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Execution Copy








PRODUCTION SHARING CONTRACT





BETWEEN


THE KURDISTAN REGIONAL GOVERNMENT OF IRAQ





AND


MARATHON PETROLEUM KDV B.V.








(Safen Block)


 TABLE OF CONTENTS





PREAMBLE





Article 1 DEFINITIONS


Article 2 SCOPE OF THE CONTRACT


Article 3 CONTRACT AREA


Article 4 GOVERNMENT PARTICIPATION


Article 5 OPERATOR


Article 6 TERM OF THE CONTRACT


Article 7 RELINQUISHMENTS


Article 8 MANAGEMENT COMMITTEE


Article 9 CiUARANTFES


Article 10 MINIMUM EXPLORATION WORK OBLIGATIONS


Article 11 EXPLORATION WORK PROGRAMS AND BUDGETS


Article 12 DISCOVERY AND DEVELOPMENT


Article 13 DEVELOPMENT AND PRODUCTION WORK PROGRAMS AND


BUDGETS


Article 14 NATURAL OAS


Article 15 ACCOUNTING AND AUDITS


Article 16 CONTRACTOR’S RIGHTS AND OBLIGATIONS


Article 17 USE OF LAND AND EXISTING INFRASTRUCTURE


Article 18 ASSISTANCE FROM THE GOVERNMENT


Article 19 EQUIPMENT AND VIA 1 TRIM S


Article 20 TITLE TO THE ASSETS


Article 21 USE OF THE ASSETS


Article 22 SUBCONTRACTING


Article 23 PERSONNEL TRAINING AND TECHNOLOGICAL ASSISTANCE


 Cc**H-Safe*








Article 24 ROYALTY


Article 25 KHOOVERY OF PETROLEUM COSTS


Article 26 SHARING OF PROFIT PETROLEUM


Article 27 VALUATION AND METERING OF CRUDE OIL AND NATURAL GAS


Article 2K SALE OF GOVERNMENT SHARE


Article 29 FINANCIAL PROVISIONS


Article 30 CUSTOMS PROVISIONS


Article 31 TAX PROVISIONS


Artick 32 CAPACITY BUILDING PAYMENTS : PRODUCTION BONUSES


Artick 33 PIPELINES


Artick 34 UNmSATION


Artick 35 LIABILITY AND INSURANCE


Artick 36 INFORMATION AND CONFIDENTIALITY


Article 37 ENVIRONMENTAL PROVISIONS


Article 38 DECOMMISSIONING


Article 39 ASSIGNMENT AND CHANGE OF CON I ROL


Article 40 FORCE MAJEURE


Article 41 WAIVER OF SOVEREIGN IMMUNIT Y


Article 42 ARBITRATION AND EXPERT DETERMINATION


Article 43 GOVERNING LAW, FISCAL STABILITY, AMENDMENTS AND


VALIDITY


Article 44 NOTICES


Article 45 TERMINATION


Article 46 COUNTERPARTS; EFFECTIVE DATE


Annexes:





Annex A CONTRACT AREA MAP AND LIST OF COORDINATES





Annex B ACCOUNTING PROCEDURE





Annexe FORM OF GUARANTEE


 PRODUCTION SHARING CONTRACT





BETWEEN


The KURDISTAN REGIONAL GOVERNMENT OF IRAQ (the "GOVERNMENT");


ANI)


MARATHON PKTROI.EUM KDV B.V.. a company established and existing under the


laws of The Netherlands, whose registered office is at da Equity Corporate Services. Equity


Tmst Co. N.V., Strnwirwkylaan 3105, Atrium 7th Floor 1077 ZX Amsterdam, The Netherlands.


("Marathon")








WHEREAS


(A) The GOVERNMENT wishes to develop the petroleum wealth of the Kurdistan


Region (as defined in this Contract) in a way that achieves the highest benefit to the


people of the Kurdistan Region and all of Iraq, using the most advanced techniques of


market principles and encouraging investment, consistent with the Constitution ot


lrm| including Article 112 thereof;


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


Region is the Kurdistan Region Law (as defined in this Contract), except with regard


to a matter wliolly within the exclusive jurisdiction of the Government of Iraq.


(O The Parties affirm their ongoing commitment and adherence to the Principles and


Criteria of the Extractive Industries Transparency Initiative (lilTT)


(D) The CONTRACTOR, together wilh it* parent and ultimate parent, has


(i) the financial capability, and the technical knowledge and technical ability, to


cany out Petroleum Operations in the Contract Area (as defined in this


Contract) under the terms of this Contract;


(ii) a record of compliance w ith the principles of good corporate citizenship: and


(lii) a willingness to cooperate wilh the GOVERNMENT by entering into this


Contract, thereby assisting the GOVERNMENT to develop the Kurdistan


Region petroleum industry, thereby promoting the economic development of


the Kurdistan Region and Iraq and the social welfare of it* people.


(F.) Marathon and Marathon Oil Corporation have provided the GOVERNMENT with a


Letter of Representations and Warranties dated concurrently herewith (the “Letter of


Representations ) as an inducement for the GOVERNMENT to cater mto this


Contract, and which the GOVERNMENT is relying upon in entering into this


Contract


(F) Concurrently with the signing of this Contract. Marathon Oil Corporation has


delivered a guarantee in favour of the GOVERNMENT at required by this C ontract


 PnuhKIkm Sharing Contratt - Safvn





NOW THEREFORE. THE PARTIES HAVE AGREED AS FOLLOWS


ARTICLE 1 - DEFINITIONS


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


units'! otherwise specified:


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


Accounts is defined in Article 15.1.


Accounting Procedure means the Accounting Procedure attached to this Contract as


Annex B and constituting an integral part of this Contract.


Act of Insolvency means, in respect of any Person, its insolvency, winding-up,


dissolution, administration or liquidation, the making by it of any arrangement or


composition with its creditors or the taking of possession by an encumbrancer of, or


the appointment of a receiver or administrative receiver over, the whole or any


substantial part of its property or assets or its ceasing or threatening to cease to carry


on business and any equivalent or analogous procedures by whatsoever name known


and in whatsoever jurisdiction. The "winding-up" of n Person also includes the


amalgamation, reconstruction, reorganisation (by way of voluntary arrangement,


scheme of arrangement or otherwise), administration, dissolution, liquidation, merger


or consolidation of that person and any equivalent or analogous procedure under the


law of any jurisdiction in which that Person is incorporated, domiciled, or resident or


carries on business or has assets.


Adjacent Contract Area is defined in Article U.


Adjustment Date is defined in Article 27.6.


Affiliated Company or Affiliate meant, at regards any of the companies or entities


constituting the CONTRACTOR, a company or other legal entity which:


(a) controls a CONTRACTOR Entity; or


(b) is controlled by a CONTR ACTOR Entity; or


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


CONTRACTOR Entity.


but shall not include ihc GOVERN ME NT in respect of a Public Company For the


purpose of this definition, “control means direct or indirect ow nership or control of


the majority of the voting rights of the applicable entity at it* shareholders’ meetings


or their equivalent


Agreed Terms is defined in Article 14.10(a).














2


 Production Sharing CW.rrl V





Applicable l aw means, as of any lime of delerminulion. Ihe laws of the Kurdistan


Region of Iraq and federal laws of Iraq recognised by the Government as applicable in


ihc Kurdistan Region


Appraisal Area means the area defined in Article 12 2.


Appraisal Work Program and Budget is defined ui Article 122.


Appraisal Report is defined in Article 12 4


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


potential of a geological feature or a geological slruciure in which Petroleum has been


discovered.


Arm’s-Length Sales means sales ol Petroleum in freely convertible currencies


between sellers and buycis liaviug no direct or indirect relationship or common


interest whatsoever with each other that could reasonably influence the sales price.


Such Ann’s- Length Sales shall exclude:


(a) sales between or among any of Ihe CONTRACTOR Entities and their


respective Affiliates;


(b) sales involving the GOVERNMKNT oi Ihe Government of Iraq: and


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


commercial practices.


Assets means all land, platforms, pipelines, plant, equipment, machinery, wells,


facilities and all ocher installations and structures and all Materials and l-quipmcnt


Associated Natural Gas means (i) any Natural Gas dissolved in Crude Oil under


romoir conditions and (ii) any residue gas remaining after the extraction of Crude


Oil from a reservoir.


Audit Request Period is defined in Article 15.3(a)


Available Associated Natural Gas is defined in Article 25.1.


Available Crude OU is defined in Article 25.1.


Available Non-Associated Natural Gas is defined in Article 25.1


Available Petroleum b defined in Article 25.1-


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


temperature of sixty degrees (60e) Fahrenheit and pressure of fourteen point seven


(|4.7)psi.


BOE means six thousand (6.000) standard cubic feet of Natural Gas to one Barrel ol


(‘rude Oil.


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


pursuant to this Contract and forming pan of an Exploration Work Program and


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


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


Production Work Program and Budget.


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


January and ending on .11 December of the same year.


Capacity Building Account means a segregated bank account with a reputable bank


in the name of. and maintained by, the GOVERNMENT, the sole purpose of which


is to support and finance infrastructure and capacity building projects in the Kurdistan


Region to be identified by the GOVERNMENT in its sole discretion.


Capacity Building Payment is defined in Article 32.1.


Chairman is defined in Article 8.1.


Change of Control is defined in Article 39.9.


Commercial Discovery means a Discovery which is potentially commercial when


taking into account all technical, operational, commercial and financial data collected


when carrying out appraisal works or similar operations, including recoverable


reserves of Petroleum, sustainable regular production levels and other material


technical, operational, commercial and financial parameters, all in accordance with


pmdenl international pclrolcum industry practice


Commercial Production means the production of Petroleum from the Production


Area in accordance w ith an annual Production Work Program and Budget.


Constitution of Iraq means the permanent constitution of Iraq approved by the


people of Iraq in the general referendum of 15 October 2005


Contract means this production sharing contract, including its Annexes A. B and C


that are an integral part hereof, as well as any extension. renewal, substitution or


amendment of this production sharing contract that may be agreed in writing by the


Parties in accordance with Article 43.7.


C ontract Area means the ana described and defined in Annex A attached to this


Contract and constituting an integral part of this Contract, and any modifications


made to that Annex in accordance with the provisions of this Contract, through


amendments, surrender, withdrawal, extension or otherwise.


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


Effective Date or any anniversary of the said Effective Date


CONTRACTOR means, individually and jointly, each CON I RACTOR Entity.


CONI RACTOR Entity means, as at any time of determination, a Party other than


■he GOVERNMENT and each holder of all or pari of the Government Interest (only








4


to the extent it is a holder of all or part of the (iovemment Interest). At any time when


there is only one Party constituting the CONTRACTOR, any reference to “the


entities constituting the CONTRACTOR" or the “CONTRACTOR Entities" or


similar reference, shall be construed as "the entity constituting the CONTRACTOR".





Corrupt Practices Laws means, as applicable


(a) the Laws of the Kurdistan Region and of Iraq in respect of bribery, kickbacks,


and corrupt business practices:


lb) the Foreign Corrupt Practices Act of 1977 of the United States of America


(Pub. L. No. 95-213 §§ 101-104 ««*). as amended.


(c) the OECD Convention on Combating Bribery of Foreign Public OfTiciaU in


International Business Transactions, signed in Paris on 17 December 1997.


which entered into force on 15 February 1999. and the Convention's


Commentaries;


(d) the Bribery Act 2010: and


(c) any other Law of general applicability relating to bribery, kickbacks, and


corrupt business practices.





Crude Oil means all liquid hydrocarbons in their unprocessed slate or obtained from


Natural (ius by condensation or any other means of extraction.


Cumulative Costs is defined in Article 26 4


Cumulative Revenues is defined in Article 26 4.


Decommissioning Costs means all the costs and expenditures incurred by the


CONTRACTOR when carrying out Decommissioning Operations, including those


defined in the Accounting Procedure.


Decommissioning Operations means any works, together with all related and


auxiliary activities, for decommissioning and ex removal and or abandonment and


making safe all of the Assets and site restoration and remediation related thereto in


relation to any Production Area.


Decommissioning Plan is defined in Article 38.7


Decommissioning Reserve Fund is defined in Article 38.1 and includes all


contributions paid into such tund and all interest accumulated in such fund.


Deductible Amount is defined in Article 35.11


Delivery Point means the point after extraction, specified in the approved


Development Plan for a Production Area, at which the Crude Oil. .Associated Natural


Gas and or Son-Associated Natural (ias is metered for the purposes of Article 27.5.


valued for the purposes of Article 27.1 and ready to be taken and disposed of.


consistent with prudent international petroleum industry practice, and 3t which a Party





5


 I'khU lum Sharing (Viiftm / Sofiai








may acquire title to iLs share of Petroleum under this Contrucl or such other point


which may be agreed by the Parties.


Development Costs means all the costs and expenditures incurred by the


CONTRACTOR when carrying out Development Operations, including those


defined in the Accounting Procedure.


Development Plan Tranche is defined in Article .12.3.


Development Operations means all development operations or works conducted in


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


developing a Production Area, including: drilling of wells: primary and subsequent


recovery projects and pressure maintenance: survey, engineering, building and


erecting or laying of production plants and facilities (including: separator*.,


compressors: generators; pumps and tankage; gathering Imcs; pipeline' and all


facilities required to be installed for production, pressure maintenance, and treatment,


storage and transportation of Petroleum); obtaining of such materials, equipment,


machinery, items and supplies as may be required or expedient for the foregoing


activities: and all auxiliary operations and activities required or expedient for the


production of Petroleum from the Production Area.


Development Period is defined in Article 6


Development Plan means a plan for development defined in Article 12.8.


Development "HI means any well drilled after the date of approval of the


Development Plan for the purpose of producing Petroleum, increasing or accelerating


production of Petroleum, including injection well' and dry holes. Any well drilled


within a Production Area shall he deemed n Development Well.


Development Work Program and Budget moans the development work program


and budget prepared pursuant to Article 13.2.


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


resulting from Petroleum Operations earned out under this Contract, provided such


Petroleum is recoverable at the surface with a measurable flow utilising techniques


used in prudent international petroleum industry practice.


Dispute is defined in Article 42.1


Dollar (US$) means the legal currency (dollar) of the United States of America


(USA).


Kffcctlv# Date is defined in Article 4<> I


Environment Fund is defined in Article 23.9.


Equipment and Materials is defined in Article 19 1.











r>


 PraducitaH Sharing < omi-mv • Suftn





Exploration Costs incans all the costs and expenditure incurred by the


CONTRACTOR when carrying out Exploration Operations, including those defined


in the Accounting Procedure


Kiploration Operations means any and all operations conducted with a view to


discovering Petroleum, including: any activities necessary to commence operations;


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


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


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


stratigraphic test holes; spud, drilling, testing, coring, logging and equipping of


Exploration Wells or Appraisal Wells; procurement of such services, material,


equipment machinery , items and supplies as may be required or expedient for the


foregoing activities; and all auxiliary operations and activities required or expedient


for the conduct of the foregoing activities.


Exploration Period is defined in Article 6


Exploration Rental is defined in Article 6.3.


Exploration Well means any well drilled for the purpose of confirming a geological


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


CONTRACTOR.


Exploration Work Program and Budget means the exploration work program and


budget prepared pursuant to Article 11.1.


Export Crude (Ml is defined in Article 24 2.


Export Non-AssocUlcd Natural Gas is defined in Article 24.2.


Export Petroleum is defined in Article 24.2.


First Exploration Well is defined in Article 10.2(d).


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


Non-Associated Natural Gas (as the ease may be) first commences, by flowing at the


rate forecast in the Development Plan without intemiption for a minimum of forty


eight (48) hours


First Sub-Period is defined in Article 6.2(a).


Force Majeure is defined in Article 40.2.


Gas Development is defined in Article 14.10.


Gas Marketing Costs means all costs and expenditure incurred by the


CONTRACTOR when carrying out Gas Marketing Operations, including those


defined in the Accounting Procedure.


Gas Marketing Operations means any and all of the activities and operations


contemplated by Article 14.6.








'


 Protiu no’iS'xuiiin Omr/iii < &•








Gas Marketing Work Program and Budget means ihc marketing work program


and budget prepared pursuant lo Article 14.8.


Government Interest is defined in Article 4.1.


Government of Iraq means the Federal Government of the Republic of Iruq, which


holds office under Ihc Constitution of Iraq and any minister, ministry, department,


sub division, agency, authority, council, committee, or other constituent element


thereof and shall. without limitation, include any corporation owned and or controlled


by any of the foregoing.


International Market Price is defined in Article 27.2.


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


Joint Operating Agreement means the agreement executed by the CONTRACTOR


Lntitics for the purpose of regulating between such entities the terms under which the


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


with prudent international petroleum industry practice; (b) as between such entities,


supplementary lo this Contract; and (c) consistent with the provisions of the Contract


Kurdistan Region means the Federal Region of Kurdistan recognised by the


Constitution of Iraq and having the same meaning as 'Region’ in the Kurdistan


Region Oil and Gas Law.


Kurdistan Region Law means all statutes, decreet, edicts, codes, orders rules


ordinances and regulations of the GOVERNMENT or of any other local, municipal,


territorial, ptuvincinl, or any other duly constituted governmental authority or agency


in the Kurdistan Region.


Kurdistan Region Oil and Gas Law means the Oil and Gas Law of the Kurdistan


Region - Iraq (l aw No. 22 of 2007) as the same may be amended.


Law means any statutes, rules, codes, regulations, decisions, proclamations, notices,


directives, constitutions, instruments, rules of court, guidance, or any other instrument


of any governmental, intergovernmental, or supranational body, agency, department


or of any regulatory, sell-regulatory or other authority or organisation having the


force and effect of a law (including Corrupt Practices Laws).


LCIA it defined in Article 42.1(b)


LIBOR meant the London Inter-Hank Offered Rate at which Dollar dcpotits fo* one


(I) Month are offered in the inter bank market in London, as quoted in the Financial


Timet of London for the day in question In the event that such rate is not published in


the Financial Times, it shall mean the I ondon Inter bank Offered Rale at which


Dollar deposits for one (I) Month are offered for the nearest day as quoted by


National Westminster Hank pic


Management Committer is defined in Article 8.


Marathon is defined in the preamble.





X


Marathon Exploration Tranche is defined in Article 32-2.


Maximum Efficient Rale (“MUR") is defined in Article 16.12.


Minimum Exploration Obligation* is defined in Article 10.1.


Minimum Financial Commitmenl means:


(ii) in respect of the l irsl Sub-Period, the nmount set out in Article 10.2(d); and


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


Month means a calendar month according to the Gregorian calendar.


Natural fins means all gaseous Pcitolcum and inerts.


Non~A**ocluted Natural Gas means any Natural Gas which is not Associated


Natural (ias.


Notice of Dispute is defined in Article 42.1.


Operator means the entity designated by the CON TRACTOR pursuant to Article 5,


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


Petroleum Operations. If at any time there exists more than one (I) Operator under


this Contract, any reference herein to the term 'Operator' shall be to each Operator


with respect to the parts of the Contract Area in which such Operator conducts


Petroleum (Iperutions.


Parties means the GOVERNMENT and each CONTRACTOR Entity. and Party*


any of the Parties.


Permits means all licences, permits, consents, authorisation* or other permission*, as


the context requires.


Person shall include natural and juristic persons (including corporations and


governmental agencies).


Petroleum means:


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


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


Of


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


returned to a Reservoir .


Petroleum Costs means all costs and expenditure incurred by the CONTRACTOR


for the Petroleum Operations, and which the CONTRACTOR is entitled to recover


under this Contract and its Accounting Procedure, including l>ccommissk>ning Costs.


Development Costs. Exploration Costs. Gas Marketing Costs and Production Costs.








9


Petroleum Field means a Reservoir or group of Reservoir* within a common


geological structure or stratigraphic unit, which may become part of a Production


Area pursuant 10 a Development Plan


Petroleum Operations means all Exploration Operations. (>as Marketing Operations.


Development Operations. Production Operations and Decommissioning Operations,


as well as any other activities or operations directly or indirectly related or connected


with the said operations (including health, safety and environmental operations and


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


Contract.


I'ipHInc Costs is defined in Article 33.5.


Prescribed Person means (i) any public official of any public authority in the Region


or Iraq (/.«•., any person holding a legislative, administrative or judicial office,


including any person employed by or acting on behalf of the Government or any


public authority in Iraq, including any legislative body); (ii) any political party or


political parly official or candidate for office; and (iii) any Person acting on behalf of


or for the honefil any of the foregoing.


Production Aren means such areas within the Contract Area designated as a


production area in an approved Development Plan prepared pursuant to Article 12.


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


which a Commercial Discovery is located arc automatically included in the relevant


Production Area.


Production Bonus means any bonus due purvuant to Article 32.8 or 32.9.


Production Costs means all the costs and expenditure incurred by the


CONTRACTOR tn carrying out the Production Operations, including those defined


in the Accounting Procedure.


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


activities, for the production of Petroleum from the start of Commercial Production,


including: extraction, injection, stimulation, pumping, treatment, storage, engineering,


operating, servicing, repairing, and maintaining any wells, plants, equipment,


pipelines, terminals and any other installations and facilities, and any related


operations and auxiliary operations, and storage and transportation of Petroleum from


the Production Area to the Delivery Point.


Production Rental is defined in Article 13.10.


Production Tranche is defined in Article 32.4


Production Work Program and Budget shall mean the production work program


and budget prepared pursuant to Article 13.6.


Profit Crude Oil is defined in Article 26.1.


Profit Natural Gas is defined in Article 26.1.








10


Puifll Petroleum is defined in Article 26.1.


Prohibited Act means, in respect of any Person, any of the following


(a) the making, offering, or authorisation (including acquiescence) for the making


or offering any payment, revenue or profit partwipaliati, gift, promo-eor other


benefit of anv Prescribed Person in violation of the Law \ of the Kurdistan


Region or the standards and principles of any Corrupt (Taction l aws other


(b) either knowingly, or without conducting reasonable due diligence, entering


into any contract with a Prescribed Person in connection with or related lo this


Contract or Petroleum Operations;


(c) defrauding sit attempting to defraud or conspiring to defraud the


GOVERNMENT in connection with or iclated to this Contract or Petroleum


Operations; or


(d) failing to notify the GOVERNMENT reasonably promptly when a Prescribed


Person solicits any direct or indirect contract or other benefit from the


CONTRACTOR or a CONTRACTOR Entity in connection with or related


to this Contract or Petroleum Operations.


Proposed Contract is defined in Article 14 10(a)


Public Company means: (i) anv entity created by the Kurdistan Region Oil and Gas


Law. including the Kurd.Man Exploration and Production Company :

established by Applicable Law as a separate entity, whether or not fully autonomous


and whether or not having independent sources of revenue, to undertake commercial


activities on behalf of the GOVERNMENT, which legal entity cannot be declared


bankrupt under Applicable Law; and (iii) any separate and autonomous company


organised under Applicable Law which is controlled, directly Of indirectly through a


wholly GOVERNMENT -owned and controlled entity, by the GOVERNMENT, the


Parliament or which is under the guidance of the GOVERNMENT or the Parliament


(whether or not in any such case partially or fully funded hy the GOVERNMENT or


the Parliament). A department, division, or agency of the GOVERNMENT, whether


or not operating under a separate name, is not a Public Company


Quarter means a penod of three (3) consecutive Months starting on the first day of


January. April. July or October respectively.














Revenues iv defined in Article 26.4.


-K- kaet.r » defined m Article 26.4.


Rayaltv is defined in Article 24 I.








II


 Second Sub-Period in defined in Article 6.2(b).





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


January or July respectively.


Senior Representatives is defined in Article 42.1(a)


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


undertaking works relating to the Petroleum Operations directly or indirectly on


behalf of. the CONTRACTOR or any CONTRACTOR Entity.


Sub-Period and Sub-Periods are defined in Article 6 2.


Tax or Taxes means all current or future levies, duties, payments, charges,


impositions, imposts, withholdings, fees, taxes (including value added tax or other


sales or transaction based tax. corporation tax. income tax. capital gains tax. stamp


duty, land tax. registration tax. capital and wealth tax. profit tax, dividend tax or


withholdings, transfer tax. customs duties, branch or permanent establishment tax or


withholdings, tax on income from movable capital und fixed tax on transfers) or


contributions payable to or imposed by the GOVERNMENT or any governmental


agencies, authorities or bodies, district, sub-district, or other political subdivisions of


or in the Kurdistan Region.


Second Exploration Well is defined in Article 10.3(b)


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


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


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


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


Budget and or a Production Work Program and Budget.


Vice-Chairman is defined in Article 8.1.


1.2 Unless the context others* isc requires or is specifically otherwise staled


(a) headings arc to be ignored;


(b) "including*' and similar words do not imply any limitations:


(c) singular includes plural and vice versa


1.3 a Person has "knowledge" or acts "knowingly" if a the relevant information is


actually known or should have been known by an officer, director, manager, site


operations manager, or other person with a supervisory or management function.




















12


 luenon Sharing Conrract - Sir/**





1.4 Reference lo:


(a) an "Article" is lo an article of this Contract and lo a “Paragraph" is lo a


paragraph in the Accounting Procedure;


(b) “gross negligence" and “grossly negligent" means, in the case of the


CONTRACTOR or any CONTRACTOR Entity, a marked and flagrant


departure from the standard of conduct of a reasonable and prudent person


■cling in the circumstances at the time of the purported misconduct, or such


wanton and reckless conduct or omissions as constitutes in effect an utter


disregard for harmful, foreseeable, and avoidable consequences


15 It is the intent of the Parties that ambiguities be resolved with reference lo principles


and practices generally accepted in petroleum producing countries and in the


international petroleum industry.








ARTICLE 2-SCOPE OF THE CONI KACT


2.1 This Contract is a production-sharing arrangement with reaped to the Contract Area,


whereby the GOVERNMENT has the right, pursuant to the Constitution of Iraq, to


regulate and oversee Petroleum Operations within the ( Ontract Area.


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


Parties and the terms and conditions under which the CONTRACTOR shall carry out


all the Petroleum Operations.


By entering into this Contract, the GOVERNMENT grants ihc CONTRACTOR the


exclusive right and authority to conduct all Petroleum Operations in the Contract Area


as detailed in Article 3. The obligations of the CONTR ACTOR constitute joint and


several obligations of the CONTRACTOR Entities, except where specifically


provided otherwise.


As of the Effective Date. Marathon is the only CONTRACTOR Entity, owns an


eighty percent (80%) undivided interest in the Petroleum Operations in respect of the


entire Contract Area, and is the CONTRACTOR.


2.2 Upon the CONTRACTOR S request, the GOVERNMENT shall provide and or


procure all Permits relating to the Petroleum Operations required by the


CONTRACTOR to fulfil its obligations under this Contract, including those relating


to any extension and renewal periods and including those required by the Government


of Iraq The GOVERNMENT (i) represents and warrants to the CONTRACTOR


that, as of the Effective Date, it has not done and has not omitted to do anyth mg that


would cause the cancellation or suspension of this Contract or any Permit granted


under this .Article 2.2 or pursuant to this Contract; and shall not do, or omit to do.


anything that would cause the cancellation or suspension of this Contract or any


Permit granted under this Ankle 22 or pursuant to this Contract, except in


accordance with this Contract For the avoidance of doubt, nothing in this Article


'hall affect the rights and obligations of the Parties pursuant to Article 43








13


 Productw" SHartxg Cuntratt Sg/rn





2.3 The CONTRACTOR Khali conduct all Petroleum Operations within the Contract


Area at its sole cost, risk and peril on behalf of the GOVERNMENT’, pursuant to this


Contract, including the following.


(a) Technical Services


The CONTRACTOR shall implement all technical, human and material


resources reasonably required for execution of the Petroleum Operations in


accordance with prudent international petroleum industry practice.


(b) financial Services


The CONTRACTOR shall be solely responsible for funding Exploration


Operations and, in the event of a Commercial Discovery, Development,


Production and Decommissioning Operations, pursuant to this Contract.


For the funding of Petroleum Operations, the CONTRACTOR shall be


entitled to have recourse to third party financing.


(c) Administrative Services


I he CONTRACTOR shall implement all appropriate management urnl


administration techniques for execution of the Petroleum Operations under


this Contract in accordance with prudent international petroleum industry


practice.


2.4 The CONTRACTOR shall be responsible to the QOI» KN'D NT for the conduct


of Petroleum Operations within the Contract Area pw---nt to the terms of this


Contract.


2.5 Natural resources other than Petroleum arc excluded from the "cope of thi» Contract,


even it the < (i.MHAt I OR discovers any such resources when executing its


obligations pursuant to this C ontract.


2.6 The CONTRACTOR shall only be entitled to recover Petroleum Costs incurred


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


Costs shall occur within the limits provided under Article 25.


2.7 During the term of this Contract. Profit Crude Oil and Profit Natural (ins produced


from Petroleum Operations shull be shared between the Parties in accordance with the


provisions of Article 26.


2.8 For the execution of Petroleum Operations under this Contract, the CONTRACTOR


shall have the right to:


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


associated with the Petroleum Operations, wherever they may be located,


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


Contract Area for the construction, installation, maintenance, operation and








14


 removal of pipelines facilities required for the








efcrtncrty and ■"> other **w»\ resources located







for the cooducl of Petroleum Operation* m accordance with Articles 22 and


23. Any foreign personnel working in the Kurdistan Region shall require prior


authorisation of the GOVERNMENT (such authunsalum not to be


unreasonably delayed or withheld) and the GOVERNMENT shall obum any


authorisation required by the Government of Iraq.


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


Petroleum Operations in accordance vs ith Article* 19. 22 and 30. and


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


GOVERNMENT will assist the COVTRAC I OR with facilitating the use by


the CONTRACTOR of any private property in the Kurdistan Region








ART 1C I E 3- CONTRACT AREA


The mitsal C oatract Area cosen the Safer Block and extends over an area of four hundred


and twenty four square kilometres |424 km\ as detailed and cheated on foe map anached


in Annex A and u delimited by foe foforenng coordinates


C ode Easting Northing URR*


A Pi36 930 4032 054 44 17 47 36 25 54


B 444 709 4027 627 44 23 01 36 23 32


C 47ft 180 4000 454 44 44 07 36 08 55


1) 474 803 3997 295 44 43 12 36 07 12


~ V. ” 463 692 W7 443 44 35 4X 3607 16


1 454 088 4008 427 44 29 21 36 1 3 11


G~~ 441 059 4019 967 44 20 36 36 19 23


H 431 780 4028 102 44 14 21“ 36 23 44


■ r 436 930 4032 054 44 17 47 36 25 54


j 444 709 4027 627 44 23 01 36 23 32


K 176 180 4000 454 44 44 07 36 08 55


_______








15


L 474 803 3997 29J 4443 12 3607 12


M 463 692 3997 443 44 35 48 36 07 16


N~ 454 088 4008 427 44 29 21 36 13 II


1 ■---------


O 441 059 4019 967_ 44 20 36 36 19 23





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


foregoing co-ordinates of the Contract Are*.


The total area of Ihc Coniraci Area may be reduced only in accordance with the provisions of





this Contract.








ARTICLE 4 - GOVERNMENT INTEREST; JOINT OPERATING AGREEMENT


4.1 The GOVERNMENT has a carried interest of twenty per cent (20%) (ihc


"Government Interest ') in the CONTRACTOR’* entitlement to Profit Petroleum


•1.2 The GOVERNMENT or any other holder of all or any pan of the Government





Interest is not, in such capacity, a CONTRACTOR Entity The GOVERNMENT or


any other holder of the Government Interest, whether in whole or in pari, in such


capacity has no obligation or liability to the CONTRACTOR to contribute any share


of Petroleum Costs or any other liability or obligation of a CONTRACTOR Entity or


to the CON TRACTOR or any CO NTH MTOR Entity.


4.3 Subject to Article 4.4, a holder of all or any part of the Government Interest ■' not. if





that is its only capacity under this Contract, entitled to any notices under this Contract


or entitled to provide any consents, except as specifically provided otherwise, but has


lights and obligations under Article 42





4.4 Any term of this Contract may be waived or amended without the consent of a holder


of a Government Interest (in such capacity), unless such svaiver or amendment would


change any right or obligation of a holder of a Government Interest.


4.5 Each Person, other than the GOVERNMENT or a Public Company, that is a holder


ol all oi |>art of the Government Interest is obligated to pay its proportionate share of


the Production Bonuses in accordance with Articles 32.8(b) and 32.9(b). If such a


holder of all or part of the Government Interest fails to pay all or any part of such


Production Bonuses: (i) Ihc failure will not constitute a default by the


CONTRACTOR, (ii) the GOVERNMENT will have no remedies against the


CONTRACTOR a* a consequence thereof, and Hu) the GOVERNMENT will not


be entitled k. terminate this Contract or any CONTRACTOR Entity's intent

















16


 PhhUmHox »iirm < mwci - Soft"








CONTRACTOR to seek lo settle a dispute or to refer such dispute to arbitration or


expen determination in accordance with the provisions of Article 42.





4.6 The provisions of Article 39 do not apply with respect to any assignment by any


holder of a Government Interest of all or any pan of its Government Interest The


assignment of the Government Interest is governed by this Article 4. A permitted


assignee of a holder of the Government Interest will have, in respect of the assigned


Government Interest, the same rights and obligations as the holder of the Government


Interest poor lo the assignment.


1.7 The GOVF.RNMENT may at any time designate a Public (Company as the holder of


all or any pari of the Government Interest without the consent of, or prior notice to.


any other Party. The Public Company will be deemed a Party to this Contract only in


respect of its Government Interest, but will not be required to sign any formal


assignment or accession agreement except as required by the GOVERNMENT The


GOVERN MEN! and the Public (ompany will provide the CONTRACTOR with u


notice notifying the CONTRACTOR of such designation by the GOVERNMENT


to a Public Company, and the Contractor shall be entitled to rely on such notice for all


purposes under this Contract.


