said corporate Income Tax shall be made for the entire duration of this Contract directly to the official Kurdistan Region tax authorities by the GOVERNMENT, for the account of each CONTRACTOR Entity, from the GOVERNMENT's share if the Profit Petroleum received pursuant to Article 26.



Each CONTRACTOR entity shall, within sixty(60) days after the end of each tax year, provide a statement to the appropriate Kurdistan Region tax authorities of its profits which are subject to corporate income tax, together with a calculation of the amount of corporate income tax due on those profits.



The GOVERNMENT shall, within ninety (90) days after the end of each tax year, provide to each CONTRACTOR Entity (i) the appropriate official tax receipts from the appropriate Kurdistan Region tax authorities or other relevant authority certifying the payment of its corporate income tax, as determined in the said statement, and that such entity has met all its Tax Obligations in the preceding tax year, and (ii) a copy of any return or other filling made by the GOVERNMENT in respect of its payment of corporate income tax on behalf of such CONTRACTOR Entity.



31.3 For the purpose of Article 31.2:

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(a) The rate of corporate income tax to be applied to each CONTRACTOR Entity shall be the generally applicable rate prescribed in the Law of Taxation (Law No. 5 of 1999), passed by the National Assembly of the Kurdistan Region, as amended by Law No. 27 of 2007 and as may be amended from time to time or substituted in respect of Petroleum Operations (as defined under the Kurdistan Region Oil and Gas Law) by a petroleum operations taxation law for the Kurdistan Region, but in no event in excess of fifteen per cent (15%). The Parties acknowledge and agree that at the Effective Date of this Contract, the corporate income tax rate if fifteen per cent (15%) for all net taxable profits.



(b) The GOVERNMENT and the CONTRACTOR agree that corporate income tax shall be calculated for each CONTRACTOR Entity on its net taxable profits under the Contract, as calculated in accordance with the provisions relating thereto in the Accounting Procedure.



31.4

Each CONTRACTOR Entity, its Affiliates as well as any Subcontractors 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 the Kurdistan Region and/or Iraq, for the entire duration of this Contract.



31.5

Each CONTRACTOR Entity and its Affiliates shall be exempt from Additional Profits Tax, as referred to in Article 40 of the Kurdistan Region Oil and Gas Law or any successor Tax.



31.6

Each CONTRACTOR Entity and its Affiliates shall be exempt from Surface Tax, as referred to in Article 40 of the Kurdistan Region Oil and Gas Law or any successor Tax.



31.7

Each CONTRACTOR Entity and its Affiliates shall be exempt from Windfall Profits Taxes, as referred to in Article 40 of the Kurdistan Region Oil and Gas Law or any successor Tax.



31.8

Each CONTRACTOR Entity and any Subcontractor shall be subject to the payment or withholding of the personal income tax and social security contributions for which such entity or Subcontractor is liable to pay or withhold in respect of its employees who are Iraqi nationals, pursuant to the Law of Taxation (Law No. 5 of 1999) passed by the National Assembly of the Kurdistan Region, as may be amended from time to time, in the same manner as the same shall be generally applied to all other industries, except that a CONTRACTOR Entity or Subcontractor shall not be liable for such taxes or contributions with respect to employees of another Person.



31.9

It is acknowledged that double tax treaties will have effect to give relief from taxes to, but not limited to, the CONTRACTOR, CONTRACTOR Entities, Subcontractors and employees and other Persons in accordance with the provisions of such double tax treaties, but shall not impose an additional burden of taxation.



31.10

Any value added tax ("VAT") shall be considered as a Petroleum Cost and shall be cost recovered in accordance with the provisions of Articles 1 and 25.


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31.11 Any value added tax ("VAT"), not otherwise recoverable by the CONTRACTOR under VAT law, shall be considered as a Petroleum Cost and shall be cost recovered in accordance with the provisions of Articles 1 and 25.



31.12 Notwithstanding any other provision to the contrary in the Contract, the Parties acknowledge and agree that the provisions of this Article 31 shall apply individually and separately to all CONTRACTOR Entities under this Contract and that there shall be no joint and several liability in respect of any liability, duty or obligation referred to in this Article 31.



ARTICLE 32 - BONUSES



Signature Bonus



32.1 No signature bonus shall be payable by the CONTRACTOR Entities to the GOVERNMENT in relation to this Contract.



Capacity Building Bonus



32.2 A capacity building bonus of

(a) one million and five hundred thousand Dollars (US$1,500,000) for the account of Oil Search (Iraq) Limited; and



(b) five hundred thousand Dollars (US$500,000) for the account of Hawler Energy Ltd;



such payments totalling two million Dollars (US$2,000,000) (the "Capacity Building Bonus") shall be payable to the GOVERNMENT by the respective CONTRACTOR Entity within sixty (60) days of the Effective Date, Notwithstanding anything to the contrary set out herein, the CONTRACTOR Entities shall not be jointly liable to the GOVERNMENT for their respective shares of the Capacity Building Bonus apportioned to them as set out at this Article 32.2 only.



Production Bonuses



32.3 In the event of a Crude Oil Commercial Discovery, the CONTRACTOR and the holder of the Government Interest shall pay, pro tata the relevant percentage participation interest in the Contract, the following relevant Crude Oil Production Bonus to the GOVERNMENT within thirty (30) days of the following relevant occurrence:



(a) two million five hundred thousand Dollars (US $2,500,000) when First Production of Crude Oil from the Contract Area commences;


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31.11 Any value added tax ("VAT"), not otherwise recoverable by the CONTRACTOR under VAT law, shall be considered as a Petroleum Cost and shall be cost recovered in accordance with the provisions of Articles 1 and 25.



31.12 Notwithstanding any other provision to the contrary in the Contract, the Parties acknowledge and agree that the provisions of this Article 31 shall apply individually and separately to all CONTRACTOR Entities under this Contract and that there shall be no joint and several liability in respect of any liability, duty or obligation referred to in this Article 31.



ARTICLE 32 - BONUSES



Signature Bonus



32.1 No signature bonus shall be payable by the CONTRACTOR Entities to the GOVERNMENT in relation to this Contract.



Capacity Building Bonus



32.2 A capacity building bonus of

(a) one million and five hundred thousand Dollars (US$1,500,000) for the account of Oil Search (Iraq) Limited; and



(b) five hundred thousand Dollars (US$500,000) for the account of Hawler Energy Ltd;



such payments totalling two million Dollars (US$2,000,000) (the "Capacity Building Bonus") shall be payable to the GOVERNMENT by the respective CONTRACTOR Entity within sixty (60) days of the Effective Date, Notwithstanding anything to the contrary set out herein, the CONTRACTOR Entities shall not be jointly liable to the GOVERNMENT for their respective shares of the Capacity Building Bonus apportioned to them as set out at this Article 32.2 only.



Production Bonuses



32.3 In the event of a Crude Oil Commercial Discovery, the CONTRACTOR and the holder of the Government Interest shall pay, pro tata the relevant percentage participation interest in the Contract, the following relevant Crude Oil Production Bonus to the GOVERNMENT within thirty (30) days of the following relevant occurrence:



(a) two million five hundred thousand Dollars (US $2,500,000) when First Production of Crude Oil from the Contract Area commences;


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31.11 Any value added tax ("VAT"), not otherwise recoverable by the CONTRACTOR under VAT law, shall be considered as a Petroleum Cost and shall be cost recovered in accordance with the provisions of Articles 1 and 25.



31.12 Notwithstanding any other provision to the contrary in the Contract, the Parties acknowledge and agree that the provisions of this Article 31 shall apply individually and separately to all CONTRACTOR Entities under this Contract and that there shall be no joint and several liability in respect of any liability, duty or obligation referred to in this Article 31.



ARTICLE 32 - BONUSES



Signature Bonus



32.1 No signature bonus shall be payable by the CONTRACTOR Entities to the GOVERNMENT in relation to this Contract.



Capacity Building Bonus



32.2 A capacity building bonus of

(a) one million and five hundred thousand Dollars (US$1,500,000) for the account of Oil Search (Iraq) Limited; and



(b) five hundred thousand Dollars (US$500,000) for the account of Hawler Energy Ltd;



such payments totalling two million Dollars (US$2,000,000) (the "Capacity Building Bonus") shall be payable to the GOVERNMENT by the respective CONTRACTOR Entity within sixty (60) days of the Effective Date, Notwithstanding anything to the contrary set out herein, the CONTRACTOR Entities shall not be jointly liable to the GOVERNMENT for their respective shares of the Capacity Building Bonus apportioned to them as set out at this Article 32.2 only.



Production Bonuses



32.3 In the event of a Crude Oil Commercial Discovery, the CONTRACTOR and the holder of the Government Interest shall pay, pro tata the relevant percentage participation interest in the Contract, the following relevant Crude Oil Production Bonus to the GOVERNMENT within thirty (30) days of the following relevant occurrence:



(a) two million five hundred thousand Dollars (US $2,500,000) when First Production of Crude Oil from the Contract Area commences;


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31.11 Any value added tax ("VAT"), not otherwise recoverable by the CONTRACTOR under VAT law, shall be considered as a Petroleum Cost and shall be cost recovered in accordance with the provisions of Articles 1 and 25.



31.12 Notwithstanding any other provision to the contrary in the Contract, the Parties acknowledge and agree that the provisions of this Article 31 shall apply individually and separately to all CONTRACTOR Entities under this Contract and that there shall be no joint and several liability in respect of any liability, duty or obligation referred to in this Article 31.



ARTICLE 32 - BONUSES



Signature Bonus



32.1 No signature bonus shall be payable by the CONTRACTOR Entities to the GOVERNMENT in relation to this Contract.



Capacity Building Bonus



32.2 A capacity building bonus of

(a) one million and five hundred thousand Dollars (US$1,500,000) for the account of Oil Search (Iraq) Limited; and



(b) five hundred thousand Dollars (US$500,000) for the account of Hawler Energy Ltd;



such payments totalling two million Dollars (US$2,000,000) (the "Capacity Building Bonus") shall be payable to the GOVERNMENT by the respective CONTRACTOR Entity within sixty (60) days of the Effective Date, Notwithstanding anything to the contrary set out herein, the CONTRACTOR Entities shall not be jointly liable to the GOVERNMENT for their respective shares of the Capacity Building Bonus apportioned to them as set out at this Article 32.2 only.



Production Bonuses



32.3 In the event of a Crude Oil Commercial Discovery, the CONTRACTOR and the holder of the Government Interest shall pay, pro tata the relevant percentage participation interest in the Contract, the following relevant Crude Oil Production Bonus to the GOVERNMENT within thirty (30) days of the following relevant occurrence:



(a) two million five hundred thousand Dollars (US $2,500,000) when First Production of Crude Oil from the Contract Area commences;


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31.11 Any value added tax ("VAT"), not otherwise recoverable by the CONTRACTOR under VAT law, shall be considered as a Petroleum Cost and shall be cost recovered in accordance with the provisions of Articles 1 and 25.



31.12 Notwithstanding any other provision to the contrary in the Contract, the Parties acknowledge and agree that the provisions of this Article 31 shall apply individually and separately to all CONTRACTOR Entities under this Contract and that there shall be no joint and several liability in respect of any liability, duty or obligation referred to in this Article 31.



ARTICLE 32 - BONUSES



Signature Bonus



32.1 No signature bonus shall be payable by the CONTRACTOR Entities to the GOVERNMENT in relation to this Contract.



Capacity Building Bonus



32.2 A capacity building bonus of

(a) one million and five hundred thousand Dollars (US$1,500,000) for the account of Oil Search (Iraq) Limited; and



(b) five hundred thousand Dollars (US$500,000) for the account of Hawler Energy Ltd;



such payments totalling two million Dollars (US$2,000,000) (the "Capacity Building Bonus") shall be payable to the GOVERNMENT by the respective CONTRACTOR Entity within sixty (60) days of the Effective Date, Notwithstanding anything to the contrary set out herein, the CONTRACTOR Entities shall not be jointly liable to the GOVERNMENT for their respective shares of the Capacity Building Bonus apportioned to them as set out at this Article 32.2 only.



Production Bonuses



32.3 In the event of a Crude Oil Commercial Discovery, the CONTRACTOR and the holder of the Government Interest shall pay, pro tata the relevant percentage participation interest in the Contract, the following relevant Crude Oil Production Bonus to the GOVERNMENT within thirty (30) days of the following relevant occurrence:



(a) two million five hundred thousand Dollars (US $2,500,000) when First Production of Crude Oil from the Contract Area commences;


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35.3

The CONTRACTOR shall indemnify and hold harmless the GOVERNMENT against all losses, damages and liability arising under any claim, demand, action or proceeding brought or instituted against the GOVERNMENT by any employee of the CONTRACTOR or of any Subcontractor or by any dependent thereof, 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.



