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 Execution Copy


























PRODUCTION SHARING





CONTRACT























THE KURDISTAN REGIONAL GOVERNMENT OF IRAQ

















Hess Middle East New Ventures Limited











and

















Petroceltic Kurdistan Limited











(Dinarta Bloch)


 Production Shoring Controct Dinorto











Table of Contents





Clause 1- Definitions; Construction 2


Definitions 2





Construction 16





Clause 2 - Scope


18


Exclusive Right 18


Compliance 18





Permits 19


Best Practices 19





Sole Risk 20


Auxiliary Rights 20





Liability Attribution 20





Clause 3- Contractor; Participating Interests


21


Contractor 21


Participating Interests 21





Clause 4 - Government Interest


21


General 21





Assignment 22





Clause 5 - Operator; Joint Operating Agreement 24





Operator 24





Joint Operating Agreement 25


Clause 6 - Term


26


General 26





Exploration Rental 26





Exploration Period 26


Sub Periods 26


Extensions of Sub-Periods 27





Expiration of Exploration Period 28





Guaranteed Amount 28


Development Period 29





Termination of Production Operations 29





Clause 7 - Relinquishment 30


Mandatory and Considered Relinquishment 30





Voluntary Relinquishment 30





General Qualifications 31


Cleanup 31





Effect of Relinquishment 31

















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Clause 8 - Management Committee 32


Establishment 32


functions 32


Regular Meetings; Venue 33


Extraordinary Meetings 33


Action by Members without Meeting 33


Agenda; Minutes 33


Chairman 34


Quorum 34


Voting 34


Subcommittees 35


Clause 9 - Guarantees 35


First Sub Period Obligations 3S


Second Sub-Period 3S


Gas Plan Guarantees 36


Accession 36


Clause 10 - Minimum Exploration Work Obligations 36


Commencement 36


Minimum Work Obligations 36


First Sub-Period 36


Second Sub-Period 37


Qualifications 37


Clause 11 - Exploration Work Programs 39


General 39


Details 39


Approval by Management Committee 39





Clause 12 - Discovery; Appraisal; Development 39


Discovery Report; Relinquishment 39


Appraisal Work Program and Budget 40


Appraisal Report and Declarations 41


Development Plan - Crude Oil 42


Clause 13 - Development Work Program 43


General 43


Development Work Program and Budget 43


Production Work Program and Budget 44


Production Rental 44


Clause 14 - Natural Gas 45


Definitions 45


General 45


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Flaring 47


Gas field Holding Period Application 47


Gas field Holding Period 48


Gas field Holding Period Rental 49


Early Termination and Relinquishment 49


Government Priority Rights 49


Domestic Gas Marketing Operations SI


Consideration of Gas Disposition Plans - Export and Domestic S2


Gas Export Plan S2


Domestic Gas Plan S3


Development Plan S3


Gas Development Period S4


Surplus Associated Gas S4


Gas Pipelines 55


Clause 15 - Accounts; Operations 55





Accounts 55


Audit 56


Clause 16-Other Contractor Rights and Obligations 56


Permanent Representative 56


Conduct of Petroleum Operations S7


Information and Reports S7


Requirement for Petroleum Operations S7


Supervision S7


Access to facilities S7


Use of facilities SB


toss or Damage SB


Intellectual Property Rights SB


Litigation SB


Production Rales SB


Lifting SB


Regional Consumption Requirements 59


Clause 17 - Use of Land and Existing Infrastructure 60


General 60


Third Party Lands 60


Infrastructure 60


Petroleum Operations 61


Adjoining Properties 61


Access 61


Clause 18-Government Assistance 62











IV


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Clause 19 - Assets and Materials 63


Genera/ 63


Procurement Procedures 63


Clause 20 - Title to Assets 63





Title Transfer 63


Leased Asseis; Subcontractor Assets 64


Clause 21 - Use of Assets 64


Right 64


No Transfer by Government 64


Contractor Redeployments 64


Clause 22 - Subcontractors; Expatriates 64


Generai 64


Loco/ Preference 64


Procurement Procedures 65


Clause 23 - Personnel; Training; Assistance 65


Expatriate Work Permits 65


Local Preference 65


Ministry Capacity BuiJding Payments and in Kind Assistance 65


Training 66


Training Expense Allocation and Payment 66


Environment fund Payments 67


Clause 24 - Royalty 67


Definitions 67


Obligation 67


Royalty Rate 68


Delivery 68


Payment in Cash 68


Clause 25 - Recovery of Petroleum Costs 69


Definitions 69


Cost Recovery 69


Valuation of Available Petroleum 69


Contractor Entitlement to Cost Oil 69


Contractor Entitlement to Cost Gas 70


Recovery Waterfall; Limitations 70


Delivery 70


Ring Fence 71


Clause 26 - Profit Petroleum 71


Definitions 71








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Calculation of R factor 71


entitlements 72


Delivery Entitlements 73


Production Estimates 73


Annual Production Report 74


Cost Recovery for Government Costs 74


Clause 27 - Valuation and Metering 74


Valuation of Crude Oil 74


Valuation of Natural Gas 75


Production Statement 75


Measurement 7S


Clause 28 - Sales Assistance 76





Clause 29 - Currency; Financial Provisions 77


Reference Currency 77


Currency Conversion 77


Payments; No Offset against Government 77


Payments to fund for Revenue Sharing 78


Currency Assurances 78


Clause 30 - Customs 79


Clause 31 - Taxes 80


General 80


Income Tax 80


Exemptions 80


Withholding for Iraq Nationals 81


Double Tax Treaties 81


VAT Cost Recovery 81


Independent Obligations 81


Clause 32 - Bonuses; Capacity Building Payments 81


Capacity Building Bonus 81


Pro

Capacity Building Payments 82


Capacity Building Account 85


No Cost Recovery 86


Clause 33 - Pipelines 86


Crude Oil Pipelines 86


Gas Pipelines 87





Clause 34 - Unitisation


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Clause 35 - Indemnification; Insurance 88


Liability 88


indemnification 88





Notice of injuries and Emergencies 89


Consequentiai Damages Limitation 90





insurance 90





Clause 36 - Records; Confidentiality 91





information 91


Confidential information 91





No Trading 92





Clause 37 - Environmental; Worker Safety and Health 93


General 93





EIR 94


EiA 94





EMMP 95


Seif Monitoring Reports 95





Relinquished Areas 95


National Parks and Nature Reserve Areas 95





Expenditures 95


Pre-existing Conditions 96





Suspension of Operations 96





Clause 38 - Decommissioning 96





Acknowledgement of future Law 96


Decommissioning Plan and Budget 97





Decommissioning Reserve Fund 97





Clause 39 - Assignment; Change of Control 98


General 98





Assignment to Affiliates and other Contractor Entities 99





Assignments to Third Parties 99


Government 99


Change of Control 100





Taxes 100





Clause 40 - Force Majeure


100


Definition 100


f//«t 101





Clause 41 - Sovereign Immunity 103





Clause 42 - Dispute Resolution 103








Cxclmlon 103











VII


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Notice of Dispute 203


Negotiation 203


Mediation 204


Arbitration 204


Expert Determination 20S





Clause 43 - Fiscal Stability 105


Genera) 20S


Acknowledgment of Future Laws 20S


Change of Tax Law 206


Disputes 206


Clause 44 - Communications; Notices 107


Clause 45 - Termination 108





Genera) 20B


Contractor Termination Rights 209


Automatic Termination 209


Corrupt Practices ioivs 209


Other Grounds for Termination 209


Consequences of Termination 222





Clause 46 - General Provisions 112


Counterparts 222


Amendments; Waivers 222


Regionai OH and Gas Councii Approval 223


Costs 223


Effective Date 223


Governing Law 223


Entire Agreement 223











ANNEXES:


Annex A


Map of Contract Area


Annex B Accounting Procedure


Annex C Form of Guarantee


 PRODUCTION SHARING CONTRACT











Thil Production Shjring Contract (thii "Contract”) is between:


Ul The Kurdistan Regional Government of Iraq (the "Government'); and


(21 Hess Middle East New Ventures Limited, a company established and existing


under the laws of the Cayman Islands, whose registered office is at Caledonian


Trust (Cayman) Limited, Caledonian House, 69 Or. Roy's Drive, P.O. Box 1043,


George Town, Grand Cayman. Cayman Islands KYI -1102; (''Hess*) and


(3| Petroceltic Kurdistan Limited, a limited liability company organized and


existing under the laws of the British Virgin Islands under company number


1551655, whose registered office is at 3rd Floor. Windward House. La Route de la


Liberation, St Helier, Jersey ('’PKL*')


(Hess and PKL together the ’Contractor* and each a ^Contractor Entity*).








Recitals


A. The Government has determined that this Contract will facilitate the development of


the petroleum wealth of the Kurdistan Region in a way that achieves the highest benefit


to the people of the Kurdistan Region and all of Iraq, will promote the economic


development of the Kurdistan Region and Iraq and the social welfare of its people, uses


the most advanced techniques, and accesses best market principles to encourage


investment.


B. The Government enters into this Contract pursuant to the Government's rights and


authorities under the Constitution of Iraq and the Kurdistan Oil and Gas Law 2007. In


accordance with the Constitution of Iraq, the prevailing Laws of the Kurdistan Region


comprise the Kurdistan Region Law and. with regard to a matter wholly within the


exclusive jurisdiction of the Government of Iraq, the federal Laws of Iraq.


C. Each Contractor Entity and the Government affirms its ongoing commitment and


adherence to the Principles and Criteria of the Extractive Industries Transparency


Initiative |EITI).


D. Each Contractor Entity has assured the Government that such Contractor Entity has,


together with its Affiliates:


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


carry out Petroleum Operations in the Contract Area under the terms of this


Contract; and


(2) a record of compliance with the principles of good corporate citizenship.


 Production Shoring Controct Dinorto








E. This Contract is a production sharing contract- The object of this Contract is for the


Contractor to undertake Petroleum Operations in the Contract Area at the Contractor's


sole risk and expense.


f. Neither the Contractor, nor any Contractor Entity will recerve any compensation for its





services, nor any reimbursement of its expenditures under this Contract, except for the


share of Petroleum from the Contract Area to which it may become entitled under this


Contract. If there is no Commerc-al Discovery in the Contract Area, or if the production


achieved from any Production Area is insufficient to reimburse the Contractor or any


Contractor Entity, each Contractor Entity will bear its own losses without any obligation


of the Government to provide any reimbursement or other compensation.


G. It is the policy of the Government to: (1) ensure that Natural Gas is first made available


to satisfy the consumption requirements and needs of the people of Iraq; (2) determine


and control all exports of Natural Gas produced in the Region; and (3) act, directly or


indirectly through a designated Affiliate of the Government or other designee of the


Government, as the aggregator of all Natural Gas produced in the Region for export.





H. Nothing in this Contract is intended to confer any right upon the Contractor other than


those rights expressly granted in this Contract. This Contract does not transfer


ownership of any Petroleum in the ground to the Contractor or any Contractor Entity.





I. Each Contractor Entity and its ultimate parent company have provided the Government


with a letter of representations and warranties dated on or before the date of this


Contract (the "Letters of Representations") as an inducement for the Government to


enter into this Contract, and upon each of which the Government is relying in entering


into this Contract.


J. Concurrently with the signing of this Contract, Mess Corporation and Petroceltic


International PLC have delivered a guarantee in favour of the Government as required


by this Contract.


K. Prior to this Contract. Hess and PKL delivered a Confidentiality and Pre Contractual


Understandings Agreement, which continues in accordance with its terms and is not


impaired by this Contract, except as expressly set forth herein.





Clause 1 - Definitions; Construction





DfflNlTIONS


1.1 Unless Otherwise specified:





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


Accounts is defined in clause 15.1.


Accounting Procedure means the Accounting Procedure attached to this Contract as


Annex B and constituting an integral part of this Contract.


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


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











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 Production Shoring Controcr Oinorto








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


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


part of its property or assets or its ceasing or threatening to cease to carry on business


and any equivalent or analogous procedures by whatsoever name known and in


whatsoever jurisdiction. The "winding-up* of a Person also includes the amalgamation,


reconstruction, reorganisation |by wav of voluntary arrangement, scheme of


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


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


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


on business or has assets.


Adjacent Contract Area is defined in clause 34.1.


Adjustment Date is defined in clause 27.7.1.


Affiliate means, in relation to any Person |the ‘'first Personal, another Person that is:


(a) the ultimate holding company of such first Person and any subsidiary (other


than the first Person) of the first Person's ultimate holding company; or


(b) if the first Person is not a subsidiary of another company, any subsidiary of the


first Person.


For the purpose of this definition, "holding company* and "subsidiary" have the


meanings given to those expressions in Section 1159 of the Companies Act 2006


(England).


Annual Reconciliation Statement is defined in clause 32.9.


Agreed Rate means interest compounded on a monthly basis, at the rate per annum


equal to the three-month term. London Interbank Offered Rate (LIBOR ratel for U$$


deposits, as published the Financial Times (London Edition) or if not published, then by


The Wall Street Journal (New York Edition), plus 2.00U, applicable on the first


International Business Day prior to the due date of payment and thereafter on the first


Business Day of each succeeding calendar month. If the aforesaid rate is contrary to any


applicable usury law, the rate of interest to be charged shall be the maximum rate


permitted by such applicable law.


Applicable Law means, as of any time of determination. Kurdistan Region Law and


federal Laws of Iraq recognised by the Government as applicable in the Kurdistan


Region.


Appraisal and Appraisal Operations means appraisal work Ibeing part of Exploration)


and a program carried out following a Discovery for the purpose of delineating the


Reservoir to which that Discovery relates in terms of measurement of thickness and


lateral extent and estimating the quantity of recoverable Petroleum therein, and


includes geological, geophysical, aerial and other surveys, stratigraphy tests, the drilling


of shot holes, core holes. Appraisal Wells and other related holes and wells, and the


purchase or acquisition of Assets and Materials therefor.


Appraisal Area means the area defined in clause 12.4.


Appraisal Report means, in respect of a Appraisal Operations in respect of a Discovery, a


report in such form as required by the Government and that includes:














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 Production Shoring Controcr Oinorto








<•» geological conditions, such as structural configuration, physical properties, and


stratigraphy;


(b) the thickness and extent of Reservoir rocks;


(c) petrophysical properties of the Reservoirs;


«) type of substances obtained;


Volumes of Crude Oil and Natural Gas initially in place;


(0


the chemical composition, the physical properties and quality of any Crude Oil


discovered;


(Bl pressure, volume and temperature analysis of the reservoir fluid;





(b) the productivity indices for wells tested at various rates of flow;


(i) Crude Oil characteristics, including oil gravity, sulphur percentage, sediment


and water content and product yield pattern;


0) Natural Gas composition;


M estimates of recoverable reserves;





(l) the estimated production capacity of the Reservoirs;


(m) production forecast per well;


(") a preliminary estimate of recoverable reserves; and


(o) such other information as reasonably required by the Government or generally


provided in such reports in accordance with Best Practices.





Appraisal Work Program is defined in clause 12.4.


Approved means approved by the Management Committee and the Government.


Approved Budget means a Budget that has been approved by the Management


Committee and the Government together with an Approved Work Program.


Approved Domestic Gas Marketing Work Program and Budget is defined in clause 14.1.


Approved Gas field Appraisal Work Plan and Budget is defined in clause 14.1.


Approved Work Program means a Work Program that has been approved by the


Management Committee and the Government.


Approved Work Program and Budget means an Approved Work Program together with


a Budget with respect thereto that has been approved by the Management Committee


and the Government.





Arm's-Length Sale(s) means, in respect of sales of Petroleum, a sale in freely convertible


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


common interest whatsoever with each other that could reasonably influence the sales


price. The following are not Arm's Length Sales;


la) sales between or among any of the Contractor Entities and their respective


Affiliates;





(bi sales involving the Government or the Government of Iraq;





(c) sales involving swaps or exchanges; and











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 Production Shoring Controcr Oinorto








(d) transactions which are not a routine sales practice in the international oil and


gas industry.


Assets means equipment and other property, whether real or personal, owned or


leased, used or expected to be used by the Contractor in connection with Petroleum


Operations.


Assets and Materials is defined in clause 19.1.


Assign and Assignment means any transfer, conveyance, novation, merger (including


"reverse triangle* mergers). Encumbrance or other dealing in any manner whatsoever or


howsoever accomplished or characterised (whether legally, beneficially, or otherwise,


into any form of trust or fiduciary holding, and whether conditionally or not). Assignee


means a Person accepting an Assignment from a Party, and Assignor means the Party


making an Assignment to another Person.


Associated Gas means Natural Gas found in association with Crude Oil, either dissolved


in the Crude Oil or as Gas-cap Gas. that is recovered as Natural Gas at the surface by


separation or other primary field processes.


Audit Request Period is defined in clause 15.3(a).


Available Crude Oil is defined in clause 25.1.


Available Gas is defined in clause 25.2.


Available Petroleum is defined in clause 25.3.





Barrel means a quantity of 42 US gallons as a unit to measure liquids, at a temperature


of 60* Fahrenheit and pressure of 14.7 psi.


Base Exploration Term is defined in clause 6.3.





Best Practices means standards that are no less stringent than the best practices,


methods, and procedures in carrying out petroleum operations consistent with a


reasonable degree of prudence, as evidenced by the best pract>ces of experienced


operators in the exploration, development, and production of petroleum principally


aimed at ensuring:


(a) conservation of Petroleum resources, which implies the utilisation of methods


and processes to maximise the recovery of Petroleum in a technically and


economically sustainable manner, control of reserve decline, and minimisation


of losses at the surface;


(b) operational safety, including the use of methods and processes that promote


occupational security and the prevention of accidents;


(c) environmental protection and worker safety, including best methods and


processes which minimise the impact of Petroleum Operations on the


environment.


fd) that all materials, resources, and supplies are available to meet the





Contractor's obligations hereunder under normal conditions and anticipated


abnormal conditions;





(o that sufficient engineering, design, construction and safety personnel are


available, are adequately experienced and trained to conduct Petroleum


Operations, and provide required training properly and within Applicable Law.








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manufacturer's gudelines and specifications, and are capable of responding to


abnormal conditions and anticipated abnormal conditions;


(f) that appropriate monitoring and testing is done to ensure that Assets are


capable of functioning, and will continue to function, as designed and to


provide assurance that Assets will function property under normal conditions


and anticipated abnormal conditions;


(g| that appropriate protective devices and design features are provided to ensure


that safe, reliable, long term Petroleum Operations can be achieved;


(h) that equipment is operated at all times in a manner compliant with Applicable


Law, applicable Permits, and this Contract, in accordance with all


manufacturers' warranties, and in a manner safe to workers, the general public,


the environment, plant and Assets;


(i) notwithstanding the requirements of the ASME Boiler & Pressure Vessel Code


Section VIII. that all pressurised equipment handling hydrocarbons (whether


such Asset is new or used| is subject to hydraulic pressure testing prior to use;


and


(j) that full and complete records of accounts are kept and maintained.


Budget means an estimate of income and expenditure approved, or as the context may


require, to be approved by the Management Committee in accordance with this


Contract in respect of all Petroleum Operations included in a Work Program.


Calendar Year means a period of 12 consecutive Months, beginning 1 January and


ending on 31 December of the same year.


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


the name of. and maintained by. the Government for the purposes set forth in clause


32.16.


Capacity Building Bonus >s defined in clause 32.1.2.


Capacity Building Payment means the obligation of each Contractor Entity to pay an


amount equal to the Capacity Building Value.


Capacity Building Payment Monthly Statement is defined in clause 32.7.


Capacity Building Value means during any period for each Contractor Entity an amount


in USS equal to the value, determined in accordance with clause 27. of 20% of the Profit


Petroleum attributed to such Contractor Entity.


Chairman is defined in clause 8.9.


Change of Control is defined in clause 39.10.


Change of Tax Law is defined in clause 43.4.


Commercial Discovery means a Discovery, after taking into account available technical,


operational, commercial, and financial data, including recoverable reserves of


Petroleum, sustainable regular production levels and other material technical,


operational, commercial and financial parameters, which is expected to result in both


full recovery of Petroleum Costs and a reasonable return on investment.














E


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Commercial Production means Production of Petroleum under an Approved Production


Work. Program and Budget of regular production and sale or other disposition.


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


of Iraq in the general referendum of 15 October 2005.


Contract means this production sharing contract.


Contract Area means, as of the Effective Date, the area shown on the map in Annex A.


as such area may be relinquished or otherwise reduced in accordance with this Contract.


Contract Year means a period of 12 consecutive Months starting from the Effective Date


or any anniversary of the said Effective Date. In the case of the final Contract Year of this


Contract, the Contract Year will end on the termination date.


Contractor means all the Contractor Entities, together.


Contractor Entity means, as at any time of determination. Mess and PKL and their


respective Permitted Assignees and successors. The Government is not a Contractor


Entity. A Public Company or other Person that is a Government Interest Holder is not a


Contractor Entity solely by virtue of being a Government Interest Holder.


Control is defined in clause 39.10(b|.


Corrupt Practices taws means, as applicable:


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


and corrupt business practices;


(b) the principles of the Laws of the place of incorporation of each Contractor


Entity and of each place of incorporation of its ultimate parent company in


respect of bribery, kickbacks and corrupt business practices;


(c) the principles of the Foreign Corrupt Practices Act of 1977 of the United States


of America (Pub. L. Ho. 95-213 §§ 101-104 ef icq), as amended;


fd) the principles of the OECD Convention on Combating Bribery of Foreign Public


Officials in International Business Transactions, signed in Paris on 17 December


1997. which entered into force on 15 February 1999. and the Convention's


Commentaries; and


fe) the principles of the UK Bribery Act 2010.


Cost Gas is defined in clause 25.9.


Cost Oil is defined in clause 25.8.


Cost Petroleum is defined in clause 25.11.


Cost Recoverable means recoverable by the Contractor as Petroleum Costs in


accordance with the provisions of this Contract (including the Accounting Procedure!.


Crude Oil means all liquid hydrocarbons (including crude mineral oil, condensate,


asphalt, ozokerite, and bitumens) in both solid and liquid form in its natural state or


obtained from Natural Gas by condensation or extraction.


Cumulative Costs is defined in clause 26.1.


Cumulative Revenues is defined in clause 26.1.











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Data means records, information, or data of any sort, whether raw, derived, processed,


interpreted or analysed, obtained or produced pursuant to this Contract, including


geological, geophysical, petrophysical, engineering, drilling, production, well location,


well log. core sample and completion status records, information and data.


Decommissioning Costs means all the costs and expenditures incurred by the


Contractor when carrying out Decommissioning Operations, including those defined in


the Accounting Procedure.


Decommissioning Operations mean closing down, decommissioning, abandoning, or


wholly or partly removing Assets and Materials in or from the Contract Area, keeping


Assets and Materials in the Contract Area in a safe condition following cessation of


production pending abandonment, and restoration of land in the Contract Area.


Decommissioning Plan and Work Program is defined in clause 38.2.


Decommissioning Reserve Fund is defined in clause 38.6 and includes alt contributions


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


Delivery Point means the point after extraction either as specified in an Approved


Development Plan for a Production Area, or at such other point (including a point of sale


in respect of Natural Gas| which may be agreed by the Parties, at which Petroleum


produced and saved »s metered for the purposes of clause 27.5, valued for the purposes


of clause 27.1, and. in the case of Crude Oil. available to be lifted by a Party.


Development Costs means all the costs and expenditures incurred by the Contractor


when carrying out Development Operations in accordance with an Approved


Development Work Program and Budget (subject to clause 2.6|.


Development and Development Operations means, in respect of a Production Area, all


operations or works conducted in accordance with an Approved Development Plan and


Budget up to the Delivery Point with a view to developing a Production Area.


Development Period is the period during the term of this Contract (a) that is not the


Exploration Period or a Gas Field Holding Period and (b| during which the Contractor is


entitled to conduct Development Operations.


Development Plan means a plan prepared by the Contractor in accordance with Best


Practices, and which includes details of


la} the delimitation of the Production Area, taking into account the results of the


Appraisal Report regarding the importance of the Petroleum Field within the


Appraisal Area;


(b) drilling and completion of Development Wells;


(c) drilling and completion of Injection Wells;


(d) the sequencing and timing of the development of Reservoirs;


(e) the expected First Production of Petroleum;


(f) laying of pipelines;


(g| installation of separators, tanks, pumps and any other associated production


and injection facilities for the production;


(h) treatment and transportation of Petroleum to processing and storage facilities;


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(i) the construction of transportation pipelines inside or outside the Contract


Area;


(j) construction of storage facilities for Petroleum;


(k| plans for the use or flaring of Natural Gas;


(l) training commitment in accordance with clause 23;


(m) preliminary decommissioning and site restoration plans;


(n) a detailed forecast of annual capital expenditures, operating expenditures, and


abandonment expenditures,


(o) each Contractor Entity's source of capital; and


Ip) any other operations and expenditures not expressly provided for in this


definition, but the Contractor expects will be reasonably necessary for


Development Operations, Production Operations, and delivery of Petroleum


and disposition of Natural Gas produced from the Contract Area.


Development Work Program and Budget means the Work Program and Budget


prepared by the Contractor pursuant to clause 13.2.


Discovery means the finding of a previously unknown accumulation^} of Petroleum in


one or more Reservoirs within the Contract Area and which have, for the first time, been


demonstrated through drilling to contain Petroleum that can be recovered at the


surface in a flow measurable by conventional petroleum industry testing methods and


may be considered for Appraisal.


Discovery Report is defined in clause 12.2.


Dispute means a dispute or claim of any and every kind or type, arising out of or relating


to this Contract (including those sounding in tort) between all or any of the Parties.


Domestic Gas Marketing Operations is defined in clause 14.1.


Domestic Gas Plan is defined in clause 14.1.


Domestic Market is defined in clause 14.1.


Effective Date is defined in clause 46.8.


EMS Monitors mean accredited professionals, including certified safety professionals,


certified industrial hygienists, registered occupational hygienists or their equivalents.


EHS Standards is defined in clause 37.2.


EIA is defined in clause 37.7.


EIR is defined in clause 37.6.


EMMP is defined in clause 37.8.


Encumbrance and Encumber means any mortgage, charge, pledge, hypothecation, lien,


assignment by way of security, title retention, option, right to acquire, right of pre¬


emption. right of set off. counterclaim, trust arrangement, overriding royalty, net profits


interest, or any other security, preferential right, equity or restriction, any agreement to


give or to create any of the foregoing and any transaction which, in legal terms, is not a


secured borrowing but which has an economic or financial effect similar to that of a


secured borrowing.


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Environment Fund is defined cn clause 23.13.


Expatriate means any employee not normally resident in the Kurdistan Region or Iraq,


who is employed by either Contractor Entities or Subcontractors for purposes of this


Contract and who is engaged on terms which provide for the payment of passages to


and from the Kurdistan Region or Iraq.


Expert means, with respect to a Dispute, an independent person with appropriate


qualifications and experience, who:


(a} has been agreed upon between the Parties to the Dispute; or


(b) has been nominated by the President of the Energy Institute in London,


England, on the application of any Party to the Dispute failing agreement within


14 days of either:


(1) approval by the Management Committee of the Terms of Reference;


or


(2) the date the Parties receive notice that the Expert is unable or


unwilling to complete the reference to Expert determination.


Exploration means such geological, geophysical, aerial and other surveys as may be


contained in an Approved Work Program and Budget with a view to discovering


Petroleum in the Contract Area previously not known to have existed using geological,


geophysical and other methods and the drilling of Exploration Well(s), and includes: (a)


any activity in connection therewith or in preparation therefor, and any relevant


processing; and |b) Appraisal.


Exploration Costs means Petroleum Costs incurred by the Contractor Entities when


carrying out Exploration Operations in accordance with an Approved Exploration Work


Program and Budget Isubject to dause 2.6}.


Exploration Operations means any and all operations conducted in respect of


Exploration, including Appraisal Operations.


Exploration Period is defined in clause 6.3.


Exploration Rental is defined in clause 6.2.


Exploration Work Program and Budget means an exploration work program and budget


prepared pursuant to clause 11.1 or 11.2.


Export Gas Marketing Operations is defined in clause 14.1.


Export Markets is defined in clause 14.1.


Export Plan Evaluation Period is defined in clause 14.27.


Extended Exploration Term is defined in clause 6.3.1.


First Exploration Well s defined in clause 10.3(d).


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


Associated Gas (as the case may be) first commences, by flowing at the rate forecast in


the Development Plan without interruption for a minimum of 48 hours.


First Sub-Period is defined in clause 6.4(a).








10


 Production Shoring Controcr Oinorto








First Sub-Period Guaranteed Amounts is defined in clause 9.1.1.


Force Majeure is defined in clause 40.1.


Force Majeure Estimate is defined in clause 40.11.


Gas means Natural Gas, both Associated Gas and Non-Associated Gas, and all of its


constituent elements produced from any Well in the Contract Area. Gas may be


produced from Natural Gas Wells or in association with Crude Oil from Crude Oil Wells.


Gas-cap Gas means free gas that overlies and is in contact with significant quantities of


Crude Oil in a Reservoir.


Gas Development Period Early Termination Notice is defined in clause 14.33.


Gas Export Plan is defined in clause 14.1.


Gas Field means an area in the Contract Area consisting of a single reservoir or multiple


reservoirs all grouped on, or related to. the same individual geological structural feature,


stratigraphic conditions, or both, which either:


(a) is a Discovery of Non-Associated Gas; or


lb) is a Discovery of Crude Oil with Associated Gas that cannot be a Commercial


Discovery without a plan for the economic disposition (excluding flaring or re¬


injection) of the Associated Gas. and notwithstanding that liquids and


condensates are included in the definition of Crude Oil (i.e.. a condensate


Reservoir is a Gas Field).


Gas Field Holding Period is defined in clause 14.10.


Gas Field Holding Period Application is defined in clause 14.8.


Gas Field Holding Period Rental is defined in clause 14.13.


Gas Marketing Costs means costs and expenditure incurred by the Contractor in


accordance with a Domestic Gas Marketing Work Program and Budget.


Gas Marketing Operations is defined in clause 14.1.


Government s defined in the preamble.


Government Business Day means a day between the hours of 9:00am and 3:00pm


when the offices of the Government are legally required to be open to conduct the


business of the Government.


Government Interest is defined in clause 4.1.


Government Interest Holder is defined in clause 4.2.


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


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


division, agency, authority, council, committee, or other constituent element thereof.


Guarantee means a Guarantee in the form and content as set forth in Annex C.


Guaranteed Amount means either the First Sub-Period Guaranteed Amount or the


Second Sub-Period Guaranteed Amount, as applicable.








11


 Production Shoring Controcr Oinorto








Hess is defined in the preamble.


Holding Period Early Termination Notice is defined in clause 14.28.


Income Tax and Incomes Taxes mean, in respect of any Person, Taxes imposed by


Kurdistan Region Laws on the income of such Person.


International Banking Day means, in respect of a Party making a payment and a Party is


to receive a payment, a day on which banks are open to conduct business by electronic


transfer of funds in both the place from where the funds are to be sent and the place


where the funds are to be received.


International Market Price is defined in clause 27.2.


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


Joint Operating Agreement means an agreement between the Contractor Entities for


the purpose of regulating the relationship between the Contractor Entities in respect of


this Contract.


Kurdistan Region means the federal Region of Kurdistan recognised by the Constitution


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


Law.


Kurdistan Region Law means Laws of the Kurdistan Region and the Laws of any


governmental authority of any district, sub-district, municipality, territorial, or other


political subdivision of the Kurdistan Region.


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


Iraq (Law No. 22 of 2007|.


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


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


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


of any regulatory, self-regulatory or other authority or organisation having the force and


effect of a law.


LCIA s defined in clause 42.4.


Loss or Expense means any liability, toss, claim, settlement payment, cost and expense,


interest, award, judgment, damages (including consequential, indirect, and punitive


damages), fees or other charge and, to the extent permitted by applicable law. any court


filing fee, court cost, arbitration fee or cost, witness fee. and each other fee and cost


(including attorneys' fees, other professionals' fees, and disbursements! of investigating


and defending or asserting a claim (including a claim for indemnification!.


Management Committee s defined in c'ause 8.


MER ('Maximum Efficient Rate"| means in respect of a Reservoir, the maximum 'ate of


production of Crude Oil. without excessive decline of production or excessive loss of


Reservoir pressure, in accordance with good oil-field practice and the provisions of


clause 16.16.


Minimum Exploration Obligations is defined in clause 10.2.











12


 Production Shoring Controcr Oinorto








Minimum Financial Commitment means:


fa} in respect of the First Sub-Period, the amounts set out in clause 10.3; and





(b) in respect of the Second Sub-Period, the amounts set out in clause 10.4.


Month means a calendar month according to the Gregorian calendar.


Natural Gas means a mixture of hydrocarbons and varying quantities of non¬


hydrocarbons that exist either in the gaseous phase or in solution with Crude Oil in


natural underground Reservoirs remaining after the extraction of liquid hydrocarbons


(including condensates) from wet gas.


Natural Gas BOC means 6,000 standard cubic feet of Natural Gas to one Barrel of Crude


Oil.


Non-Associated Gas means Natural Gas that is found in a Reservoir either (a) without


association with Crude Oil, or (b} in association with quantities of Crude Oil that, without


a plan of disposition of the Natural Gas other than by flaring or reinjection, by itself


cannot be commercially produced.


Notice of Dispute is defined in clause 42.2.


Notice of Early Termination of Gas Field Holding Period is defined in clause 14.14.


Oil Field means an area within the Contract Area consisting of a single Reservoir or


multiple Reservoirs all grouped on, or related to. the same individual geological


structural features, stratigraphic conditions, or both, and that (a) may become part of a


single Production Area for Crude Oil and (b) is not a Gas Field.


Operator means the entity designated by the Contractor pursuant to clause 5 as the


'’Operator'*.


Original Contractor Entity is defined in clause 43.4.


Parties mean the Government and each Contractor Entity, and Party any of the


Contractor Entities or the Government. The Government or a Public Company in its


capacity as holder of all or part of the Government Interest is Party only in respect of


such Government Interest.


Permit means a licence, permit, consent, authorisation, or other permission of the


Government or any relevant public authority in the Kurdistan Region in respect of


Petroleum Operations.


Permitted Assignee means, as applicaale: (a| ar. Assignee that has received an


Assignment in compliance with clause 39, or, |b) in the case of the Government Interest,


an Assignee of the Government Interest that received an Assignment thereof in


compliance with clause 4.


Person means an individual or a corporation, limited liability company, partnership


(whether or not having separate legal personality!, |oint venture, trust, unincorporated


organisation, association, government, agency or political subdivision thereof or any


other entity.


Petroleum means:


(a} any naturally occurring hydrocarbon in a gaseous or liquid state;








13


 Production Shoring Controcr Oinorto








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


(c) any of the foregoing that has been returned to a Reservoir.


Petroleum Costs means all costs and expenditure incurred by the Contractor in respect


of Petroleum Operations, including, without limitation, all costs and expenditure


incurred under clause 4.1.


Petroleum Field means a Gas Field or an Oil Field.


Petroleum Operations means all Exploration Operations. Gas Marketing Operations.


Development Operations. Production Operations, and Decommissioning Operations,


and any other activities or operations related to any of such operations authorised,


required, or contemplated by this Contract or Applicable Law.


Pipeline Costs is defined in clause 33.5.


PKL is defined in the preamble.


Production Area means an area within the Contract Area:


(a) encompassing the closure of a Petroleum bearing Reservoir outlined following


Appraisal; and


(b) which is delineated and designated as a "production area" in an Approved


Development Plan.


Production Bonus is defined in clause 32.2.


Production Costs means all the costs and expenditure incurred by the Contractor


Entities in carrying out the Production Operations in accordance with an Approved Work


Program and Budget (subject to clause 2.6) which the Contractor «s entitled to recover


as a Petroleum Cost.


Production Operations means operations and all activities related thereto carried out by


the Contractor for Petroleum production from a Production Area from the start of


Commercial Production, such as extraction, injection, stimulation, treatment, storage


within the Production Area, lifting and related operations. No operations or activities of


the Contractor after the Delivery Point are within the scope of the definition.


Production Rental is defined in clause 13.6.


Production Work Program and Budget means a Work Program and Budget prepared for


Production Operations pursuant to clause 13.4.


Profit Gas is defined in clause 25.9.1.


Profit Oil :s defined in clause 25.8.1.


Profit Petroleum is defined in clause 26.1.


Public Company means: {a| any entity created by the Kurdistan Region Oil and Gas Law.


including the Kurdistan Exploration and Production Company; (b) a legal entity


established by Kurdistan Region Law as a separate legal entity, whether or not fully


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


commercial activities on behalf of the Government, which legal entity cannot be


declared bankrupt under Kurdistan Region Law; and (c| any separate and autonomous








14


 Production Shoring Controcr Oinorto








company organised under Kurdistan Region Law which is controlled, directly or


indirectly by a wholly Government-owned and controlled entity, by the Government,


the Parliament of the Kurdistan Region, or which is under the guidance of the


Government or the Parliament of the Kurdistan Regson Iwhether or not in any such case


partially or fully funded by the Government or the Parliament of the Kurdistan Region).


A department, division, or agency of the Government, whether or not operating under a


separate name, is not a Public Company.


Quarter means a period of three consecutive Months starting on the first day of each of


January, April, July, and October.


Regional Tax Law means any Kurdistan Region Law in respect of Taxes.


Relevant Day is defined in clause 40.11(a).


Reservoir means a subsurface rock formation containing an individual and separate


natural accumulate of producible Petroleum characterised by a single natural pressure


system.


Revenues is defined in clause 26.1.


R Factor is defined in clause 26.1.


Rights Sale is defined in clause 32.10.2.


Royalty is defined in clause 24.4.


Royalty Crude Oil is defined in clause 24.1.


Royalty Gas is defined in clause 24.2.


Royalty Petroleum is defined in clause 24.3.


Royalty Rate is defined in clause 24.6.


Second Exploration Well »s defined in clause 10.4(b).


Second Sub-Period is defined in clause 6.4(b).


Second Sub-Period Guaranteed Amount is defined in clause 9.2.


Semester means a period of 6 consecutive Months starting from the first day of each of


January and Jufy.


Signature Bonus is defined in clause 32.1.


Subcontractor means any Person providing services or undertaking works relating to the


Petroleum Operations on behalf of, the Contractor, any Contractor Entity, or the


Operator, whether directly or indirectly at any contracting tier.


Sub-Period and Sub-Periods are defined in clause 6.4


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


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


transaction based tax, corporation tax. income tax, capital gains tax, stamp duty, land


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


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








15


 Production Shoring Controct Dinorto








tax on income from movable capital and fixed tax on transfers) or contributions, in each


case as imposed by Kurdistan Region law.


Terms of Reference is defined in clause 42.7.


Title Transfer Date is defined in clause 20.1.


US$ and US Dollars means the legal currency (dollar) of the United States of America.





Vice Chairman is defined in clause 8.9.1.


Well means a borehole, made by drilling in the course of Petroleum Operations.


Categories of Wells are defined:


(a) Exploration Well means a well other than an Appraisal Well drilled for the


purposes of searching for undiscovered Petroleum accumulations on any


geological entitylies) (be it of structural, stratigraphic, facies, or pressure


nature) to at least a depth or stratigraphic level specified in the Work Program.


(b) Appraisal Well means a well drilled for the purpose of delineating and


evaluating the extent, the production capacity, the potential and commercially


of recoverable reserves of a Discovery in a geological structure or feature


established by an Exploration Well.


