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CONCESSION AGREEMENT FOR PETROLEUM

EXPLORATION AND EXPLOITATION

BETWEEN

THE ARAB REPUBLIC OF EGYPT

AND

THE EGYPTIAN GENERAL PETROLEUM CORPORATION

AND

----------------------------------------IN

----------------------------- AREA

----------------------------------------A.R.E.

This Agreement made and entered on this

day of

,

20---, by and between:

First: 1- the ARAB REPUBLIC OF EGYPT (hereinafter

referred to variously as "A.R.E." or as the

"GOVERNMENT"), represented by the Minister of

Petroleum and Mineral Resources, in his capacity;

and

Legal Headquarters: 1A Ahmed Al Zomor St.,

Nasr City, Cairo.

2-



Second:



the

EGYPTIAN

GENERAL

PETROLEUM

CORPORATION, a legal entity created by Law No.

167 of 1958 as amended (hereinafter referred to as

"EGPC") represented by the Chief Executive Officer,

in his capacity.

Legal Headquarters: 270 St., Part 4, New Maadi,

Cairo.

(First Party)

----------------- , a ------------------- company organized

and existing under the laws of -----------------------represented by the President of the Company or a

concerned delegate supported with a power of

attorney. ( hereinafter referred to as "--------------"

or as "CONTRACTOR")

Legal Headquarters:

(Second Party)

1



PREAMBLE

WHEREAS, all minerals including Petroleum, existing in mines and

quarries in A.R.E., including the territorial and economical waters,

and in the seabed subject to its jurisdiction and extending beyond

the territorial waters, are the property of the State; and

WHEREAS, EGPC has applied for an exclusive concession for the

Exploration and Exploitation of Petroleum in and throughout the

Area referred to in Article II, and described in Annex "A" and shown

approximately on Annex "B", which are attached hereto and made

part hereof (hereinafter referred to as the "Area") ; and

WHEREAS, "-------------------" agrees to undertake its obligations

provided hereinafter as a CONTRACTOR with respect to the

Exploration, Development and Production of Petroleum in ----------------- AREA, ----------------------- ; and

WHEREAS, the GOVERNMENT desires hereby to grant such

Concession under this Agreement; and

WHEREAS, the Minister of Petroleum pursuant to the provisions of

Law No. 66 of 1953 and Law No. 198 of 2014, may enter into a

concession agreement with EGPC, and with " ------------------" as a

CONTRACTOR in the said Area.

NOW, THEREFORE, the parties hereto agree as follows:

The previous preamble to this Agreement are hereby made part

hereof, complemented and integrated to its provisions.

ARTICLE I

DEFINITIONS

(a) "Exploration" shall include such geological, geophysical, aerial

and other surveys as may be contained in the approved Work

Programs and Budgets, and the drilling of such shot holes,

core holes, stratigraphic tests, holes for the discovery of

Petroleum or the appraisal of Petroleum discoveries and other

related holes and wells, and the purchase or acquisition of

such supplies, materials, services and equipment therefore, all

as may be contained in the approved Work Programs and

Budgets. The verb "explore" means the act of conducting

Exploration.



2



(b) "Development" shall include, but not be limited to, all the

operations and activities pursuant to approved Work Programs

and Budgets under this Agreement with respect to:

(i)



the drilling, plugging, deepening, side tracking, re-drilling,

completing, equipping of development wells and the

changing of the status of a well, and



(ii) design, engineering, construction, installation, servicing

and maintenance of equipment, lines, systems facilities,

plants and related operations to produce and operate said

development wells, taking, saving, treating, handling,

storing, transporting and

delivering Petroleum, repressuring, recycling and other secondary recovery

projects, and

(iii) transportation, storage and any other work or activities

necessary or ancillary to the activities specified in (i) and

(ii).

(c) "Petroleum" means Liquid Crude Oil of various densities,

asphalt, Gas, casing head gas and all other hydrocarbon

substances that may be found in, and produced, or otherwise

obtained and saved from the Area under this Agreement, and

all substances that may be extracted there from.

(d) "Liquid Crude Oil" or "Crude Oil" or "Oil" means any

hydrocarbon produced from the Area which is in a liquid state

at the wellhead or lease separators or which is extracted from

the Gas or casing head gas in a plant. Such liquid state shall

exist at sixty degrees Fahrenheit (60OF) and atmospheric

pressure of 14.65 PSIA. Such term includes distillate and

condensate.

(e) "Gas" means natural Gas both associated and non-associated,

and all of its constituent elements produced from any well in the

Area (other than Liquid Crude Oil) and all non-hydrocarbon

substances therein. Said term shall include residual gas, that

Gas remaining after removal of LPG.



3



(f) "LPG" means Liquefied Petroleum Gas, which is a mixture

principally of butane and propane liquefied by pressure and

temperature.

(g) A "Barrel" shall consist of forty-two (42) United States gallons,

liquid measure, corrected to a temperature of sixty degrees

Fahrenheit (60OF) at atmospheric pressure of 14.65 PSIA.

(h) "Commercial Discovery" has the meaning as set forth in Article

III ( c ).

(i)



(1) "Commercial Oil Well" means the first well on any

geological feature which after testing for a period of not

more than thirty (30) consecutive days where practical,

but in any event in accordance with sound and accepted

Petroleum industry production practices, and verified by

EGPC, is found to be capable of producing at the average

rate of not less than two thousand (2000) Barrels of Oil

per day (BOPD). The date of discovery of a "Commercial

Oil Well" is the date on which such well is tested and

completed according to the above.

(2)



(j)



"Commercial Gas Well" means the first well on any

geological feature which after testing for a period of not

more than thirty (30) consecutive days where practical,

but in any event in accordance with sound and accepted

Petroleum industry production practices and verified by

EGPC, is found to be capable of producing at the average

rate of not less than fifteen million (15,000,000) standard

cubic feet of Gas per day (MMSCFD). The date of

discovery of a "Commercial Gas Well" is the date on

which such well is tested and completed according to the

above.



"A.R.E." means ARAB REPUBLIC OF EGYPT.



(k) "Effective Date" means the date on which the text of this

Agreement is signed by the GOVERNMENT, EGPC and

CONTRACTOR, after the relevant Law is issued.



4



(l)



(1)



"Year" means a period of twelve (12) months according

to the Gregorian Calendar.



(2)



"Calendar Year" means a period of twelve (12) months

according to the Gregorian Calendar being 1st January to

31st December.



(m) (1)



"Financial Year" means the GOVERNMENT's financial

year according to the laws and regulations of the

A.R.E..



(2)



"Tax Year" means the period of twelve (12) months

according to the laws and regulations of the A.R.E. .



(n)



(o)



“CONTRACTOR” could be one company or more (each

company to be individually referred to as a “CONTRACTOR

Member”). Unless modified in accordance with Article XXI

herein, CONTRACTOR under this Agreement shall mean

--------, -------- and ------------.



An "Affiliated Company" means a company:

(i) of which the share capital, conferring a majority of votes

at stockholders' meetings of such company, is owned

directly or indirectly by a party hereto; or

(ii) which is the owner directly or indirectly of share capital

conferring a majority of votes at stockholders' meetings

of a party hereto; or

(iii) of which the share capital conferring a majority of votes

at stockholder's meetings of such company and the

share capital conferring a majority of votes at

stockholders' meetings of a party hereto are owned

directly or indirectly by the same company.



For the avoidance of doubt, if CONTRACTOR is comprised of more

than one company, Affiliated Company shall mean an Affiliated

Company of a CONTRACTOR Member.

5



(p) "Exploration Block" shall mean an area, the corner points of

which have to be coincident with three (3) minutes by three (3)

minutes latitude and longitude divisions, according to the

International Grid System where possible or with the existing

boundaries of the Area covered by this Concession

Agreement as set out in Annex "A".

(q) "Development Block" shall mean an area, the corner points of

which have to be coincident with one ( 1 ) minute by one ( 1 )

minute latitude and longitude divisions, according to the

International Grid System where possible or with the existing

boundaries of the Area covered by this Concession

Agreement as set out in Annex "A".

(r)



"Development Lease(s)" shall mean the Development Block or

Blocks covering the geological structure capable of production,

the corner points of which have to be coincident with one (1)

minute by one (1) minute latitude and longitude divisions

according to the International Grid System where possible or

with the existing boundaries of the Area covered by this

Concession Agreement as set out in Annex "A".



(s) "Agreement" shall mean this Concession Agreement and its

Annexes.

(t) "Gas Sales Agreement" shall mean a written agreement

between EGPC and CONTRACTOR (as sellers) and EGPC or

The Egyptian Natural Gas Holding Company “EGAS” or a

mutually agreed third party (as buyer), which contains the

terms and conditions for Gas sales from a Development Lease

entered into pursuant to Article VII (e).

(u) "Standard Cubic Foot" (SCF) is the amount of Gas necessary

to fill one (1) cubic foot of space at atmospheric pressure of

14.65 PSIA at a base temperature of sixty degrees Fahrenheit

(60o F).

(v) “EGAS” means the Egyptian Natural Gas Holding Company a

legal entity created by the Prime Minister Decree No. 1009 of

2001 as amended and according to Law No. 203 of 1991 as

amended.



6



(w) "Development Plan" means a plan which on high level basis

and covering one (1) year or more , sets out the strategic

framework for the efficient exploitation of the reserves in the

Area and describes the selected development concept required

to deliver life of field production profiles used to support the

requirements of domestic and external markets of Oil , Gas and

condensate .The Development Plan outlines the activities to be

conducted during the phases of Development and Exploration

within Development Lease Blocks.

(x) "Development Work Program " means those planed physical

multi-disciplinary activities (including but not limited to drilling,

engineering, projects, subsurface) required to be undertaken

within a Financial Year to deliver the Production upon the

agreed date.



(y) "BTU" British Thermal Unit means the amount of energy

required to raise the temperature of one (1) pound of pure water

by one (1o F) degree Fahrenheit from sixty degrees Fahrenheit

(60o F) to sixty one degrees Fahrenheit (61o F) at a constant

pressure of 14.65 PSIA.

(z) 1. "Commercial Production" means Petroleum produced and

saved for regular shipment of Crude Oil or regular Gas

deliveries.

2. "Commercial Production Commencement Date" means

the date on which the first regular shipments of Crude Oil

or first regular deliveries of Gas are made.

(aa) "Egypt Upstream Gateway" means an integrated digital platform

for all upstream (Exploration & Production) and other data

(hereinafter referred to as "EUG") to preserve legacy data,

manage active data and promote the upstream opportunities

and attract new investments through international bid rounds

and through which CONTRACTOR can access, use, trade and

deliver all data, information and geological and geophysical and

other studies for the upstream activities in Egypt.



7



(bb) "Cumulative Production" means the total quantity of Petroleum

produced from the Concession Agreement Area starting from

the commencement of Production.

(cc) "Decommissioning Plan" means a plan, including the

mechanism of execution and recovery, submitted by

CONTRACTOR in parallel with the Development Plan and

approved by EGPC according to Article III (d) of this

Agreement, including but not limited to, the proper measures to

terminate the Petroleum Operations conclusively, in

accordance with sound and accepted Petroleum industry

practices, subject to the applicable laws of Article XVIII of this

Agreement.

(dd) "The Operator" means CONTRACTOR (if it is one company) or

one of the CONTRACTOR Members ( if they are more than one

company), as the case may be, appointed by them to be the

entity to which, from which and in whose name all notifications

related to or in connection with this Concession Agreement

shall be made. CONTRACTOR shall notify the name of the

Operator to EGPC.



ARTICLE II

ANNEXES TO THE AGREEMENT

Annex "A" is a description of the Area covered and affected by this

Agreement, hereinafter referred to as the "Area".

Annex "B" is a provisional illustrative map on the scale of

approximately 1:

indicating the Area covered and

affected by this Agreement and described in Annex "A".

Annex "C" is the form of a Letter of Guaranty to be submitted by

CONTRACTOR to EGPC at least one (1) day before the time of

signature by the Minister of Petroleum of this Agreement, for the

sum of ------------ million U.S. Dollars ($------------------), guaranteeing

the execution of CONTRACTOR’s minimum Exploration obligations

hereunder for the initial ------------ year Exploration period. In case

CONTRACTOR extends the initial Exploration Period for --------------- additional successive period(s) of -------------- years, in

8



accordance with Article III (b) of this Agreement, similar Letter(s) of

Guaranty shall be issued and be submitted by CONTRACTOR on

the day the CONTRACTOR exercises its option to extend. The

Letter of Guaranty shall be for the sum of ------------------- million U.S.

Dollars ($--------------) less in this/these instance(s) any excess

expenditures of the preceding Exploration period permitted for carry

forward in accordance with Article IV (b) third paragraph of this

Agreement. In case of any Shortfall ( the difference between the

amount of CONTRACTOR's financial obligation of any Exploration

period minus the total amount approved by EGPC for the same

concerned obligation period), plus any carry forward approved by

EGPC from the previous period, if any , EGPC shall notify

CONTRACTOR in writing by the value of such shortfall . Within

fifteen (15) days from the date of this notification, CONTRACTOR

shall transfer the amount of the shortfall to EGPC's account and if

CONTRACTOR did not transfer this shortfall within the mentioned

fifteen (15) days, EGPC has the right to liquidate the concerned

letter of Guaranty up to the amount of the shortfall. Each of the ------ (---) Letters of Guaranty shall remain effective for six (6) months

after the end of the Exploration period for which it has been issued

except as it may be released prior to that time in accordance with

the terms thereof.

The letters of Guaranty mentioned above shall be reduced quarterly

by Exploration Expenditures incurred and paid by CONTRACTOR

on operations and approved by EGPC for the concerned Exploration

period.

The CONTRACTOR has the right to submit a letter entitles EGPC

to solidify from the CONTRACTORS dues an amount equal to the

financial commitment of the then current phase.

Annex "D" is the form of a Charter of the Operating Company to be

formed as provided for in Article VI hereof.

Annex "E" is the Accounting Procedure.

Annex "F" is a current map of the National Gas Pipeline Grid

System established by the GOVERNMENT.

The point of delivery for Gas shall be agreed upon by EGPC and

CONTRACTOR under a Gas Sales Agreement, which point of

delivery shall be located at the flange connecting the Development

Lease Pipeline to the nearest point on the National Gas Pipeline

9



Grid System as depicted in Annex "F" or as otherwise agreed by

EGPC and CONTRACTOR.

Annexes "A", "B", "C”, "D","E" and "F" to this Agreement are hereby

made part hereof, and they shall be considered as having equal

force and effect with the provisions of this Agreement.



ARTICLE III

GRANT OF RIGHTS AND TERM

The GOVERNMENT hereby grants EGPC and CONTRACTOR

subject to the terms, covenants and conditions set out in this

Agreement, which insofar as they are contrary to or inconsistent

with any provisions of Law No. 66 of 1953, as amended, shall have

the force of Law, an exclusive concession in and to the Area

described in Annexes "A" and "B".

(a) The GOVERNMENT shall own and be entitled, as hereinafter

provided, to a royalty in cash or in kind of ten percent (10%) of

the total quantity of Petroleum produced and saved from the

Area during the Development period including renewal. Said

royalty shall be borne and paid by EGPC and shall not be the

obligation of CONTRACTOR. The payment of royalties by

EGPC shall not be deemed to result in income attributable to

the CONTRACTOR.

(b) An initial Exploration period of ---------------- years shall start

from the Effective Date. -------------- successive extension(s) to

the initial Exploration period, of ----------- years respectively,

shall be granted to CONTRACTOR at its option, upon not less

than thirty (30) days prior written notice to EGPC, such notice

to be given not later than the end of the then current Exploration

period, in case it is extended pursuant to the provisions of

Article V (a), and subject only to its having fulfilled its obligations

hereunder for that period. This Agreement shall be terminated

if neither a Commercial Oil Discovery nor a Commercial Gas

Discovery is established by the end of the --------- year of the

Exploration period, in case it is extended pursuant to Article V

(a).The election by EGPC to undertake a sole risk venture

under paragraph (c) shall not extend the Exploration period nor

affect the termination of this Agreement as to CONTRACTOR.

10



(c) Commercial Discovery:

(i) A Commercial Discovery - whether of Oil or Gas - may

consist of one producing reservoir or a group of producing

reservoirs which is worthy of being developed

commercially. After discovery of a Commercial Oil or Gas

Well CONTRACTOR shall, unless otherwise agreed upon

with EGPC, undertake as part of its Exploration program

the appraisal of the discovery by drilling one or more

appraisal wells, to determine whether such discovery is

worthy of being developed commercially, taking into

consideration the recoverable reserves, production,

pipeline and terminal facilities required, estimated

Petroleum prices, and all other relevant technical and

economic factors.

(ii) The provisions laid down herein postulate the unity and

indivisibility of the concepts of Commercial Discovery and

Development Lease. They shall apply uniformly to Oil and

Gas unless otherwise specified.

(iii) CONTRACTOR shall give notice of a Commercial

Discovery to EGPC immediately after the discovery is

considered by CONTRACTOR to be worthy of commercial

development but in any event with respect to a Commercial

Oil Well not later than thirty (30) days following the

completion of the second appraisal well or twelve (12)

months

following the date of the discovery of the

Commercial Oil Well, whichever is earlier or with respect to

a Commercial Gas Well not later than twenty four (24)

months following the date of the

discovery of the

Commercial Gas Well (unless EGPC agrees that such

period may be extended) except that CONTRACTOR shall

also have the right to give such notice of Commercial

Discovery with respect to any reservoir or reservoirs even

if the well or wells thereon are not "Commercial" within the

definition of "Commercial Well" if, in its opinion, a reservoir

or a group of reservoirs, considered collectively, could be

worthy of commercial development.

It is understood that, any Crude Oil produced from an undertesting well in the Area before it is converted to a

Development Lease, either considered Commercial or non11



Commercial Well, and not used in Petroleum operations, is

100% owned by EGPC and not subject to Article VII.

CONTRACTOR may also give a notice of a Commercial Oil

Discovery in the event it wishes to undertake a Gas

Recycling Project.

A notice of Commercial Gas Discovery shall contain all

detailed particulars of the discovery and especially the area

of Gas reserves, the estimated production potential and

profile and field life.

Within sixty (60) days following receipt of a notice of a

Commercial Oil or Gas Discovery, EGPC and

CONTRACTOR shall meet and review all appropriate data

with a view to mutually agreeing upon the existence of a

Commercial Discovery. The date of Commercial Discovery

shall be the date EGPC and CONTRACTOR jointly agree in

writing that a Commercial Discovery exists.

