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Article 5 OPERATOR










Article 14 NATURAL GAS










Article 24 ROYALTY









Ankle 52 BONUSES


Ankle 34 UNmSATTON











Anick 44 NOTICES











GOVKRNMKN'n. duly represented by the Minister or Natural Resources;


HERITAGE ENERGY MIDDLE EAST LIMITED, a company cdablished and existing

unkt the laws of Nevis. whose registered office b at P.O. Box 693. Hamilton Estate,

< fnrkstiwn. Nevis. duly represented by Anthery Buckingham;

(hereafter referred In ns Ik ••CONT RACTOR"!


(A) Tire GOVERNMENT wistes to develop the petroleum wealth of the KunlisUr

KcgRxi (ax defined In ills Contract) in a -o> that achieves the highest benefit to the

people of the Kurdistan Region and all tf Irw* usitv the most idvareed tcchnitjjo of

nartet principles and encouraging invesanent. cunsbtent with he Censtmaion of Iraq

ncludng Article 112 thereof

(B) In accordance with Ihe Constitution of Iraq, the prevailing bw of the Kunlistar

Kegioa is Ik Kurdistan Region Law (as defined In tills Comma), except with regard

10 n m iller wholly within the exclusive jurisdiction cf the Government of Iraq;

(Q The National Assembly of the KurJistar Regun approved the Oil I Gas Law of the

Kurdmaa Kepoa • Iraq (Law No. 22 of 2007) wtikh la*

(D) Hie GOVERNMENT intends to preseal to toe National Assembly of the Kurdiuar

Repen a la* to axhorar the GOVERNMENT, by contract or other authwivaion. tc

n theKunisun Repot from Kurdtstaa Report taxation to ndcmmty wch ladders

leans liability tc pay such taxatkn. and/or to guarantee the stability of the applicable

legal, fiscal and ccononic catdRRm of such projects.

Hie CONTRACTOR inteads tc develop, construct, finance aid partly own ar

merest in a petroleum refinery b the Kodislan Region, in which the

GOVERNMENT ah* holds an « parsuaat to the terms of the agreement

contained ir Annex C: and

(F) -ach CONTRACTOR Entity is acontaav.

(1) with the financial capability. and Ihe technical knowledge and lechakal ability,

to cany out Petroleum Operations m the Contract Area (as defined n thn

Contract) under the terms of this Contract.



 (H) hiviftg a record of conpliarcc wkh ihc princ pics cf gocd corporate citurnship;


(;ii) willhg 10 cooperate with the GOVERNMENT by enuring into ihs Contract

thereby usisthv ihc GOVERNMENT to develop the Kurdistan Region

petroleum industry, thereby promoting ihc economic development of ibe

Kunfiaan Region and Iraq and d** social welfare of its people.



l.l Capitalised wins and expressions in this Contract shall have be following meaning,

in less otherwise specified:

Abroad means oUside of the Kunfctan Region and other p«m of Iraj.

Accra* Authorisation is defined ia Ancle 17.9

Accounta ia defined in \rtkk I5.L

Accounting Fromlure mem** the Acceuntinj Procedure attached to this Contract as

Annex fi und constituting un integral part of this Contract.

Adjacent Contract Area Is defined in Article 34.1

Adjustment Date is defined tn Article 27.6

Amilfltcd Company

constituting the CONTRACTOR a company or other legal entity which

(» controls a CONTRACTOR Entry; or

(b) is controlled by a CONTRACTOR Ertity; tr

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


tut shall not inclulc the GOVERNMENT in respect of tac Public Company. For ihc

purport of this definition. “controT means direct cr indirect ownership or control of

tic majority of the voting rigits ol the applicable entity it its shareholders' meetings

cr thcr equivalent

Agreed Terms bdefired in Article 14.10(a).

Appraisal Area means the area denned n Article 12-2.

Appraisal Work Program and Badge! is defined n Article 1L2.

Appraisal Report h defined in Article 12.4.


Appraisal Well means a wdl drilled for ihc purpose of cvaljaling the commercial

potential of a gcobgical feature ora geological structure n which Pctroleun has been


Arm'§ Impih mrtni ul« of PHmfcnim in freely convertible currencies

betweai sellers and buyers having no direst or indirect relationship or common

interest whatsoever with each other that could remcmably influence the sales price

Such Amt's- Length Snlos shall exclude:

(i) sales between or among any of ihc CONTRACTOR Entities and their

respective Affilinton;

(H) sales involving the GOVERNMENT •« the Government of Iraq: and

(e) Miles ins.Iving exchanges and any iramadions nrt reining to normal

commercial practices

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

facilitiaa and all other in.4alhai.MK «nd structure, and all Materials and Eqoipmeat

A Module. I Natural C«« means

reservoir conditions and (ii) any residue gns remaining after the cxtractiai of Crude

Oil lr«n a rcaervoir.

Audit IUt|u

Available Aaooriated Natural Cas is defined in Article 25 I

Available ( rude OR U defined m Article 25.1.

Available Non-A««< •elated Natural Cat is defined in Article 25.1

Available Petroleum is defined in Article 25.1.

Barrel meant u quantity nl forty-two (42) 11$ gallons as a unit to measure liquids, /it a

temperature of sixty degrees <(iO°'i Fahrenheit und proiwurc of fourteen point seven

(14.7) pd

Budget* menu, nny budgets prepared by. or on behalf of. the (’OVIKACTOR

piTMiant to this Contract and forming pal of an I vpbralion Wort I*rogrum and

Budget and/or an Appraisal Wort Program and Budget a*i/or a Ga* Marketing Wort

Program and Budget uxCor a Development Wort; Pmgram and Budget and/or a

Production Wort Pregram aid Budget.

CalcnJar Year means a period of twelve (12) consecutive Monthj. commenting I

January and ending on 31 December of the same year.

Chairman is defined in Article 8.1

Commercial Discovery mains u Discovery which is potentially commercial when

Uking into account all lechnwal. operational, commercial and financial data collected

when carrying out nppruiNil works or similar operations, including recoverable


it serves of Petroleum, sustainable regular production levels and other imtcrial

technical, operational, commercial und financial pirumclers, all in accordance with

prudent international petroleum industry practice

<’ Production irenn*; the production of Petroleum from the Production

Area in accordance with annual Production Work Program und Budget.

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

of Iraq in the general referendum or 15 October 200'

Contract means this production sharing contract, including it« Annexes A. B ind C

that ate on integral pan hereof, as well as any extension, renewal, substitution or

amendment of this production shoring contract ihnt may he ugreed in writing by the

Parties in accordance with Article 43.7.

Contract Aren means the area described or»J defined in Annex A attached to this

Contract and constituting un Integral port cif this Contract, aotl any modifications

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

iinicndments, surrender, withdrawal, extension or otherwise

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

Effective l>atc or any anniversary of the said I ffcctivc Date.

CONTRACTOR includes and comprises each and all CONTRACTOR Entities.

Including any Public Company nomiauted by die CiOVKKNMENT pursuant to

Article 4. and/or any assignee of ill or port of the rights and obligations under this

Contract in accordance with Article 39.

CONTRACTOR Parity mem any Person which is lor the time beit^ a cemporttit ol

the CONTRACTOR. «*Coran> assignee of all or part of the rghts and obligations of

web Person under this Contract in axontancc with Arriclc 39.

Crude OU means all I squid fcydrouartoors in nctr mpnxessed state or obuuned from

Natura Gas by condensation re any other means of extraction.

Decommission lag Coot* means all the costs and expenditures incurred by the

CONTRACTOR whea carrying out Decommissioning Operations, including those

defined in the Accountiag Procedure.

Decommissioning Operation* means any works, together with all related and

aixiliary activities, for decemmisnonirg and/or removal and/or abandretmer* and

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

relation to any Production Area.

Decommissioning Plan is defiled in Article 38.7.

Decommissioning Reserve Fund is defined in Article 38.1 aid includes all

contribution1' paid into such fund und all interest accumulated such fund.

Deductible Amount is defined in Article 35.12.


run for a Product* Area. at wh.di the trudcOU. Aanchaed Natunrf Gas and or Noo-

AixiCJKij Saiuitl (iu b »c«crvJ for I Sc jurpoe* of Aide* 77 7. vaurrf for ihr> of Aitiek 27.: and ready to be taken and disposed oC comment »ich puden

ntenvoona.’ petittaan nfcisry praukc. and * a Party may aesube «**»«*

tac of Pttofcun wder this Contract or midi ccher port wttkn nay be agreed by thr


Oevi'kipmcnt Coats means ull (Ik unb amJ expenditures Incurred by the

CONTRACTOR when carrying out Development Operations. including those

defined in the Accounting Procedure

Drtctupmcal Operations racam all dcvckspncni operations or wurla umductcd ia

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

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

recovery projects und pressure rnninlcnnncc; survey, engineering, building und

erecting or laying of production plants and facilities (Including ceperutors.

.iHnprcssc*is; gmcraiccv; pumps and tankage: gatherng Incs; pipclnc* md all

facilities required to be instilled for pnductwn. pressure maitienanee. ard treumcn*,

storage and transportation of l*ctn>letiTi); obtaining of suefc matemk equipment,

machinery, items and supplies a\ may be required or expedient for the loregoing

mrtlvitlcs: and all auxiliary opcrilions and activities required or cxjwdicnt for lire

production of Petroleum from the IWuclion Area.

liesriopmcat Period is dcfiacd in Article 6.

DcvHopmrnt Pba means apian foe development defined in Article 12.8

Well means any well drilled after the date ol approval ol the

Plan fnr the purpose of producing Petndewn. mcreasng or acccfcralirg

of f^trulemn. lacludo* imectioa wets and dry boles Any well drilled


(WvvIofMiOTi Work Program and Radget means the development work program

and budget prepared puruiaat to Article 13.2

Dbeavrry meats a dneovery of PWnieun: wnhn the lanes of the Contract Area

rmnl-ii^ from himlium Opexabnm carried out under this Contract, provided such

Petredeum is recover** at the surface with a measurable flow Kiliurg techniques

used in prvdcfrt nlemaimnd prtndruir industry practice.

IK.pair u defied m Artie* 4? I

Dollar (INS) mam ihr trgal -um-mry (dollar) of De l‘ailed Stales of America


KfTcctivr Date means the date on whkh the condtkms referred to in Article 47 hare

Seen fulfilled

► .. roarer.. ¥mmA k defined .t Artrlc 219.

tqaipauai and M.trrtak k defined n Article 111.


Ciploraliot Carta means all the costs and expenditure lacurml b> the

CONTRACTOR when earn ing cut Exploration Operates, hcludng thwc defined

is the Accounting Procedure.

Fiploratios Operation! means aiy a»d all operations conducted with a view to

ciscovrring Petrocum. inc tiding: any activii*s necessary to commence operations.

my topographical hydrographical geological geophysical. aerial anti other surveys

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

IM subsurface for the locatkm of Petrcicum: doling of she* holes, core hole* anti

< rati graphic test holes drllmg. tesxiag. coring, logging and equipping of

Exploration We lb or Appraisal Well*; procurement of *t*:h aervices material

equipment, machnery. items and supples as may be required or expedent for the

foregoing activities; anJ all auxiliiry operatic** oral act vtlies rvMu red or expedient

for the conduct of the faregoing activities.

Exploration Period is defined in Article 6.

Exploration Rental isdefined in Ankle 6.3.

Exploration Well mcaas an* well drilled for the purpose of confirming e geological

srucnxc or rtratigraphk unit in which no Di**ov«e> has preview*!} keen made by the


Exploration Work Pragran and Budget means foe exploration work program and

tudget prepared pursuant to Artiek II.I

Expo* Crude Oil b defined ia -Ankle 242.

Export Non Aauxiatrd Natural Gaa rs defined in Ankle 2*2

Export Petroleum is defined ri Article 242

PI rat Commercial Declaration Date isdefined In Article 4. f

Flraf Exploration Well is defined In Article KU (c).

First Production menus the moment wlum Comrxwcinl Production of Crude Oil ot

Non-Associated Nitural Gas (as the ease may be) first commence*, by flowing at the mte

forocart in the Development lion without interruption for a minimum of forty eight (48)


Forte Mujcxrc isdefined in Article 40.2.

Can Development is defined in Article 14.10.

(ins Vlarkcting Costs means nil costs and expenditure incurroi b) ihc

CONTRACTOR when carrying out Gas Marketing Operations, including those

defined in the Accounting Procedure.

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

contemplated by Article 14.6.


(.'«* Marketing Work Program and Budget means lltc marketing work pn^ram anJ

budget prepared pursuant to Article 14.8.

(nneraMt lowrcst H defined n Ancle 4 1.

I rai| mean.' the entirety of the Republic oflra^ including the Kurdistan Region.

Joint Operating Agreement mams any agreement executed by the

CONTRACTOR Entities «t any time for tlte purpose of regulating between such

entities the terms unifcr which the Petroleum Operations will be conducted, which

agreement shall be:

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

consistent with the provisions of the Contract

Kurdiaian Itr,.mn means the Federal Region of Kurdtam recognised hy the

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

Has lav*.

Kurdl*Ian Region Law means all sUUutot, dotrae*. edict*. cod nilei.

ordinances and regulations of the GOV KKNMK.NT or of any other

Knrdastaa Regina Oi aad Gas law means the Oil aad Gaa of the Kurdntai

Regnn Iraq (Law Nn. 22 of 2007) as die Mine miy be amcnied

law neons all applicable law* ududiag the following: consrituinnal law, cisil law.

common law. latrmumnal law. cqirtv. treaties, statutes, decrorv edicts, codes,

“•slcn. jucgemaiU. rok*. ordinances aad rcgUalkn-.s of any local, munkipa'.

territorial, provireial federated. aatioad or any ocher duly constitutes! govcmmcnul

authority or agency.

I-CIA t» defined In Ankle 42.1(b».

MOOR mmm Ike London Inlet-dank Offered Rale 1 which Dollar k* one

(I) rretnth an: ottered in the inter-hank market in London, as quoted in the financial

I ones of London Ibr tie day m qwsuoa. In the event tlui wick me a not published h

the Financial Times, it shall mean dr London Inter-dank Offered Kate at which

Dollar deposits lor one month arc ottered hr the neared day as *x*cd by National

Westminster Hark pie.

Management ( emmittcr is dcfircd in Article 8.

Masmam Efficient Kate (VIKKi is defined in Article 16.12.


Mininum Exploration Obligation* is defined in Article 10.1.

Minimum Financial Commitmrul means:

(a) in reject of the First Sub-Period. the total of the amounts set out in Articles

10.2(d) and 10.2(c); and

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

Month means n calendar month according to the Gregorian calendar.

Natural G» means all gaseous Petroleum and mens.

Nob-Associated Natural Gas means any Nnturnl lias which is not nny Associated

Natural Gas.

Notice of Dispute is defined in Article 42.1

Operator means the entity designated by the CONI'RACTOR punuunl 10 Article 5

which, in the name aid on bchull ol the CON IRACTOR, shall curey cut all

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

this Contract, any reference herein to the term Operator1 shall be to each Operator with

respect to die pans of the Contract Area in which Mich Operator conducts Petroleum


Oplioa of Government Participation is defined in Article 4.1.

Option of Third Party Participation is defined in Article 4.8.

Party or Panics means the GOVERNMENT and'oc eatfi CONTRACTOR hntity

and/or the CONTRACTOR.

Permits means ail licences, permits, coastals, authsmatxms or other pcrmkMtn.v as

the context requires.

Person shall include natural ard juristic pcrvns (including iorporalion- and

governmental agencies*

Petroleum means:

(a) any naturally occurring hydrocartwn in a garsc *u\ or liquid state

(b) any mixture of naturally occurring hydrocartxm in a gaseous or liqud stale or

returned to a Reservoir.

Petroleum costs means all costs and expenditure incurred by the CON iKAt lOK

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

under this Contract and its Accounting Procedure, including Decommissioning Costs,

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


Petrokam Grid ncansa Resrvoir or group of Reservoir* withn a conmoa geobgkal

anxiuc or drati graphic unit, which may become part of a Prodactkm Area pursmnt to

a I Vvriopment Plan.

Patrol ram Operation* means all Exploration Operation* Gas Marketing Operations.

Development Operations, Production Operations and Decommissioning Operations.

.V* well ns nny other activities or operations directly or indirectly related or connected

with the said operations (including health, safely awl environmental operation* and

activities) And authoriwd or contemplated hy. or performed in Accordance with, thin


Pipcllac Costs is defined in Article 33,5.

Prod act to a Area means such arcus within the Contract Area designated as a

production arvu in an appro* od Development Plan prepared pursuant to Article 12.

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

which A Commercial Discovery in located arc automatically included in the rc'cvnnt

Production Area.

production Bonus means any bonus due pursuant to Article 32.3 nr 32.4.

Production Costs means all Ihc costs and expenditure incurred by the

CONTRACTOR in carrying out the Production Operations including Hum defined

in the Accounting Procedure.

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

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

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

(.pending, set vicing, repairing, and maintaining any wells, plants. cquijvncnt.

pipelines, terminals and ary other (retaliations and factleies. and any related

(fiendtuns *xl aunluiry operatiom. and saorage and mmspucuduo of Pctndcuiii fturn

the Productwn Area to tic Delivery Point.

rrodactioa Rental is defined in Article 13.10

Prod action Work Program and Bad get shall mean th: preduetko wtvl program

and budget fteparrd pursuant to Article 13.6.

Profit Crude Ot Is denoed In Ankle 26.1.

Profit Natural Go b defined in Ankk 26.1.

profit Patfnb--- is defined m An tie 2*. I.

Proposed Contract b defined in Artkk 14.10(a).

Pnblk Company means a fublk compui) doty registered and incorporated in the

Kurdistan Region and regulafcd by the GOVERNMENT under the Kurdistan Region

Oil and Gas Law.

Public Officer means a cn/l servant, including • men her or cmpmycc of a pjblw entity,

n member of ihc Kurdbun National Assembly or a member of ihe GOVERNMENT


Ouurlcr means a period of three (3) consecutive Month* starling on the llrst day of

January. April, July or Ocl«»bcr respectively.

Reservoir means a suhsurftkc rock formation containing an individual and separate

rotund occumulaiinn of producible Petroleum characterised by a simile natural pressure


•‘IT Factor is defined in Article 26.4.

Royalty is defined in Article 24

Second Fiploration Wells is defined in Article 10.3(b).

Semester means • period of fix (6) comceutlvc Months darting front the first day ol

January or July respectively.

Senior Representatives is defined in Article 42.1(a).

Subcontractor means any entity of uny contracting tier providing services ond/or

undertaking works relating :o die Petroleum Operations directly or indirectly on

behalf of. the CONTRACTOR or any CONTRACTOR Entity.

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

Tales means all curreni or future levies, duties, payments, charges, impositions,

imposts, withholdings, fees, taxes (including value added lax or other sales or

transaction based tax. corporation tax. income tax. capital gain* tax. stamp duty, land

tax. registration tax. capital end wealth tax. profit tax. dividend tax or withholdings,

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

(IX on income from movable capital znd fixed ux or transfers) ur coni ri hit ions

payable to nr imposed by the GOVF.KNWENT.

Third Party latemf isdefired in Article 4.8.

Third Party Parbripaat » defined in Article 4.9.

Work Protram meats any work pregnur prepared by. or on bdulf oC the

CONTRACTOR purnant to this Contract and forming part of an Lxplonlion Wort.

Program and Budget aad/nr an Apprai«al Wort Pmgran and Budget and/or • Gas

Marketing Wort Program and Badge! and/cc a Deveiopmer.t Wert Piograia and

Budget and/or a Production Wort Program and Budget.

Virr-Oiairaiaa it drfiaed in Anide 8 I

In this Contract, unless the context otherwise retires or is specifically otherwise


(•) headflgs arc to be ignited.

(c) singe Ur ircludc* plural and vice *cr so; and


 id) reference to an “Article" i\ to an article of this Contract and to u ‘TuraumpIT

is to a paragraph in the Accounting I’roccdure.


2.1 This Contract is a production-shurinu arrungement with respect to titc Contract Area,

whereby th: GOVERNMENT has the right, pursuant in the Constitution of Iraq, to

regulate and overer Petroleum Operations within the Contract Aren

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

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

■II die Petroleum Operations.

By entering into this Contract, the GOVERNMENT grunt-, the CONTRACTOR the

exclusive right and authority to conduct ull I’etroleum Operations in the Contract Are*

u detailed in Article

2.2 Upon the CONTRACTOR1# request, the GOVERNMENT shall provide and/or

procure all Permits relating to the Petroleum Operations required by the

CONTRACTOR to fulfil lt» obligation* under thij Contract, including those relating

io any extension and renewal periods and including those required hy the Government

of Iraq. IlK GOVERNMENT (i) represent.' and warrants to die CONTRACTOR

that it has not done und has nut omitted to do anything that would cauic the

cancellation or suspension of this Contract or any Permit granted under this Article

2.2 or pursuant to this Contract; and (ii) covenants that it will not do, or omit to do,

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

Permit grunted under this Article 2.2 or pursuant to this CuntiacL For the avoidance

of doubt nothing in das Ankle shall affect the rights and obligations of the Parties

pursuant to Artkie 43.

2J The CONTRACTOR shall conduct ail Petroleum Operations wkhtn the Contract

Area a its -ok cost, rii and peril on behalf of the GOVERNMENT, pursuant to this

Contract, including the following eperatons:

»a) Technical Services

Impcmertatkm of all technica, hunan and material resources reasonably

required for csccutbn of the Petrekum Operations, in accordance with

prudent irtemationai petroieum industry practice.

(b) Finaacial Services

I hc responsibility for funding the Exploration Operations and. in the event of

a Commercial Discovery, Development. Production und Decommissioning

Operations pursuant to this Contract.

For the luruling of Petroleum Operations, each CONTRACTOR Entity shall

he entitled to have recourse to external financing from either its Affiliated

Companies or from any third panics.


 (c) Administrative Services

Implementation of all appropriate management and administration techniques

for execution of the Petroleum Operations under this Contract, in accordance

with prudent Intrmulinnnl petroleum industry practice.

2.4 During the term of this Contract, the CONTRACTOR shall be responsible to the

GOVERNMENT for the conduct of Petroleum Operations within the Ccmract Area

2.5 pursuant lo the terms of this Contract

Natural resource' other than IVtrolcuro shall he excluded from the scope of this

Contract. even if die CONTRACTOR discovers any such resource! when executing

2.6 its obligations puminnt to this Contract

Hie CONTRACTOR shall only he entitled to recover Petroleum Costs incurred

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

2.7 Costs shall occur within the limits provided under Article 25.

During the u-rm of this Contract, Profit Cmdc Oil nnd/or Profit Natural Ci»s produced

from Petroleum 0|>crat<>ns shall lie shared between the Parties in accordance with the

2.1 provisions of Article 26.

For the execution of Petroleum Oprrntiiw* ut»ler this Contract, the CONTRACTOR

shall have the right to:

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

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

(b) freely use access roads located within the Cortract Area and outside the

Contract Area lor the constructed. installation. maintenance, operation and

removal of pipelines anJ other facilities required for the Petroleum

(c) freely use sand water, electricity and anv otheT natural resources iccatcd

irnutk or outside the Contm:( Area for the Petiole»m Operations.

(d) use *ny qualified foreign w»d local personnel and/or Subcortractcrs required

for tire conduct of Paroleun Operations in accordance with Articles 22 and

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

authorisation of the GOVERNMENT (such authorisation not to be

unreasonably delayed or wiihhcW) and the GOVERNMENT shall obtain any

autbcrisaiun required by th: Government of Iraq:

(e) impert any goeds. naterals, equipment and/or services required for the

Petroleum L/pennons in accordaacc w*n Articles 19.22 and 30; anJ

(f) freel* use land or propenv belonging to the Kurdistan Kvgkn. anJ tbe

GOVERNMENT will assifl the CONTRACTOR with faciltiating the use by

the CONTRACTOR of any private property in the Kurdistan Region.

2.9 Ir addition to production-sharing amingcnjcnu will: respect to Pctrvlcum Operations

the Coat fact Area, this Contract defines in Aancx C the term* and conditions under


 vhich the CONTRACTOR shall deidop, comma, finance and own a petiolcum

rr liner. in *>c KardisUn Region. For the avoidaacc of doubt the costs associated

with ttc refinery dull KM be recoverable under this Contract


The initial Contract Area cover, the Minin Block ural extends over an urea of one thousand

and fifteen squuro kilometres (1015 km*), as detailed and indicated on the map attached in

Annex A and is delimited by the following coordinates:

Point Latitude (d*fl min Longitude (deg X(mE) Y(mN,

*ocj_ min aec)

A 35 54 09 44 59 05 498 628 3973 147

B 35 50 il 45 04 44 507 123 3966 422

c 35 33 18 45 20 31 531 002 3934 £63

D 35 27 32 45 25 00 537 709 3924 011

E 35 21 02 45 16 58 528 718 3911 «65

F 35 20 22 45 12 49 519 366 3925 488

d 3647 18 44 51 55 487 823 3960 471

The GOVERNMENT, by execution of this Contract hereby validates and aj>provcs the

foregoing co-ordlnnlCN of the Contract Area.

The total urea of the C ontract Arva may be reduced only in accordance with the provisions of

this Contract



Government Interrat

4.1 The COVFRNMF.NT shal have the opt on of participating through a Public

Company at tha Contract in respect of the entire Contract Area, as a

CONTRACTOR Entity, with an andivded iitcres in the Peroleun Operation* and

all the other rights, dutira. obligation* and li.Nlitiesof thr CONTRACTOR (save as

provided in and subject to this Article 4) under this Contract in respect of the C.ntratf

Area, of up to twenty five p*r cert (2SS). aad not less than five per cert (5S) (the

Government IntrrcaO. sceh option being referred to herein as the Tlpttoa of

Government Participation”. The GOVERNMENT shall be entitled to exerebc the

Option of Government Participation by notifying the CONTRACTOR in of

aidt elect km und die atic of die Gtivciiinicni Interest.

4J Hie GOVERNMENT may exercise tlie Opium of Government Participation si any

lime in the period commencing oo the Inflective Date and ending one hundred und

eighty (IR0» days ultci the dole on which CONTRACTOR dcclan* the Hrvt

Commercial Discovery (which date of declaration is referred to herein as the ‘First

Commercial IH-claratlua Date"), by nominating to the CONTRACTOR, in writing,

a Public Company. If the GOVERNMENT does r»t notify th; CONTRACTOR of


 vuch dcctkn within wh period, the Optior of Covenment Participation shall be

deemed lo hive been waived.

4J If the GOVERNMENT exercbes the Ojtkm of Government Participation m

accordance with Article. 4.1 and 42:

(a) the effective dale of such particiration shall be the date of the notice by which

the COVF.RNMK.VI exercises is Option of Government Participation or the

First Commercial Declaration Dae. whichever iv the earlier.

(b) the Public Company shall participate as a CONTRACTOR Entity under this

Contract Pom such effective dase. with all its rights. Julies obligations and

liahi ities • ruler this ( ontrnet. save as rmvidrd m and sabicct to the provisions

of thu Artclc 4;

(c) the Public Company dull rot have am liability lo the .Over CONTRACTOR

Entities lo contribute its Government In tries! share of all PetnWeum Costs

incurred before the First Comnctcial Declaration Dale and its Govcramenl

Intcrrst «hire of such l*etrclcum Cost* shall be the responsibility of the oshev

CONTRACTOR Entities, provided always that such ether CONTRACTOR

Entities ahall be entitled (through the CONTRACTOR) to teener all such

Petroleum Costs in accordaxe with Amclc 25;

(J) iC pursuant to the terms of tac Joint Operafng Agreement. the Public

Company j«oilici|H.lcs in the doclupmcnt of the Co*ame»vw»l D.vcovxry, it

shall be liable to the other CONTRACTOR Entiles to antnboc its

Government Interval sluue of all Petroleum Costs incurred on or after the l int

Comraetcial Declaration Date, with the exception of the Production Bourses

referred to in Article J2. nnd shall be entitled (through the CONTRACTOR)

lo recover nil such Petroleum Costs ic acccrdarxx with Ankle 25. including

the Petroleum Costs which it has reimbursed puraant ic Article 4.3 (e);

(c) II such Ojxlon of Government Participation is exercised on or after the Firs

Commercial Derloraton One. the Public Company shall, within thins (30)

days of the date on whch he GOVERNMENT ratified the

CONTRACTOR of its election, reimburse the other CONTRACTOR

Entities for all Petroleum Costs for which h is liable pursuant to Article 4.3(d)

and which have been incurred by such other CONTRACTOR Ertities on or

after the lirvt ComnxrciaJ Declaration Date but prior lo and traludirg the

date of the notice pursuant to whth the GOVERNMENT exercises its Optioa

of Govcmncni Partcipatwn. From the date of $o:h notice, the Public

Company shall pay be Govcnuncnl Interest share of such Petnxeum Costs

directly; aad

(0 for the purposes of Article 37 of the Kurdistan Region Oil and Gas Law. the

Government I merest so assigned shall be deemed lo he held by rhe

GOVERNMENT and in axordincc with tf»c pmciple in Article 16.13. the

Pubic Company will he individually and separate > liable (and not jointly and

severally liable wkh the other CONTRACTOR Politics) to the

GOVERNMENT foe its obligations, duties and lability under ifcis Contract

as a CONTRACTOR Entity and the provisions of Article 4.5 shall apply.


Article '7 of the KunSstan Region Oi and Gas Law, the Goverrment Inters sc

principle in Article 16.13. the Pubs Canpaoy 10 which such Govonmen Interest b

transferred will hr md cduolly aad «p«^ liaMe <«*d not jointly ard tcrerally

table with the ether CONTRACTOR Emiies) to the GOVERNMENT far its

cMigabons. Julia' and Kahiliae* under tkb Centred as m CONTRACTOR FoUJv and

lire previsions of Article 4.5 shall apply.

4.5 Any failure by the Public Company to perform any of its obligations or to satisfy any

id ha cmics or liabilitic* undo this Contact a> a CONTRACTOR Entity dv.ll mfi hi

considered as a default of the other CONTRACTOR Indies and shall in no case be

Invoked by the GOVERNMENT to utmiiuic this Contract or cervix any other

rghts or rcrredies in respect of such default that may be available to c

The capacity of a Public Company as a CONTRACTOR Entity, as h may arise

pursuant to ihe provewns of this Contract, shall m ao event caacel or aflcet the right'

cf the other CONTRACTOR Bxfhies to seek to settle a dispute or to refer such

Article 42.

4.6 A l*ublic Company may assign pan or al, of its Government Interest to a thrd pmty or

parties (not being a PuNic Company) and for the avoidance of doubt the prov iskos of

Articles 39.1, 39.2 and 39.3 shall not apply. Any such assignee shall be jointly and

Kvcrally liable w4h the other CONTRACTOR Entities.

For the avoidance of doubt, following any assignment by a Public Company of nil or

part or all of a Government Interest ton third party which is not a Public Company, in

occordince with Ihe provisions of this Article 4, the provisions of Articles 39.1. .19.2

nnd 19 l ..hall apply to any subsequent assignment of such interrsi

4.7 Where a Joint Operating Agreement has been executed by the CONTRACTOR

I jttitles prior lo any exercise of the Option of Government Participation pursuant to

this Article 4. the Public Company nominated by the GOVERNMENT shall become

u party to such agreement, with any amendments necessary to lie consistent with the

principles of this Artie Ip 4 Where a Join! Operating Agreement ii not In place prior

to the exercise of the Option of (fovemment Participation pursuant to this Ankle 4,

Ike Public Company and the other CONTRACTOR I ntitio. ■ball, within a

reasonable period of time, negotiate in good faith ond enter into a Joint Operating

Agreement imJ .shall during the period between the exercising cf the Opt inn of

Government Participation aad the execution of the Join! Operating Agreement,

comply with Ankle 4.14(a) and (b) as if they were provbjunx of thisCunUact.


 4.1 The GOVERN MF.NT shall have the o^ion of norainarrag a third party. n respect o:

foe citire Contrail Area, as a CONTRACTOR Entity. with *n undivided inlcrcv* ir

foe Prtrolcun Ormliem ani all (he other rights. duties. obligaikwi' and liabilities of

tic CONTRACTOR (save as provided in and subject (o this Ancle under this

Contract in rrvprtl of tie Centrart Area, of op to twenty-five per cent (25%) aid not

levs than five percent (5%) «thc Third Part. Interest"), such option being referred

to herein a* the 'Optio* of Third Parts Participation".

4 • The GOVERNMENT may excrciar the Option of Third Party Participation it any

time prior to the date eight (I) months following the Effective Date by nctninaiing tc

tie CONTRACTOR, in writing, the sue of the Third Pam huerefl and a company

which has adequate revnnccs and capacity to discharge the obligations of a

CONTRACTOR I ntity under this Contract and a Joint Operating Agreement

respect thereof (u»ch a cotrpany to be the "Third Party Participant'). For the

Patty Partkipolkn once, in respect of ooc Third Party Part cipatl. and after suck

c.\crvi< the resulting Third Party Liferca may not be increased under this Article 4.

4.10 If the GOVERNMENT auninoas a Thin) Party Participant pmuan: to and ir

accordance with Articles 4.8 and 4.9. that Third Patty Pvtkiputi shall have the Third

Party Interest.

4.|| |f the GOVERNMENT does not Tomhuue a Thtrd Party Pan clpnrt punuam to anc

h accordance wi* Articles 4.8 ard 4.9 then the Option of Third Party Participation

•hall be deemed to have been waived.

4.12 If the Option of Third Puny Participation is exercised in accordance w nh Aiticfcs 4.8

ami 4.4:

(a) the effective date of such pirticipation shall be the Effective I Kile,

notwithstanding that the exercise ot ihe option ot third Party Participation

under Article 4.8 ocean after such date;

(b) ihe Third Party Participant shall, upon signature of a tending and enforceable

instrument ol assignment and novation in respect of this Contract rclerrcd to in

Article 39.3, pay to the CON TRACTOR, by way of cleared funds to a bonk

account nominated by the CONTRACTOR, on amount equivalent to Ihe

proportion of Petroleum Costs incurred by ihe CONTRACTOR up until the

date of such payment utiriteitnhlc to th: Third Party Interest (which Petroleum

Costs, for the avoidance of doubt, do not include bonuses payable under this

Contnict or cost* paid purwiunt to Annex C);

(c) upon payment pursuant to and in accordance with Article 4.12(b) and (he

execution of ihe instrument referred to in Article 4.12(b). Ihe Third Puny

Participant shall participate an a CONTRACTOR Entity under this Contract

as if it had be»'n a CONTRACTOR Fntity from Ihe PfTectivr Onto, with nil

its rights duties obligations and liabilities under this Contraci; and


V -

(d) where a Joint Operating Agreement has been executed by the

CONTRACTOR Entities prior to am exercise of the Option ot'Third P«rt>

Piilfcipotion pursuant to Article 4.8 and 4.9. the Third Party Participant shall,

upon signature of the instrument referred to in Article A. 12(b). become u party

to such Joint Operating Agreem.'nt on the terms thereof

(e) If a Joint Operating Agreement is not in place prior to the GOVERNMENT

exercising the Option of Third Party Participation, then the Third Party

PnrticipAnl and ihe other CONTRACTOR Entities shall, within a reasonable

period of time, negotiate in good frith and enter into a Joint Operating

Agix-vmoiK mid shall during the period between the exercising of the Option of

Third Party Participation and the execution of the Joint Operating Agreement,

comply with Article 4.14(a) and (b) as if they were provisions of this Contract.

Order of Kscrcialaic Option*

4.13 Notwithstanding Articles 4.8 to 4.12. if the GOVERNMENT exercises the Option of

Government Participation:

(a) alter the GOVERNMENT has exercised the Option of Third Party

Participation, Ihe Government Interest nhall be uiutgned under this Article 4 to

the Public Company by the CONTRACTOR Entities pro rata to their

respective participating interests under thin ContriKt; and

(b) prior to tin GOVERNMENT exercising the Option of Third Party

Participation, then the Third Party Interest shull be reduced by a percentage so

as lu put tlic other CONTRACTOR BniitlM (oilier than the Person holding

the Government Interest) and the TTtinl Potty Participant in the pasitioa they

would have bee* in had the Option of Third Party Partkipjlko been exercised

before the Option of Goverament Participation.

Joint Operating Agreement Pro»t»oa»

4.14 Any Joint Operating Agreement entered into in relation to this Contract shall be

consisrem with the principles of thh Ankle 4 and shall provide as follows:

(a) all decisions c€ anj operating cmmmilicc esubllslcd umJct such Joint

Operating Agrtemert shall require the afTirraativc vote of an agreed

percentage of pamcipitlng Interests hdd thcrcuncer. witch b any event shall

be not more that seventy fi*e per cent 75%); and

(b) in the evert of a proposed transfix by any CONTRACTOR Fntity of part of a

participating merest under suet Joint Operating Agreement. including any

Government Interest ce Third Party interest:

(i) no transfer may be mace which would result in tie transferor or

traaslerce holding less den a five percent (5%) panic paling interest.

(ii) the proposed turd party assignee mast demonstrate to the reasonable

safisfeetbn of each of the extaat CONTRACTOR Entities that it has

the financial capability to pcrlvni Is payment obligations under the

Coacmcl and uadcr Ac Joint Operating Agreement and


 (id) the propped third party MftigfCC dial I enter into an instrument

satisfactory to each of the extant CONTRACTOR Entities so at to

resume and to perform the obligations cf the wnt&rot.


5.1 The CONTRACTOR hereby designates I leritnge Energy Middle East Limited to act

as the Operator on Eehalfof the CONTRACTOR Tot the execution of the Petroleum

Operations. The CONTRACTOR shall at any time have the right to appoint another

entity as the Operator, upon giving the COVERNMENT not less than thirty (10)

days prior written net ice of such appointment.

52 The CONTRACTOR shall submit to tlic f .‘OVERNMENT for comment any agreement

regarding or regulating the Operutofs appointment and its conduct of Petroleum

Operations on behalf of the CONTRACTOR pursuant to thk Contract prior to

execution of such agreement.

5.3 In the event of the occurrence of either of the following, the GOVERNMENT may

require the CONTRACTOR to appoint toother entity as Operator as soon as is

reasonably practicable:

(a) if nn ©filer hi* been pasted in court doclaring the bankruptcy, liquidation, or

dissolution oflhc Operator, or

(b) if the Operahr terminate the activities under this Contract delegated to it by the

CONTRACTOR or u material proportion thereof, and. as a result die

CONTRACTOR fails to fulfil its obligations urder the Contract.


& I Thi> Contact comprises ar Exploration Period and a IVvcUpmcni Period, as defined



62 The Exp brat ion Period shall be for an Jtilial term of five (S) Ccrttracl Yean,

extendable on a yearly basis (as pmv-ded in Articles 4.5 and 6.61 up to a miximun

period of seven (7) Contract Years starting from the EfTccthc Date. Tic initial term

of five (5) yean shall be subdivided in two (2) su^perieds as follow*.

(a) an initial udwperiod of three (3) Contract Years <“ First Sab Peered"); and

(b) a second suKperiod of two (2) Contract Years fSecaad Sab Period")

each a "Sab-Period" and collectively ‘Sab-Period*-.

It is jnderdnnd that the right of tfv CONTR ACTOR to accede to the next Sub-Period

or osy extension thereof shall be subeef to fulQment of the Miiimurv Exploration

Obligations or minimum wort ohligsriom applicable to th* previous Sub-Period or

Daewoo ihcrerf (as the case ma> be).


6.3 During (he Exploration Perkxl, ihc CONTRACTOR shall pay to the

GOVERNMENT, in arrears nn annual surface rental for the Contract Area, os may

be reduced by rclinquishmcrt fn>cn time to linu: pursuant to Article 7. often Dollars

(IJSSIO) per square kilometre per Contract Year ("Exploration Rentar). Such

I v p|< Kit ion Rental shnl I hr com idem! ns n Petroleum Cost nnd shnll hr recovered hy the

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

6.4 If the CONTRACTOR decides net to enter into die Second Sub-Period, it shall notify

tho GOVERNMENT «t least thirty (3lt) days prior lo the expiry of the First Sub¬

total and, provided that iIk data from the first Exploration Well demonstrates that

there k no rvaeotmhlc tochnfeal cure fiv drilling the Second Fxplorition Well in the

Contract Area, die Exploration Period shnll expire at the end of the First Sub-Period,

unlwwlho I'int Sub ParnxJ liut Ixcn extendod pursuant to Article6.5 and/or Article 6.6.

6.5 If the CONTRACTOR Hub fulfilled Its Minimum Exploration Obligations for a Sub

Perkxl of the Exploration Period but considers ihnt additional work is required prior

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

under Article 12.2 in runpeot of a Discovery, or

(b) to deciding to declare n Dtaovery uu a Commercial Discovery in accordance

with Article I2.6

preparation and'or execution of an Appraisal Work Program and Budget os

provided under Article 12.2 nnd/or Oas Mattering Operations,

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

Cunua;t Year, of the Uten CUTTOil Sub-Period, up to the end of tire maximum

Exploration Period of seven (7) Contract Years, (as provided in Article 6_2> The

CONTRACTOR’S notification of its Intention to exercise such cxicndon aid its

duration shall be submitted tn writing to the GOVERNMENT at least thirty (30)

days prior to the eod of the then current Sub-Penod or the rod of the ben current

extern on (as die case nay be\

6.6 W ithoot prejudice to Article 6.5. upon expiry of the initial term of the Exploration

Period it it considers r. has lot completed its exploration cvxuatico ol the Centract

Area, the CONTRACTOR shall be entitled to at extension of the Second Sub-

Penod provided :t notifies the GOVERNMENT in writing at leas thirty (30) days

prior to the end of such Sub-Period togethe- with a proposal for a min mum work

obligation for such exiensior. Any such extension shall not exceed one (I) Contract

Year. Upon the expiry of such exfcnsioa. if it considers it has dill not completed il>

evaluation of the Contract Area, the CONTRACTOR dull be entitled to a further

extenvon of one (I) Contract Year provided hat it notifes the GOVERNMENT in

writing at least thirty (30) days prior to be end of tie original extension. The right of

the CONTR ACTOR to accede to the farther extcrvjon dull he vuhjecl to fulfilment

of the minimum work obligations applicable to the original extension

6.7 Subject to Article 6.4. at any lime curing the Exploration Period, upon thirty (30) days

prior notice to the GOVERNMENT, the CONTRACTOR dull have (he right tn

withdraw from this Contract provided that the outstanding Minimum Exploration

Obligation* nrlatnu to the the* current Sub-Period have been completed in

accordance with he Contract or it has paid to thr GOVERNMENT the amounts


specified in Article 10J or AUklc 10.3. whkhever is appl cable »ihc then cunrn: Sub-


6.8 II' no Commercial Discover) has been made at the one of the I splon inn Period

(including any extensions thereof) this Contract shall tcmtinate.

