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© 2013 Kurdistan Regional Government, KRG


© 2013 Kurdistan Regional Government, KRG


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PRODUCTION SHAKING CONTRACT


BETWEEN AND AMONG


live KURDISTAN REGIONAL GOVERNMENT OE IRAQ (the “COTernnunO;





AND


MURPHY CENTRAL DOHU'K OIL CO., LTD., a company established and existing


under the laws Of the Commonwealth of The Bahamas, having its registered office at Fast


Bay St.. P O. Box SS-190*4, Nassau, Bahamas (' Murphy-);


AND





PF.TROQUEST PETROL VE ENERJt SAN A VI TiCARET LIMITED §|RKETL a


company established and existing under the laws of Turkey, having its registered office at


Mayu Akar Plaza Knt: 16 D.62 Esentcpc Istanbul, Turkey ("Pctroquesf"),


(each a “Party" and collectively the “Parties");





WHEREAS





(A)


The Governmeat wishes to develop the petroleum wealth of the Kurdistan Region (as


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


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


principles and encouraging investment, consistent with the Constitution of Iraq


including Article 112 thereof;





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


Region is Cite Kurdistan Region law (as defined in this Contract), except with regard


tC) to a matter wholly within the exclusive jurisdiction of the Government of Iraq.


The Government intends to present to the National Assembly Of the Kurdistan





Region a law or laws to authorise the Government, by contract or other authorisation,


to exempt investors in long term projects relating to the conduct of petroleum


operations in the Kurdistan Region from Kurdistan Region taxation, to indemnify


such holders against liability to pay such taxation, and/or to guarantee the viability of


the applicable legal, fiscal and economic conditions of such projects; and


(D) Each Contractor Entity is u company.


(i) with 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) having principles of good corporate citizenship; and





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(fH) willing to cooperate with 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 its people.


(E) The parties affirm commitment to the Principles and Criteria of the Extraction


Transparencies Initiatives, EITL and adherence to its principles and criteria in


executing this Contract.





MOW, THEREFORE, THE PARTIES HAVE AGREED AS FOLLOW S





ARTICLE I - DEFINITIONS


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


unless otherwise specified:


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





Access Authorisation is defined in Article 17.9.


Accounts Is defined in Article 15.1.


Accounting Procedure means the Accounting Procedure attached to this Contract as


Annex B and constituting an integral pan of this Contract.


Adjacent Contract Amt is defined in Article 14.1.


Adjustment Date is defined in Article 27.6.





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


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


(a) controls a Coatractor Entity; or


(b) is controlled by a Contractor Entity ; or


(c) controls or Is controlled by a company or entity* which controls a Coatractor


Entity.


but shall not include the Government in respect of a Public Company. For the


purpose of this definition, “control" means direct or indirect ownership or control of


the majority of the voting rights of the applicable entity at its shareholders' meetings


or their equivalent.


Agreed Terms is defined in Article 14.10(a).


Appraisal Area means the area defined in Article 12.2.


Appraisal W ork Program and Budget is defined in Article 12.2.





Appraisal Report is defined in Article 12.4,























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


potential of a geolog ical feature or a geological structure in which Petroleum has been


discovered.


\raV Length Sale* means sales of Petroleum in freely convertible currencies


between sellers and buyers having no direct or indirect relationship or common


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


Such ArmVI ength Sales shall exclude:


(a) sales between or among any of the f on tractor fatitm and their respective


Affiliates:


(b) sales involving the Government or the Government of Iraq; and







commercial practices.


Asset* means all land, platforms, pipelines, plant, equipment, machinery, wells,


facilities and all other installations and structures and all Matcnah and I'quipmcnL


Amoetated NataraJ Gas means (i) any Natural Gas dissolved in C rude Oil under


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


Oil from a reservoir.


A adit Request Period is defined in Article 15.3(a).





Available Anortalrd Natural Cat is defined m Article 23 I .


Available Crude Oil is defined in Article 25.1.





Available Noa- Aaaoetated Natural Gat is defined in Article 25.1.


Available Pet relearn is defined m Article 25.1.


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


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


(14.7) pil.


Bad gets 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 Gas Marketing Work Program and


Budget and/or a Development W ork Program and Budget and/or a Production Work


Program and Budget


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


January and ending on 31 December of the same year.


Capacity BaUdiag Aceouat means a segregated hank account with a reputable hank


m the name of, and maintained by, the (»uvrraamii, lire vote purpose of which is to


support and finance certain infrastructure and capacity building projects to he


identified by the Government in its sole discretion in the Kurdistan Region.





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Qpadl}1 Building Payment means the obligsticn Of the C on tractor to pay m


amount; eqwl to the Capacity Building Value.


Capacity Buildup Payaieal lull Intent* means each obligation of the Contractor


to pay an amount equal to the Capacity Building Value as provided by Ankles 32.8


through 32.17.


Capacity Build in g Paynicnl: Monthly Sliticincat is defined in Article 32.Stay


Capacity Build Lag Value mean*, in respect or any period of determination, on


amount in Dollars equal to the value, esteblisbed in accordance with Article 2?, of


thirty per cent (30%) of the Contractor^ share of Profit Petrakum.


{".Minnan i8 defined in .Article 1.1 ■





Commercial Dkcoveey means a Discover) which is potentially commercial when


taking into account all technical, operational, coramerL-ial and financial data collected


when carrying out appraisal works or similar operations. including recoverable


reserves of Petroleum. jiustaJnahic regular production levels and other material


technical, opera!tonal. commercial and financial parameters, all in accordance with


prudent inteimationu I petroleum industry practice.


i ommcreial Production means the production of Petroleum from the Production


Area tn accordance with un annual Production Work Program and Budget.


( MstilalLua of Iraq means the permanent constitution or Iraq approved by llw


people of Iraq in the genera l referendum of 5 5 October 20(15,


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





arc an integral part hereof as well as any extension, renewal, substitution nr


amendment or this production Owing contract that may he agreed in writing by the


Marties in iiccofldance with Article 43.7


Contract Area means the area 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


unoxbiicoiv surrender, withdrawal, extension or otherwise.


C^tiact Year means a period of twelve (12) consecutive Months sterling from the


Effective Date or any anniversary of the said Effective Date.


Centractor means, individually and jointly, each Con tractor Entity.





Contractor Entity means Murphy, PetroctuesL and their permitted assignees pursuant


to Article 39. A holder of the Government Interest is not a Contractor Entity . At


any lime wlsen there is only one entity constituting the Contractor, any reference to


“die entities constituting tite Contractor’1 nr the “Contractor Entities'* or similar


reference., shall he .eunnstrued as. “the entity cnmiilutifig the Contractor" As of the


Effective Dale, Murphy and PeCroquCvl own an undivided interest in the Petroleum


Operations in respect of (Ite entire Contract Ana in the following percentages;





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Murphy 50%


l^trogucit 30%


The balance of the interest in Petroleum Operations in respect of the entire Contract


Area, being twenty per cent (20%). is the Government Interest as defined in Article


41*


Crwk Oil means all liquid hydrocarbons in their unprocessed stale or obtained from


Natural Gas by condensation or any other means of extraction.


i ■mutative Costs « defined in Article 26.4.





Caaalative Revenue* is defined m Article 26.4.


Decent missioning Costs means all the costs and expenditures incurred by the


Contractor when carrying out Decommissioning Operations, including those defined


in the Accounting Procedure


IkoMnmiMkMiic Operation means any worts, together with all rebard and


auxiliary activities, for decommissioning andor removal and/or abandonment and


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


relation to any Production Area-


Decom mission tag Plan is defined in Article 347.


Decommissioni■£ Reserve Fnad is defined in Article 341 and includes all


contributions paid into such fund and all interest accumulated such hand.





Deductible Amoaat is defined in Article 35.12.


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


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


Gas and/or Non-Associated Natural Gas is metered for the purposes of Article 27.5,


valued for the purpose* of Article 27.1 and ready to be taken and disposed of,


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


may acquire tide lo it* share of Petroleum under this Contract or such other point


which may he 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.


Develop meat Operations means ail 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 welK primary and subrequent


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


erecting or laying of production plants and facilities (imduding separators;


compressors; generators; pumps and lankagr. gathering lines; pipelines and all








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


storage and tnmvpurtation of Petroleum ); obtaining of such materials., equipment


machinery, ilcim and supplies as may be required or expedient Tor the foregoing


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


product kin of Petroleum Irani the Production Area.


Development Period is defined in Article 6.





Devcfopuiitriti Plan means a plan for dteveUqwWHiI defined In Article- 12,8.


Development Weil means any well drilled after the- date of approval of lihc


'Dcvdapmenit. Ptaai for the purpose off producing; Petroleum, inweastnig or aocebitiiil


production of Petroleum. including injection wells indi dry holes. Any well drilled


within a Production Aren shall be deemed a Development Well.


Development Work Program and Budge! means the development work program


and budget prepared pursuant to Article 13,2-


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


resulting from Petroleum Ppentiore carried out under this Contract, provided such


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


used in prudent international petrol cum industry practice.


Dispute is defined in Article 411.


Dollar IllS Si means the legal currency {dollar* of the United Stales of America


{USA).


Effective Dale means the dale on which the conditions referred to in Article 47 have


been fulfilled.





iMirwnnicmi Fundi Is defined in Artkie 23.9.


Equipment and Material* is defined in Article !$Ul,


hipforadon Com means all the costs and expenditure incurred by the f oilrictor





when carry ing out Exploration Operations* including those defined in the Accounting


Procedure,


Eipforatioa Operation* 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) !u investigate


ihc subsuiliaee for the kicalkin of Petroleurn; drilling ol shot holes, core hoiev and


stratigraphic lest holes: spud, drilling, testing, coring, logging and equipping of


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


equipment, machinery. items and supplies m may he required nr expedient for the


'foregoing activities: and all auxiliary dpsnfklK mdl activities required or expedient


fur the conduct, of the foregoing activities,


Eipforatfoa Period is defined in Article 6,





























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Fiploririoa Keats I k defined in Article 6.3.


I iploratka Well meorn any well drilled for the purpose of confirming a geological


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


Caatraetor.


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


budget prepared pursuant to Article 11.1.


k&port Crude Oil is defined in Article 24.2.





F sport Non-Associated Natural (ias is defined in Article 24.2.


F.spurt Prlrulrnm is defined in Ankle 24.2.


First F.iploratioa 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 cave may be) first commences, by flowing at the


rale forecast in the Development Plan without interruption for a minimum of ftaty


eight (48) hours


Force Majeure ts defined in Article 40.2.


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


Gas Development is defined in Article 14.10.


Gas Marketing Coats means all costs and expenditure incurred by the Contractor


when earning out (»a\ Marketing Operations, including those defined in the


Accounting Procedure.


Gaa Marketing Operations means any and ail of the activities and operations


contemplated by Article 14.6


Gas Marketing Work Program and Budget means the marketing work program


and budget prepared pursuant to Article 14.8.


Government Interest is defined in Article 4.1.


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


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


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


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


by any of the foregoing.


International Markrt Price is defined in Article 27.2 .


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











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Joint Operating Agreement means ihe agreement executed by the Contractor


F iiMm tor the purpose of regulating between such entities the terms under * tilth the


Petroleum Operations will be conducted. whkh agreement shall be: (a) baaed upon


the 2002 Association ol International Petroleum Negotiators C*AIPN") Model Joint


Operating Agreement and consistent with prudent international petroleum industry


practice; (b) as between such entities, supplementary to this Contract and (c)


consistent w ith the provisions of the Contract.


Kardbtaa 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.


knrriwtua Region Law means all statutes, decrees, edicts, codes, orders, rules,


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


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


in the Kurdistan Region.


Kurdistan Region Oil aad (ias Ian means the Oil and Gas Law of the Kurdistan


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


law means all applicable laws including the following: constitutional law . civil law.


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


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


territorial, provincial, federated, national nr any other duly constituted governmental


authority or agency


LCIA is defined in Article 42.1(b).


LIBOR means the London Inter-Hank Offered Rate at which Dollar deposits for one


(I) Month arc offered in the inter-hank market in Ixmdon. as quoted in the Financial


Times of I ondon for the day in quest ion In the event that such rate is not published in


the financial Times, it shall mean the London Inter bank Ottered Kate at which


Dollar deposits for otic (1) Month are offered for the nearest day as quoted by


National Westminster Hank pic.


Loaa or Expense is defined in Article 32.13(c).





Management Committee is defined m Article 8.


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





Miaimam I tploration Obligations is defined m Ankle 10.1.


Minimum Financial Commitment means:


(a) in respect of the First Sub-Period, the amount set out in Article 10.2(d); and





(b) in respect of the Second Sob-Period, the amount «l out in Article 10.3.


Month means a calendar month according to the Gregorian calendar.











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Qurter means a period of three (3) consecutive Months sorting on the first day of


January . April July w October respectively.


Reservoir means a subsurface rock formal*** containing an individual and separate


natural accumulation of producible Petroleum characterised by a single natural


pressure system.


Revenues is defined in Article 26.4.





•R" Factor is defined in Article 26.4.


Rights Sale means a sale, assignment or other disposal of the Cov era meat* rights


to receive Capacity Building Payment Instalments from the Contractor, whether foru


lump sum payment or in instalment payments, and whether the purchaser assumes all


payment risk and all risk as to the amount of Capacity Building Pay ment Instalments,


or otherwise.


Roy alty is defined in Article 24.1.


Second Exploration Well it defined in Article 10.3.





Sernad Sub-Prriod is defined m Article 6.2(b) Semester means a period of six (6)


consecutive Months starting from the first day of January or July respectively.





Senior Represeatatives is defined in Article 42.1(a)


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


undertaking worts relating to the Petroleum Operations directly or indirectly on


behalf of the Coa tractor or any Contractor Fa tits


Nab-Period and Sab-Period* are defined in Article 6.2.


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





impositions, imposts, withholdings, fees, taxes (including vahic added tax or ocher


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


duty, land tax. reghtraiion tax. capital and wealth tax, profit lax, dividend tax or


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


withholdings, lax on income hum movable capital and fixed tax on transfers! or


contributions payable to or imposed by the C«owi*acnt.


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


Contractor pursuant to this Contract and forming part of an fxplofatkin Work


Program and Budget and/or an Appraisal Work Program and Budget and/iv a

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


Budget anchor a Production W ork Program and Budget


Vke-CfeairaMB h defined in Article S. I.


1.2 In this Contract unless the context otherwise requires or b specifically otherwise


staled:








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' Point 1 atitudr (deg 14ingitude (deg X (mF) Y (mN)


in in see) min see)


1 A 37 03 06 42 35 19 285 577 4103 317


B 37 05 23 42 40 25 293 2441 4107 347


37 05 41 42 57 01 317 832 4107 347


1) 37 01 4* 42 57 10 317911 4100 106


rf 36 59 21 4301 06 323 658 4095 715


36 51 30 42 54 33 313 506 40X1 106


G 36 51 26 42 50 24 307 438 4081 106








I he Government. bv euculion ol this Contract. hereby validates and approves the foregoing


co-ordinates of the C ontract Area


The total area of the Contract Area ma> be reduced only in accordance w ith the provisions of


this Contract.