35.4

Notwithstanding Article 35.1, the GOVERNMENT shall indemnify and hold harmless the CONTRACTOR and the CONTRACTOR Entities against all losses, damages and liability arising under any claim, demand, action or proceeding brought or instituted against the CONTRACTOR or any CONTRACTOR Entity 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 part 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 are causing or likely to cause material environmental damage or material risk to health and safety. Such notice shall include a summary description of the circumstances and steps taken and planned by the CONTRACTOR to control and remedy the situation. The CONTRACTOR shall provide such additional reports to the GOVERNMENT as are reasonably necessary in respect of the effects of such events and the course of all actions taken to prevent further loss and to mitigate deleterious effects.



35.6

In the event of emergency situations as set out in Article 35.4, at the request of the CONTRACTOR, the GOVERNMENT, without prejudice and in addition to any indemnification obligations the GOVERNMENT may have, shall assist 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 are not otherwise readily available to the CONTRACTOR and by facilitating the measure taken by the CONTRACTOR to bring into the Kurdistan Region personnel, materials and equipment to be used in any such emergency response or remedial or repair effort. the CONTRACTOR shall reimburse the GOVERNMENT's reasonable and necessary costs incurred in such efforts, which reimbursed amounts shall be considered Petroleum Costs and shall be recovered by the CONTRACTOR in accordance with the provisions of Articles 1 and 25.



35.7

The GOVERNMENT shall indemnify and hold harmless the CONTRACTOR and each CONTRACTOR Entity from and against all costs (including legal costs) expenses, losses, damages and liability which such Person may suffer or incur, or may result from such person being denied, hindered or prevented from fully exercising its rights or taking the full benefit of Articles 29.4, and 29.6 to 29.11.

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35.3

The CONTRACTOR shall indemnify and hold harmless the GOVERNMENT against all losses, damages and liability arising under any claim, demand, action or proceeding brought or instituted against the GOVERNMENT by any employee of the CONTRACTOR or of any Subcontractor or by any dependent thereof, 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.



35.4

Notwithstanding Article 35.1, the GOVERNMENT shall indemnify and hold harmless the CONTRACTOR and the CONTRACTOR Entities against all losses, damages and liability arising under any claim, demand, action or proceeding brought or instituted against the CONTRACTOR or any CONTRACTOR Entity 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 part 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 are causing or likely to cause material environmental damage or material risk to health and safety. Such notice shall include a summary description of the circumstances and steps taken and planned by the CONTRACTOR to control and remedy the situation. The CONTRACTOR shall provide such additional reports to the GOVERNMENT as are reasonably necessary in respect of the effects of such events and the course of all actions taken to prevent further loss and to mitigate deleterious effects.



35.6

In the event of emergency situations as set out in Article 35.4, at the request of the CONTRACTOR, the GOVERNMENT, without prejudice and in addition to any indemnification obligations the GOVERNMENT may have, shall assist 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 are not otherwise readily available to the CONTRACTOR and by facilitating the measure taken by the CONTRACTOR to bring into the Kurdistan Region personnel, materials and equipment to be used in any such emergency response or remedial or repair effort. the CONTRACTOR shall reimburse the GOVERNMENT's reasonable and necessary costs incurred in such efforts, which reimbursed amounts shall be considered Petroleum Costs and shall be recovered by the CONTRACTOR in accordance with the provisions of Articles 1 and 25.



35.7

The GOVERNMENT shall indemnify and hold harmless the CONTRACTOR and each CONTRACTOR Entity from and against all costs (including legal costs) expenses, losses, damages and liability which such Person may suffer or incur, or may result from such person being denied, hindered or prevented from fully exercising its rights or taking the full benefit of Articles 29.4, and 29.6 to 29.11.

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GOVERNMENT with such information and data as it is obliged to provide under this Contract.



36.2 Upon the GOVERNMENT's written request, the CONTRACTOR shall provide the GOVERNMENT with samples of any rocks or any other items extracted during the Petroleum Operations.



36.3 The GOVERNMENT shall have title to all data and information, whether raw, derived, processed, interpreted or analysed, obtained pursuant to this Contract.



36.4 Each CONTRACTOR Entity shall have the right, without any limitation, to send Abroad copies of all reports and technical data, magnetic tapes and other data relating to the Petroleum Operations. Magnetic tapes or other date, the original of which must be analysed and processed Abroad, may be transported out of the Kurdistan Region.



36.5 Any representatives authorised by the GOVERNMENT and notified to the CONTRACTOR shall, upon reasonable prior written notice, have reasonable access to any information and data relating to the Contract Area in the possession of the CONTRACTOR which the CONTRACTOR is obliged to roved to the GOVERNMENT pursuant to this Contract. It is understood that, when exercising such right, the GOVERNMENT shall ensure it does not unduly interfere with or hinder the CONTRACTOR's rights and activities.



36.6 The CONTRACTOR shall provide the GOVERNMENT upon the GOVERNMENT's written request any analysis information, reports, tapes or other data (geological, geophysical, logs, interpretations, drilling reports, etc.) related to the Petroleum Operations in the possession of the CONTRACTOR. All available originals of such data shall be transferred to the GOVERNMENT at the end of this Contract.



36.7 Apart from the exceptions stated in this Article 36, the Parties undertake to keep all data and information relating to this Contract and the Petroleum Operations confidential during the entire term of this Contract and not to divulge or disclose such data or information to third parties without the specific consent of the other Parties, 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 or no fault of any Party, becomes the part of the public domain;



(b) is known to the recipient at the date of the disclosure;



(c) is required to be furnished in compliance with any applicable Law, by a government agency having jurisdiction over a CONTRACTOR Entity, by a court order or any other legal proceedings; or



(d) is required to be disclosed pursuant to the rules or regulations of any government or recognised stock exchange having jurisdiction over a CONTRACTOR Entity.

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GOVERNMENT with such information and data as it is obliged to provide under this Contract.



36.2 Upon the GOVERNMENT's written request, the CONTRACTOR shall provide the GOVERNMENT with samples of any rocks or any other items extracted during the Petroleum Operations.



36.3 The GOVERNMENT shall have title to all data and information, whether raw, derived, processed, interpreted or analysed, obtained pursuant to this Contract.



36.4 Each CONTRACTOR Entity shall have the right, without any limitation, to send Abroad copies of all reports and technical data, magnetic tapes and other data relating to the Petroleum Operations. Magnetic tapes or other date, the original of which must be analysed and processed Abroad, may be transported out of the Kurdistan Region.



36.5 Any representatives authorised by the GOVERNMENT and notified to the CONTRACTOR shall, upon reasonable prior written notice, have reasonable access to any information and data relating to the Contract Area in the possession of the CONTRACTOR which the CONTRACTOR is obliged to roved to the GOVERNMENT pursuant to this Contract. It is understood that, when exercising such right, the GOVERNMENT shall ensure it does not unduly interfere with or hinder the CONTRACTOR's rights and activities.



36.6 The CONTRACTOR shall provide the GOVERNMENT upon the GOVERNMENT's written request any analysis information, reports, tapes or other data (geological, geophysical, logs, interpretations, drilling reports, etc.) related to the Petroleum Operations in the possession of the CONTRACTOR. All available originals of such data shall be transferred to the GOVERNMENT at the end of this Contract.



36.7 Apart from the exceptions stated in this Article 36, the Parties undertake to keep all data and information relating to this Contract and the Petroleum Operations confidential during the entire term of this Contract and not to divulge or disclose such data or information to third parties without the specific consent of the other Parties, 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 or no fault of any Party, becomes the part of the public domain;



(b) is known to the recipient at the date of the disclosure;



(c) is required to be furnished in compliance with any applicable Law, by a government agency having jurisdiction over a CONTRACTOR Entity, by a court order or any other legal proceedings; or



(d) is required to be disclosed pursuant to the rules or regulations of any government or recognised stock exchange having jurisdiction over a CONTRACTOR Entity.

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GOVERNMENT with such information and data as it is obliged to provide under this Contract.



36.2 Upon the GOVERNMENT's written request, the CONTRACTOR shall provide the GOVERNMENT with samples of any rocks or any other items extracted during the Petroleum Operations.



36.3 The GOVERNMENT shall have title to all data and information, whether raw, derived, processed, interpreted or analysed, obtained pursuant to this Contract.



36.4 Each CONTRACTOR Entity shall have the right, without any limitation, to send Abroad copies of all reports and technical data, magnetic tapes and other data relating to the Petroleum Operations. Magnetic tapes or other date, the original of which must be analysed and processed Abroad, may be transported out of the Kurdistan Region.



36.5 Any representatives authorised by the GOVERNMENT and notified to the CONTRACTOR shall, upon reasonable prior written notice, have reasonable access to any information and data relating to the Contract Area in the possession of the CONTRACTOR which the CONTRACTOR is obliged to roved to the GOVERNMENT pursuant to this Contract. It is understood that, when exercising such right, the GOVERNMENT shall ensure it does not unduly interfere with or hinder the CONTRACTOR's rights and activities.



36.6 The CONTRACTOR shall provide the GOVERNMENT upon the GOVERNMENT's written request any analysis information, reports, tapes or other data (geological, geophysical, logs, interpretations, drilling reports, etc.) related to the Petroleum Operations in the possession of the CONTRACTOR. All available originals of such data shall be transferred to the GOVERNMENT at the end of this Contract.



36.7 Apart from the exceptions stated in this Article 36, the Parties undertake to keep all data and information relating to this Contract and the Petroleum Operations confidential during the entire term of this Contract and not to divulge or disclose such data or information to third parties without the specific consent of the other Parties, 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 or no fault of any Party, becomes the part of the public domain;



(b) is known to the recipient at the date of the disclosure;



(c) is required to be furnished in compliance with any applicable Law, by a government agency having jurisdiction over a CONTRACTOR Entity, by a court order or any other legal proceedings; or



(d) is required to be disclosed pursuant to the rules or regulations of any government or recognised stock exchange having jurisdiction over a CONTRACTOR Entity.

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Expenditures

37.8 Any reasonable expenditure incurred by the CONTRACTOR in relation with this Article 37 shall be deemed Petroleum Costs and shall be recovered by the CONTRACTOR in accordance with the provisions of Articles 1 and 25.



Pre-existing Conditions



37.9 The CONTRACTOR is not responsible for any pre-existing environmental conditions of any acts of unrelated third parties.



ARTICLE 38 - DECOMMISSIONING



38.1 To enable the CONTRACTOR to recover the costs associated with future Contract Area Decommissioning Operations 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 Years of the term of the Production Operations of a Production Area 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 costs in accordance with prudent international petroleum industry practice, and taking into account interest received and future interest expected to be carried on the Decommissioning Reserve Fund. Any contributions by the CONTRACTOR to the Decommissioning Reserve Fund shall be made in Dollars and shall be deemed Petroleum Costs when paid into the reserve fund, and shall be recovered by the CONTRACTOR in accordance with the provisions of Articles 1 and 25. Contributions to the Decommissioning Reserve Fund shall be 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 Production Area, the GOVERNMENT decides to take over production operations in the Production Area:



(a) the GOVERNMENT shall become liable for its future Decommissioning

Operations;



(b) 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



(c) the GOVERNMENT shall release the CONTRACTOR and the CONTRACTOR Entities from any obligations relating to Decommissioning Operations and shall indemnify the CONTRACTOR and the CONTRACTOR Entities for any costs, liabilities, expenses, claims of obligations associated therewith.



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38.3 If the CONTRACTOR undertakes the Production Area Decommissioning Operations, the contributions and any interest accumulated in the Decommissioning Reserve Fund shall be paid to the CONTRACTOR and shall be used for the Decommissioning Operations. The CONTRACTOR shall undertake any such Decommissioning Operations in accordance with prudent international petroleum industry practice in similar physical and ecological environments.



38.4 If the Decommissioning Reserve Fund is paid to the CONTRACTOR and the Decommissioning Reserve Fund is not sufficient to cover all Decommissioning Costs for the Contract Area, the balance shall be paid by the CONTRACTOR and may be recovered, if applicable, by the CONTRACTOR Entities or any of their Affiliates from any other area which is the subject of another Petroleum Contract (as defined by the Kurdistan Region Oil and Gas Law) 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 to the CONTRACTOR.



38.5 If the Decommissioning Reserve Fund is paid to the CONTRACTOR and the Decommissioning Reserve Fund exceeds all Decommissioning Costs for the Contract Area, the balance shall be transferred to the GOVERNMENT.



38.6 Any expenditure incurred by the CONTRACTOR in relation with this Article 38, including 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 1 and 25.