(iv) If Crude Oil or Gas is discovered but is not deemed by

CONTRACTOR to be a Commercial Oil / Gas Discovery under

the above provisions of this paragraph (c), or one (1) month

after the expiration of the period specified above within which

CONTRACTOR can give notice of a Commercial Oil/ Gas

Discovery, or thirteen (13) months after the completion of a

well not considered by CONTRACTOR to be a "Commercial

Oil Well" or after the expiration of twenty five (25) months after

the completion of a well not considered by CONTRACTOR to

be a "Commercial Gas Well", EGPC shall have the right,

following sixty (60) days notice in writing to CONTRACTOR, at

its sole cost, risk and expense, to develop, produce and dispose

of all Crude Oil or Gas from the geological feature on which the

well has been drilled. Said notice shall state the specific area

covering said geological feature to be developed, the wells to

be drilled, the production facilities to be installed and EGPC's

estimated cost thereof. Within thirty (30) days after receipt of

said notice CONTRACTOR may, in writing, elect to develop

such area as provided for in the case of Commercial Discovery

hereunder. In such event all terms of this Agreement shall

continue to apply to the specified area.



12



If CONTRACTOR elects not to develop such area, the specific

area covering said geological feature shall be set aside

for sole risk operations by EGPC, such area to be mutually

agreed upon by EGPC and CONTRACTOR on the basis of

good Petroleum industry practice. EGPC shall be entitled to

perform or in the event Operating Company has come into

existence, to have Operating Company perform such

operations for the account of EGPC and at EGPC's sole cost,

risk and expense or by any other means deemed to be

appropriate by EGPC for developing such discovery. When

EGPC has recovered from the Crude Oil / Gas produced from

such specific area a quantity of Crude Oil/Gas equal in value to

three hundred percent (300 %) of the cost it has incurred in

carrying out the sole risk operations. CONTRACTOR can have

the option, only in the event of EGPC's approval or in case

there has been a separate Commercial Oil / Gas Discovery,

elsewhere within the Area, to share in further development and

production of that specific area upon paying EGPC one

hundred percent (100%) of such costs incurred by EGPC.



Such one hundred percent (100%) payment shall not be

recovered by CONTRACTOR. Immediately following such

payment the specific area shall either (i) revert to the status of

an ordinary Development Lease under this Agreement and

thereafter shall be operated in accordance with the terms

hereof; or (ii) alternatively, in the event that at such time EGPC

or its Affiliated Company is conducting Development

operations in the area at its sole expense and EGPC elects to

continue operating, the area shall remain set aside and

CONTRACTOR shall only be entitled to its production sharing

percentages of the Crude Oil / Gas as specified in Article VII

(b). The sole risk Crude Oil/Gas shall be valued in the manner

provided in Article VII (c). In the event of any termination of this

Agreement under the provisions of Article III (b), this Agreement

shall, however, continue to apply to EGPC's operations of any

sole risk venture hereunder, although such Agreement shall

have been terminated with respect to CONTRACTOR pursuant

to the provisions of Article III (b).



13



(d)



Conversion to a Development Lease:

(i) Following a Commercial Oil Discovery or a Commercial Gas

Discovery and after submitting a Development Plan and a

Decommissioning Plan according to the definition referred to

in Article I of this Agreement, the extent of the whole area

capable of production to be covered by a Development

Lease shall be mutually agreed upon by EGPC and

CONTRACTOR and be subject to the approval of the

Minister of Petroleum.

Such area shall be converted

automatically into a Development Lease without the issue of

any additional legal instrument or permission. In case

CONTRACTOR did not fulfill its commitment to submit the

Oil / Gas Development Lease documentations to EGPC, in

order to issue the Development Lease related to that

discovery, within one (1) year from the date EGPC and

CONTRACTOR agree in writing that a Commercial

Discovery exists, CONTRACTOR shall be considered

assignor without charge for the area dedicated for issuing

such Development Lease. EGPC shall have the right to

develop, produce and dispose all the Petroleum produced

from such assigned area in the manner it deems appropriate

without any further legal procedures, the CONTRACTOR

shall have no right related to the production and has no right

to have recourse against EGPC for compensation or

expenditures or costs.

(ii) Following the conversion of an area to a Development Lease

based on a Commercial Gas Discovery (or upon the

discovery of Gas in a Development Lease granted following

a Commercial Oil Discovery), EGPC and CONTRACTOR

shall endeavor with diligence to find adequate markets

capable of absorbing the production of Gas and with respect

to the local markets, EGPC shall advise CONTRACTOR of

the potential outlets for such Gas and the expected annual

schedule of demand. Thereafter, EGPC and CONTRACTOR

shall meet with a view to assessing whether the outlets for

such Gas and other relevant factors warrant the

Development and production of the Gas and in case of

agreement, the Gas thus made available shall be disposed

of to EGPC or EGAS under a long-term Gas Sales

Agreement in accordance with and subject to the conditions

set forth in Article VII.

14



(iii) The Development period of each Development Lease shall be

as follows:

(aa) In respect of a Commercial Oil Discovery, twenty (20) years

from the date of the Minister's of Petroleum approval of the

Development Lease plus Two (2) Optional Extension

Periods (as defined below) provided that, in the event that,

subsequent to the conversion of a Commercial Oil

Discovery into a Development Lease, Gas is discovered in

the same Development Lease and is used or is capable of

being used locally or for export hereunder, the period of the

Development Lease shall be extended only with respect to

such Gas, LPG extracted from such Gas, and Crude Oil in

the form of condensate produced with such Gas for twenty

(20) years from the date of the first deliveries of Gas locally

or for export plus the Two (2) Optional Extension Periods

(as defined below) provided that the duration of such

Development Lease based on a Commercial Oil Discovery

may not be extended beyond thirty (30) years from the date

of the Minister's of Petroleum approval of the Oil

Development Lease.

CONTRACTOR shall immediately notify EGPC of any Gas

Discovery but shall not be required to apply for a new

Development Lease in respect of such Gas.

(bb) In respect of a Commercial Gas Discovery, twenty (20) years

from the date of the Minister's of Petroleum approval of the

Development Lease plus Two (2) Optional Extension Periods

(as defined below) provided that, if subsequent to the

conversion of a Commercial Gas Discovery into a

Development Lease, Crude Oil is discovered in the same

Development Lease, CONTRACTOR's share of such Crude

Oil from the Development Lease (except LPG extracted from

Gas or Crude Oil in the form of condensate produced with

Gas) and Gas associated with such Crude Oil shall revert

entirely to EGPC upon the lapse of twenty (20) years from

the discovery date of such Crude Oil plus the Two (2)

Optional Extension Periods (as defined below).



15



Notwithstanding, anything to the contrary under this

Agreement, the duration of Development Lease based on a

Commercial Gas Discovery shall in no case exceed thirty (30)

years from the date of the Minister's of Petroleum approval of

the Gas Development Lease.

CONTRACTOR shall immediately notify EGPC of any Oil

Discovery but shall not be required to apply for a new

Development Lease in respect of such Crude Oil.

The "Two (2) Optional Extension Periods" shall mean two

periods of five (5) years each respectively.

CONTRACTOR may elect to enter the first extension period

upon six (6) months written request sent by CONTRACTOR

to EGPC prior to the expiry of the relevant twenty (20) year

period. supplemented by a Development Plan including

technical studies, evaluation of production, expected levels of

production

during

such

first

Extension

period,

CONTRACTOR’s obligations and relevant economic

consideration , and subject to the approval of EGPC and the

Minister of Petroleum.

CONTRACTOR may also elect to enter the second extension

period upon six (6) months written request sent by

CONTRACTOR to EGPC prior to the expiry of the first

extension period. supplemented by a Development Plan

including technical studies, evaluation of production, expected

levels of production during the second Extension period,

CONTRACTOR’s obligations and relevant economic

consideration, and subject to the approval of EGPC and the

Minister of Petroleum.

(e)



Development operations shall upon the issuance of a

Development Lease granted following a Commercial Oil

Discovery, be started promptly by Operating Company and be

conducted in accordance with good oil field practices and

accepted petroleum engineering principles, until the field is

considered to be fully developed. It being understood that if

associated Gas is not utilized, EGPC and CONTRACTOR shall

negotiate in good faith on the best way to avoid impairing the

production in the interests of the parties. In case

CONTRACTOR , through the Operating Company ,did not

16



fulfill his obligations regarding the execution of the

Development Plan and did not start producing Crude Oil ,in

commercial regular shipments , within four (4) years from the

Development Lease approval date, CONTRACTOR shall be

considered assignor without charge for the Development Lease

and for all its rights, privileges related to such area , EGPC shall

have the right to develop, produce, and dispose all Crude Oil

produced from such assigned area by any means deems to be

appropriate without any further legal procedures, and

CONTRACTOR shall have no right related to the production

and shall have no right to have recourse against EGPC for any

compensation, expenditures or costs.

In the event no Commercial deliveries of Gas in accordance

with the mentioned Development Plan and Gas Sales

Agreement/scheme within four (4) years from the approval

date of the Development Lease (unless otherwise agreed by

EGPC), CONTRACTOR shall be considered assignor without

charge for the Development Lease and for all its rights,

privileges, related to such area, EGPC shall have the right to

develop, produce, and dispose all Gas produced from such

assigned area by any means deems to be appropriate without

any further legal procedures, and CONTRACTOR shall have

no right related to the production and shall have no right to

have recourse against EGPC for any compensation,

expenditures or costs.

In the event no Commercial Production of Oil in regular

shipments or Gas deliveries from any Development Block in

the Development Lease within four (4) years from the date of

commencement of Commercial Production for Oil or from the

date of first deliveries of Gas locally or for export in such

Development Lease, such Development Block shall

immediately be relinquished, unless there is a Commercial Oil

Discovery on the Development Lease based on Gas or a

Commercial Gas Discovery on the Development Lease based

on Oil. Each Block in a Development Lease being partly within

the radius of drainage of any producing well shall be

considered as participating in the Commercial Production

referred to above (unless otherwise agreed by EGPC).



17



Every four (4) years EGPC shall review the Development

Blocks of Oil Development Leases from the date of

commencement of Commercial Production and/or Gas from

the date of the first regular Gas deliveries locally or for export,

for immediate relinquish for any non-producing block or any

block that does not participate in production( unless otherwise

agreed by EGPC).

In case the production has stopped from any well, and the

reproduction hasn’t started within a period of maximum one (1)

year from the date of such stop, a revision for the Development

Lease blocks will take place in order to relinquish the

Development Blocks not producing or not contributing to

production from such well (unless EGPC agrees to extend such

period).

CONTRACTOR shall submit to EUG all data, information and

studies that have been made for any relinquished blocks within

the Area, no later than thirty (30) days from EGPC’s approval

date of any relinquishment.

Development operations in respect of Gas and Crude Oil in the

form of condensate or LPG to be produced with or extracted

from such Gas shall, upon the signature of a Gas Sales

Agreement or commencement of a scheme to dispose of the

Gas, whether for export as referred to in Article VII or otherwise,

be started promptly by Operating Company and be conducted

in accordance with good Gas field practices and accepted

Petroleum engineering principles and the provisions of such

Gas Sales Agreement or scheme. In the event no Commercial

Production of Gas is established in accordance with such Gas

Sales Agreement or scheme, the Development Lease relating

to such Gas shall be relinquished, (unless otherwise agreed

upon by EGPC).

If, upon application by CONTRACTOR it is recognized by

EGPC that Crude Oil or Gas is being drained from the

Exploration Block/ Blocks under this Agreement into a

Development Block/ Blocks on an adjoining concession area

held by CONTRACTOR/ another contractor, the Block/ Blocks

being drained shall be considered as participating in the

Commercial Production of the Development Block/ Blocks in

question and the Block being drained shall be converted into a

18



Development Lease with the ensuing allocation of costs and

production (calculated from the Effective Date or the date such

drainage occurs, whichever is later) between the two

Concession Areas. The allocation of such costs and production

under each Concession Agreement shall be in the same portion

that the recoverable reserves in the drained geological

structure underlying each Concession Area bears to the total

recoverable reserves of such structure underlying both

Concession Areas. The production allocated to a concession

area shall be priced according to the concession agreement

covering that concession area.

In case of failure by the CONTRACTOR in this Agreement and

the contractor in adjoining concession area to agree on the

allocation of costs and/or production for such separate

Development Leases under each concession area, before the

end of a six (6) month period from the date of EGPC's written

statement, EGPC shall set the rules and principles it deems

appropriate, which rules and principles shall be binding on all

relevant parties.

(f) CONTRACTOR shall bear and pay all the costs and expenses

required in carrying out all the operations under this Agreement

but such costs and expenses shall not include any interest on

investment. CONTRACTOR shall look only to the Petroleum to

which it is entitled under this Agreement to recover such costs

and expenses. Such costs and expenses shall be recoverable

as provided in Article VII. During the term of this Agreement and

its renewal, the total production achieved in the conduct of such

operations shall be divided between EGPC and

CONTRACTOR in accordance with the provisions of Article VII.

(g) (1)



(2)



Unless otherwise provided, CONTRACTOR shall be

subject to Egyptian income tax laws and shall comply

with the requirements of such laws with respect to the

filing of returns, the assessment of tax, and keeping and

showing of books and records.

CONTRACTOR shall be liable to prepare the tax return,

that only the tax authority shall be entitled to audit.

CONTRACTOR shall submit the tax return to EGPC

twenty five (25) days prior to the due date of submitting

thereof to the tax authority. EGPC shall have the right to

19



review the tax return in order to accept the tax

calculation therein. EGPC shall provide comments on

such return within fifteen (15) days of the date of

receiving the tax return from CONTRACTOR. In any

case CONTRACTOR shall be responsible for submitting

the tax return to the tax authority within the due date.

(3)



CONTRACTOR's annual income for Egyptian income

tax purposes under this Agreement shall be an amount

calculated as follows:



The total of the sums received by CONTRACTOR from the

sale or other disposition of all Petroleum acquired by

CONTRACTOR pursuant to Article VII (a) and (b);

Reduced by:

(i)

(ii)



The costs and expenses of CONTRACTOR;

The value as determined according to Article VII (c), of

EGPC's share of the Excess Cost Recovery Petroleum

repaid to EGPC in cash or in kind, if any,



Plus:

An amount equal to CONTRACTOR's Egyptian income taxes

grossed up in the manner shown in Article VI of Annex "E".

For purposes of above tax deductions in any Tax Year,

Article VII (a) shall apply only in respect of classification of

costs and expenses and rates of amortization, without regard

to the percentage limitation referred to in the first paragraph

of

Article VII (a) (1).

All costs and expenses of

CONTRACTOR in conducting the operations under this

Agreement which are not controlled by Article VII (a) as

above qualified shall be deductible in accordance with the

provisions of the Egyptian Income Tax Law.

(4) EGPC shall assume, pay and discharge, in the name and on

behalf of CONTRACTOR, CONTRACTOR's Egyptian income

tax out of EGPC's share of the Petroleum produced and saved

and not used in operations under Article VII. All taxes paid by

EGPC in the name and on behalf of CONTRACTOR shall be

considered income to CONTRACTOR.



20



In case CONTRACTOR dispose all or part of its share of

Production Sharing Gas and Excess Cost Recovery Gas, if

any, by itself to local market, after obtaining the Minister of

Petroleum’s approval, CONTRACTOR shall bear and pay to

EGPC an amount equal to the CONTRACTOR’s Egyptian

income tax in respect of the value of such Gas, the payment of

such tax by CONTRACTOR shall neither be considered as

income nor as recoverable cost to CONTRACTOR.

(5) EGPC shall furnish to CONTRACTOR the proper official

receipts evidencing the payment of CONTRACTOR's Egyptian

income tax for each Tax Year within ninety (90) days following

the receipt by EGPC of CONTRACTOR's tax declaration for

the preceding Tax Year. Such receipts shall be issued by the

proper Tax Authorities and shall state the amount and other

particulars customary for such receipts.

(6) As used herein, Egyptian Income Tax shall be inclusive of all

income taxes payable in the A.R.E. (including tax on tax) such

as the tax on income from movable capital and the tax on

profits from commerce and industry and inclusive of taxes

based on income or profits including all dividends, withholding

with respect to shareholders and other taxes imposed

by the GOVERNMENT of A.R.E. on the distribution of income

or profits by CONTRACTOR.

(7) In calculating its A.R.E. income taxes, EGPC shall be entitled

to deduct all royalties paid by EGPC to the GOVERNMENT and

CONTRACTOR's Egyptian income taxes paid by EGPC on

CONTRACTOR's behalf.

ARTICLE IV

WORK PROGRAM AND EXPENDITURES

DURING EXPLORATION PERIOD

(a)



CONTRACTOR shall commence Exploration operations

hereunder not later than six (6) months from the Effective Date.

CONTRACTOR shall have the right to use and obtain all

seismic, wells and other data with respect to the Area in EUG's

possession and in accordance with the regulations in such

respect.



21



(b) The initial Exploration period shall be ----------- years.

CONTRACTOR may extend this Exploration period for --------successive extension period(s) of ----------- years respectively,

in accordance with Article III (b), upon at least thirty (30) days

prior written notice to EGPC, subject to its expenditure of its

minimum Exploration obligations and of its fulfillment of the

technical obligations hereunder, for the then current Exploration

period.

CONTRACTOR shall spend a minimum of --------------- million

U.S. Dollars ($-----------------) on Exploration operations and

activities related thereto during the initial ------------ year

Exploration period; provided that CONTRACTOR shall acquire

-------------------------- and drill ------ (-----) wells. For the ------------- year extension period that CONTRACTOR elects to extend

beyond the initial Exploration period, CONTRACTOR shall

spend a minimum of --------- million U.S. Dollars ($---------------------------). During the extension period(s) that CONTRACTOR

elects to extend beyond the initial Exploration period,

CONTRACTOR shall drill ----------- (-------) wells.

Should CONTRACTOR spend more than the minimum amount

required to be expended or drill more wells than the minimum

required to be drilled during the initial --------- year Exploration

period, or during any period thereafter the excess may be

subtracted from the minimum amount of money required to be

expended by CONTRACTOR or minimum number of wells

required to be drilled during any succeeding Exploration period,

as the case may be.

In the event the CONTRACTOR fail to fulfill any of its technical

obligations of the then current Exploration period subject to its

fulfilment of the minimum financial obligations for such period,

EGPC may approve CONTRACTOR’s request to enter the

succeeding Exploration period, provided that the unfulfilled

technical obligations would be carried forward to the

succeeding period and CONTRACTOR shall submit a separate

Letter of Guarantee with the value of the carried forward

technical obligations , such Letter of Guarantee shall be valid

till the end of the concerned succeeding Exploration period.

Such Letter of Guarantee cannot be reduced by any other

expenses that do not relate to the obligations it guarantees.



22



Such Letter of Guarantee shall not be returned except after the

execution of the carried forward obligation. EGPC shall have

the right to liquidate the Letter of Guarantee in case the carried

forward obligation is not executed, sixty (60) days prior to the

end of the succeeding Exploration period.