ARTICLE 4 - GOVERNMENT PARTICIPATION


The (iovcrmcal shall participate in this Contract through a Public Company,


effective from the I fleetivc Oaic in respect of the entire C ontract Area with on


undivided interest in the Petroleum Operations and all the other rights, duties,


obligations and liabilities of the Contractor (save as provided m and subject to this


Article 4) under this Contract m respect of the Contract Area, of twenty per cent


(20%) (the “Government Interest i


The Public Company will not have any liability hi the Contractor In contribute its





Government Interest share of all Petroleum Costs. Petroleum Costs are the exclusive


obligation of the Contractor I antics m accordance with each Contractor f arm s


respective participating interests in the Contract, hach Contractor Entity is entitled


I through the Cootractor) to recover all such Petroleum Costs in accordance with


Ankle 25. (he Public Company shall contribute ib share of Production Bonuses


attributable to the liovcvnmcial Interest and payable pursuant to Articles 32J and








For the purposes of Article 37 of the Kurdistan Region Oil and Gas l aw. the


Government Interest shall be deemed lo be held by the (*ov era went and in


accordance with the principle m Artkk 16.13. the PuMk Company will he


indo (dually and separately liable (and not jointly and severally liabk with the


Coatractor Katibei) to the (vovcramcat for ib obligations, duties and liabilities


under this Contract and the provisions of Artkle 4.5 shall apply.





The Public Company may. at ib discretion, assign pan or ail of K> Government


I merest to a third party or parties which is another Public l umpany duly authorised


by the (voverament, provided that in no event shall a transfer be made which would











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


dissolution of the Operator; or


(b) if the Operator term males the activities under thb Contract delegated to it b>


the Coafraetor or a material proportion thereof, and. as a result the


Contractor fails to fulfil its obligations under the Contract.


AKriCLC * - TERM or Ton CONTRACT





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


below:


Urtwiflw Ptrlvti





6.2 The Exploration Period shall be for ur initial term of five (5) Contract Years,


extendable on a yearly basis (as provided in Ankles 6.5 and 6.6) up to a maximum


period of seven f7) Contract Years starting from the Effective Date The initial term


of five (5) years shall he subdivided in two sub-pennds as follows


(a) an initial sub-period of three (3) Contract Yean < "First Sub-Period”), and





(b) a second sub-period of two (2) Contract Yean ("Second Sab-Period”),


each a "‘.Sab-Period * and collectivefy "Sab-Periods**


ll is understood that the right of the Contractor to accede to the next Sub-Period or


any extension thereof pursuant to Article 6.6 shall be subject to fulfilment of the


Minimum Exploration Obligations or minimum work obligations applicable to the


previous Sub-Period or extension thereof pursuant to Article 6.6 (as the case may be).


6.3 During the fxplorutMMi Period, the Coatrartor dial I pay to the fuiverwrat. in


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


relinquishment from time lo time pursuant to Article 7, of ten Dollars (US SIO) per


squire kilometre per Contract Year (“F.sploratioa Rental”) Such Exploration Rental


shall be considered as a Petroleum Cost and shall he recovered by the Coatrartor in


accordance with the provisions of Articles I and 25.


6.4 If the Coatrartor decides not to enter into the Second Sub-Period, it shall notify' the


f Kwrmnsent at least thirty (30) days prior to the expiry of the First Sub-Period, and


the Exploration Period shall expire at the end of the First Sub-Period, unless the First


Sub-Period has been extended pursuant to Article 6.5 or Artkle 6.6.


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


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


(a) to deciding lo submit an Appraisal Work Program and Budget as provided


under Article 12.2 in respect of a Discovery, or


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


with Article 12.6(a) or 14.5(a). which additional work may include the





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preparation and/or execution of an Appraisal Work Program and Budget as


provided under Article 12.2 aml/ur Gas Marketing Operations.


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





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


Period of seven (7) Contract Years, (as provided in Article 6.2). The Contractor's


notification of its intention to exercise such extension and its duration shall be


submitted in wiling to the Ciovcramcat at least thirty (30) days prior to the end or


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


be)





6.6 W ithout prejudice to Article 6J. upon expiry of the initial term of the Exploration


Period, if the Contractor considers it has not completed its exploration evaluation of


the Contract Area, the Goveraawnt shall grant an extension of the Second Suh-


Pcnod, provided the Contractor submits a request to the (Govern meal in wiring at


least thirty (30) days prior to the end of such Sub-Period, together with a proposal for


a minimum work obligation for such extension. Any such extension shall not exceed


one Contract Year. Upon the expiry of such extension, if the Contractor considers H


has still not completed its evaluation of the Contract Ansa, the (Jiivcrwacsl shall


grant a further extension of one Contract Year provided that the Contractor provides


a request to the Gov era nr at in writing at least thirty (30) days prior to the end of the


original extension. The obligation of the Gov era me at to grant the further extension


shall be subject to fulfilment of the minimum work obligations applicable to the


original extension.


6.7 Subject to Article 6.4, at any time during the Exploration Period, upon thirty (30) days


prior notice to the Government, the Contractor shall have the right to withdraw


from this Contract provided that the outstanding Minimum Exploration Obligations


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


Contract, or it has paid to the Government the amounts specified in Article 10.2 or


Article 10.3. w hichever is applicable to the then current Sub-Period.


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


(including any extensions thereof) this Contract shall terminate.





6.9 If a Discovery is made within the maximum I xpioration Period of seven (7) Contract


Yean (as provided in Article 6 .2 k and if the Contractor considers it has not had time


to complete suflkient Gas Marketing Operations to declare the Disco very a


Commercial Discovery pursuant to Article 12.6(a) or 14 .5(a), the Contractor shall be


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


maximum period provided in Article 6.2). provided if w requests the Govrmmraf in


writing at least thirty (30) days prior to the end of the maximum Exploration Period,


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


extension. If granted by the Government any such extension shall not exceed two (2)


Contract Years Upon the expiry of such extension, if it considers it has still not


completed its Gas Marketing Operations relating to such Discovery, the Contractor


shall be entitled to request a further extension of two (2) Contract Years provided that


it id requests the Government in writing at least thirty (30) days prior to the end of


(he original extension, together with a proposal (or Gas Marketing Operations to be


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DevtlwiifiI Period


6.10 If the C on tractor considers that a Discovery of Crude Oil and any Associated Natural


Gas is a Commercial Discovo). the Coa tractor shall have the exclusive right to


develop and produce such Commercial Oiscomy. pursuant to the terms of this


Contract The Development Period for a Commercial Discovery of Crude Oil and


any Associated Natural Gas shall be twenty (20) years commencing on the declaration


of such Commercial Discovery by Contractor, in accordance will) Article I2.6

w ith an automatic right to a five (5) year extension.


6.11 If the Con tractor considers that a Discovery of Non-Associated Natural Gas is a


Commercial Discovery, the Contractor shall have the exclusive right lo develop and


produce such Commercial Discovery, pursuant to the terms of this Contract I he


Development Period for a Commercial Discovery of Non-Associated Natural Gas


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


Discovery by Contractor, in accordance with Ankle 12.6(a) or Article 14.5

an automatic right to a five (5) year extension


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


Development Renod as defined in Articles 6.10 or 6.11 then, upon its request, the


Contractor shall be entitled to an extension of such Development Period wider the


same terms as those provided in (has Contract. Such request shall be made in writing


by the Conlrartor at least ux (6) Months before the end of the said Development


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/or







6.13 The Coatractor dull have the right to laminate Production Operations for any


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


notice lo the Government of at least ninety (90) days. This Contract shall terminate


on the expiry daar of the Iasi Production Area nr when Product am (Ipcratmm for all


Production Areas have terminated.











AHTIt l.1 7 - Kr.UNQI ISHMF.NTS


I Subject to the provisions of Articles 7.2 and 7J. the Contractor shall surrender


portions of the Contract Area as follows:


(a) at the end of the initial term of the Fxploration Period referred lo in Article


6.2, including any extensions referred lo in Article 6.5. twenty five pet cent


(25%) of the net area that is determined by subtrac ting the Production Areas


from the initial Contract Area:








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(b) at the end of the fina extension period granted under Article 6.9 after the end


of the initial term of the Hxplonlion Period referred to in Article 6.2, an


additional twenty five per cent (2SS) of the net am determined by subtracting


the Production Areas from the remaining pan of the Contract Area, and





(t) at the end of the Exploration Period I including ail extensions thereof), all of


the remaining area that is not in a Production Area.


7.2 For the application of Article 7.1:


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


areas to be surrendered, and


fb) the < oatractor shall have the right to determine the area, shape and location





of the Contract Area to he kept, provided that such surrendered portions of the


('(attract Area shall be in contiguous blocks.





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


of an Appraisal Area, then these percentages shall he 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 pari of the Contract .Area by written notice sent Id the


(rovernmeal at least thirty (30) days in advance of the proposed dote of surrender,


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


Fxptoration herand 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 ( ontractor elects U)


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 Cioveminent the relevant outstanding


amounts as detailed in Article 10-2 or Article I0J. as the case may be.


7.6 The boundaries of the ponkai of the Contract Area to be relinquished by the


Contractor hill be communicated to the Government by written notice at least


thirty (30) days in advance of the relevant dale fur relinquishment, pursuant to Article


7.4.


AM I K IT H - MANAGEMENT




8,1 A Management Committee shall be established within 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


(loirranrtl and the Contractor shall by written notice nominate its respective


members of the Management Committee and their deputies.











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fT








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





itoxcrimrnl 3 (2) members dcsigru [he ( oatraotor








on len < 10) days noli 1 of (he Gosernmcai and the Contractor may


iKlitule anv of ns members of the Management C Lice. I he chairman of the





gemem C ittee shall be one of the members designated by the Government





*< hiiirman I c-thairman of the Management Committee shall be one


memhen designated h Ihe Cnnlmcfnr (the > lce-< hairnian n line





ibscncc of 0 irman, the








h Party shall have the right to invite a reasonable number ot observers as deemed





iccvssan to attend uie meet mgs of (he Management Lummioee in a noo-voting


capacity








Ihe Management ( ommillcc II review. Jcliheroic. Jcvkjc anu g


rciidmJi lo I low me








matters:








ns and Iw








ills* I on tractor vactivay reports;








production levels submitted by the Contractor. based on prudent international





petroleum industry pt








Acsoun MrON








procurement procedures for poicntial Subcontractors, with an estimated sub¬


contract value in excess of one million Dollars (SI.000.000). submitted b> the





Contractor m accorda with Article 19 V








Ucv it Plan and Budsct lor catch ! LlC 111 HI








anv matter hav ing a material adverse affect on Petroleum Operations;








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


jonsidc








l^h o! the icrantcnl aic i> rtor shall havi





Management Committee. Ihe Management Committee cannot validly deliberate





unless each of the Govern meat and the Coatracior is represented by at least one < I)


of its members or Icnuls








i BMim I attempt u ii iin-in vlct


subject mailer being subm In the event the Management Committee cannot





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





jvs dt subject matter and attempt 1 decision








f.xccpt as provided for in Article 1.4 and A in the event that no





reached ut the second meeting, the Chairman shall have the lie-breaking vote.

















































































































© 2013 Kurdistan Regional Government, KRG





 In the even! that. during the Fvp'oranon Period, no agreement ts reached al the second





meeting of the Management C ommittee, as provided for tn Article 1,3. or





approval tv r*« obtained. as required pursuant to Article I V then the proposal rruwie


b\ the Contractor shall he deemed adopted hs the Manag < otnnmiee











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


approval of the Management Committee shall be required for








approval of. and any material revision to. any exploration Work I i.ii'i


H.... a red alter the first ( ummercial Dux





relating to such Commercial Discovery











approval o( and aay material revision to, the Development Plan. thi


nr\Klia.i»m schedule. lifting schedule and Development and Production Work





PIMP Ml Budget*








establishment oi rules of pruccdurc for the Management Committee.








any insurance issues over which the Management ( iwnmitiec hasauih








approval of. and any material revision to, proem proved i. iil‘,


and or services, submitted by the C lor in accc-nlance with Article 14.3





(unless such procedures have been deemed approved bv the Management





( ommitiec in accordance with Article 19.3);








oppniv any proposed pipeline project





I bs ( on tractor m accordance with Article 33.3








approval of a first rate bonk in WMCh to place the Decommissioning Reserve





f und, m accordance with Article 3* 1;








approval of. and , I Vi mmissMifimg


'l.in Nntttcd pursuant fto Article 18 7 on an\ Decommission Work





Vo gram and Budget or (us Marketing Work Program and Budget;








any i eon if Reference which are required to he prepared and agreed fur the





ol expert determination, f a Ui Artak- 4. .








approval of any costs in excess o! ten per cent (I U%) above any Budget, and








any matter having a material adverse effect on Petroleum Operations








Ordinary meeting* of the Management Committee shall lai in the kurdistan


Region. alternately at the offices of the (•overwmeal and those of the Contrwrlor. or








■t any other location agreed between Parties, at least twice a Contract V ear prior to


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








I ither the frpvcmmcwt <« the Contractor II an cvtnwwdinary meeting of the





(anacement < ill it lev It ■ irip, . issues or developments


nctroleum Operations, subject to giving reasonable prior notice, specif)





mailers to be discussed at the meeting, to the other Parry The Management














































































































© 2013 Kurdistan Regional Government, KRG





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





members have indicated their approval ol :n decisions in such correspondence








Unless at least one (I) member or its depot Ptdi the ( »o\crninca! an ill.-


Con tractor is present, the cement Committee shall be adjourned tor a period





lot to exceed eight 18) davs. The Party being present shall then notify the other Ports





of'die new date time and location for the meeting








The agenda f the Manaucr nt ( oilli mile MM N prcpafiru 6»> the


l outractor in ace ■nee with instruct h thi¬


ns ol laimun an imumcaccu


Parties at least fifteen (15) days prior to the date ol the meeting. The '4li.il I





nclude any subject matter proposed by cither the (»avera at or the C oatractor


Decisions of the Management ( ommrttec mil he made at the meetings he





tractor shall he responsible for reparntg and keej n mutes ol the





made at the meetings. Copies of such minutes shall be (on*aided to each Parts for


review and approval bach Parts shall review and approve such minutes within ten





(10) days of receipt of the draft minutes. A Party who fails lo notify in writing its





approval or disapproval of such minutes within such ten (10) days shall he


have approved the minutes











< I-' If required, the Management wnmitiee ma request tnc creation ol a lee uo-


commitiee or other sub-committee to assist iL Anv such sufvcommitiee shall be





composed reasonable number of experts from the C »os era meat and he


Contractor each meeting, the technical suh-cummittce or any cm ■ ■*





committee shall deliver a w ritten report to the Management Committee











Any costs and expenditure ■ mmm !.. t on in*.-n»r inertings


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





iru he considered as Petroleum t osls and sha be recovered r\ the Contractor





wuancc with the provisions of Articles I and 25














ARTICLE 9 - GUARANTEES








Each Contractor Entity shall provide the (roseramcal, if so required by the Latter


pursuant to written notice received by the ( detractor I ntiP ithm thirty (30) days





of the Effective Dale, with a to# vale guarantee in a loom as shall be agreed m good





bulb between the Government and each Contractor I nlily nut later than ninety (90)


days after the Effective Dale, provided that h corporate guarantee shall he given





only in respect of the Minimum Financial Commitment for the First Sub-Period and





shall expire automatically' upon completion of the performance of the Minimum


rvnli I HNications set m Article 10 JitJ) ,ir cvncndiiun vitch Minim mu





Financial C ommitm ■■MM i' c-jt:








Noe later than sects (60) da vs after the commencement of the Second Sub-Pernod.





h Contractor Entity snail provide the C*uvcranieat. if to required bs the latter


pursuant to s* otice received hv the ( antrector r atify within thmv (34








I such commencement dale, with a :orpnnue guarantee in























































































































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(a) the form substantially agreed between the Guvenmeat and each Coatractor


Entity for the First Sub-Period. if any. subject to making the changes


necessary in order for the corporate guarantee to apply only to the Second


Sub*Period, or


(b) if there is no agreed form, in a form as shall be agreed in good faith between





the Govrrament and each Contractor Entity not later than ninety (90) days


after the Government's notice.


and provided in each case that such corporate guarantee shall be given only in respect


of the Minimum Financial Commitment for the Second Sub-Period and that such


corporate guarantee shall expire automatically upon completion of the performance of


the Minimum Exploration Obligations set out in Article 10,3 or expenditure of such


Minimum Financial Commitment whichever is the earlier.