(c) Development Well means a well drilled, deepened, or completed after the date


of approval of the Development Plan pursuant to Development Operations or


Production Operations for the purposes of producing Petroleum, increasing


production, sustaining production or accelerating extraction of Petroleum


including production Wells, Injection Wells, and dry Wells.


(d) Injection Well means a well drilled within a Production Area which injects


Natural Gas or a fluid in order to enhance the recovery of Petroleum by


pressure maintenance or by improving the quality of the Reservoir.


Work Program means any of the following: an Exploration Work Program, a Gas


Marketing Operations Work Program, a Development Work Program, a


Decommissioning Work Program, or any other program which details the Petroleum


Operations to be conducted by the Contractor and the schedule for performing such


program.





CONSTKUCTION


1.2 Unless the context otherwise requires or is specifically otherwise stated:





(a) headings are to be ignored;


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


(c) singular includes plural and vice versa.


1.3 Reference to a 'clause* is to a clause of this Contract, and reference to a "paragraph* is


to a paragraph in the Accounting Procedure.





1.4 Reference to "gross negligence* and ’’grossly negligent* means with respect to any


Person, a marked and flagrant departure from the standard of conduct of a reasonable


and prudent person acting in the circumstances at the time of the purported








16


 Production Shoring Contract Dtnarta








misconduct, or such wanton and reckless conduct as constitutes in effect an utter


disregard for harmful, foreseeable, and avoidable consequences.


1.5 Reference to "participating interest" means, in respect of each Contractor Entity and


Government Interest Holder, its undivided share, expressed as a percentage, of its


participation in the rights and obligations under this Contract.


1.6 Reference to:


(a) "significant" means important enough, from the perspective of a reasonable


person in the Government's position, to merit attention, and it includes a lesser


level of significance than does the term "material"; and


lb) "material" means of such a nature that knowledge of the item would affect a


reasonable and prudent Person's decision.


1.7 The Contractor will be considered to have •’knowledge* in respect of a matter pertaining


to this Contract or Petroleum Operations if such knowledge is held or ought reasonably


to be held by any Contractor Entity, the Operator, any Subcontractor, or any consultant,


or agent of any Contractor Entity, the Operator, or Subcontractor.


1.8 A reference to conduct includes an omission, statement, or undertaking, whether or not


in writing.


1.9 Reference to any contract, agreement, instrument, guideline or document includes any


amendments, restatements, and replacements thereof.


1.10 References to a Law or any provision of Law are references to that provision as


amended, extended or re-enacted and include all laws and official requirements made


under or deriving validity from it or enacting such modification.


1.11 In computing any period of time, the day of the act. event or default from which such


period begins to run shall be included. All references to time are to the time in Erbil.


Unless specifically provided otherwise:


(a) any payment falling due on a day that is not an International Banking Day will


be due and payable on the following International Banking Day;


(b) any notice or other communication to Government that is received on a day


that is not a Government Business Day or after 3:30 pm on a Government


Business Day will not be considered received, unless acknowledged by the


recipient, until the next following Government Business Oay.


1.12 The language which governs the interpretation of this Contract is the English language.


1.13 Ambiguities are to be resolved, where appropriate, with reference to principles and


practices generally accepted in the international petroleum industry. If there is ever any


conflict between or among standards of performance for the Contractor, the most


stringent standard will apply. In no event will the Contractor be required to take an


action that is prohibited under Applicable Law.


1.14 Any Joint Operating Agreement between Contractor Entities, including as approved by


the Government in accordance with clause 5, is only binding as between such Contractor


Entities, is not relevant for the construction or interpretation of this Contract, and does








17


 Production Shoring Controct Dinorto








not establish any approved course of dealing as between the Government and any


Contractor Entity or the Contractor.


1.15 Nothing in this Contract constitutes or implies any contractual relationship or other


relationship between |i) the Contractor or any Contractor Entity and (ii) the Government


of Iraq, any region of Iraq (other than the Kurdistan Region}, or any governorate or other


political or administrative subdivision of Iraq.


1.16 No Party shall construe any provision in this Contract as establishing that any Contractor


Entity is an employee, agent, or representative of the Government or any public


authority in the Region or in Iraq.


1.17 This Contract does not establish, and no Party shall construe this Contract to have


established, a partnership, or other form of association or fiduciary relationship


between the Government and any other Person, including any Government Interest


Holder.


1.18 Any enumeration of a Party's rights and remedies set forth in this Contract is not


intended to be exhaustive. A Party's exercise of any right or remedy under this Contract


does not preclude the exercise of any other right or remedy. Each Party's rights and


remedies are cumulative and are in addition to any other right or remedy set forth in


this Contract, any other agreement between the relevant Parties, or which may now or


subsequently exist at law or in equity, by law. or otherwise.


1.19 The Government does not confer any rights or assurances to any Party or Government





Interest Holder other than as expressly set forth in this Contract. There are no implied


rights, permissions, or assurances provided to any Contractor Entity or Government


Interest Holder.








Clause 2 - Scope





Exausivt RlOMI


2.1 The Government grants to the Contractor the exclusive right to conduct Petroleum


Operations in the Contract Area on behalf of the Government for the term of this


Contract.


2.2 Natural resources other than Petroleum are excluded from the scope of this Contract,


even if the Contractor discovers any such resources in the conduct of Petroleum


Operations.


2.3 Nothing in this Contract conveys any right, title, or interest to the Contractor or any





Contractor Entity in Petroleum before the Delivery Point.





Com I'liahce


2.4 The Contractor is responsible to the Government for the conduct of Petroleum


Operations.


2.5 Each Contractor Entity shall at all times comply, and procure that each Subcontractor


complies, with the Kurdistan Region Oil and Gas Law and all other Applicable Law. No


 Production Shoring Controct Dinorto








provision of this Contract will: |a| excuse the Contractor or a Contractor Entity or any


Subcontractor from compliance with Applicable Law; or (b) impair any right or privilege


of the Government under Applicable Law.


2.6 Subject to clause 40 (force Majeurt), the Contractor shall: (a) conduct Petroleum


Operations only in accordance with an Approved Work Program and Budget; and (b) not


suspend or abandon performance of Petroleum Operations except in accordance with


an Approved Work Program and Budget.


24.1 In cases of emergency, the Contractor shall undertake such additional efforts


and incur such additional expenditures as the Contractor considers necessary


to protect life, the environment, or property.


2.6.1.1 The Contractor shall promptly report its incurrence of such additional


expenditures to the Management Committee.


24.1.2 Such additional expenditure will be Cost Recoverable.





24.2 The Contractor is entitled to incur expenditures not identified in an Approved


Budget, provided that: (a) the aggregate amount of such expenditures do not


exceed 10% of such Approved Budget in any Calendar Year; and (bj the


Contractor has promptly reported the incurrence of such excess expenditures


to the Management Committee.


24.2.1 Excess expenditures incurred in compliance with and within the limits


set forth in clause 2.6.2 will be Cost Recoverable.





24.2.2 Any expenditure above the 10% threshold will only be recoverable by


the Contractor with the unanimous approval of the Management


Committee.








PtftMITS


2.7 Upon the Contractor's request, the Government shall provide or procure the provision


of all Permits for Petroleum Operations to be performed in accordance with an


approved Work Program and Budget, including those relating to any extension and


renewal periods. If the Government determines that a Permit is required from the


Government of Iraq and unless the Government otherwise instructs, the Government


shall be responsible for securing such Permit on behalf of the Contractor, provided that


the Contractor shall provide all necessary assistance.





Btsr Pit AC rices


2.8 In performing Petroleum Operations, the Contractor shall do so at all times in


accordance with Best Practices, including:


(a) using all technical, human and material resources reasonably required for


execution of the Petroleum Operations in accordance with Best Practices; and


(b) implementing all appropriate management and administration techniques for





execution of the Petroleum Operations in accordance with Best Practices.














19


 Production Shoring Controct Dinorto








Sou Risk


2.9 The Contractor shall conduct all Petroleum Operations at its sole cost and risk.


1.9.1 The Contractor shall provide all funding for the performance of its obligations


hereunder.


2.9.2 If no Commercial Discovery is determined, or if production of Petroleum is


insufficient to reimburse the Contractor, the Contractor will bear all losses


arising under or related to this Contract.


2.9.5 Each Contractor Entity shall only have the right to receive and dispose of its





share of the Petroleum produced and saved from the Contract Area as


reimbursement of costs incurred and compensation for services rendered


pursuant to this Contract.





Auxiuaxy Rights


2.10 The Contractor is entitled to:


(a) access and operate freely within the Contract Area and wherever Assets and


Materials of a Contractor Entity or Subcontractor may be located;


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


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


removal of pipelines and other facilities required for the Petroleum Operations;


(c) use in Petroleum Operations sand, gravel, and water belonging to the public


domain by prior arrangement with the relevant authorities and on payment of


the generally prevailing charge for such resources in the locality of use;


(d) employ qualified Expatriate and local personnel and retain Subcontractors for


the conduct of Petroleum Operations in accordance with clauses 22 and 23


(provided any Expatr ate personnel working in the Kurdistan Region will require


a Permit, not to be unreasonably withheld or delayed, and the Government will


procure any Permits required from the Government of Iraq};


(e) import any goods, materials, equipment required for the Petroleum Operations


in accordance with clauses 19, 22, and 30; and


(f) use land or property belonging to the Kurdistan Region outside of the Contract


Area on reasonable commercial terms to the extent made available, and the


Government will assist the Contractor securing the use by the Contractor of any


private property in the Kurdistan Region.





UA6IUIY AtTftlBUTION


2.11 The conduct of a Subcontractor of any Contractor Entity (at any tier) or of the


Operator will be binding upon, and considered to constitute the conduct of the


Contractor.























20


 P'oCuczjoc Shorap Coatroct Ou*o»ia








Clause 3 - Contractor; Participating Interests


Cotirucioa


J-l The obligations of th* Contractor constitute joint and several obligations of the


Contractor entities, except only •here specifically provided otherwise.





PAaiicirAimo l*m*tsisot Comiucio* Churns


J.2 As of the Effective Dille, the participating interests of the Contractor Entities are as


follows:


Mess 64%


PHI 16%








Clause 4 - Government Interest


GdHMi


4.1 The Government has a participating interest of 20% in Petroleum Operations and all


other rights, duties, and obligations of the Contractor (except as provided in this clause


4), are carried by the Contractor (the “'Government Interest").


4.2 No holder of all or any part of the Government Interest (a "Government Intereit


Holder") (including the Government), in such capacity:


(a) Is a Contractor Entity; or


|b) has any oblation or liability to the Contractor or any Contractor Entity


whatsoever, including any obbgation or I‘ability to contribute any share of


Petroleum Costs or other obligation or Lability arising out of or related to


Petroleum Operations, al of which are carried by the Contractor


No default or failure to perform of a Government Interest Holder under this Contract


may be considered a breach of this Contract by the Contractor or any Contractor Entity


or invoked by the Government to terminate this Contract as to the Contractor or any


Contractor Entity.


4.1 Subtect to clause 4.4, a Government Interest Holder is not. if that is its only capacity


under this Contract, entitled to any notices under this Contract from the Contractor or


entitled to provide any consents, except, in each case as specifically provided otherwise,


but a Government Interest Holder has rights under clause 42


4.4 Any term of this Contract may be waived or amended without prior notice and consent


of a Government Interest Holder, unless such waiver or amendment would change any


right or obligation of a Government Interest Holder.


«.«.l Any waiver or amendment which purports to change any right or obligation of a


Government Interest Holder is only effective with prior notice to and the


consent of such Government Interest Holder.

















21


 Production Shoring Controct Dinorto








4.4.2 The consent of a Contractor Entity is not required for the Government to waive


or amend this clause 4, unless such waiver or amendment would materially


affect a right or interest of a Contractor Entity.


A Government Interest Holder is not an indispensable party for any Dispute between the


4.5


Parties, unless a determination of such Dispute would change or impair the rights of a


Assignment Government Interest Holder under this Contract.








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


a Government Interest of all or any part of its Government Interest.


4.7 An Assignee of a Government Interest Holder will have, in respect of the Government





Interest which has been Assigned, the same rights and obligations as the Assignor of


4.8 such Government Interest prior to the Assignment.


The Government may at any time designate a Public Company as a Government Interest


Holder without the consent of. or prior notice to. any other Party. A Public Company as


holder of the Government Interest will be individually liable (and not jointly and


severally liable with the Contractor) for any obligations to the Government under this


Contract.


4.8.1 The Government shall provide the Contractor with a notice notifying the


Contractor of such designation of a Public Company by the Government, and


the Contractor shall be entitled to rely on such notice for all purposes under


this Contract.


4.8.2 A Public Company will not be required to sign any formal assignment or


accession agreement except as required by the Government.


4.8.3 Only for the purposes of clause 37 of the Kurdistan Region Oil and Gas Law.





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


Company, the Government Interest will be deemed held by the Government.





4.8.4 As a consequence of any deemed ownership as set forth in clause 4.8.3, the


Government:


(a) incurs no liabilities or obligations Jdirectly, indirectly, or implicitly! to


any other Party solely by virtue of such deemed holding; and


(b) does not guarantee, and must not be considered to have implicitly


guaranteed, any obligation of a Public Company as a Government


Interest Holder solely by virtue of such deemed holding.





Subject to clause 4.12. the Government may at any time Assign all or part of its


Government Interest to a Person that is not a Public Company without the consent of


any other Party.


4.9.1 Such Assignee must sign an assignment agreement as required by the


Government.

















22


 Production Shoring Contract Dtnarta








<.9.2 The Government will provide the Contractor with a notice of such assignment


by the Government, and the Contractor shall be entitled to rely on such notice


for all purposes under this Contract.


4.10 Subject to clause 4.12, a Public Company las a Government Interest Holder) may Assign


part or all of its Government Interest to another Public Company, to the Government, or


any other Person without the consent of, or prior notice to, the Contractor or any


Contractor Entity, but shall not make any such Assignment of all or any part of its


Government Interest without the prior consent of the Government and in accordance


with any assignment and novation or other agreements and conditions required and


approved by the Government.


4.10.1 Any Assignment by a Publk: Company of all or part of its Government Interest


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


the Government or in accordance with the requirements of the Government


will be void.


4.10.2 The Public Company shall promptly notify the Contractor of any assignments of


the Government Interest held by such Public Company, and the Contractor will


be entitled to rely on such notice for all purposes under this Contract.


4.11 Subject to clause 4.12, a Government Interest Holder that is not the Government or a





Public Company may Assign part or all of its Government Interest to any other Person


without the consent of. or prior notice to. the Contractor or any Contractor Entity.





4.H.1 Such Government Interest Holder shall not make any Assignments without the


prior notice to and consent of the Government and only in accordance with any


assignment and novation or other agreements and conditions required by the


Government.


4.H.2 Any Assignment by a Government Interest Holder without the prior consent of





the Government and in accordance with the requirements of the Government


will be void.





4.H.3 The Assignor and the Assignee shall jointly and promptly notify the Contractor


of any Assignments of the Government Interest pursuant to this clause 4.11.


and the Contractor will be entitled to rety on such notice for all purposes under


this Contract.





4.12 No provision of this Contract prohibits a Contractor Entity from at any time offering to


acquire or acquiring all or any part of the Government Interest from any Person that is a


Government Interest Holder.


4.12.1 If at any time a Government Interest Holder (including the Government and a


Public Company) intends to offer to Assign all or part of its Government


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


applicable holder of the Government Interest may notify the Contractor of the


availability of the Government Interest.


4.12.2 No Contractor Entity has or may have any preemption or similar priority rights





in respect of the Government Interest, and a Government Interest Holder is


never required by this Contract to sell and assign to a Contractor Entity.








23


 Production Shoring Controct Dinorto








4.13 The Government reserves the right (but is not obligated to any Party with respect


theretol either to cancel or terminate any Assignment of all or part of the Government


Interest to any Person, if the Government at any time determines that such Assignment


was contrary to Applicable Law or public policy.


4.15.1 Upon any exercise by the Government of its rights under this clause 413. the


Government Interest will automatically revert to the Government.


4.1J.2 The Government's rights under this clause 4.13 are exclusive to the


Government, are not subject to a claim from any Contractor Entity, and clauses


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





4.15.3 The Government expressly reserves all sovereign immunities in respect of any


Dispute arising out of or relating to the exercise of its rights under this clause


4.13. and any Dispute with respect to this clause 4 between the Government


and any Government Interest Holder may exclusively be resolved in accordance


with Kurdistan Region Laws before a competent authority in the Kurdistan


Region located in Erbil.








Clause 5 - Operator; Joint Operating Agreement





Opihatoh


5.1 The Contractor designates Hess, and Hess agrees to act. as Operator on behalf of and in


the interest of the Contractor under this Contract.


S.i.i The Contractor authorises the Operator to represent the Contractor and to take


such actions as agent on behalf of Contractor and to exercise such rights,


privileges and powers and to comply with such obligations under this Contract


as are attributed or imposed to Contractor by the terms of this Contract. In


such capacity, the Operator will, subject to the terms and conditions of this


Contract and to the extent agreed in the Joint Operating Agreement, have all of


the rights, privileges, powers, and responsibilities of the Contractor as set forth


in this Contract, including responsibility for the conduct of all Petroleum


Operations and other activities of Contractor as contemplated by this Contract.


5.2 The Government may deal with, and rely on, the Operator for all purposes under this


Contract.


s.l.l The obligations, liabilities, acts and omissions of the Operator are the


obligations, liabilities, acts and omissions of the Contractor.


s.2.2 The conduct of the Operator will be binding upon, and considered to


constitute, the conduct of the Contractor.


5.3 The Contractor shall at any time have the right to appoint another Contractor Entity as


the Operator, upon giving the Government not less than 30 days' prior written notice of


such appointment.





5.4 The Contractor shall cause the Operator not to resign, and the Contractor shall not


remove an Operator until such time as a substitute Operator has been appointed by the


Contractor and notice therefor has been given to the Government.








24


 Production Shoring Controct Dinorto








5.5 Upon any change of Operator pursuant to clause 5.3. the replaced Operator will be


released and discharged of all its rights and obligations as Operator hereunder, and the


replacement Operator will be considered to have assumed all such obligations, rights,


and privileges.


5.6 Without limiting the Government's rights under clause 45, if either of the following


occurs and on not less than 30 days' prior notice from the Government, the Contractor


shall propose and appoint a replacement Operator as soon as is reasonably practicable:


(a) an Act of Insolvency has occurred in respect of the Operator unless, within such


30-day notice period, the Contractor has established to the satisfaction of the


Government that the Act of Insolvency does not apply and the Government


cancels its notice; or


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


consequence of the acts or omissions of the Operator.


5.7 If the Contractor, in accordance with clause 5.6, does not comply with the obligation to


propose another Operator within 30 days from the date when the Government gave


notice to the Contractor, the Government will be entitled to exercise its rights under


clause 45 to terminate this Contract.


JOINT Ol'fcHATlKG ACHffcMfcNT


5.8 A Contractor Entity shall not enter into any Joint Operating Agreement, except if the


terms of such Joint Operating Agreement:


(a) have been approved by the Government;


(b) are in full compliance with Applicable Law as of the date of the approval by the


Government;


(c) are consistent with the provisions of the Contract; and


(d) otherwise comply with the requirements of clauses 5.9 through 5.11.


5.9 A Joint Operating Agreement must provide for the termination and release of any and


all Encumbrances, pre-emption rights, trust arrangements, and all other types of claims


or rights impairing the transferability of the participating interest of a Contractor Entity


by the Government in the event of any termination of a Contractor Entity's participating


interest by the Government pursuant to this Contract.


5.10 A Joint Operating Agreement must provide that a Contractor Entity party to such Joint


Operating Agreement shall not make an Assignment:


(a) which would result in the Assignee holding less than a 5K participating interest;


(b) which would result in the Assignor, if the Assignor is Assigning less than 100K


of its interests, holding less than a S% participating interest;


(c) without the consent of the Government in accordance with this Contract; and


(d) unless the proposed Assignee has entered into an instrument satisfactory to


each of the Contractor Entities and the Government so as to assume and to


perform the obligations of the Assignor.


 rioauil/on snoima Contract Olnorla








5.11 The Contractor shall submit to the Government tor approval ->nr agreement to amend


any Joint Operating Agreement








Clause 6-Term


Gchixai


6.1 The term ot this Contract comprises an Exploration Period and a Development Period. In


respect at a Dlicovery ot a Gas field, the term ol this Contract may also comprise a Gas


Field Molding Period as provided in clause 14 (NaturalGas).


EXNOXATION RtNIAl


6.2 From the tint day ol the Exploration Period until expiry ot the Exploration Period, the


Contractor shall pay to the Government an annual surface rental for the Contract Area


ot US$ 10,00 per square kilometre per Contract Vear {'exploration Rental*).


6.2.1 The Exploration Rental is due and payable in arrears on or before each


anniversary ol the Effective Date and on the last day ol the Exploration Period


or termination ol this Contract (whichever is earlier), and is subject to proration


In any Contract Year during which there has been a relinquishment or expiry ol


the Exploration Period, based on actual number ol days in such Contract Year.


6.1.2 I ■plor.it on Rental will not be Cost Recoverable.


ExeioxAtio* Piaioo


6-3 The Exploration Period is for a base term ol twe Contract Years from the Effective Date


(the 'Base Exploration Term").


6-S-i The Base Exploration Term is extendable on a yearly basis m accordance with


clause 65 up to a maximum term ot 7 Contract Years (the Base Exploration


Term as so extended, the 'Extended Exploration Term*).


6-3,2 The Exploration Period is sublet to further extension beyond the ( atended


Exploration Term as provided m clauses 6 6 and 6.7.


6J.3 The Exploration Period is subject to early term mat Km as provided in this


Contract.


WPtHlODS


6.4 The Exploration Period consists ot two tub-periods (each such sub period, as It may be


extended, a "Sub-Period'), each ot which Is extendable pursuant to Clauses 65 and 6.6,


provided the Exploration Period may not exceed the Extended Exploration Term except


as provided in clauses 6.6 and 6.7:


la) a lirst Sub Period ol three Contract Years from the Effective Oate I'First Sub-


Period'); and


(bl a second Sub-Period of two Contract Years beginning from the l.rst day ol the


Second Sub Period (‘Second Sub-Period').











26


 Production Shoring Controct Dinorto








Extensions o# Sus-Puioos


6.5 Subject to clauses 6.5.1, 6.5.2, 6.5.3, and 6.7. the Contractor will be entitled to


extensions, each of no more than one Contract Year, of the then current Sub-Period, if


the Contractor has notified the Government of a Discovery of Crude Oil or of a Gas Field


in such Sub-Period in accordance with dauses 12.1 and 12.2 {Discovery Report;


Relinquishment), but reasonably considers that additional work is necessary before


deciding whether to:


(a) submit a proposed Appraisal Work Program and Budget in respect of such


Discovery in accordance with dause 12.4 (Appraisal Work Program and


Budget); or


(b) in respect of a Discovery of Crude Oil. declare such Discovery to be a


Commercial Discovery.


6.5.1 The Base Exploration Term plus the extensions provided in accordance with this


clause 6.5 may not exceed the Extended Exploration Term.


6.5.2 To be entitled to exercise its right to an extension pursuant to this clause 6.5,


the Contractor must notify the Government at least 30 days before the end of


the applicable Sub-Period (as it may have been extended pursuant to this


clause 6.5) of its intention to exercise such right of extension, the proposed


duration of such extension, and the proposed Work Plan and Budget for such


extension.


6.S.5 The Contractor will not be entitled to an extension unless there is an Approved


Work Program and Budget with respect to such extension.


6.6 Subject to clause 6.7, if at the end of the Extended Exploration Term the Contractor


wishes to conduct additional Exploration Operations, the Contractor will be entitled to


an extension of the Exploration Period of one year beyond the Extended Exploration


Term, provided:


(a) the Contractor has notified the Government, at least 30 days prior to the end of


the applicable Sub-Period, of the Contractor's exercise of such entitlement and


proposed Work Program and Budget with respect thereto;


(b( the Contractor's proposed Work Program and Budget for such extension is


acceptable to the Government; and


(c) the Contractor is not in breach of any material obligation or duty under this


Contract or Applicable Law.


6.6.1 Subject to clause 6.7, upon the expiration of an extension under this clause 6.6


and if the Contractor considers it has still not completed its evaluation of the


Contract Area, the Contractor will be entitled to a second extension of one


Contract Year; provided:


(a) that the Contractor has notified the Government thereof at least 30


days before the last day of the first extension; and


(b) the Contractor's proposed Work Program and Budget is acceptable to


the Government for such extension.











27


 Production Shoring Controct Dinorto








6.6.2 The Contractor is not entitled to any single extension under this clause 6.6 of


more than one Contract Year, and the Contractor is not entitled to more than


two extensions pursuant to this clause 6.6.


6.7 The Contractor will not be entitled to any extensions under clauses 6.5, 6.6, or 6.6.1:


(a) unless the Government is satisfied that the Contractor has fulfilled its Approved


Work Program {including Minimum Exploration Obligations) in respect of the


preceding Sub-Period or extension, as applicable; or


(b) if the Contractor is in material breach of any obligation or duty under this


Contract or Applicable Law.


EXHHATION or EXMlOBATlON PtHlOO


6.8 The Exploration Period will expire at the end of the First Sub-Period |as it may be


extended pursuant to clauses 6.5 and 6.6), and this Contract will terminate, unless:


(a) the Contractor has notified the Government at least 30 days before the expiry


of the First Sub-Period of the Contractor's intention to enter into the Second


Sub-Period; or


(b) clause 6.5 is applicable.


6.9 The Exploration Period will expire at the end of the Second Sub-Period |as it may be


extended pursuant to clauses 6.S, 6.6. and 6.11.1|.


6.10 The Contractor may terminate this Contract at any time during the Exploration Period


(as it may be extended pursuant to clauses 6.5, 6.6, and 6.7) upon 30 days' prior notice


to the Government.


6.11 The Exploration Period will expire on the earlier of the first day of the |a| Gas Field


Molding Period and |b) Development Period.


6.11.1 Subject to clause 6.7, the Exploration Period will be automatically extended


during the pendency of the Government's consideration of a Gas Field Holding


Period Application in accordance with clause 14. if the Exploration Period


would otherwise expire during such consideration period.


6.11.2 If the Government denies a Gas Field Holding Period Application, the


Exploration Period will not be shortened, extended, or otherwise affected


solely because of such denial.





GuAKANTtto Amount


6.12 Subject to clause 10.5, if this Contract is terminated during the Exploration Period, and if


the Contractor has not completed the Minimum Exploration Obligations relating to the


then current Sub-Period, including additional minimum work obligations in respect of


any applicable extensions of the applicable Sub-Period, then the Contractor shall pay to


the Government the applicable Guaranteed Amount |if any).


 Production Shoring Controct Dinorto








DtVtlOPMfcNT Pttioo


6.13 Subject to extension as provided in clause 6.14. the Development Period for:


(a) all Commercial Discoveries of Crude Oil is 20 years from the date of the first


declaration of a Commercial Discovery of Crude Oil by the Contractor pursuant


to clause 12.6(a); and


(b) all Gas Fields is 20 years from the last day of the Gas Field Holding Period.


t.ii.i If the Contractor considers that a Discovery of Crude Oil is a Commercial


Discovery, the Contractor will have the exclusive right to develop and produce


such Commercial Discovery of Crude Oil pursuant to the terms of this Contract.


6.U.2 If the Contractor agrees a Gas Export Plan or a Domestic Gas Plan with the


Government and there is an Approved Development Plan with respect thereto


as provided in clause 14 (.Vofurof Gas), the Contractor will have the exclusive


right to develop and produce the Gas Fields subject to such Approved


Development Plan pursuant to the terms of this Contract.


6.14 If Commercial Production from a Production Area (whether an Oil Field or a Gas Field) is


still possible at the end of the Development Period, the Contractor will be entitled to an


automatic extension of the Development Period in respect of such Production Area.


6.14.1 The term of any such extension of the Development Period will be 5 Years.


6.14.2 To be eligible for an extension under this clause 6.14, the Contractor must


notify the Government of the Contractor's intention to exercise its right to an


extension at least 180 days before the end of the Development Period, arid the


Contractor must not be in material breach of any obligation under this Contract


or Applicable law.


TfcAMlKATIO* Ol PeODUCTlO* 0*t*ATIONS


6.15 Upon not less than 90 days' prior notice to the Government, the Contractor may


terminate Production Operations for any Production Area.


6.1S.1 Upon such termination, the Production Area shall be considered relinquished


to the Government.


6.is.2 This Contract will terminate on the date when the Contractor notifies the


Government that Production Operations for all Production Areas are stopped,


will not be resumed, and the Contractor has relinquished all Production Areas.


6.is.3 Termination of Production Operations will not relieve a Contractor Entity of any


liabilities or obligations under a gas sales and purchase agreement with the


Government {or any Public Company or other Affiliate of the Government, or


otherwise, as designated by the Government! in respect of any Gas Export Plan


or Domestic Gas Plan, except as otherwise provided in the relevant


agreements.




















29


 Production Shoring Controct Dinorto








Clause 7 - Relinquishment


Mandatory ahd Co*Sii>tftto Ruinquishmint


7.1 By no later than the last day of the Base Exploration Term (without any extensions), and


subject to clauses 7.7, 7.8. and 7.10, the Contractor shall relinquish 25* of the Contract


Area that is then not (a) the subject of Appraisal, |b) a Gas Field subject to a Gas Field


Molding Period, or (c) a Production Area.


7.1.1 At the end of the first extension to the Base Exploration Term (if any) granted


pursuant to clause 6.S or clause 6.6, the Contractor shall relinquish 25* of the


remaining Contract Area that is then not: (a) the subject of Appraisal. |b) a Gas


Field subject to a Gas Field Holding Period, or |c) a Production Area.


7.1.2 The Contractor shall give the Government not less than 30 days' prior notice of


the boundaries of the portion of the Contract Area to be relinquished.


7.2 As of the first day of the Development Period or a Gas Field Holding Period, whichever is


first to occur, all of the remaining area of the Contract Area will be considered to be


relinquished that is then not (a) a Gas Field subject to the Gas Field Molding Period, or


(b) a Production Area.


7.3 The Contractor shall relinquish a Discovery as provided in clause 12.3, and a Discovery


will be considered relinquished as provided in clause 12.4.5.


7.4 On not less than 30 days' prior notice to the Contractor by the Government, the


Contractor shall relinquish a Production Area if, in respect of such Production Area:


(a) for reasons other than Force Mojeure in accordance with clause 40 (Force


Majcure), the Contractor has ceased normal production of such Production


Area for more than 180 consecutive days; or


(b) if the Contractor has failed to resume Petroleum Operations in such Production


Area within 270 days’ following the occurrence of an event entitling the


Contractor to claim Force Manure in accordance with clause 40 {Force


Ma/eure).


7.5 If the Contractor has notified the Government of its intention to terminate Petroleum


Operations in a Production Area in accordance with clause 6.15 {Termination of


Production Operations), the Contractor shall relinquish the Production Area effective as


of the date of the expiration of the 90-day notice period with respect thereto as


provided in clause 6.15.


7.6 To the extent not set forth in this clause 7, Gas Fields will be considered relinquished as


provided in clause 14 {HaturoiGos).


y/OlUNTAAY RtUNQUISHMtK T


7.7 During the Exploration Period, the Contractor may relinquish all or any part of the


Contract Area on not less than 90 days' prior notice to the Government of its intention


to relinquish and the boundaries of the portion of the Contract Area to be relinquished.


7.7.1 The Government shall credit any voluntary relinquishments during the:











30


 Production Shoring Controct Dinorto








(a) Pint Sub*Per»od against the Contractor's mandatory relinquishments


obligations under clause 7.1;


(b) the first extension of the First Sub-Period against the Contractor's


mandatory relinquishments obligations under clause 7.1.1


7.8 During the Development Period, the Contractor may relinquish a Production Area for


Crude Oil as provided in clause 6.15 [Termination of Production Operations).


7.9 During a Gas Field Holding Period, the Contractor may relinquish the Gas Field on not


less than 90 days' prior notice to the Government. The relinquishment will be effective


as of the last day of such 90-day notice period.


GtlltKAL QUALIf tCATtONS


7.10 For the application of clause 7.1:


(a) except as provided in clause 7.11, the Contractor is entitled to determine the


area, shape, and location of the Contract Area to be kept: and


(b) the Contractor is entitled to retain for 24 months that part of the Contract Area


which contains a Discovery and which, in the opinion of Contractor, may.


together with any other Discovery within the Contract Area, constitute a


Commercial Discovery of Crude Oil.


7.11 For the application of clauses 7.1. 7.7, and 7.B, the relinquished portions of the Contract


Area must be contiguous and be of a shape and size of which will readily permit


delineation.


Cuah-up


7.12 Prior to relinquishment of any area, the Contractor shall, in accordance with Best


Practices. Applicable Law. and the EHS Standards:


(a) perform all necessary clean up activities to restore such area as nearly as


possible to the condition in which it existed on the Effective Date, including


removal of such Assets and Materials, facilities, or installation as the


Government may reasonably instruct;


(b( safely cap all Wells and. unless otherwise instructed by the Government, and


contingent upon safety and additional cost considerations, ensure that any


Well technically capable of production is left in a condition that it may be re¬


entered for further testing or completion; and


(c) take all actions to prevent hazards to the natural environment, human life, or


property.


EfftCTOf RtllNQU&HMtNl


7.11 This Contract will terminate:


(a) upon the relinquishment (whether mandatory, considered or voluntary) of


the entire Contract Area; and


(b) with respect to all relinquished areas immediately upon relinquishment,


and the Contractor shall have no further rights with respect to such areas.











n


 Production Shoring Controct Dinorto








7.14 No relinquishment by the Contractor will relieve the Contractor from any liabilities


arising from or related to the relinquished Contract Area or of any continuing


obligations of the Contractor under this Contract. A relinquishment that constitutes


a termination of this Contract will be governed by clause 45.14.





7.15 If the Contractor relinquishes the entire Contract Area during the Exploration Period


without having fulfilled its Minimum Exploration Obligations with respect to the


then current Sub-Period, the Contractor shall promptly pay to the Government the


applicable Guaranteed Amount {if any), subject to clause 10.5.


7.16 Upon any relinquishment of any Gas Field when the Contractor retains rights under


this Contract to conduct Exploration Operations or Production Operations, the


Government and any contractors of the Government and their representatives and


subcontractors will have the absolute right to move freely within the Contract Area,


provided no such Person causes any unreasonable interference in ongoing


Exploration Operations or Production Operations of the Contractor.








Clause 8 - Management Committee





ESTAftLtSHMtNT


5.1 Within 30 days following the Effective Date, the Contractor and the Government shall:


(a) establish a Management Committee for the purpose of providing orderly


direction of all matters pertaining to the Petroleum Operations and Work


Programs; and


(b) by notice to the other, each nominate its respective members of the


Management Committee and their alternates.


8.2 The Management Committee shall comprise two members designated by the


Government and two members designated by the Contractor.


s.2.1 A Government Interest Holder {solely in respect of such capacity) is not entitled


to representation on the Management Committee.


8.3 Upon 10 days' prior notice to the other, each of the Government and the Contractor


may replace any of its members of the Management Committee.


8.s.l Decisions of the Management Committee are to be made at the meetings.





Functions


8.4 The Management Committee shall review, deliberate, decide, approve, and give advice,


suggestions and recommendations to the Parties regarding the following subject


matters:


(a) Work Programs and Budgets;


(b) the Contractor's activity reports;


(c) production levels proposed by the Contractor;


(d) Accounts of Petroleum Costs;


(e) procurement procedures for potential Subcontractors;








32


 Production Shoring Controct Dinorto








(I) Development Plan and Budget tor each Production Area;


(Hi any matter having a material advene affect on Petroleum Operations; and


(h) any other subject matter that the Contractor and the Government are willing to


consider.





Riouia* Miuinos; VlNUt


•S Unless otherwise agreed by the Management Committee, all meetings of the


Management Committee will take place in the Kurdistan Region, alternately at the


offices of the Government and those of the Contractor, at least (a| twice each Contract


Year prior to the date of the first Commercial Discovery and (b) three times each


Contract Year thereafter.





LxiaaoiDiNAix MtniNos


(ft Cither the Government or the Contractor may call an extraordinary meeting of the


Management Committee to discuss important Issues or developments related to


Petroleum Ooeratrons where:


(a) the meeting of the Management Committee will have a quorum in accordance


with clauses 8.11 through 8.13, but not all members of the Management


Committee are present, subject to reasonable notice (In any event not less than


10 days): or


(b) all members of the Management Committee will be present at the meeting,


without notice.


8A.S The Party calling an extraordinary meeting shall speedy the matters to be


discussed at the meeting.


Action •* Mtxrstis wiIhOuT Mmmo


8.7 Any action required or permitted to be taken at a meeting of the Management


Committee may be taken without a meeting if the action is evidenced by the written


consent of the members of the Management Committee approving such action and


delivered to the Contractor.








Aatnoa; Manxes


U The Contractor shall (a) prepare the agendas for meetings of the Management


Committee in accordance with instructions of the Chairman and (b| provide such


agendas to the Government and the members at least IS days before the date of the


meeting.


ui Each agenda must include any subiect matter proposed by either the


Government or the Contractor.


The Contractor shall be responsible for preparing and keeping mmutes of the





decisions made at the meetings


m.i The Contractor shall send a copy of such minutes to the Government and the


members for review and approval. The Government and the Contractor ihal


review and approve or disapprove such minutes withm 10 days after receipt of


the draft minutes











II


 Production Shoring Controct Dinorto








8.6.4 Unless either the Government or the Contractor notifies the other of its


disapproval of the minutes within such 10-day period, the minutes will be


considered approved by the Government and the Contractor at the end of such


10-day period.





Chamman


8.9 The chairman of the Management Committee shall be one of the members designated


by the Government {the '’Chairman*’).


8.9.1 The vice-chairman of the Management Committee shall be one of the members


designated by the Contractor (the "Vice-Chairman*).


8.9.2 In the absence of the Chairman or his alternate, the Vice-Chairman shall act as


the Chairman.


8.10 Each of the Contractor and the Government may send advisers and experts to meetings


of the Management Committee.


6.10.1 Unless the Government agrees otherwise, the costs of the Contractor's advisors


and experts incurred in attending meetings of the Management Committee will


not be Cost Recoverable.


Quoftufi


8.11 The Management Committee cannot validly deliberate, unless each of the Government


and the Contractor is represented by at least one of its members or its alternate.


8.12 If at least one member or its alternate representing each of the Government and the


Contractor is not present, the Management Committee must be adjourned.


8.13 If the meeting is adjourned pursuant to clause 8.12. the Party present at the adjourned


meeting shall then notify the other Party of a new date, time, and location for the next


meeting.


VOTIMG


8.14 Each of the Government and the Contractor will have one vote in the Management


Committee. The two members appointed by the Government, and the two members


appointed by the Contractor, are required to vote as a single block. A vote cannot be


fractionalised.


8.15 An abstaining vote will be considered as a vote in support of the motion by the voting


member.


8.16 Unanimous approval of the Management Committee is required for all matters, except


as set forth in clauses 8.18 and 8.19.


8.17 If the Management Committee cannot reach unanimous agreement on a matter, the


Management Committee shall meet a second time within 14 days to attempt to reach a


unanimous decision.














34


 Produced* Shorag Contract ©■««'«•








• IB Except as proved in clause 8.19. »the Management Committee is unable to teach a


unanimous agreement at the second meeting, the vote of the Government shall be


considered the tie-breaking vote.