38.7 The CONTRACTOR shall submit to the Management Committee for approval in accordance with Article 8.5 a detailed plan for decommissioning the Contract Area facilities and site restoration (the "Decommissioning Plan"), such Decommissioning Plan to be submitted no later than twenty four (24) Months prior to the date estimated by the CONTRACTOR for the end of Commercial Production from the Contract Area. The Management Committee shall provide comments, if any, on the Decommissioning Plan within ninety (90) days after receipt. The CONTRACTOR's completion of the Decommissioning Operations in accordance, in all material respects, with the Decommissioning Plan for a Production Area approved by the Management Committee shall satisfy all of the CONTRACTOR's obligations with respect to the performance of Decommissioning Operations for such Production Area. In the event the GOVERNMENT does not agree that Decommissioning Operations for a Production Area were carried out in accordance with the approved Decommissioning Plan, it must advise the CONTRACTOR within six (6) months of CONTRACTOR's completion of such operations.



ARTICLE 39-ASSIGNMENT AND CHANGE OF CONTROL



Assignment to Affiliates



39.1 Each CONTRACTOR Entity shall be free to sell, assign, transfer or otherwise dispose of all or part of its rights, obligations and interests under this Contract to an Affiliated Company or to another CONTRACTOR Entity with the prior consent of the GOVERNMENT, which consent shall not unreasonably delayed or withheld.

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38.3 If the CONTRACTOR undertakes the Production Area Decommissioning Operations, the contributions and any interest accumulated in the Decommissioning Reserve Fund shall be paid to the CONTRACTOR and shall be used for the Decommissioning Operations. The CONTRACTOR shall undertake any such Decommissioning Operations in accordance with prudent international petroleum industry practice in similar physical and ecological environments.



38.4 If the Decommissioning Reserve Fund is paid to the CONTRACTOR and the Decommissioning Reserve Fund is not sufficient to cover all Decommissioning Costs for the Contract Area, the balance shall be paid by the CONTRACTOR and may be recovered, if applicable, by the CONTRACTOR Entities or any of their Affiliates from any other area which is the subject of another Petroleum Contract (as defined by the Kurdistan Region Oil and Gas Law) 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 to the CONTRACTOR.



38.5 If the Decommissioning Reserve Fund is paid to the CONTRACTOR and the Decommissioning Reserve Fund exceeds all Decommissioning Costs for the Contract Area, the balance shall be transferred to the GOVERNMENT.



38.6 Any expenditure incurred by the CONTRACTOR in relation with this Article 38, including 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 1 and 25.



38.7 The CONTRACTOR shall submit to the Management Committee for approval in accordance with Article 8.5 a detailed plan for decommissioning the Contract Area facilities and site restoration (the "Decommissioning Plan"), such Decommissioning Plan to be submitted no later than twenty four (24) Months prior to the date estimated by the CONTRACTOR for the end of Commercial Production from the Contract Area. The Management Committee shall provide comments, if any, on the Decommissioning Plan within ninety (90) days after receipt. The CONTRACTOR's completion of the Decommissioning Operations in accordance, in all material respects, with the Decommissioning Plan for a Production Area approved by the Management Committee shall satisfy all of the CONTRACTOR's obligations with respect to the performance of Decommissioning Operations for such Production Area. In the event the GOVERNMENT does not agree that Decommissioning Operations for a Production Area were carried out in accordance with the approved Decommissioning Plan, it must advise the CONTRACTOR within six (6) months of CONTRACTOR's completion of such operations.



ARTICLE 39-ASSIGNMENT AND CHANGE OF CONTROL



Assignment to Affiliates



39.1 Each CONTRACTOR Entity shall be free to sell, assign, transfer or otherwise dispose of all or part of its rights, obligations and interests under this Contract to an Affiliated Company or to another CONTRACTOR Entity with the prior consent of the GOVERNMENT, which consent shall not unreasonably delayed or withheld.

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38.3 If the CONTRACTOR undertakes the Production Area Decommissioning Operations, the contributions and any interest accumulated in the Decommissioning Reserve Fund shall be paid to the CONTRACTOR and shall be used for the Decommissioning Operations. The CONTRACTOR shall undertake any such Decommissioning Operations in accordance with prudent international petroleum industry practice in similar physical and ecological environments.



38.4 If the Decommissioning Reserve Fund is paid to the CONTRACTOR and the Decommissioning Reserve Fund is not sufficient to cover all Decommissioning Costs for the Contract Area, the balance shall be paid by the CONTRACTOR and may be recovered, if applicable, by the CONTRACTOR Entities or any of their Affiliates from any other area which is the subject of another Petroleum Contract (as defined by the Kurdistan Region Oil and Gas Law) 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 to the CONTRACTOR.



38.5 If the Decommissioning Reserve Fund is paid to the CONTRACTOR and the Decommissioning Reserve Fund exceeds all Decommissioning Costs for the Contract Area, the balance shall be transferred to the GOVERNMENT.



38.6 Any expenditure incurred by the CONTRACTOR in relation with this Article 38, including 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 1 and 25.



38.7 The CONTRACTOR shall submit to the Management Committee for approval in accordance with Article 8.5 a detailed plan for decommissioning the Contract Area facilities and site restoration (the "Decommissioning Plan"), such Decommissioning Plan to be submitted no later than twenty four (24) Months prior to the date estimated by the CONTRACTOR for the end of Commercial Production from the Contract Area. The Management Committee shall provide comments, if any, on the Decommissioning Plan within ninety (90) days after receipt. The CONTRACTOR's completion of the Decommissioning Operations in accordance, in all material respects, with the Decommissioning Plan for a Production Area approved by the Management Committee shall satisfy all of the CONTRACTOR's obligations with respect to the performance of Decommissioning Operations for such Production Area. In the event the GOVERNMENT does not agree that Decommissioning Operations for a Production Area were carried out in accordance with the approved Decommissioning Plan, it must advise the CONTRACTOR within six (6) months of CONTRACTOR's completion of such operations.



ARTICLE 39-ASSIGNMENT AND CHANGE OF CONTROL



Assignment to Affiliates



39.1 Each CONTRACTOR Entity shall be free to sell, assign, transfer or otherwise dispose of all or part of its rights, obligations and interests under this Contract to an Affiliated Company or to another CONTRACTOR Entity with the prior consent of the GOVERNMENT, which consent shall not unreasonably delayed or withheld.

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38.3 If the CONTRACTOR undertakes the Production Area Decommissioning Operations, the contributions and any interest accumulated in the Decommissioning Reserve Fund shall be paid to the CONTRACTOR and shall be used for the Decommissioning Operations. The CONTRACTOR shall undertake any such Decommissioning Operations in accordance with prudent international petroleum industry practice in similar physical and ecological environments.



38.4 If the Decommissioning Reserve Fund is paid to the CONTRACTOR and the Decommissioning Reserve Fund is not sufficient to cover all Decommissioning Costs for the Contract Area, the balance shall be paid by the CONTRACTOR and may be recovered, if applicable, by the CONTRACTOR Entities or any of their Affiliates from any other area which is the subject of another Petroleum Contract (as defined by the Kurdistan Region Oil and Gas Law) 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 to the CONTRACTOR.



38.5 If the Decommissioning Reserve Fund is paid to the CONTRACTOR and the Decommissioning Reserve Fund exceeds all Decommissioning Costs for the Contract Area, the balance shall be transferred to the GOVERNMENT.



38.6 Any expenditure incurred by the CONTRACTOR in relation with this Article 38, including 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 1 and 25.



38.7 The CONTRACTOR shall submit to the Management Committee for approval in accordance with Article 8.5 a detailed plan for decommissioning the Contract Area facilities and site restoration (the "Decommissioning Plan"), such Decommissioning Plan to be submitted no later than twenty four (24) Months prior to the date estimated by the CONTRACTOR for the end of Commercial Production from the Contract Area. The Management Committee shall provide comments, if any, on the Decommissioning Plan within ninety (90) days after receipt. The CONTRACTOR's completion of the Decommissioning Operations in accordance, in all material respects, with the Decommissioning Plan for a Production Area approved by the Management Committee shall satisfy all of the CONTRACTOR's obligations with respect to the performance of Decommissioning Operations for such Production Area. In the event the GOVERNMENT does not agree that Decommissioning Operations for a Production Area were carried out in accordance with the approved Decommissioning Plan, it must advise the CONTRACTOR within six (6) months of CONTRACTOR's completion of such operations.



ARTICLE 39-ASSIGNMENT AND CHANGE OF CONTROL



Assignment to Affiliates



39.1 Each CONTRACTOR Entity shall be free to sell, assign, transfer or otherwise dispose of all or part of its rights, obligations and interests under this Contract to an Affiliated Company or to another CONTRACTOR Entity with the prior consent of the GOVERNMENT, which consent shall not unreasonably delayed or withheld.

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38.3 If the CONTRACTOR undertakes the Production Area Decommissioning Operations, the contributions and any interest accumulated in the Decommissioning Reserve Fund shall be paid to the CONTRACTOR and shall be used for the Decommissioning Operations. The CONTRACTOR shall undertake any such Decommissioning Operations in accordance with prudent international petroleum industry practice in similar physical and ecological environments.



38.4 If the Decommissioning Reserve Fund is paid to the CONTRACTOR and the Decommissioning Reserve Fund is not sufficient to cover all Decommissioning Costs for the Contract Area, the balance shall be paid by the CONTRACTOR and may be recovered, if applicable, by the CONTRACTOR Entities or any of their Affiliates from any other area which is the subject of another Petroleum Contract (as defined by the Kurdistan Region Oil and Gas Law) 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 to the CONTRACTOR.



38.5 If the Decommissioning Reserve Fund is paid to the CONTRACTOR and the Decommissioning Reserve Fund exceeds all Decommissioning Costs for the Contract Area, the balance shall be transferred to the GOVERNMENT.



38.6 Any expenditure incurred by the CONTRACTOR in relation with this Article 38, including 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 1 and 25.



38.7 The CONTRACTOR shall submit to the Management Committee for approval in accordance with Article 8.5 a detailed plan for decommissioning the Contract Area facilities and site restoration (the "Decommissioning Plan"), such Decommissioning Plan to be submitted no later than twenty four (24) Months prior to the date estimated by the CONTRACTOR for the end of Commercial Production from the Contract Area. The Management Committee shall provide comments, if any, on the Decommissioning Plan within ninety (90) days after receipt. The CONTRACTOR's completion of the Decommissioning Operations in accordance, in all material respects, with the Decommissioning Plan for a Production Area approved by the Management Committee shall satisfy all of the CONTRACTOR's obligations with respect to the performance of Decommissioning Operations for such Production Area. In the event the GOVERNMENT does not agree that Decommissioning Operations for a Production Area were carried out in accordance with the approved Decommissioning Plan, it must advise the CONTRACTOR within six (6) months of CONTRACTOR's completion of such operations.



ARTICLE 39-ASSIGNMENT AND CHANGE OF CONTROL



Assignment to Affiliates



39.1 Each CONTRACTOR Entity shall be free to sell, assign, transfer or otherwise dispose of all or part of its rights, obligations and interests under this Contract to an Affiliated Company or to another CONTRACTOR Entity with the prior consent of the GOVERNMENT, which consent shall not unreasonably delayed or withheld.

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38.3 If the CONTRACTOR undertakes the Production Area Decommissioning Operations, the contributions and any interest accumulated in the Decommissioning Reserve Fund shall be paid to the CONTRACTOR and shall be used for the Decommissioning Operations. The CONTRACTOR shall undertake any such Decommissioning Operations in accordance with prudent international petroleum industry practice in similar physical and ecological environments.



38.4 If the Decommissioning Reserve Fund is paid to the CONTRACTOR and the Decommissioning Reserve Fund is not sufficient to cover all Decommissioning Costs for the Contract Area, the balance shall be paid by the CONTRACTOR and may be recovered, if applicable, by the CONTRACTOR Entities or any of their Affiliates from any other area which is the subject of another Petroleum Contract (as defined by the Kurdistan Region Oil and Gas Law) 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 to the CONTRACTOR.



38.5 If the Decommissioning Reserve Fund is paid to the CONTRACTOR and the Decommissioning Reserve Fund exceeds all Decommissioning Costs for the Contract Area, the balance shall be transferred to the GOVERNMENT.



38.6 Any expenditure incurred by the CONTRACTOR in relation with this Article 38, including 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 1 and 25.



38.7 The CONTRACTOR shall submit to the Management Committee for approval in accordance with Article 8.5 a detailed plan for decommissioning the Contract Area facilities and site restoration (the "Decommissioning Plan"), such Decommissioning Plan to be submitted no later than twenty four (24) Months prior to the date estimated by the CONTRACTOR for the end of Commercial Production from the Contract Area. The Management Committee shall provide comments, if any, on the Decommissioning Plan within ninety (90) days after receipt. The CONTRACTOR's completion of the Decommissioning Operations in accordance, in all material respects, with the Decommissioning Plan for a Production Area approved by the Management Committee shall satisfy all of the CONTRACTOR's obligations with respect to the performance of Decommissioning Operations for such Production Area. In the event the GOVERNMENT does not agree that Decommissioning Operations for a Production Area were carried out in accordance with the approved Decommissioning Plan, it must advise the CONTRACTOR within six (6) months of CONTRACTOR's completion of such operations.



