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MODEL

PRODUCTION SHARING CONTRACT



BETWEEN



THE REPUBLIC OF LIBERIA



REPRESENTED BY THE NATIONAL OIL

COMPANY OF LIBERIA

AND

CONTRACTOR X



OFFSHORE BLOCK Y



PRODUCTION SHARING CONTRACT



BETWEEN

The Republic of Liberia, (STATE) represented for the purposes of this Contract by

the National Oil Company of Liberia (NOCAL), a company incorporated under the

laws of Liberia;



AND

____________, a company incorporated in the jurisdiction of the (_________),

hereinafter referred to as “the Contractor”.



WHEREAS





the discovery and exploitation of petroleum are important for the interest and

the economic development of the country and its people;







NOCAL wishes to undertake operations for exploration for exploitation,

transportation, storage, processing and marketing of petroleum;







NOCAL has the mining rights in respect of Petroleum exploration and

exploitation over the entirety of available areas in Liberia including the

Delimited Area defined hereinafter;







NOCAL wishes to promote the development of the Delimited Area, and the

Contractor wishes to cooperate with NOCAL by assisting it in the exploration

for and production of the potential resources within the Delimited Area, and

thereby encouraging the economic growth of the country;







The company which is a Party to this Contract shall be the Contractor; and







The Contractor represents that it has the financial resources, the technical

competence and the organization capacity necessary to carry out in the

Delimited Area the Petroleum Operations specified hereinafter.



NOW THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:



ARTICLE 1

DEFINITIONS

The following terms used in this contract shall have the following meaning:

1.1



ASSOCIATED NATURAL GAS means Natural Gas, which exists in the

reservoir with Crude Oil, which is or could be produced in association with

Crude Oil.



1.2



APPRAISAL PREIMETER means any part of the Delimited Area where

one or more Petroleum discoveries have been made, and in respect of which

NOCAL has granted to the Contractor an exclusive appraisal authorization for

the purpose of appraising the extent of said discoveries.



1.3



ANNUAL WORK PROGRAM means the document describing, item by

item, the Petroleum Operations to be carried out during a Calendar Year

within the Delimited Area and in each Exploration Perimeter, if any,

established in accordance with the Contract.



1.4



ARMS LENGTH SALES. For the purpose of determining arms length

sales, the price of Crude Oil will generally be based n a per barrel basis of one

or more Crude Oil blends which at the time of calculation are being freely and

actively traded in the international oil market and have similar characteristics

and quality to t he Crude Oil being marketed. The price for such Crude Oil

will be ascertained from Platt’s Crude Oil Market Wire daily publication or

the spot market for the same Crude Oil ascertained in a similar manner.

1.5 AFFILIATED COMPANY means:

1.25.1 a company or any other entity which directly or indirectly controls or is

controlled by any entity constituting the Contractor; or

1.25.2 a company or any other entity which directly or indirectly controls or is

controlled by a company or entity which itself directly or indirectly

controls any entity constituting the Contractor.

Such “control” means direct or indirect ownership by a company or any

other entity or more than fifty percent (50%) of the shares, conferring

voting rights, forming the stock or another company.



1.6



BARREL means U.S. barrel, i.e., 42 U.S. gallons measured at a temperature

of 60o F and under an atmospheric pressure.



1.7



BUDGET means the itemized cost estimates of the Petroleum Operations

described in an Annual Work Program.



1.8



CALENDAR YEAR means a period of twelve (12) consecutive months

beginning on January first (1st) and ending on the following December thirtyfirst (31 st), according to the Gregorian calendar.



1.9



CONTRACT YEAR means a period of twelve (12) consecutive months

beginning on the Effective Date or on the anniversary thereof.



1.10



CRUDE OIL means crude mineral oil, asphalt, ozokerite, and all kinds of

Petroleum and bitumen, either solid or liquid in their natural condition or

obtained from Natural Gas by condensation or extraction, including

condensates and Natural Gas liquids.



1.11



CONTRACTOR means _____________ and any of its successors and

permitted assigns that shall act as operator and shall conduct Petroleum

Operations.



1.12



CONTRACT means this Production Sharing Contract and its appendices

forming an integral part hereof, together with any extension, renewal,

replacement or modification hereto, which may be mutually agreed between

the Parties.



1.13



DELIVERY POINT means the F. O. B. point connection the loading

facilities to the vessel when loading Crude Oil in the Republic of Liberia or

any other transfer point mutually agreed between the Parties.



1.14



FISCAL YEAR means a period of twelve (12) consecutive months

beginning on January first (1st) and ending on the following December thirtyfirst (31 st).



1.15



EFFECTIVE DATE means the date on which this Contract comes into

force and effect, as defined in Article 37.



1.16



PETROLEUM COSTS means all expenditures actually incurred and paid

by the Contract for the purposes of the Petroleum Operations under this

Contract, and determined in accordance with the Accounting Procedure

attached hereto as Appendix 2.



1.17



DOLLAR means dollar of the United States of America.



1.18



DELIMITED AREA means the area in respect of which NOCAL under this

Contract, grants to the Contractor an exclusive exploration right. The areas

surrendered by the Contractor in accordance with the provisions of Articles

3.5 and 3.6 shall be deemed as excluded from the Delimited Area, which shall

be reduced accordingly. Conversely, the Exploration Perimeter(s) shall be an

integral part of the Delimited Area during the term of the relevant exclusive

exploration authorization.



1.19



EXPLOITATION PERIMETER means any part of the Delimited Area in

respect of which NOCAL has granted to the Contractor an exclusive

exploitation authorization.



1.20



FIELD means a commercial accumulation of Petroleum in one or several

overlaying horizons, which has been appraised in accordance with the

provisions of Article 11.



1.21



NATURAL GAS means methane, ethane, propane, butane and dry or wet

gaseous hydrocarbons, whether or not associated with Crude Oil, as well as

gaseous products extracted in association with Petroleum, such as without

limitation, nitrogen, hydrogen sulfide, carbon dioxide, helium and water

vapor.



1.22



NON-ASSOCIATED NATRURAL GAS means Natural Gas other than

Associated Natural Gas.



1.23



PETROLEUM OPERATIONS means Crude Oil and Natural Gas.



1.24



PARTIES means NOCAL and the Contractor; and PARTY means either

NOCAL or the Contractor.



1.25



TOTAL PRODUCTION means the total production of Crude Oil or the

total production or Natural Gas obtained from the whole Delimited Area less

the quantities used for the requirements of the Petroleum Operations and any

unavoidable losses.



1.26



THRID PARTY means a company or any other entity, other than the

Contractor, which does not come within the foregoing definition.



ARTICLE 2

SCOPE OF THE CONTRACT



2.1



The Contract is a Production Sharing Contract and includes all the provisions of

the agreement between NOCAL and the Contractor.



2.2



NOCAL authorizes the Contractor to be the Operator pursuant to the terms set

forth herein and to carry out the useful and necessary Petroleum Operations in

the Delimited Area, on an exclusive basis.



2.3



The Contractor under takes, for all the work necessary for carrying out the

Petroleum Operations provided for hereunder, to comply with good international

petroleum industry practice and to be subject to the laws and regulations in force

in Liberia unless otherwise provided under this Contract.



2.4



The Contractor shall supply all financial and technical means necessary for the

proper performance of the Petroleum Operations.



2.5



The Contractor shall bear alone the financial risk associated with the

performance of the Petroleum Operations. The Petroleum Costs related thereto

shall be recoverable by the Contractor in accordance with the provisions or

Article 16.2.



2.6



During the term hereof, in the event of production, the Total Production arising

from the Petroleum Operations shall be shared between the Parties according to

the terms set forth in Articles 16.2 and 16.3.



2.7



On the Effective Date, the Delimited Area shall be the area as defined in

Appendix 1.



2.8



The Contractor shall furnish NOCAL with all reports, information and data

referred to hereunder, including without limitation any agreement, for the

provision of goods and services in respect of Petroleum Operations in excess of

$100,000, binding on the entities constituting the Contractor.



ARTICLE 3

DURATION OF EXPLORATION PERIODS AND

SURRENDERS

3.1



The exclusive exploration authorization is hereby granted to the Contractor for a

period of __________consecutive years defined by three consecutive periods.

A first Exploration Period of ________ Contract Years, a second Exploration

Period of _______ Contract Years and the third Exploration Period of _______

Contract Years in respect of the entire Delimited Area.



3.2



If during the first exploration period set forth above the Contractor has fulfilled

the exploration work commitments defined in Article 4, as ascertained by the

Government, the exclusive exploration authorization shall, at the Contractor’s

request, be renewed for a second exploration period of _______ Contract Years.



3.3



If, at the end of such second exploration period and provided that is has fulfilled

its work commitments as set forth above, the Contract so request, a third

exploration period shall be authorized for two (2) Contractual Years.



3.4



The applications referred to in Articles 3.2 and 3.3 shall be made at least sixty

(60) days prior to the expiration of the current exploration period.



3.5



The Contractor shall surrender at least the following surfaces:

a. Twenty-five percent (25%) of the initial surface of the Delimited Area at

the expiration of the first exploration period.

b. Twenty-five percent (25%) of the initial surface of the Delimited Area at

the expiration of the second exploration period.

Such surrenders shall be constituted of one block of a simple geometrical shape

delimited by north-south, east-west lines or by natural boundaries of the area

concerned.

For the purpose of computing the surface to be surrendered, the surface in

respect to any Exploration Perimeter shall be deducted form the initial surface of

the Delimited Area.

The surfaces previously surrendered pursuant to the provisions of Article 3.6

shall be deducted for the surfaces to be surrendered.

Subject to its compliance with the above-mentioned requirements, the

Contractor shall have the right to determine the area to be surrendered.



The Contractor undertakes to furnish NOCAL with a precise description and a

map showing the details of the surrendered areas and those retained, together

with a report specifying the work carried out in the surrendered areas from the

Effective Date and the results obtained.

3.6



During any exploration period, the contractor may, at any time, notify NOCAL

that it surrenders the whole or any part of the Delimited Area and the rights

granted to it by giving sixty (60) day’s notice to that effect.

No surrender during or at the expiration of any exploration period shall reduce

the work commitments and the investment obligations set forth in Article 4 for

the current exploration period.

In the event of surrender, the Contractor shall have the exclusive right to retain,

for their respective term, the surfaces in respect of respect of Appraisal

Perimeters and Exploitation Perimeters which would have been granted and to

carryout the Petroleum Operations therein.



3.7



At the expiration of the third exploration period set forth in Article 3.3, the

Contractor shall surrender the whole remaining surface of the Delimited Area

expect as to any Appraisal Perimeters and Exploitation Perimeters which would

have then been granted.



3.8



If at the expiration of all the exploration periods the Contractor has not obtained

an exclusive appraisal authorization or an exclusive exploitation authorization,

this Contractor shall terminate.

If an exploratory well is operating at the expiry of an exploration period, then

NOCAL shall grant Contractor an extension of the exclusive exploration

authorization of 60 days (after the exploration well is terminated and the rig

released) in order to evaluate the results of the well.



3.9



The termination of this Contract, whatever the reason thereof, shall not relieve

the Contractor of any obligations under this Contracts incurred prior to, or

arising from, said termination and which shall be fulfilled.



ARTICLE 4

EXPLORATION WORK COMMITMENTS

4.1



The Contractor shall commence the geological and seismic work within three

months from the Effective Date.



4.2



The Contractor, during the first exploration period defined in Article 3.1, shall

carry out a minimum work programme at a cost of no less than _________

million Dollars which includes a 3D Seismic Survey of _______square km and

the drilling of _______ exploration well.



4.3



The Contractor, during the second exploration period defined in Article 3.1,

shall carry out a minimum work programme at a cost of no less than ________

million Dollars including a commitment to drill _______ exploration well (s) .



4.4



The Contractor, during the third exploration period defined in Article 3.1, shall

carry out a minimum work programme at a cost no less than ________ million

Dollars including a commitment to drill _______ exploration well (s).



4.5 Each of the exploratory wells shall be drilled to a minimum depth of

___________________ meters, after deduction of the water depth, or to a lesser

depth if the continuation of drilling performed in accordance with good

international petroleum industry practice is prevented for any of the following

reasons:

(a)

(b)

(c)

(d)



The basement is encountered at a lesser depth than the minimum

contractual depth;

Continuation of drilling presents an obvious danger due to the existence of

abnormal formation pressure;

Rock formations are encountered the hardness of which prevents, in

practice, the continuation of drilling by the use of appropriate equipment;

Petroleum formations are encountered the crossing of which requires, for

their protection, the laying of casing preventing the minimum contractual

depth from being reached.



In the event that any of the above reasons occurs, the exploratory well shall be

deemed to have been drilled to the minimum contractual depth.

Notwithstanding any provision in this Article to the contrary, NOCAL and the

Contractor may, at any time, agree to abandon the drilling of a well at a lesser

depth than the minimum contractual depth.

In order to carry out the exploration drilling defined in Article 4.3 and 4.4 in the

best technical conditions in accordance with good international petroleum industry

practice, the Contractor undertakes to make the expenditure required to meet the

objectives of the well work programme which will include drilling and as

appropriate, testing.