6.V If n Discovery is mode within the maximum Exploration Period of seven (7) Contract

Years (as provided in Article 6.2). and if the CONTRACTOR considcn it his not

had time to complete sufficient Cim Marketing Operations to declare the Discovery a

Commercial Discovery pursuant to Article 12.6(a) or 14.5(a). the CONTRACTOR

shrill hr entitled to request nn extension of Ihc Exploration Period (notwithstanding

the maximum period provided in Article 6.2), provided it to requests the

COVI.RNMFNT |n writing «t lend thirty (30) days prior to the end of the maximum

Exploration Period, together with a proposal for Gas Marketing Operations to he

undertaken during .such extension. If granted by the GOVERNMENT, any such

extension shall mx exceed two (2) Contract Years. Upon the expiry of such extension,

if it cvaukicis it baa Mill not completed its Gas Marketing Operations relating to such

Discovery, the CONTRACTOR shall be entitled to request a further extension of two

(2) Contract Yean, provided that it so requests the GOVERNMENT in writing at

least thirty (30) days prior to the end of the original extension, together with a

proposil fix Gas Marketing Operations n> tie undertaken during such extension.

6.10 ir the CONTRACTOR COliskleis that u Discovery of Crude Oil and any Associated

Natural Gu is a Commercial Discovery, the CONTRACTOR shot have the

exclusive right to develop and pnxlucc such CumnrerciaJ Discovery, pursuant x» the

terms of this Contract live Devetopmert Period foe ■ Commercial Dscovoy of Crude

Oil and any AsociatcC Naural Gas shall be twerty (20) yars commercing co the

drclanxkxi of such Commercial Discovery by CONTRACTOR, in accordance wrth

Article 12.6(a). wi± an automatic right toa fivc(5) year externum

6.11 If the CONTRACTOR consdcre drat a Discovery of Nov Associated Naairal Gas is

a Commcrcal Discovery. the CONTRACTOR dull have the exclusive right to

develop and produce such Comncrcial Discovery, pursuant to the trims of this

Control. The Dcvrlofmcnt Period far a Commercial Discovery of Non-Associaacd

Naim Gas shall be twenty (20) years, commercing on th: declaration of such

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

Article 14.5(a), wifc an automatic ri^a to a five (5) ye* extension

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

Devekpmen Period as defiued in Ankles 6.10 or 6.11 then upoa its request, the

CONTRACTOR shall be entitled to an extension of such Development Period jndcr

the came terms » those provided in litis frrtraci Such rrsjirM dull hr made in

writing by the CONTRACTOR at lean six (6) Months beferr the end of the said

Devekpmert Period.



n*c lam of my mch extension of the Ifcselofrocm Period shall bo:

(a) five (5) Yean, for CruJo Oil and any ArtOefattd Natural Cm, and/or

(b) 11 vo (5) Yean for Non-Autaclalud Natural Guo.

6.13 The CONTRACTOR shall have the ri*)hi lo tomtiitaic Production (ipr rations (nr any

Production Area al an>' lime during the term of this ( ontract. subject (o giving

xHKe to I ho GOVERNMENT of al least ninety (0©) day*. I*i» Contract shall

crmiaalc on the expiry due of the last Protection Area or a hen Product ioa

Operations A* all Prudjctk* Are** have tern inoted


7,1 Subject to Ihc provisions of Articles 7.2 and 7.3. the CONTRACTOR shill surrender

portkma of the Contract Area as fellows

(a) at the end of the initial term of the Exploration Period referred tn in An*cl<*

6.2, twenty five per cent (25%) of the net area Octcmined by subtracting the

PiuIikImi Areas from the initial Contract Area;

(b) at the end of the first extension period entered into under lhi» <'niifnct nller th-

etui of ihc initial term of ihc Exploration Period referred to in Article 6.2. an

iiddlllomil twenty five per tent (25%) of the net area determined by subtracting

the Production Areas from the remaining part of ihc Contract Area; and

(c) at the end of the Exploration Period ('including ill cecnvkm thereof) all vf

the remakilug area dm H aul in ■ Pruduetkn Area.

72 For the apftkouea of Ankle 7.1:

(a) any areas already relinquished pursuant to Article 7.4 shall he deducted fine*

areas u> hr surrendered; and

(b) the CONTRACTOR sha.1 have the right to drtermne th: area, shape and

of the Contract Area shall be in contiguous bockv

73 If the rebnqutshracrt referred to is Ankle 7.1 can only be achieved by racludng pari

Of aa Appraisal Area, that these parentages thall be reduced lo t»cludi such

Appraisal Area.

74 Dimag (he Exploration Perud. thr CONTRACTOR may at he cni of each Corarnct

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

GOVERNMENT « Ieast thm* (30t days in advance of the propped date of

during the Exploration Period shall be deemed csgal to the oHifteory rchnqui*mcm

referred to ondcr Amce 7.1. Tho Contract shall icmirute m tte event of she srrenda

of the entire Coctract Area.


 7.5 No iurrender provided mdrr Article 7.4 shall exerrpl the COVTHAfTOR from its

•ulstudmg obligations under this Contract In ’he oent dr CONTRACTOR elects to

Obligations relating to the hen currea Sub-Peried as provided it. Ancle 10.2 or

Article tOJ. the CONTRACTOR shal pay to the GOVERNMENT he relevant

ctnsaniing anoint as detailed in Article 02 or Ankle 103.» #w caw may be.

7.6 The boundaries of the portion if the Contact Area to be relinquished by the

CONTRACTOR shall be cunmuukated to the GOVERNMENT by writfcn notice at

least thirty (JO) days in advance if the relevant die for relinquishncnt pursuant to

Ankle 7.1.


A Maragenent Comm (tee rtoll be established within thirty (JO) day* Wkrwirg the


Effective D«*c forth© purpose of frovidrig orderly direction of all marten pertaining

to the Petroleum Operations and the Work Pregrams. Within sach period, each of the

GOVERNMENT and the CONTRACTOR abal by written notice Dominate its

respective members of tie Management Committee md their deputies.

The Management Corrmittce shall con prise two (2) members designated by the

GOVERNMENT and two (2) members desigaated by the CONTRACTOR.

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

may sibstitue an, of its members of the Management Committee. The chairman of

Oc Management Conmiuce shall be one of die members designated by the

GOVERNMENT (the “Ckainnas") The vice-chakman of the Management

Committee shall be one of (he members designated b) the CONT RACTOR (the

“VIca-CTiulntian”). In the absence of the Chairman, the Vice-Chnimutn sltall chair

the meeting

I ach l*arty shall have the right to invite a reasonable number ot observers as deemed

necessary to attend the meetings of the Management Committee in n non-toting


8.2 Die Management Committee shill review, deliberate, decalc und give advice,

suggestions and recommendation.' to the Parties regarding the following subject


(a) Wort Programs and Budgets;

(ti) the C ONTRACTOR * activity reports:

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

international petroleum industry practice;

(d) Accomts of Petroleum Costs;

(e) procurement procedures for potential Subcontractors, submitted by the

CON I KAL I OR in accordance with Arttek 19.3:



(0 Development Plan and Budget fer each Production Arcu;


8.) h*ch of the GOVERNMENT and ihe CONTRACTOR shall have one (I) vote ir.

the Management Committee The Management Con mi lure cannot valid!, deliberate

unkrN. each of the GOVERNMENT and the CONTRACTOR is represented by •>

fca-4 one (I) of its members or its deputy.

The Management Committee shall attempt so reach unanimous agreement an an>

subject mailer being submitted. In the event the MnnagenKnl Committee cannot

reach unanimous agreement, n second meeting sluill he held within fourteen 1141 days

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

Except as provided for in Article 8.4 untl Article 8.5, in the event tliut no agreement Is

reached at the wound meeting, (hcf'linirmnn 'hull luivo tlio lic-brcnking vote

8.H In the event that, during the Exploration Period, no agreement is reached at the sxond

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

approval is not obtained. n«J required pnminm to Article 8 5; then the prrpovil made

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

8.5 Notwithstanding the provisions of Article 8.3, and subject to Article 8.4. unanimous of the Management Committee shall he required fttr

(>) approval of. and any mat era I revision to. aay Exploration 'bock Program anc

Budget prepared after the 5m Commercial Discovery n the Prudxtiut Area

approval oC rod ooy mlm, revwion to. Ur rVvelnpment PU. the

predictior schedule, lifting schedule and Development and Production Wart

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

(r) approval of. and any material revision to. pronermnt procedure* for giant*

mdor aenicev submJted by the CONTRACTOR in Kconfcncc with Article

10.3 (imUc uMch procedures love hero deemed ^proved by the Mana^meni

Committee in aourdoacc wth Article I9JK


(f>) approval of. and any material revision to. any proposed Oxommbnioning Plan

submitted pursuant to Article 38.7 on nny Dtxommlssioning Work Program and

Budget or Gas Marketing Work Program and Budget;

(i) any Terms of Reference which are required to be i*epefed and agreed for the

purposes of expert determination, pursuant to Article 42.2;

(j) approval of any costs in excess of ten per cent (10%) flbovc any Hudpt: and

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

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

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

CONTRACTOR or 8 any other location agreed between Parties at least twice a

Contract Year prior to the dote of the first Commercial Discovery and three times a

Contract Year thereafter.

8.7 Either tltc GOVERNMENT or the CONTRACTOR may call an extraordinary

meeting of the Management Committee to diseuss important issues or developments

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

the miners to Ke discussed nl the meeting, to the other Party. The Management

Committee muy from time to time make decisions by correspondence provided ill the

members have indicated their approval of such dreidonv in such correspondence

8.8 Unleu at ieust one (1) member or it* deputy of each of the GOVERNMENT and the

CONTRACTOR is present, the Management Committee shall be adjourned for a

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

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

8.9 Ore agenda for meetings of the Manajemert Committee shall he prepared by the

CONTRACTOR in rcconlaicc with inoructbna of the Cha.ruan ard conmun coicd

to the Parlies at least fifteen (15) days prior ® the date of the meeting. The agenda

.Viall include any subject mffla proposed by either the GOVERNMENT or the

CONTRACTOR Decisions of the Management Committee will be made at the

meetings- The CONTRACTOR dal: be responsible for rrci*wuig aid keeping

minutes of ±c decisions made at the meetings- Copits of wch minutes shall be

forwarded to each Part) for review aad approval, bach Party dull review and

approve such mimics within ten (10) days of reccpt of the draft ninutes. A Pam

who (ails to notify in writing its approval or disapproval of such minutes within such

ten (1C) days shall be deemed to have approved the minutes.

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

committee er any other sub-committee to assst it. Any such julxcmmitre shall be

composed of a reasonable number of expats from tbc GOVERNMENT and the

CONTRACTOR After cact meeting, the technical subcommittee ar an) other sub¬

committee vtall deliver a wriaen report to the Vlanajcmcat Committee,

8.11 Any costs and expend:lure incurred b> the CONTRACTOR for mcet.ngs of the

Manapanea Conmittee or my technical subcommittee or any other subcommittee

shall be consxfcred as Petroleum Costs and shall be recovered b> the

CONTRACTOR in accordaacc with the provsions of Articles I and 2$.



9.1 l-Ach CONTRACTOR Emily shall provide lie GOVERNMENT, if so rcvjuirrd by

ike latter pursuant to written notice received by ihe CONTRACTOR E-.eiiiy within

ikirty (30) days of the Effective Dele, wth a corporate guarantor in a form as shall be

agreed in good fmih bet*wn the GOVERNMENT and each CONTRACTOR

nil later than ninety (90) days after the Effective Dmc. provided

guarantor shall he given only in respect of Ihe Minurum FnancnJ Coovnitncm fjr the

lira Sub-Period aad shall expire aacmaacally upon compkljon of dr pcrtonuaacc of

i Ankle 10.3d) aad (e) or cxpcndiure of


9 2 Not later that sixty (60) days after he ccmmeacemera of he Second Sub-teriod. each

CONTRACTOR FniHy shall provide he GOVERNMENT, if so rrqurrd by the

tiller pursued to wTrttci notice received by Ihr CONTRACTOR Entity within ihirty

(JO) days ofwch commencwtaenl dale, whh a corporate guarantee in

(a) the form wbrtrotial y apeed between the GOVERNMENT and each

CONTRACTOR Entity for tire First Sub-Period, if any. subject to makitg the

change* ncce«ar> in order for die corpora* guaranter to >«•> » «hr

Second Sth-Penod. or

(b) if there is ao agreed farm, n a form as shaE be a*nxd m gcod fath between

the GOVERNMENT and each CONTRACTOR Entity not later dm amety

(90) Jays after the GOVERNMENT s notice.

and provided in each ca«c thtf tuck corporate guaraxcc nail he given unb hi respect

uf the Minimum Financial Cp«t--- 1 for die Swat W. IWd and that auch

corporate guarantee shall expire automatically upon compkthv of the pcrirmaacc of

the Exploration Obligations xi out in Article 10.3 (b) cc cftpcndrfar* of

ajch Minimum Financial Commitment. whichever it the earlier

9.3 In the even; of an assignntoit by a CONTRACTOR Entity in accordance with

Article 39. the relevant third party anlgnoo -Jm 11 provide tlic GOVERNMENT. If so

rc«|uiml by the latter jxirsunnt to written notice given to such assignee within Ihirty

(30) ttays of the Effective Gate, with a corporate guarantee In die form agreed

pursuant to Article 9.1 or 9.2. as applicable lo the then current Sub-l*criod or. in the

absence of any such ugreed lorm o( corporate guarantee, in a linn us shall be ugived In

good faith between the GOVERNMENT and such assignee nrt Inlet Hum ninety (90)

tbys alter the effective dale of die assignment, provdod that such oapanM guarantee

■hall be given only in rejpect pf the Minimum Financial Commitment for the then oirrcnl

Sub-Period, and shall expire automatically uptn completion of the pcrlnmvamc of the

Minimum I-aplontion (Wigabons set out in Articles !02(dl and (c) or Article 10.3(b). as

the case may he. cr expenditire of such MM---u Financial Commitment. whichever b




10.1 The CONTRACTOR shall start l Apkmlkm Operation* within Hilly (VJ> days of

Management ComailUce approval of the ExpbnUkm Work Program ami Budget in

aivordanoe with Article H The CONTRACTOR shall perform geological,

geophysical and/or drilling work* as provided under Articles 10.2 to 10.3 (the

Minimum Fiplorutloi ObUgntimr*)- If applicable. tlir said Minimum I xpknition

Obligations dull he performed during each Sub-Period in aocordnacc with prudent

102 During the First AnK-Perind. the C ONTRACTOR shall-

(■) carry out geological nnd gccfihysical studies.»«fiijn-uiv tie toil aving

(i) the compilation of a technical database:

(ii) the performance of h remote sensing study:

(ill) o field visit to verify initial gcolonicul anti geophysical work and

remote sensing results and plan for two dimensional seismic

itoiiihiitlon: nnd

(h> carry out n data search for existing data specific to this Contract Area,

comprising the following:

(i) well data, if available, for example, electric logs;

(ii) seismic data and gravity tfata. il available: and

«> field

(4) acqure. process and interim two hurdred and fifty (250) Inc kiometres of

firwrcial amount of ore mil ion DrHUn (IJSS1.000.000k and

(e) drill one (1) Lxrloratbn Well (tte “First F.sploralioa Well'), coramining for

this purpose a mrumum finaxtal amourl of seven million live hundred tfvussnd


103 During the Second SufvPcrioi the CONTRACTOR dial:

dwriotS^Tfiree CONTRACTOR omkkn that the

resuK horn thr First Fx^tocatro Well jnrify the acquisition of fwther

sciatic dsa. and

(t* drill me (I) Exfioraum Well (ftc “Second FiptoraiMn WriT) cummfUng

for rtM ptrposr a mnimun fimncial mu« of xrvtu milion fWe Kndrrd

iuusand Dollars (USS7_50Q0O0k unless the dan from the First Fxpfararion


Well demosstrates lhai there is not a reasonable technical ease for drilling the

Second Exploration Wells in the C ontract Area

10.4 Notwithstanding the provisions in Articles 10.2 to 10J. for the execution t*f the

Minimum Exploration Obligations under Articles 10.2 10 10.3. it is agreed is follows:

(i) Minimum Exploration Obligations in the Scccod StfvPcnod shall only apply in

the event the CONTRACTOR has not elected to notify the GOVERNMENT

that it will not enter into the Second Sub-Period, in accmbmee with and

subject to Article 6.4.

(I>) Subject to Article 10.4(a). ihc CON TRACTOR shall be retired to meet its

Minimum Exploration Obligations for the applicable Sob-l'criod. even If this

entails exceeding the Minimum financial Commitment for such Sub-Period. If the

CONTRACTOR ha* satisfied its Minimum Exploration Obligations without

having spent the total Minimum financial Commitment for such Sub-Period, it

shall be deemed to have iutisfi«d its Minimum Explcralio* r tbligatioa* for

such Sub-Period.

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

Committor unless:

(i) the formation it dncocmtcrcd at a lesser depth than originally


(ii) h.i'cmcnt is encountered ni a lesser dcpih than originally anticipated;

(iii) in the CONTRACTOR'S sdc orinion continued drilling of the

relevant Exploration We i presents a hazard due to the presove of

abrormal or uaforeiecn conditions:


(d) Any geological or gcophyscal woci earned out cr any scivric diea aufrired.

processed or interpreted of any I spkxdtKia Well drilled or any other «.«tk

perfermed in excess of Ik- Mnimum Exploration Obligations and/or any

amoants stem a cxcew of the Mai Minlmim I iuukuI Commitment in any

giver Sub-Period, shill be earned firwaid to he next Sab-Period cr any

extension oenoC and shall be taken Into accoutt to satisfy the Minimum

Exphraticn ObSgatuns axvlor the total Mmmun Finmeial Commitment fc*

such subsequent $ub-ftnod r extensam pend


 (c) For ihc avoidance of doubt. If: (•) in the First Sub-l’criod, the

CONTRACTOR perform. unv of the Minimum Exploration Obligations

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

CONTRACTOR has nol elected to notify the GOVERNMENT that ii will

not enter into the Second Sub-Period (in mx^vrrlume with and subject to Arti«'U*

6.4), ihc performance of such Minimum Exploration Obligations shill be

deemed to catiidy the tome Minimum Exploration Obligation* for the Second



Within forty-five (4S> days following (he Effective Dale, the CONTRACTOR shall

prepare and submit to Ihc Mnnogetiiere Committee a proposed work program and

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

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

in each Calendar Year, the CONTRACTOR shall suhmit n proposed Exploration

Work Program unj Budget to Ihc Management Committee for ihc following Cafcndar


Each Exploration Work Program and Budget shall include detaik of, but ml he


limited to. the following:

(a) work to he undertaken;

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

(c) cost estimate of services to be provided. iach»dhg services by ttird pirtic-

antVer Affiliated Companies of sty CONT MAC 'I OR fauity, and

(d) estimated experdhures. broken down by cost centre h accordant wch the

113 The Management Committee shall meet within sixty (60) days following is receipt of

CONTRACTOR s proposal to examine and approve the Expbretkn Werk Program

*d Bridget

If the GOVERNMENT requests my mxKfieotion to the Fxpkxratk* Wrek Program


«J Bod get. the Managemen: Cotrminee shal meet to discuss the Exploration Work

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

period referral to in Article 113. The CONTRACTOR shall communicate its

comments on any such requested modifications to the GOVERNMENT at the

meeting of the Management Camiritlee or in writing prior to such meeting

The CONTRACTOR shall be authorise! to make expenditures net budgeted in an

improved LxpkmKioa Work Program an! Budget provided ths the aggregate annum

of suck expend Hires stall net exceed tea per cent (10%) of the approved Exploration

Work Program aad Badget in ary C&cndar Year and provded further that such

excess expenditures stall be reported as sewn as is reasonably practicable id the

Managemerx Committee. Fer the avoidance of dnuM all excess expenditures stall be



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

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

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

11.6 In « hm-; of emeryrncy, the CONTRACTOR may incur Hitch additional expenditures

at it ilecms necessary to protect life, environment or properly. Such additional

expenditures uhnll bo reported promptly to the Management Committee. For the

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

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

Articles I ami 25.


12.1 If the drilling of an Exploration Well mult* in a Discovery. the CONTRACTOR

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

confirming the preoumod cxiutcncoof ouch Di-covory or within such longer period as

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

Discovery- Within thirty (30) days following notification of the -xii Dis:ov«y. ibe

CONTRACT OR shall present to the Management Comnittccall technical dan then

available together with to opnxw on dx commcfvVI poaeniu.1 of Ok said Discovery

(die "Discovery Report”). TV: CONTRACTOR shall provide n a finely nanracr such

uher lifomutiun rciatlrg to the Discovery as the GOVERNMENT may reastnabh


12.2 If. pursuant to Ankle 12.1. the CONTRACTOR considers that the Dbcovery has

commercial poicreial it shall w ithin ninety (90) days follow jig notidcakxi » the

GOVERNMENT of the Discovery, submit an appraisal program n reject of the

Discovery (the •Appraisal Work Prog ran and Badger to ftc Management

Committee. The Management Committee shall examine (he Afprai«*l WcA Pn gram

and Hwlget within thirty (30) days of its receipt If the GOVERNMENT request any

modification to the Appraisal Work Program and Budget. the Management

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

requested modifications ihcreto within sixty (60) days from its fcceij* of tlx: proposed

Appraisal Work Program unci Budget The CONTRACTOR shall communicate its

comments on any such requested modifications to the GOVERNMENT ut the

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

The Appraisal Work IVogramand budget shall include the following

(a) an appraisal works program ind budget, in nccmlancc with prudent

imcmatinml petroleum industry practice:

(b) an esinuited tinv-framc for completion of appraisal works; and

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

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

appraised (the "Appraisal Area**).


12.3 It following iDKanwy. a rig acceptabk to the CONTRACTOR »«vailabk to drill

• well the CONTRACTOR may dril any additional F.xpliralKn Well or any

A9nni«l Well deemed necessary by the CONTRACTOR hcforr or durinf the

Management C'omnittec's review of the Discovery Report provided in axordincc

w th Ariel* 12.1 or its review of the Appraisal Wort; Program aad Budget.

TV f'OVTTtAfTDR shall he authorised to incur rvperxJitum not budgeted n mi

afproved Appraisal Wert Program and Budget provided that the aggregate amotnf of

«rb *sp*nd«urr« shall not eveert ten per cent (10%) of the approved Appraisal

Wort Prognm aid Budget n am Caknfar Year and provided father that such

Management Committee For the a»o*dtacc of doubt, all excess expcvditurrs shall be

recovered by lha CONTRACTOR in accordance with tH* pn.vitunt of Articles I

ard 25. pros tied that any exons expenditures above the ten per cent (10%) limit shall

oaly be recovered with the unanimous approval of th: Maragcmrnl Committee

12.4 The CXWT11ACTOR 'hall lubmri a drta.kc report relating x> the IWwerv (th*

-Appraisal Report") to the Managenem Comninee wrtan nnrty (90) days

fUkmtlg voarpktoo of the Apprsi---I Wart Piograra and Budget.

12.5 The Afpraisal Rc»wrt shill include he follow.rg:

(a) geotoghal conditions;

(b) physical properties of any Irpuida;

(«) sulphir. sediment and water content;

(d) type *f suhitancre obtainad;

(a) Natural (ia« compositnn;

(() production I'orecaal per well, and

<8> ■ preliminary cetimatc of recoverable reserves.

 ihe < ONTRACTOR has determined that ihc Discovery s a signifcant

Discovery of Noa-AssociataJ Natural Gas. which nay become a Commercial

Discovery subject to Gas Madeline Operations. in accordance with

Article 14.5.

12.7 In case ihc rtatement of ihc CONTRACTOR corresponds to Article 12.6(c). Ihc

CONTRACTOR shall submit n Work Program and I Induct 10 the Management

Committee within thirty (30) days following such statement. Any well drilled to

evaluate iha und significant Discovery shill he considered an I vploraiion Well.

17 * II the Disco very hns been declared a Commercial Discovery by the CONTRACTOR

pursuant to Article I2.«

proposed Development Plan to the Management Committee within one hundred

eighty (180) days following such declaration. The Development Plon shall he in

accordance with prndoni intemuti.«u.l prtrolcim industry pne lire I vrept with the

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

(Ulowing *» applicable:

(e) the da limitation of the Production Are#, taking rn»> account the remits of the

Appraisal Report regarding the importance of the Petroleum I icld within the

Appraisal Arc*.

(1) drilling mid completion of Development Wclb;

(O drilling and completion of water cr Natural Gas injection went;

«> laying of g* the rug pifel'met.

(«) installation of separate unkv pumpi and any other Mwatrd production

and injection fire lilies for th: production;

(ft treatment and tansportaikn of Petroleum to the pmccssng aid storage

facilities onshore or offshora;

(g» laying of export pipeline-, inside or outside the Ccmtrmci Area to 4* sfrage

facility « Delivery Point;

(h) construction of sorage facilities for Petroleum;

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

(j) training commitment in accordance with Article 23;

(V) a preliminary decommissioning and site restoration pian;

(l) all contracts and arraagements trade cr lo be made by the CONTRACTOR

for tk> talc of Nitural Gas.

(m) to the CTtMt avmlahlc. all contracts and arrangements readc cr to be made by

Pcrvms in respect of that Nitural Gas downstream of the point at which it is to


 be sold bv the CONTRACTOK ind which are relevant to the price al which

land other terms on which) h is to he sold by the CONTRACTOR or arc

otherwise relcvaat to tf*e determiaation of the valae of it for the pirpovs of

this Contract, but not beyoed the point at which I is first disposed of *1 an

Arm'* I enjth *Ule:

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

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

necessary for Development Operations. Production Operations and delivery of

IVtmkum produced, in accordance with prudent international petroleum

industry practice

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


Pan within «fy (90) <>»>«. aflrr its rcecif* of such plan Iht Development Period for

each C ommercial Discovery within a Development Plar shall be extended for the

namber of days in excels of su:h sixty (60) day period that it takes for the

Management Committee to approve the Development Plan. The Development Plan

d-ull I* considered approved by the GOVERNMENT if the GOVERNMENT,

through its representatives on the Management Committee, indicate* it.' **pn>\al in


12.10 If the GOVERNMENT requests any modifications to the Development Plan, then the

Management Committee shell mart within sixty (601 days of receipt by the

CONTRACTOR of the GOVERNMENT' written notification of requeued

modification* accompanied by all the dxummis justifying sach request and shall

discuss such request. ITtc CONTRACTOR VudI lomuunkali Us comments ua any

sach requested modi fictions to the GOVERNMENT al ^iM| or m writing

S meeting or withm a further period of Dirty (30) days bom tie drtc of such

fleeting shat be incorporated into tie Uevetoftnem Plan Much shall then be deemed

approved and adogaed

1111 If the CONTRACTOR make* several Commercial Discoveries within the Contract

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

CONTRACTOR shall be entitled to develop and to produce each Commercial

Discovery aad the GOVERNMENT shall provide the appropriate homes covering

each Production Area, la case the area covered by tfe Commercial Discovery extends

beyond the boundaries of the Contact Area, and to the extent such area outside the

Cnntrart Area k rest the subject of a Petroleum Cortract as defined in the Kurdistan

Region Oil and Get Ea») with a thrd party, the provision of Article K2 ihall apply





13.1 Upon the approval of the Development Plan by the Management Committee the

CONTRACTOR shall start the Development Operations for the Commercial

Discovery in accordance with the Development Plan and prudent International

petroleum industry practice.

112 Within ninety (90) davs followiag approval of the Ifcvdopmart PUn by the

Management Conrnitlce. the CONTRACTOR shall prepare and submit to the

Management Committee a proposed work program and budget for Development

Operations (the ‘Drvclopatent Work Progran and Rader'”) to he carried out in the

Production Area fur the duration of the Development Operation. Thereafter, no later

than I October in each Calendar Year, the CONTRACTOR shal submit to the

Management Committee updates ia respect of its IVvelepmeri Weak Pmgrarr and

Bjdgct To enable the Management Ccmnmcc to forecail expenditures. each

Development Wort Program and Badget dull ncludc details of the f.dlo* ng

(a) *orfcs to be carried out

(c) type »f services to he presided dimnguidung between third forties and

Affiliated Companies of any CONTRACTOR Entity- aad

13.3 If nny modification to tfic Development Wort Program and Budget is requested hy

the GOVERNMENT. the Management Committee dmll meet to discuss the

Devekipmeni Wort Program and Budget and proposed modifcatiofls thereto within

sixty (40) days from it. receipt of the proprsed IVvelopmert Wtrk Program and

Budget The CONTRACTOR 'hall communicate it* conmcnti on any such

KHucsfcd nwdifkatkms to the GOVERNMENT *« the ncctirg of ihe Managrnwit

Commute or in writing prior to such meeting.

13.4 The CONTRACTOR dial I be auihoriscd to incur expenditures not budgeted in an

aptHwvcd Development Work Program and Budget provided that the aggregate

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

Development Wink 1‘iogiuin and Budget in nay Calcndai Year and provided further

that such excess expenditures shall be reported as loon as is reasonably practicable to

the Management t oniinlltcc. For the avoidance of doul*. all excess cxpcinliuics

shall he recovered hy the CONTRACTOR in accordance with the provisions of

Articles I and 25. provided that any excess expenditures ihovc the ten per cem (lu%)

limit shall only be recovered with the unanimous approval of the Management


13i la cases of emergency, the CONTRACTOR nay incur such laJdJliuial expenditures

as il deems necessary to protect life, environment or property Such additional

expenditures shall be reported promptly to #vc Management CommiOec. Fro the


 ard sh*l be recovered by the CONTRACTOR in axordaoce %rth Qc prcvjsaoas of

Articles 1 mi 25.

13 6 No later than I October of the CaletdaM car precedng the cstinalcdcommencejicnt

of prcdictior pursuant to an tpproved Development Plan and thereafter no later than

I October in each ( alcnlar Year, tic CONTRACTOR shall prepare and submit to

Or Maueenent Comrrmce a proposed wort program and budget for Production

Operatic (*c -Pmdacftna Wort Program aad BadfeC* for the foUonin*

P^Juctioo Uort Prognm and Budf« shall inriudr «*taik of the Wlrwm*

(a) »«ii to be carried out;

(k) -nultr a I ami rquipmrm to he acquired by man categories.

(c) type of cervices to he provided, distinguishing between third panics and

Affiliated Companies of am CONTRACTOR Emits; aad

137 If any nodifcalxw to the Product** Wort Pwgran and Budjct is requested by the

COVERNMEVT the Manxfrmrrt Conmitter shall meet to tftscusa the Produ.tMMl

Wort Program and lludgct and proposed modsficalwas thereto withia sixty (60) days

from its reevipt of th? pnpoaed Pmductiro Wort Program and Huigel The

CONTRACTOR vhal commuracatc its conuicnts on any such requested

modification, to the GOVERNMENT ai the nretirg of tie Management Committer

or in writing prior to such meeting.

13 J Pic CONTRACTOR shall he atAorised to incur expeadHurts not budgeted m an

or such expenditures shall act exceed tea per cent (10%) of the approved Production

th^SLcc rfXuK shall be

recovered b> the CONTRACTOR in axoedmee *ith lie provision of Arlklcs I

aad 25. provded nat arty excess cipcndJurc above the itn per «.c««i (10%) limn dull

only be recovered with Ik unanimeus approval of the Maaagcrrcnt Commttce

13.9 l> cases of emergency. the C ONTRACTOR may ncur such additional expenditure

as it deems necessary to protea life envbonmcm ur property. Such additional

expenditures dial be icported pnmpth to the SUnmpynerr Conmitice Fcr the

s.oidaace of dourt. such adAiood expeodmre shall be consadcrcd Petrocum UM>

md shall be recovered h> the CONTRACTOR * uxortnc w«b Ik provision of

Artkies I and 25.

13.10 After Ik canmcrecmcnt of Comoercol Production the C ONIKACIOR dial pay

to the GOVERNMENT, in ran. an annual surtax rcrul for the Produ.*tR>n Area,

of one huadred Dolbr* (1)SSI00) per square hiWmctre per Conrad Year



 ("Prodoctioa RcntaT). Such ProdocUon Rental shill be consdcred as a Petroleum

Cmi ami shall be recovered by (he CONTRACTOR in accordance with the

pmvixions of Articles 1 and 25.


14.1 To lake account of specific conditions relating to Natural Gas anti to promote ns

development in the Kurdistan Region, the GOVERNMENT will grant specific

benefit! to th: CONTRACTOR on principles materially similar to thorn contained in

this Contract, including, consistent with the Kudisuin Region Oil and Gas Law. more

generous provisions in respect of the recovery of Petroleum Costs and the slmriag of

IVMrolcum thnn in respect ofCnidcOil.

14 ? Ihr t'ONTR ACTOR may freely use any Natural Gas required fir the l*ctrolcum

Operations. If technically and economically justified, the CONTRACTOR shill in

priority use any Natural Gas for the purpose of enhancing recovery of Crude Oil in

accordance with prudent international petroleum industry practice as follows.

14.) Any excess Associated Natural Gas produced that b nether ased in the Petrefcum

Operations nor developed and msU by the CONTRACTOR dull. up«U the

CiOVERNMENT) written request be transferred at th: firs praetkabe del very

poinl an agreed betweer the Parties, free of ctwrge to the COVFRNMFNT In v>. h

CISC, the GOVERNMENT dull be tolcly responsible for collecting, treating,

compressing and transporting such Natural Gaa from such agreed delivery point and

shall be solcy liable for any additi

11k: cuvtaKtiun and operation of required facilities as wall aa the of»We of such

excess Associated Nattral Cias by the GOVf.RNMEVT >hal occar in accordance

with prudetu intcraatiunal pcaukuai mhI-vU, practise and shall not btorfoc the

production, lifting and ranyvetaism of the Crude Oil by the CONTRACTOR For

the avridancc of doubt all oprndturc ttcurred by the CONTRACTOR up to such

agreed delivery point shall be considered Petroleum Cosh and shall be moverrd by

the CONI KACTOK in accordance with the pmvuwmof ATOdrs I and 23

la the event the GOVERN MEN I finds a market fre AwiclatoJ N-uiral Cu>. it shall

promptly give written notice to the CONTRACTOR, and the CONTRACTOR may

elect tc parteipotc in v^plylag such Awociatcd Nutural Ott within ninety (VO)days

following notification thereof by the GOVERNMENT ir the CONTRACTOR

elect* to participate in supplyinn Associated Natunil lias to such market, all

expenditures associated with an> necessary facilities shall be paid for by the

CONTRACTOR. For the uvoidnacc of doubt, such expenditure incurred dull he

considered Petroleum Costs ami shull he recovered by the CONTRACTOR in

accordance with the provisions of Articles I and 25.



 14.4 (Mil on upprovcd Natural Gas sale' contract is executed in respect of all volumes of

Natural Gus expected to be pnxJuced. the CONTRACTOR dull be entiled dtxtng

the Exploration Period and the Development Period to curry out


14.5 It pursuant In Artiefc 116(d). the CONTRACTOR has deteimitrd than the Discovery

is a significant Discovery of Non-Associalcd Natural Caw. which may becorae a

Commercial Discovery subject to Gas Marketmg Operatbos. it shal cam out Gas

Marketing Opera!ions, at the end of which it shaD submit a wntten vtatcircnt to the

Management Committee specifying that

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

Diiseovary; or

(b> the CONTRACTOR has determined that the Discover is not a Commercial


14.6 For the purpose of this Contract. “Gas Marketing Operation, means aay activity

urder toi« Contract relating to the mtrketng of Noe-Avsociated Natural Gas.

irv'luditg any evaluation to find a commercial market for inch Non-Assoc tiled

Natural (lax and/or to find a commercially viable means of extraction of

sw:h Non• Av,i minted NrfumI Gas uikI may include activities rch.texl to evaluating the

quaittilka uf Nun-Associated Natural Gas to be sold, its quality, the geographic

location of potential maikcts to be supplied as well as evaluating the costs of

production. OTMiaportaliai am! disUthulkn of the Non-Associated Natural Ga» from

the Delivery Point to the relevant market.

14.’ All costs and expenditure incurred by the CONTRACTOR m the performance of the

activities m rctaikn to be Gas M-kc.u* Opera-, dull be compered Petroleum


14.1 f*> later thar I October of the Calendar Year preceding #>c Calendar Yem in which

aay Gas Marketing Uperattom arc due la uecu. the CONTRACTOR xhall prepare

aad submit to the Maragemenl C mm nee ha Gas Market mg Work Program and

frjS'exp^dml^dr Gas Market mg Work Program ^dfedgef shall ndude the


(a) works to be earned out;

(b) type of services to be provided, dlstinguidiing between third panics oral

Affiliated compares of any CONTRACTOR Fntiy. aid

If any modification to tke Gas Marketmq Work b>


Marketing W.*k fTogran

(60) days frctn its receipt of toe proposed Oasj Work

The CONTRACTOR shall communicate i on any such requested



 modifications to the GOVERNMENT at the meeting of the Management Committee

or in writing prior In .inch meeting.

14.9 lie CONTRACTOR shall he authorised to incur expenditure, not budgeted in an

approved Gai Marketing Wtri IVi.gram and Budget provided tha: the aggregate

amount of such expend lure dull sot exceed ten per cent (19%) of the approved

Hedge! n any Cairo. Ur Year and provided further thit such excess expend I lures dull

be repotted as won as reasonably practicable to the Management Committee For the

avoidanco of doubt, all now expenditures shall he recovered by the

CONTRACTOR at accordance with the provisions of Articles I and 25. provided any uaveu expenditure above the ion per cent (10%) limit shall only hr recovered

with the Uiummoui approval of the Management Committee.

14.10 If any Non-Associated Natural Cm is discovered wtfhin the Contract Are*. anC the

CONTRACTOR rcawnably considers that the Non Associated Nrural Tmk

Dacovcry will only be a Discovery if certain terms of this Contract arc

amended. It dull be entitled tv request ninciulincnls to this Contract. with its rromi

The CJOVKRNMF.NT shall in good taith give reasonable conskJcratMn to the

CON I R At ’I OK I proponed amendment and reasons and the Parties droll in good

frntli attempt to agree on the necessary amendments to the Contract. If the Puttie arc

unable to agree on such amendments, and the Exploration Period expires without tin

CONTRACTOR having declared such Discovery to be * Commercial Diicovery in

accordance with Article 12.6(a) or Article 14.5(a). and subsequently wlthhi a period

of eight (8) ,ear. from the end of such Expbnticn Period, the GOVERNMENT

reaches agreement with any third party to develop such Discovery (the Km

Development”), then the following provisions shall *pply:

(a) either before or upon agreement in relation to the Gas Development having

been reached (and whether «* not w*ch agrcenent is recorded n a tUly termed

production sharag and/or operathg or other like agreement). but before such

agrcenent * signed (the "Propoard Cna tract") (lubjctf onh to the ngtts of

each CONTRACTOR Entry to pe-copt «xh Proposed Comet purport to

Artiefc 14.10(h) Bii suJi condNons as nay be appTicaMe). the


of such cixumaancev serve on each of the CONTRACTOR Emiles, a

notice to dat effect and shall w«#i such noire provide such inforruhne and

main terms of such agreement as the CONTRACTOR Emilies may

reasonably request to determine if they will excreicr thro rigfcu (dr - Agreed

(•) ** identky of web third puty:

(8) the efface dele of 4k Proposed Contract;

(iii) the applcablc commercial leraw. iecludhg hcnuscs. royalties. cod

recovery, profk sharog. Uxatioa and any odrr sroilnr terms; and

frv) all and «ny reaierUI condifinra to whic* the Proposed Contract is


Ibi Upon a from my CONTRACTOR Entity. the GOVERNMENT will

provide all ihe CONTRACTOR Entities w«h such further information and

fcrms n nit h rraennaNy requested by any CONTRACTOR Entity.

Within one hundred and eighty days (IKO) thy* alcr receipt of a notice and

»ny Italhrr Information umler Article 14.10(a) in relation to a Proposed

Contract each o( the ( 'ONTRACTOR Entities shall elect either:

0) to enter Into the I’ropitscd Contract on the or substantially similar

'em* in the A|rrrtsl Terms with the riithl to cost recover all Petroleum

Conn incurred under this Conrad again* all Petroleum revenues

r»c*v«d under ihr Propel ( Vntrad. op lo any cat* recovery limits

id rot therein; or

• ii) lo waive tre aforesaid ri^e of pre-emptum in rcbtion lo the Propped


•nd .Hall wrva accordingly ii|tm thr GOVERNMENT and a I the

CONTRACTOR I Jtfktes and in default of recct|« by Bre GOVERNMENT

of any Midi noli.c within rwch period of «*n* hundred and eighty (I BO) days

tuch CONTRACTOR Entity sludl be Jeemed conclusively to have served a

iKKlte ckumg U> wane its aforesaid right ol prv amption in relation to the

Proposed C ontract

(c) In the event that more than one of the CONTRACTOR Entities exercises its

rights under Article M.KMbKD in iclalon to the TropoMd Contract. then the

GOVERNMENT shall transfer or grant each such C ONTRACTOR Entity

an interem in the Proponed Contract upon the Agreed Perms (in accordance

with Article 14,10(b|(i)) in the proportions In which their response

percentage interests tear to the aggregate of «cir rcspculvc pcivcaUgc

merest* unJer Ur relevant Joint Operating Agreement (as it applied at the end

of tie Exploration Pened) a in suet otter popomom os mkJi

CONTRACTOR I runes shall acre between then

(«ft In thr event thacreoftte CONTRACTOR Frames cxcrcno ft* right*

trader Artick M.IOORi) ■ rehtion lo Re Ptopoaed lomo (her the

GOVERN VI ENT shall transfer or grant tte whole ef the ram h the

Proptned (•«*/** open the Agreed Terms (in accordance wift 14 Uth»i»u>

such CONTRACTOR Entity.