9.3 In the event of an assignment by a Coitrartor Entity in accordance with Article 39.


the relevant third party assignee shall provide the Government if so required by the


latter pursuant to written notice given to such assignee within thirty (30) days of the


effective date of the assignment, with a corporate guarantee in the Form agreed


pursuant to Article 9.1 or 9.2, as applicable to the then current Sub-Period or. in the


absence of any such agreed form of corporate guarantor, in a form as shall he agreed


in good faith between the (anrrvmnl and such assignee not to ter than ninety (90)


days after the effective date of the assignment, provided that such corporate guarantee


shall be given only in respect of the Minimum Financial Commitment for the then


current Sub-Period, and shall expire automatically upon completion of the


performance of the Minimum Exploration Obligations vet out m Articles 10.2(d) or


Article 10.3, as the ease may be. or expenditure of such Minimum financial


Commitment, whichever is the earlier. Furthermore, the assignment to the relevant


third party assignee shall reduce the extent of the existing Contractor Entity


corporate guarantee pro rata in accordance with the relevant third party percentage


participation, irrespective of whether the tioveraiacot requires a guarantee of the


third party assignee.











ARTICLE !• - MINIMUM EXPLORATION WORK OBLIGATIONS


10.1 Ihc Contractor shall start Exploration Operations within thirty (30) days of





Management Committee approval of the Exploration Work Program and Budget in


accordance with Article 8. The Contraeior shall perform geological, geophysical


andfar drilling works as provided under Articles 10.2 to 10.3 (the ' Minlamm


Exploration Obligations ‘). If applicable, the said Minimum Exploration Obligations


shall be performed during each Sub-Period in accordance with prudent international


petroleum industry practice.










































































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10.2 During the first Sub-Period, the Contractor stalk





(if carry out geological and gcopffyiici] Judies, ctwiprising the lot lowing:


(i) the compilation of a technical database;


(ii) ihc performance of a remote sensing study; and





(ill) a field visit to verify Initial gcoJogiettl and geophysical wotk and


remote' sensing, results and pta for two dimensional seismic


ppcfukiBlofl;


(b| carry out a. data search few existing, data specific to this Contract Area,


comprising ihc following:


<1) well data, if available, for example, elec irk logs;


(ii) seismic data and gravity data, if avaiLabJe; and


(Hi) reprocess seixmk data, if availibk;





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


and samp ling; and


(d) drill one (I) Exploration Well (the ^Pirat F.tplnratm Weir'), including


testing »nd coring m appropriate, committing for tills purpose a minimum


financial amount of twenty mi I Item Dollars IIJS £30.IUHW0, DOCP}.


10.3 During die Second Sub-Period, the Contractor shall drill one Exploration W ell i dle


“Second Expfarattoa WelD. including testing and coring as appropriate, committing


for this purpoae a minimum financial amount of twenty million Dollars


(US$20,000,000), unless the data from the Find Exploration Well dcmanurain that


there ts not a reasonable tedhnieal case tor drilling tta Second Exploration Wdll 'in ihe


(. onutket Area.


10.4 Notwithstanding the provisions in Articles 10.2 to 10.3. Tor the execution of Ihc


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


(a) Minimum Exploration Obligations in the Second Su*> Period shall only apply


in the event the Contractor has not elected to notify the (iuvcnunrlt that it


will not enter into the Second SulvPtnod. in accordance with and subject to


Article 6.4.


(b) Subject to Article 10.4(a). the Contractor stall be required to meet its


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


entails esceediing the Minimum Financed Commitment, for such Slab-Period.


If the Cuntracfor has satisfied, its Minimum Exploration Obligations wttlwwt


having spent the total Minimum Financial Commilmcn* for such Sub-Period,


it shall ta deemed to tare satisfied its Minimum Exploration Obligation* fin


such Sub-Period.








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ARTICLE II - EXPLORATION WORK PROGRAMS AND BUDGETS


11.1 \k ithin forty-fix 05) day* following the Effective Dale, tfie Contractor ihall


prepart and submil to the Management Committee a proposed work program and


budget relating to Exploration Operations (the ‘'Exploration Work Program a ad


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


in each Calendar Year, the C oatrartor shall submit a proposed Exploration Work


Program and Budget to the Management C ommittee for (he following ( alcndar Year.





11.2 Each Exploration Work Program and Budget shall include details of. but not he


limited to. the following:


(a) work to be undertaken.





(b) material v goods and equipment to be acquired;


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


and/or Affiliated Companies of am Contractor Entity; and





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


Accuunlmg 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 Gov era meal 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 <601 day


penod referred to in Article 11.3 The Contractor shall communicate its csanmcttl.s


on any such requested modifications to the Ciovcrnmenl 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


approved Exploration Work Program and Budget provided that the aggregate amount


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


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


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


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


recovered by the Contractor in accordance with the provisions of Articles I and 25,


provided that any excess expenditures above the ten per coil (10%) limit shall only be


recovered with the unanimous approval of the Management Committee.


11.6 In cases of emergency. the Contractor mas incur such additional expenditures as it





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


expenditures shall be reported promptly to thr Management Committee For the


avoidance of doubt, such additional expenditure shall be oawkftd Petroleum € oats


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


Articles I and 25.





















































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(o) any other operations not rxprcwly provided for in this Omrad but reasonably


necessary fur Development Operations. Production Operations and delivery of


Petroleum produced, in accordance with prudent international petroleum


Industry practice.





12.9 The Management Committee shall use its best efforts to approve the Development


Plan within sixty (60) days after its receipt of such plan. The Development Period for


each CommcrcaJ Discovery within a Development Plan shall be extended for the


number of days in excess of such sixty (60) day period that it takes for the


Management Committee to approve the Development Plan. The Development Plan


shall be considered approved by the Cov era area t if the Government, through its


representatives on the Management Committee, indicates its approval in writing.


12.10 If the Govern area t requests any modifications to the Development Plan, then the


Management Committee shall meet within sixty (60) days of receipt by the


C on tractor of die Government's written notification of requested modifications


accompanied by all the documents justifying; such request, and shall discuss such


request. The Coa tractor shall communicate its comments on any such requested


modifications to the Government at such meeting or in writ mg prior to such meeting.


Any modification approved by the Management t ommittre at such meeting or within


a further period of thirty (30) days from the dale of such meeting shall be incorporated


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


12.11 If the Coa tractor makes several Commercial Discoveries within the Contract Area


each such Commercial Discovery will have a separate Production Area. I he


Contractor dull be entitled to develop and to produce cadi Commercial Discovery


and the Covrraareal shall provide Use appropriate Permits covering each Production


Area. In case the area covered by the Commercial Discovery extends beyond the


boundaries of the Contract Area, and to the extent such area outside the Contract Area


it not the subject of a Petroleum Contract (as defined in the Kurdistan Region t HI and


Gaa Law) with a third parly, the provisions of Article 34.2 shall apply.





ARTIC LE 13 - DEVELOPMENT AMI PRODUCTION WORK PROGRAMS AND


BUDGET





13.1 Upon the approval of the Development Plan by (he Management C ommittee, the


Con tractor shall sun the Development Operations tor the Commercial Discovery in


accordance with the Development Plan and prudent international petroleum industry


practice.








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


Management Committee, the C ontractor shall prepare and submit to the Management


Committee a proposed work program and budget for Development Operations (the


development Work Program and Badger") to he carried out in the Production


Area for the duration of the Development Operations. I hereafter, no later than I


October in each Calendar Year, the Contractor shall submit to the Management


Committee updates in respeci of its Development Work Program and Budget. To
































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enable the Management Committee to fnrecK expenditurev each Development Work


Program and Budget shall include details of the Mluwing:


(a) woiis to be carried out;







(cl type of services to be provided, distaiguishing between third parlies and





Affiliated Companies of any C ontractor Latity; and


(d) categories uf general and administrative expenditure


I3J If any modification to the Development Work Program and Budget is requested by


the Goveramrat. the Management Committee shall meet to diKtra the Development


Work Program and Budget and proposed modifications thereto within sixty 160) days


front its receipt of the proposed Development Work Program and Budget. The


Contractor shall communicate its comments on any such requested modifications to


the Government at the meeting of the Management Committee tv in writing prior to


such meeting.





13.4 The Contractor shall he authorised to incur expenditures not budgeted in an


approved Development Work Program and Budget provided that the aggregate


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


Development Work Program and Budget in any Calendar Year and provided further


that such excess expenditures shall be reported as soon as b reasonably practicable to


the Management t ommittec for the avoidance of doubt, all excess expenditures


shall he recovered by the Goa tractor 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





13.5 la cases of emergency, the Contractor may incur such additional expenditures as it


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


expenditures shall be reported promptly to the Management Committee For the


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


and shall be recovered by the Contractor in accordance with the provisions of Articles


I and 25.


Appro*il uf Annul Predtltw UorV. Pruvraw. ■*< Budget





13.6 No later than I October of the Calendar Year preceding the estimated commencement


of production ptwuanl to an approved Development Plan and thereafter no later than


I October m each Calendar Year, the Contractor shall prepare and submit to the


Management Committee a proposed work program and budget for Production


Operations (the 'Production Work Program aad Badger") for the following


Calendar Year To enable the Management Committee to forecast expenditures, the


Production Work Program and Budget shall include details of the following:


(I) works to be carried out;





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





















































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(c) type of services to he provided, distinguishing between third parties and





Affiliated Companies of any Contractor I atity. and


(d) c«tcgor»e\ of general and administrative expenditure.





If any modification to the Production Work Program and Budget is requested by the


Government, the Management Committee shall meet to discuss the Production Work


Program and Budget and proposed modifications thereto within sixty (AO) days from


its receipt of the proposed Production Work Program and Budget The Contractor


shall communicate its comments on any such requested modifications to the


Government at the meeting of the Management Committee or in writing prior to such


meeting.


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


^proved Production Work Program und Budget provided that the aggregate amount


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


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


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


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


recovered by the Contractor in accordance whh 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 expenditure as it


deems neccvsarv to protect life, environment or property Such additional

















After the commencement of Commercial Production the Contractor shall pay to the


(Uo rrament in arrears, an annual surface rental for the Production Area, of one


hundred Dollars (CSS100) per square kilometre per Contract Year CProduction


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


be recovered by the Contractor in accordance with the provision* of Articles I and


25.








ARTICLE 14 - NATURAL GAS








To take account of specific conditions relating to Natural Gas and to promote its


development in the Kurdistan Region, the Covers aural will grant specific benefits to


the Contractor on principles mmeriaJly similar to those contained in this Contract


including, const stem with the Kurdistan Region Oil and Gas Law. more generous


provisions in respect of the recovery of Petroleum ('oats and the sharing of Profit


Petroleum than in respect of Crude Oil.




































































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14.2 The Contractor may freely use my Natural Gas required for the Petroleum


Operations. If lectaicalty and economically justified, the Contractor shall m priority


uve any Natural Gaa fie the purpose of enhancing recovery of t rade Oil in


accordance s kh prudent international petroleum industry practice as follows


\wiioiid Natural Gas


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


Operations nor developed and sold by the C ontractor shall, upon the Government's


written request, he transferred at the first practicable delivery point as agreed between


the Parties, free of charge to the (.overameat. In such case, the Government shall be


solely responsible for collecting, treating, compressing and transporting such Natural


Gns from such agreed delivery point and shall be solely liable for any additional direct


and indirect costs associated therewith. The com*ruction and c^xrration of required


facilities as well as the offtake of such excess Associated Natural Gas by the


Government stall occur in accordance with prudent international petroleum industry


practice and shall not interfere with the production, lifting and transportation of the


Crude Oil by the Contractor. For the avoidance of doubt, all expenditure incurred by


the Contractor up to such agreed delivery point shall be considered Petroleum Costs


and shall be recovered by the Contractor in accordance with the provisions off


Ankles I and 25.


In the event the Government finds a market for Associated Natural Gns. it shall


promptly give written notice to the Contractor, and the Contractor may elect to


participate in supplying such Associated Natural Gav within ninety (90) days


following notification thereof by the t-nrranett If the ton tractor 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


md shall be recovered by the Contractor in accordance with the provisions of


Articles I and 25.


Non Associated Nataral Gas


14.4 Until an approved Natural Gav vaiev conuacl iv executed in respect of all volumes of





Natural (in* expected lo he produced, the Contractor shall he entitled during Ihe


Exploration IVnad and the Development Period to cart) out (its Mattering


Operations.


14.5 If. pursuant to Article 12.6(d). the Coatractor hats determined that the Discovery is a


significant Discovery of Non-Associated Natural Gas which may become a


Commercial Discovery subject to Gas Marketing Operations. H shall carry out Oil


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


Management Committee specifying that.





(a) the Coatractor has determined that the Discovery k a Commercial Discovery;


Of


(b) the Contractor haa determined that the Discovery is not a Commercial


Discovery.





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14.6 For the purpose of this Contract. “G«* Marketing Operahoas means any activity


under this Contract relating to the marketing of Non-Associated Natural Gas.


including an> evakaukm to find a commercial market tor such Non-Associated


Natural Gas and or U> find a commercially viable technical means of extraction of


such Nun-Associated 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 praential markets to he supplied as well as evaluating the costs of


production, iranspunaiion and dixtrihutiiwi of the Nun*Associated Natural (ias from


the Delivery Point to the relevant market


14.7 All costs and expenditure incurred by the C ontractor in the performance of the


activities in retailor to the Gas Marketing Operations shall be considered Petroleum


Colts.


14.8 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 cnaMc the Management Committee to forecast


expenditures, the lias Marketing Work Program and Budget shall include the


following:


fa) works lo be carried out:





fb) type of services to be provided, distinguishing between third pates and


Affiliated companies of any Contractor Kam%; and


(c) catcgcwies of general and administrative expenditure.





If any modification to the (ias Marketing Work Program and Budget is requested by


the Government the Management Committee shall meet to divuva the Gas


Marketing Work Program and Budget and proponed modifications thereto within sixty


(60) days from iti receipt of the proposed Gas Marketing Work Program and Budget.


The Contractor shall communicate its comments oa any such requested


modifications to the Government at the meeting of the Management Committee or in


writing prior to such meeting


14.9 The Contractor shall be authorised to incur expenditures not budgeted in an


approved (ias 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 W ork 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, h* the avoidance of doubt, all excess expenditures shall be


recovered 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.


14.10 If any Non-Amooaicd Natural (as is discovered within the C ontract Area, and the





C natrmrtor reasonably considers that the Non-Associated Natural Gas Discovery will


only be a Commercial Discovery if certain terms of this Contract are amended, it shall


be entitled lo request amendments to this Contract, with its reasons. The








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Utrnnwnl shall in good faith give reasons hie consideration to the Contractor's


proponed amendment and reasons and the Panics shall in good faith attempt to agree


nn the rvcccvsar. amendments to the Contract If the Panin are unable to agree on


such amendments, md the exploration Period expires without the Contractor having


declared such Discovery to be a Commercial Discovery in accordance a ith Article


12.6(a) or Article 145(a). and subsequently within a period of eight <*) years from the


end of such Exploration Period, the (wnmncil reaches agreement with an) third


party to develop such Discovery (the "Gas DevetopmcaO. then the following


provisions shall apply:


(a) cither before or upon agreement in relation to the Gns tteselopmcnt having


been reached (and whether or not such agreement is recorded in a full) termed


production sharing and/or operating or other like agreement*, hut before such


agreement it signed (the “Proponed Conitract ') (subject only to the rights of


each Contractor Kathy to pre-empt such Proposed Contract pursuant to


Article 14.10(b) and such conditions as may he applicable), the Government


shall, as soon as reasonably practicable after the occurrence of such


circumstances, serve on each of the Contractor F aririe*. a notice In that


effect and shall with such notice provide such information and main terms of


such agreement as the Contractor Entities may reasonably request to


determine if they will exercise their rights (the “Agreed Trrma"). including.


