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TRANSLATION CERTIFICATE
Reference is made to an English Language translation of the exploration contract, dated July 27,
2007, between the Ministry of Energy and Mineral Resources of the Republic of Kazakhstan and
Marsel Petroleum LLP, as amended on November 18, 2008, March 4, 2009 and April 14, 2009
(the “Agreement”)* a copy of which is attached hereto at Schedule “A”.
The undersigned, Askhat Tynbayev, hereby certifies that the English language translation
referenced above is, in all material respects, a complete and accurate translation of the original
Russian language version of the Agreement.
Holders of securities of the Corporation may request a copy of the original Russian language
version of the Agreement. To request a copy of the Agreement, please contact:
Sandy Quilty
Chief Financial Officer
Tel: +1 (403)201-9694
DATED as of the 23^ day of February, 2011.
SCHEDULE“A”
CONTRACT
for oil and gas exploration within blocks XXX-42,43 (part), 44,45 (part), XXXl-42,43
(part), 44 (part), 45 (part), XXXII-42,43,44, 45 (part), XXXIII-42 (part), 43 (part), 44
(part), 45 (part) in South-Kazakhstan and Kyzylorda oblasts of the Republic of
Kazakhstan
Between
Ministry of Energy and Mineral Resources
of the Republic of Kazakhstan
(the Competent Authority)
And
Marsel Petroleum LLP
(the Contractor)
Astana, 2007
TABLE OF CONTENTS
Preamble
Section 1. Definitions
Section 2 Contract purpose
Section 3. Contract validity
Section 4. Contract territory
Section 5. Property and information ownership
Section 6. State right for acquisition and requisition of minerals
Section 7. General rights and obligations of the Parties
Section 8. Work program
Section 9. Exploration period
Section 10. Commercial discovery
Section 11. Record keeping and reporting
Section 12. Oil and gas measuring
Section 13. Subcontracted operations
Section 14. Financing
Section 15. Taxes and other mandatory budget payments
Section 16. Accounting
Section 17. Insurance
Section 18. Liquidation and liquidation fund
Section 19. Mineral resources and environment conservation
Section 20. Population and personnel safety
Section 21. The parties’ liability for violation of the provisions of the Contract
Section 22. Force-majeure
Section 23. Confidentiality
Section 24. Transfer of rights and obligations
Section 25. Applicable law
Section 26. Dispute resolution
Section 27. Guarantee of Contract stability
Section 28. Conditions for Contract alteration or termination
Section 29. Language of the Contract
Section 30. Additional provisions
Exhibits:
Exhibit 1 - Geological allotment
Exhibit 2 - Agreement on information acquisition # 143 8 as of March 16, 2006
Exhibit 3 - Work program
Documents attached:
Notification Letter from the RoK Ministry of Energy and Mineral Resources
dated December 05, 2005 regarding announcement of Marsel Petroleum LLP
the winner of the tender
Marsel Petroleum LLP Tender offer
Protocol N2 61k/06 of the Meeting ofYuzhkaznedra Territorial Management
of April 04, 2006 regarding preliminary review of the Contracts and Work
Programs
Expert Conclusions of the Ministries and authorities
Protocol of the Work Group meeting
This Contract for oil and gas exploration within blocks XXX-42, 43 (part), 44, 45 (part),
XXX1-42, 43 (part), 44 (part), 45 (part), XXXII-42, 43, 44, 45 (part), XXXHI-42 (part), 43
(part), 44 (part), 45 (part) in South-Kazakhstan and Kyzylorda oblasts of the Republic of
Kazakhstan is made on July 27, 2007 between Ministry of energy and mineral resources of
the Republic of Kazakhstan (hereinafter referred to as the Competent Authority) and Marsel
Petroleum, Limited Liability Partnership (hereinafter referred to as the Contractor) on the
basis of the Protocol of the Tender Committee #3 dated December 01, 2005 on tender for the
subsoil use right.
PREAMBLE
Whereas:
1. In accordance with the Constitution of the Republic of Kazakhstan the Subsoil, including
hydrocarbon material contained therein is property of the State.
2. Tender Committee of the tender for the subsoil use right (Protocol dated December 01,
2005) has recognized Marsel Petroleum as the winner of the tender for getting the right
for exploration of oil and gas.
3. The Republic of Kazakhstan wishes to rationally and efficiently use the Minerals, as well
as perform the hydrocarbon exploration within blocks XXX-42, 43 (part), 44, 45 (part),
XXXI-42, 43 (part), 44 (part), 45 (part), XXXII-42, 43, 44, 45 (part), XXXIII-42 (part),
43 (part), 44 (part), 45 (part) in South-Kazakhstan and Kyzylorda oblasts of the Republic
of Kazakhstan.
4. The Contractor is willing and possesses financial abilities to rationally and efficiently
perform the hydrocarbon exploration in accordance with the Contract.
5. Government of the Republic of Kazakhstan has vested the Competent Authority with the
right of signing and executing of the Contract.
6. The Competent Authority and the Contractor has agreed that this Contract shall regulate
their mutual rights and obligations during exploration of hydrocarbon material.
The Competent Authority and the Contractor hereby agree on the following:
Section 1. DEFINITIONS
Definitions and terms not defined herein shall have the meaning conforming with definitions
and terms as found in the Law #2828 of the Republic of Kazakhstan On subsoil and subsoil
use with amendments and supplements dated January 27, 1996 (hereinafter referred to as the
Law On subsoil) and Law # 2350 On oil dated (hereinafter referred to as the Law On oil)
dated June 28, 1995 with amendments and supplements and other legislative acts regulating
subsoil use matters.
1. The State (the Republic) shall mean the Republic of Kazakhstan.
2. The Government shall mean the Government of the Republic of Kazakhstan.
3. The State Body shall mean the central executive body of the Republic of Kazakhstan
which is empowered to fulfill certain functions on behalf of the State.
4. Subsoil use legislation shall mean the Law of the Republic of Kazakhstan On subsoil
and subsoil use dated January 27, 1996 #2828, amendments and supplements thereto and
other legislative acts on some types of minerals and technogenic mineral formations.
5. Tax legislation shall mean the Code of the Republic of Kazakhstan on Taxes and other
obligatory budget payments # 209-11 dated June 12, 2001, with subsequent amendments
and supplements (hereinafter referred to as the Tax Code) and other normative and legal
acts, passage of which if provided for by the Tax Code.
6. The Competent Authority shall mean the Ministry of energy and mineral resources of
the Republic of Kazakhstan which acts on behalf of the Republic of Kazakhstan in
exercise of the rights relating to execution and performance of contracts.
7. Authorized body on Subsoil Study and Use shall mean a state authority regulating
geological studies, rational and complex use of subsoil.
8. Authorized body on Environmental Protection is a central authority of the Republic
of Kazakhstan that executes a state policy on environmental protection, and its territorial
bodies.
9. Subsoil User shall mean a physical or natural person that has the right for subsoil use
operations in accordance with Law on Subsoil and Subsoil Use.
10. Subsoil shall mean a portion of the earth's crust below topsoil, and in case of absence of
topsoil - below the earth surface and bottom of water reservoirs, extending to the depth
accessible for Petroleum Operations conducted with consideration of scientific and
technological progress.
11. Field shall mean one or more natural deposits of hydrocarbons in a geological reservoir
of any type.
12. Geological allotment shall mean an exhibit to the Contract being its integral part,
defining in graphic form and descriptively the Subsoil area where the Subsoil user has
the right to carry out exploration of oil and gas.
13. Mineral shall mean hydrocarbon materials contained in the subsoil.
14. Oil shall mean crude oil, gas condensate and natural gas, as well as hydrocarbons
obtained after refining of crude oil, natural gas and processing of oil shale and tar sand.
15. Crude oil shall mean any hydrocarbon materials regardless their specific gravity,
obtained from the subsoil in a liquid state at the normal atmosphere temperature and
pressure, including liquid hydrocarbons known as a distillate or condensate, formed from
die natural gas by way of natural condensation.
16. Hydrocarbon material shall be a synonym to the term of "oil" and mean crude oil, gas
condensate and natural gas, as well as hydrocarbons obtained after refining of crude oil,
natural gas and processing of oil shale and tar sands.
17. Associated components in oil shall mean minerals and various compounds, containing
in oil and formation waters to be obtained technologically.
18. Natural gas shall mean hydrocarbons in a gaseous form at normal atmosphere
temperature and pressure, including combination gas, dry gas, and associated gas
remained after extraction or separation of liquid hydrocarbons from the combination gas,
and non-hydrocarbon gas, obtained together with liquid or gaseous hydrocarbons.
19. The Contract shall mean this contract for exploration of hydrocarbon material made
between the Competent Authority and the Contractor within blocks XXX-42, 43 (part),
44,45 (part), XXXI-42, 43 (part), 44 (part), 45 (part), XXXH-42, 43,44, 45 (part),
XXXII1-42 (part), 43 (part), 44 (part), 45 (part) in South-Kazakhstan and Kyzylorda
oblasts of the Republic of Kazakhstan, as well as all the exhibits to present Contract.