4.6



If during the exploration period the Contractor has performed its work

commitments for an amount lesser than the amount specified above, it shall be

deemed to have fulfilled its investment obligations relating to that period.

Conversely, the Contractor shall perform the entirety of its work commitments

set forth in respect of an exploration period even if it results in exceeding the

amount specified above for that period.



4.7



If at the expiration of any of the three (3) exploration periods defined in Articles

3.1, 3.2 and 3.3 or upon the date of surrender of the whole Delimited Area, or

upon the date of termination of this Contract, the Contractor has not fulfilled its

applicable work commitments set forth in this Article, it shall pay as

compensation to NOCAL, within thirty (30) days after that date of expiration,

surrender or termination, the unspent balance of exploration work commitments

above-defined for the current exploration period.



ARTICLES 5

ESTABLISHMENT AND APPROVAL OF ANNUAL WORK

PROGRAMS AND BUDGETS

5.1 At least three (3) months before the beginning of each Calendar Year, or for the

first year, within one (1) month from the Effective Date, the Contractor shall

prepare and submit for approval to NOCAL an Annual Work Program together

with the related Budget for the entire Delimited Area, specifying the Petroleum

Operations that the Contractor proposes to perform during the Calendar Year and

their cost.

5.2 If NOCAL wishes to propose any revisions or modifications to the Petroleum

Operations specified in said Annual Work Program, it shall, within thirty (30)

days after receipt of the program, so notify the Contractor, presenting all

justifications deemed useful. In that event, NOCAL and the Contractor shall meet

as soon as possible to consider the proposed revisions or modifications and to

mutually establish the Annual Work Program and the related Budget in its final

form, in accordance with good international petroleum industry practice.

However, during the Exploration Period, the Annual Work Program and the

related Budget established by the Contractor after the above mentioned meeting

shall be deemed to be approved provided that they comply with the obligations set

forth in Article 4 and provided that any increase in expenditure is mutually agreed

by NOCAL and the Contractor in the forum of a Joint Operations Committee

according to the terms of Article 5.5.

Each part of the Annual Work Program and Budget in respect of which NOCAL

has not proposed any revision or modification within the period of thirty (30) days

above-mentioned, shall be carried out by the Contractor within the stated time.

5.3 Should NOCAL fail to notify the Contractor of its wish for revision or

modification within the period of thirty (30) days above-mentioned, such Annual

Work Program and the related Budget submitted by the Contractor shall be

deemed to be approved by NOCAL. It is agreed by NOCAL and the Contractor

that the Contractor may acquire knowledge as and when the work is implemented

or certain events may justify changes to the details of the Annual Work Program.

In that event, after notification to NOCAL, the Contractor may make such changes

provided that the basic objectives of said Annual Work Program are not modified.

5.4 Whenever NOCAL is required to exercise its discretion or its approval is required

under this Agreement, it shall exercise its discretion or grant its approval on the

basis of the efficient and economic conduct of Petroleum Operations in respect of

the Delimited Area and in accordance with good international oil industry

practice.

5.5 At the commencement of the first Exploration Period NOCAL and the Contractor

shall form a Joint Operations Committee (JOC) consisting of not more than three

(3) members appointed by NOCAL and not more than three (3) members



appointed by the Contractor. The purpose of this JOC will be to review present

and future Petroleum Operations and report jointly to NOCAL and the Contractor.

5.6 The JOC shall meet twice every calendar year or as otherwise agreed by the

members. No meeting of the JOC shall be held unless two (2) members each

appointed by the Contractor and NOCAL are present.

5.7 The Contractor shall appoint the first Chairman of the JOC who shall hold office

until the second anniversary following the Effective Date. Thereafter, NOCAL

and the Contractor shall have the alternating right to nominate a Chairman of the

JOC who shall hold office for a period of two (2) years.

5.8 All costs of the meeting of the JOC shall be borne by the Contractor and these

costs will be regarded as recoverable costs. Members of the JOC shall be entitled

to sitting fees for attendance at the JOC (payable by the Contractor) in such

amounts as are agreed by NOCAL and the Contractor.



ARTICLE 6



CONTRACTOR’S OBLIGATIONS IN RESPECT OF THE

EXPLORATION PERIODS AND ENVIRONMENTAL

MANAGEMENT

6.1 The Contractor shall provide all the necessary funds and purchase or hire all the

equipment, facilities and materials required to carry out the Petroleum

Operations.

6.2 The Contractor shall provide all technical assistance, including the personnel

required to carry out the Petroleum Operations.

6.3 The Contractor shall be responsible for the preparation and performance of the

Annual Work Programs which shall be carried out in the most appropriate

manner in observance of good international petroleum industry practice.

6.4 The Contractor undertakes to take all the reasonable and practical steps to:

(a) Ensure the protection of water-bearing strata encountered during its work;

(b) Carry out the tests necessary for determining the value of any show

encountered during drilling and the exploitability of any possible Petroleum

discoveries and;

(c) Avoid losses and discharges of Petroleum produced as well as losses and

discharges of mud or any other product used in the Petroleum Operations.

6.5 The Contractor further undertakes to carry out all petroleum operations in

accordance with the Environmental Protection and Management Laws of Liberia

and all international environmental protocols. In this respect, the Contractor

shall:

(a) Submit to the Government and Environmental Impact Statement (EIS) prior

to the commencement of exploration and production.

(b) Take reasonable preventative, corrective and restorative measures to protect

from pollution, contamination or damage resulting Petroleum Operations

water bodies, land surfaces and the atmosphere, and that any pollution,

contamination and damage of such water bodies, land surface and atmosphere

hereunder the rectified.

Subject to the foregoing, and at the conclusion of Petroleum Operations in the

Delimited Area, the Contractor will undertake reasonable efforts to restore the

terrain to a state in which it is useable.



6.6 All works and facilities erected by the Contractor hereunder shall, according to

their nature and to the circumstances, be built, placed, signaled, marked, fitted

and preserved so as to allow at any time and in safety free passage to navigation

within the Delimited Area, and without prejudice to the forgoing, the Contractor

shall, in order to facilitate navigation, install the sound and optical devices

approved or required by the competent authorities and maintain them in a manner

satisfactory to said authorities.

6.7 In the exercise of its right to build, carry out work and maintain all facilities

necessary for the purposes hereof, the Contractor shall not disturb and existing

graveyard or building used for religious purposes, nor cause a nuisance to any

government or public building, except with the prior consent of NOCAL, and

shall make good the damage caused by it in that event.

6.8 In its conduct of Petroleum Operations, the Contractor undertakes to take all

necessary precautions to prevent marine pollution.

6.9 In order to prevent pollution, NOCAL and Contractor agree that Contractor shall

observe all existing international environmental protocols, regulations and rules

as may be applicable to prevent pollution and preserve the environment. NOCAL

and the Contractor shall meet and consider any measure, which may be necessary

to preserve the environment.

6.10 NOCAL and the Contractor shall commission periodic environmental audits as

required to ensure compliance with EIS.

6.11 The Contractor and its subcontractors shall be obligated to give preference to

enterprises and goods from Liberia, if conditions of price, quality, delivery time

and terms of payment are similar to those from other counties or from nonLiberia sources. Specifically, the contractor commits itself to award to only

Liberians, supply, constructions or service contracts, the estimated value of which

is under __________________________________________.



ARTICLE 7

CONTRACTOR’S RIGHTS IN RESPECT OF THE

EXPLORATION PERIODS



7.1 Without prejudice to the provisions hereof, the Contractor shall have the right

to carry out the Petroleum Operations within the Delimited area. Such rights

includes, inter alia;

(a) full responsibility for, management of and control over all the Petroleum

Operations;

(b) authority to exercise any of the right of the rights conferred hereby through

agents and independent contractors, and to pay accordingly any of their

expenses and costs in the place and in the currency chosen by the

Contractor.

7.2 The Contractor shall have the right to clear the ground, dig, perforate, drill,

build, erect, place, supply, operate, manage and maintain ditches, pools,

wells, trenches, excavations, dams, canals, water conduits, plants, tanks,

basins, maritime and other storage facilities, primary distillation units, first

extraction gasoline separator units, sulfur plants, and other facilities for

Petroleum production, together with the pipelines,, pumping stations,

generator units, power plants, high voltage lines, telephone, telegraph, radio

and other communication facilities, factories, warehouses, offices, employees’

housing, hospitals, premises, orts, docks, harbors, dikes, jetties, dredges, sea

walls, under water piers and other facilities, ships, vehicles, railways,

warehouses, workshops, foundries, repair shops and all the auxiliary services

which are necessary for or useful to the Petroleum Operations or in

connection therewith; and all additional facilities which are or may become

necessary for or reasonably subsidiary to the carrying out of the Petroleum

Operations.

7.3 The agents, employees and representatives of the Contractor or its

subcontractors shall have the right, for the purposes of the Petroleum

Operations to enter into or leave the Delimited Area and shall have free

access to all the facilities set up by the Contractor.

7.4 The Contractor shall have the right, subject to the payment of fees applicable

in Liberia, to remove and use the surface soil, mature timber, clay, sand,

limestone, gypsum, stones and other similar materials, which may be

necessary for the performance of the Petroleum Operations.



With the consent of the competent administrative services, the Contractor may

make reasonable use of such materials for the performance of the Petroleum

Operations, subject to payment of fees applicable in Liberia, when they are

located on land owned by the STATE and placed in the vicinity of the land

where said Operations are taking place.

The Contractor may take or use the water necessary for the Petroleum

Operations, provided that existing irrigation or navigation are not impaired

and that land, house or watering places for livestock are not deprived or a

reasonable quantity of water.



ARTICLE 8

ACTIVITY REPORTS DURING THE EXPLORATION PERIODS

AND SUPERVISION OF PETROLEUM OPERATIONS

8.1 Subject to the terms of Articles 8.5 and 8.6, NOCAL shall own and may freely

use all the original data and documents relating to the Petroleum Operations such

as, but without limitation, records, samples, geological, petrophysical, drilling

and operating reports.

8.2 The Contractor undertakes to furnish NOCAL with the following periodic

reports:

(a) daily reports on drilling operations;

(b) weekly reports on seismic operations;

(c) within thirty (30) days after each Calendar quarter, a report on the Petroleum

Operations carried out together with a detailed statement on Petroleum Costs

in respect of the preceding quarter;

(d) prior to the end of February of each Calendar Year, an annual report on the

Petroleum Operations carried out together with a detailed statement on

Petroleum Costs in respect of the preceding Calendar Year.

8.3 In addition, the following reports or documents shall be furnished to NOCAL as

soon as they are prepared or obtained:

(a) a copy of all geological surveys and syntheses together with the related maps;

(b) a copy of all geophysical surveys, measurement and interpretation reports,

map profiles, sections or other documents related thereto, as well as, at

NOCAL’s request, the originals of all recorded seismic magnetic tapes;

(c) a copy of the drilling location and completion report for each well together

with a complete set of recorded logs;

(d) a copy of all drill tests or production tests together with any study related to

the flow or production of a well;

(e) a copy of all reports relating to core analyses.



All maps, sections, profiles, logs and all other geological or geophysical

documents shall be supplied on an appropriate transparent support in view of

subsequent reproduction.



A representative portion of the cores and cuttings removed from each well, as

well as samples of fluids produced during drill tests or production tests shall also

be supplies to NOCAL within a reasonable period.

Upon expiration or in the event of surrender or termination of this Contract, the

original documents and samples relating to the Petroleum Operations shall be

provided to NOCAL.

8.4 The Contractor shall keep NOCAL informed of its activities through the duly

designated representative of the latter. In particular, the contractor shall notify

NOCAL as soon as possible and in any event at least fifteen (15) days in advance

of all projected Petroleum Operations, such as any geological survey, seismic

surveys, and commencement of drilling and installation of a platform. In the

event the Contractor decides to abandon a drilling it shall notify NOCAL thereof

within at least seventy-two (72) hours prior to such abandonment, unless

operational safety demands a faster response.

8.5 All data, information, documents, reports and statistics including interpretation

and analysis supplied by the Contractor pursuant to this Contract shall be treated

as confidential and shall not be disclosed by any Party to any other person

without the express written consent of the other Parties within the life f the

Exploration, Appraisal or Exploration authorization period.

8.6 The provision of Article 8.5 shall not prevent disclosure:

8.6.1 By NOCAL or the State

(a) To any agency of the State or to any advisor or consultant to NOCAL

(b) For the purpose of complying with the State’s international obligations for

the submission of statistic and related data.

8.6.2 By the Contractor

(a) To its affiliates, advisors or consultants

(b) To a bona fide potential assignee or all or part or the contractor’s interest

hereunder

(c) To banks or other lending institutions for the purpose of seeking external

financing of costs of the Petroleum Operations

(d) To Non-Affiliates who shall provide services for the Petroleum

Operations, including sub-contractors, vendors, and other service

contractors, where this is essential for their provision of services.