4.8 Only for the purposes of Article 37 of the Kurdistan Region (Til and Gas Law.


whenever and to the extent the Government Interest is held by a Public Company, the


Government Interest shall Ik deemed held by the GOVERNMENT. The


GOVERNMENT incurs no liabilities or obligations (directly, indirectly, or


implicitly) to any other Party as a consequence of such deemed ownership. The


GOVERNMENT will not be deemed to guarantee any obligation of the Public


(ompany or any holder of all any part of the Government Interest


4.9 Subject lo Article 4.12. (be GOVERNMENT may al any lime assign all or pail of iu


Government Interest lo a Person that is nol a Public ( ompany without the consent of


any other Party. Such assignee will be deemed a Party lo this Contract only in respect


of its Government Interest but will not be required lo sign any formal assignment or


accession agreement unless otherwise required by the GOVERNMENT The


GOVERNMENT and the Public Company will provide the CONTRACTOR with


such a notice, jointly signed by each, notifying the CONTRACTOR of such


assignment by the GOVERNMENT, and the Contractor shall be entitled to rely on


such notice for all purposes under this Contract.


4.10 Subject to Article 4.12. a Public Company may assign part or all of its Government


Interest lo another Public Company, to the GOVERNMENT, or any other Person


without the consent of. or prior nonce »o. the CONTRACTOR or any


CONTRACTOR Entity, but may not make any assignments without the prior


consent of the GOVERNMENT and in accordance with any assignment and


novation or other agreements and conditions required by the GOVERNMENT. Any


assignment by a Public Company of ail or part of iu Government Interest to another


Public Company or any other Person without the prior consent of the


GOVERNMENT or in accordance with the rvquircincnu of the GOVERNMENT


will be void The Public Company or the GOVERNMENT shall promptly notify the


CON IRACTOR of any assignments of the Government Interest held by such Public








17


 f^hatUoy Shi ring Contract ■ Safe*





Company. and the Contractor will be entitled to rely on such notice tor all purposes


under this Contract.


4.11 Subject to Article 4.12. a holder of all or part of the Government Interest, which is not


the GOVERNMENT ot a Public Company, may assign pan or all of ns Government


Interest to any other Person without the consent of. or prior notice to. the


< ONT RACTOR or any CON TRACTOR Entity Such holder of all or pan of the


consent of the GOVERNMENT and only in accordance with any assignment and


novation or other agreements and conditions required by the

assignment by such holder of all or part of the (iovernmert Interest without the prior


consent of the GOVERNMENT or in accordance with the requirements of the


GOVERNMENT will be void. The assignor and the assignee shall jointly and


promptly notify the CONTRACTOR of any Assignments of the Government Interest


pursuant to this Article 4.11. and the CONTRAC TOR will he entitled to rely on such


notice for ull purposes under this Contract.


4 12 Nothing under this Contract prohibits a CONTRACTOR Entity at any time from


offering to acquire and/or acquiring nil or any part of the Government Interest from


any Person that is a holder of all or any pan of the Government Interest. If at any time


any holder of all or any pan of the Government Interest (including the


GOVERNMENT and a Public Company) intends to offer to sell all or pan of its


Government Interest to any Person that is not a Public Company or the


GOVERNMENT, the applicable holder of ihc Government Interest shall timely


notify (he CONTRACTOR of the availability of the (iovemment Interest. No


CONTRACTOR Entity hat any preemption or similar priority rights in respect of the


Government Interest, and the holder is not required to sell and assign to a


CONTRACTOR Entity


4.13 The GOVERNMENT reserves the right tbut is not obligated to any Party with


respect thereto) either to cancel or terminate any assignment of all or part of the


GOVERNMENT Interest to any Person, if the GOVERNMENT at any time


determines that such transfer constitutes (i) a violation of any Corrupt Practices Laws


applicable lo the assignee of the (iovemment Interest, (ii) ;i violation of any Corrupt


Practices Laws applicable to the assignor of such (iovemment Interest, (iii) u


Prohibited Act, or (iv) would impair the ability of the CONTRACTOR or any


CONTRACTOR Entity to perform any of its material obligations under this Contract


as u consequence of the application of Laws applicable to such CONI RACTOR


Entity.


Upon any curette by the GOVERNMENT of its rights under th.» Article 4.13, the


Government Intern! w* automatically revert lo the GOV ERNMENT


The GOVERNMENT'S rights under this Article 4 13 are exclusive to the


GOVERNMENT, are not subject to a claim from any CONTRACTOR Entity, and


Ankles 41 and 42 do not apply with respect to this Article 4.13.


The GOVERNMENT expressly reserves all sovereign immunities in respect of any


Dispute arising out of or relating to this Article 4.13, and any Dispute with respect to


this Article 4 between the GOVERNMENT and any holder of a (iovemment Interest








18


 Production Sharing Contract - Safen








may only be resolved in accordance with the Applicable Laws of the Kurdistan


Region.





JvliU Running Aummssi


4.14 The CONTRACTOR Entities. or any of them, shall not enter into any joint


operating agreement in respect of this Contract except if the terms of such Joint


Operating Agreement ha\e been approved by the GOVERNMENT, arc in


compliance with Applicable Laws of the Kurdistan Region as of the date of the


approval by the GOVERNMENT, and do not require the affirmative rote of more


than seventy-five per cent (75%) of the participating interests for any decision of any


operating committee established under such Joint Operating Agreement. A joint


operating agreement must provide for the termination and release of any and all


encumbrances, preemption rights, and similar claims on the participating interest of a


CONTRACTOR Entity in the event of any termination of a CONTRACTOR Entity


by the GOVERNMENT pursuant to this Contract.


In the event of a proposed transfer by any CONTRACTOR Entity of part of a


participating interest under such Joint Operating Agreement:


(a) no transfer may be made: (i) which would result in the transferor or


transferee holding less than a five per cent (5%) participating interest,


and (ii) without the consent of the GOVERNMENT in accordance


with this Contract;


(b) the proposed third party assignee must demonstrate to the reasonable


satisfaction of each of the extant CONTRACTOR Entities that it has


the financial capability to perform its payment obligations under the


Contract and under the Joint Operating Agreement; and


(c) the proposed lliiid party assignee shall enter into an instrument


satisfactory to each of the CONTRACTOR Entities and the


GOVERNMENT so us to assume and to perform the obligations of


the transferor.















































19


 Production Sharing Contract Safcn








ARTICLE 5 OPERATOR


5.1 The CONTRACTOR designates Marathon lo act as ihc Operator on behalf of the


CONTRACTOR for the execution of the Petroleum Operations. The


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


Operator, upon giving the GOVERNMENT not less than thirty (30) days prior


written notice of such appointment


5.2 The CONTRACTOR shall submit to Ihc GOVERNMENT for approval any


agreement to amend any Joint Operating Agreement regarding or regulating the


Operator's appointment and its conduct of Petroleum Operations on belnilf of the


CONTRACTOR pursuant to this Contract prior to execution of such agreement


5.3 Without limiting the GOVERNMENT’S rights under Article 45. if either of the


following occur und on not less than 30 days’ prior notice from the


GOVERNMENT, the CONTRACTOR shall appoint a replacement Operator as


soon as is reasonably practicable:


(a) an Act of Insolvency has occurred in respect of the Operator and. within such


30-day notice period, the CONTRACTOR has demonstrated to the


satisfaction of the GOVERNMENT that the Act of Insolvency (i) does not


apply or (ii) will not have any adverse effect on Petroleum Operations, and in


either case, the GOVERNMENT cancels its notice; or


(b) the CONTRACTOR is not fulfilling its obligations under this Contract as a


consequence of the aets or omissions of the Operator.


ARTICLE 6 - TERM OF THE CONTRACT


6.1 This Contract comprises an Exploration Period and a Development Period, as


provided in this Article 6.











6.2 The Exploration Period shall be for a base term of five (5) Contract Years from the


Effective Dale (the "Baw Exploration Term"). The Base Exploration Term is


extendable on a yearly basis m accordance with Article 6.5 up to a maximum term of


seven (7) Contract Years (the Base Exploration Term as so extended, the "Extended


Exploration Term") The Exploration Period is subject to further extension beyond


the Extended Exploration Term as provided in Articles 6.6 and 6.7 The Exploration


Period is subject to early termination as provided in Article 6.4.


The Exploration Pciiod consists of two (2) sub-periods, oach of which is extendable


pursuant to Articles 6.5 and 6.6, provided the Exploration Period nuiy not exceed the


Extended Exploration Term except as provided in Articles 6.6 and 6.7 (each such sub¬


period, as it may be extended, a ‘'Sub-Period"):


(a) a first Sub-Period of three (3) Contract Years ("First Sub-Period”); und







20


The CON TRACTOR will no* be entitled to an extension of a Sub-Penod under


Articles 6.5 and Article 6.6. as applicable, unless the CONTRACTOR ha* fulfilled:


(i) its Minimum Exploration Obligations applicable to such Sub-Period, or.(ii) in the


case of any further extensions of u Sub-Period pursuant to Article 6.6, its additional


minimum work obligations applicable to the preceding extension in accordance with


Article 6.6.


6.3 During the Exploration Period, the CONTRACTOR shall pay to the


GOVERNMENT an annual surface rental for the Contract Area, as the Contract


Area may be reduced by relinquishment pursuant to Article 7, of ten Dollar* (US$10)


per square kilometre per Contract Year t "Exploration Rental"). The Exploration


Rental is due and payable in arrears on or before each anniversary of the Effective


Date and on the last day of the Exploration Period or termination of this Contract


(whichever is earlier), and is prorated in any Contract Year during which there has


been a relinquishment or expiry of the Exploration Period, based on actual number of


days in such Contract Ycoi Exploration Rental shall be considered .r> a Petroleum


Cost and shall be recoverable by ihe CONTRACTOR in accordance with (lie


provisions of Articles I and 25.


6.4 The Exploration Period will expire nl the end of the First Sub-Period (as it may be


extended pursuant to Articles 6.5 nnd 6.6), and this Contract will automatically


terminate without further notice to the CONTRACTOR, unless any of the following


is applicable: (i) the CONTRACTOR has notified the GOVERNMENT at least


thirty (30) days prior to the expiry of the First Sub-Period of the CONTRACTOR'S


intention to enter into the Second Sub-Period, (ii) Article 6.7 is applicable, or (lii) the


Development Period has commenced.


The Exploration Period will terminate at the end of the Second Sub-Period (as it may


be extended pursuant to Articles 6.5 and 6.6). and this Contract will automatically


terminate without further notice to the CONTRACTOR, unless 00 Article 6.7 is


applicable, or (iii) tbe Development Period has commenced


The CONTRACTOR shall have the right to w ithdraw from this Contract at any time


during the Exploration Penod upon thirty (30) days prior notice to the


GOVERNMENT, provided either that 0) the CONTRACTOR has completed the


Minimum Exploration Obligations relating to the then current Sub-Penod, including


additional minimum work obligations in respect of any applicable extensions of the


applicable Sub-Period, or (ii) on or before the final day of such 30-day notice period,


tbe CONTRACTOR has paid to the GOVERNMENT the amounts specified in


Article 10.2 or Article 10.3. whichever is applicable, to the then current Sub-Period.


This Contract will terminate upon satisfaction of 0k withdrawal requirements in the


preceding paragraph


If no Commercial Discovery has been made at the end of the Exploration Period


(including any extension as provided in Articles 6 6 and 6.7). this Contract will


automatically terminate without further notice to the CONTRACTOR


The Exploration Penod and the Contract shall terminate if and as of the date the


CONTRACTOR surrenders the entire Contract Area in accordance with Article 7.4.








21


 Production Sharing Contract - Haler>





6.5 If the CONTRACTOR has fulfilled its Minimum Exploration Obligations for a Sub-


Period. but considers that additional work is necessary before deciding whether to:


(a) submit an Appraisal Work Program and Budget as provided under Article 12.2


in respect of a Discovery, or


(b) declare a Discovery as a Commercial Discovery in accordance with Article


12.6

execution of an Appraisal Work Program and Budget, as provided under


Article 12.2 and/or Gas Marketing Operations;


then the CONTRACTOR will be entitled to extensions, each of no more than one (I)


Contract Year, of such Sub-Period. The Sub-Period plus the extensions provided in


accordance with this Article 6.5 may not exceed the Extended Exploration Term. To


exercise its right to an extension pursuant to this Article 6.5. the CONTRACTOR


must notify the GOVERNMENT of its intention to exercise such right of extension


and of the nccessury duration of such extension at least thirty (30) days before the end


of the Sub-Period or the relevant extension.


6.6 Except as provided in the last sentence of this Article 6.6. if the CONTRACTOR


considers it has not completed its exploration evaluation of the Contract Area, the


CONTRACTOR will be entitled to an extension of the Exploration Period beyond


the Extended Exploration Term, provided; (i) the CONTRACTOR lias notified the


GOVERNMENT, at least thirty (30) days prior to the end of the applicable Sub-


Period (ns it may have been extended pursuant to Article 6.5), of the


CONTRACTOR’S exercise of such entitlement and (ii) the CONTRACTOR s


proposal for a minimum work obligation is acceptable to the GOVERNMENT for


such extension.


Any such extension shall not exceed one (I) Contract Year. Upon the expiry of such


extension and except as provided in the last paragraph of this Article 6 6. if the


CONTRACTOR considers it has still not completed its evaluation of the Contract


Area, the CONTRACTOR will he entitled to a further extension of one (I) Contract


Year, provided: (i) that the CONTRACTOR has notified the GOVERNMENT


thereof ai least thirty (30) days prior to the end of the first extension, and (ii) the


CONTRACTOR'S proposal for a minimum work obligation is acceptable to the


GOVERNMENT for such extension


The right of the CON TRACTOR to receive each extension as provided in this


Article 6.6 will be subject to the GOVERNMENT’S determination that the


CONTRACTOR has satisfied its minimum work obligations with respect to the


preceding period and the GOVERNMENT’S approval of the proposed additional


minimum work obligation with respect thereto.


6.7 If a Discovery is made within the Exploration Period (including any extensions), and


if the CONTRACTOR considers it has not had time to complete sufficient Gas


Marketing Operations to declare the Discovery a Commercial Discovery pursuant to


Article 12.6(a) or 14.5(a). the CONTRACTOR will be entitled to request an


extension of the Exploration Period (including any extensions) beyond the


Exploration Term, provided, not less than thirty (30) days prior to the end of the








22


 SKrm* G








Exploration Period (including any extension#), Uk CONTRACT OK (i) so notifies


the GOVERNMENT and(ii) provides a proposal tor Gas Marketing Operations to be


undertaken during such extension acceptable to the GOVERNMENT


Subject to approval of the Gas Marketing Operations by the GOVERNMENT, any


such extension shall not exceed two (2) Contract Years.


Upon the expiry of such extension, if the CONTRACTOR considers it has not


completed its Gas Marketing Operations, the CONTRACTOR wfll be entitled to


request a second extension of up to two (2) Contract Years, presided that not less


than thirty (30) days pnor to the end of the original extension, the CONTRACTOR:


so notifies the GOVERNMENT and (ii) provides a proposal for Gas Marketing


Operations to be undertaken during such extension which t* acceptable to the


GOVERNMENT.


Development rtTitfd


6.S II the CONTRACTOR considers that a Discovery of Crude Oil and any Associated


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


exclusive right to develop and produce such Commercial Discovery, pursuant to the


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


Cmde Oil and any Associated Natural Gas shall be twenty (20) years commencing on


the declaration of such Commercial Discovery by CONTRACTOR, in accordance


with Article 12.6(a), with an automatic right to a five (5) year extension.


6.9 It the CONTRACTOR considers that a Discovery of Non-Associated Natural Gas is


a Commercial Discovery, the CONTRACTOR shall have the exclusive right to


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


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


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


Commercial Discovery by CONTRACTOR, in accordance with Article 12.6(a) or


Article 14.5(a). with an automatic right to a fixe (5) year extension.


6.10 If Commercial Production from a Production Area is still possible at the end of its


Development Period as defined in Articles 6.8 or 6.9 then, upon the request of the


CONTRACTOR, the CONTRACTOR shall be entitled to an extension of such


Development Period under the same terms as those provided in this Contract. Such


request shall be made in writing by the CONTRACTOR at least six (6) Months


before the end of the Development Period.


The term of any such extension of the Development Period shall be:


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


(b) five (5) Years for Non-Associated Natural Gas


6.11 The CONTRACTOR shall have the right to terminate Production Operations for any


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


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











23


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


Operations for nil Production Areas have terminated.








ARTICLE 7 RELINQUISHMENTS


7.1 Subject to the provisions of Articles 7.2 and 7.3. the CONTRACTOR shall surrender


portions of the Contract Area as follows:


(a) ut the end of the Base Exploration Term (without any extensions), twenty live


per cent (25%) of the net urea determined by subtracting the Production Areas


from the initial Contract Aren;


(b) at the end of the lirst one-year extension to the Base Exploration Term granted


pursuant to Article 6.5 or Article 6.6. an additional twenty five per cent (25%)


of the net men determined by subtracting the Production Areas from the


remaining part of the Contract Area; and


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


the remaining area that is not in a Production Area.


7.2 For the application of Article 7.1:


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


areas to be surrendered; and


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


location of the Contract Area to be kept, provided that such surrendered


portions of the Contract Area shall be in contiguous blocks


7.3 If the relinquishment referred to in Article 7.1 can only be achieved by including pan


of an Appraisal .Area, then these percentages shall be reduced to exclude such


Appraisal Area.


7.4 During the Exploration Period, the CONTRACTOR may at the end of each Contract


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


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


surrender, subject to the provisions of this Article 7.4. Such voluntary surrenders


during the Exploration Period shall be deemed equal to the obligatory relinquishments


referred to under Article 7.1. This Contract shall terminate in the event of the


surrender of the entire Contract Area.


7.5 No surrender provided under Article 7.4 shall exempt the CONTRACTOR from its


outstanding obligations under this Contract In the event the CONTRACTOR elects


to surrender the entire Contract Area without having fulfilled the Minimum


Exploration Obligations relating to the then current Sub-Period as provided in Article


10.2 or Article 10.3. the CONTRACTOR shall pay to the GOVERNMENT the


relevant outstanding amount as detailed in Article 10.2 or Article 10.3. as the ease


maybe.











24


7.6 The CONTRACTOR shall notify the GOVERNMENT of the boundaries of the


portion of the Contract Area to be relinquished by the CONTRACTOR at least thirty


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








ARTICLE 8 - MANAGEMENT COMMITTEE


8.1 A Management Committee shall be established w ithin thirty (30) days following the


Effective Dale for the purpose of providing orderly direction of all matters pertaining


to the Petroleum Operations and the Work Programs. Within such period, each of the


GOV ERNMENT and the CONTRACTOR shall by written notice nominate its


respective members of the Management Committee and their deputies.


The Management Committee shall comprise two (2) members designated by the


GOVERNMENT and two (2) members des.gnated by the CONTR ACTOR


Upon ten (10) days notice, each of the GOVERNMENT and the CONTRACTOR


may substitute any of its members of the Management Committee. The chairman of


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


GOVERNMEN T (the “Chairman"). The vice-chairman of the Management


Committee shall be one of the members designated by the CONTRACTOR (the


"Vice-Chairman”). In the absence of the Chairman, the Vice-Chairman shall chair


the meeting.


Each Party shall have the right to invite a reasonable number of observers to attend


the meetings of the Management Committee in a non-voting capacity.


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


suggestions and recommendations to the Parties regarding the following subject


matters:


(a) Work Programs and Budgets;


(b> the CONTRACTOR'S activity reports.


(c) production levels submitted by the CONTRACTOR, based on prudent


international petroleum industry practice;


(d> Accounts of Petroleum Costs;


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


contract value in excess of one million Dollars ($1,000,000). submitted by the


CONTRACTOR in accordance with Article 19.3;


(0 Development Plan and Budget foe each Production Area;


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


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


consider.








25


 Production Skating Contract Safe*





8.3 Each of the GOVERNMENT and the CONTRACTOR shall have one (1) vote in


the Management Committee. The Management Committee cannot validly deliberate


unless each of the GOVERNMENT and the CONTRACTOR is represented by at


least one(11 of its members or its deputy.


The Management Committee shall attempt to reach unanimous agreement on any


subject matter being submitted In the event the Management Committee cannot


reach unanimous agreement, u second meeting shall he held within fourteen (14) days


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


Except as provided for in Article 8.4 and Article 8.5. in the event that no agreement is


reached at the second meeting, the Chairman shall have the tie-breaking vote.


8.4 In the event that, during the Exploration Period, no agreement is reached at the second


meeting of the Management Committee, ns provided for in Article 8.3. or unanimous


approval is not obtained, as required pursuant to Article 8.5i then the proposal made


by the CONTRACTOR shall be deemed adopted by the Management Committee.


8.5 Notwithstanding the provisions of Article 8.3, and subject to Article 8.4. unanimous


approval of the Management Committee shall be required for:


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


Budget prepared ntlcr the first Commercial Discovery in the Production Area


relating to such Commercial Discovery;


(b) approval of, and any material revision to, the Development Plan, the


production schedule, lifting schedule and Development and Production Work


Programs and Budgets;


(c) establishment of rules of procedure for the Management Committee;


(d) any insurance issues over which the Management Committee has authority;


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


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


19.3 (unless such procedures have been deemed approved by the Management


Committee in accordance with Article 19.3);


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


submitted by CONTRACTOR in accordance with Article 33.3;




Fund, in accordance with Article 38.1;


(h) approval of. and any matcnal revision to. any proposed Decommissioning


Plan submitted pursuant to Article 38.7 on any Decommissioning Work


Program and Budget or (ias Marketing Work Program and Budget.


(i) any Terms of Reference which arc required to be prepared and agreed for the


purposes of expert determination, pursuant to Article 42.2;








26


(j) approval of any costs in excess of ion per cent (10%) above any Hudget;


(k) any mailer ha\ mg a material adverse effect on Petroleum Operation*, and


0) approval of CONTRACTOR'* plans for Ihc recruitment, integration and


training of CONTRACTOR Entity and GOVERNMENT personnel, in


accordance with Article 23.6.


8.6 Ordinary meetings of the Management Committee shall take place in the Kurdistan


Region, alternately at the offices of the GOVERNMENT and those of the


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


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


Contract Year thereafter.


8.7 Either the GOVERNMENT or the CONTRACTOR may call an extraordinary


meeting of the Management Committee to discuss important issues or developments


related to Petroleum Operations, subject to giving reasonable prior notice, specifying


the mailers to be discussed at the meeting, to ihc other Party The Management


Committee may from time to time make decisions by correspondence provided all the


members have indicated their approval of such decisions in such correspondence


8.8 Unless at least one (I) member or its deputy of each of the GOVERNMENT and the


CON TRACTOR is present, the Management Committee shall be adjourned for a


period not to exceed eight (8) days The Party being present shall then notify- the other


Party of the new date, time and location for the meeting.


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


CONTRACTOR in accordance with instructions of the Chairman and communicated


to the Panics at least fifteen (15) days prior to the date of the meeting The agenda


shall include any subject matter proposed by either the GOVERNMENT Of the


CONTRACTOR. Decisions of the Management Committee will be made at the


meetings. The CONTRACTOR shall be responsible foe preparing and keeping


minutes of the decisions made at the meetings Copies of such minutes shall be


forwarded to each Party for review and approval Each Patty shall review and


approve such minutes within ten (10) days of receipt of the draft minutes. A Party


who fails to notify in wnting its approval or disapproval of such minutes w ithin such


ten (10) days shall be deemed to have approved the minutes.


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


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


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


CONTRACTOR. After each meeting, the technical sub-committcc or any other sub


committee shall deliver a written report to the Management Committee


8.11 Any costs and expenditure incurred by the CONTRACTOR for meetings of the


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


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


CONTR ACTOR in accordance with the prov isions of Articles I and 25











27


 Pradtunon («""* Sa/en





ARTICLE 9 - GUARANTEES


9.1 Concurrently with the signing of this Contract, Marathon shall deliver to the


GOVERNMENT a payment guarantee of a parent company or ultimate parent


company, in form and content acceptable to the GOVERNMENT, in respect ol


Marathon’s payment obligations with respect to the First Sub-Period pursuant to


Article 7.5 and the Marathon Exploration Tranche pursuant to Article 32.


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


CONTRACTOR Entities shall provide the GOVERNMENT, if so required by the


GOVERNMENT pursuant to written notice received by each CONTRACTOR


Entity within thirty (30) days following commencement of the Second Sub-Period,


with a joint and several guarantee of such parent company or ultimate parent company


of each CONTRACTOR Entity in form and content acceptable to the


GOVERNMENT with respect to the obligations of the CONTRACTOR under


Article 7.5. Such guarantee shall be in die form and content us set forth in Annex C.


but only in respect of the stated payment obligations under Article 7.5.


9.3 In the event of an assignment by a CONTRACTOR Entity to a third paity in


accordance with Article 39, a parent company or ultimate parent company of such


third party assignee acceptable to the GOVERNMENT must accede to the applicable


guarantee, effective as of the effective date of the assignment, ns a condition


precedent to the approval of the assignment by the GOVERNMENT


ARTICLE 10 MINIMUM EXPLORATION WORK OBLIGATIONS


10.1 The CONTRACTOR shall start Exploration Operations within thirty (30) days of the


Management Committee’s approval of the Exploration Work Program and Budget in


accordance with Article 8. The COM RACTOR shall perform geological,


geophysical andor drilling works as provided under Articles 10-2 to 10.3 (the


“Minimum Exploration Obligations ’). Ihc Minimum Exploration Obliganons shall


be performed during each Sub-Penod in accordance with prudent international


petroleum industry practice.


10.2 During the First Sub-Period, the CONTRACTOR shall:


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


(i) the compilation of a technical database.


(ii) the performance of a remote sensing study:


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


remote sensing results and plan for two dimensional seismic


acquisition; and


(b) perform field work composing structural, stratigraphic and lithologic mapping


(c) acquire, process and interpret one hundred and fifty (150) line kilometres of


two dimensional seismic data, or a three dimensional seismic data program by


agreement between the Parties


(i) committing for this purpose a minimum financial amount consistent


with prudent international petroleum industry practice and


commensurate with market conditions in the Kurdistan Region for


seismic services: and


(ii) subject to completion of the related geological survey works,


interpretation of any offset data and preparation for the tendering of the


seismic exploration activities, commencing seismic exploration


activities within six (6) months of the Effective Date or as soon as


practicable thereafter:


and


(d) drill one (I) Exploration Well (the “First Exploration Well"), including


testing and coring as appropriate, committing for this purpose a minimum


financial amount of ten million Dollar* (L’SSI 0.000,000) for such well


10.3 During the Second Sub-Period, the COM RACTOR shall:


(a) acquire, process nnd interpret further seismic data (being either two


dimensional or three dimensional), if the CONTRACTOR considers that the


results from the First Exploration Well justify the acquisition of further


seismic data; and


(b) drill one (1) Exploration Well (the -Second Exploration Well'), including


testing and coring as appropriate, committing for this purpose a minimum


financial amount of ten million Dollars (US$10,000,000). unless the data from


the First Exploration Well demonstrates that there is no reasonable technical


case for drilling the Second Exploration Well m the Contract Area.


10 4 Notwithstanding the provisions in Articles 10.2 to 10.3. for the execution of the


Minimum Exploration Obligations under Articles 10.2 to 10.3. it is agreed as follows:


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


in the event the CONTRACTOR has elected to notify the GOVERNMENT


that it will enter into the Second Sub-Period, in accordance with Article 6 4


(b) Subject to Article 10.4(a), the CONTRACTOR shall be required to meet its


Minimum Exploration Obligations for the applicable Sub-Period, even if this


entails exceeding the Minimum Financial Commitment for such Sub-Penod.


If the CONTRACTOR has satisfied its Minimum Exploration Obligations


without having spent the total Minimum Financial Commitment lor such Sub-


Period. it shall be deemed to have satisfied its Minimum Exploration


Obligations for such Sub-Period.


(c) Each Exploration Well shall be drilled to the depth agreed by the Management


Committee unless:








29


 PmlucttOf ftMw CWoc/ - Sn/evi








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


anticipated;


(ii) basement is encountered at a lesser depth than originally anticipated;


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


relevant Exploration Well presents a hazard due to the presence of


abnormal or unforeseen conditions;


(iv) insurmountable technical problems are encountered rendering it


impractical to continue drilling with standard equipment; or


(v) petroleum formations arc encountered whose penetration requires


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


Management Committee to be reached.


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


shall he deemed to have been drilled to the depth agreed by the Management


Committee and the CONTRACTOR shall be deemed to have satisfied its


Minimum Exploration Obligations in respect of the Exploration Well.


(d) Any geological or geophysical work Carried out or any seismic data acquired,


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


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


amounts spent in excess of the total Minimum Financial Commitment in any-


given Sub-Period, shall be carried forward to the next Sub-Period or any


extension period and shall be taken into account to satisfy the Minimum


Exploration Obligations and/or the total Minimum Financial Commitment for


such subsequent Sub-Period or extension period


(c) For the avoidance of doubt, ifi (i) in the First Sub-Period. the


CONTRACTOR performs any of the Minimum Exploration Obligations


prescribed for the Second Sub-Period in Article 10.3; and (ii) the


CONTRACTOR has elected to notify the GOVERNMENT that it will enter


into tbe Second Sub-Period (in accordance with and sub)cct to Article 6 4). the


performance of such Minimum Exploration Obligations shall be deemed to


satisfy the same Minimum Exploration Obligations for the Second Sub-Period.


ARTICLE II - EXPLORATION WORK PROGRAMS AND BUDGETS


II.I Within ninety (90) days following the Effective Date, the CONTRACTOR shall


prepare and submit to the Management Committee a proposed work program and


budget relating to Exploration Operations (the "Exploration Work Program and


Budget") for the remainder of the Calendar Year. Thereafter, no later than I October


in each Calendar Year, the CONTRACTOR shall submit a proposed Exploration


Work Program and Budget to the Management Committee for the following Calendar


Year.














30


 Production Skating Contract - Safer.1








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


limited lo. the following:


(n) work to be undenaken;


(b) materials, goods and equipment to be acquired;


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


and/or Affiliated Companies of any CONTRACTOR Entity; and


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


Accounting Procedure.


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


CONTRACTOR'S proposal to examine and approve the Exploration Work Program


and Budget.


11.4 If the GOVERNMENT requests any modification to the Exploration Work Program


and Budget, the Management Committee shall meet to discuss the Exploration Work


Program and Budget and proposed modifications thereto within the sixty (60) day


period referred to in Article 11.3. The CONTRACTOR shall communicate its


comments on any such requested modifications to the GOVERNMENT at the


meeting of the Management Committee or in writing prior to such meeting.


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


approxcd Exploration Work Program and Budget provided that ihc aggregate amount


of such expenditures shall not exceed ten per cent (10%) of the approved Exploration


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


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


Management Committee. For the avoidance of doubt all excess expenditures shall be


recoverable by the CONTRACTOR in accordance with the provisions of Articles I


and 25, provided that any excess expenditures above the ten per cent (10%) limit shall


only be recovered with the unanimous approval of the Management Committee


11.6 In eases of emergency, the CONTRACTOR may incur such additional expenditures


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


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


avoidance of doubt, such additional expenditure shall be considered Petroleum C osts


and shall be recoverable by the CONTRACTOR in accordance with the provisions


of Articles I and 25.


ARTICLE 12 - DISCOVERY AND DEVELOPMENT


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


shall notify the GOVERNMENT within forty-eight (48) hours of completing tests


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


the CONTRACTOR reasonably requires to determine whether or not there is a


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








31


 rnduatoH Omo •








CONTRACTOR shall present to ihc Management Committee all technical data then


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


(the "Discovery Report''). The CONTRACTOR shall provide in a timely manner


such other information relating to the Discovery as the GOVERNMENT may


reasonably request.


Auuiiihal Wurh rimain mid Duilmt


12 2 If. pursuant to Article 12.1, the CON TRACTOR considers that the Discovery has


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


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


Discovery (the “Appraisal Work Program and Budget") to the Management


Committee. The Management Committee shall examine the Appraisal Work Program


and Budget within thirty (30) days of its receipt. If the GOVERNMENT requests any


modification to the Appraisal Work Program and Budget, the Management


Committee shall meet to discuss the Appraisal Work Program and Budget and the


requested modifications thereto within sixty (60) days from its receipt of the proposed


Appraisal Woik Program and Budget. The CON I RACTOR shall communicate its


comments on any such requested modifications to the GOVERNMENT at the


meeting of the Management Committee or in writing prior to such meeting.


The Appraisal Work Program and Budget shall include the following:


(u) on appraisal works program and budget, in accordance with prudent


international petroleum industiy practice;


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


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


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


appraised (the "Appraisal Area").


12.3 If, following a Discovery, a rig acceptable to the CONTRACTOR > available to drill


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


Appraisal Well deemed necessary by the CONTRACTOR before or duiing the


Management Committee’s review of the Discovery Report provided in accordance


with Article 12.1 or its review of the Appraisal Work Program and Budget


The CONTRACTOR shall be authorised to incur expenditures not budgeted in an


approved Appraisal Work Program and Budget provided that the aggregate amount of


such expenditures shall not exceed ten per cent (10%) of the approved Appraisal


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


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


Management Committee. For the avoidance of doubt, all excess expenditures shall be


recoverable by the CONTRACTOR in accordance with the provisions of Articles I


and 25. provided that any excess expenditure above the ten per cent (10%) limit shall


only be recovered with the unanimous approval of the Management Committee.


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


as it deems necessary to protect life, environment or property. The CONTRACTOR








32


 /VniAw-Mut Sharing COtHroa-





shall immediately report such additional expenditures to the Management Committee.


Such additional expenditure shall be considered Petroleum Costs and will be


recoverable by the CONTRACTOR in accordance with the provisions of Articles 1


and 25.


Apiirni?«l Report


12.4 The CONTRACTOR shall submit a detailed report relating to the Discovery (the


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


following completion of the Appraisal Work Program and Budget


12.5 The Appraisal Report shall include the follow ing


(a) geological conditions;


(b) physical properties of any liquids;


(c) sulphur, sediment and walcr content;


(d) type of substances obtained.