20. Contract territory shall mean the territory determined by the Geological allotment
where the Subsoil user has a right to carry out subsoil use operations in accordance with
the Contract.
21. Annual validity of the Contract shall mean the period equal 12 (twelve) consecutive
months according to the Gregorian calendar; this period in context of the Contract starts
from the effective date of the Contract or any other anniversary date of the Contract.
22. Effective date of the Contract shall mean the date determined in clause 3.1. herein.
23. Work program shall mean a complex of plans of the Subsoil User for the entire term of
the Contract including actions taken to fulfill the tender offer conditions.
24. Annual Work Program shall mean the plan of the Contractor's activities for a period
of one calendar year that includes scopes and directions for mining works in exploration
and financial costs.
25. Oil operations shall mean exploration work at the Contract territory.
26. Exploration shall mean any work (operations) connected with a search for gas and oil
and include:
geophysical survey;
test drilling;
drilling of prospecting and exploration wells, as well as the test production at the
field being under exploration.
27. Subsoil use operations shall mean work related to exploration of oil and gas performed
within the Contract territory in accordance with the Contract.
28. Good practices of field development shall mean worldwide practices usually employed
during petroleum operations as rational, safe, necessary and economically efficient.
29. Oil and gas pipelines shall mean pipelines designed for oil transportation, as well as
pipelines operating in a gathering main operating mode, as well as equipment and
facilities on refining, separation and liquefaction of the materials transported through the
pipeline system or its separate parts, control and insulation system, electrochemical
protection system and other equipment designed for servicing of such pipelines.
30. Historical costs shall mean aggregate past costs incurred by the State in geological study
of the Contract territory, searches, and exploration of the fields.
31. Approved reserves shall mean geological and recoverable Mineral reserves estimated
by the state expert review.
32. Subsoil plot (block) shall mean a geometrized portion within contour boundaries
allocated for subsoil use operations.
33. Parties shall mean the Competent Authority and the Contractor where collectively
determined herein.
34. The Contractor shall mean Marsel Petroleum LLP having entered with the Competent
Authority into this Subsoil Use Contract.
35. Subcontractor shall mean a legal entity or an individual having agreed with the
Contractor to perform some part of the Contractor’s obligations hereunder.
36. Third party shall mean any individual or legal entity except for the Parties under the
Contract.
37. Kazakhstan manufacturer shall mean a legal entity or an individual of the Republic of
Kazakhstan manufacturing goods, executing the work and rendering services of the
Kazakhstan origin.
38. Kazakhstan origin (goods, works and services of the Kazakhstan origin) shall mean
direct manufacture (rendering) of goods, work and services by legal entities and/or
individuals of the Republic of Kazakhstan in the territory of the Republic of Kazakhstan.
39. Kazakhstan content shall mean percentage of the following:
Kazakhstan employees hired during execution of the Contract with categorization of the staff
and indication of the percentage of each category in relation to foreign employees whose
number shall decrease year wise as the Contractor implements compulsory training
programs and professional development of the Kazakhstani staff;
cost of goods, work, services of the Kazakhstani origin, being purchased both directly and by
means of subcontracts, in the total cost of goods, work, services of the Contractor.
40. Goods shall mean equipment, ready-made products and material and technical values,
purchased both for direct use during subsoil use operations and for activities specified by
the Contract as associated activities.
41. Services shall mean activities provided on a paid basis necessary both for direct use in
the process of subsoil use operations and in the activities stipulated by the Contract as
associated activities and which are not aimed at creation (production) of goods or other
material objects.
Section 2. CONTRACT PURPOSE
2.1. The purpose of this Contract is to define contractual relations between the Competent
Authority and the Contractor in accordance with the State’s legislation in force as of the
effective date of the Contract and to register legally the relations between the Competent
Authority and Contractor.
Section 3. CONTRACT VALIDITY
3.1. The Contract shall come into force from the date of its state registration in the Competent
Authority (authorized state body) with mandatory issue of the Contract registration Act.
3.2. The term of the Contract shall be 5 (Five) years from the date of its registration and the
Contract will be in full force and effect till July 27, 2012.
3.3. The term of the Contract may be extended by mutual consent of the Parties in accordance
with the State’s legislation.
3.4. Shall the term of the Contract be extended, the provisions of the Contract shall be
changed by written consent of the Parties.
Section 4. CONTRACT TERRITORY
4.1. The Contractor shall perform oil and gas exploration within the Contract territory in
accordance with terms of the Contract.
4.2. If in the course of subsoil use operations it becomes apparent that geographic boundaries
of the Field go beyond the Contract Territory, the issue of its expansion shall be addressed by
the Competent Authority without initiation of a tender, provided that this does not involve
interests of the subsoil users from the neighboring areas.
4.3. Return of the Contract territory, except for the territory where the Commercial discovery
was made, shall be made in the following procedure: in 3 years - 20%; in 4 years - 20%; the
remaining part of the contract territory shall be returned upon the completion of the
exploration period.
Section 5. PROPERTY AND INFORMATION OWNERSHIP
5.1, All tangible and intangible assets purchased by the Contractor for exploration of
hydrocarbon material shall be deemed the Contractor’s property.
5.2 Proprietary rights defined in clause 5.1 herein may be pledged or encumbered in any
other way to the benefit of a Third party in order to secure financing of exploration of
hydrocarbon material in accordance with the State’s legislation.
5.3. Information on geology of the Subsoil and Mineral resources contained therein, Field's
geologic parameters, size of mineral reserves, development conditions and other features of
the Subsoil, which are found in geologic reports, maps and other materials shall be deemed
the State’s property in case it has been obtained from budget assignments, or the Contractor's
property if obtained on the Contractor's own account.
5.4. Information on the Subsoil within the Contract Territory owned by the State shall be
purchased by the Contractor from the Authorized body on subsoil study and use in the
manner specified by the legislation.
5.5. Geological and other information on Subsoil acquired by the Contractor in the course of
exploration of oil and gas must be mandatory and free of charge submitted for storage,
classification and summarizing to the Authorized body on subsoil study and use.
5.6. Utilization of geological information on Subsoil acquired at the cost of the Contractor
and submitted in accordance with clause 5.5 hereof for educational, scientific, commercial or
other purposes shall be determined on the basis of a separate agreement between the
Contractor and the Authorized body on subsoil study and use.
5.7. Upon the Contract termination all geological information shall become the State
property. The Contractor must submit all documents and other physical media containing
geological information, including source information, free of charge to the Authorized body
on subsoil study and use,
Section 6. STATE RIGHT FOR ACQUISITION AND REQUISITION OF MINERALS
6.1. In case of war, natural disasters and in other cases prescribed by emergency laws of the
State, Government shall have a right for requisition of Minerals belonging to the
Contractor. Requisition shall be done in amounts as required for State needs during the
whole term of an emergency situation,
6.2. The State guarantees compensation for requisitioned Minerals in physical or monetary
terms at world market prices as of the date of requisitioning in the official currency of
the State.
6.3. The State shall have the priority right for purchase of oil and gas from the Contractor at
prices not exceeding the world market prices. Volume, price and conditions will be
specified by a separate agreement,
Section 7. GENERAL RIGHTS AND OBLIGATIONS OF THE PARTIES
7.1. The Contractor shall have the right to:
7.1.1. Carry out exclusive exploration at the Contract territory.
7.1.2. Independently perform any legal Subsoil use operations within the limits of designated
Contract Territory in accordance with the terms hereof.
7.1.3. Use at its discretion results of its activity, including obtained hydrocarbon material,
including oil and gas lifted to the surface considering the provisions of the Clause 7.2.22.
7.1.4. Construct production and civil facilities required for oil and gas exploration on the
Contract Territory and in the case of necessity on other territories allocated for use by the
Contractor in accordance with the applicable procedure,
7.1.5. Utilize common purpose objects and communications both within the Contract territory
and outside, on the basis of agreements with respective owners.
7.1.6. Negotiate extension of the Contract term in top priority order, specified by clause 3.3.
herein.
7.1.7. Hire subcontractors to perform works connected with exploration.
7.1.8. Transfer the rights or part of its rights to the Third Party in accordance with conditions,
stipulated by the Contract and State’s legislation.
7.1.9. Terminate its activities subject to conditions stipulated by the Contract and the State
legislation.
7.1.10. In case of the Contract termination, the Contractor may independently dispose of the
property in its possession, unless otherwise provided for by the laws of the Republic of
Kazakhstan.
7.1.11. Hire foreign highly qualified specialists for implementation of foreign equipment and
technologies in accordance with the State’s applicable law.
7.1.12. Run pilot operation in accordance with the approved project document.
7.2. The Contractor shall:
- Start implementing of the Work Program within 30 days following the Effective Date of the
Contract. Not use the Contract territory for any purposes other than specified by the Contract,
7.2.1. Ensure occupational, health safety and environmental protection during subsoil use
operations.