(i) the identity of such third party ;


(li) the effective dale of the lYopowd Contract;





(Hi) the applicable commercial terms, including bonuses, royalties, cost


recovery'- profit sharing, taxation and any other similar terms; and


(iv) all and any material conditions to which the Proposed Contract is





subject


(b) Upon a reguest from any Contractor Fatity. the Cos era meal will provide all


the Coo tractor Entities with such further information and terms as may be


reasonably requested by any Contractor Fatity Whhin one hundred and


eighty days (ISO) days after receipt of a notice and any further information


under Article 14 10(a) in relation to a Proposed Contract each of the


Coatrarlor l a title* 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


Cods incurred under this Contract against all Prtmlcum revenues


received under the Proposed Contract, up to any coat recovery limits


set out therein; or





(ii) to waive the aforesaid right of pre-emption in relation to the Proposed


Contract;


and shall serve notice accordingly upon the Ciwverameal and all the


Contractor E a titles and in default of receipt by the (.over ament of any such








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notice within such period of one hundred and eight> (180) days such


Contractor Parity shall he deemed conclusively to have served a notice


electing to waive its aforesaid right of pre-emption in relation to the Proposed


Contract.


(C) In the event that more than one of the C eatraetor Parities exercises its rights


under Article 14.100>X>) in relation to the Proposed Contract then the


(rfivrnnral shall transfer or grant each such Contractor Fa lit} an interest


in the Proposed Contract upon the Agreed Terms (In accordance with Article


l4.l(l(bMi)) in the prupurtuns 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 ( oatractor rarities shall agree between


them


(d) In the event that one of the Contractor Parities exercises its rights under


Article M.I0(bXi) in relation to the Proposed Contract then the (ioverament


shall transfer or grant the whole of the interest in the Proposed Contract upon


the Agreed Terms (In accordance with l4.IO(bXi)) to such Con tractor Parity.


(c) In the event that none of the C ontractor Parities exercises its rights under


Article l4.IO(bHt) then the (ioirrsanl may enter into the Proposed


Contract on terms no more favourable to its counterparty than the Agreed


Terms and. in such case, the aforesaid rights of pre-emption shall thereupon


cease to apply in relation to the Proposed Contract


14.11 If the pre-emption rights in Article 14.10 are not exercised and the (krvcraaacal





enters into the Proposed Contract with the third party concerned, the Goveramcal


will use its best endeavours to avoid any effect which may hamper the Petroleum


Operations of the ( oatractor while producing Petroleum.





Haring


14.12 Flaring of Natural Gas in the course of activities provided for under this Contract, is





prohibited except (i) short-term flaring up to twelve (12) Months necessary for testing


or other operational reasons m accordance with prudent international petroleum


industry practice (which shall include the llanng of Associated Natural Gas to the


extent the Contractor considers that rc-aijocting Associated Natural Gas is nut


justified technically and economical)} and provided the Govern meat decides not to


take such Associated Natural Gas), or (ii) with the prior authorisation of the


Gov era meat, such authorisation not to be unreasonably withheld or delayed The


Contractor shall submit such request to the (ioveraaveat. which shall include an


evaluation of reasonable alternatives to flaring that have been considered along with


information on the amount and quality of Natural Gas involved and the duration of the


requested flaring.










































































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ARTICLE 15- ACCOUNTING AND AUDITS





15.1 The Contractor shall keep in its offices in the Kurdistan Region copies of all hooks


and accounts of all revenue*, relating to the Petroleum Operations and all Petroleum


Costs (the “ArcnnatO, except during the bxptorarion Period. when the Contractor


shall he entitled to keep the Accounts at its headquarters Abroad. The Accounts shall


reflect in detail expenditure incurred as a function of the quantities and value of


Petroleum produced, and shall be kept for a period of five (5) years All Accounts


which are mode available to the Government in accordance with the provisions of


Ihb Contract shall be prepared at the bnglish language. The Accounts shall be kept in


accordance with prudent international petroleum industry practice and in accordance


wkh 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 C alendar Year, the Contractor





shall submit to the Gov era meat a summary statement of all Petroleum Casts 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 nght:


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


a period of two (2) Calendar Years follow ing the end of such Calendar Year


(the '‘Aadit Request Period*'); and


(b) to retain an auditor of international standing familiar with international


petroleum industry accounting practice to undertake or assist the Government


to undertake the audit


Notwithstanding paragraphs (a) and (b) of this Article 15.3. the Government shall





have the right to audit the Accounts w ith respect to each Calendar Year al any time in


the case of manifest error or fraud.





15.4 The reasonable cost of retaining an auditor pursuant to Article 15.3 shall be home by


the Contractor and treated as a Petroleum Coal 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 request in writing all reasonably available


information and justification* for it* audit of Petroleum Costs


15.6 Should the (>o*emawat consider, on the basis of data and information available, that


the Contra cl or made a material mistake or there is any irregularity in respect of the


Accounts and considers that any corrections, adjustments or amendments should be


made, the (Moventmeat shall make any audit exceptions in writing and notified to the


( on tractor within six (6) Months of the date of request referred k> in Article 15.3.


and failure to give such written exception with mi such time *hall he deemed to he an


acknowledgement of the correctness of the Contractor's Accounts.



























































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The Contractor shall provide the (roverament 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 art}' quantities of Petroleum produced and sold.





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


by the Can tractor;


(c) a statement specifying the number of personnel, their title, their nationality as





well as a report on any medical services and equipment made available to such


personnel: and


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


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





Reqaireracat for Pctrufcnm Operations





16.4 The t on tractor may freely use any Petroleum produced will


the Petroleum Operations.








The f ontrartar shall at all times provide rcavaable assistance as may reasonably be


requested by the r .mrramrni during its review and verification of records and of any


other information relating to Petroleum Operations at the officcv worksites or any


other facilities of the Contractor





Upon giving reasonable prior notice to the Contractor, the tioverameal may tend a


reasonable number of representatives to the work sites ur any other facilities of the


( ontractor in the Kurdistan Region to perform such reviews and verifications. Ihc


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.





bmm 19 Knililin





For the performance of the Petroleum Operations, the Contractor, any Affiliate of


each Contractor Entity, its and their Subcontractors and the employees, consultants


and agents of each of the foregoing shall at all times he granted free access to the





Contract Area and to any facilities for Ihc Petroleum Operations located within or


outside of the Contract Area or within or outside the ProductKsi Area, for the purpose


of carrying out the Petroleum Operations.





V'K Vf f





Upon notice from the Government, the Contractor shall make available to a


reasonable number of representatives of the €#avcmmeat those of the Contractor's


facilities which are necessary to enable such representatives to perform thetr tasks


related to this Contract and the Kurdistan Region Oil and Gas law including, in case



























































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of works to he performed on work sites, transportation, accommodation and beard,


under the same conditions as those provided by the Contractor for its own personnel.


Notwithstanding Article lb X. the (wnminfil shall indemnify and hold harmless


each Contractor tatity agamst all losn. damages and liability arising under any


claim, demand, action or proceeding brought or initialed against any Contractor


Cathy by any representative of the < Jmemment in connection with the access Id or


use of the facilities by such representatives


or Bib


16.8 The Contractor shall be responsible fur any Ion or damage caused to third parties by


its or its Subcontractors personnel solely and directly resulting from their negligence,


errors or nmiwiom In accordance with applicable Kurdistan Region law.


Intellectual Property Rights


16.9 In its Petroleum Operations, the Contractor shall respect any patents belonging to


third parties.


litigation





16.10 The Contractor shall as soon as reasonably practicable inform the Government of


any material litigation relating to this Contract.


SflftH


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 earning 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:


(by reporting to the Government within seventy-two (73) hours of such accident,


any accident where personnel has been injured while engaged in Petroleum


Operations and resulting m such personnel being unable to return to work;


(c) implementing a permit-to-work procedure around hazardous equipment and


tnttallabara;


(d) providing safe storage areas for explosives, detonators and any other


dangerous products used in the operations.


(e) supplying fine-extinguishing equipment in each work area



























































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(f> for the purpose of taking control of any blow out or fire which could damage


the environment or Petroleum Field, in accordance with prudent international


petroleum industry practice, and





(g) for the purpose of preventing any involuntary injection of fluids in petroleum


formations and production of Crude Oil and Natural Gas at rales that do not


conform to prudent international petroleum industry practice.


Prod action Rates





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 beta* the Maximum Efficient Rate


rMER”) for the Reservoir, as provided for in the I development Plan, as a


consequence of a decision by the timrranrsi nr 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 rates. In such event, the


Government shall grant an extension of the Development Period of am 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 Ml R for the individual


wells and Reservoir of the Petroleum Field been maintained





Legal States


16.13 Ihc respective rights, duties, obligations and liabilities of the Government and the


( on tractor undrr this Contract are to he understood as being separate and individual


mid not joint and several The Parties agree that this Contract shall not create and


shall not be deemed to have orated a partnership or other form of association


between them.


LIWm





16.14 The Government and, subject to Ankles 32.11(a) and (b). each Contractor Fatity.


shall have the nght 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. I.'pun 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 Fatity Such lifting agreement shall include the following:





(a) the obligation of the Government and each Contractor Fatity to lift


regularly throughout each Calendar Year, their share of Petroleum produced


from the Production Area.


(b) notification procedures by the Operator to the (tovcraatcnl and each


Contractor Fntity regarding entitlements and availability of Petroleum for


lifting by each Party (luring each lifting period and nominations by each Party,


and


(c) (he right of the Parties lu lift any Available Petroleum not scheduled for lifting


and/or not lifted by the other Party during each such lifting period.



























































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Kurdistaa Rwion (oasataplion kroniremcnt*


16.15 The Coa tractor tatttte* dull tell and transfer lo the Government. upon written


request of the Government. am amounts of Crude Oil that the (imcranrai shall


deem necessary to meet Kurdrstan Region internal consumption requirements The


sales price of such Crude Oil shall be the International Market Price. The


(Hnrraarol shall provide the Contractor I.ntitles with not leu than six <61 Months'


advance written notice of its intention lo buy Mach Crude Oil.





Payments shall be made in Dollars and otherwise on terms consistent with prudent


international petroleum industry practice. The Coatractor Entities' obligation to sell


Crude Oil to the tioverameat shall be. with the other operators (including the


(^overameat) then producing in the Kurdistan Region, pro rata to their respective


production rales.





The provision* of this Article 16.15 shall not apply to Non-Assocmied Natural Gas.











ARTICLE 17 - USE OF LAND AND EXISTING INFRASTRUCTURE


17.1 The Government shall make available to the Contractor any land or property in the


Kurdistan Region required for the Petroleum Operations; provided, however, the


Contractor shall not request to use any such land unless there is a real need Cor it


The Coo tractor thaJI have the right to build and maintain, above and below ground,


any facilities required for the Petroleum Operations


17.2 If it becomes necessary for cooduct of the Petroleum Operations to occupy and use


any land or property in the Kurdistan Region belonging lo third parties, the


Contractor shall endeavour to reach amicable agreement with the owners of such


if such amicable agrcrwuaM cannot he reached, the Coatractor shall notify the


Go* era meal On receipt of such notification:


(a) the Government shall determine the amount of compensation to he paid by


the Coatractor lo the owner, if occupation will he for a short duration: or







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 he acquired by and recorded in the name


of the <»•> era meat. but the Contractor shall be entitled free u«c of the land


or property for the Petroleum Operations for the entire duratkai of this


Contract


The amount of the compensation in Article 17.2(a) shall he fair and reasonable, in


accordance with Article 29 of the Kurdistan Region CXI and Tins l aw. and shall take


into account the right* of the owner and any effective use of the land or property by


its owner at the time of occupation by the Coatractor All reasonable coats,


expenditures and fair and reasonable compensation (as required pursuant to Article 29








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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 compensatexi incurred by the ('iiatractor shall be considered Petroleum Costs


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


Articles I and 25.





For its Petroleum Operations, the Contractor shall have the right in the Kurdistan


Region to use. subject to applicable Ijjw. any railway, tramway, mad. airport, landing


field, canal, river, bridge i* waterway, any tekeunununkation* 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 he mutually agreed.





Under national emergencies due to environmental catastrophe or disaster, or internal


or external war. the Gweninwnt shall have the right to request to use any


transportation and communication facilities installed by the Contractor In such


cases, the request shall originate from the Minister of Natural Resources For the


avoidance of doubt, such costa, expenses or liabilities incurred by the Contractor


hereunder shall be considered Petroleum Costs and shall he recovered by the


Contractor in accordance with the provisions of Articles 1 and 25.


For its Petroleum Operations, the Contractor mall have the right in the Kurdistan


Region to clear land, excavate, drill, bore, construct erect place, procure, operate,


emit and discharge, manage and maintain ditches, tanks, wells, trenches, access roads,


excavations, dams, canals, water mains, plants, reservoirs, basins, storage and


disposal facilities, primary distillation units, extraction and processing units,


separation unite, 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, garagev hangars, workshops, foundries, repair shops and any


other auxiliary facilities fur the Petroleum Operations and. generally, everything


which is required for its performance of the Petroleum Operations. I he Contractor








For its Petroleum Operations, the Coatractor hall have the right in the Kurdistan


Region, subject to compliance with applicable Kurdistan Region l aw. to remove and


use the topsoil, fully-grown limber, clay. sand, lime, gypsum, stone* (other than


precious stones) and other similar substances as required fix its Petroleum (Iperations.





The Contractor shall have the right in (he Kurdistan Region k> take or use any water


necessary lev the Petroleum Operations provided it does not damage any existing


irrigation or navigation systems and that land, houses or watering points belonging to


third parties are not deprived of their use.


The Government shall have the right in the Kurdistan Region to build, operate and





maintain roads, railways, airports, landing amps, canals, bridges, protection dams,


police stations, military' installations, pipelines and telecommunications networks in


the Contract Area, provided this docs not increase the costs, or compromise or have a


material adverse effect on the performance of the Petroleum Operations. If the






























































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construct ion. operation and maintenance of such facilities by the Crovcmmcal results





in increased cost or expense for the Contractor then, for the avoidance of doubt. such


con and expense shall he considered Petroleum Coats and shall he recovered by the


Contractor in accordance with the provisions of Articles I and 25.





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.





Access to the Contract Area may be granted pursuant to an Accra Authorisation, as


shall be defined in. and consistent with, the Kurdistan Region Oil und Gas La*, lo


authorised third parties on reasonable terms and condition* Including coordination),


including Persons authorised to construct, install and operate structures. facilities and


installations, and to carry out other worts, provided that nothing in the Access


Authorisation or in this Article 17.9 authorises the holder lo drill a Well ur to perform


any Petroleum < tperatiom in Contract Area.





The (•ovcmmtnl shall give the Contractor adequate advance notice of any Access


Authorisation in respect of the Contract Area and shall not grant any Access


Authorisation in respect of the Contract Area until it has taken into account any


submissions made by the Contractor nor in such a way that there is undue interference


with or hindrance of the rights and activities of the Contractor.








AHIKU 18 - A SSLS I ANCE FROM THE GOVERNMENT





To the extent allowed by Kunfetan Region law and Iraqi law and at the specific


request of the Contractor, the (*ovcrnmml shall take all necessary steps to assist the


('•■tractor Entities in, but nnt limited to, the following array








securing any necessary Permits ft


transportation and communications:








securing regulatory Permits in matters of customs or imporVexport.








securing entry and exit visas, work and residence permits as well as any other


adminritralivc Permits for each Contractor Entity's, its Affiliate** and its


Subcontractors* foreign personnel (including their family members) working


in the Kurdistan Regno and any other pan of Iraq during the implementation





of this Contract;





securing any necessary Permits to send Abroad documents, data or





analysis or processing for the Petroleum Operations:





relations with federal and local authorities and administrations, including for


the purposes of the remainder of this Article 18. t;





securing any necessary environmental Permits:







































































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(g) obtaining any other Permits requested by any Coatraetor Fahey for the


Petroleum Operation*:


(h) access to any enisling data and information, including data and information


relating to the Contract Area held by pmious operators or contractors; and


(i) providing all necessary security for Petroleum Operations.