(c) Natural Gas composition;


(0 production forecast per well, and


(g) a preliminary estimate of recoverable reserves








I2.(< Together with its Appraisal Report, the CONTRACTOR shall submit a written


statement to the Management Committee specifying that:


(a) tlw CON TRACTOR has determined that the Discovery is a Commercial


Discovery;


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


Discovery;


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


Discovery, which may become a Commercial Discovery subject to additional


exploration nndfor uppiuisal works within or outside of the Appraisal Area; or


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


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


Discovery subject to Gas Marketing Operations, in accordance with


Article 14 5.


12.7 In ease the statement of the CON TRACTOR corresponds to Article 12.6(c). the


CONTRACTOR shall submit a Work Program and Budget to the Management


Committee within thirty (.10) days following such statement. Any well drilled to


evaluate the said significant Discovery shall be considered an Exploration Well








33


LHvd9ement Plan





12.8 If ihe Discovery has been declared a Commercial Discovery by the CONTRACTOR


pursuant lo Article 12.6(a) or Article 14 5(a). the CONTRACTOR shall submit a


proposed Development Plan to the Management Committee within one hundred


eighty (180) days following such declaration. The Development Plan shall be in


accordance with prudent international petroleum industry' practice. Except with the


consent of the GOVERNMENT, such Development Plan shall include details of the


following as applicable:


(a) the delimitation of the Production Area, taking into account the results of the


Appraisal Report regarding the importance of the Petroleum Field within the


Appraisal Area:


(b) drilling and completion of Development Wells;


(c) drilling and completion of water or Natural Gas injection wells:


(d) laying of gathering pipelines;


(c) installation of separators, tanks, pumps and any other associated production


and injection facilities for the production:


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


facilities onshore or offshore.


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


facility or Delivery Point;


(h) construction of storage facilities for Petroleum.


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


(j) training commitment in accordance w ith Article 23;


(k) a preliminary decommissioning and site restoration plan;


(l) all contracts and arrangements made or to be made by the CONTRACTOR


for the sale of Natural Gas:


(m) to the extent available, all contracts and arrangements made or to be made by


Persons in respect of that Natural Gas downstream of the point at which it is to


be sold by the CONTRACTOR and which arc relevant to the price at which


(and other terms on which) it is lo be sold by the CONTRACTOR or arc


otherwise relevant to the determination of the value of it for the purposes of


this Contract, but not beyond the point at which it is first disposed of in an


Arm's Length Sale;


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











34


 Production Sharing Contra.! Srtfen





(o) any oilier operations not expressly provided for in this Contract but reasonably


necessary for Development Operations, Production Derations and delivery of


Petroleum produced, in accordance with prudent international petroleum


industry practice.


12.9 The Management Committee shall use its best efforts to approve the Development


Plan within sixty (60) days after its receipt of such plan. The Development Period for


each Commercial Discovery within a Development Plan shall be extended for the


number of dnys in excess of such sixty (60) day period that it takes for the


Management Committee to approve the Development Plan. The Development Plan


shall Ik* considered approved by the GOVKUNVII.VI if the GOVERNMENT,


through its representatives on the Management Committee, indicates its approval in


writing.


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


Management Committee shall meet within sixty (60) days of receipt by the


CONTRACTOR of the GOVERNMENT'S written notification of requested


modifications accompanied by all the documents justifying such request, and shall


discuss such request. The CONTRACTOR shall communicate Us comments on any


such requested modifications to the GOVERNMENT at such meeting or in writing


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


such meeting or within a further period of thirty (30) days from the date of such


meeting shall he incoiporatcd into the Development Plan which shall then be deemed


approved and adopted.


12.11 If the CONTRACTOR makes several Commercial Discoveries within the Contract


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


CONTRACTOR shall be entitled to develop and to produce each Commercial


Discovery and the GOVERNMENT shall provide the appropriate Permits covering


each Production Area..





AR I K l.l 13 - DEVELOPMENT AND PRODUCTION WORK PROGRAMS AND


BUDGET


13.1 Upon the approval of the Development Plan by the Management Committee, the


CONTRACTOR shall start the Development Operations for the Commercial


Discovery in accordance with the Development Plan and prudent international


petroleum industry practice.


AJWfgvHL 9fPmlwmvm fregrem and Budget


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


Management Committee, the CONTRACTOR shall prepare and submit to the


Management Committee a proposed work program and budget for Development


Operations (the "Development Work Program and Budget ") to be carried out in the


Production Area tor the duration of the Development Operations. Thereafter, no Inter


than I October in each Calendar Year, the CONTRACTOR shall submit to the


Management Committee updates in respect of its Development Work Program and


 ProJadioi Shinny Confratl .Vifcvi





Budget. To enable the Management Committee to forecast expenditures, each


Development Work Program and Budget shall include details of the following:


(a) works to be carried out;


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


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


Affiliated Companies of any CONTRACTOR Entity; and


(d| categories of gcncrul and administrative expenditure.


13.3 If any modification to die Development Work Program and Budget is requested by


the GOVERNMENT, the Management Committee shall meet to discuss the


Development Work Program and Budget and proposed modifications thereto within


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


Budget. The CONTRACTOR shall communicate its comments on any su«.h


requested modification* to the GOVERNMENT at the meeting of the Management


Committee or in writing prior to such meeting.


13.4 The CONTRACTOR shall be authorised to incur expenditures not budgeted in an


approved Development Work Program and Budget provided that the aggregate


amount of such expenditures shall not exceed ten per cent (10%) of the approved


Development Woik Program and Budget in any Calendar Year and provided further


that such excess expenditures shall be reported as soon as is reasonably practicable to


the Management Committee. For the avoidance of doubt, all excess expenditures


shall he recoverable by the CONTRACTOR in accordance with the provisions of


Articles I and 25, provided that any excess expenditure above the fen per cent (10*'.)


limit shall only be recovered with the unanimous approval of the Management


Committee.


13.5 In cases of emergency, the CONI RACTOK muy incur such additional expenditures


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


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


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


and shall be recoverable by the CONTRACTOR in accordance with the provisions


of Articles I and 25.











1.3.6 No Inter than I October of the Calendar Year preceding the estimated commencement


of production pursuant to an approved Development Plan and thereafter no Inter than


I October in each Calendar Year, the CONTRACTOR shall prepare and submit to


(he Management Committee a proposed work program and budget for Production


Operations (the “Production Work Program and Budget") for the following


Calendar Year. To enable the Management Committee to forecast expenditures, the


Production Work Program anil Budget shall include details of the following





(a) works to be carried out;


 Production Sharing Contract ■ Safer





(b) inaicrial und oquipmont to be acquired by main categories;


(C) type of services «0 bo provided, distinguishing between third parties and


Affiliated Companies of any CONTRACTOR Entity; and


categories of general and administrative expenditure


13.7 If any modification to the Production Work Program and Budget is requested by the


GOVERNMENT, the Management Committee shall meet to discuss the Production


Work Program and Budget and proposed modifications thereto w ithin sixty (60) days


from its receipt ol the proposed Production Work Program and Budget The


CONTRACTOR shall communicate its comments on any such requested


modifications to the GOVERNMENT at the meeting of the Management Committee


or in writing prior to such meeting.


13.8 The CONTRACTOR shall be authorised to incur expenditures not budgeted in an


upproved Production Work Program and Budget provided that the aggregate amount


of such expenditures shall not exceed ten per cent (10%) of the approved Production


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


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


Management Committee. For the avoidance of doubt, all excess expenditures shall be


recoverable by the CONTRACTOR in accordance with the provisions of Articles I


and 25, provided that any excess expenditure above the ten per cent (10%) limit shall


only be recovered with the unanimous approval of the Management Committee.


13.9 In eases of emergency, the CONTRACTOR may incur such additional expenditure


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


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


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


and shall be recoverable by the CONTRACTOR in accordance with the provisions


of Articles I and 25.


13.10 After the commencement of Commercial Production the CONTR ACTOR shall pay


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


of one hundred Dollars (IJSSIOO) per square kilometre per Contract Year


( Production Rental") Such Production Rental shall be considered as a Petroleum


Cost and shall be recoverable by the CONTRACTOR in accordance with the


provisions of Articles I and 25.


ARTICLE 14 - NATI'RAI. GAS











14.1 To take account of specific conditions relating to Natural Gas and to promote its


development in the Kurdistan Region, ihc GOVERNMENT will grant specific


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


this Contract, including, consistent with the Kurdistan Region Oil and Gas Law. more


generous pros isions in respect of the recovery’ of Petroleum Costs and the sharing of


Profit Petroleum than in respect of Crude Oil-








37


 ProM )I.-M Mi.r'l*g Contract - Sopcn





14.2 The CONTRACTOR may freely use uny Natural Gas required for the Petroleum


Operations. If technically anti economically justified and in line with international oil


ami kiin industry practice, the CONTRACTOR shall in priority use any Natural Gas


lor the purpose of enhancing recovery of Crude Oil in accordance with prudent


international petroleum industry practice us follows.


AsMiclaiyd Natural Gas


14..' Any excess Associated Natural Gas produced that is neither used in the Petroleum


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


GOVERNMENT'S written request, he transferred at the first practicable delivery


point within the Contract Area ns ngreed between the Parties, free of charge to the


GOVERNMENT. In such ease, the GOVERNMENT shall he solely responsible for


collecting, treating, compressing and transporting such Nutural Gas from such agreed


delivery point and shall be solely liable for any additional direct and indirect costs


associated therewith. The construction and operation of required facilities as well as


the offtake of such excess Associated Natural Gas by the GOVERNMENT shall


occur in accordance with prudent international petroleum industry practice and shall


not interfere with the production, lilting and transportation of the Crude Oil by the


CONTRACTOR. For the avoidance of doubt, all expenditure incurred by the


CONTRACTOR up to such agreed delivery point shall be considered Petroleum


Costs and shall be recoverable by the CONTRACTOR in accordance with the


provisions of Articles I and 25.


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


promptly give written notice to the CONTRACTOR, and the CON IRACTOR may


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


following notification thereof by the GOVERNMENT. If the CONTRACT OK


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


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


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


considered Petroleum Costs and shall be recoverable by the CONTRACTOR in


accordance with the provisions of Articles 1 and 25.








14.4 Until an approved Natural Gas sales contract is executed in respect of all volumes of


Natural Gas expected to be produced, the CONTRACTOR shall be entitled during


the F.xploration Period and the Development Period to carry out Gas Marketing


Operations, which may be conducted in stages


14.5 If. pursuant to Article I2.6(d>. the CONTRACTOR has determined that the


Discos cry' is a significant Discovery of Non-Associated Natural Gas. which may


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


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


to the Management Committee specifying that:


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


Discovery; or











38


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


Discovery.


14 6 For the purpose of this Contract. "Cat Marketing Operations ' means any activity


under this Contract relating to the marketing of Non-Associated Natural Gas.


including any evaluation to find a commercial market for such Non-Associated


Natural Gas ami or to find a commercially viable technical means of extraction of


such Xon-Associatcd Natural Gas and may include activities related to evaluating the


quantities of Non-Associated Natural Gas to be sold, its quality, the geographic


location of potential markets to be supplied as well as evaluating the costs of


production, transportation and distribution of the Non-Associalcd Natural Gas from


the Delivery Point to the relevant market.


14.7 All costs and expenditure incurred by the CONTRACTOR in the performance of the


activities in relation to the Gas Marketing Operations shall be considered Petroleum


Costs


|4 X No later than I October of the Calendar Year preceding the Calendar Year in which


any Gas Marketing Operations arc due to occur, the CONTRACTOR shall prepare


and submit to the Management Committee its Gas Marketing Work Program and


Budget for the following Calendar Year. To enable the Management Committee to


forecast expenditures, the Gas Marketing Work Program and Budget shall include the


following:


(a) works to be carried out;


(b) type of services to be provided, distinguishing between third parties and


Affiliated companies ofuny CONI RACTOR Entity; und


(c) categories of general and administrative expenditure


If any modification to the (ins Marketing Work Program and Budget is requested by


the GOVERNMENT, the Munugement Committee shall meet to discuss the Gas


Marketing Work Program und Budget and proposed modifications thereto within sixty


(60) days from its receipt of the proposed Gas Marketing Work Program and Budget.


The CONTRACTOR shall communicate its comments on any such requested


modifications to the GOVERNMENT ut the meeting of the Management Committee


or in writing prior to such meeting.


14.0 The CONTRACTOR shall be authorised to incur expenditures not budgeted in an


approved Gas Marketing Work Program and Budget provided that the aggregate


amount of such expenditure shall not exceed ten per cent (10%) of the approved Gas


Marketing Work Program and Budget in any Calendar Year and provided further ihat


such excess expenditures shall lie reported as soon as reasonably pructicublo to the


Management Committee, lor the avoidance of doubt, all excess expenditures shall be


recoverable by the CONTRACTOR in accordance with the provisions of Articles I


and 25. provided that any excess expenditure above the ten per cent (10%) limit shall


only be recoverable with the unanimous approval of the Management Committee.














.19


14 10 If »» Non Associated Natural Gas n discovered within the Contract An*, and the


CONTRACTOR reasonably considers that the W Associated Natural Gat


Discovery will only be a Commercial Discovery if certain terms of this Contract arc


The GOVERNMENT shall in^d faith grve rcasooabk^^^t^B^TAc


CONTRACTOR • proposed amendment and reasons and the Panes shall m good


forth attempt to agree on the necessary amendments to the Contract If the Parties are


uniiblc to agree on such amendments, und the Exploration Period expires without the


('ONTRAC'TOR having declared such Discovery to be a Commercial Discovery in


accordance with Article 12.6(a) or Article 14.5(a), and subsequently within a period


of eight (S) years from the end of such exploration Period, the GOVERNMENT


reaches agreement with any third party to develop such Discovery (the "Gas


Development”), then the following provisions shall apply:


(a) either before or upon agreement in relation to the tins Development having


been reached (and whether or not such agreement is recorded in a fully termed


production sharing und/or operating or other like agreement), but before such


agreement is signed (the "Proposed Contract") (subject only to the rights ol


each CONTRA! I OR Entity to pre empt such Proposed Contract puiMinnt to


Article 14.10(b) and such conditions as may be applicable), the


GOVERNMENT shall, as soon as reasonably practicable alter the occurrence


of such circumstances, serve on each of the CONTRACTOR Entities, a


notice u» that effect and shall with such notice provide such information and


mam terim of such agreement as the CONT RACTOR Entities may


reasonably request to determine if they will exercise their rights (the ‘Agreed


(i) the identity of such third party.


(ii) the effective dale of the Proposed Contract.


recovery' profit sharing, taxation and any other similar terms; and


(iv) all and any material conditions to which the Proposed Contract is





(b) Upon b request from any CONTRACTOR Entity, the GOVERNMENT will


provide all the CONTRACTOR Entities with such further information and


terms as may be reasonably requested by any CONTRACTOR Entity.


Within one hundred and eighty days (180) days after receipt of a notice and


any further information under Article 14.10(a) in relation to n Proposed


Contract each of the CONTRACTOR Entities shall elect either


(i) to enter into the Proposed Contract on the same or substantially similar





terms to the Agreed Terms, with the right to cost recover all Petroleum


Costs incurred under this Contract against all Petroleum revenues


received under the Proposed Contract, up to any cost recovery limits


set out therein; or











40


(ii) to waive the aforesaid right of pre-emption in relation to the Proposed


Contract.


and shall sene notice accordingly upon the GOVERNMENT and all the


CONTRACTOR Entities and in default of receipt by the GOVERNMENT


of any such notice within such period of one hundred and eighty (180) days


such CONTRACTOR Entity shall be deemed conclusively to have seised a


notice electing to waive its aforesaid right of pre-emption in relation to the


Proposed Contract.


(c) In the event that more than one of the CONTRACTOR Entities exercises its


rights under Article 14 IO(bXQ in relation to the Proposed Contract, then the


GOVERNMENT shall transfer or grant each such CONTRACTOR Entity


an interest in the Proposed Contract upon the Agreed Terms (in accordance


with Article I4.l0(b)(i» in the proportions in which their respective


percentage interests bear to the aggregate of their respective percentage


interests under the relevant Joint Operating Agreement (as it applied at the end


of the Exploration Period) or in such other proportions as such


CONTRACTOR Entities shall agree between them.


(d) In the event that one of the CONTRACTOR Entities exercises its rights


under Article l4.IO(bXi> in relation to the Proposed Contract then the


GOVERNMENT shall transfer or grant the whole of the interest in ihe


Proposed Contract upon the Agreed Terms (in accordance with 14.l(HbMi)) to


such CONTRACTOR Entity.


(c) In the event that none of the CONTRACTOR Emilies exercises its rights


under Article I4.l0(b)(i) then the GOVERNMENT may enter into the


Proposed Contract on Icons no more fovouniblc to it* counterparty than the


Agreed Terms and, in such ease, the aforesaid rights ol pre-emption shall


thereupon cease to apply in relation to the Proposed Contract.


14.11 If the pre-emption lights in Article 14 10 me not exercised und the GOVERNMENT


enters into the Proposed Contract with the third parly concerned, the


GOVERNMENT will use its Ik*s( endeavours to avoid any effect which may hamper


the Petroleum Operations of the CONTRACTOR while producing Petroleum.








14.12 Flaring of Natural Gas in the course of activities provided for under this Contract, is


prohibited except (i) short-term liming up to twelve (12) Months necessary for testing


or other operational reasons in accordance with pnident international petroleum


industry practice (which shall include the flaring of Associated Natural Gas to the


extent the CONTRACTOR considers that re-injecting Associated Natural Gas is not


justified technically and economically and provided the GOVERNMENT decides


not to take such Associated Natural Gas), or (ii) with the prior authorisation of the


GOVERNMENT, such uuthorisution not to he unreasonably withheld or delayed


The CONTRACTOR shall submit such request to the GOVERNMENT, which shall


include an evaluation Of reasonable alternatives lo flaring that have been considered











41


along with information on the amount and quality of Natural Ga* invoked and the


duration of the requested Haring


ARTICLE 15- ACCOUNTING AND AUDITS


15.1 The CONTRACTOR shall keep in Us offices in Ihc Kurdistan Region copies of all


books and accounts of all revenues relating to the Petroleum Operations and all


Petroleum Costs (the “Accounts"), except during the Exploration Period, when the


CONTRACTOR shall be entitled to keep the Accounts at its headquarters Abroad.


The Accounts shall reflect in detail expenditure incurred as a function of the


quantities and value of Petroleum produced, and skill be kept for a period of five (5)


years All Accounts which are made available to the GOVERNMENT in accordance


with the provisions of this Contract shall be prepared in the English language Pie


Accounts shall be kept in accordance with prudent international petroleum industry


practice and in accordance with the provisions of the Accounting Procedure The


Accounts shall be kept in Dollars, which shall be the reference currency for the


purposes of this Contract


15.2 Within ninety (90) days following the end of each Calendar Year, the


CONTRACTOR shall submit to the GOVERNMENT a summary statement of all


Petroleum Costs incurred during the said Calendar Year. The summary statement


shall also include a profit calculation pursuant to the provisions of Article 26.


15 3 The GOVERNMENT shall have the right


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


a period of five (5) Calendar Years following the end of such Calendar Year


(the “Audit Request Period”); and


(b) to retain an auditor of international standing familiar with international


petroleum industry accounting practice to undertake or 3"ist the


GOVERNMENT to undertake the audit


Notwithstanding paragraphs (a) and (b) of this Article 15 3. die GOVERNMENT


shall have the right to audit the Accounts with respect to each Calendar Year at any¬


time in the ease of manifest error or fraud.


15.4 The reasonable cost of retaining an auditor pursuant to .Article 15 3 shall he home by


the CONTRACTOR and treated a» a Petroleum Cost for the purpose of cost recovery


under Articles I and 25.


15.5 During the Audit Request Period for any Calendar Year but not thereafter, the


GOVERNMENT, acting reasonably and in accordance with prudent international


petroleum industry practice, may rcxpicsl in writing all reasonably available


information and justifications for its audit of Petroleum Costs


15.6 Should the GOVERNMENT consider, on the basis of data and information available,


that the CONTRACTOR made a material mistake or there is any irregularity in


respect of the Accounts and considers that any corrections, adjustments or











42


 Production Shoring l o*nwt • Soft*





amendments should be made, the GOVERNMENT shall make any audit exceptions


in writing and notified to the CONTRACTOR within six (6) Months of the date of


request refened to in Ankle 15J. and failure to give such written exception within


such time shall be deemed to be an acknowledgement of the correctness of the


CONTRACTOR'* Accounts.


15.7 In respect of any audit exception made by the GOVERNMENT in accordance with


Article 15.6. the CONTRACTOR shall then have sixty (60) days to make necessary


corrections, adjustments or amendments or to present Us comments in writing or


request a meeting with the GOVERNMENT. The GOVERNMENT shall within


thirty (30) days of the CONTRACTOR’S response, notify the CONTRACTOR in


writing of ils position on the corrections, adjustments, amendments or comments. If


thereafter there .still exists a disagreement between the GOVERNMENT and the


CON I KACTOR, the dispute will be settled in accordance with Article 15.9.


15.X In addition to the annual statements of Petroleum Costs as provided in Article 15.2,


the CONTRACTOR shall provide the GOVERNMENT with such production


statements and reports, as required pursuant to Article 16.3.





15.9 Any dispute between the Parties under this Article 15 that cannot be settled amicably


within sixty (60) days of the GOVERNMENT’S final notice under Article 15.7, may


be submitted to an expert on the request of either the GOVERNMENT or the


CONTRACTOR in accordance with the provisions of Article 42.2. Notwithstanding


the provisions of Article 42, in this specific instance the decision of the expert shall


not necessarily be final and either Party may decide to submit the matter to arbitration


in accordance with the provisions of Article 42.1.








ARTICLE 16 CONTRACTOR’S RIGHTS AND OBLIGATIONS


Permanent Representative





16.1 If not done already , within ninety (90) day* following the Effective Date, each


CON I RAO OK Entity shall open an office and appoint a permanent representative


in the Kurdistan Region, who may be contacted by the GOVERNMENT with regard


to any matter relating to this Contract and will be entitled to receive any


correspondence addressed to Mich CONTRACTOR Entity.








16.2 The CONTRACTOR shall carry out all Petroleum Operation* in accordance with the


provisions of tins Contract, prudent international petroleum industry practice and


applicable Kurdistan Region I aw.


The CONTRACTOR shall be responsible for the conduct, management, control ami





administration of Petroleum Operations and shall be entitled to conduct Petroleum


Operations in accordance with the provisions of this Contract In conducting its


Petroleum Operations, the CONTRACTOR shall have the right to use any Affiliate


of each CONTRACTOR Entity, its and their Subcontractors, and the employees,


consultants, and agents of cadi of the foregoing. The CON I K ACTOR and all such








43


 PtodUTtHm $kdrtn& < iWlfruCf -








Persons shall at all limes have free access to the Contract Area and any Production


Areas for the purpose of carrying out Petroleum Operations.








16.3 The CONTRACTOR shall provide the GOVERNMENT with periodic data and


activity reports relating to Petroleum Operations. Said reports shall include details of


the following:


(a) information and data regarding all Exploration Operations. Development


Operations and Production Operations (as applicable) performed during the


Calendar Year, including any quantities of Petroleum produced and sold;


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


by the CONTRACTOR;





(C) a statement specifying the number of personnel their title, their nationality as


well as a report on any medical services and equipment made available to such


personnel: and


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


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








16.4 The CONTRACTOR nuy freely use any Petroleum produced within the C ontract


Area for the Petroleum Operations


Sin»yiTiMon.hv_ihc(;;ovT;K.N.vii::.Ni


16 5 The CONTRACTOR shall at all limes provide reasonable assistance as may


reasonably be requested by the GOVERNMENT during its review and verification


of records and of any other information relating to Petroleum Operations at the


offices, worksites or any other facilities of the CONTRACTOR


Upon giving reasonable prior notice lo the CONTRAC I OK. the GOVERN Ml NT


may send a reasonable number of representatives to the work-sites or any oilier


facilities of the CONTRACTOR in the Kurdistan Region to perform such reviews


and verifications. The representatives of the GOVERNMENT shall at all times


comply with any safety regulations imposed by the CONTRACTOR and such


reviews and verifications shall not hinder the smooth progress of the Petroleum


Operations.


A«t» igfaaiitip


16 6 For the performance of the Petroleum Operations, the CONTRACTOR, any Affiliate


of each CONTRACTOR Entity, its 3nd their Subcontractors and the employees,


consultants and agents of each of the foregoing shall at all tiroes be granted free


access to the Contract Area and lo any facilities for the Petroleum Operations located











44


 /VoiAwrtiui SJuiring Ccnmtci ■ Sitftn








within or outside of the Contract Area or within or outside the Production Area, for


the purpose of carrying out the Petroleum Operations


Us, of


16.7 Upon notice from the GOVERNMENT, the CONTRACTOR shall make available


to a reasonable number of representatives of the GOVERNMENT those of the


CONTRACTOR'S facilities which arc necessary- to enable such representatives to


perform their tasks related to this Contract and the Kurdistan Region Oil and Gas Law


including, in case of works to be performed on work sites, transportation,


accommodation and board, under the same conditions as those provided by the


CONTRACTOR for its own personnel.


Notwithstanding Article 16.8. the GOVERNMENT shall indemnify and hold


harmless each CONTRACTOR Entity against all losses, damages and liability


wising under any claim, demand, action or proceeding brought or initiated against any


CONTRACTOR Entity by any representative of the GOVERNMENT in connection


with the access to or use of the facilities by such representatives.


L»smrl>nmimg


16.8 I'hc CONTRACTOR shall lie responsible for tiny loss or damage caused to third


parties by its or its Subcontractors personnel solely and directly resulting from their


negligence, errors or omissions in accordance with applicable Kurdistan Region Law.


.!»ivllvv

16.9 In its Petroleum Operations, the CONTRACTOR shall respect any intellectual


property rights belonging to third parties.


Litigation


16.10 The CONTRACTOR shall as soon as reasonably practicable inform the


GOVERN MKVT of any material litigation relating to this Contract





Saf£«i


16.11 The CONTRACTOR shall implement a health, safety and environment program and


take necessary measures to ensure hygiene, health and safety of its personnel carry ing


out Petroleum Operations in accordance with prudent international petroleum industry


practice.


Said measures shall include the following


(a) supplying first aid and safety equipment for each work area and maintaining a


healthy environment for personnel.


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


accident, any accident where personnel has been injured while engaged in


Petroleum Operations and resulting in such personnel being unable to return to


work;








45


 Production Sharing Cd-mw Safen





implementing a pcrmil-to-work procedure around hazardous equipment and


installations;





(d) providing safe storage areas for explosives, detonator' and any other


dangerous products used in the operations;





(c) supplying fire-extinguishing equipment in each work area;


(0 for the purpose of taking control of any blow out or fire which could damage


the environment or Petroleum Field, in accordance with prudent international


petroleum industry practice; and


(g) for the purpose of prev enting any involuntary injection of fluids in petroleum





formations and production of Crude Oil and Natural Gas at rates that do not


conform to prudent international petroleum industry practice.





Production Ratos





16.12 Subject to Article 43.2. in the event the production rate of the individual wells and


Reservoir of a Petroleum Field is to be set below the Maximum Efficient Rate


("MER") for the Reservoir, as provided for in the Development Plan, as a


consequence of a decision by the GOVERNMENT or any federal or international


regulatory body, the GOVERNMENT undertakes to allocate any such reduction


fairly and equitably among the various operators (including the GOVERNMENT)


then producing in the Kurdistan Region, pro rata their respective production rate' In


such event, the GOVERNMENT shall grant an extension of the Development Period


of any Production Area so affected for a reasonable period of time in order to produce


the Petroleum which would otherwise have already been produced, had the MER for


the individual w ells and Reservoir of the Petroleum Field been maintained.





Legal Status


16.13 The respective rights, duties, obligations and liabilities of the CONTRACTOR and


the GOVERNMENT under this Contract arc to be understood as being separate and


individual and not joint and several. The Parties agree that this Contract shall not


create and shall not be deemed to have created a partnership or other form of


association between them





Lifting


16.14 The GOVERNMENT and each CONTRACTOR Entity shall have the right and the


obligation to take in kind and separately sell or otherwise dispose of their respective


shares of Petroleum in accordance with Articles 25. 26 and 27. L’pon approval of the


Development Plan, the Parties shall meet as soon as practicable to reach a detailed


agreement governing the lifting of Petroleum by each such CONTRACTOR Entity.


Such lifting agreement shall include the following:


(a) the obligation of ihc GOVERNMENT and each CONTRACTOR Entity to


lift, regularly throughout each Calendar Year, their share of Petroleum


produced from the Production Area.











46


 (b) notification procedures by the Operator to the GOVERNMENT and each


CONTRACTOR Entity regarding entitlements and availability of Petroleum


for lifting by each Party during each lifting period and nominations by each


Party, and


(c) the right of the Parties to lilt any Available Petroleum not scheduled for lifting


und'or not lilted by the other Party during each such lifting period











16.15 The CONTRACTOR Entities shall sell and transfer to the GOVERNMENT, upon


written request of the GOVERNMENT, any amounts of Crude Oil that the


GOVERNMENT shall deem necessary to meet Kurdistan Region internal


consumption requirements. The sales price of such Crude Oil shall he the


International Market Price. The GOVERNMENT shall provide the


CONTRACTOR Entities with not less than six (6) Months' advance written notice of


its intention to buy such Crodc Oil.


Payments shall he made in Dollars and otherwise on terms consistent with prudent


international petroleum industry practice. The CONTRACTOR Entities' obligation


to sell Crude Oil to the GOVERNMENT shall be, with the other operators (including


the GOVERNMENT) then producing in the Kurdistan Region, pro rata to their


respective production rales








ARTICLE 17-USE OF I.ANI) AND EXISTING INIKASTRVC Tl RE


17.1 The GOVERNMENT shall make available to the CONTRACTOR any land or


property in the Kurdistan Region required for the Petroleum Operations provided,


however, the CONTRACTOR shall not request to use any such land unless there is a


real need for it. The CONTRACTOR shall have the right to build and maintain,


above and below ground, any facilities required tor the Petroleum Operations


17.2 If it becomes necessary for conduct of the Petroleum Operations to occupy and use


any land or property in the Kurdistan Region belonging to third parties, the


CONTRACTOR shall endeavour to reach amicable agreement with the owners of


such land If such amicable agreement cannot be reached, the CONTRACTOR shall


notify the GOVERNMENT. On receipt of such notification:


(a) the GOVERNMENT shall determine the amount of compensation to be paid


by” the CONTRACTOR to the owner, if occupation will be for a short


duration, or


(b) the GOVERNMENT shall expropriate the land or property in accordance


with applicable Kurdistan Region Law. if such occupation will be long lasting


or makes it henceforth impossible to resume original usage of such land or


property. Any property rights shall be acquired by and recorded in the name


of the GOVERNMENT, but the CONTRACTOR shall be entitled free use


of the land or property for the Petroleum Operations for the entire duration of


this Contract











47


 /WiK-fKi- Sharing Omttmt S,tfen





The nmounl of the compensation in Article 17.2(u) shall be lair and reasonable, in


accordance with Article 29 of the Kurdistan Region Oil and Gas Law. and shall take


into account the rights of the owner and any ctlcctivc use of the land or property by


its owner at the time of occupation by the CONTRACTOR. All reasonable costs,


expenditures and fair and reasonable compensation (as required pursuant to Article 29


of the Kurdistan Region Oil and Gas Law) which results from such expropriation


shall he borne by the CONTRACTOR. For the avoidance of doubt, such costs,


expenses and compensation incurred by the CONI RAC FOR shall be considered


Petroleum Costs and shall be recoverable by the CONI RAC TOR in accordance with


the provisions of Articles I and 25.


17.3 For its Petroleum Operations, the CONTRACTOR shall have the right in the


Kurdistan Region to use, subject to Applicable Law. any railway, tramway, road,


aiiport. landing field, canal, river, bridge or waterway, any telecommunications


network and any existing pipelines or transportation infrastructure, on terms no less


favourable than those offered to other entities and. unless generally in force, to be


mutually agreed.


17.4 Under national emergencies due to environmental catastrophe or disaster, or internal


or external war, the GOVERNMENT shall have the right to request to use any


transportation and communication facilities installed by the CONTRACTOR. In


such cases, the request shall originate from tlic Minister of Natural Resources. For the


avoidance of doubt, such costs, expenses or liabilities incurred by the


CONTRACTOR hereunder shall be considered Petroleum Costs and shall be


recoverable by the CONTRACTOR in accordance with the provisions of Articles I


and 25.


17.5 For its Petroleum Operations, the CONTRACTOR shall have the right in the


Kurdistan Region to clear land, excavate, drill, bore, construct, end. place, procure,


operate, emit and discharge, manage and maintain ditches, tanks, wells, trenches,


access roads, excaw lions, dams, canals, water mains, plants, reservoirs, basins,


storage and disposal facilities, primary distillation units, extraction and processing


units, separation units, sulphur plants and any other facilities or installations for the


Petroleum Operations, in addition to pipelines, pumping stations, generators, power


plants, high voltage lines, telephone, radio and any other telecommunications systems,


as well as warehouses, offices, sheds, houses for personnel, hospitals, schools,


premises, dikes, vehicles, railways, roads, bridges, airlines, airports and any other


transportation facilities, garages, hangars, workshops, foundries, repair shops and any


other auxiliary facilities for the Petroleum Operations and. generally, everything


which is required for its performance of the Petroleum Operations The


CONTRACTOR shall ha\e the right to select the location for these facilities.


17.6 For its Petroleum Operations, the CONTRACTOR shall have the right in the


Kurdistan Region, subject to compliance with applicable Kurdistan Region Law, to


remove and use the topsoil. fuJtv-grown timber, clay. sand. lime, gypsum, stones


(other than precious stones) and other similar substances as required for its Petroleum


Operations


The CONTRACTOR shall have the right in the Kurdistan Region lo take or use any


water necessary for the Petroleum Operations provided it docs not damage any





48


 RratktcTian Sharing Comraa - Safin








existing irrigation or navigation systems and that land, houses or watering points


belonging to third parties ore not deprived of their use.