«l« The Contractor shall have the tie-breakmg vote during the Exploration Period ul respect


of approval of the Exploration Work Program and Budget.


SoacoMMittm


8.20 file Management Committee may request the creation of a technical sub-committee or


any other sub committee to assist It


*10 1 Any such sub committee shall be composed of a reasonable number of esperts


from the Government and the Contractor.


*.lo.2 After each meeting, the technical sub committee or any other sub committee


shall deliver a written report to the Management Committee.


*10.1 Any costs Incurred by the Contractor for meetings of the Management


Committee and In respect of technical sub committees or any other sub¬


committees will be Cost Recoverable








Clause 9 - Guarantees


fi*si Sue Ptnioo Obuoatious


9.1 Concurrently with the signing of this Contract, the Contractor shall casrse to be delivered


to the Government a joint and several payment guarantee of the ultimate parent


companies of each of the Contractor Entities


»J-t Such guarantee mutt be (a| m form and content acceptable to the Government


and (b) In respect of the Contractor's obhgation to pay the Capacity Bwlduig


Payment and the Contractor's payment oblation pursuant to clause 10.S3


(such obl«ationt of the Contractor, the 'first Sub Period Guaranteed


Amounts'| .n respect of the first Sub Period.





Sccoao Sus-Ptaioo


*-* Not later than 60 days after the first day of the Second Sub Period, the Contractor shaB


provide the Government, unless the Government waives this clause 9 2 pursuant to


not

Sub Period, with a joint and several guarantee of the ultimate parent companies of each


Contractor Entity, substantially In the form of Anne. C and otherwise acceptable to the


Government, with respect to the Contractor's payment oblations pursuant to clause


10.S 4 (such obligation of the Contractor, the 'Second Sub-Period Guaranteed


Amount').


Ill ff J Contractor Entity does not have an ultimate parent company, the


Government the Contractor Entity shall cause a controlling OenefKtaI


shareholder or other Person with sufficient Credit quality In the opinion of the


Government and otherwise acceptable to the Government to br a party to


such Guarantee.


 P'odu aton SAonitg Control! Dunna








t il II the Government does not receive luch guarantee within JO days following


start ol the Second Sub-Period as provided In this clause 9.2. the Government


may notify the Contractor to impend all operation! In the Contract Area until


the requirement! of this clause 9.2 have been satisfied.





Gas Pc** Ouaiumtus


9.1 Each Contractor Entity shall deliver such guarantees or other form of credit as are


required In respect of any gas sales and purchase agreement entered into among the


Parties for the laic ol Natural Gas to the Government or any other Person.





Accession


9.4 In the event of an Assignment by a Contractor Entity to a third party In accordance with


clause 39. an ultimate parent company of such Assignee acceptable to the Government


must accede to the applicable guarantee, effective as of the effective date of the


Assignment, at a condition precedent to the approval of the Assignment by the


Government








Clause 10- Minimum Exploration Work Obligations


COMMINCIMtNI


10.1 The Contractor shall start Exploration Operations within JO days of the Management


Committee's approval of the Exploration Work Program and Budget in accordance with


clause S.


Mmsausi DnouiiM Oaoaanows


10.2 The Contractor shall perform geological, geophysical and dr mg works as provided


under clauses 10 iifmt Sub Period) and 10 4 (Second Sub Period! (such works, the


'Minimum Captor at ion Obligations-1.


»«st Sue-Piaioo


10.3 Subject to clause 10.S IQuok/tcohons). during the f nsl Sub-Period the Contractor shall:


(a) carry out geological and geophysical studies, comprising:


(11 the compilation ol a technical database;


(2| the performance of a remote sensing study: and


(31 a field visit to verily Initial geological and geophysical work and remote


sensing results and plan for two dimensional seismic acquisition; and


(b) perform Held work comprising structural, stratigraphic and lithologic mapping


and sampling;


(e) acquire, process and mterpret SOO line kilometres of two dimensional seismic


data, or a three dimensional seismic data program by agreement between the


Parties, committing for this purpose a minimum financial amount consistent


with Best Practices and commensurate with market conddions m the Kurdistan


Region for seismic services; and


 Production Shoring Controct Dinorto








(d) drill one Exploration Well (the “First Exploration Weir), including testing and


coring as appropriate, and commit for this purpose a minimum financial


amount of US$40,000,000.


Stco*D Sua-Ptxioo


10.4 If the Contractor has notified the Government that the Contractor will enter into the


Second Sub-Per>od in accordance with clause 6.8 {Expiration of Exploration Period},


then, subject to clause 10.5 {Qualifications), during the Second Sub-Period the


Contractor shall:


(a) acquire, process and interpret further seismic data Jbeing either two


dimensional or three dimensional), if the Contractor considers that the results


from the First Exploration Well justify the acquisition of further seismic data;


and


(b) drill one Exploration Well (the "Second Exploration Well"), including testing


and coring as appropriate, and commit for this purpose a minimum financial


amount of USS 40,000.000, unless the Data from the First Exploration Well


demonstrates that there is no reasonable technical case for drilling the Second


Exploration Well in the Contract Area.


QUAUf NATIONS


10.5 In respect of the Minimum Exploration Obligations under clauses 10.3 and 10.4. this


clause 10.S applies.


io.s.i The Contractor shall satisfy the Minimum Exploration Obligations for a Sub¬


Period. even if satisfaction will require the Contractor to spend more than the


Minimum Financial Commitment for such Sub-Period.


io.s.2 If the Contractor has satisfied its Minimum Exploration Obligations for a Sub¬


Period without having spent the total Minimum Financial Commitment for such


Sub-Period, the Contractor will be considered to have satisfied its Minimum


Exploration Obligations for such Sub-Period.


lO.s.i If this Contract is terminated during the First Sub-Period, and if the Contractor


has expended less than US$40,000,000 as required by clause 10.3(d), and if


clause 10.5.2 or clause 10.5.6 is not applicable, then the Contractor shall pay


the Government an amount equal to the difference between (x) US$40,000,000


and (y) the amount actually expended in accordance with the Approved Work


Plan and Budget in respect of the Minimum Work Obligations for the First Sub¬


Period. The Contractor shall make such payment on the Termination Date, and


the Contractor's obligation to make such payment will survive termination of


this Contract.


10.s.4 If this Contract is terminated during the Second Sub-Period, and if the


Contractor has expended less than US$40,000,000 as required by clause


10.4(b), and if clause 10.5.2, clause 10.5.6. or 10.5.8 is not applicable, then the


Contractor shall pay the Government an amount equal to the difference


between (x| US$40,000,000 and (y) the amount actually expended in


accordance with the Approved Work Plan and Budget in respect of the


Minimum Work Obligations for the Second Sub Period. The Contractor shall








37


 Production Shoring Contract Dtnarta








make such payment on the Termination Date, and the Contractor's obligation


to make such payment will survive termination of this Contract.


io.s.s The Contractor shall drill each Exploration Well to the depth set forth in the


Approved Exploration Work Program, unless:


(a} formation is encountered at a lesser depth than originally anticipated;


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


(c) in the Contractor's reasonable opinion, continued drilling of the


Exploration Well is too hazardous because of abnormal or unforeseen


conditions;


(d) it is impractical to continue drilling with the Contractor's Assets,


because insurmountable technical problems have been encountered;


(e) Petroleum formations have been encountered, penetration of which


will require laying protective casing as a consequence of which the


Exploration Well cannot be drilled to the depth required by the


Approved Exploration Work Program;


(f) the Government and the Contractor agree to terminate the drilling


operation; or


(g| the Government confirms that the drilling obligation has been fulfilled.


io.s.6 If the Contractor stops drilling for any of the reasons set forth in clause 10.S.S:


(a) the Exploration Well will be considered to have been drilled to the





depth required by the Approved Exploration Work Program; and


(b) the Minimum Exploration Obligations in respect of the Exploration





Well will be considered to have been satisfied.


io.s.7 Any geological or geophysical work carried out or any seismic data acquired,





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


performed in excess of the Minimum Exploration Obligations and any amounts


spent in excess of the total Minimum Financial Commitment in any given Sub¬


Period. shall be carried forward to the next Sub-Period or any extension period


and shall be taken into account to satisfy the Minimum Exploration Obligations


and the total Minimum Financial Commitment for such subsequent Sub-Period


or extension period.


10.s.a The Minimum Exploration Obligations performed in the First Sub-Period will


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


(a) to the extent, in the First Sub-Period, the Contractor has performed


the Minimum Exploration Obligations required for the Second Sub¬


Period; and


(b) if the Contractor has notified the Government that the Contractor will


enter into the Second Sub-Period in accordance with clause 6.8


(Expiration of Exploration Period).

















38


Clause 11 - Exploration Work Programs





GCNtftAL


11.1 Within 90 days following the Effective? Date, the Contractor shall prep are and submit to


the Management Committee a proposed work program and budget in respect of


Exploration Operations (the "Exploration Work Program and Budget*) for the


remainder of the Calendar Year.


11.2 Thereafter, no later than 1 October us each Calendar Year, the Contractor shall submit a


proposed Exploration Work Program and Budget to the Management Committee for the


following Calendar Year.


11.1 The Contractor shall not conduct any Exploration Operations unless there is an


Approved Exploration Work Program and Budget.


DlVA*t


11.4 Each Exploration Work Program and Budget shall include details of, but not be limited


to, the following:


(a) work to be undertaken;


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


(c) cost estimates of services to be provided, including services by third parties


(including Affiliates of a Contractor Entity); and


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


Accounting Procedure.








11.5 The Management Committee shag meet within 60 dip follow mg its receipt of


Contractor's proposed Exploration Work Program and Budget, and e.ther approve,


approve w*h conditions, or reject the proposed Exploration Work Program and Budget.


11.6 Withm such 60-da* period, the Government may notify the Contractor of any





mod fixation to the proposed Exploration Work Program and Budget requested by the


Government, and the Contractor shall promptly notify the Government of the


Contractor's comments to the Government's requests


u.4-1 If there is a deadlock in respect of the approval of a proposed Exploration Work


Program and Budget, then clause 8 19 will apply








Clause 12 - Discovery: Appraisal: Development








12.1 The Contractor shall notify the Government of a Discovery within 41 hours of


completing tests confirm mg the presumed existence of the Discovery.


12.2 WiChm JO days foBowing not.Uat.on of the Oncovery to th. Government pursuant to


clause 12.1. the Contractor shall debver a comprehensive report (the 'Discovery


 Production Shoring Controct Dinorto








Report**! to the Management Committee and the Government. The Discovery Report


must detail ail technical Data then available to the Contractor together with:


(a) the Contractor's opinion on the commercial potential of the Discovery, and


(b) a statement as to whether the Contractor 11> intends to conduct Appraisal


Operations with respect to such Discovery, (2) will request an extension


pursuant to clause 6, or (3) both of the foregoing.


12.2.1 The Contractor shall promptly provide such other information relating to the


Discovery as the Government reasonably requests.


12.3 If the Contractor notifies the Government in the Discovery Report that the Contractor


does not intend to conduct Appraisal Operations, the Contractor shall send a notice of


relinquishment to the Government within not more than 30 days following the date of


the Discovery Report.


12.3.1 In such notice of relinquishment, the Contractor must provide 30 days' notice


to the Government of the relinquishment of an area containing, at a minimum,


the geological structure or feature in which the Discovery was made.


12.$.2 Such relinauishment will be effective as of the last day of such 30-day notice


period and will be credited to the Contractor's mandatory relinquishment


obligations under clause 7.1.


12.2.3 If the Contractor fails to deliver a notice of relinquishment as provided in this


clause 12.3, an area containing, at a minimum, the geological structure or


feature in which the Discovery was made will be considered relinquished as of


the 90W day following the date of the Discovery Report.


Appmaisai Work Phogkam a*d Buo4tf





12.4 If the Contractor has stated an intention in the Oiscovery Report to conduct Appraisal


Operations, within 60 days following the date of the Discovery Report the Contractor


shall submit to both the Management Committee and the Government the Contractor's


proposed Work Program for Appraisal of the Discovery (the 'Appraisal Work Program")


and proposed Budget with respect to such proposed Appraisal Work Program.


12.4.1 The Contractor shall include in such proposed Appraisal Work Program:


(a) the area to be Appraised (the 'Appraisal Area"), the surface of which


may not exceed twice the surface of the geological structure or


prospect to be appraised; and


(b) the date the Contractor will start Appraisal Operations and the date


the Contractor expects to complete Appraisal Operations.


12.4.2 The Management Committee and the Government must complete their


respective review of the proposed Appraisal Work Program and Budget within


30 days of its receipt by the Management Committee and the Government.


12.4.3 If the Government requires any modification to the proposed Appraisal Work


Program and Budget, the Management Committee shall meet to discuss the


proposed Appraisal Work Program and Budget and the required modifications








40


 Production Shoring Controct Dinorto








thereto within 60 days from its receipt of the Government's required


modifications.


12.4.4 If the Management Committee does not receive a proposed Work. Program and


Budget for Appraisal Operations within 60 days after the date of the Oiscovery


Report, at any time thereafter the Government may send a notice to the


Contractor setting forth that the Discovery will be considered as relinquished as


of the date set forth in such notice {which may not be less than 30 days), unless


the Management Committee has received a proposed Work Program and


Budget for Appraisal Operations.


12.4.s If the Management Committee has not received such proposed Work Program


Budget for Appraisal Operations within the period set forth in the notice from


the Government to the Contractor as set forth in clause 12.4.4, the Discovery


will be considered relinquished as of the last day of the notice period (subject


to clause 40 |Force Majeure]].


APf KAlSAl RtfOftT A NO DtClAHATlONS


12.5 The Contractor shall submit an Appraisal Report to the Management Committee within


90 days following completion of the Approved Appraisal Work Program.


12.6 Together with its Appraisal Report, in respect of each Discovery the Contractor shall


submit a declaration to the Management Committee specifying that the Contractor has


concluded one of the following:


(a) the Discovery is a Commercial Discovery of Crude Oil;


(b) the Discovery is not a Commercial Discovery of Crude Oil or a Discovery of a


Gas Field;


(c) the Discovery is a Discovery of Crude Oil that may become a Commercial


Discovery of Crude Oil, subject to additional Exploration or Appraisal within or


outside of the Appraisal Area;


(d) the Discovery is a Gas Field and stating that the Contractor either intends to (1|


submit a Gas Field Holding Period Application in accordance with clause 14.8


(Gos Field Holding Period Application], or <2| the Contractor is relinquishing the


Gas Field.


12.7 If, with respect to a Discovery the declaration of the Contractor pursuant to clause 12.6


is that:


(a) the Discovery is not a Commercial Discovery of Crude Oil or a Discovery of a


Gas Field, then clause 7.3 will apply; or


(b( the Discovery is a Discovery of a Gas Field, and the Contractor intends to


submit a Gas Field Holding Period Application in accordance with clause 14


INatural Gos|, then clause 14 will apply.


12.8 If. with respect to a Discovery the declaration of the Contractor pursuant to clause 12.6


is that the Discovery is a Commercial Discovery of Crude Oil or that the Discovery may


become a Commercial Discovery of Crude Oil subject to additional Exploration or


Appraisal within or outside of the Appraisal Area, then the Government shall examine


the Appraisal Report and any studies, conclusions, and other Data that it may obtain








41


 Production Shoring Controct Dinorto








within a reasonable period of time, taking into account the declaration submitted by the


Contractor in accordance with clause 12.6.


12.8.1 The Management Committee and the Government may each obtain opinions,


reports and studies, including a feasibility study, from independent third


parties.


12.8.2 If, in the view of each of the Management Committee and the Government, the


results of the Appraisal Report, studies or independent third party opinions


confirm that the Discovery is a Commercial Discovery of Crude Oil. then, unless


the Contractor has terminated the Contract or exercised its rights to


relinquishment, the Management Committee shall either:


(a) in the case of a Commercial Discovery, declare a Commercial Discovery


of Crude Oil and instruct the Contractor to submit a proposed


Development Plan in accordance with clause 12.9; or


(b) subject to clause 34 nitration), in the case of Discovery that may


become a Commercial Discovery subject to additional Exploration or


Appraisal within or outside of the Appraisal Area, instruct the


Contractor to submit its proposed Appraisal Work Program and Budget


to the Management Committee within 30 days.





DtVtLOPMtWT PlAh - CHUOt Oil


12.9 If the Management Committee has declared a Commercial Discovery of Crude Oil


pursuant to clause 12.8, the Contractor shall submit a proposed Development Plan for


Crude Oil to the Management Committee and the Government within 180 days


following the date of the Appraisal Report submitted pursuant to clause 12.5.


12.10 The Government shall endeavour to complete its review of the Contractor's proposed


Development Plan within 60 days after receipt of such plan by the Government.


12.10.1 The Development Period for each Commercial Discovery within a Development


Plan will be extended for the number of days in excess of such 60-day period


that it takes for the Government to approve the Development Plan.


12.11 If the Government requests any modifications to the Development Plan, and if the


Contractor notifies the Government of any objections or has other concerns with any


such requested modifications, then the Government and the Contractor shall meet as


soon as practical to attempt to reach agreement on a Development Plan.


12.11.1 The Contractor and the Government shall endeavour to have such meeting in


all events within 60 days of receipt by the Contractor of the Government's


written notification of requested modifications accompanied by all the


documents justifying such request.


12.11.2 If the Contractor and the Government are able to agree on changes proposed





by the Government or any other modifications, and there are no further


requested changes on the part of the Government, the Contractor shall


formally submit the agreed Development Plan to the Management Committee,


and the Management Committee shall promptly approve the Development


Plan.











42


 Production Shoring Controct Dinorto








12.12 If the Contractor does, not deliver a Development Plan in accordance with clause 12.9,


the Government may vend the Contractor a warning notice that the Contractor is in


breach of clause 12.9 and that failure to comply within 30 days from the date of such


notice can result in relinquishment of an area containing, at a minimum, the geological


structure or feature in which the Discovery was made.


12.12.1 If the Contractor does not deliver a Development Plan in accordance with





clause 12.12, the Government may send the Contractor a notice that the


Contractor is in breach of clause 12.9 and that failure to comply within 15 days


from the date of such notice will result in relinquishment of an area containing,


at a minimum, the geological structure or feature in which the Discovery was


made.





12.12.2 If the Contractor does not deliver a Development Plan in accordance with


clause 12.12.1, an area containing, at a minimum, the geological structure or


feature in which the Discovery was made will be considered relinquished as of


the 15?> day following the date of the notice sent in accordance with clause


12.12.1.








Clause 13 - Development Work Program





GftMtftAl


13.1 The Contractor shall perform Development Operations in accordance with a


Development Plan approved by the Government and the Management Committee and


an Approved Development Work Program and Budget,


is.n This clause 13 applies to Gas Fields and Oil Fields.





DtvtiopMtNT Work Paooaam a*i> Buotitv


13.2 Within 90 days following approval of a Development Plan by the Management


Committee and the Government, the Contractor shall prepare and submit to the


Government and to the Management Committee a proposed Work Program and Budget


for Development Operations (the 'Development Work Program and Budget') to be


carried out in the Production Area for the expected duration of the Development


Operations.


is.2.l No later than 1 October in each following Calendar Year, the Contractor shall


submit to the Management Committee updates in respect of its Development


Work Program and Budget.





is.2.2 Each Development Work Program and Budget shall include details of the


following:


(a) works to be carried out;





(b) Assets and Materials to be acquired;


(c) service providers and services to be provided by third parties and


Affiliates of a Contractor Entity;


(d) in the case of no production, the estimated start date for production;


and











43


 Production Shoring Controct Dinorto








(e) expected Petroleum Costs.


13.3 If the Government considers that modifications must be made to the Development


Work Program and Budget:


(a) the Contractor shall communicate its comments on any such requested


modifications to the Government as promptly as reasonable; and


(b) the Management Committee shall meet to discuss the Development Work


Program and Budget and the Government's proposed modifications thereto


within 60 days from its receipt of the proposed Development Work Program


and Budget.


PXOOUCIIOM Won* PHOGKAM AMO BuOGt I


13.4 No later than 1 October of the Calendar Year preceding the estimated start date for


production as set forth in an Approved Development Plan, and thereafter no later than 1


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


Management Committee a proposed Work Program for Production Operations |the


‘ Production Work Program and Budget*) for the following Calendar Year.


U.4.l To enable the Management Committee and the Government to forecast


Petroleum Costs, the Contractor shall include details of the following in the


proposed Production Work Program and associated Budget:


(a) works to be carried out;


(b) Assets and Materials to be acquired;


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


and Affiliates of Contractor Entities; and


(d) all expected Petroleum Costs.


13.5 If any modification to a proposed Production Work Program and Budget or Approved


Production Work Program and Budget is requested by the Government, the


Management Committee shall meet to discuss the Production Work Program and


Budget and proposed modifications thereto. The Contractor shall communicate its


comments on any such requested modifications to the Government prior to such


meeting.


PXOOUCIIOM RfcNTAl


13.6 From the first day of First Production from any Production Area {whether in respect of


an Oil Field or a Gas Field) in the Contract Area, the Contractor shall pay to the


Government, in arrears, an annual surface rental (“Production Rental") for the Contract


Area, of US$100.00 per square kilometre per Contract Year. The Contractor shall pay the


Production Rental on the first day of the first Month follosving First Production and


continuing thereafter on each anniversary thereof. Production Rental payments will not


be Cost Recoverable.




















44


 Production Shoring Controct Dinorto








Clause 14 - Natural Gas


DfflNlTIONS


14.1 A4 used in this Contract:


’Approved Domestic Gas Marketing Work Program and Budget*’ is a Work Program for


Domestic Gas Marketing Operations and associated Budget that has been approved by


the Management Committee and the Government.


‘Approved Gas Field Appraisal Work Plan and Budget" means an Approved Work Plan


and Budget for the Appraisal of a Gas Field.


'Domestic Gas Marketing Operations'* means Gas Marketing Operations solely in


respect of the Domestic Market for Natural Gas. in all events carried out pursuant to and


in accordance with an Approved Domestic Gas Marketing Work Program and Budget.


'Domestic Gas Plan*' means a plan for the sale or other disposition of Natural Gas to the


Domestic Market.


'Domestic Market" means sales or other gas projects within the Region where the


entirety of the Natural Gas is intended for consumption within Iraq.


'Export Gas Marketing Operations" means all Gas Marketing Operations in respect of


an Export Market for Natural Gas.


'Export Market'' means sales of Natural Gas, including for transportation outside of the


borders of Iraq, whether the deliveries or point of sale occur inside or outside the


borders of Iraq where the ultimate destination of the volumes sold is outside of Iraq. A


sale to the Government {whether directly or indirectly through a Public Company or


other Affiliate of the Government designated by the Government) meeting the


foregoing criteria will be within this definition.


'Gas Export Plan* means a plan for the sale or other disposition of Natural Gas to an


Export Market, including a sale of Natural Gas to the Government, a Public Company or


otherwise, in accordance with a gas sales and purchase agreement with the Contractor


Entities, as proposed by the Government.


'Gas Marketing Operations* means any activity relating to the evaluation of markets or


projects for the potential delivery, sale, processing, compression, and transportation of


Natural Gas, including evaluations of potential markets and projects, the quantities of


Natural Gas that could be sold, delivery specifications and requirements, production


costs, transportation arrangements, and all other activities generally relevant to the


identification of a sale or other disposition of Gas from the Contract Area, and includes


such activities as they may relate to Gas from other Natural Gas producers in the Region.


"Gas Marketing Operations* does not include the actual entry into any contract or


contracts for the sale, dedication, designation, commitment, or other disposal of Gas


from the Contract Area.





GtNtftAL


14.2 This clause 14 applies to (a) Gas {including Associated Gas| from the Contract Area and


(b) all Gas Fields.











45


 Production Shoring Contract Dtnarta








14.3 If technically and economically justified, and subject to clause 14.6, the Contractor may


freely use Gas that is produced from the Contract Area for Petroleum Operations in


accordance with an Approved Work Plan and Budget.


14.4 If technically and economically justified, the Contractor shall, in priority, use Associated


Gas from an Oil Field in an Oil Field for the purpose of enhancing recovery of Crude Oil in


accordance with Best Practices.


14.5 The Contractor Entities each acknowledge that it is in their interest to sell, dedicate,


designate, commit, or otherwise dispose of their respective entitlements to Gas


produced from the Contract Area on a jointly dedicated basis together with the


Government.


14.3.1 Notwithstanding the lifting entitlements of a Contractor Entity under this


Contract, a Contractor Entity shall not land is not authorised to| sell, dedicate,


designate, commit, or otherwise dispose or ship its entitlement to Gas, except


on a jointly-dedicated basis together with the Government.


14.3.2 A Contractor Entity shall not land is not authorised to) to sell, dedicate,


designate, commit, or or otherwise dispose of or ship the Government's or


Government Interest Holder's entitlement to Gas.


14.3. s Neither the Government, nor a Government Interest Holder has any right to


sell, dedicate, designate, commit, or or otherwise dispose of or ship a


Contractor Entity's entitlement to Gas, except, in the case of Associated Gas. as


provided in clause 14.37.


14.3.4 The Government controls and determines the interests of each Government


Interest Holder in respect of the sale, dedication, designation, commitment, or


other disposal or shipment of Gas. A Government Interest Holder shall not


commit, or otherwise dispose or ship its entitlement to Gas (and no


Government Interest Holder is authorised to sell, dedicate. designate, commit,


or otherwise dispose of or ship its entitlement to Gas), except on a jointly-


dedicated basis together with the Government.


14.3.5 No Contractor Entity is obligated to sell, dedicate, designate, commit, or


otherwise dispose of or ship its entitlement to:


(a) Non-Associated Gas to the Government or any other Person, except


on such terms as are acceptable to the Contractor Entity; or


(b) Associated Gas to the Government or any other Person, except as


provided in clause 14.37.


14.3.6 The Government will not sell, dedicate, designate, commit, or otherwise


dispose of or ship its entitlement to Gas (including, in respect of the


Government, pursuant to clause 32.11), except on a jointly-dedicated basis


together with the Contractor Entities.


14.3. ? The Government may at any time by notice to the Contractor designate a Gas


F.*eld or Gas Fields as exclusively dedicated and reserved for the Oomestic


Market or the Export Market.











46


 Production Shoring Controct Dinorto








14.s.8 Nothing in this Contract prohibits the Government from inviting the Contractor


Entities to participate in any Person organised to undertake all or any part of a


Gas Export Plan or Domestic Gas Plan.





FlAKIXG


14.6 Flaring of Natural Gas is prohibited, except:





(a) in accordance with an Approved Work Program and applicable Permits; or


(b) in an emergency.


14.7 The Contractor shall submit any request for a Permit for flaring to the Government.


14.7.1 The Contractor must include in such request for a Permit:


(a) an evaluation of reasonable alternatives to flaring that have been


considered by the Contractor together with information on the


expected amount and quality of Natural Gas to be flared and the


proposed duration of the requested flaring; and


(b) its consideration and plans for taking all commercially reasonable


measures to ensure the extraction of natural gasoline and other


liquids from Associated Gas to be flared.


14.71 The Government may refuse to grant such Permit in the Government's sole





discretion, including in circumstances where the request reasonably shows that


flaring would be in the economic interest of the Parties or is necessary for the


production of Petroleum, and the Government has no implied duty to provide


any Permit for flaring.


Gas Fitio Holding Ptmoo Application





14.B If the Contractor submits a declaration in accordance with 12.6(d) in respect of a


Discovery of a Gas Field, the Contractor may. not less than 90 days thereafter, submit a


written application (a *Gas Field Holding Period Application'*) to the Government to


hold such Discovery as a Gas Field for a period as set forth in clause 14.10 to 14.12.


14.8.1 The Contractor will not be entitled to submit a Gas Field Holding Period


Application in respect of a Gas Field after the 8 ' anniversary of the Effective


Date, and the Government will have no obligation or duty, and no implied


obligation or duty, to consider a Gas Field Molding Period Application received


after such date or to grant a Gas Field Molding Period with respect thereto.


14.8.2 If the Contractor does not submit a Gas Field Holding Application within such


90-day period, and effective as of the 120,h day following the date the


Contractor submitted its Appraisal Report and declaration in accordance with


clause 12.6(d), the Contractor shall relinquish either:


(a) the entire Contract Area when there is no other Discovery and no


Exploration Operations; or


(b) the structures containing the Gas Field, when the Contract is entitled


to conduct further Exploration Operations or there is a Discovery.


14.9 The Contractor must include in a Gas Field Holding Period Application:





(a) the proposed delineation and related surface area of the Gas Field;








47


 Production Shoring Controct Dinorto








(b) the estimated reserves in the Gas Field:


(c) a proposed Gas Field Appraisal Work Plan and Budget, if either: (11 the


Government has notified the Contractor that the Government requires


additional Appraisal Operations, or (2) the Contractor wishes to undertake


further Appraisal Operations; and


(d) its proposed Domestic Gas Marketing Work Plan and Budget, if the


Government has notified the Contractor that the Gas Field has been designated


by the Government as exclusively dedicated for the Domestic Market.


i4.*.i Nothing in this clause 14.9 precludes the Government from instructing the


Contractor to prepare a Domestic Gas Marketing Work Plan and Budget at a


later date.


Gas Fitto Holding PeilOD


14.10 Upon the Government's approval of a Gas Field Holding Application and additional


submissions in accordance with clause 14.9. the Contractor will be entitled to hold the


subject Gas Field for a period as set forth by the Government in a notice to the


Contractor setting forth its approval of a Gas Field Holding Period Application |such


period, as it may be shortened or extended in accordance with this Contract, the "Gas


Field Holding Period") as set forth in clause 14.11.


14.11 The Government shall set forth a Gas Field Molding Period in accordance with this clause


14.11.


I4.n.i If the date the Contractor has submitted a Gas Field Holding Application is


before the S*h anniversary of the Effective Date, then the Government shall


provide a Gas Field Holding Period of four years (such period terminating on


the 9 * anniversary of the Effective Date|.


14.H.2 If the date the Contractor has submitted a Gas Field Holding Application is on or


after the 5^ anniversary of the Effective Date and before the 6th anniversary of


the Effective Date, then the Government shall provide a Gas Field Molding


Period of three years (such period terminating on the 9 * anniversary of the


Effective Date).


14.11. s If the date the Contractor has submitted a Gas Field Holding Application is on or


after the 6n anniversary of the Effective Date and before the 7th anniversary of


the Effective Date, then the Government shall provide a Gas Field Molding


Period of two years (such period terminating on the 9** anniversary of the


Effective Date).


14.H.4 If the date the Contractor has submitted a Gas Field Holding Application is on or


after the 7” anniversary of the Effective Date and before the 8,f' anniversary of


the Effective Date, then the Government shall provide a Gas Field Molding


Period of one year (such period terminating on the 9anniversary of the


Effective Date).


14.H.5 If the date the Contractor has submitted a Gas Field Holding Application is on or


after the 8**' anniversary of the Effective Date, in accordance with clause 14.8.1


the Contractor wilt not be entitled to a Gas Field Holding Period.


 Production Shoring Controct Dinorto








14.12 If the Contractor submits a declaration in accordance with 12.6|d) in respect of


subsequent Discoveries of Gas Fields, the Contractor may in respect of each such


subsequent Discovery and not less than 90 days thereafter, submit Gas Field Holding


Period Application to the Government to hold such Discovery as a Gas Field within the


existing Gas Field Holding Period.


14.12.1 The Contractor must include in such Gas Field Holding Period Application the


same information as provided in clause 14.9.


14.12.2 The Contractor is not entitled to separate Gas Field Molding Periods for each


Gas Field, and is entitled to only one Gas Field Holding Period for all Gas Fields.


14.12.S If the Contractor does not timely submit a Gas Field Holding Period Application


in respect of an additional Discovery of a Gas Field, such Discovery of a Gas


Field will not be entitled to a Gas Field Holding Period.


Gas Fiuo Holding Ptftioo RtNTAi


14.13 From the first day of the Gas Field Holding Period until expiry of the Gas Field Holding


Period, the Contractor shall pay to the Government an annual surface rental for that


portion of the Contract Area that is subject to the Gas Field Holding Period of US$10.00


per square kilometre per Contract Year (the vGas Field Holding Period Rental'I.


14.13.1 The Gas Field Holding Period Rental is due and payable in arrears on or before


each anniversary of the Effective Date and on the last day of the Gas Field


Holding Period or termination of this Contract Iwhichever is earlier), and is


subject to proration in any Contract Year during which there has been a


relinquishment or expiry of the Gas Field Holding Period, based on actual


number of days in such Contract Year.


14.13.2 Gas Field Holding Period Rental will not be Cost Recoverable.


EAHLY Tt*MINATK>N A NO RttlNQUISMMtNT


14.14 If the Contractor fails to undertake and complete all work contemplated by and in


accordance with an Approved Gas Field Appraisal Work Plan and Budget with respect to


a Gas Field, the Government may provide not less than 90 days' prior notice (a "Notice


of Early Termination of Gas Field Holding Period') to the Contractor that the Gas Field


Holding Period will terminate at the end of such 90-day not»ce period, unless the


Contractor completes, within such period, all such required work in accordance with the


Approved Gas Field Appraisal Work Plan and Budget.


14.14.1 In any such notice of termination, the Government must provide reasonable


detail of all work that the Government considers that the Contractor has not


completed.


GovikMMtwi PftioitiTv Rights


14.15 The Government (directly or indirectly through a Public Company or an Affiliate of the


Government designated by the Government, or other designee of the Government! has


the exclusive right:


(a) to conduct all Export Gas Marketing Operations with respect to Natural Gas;


and











49


 Production Shoring Controcr Oinorto








fb) to purchase for resale to Export Markets the entitlement of each Contractor


Entity to Natural Gas.


14.is.2 The Contractor shall not (and each Contractor Entity shall not and is not


authorised to):


(a) conduct any Export Gas Marketing Operations; or


(b) enter into any agreements for the sale, designation, dedication,


commitment, or other disposal of Natural Gas to Export Markets,


except to the Government (directly or indirectly through an Affiliate of


the Government designated by the Government or other designee of


the Government).


14.16 The Government has no obligation to find an Export Market for all or any Natural Gas


produced from the Contract Area.


14.16.x The Government will incur no liability whatsoever to the Contractor or to any


Contractor Entity or to any Government Interest Holder, if the Government


does not provide a Gas Export Plan that is acceptable to all other Parties.


14.17 Except as provided in clause 14.17.1. all expenses incurred by the Government in


respect of Export Gas Marketing Operations are solely for the account of the


Government.


14.17.1 The Contractor shall reimburse the Government for all expenses incurred by


the Government in its conduct of Export Gas Marketing Operations:


(a) within 30 days after receipt of an invoice therefor; and


(b) provided that the Parties have signed a gas sales and purchase


agreement.


14.17.2 Payments made by the Contractor to the Government pursuant to clause


14.17.1 will be Cost Recoverable.


14.18 The Contractor shall provide all assistance reasonably requested by the Government


with respect to the Government's Export Gas Marketing Operations.


i4.ia.i Expenses incurred by the Contractor in providing assistance to the Government


in accordance with this clause 14.18 will only be Cost Recoverable if such


expenses are included in an Approved Work Plan and Budget, or. if such


expenses are not included in the Approved Work Plan and Budget or exceed the


amounts set forth in the Approved Budget, as provided in clauses 14.18.2 or


14.18.3.


14.14.2 Individual line-item expenses in any Calendar Year of more than that set forth in


the Approved Budget but less than 10% over such line-item amount will be Cost


Recoverable, if the Contractor has notified the Government of all such expenses


as soon as is practical.


14.14.1 Individual line-item expenses in any Calendar Year of more than 10% of the line-


item amount set forth in the Approved Budget will only be Cost Recoverable only


if each such line-item expense of more than 10% is approved by the Government


before the expense is incurred, unless the Government otherwise agrees.








50


 Production Shoring Controct Dinorto








DoMtsvic Gas Marking Operations


14.19 The Contractor and the Government:





<3| are each entitled to conduct Domestic Gas Marketing Operations; and


W shall cooperate and coordinate in their Domestic Gas Marketing Operations.





14.20 Expenses incurred by the Contractor in its conduct of Domestic Gas Marketing


Operations will only be Cost Recoverable if such costs are included in an Approved


Domestic Gas Marketing Work Program and Budget.





14.20.1 All expenditure incurred by the Contractor in the performance of Domestic Gas


Marketing Operations pursuant to an Approved Domestic Gas Marketing Work


Program and Budget will be Cost Recoverable.


14.20.2 The Contractor shall include in each proposed Domestic Gas Marketing Work


Program all details as required by Government, including:


(a) works to be carried out;


(b) type of services to be provided, distinguishing between third parties


and Affiliated companies of each Contractor Entity; and


(c) categories of general and administrative expenditure.


14.20.5 No later than 1 October of the Calendar Year preceding each Calendar Year in


which the Contractor proposes to conduct any Domestic Gas Marketing


Operations, the Contractor shall prepare and submit to the Management


Committee and the Government a proposed Domestic Gas Marketing Work


Program and Budget for the following Calendar Year.


14.20.4 If the Government requests any modification to the Domestic Gas Marketing


Work Program and Budget, the Government and the Contractor shall meet to


discuss the proposed Domestic Gas Marketing Work Program and Budget and


proposed modifications thereto promptly after the Contractor's receipt of the


Government's requested modifications of the proposed Domestic Gas


Marketing Work Program and Budget. The Contractor must communicate its


comments to the Government in respect of any modifications requested by the


Government before such meeting.


14.20.S If the Government and the Contractor are not able to agree on the


modifications proposed by the Government, expenses incurred by the


Contractor will not be Cost Recoverable.


14.20.6 Individual line time expenses in any Calendar Year of more than that set forth


in the Approved Budget but less than 10% over such line-item amount will be


Cost Recoverable, if the Contractor has notified the Government of all such


expenses as soon as practical.


14.20.7 Individual line-item expenses in any Calendar Year of more than 10% of the


line-item amount set forth in the Approved Budget will only be Cost


Recoverable only if each such line-item expense of more than 10% is approved


by the Government before the expense is incurred, unless the Government


otherwise agrees.











51


 Production Shoring Controct Dinorto








14.21 Neither the Government, nor the Contractor:


(a) has any obligation to find a Domestic Market for Natural Gas produced from


the Contract Area; or


(b) will incur any liability whatsoever to any Party (or any Government Interest


Holder), if such Party does not provide a Domestic Gas Plan that is acceptable


to all other Parties.


14.22 The Contractor is not obligated or otherwise responsible for any expenditure incurred by


the Government in the Government's conduct of any Domestic Gas Marketing


Operations.


CoKSiotMAirON or Gas Disposition Pla*s - Expo* t and DOMtstic


14.23 Neither the Contractor, nor the Government has any obligation to agree to any Gas


Export Plan or Domestic Gas Plan proposed by the other Party.


14.23.1 The Contractor and the Government must both agree on any Gas Export Plan or


Domestic Gas Plan.


14.23.2 A Government Interest Holder has no right to evaluate, consider, or otherwise


approve a Gas Export Plan or a Domestic Gas Plan, and each Government


Interest Holder will be bound by the decision of the Government and the


Contractor with respect thereto.


14.24 The Government has no obligation to consider any Domestic Gas Plan proposed by the


Contractor, unless the Government has designated a Gas Field as exclusively reserved


for the Domestic Market.


14.24.1 No provision of this Contract prohibits the Government from considering and


approving a Domestic Gas Plan proposed by the Contractor.


14.25 The Parties may agree on both a Gas Export Plan and a Domestic Gas Plan, or may agree


a Domestic Gas Plan on a standby basis in the event the Government does not propose a


Gas Export Plan.