(e) In thr event th* none of Bre CONTRACTOR ntities exerciser its rights

under Arti:k I4.l0(b)(i) ire GOVERNMENT may enter into the

Prop, ved Contract on terms no nor? ivourablc to its counterpart} than the

Agreed Ictus axl. >a such case, the aforesaid ights of pre-cm*HO shall

theraap.*. .rara m ap^Cy in relraim to Vir pRfnvc* CoamcL

14 11 irihr right* m Artick 14.10are rot exercise* raid the GOVERNMENT

eaters into the Proposed Coetrad with the thud pern concerned, the

COVERS ME VI will ■« it. hm endeavours tn av «id ary effect which tray hamper

the Petroleum Oparaawn of Ur CONTRACTOR whlc prcdixing Petroleum


14.12 FVmg af Nmural <*s ir the count of activities provided fee

prohibited except (i) shortterm flaring up to twelve (12) Months necessary tor testing or

other operational reasons in atxoniance with prudent international petroleum industry

practice (which shall include the flaring of Associated Natural Gtn to the extent the

CONTRACTOR ennsidm that re-inject inu Associated Natural Gas is nrt justified

technically and economically and provided the GOVERNMENT deodes not to take

such Aaaociatad Natural Crash nr (ii) with he prior auhorisatkn of the


CONTRACTOR shall «4wnir asch mji^l to thr

an evahatwn of n»raUe alternatives to Hannj that have been considered along with

a the ranoual ravd qualry of Naliail Gas involved and the duraion of the


15-1 TV CONTRACTOR shall keep in its offlcca in Ihe Kuniistan Region copies of all

bu>k<« and aoeounla of all revenues relating lo Ihe Petroleum Operations and all

Petroleum Costs (the "Aivouatt"). except during the I'xplonHion IVriod. when tile

(CONTRACTOR -hull be cntillcd to keep the Accounts at its headquarters Abroad. The

Aivuuitf* 'hall reflect in detail expenditure incurred as a functina of the quantities and

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

Account* Whch art maoc available tu th; GOVERNMENT la acecnfcnc* witk the

provisum of ihis Contract shall he prepared in th: EngMi languay The Accounts shall

be kept In accordance with prudent international petroleum indurtry practice and in

accordance with th: provisions of the Accounting Procedure. The Accounts shall be

kept in DoUvs. which shall be the refererae currency for the fuiposcs of this

15.2 Vkahm ninety (*0) days following the end of each Calendar Year, the

CONTRACTOR shall Whml to Ue GOVERNMENT . summary Matcarcftf U all

Petroieam Casts ireuned during the saidCalcadv Year. The sunmars Oatonent hall

ato inoude a profa aloaatkw ptriutoi to 4»c pnw ««* of Article 2h.

15.3 TV GOVERNMENT hall have the right:

(a) lo rcaicsl hi auCti at tic Account wnJ respect to each Calcadai Year within

(h) to retain an auditor of ictemarional standing familiar wth Mcrnabunal

petroeum industry accounting prxiicc to undertake or assist the

GOVERNMENT to undertake the aud.t.

15.4 llv rcawmbfe cost of retiming an ludncr puruant K> Artck I5J shall be borne by

the COrrnuCTOR and treated as a Petroleum Cost for de purpose of cos recovery

ureter Articles I and 25.

15 5 Daring the Audit Request Period for toy Calendar Year btf not thereafter, the

GOVERNMENT. acting reasonably and in accurdmc* with prudent mtrmaUmal

pmnlrun mtusfn prank*. may reqaest n writing all rcawrably avaibblc

15.6 Shi hi kl ttc GOVERNMENT consider, oe the twis cf dau and information available

that the fOffTRAfTflR made a material mistake or there a any incpilarity in

respect of tlic Accourts aad etnsiders that ary ccmctioro, adjustment* or

•recmlnwnt. should hr made, fhr GOVERNMENT shall make any audit exceptions

in writiag and notified to the CONTRACTOR within si* (6) Months of C* da* of

(0|ucsr referred to in ArticU 15.3. and failure In give «h wrinen exccpt.<» wthm

su:h time shall be deemed to he an acknowledgement of the correctness of the

CONTRACTOR'* Accounts.

15.7 In ics|nvl of any audit exception made by ihr GOVERNMENT in accordance with

Article 15.6. the CONTRACTOR shall then have sixty (60) days to make necessary

CUicctlons. adjostaicnla or amendment* or to present ns cortmenw in writing or

request a meeting with the GOVERNMEVT. The GOVERNMENT shall within

thirty <)0) days of die CONTRACTOR * response, notity the CONTRACTOR .n

writing of its position on the corrections, adjustments. amendments .* commeas If

thereafter tltcrc Mill exists o disagreement between die government and the

CONTRACTOR, the dispute will I* settled in accordance with Artie* 15.9

15.1 In addition to the annual statements of Petroleum Costs as provided in Anicle 15.2.

the COVIRACTOK than provide the GOVERNMENT .kh mJ» pnxkrtkm

sutements and repairs, at required pursuant to Article I6J.

15.9 Any dilute between Ihc Parties unier this Article 15 that canre* be settled amicably

Witliin Sixty (60) days ol the GOVERNMENTS Dual make *™k. Aitxk 15.7. may be

submitted to an expert on the request of cither the GOVERNMENT or the

CONTRACTOR in accordance w* the provisions of Article 4i2. Nmw ehviaading

tt* provision* of Aitklr 42. n this specific irstance the dccison of the expert shall

not necessarily be foal and erJrer Party may decide to submit the maner toartonrsoon

in accordance with the provmmt of Ankle 421.


16.1 If not done alrenly. within ninety (90) days Mowing the LfTculve M. each

CONTRAfTOR Emily shall opea an office and appoint a permanent rcfrcserrahve

ta the Kurdistan Region. who may be coatacted by t>c GOVE.KN M f.NT with regard

to any maacr relating to this Coronet and will be entitled to receive any

correspondence addressed to such CONTRACTOR hrtrty.


16.2 Ihe CONTRACTOR shall carry out all Petroleum Operatbns ir accordance with the

provisions of this Contract, prudert international petroleum ladusoy prmniw and

applicable Ktrdisxa Regain Law.

TV CONTRACTOR shall be respensibk for tic conduct management, control and

adninisvslior of Fktrolcum Opcrabocs and shall be entitled lo conJuct Petroleum

Operations in accmtancr witi the provision* of tin Contract In competing it*

Petrolcun Opcralkm. th: CONTRACTOR shill have the righ U> u* an? Affiliate

of each CONTRACTOR Fntky. is an! their Suhcontractorv and the empkneev

consultants. md apmis of each of the foregoing. IV CONTRACTOR anJ ail such

Persons shall M all tiroes have free ac«« lo tie Centrar Area and an> Production

Ant fcr the :wrpo* of ramng ov. Petroleum Operations

I6J The CONTRACTOR *all provkfc the GOVERNMENT with periodic data and

activity reports rehting t> Pctn.lcun Opoatima. Sad inwb shall iraludc detail', of

at formation and data regaiding ail Faphmtion Operandm. Development

Operations and Production Opentkms (as applicable) perfumed Junnj the

Calendar Year, includiag an; qualities of Pemdeum produced and sM.

(b* data and information regarding any transportation tacilit c\ bull ai>3 operated


(el ■ statement specifying the

acII as a report on any medical services and

personnel; and

(dl :i descriptive statement ol all capital assets acquired lb« ilw Petroleum

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

16.4 The CONTRACTOR nay freely use any Petroleum produced within the Cor tract

Area for live Petroleum Operations.

Ifo5 Ihc CONIRAC.TOK shill at all times provide rcaronebk -ssisUikc as may

reasonably he requested by the GOVERNMENT during its review and verification

of records and of any other information relating to Petrolearn (peratkim m the

offices. worksites or any other facil tics of the CONTRACTOR.

I pon giving reasonable prior notice to the CONTRACTOR, the GOVERNMENT

may send a reasonable number of representatives to the work-sites or nny other

facilities of the CONIKAfTOR in the Kurdistan Region to perform such reviews

aid verifications. The represcnlanves of the GOVERNMENT shall at all times


 comply with any safety regulation* imposed by the CONTRACTOR and such

reviews and verification* shall not hinder the smooth progress of the Petroleum


16.6 Far the performance of the Petroleum (ipcraliors. the CONTRACTOR, any Affiliate

of each CONTRACTOR Kitity. it and thee Sulcm tractors and the employees,

consultantn and a*ml* of rath of the foregoing shall at all tones be granted free

access to the Contract Aiea onJ to any facilities for the Pcroleun Operations located

within or outside of the Coni rad Arm or within or outside the Production Area for

the purpose of coming out the Petroleum Operations

Use of Facilities

16.7 Upon notice from the GOVERNMENT, the CONTRAfTOR shall make available

to a reutmaklr number of rrpreurnlatlves nf the GOVERNMENT these of the

CONTRACTOR'S facilities which are accessory «o enable such representatives to

perform their tasks related to this Central and ihe Kardwun Region Oil and On I aw

including, in case of works to be performed on work sites, transportation,

aixutnnodalmii and board. under ihe «mr condition* as the** provklrd h> Ihe

CON I RACTOR for its own personnel

Notwithstanding Article 16.8. the GOVERNMENT shall indemnify and hold

harm lew each CONTRACTOR l.nlity ngaiurt all losses, damages and liability

arising under any claim, demand, action tv proceeding brought cr initialed against any

CON I KALI OK Entity by any rcp

with thr access to cr use of the facil tics by suck represenUlises.

16.8 llie CONTRACTOR shall be responsible for any loss or damage caused to third

parties oy Its or Its Subcontractors |icim.iiicI solely and directly rcnulimg from their

negligence, errors or omissiom in accordance with applicable Kurdistan Region law.

16.* In its Petroleum Operations, the CONTRACTOR shall respect any patents belonging

to third panics


16.10 The CONTRACTOR slu.ll us wop bn reasonably practicable inform ihe

GOVERNMENT of any material litigation relating to this Contract.


16.11 Ihe CONTRACTOR 4ull implement a health, safety and environment program and

take necessary mcasuio to craurc hygiene. health and safety of its personnel carrying

out Petroleum Operation in acconimcc with (ruder! international pcfmlctxn industry




 Sad measures shall include ihc following:

(a) sapplying first aid and «*frty equipment for each work area and maiatalnlag a

tealthy cnvironmeni for personnel;

(b) reporting to the GOVERNMENT within sc vent)-two (72) hours of such

iwrident. any Occident where personnel has been injured while engaged in

IHrtrulcum Operations and resulting In sich personnel being unable to return to


«•) implementing • perm it do-work procedure around hazardous cquljvncnt and


(d| poviding safe storage areas fre explosives, detonators and nny other

dangemiM products lived in llic operations:

(e) supplying fifr-exlrnguidiing equipment in each wort area:

(0 for the purpwc of takirg control rf any blow out i* fire which could damage

the environment or Petroleum field, in accordance with prudent international

petroleum industry practice: and

vc of preventing any involuntary injoction <»r fluids in pctrofcum

formations and produciion of Cniie Oil and Natural Gas at rates that do not

conform to prudent intrmniiionl prtmlran industry practice.

16.12 Subject to Article 4» 7. in the evert the production rate of Ihc individual wells and

Reservoir of a Petroleum Field is to be set bekm the Maximum I Ilk lent Rate

<”VI*.R*) to the Reservoir, as provided for in the Development flan, as a

: of a dcci»» by the GOVERNMENT or my federal or

body. to COVUNMDrr undertakes to alocak any

forty md afjitabt. among the various operators (ntluditg the GOVERNMENT)

then pcoduciig in to Kvdirtan Repen. pro rata too respective productm«i rules In

such event, the GOVERNMENT shall grant an extension of the Development Period

of any rmdurtkm Area w affected to • naaooaMa period of time in onto to pndure

which wcxild otherw^c have already Seen produced, hml the MFR for

10.13 Tbe rerpccthc rights, italics, obligations kabilWaa of to CONTRACTOR and

to GOVERNMENT to be jndcniood as be ng

The Parties ag»v« tot Cm Co

or utor form of

16.14 Ihc GOVERNMENT and cadi CONTRACTOR Emily to right and

to take in kird aoC seprtoely sell




 shares of Petroleum. Upon approval of the Development Plan, the Parties thnll meet

as soon as prarticabk to reach a detailed agreement governing the lilting o( I’drokum

hy each such CONTRACTOR Entity. Such lining agreement shall include the


(a) the obligation of the GOVERNMENT and each CONTRACTOR hntity to

lilt, regularly throughout each Calendar Year, their shun; of Petroleum

produced from the Production Area;

(bl notification procedure by fcc Operate* to toe GOVERNMENT and each

CONTRACTOR F.ntity re«rdinz cnlitkmcnts an! avariability of Pcuocum

for lilting by each Party during each lining period and nominations by each

Party , ami

(c) the right of the Parties to lift any Available Petroleum n« scheduled for lifting

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

If. 15 rhe CONTRACTOR Entities shall sell and transfer to the GOVERNMENT, upon

written mjupat of the GOVERNMENT', any amounts or Crude Oil that the

GOVERNMENT shall deem necessary to meet hurditfan Region internal

consumption requirement. The ales prior of such Crude Oil shall be the

International Market Price. The GOVERNMENT shall provide the

CONTRACTOR Entities with not less than tlx (6) Months1 advance written notice

of its intcntiui to buy such Crude Oil.

Paymeats shall be made in Dollars and otherwise on terms consistent w*h prudent

IrlcmaiMNial pctnfcum induary practice. I he CONTRACTOR t n-ities' itoligafim

to sell Crude Oil to the GOVERNMENT shal be. with tie caber operators (melading

the GOVERNMENT) then prodding in the Kurdisxar pro rata to their

respectve pr»ducLon rare*.

The previsions of iris Artiek 16.15 shall nca apply to Nor-Associated NaUraJ Cias


17.1 The GOVERNMENT shall make available to th? CONTRACTOR any laid or

property in Ik Kurdisan Region required ft* the Petroleum Operations. provided

real nerd fer d The CONTRACTOR shall have the right to burid and manum.

above and below ground any facilities required for toe Porulewn Operate

172 If II becomes necessary for icndiKt of toe Petrokara Operation), to occ w and use

ms land or property in ike Kardisun Region belonging to third parties, the

LON TKAt lOK shall endeavour to reach ankatfc agreement wkh th* owwrre of

arch land. If such arakabk agreement cannot be reached the CONTRACTOR shall

notify the GOV EKNMENI on receipt of such nouffcabon.


 <•> th* COVRRNMFNT Owl I drtermnc the aireunf of campemMwn to hr paid

by lhe CONTRACTOR to the owner If occupation will be lot a shun

('•) the GOVERNMENT .hall r»pmori*ic the bnd or pnperty in aixurdmcc

with applicable Kurdistan Region Law, if Mich oocupatkM will be long lasing

or male* rt henceforth impartible to resume original usage of Mich land or

property. Any proper!} rights shal be acquired by and recorded in the rume

of the GOVERNMENT, bw the CONTRACTOR shal he entitled free use

cf the land or property for the Petroleum Operations for ihe ertire diration of

I he amount of the compensation in Article 17.7(a) shall he lair and reuxonable. in

accordance with Article 29 of the kurdiSMi Region OU and Ga> law. and shall take

into account tnc ngfits «>f the owner oxl any effective m of the Urn I or property by its

owner al the time i»r occupation by the CONTRACTOR All rrusonuble costs,

expenditures and lair and reawnnbk compensation (m required p.irv.«nl to Article 29

of the Kurdistan Region Oil and Gas law) which rrvils from such expropriation shall

he home hy Ihe CONTRACTOR. For We avoldmuc of doubt, «u*)h oorA*. expenses

and compensation Incurred bv the CONTRACTOR shall Ire considered Petroleum

Costs rod shall be recovered by the CONTRACTOR in ats.*danc* with the

provisium of Articles I and 25.

17 1 lar ilt Petroleum Operations, the CONTRACTOR shall have the right in the

Kurdistan Region to use. subject to applicable l aw. ary ral'way. tramway, road,

airport, laming feU. canal, river, bridge or waterway, any tclccomrrunkatiom

Mtwori and any raiding pipelines or tram** nation ml restructure, on icons no less


recovered by the CONTRACTOR in accordance with the provision* of Ankles I

rod 25

I7J for k» fVtiotcsws € the CONTRACTOR dull have rgM in the

Region to clear land. procure.


Murage and disposal facilities. pnmaiy distillation unin. extrartUm ami processing

■nits reparation units, sulphur plants and other fault lie* or intfallaums far the

well as unices, schools


tun facilities, garage-

other auxiliary (acilMes for the Petroleum Operations and generally, everythin!


CONTRACTOR sAall have thc^ngL to select the location «or the*

17.6 For it' Petroleum Operations. the tt»MKAl lt>K shall have the rigta In U»c

kirdratan Repoo. subtext to uxnplnncc with applicable Kurdiftan Regioa Law. to

I)M CONTRACTOR shall have Ihc right in the Kurdistan Region to lake or use uny

water r**cc*»»ry fra the Petroleum Operations provided it does not damage any

existing irrigation or navigation syttrms and that land, bouse* or watering points

belonging to third panic* tor not deprived of their use

17.7 lie GOVERNMENT shall have the right in the Ktrdirtnn Region in huihl. Operate

and maintain roods, railways, airports, landing strips, canals, bridges, protection duns,

police station*, military uistnllaliom. pipeline' and telecommunications networks in

the Contract Area, provided this does not increase the emu, or compromise or have a

material adverse effect on the pctfuemaaic of die IVtrokum Operation*. If the

cimtnation, operation and nuintenancc of such facilities by the GOVERNMENT

remits n increased cost or expense for tie CONTRACTOR then, fee the avoidance

ol doubt, such COB and expense shall he comidsrad Petroleum Costa uixl shall be

recovered by the CONTRACTOR in accordance with the provision* of Articles I

and 25.

17.1 Upon request of the CONTRACTOR, the GOVERNMENT shall prohibit the

ccnstruction of residential or commercial tHiildrgs tn the vicinity of facilities used for

Ihc Petroleum Operations that may be declared dinger>us due to the Petroleum

Operations aad to prohibit an; interference witi the use ol any facilities required for

175 Ace*»» the Contract Am ray be granted punaart la an Aoccn Authoraatioa. as shall

be defired in. and corotmnt wah. de kurJman Regan Oil and liaa Law. a- aufeensed

thfd puiie* on rrmmabk terms rod ccnditwro (iacludng ixordumionf. inchding

Persons authcriscd to construct install and operate stiacturov faciirics and iretallabonv

and h> carry cur othrr worluL provided that renting in he Access Authensatkn or ia dm

A-tick 17.9 aBhorhes the holds to drill a Well or to perfcwn any PHrdcum Operations

 (b) securing regulatory Permits « matters of cusutns o» hnp»rt/exfvu.

(c) securagentyandexitviMS. wort and residence permits as well a* any «her

administrative Permits for each CONTRACTOR Entity v its Aflilaic * and

n Scbconvacior*' ftfeign penonnd (inciidmg thee ttnily nemters)

wwkiBS in the Kurdntan Kefioa ml any other part of Iraq daring the

rnpleoenuiion of this Contract;

(d) -ccuriag any necessary Perm ts k> tend Abntnl document*. dau or samptet for

atalyss or processing for the Petroleum Operations

lei relalkns with ,ncudm‘ **

(g> obtaining aay other Permits requeued la any CON IK At'I OK tatty for the

fl» access » aay exiting data and iafonrniioo, mcliding Jau and irfiemation

relating to rtc Contract Area held by previous operators c» contractor*; ana

(i) providing aJl necessary security for Petroleum Operation*.

112 U hhin*e scope of serv ees to be provided under dm Article II. remauble and duly

juaifKC expenses ncurrrd by the GOVERNMENT or paid to third parties shall be

charged to the CONTRACTOR and *hal be carsilcrtd Petroleum Co«s aad diall be

recovered b> the CONTRACTOR as Petroleum Cosh m accordance with, the

provisions of Articles I and 25.


19.1 The C ONTRACTOR shall supply, or procure the spply of. all materials, equipment,

machinery, tods, -pan: parts and any other items or good* required lor the Petroleum

Carnations rKqoipinrnt aad Materials ).

19.2 Said Fquipraeni and Materials shall he provided by the CONTRACTOR in

accordance with the relevant Work Programs aad Bulgets

19.) As soon as possiNc after the Effective Date, foe CONTRACTOR -hall provide the

Management Committee with a copy of ds procedures for procurement of I quirroent

usd Materials and/or services for the Petroleum Operations as required by the

provisions or Article K.2 (e). including the criteria for tender evaluation, which

procedures and chicriu shall be in accordance with prudent internal ional petroleum

Irduntiy practice If ihr Maragement Committee does not request My modifications

to the procuremcni procedures within thirty (3«) days after receiving such procedures.

IW procedures dull h* deemed approved hy Ihr Management Committee


10 4 The CONTRACTOR shall give priority to equipment and Materials that arc reality

avillnhlc in the Kurdistan Regitn and other parts of Iraq to the extent their price, grade,

quality, quantity, upecificaticm. pure have, delivery and other commercial and

technical terms arc comparable in all material respects with those generally available in

the international prtiolcufr indn*iy


20.1 During the Exploration Period any Assets acquired by the CONTRACTOR lor the

Pemtlntn Operations dull remain the property of the CONTRACTOR, the

CONTRACTOR I ntitics. their Affiliates or their Subcontractor, as tkc ease may be.

20.2 During the Development Period subject to Article 21. all Assets acquired by the

CONTRACTOR for xhr Petroleum Operations shill become the property of the

GOVERNMENT upon the completion of the recovery of the costs of all such assets

by the CONTRA* TOR or thr end of (hr Contract whichever is the earlier

20.3 n» pcovi«ion« of Article 202 dull not apply to aay Assets leased by the

CONTRACTOR or bdongieg to an Affiliatod Company of a CONT RACTOR

Entity or belonging to it* or their Subcontractors nr its nr (heir employees.


21.1 Each CONTRACTOR Entity shall have the exclusive right to use. free of any

charge, all Aivrtv described in Article 20. both before and after recovery of the cost of

the same, for the Petroleum Operations, as well as for any petroleum infer

other agreement* in the Kunliuan Regirai to wt*ch h nr any of in Affiliates it a forty,

provided that the Petroleum Operations take friority. Ihe GOVERNMENT agrees

net to trailer or ohrrww tfaqaw# of any of arch Asses without the

CONTRACTOR’S prior written approval

212 The CONTRACTOR nay fiecly mom to the Coatract Area any Assets frorr any

relinquished portkn of the Gwtiwi Area. or from any other area in the K unman



22.1 TV CONTRACTOR thall it hive al the


222 The CONTRACTOR shall gve polity to Subcontractors from the Kurdistan Region

of Iraq to the extort their cooprtence. rrtev experience, reputation.

ledrt rrtmg md term of avm labilky. delivery and other

the CONTRXfTOR * cole ipiman. ermpanMr in all

with those prrvided by foreign compares opening it the

ictcmatkma! pcUvfcum industry. S*»h Subcontraaore muat be bora fidr Kurdistan

Region companies nrt reialcd » any PuNi: Offer, drectly or indirectly, and must have


22.3 Selection of Subcontractor 'hall akc place m accorthncc with the procurement

procedures submitted by the CONTRACTOR to the Management Committee in

accordance with Article 19.3 and upproved by the Management Committee.

2? 4 IV CONTRACTOR shall provide the GOVERNMENT with copies of agreements

entered into with Subcontractor, where their amount exceed' the limit wet b> the

Management Committee from time to time.



23.1 l or the Petroleum Operations the CONTRACTOR shall give, and shall require its

Subcontractors to five, preference to personnel from the Kurdistan Region and other

part' of Iraq to the extent such personnel have the technical capability, qua fixations,

crenprtmce and experience required to perform the work.

23.2 llte C ONTRACTOR Entities shall give due consideration to the tecondment of

GOVERNMENT personnel to the CONTRACTOR Entities and of the

CONTRACTOR Entities’ personnel to the GOVERNMENT during the various

phaset of the Petroleum Operations. Terns and conditions for such tecondment shall

V mutually agreed hy the Parlies and nn> costs associated therewith shall he

considered Petroleum Costs and shall be recovered by the CONTRACTOR in

Mcordaneo with the provision* of Article I aivl 25.

23.) Each CONTRACTOR Entity and it' Affiliates ard Subcontractors shall have the

right to hire foreign personnel wherever the personnel from the Kurdistan Regina and

odtor parts of Iraq do not have the mpimte nvhriral capability. qualification or

experience for positions to be filled as required pursuant to Article 23.1. la the event

my M«h fswdgn pcnoancl arid'o* a moabu of ihrir (amity engage « divines or

commit acts winch breach Kudistai Region law. tie CONTRACTOR dull at the

M“SCT* ^ ",-n-r

23.4 For the first five (5) Contract Years, the CONTRACTOR shall provide up to two

hundred and fifty ihou«ndlX.IUr. (USE50,(00) j. ad.incc each Conrmrt Year to

the GOVERNMENT for the recreitmcrt or wcondmcnt of personnel whether from

the KudtSan Region Xher pins of Iraq or Atmmd. u Uw of Natural

Resource* The selection of web pcnortiel shall be at dc dhemioa of the Mhhicr

of Nararai Resources, bach mats *u!l he conuderet as rvuutaan Cows «al dwU be

recovered in acconancc with Ac promwm of Alkies I and 25.

23J la a planed way. h acccrdarex with the provisions of this Article 23.5 and Article* 23.6

■sd 23 7. the CONTRACT OK shall tram all as personnel ftorr the Kurdbtan Keg km

aid other parts of Iraq directly or ndirectly involved in the Petroleum Opera!mas for

trld b. the CONTRACTOR Entities- foreign weaken wrth an oyuvakni


Such traning shall also include the transfer of knowledge of petrefeum technology and

the necessary monapmcnl experience so «' to enable the personnel from the Surdimui

Key km and other part* of Iraq to apply advanced and appropriate tcchnohyy in the

Petroleum Operations, to the extent permitted by applicable Law and agreements w ith

third parties, and subject m appmprialc confidentmlitv agreements.

2 J.6 In addtion to the requirements of Article 23 I. the recruitment. mtepaiioc and «aWn| of

the CONTRACTOR Lntitics’ personnel from the Kurdistan Region and other parts

..l Iraq .hull be planned, which plans shall he submitted to the Management Committee

for its approval. Ihe training plan shall lake into consideration the requirements of Article

2J3 and may include training thr ihr (JOVERNMENT"* personnel. dependng on the

exient to which the «nourt allocated to the training plan, as pracribcd by Article 23 7. is

otiilahk otter taking Into comdeMra ihr rrainng of ihr CONTRACTOR Entities*

Kurdistan Region and other Iraqi personnel.

Within ninety (90) day* or the Effective Date, the CONIRACTOR shall submit to

the Management Committee a proposad training plan for the remainder of the

Calendar Year. Hereafter. t» later than I October in each Calendar Year, the

CONTRACTOR shall subrail a proposed trainmg plan » the Management

Committee for the fallowing Calendar Year.

23.7 I lie training plan referred to In Article 23.<> shall provide for the allocation of the

uitnium of one hundred ami fifty thousand Dollars (UK* 150.000) for each Contract

Year during the Exploration l*eriod and three hundred thousand Dollars (US$300,000)

lor each l on tract year daring ihe Development Peikd

23.H l ath t ONI RAI IOK Dully slmll be respunsMe fir the tramiag coas which it may

incur in respect of the personnel it employs front the Kurdtsun Region and other ports of

Iraq. All such reasonable costs shall be considered tu. »W4c«n C«.as -id dial I be

recovered in accordance with the provisions of Ankles I and 25. C*st' tacurred by

dr CONTRACTOR for trailing programs far the GOVERNMENT’* pcrwmnd

shall be borne by the CONTRACTOR only to the extent fiat dry are me laded n the

CONTRACTOR'S trairma pan. panuaal to Article 23.6 and stall oho be wiudcral

as Petroleum Cos* and shall be recovered in accordant dr provnioo of

Articles I and 25. The cost of all other training programs for the GOVERN MENT S

pmnnirl shall be the GOVERNMENT’S respansiblity.

23J Fiom the das: of Fir* Produenon km the Ccrtract Area, the CONTRACTOR shall

contribae the ameum of one hundred and fifty thousand Dollar* (USJ1M1.UUU) each

C ontract Year during the Exploration Period and three hundred thousand Dalian

(USS3CO.OOO for each C ortraci Year duriag the Dcvelopncnt Penod inn. the

ravimranent fund e«ah ishwd by dr GOVERNMENT for the benefit of the natural

cavirorment of dr Kurdistan Regun. penuaa to the Ksrdisxan Region Oil and Gas

Law One -E-vir---^.1 ¥mmT) Such arewts shall be deemed to be PWrofcsan

Cots and shall be recovered in accordance »kh Articles I anJ 25.

23.10 Any expendture ncurrrd by the CONTRACTOR urxfcr this Artcle 23 shall be

considered Pvtrolcsm Coav and shall hr iwosereri in axowhncc with Arta ks I and 25.


23.11 Before the end of the flitt Contract Year, the CONTRACTOR shall provide to the

GOVERNMENT in kind technological and logistical assistance to tin- Kurdistan

Region petroleum sector, including geological computing hardware and software and

such other equipment as the Mmiser of Natural Resources may require, up to the

value of one million Ddlora (US$1,000,000). The form of such assistance shall be

m dually agreed by the Parties and my costs auociaxd therewith shall be considered

Prtroleum Cc-sts and shall he recovered by the CONTRACTOR in accordance with

the provisions of Articles I and 25.


24 I Hr CONTRACTOR shall pay to the GOVERNMENT a pattern of Pctolcuni produced

and saved fran the Contract Area, os provided n this Article 24 (the “Royalty").

24.2 I he Royalty shall he applied on all Petroleum produced and saved from the Contract

Area which is Crude Oil or Non-Associated Natural Gas. except for Petroleum used in

Petroleum Operations, rc-injixted in a Petroleum Field, los. flared or for Pecedan that

I'utKHii K> used or sold and such ('rude Oil end Non-Associated Naural Gas (cxJudirg the

excepted F\-tioleura) shall he referred to colixtiveiy as “Export PetrotranT and

wpondrly and rc^MCthely at “Export Cmrir Of" and “Export Noo-tmaated

Natural Gas".

24.) If payable in cash, the amount of tfr Royalty rakmharrl by applying he Royalty raes

provided under Anick 24.4 shall be pa* by iW CONTRACTOR at directed by the

GOVERNMENT, in accordance with Artirk 24 7.

If payable in kind, the quantity or Export Petroleum comMpondtag to the Royalty and

cakulaicd by applying the Royalty role* provided under Artick 74 4 thall be drlncred

in kind by the CONTRACTOR to the GOVERNMENT at he Delivery |S..nt Title and

it* of loss of the Royalty paid in knd shall be transferred at the Iklirery INtint

In levs the GOVERNMENT roqu res the Royalty to be paid in hind. by giving the

CONTRACTOR not less than ninety (90) days prior written notice prior to the

commencement of the relcvuul Quarter, the GOVERNMENT uhnll he deemed to

hive elected to receive lltc Royally in full and in cash for the relevant Quarter.

24.4 Ihc Royalty due on any Export l*etrolcum produced and saved in the Contract Area

shall he determined daily by applying the following relevant Royalty -at*. to the

Export Crude Oil or to the Export Noo- XwxuUaJ Natural Cm (as tic ease may he)

produced and saved on tlui day.

(i) For Export Crude oil:

the Royally rate for Export Crude Oil shall Ik ten per cent (10%). which, for

the avoidance of doubt shallapply regardless of the gravity of the oil; and


 (b) For F.iport Natural Ca»:

the Royalty rate far Export Non-Associated Natural Gas shall he tea per cent


24.5 Associated Natural Gas and any other Petroleum shall be exempt Irom any Royalty.

24.6 If. punant to Ankle 24J. th: GOVERNMENT receive the Koyaly In klml. and

pusuanl to Ankle 28. the GOVERNMENT requests assisancc for the sale of all or

pan of the Royalty recoved in kirri. each CONTRACTOR trrtity shall assist the

GOVERNMENT in sclkng all or put of such Royalty received in kind (belonging to

the GOVERNMENT) in consideration of a commission per Barrel payable to such

CON TRACTOR Entity, in accordance with Ankle 28.

24.7 If purs.Ml to Artick 24a the GOVERNMENT receives th: Royalty in cash:

(a) any Export Crude Oil sha I be valued at the International Market Price

obtained at toe Delivery Poii*. as defined in Ankle 27.2:

(b) any Export Non-Associated Natural Gas shall be valued at the actual price

obtained at the Delivery Point under on termed contract, as provided in Article


(cl the CONTRACTOR shall pay «ch Royalty each Quarter, in aiTcaiv within

•forty (VI) days of the end of each Quarter, and dull calculate the payment

due for the relevant Quarter by reference U* tbc price for the Export Petroleum

ii ihe Delivery Point, determined in accordance with raragraphs (a) and (b)

•hove, and the Royalty due on the Export Petroleum, determined in

icconlunoc with Article 24 4. for the uni (>«rter and

(J) i»e CONTRACTOR -nrities shall he entitled to export freely the volume of

Export Petr^kuw corresponding to the Royaky decnmird in accordance with

Artiefc 24.4 for Ac pt«po«r of paying rfcc Royalty m cask


25.1 All Export Crude Oil prudaced and raved from the Contract Area -ball, after

All Associated Natural Gas produced and saved frren the Cortract Area, except fur

Aaaocirtad Natural Gat whch is used in Nrtndnan Operations, re-infected in a

Pttiukam Field, loo. ftaaxl or canna be used or void, shall be considered as ‘Avaiabtc

All Export Non-Associaied Natural Gaspmdcerd and saved from the Cnatract Area

shall, after deductxm of any Quantities of Expert Non-Associated Natural Gas dee for

Royally pumanf *> Artick 24. be considered aa “A-mil-Mr W-Aumrktad Natural



"Avail*Mr Prtndeaw means Available Crude Oil Available Aeccwed Natural Gat

anJ AvalaMc Non-Associdcd Natural Gas.

252 Ftr the purpose of #iis Article 25:

(a) uny Availahle Crude Oil dull be valued at the International Market Price

obtained at the l>livery Point, as (feline*) in Article 27.2: and

(b) my Available Associated Nnlural Gas and uny Available Non-Assoc .tied

Natural Gas dull be valued at the actual price obtained at the Delivery Point

•mdrr an approved contract, as provided in Artclc 27.3.

25 1 Object to the provisions of this Ccntraa. from the First Production in the Contract

Area, the CONTHACTOH dull at all times be entitled to recover all Petroleum

Costs incurred undrr rhit Contact, of up to forty per cent (140%) of Available Crude

Oil (which, for the avoidance of doubt, shall apply regardless of the gravity of the oil)

and Avnilublo Awooiated Nnlural Gw. produced and uived within nny Calendar Year.

Available Crude Oil above this pcnenuijp or otherwise t*x used for the recovery or

IMndcum Cotta shrill be Profit CrudeOil.

25.4 Subject to the provinioni of this Contract, from l ira Production in the Cnrtract Arm.

the CONTRACTOR dull at all times he entitled to recover all Petroleum Costs

iu.urrcd u/xkr dm Contract of up to fifty per cent (50%) of Available Non-

Associated Natural Gas prodaccd and saved within any Calendar Year. Available

Non-Awciated Natural Gaa above this percentage or otherwise not used ft* the

recovery of Petroleum Costs shall be Profit Natural (ias.

25.3 l or the application of Article 25J ami 25.< Use CONTRACTOR dull keep a

detailed account ol Petroleum Costs In dLcocdoax with the provisions detailed is the

A .court mg Procedure. Recovery of Pcrokuai Corts shall occur in the following

(a) PTOdacdoa Cotas:

Contract Area);

(c) Gas Marketing Costs:

(tft Development Cotta; and

25.4 fatal recovery of Petroleum Costs during any Calendar Year, expressed in quart* ics

Petntom shall nut

25.4. If in my Calenttr Year, the ArailaNc Crude Oil ardor Avaikbk Xoa-

Assuciaied Natural Gw do not allow the CONTRACTOR to raw mi its

Petroleum Costs pursuant to this Article 25. be amount of un-recorcred Petroleum

Costs ci sues Calendar Year shall be carted forwad indefinitely u the subsequent

' alcndar Years urtil all Petroleum Costs are fully recovered, but. save as provided m

Articles 14.10 and iS.4. n no (thcr case alter the trmtnaliun of the Canaan.


25.7 11* provision of Artie to 27.7 and 27 J shall b» appled to determine die qumtities of

Available Crude Oil ard/or Available Non-Associated Natural Gas die to the

CONTRACTOR Inr the recovery rfits firtn>kum Costs.

7S H TW quantifies of IVnolcum ccnespondinf to the share of Available Petroleum dac to

the CONTRACTOR for the recovery of 111 Petroleum Costs shall be delivered to the

CONTRACTOR at thr Delivery Point I ille and risk of loss of such Available

Petroleum shall be transferred at the I Jcliwry Point.

25.9 Each CONTRACTOR Entity shall he entitled to receive, take in kind and to caport

freely >11 Available Petroleum to which it i« entitled for recovery of its Petroleum

Crisis ia accordance witfi the provisions of this Contract and to retain Abroad any

proceed* fn»i tire sale of all such Available Petrvfcum Petroleum Co* in each

Production Area shall be recovered from Available Petroleum from that Production


25.10 Subject to Article 38.4. tor the avoidance of doubt, Petroleum Costs unde this

Contract ure net recoverable ngnmst other contract areas held by the



26.1 Under tills Contract

(a) “Protil Pelroleam'’ means Profit Crude Oil and Profit Natural Gas;

(b) "Proll t rade Ofl” means lie quantities of Available Crude Oil und Available

Associated Nutural Gas produced from he Production Area, after lie recovery

of Petroleum Costs, in accordance with Articles I aad 25. aid

It) Trofc Natural Gas' nans the quantities of Avails** Non-AwcHed huuaal

Gat produced fhm the Production Area, alter the recovery of Pctrocum Costs

in accordance « eh Articles and 25.

762 From First Pmdjctiue and as and when Peookurr is being produced the

CONTRACTOR shall be entitled to tike a percentage share of Profit Crude Oil

and/or Profs Natural Gas. n consideration for its investment ia the Petrrlcum

Opcralonv which percentage share shall be Jetemined in accordance with Article


26 J To dctrrmim the peremUg* than of P-oCrt Crude Oil sruVor Profit Nat and Gat to

which the CONTRACTOR n^nwled. thc^Factor shall m


2M Oe -R- Factor shall be calculated as follows:



X: h equal to Cumulative Revenues actually received by the CONTRACTOR:

Y: is equal to Cumu alive Costs actually ircurred by the CONTRACTOR, “ran

the date of tftc ttfMtUR of tfrs Coctract.

For the purpore of this Article 26.4:

“Cumulative Revenue* means local Revenues, as defined below, received b» die

CONTRACTOR until the end of the relevant Semester, determined in accordance

w«h Ankle 26.7.

"Revenues" means the total amouat actually received bj the CONTRACTOR for

rreovety or its Petroleum Costs and Ha share of Profit Petroleum In the Production


“Cunulailvc Coals” moans all Petroleum Costs In lh« Production Area, actually

irvurred by tbe CONTRACTOR until the end of the relevant Semester. determined

in accordance with Article 26.7.

Notwithstanding the foregoing provisions of this Artkle 26.4 for the period from

Finvt Producta'ii until live end of the Calendar Year m which I irvt Production occurs,

the “R” Factor shall be deemed to be less than one (I).

26.J TV share of Profit Petroleum to which the CONTRACTOR shall be entitled from

Pnt Pr jducaioo i»

(•) far Profit Crude Oil. equal to the quoaritiev of FMrolcam rewh-s &o« the

application of the relevant pcrecruge as tnrfcattd below to tie daily vetume

ol production of Profit Crude Od withri the Productiui Area * the

corresponding Delivery PotaL

-R- Factor CONTRA! TOR’* % Share af Prefit Crude Oil



R>2 15%


(b) far Profit Natural Gas. equal to Use quantities of Non-Associated Natural Gas

the daily volume of production af Profit Natural Gas with tv the Prediction

Area at the corresponding Delivery Port:


-K" Hdor C'ONTRACTDK’a % Share of Profit Natural Gai

R < or - I 35%

I < R< or - 2.75 35 - (35 -18) *

R > 175 18%

26.6 IV CONTRACTOR'S accounting shall account separately for all components for the

calculation of“X" and “Y" values in the formula provided m Ankle 26.4

26.7 For caci Semester, startng trim the I"* of January of the Cakodar You following ihe

Calendar Year in which First Production occurs, the CONTRACTOR shall calculate

tit “RM Factor applicable to the relevant Semester within tinny (JO) days of lire

beginning of such Semester. The "H" Factor to be applied during a Semester shiill be determined by applying the Cumulative Revenues actually received unit the

Cumulative Costs actually incurred up to and including die Last day of the preceding


If the CONTRACTOR is unable to cakutate the ~R" Factor lor the relevant

Semester before aa allocation of Profit Petroleum for such ScanJet mus: be made,

then the allocation of Profit Petroleum for the previews Semester shall be used for the

rdevnni Semester I fpnn the calculation of the “R” Factor for the relevant Semester:

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

Semester is the same, then rc> adjustment shall be made; and

(fc) if the allocation of the Profu Petroleum in lb* two Semewm a different, then

rhe CONTRACTOR shall make any adjustment! to tw Panes’ respective

share, of IVofit Petroleum to restore them to the positiaa that they vould have

bMii in had the *R“ Factor fix the relevant Semester been a.aiiabc from the

start of mch Semester.

26.8 If at any time an error occurs in the calculation of the TT Facte*, resulting in a

change in the CONTRACTOR’* perceatage dare of Profit Create Oil ard/or Profit

Natural Gas. the necessary creredkm shall be made and any aJjuvtraents shall apply

foot ike Semewarr in which the error occurred. TV Pre«> haring benefited from a

sarp!us of Profit FYtrokum shall ^render such wr>lus to the *her Part v

fwn the fim day »f ike Screeaier following the Semester ie which tV ereor was

rtcogn sed. However, each I fling of Petrokon resting to such eror by the Party

receiving the surplus xh.ll nul cacccd l»«m>-fw per ccnl (25*) of the dure of Profit

Petroleum to which such surrendemg Party is cntitfcd. For the avoidance of doabt if

a any rune an error occurs In die eahuUaion of the ~R“ factor. whkh docs noi result

ia a change in the CONTRACTOR’! ncrccatagc share of Piofit Crude Oil and/or

Profit Natural Gas. no correction dull be made.