18.2 Vt ithin the scope of tcrvices to be provided under this Article 18, reasonable and duly





justified expenses incurred by the (•overament or paid to third panics shall be


charged to the Contractor and shall be considered Petroleum Costs and shall be


recovered by the Contractor as Petroleum Costs in accordance with the provisions of


Articles I and 25.


ARTICLE If - EQU IPMENT AND MATERIALS





19.1 The Coatraetor shall supply, or procure the supply of, all materials, equipment,


machinery, toot*, spare ports and any other items or goods required for the Petroleum


Operations ("Eqaiptaeat aad Materials )


19.2 Said Kquipraent and Materials shall be provided by the Coatraetor in accordance


with the relevant Work Programs and Budgets.


19.3 As soon as possible after the Effective Dale, the Contractor shall provide the


Management Committee with a copy of it* procedures for procurement of equipment


Mid Materials and/or services for the Petroleum Operations as required by the


provisions of Ankle 8.2(e). including the criteria for tender evaluation, which


procedures and criteria shall be in accordance with prudent international petroleum


industry practice. If the Management Committee does mg request any modifications


in the procurement procedures within thirty 130) days after receiving such procedures,


the procedures shall be deemed approved by the Management Committee.


19.4 The Coatraetor shall give priority to Equipment and Materials that arc 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


ARTICLE 29 - TITLE TO ASSETS





20.1 During the Exploration Period, any Assets acquired by the Coatraetor for the


Petroleum Operations shall remain the property of the Coatraetor. the Coatraetor


K a tides, their Affiliates Of their Subcontractors, as the case may be.


20.2 During the Development Period subject to Article 21. all Assets acquired by the


Coatraetor fir (he Petroleum Operations shall become the property of the


Uunmcat upon the completion of the recovery of the costs of all such Assets by


the Coatraetor. or the end of the Contract, whichever is the earlier.











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The provisions. of Article 20.2 shall not apply to any Assets leased by the Contractor


or belonging lo an Affiliated Company of a Contractor Entity or belonging to its or


their Subcontractors or its or their employees.





ARTICLE 21 - llSE OF THE ASSETS





Each Contractor Entity shall base the exclusive right to me. free of any charge, all


Assets described in Article 20, buth before and after 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 thai 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


| he 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.











The Contractor shall ensure that any Subcontractors it engages have all the requisite


experience and qualifications.





The Contractor shall give priority to Subcontractors from the Kurdistan Region and


other puns of Iraq to the extent their competence, rates, experience, reputation,


qualifications, specialties, credit rating and terms of availability, delivery and other


commercial terms are. in the Contractor's sole opinion, comparable in all material


respects with those provided by foreign companies operating in the international


petroleum mdirtfry. Such Subcontractors must be bona fide Kurdistan Region


companies not related to any Public Officer, directly’ or indirectly, and must have all


necessary resources and capacity.


Selection of Subcontractors shall take place in accordance with the procurement


procedures submitted by the Coatraetor to the Management Committee m


accordance with Article 19 1 and approved by the Management Committee.


The Contractor shall provide the Coveraaaeat with copies of agreements entered





into with Subcontractors, where their amount exceeds the limit set by the


Management Committee from time to time.





ARTICLE 2J - PERSONNEL, T RAINING, AND TECHNOLOGICAL ASSISTANCE











For the Petroleum Operations, the Contractor shall give, and dial I require its


Subcontractors to give, preference to personnel from the Kurdistan Region and other


pmts of Iraq to the extent such personnel have the technical capability, qualifications,


competence and experience required to perform the work.



























































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The Contractor F.ntifie* shall give due consideration to the secondment of


(iovemment personnel to the Contractor I'atitics and of the Contractor K a tirin'


pcrwmncl to the (imrrnmml during the various phases of the IVtnilcum Operations.


Terms nod conddiurts for such secondment shall be mutual!) agreed by the Parties


and any costs associated therewith shall be considered Petroleum Costs and dull be


recovered by the Contractor to accordance with the provisions of Articles I and 25.





Kadi Contractor Entity and its Affiliates and Subcontractors shall have the right lo


hire foreign personnel whenever the personnel from the Kurdistan Region and other


parts of Iraq do not have the requisite technical capability, qualifications or


experience for positions to be filled as required pursuant to Article 23.1. In the event


any such foreign personnel and or a member of their family engage in activities or


commit acts which breach Kurdistan Region law. the Contractor shall, at the request


of the Management Committee, lake the necessary steps to re patriate such


individual *).





During the Fxpkmion Period the Contractor shall provide two hundred and fifty


thousand Dollars (I fS$250,000) in advance each Contract Year to the Cieuranral


for the recruitment or secondment of personnel, whether from the Kurdistan Region,


other parts of Iraq, or Abroad, lo the Ministry of Natural Resources. I he selection of


such personnel shall be at the discretion of the Minister of Natural Resources. Such


costs shall be considered as Petroleum Costs and shall be recovered in accordance


w ith the provisions of Articles I and 25.











In a planned way. in accordance with the provisions of this Article 23.5 and Articles


23-6 and 23.7, the Contractor shall train all its personnel from the Kurdistan Region


and ocher 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 Lntitics foreign workers with an equivalent resume. 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 rxirm permitted by applicable law and agreements with


third parties, and subject to appropriate confidentiality agreements





In addition to the requirements of Article 23-1, the recruitment, integration and


training of the Contractor Katities' personnel from the Kurdistan Region and other


parts of Iraq dall be planned, which plans shall be submitted to the Management


Committee for its approval. Jhe training plan shall take into consideration the


requirements of Article 23.5 and may include training for the <«ov era aval’s


personnel, depending on the extent to which the amount allocated to the training plan,


as prescribed by Article 23.7. is available after taking into consideration the training


of the Contractor Entities' Kurdistan Region and other Iraqi personnel.








Within ninety (90) days of the l.ffcclivc Dale, the Contractor shall submit to the


Management Committee a proposed training plan for the remainder of the C alendar


Year. Thereafter, no later than I October in each Calendar Year, the Contractor shall




































































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submit i proposed training plan to the Management Committee for the following


Calendar Year





Tile training plan referred to in Article 25 6 shall provide ft* 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 (L'S$300.000> in advance for each Contract Year during the


Development Period.





Each Contractor Entity shall be responsible for the training costs which it may incur


in respect of the personnel it employs from the Kurdistan Region and other parts of


Iraq. All such reasonable costs shall be considered as Petroleum Costs and shall he


recovered in accordance with the provisions of Articles I and 25 Costs incurred by


the Contractor for training programs for the (nwraarDi'i personnel shall he home


by the Contractor only to the extent dial they arc included in the Contractor's


training plan, pursuant to Article 25-6 and shall also be considered as Petroleum Coats


and shall be recovered 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


(iovemmeot’ % responsibility











The Contractor shall contribute the amount of one hundred and fifty Dollars


(USS150.000) in advance each Contract Year during the Exploration Period and three


hundred thousand Dollars (US$300,000) in advance for each C ontract Year during the


Development Period into the environment fund established by the Government for


the benefit of the natural environment of the Kurdistan Region, pursuant to the


Kurdistan Region Oil and Gas Law (the Lav iron meat FaatT). Such amounts shall


be deemed to be Petroleum Costs and shall be recovered in accordance with Articles I








Any expenditure incurred by the Contractor under this Article 23 shall he considered


Petroleum Costs and shall be recovered in accordance with Attacks I and 25.





Technological aad fogtatical assistance





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 (US$1,000,000). The form of such assistance shall be mutually


agreed by the Parties and any costs associated therewith shall he considered


Petroleum Costs and shall be recovered by the Contractor m accordance with the


provisions of Ankles I and 25.








AKTICU 24 ROY ALTY





The f'ontrartor shall pay to the Guvrramrni a portion of Petroleum produced and


saved from the Contract Area, as provided in this Article 24 (the "Royalty").







































































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242 The Royalty shall be applied on ail Petroleum produced and wed from the Contract


Area which is Crude Oil or Non*Associated Natural (ins. except for Petroleum used in


Petroleum Operations. rc-injcxicd in a Petroleum Field, lost flared or for Petroleum


that cannot be used or sold and such Crude Oil and Non-Associated Natural Gas


(excluding the excepted Petroleum) shall be referred to collectively as Export


Petroleum' and separately and respectively as "Export Crude OH" and “Export


Non-Associated Natural Cm"


24.3 If payable in cash, the amount of the Royalty calculated by apply ink the Royalty rates


provided under Article 24 4 shall be paid by the Contractor as directed by the


(ioserimcat 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 Coatrurtnr to the (nnemacil at the Delivery Point Title


and risk of loss of the Royalty paid in kind shall be transferred at the Delivery Point.


Unless the Govern meat requires the Royalty to be paid in kind, by giving the


Contractor not levs than ninety (90) days prior written notice prior to the


commencement of the relevant Quarter, the Government shall he deemed to have


elected to receive the Royalty in hill and in cash for the relevant Quarter.


24.4 The Royalty due an any Export Petroleum produced and saved in the Contract Area


shall be determined daily by applying the following relevant Royalty rate, to the


Ixport Crude Oil or to the Export Non-Associated Natural Gas (as the ease may be)


produced and saved on that day:


(a) For Export Crude Oil: the Royalty rale for Export Crude Oil shall he ten per


cent (10%k which, for the avoidance of doubt, shall apply regardless of the


gravity of die oil; and


(b) For Export Non-Associated Natural Gas: the Royalty rate for Export Non-


Associmed Natural Gas shall be ten per cent (109k).


24.5 Associated Natural Gas and any other Petroleum shall be exempt from any Royally.





24.6 If. psmuont to Article 24.3. the Government receives the Royally in Iwd. and


pursuant to Article 28, the Government requests assistance for the sale of all or pan


of the Royally received in kind, each Contractor Entity shall assist the Government


in selling all or part of such Royalty received in kind (belonging to the Govrruaneat)


in consideration of a commission per flarrel payable to such C#n true tor Entity, in


accordance with Article 21.


24.7 If. pursuant to Article 24,3. the (ioscriiaeat 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 272:






























































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(b) an> Export Non-Associated Natural Gas shall he valued at the actual price


obtained a( the Delivery Point under an approved contract, as provided in


Attic Ic 27.3;





(c) the Contractor shall pay such Royalty each Quarter, in arrears, within thirty


(30) days of the end of each Quarter, and shall calculate the payment due for


the relevant Quarter by reference to the price for the Export Petroleum at the


Delivery Point, determined in accordance with paragraphs (a) and (b) above,


and the Royalty due un the Export Petroleum, determined in accordance with


Article 24.4. for the said Oiartcr; 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 t rode Oil due for Royalty pursuant to Article


24, he considered as "Available Crude OH


All Associated Natural Gas produced and saved from the Contract Area, except for


Associated Natural Gas which is used in Petroleum Operations, rc-injected in a


Petroleum Field, lost. Oared or cannot he used or sold, shall he considered os


** Available Ajwwtaled Natural <»aa".


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 Noa-A**ocut*d Natural


GnT


“Available Petroleum means Available Crude Oil Available Associated Natural


Gas and Available Non-Assoclaied Natural Gas.


252 For the purpose of this Article 25:


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





obtained at the Delivery Point, as defined n Article 272: and


any Available Associated Natural Gas and any Available Non-Avsociaied


Natural Gas shall be valued at the actual price obtained at the Delivery Point


under an approved contract, as provided m Article 27 J.


25.3 Subject to the provisions of this Contract, from the First Production in the Contract


Area, the Contractor shall at all limes be era it led to recover all Petroleum Costs


incurred under this Contract, of up to forty per cent (40%) of Available Crude Oil


(which, for the avoidance or doubt, shall apply regardless of the gravity of the oil) and


Available Associated Natural Gas. produced and saved within any Calendar Year


Available Crude Oil above this percentage or otherwise not used for the recovery of


Petroleum Costs shall he Profit Crude Oil.


















































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25.4 Subject to the provisions of this Contract from First Production in the Contract Area,


the Contractor shall at all times he entitled it' recover all Petroleum Costs incurred


under this Contract of up to fiffe> per ccnl (SOH) of Available Non-Associated Natural


(its produced and saved within any Calendar Year. Available Non-Associated


Natural Gas above this percentage or otherwise not used for the recovery of


Petroleum Costs shall he Profit Natural Gas.





25.3 For the application of Article 2$.3 and 25.4, the Contractor thall 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 following


order.





(■) Production Costs;


(b) I x pineal ton Cost* (including appraisal costs and further exploration within the


Contract Area);


(c) Gas Marketing Costs:





(d) Development Costs; and





(c) 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 m Articles 25-3 and


25.4. If in any Calendar Year, the Available Crude Oil and'or Available Non-


Associated Natural Gas do not allow the Contractor to recover all its Petroleum Coats


pursuant to this Article 25. the amount of ua-recovered Petroleum Costs in such


Calendar Year shall be carried forward indefinitely to the subsequent Calendar Years


until all Petroleum Coats are fully recovered, hue save as provided in Article* 14.10


and 31.4. in no other ease after the termination of the Contract.


25.7 The provisions of Article* 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 Ihr quantifies of Petroleum corresponding to the share of Available Petroleum due to





the Contractor far the recovery of its Petroleum Costs shall be delivered to the


Contractor at the Delivery Point. Title and risk of loss of such Available Petroleum


shall be transferred at the Delivery Point.


23.9 Each Contractor lathy shall be entitled to receive, take in kind and to export Urctly





all Available Petroleum to which it h entitled far recovery of its Petroleum Costs in


accordance with the provisions of this Contract and to retain Abroad any proceeds


from the sale of all swdi Available Petroleum. Petroleum Costs m each Production


Ana shall be recovered from Available Petroleum from the Contract Area.


25.10 Subject to Ankle 31.4. for the avoidance of doubt. Petrokum Cost* under this





Contract arc not recoverable against other contract areas held by the Contractor.











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ARTICLE 26 - SHARING OF PROFIT PETROLEUM


26.1 Under this Contract


(a) Profit Petroleum means Profit Crude Oil and Profit Natural Gas;





(b) ‘Profit Crude Oir' means the quantities of Available Crude Oil and


Available Associated Natural Oas produced from the Contract Am. after the


recovery of Petroleum Coats, in accordance with Articles I and 25; and


(c) “Profit Nataral Gat" means the quantities of Available Non-Associated


Natural Gas produced from the Contract Area, after the recovery of Petroleum


Costs in accordance with Ankles 1 and 25.


26.2 From Firsl Production and as and when Petroleum is being produced, the C ontractor


shall tv entitled to take a percentage diarc of Profit Crude Oil and/or Profit Natural


Or in consideration for Its investment in the Petroleum Operations, which


percentage share shall be determined in accordance with Article 26-5.


26J To determine the percentage share of Profit Crude Oil and/or Profit Natural Gas to


which the Coatractor is entitled, the “R" Factor shall he calculated in accordance


with Article 26.4 and shall be applied to the Contract Area.





26.4 The “R~ Factor shall be calculated as follows:


R-X/Y


where


X: is equal to Cumulative Revenues actually received by the Contractor.





Y: is equal to Cumulative Costs actually incurred by the Contractor


For the purpose of this Article 26.4;


< amwkativ« Krvcaacs" means total Revenues, as defined bekm. received by the


Contractor until the end of the relevant Semester, determined in accordance with


Ankle 26.7.