In case CONTRACTOR surrenders its Exploration rights under

this Agreement as set forth above before or at the end of the ---------- year of the initial Exploration period, having expended

less than the total sum of ------------------ million U.S. Dollars ($----------------) on Exploration or in the event at the end of the ------- year, CONTRACTOR has expended less than said sum

in the Area, an amount equal to the difference between the

said ------------ million U.S. Dollars

($---------------) and the

amount actually spent on Exploration shall be paid by

CONTRACTOR to EGPC at the time of surrendering or within

six (6) months from the end of the ------------ year of the initial

Exploration period, as the case may be. Any expenditure

deficiency by CONTRACTOR at the end of any Extension

period for the reasons above noted shall similarly result in a

payment by CONTRACTOR to EGPC of such deficiency, such

deficiency shall be unrecoverable. Provided this Agreement is

still in force as to CONTRACTOR, CONTRACTOR shall be

entitled to recover any such payments as Exploration

Expenditure in the manner provided for under Article VII in the

event of Commercial Production.

Without prejudice to Article III (b), in case no Commercial Oil

Discovery is established or no notice of Commercial Gas

Discovery is given by the end of the ----------- year, as may be

extended pursuant to Article V (a) or in case CONTRACTOR

surrenders the Area under this Agreement prior to such time,

EGPC shall not bear any of the aforesaid expenses spent by

CONTRACTOR.

(c)



At least four (4) months prior to the beginning of each Financial

Year or at such other times as may mutually be agreed to by

EGPC and CONTRACTOR, CONTRACTOR shall prepare an

Exploration Work Program and Budget for the Area setting

forth the Exploration operations which CONTRACTOR

proposes to carry out during the ensuing Year.

The Exploration Work Program and Budget shall be reviewed by

a joint committee to be established by EGPC and

23



CONTRACTOR after the Effective Date of this Agreement. This

Committee, hereinafter referred to as the "Exploration Advisory

Committee", shall consist of six (6) members, three (3) of whom

shall be appointed by EGPC and three (3) by CONTRACTOR.

The Chairman of the Exploration Advisory Committee shall be

designated by EGPC from among the members appointed by it.

The Exploration Advisory Committee shall review and give such

advice as it deems appropriate with respect to the proposed

Work Program and Budget. Following review by the Exploration

Advisory Committee, CONTRACTOR shall make such revisions

as CONTRACTOR deems appropriate and submit the

Exploration Work Program and Budget to EGPC for its approval.

Following such approval, it is further agreed that:

(i)



CONTRACTOR shall not substantially revise or modify

said Work Program and Budget nor reduce the approved

budgeted expenditure without the approval of EGPC;



(ii)



In the event of emergencies involving danger of loss of

lives or property, CONTRACTOR may expend such

additional unbudgeted amounts as may be required to

alleviate such danger. Such expenditure shall be

considered in all aspects as Exploration Expenditure and

shall be recovered pursuant to the provisions of Article VII

hereof.



(d) CONTRACTOR shall advance all necessary funds for all

materials, equipment, supplies, personnel administration and

operations pursuant to the Exploration Work Program and

Budget and EGPC shall not be responsible to bear or repay any

of the aforesaid costs.

(e) CONTRACTOR shall be responsible for the preparation and

performance of the Exploration Work Program which shall be

implemented in a workmanlike manner and consistent with

good industry practices.

Except as is appropriate for the processing of data, specialized

laboratory engineering and development studies thereon, to be

made in specialized centers outside A.R.E. subject to EGPC’s

approval ,all geological and geophysical studies as well as any

other studies related to the performance of this Agreement,

shall be made in the A.R.E. .

24



CONTRACTOR shall entrust the management of Exploration

operations in the A.R.E. to its technically competent General

Manager and Deputy General Manager. The names of such

Manager and Deputy General Manager shall, upon

appointment, be forthwith notified to the GOVERNMENT and to

EGPC. The General Manager and, in his absence, the Deputy

General Manager shall be entrusted by CONTRACTOR with

sufficient powers to carry out immediately all lawful written

directions given to them by the GOVERNMENT or its

representative under the terms of this Agreement. All lawful

regulations issued or hereafter to be issued which are

applicable hereunder and not in conflict with this Agreement

shall apply to CONTRACTOR.

(f)



CONTRACTOR shall supply EGPC, within thirty (30) days from

the end of each calendar quarter, with a Statement of

Exploration activity showing costs incurred by CONTRACTOR

during such quarter. CONTRACTOR's records and necessary

supporting documents shall be available for inspection by

EGPC at any time during regular working hours for three (3)

months from the date of receiving each statement.

Within the three (3) months from the date of receiving such

Statement, EGPC shall advise CONTRACTOR in writing if it

considers:

(1)



that the record of costs is not correct; or



(2)



that the costs of goods or services supplied are not in

line with the international market prices for goods or

services of similar quality supplied on similar terms

prevailing at the time such goods or services were

supplied, provided however, that purchases made and

services performed within the A.R.E. shall be subject to

Article XXVI; or



(3)



that the condition of the materials furnished by

CONTRACTOR does not tally with their prices; or



(4)



that the costs incurred are not reasonably required for

operations.

CONTRACTOR shall confer with EGPC in connection with the

problem thus presented, and the parties shall attempt to reach

a settlement which is mutually satisfactory.



25



Any reimbursement due to EGPC out of the Cost Recovery

Petroleum as a result of reaching agreement or of an arbitral

award shall be promptly made in cash to EGPC, plus simple

interest at LIBOR plus two and half percent (2.5 %) per annum

from the date on which the disputed amount(s) would have

been paid to EGPC according to Article VII (a) (2) and Annex

"E" of this Agreement (i.e., the date of rendition of the relevant

Cost Recovery Statement) to the date of payment. The LIBOR

rate applicable shall be the average of the figure or figures

published by the Financial Times representing the mid-point of

the rates (bid and ask) applicable to one month U.S. Dollars

deposits in the London Interbank Eurocurrency Market on

each fifteenth (15th) day of each month occurring between the

date on which the disputed amount(s) would have been paid

to EGPC and the date on which it is settled.

If the LIBOR rate is available on any fifteenth (15th) day but is

not published in the Financial Times in respect of such day for

any reason, the LIBOR rate chosen shall be that offered by

Citibank N.A. to other leading banks in the London Interbank

Eurocurrency Market for one month U.S. Dollar deposits.

If such fifteenth (15th) day is not a day on which LIBOR rates

are quoted in the London Interbank Eurocurrency Market, the

LIBOR rate to be used shall be that quoted on the next following

day on which such rates are quoted.

If within the time limit of the three (3) month period provided for

in this paragraph, EGPC has not advised CONTRACTOR of its

objection to any Statement, such Statement shall be

considered as approved.

(g) CONTRACTOR shall supply all funds necessary for its

operations in the A.R.E. under this Agreement in freely

convertible currency from abroad. CONTRACTOR shall have

the right to freely purchase Egyptian currency in the amounts

necessary for its operations in the A.R.E. from EGPC or from

any bank authorized by the GOVERNMENT to conduct foreign

currency exchanges. Priority shall be given to EGPC to

purchase the foreign currencies from CONTRACTOR at the

same applicable rate and date as such currencies may be

purchased from the National Bank of Egypt.



26



(h) EGPC is authorized to advance to CONTRACTOR the Egyptian

currency required for the operations under this Agreement

against receiving from CONTRACTOR an equivalent amount of

U.S. Dollars at the official A.R.E. rate of exchange, such amount

in U.S. Dollars shall be deposited in an EGPC account abroad

with a correspondent bank of the National Bank of Egypt, Cairo.

Withdrawals from said account shall be used for financing

EGPC's and its Affiliated Companies' foreign currency

requirements subject to the approval of the Minister of

Petroleum.



ARTICLE V

MANDATORY AND VOLUNTARY RELINQUISHMENTS

(a) MANDATORY:

At the end of the -------- (-------) year after the Effective Date

hereof, CONTRACTOR shall relinquish to the GOVERNMENT

a total of ------------------ percent ( -------- %) of the original Area

on the Effective date not then converted to a Development

Lease or Leases "Area subject to relinquish". Such

relinquishment shall be in a single unit of whole Exploration

Blocks not converted to Development Leases unless otherwise

agreed upon between EGPC and CONTRACTOR so as to

enable the relinquishment requirements to be precisely fulfilled.

Subject to the approval of the Minister of Petroleum. During the

next ----------- (--) year Exploration period, CONTRACTOR may

retain the " Area subject to relinquish" mentioned above,

CONTRACTOR shall submit at least six (6) months prenotification to EGPC, including the additional technical activities

to be undertaken in the "Area subject to relinquish", during the

next ----------- (--) year Exploration period that CONTRACTOR

elects to extend beyond the initial Exploration period , provided

that CONTRACTOR shall submit a statement of costs and

expenses of such additional technical activities , it is

understood that CONTRACTOR is committed to such financial

and technical commitments in addition to the Exploration

commitments related to the second --------------- (---) year

Exploration period according to Article IV (b) ,provisions of

Article IV of this Agreement shall be applied , CONTRACTOR

shall submit a Letter of Guarantee with an equal amount to the

costs of such additional activities in the form specified in Annex

27



(c) of this Agreement, and shall also pay an unrecoverable

bonus for retaining "the Area subject to relinquish".

At the end of the ---------- (------) year after the Effective Date

hereof, CONTRACTOR shall relinquish to the GOVERNMENT

an additional --------------- percent (--------%) of the original Area

on the Effective date not then converted to a Development

Lease or Leases. CONTRACTOR shall also relinquish the

"Area subject to relinquish" retained pursuant to the above

mentioned paragraph, excluding the area(s) converted to

Development Lease/Leases. Such relinquishment shall be in a

single unit of whole Exploration Blocks not converted to

Development Leases (unless otherwise agreed upon between

EGPC and CONTRACTOR) so as to enable the relinquishment

requirements to be precisely fulfilled. CONTRACTOR may

retain the above mentioned additional --------------- percent ( -------%) area and/or the area retained during the previous

Exploration period, during the next ----------- (--) year

Exploration period that CONTRACTOR elects to extend

beyond the second Exploration period, subject to the approval

of the Minister of Petroleum and pursuant to the terms and

conditions mentioned above.

) this paragraph shall be added in case there are 3 exploration periods (



Without prejudice to Articles III and XXIII and the last three

paragraphs of this Article V (a), at the end of the ----------- year

of the Exploration period, CONTRACTOR shall relinquish the

remainder of the Area not then converted to Development

Leases.

It is understood that at the time of any relinquishment the areas

to be converted into Development Leases and which are

submitted to the Minister of Petroleum for his approval

according to Article III (d) shall, subject to such approval, be

deemed converted to Development Leases.

CONTRACTOR shall not be required to relinquish any

Exploration Block or Blocks on which a Commercial Oil or Gas

Well is discovered before the period of time referred to in Article

III (c) given to CONTRACTOR to determine whether such Well

is a Commercial Discovery worthy of Development or to

relinquish an Exploration Block in respect of which a notice of

28



Commercial Gas Discovery has been given to EGPC subject

to EGPC's right to agree on the existence of a Commercial

Discovery pursuant to Article III (c), and without prejudice to the

requirements of Article III (e).

In the event at the end of the initial Exploration period or the

successive extension(s) of the initial Exploration period, a well

is actually drilling or testing, CONTRACTOR shall be allowed

up to six (6) months to enable it to discover a Commercial Oil

or Gas Well or to establish a Commercial Discovery, as the

case may be. However, any such extension of up to six (6)

months shall reduce the length of the next succeeding

Exploration period, as applicable, by that amount.

(b) VOLUNTARY:

CONTRACTOR may, voluntarily, during any period relinquish

all or any part of the Area in whole Exploration Blocks or parts

of Exploration Blocks provided that at the time of such

voluntary relinquishment its Exploration obligations under

Article IV (b) have been satisfied for such period.

Any relinquishments hereunder shall be credited toward the

mandatory provisions of Article V (a) above.

Following Commercial Discovery, EGPC and CONTRACTOR

shall mutually agree upon any area to be relinquished

thereafter, except for the relinquishment provided for above at

the end of the total Exploration period.

All data and information obtained following Petroleum

Operations under this Agreement , according to Article III ( e )

and Article (V) , shall be submitted by CONTRACTOR to EUG

immediately

after

relinquishment

(MANDATORY

or

VOLUNTARY) as mentioned in this article above, not later than

thirty (30) days from EGPC’s approval on this relinquishment.

By the time of such relinquishment or the expiry date of the

Concession period, CONTRACTOR shall ensure that all

environmental regulations set out in Article XVIII herein, have

been followed, in accordance with sound and accepted

Petroleum industry practices, if so requested by EGPC.



29



ARTICLE VI

OPERATIONS AFTER COMMERCIAL DISCOVERY

(a) On Commercial Discovery, EGPC and CONTRACTOR shall

form in the A.R.E. an operating company pursuant to Article VI

(b) and Annex "D" (hereinafter referred to as "Operating

Company") which company shall be named by mutual

agreement between EGPC and CONTRACTOR and such

name shall be subject to the approval of the Minister of

Petroleum. Said company shall be joint stock company, in

which EGPC and CONTRACTOR each contribute by fifty

percent (50%). Operating Company shall be subject to the laws

and regulations in force in the A.R.E. to the extent that such

laws and regulations are not inconsistent with the provisions of

this Agreement or the Charter of Operating Company.

However, Operating Company and CONTRACTOR shall, for

the purpose of this Agreement, be exempted from the following

laws and regulations as now or hereafter amended or

substituted:

-



Law No. 48 of 1978, on the employee regulations of public

sector companies;



-



Law No. 159 of 1981, promulgating the law on joint stock

companies, partnership limited by shares and limited liability

companies;



-



Law No. 97 of 1983 promulgating the law concerning public

sector organizations and companies;



-



Law No. 203 of 1991 promulgating the law on public

business sector companies; and



-



Provisions of part 2 of Chapter 6 of Law No. 88 of 2003,

organizing dealings in foreign currencies.



(b) The Charter of Operating Company is hereto attached as

Annex "D". Within ninety (90) days after the date of the

Minister's of Petroleum approval of a Development Lease for

Oil or Gas (unless otherwise agreed upon by EGPC and

CONTRACTOR), the Charter shall take effect and Operating

30



Company shall automatically come into existence without any

further procedures. The Exploration Advisory Committee shall

be dissolved forthwith upon the coming into existence of the

Operating Company.

(c) Ninety (90) days after the date Operating Company comes into

existence in accordance with paragraph (b) above, it shall

prepare a Work Program and Budget for further Exploration and

Development for the remainder of the year in which the

Commercial Discovery is made; and not later than four (4)

months before the end of the current Financial Year (or such

other date as may be agreed upon by EGPC and

CONTRACTOR) and

four (4) months preceding the

commencement of each succeeding Financial Year thereafter

(or such other date as may be agreed upon by EGPC and

CONTRACTOR), Operating Company shall prepare an annual

Production Schedule, Work Program and Budget for further

Exploration and Development for the succeeding Financial

Year. The Production Schedule, Work Program and Budget

shall be submitted to the Board of Directors for approval.

(d) Not later than the twentieth (20th) day of each month, Operating

Company shall furnish to CONTRACTOR a written estimate of

its total cash requirements for expenditure for the first half and

the second half of the succeeding month expressed in U.S.

Dollars having regard to the approved Budget. Such estimate

shall take into consideration any cash expected to be on hand

at month end.

Payment for the appropriate period of such month shall be

made to the correspondent bank designated in paragraph (e)

below on the first (1st) day and fifteenth (15th) day respectively,

or the next following business day, if such day is not a business

day.

(e) Operating Company is authorized to keep at its own disposal

abroad in an account opened with a correspondent bank of the

National Bank of Egypt, Cairo, the foreign funds advanced by

CONTRACTOR. Withdrawals from said account shall be used

for payment for goods and services acquired abroad and for

transferring to a local bank in the A.R.E. the required amount to

meet the expenditures in Egyptian Pounds for Operating

Company in connection with its activities under this Agreement.

31



Within sixty (60) days after the end of each Financial Year,

Operating Company shall submit to the appropriate exchange

control authorities in the A.R.E. a statement, duly certified by a

recognized firm of auditors, showing the funds credited to that

account, the disbursements made out of that account and the

balance outstanding at the end of the Year.

(f) If and for as long during the period of production operations there

exists an excess capacity in facilities which cannot during the

period of such excess be used by the Operating Company,

EGPC shall have the right to use the excess capacity if it so

desires without any financial or operational disadvantage to the

CONTRACTOR or the Operating Company.



(a)



ARTICLE VII

RECOVERY OF COSTS AND EXPENSES AND

PRODUCTION SHARING

(1) Cost Recovery Petroleum:

Subject to the auditing provisions under this Agreement,

CONTRACTOR shall recover quarterly all costs, expenses

and expenditures in respect of all the Exploration,

Development and related operations under this Agreement

and which was approved by EGPC to the extent and out of

------------- percent (---%) of all Petroleum produced and

saved from all Development Leases within the Area

hereunder and not used in Petroleum operations. Such

Petroleum is hereinafter referred to as "Cost Recovery

Petroleum".

For the purpose of determining the classification of all costs,

expenses and expenditures for their recovery, the following

terms shall apply:



1.



"Exploration Expenditures" shall mean all costs and

expenses for Exploration and the related portion of indirect

expenses and overheads.



1.



2.



"Development Expenditures" shall mean all costs and

expenses for Development (with the exception of Operating

Expenses) and the related portion of indirect expenses and

overheads.

32



3.



"Operating Expenses" shall mean all costs, expenses and

expenditures made after initial Commercial Production,

which costs, expenses and expenditures are not normally

depreciable.



However, Operating Expenses shall include work over, repair and

maintenance of assets but shall not include any of the following:

sidetracking, re-drilling and changing of the status of a well,

permanent abandonment of a well, replacement of assets or part of

an asset, additions, improvements, renewals or major overhauling.

Exploration Expenditures, Development Expenditures and

Operating Expenses shall be recovered from Cost Recovery

Petroleum in the following manner:(i) “Exploration Expenditures”, including those accumulated prior

to the commencement of initial Commercial Production, which

for the purposes of this Agreement shall mean the date on

which the first regular shipment of Crude Oil or the first

deliveries of Gas are made , shall be recoverable at the rate of

twenty five percent ( 25 %) per annum starting either in the Tax

Year in which such expenditures are incurred and paid or the

Tax Year in which initial Commercial Production commences,

whichever is the later date.

(ii) “Development Expenditures”, including those accumulated

prior to the commencement of initial Commercial Production

which for the purposes of this Agreement shall mean the date

on which the first regular shipment of Crude Oil or the first

deliveries of Gas are made, shall be recoverable at the

rate of twenty five percent ( 25 %) per annum starting either in

the Tax Year in which such expenditures are incurred and paid

or the Tax Year in which initial Commercial Production

commences, whichever is the later date.

(iii) “Operating Expenses”, incurred and paid after the date of initial

Commercial Production, which for the purposes of this

Agreement shall mean the date on which the first regular

shipment of Crude Oil or the first deliveries of Gas are made,

shall be recoverable either in the Tax Year in which such costs

and expenses are incurred and paid or the Tax Year in which

initial Commercial Production occurs, whichever is the later

date.

33



(iv) To the extent that, in a Tax Year, costs, expenses or

expenditures recoverable per paragraphs (i), (ii) and (iii)

preceding, exceed the value of all Cost Recovery Petroleum for

such Tax Year, the excess shall be carried forward for recovery

in the next succeeding Tax Year(s) until fully recovered, but in

no case after the termination of this Agreement, as to

CONTRACTOR.