ARTICLE 39-ASSIGNMENT AND CHANGE OF CONTROL



Assignment to Affiliates



39.1 Each CONTRACTOR Entity shall be free to sell, assign, transfer or otherwise dispose of all or part of its rights, obligations and interests under this Contract to an Affiliated Company or to another CONTRACTOR Entity with the prior consent of the GOVERNMENT, which consent shall not unreasonably delayed or withheld.

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38.3 If the CONTRACTOR undertakes the Production Area Decommissioning Operations, the contributions and any interest accumulated in the Decommissioning Reserve Fund shall be paid to the CONTRACTOR and shall be used for the Decommissioning Operations. The CONTRACTOR shall undertake any such Decommissioning Operations in accordance with prudent international petroleum industry practice in similar physical and ecological environments.



38.4 If the Decommissioning Reserve Fund is paid to the CONTRACTOR and the Decommissioning Reserve Fund is not sufficient to cover all Decommissioning Costs for the Contract Area, the balance shall be paid by the CONTRACTOR and may be recovered, if applicable, by the CONTRACTOR Entities or any of their Affiliates from any other area which is the subject of another Petroleum Contract (as defined by the Kurdistan Region Oil and Gas Law) 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 to the CONTRACTOR.



38.5 If the Decommissioning Reserve Fund is paid to the CONTRACTOR and the Decommissioning Reserve Fund exceeds all Decommissioning Costs for the Contract Area, the balance shall be transferred to the GOVERNMENT.



38.6 Any expenditure incurred by the CONTRACTOR in relation with this Article 38, including 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 1 and 25.



38.7 The CONTRACTOR shall submit to the Management Committee for approval in accordance with Article 8.5 a detailed plan for decommissioning the Contract Area facilities and site restoration (the "Decommissioning Plan"), such Decommissioning Plan to be submitted no later than twenty four (24) Months prior to the date estimated by the CONTRACTOR for the end of Commercial Production from the Contract Area. The Management Committee shall provide comments, if any, on the Decommissioning Plan within ninety (90) days after receipt. The CONTRACTOR's completion of the Decommissioning Operations in accordance, in all material respects, with the Decommissioning Plan for a Production Area approved by the Management Committee shall satisfy all of the CONTRACTOR's obligations with respect to the performance of Decommissioning Operations for such Production Area. In the event the GOVERNMENT does not agree that Decommissioning Operations for a Production Area were carried out in accordance with the approved Decommissioning Plan, it must advise the CONTRACTOR within six (6) months of CONTRACTOR's completion of such operations.



ARTICLE 39-ASSIGNMENT AND CHANGE OF CONTROL



Assignment to Affiliates



39.1 Each CONTRACTOR Entity shall be free to sell, assign, transfer or otherwise dispose of all or part of its rights, obligations and interests under this Contract to an Affiliated Company or to another CONTRACTOR Entity with the prior consent of the GOVERNMENT, which consent shall not unreasonably delayed or withheld.

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38.3 If the CONTRACTOR undertakes the Production Area Decommissioning Operations, the contributions and any interest accumulated in the Decommissioning Reserve Fund shall be paid to the CONTRACTOR and shall be used for the Decommissioning Operations. The CONTRACTOR shall undertake any such Decommissioning Operations in accordance with prudent international petroleum industry practice in similar physical and ecological environments.



38.4 If the Decommissioning Reserve Fund is paid to the CONTRACTOR and the Decommissioning Reserve Fund is not sufficient to cover all Decommissioning Costs for the Contract Area, the balance shall be paid by the CONTRACTOR and may be recovered, if applicable, by the CONTRACTOR Entities or any of their Affiliates from any other area which is the subject of another Petroleum Contract (as defined by the Kurdistan Region Oil and Gas Law) 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 to the CONTRACTOR.



38.5 If the Decommissioning Reserve Fund is paid to the CONTRACTOR and the Decommissioning Reserve Fund exceeds all Decommissioning Costs for the Contract Area, the balance shall be transferred to the GOVERNMENT.



38.6 Any expenditure incurred by the CONTRACTOR in relation with this Article 38, including 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 1 and 25.



38.7 The CONTRACTOR shall submit to the Management Committee for approval in accordance with Article 8.5 a detailed plan for decommissioning the Contract Area facilities and site restoration (the "Decommissioning Plan"), such Decommissioning Plan to be submitted no later than twenty four (24) Months prior to the date estimated by the CONTRACTOR for the end of Commercial Production from the Contract Area. The Management Committee shall provide comments, if any, on the Decommissioning Plan within ninety (90) days after receipt. The CONTRACTOR's completion of the Decommissioning Operations in accordance, in all material respects, with the Decommissioning Plan for a Production Area approved by the Management Committee shall satisfy all of the CONTRACTOR's obligations with respect to the performance of Decommissioning Operations for such Production Area. In the event the GOVERNMENT does not agree that Decommissioning Operations for a Production Area were carried out in accordance with the approved Decommissioning Plan, it must advise the CONTRACTOR within six (6) months of CONTRACTOR's completion of such operations.



ARTICLE 39-ASSIGNMENT AND CHANGE OF CONTROL



Assignment to Affiliates



39.1 Each CONTRACTOR Entity shall be free to sell, assign, transfer or otherwise dispose of all or part of its rights, obligations and interests under this Contract to an Affiliated Company or to another CONTRACTOR Entity with the prior consent of the GOVERNMENT, which consent shall not unreasonably delayed or withheld.

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Amendments



43.7 Any amendment to this Contract shall be the subject of a formal amendment, duly approved in writing by the Parties and subject to the same conditions of validity as this Contract. Notwithstanding the foregoing, the GOVERNMENT has the right and authority to waive the application of the provisions of this Contract on a case-by-case basis without having to fulfil the conditions of validity of this Contract, should CONTRACTOR so request.



43.8 This Contract constitutes the entire agreement of the Parties and supersedes any and all prior understanding or agreements in respect of the subject matter of this Contract, including the Original Contract.



43.9 Unless otherwise expressly stated elsewhere in this Contract, no failure or delay of any Party to exercise any right, power or remedy under this Contract shall operate as a waiver thereof; nor shall any single or partial exercise of any such right, power or remedy preclude any other or future exercise thereof or the exercise of any other right, power or remedy.



Validity



43.10 As signatories to this Contract for and on behalf of the GOVERNMENT, the Ministry of Natural Resources in the Kurdistan Region and the Regional Council for the Oil and Gas Affairs of the Kurdistan Region - Iraq hereby represent that they agree and approve this Contract for the purpose of the Kurdistan Region Oil and Gas Law.



ARTICLE 44-NOTICES



44.1 All notices, demands, instructions, waives, consents or other communications to be provided pursuant to this Contract shall be in writing in English, shall be effective upon receipt, and shall be sent by receipted hand delivery or by email (followed by delivery by reputable international air courier company with an establishment in Erbil in the Kurdistan Region) to the following address:



To the GOVERNMENT



Attention:



His Excellency the Minister of Natural Resources



Address:



Ministry of Natural Resources



Kurdistan Regional Government

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Amendments



43.7 Any amendment to this Contract shall be the subject of a formal amendment, duly approved in writing by the Parties and subject to the same conditions of validity as this Contract. Notwithstanding the foregoing, the GOVERNMENT has the right and authority to waive the application of the provisions of this Contract on a case-by-case basis without having to fulfil the conditions of validity of this Contract, should CONTRACTOR so request.



43.8 This Contract constitutes the entire agreement of the Parties and supersedes any and all prior understanding or agreements in respect of the subject matter of this Contract, including the Original Contract.



43.9 Unless otherwise expressly stated elsewhere in this Contract, no failure or delay of any Party to exercise any right, power or remedy under this Contract shall operate as a waiver thereof; nor shall any single or partial exercise of any such right, power or remedy preclude any other or future exercise thereof or the exercise of any other right, power or remedy.



Validity



43.10 As signatories to this Contract for and on behalf of the GOVERNMENT, the Ministry of Natural Resources in the Kurdistan Region and the Regional Council for the Oil and Gas Affairs of the Kurdistan Region - Iraq hereby represent that they agree and approve this Contract for the purpose of the Kurdistan Region Oil and Gas Law.



ARTICLE 44-NOTICES



44.1 All notices, demands, instructions, waives, consents or other communications to be provided pursuant to this Contract shall be in writing in English, shall be effective upon receipt, and shall be sent by receipted hand delivery or by email (followed by delivery by reputable international air courier company with an establishment in Erbil in the Kurdistan Region) to the following address:



To the GOVERNMENT



Attention:



His Excellency the Minister of Natural Resources



Address:



Ministry of Natural Resources



Kurdistan Regional Government

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Amendments



43.7 Any amendment to this Contract shall be the subject of a formal amendment, duly approved in writing by the Parties and subject to the same conditions of validity as this Contract. Notwithstanding the foregoing, the GOVERNMENT has the right and authority to waive the application of the provisions of this Contract on a case-by-case basis without having to fulfil the conditions of validity of this Contract, should CONTRACTOR so request.



43.8 This Contract constitutes the entire agreement of the Parties and supersedes any and all prior understanding or agreements in respect of the subject matter of this Contract, including the Original Contract.



43.9 Unless otherwise expressly stated elsewhere in this Contract, no failure or delay of any Party to exercise any right, power or remedy under this Contract shall operate as a waiver thereof; nor shall any single or partial exercise of any such right, power or remedy preclude any other or future exercise thereof or the exercise of any other right, power or remedy.



Validity



43.10 As signatories to this Contract for and on behalf of the GOVERNMENT, the Ministry of Natural Resources in the Kurdistan Region and the Regional Council for the Oil and Gas Affairs of the Kurdistan Region - Iraq hereby represent that they agree and approve this Contract for the purpose of the Kurdistan Region Oil and Gas Law.



ARTICLE 44-NOTICES



44.1 All notices, demands, instructions, waives, consents or other communications to be provided pursuant to this Contract shall be in writing in English, shall be effective upon receipt, and shall be sent by receipted hand delivery or by email (followed by delivery by reputable international air courier company with an establishment in Erbil in the Kurdistan Region) to the following address:



To the GOVERNMENT



Attention:



His Excellency the Minister of Natural Resources



Address:



Ministry of Natural Resources



Kurdistan Regional Government

93/122
Amendments



43.7 Any amendment to this Contract shall be the subject of a formal amendment, duly approved in writing by the Parties and subject to the same conditions of validity as this Contract. Notwithstanding the foregoing, the GOVERNMENT has the right and authority to waive the application of the provisions of this Contract on a case-by-case basis without having to fulfil the conditions of validity of this Contract, should CONTRACTOR so request.



43.8 This Contract constitutes the entire agreement of the Parties and supersedes any and all prior understanding or agreements in respect of the subject matter of this Contract, including the Original Contract.



43.9 Unless otherwise expressly stated elsewhere in this Contract, no failure or delay of any Party to exercise any right, power or remedy under this Contract shall operate as a waiver thereof; nor shall any single or partial exercise of any such right, power or remedy preclude any other or future exercise thereof or the exercise of any other right, power or remedy.



Validity



43.10 As signatories to this Contract for and on behalf of the GOVERNMENT, the Ministry of Natural Resources in the Kurdistan Region and the Regional Council for the Oil and Gas Affairs of the Kurdistan Region - Iraq hereby represent that they agree and approve this Contract for the purpose of the Kurdistan Region Oil and Gas Law.



ARTICLE 44-NOTICES



44.1 All notices, demands, instructions, waives, consents or other communications to be provided pursuant to this Contract shall be in writing in English, shall be effective upon receipt, and shall be sent by receipted hand delivery or by email (followed by delivery by reputable international air courier company with an establishment in Erbil in the Kurdistan Region) to the following address:



To the GOVERNMENT



Attention:



His Excellency the Minister of Natural Resources



Address:



Ministry of Natural Resources



Kurdistan Regional Government

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Amendments



43.7 Any amendment to this Contract shall be the subject of a formal amendment, duly approved in writing by the Parties and subject to the same conditions of validity as this Contract. Notwithstanding the foregoing, the GOVERNMENT has the right and authority to waive the application of the provisions of this Contract on a case-by-case basis without having to fulfil the conditions of validity of this Contract, should CONTRACTOR so request.



43.8 This Contract constitutes the entire agreement of the Parties and supersedes any and all prior understanding or agreements in respect of the subject matter of this Contract, including the Original Contract.



43.9 Unless otherwise expressly stated elsewhere in this Contract, no failure or delay of any Party to exercise any right, power or remedy under this Contract shall operate as a waiver thereof; nor shall any single or partial exercise of any such right, power or remedy preclude any other or future exercise thereof or the exercise of any other right, power or remedy.