7.2.2. Observe terms and conditions of the Memorandum of Understanding with regard to
transparency initiative of producing sectors in the Republic of Kazakhstan.
7.2.3. Annually, not later than within thirty calendar days after approval of the Annual Work
Program, submit to the state regulating authorized body on trade and industrial policy an
annual program of purchase of goods, works and services in the form approved by the state
regulating authorized body on trade and industrial policy.
7.2.4. On a quarterly basis, not later than of the 15th day of the month following the reporting
period submit a report on purchased goods, works and services to the state regulating
authorized body on trade and industrial policy in the form approved by the state regulating
authorized body on trade and industrial policy.
7.2.5. Provide reporting confirmed by the audit report in accordance with the requirements of
the transparency initiative of producing sectors in the Republic of Kazakhstan following the
procedure approved by the Government of the Republic of Kazakhstan.
7.2.6. Not prevent the other entities from: free travel within the Contract Territory, utilization
of common purpose objects and communications or conducting of any kinds of work,
including exploration of other mineral resources but hydrocarbon materials, unless it is
related to special safety conditions and such activities hinder exploration operations.
7.2.7. Follow projects of oil ad gas exploration approved in accordance with the established
procedure, ensuring personnel and population safety.
7.2.8. Compulsorily use equipment, materials and finished goods manufactured in the State in
amount of no less than 30% of the total cost of the goods necessary for performance of the
Contract, if they meet the requirements of the technical regulation legislation of the Republic
of Kazakhstan, are certified and permitted to be used in the industry, by holding the Tender in
the Republic of Kazakhstan according to the procedure defined by the Government of the
Republic of Kazakhstan.
7.2.9. Compulsorily hire Kazakhstani companies and enterprises to deliver works and
services during exploration operations including air, railroad, water and other transportation
services, in amount of no less than 70% of the total cost of the works and services necessary
for performance of the Contract, by holding the Tender in the Republic of Kazakhstan
according to the procedure defined by the Government of the Republic of Kazakhstan.
7.2.10. Incase if a service is not available in the Republic of Kazakhstan, the Contractor
may use services of foreign companies subject to permission by the authorized governmental
body.
7.2.11. Submit the Work Program and complete progress reports to the Competent Authority.
7.2.12. Engage Kazakhstan specialists and local staff in the exploration and arrange for their
professional training with the following percentage of the Kazakhstani specialists: top
managers -100%, medium-level managers - 95%, skilled workers - 100% of the total number
of the employed personnel with further increase of the Kazakhstan content.
7.2.13. Allocate not less than 1.1% of annual work program volume for professional training
of Kazakhstani personnel involved in the Contract works during the term of the Contract.
If total amount of money allocated for Kazakhstani staff training exceeds the actual demand
of employees training, the Contractor shall use the remaining amount to finance top priority
secondary education projects in accordance with the Cooperation Agreement between the
Ministry of Education and Science of the Republic of Kazakhstan and die Ministry of Energy
and Mineral Resources of the Republic of Kazakhstan. Information on the remaining
education funds shall be submitted to the Competent Authority after the Annual Work
Program and the budget for the next year of the Contract term are approved.
7.2.14. Provide free access to required documents, information and operation places for State
control agencies when such agencies are in the course of implementing their official
responsibilities and timely eliminate all discovered violations. Submit to the State control
agencies on subsoil exploration and use the geological reports on activity results within the
Contract territory.
7.2.15. Timely pay taxes and other mandatory payments to the budget, as well as penalties
for irrational subsoil use and environmental pollution, including breaches of Kazakhstan
content obligations.
7.2.16. Disclose information regarding exploration to Third parties, if needed, only upon the
written consent of other Party. Preserve objects of cultural and historical significance found
on the Contract territory in the course of the Contractor's activities.
7.2.17. Forecast long-term environmental impact of Contract fulfillment activities. The
Contractor shall submit forecast of long-term environmental impact along with detailed
reports on measures undertaken to minimize long-term negative environmental consequences
of the Contractor's Contract fulfillment activities to the Competent Authority and State
control agencies on environmental protection not later than in 2 years upon the beginning of
operations hereunder. The Contractor shall take such measures to minimize long-term
negative environmental consequences as the Competent Authority and state environmental
authorities may reasonably require, at the Contractor's own expense.
7.2.18. Leave the Contract territory in condition conforming to mining and sanitation control
and environmental protection requirements.
7.2.19. Restore land plots and other objects of nature, which were affected by the Contractor's
activities hereunder to the condition of being useable in the future in accordance with State
legislative requirements.
7.2.20. By agreement with local executive bodies, annually allocate financial means for the
development of the regional social sphere at the rate of 3.1% from annual amount of costs for
exploration, in proportion to the explored territory.
7.2.21. Accept all the previously drilled wells to the balance and monitor them.
7.2.22. Deliver to the domestic refinery plants the whole volume of oil obtained during the
exploration period.
7.2.23. Ensure gas utilization in compliance with the legislation of the Republic of
Kazakhstan.
7.2.24. Submit declarations on industrial objects safety in order and due form approved by the
Government of the Republic of Kazakhstan, to the central executive body on emergency
situations and local executive bodies of the Republic.
7.2.25. Conduct works for exploration of oil and gas in the geological allotment located in the
South-Kazakhstan state protected zone only after approval of special ecological requirements.
7.2.26. Provide equal conditions and labor payment for the Kazakhstan personnel versus the
expatriate personnel involved, including subcontracted personnel.
7.3. The Competent Authority shall:
7.3.1. Ensure Contract execution and termination according to the procedure and on the
grounds stipulated by the State’s legislation.
7.4. The Competent Authority shall have the right to:
7.4.1. Represent the State in negotiating the terms of the Contract with the Contractor.
7.4.2. Require periodic reports on the Contract performance. Require other information
regarding terms of the Contract.
7.4.3. Inspect Contractor's Exploration activities of hydrocarbon material, including
Contractor's documentation regarding activities hereunder.
7.4.4. Access any operations on the Contract Territory, related to exploration.
Section 8. WORK PROGRAM
8.1. The Contractor shall conduct oil and gas exploration in accordance with die Work
program approved by the Authorized body on subsoil study and use and Exploration Project
approved by the Authorized body on subsoil study and use and Authorized body on State
control and Supervision of Emergency Situations.
8.2. The Work Program shall be based on feasibility studies and justifications with
consideration of good practices of field development.
m Exploration works Total cost,
thousands of
US$
Year 1
1 Coordination and approval of the Exploration and Production 20.0
Contract with the Competent Authority
2 Geologic-geophysical information and materials acquisition 20.0
3 Reprocessing of previous CDP data 300.0
4 Purchase of equipment, office equipment and equipment for 1,851.74
prospecting, drilling, testing and utilization of gas, condensate and oil
5 Exploration Project for drilling of exploration wells 60.0
6 Training of Kazakhstani specialists (personnel) 66.33
7 Investments for development of the social infrastructure 186.93
8 Drilling of 2 deep wells to the depth of 4,000 m 4,000,0
Total for Year 1 6,505.0
Year 2
9 Re-interpretation of drilling geophysical materials and GIS 200.0
10 Re-entry of the wells drilled before 1,701.0
11 Drilling of 4 deep wells to the depth of 3,000 m 6,000.0
12 Drilling of 2 deep wells to the depth of 4,000 m 4,000.0
13 Construction of infield and access roads 400.0
14 Training of Kazakhstan specialists (personnel) 132.0
15 Investments for development of the social infrastructure 372.0
Total for Year 2 12,805.0
Year 3
16 Reinterpretation of drilling geophysical materials and GIS data 200.0
17 Estimation of gas, condensate and oil reserves 100.0
18 Re-entry of the wells drilled before 1,537.2
19 Drilling of 4 deep wells to a depth of 4,000 m 8,000.0
20 Drilling of 4 deep wells to a depth of 3,000 m 6,000.0
21 Construction of infield and access roads 400.0
22 Training of Kazakhstan specialists (personnel) 174.9
23 Investments for development of the social infrastructure 492.9
Total for Year 3 16,905.0
Year 4
24 Reinterpretation of drilling geophysical materials and GIS data 200.0
25 Re-entry of the previously drilled wells 1,337.7
26 Drilling of 4 deep wells to a depth of 4000 m 12,000.0
27 Drilling of 4 deep wells to a depth of 3000 m 7,000.0
28 Test Production Project for the fields defined 100.0
29 Construction of infield and access roads 400.0
30 Training of Kazakhstan specialists (personnel) 227.15
31 Investments for development of the social infrastructure 640.15
Total for Year 4 21,905.0
Year 5
32 Reinterpretation of drilling geophysical materials and GIS data 100.0
33 Estimation of gas, condensate and oil reserves 100.0
34 Drilling of 4 deep wells to a depth of 4,000 m 12,000.0
35 Drilling of 4 deep wells to a depth of 3,000 m 6,613.3
36 Test Production Project for the fields defined 100.0
37 Construction of infield and access roads 300.0
38 Training of Kazakhstan specialists (personnel) 207.35
39 Investments for development of the social infrastructure 584.35
Total for Year 5 20,005.0
Grand total 78,125.0
8.3. The Contractor may propose amendments and/or supplements to the approved Work
Program. Amendments and supplements to the Work Program shall be made in writing upon
mutual consent of the Parties.