269 The quantities of lYofit FNaretoan due to the CONTRACTOR shal be ddixeKd u>

the COIVTRACTOR Entitiei at Ok Delivery Poirt. Tale and risk of loss of such

Profit Petroleum thall tc transferred to tie CONTRACTOR I milks at ike Dclvcry




 Each CONTRACTOR Entity shall be to receive. lake in kiad and to export

freely in *h«x of Profit Petrocum i with Ihc pros wm of t

Abroad any prwteih fora of al such Profi

26 0 TV share of ihe Profit Petroleum to wtveh the GOVERNMENT b atoVd it any

Calendar Year in aceixeance with Article 26.5 shaL be dxmed to include a potion

rtprcsroimg the corporate inccmc tax mpo*d ipon and due by each

CONTRACTOR Emily, and whfcfc will be pa«l directly by the GOVERNMENT on

behalf of each such entity representing the CONTRACTOR lo the appropriate tax

authorities in accordance with Article 112. IV GOVERNMENT shall provide the

CONTRACTOR Entities with all written dreumentalien and evidence reasonably

required by IV CONTRACTOR I ni it in to confinn that such corporate neons: tax

has bora paid by the GOVERN M EN1

26.! I Ihc quantities of Profit Petroleum due lo the GOVERNMENT shall V delivered to

tlr GOVERNMENT at the Delivery Point Title and risk of loss of such Profit

Petroleum dull be transferred al lh»> Dolivory Point

26.12 At (com twenty-one (21) dnya prior to CONTRACTOR’# estimated dale of First

Production and. subsequently. thirty (.10) days prior to the beginning of each

Semester, the CONTRACTOR shall prepare and deliver lo the GOVERNMENT a

production program coreprisiag the production forecast fa the next Semeser and the

furocatf of Ike quantities of Crude Oil aad Natural Gas to whith cadi Party dull be

cat it led during the said Semester.

26.13 Within ninety (W) days following the end of each Calendar Year. Ihc

C ON IKALTOK shall prepare iuhI thllvcr on annual production re fort to the

GOVERNMENT. Muting the quantities of ( rode Oil ond Natural Gas to which each

Party o enlitlcd. the quantities ot Cnxfc Oil ard Natural Gas lilted by each Part, and

the mulling over-lift or under-lilt position of e*:h Pwty. funuanl lo the lifting

l to Aftick 16. M.

26.14 Any cast* or expenditure trvurreC by tie CONTRACTOR Ms

sapplkrs relating to the lifting of he GOVERNMENT'* dm e of b 1

CONTRACTOR shall art be conadercd Petroleum CoR* and »i

GOVERNMENT according to terms to be mutually




271 for the purpose of this Central, any l rule Oil prodaced n the l unmet Area shall be

valued al the end of each Quanet at the Dr ivers Point based on the Irtcrnatunal

Market Prta. as drfince in Article 172.

272 The later national Market Price relrned to m Article 27.1 shall be the weighted

average price per Band, expressed in Dollars, obtained by th: CONTRACTOR at


the Delivery Poinl. by netback if necessary, during the Quarter endirg on the date of

valuation for Arm's Length Sales of Crude OIL

IV CONTRACTOR shall provide evidence to the GOVERNMENT that tV sales

of Crude Oil referred to in Article 27.2 urc Ann's Length Sales. If the

GOVERNMENT considers that any such sale of Crude Oil Is not on the basis of an

Ann’s length Sale then the COVLKNMENT has the right to refer the matter to an

open pursuant to Articb 42.2.

In the event that there is no lilting of Crude Oil in the relevant Quarter or no Arm's

I mgth Sales the applicable ‘iatrnulioaal Market Price” for such Quarter shall be

the weighted average price per Barrel obtained during that Quarter fn*m Arm’s

I mgth Salei of Crude Oil of the same or similar gravity ard quality from other

production areas told Jt markets competing with Cnale Oil produced from the

Contract Area, taking it*o account gravity amt quality difference. aa

aad other post Delivery Point costs.

To determine such price, the Parties shall, price to the commencement of Production,

agree on a banket of Cnale Oil comparable to those produced in the Contract Are* imd

sold in the international market. Prices ebtained shall be adjusied to account for any

v«i (allotis such ru quality, specific gravity, sulphur content, iramportaiioii coat*.

IKoduct yield, seasonal variations In price and detmuid. general market trends and

tnlicr terms of sale.

27.3 IV price of Natural Cias dull V tV actual price obtained M the Delivery Point,

(which may take into axourt quantities to be sold, quality, geographic ocauon of

markets to he supplied as well as u*st> of pruduukn. transpuratkm and 4i*a»dwtiun

of Nataral tins from the Delivery Point lo the relevant market, in accordance with

dandari mtcmaticnal petroMaa industry practice k IV GOVERNMENT shall have

the right to review and ***oveNat»*IGM Mies coaracb.

27.4 la accordance with this Artkfc 27A the GOVERNMENT and tV CONTRACTOR

shall establish a satcmcnl showing calculations of the value of Pctiofcura produced

aad soU fron the Contract Area. Such statement shall include followmg information:

(a) quantities of Caidc Oil sold by tV CT3VTRACTOR Entities during the

preceding Moot* constituting Am v length sales together wih corespooding

(h) quantities of Caidc Oil sold by the CONTRACTOR Fannies during Uk

preceding Month that do not tall m the category referred to us pangraf* (a)

(4) ot Natural t ran sold by the CONTRACTOR hntlOrs and the

GOVERNMENT toother with sale paces realised-




27.? All Export Petmloim shall he metered at the Del;very Point in axordance with

prudent intervalhnuI petroleum industry practce ani such meters skill be to fiscal

mrter aanriank All metering equipment shall be installed wd (pcrated by the


of reasonable pri.e wriltm noliee. have the right to inspect any such metering

equipment installed by the CONTRACTOR, k well as ill relevant documents and

supporting information remu'nitbly necessary to validate the accuracy of such

metering. All metering equipment shall be subject to periodic technical inspections in

accordance with prudent Intarralioral petroleum industry practice

27.6 If any raderiag oquipm.-nt la defective, ihe CONTRACTOR shall use all reasonable

endeavours to rcpiir it withn fifteen (15) days or. if deemed necessary by the

CONTRACTOR. .cpUre it as aeon as roasmabl, practicaNe from the dale tbe

defect became known Ihe "Adjustment Date" shall be the last date that the

metering equ pmcia was known m agreed to have been measuring correctly, or if not

known or agreed, the date that is mdwat between the date the defect was discovered

and the last date Ike equipment »m known to have measured correctly. The results

from the defective equipment shall be disregarded for the period from the Adjustment

Dale until the date the detective equipment is repaired or replaced and tltc

neasurement for such period thull be estimated:

(a) if chock measuring equipment is installed and registering accurately, then by

using the measurements recorded by such check measuring equipment.

(b) if check mcasumg equipment is n« nsalfcd or nrt registering accurately,

then by correct iag the emf if he percentage of emr is Bceminabk by

verification. calibratioa or rro thematic* cakslatiua. or

(c) if neither method is feasible, then by estimating he relume andrur quantity

delivered hived on deliveries during the preceding comparable perfod of time

when the metering equipment was registered accurately.

27.7 Any disputes arising under this Article 27 shall lie willed by otpen Jctemmatmn in

accordance with lie provision* of Article 42.2.


Upon the tiOVERNMlNI** prior wriBen oxicc of m k*u ninety (90) days. each

CONTRACTOR Entity dial I provide all reascnabl) necessary assistance to the

GOVERNMENT for the sale of all or pan of the quantile* of t mdc Oil to whka the

GOVERNMENT is entitled, in consideration of i sales commission per Barrel to he

established with reference to prudent international petroleum practice and to be mutually

nitrccd upon betweea ihe Purl let.


29.1 Any payment to be made by a CONTRACTOR Faulty iu ihe GOVERNMENT

pursuaat to this Contract dull be in Dollars and shall be offset against any cutstaading


paymerts due by he GOVERNMENT ID the COM KACTOR Entity. or paid into

lie bmk account Ally Ocsigrated n Ux GOVERNMENT in writing ird shtol be

paid within thirty 00) (toys of the dac date. after whch inrrcsi conquunifcd monthly

atthe rate of 11 IKK pirn two (2) percentage points dull he appjed.

29.1 The GOVERNMENT may. at its we diKirticn. direct tie CONTRACTOR

Ratifies to pay-

(a) any Royalty in cash due to the GOVERNMENT mmuant to he provisions of

Article 24; and/or

(h) any pocrafe fraen dr sak undertaken by the CONTRACTOR Entity on

behalf of tW CJOVF R NME-YT pursuant to Art ale 21 of «a> Ciudc Oil lo

which the GOVERNMENT is emitted punumt to Anide 25; andc*

(c) any Production Bonus.

to a fued for rrverue sharing, which may m die course be established by legislation

coexistent w «h the Cnmtitultxi of Iraq, between the fkwemreem of Iraq and other

regions (inclading the Kurdistan Region) and govemoraics of Iraq. Nothing la this

Article 20_2 shall be uadmtmd as anfiymg any contractual rrlatomhip nr other

rclatiorship between the CONTRACTOR mVor ai^fONTRACTOR Entity and

29J Any pavmcrl due by the GOVERNMENT to a CONTRACTOR Entity shall be

ofTsct again* fuurc payments Sue by mch CONTRACTOR Entry to the

GOVERNMENT or paid in Dolton to tie Kink account designate! by the

CONTRACTOR Entity in writing and shall be ped wahin thirty (30) 4my% ef (he

dale of invoice, after which interest corrpoundcd monthly at the rate of l IIIOR plus

two (2) percentage |H>lni* Rial lie applied.

29.4 Any cineocy cometskw u> be made under this Cxntimei 'hall be at the c whang* rale

of the Central Bank of Iraq, provided such exchange rate applied lo the

CON IKACTOK > mines shall not be levs favourable dun the rate offered by other

private, commercial or industrial hanks in the international market In the abscrce of

Ihc Central Bonk ol Iraq or in Ihc event that the Central Bank of Iraq U uuahlc lo

provide ihc relevant exchange rale, any currency convert ion lo be made under this

Contract shall he at Ihc exclnngc rale of u reputable ctimmetclal hank carrying on

business in the international market and approved by the Parties

29.5 Ihc CONTRACTOR shall not realL« any gain or Ims due to exchange rale

fuel rations and. consequently. any gain or km resulting tn«n the exchange of

currency shall be cither considered os revenue and credited lo the Accounts or shill be

considered as a Petroleum C ost aad shall be recovered by the CONTRACTOR in

Kcnrdancc with Articles I and 25. as the case mav be

.’9 6 lach CONTRACTOR Entity shall at all limes he emitted to freely convert into

Dollars or any Other foreign currency any Iraqi dinars received in Ihc framework of

ihr Pdroteum Opcruiiims nm) to freely transfer die wno Abroad. The conversion rale

shall he as provided under Article 29.4.


 29.7 Each CONTRACTOR Entity shall have Ihc right lo be paid, receive, keep, irar.'fcr

anJ use Abroad, without any restrictions, all proceeds of its share ol IVtnvIcun.

29.8 Each CONTRACTOR Entity and its Subcontractors shall have the right to Irccly

open and maintain hank accounts for Petroleum Operations within or outside the

Kirdisun Region and other parts of Iraq.

29.9 Each CONTRACTOR Entity shall have the right to pay in any freely convembk

etmmcy all as financial requirements frr the Petroleum Operations and to coeven

these currencies to Iraqi dinars in *iy hank in the kurdbtan Region or otto pans of

Iraq, at thr same exchange rate as provided under Article 29.4.

79 10 Pach CONTRACTOR Entity shall have the right, without any restrirtions, to freely

repatriate Abroad and to freely dispose of

(at any proceeds received in the Kurdirtan Region or other pans of Iraq from the

ule of IVwleum:

|H) tny proceeds received from other operations and activities carried out indcr

this Gmtract in the Kurdistan Region or other pans tflraq

29.11 Each CONTRACTOR Entity shall have the nght lo pay in any foreign carrency its

Suhconiruciora and its expatriilc personnel, either in the Kurditfun Region, other parts

of Imq, or Abroad Said Subcontractor* and expatriate pmontxl shall be obliged U>

Iran-iter to the Kurdistan Region the amount nr foreign currency required for their kwal

needs and they shall have the right to repatriate tie proceeds of foe sae of their

be kinging* in accordance wiihlha regulator** b fore* in dc kiotolar Rrgun.

29.12 Lach CONTRACTOR Eatn*** Atfiliairs.

equally benefit from tie same rghts as saefa CONTRACTOR Entry anJ its

personnel as regards this Article 29.

29.13 For ihc financing of Petroleum Opmiiau. crc-h fONTR Af TOM Inlity shall have

the right to have recourse to external financing from third partici «x frxn its Affihated

Companies on an ami's length bask


30.1 All sen ices, material equipment, pods, consumables and products imported into the

Kurdbtan Region and other parts of Iraq by I hr CONTRACTOR, any

CONTRACTOR Entity, its Affiliates, any Subcontracts «x any agent of any of the

foregoing, fee use or consumption in the Petroleum Oporolions shall he ndmitled tree

and exempt from any and all Taxes on Import Ihc CONTRACTOR, uny

CONTRACTOR Emily, its AffilUtca. uny Subcontractor or any agent of any ol the

foregoing shill have the right to re-expod from the Kurdistan Region and other pails

of Iraq tree trixn ill Texes cn export aay nirtcrUL equipment guuK ceeuumabk*

and products that ire no longer required for the Petroleum Operations, except where

tele hat passed to the GOVKRNMf.NT In acawdatce wall Ankle 20. in which case

re-expert shall he approved by the Management Committee.



10.2 Ike CONTRACTOR, any CONTRACTOR Entity, its Affiliate*, any Subcontractor

or any agent of any of the foregetng. and their personnel (tacludng their family

mernhet*) shill have the right to freely import intc the Kurdistan Region and Other

pots of I rat] and re-export horn the Kunlistai Region and other parts of Iraq any

personal he longings and furniture free mil exempt from any Taxes on import or

export. Hie sale in the Kurdistan Region and other ports of Iraq of personal belongings

and furniture of expatriate personnel ahall comply with K unlist nr Rogim law.

»0.J Each CONTRACTOR Entity and Us Affiliates dial! be eatitlod to freely export from

th: KurJistan Rcgwi and other parts of Iraq, free of aiy Taxes, aay Pttrulcum to which

it is ent tied pursuant to rf*e pro vis*, ns of this Contract

30.4 The GOVERNMENT tonll indemnify the CONTRACTOR, my CONTRACTOR

Entity, its Affiliates, any Subcontractor or any agent of any of the foregoing, and their

personnel (including their family members) for any import or export Taxes rvfemxl to in

Articles 30.1,30.2 or 30.3.


31.1 Except ax expressly provided in this Article 31. and without prejuttcc to the

exemptions expressly provided for in Article 30 and in this Article 31. each

CONTRACTOR Entity, its Affiliates and my Subcontractor shall, for the entire

duration of thio Contract, be exempt from nil Taxes is a result of its income assets and

activities under this Contract The GOVERNMENT -hall indemnify each

CONTRACTOR Entity upon demamJ mguna any Ikoihry to pay any Taxes wrvnl «w

imposed uptn with creity which rebar to any of the exonpkns grafted by toe

GOVERNMENT under toil Artkk 11.1, nsd under Amcka 31.4 toroufto 31.11.

312 Each CONTRACTOR Entity toall he wibect to csvpcraa* iacranr «■«

Petroleum Operatiem as provided in Article 31J. which shill he deemed to be incisive

und in liill aid total discharge of any l ax on income, raooiptn. iw.miw, gains or profile

of each such entity. Payment of tie said corporate income tax shrill be nude lor the

entire duration of this Contrast directly to tile official Kurdistan Region tax authorities

by the GOVERNMENT, for the account of each CONTRACTOR I ntity. from the

GOVERNMENTS share of toe Profit Petroleum received pursuant to Artick 2C

bach CONTRACTOR Entity ahall. within sixty <«>> days after lbs end of caib lax

year, provide a satemcnl to the appropriate Kurdistan Regioa tax authorities of K*

profits which arc subject to corporate Income tax. together wklt a xakulalkm ol the

nmouiu of corporate inromc tax tine on those profits

The GOVERNMENT shall, within ninety (W) days nllcr Ihc end of each tax year,

provide to each CONTRACTOR l.ntity (i) the appropriate official tax receipts from

the appropriate Kardisun Region Ux autoorities or other relevant auhority certifying

the payment of its corporate income tax. as drtermned r the vud Wikmenu aid 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 ol its payment of

corporate income tax on behalf of mh CONTRACTOR Entity.


31.3 For ihc purpose* of Article 31.2:

(a) The nlc of corporate incline lax to be applied to cjkH CONTRACTOR

Em My dial I he the generally applicable rate prescribed in the Law of Taxation

(law No 4 or l**W) passed hs the National Assembly of the Kurdistan

Region, as may he amended from time to time cr substituted in respect of

Pclmlnim Opmuinna (as defined under the Kurdistan Region Oil and Gas

Law) by a petroleum operations taxation law for the Kurdistan Region, but in

no •vent in ihcom of forty per cent (4(W»). The Parties acknowledge ami ngree

that ai ihc Effective llntc of this Contract, die corporate income lax rate is

fitrty per cent (40*4) for nil net lusable profits In rxeest of nine million Iraqi


(bl Ihc GOVERNMENT and the CONTRACTOR agree that corporate income

ms shall be calculated fur each CONTRACTOR Entity on iu net taxable

profits under the Contract, as calculated in accordance with the provisions

iclaiug lltcrcUi In the Accounting Procedure.

31.4 laxb CONTRACTOR Entity, its Affiliates as well *j any Subcontractor*

exempt from any withholding tax applicable on any payments made to them ct by

them to or than AfllUars or thud parties, whether inside or outside the Kun*«an

Region and/or Iraq, for the entire duration of ths Cortract

31J Each CONTRACTOR Entity and its Affiliates shall be exempt from Additional

Pmllla I ax. is referred m In Article 40 uf die Kurdistan Region Oil and Gas Law or

any successor Tax

31.6 Each CONTRACTOR Entity und its Affiliates shall he exempt from Surface l ax. os

referred to Iti Article 40 ol the Kwdtaar Region Oil and <»» law i« any successor


31.7 Each CONTRACTOR Fntity and ks Affiliates shall he exempt from Windfall Profits

I axes, as referred to to Article 40 of the kurtiuan Region OR and Una Law or any

31.« It is acknowledged that double tax Leatiei will have effect to give relief from taxes to.

hat not limited to. the CONTRACTOR. CONTRACTOR Fatltica. Subcontrstor*

are! employees and otha Persons in accordance with the ptoviskm of such double tax

treaties, hut dial I nil impose an add tionx burden of taxation

31.10 Any vahe adfcd^UiM*‘VAT^»diiIl be cresidcml as a PetrukesanCad and shall hecw*


31.11 Any value added tax ("VAT*), not ithcrwisc recoverable b> ihc CONTRACTOR under

VAT law. fJnll be considered as ■ Petroleum Cost and shall he cost recovered in

amordaacc wWi tlw provisions of Ankles I and 25.

II I? Notwithstanding ary other provlsun to Ihc contrary in this Contract. the Panics

acknowledge and agree ihat the provisions of this Article 31 shall apply irdividimlly

and separately to all CONTRACTOR Ini it ics under this Contract and that there shall

he no joint aad several fcabilily in respect of aay liability, duty or obiigaticn referred

loin lh* Artrlr II.


Signature Bonus

32.1 A signature bonus of ten million Dollars (l)S$l0.000,0(10). less live million DoUon

(1ISS5.000.000I in lecogrition of work already carried out by the CONTRACTOR n the

Contract Area rS**natir* Bonn '), shall be payable to the GOVERNMENT by the

CONTRACTOR within thirty (30) day* of the Effective Date

32.2 A capacity building bonus of fltleen million Dollars (l S$|?.000.000) (Capacity

lluilillig Bobu") shall be payable to the GOVERNMENT by the CONTRACTOR

within thirty (30) days of the Effective Date.

3? 3 Ir Ihc event of a Crude Oil Cotwrcfcia Discovery, the CONTRACTOR shal pay

the following relevant Crude Oil Production Bonus to the GOVT.RNMENT within

thirty (10) days of the frilnwiag relevant occurence:

(i) two m illicit five hundred thousand Dollars (US S1500.CO0) a hen First

Production of Cmdc Oil from the Contract Area canmcaccv

Contract Are* reaches a cumulative amount of ten millkn Barrels of Cmdc Oil

(10 mmbo)

(c) ten million Delias (US Sl0.000.i00) when production erf Crude OH from the

Contract Area reaches a cumulative amount of ts«cnlv five million Barrels of

Crude Oil (25 mmbo) ;and

(d) twenty million Dollars (US $20,000,000) when production of Crude Oil from

lha Contraci Aren riches n riimulative amount of fitly million Barrels of

Cmdc Oil (50 mmbo).

32.4 la the even of a Nun-Associated Natural Gas Commercial Discovery, the

CONIRACTOR dull pay ihc following relcvanl Nw-Avwurd Mitural Gas

huduction Bonus to tie GOVERNMENT within thirty (30) day* of the following

relevant occumime;


(■) two nillioa five hunJred thousand Dollars (US S2.500.OTO) when First

Prediction of Non-Avsocated Natural Gas from the Contract Area


Natural Gas from live Contract Area reaches a cumulative nmouM of ten milium

barrel* of oil equividrnt (10 mmhnc);

(e) icn million Dollars (l!S S 10.000.000) when production of Non-Assoaated

Natural Gas from the Contract Area readies a cumulative amount of twent) live

million barrels of oil equivalent (25 mmhnr); nrd

(d) rwmty millrai Dollars (IJS S20.000.000) when priductum of Non-.\»ocialed

Natural Gas from the Contract Arcs reache* a cumutativc amotnt of fifty

million barrel* of oil •qurvalenl (50mmhw)

32.J For the purpose* nl this Article 32. a Commercial Discovery shall be declared by the

CONTRACTOR lo l*e either a CnuJe Oil Cotnmcreial Discovery or u Non-

AaaoeUlsd Goa Com mare i ul Discovery and under noeireumtfnnre* shall a Prediction

Bonus he due in respect of both Crude Oil and Non-Astwciatal Natural Gas fir the

sane Commercial Discovery.

32.6 No bona* due punaar* lolhi» Article 32 shall he deemrd In hr a IVtrelrun Coa


33.1 Ihe GOVERNMENT slinll obtain any required Pcnnits fie die transportation of

Petroleum in the Kurdiwnn Region and in Iraq as well ns nny necessary Permits and

easement rights for the constrictior of ary pipelines and related facilities required for


33J Ptot to the ronsductios of any pipeline and related facilities as provided in Article

33.2. the CONTRACTOR wbrne follow** information to fcr Mawpmmi

Comm nee:

(«) consWudkm tchrduW.


(i) any other information relating 10 the pipeline project

IV Mimecncnl ( omnutcc Utatll examine all the above nfomwion and shall within

nnety (90) Jays. approv* tV proposed pipeline preyed « "xadMaa with the

paovtsaom of Article 1-5

33.4 Sabjeci to sfurc capacry being

Hard parties stall be cntkkd to transport tie* rttrcfcum trough any pipeline

construxcd by the CONTRACTOR in axordancc with this Aricie 33 on asms to he

afreed between tV CONTRACTOR and sach third pny. Those terns shall be

raronahle crenmocial Btm and stall tax dscnrmrutc among third party user* The

CONTRACTOR stall always have priority of acce» to sach pipelines.

33.5 To the extol that they are incused tpstream of the Delivery Point, any emu

awoctaed with the deskn. constnartkwi. operation and irainteaance of the pipelines

ad related frcilitrs by CONTRACTOR under this Arkk 33 rffipribe CaataT

stall hr considered Prtnkwr Cos* and staU be recovered by the CONTRACTOR

■r accordant with the provisuns of Articles I and 25.

33.fc The CONTRACTOR doll have the absolute right without any exxpncm aid fie

facilities conanaxed by CONTRACTOR utder tns Article 33 and to tramport

IVtrolcum produced fnrn any Production Are* aail to nprratr ard mnintair any

pipeline and its related facilities, freely ami without any additional ants.

33.7 To the exteat related to transportation upstream of the Delivery Point, any tariffs

received fnrn third pwlies for ut« of any pipeline and relat'd facilities by

CONTRACTOR undet this Artkk 33 shall V applied to the recovery of Petroleum

Coots until all Pipeline CirWs have been fully recovered by the CONTRACTOR

pursuant lo he provixmas of Artkles I and 25 and shall not he included in income for

corporate Income lax puposet. Tlie GOVERNMENT dull be entitled to receive any

such tariffs from third pirties for I heir use of such ppclinc and related facilities when

the said Pipeline t twin have teen Hilly lecovctod by llic CONTRACTOR Flic costs

Delivery l*oint shall he considered Pipeline Costs and therefore Petroleum Cost* and

shall be recovered by the CONTRACTOR in accordance with the provisions of

Ankles I and 25.

33M l pon recovery by the CONTRACTOR of aH the Pipelne Coals. the operating and

maintenance cost* of «iy ppclinc and its related facilities shall be borne by the

CONTRACTOR and shall V considered Petroleum Costs and shall be recovered by

the CONTRACTOR in accordance with the provisum of Artkks I and 25.

33.9 The GOVERNMENT shall have the same rights us the CONTRACTOR for use.

free of charge, of any pipeline and related facililki constructed hy CONTRACTOR


uoder this Article 33 frr the tranvpofUl <«n of the share of Pttmlcum to which the

GOVERNMENT is entitled wider this C untract up t> the Delivery Pont, provided that

w*vcrc (he GOVFHNMFNT is pnrtkipatiiv in ifc capacity * • CONTRACTOR Entity

pursuant to Article 4. it shall lie liable f«* ib share of Prtmlcun Cote.

33.10 The CONTRACrOR shull bear the of operation and mnmicnancc of ary pipeline

uod related facllltlr* constructed by CONTRACTOR under this Article 33 nnl all

risks of accidental loss it damage to such pipeline and related facilities while they ore

required for IVrtrokum Operation.


34.1 In the event a Reservoir extends beyond the Contract Area into an adjacent area which

is the uibjaui of another Petroleum Contract (as defined hy the Kurdistan Region Oil

and Gas l aw) (an "Adjacent Contract Area'* or in the event a Reservoir of an

Adjoecnl Contract Area extend* into the Contract Are*. the provisions of Article 47.

Paragraph Second of the Ktrditfan Region Oil sal Gas l*w shad apply and the

GOVERNMENT shall require the CONTRACTOR and the contractor of the

Adjacent Contract Area to agree upon a >cbedi)e for reaching agreement cf the terms

of die iNiilisatkNi of the Reservoir, which terras shall bo based on reliable technical,

operational and economical parameters, all in accordance with prudent international

petroleum Industry practice. In the event that the Minister of Natural Resources

decides the unitiuition purauant In Article 47. Paragraph T hird of the Kurdistan

Region Oil und tias law. aid II the CONTRACTOR docs ik* agree with the

Minister of Natunl Resource's decision, the CONTRACTOR shall be entitkd to

arbitration pursuant to Ike provisions of Article42.1.

342 For clanlicacion and tie avoidance ol doubt and notwithstanding Artkk 47 of the

Kurdistan Region Oil and Gas Law. in the event that a Reservoir extends beyond the

boundaries of the C ontract Area into art adjacent area ahicD is im the subject of

another Petroleum Contract (as defined by the KuidivUr Keyon Ol and Gas aw|.

the GOVERNMENT shall, upon die CON I K ACTOR'S icqueti. take the nc

steps to extend the boundaries of Contract Area so as to include the entire Reservoir

within the Contract Area, provided that the CONTRACTOR can ofTer the

GOVERNMENT a competitive minimum work pre-grant for such adiaccn: area.



35.1 Subject to the tither provisions ol this Contract, the CON I KAt I'OK. In Its capacity

as the entity responsible for die execution of the Petroleum Operations within the

Contract Area, shall he liable to third panics is the extent provided under applicable

law far any losses anJ damage » mas cauw to them in conducting the Petroleum

Operations, and stall defend, mdermify aid htdd harmless the GOVERNMENT with

respect to all claims for such loss or damage.

353 Notwidistimding the other provisions of this Contract, the CONTRACTOR and the

CON'IKAC TOR Fntltcs slaall not be liable to the GOVERNMENT or tlic Public


Campasy or other gusemment atenciev autoorilies or brefies. coats or pJilfoal

sahdiviuoRS far any damage or loss cr dains of mty kind resulting from its coaduct of the

Mrotam Operatic**. urfcss sach dunagr or kos is tie result of wilful misconduct or a

rrtocnb firilue to conduct Pcrolcim Operation in accordance w ith the terms of this

Contract: provided, however. That such liahrily cannot result in the event of any

omissions, errors cr misakes committed in good faitfr by the CONTRACTOR a the

•icrcise of toe powers and authorisation* conferred upm the «»MW*CT()fi hy

vrtue of this Contract. rod fjnhcr provided that in no event shall the

CONTRACTOR and the CONTRACTOR f nines hr liable for any indirect or

consequential loss or dimage whatsoever or any lots, ckmages. cots, esperoes or

labilities caraed (directly or hdireetly) by any of thr following arising out oC mating

to. or connected with th s Contract or the Petroleum Operations carried out under this

CuoUact. (i) resenoir or formation damage, (ii) inability to produce. -se or dispose of

Petroleum; (ui) lots or defement of income; liv) special or puiitive damages; or (v)

other iBdirec damages ct loses whether or not similar to die foregoing.

35.) The CONTRACTOR shall indemnify and liuld hanafan toe GOVERNMENT

against all losses, damages and liability ansirg under am clam, demanc. aaim or

proceeding trough: or irMHutaJ against the GOVERNMENT by any employee of the

CONTRACTOR or of any Subcontractor or by ary defender* thereoC for personal

injuries, industrial illness deton or Cmnage to pxsonal property wsaired in connection

with, reluted to or arising out of the performarcc or noo-ferfomance of this Contract

regardless of the fault or neglgcnce in wtofc cr in party of any entity or indivHiiHi

35.4 Notwithstanding Mick 15.1. toe GOVERN MIN I shall indemnify aad boid harmless

the CON TRACTOR ad the CONTRACTOR Entries ajainst all loses, damages and

liability arising under any claim, dcmanl. ad»m « prooxdinj brought a instituted

against the CONTRACTOR or any CONTRACTOR lutity by any anpfoyec of the

GOVERNMENT or of my Pabiic Company or of any wbartraaor o the foregone or

by any dcpcrdcnl of any such employee. for personal injuries. inCustrid illness, doth or

damage to pavuna property sustained m connection with, related to or arising out of the

prrforTwance or non-performarre of this Contract regardless of toe faah or negligence

b w hoc or in part of any entity or ridividual.


rweify toe GOVERNMENT of. all emergency and •ther events (inchding explosions,

leaks and splls). occurring in relation to the Petroleum Opcratom which are causing

cr likely to MteraTcroironnientti danwye nr martial mi to health and safety

Such rrticc shall include a summary descriptkn of toe cireum vanco and fleps taken

*sd pLinrwc by the CONTRACTOR to control and remedy the oration The

CONTRACTOR *aU provide suck addooral reports to the GOVERNMENT as arc

reasonably necessary ir reaped of the effect* of luch events and the course of all

rotions taken to prevent forther loss and to mitigate dcleteriow effects.

356 Ii the event of eracrgency btobs as sa oU in Article 35.4 . at tic rccuest of the

CONTRACTOR, the GOVERNMENT, without prejtofcx aad -> adda«i to any

bdcmrificatfoa cWigatons the GOVERNMENT miy have, than assifl the

CONTRACTOR, to the CMC* possible, *1 any emergency rcsfwnsc. rcmtxlal or repoii

effort by making svailaNe any Librur. nulrrials and equipment in rcawnabfc quantities

requested by the CONTRACTOR which arc not ahcrvhe ratdBy avaibbk to the

CONTRACTOR and by fociltflingthe treasures taken by toe CONTRACTOR tohnng


into the Kurdistan Region personnel materials and equipment to he used in any such

emergency response or remedial or repair c(Fon Ihc CONTRACTOR shall reimburse

the GOVERNMENTS reasonable aid necessary yens incurred in such c(Twtv which

reimbursed amounts shall he omsidcred Petroleum Costs and shall be recovered by the

CONTRACTOR n aermianrr with the paivisirm of Ankles I aad 25.

35 7 TV GOVERNMENT »hall indemnify aid hdd harm lew the CONTRACTOR and

each CONTRACTOR Entity from and against all costs (inclining legal costs)

C'prnw*. Imwv damages anl liability whkh suck Person may suffer cr incur, or

may mult from such Person being denied, hindered or prevented from fully

•*ereUing it* righti or laking tho lull benefit of Articles 20 4. and 70.6 to 20.11.

35.1 In acuwtlanoa with pnidonl irtrmntioniil primleum industry practice, each

CONTRACTOR Entity shall maintain ary insurance required by applicable Kurdistan

Kogion I jiw, m wet aa ary inti ranee approved by the Mniuipnnmt t 'nmmittrr

Knell insurance policies may cover

(a) loss rtf ant damage In material and equipment used in the Petroleum


(b) personal irqury. damage to friird panics and risks of pollution associated with

Petroleum Operations fie reasonable ■mounts, within tke limits approved by

the Management Committee

35.0 Any insurance policy relating to this Contract shall tame the GOVERNMENT as an

additional Insured party and shall include a waiver of vubrcgalion prorectinj thr

GOVERNMENT again* any clam, loss and damage resulting from any hrtredeum

Operation cmductcd by or oa behalf of the CONTRACTOR under this Contms. to

the extent lha the CONTRACTOR is liable fcr such clain. loss or damage under this

Contrast. The CONTRACTOR shell n« he liable for and daU act purchase insurance

GOVERNMENT or of oiy Pitot*. Canpny or of any ofbadn wfosnakna of

my pervnocl of aay of He foregoing.

35.10 lpan its written request the GOVERNMENT stall be provided with insurance

certificates. nchaSng necessary details, for aay inwnr poUy nainu.«d by the

CONTRACTOR whk* relates to his Contract

35.11 Each CONTRACTOR Entity shad be responsible fur tfv filug of all cUims made

indcr any insurance policy nuintaiacd by such CONTRACTOR Entity wkkh relate*

tc this Contract. Any premiums and payments relating to such insurance policies shall

he amudered Pttolctini Cota and shaT be recovered by the CONTRACTOR in

accordoicc with the pmvtskmsof Aracles I and 25.

15 12 la *tynsur®cc|»licy maintained by a CONTRACTOR Entity whkhreblc* to this

Contract, the amoont for which the CONI HALT OR itself is table (the UrdactibR

AbmT) stall V reasonably determined between the CONTRACTOR Entity and

tke man aid n*± Deduct** Armrt shall m the even of any ntmr ebon be


 considered a Petroleum Cost and shall be recovered by the CONTRACTOR in

accordance with the provision* of Articles I oral 25.


(he CONTRACTOR shall keep all records, daw and information relating to the


Petroleum Operations in accordance with the kurdiitan Region Oil and Cias Uw and

prudent international petroleum irdustry practice. In addition, it shall provide the

36.2 GOVERNMENT with such information and data os it is obliged to provide under

this Cmtract

Upon the GOVERNMINI’s written resjuest. the CONTRACTOR dull provide the

GOVERNMENT with samples of any rocks or any »*hcr items extracted during the

36 3 IVtralaim (Vvmt*h\\

Ihr GOVERNMENT dull hive tide lo all data and information, whether raw. densest,

p-occsed. interpreted or analysed, obtained pursuant to this Contract

36.4 Inch CONTRACTOR I ntity shall have the right, without any liiaitalkn. lo send Ahrood

copies of nil reports nnd technical ctala. magnetic tapes und oilier data relating to llsc

Petroleum Operations Magnetic tapes or other data, the original of which mist he

363 analysed and processed AhmnH. inn> be transported out of the Kurdistan Region.

Any rppn*sriitml*es niiihonsed Sy the GOVERNMENT and notified to the

CONTRACTOR shall, upon reasonable prior written notice. have rcasotuhlc access

to any information amt data rrlatmg to the Contract Area in the pnvaessmn of the

CONTRACTOR which the CONTRACTOR is obt.gc« to provide to the

366 GOVERNMENT pursuant to this Conrad It ■ andmtnnd that when nereis*f

such ryfat he GOVERNMENT shall ensure - «toes not unduly nterfere wth or

itoidcr the CONTRACTOR srigfes and activeins

The CONTRACTOR Mall proved. the GOVERNMENT upon the

GOVERNMENTS wrtten request any analysis information. reports. n^s or other

sfiua (geological. icuptnskal logs, inter,icuions. drilling reports. *2c.> related to th«

Petroleum Operations in the possession of (he CONTRACTOR. Al available

367 OTginsIs of such data Mall be transferred to toe GOVERNMENT * the end cf this


Apart from the exception* stored h this -Ankle 36. the Parties undertake to keep al I

such consent not to be unreasonaMy withheld or delayed. The foregoing

confidential ty ot> igalKtt shall not apply to information or data whicl:

(a) is or. through no fault of any Party , becomes part of the public domain;

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


(c) s retired lo be funashed m ccenptianc* *«h «n> applicable law. by a

(oxrrwncirt agervy jradetion over a C ONTRACTOR FaWy. yy a

cn*m ruder ar am other Iced proceeds*!*, or

(di « rewired lo he disclosed pursuant to tfcc roles or rcitslatioes of any

•overament or recoptiscd stock exchange having jurisdiction over a


Ml VwwitKtanrlng hr forrgong a Anicle 36.7. in accordance witk prudent

irrcmatonal ^ctndcum rtdustry practice, such lata md tnfcwmniion may be disclosed


(hi employers, officers and directors of each CONTRACTOR Entity and Iheir

respective Affiliated Companies for the purpose of the Petroleum Operator*,

rubject to pat h such entity taking customary precautions lo ensure such

information is kcpl confidential;

consultant* or agents retained by any CONTRACTOR Entity or its Affiliates

for th* purj»>u» of analysing or evaluating infnonotnn nr data;

(d) hanks or flaanrial insMutioas retained hy any CONTRACTOR Ratify nr its

Affiliates with a view to financing Petroleum Opcntkmi including any

pro feta irwval coo-olwn*. reutned by such ban* nr financial inshtirtma;

(e) A<»i.r fit)/ pmtpactivc assignees of a pnrticipiting interest under this Contract

(including my entity with whom a CONTRACTOR Entity and/or iu Alllliotcs

JTC conducting fitir ncgrtialkns dinctad knvardv a rrrrger cons..lklalnn nr

die sale of a material pntion of its ce at Alllliaw shares):

(fi prospective or actual Subcontractors aid suppliers engaged by a P»*y where


work for such Party- aid

provided that Jhaln---n shall not hr made pursuant to paragraphs (ek (dX (e) a»*l (fX

unless such third party his entered into a confidentially urdcrtaiing.

36.* Any data and infoemaum relating to rrlmquvhrd or swrcntfcred anas undo this

36.10 Subject to tie peovisfoas of his Article 36. the CONTRACTOR ray not veil nor

etchange any dau reined to the rctiokuni OpcraiH«u withoai the approval cf the

GOVERNMENT which approval shal not be uarravoabh withheld or delayed

where. ■ the CONIKALIOKs renewable upinkm. suJi sAe or caclroigs wuuU

benefit the Petroleum Operations.



37.1 During ihc performance of I he Petroleum Operations. the CONTRACTOR shall take

reasonable measure? to ensure that it the Operator, its Subcontractors and agents

attend to the protection of the environment and prevention of prilutkn, in accordance

with prudent petroleum ndustry practice in simitar physical and

(votogiral environments and any then applicable Kurdistan Region I-aw.

37.2 Prior to surrendering a port so. of the Contract Area, the CONTRACTOR shall take

reasonable measures to abandon the area so be surrendered in accordaace with pradent

international petroleum industry practice in similar physical and ecological

eavironmenb Such measures shall include removal or closure in place of facilities,

nwerta and norther with reasonable measures necessary for die

preservation of Uuna. flora and ccos>«cras. ail in accordance •* pradent

.rtmunoiul petroleum mdustry pracuce n similar physical and emlcgical

eavironmentv Die CONTRACTOR shall only he responsible foe sie rcaoratwi or

cavirunmcnUJ damage to the ex lent the same pertain. solely and directly to Petroleum

Operations conducted ptnuar* to this Contract

37.J The CONTRACTOR dull take reasonable precautions and measures in occortance

ccologcal ervironnents hi prevert any pollution wtich may arise dreclly as a result

of the feu oleum Operations and to protect the environment (buna and flora), water

sesirco and «iy otter natural -esotaces when carrying out Petrocum Operations.


etke in uni physical and ecological

of peoperty.

37.5 Ihc < ON I KAt IOK slat I conduit and submit on cnvIumuciMl In |«u avscsaoicni

to I he GOVERNMENT within six (6) months after the Effective Date.

37.6 The CONTRACTOR shall take reasonable measures lo minimise nny adverse

nuitertiil Impact on nuilonul parks and nature reserves wMeli may ntlne directly ns n

result of Ihc Petroleum Operations, in accordance with prudent International

petroleum Industry practice in simitar physical and ecological environment).

37.7 Ihc

arc no national parks, nature reserves or other protected areas located in whole or in

port within the Cmtract Area where the CONTRACTOR shall not be entitled to

cany toil Petroleum Operations and (ii) covenants that during the term of this

Contract will not designate or create or pens it the creation ol any national farts,

nature reserves or other prtfcctcd areas, located in whole or in part within the

Contract Area.



37J Aay rwnvMc expendcure incurred by ihc CONTRACTOR in retailor with Urn

Article 37 shall be deeroe< Pttokun C om aad shall be recovered by die

CONTRACTOR «i accordant w nh the pros mom of Article* and 25.

37* TV CONTRACTOR is «* responsible for any pre-erating cmronmentti

auditions or any Kts of unrelated Dird parties


38. To enable the CONTRACTOR to recover the costs associated with future C .-tract

At* Decoram running Operation* under the Contact, the COrtTKACTOK dull

have the right to establish a reserve fund for fature dccmmivaoning and site

restoration (a “ Decora niiwioaiag Reserve Faad~) The Dccommimonirg Reserve

Fand may V established at aay time during the final ten (10) Calcrviar Yean d the

term of the Production Operations of a Productice Area but. upon the reasoaable

request by the CONTRACTOR, he GOVERNMENT shall allow the

CONTRACTOR to establish such fund over a longer period. Once cstaMidird. the

CONTRACTOR dull nakc regular cortribuoons to the Decanmiraaonirx Reserve

land based upon estimated Petroleum Field ckanmissaonotf and she restoration

cart* in acccdanc* with prudent mmutmil amlam industry pra.ticr. and t*k mg

Mo account interest received and futut Merest expected to be earned oa the

PtUukranTo!*!*when paid into fee reserve fund and dull V nemrad bj the

CONTRACTOR in accordance with the promfciM of Articres I and 25.