Validity



43.10 As signatories to this Contract for and on behalf of the GOVERNMENT, the Ministry of Natural Resources in the Kurdistan Region and the Regional Council for the Oil and Gas Affairs of the Kurdistan Region - Iraq hereby represent that they agree and approve this Contract for the purpose of the Kurdistan Region Oil and Gas Law.



ARTICLE 44-NOTICES



44.1 All notices, demands, instructions, waives, consents or other communications to be provided pursuant to this Contract shall be in writing in English, shall be effective upon receipt, and shall be sent by receipted hand delivery or by email (followed by delivery by reputable international air courier company with an establishment in Erbil in the Kurdistan Region) to the following address:



To the GOVERNMENT



Attention:



His Excellency the Minister of Natural Resources



Address:



Ministry of Natural Resources



Kurdistan Regional Government

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Amendments



43.7 Any amendment to this Contract shall be the subject of a formal amendment, duly approved in writing by the Parties and subject to the same conditions of validity as this Contract. Notwithstanding the foregoing, the GOVERNMENT has the right and authority to waive the application of the provisions of this Contract on a case-by-case basis without having to fulfil the conditions of validity of this Contract, should CONTRACTOR so request.



43.8 This Contract constitutes the entire agreement of the Parties and supersedes any and all prior understanding or agreements in respect of the subject matter of this Contract, including the Original Contract.



43.9 Unless otherwise expressly stated elsewhere in this Contract, no failure or delay of any Party to exercise any right, power or remedy under this Contract shall operate as a waiver thereof; nor shall any single or partial exercise of any such right, power or remedy preclude any other or future exercise thereof or the exercise of any other right, power or remedy.



Validity



43.10 As signatories to this Contract for and on behalf of the GOVERNMENT, the Ministry of Natural Resources in the Kurdistan Region and the Regional Council for the Oil and Gas Affairs of the Kurdistan Region - Iraq hereby represent that they agree and approve this Contract for the purpose of the Kurdistan Region Oil and Gas Law.



ARTICLE 44-NOTICES



44.1 All notices, demands, instructions, waives, consents or other communications to be provided pursuant to this Contract shall be in writing in English, shall be effective upon receipt, and shall be sent by receipted hand delivery or by email (followed by delivery by reputable international air courier company with an establishment in Erbil in the Kurdistan Region) to the following address:



To the GOVERNMENT



Attention:



His Excellency the Minister of Natural Resources



Address:



Ministry of Natural Resources



Kurdistan Regional Government

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ANNEX B

ACCOUNTING PROCEDURE









PARAGRAPH 1 - GENERAL PROVISIONS



1.1 Purpose



To classify expenditures, define further Petroleum Costs (in addition to those defined

as such in the Articles of the Contract), and prescribe the manner in which the

CONTRACTOR's Accounts shall be prepared and approved.



1.2 Definitions



Words and phrases to which a meaning has been assigned in Article 1 or other

Articles of the Contract shall have the same meaning when used in this Annex.



1.3 Inconsistency



In the event of any inconsistency or conflict between the provisions of this Annex and

the other provisions of the Contract, then the other provisions of the Contract shall

prevail.



1.4 Accounting Records and Reports



1.4.1 The CONTRACTOR shall maintain the Accounts in accordance with Article 15.1

and in accordance with this Accounting Procedure, including in accordance with the

charts of Accounts agreed under Paragraph 1.4.2.



1.4.2 Within sixty (60) days of the Effective Date, the CONTRACTOR shall submit to and

discuss with the GOVERNMENT a proposed outline of charts of Accounts, which

outline shall be in accordance with generally accepted standards and recognized

accounting systems and consistent with normal petroleum industry practice and

procedures. Within ninety (90) days of receiving the above submission, the

GOVERNMENT shall either provide written notification of its approval of the

proposal or request in writing revisions to the proposal. Within one hundred and

eighty (180) days after the Effective Date, the CONTRACTOR and the

GOVERNMENT shall agree on the outline of charts of Accounts which shall

describe the basis of the accounting system and procedures to be developed and used

under this Contract. Following such agreement, the CONTRACTOR shall

expeditiously prepare and provide the GOVERNMENT with formal copies of the

comprehensive charts of Accounts and manuals related to the accounting, recording

and reporting functions, and procedures which are, and shall be, observed under the

Contract.



1.4.3 Notwithstanding the generality of the foregoing, the CONTRACTOR shall make

regular Statements relating to the Petroleum Operations. These Statements are as

shown:




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ANNEX B

ACCOUNTING PROCEDURE









PARAGRAPH 1 - GENERAL PROVISIONS



1.1 Purpose



To classify expenditures, define further Petroleum Costs (in addition to those defined

as such in the Articles of the Contract), and prescribe the manner in which the

CONTRACTOR's Accounts shall be prepared and approved.



1.2 Definitions



Words and phrases to which a meaning has been assigned in Article 1 or other

Articles of the Contract shall have the same meaning when used in this Annex.



1.3 Inconsistency



In the event of any inconsistency or conflict between the provisions of this Annex and

the other provisions of the Contract, then the other provisions of the Contract shall

prevail.



1.4 Accounting Records and Reports



1.4.1 The CONTRACTOR shall maintain the Accounts in accordance with Article 15.1

and in accordance with this Accounting Procedure, including in accordance with the

charts of Accounts agreed under Paragraph 1.4.2.



1.4.2 Within sixty (60) days of the Effective Date, the CONTRACTOR shall submit to and

discuss with the GOVERNMENT a proposed outline of charts of Accounts, which

outline shall be in accordance with generally accepted standards and recognized

accounting systems and consistent with normal petroleum industry practice and

procedures. Within ninety (90) days of receiving the above submission, the

GOVERNMENT shall either provide written notification of its approval of the

proposal or request in writing revisions to the proposal. Within one hundred and

eighty (180) days after the Effective Date, the CONTRACTOR and the

GOVERNMENT shall agree on the outline of charts of Accounts which shall

describe the basis of the accounting system and procedures to be developed and used

under this Contract. Following such agreement, the CONTRACTOR shall

expeditiously prepare and provide the GOVERNMENT with formal copies of the

comprehensive charts of Accounts and manuals related to the accounting, recording

and reporting functions, and procedures which are, and shall be, observed under the

Contract.



1.4.3 Notwithstanding the generality of the foregoing, the CONTRACTOR shall make

regular Statements relating to the Petroleum Operations. These Statements are as

shown:




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the CONTRACTOR or to the GOVERNMENT, as the case may be, shall be made promptly.



1.6.4 When issues are outstanding with respect to an audit, the CONTRACTOR shall maintain the relevant documents and permit inspection thereof until the issue is resolved.



1.7 Payments



Unless as otherwise provided in Article 24, Article 29 or other Articles of the Contract:



1.7.1 All payments between the Parties shall, unless otherwise agreed, be in Dollars and be made through a bank designated in writing by each receiving party; and all sums due under the Contract shall be paid within thirty (30) days following the end of the Month in which the obligation to make such payment occurred.



1.7.2 All sums due by one party under the Contract shall, for each day such sums are overdue, bear interest compounded monthly at LIBOR plus two per cent (2%).



1.8 Currency Exchange Rates



In addition to the provisions of Article 29, the following provisions shall apply to any exchanges of currency carried out in accordance with Article 29.



1.8.1 Amounts received and Petroleum Costs incurred, shall be converted from other currencies into Dollars in accordance with the CONTRACTOR's usual accounting procedures which shall reflect generally accepted accounting practices in the international petroleum industry, and with reference to exchange rates obtained in accordance with Article 29.



1.9 Accrual Basis, Cash Flow Basis and Reports



All books and Accounts shall be prepared on an accrual basis in accordance with generally accepted accounting principles used in the international petroleum industry.



1.10 Values and Treatments



Values and treatments proposed by the CONTRACTOR relating to all Petroleum Costs shall be subject to challenge by the GOVERNMENT in the course of audit to ensure that they are in accordance with the provisions of this Accounting Procedure.





PARAGRAPH 2-CLASSIFICATION, DEFINITION AND ALLOCATION OF COSTS AND EXPENSES



2.1 Segregation of Costs and Expenses



Petroleum Costs shall be segregated in accordance with the purposes for which such Petroleum Costs are made. The purposes which shall qualify are:

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the CONTRACTOR or to the GOVERNMENT, as the case may be, shall be made promptly.



1.6.4 When issues are outstanding with respect to an audit, the CONTRACTOR shall maintain the relevant documents and permit inspection thereof until the issue is resolved.



1.7 Payments



Unless as otherwise provided in Article 24, Article 29 or other Articles of the Contract:



1.7.1 All payments between the Parties shall, unless otherwise agreed, be in Dollars and be made through a bank designated in writing by each receiving party; and all sums due under the Contract shall be paid within thirty (30) days following the end of the Month in which the obligation to make such payment occurred.



1.7.2 All sums due by one party under the Contract shall, for each day such sums are overdue, bear interest compounded monthly at LIBOR plus two per cent (2%).



1.8 Currency Exchange Rates



In addition to the provisions of Article 29, the following provisions shall apply to any exchanges of currency carried out in accordance with Article 29.



1.8.1 Amounts received and Petroleum Costs incurred, shall be converted from other currencies into Dollars in accordance with the CONTRACTOR's usual accounting procedures which shall reflect generally accepted accounting practices in the international petroleum industry, and with reference to exchange rates obtained in accordance with Article 29.



1.9 Accrual Basis, Cash Flow Basis and Reports



All books and Accounts shall be prepared on an accrual basis in accordance with generally accepted accounting principles used in the international petroleum industry.



1.10 Values and Treatments



Values and treatments proposed by the CONTRACTOR relating to all Petroleum Costs shall be subject to challenge by the GOVERNMENT in the course of audit to ensure that they are in accordance with the provisions of this Accounting Procedure.





PARAGRAPH 2-CLASSIFICATION, DEFINITION AND ALLOCATION OF COSTS AND EXPENSES



2.1 Segregation of Costs and Expenses



Petroleum Costs shall be segregated in accordance with the purposes for which such Petroleum Costs are made. The purposes which shall qualify are:

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2.4 Development Costs,



Development costs are all direct and allocated indirect costs and expenditures incurred in carrying out Development Operations including all direct and allocated indirect costs and expenditures incurred in:



2.4.1 Drilling wells which are completed as producing wells and drilling wells for purposes of producing from a Petroleum reservoir, whether these walls are dry or producing and drilling wells for the injection of water or gas to enhance recovery of Petroleum.



2.4.2 Completing wells by way of installation of casing or equipment or otherwise after a well has been drilled for the purpose of bringing the well into use as a producing well or as a well for the injection of water or gas to enhance recovery of Petroleum.



2.4.3 The costs of Petroleum production, transport and storage facilities such as pipelines, flow lines, production and treatment units, wellhead equipment, subsurface equipment, enhanced recovery systems, Petroleum storage facilities, and access roads for production activities.



2.4.4 Engineering and design studies for the wells and facilities referred to in Paragraphs 2.4.1, 2.4.2 and 2.4.3.



And including that portion of all service expenditures and that portion of all general and administrative expenditures directly attributable to Development costs or allocated thereto on a consistent and equitable basic and any other expenditure incurred in the Development Operations and not otherwise covered under Paragraph 2.3



2.5 Production Costs



Production Costs are all direct and allocated indirect costs and expenditures incurred in carrying out Production Operations, including all direct and allocated indirect costs and expenses incurred in Petroleum Operations after First Production which are other than Exploration Costs, Gas Marketing Costs, Development Costs and Decommissioning Costs, Production Costs include that portion of all service expenditures and that portion of all general and administrative expenditures directly attribute to Production Costs or allocated thereto on a consistent and equitable basis.



2.6 Decommissioning Costs



Decommissioning Costs are all direct and allocated indirect costs and expenditures incurred in carrying out Decommissioning Operations and include that portion of all service expenditures and that portion of all general and administrative expenditures directly attribute to Decommissioning Costs or allocated thereto on a consistent and equitable basis, and the Decommissioning Reserve Fund shall be determined on such basis, in advance of incurring such costs, as provided in Article 38 and, for the purposes of cost recovery, the contributions to the Decommissioning Reserve Fund shall be recovered in accordance with Article 38.

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2.7 Service Expenditures



Service expenditures are expenditures in support of Petroleum Operations including warehouses, vehicles, motorized rolling equipment, aircraft, fire and security stations, workshops, water and sewerage plants, power plants, housing, community and recreational facilities and furniture, tools and equipment used in these activities. Service expenditures in any Calendar Year shall include the costs incurred in such year to purchase and/or construct the said facilities as well as the annual costs of maintaining and operating the same. All service expenditures shall be regularly allocated as specified in Paragraphs 2.2.5, 2.3, 2.4, 2.5 and 2.6 to Exploration Costs, Gas Marketing Costs, Development Costs, Production Costs and Decommissioning Costs respectively and shall be separately shown under each of these categories. Where service expenditures are made in respect of shared facilities, the basis of allocation of costs to Petroleum Operations shall be consistent and equitable and shall be specified.