(v) The recovery of costs and expenses, based upon the rates

referred to above, shall be allocated to each quarter

proportionately (one fourth to each quarter). However, any

recoverable costs and expenses not recovered in one quarter

as thus allocated, shall be carried forward for recovery in the

next quarter.

(vi) Any new investments or costs during the last -------- (--) years

from the obligation period stated in this Agreement shall be

excluded from item 1- and 2- above, and shall be recoverable

proportionately over the remaining available quarters of the

Concession Agreement period starting from the quarter in

which such costs are incurred and paid during the Tax Year,

and till the end date.

(2) Except as provided in Article VII (a) (3) and Article VII (e) (1),

CONTRACTOR shall each quarter be entitled to take and own

all Cost Recovery Petroleum, which shall be taken and

disposed of in the manner determined pursuant to Article VII

(e). To the extent that the value of all Cost Recovery

Petroleum [as determined in Article VII (c)] exceeds the actual

recoverable costs and expenditures, including any carry

forward under Article VII (a) (1) (iv), to be recovered in that

quarter, then the value of Excess Cost Recovery Petroleum

shall be shared between EGPC and CONTRACTOR in

accordance with the following percentages : EGPC ------percent (---%) and CONTRACTOR ------ percent (---%), the

value of such Excess Cost Recovery Petroleum shall be paid

by CONTRACTOR to EGPC either (i) in cash in the manner set

forth in Article IV of the Accounting Procedure contained in

Annex "E" or (ii) in kind in accordance with Article VII (a) (3).

(3) Ninety (90) days prior to the commencement of each Calendar

Year EGPC shall be entitled to elect by notice in writing to

CONTRACTOR to require payment of up to one hundred

percent (100%) of EGPC's share of Excess Cost Recovery

Petroleum in kind. Such payment will be in Crude Oil from the

34



Area F.O.B. export terminal or other agreed delivery point

provided that the amount of Crude Oil taken by EGPC in kind in

a quarter shall not exceed the value of Cost Recovery Crude Oil

actually taken and separately disposed of by CONTRACTOR

from the Area during the previous quarter. If EGPC's entitlement

to receive payment of its share of Excess Cost Recovery

Petroleum in kind is limited by the foregoing provision, the

balance of such entitlement shall be paid in cash.

(b) Production Sharing

(1)



The remaining ----- ------- percent (---%) of Petroleum shall be

divided between EGPC and CONTRACTOR based on Brent

price and according to the following shares:

Such shares shall be taken and disposed of pursuant to Article

VII (e) .



(i)



Crude Oil (Quarterly Average ):

Crude Oil produced and saved under this Agreement and not used in

Petroleum operations, Barrel of Oil Per Day (BOPD) (quarterly average)

Brent Price

US$/bbl



Less than or

equal to 5,000

BOPD



More than

5,000 BOPD

and less than

or equal to

10,000 BOPD



More than

10,000 BOPD

and less than

or equal to

15,000 BOPD



More than

15,000 BOPD

and less than

or equal to

25,000 BOPD



EGPC

%



EGPC

%



EGPC

%



EGPC

%



Cont.

%



Cont.

%



Less than or equal to 40 US$

More than 40 US$ and less

than or equal to 60 US$

More than 60 US$ and less

than or equal to 80 US$

More than 80 US$ and less

than or equal to 100 US$

More than 100 US$



35



Cont.

%



Cont.

%



More than

25,000 BOPD



EGPC

%



Cont.

%



(ii) Gas &LPG (Quarterly Average):



Gas and LPG produced and saved under this Agreement and not

used in Petroleum operations (Standard Cubic Feet of Gas Per

Day (SCFD) (quarterly average) divided between EGPC and

CONTRACTOR.

EGPC %



Contractor %



Less than 25 MMSCF/Day

Equal to 25 and less than 50 MMSCF/Day

Equal to 50 and less than 100 MMSCF/Day

Equal to 100 and less than 125 MMSCF/Day

Equal 125 MMSCF/Day and above



(2)



After the end of each contractual year during the term of

any Gas Sales Agreement entered into pursuant to Article

VII (e), EGPC and CONTRACTOR (as sellers) shall render

to EGPC or EGAS (as buyer) a statement for an amount

of Gas, if any , equal to the amount by which the

quantity of Gas of

which EGPC

or EGAS (as

buyer) has taken delivery falls below seventy five percent

(75%) of the Contract quantities of Gas as established by the

applicable Gas Sales Agreement (the "Shortfall"), provided

the Gas is available. Within sixty (60) days of receipt of the

statement, EGPC or EGAS (as buyer) shall pay EGPC

and CONTRACTOR (as sellers) for the amount of the

Shortfall, if any. The Shortfall shall be included in EGPC's

and CONTRACTOR's entitlement to Gas pursuant to Article

VII (a) and Article VII (b) in the fourth (4th) quarter of such

contractual year.

Quantities of Gas not taken but to be paid for shall be

recorded in a separate “Take-or-Pay Account “. Quantities

of Gas ("Make Up Gas") which are delivered in subsequent

years in excess of seventy five percent (75%) of the contract

quantities of Gas as established by the applicable Gas

Sales Agreement, shall be set against and reduce quantities

of Gas in the “Take-or-Pay” account to the extent thereof

and, to that extent, no payment shall be due in respect of

such Gas. Such Make Up Gas shall not be included in

36



CONTRACTOR's entitlement to Gas pursuant to Article VII

(a) and (b). CONTRACTOR shall have no rights to such

Make Up Gas.

If at the end of any Contractual year, EGPC and

CONTRACTOR (as sellers) fail to deliver seventy five

percent (75%) of the annual contract quantity of Gas as

defined in the Gas Sales Agreement with EGPC or EGAS

(as buyer), the difference between seventy five percent

(75%) of the annual Contract quantity of Gas and the actual

Gas quantity delivered shall be referred to as the “Deliveror - Pay Shortfall Gas”. EGPC or EGAS (as buyer) shall

have the right to take a quantity of Gas equal to Deliver-orPay the Shortfall Gas and such quantity of Gas shall be

priced at ninety percent (90%) of the Gas price as defined

in the Gas Sales Agreement .The mechanism for the

Deliver-or-Pay concept will be determined in the Gas Sales

Agreement .

The percentages set forth in Article VII (a) and (b) in respect

of LPG produced from a plant constructed and operated by

or on behalf of EGPC and CONTRACTOR shall apply to all

LPG available for delivery.

(c) Valuation of Petroleum:

(1)

(i)



(ii)



Crude Oil:

The Cost Recovery Crude Oil to which CONTRACTOR

is entitled hereunder shall be valued by EGPC and

CONTRACTOR at "Market Price" for each calendar

quarter.

"Market Price" shall mean the weighted average prices

realized from sales by EGPC or CONTRACTOR

during the quarter, whichever is higher, provided that

the sales to be used in arriving at the weighted

average(s) shall be sales of comparable quantities on

comparable credit terms in freely convertible currency

from F.O.B. point of export sales to non-affiliated

companies at arm's length under all Crude Oil sales

contracts then in effect, but excluding Crude Oil sales

contracts involving barter, and



37



(1) Sales, whether direct or indirect, through brokers

or otherwise, of EGPC or CONTRACTOR to any

Affiliated Company.

(2) Sales involving a quid pro quo other than payment

in a freely convertible currency or motivated in

whole or in part by considerations other than the

usual economic incentives for commercial arm's

length Crude Oil sales.

(iii)



It is understood that in the case of “C.I.F.” sales,

appropriate deductions shall be made for transport and

insurance charges to calculate the F.O.B. point of

export price; and always taking into account the

appropriate adjustment for quality of Crude Oil, freight

advantage or disadvantage of port of loading and other

appropriate adjustments. Market Price shall be

determined separately for each Crude Oil or Crude Oil

mix, and for each port of loading.



(iv)



If during any calendar quarter, there are no such sales

by EGPC and/or CONTRACTOR under the Crude Oil

sales contracts in effect, EGPC and CONTRACTOR

shall mutually agree upon the Market Price of the

barrel of Crude Oil to be used for such quarter, and

shall be guided by all relevant and available evidence

including current prices in freely convertible currency

of leading Crude Oils produced by major Oil producing

countries (in the Arabian Gulf or the Mediterranean

Area), which are regularly sold in the open market

according to actual sales contracts terms but excluding

paper sales and sales promises where no Crude Oil is

delivered, to the extent that such sales are effected

under such terms and conditions (excluding the price)

not significantly different from those under which the

Crude Oil to be valued, was sold, and always taking into

consideration appropriate adjustments for Crude Oil

quality, freight advantage or disadvantage of port of

loading and other appropriate adjustments, as the

case may be, for differences in gravity, sulphur, and

other factors generally recognized by sellers and

purchasers, as reflected in

Crude

prices,

transportation ninety (90) days insurance premiums,

unusual fees borne by the seller, and for credit terms

38



in excess of sixty (60) days, and the cost of loans or

guarantees granted for the benefit of the sellers at

prevailing interest rates.

It is the intent of the Parties that the value of the Cost

Recovery Crude Oil shall reflect the prevailing market

price for such Crude Oil.

(v) If either EGPC or CONTRACTOR considers that the

Market Price as determined under sub-paragraph (ii)

above does not reflect the prevailing Market Price or in

the event EGPC and CONTRACTOR fail to agree on

Market Price for any Crude Oil produced under this

Agreement for any quarter within fifteen (15) days after

the end thereof, any party may elect at any time

thereafter to submit to a single arbitrator the question,

what single price per Barrel, in the arbitrator's

judgment, best represents for the pertinent quarter the

Market Price for the Crude Oil in question. The

arbitrator shall make his determination as soon as

possible following the quarter in question. His

determination shall be final and binding upon all the

parties. The arbitrator shall be selected in the manner

described below.

In the event EGPC and CONTRACTOR fail to agree

on the arbitrator within thirty (30) days from the date

any party notifies the other that it has decided to submit

the determination of the Market Price to an arbitrator,

such arbitrator shall be chosen by the appointing

authority designated in accordance with Article XXIV

(e), or such other appointing authority with access to

such expertise as may be agreed to between EGPC

and CONTRACTOR, with regard to the qualifications

for arbitrators set forth below, upon written application

of one or both of EGPC and CONTRACTOR. Copy of

such application by one of them shall be promptly sent

to the other.

The arbitrator shall be as nearly as possible a person

with an established reputation in the international

Petroleum industry as an expert in pricing and marketing

Crude Oil in international commerce. The arbitrator shall

not be a citizen of a country which does not have

39



diplomatic relations with both the A.R.E. and ------------.

He may not be, at the time of selection, employed by,

or an arbitrator or consultant on a continuing or frequent

basis to, the American Petroleum Institute, the

Organization of the Petroleum Exporting Countries or

the Organization of Arab Petroleum Exporting

Countries, or a consultant on a continuing basis to

EGPC, CONTRACTOR or an Affiliated Company of

either, but past occasional consultation with such

companies, with other petroleum companies,

governmental agencies or organizations shall not be a

ground for disqualification. He may not have been, at

any time during the two (2) years before selection, an

employee of any Petroleum company or of any

governmental agency or organization.

Should a selected person decline or be unable to serve

as arbitrator or should the position of arbitrator fall

vacant prior to the decision called for, another person

shall be chosen in the same manner provided in this

paragraph. EGPC and CONTRACTOR shall share

equally the expenses of the arbitrator.

The arbitrator shall make his determination in

accordance with the provisions of this paragraph, based

on the best evidence available to him. He will review Oil

sales contracts as well as other sales data and

information but shall be free to evaluate the extent to

which any contracts, data or information is substantiated

or pertinent. Representatives of EGPC and

CONTRACTOR shall have the right to consult with the

arbitrator and furnish him written materials provided the

arbitrator may impose reasonable limitations on this

right. EGPC and CONTRACTOR each shall cooperate

with the arbitrator to the fullest extent and each shall

insure such cooperation of its trading companies. The

arbitrator shall be provided access to Crude Oil sales

contracts and related data and information which EGPC

and CONTRACTOR or their trading companies are

able to make available and which in the judgment of the

arbitrator might aid the arbitrator in making a valid

determination.



40



(vi)



(2)



Pending Market Price agreement by EGPC and

CONTRACTOR or determination by the arbitrator, as

applicable, the Market Price agreed for the quarter

preceding the quarter in question shall remain temporarily in

effect. In the event either EGPC or CONTRACTOR should

incur a loss by virtue of the temporary continuation of the

Market Price of the previous quarter, it shall promptly be

reimbursed such loss by the other party plus simple interest

at the LIBOR plus two and one - half percent (2.5%) per

annum rate provided for in Article IV (f) from the date on

which the disputed amount(s) should have been paid to the

date of payment.

Gas and LPG



(i)



The Cost Recovery, Production Sharing and Excess Cost

Recovery , if any, Gas Price for local market will be agreed

upon between CONTRACTOR and EGPC or EGAS after the

Commercial Discovery and before converting an area to a

Development Lease(s). Production Sharing Gas Price for

export will be valued at Netback Price.



(ii)



The Cost Recovery and Production Shares of (LPG)

produced from a plant constructed and operated by or on

behalf of EGPC and CONTRACTOR shall be separately

valued for Propane and Butane at the outlet of such LPG

plant according to the following formula (unless otherwise

agreed between EGPC and CONTRACTOR):

PLPG =

Where



0.95 PR



PLPG = LPG price (separately determined for Propane and

Butane) in U.S. Dollars per metric ton.

PR =The average over a period of a month of the figures

representing the mid-point between the high and low

prices in U.S. Dollars per metric ton quoted in "Platt's

LPGaswire" during such month for Propane and

Butane FOB Ex-Ref/Stor. West Mediterranean.

In the event that "Platt's LPGaswire" is issued on

certain days during a month but not on others, the value

of (PR) shall be calculated using only those issues

which are published during such month. In the event

41



that the value of (PR) cannot be determined

because "Platt's LPGaswire" is not published at all

during a month, EGPC and CONTRACTOR shall meet

and agree to the value of (PR) by reference to other

published sources. In the event that there are no such

other published sources or if the value of (PR) cannot

be determined pursuant to the foregoing for any other

reason , EGPC and CONTRACTOR shall meet and

agree the value of (PR) by reference to the value of

LPG (Propane and Butane) delivered FOB from the

Mediterranean Area.

Such valuation of LPG is based upon delivery at the

delivery point specified in Article VII (e) (2) (iii).

(iii)



The prices of Gas and LPG so calculated shall apply during

the same month.



(iv)



The Cost Recovery and Production Shares of Gas and LPG

disposed of by EGPC and CONTRACTOR other than to

EGPC or EGAS shall be valued pursuant to Article VII (e).



(d) Forecasts:

Operating Company shall prepare (not less than ninety (90)

days prior to the beginning of each calendar semester

following first regular production) and furnish in writing to

CONTRACTOR and EGPC a forecast setting out a total

quantity of Petroleum that Operating Company estimates can

be produced, saved and transported hereunder during such

calendar semester in accordance with good Oil and Gas

industry practices.



Operating Company shall endeavor to produce each calendar

semester the forecast quantity. The Crude Oil shall be run to

storage tanks or offshore loading facilities constructed,

maintained and operated according to GOVERNMENT

Regulations, by Operating Company in which said Crude Oil

shall be metered or otherwise measured for royalty, and other

purposes required by this Agreement. Gas shall be handled

by Operating Company in accordance with the provisions of

Article VII (e).

42



(e)



Disposition of Petroleum:

(1) EGPC and CONTRACTOR shall have the right and the

obligation to separately take and freely export or otherwise

dispose of, currently all of the Crude Oil to which each is

entitled under Article VII (a) and (b). Subject to payment of

sums due to EGPC under Article VII (a) (2) and Article IX,

CONTRACTOR shall have the right to remit and retain

abroad all funds acquired by it including the proceeds from

the sale of its share of Petroleum.



Notwithstanding anything to the contrary under this

Agreement, priority shall be given to meet the requirements

of the A.R.E. market from CONTRACTOR's share under

Article VII ( b ) of the Crude Oil produced from the Area and

EGPC shall have the preferential right to purchase such

Crude Oil at a price to be determined pursuant to Article VII

( c ) . The amount of Crude Oil so purchased shall be a

portion of CONTRACTOR's share under Article VII (b). Such

amount shall be proportional to CONTRACTOR's share of

the total production of Crude Oil from the concession areas

in the A.R.E. that are also subject to EGPC's preferential right

to purchase. The payment for such purchased amount shall

be made by EGPC in U.S. Dollars or in any other freely

convertible currency remittable by CONTRACTOR abroad.

It is agreed upon that EGPC shall notify CONTRACTOR, at

least forty-five (45) days prior to the beginning of the

Calendar Semester, of the amount to be purchased during

such semester under this Article VII (e) (1).

(2) With respect to Gas and LPG produced from the Area:

(i)



Priority shall be given to meet the requirements of the local

market as determined by EGPC, taking into consideration the

following cases:In case CONTRACTOR elects to dispose all or part of its

share of Production Sharing Gas and Excess Cost

Recovery Gas, if any, by itself to local market, after

obtaining the Minister of Petroleum’s approval,

43



CONTRACTOR shall notify EGPC of the Gas price,

Quantities and Gas buyer, the effective Law No. 196 of

2017 for Regulating Gas Market Activities in A.R.E. shall

be applied on CONTRACTOR.

In

case

EGPC/EGAS

or

EGPC/EGAS

and

CONTRACTOR export Gas or LPG jointly, they should

obtain the A.R.E. competent authorities’ approval on the

price and quantities allocated for export.

(ii) In the event that EGPC or EGAS is to be the buyer of Gas,

the disposition of Gas to the local markets as indicated

above shall be by virtue of long term Gas Sales Agreements

to be entered into between EGPC and CONTRACTOR (as

sellers) and EGPC or EGAS (as buyer).

EGPC and CONTRACTOR (as sellers) shall have the

obligation to deliver Gas to the following point where such

Gas shall be metered for sales, royalty, and other purposes

required by this Agreement:

(a) In the event no LPG plant is constructed to process such Gas,

the delivery point shall be at the flange connecting the

Development Lease pipeline to the nearest point on the

National Gas Pipeline Grid System as depicted in Annex "F"

hereto, or as otherwise agreed by EGPC and CONTRACTOR.

(b) In the event an LPG plant is constructed to process such Gas,

such Gas shall, for the purposes of valuation and sales, be

metered at the outlet to such LPG Plant. However,

notwithstanding the fact that the metering shall take place at

the LPG Plant outlet, CONTRACTOR shall through the

Operating Company build a pipeline suitable for transport of

the processed Gas from the LPG Plant outlet to the nearest

point on the National Gas Pipeline Grid System as depicted

in Annex "F" hereto, or otherwise agreed by EGPC and

CONTRACTOR. Such pipeline shall be owned in accordance

with Article VIII (a) by EGPC, and its cost shall be financed

and recovered by CONTRACTOR as Development

Expenditures pursuant to Article VII.