Conti llutkim to tic Ihxonutiivvninng Reserve Fund dual he placed with a firs rale

hank approved by ihc Management Committee in acionlarcc with Ankle 8.5.

38.2 If, at tkc end of the tern of the Production Ope rati, ms of the Production Area, the

GOVERNMENT dixMca to »kc over operation* In the Production Area.

(a) I lie GOVERNMENT tJiull become liable Tor its l\iturc IVcontmisaioning


(b) the contributions nnd any interest accumilotcd In the Decommissioning

Kcscivc I end, to the eaten, that tonliibutiun* Imvq l>ccn recovered os

Petroleum Costs, shall be paid to the GOVERNMENT; and

(c) the GOVERNMENT shall release the CONTRACTOR and the

C UNIKAITOK Entitles from any obligations rclatini to Docunmtaaioning

Operations and shall indemnify the CONTRACTOR and the

( ONI KACIOK Entitles lor any costs, liabilities, expenses, claims or

obligations associated therewith.

38.3 If the CONTRACTOR undertakes the Production Ana Decommissioning Operations,

the contributions and any interest accumulated in the Uecommisstonlag Kctcrvc Fund

dull be paid to tkc CONTRACTOR and shall be used for the lCommissioning


Opcralimv The CONTRACTOR shill uuien^e nay such Decommissioning

Operations ia accordance whh pruJenl .mermtioful petroleum indastiy practice in

similar physical and ecological environments.

IK 4 II ihe Dcccwimiv'iunim Reserve Fund is pod to the CONTRACTOR and the

Decommissioning Reserve Fund is not sufficient to coverall Decomnisskning Costs

for ihc Contract Area, tf* holme shall he paid by the CONTRACTOR and miy be

recovered, if applicable by the CONTRACTOR Entities or any of their Affiliates

from ary oiler ana which is ihe subject of ancfher Petroleum Contra^ (as defined hy

tie Kufdistn Region Oil and Gas U») anywhere ir. the Kurdisan Region and. lo the

catcni me bounce i not recoverable as aforesaid. such retraining balance shall be paid


38.5 If the Decommissioning Reserve Fond is paid to the CONTRACTOR and the

Decomnissroning Reserv e Find exceeds all I>reocnmissi«iing Costs far the Contact

Area, the balance shall be transferred to the GOVERNMENT.

38.6 Any expenditure neural by the CONTRACTOR in rdatioe with this Artiefc 38.

ircludiag any comnbutbna to the Decoomisaoning Reserve Fund, shall be deemed

Petroleum Casts aid shill be recovered by the CONTRACTOR in accordance with

the provisions of Articles I and 25.

38.7 TTic CONTRACTOR shall submit to the Management Committee for ^prosal in

accordance w ith Article 8.5 a detailed plan for dccommssiormg thr Contract Area

facilities and site restoration (the DcconmfcMioalas PUa-). sach Orcon*ni»ioning

Pan to be submitted no later than twenty four (24) Months prior to the date estimated

by the CONTRACTOR for the end of Correncrcnl Production Rum the CoMract

Area. The Macagcmenl Committee shall provide comments, if am. or. the

Decommissioning Plan within ninety (90) days after receipt. The CONTRACTOR s

completion of tlur Decommissioning Operations in accordance, in nil material

respects, with the Decommissioning Plan lor a Production Area approved by the

Management Committee shall satisfy nil of the CONTRACTOR’S obligations with

respect to ihc performance of Decommissioning Operation* for such Production Aren.

In the event the GOVERNMENT does not agree thnt Decommissioning Operations

for a Production Area were carried out m accordance with the approved

Decommissioning Plnn. it must advise the CONTRACTOR within six (61 months of

CONTRACTOR’S completion of such operations.


Assignment lo Affiliates

39.1 Fach CONTRACTOR Entity shill lie free to sell, assign, transfer or otherwise

dispose of nil or part of it* rights, obligations and interests under this Contract to an

Affiliated Company nr to another CONTRACTOR Entity with the prior consent of

the GOVERNMENT, which consent shall not he unreasonably delayed or withheld


39,2 Each CONTRACTOR Emily shall have ihc right to sell. assign. 'nimfcr oc otherwise

dispose of all or part of it* right* aid interests under this Contract to any third pony

(not hc-ny nn Affiliated Company or another CONTRACTOR Utility) with the prior

consent of GOVERNMENT, which consent shall not he unreasonably delayed or

withheld Any CONTRACTOR Entity proposing to sell, assign, transfer or otherwise

dispose of al or part of its rights and interests under this Conrad to any such third

party Out 11 request *uch consent in writing, which request shod hr arconpanied hy

reasonable evidence of the technical and financial capability of the propped third

party aaaignao.

.)*>.) In order lor any deed of sale, assignment, transfer or other disposal n« provided ureter

Articlet 39.1 or 39.2 to be effective, the hulks and the relevant third parly, if any.

dial I entei Into a binding nnJ cnforccoblc instrument of awipuneal und novation,

which shall include u undertaking hy the tramferee or assignee to fulfil the

obligation* under llilr- Contract which correspond to the interest tnuiafcncd

39.4 Ifty way of darll'iuiUon, and not In limitation of the foregoing provisions of this

Article 39, tie GOVERNMENT shall not be considered to be acting unreasonably in

withholding convent to any such assignment if the assignment to such proposed

atsigntx is deemed contrary to the GOVERNMENT'S interests, as evidenced in

writing to that effect signed by die duly authorised representative of the


39.5 In the event a CONTRACTOR Entity assigns or in any other way transfers its rights

oad interests under this Contract, including through the exercise of the Option of

Government Participation or the Option of Third Pam Participation. shelter in

whole or in part, neb assignment cr transfer shall (fc* give rise to any Tax. metaling

oa the consiticratkn paid or received or cn the mean* or gain tterefran

39.4 The GOVERNMENT may not al any time tnwsfcr any or all its rights and

obfigatons aider this Contract to my Person. including to a Public (omputy or any


39.7 "Change of Coatror (or the purpose of this Article 39.7 means any direct or indirect

Change of the identity to the Person who Controls a CONTRACTOR Entity (whether

ibmugb merger, sale of shares or of other equity rilcrviy or otherwise) through a

single transortion or series of transactions, from aoe or more transferors to one or

more transferee*. in which trie market value of scch entity's participating interest

(•huh shall he as specified in the Joint Operating Agreement relatrig to this

(nmrrnfi. nr where there is ml> nar CONTRACTOR fnlity. one Hundred (IWS)

per cert) in this Contract reyresert* mere thin seventy five per cent (75%) cf the

the Change m CoaooL For the purpose of this defintxm -ComroT meat* the direct

or ndwcl o^wrehip or coodol of the majority of eve, «f the applt-ahlr


 I Kh C ONIRACTOR Cnlit* which b or artittpacs with ■ reasonable degree of

.crtamtv that it wil be subject to a Change in Coatrol. other than to an AlTikatcd

t «>ipfta» or I CONTRACTOR I riitv. shall notify the GOVERN Ml NT as mb a*

practicable a ter it become* aware of the Change in Control or anticipated Change in

• •oiml and request th* control of GOVERNMENT. which consent shill nat he

urrcascnably delayed or withheld

A Change in Control shall not give rise to any Tax iicloding on ihe ccm idem! ion paid

ni received or on the income or gain therefrom


40 I No delay. detauk breach or otnivsicn of tie C ONTRACTOR b the execu .on of any

of ht obligation* under this Contract shill he considered a failure to perform this

C otract or be the subject of a dispute if uch debv. default. breach or omisuon ii due

to a care of force Majetre In «uch event ihe CONTRACTOR shall pnanptly notify

the GOVERNMENT n wrung and take al reasonably appropriate treasures to

perform its obligations, under ibis Contract to 'be extent pvuihle Ibe lim* revi limy

fp«m ary such delay or curtairncnt in the execution of such oMgaUxtv inrvawd by

the time necessary- to repair a»y dartag* rv-nil tig from or occurred during uwh 4el«y

or curtailment, stall be added to any time period provided under dm Contract

(including the Exploration Period and no, c.s«*n*ion thereto, any Sub INred and any

eilcnxkm thereto md any [>cvckiprrcnl Period and any extension thereto). The Italic*

shall meet as soon as possible ultci the itotiniaiioii of Fcxcc SVajeurs wid a view u>

“ting reasonable endeavour* to mitigate tor f Meets thereof

40.2 For the purpose of this Cam. "Forte Majrwrr' mears my event the b

u# foreseeable. mstmwiraaMc and nrviuibfe. nut dac to any error or umbaton by the

CONTRACTOR but due to c.rvimvtaaca bcyool its control which (reverts or

impedes cxecutior of *1 or pari oC Os obligator* under tots Cimmna. Such events

shall ircludethe following:

<•> war. whether declared or not. civil war. iwnoctoM. r ots. civil ojnwwtxwv

terrorism. aiy ottar h.rstilc ms. whether internal create

<*) strikes or ether labour conllcts;

(0 accidents or blowouts;

w quarantine restrictions ur cpidernks.

(«) any act, event, tappcalng t* UCUMIUIkc due to natural causes, in particular.

but without limitatun. flood*. st.ems. cyclooev fires, lightning, or


(0 environmental nstricum*. which the GOVEKNMKNI has not nobbed to the


(I) except in respect of the GOVERNM ENT awl/or any Public Com|wny which

may he a CONTRACTOR I ntity. any acts or order* of the



element thereof, or aay corporation owned and/cr controlled by any of the

40 \ The intention of the Parties is that Forte Muicurc shall receive the interpretation that

complies mo* with prudent international petroleum industry practice. Force Mnjeure

n fleeting a CONTRACTOR Entity or an Afflllinted Company of n CONTRACTOR

Entity shall be deemed Fcrce Mnjeure affecting the CONTRACTOR if the

Oons«qMfK« of such Force Mnjeure prevents the performance of any of the

CONTRACTOR’S obligations under this Contract


Ok GOVERNMENT an! any Puhle Company which may he a CONTRACTOR Frtlity at

any time hereby fully and irrevocably waives aay claim to immmity for itself or any >>f its

Thin waiver include* any claim to immunity from:

(a) aay expert determination, mediation, or arbitration proceedings commenced pursuant

to Arlkle 42;

(b) aay judicial administrative or proceedings » aid the expert determination,

to Article 4?: and


42 1 For the purpose of this Article 4? I ‘Mpatf’ shall mean any dispute, cortroveray or

Claim (of aay and every kind of type, whether based on contract. I«t, sutule.

regulation or otherwise) arising out of. relating lo. re connected with this Contract nr

the operation earned out under this Cortract inclading any dispute as the

contraction. existence, valkhty. irtaepretabo*. enfareeafclity hrrwh nr Wmimtinn

of this Conrad, which arises between the Patties (or between aay of* or more

cstrtK- conMtutiiw the CONTRACTOR and *• GOVERNMENT:


In the event or u Dispute, the parties to the Dispute shall use their reasonable

endeavours to negotiate promptly in good faith a mutually acceptable resolution of

such Dispute

Subject to the provisions of Article 42.2. a Party who desires to submit a Dispute for

resolution which has net been promptly resolved as aforesaid shall commence die

dispute resolution process hy providing the other parties to the Dispute written notice

of the Dispute ("Notice of Dispute-)* I he Notice of Dispute shall identify the parties

lo the Dispute, '•lull contain n brief statement of the nature of the Dispute and the

relief requested nnd shall request negotiations among Senior Representatives.

(a) In the event that any Notice of Dispute is given in accordance with this Article

12.1. the pirtics to the Dispute ‘hall first crelc settlement of the diepuv hy

negotiation between Senior Representatives. "Senior Representative" means

any individual who hn* authority «o negotiate the settlement of the Dispute for a

party to ilic Dispute, which for the GOVERNMENT sha3 mean the Minister of

Natural Reunite***. Within thirty (30) days after die date of delivery of the

Notice of Dispute, the Senior Representatives representing tbc parties to the

Dispute shall meet nl a mutually acceptable date, lime and place to exchange

relevant information in an attempt to resolve the Dispute. If a Saiior

Kcprescmaitvc Intends to be accompanied at the meeting by a legal adviser, each

oilier party shall he given written notice of such intention and its Senior

Representative may nlw he accompunicd at the meeting by a legal adviser.

|b) It live Dispute cannot be resolved by negotiation in accoahncc with Article 42.1

(u) within sixty (60) days after the date of the receipt by eadi party to toe Dispute

of the Notice of Dispute or such further period as the partes to the Dsputc may

agree in writing, nny party to the Dispute may seek seoknvait of the dispac by

mediation In accordance with the London Court of International \rbitraion

(“LCIA") Mediation Procedure, which Procedure shall be decried t> be

incorporated by reference into this Article, and toe parties to such Dispute

shall submit to such mediation prreedurc.

(c) If the Dispute is not settled within the carter of (A) sixty (60) days cf the

appointment of the mediutor. or such further period as the paries to the

Dispute mny otherwise ngree in writing under the mediation procedure under

Article 42.1 (b). and (B) one hundred and twenty (120) days after the delivery of

die Dispute Notice, nny party In thr Dispute may refer the Dispute in. and seel

final resolution by. arbitration under the LCIA Rules, which Rules shall be

deemed to bo incorporated by reformed into this Article

(i) Any arbitration shall he conducted by three (1) arbitrators

(ii) If the parties to thr Dispute are thr GOVERNMENT and all the

CONTRACTOR Entities, the GOVERNMENT and the

CONTRACTOR shall each appoint one (I) arbitrator If the parties to

the Dispute arc the GOVERNMENT und more than one. but not all

the CONTRACTOR Entitles, the GOVERNMENT shall oppoint

onc( I) arbitrator and such CONTRACTOR Entities shall appoint one

(I) arbitrator. If the parties to die Dispute arc the GOVERNMENT


and one CONTRACTOR Entity, the GOVERNMENT and such

CONTRACTOR Entity shall each appoint one (I) arbitrator.

(iii) In any event. the two arbitrator* so appointed shall, In good faillt. use

nil reasonable rrwlcavour* to nyrrr on the appointment of the third

arbitrator. who will chair the arbitral tribunal. In ease ol failure to

appoint ah irbhmtor or to agtw cn the ttppointmmt of the third

urbitnitor. Rules of the LCIA shall apply.

(vi) Arbitration shall take place in London. England The language to he

used in any prior negotiation, mediation and in the arbitration shall he

English During the arbitration procedure and until the arbitral

decision, the I‘union shall continue to perform their obligation* and take

no tetions tlint would impair th; Contract. The arbitral awurd may Ire

enfold'd by any court of competent jurisdiction, including in the

Kurdistan Region. Any award shall be expressed in Dollars.

(v) Hie Parties ugree that the arbitral award shall he final and not subject

to any uppcol, including to the Courts of England on issues of Law.

(vi) With respect to any matter referred to arbitration under Article 43.4.

the arbitral tribunal shall have the authority to amend this Contract to

restore llic economic position referred to in Ankle 43.3.

Eipert Iktcrnilnalkm

42.2 Any disagreement between die Parties relating to Articles 15.9. 27.2 and 27.9. as well

as any disagreement the Parties agree to refer to an expert, shill be submitted :o an

expert. Die Management Committee shill prepare and agree appropriate term of

rcfcrciKc relating to the disagreement to be wibmiled to the expert, in accordance

with Article 1.5 (“Terms of KcfereaceT as soon as possiMe a net the Ltleetive Date.

(a) The disagreement shill be submitted to an expert appointed by mutual

agreement of the Parties withia thirty (W) days following the date of

preparation and agreement of the I cm* ol Kelcrencc by the Management

Comnittcc If the Partes cannot igree on the choke of ihc expert within such

thirty (30) day period, at the request of either Party the expert shall be

appointed by the President yf the Energy Institute in Ixmdoa, England Any

expert appointed must have the necessary qualifications for reviewing and

dec king or. the subjee master of the diwgrcemcnt.

(b) The duties of the expert shall be stated in the Terms of Rfforesee prepared and

*gnxd by the Management Committee. The Msnagereent Committee shall

promptly ptovidc the expert with he agreed Terms of Reference relating t> the

disagreement. Each Paty shall have the rigft to give to the expert in writing

any irfnrmation which it corsiden useful, provided it doe* so withir forty-five

(45) days after tfc expert’s ippointmen Such informauon stall be provided

to the orher Party at the vane time and such other Parry shall he entitled to

provide comments on such snfonration to the first Party and the expert within

thirty (30) day* after receiving wch iaformat ion The expert dial have the


 right to review aid verify any information he deems useful lo assist him n his

review of the disagreement

(c) The expert shall render his decision within forty-five (45) days of his receipt

of the Icrms of Reference and the information referred to in Article 42.2

Subject to ihc provisions of Article 159. any decision of the expert shall he

final and shall rvii he subject lo any appeal, except in the cose of manifest

error, fraud or malpractice. Any costs anti expenses associated with the expert

determination shall bo shared equally Mwemt the Pnrties


4? \ Nn negotiation, mediation, arbitration or expert determination procedure under this

Article 42 shall exempt the Partes from fulfil ling their respective legal and/or

contractual obligation-.


Govcrnlw U*

43.1 This Contract, including an> disfiulc arising therefrom, thcmmde' or n trillion

thereto and the agreement to arbitrate in Article 42. shall be gosemec by English law

(except any rule of English law whch would refer the matter ic another jieisdictiaoX

ti-yeiher with any irlevant rules, cuilom* nnd practices ofintemiticwl taw as well as

by principles and rrail ice generally accepted In petroleum prodacmg counrics and in

43.7 The obligations of the CONTRACTOR In rasped of this Contract d»ll not he

changed by the GOVERNMENT and the general ami overall equilibrium between

the Parties under this Contract shall n-»l he alT«1ed in n substantial nod li»uin(-


43 J Tbc GOVERNMENT juarartecs to the CONTRACTOR, for the entire duration of

this Centroct. that it will maintain the stability of the legal, lived and cconxnic

conditions of this Contract, us they result frora this Contract asd as they result from

the laws and regulation* in forte on Ihc date of rignahire of this Contract. Ihc

CONTRACTOR has entered into this Contract on the hisis cf the legal, fisc*! and

economic frame work i«cvniling at the l.rrctllvc Dale. If. at any time alter the

Effective Dare, there is any change in the legal, fiscal and/or economic framework

under the Kurdistan Region Law or other I aw i|tplkahlc in or m tlie Kurdistan Region

which detrimentally alTecta Ihc CONTRACTOR, the CONTRACTOR Entities cm

any oilier Person entitled to benefits under fills Contract, the tents and conditions of

the Contract shall he tillered so at to restore Ihc CONTRACTOR, the

CONTRACTOR Entities and tiny other Person entitled to benefits under this

Contract lo Ihc some overall economic position (Inking into account home country

taxes) us that which such Person would have been in. had no such change in the legal,

fiscal und/or economic framework occurred.



 43.4 If ihc CONTRACTOR helloes thil its economic position. or the economic portion

of ■ CONTRACTOR Entity or any other Person entitled to benefits under this

Contract. ha* heea detrimentally affected as provided «*> Ankle 43J. upon the

CONTRACTOR'* written request, the tonic* dull meet to agree oa an> ncccisary

mea*ure* or rucking any appreprialr anmlmnK to the terms of fbk Contrail t> rr-

cstablishing the ctpiilihrum between the Parties and reacting the CONTRA* TOR.

the CONTRACTOR lntifi«% or wry ochar Parser entitled la benefits under this

Contract to the position (lakinf into account home country taxes) it was in prior to the

occurrence of Ihc change having tuKh detrimental effect. Should the Parties be unable

to agree on the merit of amending this Contract and/or on any amendments to he made

to 111 b Contra witliln ninety (W) days of the CONTRACTOR’* request (or such other

period as may he agreed by the I’artion), the CONTRACTOR may refer the nutter in

dispute Ui nrl’ilrutkit as provided In Article 42.1. without the necessity of firfl referring

th: mater to acgothlion and mediation

43.5 Without prejudice to the generality of the foregoing, the CONTRACTOR shall be

entitled to the benefit of any Mture changes to the petroleum legislation or any other

legislation complement mg. amending or replacing it.

43.6 The Parties agree to cooperate in al possible ways with a view to fully ackicvii* the

objectives ot this Contra. Ihc GOVERNMENT shall feci Hue the perfcrnuuKC of

the Petroleum Operations by promptly granting to *c CONTRACTOR any

necessary' authorisation, permit, licence or accevs right and making available any

existing facilities and services with a view to he I’artics obtaining maximum mutual

benefit from the Contrail.


43.7 Any amendment to this Contract shall he the subject of a fomal *ncnd»>cnC duly

approved in writing by the Parties and aibjec: to the same coaditi

tfis Qntract Notwithstanding the foregreng. the GOVERNMENT has the right and

aathoriry to waive or nudity the applictfioa of the protons of rtaCo^ract on a

43.4 Ibilaaa otWi« expressly reared rUrwVre n this Comet, so faiure re drlay of

aay Party to exetcue any rigta. power or remedy wider this Conrad-hall epera* as a

remedy preclude aay caber or future exercise thereof or the exercise of" any other right,

puwer re remedy.

4).I0 As wgratonc* to ihn Comet for aad on behalf of tf* GOVERNMENT, the M.airtry

of Natiral Resources in the Kurdiaan Region and he Regional Coancil for the Oil

aad Cl® Affairs of Ihc Kurdinan Regior Irwj hereby represent that they agree and

approve this Contra for the purpmes of the Kjrdts&n Region Oil and Gas law.



44.1 All notices, demands, instructions, waivers, consents or otltcr communications to be

provided pursuant to this Contract shall be in writing in English, shall he effective

upon receipt and shall be sent by receipted hind delivery or by email Hollowed hy

delivery by reputable international lir courier company w*h nn establishment in Hrbil

in the Kurdistnn Region) to the following nddrrssrs:



His Excellency the Minister of Natural Resources


Minisuy of Natural Resources

Kurdistan Regional Government

Hrblk Kurdistan



Attention The Directors

Address: Ilir/el Court. S Peter Fort. Guernsey. Channel l»lands.GYI 2NI.


A notice delivered by craail (followed by air courier) shall save for manifest cmr. be

deemed to have been defivered upoa its transmission by email.

44.2 The atovc address and'or designated representative of any of the Parties may be

changed on giving ten (10) days poor nrtice to the other Pam delivered pursuant to

Article 44.1.



45.1 Subject lo the provisions of Article 45.5, the GOVERNMENT shall have the right to

terminate this Contract in the event the CONTRACTOR:

(a) fails to meet a material financial obligation expressly Mated in this Contract; or

(b) during the First Sub-Period docs rot curry out drilling and seismic acquisition,

as detailed in Article 102 or. during the Second Sub-Period (or earlier), docs

not curry out drilling and seismic acquisition, as detailed in Article 10.3; or

(c) interrupts Production for a period of more than ninety (90) consecutive days vs ith

no cause or justification acceptable tn accordance with this Contract or under

prudent international petroleum industry practice, it being recognised that Force

Mnjeurr is an nccrptnhfc justification for such interruption*: nr

(d) Intentionally extracts or produces any mineral which is not covered by the object

of this Contract, unless such extraction or production is expressly authorised or

unavoidable as a result of operations carried out in accordance with prudent

international petroleum industry pncticc; or

(c) if the CONTRACTOR comprises solely ore entity, is declared in

accordance with applicable law;

(I) wilfully refuses to abide by negotiation, mediation, arbitration <* exprfl decision

under Article 42 ;or

(g) if u CONTRACTOR Entity named as a pony to the agreement contained in

Anna C fails tn meet a finonria) obligation expressly stated in that anrex

45 J The GOVERNMENT may also terminate the Cnnlnrl only in respect of one

CONTRACTOR Entity if such entity is subject to a Chaage of Control for which the

GOVERNMENT hoi nrt given its author satin* in aaxmtaoce *th Amcle N.7.

45.1 At any time prior to thr Development Period, the CONTRACTOR shal Hav the

right to term note to Contract by •urrendcring the entire Contract Area in accordance

with the provisions of Ankle 7.

•IS.I During the DevcfopnwM Period. the CONTRACTOR shall have the right to

tcrminnlc this Conroct at any time by suTcndcring *11 Production Areas. provided its

(hen Ctfrent obligations have been wiisfied in accordance with tfris Contract

45.5 If the GOVERNMENT intend, lo exercise hi right to terrains* thi» Contract

ptrsuaat to Article 45.1. it dull Tint comply wih the following provisionv

(a) The GOVERNMENT dull notify the CONTRACTOR of its intention to

termhate to Contract stotiag the rcasms for such term nation and requesting

the latter

(1) to remedy the defautu or

(n) to propo* acceptable compensation.


«h» If. within three (3) Months oiler the notice referred to in Article A5S(a\ the

CONTRACTOR has not remedied the situation complained of b) the

GOVERNMENT to its satisfaction or offered compensation acceptable to the

GOVERNMENT in each case tiding reasonably, the GOVERNMENT shall

notify the CONTACTOR in writing that the Contract shall he terminated

from the termination date detailed In such notice. Pits Contract shall terminate

on such lamination date unle8» the CONTRACTOR issues u notice of

dispute as provided under Article 42. in which case this Contract shall remain

In Ibrtc until a (Inal settlement of the dispute lias been reached in accordance

with the dispute resolution provisions of Article 42.

The foregoing precisions of this Article 45.5 arc subject to the proviso that, in case of

a dispute where there has been breach of this Contract which lui> luen submitted to

dispute resolution pursuant to Article 42, the GOVERNMENT shall not be entitled to

exercise its right tc terminate this Comma prior to a tlnal determination under Article

42 in favour of die GOVERNMENT

45.6 If the GOVERNMENT terminates this Contract pursuant to the provisions of Articles

45.1 and 43..\ the CONTRACTOR shall lose all Ks rights ur.l Interests under this

Contract. Notwithstanding the foregoing, the provisions of Articles 14.10. 16.7, JO.

31, 35.1, 35.3, 35.4, 35.7, 36, 38.2(c), 41.42. 43.1 to 43.6 and Annex C shall survive

the termination or expiry of this Contract

45.7 If □ CONTRACTOR Entity breaches Article 46.1 or 462 the GOVERNMENT or

another CONTRACTOR Entity aav terminate this Contract n re vied of the first


45.8 If the Contact is Etmirsted aider Ardoc 452 cr 45.7. the oncre-J of the relevant

CONTRACTOR Entity dull h: transferred to th: other CONTRACTOR Entities ia the

proportions in which their respective percentage irtercstt bear to the aggregate of

their respective percentage interests under the relevant joint Operating Agreement or

in such other proportions as sich CONTRACTOR Entities shall agree between hem

I or the market value thereof (as such temi is defitrd in Article 39.7L Such transfer dull

not give rise to any Tax including on the consideration paid or received nr of the

income or gain therefrom.


46.1 If this Contract is reasonably proven to have been obtained in violation of Kurdistan

Region I .aw concerning corruption, this Contract is void ah initio

46.2 Each CONTRACTOR Entity agrees that ifii is, at any time, reasonably proven to be in

breach of Kurdistan Region Law concerning comiption the provisions of Article 45.7




Tlli» Cot iU art dial hccmiK effective and be binding on the Parties up»n ibe sigraiurc of the

Contrud b» the duly auhoriied represeniaiivcs of the GOVTRNM F.N'T ord the

COMRAC TOR as provided bdow.

Entered inloin four (4)orig«u*ls *i Eftil. the Kurdistan Rcgxm on luesday 2 October. 2007


By:. By

Nee In tv mi Bar/aai Ashti llawami

Prime Minister Minister of Natural Resources

KurdiSan Regional Government Kurdistan Kegkmal Government

Cm behalf of the Regional Council On behalf of tte Ministry of Natural

for the Oil and Gas A flairs of Resources in the Kurdistan Region

the Kurdistan Region - Iraq

For end. CONTRACTOR Entity



 yj c^r*-y





1.1 Pi r pose

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

defined as such in the Aniclcs of the Contract), and prescribe the manner in

which the CONTRACTOR'S Accounts shall be prepared and approved.

1.2 HcflnitioBs

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

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

1.3 lacnasblency

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

Annex and the other provisions of the Contract, then the other provisions of

the Contract shrill prevail.

1.4 Accounting Records and Reports

1.4.1 The CONTRACTOR shall maintain the Accounts in accordance with ArtLtc

15.1 and in accordance with this Accoutring Procedure, induling in

accordance with the chars of Accounts apreed under Paragraph 1.4.2.

1.4.2 Within sixty (60) days of Effective Dale, the CONTRACTOR shill

submit k> and discuss wish the GOVERNMENT a proposed outline of darts

of Acecsmts. which ouLine shall he in accordance with generally accepted

standards and recognized accounting systems and coroi stent with noma I

pcmiletm industry practice and procedures Within ninety (00) days of

receiving the above submission, th: GOVERNMENT dull either provide

written notifeatior. of its approval of the proposal or request in writing

revisions to the pnposal Within oik hundred and eighty (180) days after die

Effective l>at*. the CONTRACTOR and the GOVERNMENT shall agree on

the outline ctf chans of Accounts which dull describe the basis of tic

accounting system and procedure? to be developed and used under this

Centred Following such agreement the CONTRACTOR shall cxpeduuxaly

prepare and provide the GOVERNMENT with tomal copies of tic

comprehensive charts of Accounts and manuals related to the accountieg.

nxunllng and reporting functions, and procedures *tncti are, and stall he,

observed under the Contract.

1.4 J Nrtwithoanding thr generality of the foregoing. the CONTRACTOR dull

make regular SuBcmctts resting to the Petroleum operations. Ihcse

Sutemeats art as shown:


(a) Production Statement (as indented in Paragraph 6).

(b) Value of Production and Pricing Statement (is indicated in Piragroph


(e) Cost Recovery and Share Account Statement (as indicated in

Paragraph «).

(di Stutcineni of Expenditures and Receipts (us inJicuicd in Paragraph *>)-

(cl final Knd-of-Ycar Statement (as indicated in Paragraph 10).

(0 Budget Statement (as indicated in Paragraph 12).

1.4.4 Al reports an) statement shall be prepared in accordance with the Contract

Kurdistan Region Law. and where there are no relevant provisions of either of

these. in accordance with prudent intcmatxmnl petroleum industry practice.

1.5 laaguage and linitsof Account

All Accounts shall be maintained and prepared in the English liinguugo ind

shill lie recorded in Dolluis. Where necessary for clarification, the

CONTRACTOR muy also maintain Accounts in other cuirencies.

1.6 A adit a ad Inspection RighU of the GOVERNMENT

In addition to the provisions of Articles 153 to 15.7 and 15.9. the following

provisions shill apply to any audit carried out in accordance with Articles I J.3

to 15.7:

1.6.1 Fer purposes of mhum. the GOVERNMENT, acting reasonably and in

accocdaacc with prudent infcraaUmal petroleum industry practice, ay

exwnine and verify, at reasonable tmc\ upon reasonable prior written notax

to the CONTRACTOR all char*.-* an) credits relating to he Prtrolcam

inventories. vouchcr\ payrolls invoices and any other documertx.

correspondence »*d record. includin' eleetroric record* rvttonaklv

considered necessary by the (GOVERNMENT to audit and verify the charges

1.6.3 W'tcrc he GOVERNMENT restores vct.fVji.un of charge* made by an

Affiliated Company of the CONTRACTOR the GOVERNMENT shall

have th; nail to obtan an null cent Ovale for such charges 'nni an

internationally recognized firm of public accountants scceptabe to both tfvc

GOVERNMENT and the CONIKAtTOK. whKh may be tic

CONTRACTOR’S daluuiry auditor


I 64 All agreed adjustments resulting from nn audit duill he promptly maifc in the

CONTRACTOR'S Accounts and any consequential adjustments to payments

due to die CONTRACTOR o« to the GOVERNMENT. us the case mny he.

shall be made promptly.

1.6.4 When issues an; outNtanding with respect to an audit, the CONTRACTOR

shall maintain tho relevant documents and permit imipectioo thereof until the

issue is resolved.

1.7 Payment*

Unless us otherwise provided in Article 24. Article 29 or other Articles of the


1.7.1 All payments between the PnrtiM shall, unleao otherwiio agreed. he in Dollars

and be made through a bank designated in writing by each receiving party: and

all •ums due under the Contract ahall be paid within thirty (.10) days following

the end of the Month in which the obligation to make such payment occurred.

1.7.2 All sums due by one party to the other uiklcr the Contract shall, for each day

such sums arc overdue, bear interest compounded monthly at UBOR plus two

percent (2%).

I.H Currency Exchange Kates

In addition to the provisions of Article 29. the following provisions shall apply

to any exchanges ofeurreoey canicd out in accordance with Article 29:

I.H.I Amounts received and Petroleum Costs incurred, shall be coaverted from

other currencies into Dollars in accordance with the CONTRACTOR s usual

accounting procedures which ahull reflect generally accepted m*.>unti»g

practices in the irlemational petroleum industry, and with reference :o

exclumgt rules obtained in accordance with Article 29

1.9 Accrual llanin, C ash Flow Basts and Reports

All IhhiKs and Accounts shall be prepared on an acciuul tests ia ace-dome

with generally accepted accounting principles used in the mtcnututul

petroleum Industry.

1.10 Values and Treatments

Values ami treatments proposed by the CONTRACTOR relating lo ull

Petroleum Cods shrill be subject to challenge by the GOVERNMENT in the

course of audit to ensure that they arc in accordance with the provisions of this

Accounting Procedure.




2.1 Segregation of Costs and Expenses

Petroleum Costs shall be segregated in accordance with the purposes for

which such Pomlcum Costs are made. lire purposes which shall qualify are:

(a) those which have been included in the approved Work Program and

Budget for the ycur in which the Costs and Expenditures are made:

(b) expenditures incurred in eases of emergency as set out in Articles 111. 35.5. 35.6 and any other Articles of the Contract:

(c) any other purposes agreed in the Articles of the Contract: and

All Petroleum Costs recoverable under Paragraph 3 relating to Petroleum

Operations shall be classified, defined and allocated as set out below.

2.2. Exploration Costs

Exploration Costs arc all direct and allocated indirect costs and expenditures

incurred In carrying out the Exploration Operations, including all direct and

allocated indirect costs and expenditures incurred in the search for 1’etrolcum

in an urea which is. or was at the time when such costs and expenses were

incurred, pun of the Contract Area ircluding:

12.1 Aerial geophysical, geochemical, pakoncologtal geological topographical

anc seismic surveys arel -Julies and their intrnvrtatim and pirchavd

geological and geophysical infermatoo

222 Stratigraphic lest hole driling and water well drilling

2.2.3 Labour, materab. applies, and services used ir. drill ng wells with the object

of rinding Petroleum or Appraisal Wells excluding any coot of the MiKrquent

conpletbn of such well* *\ prefacing wefls.

22.4 Facilities to tie extent used in aippod of the purposes described m Paragraphs

22.1. 222 and 111 including access made

2.2.5 Thu portion of all service expenditures ind that prrtion of all general aad

administrative expenditures dreed;y atuibutaNe to l-Jiploraiun Costs or

allocated thereto on a consistent and equitable basis.

2.2.6 Any other expenditures incurred in ihc seech far and appraisal of Petroleum

after the Effective Due ard not otherw ise covered under dm Paragraph 22.

9 VI64

33 Cia* Marketing Cmtn

Gas Marketing Costs ire oil direct and allocated indirect costs and

expenditures incurred in carrying out Gns Marketing Operations and Include

ihm portion of nil servlet- expenditures end that portion of nil general and

administrative expenditures directly attributable to Gas Marketing Costs or

allocated thereto on a comistenl and equitable basis.

2.4 I>rvrlii|itnent Coats

Development Costs are nil direct and allocated indirect costs and expenditures

incurred in carrying out Development Operations including all direct and

allocated indirect costs nixl expenditures incurred in:

2.4 I Drilling wells which are completed ns producing wells and drilling wells for

putposes of producing from n Petroleum reservoir, whether these wells arc dry

or producing and drilling wulli for the injoction or water or gas to enhance

recovery of Petroleum.

2.4.2 Completing wells by way of installation of casing or equipment or otherwise

ntlcr a well has been drilled for the purpose of bringing the well into use as a

producing well or as n well for the injcciitm of water or gas to enhance

recovery of Petroleum.

2.4.3 The costs of Petroleum production, transport mhJ v^agt facilities such as

pipelines, flow lines, products*! ard treatmert unit, wtllhcal equipmem.

sufciurfaec equipment. enhanced recovery systems. Petroleum storage

facilities, and access roads for production activitex.

2.4.4 F.njinccnng and design studies for the wells and facilities referred to in

I'amgiapts 2.4.1. 2.4.2 anj 2.4J.

And Including tfuii porthai or all service expenditures and that portkn of all

general «nd administrative expenditures dmxtly attrouiahc to IVcvcbpmcnt

Costs or allocated thereto on n consistent and equitable basis; aid ary otter

expenditure incurred in the Development Operations and not otherwise

covered under Paragraph 2.3.

2.3 Production Costs

Production Costs ore all direct and allocated indirect costs and expenditures

incurred in carrying oul Production Operations, including all direct ard

allocated indirect costs and expense* Incurred m I'ctrolcum Operations niter

First Productiio which are other than l-xploration Costs, Gas Marketing Costs.

Development Costs and Decommissioning CoSs. Production Costs include

that portion of all service expenditures and that portion of all general und

administrative expenditures directly attributable to Production Costs or

allocated thereto on a consistent and equitable basis.


2.fc Ihrommiwoninc Costs

Decommissioning Costs are nil direct and allocated indirect costs anil

expenditures incurred in carrying out Decommissioning Operations and

Include thnt portion of all service expenditures and that portion of all general

and administrative expenditures directly attributable to Decommissioning

Cealx or allocated thereto on n consistent «nd equitable basis, and the

Decommissioning Reserve Fund shall be determined on such basis, in advance

of incurring such costs, W provided in Article 38 and, for the purpose; of cost

recovery, the contributions to the Decommissioning Reserve Fuml shall be

recovered In accordance with Article 38.

2.7 Service Kapcadlturva

Service expenditure., Of* expenditures in support of Petroleum Operation*

including warehouses, vehicles, motorized rolling equipment aircraft, fire and

security Maliimn, work diops, water and sewerage plants, power plants,

housing, community and recreational facilities and furniture, tools and

equipment used in llicac activities. Service expenditures in any Calendar Year

shall include the costs incurred in such year to purchase and/or consltud live

said tncilltlcf us well as Hie annual costs of maintaining and operating the

same. Ml service expenditures dull be regularly allocated as specified in

Paragraphs 2,2.3. 2.J, 2.4. 2.3 and 2.0 to I'xploratlon Costs. Gas Mattering

Costs, Development Costs. Production Costs and Decommissioning Costs

re'pcclivcly and shall lie separately shown under each of these categories.

Where service expenditures ate mode in respect of dvared facilities, the basis

of allocation of costs to frtiolcum Operations shall be consistent and equitable

and shall be specified.

2.8 (Uaeral aod Administrative hipciditnrcs

General and alminsrati'c cxfcnditarcs arc:

2.8.1 Al main office, field office and general administrative cxpcixlitures in itc

Kurdistan Region inclading supervisory, axourting. procurcmenl and

ctrployee relations services.

2.8.2 Where the CONTRACTOR a an Affiliate of a group of companies whose

headquarters a Abroad (a “Foreig. CONTRACTOR"), an onaual overhead

charge dial I be made for servees rendered (excluding the direct cxpcndituies

as referred n Paragraph 3.l.2.(t)) by any Affiliate of the Foreign

CONTRACTOR outside the Kuidistaa Region to support and manage

Petroleum Operatkns under tie Cor tract, or where the CONTRACIT>K. rot

heng a foreign CONTRACTOR draw* up»« the servires of an WTilute

within the Kurdistan Region, an amual overhead charge shall be rude tor

services rendered (excluding the direct expendeure* « referred in Paragraphs

3.1.1(a) and (b)) by uich Affiliate to support and manage Petrokun

Operations uixlcr the Contract C*Parcat Company Overhead").

Parent Company Overhead w.ll be deemed to cover the actual cora (berig

sabriev wages and labuar burden, employee benefits, travel, hotel aad other

05 IM

nn*mall> rammrvaWc rucmo paid by the AffHale of a CONTRACTOR m

rrrvmna of office Mtmmoklioi and r^vninn of vrvke n»onaH>

necessary for operation and mamtainmj such staff office*) incurred lor

Mfvice* itixM bj Iho« function, of CONTRACTOR* Affiliate, such M.

but not limited to. international productioa headquarters, intenationil

exploration hca*k|iwrtcn. irva-uiry. payroll, taxation, insurance, legal,

communications, computer services, controllers. personnel, executive

administrative management, research and development, eenlrnl engineering

and process engineering which:

(a) cannot, without unreasonable effort andor expenditure or without the of confidential data proprietory to any of the

CONTRACTOR'S Affiliates, be charged under any oilier section of

this Annex: and

(b) ore properly allocable to Petroleum Operations undo die Contract. It is

understood, however, that services perfo-med by the deportments listed

above and other corporate departments which directly benefit

Petroleum Operations under the Contract shill be charged a. direct

costs in accordance with Paragraph 3.

In respeet ol the cott* ol the CONI KACTOK s Parent Company Oserhe^d.

as described above, the CONTRACTOR shall charge monthly to Petroleum

Operations an amount equal to the total of the following: lixplomtion Overhead

The CONTRACTOR shill he entitled to an annual charge hosed on a sliding

scale percentage and charged raonthy to Petroleum Operations The fasts far

applying this percentage shall be the trtoJ of iixploralian Costs and Cos

Maietkg CtBts daring each Calendar Year (exclusive of dm I xpfantran

OverheaJ) or fraction thereof less expenditures which have bee* subjected to

the two 2) per ear fee. referred to in Paragraph VI 8(b). The diditK scale

percentage shall be iic folowitg;

For the fira four oiUioc Dollars (ISJ4.C00.0W) foor per cent |4S)

For the next four nillioa Dot fan (l SS4.W0.0i0) three per cent (3%)

Over eight million Dollars (US$8,000,000) (wo per cent (2%)

The foregoing percentages may be reviewed but not more often than innually,

und uny approved appropriate nd«ustmcnt shall be iiukIc, if necessary,


2.8.22 Development. I'rodiictioriand Decommissioning Operation.' Overhead

The overhead rites applicable to Development. Production ami

Decommissioning Operations shall be agreed between the Parties in due

course and shell incorporate the following guidelines:


 (■) TV CONTRACTOR’* clur*r* musl V charged a* direct charges

whenever possible. Overhead charges exist only to etimpemale the

CONTRACTOR c Affiliates ft«r m*U which are properly allowable to

Petroleum Operations under the Contract bu which cannot, without

unreasonable cfTarl and/or nletua of confidential data proprietary to

the CONTRACTOR’* Affilale*. V charged unde* any *her xectkm

Overhead «xs*s a«e billed HKnthlv Overhead mu* V axnnxruurac

with services rendered and hised on actual cent studies but nay not

exceed on amount calculated a* a pcivcjmkc of certain

overhead and Ukbc. %*h».h du not. shall be agteed among he Pmtev

(C) The maximum | unci Huge iuio may be revised by mutual ugicement

not more often than annually. IV initial maximum percentage rales

and the types ol expenditures to which they apply shall be agreed as

won at dtc Parties possess reasonably reliable cost estimates for the

relevant Producticn Area.