2.8 General and Administrative Expenditures



General and administrative expenditures are:



2.8.1 All main office, field office and general administrative expenditures in the Kurdistan Region including supervisory, accounting, procurement and employee relations services.



2.8.2 Where the CONTRACTOR is an Affiliate of a group of companies whose headquarters is Abroad (a "Foreign CONTRACTOR"), an annual overhead charge shall be made for services rendered (excluding the direct expenditures as referred in Paragraph 3.1.2(b)) by any Affiliate of the Foreign CONTRACTOR outside the Kurdistan Region to support and manage Petroleum Operations under the Contract, or where the CONTRACTOR, not being a Foreign CONTRACTOR draws upon the services of an Affiliate within the Kurdistan Region, an annual overhead charge shall be made for services rendered (excluding the direct expenditures as referred in Paragraphs 3.1.2(a) and (b)) by such Affiliate to support and manage Petroleum Operations under the Contract ("Parent Company Overhead").



Parent Company Overhead will be deemed to cover the actual cost (being salaries, wages and labour burden, employee benefits, travel, hotel and other normally reimbursable expenses paid by the Affiliate of a CONTRACTOR in accordance with its standard personnel policy in force in the relevant period, provision of office accommodation and provision of services reasonably necessary for operation and maintaining such staff offices) incurred for services rendered by those functions of CONTRACTOR's Affiliate, such as, buy not limited to, international production headquarters, international exploration headquarters, treasury, payroll, taxation, insurance, legal, communications, computer services, controllers, personnel, executive administrative management, research and development, central engineering and process engineering which:



(a) cannot, without unreasonable effort and/or expenditure or without the release of confidential data proprietary to any of the CONTRACTOR's Affiliates, be charged under any other section of this Annex; and

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2.7 Service Expenditures



Service expenditures are expenditures in support of Petroleum Operations including warehouses, vehicles, motorized rolling equipment, aircraft, fire and security stations, workshops, water and sewerage plants, power plants, housing, community and recreational facilities and furniture, tools and equipment used in these activities. Service expenditures in any Calendar Year shall include the costs incurred in such year to purchase and/or construct the said facilities as well as the annual costs of maintaining and operating the same. All service expenditures shall be regularly allocated as specified in Paragraphs 2.2.5, 2.3, 2.4, 2.5 and 2.6 to Exploration Costs, Gas Marketing Costs, Development Costs, Production Costs and Decommissioning Costs respectively and shall be separately shown under each of these categories. Where service expenditures are made in respect of shared facilities, the basis of allocation of costs to Petroleum Operations shall be consistent and equitable and shall be specified.



2.8 General and Administrative Expenditures



General and administrative expenditures are:



2.8.1 All main office, field office and general administrative expenditures in the Kurdistan Region including supervisory, accounting, procurement and employee relations services.



2.8.2 Where the CONTRACTOR is an Affiliate of a group of companies whose headquarters is Abroad (a "Foreign CONTRACTOR"), an annual overhead charge shall be made for services rendered (excluding the direct expenditures as referred in Paragraph 3.1.2(b)) by any Affiliate of the Foreign CONTRACTOR outside the Kurdistan Region to support and manage Petroleum Operations under the Contract, or where the CONTRACTOR, not being a Foreign CONTRACTOR draws upon the services of an Affiliate within the Kurdistan Region, an annual overhead charge shall be made for services rendered (excluding the direct expenditures as referred in Paragraphs 3.1.2(a) and (b)) by such Affiliate to support and manage Petroleum Operations under the Contract ("Parent Company Overhead").



Parent Company Overhead will be deemed to cover the actual cost (being salaries, wages and labour burden, employee benefits, travel, hotel and other normally reimbursable expenses paid by the Affiliate of a CONTRACTOR in accordance with its standard personnel policy in force in the relevant period, provision of office accommodation and provision of services reasonably necessary for operation and maintaining such staff offices) incurred for services rendered by those functions of CONTRACTOR's Affiliate, such as, buy not limited to, international production headquarters, international exploration headquarters, treasury, payroll, taxation, insurance, legal, communications, computer services, controllers, personnel, executive administrative management, research and development, central engineering and process engineering which:



(a) cannot, without unreasonable effort and/or expenditure or without the release of confidential data proprietary to any of the CONTRACTOR's Affiliates, be charged under any other section of this Annex; and

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(d) Overhead charges are not subject to audit by GOVERNMENT

(e) The CONTRACTOR shall upon request furnish at the end of each relevant Calendar Year to the GOVERNMENT a confirmation by its statutory auditor that the overhead costs actually charged do not duplicate any other charges and that the method used in allocating overhead to Petroleum Operations hereunder as opposed to other activities is reasonable and in accordance with generally accepted accounting practices

(f) The CONTRACTOR must budget for overhead charges


2.8.3 All general and administrative expenditures shall be regularly allocated as specified in Paragraphs 2.2.5, .2.3, 2.4, 2.5, and 2.6 to Exploration Costs, Gas Marketing Costs, Development Costs, Production Costs, and Decommissioning Costs respectively and shall be separately shown under each of these categories.



PARAGRAPH 3—COSTS, EXPENSES, EXPENDITURES, AND CREDITS OF THE CONTRACTOR



3.1 Costs Recoverable Without Further Approval of the GOVERNMENT

The following Petroleum Costs incurred by the CONTRACTOR pursuant to the Contract as classified under the headings referred to in Paragraph 2 shall be recoverable for the purpose of Article 25 of the Contract (except to the extent provided in Paragraph 4 or elsewhere in this Annex) without the requirement for obtaining any further approval of the GOVERNMENT, subject to audit as provided for in Article 15 and in Paragraph 1.6.



3.1.1 Surface Rights

All direct costs necessary for the acquisition, renewal, or relinquishment of surface rights acquired and maintained in force for the purposes of the Contract.



3.1.2 Labour and Associated Labour Costs

(a) The CONTRACTOR’s locally recruited employers based in the Kurdistan Region; Costs of all CONTRACTOR’s locally recruited employees who are directly engaged in the conduct of Petroleum Operations under the Contract in the Kurdistan Region. Such costs shall include the costs of salaries, wages, bonuses, overtime, employee benefits, and GOVERNMENT benefits for employees and levies imposed on the CONTRACTOR as an employer, transportation and relocation costs within the Kurdistan Region of the employee and such members of the employee’s family (limited to spouse and dependent children) as required by law or customary practice in the Kurdistan Region. If such employees are engaged in other activities in the Kurdistan Region, in addition to Petroleum Operations, the cost of such employees shall be apportioned on a time sheet basis according to sound and acceptable accounting principles.


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(d) Overhead charges are not subject to audit by GOVERNMENT

(e) The CONTRACTOR shall upon request furnish at the end of each relevant Calendar Year to the GOVERNMENT a confirmation by its statutory auditor that the overhead costs actually charged do not duplicate any other charges and that the method used in allocating overhead to Petroleum Operations hereunder as opposed to other activities is reasonable and in accordance with generally accepted accounting practices

(f) The CONTRACTOR must budget for overhead charges


2.8.3 All general and administrative expenditures shall be regularly allocated as specified in Paragraphs 2.2.5, .2.3, 2.4, 2.5, and 2.6 to Exploration Costs, Gas Marketing Costs, Development Costs, Production Costs, and Decommissioning Costs respectively and shall be separately shown under each of these categories.



PARAGRAPH 3—COSTS, EXPENSES, EXPENDITURES, AND CREDITS OF THE CONTRACTOR



3.1 Costs Recoverable Without Further Approval of the GOVERNMENT

The following Petroleum Costs incurred by the CONTRACTOR pursuant to the Contract as classified under the headings referred to in Paragraph 2 shall be recoverable for the purpose of Article 25 of the Contract (except to the extent provided in Paragraph 4 or elsewhere in this Annex) without the requirement for obtaining any further approval of the GOVERNMENT, subject to audit as provided for in Article 15 and in Paragraph 1.6.



3.1.1 Surface Rights

All direct costs necessary for the acquisition, renewal, or relinquishment of surface rights acquired and maintained in force for the purposes of the Contract.



3.1.2 Labour and Associated Labour Costs

(a) The CONTRACTOR’s locally recruited employers based in the Kurdistan Region; Costs of all CONTRACTOR’s locally recruited employees who are directly engaged in the conduct of Petroleum Operations under the Contract in the Kurdistan Region. Such costs shall include the costs of salaries, wages, bonuses, overtime, employee benefits, and GOVERNMENT benefits for employees and levies imposed on the CONTRACTOR as an employer, transportation and relocation costs within the Kurdistan Region of the employee and such members of the employee’s family (limited to spouse and dependent children) as required by law or customary practice in the Kurdistan Region. If such employees are engaged in other activities in the Kurdistan Region, in addition to Petroleum Operations, the cost of such employees shall be apportioned on a time sheet basis according to sound and acceptable accounting principles.


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3.1.3 Transportation and Employee Relocation Costs



The cost of transportation of employees, equipment, materials and supplies other than as provided in Paragraph 3.1.2(f) necessary for the conduct of the Petroleum Operations under the Contract along with other related costs such as, but not limited to, import duties, customs fees, unloading charges, dock feeds, and inland and ocean freight charges.



3.1.4 Charges for Services



(a) Third Parties



The actual costs of contract services, services of professional consultants, utilities, and other services necessary for the conduct of the Petroleum Operations under the Contract performed by third parties other than an Affiliate of the CONTRACTOR.



(b) Affiliates of the CONTRACTOR

(i) Professional and Administrative Services Expenses:cost of professional and administrative services provided by any Affiliates of the CONTRACTOR for the direct benefit of Petroleum Operations, including services provided by the production, exploration, legal, procurement, financial, insurance, accounting and computer services divisions other than those covered by paragraphs 3.1.4(b) (ii), 3.1.6 and 3.1.8(b) which CONTRACTOR may use in lieu of having its own employees. Such charges shall reflect the cost of providing their services. Such charges shall not include any element of profit and shall be no more or less favourable than similar charges for other operations carried on by the CONTRACTOR and its Affiliates. The chargeout rate shall include all costs incurred by Affiliates incidental to the employment of such personnel including all Labour and Associated Labour Costs and the cost of maintaining and operating offices and providing all support services for each personnel. Costs of travel of such personnel in respect of Petroleum Operations will be directly charged. The charges for such services shall not exceed those prevailing if performed by non-Affiliated third parties, taking into account the quality and availability of such services. Where the work is performed outside the home office base of such personnel, the daily rate shall be charged from the date such personnel leave the home office base where they usually work up to their return thereto, including days which are not working days in the location where the work is performed, excluding any holiday entitlements derived by such personnel from their employment at their home office base.



(ii) Scientific or Technical Personnel: cost of scientific or technical personnel services provided by any Affiliate of the CONTRACTOR for the direct benefit of Petroleum Operations, which cost shall be charged on a cost of service basis and shall not include any element of profit. The chargeout rate shall include all costs incurred by Affiliates


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incidental to the employment of such personnel including all Labour and Associated Labour Costs and the cost of maintaining and operating offices and providing all support services for such personnel costs of travel of such personnel in respect of Petroleum Operations will be directly charged. The charges for such services shall not exceed those prevailing if performed by non-affiliated third parties, taking into account the quality and availability of such services. Unless the work to be done by such personnel is covered by an approved Work Program and Budget, the CONTRACTOR shall not authorize work by such personnel without approval of the GOVERNMENT.



(iii) Equipment and facilities: use of equipment and facilities owned and furnished by the CONTRACTOR's Affiliates, at rates commensurate with the cost of ownership and operation; provided, however, that such rates shall not exceed those currently prevailing for the supply of like equipment and facilities on comparable terms in the area where the Petroleum Operations are being conducted and shall be on an arm's length basis. On the request of the GOVERNMENT, the CONTRACTOR shall provide the GOVERNMENT with evidence of such rates being on an arm's length basis. (If the GOVERNMENT considers that any such rate is not on an arm's length basis then the GOVERNMENT has the right to refer the matter to an expert pursuant to Article 42.2 of the Contract). The equipment and facilities referred to herein shall exclude major investment items such as (but not limited to) drilling rigs, producing platforms, oil treating facilities, oil and gas loading and transportation systems, storage and terminal facilities and other major facilities, rates for which shall be subject to separate agreement with the GOVERNMENT.



3.1.5 Communications



Cost of acquiring, leasing, installing, operating, repairing and maintaining communication systems including radio and microwave facilities within and between the Contract Area and the CONTRACTOR's nearest base facility.



3.1.6 Office and Miscellaneous Facilities



Net cost to the CONTRACTOR of establishing, maintaining and operating any office, sub-office, warehouse, housing or other facility directly serving the Petroleum Operations. If any such facility services more than one contract area the net costs thereof shall be allocated on an equitable basis in accordance with prudent international petroleum industry practice.