Gas Export Plan


14.26 The Government must provide a proposed gas sale and purchase agreement as part of


the Government’s proposed Gas Export Plan.


14.27 The Contractor will have not less than 90 days from the date that the Government first


provides a Gas Export Plan to the Contractor (such 90-day period, as it may be extended


by the Government pursuant to clause 14.27.1, the ^Export Plan Evaluation Period”) to


evaluate the Gas Export Plan, make any recommendations with respect thereto, and


consider the requirements of a Development Plan that would be necessary to enable the


Contractor to determine whether Gas Export Plan renders a Gas Field economic for the


Contractor to develop.


14.27.1 The Government may agree to extend the Export Plan Evaluation Period for


such period as the Government sets forth in a notice to the Contractor.


14.27.2 If the Export Plan Evaluation Period extends beyond the last day of the Gas


Holding Period, the Gas Holding Period will be extended for such excess days.








52


 Production Shoring Controct Dinorto








14.28 If, at the conclusion of the Export Plan Evaluation Period, the Contractor and the


Government have not agreed a Gas Export Plan as proposed by the Government, the


Government may send a notice (a 'Holding Period Early Termination Notice*} to the


Contractor that the Gas Field Holding Period will terminate as of the date set forth in


such notice.


14.28.1 The date set forth in the Holding Period Early Termination Notice may not be


earlier than the scheduled expiry of the Gas Field Holding Period and may not


be earlier than the 30 days after the date of the notice.


14.28.2 If at the conclusion of the notice period as set forth in the Molding Period Early


Termination Notice land any extensions thereto provided by the Government


to the Contractor in a subsequent notice!, the Contractor and the Government


have not agreed on a Gas Export Plan, the Gas Field Holding Period shall


terminate and all Gas Fields subject to the Gas Field Molding Period will be then


be considered as fully relinquished to the Government.


14.28.3 The Contractor and the Government will only be considered to have agreed to


a Gas Export Plan proposed by the Government when the Parties (as sellers)


have signed a gas sales and purchase agreement with the Government |or any


Affiliate of the Government or other Person designated by the Government as


contemplated by the Gas Export Plan| as the purchaser.


DoMtSTtc Gas Plan


14.29 If the Government notifies the Contractor that the Government has designated a Gas


Field as reserved for Domestic Markets, the Contractor shall:


(a) propose a Work Program and plan for Domestic Gas Marketing Operations and


associated Budget;


(b) carry out Domestic Gas Marketing Operations in accordance with an Approved


Domestic Gas Marketing Plan and Budget; and


(c) propose a Domestic Gas Plan at any time.


14.30 If the Government has designated the Gas Field as exclusively reserved for Domestic


Markets, the Government shall give reasonable consideration to a Domestic Gas Plan


proposed by the Contractor.


DlVtlOl'MfcNT Plah


14.31 Within 90 days after Government and the Contractor have agreed to a Gas Export Plan


or a Domestic Gas Plan, the Contractor shall prepare and deliver a Development Plan for


the Development of the Gas Fields in the Contract Area, including the sequencing and


timing of the development of the Gas Fields and the expected First Production


corresponding to the delivery requirements under the applicable agreed plan.


14.32 If the proposed Development Plan is not satisfactory to the Government, the


Government shall so notify the Contractor and meet with the Contractor to discuss the


proposed Development Plan.


14.33 If the Government has not approved a Development Plan within 180 days following


agreement of a Gas Export Plan or Domestic Gas Plan, as applicable, the Government


 P/odu ctton Shonoa Control! Dinar to








may 'end the Contractor a notice (the *Gas Development Period Early Termination


Notice') 'citing forth a date, which molt not be leu than 30 dayi from the date of the


Gas Development Period Early Termination Notice, that the Gai Field will be comldered


rellnqulihed ai of the date set forth in loch notice unlen the Government has accepted


a Development Plan for the Gai Field.


14.J« If at the conclusion of the 30-day notice period as set forth in the Gas Development


Period Early Termination Notice land any extension! thereto provided by the


Government to the Contractor in a subsequent notice), the Government has not


accepted a Development Plan proposed by the Contractor, all Gas Fields will be


considered as fully relinquished to the Government. If the Contractor is not then


entitled to any rights to produce and develop Crude Oil, this Contract will thereupon


terminate.


14.If If the Contractor does not develop a Gai field within the periods as set forth in


Approved Development Plan, sub|ect to clause 40|Forir Maje/re|, the Government may


send the Contractor a Gas Development Period Early Termination Notice setting forth a


date, which must not be less than 30 days from the date of the Gas Development Period


f arly Termination Notice, that the Gas held will be comldered relinquished as of the


date 'et forth In such notice.


G»s DevttoeMiNi Pi a mo


14.36 The approval of the Development Plan for a Gas Field by the Government will entitle the


Contractor to retain Its lights In respect of the Gas Field subject to such Development


Plan for the duration of the Development Period.


14.IT The Contractor shall, at the request of the Government on not less than 90 days’ prior


notice, deliver to the Government all Associated Gas produced that is not (a) used m the


Petroleum Operations, (b) re-injected, fc) permitted to be flared m accordance with


clause 14.6 and 14.7; or Id) sold in accordance with a Gas Export Plan or a Domestic


Market Plan.


14.1 r i The Contractor shall separate, gather, compress, and deliver such Associated


Gas to the Government at a delivery point at the boundary of the Contract Area


or gas processing plant as agreed between the Government and the Contractor,


free of charge to the Government.


mil If at any time there is a regional main gas pipeline, the Contractor shall


transport and deliver the Associated Gas to such tie-in point as is determined


by the Government, meeting pipeline specifications, unless it is uneconomic.


IUU AI expenditures incurred by the Contractor up to such agreed drhvery pomt.


including ppeirse construction and operation, compression, treatment, and


processing, wil be Cost Recoverable.


14.M The Government w I be solely: (a) responsible for collecting, treating, compresv.ng. end


transporting from the agreed delivery point all Associated Gas delivered to the


Government pursuant to clause 14.38; and (b) liable for all costs, expenses, and


Uab«M>es in respect of such Associated Gas after the agreed deirvery point.


 SAo--» Ccr-'-'Oit Os-ana








14.39 Each Contractor Entity's entitlement to Associated Gas liom an Oil Held will De


governed by the duration allowed tor the production ol Crude Oil under clauses G 1.1


and 6.14.








Gas Pikiincs


14.40 The Contractor land no Contractor Entity or Government Interest Holderl Is not entitled


to (and shall not) ship or otherwise transport Natural Gas outside ol the Contract Area,


ear rpt on a Joint dedicated, common stream basis svith each other Contractor Entity and


the Government.


14 41 The Contractor Is not authorised to construct any pipelines lor the transportation of


Natural Gas to the Export Market or the Domestic Market, eacept In accordance with a


Gas Export Plan or a Domestic Gas Plan, as applicable, and the applicable Approved


Development Plan and Approved Work Plan and Budget.








ClAU8E 15-Accounts; Operations


Accounts


IS 1 The Contractor shall maintain in accordance with the Accounting Procedure and


accepted accounting practices generally accepted in the international Petroleum


Industry and. to the extent compatible with such practices. In accordance with US


Generally Accepted Accounting Principles or International Financial Reporting Standards


(In either case consistently appliedl, at its business ollice in the Kurdistan Aegon. a>


records ol account and such other records in respect of the work performed under this


Contract, the costs incurred, and the amount and value of all Petroleum produced and


saved from the Contract Area (the "Accounts').


iS-i-i The Accounts must reflect in detail al expenditures incurred and revenues


received.


tua The Contractor shall keep copies of the Accounts for the entire term of this


Contract.


is.1 s Ai Accounts shall be prepared m the English language-


iS-i.a The Contractor shall record and maintain the Accounts in USS.


1S-1.S The Contractor shall make the Accounts available at At offices in Kurdistan


Region at all reasonable lanes for inspection and audit by representatives of


the Government, including independent auditors that may be employed by the


Government.


11.1 In addition to all other reports required by this Contract, withm 90 days folkrwmg the


end of each Calendar tear, the Contractor shal submit to the Government a delated


statement of |a| all Petrolesim Costs incurred m respect of such Calendar Year and |b)


calculations of Prof A Petroleum pursuant to clause 16.


is-l.1 The reports must be accompanied by a report of the Operator's ultimate parent


company's auditors confirming the accuracy of such statement.


 Production Shoring Controct Dinorto








is.2.2 The Contractor shall provide the Government with such production statements


and reports as required pursuant to clause 16.4.





Audit


15.3 The Government is entitled:


(a) to inspect and audit the Accounts with respect to each Calendar Tear at any


time within a period of five Calendar Years following the end of such Calendar


Year (the ’Audit Request Period"}; and


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


petroleum industry accounting practice to undertake or assist the Government


with respect to any audit.


15.4 The Contractor shall pay all reasonable costs and fees of an auditor appointed by the


Government pursuant to clause 15.3|b), which costs and expenses will be Cost


Recoverable.


15.5 The Contractor shall provide all supporting records and information requested by the


Government in support of a Government audit.


15.6 If, as a consequence of an audit, the Government considers that there is a significant


mistake or irregularity in respect of the Accounts, the Government shall notify the


Contractor of such mistakes or irregularities within 6 Months following the date the


Government completes the audit. If the Government fails to notify the Contractor of any


audit exceptions within such six-month period, the relevant Accounts subject to the


Government's audit will be presumed to be correct.


15.7 Within 60 days of any notification from the Government pursuant to clause 15.6, the


Contractor shall either (a) make necessary corrections, adjustments or amendments, or


(b) notify the Government of the Contractor's objections, concerns, or other comments


with respect thereto.


is.7.1 If the Contractor notifies the Government of objections, concerns, or other


comments as provided in clause 15.7, the Government shall, within 30 days


following receipt of such notice, notify the Contractor of the Government's


response to the Contractor's objections, concerns, or other comments.


15.8 Any Dispute between the Parties under clauses 15.3 through 15.7 that cannot be settled


amicably within 60 days of the Government's final notice under clause 15.7.1 is subject


to resolution by an Expert in accordance with clause 42.


Clause 16 - Other Contractor Rights and Obligations


PUMANINT Rt I'K&StN! ATIVt


16.1 Within 90 days following the Effective Date, each Contractor Entity shall open an office


and appoint a permanent representative in the Kurdistan Region.

















56


 Crodudton Sharing Controct Dinorto








Conduci01 PimoilUM OnunuM


16} The Contractor shall be responsible lor the conduct, management, control and


administration of Petroleum Operations in accordance w.th this Contract.


16 I In conducting its Petroleum Operations, the Contractor may use any Affiliate of each


Contractor Intlty, its and their Subcontractors, and the employees, consultants, and


agents ol each ol the foregoing.


iMPiMAiroh ano Hr roars


164 The Contractor shall provide the Government with periodic Data and activity reports


relating to Petroleum Operations. The Contractor shall include details of the following in


such periodic Data and activity reports:


(a) Information and Data regarding all Petroleum Operations performed during the


Calendar Year, Including any Quantities of Petroleum produced and sold;


(b) Data and Information regarding any transportation facilities built and operated


by the Contractor:


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


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


personnel; and


(d) a descriptive statement of all significant Assets deployed since the previous


report, including all costs associated therewith.


Requikemeni ton Pethouum OrteAtions


16.6 The Contractor may freely use any Petroleum produced •■thm the Contract Area for the


Petroleum Operations.





SueiavtttON


16.6 The Contractor shall at all times provide reasonable assistance as may reasonably be


requrstrd by the Government during ts review and verification of Accounts and records


and of any other information relating to Petroleum Operations at the ©" ces. wort sites


or any other facilities of the Contractor.


16.6.1 Upon giving reasonable prior notice to the Contractor, the Government may


send a reasonable number of representatives to the wor« sites or any other


facilities of the Contractor in the Kurdistan Region to perform such lo res and


verifications.


16.6.1 The representatives of the Government shall at all times comply with any safety


regulations imposed by the Contractor, and the Government shall use


reasonable efforts to ensure that such reviews and verifications do not hinder


Petroleum Operations.


Access to f acuities


16.7 For the performance of the Petroleum Operations, the Contractor, any Affiliate ol each


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


agents of each of the foregoing shall at all times be granted free access to the Contract


Area and to any facilities for the Petroleum Operations located within or outside of the











S7


 Production Shoring Controct 0inano








Cantuct Area or within or outside the Production Area, for the purpose of carrying out


the Petroleum Operations.


Ust or FACIUIMS


16.8 Upon notice from the Government, the Contractor shall mate available to a reasonable


number of representatives of the Government those of the Contractor's facilities which


are necessary to enable such representatives to perform their tasks related to this


Contract and the Kurdistan Region Oil and Gas law including, in case of works to be


performed on work sites, transportation, accommodation and board, under the same


conditions as those provided by the Contractor for Its own personnel.


16.9 Notwithstanding clause 16.8, the Government shall indemnify and hold harmless each


Contractor Entity against all losses and Expenses In respect of any claim, demand, action


or proceeding brought against any Contractor Entity by any representative of the


Government in connection with the access to or use of the facilities by such


representatives, except for any losses or Expenses caused by the gross negligence o»


wilful misconduct of any Contractor Entity, any of its Subcontractors, or any of their


respective employees or agents.


lOltOODAMAOt


1A 10 The Contractor shall be responsible for any loss and Ixpense or other damage caused to


third parties by any Contractor Entity or rts Subcontractors or their respective personnel


In the conduct of Petroleum Operations or other* ie m accordance with Kurdistan


Region laws.


inieuiciUAi P*ort«iv Rights


16.11 The Contractor shall not Infringe on any intellectual property rights of any other Person.


Uiru AtroN


10 11 The Contractor shall as soon as reasonably practicable inform the Government of any


litigation relating to Petroleum Operations or this Contract.


PtrooucnoN Rati»


10 11 In connection with a general decision to reduce production across Iraq, the Government


may require the Contractor to set the production rate of Reservoirs below the MER for


such Reservoirs as provided for In the Development Plan.


illl.l If the Government issues a requirement as provided in clause 16.16. the


Government shall allocate any such reduction fairly and equitably among the


various production arras then producing in the Kurdistan Region, pro rota to


their respective production rates as at such allocation date, and with a view to


prudent allocation among such blocks.


Luting


16.14 The Government and. subject to clauses 32.11(a) and (b|. each Government Interest


Holder, and each Contractor Entity have the right and the obligation to take in kind and


separately sell or otherwise dispose ol their respective shares of Petroleum in


accordance with clauses 25. 26 and 27.


 P'Otfutuoe JAorw# fperroct Dwto








It IS Not leu than 12 Calendar Month* prior to the Date of start of Commercial Production


from any Development Area. Contractor shad submit to the Manageme nt Committee


and the Government for respective approvals proposed procedures and terms in respect


Of the scheduling, storage, and lifting of Petroleum by each Contractor Int.ty. the


Government, and each Government Interest Holder from each Production Area,


including rights of kiting Parties, notification time, maimum and minimum quantities,


duration of storage, scheduling, conservation, spdlage. habiktwt of the Part.es and


penalties for over and under lifting, safety, and emergency procedures None of the


Government, the Contractor, a Contractor Cntrty. or a Government Interest Holder may


hit any Petroleum untd such procedures and agreements have been estabkshed by


agreement of the Contractor and the Government.





oionaiCoatuMriioii Rtauwrminis


1*1* The Contractor Entities shad sell and deliver to the Government, upon written request of


the Government, any amounts of Crude Oil that the Government shad request to meet


Kurdistan Region internal consumption requirements.


u I* I The Government shad pay the International Market Price for such Crude Od.


The Contractor Entities and the Government shad enter into a sales agreement


covering such purchase and sale containing normal commercial terms


prevailing m the international petroleum industry.


i*i»* The Government shall provide the Contractor Cnt,t.cs w-th not less than ISO


days' advance written notice of its intention to buy such Crude 0


16.16.5 On such notice, the Government shall specify the volume ol Contractor's


entitlement required, the particular quality desired Inhere more than one


Petroleum quality is produced In the Contract Area) and the duration for which


such Petroleum will be purchased.


ib.16.4 On such notice, out ol Ihe total quantity ol Crude Oil to which the Contractor is


entitled from the Contract Area in a Calendar Year, each Contractor Entity shall


provide lor the period requested by Government up to such Contractor Entity's


pro rata share ol Crude Oil.


16.16.5 The Government Is entitled to trade such Crude Oil. whether lor a quality that


meets the Government's requirements or otherwise.


16.17 In case of war or imminent apprehension of war or grave national emergency, the


Government may requisition ad or a part of the Petroleum production from the Contract


Area and requee the Contractor to maimise such production The provisions of clause


16.16.1 regarding delivery. pr

requisitioned from the Contractor.


16.IS If the Government imposes an obkgation on the Contractor Of the Contractor Entities to


sed to the Government Ms accordance with clauses 16 16 or 16.17. the Government shall


use reasonable endeavours to impose such obligations proportionally among the


operators then produemg in the Kurdistan Region based on each operator's production


 Production Shoring Controct Dinorto








Clause 17 - Use of Land and Existing Infrastructure


GtNtfcAl


17.1 The Government shall make available to the Contractor any land in the Kurdistan Region


outside of the Contract Area which the Government is satisfied is reasonably required


for Petroleum Operations. The Contractor shall have the right to build and maintain,


above and below ground, any facilities required for the Petroleum Operations.


Thud Pahty Lanos


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


land in the Kurdistan Region belonging to third parties, the Contractor shall endeavour


to reach amiable agreement with the owners of such land. If such amicable agreement


cannot be reached, the Contractor shall notify the Government.


17.2.1 On receipt of such notification:


(a) the Government shall determine the amount of compensation to be


paid by the Contractor to the owner, if occupation will be for a short


duration; or


(b) the Government shall expropriate the land or property in accordance


with Kurdistan Region law, if such occupation will be long lasting or


makes it henceforth impossible to resume original usage of such land


or property.


17.2.2 Any property rights shall be acquired by and recorded in the name of the


Government, but the Contractor shall be entitled free use of the land or


property for the Petroleum Operations for the term of this Contract.


17.2.3 The amount of the compensation in clause 17.2.1|a| shall be fair and


reasonable, in accordance with clause 29 of the Kurdistan Region Oil and Gas


Law, and shall take into account the rights of the owner and any effective use


of the land or property by its owner at the time of occupation by the


Contractor.


17.2.4 All reasonable costs, expenditures and fair and reasonable compensation (as


required pursuant to clause 29 of the Kurdistan Region Oil and Gas law) which


results from such expropriation shall be paid by the Contractor and will be Cost


Recoverable.


iMMASTHUCYUHt


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


to use, subject to Applicable Law, any railway, tramway, road, airport, landing field,


canal, rrver, bridge, or waterway, any telecommunications network and any existing


pipelines or transportation infrastructure, on terms no less favourable than those


offered to other Persons and. unless generally in force, to be agreed.


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


maintain roads, railways, airports, landing strips, canals, bridges, protection dams, police


stations, military installations, pipelines (subject to clauses 14 and 38) and


telecommunications networks in the Contract Area, provided this does not increase the








60


 Production Shoring Controct Dinorto





costs, or compromise or have a material adverse effect on the performance of the


Petroleum Operations. If the construction, operation and maintenance of such facilities


by the Government results in increased cost or expense for the Contractor then such


cost and expense will be Cost Recoverable.


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


external war, the Government shall have the right to request to use any transportation


and communication facilities installed by the Contractor. Any associated costs, expenses


or liabilities incurred by the Contractor will be Cost Recoverable.


PnnoLiuM Omxatioks


17.6 In the conduct of Petroleum Operations, the Contractor has the right in the Kurdistan


Region, subject to compliance with applicable Kurdistan Region Law and CMS Standards,


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


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


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


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


sulphur plants and any other facilities or installations for the Petroleum Operations, in


addition to pipelines, pumping stations, generators, power plants, high voltage lines,


telephone, radio and any other telecommunications systems, as well as warehouses,


offices, sheds, houses for personnel, hospitals, schools, premises, dikes, vehicles,


railways, roads, bridges, airlines, airports and any other transportation facilities,


garages, hangars, workshops, foundries, repair shops and any other auxiliary facilities


for the Petroleum Operations and, generally, everything which is required for its


performance of the Petroleum Operations. The Contractor has the right to select the


location for these facilities.


17.7 For the conduct of Petroleum Operations, the Contractor shall have the right in the


Kurdistan Region, subject to compliance with applicable Kurdistan Region Law and EMS


Standards, to remove and use the topsoil, fully-grown timber, clay. sand. lime, gypsum,


stones (other than precious stones) and other similar substances as required for its


Petroleum Operations.


17.8 Subject to Applicable Law and compliance with CHS Standards, the Contractor shall have


the right in the Kurdistan Region to take or use any water necessary for the Petroleum


Operations, provided it does not damage any existing irrigation or navigation systems


and that land, houses or watering points belonging to third parties are not deprived of


their use.


A0J0i*IK6 PftOMftYlCS


17.9 Upon request of the Contractor, the Government shall prohibit the construction of


residential or commercial buildings in the vicinity of facilities used for the Petroleum


Operations that may be declared dangerous due to Petroleum Operations and to


prohibit any interference with the use of any facilities required for Petroleum


Operations.


ACCtSS


17.10 Access to the Contract Area may be granted pursuant to an access authorisation, as


defined in. and consistent with, the Kurdistan Region Oil and Gas Law to authorised third








61


 Production Shoring Controct Dinorto








parties on reasonable terms and conditions (including coordination!, including Persons


authorised to construct, install and operate structures, facilities and installations, and to


carry out other works, provided that nothing in such access authorisation or in this


clause 17.10 authorises the holder of an access authorisation to drill a Well or to


perform any Petroleum Operations in the Contract Area.


17.11 The Government shall gve the Contractor adequate advance notice of any access


authorisation in respect of the Contract Area and shall not grant any access


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


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


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











Clause 18 - Government Assistance


18.1 To the extent allowed by Applicable Law and at the specific request of the Contractor,


the Government shall take all necessary steps to assist the Contractor Entities in, but not


limited to. the following areas:


(a) securing any necessary Permits for the use and installation of means of


transportation and communications;


(b) securing regulatory Permits in matters of customs, import, or export;


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


administrative Permits for each Contractor Entity's, its Affiliate's and its


Subcontractors' Expatriate personnel (including their family membersl working


in the Kurdistan Region and any other part of Iraq during the implementation of


this Contract;


(d) securing any necessary Permits to send Abroad documents. Data or samples for


analysis or processing for the Petroleum Operations;


(e) relations with federal and local authorities and administrations, including for


the purposes of the remainder of this clause 18.1;


(f) securing any necessary environmental Permits;


(g| obtaining any other Permits requested by any Contractor Entity for the


Petroleum Operations;


(h) access to any existing Oata and information, including Data and information


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


(i) providing all necessary security for Petroleum Operations.


18.2 The Contractor shall pay reasonable and justified expenses incurred by the Government


with respect to its undertakings under this clause 18 against an invoice received therefor


from the Government. Such payments will be Cost Recoverable.


























62


 production Shoring Contract Dinorto








Clause 19- Assets and Materials


GlKIKAl


19 1 The Contractor shall supply. or procure the supply of. Assets, materials, and


consumables required for Petroleum Operations ("Assets and Materials'


191 The Contractor shall provide Assets and Materials In accordance with the relevant


Approved Work Program and Budget.


PaOCUMMINI P*0Ct(HI"IS


19.1 As soon as possible after the effective Oate. the Contractor shall provide the


Management Committee with a copy of Its procedures for procurement of Assets and


Materials and services for the Petroleum Operations as required by clause 8.4|e(,


Including the criteria for tender evaluation.


19.1.1 Such procedures and criteria must provide for fair and transparent tender


evaluation and be In accordance with Best Practices and Applicable Law.


194 If the Management Committee does not request any modifications to the procurement


procedures within 30 days after receiving such procedures, the procedures shall be


considered approved by the Management Committee


19*5 The Contractor shall give priority to Assets and Materials that are readily available In the


Kurdistan Region and other parts of Iraq to the extent their price, grade, quality,


quantity, specifications, purchase, delivery and other commercial and techis«al terms


are comparable in all material respects with those otherwise ava lable to the Contractor.








Clause 20 - Title to Assets


Tim Taansria


10 1 "Title Transfer Date" means the earlier of:


(a) the first date on which the "R" factor, as calculated in accordance with clause


26, Is equal to 1.00; or


(b) the termination of this Contract.


20.7 Subject to clause 21, on the Title Transfer Date, all Assets of the Contractor, a Contractor


Entity, or the Operator |or any of their respective Affiliates) in the Kurdistan Region will


become the property of the Government.


20.3 Until the Title Transfer Date, all Assets in the Kurdistan Region are the property of the


Contractor, the applicable Contractor Entity, any Affiliate of a Contractor Entity, the


Operator, or a Subcontractor, as the case may be.























63


 P'Od*c:o*i SHct^a Cor.vott D.r»> 13








Uasco Asm is; Sjsco* iiacioi Asms


20.4 The provisions of clause 20.2 wi* "0« joply to any Assets:


(a) leased by the Contractor, a Contractor Entity, or the Operator In accordance


with an operating lease that has been approved by the Management


Committee; or


(b) belonging to or leased by a Subcootractor or an Affiliate of such Subcontractor


Clause 21 - Use of asscts


RttMt


21.1 Whether before or after the Title Transfer Date and whether before or after recovery of


the cost of any Assets, the Contractor, each Contractor Entity, and the Operator she! at


al times have the exclusive right to use all Assets m the Kurdistan Region for Petroleum


Operations free of any charge by the Government


2U During the term of this Contract, the Government shall not transfer or otherwise


dispose of any Assets without having received prior no!«e of the Contractor's consent.








2U The Contractor may freely move any Assets and Materials from any relinquished portion


of the Contract Area to the remaining part of the Contract Area or from any other


contract area In the Kurdistan Region with respect to which the Contractor is a party to a


production sharing contract with fhe Government for use m petroleum operations


under such contract.








Clause 22 - Subcontractors


GENERAL


22.1 The Contrai tor shall ensure in accordance with Best Practices that each Subcontractor


has all requisite e«perience and qualifications.


Local Pxiiiaince


22.2 The Contractor shall give priority to Subcontractors from the Kurdistan Region and other


parts of Iraq to the e»tent their competence, rates, experience, reputation,


qualifications, specialties, financial capacity, availability, delivery and other commercial


terms are. In the Contractor’s sole opinion, comparable in all material respects with


those provided by foreign companies operating in the international petroleum industry,


and will not cause any Contractor Entity or its Affiliates to violate any Law applicable to


it, including Corrupt Practices laws.


22.2.1 A Subcontractor will not qualify as 'from the Kurdistan Region and other parts


of Iraq' Unless it is organised under Applicable law or the laws of Iraq,














64


 P'oOucltoa Shonng Controct Dtnorlo








domiciled in Iraq, and majority-owned and Controlled by Citizens of the


Kurdistan Region or Iraq.


P*OCUHtl*l8NI PftOClOUHtS





22.3 The Contractor shall select its Subcontractors in accordance with the procurement


procedures approved by the Management Committee pursuant to clause 19.3.


22.3.1 Each contract with Subcontractors must include a provision that obligates such


Subcontractor to comply with Corrupt Practices laws In the Subcontractor's


performance of the contract.


22.« The Contractor shall provide the Government with copies ol each contract with


Subcontractors where the contract amount exceeds the limit set by the Management


Committee from time to time,








Clause 23 - Personnel; Training; Assistance


EirataiAir Woax Plasms


21.1 Any Expatriate personnel working m the Kurdistan Region will require issuance of a


Permit from the Government (such Permit not to be unreasonably delayed or withheld!


and the Government shall obtain any Permit required by the federal government of Iraq.


Locai PautXNCt


23 2 For the Petroleum Operations, the Contractor shall give, and shall require its


Subcontractors to give, preference to citizens of the Kurdistan Region and other parts of


Iraq to the eaten! such citizens have the technical capac ity, qua • cations, competence,


and experience required to petform the work, are available at competitive


compensation rates, and their employment would not cause the Contractor, any


Contractor Entity, any of At Affiates. or any of its Subcontractors to violate any law


applicable tod.


23.3 Each Contractor Entity and Ms AlWates and Subcontractors have the right to hire


Expatriate personnel whenever the personnel from the Kurdistan Region and other parts


of Iraq do not have the requisite technical (apabifcty. qualifications or experience for


positions to be filled as required pursuant to clause 23.2.


23.3.1 In the event any Expatriate personnel or a member of such Expatriate's family


engages in an activity or commas an act m breach Kurdistan Region law. the


Contractor shall, at the request of the Management Committee, take the


necessary steps to repatriate such IndnnduaKi).


Ministry Capacity Buiioino Paymints ani> In Kino Assisianci


23.« The Contractor shall give reasonable consideration to the -.r; ondment of Government


personnel to the Contractor and ot the Contractor's personnel to the Government


during the various phases of the Petroleum Operations The Government and the


Contractor shall agree on terms and conditions for such secondment, and any costs


associated therewith will be Cost Recoverable


 Production Shoring Controct Dinorto








23.5 For the first five Contract Years, the Contractor shall pay to the Government USS2SO.OOO


within 30 days of the Contract date and on each anniversary of the Contract date


thereafter for the recruitment of personnel, whether from the Kurdistan Region other


parts of Iraq or Abroad, to the Ministry of Natural Resources. The selection of such


personnel shall be at the discretion of the Minister of Natural Resources. Such payments


will be Cost Recoverable.


23.6 The Contractor shall pay the Government US$1,000,000 within 30 days of the Contract


date pursuant to this clause 23.6.


21.6.1 The Government shall apply such funds to fund technological and logistical


support to the Government in respect of the regulation and administration of


the Kurdistan Region petroleum sector as the Minister of Natural Resources


may require, which may include procurement by the Government of geological


computing hardware and software and such other equipment.


25.6.2 The payment by the Contractor pursuant to this clause 23.6 will be Cost


Recoverable.


TAA IKING


23.7 The Contractor shall train all its personnel from the Kurdistan Region and other parts of


Iraa directly or indirectly involved in the Petroleum Operations for the purpose of


improving their knowledge and professional qualifications in order that such personnel


gradually reach the level of knowledge and professional qualification held by the


Contractor Entities' Expatriate workers with an equivalent resume.


25.7.1 Such training shall also include the transfer of knowledge of petroleum


technology and the necessary management experience so as to enable the


personnel from the Kurdistan Region and other parts of Iraq to apply advanced


and appropriate technology in the Petroleum Operations, to the extent


permitted by Applicable Law and agreements with third parties, and subject to


appropriate confidentiality agreements.


23.8 The Contractor shall submit its plan for the recruitment. Integration, and training of


personnel from the Kurdistan Region and other parts of Iraq to the Management


Committee for its approval. Such training plan: |a} must take into consideration the


requirements of clause 23.7; and |b) may include training for the Government's


personnel, depending on the extent to which the amount allocated to the training plan


in accordance with clause 23.10 is available after taking into consideration the training


of the Contractor Entities' Kurdistan Region and other Iraqi personnel.


23.9 Within 90 days of the Effective Date, the Contractor shall submit to the Management


Committee a proposed training plan for the remainder of the Calendar Year. Thereafter,


no later than 1 October in each Calendar Year, the Contractor shall submit a proposed


training plan to the Management Committee for the following Calendar Year.


Tha iking ExrtKSt Allocation and Payment


23.10 The Contractor shall pay the Government on the first anniversary of this Contract and


each anniversary thereafter, for training, the amount of:


(a) US$150,000 for each Contract Year during the Exploration Period; and











66


 P/odutttoo Worms Controct Dino-ro





(b) US$300,000 for each Contract Year (luring the Development Period.


n il lath Contractor Entity shall be responsible for the training costs which such Contractor


f rslity may incur in respect of the personnel it employs from the Kurdistan Region and


other parts of Iraq.


1111.1 All such reasonable costs will be Cost Recoverable.


II.II.a Costs incurred by the Contractor for training programs for the Government's


personnel shall be borne by the Contractor only to the extent that they ate


Included in the Contractor's approved training plan pursuant to clause 23 B.


and will be Cost Recoverable.


11.11.1 Ihe cost of all other training programs for the Government's personnel will be


the Government's responsibility.


(NViaoNMINI FUND PAVMI MS





11 II The Contractor shall pay to the Government:


(a) USSlSO.OOO within 30 days of the date of this Contract and on each annual


anniversary of the Contract date thereafter during the Exploration Period; and


(b) US$300,000 on each annual anniversary of the Contract date during the


Development Period.


1111 Ihe Government will credit all such payment* to the environment fund to be established


by the Government for the benefit of the natural environment of the Kurdistan Region,


pursuant to the Kurdistan Region Oil and Gas law (the ‘Ineironitient fund* I


23.14 Payments by the Contractor pursuant lo clause 23.12 wil be Cost Recoverable





Clause 24 - Royalty





DtrirtniONS





24.1 "Royalty Crude Oil" means Crude Oil. regardless of gravity, produced and saved from


the Contract Area.


24.2 "Royalty Gas" means Gas produced and saved from a Gas Field.





24.3 "Royalty Petroleum" means Royalty Crude Oil and Royalty Gas.


Obmgation





24.4 The Contractor shall pay to the Government a portion of Petroleum produced and saved


from the Contract Area, either in kind or In cash as directed by the Government, as


provided in this clause 24 (such payment, the 'Royalty').


14.4.1 The Government wil) be considered lo have elected to receive the Royally in


cash, unless the Government has given not less than 90 days' prior notice to


the Contractor of the Government's election 10 receive the Royalty in kind


14.4.1 If the Government has elected to receive the Royalty in kind, the Contractoi


shall deliver to the Government at the Delivery Point the quantity of Royalty





67


 Production Shoring Controct Dinorto








Petroleum equal in value to the Royalty payable with respect thereto. Title and


Risk of loss of Royalty paid in kind will transfer to the Government at the


Delivery Point.


24.4.3 If the Government has elected to receive the Royalty in kind, the Government





may require the Contractor to assist in the sale of all or part of the Royalty


received in kind pursuant to clause 2E.


24.5 The Royalty is payable on all Royalty Petroleum.





24.s.i No Royalty is payable in respect of Associated Gas from an Oil Field.





RovAtiY Rah


24.6 The Contractor shall calculate the Royalty daily by applying the following rate {as


applicable the 'Royalty Rate**) to the Royalty Petroleum produced and saved on that


day for:


(a) IOK for Royalty Crude Oil; and


(b) 10% for Royalty Gas.


DtllViftY





24.7 If the Royalty is payable in kind, the Contractor shall deliver to the Government at the


Delivery Point each day a volume of Crude Oil or Natural Gas, as applicable, equal to the


applicable Royalty Rate multiplied by the applicable quantity of Royalty Petroleum.


24.8 If the Royalty is payable in cash, the Contractor is entitled to take delivery at the


Delivery Point of the quantity of Royalty Petroleum corresponding to the value of the


Royalty Petroleum determined in accordance with clause 24.6.


24.s.i Subject to clause 14 (Natural Gai) in respect of Natural Gas, the Contractor will


be entitled to freely sell such Royalty Petroleum.





24.8.2 Title and risk of loss to Royalty Petroleum with respect to which the Contractor


has taken delivery under this clause 24.7 will pass to the Contractor Entities at


the Delivery Point in accordance with their participating interests.


24.9 Disposition of paid-in-kind Royalty Gas by the Government is governed by clause 14


[Natural Gos|.


Paykunt ih Cash


24.10 If the Royalty is payable in cash, the Contractor shall:


(a) value Royalty Crude Oil at the International Market Price for each Month and


Quarter in accordance with clause 27;


(b) value Royalty Gas for each Month and Quarter in accordance with clause 27;


(c) calculate the Royalty payable based on the valuations of Royalty Crude Oil and


Royalty Gas for each Quarter; and


(d) pay to the Government the applicable Royalty quarterly, in arrears, within 30


days of the end of each Quarter.











68


 Pfodmtton Shonng Contract Dinorto








Clause 25 - Recovery of Petroleum Costs


Dtrinnions


25.1 "Available Crude Oil* means all Crude Oil and Associated Gas produced and saved from


the Contract Area after deduction ot any quantities of Crude Oil to be delivered to the


Government for payment of Royalty in kind or delivered to the Contractor m respect of


the payment of Royalty in cash pursuant to clause 24.


25.2 "Available Gas" means all Gas produced and saved from a Gas field m the Contract


Area, rscept for Gas that is used in Petroleum Operations, re-Injectcd. flared in


accordance with clause 14.6, or is not used oi sold


25.3 "Available Petroleum* means Available Crude Oil and Available Gas.


Cost Recovtai


25.4 The Contractor is entitled to:


(a) recover Petroleum Costs In accordance with this clause 25 and the Accounting


Procedures; and


(b) allocate, as between the Contractor Entities, to each Contractor Entity its


proportionate share of Available Petroleum in accordance with the respective


participating interest of such Contractor Entity in relation to the aggregate


participating interests of the other Contractor Entities.


25.5 Cost Recovery by the Contractor Entities in an* period wdl be achieved by a Contractor


Entity when it has taken delivery of its partiopating interest share of Avalable


Petroleum from the Contract Area of equivalent vaiue (as determined pursuant to this


clause 2SJ to the Petroleum Costs to be recovered by the Contractor m accordance with


this Contract.


Vasuanoh or Avaaaasi PiraostuM


Hi The Contractor shall value Available Crude 01 at the International Market Price obtained


at the Delivery Point by the Contractor Entires and the Government.


25 7 The Contractor shall value Available Gat at the actual prices obtained at the point of sale


m accordance with clause 14.S m accordance with a Gas Esport Plan or Domestic Gas


Plan The 'point of sale" wl be such pomt at identified by the Parties in relevant Gas


Esport PUn or Domestic Gas Plan.


Coniaacioa EurruiMim roCosr Oa


25 l Subtect to the Accounting Procedure, from the First Production from any Production


Area Ms the Contract Area and thereafter from al Production Areas, the Contractor (and


each Contractor Entity) is entitled to recover al Petroleum Costs from up to 40* of


Available Crude Oil (such amount. 'Cost Oil* I within any Calendar year


H.1,1 Available Crude OH that is not Cost Oil is 'Profit OH",

















69


 Production Shoring Controct Dinorto








Contractor Entitlement to Cost Gas


25.9 Subject to the Accounting Procedure, from First Production from any Production Area in


the Contract Area and thereafter from ail Production Areas, the Contractor (and each


Contractor Entity) is entitled to recover Petroleum Costs from up to 50% of Available


Gas (such amount, 'Cost Gas") produced within any Calendar Year.


25.9.1 Available Gas that is not Cost Gas *s 'Profit Gas**.





Recovery Waterfall; Limitations


25.10 Petroleum Costs are Cost Recoverable under clauses 2S.8 and 25.9 in the following


order:


(1) Production Costs;


(2) Exploration Costs (including Appraisal costs within the Contract Area);


(3) Gas Marketing Costs;





(4) Development Costs;


(5) Crude Oil Pipeline Costs; and lastly


(6) Decommissioning Costs.


25.11 The Contractor is (and the Contractor Entities are) not entitled to recover aggregate


Petroleum Costs during any Calendar Year, expressed in quantities of Petroleum, in


excess of the percentages of Available Petroleum as set forth in clauses 25.8 and 25.9.


25.U.1 If in any Calendar Year. Cost Oil and Cost Gas (Cost Oil and Cost Gas, together


or either. "Cost Petroleum") is not sufficient to allow the Contractor Entities to


recover all Petroleum Costs for such Calendar Year, the amount of Petroleum


Costs not recovered in such Calendar Year may be (a) carried forward


indefinitely to subsequent Calendar Years and |b) charged to Cost Petroleum


(as applicable) until the earlier of full recovery of all Petroleum Costs or


termination of this Contract.