(e) To government agencies for obtaining necessary rulings, permits, licenses

and approvals, or as may be required by applicable law or financial stock

exchange, accounting or reporting practices.



8.6.3 Any Party disclosing information or providing data to a Third Party under the

terms or this Article shall require such persons to undertake the confidentiality

of such data.



ARTICLE 9

OCCUPATION OF LAND

6.1 The STATE shall make available to carry the Contractor, and only for the

purposes of the Petroleum Operation, any land, which it owns and which is

necessary for said operations. The Contractor shall have the right to build and

the obligation to maintain, above and below the ground, the facilities

necessary for the Petroleum Operations.

The Contractor shall indemnify the STATE for any damage caused to the land

by the construction, use and maintenance of its facilities on such land.

The STATE shall authorize the Contractor to build, use and maintain

telephone, telegraph and piping systems above and below the ground and

alone the land not belonging to the STATE, provided that the contractor pays

to the land-owners, a reasonable compensation mutually agreed upon.

6.2 The rights on land owned by private persons, which would be necessary for

the carrying out of the Petroleum Operations, shall be acquired by direct

agreement between the Contractor and the private person concerned.

In event of disagreement, the Contractor shall notify the STATE thereof, and

the later shall proceed to expropriation for a public purpose, at Contractor’s

expenses. When determining the value of those property rights, no

consideration shall be given to the Contractor’s purpose for acquiring them

and the STATE agrees that no law or procedure for said acquisition shall have

the effect of giving them an excessive value or a confiscation value. Those

rights acquired by the STATE shall be registered in its name, but the

Contractor shall be entitled to benefit therefrom for the purposes of the

Petroleum Operations. During the entire term of this contract, the STATE

guarantees that the Contractor shall be protected in the use and occupation of

such land just as if it owns the property rights thereto.



ARTICLE 10

USE OF FACILITIES

10.1 For the purpose of the Petroleum Operations, the Contractor shall have the right

to use, in accordance with the applicable laws, any railroad, tramway, road,

airport, landing strip, canal, river, bridge, waterway and any telephone or

telegraph network in Liberia whether owned by the STATE or by any private

enterprise, subject to the payment of fees then in effect or mutually agreed upon

which will not be in excess of the prices and tariffs charged to Third Parties for

similar services.

The Contractor shall have the right to use for the purposes of the Petroleum

Operations any land, sea or air transportation means for the transportation of its

employees or equipment, subject to compliance with the laws and regulations

which generally govern the use of such means of transportation.

10.2 The STATE shall have the right to use for exceptional matters any

transportation and communication facility installed by the Contractor, subject to

a fair compensation mutually agreed upon which will not be in excess of the

prices and tariffs charged to Third Parties for similar services provided that such

use does interfere with Petroleum Operations.

10.3 Nothing in this Contract shall limit the STATE’S right to build, operate and

maintain on, under and along the land made available to the Contractor for the

purposes of the Petroleum Operators, roads, railroads, airports, landing strips,

canals, bridges, pipelines, useful telephone and telegraph lines, provided that

such rights is not exercised in a manner which restricts or hinders the

Contractor’s rights hereunder, or the Petroleum Operations.



ARTICLE 11

APPRAISAL OF A PETROLEUM DISCOVERY

11.1



In the event the Contractor discovers Petroleum, it shall, as promptly as

possible, notify NOCAL thereof and submit to it, within thirty (30) days after

the date of the temporary plugging or abandonment of the discovery well, a

report including all information relating to said discovery.



11.2



If the Contractor wishes to undertake appraisal work relating to the

abovementioned Petroleum discovery, it shall submit for approval to NOCAL,

within sis (6) months after the date of notification of said discovery, the

appraisal work program and the estimate of the related Budget.

The Provisions of Article 5 shall be applicable, mutates mutandis, to said

program as regards its approval and performance, it being understood that the

submitted program shall comply with good international petroleum industry

practice.



11.3



If the Contractor meets the conditions referred to in Article 11.2 and on

request to NOCAL, the letter shall grant to it an exclusive appraisal

authorization for a duration of two (2) years from the date of approval of the

appraisal work program and the related Budget, in respect of the Appraisal

Perimeter specified in said program. Except otherwise provided by this

Article, the Contractor shall, during the term of said exclusive appraisal

authorization, be subject to the same regime as that applicable to the exclusive

exploration authorization.



11.3.1 The Contractor shall then diligently carry out the appraisal work program for

the discovery in question; in particular it shall drill the appraisal wells and

carry out the production tests specified in said program.

At the Contractor’s request at least thirty (30) days prior to the expiration of

the appraisal period above-defined, the duration of said period may be

extended by a maximum of six (6) months, provided that such extension is

justified by the continuation of the drilling and production tests specified in

the appraisal program.

Further extensions of the appraisal period may be requested by the Contractor

and granted by NOCAL in the event that further geological, geophysical,

subsurface, facilities or commercial work is considered justified by the

Contractor in order to establish whether the field corresponding to the

Petroleum discovery is commercial.

11.3.2 Within three (3) months after the completion of appraisal work, and no later

than thirty (30) days prior to the expiration of the appraisal period, the



Contractor shall provide NOCAL with a detailed report giving all the

information relating to the discovery and the appraisal thereof.

11.3.3 If, after having carried out the appraisal work, the Contractor considers that

the Field corresponding to the Petroleum discovery is commercial, it shall

submit to NOCAL, together with the previous report, an application for an

exclusive exploitation authorization accompanied by a detailed development

and production plan for said Field, specifying inter alia;

(a) the planned delimitation of the Exploitation Perimeter applied for by the

Contractor, so that it covers the areas defined by the seismic closure of the

field concerned, together with all the technical justifications with respect

to the extent of said Field;

(b) an estimate of the reserve in place; the proven and probable recoverable

reserves and the corresponding annual productions, together with a study

on the methods of recovery and the possible valorization of the products

associated with Crude Oil, such as any Associated Natural Gas,

(c) item by item, the description of equipment and work necessary for

production, such as the number of development wells, the number

platforms, pipelines, production, processing, storage and loading facilities

together with their specifications;

(d) the estimated schedule for its implementation and the projected date of

production start-up;

(e) the estimates of investments and exploitation costs together with an

economic evaluation demonstrating the commercial nature of the

discovery in question.

11.3.4 The commercial nature of one or more Petroleum Fields shall be determined

by the Contractor, provided that it shall, at the end of appraisal work, submit

to NOCAL the economic study referred to in Article 11.3.3 (e) demonstrating

the commercial nature of said Field or Fields.

A Field may be declared commercial by the Contractor if, after taking into

account the provisions of this Contract and the submitted development and

production plan, the projected incomes and expenses determined in

accordance with good international petroleum industry practice confirm the

commercial nature of said Field.

11.3.5 For the purposes of evaluating the commercial nature of said Field or Field,

NOCAL and the Contractor shall meet within thirty (3) days after the

submission of the development and production plan accompanied by the

economic evaluation.



11.3.6 The development and production plan submitted by the Contractor shall be

subject to the approval of NOCAL. Within nine (90) days after the

submission of said plan, NOCAL may propose revisions or modifications

hereto by notifying the Contractor thereof with all the useful justifications. In

that event, the Parties shall meet as soon as possible in order to consider the

proposed revisions or modifications and establish by mutual agreement the

plan in its final form; the plan shall be deemed to be approved by NOCAL

upon the date of such agreement.

Should NOCAL fail to notify the Contractor of its wish for revision or

modification within the above-mentioned nine (90) day period, the

plan submitted by the Contractor shall be deemed to be approved by

NOCAL at the expiration of said period.

11.4



If for reasons not technically justified, the Contractor, within twelve (12)

months after notification to NOCAL of a Petroleum discovery, has not applied

for an exclusive appraisal authorization or if, after its granting, it has not

commenced the appraisal work in respect of said discovery, or if the

Contractor, within eighteen (18) months after completion of the appraisal

work, does not declare the discovery as commercial NOCAL may require that

the Contractor surrenders all its rights in respect of the area deemed to

encompass said discovery without any compensation for the Contractor. If,

within sixty (60) days after NOCAL’s request, the Contractor has not notified

its decision, it shall surrender said area and will forfeit all its rights on

Petroleum which could be produced from said discovery, and any area so

surrendered shall be deducted from the surfaces to be surrendered under

Article 3.5.



ARTICLE 12

GRANT OF AN EXLUSIVE EXPLOITATION AUTHORIZATION

IN RESPECT OF A COMMERCIAL DISCOVERY

12.1



A commercial Petroleum discovery shall entitle the Contractor to an exclusive

right, if it so requests pursuant to the conditions set forth in Article 11.3.3, to

obtain, in respect of the field concerned, an exclusive exploitation

authorization covering the related Exploitation Perimeters with the Delimited

Area shall not be limited.



12.2



If the Contractor makes several commercial discoveries in the Delimited Area,

each such discovery shall, in accordance with provisions of Article 12.1 give

rise to an exclusive exploitation authorization each corresponding to an

Exploitation Perimeter. The number of exclusive exploitation authorizations

and related Exploitation Perimeters within the Delimited Area shall not be

limited.



12.3



If in the course of work carried out after the grant of an exclusive exploitation

authorization, it appears that the area defined by the seismic closure of the

Field concerned is larger than originally estimated pursuant to Article 11.3.3,

NOCAL shall grant to the Contractor, as part of the exclusive exploitation

authorization already granted, an additional area so that the entirety of said

field is included in the Exploitation Perimeter, provided, however, that the

Contractor supplies NOCAL, together with its application with the technical

evidence of the extension so required and provided, further, that the above

mentioned extension is an integral part of the Delimited Area as defined at the

time of said application.



12.4



Where a field extends beyond the boundaries of the Delimited Area, NOCAL

may require the Contractor to exploit said Field in association with the right

holder of the adjacent area under the provisions of a unitization agreement.

Within six (6) months after NOCAL has notified its request, the Contractor

shall submit to its approval the development and production plan of the Field

concerned which shall be prepared in agreement with the right holder of the

adjacent area.



ARTICLE 13

DURATION OF THE EXPLOITATION PERIOD

13.1



The duration of an exclusive exploitation authorization during which the

Contractor is authorized to carry out the exploitation of a Field declared

commercial is set at twenty-five (25) years from its date of issue.

If upon expiration of the exploitation period of twenty-five years abovedefined, a commercial exploitation of a Field remains possible NOCAL may

authorize the Contractor, at the latter’s request submitted at least twelve (12)

months prior to said expiration, to continue under this Contract the

exploitation of said Field during an additional period of no more than ten (10

years, provided that the Contractor has fulfilled all its obligations during the

current exploitation period.

If, upon expiration of that additional exploitation period, a commercial

exploitation of said Field remains possible, the Contractor may request

NOCAL at least twelve (12) months prior to said expiration that it be

authorized to continue the exploitation of said Field under this Contract,

during the current exploitation.



13.2



The Contractor may, at any time, fully or partially surrender any exclusive

exploitation authorization by giving at least twelve (12) months’ prior notices

which may be reduced with NOCAL’s consent.

That notice shall be accompanied by the list of steps which the surrendering

Contractor undertakes to take, in accordance with good international

petroleum industry practices arising out of its surrender.



13.3



Interruption of development work or production of a Field declared

commercial, for a consecutive period of at least six (6) months, decided by the

Contractor without NOCAL’s consent, or abandonment of the exploitation of

Field, may give rise to the withdrawal of the exclusive exploitation

authorization concerned. In the event of any disagreement between NOCAL

and the Contractor regarding the circumstances of the interruption then the

JOC shall meet to resolve the disagreement.



13.4



Upon expiration surrender or withdrawal of the last exclusive exploitation

authorization granted to the Contractor, this Contract shall terminate.



13.5



The termination of this Contract, whatever the reason thereof, shall not relieve

the Contractor of any obligations incurred prior to, or arising from, said

expiration or termination and which shall be fulfilled.



ARTICLE 14

EXPLOITATION OBLIGATION

14.1



For any field in respect of which an exclusive exploitation authorization has

been granted, the Contractor undertakes to perform, at its sole cost and its own

financial risk, all the Petroleum Operations useful and necessary for the

exploitation of said Field.



14.2



However, if the Contractor can provide accounting evidence, during either the

development period or the production period, that the exploitation of a field

cannot be commercially profitable notwithstanding that an exclusive

exploitation authorization has been granted in accordance with the provisions

of Article 12.1, NOCAL agrees not to force the Contractor to continue the

exploitation of such Field.

In that event, NOCAL, in its discretion, may withdraw the exclusive

exploitation authorization concerned from the Contractor without any

compensation for the latter, by giving a sixty (60) days’ prior notice.



ARTICLE 15

CONTRACTOR’S OBLIGATIONS AND RIGHTS IN RESPECT

OF EXCLUSIVE EXPLOITATION AUTHORIZATIONS

15.1



The Contractor shall commence development work not later than (6) months

after approval of the development and production plan referred to in Article

11.3.6 and shall continue it with the maximum diligence.



15.2



The provisions of Articles 5, 6, 7, 8, 9 and 10 are also applicable, mutatis

mutandis, in respect of any exclusive exploitation authorization.