3.1.7 Ecological and Environment



(a) Costs incurred in the Contract Area as a result of legislation for archaeological and geophysical surveys relating to identification and protection of cultural sites or resources;

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incidental to the employment of such personnel including all Labour and Associated Labour Costs and the cost of maintaining and operating offices and providing all support services for such personnel costs of travel of such personnel in respect of Petroleum Operations will be directly charged. The charges for such services shall not exceed those prevailing if performed by non-affiliated third parties, taking into account the quality and availability of such services. Unless the work to be done by such personnel is covered by an approved Work Program and Budget, the CONTRACTOR shall not authorize work by such personnel without approval of the GOVERNMENT.



(iii) Equipment and facilities: use of equipment and facilities owned and furnished by the CONTRACTOR's Affiliates, at rates commensurate with the cost of ownership and operation; provided, however, that such rates shall not exceed those currently prevailing for the supply of like equipment and facilities on comparable terms in the area where the Petroleum Operations are being conducted and shall be on an arm's length basis. On the request of the GOVERNMENT, the CONTRACTOR shall provide the GOVERNMENT with evidence of such rates being on an arm's length basis. (If the GOVERNMENT considers that any such rate is not on an arm's length basis then the GOVERNMENT has the right to refer the matter to an expert pursuant to Article 42.2 of the Contract). The equipment and facilities referred to herein shall exclude major investment items such as (but not limited to) drilling rigs, producing platforms, oil treating facilities, oil and gas loading and transportation systems, storage and terminal facilities and other major facilities, rates for which shall be subject to separate agreement with the GOVERNMENT.



3.1.5 Communications



Cost of acquiring, leasing, installing, operating, repairing and maintaining communication systems including radio and microwave facilities within and between the Contract Area and the CONTRACTOR's nearest base facility.



3.1.6 Office and Miscellaneous Facilities



Net cost to the CONTRACTOR of establishing, maintaining and operating any office, sub-office, warehouse, housing or other facility directly serving the Petroleum Operations. If any such facility services more than one contract area the net costs thereof shall be allocated on an equitable basis in accordance with prudent international petroleum industry practice.



3.1.7 Ecological and Environment



(a) Costs incurred in the Contract Area as a result of legislation for archaeological and geophysical surveys relating to identification and protection of cultural sites or resources;

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incidental to the employment of such personnel including all Labour and Associated Labour Costs and the cost of maintaining and operating offices and providing all support services for such personnel costs of travel of such personnel in respect of Petroleum Operations will be directly charged. The charges for such services shall not exceed those prevailing if performed by non-affiliated third parties, taking into account the quality and availability of such services. Unless the work to be done by such personnel is covered by an approved Work Program and Budget, the CONTRACTOR shall not authorize work by such personnel without approval of the GOVERNMENT.



(iii) Equipment and facilities: use of equipment and facilities owned and furnished by the CONTRACTOR's Affiliates, at rates commensurate with the cost of ownership and operation; provided, however, that such rates shall not exceed those currently prevailing for the supply of like equipment and facilities on comparable terms in the area where the Petroleum Operations are being conducted and shall be on an arm's length basis. On the request of the GOVERNMENT, the CONTRACTOR shall provide the GOVERNMENT with evidence of such rates being on an arm's length basis. (If the GOVERNMENT considers that any such rate is not on an arm's length basis then the GOVERNMENT has the right to refer the matter to an expert pursuant to Article 42.2 of the Contract). The equipment and facilities referred to herein shall exclude major investment items such as (but not limited to) drilling rigs, producing platforms, oil treating facilities, oil and gas loading and transportation systems, storage and terminal facilities and other major facilities, rates for which shall be subject to separate agreement with the GOVERNMENT.



3.1.5 Communications



Cost of acquiring, leasing, installing, operating, repairing and maintaining communication systems including radio and microwave facilities within and between the Contract Area and the CONTRACTOR's nearest base facility.



3.1.6 Office and Miscellaneous Facilities



Net cost to the CONTRACTOR of establishing, maintaining and operating any office, sub-office, warehouse, housing or other facility directly serving the Petroleum Operations. If any such facility services more than one contract area the net costs thereof shall be allocated on an equitable basis in accordance with prudent international petroleum industry practice.



3.1.7 Ecological and Environment



(a) Costs incurred in the Contract Area as a result of legislation for archaeological and geophysical surveys relating to identification and protection of cultural sites or resources;

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incidental to the employment of such personnel including all Labour and Associated Labour Costs and the cost of maintaining and operating offices and providing all support services for such personnel costs of travel of such personnel in respect of Petroleum Operations will be directly charged. The charges for such services shall not exceed those prevailing if performed by non-affiliated third parties, taking into account the quality and availability of such services. Unless the work to be done by such personnel is covered by an approved Work Program and Budget, the CONTRACTOR shall not authorize work by such personnel without approval of the GOVERNMENT.



(iii) Equipment and facilities: use of equipment and facilities owned and furnished by the CONTRACTOR's Affiliates, at rates commensurate with the cost of ownership and operation; provided, however, that such rates shall not exceed those currently prevailing for the supply of like equipment and facilities on comparable terms in the area where the Petroleum Operations are being conducted and shall be on an arm's length basis. On the request of the GOVERNMENT, the CONTRACTOR shall provide the GOVERNMENT with evidence of such rates being on an arm's length basis. (If the GOVERNMENT considers that any such rate is not on an arm's length basis then the GOVERNMENT has the right to refer the matter to an expert pursuant to Article 42.2 of the Contract). The equipment and facilities referred to herein shall exclude major investment items such as (but not limited to) drilling rigs, producing platforms, oil treating facilities, oil and gas loading and transportation systems, storage and terminal facilities and other major facilities, rates for which shall be subject to separate agreement with the GOVERNMENT.



3.1.5 Communications



Cost of acquiring, leasing, installing, operating, repairing and maintaining communication systems including radio and microwave facilities within and between the Contract Area and the CONTRACTOR's nearest base facility.



3.1.6 Office and Miscellaneous Facilities



Net cost to the CONTRACTOR of establishing, maintaining and operating any office, sub-office, warehouse, housing or other facility directly serving the Petroleum Operations. If any such facility services more than one contract area the net costs thereof shall be allocated on an equitable basis in accordance with prudent international petroleum industry practice.



3.1.7 Ecological and Environment



(a) Costs incurred in the Contract Area as a result of legislation for archaeological and geophysical surveys relating to identification and protection of cultural sites or resources;

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incidental to the employment of such personnel including all Labour and Associated Labour Costs and the cost of maintaining and operating offices and providing all support services for such personnel costs of travel of such personnel in respect of Petroleum Operations will be directly charged. The charges for such services shall not exceed those prevailing if performed by non-affiliated third parties, taking into account the quality and availability of such services. Unless the work to be done by such personnel is covered by an approved Work Program and Budget, the CONTRACTOR shall not authorize work by such personnel without approval of the GOVERNMENT.



(iii) Equipment and facilities: use of equipment and facilities owned and furnished by the CONTRACTOR's Affiliates, at rates commensurate with the cost of ownership and operation; provided, however, that such rates shall not exceed those currently prevailing for the supply of like equipment and facilities on comparable terms in the area where the Petroleum Operations are being conducted and shall be on an arm's length basis. On the request of the GOVERNMENT, the CONTRACTOR shall provide the GOVERNMENT with evidence of such rates being on an arm's length basis. (If the GOVERNMENT considers that any such rate is not on an arm's length basis then the GOVERNMENT has the right to refer the matter to an expert pursuant to Article 42.2 of the Contract). The equipment and facilities referred to herein shall exclude major investment items such as (but not limited to) drilling rigs, producing platforms, oil treating facilities, oil and gas loading and transportation systems, storage and terminal facilities and other major facilities, rates for which shall be subject to separate agreement with the GOVERNMENT.



3.1.5 Communications



Cost of acquiring, leasing, installing, operating, repairing and maintaining communication systems including radio and microwave facilities within and between the Contract Area and the CONTRACTOR's nearest base facility.



3.1.6 Office and Miscellaneous Facilities



Net cost to the CONTRACTOR of establishing, maintaining and operating any office, sub-office, warehouse, housing or other facility directly serving the Petroleum Operations. If any such facility services more than one contract area the net costs thereof shall be allocated on an equitable basis in accordance with prudent international petroleum industry practice.



3.1.7 Ecological and Environment



(a) Costs incurred in the Contract Area as a result of legislation for archaeological and geophysical surveys relating to identification and protection of cultural sites or resources;

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incidental to the employment of such personnel including all Labour and Associated Labour Costs and the cost of maintaining and operating offices and providing all support services for such personnel costs of travel of such personnel in respect of Petroleum Operations will be directly charged. The charges for such services shall not exceed those prevailing if performed by non-affiliated third parties, taking into account the quality and availability of such services. Unless the work to be done by such personnel is covered by an approved Work Program and Budget, the CONTRACTOR shall not authorize work by such personnel without approval of the GOVERNMENT.



(iii) Equipment and facilities: use of equipment and facilities owned and furnished by the CONTRACTOR's Affiliates, at rates commensurate with the cost of ownership and operation; provided, however, that such rates shall not exceed those currently prevailing for the supply of like equipment and facilities on comparable terms in the area where the Petroleum Operations are being conducted and shall be on an arm's length basis. On the request of the GOVERNMENT, the CONTRACTOR shall provide the GOVERNMENT with evidence of such rates being on an arm's length basis. (If the GOVERNMENT considers that any such rate is not on an arm's length basis then the GOVERNMENT has the right to refer the matter to an expert pursuant to Article 42.2 of the Contract). The equipment and facilities referred to herein shall exclude major investment items such as (but not limited to) drilling rigs, producing platforms, oil treating facilities, oil and gas loading and transportation systems, storage and terminal facilities and other major facilities, rates for which shall be subject to separate agreement with the GOVERNMENT.



3.1.5 Communications



Cost of acquiring, leasing, installing, operating, repairing and maintaining communication systems including radio and microwave facilities within and between the Contract Area and the CONTRACTOR's nearest base facility.



3.1.6 Office and Miscellaneous Facilities



Net cost to the CONTRACTOR of establishing, maintaining and operating any office, sub-office, warehouse, housing or other facility directly serving the Petroleum Operations. If any such facility services more than one contract area the net costs thereof shall be allocated on an equitable basis in accordance with prudent international petroleum industry practice.



3.1.7 Ecological and Environment



(a) Costs incurred in the Contract Area as a result of legislation for archaeological and geophysical surveys relating to identification and protection of cultural sites or resources;

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incidental to the employment of such personnel including all Labour and Associated Labour Costs and the cost of maintaining and operating offices and providing all support services for such personnel costs of travel of such personnel in respect of Petroleum Operations will be directly charged. The charges for such services shall not exceed those prevailing if performed by non-affiliated third parties, taking into account the quality and availability of such services. Unless the work to be done by such personnel is covered by an approved Work Program and Budget, the CONTRACTOR shall not authorize work by such personnel without approval of the GOVERNMENT.



(iii) Equipment and facilities: use of equipment and facilities owned and furnished by the CONTRACTOR's Affiliates, at rates commensurate with the cost of ownership and operation; provided, however, that such rates shall not exceed those currently prevailing for the supply of like equipment and facilities on comparable terms in the area where the Petroleum Operations are being conducted and shall be on an arm's length basis. On the request of the GOVERNMENT, the CONTRACTOR shall provide the GOVERNMENT with evidence of such rates being on an arm's length basis. (If the GOVERNMENT considers that any such rate is not on an arm's length basis then the GOVERNMENT has the right to refer the matter to an expert pursuant to Article 42.2 of the Contract). The equipment and facilities referred to herein shall exclude major investment items such as (but not limited to) drilling rigs, producing platforms, oil treating facilities, oil and gas loading and transportation systems, storage and terminal facilities and other major facilities, rates for which shall be subject to separate agreement with the GOVERNMENT.



3.1.5 Communications



Cost of acquiring, leasing, installing, operating, repairing and maintaining communication systems including radio and microwave facilities within and between the Contract Area and the CONTRACTOR's nearest base facility.



3.1.6 Office and Miscellaneous Facilities



Net cost to the CONTRACTOR of establishing, maintaining and operating any office, sub-office, warehouse, housing or other facility directly serving the Petroleum Operations. If any such facility services more than one contract area the net costs thereof shall be allocated on an equitable basis in accordance with prudent international petroleum industry practice.



3.1.7 Ecological and Environment



(a) Costs incurred in the Contract Area as a result of legislation for archaeological and geophysical surveys relating to identification and protection of cultural sites or resources;

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Inventories of property in use in Petroleum Operations shall be taken at reasonable intervals but at least once a year with respect to movable assets and once every three (3) years with respect to immovable assets. The CONTRACTOR shall give the Government at least thirty (30) days written notice of its intention to take such inventory and the GOVERNMENT shall have the right to be represented when such inventory is taken.