25.H.2 The Government never has any obligation or liability to the Contractor or any


Contractor Entity in respect of Petroleum Costs that are not recovered by any


Contractor Entity from Cost Petroleum.


25.H.3 Any Petroleum Costs that are subject to Dispute and have not been finally


resolved by the Parties shall not be included as Cost Petroleum until finally


resolved by the Parties or pursuant to clause 42 IDispule Pesofufion).


Delivery


25.12 Each Contractor Entity may take delivery of its proportionate share of Petroleum from


the share of Available Petroleum allocable to the Contractor for the recovery of


Petroleum Costs at the Delivery Point.


25.12.1 Title and risk of loss of such Available Petroleum will transfer to such


Contractor Entity at the Delivery Point.

















70


 Production Utotma Contract Dlnorto








Pino FthCt


2S.1I Sub|cct lo clause 38.4, Petroleum Coils under this Contract are not recoverable against


other areas In the Region in which any Contractor Entity ii party to a production sharing


contract or has any other interest.








Clause 26 - Propit Petroleum


DlflNIIIONS


20.1 Under this Contract:


(a) ■Cumulative Costs* means, as o( any time of determination, total Petroleum


Costs actually incurred by the Contractor from the Effective Dale to such time


of determination.


(b) "Cumulative Revenues* means, as of any time of determination, total


Revenues actually received by the Contractor Entities from the Effective Date to


such time of determination, howsoever characterised. Including Revenues


characterised as recovery of Petroleum Costs, Profit Petroleum, or otherwise.


(c) "Profit Petroleum* means Profit Oil and Profit Gas.


(d) "Revenues” means funds actually received by the Contractor Entitles In respect


their respective shares of Petroleum from the Contract Area.


(e) "R Factor" means a ratio calculated:


R = Wvl


where:


R = the R factor:


* : Cumulative Revenues, and


Caicuustoii or R Facto*


26.2 Within JO days from the Erst da* of each Semester starting on the 1* of January of the


Calendar Vear toBowing the Calendar Tear us winch Test Production occurs, the


Contractor shall calculate the R factor as of the last day of the preceding Semester and


promptly notify the Government thereof


26.3 From First Production unbl the end of the Calendar Year in which Fust Production


occurs, the R Factor shall be deemed to be less than one


26.4 The Contractor shall include, m ils notification in accordance with clause 26.2.


comprehensive detail in respect of each element of Cumulative Revenues and


Cumulative Costs supporting each calculation of the R Factor


26.5 The calculation of the R Factor wdl apply to all Production Areas in the Contract Area


until a new R Factor calculation has been made in accordance with clause 26.2.














71


 Production Shoring Controct Dinorto








EnYiTUKUKTS


26.6 From First Production and as and when Petroleum is being produced:


(a) the Contractor is to be attributed and allocated a percentage share of Profit





Petroleum, in consideration for the Contractor's investment in the Petroleum


Operations;


lb) each Contractor Entity is to be attributed and allocated a percentage share of


the Contractor's share of Profit Petroleum in accordance with each Contractor's


participating interest;





(c) the Government Interest Holders are to be attributed and allocated a


percentage share of Profit Petroleum in accordance with the participating


interest of the Government Interest; and


(d) each Contractor Entity shall pay Capacity Building Payments based on the value


of Profit Petroleum attributed to each Contractor Entity.





26.7 The total amount of Profit Petroleum which will be attributed and allocated to the


Contractor and the Government Interest Holders from First Production in accordance


with their respective participating interests is:





(a) for Profit Oil, an amount equal to the quantities of Petroleum resulting from


the application of the relevant percentage as indicated below to the daily


volume of production of Profit Oil within the Contract Area at the


corresponding Delivery Point:





*IT Factor Total Amount


R < or = 1 30%





1 < R< or = 2.0 30-1(30 - 15) x |R-11/(2.0 - 1.0))%





R >2.0 15%


and





(b) for Profit Gas. equal to the quantities of Gas resulting from the application of


the relevant percentage as indicated below to the daily volume of production


of Profit Gas within the Contract Area at the corresponding Delivery Point:





Factor Total Amount


R< or =1 38%





1< R

R >2.75 19%





26.8 Profit Petroleum which is attributed and allocated neither to the Contractor or


Government Interest Holder in accordance with clause 26.7 is to be attributed and


26.9 allocated to the Government.





When the Contractor is unable to calculate the R Factor for the relevant Semester


before an allocation of Profit Petroleum for such Semester must be made, then the


Contractor shall apply the allocation of Profit Petroleum applicable to the previous


Semester. Upon the calculation of the R Factor for the relevant Semester:








72


 Production Shoring Controct Dinorto








(a) if the attribution and allocation of Profit Petroleum in the previous Semester


and the relevant Semester is the same, then no adjustment shall be made; and


(b) if the attribution and allocation of the Profit Petroleum in the two Semesters is


different, then the Contractor shall make any adjustments to the Parties’ and


Government Interest Holders' respective shares of Profit Petroleum to restore


them to the position that they would have been in had the R factor for the


relevant Semester been available from the start of such Semester.


26.10 Subject to clause 26.10.2. if the Contractor makes an error in the calculation of the R





factor, resulting in a change in the Contractor's percentage share of Profit Oil. Profit


Gas, or both, the necessary correction shall be made and any adjustments shall apply


from the Semester in which the error occurred.


26.10.1 The Party having benefited from a surplus of Profit Petroleum shall surrender


such surplus to the other Party, beginning from the first day of the Semester


following the Semester in which the error was recognised.


26.10.2 Each lifting of Petroleum relating to such error by the Party receiving the





surplus shall not exceed 25% of the share of Profit Petroleum to which such


surrendering Party is entitled.





DtllVtftY CNTlTUMiNTS


26.12 Subject, in the case of Gas, to clause 14 [Natural Goi|, each Contractor Entity is entitled


to receive at the Delivery Point, take in kind, and to export freely its individual share of


the Contractor's entitlement to Profit Petroleum in accordance with its participating


interest, and to retain Abroad any proceeds from the sale of all such Profit Petroleum.


26.13 Subject, in the case of Gas, to clause 14 [Natural Gos|, each Government Interest Holder


is entitled to receive at the Delivery Point, take in kind, and to export freely its individual


share of the Government Interest entitlement in accordance with its participating


interest, and to retain Abroad any proceeds from the sale of all such Profit Petroleum.


26.14 The Contractor shall deliver quantities of Profit Petroleum due to the Government at the


Delivery Point.


26.15 Title and risk of loss to Profit Petroleum will pass to each Party and Government Interest


Holder at the outlet flange of the Delivery Point.


26.16 The Government is not entitled to increase the share of Profit Petroleum to which the


Government is entitled in any Calendar Tear because of the Government's payment of


Incomes Taxes on behalf of all or any Contractor Entities pursuant to clause 31.2.2.


Production Esiimaus


26.17 At least 21 days before Contractor's estimated date of First Production and 30 days


before the first day of each Semester thereafter, the Contractor shall deliver to the


Government the Contractor's:


(a) production forecast for the next four Semesters; and














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 Production Shoring COnt'Oit Dinarro








(b) forecast of the quantities of Crude Oil and Natural Gas to which each Party and


the Government Interest Holders will be attributed and allocated during the


not four Semesters.


ll.lt The Contractor shall endeavour to produce In each Semester not less than the forecast


quantity for such Semester.


Annual Pioouciion Rimori


>1.11 Within 90 days following the end of each Calendar Year, the Contractor shall prepare


and deliver an annual production report to the Government.


it.to.I The Contractor shall set forth In such annual production report the quantities of


Crude Oil and Natural Gas to which each Party and the Government Interest


Holder Is entitled to be attributed and allocated, the quantities of Crude Oil and


Natural Gas lifted by each Party and Government Interest Holder, and the


resulting over-lift or under lift position of each Party and Government Interest


Holder as at the end of such Calendar.


Cost Rtcovtav ior Govirnniini Costs


>6.20 Any costs or e«pendlture incurred by the Contractor In respect to the lifting of the


Government's or Government Interest Holder’s share of Petroleum will be Cost


Recoverable.








Clause 27 - Valuation and metering


Valuation or Ceuor On


27.1 The Contractor thaB determine the value of Crude 01 produced «i the Contract Am at


the end of each Month and each Quarter at the Delivery Point based on the


International Market Price


27.2 'International Market Price' means the weighted average price per Barrel, e.pressed in


USS. obtained by the Contractor at the Defrvery Point, by netback if necessary, during


the Quarter or Month ending on the date of valuation for Arm's length Sales of Crude


OiL


JUi The Contractor shall provide evidence to the Government that the sales of


Crude O! for the purposes of determining International Market Price are Arm's


length Sales


tm Any Dispute as to whether any sales are or are not Arm's length Sales may be


referred by the Contractor or the Government to an Eapert for decision


pursuant to clause 4i


HJJ In the event that there either is no lifting of Crude Oil in the relevant Quarter or


Month, or no Arm s length Sales, the applicable 'International Market Price'


for such Quarter or Month shall be the weighted average price per Barrel


obtained during that Quarter or Month from equivalent sales of Crude Oil of


the same or simlar gravity and quabty from other production areas in the


Kurdistan Region sold in markets competing with Crude Oil produced from the








7*


 Production Shoring Controct Dinorto








Contract Area, taking into account gravity and quality difference* and


transportation and other post Delivery Point costs.


IT.2.4 For purposes of clause 27.2.3, the Government and the Contractor shall, prior


to the start of First Production, agree on a basket of Crude Oil from other


producers in the Kurdistan Region comparable to those produced in the


Contract Area and sold in the international market.


27.1.5 Prices obtained shall be adjusted to account for any variations such as quality,


specific gravity, sulphur content, transportation costs, product yield, seasonal


variations in price and demand, general market trends and other terms of sale.


Valuation o# Natural Gas


27.3 The Contractor shall determine the value of Natural Gas the end of each Month and


each Quarter at the Delivery Point based an the actual price received from gas sales


contracts entered into in accordance with clause 14.


Production Statemlnt


27.4 By the 10,h day of each Month, the Contractor shall provide a statement to the


Government (together with the Capacity Building Payment Monthly Statement as


required by clause 32.7| showing the Contractor's calculations of the value of Petroleum


produced and sold from the Contract Area for the previous Month. Each such statement


must include:


(a) quantities of Crude Oil sold by the Contractor Entities during the preceding


Month constituting Arm’s Length Sales together with corresponding sale prices;


(b) quantities of Crude Oil sold by the Contractor Entities during the preceding


Month that do not fall in the category referred to in (a) above, together with


sale prices applied during such Month;


(c) inventory in storage belonging to the Contractor Entities at the beginning and


at the end of the preceding Month; and


(d) quantities of Gas sold by the Contractor Entities and the Government together


with sale prices realised during the preceding Month.


MtASURfcMtNT


27.5 The Contractor shall measure all Petroleum at the Delivery Point in accordance with Best


Practices and Applicable Law.


2T.S.1 The Contractor shall install and operate all metering equipment.


2T.S.2 The meters must be to fiscal meter standards in accordance with Best Practices.


27.5.3 The Contractor shall periodically inspect and test the accuracy of the


Contractor's metering equipment using means and methods in accordance with


Best Practices.


27.5.4 All measurements shall be adjusted to a pressure of 14.73 pounds per square


inch and a temperature of 60- Fahrenheit.











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 Production Shoring Controct Dinorto








27.6 The Government may at any time inspect the metering equipment installed by the


Contractor and all records, charts, measurements, and test Data at all reasonable times.





27.7 If any metering equipment is defective or not functioning property, the Contractor shall


promptly notify the Government upon the discovery thereof and use all reasonable


endeavours to repair, adjust, correct, or replace it promptly (and in any event within 15


days).





27.7.1 The "Adjustment Date** means the last date that the metering equipment was


known or agreed to have been measuring correctly, or if not known or agreed,


the date that is midway between the date the defect was discovered and the


last date the equipment was known to have measured correctly.





27.7.2 The results from the defectrve equipment shall be disregarded for the period


from the Adjustment Date until the date the defective equipment is repaired or


replaced, and the measurement for such period shall be estimated:


(a) if check measuring equipment is installed and registering accurately,


then by using the measurements recorded by such check measuring


equipment;


(b) if check measuring equipment is not installed or not registering


accurately, then by correcting the error if the percentage of error is


ascertainable by verification, calibration or mathematical calculation;


or


(c) if neither method set out in clause 27.7.2(a) or 27.7.2|b) is feasible,


then by estimating the volume or quantity delivered (or both) based


on deliveries during the preceding comparable period of time when


the metering equipment was registering accurately.


27.8 The Parties shall resolve any Dispute arising under this clause 27 by Expert


determination in accordance with the provisions of clause 42.








Clause 28 - Sales Assistance


28.1 The Government may at its option and upon at least 90 days' prior notice require the


Contractor to market all or part of the Government's share of Crude Oil produced from


Oil fields in the Contract Area. In such event the Government and the Contractor shall


enter into an appropriate agency contract with reference to international petroleum


practice.


28.2 As soon as possible after receipt of any such notke from the Government under clause


28.1. the Contractor shall provide the Government all information available to it


concerning possible purchasers of the Government's Crude Oil. the price therefor, and


other terms and conditions of sale. With transmittal of such information Contractor shall


specify the time within which the Government must determine whether or not


Contractor should proceed with such sale.


28.3 The Contractor's obligations in respect of Natural Gas are governed by clause 14{Natural


Got).











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Clause 29 - Currency; Financial Provisions


RtttfttNCE CURRENCY


29.1 The US$ shall be the unit of currency for all payments (whether revenue or cost),


bookkeeping, records, the Accounts, reporting, and all other purposes under this


Contract.


CURRENCY CONVERSION


29.2 Payments in currencies other than USS shall be translated into US$ at the average daily


selling and buying rates of exchange of the Calendar Month preceding the Calendar


Month in which the due date for payments falls, as such average rate can be calculated


from the aforesaid daily rates of exchange published by the Central 8ank of Iraq.


29.3 Any currency conversion to be made under this Contract shall be at the exchange rate of


the Central Bank of Iraq, provided such exchange rate applied to the Contractor Entities


shall not be less favourable than the rate offered by other private, commercial or


industrial banks in the international market. In the absence of the Central Bank of Iraq


or in the event that the Central Bank of Iraq is unable to provide the relevant exchange


rate, any currency conversion to be made under this Contract shall be at the exchange


rate of a reputable commercial bank carrying on business in the international market


and approved by the Parties.


29.4 The Contractor shall record any gain resulting from the exchange of currency as revenue


and credit such amount to the Accounts, and any loss will be Cost Recoverable.


Payments; No Omset against Government


29.5 A Party making a payment to the Government, including to the Capacity Building


Account or to any revenue sharing account as agreed between the Government and the


government of the Republic of Iraq, shall: (a) make such payment in US$ on or before


the date when due in cleared funds by wire transfer from a reputable bank in


accordance with wire instructions provided by the Government; and (b) shall pay all


payments without (and free and clear of any deduction for) set off or counterclaim.


19.s.i If any payment is due to be paid to the Government on a day that is either not


an International Banking Day. then the payment will be due on the next


following International Banking Day.


19.s.2 If a Party fails to make any payment to the Government when due, such Party


shall pay interest on such unpaid amount, compounded monthly, at the Agreed


Rate from the date when due to. but not including, the date when paid.


29.S.S Each Contractor Entity acknowledges and accepts that a fundamental principle


of this Contract is that the Contractor and each Contractor Entity must pay


amounts owed by it as and when required.


is.s.4 Each Contractor Entity waives any right to raise by way of set off or invoke as a


defence to its obligations to make any payments to the Government as


required by this Contract, whether in law or equity, any failure by the


Government or any Contractor Entity to pay amounts due and owing under any


claim the Operator, a Contractor Entity, or any other Person may have against








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 Production Shoring Controct Dinorto








the Government, whether such claim arises under or relates to this Contract or


otherwise.


29.5.5 The making of any payment to the Government, or the acceptance or use of


any payments by the Government, does not impair the rights of the Contractor,


any Contractor Entity, or the Government under clause IS or English law.


29.5.6 Each Party receiving a payment from another Party under this Contract shall,


upon receipt of a notice requesting a receipt therefor, endeavour to provide


the other Party with a notice of receipt of such payment.


Payments to Fund 10a Rtvtwu* Shahwo


29.6 Upon receipt of an instruction and wire instructions therefor from the Government and


in the event of the establishment of a fund for revenue sharing between the federal


government of Iraq and other regions (including the Kurdistan Region) and governorates


of Iraq, the Contractor shall pay into such fund:


(a) any Royalty payable in cash due to the Government pursuant to the provisions


of clause 24;


(b) proceeds from the sale of any Crude Oil undertaken by a Contractor Entity on


behalf of the Government pursuant to clause 28 to which the Government is


entitled pursuant to clause 26; and


(c) all Production Bonuses.


CuHtlHCY ASSUHANCIS


29.7 Each Contractor Entity shall at all times be entitled to freely convert into USS or any


other foreign currency any Iraqi dinars received in the framework of the Petroleum


Operations and to freely transfer the same Abroad. The conversion rate shall be as


provided under clauses 29.2 and 29.3.


29.8 Each Contractor Entity shall have the right to be paid, receive, keep, transfer, and use


Abroad, without any restrictions, all proceeds of its share of Petroleum.


29.9 Each Contractor Entity and its Subcontractors shall have the right to freely open and


maintain bank accounts for Petroleum Operations within or outside the Kurdistan


Region.


29.10 Each Contractor Entity shall have the right to pay in any freely convertible currency all its


financial requirements for the Petroleum Operations and to convert these currencies to


Iraqi dinars in any bank in the Kurdistan Region, at the same exchange rate as provided


under clauses 29.2 and 29.3.


29.11 Each Contractor Entity shall have the right, without any restrictions, to freely repatriate


Abroad and to freely dispose of:


(a) any proceeds received in the Kurdistan Region from the sale of Petroleum; and


(b) any proceeds received from other operations and activities carried out under


this Contract in the Kurdistan Region.


 Production Shoring Controct Dinorto








29.12 Each Contractor Entity shall have the right to pay in any foreign currency its


Subcontractors and its Expatriate personnel, either in the Kurdistan Region, other parts


of Iraq, or Abroad.


29.12.1 Subcontractors and Expatriate personnel shall be obliged to transfer to the


Region the amount of foreign currency required for their local needs and shall


have the right to repatriate the proceeds of the sale of their belongings in


accordance with the regulations in force in the Kurdistan Region.


Each Contractor Entity's Affiliates. Subcontractors, and their respective employees and


29.13


personnel shall equally benefit from the same rights as such Contractor Entity and its


employees in respect of this clause 29.


29.13.1 Where the Contractor, or any Subcontractors of Contractor, has guaranteed the





full and proper discharge by any Expatriate employee engaged in Petroleum


Operations of his liability to the personal Income Tax under Kurdistan Region


Law. that employee will be entitled to receive the whole or any part of his


remuneration in the country in which he is normally resident.





In respect of the assurances provided in clauses 29.6 through 29.13. the Contractor shall


29.14


comply with the procedures and formalities required by Applicable Law in respect of


foreign exchange.








Clause 30 - Customs


30.1 All services. Assets and Materials, vehicles, tools, spare parts, consumables, products,


and other items imported into the Kurdistan Region by the Contractor, any Contractor





Entity, its Affiliates, any Subcontractor or any agent of any of the foregoing, for use or


consumption in the Petroleum Operations shall be admitted free and exempt from any


and all Taxes on import.


so.i.i The Contractor, any Contractor Entity, its Affiliates, its Subcontractors, and any





agent of any of the foregoing shall have the right to re-export from the


Kurdistan Region, free from all Taxes on export, any Assets and Materials,


equipment, goods, machinery, vehicles, tools, spare parts, consumables,


products, and other items that are no longer required for the Petroleum


Operations, except where title has passed to the Government in accordance


with clause 20.


The Contractor, any Contractor Entity, its Affiliates, any Subcontractor, and any agent of


30.2


any of the foregoing, and the employees of the Contractor, a Contractor Entity or its


Affiliates, and Subcontractors (including their family members) shall have the right to


freely import into the Region and re-export from the Kurdistan Region any personal


belongings and furniture free and exempt from any Taxes on import or export. The sale


in the Kurdistan Region of personal belongings and furniture of Expatriates must comply


with Applicable Law.


Each Contractor Entity and its Affiliates shall be entitled to freely export (subject, in the


30.3


case of Natural Gas. to clause 14) from the Kurdistan Region, free of any Taxes, any


Petroleum to which it is entitled pursuant to the provisions of this Contract.











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 Pfodmtton Shoring Contract Dinorto








10 4 The Government shal indemnify the Contractor any Contractor EntAy. 'll Affiliates, any


Subcontractor or any agent of any of the foregoing, and their personnel (inchidmg their


famdy members) lor any import or e.port Ta.es referred to in clauses 30.1. 30 2 or 30.3.








Clause 31 - Taxes


Gcauju


31 » (Kept at e.prestly provided in this clause 31. and wAhout prejudice to the e.emptions


e.prettly provided for in clause 30. each Contractor Entity. «ti Affiliates and any


Subcontractor shall, for the entire duration of this Contract, be exempt from all Taxes as


a result of Its Income. Assets, and activities under this Contract,


it.l.l The Government shall indemnify each Contractor Entity upon demand against


any liability to pay any Taxes assessed or Imposed upon such Contractor Entity


which relate to any of the exemptions granted by the Government under this


clause 31.


Incomi Tax


31.2 f ach Contractor Entity will be subject to Income Tax on Its income from Petroleum


Operations.


11,1.1 Each Contractor Entity shall, in accordance with Applicable law. provide a


return to the appropriate Kurdistan Heglon tax authorities in accordance with


Kurdistan Region law of its income subject to Income Tax. together with a


calculation of the amount of Income Tax due.


M-2-2 The Government shal pay ail Income Tax directly to the applicable Kurdistan


Region authorities for the account of each Contractor Entity in accordance with


the Contractor Entity's tax return The Government shall pay such Income


Taxes from the Government's share of Profit Petroleum.


31-2-3 The Government shal. with.n 90 days after the end of each tax year, provide le


each Contractor Entity lax recasts from the appropriate Kurdistan Region


authorities confirming the payment in ful of the Contractor Entity's Income Tax


for such tax year and that no Income Tax is owmg.


Il l As of the Effective Date, the Income Tax rale for companies under Kurdistan Region law


is 15* of taxable income.





ExiM»iio*rs


11.4 Each Contractor Entity, its Affihatei. and forc«n Subcontractor shal be exempt from any


withholding tax on any interest or dradend paid by such Contractor Entity. Affiliate, or


Subcontractor.


IIi Each Contractor Entity and its Affiliates shal be exempt from Additional Profits Tax.


Surface Tax. and Windfall Profits Taxes, as each of the foregoing is referred to in clause


40 of the Kurdistan Region Oil and Gas law. or any successor equivalent Ta*.














SO


 Production Shoring Controct Dinorto








WlTHMOlOlNG »O* IKAQ NATIONALS


31.6 Each Contractor Entity shall pay or withhold (and shall cause each Subcontractor to pay


or withhold) the personal Income Tax and social security contributions for which such


Contractor Entity or Subcontractor is obligated to pay or withhold in respect of its


employees who are Iraqi nationals, pursuant to the Law of Taxation (Law No. 5 of 199*))


and otherwise in accordance with Applicable Law. A Contractor Entity or Subcontractor


is only obligated in respect its own employees who are Iraqi nationals, and is not liable


under this clause 31.6 with respect to employees of any other Person.





Douatfc Tax Treaties


31.7 Double tax treaties, to the extent recognised by the Government as effective in the


Region, will have effect to give relief from Taxes to. but not limited to. the Contractor


Entities. Subcontractors, and their respective employees in accordance with t-.e


provisions of such double tax treaties, but w :i not impose an additional burden of


taxation on any such Contractor Entity. Subcontractor, or employee.


VAT Cost Recover*





31.8 Any Tax that is a value added or similar type of Tax will be considered as a Petroleum


Cost and «1 be Cost Recoverable, if not otherwise recovered under Applicable law





ivomr OaixOATMOis


31.9 The provisions of this clause 31 apply individually to each Contractor Entity. There is no


kabifity. duty, or obligation referred to in this clause 31 that it a fornt and several liability


of the Contractor Entities together








Clause 32 - Bonuses; Capacity Building Payments


Signaium Donut;Camciiy Ouitomo Bonus.


12 I The Contractor shall pay .1 Signature Bonus »«td a Capacity Build mg Bonin as provided m


this clausa 32.1.


11.1.1 The Contractor UuII pay an amount equal to USSS.000.000 {such amount, the


'Signature Bonus") within 30 days of the date of this. Contract.


11.1.2 The Contractor thill pay an amount equal to USS135.000.000 (such amount, the


'Capacity Building Donut') within 30 days of the date of this Contract.





Proouciion Donustt


*2.2 Each Contractor Entity shall pay to the Government the amounts as provided In claute


32.4 for, and in respect of, each Production Area (such payments pursuant to clauses


32.41, each a "Production Bonus", and collectively. 'Production Bonuses'').


12.1 For the purposes of calculating the cumulative amount of production in order to


determine whether a Production Bonus Is poyable. Natural Gas BOE: (a) does not Include


Natuial Gas used for Petroleum Operations (Including re-in|ection), but (b) does Include


flared gas.








81


 Production Shoring Controct Dinorto








32.4 In respect of production of Crude Oil and Natural Gas from the Contract Area the


Contractor shall pay the following Production Bonuses to the Government within 30


days of the following relevant occurrence:


(a) US$2,500,000 on First Production;


(b) US$5,000,000 when production reaches a cumulative amount of 10,000,000


Barrels of Crude Oil and Natural Gas BOE;


(c) US$10,000,000 when production reaches a cumulative amount of 25,000,000


Barrels of Crude Oil and Natural Gas BOE; and


(d) US$20,000,000 when production reaches a cumulative amount of 50,000,000


Barrels of Crude Oil and Natural Gas BOE.


32.5 (Not used).


Capacity Buiiding Paymihts


32.6 Each Contractor Entity shall pay Capacity Building Payments to the Government in


accordance with clauses 32.7 through 32.16(b).


32.6.1 Each Contractor Entity is separately liable (and not jointly and severalty liable


with any other Contractor Entity) to the Government for its obligations, duties


and liabilities under clauses 32.7 through 32.16(b).


32.7 On or before the 10'* day of each Month in the Development Period, the Contractor


shall provide to the Government, together with the monthly production statement


prepared by the Contractor in accordance with clause 27.4 and paragraph 6.1, and the


monthly valuation statement in accordance with clause 25 and paragraph 7.1, a


statement (the ‘ Capacity Building Payment Monthly Statement") setting out the


Contractor's calculation of the Capacity Building Value attributable to each Contractor


Entity for the preceding Month.


32.7.1 In each Capacity Building Payment Monthly Statement, the Contractor shall


detail each item taken into account in making its calculation of the Capacity


Building Payments due from each Contractor Entity, the quantities of Profit


Petroleum produced during the Month covered by such Capacity Building


Payment Monthly Statement, the volumes of such production sold, the


Capacity Building Value attributed to such sales, and the Capacity Building


Payment required to be paid with respect thereto by each Contractor Entity.


32.8 Except as provided in clauses 32.8.1 and 32.8.2, and subject to clause 29.5, on the same


date on which the Contractor provides the Contractor Entity's Monthly Statement to the


Government in accordance with clause 32.7, each Contractor Entity shall pay to the


Government the Capacity Building Payment stated as owed by such Contractor Entity in


the Capacity Building Payment Monthly Statement.


32.6.1 If the Contractor Entity has sold its Profit Petroleum to |a| the Government or a


Pubic Company |or a company or an entity owned and controlled, directly or


indirectly, by a Public Company or the Government), or |b) the State Oil


Marketing Organisation (SOMO) or any Person owned or controlled by the


Government of Iraq, then (c| the Contractor Entity will only be obligated to pay


 Production Shoring Contract Dtnarta








the Capacity Building Payment when and to the extent the Contractor Entity has


received payment by such Person.


32.*.2 Clause 32.8.1 does not apply when a Contractor Entity sells its share of Profit


Petroleum to any Person not identified sn clause 32.8.1.


32.9 Within 30 calendar days following the date on which the Contractor delivered the Final





End-of-Year Statement (as defined in Paragraph 10 of Annex 8| to the Government for


each Calendar Year in accordance with clause 26.19 and paragraph 10 of the Accounting


Procedure, and based on the information in such Final End-of-Year Statement, the


Contractor shall provide to the Government, in respect of each Contractor Entity, a


reconciliation of the actual aggregate amount of the Capacity Building Value and the


actual aggregate of the Capacity Building Payments payable by each Contractor Entity


for such Calendar Year period {the ^Annual Reconciliation Statement*).


32.9.1 If the results of an Annual Reconciliation Statement show that a Contractor


Entity was. in the aggregate over the Calendar Year period covered by the


Annual Reconciliation Statement, obligated to pay Capacity Building Payments


in an amount less than the actual aggregate Capacity Building Value attributed


to such Contractor Entity for such Calendar Year period, within 30 calendar


days following the same date on which the Contractor sent the Annual


Reconciliation Statement to the Government such Contractor Entity shall pay


(subject to the same exceptions as provided in clauses 32.8.1 and 32.8.2} the


amount of the underpayment as shown in the Annual Reconciliation


Statement.


32.9.2 Subject to clause 32.9.2.1. if the results of an Annual Reconciliation Statement


show that a Contractor Entity has. in the aggregate over the Calendar Year


period covered by the Annual Reconciliation Statement, made Capacity Building


Payments in excess of the Capacity Building Value attributed to it during such


Calendar Year period, such Contractor Entity may submit an invoice to the


Government for reimbursement of excess Capacity Building Payments.


32.9.2.1 The Contractor Entity must send an invoice to the Government within


SO days following the date of the Annual Reconciliation Statement. If


the Contractor Entity fails to send an invoice within such 60-day


period, the Contractor Entity will be considered to have waived any


claim for reimbursement.


32.9.2.2 Within 30 days of receipt of such invoice, the Government shall either:





(a} pay such invoice in full, or (b| notify the Contractor Entity that the


Contractor Entity will be entitled to deduct 1S% of the amount


otherwise payable from the next following Capacity Building Payments


until the amount of the invoke has been paid in full.





32.9.2.3 The right to receive payment under clause 32.9.2.2. either in full or by


way of set-off against future Capacity Building Payments as provided in


this clause 32.9. will be a Contractor Entity's only remedy in respect of


any overpayment of Capacity Building Payments, and the Government


will have no obligation to make any reimbursement or other


compensating payments to an affected Contractor Entity.











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 Production Shoring Contract Dtnarta








32.10 The Government may enter into one or more Right* Sales without the consent of the


Contractor or any Contractor Entity.


12.10.1 The Government shall provide timely notice to a Contractor Entity of any Rights


Sales to the extent that such Rights Sale may require the Contractor Entity to


make Capacity Building Payments to an account other than the Government or


the Capacity Building Account.


32.10.2 A "Rights Sale" means an Assignment of the Government's rights to receive the


Capacity Building Payments.


32.11 Subject to clause 32.12. and notwithstanding any other provision of this Contract, any


lifting agreement, any sales or marketing agreement, or any other agreement: if a


Contractor Entity fails to pay a Capacity Building Payment in full when due. the


Government will automatically be entitled, on not less than 60 days' prior notice to the


defaulting Contractor Entity and the Contractor in the case of the first default, and not


less than 30 days' in the case of any subsequent default, to:


(a) lift, at the Delivery Point, such amount of the defaulting Contractor Entity's


Profit Petroleum as is equal to the value thereof in default; and


(b) continue to lift up to 20% of such defaulting Contractor Entity's Profit


Petroleum for the remainder of the Development Period.


32.11.1 The rights of the Government to sell or otherwise dispose of Natural Gas will be


subject to clause 14.


32.12 A defaulting Contractor Entity will have a single cure period of 30 days only in respect of


its first default.


32.12.1 If the defaulting Contractor Entity pays the defaulted Capacity Building


Payments in full plus interest at the Agreed Rate within such 30-day cure


period, the Government shall not exercise its lifting rights under clause 32.11 in


respect of such defaulting Contractor Entity.


32.12.2 In the case of any subsequent default by the same defaulting Contractor Entity,


the Government may exercise its right to lift, whether or not the defaulting


Contractor Entity cures its default within the 30-day cure period or otherwise.


32.13 The lifting rights of the Government pursuant to clauses 32.11 and 32.12 are exercisable


by way of set-off, without first resort to legal process, and without any liability or claims


of the defaulting Contractor Entity, the Contractor the Operator, or any other Person,


and notwithstanding any other provision of this Contract, any provision in any lifting


agreement, any provision of any Joint Operating Agreement, or any other agreement to


which the Contractor or a defaulting Contractor Entity is a party.


32.13.1 Each Contractor Entity shall ensure that all agreements in respect of the lifting


or sale (including swaps or other sales arrangements) of Profit Petroleum of


such Contractor Entity sets forth the Government's priority rights as set forth in


clauses 32.11 through 32.13.


32.13.2 Any Dispute between a Contractor Entity and the Government in respect of a


claim that the Government, in exercising its rights under clauses 32.11 through


32.13. will be subject to:


 Production Shoring Controct Dinorto








(a) resolution in accordance with the lifting agreement among the


Contractor Entities and the Government in the same manner as any


other overlift or underlet is to be resolved between the parties


thereto; and


(b) clause 14 in respect of Natural Gas.


32.14 A defaulting Contractor Entity shall indemnify the Government from any Loss or Expense


that may in any way arise from the exercise by the Government of its rights in respect of


such defaulting Contractor Entity under clauses 32.11 through 32.13.


$2.14.1 The Government will retain control over the defence of. and any resolution or


settlement relating to. such Loss or Expense.


$2.14.2 A defaulting Contractor Entity shall cooperate with the Government and


provide reasonable assistance in defending any claims against the Government.


$2.14.$ A claim for a Loss or Expense as set forth in a notice from the Government to a


defaulting Contractor Entity will be conclusively deemed to be a Loss or


Expense if the Contractor Entity fails to dispute the Government's liability by


the end of a 30*day period following the effective date of the notice from the


Government. The Contractor Entity shall promptly pay the deemed Loss or


Expense on demand.


$2.14.4 The Government's rights under clauses 32.11 through 32.14 are not exclusive


and are without prejudice to any other rights or remedies the Government may


have under law or this Contract.


32.15 Any Dispute between the Government and a Contractor Entity in respect of the


calculation of Capacity Building Value and the Capacity Building Payment due with


respect thereto that cannot be settled amicably within 60 days of the Government's


final notice under clause 15.7 is subject to resolution by an Expert in accordance with


clauses 15.8 and 42.


Capacity Building Account


32.16 To the extent permitted by Laws of the Kurdistan Region or as otherwise agreed with


the Government of Iraq, the Government will:


(a) maintain the Capacity Building Account;


(b( instruct the Contractor and the Contractor Entities, as applicable, to pay the


Capacity Building Bonus, and Capacity Building Payments to the Capacity


Building Account in accordance with wire instructions therefor provided by the


Government;


(c) apply funds from the Capacity Building Account to fund infrastructure and


capacity building projects in the Kurdistan Region selected by the Government


in its sole discretion; and


(d) periodically publish reports of the Government's application of funds from the


Capacity Building Account in sufficient detail to identify the projects to which


the Government has applied the funds therein.


 Production Shoring Controct Dinorto








No Cost Ricovtitr


32.17 The Signature Sonus, Capacity Building Bonuses, Production Bonus, and Capacity


Building Payments are not Cost Recoverable.








Clause 33 - Pipelines


C*uot On PimiNis


33.1 The Government shall obtain any required Permits for the transportation of Crude Oil in


the Kurdistan Region and in Iraq, as well as any necessary Permits and easement rights


for the construction of any pipelines and related facilities required for the Petroleum


Operations.


33.2 The Government undertakes to transfer to the Contractor its rights for transportation of


Crude Oil by pipeline, to the extent of available capacity and in the national and regional


interest. The Contractor is entitled to design, construct, operate, and maintain pipelines


and any related facilities in the Kurdistan Region for the transportation of Crude Oil


produced under this Contract.


33.3 Prior to the construction of any Crude Oil pipeline and related facilities as provided in


clause 33.2, the Contractor shall submit the following information to the Management


Committee in respect of any pipeline project:


(a) proposed pipeline route and related facilities;


(b) forecasted pipeline flow rate and capacity;


(c) estimated capital costs and operating costs of the pipeline and related facilities;


(d) proposed financing schedule;


(e) construction schedule;


(f) general technical description of the pipeline and related facilities;


(g) construction plans and tests;


(h) preventive measures for damage to the environment and third parties; and


(i) any other information relating to the pipeline project.


The Management Committee shall examine all the above information and shall, within


90 days, approve or disapprove the proposed pipeline project.


33.4 Subject to available capacity, tie-in agreements, and pipeline crude oil minimum quality


specifications, the Contractor shall permit third parties to transport their Petroleum


through any Crude Oil pipeline constructed by the Contractor on terms to be agreed


between the Contractor and such third party.


ss.4.1 Such terms must be reasonable commercial terms and must not discriminate


among potential third party users.


ss.4.2 The Contractor and the Government shall always have priority of access to such


pipelines.


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33.5 All costs associated with the design, construction, operation, and maintenance of Crude


Oil pipelines and related facilities by Contractor upstream of the Delivery Point of the


pipeline under this clause 33 {'Pipeline Costs") will be Cost Recoverable.


33.6 The Contractor shall have the absolute right, without any exceptions and for the entire


duration of this Contract, to use, free of Tax or tariff imposed bv the Government, any


Crude Oil pipeline and related facilities constructed by the Contractor in accordance


with this clause 33 to: (a) transport Crude Oil produced from any Production Area and


(b) operate and maintain such Crude Oil pipeline and related facilities.


33.7 All tariff and other payments to the Contractor from third party shippers (which include


all payments in respect of ship or pay obligations) for use of any pipeline and related


facilities under this clause 33 shall be applied to the recovery of Petroleum Costs until all


Pipeline Costs have been fully recovered by the Contractor pursuant to the provisions of


this Contract.


33.7.1 The Government will only be entitled to receive tariffs paid by third party


shippers for their use of the Crude Oil pipeline and related facilities after


Pipeline Costs have been fully recovered by the Contractor.


33.7.2 Except as provided in clause 33.7.3, the incremental costs of providing


transportation services for third party shippers up to the transportation


Delivery Point will be considered Pipeline Costs and will be Cost Recoverable.


33.7.3 Incremental costs will not be Cost Recoverable in respect of payments to


shippers for lost or unaccounted for Crude Oil. indemnities, damages for breach


of contract, costs and liabilities from Crude Oil purchase contracts, non¬


contractual liabilities, personal injury, third-party environmental claims, and


any other form of expense that is not a direct operating expense.


33.8 Upon recovery by the Contractor of all Pipeline Costs, the operating and maintenance


costs of any pipeline and its related facilities shall be borne by the Contractor, be


considered Petroleum Costs, and will be Cost Recoverable.


33.9 The Government shall have the same rights as the Contractor for use, free of charge, of





any pipeline and related facilities constructed by Contractor under this clause 33 for the


transportation of the share of Petroleum to which the Government is entitled under this


Contract.


33.10 The Contractor shall bear the cost of operation and maintenance of any Crude Oi


pipeline and related facilities constructed by Contractor under this clause 33 and all risks


of accidental loss or damage to such pipeline and related facilities while they are


required for Petroleum Operations.