8.4. The Contractor shall get approval for the annual work program from the Authorized body
on subsoil study and use or its territorial subdivisions.
8.5. The Contractor may accumulate funds designed for financing of production and social
infrastructure.
Section 9. EXPLORATION PERIOD
9.1. According to the Contract, the Exploration period shall consist of 5 (five) consecutive
years, and may be extended only twice each time for two years upon mutual consent of the
Parties and in accordance with the subsoil use legislation. In such a case the Parties shall first
define the portion of the Contract Territory to be kept by the Contractor for further exploration
and make respective amendments to the Work Program.
9.2. The Contractor shall start exploration no later than in 30 days from the effective date of
the Contract. Within 15 days the Contractor shall notify the Competent Authority of the
exploration starting date.
9.3. Minimum amount of financing for the exploration period shall equal US$78,125,000,
including: first year - US$6,505,000; second year - US$12,805,000; third year -
US$16,905,000; fourth year-US$21,905,000; fifth year-US$20,005,000.
9.4. Upon completion of the exploration period, the Contractor shall confirm the reserves in
the authorized body - State Reserves Committee of the Republic of Kazakhstan in accordance
with the established procedure.
9.5. In the course of the exploration, as per the Contract, the Contractor shall return the
Contract territory, except for the territory where the Commercial discovery has been done.
9.6. As per the Contract, the Contractor shall determine the subsoil land plots to be returned
and notify the Competent Authority no later than in 30 days prior to such return of the
territory.
9.7. Returned plots shall comply with all statutory environmental protection requirements of
the State. The Contractor shall restore such returned territories and other objects of nature
disturbed as a result of exploration to such state as is suitable for use for its primary purpose,
at the Contractor’s own expense.
9.8. The Contract shall be terminated upon the expiration of the exploration period, save
possible extensions, if no Commercial Discovery has been made at the Contract Territory or
no decision has been made to enter Production period. Shall the Contractor refrain from
continuing the works hereunder, it then shall forfeit all rights for the Contract territory and
may not claim any future reimbursement of its costs, incurred under this Contract.
Section 10. COMMERCIAL DISCOVERY
10.1. In the case if the Contractor discovers hydrocarbon material which is, in its opinion,
economically profitable for the Production, he shall immediately notify thereof the
Competent Authority and prepare a report on reserves estimation and evaluation in order to
submit it within twelve months to the State Reserves Committee of the Republic of
Kazakhstan.
10.2. The authorized body shall ensure that a state expert evaluation of the field reserves
within the Contract territory is made in accordance with the procedure established by the
Subsoil Use Legislation.
10.3. Commercial Discovery shall grant an exclusive right to the Contractor to enter the
Production stage on the basis of the production contract signed by means of direct
negotiations.
10.4. In the case of Commercial Discovery the Contractor shall have a right for full or partial
reimbursement of costs incurred in connection with commercial discovery.
10.5. In the case if there was no Commercial Discovery, the Contractor shall have no right for
reimbursement of costs incurred during the exploration period.
Section 11. RECORD KEEPINGAND REPORTING
11.1. The Contractor shall keep records and store record documentation in respect of
exploration of oil and gas hereunder during the stipulated period in accordance with the
State’s legislation.
11.2. The Contractor shall quarterly submit to the Competent Authority a report on its
activities together with the form #2 LKU attached by 25th day of the month following the
reporting period (report on execution of license-contractual liabilities).
11.3. The Contractor shall annually submit to the Competent Authority a report on spending
funds for training, indicating the list of trainees, list of programs, training organizations and
duration of a training course, for social programs.
11.4. The Contractor shall submit reports on its activities to the state authorities within the
term and according to the procedure stipulated by the State’s legislation.
11.5. The Competent Authority shall have a right to inspect the Contractor's compliance with
the Contract terms and conditions and may be present via its representatives during
exploration operations conducted by the Contractor.
Section 12. OIL AND GAS MEASURING
12.1. The Contractor shall measure and weigh oil and gas produced at the Contract Territory
in accordance with methods and practices applied in the State.
12.2. The Contractor shall conduct annual tests of equipment and instrumentation used for oil
and gas measuring and weighting attended by representatives of the authorized body for
metrology and standardization.
12.3. If it is detected during a test or examination that equipment or instrumentation has
defects and if it is not possible to determine how long the defects have existed, such period
shall be determined as half the time from the previous measurement until the date when the
defects were found.
12.4. In case if the Contractor deems necessary to introduce modifications to the applied
methods or replace installed instrumentation, the Contractor shall notify the authorized body
for metrology and standardization no later than 30 days in advance, in order to give its
representatives an opportunity lo attend such modifications or replacement.
Section 13. SUBCONTRACTED OPERATIONS
13.1. As part of the annual Work Program, the Contractor shall provide to the authorized
body in the sphere of state regulation of trade and industrial policy a plan of subcontracted
works, list of subcontracts for materials, equipment and services supply to be signed in the
following calendar year with indication of estimated costs of Subcontracts as well as a list of
potential Kazakhstan and foreign Subcontractors.
13.2. The Contractor shall as a rule hire subcontractors in accordance with the legislation.
13.3. The Contractor shall be liable for performance of subcontracts in accordance with
State’s legislation.
Section 14. FINANCING
14.1. The Contractor shall undertake to fully finance its activities under the Contract in
accordance with the Work Program approved by the Parties.
14.2. The Contractor shall be free to obtain loans in any currency in and outside the State for
financing of its activities, provided it does not contradict the State’s legislation.
14.3. The Contractor may maintain bank accounts both in domestic and foreign currency
with banks within and outside the State for the purpose of Contract performance and
obtaining funds representing earnings and proceeds under the Contract.
14.4 All settlements under the Contract shall be made in the order stipulated by the State’s
legislation.
14.5. The Contractor and Subcontractors shall carry out their currency transactions in
accordance with the State’s legislation on currency regulation.
Section 15. TAXES AND OTHER MANDATORY BUDGET PAYMENTS
15.1. Taxation of the Subsoil Use Contract shall comply with the first tax regime model,
according to which the Contractor shall pay taxes and other mandatory budget payments as
established by the tax laws in effect at the time such liabilities arise.
15.1.1. Signature bonus.
The Contractor shall pay the Signature bonus in the amount of US$570,000 (Five hundred
seventy thousand US dollars) no later than in 30 (Thirty) calendar days after the Effective
Date of the Contract.
15.2. Tax payments.
The Contractor shall pay all the tax payments in compliance with the Tax laws of the
Republic of Kazakhstan in force on the day of the customs declaration acceptance.
15.3. Transfer pricing.
Should the price used in the course of a transaction execution vary from the market price, the
state bodies controlling application of transfer prices shall have a right to adjust tax entities in
compliance with the legislation on state control of transfer prices application.
15.4. Pension tax, social insurance.
The Contractor shall withhold and transfer mandatory pension taxes of its employees to
pension funds in compliance with the pension insurance law, and ensure completeness of
assessments and timely social insurance payments to the State social insurance fund in
compliance with the social insurance law in force as of date of creation of such liability.
15.5. Penalties
15.5.1. Penalties for violation of Tax legislation shall be applied in accordance with the
legislation in force as of the date of commitment of such violation,
15.5.2. Fines for payments other than taxed shall be applied at rates stipulated by the law in
force as of the date of commitment of such violation.
Section 15-1. REIMBURSEMENT OF HISTORICAL COSTS
The Contractor shall pay past costs to the budget in accordance with the provisions of
the Agreement on geological information acquisition dated 16.03.2006 #1438 (hereinafter
referred to as the Agreement),
In accordance with the Agreement concluded between the Committee on geology and
subsoil use of the Ministry of energy and mineral resources of the Republic of Kazakhstan
and Marsel Petroleum LLP, historical costs equal US$1,818,404 (One million eight hundred
eighteen thousand four hundred four US dollars).
For the right to use geological information the Contractor shall undertake to pay 1.5%
of the total amount of historical costs in the amount of US$27,276 (twenty seven thousand
two hundred seventy six US dollars) in accordance with clause 1.2. of the Agreement.
The procedure of payment of the remaining amount of historical costs in the amount of
US$1,791,128 (One million seven hundred ninety one thousand one hundred twenty eight
US dollars) after payment for the right to use geological information, shall be specified by
the Production Contract.