15.3



the Contractor shall have the right to build, use, operate and maintain all the

Petroleum storage and transportation facilities which are necessary for the

production transportation and sale of Petroleum produced, pursuant to the

conditions specified in this Contract.

The Contractor may determine the route and location of any pipeline inside

Liberia which is on the surface land of Liberia or under the waters that lie

within the jurisdiction of the State which is necessary for the Petroleum

Operations, provided that it shall submit plans to NOCAL for approval prior to

the commencement of work; any pipeline crossing or running alongside roads

or passageways (other than those used exclusively by the Contractor) shall be

built so as not to hinder the passage on those roads or passageways.



15.4



The contractor may, to the extent and for the duration of the excess capacity of

a pipeline or processing, transportation or storage facility built for the purses

of the Petroleum Operations, be obligated to accept the flow of Petroleum

coming from exploitations other than that of the Contractor, provided that such

flow shall not cause prejudice to the Petroleum Operations, and provided,

further, that a reasonable tariff covering a normal remuneration for capital

invested in respect of the pipeline or facility concerned shall be paid by the

user.



15.5



Following the grant of an exclusive exploitation authorization, the Contractor

undertakes to proceed diligently with the carrying out of development wells,

spacing them in a manner so as to ensure, in accordance with good

international petroleum industry practice, the maximum economic recovery of

the Petroleum contained in the Field in question.



15.6



The Contractor shall, in the conduct of development and production

operations, comply with all good international petroleum industry practice

which in particular ensures the good conservation of fields and maximum

economic recovery of Petroleum.

The Contractor shall, inter alia, carry out enhanced recovery studies and use

such recovery processes if they may lead to an increase in Petroleum recovery

rate under economic conditions.



15.7



The Contractor shall provide NOCAL with all the reports, studies,

measurement results, tests and documents enabling the monitoring of the

proper exploitation of each Field.

The Contractor shall, in particular, carry out the following measures on each

producing well:



15.8



(a)



monthly testing of production and gas/oil ratio;



(b)



half-yearly measurement of the field reservoirs pressure.



The Contractor undertakes to produce every year from each Field quantities of

Petroleum in accordance with the provisions of Article 15.6.

The annual production rates of each field shall be submitted by the Contractor

together with the Annual Work Programs for the approval of NOCAL which

shall not be withheld provided that the Contractor gives proper technical and

economic grounds.



15.9



The Contractor shall measure, in a point mutually agreed between the Parties,

all Petroleum produced and not used for the requirements of the Petroleum

Operations, and excluding unavoidable losses, after extraction of water and

sediments, by using the measurement appliances and procedures customarily

used in the international petroleum industry.

The authorized NOCAL’s representatives shall have the right to examine those

measurements and inspect or cause to be inspected the appliances or

procedures used. If the contractor wishes to change said measurement

appliances or procedures, it shall obtain prior approval from NOCAL. Where

the appliances and procedures used therefore have caused an overstatement or

understatement of measured quantities, the error shall be deemed to have

existed since the date of the last calibration of the appliances, unless the

contrary can be justified, and the proper adjustment shall be made for the

period of existence of such error.



ARTICLE 16

RECOVERY OF PETROLEUM COSTS AND PRODUCTION

SHARING

16.1



From the commencement of regular production of Crude Oil, the contractor

shall market all the production of Crude Oil obtained from the Delimited Area,

in accordance with the provisions hereinafter defined.



16.2



For the purposes of recovery of the Petroleum Costs, the Contractor may

freely take each Calendar Year a portion of the Production in no event greater

than _____________________ of the total Production of Crude Oil or gas

from the Delimited Area, or only any lesser percentage which would be

necessary and sufficient to recover remaining cost.

The Value of such portion of total Production allocated to the recovery of the

Petroleum Costs by the Contractor, as defined in the preceding paragraph,

shall be calculated in accordance with the provisions of Article 18.

If during a Calendar Year the Petroleum Costs not yet recovered by the

Contractor under the provisions of this Article 16.2 exceed the equivalent in

value of _____________________ of the Total Production of Crude Oil or

Total Production of Gas from the Delimited Area, as calculated above, the

balance of the Petroleum Costs which cannot be recovered in that Calendar

Year shall be carried forward in the following Calendar Year or Years until

full recovery of the Petroleum Costs or until the expiration of this Contract.



16.3



The quantity of Crude Oil from the Delimited Area remaining during each

Calendar Year after the Contractor has taken from the Total Production the

portion necessary for the recovery of the Petroleum Costs, hereinafter referred

to as “Remaining Oil Production,” shall be shared between NOCAL and the

Contractor as follows:

The Remaining Oil Production shall be shared according to the daily Total

Production from the Delimited Area:

Increments of daily oil

Total Production (in

Barrels per day)



NOCAL’s Share



Contractor’s Share



__________________



___%



__%



__________________



___%



__%



__________________



___%



__%



__________________

16.4



____%



___%



In case of natural gas, the following production sharing shall apply:



Increments of daily Gas

Total Production



NOCAL’s Share

__%



Contractor’s Share

__%



For the purpose of this Article, the daily total Production shall be the average

rate of Total Production during the calendar quarter in question.

16.5



For the purposes of consistency with the tax laws of the Republic of

Liberia, the Contractor shall be liable to pay its own Income Tax to the

Government of Liberia.



16.6



NOCAL may receive its share of production defined in Article 16.3 and 16.4

either in kind or in cash.



16.7



If NOCAL wishes to receive in kind all or part of its share of production

defined in Article 16.3 or 16.4 it shall so notify in writing the Contractor at

least ninety (90) days prior to the beginning of the calendar quarter concerned

specifying the precise quantity that it wishes to receive in kind during said

quarter.



16.8



If NOCAL wishes to receive in cash all or part of its share of production

defined in Article 16.3 or 16.4 or if NOCAL has not notified the Contractor if

its decision to receive its share of production in kind pursuant to Article 16.7,

the Contractor shall market NOCAL’s share, of production to be taken in cash

for the quarter concerned, lift said share during such quarter and pay to

NOCAL within thirty (30) days following the date of each lifting, an amount

equal to the quantity corresponding to NOCAL’s share of production

multiplied by the sale price defined in Article 18.

NOCAL may require payment, for sales of its share of production sold by the

Contractor, in Dollars or in the foreign currency in which the sale has been

made.



ARTICLE 17

TAXATION

17.1



Unless otherwise provided for in this Contract the Contractor shall, in respect

of its Petroleum Operations, be subject to the laws generally applicable and

the regulations in force in Liberia concerning taxes which are or may be levied

on incomes, or determined thereto.

It is specifically acknowledged that the provisions of this Article shall apply

individually to any entity comprising the Contractor under this Contract.

The Contractor shall keep separate accounts for each fiscal Year in respect of

the Petroleum Operations, in accordance with the regulations in force in

Liberia, enabling in particular the establishment of a profit and loss account as

well as a balance sheet showing both the results of said Petroleum Operations

and the asset and liability items allocated or related thereto.



17.2



For the purposes of Article 17.1 the Contractor shall in respect of its net profit

arising from Petroleum Operations, be liable to corporate income tax under the

laws and regulations in force in Liberia. Income tax applicable to Petroleum

Operations carried out under this Contract shall be thirty-five percent (35%),

which shall be paid directly by the Contractor to the Government of

Liberia.



17.3



For the purposes of assessing the Contractor’s taxable net income in respect of

a Fiscal Year, the profit and loss account shall, inter alia, be credited by the

following:

(a)



17.4



the Contractor’s annual gross income recorded in its accounting books,

arising from the marketing of the quantity of Crude Oil or Gas to

which it is entitled under Articles 16.2, 16.3 or 16.4 all other incomes

or proceeds related to the Petroleum Operations, including inter alia

those arising from:

i)



the sale of related substances;



ii)



processing, transportation of storage of products for Third

Parties in the facilities dedicated to the Petroleum Operations.



Such profit and loss account shall be debited with all charges necessary for the

purposes of the Petroleum Operations in respect of the fiscal Year concerned,

which may be deducted under the applicable laws of Liberia and the

provisions of this Contract.

In particular the following items may be debited from the income of the fiscal

Year:



17.5



(a)



In addition to the charges specifically set forth below in this Article

17.4, all other Petroleum Costs, including the costs supplies, personnel

and manpower expenses, costs of services provided to the Contractor

in respect of the Petroleum Operations, provided, however, that costs

of supplies, personnel and services rendered by Affiliated Companies

shall be deductible provided that they do not exceed those which

would be normally charged in arm’s length transactions between

independent buyer and seller for identical or similar supplies or

services.



(b)



Overhead costs relating to the Petroleum Operations performed under

this Contract, including without limitation:

i)



Rentals for movable and immovable properties as well as

insurance premiums;



ii)



As set out in the Accounting Procedure in light of the services

rendered to the Petroleum Operations performed in Liberia, of

wages and salaries paid to managers and employees residing

abroad, and the general and administrative overhead costs of

the central services of the Contractor and its Affiliated

Companies working for its account, located abroad, and

indirect costs incurred by said central services abroad for their

account. Overhead costs paid abroad shall in no event be

greater than the limits specified in the Accounting Procedure.



(c)



Interest paid to creditors of the Contractor, for their actual amount,

subject to the limits specified in the Accounting Procedure.



(d)



Losses of materials or assets resulting from destruction or damage,

assets which are renounced or abandoned during the year, bad debts,

indemnities paid to third Parties as compensation for damage.



(e)



Reasonable and justified reserves made for clearly identified future

losses or liabilities which current events render probable.



(f)



Any other losses or changes directly related to the Petroleum

Operations, including exchange losses realized in connection with the

Petroleum Operations as well as bonuses and amounts paid during the

Fiscal Year.



(g)



Surface Rentals as defined in Article 17.10.



(h)



Any other Contractor Expense recorded according to the Accounting

Procedure.



The Contractor’s taxable net profit shall be equal to the difference, if positive,

between all the amounts credited and all the amounts debited in the profit and

loss account, plus an amount equal to Contractor’s Liberian income tax. If

this amount is negative, it shall constitute a loss.



17.6



Within three (3) months after the end of a Fiscal Year, each entity constituting

the Contractor shall submit to the competent tax authorities its annual tax

return together with financial statements, as required by applicable

regulations.



17.7



Except for the income tax defined in this Article and the bonuses provided for

in Article 19, the Contractor shall be exempt from all other levies, duties, taxes

or contributions of any nature whatsoever arising from the Petroleum

Operations and any revenues related thereto or, more generally, on

Contractor’s property, activities or actions, including its establishment and its

operation hereunder.



17.8



Surface rentals shall be payable to NOCAL per square kilometer of

the area remaining at the beginning of each Calendar Year as part of the

Delimited Area, in the amounts as set out below:

Phase of Operation



Surface Rentals Per Annum



First Exploration Period



$___ per sq. km.



Second Exploration Period



$ ___ per sq. km.



Third Exploration Period



$ ___ per sq. km.



Development & Exploitation Area



$____per sq. km



ARTICLE 18

VALUATION OF PETROLEUM

18.1



For the purposes of this Contract, the Crude Oil price shall be the F.O.B.

“Market Price” at the Delivery Point, expressed in Dollars per barrel and

payable within thirty (30) days after the date of the bill of lading, as

determined hereinafter for each quarter.

A market Price shall be determined for each type of Crude Oil or Crude Oil

mix.



18.2



The Market Price applicable to liftings of Crude Oil made during a calendar

quarter shall be calculated at the end of said quarter and shall be equal to the

weighted average of the process obtained for Crude Oil from the Delimited

Area during said quarter by the Contractor and by NOCAL from independent

purchasers, as adjusted to take into account the differences in quality and

gravity as well as in F.O.B. delivery terms and payment conditions.



18.3



In the event such sales are not made, the Market Price shall be determined on

the basis of the prices obtained on the international market during said quarter

between independent buyers and sellers for sales of crude oils of quality

similar to the Crude Oil from the Delimited Area in the same markets as those

in which the Liberian Crude Oil would normally be sold, as adjusted to take

into account the differences in quality, gravity, transportation as well as in

sales and payment conditions. For the avoidance of doubt, oil sales into the

Liberian market shall be valued according to the terms of this Article 18.3.



18.4



The following transactions shall, inter alia, be excluded from the calculation of

the market Price of Crude Oil;



18.5



(a)



sales in which the buyer is an Affiliated Company of the seller as well

as sales between entities constituting the Contractor;



(b)



sales in exchange for other than payment in freely convertible

currencies and sales fully or partially made for reasons other then the

usual economic incentives involved in Crude Oil sales on the

international market (such as exchange contracts, sales from

government to government or to government agencies).



Within ten (10) days following the end of each quarter, the Parties shall advise

each other of the prices obtained for their share of production of Crude Oil

from the Delimited Area sold to independent purchasers during the quarter in

question, indicating for each sale the identity of the purchaser, the quantities

sold, the delivery and payment terms.

Within twenty (20) days following the end of each quarter, the Contractor

shall determine in accordance with the provisions of Article 18.2 or Article

18.3, as the case may be, the market Price applicable for the quarter



concerned, and shall notify NOCAL of that market Price, indicating the

method of calculation and all data used in the calculation of that Market Price.