17.7 | he GOVERNMENT shall have the right in the Kurdistan Region to build, operate


and maintain roads, railways, airports, landing strips, canals, bridges, protection dams,


police stations, military installations, pipelines and telecommunications networks in


the Contract Area, provided this does not increase the costs, or compromise or have a


mutcriul adverse effect on the performance of the Petroleum Operations. If the


construction, operation and maintenance of such facilities by the GOVERNMENT


results in increased cost or expense for the CONTRACTOR then, for the avoidance


of doubt, such cost and expense shall be considered Petroleum Costs and shall he


recoverable by the CONTRACTOR in accordance with the provisions of Articles I


and 25.


17.8 Upon request of the CONTRACTOR, the GOVERNMENT shall prohibit the


construction of residential or commercial buildings in the vicinity of facilities used for


the Petroleum Operations that may be declared dangerous due to the Petroleum


Operations and to prohibit any interference with the use of any facilities required for


the Petroleum Operations.


17.9 Access to the Contract Area may he granted pursuant to an access authorisation, as


shull be defined in. and consistent with, the Kurdistan Region Oil and Gas Law to


authorised third panics on reasonable terms and conditions (including coordination),


including Persons authorised to construct, install and operate structures, facilities and


installations, and to carry out other works, provided dial nothing in such access


authorisarion or in this Article 17.9 authorises the holder of an access authorisation to


drill a Well or to perform any Petroleum Operations in Contract Area.


The GOVERNMENT shall give the CONTRACTOR adequate advance notice of


any access authorisation in respect of the Contract Area and shall not grant any access


authorisation in respect of the Contract Area until it has taken into account any


submissions made by the CONTRACTOR nor in such a way that there is undue


interference with or hindrance of the rights and adiv ilics of the CONTRACTOR.


ART 1CLE 18 - ASSISTANCE FROM THE GOVERNMENT


18.1 To the extent allowed by Kurdistan Region Law and Iraqi law and at the specific


request of the CONTRACTOR, the GOVERNMENT shall take all necessary step*


to assist the CONTRACTOR Entities in. but not limited to. the following areas:


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


transportation and communications;


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


(c) securing entry and exit visas, work and residence permits as well as any other


administrative Permits foe each CONTRACTOR Entity's, its Affiliate's and


its Subcontractors* foreign personnel (including their family members)











49


working in the Kurdiltan Region anil any other |>urt of Iraq during the


implementation of this Contract;


(d> securing any necessury Permits to send Abroad documents, data or samples fot


analysis or processing Ibr the Petroleum Operations;


(c) relations with federal anil local authorities and administrations, including for


the puiposes of the remainder of this Article IK. I;


(t) securing any necessary environmental Permits;


(g) obtaining any other Permits requested by any CONTRACTOR Hntity for the


Petroleum Operations,


(h| access to any existing data and information, including data and information


relating to the Contract Area held by picvious operators or contractors; and


(i) providing all necessary security foi Petroleum Operations.


18.2 Within the scope of services to be provided under this Article 18, reasonable and duly


justified expenses incurred by the GOVERNMENT or paid to third parties shall be


charged to the CONTRACTOR and shall be considered Petroleum Costs and shall be


recoverable by the CONTRACTOR as Petroleum Costs in accordance with the


provisions of Articles I and 25.


ARTICLE 19 EQU IPMENT AND MATERIALS


19 I The CONTRACTOR shall supply, or procure the supply of. all materials, equipment,


machinery, tools, spare parts and any other items or goods required for the Petroleum


Operations (“Equipment and Materials").


19.2 Said Equipment and Materials shall be provided by the CONTRACTOR in


accordance with the relevant Work Programs and Budgets.





19.3 As soon as possible alter the Effective Dale, the CONTRACTOR shall provide the


Management Committee with a copy of its procedures for procurement of Equipment


and Materials and'or services for the Petroleum Operations as required by the


provisions of Article 8.2 (c). including the criteria for tender evaluation, which


procedures and criteria shall provide for fair and transparent tender evaluation and be


in accordance with prudent international petroleum industry practice. Applicable Law.


and to assure no such contract will constitute a Prohibited Act. If the Management


Committee does not request any modifications to the procurement procedures within


thirty' (30) days after receiving such procedures, the procedures shall be deemed


approved by the Management Committee.


19.4 The CONTRACTOR shall give priority to Equipment and Materials that are readily


available in the Kurdistan Region and other parts of Iraq to the extent their price,


grade, quality, quantity, specifications, purchase, delivery and other commercial and


technical terms are comparable in all material respects with those generally available


in the international petroleum industry and to the extent that the procurement of such








50


 c«








Equipment and Materials will not cause any CONTRACTOR Entity or its Affiliates


to violate any Law applicable to it or constitute a Prohibited Act.


ARTICLE 20 - TITLE TO ASSETS


’0.1 During the Exploration Period, any Assets acquired by the CONTRACTOR for the


Petroleum Operations shall remain the property of the CONTRACTOR, the


CONTRACTOR Entities, their Affiliates or their Subcontractors, as the ease may be


20.2 During the Development Period, subject to Article 21. all Assets acquired by the


CONTRACTOR for the Petroleum Operations shall become the property of the


GOVERNMENT upon the completion of the recovery of the costs of all such assets


by the CON'I KA< TOR. or the end of the Contract, whichever is the earlier.


20.3 The provisions of Article 20.2 shall not apply to any Assets leased by the


CONTRACTOR or belonging to an Affiliated Company of a CONTRACTOR


E.ntity or belonging to its or their Subcontractors or its or their employees.


ARTICLE 21 - USE OK THE ASSETS


21.1 The CON I RAC FOR shall have the exclusive right to use. free of any chnrgo, all


Assets described in Article 20, both before and affer recovery of the cost of the same,


for the Petroleum Operations, as well as for any petroleum operations under other


agreements in the Kurdistan Region to which it or any of its Affiliates is a party,


provided that the Petroleum Operations take priority. The GOVERNMENT agrees


not to transfer or otherwise dispose of any of such Assets without the


CONTRACTOR'S prior written approval


21.2 Ore CONTRACTOR may freely move to the Contract Area any Assets from any


relinquished portion of the Contract Area, or from any other area in the Kurdistan


Region


ARTICLE 22 - SUBCONTRACTING


22.1 The CONTRACTOR shall ensure that any Subcontractors it engages base all the


requnite experience and qualifications.


222 The CONTRACTOR shall give priority to Subcontractors from the Kurdistan


Region and other parts of Iraq to the extent their competence, rates, experience,


reputation, qualifications, specialties, credit rating and terms of availability, delivery


and other commercial terms arc. in the CON I KACTOR s sole opinion, comparable


in all matcnal respects with those provided by foreign companies operating in the


international petroleum industry, and will not cause any CONTRACTOR Entity or


its Affiliates to violate any Law applicable to it. including Conupt Practices Iavs, or


constitute a Prohibited Act. Such Subcontractors must be bona fide Kurdistan Region


companies (i.e.. organised and in good standing under Applicable Law. domiciled in


the Kurdistan Region, and majority-owned and controlled by citizens of the Kurdistan


Region or Iraq) and having all necessary resources and capacity





51


 /Vwkrtio-








22.3 Selection of Subcontractors shall take place in accordance with the procurement


procedures submitted by the CONTRACTOR to the Management Committee in


accordance with Article 19.3 and approved by the Management Committee. Such


procurement procedures will include the requirement that contracts with


Subcontractors include a provision which obligates such Subcontractors to comply


with applicable Corrupt Practices Laws in connection with such contracts.


22.4 The CONTRACTOR shall provide the GOVERNMENT with copies of agreements


entered into with Subcontractors, where their amount exceeds the limit set by the


Management Committee from time to time.


22.5 If the CONTRACTOR is determined pursuant to Article 42 to have knowingly


entered into n contract with a Prescribed Person (whether a Subcontractor or


otherwise) in connection with this Contract or Petroleum Operations without


following the procurement procedures adopted pursuant to the Contract or obtaining


the approval of the Management Committee, the GOVERNMENT may require the


CONTRACTOR to cancel the contract and, if the GOVERNMENT requires such


cancellation, the value of the contract will be deducted from Petroleum Costs.


22.6 II a CONTRACTOR Entity is determined pursuant to Article 42 to have knowingly


entered into u contract with a Prescribed Person other than in connection with this


Contract or Petroleum Operations without following procurement procedures


substantially the same ns those adopted pursuant to the Contract or obtaining the


approval of the Minister of Natural Resources (such approval shall be deemed


rejected unless approved within thirty (30) days), ihe GOVERNMENT may require


such CONTRACTOR Entity to cancel the contract and. if the GOVERNMENT


requires such cancellation, the value of the contract will be deducted from such


CONTRACTOR Entity’s share of Petroleum Costs and such CONTRACTOR


Entity's share of Available Petroleum will be reduced accordingly However, the


reduction in Petroleum Costs of a CONTRACTOR Entity pursuant to the preceding


sentence may only be made with respect to one production sharing contract in which


such CONTRACTOR Entity is involved, as selected by the GOVERNMENT.














ARTICLE 23 - PERSONNEL, TRAINING, AND TECHNOLOGICAL ASSISTANCE


23.1 For the Petroleum Operations, the CONTRACTOR shall give, and shall require its


Subcontractors to give, preference to citizens ot the Kurdistan Region and other parts


of Iraq to the extent such citizens have the technical capability, qualifications,


competence and experience required to perform the work, arc available at competitive


compensation rates, and their employment would not cause any CONTRACTOR


Entity, any of its Affiliates, or any of its Subcontractors lo violate any Law applicable


to it


232 The CONTRACTOR shall give due consideration to the secondment of


GOVERNMENT personnel to the CONTRACTOR and of Ihe CONTRACTOR'S








52


personnel to the GOVERNMENT during the vinous phases of the Petroleum


Operations Terms and conditions for such secondment shall be mutually agreed by


the Parties, and any costs associated therewith shall be considered Petroleum Costs


and shall be recoverable by the CONTRACTOR m accordance with the provisions


of Articles | and 25.


23.3 Each CONTRACTOR Entity and its Affiliates and Subcontractors shall have the


right to hire foreign personnel whenever the personnel from the Kurdistan Region and


other parts of Iraq do not have the requisite technical capability, qualifications or


experience for positions to be filled as required pursuant to Article 23.1. In the ev ent


any such foreign personnel and Or a member of their family engage in activities or


commit acts which breach Kurdistan Region Law, the CONTRACTOR shall, at the


request of the Management Committee, take the necessary steps to repatriate such


individiialfs).


23.4 For the first five (5) Contract Years, the CONTRACTOR shall pay to the


GOVERNMENT two hundred and fifty thousand Dollars (USS250.000) in advance


each Contract Year for the recruitment or secondment of personnel, whether from the


Kurdistan Region other parts of Iraq or Abroad, to the Ministry of Natural Resources.


The selection of such personnel shall be at the discretion of the Minister of Natural


Resources. Such casts shall be considered as Petroleum Costs and shall be recoverable in


accordance with the provisions of Aiticles I and 25.


Training


23.5 In a planned way, in accordance with the provisions of this Article 23 5 and Articles


23.6 and 23.7, the CONTRACTOR dull train all its personnel from the Kurdistan


Region and other parts of Iraq directly or indirectly involved in the Petroleum


Operations for the purpose of improving their knowledge and professional


qualifications in order that such personnel gradually reach the level of knowledge and


professional qualification held by the CONTRACTOR Entities' foreign workers with


an equivalent rcSumC Such training shall also include the transfer of knowledge of


petroleum technology and the necessary management experience so as to enable the


personnel from the Kurdistan Region and other parts of Iraq to apply advanced and


appropriate technology in the Petroleum Operations, to the extent permitted by


Applicable law and agreements with third parties, and subject to appropriate


confidentiality agreements.


23.6 In addition to the requirements of Article 23 I, the recruitment, integration and


training of ihe CONTRACTOR Entities' personnel from the Kurdistan Region and


other parts of Iraq shall be planned, which plans shall be submitted to the


Management Committee for its approval. The training plan shall take into


consideration the requirements of Article 23.5 and may include training for the


GOVERNMENT'S personnel, depending on the extent to which the amount


allocated to the training plan, as prescribed by Article 23.7. is available after taking


into consideration the training of the CONTRACTOR Entities' Kurdistan Region


and ocher Iraqi personnel.


Within ninety (90) days of the Effective Date, the CONTRACTOR shall submit to


the Management Committee a proposed training plan for the remainder of the








53


Calendar Year. Thereafter, no later than I October in each Calendar Year, the


CONTRACTOR »hall submit a proposed training plan to the Management


Committee for the following Calendar Year.


23.7 The training plan referred to in Article 23.6 dull provide for the allocation to the


GOVERNMENT of the amount of one hundred and fifty thousand Dollars


(US$150.000) in advance for each Contract Year during the Exploration Period and three


hundred thousand Dollars (USS300.000) in advance for each Contract Year during the


Development Period To the extent any amount allocated for a Contract Year is not


utilised in such Contract Year, ihc unutilised allocation shall be carried forward and


added to the allocation for the following Contract Year indefinitely


23.X Each CONTRACTOR Entity shall be responsible for the training costs which such


CONTRACTOR Entity may incur in respect of the personnel it employs from the


Kurdistan Region and other parts of Iraq. AH such reasonable costs shall be


considered as Petroleum Costs and shall be recoverable in accordance with the


provisions of Articles I and 25. Coats incurred by the CONTRACTOR for training


programs for the GOVERNMENT'S personnel shall be borne by the


C ONTRACTOR only to the extent that they arc included in the CONTRACTOR S


training plan, pursuant to Article 23.6 and shall also be considered as Petroleum Cost*


and shall be recoverable in accordance with the provisions of Articles I and 25. The


cost of all other training programs for the GOVERNMENT'S personnel shall be the


GOVERNMENT, responsibility.











23.9 The CONTRACTOR dall pay to the GOVERNMENT the amount of oik hundred and


fifty thousand Dollars (US$150,000) in advance each Contract Year during the


Exploration Penod and three hundred thousand Dollars (US$300,000) in advance for


each Contract Year during the Development Period solely for application by the


GOVERNMENT to the environment fund to be established by the GOVERNMENT


for the benefit of the natural environment of the Kurdistan Region, pursuant to the


Kurdistan Region Oil and Gas l aw (the “Environment Fund") Such payments by


the CONTRACTOR shall be deemed to be Petroleum Costs and shall be recoverable in


accordance with Articles I and 25.


23.10 Payments by the CONTRACTOR under this Article 23 shall be considered


Petroleum Costs and shall be recoverable in accordance with Articles I and 25











23.11 Before the end of the first Contract Year, the CONTRACTOR shall provide to the


GOVERNMENT technological and logistical assistance to the Kurdistan Region


petroleum sector, including geological computing hardware and software and such


other equipment as the Minister of Natural Resources may require, up to the value of


one million Dollars (USS 1.000.000). The form of such assistance shall be mutually


agreed by the Parties, and any costs of the CONTRACTOR associated therewith


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


in accordance with the provisions of Articles I and 25








54


 ARTICLE 24 ROYALTY





24.1 The CONTRACTOR shall pay to the GOVERNMENT a portion of Petroleum


produced and saved from the Contract Area, as provided in this Article 24 (the


"Royalty”).


24 2 The Royalty shall be applied on all Petroleum produced and saved from the Contract


Area which is Crude Oil or Non-Assoeiated Natural Gas. except for Petroleum used in


Petroleum Operations, rc-injcctcd in a Petroleum Field, lost, flared or for Petroleum


that cannot be used or sold and such Crude Oil and Non-Associalcd Natural Gas


(excluding the excepted Petroleum) shall be referred to collectively as "Export


Petroleum and separately and respectively as “Export Crude Oil” and “Export


Non-Assoeiated Natural Gas”.


24 3 If payable in cash, the amount of the Roy alty calculated by applying the Royalty rates


provided under Article 24.4 shall be paid by the CONTRACTOR as directed by the


GOVERNMENT, in accordance with Article 24.7.


If payable in kind, the quantity of Export Petroleum corresponding to the Royalty and


calculated by applying the Royalty rates provided under Article 24.4 shall be


delivered in kind by the CONTRACTOR to the GOVERNMENT at the Delivery


Point. Title and risk of loss of Royally paid in kind will transfer to the


GOVERNMENT at the Delivery Point


Unices I lie GOVERNMENT requires the Royalty to be paid in kind, by giving the


CONTRACTOR not less than ninety (90) days prior written notice prior to the


commencement of the relevant Quarter, the GOVERNMENT shall be deemed to


have elected to receive the Royalty in full and in cash for the relevant Quartet.


24.4 The Royalty due on any Export Petroleum produced and saved in the Contract Area


shall be determined daily by applying the following relevant Royalty rate to the


F.xport Crude Oil or to the Export Non-Assoeiated Natural Gas (as the case may be)


produced and saved on that day:


(a) For Export Crude Oil:


the Royalty rate for Export Crude Oil shall be ten per cent (lO'Vo). which, for


the avoidance of doubt, shall apply regardless of the gravity of the oil; and




the Royally rate for Export Non-Assoeiated Natural Gas shall be ten |»er cent


[10%).


24.5 Associated Natural Gas and any other Petroleum shall be exempt from any Royalty.


24.6 If. pursuant to Article 24.3, the GOVERNMENT receives the Royalty in kind, and


putsuant to Article 28. the GOVERNMENT requests assistance for the sale of all or


part of the Royalty received in kind, each CONTRACTOR Entity shall assist the


GOVERNMENT in selling all or part of such Royalty received in kind (belonging to











55


 Pnnlmtum SbarUvi Ctmtmrt Safe*





tin- GOVERNMENT) in consideralion of a commission per Barrel payable lo such


CONTRACTOR Entity, in accordance with Article 28.


24.7 If, pursuant to Article 24.3. the GOVERNMENT receives the Royalty in cash


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


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


(b) any Export Non-Associated Natural Gas shall be valued at the actual price


obtained at the Delivery Point under an approved contract, as provided in


Article 27.3;


(c) the CONTRACTOR shall pay such Royalty each Quarter, in arrears, within


thirty (30) days of the end of each Quarter, and shall calculate the payment


due for the relevant Quarter by reference to the price for the Export Petroleum


at the Deliver)' Point, determined in accordance with paragraphs (a) and (b)


above, and the Royalty due on the Export Petroleum, determined in


accordance with Article 24.4, for the said Quarter; and


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


Export Petroleum corresponding to the Royalty determined in accordance with


Article 24.4 for the purpose of paying the Royalty in cash.


ARTICLE 25 - RECOVERY OF PETROLEUM COSTS


25.1 All Export Crude Oil produced and saved from the Contract Area shall, after


deduction of any quantities of Export Crude Oil due for Royally pursuant to Article


24. be considered as “Available Crude Oil*.


All Associated Natural Gas produced and saved from the Contract Area, except for


Associated Natural Gas which is used in Petroleum Operations, re-injected in a


Petroleum Field, lost, flared or cannot be used or sold, shall be considered as


"Available Associated Natural Gas".


All Export Non-Associated Natural Gas produced and saved from the Contract Area


shall, after deduction of any quantities of Export Non-Associated Natural Gas due for


Royalty pursuant to Article 24. be considered as “Available Non-Associated Natural


Gas”


“Available Petroleum" means Available Crude Oil. Available Associated Natural


Gas and Available Non-Assoc rated Natural Cias.


25.2 For the purpose of this Article 25:


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


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


(b) any Available Associated Natural Gas and any Available Non-Assoc rated


Natural Gas shall be valued at the actual price obtained at the Delivery Point


under an approved contract, as provided in Article 27.3.





56


25.3 Subject to the provisions of this Contract, from the f irst Production m the Contract


Area, the CONTRACTOR shall at all times be entitled to recover all Petroleum


Costs incurred under this Contract of up to forty per cent (40%) of Available Crude


Oil (which will apply regardless of the gravity of the oil) and Available Associated


Natural Gas. in each ease produced and saved within any Calendar Year Available


Crude Oil above forty per cent (40%) and Available Associated Natural Gas above


forty per cent (40%) otherwise not used for the recovery of Petroleum Costs shall be


Profit Crude Oil.


25.4 Subject to the provisions of this Contract from First Production in the Contract Area,


the CONTRACTOR shall at all times be entitled to recover all Petroleum Costs


incurred under this Contract of up to fifty per cent (50%) of Available Non-


Asvociatcd Natural Gas produced and saved within any Calendar Year. Available


Non-Associatcd Natural Gas above this percentage or otherwise not used for the


recovery of Petroleum Costs shall be Profit Natural Gas.


25.5 For the application of Article 25.3 and 25.4, the CONTRACTOR shall keep a


detailed account of Petroleum Costs in accordance with the provisions detailed in the


Accounting Procedure Recovery of Petroleum Costs shall occur in the follow ing


order.


(1) Production Costs;


(2) F.sploration Costs (including appraisal costs and further exploration within the


Contract Area);


(3) Gas Marketing Costs;


(4) Development Costs; and lastly


(5) Decommissioning Costs.


25.6 Total recovery of Petroleum Costs during any Calendar Year, expressed in quantities


of Petroleum, shall not exceed the relevant percentages indicated in Articles 25.) and


25.4. If in any Calendar Year, the Available Crude Oil und/or Available Non-


Associated Natural (ius do not allow the CONTRACTOR to recover all its


Petroleum Costs pursuant to this Article 25. the amount of un-rccovcrcd Petroleum


Costs in such Calendar Year shall be carried forward indefinitely to the subsequent


Calendar Years until all Petroleum Costs arc fully recovered, but. save as provided in


Articles 14 10 and 38,4, in no other ease after the termination of the Contract.


25.7 The provisions of Articles 27.5 and 27.6 shall be applied to determine the quantities


of Available Crude Oil and/or Available Non-Associated Natural Gas due to the


CONTRACTOR for the recovery of its Petroleum Costs.


25.8 The quantities of Petroleum corresponding to the share of Available Petroleum due to


the CONTRACTOR for the recovery of its Petroleum Costs shall be delivered to the


CONTRACTOR at the Delivery Point. Title and risk of loss of such Available


Petroleum shall bo transferred at the Delivery Point.











57


259 Each CONTRACTOR Monty shall be entitled to nxo e. lake m kind and to export


freely all Available Petroleum to which it is cnotled for recovery of iU Petroleum


Cons m accordance with the provisions of this Con trad and lo retain Abroad any


proceeds from the sale of all web Available Petroleum. Pctrolcvan Costs in each


Production Area shall be recoverable &om Available Petroleum from the Contract


Area.


25 10 Subject to Article 38.4. for the avoidance of doubt. Petroleum Costs under ibis


Contract are not recoverable against other contract areas held by the


CONTRACTOR.








ARTICl.i; 2*- SHARING OF PROFIT PH KOI FI M


2ft. I Under tins Contract.


(.0 “Profit Petroleum" moans Profit Crude Oil and Profit Natural (ias:




Available Associated Nntuml Gas produced from the ( ontr.K t Area, after the


recovery of Petroleum Costs, in accordance with Articles I and 25: and


(C) "Profit Natural Gas" means the quantities of Available Nofr Associated


Natural Gas produced from the Contract Area, after the recovery of Petroleum


Costs in accordance with Articles 1 and 25


26-2 From First Production and as and when Petroleum is berng produced, the


CONTRACTOR shall be entitled to take a percentage share of Profit Crude Oil


and or Profit Natural Gas. in consideration for its investment in the Petroleum


Operations, which percentage share shall be determined in accordance with Article








26 3 To determine the percentage share of Profit C rude Oil and'or Profit Natural Cias lo


which the CONTRACTOR is entitled, the “R" Factor shall be calculated in


acconiancc with Article 26.4 and shall be applied to the Contract Area.


26.4 The "R“ Factor shall he calculated as follow's:


R-X/Y


where


X: is equal to Cumulative Revenues actually received by the CONTRACTOR;


Y is equal to Cumulative Costs actually incurred by the CONTRACTOR


For the purpose of tbit Article 26 4:














58


 Production Sharing Coni' m l Satrn





"Cumulative Revenues" means total Revenues, as defined below, received by the


CONTRACTOR until the end of the relevant Semester, determined in accordance


with Article 26.7.


"Revenues' means the total amount actually received by the CONTRACTOR for


recovery of it* Petroleum Costs and its share of Profit Petroleum in the Contract Area


“Cumulative Costs means all Petroleum Costs actually incurred pursuant to this


Contract by the CONTRACTOR until the cod of the relevant Semester, determined


in accordance with Article 26.7.


Notwithstanding the foregoing provisions of this Article 26.4, for the period from


first Production until the end of the Calendar Year in which Firet Production occurs,


the "R" Factor shall be deemed to be less than one < I)


26.5 The share of Profit Petroleum to which the CONTRACTOR shall he entitled from


F irst Production is:


(a) for Profit Crude Oil. equal to the quantities of Petroleum resulting from the


application of the relevant percentage as indicated below to the daily volume


of production of Profit Crude Oil within the Contract Area at the


corresponding Delivery Point:


**R” Factor CONTRACTOR’S % Share of Profit Crude Oil


R

I < R

R > 2 25 16%


and


(b) for Profit Natural Gas. equal to the quantities of Non Associated Natural Gas


resulting from the application of the relevant percentage as indicated below to


the daily volume of production of Profit Natural Gas within the Contract Area


at the corresponding Delivery Point:


“R- Factor CONTRACTOR’S % Share of Profit Natural Gas


R < or = I 38%


I < R< or - 2.75 38 |(38 - I9)x(R-iy(2.75-l»%


R >2.75 19%


26.6 The CONTRACTOR'S accounting shall account separately for all components for


the calculation of “X" and “Y" values in the formula provided in Article 26 4











59


267 For each Semester. starting from tbe l" of January of the Calendar Year following the


Calendar Year in which First Production occurs, the CONTRACTOR shall calculate


the -R” Factor applicable to the relevant Semester within thirty (30) days of the


beginning of such Semester The “R” Factor to be applied during a Semester shall be


that determined by applyi^^Cumul^e ^ac^^^rcOTs^and^the








If the CONTRACTOR is unable to calculate the ~R~ Factor for the relevant


Semester before an allocation of Profit Petroleum for such Semester must be made,


then the allocation of Profit Petroleum for the previous Semester shall be used for the


relevant Semester. Upon the calculation of the “R" Factor for the relevant Semester.


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


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


(b) if the allocation of the Profit Petroleum in the two Semesters is different, then


the CONTRACTOR shall make any adjustments to the Parties’ respective


shares ol Profit Petroleum to restore them to the position that they would have


been in had the "R" I actor for the relevant Semester been available from the


start of such Semester.


26 8 If at any lime an cm*r occurs in the calculation of the "R" Factor, resulting in a


change in the CONTRACTOR'S percentage share of Profit Crude Oil and or Profit


Natural (ins. Ihc necessary correction shall be made and any adjustments shall apply


from tire Semester in which the cttot occuncd The Party having benefited from a


surplus of Profit Petroleum shall surrender such surplus to the other Party, beginning


from the first day of tbe Semester following Ihc Semester in which the error was


recognised. However, each lifting of Petrol cum relating to such error by the Party


receiving the surplus shall not exceed twenty-five per cent (25%) of the vhare of Profit


Petroleum to which such surrendering Party n entitled For the avoidance of doubt, if


at any lime an error occurs in the calculation of the “R“ Factor, which docs not result


in a change in the CONTRACTOR'S percentage share of Profit Crude Oil and or


Profit Natural Gas. no correction shall be made


26.9 The quantities of Profit Petroleum due to the CONTRACTOR shall lie delivered to


the CONTRACTOR Entities at the Delivery Pomi Title and risk of loss of such


Profit Petroleum shall be transferred to the CONTRACTOR Entities at the Delivery


Point.


I ach CONTRACTOR Entity shall be entitled to receive, take in kind and to export


freely its share of Profit Petroleum in accordance with the provisions of this Contract


and to retain Abroad any proceeds from the sale of all such Profit Petroleum


26 10 The share of the Profit Petroleum to which the GOVERNMENT is entitled in any


Calendar Ye* in accordance with Article 26 5 shall be deemed to include a portion


representing the corporate income tax unposed upon and due by each


CONTRACTOR Fmtity. and which will be paid directly by the GOVERNMENT on


behalf of each such entity representing the CONTRACTOR to the appropriate tax


authorities m accordance with Article 312. The GOVERN MINT shall provide the








60


CONTRACTOR EMiliM with all written documentation and evidence reasonably


required by the CONTRACTOR Entities to confirm that such corporate income tax


has been paid by the GOVERNMENT


26.11 The quantities of Profit Petroleum due to the GOVERNMENT shall be delivered to


the GOVERNMENT at the Delivery Point. Title and risk of k»s of such Profit


Petroleum shall be transferred at the Delivery Point


26.12 At least twenty-one (21) days poor to CONTRACTOR'S estimated date of First


Production and. subsequently, thirty (30) days prior to the beginning of each


Semester, the CONTRACTOR shall prepare and deliver to the GOVERNMENT a


production program comprising the production forecast for the next Semester and the


forecast of the quantities of Crude Oil and Natural Gas to which each Party shall be


entitled during the said Semester.


26.13 Within ninety' (90) days following the end of each Calendar Year, the


CONTRACTOR shall prepare and deliver an annual production report to the


GOV ERNMENT, stating the quantities of Crude Oil and Natural Gas to which each


Party is entitled, the quantities of Crude Oil and Natural Gas lifted by each Party and


the resulting over-lift or under-lift position of each Party, pursuant to the lifting


agreement entered into pursuant to Article 16.14.


26.14 Any costs or expenditure incurred by the CONTRACTOR, its Subcontractors or


suppliers relating to the lifting of the GOVERNMENT'S share of Petroleum by the


( OMR ACTOR shall not be considered Petroleum Costs and shall be charged to the


GOVERNMENT according to icrms to be mutually agreed between the


CONTRACTOR and the GOVERNMENT











ARTICLE 27 - VALUATION AND METERING OF CRUDE OIL AND


NATURAL GAS





Valuation


27.1 Foi the purpose of this Contract, any Crude Oil produced in the Contract Area shall be


valued at the end of each Quarter at the Delivery Point based on the International


Market Price, as defined in Article 27.2.


27.2 The 'intornullonal Market Price" referred to in Article 27.1 shall be the weighted


average price pet Barrel, expressed in Dollars, obtained by the CONTRACTOR at


the Delivery Point, by netback if necessary, during the Quarter ending on the date of


valuation for Ann's Length Sales of Crude Oil.


The CONTRACT OR shall provide evidence to the GOVERNMENT that the sales


of Crude Oil referred to in Article 27.2 arc Arm's Length Sales. If the


GOVERNMENT considers that any such sale of Crude Oil is not on the basis of an


Arm’s Length Sale then the GOVERNMENT has the right to refer the matter to an


cx|>ert pursuant to Article 42.2.








61


 Productia1 SAarUag ( M>al -








In ihc event that there is no lifting of Crude Oil in the relevant Quarter or no Arm s


Length Sales, the applicable "International Market Price" for such Quarter shall be


the weighted average pnee per llarrel obtained during that Quarter from Aim-*


Length Sales of Crude Oil of the same or similar gravity and quality from other


production areas sold in markets competing with Crude Oil produced from the


Contract Area, taking into account gravity and quality difference and transportation


and other post Delivery Point costs.


To determine such price, the Parties shall, prior to the commencement of Production,


agree on a basket of Crude Oil comparable to those produced in the Contract Area and


sold in the international market Prices obtained shall be adjusted to account for any


variations such as quality, specific gravity, sulphur content, transportation costs,


product yield, seasonal variations in pnee and demand, general market trends and


ocher terms of sale.


273 The price of Natural Gas shall be the actual price obtained at the Delivery Point,


(which may lake into account quantities to be sold, quality, geographic location of


markets to be supplied as well as costs of production, transportation and distribution


of Natural Gas from the Delivery Point to the relevant market, in accordance with


standard international petroleum industry practice). The GOVERNMENT shall have


the right to review and approve Natural Gas sales contracts.


Accounting Statement


27 4 In accordance with this Article 27.4, the GOVERNMENT and the CONTRACTOR


shall establish a statement showing calculations of the value of Petroleum produced


and sold from the Contract Area Such statement shall include the following


information:


(it) quantities of Crude Oil sold by the CONTRACTOR Entities during the


preceding Month constituting Arm’s Length Sales together with corresponding


sale prices;


(b) quantities of Crude Oil sold by the CONTRAC TOR Entities during Ihc


preceding Month that do not lull in the category referred to in paragraph (n)


above, together with sale prices applied during such Month;


(c> inventory in storage belonging to the CONTRACTOR Entities at the


beginning and at the end of the Month; und


(d) quantities of Natural (las sold by the CONTRACTOR Entities and the


GOVERNMENT together with sale prices realised.


Mffrflng


27.5 All Export Petroleum shall be metered at the Delivery Point in accordance with


pnident international petroleum industry practice and such meters shall he to fiscal


meter standards. All metering equipment shall be installed and operated by the


CONTRACTOR. ITic GOVERNMENT shull. on receipt by the CONTRACTOR


of reasonable prior written notice, huve the right to inspect any such metering





62


 Pnhtii'tom Sharing Contract 5qftn








equipment initialled by the CONTRACTOR, as well as all relevant documents and


supporting information reasonably necessary to validate the accuracy of such


metering All metering equipment shall be subject to periodic technical inspections in


accordance with prudent international petroleum industry practice


27.6 If any metering equipment is defective, the CONTRACTOR shall me all reasonable


endeavour* to repair it within fifteen (15) days or. if deemed necessary by the


CONTRACTOR, replace it as soon as reasonably practicable from the dale tbe


metering equipment was known or agreed to have been measuring correctly, or if not


known or agreed, the dale that is midway between the dale the defect was discovered


and the last dale the equipment was known to have measured correctly The results


from the defective equipment shall be disregarded for the period from the Adjustment


Dute until the dale the defective equipment is repaired or replaced and the


measurement I'm such period shall be estimated:


(a) 11 check measuring equipment is installed uikI registering iiccuratcly, then by


using the measurements recorded by such check measuring equipment;


(b) if check measuring equipment is not installed or not registering accurately,


tlscti by correcting the error if the percentage of error is ascertainable by


verification, calibration or mathematical calculation; or


(c) if neither method is feasible, then by estimating the volume and'or quantity


delivered based on deliveries during the preceding comparable period of ume


when the metering equipment was regnlered accurately


27.7 Any disposes arising under dm Article 27 shall be settled by expert detenmnatioo in


accordance with the provisions of Article 42.2.