33.11 Title to pipelines and related facilities in the Kurdistan Region belongs to the


Government.





Gas PiMunis





33.12 The Contractor has no right and is not authorised to construct Natural Gas pipelines or


to ship Natural Gas, except in accordance with an agreed Domestic Gas Plan or an


 Production Shoring Controct Dinorto








agreed Gas Export Plan and related Approved Development Plan. Pipelines and related


facilities for the transportation of Natural Gas are governed by clause 14 (Natural 6ai\.








Clause 34 - Unitisation


34.1 If a Reservoir extends beyond the Contract Area into an adjacent area (an ‘ Adjacent


Contract Area‘*| which is the subject of another Petroleum Contract (as defined by the


Kurdistan Region Oil and Gas Law|, or in the event a Reservoir of an Adjacent Contract


Area extends into the Contract Area, the provisions of clause 47, Paragraph Second, of


the Kurdistan Region Oil and Gas Law will apply.


34.2 The Contractor must agree with the contractor of the Adjacent Contract Area upon a


schedule for reaching agreement of the terms of the unitisation of the Reservoir, based


on reliable technical, operational, and economical parameters and in accordance with


Best Practices.


Clause 35 - Indemnification; Insurance


Uasiuiv


35.1 Subject to the other provisions of this Contract, the Contractor, in its capacity as the


entity responsible for the execution of the Petroleum Operations within the Contract


Area, shall be liable to third parties to the extent provided under Applicable Law for any


Loss and Expense caused to such third parties in the conduct of Petroleum Operations.


35.2 Notwithstanding the other provisions of this Contract and except as provided in clause


35.2.1, the Contractor will not be liable to the Government or a Government Interest


Holder, or any governmental authorities, bodies, courts, or political subdivisions in the


Kurdistan Region for any Loss or Expense resulting from the Contractor's conduct of


Petroleum Operations (other than personal injuries, industrial illness, or death).


35.2.1 Clause 35.2 does not apply in respect of any Loss or Expense arising out of or


related to (a) the wilful misconduct or gross negligence of the Contractor, or (b)


a material failure to conduct Petroleum Operations in accordance with the


terms of this Contract.


iNDEMNlf ICAf (ON


35.3 The Contractor shall indemnify the Government against all Loss and Expense arising


under any claim, demand, action, or proceeding brought or instituted against the


Government by any:


(a) employee of the Contractor or of any Subcontractor or by any dependent


thereof, for personal injuries, industrial illness, death or damage to personal


property sustained in connection with, related to or arising out of the


performance or non-performance of this Contract regardless of the fault or


negligence in whole or in part of any entity or individual other than the


Government; and


 Production Shoring Controct Dinorto





(b) with respect to all claims, demands, actions, or proceedings made by third


parties arising out of or related to Petroleum Operations.


35.4 The Government wdl retain control over the defence of. and any resolution or settlement


relating to. all claims, demands, actions, or proceedings made by third parties, including


any employee of the Contractor or of any Subcontractor or by any dependent thereof.


ss.4.1 The Contractor shall cooperate with the Government and provide reasonable


assistance in defending all claims, demands, actions or proceedings made by


third parties, including any employee of the Contractor or of any Subcontractor


or by any dependent thereof, against the Government.


55.4.2 A claim for Loss or Expense in respect of any claim, demand, action, or


proceeding made by third parties against the Government (including those made


by any employee of the Contractor or of any Subcontractor or by any


dependent thereof), as set forth in a notice from the Government to the


Contractor will be conclusively considered a Loss or Expense payable by the


Contractor if: |a) the Contractor consents thereto, or {b) the Contractor fails to


dispute the Government's liability, in whole or in part, by the end of a 30-day


period following receipt of the notice from the Government to the Contractor.


The Contractor shall promptly pay such Loss or Expense on demand.


NOIICI Of iNJURttS AND Ew J HGtNCIl S


35.5 The Contractor shall take all necessary steps to respond to. and shall promptly notify the


Government of. all emergency arid other events (including personal injuries, explosions,


leaks and spills), occurring »n relation to the Petroleum Operations which are causing or


likely to cause material environmental damage or material risk to health and safety.


Such notice shall include a summary description of the circumstances and steps taken


and planned by the Contractor to control and remedy the situation.


55.1.x The Contractor shall provide such additional reports to the Government as are


reasonably necessary in respect of the effects of such events and the course of


all actions taken to prevent further loss and to mitigate deleterious effects.


35.6 In the event of emergency situations as set out in clause 35.5 and at the request of the


Contractor, the Government shall assist the Contractor to the extent possible in any


emergency response, remedial, or repair effort by: {a) making available any labour,


materials, and equipment in reasonable quantities requested by the Contractor that are


not otherwise readily available to the Contractor; and (b| facilitating the measures taken


by the Contractor to bring into the Kurdistan Regron personnel and Assets and Materials


to be used in any such emergency response or remedial or repair effort.


55.6.1 The Contractor shall reimburse the Government’s reasonable and necessary


costs incurred in such efforts, which reimbursed amounts shall be considered


Petroleum Costs and will be Cost Recoverable, unless the emergency was


caused by the gross negligence or wilful misconduct of the Contractor or a


breach of the Contractor's obligations hereunder.


55.6.2


Any assistance that the Government provides will be without prejudice and in


addition to any indemnification rights the Government may have under this


Contract or Applicable Law.


 Production Shoring Controct Dinorto








Consequential Damages Limitation


35.7 Except as expressly provided otherwise, no Party will be liable to another Party under


the Contract for or in respect of any indirect, incidental, consequential, or exemplary


loss or damages, including with respect to the Contractor, any liability or damages with


respect to actual or alleged damage to any Reservoir within the Contract Area (and any


extension of such Reservoir outside of the Contract Area), and any loss of Petroleum


production by the Contractor, unless caused by the wilful misconduct or gross


negligence of the Contractor.


Insurance


35.8 The Contractor shall obtain and maintain any insurance required by applicable Kurdistan


Region Law. in accordance with Best Practices, and any insurance required by the


Management Committee; which insurances, at a minimum, must provide sufficient


cover for:


(a) loss of and damage to Assets and Materials; and


(b) personal injury, damage to third parties, and pollution caused by or arising


from Petroleum Operations.


35.9 The Contractor shall ensure that all insurance policies shall name the Government as an


additional insured party and include a waiver of subrogation protecting the Government


against any Loss or Expense resulting from any Petroleum Operation conducted by or on


behalf of the Contractor under this Contract, to the extent that the Contractor is liable


for such Loss or Expense under this Contract.


SS.9.X The Contractor is not obligated to purchase insurance cover for any claims


arising from negligence or wilful misconduct of the Government or of any


Public Company or of any of their respective subcontractors or personnel.


35.10 Upon the Government's written request, the Contractor shall provide the Government


with insurance certificates, including necessary details, for any insurance policy


maintained by the Contractor.


35.11 Each Contractor Entity shall be responsible for the filing of all claims made under any


insurance policy maintained by such Contractor Entity which relates to this Contract.


Any premiums and payments relating to such insurance policies Jother than political risk


insurance) shall be considered Petroleum Costs and will be Cost Recoverable.


35.12 In any insurance policy which is required by this Contract, the amount for which the


Contractor itself is liable will, in the event of any insurance claim, be considered a


Petroleum Cost, and will be Cost Recoverable. Political risk insurance is never Cost


Recoverable, unless such uninsured amount is contrary to Best Practices or Applicable


Law.


























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Clause 36 - Records; Confidentiality


Information


36.1 The Contractor shall keep all records, Data and information relating to the Petroleum


Operations in accordance with Kurdistan Region Laws and Best Practices.





36.2 Upon the Government's written request, the Contractor shall provide the Government


with samples of any rocks or any other items extracted during the Petroleum


Operations.


36.3 The Government shall have title to all Data and information, whether raw. derived,


processed, interpreted or analysed, obtained pursuant to this Contract.


36.4 Each Contractor Entity shall have the right, without any limitation, to send Abroad


copies of all reports and Data, magnetic tapes and other Data relating to the Petroleum


Operations. Magnetic tapes or other Data, the original of which must be analysed and


processed Abroad, may be transported out of the Kurdistan Region.


36.5 Any representatives authorised by the Government and notified to the Contractor shall,


upon reasonable prior written notice, have reasonable access to any information and


Data relating to the Contract Area in the possession of the Contractor which the


Contractor is obliged to provide to the Government pursuant to this Contract. It is


understood that, when exercising such right, the Government shall ensure it does not


unduly interfere with or hinder the Contractor's rights and activities.


36.6 The Contractor shall provide the Government with all information, analyses reports,


tapes. Data, and other information:


(a) as it is obliged to provide the Government pursuant to this Contract; and


(b) upon the request of the Government and upon termination of this Contract, in


respect of Petroleum Operations as requested by the Government.


Confidential Information


36.7 Except a provided in clause 36.8, each Party shall |a| keep all Data and information


relating to this Contract and the Petroleum Operations confidential during the entire


term of this Contract and (b) not divulge or disclose such Data or information to third


parties without the specific consent of the other Parties, such consent not to be


unreasonably withheld or delayed. The foregoing confidentiality obligation does not


apply to information or Data which:


(a) is, or, through no fault of the disclosing Party, becomes part of the public


domain (information known to other contractors in the Kurdistan Region or


elsewhere is not presumptively in the public domain);


(b) is known to the recipient at the date of disclosure;


(c) is required to be furnished in compliance with any Law applicable to it. by a


competent governmental authority with jurisdiction over such Party or its


Affiliates, by a court order or any other legal proceedings with jurisdiction over


such Party or an Affiliate; or














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(d) is required to be disclosed pursuant to the rules or regulations of any


government or recognised stock exchange having jurisdiction over a Contractor


Entity or an Affiliate.


36.8 Notwithstanding the foregoing in clause 36.7, in accordance with Best Practices and


subject to clause 36.8.1, such Data and information may be disclosed to:


(a) Affiliates of each Contractor Entity;


(b) employees, officers and directors of each Contractor Entity and their respective


Affiliated Companies for the purpose of the Petroleum Operations, subject to


each such entity taking customary precautions to ensure such information is


kept confidential;


(c) consultants or agents retained by any Contractor Entity or its Affiliates for the


purpose of analysing or evaluating information or Oata;


(d) banks or financial institutions retained by any Contractor Entity or its Affiliates


with a view to financing Petroleum Operations, including any professional


consultants retained by such bank or financial institution;


(e) 6ono fide prospective assignees of a participating interest under this Contract


(including any Person with whom a Contractor Entity or an Affiliate of such


Contractor Entity are conducting bono fide negotiations directed towards a


merger, consolidation or the sale of a material portion of its or such Affiliate's


equity ownership interests!;


(f) prospective or actual Subcontractors and suppliers engaged by a Party where


disclosure of such information is essential to such Subcontractor's or supplier's


agreement to work for such Party;


(g| any other Person or entity with the prior consent of the non-disclosing Party;


and


(h) by the Government, except in respect of intellectual property or trade secrets


of the Contractor or any Contractor Entity and their respective Subcontractors.


36.8.1 No Contractor Entity may make a disclosure pursuant to clauses 36.8 (cj. {d).


(e). or |f). unless the recipient has entered into a confidentiality undertaking no


less encompassing than the provisions hereof.





36.9 Any Data and information relating to relinquished or surrendered areas under this


Contract shall become the exclusive property of the Government. The Government will


have the right to use such Data and information for any purpose, and in particular for


the purpose of promoting such relinquished areas. Each Contractor Entity shall be


entitled to keep copies of such Data and information and to use such Data and


information for any purpose.





No Traoimg


36.10 Subject to the provisions of this clause 36. the Contractor may not sell nor exchange any


Data related to Petroleum Operations without the approval of the Government, which


approval shall not be unreasonably withheld or delayed where, in the Contractor's


reasonable opinion, such sale or exchange would benefit Petroleum Operations.











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Clause 37 - Environmental; Worker Safety and Health








GtfttftAl


37.1 The Contractor shall carry out Petroleum Operations, and procure that they are carried


out, in such a manner as to:


(a) protect the natural environment and ensure that Petroleum Operations result


in minimum ecological damage or destruction;


(b) ensure the safety, health and welfare of Persons in or affected by Petroleum


Operations;


(c) manage the resources in a way which has long-term benefits to the Kurdistan


Region and the Contractor;


(d) maintain in safe and good condition and repair, the Contract Area and all


structures, facilities, installations, equipment and other property, and other


works, used or to be used in Petroleum Operations;


(e) on the earlier of: (i) the termination of this Contract; and {ii) when no longer


required for Petroleum Operations; and. in either case, except with the consent


of the Government; or unless this Contract otherwise provides, abandon,


decommission, remove or dispose of the property and other works mentioned


in paragraph |d). clean up the Contract Area and make it good and safe, and


protect and restore the natural environment;


(f) control the flow and prevent the waste or escape of Petroleum, water or any


product used in or derived by processing Petroleum;


(g| prevent the escape of any mixture of water or drilling fluid with Petroleum;


(h) prevent damage to Petroleum-bearing strata in or outside the Contract Area;


(i) except with the consent of the Government, keep separate each Reservoir


Discovered in the Contract Area, and such of the sources of water discovered in


the Contract Area as the Government directs;





ai prevent water or any other matter entering any Reservoir through wells in the


Contract Area, except when required by. and in accordance with, the


M Development Plan and Best Practices and the EHS Standards;


minimise interference with pre-existing rights and activities; and





(I) remedy in a timely fashion any damage caused to the natural environment.





37.2 The Contractor shall implement a health, safety and environment program and take


necessary measures to ensure hygiene, health and safety of its personnel carrying out


Petroleum Operations in accordance with Best Practices (**EHS Standards**).





37.3 The EHS Standards must be no less stringent than those set out in the relevant World


Bank Group Environmental, Health, and Safety Guidelines


(http://www.ifc.orR/ifcext/sustainability.nsf/Content/EHSGuidelines).


37.4


The measures the Contractor must take include the following:


(a) supplying first aid and safety equipment for each work area and maintaining a


healthy environment for personnel;


 Production Shoring Controct Dinorto








(b) reporting to the Government within 72 hours of such accident, any accident


where personnel has been injured while engaged in Petroleum Operations and


resulting in such personnel being unable to return to work;


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


Materials and installations;


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


dangerous products used in the operations;


(e) supplying fire extinguishing equipment in each work area;


(f) measures for the purpose of taking control of any blow out or fire which could


damage the environment or Petroleum Field, in accordance with Best Practices;


and


(g| measures for the purpose of preventing any involuntary injection of fluids in


Petroleum formations and production of Crude Oil and Natural Gas at rates


that do not conform to MER.


37.5 Within 90 days from the Effective Date, the Contractor shall propose EMS Monitors to


the Government to conduct periodic monitoring of the Petroleum Operations of the


Contractor's health, safety, and environment program.


37.5.1 The Government may, at any time, appoint such EMS Monitors as it wishes.


37.5.2 The Contractor shall pay the reasonable fees and expenses of the EMS Monitors.


37.S.S The fees and expenses of the EMS Monitors will be Cost Recoverable.


EIR


37.6 Within 180 days of the Effective Date, the Company must deliver a comprehensive and


detailed environmental impact report 1*EINV) prepared in accordance with Best


Practices.


37.6.1 The Government may require that such EIR be reviewed and validated by a


recognised independent environmental consultant selected by the Government


(at the cost of the Contractor, which costs will be Cost Recoverable), and may


post the report on the Government's website to invite public comments.


ElA


37.7 The Contractor must provide an environmental impact assessment ('’ElA*') report


together with its Development Plan and a final ElA not less than 180 days before the


scheduled start of decommissioning operations or the scheduled expiration of this


Contract, whichever is earlier.


37.7.1 If the Contractor does not cause the final ElA to be delivered in accordance


with this clause 37.7. then the Government will be entitled to produce such ElA


and the Contractor shall pay all costs in respect therewith (which costs will be


Cost Recoverable).




















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IMMP


17 1 The Company null provide an environmental management and monitoring plan <«he


IMMP*) satisfactory m all respects to the Government, before the Government will


ailhorite Hart of Petroleum Operations.


n» l Suth IMMP mutt establish such procedure! at may be reasonably necessary to


continuously determine and assure that


(a) all Petroleum Operations are in compliance with and do not violate the


requirements of Applicable taw or this Contract;


(b) no hatardous substances or solid wastes are disposed of or otherwise


released on or to any property except in compliance with the IMS


Standards;


(c) no hazardous substance will be released on or to any property In a


quantity equal to or exceeding that quantity which would requite


reporting under Applicable law or the HIS Standards; and


(d) no waste or haMidout substance is released so as to pose an


imminent and substantial endnngerment to public health or welfare or


the environment


Sill Momiiorino Rirons


37.9 The Contractor shall provide self monitoring reports to the Government following the


Operator's standard practice as set forth In the 'Corporate Sustainability Report* of


Mess, a copy of which has been provided to the Government.


■iimquismio Aatas


l> 10 Pror to rebnquohing a portion of the Contract Area, the Contractor shaB tale


Practices and the CMS Standards m urn Aar physical and ecological enveonments


17111 Such measures shal mdude removal or closure In place of facilities and Assets


and Materials together with reasonable measures necessary for the


preservation of fauna, flora and ecosystems, all in accordance with Best


Practices in similar physical and ecolog«al environments The Contractor shall


only be responsible for site restoration or environmental damage to the extent


the same pertains solely and directly to Petroleum Operations conducted


pursuant to this Contract


Nanowai Pun uo Natuu Rtsiavl AaiAS


17.11 The Contractor shall tale reasonable measures m accordance w*h Appl««bte Law. Best


Practices, and the IMS Standards * s.m Jar physical and ecological en vwonments to


mm wise any adverse material impact on national parts and nature reserves which may


arise directTy as a result of the Petroleum Operations.


 SAOO-# Cc«-'3ct o^ono








37.13 The Contractor is rot responsible for arsd wdl bear no cost. ripens* or fiabiMv Id


claims, damag es or losses arising Out ol or related to any prr ousting environmental


conditions or any acts of unrelated third parties


37.13.1 The Contractor shall subm.t to the Government, for the Government's


approval. • baseline environmental study of the Contract Area within 1*0 days


of the effective Date.


Sosetuwo* or Ortuimt


37.14 The Government may. on not less than 14 hours' notice. order the Contractor to


suspend a* or any part of Its operations pending conclusion of a Government


Investigation into the circumstances of any modem, mctud.n g possible violations of f MS


Standards. Involving:


(a) personal injury to any person In connection with the Project;


(b) an emission of hajardous substances or other release ol haiardous substances


causing damage. m|ury. claims, or a threat of any of the foregoing constituting a


potential violation of EHS Standards;


(c) the presence m, on. under, or migrat.ng from any part of the Contract Area |or


surface water on or groundwater under the Contract Area of any substance at a


concentration above the concentration at which the substance is normally


present in. on or under land m the same kxafcty: or


(d) the disposal o' haiardous wastes m violation of the £MS Standards.


37.15 On not less than JO days' prior notice to the Contractor, the Government may order the


Contractor to suspend all or any part of its Petroleum Operations when the Government


has determined that the Contractor has either significantly or persistently failed to


satisfy the I IIS Standards or is conducting project operations in a grossly negligent


manner that could endanger its employees, third parties, or the environment. Any


suspension order under Ihis clause 37.IS will nol be lifted until the Government is


satisfied that the Contractor has a plan (satisfactory in all respects to the Government)


to come into lull compliance with the EHS Standards.


37.16 On not less than JO days' prior notice to the Contractor, the Government may order the


Contractor to suspend all or any part ol Petroleum Operations until the Contractor has


fully paid all outstanding liabilities arising from or related to significant environmental


damages or personal Injuries, In either case caused by Petroleum Operations in breach


of the Contractor's obligations hereunder or Applicable low.








Clause 38 - Decommissioning


AcinoniiootMtNT or fuTunt Law


38.1 The Contractor acknowledges that there Will likely be extensive future regulation of


Decommissioning Operations under Applicable law.


38.1.1 The Contractor acknowledges and accepts that Applicable law may obligate the


Contractor, and possibly the shareholders and ultimate parent company of











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each Contractor Entity, to post bonds or guarantee! and to be liable for unpaid


decommissioning obligations.


Decommissioning Plan and Buoget


18.2 The Contractor shall undertake Decommissioning Operations in accordance with Best


Practices in similar physical and ecological environments. The Contractor shall submit to


the Management Committee and the Government for their respective approvals, in


accordance with clause 8.4, a detailed plan and work program for decommissioning the


Production Area facilities and site restoration (the "Decommissioning Plan and Work


Program"} and forecasted Budget no later than 24 Months before the date estimated by


the Contractor for the end of Commercial Production from each Production Area.


58.2.1 The Management Committee shall provide comments, if any, on the


Decommissioning Plan within 90 days after receipt.


58.2.2 The Contractor's completion of Decommissioning Operations in accordance/ in


all material respects, with the Decommissioning Plan for a Production Area


approved by the Management Committee and the Government will satisfy all


of the Contractor's obligations with respect to the performance of


Decommissioning Operations for such Production Area.


18.3 The Management Committee shall meet within 60 days following its receipt of


Contractor's proposal to examine and approve the Decommissioning Plan and Budget.


18.4 The Contractor shall not undertake Decommissioning Operations unless the


Government has approved the Decommissioning Plan and Work Program, and Budget.


18.5 The Contractor shall on the first anniversary of the submission of the first


Decommissioning Work Program and Budget and annually thereafter (or at such


extended periods as may be agreed by the Government) during the term of this


Contract, submit to the Government revised Decommissioning Work Programs and


Budgets taking into account changes in the Development Plan and advances in Best


Practices.


Decommissioning Reserve Fund


18.6 To enable the Contractor to recover the costs associated with Decommissioning


Operations, the Contractor shall either establish a segregated fund to fund


decommissioning and site restoration (a "Decommissioning Reserve Fund*) at a


financial institution satisfactory to the Government and under such escrow or trust


terms as the Government may require, or provide such corporate or third party


guarantees or bonds as the Government may require in accordance with Applicable Law.


58.6.1 The Decommissioning Reserve Fund must be established before the final 10


Calendar Years of the term of the Production Operations of a Production Area.


58.6.2 Once established, the Contractor shall make regular contributions to the


Decommissioning Reserve Fund based upon estimated decommissioning and


site restoration costs in accordance with Best Practices.


58.6.3 The Contractor shall pay its contributions to the Decommissioning Reserve


Fund in US$.








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38.7 If, at the end of the term of the Production Operations of a Production Area, the


Government decides to take over production operations in the Production Area:


(a) the Government shall become liable for Decommissioning Operations in such


Production Area;


(b) the contributions and any interest accumulated in the Decommissioning


Reserve Fund, to the extent that such contributions have been recovered as


Petroleum Costs, shall be delivered and paid over to the Government; and


(c) the Government shall release the Contractor and the Contractor Entities from


any obligations relating to Decommissioning Operations and shall indemnify


the Contractor and the Contractor Entities for any costs, liabilities, expenses,


claims or obligations associated therewith to the extent permitted by


Applicable Law (including any caps on such liability as may be required by


Applicable Law or Government policyl.





38.8 If the Contractor undertakes Decommissioning Operations in a Production Area, the


Contractor may use the contributions and any interest accumulated in the


Decommissioning Reserve Fund for the Decommissioning Operations.


38.9 If the Decommissioning Reserve Fund is paid to the Contractor and the


Decommissioning Reserve Fund is not sufficient to cover all Decommissioning Costs for


the Contract Area, the Contractor shall pay the balance and the Contractor Entities, or


any of their Affiliates, may recover such balance from any other area which is the


subject of another Petroleum Contract (as defined by the Kurdistan Region Oil and Gas


Law) anywhere in the Kurdistan Region and. to the extent the balance is not recoverable


as aforesaid, such remaining balance shall be paid by the Government to the Contractor.


38.10 If the Decommissioning Reserve Fund is paid to the Contractor and the


Decommissioning Reserve Fund exceeds all Decommissioning Costs for the Contract


Area, the balance shall be transferred to the Government.


38.11 Any expenditure incurred by the Contractor in relation with this clause 38. including any


contributions to the Decommissioning Reserve Fund, shall be deemed Petroleum Costs


and will be Cost Recoverable.








Clause 39 - Assignment: Change of Control


GtNLKAl


39.1 Clauses 39.2 through 39.6 do not apply to Government Interest Holders in respect of the


Government Interest. The consent of any Government Interest Holder, in its capacity as


Government Interest Holder, is not required for any Assignment by a Contractor Entity.


39.2 Except as provided in clause 39.3, no Contractor Entity may Assign to any Person, in


whole or in part, any of its rights, privileges, duties or obligations under this Contract


without the prior consent of the Government, which consent the Government shall not


unreasonably withhold or delay.


39.3 Any Assignment of all or any part of a Contractor Entity's rights, obligations, or interests


under this Contract without the prior consent of the Government or that otherwise is in


 Production Shoring Controct Dinorto








breach of this Contract or Applicable Law will be void as to the Assignee and the


Assignor will remain liable under this Contract.


39.4 No consent of the Government in respect of an Assignment by a Contractor Entity is


valid unless in writing and signed by the Prime Minister and the Minister of Natural


Resources of the Kurdistan Region.


39.5 No Contractor Entity is entitled to make an Assignment when it or the Contractor is in


default under any obligation under this Contract.





Assignment to Ahiuatcs and other Contractor Entities


39.6 A Contractor Entity that is not in default under any obligation under this Contract is


entitled to Assign its rights, privileges, duties and obligations under this Contract to an


Affiliate or to another Contractor Entity, provided the assignee enters into an agreement


with the Government, acceptable in form and content to the Government, to be bound


by the terms and conditions of this Contract.


*9.6.1 If a Contractor Entity Assigns any of its rights, privileges, duties or obligations


under this Contract to an Affiliate of such Contractor Entity, the Assignor will


remain jointly and severally liable with the Assignee for the performance by the


assignee of all obligations, duties, and liabilities pertaining to the Assignment.


Assignments to Third Parties


39.7 A Contractor Entity proposing to Assign all or any part of its rights, obligations, and


interests under this Contract shall request the consent of the Government and the other


Contractor Entities, and accompany such request with:


(a) evidence of the technical and financial capability of the proposed third party


assignee and its controlling (directly or indirectly) shareholders;


(b( a letter of representations and warranties from the proposed assignee in form


and content acceptable to the Government including a representation that the


proposed assignment will not to the knowledge of such Contractor Entity after


reasonably diligent investigation violate any Corrupt Practices Laws applicable


to the Contractor Entity; and


(c) a letter of representations from the assignor in form and content satisfactory to


the Government, including a representation that the proposed assignment will


not to the knowledge of such Contractor Entity after reasonably dil.gent


investigation violate any Corrupt Practices Laws applicable to the Contractor


Entity.


39.8 For any Assignment to be effective, the Parties and the relevant third party, if any. must


enter into a binding and enforceable instrument of assignment and novation with the


Government, which must include an undertaking by the assignee to fulfil the obligations


under this Contract which correspond to the assigned participating interest.


Government


39.9 Except as provided in clause 4 in respect of the Government Interest, and as provided in


clauses 32.6 through 32.14, the Government shall not Assign all or any part of its rights


and obligations under this Contract to any Person.








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CHAN61Of COMTtOl


39.10 ' Change of Control" means:


(a) any direct or indirect change of the identity of the Person who Controls a


Contractor Entity (whether through merger, sale of shares or of other equity


interests, or otherwise, through a single transaction or series of transactions,


from one or more transferors to one or more transferees); where


(b) "Control" means the power (including contingent powers) to cause a


Contractor Entity to do. or not do. an act that may otherwise be in the interest


of such Contractor Entity to do or not do. and whether such power is


exercisable pursuant to shareholders agreements, financing agreements, voting


rights agreements, management agreements, board memberships, direct or


beneficial ownership, or in any other direct or indirect way. for this purpose,


and without limiting the foregoing, any Person that owns SO'A of the


outstanding voting securities (or equivalent ownership interests), determined


after accounting for all securities that are convertible into voting securities, of


any other Person will be conclusively considered to control such other Person.


39.11 A Contractor Entity shall: (a) promptly notify the Government when such Contractor


Entity expects to be subject to a Change in Control and (b) request the consent of


Government with respect to such Change of Control.


Taxcs


39.12 If a Contractor Entity Assigns all or part of its rights, obligations, and interests under this


Contract, in compliance with this clause 39. or is subject to a Change of Control


accomplished with the Government's consent, neither such Assignment nor Change of


Control will constitute a taxable event as to the assignor, assignee, or any other Person


under Kurdistan Region Law.








Clause 40 - Force Majeure


DEFINITION


40.1 "Force Majeure" means any event: |1} that is unforeseeable, insurmountable, and


irresistible, not caused by any error or omission by the Contractor acting as a reasonable


and prudent operator and solely and directly caused by circumstances beyond the


control of the Contractor as a reasonable and prudent operator; and (2) which prevents


or impedes performance of all or part of the Contractor's obligations under this


Contract. Such events include:


(a) war. whether declared or not. civil war. insurrection, riots, civil commotion,


terrorism, any other hostile acts, whether internal or external;


(b) strikes or other labour conflicts;


(c) accidents or blowouts;


(d) quarantine restrictions or epidemics;














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(e> any act. event, happening or occurrence due to natural causes. in particular,


but without limitation, floods, storms, cyclones, fires, lightning, earthquakes, or


(0 lack of water necessary for Petroleum Operations; and


any acts or orders of any competent foreign governmental authority validly


asserting jurisdiction over the Contractor or a Contractor Entity.





EfftCT


40.2 No delay, default, breach or omission of the Contractor or a Contractor Entity »n the


performance of any of their respective obligations under this Contract will be considered


a material breach of this Contract if such delay, default, breach or omission is due to


Force Majeure.


40.3 The Contractor shall promptly notify the Government of the occurrence of a Force


Majeure Event and take all reasonably appropriate measures to perform its obligations


under this Contract to the extent possible.


40.4 The time resulting from any such delay or curtailment in the execution of such


obligations, increased by the time necessary to repair any damage resulting from or


occurred during such delay or curtailment, shall be added to any time period provided


under this Contract (including the Exploration Period and any extension thereto, any


Sub-Period and any extension thereto and any Development Period and any extension


thereto).


40.5 The Government and the Contractor shall meet as soon as possible after the notification


of Force Majeure with a view to using reasonable endeavours to mitigate the effects


thereof.


40.6 An event affecting a Contractor Entity will be considered Force Majeure affecting the


Contractor if the consequence of such Force Majeure prevents the performance of any


of the Contractor's obligations under this Contract. The application or potential


application of any Law applicable to a Contractor Entity or any of its Affiliates, other


than Kurdistan Region Law or other Laws of the Republic of Iraq, which could result in a


criminal or civil penalty or sanction, is not Force Majeure.


40.7 The following events or circumstances will not constitute Force Majeure:


(a) any event or circumstance arising in connection with any Assets and Materials


or facilities other than the Assets and Materials and facilities of the Contractor


or a Contractor Entity or a Subcontractor;


(b) the breakdown or failure of any Assets caused by normal wear and tear or


caused by the failure of the Contractor to maintain such Assets or to maintain a


suitable stock of spares;


(c) any event or circumstance affecting any third party;


(d) any event or circumstance which comprises or results from any wilful


misconduct or gross negligence of the Contractor, or any act or omission by the


Contractor which could have been prevented or overcome by the exercise by


the Contractor of the standard of a reasonable and prudent operator acting in


accordance with Best Practices;











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(e) the imposition of sanction* by the Government due solely to the failure of the


Contractor to comply with any Applicable Law;


(f) change of Applicable Law: and


(g| the inability or the failure of the Contractor to raise sufficient financing for the


performance of the Contractor's obligations hereunder.


*0.8 The Contractor will not be entitled to relief in accordance with this clause 40. or having


become entitled will cease to be so entitled, to the extent that the Contractor fails to


comply with the requirements of this clause 40. unless such failure would itself qualify


as Force Majeure.


40.9 The Contractor shall, to the greatest extent possible, continue to perform its obligations


in accordance with this Contract to the extent not prevented, impeded, or delayed by


Force Majeure.


40.10 If Force Majeure occurs, the Contractor shall take reasonable endeavours to bring the


Force Majeure to an end and to resume full and proper performance of the obligation to


which the Force Majeure relates.


40.11 The Contractor shall give notice (a 'Force Majeure Estimate") to the Government at


each of the following times:


(a) forthwith after the day (the "Relevant Day") upon which the Contractor first


knew or ought reasonably to have known of the inability to perform an


obligation in accordance with this Contract for which relief is sought;


(b) within 7 days from the Relevant Day and on the last day of each subsequent


period of 7 days thereafter; and


(c) forthwith after the Contractor anticipates that it will be able to resume


performance of the covenant or obligation for which relief is sought.


40.12 Each Force Majeure Estimate shall contain the Contractor's good faith best estimates of


the following information:


[a) full particulars of and the reasons for the Force Majeure event;


(b) the expected extent of the Contractor's inability to perform any covenant or


obligation in accordance with this Contract;


[c) the expected duration of the Force Majeure from the Relevant Day and the


expected date that performance of the covenant or obligation to which the


Force Majeure relates will be resumed (whether incrementally or in whole);


and


(d) the actions which the Contractor proposes to take to bring the Force Majeure


event to an end and to resume full and proper performance of the obligation to


which the Force Majeure relates and the Contractor's estimate of the expected


schedule thereof.


40.13 The Contractor shall ensure that each subsequent Force Majeure Estimate will contain


any of the above information not previously given notice of. a full report confirming or


updating and amplifying the information contained in any previous Force Majeure


Estimates and such further information as the Government may reasonably request.








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Clause 41 - Sovereign Immunity


41 1 Thn clause 41 does not apply to the Government «n respect of any Dispute 4m** out of


or related to |4) the exercise of rights by the Government as set forth in clauses 32 11


and 12 12. (b| clause 4 13; or (cl clause 4 to the extent the Dispute is between the


Government and any holder of a Government Interest. The Government expressly


reserves all sovereign enmunrties in respect of the foregoing Disputes.


41 2 f ach Party hereby ffuby and irrevocably waives any claim to immunity for itself or any of


its assets This waiver includes any claim to immunity from:


(a) any eapert determination, mediation, or arbitration proceedings commenced


pursuant to clause 42;


(b) any judicial. administrative or other proceedings to aid the eapert


determination, mediation, or arbitration proceedings commenced pursuant to


clause 42; and


(c) any effort to confirm, enforce or execute any decison. settlement, award,


judgment. service of process, execution order, or attachment (but not any pre


judgment attachment) that results from an expert determination, mediation,


arbitration or any judicial, administrative, or other proceedings commenced


pursuant to this Contract.








Clause 42 - Dispute Resolution


Exclusion


42.1 This clause 42 does not apply to any Dispute arising out of or relating to the eim se of


rights by the Government as set forth in clauses 32.11 through 32.13. which Disputes


shall be subject to the exclusive jurisdiction of the courts of the Kurdistan Region located


in Erbil.


Nonet o# Drseuu


42.2 Subject to the provisions of clause 42.3. a Party who desires to submit a Dispute for


resolution which has not been resolved by negotiation shal commence the Dispute


resolution process by providing each other Party that is a party to the Dispute with a


notice of the EHspute (a 'Notice of Dispute*).


42.2.1 A Notice off Dispute must (a) identify the parties to the Dispute, contain a brief


statement of the nature of the Dispute, and the relief requested and (b|


request negotiations among the senior representatives of the parties to the


Dispute as set forth in clause 42.3.


Nl40fUV»0«


42 ) The parties to the Dispute shal first seek to settle the Dispute by negotiation between


senior representatives with authority to negotiate the settlement of the Dispute Such


senior representatives shal meet at a mutually acceptable date. time, and place to


attempt to resolve the Dispute.


 Production Shoring Controct Dinorto








Mediation


42.4 If the Dispute is not resolved by negotiation in accordance with clause 42.3 within 60


days after the date of the receipt by each party to the Dispute of the Notice of Dispute


or such further period as the parties to the Dispute may agree in writing, any party to


the Dispute may seek settlement of the dispute by mediation in accordance with the


London Court of International Arbitration (*ICIA*} Mediation Procedure, which


Procedure shall be deemed to be incorporated by reference into this clause, and the


parties to such Dispute shall submit to such mediation procedure.





Aabitaation


42.5 If the Dispute is not settled within the earlier of |a) 60 days of the appointment of the


mediator, or such further period as the parties to the Dispute may otherwise agree


under the mediation procedure under clause 42.4. and {b) 120 days after the delivery of


the Notice of Dispute, any party to the Dispute may refer the Dispute to. and seek final


resolution by. arbitration under the LCIA Rules, which Rules are incorporated by


reference into this clause 42.5.


42.5.1 An election by a Party to refer a Dispute to arbitration shall be construed as


meaning such Dispute shall be resolved by binding arbitration under the LCIA


Rules.


42.5.2 Except as specifically provided otherwise, no Dispute is subject to decision by


any court, and the Government specifically does not submit to the jurisdiction


of any court outside of the Kurdistan Region.


42.5.5 Any arbitration shall be conducted by three arbitrators.


42.5.4 If the parties to the Dispute are the Government and all the Contractor Entities,


the Government and the Contractor shall each appoint one arbitrator. If the


parties to the Dispute are the Government and more than one. but not all the


Contractor Entities, the Government shall appoint one arbitrator and such


Contractor Entities shall appoint one arbitrator. If the parties to the Dispute are


the Government and one Contractor Entity, the Government and such


Contractor Entity shall each appoint one arbitrator.


42.5.5 The two arbitrators so appointed shall, in good faith, use all reasonable


endeavours to agree on the appointment of the third arbitrator, who will chair


the arbitral tribunal. In case of failure to appoint an arbitrator or to agree on


the appointment of the third arbitrator, the Rules of the LCIA shall apply.


42.5.6 The seat of arbitration shall be London. England. The language to be used in


any prior negotiation, mediation and in the arbitration shall be English. The


arbitral award may be enforced by any court of competent jurisdiction. Any


award shall be expressed in US$.


42.5.7 The Parties agree that the arbitral award will be final and not subject to any


appeal, including to the Courts of England on issues of Law.

















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lm«i Duihminmion


47.6 Any Dispute between all or any of the Parties in respect of clauses >58. 27.2 and 27.7.


and any Dispute the disputing parties agree to refer to an l>pert, shall be submitted to


an Expert In accordance with this clause 42.6.


47.7 The Management Committee shall prepare and agree appropriate terms of reference


(-Terms of Reference*) for the Expert In respect to a Dlipute to be submitted for


resolution by the Expert.


«»M The Terms of Reference must set forth the duties of the Expert.


4»M The Terms of Reference must requite the Expert to use reasonable endeavours


to Issue an opinion within 45 days of the Expert's receipt of the Terms of


Reference and the information referred to In clause 42.2.


41.M The Management Committee shall promptly provide the Expert svith approved


Terms of Reference.


47.8 Each Party to the Olspute shall have the right to provide the Expert withanv written


information which such Party considers relevant, provided such written information is


provided to the Expert within 45 days after the Expert's appointment.


41.1.1 Such information shall be provided to each other Party at the same time and


each such other Party shall be entitled to provide comments on such


Information to the first Party and the Expert within 30 days after receiving such


Information


42.1.1 The Expert may consider any information the E xpert considers useful to reach a


decision.


421 Subject to the provisions of clause >58. any decision of the Expert shall be final and sha*


not be subject to any appeal, except in the case of manifest error or fraud


42 10 Each Party to the Dispute shall pay an equal share ol the costs and expenses of the


Expert.