For incompliance with the historical costs assessment procedure and terms and
conditions of their payment to the budget, the Contractor shall be held liable in accordance
with the Tax Code as provided for incompliance with the historical costs assessment
procedure and terms and conditions of their payment to the budget.
Section 16. ACCOUNTING
16.1. The Contractor undertakes to maintain full and accurate accounting of all income and
expenses with regard to the Contractor's activities hereunder, in accordance with the
accounting procedure stipulated in State’s legislation.
16.2. All Contractor's accounting books and records shall be properly maintained and be
available for inspection by the Competent Authority and State agencies in accordance with
their competence as defined in the State’s legislation.
Section 17. INSURANCE
17.1. Within 180 days following the Effective Date of the Contract, the Contractor shall
develop and present for approval of the Competent Authority a program of insurance of
business risks, property and liability related to the Exploration.
17.2. Insurance shall be provided for property and liability risks, related to:
• Transportation and storage of goods delivered to the site of exploration of
hydrocarbon reserves;
• Contractor's property used in the process of Exploration of hydrocarbons, including
rented or leased property;
• Environmental and land pollution and costs of liquidating consequences of damage
caused to environment, including land improvement and reclamation;
• General civil liability to third parties including harm caused to health and life of the
personnel and population.
17.3. The Contractor shall insure its employees against work accidents and occupational
diseases, including risks related to them.
17.4. The Contractor at its own discretion shall choose insurance companies in accordance
with the State’s legislation.
Section 18. LIQUIDATION AND LIQUIDATION FUND
18.1. Not later than within two years of the Effective Date of the Contract the Contractor
shall present for approval of the Competent Authority a program on liquidation of
consequences of its activities under the Contract which shall include estimates of liquidation
costs.
18.2. Suspension and abandonment of oil, gas and other wells shall be carried out in
accordance with the requirements established by the authorized body on state inspection and
supervision of emergency situations.
18.3. The liquidation program shall provide for removal or liquidation of buildings and
equipment utilized in the course of activities performed by the Contractor within the Contract
territory.
18.4. In order to provide full financial security for implementation of liquidation program the
Contractor shall establish a liquidation fund at the rate of 1% (one percent) of annual volume
of expenses for Exploration of hydrocarbon material.
18.5. The payments at the rate of 1% of the annual volume of costs for Exploration of
hydrocarbon material to the liquidation fund shall be made by the Contractor once a year to a
special deposit account in a bank located in the Republic of Kazakhstan and shall be included
in the Subsoil use expenditures. Application of the liquidation fund shall be made by the
Contractor upon permit of the Competent Authority by the agreement with the Authorized
body on subsoil study and use.
18.6. If actual liquidation costs exceed the amount of Liquidation fund, the Contractor shall
provide additional financing for liquidation purposes.
18.7. If actual liquidation costs are less than the amount of Liquidation fund, the surplus shall
be transferred to the Contractor and be taxed as income.
18.8. If the State takes the decision on continuation of operating all or some of the facilities
handed over to it by die Contractor after expiration of the Contract on its own responsibility,
then the Contractor shall be free of any responsibilities for implementing liquidation program
and vest upon the State all rights for all accumulated assets in the liquidation fund.
Section 19. PROTECTION OF SUBSOIL AND ENVIRONMENT
19.1. In the course of the Contract performance the Contractor shall observe the State’s
legislation related to protection of the Subsoil and environment, provide sanitary and
epidemiological welfare of population, and take all necessary measures with the purpose of:
• Protection of people's lives and health;
• Ensuring of rational mid integral use of oil and gas;
• Preservation of natural landscapes and reclamation of damaged and polluted lands and
other geomorphologic structures;
• Preservation of properties of energetic condition of upper sections of the Subsoil for the
purpose of prevention of earthquakes, landslides, underflooding and soil subsidence.
19.2. During the Exploration the Contractor shall observe the following in preferential order:
I. Ecological requirements:
• environment preservation;
• prevention of man-caused desertification of lands;
• prevention of water and wind soil erosion;
• isolation of freshwater and lost circulation horizons to avoid their pollution;
• prevention of desiccation and pollution of underground waters;
• other requirements according to the Legislation related to the subsoil use and
environment;
• industrial monitoring of environment in accordance with programs agreed with the
authorized state agencies in charge of protection of environment.
II. Subsoil protection requirements:
• ensuring of completeness of advanced geological Subsoil research for reliable estimation
of volume and structure of oil and gas reserves, subsoil areas granted for the subsoil use;
• ensuring of complete extraction of oil and gas;
• reliable record keeping of recoverable and left in the Subsoil general and commonly
occurring Mineral resources and associated components;
• subsoil use in accordance with the requirements of the State’s legislation on
environmental preservation protecting subsoil against dangerous man-caused processes in
die course of exploration;
• preservation of subsoil against floodings, fires, explosions, collapse of superincumbent
rocks, as well as other disasters decreasing their quality or complicating fields
development;
• prevention of the Subsoil contamination during the Exploration;
• observance of the procedure for modification and termination of Exploration as provided
for in Section 28 of the Contract and the procedure for liquidation of the deposit
development objects as provided for in Section 18 herein;
• ensuring fulfillment of ecological and sanitary and epidemiological requirements while
storing and disposing industrial and domestic wastes with a view to prevent their
accumulation at water collection areas and underground waters;
III. Sanitary and epidemiological requirements:
• Provision of sanitary protection zones;
• Ensure sanitary protection zones development;
• All the equipment, pipes, chemicals, decontamination agents, etc. shall be those included
into the list of agents and materials permitted by the state bodies on sanitary and
epidemiological control;
• Sanitary and epidemiological measures to maintain the sanitary and epidemiological
condition, to prevent occupational injuries and diseases;
• Provision of conditions favorable for the population health promotion.
The Contractor shall ensure completeness and reliability of geological, hydrogeological,
ecological, engineering geological and technological study of object of exploration.
19.3. Positive opinion of the state ecological and sanitary and epidemiological expertise on
such operations and permission for Subsoil Use Operations issued by executive bodies in
charge of environmental protection on the basis of that opinion shall be the necessary
ecological justification of the Subsoil Use Operations.
19.3.1. The Subsoil User shall submit all preliminary design and project documentation
containing the environmental impact assessment and Environmental Protection section
setting out the measures planned for the period of implementation and termination of
Exploration of oil and gas to the state ecological commission of experts for their expert
examination.
19.4. The Contractor shall monitor the condition of Subsoil and environment with the
purpose of studying the impact of its activity hereunder and taking steps for prompt
elimination of any adverse impact. The data of industrial monitoring and environmental
impact assessment report shall be submitted to special authorized bodies for environmental
protection and sanitary-epidemiological service.
19.5. The Contractor shall remediate the disturbance of the environment, implement
recovery works and compensate in full the damage caused to environment, life and health of
the population. The Contractor shall not damage geological, archeological and historical
protected natural sites within the Contract territory.
19.6. State control over compliance with the legislation related to the protection of the
Subsoil and environment shall be carried out by the authorized executive body in charge of
protection of environment.
19.7. The Contractor shall ensure protection of environment of the Contract Territory.
19.8. Upon termination of the Contract, the Contractor shall transfer the Contract Area in the
condition suitable for its further direct utilization in accordance with the legislation of the
State.
19.9. Any violations (deterioration) of environmental conditions and the Contract Territory
itself occurred during the course of Contract implementation shall be restored at Contractor's
own expense to condition suitable for its further direct utilization.
19.10. In case of emission (discharge) of polluting substances to the environment above the
allowed levels, the Contractor shall take actions to eliminate the consequences and
compensate the damage caused, and in case of occurrence of emergency and extraordinary
situations as a result of the Contractor's activity, the Contractor shall promptly inform of
such circumstances the authorized body in charge of protection of environment.
Section 20. POPULATION AND PERSONNEL SAFETY
20.1. In the course of Exploration of oil and gas in accordance with the Contract the
Contractor shall ensure compliance with the sanitary standards, work safety rules stipulated
by the legislation of the State, as well as measures on prevention and remediation of
emergency situations and occupational diseases.
20.2. Exploration of oil and gas shall be prohibited if it constitutes danger to people's life
and health.
20.3. State control of technical safety and industrial sanitation standards observance in the
course of exploration of oil and gas shall be carried out by the authorized State bodies.
20.4. Main requirements for safe oil and gas exploration are:
• admission to work only of personnel who have received special training and
qualification, and to mining works management - only of personnel who have
relevant education and passed preliminary medical examination in accordance with
the effective order of the Ministry of Health of the Republic of Kazakhstan;
• provision of people engaged in exploration works with coverall, personal and
collective protective equipment;
• utilization of machinery, equipment and materials which meet safety requirements
and sanitary standards;
• record-keeping, proper storage and consumption of explosives as well as their proper
and safe use;
• conducting a variety of geological and mine surveying and other observations
required for technological cycle of operations and prediction of dangerous situations;
• timely update of technical documentation and emergency liquidation plans, defining
the limits of safe operation areas more precisely;
• observance of projects on well construction and technological schemes of field
development and facilities construction approved by the authorized body in charge of
industrial safety and emergency situations;
• implementation of sanitary-epidemiological arrangements aimed at prophylactics of
industrial diseases and intoxication;
• workers shall be provided with necessary sanitary facilities;
• workers shall be provided with quality drinking water and hot meals;
• radiation safety;
• establishment of preliminary and periodical medical examinations of personnel who
work in hazardous and adverse conditions;
• establishment of laboratory and instrumental control of air condition in work areas
and hazardous adverse technological workplaces.