(iii) EGPC and CONTRACTOR shall consult together to

determine whether to build an LPG plant for recovering

44



LPG from any Gas produced hereunder. In the event

EGPC and CONTRACTOR decide to build such a plant,

the plant shall, as is appropriate, be in the vicinity of the

point of delivery as determined in Article II and Article VII

(e) 2 (ii). The delivery of LPG for, royalty and other

purposes required by this Agreement shall be at the outlet

of the LPG plant. The costs of any such LPG plant shall

be recoverable in accordance with the provisions of this

Agreement unless the Minister of Petroleum agrees to

accelerated recovery.



(iv) EGPC or EGAS (as buyer) shall have the option to elect,

by ninety (90) days prior written notice to EGPC and

CONTRACTOR (as sellers), whether payment for the Gas

which is subject to a Gas Sales Agreement between EGPC

and CONTRACTOR (as sellers) and EGPC or EGAS (as

buyer) and LPG produced from a plant constructed and

operated by or on behalf of EGPC and CONTRACTOR,

as valued in accordance with Article VII (c), and to which

CONTRACTOR is entitled under the Cost Recovery

and Production Sharing provisions of Article VII, of this

Agreement, shall be made 1) in cash or 2) in kind.



Payments in cash shall be made by EGPC or EGAS (as

buyer) at intervals provided for in the relevant Gas Sales

Agreement in U.S. Dollars, remittable by CONTRACTOR

abroad.

Payments in kind shall be calculated by converting the

value of Gas and LPG to which CONTRACTOR is entitled

into equivalent Barrels of Crude Oil to

be taken

concurrently by CONTRACTOR from the Area, or to the

extent that such Crude Oil is insufficient, Crude Oil from

CONTRACTOR's other concession areas or such other

areas as may be agreed. Such Crude Oil shall be added to

the Crude Oil that CONTRACTOR is otherwise entitled to

lift under this Agreement. Such equivalent Barrels shall be

calculated on the basis of the provisions of Article VII (c)

relating to the valuation of Cost Recovery Crude Oil.



45



Provided that:

(aa) Payment of the value of Gas and LPG shall always be

made in cash in U.S. Dollars remittable by

CONTRACTOR abroad to the extent that there is

insufficient Crude Oil available for conversion as

provided for above.

(bb) Payment of the value of Gas and LPG shall always be

made in kind as provided for above to the extent that

payments in cash are not made by EGPC.

Payments to CONTRACTOR (whether in cash or kind),

when related to CONTRACTOR's Cost Recovery

Petroleum, shall be included in CONTRACTOR's

Statement of Recovery of Costs and of Cost Recovery

Petroleum referred to in Article IV of Annex "E" of this

Agreement.

(v)



(vi)



(vii)



Should EGPC or EGAS (as buyer) fail to enter into a

long-term Gas Sales Agreement with EGPC and

CONTRACTOR (as sellers) within four (4) years from

the approval date of a Gas Development Lease

pursuant to Article III, EGPC and CONTRACTOR shall

have the right to take and freely dispose of the quantity

of Gas and LPG in respect of which the notice of

Commercial Discovery is given by exporting such Gas

and LPG , subject to the approval of the competent

authorities and in case EGPC/EGAS is not in need for

such Gas or LPG to meet the needs of domestic

markets.

The proceeds of sale of CONTRACTOR's share of Gas

and LPG disposed of pursuant to the above subparagraph (v) may be freely remitted or retained abroad

by CONTRACTOR.

In the event EGPC and CONTRACTOR agree to

accept new Gas and LPG producers to join in an

ongoing export project, such producers shall have to

contribute a fair and equitable share of the investment

made.



(viii)(aa)



Upon the expiration of the four (4) year period

referred to in Article VII (e) (2) (v), CONTRACTOR

46



shall have the obligation to exert its reasonable

efforts to find an export market for Gas reserves.

(bb)



In the event at the end of the four (4) year period

referred to under Article VII (e) (2) (v),

CONTRACTOR and EGPC have not entered into

a Gas Sales Agreement, CONTRACTOR shall

retain its rights to such Gas reserves for a further

period up to two (2) years, subject to Article VII (e)

(2) (viii) (cc), during which period EGPC shall

attempt to find a market for Gas reserves.



(cc) In the event that EGPC and CONTRACTOR are

not exporting the Gas and EGPC & CONTRACTOR

have not entered into a Gas Sales Agreement with

EGPC / EGAS pursuant to Article VII (e) (2) prior to

the expiry of six (6) years from the approval date of

a Gas Development Lease, it shall be considered

that CONTRACTOR has assigned the Gas

reserves in respect of which such notice has been

given. And CONTRACTOR does not accept an

offer of a Gas Sales Agreement from EGPC within

six (6) months from the date such offer is made

provided that the Gas Sales Agreement offered to

CONTRACTOR shall take into consideration Gas

prices commensurate with Gas Sales Agreements

in the adjacent and/or comparable Areas in Egypt

in terms of water depth and the reservoir depth to

enable a commercial contract including:

-



-



A sufficient delivery rate.

Delivery pressure to enter the National Gas Pipeline

Grid System at the point of delivery.

Delivered Gas quality specifications not more

stringent than those imposed or required for the

National Gas Pipeline Grid System.

The Gas prices as specified in the Gas Sales

Agreement.



(dd) In the event that CONTRACTOR has not entered into a

Gas Sales Agreement pursuant to Article VII (e) (2)or

otherwise found an acceptable scheme for commercial

disposal of such Gas , at the time of the expiration of

47



six (6) years from the approval date of a Gas

Development Lease or failing agreement with EGPC on

Gas disposal at the expiration of six (6) years ,

CONTRACTOR shall surrender to EGPC such

Development Lease (s) in which Gas discovery is made

(unless otherwise agreed by EGPC).

(ix) CONTRACTOR shall not be obligated to surrender a

Development Lease based on a Commercial Gas

Discovery, if Crude Oil has been discovered in

commercial quantities in the same Development Lease.

(f)



Operations:

If following the reversion to EGPC of any rights to Crude Oil

hereunder, CONTRACTOR retains rights to Gas in the same

Development Lease, or if, following surrender of rights to Gas

hereunder, CONTRACTOR retains rights to Crude Oil in the

same Development Lease, operations to explore for or exploit

the Petroleum, the rights to which have reverted or been

surrendered (Oil or Gas as the case may be) may only be

carried out by Operating Company which shall act on behalf

of EGPC alone, unless CONTRACTOR and EGPC agree

otherwise.



(g)



Tanker Scheduling:

At a reasonable time prior to the commencement of

Commercial Production EGPC and CONTRACTOR shall

meet and agree upon a procedure for scheduling tanker lifting

from the agreed upon point of export.



ARTICLE VIII

TITLE TO ASSETS

(a) EGPC shall become the owner of all CONTRACTOR acquired

and owned assets which assets were charged to Cost Recovery

by CONTRACTOR in connection with the operations carried out

by CONTRACTOR or Operating Company in accordance with

the following:

(1)



Land shall become the property of EGPC as soon as it is

purchased.

48



(2)



Title to fixed and movable assets shall be transferred

automatically and gradually from CONTRACTOR to EGPC

as they become subject to recovery in accordance with the

provisions of Article VII; however the full title to fixed and

movable assets shall be transferred automatically from

CONTRACTOR to EGPC when its total cost has been

recovered by CONTRACTOR in accordance with the

provisions of Article VII or at the time of termination of this

Agreement with respect to all assets chargeable to the

operations whether recovered or not, whichever first occurs.

The book value of the assets created during each calendar

quarter shall be communicated by CONTRACTOR to EGPC

or by Operating Company to EGPC and CONTRACTOR

within thirty (30) days of the end of each quarter.



(3)



All samples and technical data shall be transferred to EUG

once it is completed or requested or at the time of termination

of this Agreement.



(4)



EGPC shall have title through “EUG” to all original data and

information (original and/or copied as detailed in Article XIV

( e ), second paragraph) resulting from Petroleum operations

under this Agreement (either charged to recoverable costs or

not) including but not limited to geological, geophysical,

geochemical, petro physical, cores, cuttings taking from

drilling wells and engineering data; well logs and completion

status reports; and any other data that the COMTRACTOR

or anyone acting on its behalf may compile or obtain during

the term of this Agreement. (Including but not limited to

geological, geophysical, well logs and their sectors) As well

as all data and interpretations related to this data and other

information that is in the CONTRACTOR’s possession.



(b) During the term of this Agreement and the renewal period(s)

EGPC, CONTRACTOR and Operating Company are entitled to

the full use and enjoyment of all fixed and movable assets

referred to above in connection with operations hereunder or

under any other Petroleum concession agreement entered into

by the Parties. Proper accounting adjustment shall be made.

CONTRACTOR and EGPC shall not dispose of the same

except with agreement of the other.

49



(c) CONTRACTOR and Operating Company may freely import into

the A.R.E., use therein and freely export at the end of such use,

machinery and equipments which they either rent or lease in

accordance with good industry practices, including but not

limited to the lease of computer hardware and software.

ARTICLE IX

BONUSES

(a)



CONTRACTOR shall pay to EGPC as a signature bonus the

sum of ------------ million U.S. Dollars ($--------------- ) before the

Effective Date of the Concession Agreement , after the

relevant law is issued.



(b)



CONTRACTOR shall pay to EGPC the sum of ------------------------U.S. Dollars ($------------------), in case CONTRACTOR

retains an " Area to relinquish" according to the provisions of

Article V of this Agreement, upon the Minister of Petroleum

approval for such request.



(c)



CONTRACTOR shall pay to EGPC as a Development Lease

bonus the sum of ----------------------- U.S. Dollars ($-------) per

each Development Block (1’*1’) or part of a Development

Block, upon the approval of each Development Lease.



(d)



CONTRACTOR shall pay to EGPC as a Development Lease

First Extension bonus the sum of ---------------------- U.S.

Dollars

(------------------)

upon

the

approval

on

CONTRACTOR's request to enter into the first five (5) year

Extension Period pursuant to Article III (d) (iii) (bb).



(e) CONTRACTOR shall pay to EGPC as a Development Lease

Second Extension bonus the sum of ---------------------- U.S.

Dollars (----------------) upon the approval on CONTRACTOR's

request to enter into the second five (5) year Extension Period

pursuant to Article III (d) (iii) (bb).

(f)



CONTRACTOR shall pay to EGPC the sum of --------------------- U.S. Dollars (-----------------) as a cumulative production

bonus when the total cumulative production from the Area first

reaches the rate of one MMBOE (1,000,000) or equivalent,

Payment will be made within fifteen (15) days thereafter.

50



(g) CONTRACTOR shall pay to EGPC the sum of --------------------- U.S. Dollars (-----------------) as a cumulative production

bonus when the total cumulative production from the Area first

reaches the rate of two MMBOE (2,000,000) or equivalent,

Payment will be made within fifteen (15) days thereafter.

(h) CONTRACTOR shall pay to EGPC the sum of --------------------- U.S. Dollars (-----------------) as a cumulative production

bonus when the total cumulative production from the Area first

reaches the rate of four MMBOE (4,000,000) or equivalent,

Payment will be made within fifteen (15) days thereafter.

(i) CONTRACTOR shall pay to EGPC the sum of --------------------- U.S. Dollars (-----------------) as a cumulative production

bonus when the total cumulative production from the Area first

reaches the rate of six MMBOE (6,000,000) or equivalent,

Payment will be made within fifteen (15) days thereafter .

(j)



CONTRACTOR shall pay to EGPC the sum of --------------------- U.S. Dollars (-----------------) as a cumulative production

bonus when the total cumulative production from the Area first

reaches the rate of eight MMBOE (8,000,000) or equivalent,

Payment will be made within fifteen (15) days thereafter.



(k) CONTRACTOR shall pay to EGPC the sum of --------------------- U.S. Dollars (-----------------) as a cumulative production

bonus when the total cumulative production from the Area first

reaches the rate of ten MMBOE (10,000,000) or equivalent,

Payment will be made within fifteen (15) days thereafter.

(l) CONTRACTOR shall pay to EGPC at the beginning of every

Financial Year during any of the Exploration periods an amount

equal to fifty thousand U.S. Dollars ($50,000) as a training

bonus for the training of EGPC employees in departments of

Agreements , Exploration , Production and Financial Control

Foreign and Joint Venture companies. CONTRACTOR shall

also pay fifty thousand U.S. Dollars ($50,000) as a training

bonus for the training of EGPC employees from other

departments with a total amount of one hundred thousand U.S.

Dollars ($100,000).



51



(m) CONTRACTOR shall pay to EGPC at the beginning of every

Financial Year during any of the Development periods an

amount equal to fifty thousand U.S. Dollars ($50,000) as a

training bonus for the training of EGPC employees in

departments of Agreements , Exploration , Production and

Financial Control Foreign and Joint Venture companies.

CONTRACTOR shall also pay fifty thousand United States

Dollars ($50,000) as a training bonus for the training of EGPC

employees from other departments with a total amount of

one hundred thousand U.S. Dollars ($100,000).

(n)



CONTRACTOR/ CONTRACTOR Member shall pay to EGPC

the sum of two hundred thousand U.S. Dollars ($200,000), in

case CONTRACTOR or CONTRACTOR Member assigns in

whole or in part of it’s rights, privileges, duties and obligations

to

an

Affiliated

Company

of

the

same

CONTRACTOR/CONTRACTOR Member, on the date of the

GOVERNMENT's approval of each assignment request.



(o)



CONTRACTOR / CONTRACTOR Member shall pay to

EGPC as an Assignment Bonus on the date of the

GOVERNMENT's approval of each assignment requested by

any of the CONTRACTOR Members to any assignee,

pursuant to Article XXI, as follows:

1- During any Exploration period (as it may be extended),

CONTRACTOR / CONTRACTOR Member assigns in whole

or in part of its rights, privileges, duties and obligations to any

assignee ( other than an Affiliated Company of the same

CONTRACTOR /CONTRACTOR Member), CONTRACTOR

/CONTRACTOR Member shall pay to EGPC the sum

equivalent to ten percent (10%) valued in U.S. Dollars of the

total financial commitment of the then current Exploration

period during which the assignment is made and according to

the assigned percentage .

2- During the Development period or its extensions, in case

CONTRACTOR / CONTRACTOR Member assigns in whole

or in part of its rights, privileges, duties and obligations to any

assignee (other than an Affiliated Company of the same

CONTRACTOR

/

CONTRACTOR

Member),

CONTRACTOR/CONTRACTOR Member shall pay to EGPC

the sum equivalent to ten percent (10%), valued in U.S.

Dollars, of the value of each assignment deal which could be

any of the following:

52



 The financial value to be paid by the Assignee to the Assignor ; or

 The financial commitments for technical programs /Development plan;

or

 The financial value of the reserves , to be swapped between the

Assignor and the Assignee from the Development Lease(s) areas; or

 The financial value of shares and/or stocks to be exchanged between

the Assignor and the Assignee; or

 Any other type of deals to be declared.

3-



During any Exploration phase and after a Development Lease

is granted, in case CONTRACTOR / CONTRACTOR Member

assigns in whole or in part of its rights, privileges, duties and

obligations to any assignee (other than an Affiliated Company

of the same CONTRACTOR /CONTRACTOR Member)

CONTRACTOR/ CONTRACTOR Member shall pay to EGPC

the sum value, in U.S. Dollars, as mentioned in 1- and 2- above.

(p) All the above mentioned bonuses shall in no event be

recovered by CONTRACTOR.

(q) In the event that EGPC elects to develop any part of the Area

pursuant to the sole risk provisions of Article III (c) (iv),

production from such sole risk area shall be considered for the

purposes of this Article IX only if CONTRACTOR exercises its

option to share in such production, and only from the initial date

of sharing.



(r) Gas shall be taken into account for purposes of determining the

total average daily production from the Area under Article IX

(f-k) by converting daily Gas delivered into equivalent Barrels

of daily Crude Oil production in accordance with the following

formula:

MSCF x H x 0.167 = equivalent Barrels of Crude Oil

where

MSCF=

one thousand Standard Cubic Feet of Gas.

H



=



the number of million British Thermal Units (MMBTU)

per MSCF.



53



ARTICLE X

OFFICE AND SERVICE OF NOTICES

CONTRACTOR shall maintain an office in A.R.E. at which notices

shall be validly served.

The General Manager and Deputy General Manager shall be

entrusted by CONTRACTOR with sufficient power to carry out

immediately all local written directions given to them by the

GOVERNMENT or its representatives under the terms of this

Agreement. All lawful regulations issued or hereafter to be issued

which are applicable hereunder and not in conflict with this

Agreement shall apply to the duties and activities of the General

Manager and Deputy General Manager.

All matters and notices shall be deemed to be validly served which

are delivered to the office of the General Manager or which are sent

to him by registered mail to CONTRACTOR's office in the A.R.E. .

All matters and notices shall be deemed to be validly served which

are delivered to the office of the Chief Executive Officer of EGPC or

which are sent to him by registered mail at EGPC's main office in

Cairo.

ARTICLE XI

SAVING OF PETROLEUM AND PREVENTION OF LOSS

(a) Operating Company shall take all proper measures, according

to generally accepted methods in use in the Oil and Gas

industry to prevent loss or waste of Petroleum above or under

the ground in any form during drilling, producing, gathering, and

distributing or storage operations. The GOVERNMENT has the

right to prevent any operation on any well that it might

reasonably expect would result in loss or damage to the well or

the Oil or Gas field.

(b) Upon completion of the drilling of a productive well, Operating

Company shall inform the GOVERNMENT or its representative

"The Minister of Petroleum and Mineral Resources" of the time

when the well will be tested and the production rate

ascertained.

(c) Except in instances where multiple producing formations in the

same well can only be produced economically through a single

54



tubing string, Petroleum shall not be produced from multiple Oil

bearing zones through one string of tubing at the same time,

except with the prior approval of the GOVERNMENT or its

representative, which shall not be unreasonably withheld.

(d) Operating Company shall record data regarding the quantities

of Petroleum and water produced monthly from each

Development Lease. Such data shall be sent to the

GOVERNMENT or its representative on the special forms

provided for that purpose within thirty (30) days after the data

are obtained. Daily or weekly statistics regarding the production

from the Area shall be available at all reasonable times for

examination by authorized representatives of the

GOVERNMENT.

(e) Daily drilling records and the graphic logs of wells must show

the quantity and type of cement and the amount of any other

materials used in the well for the purpose of protecting

Petroleum, Gas bearing or fresh water strata.

(f)



Any substantial change of mechanical conditions of the well

after its completion shall be subject to the approval of the

representative of the GOVERNMENT.