With in thirty (30) days following receipt of the notice referred to in the

preceding paragraph, NOCAL shall verify that the calculation of Market Price

complies with the provisions hereof and shall notify the Contractor of its

acceptance or objections. Failing notification from NOCAL within that thirty

(30) day period the market Price provided for in the Contractor’s notice

referred to in the preceding paragraph shall be deemed to have been accepted

by NOCAL.

In the event that NOCAL has notified objections to the market Price, the

parties shall meet within fifteen (15) days following NOCAL’s notification to

mutually agree on the market Price. If the parties fail to agree on the market

Price applicable to a given quarter within seventy-five (75) days after the end

of that quarter, NOCAL or the Contractor may immediately submit to an

expert, appointed in accordance with the following paragraph, the

determination of the Market Price (including the determination of reference

crude oils if the parties have not determined them). The expert shall determine

the price within thirty (30) days after his appointment and his conclusions

shall be final and binding on the Parties. The expert shall decide in

accordance with the provisions of this Article.

The expert shall be selected by agreement between the parties or, if no

agreement is reached, by the International Center of Expertise of the

International Chamber of Commerce in accordance with its rules on Technical

Expertise, at the request of the most diligent party. The expertise costs shall

be charged to the Contractor and included in the Petroleum Costs.

18.6



In the event it would be necessary to calculate on a provisional basis during a

quarter the Crude Oil price applicable to the liftings made during said quarter,

that price shall be established as follows:

(a)



For any sale to independent buyers, the price applicable to that sale

shall be the price obtained for the Crude Oil for said sale, as adjusted

to take into account the F.O.B. delivery terms and thirty (30) days

payment terms.



(b)



For any lifting other than those which are the subject of a sale to

independent buyers, the price applicable to that lifting shall be the

Market Price determined for the preceding quarter or, if that Market

Price has not been determined a price set up by agreement between the

Parties or, failing agreement, the last known Market Price.



Once the market Price for a quarter has been determined on a final basis

adjustment if required, shall be made within thirty (30) days.



ARTICLE 19

BONUSES AND HYDROCARBON

DEVELOPMENT FUND

19.1



The Contractor shall pay to NOCAL the following bonuses:

(a)



_______________ dollars when the total Production of Crude Oil from

the Delimited Area first reaches the average rate of thirty thousand

(30,000) barrels per day during a period of thirty (30) consecutive

days.



(b)



_________________ dollars when the total Production of Crude Oil

from the Delimited Area first reaches the average rate of fifty thousand

(50,000) barrels per day during a period of thirty (30) consecutive

days.



(c)



_________________dollars when the Total Production of Crude Oil

form the Delimited Area first reaches the average rate of

______________________________ barrels per day during a period

of thirty (30) consecutive days.



Each of the amounts referred to in (a), (b), and (c) above shall be paid with

thirty (30) days following the expiration of the reference period of thirty (30)

consecutive days.

19.2



These bonuses shall not be recoverable and shall therefore not be treated

as Petroleum Costs.



19.3



HYDROCARBON DEVELOPMENT FUND

19.3.1 To stimulate research in the field of hydrocarbon, most

especially in continental areas, and to assist the Government in

its overall goal of achieving energy sustainability, a

Hydrocarbon Development Fund, to be managed by NOCAL,

has been established.

Within thirty (30) days of the Effective Date of this Agreement,

the

Contractor

shall

make

a

contribution

of

______________________________ to this Fund.

19.3.2



The contribution to the Hydrocarbon Development

Fund referred to in Article 19.3.1 will be recoverable and

therefore, shall be considered as Petroleum Costs.



ARTICLE 20

OWNERSHIP AND ABANDONMENT OF ASSETS

20.1



Upon expiration, surrender or termination of this Contract, whatever the

reason thereof, in respect of all or part of the Delimited Area, or at the end of

exploitation of a Field, the Contractor shall transfer at no cost to NOCAL the

ownership of assets, movables and immovables, used for the requirements of

the Petroleum Operations carried out in the area so surrendered, located

whether inside or outside the Delimited Area, such as wells and their

equipment, building, warehouses, docks, lands, offices, plants, machinery and

equipment, bases, harbors, wharfs, jetties, buoys, platforms, pipelines, roads,

bridges, railroads and other facilities.

Such transfer of ownership shall cause the automatic cancellation of any

security or surety concerning those assets, or which those assets constitute.

However, the Contractor may continue to use those assets beyond the date

referred to in the first paragraph, for the requirements of its Petroleum

Operations in Liberia governed by other contracts.



20.2 If NOCAL decides not to accept, for all or part of the assets, the transfer of

ownership provided for in Article 20.1, it may, not later than ninety (90) days

following the date specified in said Article, require the Contractor in accordance

with good international petroleum industry practice, to perform abandonment

operations and to remove, at the cost of the Contractor, the facilities relating to the

surrendered area.



ARTICLE 21

NATURAL GAS

21.1



Non-Associated Natural Gas

21.1.1 In the event of a Non-Associated Natural Gas discovery, the

Contractor shall engage in discussions with NOCAL with a view to

determining whether the appraisal and exploitation of said discovery

have a potentially commercial nature.

21.1.2 If the Contractor, after the above-mentioned discussions, considers that

the appraisal of such Non-Associated Natural Gas discovery is

justified, it shall undertake the appraisal work program for said

discovery.

The Contractor shall have the right, for the purposes of evaluating the

commerciality of the Non-Associated Natural Gas discovery, if it so

requests at least thirty (30) days prior to the expiration of the third

exploration period set forth in Article 3.3 to be granted an exclusive

appraisal authorization concerning the Appraisal Perimeter of the

abovementioned discovery, for a term of two (2) years.

In addition, the Parties shall jointly evaluate the possible outlets for the

Natural Gas, both on the local market and for export, together with the

necessary means for its marketing, and they shall consider the

possibility of a joint marketing of their shares of production in the

event the Natural Gas discovery would not otherwise be commercially

exploitable. For that purpose, a Consultative Committee for Natural

Gas shall be established by the Parties to ensure the coordination of the

upstream and downstream components of the Natural Gas project and

facilitate its evaluation and implementation.

21.1.3 Following completion of appraisal work, in the event the Parties

should jointly decide that the exploitation of that discovery is justified

to supply the local market, or in the event the Contractor should

undertake to develop and produce that Natural Gas for export, the

Contractor shall submit prior to the expiration of the appraisal period

an application for and exclusive exploitation authorization which

NOCAL will grant under the terms provided by Article 12.1.

The Contractor shall then have the right and obligation to proceed with

the development and production of that Natural Gas in accordance with

the approved development plan referred to in Article 11.3 and the

provisions of this Contract applicable to Crude Oil shall apply, mutatis

mutandis, to Natural Gas, unless otherwise specifically provided under

Article 21.3.



21.1.4 If the Contractor considers that the appraisal of the Non-Associated

natural Gas discovery concerned is not justified, NOCAL may, by

giving twelve (12) months prior notice which may be reduced either

with NOCAL’s consent or automatically in the event the exclusive

exploration authorization expires earlier, require the Contractor

surrender its rights in respect of the area encompassing said discovery.

In the same manner, if the Contractor, after completion of appraisal

works, considers that the Non-Associated Natural Gas discovery is not

commercial, NOCAL may, by giving three (3) months prior notice,

unless the exclusive exploration authorization expires earlier, require

the Contractor to surrender its rights on the area encompassing said

discovery.

In both cases, the Contractor shall forfeit its rights to all NonAssociated natural Gas which could be produced from said discovery,

and NOCAL may then carry out, or cause to be carried out, all the

appraisal, development, production, processing, transportation and

marketing work relating to that discovery, without any compensation

for the Contractor.

21.1.5 Notwithstanding the terms of Article 21.1.4, if the Operator is of the

view that the Non-Associated Gas discovery in question is noneconomic as a standalone development but can demonstrate that there

is sufficient prospectivity in the region to support a combined

development of current discovered reserves and future exploration

prospects as a combined economic development, then NOCAL will

provide the Contractor a period of thirty-six (36) months before

exercising its rights pursuant to Article 21.1.4.

21.2



ASSOCIATED NATURAL GAS

21.2.1 In the event of a commercial discovery of Crude Oil, the Contractor

shall state if it considers that the production of Associated Natural Gas

is likely to exceed the quantities necessary for the requirements of the

Petroleum Operations related to the production of Crude Oil (including

re-injection operations), and if it considers that such excess is capable

of being produced in commercial quantities. In the event the

Contractor shall have informed NOCAL of such as excess, the Parties

shall jointly evaluate the possible outlets for that excess of Natural

Gas, both on the local market and for export (including the possibility

of joint marketing of their shares of production of that excess of

Natural Gas in the event such excess would not other wise be

commercially exploitable), together with the means necessary for its

marketing.

In the event the Parties should decide that the development of the

excess of Natural Gas is justified, or in the event the Contractor would

wish to develop and produce that excess for export, the Contractor

shall indicate in the development and production program referred to in

Article 11.3.3 the additional facilities necessary for the development



and exploitation of that excess and its estimate of the costs related

thereto.

The Contractor shall then have the right to proceed with the

development and exploitation of that excess in accordance with the

development and production program approved by NOCAL under the

terms provided by Article 11.3.6, and the provisions of the Contract

applicable to Crude Oil shall apply, mutatis mutandis, to the excess of

Natural Gas, unless otherwise specifically provided by Article 21.3.

A similar procedure shall be applicable if the sale of marketing of

Associated Natural Gas is decided during the exploitation of a Field.

21.2.2 In event the Contractor should not consider the exploitation of the

excess of Natural Gas as justified and if NOCAL, at any time, would

wish to utilize it, NOCAL shall notify the Contractor thereof, in which

event:

(a)



the Contractor shall make available to NOCAL free of charge

at the Crude Oil and Natural Gas separation facilities all or part

of the excess that NOCAL wishes to lift;



(b)



NOCAL shall be responsible for the gathering, processing,

compressing and transporting of that excess from the

abovementioned separation facilities, and shall bear any

additional costs related thereto;



(c)



the construction of the facilities necessary for the operations

referred to in paragraph (b) above, together with the lifting of

that excess by NOCAL, shall be carried out in accordance with

good international petroleum industry practice and in such a

manner as not to hinder the production, lifting and

transportation of Crude Oil by the Contractor.



21.2.3 Any excess of Associated Natural Gas which would not be utilized

under Articles 21.2.1 and 21.2.2, shall be re-injected by the Contractor.

However, the Contractor shall have the right to flare said gas in

accordance with good international petroleum industry practice,

provided that the Contractor furnishes NOCAL with a report

demonstrating that said gas cannot be economically utilized to improve

the rate of recovery of Crude Oil by means of re-injection pursuant to

the provisions of Article 15.6, and provided, further, that NOCAL

approves said flaring, which approval shall not be unreasonably

withheld.

21.3



Provisions common to Associated and Non-Associated Gas

21.3.1 In order to encourage the exploitation of Natural Gas, NOCAL may

grant to the Contractor specific benefits when they are duly justified



concerning, inter alia, the recovery of the Petroleum Costs relating to

Natural Gas.

21.3.2 The Contractor shall have the right to dispose of its share of production

of Natural Gas, in accordance with the provisions of this Contract. It

shall also have the right to proceed with the separation of liquids from

all Natural Gas Produced, and to transport, store as well as sell on the

local market or for export its share of liquid petroleum so separated

which will be considered as Crude Oil for the purposes of their sharing

between the Parties under Article 16.

21.3.3 For the purposes of this Contract, the Natural Gas price,

expressed in Dollars per million BTU, shall be equal to:

(a)



with respect to Natural Gas export sales to Third Parties, the

price obtained from purchasers;



(b)



with respect to sales on the local market of Natural Gas as a

fuel, such price as NOCAL and the Contractor shall mutually

agree upon.



ARTICLE 22

FOREIGN EXCHANGE CONTROL

22.1



The Contractor shall comply with the foreign exchange control regulations,

subject to the provisions of this Article.



22.2



The Contractor shall have the right to retain abroad all the foreign currencies

arising from export sales of all Petroleum to which it is entitled under this

Contract, or from assignments, as well as equity, incomes from loan and more

generally, all assets acquired abroad by it, and to freely dispose of such

foreign currencies or assets to the extent that they may exceed its requirements

for its operations in Liberia.



22.3



No restriction shall be exercised on importation by the Contractor of funds

intended for the performance of the Petroleum Operations.



22.4.1 The Contractor shall have the right to purchase currencies of Liberia with

foreign currencies, and freely exchange into foreign currencies of its election

any funds held by it in Liberia in excess of its local requirements at exchange

rates which shall not be less favorable than those generally applicable to any

other buyer or seller of foreign currencies.



ARTICLE 23

APPLICABLE LAW

The laws and regulations in force in the Republic of Liberia and the provisions of

international law as may be applicable to international oil and gas activities shall

apply to the Contractor, to this Contract and to the Operations which are the purpose

thereof, unless otherwise provided by the Contract.