(d) OverVad charges are not sublet to audit by (.OVKKNMENT

(c| Ihc CONTRACTOR shall upon request fiimlsli u the end of each

re levari Calendar Year to the GOVERNMENT a confirmatkn by its

statutory auditor that the costa actually churgcd do not

duplicate any other charges ttiul that the method used in allocating

overhead to Petroleum Operations hereunder us opposed to other

activates is reasonable anil in accordance with generally accepted

accounting practices.

(0 Ihc CONTRACTOR oust kidget for overhead charges.

2.8.3 All general and administrative cxpcndrttacs shall h: regularly allocated as

specified in Paragraphs 2.2.5. 2.3. 24. 2.J and 2.6 to txpkmica Cost*. Gas

Marketing Costs. Development Costs. PnxJuclUn Costs and Decommissioning

Cotta respectively and shall be wparalcly shown under each of the*




J.l Coals Recoverable Without Eurther Approval of the GOVERNMENT

Petroleum Costs incurred by ihc CONTRACTOR pursuant to the Contract as

classified under the headings referred to in Panigraph 2 shall he recoverable

for the purpose of Article 25 of Ihc Conlrnct (except to the extent provided in

Paragraph 4 or elsewhere in this Annex), subject to audit us provided for in

Article !5 and in Paragraph 1.6


3.1.1 Outface Right-

All direct cost necessary for the a:quistion. renewal or relinquishment of

surface rights acquired and maintained in face tx ihe purposes of the



(a) The CONTRACTOR s locJh m noted employeei fated in tv

KurdisUm Region Cons of all CONTRACTOR s locally recruited

employees who are directly engaged n the conduct of Petmlean

Operations inder ihe Contract in the Kurdistan Regiot. Such costs

shall include the cods of salaries, wages, bonuses, overtime, employee

benefits anc GOVERNMENT tenefns for emfJoyces and leves

imposed on the CONTRACTOR as an employer, transportation aad

relocaL-on costs within he Kurdistan Region cf the employee and sudi

members of the employee's family (limited t> spouse asd dependent

children) as required by law or custotrary practice in die KardisUn

Region. If >och employees arc cngagal in other activities in the

Kurdistan Region in addition to Petroleum Operations the cost of

such employees stall be apportioned on * time sheet basis according to

sound and acceptable accounting principles.

(b) Assigned Personnel: Costs of salaries aid wages ircludiag bonuses of

the CONTRACTOR'S cmpbyecs directly crgaged m the onduct ol

the Petroleum Operatkm unicr the Contract whether temporarily or

[Krmaoetuly assigned, rrespcctivc ol the location ol such employees,

it being understood that in the case of those personnel only a pert ion of

who* time is wholly dedicated to Petroleum Operatkm under the

Comma, only that probata portion of applicable salaries, wages, aid

other costs as delineated in Paragraphs 3.1.2(c), (d). (c)» (f) and (gX

dull be charged and tic basis of such pro-rata allocation shall be


(c) Ihe CONTRACTOR S co*s regarding holiday, vacation, sickness

and disability benefits and living and housing and other customary

allowances applicable to thr salaries and wages chargeable under

Paragraph 1.1 ?

(d) Fapenvs or eontrbutkm made pirsuan- lo assessments nr obligations

imposed under Law waich arc applicable In the CONTRACTOR *

cost of salaries and wages chargeable under Paragraph 1 I 7(h)

(e) The CONTRACTOR'* cost of rswhlishrd pirns for emfdoyees' groop

life imuratKc. hspilali/alion. pension, stick fore hates. savings,

bonus, and other Scncfil pUr-v of • like nature CtMtomarly granted to

the CONTRACTORS employees provided however that such costs

are in accordance with generally accepted standard-, in the inlcnalioral

petroleum iadnsby. applicable to salaries aad wages chargeable to

fVuokuiii Operations imdcr raingraph 3 I -2(b)


 (0 Actual transportation anti travel expenses of employees of

CONTRACTOR, including those mad: for travel and rckKilion of

the expatriate employees, including their families and personal effects,

assigned to the Kurdistan Region whose salaries and wages are

chargeable to Petroleum Operation* under Paragraph 3.1.2(b).

Actual transportation expenses of expatriate personnel transferred to

Petroleum Operations from their country of origin shall be charged to die

Petroleum Operations. Transportation expenses of personnel transferred fn»n

Petroleum Operations to a country other than the country or their origin shill

not be charged to the Petroleum Operations, Transportation cost is used in this

section shall mean the cost of freight and passenger service, meals, hotels,

insurance and oilier expenditure* related to vacation and transfer travel and

uilbrirwol under the CONTRACTOR** standard personnel golkfes The

CONTRACTOR shall ensure that all expenditures related to transponaiXui

costs are equitably allocated to the activities, which have benefited from ihc

personnel concerned.

(gl Reasonable personal expenses of personnel whose salaries and wages

arc chargeable to Petroleum Operations under Paragraph 3.1.2(b) and

lor winch expenses such personnel are reimbursed under the

CONTRACTOR’S slindnrd personnel policies. In the event such

expenses arc not wholly attributable to Petroleum Operations, the

Petroleum Operations dud I he charged with only the applicable portion

thereof, which dial I be determined on an equitable basis.

3.1.3 j; mfi'ASZ lion mid I Costs

The cofl of transportation of employees, equpmen, material' and vuppbes

other than as prxmlcd ia Paragraph 3.1.2(0 orccssary for the coodurt of the

Petroleum Oycratkns under the Contract along with other related costs such

as. but lot limited to. import duties cuaoms fees, unloading charges, deck

fees, and inlaid and ocean freight charges

3.1.4 Chanm for Services

(a) Third Parties

The actual costs of contract services, services of professional

consultants, utilitfes. ani other services reccssary fer the conduct of the

Petroleum Operations aider the Contract performed by thinJ parties

rther than a* Affiliate of the CONTRACTOR.

(b) AffUiaes of the CONTIACIOR

(i) Profession! aid Administrative Services F.ipeascs cos* of

professoral and aCm migrative services provided by my

AffiStfes of the CONTRACTOR for the direct benefit of

Petroleum Operations, includieg services provided by die

product io*. exploration, legal. procure inert. franciaL

insurance, acciunling and computer servers divisions other


than those covered by paragraph! 3.1 * (b) (ii), ' I .ft owl ' I 8

(b) which CONTRACTOR may use in lieu of having its own

employees Such chiryes shall reflect the cost of providing

their services. Such charge* shall not include any element of

profit and shall he no mere or lc«* favourable than simihr

charges for other operations carried «n by the

CONTRACTOR anti its AfT.liMe* 1ha chargwM.1 r» vh.ll

include all cods tnrurreC by AfTihatev incidental to the

oniptaymcat of such personnel ioe udinj, all L*b-ur aad

Associated Labour Costs and the cost of mamtamng aad

operating officei and providing all 'upport services for -toch

pcrscnnel. Costs of travel of such personnel in re'pcct of

Pciruknim Operations will be directly duugeil Tim charges for

such services shall not exceed those prevailing if pcrfnoncd by

iton-AITiliatcd third panics, taking Into account the quality and

availability of

outside the home office base of such personnel, the daily rate

shall be charged from die dale such personnel leave tin: home

office hose where they usually work up to their return thereto,

including days which ore not working days in the location

where the work is performed, excluding any holiday

entitlements derived by such personnel from their employment

at their home office base.

(H) Scientific or Technical Personnel cost of scientific or

technical personnel services provided by any Affiliate of the

CONTRACTOR fw the direct benefit of Pttrokun

Operation*. w*i* coa dull be charjed ns i enu of arrve-r

basis and 'full not indude any dement of profit The chargco*

the anpkwmcnr of nidi personnel including «E Labour »d

operating offices and providing all sapport services far su;h

personnel costs of ravel of M.h personnel n icopcci of

Petrdeum Operations will be directly charged Tlsc charges for

such services shall nu exceed thne pretdilaig If performed hy

nonaffiliaied third parties, taking into account the quality aad

availability of such services. Unless the wort to be done Sy

such persomel s covered by an approved Wirt Program aid

Budget the COVIRACIOK dull nu autfunsc woat by su:h

perscnnel wnhtut apjrovalof the V?.RNMEfCT.

’" * S£d^d faULhcd by *c CONTRACTOR-* A Hi kales, at

currently prevailing for tie simply of lice cunpment aid

facilities an comparable trims in the area where tie Pdrolcun

Opendom are bemg conduced md shall be on v armMcnsfh

basis Oa the request of the GOVERNMENT, ac


CONTRACTOR shall provide the GOVERNMENT wilh

evidence of such rales being on on arm’s length basis. (If the

GOVERNMENT considers I hit any such rale is not on an arm's

length basis then the GOVERNMENT hits the right to refer the

mutter to an expat pursuant to Article 4J ? of the ContRk-l). The

equipment and facilities referred to herein shall exclude major

investment items such as (but not limited to) drilling rigs,

producing platforms, oil trailing facilities, oil and gas loading

and transportation systems, storage and terminal facilities nod

other major facilities, rates for which shill he subject 10

sc pm ale agreement with die GOVERNMENT.

3.15 &fflUUVjitcatifg3

Com of acquiring, leasing, installing, operating, repairing and maintaining

communication systems including radio and microwave facilities within and

between die Contract Ana and die CONTRACTOR** nearest base facility.

3.1.6 Office and MfeceflqitCOt is Facilities

Ncl cost to the CONTRACTOR of establishing, maintaining and operating

any office, sub-office, warehouse, housing or other facility directly serving the

Petroleum Operations. If any such facility services more than one coiilrixt

arc* the net costs thereof shall be allocated on an equitable basis in accordance

with prudent international petroleum industry practice.

3.1.7 Illogical and Environment

(a) Costs ncurrrd in the Contract Area e» a result of legislation for

archaeological and geophysical surveys relating to identification ard

protection ol cultural sites or resources;

(b) Costs incurred in environmental or ecological surveys requ red by

regulatory aalhonjev including at environmenUl impact assessment

commissioned pursuant to Article 37.3 of the Contact and ary other

costs incurred in complying with the requremenls of Article 37.

(c) Costs to provide cr have available pollution containment and removal

(d) Costs of actnl cxotrol and cleanup of cm! spills, and of such further

responsibilities resulting therefrom as may be required by applicable

bws ard regulations;

(e) Costs of restoration of the operating cnvronrrenl ircurreJ pursuant to

aa approved scheme prepared in accordance with Ankle 38 of the


(f) Any costs incurred for the decommissioning of facilities and s*c

restoration, including my related activity required by the

GOVERNMENT or other competent authority or by the Contract; and

101 IM

(i>) Any conlrttutnas raade by the CONTRACTOR ID ike

recommissioning Reserve Find ir accordance with Artck 31. when

such contributionsare made

3.1« MgedaUhiLtiaiurmw* c<**3

Costs nf materials

goals of n similar nature used cr consumed in Petroleum Operations subject to

the following-

(n> Acquisition - the CONTRACTOR shall only supply or purchase

materials for use in Petroleum Operations that may be used in the

foraGcwbk future Ihe accumulation of surplus stocks and inventory

shull be avoided so far as is rcascnably practical and consistent with

efficient ond economical operations. Inventory levels shall, however,

take into account the time lag far replacement, emergency needs,

weather conditions affecting operations «ukI similar considerations.

(b) Coni pone uts uf coats arm’s length transaction* except ss

otherwise provided in paragraph 3.1.8(d). material purchased by the

CONTRACTOR in arm’s length transactions in tfe open market for

ate in the Petroleum Operations under the Contract shall be valued to

Include Invoice price less trade and cadi discounts (if any), licence

fees, purchase and procurement fees plus freight and forward it g

charges between point til supply and point of shipment, freight to pen

of destination. Inairuncc, taxes, customs duties, consular fees, cxciw

taxes, other items chargeable ugninsl imported materials and. where

applicable, handling aid trunsportaticn expenses frtni print of

importation to warehouse or operating vie. Where an Affiliate of the

CONTRACTOR has arranged the purchase, coordinated the

forwarding end expediting effort, its costs rrtould not exceed those

carrendy prevailing in aornul arm's kagth transactions on the open

market and in any case shall not exceed a fee equal to two per cent

(3%) of the value of th* materials added lo the end of ihr materials


(c) Accouating - sues material costs shall be charged to the account it g

records and hooks m accordance wih the Tint la. Ural Oaf*(FIFO)


(d) Material purchased fron or arid to Affi&atcs of the CONTRACTOR

or transferred front other activities of the CONTRACTOR to or frrm

Prtrokum Operations under this Contract shaB be valued and chargtd

or credited oi the prices spec mod ia Paragraph-* ). 1 Aid Hi). 3.1 K


(i) New material, including used new material moved from

invertors (Condition “A"), shall be valued at the correal

interrationil net price which shall not exceed the price

prevailing in normal arm's length trait vie ions in tlx open



(ii) I IwH matrrial (Condition* -B”. “C~ and “IT:

(A) Material which is in sound and serviceable condition

and is suitable for rc-usc without reconditioning shall he

clou)fled os Condition “B" and priced at seventy five

per cent (75%) of the current prior of new material

defined in Paragraph 3.1.1(d)(1);

(B) Materiel which cannot be classified os Condition “B"

but which alter reconditioning will be further

serviceable for itn origino) function shall he clasiilicd as

Condition and priced at not more than fill)' per cent

(50%) of the current price of new material as defined in

Paragraph 3.1 K

Ik charged to the reconditioned material provided tluit

the value of Condition “C" material plus the coM of

reconditioning do not exceed the value of Condition

"B" material;

(C) Material which cannot be classified as Condition “B" or

C ondition "C" shall be classified us Condition *1)“ and

priced at a value commensurate with its use by the

CONTRACTOR. If material is not fit for use by the

CONTRACTOR it shall be disposed of as junk.

(iii) Material involving ereclicn costs shall be charged at be

applicable condition percentage of the current knocked-down

price of new material «s defined h Paragraph 3 l.&dRi)

(iv) When the use of material is temporary and its -crvic* to the

Petroleum Operations under the Contact dies nit junify the

reduction in price os provided for in paragraph Vl.S.fdXiiXb).

such material dull be pricoJ on a basil thut wiff rcMdi m a net

charge to the accounts under the Contract consiUcnt with the

value of the service rendered.

(v) Premium prices • whenever material is not readily obtainable at

published nr 11 Wed prices because of national amergancicHt,

Strikes or oilier unusual causes ewer which the

CONTRACTOR has no control, tlu- CONTRACTOR may

charge Petroleum Operations for the required material at the

CONTRACTOR’* actual cost incurred in providing -uch

material, in making it suitable for use. and in moving it to the

Cuutiucl Area, provided undue in writing ft furnished to die

GOVERNMENT of the proposed charge prior to charging

Petroleum t >jvr«ilun% lor such material and the

GOVERNMENT shall have the right to challenge the

transaction on nulll.

(vi) Warranty of mincrtnl llirnlshcd by the CONTRACT OK - the

CONTRACTOR does not warrant the material furnished. In


ciu* of dr foci i vr material, credit 'hull not hr passed lo

Petroleum Operations until adjustment ha* been received by the

CONTRACTOR from the manufacturers of the material nr

their agents.

(vii) Adjustments arising from material inventories conducted in

accordance wilh Paragraph S.2.

(o) Equipment of ihc CONTRACTOR chnrgod at rate* not lo exceed die

average commercial rales of non-afliHated third parties for equipment,

facilities. imtnllutinn.'i and utilities for use in iho area where (lie same

arc used. On request, the CONTRACTOR shall furnish a list of rases

and die basU of application. Such rates dmll he revised when found lo

be either excessive or insufficient, but not more tluin once every six (6)


Orilling Units und other equipment lost In die hole or damaged beyond

repair may be charged at replacement cost less depreciation phis

transportation costs to deliver like equipment to the location where


(0 Use of leased or hired machinery and/or equipment in ihc Petroleum

Operations shall he charged at lull cost to the CON I KACI OK. I Ins

may include mobilisation and de-mobilisation charges, lease and hire

foes, av well as other contractual costs.

3.1.9 Rentals and fixes

All rentals of every kind and nature levied by any GOVERNMENT and ill

Taws imposed in connection with the CONTRACTOR'* assets, income or

activities under the Contract ard paid directly by the CONTRACTOR or any

CONTRACTOR Entity (save where the contrary is expressly provided in ihc

Contract) with the exception of Taxes described in Article 312) are! boms

payments made under Article 32.

If the CONTRACTOR, any CONTRACTOR Entity or my of its Affiliated

Companies is subject to income or withholdiag tax as a result of services

performed at cost for the Petrocum Operations under the ContrarL its chants

for such services may be increased by Ihc amoutf retired to cover suA taxes

(grossed up) deluding taxes on such gross up

3 1.10

Insurance premiums and costs incurred for insurance carried for ihc benefit of

Ihc Petroleum Operations provided that such insurance is customary , affords

prvdenl protection againfl risk and is at a premiam no higher «hoa that charged

on a ccmpcttivc basis by irsurartc cranparics which ore aot Affiliated

Companies of the CONTRACTOR. Except in cun of failure to insure

where insurant coverage is require*: purwant to the Contract, actual costs and

loves incurred dial be recoverable to the vxtea* not nude good by imurawc

uncss such bsses resuk solely from aa act of wilful misconduct by the


 at of property

fire, floed.

3.1.11 Expenses

AH raaxonabt* costs and wxpmmmm rr%uhi.g from the handling, mvcoigatir*.

asserting, defending, or vetting of any claim or legal «3km necessary or

expediert foe the procvrmg. perf«viin& retention and protection of IV

Contract Area, aivi in defending or prosecating lawsaits iivolvmg the

Cun tract Area or any third pari? claim oriMng oat or the P«r*>tcum Operation,

under the Contract, or sums paid in respect of legal services necessary for the

prutcutlcn of Use Joint Imcioi of the GOVERNMENT nod the

CONTRACTOR shall he recoverable. SueJt expenditures shall include

attorney's fees, court costs, arbitration costs, costs of investigation, uiui

procurement of evidence and amount* paid in serfcnvni or satisfaction of any

such litigation and claims provided micIi costs arc not covered elsewhere in the

Amex. Where legal services are rendered in such mailers by salaried or

regularly retained lawyers of tic CONTRACTOR

of the CONTRACTOR, such compensation shall be inebded instead under

Paragraph 3.1.2 or 3.1 4(b) as applicable.

3.1.12 Claims

Expenditures nuidc in the settlement or satisfaction of any loss, claim, damage,

judgement or other expense arising out of or relating to Petroleum Operations,

except ns may otherwise be covered elsewhere in the Annex.

All cose and expenses irvurred by the CONTRACTOR u the traimag ol ts

employees encased in Petroleum Opmlina under the Contract

Thz costs described in Paragraph 2J.I and the charge described in Paragraph


incurred by He


Other reas»>nablc expenditure' not covered or deal with in the freegohg

prevision* of Paragraph 3 which are necessarily incurred by the

CONTRACTOR for the proper, ccoromicil and efficient conduct of

Petroleum Operations.


3.2 Credit l oder tbe f natract

The proceeds. other than I he proceeds from the uk of Petroleum received

from Petroleum Operatkns under he Contract, including the tom listed

he low dull be credi'ed to the Account under thr Cortract Gw I hr purposes of

Article 25 of tic Co#trad:

3.2.1 The proceeds of am insurance or claim or judicial awards in coancction with

Petroleum Operation under the Contract or any assets chirpnl to the

Accounts under the Contract where such operations or assets hast been

insured nnd the premia chirped to the Account* under the Contra* t

3.3.2 I cgal costs chirped to the uccounU under Paragraph ^ I 11 and tuhs

recovered hy the CONTRACTOR

3,2.3 Revenue received from third parlies for the use of property or assets the um

of which has been charged to the Accounts under the Contract.

3.2.4 Any adjustment received by the CONTRACTOR from the

sufplicrymanalacurers cr their agcrl* in connection with a defective material

the cost of which woa previously (horned by the CONTRACTOR to the

Accounts under the ContracL

3.2.5 Rentals, refunds, including refunds of taxes paid, or other credits received hy

the CONTRACTOR which apply to any iliaigc whbh Im. been made to the

Accounts under the Contract, hut excluding any award granted to the

« om RACT OR under arbitration or cxjiert proceedings.

3J.6 COR* origmaly charged to the Account* unda the Contract for materials

suHesjuently exported from the Kirdistta Refion w traesferred to another

i2J Proceeds Bor# the sale or exchange by the CONTRACTOR of plant ur

facilities used in Petroleum Operafuns Ike ac^uisitmn ccsls of which ha*

been charged to the AoowU under tie t uttia

3.2.9 Pnxeesh derived from tie ak. exchange lease, hire, truster or disposal in

any meaner whatsoever of aay other item tf* costs of which have been

3 J Duplication of Charges «ad ( rrdit.

Nexwithtfandng any provision » the contrary m the AcxxMrtag Precedure.

there shall be no duplication of charges or credits lo the Accowts uadcr the





The following costs «nd expenditures shall no* be included in the Petroleum Costs

recoverable umlcr Article 25:

4.1. Taxes os income or profit pwd to any GOVERNMENT auCSnnty except

taws aid dutkrs that may be iocludtd in the ccsts of material and cqjipmcnt

purchased for die Petroleum Operation?;

4i Any paymcol made to the GOVERNMENT by reason of the failure of the

CONTRACTOR to fulfil its Minimum Exploration Obligations in roped of

the relevant Sab-Period trader the Contract

43. The cos* of any letter of guarantee, if any. required under the Cortract;

4.4 The bon jscs set out in Article 32 of tfve Ccnlract;

43. Costs of marketing or transportation of Petroleum beyond the Delivery Pont

(excluding Gas Mattering Costs):

4.6. Attorney's fees and other costs of proceedings in connection * th arbitral) >n

under Article 42 of the Contract or inlematknally recognised independent

expert detemunatioo as provided in 'he Contract or this Accounting


4.7 Any interests, fees, costs and expenses paid by the CONTRACTOR for loans

and any other form of financing or advances for the financiag of the Pttrolcun

Costs cracred into by the CONTRACTOR with third parties or Affiliated


4.8 Any accounting pnivision for depreciation and/or amortisahon. excluding aay

adjustments in value pui.suaiit to Partigtupli 3.1.8,

4.V DivlticuJs, repay ment of equity oi repayment of intercompany loans.

4.10 Fines and penalties im|>ox:«J aider


5.1 Record*

The CONTRACTOR shall maintain detailed records of property in use for

Petroleum Operations under the Contract in accordance with prudent

international petroleum industry practice for cxploraticn and production


5.2 Inventories

Invent ores of property in ua* in Petroleum Operations shall be taken at

reasonaNc intervals but ■ lead one* a year with respect to movable tacts aad


 once every three (3) yenrv with mpert t<* immovable assets. The

CONTRACTOR shall give the GOVERNMENT at least thirty (30) days

written notice of its intention Intake such Inventory and the GOVERNMENT

shall have the right to be represented when such Inventory is taken.

Failure of the GOVERNMENT (<• be represented at an inventory shall bind

the GOVERNMENT to ocoopl the inventory taken hy the CONTRACTOR

the CONTRACTOR shall clearly Inform GOVERNMENT about the

principles up

CONTRACTOR shall make every effort to provide to the GOVERNMENT

a full report on such inventory within thirty (30) days of the taking of the

Inventory. When an avtlgimiciil of rights under the Contract takes place the

CONTRACTOR may. nt the request of the assignee, lukc a special inventory

provided that tt»c costs of such Inventory uiv borne by the assignee.


6.1 Production Information

Wiihout prejudice to the rights and obligations of the Parties under Article 16

of die Contract, from the date of l int Production from die Contract Area the

CONTRACTOR shall submit n monthly production statement to the

GOVERNMENT showing lltc following Information separately for each

producing Development Area und in aggregate for the Contract Area;

6.1.1 The quuntity of Crude OU produced md saved.

6.1.2 The qually chiracisisic? of such Crude Oil produced and saved.

6.1.3 The quarthy of Nalual Gas produced and raved

6.1.4 Hie quality characteristics of scch Natural Gas produced and saved.

6.1.5 The quantities of Grade 00 nd Natml Gas used for the purposes of canyiig

6.1.6 The qumiiiics of Crude Oil and Nstiral Gas unavoidably loa.

6.1.7 The quoelilica of Natural Gas tiered aid vented.

6.1.1 The size of Petroleum stocks held »■ the begin*.ng of the calendar Month m


6.1.9 The size of Petroleum flocks held si be end of the calendar Month in


6.1.10 The quariitics of Natural Gms rrinjccied mm the lUffivoir.

6.1.11 In respect of the Contract Awa as a whole, the quanMiev of Petroleum

transferred at die Measurement Poirt. All quantities show, in this Statement

108 164

WU -

shall he expressed in both volumetric tcrmMBaiTcIs of oil wd cubic meters of

gas) and in weight (metric tonnes).

6.2 Submission of Production Statement

The Production Statement lor each calendar Month *10111 lie .submitted to the

GOVF.RNMPNT no Inter than ten (10) days alter die end of such calendar



7.1 Value of Productnu aud Pricing Statemeat Information

The CONTRACTOR shall for the purposes of Article 25 of the Contract,

prepare a statement providing calculations of the value of Crude Oil produced

and saved during each Ouirter

Ths “Value of ProCudkn and Priciag SuaemesT shill contain :hc fdlowiag


7.1.1 I he quantities and prices realized therefor by the CONTRACTOR in respect

of ales of Neural Gas and Crude Oil delivered to third pirties made duriag

the Quancr in question.

7.1.2 The qualities and prices realized therefor by thr CONTRACTOR in respect

of ales of Natural Gas and Crude Or delivered during the Quarter in qjesticn.

other titan to Third Parties.

7.2 Sulim iasion of Value of Production and Pricing Statement

The Value of Production and Pricing Statement for each Quarter .'hall be

submitted to the GOVERNMENT not Inter than twenty-one (21) days oiler

the end of such Quarter.



8.1 Coil Recovery Statement

The CONTRACTOR shall prepare with respect to each Quarter u Cost

Rocovcry Statement containing the following informnlion:-

8.1 I Recoverable Petroleum Costs carried forward from the previous Quarter, if


8.1.2 Recoverable Petroleum Costs for the Quarter in question.

8.1.3 ( redits under ihe Contract for the Quirlcr in question.

8.1.4 Total Recoverable Petroleum Costs lor ihe Quarter in question (Paragraph

8.1.1 plui Paragraph 8.1 X net of Paragraph 8.1 J ).


8.1 5 Quantify and xaluc of Perolctrn applied to cos recovery ourvuani to Article

25 taken by the CONTRACTOR for the Quarter in qocstkn.

8.1.6 AnxHint of recoverable Petroleum Costs to be earned forward into the next

Quarter (Paragraph *14 net of Paragraph 1.1.5)

8_2. Cumnlaiivr Production Stalratrat

The CONTRACTOR thill prepare with respect to e*:h Otnrter l Curaulalive

Production Siatrmcrl cortainirg the following hforaation

8.2.1 The cumulative production petition at the end of the Quiner preceding Ac

Quincr in queOion

8 2.2 Production of Export Petroleum for tkr Quirter h queaion

824 The cumulative pmeuetko position M the end of the Quarter in questioa.

8.2.5 The ameunt of Petroleum applied to Royalty pursuant to Article 24. cost

recovery pursuant to Article 25 and Profit Petiokun pursuant to Ancle 26

taken by the GOVERNMENT and by the CONTRACTOR, respectively,

durng the Quarter ra question

8.2.6 The forecast of production and the shore of Petroleum applied to Royaky

pursuant to Article 24. o*«l rurovrry pursuant to Article 25 aid Profit Oil

pursuant to Artide 24 due to the GOVERNMENT md lo tie

CONTRACTOR, respectively, for the next succeeding Quarter.

8.3 Preparation and Submission of Coal Recovery and Cnaralarirr

Production Statements

8.3.1 Provisional Cost Recovery and Cumulative Production Statements, containing

estimated information where necessary, shall Sc submitted by the

CONTRACTOR on the last day of each Quarter for the purposes of Article

25 or the Contract.

8.3.2 quarterly Cost Recovery nnJ Cumulative Production Statements dud I bo

submitted within thirty (30) days of the end of the Quarter in question.

8.4 Annual Statement

For the purposes of Article 25 or the Contract, an Annuul Cost recovery mid

Cumulative Production Statement shall be submitted within ninety' (90) days

of the end of each Year. The Annuul Statement shall contain the categories of

intbnnaliuii listed in Paragraphs 8.1 and 8.2 for the Year in question, scpuiatid

into the Quarters of the Year in question and showing the cumulative positions

at the end of the Year in question with respect to cumulative unrecovercd

Petroleum Costs and Cumulative Production.



0.1 TV CONTRACTOR Ov.ll prepare with -expect to each Quarter a Statement

of Expenditure an! Receipt1, under the Cofltmci Hie Statement will

dixtingui&h between Exploration ('.win. Guv Marketing CnKts, Development

Costt. Production Costs and Dccomm Unioning Costs und will identify major

llama of expenditure within mono entegoricn. The Statement will show the

lol lowing:

9.1.1 Actual expenditures and receipts for the (jourlcr in question.

9.1.2 Cumulative expenditure and receipts fee the budget Calendar Year in


9.1.3 Latent forecast cumulative expenditure* nt the Calendar Year end.

9.1.4 Variations between budget forecau and latent forecast and explanation*


9.2 The Statement of Expenditure and Receipts of each (Quarter shall he submitted

to the GOVERNMENT no l*er than thirty (30) days after the end of vueh



The CONTRACTOR will prepare a Finul F.nd-of-YcAr ^Ul.-merit The Sutement

will contain infermatiun us provided in the Production Stutcnicm. Value of ^reduction

und Pricing Slaicmcrt. Cort Recovery and Cun-ulatisc Prcducujo Suicmcnti aad

Statement of Expenditures and Receipts fat wi3 be based on actual quantities of

Pet r\ I cun i produced and expenses inverted Fhb Statement will be used to make aay

adjustment that are rexevsiry to the payments made by the CONTRACTOR under

ibe Contract. The final Lnd-eT-Yc« Staxmert of each Calendar Year •hall be

submitted to the GOVERNMENT withic ninety (90) days of the end of such

Calendar Tear.


Each such report and statement provided for ir. Paragraph 6 through 10 shall be

considered true and correct unless the GOVERNMENT >»•<> a> exception thereto

within the timeframe usd uadcr Ike process art out in Article 15 of die Contract.


III lioch oniual Work Program and Bodget to be prepared in aceordaive with

Articles II. 12 and 14 of the Contract, it respect of Kxpbraticn Costs. Gas

Maketirg Curts. Development Costs and Prodjclk* Cost* respectively w.ll

show the following:


11.12 (imula&sc cspcndtum lo the end of aid budget Caendar Year

11.13 A schedule sftowirv (he mu* unpofUnt individual rteim of Deveopment

Com (tf^Hfeabte) lor -id hulgn Y«r



13.1 For (he purpme of Artkie 313(b) of the Contract. tic net taxabk profit* of

each CONTRACTOR I ni it y from all (he Petrokun Operatioas carried cut

uifcJer this CnMwi. iKall Sr calculated in accordance «* ith Rm Paragraph


13 J Far purposes of drtemuring tke net taxabk profits cC each CONTRACTOR

13.3.1 I Ik profit and low account of *uch CONTRACTOR Entity shall be credited

with I he following.

(a) if the Royalty is paid in cash puntuitnl ti A rick 24. reu-nuci ammg

from ihc diipovtl of Royally volumes) at recordrd in such entity’ll

Accounts and detennirwd In accordance with the provisions of Artick


(b) revenue* arising liuui die dispotal of any Available Pclrokum to

wfckh such entity is entitled for recovery of its Petroleum Cosit as

rcconfcd In its Accounts end determined in accord* ice with Ik

provisions of Ailkk 23;

(c) revenues from the disposal of aay Profit Petroleum to which u*'h

entity Is entitled under Ankle 26 as Is recorded in its Accounts and

determined in acoirdarcc with the provisions of Artick 26;

(d) any oilier revenues or proceeds directly corrected to die Petroleum

Openmons incluJing those arising ftom the disposal of related

Petroleum substances, or from llw trcaimcnU tforuge and transportation

of products for third parties;

(c) any cschanjc gams realised or eRher financial Income earned by such

entity in connection widi die Petroleum Operations;



13.3-2 ihe profit and **s Mount for such CONTRACTOR Entity dudl he iebiled

win all charges ircuncl for the purposes of the Petroleum Operations

whether ncurred iruide or outride the Kwdiclas Reg on. which charges shall

incude the following:

(a) ir addilion tc the charges specifically set forth below in this Pangraph,

al other Petroleum Cotf*. bsludiag the cosU of -upplie*. pmonwl

aad manpower expenses, and the cost of service, provided to the

CONTRACTOR in connection with the Petroleum Costs

(b) if the Royalty is pud in cash pursuant to Article 24. Royalty payments

made end as reccnied in such entity's Accaints and tfctcrmmcd n

axoidtncc with the provisions of Article 24;

(e) General and administrative expenditures rented to the Pesrolcton

Operations performed under this Contract

(d) deprecation of capital expenditure in axordincc with «hc follow irg


(!) capital expenditures meurred by the CONTRACTOR for the

purposes of the Petroleum Operations shall tc depreciated on a

reducing balance basis

(it) the depreciation rales, which stall be applicable from the

Calendar Year during which sach capital cxpenilitircs are

incurred, or fnxn the Calendar Year during whfch the axxt>

corresponding to said capital expenditures are pu: into normal

service, whichever b later, for the first Calendar Year u

question and for ctKh subsequent (akrvlar Year, are «s


Nature of the capital lobe Annual 4cpreenCk« Kale


Pemanert buildings 10.O'.

Temporary buiklings 20.0V,

OfTtx and home furriture and fixture* 20.0%

Productive wclb 20.0%

Production and delivery equipment 20,0%

Drilling equipment 20.0%

Pipelines 20.0%


 Automotive equipment 20.0%

Marine and nvialinn equipment 70.0%

All other capital tissris 70.0%

(e) Exploration Costs (which for the avoidance of (lout* include appraisal

expenditures! shall he deductible on a reducing balance basts at the

rate of 20% per annum

(0 irtcrcsl and fees paid to creditors of the CONTRACTOR, for their

actual amount;

(g) losses of Assets rt?»ulting from destruction or damage, assets which are

renounced nr ahnndorved during the year, assets which are transferred

under Article 20.2, bod debts, indemnities paid to third parties as

compensation for damage:

(b) any other costs, expenses, losses or charges dircclly related to the

Petroleum Operations, including exchange losses realised in

connection with the Petroleum Operations *s well as the bonuses

provided in Article 32. ihc Exploration Rental provided in Article 6-3.

the Production Rental provided in Article 13.10. the allocation to

training, provided in Article 23.7 and the allocation to the Environment

Fund provided In Article 239. llw vo*t> qiesilkd in Articles 23.11.

38.1 aad 3*6 ard transportation and marketing com* beyond the

fhrlivciy Potat;

(i) the ainuunt of iwn-ofl

Years, which shall be earned forward for an indefinite period until fell

scttlcnvnt of said losses or termination of this Contract;

I3.3J. the net prollt cl suck CONTRACTOR Lrtity snail be equal to nc difference

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

loss acccxmt; and

(a) it this amour* is negative n stall comiittle a loss.

(b) it the amour* is positive, it shall be grossed t*> to take accoura of the

fact that such entity's corporate income tax is being sealed oa of the

(A»VFR.NMtfVTs share ot the Prolit Petroleum n accordant: with

Article 31.2. by applying the following formula in order to provide

sach ertity's net taxable profits for corporate income tax purposes

Net Taxable Net Profit^ (100-Apotkabk Rate of Corporate Ireomc

Profits Tax >


13.4 For purposes of determinini* each CON’TRACTOR Entity's linWIity to

corporate income tax for n tax year in respect of the Petroleum Operations

earned out under this Contract, the net taxable profits (if any) for such lax year

sliflll be multiplied by the applicable rate of corporate income tax, ns provided

in Article 3l.3(o).



 ki;hm:rv -ioint development agreement

Dated Tuesday 2 October. 2007













2.1 Incorporation of the Company ---------------------------------------------126

Z2 FitMi Deenkn to Proceed------------12*

2-3 Transfer cf Project Aocts------------126



3 2









4.1 Initial Shirr Capital of Canpanv . -131

4.2 Increased Share Capiat -13:

4.3 Payment of Additional Capital C(Hllributioos. ...132

4.4 liirding Requirements oftbe Company......... »•«•••***«••........ 132


5.1 Board of Direxiare............. -..............................................................135

5-2 OfTiocn.........................

5.3 management (ommittcc. ..... _______________139

6. SHAREHOLDERS'ACTIONS **••---•* «•*••••••••••». it •• •••«•• ••••••*«••(«• »••* •••••••*•••••« ....................I4U

6. 1 CkiWral MCCtflgV .nwa44H»»MM---•■---»»---»«>»*>•••• *«»♦••»#.«»»•*•••»•••••»

6.2 Shareholder Voting.......................................................................


7.1 General ------------... • «••••» ••••••• •••#** ...---143

7.2 Confltd of Interest... _______HJ

7-3 Internal Cent*........... .......,143



II Dividends...

1.2 Other pasmet

9 IN I'AULT-- ---144






10 I • *#*»••• •• •( $ •• »••••• •••«# •••••••«« • 147

10.2 Minimum Shareholding

101 ............... ........ ■ nntM»«« 147

10.4 ..................................... ........ ■!■■■«■ i> 14®

I0.J Tnnxfrrx to AffitiaOrx.......... ......................... I 4^

10.4 Right of Fin* Refusal ................................................. I 49

10.7 -----------------------------150

101 Restricts l««md ---..................15®


10.10 RexignaiHKi of Nttninee......«... ---ISI

10.11 laklal Pubtk OflfariiaB_..«J MMtHhtlMMINII •••••■••••••* ____151

10.12 --ISI

I0.IJ ___ISI








|4.| i||r fiiiiMiii ...................................................

I4J ------;»




15.1 General Liability anJ Indemnity................. »•»••••••• 1 5^

15.2 Consequential Damages......

16. FORCE MAJEURE.............................. ..137

16.1 Force Majeun: Event.......................


16.2 Burden of Proof..... -------157

>••••••••••••••• ••• ••••• ____137

16 J Excused Performance ..................

16.4 Other EicuseC -----158


17. MISCELLANEOUS.™.........

• r * • ■ ••••»»» pi.t.t...'.* .............. - - ------------------^

I \q

172 AmendncmlK ................... i i i i t i * . t i t r ' ivtiiiiiti t vtittiianinnAiintittiiii A % .

17.3 Waiver * • ••••••••••»•••••••••••••••• *• ••••••••• • "

174 I* Agreement .............................................159

I7J Scvcr»Kility .....................

17* Cmfiilcitia) Inforrralion__

17 7 Public Announcements........ .......................161

17.8 Flirt Kit \wiinncis „...................... ...... - 162

17.4 A.I *V r| I..•••*.•«

17.10 W ^ ^ m » ^^ ^^ ~ ^ ^ - W m -

No Ilird Person RinhlSt*..

17.11 Currency of Puynicni......... .................................................................................. 16?



17.13 Waiver of Immunity.......... 1

17.14 Governing law...-----------

17.15 Coni lifts...... ........

17.16 Expenses................... - 1

17.17 Successors and Assigns......

119 164


refinery to be erected in theTaq Taq / Miron are*, is entered into the second day of October.

Ml. between:


HERITAGE ENERGY MIDDLE EAST I IMI I I I), a company organised mid doing

business under the laws of Nevis, having a registered office on the date hereof ut P.0. Box

(401. Hamilton Estate. Charlestown. Nevig ('Heritage").


Capitalised tcmi.i used in this Agreement, including in the reeiulil. shall luve the meanings

set out in Clause 1.1

A. The Oil and Gas Law of the Kurdistan Region - Iriuj (Uw No.

22 of 2007) applies to petroleum operations In the Kurdistan

Region, including the refining of petroleum, and authorises the

Ministry of Natural Resources ol the Kurdistan Regional

Government to regulate refinery infrastructure and to licence

petroleum operations to third parties.

B. The Shareholders ore entering into this joint development

agreement to record their agreement on certain initial matters

relating to their collaboration on the Prujeci-

C. The Shareholders wish to incorporate a joint venture company

(Ibe Company-) in t mutually acceptable, tax efficient

jurisdiction lor the purpose of developing, constructing

financing, owning and operating the Project

D. To facilitate the development of the Project through the

Company, the Shareholders mate to enter into this Agreement

(or a separate definitive shareholders' agreement on

substantially the uiw terms as this Agrwment (the

"Shareholders' Agreement *)) to set out their respective rights

and obligations in connection with the management, operations

and funding of the Company

E. The Company will be incorporated withm thirty (30) days from

the date of Cus Agreement is entered into (the Teapuy

Incorporation Dale").

F. The Shareholders acknowledge tbat the implementation and

operation of the Project will require compliance wth the

principle* and mer human* «ct out in this Agreement I be

Shareholders agree to cause the Company to participate in the

Project on the terms and condition- consistent wrth the

provisions of this Agreement and the Project Documents to

wtech it is, or will be. a party.


 NOW | lIPKt.FOKI. In um*u]ctalk>n of the ftregoing. and fof other good and valuable

Mttsafcntton. foe receipt and wfficicacy of which are ackrowledgcd by each Shareholder,

the Shareholders agree as follow*


l.l DtHMfitm

Unless the context of thi s Agrecmni uhcrwiw require?:

Acreptaace Notice- has foe meaning given to lhai tern in Clause 10 Afh).