ARTICLE XII

CUSTOMS EXEMPTIONS

(a) EGPC, CONTRACTOR, and Operating Company shall be

permitted to import and shall be exempted from customs duties,

any taxes, levies or fees (including fees imposed by Ministerial

Decision No. 254 of 1993 issued by the Minister of Finance,

as now or hereafter amended or substituted) of any nature

and from the importation rules with respect to the importation of

machinery, equipment, appliances, materials, items, means of

transport and transportation (the exemption from taxes and

duties for cars shall only apply to cars to be used in operations),

electric appliances, air conditioners for offices, field housing

and facilities, electronic appliances, computer hardware and

software, as well as spare parts required for any of the

imported items, all subject to a duly approved certificate issued

by the responsible representative nominated by EGPC for such

purpose, which states that the imported items are required for

55



conducting the operations pursuant to this Agreement . Such

certificate shall be final and binding and shall automatically

result in the importation and the exemption without any further

approval, delay or procedure.

(b) Machinery, equipment, appliances and means of transport and

transportation imported by EGPC's, CONTRACTOR's and

Operating Company's contractors and sub-contractors

temporarily engaged in any activity pursuant to the operations

which are the subject of this Agreement, shall be cleared under

the "Temporary Release System" without payment of customs

duties, any taxes, levies or fees (including fees imposed by

Ministerial Decision No. 254 of 1993 issued by the Minister of

Finance, as now or hereafter amended or substituted) of any

nature ,upon presentation of a duly approved certificate issued

by an EGPC responsible representative nominated by EGPC

for such purpose which states, that the imported items are

required for conducting the operations pursuant to this

Agreement. Items (excluding cars not to be used in operations)

set out in Article XII (a) imported by EGPC's, CONTRACTOR's

and Operating Company's contractors and sub-contractors for

the aforesaid operations, in order to be installed or used

permanently or consumed shall meet the conditions for

exemption set forth in Article XII (a) after being duly certified by

an EGPC responsible representative to be used for conducting

operations pursuant to this Agreement.

(c)



The expatriate employees of CONTRACTOR, Operating

Company and their contractors and sub-contractors shall not

be entitled to any exemptions from customs duties and other

ancillary taxes and charges except within the limits of the

provisions of the laws and regulations applicable in the A.R.E.

However, personal household goods and furniture (including

one (1) car) for each expatriate employee of CONTRACTOR

and/or Operating company shall be cleared under the

"Temporary Release System" (without payment of any

customs duties and other ancillary taxes) upon presentation of

a letter to the appropriate customs authorities by

CONTRACTOR or Operating Company approved by an

EGPC responsible representative that the imported items are

imported for the sole use of the expatriate employee and his

family, and that such imported items shall be re-exported

outside the A.R.E. upon the repatriation of the concerned

expatriate employee.

56



(d)



Items imported into the A.R.E. whether exempt or not exempt

from customs duties and other ancillary taxes and charges

hereunder, may be exported by the importing party at any time

after obtaining EGPC's approval, which approval shall not be

unreasonably withheld, without any export duties, taxes or

charges or any taxes or charges from which such items have

been already exempt, being applicable. Such items may be

sold within the A.R.E. after obtaining the approval of EGPC

which approval shall not be unreasonably withheld. In this

event, the purchaser of such items shall pay all applicable

customs duties and other ancillary taxes and charges

according to the condition and value of such items and the

tariff applicable on the date of sale, unless such items have

already been sold to an Affiliated Company of

CONTRACTOR, if any, or EGPC, having the same exemption,

or unless title to such items (excluding cars not used in

operations) has passed to EGPC.

In the event of any such sale under this paragraph (d), the

proceeds from such sale shall be divided in the following

manner:

CONTRACTOR shall be entitled to reimbursement of its

unrecovered cost, if any, in such items and the excess, if any,

shall be paid to EGPC.



(c) The exemption provided for in Article XII (a) shall not apply to

any imported items when items of the same or substantially the

same kind and quality are manufactured locally meeting

CONTRACTOR's and/or Operating Company's specifications for

quality and safety and are available for timely purchase and

delivery in the A.R.E. at a price not higher than ten percent (10%)

of the cost of the imported item, before customs duties but after

freight and insurance costs, if any, have been added.



(d) CONTRACTOR, EGPC and their respective buyers shall have

the right to export the Petroleum produced from the Area

pursuant to this Agreement and such Petroleum shall be

exempted from any customs duties, any taxes, levies or any

other imposts in respect of the export of Petroleum hereunder.



57



ARTICLE XIII

BOOKS OF ACCOUNT: ACCOUNTING AND PAYMENTS

(a)



(b)



(c)



EGPC, CONTRACTOR and Operating Company shall each

maintain at their business offices in the A.R.E. books of account,

in accordance with the Accounting Procedure in Annex "E" and

accepted accounting practices generally used in the Petroleum

industry, and such other books and records as may be necessary

to show the work performed under this Agreement, including the

amount and value of all Petroleum produced and saved hereunder.

CONTRACTOR and Operating Company shall keep their books of

account and accounting records in United States Dollars.

Operating Company shall furnish to the GOVERNMENT or its

representatives monthly returns showing the amount of Petroleum

produced and saved hereunder. Such returns shall be prepared in

the form required by the GOVERNMENT, or its representative and

shall be signed by the General Manager or by the Deputy General

Manager or a duly designated deputy and delivered to the

GOVERNMENT or its representative within thirty (30) days after

the end of the month covered in the returns.

The aforesaid books of account and other books and records

referred to above shall be available at all reasonable times for

inspection by duly authorized representatives of the

GOVERNMENT.

CONTRACTOR shall submit to EGPC a Profit and Loss Statement

of its Tax Year not later than four (4) months after the

commencement of the following Tax Year to show its net profit or

loss from the Petroleum operations under this Agreement for such

Tax Year.

CONTRACTOR shall at the same time submit a year-end Balance

Sheet for the same Tax Year to EGPC. The Balance Sheet and

financial statements shall be certified by an Egyptian certified

accounting firm.

ARTICLE XIV

RECORDS, REPORTS AND INSPECTION

(a) CONTRACTOR and/or Operating Company shall prepare and,

at all times while this Agreement is in force, maintain accurate

and current records of its operations in the Area.

CONTRACTOR and/or Operating Company shall furnish the

58



GOVERNMENT or its representative on annual basis, in

conformity with applicable regulations and in accordance with

sound and accepted Petroleum industry practices a detailed

report of all data , technical information and interpretations

collected during the year, concerning its operations under this

Agreement. Operating Company will perform the functions

indicated in this Article XIV in accordance with its role as

specified in Article VI.

(b) CONTRACTOR and/or Operating Company shall save and keep

for a reasonable period of time a representative portion of each

sample of cores and cuttings taken from drilling wells, to be

disposed of, or forwarded to the GOVERNMENT or its

representative in the manner directed by the GOVERNMENT.

All samples acquired by CONTRACTOR and/or Operating

Company for their own purposes shall be considered available

for inspection at any reasonable time by the GOVERNMENT or

its representatives.

(c) (Unless otherwise agreed to by EGPC), in case of exporting any

rock samples outside A.R.E., samples equivalent in size and

quality shall, before such exportation, be delivered to EGPC as

representative of the GOVERNMENT.

(d) Originals of records can only be exported with the permission of

EGPC; exporting such data shall be by transferring it digitally,

through EUG , for the purpose mentioned in this paragraph, if

possible, provided that a monitor or a comparable record is

maintained in EUG in the A.R.E., and provided that such exports

shall be repatriated to A.R.E. promptly following such processing

or analysis on the understanding that they belong to EGPC.

(e) During the period CONTRACTOR is conducting the Exploration

operations, EGPC's duly authorized representatives or

employees shall have the right to full and complete access to

the Area at all reasonable times with the right to observe the

operations being conducted and to inspect all assets, records

and data kept by CONTRACTOR. EGPC's representative, in

exercising its rights under the preceding sentence of this

paragraph (e), shall not interfere with CONTRACTOR's

operations. CONTRACTOR shall provide EGPC, through EUG,

with copies of any and all data (including, but not limited to,

geological and geophysical reports, logs and well surveys)

information and interpretation of such data, and other

information in CONTRACTOR's possession.

59



For the purpose of obtaining new offers or carrying out regional

studies, GOVERNMENT and/or EGPC shall, through EUG

during Exploration and Development period, show any third

party geophysical, geological data, information and other

technical data or CONTRACTOR's reports and interpretations,

with respect to the part or parts adjacent to the proposed area in

the new offers, upon notifying CONTRACTOR, and provided that

three (3) years have passed such data, unless CONTRACTOR

agrees to a shorter period.

CONTRACTOR shall also have the right to show any third party

the data relevant to the Area in case of assignment (subject to

EGPC's approval), in case CONTRACTOR desires to assign in

accordance with Article XXI.



ARTICLE XV

RESPONSIBILITY FOR DAMAGES

CONTRACTOR shall entirely and solely be responsible in law

toward third parties for any damage caused by CONTRACTOR's

Exploration and/or Exploitation operations and shall indemnify the

GOVERNMENT and/or EGPC against all damages for which they

may be held liable on account of any such operations.

However, any damage resulting from issuing any order, regulation

or direction of the GOVERNMENT of the Arab Republic of Egypt

whether in the form of a law or otherwise, EGPC and/or

CONTRACTOR shall be exempted from the responsibility of nonperformance or delay of any obligation hereunder, in consequence

of issuing these orders, regulations or directions in the limitation of

imposing these orders, regulations or directions. CONTRACTOR

shall be granted the necessary period to restore the damage done

of the non-performance or delay by adding a period to the period of

the Agreement, with respect to the Block or Blocks affected by these

orders , regulations or directions.



60



ARTICLE XVI

PRIVILEGES OF GOVERNMENT REPRESENTATIVES

Duly authorized representatives of the GOVERNMENT shall have

access to the Area covered by this Agreement and to the Operations

conducted thereon. Such representatives may examine the books,

registers and records of EGPC, CONTRACTOR and Operating

Company and make a reasonable number of surveys, drawings and

tests for the purpose of enforcing this Agreement. They shall, for this

purpose, be entitled to make reasonable use of the machinery and

instruments of CONTRACTOR or Operating Company on the

condition that no danger or impediment to the operations hereunder

shall arise directly or indirectly from such use. Such representatives

shall be given reasonable assistance by the agents and employees

of CONTRACTOR or Operating Company so that none of the

activities shall endanger or hinder the safety or efficiency of the

operations. CONTRACTOR or Operating Company shall offer such

representatives all privileges and facilities accorded to its own

employees in the field and shall provide them, free of charge, the

use of reasonable office space and of adequately furnished housing

while they are in the field for the purpose of facilitating the objectives

of this Article. Without prejudice to Article XIV (e) any and all

information obtained by the GOVERNMENT or its representatives

under this Article XVI shall be kept confidential with respect to the

Area.



ARTICLE XVII

EMPLOYMENT RIGHTS AND TRAINING OF

ARAB REPUBLIC OF EGYPT PERSONNEL

(a) It is the desire of EGPC and CONTRACTOR that operations

hereunder be conducted in a business-like and efficient manner:

(1) The expatriate administrative, professional and technical

personnel employed by CONTRACTOR or Operating

Company and the personnel of its contractors for the conduct

of the operations hereunder, shall be granted a residence as

provided for in Law No. 89 of 1960 as amended and Ministerial

Order No. 8180 of 1996 as amended, and CONTRACTOR

agrees that all immigration, passport, visa and employment

regulations of the A.R.E., shall be applicable to all alien

employees of CONTRACTOR working in the A.R.E.

61



(2) A minimum of twenty-five percent (25%) of the combined

salaries and wages of each of the expatriate administrative,

professional and technical personnel employed by

CONTRACTOR or Operating Company shall be paid monthly

in Egyptian Currency.

(b) CONTRACTOR and Operating Company shall each select its

employees and determine the number thereof, to be used for

operations hereunder.

(c) CONTRACTOR, shall after consultation with EGPC, prepare and

carry out specialized training programs for all its A.R.E.

employees engaged in operations hereunder with respect to

applicable and financial aspects of the Petroleum industry.

CONTRACTOR and Operating Company shall give preference

to the employment of qualified Egyptian nationals.

(d) During Exploration and Development phases, CONTRACTOR

shall give mutually agreed numbers of EGPC employees an

opportunity to attend and participate in CONTRACTOR's and

CONTRACTOR's Affiliated Companies

training programs

relating to Exploration and Development operations, with

annual total cost ------------------U.S. Dollars ( $------------) In the

event that the total cost of such programs is less than -----------------U.S. Dollars ( $------------) in any Financial Year during such

period, CONTRACTOR shall pay EGPC the amount of the

shortfall within thirty (30) days following the end of such

Financial Year. However, EGPC shall have the right that said

amount ------------------U.S. Dollars ( $------------) allocated for

training, be paid directly to EGPC for such purpose.

ARTICLE XVIII

LAWS AND REGULATIONS

(a) CONTRACTOR and Operating Company shall be subject to Law

No. 66 of 1953 for Mines and Quarries (excluding Article 37

thereof) and its amendments and the regulations issued for the

implementation thereof, including the regulations for the safe

and efficient performance of operations carried out for the

execution of this Agreement and for the conservation of the

Petroleum resources of the A.R.E. provided that no regulations,

or modification or interpretation thereof, shall be contrary to or

inconsistent with the provisions of this Agreement.

62



(b) CONTRACTOR and Operating Company shall be subject to the

provisions of the Law No. 4 of 1994 concerning the environment

and its executive regulation as may be amended, as well as any

laws or regulations may be issued, concerning the protection of

the environment.

(e) Except as provided in Article III (g) for Income Taxes, EGPC,

CONTRACTOR and Operating Company shall be exempted

from all taxes and duties, whether imposed by the

GOVERNMENT or municipalities including among others,

Sales Tax, Value Added Tax and Taxes on the Exploration,

Development, extracting, producing, exporting or transporting

of Petroleum and LPG as well as any and all withholding taxes

that might otherwise be imposed on dividends, interest,

technical service fees, patent and trademark royalties, and

similar items. CONTRACTOR shall also be exempted from any

tax on the liquidation of CONTRACTOR, or distributions of any

income to the shareholders of CONTRACTOR, and from any

tax on capital.

(d) The rights and obligations of EGPC and CONTRACTOR

hereunder, and for the effective term of this Agreement shall be

governed by and in accordance with the provisions of this

Agreement and can only be altered or amended by the written

mutual agreement of the said contracting parties in the same

procedures by which the original Agreement has been issued.

(e) The contractors and sub-contractors of CONTRACTOR and

Operating Company shall be subject to the provisions of this

Agreement which affect them. Insofar as all regulations which

are duly issued by the GOVERNMENT apply from time to time

and are not in accord with the provisions of this Agreement,

such regulations shall not apply to CONTRACTOR, Operating

Company and their respective contractors and sub-contractors,

as the case may be.

(f) EGPC, CONTRACTOR, Operating Company and their

respective contractors and sub-contractors shall for the

purposes of this Agreement be exempted from all professional

stamp duties, imposts and levies imposed by syndical laws with

respect to their documents and activities hereunder.



63



(g) All the exemptions from the application of the A.R.E. laws or

regulations granted to EGPC, CONTRACTOR, the Operating

Company, their contractors and sub-contractors under this

Agreement shall include such laws and regulations as presently

in effect or hereafter amended or substituted.

ARTICLE XIX

STABILIZATION

In case of changes in existing legislation or regulations

applicable to the conduct of Exploration, Development and

production of Petroleum, which take place after the Effective

Date, and which significantly affect the economic interest of this

Agreement to the detriment of CONTRACTOR or which imposes

on CONTRACTOR an obligation to remit to the A.R.E. the

proceeds from sales of CONTRACTOR's Petroleum,

CONTRACTOR shall notify EGPC of the subject legislative or

regulatory measure and also the consequent effects upon

issuing legislation or regulation which impact on the stabilization.

In such case, the Parties shall negotiate possible modifications

to this Agreement designed to restore the economic balance

thereof which existed on the Effective Date.

The Parties shall use their best efforts to agree on amendments

to this Agreement within ninety (90) days from aforesaid notice.

These amendments to this Agreement shall not in any event

diminish or increase the rights and obligations of

CONTRACTOR as these were agreed on the Effective Date.

In case of the parties’ failure to solve the disputes, Article XXIV

of this Agreement shall be applied.

ARTICLE XX

RIGHT OF REQUISITION

(a) In case of national emergency due to war or imminent expectation

of war or internal causes, the GOVERNMENT may requisition all

or part of the production from the Area obtained hereunder and

require Operating Company to increase such production to the

utmost possible maximum. The GOVERNMENT may also

requisition the Oil and/or Gas field itself and, if necessary, related

facilities.



64



(b) In any such case, such requisition shall not be effected except after

inviting EGPC and CONTRACTOR or their representative by

registered letter, with acknowledgement of receipt, to express their

views with respect to such requisition.

(c) The requisition of production shall be effected by Ministerial Order.

Any requisition of an Oil and/or Gas field, or any related facilities

shall be effected by a Presidential Decree duly notified to EGPC and

CONTRACTOR.

(d) In the event of any requisition as provided above, the

GOVERNMENT shall indemnify in full EGPC and CONTRACTOR

for the period during which the requisition is maintained, including:

(1)

(2)



All damages which result from such requisition; and

Full repayment each month for all Petroleum extracted

by the GOVERNMENT less the royalty share of such

production.

However, any damage resulting from enemy attack is not within the

meaning of this paragraph (d). Payment hereunder shall be made

to CONTRACTOR in U.S. Dollars remittable abroad. The price paid

to CONTRACTOR for Petroleum taken shall be calculated in

accordance with Article VII (c).

ARTICLE XXI

ASSIGNMENT

(a) Neither EGPC nor CONTRACTOR may assign to a person, firm or

corporation, in whole or in part, any of its rights, privileges, duties or

obligations under this Agreement either directly or indirectly (indirect

assignment shall mean, for example but not limited to , any sale,

purchase, transfer of stocks, capital or assets or any other action

that would change the control of CONTRACTOR/CONTRACTOR

MEMBER on its share in the company's capital) without the written

consent of the GOVERNMENT, and in all cases priority shall be

given to EGPC, if it so desires, to obtain such interest intended to be

assigned (except assignment to an Affiliated Company of the same

CONTRACTOR Member).

(b) Without prejudice to Article XXI (a) , CONTRACTOR may assign all

or any of its rights, privileges, duties and obligations under this

Agreement to an Affiliated Company of the same CONTRACTOR/

CONTRACTOR Member, provided that CONTRACTOR shall notify

65



EGPC and the GOVERNMENT in writing and obtain the written

approval of the GOVERNMENT on the assignment.

In the case of an assignment either in a whole or in a part to an

Affiliated Company, the assignor together with the assignee shall

remain jointly and severally liable for all duties and obligations of

CONTRACTOR under this Agreement provided such Affiliated

Company remains in the same capacity as an Affiliated Company.

(c) To enable consideration to be given to any request for such

GOVERNMENT's consent referred to in (a) or (b) above, the

following conditions must be fulfilled:

(1) The obligations of the assignor deriving from this

Agreement must have been duly fulfilled as of the date

such request is made.