20.5. In the case of occurrence of direct hazard to life and health of employees and/or
population, the Contractor's officials shall immediately suspend the operations and ensure
transportation of people to a safe place and inform the Ministry of Health of the Republic of
Kazakhstan, the Ministry of Emergencies of the Republic of Kazakhstan, the Competent
Authority and other local executive body.
20.6. In accordance with the legislation of the Republic of Kazakhstan the Contractor shall
indemnify the damage caused to health of citizens in the course of the Contract and labor
duties fulfillment.
20.7. State control of observance of the legislation of the Republic of Kazakhstan in regard to
the sanitary-epidemiological welfare of the population shall be carried out by State body on
sanitary-epidemiological control of the Republic of Kazakhstan.
20.8. The Contractor shall develop accident and other hazardous situation prevention
programs in the course of petroleum operations and get them approved in the Ministry on
emergency situations of the Republic of Kazakhstan.
Section 21. THE CONTRACTOR'S LIABILITY FOR VIOLATION OF THE
CONTRACT PROVISIONS
21.1. Transactions made by the Contractor may be deemed invalid on the grounds provided
by the Legislation of the State.
21.2. The Contractor shall bear full responsibility before the Competent Authority and Third
parties for consequences of activities, stipulated in clause 21.1. of this Contract.
21.3. Persons guilty in consummation of such transactions and also other violations of the
Republic of Kazakhstan legislation shall bear disciplinary, material, administrative and
criminal liability as established by the Law.
Section 22. FORCE-MAJEURE
22.1. None of the parties shall bear responsibility for non-fulfillment or improper fulfillment
of the liabilities under the Contract, if such non-fulfillment or improper fulfillment was
caused by the circumstances of insuperable force (force-majeure).
22.2. The force-majeure events shall include all extraordinary and unforeseen, under the
prevailing conditions, circumstances such as war conflicts, natural calamities and disasters
(fires, etc.).
22.3. In case of occurrence of force-majeure circumstances, the affected Party shall forthwith
inform the other Party by handing over or sending by mail a written notification specifying
the date of beginning and description of force-majeure circumstances.
22.4. In case of force-majeure the Parties shall immediately take all measures to find an
impartial solution to the situation and use all available means to minimize consequences of
such circumstances.
22.5. Upon full or partial suspension of works hereunder caused by force-majeure
circumstances, duration of these works shall be extended to duration of force-majeure and
shall resume from the moment of cessation of force-majeure circumstances.
Section 23. CONFIDENTIALITY
23.1. Information received or acquired by any of the Parties in the course of the Contract
fulfillment shall be confidential. The Parties may use confidential information to compose
required reports as specified in the State’s legislation.
23.2. The Parties shall not have a right to transfer confidential information to Third parties
without a prior written consent of the other Party with exception of the following cases:
• if such information is used in the course of legal proceeding;
• when such information is provided to Third parties which render services to the
Contractor provided that such a Third party undertakes to treat such information as
confidential and to use it only for the purposes established by the Parties and for the
term determined by the Parties;
• when information is submitted to a bank or any other financial organization from
which the Contractor receives funding, provided that such bank or other financial
institution undertakes to treat such information as confidential and to use it only for
specified purposes.
23.3. The Parties shall define the term of confidentiality for all documents, information and
reports concerning the Exploration of oil and gas at the Contract Territory in accordance with
the State’s legislation.
Section 24. TRANSFER OF RIGHTS AND OBLIGATIONS
24.1. Partial or complete transfer of the subsoil use right by the subsoil user to another person
on a free of charge or paid basis, including assignment of shares in the legal entity that is a
subsoil user, including transfer as a contribution into the charter capital of newly established
legal entity, transfer of the subsoil use right as a part of sold property complex (assignment of
shares in the legal entity that is a subsoil user) in the process of bankruptcy proceedings in
respect of the subsoil use or in the process of privatization of the subsoil users that are state
entities, as well as pledging of the subsoil use right shall be done with the permission of the
Competent Authority.
24.2. Expenses related to the transfer of rights and obligations under the Contract shall be
borne by the Contractor, and the State shall not reimburse them.
24.3. As long as the Contractor retains any participation in the Contract, the Contractor and
the Third party to which the Contractor has transferred its rights and obligations hereunder
shall bear joint liability under the Contract.
24.4. The State enjoys a priority right before the other party to the Contract or participants of
a legal entity possessing the subsoil use right, and other persons, to acquire the alienable right
of subsoil use (its part) and (or) shares in the legal entity that is the owner of the subsoil use
right as well as in the legal person that is able to define the decisions directly and(or)
indirectly and(or) have influence on the decisions taken by the subsoil user in case the
principal activity of such legal person is connected with subsoil use in the Republic of
Kazakhstan on terms and conditions that are not worse than terms and conditions offered by
the other buyers.
24.5. The subsoil use right cannot be transferred within two years from the Effective Date of
the Contract except for the cases when transfer takes place due to liquidation of a legal entity,
enforcement of pledged subsoil use right and transfer of the subsoil use right following the
procedure of inheritance or reorganization of a legal entity.
Section 25. APPLICABLE LAW
25.1. This Contract and other agreements executed on the basis hereof shall be governed by
the law of the Republic of Kazakhstan unless otherwise stipulated by international
agreements to which the Republic of Kazakhstan is a party.
25.2. The Contractor undertakes to fulfill international obligations assumed by the State in
the sphere of environmental protection within the Contract Territory and areas adjacent to it.
Section 26. PROCEDURE FOR DISPUTES SETTLEMENT
26.1. The Parties shall take all reasonable measures to settle any dispute and disagreement
arising out of this Contract by way of negotiations.
26.2. Any dispute regarding the Contract, which can not be settled by means of negotiations
within 30 days from the moment when such a dispute arises, shall be subject to final
settlement in the State’s juridical agency authorized to settle such disputes, in accordance
with the legislation, or to one of the arbitration courts.
Section 27. GUARANTEES OF CONTRACT STABILITY
27.1. Contract provisions shall remain unchanged during the full term of Contract.
27.2. Amendments and supplements to the legislation that come into force after the Effective
Date of the Contract and affecting the Contractor shall not be applied to the Contract.
Guarantees stipulated hereto shall not be applied to the amendments in the legislation of the
Republic of Kazakhstan in regard to provision of the defence capability, national security,
ecological safety, healthcare and taxation.
27.3. If amendments and supplements are introduced to the Legislation which makes it
impossible to perform further activities under the Contract, appropriate amendments shall be
introduced to the Contract by written agreement of the Parties to restore the initial balance of
the Parties' interests.
Section 28. CONDITIONS FOR CONTRACT ALTERATION OR TERMINATION
28.1. The Competent Authority shall have the right to unilaterally terminate the Contract
upon:
- the Contractor's refusal to eliminate the causes that has led to decision to suspend
exploration or the Contractor's non-elimination of such causes within the time enough for
their elimination;
- Violation of contractual obligations by the Contractor;
- Non-fulfillment of requirements of notification about violation of contractual obligations
within the term set forth by the Competent Authority;
- Impossibility to eliminate the causes that has led to suspension of subsoil use operations;
- Material breach of obligations stipulated by the Contract or the Work Program by the
Contractor;
- Bankruptcy of the Contractor pursuant the legislation of the Republic of Kazakhstan,
except when the subsoil use right is a pledge object in accordance with the Law in force;
- Non-execution of Article 71, Part 3, of the Law on Subsoil and Subsoil Use with regard
to the priority right of the State.
28.2. Before the decision on termination of the Contract is taken, the Competent Authority
shall have the right to require immediate suspension of subsoil use operations by sending a
notification to the Contractor and Contractor shall immediately comply therewith.
28.3. The Parties may cancel or change terms and conditions of the Contract only on the
grounds and only in accordance with the procedure set forth by the legislative acts of the
Republic of Kazakhstan and the Contract.
28.4. The Parties shall not be released from fulfillment of their current obligations that
remained unfulfilled on the date of termination of the Contract or change of its terms and
conditions.
28.5. Termination of the Contract shall not release the Subsoil user from its obligations of
restoration of the Contract territory to the condition safe for health and life of population and
environment in accordance with the liquidation project approved in such manner as specified
by the legislation of the Republic of Kazakhstan.