ARTICLE 28 - SALE OF GOVERNMENT SHARE


Upon the GOVERNMENT'S poor written notice of at least ninety (90) days, each


CONTRACTOR Entity shall provide all reasonably necessary assistance to the


GOVERNMENT for the sale of all or part of the quantities of Crude Oil to which the


GOVERNMENT is entitled, in consideration of a sale* commission per Band to be


established with reference to prudent international petroleum practice and to be mutually


agreed upon between the Parties.





ARTICLE 24- FINANCIAL PROVISIONS


29.1 Each Party nuking a payment lo the GOVERNMENT: shall (I) shall make such


^c^Lc'w rth wire instructions provided by the GOVERNMENT, on tbe date


when due. and (u) not offset against such payment any outstanding and undisputed


payments due from the GOVERNMENT to such Party, except with the prior wrioen


consent of the GOVERNMENT.


 If ■ Party faib to make any payment to the GOVERNMENT when due. such Party


shall pay micro! or. such unpakl amount compounded monthly, at the rale of LIBOR


(determined » of the first day oo or following the due date with respect to which


LIBOR can first be determined) plus two (2) percentage pomts


292 The GOVERNMENT may. at its sole discretion, direct the CONTRACTOR





l-iililm inrav-





(a) any Royalty in cash due to the GOVERNMENT pursuant to the provisions of


Article 24; and or


(b) any proceeds from the sale undertaken by a CONTRACTOR Polity on behalf





of the GOVERNMENT pursuant to .Article 28 of any Crude Oil to which the


GOVERNMENT is entitled pursuant to Article 25; and





(c) any Production Bonus.


lo a lund for revenue sharing, which may in due course be established by legislation





consistent with the Constitution of Iraq, between the Government of Iraq and other


regions (including the Kurdistan Region) and govemorates of Iraq. Nothing in this


Article 29.2 shall be understood as implying any contractual relationship or other


relationship between the CONTRACTOR and or any CONTR ACTOR Fruity and


the Government of Iraq and or the regions of Iraq (other than the Kurdistan Region)


ami or and gov emorates of lt»q


29.3 The GOVERNMENT: (i) shall make any payment to the CONTRACTOR m





Dollars in cleared funds by wire transfer from a reputable ^nk in accordance with


wire instructions provided by the CONTRACTOR; and (ii) may w .ih » lice to and


the prior written consent the CONTRACTOR, offset again.! %uch payn .it any


outstanding payments due by the CONTRACTOR to the GOV I RN ME NT.





If the GOVERNMENT fails to make any payment to the CONTRACTOR when


due, the GOVERNMENT shall pay interest on such unpaid amount, compounded


monthly, ut the rale of LIBOR (determined as of the first day on or following the due


date with respect to which LIBOR can first be determined) plus two (2) percentage


points.





29.4 Any currency conversion to be made under this Contract shall Ik at the ext


of the Central Bank of Iraq, provided such exchange rate applied to the


CON I K \CTOR Entities shall not be less favourable than the rate offered by other


private, commercial or industrial banks in the international market In the absence of


the Central Bank of Iraq or in the event that the Central Bank of Iraq i' unable to


provide the relevant exchange rate, any currency conversion to be


Contract shall be ai the exchange rate of a








29 5 The CONTRACTOR shall not realise any gaia or lens due to exchange rate


currency shall be other considered as revenue and credited to the Account* or shall be














64


 considered at a Petroleum Coal and shall be recoverable by the CONTRACTOR to


accordance * ith Articles 1 and 25. as the case may be


Each COM RAC TOR Entity shall at all times be entitled to freely con ten .bio


296


Dollar* or any other foreign currency any Iraqi dinar* received imbibe framework of


•hall be a* pros idcd under Article 29.4.


29 7 Each CONTRACTOR Entity shall have the right to be paid, receive, keep, transfer


and use Abroad, without any restrictions, all proceeds of its share of Petroleum


29 k Each CONTRACTOR Entity and its Subcontractors shall have the nght to freely


open and maintain bank accounts for Petroleum Operation* within or outside the


KurdivUn Region and other parts of Iraq.


29.9 Each CONTRACTOR Entity shall have the nght to pay in any freely convertible


currency nil its financial requirements for the Petroleum Operation* and to convert


those currencies to Iraqi dinars in any bank in the Kurdistan Region or other parts of


Iraq, at the same exchange rate as provided under .Article 29 4.


29.10 Each CONTRACTOR Entity shall have the right, without any rcslnction*. to freely


repatriate Abroad and to freely dispose of:


(a) any proceed* received in the Kurdistan Region or other parts of Iraq from the


sale of Petroleum:


(b) any proceeds received from other operation* and activine* earned out under


this Contract m the Kurdistan Region or other parts of Iraq


29.11 Each CONTRACTOR Entity shall have the nght to pay m any foreign currency it*


of Iraq, or Abroad. Said Subcontractors and expo in ale personnel dull be obliged to


transfer to the Kurdistan Region the amount of foreign currency required for their


local needs and they shall have the right to repatrulc the proceeds of the sale of ihcir


belongings in accordance with the regulations in force in the Kurdman Region


29.12 Each CONTRACTOR Entity's Affiliates. Subcontractor* and their personnel shall


equally benefit from the same rights as such CONTRACTOR Entity and its


personnel as regards this Article 29.


29.13 for the financing of Petroleum Operations, each CONTRACTOR Entity shall have


the nght to have recourse to external financing from third parties or from it* Affiliated


Companies on an arm's length basis


29.14 Each Party receiving a payment from another Party under


this C


with a notice of receipt of such payment.

















65


 <





ARTICLE JO CUSTOMS PROVISIONS





30 I All services, materials. equipment. goods, machinery. vehicle*. wob. spare parts,


consumables. products, and other items imported into the Kurdistan Region by the


CONTRACTOR, any CONTRACTOR Entity. Ms Affiliate*. any Subcontractor or


any agent of any of the foregoing, for use or consumption m the Petroleum Operations


shall be admitted free and exempt from any and all Taxes oo import The


CONTRACTOR, any CONTRACTOR Entity. Ms Affiliate*, any Subcontractor or


any agent of any of the foregoing shall have the nght to re-export from the Kurdistan


Region free from all Taxes on export any materials, equipment, goods, machinery,


vehicle*, tools, spare parts, consumables, products, and other items that are no longer


required for the Petroleum Operations, except where title has passed to the


GOVERNMENT in accordance with Article 20. in which ease re-export shall be


approved by the Management Committee


30.2 The CONTRACTOR, any CONTRACTOR Entity, its Affiliates, uny Subcontractor


or any agent of any of the foregoing, and their personnel (including their family


members) shall have the nght to freely import into the Kurdistan Region and other


parts of Iraq and re-export from the Kurdistan Region and other parts of Iraq any


personal belongings and furniture free and exempt from any Taxes on import or


export The sale in the Kurdistan Region and other parts of Iraq of personal


belongings and furniture of expatriate personnel shall comply with Kurdistan Region


Law.


30 3 Each C ONTRACTOR Entity and its Affiliates shall be entitled to freely export from


the Kurdistan Region and other pare of Iraq, free of any Taxes, any Petroleum to


which M » entitled pursuant to the provisions of thn Contract


30 4 The GOVERNMENT shall indemnify the CONTRACTOR, any CONTRACTOR


Entity, its Affiliates, any Subcontractor or any agent of any of the foregoing, and then


personnel (including their family members) for any import or export Taxes referred to


in Article* 30 I. 30 2 or 30 3





ARTICLE 31 - TAX PROVISIONS


31.1 Except as expressly presided in this Article 31. and without prejudice to the


exemptions expressly provided for in Ankle 30 and in this Article 31. each


CONTRACTOR Entity. iu Affiliates and any Subcontractor shall, for the entire


duration of this Contract, be exempt from all Taxes as a result of its income, assets


and activities under this Contract The GOVERNMENT shall indemnify each


CONTR AC TOR Entity upon demand against any liability to pay any Taxes assessed


or imputed upon aurh entity which relate to any of the exemptions granted by the


GOVERNMENT under this' Article 31.1 and under Articles 314 to 31 10


31.2 Each CON I R ACTOR Fntity shall be subject to corporate income tax on Ms income


from Petroleum Operations as provided in .Article 31.3. which shall be deemed to be


inclusive and m full and total discharge of any Tax oo income, receipt*, revenues,


gams or profits of each such entity. Payment of such corporate income tax shall be


made for the entire duration of this Contract directly to the official Kurdistan Regain








66


 ■S+n








lax authorities by the GOVERNMENT, for the account of each CONTRACTOR


Entity, from the GOVERNMENT'S share of the Profit Petroleum received pursuant


to Ankle 26.


Each CONTRACTOR Entity shall, within sixty (60) days after the end of each tax


year, provide a statement to the appropriate Kurdistan Region tax authorities of it*


profits which are subject to corporate income tax. together with a calculation of the


amount of corporate income tax due on those profits.


The GOVERNMENT shall, within ninety (90) days after the end of each tax year,


provide to each CONTRACTOR Entity (i) the appropriate official tax receipts from


the appropriate Kurdistan Region tax authorities or other relevant authority certify ing


the payment of its corporate income tax, as determined in the said statement, and that


such entity has met all its Tax obligations in the preceding tax year, and (ii) a copy of


any return or other filing made by the GOVERNMENT in respect of its payment of


corporate income tax on behalf of such CONTRACTOR Entity.


31.3 For the purposes of Article 31.2:


(a) rhe rate of corporate income tax to be applied to each CONTRACTOR


Entity shall Ik* the generally applicable rate prescribed in the Law of Taxation


(Low No. 5 of 1999), passed by the National Assembly of the Kurdistan


Region, ns has been amended by Law No, 26 of 2007, and as may be amended


from time to time or substituted in respect of Petroleum Operations (as defined


under the Kurdistan Region Oil and Gas Law) by a petroleum operations


taxation law for the Kurdistan Region but in no event in excess of forty per


cent (40%). The Parties acknowledge and agree that at the Effective Date of


this Contract, the corporate income tax rate i* fifteen per cent (15%) for all net


taxable profits.


(b) The GOVERNMENT and the CONTRACTOR agree that corporate income


tax shall be calculated for each CONTRACTOR Entity on its net taxable


profits under the Contract, as calculated in accordance with the provisions


relating thereto in the Accounting Procedure


31.4 Each CONTRACTOR Entity, its Affiliates and any Subcontractors shall be exempt


from any w ithholding tax applkablc on any payments made to them or by them to or


from Affiliates or third parties, whether inside or out>idc the Kurdistan Region and or


Iraq, for the entire duration of this Contract.


31.5 Each CONTRACTOR Entity and its Affiliates shall be exempt from Additional


Profits Tax, as referred to in Ankle 40 of the Kurdistan Region Oil and Gas Law or


any successor Tax.


31.6 Each CONTRACTOR Entity and its Affiliates shall be exempt from Surface Tax. as


referred to in Article 40 of the Kurdistan Region Oil and Gas Law or any successor


Tax














67


317 Each CONTRACTOR Emily and its Affiliate* shaU be exempt front Windfall Profits


Taxes, as referral to in .Article 40 of the Kurdistan Region Oil and Cm Law or any


successor Tax.


31.8 I jeh CONTRACTOR Entity and any Subcontractor shall be subject to the payment


or withholding of the personal income tax and social security contribution* for which


such entity or Subcontractor is liable lo pay or withhold in respect of its employees


who are Iraqi national*, pursuant to the Lam of Taxation (Law No 5 of 1999) passed


by the National Assembly of the Kurdistan Region, as may be amended from time lo


time, in the same manner as the same shall be generally applied lo all other industries,


except that a CONTRACTOR Entity or Subcontractor shall not be liable for such


taxes or contributions with respect to employ ees of another Person


319 It is acknowledged that double tax treaties will have effect to give relief from taxes to.


but not limited to. the CONTRACTOR CONTRACTOR Entitle*. Subcontractors


and employees and other Persons in accordance with the provisions of «*ch double


tax treaties, bat shall not impose an additional burden of taxation


11 10 Any Tax that is a value added, or similar type of Tax (“VAT”) shall be considered as


a Petroleum Cost and shall be cost recoverable, if not otherwise recovered under


Applicable Law. in accordance w ith the provisions of Articles I and 25.


31.11 Notwithstanding any other provision to the contrary in this Contract the Parties


acknowledge and agree that die provisions of this Article 31 shall apply individually


and separately to all CONTRAf TOR Entitle* under this Contrail and that there shall


he no joint and several liability in respect of any liability, duty or obligation referred


to in this Article 31.








ARTICLE 32


CAPACITY BUILDING PAYMENTS; PRODUCTION BONUSES











32.1 Marathon and the CONTRACTOR shall pay to the GOVERNMENT capacity


building payments (each such payment a “Capacity Building Payment" and


collectively, the "Capacity Building Payments") as provided in Articles 32.2


through 32. 7.


32.2 Marathon shall pay (the following collectively constituting the "Marathon


Exploration Tranche”) sixty million Dollars (USS60.000.000) in three instalment*:


(1) thirty million Dollars (US$30,000,000) within thirty (30) days of the Effective


Date;


(2) fifteen million Dollars (USS15.000.000) on or before 31 December 2011; and


(3) fifteen million Dollars (US$1 $.000,000) within 30 days alter completion of


site preparation for the first well








68


 M-





32 3 The C ONTRACTOR shall pay twenty, five million Dollars (LSS25.000.000) (such


payment, thr Development Man Tranche") to the GOVERNMENT w.tlun thirty


(30) days of the approai of the Development Plan by the Management Comrmuee.


32 4 The CONTRACTOR shall pay seventeen milium Dollars (USS17.000.000) (the


tollowing constituting the Prodnctlon Tranche") to the GOVERNMENT within


30 days alter production of ( rode Oil aad Natural Gas reaches a cumulative amount


of ten million barrels of Crude Oil and Natural Gas BOF. and multiples of ten million


(10.000.000) thereof, so that, for the duration of this Contract, the CONTRACTOR


is obliged to p3y to the GOV) RNMF.VT seventeen million Dollars (USS17.000.000)


within thirty (30) days of the day on which production of Crude Oil and Natural Gas


from the Contract Area equals a cumulative amount of:


(a) ten million (10.000.000) Barrels of Crude Oil and Natural Gas BOE;


(b) twenty million (20.000.000i Barrels of Crude Oil and Natural Gas BOE.


(c) thirty million (30.000.000) Barrels of Crude Oil and Natural Gas BOE,


and so on.


for purposes of calculating the Production Tranche pursuant to this Article 32 4.


Natural Gas BOF. shall not include Natural Gas used for Petroleum Operations


(including re-injection) or. to the extent permitted by this Contract the Laws of the


Kurdistan Region, and authorised by the Management Committee, for flaring


32.5 To the extent permitted by l aws of the Kurdistan Region or as otherw ise agreed with


the Government of Iraq, the GOVERNMENT will:


(a) open and maintain the Capacity Building Account;


(b) instruct Marathon and the CONTRACTOR to make all Capacity Building


Payments to the Capacity Building Account (in accordance with wire


instructions provided by the GOVERNMENT to Marathon and the


CONTRACTOR, as applicable;


(c) apply funds from the Capacity Building Account as set forth in the definition


of Capacity Building Account; and


(d) periodically publish reports of the GOVERNMENT’! application of funds


front the Capacity Building Account in sufficient detail to Identify the projects


to which the GOVERNMENT hits applied the Cupaeity Building Payments


32.6 The obligation of Marathon and the CONTRACTOR, as applicable, to pay the


Capacity Building Payments is. except as specifically provided otherwise in Articles


32.2 through 32.4, absolute and unconditional No Capacity Building Payment will be


refundable to Marathon or the CONTRACTOR, whether in whole or in part, under


any circumstance, including if the Contract is terminated pursuant to Article 45





(>•)


 rroAxtKm S**r~t Com0<*t











32.7 Marathon and the COM RACTOR each acknowledge and accept that a fundamental


principle of Aiticlci 32.1 through 32.6 is that, except as specifically provided in


Articles 32.2 through 32 4. Marathon ami the CONTRACTOR, as applicable, must


absolutely und unconditionally make the Capacity Building Payments required by


Articles 32.1 through 32.6. Accordingly, in respect of their respective obligations under


Articles 32.1 through 32.6, ami notwithstanding any provision in the Contract to the


contrary. Marathon (on behalf of itself and each of its successors and assigns) and the


CONTRACTOR each waives any right to raise by way of set oil or invoke us a


defence to its obligations to make any of the payments required by Articles 32.1


through 32.6. whether in law or equity, any failure by the GOVERNMENT or uny


CONTRACTOR Entity to pay amounts due and owing under the Contract or any


alleged claim that Marathon (or its successors and assigns) or the CONTRACTOR


may have against the GOVERNMENT, any other CONTRACTOR Entity, or any


other Person, whether such claim arises under or relates to this Contract or other* me.


production Bonuses


32 # 1° (hc event of a Crude Oil Commercial Discovery:


(a) the CONTRACTOR shall pay the following relevant Crude Oil Production


Bonus to the GOVERNMENT within thirty (30) days of the following


relevant occurrence:


(I) two million five hundred ihufand Dollars (USS2.300.000) when First


Production of Crude Oil from the Contract Area commences;





(2) five million Dollars (liSS5.000.000) when production of Crude Oil and


Natural Gas from the Contract Area reaches a cumulative amount of


i (10.000.000) Bands of Crude Oil and Natural Gas BOE;





<3) (USS10.000.000) of Crude Oil


Contract Area reaches a of twenty five


Barrels of Crude Oil ami Natural Gas BOE and





(4) twenty million Dollars (LSS20.000.000) of Crude OU


the Contract Area of fifty


(50,000.000) Barrels of Crude Oil and Natural Gas BOE.





For purposes of calculating the Production Bonus pursuant to this Article


32 8(a). Natural Gas BOE shall not include Natural Gas used for Petroleum


Operations (including rc-injcction) or. to the extent permitted by this Contract,


the Laws of the Kurdistan Region, and authorised by the Management


Committee, for Hating





(b) each bolder of a Government Interest, other than the GOVERNMENT or a


Public Company, shall pay. pro rau the percentage of the Government Interest


such holder to the the total Government Interest held by Persons other


the GOVERNMENT or a Public Company, the folio*mg Crude OU








70


 •S**n





Production Bonuses to the GOVERNMENT within thirty (30) days of the


following relevant occurrences:


(|) five hundred thousand Dollars (USS500.000) when First Production of


Crude Oil from the Contract Area commences.


(2) one million Dollars (USS1.000.000) when production of Crude Oil and


Natural Gas from the Contract Area reaches a cumulative amount of


ten million (10,000,000) Barrels of Crude Oil and Natural Gas BOE;


(3) two million Dollars (USS2.000.000) when production of Crude Oil


from the Contract Area readies a cumulative amount of twenty five


million (25,000,000) Barrels of Crude Oil and Natural Gas BOE; and


(4) four million Dollars (USS4.000.000) when production of Crude Oil


from the Contract Area reaches a cumulative amount of fifty million


(50.000.000) Barrels of Crude Oil and Natural Cias BOB. For purposes


of calculating the Production Bonus pursuant to this Article 32.8(b),


Natural Gas BOE shall not include Natural Gas used for Petroleum


Operations (including re-injection) or. to the extent permuted by this


Contract, the Laws of the Kuidiaan Region, and authorised by the


Management Committee, for Haring


32.9 In the event of a Non-Associated Natural Gas Commercial Discovery


(a) the CONTRACTOR shall pay the following Non-Associatcd Natural Gas


Production Bonuses to the GOVERNMENT within thirty (30) days of the


following occurrences:


(1) two million five hundred thousand Dollars (USS2,500.000) when First


Production of Non-Associatcd Natural Gas from the Contract Area


commences;


(2) five million Dollars (USS5,000.000) when production of Non-


Associatcd Natural Gas from the Contract Area reaches a cumulative


amount of ten million (10,000.000) Natural Gas BOE;


(3) ten million Dollars (USS10.000,000) when production of Non-


Associuted Natural Gas from the Contract Area reaches a cumulative


amount of twenty live million (20.000.000) Natural Gas BOE; and


(4) twenty million Dollars (USS20.000.000) when production of Non-


Associatcd Natural Gas from the Contract Aren reaches a cumulative


amount of fifty million (50.000,000) Natural Gas BOE; For purposes


of calculating the Production Bonus pursuant to this Article 32.9(a),


Natural Gas BOE shall not include Natural Gus used for Petroleum


Operations (including re injection) or. to the extent permitted by this


Contract, the Laws of the Kurdistan Region, and authorised by the


Management Committee, for Haring.











71


 ProfanaiftwCMOBf-S#"


(b) Each holdcT of a Government Interest, other than the GOVERNMENT or a


Public Company, shall pay. pro rata the percentage of the Government Interest


held such holder to the the total Government Interest held by Persons other


than the GOVERNMENT or a Public Company, the following Natural Gas


Production Bonuses to the GOVERNMENT within thirty* (30) days of the


following relevant occurrence:


(1) five hundred thousand Dollars (USS500.000) when First Production of


Non-Associated Natural Gas from the Contract Area commences;


(2) one million Dollars (USS1,000.000) when production of Non-


Associatcd Natural Gas from the Contract Area reaches a cumulative


amount of ten million (10.000.000) Natural Gas BOE;


(3) two million Dollais (USS2.000.000) when production of Crude Oil


from the Contract Area reaches a cumulative amount of twenty five


million (25,000,000) Natural Gas BOE; and


(4) four million Dollars (USS4.000.000) when production of Crude Oil


from the Contract Area reaches a cumulative amount of fifty million


(50.000,000) Natural Gas BOE.


For purposes of calculating the Production Bonus pursuant to this Article


32.9(b). Natural Gas BOE shall not include Natural Gas used for Petroleum


Operations (including re injection) or. to the extent permitted by this Contract,


the Laws of the Kurdistan Region, and authorised by the Management


Committee, for flaring.


32.10 The CONTRACTOR shall declare a Commercial Discovery to be either a Crude Oil


Commercial Discovery or a Non-Associated Gas Commercial Discovery. Under no


circumstances shall a Production Bonus be due in respect of both Crude Oil and Non-


Associated Natural Gas for the same Commercial Discovery.








32.11 No bonus or Capacity Building Payment due pursuant to this Article 32 shall be


deemed to be a Petroleum Cost.





ARTICLE 33-PIPELINES


33.1 The GOVERNMENT shall obtain any required Permits for the transportation of


Petroleum in the Kurd)sun Region and in Iraq, as well as any necessary Permits and


easement rights for the construction of any pipelines and related facilities required for


the Petroleum Operations, as provided in Article 332.


33 2 The GOVERNMENT undertakes to transfer to the CONTRACTOR its rights for


transportation of Petroleum by pipeline The CONTRACTOR shall have the right to


design, construct, operate and mainum pipelines and any related facilities for the


transportation of Petroleum produced under this Contract.








72


33.3 Prior lo the construct ton of any pipeline and related facilities as provided in Article


33.2. the CONTRACTOR shall submit following information to the Management


Committee:





(a) proposed pipeline route and related facilities.


(b) forecasted pipeline How rate and capacity;


(c) estimate of financial investment and operating costs of the pipeline and related


facilities;


(d) proposed financing schedule;


(e) construction schedule;


(f) general technical description of the pipeline and related facilities;


(g) construction plans and tests:


(h) preventive measures for damage to the environment and third parties; and


(i) any other information relating to the pipeline project.


The Management Committee shall examine all the above information and 'hall within


ninety (90) days, approve the proposed pipeline project in accordance with the


provisions of Article 8.5.


33.-1 Subject to spore capacity bang available and to their Petroleum being compatible,


third parties shall be entitled to transport then Petroleum through any pipeline


constructed by the CONTRACTOR in accordance with this Article 33 on terms to be


agreed between the CONTRACTOR and such third party. Those terms shall be


reasonable commercial terms and shall not discriminate among third party users. The


CONTRACTOR shall always have priority of access to such pipelines.


33.5 To the extent that they arc incurred upstream of the Delivery Point, any costs


associated with the design, construction, operation and maintenance of the pipelines


and related facilities by CONTRACTOR under this Article 33 ( Pipeline Costs )


shall be considered Petroleum Costs and shall be recoverable by the


CONTRACTOR in accordance with the provisions of Articles I and 25.


33.6 The CONTRACTOR shall have the absolute right, without any exceptions and for


the entire duration of this Contract, to use. free of charge, any pipeline and related


facilities constructed by CONTRACTOR under this Article 33 and to transport


Petroleum produced from any Production Area and to operate and maintain any


pipeline and its related facilities, freely and without any additional costs.


33.7 To the extent related lo transportation upstream of the Delivery Point, any tariffs


received from third parties for use of any pipeline and related facilities by


CONTRACTOR under this Article 33 shall be applied to the recovery of Petroleum


Costs until all Pipeline Costs have been fully recovered by the CONTRACTOR


pursuant to the provisions of Articles I and 25 and shall nor be included in income for








73


corporate income to purposes Ike GOVERNMENT shall be entitled io receive


when'll said Pipeline CostTTsve been fullynreovcred b>*Uto CONTACTOR The


costs associated with providing such transportation services for third parties up to the


Delivery Point shall be considered Pipeline Costs and therefore Petroleum Coos and


shall be recoverable by the CONTRACTOR in accordance with the provisions of


Articles I and 25.


33.8 Upon recovery by the CONTRACTOR of all (he Pipeline Costs, the operating and


maintenance costs of any pipeline and its related facilities shall be borne by the


CONTRACTOR and shall be considered Petroleum Costs and shall be recoverable


by the CONTRACTOR in accordance mth the provisions of Articles I and 25.


33.9 The GOVERNMENT shall have the same nghts as the CONTRACTOR for use.


free of charge, of any pipeline and related facilities constructed by CONTRACTOR


under this Article 33 for the transportation of the share of Petroleum to which die


GOVERNMENT is entitled under this Contract up to the Delivery


33 10 The CONTRACTOR shall bear the cost of operation and maintenance of any


pipeline and related facilities constructed by CONTRACT OR under this Article 33


and all risks of accidental loss or damage to such pipeline and related facilities while


they are required for Petroleum Operations.








ARTICLE 34 - UNTTISATION








In the event a Reservoir extends beyond the Contract Area into an adjacent area uhich is the


subject of another Petroleum Contract (as defined by the Kurdistan Region Oil and Gtt l aw)


(an "Adjacent Contract Area"), or in the event a Reservoir of an Adjacent Contract Area


ex lends into the Contract Area, the provisions of Article 47. Paragraph Second of the


Kurdistan Region Oil and Gas Law shall apply and the GOVERNMENT shall require the


CONTRACTOR and the contractor of the Adjacent Contract Area to agree upon a schedule


for reaching agreement of the terms of the un-tivition of the Reservoir, which terms shall be


based on reliable technical, operational and economical parameters, all in accordance with


prudent international petroleum industry practice In the event that the Minister of Natural


Resources decides the unilisaUoo pursuant to Article 47. Paragraph Third of the Kurdistan


Region Oil and Gas Law. and if the CON IRACTOR docs not agree with the decision of the


Minister of Natural Resources, the CON I RACTOR shall be entitled to arbitration pursuant


to the provisions of Article 42.1.





ART 1C LE 33 LIABILITY AND INSURANCE





Liability


35.1 Subject to the other provisions of this Contract, the COM RACTOR. in its capacity


as foe entity responsible for the execution of the Petroleum Operations within foe


Contract .Area, shall be liable to third panics to foe extent provided under Applicable














74


 r>«wfcir»*vi Sharing Contract - .tyr»





Law fo» any losses and damage il may cause lo them in conducting the Petroleum


Operations





35.2 Notwithstanding the other provisions of this Contract, the CONTRACTOR will not


be liable to the GOVERNMENT or the Public Company or other government


agencies, authorities or bodies, courts or political subdivisions for any damage or low


or claims of any kind resulting from the CONTRACTOR’, conduct of the Petroleum


Operations (other than personal injuries, industrial illness, or death), unless such


damage or loss is the result of wilful misconduct or a material failure to conduct


Petroleum Operations in accordance with the terms of this Contract





35.3 The CONTRACTOR shall indemnity the GOVERNMENT against nil losses,


damages uml liability arising under any claim, demnnd. action or proceeding brought


or instituted against the GOVERNMENT by any:


(i) employee of the CONTRACTOR or of any Subcontractor or by any





dependent thereof, for personal injuries, industrial illness, death or damage to


personal property sustained in connection with, rclutcd to or arising out ol the


performance or non-performance of this Contract regardless of the fault or


negligence in whole or in part of any entity or individual other than the


GOVERNMENT; and


(it) a with respect to all claims for loss or damage made by third parties arising out





of or related to Petroleum Operations


The GOVERNMENT will retain control ova the defence o«. and any rootuiwn or


settlement relating to. such km or damage Tlie CONTRACTOR stall cooperate with


the GOVERNMENT and provide reasonable assistance m defending any claims


against the GOVERNMENT The CONTRACTOR may participate in such defence


at its cost and expense and will be entitled to be consul ted poor to any settlement A


claim set forth m a notice from the GOVERNMENT to the CONTRACTOR will be


conclusively deemed an indemnifiable loss, damage, or expense if (i) the


CONTRACTOR consents thereto, or (it) the CONTRACTOR fails to depute the


GOVERNMENT’S liability, m whole or in part, by the end of a thirty (30) day period


follow mg receipt of the notice from the GOVERNMENT the CONTRACTOR shall


promptly pay the deemed loss or expense on demand


35 4 The CONTRACTOR shall take all necessary steps lo respond to. and shall promptly





notify the GOVERNMENT of. all emergency and other cvcntt (including personal


injuries, explosions, leaks and spills), occurring in relation to the Petroleum


Operations which arc causing or likely to cause material environmental damage or


material risk to health and safety. Such notice shall include » summitry description of


the circumstances and steps taken und planned by the CONTRACTOR to control and


remedy the situation The CON I RACTOR shall provide such additional reports to


the GOVERNMENT as arc reasonably necessary in reaped of the effects of such


events and the course of all actions taken to prevent further loss and lo mitigate


deleterious effects.


35 5 In the event of emergency situations as set out in Article 35.4, at the request of the


CONTRACTOR, the GOVERNMENT, without prejudice and in addition to any








75


 Sluirtilt < ‘mirtu-i - Saf>m





indemnification obligations the GOVERNMENT may have, shall assist the


CONTRACTOR, to the extent possible, in any emergency response, remedial or


repair effort by making available any labour, materials and equipment in reasonable


quantities requested by the CONTRACTOR which are not otherwise readily


available to the CONTRACTOR and by facilitating the measures taken by the


CONTRACTOR to bring into the Kurdistan Region personnel, materials and


equipment to be used in any such emergency response or remedial or repair effort.


The CONTRACTOR shall reimburse the GOVERNMENT'S reasonable and


necessary costs incurred in such efforts, which reimbursed amounts shall be


considered Petroleum Costs and shall be recoverable by the C ONTKACTOR in


accordance with the provisions of Articles I and 25.


35.6 Except as expressly provided in the Contract, neither Putty shall Ik liable to the other


Party under the Contract for or in respect of any indirect, incidental, consequential or


exemplary loss or damages, including without limitation and with respect to the


< ON IK ACTOR, any liability or damages with respect to actual or alleged damage


to any Petroleum reservoir falling within the Contract Area (and uny extension of


such reservoir outside of the Contract Area), and uny associated loss of Petroleum


production from such reservoir by the CONTRAC TOR, unless caused by the wilful


misconduct or gross negligence of the CONTRACTOR


liiMiraim;


35.7 In accordance with prudent international petroleum industry practice, the


CON TRACTOR shall obtain and maintain any insurance required by applicable


Kurdistan Region l aw. as well as any insurance approved by the Management


Committee.





Such insurance policies may cover


(a) loss of and damage to material and equipment used in the Petroleum


Operation*; and


(b) personal injury, damage to third parties and risks of pollution associated with


Petroleum Opo*tion> for reasonable amounts, within the limits approved by


the Management Committee.


35.8 Any insurance policy relating to this C ootract shall name the GOVERNMENT as an


additional insured party and shall include a waiver of subrogation protecting the


GOVERNMENT against any claim, loss and damage resulting from any Petroleum


Operation conducted by or on behalf of the CONTRACTOR under this Contract, to


the extent that the CONTRACTOR is liable for such claim, loss or damage under


this Contract. The CONTRACTOR shall not be liable for and shall not purchase


insurance cover for any claims arising from negligence or wilful misconduct of the


GOVERNMENT or of any Public Company or of any of their respective


subcontractors or personnel


35.9 Upon its written request, the GOVERNMENT shall be provided with insurance


certificates, including necessary details, for any insurance policy maintained by the


CONTRACTOR which relates to this Contract








76


 PimbirUm .Vni'iHg Contrarl-S>\frti








35.10 Each CONTRACTOR Entity shall be responsible for the tiling of all claims made


under any insurance policy maintained by such CONTRACTOR Entity which relates


to this Contract Any premiums and payments relating to such insurance policies


(other than political risk insurance) shall be considered Petroleum Costs and shall Ik


recoverable by the CONTRACTOR in accordance with the provisions of Articles I


and 25.


35.11 In any insurance policy maintained by a CONTRACTOR Entity which relates to this


Contract, the amount lor which the CONTRACTOR itself is liable (the “Deductible


Amount") shall be reasonably determined between the CONTRACTOR Entity and


the insurer and such Deductible Amount shall in the event of any insurance claim be


considered a Petroleum Cost and shall be recoverable by the CONTRACTOR in


accordance with the provisions of Articles I and 25.


ARTICLE 36 INFORMATION AND CONFIDENTIALITY


36.1 The CONTRACTOR shall keep all records, data and information relating to the


Petroleum Operations in accordance with the Kurdistan Region Oil and Gas I aw and


prudent international petroleum industry practice. In addition, it shall provide the


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


(his Contract.