(2) The instrument of assignment must include provisions

stating precisely that the assignee is bound by all

covenants contained in this Agreement and any

modifications or additions in writing that up to such time

may have been made. A draft of such instrument of

assignment shall be submitted to EGPC for review and

approval before being formally executed.

(3) The assignor(s) must submit to EGPC reasonable

documents that evidence the assignee's financial and

technical competence, and the documents that confirm the

affiliation

of

such

company

to

the

CONTRACTOR/CONTRACTOR MEMBER.

(d) Any assignment, sale, transfer or other such conveyance made

pursuant to the provisions of this Article XXI shall be free of any

transfer, capital gains taxes or related taxes, charges or fees

including without limitation, all Income Tax, Sales Tax, Value

Added Tax, Stamp Duty, or other Taxes or similar payments.

(e)



Once the assignor and a proposed third party assignee, other

than an Affiliated Company, have agreed the final conditions of

an assignment, the assignor shall disclose in details such final

conditions, including the value of each assignment deal valued

in U.S. Dollars, in a written notification to EGPC. EGPC shall

have the right to acquire the interest intended to be assigned, if

within ninety (90) days from assignor’s written notification,

EGPC delivers to the assignor a written notification that it

accepts the same conditions agreed to with the proposed third

66



party assignee. If EGPC does not deliver such notification

within such ninety (90) day period, the assignor shall have the

right to assign to the proposed third party assignee, subject to

the Government’s approval under paragraph (a) of this Article.

In the event that EGPC exercises its option to acquire the

interest intended to be assigned and if a “joint operating

agreement” is not already existing among the CONTRACTOR

MEMBERS including the assignor, EGPC and CONTRACTOR

shall negotiate in good faith to enter into a joint operating

agreement, according to the model published by the

Association for International Petroleum Negotiators to finalize

such agreement within one hundred and twenty (120) days

from EGPC’s notification. If EGPC and CONTRACTOR cannot

agree on a joint operating agreement within such one hundred

and twenty (120) day period, the assignor shall have the right

to assign to the proposed third party assignee, subject to the

Government’s approval under paragraph (a) of this Article.

(f)



As long as the assignor shall hold any interest under this

Agreement, the assignor together with the assignee shall be

jointly and severally liable for all duties and obligations of

CONTRACTOR under this Agreement.

ARTICLE XXII

BREACH OF AGREEMENT AND POWER TO CANCEL



(a) The GOVERNMENT shall have the right to cancel this

Agreement by Order or Presidential Decree, with respect to

CONTRACTOR, in the following instances:

(1)



If it knowingly has submitted any false statements to the

GOVERNMENT which were of a material consideration for

the execution of this Agreement;



(2)



If it assigns any interest hereunder contrary to the provisions

of Article XXI;



(3)



If it is adjudicated bankrupt by a court of competent

jurisdiction;



(4)



If it does not comply with any final decision reached as the

result of court proceedings conducted under Article XXIV (a);



67



(5)



If it intentionally extracts any mineral other than Petroleum

not authorized by this Agreement or without the authority of

the GOVERNMENT, except such extractions as may be

unavoidable as the result of the operations conducted

hereunder in accordance with accepted Petroleum industry

practice and which shall be notified to the GOVERNMENT

or its representatives as soon as possible; and



(6)



If it commits any material breach of this Agreement or of the

provisions of Law No. 66 of 1953, as amended by Law No.

189 of 2014, which are not contradicted by the provisions of

this Agreement.

Such cancellation shall take place without prejudice to any

rights which may have accrued to the GOVERNMENT

against CONTRACTOR in accordance with the provisions of

this Agreement, and, in the event of such cancellation,

CONTRACTOR, shall have the right to remove from the Area

all its personal property.



(b) If the GOVERNMENT deems that one of the aforesaid causes

(other than a force majeure cause referred to in Article XXIII)

exists to cancel this Agreement, the GOVERNMENT shall give

CONTRACTOR ninety (90) days written notice personally

served on CONTRACTOR's General Manager in the legally

official manner and receipt of which is acknowledged by him or

by his legal agents, to remedy and remove such cause; but if

for any reason such service is impossible due to unnotified

change of address, publication in the Official Journal of the

GOVERNMENT of such notice shall be considered as valid

service upon CONTRACTOR. If at the end of the said ninety

(90) day notice period such cause has not been remedied and

removed, this Agreement may be canceled forthwith by Order

or Presidential Decree as aforesaid; provided however, that if

such cause, or the failure to remedy or remove such cause,

results from any act or omission of one party, cancellation of

this Agreement shall be effective only against that party and not

as against any other party hereto.



68



ARTICLE XXIII

FORCE MAJEURE

(a) The non-performance or delay in performance by EGPC and

CONTRACTOR, or either of them of any obligation under this

Agreement shall be excused if, and to the extent that, such nonperformance or delay is caused by force majeure. The period of

any such non-performance or delay, together with such period

as may be necessary for the restoration of any damage done

during such delay, shall be added to the time given in this

Agreement for the performance of such obligation and for the

performance of any obligation dependent thereon and

consequently, to the term of this Agreement, but only with

respect to the block or blocks affected.

(b) "Force Majeure" within the meaning of this Article XXIII, shall be

any act of God, insurrection, riot, war, strike, and other labor

disturbance, fires, floods or any cause not due to the fault or

negligence of EGPC and CONTRACTOR or either of them,

whether or not similar to the foregoing, provided that any such

cause is beyond the reasonable control of EGPC and

CONTRACTOR, or either of them.

(c) Without prejudice to the above and except as may be otherwise

provided herein, the GOVERNMENT shall incur no responsibility

whatsoever to EGPC and CONTRACTOR, or either of them for

any damages, restrictions or loss arising in consequence of such

case of force majeure hereinafter referred to in this Article.

(d) If the force majeure event occurs during the initial Exploration

period or any extension thereof and continues in effect for a

period of six (6) months CONTRACTOR shall have the option

upon ninety (90) days prior written notice to EGPC to terminate

its obligations hereunder without further liability of any kind.



ARTICLE XXIV

DISPUTES AND ARBITRATION

(a) Any dispute, controversy or claim arising out of or relating to this

Agreement or the breach, termination or invalidity thereof,

between the GOVERNMENT and the parties shall be referred to

the jurisdiction of the appropriate courts of A.R.E. to settle any

dispute arising on the interpretation or the execution of any term

of this Agreement.

69



(b) Any dispute, controversy or claim arising out of or relating to

this Agreement, or breach, termination or invalidity thereof

between EGPC and CONTRACTOR shall be settled by

arbitration in accordance with the Arbitration Rules of the

Cairo Regional Center for International Commercial Arbitration

(the Center) in effect on the date of this Agreement, the approval

of the Minister of Petroleum is provided in case EGPC only turn

to arbitration. The award of the arbitrators shall be final and

binding on the parties.

(c) The number of arbitrators shall be three (3).

(d) Each party shall appoint one arbitrator. If, within thirty (30) days

after receipt of the claimant's notification of the appointment of

an arbitrator the respondent has not notified the claimant in

writing of the name of the arbitrator he appoints, the claimant

may request the Center to appoint the second arbitrator.

(e) The two arbitrators thus appointed shall choose the third

arbitrator who will act as the presiding arbitrator of the tribunal. If

within thirty (30) days after the appointment of the second

arbitrator, the two arbitrators have not agreed upon the choice of

the presiding arbitrator, then either party may request the

Secretary General of the Permanent Court of Arbitration at the

Hague to designate the appointing authority. Such appointing

authority shall appoint the presiding arbitrator in the same way

as a sole arbitrator would be appointed under Article 6.3 of the

UNCITRAL Arbitration Rules. Such presiding arbitrator shall be

a person of a nationality other than A.R.E. or --------------- and of

a country which has diplomatic relations with both A.R.E. and

------------------ and who shall have no economic interest in the

Petroleum business of the signatories hereto.

(f) Unless otherwise agreed by the parties to the arbitration, the

arbitration, including the making of the award, shall take place in

Cairo, A.R.E. .

(g)The decision of the arbitrators shall be final and binding upon the

Parties, including the arbitration fees and all the related issues

and the execution of the arbitrators decision shall be referred to

the appropriate courts according to the Egyptian laws.

(h) Egyptian Law shall apply to the dispute except that in the event

of any conflict between Egyptian Laws and this Agreement, the

provisions of this Agreement (including the arbitration provision)

shall prevail. The arbitration shall be conducted in both Arabic

and English languages.

70



(i) EGPC and CONTRACTOR shall agree that if, for whatever

reason, arbitration in accordance with the above procedure

cannot take place, all disputes, controversies or claims arising

out of or relating to this Agreement or the breach, termination or

invalidity thereof shall be settled by ad hoc arbitration in

accordance with the UNCITRAL Rules in effect on the Effective

Date.

ARTICLE XXV

STATUS OF PARTIES

(a)



(b)



(c)



The rights, duties, obligations and liabilities in respect of EGPC

and CONTRACTOR hereunder shall be several and not joint or

collective, it being understood that this Agreement shall not be

construed as constituting an association or corporation or

partnership.

CONTRACTOR shall be subject to the laws of the place where it

is incorporated regarding its legal status or creation, organization,

charter and by-laws, shareholding, and ownership.

CONTRACTOR's shares of capital which are entirely held abroad

shall not be negotiable in the A.R.E. and shall not be offered for

public subscription nor shall be subject to the stamp tax on capital

shares nor any tax or duty in the A.R.E.. Any procedure carried

out by CONTRACTOR/CONTRACTOR MEMBER in A.R.E. or

outside A.R.E. that leads to change of control of the

CONTRACTOR/CONTRACTOR MEMBER on its share in the

company's capital, shall be subject to the procedures and

provisions of Article IX" Bonuses" and Article XXI ''Assignment''.

CONTRACTOR shall be exempted from the application of Law

No. 159 of 1981 as amended.

In case CONTRACTOR consists of more than one member, all

CONTRACTOR Members shall be jointly and severally liable for

the performance of the obligations of CONTRACTOR under this

Agreement.



71



ARTICLE XXVI

LOCAL CONTRACTORS AND

LOCALLY MANUFACTURED MATERIAL

CONTRACTOR or Operating Company, as the case may be, and their

contractors shall:

(a) Give priority to local contractors and sub-contractors, including EGPC's

Affiliated Companies as long as their performance is comparable with

international performance and the prices of their services are not

higher than the prices of other contractors and sub-contractors by more

than ten percent (10%).

(b) Give preference to locally manufactured material, equipment,

machinery and consumables so long as their quality and time of

delivery are comparable to internationally available material,

equipment, machinery and consumables. However, such material,

equipment, machinery and consumables may be imported for

operations conducted hereunder if the local price of such items at

CONTRACTOR's or Operating Company's operating base in A.R.E. is

more than ten percent (10%) higher than the price of such imported

items before customs duties, but after transportation and insurance

costs have been added.

ARTICLE XXVII

ARABIC TEXT

The Arabic version of this Agreement shall, before the appropriate courts

of A.R.E., be referred to in construing or interpreting this Agreement;

provided however , that in any arbitration pursuant to Article XXIV herein

above between EGPC and CONTRACTOR the English and Arabic

versions shall both be referred to as having equal force in construing or

interpreting this Agreement.

[



ARTICLE XXVIII

GENERAL

The headings or titles to each of the Articles to this Agreement are solely

for the convenience of the parties hereto and shall not be used with respect

to the interpretation of said Articles.



72



ARTICLE XXIX

COPIES OF THE AGREEMENT

This Agreement is issued of --- (--) identical originals, the Government

and EGPC retain three (3) originals, CONTRACTOR retains -- (--)

original of this Agreement to act in accordance to its provisions if

necessary.



ARTICLE XXX

LEGAL HEADQUARTERES

The parties approved that the address supplemented to their entity in

the preface is their chosen address for notification, all notices sent and

correspondences received in such address are considered valid with the

outcome of all its legitimate effects. In the event any of the parties

changes the aforesaid address, such Party shall notify the other Party

by a registered letter upon receipt otherwise, the correspondence only

sent to the aforementioned address is to be considered valid with the

outcome of all its legitimate effects.



73



ARTICLE XXXI

APPROVAL OF THE GOVERNMENT

This Agreement shall not be binding upon any of the parties hereto

unless and until a law is issued by the competent authorities of

the A.R.E. authorizing the Minister of Petroleum to sign this

Agreement and giving this Agreement full force and effect of law

notwithstanding any countervailing Governmental enactment , and

the Agreement is signed by the GOVERNMENT, EGPC, and

CONTRACTOR.

-------------------------------------------------



By

Mr.: ----------------------------------------In his capacity: ----------------------------------------Signature: ----------------------------------------EGYPTIAN GENERAL PETROLEUM CORPORATION

By

Mr.: ----------------------------------------In his capacity: ----------------------------------------Signature: ----------------------------------------ARAB REPUBLIC OF EGYPT

By

His Excellency :----------------------------------------In his capacity: ----------------------------------------Signature: ----------------------------------------Date: -----------------------------------------



74



ANNEX "A"

CONCESSION AGREEMENT

BETWEEN

THE ARAB REPUBLIC OF EGYPT

AND

THE EGYPTIAN GENERAL PETROLEUM CORPORATION

AND

-----------------------------------------------IN

-------------------------------- AREA

-----------------------------------------------A.R.E.

BOUNDARY DESCRIPTION OF THE CONCESSION AREA

Annex "B" is a provisional illustrative map at an approximate scale

of 1 : ------------------ showing the Area covered and affected by this

Agreement.

-



-



The Area measures approximately -----------------square

kilometers and ---------------------------- square meters

(---------------- km2) of surface Area. It is composed of all or part

of Exploration Blocks, the whole Blocks are defined on three (3)

minutes latitude by three (3) minutes longitude grid.

It is to be noted that the delineation lines of the Area in Annex

"B" are intended to be only illustrative and provisional and may

not show accurately their true position in relation to existing

monuments and geographical features.



75



Coordinates of the corner points of the Area are given in the

following table which forms an integral part of Annex "A":BOUNDARY COORDINATES

OF



76



ANNEX “B”

Map of Concession Agreement



77



ANNEX "C"

Letter of Guaranty

Letter of Guaranty No. --- (Cairo ------------ 200--)

EGYPTIAN GENERAL PETROLEUM CORPORATION.

Gentlemen,

The undersigned, National Bank of Egypt ( or any bank operating

in A.R.E. under the supervision of the Central Bank of Egypt and

that has credit rating not less than that of A.R.E. ) as Guarantor,

hereby guarantees to the EGYPTIAN GENERAL PETROLUEM

CORPORATION ( hereinafter referred to as “ EGPC ”) to the limit

of ----------------------- million U.S. Dollars ($------------------), the

performance by “---------------------------“ (hereinafter referred to as

“CONTRACTOR”) of its obligations required for Exploration

operations to spend a minimum of ---------------- million U.S. Dollars

($------------------) during the initial ------------ (--) year of the

Exploration period under Article IV of the Concession Agreement

issued by Law No. ------------------------------ (hereinafter referred to

as the “Agreement”) covering ----------------- Area---------------------described in Annexes “A” and “B” of said Agreement, by and

between the Arab Republic of Egypt (hereinafter referred to as

“A.R.E.”), EGPC and CONTRACTOR, dated ------- .

It is understood that this Guaranty and the liability of the Guarantor

hereunder shall be reduced quarterly, during the period of

expenditure of said ------------------- million U.S. Dollars ($-------------)

by the amount of money expended by CONTRACTOR for such

Exploration operations during each such quarter. Each such

reduction shall be established by the joint written statement of

CONTRACTOR and EGPC.

In the event of a claim by EGPC of non-performance or surrender

of the Agreement on the part of CONTRACTOR prior to fulfillment

of said minimum expenditure obligations under Article IV of the

Agreement, there shall be no liability on the undersigned Guarantor

for payment to EGPC unless and until such liability has been

established by written statement of EGPC setting forth the amount

due under the Agreement.



78



It is a further condition of this Letter of Guaranty that:

(1) This Letter of Guaranty will become available only provided

that the Guarantor will have been informed in writing by

CONTRACTOR and EGPC that the Agreement between

CONTRACTOR, A.R.E. and EGPC has become effective

according to its terms and said Guaranty shall become

effective on the Effective Date of said Agreement.

(2) This Letter of Guaranty shall in any event automatically expire:

(a) ---------------- years and six (6) months after the date it

becomes effective, or

(b) At such time as the total of the amounts shown on

quarterly

joint

statements

of

EGPC

and

CONTRACTOR equals or exceeds the amount of said

minimum expenditure obligation, whichever is earlier.

(3) Consequently, any claim, in respect thereof should be made to

the Guarantor prior to either of said expiration dates at the

latest accompanied by EGPC's written statement, setting forth

the amount of under-expenditure by CONTRACTOR to the

effect that:

(a) CONTRACTOR has failed to perform its expenditure

obligations referred to in this Guaranty, and

(b) CONTRACTOR has failed to pay the expenditure

deficiency to EGPC.

Please return to us this Letter of Guaranty in the event it does not

become effective, or upon the expiry date.

Yours Faithfully,

Accountant: -------------------------------Manager: -----------------------------------



79



ANNEX "D"

CHARTER OF OPERATING COMPANY

ARTICLE I

A joint stock company having the nationality of the ARAB

REPUBLIC OF EGYPT shall be formed with the authorization of the

GOVERNMENT in accordance with the provisions of this

Agreement referred to below and of this Charter.

The Company shall be subject to all laws and regulations in force in

the A.R.E. to the extent that such laws and regulations are not

inconsistent with the provisions of this Charter and the Agreement

referred to below.

ARTICLE II

The name of the Operating Company shall be mutually agreed upon

between EGPC and CONTRACTOR before the date of the

Minister's of Petroleum approval of the Development Lease and

shall be subject to the approval of the Minister of Petroleum.

ARTICLE III

The Head Office of Operating Company shall be in the A.R.E. in

Cairo.

ARTICLE IV

The object of Operating Company is to act as the agency through

which EGPC and CONTRACTOR, carry out and conduct the

Development operations required

in

accordance with the

provisions of the Agreement signed on the ------ day of --------------by and between the ARAB REPUBLIC OF EGYPT, THE

EGYPTIAN

GENERAL PETROLEUM CORPORATION and

CONTRACTOR covering Petroleum operations in --------------------Area , ----------- described therein.



80



Operating Company shall be the agency to carry out and conduct

Exploration operations on the date it comes into existence pursuant

to Work Programs and Budgets approved in accordance with the

Agreement.



Operating Company shall keep account of all costs, expenses and

expenditures for such operations under the terms of the Agreement

and Annex "E" thereto.

Operating Company shall not engage in any business or undertake

any activity beyond the performance of said operations unless

otherwise agreed upon by EGPC and CONTRACTOR.



ARTICLE V

The authorized capital of Operating Company is twenty thousand

(20,000) Egyptian Pounds divided into five thousand (5,000) shares

of common stock with a value of four Egyptian Pounds per share

having equal voting rights, fully paid and non-assessable.