Section 29. LANGUAGE OF THE CONTRACT
29.1. This Contract is made in the state and Russian languages and all copies are identical.
29.2. In the event of any discrepancy or conflict between the language versions, the Russian
version shall prevail.
29.3. The Parties hereby agree that the state and Russian languages shall be used for
communication purposes. Starting from the Effective Date technical documents and all data
concerning exploration of oil and gas shall be prepared in the state and Russian languages.
29.4. Documents and information relating to administrative activities shall be prepared in the
state and Russian languages,
Section 30. ADDITIONAL PROVISIONS
30,1. All notifications and documents required in connection with the Contract
implementation shall be deemed as duly delivered or handed over to each of the Parties to the
Contract only upon receipt.
30,2, Notifications and documents shall be handed in personally or sent by mail, registered
airmail, fax, telex or by wire to the following addresses:
Competent Authority address: Contractor's address:
Astana, 010000 Almaty
Kabanbai Batyr str., 22 The Republic square, 15
Tel.: (8 3172) 97-68-01,97-68-63 Tel.: (8 327) 2 67-25-17
Fax:(8 3172) 97-68-65
Ministry of Energy and Mineral Resources Marsel Petroleum
of the Republic of Kazakhstan Limited Liability Partnership
On behalf of the Competent Authority On behalf of Marsel Petroleum LLP
B. Izmukbambetov, Minister M. Nalibayev, Director
30.3. In case of change of the address as shown in this Contract each Party shall notify the
other Party in writing.
30.4. All annexes, schedules and addenda to the Contract shall be deemed to be its integral
parts. In case of any discrepancy between an annex and the Contract provisions, the Contract
shall always prevail.
30.5. Amendments and additions to the Contract that are not in conflict with the Contract
terms and conditions shall be executed by a written agreement between the Parlies. Such an
agreement shall be deemed to be an integral part of the Contract.
This Contract is executed on July 27, 2007 in the city of Astana of the Republic of
Kazakhstan by the authorized representatives of the Parties.
Competent Authority Contractor
Ministry of Energy and Mineral Resources Marsel Petroleum
of the Republic of Kazakhstan Limited Liability Partnership
[signed] [signed]
B. Izmukhambetov, Minister M. Nalibayev, Director
[seal] [seal]
State registration # 2854 dated November “18”, 2008
ADDENDUM # 1
To Contract # 2433 dated July 27, 2007
for exploration of oil and gas within blocks XXX-42,43 (partially), 44,45
(partially); XXXI-42,43 (partially), 44 (partially), 45 (partially); XXXII-42, 43,
44, 45 (partially);XXXIIl - 42 (partially), 43 (partially), 44 (partially), 45
(partially) in the territory of the Kyzylorda and South Kazakhstan oblasts
Between
MINISTRY OF ENERGY AND MINERAL RESOURCES
(Competent Authority)
And
Marsel Petroleum Limited Liability Partnership
(Contractor)
Astana, 2008
This Addendum # 1 to Contract # 2433 dated July 27, 2007 for exploration of oil and gas
within blocks XXX-42,43 (partially), 44,45 (partially); XXXI-42,43 (partially), 44 (partially),
45 (partially); XXXII-42, 43, 44, 45 (partially);XXXIII - 42 (partially), 43 (partially), 44
(partially), 45 (partially) in the territory of the Kyzylorda and South Kazakhstan oblasts of
the Republic of Kazakhstan (the “Contract”) was singed on November 18, 2008 between the
Ministry of energy and mineral resources (Competent Authority) and Marsel Petroleum
Limited Liability Partnership (the “Contractor”),
Preamble
Whereas:
The Contractor applied to the Competent Authority with a request to amend the Work
Program as to change of physical volume of exploration works, without changing the total
amount of financial obligations under Contract.
The Competent Authority decided to change the Work Program and make relevant
amendments to the Contract (Minutes # 14 dated 10.07.2008).
The Competent Authority and the Contractor agreed on the following:
1, Clause 8.2. of Section 8 of the Contract “Work Program” in physical and monetary
terms shall be amended and restated as follows:
m Total cost,
Exploration works thousands of
i US$
Year 1
1 Coordination and approval of the Exploration and Production 20
Contract with the Competent Authority
2 Geologic-geophysical information and materials acquisition 20
3 Reprocessing of previous CDP data 218
4 Purchase of equipment, office equipment and equipment for 60
prospecting, drilling, testing and utilization of gas, condensate and oil
5 Re-entry of the well 875
6 2D seismic exploration works 2,200
7 Exploration Project for drilling of exploration wells 60
8 Training of Kazakhstani specialists (personnel) 66
9 Investments for development of the social infrastructure 186
10 Drilling of 1 deep well to the depth of 2,500 m 2,800
Total for Year 1 6,505
Including indirect charges 5%
Year 2
1 Re-interpretation of drilling geophysical materials and GIS 200
2 Reprocessing and re-interpretation of previous CDP data 400
3 Re-entry and restoration of the wells 908
4 2D seismic exploration works 4,000
5 2D materials processing and interpretation 500
6 Drilling of 1 deep well to the depth of 3,000 m 4,000
7 Drilling of 1 deep well to the depth of 2,000 m 2,500
8 Well testing and study 1,000
9 Construction of infield and access roads 101
10 Training of Kazakhstan specialists (personnel) 156
11 Investments for development of the social infrastructure 440
Total for Year 2 14,205
Including indirect charges 5%
Year 3
1 Reprocessing and re-interpretation of previous CDP data 500
2 Estimation of gas, condensate and oil reserves 200
3 Re-entry and restoration of the wells 1,200
4 Well testing and sampling 1,000
5 2D seismic exploration works 5,037
6 2D materials processing and interpretation 1,000
7 Drilling of 1 deep well to the depth of 3,000 m 4,000
8 Drilling of 1 deep well to the depth of 2,000 m 3,250
9 Construction of infield and access roads 200
10 Training of Kazakhstan specialists (personnel) 188
11 Investments for development of the social infrastructure 530
Total for Year 3 17,105
Including indirect charges 5%
Year 4
1 Estimation of gas, condensate and oil reserves 200
2 Well testing and sampling 1,342
3 2D seismic exploration works 6,200
4 2D materials processing and interpretation 987
5 Drilling of 1 deep well to the depth of 3,000 m 4,000
6 Drilling of 1 deep well to the depth of 2,500 m 3,250
7 Drilling of 1 deep well to the depth of 2,000 m 2,500
8 Test Production Project for the fields defined 200
9 Construction of infield and access roads 200
10 Training of Kazakhstan specialists (personnel) 216
11 Investments for development of the social infrastructure 610
Total for Year 4 19,705
Including indirect charges 5%
Year5
1 Estimation of gas, condensate and oil reserves 200
2 2D seismic exploration works 1,500
3 2D materials processing and interpretation 313
4 Drilling of 1 deep well to the depth of 4,000 m 5,500
5 Drilling of 1 deep well to the depth of 3,500 m 4,750
6 Drilling of 1 deep well to the depth of 2,500 m 3,250
7 Drilling of 1 deep well to the depth of 2,000 m 2,500
8 Well testing and sampling 1,228
9 Test Production Project for the fields defined 300
10 Construction of infield and access roads 200
11 Training of Kazakhstan specialists (personnel) 226
12 Investments for development of the social infrastructure 638
Total for Year 5 20,605
Including indirect charges 5%
Grand total 78,125
2. Annex 3A “Work Program” shall be an integral part of this Addendum # 1 to Contract
# 2433 dated 27.07.07.
3. This Addendum # 1 to the Contract shall be an integral part of Contract # 2433 dated
July 27, 2007 and shall come into force as from the date of its registration by the
Competent Authority.
4. This Addendum # 1 to the Contract is made in 3 (three) copies in the state and Russian
languages and is signed on November 18, 2008 in Astana, Republic of Kazakhstan by
the authorized representatives of the Competent Authority and Contractor.
Signatures of the Parties:
Executive secretary Marsel Petroleum LLP
of the Ministry of energy
and mineral resources
of the Republic of Kazakhstan General Director
Batalov A.B. Nalibayev MX
[signed] (signedl
State Registration No. 3078 as of March 4, 2009
ADDENDUM #2
To Contract # 2433 dated July 27, 2007
for exploration of oil and gas within blocks XXX-42,43 (partially), 44,45
(partially); XXXI-42,43 (partially), 44 (partially), 45 (partially); XXXII-42,43,
44,45 (partially);XXXHI ~ 42 (partially), 43 (partially), 44 (partially), 45
(partially) in the territory of the Kyzylorda and South Kazakhstan oblasts
Between
MINISTRY OF ENERGY AND MINERAL RESOURCES
(Competent Authority)
And
Marsel Petroleum Limited Liability Partnership
(Contractor)
Astana, 2009
This Addendum # 2 to Contract Jfe2433 dated 27.07.2007 on Oil and Gas Exploration within
the blocks XXX-42, 43 (part), 44, 45 (part), XXXI-42, 43 (part), 44 (part), 45 (part), XXX11-
42, 43, 44, 45 (part); XXXIII-42, (part), 43 (part), 44 (part), 45(part) in the South Kazakhstan
and Kyzylorda Oblasts was made between the Ministry of Energy and Mineral Resources (the
“Competent Authority”) and Marsel Petroleum Limited Liability Partnership (the
“Contractor”) on March 4,2009.