Failure of the GOVERNMENT to be represented at an inventory shall bind the GOVERNMENT to accept the inventory taken by the CONTRACTOR.



The CONTRACTOR shall clearly inform GOVERNMENT about the principles upon which valuation of the inventory has been based. The CONTRACTOR shall make every effort to provide to the GOVERNMENT a full report on such inventory within thirty (30) days of the taking of the inventory. When an assignment of rights under the Contract takes place the CONTRACTOR may, st the request of the assignee, take a special inventory provided that the costs of such inventory are borne by the assignee.



PARAGRAPH 6 - PRODUCTION STATEMENT



6.1 Production Information



Without prejudice to the rights and obligations of the Parties under Article 16 of the Contract, from the date of First Production from the Contract Area the CONTRACTOR shall submit a monthly production statement to the GOVERNMENT showing the following information separately for each producing Development Area and in aggregate for the Contract Area.



6.1.1 The quantity of Crude Oil produced and saved.



6.1.2 The quality characteristics of such Crude oil produced and saved.



6.1.3 The quantity of Natural Gas produced and saved.



6.1.4 The quality characteristics of such Natural Gas produced and saved.



6.1.5 The quantities of Crude Oil and Natural Gas used for the purposes of carrying on drilling and production operations and pumping to field storage.



6.1.6 The quantities of Crude Oil and Natural Gas unavoidably lost.



6.1.7 The quantities of Natural Gas flared and vented



6.1.8 The size of Petroleum stocks held at the beginning of the calendar Month in question



6.1.9 The size of Petroleum stocks held at the end of the calendar Month in question.



6.1.10 The quantities of Natural Gas reinjected into the Reservoir.

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Inventories of property in use in Petroleum Operations shall be taken at reasonable intervals but at least once a year with respect to movable assets and once every three (3) years with respect to immovable assets. The CONTRACTOR shall give the Government at least thirty (30) days written notice of its intention to take such inventory and the GOVERNMENT shall have the right to be represented when such inventory is taken.



Failure of the GOVERNMENT to be represented at an inventory shall bind the GOVERNMENT to accept the inventory taken by the CONTRACTOR.



The CONTRACTOR shall clearly inform GOVERNMENT about the principles upon which valuation of the inventory has been based. The CONTRACTOR shall make every effort to provide to the GOVERNMENT a full report on such inventory within thirty (30) days of the taking of the inventory. When an assignment of rights under the Contract takes place the CONTRACTOR may, st the request of the assignee, take a special inventory provided that the costs of such inventory are borne by the assignee.



PARAGRAPH 6 - PRODUCTION STATEMENT



6.1 Production Information



Without prejudice to the rights and obligations of the Parties under Article 16 of the Contract, from the date of First Production from the Contract Area the CONTRACTOR shall submit a monthly production statement to the GOVERNMENT showing the following information separately for each producing Development Area and in aggregate for the Contract Area.



6.1.1 The quantity of Crude Oil produced and saved.



6.1.2 The quality characteristics of such Crude oil produced and saved.



6.1.3 The quantity of Natural Gas produced and saved.



6.1.4 The quality characteristics of such Natural Gas produced and saved.



6.1.5 The quantities of Crude Oil and Natural Gas used for the purposes of carrying on drilling and production operations and pumping to field storage.



6.1.6 The quantities of Crude Oil and Natural Gas unavoidably lost.



6.1.7 The quantities of Natural Gas flared and vented



6.1.8 The size of Petroleum stocks held at the beginning of the calendar Month in question



6.1.9 The size of Petroleum stocks held at the end of the calendar Month in question.



6.1.10 The quantities of Natural Gas reinjected into the Reservoir.

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8.1.5 Quality and value of Petroleum applied to cost recovery pursuant to Article 25 taken

by the CONTRACTOR for the Quarter in question.



8.1.6 Amount of recoverable Petroleum Costs to be carried forward into the next Quarter

(Paragraph 8.1.4 net of Paragraph 8.1.5).



8.2. Cumulative Production Statement



The CONTRACTOR shall prepare with respect to each Quarter a Cumulative

Production Statement containing the following information:



8.2.1 The cumulative production position at the end of the Quarter preceding the Quarter in

question



8.2.2 Production of Export Petroleum for the Quarter in question



8.2.4 The cumulative production position at the end of the Quarter in question



8.2.5 The amount of Petroleum applied to Royalty pursuant to Article 24, cost recovery

pursuant to Article 25 and Profit Petroleum pursuant to Article 26 taken by the

GOVERNMENT and by the CONTRACTOR, respectively, for the next

succeeding Quarter



8.2.6 The forecast of production and the share of Petroleum applied to Royalty pursuant to

Article 24, cost recovery pursuant to Article 25 and Profit Oil pursuant to Article 26

due to the GOVERNMENT and to the CONTRACTOR, respectively for the next

succeeding Quarter



8.3 Preparation and Submission of Cost Recovery and Cumulative Production

Statements



8.3.1 Provisional Cost Recovery and Cumulative Production Statements, containing

estimated information where necessary, shall be submitted by the CONTRACTOR

on the last day of each Quarter for the purposes of Article 25 of the Contract



8.3.2 Final quarterly Cost Recovery and Cumulative Production Statements shall be

submitted within thirty (30) days of the end of the Quarter in question



8.4 Annual Statement



For the Purposes of Article 25 of the Contract, an Annual Cost Recovery and

Cumulative Production Statement shall be submitted within ninety (90) days of the

end of each Year. The Annual Statement shall contain the categories of information

listed in Paragraphs 8.1 and 8.2 for the Year in question, separated into the Quarter

of the Year in question and showing the cumulative positions at the end of the Year in

question with respect to cumulative unrecovered Petroleum Costs and Cumulative

Production.




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8.1.5 Quality and value of Petroleum applied to cost recovery pursuant to Article 25 taken

by the CONTRACTOR for the Quarter in question.



8.1.6 Amount of recoverable Petroleum Costs to be carried forward into the next Quarter

(Paragraph 8.1.4 net of Paragraph 8.1.5).



8.2. Cumulative Production Statement



The CONTRACTOR shall prepare with respect to each Quarter a Cumulative

Production Statement containing the following information:



8.2.1 The cumulative production position at the end of the Quarter preceding the Quarter in

question



8.2.2 Production of Export Petroleum for the Quarter in question



8.2.4 The cumulative production position at the end of the Quarter in question



8.2.5 The amount of Petroleum applied to Royalty pursuant to Article 24, cost recovery

pursuant to Article 25 and Profit Petroleum pursuant to Article 26 taken by the

GOVERNMENT and by the CONTRACTOR, respectively, for the next

succeeding Quarter



8.2.6 The forecast of production and the share of Petroleum applied to Royalty pursuant to

Article 24, cost recovery pursuant to Article 25 and Profit Oil pursuant to Article 26

due to the GOVERNMENT and to the CONTRACTOR, respectively for the next

succeeding Quarter



8.3 Preparation and Submission of Cost Recovery and Cumulative Production

Statements



8.3.1 Provisional Cost Recovery and Cumulative Production Statements, containing

estimated information where necessary, shall be submitted by the CONTRACTOR

on the last day of each Quarter for the purposes of Article 25 of the Contract



8.3.2 Final quarterly Cost Recovery and Cumulative Production Statements shall be

submitted within thirty (30) days of the end of the Quarter in question



8.4 Annual Statement



For the Purposes of Article 25 of the Contract, an Annual Cost Recovery and

Cumulative Production Statement shall be submitted within ninety (90) days of the

end of each Year. The Annual Statement shall contain the categories of information

listed in Paragraphs 8.1 and 8.2 for the Year in question, separated into the Quarter

of the Year in question and showing the cumulative positions at the end of the Year in

question with respect to cumulative unrecovered Petroleum Costs and Cumulative

Production.




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11.1.3

A schedule showing the most important individual items of Development Costs (if applicable) for said budget Year.



PARAGRAPH 13 - CONTRACTOR ENTITY INCOME TAX COMPUTATION



13.1

For the purpose of Article 31.3(b) of the Contract, the net taxable profits of each CONTRACTOR Entity from all the Petroleum Operations carried out under this Contract, shall be calculated in accordance with this Paragraph.



13.2

Each CONTRACTOR Entity shall maintain for each Calendar Year separate Accounts with respect to the Petroleum Operations which shall be sued, inter alia, to establish a profit and loss account and a balance sheet which will show the results of the Petroleum Operations carried out in such Calendar Year as well as the assets and liabilities assigned or directly related thereto. The profit and loss account will be maintained under the accrual method of accounting.



13.3

For purposes of determining the net taxable profits of each CONTRACTOR Entity for corporate income tax purposes:



13.3.1

the profit and loss account of such CONTRACTOR Entity shall be credited with the following:

(a) if the Royalty is paid in cash pursuant to Article 24, revenues arising from the disposal of Royalty volumes as recorded in such entity's Accounts and determined in accordance with the provisions of Article 24;

(b) revenues arising from the disposal of any Available Petroleum to which such entity is entitled for recovery of its Petroleum Costs as recorded in its Accounts and determined in accordance with the provisions of Article 25;

(c) revenues from the disposal of any Profit Petroleum to which such entity is entitled under Article 26 as is recorded in its Accounts and determined in accordance with the provisions of Article 26;

(d) any other revenues or proceeds directly connected to the Petroleum Operations including those arising from the disposal of related Petroleum substances, or from the treatment, storage and transportation of products for third parties;

(e) any exchange gains realised or other financial income earned by such entity in connection with the petroleum Operations;



13.3.2

the profit and loss account for such CONTRACTOR Entity shall be debited with all charges incurred for the purposes of the Petroleum Operations whether incurred inside or outside the Kurdistan Region, which charges shall include the following:



(a) in addition to the charges specifically set forth below in this Paragraph, all other Petroleum Costs, including the costs of supplies, personnel and manpower expenses, and the cost of services provided to the CONTRACTOR in connection with the Petroleum Costs;

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(b) if the Royalty is paid in cash pursuant to Article 24, Royalty payment made and as recorded in such entityâs Accounts and determined in accordance with the provisions of Article 24;



(c) General and administrative expenditures related to the Petroleum Operations performed under this Contract;



(d) depreciation of capital expenditure in accordance with the following provisions:



(i) Capital expenditures incurred by the CONTRACTOR for the purposes of the Petroleum Operation shall be depreciated on a reducing balance basis;



(ii) The depreciation rates, which shall be applicable from the Calendar Year during which such capital expenditures are incurred, or from the Calendar Year during which the assets corresponding to said capital expenditures are put into normal service, whichever is later, for the first Calendar Year in question and for each subsequent Calendar Year, are as follows:



Nature of the capital asset to be depreciated                            Annual depreciation Rate
Permanent buildings                                                                                10.0%
Temporary buildings                                                                                20.0%
Office and home                                                                                      20.0%
Productive wells                                                                                       20.0%
Production and delivery equipment                                                         20.0%
Drilling equipment                                                                                    20.0%
Drilling equipment                                                                                    20.0%
Pipelines                                                                                                  20.0%
Automotive equipment                                                                             20.0%
Marine and aviation equipment                                                                20.0%
All other capital assets                                                                             20.0%


(c) Exploration Costs (which for the avoidance of doubt include appraisal expenditures) shall be deductible on a reducing balance basis at the rate of 20% per annum.



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(b) if the Royalty is paid in cash pursuant to Article 24, Royalty payment made and as recorded in such entityâs Accounts and determined in accordance with the provisions of Article 24;



(c) General and administrative expenditures related to the Petroleum Operations performed under this Contract;



(d) depreciation of capital expenditure in accordance with the following provisions:



(i) Capital expenditures incurred by the CONTRACTOR for the purposes of the Petroleum Operation shall be depreciated on a reducing balance basis;



(ii) The depreciation rates, which shall be applicable from the Calendar Year during which such capital expenditures are incurred, or from the Calendar Year during which the assets corresponding to said capital expenditures are put into normal service, whichever is later, for the first Calendar Year in question and for each subsequent Calendar Year, are as follows:



Nature of the capital asset to be depreciated                            Annual depreciation Rate
Permanent buildings                                                                                10.0%
Temporary buildings                                                                                20.0%
Office and home                                                                                      20.0%
Productive wells                                                                                       20.0%
Production and delivery equipment                                                         20.0%
Drilling equipment                                                                                    20.0%
Drilling equipment                                                                                    20.0%
Pipelines                                                                                                  20.0%
Automotive equipment                                                                             20.0%
Marine and aviation equipment                                                                20.0%
All other capital assets                                                                             20.0%


(c) Exploration Costs (which for the avoidance of doubt include appraisal expenditures) shall be deductible on a reducing balance basis at the rate of 20% per annum.



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