36.2 Upon the GOVERNMENT'* written request, the CONTRACTOR ball pros uic the


GOVERNMENT with samples of any rocks or any other items extracted during the


Petroleum Operations.


36.3 The GOVERNMENT shall have title to all data and information, whether raw.


derived, processed, interpreted or analysed, obtained pursuant to this Contract


36.4 Each CONTRACTOR Entity shall have the right, without any limitation, to send


Abroad Copies of all reports and technical data, magnetic tapes and other data relating


to the Petroleum Operations. Magnetic tapes or other data, the original of which must


be analysed and processed Abroad, may Ik transported out of the Kurdistan Region.


36.5 Any representatives authorised by the GOVERNMENT and notified to the


CONTRACTOR shall, upon reasonable prior written notice, have reasonable access


to any information and data relating to the Contract Area in the possession of the


CONTRACTOR which the CONTRACTOR is obliged to provide to the


GOVERNMENT pursuant to this Contract It is understood that, when exercising


such right, the GOVERNMENT shall ensure it docs not unduly interfere with or


hinder the CONTRACTOR'S rights and activities.


36.6 The CONTRACTOR shall provide the GOVERNMENT upon the


GOVERNMENT'S written request any analysis information, reports, tapes or other


data (geological, geophysical, logs, interpretations, drilling reports, etc.) related to the


Petroleum Operations in the possession of the CONTRACTOR All available


originals of such data shall be transferred to the GOVERNMEN T at the end of this


Contract








77


36.7 A pan from the exceptions stated in this Article 36. the Parties undertake to keep all


data and information relating to this Contract and the Petroleum Operations


confidential during the entire term of this Contract and not to divulge or disclose such


data or information to third parlies without the specific consent of the other Parties,


such consent not to be unreasonably withheld or delayed. Hk foregoing


confidentiality obligation shall not apply to information or data which


(a) is or. through no fault of any Party, becomes part of the public domain;


(b) is known to the recipient at the dale of disclosure.


(c) is required to be famished in compliance with any Law applicable to it, by a


government agency having jurisdiction over such Party or its Affiliates, by a


court order or any other legal proceedings with jurisdiction over such Party or


its Affiliates, or


(d) is required to be disclosed pursuant to the rales or regulations of any


government or recognised stock exchange having jurisdiction over a


CONTRACTOR Entity or its Affiliates.


36.8 Notwithstanding the foregoing in Article 36.7, in accordance with prudent


international petroleum industry practice, such data and information may be disclosed


to;


(a) Affiliates of each CONTRACTOR Entity;


(b) employees, officers and directors of each CONTR ACTOR Entity and their


respective Affiliated Companies for the purpose of the Petroleum Operations,


subject to each such entity taking customary precautions to ensure such


information is kept confidential;


(c) consultants or agents retained by any CON I RACTOR Entity or its Affiliates


for the purpose of analysing or evaluating information or data;


(d) banks or financial institutions retained by any CONTRACTOR Entity or its


Affiliates with a view to financing Petroleum Operations, including any


professional consultants retained by such bonk or financial institution;


(c) bona fide prospective assignees of a participating interest under this Contract


(including any entity with whom a CONTRACTOR Entity and'or its


Affiliates are conducting bona fide negotiations directed towards a merger,


consolidation or the sale of a material portion of its or an Affiliates shares);


(0 prospective or actual Subcontractors and suppliers engaged by a Party where


disclosure of such information is essential to such Subcontractor's or


supplier's work for such Party- and


(g) any other Person or entity, upon the prior written approval of the non-


disclosing Parties.











78


provided that disclosure shall not be made pursuant to paragraphs (c). (d». (e) and (f).


unless such third party lias entered into a confidentiality undertaking.


36.9 Any dutu and information relating to relinquished or surrendered areas under this


Control shall hccomc the exclusive property of the GOVERNMENT, who shall


have the right to use same for any puiposc, in particular for the purpose of promoting


said areas Each CONTRACTOR Entity shall be entitled to keep copies of such data


and information and to use such data and information for any purpose.


36.10 Subject to the provisions of this Article 36. the CONTRACTOR may not sell nor


exchange any data related to the Petroleum Operations without the approval of the


GOVERNMENT, which approval shall not be unreasonably withheld or delayed


where, in the CONTRACTOR’S reasonable opinion, such sale or exchange would


benefit the Petroleum Operations.


ARTICLE 37 - ENVIRONMENTAL PROVISIONS


37.1 During the performance of the Petroleum Operations, the CONTRAXTOR shall take


reasonable measures to ensure that it. the Operator, its Subcontractors and agents


attend to tin: protection of the environment and prevention of pollution, in accordance


with prudent international petroleum industry practice in similar physical and


ecological environments and any then applicable Kurdistan Region I .aw.


37.2 Prior to surrendering a portion of the Contract Area, the COVER ACTOR shall lake


reasonable measures to abandon the area to be surrendered in accordance w ith prudent


international petroleum industry practice in similai physical and ecological


environments. Such measures shall include removal o* closure in place of facilities,


material and equipment together with reasonable measures necessary for the


preservation of fauna, flora and ecosystems, all in accordance with prudent


international petroleum industry practice in similar physical and ecological


environments. The CONTRACTOR shall only be responsible for site restoration or


environmental damage to the extent the same pertains solely and directly to Petroleum


Operations conducted pursuant to this Contract.


37J The CONTRACTOR shall take reasonable precautions and measures in accordance


with prudent international petroleum industry practice in similar physical and


ecological environments to prevent any pollution which may arise directly as a result


of the Petroleum Operations and to protect the environment (fauna and flora), water


sources and any other natural resources when carrying out Petroleum Operations


37 4 The CONTRACTOR 'hall, in accordance with prudent international petroleum


industry practice in similar physical and ecological environment*, respect the


preservation of property, agricultural areas, and fisheries, when carrying out


Petroleum Operations.


J7.5 The CONTRACTOR shall conduct and submit an environmental impact assessment


to the GOVERNMENT within twelve (12) months after the Effective Date














79


 Sharing Contract ■ Safai





yrt\m\l rnrka Hl«d Na>urc Reserve AK«S


37.6 I'hc CONTRACTOR shall lake reasonable measures lo minimise any adverse


material impact on national parks and nature reserves which may arise directly as a


result of the Petroleum Operations, in accordance with prudent international


petroleum industry practice in similar physical and ecological environments.


37.7 The GOVERNMENT: (i) represents and warrants that, on the Effective Date, there


arc no national parks, nature reserves or other protected arcus located in whole or in


part within the Contract Area where the CONTRACTOR shall not be entitled to


carry out Petroleum Operations and (it) covenants that during the term of this


Contract will not designate or create or permit the creation of any national parks,


nature reserves or other protected areas, located in whole or in purl within the


Contract Area.


F*l/VIHllHim


37.8 Any reasonable expenditure incurred by the CONTRACTOR in relation with this


Article 37 shall be deemed Petroleum Costs and shall be recoverable by the


CON TRACTOR in accordance with the provisions of Articles I and 25








i!re-exi5tlm? Conditions


37 9 The CONTRACTOR is not responsible for any pre-existing environmental


conditions or any acts of unrelated third panics





ARTICLE 38 - DECOMMISSIONING


38.1 To enable the CONTRACTOR to recover the costs associated with tuturc Contract


Area Decommissioning Operations under this Contract, the CONTRACTOR shall


have the right to establish a reserve fund for future decommissioning and site


restoration (a "Decommissioning Reserve Fund"). The Decommissioning Reserve


Fund may be established at any time during the final ten (10) Calendar Years of the


term of the Production Operations of a Production Area hut, upon the reasonable


request by the CONTRACTOR, the GOVERNMENT shall allow the


CONTRACTOR to establish such fund over a longer period. Once established, the


CONTRACTOR shall make regular contributions to the Decommissioning Reserve


Fund bused upon estimated Petroleum Field decommissioning and site restoration


costs in accordance with prudent international petroleum industry practice, and taking


into account interest received and future interest expected lo be earned on the


Decommissioning Reserve Fund. Any contributions by the CONTRACTOR to the


Decommissioning Reserve Fund shall be made in Dollars and shall be deemed


Petroleum Costs when paid into the reserve fund, and shall be recoverable by the


CONTRACTOR in accordance with the provisions of Articles I and 25.


Contributions to the Decommissioning Reserve Fund shall be placed with a first rate


bunk approved by the Management Committee in accordance with Article 8,5.











80


 Prothctu* Owing Contract • Sa/m








38.2 If. at the etui ol the term of the Production Operations of the Production Area, the


GOVERNMENT decides to take over production operations in the Production Area:


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


Operation*;


(b) the contributions and any interest accumulated in the Decommissioning


Reserve l und. to the extent that such contributions have been recovered us


Petroleum Costs, shall be paid to the GOVERNMENT; and


(C) the GOVERNMENT shall release the CONTRACTOR and the


CONTRACTOR Entities from any obligations relating to Decommissioning


Operations and shall indemnify the CONTRACTOR und the


CONTRACTOR Entities for any costs, liabilities, expenses, claims or


obligations associated therewith.


38.3 If the CONTRACTOR undertakes the Production Area Decommissioning


Operations, the contributions and any interest accumulated in the Decommissioning


Reserve Fund shall be paid to the CONTRACTOR and shall be used for the


Decommissioning Operations The CONTRACTOR shall undertake any such


Decommissioning Operations in accordance with prudent international petroleum


industry practice in similar physical and ecological environments.


38.4 If the Decommissioning Reserve Fund is paid to the CONTRACTOR and the


Decommissioning Reserve Fund is not sufficient to cover all Decommissioning Costs


for the Contract Area, the balance shall be paid by the CONTRACTOR and ma> be


recovered, if applicable, by the CONTRACTOR Entities or any of their Affiliates


from any other area which is the subject of another Petroleum Contract (as defined by


the Kurdistan Region Oil and Gas Law) anywhere in the Kurdistan Region and. to the


extent the balance is not recoverable as aforesaid, such remaining balance shall be


paid by the GOVERNMENT to the CONTRACTOR


38 5 If the Decommissioning Reserve Fund is paid to the CONTRACTOR and the


Decommissioning Reserve Fund exceeds all Decommissioning Costs for the Contract


Area, the balance shall be transferred to the GOVERNMENT.


38.6 Any expenditure inclined by the CONTRACTOR in relation with this Article 38.


including any contributions to the Decommissioning Reserve Fund, shall be deemed


Petroleum Costs and shall be recoverable by the CONTRACTOR in accordance with


the provisions of Articles I and 25.


38.7 The CONTRACTOR shall submit to the Management Committee for approval in


accordance with Article 8 5 a detailed plan for decommissioning the Contract Area


facilities and site restoration (the "Decommissioning Plan"), such Decommissioning


Plan to be submitted no later than twenty four (24) Months prior to the date estimated


by the CONTRACTOR for the end of Commercial Production from the Contract


Area. The Management Committee shall provide comments, if any. on the


Decommissioning Plan within ninety (90) days after receipt. The C ON I RACTOR's


completion of the Decommissioning Operations in accordance, in all material


respects, with the Decommissioning Plan for a Production Aren approved by the








81


Management Committee shall satisfy all of the CONTRACTOR'S obligations with


respect to the performance of Decommissioning Operations for such Production Area.


In the event the GOVERNMENT docs not agree that Decommissioning Operations


for a Production Area were carried out in accordance with the approved


Decommissioning Plan, it must advise the CONTRACTOR within six (6) months of


CONTRACTOR'S completion of such operations.


ARTICLE 39 - ASSIGNMENT AND CHANGE OF CONTROL


Assignment to Affiliates


39.1 Each CONTRACTOR Entity shall be free to sell assign, transfer or otherwise


dispose of all or part of its rights, obligations and interests under this Contract to an


Affiliated Company or to another CONTRACTOR Entity with the prior consent of


the GOVERN\1 F.NT. which consent shall not be unreasonably delayed or w ithhcld


Assignments by CON TRACTOR Entities


39.2 Articles 39 2 through 39.6 do not apply to holders of the Government Interest in


respect of the Government Interest. The consent of any bolder of the Government


Interest, in its capacity as bolder of all or pan of the Government Interest is not


required for any sale, assignment transfer, or other disposal of all or part of its rights


and interests under this Contract


39.3 Without prejudice to Article 39.1, each CONTRACTOR Entity shall have the right


to sell, assign, transfer or otheiwisc dispose of all or p.iri of it' rights and interests


under this Contract (directly or indirectly) to any Person which is not an Affiliated


Company (an "assignee") only with the prior consent of GOVERN VIEN'I and each


Other CONTRACTOR Entity. The GOVERNMENT and the other Contractor


Entities shall not unreasonably delay or refuse to provide such consent. The


GOVERNMENT consents to any transfers (direct or indirect) by Marathon to any


wholly owned (directly or indirectly) subsidiary of the ultimate parent company of


Marathon, subject to the signing of applicable assignment and novation


documentation.


39.4 No CONTRACTOR Entity is entitled to sell, assign, transfer or otherwise dispose of


all or part of its rights and interests under this Contract (directly or indirectly) if such


assignment will, to such Contractor Entity's knowledge based on reasonable due


diligence, constitute or he a part of a Prohibited Act


39.5 Any CONTRAC TOR Entity proposing to sell, assign, transfer or otherwise dispose


of all or part of its rights and interests under this Contract shall request consent from


the GOVERNMENT and. together with such request for a consent, provide the


GOVERNMENT with:





(a) evidence of the technical and financial capability of the proposed assignee and


its controlling (directly or indirectly) shareholders;




and cooler* wxvpobk to the GOV I RNMENT: and


(c) a letter of representation from the assignor m form and content satisfactory to


tbe Government, including a representation that the proposed assignment will


not (i) to the knowledge of tuck CONTRACTOR Entity after reasonably


diligent investigation, constitute or be a part of a Prohibited Act or (ii) violate


any Comipl Practices I iws applK-able to the CONTRACTOR Entity


An assignee of any CONTRACTOR Entity will have the rights, obligations, and


liabilities of the CONTRACTOR under, and be subject to. this Contract.


39.6 In order for any deed of sale, direct alignment, direct transfer or other direct disposal


as provided undo Articles 39.1 of 39.3 to be effective, the Panics and the relevant


third parry, if any. shall enter into a binding and enforceable instrument of assignment


and novation, which shall include an undertaking by the transferee or assignee to fulfil


the obligations imfcr this Contract which correspond to tbe interest transferred or








39.7 In the event a CONTRACTOR I ntity amigos or in am other way transfers its rights


and interests under this Contract whether in whole or m pan. such assignment or


transfer shall trot give rise to any Tax. including on the consideration paid or received


or on the income or gam therefrom











39,K Except as provided in Article 'I in respect of the Government Interest, the


GOVERNMENT may not m any time transfer any or all of its rights and obligations


under this Contract to any Person, including to a Public Company or any other


company or entity.





( hatiitc of Control


39.9 "Change of Control" means any direct or indirect change of the identity to the


Person who Controls a CONTRACTOR Entity (whether through merger, sale of


shares or of other equity interests, or otherwise) through 3 single transaction or series


of transactions, from one or more transferors to one or more transferees, in which the


market value of such CONTRA( TOR Entity's participating interest (which shall be


as specified in the Joint Operating Agreement relating to this Contract) or where there


is only one CONTRACTOR Entity, one hundred percent (100%) in this Contract


represents more than seventy five percent (75%) of the aggregate market value of the


assets of such entity and its Affiliates that arc subject to the Change in Control. For


(he purpose of this definition: "Control" means the direct or indirect ownership or


control of the majority of the voting rights of the applicable entity at its shurcholdent’


meetings or their equivalent; and "markcl value” shall be determined based upon the


amount in cash a willing buyer would pay a willing seller in an Arm's Length


transaction.





Each CONTRACTOR Entity which is or anticipates with a reasonable degree of


certainty that it will be subject to u Change in Control, other than to an Affiliated


 («-*(• S<*n








Company or ■ CONTRACTOR Entity. shall notify the GOVERNMENT as *oon as


practicable after it become* aware of the Change in Control or anticipated Change in


Control and rexpicst the consent of GOVERNMENT, which content shall not be


unreasonably delayed or withheld


A Change in Control shall not give rise to any Tax including on the consideration








ARTICLE 40-FORCE MAJEI RE


40 I No delay, default, breach or omisswn of the CONTRACTOR in the execution of any


of its obligations under this Contract shall be considered a failure to perform this


('online! <>i he the subject of a dispute if such delay, dcl.iuli. breach or omission is due


to ii mse of l orce Majcuit. In such event the C ON7RAC I OR hall promptly notify


the GOVERNMENT in writing and take all reasonably appropriate measures to


perform its obligations under this Contract to the extent possible. The time resulting


from any such delay or curtailment in the execution of such obligations, increased by


the time necessary to repair any damage resulting from or occurred during such delay


01 curtailment, shall be added to any time period provided under this Contract


(including the Exploration Period und any extension thereto, any Sub-Period and any


extension thereto and any Development Period and any extension thereto). I he Parties


shall meet as soon as possible after the notification of Force Majeuro with a view to


using reasonable endeavours to mitigate the effects thereof.


40 2 For the purpose of this Contract. “Force Majeare means any event that is


CONTR ACTOR but due to circumstance* beyond its control, which prevent* or


impedes execution of all o* part of its obligations under this Contract Such events


shall include the folkmmg


(a) war. whether declared or not. civil war. insurrection, not*, civil commotion,


terrorism, any other hostile acts, whether internal or external;


(b) stnkcs or other labour conflicts;


(c) accidents or blowouts;


(d) quarantine restriction* or epidemics;


(e) any act. event, happening or occurrence due to natural cauacx. in particular,


but without limitation, floods, storms, cyclones, fires, lightning, canhquakcv


(0 environmental restriction*. w hicfa the GOVERNMENT has not notified to the


CONTRACTOR;


(g) except in respect of the GOVERNMENT and any Public Company, any acts


or orders of the GOVERNMENT, ony minister, ministry, department, sub-











84


 Ptvducthn Sharing Contract - $qfm





division, agcncy. aulbonly. council, committee, of other constituent element


thereof, or any corporation controlled by the any of the foregoing; and


(h) any acts or orders of any other government claiming or asserting jurisdiction


over the subject matter of this Contract, any minister, ministry , department,


subdivision, agency, authority, council, committee, or other constituent


element thereof, or any corporation controlled by any of the foregoing


JOJ The intention of the I’artics is that Force Majeure shall receive the mtciprclntion that


complies most with prudent international petroleum industry practice. Force Mujeure


affecting 11 CONTRACTOR Entity or an Affiliated Company of a CONTRACTOR


Entity shall be deemed Force Majeurc affecting the CONTRACTOR it the


consequence of such Force Majeure prevents the performance of any of the


CONTRA! I OK's obligations under this Contract. The application or potential


application of any l.aw applicable to a CONTRACTOR Entity or any of its


Affiliates, other than Laws of the Kurdistan Region or other Laws of the Republic of


Iraq, which could result in a criminal or civil penalty 01 sanction is not Force Majeure.


Alt I ICI.E 41 - WAIVER OF SOVEREIGN IMMUNITY


Except in respect of any Dispute (i) arising out of or related to Article 4.11 or (ii) with respect


to Article 4 between the GOVERNMENT and any holder of a Government Interest, the


GOVERNMENT hereby fully and irrevocably waives any claim to immunity for itself or


any of its assets


This waiver includes any claim to immunity from:


(a) any expert determination, mediation, or arbitration proceedings commenced pursuant


to Article 42;


(b) any judicial administrative or other proceedings to aid the expert determination,


mediation, or arbitration proceedings commenced pursuant to Article 42; and


(c) any effort to confirm, enforce or execute any decision, settlement, award, judgment


service of process, execution order or attachment (excluding pre-judgment


attachment) that results from an expert determination, mediation, arbitration or any


judicial, administrative or other proceedings commenced pursuant to this Contract.











ARTICLE 42 - ARBITRATION AND EXPERT DETERMINATION


42.1 For ihe purpose of this Article 42.1, "Dispute" shall mean any dispute, controversy or


claim (of any and every kind or type, whether based on contract, tort, statute,


regulation or otherwise) arising out of, relating to. or connected with this Contract or


the operations carried out under this Contract, including any dispute us the


construction, existence, validity, interpretation, enforceability, breach or termination





K5


of this Contract, which arises between any of the Parties (or between any one or more


Parties and the GOVERNMENT).


In the event of a Dispute, the parties to the Dispute shall use their reasonable


endeavour' to negotiate promptly in good faith a mutually acceptable resolution ot


such Dispute


Subject to the provisions of Article 42.2, a Party who desires to submit a Dispute for


resolution which has not been promptly resolved as aforesaid shall commence the


dispute resolution process by providing each other Party that is a party to the Dispute


with a written notice of the Dispute (a “Notice of Dispute"). The Notice of Depute


shall identify the parties to the Dispute, contain a bnef statement of the nature of the


Dispute and the relief requested and request negotiations among the Senior


Representatives of the parties to the Dispute


(a) In the event that any Notice of Dispute is given in accordance with this Article


42.1. the parties to the Dispute shall first seek settlement of the dispute by


negotiation between Senior Representatives. "Senior Representative" means


any individual who has authority to negotiate the settlement of the Dispute for


a party to the Dispute, which for the GOVERNMENT shall mean the


Minister of Natural Resources. Within thirty (30) days after the date of


delivery of the Notice of Dispute, the Senior Representatives representing the


parties to the Dispute shall meet at a mutually acceptable date, tune and place


lo exchange relev ant information in an attempt to resolve the Dispute. If a


Senior Representative intends to be accompanied at the meeting by a legal


adviser, each other party shall be given written notice of such intention and its


Senior Representative may also be accompanied at the meeting by a legal


adviser.


(b| If the Dispute cannot be resolved by negotiation in accordance with Article


42.1 (a) within sixty (60) days after the date of the receipt by each party to the


Dispute of the Notice of Dispute or such further period as the parties to the


Dispute may agree in writing, any party to the Dispute may seek settlement of


ilie dispute by mediation in accordance with the London Court of International


Arbitration ("LC'IA") Mediation Procedure, which Procedure shall be deemed


to bo incorporated by reference into this Article, and the parties to such


Dispute shall submit to such mediation procedure.


(c) If the Dispute is not settled within the earlier of (A) sixty (60) days of the


appointment of the mediator, or such further period as the parties to the


Dispute may otherwise agree in writing under the mediation procedure under


Article 42.1 (b), and (II) one hundred and twenty (120) days after the delivery-


of the Notice ol Dispute, any party to the Dispute may refer the Dispute to.


and seek final resolution by. arbitration under the LC1A Rules, which Rules


shall be deemed to be incorporated by reference into this Article.


(i) Any arbitration shall be conducted by three (3) arbitrators.


(ii) If the parties to the Dispute are the GOVERNMENT and all the


CONTRACTOR F.ntitics. the GOVERNMENT and the








86


 Production Sharing Contract Saftn





CONTRACTOR shall each appoint one (1) arbitrator. If the parties to


the Dispute are the GOVERNMENT and more than one. but not all


the CONTRACTOR Entities, the GOVERNMENT shall appoint one


(I) arbitrator and such CONTRACTOR Entities shall appoint one (1)


arbitrator. If the parties to the Dispute arc the GOVERNMENT and


one CONTRACTOR Entity, the GOVERNMENT and such


CON TRACTOR Entity shall each appoint one <1) arbitrator.


(iii) In uny event, the two arbitrators so appointed shall, in good faith, use


all reasonable endeavours to agree on the appointment of the third


arbitrator, who will chair the arbitral tribunal. In ease of failure to


appoint .in arbitrator or to agree on the appointment of the third


arbitrator. Rules of the LCIA shall apply.


(iv) The seat, or legal place, of arbitration shall be London, England. The


language to be used in any prior negotiation, mediation and in the


arbitration shall be English. During the arbitration procedure and until


the arbitral decision, the Parties shall continue to perform their


obligations and take no actions that would impair the Contract. The


arbitral award may be enforced by any court of competent jurisdiction,


including in the Kurdistan Region. Any award shall be expressed in


Dollars.


(v) The Parties agree that the arbitral award shall be final and not subject to


any appeal, including to the Courts of England on issue* of I aw.


Fu»n Deter mination


42.2 Any disagreement between the Parties relating to Articles 15.9. 27.2 and 27.7. as well


as any disagreement the Parties agree to refer to an expert, shall be submitted to an


expert. The Management Committee shall prepare and agree appropriate terms of


reference relating to a disagreement to be submitted to the expert, in accordance with


Article 8.5 (“Terms of Reference"), as soon as povablc after the Effective Date


(it) The disagreement shall be submitted to an expert appointed by mutual


agreement of the Parties within thirty (30) days following the date of


preparation and agreement of the Terms of Reference by the Management


Committee. If the Parties cannot agree on the choice of the expert w ithin such


thirty (30) day period, at the request of either Party, the expert shall be


appointed by the President of the Energy Institute in London. England Any


expert appointed must have the nccc"-iry qualifications for reviewing and


deciding on the subject matter of the disagreement


,b> The duties of the expert shall be stated in the Terms of Reference prepared and


agreed by the Management Committee. The Management Committee shall


promptly provide the expert with the agreed Terms of Reference relating to the


disagreement. Each Party shall have the light to give to the expert in writing


any information which it considers useful, provided it docs so within forty-live


(45) days after the expert’s appointment. Such information shall be provided


to the other Party at the same time and such other Party shall be entitled to





87


 provide ihc first Party and th


item (30) da>» after receiving The expert


nght to review and verify any Itoa in his








(c> The expert shall render his decision wiihm forty-five (45) days of his receipt


of the Terms of Reference and the information referred to m Attack 42.2.


Subject to the provisions of Article 15 9. any decision of the expert shall be


final and shall not be subject to any appeal, except in the case of manifest


error, fraud or malpractice Any costs and expenses associated with the expert


determination shall be shared equally betw een the Panics.











42 3 No or expert determination procedure


Article 42 shall the Parties from fulfilling











ARTICLE 43-GOVERNING LAW,FISCAL STABILITY. AMENDMENTS AND


VALIDITY











43.1 This Contract, including any dispute arising therefrom, thereunder or in relation


thereto and the agreement to arbitrate in Article 42. shall be governed by English law.


Limi-Stability





43.2 The obligations of the CT>NTR ACTOR in respect of this Contract shall not be


changed by the GOVERNMENT and the general and overall equilibrium between


Ihc Parties under this Contract shall not be affected n a substantial and lasting








43 J The GOVERNMENT guarantee* to the CONTRACTOR, for the entire iteration of


this Contract, that it wUI maintain the stability of the legal, fiscal and economic


conditions of this Contract, as they result from this Contract and as they result from


the Lows of the Kurdistan Region in force on the date of signature of this Contact


The C ONTRACTOR has entered into this Contract on the bast* of the legal, fiscal


and economic framework prevailing at the Effective Dale If. at any time after the


Effective Date, there is any change m the legal, fiscal and or economic framework


under the l aws of the Kunkslan Region or other Law* of the Republic of Iraq


applicable in or to the Kurdistan Region which detrimentally allccts the





CONTRACTOR, the CONTRACTOR Entities or any other Person entitled to


benefits under this Contract. Ihc terms and conditions of the Contract shall be altered


so as to restore the CONTRACTOR, the CONTRACTOR Entities and any other


Person entitled to benefits under this Contract to the some overall economic position


(taking into account home country taxes) as that which such Person would have bean





in. had no such change m the legal, fiscal and or economic framework occurred











88


 SV'iiAiHifrui ('omraci - Safer*








43.4 If the CON TRAC* I OR believes that its economic position, or the economic position


of a CONTRACTOR Entity or any other Person entitled to benefit* under this


Contract, has been detrimentally affected as provided in Article 43 3. upon the


CONTRACTOR’S written request, the Parties shall meet to agree on any necessary


measures or making any appropriate amendments to the terms of this Contract to re¬


establishing the equilibrium between the Parties and restoring the CONTRACTOR,


the CONTRACTOR Entities or any other Person entitled to benefits under this


Contract to the position (taking into account home country taxes) it was in prior to the


occurrence of the change having such detrimental effect should live Parties be unable


to agree on the merit of amending this Contract and/or on any amendments to be


made to this Contract within ninety («X>) days of the CONTRACTOR’S request (or


such other period as may he agreed by the Parties), the CONTRACTOR may refer


the matter in dispute to arbitration as provided in Article 42.1, without the necessity of


first referring the mailer to negotiation and mediation.


43.5 Without pn|uduc to the generality of the foregoing, the CONTRACTOR shall be


entitled to the benefit of any future changes to the petroleum legislation or any other


legislation complementing, amending or replacing it.


43 6 I lie ParlicH agree to cooperate in all possible ways with u view to fully achieving the


objective* of this Contract. The GOVERNMENT shall facilitate the performance of


the Petroleum Operation* by promptly granting to the CONTRACTOR, on


application lUu loi in accordance with Applicable Law and within the scope of


A|>plicnhlc I iw. .my necessary authorisation, permit, licence or access right and


making available any existing facilities and services with a view to the Parties


obtaining maximum mutual benefit from the Contract











43.7 The GOVERNMENT and the CONTRACTOR may amend this Contract only by an


agreement of the GOVERNMENT and the CONTRACTOR that identifies itself as


an amendment to this Contract. A bolder of a Government Interest is not entitled to be a


patty to any agreement amending this Contract, unless the terms of such amendment


affect any right or obligation of such Party as a holder of all or part of the Government


Interest. The GOVERNMENT shall notify holders of the GOVERNMENT Interest of


any proposed amendments and signed amendments, and the CON TRACTOR will


have no obligation to notify holders of the GOVERNMtN I Interest of any proposed


amendments and signed amendments.


43 8 A Party may waive any condition or obligation of such Party in this Contract only by


a writing executed by such Party. A waiver made in writing on one occasion will be


effective only m that instance arid only for the purpose stated. A waiver once given is


not to be construed as a waiver era any future occasion. No waiver or amendment in


or contract, except at expressly set forth in such waiver or amendment.





No failure or delay by a Party in exercising any right hereunder, or rn requiring the


dealing between the Parties (or any other them), will operate as a waiver or estoppel





of any right or condition or any provision, right, or condition of this Contract.


 Any single or partial exercise of a*y nght. power or remedy by a Party will not


preclude any other or future exercise thereof by such Party or the exercise by such


Party of any other right, pow er or remedy


Validity





4.1.9 As signatories to this Contract for and on behalf of the GOVERNMENT. iff?


Ministry of Natural Resources in the Kurdi'tan Region and the Regional Council


the Oil and Gas Affairs of the Kurdistan Region • Iraq represent that this Contrac


jpprmcd for the purposes of the Kurdistan Region Oil and Gas Law .





ARTICLE 44-NOTICES


44.1 All notices, demands, instructions, waivers, consents or other communications to be


provided pursuant to this Contract shall he in writing in English, shall be effective


upon receipt, and shall be sent by receipted hand delivery or by email (followed by


delivery by reputable international air courier company with an establishment in Elbtl


in the Kurdistan Region) to the following .iddrcsscN


To the GOVERNMENT:


Attention:


Mis Excellency the Minister ot Natural Resources


Address:


Ministry of Natural Resources


Kurdistan Regional Government


l.tbil, Kurdistan, Iraq


Email: mnrWkrgoil.com














To each CONTRACTOR Entity:


MARAT IION PETROLEUM KDV BA .


Attention Team Manager Legal





Address:


c/o Equity Coiporate Services


Equity Twit Co. N.V.


Stmwinskyluan 3105


Atrium 7th Moor 1077 ZX Amsterdam


The Netherlands











90


 E








Marathon Oil Company


5555 San fetipe Road


Houston. Texas 77056. USA


Attention: Senior Vice President, World*tdc Exploration


Email: arbay'amarathuno.l com


and


spguidiy'

44.2 The above address and designated representative of any of the Parties may be changed


on giving ten (10) days poor notice to the other Party delivered pursuant to Article


44.1.








ARTICLE 45 - TERMINATION


45.1 The GOVERNM ENT undertakes to exercise its termination rights under this Article


of the triggering act or event the identity of the Person at fault, and the relative


significance of any adverse consequences to the CONTRACTOR or a


CONTRACTOR Entity that may arise from the GOVERNMENT • exercise of Ms


rights under this Article 45.


45.2 In any notice of termination given by the GOVERN ME NT under this Article 45. the


GOVERNMENT must specify the grounds for exercising the tcrmmatimi right and


the date on which the Contract or the rights and micro'' of a CON I AC l‘t>K Entity,


as applicable, will terminate.


45.3 If a competent authority has reasonably determined (in a proceeding applying Aie


process) that this Contract has been obtained by the CON I R At TOR. or any Person


acting on behalf of the CONTRACTOR, in violation ol ( ooupt Practices Laws,


then, on not less than thirty (30) days’ prior notice lo (he CONTRACTOR, the


GOVERNMENT may terminate this Contract Any (Inal dcscmunaiion. judgment


sanction, or conviction (not subject to further appeal on the i»»uc). including under a


consent order in which there is a finding or admission of guilt, of a judicial or


regulatory authority in the United States of America. England, or The Netherlands


with jurisdiction over a CONTRACTOR Entity or an At filiate of such


CONTRACTOR Entity, will be conclusively drtcnmnative If mich determination


has been made by an authority within Iraq, and the CONTRACTOR disputes such


determination by referring such Dispute to artntration within the 30-day notice period


(without regard to anv negotiation period in Article 42). the termination will be


suspended until there a an award under Article 42 m favour of the GOVERNMENT








91


 Muffin* ' - -W™








Practices Laws. Unless the GOVERNMENT ha* cancelled a notice of termination


or. in Ihe ease of Ihc preceding sentence, a Dispute has been referred to arbitration in


accordance with Article 12, this Contract will be terminated as of the end of such


thirty (30) day notice period.