Preamble
Whereas the Republic of Kazakhstan adopted a new Code on Taxes and Other Mandatory
Payments to the Budget as of December 10, 2008, cancelling stable tax regime conditions for
the Contract,
The Competent Authority and the Contractor have agreed to amend the Contract as follows:
1) To amend and restate Clause 5 of Section I of the Contract as follows: “Tax legislation
shall mean the Code of the Republic of Kazakhstan on Taxes and Other Mandatory
Payments to the Budget as of December 10, 2008”.
2) To amend and restate Section 15 of the Contract as follows:
“TAXATION
15.1. The Contractor shall pay taxes and other mandatory payments to the budget as
per the Tax legislation of the Republic of Kazakhstan effective at the time when
such payment liabilities arise.
15.2. Subscription bonus.
The Contractor shall pay the Subscription bonus in the amount of US$570,000
(five hundred seventy thousand US dollars).
15.3. Customs payments.
The Contractor shall pay all customs payments in compliance with the Customs
legislation of the Republic of Kazakhstan in force as of the day of the customs
declaration acceptance.
15.4. Transfer pricing.
Should the price used in the course of a transaction execution vary from the
market price, the state bodies which control application of transfer prices shall
have the right to adjust units to be taxed in compliance with the legislation on
state control of transfer prices application.
15.5. Provision of pensions, social deductions.
The Contractor shall withhold and transfer mandatory pension fees of its
employees to accumulative pension funds in compliance with the provisions of
pension legislation, and shall be responsible for full calculation and timely
payment of social deductions to the State social insurance fund in compliance
with the mandatory social insurance law in force as of the date when such
liabilities arise.
15.6. Punitive sanctions
15.6.1. Punitive sanctions for violation of the Tax legislation shall be applied in
accordance with the legislation in force as of the date of commitment of such
violation,
15.6.2. Fines for payments other than tax payments shall be applied at rates
stipulated by the laws in force as of the date of commitment of such violation.”
The afore-mentioned tax regime comes into force effective January 1, 2009,
The remaining provisions of the Contract, including exhibits and addendums thereto not
covered by this Addendum shall remain unchanged and lawfully valid to the full extent,
This Addendum N°2 is an integral part of Contract Ns 2433 dated 27.07.2007 and comes into
force on January 1, 2009.
This Addendum Ni> 2 was signed in Astana by the authorized representatives of the Parties on
March 4, 2009.
COMPETENT AUTHORITY CONTRACTOR
Executive secretary Marsel Petroleum LLP
of the Ministry of energy
and mineral resources
of the Republic of Kazakhstan General Director
Batalov A.B. Nalibayev MX
[signed] [signed]
[seal] (seal]
Registration# 3236 dated April 14, 2009
ADDENDUM # 3
To Contract # 2433 dated July 27, 2007
for exploration of oil and gas within blocks XXX-42,43 (partially), 44,45
(partially); XXXI-42,43 (partially), 44 (partially), 45 (partially); XXXII-42,43,
44, 45 (partially);XXXIIl - 42 (partially), 43 (partially), 44 (partially), 45
(partially) in the territory of the Kyzylorda and South Kazakhstan oblasts
Between
MINISTRY OF ENERGY AND MINERAL RESOURCES
(Competent Authority)
And
Marsel Petroleum Limited Liability Partnership
(Contractor)
Astana, 2009
This Addendum # 3 to Contract # 2433 dated July 27, 2007 for oil and gas exploration within
blocks XXX-42, 43 (part), 44, 45 (part); XXXI-42, 43 (part), 44 (part), 45 (part); XXXII-42,
43, 44, 45 (part); XXXH1-42 (part), 43 (part), 44 (part), 45 (part), in the Kyzylorda and South-
Kazakhstan oblasts (hereinafter - Contract) is made on April 14, 2009 between Ministry of
energy and mineral resources of the Republic of Kazakhstan (hereinafter - Competent
Authority) and Marsel Petroleum Limited Liability Partnership (hereinafter - Contractor),
Preamble
Whereas:
The Contractor filed a request to the Competent Authority on amendment of the Work
Program as to reallocation of investments under Contract # 2433 dated 27.07.07 with the total
amount of financial obligations under the Contract to remain unchanged,
The Competent Authority decided to change the Work Program and make relevant
amendments to the Contract (Minutes # 3 dated 27.02.2009).
The Competent Authority and the Contractor agreed on the following:
1. Clause 8.2. of Section 8 of the Contract “Work Program" in physical and monetary
terms shall be amended and restated as follows:
m Exploration works Total cost,
thousands of
US$
Year 1
1 Coordination and approval of the Exploration and Production 20
Contract with the Competent Authority
2 Geologic-geophysical information and materials acquisition 79.2
3 Reprocessing of previous CDP data 110.3
4 Purchase of equipment, office equipment and equipment for 708.2
prospecting, drilling, testing and utilization of gas, condensate and oil
5 Other exploration expenses 129.8
6 2D seismic exploration works 1,062.2
7 Exploration Project for drilling of exploration wells 60
8 Training of Kazakhstani specialists (personnel) 73.2
9 Investments for development of the social infrastructure 318.8
10 Drilling of 1 deep well to the depth of 2,500 m 2,757.4
11 Insurance 56.4
12 Liquidation fund 43
13 Including indirect charges 397.5
14 Taxes and payments 134.3
15 Capital expenditure 1,093.6
Total for Year 1 7,043.9
Including indirect charges 5%
Year 2
1 Re-interpretation of drilling geophysical materials and GIS 200
2 Reprocessing and re-interpretation of previous CDP data 400
3 Re-entry and restoration of the wells 1,295
4 2D seismic exploration works 4,000
5 2D materials processing and interpretation 500
6 Construction of infield and access roads 101
7 Training of Kazakhstan specialists (personnel) 132
8 Investments for development of the social infrastructure 372
Total for Year 2 7,000
Including indirect charges 5%
Year 3
1 Reprocessing and re-interpretation of previous CDP data 500
2 Estimation of gas, condensate and oil reserves 200
3 Re-entry and restoration of the wells 1,250
4 Well testing and sampling 1,000
5 2D seismic exploration works 6,182
6 2D materials processing and interpretation 1,000
7 Drilling of 1 deep well to the depth of 3,000 m 4,000
8 Construction of infield and access roads 200
9 Training of Kazakhstan specialists (personnel) 175
10 Investments for development of the social infrastructure 493
Total for Year 3 15,000
Including indirect charges 5%
Year 4
1 Estimation of gas, condensate and oil reserves 200
2 Well testing and sampling 1,500
3 2D seismic exploration works 6,200
4 2D materials processing and interpretation 987
5 Drilling of 1 deep well to the depth of 3,000 m 4,295
6 Drilling of 1 deep well to the depth of 2,500 m 3,250
7 Drilling of 1 deep well to the depth of 2,000 m 2,500
8 Test Production Project for the fields defined 200
9 Construction of infield and access roads 200
10 Training of Kazakhstan specialists (personnel) 175
11 Investments for development of the social infrastructure 493
Total for Year 4 20,000
Including indirect charges 5%
Year 5
1 Estimation of gas, condensate and oil reserves 200
2 2D seismic exploration works 1,500
3 2D materials processing and interpretation 313
4 Drilling of 1 deep well to the depth of 4,000 m 4,976.1
5 Drilling of 2 deep wells to the depth of 3,500 m 9,000
6 Drilling of 2 deep wells to the depth of 2,500 m 6,000
7 Drilling of 2 deep wells to the depth of 2,000 m 4,500
8 Well testing and sampling 1,500
9 Test Production Project for the fields defined 300
10 Construction of infield and access roads 200
11 Training of Kazakhstan specialists (personnel) 155
12 Investments for development of the social infrastructure 437
Total for Year 5 29,081.1
Including indirect charges 5%
Grand total 78,125
5. Annex 1 “Work Program” shall be an integral part of this Addendum # 3 to Contract #
2433 dated 27.07.07.
6. This Addendum # 3 to the Contract shall be an integral part of Contract # 2433 dated
July 27, 2007 and shall come into force as from the date of its registration by the
Competent Authority.
7. This Addendum # 3 to the Contract is made in 3 (three) copies in the state and Russian
languages and is signed on April 14, 2009 in Astana, Republic of Kazakhstan by the
authorized representatives of the Competent Authority and Contractor.
Signatures of the Parties:
Executive secretary Marsel Petroleum LLP
of the Ministry of energy
and mineral resources
of the Republic of Kazakhstan General Director
Batalov A.B. Nalibayev M.l.
[signed] [signed]