Reverses means the total amount actually received by the Co*tractor for recovery


of its Petroleum Costs and its share of Profit Petroleum in the Contract Area.


“Caaraftaflve Cants" means all Petroleum Coats actually incurred pursuant to this


C ontract by the Contractor until the end of the relevant Semester, determined in


accordance with Ankle 26.7.


Notwithstanding the foregoing provisions of this Ankle 26.4. for the period from


First Production until the end of the Calendar Year in which fine Production occurs,


the IT Factor shall be deemed ui be less than one (I).








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The share of Profit Petroleum to which the Contractor shall be entitled from First





Production ix





tor 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:
































for Profit Natural Gaw 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 ProfH Natural Gas


























The Contractor's accounting shall account separately for all components far the


calculation of “X“ and “Y~ values in the formula provided in Article 26.4.





For each Semester, storting from the I" of January of the C alcndar Year follow ing 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 chinng a Semester shall he


that determined by applying the Cumulative Revenues actually received and the


Cumulative Coals actually incurred up to and including the last day of the preceding


Semester.





If the Contractor b 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 l Ipnrt the calculation of the “R" Factor for the relevant Semester:





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


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

































































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(b) if the allocation of the Profit Petroleum in the two Semesters is different, then


the C'oarrartor shall make any adjustments to the Parties’ respective shares of


Profit Petroleum to restore them to the position that they would have been in


had the "K" factor for the relevant Semester been available from the start of


such Semester.


26.8 If at any time an error occurs in the calculation of (he “R“ Factor, resulting in a





change in the Contractor s percentage share of Profit Crude Oil and/or Profit Natural


Gas. the necessary correction shall be mode and any adjustments shall apply from the


Semester in w hich the error occurred. The Pam having bene filed f rom a surplus of


Profit Petroleum shall surrender such surplus to the other Party, beginning from the


first day of the Semester following the Semester in which the error was recognised.


However, each lifting of Petroleum relating lo such error by the Party receiving the


surplus shall not exceed twenty-five per cent (25%) of the share of Profit Petroleum to


which such surrendering Party is entitled, for die avoidance of doubt, if at any time


an error occurs in the calculation of the **K~ factor, which does not result in a change


ui the Contractor's percentage share of Profit Crude Oil and-ar Profit Natural Gas.


no correction shall be made





26.9 The quantities of Profit Petroleum due to the Contractor shall be delivered to the


Contractor Ratifies at the Delivery Point. Title and risk of loss of such Profit


Petroleum shall be transferred to the Contractor Ratines at the Delivery Point


Each Coa tractor ratify shall he 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 proceed* from the sale of all «uch Profit Petroleum.


Notwithstanding the other provisions of this Article 26.9, where the Contractor is in


breach of any of its obligations in respect of the payment of Capacity Building


Payment Instalments under Article 32.8 through 32.17, the t^overamcat will have the


rights set forth in Articles 32.11 and 32.12.


26.10 The share of the Profit Petroleum to which the Government is entitled in any





Calendar Year in accordance with Article 26.5 shall be deemed lo include a portion


representing the corporate income tax imposed upon and due by each Contractor


Kathy, and which will be paid directly by the (fovcramcat on behalf of each such


entity representing the Contractor to the appropriate tax authorities in accordance


wuh Article 312. The Government shall provide (he Contractor Kathies with all


written documentation and evidence reasonably required by the Contractor Kathies


to confirm that such corporate income tax has been paid by the Goverameat


26.11 The quantities of Profit Petroleum due to the (Coversmeal shall be delivered lo the


Goverameat at the Delivery Pont Title and risk of km of such Profit Petroleum


shall be transferred at the Delivery Point.





26.12 At least twenty-one (21) days prior to Contractor's estimated dale of First Production


and. subsequently, thirty (30) days prior to the beginning of each Semester, the


Contractor shall prepare and deliver to the trovernnwat • production program


comprising the production forecast fur the next Semester and the forecast of the






























































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quantities or Crude Oil and Natural Gas to -Inch each Parts shall he entitled during


the uid Semester.


26.13 Within ninety (90) day* following the end of each Calendar Year, the


Contractor shall prepare and deliver an annual production report u» the Government,


staling the quantities of Crude Oil and Natural Gas to which each Party is entitled, the


qualities of Crude Oil and Natural Gas lifted by each Party and the resulting over-lift


or under-lift position of each Party, pursuant in the lifting agreement entered into


pursuant tu 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 Contractor


shall not be considered Petroleum Costs and (hall be charged to the Government


according to terms to be mutually agreed between the Contractor and the


(.o* cm meat








ARTICLE 27 - VALUATION AND METERING OF CRUDE OIL AND NATURAL


GAS


ygjggfes





27.1 For the purpose of this Contract, any Crude Oil produced in the Contract Area shall be


valued at the end of each Quarter and Month at the Delivery Point based on the


International Market Price, as defined in Article 27.2.


27.2 The "laicmabonaJ Market Price" referred to in Article 27 I (hall he the weighted


average price per Barrel, expressed in Dollars, obtained by the Contractor at the


Delivery Point, by netback if necessary , during the Quarter and Month ending on the


Ami* of valuation for Arm's length Sales of Crude Oil.


The Contractor shall provide evidence to the (Government that the sales of Crude


Oil referred to m Article 27.2 are Arm’s length Saks. If the Guv era meat considers


that any such sak of Crude Oil is not on the bass of an Arm s Length Sale then the


(Government has the right to refer the matter to an expert pursuant to Article 42J.


In the event that there is no lifting of Crock Oil in the relevant (>iartrr and Month or


no Ann's length Sales, the applicable ''International Market Price" for such


Quarter and Month shall be the weighted average price per Barrel obtained during that


Quarter and Month from Arm's Length Saks 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 ink) account gravity and quality


differences and transportation and other post Lklivcry 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


told in the international market Prion obtained shall he adjusted to account for any


variations such as quality, specific gravity, sulphur content, transportation costs,


product yield, seasonal variations in price and demand, general market trends and


other terms of sak.



























































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27 .3 The price of Natural Gas shall he the actual price obtained at the Delivers Point,


(which may take into account quantities to be sold, quality, geographic location of


markets to be supplied as well as costa of production, tranqvelation 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


light to review and approve Natural Gas sales contracts.


Accoaatian Statement


27.4 By the tenth (10^) day of each Month, the Contractor shall provide a statement to the





Government showing the Contractor's calculations of the value of Petroleum


produced and sold from the Contract Area lor the previous Month Such statement


shall include the following information:


(a) quantities of Crude Oil sold by the Contractor ratifies during the





preceding Month constituting Amt's Length Saks together with


corresponding sale prices:


(b) quantities of Crude Oil sold by the Contractor Entities during the





preceding Month that do not fail in (he category referred to in


paragraph (a) above, together with sale prices applied during such


Month:


(c) inventory in storage belonging to the Contractor ratifies at the





beginning and at the end of the Month: and




Govern meat together with sale prices realised.


Concurrently with the delivery of the monthly statement, the Contractor shall deliver


the Capacity Building Payment Monthly Statement lo the Government as provided in


Ankle 32.8(a).


Metering





27.5 All Export Petroleum shall be metered at the Delivery Point in accorduicc with


prudent international petroleum aidustry practice and such meters shall be to fiscal


meter standards. All metering equipment shall be installed and operated by the


Contractor The Government shall, on receipt by the Contractor of reasonable


prior written notice, have the right to inspect any such metering equipment installed


by the Contractor, as well as all relevant documents and 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 use all reasonable


endeavours k» repair it within fifteen (15) days or. If deemed necessary by the


Can tractor, replace it ax soon as reasonably practicable from the date the defect


became known The *‘Ad)m

equipment was known or agreed to have been measuring correctly, or if not known or





















































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agreed the date that is midway between the (tec the defect »» discovered and the


lax date the equipment was known to have measured correctly The results from the


defective equipment shall be disregarded for the period from the Adjustment Date


until the dale the defective equipment is repaired or replaced and the measurement for


such period shall be estimated:





if check measuring equipment is install md registering accurate!), then by


using the measurements recorded by sue lock measuring equipment:





if chock measuring equipment is not installed or not registering


then by correcting the error if the percentage of error is ascot


verification- calibration or mathematical calculation: or





if neither method is feasible, then by ctlimaling the t i <1 umc and'or quantity


delivered based on deliveries during the preceding com parable period of time


when the metering equipment was registered accurately.





27.7 Any disputes arising under this Ankle 27 shall be settled by expert determination in





accordance with the provisions of Ankle 42.2.





ARTICLE 28 - SALK Of GOVERNMENT SHaRF





Upon the Government's prior written notice of at least ninety (90) days, each C ontractor


Entity shall provide all reasonably necessary assistance to the Ctovcramcnt for the sale of all


or part of the quantities of Crude Oil to which the GtowraiMat is entitled, in consideration


of a sales commission per Barrel to be established with reference to prudent international


petroleum practice and to be mutually agreed upon between the Paniev








ARTICLE





Any payment to be made by a Contractor Lathy to the Government pursuant to this


Contract shall be in Dollars and shall, except as provided in the next sentence and


Articles 32.8 through 32.17. he offset against any outstanding payments due by the


Government to the Contractor Entity, or paid into the bank account duly designated


by the Government in writing and shall be paid within thirty (30) days of the due


aafter which interest compounded monthly at the rale of IJBOK plus two (2)


percentage points shall be applied. The right of tot-off provided in this Article 29.1


will not apply in respect of the obligation of the C ontractor to make Capacity


Building Payments as further provided m Articles 32.8 through 32.17.





The Govern meal may. at its sole discretion, direct the Contractor Entitle* to pay:


(a) any Royalty til cash due to the Government pursuant to the provisions of





Article 24; andtor
















































































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(c) any Production Bonus.


to a fund fur revenue sharing. which may in due course be established by legislation





consistent vs ah the t ontfituiion 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 nr ocher


re lac Kinship between the Contractor andi* any Contractor Katin and the


Government of Iraq and'or the regions of Iraq (other than the Kurdistan Region)


and or and govemorates of Iraq.


29.3 Any payment due by the Government to a Contractor Entity shall be offset against


future payments due by such Contractor Entity to the Governateat. or paid in


Dollars to the bank account designated by the Contractor Entity in writing and shall


he paid within thirty (30) days of the dale of invoke, after which interest compounded


monthly at the rate of LIBOR plus two (2) percentage points shall be applied





29.4 Any currency conversion to be made under this Contract shall be at the exchange rate


of the Central Bank of Iraq, provided such exchange rate applied to the Contractor


Entities shall not be less favourable than the rate offered by other private, commercial


or industrial banks in the international market. In the absence of the Central Bank of


Iraq or in the event that the Central Honk of Iraq is unable to provide the relevant


exchange rale, any currency conversion to be made under this Contract shall be at the


exchange rate of a reputable commercial bank carrying on business tu the


international market and approved by the Parties


29.3 The Contractor shall not realise any gain or loss due to exchange rate fluctuations


and. consequently , any gain or loss resulting from the exchange of currency shall be


either considered as revenue and credited to the Accounts or shall be considered as a


Petroleum Cost and shall be recovered by the Contractor in accordance with Articles


I and 25, as the case may be,





29.6 Each Contractor l.atity shall at all times he entitled to freely convert into Dollars or


am other foreign currency any Iraqi dinars received in the framework of the


Petroleum Operations and to freely transfer the same Abroad. The conversion rale


shall be as provided under Article 29.4.


29.7 Each ( on tractor la lily shall have die right to be paid, receive, keep, transfer and





use Abroad, without any restriction*, all proceeds of its share of Petroleum.


29.8 Each Contractor Entity and its Subcontractors shall have the right to freely open and


maintain hank accounts for Petroleum Operations within or outside the Kurdistan


Region and other parts of Iraq.


29.9 Each Contractor Entity shall have the right to pay in any freely convertible currency


all its financial requirements for the Petroleum Operations and to convert these


currencies to Iraqi dinars in any bank in the Kurdistan Region or other parts of Iraq, at


the same exchange rale a* provided under Article 29.4.


29.10 Each Coatractor Eerily shall have the right without any restrictions, lo freely


repatriate Abroad and to freely dispose of:





























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(a) any proceeds received in the Kurdistan Region or other pans of Iraq from the


talc of Petroleum:







this Contract in the Kurdistan Region or other parts of Iraq.


29.11 Each Contractor Entity shall have the right to pay in an) foreign currency its


Subcontractor* and its expatriate personnel, either in the Kurdistan Region, other parts


of Iraq, or Abroad. Said Subcontractors and expatriate personnel shall be obliged to


transfer to the Kuniboan Region the amount of foreign currency required for their


local needs and they shall have the right to repatriate the proceeds of the sale of their


belongings in accordance with the regulations in force in the Kurdistan Region.


29.12 Each Coatractor Rarity's AITiiiaicv Subcontractors and their personnel shall equally


benefit from the same rights as such < oatracior Rarity and ns personnel as regards


this Article 29.


29.13 For the financing of Petroleum Operations, each Contractor F.atity shall have the





right to have recourse to external financing from third parties or from its AfTilintcd


Companies on an arm's length basis.





ARTICLE !• - CUSTOMS PROVISIONS





30.1 All services, material, equipment, goods, consumables and products imported into the


Kurdistan Region and other pans of Iraq by the Coatractor. any Contractor Rarity,


its Affiliates, any Subcontractor or any agent of any of the foregoing, for use or


consumption in the Petroleum Operations shall be admitted free and exempt from any


and all Taxes on import. The Coatractor. any Contractor F.atity. its Affiliates any


Subcontractor or aay agent of any of the foregoing shall have the right to re-export


hum the Kurdistan Region and ocher parts of Iraq fire from all Taxes on export any


material, equipment goods, consumables and products that arc no lunger required for


the Petroleum Operations, except where tide has passed to the (iov era meat in


accordance with Article 20. in which case re-export shall be approved by the


Management Committee.





30.2 The Contractor, any Contractor Rarity, its Affiliates, any Subcontractor or any


agent of any of the foregoing, and their personnel (including their family members)


shall have the right to frcdy 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 Contractor Ratify and its Affiliates shall be entitled to freely export from the


Kurdistan Region and other parts of Iraq, free of any Taxes, any Petroleum to which it


is entitled pursuant to the provisions of this Contract














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30 4 The GwersMit shall indemnify the Coitndor. any C oilractor Fatity. its


Affilialex, any Subcontractor or any agent of aay of the foregoing. and their personnel


(including thru family members) lor any import or export Taxes referred to in


Articles 30.1. 30.2 or 30.3.





ARTICLE 31 - TAX PROVISIONS





31.1 Except as expressly provided in this Article 31. and without prejudice to the


exemptions expressly provided for in Article 30 and in this Article 31. each


Contractor Ratify. its Affiliates and any Subcontractor shall, for the entire duration


of this Contract, be exempt from all Taxes as a result of its income, assets and


activities under this Contract. The (imrranrtl shall indemnify each C oatractor


Rarity upon demand against any liability to pay any Taxes assessed or imposed upon


such entity which relate lo any of the exemptions granted by the (iovcniiartt under


this Article 31.1. and under Articles 31.4 to 31.11.


31.2 Each Coatractor Ratify shall be subject to corporate income tax an its income from





Petroleum Operations ax provided in Article 31.3. which shall be deemed to be


inclusive and in hill and total discharge of any Tax on income, receipts, revenues,


gains or profits of each such entity. Payment of the said corporate income tax shall be


made fur the entire duration of this Contract directly lo the official Kurdistan Region


tax authorities by the Government, for the account of each Contractor Rarity, from


the Government's share of the Profit Petroleum received pursuant to Article 26.





bach Contractor Entity shall within sixty (60) days alter the end of each tax year,


provide a statement to the appropriate Kurdistan Region tax authorities of its profits


which are subject to corporate income Utx. together w ith a calculation of the amount


of corporate income ux due on those profits


The (imvnmnit shall, within ninety (90) days after the end of each tax year, provide


to each (uatracSar Entity (i) the appropriate official lax receipts from the


appropriate Kurdistan Region tax authorities or other relevant authority certifying the


payment of its corporate income tax. as determined in the said statement, mi 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 lax on behalf of such Contractor Ratify


313 For the purposes of Article 313:





(a) the rate of corporate income tax to be applied to each Contractor Entity


shall be the generally applicable rate prescribed in the law of Taxation (law


No. 5 of 19991 passed fay the National Assembly of the Kurdistan Region, as


has been amended by Law No. 26 of 2007. and as may be amended horn lime


lo 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, hut in no event in excess of forty per cent (40%).