Clause 43 - Fiscal Stability


Cimiiai


411 The Government shal maintain the ItabxMy of the fiscal conditions of the Partes under


this Contract, as they result from Applicable law m force as of the Effective Date, for the


entire duration of this Contract in accordance with this cUuse 41


43.2 The provisions of the clause 43 do not apply to Government interest Motders.





rent or futuu Laws


The Contractor acknowledges that the Government has advised it may propose laws


43.3


which could have a beneficial or detrimental effect upon the fiscal position of the


Contractor, including Laws the primary purpose ol which may be:


(a) the protection of the environment lo the standards of the European Union;


 Production Shoring Controct Dinorto








(b) the promotion of the health and safety of citirens of the Kurdistan Region to


the standards of the European Umon;


(c) the promotion of the health and safety of personnel engaged in Petroleum


Operations to the standards of the European Union;


(d) the regulation of haiardous substances, including the transportation and


disposal thereof, to the standards of the European Union;


(e) decommissioning of petroleum facilities, including Wells and refineries, to the


standards of the European Union and Alberta, Canada;


(f) regulation of pipelines; and


(g) the regulation of companies.


The introduction of such Laws will not entitle the Contractor or any Contractor Entity to


any rights to any alteration to the terms of this Contract.


Change o» Tax Law


43.4 If, at any time after the Effective Date:


(a) there is any change to Regional Tax Laws in force on the Effective Date (a


•'Change of Tax Law' ); and


(b) the fiscal position of the Contractor Entities under this Contract is materially


either beneficially or detrimentally affected by such Change of Tax Law; then


(c) the Contractor and the Government shall negotiate to alter the terms of this


Contract so as to place the Contractor Entities in the same overall economic


position (taking into account home country taxes) as that which the Original


Contractor Entities ("Original Contractor Entities* means Hess and would have


been without any Change of Tax Law.


43.5 The Government will under no circumstances be liable to any Party or Person for any


consequential or indirect losses because of any Change of Tax Law.


Disputes


43.6 If a Party believes that a Change of Tax Law has beneficially or detrimentally affected the


Contractor Entity as provided in clause 43.4. and upon that Contractor Entity's request,


the Government shall meet with the Contractor Entities to decide on any necessary


measures or making any appropriate amendments to the terms of this Contract to place


the Contractor Entities in the position (taking into account home country Taxes for the


Original Contractor Entity) as the Original Contractor Entity was in prior to the


occurrence of the Change of Tax Law.


43.7 Should the Government not agree with the Contractor in respect of the effect of the


Change of Tax Law, within 90 days of the request of the Party referred to in clause 43.6


(or such other period as may be agreed by the Parties), a Party may refer the Dispute to


arbitration as provided in clause 42 without first referring the matter to negotiation and


mediation.

















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Clause 44 - Communications: Notices


44.1 A Party giving any notice or making any request, demand, or other communication to


another Party (each a "notice*) shall do so in writing, express the notice in English,


address such notice as provided in clause 44.2, and use one of the following methods to


deliver such notice, each of which, for the purposes of this Contract is a writing:


(a) personal delivery:


(b) email; and


(c) international recognised air courier, with all fees prepaid, and, in the case of


any notice to the Government, with a reputable international air courier


company with an establishment in Erbil in the Kurdistan Region.


44.2 Any not>ce or communication not provided in English is not valid unless acknowledged


and accepted by the recipient.





44.3 Each Party shall address notices in respect of this Contract:


To the Government:


Attention: His Excellency the Minister of Natural Resources


Address: Ministry of Natural Resources


Kurdistan Regional Government


Erbil, Kurdistan, Iran


Email: mnr@krgoil.com








To a Contractor Entity:


Hess:


Mess Middle East New Ventures Limited


Attention: Exploration Business Manager


Address: c/o Level 9, The Adelphi Building





1 11 John Adam Street


London WC2N 6AG


Telephone: 4 44 (0)20 7331 3180





Email: nvaughn@hess.com





PKL:


Petroceltic Kurdistan Limited














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Attention: Tom Hickey


Address: 75 St Stephens Green.





Dublin 2. Ireland





Telephone: 4 353 1 421 8300


Email: tom.hickey@petroceltk.ie





44.4 A notice is effective only if the Party giving or making the notice has complied with this


clause 44 and if the addressee has received the notice.


44.4.1 If a notice is delivered to the recipient in person, the notice will be considered


received by the addressee by the date set forth in the signed receipt.





44.4.2 If a Party sends a notice by an internationally recognised air courser in


accordance with this clause 44. the notice will be considered received by the


addressee by the date set forth in the signed receipt.


44.4.3 If a Party sends a notice by email and the email transmission is followed by


delivery of the Notice by air courier in accordance with this clause 44 or is


acknowledged by the recipient, the notice will be considered to have been


delivered to the addressee when the email departed the gateway of the


sender.





44.5 A Party may change its address as set forth in clause 44.2 by a prior notice to the other


Party in accordance with this clause 44.











Clause 45 - Termination


GtNlftAl


45.1 The Government undertakes to exercise its termination rights under this clause 45 in a


reasonable and proportionate manner, having regard for the nature and severity of the


triggering act or event, the identity of the Person at fault and the relative significance of


any adverse consequences to the Contractor or a Contractor Entity that may arise from


the Government's exercise of its rights under this clause 45.


45.2 In any notice of termination given by the Government under this clause 45. the





Government must specify the grounds for exercising the termination right and the date


on which the Contract or the rights and interests of a Contractor Entity, as applkable.


will terminate.


45.3 The Contractor is not entitled to claim Force Majeure as a consequence of the


Government's exercise of its rights under this clause 45. and no obligation of the


Contractor will be suspended as a consequence of any Dispute with respect to the


Government's exercise of its rights under this clause 45.























108


 P'oaucioc Sftora* Coava Dwta











s Contract at any time during the Exploration Period


(as it may be extended pursuant to clauses 6.5.6.6. and 6.7) or the Gas field Holding


Period upon JO days' prior notice to the Government.


Aurouxnc Tiaxmarioa


45.5 rhis Contract will automatically terminate the end of the Exploration Period (including


any extensions as provided in clauses 6.S, 6.6, and 6.7| without notice to the Contractor


If, as of the last day of the Exploration Period, if:


(a) the Development Period has not started in respect of a Discovery of Crude Oil


or Gas Field; or


(b) no Gas Field Holding Period is applicable with respect to a Gut Field


45.0 In accordance with clause 7.13, this Contract will terminate:


(a) upon the relinquishment (whether mandatory, considered, or voluntary) of the


entire Contract Area; and


(b) with respect to all relinquished areas immediately upon relinquishment, and


the Contractor shall have no further rights with respect to such areas.


Cohiupi Pn*c!ic«» Iaws


45.7 On not less than JO days’ prior notice to the Contractor, the Government may terminate


this Contract it a competent authority has reasonably determined |ln a proceeding


applying due process).


(a) that this Contract has Been obtamed by the Contractor, or any Person acting on


behalf of the Contractor, m violation of Corrupt Practices Laws, or


(b) that a permit, approval, consent, or wan-et in connection with this Contract or


Petroleum Operations hat been obtamed by the Contractor, or any Person


acting on behalf of the Contractor, m yoiatmn of Corrupt Practices laws.


451 Any final determination, judgment, sanction, or conviction (not subject to further appeal


on the issue), including under a consent order m which there is a finding or admission of


the factual circumstances described m clause 45.7(a) or (b| lot both), of a judicial or


regulatory authority m the United States of America. England, or a legal jurisdiction


where a Contractor Entity or its ultimate parent company is incorporated, with


jurisdiction over a Contractor Entity or an Affiliate of such Contractor Intity, will be a


reasonable determination for the purposes of clause 45.3 and will be conclusively


determinative.


45 0 Unless the Government has cancelled a notice of termination this Contract will be


terminated as of the end of such JO day notice period.


Oiiuh Gaounos rot Tiumumion


45.10 The Government may terminate this Contract, on not less than 90 days’ pn©» not«e. rf


the Contractor:


(a) fads to meet a material hnancial obligation in th.s Contract;











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(b) during the First Sub-Period does not carry out drilling and seismic acquisition,


as detailed in clause 10.3 or, during the Second Sub-Period {or earlier), does not


[c) carry out drilling and seismic acquisition, as detailed in clause 10.4;





interrupts Production for a period of more than 90 consecutive days with no


cause or justification acceptable in accordance with this Contract or under Best


Id) Practices, it being recognised that Force Majeure is an acceptable justification


for such interruptions;





unless such extraction or production is expressly authorised or unavoidable as a


result of operations carried out in accordance with Best Practices, extracts or


produces any mineral or object which is not covered by this Contract and does


10 so wilfully or in a manner that constitutes gross negligence or persistently after


receiving notice thereof; or





refuses to abide by any negotiation, mediation, arbitration or expert decision


under clause 42.


44.10.1





If, within the 90-day notice period, the Contractor has either remedied the


default identified in such notice to the satisfaction of the Government, or the


Government has agreed another remedy with the Contractor, including


44.10.2 compensation, the Government shall cancel such notke of termination.





If. within such 90-day notice period, the conditions set forth in clause 45.B have


not been satisfied, the Government may, on not less than 30 days' notice,


terminate the Contract, and. unless such notice is cancelled by the Government


before the end of such 30-day period, this Contract will be terminated as of the


termination date set forth in the notice from the Government.





45.11 This Contract is subject to termination as provided in clause 14.


45.12 Where the Contractor comprises only one Contractor Entity, the Government may


terminate the Contract on not less than 30 days' notice to such Contractor Entity


following the occurrence of an Act of Insolvency, unless, within such 30-day period, the


Government cancels its notice based on evidence provided by the Contractor Entity that


the Act of Insolvency has been dismissed, discharged, or otherwise is no longer


applicable.


45.13 The rights and interests of an individual Contractor Entity will be automatically


terminated, without prior notice from the Government, if such Contractor Entity:


la) is subject to a Change of Control for which the Government has not given its


authorisation in accordance with clause 39.11; or


(b) has made or has purported to make an assignment of all or part of its interests


hereunder (including under any provision of a joint operating agreement)


without the prior consent of the Government in accordance with clause 39.























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CONSIQUiHCfeSOI T**MINATI0K


45.14 Upon termination or expiration of this Contract:


(a) the Contractor land each Contractor Entity! will no longer have, as of the


effective date of such termination, any further rights and interests under this


Contract;


(b) all accrued rights and liabilities of the Contractor and of each Contractor Entity


will survive; and


(c) the provisions of clauses 16.9. 30. 31. 35.1. 35.3, 35.4, 35.7. 36. 38.7(c). 41. and


42 will survive the termination or expiry of this Contract.


45.15 If the Government terminates the participating interests of a Contractor Entity, but not


the Contract, and there are remaining Contractor Entities:


(a) such terminated Contractor Entity will no longer have, as of the effective date


of such termination, any further rights and interests under this Contract;


(b) all accrued rights and liabilities of such terminated Contractor Entity will


survive; and


(c) as to and in respect of such terminated Contractor Entity, the provisions of


clauses. 16.9. 30. 31. 35.1, 35.3. 35.4, 35.7. 36. 38.7|c). 41. and 42 will survive


such termination.


45.16 If the participating interests of a Contractor Entity {or of Contractor Entitiesl are


terminated, but the Contract is not terminated and there are remaining Contractor


Entities, the Government may offer, on not less than 15 days' prior notice from the


Government to the other Contractor Entities, to assign and novate such terminated


Contractor Entity's participating interest, or any part thereof, to the remaining


Contractor Entities on such terms and in such amounts as the Government may


determine.


4S.16.1 The Government has no obligation to make such allocation and may retain the


terminated interest, provided that the Government will use reasonable


endeavours to find a new buyer for such interests.


45.17 No assignment, novation, transfer, or other disposition of a terminated Contractor


Entity's participating interests to another Contractor Entity pursuant to this clause 45


will be a taxable event under Applicable Law as to the Contractor Entity receiving the


undivided interests of a terminated Contractor Entity.


45.18 Neither the Government, nor any Contractor Entity, will assume any liabilities,


obligations, or duties of a terminated Contractor Entity in respect of the terminated


Contractor Entity's undivided interest arising or accrued prior to the latter of:


(a) the effective date of the termination of such Contractor Entity; and


(b) in the case of assignment and novation to the remaining Contractor Entities,


the effective date of the reassignment and redistribution of the terminated


Contractor Entity's interests to another Contractor Entity.


45.19 The Government will in no circumstances assume accrued liabilities, obligations, or


duties of a terminated Contractor Entity in respect of the terminated Contractor Entity's








111


 Production Shoring Controct Dinorto








participating interest. whenever arising or accrued. All accrued liabilities will remain the


sole obligation of the terminated Contractor Entity.


45.20 No termination under this Contract, including in this clause 45. limits or impairs a Party's


rights under English Law or Applicable Law in respect of termination.








Clause 46 - General Provisions


Counte*i*amis


46.1 The Contractor Entities and the Government may execute this Contract in counterparts,


each of which constitutes an original, and all of which, collective^, constitute only one


agreement. The signatures of all of such Parties need not appear on the same


counterpart, and delivery of an executed counterpart signature page by facsimile or


electronic scan is as effective as executing and delivering this Contract in the presence of


the other Parties. In proving this Contract, a Party must produce or account only for the


executed counterpart of the Party to be charged.


Amenoxuuis; Waivers


46.2 The Government and the Contractor may amend this Contract only by a written


agreement of the Government and the Contractor that identifies itself as an amendment


to this Contract.


46.2.1 A Government Interest Holder, in such capacity, is not entitled to be a party to


any agreement amending this Contract, unless the terms of such amendment


affect any right or obligation of such Party as a holder of all or part of the


Government Interest.


46.2.2 The Government shall notify Government Interest Holders of any proposed


amendments and signed amendments, and the Contractor will have no


obligation to notify Government Interest Holders of any proposed amendments


and signed amendments.


46.3 A Party may waive any conditk>n or obligation of such Party in this Contract only by a


writing executed by such Party. A waiver made on one occasion will be effective only in


that instance and only for the purpose stated. A waiver once given is not to be


construed as a waiver on any future occasion. No waiver or amendment in respect of


this Contract will constitute a waiver or amendment of any other agreement or contract,


except as expressly set forth in such waiver or amendment.


46.4 No failure or de!ay by a Party in exercising any right hereunder, or in requiring the


satisfaction of any condition under, this Contract, and no act, omission, or course of


dealing between the Parties (or any other them), will operate as a waiver or estoppel of


any right or condition or any provision, right, or condition of this Contract.


46.5 Any single or partial exercise of any right, power or remedy by a Party will not preclude


any other or future exercise thereof by such Party or the exercise by such Party of any


other right, power or remedy.














112


 P'odutt/on Moiing Cont/otr Omenta








RlOIONAI Otl AhD GAS Council ArrROVAl


4ii b The Government warrants that this Contract is approved for the purpose* of the


Kurdistan Region Oil and Gas law.


Com


4b 7 I ach Party shall bear all costs incurred by it in connection with the preparation and


negotiation of and entry into this Contract and all documents to be entered Into


pursuant to it. Such costs will not be recoverable as Petroleum Costs.





Enactrva Oaii


4b H This Contract is effective as of the date set forth on the signature page (the "effective


Data"}.


Govixniho Law


4b 9 This Contract, including any dispute arising therefrom, thereunder or in relation thereto


and the agreement to arbitrate in clause 42, Is governed bv English law. Except in


respect of Government Interest Holders, no term of this Contract is enforceable under


the Contracts (Rights of Third Parties) Act 1999 by a Person who Is not a Party to this


Contract-


Eniwi Aohiimini


4b 10 As of the Effective Date, this Contract and the letters ol Represent a- ons constitute the


final, complete and exclusive expression of the Parties' agreement on the matters


contained in this Contract.


4t.ie.i AR prior and contemporaneous negotiations and agreements between the


Parties on the matters contained in this Contract are expressly merged into and


superseded by this Contract.


«*-ia-» The provisions of th.s Contract may not be explained, supplemented or


qualified through evidence of trade usage or a prior course of dealings


am In entering mto this Contract no Party has relied upon any statement.


representation, warranty, or agreement of any other Party or any other Person,


except for those expressly contained in this Contract, m the letters of


Representations, and the Guarantee.


«*-ia.4 There is no condrt.on precedent to the effectiveness of th-s Contract (except lor


signature and delivery by the Government and the Contractor Entities)


IblU There are no representations or warranties, m each case other than those


expressly stated ■* this Contract and the letters of Representations.








(Signature pooe/oKPws /




















113


 2L.


Oatc July 2011














for and ixi behalf c/thr GOVERNMENT Of THE KUWWAN REGION Of IRAQ




















Pr*mo MMliter


Kurdistan ReglOftftt Government





On behalf of the Regional Council


for the Oil and Gas Affairs of the Kurditun Revlon - Iraq











AMS*


By:.


Aihti Hawrami





Minister Of Natural Resources


Kurdstan Regional Government


On behalf of the Ministry of Natural Retources in the


Kurdistan Region














For the Contractor and each Contractor Entity:











Hess Miodie East New Venturis Limited


























Name:


its:............








Petroccltic Kurdistan Limited














By:...........................................


Name:..........................


ItR---------








ISfynoture poyc to Production Sharing Contract OinortcJ


For and on behalf of the GOVERNMENT OF THE KURDISTAN REGION OF IRAQ

















8y:...........................-.......


Barham Salih


Prime Minister


Kurdistan Regional Government





On behalf ofthc Regional Council


for the Oil and Gas Affairs of the Kurdistan Region - Iraq














By:------------------------------





Ashtl Hawraml


Minister of Natural Resources


Kurdistan Regional Government


On behalf of the Ministry of Natural Resources In the





Kurdistan Region











For the Contractor and each Contractor Entity:














Hess Middle East New Ventures Limited






































Petroceltic Kurdistan limited














By.-----------


Name:......


Its:----------








ISlgnoture page ro Production Shoring Contract - Dinorta]


 u

















For and on behalf of tie GOVERNMENT Of TMF KURDISTAN REGION Of IRAQ




















B3'h3m Salih


Prime Minister


K jrdistan Regional Government





On behalf of the Regional Council


for the OH and Gas Affair of the Kurdlst an Region - Iraq




















A?hti Hawrsrnl


Minister of Natural Resources


Kurdistan Regional Government





On behalf of tho Mlnlttiy of Natural Resources In the


Kixdistan Region














for the Contractor and ea:h Cor:rac:cr Entrty:











Hess Mhkke Fast New Ventures Limited




















By-


Name: ...





Its:..........








Petroceltk Kurdistan Limited

















Name











IS/goa'.'j/eooat to Production Shoring Contrmt - Dinortnl


 Production Shoring Contract • Dinatta























Annex A











Map showing coordinates of the Dinarta Contract Area corner points























(see following page]

















































































































































































































































































































A • I


 Dinarta Block


44*IW'I

















Turke>


4040000 40t0000 4100000 D*riiuU














nutrm wswn jiwn

































































Sidakan














Mun<






































44 24 20 KaTraMlix
































420000

















1:400,000 □ Kilometre


 Production Shoring Contract • Dinatta








Annex B


Accounting Procedures











PARAGRAPH 1 - GENERAL PROVISIONS


1.1 Purpose





The purpose of this Annex B - Accounting Procedures is to classify expenditures, define further


Petroleum Costs (in addition to those defined as such in the clauses of the Contract), and


prescribe the manner in which the Accounts shall be prepared and approved.








1.2 Definitions


Words and phrases to which a meaning has been assigned in clause 1 or other clauses of the


Contract shall have the same meaning when used in this Annex.








1.3 Inconsistency


In the event of any inconsistency or conflict between the provisions of these Accounting


Procedures and the main body of the Contract, the provisions of the main body of the Contract


will control.





1.4 Accounting Records and Reports


1.4.1 The Contractor shall maintain the Accounts in accordance with clause 15 and this


Accounting Procedure.


1.4.2 Within 60 days of the Effective Date, the Contractor shall submit to and discuss with the


Government a proposed outline of charts of Accounts in accordance with generally


accepted standards and recognized accounting systems and consistent with normal


petroleum industry practice and procedures.


1.4.5 Within 90 days of receiving the above submission, the Government shall either provide


written notification of its approval of the proposal or request in writing revisions to the


proposal.


1.4.4 Within 180 days after the Effective Date, the Contractor and the Government shall agree


on the outline of charts of Accounts which describe the basis of the accounting system


and procedures to be developed and used under this Contract.


1.4.s Following such agreement, the Contractor shall expeditiously prepare and provide the


Government with formal copies of the comprehensive charts of Accounts and manuals


related to the accounting, recording and reporting functions, and procedures which are.


and shall be, observed under the Contract.


1.4.6 Notwithstanding the generality of the foregoing, the Contractor shall provide regular


statements relating to the Petroleum Operations:


(a) Production Statements (Paragraph 6);


(b| Value of Production and Pricing Statements (Paragraph 7);


(c| Cost Recovery and Share Account Statements (Paragraph 8|;


(d| Statements of Expenditures and Receipts (Paragraph 9);








B- 1


 Production Shoring Contract • Dinatta








(e) final Endof-Year Statements IParagraph 10): and


(f) 8udget Statements (Paragraph 12).


1.4.7 All reports and statements shall be prepared in accordance with the Contract. Applicable





Law. and where there are no relevant provisions of either of these, in accordance with


Best Practices.








l.S Language and Units of Account


All Accounts shall be maintained and prepared in the English language and shall be recorded in


US Dollars. Where necessary for clarification, the Contractor may also maintain Accounts in


other currencies.








1.6 Audit and Inspection Rights of the Government


The following provisions shall apply to any audit carried out in accordance with clauses 15.2 to


15.7:


1.6.1 for purposes of auditing, the Government, acting reasonably, may examine and verify,


at reasonable times upon reasonable prior written notice to the Contractor, all


accounting records, including charges and credits relating to the Petroleum Operations,


such as records of account, accounting entries, supporting records and inventories,


vouchers, payrolls, invoices and any other documents, correspondence and records


including electronic records reasonably considered necessary by the Government to


audit and verify the charges and credits, values and treatments.


1.6.2 The auditors are entitled to visit and inspect at reasonable times, all sites, plants,


facilities, warehouses and offices of the Contractor directly or indirectly serving the


Petroleum Operations and to question personnel associated with those Petroleum


Operations.


1.6.s Where the Government requires verification of charges made by an Affiliate of a


Contractor Entity, the Government shall have the right to obtain an audit certificate for


such changes from an internationally recognised firm of public accountants acceptable


to both the Government and the Contractor.


1.6.4 All agreed adjustments resulting from an audit shall be promptly made in the Accounts


and any consequential adjustments to payments due to the Contractor or to the


Government, as the case may be. shall be made promptly.


1.6.4 When issues are outstanding with respect to an audit, the Contractor shall maintain the


relevant documents and permit inspection thereof until the issue is resolved.





1.7 Accrual Basis. Cash Flow Basis and Reports


All Accounts shall be prepared on an accrual basis in accordance with generally accepted


accounting principles used in the international petroleum industry.





1.8 Values and Treatments


Values and treatments proposed by the Contractor relating to all Petroleum Costs shall be


subject to challenge by the Government in the course of audit to ensure that they are in


accordance with the provisions of this Accounting Procedure.














B- 2


 Production Shoring Contract • Dinatta








PARAGRAPH 2 - COSTS ANO EXPENSES


2.1 Segregation off Costs and Expenses


2.1.1 Petroleum Costs must be segregated in accordance with the purposes ffor which such


Petroleum Costs are made. The purposes which Qualify are:


(a) those which have been included in the approved Work Program and Budget ffor


the year in which the Costs and Expenditures are made;


(b| expenditures incurred in cases off emergency under the Contract;


(c| any other purposes agreed in the Contract; and


(d| other items which have been agreed by the Government and the Contractor.


2.1.2 All Petroleum Costs recoverable under Paragraph 3 as Petroleum Operations shall be


treated as set out in the balance off this Paragraph 2.





2.2 Exploration Costs


Exploration Costs are 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 ;n the search for Petroleum in an area which is, or was at the time when such costs and


expenses were incurred, part off the Contract Area, including:


(a) aerial, geophysical, geochemical, paleontological, geological, topographical and seismic


surveys and studies and their interpretation and purchased geological and geophysical


information;


(b) stratigraphic test hole drilling and water well drilling;


(c) labour, materials, supplies, and services used in drilling and formation testing off wells


with the object off finding Petroleum or Appraisal Wells excluding any costs off the


subsequent completion off such wells as producing wells;


(d) facilities to the extent used m support of the purposes described in (a), |b), and (c|.


including access roads;


(e) that portion off all service expenditures and that portion off all general and administrative


expenditures directly attributable to Exploration Costs or allocated thereto on a


consistent and equitable basis; and


(f) any other expenditure incurred in the search ffor and appraisal off Petroleum after the


Effective Date and not otherwise covered under this Paragraph 2.2.


2.3 Gas Marketing Costs


Gas Marketing Costs are all direct and allocated indirect costs and expenditures incurred in


carrying out Gas Marketing Operations in accordance with an Approved Gas Marketing Plan and


Budget and include that portion of all service expenditures and that portion of all general and


administrative expenditures directly attributable to Gas Marketing Costs or allocated thereto on


a consistent and fair basis.





2.4 Development Costs


Development Costs are all direct and allocated indirect costs and expenditures incurred in


carrying out Development Operations including all direct and allocated indirect costs and


expenditures incurred in:


la) drilling wells which are completed as producing wells and drilling wells for purposes off


producing from a Petroleum reservoir, whether these wells are dry or producing and


drilling wells ffor the injection of water or gas to enhance recovery off Petroleum.





B- 3


 tto4*I** M+'I'H Coatrerf o<*one








(b) cOl*pl(Ui| arh by an ol institution ol casing or equipment or otherwise iltn a w*M


hat been drilled lor the purpose ol bringing the well into use at a producing wel or at a


web lor the injection ol arater or gat to enhance recovery ol Petroleum


(c) the cotlt ol Petroleum production, transport and storage facilities Such at pipelines.


How lines, production and treatment units, webfsead equipment, subsurface equipment,


enhanced recovery systems. Petroleum storage facd'ties. and access roads for


production activities.


(d) engineer*^ and design studies for the aeh and lacildwt referred to m (a|. lb), and |ch


and





(e) that portion ol al service expenditures and that portion ot all general and administrative


expenditures deectfy attributable to Development Costs or abocated thereto on a


consistent and equitable basis; and any other expenditure incurred in the Development


Operations and not otherwise covered under Paragraph 2.4.





25 Production Costs


Production Costs are all direct and allocated indirect costs and expenditures incurred in carrying


out Production Operations, inctudmg all direct and allocated indirect costs and expenses incurred


in Petroleum Operations alter lest Production which are other than Exploration Costs. Gas


Marketing Costs. Development Costs and Decommissioning Costs. Production Costs include that


portion ol al service expenditures and that portion ol all general and administrative expenditures


directly attributable to Production Costs or allocated thereto on a consistent and equitable basis





2.4 Decommissioning Costs


Decommissioning Costs are all direct and allocated indirect costs and expenditures incurred m


carrying out Decommissioning Operations and include that portion ol al service expenditures


and that portion of all general and administrative expenditures directly attributable to


Decommissioning Costs or allocated thereto on a consistent and equitable basis, and the


Decommissioning Reserve fund shall be determined on sucb basis. In advance ol incurring such


costs, as provided In clause *8 and, lor the purposes ol cost recovery, the contributions to the


Decommissioning Reserve fund shall be recoverable In accordance with clause 38.


2.7 Service Expenditures


J.M Service expenditures ore expenditures in support ol Petroleum Operations including


warehouses, vehicles, motorized rolling equipment, aircraft, lire and security stations,


workshops, water and sewerage plants, power plants, housing, community and


recreational facilities and furniture, tools and equipment used in these activities.


Servn p rxprnditurrs In any Calendar Year shall include the costs incurred in such year to


purchase or construct, or both, such facilities as well as the annual costs of maintaining


and operating such facilities.


1.1.1 All service expenditures shall be regularly allocated as specified in Paragraphs 2.2, 2 3.


2.4, 2.S and 2.6 to (xploratlon Costs, Gas Marketing Costs, Development Costs,


Production Costs and Decommissioning Costs respectively and shall be separately shown


under each of these categories.


Z.T.S Where service expenditures are made in respect of shared facilities, the basis of


allocation of costs to Petroleum Operations shall be consistent and equitable and shall


be specified.

















B - 4


 Production Shoring Contract • Dinatta





2.8 General and Administrative Expenditures


2.6.1 General and administrative expenditures are:


(a) all main office, field office and general administrative expenditures in the


Kurdistan Region including supervisory, accounting, procurement and


employee relations services; and


(b) where the Contractor is an Affiliate of a group of companies whose


headquarters is Abroad (a ^Foreign Contractor*), an annual overhead charge


shall be made for services rendered (excluding the direct expenditures as


referred in Paragraph 3.1.2.) by any Affiliate of the Foreign Contractor


outside the Kurdistan Region to support and manage Petroleum Operations


under the Contract, or where the Contractor, not being a Foreign Contractor


draws upon the services of an Affiliate within the Kurdistan Region, an annual


overhead charge shall be made for services rendered (excluding the direct


expenditures as referred in Paragraphs 3.1.2.(a) and > by such Affiliate to


support and manage Petroleum Operations under the Contract (such overhead


charge. ‘Parent Company Overhead"}.


2.8.2 Parent Company Overhead will be considered to cover the actual cost (salaries, wages


and labour burden, employee benefits, travel, hotel and other normally reimbursable


expenses paid by the Affiliate of a Contractor in accordance with its standard personnel


policy in force in the relevant period, provision of office accommodation and provision


of services reasonably necessary for operation and maintaining such staff offices}


incurred for services rendered by those functions of Contractor's Affiliate, such as, but


not limited to. international production headquarters, international exploration


headquarters, treasury, payroll, taxation, insurance, legal, communications, computer


services, controllers, personnel, executive administrative management, research and


development, central engineering and process engineering which:


(a} cannot, without unreasonable effort and/or expenditure or without the release


of confidential Data proprietary to any of the Contractor's Affiliates, be charged


under any other section of this Annex; and


fb) are properly allocable to Petroleum Operations under the Contract. It is


understood, however, that services performed by the departments listed above


and other corporate departments which directly benefit Petroleum Operations


under the Contract shall be charged as direct costs in accordance with


Paragraph 3.


2.6.3 In respect of the costs of a Contractor Entity's Parent Company Overhead, as described


above, the Contractor shall charge monthly to Petroleum Operations an amount equal


to the total of the following:


J.6J.1 Exploration Overhead


The Contractor shall be entitled to an annual charge based on a sliding scale


percentage and charged monthly to Petroleum Operations. The basis for


applying this percentage shall be the total of Exploration Costs and Gas


Marketing Costs during each Calendar Year (exclusive of this Exploration


Overhead} or fraction thereof less expenditures which have been subjected to


the 2% fee. referred to in Paragraph 3.1.8(b). The sliding scale percentage shall


be the following:


(a) for the first USS4.000.000: 4%;


(b) for the next US$4,000,000: 3!<; and


(c} over USS8.000.000: 2%.








B - 5


 Production Shoring Contract • Dinatta








The foregoing percentages may be annually, and any approved appropriate


adjustment shall be made, if necessary, prospectively.


zj.i 2 Development, Production and Decommissioning Operations Overhead





The overhead rates applicable to Development Operations, Production


Operations, and Decommissioning Operations shall be agreed between the


Parties and shall incorporate the following guidelines:


(a) The Contractor's charges must be charged as direct charges whenever


possible. Overhead charges exist only to compensate the Contractor's


Affiliates for costs which are properly allocable to Petroleum


Operations under the Contract but which cannot, without


unreasonable effort and/or release of confidential Data proprietary to


the Contractor's Affiliates, be charged under any other section.


Overhead costs are billed monthly. Overhead must be commensurate


with services rendered and based on actual cost studies but may not


exceed an amount calculated as a percentage of certain annual


expenditures excluding Exploration Costs.


(b| That percentage as well as the types of expenditures, which affect


overhead and those, which do not, shall be agreed among the Parties.


(c| The maximum percentage rates may be revised by mutual agreement


not more often than annually. The initial maximum percentage rates


and the types of expenditures to which they apply shall be agreed as


soon as the Parties possess reasonably reliable cost estimates for the


relevant Production Area.


(d| Overhead charges are not subject to audit by Government.





(e) The Contractor shall upon request furnish at the end of each relevant


Calendar Year to the Government a confirmation by its statutory


auditor that the overhead costs actually charged do not duplicate any


other charges and that the method used in allocating overhead to


Petroleum Operations hereunder as opposed to other activities is


reasonable and in accordance with generally accepted accounting


practices.


(f) The Contractor must budget for overhead charges.





2.8.3 All general and administrative expenditures shall be regularly allocated as specified in


Paragraphs 2.2, 2.3. 2.4. 2.5. and 2.6 to CxploratK>n Costs. Gas Marketing Costs,


Development Costs, Production Costs and Decommissioning Costs, respectively and shall


be separately shown under each of these categories.





PARAGRAPH 3 - COSTS, EXPENSES. EXPENDITURES AND CREDITS


3.1 Costs Recoverable Without Further Approval of the Government


The following Petroleum Costs incurred by the Contractor pursuant to the Contract as classified


under the headings referred to in Paragraph 2 shall be recoverable for the purpose of clause 25


of the Contract (except to the extent provided in Paragraph 4 or elsewhere in this Annex) without


the requirement for obtaining any further approval of the Government, subject to audit as


provided for in clause 15 and in Paragraph 1.6.














B - 6


 Production Shoring Contract • Dinatta








3-1.1 Surface Rights


All direct costs necessary for the acquisition, renewal or relinquishment of surface rights


acquired and maintained in force for the purposes of the Contract.


3.1.2 Labour and Associated Labour Costs


(a) The Contractor's locally recruited employees based in the Kurdistan Region:


Costs of all the Contractor's locally recruited employees who are directly


engaged in the conduct of Petroleum Operations under the Contract in the


Kurdistan Region. Such costs shall include the costs of salaries, wages, bonuses,


overtime, employee benefits and Government benefits for employees and levies


imposed on the Contractor as an employer, transportation and relocation costs


within the Kurdistan Region of the employee and such members of the


employee's family (limited to spouse and dependent children} as required by


Applicable Law or customary practice in the Kurdistan Region. If such employees


are engaged in other activities in the Kurdistan Region, in addition to Petroleum


Operations, the cost of such employees shall be apportioned on a time sheet


basis according to sound and acceptable accounting principles.


(b| Assigned Personnel: Costs of salaries and wages including bonuses of the


Contractor's employees directly engaged in the conduct of the Petroleum


Operations under the Contract, whether temporarily or permanently assigned,


irrespective of the locat>on of such employees, it being understood that in the


case of those personnel only a portion of whose time is wholly dedicated to


Petroleum Operations under the Contract, only that pro-rata portion of


applicable salaries, wages, and other costs as delineated in Paragraphs 3.1.2(c),


(d), (e), (f) and (g). shall be charged and the basis of such pro rata allocation


shall be specified.


(c| The Contractor's costs regarding holiday, vacation, sickness and disability


benefits and living and housing and other customary allowances appl>cable to


the salaries and wages chargeable under Paragraph 3.1.2(b).


(d) Expenses or contributions made pursuant to assessments or obligations imposed


under Applicable Law which are applicable to the Contractor's cost of salaries and


wages chargeable under Paragraph 3.1.2(b).


(e| The Contractor's cost of established plans for employees' group life insurance.


hospitalization, pension, stock purchases, savings, bonus, and other benefit plans of


a like nature customarily granted to the Contractor's employees, provided however


that such costs are in accordance with generally accepted standards in the


international petroleum industry, applicable to salaries and wages chargeable to


Petroleum Operations under Paragraph 3.1.2(b).


(fI Actual transportation and travel expenses of employees of Contractor, including


those made for travel and relocation of the Expatriate employees, including their


families and personal effects, assigned to the Kurdistan Region svhose salaries and


wages arc chargeable to Petroleum Operations under Paragraph 3.1.2(b).


(1| Actual transportation expenses of Expatriate personnel transferred to


Petroleum Operations from their country of origin shall be charged to the


Petroleum Operations. Transportation expenses of personnel transferred


from Petroleum Operations to a country other than the country of their


origin shall not be charged to the Petroleum Operations.











B- 7


 Production Shoring Contract • Dinatta








(2| 'Transportation and travel expenses' as used in this sub-paragraph (f)


means the cost of freight and passenger service. meals, hotels, insurance


and other expenditures related to vacation and transfer travel and


authorized under the Contractor's standard personnel policies. The


Contractor shall ensure that all expenditures related to transportation


costs are equitably allocated to the activities, which have benefited from


the personnel concerned.


(g) Reasonable personal expenses of personnel whose salaries and wages are


chargeable to Petroleum Operations under Paragraph 3.1.2(b) and for which


expenses such personnel are reimbursed under the Contractor's standard personnel


policies. In the event such expenses are not wholly attributable to Petroleum


Operations, the Petroleum Operations shall be charged with only the applicable


portion thereof, which shall be determined on an equitable basis.


UJ Transportation and Employee Relocation Costs


The cost of transportation of employees, equipment, materials and supplies other than as


provided in Paragraph 3.1.2(f) necessary for the conduct of the Petroleum Operations under


the Contract along with other related costs such as. but not limited to. import duties,


customs fees, unloading charges, dock fees, and inland and ocean freight charges.


3.1.4 Charges for Services


(a) Third Parties


The actual costs of contract services, services of professional consultants, utilities,


and other services necessary for the conduct of the Petroleum Operations under the


Contract performed by third parties other than an Affiliate of the Contractor.


(b) Affiliates of the Contractor


(1| Professional and Administrative Services Expenses: cost of professional


and administrative services provided by any Affiliates of the Contractor for


the direct benefit of Petroleum Operations, including services provided by


the production, exploration, legal, procurement, financial, insurance,


accounting and computer services divisions other than those covered by


paragraphs 3.1.4 (b||2). 3.1.6. and 3.1.8 |b) which Contractor may use in


lieu of having its own employees. Such charges shall reflect the cost of


providing their services. Such charges shall not include any element of


profit and shall be no more or less favourable than similar charges for


other operations carried on by the Contractor and its Affiliates. The


charge-out rate shall include all costs incurred by Affiliates incidental to


the employment of such personnel including all labour and associated


labour costs and the cost of maintaining and operating offices and


providing all support services for such personnel. Costs of travel of such


personnel in respect of Petroleum Operations will be directly charged. The


charges for such services shall not exceed those prevailing if performed by


non-Affiliated third parties, taking into account the quality and availability


of such services. Where the work is performed outside the home office


base of such personnel, the daily rate shall be charged from the date such


personnel leave the home office base where they usually work up to their


return thereto, including days which are not working days in the location


where the work is performed, excluding any holiday entitlements derived


by such personnel from their employment at their home office base.














B - 8


 Production Shoring Contract • Dinatta








<21 Scientific or Technical Personnel cost of scientific or technical personnel


services provided by any Affiliate of the Contractor for the direct benefit of


Petroleum Operations, which cost shall be charged on a cost of service


basts and shall not include any element of profit. The chargeout rate shall


include all costs incurred by Affiliates incidental to the employment of such


personnel including all labour and associated labour costs and the cost of


maintaining and operating offices and providing all support services for


such personnel costs of travel of such personnel in respect of Petroleum


Operations will be directly charged. The charges for such services shall not


exceed those prevailing if performed by non-affiliated third parties, taking


into account the quality and availability of such services. Unless the work


to be done by such personnel is covered by an approved Work Program


and Budget, the Contractor shall not authorize work by such personnel


without approval of the Government.