ARTICLE 24

MONETARY UNIT

24.1



The registers and accounting books relating to this Contract shall be

maintained and recorded in Dollars. Said registers and accounting books shall

be used to determine the Petroleum Costs, gross income, exploitation costs

and net profits for the purpose of the preparation of the Contractor’s tax

return; they shall contain, inter alia, Contractor’s accounts showing the sales

of Petroleum under this Contract.



24.2



Whenever it is necessary to convert into Dollars expenses and incomes

expressed in another currency, the exchange rates to be used shall be equal to

the arithmetic average of the daily closing rates for the purchase and sale of

said currency during the month when the expenses were paid and the income

received.



24.3



The originals of the registers and accounting books referred to in Article 24.1

shall be kept in Liberia.

The registers and accounting books shall be supported by detailed Documents

with respect to receipts and Petroleum Costs.



ARTICLE 25

ACCOUNTING METHOD AND AUDITS

25.1



The Contractor shall maintain its accounts in accordance with the regulations

in force and with the provisions of the Accounting Procedure set out in

Appendix 2 attached hereto forming an integral part of this Contract.



25.2



After giving the Contractor notice thereof in writing, the STATE shall have

the right cause the registers and accounting books relating to the Petroleum

Operations to be inspected and audited by its own agents or by experts of its

election, and shall have a period of four (4) years following the end of each

Calendar Year to carry out those inspections or audits relating to said year and

may submit its objections to the Contractor for any contradictions or errors

found during such inspection or audits.

Should the STATE fail to make any claim within the abovementioned period

of four (4) years, no further objection or claim shall be made by the Liberian

administration for the Calendar Year concerned.



ARTICLE 26

IMPORT AND EXPORT

26.1



26.2



(a) The Contractor shall have the right to import into Liberia, in its own name

or on behalf of its contractors and subcontractors, all the technical equipment,

materials, machinery and tools, goods

and supplies necessary in the Contractor’s opinion for the proper conduct and

achievements of the Petroleum Operations; such imports include but are not

limited to, drilling exploration, development, production, transportation, sales

and marketing, equipment pipelines, tanks, geological and geophysical tools,

boats, ships, launches, drilling barges, ships and platforms, production

platforms, civil engineering and telecommunication equipment, power plants

and all related equipment, aircraft automotive equipment and other vehicles,

instruments, tools, spare parts, alloys and additives, camping equipment,

protective clothing and equipment, medical surgical and sanitary equipment,

supplies and instruments necessary for the installation and operation of

hospitals and dispensaries, documentation equipment, construction materials

of all types, lumber, office furniture and equipment, automobiles, explosives,

chemicals, fuels, ship supplies, pharmaceutical products, medicines.

(b)



The Contractor shall have the right to import into Liberia, in its own

name or on behalf of its contractors or subcontractors, the furniture,

clothing, household appliances and all personal effects for all the

foreign employees and their families assigned to work in Liberia for

the Contractor or its contractors or subcontractors.



(c)



However, the Contractor, its agents, contractors and subcontractors

undertake not to proceed with the imports mentioned in Article 26.1 (a)

insofar as such items are available in Liberia under equivalent

conditions of quantity, quality, price, delivery and terms of payment

unless specific requirements or technical emergencies are presented by

the Contractor.



(d)



The Contractor, its agents, contractors and subcontractors shall have

the right to re-export from Liberia, free of all duties and taxes and at

any time, all the items imported under Article 26.1 (a) and (b) which

are no longer necessary for the Petroleum Operations except the items

which have become the property of the State under the provisions of

Article 20.



All the technical materials, machinery and tools, goods and supplies specified

in Article 26.1 which the Contractor, its agents, contractors and

subcontractors, their foreign employees and their families will have the right

to import in one or more shipments to Liberia, shall be fully exempt of all

duties and taxes payable as a result of the importation (“entry duties and

taxes”).



As the case may be, the applicable administrative formalities will be those of

the following regimes:

(a)



Exceptional temporary admission regime in full suspension of entry

duties and taxes for equipment, materials, machinery and tools, goods

and supplies necessary for the proper progress of the Petroleum

Operations, for the entire duration of their use in Liberia including the

continental shelf, it being understood that for the equipment, materials,

machinery and tools, and goods and supplies consumed during the

operations or left in place, the exceptional temporary admission

discharge will be automatic by simple quarterly declaration and

without payment of duties and taxes.

In the event of a duly justified emergency, the equipment, materials,

tools and machinery, goods and supplies will be placed at the disposal

of the users as soon as they arrive in Liberia and the administrative

regularization relating to their admission will be made later and as

soon as possible.



(b)



Supply regime for consumable goods and foodstuffs, fuels and

lubricants used at sea, in particular on all ships, aircraft and machinery

used for petroleum exploration and exploitation.



(c)



Exempt admission regime according to the regulations in force, for

furniture, clothing, household appliances and personal effects.



26.3



The Contractor, its agents, contractors and subcontractors shall provided that

they inform the STATE in advance of their intent to sell and subject to the

provisions of Article 20, have the right to sell in Liberia, all equipment,

materials, machinery and tools, goods and supplies which they have imported

when they are considered as surplus and no longer necessary for the Petroleum

Operations. In that event, the seller shall be responsible for paying all duties

and taxes applicable on the date of the transaction and for filing all the

formalities prescribed by the regulations in force.



26.4



During the term of this Contract, the Contractor, its customers and

their carriers shall have the right to export freely at the export point selected

for that purpose, free of all duties and taxes and at any time, the portion of

Petroleum to which the Contractor is entitled in accordance with the

provisions of this Contract, after deduction of all deliveries made to the

STATE.



ARTICLE 27

DISPOSAL OF PRODUCTION



27.1



Each Calendar Year, up to a total of ten percent (10%) of the share of Crude

Oil Production to which the Contractor is entitled, shall be sold to NOCAL by

the Contractor for the purpose of satisfying the needs of the domestic market

of Liberia. Such contribution of the Contractor shall be in proportion to its

share of production, in the total Crude Oil Production in Liberia.

The quantity of Crude Oil the Contractor shall be obligated to sell to NOCAL

shall be notified to it by NOCAL at least three (3) months prior to the

beginning of each calendar quarter.



27.2



The price of the Crude Oil sold to NOCAL under Article 28.1 for the needs of

the domestic market shall be the Market Price defined in Article 18.

That Crude Oil price shall be payable to the Contractor in Dollars two (2)

months after receipt of the invoice unless otherwise agreed between the

parties.



27.3



The transfer of title to, and risk of, the share of Petroleum production to which

each party is entitled shall be made at the Delivery Point, or at any other

transfer point agreed between the Parties.



27.4



Each of the Parties shall have the right and obligation, to dispose of and lift the

share of Petroleum to which it is entitled under this Contract. Such share shall

be lifted on as regular a basis as possible, it being understood that each of the

Parties, within reasonable limits, will be authorized to lift more (overlift) or

less (underlift) that its share of Petroleum produced and unlifted by the lifting

day to the extent that such overlift or underlift does not infringe on the rights

of the other Party and is compatible with the production rate and the storage

capacity.

In the establishment of the sequence of liftings, priority will be given to the

Party with the largest share of produced and unlifted quantity of Petroleum at

a given time. The Parties shall periodically meet to establish a provisional

lifting program on the basis of the principles above-described and taking into

account the wishes of the Parties as regards the dates and quantities of their

liftings, provided that those wishes are compatible with said principles.



ARTICLE 28

PROTECTION OF RIGHTS

28.1



The Contractor shall take all necessary steps to achieve the objectives of this

Contract in its conduct of Petroleum Operations.



28.2



NOCAL shall take all necessary steps to facilitate the implementation by the

Contractor of the objectives of this Contract, and the STATE shall protect the

property and operations of the Contractor, its employees and agents in the

territory of Liberia.



28.3



At the request of the Contractor, the STATE shall prohibit the construction of

dwelling or business buildings in the vicinity of installation which the

Contractor may declare dangerous as a result of its operations. It shall take all

necessary precautions to prohibit anchoring in the vicinity of submerged

pipelines at river passages, and to prohibit any hindrance to the use of any

other installation necessary for the Petroleum Operations whether on land or

offshore.



28.4



The Contractor shall take out and cause to be taken out by its contractors and

subcontractors, in respect of the Petroleum Operations all insurances of the

type and for such amounts customarily used in the international petroleum

industry, including without limitation, third party liability insurance and

insurances to cover damage to property, facilities, equipment and materials,

without prejudice to such insurances with would be required under Liberian

legislation.



ARTICLE 29

PERSONNEL AND TRAINING

29.1



The Contractor shall, for the purposes of the Petroleum Operations, employ

Liberian personnel whenever qualified for requirements of the employment.

Managers, technicians, engineers, accountants, geologists, geophysicists,

scientists, chemists, drillers, foremen, mechanics, skilled workers, secretaries

and executive employees may be hired outside Liberia if similarly qualified

specialists cannot be hired in Liberia.



29.2



Upon commencement of the Petroleum Operations, the Contractor shall

provide funding for Training Programmes (____________________) and for

the purpose the Contractor shall devote an annual Training Budget of:

(a) ________________ during each year of the exploration period;

(b) ________________ during each year of the exploitation period.

Additionally, the Contractor shall make an annual contribution of

__________________________________ to the University of Liberia for

the enhancement of programmes in Geology, Mining Engineering and

Environmental Studies.



29.3



Upon commencement of the petroleum Operations, the Contractor shall

provide funding for Social and Welfare programmes in Liberia and for that

purpose the Contractor shall devote an annual Social and Welfare Budget:

(a) ________________ during each year of the exploration period;

(b) ________________ during each year of the exploitation period.

An escrow account shall be established by both Parties for the purposes of

receiving money and paying for the programmes detailed in Articles29.2.1 and

29.2.2 and they shall both be signatories to such account, except for the

contribution to the University of Liberia which shall be paid directly to

the institution.

The Training requirements shall be developed by both Parties with the

Understanding that NOCAL shall provide 70% of the training candidates and

the Contractor shall provide 30% of the candidates.

The Training and Social and Welfare Programmes shall be mutually agreed by

the Parties.

The Training and Social and Welfare expenses borne by the Contractor shall

be included in recoverable Petroleum Costs. Funding for the Training and



Social and Welfare Programmes shall be paid within thirty (30) days of the

Effective Date. Thereafter, payments shall be made within thirty days of

each subsequent anniversary of the agreement.

29.4



The Entry into Liberia of all foreign personnel shall be authorized and the

STATE shall issue the documents necessary for that entry to all members of

the foreign personnel, such as entry visas, working permits and exit visas, in

compliance with the immigration regulations in force in Liberia.

At the request of the Contractor, the STATE shall facilitate any

Immigration formalities with the Immigration Bureau, at the points of entry

into and exit from Liberia, in respect of the Contractor’s employees,

contractors, subcontractors and agents, and their families, all without undue

delays.



29.5



All the employees required for the conduct of the Petroleum Operations shall

be under the Contractor’s authority or that of its contractors, subcontractors

and agents, in their capacity as employers. Their work, number of working

hours, salaries and any other matters relating to their employment conditions

shall be determined by the Contractor or its contractors, subcontractors and

agents.



ARTICLE 30

ACTIVITY REPORTS IN RESPECT OF

EXCLUSIVE EXPLOITATION AUTHORIZATIONS

30.1



The provision of Article 12 shall apply, mutatis mutandis, to any exclusive

exploitation authorizations. In addition, the following periodic activity reports

shall, inter alia, be furnished in respect of each Field:

(a)



daily production reports:



(b)



monthly reports stating the quantities of Petroleum produced and those

sold during the previous month together with information on such

sales.



Unless the Contractor gives its written consent, the information relating to a

Field under exploitation, except statistical data about activity, shall be

considered as confidential by the Parties during the term of this Contract.

30.2



The Contractor shall forthwith notify the STATE of any material damage

whatsoever caused to the petroleum fields of facilities, and shall take all

necessary steps to terminate it and carry out the necessary repairs.



30.3



From the year of granting an exclusive exploitation authorization, the annual

report referred to in Article 8.2 shall also include the following:

(a)



information on all development and production operations carried out

during the previous Calendar Year, including the quantities of

Petroleum produced and those sold, if any;



(b)



information on all transportation and sales operations together with the

location of the main facilities built by the Contractor, if any;



(c)



a statement specifying the number of employees and workers, their

qualification and their nationality, together with a report on the

medical care and training provided to them.



ARTICLE 31

ARBITRATION

31.1



In the event of any dispute between the STATE or NOCAL and the Contractor

relating to, or arising out of, the interpretation or execution of the provisions

of this Contract, the parties shall make their best efforts to settle such dispute

amicably.

If within three (3) months from the date of notice of such dispute by either

Party to the other, the Parties have not reached settlement, the dispute shall, at

the request of the most diligent Party, be referred for arbitration to the

International Chamber of Commerce in accordance with its rules and

regulations.



31.2



The arbitration shall be held in ______________________. The language

used during the procedure shall be the English language. The arbitration shall

be determined by three (3) arbitrators. The arbitrators shall not have the same

nationality as the Parties.