'A filial*’ means in rclatkn to any Penon. any r«her N-rxnr that, directly or indirectly. IS in

control ol is controlled b>. or b under common control wife, such Person. For purposes of

more that 50 per cent of the recurkia hiving ortfirary mcing power for the dcctxn of

directors of such Pen*at or(b) Jnvt w iau» the direction of the reanayroeir and policies of

such Person wtoher by contract or otherwise

APiliaie Trmasfrr' has the meaning given to dut terra m Cause 10 5.

"AppolaMag Authority " has the mewing given Id that term in Clause 132(c).

of the Company as the

amended fnim umc to I

business |>aj” means any day (other than a Saturday, Sunday or public holiday), upon

which baiks arc permitted to be open for businevi in the Region and New York.

"Capital Expenditures* mcam expenditures incurred or to be iacurred by the ( anpaiy to

uapiirc or construct llxcd assets, plum and c»p.i|M.cni

replacements, but excluding repairs) competed ir accordance with IAS

'Capital F.ipendifarr* Badge;' marts the mruaJ bulge! for Capital I xpcaditum for each

yea foiling on or attar the Comnereal Operate «> Itam to be prepared by th* Oiid Financial

Officer and approved by the Shareholders

TaaamW Operat»a Dale* means, with respect to (he Faciity. foe dare on which such

the purpnes cf. and in accordance with, fob Ag-cemtm

"Construction Plume'* means the |x-iiod from the Final Decision in Proceed Date until thr

Cemmereial Operation I talc


"Conduction Phase lludgct" means the budget itemizing all carte w*l expenses (including

Capital Expenditures) anticipated to be incurred by the Corrpony in connection with activities

•chcdulcd » occur during die ConsUuctiun Mum: and indiuitiiig the item or type of

expenditures, the purpose thereof aal the timing of such expenditures, as agreed by the

Shareholders and as such budget may be modified from time to time by resolution ol the

Shareholders in accordance with Clause 6.2B>Xv),

'funtlruction Phase Finineine Plan" menas die plan for the sources and amounts of

financing for tbo costs und expenses referred to in the Construction Plane Budget, including a

timctnblo for the um>« of fund#, ns such financing plan may he iivxlifirtl from time to time by

resolution of the Shareholders in accordance with Clause 6.2(hXv).

'Continuing Shareholders" has the meaning given to dial term in Clouse 10.4(a).

’Defaulting Shareholder" means a Shareholder who defaults in its obligations and fails to

remedy suefi default, as more particularly described in Clou* 9.1.

Development lludgct” means the budget for costs and expenses of developing the Piojcxi

during the Development Phase as such budget may he modified from time to time by

resolution of the Shareholders in accordance with Clouse 6.2(bXv).

Development Cost*' means costs and expenses within the Development Budge

’Development Period Fimmeiag Plan” means the plan far th: financing of fac ex sis aad

expenses referred lo m the Develop™ enJ Budget by the SharrK>lderv including a timetable

far the use of funds, a> such financing plan may be nudified from time to fane by. resoluti on

of die Shareholders in accordance with Claw 62(bX*g

' l>rt clupnu-tii Phase* means lie penud fiwoi lie dau of cxccrtion of ihb Agreement until

the Final IXxision lo Proceed Dote.

Dispute” has the meaning given to that term in Clause 13.1.

'Facility" means the commcrciul oil refinery to he developed in the Taq Taq / Miran area in

the Region

'Fair Martel Value* of any Shares on any particular date means the fair rmriet value ol

n»ch Shares at the date of a proposed transfer pursuant to Clause 10 as determined b> m

^dependent thirl party appraiser with the requisite experience and qualifications in dccidng

such matters as selected by the Offering Shareholder (wh.w free, costs and expenses in

connection with such determination shall be paid by the Offering Shareholder).

’Final Decision to Proceed Dale" means the date «i which each of the conditions set out

below (as the same may he modified or supplemented from time to time by resolution of die

Shareholders in accordance with Clouse 6.2(b)) has been satisfied:

(a) the due incorporation of the Company in accordance with this Agreement;

(b) agreement by the Parties on the Development Budget . the Development

Period Financing Plan, the Construction Phase Budget and the Construction

Phase Finarring Plan:


(C) ibc issuance by ihc Guvcmmcni of a report on the basic design and

engineering work* (incorporating the form of (he call for lender to be

submittal in raped ol (he design and construction o! the facility id

prospective con motion and providing • price estimate for (he capital cost of

the Facility);

(d) a feasibility stud) has been carried out by Heritage or. ui its option, an

indepereteni third party which corfinm (hut the costs of commissioning and

implementing the Project and achieve tic Commercial Operation Ihitc will not

exceed U.S.$ MO million;

(C) u full scoping Mudy bus been uiukilakcn by independent consultants

incorporating details of the guaranteed feedstock, operations, off-take

agreements und tinancinl viability ol the facility; and

(0 purchase arrangements lor oil and gas to be processed at the facility arc n

place and in full force and efleet

"Kinaace Committee' has the mean in/ given to that term in Clause 5 J(aXii).

"Fore* Majrare Event" ha* the meaning given In that term in Clause 16.1.

"UNP Implicit Price Deflator" meant ihc (iron National Product Implicit l*rice Defmtor as

published from time to lime in Ihc United Slates Department of Commerce lluicau of

Economic Analysis publication entitled "Survey of Current Buvneos"; provided lhal if such

(irosa National Product Implicit Price Deflator a* published front time to time is unavailable,

the OKI* Implicit Price Deflator shall mean on index, in substance simiar thereto. selected by

*«l----1- I t---

UbC MumlUKlCn.


agency, authority, board, bircau.

of the Ki

"IAS" means the intcmahoaal accounting standards u issued arvl updated from lima U> line

by the International Accounting Standards Committee.

Inflated' mean*, as of any date, with respect to any amount of U.S. Dollars (which omouit

'hall, for the purposes of this definition. be deemed to be expressed In Jaiuary I. 20t7 VS.

Dollars). such amount ad)listed » reflect changes in the GNP Implicit Pnee Urflaior from

January I. 2007 to such date


"Law" 11 teams llie name of llic applicable legislation which governs iIk> Company’s

incorporation, us amended from time to time or any statutory rc-cnoctincnt thereof, and

where \cr the context requires, any statutory rules framed thereunder.

"Management C ommittee' has the meaning given to that term in ( louse 5J(a)(il.

"Nominee- means any Person nominated to be a member of the Board ol Directors of th:

Company in accordance with Clause 5.1.

'Offer' has the n-enning given to that term in Clouse I0.6(bi

“Offering Shareholder' tww the meanng given to that term iaCbuae 10.4(a).

“Operating Bndcrt“ mean* the inniui operating budget to he psrpaml foe each year falling

on or alter he Commercial Operation Date by the Chief Knanc al Officer and approved by

the Shareholders.

Tanks- shall mean collectively all die Parties from lime to lime party to this Agrccmcat

aad "Party- shall meat any such party

•Pmdactioi Shariog Agreement" cr PSA" mean* a definitive agreement excelled on

around live date of this Agreement by Heritage and the Oovemment which governs Or

production Uuuing arrangement between the Patties n respect of their involvement in the

Project, and to which this Agreement constitutes .Annex C.

'Project- means the development, construction, ownership, testing, ttwimssoain*.

operation, maintenance and financing (including any refinancing) of the facility and of dl

ancillary equipment or facilities related thereto.

"Project Avvefa" mcaas all rights and benefits uidcr any licenses, permits or any available

Project Document all of which arc to be legally tramfcrml lo die Company in accordance

with this Agreement.

"Project Documents" means, collectively, all material contracts and agreements relating to

the Project lo which the Company may be. cr becomes, a purty.

"Proposed Transferee Croup" has the meaning given to Out term in Clause 10.4(a).

"Region” means (he Federal Region of Kurdistan recognised by the Constitution of Iraq und

having ihr same moaning as ‘Region* in the Kurdistan Region Oil and Gas Law.

“Share" means any vesing »h-rv of the Company, including, as the cement may require, ary

voting share of the Company not yet issued.

“Shareholder Laan” meant any financial acconmodalion made available by a Shareholder

to the Company on such tonus and coadiuons (including in relation to interest rate,

repayment schedule and security) at the time such financial jcconmodation is to be provided.



'Shareholder*' Agreement" has ihc meaning asrnbeti to H in Recital C io tus Agx««aeiii

“Shareholding Interest” means, in respect of any Person Irom lime lo time, the proportion

that the number of thut Person's Shares bears to the number of all issued Shores, as adjusted

in accordance with this Agreement from time to time Initially, the Shareholding Interest of

inch Shareholder shall he as follows:

Sharrholder Initial liUercit after fall coat

rrecvtry and financing


Ihe Government 50V. 51%

Heritage 50% d9%

~1 rchnie.l ComaitH#*- hat ihr meaning given to that Irrm in Clause S.KaKiii).

TnUMfem' has the meaning given lo I ha I term in Cl»u*r 10 (\

D.S. Dollars”, "5” and "U.S.S" moans the lawful currency of the United Xuum of America

1.2 IsmimiAiHW

Unless the context of this Agreement icquitcs.

<•> words of any gender include each odw gonto.

(b) words asing the angular or plural nurrher aiw iaclude the pturri u* Miigulu

number, respectively:


references tc a "Perso#" include a reference to any

patnenhip. joint .omre. trust, aay other le$al Person and any Govcrancnul

ary rcurcivc lo any Person in any capacity indole* a rrfermcr lo it*

permitted successors aid assigns in arch capacty aad. ir the case of aay

GorctnncoUl Ajhonty, any Pence wccccmg lo its Aasctioaa aad


tit terms "bereor. 'herein’, ‘hfretoy’. 'hereto' and similar words refer lo

this entire Agreement and not any particular Clause of oilier suMIVlMons of

this Agreement;

(f) references to 'Clause0 arc to such subdivisions contained in this Agreement;

(g> the words 'include" and "including' shall be deemed to he followed by

“without limitation' or 'but not limited to' whether or not they are followed

b; such phrases or words of like import;


(h> references U. any statue or s*«t*or> provision shall he comtrurd as a

reference lo the same as it nay lave been, or may frun tine to time be,

amended. modified or re-enacted:

(i) rrfrtrtvr* to any agreement « Acumen (mcudini this \grwmcnt shall be

comtnrd at a reference to such agrccmcat or document as amended, modified

or .upfd.-mcaicd arsd in cITecl from time to time and dull include a reference

lo any document which amende modifies or supplements it. or it entered iMo.

made or given punuart to or in accordance wifi its terms;

(j) "ihU Agreement" and words or similar import shall mean this Agreement:

(k) tin* haullngs contained in thin Agreement an: inserted for convenience of

reference only and shall not affect the interpretation of this Agreement;

(l) references to "days’ shall refer to calendar days unless Husstess l>ays ore

•pacifiad; reference* to "wrek.". 'mnaths" or "years’ shall he lo calendar

weeks, months or years respectively; and

(m) all accounting terms used but net expressly defined herein shall have the

meaning* mpactively given lo them under IAS.



2.1 iNconroKxtwN or Dir. Company

Within thirty (JO) days fiom the dale of #ic signing of this Agreement. Heritage, in

coasuliatkm with the (k»cmnvm. will incorporate the Company under the Ians of a

jursdktoo to be idenufed by the Partin as being tie oftimun chocc anethc by

The Company will be finned with corporate >hjcc«vrx appropriate for the further

operation and development of tic Project. I he Company shall be incerponued with a

capital suusttav and in a manner ©oa>i*eal with this Agreement which will optimise

tax benefits mad muimisr advene tax consequences to the Company and the Paries

As at the C ompany liwomoratun Dale ami subjoel toC'lau* 4. esc Parties will be the

2J FliAiDMnwvioPittitD

l^h of the Panic* shat use its best cnJcascun lr satisfy endt of the conditions

wlich Is Ms uMigaUxi lo Juchargc compramg the defmiticn «>f the “Fmal Decision to

Proceed Date" with the mention that the final Decision to Proceed Date shall be no

more than one huntfred aad fifty <154) days Dura the date of this hpeement

2J I kaiwd.ii tar I’mi >.t « i Assets

Within teven (7) day* fism the Final Devaion to Proceed Dale, die Government dial!

compkte the legal transfer of the Pri ject Asset* lo the Company




Follmint execution of this Agreement aid fa the term hereof the Part** Ml

conply. and * all times act consiscntly with. the lenm and pnntolom of Bu>

Agreemcat and ihc Shareh.ldcn shall act to cans: the Company to comply. «d ai all

limes ad comment>> with. the tenra and provision- ol Uis Agreement Withjut

iimeing ihc fentont each **areholder shall sole and lake all after necessary

actum to ensure dm the By-Laws do no* con Ok* witj ihc pnmaons ol ton

AgrrrtnrM and that the provnkms af this Apeement arc complied with by aach

Shareholder and ihc v ompmy.


(a) The business of (he Company shall be to implement ihc Pn>,cct. incbding by

hi entry into nml performance of. all Project Documents. Ihc Company shall

(subsequent to the transfer of such assets lo Ihc Company) have all nghl. title

and interest in the Pmjerl Assets and the Facility.

(b) The Cenpany shall (if irquinrd) erter into, anj perfcwm as obligations under,

any financing documents, as borrower fa the purposes of the Project

(c) Ihc Company nuy generally engage in any activity unil cndeuvair in the

pursuit and in cnnhwinHy with the objectives, activities and purposes

mentioned i« the two preceding pamgraphs anJ to condiKt its actisites fa its

own account or in cof^unctioa with other Persons, all m sach manner and form

at may be required in accordance with th: By-Laws.

33 M»s*umsrorCoMron


Th: Company ard operated in with setmd

shall hr managed and u

•f the Preset mall be

^A*lS OandlSrS ttoSrss probity and

business ethics, and die Tactics shall lake all reasonable action within rhea power that

is necessary or desirable lo ensure ctenpliance with this C lause 3.3(b) Each Tarty

stall detenu, mdornlfy Hid held the olho Partes hamtlaae for *> breach by rt of the


 (c) Business Principles Policy

ITk Confwny shall establish a business principles policy which shall lake ialo

account the business prim ates observed by the Shareholders and icikvi ihc icmu «hI

conditions of this Agreement.


Immediately upon ih: exccutum of th* Agreement, or as sewn as reaaoaabty practaal

thereafter. ihc Parties shall lake the follow tag actions.

(a) Apply for each Governmental Authorisation required or dcababk to enable ihc

transfer of the Project Assets l> the Company.

(b) Each Party shall obtain all corporate approvals and Governmental

Authorisation required •* desirable lor entering into and performing this


(c) Each Party shall apply for and obtain an; requred approvals f« such Party to

make the investments ufdcr this Agreement.

(d) Each Party shall notify the other lliat it hus otxaliKd die required approval*

slated in thisCtausc 3.4

3.4 Ac rorvriNC Mattus and financing Plan

la) Accounting Policy

(i) The mounts fir the Ctaw *al' * P^mcC m axordancc with

IAS and. to the cttcri retired by appticaHc taw. the jurisficrio* of

incorporat on of the Compaiy (if appl cable u in each ease consistently

applied and auJited by a lirm ol registered public atcuutuim of

internal ioral rcpile appointed by the Shareholder*

fii) All hooks and moats of tie Cempary shaJ be kept ■ fcnghsh ard in

U.S. Dollars

(iii) At any lime, any Sliaicholder may require by giving reasonable written

notice an audit of the Company's accounts by (haI Shareholder's

audkors. which audit dull be carried out M the cost of such


The financial year of the Conpany shall commence on January I of each ycai and

shall enJ on the foBowir^ December 31.

(c) Rudgcts/Fiiumcing Plan

(i) As soon as reasonably practicable following 4tc cuxutkm of this

Agreement, the Parlies shall agree the fkvelopmcnt Budget the



Development Period Financing Plan, the Construction Phase Budget

jnd lhe ConitrucUm Phase I inane mg Plan.

(ii) The Shareholders shall caus: the thief Financial Officer u> prepare

and submit to the Shareholders for approval not later than 60 days

before the Commercial Operation Date: (i) an annual Capital

fxperaJitures Budget: and (ii) an annual Operating Budget, vvhich

annua.1 Operating Budget shall include tfce fiolbwing:

(A) an estimate of the working capital requirements of the


(II) an estimate of rroposed maintenance expenditure Including the

item or type of expenditure, the necessity therefore araJ the tine

of sach openddure:

(O an estimate of proposed expenses of operating the. including

the item or type of expenditure, the purpose thereof and the

liming of such expenditure;

(D) a projected deoiled profit and less account:

(F) a review of the projected business: and

(F) a summary of business objectives


(»> Rich Party (through its appointed representative) shall at all reasonable times

during normal business hours at the place where the relevant books and

records are IcpC have nghts of aacv> la all books and records relared to the

Compaiy and the Project la addition. cnch Party diall have the nghtto reek

put) iavolved in tfsat aipect (including third party contractors and suppliers).

(b) With.*»t prejudicing the generality of the preccdng paragraph, the

(>) cnxure thre iSr Bored cf Directors provides all budgeting and

accounting in format kn that a Shareholder may reasonably request;

(ii) cause the Chief I mancial OfTree* to ensure tie pmmpt preparation and

prowkm of the following nfonaation to the Board of Directors and to

(A) uiuudital quretcrly and audited annual financial stafcmcnts of

the Company :


 (C) a report of any iwlual it anticipated Begragate expenditure*. h)

the Company during u period that exceed the aggregate budget

expenditure-; for such periods by S % in the nugrepite or more

than 10% for any particular item;

(D) any ariicipaicd deviation*. fn>m the estimate* set forth in the

Development Budget, die Construction Phase Budget or any

annual Operating Budget or Capital Fxpenditures Budget of the

amounts and liming of fundi, tluil will be required with respect

to the agreed expenditures; and

(E) copies of all documentation provided to any lenders to the


(iir> cause die general manager to cn.-ure the prompt preparation and

provision to the Board of Directors and to each Shareholder copies of

all reports or oilier material information (both in Fngliah) provided to

the Company;

(iv) cause the project manager to ensure the prompt preparation and

provision of tbc following information to die Board of Directors and to

each SharcholiJcr.

(A) quarterly and annual construction and operating reports of the


(B) a report of any unexpected occurrence which will, or is likely

to, materially affect the construction or eperaton of the Project


(Q copies of all reputs or ocher material laforuuikun provided lo

cr by ck Ccmvtniction Contractor or any other major contractor

retained for the pcrposcs of the Project.

(c) I he Parties shall cause the t unjuny to jse ns reasonabc endeavours tc

ensue tha all material agreements with third party contractors aad suppliers

in rclatior to the Ciwnpany or the Pioiecl contain iniormaaon rghts which

mirror the provisions of Clause 16(a).


The Company shall obtain ard ma main insurance o cover its assets and labilites for

toe benefit of itself arvl of toe MarehoMers al competitive rates at all tanes during

constructior and operational phases in accordance with appicablc laws. rules and

reguhtkms and with good interratioful oil and gas isdustry practice fix Mmilar

facilities ard acivrfics provided suet insurance is available in the marirt on

Such rauranccs shall be of the type ard for amotnts in line with the Shareholders

requirements to tbc extent they arc available on the commercial market oe reasonable




All inuirantc shall he sibscrbed:

ia) in accordance with th: Region's laws. rules and regulaton*:

ib» with rcpuablc nsurcr* and reinsurers havitg a Truncal Mrcn«th satisfactory

in al respects to the Shareholders; and

|cl in U.S.S. mless the Shareholders otherwise Jclemine.


(a) The Company shall employ- such number cf individuals, having *tc requisite

experience and skills, a% 'lull be necessary for the purposes of the ProjecL

lb) The Shaft holders shill be entitled to second to the Company a number of

senior managenent pcrxomel ia proportioo to their respective Shareholding

Interests IHe Sharehnldcn shall second personnel from its own organsatioe

to tie Company on the Company’s written request to provide suck personnel

If Ihr Company determines hy resoltfion of die Shareholders in accordance

w ith Clause 63(b) that any pcn.mncl so seconded is not sukable for the type

of work lo he perforrwd. r may rrquoe I hr relevant Sharrh<>ldcr to withdraw

and replace such peronncl or to take such «ttps as the Board of Directors may

decn neevuary The detailed temw and coral it inr« for vcondmmt of

personnel shall be agreed between the Company otd ereh of the Slarehtldcrs

34 Promotion or me Proji c i

(a) Each Party shall use its reasonable endeavours to develop, implement and

maintain die Project m accordance with good and prudent international oil and

gas industry practice

(b) Each Party shill tale reasonable measures to procure tlut the Coopany.

without undue delay, enters into the Project Document on termc acceptable to

the Company.

ic) Each Party shall famish technical assistance to he Compuiy

Company's request oad the Party’s agreement to provide such assstoncc- The

Partes shill caase the Company to request aechnial assistant frtm the Party

whkh in the Ccnipony’s opinion has the bess niitiblc resources fc* the ask in

question. The detailed terns and condition, for tcchncal atsistaacc shall be

agreed between the Company and each of tie Parties.


4.1 ImiialSH-UU. Capital at-CoMrany

The *karc capital of tb* Company shall initially be the minimun required by lh= law*

of the juris!ictkn of incorporation of the Compmy. Each Share will entitle the

bolder thereof to one »ute each in each noler incscntcd to ire St or tinklers of the

Company, ind each Siiare will catitle each Shareholder to siare equally wrtk each

other in the profits of the Company. The Inkling of Sure' dull be evidenced by


 share cerUfcalca of the Cooipaiy. Each Shareholder *h»l be allotud one-half of ihe

issued Shares.

4.2 Increased Shirk Capital

Phe share capital of the Company shall be increased to tie equivalent in the currency

of the jurisdiction of incorporaaon of the Company af U S S 40 million lhc entire*

of the aforesaid share captal shall be subscribed for by Hen tape but each Shareholder

shall be llloaed oac-hrf of the nrtditnnal issued Shares. The amxmt of the

contribute shill always b* such that »len thr convrrwon h.-twem II S Dollars and

the cvuracy of the janadciion of ircoeperaboo of the C .mpoey is nade. the number

of Share* to be issued to each Shareholder will be a whole number


Following the date of the increase in the Companys share capital (as set out in Clause

4 2 above), the further costs of the Project to a:h»cvr the Commercial Operation Dare

shall be met as follows:

(a) by Heritage in tie form of a Sharchr Idcr Loan, paid in iratalmfnts ap

to II S Sion million *> cower the ongoing Project costs: and

(5) thereafter, by each Shareholder prt> n*a to their SharehoUing inters

and is the form of a Shareholder Lorn by such means as mall be fixed

by lhc unanimous approval of lhc Board of Directors and the



(a) Funding PoR-Coremorcial Operation Date

I he Shareholders ajrec hnt the cods associated with the Project subsequent to the

Commercial Operation Dale shall he met with the profits earned by the Company

renulling from iu involvement in lhc Project, to ihe extent that such profits shall he

available for the lawful use of the Company.

(b) Bank Accounts and Procedures

As soon as practicable alter the Company Incorporation Date. Ihc Shareholders shall

ensure llial die ('oiii|>uii) establishes the procedures, bank accounts (which shall be

located in a jurisdiction to he agreed upon by the Shareholders) md other facilities

necessary for it to receive the funding for the Company in connection with the Project

and disburse funds far Ihe purposes of the Project.


 tc) Noo-Pa>r*cni of the Fundis* Rcquircncm far the Company

Where a shareholder d*» not pay any of the Company'* funding requirements by the

due date therefor in accordance with any funding make received in the manner

.IrwriYd ia Chare 4.4(e). such Shareholder shal be in defiult and subject to the

pntvittons of Clause 9.

id) Shareholder Ixwns

Other than as provided far in tois Clause 4. the Company dull na mew any

^fuuTa accordance wkh Clamc 62(b) that the Conpany s fandm^wnment.

n eorarrtinn wrh the Project are lo hr met by sad. leans. All *fcarctuldrr Loam

dull be made or an uteres free basis and “hall Fe pursuant to a Shareholder Loaa

•grrvatenl and »iaM tgrerd to in wiling by the Crenpary and

approved before execution thereof by all of d* Sharehokerx.

I l»c Shareholders shall cause the Chief financial Officer to give cadi Shareholder not

Imu. than 60 Business Days notice prior to the date on which any funds are required hy

the Company, and any such notice shall specify:

•baolvto discretion as to how to meet such funding obligation*; ami (ii) the dale upon

which such funding obligations are due to be |uid by the relevant Shareholder.

|0 lhiid P*ry Financing

In relation to third party financing for the Project, ai and when required, tbc Company

dull .sc its best arrange fee bad ponibla fmoming pan for the Projea

mdnukinp sbnl be pwidaM^ each SharehoWer on a pv rum and ocveml bub.

Any Shareholder can directh or though an Affifiae provide toird jarty fiiuncng far

.he PtDfcct prtn tied the peovttkn of such financing itoc. rw jcxpanlbc mboa

terms and condibons ao lest favourable lo toe Compary dun any other third party


(g) Noo-Kecourxc Obligations

the rartcj shall uve mwmNc endeavours us ensure iluu all Project (X*. uncut*

under which the Company shall incur aay inJcbtcJncw for borrowed money

.including Shareholder Loaas) or the drlcrrol purchase price of pepert) (other tfu»

trade payaNcs ard uMgatkiH for the deferred purchase price of property incirrcd ia

the ordinary course of msmess) shall specdkally that such obligation shall be

recotrac orfy lo the assets cf the Company, as the care requires, and non-raxursc at

extent pcmiticd yy the applcabtehw. toe SharehoUm and tbc.r rmpectire AIT. lures

shall have ao pcnooal Habilky for the obligations and of thr Company,

including arty indebtedness of tte Can par- for bnrrrwcd money or toe deferred

purchase price of property. is Skarrhclder

135 164


(i) no:d provide uny financial accommodation to the Company oilier than

as provided in this Agreement; or

(ii) dull he required to |uumntoe, or provide uny other loon ol'

undertaking in <»ip|xirt of. the obligations of the Company from lime to


S’othiag in *is Agreement b intewted. oof stall rt be coasmicd. to amit the aMity of

*ny Shareholder to finance its jiirtkipolion in the Cenipam in any manner such

Shareholder sees fit (subject to the resrictkns on assigning its Stares cuntaricd ia

*is Agreenent ind tattler ippliaihlr iaw). provtied that such fisanriag dull nrt

•equire the provision of security or undertakings by. or rtcoine to the Company ct

(he other St*reh<4der»

to Issuance of Shares

(0 lowing die IVvelopment Phase, no Shares shall he isoied other ttwn at

provided by Clause 4.1.

(ii) Shares shall not be issued other than in accordance win dm

A jrremml and ihe By-Lawc


Board of DnarroRs

(a) Composifcon ard Flection »f Boird of Directors

With cfTcci from the Company Incorporation Dare, th: Boird of Directors of the

Company dial I consist of four members, such members are to he elected *r upturned.

Hie initial Board of Dirrrhrs shall comprise two individuals nominated by Heritage

and two individuals nominnted by the ( kvemment.

|h) Management by Board of Directors

Subject to Clauses 5.2 and 5.3. the management of the Company shall, in accordance

with ihe By-Law*. l\c vested In the Board of Directors, except foe the rights of

Shareholders exclusively reserved to Shareholders as expressly set out in this

Agreement and the Law. To the extent that mxy twines* (me lading hut mt limited to

Jee irons, jropc**iv appointment! and jetioes) is to be transarted h conacctkm with

(he Project by th* Board of Director* in advarce of the Company lr«orp.ratior Date,

such business shall be transacted by be Management Committee (os described ta

Clause 5.3) to be agreed by the Sharettokkr? in good frith, aid any reference to the

•Board of Directors" ia this Agreement in such a context shall be deemed to mean the

Management Cnominee.


5.! OtTKUK

la) Charman

(i) Th: first chairman of ihe Board of Directors shall be nomiiated by the

Gcvemncnt. and thereafter the afpomenent of the chairman shat

rotate between the Shareholders cn every anniversary of the daw


(ii) The duties of the chairman shalL with si the guidriines and limits

established b> the Board of Dhectorv incLide:

(A) ree-'idns o'er rrcctmzs of the 3oard of Directors acd the

general meeting of the Shareholder.:

(B) calling meetings of th: Board of Directors as ard when he

deems it neerssary: and

(O nakin* vudi public aanoureremeats. * ma> be required tn

replicable liw. on behalf of nc Canpany.

lb) General Manager

(i) Heritage shall have vole discretion to appoint a general mirager to be

the principal administrative nntl executive officer of the Crrapmy. The

general manager shall report in English to the Board of Directors oo a

quarterly hash (or at such Intervals w may he otherwise derermiaed by

the Board of Directors) and comply with all decisions and Cirectkms of

the Board of Directors. The general manager shall have surh authority

os is delegated to him by the Btuird of Directors.

(ii) The general raanagrr shall be -espoasibie for the administration of the

CctDjwun’ oo a day Unby basis wiihin tihe pofclo laid (bun by the

Ik anl of Directors in respect of the following:

(A) representing the Company with respect to ill it* rights and

(Hi nfonring the Chairmaa and the Viinagcmcnl Committee of the

rdcvaat da* to thy activities and decisions in relation to the

Company’s operations:

(O carrying out or having carried out the decisions of the Heard o'*


(D) signing documents refating to the Company's operations as

authorised by the Board ofDraury

(Cl preparing the wort, programne for the Project and enmrag the

rnplencnt&ion thereof after approval b> the Boon) of

Directors, and lie Shueboders in «u:ordancc with Clause



 (FI uxwtinaiiiK during the CcasJniction Phase with the project

manager to ensure the efficient aid timely realisation of the


(Cil ensuring that the Facility is operated and maintained wifely,

reliably, efficiently, economralh and ir accordance with good

/ind pmilenl operating practices:

(lit determining the level of spare parts, chemicals and other stores

olid equipment to be maintained by Company;

(I) making recommendations to the Board of Directors regarding

improvements, additions and alterations tfl the Facility:

(J) insuring thil the Company complies with its operational

responsibilities under any agreement relating to the use of the


(K) Mihmining. as requested by the Board of Director, development

plans for approval by the Board of Directors covering the

requirement* of the Company for personnel and I hr

qualifications and numbers of such personnel;

(L| ‘electing and employing, in accordance with the recruitment

policies approved by the Board of Directors, all n«c*viar>


(M) preparing recommendations to the Board of DirccUrs on

mnttcri relating to personnel, irvrludirg remuneration, othc-

condilons of service, career dcvclopmcrt and training;

(N) ensuring that all the books and record* of the Company arc

p^^edy kepi;

(O) ensuring that the Company obtaics adequate insurance cover,

as required by the Board of Directors and in accordance w ith

(I*) obtain ng all Governmental \uthcrisotkwtt a-vociatcd w ith the

implementation of tlie Project m;ludirg release of land and

lights of way upon which the Futility is located, ami

(Q) ensuring tbei the Company obtoim unrestricted rights of use ir

respect of and appropriate parcel or parcels of land convenient

h* the construction of ihc Facility and Uiai die Facility shall be

timely and properly cmstnictcd. as required by the Board of


(lii) Unless otherwise agreed by the StmreluiUkrx the gencml manager

shall serve for u minimum term of 3 years and a maximum term of 5

years or. II later, the date on which the Herbage Shareholder Loan

(advanced pursuant to Clause 4.3(l)) is repaid in full.



(c) Chief Flnanclnl Officer

(i) I Icrltagc shall hove sole discretion lo appoint a Chief Finunciiil OITiccr

lo he the principal financial officer of the Company, fhc Chief

Financial Officer (hall report to the general manager. The Chief

Financial Officer shull hive, such authority as shall be delegated to

him hy the Beard nf Director*.

(ii) rhp Chief Fiiumclal Officer shall:

(A) prepare the annual Capital Expenditures Budect and the annual

Operating Budget and ensure the implementation thereof alkf

approval by the Board <>r Directors and the Shareholders In

accordance with Clause 6.2(b).

(B) prepare and distribute to the Board of Directors «nd lo each

Shareholder the information referred to in Clause 1 h(h)(i');

(O tame on behalf of the Company any notice of defimlt under

Clause 9.1(a);

(D) notify each Shareholder of all advances and payments made in

connection with all financial agreements on the same rinlr ni

instructions therefore arc given und immediately notify ull

I'tulieg of nny advances or payment not made on the duo date

with reason* therefore;

(10 ensure that the Company complies with its obligations under

nny financing document;

(F) ensure that effective oort accounting aad control stems are

established and rmintaned; and

(G) qjbmr to tfr B

progress report covering expenditure to «klc and ftfcwt

expenditure for the cuncrtt financial year

(iii) Unless otherwise agreed by the Shareholder!. the Chief Financial

Officer dull verve for a minimum term of 3 years and a maaimure

tenn of 5 years or. if later, the date on which the Heritage Shareholder

Lean (advanced pursuant lo Clause 0(0) » repaid in full.

td) Project Manager

(I) Heritage shaE have sok disc'd km to appoint a prvijcvt manager u>

serve daring the Constnetior Phate (and. if applicable, thereafter!

The project manager shall be respuisibk during the design

engineering, procurcmcre. comtmctatn and commissioning phases for

the technical ispects of ae Project ind shall provide assistance Junnj

performance testing of the Facility. Ihc project manager shall repor

lo the general manager ao a qiaitcrty basn. I h: project iranogcr shad


 have such uuhorily as 'hull he delegated to him by the Board of


(il) Th: project manager shall:

(A) inform the Technical Committee of th: relevant iloy to day

activities and decisions In relation to the execution of the


IB) tc assisted by two deputy project managers, we of whore shall

he responsible for the Facility:

(O exercise general supervision of the services performed by the

two project teams under each of tire deputy project managers

and he responsible for the coordination of such services,

including without limitation, debating nny possible synergies,

giving approval to planning and organisation ch,,rt* prepared hy

the project teams, secondment, replacement of seconded

personnel to he assigned to the project teams;

(D) he responsible for all relationships lx-tween ihe project teams

and the Company and bo the sole oontacl within the Company

for the project teams;

(E) submit to the general manager and the Board of Directors ui

regular intervals as decided by the general manager and the

Board of Directors u written progress report on worl performed

by each project team during that period:

(F) develop aid propose to the Board of Director* after

confutation with ihe general manager! hief Financial Officer

criteria with respect to *c foBowing.

(i) fiual.salioa of die project definition tor each frujcc.

team; and

(a) periodic revision of the budget for the Facility handled

by each project cam.

(Gl develop, afccr eonsultalion with the general it onagri for

approval by the Board of Directors, co-ordtnrfing procurrroen

(HI Ocvclcp. afxr consultation with the general manager for

approval by the Board of Directors, design pcJicy ia relation tc

cnvinnmcnal issues, operations and mamtcnarce, health,

safety and fire criteria:

(I) appraise activities and progress of the Facility, establish

gukfclnes for acfctcvm* interchangeability ard Maodardivatiori

of machinery, electrical ard inarument equipment, advise



tpcrationr. and maintenance managers of the technical

requirements lor spare parts and all buildings necessary for

ivpcralijmN including workshops, officct and warehouses, und

devise a material coding system ami prepare operating manuals

(J) establish u co-ordinal ion and correspondence procedure

Including formaH for each project team to use :.n reporTin£

progress oa engineering, procurement. constnxtion. com

control and *ch«-ilnllng mnltcfv;

(K) .tfablkh anil supervise n systrm for scheduling the use of port

facilities by the Project if required;

(1,1 co-ordinate allocation of locally readily available resources

uich in comiroctnn material, labour nnd transport;

(M) iwnrtl, sign und adm inkier, within limit* of authority set by the

Board of Directors, contracts related to support serv ices seeded

by the Project (murine facilities, trucking, air transportation,

material handing and customs clearance, etc.);

(N) conduct periodic progress meetings with the projects teams

with the object of achieving central coordination work

progress, budgets and scheduling; and

(O) provide documentation and representation at all meetings

■c^uiicd by the Company in connection with all upaett of the


(iii) The project manager shall serve until th: completion ef the

Ccrutrctiun Phase or. if lata. uni.I the dale on which fee Ikritogc

Sharehdder loan (advarecd ponuart to Clause 4 J(i)) is repaid m full

(e) Other Officers

The «xbcr senior stafT of the Company shall be appointed by the Boat! of Direct** oa

die terms and conditions approves: by the Bond of Director*. Such senior staff vital

be responsible for operatic**, ackniniflraik*, finance and such ether areas as the

Boon) of Onctcn Shall deem appropriate. Before die Cooncrchl Operation Halt,

the Board of Director* shall appoiat a pfant manager for tf»c operations of the Facility.

S3 HAiucEMurr CoHMnra

fa) The Parties shall establish for the period up to the Company Incorporate*

Date and thereafter, if required:

(0 a an payment committee computing OIK Person nominated by cock

Pwty (tbc "Management Committee");

(ii) a finance ccramiftce coreprisng one Person nominated by each Party

(the -KUnnee Committee-): aid


(iii) a technical committee compels ng one Person nominated by each Party

(the Tcchakal Committee')

lb) Ihe Management Comm nee. the finance Committee aod the Technical

Commiitee shall each operate in l-nullxh and:

(i) perform such duties as may be delegated to it by the Panics:

(ii) have the power to designate and appoint such persons as it think);

appropriate to assist it in its duties; and

(iii) comply with all decisions nnd directions of the Panics


h.l Gknkhal Meetings

(a) General

H»c Shareholders shall have at least one general meeting of Shareholders each year,

and shall meet more frequently if required. All general meetings of Shareholders

shall he located and conducted in a manner consistent with the Hy-Laws.

(b) Observers and Advisors

Each Shareholder may invite any Person selected by it to attend a general meeting of

Shareholders as its advisor. In addition, the chairman of the Board of Directors may

invite observers from any Person, including any Construction Cortractcr. th<

Company and other third Panics, to attend ary general racctirvs of Shareholders and

to give reports and advice to the Shareholders. Each observer invited to anend a

fcncol meeting of Shareholder* dull have such wtic ration rigtls (excluding the

right to vote) as may he agreed by the Shareholders at the relevant meeting. An*

■darner may he requested Ip absent it'etf from any deliberations of a general meeting

of Sfurchoi jers. as thoaght fit by die Sharehoders at the relevant meeting

62 Sharimolmr Von*c

Resolutions of the Shareholders shall be adopted on the basis of a unanimous


ta) a drcisxM regarding the transfer of Shares or rights in the fVnjcct by a

Shaicboltfcr to a third pmty. t» the extent not otherwise permitted under

(V« 10 of this Agreement and the By-laws and approval of all terms,

conditions and agreenents related thereto;

lb) subject to Clause 62(c) bebw the following matters:

(i) rati Heat on of dealings of Directors cr offcers w ith the Company.

(ii) change n the numhre of Directors:

(iii) amendment of the By-Laws;


 flv) approval or any dealings or contficiual arrangements between the

Company and any Shareholder, or any Affiliate, director or officer of

' t.2(b)mvi);

(*) approval of each of the

(vO approval anti ratification af the wori for the Project:

(vii> an, chnngr 10 ttv general lequiranvcnts rrgurdmt the method of

contribution described in Clause 4 md any subsequent change lo any

method of contritnitioo which liau Scon implemented in accordance

whh this paragraph;

(viiit entry into Shareholder Loan igrecatcnls and approval of all related

(ix) the ptuvhtuo. (tale, lease, pledge or other disposition of assets of the

Company lor n value exceeding in the ngjngflle for any year. L.S.S I

million (liilUted), other ihnn un wpoelflwilly contcmpluted by or

provided in a prqject Document;

(x) adoption or implementation of a plan of merger, amalgamation,

consoliikliiHi or mxganisaiioa of tire Company wife or into *---



required to distribute trapped cash) of. or * Of

of shores in. the Compaiy. aid lire of a any other

ctfiity capital in the Company;

(xiiil entry tmo any Project or any thereto.

by tfi

(Xhr) of

(av) to the JM folky


(xvi I afprova. of a/i Jgreemerf lo he entered into by a prepose*: Transferee

In conncviiun with its pctfutuuuicc of all of die ibligaikms of the

relevant transferring Shareholder.




 ('ocnpary. Itc apcomincni of or any charge ia Ihe Company's

(xix) the initatiun of mbiUMkm •« lUftfloa by he Company «rd an,

settlement or compromise of any arbitration or litigation to which the

Compoay b a parly;

(U) iIk Issuance of redemption of any stares in tin; Company, other equity

securities, debt or convert ibb securities. warrants or rights by the

Compary or he grant of options in >cspu.i of any such iasinmcnt or


(xxi) Ihe creation or accuisitun of any rnhsiduny ®f the Company or the

making of any cquty mvedment by the company In mother Prraon.

(xxM) any prepayment under ary financing doemms rctauig to the rvjcxt

(xxiii) identifying irtemal costs of each Sfa/ch Uct is be hchafcd as pan tf

the Development Coats aid the train for repayment cf nick costs;

| xx»v) any modificajons of or supplement to the conditions to be satisfied ia

order to achieve the f inal Deerskin to Proceed Dale.

(xx») the establishment and approval of the annual Operating Budget and

ary modifications herct.

(xxri) the approval of the Company's anneal report, balance sheet pnifrt araJ

loss statement;

(xxril) the extension of the curpM&ic existence of ihe Cotnpuiy.

(xx«iii)thc olaWbhricnt of box guxklmes punuanl to wkkh the < unpany

is to operate;

(xxix) th: dectaralk* of dividends as contemplated by Clauie H.l.

(xxx) w-thdrawaJ o'seconded posoanel as contempUed by Class* 3.1; and

(xxxi) ary ocher matters from time to time identified^ -vrating^by



(c) In relatkjn lo any 'otc involving aav contract, agreement. undertaking or other

arrangement to which a Shareholder or its AfTiliaic (other thin the Company)

is a part)', such Slurclx»dcr rfuill be cxdudcd (kotn die applicable rote

lo the extent that the resolution of any business by the Shareholders is reqtared m

advance of the Company Incorporation Dae. the Shareholders shall negotiate in good

faith and agree upon any such resolutions anc use their best endeavours to reach a

commercially reasonable consensus in a timely manrer.



Nutting cuntai xxl it this Agreement is intended, nor shall it be construed, as erealing

a partnership, agency or trust relationship between or among the Shareholders. The

relationship of the .Shareholders to the Company shall be ih* of shareholders with

limited liability The undertakings of the Shareholders pursuint to this Agreement

shall be oa a several basis

7.2 Conflict or Interest

Except as expressly staled in this Agreement there shall be no restriction on the

freedom of am Shareholder to conduct its business as it sees St. ard no Shareholder

shall owe any fiduciary obligations, directly or indirectly, express or implied, to any

other SluL-chuUkr solely by reason of being a Shareholder under this Agreemert.