(3| Equipment and facilities: use of equipment and facilities owned and


furnished by the Contractor's Affiliates, at rates commensurate with the


cost of ownership and operation; provided, however, that such rates shall


not exceed those currently prevailing for the supply of like equipment and


facilities on comparable terms in the area where the Petroleum Operations


are being conducted and shall be on an arm's length basis. On the request


of the Government, the Contractor shall provide the Government with


evidence of such rates being on an arm's length basis. (If the Government


considers that any such rate is not on an arm’s length basis then the


Government has the right to refer the matter to an expert pursuant to


clause 42.2 and 42.6 of the Contract). The equipment and facilities referred


to herein shall exclude major investment items such as (but not limited to)


drilling rigs, producing platforms, oil treating facilities, oil and gas loading


and transportation systems, storage and terminal facilities and other major


facilities, rates for which shall be subject to separate agreement with the


Government.





3.1.S Communications


Cost of acquiring, leasing, installing, operating, repairing and maintaining communication


systems including radio and microwave facilities within and between the Contract Area and


the Contractor's nearest base facility.





3.1.4 Office and Miscellaneous Facilities


Net 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 contract area the net costs thereof shall be allocated on an


equitable basis in accordance with Best Practices.


3.1.7 Ecological and Environment





(a) Costs incurred in the Contract Area as a result of legislation for archaeological and


geophysical surveys relating to identification and protection of cultural sites or


resources;


(b) Costs incurred in environmental or ecological surveys required by regulatory


authorities, including an environmental impact assessment commissioned pursuant


to clause 37.7 of the Contract and any other costs incurred in complying with the


requirements of clause 37;


(c) Costs to provide or have available pollution containment and removal equipment;








B- 9


 Production Shoring Contract • Dinatta








(d| Cost!* of actual control and cleanup of oil spills, and of such further responsibilities


resulting therefrom as may be required by applicable laws and regulations;


{e| Costs of restoration of the operating environment incurred pursuant to an approved


scheme prepared in accordance with clause 38 of the Contract;





(f| Any costs incurred for the decommissioning of facilities and site restoration.


including any related activity required by the Government or other competent


authority or by the Contract; and





(8) Any contributions made by the Contractor to the Decommissioning Reserve Fund in


accordance with clause 38. when such contributions are made.





3J4 Material and Equipment Costs


Costs of materials and supplies, equipment, machines, tools and any other goods of a similar


nature used or consumed in Petroleum Operations subject to the following:


la| Acquisition Costs - the Contractor shall only supply or purchase materials for use in


Petroleum Operations that may be used in the foreseeable future. The


accumulation of surplus stocks and inventory shall be avoided so far as is reasonably


practKial and consistent with efficient and economical operations. Inventory levels


shall, however, take into account the time lag for replacement, emergency needs,


weather conditions affecting operations and similar considerations.


(b) Components of costs, arm's length transactions * except as otherwise provided in


paragraph 3.1.8(d), material purchased by the Contractor in arm’s length


transactions in the open market for use in the Petroleum Operations under the


Contract shall be valued to include invoice price less trade and cash discounts (if


any), licence fees, purchase and procurement fees plus freight and forwarding


charges between point of supply and point of shipment, freight to port of


destination, insurance, taxes, customs duties, consular fees, excise taxes, other


items chargeable against imported materials and. where applicable, handling and


transportation expenses from point of importation to warehouse or operating site.


Where an Affiliate of the Contractor has arranged the purchase, coordinated the


forwarding and expediting effort, its costs should not exceed those currently


prevailing in normal arm's length transactions on the open market and in any case


shall not exceed a fee equal to 2% of the value of the materials added to the cost of


the materials purchased.


|c) FIFO such material costs shall be charged to the accounting records and books in


accordance with the '’First in. First Out** (FIFO) method;


|d) Material purchased from or sold to Affiliates of the Contractor or transferred from


other activities of the Contractor to or from Petroleum Operations under this


Contract shall be valued and charged or credited at the prices specified in


Paragraphs 3.1.8(d)(1). 3.1.8(d)(2). and 3.1.8(d)(3|:


(1| New material, including used new material moved from inventory


(Condition *A"), shall be valued at the current international net price which


shall not exceed the price prevailing in normal arm’s length transactions in


the open market.


(2) Used material (Conditions *’B\ T* and '’D'*):


(A) Material which is in sound and serviceable condition and is


suitable for re-use without reconditioning shall be classified as











3-10


 Production Shoring Contract • Dinatta








Condition ''B* and priced at 75% of the current price of new


material defined in Paragraph 3.1.8(d)(1).


{B} Material which cannot be classified as Condition *B" but which


after reconditioning will be further serviceable for its original


function shall be classified as Condition "C and priced at not more


than 50% of the current price of new material as defined in


Paragraph 3.1.8(d)(1). The cost of reconditioning shall be charged


to the reconditioned material provided that the value of Condition


"Cv material plus the cost of reconditioning do not exceed the


value of Condition "B" material;


(C) Material which cannot be classified as Condition *B" or Condition


*CV shall be classified as Condition *'DV 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.


(3) Material involving erection costs shall be charged at the applicable


condition percentage of the current knocked*down price of new material


as defined in Paragraph 3.1.8(d)(1).


(4| When the use of material is temporary and its service to the Petroleum


Operations under the Contract does not justify the reduction in price as


provided for in paragraph 3.1.8(d|(2|(B), such materia1 shall be priced on a


basis that will result in a net charge to the accounts under the Contract


consistent with the value of the service rendered.


(5| Whenever material is not readily obtainable at published or listed prices


because of national emergencies, strikes, or other unusual causes over


which the Contractor has no control, the Contractor may charge Petroleum


Operations for the required material at the Contractor's actual cost


incurred in providing such material, in making it suitable for use. and in


moving it to the Contract Area; provided notice in writing is furnished to


the Government of the proposed charge prior to charging Petroleum


Operations for such material and the Government shall have the right to


challenge the transaction on audit.


(6| The Contractor does not warrant the material furnished. In case of


defective material, credit shall not be passed to Petroleum Operations until


adjustment has been received by the Contractor from the manufacturers of


the material or their agents.


(7| Adjustments arising from material inventories conducted in accordance


with Paragraph 5.2.


(e) Equipment of the Contractor shall not be charged at rates exceeding the average


commercial rates of non*affiliated third parties for equipment, facilities, installations


and utilities for use in the area where the same are used. On request, the


Contractor shall furnish a list of rates and the basis of application. Such rates shall


be revised when found to be either excessive or insufficient, but not more than once


every 6 Months.


(fI Drilling tools and other equipment tost in the hole or damaged beyond repair may be


charged at replacement cost less depreciation plus transportation costs to deliver


like equipment to the location where used.











B- 11


 Production Shoring Contract • Dinatta








Use of leased or hired machinery and/or equipment in the Petroleum Operations


shall be charged at full cost to the Contractor. This may include mobilisation and de¬


mobilisation charges, lease and hire fees, as well as other contractual costs.








Ui Rentals and Taxes


{a) All rentals of every kind and nature levied by any Government and all Taxes imposed


in connection with the Contractor's assets, income or activities under the Contract


and paid directly by the Contractor or any Contractor Entity (except where the


contrary is expressly provided in the Contract) with the exception of Taxes


(described in clause 31.21. bonus payments. Capacity Building Payments, and any


other payments made under clause 32.


(b) If the Contractor, any Contractor Entity or any of its Affiliated Companies is subject


to income or withholding Tax as a result of services performed at cost for the


Petroleum Operations under the Contract, its charges for such services may be


increased by the amount required to cover such Taxes Igrossed up) including Taxes


on such gross up.


J.i.io Insurance and Losses


Insurance premiums and costs incurred for insurance carried for the benefit of the


Petroleum Operations provided that such insurance is customary, affords prudent protection


against risk and is at a premium no higher than that charged on a competitive basis by


insurance companies which are not Affiliated Companies of the Contractor. Except in cases


of failure to insure where insurance coverage is required pursuant to the Contract, artual


costs and losses incurred shall be recoverable to the extent not made good by insurance


unless such losses result solely from an act of wilful misconduct by the Contractor. Such costs


may include repair and replacement of property in the Contract Area resulting from damages


or losses incurred by fire, flood, storm, theft, accident or such other cause.


l.s.si Legal Expenses


All reasonable costs and expenses resulting from the handling, investigating, asserting,


defending, or settling of any claim or legal action necessary or expedient for the procuring,


perfecting, retention and protection of the Contract Area, and in defending or prosecuting


lawsuits involving the Contract Area or any third party claim arising out of the Petroleum


Operations under the Contract, or sums paid in respect of legal services necessary for the


protection of the joint interest of the Government and the Contractor shall be recoverable.


Such expenditures shall include attorney’s fees, court costs, arbitration costs, costs of


investigation, and procurement of evidence and amounts paid in settlement or satisfaction


of any such litigation and claims provided such costs are not covered elsewhere in the Annex.


Where legal services are rendered in such matters by salaried or regularly retained lawyers


of the Contractor Entities or their Affiliates, such compensation shall be included instead


under Paragraph 3.1.2 or 3.1.4|b) as applicable.


1.1.12 Claims


Expenditures made in the settlement or satisfaction of any loss, claim, damage, judgment or


other expense arising out of or relating to Petroleum Operations, except as may otherwise


be covered elsewhere in the Annex.























3-12


 Production Shoring Contract • Dinatta








3.1.13 Training Costs


All costs and expenses incurred by the Contractor in the training of its employees engaged in


Petroleum Operations under the Contract.


J.t.14 General and Administrative Costs


The costs described in Paragraph 2.8.1 and the charge described in Paragraph 2.8.2.


3.1.IS Banking Charges and Currency Exchange Losses


Charges and fees by the banks for money transfers, payments and foreign exchange


transactions, as well as currency exchange losses incurred by the Contractor in connection


with the Petroleum Operations.


3.1.14 Other Expenditures


Other reasonable expenditures not covered or dealt with in the foregoing provisions of


Paragraph 3 which are necessarily incurred by the Contractor for the proper, economical and


efficient conduct of Petroleum Operations.


3.2 Credit Under the Contract


The proceeds, other than the proceeds from the sale of Petroleum received from Petroleum


Operations under the Contract, including the items listed below shall be credited to the Accounts


under the Contract for the purposes of clause 2S of the Contract:


3.2.1 The proceeds of any insurance or claim or judicial awards in connection with Petroleum


Operations under the Contract or any assets charged to the Accounts under the Contract


where such operations or assets have been insured and the premia charged to the


Accounts under the Contract.


3.2.2 Legal costs charged to the accounts under Paragraph 3.1.11 and subsequently


recoverable by the Contractor.


3.2.3 Revenue received from third parties for the use of property or assets the cost of which


has been charged to the Accounts under the Contract.


3.2.4 Any adjustment received by the Contractor from the suppliers/manufacturers or their


agents in connection with a defective material the cost of which was previously charged


by the Contractor to the Accounts under the Contract.


3.2.5 Rentals, refunds, including refunds of taxes paid, or other credits received by the


Contractor which apply to any charge which has been made to the Accounts under the


Contract, but excluding any award granted to the Contractor under arbitration or expert


proceedings.


3.2.4 Costs originally charged to the Accounts under the Contract for materials subsequently


exported from the Kurdistan Region or transferred to another Contract Area within the


Kurdistan Region.


3.2. ; Proceeds from the sale or exchange by the Contractor of plant or facilities used in


Petroleum Operations the acquisition costs of which have been charged to the Accounts


under the Contract.


3.2. * Proceeds derived from the sale or license of any intellectual property the development


costs of which were incurred pursuant to and are recoverable under the Contract.














3-13


 Production Shoring Contract • Dinatta








3J.t Proceeds derived from the sale, exchange, lease, hire, transfer or disposal in any manner


whatsoever of any other item the costs of which have been charged to Petroleum


Operations.


3.3 Duplication of Charges and Credits


Notwithstanding any provision to the contrary in this Accounting Procedure, there shall be no


duplication of charges or credits to the Accounts under the Contract.





PARAGRAPH 4 - COSTS AND EXPENSES NOT TO BE TREATED AS RECOVERABLE


4.1 The following costs and expenditures shall not be included in the Petroleum Costs recoverable


under clause 25:


(a) Taxes on income or profit paid to any Government authority except taxes and duties


that may be included in the costs of material and equipment purchased for the


Petroleum Operations;


(b) any payment made to the Government by reason of the failure of the Contractor to


fulfill its Minimum Exploration Obligations in respect of the relevant Sub-Period under


the Contract.


(c) the cost of any guarantee required under the Contract;


(d) bonuses. Capacity Building Payments, or other payments set out in clause 32 of the


Contract;


(e) costs of marketing or transportation of Petroleum beyond the Delivery Point lexcluding


Gas Marketing Costs);


(f) attorney's fees and other costs of proceedings in connection with arbitration under


clause 42 of the Contract or internationally recognised independent expert


determination as provided in the Contract or this Accounting Procedure;


(g| any interests, fees, costs and expenses paid by the Contractor for loans and any other


form of financing or advances for the financing of the Petroleum Costs entered into by


the Contractor with third parties or Affiliated Companies;


(h) any provision for depreciation and/or amortisation, excluding any adjustments in value


pursuant to Paragraph 3.1.8;


(i) dividends, repayment of equity or repayment of intercompany loans; and


(j) fines and penalties imposed under Law.


PARAGRAPH 5 - RECORDS AND VALUATION OF ASSETS


5.1 Records


Contractor shall maintain detailed records of property in use for Petroleum Operations under the


Contract in accordance with Best Practices for exploration and production activities.


5.2 Inventories


S.2.1 Inventories of property in use in Petroleum Operations shall be taken at reasonable


intervals but at least once a year with respect to movable assets and once every three


years with respect to immovable assets. The Contractor shall give the Government at


least 30 days written notice of its intention to lake such inventory and the Government


shall have the right to be represented when such inventory is taken.











3-14


 Production Shoring Contract • Dinatta








s.2.2 failure of the Government to be represented at an inventory shall bind the Government


to accept the inventory taken by the Contractor.


S.2.J The Contractor shall clearly inform Government about the principles upon which


valuation of the inventory has been based. The 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 assignment of rights under the Contract takes place


the Contractor may. at the request of the assignee, take a special inventory provided


that the costs of such inventory are borne by the assignee.








PARAGRAPH 6 - PRODUCTION STATEMENT


6.1 Production Information


Without prejudice to the rights and obligations of the Parties under clause 16 of the Contract,


from the date of First Production from the Contract Area the Contractor shall submit a monthly


production statement to the Government showing the following information separately for each


producing Development Area and in aggregate for the Contract Area:


(a) the quantity of Crude Oil produced and saved;


(b) the quality characteristics of such Crude Oil produced and save;


(c) the quantity of Natural Gas produced and saved;





(d) the quality characteristics of such Natural Gas produced and saved;


(e) the quantities of Crude Oil and Natural Gas used for the purposes of carrying on drilling


and production operations and pumping to field storage;


(f) the quantities of Crude Oil and Natural Gas unavoidably lost;


(g) the quantities of Natural Gas flared and vented;


(h) the size of Petroleum stocks held at the beginning of the calendar Month in question;





(i| the size of Petroleum stocks held at the end of the calendar Month in question;


(j) the quantities of Natural Gas reinjected into the Reservoir; and


(k} in respect of the Contract Area as a whole, the quantities of Petroleum transferred at


the Measurement Point. All quantities shown in this Statement shall be expressed in


both volumetric terms (Barrels of oil and cubic meters of gas} and in weight (metric


tonnes).


6.2 Submission of Production Statement


The Production Statement for each calendar Month shall be submitted to the Government no


later than 10 days after the end of such calendar Month.








PARAGRAPH 7 - VALUE OF PRODUCTION AND PRICING STATEMENT





7.1 Value of Production and Pricing Statement Information


The Contractor shall, for the purposes of clause 2S of the Contract, prepare a statement providing


calculations of the value of Crude Oil produced and saved during each Quarter and each Month.


This 'Value of Production and Pricing Statement' shall contain the fallowing information:


(a) the quantities and prices realised therefor by the Contractor in respect of sales of


Natural Gas and Crude Oil delivered to third parties made during the Quarter and Month


in question; and











3-15


 Production Shoring Contract • Dinatta








(b) the Quantities and prices realised therefore by the Contractor in respect of sales of


Natural Gas and Crude Oil delivered during the Quarter and Month in quest>on, other


than to third parties.





7.2 Submission of Value of Production and Pricing Statement


The Contractor shall submit the Value of Production and Pricing Statement for each Quarter and


each Month to the Government not later than 10 days after the end of such Quarter and Month.





PARAGRAPH 8 - COST RECOVERY AND SHARE ACCOUNT STATEMENT


8.1 Cost Recovery Statement





The Contractor shall prepare with respect to each Quarter and each Month a Cost Recovery


Statement containing the following information:


(a} Recoverable Petroleum Costs carried forward from the previous Quarter and Month, if





any;


(b) Recoverable Petroleum Costs for the applicable Quarter and applicable Month;





(c) credits under the Contract for the applicable Quarter;


(d) Total Recoverable Petroleum Costs for the applicable Quarter and applicable Month


(Paragraph 8.1(a) plus Paragraph 8.1(b|, net of Paragraph 8.1(c));


(e) quantity and value of Petroleum applied to cost recovery pursuant to clause 2S taken by


the Contractor for the applicable Quarter and applicable Month; and


(f) amount of recoverable Petroleum Costs to be carried forward into the next Quarter and


the next Month (Paragraph 8.1(d) net of Paragraph 8.1(e)).


8.2. Cumulative Production Statement


The Contractor shall prepare with respect to each Quarter and each Month a Cumulatve


Production Statement containing the following information:


(a) the cumulative production position at the end of the Quarter preceding the Quarter and


Month in question;


(b) Production of Export Petroleum for the Quarter and Month in question;


(c) the cumulative production position at the end of the Quarter and Month in question;


(d) the amount of Petroleum applied to Royalty pursuant to clause 24, cost recovery


pursuant to clause 2S and Profit Petroleum pursuant to clause 26 taken by the


Government and by the Contractor, respectively, during the Quarter and Month in


question; and


(e) the forecast of production and the share of Petroleum applied to Royalty pursuant to


clause 24. cost recovery pursuant to clause 25 and Profit Petroleum pursuant to c’ause


26 due to the Government and to the Contractor, respectively, for the next succeeding


Quarter and Month.





8.3 Preparation and Submission of Cost Recovery and Cumulative Production Statements


8.S.I The Contractor shall submit provisional Cost Recovery and Cumulative Production


Statements, containing estimated information where necessary, on the last day of each


Quarter and Month for the purposes of clause 25 of the Contract.


t.i.2 The Contractor shall submit final quarterly Cost Recovery and Cumulative Production


Statements within 30 days of the end of the applicable Quarter and applicable Month.








B- 16


 JM'S Cowtewr. D*cna








8.4 Annual Statement


for the purposes of clause 25 of the Contract, the Contractor thal submit an Annual Cost


recovery and Cumulative Producton Statement within 90 days of the end of each Year The


Annual Statement mutt contain the categories of information litrd in Parag rapist • 1 and 8 2 for


the Year in question. separated into the Quarter! of the Year In question and showrng the


cumulative position! at the end of the Year m question with respect to cumulative unrecovered


Petroleum Cost! and Cumulative Production


PARAGRAPH 9 - STATEMENT Of EXPENDITURE AND RECEIPTS


9.1 The Contractor shall prepare with respect to each Quarter a Statement of I ipend'ture and


Receipts under the Contract. The Statement of Expenditure and Receipts must d

between Eiplocation Costs. Gas Marketing Costs. Development Costs. Production Costs and


Decommissioning Costs and •< identify maior items of erpenddures withm these categories The


Statement of Expenditure and Receipts must show the foRowmg


(a) actual expenditures and receipts lor the Quarter m question.


(b) cumulative expenditure and receipts for the budget Calendar Year in question.


(c) latest forecast cumulative expenditures at the Calendar Year end; and


(d) Variations between budget forecast and latest forecast and explanations thereof.


9.2 The Contractor shall submit to the Government a Statement of Expenditure and Receipts for each


Quarter no later than 30 days after the end of such Quarter.








PARAGRAPH 10 - FINAl END-Of-YEAR STATEMENT


10.1 The Contractor shall prepare a final End of-Tear Statement contammg information at requeed





for the Production Statement, Value ol Production and Pricing Statement, Cost Recovery and


Cumulative Production Statements, and Statement of Expenditures and Receipts, except based


on actual quantities of Petroleum produced and expenses Incurred,





10.2 The final End-of Year Statement will be used to make any adjustments that are necessary to the


payments made by the Contractor under the Contract.


10.3 The Contractor shall submit its f Inal End-of Year Statement of each Calendar Year lo the


Government withm 90 days o( the end of each Calendar Year








PARAGRAPH 11 - AUDITS


Each such report and statement required pursuant to Paragraphs 6 through 10 shall be considered true


and correct, unless the Government raises an exception thereto within the timeframe and under the


process set out In clause 15 of the Contract








PARAGRAPH 12 - ANNUAL WORK PROGRAM AND BUDGET


Each annual Work Program and Budget to be prepared In accordance with clauses 11, 12, 13. and 14 ol


the Contract, in respect of Exploration Costs. Gas Marketing Costs. Development Costs, and Production


Costs must show


(a) forecast expenditures for the budget Calendar Year In question, including a quarterly


classification ol such expenditures;








B- 17


 Production Shoring Contract • Dinatta








ib) cumulative expenditures to the end of such budget Calendar Year; and





(c) a schedule showing the most important individual items of Development Costs (if applicable) for


such budget Year.








PARAGRAPH 13 - TAX RECORDS AND FILINGS; DEPRECIATION


13.1 Each Contractor Entity shall timely prepare and file all Tax returns and reports in accordance with


Applicable law. Nothing in this Paragraph 13 limits the obligation of the Government to pay


Taxes on income on behalf of a Contractor Entity as provided in the Contract. For the purposes of


clause 31.2 of the Contract, the net taxable profits of each Contractor Entity from all Petroleum


Operations carried out under the Contract shall be calculated in accordance with this Paragraph


13 and Applicable Law.


13.2 Each Contractor Entity shall maintain separate Accounts with respect to the Petroleum


Operations to enable the Government to verify and audit Taxes payable by such Contractor Entity


for a tax period. Such Accounts shall be prepared and maintained on a cash or accrual basis as


required by Applicable Law in respect of Taxes and maintained throughout the term of the


Contract and for a period of five years thereafter.





13.3 The Accounts of a Contractor Entity shall be credited with such Contractor Entity's share of all


revenues from or related to Petroleum Operations, including:


(a) if the Royalty is paid in cash pursuant to clause 24, revenues arising from the disposal of


Royalty volumes;





(b) revenues arising from the disposal of any Available Petroleum to which such Contractor


Entity is entitled for recovery of its Petroleum Costs in accordance with clause 25;


revenues from the disposal of Profit Petroleum to which such Contractor Entity is


entitled under clause 26; and


{d| revenues arising from the disposal of related Petroleum substances or from the





treatment, storage, or transportation of products for third parties.


13.4 A Contractor Entity may debit its Accounts for all Petroleum Costs and other costs under this


Contract, including:





(a) the costs of supplies, personnel and manpower expenses, and costs of services provided;





if the Royalty is paid in cash pursuant to clause 24. Royalty payments made and as


recorded in such entity's Accounts and determined in accordance with clause 24;





<«> general and administrative expenditures for Petroleum Operations;





Ml depreciation of capital expenditure in accordance with Paragraph 13.6 below;





{e| losses of Assets resulting from damage, Assets which are renounced or abandoned during


the year, Assets which are transferred under clause 20.2, bad debts, indemnities paid to


third parties as compensation for damage;







Capacity Building Payments, and other payments provided in clause 32. the Exploration


Rental provided in clause 6.2, the Production Rental provided in clause 13.6. the


allocation to training provided in clause 23.10, the allocation to the Environment Fund


provided in clause 23.12. the costs specified in clauses 23.5, 23.6, 38.6 and 38.11, and


transportation and marketing costs beyond the Delivery Point; and











3-18


 Production Shoring Contract • Dinatta








(g) losses carr:ed forward from previous Tax periods.


The net profit of a Contractor Entity shall be equal to the difference between the amounts


13.S


credited and the amounts debited from its Accounts.





13.5.1 If such difference is negative, it shall constitute a loss against which no income Tax


will be payable.


13.5.2 If the amount is positive, it shall be grossed up to take account of the fact that such





entity's corporate income tax is being settled out of the Government's share of the


Profit Petroleum in accordance with clause 31.2, by applying the following formula


in order to provide such entity's net taxable profits for corporate income tax





purposes:


Net Taxable Profits = Net Profits /IlOO - Applicable Income Tax Ra!c|


100





13.6 A Contractor Entity shall not record depreciation or amortization charges, except as permitted by


Applicable Law and only with the prior written authorization of the Government.














































































































3-19


 Production Shoring Contract • Dinatta














Annex C


FORM OF GUARANTEE
































GUARANTEE





























[X]





and





[Y]




















IN FAVOUR OF

















The Kurdistan Regional Government of Iraq























<■)





(Second Sub-Period Guaranteed Amount)

































































C - 1


 Production Shoring Contract Olnarta

















GUARANTEE


(Second Sub-Period Guaranteed Amount)








This Guarantee, dated__. is by:


m w»nr *»


and


121 |V| l-V-J


in favour of


|3| The Kurdistan Regional Government of Iraq (the * Government").


1.1 Definitions; Interpretation


1.1 Definitions


1.1.1 Unless defined in this Guarantee, terms defined in the Contract have the same meaning in


this Guarantee.


1.1.2 As used in this Guarantee:


“Demand* is defined in clause 2.3.


“Government* is defined in the preamble.


“Guaranteed Obligations* is defined in clause 2.1.


“Guarantors*' means |X and Y| and "Guarantor" means either of |X or Y).


“Person* means any individual, company, corporation, firm, partnership, joint venture,


association, organisation, state or agency of a state or other entity, whether or not having


separate legal personality.


1.2 Construction and Interpretation


1.2.1 Any reference to a clause or annex is, unless otherwise stated, to a clause or annex of


this Guarantee.


1.2.2 Any reference to a "clause* is to a "clause" of this Guarantee.


1.2.3 Headings and sub-headings are for ease of reference only.


2. Guarantee


2.1 Guaranteed Obligations


The Guarantors guarantee to the Government the due and punctual payment of the Second Sub¬


Period Guaranteed Amount in the manner and currency prescribed by the Contract for payments


by the Contractor together with any interest due with respect thereto as provided in the Contract


(the "Guaranteed Obligations").


2.2 Joint and Several


The liability of each Guarantor under this Guarantee is joint and several. Every undertaking and


agreement contained in this Guarantee is to be construed as joint and several ooligatcons of the


Guarantors.


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2.3 Demand


A Guarantor will have no obligation in respect of a Guaranteed Obligation unless the Guarantor


has received a written demand for payment {the ''Demand'). The Government may submit a


Demand to either or both Guarantors. A Oemand must:


(a) make specific reference to this Guarantee;


lb) state the amount that is demanded and which components of the Guaranteed Obligations


are the subject of the Demand;


(c) state that the Government has not received payment of the relevant Guaranteed


Obligation from the Contractor Entity on the date on which it became due and payable;


and


[d) provide the Government's wire instructions for the payment of the Demand.


2.4 Payment


A Guarantor shall make payment to the Government in accordance with a Demand by wire


transfer of cleared funds in US$ in accordance with the Government’s wire instructions within S


International Business Days after receipt of a Demand.





3. Nature of Guarantee


3.1 This Guarantee is an absolute, unconditional, and »rrevocable guarantee of payment when due


and not of collection, and whether by acceleration or otherwise.


3.2 The Government is not required to exercise any right, assert any claim or demand, or enforce any


remedy whatsoever against the Contractor, a Contractor Entity, or any other Person before, or as


a condition to, exercising any of the rights, powers, or remedies conferred upon the Government


by this Guarantee or by applicable law. Without limiting the generality of the foregoing, the


Government will not be required to {a) take any action or obtain judgment in any court against


the Contractor, a Contractor Entity or any other Person, or (b) to make or file any daim or proof


n a winding up or dissolution of the Contractor, a Contractor Entity or any other Person.


3.3 Except as provided in clause 2.2, each Guarantor hereby expressly waives presentment, demand,


protest, and notice of dishonour in respect of each Guaranteed Obligation.


3.4 Subject to clause 6. the obligations of the Guarantors:


(a) constitute continuing obligations, notwithstanding any settlement of account or other


matter or thing whatsoever;


(b) will not be considered satisfied by any intermediate payment of the Contractor’s


obligations in respect of the Guaranteed Obligations; and


(c) will continue in full force and effect until the Guaranteed Obligations have been paid in full


to. and received by. the Government in accordance with the Contract.


3.5 Subject to clause 8, neither the obligations of the Guarantors pursuant to. nor the rights, powers,


and remedies conferred upon the Government by. this Guarantee or by law will be discharged,


impaired, or otherwise affected by:


[a) the winding up, dissolution, administration, reorganisation or moratorium of the


Contractor or any Contractor Entity or any change in its status, function, control, or


ownership;


(b) time or other indulgence, including any composition, being granted or agreed to be


granted to the Contractor in respect of any of the Guaranteed Obligations;











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(C) any change in the time, manner, or place of payment of, or any other term of. all or any of


the Guaranteed Obligations. or any other extension or. compromise of the Contractor,


«!> provided that none of the foregoing increases the amount of the Guaranteed Obligations;


any reduction, limitation, impairment, or termination of any part of the Guaranteed


Obligations for any reason, including any claim of waiver, release, surrender, alteration, or


le> compromise;


any increase in the amount payable in respect of any Guaranteed Obligation, provided that


the Guarantor has provided its prior written consent to any such increase which expressly


10 states Guarantor's intention that this Guarantee will apply to such increased amount;


the termination of the Contract or termination of a Contractor Entity's rights under the


Contract, or any withdrawal or abandonment by the Contractor or a Contractor Entity of


l8l its interests under the Contract;


any direct or indirect change in the ownership of the Contractor Entity, including by


merger, amalgamation, by law. or otherwise;


(K)


any transfer all of any part of the Contractor or a Contractor Entity's interests under or in


respect of the Contract;


ro any dispute or claim the Contractor or a Contractor Entity may have against the


Government;


Li) the insolvency or bankruptcy of. or similar event affecting, the Contractor or a Contractor


Entity; or


W


any other circumstance or combination of circumstances which might otherwise constitute


a defense available to. or a legal or equitable discharge of. the Contractor or a Contractor


Entity.





3.6 Each Guarantor waives any right to or claim of any defense or setoff, counterclaim, recoupment,


or termination by reason of (a) the invalidity, illegality, non-genuineness, irregularity,


compromise, unenforceability of, or any other event or occurrence affecting, any Guaranteed


Obligation; |b} any claims, set-offs, or liabilities of the Contractor Entity to the Guarantor or the


Government; (c) any claims, set-offs, or liabilities of the Guarantor in respect of the Government;


or (d) any other reason whatsoever.





3.7 This Guarantee will continue to be effective or be reinstated, if at any time any payment (in


whole or in part) of any of the Guaranteed Obligations is rescinded or must otherwise be restored


by the Government upon the insolvency, bankruptcy, or reorganisation of the Contractor or a


Contractor Entity or otherwise, all as though such payment had not been made. Any settlement


or discharge between the Guarantors |or any of them) and the Government Wi'l be conditional


upon no payment by the Contractor, a Contractor Entity, or any other Person to the Government


on the Contractor's behalf being avoided or reduced by virtue of any laws relating to bankruptcy,


insolvency, liquidation, or similar laws.





4. Taxes


4.1 The Guarantors shall make all payments to the Government free and clear of, and without


deduction for. any present or future Taxes or other charges of any nature whatsoever imposed by


jny taxing authority.


4.2 If any withholding or deduction from any payment to be made by a Guarantor is required in


respect of any Taxes, then the Guarantors shall:


(a) pay directly to the relevant authority the full amount required to be so withheld or


deducted:








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ib> promptly forward to the Government an official receipt or other documentation


satisfactory to the Government evidencing such payment to such authority; and





10 pay to the Government such additional amount or amounts as is necessary to ensure that


the net amount actually received by the Government will equal the full amount the


Government would have received had no such withholding or deduction been required.





4.3 If any Taxes are directly asserted against the Government with respect to any payment received


by the Government from a Guarantor pursuant to this Guarantee/ then:


[a| the Government may pay such Taxes; and





(b) the Guarantor shall indemnify the Government against any Loss or Expense which the


Government incurs as a result or arising out of or in relation to any failure to pay or delay


in paying any of any such Tax. and promptly pay such additional amounts (including, if


incurred as a result of Guarantor's or the Contractor's conduct, any penalties, interest, or


expenses) as necessary so that the net amount received by the Government, after the


payment of such Taxes (including any Taxes on such additional amount), will equal the


amount the Government would have received had such Taxes not been asserted.





5. Notices


5.1 Address for notices to Guarantor


The Government shall:


la) make any Demand or provide any notice or other communication to a Guarantor in





respect of this Guarantee in writing;


(b) address such Demand, notice, or other communication as provided in clause 5.1(c); and


(c) use one of the following methods to deliver such Demand or other notice or


communication, each of which, for purposes of this agreement, is a writing: (1) personal


delivery; (2) email (followed by delivery of the Demand, notice or communication by air


courier); or (3| a reputable, internationally recognised air courier, with all fees prepaid, and


sent to the Guarantors:


If to |X):





[XI


Attention:





Address:


Phone:


Email:


If to |Y)





m





Attention:


Address:


Phone:


Email:





Effectiveness as to Guarantor


5.2


S.2A A Demand, notice or other communication will be effective as to a Guarantor only if fa)





the Government has complied with this clause 5 and |b) such Guarantor has received


the Demand, notice, or other communication.





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SJ.l If a Demand, notice or other communication is personally delivered to a Guarantor, it


wil be considered received by the Guarantor by the date set forth in a signed receipt of


such delivery.


s.2.1 If the Government sends a Demand, notice, or other communication to a Guarantor by a


reputable, internationally recognised air courier in accordance with clause 5.1, the


Demand, notice, or other communication will be considered received by the Guarantor


on the date set forth in a receipt signed by the Guarantor.


5.2.4 If the Government sends a Demand, notice, or other communication by email to a


Guarantor and the email transmission is followed by delivery of the Oemand, notice, or


other communication the Guarantor by air courier in accordance with clause 5.1, the


Demand, notice, or other communication shall be considered to have been delivered to


the Guarantor when the email is received by the Guarantor.





5.3 Notices to Government


A Guarantor shall give all notices or other communications to the Government in the same


manner as prescribed in the Contract for notices to the Government.


5.4 Change of Address





A Guarantor or the Government may change its address as set forth in clause 5 by a notice to the


other parties in accordance with this clause 5.








6. Term


6.1 This Guarantee is effective as of the date set forth in the preamble.


6.2 Subject to clause 3.7, this Guarantee will cease to be effective upon discharge of all of the


Guaranteed Obligations.


7. Representations and Warranties


Each Guarantor represents and warrants:


7.1 This Guarantee has been authorised by all necessary corporate action, and the Guarantor has all


necessary power and authority to sign and perform its obligations hereunder.


7.2 This Guarantee is legal, valid, arid binding as to such Guarantor.


7.3 The Guarantor has received ail authorisations and consents necessary for the provision of this


Guarantee to the Government, and the validity and enforceability against it, of this Guarantee.


7.4 Except as provided in the next sentence, there is no Law applicable to it or agreement to which it


is a party that (a) conflicts with or prevents it from performing this Guarantee in accordance with


its terms, or |b) affects the validity and enforceability against it of this Guarantee in accordance


with its terms. No representation is made in respect of the laws of the Kurdistan Region of Iraq or


the Republic of Iraq.


7.5 The Guarantor is not a party to any administrative or judicial proceeding, litigation, or arbitration


that could affect the validity or enforceability of this Guarantee.























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8. Arbitration; Indemnification





8.1 The Guarantors and the Government shall exclusively refer any dispute, claim, or controversy


arising out of or in connection with this Guarantee (including a disoute, claim or controversy


relating to any non-contractual obligations arising out of or in connection with this Guarantee! to


and to be finally resolved by arbitration under the rules of the London Court of International


Arbitration, which rules are incorporated by reference Into this clause 10.


8.2 The language of the arbitration wil be English, and any award will be written In the English





language.


8.3 The seat, or legal place, of the arbitration will be London, England.


8.4 The arbitral tribunal will comprise one arbitrator directly appointed by the London Court of


International Arbitration.


8.5 The Government may seek enforcement of an arbitral award by any court of competent


jurisdiction.


8.6 Any award must be expressed in US$.





8 7 The arbitral award will be final and not subject lo any appeaL


8 8 If any question of law arises during the arbitral proceedings or arises out of an award, neither the


Government nor cither Guarantor may make an application or brmg an appeal to any court on a


question of lasv. and both the Government and the Guarantors expressly warm their respective


lights to make an application or bring an appeal under the Cngksh Arbitration Act 1997.


8 V The Guarantors shall indemnify the Government from and against ali costs and expenses


(Including legal fees and any taxes or dutres) Incurred by the Government in the enforcement and


protection of its rights under this Guarantee.





9. Benefit; Assignment


9.1 This Guarantee mures to the benefit of the Government and its (and any subsequent! successors


and assigns, each of which shall be entitled to enforce this Guarantee against the Guarantors





9.2 No Guarantor Is entitled to assign or transfer a8 or any of its rights, benefits, or obligations under


this Guarantee unless the Government provides prior written consent to the Guarantor. The


Government n entitled to assign on or any of its rights and benefits hereunder.





10. Severability


If at any time any provision of this Guarantee is determined to be illegal, invalid, or unenforceable n J'i


respect under the laws of any jurisdiction, neither (a( the legality, validity or enforceability of the


remaining provisions hereof, nor |b) the legality, validity, or enforceability of such provision under the


laws of any other jurisdiction will, in any such case, in any way be affected or impaired thereby.





11. Variation


11.1 This Guarantee may be amended only by a written agreement of the Government and the


Guarantors that identifies itself as an amendment to this Guarantee.


11.7 The Government or the Guarantors may waive any provision m this Guarantee only by a writing


executed by such party.


11.1 A waiver or consent made on one occasion wiB be effective only In that Instance and only for the





purpose stated.


11.a No failure or delay m exercising any right or remedy, or In requiring the satisfaction of any


condition, under this Guarantee by a Guarantor or the Government, and no act, omission or


 Production Shoring Contract Olnarta











course of dealing between the Government and a Guarantor, will operate as a waiver or estoppel


of any fight, remedy, or condition.








12. Governing Law


This Guarantee and all matters arising from or connected with it are governed by English law.














(Signature page follows.]






















































































































































































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Date:











IX]








................-............---





Name:





Title:











m











®V-«---.....................---


Name:





Title:











Accepted and received for and on behalf of the


Government of the Kurdistan Region of Iraq:























Prime Minister


Kurdistan Regional Government





On behalf of the Regional Council


for the Oil and Gas Affairs of the Kurdistan Region - Iraq














Bv:.............................








Minister of Natural Resources


Kurdistan Regional Government


On behalf of the Ministry of Natural Resources in the


Kurdistan Region











/Signature page to Guarantee of/X l (Y, et a)] in favour of the Government of the Kurdistan Region of Iraq


(Dinarto).l




















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