The arbitration tribunal’s award shall be final; it shall be binding on the Parties

and shall be enforceable in any court of appropriate jurisdiction.



31.3



The expenses of any arbitration shall be borne equally by the Parties, that is to

say, each party shall pay the expenses of its own arbitrator and the expenses of

the third arbitrator in equal shares, and any expenses imposed by the

International Chamber of Commerce shall be shared equally by the Parties.

The performance by the Parties of their obligations under this Contract shall

not be suspended during the course of the arbitration.



ARTICLE 32

TERMINATION

32.1



Termination by the Contractor. During the Exploration and Exploitation

Periods, the Contractor may surrender, by not less than sixty day notice to

NOCAL, all of its rights and obligations hereunder in respect of all or any part

of the Delimited Area, and the operator shall be relieved of all obligations to

NOCAL in respect of the area so surrendered except those obligations rising

out of a related to the surrender.



32.2



Termination by NOCAL. Subject to the provisions of Article 31, NOCAL

shall have the right to terminate this Agreement if any of the following events

(hereinafter called “Events of Default”) shall occur and be continuing:

(a)



Where the Contractor shall fail to make any of the payments described

in this Agreement on the due payment date, and such default is not

cured within thirty (30) days after notice by NOCAL or within such

longer periods as may be specified in said notice;



(b)



Where the Contractor shall materially fail to comply with its work

commitments and other conditions in this Agreement and such failure

is not cured within ninety (90) days after notice by NOCAL of within

such longer period as may be specified in the notice;



(c)



Where the Contractor shall (i) voluntarily dissolve, liquidate or wind

up its affairs, or make an assignment of all of substantially all of its

assets for the benefit of creditors other than an assignment made to

secure indebtedness incurred in the ordinary course of business; (ii) file

a petition or application to any tribunal for the appointment of a trustee

or receiver for all or any substantial part of the Contractor’s assets; (iii)

commence any proceedings for its bankruptcy, reorganization,

arrangement, insolvency or readjustment of debt under the laws of any

jurisdiction, whether now or hereafter in effect, or if any such petition

or application is filed, or any such proceedings are commenced against

it, shall indicate its approval thereof, consent thereto or acquiescence

therein, or (iv) if any order is entered appointing any such trustee or

receiver, or adjudicating the Contractor bankrupt or insolvent, or

approving the petition in any such proceedings, and provided that the

Contractor shall fail to take corrective measure(s) to have such order

removed or lifted within sixty (60) days;



(d)



Where the Contractor shall fail to carry out Exploration as required by

Article 4, or cease Exploration for a period of twelve (12) consecutive

months or cease production with respect to all Production Areas for a

period of twenty-four (24) consecutive months, unless such failure or

cessation is consented to by NOCAL or is caused by a state of force

majeure.



32.3



Opportunity to cure. In the case of an alleged Event of Default described

above, NOCAL, before taking any further action, shall provide Notice to the

Contractor of the alleged occurrence of such Event of Default and of

NOCAL’s views in that regard and shall offer the Operator a fair opportunity

to consult with NOCAL to resolve the matter. If, after a reasonable period of

time of consultation, NOCAL is of the reasonable opinion that the matter

cannot be resolved by further consultation, NOCAL may they send to the

Contractor Notice of NOCAL’s intention to terminate this Agreement. If the

Event of Default is not cured within sixty (60) days after said Notice, or within

such longer period as may be necessary to allow a reasonable period of time to

effect such cure, then this Agreement shall be terminated, subject to Article

31.



32.4



Disputes Regarding Events of Default. Notwithstanding the provision of

Article 32.2 if the Contractor disputes whether there has been an Event of

Default described above and, within sixty (60) days after receipt by the

Contractor of NOCAL’s Notice of its intention to terminate this Agreement,

refers such dispute to arbitration in accordance with Article 31, then

termination of this Agreement shall not take effect until the finality of, and in

accordance with, an arbitration award upholding NOCAL’s right to terminate

the Agreement



ARTICLE 33

FORCE MAJEURE

33.1



No delay or default of a party in performing any of the obligations resulting

from this Contract shall be considered a breach of this Contract if such delay

or default is caused by a case of Force Majeure.

If in the event of Force Majeure the performance of any of the obligations

under this Contract is delayed, that delay extended by the period of time

required to repair the damage caused during such delay and to resume the

Petroleum Operations shall be added to the period provided by this Contract

for the performance of said obligation, and the exclusive exploration or

exploitation authorizations shall be extended by that period as regards the area

concerned by Force Majeure.



33.2



Force Majeure means any event unforeseeable and beyond the control of a

Party, such as: earthquake, flood, accident, strike, lockout, riot, delay in

obtaining the rights-of-way, insurrection, civil disturbances, sabotages, acts of

war or conditions attributable to war, or any other cause beyond its control,

similar to or different from those already mentioned.



33.3



Where a Party considers it is prevented from performing any of its obligations

by the occurrence of Force Majeure, it shall forthwith notify the other party

thereof by specifying the grounds for establishing Force Majeure, and take all

necessary and useful steps to ensure the normal resumption of the performance

of the concerned obligations upon termination of the event constituting the

Force Majeure.

Obligations other than those affected by Force Majeure shall continue to be

performed in accordance with the provisions of this Contract.



ARTICLE 34

JOINT AND SEVERAL OBLIGATIONS

AND GUARANTEES

34.1



All the clauses, conditions and provisions of this Contract shall be binding on

the Parties and their respective successors and assignees. This Contract

constitutes the only agreement between the Parties and no previous

communication, promise or agreement, whether oral or written, between the

Parties, related to the purpose of this Contract may be asserted to amend the

clauses hereof.

The STATE certifies and guarantees that there is no other applicable

agreement with respect to the petroleum rights within the Delimited Area, that

it will perform its obligation in fairness and good faith and that this Contract

will not be cancelled, amended or modified except by agreement between the

Parties.



34.2



Where the Contractor is constituted by several entities, the obligations and

liabilities of those entities under this Contract shall be point and several.



ARTICLE 35

RIGHTS OF ASSIGNMENT

35.1



All or part of the rights and obligations arising from this Contract may be

assigned by any of the entities constituting the Contractor to Third Parties

whose technical and financial reputation is well established; the assignees with

the other entities constituting the Contractor shall thereafter be jointly and

severally liable for the obligations arising from this Contract.

The terms of any assignment shall be subject to the prior approval of NOCAL,

which approval shall not be unreasonably withheld.

If within thirty (30) days following notification to NOCAL of a projected

assignment accompanied by all the related information and the draft

assignment deed, NOCAL has not given its decision, that assignment shall be

deemed to be approved by NOCAL.

From the date of approval of an assignment, the assignee shall comply with

the terms and conditions of this Contract.



35.2



All or part of the joint and several rights and obligations arising from this

Contract may be freely assigned at any time by any of the entities constituting

the Contractor to one or more Affiliated Companies or other entities

constituting the Contractor.



ARTICLE 36

STABILITY OF CONDITIONS

36.1



This Contract is executed between the Parties in accordance with the laws and

regulations in force at the date of its signing and on the basis of the provisions

of said laws and regulations, as regards, inter alia, the economic, fiscal and

financial provisions of this Contract.



36.2



This Agreement may not be amended or modified by virtue of the adoption or

amendment of Law or regulation by the State of Liberia after the Effective

Date of this Agreement. This Agreement may only be amended or modified

by written agreement of all parties.



36.3



Periodic Review: In the event of changes in circumstances from those

existing at the Effective Date, that have a material effect on the terms of this

Agreement, either NOCAL or the Contractor shall at the request of the other

consult together. If it is established that such Profound Changes in

Circumstances have occurred, then the Parties shall effect such changes in or

clarifications to this Agreement that they agree are necessary. The Parties

shall meet in good faith to make the necessary revisions and adjustments to the

Agreement in order to maintain such expected economic benefits to each of

the Parties, provided that the economic benefits to the Parties shall not be

reduced as a result of exercising the terms of this article. For the purposes of

this Agreement the term “Profound Changes in Circumstances” shall mean

such changes in the economic conditions of the petroleum industry world wide

or in Liberia or such changes that result in such a material and fundamental

alteration of the conditions and assumptions relied upon by the Parties at the

Effective Date of this Agreement (or the time after any subsequent review

under this Article) to the effect that the overall balance of equities and benefits

reasonably anticipated by the Parties will no longer be achievable.

Additionally, the Parties also agree to review the agreement every five years to

consider the concerns of any of the Parties.



ARTICLE 37

IMPLEMTATION OF THE CONTRACT

37.1



The Parties agree to cooperate in every possible manner to achieve the

objectives of this Contract.

NOCAL shall facilitate the Contractor’s performance of its activities by

granting it any permits, licenses, access rights necessary for the performance

of the Petroleum Operations and by making available to it any appropriate

services and facilities, so that the Parties can obtain the best benefit from a

sincere cooperation. However, the Contractor shall observe the applicable

procedures and formalities, and shall apply to the competent Ministries and/or

Agencies of the Administration.

The Parties agree to respect the terms of this Agreement and not to unilaterally

abrogate any part of the terms and conditions contained herein.



37.2



Any notices or other communication under this Contract shall be deemed to

have been made when they are delivered to an authorized representative of the

Party concerned at the location of Said Party’s principal office in Liberia, or

sent by telegram, cable or facsimile with all expenses paid, or deposited as

registered letters with the Postal administration of Liberia with postage

prepaid.

Notifications shall be deemed to have been made on the date when the

addressee shall receive them.



37.3



If NOCAL considers that the Contractor has committed a breach in the

performance of any of its obligations, it shall so notify the Contractor in

writing and the Contractor shall have sixty (60) days to remedy the breach or

refer the matter to arbitration in accordance with this Contract.



37.4



The terms and conditions of this Contract may be modified only in writing and

by mutual agreement between the Parties.



37.5



Unless otherwise specified in writing, the Ministry and NOCAL shall

represent the STATE under this Contract and is empowered to grant, in the

name and on behalf of the STATE, any consent necessary or useful for the

implementation of this Contract.



37.6



Heading in this Contract are inserted for purposes of convenience and

reference and in no event shall define, restrict or describe the scope of object

of the Contract or of any of its clauses.



37.7



Appendices 1 and 2 attached hereto shall form and integral part of this

Contract.



37.8



Any waiver of the STATE or NOCAL concerning the performance of any

obligation of the Contractor shall be in writing and signed by the

representative of the STATE or NOCAL, and no waiver shall be implied if the

STATE or NOCAL does not exercise any of its rights to which it is entitled

under this Contract.



ARTICLE 38

EFFECTIVE DATE

Upon execution by the parties and when promulgated as the law of the

Republic of Liberia, this Contract shall become effective, the date of execution being

referred to as the Effective Date, and said Contract shall become binding on the

Parties.

Counterparts. This Agreement may be executed in multiple counterparts, and by

different Parties in separate counterparts, and each such counterpart shall be deemed

an original Agreement for all purposes, provided that no Party shall be bound by this

Agreement unless and until all parties have executed a counterpart.



IN WITNESS WHEREOF, the Parties have signed this Contract on the date as set

forth below.

___________________________________

Dr. Fodee Kromah

PRESIDENT/CEO

NATIONAL OIL COMPANY OF LIBERIA



_________________________

Date



___________________________________

Mr. Clemenceau B. Urey

CHAIRMAN, BOARD OF DIRECTORS

NATIONAL OIL COMPANY OF LIBERIA



_________________________

Date



___________________________________

Dr. Eugene Shannon

MINISTER OF LANDS, MINES & ENERGY

REPUBLIC OF LIBERIA



_________________________

Date



___________________________________

Dr. Antoinette Sayeh

MINISTER OF FINANCE

REPUBLIC OF LIBERIA



_________________________

Date



_________________________________

_________________________

Hon. Richard Tolbert

Date

CHAIRMAN, NATIONAL INVESTMENT COM.

REPUBLIC OF LIBERIA

___________________________________

Attested:



_________________________

Date



Hon. Frances Johnson-Morris

MINISTER OF JUSTICE

REPUBLIC OF LIBERIA

___________________________________

Approved:

Her Excellency

Ellen Johnson-Sirleaf

PRESIDENT

REPUBLIC OF LIBERIA



_________________________

Date



___________________________________

Ratified:

National Legislature of the Republic of Liberia



_________________________

Date



APPENDIX 1

Attached to and made part of this Contract between the Republic of

Liberia and the Contractor.



DELIMITED AREA

On the Effective Date, the Delimited Area, designated as Block 13, is

formed by the area included inside the perimeter constituted by the points

indicated on the map attached thereto.

The geographical coordinates of those points are the following, with

Reference to the Greenwich meridian:

Point



Latitude



Longitude



Those coordinates are only given for purposes of defining the Delimited

Area and shall not be considered as the boundaries of the national

jurisdiction of Liberia.

The surface of the Delimited Area above-defined is deemed to be equal to

about ______________ sq. km.



APPENDIX 2

Attached to and made part of this Contract between the Republic of

Liberia and the Contractor.