The Panics acknowledge and agree that at the Effective Dale of this Contract


the corporate income tax rate b fifteen per cent (15%) for all net taxable


profits.



























































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(b) The (imtnMDl and the Contractor agree that corporate income tax shall be


calculated for each Contractor Entity on its net taxable profits under the


Contract, ai calculated in accordance with the pmvhioat relating thereto in the


Accounting Procedure.


31.4 Each Contractor Entity, its Affiliates as wdl as any Subcontractors shall be exempt


from any withholding tax applicable on any payments made to them or by them to or


from Affiliate* or third parties, whether inside or outside the Kurdistan Region and/or


Iraq, for the entire duration of this Contract.


3IJ Each Contractor Entity and its Affiliates shall be exempt from Additional Profits





Tax. ns referred to in Article 40 of the Kurdistan Region Oil and Gas law or an>


successor I an


31.6 Each Contractor Polity and its Affiliates shall be exempt from Surface Tax. as





referred to in Article 4(1 of the Kurdistan Region Oil and Gas Law or am successor


Tax


31.7 Each Contractor Entity and its Affiliates shall be exempt from Windfall Profits





Taxes, as referred to in Article 40 of the Kurdistan Region Oil and Gas Law or any


successor Tax


31.8 Each Contractor Entity and any Subcontractor shall he subject to the payment or





w ithholding of the personal income lax and social security contribution* far w hich


such entity or Subcontractor is liable to pay or withhold in respect of its employees


who arc Iraqi nationals, pursuant to the I aw of Taxation (Ixw So. 3 of 1999) passed


by the National Assembly of the Kurdistan Region, as may be amended from time to


time, in the same manner as the same shall he generally applied to all other industries,


except that a Contractor Entity or Subcontractor shall not he liable for such taxes or


contributions w ith respect to employ ees of another Person.





31.9 It b acknowledged that double tax treaties will have effect to give relief from taxes to,


but not limited to, the Contractor. Contractor Entities. Subcontractors and


employees and other Persons at accordance with the provisions of such double tax


treaties, but shall not impose an additional burden of taxation.


31.10 Any value added tax ("VAT"*) shall he considered as a Petroleum Cost and shall he





cod recovered in accordance with the provisions of Articles I and 23.


31.11 Any value added tax (“VAT**), not otherwise recoverable by the Contractor under


VAT law-, shall be considered as a Petroleum Cost and shall be cost recovered in


accordance with the provisions of Articles I and 23.





31.12 Notwithstanding any other provision to the contrary in this Contract, the Parties


acknow ledge and agree that the provisions of this Article 31 shall apply individually


and separately to all Contractor Entities under this Contract and that there shall be


no joint and several liability in respect of any liability, duty or obligation referred to in


this Article 31.











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ARTICLE 32 - BONUSES; CAPACITY Bl ll.DINC. PAYMENTS


Measure Bob ms


32.1.1 Murphy shall pay a signature buaus of six hundred and twenty-five thousand Dollars


(USS625.000) rMarphy Signature Boa as*) lo the GoveraaKat within thirty (30)


days of the Effective Date.


32.1.2 Petnxjoesl shall pay a signature bonus of three hundred and seventy-five thousand


Dollars (US$375,000) (' Prtroqaeet Signaler* Bobus') io the (Armani within


thirty (30) days of the Effective Date.


C anacifs Beitdiag Boa as


32.2.1 Murphy shall pay a capacity building bonus of thirty-throe million, seven hundred and





fifty thousand Dollars (US$33,750,000) ( Murphy Capacity Baildiag Bunas') to


the Government within thirty (30) days of the Effective Date


32.2.2 Pctroqucst shall pay a capacity building bonus of twenty million, two hundred and





fifty thousand Dollars (US$20250,000) (“Petraqaeat Capacity Baildiag Bonn”) In


the (iotcraacai within thirty (30) days of the Effective Date


Production Bonuses





32.3 la the event of a Crude Oil Commercial Discovery, the Contractor and the holder of


the Government Interest dial I pay. pro rata the relevant percentage participation


interest in the Contract, the following relevant Crude Oil Production Bonus to the


GoteraaKat within thirty (30) days of the following relevant occurrence:





(a) two million five hundred thousand Dollars (US $2,500,000) when first


Production of Crude Oil from the Contract Area commences;


(b) five million Dollars (US $5,000,000) when production of Crude Oil from the


Contract Area readies a cumulative amount of ten million Barrels of Crude


Oil (10 mmbo);


(c) ten million Dollars (US $10,000,000) when production of Crude Oil from the


Contract Area reaches a cumulative amount of twenty five million Barrels of


Crude Oil (25 mmho); and


(d) twenty million Dollars (US $20,000,000) when production of Crude Oil from


the Contract Area reaches a cumulative amount of (iffy million Bands of


Crude Oil (50 mmbo).


32.4 In the event of a Non-Associated Natural Gas Commercial Discovery, the Contractor


and the holder of the Government Interest shall pay. pro rata the relevant percentage


participation interest in the Contract, the following relevant Nan-Associated Natural


(■as Production Bonus to the Government within thirty (30) days of the following


relevant occurrence





















































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(a) two million five hundred thousand Dollars (US S2.500,000) when First


Production of Non-Atsociatcd Natural (at front the Contract Area


commences.


(b) five million Dollars (US S5,000.000) when production of Non-Associated


Natural Gas from the Contract Area reaches a cumulative amount of ten


million barrels of oil equivalent (10 mm hoc


(c) ten million Dollars (US 110,000.000) when production nf Non-Aunciaied





Natural Gas from the Contract Area reaches a cumulative amount of twenty


five million barrels of oil equivalent (25 nunboe); and


(d) twenty million Dollars (US S20.000.000) when production oI Non-Associated





Natural Gas from the Contract Area reaches a cumulative amount of fifty


million barrels of oil equivalent (50 mm hoc).





32.5 For the purposes of this Article 32. a Commercial Discovery shall be declared b> the


Contractor to be either a Crude Oil Commercial Discovery or a Non-Associated Gas


Commercial Discovery and under no circumstances shall a Production Bonus be due


in respect of both Crude Oil and Non-Associated Natural (ion for the same


Commercial Discovery.


Boa as cost recovers and payment





32.6 No bonus or payment due pursuant to this Ankle 32 shall be deemed to be a


Petroleum Cost


32.7 The Contractor (and. where applicable, the holder of the Government Interest) shall


pay any bonus or payment due pursuant to this Article 32 in Dollars by wire transfer


to a specified bank account of the < H»crnmcat


Banding !■«>■..[





32.S In respect of the Capacity Building Payment Instalments


(a) on or before the tenth (10*) day of each Month in the Development Period, the





Contractor shall provide to the (•ovrrnmeat. together with the monthly


production statement prepared by the Contractor in accordance with Article


27.4 and Paragraph 6.1. and the monthly valuation statement in accordance


with Article 25 and Paragraph 7.1. a statement (the “Capacity Building


Pas meat Monthly Statement") setting out the Contractor's calculation of


the Capacity Building Value for the preceding Month In each Capacity


Building Payment Monthly Statement the Contractor shall detail each item


taken into account in making its calculation of the amounts due hum the


Contractor, the quantities of Profit Petroleum produced during the Month


covered by such Capacity Building Payment Monthly Statement, the volumes


of such production sold the Capacity Building Value attributed to such sales,


and the Capacity Building Payment Instalments required to be paid with


respect thereto by the Contractor,











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(b) on the same date on which the Coatractor provider the CapacrTv Building


Paymem Monthly Statement to the (imrrratil in accordance with Article


32.8(a). the Contractor shall pay (except as provided in the next sentence) the


Capacity Building Payment Instalment as shown as owed by the C oatmetor


in the Capacity Building Payment Monthly Statement. If:





(1) the Contractor has sold I he Contractor'* Profit Petroleum to (i) the


Government or a Public Company (or a company or an entity owned


and controlled, directly or indirectly, by a Public Company or the


Government), (ii) the State Oil Marketing Organisation (SOMO) or


any entity owned and controlled by the Government of Iraq: and if





(2) any such counterparty as identified in (I) has not paid the Contractor


for the Petroleum lifted by such entity, then:


(3) the Contractor n only obligated to pay the Capacity Building Payment





when. i£ and to the extent the Contractor has received payment by


such counterparty.





The preceding sentence does not apply with respect la and to the extent of


sales of the Contractor's Profit Petroleum to any other counterparties.


(C) within thirty (30) calendar days following the dale on which the Contractor


delivered the Final Fnd-of-Year Statement to the ftovernmeat for each


Calendar Year in accordance with Article 26 13 and Paragraph 10, and hased


on the information in such Final Fnd-of-Ycar Statement, the Contractor shall


provide to the Government a written reconciliation of the aggregate amount of


the Capacity Building Value and the aggregate payments of the Capacity


Building Payment Instalments during such Calendar Year period (the ~Aanaal


Rerun cilia tioa Statement*').




has. if) the aggregate over the Calendar Year period covered by the Annual


Reconciliation Statement, made Capacity Building Payment Instalments in an


amount less than the aggregate Capacity Building Value during such Calendar


Year period, the Contractor shall pay (subject to the same exception as


provided in the second and thifd sentences of Article 32.8(b)) the amount of


the underpayment as shown in the Annual Reconciliation Statement within


thirty (30) calendar days follow ing the same date the Contractor delivered the


Annual Reconciliation Statement to the Govern meat;


(e) if the results of an Annual Reconciliation Statement show that the f oatractor





has, in the aggregate over the Calendar Year period covered by the Annual


Reconciliation Statement, made Capacity Building Payment Instalments in


excess of the Capacity Building Value during such Calendar Year period, and


if and to the extent the Government has agreed with the Coatractor in respect


of the amount of such overpayment, the Coa tractor may deduct such


overpayment to the extent that the fiowmauil has agreed with the amount of


such overpayment from the next following payments of ('opacity Building


Paymem Instalments. In do event will the Contractor be entitled to deduct





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Hie Contractor Mill have a single cure period of thirty (30) days only in


respect of Rs first default If the Contractor is in default for the first time, and


pays the defaulted Capacity Building Payments in full plus interest in


accordance with Article 32.8(f) in such thirty (30) day period, the


Government shall not exercise its lifting rights under this Article 32.11. In


the case of any subsequent default, the Government may exercise its right to


lift whether or not the Contractor cures ks default in the thirty (301 day notice


period.





Tile lifting rights of the Ciovcramcat pursuant lo Article 32.11 arc exercisable by way


of set-off. without first resort to legal process, and without any liability or claims of


the Contractor, the Operator, or any other Person, and regardless of any provisions of


any lifting agreement or provision of a joint operating agreement nr any other


agreement to which the Contractor nr any Contractor Fa fits is a parly The


Contractor shall ensure that all agreements in respect of the lifting ic sale of


Petroleum reflect the Government a priority rights as set forth m Article 32.11 and


this Article 32.12.





The Contractor shall indemnify' the Government from any lews nr I x prove


(•s defined in Article 32.l3(cX below) that may in miy way arise from the


exercise by the Govermneat of its rights in respect of the Cunlraelor under


Articles 32.11 and 32.12.





The Goveraaacaf will retain control over the defence of. and any resolution or


settlement relating to. such l oss or Expense The Contractor shall cooperate


with the Guvvraawal and provide reasonable assistance in defending any


claims agamst the Gmtnmmi








Ixw or Expense” means any liability, loss, claim, settlement payment cost


and expense, interest, award, judgment, damages (including punitive


damages), diminution in value, fees or other charge and, to the extent


permitted by applicable law, any court filing fee, court cost, arbitration fee or





cost, witness fee. and each other tee and cost of investigating and defending or


asserting a claim for indemnification, including attorneys* fees, other


professionals' fees, and disbursements, but does not include consequential


damages A claim set forth in a notice from the Government to the


Contractor will be conclusively deemed a loss or Expense if the Contractor


fails io dispute the Govcramcaf's liability by the end of a thirty (30) day


period following the effective dale of (he notice from the CfovcrameaL The


Contractor shall promptly pay the deemed Loss or Expense on demand





32.14 The Government s rights under Articles 32.11 through 32.13 are not exclusive and





are without prejudice lo the Government1 s terminal lor rights under Article 45.








Except as provided in Artkle 32.8(e) and notwithstanding any provision in this





Contract to Ihc contrary, the Contractor shall pay all Capacity Building Payments


without (and free and clear of any deduction for) set-of! or counterclaim.







































































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32.16 The Contractor acknowledges and accepts that a fundamental principle of Articles


32.8 through 32.17 » that the t o«tract or must pay the Capacity Building Payments


owed by it as and when required. Accordingly, in respect of its obligations under


Articles 32.8 through 32.17 onh and except aa provided in Article 32 8(c). the


Contractor hereby waives any right to raise by way of set off or invoke as a defence


to its obligations to pay Capacity Building Payments pursuant to Articles 32.8 through


32.17. whether in law or equity, any failure by the (ioverameal. the Contractor or


any Contractor Entity to pay amounts due and owing under the Contract or any


alleged claim that the Contractor may have against the Goveramral. the Operator, a


Contractor Entity, or any other Person, whether such claim antes under or relates to


this Contract or otherwise


32.17 The Contractor shall make Capacity Building Payments to the Cos era meal by wire


transfer of immediately uvailaMc funds in Dollars in accordance with wire instructiom


provided by the Government The making of any payments by the Cootrartor under


Articles 32.8 through 32.17, or the acceptance or use of any payments by the


Government, docs not impair the rights of the Coa tract or or the Government under


Article 15. Any dispute between the Govern meal and the Contractor in respect of


the calculation of each of the Capacity Building Value and the Capacity Building


Payment due with respect thereto b subject to Artiek 15.9,








ARTICLE 3d - PIPELINES





33.1 The (roveraamat shall procure and obtain any required Permits for :


(a) the transportation of Petroleum in the Kurdistan Region and in Iraq .





(b) the export of Petroleum from the Kurdistan Region and Iraq.


as well as any necessary Permits and easement rights tor the construction of any


pipelines and related facilities required for the Petroleum Operations, as provided in


Artkk 33,2.


33.2 The (rtivcramral undertakes to transfer to the < ••tractor its rights for transportation





of Petroleum by pipeline. The C ••tractor shall have the nghl to design, construct,


operate and maintain pipelines and any related facilities for the transportation of


Petroleum produced under thb Contract


33.3 Prior to the construction of any pipeline and related facilities as provided in Article





33.2. the (oa tractor shall submit following information to (he Management


Committee:





(a) proposed pipeline route and related facilities:


(b) forecasted pipeline flow rate and capacity;





(c) estimate of financial investment and operating oocts of the pipeline and related


facilities:





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(d) proposed financing schedule:


(e) construction schedule.





(0 general technical description of the pipeline and related facilities:


(g) con struct ion plans and tests;





(h| preventive measures for damage to the environment and third parties; and


(i) any other informatiun relating to the pipeline project.





The Management Committee shall examine all the above information and shall within


ninety (90) days, approve the proposed pipeline project in accordance with the


provisions of Article 8.5.