45.4 ir a competent authority has reasonably determined (in a proceeding applying due


process) that a permit, approval, consent or waiver in connection with this Contract or


Petroleum Operations has been obtained by the CONTRACTOR, or any Person


acting on behalf of the CONTRACTOR, in violation of Corrupt Practices Laws,


then, on not less than thirty (30) days' prior notice to the CONTRACTOR, the


GOVERNMENT may terminate the permit, approval, consent or waiver Any final


determination, judgment, sanction, or conviction (not subject to further appeal on the


issue), including under a consent order in which there is a finding or admission of


guilt, of n judicial or regulatory authority in the United state* of America. England, or


The Netherlands with jurisdiction over a CONTRACTOR Entity or an Affiliate of


such CONTRACTOR Entity, will be conclusively determinative





45.5


45.5.1 The GOVERNMENT may terminate this Contract, on not less than ninety


(90) days' prior notice, if tin; CONTR AC I OR





(a)








(b) during the First Sub-Period does not carry

acquisition, as detailed in Article 10.2 or. during the Second Sub-


Penod (or earlier), docs not carry out drilling and seismic acquisition,





as detailed m Article 10.3:





(c) Production for a period of i


days with no cause or.


Contract or under prudent international petroleum industry practice, it


being recognised that Force Majeure is an acceptable justification for








(d) unless such extraction or production is expressly authorised or


unavoidable as a result of operations earned out in accordance with


prudent international petroleum industry practice, extracts or produces





any mineral or object which is not covered by this Contract and docs


so wilfully or in a manner that constitutes gross negligence or


persistently after receiving notice thereof; or





(e) refuses to abide by any negotiation, mediation, arbitration or expert


decision under Article 42.





45 5 2 If. within the ninety (90Htoy nonce penod. the CONTRACTOR has either


remedied the default identified m such notice to the satisfaction of the


GOVERNMENT, or the GOVERNMENT has agreed another remedy with





the CONTRACTOR including compensation, the GOVERNMENT shall











92


 ProdltClkm < 'imlrnrl - Sa/en





45.5.3 If. within such ninety (90)-duy notice period, the condition* set forth in Article


45.5.2 110vc not been sulisiicd, the GOVERNMENT may, on not less than


thirty (30) days' notice, terminate the Contract, and. unless such notice is


cancelled by the GOVERNMENT before the end of such thirty (30)-duy


period, this Contract will be terminated ns of the termination date set forth in


the notice from the GOVERNMENT.


45.6 Where the CONTRACTOR comprises only one CONTRACTOR Entity, the


GOVERNMENT may terminate the Contract on not less than forty five (45) days’


notice to such CONTRACTOR Entity following the occurrence of an Act of


Insolvency, unless, within such forty-five (45>

GOVERNMENT cancels its notice or the CONTRACTOR Entity has notified the


GOVERNMENT that the CONTRACTOR Entity has cured relevant Act of


Insolvency.


45.7 The rights and interests of an individual CONTRACTOR Entity will be


automatically terminated, without prior notice from the GOVERNMENT, if such


CONTRACTOR Entity:


(i) is subject to a Change of Control for which the GOVERNMEN T has not


given its authorisation in accordance with Article 39.9; or


(ii) has made an assignment of all or part of its interests hereunder without the


prior consent of the GOVERNMENT in accordance with Article 39


(including under any provision of a joint operating agreement).


45 X This Contract will terminate as provided in Article 6 and Ankle 7.


45.9 Upon termination or expiration of this Contract


(a) the CONTRACTOR (and each CONTRACTOR Entity) will no longer have,


as of the effective date of such termination, any further rights and interests


under this Contract.


(b) all accrued rights and liabilities of the CONTRACTOR and of each


CONTRACTOR Entity will survive.


(c) the provisions of Articles 14.10. 16.7, 30. 31. 35 I. 35.3, 35.4. 35.7. 36.


38.2(c). 41. 42. 43.1 to 43.6 will survive the termination or expiry of this


Contract


45.10 If the GOVERNMENT terminates the undivided interests or a CONTRACTOR


Entity, but not the Contract, and there arc remaining CONTRACTOR Entities:


(a) such terminated CONTRACTOR Entity will no longer have, as of the


effective date of such termination, any further rights and interests under this


Contract;


(b) all accrued rights and liabilities of such terminated CONTRACTOR Entity


will survive.


(c) a» to and ■ respect of such terminated CONTRACTOR Entry, the


provisions of Articles 14.10. 16.7. 30. 31. 35.1. 35J. 35 4. 35.7. 36. 38 2.


41.42.43 I to 43 6 will survive the termination or expiry of this (. cam


45.11 If the undivided interests of a CONTRACTOR Entity (or of CONTRACTOR


Entities) arc terminated, but the Contract is not terminated and there are remaining


CONTRACTOR Entities, the GOVERNMENT may oiler, on not less than 15 days’


pnor notice from the GOVERNMENT to the other CONTRACTOR Entities, to


assign and novate such terminated CONTRACTOR Entity’s participating mterst. or


anv part thereof, to the remaining CONTRACTOR Entities on such terms and in


such amounts as the GOVERNMENT may determine The GOVERNMENT has no


obligation to make such allocation and may retain the terminated interest, provided


that the GOVERNMENT will use reasonable endeavours to find a new buyer lor


such interests


45.12 No assignment, novation, transfer, or other diapoation of a terminated


CON I RACTOR Entity’s undivided interests to another CONTRACTOR Entity


pursuant lo this Article 45 will be a taxable event under Applicable Law ns to the


CONTRACTOR Entity receiving the undivided interests of a temiinatcd


CONTRACTOR Entity.


45 13 Neither the GOVERNMENT nor any CONTRACTOR Entity will assume any


liabilitcs. obligations, or duties of a terminated COM RAC TOR Entity in respect of


the terminated CONTRACTOR Entity’s undivided interest anting or accrued poor


lo the latter of (i) the effective date of the termination of such CONTRACTOR


CONTRACTOR Entities, the effective <£*!**he realignment and redistribution of


the terminated CONTRACTOR Entity * uwertsts to another CONTRACTOR


Entity The GOVERNMENT will in no circumstances assume accrued liabilitcs.


obligations, or duties ol a terminated CONTRACTOR Entity in respect of the


terminated CONTRACTOR Entity’s undivided interest, whenever arising or


accrued. All accrued liabilities will remain the sole obligation of the terminated


CONTRACTOR Entity


45.14 Nothing in this Article 45 limits or m*»in a Party’s nghts under English Law m


ARTICLE 44 - COUNTERPARTS; ENI IRE AGREEMENT


46.1 The Parties may execute this Contract in counterpart*, each of which constitutes an


original, and all of which, collectively, constitute only one agreement The signatures


of all of the Parties need not appear on the same counterpart, and delivery *>f an


executed counterpart signature page by facsimile or electronic scan is as effective as


executing and delivering this Contract in the presence of the other Parties This


Contract is effective as of the date set forth on the signature page (the "Effective


Date-) In proving this Contract, a Party must produce or account only for the


executed counterpart of the Party to be charged


46 2 This Contract and the Letter of Representations and Warranties constitutes the final,


complete and exclusive expression of the Parties' agreement on the matters contained


in this Contract. All prior and contemporaneous negotiations and agreements between


the Panics on the matters contained in this Contract are expressly merged into and


superseded by this Contract. The provisions of this Contract may not bo explained,


supplemented or qualified through evidence of trade usage or a poor course of


dealings In entering into this Contract neither Party has relied upon any statement,


representation, warranty or agreement of the other party

for thine expressly contained in this Contract, and in the Letter of Representations and


an antics and the Guarantee. There is no coodit ion precedent to the effectiveness of


th.> Contract (except for signature and delivery by the Panics) and there are no


representations or warranties, m each case other than those expressly staled in this











(ZKmttHrrpagr/Mlon.J











































































































95


Effective Date 2fL October. 2010








For the M RDISTAN REGIONAL GOVERNMENT





-




-TVKJt-





Minisicr of Natural Resources


Kurdistan Regional Goscramcnl Kurdistan Regional Government


On behalf of the Regional Council On behalf of the Ministry of Natural


for the Oil and Gas AfTairs of Resources in the Kurdistan Region


the Kurdistan Region • Iraq

















For each COVTR ACTOR Entity























under a power of attorney dated 14 October 2010





























I Signature page tv Production Sharing Contract - Safenj


 PrwhKitOH Sharing Contract - Safi/n














ANNEX A


Map showing coordinates of the Safcn Contract Area corner points























yu













































































97


 #“»*<** 1km Sharing C«»»m ' • W-"








ANNEX B


ACCOUNTING PROCEDURE











PARAGRAPH I - GENERAL PROVISIONS





1.1 Purpose


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


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


CONI KACTOR’s Accounts shall be prepared and approved.


1.2 Definitions


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


Artiolca of the Contract xlmll have the same meaning when used in this Annex.


1.3 Inconsistency


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


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


prevail.


1.4 Accounting Records and Reports


1.4.1 The CONTRACTOR shall maintain the Acc«*u in accordance with Article 15 I


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


charts of Accounts agreed under Paragraph I 4 2.


I 4 2 Within sixty (60) day* of the Effector Date, the CONTRACTOR dull submit to and


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


outline shall be in accordance with generally accepted standards and recognized


accounting systems and consistent with normal petroleum industry practice muun


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


GOVERNMENT shall cither provide written notification of n» approval oi


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


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


GOVERNMENT shall agree on the outline of charts of Accounts which


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


under this Contract. Following such agreement, the CONTRACTOR


expeditiously prepare and provide the GOVERNMENT with formal copies o


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


and reporting functions, and procedures winch arc. and shall be. observed under the


Contract


14 3 Notwithstanding the generality of the foregoing, the CONTRACTOR shall make


shown








I


(a) Frixluclion Suicmcnl (as indicated in Paragraph 6).


(b) Value of Production and Pricing Statement (a» indicated in Paragraph 7).


(c) Cost Recovery and Shore Account Statement (oh indicated in Paragraph 8).


(d) Statement of Expenditures and Receipts (ns indicated in Paragraph 9).


(c) Final End-of-Ycar Statement (as indicated in Paragraph 10).


(0 Budget Statement (at indicated in Paragraph 12).


1.4.4 All reports and statements shall be prepared in accordance with the Contract.


Kurdistan Region l aw. and where there are no relevant provisions of either of these,


in accordance with prudent international petroleum industry practice.


1.5 Language and Units of Account


All Accounts shall be maintained mid prepared hi the English language and shall he


recorded in Dollars. Whore necessary for clarification, the CONTRACTOR may


also maintain Accounts in other currencies.


1.6 Audit and Inspection Rights of lb* GOVERNMENT


In addition to the provisions of Articles 15.3 to 15.7 and 15.9. the following


provisions shall apply to any audit earned out in accordance wrth .Articles 15.3 lo


15.7:


1.6.1 For purposes of auditing, the GOVERNMENT, acting reasonably and in accordance


with prudent mtcmotional petroleum industry practice, may examine and verify, at


reasonable time* upon reasonable prior written notice to the CONTRACTOR, all


charges and credits relating to the Petroleum Operation*, such as books of account,


accounting entries, material records and inventories, vouchers, payrolls, invoice! and


any other document*, correspondence and records including electronic records


reasonably considered necessary by the GOVERNMENT lo audit and verify the


charges and credit*, values and treatments


I 62 Furthermore, the auditors shall have the nght to connection with such audit, to visit


and inspect at reasonable times, all sites, plants, tacil.no.. warehouses and office* of


the CONTRACTOR directly or indirectly serving the Petroleum Operation* and to


question personnel associated with those Petroleum Operation*.


163 Where the GOVERNMENT requires verification ot charge* made by an Affiliated


Company of the CONTRACTOR, the GOVERNMENT shall have the right to


obtain an audit certificate for such changes from an internationally recognized firm of


public accountant* acceptable to both the GOVERNMENT and the


CONTRACTOR which may be the CONTRACTOR * statutory auditor


1.6.4 All agreed adjustments resulting from an audit dull be promptly made m the


CONTRACTOR 'S Accounts and am consequential adjustments to payments due to











:


 Production Storing (V«i» m t Siifrn





(he CONTRACTOR or to the GOVERNMENT, us tho case may be, shall be made


promptly.


1.6.4 When issues are outstanding with respect U> an audit, the CONTRACTOR shall


maintain the relevant documents and permit inspection thereof until the issue is


resolved.


1.7 Payments


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


Contract:


1.7.1 All payments between the Parties shall, unless otherwise agreed, be in Dollars and be


made through a bank designated in writing by each receiving party; and nil sums due


under the Contract shall be paid within thirty (30) days following the end of the


Month in which the obligation to make such payment occurred.


1.7.2 All sums due by one party to the other under the Contract shall, for each day such


sums are overdue, bear interest compounded monthly at LIBOR plus two per cent


(2%).


1.8 Currency Exchange Rates


In addition to the provisions of Article 29, die following provisions shall apply to any


exchanges of currency carried out in accordance with Article 29:


1.8.1 Amounts received and Petroleum Costs incurred, shall be converted from other


currencies into Dollars in accordance with ihe CONTRACTOR'S usual accounting


procedures which shall relied generally ucccptcd accounting practices in the


international petroleum industry, and With reference to exchange rales obuined in


accordance with Article 29.


1.9 Accrual Basis. Cash Flow Basis and Reports


All books and Accounts shall be prepared on an accrual basis m accordance wuh


generally accepted accounting principles used in the international petroleum industry


1.10 Values and Treatments


Values and treatments proposed by the CONTRACTOR relating to all Petroleum


Costs shall be subject to challenge by the GOVERNMENT in the course of audit to


ensure that they are in accordance with the provisions of this Accounting Procedure.





PARAGRAPH 2 CLASSIFICATION, DEFINITION AND ALLOCATION OF


COSTS AND EXPENSES


2.1 Segregation of Costs and Expenses


Petroleum Costs shall be segregated in accordance with the purposes lor which such


Petroleum Costs are made. The purposes which shall qualify are:





3


 ProJ*i*m i





(a) those which have been included in Ihc approved Work Program and Hudget


for Ihc year in which ihc Coni* and Expenditures arc made;


(b) expenditures incurred in CMOS of emergency as set out in Article* 11.7, 13.5.


13.9 35.5, 35.6 und any other Articles of the Contract;


(c) any other purposes agreed in the Articles of the Contract; and


(d) other items which have been agreed by the Parlies from time to time.


All Petroleum Costs recoverable under Paragraph 3 relating to Petroleum Operations


shall be classified, defined and allocated a* vet out below.


2.2 Exploration Costs


f xploration Costs arc all direct ami allocated indirect costs and expenditures incurred


in car tying out the Exploration Operations, including all direct and allocated indirect


costs mid expenditures incurred in (he search lor Petroleum in an area which m, or was


at the time when such costs and expenses were incurred, part of the Contract Area


including:


2.2.1 Acnal, geophysical, geocliomicol, paleontological, geological, topographical and


seismic surveys and studies and their interpretation and purchased geological and


geophysical information


2.2.2 Stratigraphic test hole drilling and water well drilling


wells with the object of finding Petroleum or Appraisal Wells excluding any costa of


the subsequent completion of such w db as producing »dlv


2.2.4 facilities to the extent used in support of the purposes described in Paragraph* 2.2 I.


2.2.2 and 2.2.3. including access roads.


2.2.5 That portion of all service expenditures and that portion of all general and


administrative expenditures directly attributable to Exploration Coats or allocated


thereto on a consistent and equitable basis.


22.6 Any other expenditures incurred in the search for and appraisal of Petroleum after the


Effective Date and not otherwise covered under this Paragraph 22


2J Cm Marketing Costs


Gas Marketing Costs arc all direct and allocated mdirecl cost, and cxpenchtures


incurred in earning out Gas Marketing Operations and include that portion of all


service expenditures and that portion of all general and administrative expenditures


directly attributable to Gas Marketing Costs or allocated thereto on a consistent and


equitable basis











4


 Development Costs are all direct and allocated indirect costs and expenditures


incurred in carrying out Development Operations including all direct and allocated


indirect costs and expenditures incurred in:





2.4.1 Drilling wells which arc completed as producing wells and drilling wells for purposes


of producing from a Petroleum reservoir, whether these wells are dry or producing


and drilling wells for the injection of water or gas to enhance recovery of Petroleum


2.4.2 Completing wells by way of installation of casing or equipment or otherwise after a


well has been drilled for the purpose of bringing the well into use as a producing well


or as a well for the injection of water or gas to enhance recovery of Petroleum


.’ 4.3 The costs of Petroleum production, transport and storage facilities such as pipelines.


How lines, production and treatment units, wellhead equipment, suhsuitace


equipment, enhanced recovery systems, Petroleum storage fncllllios, and access roads


for production activities.


2.4.4 rngincering and design studies for the wells and facilities referred to in Paragraphs


2.4.1.2.4.2 and 2.4.3.


And including that portion of all service expenditures and that portion of all general


and administrative expenditures directly attributable to Development Costs or


allocated thereto on a consistent and equitable basis; and any other expenditure


incurred in the l>cvdopment Operations and no* otherwise covered under


Paragraph 2J.


2-5 Production Casts


Production Costs are all direct and allocated indirect costs and expenditures incurred


in canying out Production Operations, including all direct and allocated indirect costs


and expenses incurred in Petroleum Operations after First Production which are other


i K»w F.x pi oral ton Costs. Gas Marketing Costs, Development Costs and


Decommissioning Costs. Production Costs include that portion of all service


expenditures and that portion of all general and administrative expenditures directly


attributable to Production Costs or allocated thereto on a consistent and equitable


basis


2.6 Dreoramissioaing Costs


Decommissioning Costs are all direct and allocated indirect costs and expenditures


incurred in carry ing out Dccommmiooing Operations and include that portion of all


directly aanbuUwT to Decompiling Costs or allocated thereto on a consistent


Mid equitable basis Mid the Dcccnvntsstaeing Reserve Fund shall be determined on


such basis, ta adsancc of meaning such costs, as presided m Article 31 and. for the


purposes of coal recovery, the contributions to the Decommissioning Reserve Fund


shall be recoverable m accordance with Article 38.











5


2.7 Service Expenditures





Sen ice expenditures are expenditures in support of Petroleum Operations including


warehouses, vehicles, motorized rolling equipment, aircraft, lire and security stations,


workshops, water and sewerage plants, power plant*, housing, community and


recreational facilities and furniture, took and cqupmcnl used in these activities.


Service expenditures m any Calendar Year shall include the costs incurred in such


year to purchase andor construct the said facilities as well as the annual costs of


allocated as specified in Paragraphs 13-5. 2 J. 2 4. 2 5 and 2.6 to Exploration Coats.


Gas Marketing Costs. Development Costs. Protection Costs and Decommissioning


Costs respectively and shall be separately shown under each of these categories


Where service expenditures are made in respect ol shared facilities, the basis of


allocation of costs to Petroleum Operations dull be consistent and equitable and shall


be specified.


2.8 General and Administrative Fxpenditnres





General





18.1 All mam office, field office and general administrative expenditures in the Kurdistan


services





2.8.2 Where the CONTRACTOR is an Affiliate of a group of companies whose


headquarters is Abroad (a ‘'Foreign CONTRACTOR’*), an annual oveihcad charge


shall be mode lor services rendered (excluding the direct expenditures as referred in


Paragraph 3.l.2. by any Affiliate of the Foreign i ONTO ACTOR outside the


Kurdistan Region to support and manage Petroleum Operations under the Contract, or


where the CON I RACTOR. not being u Foreign CONTRACTOR draws upon the


services of an Atliliatc within the Kurdistan Region, an annual overhead charge shall


be made for service* rendered (excluding the direct expenditures as referred in


Paragraphs 3.1.2 (a) and (b» by such Affiliate to support and manage Petroleum


Operation* under the Contract ( Parent Company Overhead").


Parent Company Overhead will be deemed to cover the actual cost (being salaries,


wages and labour burden, employee benefits, travel, hotel and other normally


reimbursable expenses paid by the Affiliate of a CONTRACTOR in accordance wills


it* standard personnel policy in force in the relevant period, provision of office


accommodation ami provision of services reasonably necessary for operation and


maintaining such staff offices) incurred for services rendered by those functions of


CONTRACTOR’S Affiliate, such as. but not limited to. international production


headquarter*, international exploration headquarters, treasury, payroll taxation,


insurance, legal, communication*, computer services, controllers, personnel,


executive administrative management, research and development, central engineering


and process engineering w hich:


(a) cannot, without unreasonable effort and/or expenditure or without the release


of confidential data proprietory to any of the CONTRACTOR’S Affiliates, bo


charged under any other .section of this Annex; and








6


(b) arc properly allocable lo Petroleum Operations under the Contract It is


understood, however, that services performed by the departments listed above


and other corporate departments which directly benefit Petroleum Operations


under the Contract shall he charged as direct costs in accordance with


Paragraph 3.


In respect of the costs of the CONTRACTOR'S Parent Company Overhead, as


described ubove, the CONTRACTOR shall charge monthly to Petroleum Operations


an amount equal to the total of the following:


2.H.2.I F.xploration Overhead


Ihe CONTRACTOR shall be entitled to an annual charge based on a sliding scale


percentage and charged monthly to Petroleum Operations. The basis for applying this


percentage shall be the total of Exploration Costs and Gas Marketing Costs during


each Calendar Year (exclusive of this Exploration Overhead) or traction thereof less


expenditures which have been subjected to the two (2) per cent fee, referred to in


Paragraph 3 I «b). The sliding scale percentage shall be the following:


For the first four million Dollars (US S4.000.000) four per cent (4%)


For the next four million Dollars (US $4,000,000) three per cent (3%)


Over eight million Dollars (US $8,000,000) two per cent (2%)


The foregoing percentages may be reviewed but not more often than annually, anil


any approved appropriate adjustment shall be made, if necessary , prospectively


2 8 2 2 Development. Production and Decommissioning Operations Overhead


The overhead rates applicable lo Development. Production and Decommissioning








(a) The CONTRACTOR’! charge* must be charged as direct charge* whenever


possible. Overhead charge* exist only to compensate the CONTRACTOR s


Affiliates for costs which are properly allocable to Petroleum Operations


under the Contract but which cannot, without unreasonable effort and or


release of confidential data proprietary lo the CONTRACTOR'* Affiliates,


be charged under any other section Overhead costs arc billed monthly.


Overhead must be commensurate with services rendered and based on actual


cost studies but may not exceed an amount calculated as a percentage of


certain annual expenditure* excluding F.xploration Costs and


(b) That percentage as well as the types of expenditures, which affect overhead


and those, which do not. shall be agreed among the Parties





(c) The maximum percentage rate* may be revised by mutual agreement not more


often than annually The initial maximum percentage rales and the type* of


(cl) Overhead charges arc not subject to audit by GOVERNMENT.


(c) The CON I RACTOR shall upon request furnish at the end of each relevant


Calendar Year to the GOVERNMENT a confirmation by its statutory auditor


that the overhead costs actually charged do not duplicate any other charges


und that the method used in allocating overhead to Petroleum Operations


hereunder as opposed to other activities is reasonable and in accordance with


generally accepted accounting practices


(0 The COST K ACT OR must budget foe overhead charges,


2.8.3 All general and administrative expenditures shall be regularly allocated as specified in


Paragraphs 2.2.5, 2 3. 2.4, 2.5 and 2.6 to Exploration Costs. Gas Marketing Costs,


Development Com*. Production Costs and Decommissioning Costs respectively and


shall be separately shown under each of these categories.





PARAGRAPH 3 COSTS, EXPENSES, EXPENDITURES AND CREDITS OF THE


CONTRACTOR


3.1 Costs Recoverable Without Further Approval of the GOVERNMENT


The following Petroleum Costs incuncd by the CONTRACTOR pursuant to the


Contract as classified under the headings referred to in Paragraph 2 shall be


recoverable for the purpose of Article 25 of the Contract (except lo the extent


provided in Paragraph 4 or elsewhere in this Annex) without the requirement foe


obtaining any further approval of the GOVERNMENT, subject to audit as provided


for in Article 15 and in Paragraph 1.6.








of surface


of the C











(a) The CONTRACTOR'S locally recntiSed employeet hosed m the Kurdistan


Region: Costs of all CONTRACTOR'S locally rccniitcd employees who arc


directly engaged in the conduct of Petroleum Operations under the Contract in


the Kurdistan Region Such costs shall include the costs of salaries, wages,


bonuses, overtime, employee benefits and GOVERNMENT benefits for


employees and levies mposed on the CONTRACTOR as an employer,


transportation and relocation costs within the Kurdistan Region of the


employee and such members of the employees family (limited to spouse and


dependent children) as required by law or cuatormry practice in the Kurdistan


Region. If such employees arc engaged in Other activities in the Kurdistan


Region, in addition to Petroleum Operations, the cost of such employees shall


be apportioned on a time sheet basis according to sound and acceptable


accounting principles.














*


(b) Auigmrd Prrurmet Costs of silanes and wages including bonuses of the


CONTRACTOR s employees directly engaged m the conduct of the


assigned. irrespective of the location of such employees, it being understood


that in the case of those personnel only a portion of whose time is wholly


dedicated to Petroleum Operations under the Contract, only that pro-rata


portion of applicable salaries, wages, and other costs as delineated in


Paragraphs 1.1.2(c). (d). (c). (0 and (g). shall be charged and the basis of such


pro-ruta allocation shall be specified.


(c) The CONTRACTOR’S costs regarding holiday, vacation, sickness and


disability benefits and living and housing and other customary allowances


applicable to the salaries and wages chargcublc under Paragraph 3.1.2(b).


(d) Expenses 01 contributions made pursuant to assessments or obligations


Imposed under Law which are applicable to the CONTRACTOR'S cost of


valiino and wages chargeable under Paragraph 3.1.2(b)


(e) The C TINTRACTOR's cost of established plans lor employees' group life


insurance, hospitalization, pension, stock purchases, savings, bonus, und other


benefit plans of a like nature customarily granted to the CONTRACTOR’S


employees, provided however that such costs arc in accordance with generally


accepted standards in the international petroleum industry, applicable to


salaries and wages chargeable to Petroleum Operations under


Paragraph 3.1.2(b).


(0 Actual transportation and travel expenses of employees of C ONTRACTOR,


including those made for travel and relocation of the expatriate employees,


including their families and personal effects, assigned to the Kurdistan Regie*


whose salaries and wages arc chargeable to Petroleum Operations under


Paragraph 3.1.2(b).


Actual transportation expenses of expatriate personnel transferred to Petroleum


Operations from their country of origin shall be charged to the Petroleum Operations


I ransportation expenses of personnel transferred from Petroleum Operations to a


country other than the country of their origin shall not be charged to the Petroleum


Operations Transportation cost as used in this section shall mean the cost of freight


and passenger service, meals, hotels, insurance and other expenditures related to


vacation and transfer travel and authorized under the CONTRACTOR'S standard


personnel policies The CONTRACTOR shall ensure that all expenditures related to


transportation costs are equitably allocated to the activities, which have benefited


from the personnel concerned.


chargeable to Petroleum Operations under Paragraph 3.1.2(b) and for which


expenses such personnel are reimbursed under the CONTRACTOR s


I he cost of transportation of employees, equipment, maicnab and supplies other than


as provided in Paragraph 3.1.2(f) necessary for the conduct of the Petroleum


Operations under the Contract along with other related costs such as. but not limited


to. import duties, customs fees, unloading charges, dock fees, and inland and ocean


freight charges











(a) Third Parries


The actual costs of contract services, services of professional consultants,


utilities, and other services necessary for the conduct of the Petroleum


Operations under the Contract performed by third parties other than an


Affiliate of the CONTRACTOR


(b) Affiliates of the CONTRACTOR


(i) Professional and Administrative Services Expenses cost of


professional and administrative services provided by any Affiliates of


the CONTRACTOR for the direct benefit of Petroleum Operations,


including services provided by the production, exploration, legal,


procurement, financial, insurance, accounting and computer services


divisions other than those covered by paragraphs 3.1.4 (b)

and 3.1.8 (b> which CONTRACTOR may use in lieu of having its


own employees, Such charges shall reflect the cost of providing their


services Such charges 'hall not include any element of profit and shall


he no more or less favourable than similar charges for other operations


carried on by the CONTRACTOR and its Affiliates, The chargeout


rate shall include all costs incurred by Affiliates incidental to the


employment of such personnel including all Labour and Associated


I ubour Costs and the exist of maintaining and operating offices and


providing all support services for such personnel. Costs of travel of


such personnel in respect of Petroleum Operations will be directly


charged The charges for such services shall not exceed those


prevailing if performed by non-Affiliated third parties, taking into


account the quality and availability of such services. Where the work is


performed outside the home office base of such personnel, the daily


rule shall be charged from the date such personnel leave the home


office base where they usually work up to their return thereto,


including days which are not working days in the location where the


work is performed, excluding any holiday entitlements derived by such


personnel from their employment at their home office base.


(ii) Scientific or Technical Personnel: cost of scientific or technical


personnel services provided by any Affiliate of the CONTRACTOR


for the direct benefit of Petroleum Operations, which cost shall be


charged on a cost of service basis and shall not include any element of


profit. The chargcout rate shall include all costs incurred by Affiliates








10


 incidental lo the employment of such personnel including all Labour


and Associated Labour Coats and the cost of maintaining and operating


offices and providing all support services for such personnel costs of


travel of such personnel in respect of Petroleum Operations will be


directly charged The charges for such services shall not exceed those


prevailing if performed by non-affiliatcd third parties, taking into


account the quality and availability of such services Unless the work


to be done by such personnel is covered by an approv ed Work Program


and Budget, the CONTRACTOR shall not authorize work by suck


personnel without approval of the GOVERNMENT





SntX UK COMRACrORSU - rate* comment





with the cost of ownership and operation, prov ided. however, that such


rales shall not exceed those currently prevailing for the supply of like


equipment and facilities on comparable terms in the area where the


Petroleum Operations arc being conducted and shall be on an amt’s


length basis. On the request of the GOVERNMENT, the


CONTRACTOR shall provide the GOVERNMENT with evidence


of such rates being on an arm’s length basis (If the GOVERNMENT


considers that any such rale is not on an ami's length basis then the


GOVERNMENT has the right to refer the matter to an expert


pursuant lo Article 42 2 of the Contract). The equipment and facilities


referred to herein shall exclude major investment items such as (but


facilities and other major facilities, rales for which shall be subject to





separate agreement with the GOVERNMENT





3.1.5 Communications


Cost of acquiring, leasing, installing, operating. repairing and maintaining


communication systems including radio and microwave facilities within and between


the Contract Area and the CONTRACTOR’S nearest base facility.








Net to the CONTRACTOR of any


directly the


If an i the net


shall be











(a) Coats incurred in the Contract Area as a result of legislation for archaeological


ami geophysical surveys relating to identification and protection of cultural


site* or resources;














II


 (b) Of ecological survey* required by regulatory











(O Coat* lo provide have










responsibilities resulting therefrom as may be required by applicable law* and





Cost* of restoration of the operating environment incurred pursuant to an





approved achane prepared in accordance with Article 38 of the Contract;


(0 Any costs incurred for the decommissioning of facilities and vile restoration,


including any related activity required by the GOVERNMENT or other


<*> competent authority or by the Contract, and





Any contributions made by the CONTRACTOR to the Decommissioning


Reverse Fund in accordance with Article 38. w hen such contributions arc








Cost* of materials and supplies, equipment, machines, tools and any other goods of a





similar nature used or consumed in Petroleum Operation* subject to the following


(a) Acquisition - the CONTRACTOR shall only supply or purchase material*





for use in Petroleum Operations that may be used in the foreseeable future


The accumulation of surplus stocks and inventory shall be avoided so far as is


reasonably practical and consistent with efficient ami economical operations.


Inventory levels shall, hosvever, take into account the time lag for


replacement, emergency needs, weather conditions affecting operations and


similar considerations


(b) Component* of cost*, arm's length transaction* - except ns otherwise


provided in paragraph 3.1.8(d), material purchased by the CONTRACTOR


in arm's length transactions in the open market for use in the Petroleum


Operations under the Contract shall be valued to include invoice price lesi


trade and cash discounts (if any), licence fees, ptuebiiM’ and procurement fees


plu* freight and lonvurding charges between point of supply and point of


shipment, freight to port of destination, insurance, taxes, customs duties,


consular fees, excise taxes, other item* chargeable again*! imported material*


and. where applicable, handling and transportation expense* from point of


importation to warehouse or operating sue Where an Affiliate of the


CONTRACTOR has arranged the purchase, coordinated the forwarding and


expediting effort, it* coils should not exceed those currently prevailing in


normal arm'* length transactions on the open market and in any ease shall not








12


 Production Sharing Comiaci - Safin








exceed a fee equal lo (wo per cent (2%) of the value of (he materials added lo


(he cost of (he material* purchased


(c) Accounting - such material costs shall be charged (o (ho accounting records


and books in accordance with the "First in. First Out" (FIFO) method;


(d) Material purchased from or sold to Affiliates of the CONTRACTOR or


transferred from other activities of the CONTRACTOR to or Horn Petroleum


Operations under tins Con true I shall be valued and charged or credited at the


prices specified in Paragraphs 3.1 X(dM0. 3.l.8(dXii) and 3.I.X(d)(iii):


(i> New material, including used new material moved from inventory


(Condition "A"), shall be valued at the current international net price


which shall not exceed the price prevailing in normal .inn's length


transactions in the open market.