ACCOUNTING PROCEDURE

Article 1 – General Provisions

1.1



Object

This Accounting Procedure shall be followed and observed in the

performance of the obligations under the Contract to which this

Appendix is attached.

The purpose of this Accounting Procedure is to establish the

principles of accounting which shall reflect the Operators actual

costs relating to Joint Operations to the end that the Operator shall

subject to the processes of the Agreement neither gain nor lose by

reason of the fact that it acts as Operator.



1.2



Accounts and Statements

The registers and accounting books of the Contractor shall be in

conformity with accounting rules and regulations for business

applicable in Liberia. However, the Contractor may apply the

accounting rules and procedures customarily used in the petroleum

industry, insofar as none of these are contrary to the rules and

regulations referred to above.

In accordance with the provisions of Article 25 of the Contract,

accounts, books and registers shall be maintained and recorded in

Dollars. These accounts shall be used, inter alia, to determine the

amount of Petroleum Costs, the recovery of said Costs, the

production sharing, as well as for the purposes of Contractor’s tax

return.

The Contractor shall record all operations connected with the

Petroleum Operations in accounts separate from those relating to

any other activities which it may carry out in the Republic of

Liberia.



All accounts, books, records and statements, together with

documents supporting expenses incurred, such as invoices and

service contracts, shall be kept in the Republic of Liberia in order

to be provided at the request of the competent authorities of

Liberia.

1.3



Interpretation

The definitions of the terms used in this appendix 2 shall be the

same as those of the same terms set forth in the Contract. In the

event of any conflict between the provisions of this Accounting

Procedure and the Contract, the provisions of the Contract shall

prevail.



1.4



Modifications

The provisions of this Accounting Procedure may be modified by

mutual agreement between the Parties.

The Parties agree that if any provision of the Accounting Procedure

proves inequitable to either Party, such provision shall be modified

in good faith by the Parties.



Article II – Petroleum Costs

II.1



Petroleum Costs Account

The Contractor shall maintain a “Petroleum Costs Account” which

will record in detail the expenses incurred by the Contractor

directly relating to the Petroleum Operations carried out under this

Contract, and which will be recoverable in accordance with the

provisions of Article 16 of the Contract.

This petroleum Costs Account shall, inter alia, record separately,

by Appraisal Perimeter of Exploitation Perimeter if any, the

following expenses:

(a)



exploration expenditures;



(b)



appraisal expenditures;



c)



development expenditures;



(d)



exploitation expenses;



(e)



financial costs;



(f)



overhead costs in Liberia;



(g)



overhead costs abroad.



The Petroleum Costs Account shall enable, inter alia, to identify at

any time:

(a)



the total amount of Petroleum Costs since the Effective;



(b)



the total amount of Petroleum Costs recovered;



(c)



the total amount credited to the Petroleum Costs Account

pursuant to Article II.4 (b) below:



(d)



the total amount of Petroleum Costs which remain to be

recovered.



(e)



the calculation of taxable income.



For the purposes of Article 16 of the Contract, Petroleum Costs

shall be recovered in the following sequence:

(a)



exploitation expenses in respect of a Field incurred and paid

from the date of commencement of regular production;



(b)



financial costs;



(c)



other Petroleum Costs.



In addition, within each of the foregoing categories, the costs shall be

recovered in the sequence in which they are incurred.

Unless otherwise provided for in this Accounting Procedure the

intent of the Parties is not to duplicate any item of the credit or

debit of the accounts maintained under the Contract.

II.2



Items debited to the Petroleum Costs Account

The following expenses and costs shall be debited to the Petroleum

Costs Account:

II.2.1 Personnel Expenses

All payments in respect of the salaries and wages of the

Contractor’s employees will be those costs directly assigned

to the Petroleum Operations carried out under this Contract.

The precise amounts of expenses will be reviewed in the

future and will be in agreement with accepted human

resource procedures adopted by the Contractor that are

generally applicable in the international oil and gas industry.

The expenses allowed will be the actual expenses incurred as

permitted by such Human Resource Procedures.



II.2.2 Overhead Costs In Liberia

Wages and salaries of the Contractor’s personnel directly

engaged in the Petroleum Operations in the Republic of

Liberia, whose work time is not directly allocated to the

programs, as well as costs of maintaining and operating in



Liberia a main and administrative office and sub-offices

necessary for the Petroleum Operations.

II.2.3 Overhead Costs Abroad

The Contractor shall charge costs paid abroad, connected to

the carrying out of the Petroleum Operations by the

Contractor or its Affiliated Companies. The amounts

charged shall be the actual costs borne by the Contractor.

These costs, including a detailed breakdown of the costs,

will be provided to the JOC for its review and agreement.

II.2.4 Buildings

Construction, maintenance expenses, we well as rents paid

for

All offices, houses, warehouses and buildings of other types,

Including housing for employees, and cost of equipment,

furniture, and fittings necessary for the operation of those

buildings directly required for the performance of the

Petroleum Operations.

II.2.5 Materials, Equipment and Rentals

Costs of equipment, materials, machinery, and facilities

Purchased or provided for use in the Petroleum Operations,

as well as rentals or compensations paid or incurred for the

use of any equipment of facilities required directly for the

performance of the Petroleum Operations.

II.2.6 Services

Costs of services directly related to Petroleum operations

rendered by subcontractors and consultants, as well as any

costs directly related to services rendered by the STATE or

NOCAL or any other authorities of the Republic of Liberia.

Costs of services directly elated to Petroleum Operations

rendered by Affiliated Companies, provided that such costs

shall not exceed those normally charged by independent

companies for an identical or similar service.



II.2.7 Insurance Premiums

Premiums paid for insurances customarily taken out for the

Petroleum Operations to be carried out by the Contractor.

II.2.8 Legal Expenses

All expenses of handling, investigation and settlement of

litigation or claims directly arising from the Petroleum

Operations.

II.2.9. Financial Costs

All interests paid by the Contractor in respect of the loans

from Third parties and advances obtained from Affiliated

Companies, provided that those loans and advances shall be

for the purpose of the financing of Petroleum Costs related

only to the development of Petroleum Operations in respect

of a field. In the event such financing is provided by

Affiliated Companies, the allowable interest rates shall not

exceed the rates customarily used in the international

financial market for loans of a similar nature.

II.2.10 Other Expenses

Any other expenses incurred and paid by the Contractor for

the purposes of the necessary and proper conduct of the

Petroleum

Operations under the approved annual Work Programs and

Budgets, other than the expenses covered and dealt with by

the

Foregoing provisions of this Article and other than the

expenses excluded from the Petroleum Costs.

II.3



Expenses not chargeable to the Petroleum Costs Account

The expenses which are not directly necessary for the performance

of the Petroleum Operations, and the expenses excluded by the

provisions of the Contract or this Accounting Procedure as well as

by the regulations in force in Liberia, are not chargeable to the

Petroleum Costs Account and shall therefore not be recoverable.



Such expenses shall include, without limitation:

(a)



expenses relating to the period before the Effective Date;



(b)



any expenses relating to the operations carried out beyond

the Delivery Point, such as transportation and marketing

costs;



(c)



financial costs relating to the financing of exploration

Petroleum Operations, and those relating to the share of

financing of development Petroleum Operations;



(d)



bonuses defined in Article 19 of the Contract;



(e)



exchange losses.



II.4 Items credited to the Petroleum Costs Account

The following incomes and proceeds shall, inter alia, be credited to

the Petroleum Costs Account:

(a)



income arising from the marketing of the quantity of Crude

Oil to which the Contractor is entitled under Article 16 of the

Contract for the purpose of recovery of the Petroleum Costs;



(b)



any other incomes or proceeds related to the Petroleum

Operations specifically those arising from:

• Sales of related substances;

• Any services rendered to Third Parties using the

facilities dedicated to the Petroleum Operations,

including, but not limited to, processing,

transportation and storage of products for Third

Parties in those facilities.



Article III – Cost Evaluation Basis For Services, Materials and

Equipment Used in the Petroleum Operations

III.1 Technical Services

A reasonable rate shall be charged for the technical services

rendered by the Contractor or its Affiliated Companies for the

direct benefit of the Petroleum Operations carried out under the

Contract, such as gas, water, core analyses and any other analyses

and tests, provided that such charges shall not exceed those

normally charged by independent technical service companies and

laboratories for similar services.

III.2 Purchase of Materials and Equipment

Materials and equipment purchase from third Parties and directly

necessary for the performance of the petroleum Operations carried

out under the Contract shall be charged to the Petroleum Costs

Account at “Net Cost” incurred by the Contractor.

“Net Cost” shall include such items as taxes, shipping agent fees,

transportation, loading and unloading costs, license fees, related to

the supply of materials and equipment, as well as transit losses not

recovered through insurance.

III.3 Use of Equipment and Facilities Exclusively by the Contractor

Equipment and facilities owned by the Contractor and used directly

for the petroleum Operations shall be charged to the Petroleum

Costs Account at a rental rate which shall be sufficient to cover

maintenance, repairs, depreciation and services required for the

performance of the Petroleum Operations.

III.4 Valuation of Materials

All materials transferred to Liberia from the Contractor’s

warehouses, or from those of any entity constituting the Contractor

or their Affiliated Companies, shall be valued as follows:



(a)



New Material

New material (condition “A”) means new material

which Has never been used; one hundred percent

(100%) of the current market price, which corresponds

to the price normally charged for similar supplies in

arm’s length transactions between buyer and seller.

Material in good condition (condition “B”) means

material in good condition which is still usable for its

original purpose without repair, at a maximum of

seventy-five percent (75%) of the price of new

material.

(b)



Other Used Material

Other used material (condition “C”) means material

still usable for its original purpose, but only after

repairs and

Reconditioning: at a maximum of fifty percent (50%)

of the price of new material.



(c)



Material In Poor Condition

Material in poor condition (condition “D”) means

material no longer usable for its original purpose but

still usable for other purposes: at a maximum of

twenty-five percent (25%) of the price of new

material.



(d)



Scrap Material

Scrap material (condition “E”) means material beyond

usage and repair: prevailing price of scrap material.



III.5 Materials and Equipment Disposed By The Contractor

Material and equipment purchased by all the entities constituting

the Contractor shall be valued in accordance with the principles

defined in Article III.4 above.



Materials and equipment purchased by any entity constituting the

Contractor or by Third Parties shall be valued at the received sale

price, which shall in no event be less than the price determined in

accordance with the principles defined in Article III.4 above.

The corresponding amounts shall be credited to the Petroleum

Costs Account.

Article IV – Inventories

IV.1 Period

The Contractor shall keep a permanent inventory both in quantity

and value of all normally controllable materials used for the

Petroleum Operations and shall proceed at reasonable intervals

with the physical inventories as required by the Parties.

IV.2 Notice

A written notice of intention to take an inventory shall be send by

the Contractor at least ninety (90) days prior to the commencement

of said inventory so that the STATE and the entities constituting

the Contractor may be represented at their own expenses during the

inventory operations.

IV. 3 Information

In the event the STATE or any entity constituting the Contractor

shall not be represented at an inventory, such Party or Parties shall

be bound to accept the inventory taken by the Contractor which

shall furnish to such Party or Parties a copy of said inventory.

Article V – Financial and Accounting Statements

The Contractor shall furnish the STATE and NOCAL with all the reports,

records and statements provided by the provisions of the Contract and the

applicable regulations and, inter alia, the following financial and

accounting statements:



V.1



State of Exploration Work Obligations

Such annual statement shall be submitted not later than one (1)

month after the end of each Contractual Year in respect of the

exploration periods.

It shall present with details the exploration work and expenditures

carried out by the Contractor to fulfill its obligations set forth

Article 4 of the Contract, excluding specifically appraisal wells and

related appraisal expenditures as well as development expenditures,

exploitation expenses, overhead costs and bonuses.



V.2



Statement of Recovery of Petroleum Costs

A quarterly statement shall be submitted not later than one (1)

month after the end of each Calendar Quarter. It shall present the

following items of the Petroleum Costs Account:

(a)



the amount of Petroleum Costs which remain to be recovered

at the beginning of the quarter;



(b)



the amount of Petroleum Costs in respect of that quarter and

recoverable under the provisions of the Contract;



(c)



the quantity and the value of the production of Petroleum

taken by the Contract of during the quarter for the purpose of

recovery of the Petroleum Costs;



(d)



the amount of incomes or Proceeds credited for the purpose

of Article II.5 (b) above during the quarter;



(e)



the amount of Petroleum Costs which remain to be recovered

at the end of the quarter.



In addition, an annual statement of the recovery of Petroleum Costs

Shall be submitted prior to the end of February of each Calendar

Year.

V.3



Statement of Production

After commencement of production, such monthly statement shall

be submitted not later than fifteen (15) days after the end of each

month.



It shall present for each month the detailed production of each

Exploitation Perimeter and, inter alia, the quantities of Petroleum:

(a)



stored at the beginning of the month;



(b)



lifted during the month;



(c)



lost and used for the requirements of the Petroleum

Operations;



(d)



stored at the end of the month.