33.4 Subject to spare capacity being available and to their Petroleum being compatible,


third parties shall be entitled to transport their Petroleum through any pipeline


constructed by the Contractor in accordance with this Article 33 on terms to be


agreed between the Contractor and such third party. Those terms shall be reasonable


commercial terms and shall not discriminate among third party users. 1 he Contractor


shall always have priority of access to such pipelines.





33.3 To the extent that they are 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 ('oats and shall be recovered by the Contractor in accordance


with the provisions of Articles 1 and 25.


33.6 The Contractor shall have the absolute right without any exceptions and for the





entire duration of this Contract to uisc. 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 to transportation upstream of the Delivery Point, any tariffs


received from third parties for use of any pipeline and related facilities by Contractor


under this Ankle 33 shall be applied to the recovery of Petroleum Coats until all


Pipeline Coots have been hilly recovered by the Contractor pursuant to the


provisions of Ankles I and 25 and shall not be included in income for corporate


income tax purposes The (Government shall be entitled to receive any such tariffs


from third parties for their use of such pipeline and related facilities when the said


Pipeline Costs have been fully recovered by the Contractor The costs associated


with providing such transportation services for third parties up to the Delivery Point


shall be considered Pipeline Costs and therefore Petroleum Costs and shall be


recovered by the Contractor in accordance w ith the provisions of Articles I and 25.


33.8 Upon recovery by the Coutraclor of all the Pipeline Coks. the operating and


maintenance coats of any pipeline and its related facilities dial! be borne by the
























































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Coarractor and shall be considered Petroleum Coos and shall be recovered by the


Contractor in accordance with the provisions of Articles I and 25.





33.9 The Government shall have the same rights as the Contractor for use, free of


charge, of any pipeline and related facilities constructed by Contractor under this


Article 33 for the transportation of the share of Petroleum to which the Government


is entitled under this Contract up to the Delivery Point





33.10 The Contractor shall bear the coat of operation and maintenance of any pipeline and


related facilities constructed by C ontractor under this Article 33 and all min of


accidental loss or damage to such pipeline and related facilities while they are


required for Petroleum Operations.





ARTICLE 34 - l .NM LNAI ION





34.1 In the event a Reservoir extends beyond the Contract Area into an adjacent area which


is the subject of another Petroleum Contract (as defined by the Kurdistan Region Oil


and Ciu Law) (an “Adjacent Contract Area‘t or in the event a Reservoir of an


Adjacent Contract Area extends into the Contract Area, the provtxions of Article 47,


Paragraph Second of the Kurdistan Region Oil and (ias law shall apply and the


Government shall require (he Contractor and the contractor of (hr Adjacent


Contract Area to agree upon a schedule for reaching agreement of the terms of the


unit nation of the Reservoir, which terms shall be based on reliable technical,


operational and economical parameters, all in accordance with prudent international


petroleum inthntry practice


In the event that the Minister of Natural Resources decides the unitisalion pursuant to


Article 47, Paragraph Third of the Kurdistan Region Oil and Gas Law. and if the


Coalraetor docs out agree with the decision of the Minister of Natural Resources, the


(detractor shall be entitled to arbitration pursuant to the pros ohms of Article 42.1.


34.2 For clarificalioo and the avoidance of doubt and notwithstanding Article 47 of the


Kurdistan Region Oil and Gas Law, in the event that a Reservoir extends beyond the


boundaries of the Contract Area into an adjacent area which is not the subject of


another Petroleum Contract (as defined by the Kurdistan Region Oil and Gas Law),


the Government shall, upon the Contractor's request, take the necessary steps to


extend the boundaries of Contract Area so as to include the entire Reservoir within the


Contract Area, provided that the Contractor can offer the Government a competitive


minimum work program for such adjacent area.





ARTICLE 33 - LIABILITY AND INSURANCE





Contractor liability


33.1 Subject to the other provisions of this Contract, the Contractor, in its capacity as the


entity responsible lor the execution of the Petroleum Operations within the Contract


Area, shall be liable to third parties to the extent provided under applicable law for


any losses and damage it may cause u> them in conducting the Petroleum Operations.
























































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and shall defend, indemnify and hold harmless the Govrrnmcat with respect to all


claim* for such Iota or damage.


33.2 Notwithstanding the other provisions of this Contract the Contractor and the


Contractor Entities shall not be liable to the (Kncmaent or the Public Company or


other government agencies, authorities nr bodies, courts or political subdivisions for


any damage or km or claims of any kind resulting from its conduct of the Petroleum


Operations unless such damage or loss is the result of wilful misconduct Contractor


or a material failure to conduct Petroleum Operations in accordmscc with the terms of


this Contract: provided, however, that such liability cannot result in the event of any


omissions, errors or mistakes committed in good faith by the Contractor in the


exercise of the powers and authorisations conferred upon the Contractor by virtue of


this Contract, and further provided that in no event shall the C ontractor and the


Contractor I antic* he liable for any indirect or consequential km or damage


whatsoever or any loss, damages, costs, expenses or liabilities caused (directly or


indirectly) by any of the following arising out of. relating to. or connected with this


Contract or the Petroleum Operations carried out under this Contract: (i) reservoir or


formation damage; (ii) inability to produce, use nr dispose of Petroleum; (iii) loan nr


deferment of income; (iv) special or punitive damages; or (v) other indirect damages


or loases whether or not similar to the foregoing.





33.3 The Contractor shall indemnify and hold harmless the Government against all


losses, damages and liability arising under any claim, demand, action or proceeding


brought or instituted against the Government by any employee of the Contractor or


of any Subcontractor or by any dependent thereof, for personal injuries, industrial


illness, death or damage to personal property sustained in connection with, related to


or arising out of the performance or non-performance of this Contract regardless of


the fault or negligence in whole or in party of any entity or individual.


33.4 Notwithstanding Article 33.1. the Government shall indemnify and hold harmless the


Contractor and the Contractor Eatitic* against all losses, damages and liability


arising under any claim, demand, action or proceeding brought or instituted against


the Contractor or any Contractor Entity by any employee of die Government or of


any Public Company or of any subcontractor of the foregoing or by any dependent of


any such employee, for personal injuries, industrial illness, death or damage to


personal property sustained in connection with, related to or arising out of the


performance or non-performance of this C ontract regardless of the fault or negligence


in whole or in part of any entity or individual





The Contractor shall take all nocesoary rtcpv to respond to. and shall promptly notify


the

spills), occurring in relation to the Petroleum (Operations which arc causing or likely


lo cause material environmental damage or material risk to health and safety. Such





notice shall include a summary description of the circumstances and steps taken and


planned by the Contractor to control and remedy the situation The C ontractor shall


provide such additional reports lo the Government as arc reasonably necessary In


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35.6 In the event of emergency smations as set out in Article 35.4. at the request of the


Contractor, the (Government. without prejudice and in addition to any


indemnification obligations the (Government may have, shall assist the Contractor, to


the extent possible, in any emergency response, remedial or repair effort by making


available any labour, materials and equipment in reasonable quantities requested by


the Contractor which are not otherwise readily available lo the Contractor and by


facilitating the measures taken by the Contractnr to bring into the Kurdistan Region


personnel, materials and equipment to be used in any such emergency response or


remedial ar repair effort. The Contractor shall reimburse the Government's


reasonable and necessary costs incurred in such efforts, which reimbursed Mounts


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


accordance with the provisions of Articles I and 25.


35.7 The (Government shall indemnify and hold harmless the Contractor and each





Contractor Entity from and against all coat* (including legal coals) expenses. losses,


damages and liability which such Person may suffer or incur, or may result from such


Person being denied, hindered or prevented from fully exercising its rights or taking


the full benefit of Articles 29.4. and 29.6 to 29.11.


immnncT





35.8 In accordance with prudent international petroleum industry practice, each


Contractor Entity shall maintain any insurance required by applicable Kurdistan


Region Law. 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


Operations: and


(b) personal injury, damage lo third partirsand risks of pollution associated with


Petroleum Operations far reasonable amounts, within the limits approved by


the Management Committee


35.9 Any insurance policy relating to this Contract 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 nut be liable for and shall not purchase insurance


cover for any cbiim arising from negligence or wilful misconduct of the


(Government or of any Public Company or of any of its or their subcontractors or of


any personnel of any of the foregoing.





35.10 Upon its written request the Govern meat shall be provided with insurance


certificates, including necessary details, for any insurance policy maintained by the


Contrnctor which relates to this C ontract


35.11 Koch Contractor Entity shall he responsible for the filing of all claims made under


any insurance policy maintained hy such Contractor Entity which relates to this
























































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data or information lo third parties without the specific consent of the <«her Panics,


such consent not to he unreasonably withheld or delayed. The foregoing


confidentiality obligation shall nut apply to information or data which:


(a) is or, through no fault of any Parly, becomes part of the public domain.


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





(c) is required lo be furnished in compliance with any applicable Law, by a


government agency hav ing jurisdictian over a Contractor Entity, by a court


order or any other legal proceedings; or


Id) is required lo be disclosed pursuant to the rules or regulations of any


government or recognised stock exchange having jurisdiction over i


Contractor Entity.


36.8 Notwithstanding the foregoing in Article 36.7, in accordance with prudent


international petroleum industry practice, such data and information may he disclosed


lo:


(a) Affiliates of each Contractor Entity;


(b) employees, officers and directors of each Contractor Entity and (heir





respective Affiliated Companies for the purpose of the Petroleum Operations,


subject to each such entity taking customary precautions to ensure such


information ts kept confidential;


(c) consultants ur agents retained by any Coatrartor Fatity or its A Hi (tales for


the purpose of analysing or evaluating information or data;


(d) bonks 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 bank or financial institution;


(c) hofta/kit prospective assignees of a participating interest under this Contract


(including any entity with whom a Contractor Fatity and/or its Affiliates are


conducting bona fide negotiations directed towards a merger, consolidation nr


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


(§) any other Person or entity, upon the prior written approval of the non¬


disc lostag Parties.





provided that disclosure shall not be made pursuant to paragraphs (c), (d), (c) and (f),


unless such third party has entered into a confidentiality undertaking


36.9 Any data and information relating lo relinquished or surrendered areas under this


Contract shall become the exclusive property of the Governo^at, who shall have the















































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right to use same for any purpose, in particular for the purpose of promoting said


areas, Each Contractor FBitty shall he entitled to keep copies of such data and


information and In use Mich data and information lor any purpose


36.10 Stibjo;t 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'-* reasonable opinion, such vale or exchange would benefit the


Petroleum Operations.


ARTICLE 37 - ENVIRONMENT\L PROVISIONS





37.1 Dunrg the performance of the Petroleum Operation*, the Contractor shall take





reasonable measures to ensure that it. the Operator, its Subcontractors and agents


attend to the protection of the em irorunent and prevention of pollution, in accordance


with prudem international petroleum industry practice in similar physical and


ecological environments and any then applicable Kurdistan Region Law.


37.2 Prior to surrendering a portion of the Contract Area, the Cm tractor shall take


reasonable measures ui abandon the area to he surrendered m accordance with prudent


international petroleum industry practice ui similar physical and ecological


environments. Such measures shall include removal or 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 m 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


37.3 Ihc Contractor dull take reasonable precautions and measures in accordance with


prudent international petroleum industry practice in similar physical and ecological


environments to prevent am 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 ndunl resources when carrying out Petroleum Operations.


37.4 The Contractor Uadi, in accordance with prudent international petroleum industry


practice in similar physical and ecological environments, respect the preservation of


property , agricultural areas, and fisheries, when carry ing out Petroleum Operations.


37.3 The Contractor shall conduct and submit an environmental anpact assessment to the


(.mrraairaf within six (6) months after the Effective Dale.





National Parks tad Nafare Reserve Areas


37.6 The Contractor shall take reasonable measures to 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.
























































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37.7 The frfrttniBMt: (i) represents and warrants that, on the Ffleetive Dale, there are no


national pari*. nature reserves or other protected areas located in whole or in pan


within the Contract Area where the Coatrarto* shall not be entitled to carry out


Petroleum Operation* and

designate or create or permit the creation of my national park*, nature reserve* or


other protected areas, located in whole or in part within the Contract Area.








37.8 An> reasonable expenditure incurred by the Contractor in relation with this Article


37 shall be deemed Petroleum Costs and shall be recovered by the Contractor in


accordance with the provisions of Articles I and 25.


Prr-r list tea Conditions





37.9 The Contractor ts not responsible for any pre-existing environmental conditions or


any acts of unrelated third parties.





ARTICLE 38 - DF.COMMlVMOMNt;





38.1 To enable the Contractor to recover the costs associated with future Contract Aren


Decommissioning Operations under this Contract the Contractor shall have the right


to establish a reserve fund for future decommissioning and site restoration (a


"Dccoaiait'Mioaiag Reserve Fuad"), The Decommissioning Reserve Fund may be


established at any tune during the Final ten (10) Calendar Years of the term of the


Production Operations of a Production Area but, upon the reasonable request by the


Coatractor, the Crovemment shall allow the Contractor to establish such fund over


a longer period. Once established, the Contractor shall make regular contributions to


the Decommissioning Reserve Fund based upon estimated Petroleum Field


decommissioning and site restoration costs in accordance with prudent international


petroleum industry practice, and taking into account interest received and future


interest expected to he earned on the Decommissioning Reserve Fund. Any


contributions by the Contractor to the Decommissioning Reserve Fund shall be made


m Dollars and shall be deemed Petroleum Costs when paid into the reserve fund, and


shall be recovered by the Contractor m accordance with the provisions of Article 25.


Contribution* to the [Xvommi** tuning Reverse Fund shall be placed w ith a Dm rale


hank approved by the Management Committee in accordance waft Article 8-5


38.2 1C at the end of the term of the Production Operations of the Production Area, the


(rosrraareal decides to take over production operations in the Production Area:





(a) the (lowmaral shall become liable far its future Decommissioning


Operations.


(b) the contributions and any interest accumulated in the Decommissioning


Reserve Fund, to the extent that such contributions have been recovered as


Petroleum Coals, shall he paid to the (.o* create at and






























































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(c) the (Hnenmnt shall release the CoetrKtor and the Contractor Rarities


fmm am obligation* fettling to Dectwnmissionmg Operations and shall


indemnify the Contractor and the Coalractur Kaiitini for an) costa,


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 he paid to the Contractor and shall be used for the Decommissioning


Operation*. The C ontractor shall undertake any wch 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 sullictcm to cover all Decommisooning Coats


for the Contract Area, the balance shall be paid by the Contractor and may be


recovered, if applicable, by the Coalractor la tines or any of their Affiliates from


any other area which is the subject of another Petroleum Contract

Kurdistan Region Oil and Gas law) anywhere in the Kurdistan Region and, to the


extent the balance is nut recoverable as aforesaid, such remaining balance shall be


paid by the Gwcrameat 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 (.osrrament





38.6 Any expenditure incurred by the Contractor in relation with this Article 38,


including any contributions to the Decommissioning Reserve Fund, shall be deemed


Petroleum Costs and shall be recovered by the Contractor in accordance wkh the


provisions of Article 25.


38.7 The Contractor shall submit to the Management Committee for approval in


accordance with Article 8.5 a detailed plan for decommissioning ihe Contract Area


facilities and she restoration (the Decoramixuoatag Ptaa"k such Decommissioning


Plan to be submined 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 withai ninety (*>0) days after receipt The Contractor's


completion of the Decommissioning Operations in accordance, in all material


respects, with the Decommissioning Plan for a Production .Area approved by the


Management Committee shall satisfy all of the Contractor's obligations with respect


to the performance of Decommissioning Operations for such Production Aren. In the


event the (^overaateat docs not agree that Decommissioning Operations lor a


Production Area were carried oal in accordance with the approved Decommissioning


PUn. it must advise the Contractor within six (6) months of the Contractor's


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ARTICLE 39 - ASSIGNMENT AND CHANCE OK CONTROL


Am