(li) Used material (Conditions “B". T and "D";


(A) Material which is in sound and serviceable condition and is


suitable lor re-use without reconditioning shall be classified as


Condition "H" and priced at seventy five per cent (75%) of the


current price of now material defined in Paragraph 3.l.8(d)(i);


(It) Material which cannot be classified as Condition “B" but which


after reconditioning will lie further serviceable for its origiiuil


function shall be classified as Condition ~C~ and priced at not


more than fifty per cent (50%) of the current price of new


material as defined in Paragraph 3.1 HidK0- The cost of


reconditioning shall be charged to the reconditioned material


prov ided that the value of Condition 'XT' material plus the cost


of reconditioning do not exceed the value of Condition "B"


material;


(Q Material which cannot be classified as Condition ~B“ or


Condition "C shall be classified as Condition “D" and priced


at a value commensurate with its use by the CONTRACTOR


If material is not fit for use by the CONTRACTOR it shall be


disposed of as junk


(iii) Material involving erection costs shall be charged at the applicable


condition percentage of ihc current knockcd-down pnee of new


material as defined in Paragraph 3.l.8(d)(i) -


(iv) When the use of material u. temporary and its service lo the Petroleum


Operations under the Contract docs not justify the reduction in pnee as


provided for in paragraph 3.l.8.(dNii)0>X such material shall be priced


on a basis that will result in a net charge to the accounts under the


Contract consistent w ith the value of the serv ice rendered














13


 .Storing ConlracI • Saffw








(v) Premium prices - whenever material is not readily obtainable at


published or listed prices because of national emergencies, strikes or


other unusual causes over which the CONTRACTOR has no control,


the CONTRACTOR may charge Petroleum Operations for the


required material at the CONTRACTOR’S actual cost incurred in


providing such material, in making it suitable for use, and in moving it


to the Contract Area; provided notice in writing is furnished to the


GOVERNMENT of the proposed charge prior to charging Petroleum


Operations for such material and the GOVERNMENT shall have the


right to challenge the transaction on audit.


(vi) Warranty of material furnished by the CONTRACTOR the


CONTRACTOR docs not warrant the material funmhed. In ease of


defective material, credit shall not he passed to Petroleum Operations


until adjustment has been received by the CONTRACTOR from the


manufacturers of the material or their agents


(vii) Adjustments arising from material inventories conducted in accordantc


with Paragraph 5.2.


(c) Equipment of the CONTRACTOR charged at rates not to exceed the average


commercial rates of non-affiliated third parties for equipment, facilities,


installations and utilities for use in the area where the same are used On


request, the CONTRACTOR shall furnish a list of rates and the basis of


application. Such tales shall be revised when found to be either excessive or


insufficient, but not more than once every six (6) Months.


Drilling tool* and other equipment lost m the hole or damaged beyond repair


may be charged dl replacement cost less depreciation pluv transportation costs


to deliver like equipment to the location where used


(D Use of leased or hired machinery andfor equipment in the Petroleum





Operations shall be charged at full cost to the CONTRACTOR This may


include mobilisation and dc mobilisation charges, leave and hire fees, as well


as other contractual costs.





All rentals of every kind and nature levied by any GOVERNMENT and all Taxes


imposed in connection with the CONTRACTOR’» assets, income or activities under


the Contract and paid directly by the CONTRACTOR or any CONTRACTOR


Entity (save where the contrary is expressly provided in the Contract) with the


exception of Taxes (but only those Taxes described in Article 31 3), bonus payments


Capacity Building Payments, and any other payments made under Article 32.


If the CONTRACTOR, any CONTRACTOR Entity or any of its Affiliated


Companies is subject to income or withholding tax as a result of services performed at


cost for the Petroleum Operations under the Contract its charges for such serv ices


may be increased by the amount required to cover such taxes (grossed up) including


taxes on such gross up.





14


 ProdHClhm iVAtiflw C'uiwn* '• Stiffit





Insurance premiums and costs incurred for insurance carried for the benefit of the


Petroleum operations provided that such insurance is customary. atTords pnKlcnt


protection against risk and is at a premium no higher than that charged on n


competitive basis hy insurance companies which arc not Affiliated Companies of the


CONTRACTOR l-xccpl in cases of failure to insure where insurance coverage is


required pursuant to the Contract, actunl costs and losses incurred shall he recoverable


to the extent not made goixl hy insurance unless such losses result solely from on act


of wilful misconduct by the CONTRACTOR. Such costs may include repuir und


replacement of properly in the Contract Area resulting from damages or losses


incurred hy fire, Hood, storm, theft, accident or such other cause.


3.1.11 Legal Expenses


All reasonable costs and expenses resulting from the handling, investigating,


.•'setting, defending, or settling of any claim or legal action necessary or expedient for


the procuring, perfecting, retention and protection of the Contract Area, and in


defending or prosecuting lawsuits involving the Contract Area or any third party


claim arising out of the Petroleum Operations under the Contract, or sums paid in


res|>cct ot legal services necessary” for the protection of the joint interest of the


GOVERNMENT and the CON I RACTOR shall be recoverable. Such expenditures


shall include attorney's tecs, court costs, arbitration costs, costs of investigation, and


procurement of evidence and amounts paid in settlement or satisfaction of any such


litigution and claims provided such costs arc not covered elsewhere in the Annex


Where legal services arc rendered in such matters by salaried or regularly retained


lawyers of the CONTRACTOR or an Affiliated Company of the CONTRACTOR


such compensation shall be included instead under Paragraph VI.2 or 3.1.4(b) as


applicable





) | 12 Claims





lodgement or other expense anting out of or relating to Petroleum Operations, except


as may otherwise be covered elsew here in the Annex.











All costs and expenses incurred by the CONTRACTOR in the training of its


employees engaged in Petroleum Operations under the Contract


3.1.14 General and Administrative C'OflS


T he costs described in Paragraph 2.8.1 and the charge described in Paragraph 2 8.2























15


3.1.16





Other reasonable expenditures not covered or dealt with in the foregoing provisions of


Paragraph 3 which arc necessarily incurred by the CONTRACTOR for the proper,


economical and efficient conduct of Petroleum Operations.


3.2 Credit Under the Contract


The proceeds, other than the proceeds from the sale of Petroleum received from


Petroleum Operations under the Contract, including the items listed below dull be


credited to the Account* under the C ontract for the purposes of Article 25 of the


3.2 I The proceeds of any insurance or claim or judicial awards in connection with


Petroleum Operations under the Contract or any assets charged to the Accounts under


(he Contract where such operations or assets have been insured ami the premia


charged to the Accounts under the Contract


3.2.2 l egal costs charged to the accounts under Paragraph 3 1.11 and subsequently


recoverable by the CONTRACTOR.


3.2.3 Revenue receiv ed from third panic* for the use of property or assets the cost of which


hat been charged to the Accounts under the Contract.


3.2.4 Any adjustment received by the CONTRACTOR from the supplier* manufacturers


or their agents in connection with a defective material the cost of winch was


previously charged by the CONTRACTOR tothe Accounts imiei the Contract


3.2.5 Rentals, refunds, including refunds of taxes paid, or other credits received by the


CONTRACTOR which apply to any charge winch has been made to the Accounts


under the Contract, but excluding any award granted to the CONTRACTOR under


arbitration or expert proceedings


3.2.6 Costs originally charged to the Accounts under the C ontract for materials


subsequently exported from the Kurdistan Region or transferred to another Contract


Area within the Kurdistan Region


3.2.7 Proceeds from the sale or exchange by the CONTRACTOR of plant or facilities used


m Petroleum Operations the acquisition costs of which have been charged to the


Accounts

3.2.8 Proceeds derived from the sale or license of any intellectual property the development


costs of which were incurred pursuant to and are recoverable under the Contract


Proceeds derived from the sale, exchange, lease, hire, transfer or disposal in any


3.2.9


manner whatsoever of any other item the costs of which have been charged to


Petroleum Operations














16


3.3 Duplication of Charge* and Credits





Notwithstanding any provision to the contrary in this Accounting Procedure, there


shall be no duplication of charges or credit* to the Account* un.ict the Contract


PARAGRAPH 4 - COSTS AND EXPENSES NOT TO HI. TREATED AS


RECOVERABLE


The following costs and expenditures shall not be mcliMlcd in the Petroleum Costs


recoverable under Article 25:


4.1 Taxes on income or profit paid to any GOVERNMENT authority except Taxes and


duties that may be included in the costs of mutarinl and equipment purchased for the


Petroleum Operations:


4.2 Any payment made to the GOVERNMENT by reason of the failure of the


CONTRACTOR to fulfil its Minimum Exploration Obligations in respect of the


relevant Sub-Period under the Contract.


4.3 The cost of any letter of guarantee, if any. required under the Contract;


4.4 The bonuses. Capacity Building Payments, or other payment* ret out in Article 32 of


the Contract;


4.5 Cost* of marketing or transportation of Petroleum beyond the Delivery Point


(excluding Gas Marketing Carts);


4.6 Attorney * fees and other carts of proceedings in connection with artMtnuoo under


Article 42 of the Contract or internationally recognised independent expert


determination as presided in the Contract or this Accounting Procedure


4.7 Any interests, fees, costs and expense* paid by the CONTRACTOR for loan* and


any other form of financing or advances for the financing of the Petroleum Costs


entered into by the CONTRACTOR with third panic* or Afiiliatcd Companies.


4 8 Any accounting provision for depreciation and or amortisation, excluding any


adjustments in value pursuant to Paragraph 3.1.8;


4.9 Dividends, repayment of equity or repayment of intercompany loans,


4.10 Fines and penalties imposed under Law.


PARAGRAPH 5 - RECORDS AND VALUATION OF ASSETS


5.1 Records





The CONTRACTOR shall


Petroleum Operations under








17


 Sharing CM**v Safin











5.2 Inventories


Inventories of property in uw in Petroleum Operations shall he taken at reasonable


intervals hut at least once a year with respect to movable assets and once every three


(3) years with respect to immovable assets The CONTRACTOR shall give the


GOVERNMENT at least thirty (30) days written notice of its intention to take such


inventory and the GOVERNMENT shall have the right to be represented when such


inventory is taken.


failure of the GOVERNMENT to he represented at an inventory shall bind the


GOVERNMENT to ncoepl the inventory taken by the CONTRACTOR


The CONTRACTOR shall clearly inform GOVERNMENT about the principles


upon which valuation of the inventory has been based The CONTRACTOR shall


make every effon to provide u» the GOVERNMENT a full report on such inventory


within thirty (30) days of the takmg of the inventory . When an assignment of rights


under the Contract takes place the COM RACTOR may. at the request of the


assignee, take a special inventory provided that the costs of such inventory are home


by the assignee.


PARAGRAPH 6 PRODUCTION STATEMENT


0.1 Production Information


Without prejudice to the rights and obligations of the Parties under Article 16 ot the


Contract, from the date of First Production from the Contract Area the


CONTRACTOR shall submit a monthly production statement u> the


GOVERNMENT showing the following information separately for each prudmmg


Development Area and in aggregate for the Contract Area:


6.1.1 The quantity of Crude Oil produced and saved


I 2 I he quality characteristics of such Crude Oil produced and savod.


6.1.3 The quantity of Natural Gas produced and saved.


6.1 <1 Hie quality characteristics of such Nuturul Gas produced and saved.


h. I ' Fite quantities of Crude Oil anil Natural Gas used for the purposes of lurrying on


drilling and production operations and pumping to field storage.


6.1 6 rhe quantities of Crude Oil and Natural Gas unavoidably lost.


6 I 7 The quantities of Natural Gas Hared and vented.


6 I 8 11k sire of Petroleum stocks held at the beginning of the calendar Month in question.


6 I 9 The Si/c of Petroleum slocks held at the end of the calendar Month in question








18


6.1.10 The quantities of Natural Gas reinjected into the Reservoir.





6.1.11 In respect of the Contract Area as a whole, the quantities of Petroleum transferred at


the Measurement Point. All quantities shown in this Statement shall be expressed in


both volumetric terms (Barrels of oil and cubic meters of gas) and in weight (metric


tonnes).


6.2 Submission of Production Statement


The Production Statement for each calendar Month shall be submined to the


GOVERNMENT no later than ten (10) days after the end of such calendar Month





PARAGRAPH 7-VALUE OF PRODUCTION AND PRICING STATEMENT


7.1 Value of Production and Pricing Statement Information


The CONTRACTOR shall, for the purposes of Article 25 of the Contract, prepare a


statement providing calculations of the value of Crude Oil produced and saved during


each Quarter.


This “Value of Production and Pricing Statement" shall contain the following


information:


7.1.1 The quantities and prices realized therefor by the CONTR ACTOR in respect of sales


of Natural Gas and Crude Oil delivered to third parties made during the Quarter in


question.


7.1.2 The quantities nnd prices realized therefor by the CONI K ACTOR in respect of sales


of Natural (ins nnd Crude Oil delivered during the Quarter in question, other thun to


Third Parties,


7.2 Submission of Value of Production and Pricing Statement


The Value ol Production and Pricing Statement for each Quarter shall Ik submitted to


the GOVERNMENT not later than ten (10) days after the end of such Quarter.


PARAGRAPH 8 - COST RECOVERY AN!) SHARE ACCOUNT STATEMENT


H.l Cost Recovery Statement


The CONTRACTOR shall prepare with respect to each Quarter a Cost Recovery'


Statement containing the following information:-


K. I. I Recoverable Petroleum Costs carried forward from the previous Quarter, if any.


K 1.2 Recoverable Petroleum Costs for the Quarter in question


8.1.3 Credits under the Contract for the Quarter in question.








19


 ft mAh mm Shmtg C. Stffm





8.1.4 Total Recoverable Petroleum Costs for the Quarter in question (Paragraph 8.1.1 plus


Paragraph 8.1.2. not Of Paragraph 8.1.3).


8.1.5 Quantity and value of Petroleum applied to cost recovery' pursuant to Article 25 taken


by the CONTRACTOR for the Quarter in question.


8.1.6 Amount of recoverable Petroleum Costs to be carried forward into the next Quarter


(Paragraph 8.1 4 net of Paragraph 8.1.5).


8.2. Cumulative Production Statement


The CONTRACTOR shall prepare with respect to each Quarter a Cumulative


Production Statement containing the following information:


8.2.1 The cumulative production position at the end of the Quarter preceding the Quarter


and Month in question.


8.2.2 Production of I sport Petroleum for the Quarter in question.


8.2.4 The cumulative production position at the end of the Quarter in question.


8.2.5 The amount of Petroleum applied to Royalty pursuant to Article 24, cost recovery


pursuant to Article 25 and Profit Petroleum pursuant to Article 26 taken by the


GOVERNMENT and by the CONTRACTOR, respectively, dunng the Quarter in


question.


8.2.6 The forecast of production and the share of Petroleum applied to Royalty pursuant to


Article 24. cost recovery pursuant to Article 25 and Profit Oil pursuant to Article 26


due to the GOVERNMENT and tothe CONTRACTOR, respectively, for the next


succeeding Quarter and Month.


8J Preparation and Submission of Cost Recovery and Cumulative Production


Statements


8.3.1 Provisional Cost Recovery and Cumulative Production Statements, containing


estimated information where necessary, shall be submitted by the CONTRACTOR


on the last day of each Quarter and Month for the purposes of Article 25 of the


Contract.


8.3.2 Final quarterly Cost Recovery and Cumulative Production Statements shall be


submitted within thirty (30) days of the end of the Quarter in question


8.4 Annual Statement


For the purposes of Article 25 of the Contract, an Annual Cost recovery and Cumulative


Production Statement shall be submitted within ninety (90) days of the end of each


Year. The Annual Statement shall contain the categories of information listed in


Paragraphs 8.1 and 8 2 for the Year in question, separated into the Quarters of the


Year in question and showing the cumulative positions at the end of the Year in


question with respect to cumulative unrccovcrcd Petroleum Costs and Cumulative


Production








20


 PARAGRAPH*-STATEMENT Of EXPENDITURE! AND RECEIPTS





9.1 The CONTRACTOR shall prepare with respect to each Quarter a Statement of


Expenditure and Receipts under the Contract. The Statement w ill distinguish between


Exploration Costs. Gas Marketing Costs. Development Costs. Production Costs and


Decommissioning Costs and will identify major items of expenditures within these


categories The Statement will show the following


9.1.2 Cumulative expenditure and recedes far the budget Calendar Year m questun


9.1.3 I atest forecast cumulative expenditures at the Calendar Year end.


9.1.4 Variations between budget forecast and latest forecast and explanations thereof.


9 2 The Statement of Expenditure and Receipts of each Quarter shall be submitted to the


GOVERNMENT no Inter than thirty (30) days after the end of such Quarter





PARAGRAPH If-FINAL END-OF-YEAR STATEMENT


The CONTRACTOR will prepare a Final End-of-Year Statement The Statement will


contain information as provided in the Production Statement, Value of Production and


Pricing Statement. Cost Recovery and Cumulative Production Statements and Statement of


Expenditures and Receipts but will be based on actual quantities of Petroleum produced and


ST^ieots made by the CONTRACTOR under theComract The final End oTYcar


Statement of each Calendar Year shall be submitted to the GOVERNMENT within ninety


(90) days of the end of such Calendar Year.














PARAGRAPH II-AUDITS


Each such report and statement provided for m Paragraph 6 through 10 shall be considered


true and correct, unless the GOVERNMENT raises an exception thereto within the


timeframe and under the process set out in Article 15 of the Contract


























21


 /VuAnfiiui .Wuirtnir Co«t«* I ■ SOfrn











PARAGRAPH 12 - ANNUAL WORK PROGRAM AM) BUDGET


II. | Each annual Work Program and Budget lo be prepared in accordance with Ankle*


11. 12 and 14 of the Contract in respect of Exploration Cost*. Ga» Marketing Costs.


Development Costs and Production Costs respectively will show the following:


11 l .l Forecast expenditures for the budget Calendar Year in question including a quarterly


classification of such expenditures.


III, 2 t umululivc expenditures to the end of said budget Calendar Year.


11.1.3 A schedule showing the most important individual items of Development Costs (if


applicable) for said budget Year.


PARAGRAPH 13-CONTRACTOR ENTITY INCOME TAX COMPUTATION


13.1 For the purpose of Article 31.3(b) of the Contract, the net taxable profits of each


CONTRACTOR Entity from all the Petroleum Operations coined out under this


Contract, shall be calculated in accordance with this Paragraph


13.2 Each CONTRACTOR Entity shall maintain for each Calendar Year separale


Accounts with respect to the Petroleum Operations which shall be used, oner alia, to)


establish a profit and loss account and a balance sheet which will show the results of


liabilities assigned or directly related thereto. The profit and loss account will be


maintained under the accrual method of accounting


13.3 For purposes of determining the net taxable profits of each CONTRACTOR Entity


for corporate income tax purposes:


13.3.1 the profit and loss account of such CONTRACTOR Entity shall be credited w ith the


following:


(a) if the Royalty is paid in cash pursuant to Ankle 24. revenues arising from the


disposal of Royalty volumes as recorded in such entity's Accounts and


determined in accordance with the provisions of Aniclc 24;


(b) revenues arising from the disposal of uny Available Petroleum to which such


entity is entitled for recovery of its Petroleum Costs as recorded in its


Accounts and determined m accordance with the provisions of Aniclc 25;


(c) revenues from the disposal of any Profit Petroleum to which such entity is


entitled under Ankle 26 as is recorded in Us Accounts and determined in


accordance with the provisions of Article 26;











22


 Pro4m1*m .Vituri-* ( »«*.*« - .V<«Am





(d) any other revenues or proceeds directly connected to the Petroleum Operations


including those arising from the disposal of related Petroleum substances, or


front the treatment, storage and transportation of products for third parties;


(c) any exchange gains realised or other financial income earned hy such entity in


connection with the Petroleum Operations;


13 3.2 the profit and loss account for such CONTRACTOR Entity shall be debited with all


charges incurred for the purposes of the Petroleum Operations whether incurred inside


or outside the Kurdistan Region, which charges shall include the following:


(a) in addition to the charges specifically set forth below in this Paragraph, all


other Petroleum C osts, including the costs of supplies, personnel and


manpower expenses, and the cost of services provider! to the


CONTRACTOR In connection with the Petroleum Costs;


(b) it the Royalty is paid in cash pursuant to Article 24, Royally payments made


and as recorded in such entity's Accounts and determined in accordance with


the provisions of Article 24;


(c) General and administrative expenditure* related to the Petroleum Operations


performed under this Contract;


(d) depreciation of capital expenditure in accordance with the following


provisions:


(i) capital expenditures incurred by the CONTRACTOR Jar the purpose*


of the Petroleum Operations shall be depreciated on a reducing balance


(n) the depreciation rates, which shall be applicable hum the Calendar


Year during which such capital expenditure* are incurred, or from the


Calendar Year during which the assets corresponding to said capital


expenditures are put into normal service, whichever it lalcr, for the


first Calendar Year m question and for each subsequent Calendar Year,


arc as follows:


Nature of the capital asset to be depreciated Annual depreciation Rate








Permanent buildings 10.0%


Temporary buildings 200%





Office and be me furniture and fixtures 20.0%


Productive w 200%





id delivery equipment 20.0%








23


 Drilling equipment 20.0%


Pipelines 20.0%


Automotive equipment 20.0%





Marine and aviation equipment 20.0%


20.0%


All other capital assets








(c) Exploration Costs (which foe the avoidance of doubt include appraisal


expenditures) shall be deductible on a reducing balance basis at the rale of


20% per annum.


(0 interest and fees paid to creditors of the CONTRACTOR, for their actual


amount:


(g) losses of Assets resulting from destruction or damage, assets which are


renounced or abandoned during the year, assets which are transferred under


Article 20.2, bad debts, indemnities paid to third parties as compensation for


damage:


(h) any other costs, expenses, losses or charges directly related to the Petroleum


Operations, including exchange losses realised in connection with the


Petroleum Operations H* well as the bonuses. Capacity Building Payments, or


other payments provided in Article 32, the Exploration Rental provided in


Article 6.3, the Production Rental provided in Article 13.10, the allocation to


training, provided in Article 23.7, the allocation to the Environment Fund


provided in Article 23.9, the costs specified in Articles 23.11. 38 I and 38.6,


and transportation and marketing costs beyond the Delivery Point;


(i) the amount of non-offset losses relating to the previous Calendar Years, which


shall be carried forward tor an indefinite period until full settlement of said


losses oi termination of this Contract;


13.3.3. The net profit of such CONTRACTOR Entity shall be equal to the difference


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


account; and


(a) if this amount is negative, it shall constitute u loss.


(b) if the amount is positive, it shall be grossed up to lake account of the fact that


such entity’s corporate income tax is being settled out of the


GOVERNMENT'S share of the Profit Petroleum in accordance with Article


31.2. by applying the following formula in order to provide such entity’s net


taxable profits for corporate income tax purposes:


Net Taxable Net Profits/' (J00 • Applicable Rale of Coipoiatcincome.Tax )


Profit*^ 100








24


 F'raducJton Sharing Contract - Safcn














13.4 For purposes of determining each CONTRACTOR Entity’s liability to corporate


income tax for a tax year in respect of the Petroleum Operations earned out under this


Contract, the net taxable profits (if any) for such tax year shall be multiplied by the


applicable rate of corporate income tax. as provided in Article 31.3(a).



























































































































































25


 Asst* <


fPKM vr.FE














Guarantee

















BY

















Marathon Oil Corporation

















in r Avon or














The Kurdistan Regional Government of Iraq




















(S*fen Bloch PSC)







































































I


 -Sa*«








GUARANTEE








THIS GUARANTEE, dated is bv:


(1) Marathon On CORrORATlON. a rorporatMn incorporated under the laws of the State ot


Delaware. United States ol America (the "Guarantor")


in favor of


(2) The Kurdistan Regional Government op Iraq (the "Beneficiary').








The Beneficiary has entered into a I’roductlon sharing Contract (the “PSC”) dated l_|


October 2010 with Marathon Petroleum KDV It V. (the PSC «ompany"), an indirect


subsidiary of tiie Guarantor. In respect of the Safeu block In the Kurdistan Region ol Iraq


The delivery of the Guarantee it a requirement of. and Is delivered pursuant to, the PSC








1. Definitions; Interpretation


1.1 Definitions


1.1.1 Unless defined In thtt Guarantee, term* defined In the PSC have the name moaning


in this Guarantee.


1.12 As used In this Guarantee:


"Beneficiary” it defined In the preamble.


" Huai nest Day" means a day on which banks are open for general btutlncw In


Londoa England and New York City, United Scales of America.


'Demand rs defined m clause 22.


'Guaranteed Obligations' is defined in clause 21.


'person* means any individual company, corporation, firm, partnership, joint


venture, association, organisation, state or agency of a stale or other entity, whether


or not having separate legal personality.


"PSC* bdefined in the Recital


"PSC Company" is defined in the Recital


1.2 Construction and Interpretation


1.2.1 Any reference to a clause oc annex rs. unless otherw ise stated, to a ciauu* nr


annex of this Guarantee


1.2 2 Any reference to an " Artide" is to an "Article" of the PSC.


1.2.3 Headings and sub-headings are for ease of reference only.


2. Guarantee


2.1 Guaranteed Obligations


The Guarantor guarantees, to the Beneficiary, the due and punctual payment and in the


manner and currency prescribed by the PSC for payments by the PSC Company, within 5


Business Days after receipt of written demand for payment as provided in clause 2.2


(IVmand) of all sums payable by the PSC Company pursuant to Article 7.5 of the PSC








2


 22





the Guarantor has reeric rdi» nllen drmand for payment (the


Guarantor shall make payment to the Ifenetmary by wire


within 5 Business Days after mnpt of a Drmand A Demand


(a) make specific reference to th» Guarantee.





(b) state the amount that « demanded and which components of the Guaranteed


Obligations are the Mibpct of the Drmand:


(C) State that the h*» not received payment of the


and





fd) » wire untrucluns for the pay mere cd the Demand.








1. Nature of Guarantee


XI Th* Guaranty - an atwofcato. uncomlmunal and .rrevocabie guarantor of paymmt


when due and no* of oflestkex and whether by accrferaram or otfwwwe.


3.2 The Bcnrfidary It not nrt(ulred to evrcltr any right assert any daun or drmand. or


enforce any remedy what*»v*r again* the P5C Company or any other person before, or


im a condition to, cxcrclnlng any of the right*, powers, or retnedw conferred upon the


Bcncfictuy by Him Guanntoo or by applKable law. Without limiting the fpwrahfy of the


foregoing. the Beneficiary will not be required to (i) tike any a.ti «n t» «*>um ru.lgn-m in


any court against the PSC Company, or (it) to make or file any claim or pn.rf In a


winding up or dissolution of 'he PSC Company





33 Eccep* as provided In clause 22 (O-raooA the Guarantor hrrct>y oprmdy waive*




















(b) wgl not be cuvudered vatWicd by any mlrrmedialr payment of the PSC





(c) will conbnue m full force and eflecl unt.l the Guaranteed Obligation* have been


paid in full to, and received by, the Government m accordance wMh tlw PSC.























granted to the PSC Company in respect of any of thr Guaranteed QNgatinwc














3


 ProilMKon Sharing Contract - Soft*





(c) any change in the time, manner, nr place ot payment of, or any other term of, all or


any of the Guaranteed Obligation*, or any other cxlcnnlon or, compromise of the


PSC Company, provided that none of the foregoing increases the amount of the


Guaranteed Obligations;


(d) any reduction, limitation, impairment, or termination of any part of the


Guaranteed Obligations for any reason. Including any claim of waiver, release,


surrender, alteration, or compromise.


(e) any increase in the amount payable In imped of any Guaranteed Obligation,


provided that the Guarantor has provided its prior written consent to any such


increase which expressly states Guarantors intention that this Guarantee will


apply to such increased amount;


(0 the termination of the PSC or termination ot tin- PSC Company'll rights under the


PSC, or any withdrawal or abandonment by the PSC Company of its interests


under the PSC;


(g) any direct or indirect change in the ownership of the PSt (imi|Mny, Including by


merger, amalgamation, by law, or otherwise,


(h) any transfer all of any part of the PSC Company's interest* under or in reaped of


the PSC;


(i) any dispute or claim the PSC Company may have against the Beneficiary,


(i) the Insolvency or bankruptcy of, or similar event affecting, the INC' c innpany;





or


(j) any other circumstance or combination of circumstances which might odwrvre*


constitute a defer** available to. or a legal or equitable discharge of. the PSC


Company


36 The Guarantor waive* any right to or daim of any drtm* or ictoff. countodaim,


recoupment or termination by rr**on of (0 «hc invalid**, illegality, non-genuuienesv


irregularity, compromise, uncnhxcc ability of. or any other event or occurrence affecting,


any Guaranteed Obligation. (■) any claims vt.ufy or liabtlitir* of the PSC Company to


the i ,uarantur or the Beneficiary; (ill) any claim*. wt-ofh, or liabihUn of die Guarantor in


respect of the Benrhctary; (tv) or any othrr reason whatsoever.


3 7 This Guarantee will continue to be ifh.li woe br rcttwloaod. a. too ca«e may be. if at any


time any payment (in whole or in part) ol any of the Guaranteed Obligations is rescinded


or must otherwise be restored by the Beneficiary upon the insolvency, bankruptcy, or


reorganization of the PSC Company or othcrwi*c, all a* though such payment had not


been made Any settlement ot di*chirgo between tlie (.uarantor anil the Beneficiary will


be condition.il upon no payment by the PSC Company, or any other pernon, to die


Beneficiary on the PSC Company'll behalf being avoided or reduced by virtue of any laws


relating to bankruptcy, Insolvency, liquidation, or similar laws.








4. Taxes


•I I The Guarantor shall make .ill payments to the Beneficiary in accordance with the PSC





and free and clear of, and without deduction for. any present or future lax.-*,


withholding or other charges of any nature whatsoever imposed by any taxing


authority.














4


 PnMhcHim Shunnv l'«m( •





42 If any withholdlnc or deduction from any payment lo be slack- by (Ik- Guarantor n


required in respect of any boo, then lla- Guarantor shalL


(a) pay directly lo the relevant authority die full amount retired to be so withheld or


deducted;


(b) promptly forward lo the Beneficiary an official receipt or other documentation


MtidiHtory to tin* Beneficiary evidencing such payment to such authority; and


(c) pay to the Boiuiflclary such additional amount or amounts as is necessary to ensure


that the ncl amount actually received by the Beneficiary will equal the lull amount


the Beneficiary would have received had no such withholding or deduction been


required





4.1 If any taxes are directly averted against the Beneficiary with respect to any payment


received by the Beneficiary from the Guarantor pursuant to this Guarantee, thru


(a) the Beneficiary may pay such taxes; and


(b) the- Guarantor dull Indemnify the Beneficiary against any claim, demand, .noon,


liability, damages. cost. lews, or expert*? (including legal fee- and any apptk able


value .tddrxl tax) which the Beneficiary incurs as a result or arising out of or In


relation to any failure to pay or delay in paying any of any such tax, and promptly


pay such additional amounts (including, if incurred as a result of Guarantor’s or


the PSC Company's action, omission or dday, any penalties, interest or expenses)


as necessary so that the net amount received by the Beneficiary, after the payment


of such l.nc* (including any taxes on such additional amount), will equal the


amount the Beneficiary would have received had such taxes not been asserted.





5. Benefit; Assignment


S I The Guarantee enures to the berw-tit ot ttv* Beneficiary and its (and


successors and each of which shall be mulled to enforce this Guarantee against








12 The an or any of u» rights. I


allot any of its rights and








6. Severability


unenforceable in any respect under the Ians of any (uiNdklton. neither (I) the legally. valhluy or





enforceability of the remaning provision* herexif nor (ii) the legality, validity or enforxxrabdlty of


«u»h provision under the laws of any other ru rixUiion will in any such case, in any way be


allotted or impaired thereby.








7. Notices


71 Address for notices to Guarantor


I hr Beneficiary shall:


(a) make any Demand or provide any nolle? and other communication to the


Guarantor in respect of this Guarantee in writing;


(b) address such Demand, not**-, or Other communication as provided in daUM-7.1(cX*


and








5


 (c) use m of the follow ing method* (o deliver »uch Demand ex other nobcc or


communication, each of which, for purposes of thb agreement. o a venting. (0


personal detiveiy; (n> email (followed by delivery of the Demand, notice or


communication by an counerh or (in) a reputable, Internationally recogn^d air


couner. with all fees prepaid, and sent to the Guarantor








Marathon Oil Corporation


Attention: Treasurer


Address:





5555 San Felipe Road


Houston, Texas 77056


United States of America


(Telephone for air courier • I (71.1) 296*1959)


Email: PCRctnboH&'MdialhoiiOilcom


7.2 Effectiveness as to Guarantor





72.1 A Demand, notice or other communication will be effective as to the Guarantor


only if (i) the Bem-fi. iary hn« complied with this clause 7 and (ii) the Guarantor has


received the Demand, notice, or oilier communication.


72.2 If a Demand, notice or other communication Is delivered in person, it will bo


deemed received by the Guarantor by the date set forth In the signed receipt


73.3 If the Beneficiary sends a I Vnuind, notin', or other communication by a reputable,


internationally recognised alt courier In accordance' with clause 71, the Demand,


notice, or other communication will be deemed received by thr Guarantor by the


dale set forth m the signed receipt.


724 If Bencfmary wndsa Demand, notice,othercommumcation by email and the


email trarwnivion b followed by delivery of the Demand, notice, or other


communication by air courier in accordance with riauw 7.1, the Demand, notice, or


other communication shall be denned to have been delivered to the Guarantor


when the email is received by the Guarantor.


7^ Notices to Beneficiary


The Guarantor shall give all notoce* or other communications to the Beneficiary in


connection with thb Guarantee in the same manner as prescribrd in the P5C fur kMki-v


to the Beneficiary





7.4 Change of Addre*.


The Guarantor or the Beneficiary may change its address as set forth in dame 7 by a


notice to the other In accordance with this clause 7.





8. Term


Thb Guarantee b effective as of I . Subject to dau* 3.7. this Guarantee shall


cease to be effective upon discharge of all of the'





9. Representatlons and Warranties


The Guarantor represents and warrants:











6


This


 11_3 No (allure or delay in ecCKUing any right or remedy, or in requiring the satisfaction of


by the Guarantor or tlte Bererficiary. and no act


of dealing between the Beneficiary and the Guarantor, will operate as


a waiver or estoppel of any right, remedy, or condition.





12. Governing Law


Hii* Guarantee and all matters arising from or connected with it are governed by English law














ISignaturepagepUows.l


Received and accepted for and on behalf of the Gov ms mi m O* no Kurdistan Region Of


IRAQ














Br..........................................


On bchall of the RICION Ai COUNCI I


ior mi on and Gas AnAiRsor me Kurdistan Region - Iraq














Br.....................-...................


On bchall of the Ministry of Natural Resources in thi


Kurdistan Region

















I Signature page At Guarantee of Marathon Oil Corporation in favor of the Government of the KurJntan


Regain (Safen) I



























































9