7J Internal Costs

All reasonable and proper out-of pocket costs and expenses incurred by anyone in the

Management Committee. I;irunce Committee or Technical Committee or by a

Shareholder acting cm behalf of the Company is authorised by the Board of Drcctors

ami costs and expenses from time lo time identified by the Shareholders pursuant »

Clause 6.2(b)(xxiii) shall be considered part of the Development Costs pay able in tie

first instance by the relevant Shareholders, but repayable to each such SharehoMrr by

the Company as determined by the Shareholders in accordance *ith Clauie

6.2(bXxxiiij. Internal ewta fur momgement tia»c stall be charged os agreed h:t««xn

the Shareholders. Records of any such costs and expenses shall be prepared on a

continuing boas and the Shareholders shall cause the Chief Fimixiof OPiker w

provide details thereof uf*>n requesL


8.1 Dividivbs

Each Shareholder shall cause the directors) ncminxrd by it to vote 'or the

dcclaratkn and pay ment of dividends on the Shares to the maximum exent possible

out of legally available finds. Froai time to time, the Shareholders shall coore the

Board of Directors to determine whether the Company has funds available for

distribution to the Shareholders by way of dividend, after uking into account the

Company's anticipated legal, operating, capital and any debt serv ice requirements and

the Comjeny's ability in the future to generate revenue* or procirc financing Ike


 Conoany shall distribute to the Shin-lvJ.kT* by way of dividend any such fund*

which the Bom! of IWrectors. subject to the approval of the Shareholders, aid

applicable law. dctcminci aie available Ui thm purple pursuant lo thi* Clause 8.1

&2 OnUMVMDtn

To Qe ecent Cut after aa> distributor* lo the Shaehokters try way of divkfcnd n

acco-dance with Clause LI. and alter hiving taken into account all other natien

referred to in Clause 8 1. there rema ns in the Company available cash for payment to

the Shareholders, the Company Owl apply such available cash in the following ways

and in die following proportions

(i) 40 per cent, of such available cash shall be paid irat to the

Sluidioldcxs by way of a pr» rat* repayment of the Shareholder

Loam; and

(ii> 60 per cent of such imulublc cash shad be paid secondly to the

Shareholders in proportion lo their Shareholding Interest


9.1 Default

(a) Default

Where any Shareholder fails to:

(i) pay any sums due in respect of a funding notice reccivec pursuant :o

('Inure 4.4(

made such payment within 60 Business Days of the due date hr

puyiicm (“Payaicwi D»f*«h"|.oc

(it) comply wth ary nuteml obligatioe umkr this .Agreement and dues

not remedy- its breach of such material obligation within 60 Business

Days after be mg given oolke b> the Board of Directors or a

Shareholder (with a copy to the other Shareholder and the Board of

Directors, as the case requires) rcqicring such remedy if tine breach is

capable of heop remedied within that period ot if 30C fails to

dcnwmstrac to the reasonable satisfacioa of the noo-defauluog

diligently pursued. *ach breach is net remedied in my even! w-thin 60

Business Days of hcatg given sach iwtice Noa-Payoiea. DcfaulD.

(the 'Defaulting Shareholder-), the lMauling Shareholders ngfet to purtlo|wu: in

the Company through its ownership of Shares stall h: suspended as provided in

paragraph (c) below

(b) Notice of Default

The Company shall cause the gcreral manager to issue a notice of dcfaul under

Cloaw 9 KaK*) «° Defaulting Shareholder (with a copy to the other Shareholder)

on the Business Day immediately following the dale of such dcfsult; provided that



 failuir in jtivi* miy such notice shall noi obviate nny m»ch default nor relieve any

Shareholder from nny of its obligations hereunder

(c) Suvpemkn

Dunne ■"> °T wspcmioo rftbc rights of the Detattag Shmhokfcr under tho


appovntavent ^rpnsy) vuil t* enulcd »o be tountoJ in a quorum cr

respect of my miner or dcc.vioa where Shareholder apprtval is

required or soi»ght (although such ^prevntalivea shall hr rattled to

attend all general meetings of Sbarehclders dunag the perod d

•u .pension as observers);

(ii) nny director who has been elected from ilitr nomination of Detailing

Shareholder shall not be entitled m be counted in a quorum of oierclsc

inch d I lector's right to vote at nny meeting of the llonrd of Directors

and, in the ease of ihe chairman of llu? Board of Directors, shall not he

entitled to preside over the genera! meeting!, of Slutrcholdcra} and

(iii) the Defaulting Shareholder shall not be entitled to receive any

dividends or distribution*. payments or tthcr returns of any naiurc on

equity or any payment of any ainoum in napotl of Muvicliokkr Imuii.

(including payments of principal and interest thereon) tnm the


(d) Remedy


to curing the default a I costs

or recovery or or recovery (IrxUJMi* In aJ

dies) that tuve been incuneJ

by the Company or the noe-de faulting by rcavn of such Jetaut have

been paid by the Detaching Shareholder to Party

92 KL.Mimr.s(» Default

(a) Default Transfer

If the Detailing Shareholder has not remedied lie default within 60 Business Days

then: (i) in the case ol a Non-Payment Drftah. Ok norwlctaalting Shareholder sha !

be entitled (by notice without reservalkm or condition, to the I)cflatting Shareholder

with a cop) to th: Board of Directors) to acquire from the Dctauttirg Shareholder the

5**o»«fcr *■! p^J^^nsfer all of its t^STJldtmSSL

Martel Value or such price as may be agreed by th: Shareholders, and (ii) in the ease

dm Payment Default the twvdctaltB* SherchoUcr shall be entiled to verve notice

and lave tramfened la it the Defaulting Shareholder * Shares as pamded above and


 he entitled 10 the PSA

the PSA for failure on F«ft tf


The I Waul* n* Shareholder doll wirfyut dea> fokm*g an>

. do aay anj all tets required to he docc h>


obttnmg all'

execute «n\ and all ekcumc-its ard* lak; suck other aeiinnc at may he

order to effect a prune* and valid muster of I If ai:

<. ■vcm-ncrtlal Audsoraatiora arc •** ootained in a limly nanmr. the Shareholder dull hold te Shires in trasl for the nm-defaulting

(c) further Claims

Where o transfer of a Defaulting Shareholder's Share; occur* pervuu* to Clause

9.2(a) or 9.2(b). the Defaulting Shareholder shall have no farther rights or clainu

amki (hi* Apcencni » relation to the Company or the Pro}** and all Panic* aha!

tike a!l action necessary or desirable to effect any requite changes in the officers of

fie Cempany.

hJ) Remedy Not Exclusive

■uenefed lopecj ufa.aH> affect the avalabilty or exenhe uC any other lights and

remedies of the Company ard the non-dcfaukmg Shareholder agairst the Defnihing

Shardtohlet under this Agreement, both at law and m equity.

(c) Power or Attorney

lor the purposes of giving effect w the share transfer pruvblwu. of this CIuuk 9. d'

soon t' reasonably practicable upon execution of this Agreement. the Shareholders

shall iigicc upon a forms ol power of unomey in favour of the Chief finance Officer

ami cause lo be executed such agreed powers of attorney promptly thcrvnllcr.

9.J Continuing Oiii.icaiions

Any Shareholder which ceases to Ire a Shandiolder pursuant to any of the provisions

ol tills Clause 9 shall nevertheless remain bound by lo obligations to keep

information confidential as provided in Clause 17.6, regardless of (he fart thal it no

longer holdi Shares, lor a period of 5 years from the date upon which it ceased t> hold


9.4 |ND* UNITY

Any Shareholder whkh becomes a Dcfauimg Sharehokkr shall indemnify the

Com piny and the non-dclnullmg Shareholder in respect of. ind bald each ol their

harmless from and against, iny aid all liabiities. losses, damage, claims, expenses.


 line* nr penalties suffered. incurred or uislained by- any of llxrm or lo which my of

hem becomes subject.



(a) Restrictions on Transfer

No Shareholder sAall transfer any of its Share- unless:

(0 of the By-Laws aiw

(ii) the transfer cctnplio in oil resets with the retirements of applicable

law. the Project Documents. any financing documents and the

transferring Shareholder and proposed rccipimt hove received al

necessary Governmental Authorisations fer such transfer; and

(iii) the proposed reciptent of such Shares has delivered to the Company

(At n written acknowledgement tliat the Shares to bo received by it arc

subject to this Agreement; and

substance approved by the nro-rrmslcrring Shareholder. pursuant in

Clause 6.2(a)) to lire clTcct that such recipient shall perfonn oil of the

obligation* of the Irumd'crring Shareholder in rwpect of the Share-

being transferred and that such recipient and its successors in interest

shall be bound by die terms of Ibis Agreement and my other relevant

agreement as agreed to by the Shareholders.

Any attempted transfer of Shares in volaticii of the toms cf die By-Laws ar thh

and shall not reflect or. its records any change in the registered ow-vershp of Share-

pui munt to such transfer.

10.2 Miniwtt.wSHAROJOi.MrrG

in the case of • all of its Shorn, no •h-T

any of its Shares if. as a or the

r«n tc» than 5 pc*


Subject to any transfer of the Shares of a Defaulting SJurchokJcr pursuant to Clause

*.2. cavil Sliarchuldcr agree* that It -hall nut li.nsfo any of its Share* If. at the time of

the transfer, such Shareholder is in dcfaalt under this Agreement.


10.4 Conskvi of Otjii h SjiAHNioinrus

'■> Notification to Other Shareholder*

Except for an Affiliate Transfer or • transfer from one Shareholder to another

i including pursuant to Clause 9.2), Upon any Shareholder (an '’Offering

Shareholder") wishing to transfer any Shares, the Offering Shareholder aha 11 by

notice in writing to the other Shareholder (the "Continuing Shareholder") suite it*

wish to transfer Shares, the number ol Share* proposed to he transferred and give

reasonable particulars of the proposed Transferee, including its kknnt>. bu.incw

financial standing and detail* of it* hokting .vn panics a*d material Affiliate*, if any,

(such holding companies and mat era I Affiliates. together with the proposed

transferee. being the ‘Propped I rwa.frrre Croup" t aa m«e«*ar> to perra.i ih*

Contraumg Shareholder to evaluate the Proposed Transferee Group (including a

Kims iff the molten described in (wagraph (b) hck-~). An Offering Sha.vhokk. dial


ib> future* K*fee

b ithia 20 day* of such nutitc of •■**•***• to tran*fc> Share* being gives (uakaa 4 it

Sm withdrawn), the Coounamg Swehrtdcr may (by cornier twice in wnungio the

Offer big SsretnWcr) veto he planed uwter. but cnly if such Shaichokkt ha*

reasonable grounds to believe that any of the following apply:

(i) the proposed Transferee is not an ertity duly iivorperatcd and ia good

sanding In the place of its Incaporalan; or

(ii) the Proposed Transferee Cltwop does not have the necessary ffmiK-ui

resources or ability to raise sufficient finance to meet the proposed

I ransferce s landing and other obligations under this Agreement it the

proposed Transferee were to become a Shareholder; or

(iii) the Proposed 1 ranstcrcc Group is or is owned, contrived

in any way with, any Person or interest which has or has had a

reputation in the international community for having any criminal,

illegal, fraudulent t* otherwise dishonest conduct, which would in the

reasonable vew of that Continuing Shareholder, if the proposed

transfer went ahead, hare an adverse effect oa the reputation of the

Company- andtor on any of the Shareholders.

(c) Ability to Proceed

If a counter notice described in Clause 10.4(b) is validly given by the Continuing

shareholder (as the case requires) within Mich 20-dny period, the proposed transfer

dull aot proceed Otherwise, if do such notice is given, or if givoi is sibseegicnth

withdrawn then, subject to all apfTicable provision* of this A pee mem, the proposed

transfer ma* proceed.


 1(1.5 Transi ms 10 Affiliates

Subject to compliance with Clause 10.1. a Shareholder may transfer the whole or pan

of its Shnics to an Affiliate (an "Affiliate Tranufcr'). provided (hat:

(a) such Shareholder shall along with the Shares, transfer all the corresponding

rights and obligations under this Agreement.

(b) such Shareholder shall have given 15 days’ notice of such transfer and

assignment to the other Shareholder.

(c) such Shareholder shall remain liable to the other Shareholder for the

performance of the obligations of such Affiliate under this Agreement if such

Affiliate fails to perform any of such obligations to the extent that such

obligations are not the subject of any parent compmy guarantee: anti

(d) if such Affiliate ceases to be an Affiliate of the original Shareholder, then the

Share hokfcr shall procure the re-transfer of Shares and the re-assignment of

such rights and obligations to itself (provided it remains nn Affiliate of such

parent company) or another Affiliate of such purent company.

io.6 Right of First Refusal

Subject to compliance with die Other provisions of this Clause 10 and the coodhkms

out below, a Shareholder may tramfer .’II or pan of its Shares ahng with the

corresponding rights und obligations unJer this Agreement (ircludiag all of its rights

W a lender under Shareholder Loans, if any) to the other Shareholder or • third party

(either being referred to as the Transferee-) Hie following c.mditons shall apply to

any such transfer, other than any Affiliate Transfer.

(a) Where un Offering Shareholder wishes to sell all or part of its Shwe* l>

anotlter party (ineJudmg another Shareholder), hi addition to the notice it n

required to give pursuant to Clause 10.4

promptly give written notice of the proposed details of such sale, demised ir

Clause 10.6(b). to the Continuing Shareholder.

(1>) Once the Offering Shareholder end u projioscd Transferee have negotiated all

the material terms and conditions of a proposed transfer of Shares (including

price, terms, representations and warranties, indemnities mid covennnlsX »uch

terms and conditions shall be disclosed in detail to the Continuing Shareholder

in a notice (an ' Offer") from the OiTering Shareholder. Tlie Continuing

Shareholder shall have the right to acquire from the Offering Shareholder all

(but not part only) of such Shares oflcrcd on the same terms and contUttom

agreed by the proposed Transferee if. within 30 days of the date of the Offer,

such Continuing Shareholder deliver, to the other Continuing ShareholArr and

to the Offering Shareholder an acceptance notice (an "Acceptance Notice"!

stating; that it accepts the agreed terms and conditions of the transfer without

reservations or conditions: provided that if the Continuing Shareholder wishes

to acquire such Shares, such acquiring Continuing Shareholder 'Jull have the

right to acquire such Shares pro nua in proportion to their rcspxtivc

Shareholding Interests. Failure by any Continuing Shareholders to provide nn



. Wcpcncc Kobe* within *uch 10-doy prooi shot! he termed a decirion not

to purchase the offered shares, loch Continuing Shareholder tha: delivers an

Accept*** Notice shall be bound lo purchase tfec Shires and the Offering

Shareholder dull be bound to sell the Shares, at the date specified in the

Acceptance Notice, but tn n> event later than 30 day* alter the date of the

Acceptance Notice.

(c) If the Continuing Shareholder delivers an Acceptmcc Notice to he Offering

Shareholder in accordance with Clauic 10.6(b) or. if the purchase is not

consummated within the TO-day penotl ^lccified in Clause 10.6(b). the

Offering Shareholder shall be entitled to proceed with the transfer lo the

piM|K>*cd Transferee, under tomtl and conditions no more favourable to the

I nnslercc than those set out in the Offer; pfgyidsd Out the transfer shall be

concluded within 90 days from tl*c due of the OITci, plus such rcaaonoNc

additional period as miy be required lo secure third party approvals. If the

transfer is f*« corccumnuitcd within such 90-day cr such additional period, the

Offering Shareholder -hall not he permitted to transfer all or clause of Us

Share* without again complying with this rght of fira refusal procedure *t

forth In this Clau* 10 6

(d) It the Offering Shurclwiklcr’ii proposed transfer of Shares involves

consideration oilier than cash or involves other non-cash assets included in a

wider transaction (i.c.. global package). then the consideration payable for the

Shares exclusively shall be allocated a reasonable and justifiable Fair Market

Value in hard currency by that Shareholder in its notification to the Continuing

Shareholder* and such Continuing Shareholders may utisfv the requiremerts

of (his Clause 10.6 by agreeing to pay tuch Fair Market Value a turd


10.7 TRANKranoiTu Coi*n*tr*c Obi icatio**

Each Uanferar of Shares shall remain Found by its obl:g«n

confidential at provided in (lauae 17.6. regardless of the fact that it has made a

transfer, for a period of 5 yean ftutu the dole uf the Assignment.

10.8 RtSTHKTIVK Lf.Cf >D

The Shareholders shall cause the Company to include on all ccrti/kaua evidencing

the Shares tltc following restrictive legend;














10.9 KM.i'i raiion c>* Shark. Transfers

I he Share balden promptly shall direvJ the Compuny to regfJer. ind the Com p«n\

promptly shall register any transfer of Shares whch occurs n accordance wth the

provisions of the By-Laws aad dm Agreemert.

10.10 Kr.Mf.nation or Nomink*.

Immediate I* upoa complcikn of fee Transfer of aD ihc Shares of nay Paly pirsuaxt

m the provisions of this Claasc 10. the Party transferring its Shares shall pcocue the

resigmiton of am Nominee which it has apjwmtcd to th: Boord of Directors without

tuch director bring era it led to ary ebbn for dan-age* or ermpemation for loss of

office of any kind whatsoever.

10.11 Lnttial PtIIJC Oftuimg

An initial public offering of Sham may be nade it any time with the consent of aE

Shareholders 11 poo each consent the Parties shall cooperate in tie impk-mcBtatioe

of such offering. Each Shareholtfcr may elect to partic pale -n a public offering of

Share* on a pm rain basis

10.12 Transfer Nor PtttMrrrKOBV Lsw

In the cveni that a Party u n

ihc Party holding the right shall have the right to propose a third party legally

qualified purchaser who will be able to acquire the offered Shares.

10.1 J Covkrnmintai. Aithohisahonk

In the event thnt any assignment or ir natter of Shares under this Mauve If) shall lv

subject to any (governmental Authorisation, such assignment or transfer shall not

become effective until such validation or nppmval has been obtained



This A green lent shall commence on the datr hereof and shnll terminate, subject to

Clause 12.5. upon the date the Shareholders have each agreed in writing Jo terminate

this Agreement. Subject to Clauses 9.3. 9.4. and 10.7, this Agreement shall no longer

apply to nny Shareholder upon that Shareholder ceasing to hold Shares.

IL2 Survival

Without intending to exclude the provisions hereof which by their future survive, the

provlaiona ofClauMM 9. 12. 14 and IJ and CIuum* 17.1. It* and 17.14 mxl dill

Clause 11.2 shall survive any completion or earlier termination of this Agreement.



Where dm A^ccmcnl n icrmina^d. ike obRgsrieos of the Shareholder, up lo anil

including the dale of termination dial I not he affected. When: a Shareholder ceases

its involvement in the Company (by die sale or dilution of that Shareholder's

Shareholding Interest), or by its withdrawn! during the Development Phase), the

obligations of the continuing Shareholders tirxler this Agreement shall not he affected

by that event and the obligations of the retiring SKirehddcr up to and including the

dale of cessation of its involvement in ihe Project shall remain unaffected by that



III General

Upon termination of this Agreement pursuant to Clause 11 or upon dissolution of the

Company. the Company shall he liquidated in accordance with the laws of the

jurisdktion of incorporation of the Company, the requirements of this Clause 12 und

the By-Laws.


Subject to applicable law. a third party liquidator (not being an Affiliate of any

Shareholder) selected by the Board of Directors shall be appointed who shell use

reasonable commercial efforts to sell or otherwiM? liquidate or make a cutiodian

arrangement for. the assets or the Company, either as a going concern or as separate

items, and shall seek to maximise the proceeds received for such usieis and shall use

his best efforts to obtain the best prices for such assets Ihe Sharehokfcrs stall be

bound by the terms of any sale or disposition effected by a liquidator

I2.J Purchase »y 8h*hmkm non

Subject to applicable Uw ard the prov^iom of Clause 12.2. «ch Shareholder may

bid for and purchase the aswts ( f the Company to be sold or dnpo-oJ of k> the


12.4 DlSIKIBtmON

After establishment of such o«ah reserve* os the Iquidator itctcmun,! to be

reasonably necessary to fund any contingent or foreseeable Cntbilifj or ahligat.m of

die Company, the liquidator shall dlitribulc Ihe proceeds of liquidation m IIk

following order, subject to lbs provblora of any applicable law:

(u) first, to the payment of the liquidator reasonable expenses In liquidating the


(b) second, to (lie |uy incut of4 die reasonable expenses in causing the Company to

be liquidated or wourd up;

(c) third, to creditors of the Company other than the Shareholders; and



(d) fourih. to the extent there is any surplus, to the Shareholders in respect of the

repayment of Shareholder loans, if any; and the balance as a return of capital

to the Shareholders in proportion to the paid-up nominal value of tlvc total

Shares owned by each Shareholcfcr at the time of any such distribution.

If any Shareholder receives from the liquidator proceeds in excess of what it is

entitled lo receive under this Clause 12.4. it shall hold such excess proceeds Is trust

for the other Shareholder in proportion to their respective Shareholding I Mere « and

■hall promptly distribute such excess proceeds lo the other Shareholder

12.5 Tkrmination on CoMPi.rnoN o* I-KH'Idation

Upon completion of the liquidation of the Company, this Agreement shall he

terminated for all purposes, save as provided in Clause 11.2. Termination of this

Agreement in accordance with the provisions of this Clause 12.5 shall nrt affect any

rights or obligations which may have accrued to any Shareholder before such




I he Parties shall attempt in good faith to resolve all disputes arising in cnanectkifl

with the interpretation or application of th: provisions of this Ngreemeot or in

connection with the drtcrmmaiksn of any natters wtuch arc subject to objective

determination punuant to this Agreement (each, a "Dtspalc') by mutual agreement it

accordance with Jib. Clause 13. If a Dispute arises under this Agreement betweer

two Of more Parties, ary such Pam may request dal the Dispute be submitted to the

respective chief executive officers of the Parties lo ihc D sputc for resolutim. If such

chief executive olliccrs foil to resolve ihc Dispute within JO days of’.he dtfc on which

the matter was llrst submitted to the lost of litem fe« tvs* lutiuo. tin any Party lo iIk

Dispute muy demand that such nutfter be resolved by hireling arbitration, as presided

in Clause IJ.2.


(a) Submission to Arbitration

ir any Dispute cannot be resolved between die Panics pursuant to Clause IJ.I or

otherwise, then such Dispute shall be ststied exclusively and finally by arbitration. It

Is specifically understood and agreed that any Dispute that cannot he resolved

between Ihc Parties shull be submitted to arbitration irrespective of the magnitude

thcrool, Hie amount in question or whettor su:h Dispute would otherwise he

considered justiciable or ripe for resolution by any court or urbitral tribunal, fills

Agreement and the rights and obligations of the Parties shall remain in full force and

•fleet pending the award in such arbitration proceeding, which award -.hall determine,

if the clrcum«anccs so require, whether and when termination of this Agreement shall

become cflcetivc.


lb> Rules of Arbitration

Each urttitr.ilion shall follow the Rules of Artitraticn and Conciliation of the

International Chamber of Commerce m in effect on the date of this Agreemmt or

such other rules as agreed by the disputing Parties

(c) Arbitral Tribunal

Each arbitral tribunal shall consist of three independent arbitrators, appointed a.'


(i) if there are only two Parties to the Dispute:

(Ai the claimant shall nominate one arbitrator and shall by notice

call or. the other Party to the Dispute to nominate n second

arbitrator within 30 diys of the notice, failing which such

arbitral nr shill at tlw request of the clamant be aopom*d h>

be lrtemalional Court of Arbitration of the Liternaiona

Chamber ofCormnerre(the *App>«ntia« A«tfcori*y"k; ard

(and. shall he apponted by agreement between the two

arbitral on appointed uadcr paragraph (A) above or. in default

of agreemert w ithm 30 days of the appiintment of the second

arbitrator, oa the aocninadon of the Appointing Authority at the

writtcr request of either or bc

(ii) if there lire more than two Partes to hr Dispute

(A) each Piuly to the arbitration sltall propose to the ether Parties

by notice the nurocs of one or more Persons, one or more of

whom (up to three in total) would

(B) if the Partiet ure unable lo agree at all three arbitrators within

30 days of the tlrat notice given undci paragraph (A) above,

then the Appointing Authority shall appoint the remaining

arbitrators ai the written request of any Party lo the Dispute.

(iii) Should a vacancy arise bccaure any arbitrator dies, resigns refuses to

act or becomes incapable of performing his (Unctions, the vacancy

shill be filled by the method by which die arbitrator was originally


(d) Location of Arbtiraiion

Each arbitration shall he conducted in London. England and the Parties agree to

exclude any right uf application to any court or tribunal of conipcitni Jurisdiction In

connection with any question oflmv arising in the course of any arbitration.


 (c) Uncuiac of Artitratbo

!he teigoape to he u»cd in each arbitratim shall be English.

(0 Decision f inal and Binding

An> decision or award of an arbitral tribunal appointed pursuant to this Clause 13.2

.•hall fce by majority vote and shall be final anil binding upon the Parties, ITte Parties

waive, lo the extent permitted by law. any rights to appeal or any review of such

award by any court or tribunal of competent jurisdiction I he Parties agree thU any

arbitruiioii award made may be enforced by a Party against assets of the relevant Party

wherever they nrr located cr may be found, and a judgment upon any arbitration

■ward may he entered by any court having jurisdiction thereof Hie Parties expressly

submit to the jurisdiction of any such court.

No Person who Is, or has been, an employee or agent of. or consultant or counsel to,

ony Party or any Affiliate of a Party shall he eligible to act as an arbitrator ill any time


The losing Party shall be accountable for all the expenses incurred in the arbitration

The Parties agree that .such arbitration tribunal shall take into account the time value

of the dllipuM nmoiint in determining any mmuint the arbitration tribunal may award

to the prevailing Parly*

(i) Cooperation in good faith

Each Patty shall cooperate in good faith to expoJite to the maximum practicable

extent the conduct of any arbitral prncredngx commenced under this Aerwment

Any Party who believes that another Patty has dcfajltcd n its obligation to cooperate

under this Claus* 132 may apply «° the arbitrator* during the coarse of the

proceedings for a determination to that effect If the arbiraton determine that a Pans

las defaulted under thb CUusc 13.2. he fnal a-ord .hall contan an asscaencnt

against the defaulting Party of dl costs incurred by the nm-dc aulting Party in

connection with tbc jrbiuwion routing 'mm tliat default. including. without

limitation, the reasonable fee. and disbursements of its camseL


14.1 The Governments Warranty

The Government warrants and represents to Heritage (and acknowledges and

confirms liial Heritage i:« entering into this agreement on the basts of. aid reliance

upon, such representation) that there arc no disputes, litigation proceedings, land

claims, tribunals ur legal actions, whether pending, current or threatened, by any third

party in respect of the Project Assets or the transfer of the Project Assets as

contemplated by and In accordance with this Agreement.


 14 ? viiahiihm r»m\H»rttts»vr*noss *M»w*wu»ms

(JKh Shareholder reprevents Bid wanans 10 each ether Shareh>ldcr that (ID I he extert




il h»s ihr power and authrrity in execute. deliver and carry out the terms and

provisions of (hits Agreement, und it U and shall renuin subject to civil and

private commercial law nn

(c) Agreement and the Project IXKuncnts to which h is. or will he. a party;

all necessary ftMlon lias teen uken to authorise its execution, delivery and

performance o( this Agnwnitfnl and this Agreement hn% hern duly executed

and delivered by It and constitutes its valid. Icyul mid hind in* obligation

enforceable again*! il in accordance with its Uima. uuhjcvi to hankniptcy,

(d) inwdvcncy, reorganisation, moratorium or other iliniluf laws affecting

cimllturs’ 11 glits gciK inlly.

ihi Governmental Aathoriiation is required for it* valid elocution, delivery

and performance under this Agreement except suih as luve been duly

obtained or made, aiai

(c) none of the cxesuUui or delivery of this Agree, nm. the performance of the

obligators in connection with the transactions conlcmptacd hereby at the

Mflmcni of the Urrm> aid ccndkWxr. hereof by that SharctaAkf will

currently in effect: or (a) coaflid with, viotec or resul in • breach ot

instumeri to which I is a party or by which il or any cf its properties or assets

arc bound



Subject to Clause I5Z each Sharchoder mall ndcmaify aid held tunnies each

other Shareholder, its respective Affiliaies and the respective directory employees,

aad apmts of such other Shareholder and such Allilatcv against any

loss, tiamair. chin cr expense (inefading reasmaNe lepl fees anl

v) and fries or penalties of wtaieve' natire. arsing out of or n connection

Tkis inJemnty is in addhkn to all ether rights and remedies a

for breach of the


IA2 CONnoiiuniAL Damages

NotwshsUrxling anything to the contrary set forth elsewhere in lbs Agreement. no

Shareholder shall, in any ocnl be liable under Ihn Agreement to any other

shareholder for may incidental mdimx special punitive exemplary nr ccreseqicnito

Ins or damages arising out of. or in coancctwn with, th s Agreement including loss

of revenue. loss of profits, loss of product cost of capital and Iocs of husinew

reputation or opportunity. whether such liabilty arises oat of contra;!, tort (htc'udmg

rcgligmce), strict BabJky. itatutr or otherwise. «d «Kh Shareholder 'ekasrs the

other Shareholder from such lability.



•Fore* Majrarr Eveaf means ary act or event that presents the affected Part) frotr.

performing iu okligatims under this Agreement or complyrrg widi any condition*

required by any other Party under this Agreement if such act or event is bey cod the

iCAvorwhlc control of the affected Party and of any Affiliate of the affected Party and

•oc the fauh of the affected Party or of any Affiliate of the affected Pam. and suck

ratty has been urobk to overcome such act or even: which falls within ooe or more of

tie following categories: flood, tornado, hurricane, typhoon. lightning, earthquake,

fire, Ciplovkm. civil diOurbancc. war. riot, rebellion, dissstnxo maritime colliwun or

jinking act of God or the public enemy, srikes or labour depots (of the kinds

described ir the text sentence) or action of « court or public authcrity. Strikes and

labour dispites of the following kinds only, namely, national strikes and labour

disputes noi aimed manly at the affected Party or a an Affiliae of he afcctcd Party

(where a trade or labour union has requested or required all or a majority of its

members to engage in the relevant strike or labour dispuic), stall be convdcrec to be

Force Majeure Events. Any other strikes or labour disputes, collective bargaining

agreements of any Party or of any Affiliate of any Party r.-suliiig in a delay or

stoppage of the services and other work hereunder, tote delivery of equipment or

malcrinls (not caused by a Force Majeure Event); and economic hardship, are

explicitly excluded from a Force Majeure Event and arc solely the> o:

the affected Party.

16.2 Burden OF Proof

III the event that the Panics arc unable in good fiiith to agree tliat a Force Majeure

Event has occurred, or the effect thereof, the Parties shall submit the dispute to

arbitration pursuant to Clause 13. provided Ihnt the burden of proof as to whether e

Force Mujeore Event has occurred shall be upon the Pars cla ming a Force Myeure



If any Party is rendered wholly or partially unable to perform its obligations untfcr this

Agreement of a Force Majeire Event such Party will he excused freer

whatever performance is affected by the Force Majeare Event to the extent so

•Heeled: provided that:


 (a) llic non-performing Party sluill give the other Parties prompt notice describing

the particulars of the occurrence, including an estimation of its expected

duration and probably impact on the performance of such Party's obligations

hereunder and continue to furnish timely regular reports with respect ihcrelc

during the continuaticn of the Force Mijeurr Event;

(h) lb.- uivpenvinn of performance dial I hr of no greater «c«pc and of no longer

duration than is rcawnably required by the force Majcire Event:

(c) no liability of nay Party that aro*c before the occurrence of the Force Majeure

Event causing the suspension of performareo shill he evented n« a result of

the cccurrencc;

(d) the aon-perforning Party shall exercise all reasonable efforts to mitigate or

limit tlomoga* to the other Parties;

(o) 'bo ron-performlng Party shall iwe its best nuleuvoiire to continue to perform

its obllgiitmtiN licreunder atid to correct or core the event or condition excusing

porlWmuiKo; rust

(0 when the mm performing Pony in able to resume performance of its

obligations under this Agreement, such Party sluill give the other Parties

written notice to that effect and slmll promptly romimo perfomanoe hereunder.


If by ir under the authevity of any Governmental Authority, all or a lubuantial part of

the Shures or the shares of a Party which is a private company cr the whole or i

mtrtfrtUI pul of the revenues or assets of the Company or a Party which is a f»ual«

realised, ccnfiscaicd or expropriated then (I) m the asc of the

Party will be excused from the prefianuMsc of its obligation;

(i) in the ease d an afleefcd Party, k will be excused from the


17.1 Nonas

Excep. os odicrwac specified in lkt> Agreement, aay notice, demand for .nforraalior

or documents required or authorised by dm Agreerrent to be given to a Party shill, be

given in wraing aid stull be suffkicnll* given if Uouuiillcd aid clearly received by

facsimile transmission addressed as set out below, with a confirming copy in writing

or If delivered by rcglsttrd air mail, courier or haul delivered ogoitst wiiUcn receipt

to the address set out be km cr to soch odicr address os su:h Party may dcugnale from

tune to tune, by notice given m accredancr with Out Clone ILL All notices

addressed oad sett in axordance with Uis Chose 17.1 Mil be effective upon actual

delivery or tecetf* thereof, provided the all web iwtices shall be deemed rtccired at

of 5 days frevn the troc the twice n icnt Irrespective of method 1 The

or documents to each Party oad the



Add revs:

Minim? of Natural Resource;*

Kurdistan Regional Government

I'.rbil. Kurdistan



Address; Hired Court St Peter Pori. (fccmxcy, Channel IslanJs. GY I 2NL

Atlcrtion: The Directors

Tel: -44 1481 727 664

Fax: -44 1481 724 662


No amendment of any provision ol this Agrccmcit shall be unless « is ir

writing and signed by each Party.

I7J WAivnt

No wuiver of any provision of this Agreement shall be effective unless it in vntinj.

and sijned by each Party who is waiving rights or against whom the waivo is ctaimcc

and each such waiver sliall be effective only in the specific instance and for the

specified purpose for which it was given. Ir addition, oo failure

Party w exercise, and no course of dealing wfch respect to. and no delay in exercising,

any right power or remedy under this Agreement shall operate as a waiver thereof

The rights and remcdcs provided in this Agreement shall be cumulative and not

exclusive of any rights or remedies provided by law.

17.4 F.ntim: A«;ar.fcMr-N r

This Agreement nnd the applicable provisions of the PSA. constitute the entire

underaandiitB between the Parties mid supersedes any and all previous

understandings, whether written or oral, between the Panics with respect to the

uibjccr mailer hereof

17.*: XlfVltlABllJTV

Any provision of this Agreement that is prohibited or unenforceable ia an)

jurisdiction shall not invalidate or render unenforceable such provision m any other


jurisdiction, and shall not invalidate t>r render unenforceable any of the other

provisions hereof in any jurisdiction.

17.6 CoNmuiNiMi. Information

Party in relation to the Company and the Project that is either marked

’confidential" or is by its nature intended to be for the knowledge of the

recipient nlonr. shall he considered confidential and shill he kept confidential

and shall not be disclosed during the term of this Agreement and for n period

of 5 years utter the expiration or earlier terminal bn of this Agreement to any

Person or entity who is not a Party except:

(i) with the prior written consent of the Party that originally disclosed the

confidential information;

(ii) to an Affiliate, provided that sveh Affiliate maintain* confidentiality at

provided m this Clause 17.6;

(iii) to a (joscmmeriial Authority when required by applicable law.

(iv) to the extent that ach doa and information is required to be furnished

in compliance with any applicable laws or regulation* nr pursuant Ui

any legal proceedings or because of any order of nny court binding

upon n Party;

(v» oubjeet to Clause 17.6(b). to o bona fi

(including an entity with whom a Shareholder b cooductirg borofnk

negotiations directed toward a merger, consol bain* or the mIc of ■

majority of its or an Affiliate's shares);

(vi) subject to Clause 17.6(b). to a third party consultant engaged to

prepare a dteumcni required for any of the Company's fending


(vii) to a bark or other financial lastitubon. to the extern necessary for a

Party arranging for funding of to oblgalkns unicr th.s Agreement.

(viii) to die c.Mcnt LujI suJi d** and inforualHX mud be tfecluxd pmuant

to any rules jr requirements of any goieminent or stock exchange jurisdiction over such Party or iu Affifiaies. provided dial if

an;. Party desires to diickwe informal kn in an arnual or periodic

report tc its cr its Affiliate-.' siarcbotdcr* and to the public, and such

duclosure is rot required pursaant to any rules or requirements of an)

go. emir cm or stock exchange, then such Party shall comply wrh dm

Clause 17.6;

the Project aad to its legal counsel, auditors and other consultants

subject to caci Party tafchg customary precautions to ensure such dau

ani information are kept confiCenlia ;


become* part of the publb domain;

confidci'tial hul* by suck Party; and

(w»> wkctc my iWji nr Mnnralinn is Utrt lawfully acquired by such Parly

fnm vurccs other than the Party who originally furnished suck iaformilinn in w*h Party, which sources arc not found In

keep such daU confidcntnl

lb) Disclosure punuanl to purigrnpls (v) and ivi) of Clause 17.6(a) shall no* he

mads unlm, btfow iuch diirknufr. the divining Pam Ka\ nhlawd •

written undertaking from clu recipient Party to keep the data and Information

strictly coulidcnlinl and net to u« or disclose the duty and information except

for the express purpose for which disclosure is to he made.

(c) If this Agreement is terminated, such Part) and its Affiliates will, and will use

their best c(T«*t» to c«uie thdf rc:p«xlnc officers, director*. employees

acccuntants. counsel, consultant*. ads son and agents ». destroy or deliver to

the Party which originally furnished such rmifirtmthl infermatiun to suck

Party, upon request, all documents anJ other male rials and all copies thereof,

obtained by such Party or Its AID Holes In connection with this Agreement tin

are subject to such confidence Ihc obligations of each Shareholder under this

Clause 17.6 shall survive termination of this Agreement.

purpose of their involvement in the Company

<«) Confidential internal too is. aiW shall remain. owned by. md proprietary la

the disc toting rally and its Afliiatcv Ihc dtsckstng Pans and is AfTlIiaiet

reserve the right to dtsdose, aaaiga. transfer, sell trade and Ikease it*

Confidential Information. in whole or in jnrt, at any time and from Lmc to

time, to any Person, entity or governmental body ri thdr sob discretion

without obtaining any content from, or providing any notice to. the receiving


17.7 Pl'BUT ANMMlNC’fc.M».NIJ»

If a Party wishes to issue or make any public anmamceaent or statement in any way

connected with this Agreement, the Company or the Pn?ccL h shall not do so unless,

before its release, that Party famishes the other Parties with a copy of such

annoujeement or statement and obtains the approval of the other Parties, except that

no Party shill he prohibited from issuing or milking any such public announcement or

statement if it is ncccisuiy to do » in order to comply with the applicable laws, rules

or regulations of any flovommonml Authority, legal proceedings or stock exchange

having Jurisdiction over such Party as vet out in paragraphs (iii) and (viii) of Clause

17.6(a) Iw addition, wtvere any proposed public amouixrmrd nr ojicmmt of a lyp-

Jescribed a this Clause 17.7 idetiifies or otherwise refers to a Party (otocr than the


•hall rot he made without the prior content of the Party so dentiled cr otherwise

referred to.


bach Party agrees to dx or cause to be done. all arts and thiags ard to exccinc and

deliver such furtte wrtlcn «recr»cnt5 and irsanarertv to may from time to tine be

reasonably required to carry mu the terms and pros mom jf this Agrecmcrt.

17.9 S». !-<)»»

All payments to be nude by any Shareholder under Ihs Agreement dull be made

without sct-olTor deduction on am account whatsoever

17.10 No Titiku Pkrson Ktcirrs

This Agreement is not for the benefit c* any Pcrvn or entity other than the Part**

and no other Person or entity shall he deemed to be a third party bcrvficuiy hereof or

entitled to any benefits hereunder.

17.11 Currency of Payment

Payments l«> he made by or to any Pars dial I be denominated and payable ia U S

Dollars, unless otherwise determined by the Parties to he ia anther freely

exchangeable currency, and any payments nade prior to th.s Agreement shall be

denominated in U.S. Dollars at the applicable exchange rale then presailing at the

rime of surh payment. F.xcrp* '•here otherwise r«frrssl> provided herrm al

payments uadcr Ms Agreenerfl toail be made by tranter or credt of lands to the

17.12 fomnvwtan

This Agmwnt may hr executed in more thin one coustrrpvt. c*h of whick dial,

be deemed » be to original.

17.13 WAIVE* Of I.MMl NtTY

To the extent that any of the Parties nay be or here a ter become entiled, in any

jurisdiction. lo claim fnr itxdf or its property, asset* or mvoiiev immunity (for any

reason whatsoever) in respect of its obligations under this Agreement fron scrsice of

proto*. suit, juriidiction of iny court, jldgirvnl. crt\cr. altathmrr* (before or

after judgment or award). setoff. execution of a judgment or «

•f its properly, assets or revenues such an mmimly (whether or »4 clamed) each

Party hereby nruovaHj agrees ao* «c claim and hereby irrevocably waives web

17.14 Govuwihc Law


 17.15 CONFLICT*

:n the event of any codlict between this Agreemctt and the Bs-U* v the provision*

of this Agreement shall prevail. In addition, the Shareholders shall talc all actio#

accessary i» desfable to effect all nmmliwnK to the By-l iwt to avoid any sue*


17.16 EXKftSCS

Except us otherwise provided herein, ull costs and expenses incurred in connection

with this Agreement shill he paid by the Party incurring such a»st or expense.

17.17 SurrnssoRS and Assigns

The provisions of this Agreement thull be binding upon and inure to tire benefit of tin;

Parties and their respective successors and assigns; provided that no Party may assign,

delegate or otherwise transfer nn> of its rights or obligations under this Agreement

without the prior written consent of the other Pirtics. except otherwise provided




IN WITNESS WHEREOF, the Panics, by their respective officers duly authorised, have

caused this Agreement to be duly executed and delivered as or the date hereof.



Ashti Hawrani

Minister of Natural Resources

On behalf of the Ministry of Natural

Resources in the Kurdistan Region