EGPC and CONTRACTOR shall each pay for, hold and own,

throughout the life of Operating Company, one half (1/2) of the

capital stock of Operating Company provided that only in the event

that either party should transfer or assign the whole or any

percentage of its ownership interest in the entirety of the

Agreement, may such transferring or assigning party transfer or

assign any of the capital stock of Operating Company and, in that

event, such transferring or assigning party (and its successors

and assignees) must transfer and assign a stock interest in

Operating Company equal to the transferred or assigned whole or

percentage of its ownership interest in the entirety of the said

Agreement.



81



ARTICLE VI

Operating Company shall not own any right, title, interest or estate

in or under the Agreement or any Development Lease created

thereunder or in any of the Petroleum produced from any

Exploration Block or Development Lease thereunder or in any of the

assets, equipment or other property obtained or used in connection

therewith, and shall not be obligated as a principal for the financing

or performance of any of the duties or obligations of either EGPC or

CONTRACTOR under the Agreement. Operating Company shall

not make any profit from any source whatsoever.



ARTICLE VII

Operating Company shall be no more than an agent for EGPC and

CONTRACTOR. Whenever it is indicated herein that Operating

Company shall decide, take action or make a proposal and the like,

it is understood that such decision or judgment is the result of the

decision or judgment of EGPC/CONTRACTOR or EGPC and

CONTRACTOR, as may be required by the Agreement.



ARTICLE VIII

Operating Company shall have a Board of Directors consisting of

eight (8) members, four (4) of whom shall be designated by EGPC

and the other four (4) by CONTRACTOR. The Chairman shall be

designated by EGPC and shall also be a Managing Director.

CONTRACTOR shall designate the General Manager who shall

also be a Managing Director.



ARTICLE IX

Meetings of the Board of Directors shall be valid if a majority of the

Directors are present and any decision taken at such meetings must

have the affirmative vote of five (5) or more of the Directors;

provided, however, that any Director may be represented and vote

by proxy held by another Director.



82



ARTICLE X

General meetings of the Shareholders shall be valid if a majority of

the capital stock of Operating Company is represented thereat. Any

decision taken at such meetings must have the affirmative vote of

Shareholders owning or representing a majority of the capital stock.

ARTICLE XI

The Board of Directors shall approve the regulations covering the

terms and conditions of employment of the personnel of Operating

Company employed directly by Operating Company and not

assigned thereto by CONTRACTOR and EGPC.

The Board shall, in due course, draw up the By-Laws of Operating

Company, and such By-Laws shall be effective upon being

approved by a General Meeting of the Shareholders, in accordance

with the provisions of Article X hereof.

ARTICLE XII

Operating Company shall come into existence within thirty (30) days

after the date of the Minister's of Petroleum approval of a

Development Lease, whether for Oil or Gas , as provided for in the

Agreement (unless otherwise agreed by EGPC and

CONTRACTOR).

The duration of Operating Company shall be for a period equal to

the duration of the said Agreement, including any renewal thereof.

The Operating Company shall be wound up if the Agreement

referred to above is terminated for any reason as provided for

therein.

-------------------------------------------------



By

Mr.: ----------------------------------------In his capacity: ----------------------------------------Signature: ----------------------------------------EGYPTIAN GENERAL PETROLEUM CORPORATION

By

Mr.: ----------------------------------------In his capacity: ----------------------------------------Signature: ----------------------------------------DATE: ------------------------83



ANNEX "E"

ACCOUNTING PROCEDURE

ARTICLE I

GENERAL PROVISIONS

(a)



Definitions:

The definitions contained in Article I of the Agreement shall

apply to this Accounting Procedure and have the same

meanings.



(b)



Statements of activity:



(1) CONTRACTOR shall, pursuant to Article IV of this Agreement,

and until the coming into existence of the Operating Company in accordance with Article VI of the Agreement - render to EGPC

within thirty (30) days of the end of each calendar quarter a

Statement of Exploration Activity reflecting all charges and

credits related to the Exploration Operations for that quarter

summarized by appropriate classifications indicative of the

nature thereof.

(2) Following its coming into existence, Operating Company shall

render to EGPC and CONTRACTOR within fifteen (15) days of

the end of each calendar quarter a Statement of Development

and Exploration Activity reflecting all charges and credits related

to the Development and Exploration operations for that quarter

summarized by appropriate classifications indicative of the

nature thereof, except that items of controllable material and

unusual charges and credits shall be detailed.

Pursuant to Article VII, EGPC shall audit and approve each

statement of Development and Exploration Activity submitted by the

CONTRACTOR or the Operating Company (as the case may be).

Any comments made by EGPC shall be reflected by the

CONTRACTOR or the Operating Company (as the case may be) on

the Statement produced for the next calendar quarter.



84



(c)



Adjustments and Audits:



(1)



Each quarterly Statement of Exploration Activity pursuant to

Article I (b) (1) of this Annex shall conclusively be presumed to

be true and correct after three (3) months following the receipt

of each Statement by EGPC unless within the said three (3)

months EGPC takes written exception thereto pursuant to

Article IV (f) of the Agreement. During the said three (3) month

period supporting documents will be available for inspection by

EGPC during all working hours.

CONTRACTOR will have the same audit rights on Operating

Company Statements as EGPC under this sub-paragraph.



(2)



All Statements of Development and Exploration Activity for any

calendar quarter pursuant to Article I (b) (2) of this Annex, shall

conclusively be presumed to be true and correct three (3)

months following the receipt of such Statement, unless within

the said three (3) month period EGPC or CONTRACTOR takes

written exception thereto. Pending expiration of said three (3)

months EGPC or CONTRACTOR or both of them shall have the

right to audit Operating Company accounts, records and

supporting documents for such quarter in the same manner as

provided in Article IV (f) of the Agreement.



(d)



Currency Exchange:

CONTRACTOR's books for Exploration and Operating

Company's books for Development and Exploration, if any,

shall be kept in the A.R.E. in U.S. Dollars. All U.S. Dollars

expenditures shall be charged in the amount expended. All

Egyptian Pounds expenditures shall be converted to U.S.

Dollars at the applicable rate of exchange issued by the

Central Bank of Egypt on the first day of the month in which

expenditures are recorded, and all other non-U.S. Dollars

expenditures shall be translated to U.S. Dollars at the buying

rate of exchange for such currency as quoted by National

Westminster Bank Limited, London at 10.30 a.m. G.M.T., on

the first day of the month in which expenditures are recorded.

A record shall be kept of the exchange rates used in translating

Egyptian Pounds or other non-U.S. Dollars expenditures to

U.S. Dollars.



85



(e) Precedence of Documents:

In the event of any inconsistency or conflict between the

provisions of this Accounting Procedure and the provisions of the

Agreement treating the same subject differently, then the

provisions of the Agreement shall prevail.

(f)



Revision of Accounting Procedure:

By mutual agreement between EGPC and CONTRACTOR, this

Accounting Procedure may be revised in writing from time to time

in the light of future arrangements.



(g) No Charge for Interest on Investment:

Interest on investment or any bank fees, charges or commissions

related to any bank guarantees shall not at any time be charged

as recoverable costs under the Agreement.



ARTICLE II

COSTS, EXPENSES AND EXPENDITURES

Subject to the provisions of the Agreement, CONTRACTOR shall

alone bear and, directly or through Operating Company, pay the

following costs and expenses, which costs and expenses shall be

classified and allocated to the activities according to sound and

generally accepted

accounting principles and treated and

recovered in accordance with Article VII of this Agreement:

(a) Surface Rights:

All direct cost attributable to the acquisition, renewal or

relinquishment of surface rights acquired and maintained in force

for the Area.

(b) Labor and Related Costs:

(1) Salaries and Wages, which was approved by EGPC, of

CONTRACTOR's or Operating Company's employees, as the case

may be, directly engaged in the various activities under the

Agreement including salaries and wages paid to geologists and

other employees who are temporarily assigned to and employed in

such activities.



86



Reasonable revisions of such salaries and wages shall be effected

to take into account changes in CONTRACTOR's policies and

amendments of laws applicable to salaries. For the purpose of this

Article II (b) and Article II (c) of this Annex, salaries and wages

shall mean the assessable amounts for A.R.E. Income Taxes,

including the salaries during vacations and sick leaves, but

excluding all the amounts of the other items covered by the

percentage fixed under (2) below.

(2) For expatriate employees permanently assigned to Egypt:

1.



All allowances applicable to salaries and wages;



2.



Cost of established plans; and



3.



All travel and relocation costs of such expatriate employees

and their families to and from the employee's country or

point of origin at the time of employment, at the time of

separation, or as a result of transfer from one location to

another and for vacation (transportation costs for employees

and their families transferring from the A.R.E. to another

location other than their country of origin shall not be

charged to A.R.E. Operations).



Costs under this Article II ( b ) ( 2 ) shall be deemed to be equal

to seventy percent ( 70 %) or applied percentage, which is lesser,

of basic salaries and wages paid for such expatriate personnel

including those paid during vacations and sick leaves as established

in CONTRACTOR's international policies, chargeable under Article

II (b) (1), Article II (i) of this Annex.

However, salaries and wages during vacations, sick leaves and

disability are covered by the foregoing percentage. The percentage

outlined above shall be deemed to reflect CONTRACTOR's actual

costs as of the Effective Date with regard to the following benefits,

allowances and costs :1.

2.

3.

4.

5.

6.

7.



Housing and Utilities Allowance.

Commodities and Services Allowance.

Special Rental Allowance.

Vacation Transportation Allowance.

Vacation Travel Expense Allowance.

Vacation Excess Baggage Allowance.

Education Allowances (Children

of Expatriate Employees).



87



8.



9.

10.

11.

12.

13.

14.

15.

16.

17.



18.

19.

20.

21.

22.

23.

24.

25.



Hypothetical U.S. Tax Offset

(which results in a reduction of

the chargeable percentage).

Storage of Personal Effects.

Housing Refurbishment Expense.

Property Management Service Fees.

Recreation Allowance.

Retirement Plan.

Group Life Insurance.

Group Medical Insurance.

Sickness and Disability.

Vacation Plans Paid (excluding

Allowable Vacation Travel

Expenses).

Savings Plan.

Military Service Allowance.

F.I.C.A.

Workman's Compensation.

Federal

and

State

Unemployment

Insurance.

Personnel Transfer Expense.

National Insurance.

Income taxes on above additional benefits.



The percentages outlined above shall be reviewed at intervals of

three (3) years from the Effective Date and at such time

CONTRACTOR and EGPC will agree on new percentages to be

used under this paragraph.

Revisions of the percentages will take into consideration variances

in costs and changes in CONTRACTOR's international policies

which change or exclude any of the above allowances and benefits.

The revised percentages will reflect as nearly as possible

CONTRACTOR's actual costs of all its established allowances and

benefits and of personnel transfers.

(3) For expatriate employees temporarily assigned to Egypt all

allowances, costs of established plans and all travel relocation

costs for such expatriates as paid in accordance with

CONTRACTOR's international policies. Such costs shall not

include any administrative overhead.



88



(4) Costs of expenditure or contributions made pursuant to law or

assessment imposed by Governmental authority which are

applicable to labor cost of salaries and wages as provided under

Article II (b) (1), Article II (b) (2) and Article II (i) of this Annex.

(c)



Benefits, allowances and related costs of national

employees:

Bonuses, overtime, customary allowances and benefits on a

basis similar to that prevailing for Oil companies operating in

the A.R.E., all as chargeable under Article II (b) (1) and Article

II (i) of this Annex. Severance pay will be charged at a fixed

rate applied to payrolls which will equal an amount equivalent

to the maximum liability for severance payment as required

under the A.R.E. Labor Law.



(d)



Material :

Material, equipment and supplies purchased or furnished as

such by CONTRACTOR or Operating Company.



(1) Purchases:

Material, equipment and supplies purchased shall be at the

price paid by CONTRACTOR or Operating Company plus

any related cost and after deduction of all discounts actually

received.

(2) Material Furnished by CONTRACTOR:

Material required for operations shall be purchased directly

whenever practicable, except that CONTRACTOR may

furnish such material from CONTRACTOR's or

CONTRACTOR's Affiliated Companies stocks outside the

A.R.E. under the following conditions:

1.



New Material (Condition "A") :

New Material transferred from CONTRACTOR's or

CONTRACTOR's Affiliated Companies warehouse or

other properties shall be priced at cost, provided that

the cost of material supplied is not higher than

international prices for material of similar quality

supplied on similar terms, prevailing at the time such

material was supplied.



89



2.

a)



b)



Used Material (Conditions "B" and "C") :

Material which is in sound and serviceable condition

and is suitable for reuse without reconditioning shall be

classed as Condition "B" and priced at seventy-five

percent (75%) of the price of new material.

Material which cannot be classified as Condition "B" but

which is serviceable for original function but

substantially not suitable for reconditioning, shall be

classed as Condition "C" and priced at fifty percent

(50%) of the price of new material.



c)



Material which cannot be classified as Condition "B" or

Condition "C" shall be priced at a value commensurate

with its use.



d)



Tanks, buildings and other equipment involving

erection costs shall be charged at applicable

percentage of knocked - down new price.



(3) Warranty of Materials Furnished by CONTRACTOR :

CONTRACTOR does not warrant the material furnished

beyond or back of the dealer's or manufacturer's guaranty;

and in case of defective material, credit shall not be recorded

until adjustment has been received by CONTRACTOR from

manufacturers or their agents.

The value of the Warehouse stock and spare parts shall be

charged to the cost recovery category defined above, only

when used in operations.

(e)



Transportation and Employee Relocation Costs:



(1) Transportation of equipment, materials and supplies necessary

for the conduct of CONTRACTOR's or Operating Company's

activities.

(2) Business travel and transportation expenses to the extent

covered by established policies of CONTRACTOR or with

regard to expatriate and national employees, as incurred and

paid by, or for, employees in the conduct of CONTRACTOR's

or Operating Company's business.

(3) Employees transportation and relocation costs for national

employees to the extent covered by established policies.



90



(f)



Services:



(1)



Outside services: The costs of contracts for consultants,

services and utilities procured from third parties.



(2)



Cost of services performed by EGPC, by CONTRACTOR

or by their Affiliated Companies in facilities inside or

outside the A.R.E. Regular, recurring, routine services,

such as interpreting magnetic tapes and/or other analyses,

shall be performed and charged by EGPC and/or

CONTRACTOR or their Affiliated Companies, as well as,

geological and geophysical studies relevant to the

Concession Area purchased by CONTRACTOR, through

EUG, at an agreed contracted price. Major projects

involving engineering and design services shall be

performed by EGPC and/or CONTRACTOR or their

Affiliated Companies at a negotiated contract amount.



(3)



Use of EGPC's, CONTRACTOR's or their Affiliated

Companies' wholly owned equipment shall be charged at

a rental rate commensurate with the cost of ownership and

operation, but not in excess of competitive rates currently

prevailing in the A.R.E. .



(4)



CONTRACTOR's

and

CONTRACTOR's

Affiliated

Companies' rates shall not include any administrative or

overhead costs.



(g) Damages and Losses:

All costs or expenses, necessary to replace or repair damages

or losses incurred by fire, flood, storm, theft, accident or any other

cause not controllable by CONTRACTOR or Operating Company

through the exercise of reasonable diligence. CONTRACTOR or

Operating Company shall furnish EGPC and CONTRACTOR

written notice of damages or losses incurred in excess of ten

thousand ($10,000) U.S. Dollars per occurrence, as soon as

practicable after report of the same has been received by

CONTRACTOR or Operating Company.



91



(h) Insurance and Claims:

The cost of any public liability, property damage and other

insurance against liabilities of CONTRACTOR, Operating

Company and/or the parties or any of them to their employees

and/or outsiders as may be required by the laws, rules and

regulations of the GOVERNMENT or as the parties may agree

upon. The proceeds of any such insurance or claim collected, less

the actual cost of making a claim, shall be credited against

operations.

If no insurance is carried for a particular risk, in accordance with

good international Oil field practices, all related actual

expenditures incurred and paid by CONTRACTOR or Operating

Company in settlement of any and all losses, claims, damages,

judgments and any other expenses, including legal services.

(i) Indirect Expenses:

Camp overhead and facilities such as shore base, warehouses,

water systems, road systems, salaries and expenses of field

supervisory personnel, field clerks, assistants, and other general

employees indirectly serving the Area.

(j) Legal Expenses:

All costs and expenses of litigation, or legal services otherwise

necessary or expedient for the protection of the Area, including

attorney's fees and expenses as hereinafter provided, together

with all judgments obtained against the parties or any of them on

account of the operations under the Agreement, and actual

expenses incurred by any party or parties hereto in securing

evidence for the purpose of defending against any action or claim

prosecuted or urged against the operations or the subject matter

of the Agreement. In the event actions or claims affecting the

interests hereunder shall be handled by the legal staff of one or

more of the parties hereto, a charge commensurate with cost of

providing and furnishing such services may be made to

operations.

(k)

(1)



Administrative Overhead and General Expenses:

While CONTRACTOR is conducting Exploration operations,

the cost of staffing and maintaining CONTRACTOR's head

office in the A.R.E. and/or other offices established in the A.R.E.

as appropriate other than field offices which shall be charged

as provided for in Article II (i) of this Annex, and excepting

92



salaries of employees of CONTRACTOR who are temporarily

assigned to and directly serving on the Area, which shall be

charged as provided for in Article II (b) of this Annex.

(2)



(l)



While the Joint Venture Company is conducting operations, the

Joint Venture Company's personnel engaged in general clerical

and office work, supervisors and officers whose time is

generally spent in the main office and not the field, and all

employees generally considered as

general and

administrative and not charged to other types of expense shall

be charged to operations. Such expenses shall be allocated

each month between Exploration and Development operations

according to sound and practicable accounting methods.

Taxes:

All taxes, duties or levies paid in the A.R.E. by CONTRACTOR or

Operating Company with respect to this Agreement other than

those covered by Article III (g) (1) of the Agreement.



(m) Continuing CONTRACTOR Costs:

Costs of CONTRACTOR activities required under the Agreement

and incurred exclusively in the A.R.E. after Operating Company

is formed. No sales expenses incurred outside or inside the

A.R.E. may be recovered as a cost.

(n) Other Expenditures:

Any costs, expenses or expenditures, other than those which are

covered and dealt with by the foregoing provisions of this Article

II, incurred by CONTRACTOR or Operating Company under

approved Work Programs and Budgets.

ARTICLE III

INVENTORIES

(a)



Periodic Inventories, Notice and Representation:

At reasonable intervals as agreed upon by EGPC and

CONTRACTOR inventories shall be taken by Operating

Company of the operations materials, which shall include all

such materials, physical assets and construction projects.

Written notice of intention to take inventory shall be given by

Operating Company to EGPC and CONTRACTOR at least

thirty (30) days before any inventory is to begin so that EGPC

93



and CONTRACTOR may be represented when any inventory

is taken. Failure of EGPC and/or CONTRACTOR to be

represented at an inventory shall bind them to accept the

inventory taken by Operating Company, who shall in that event

furnish the party not represented with a copy thereof.

(b)



Reconciliation and Adjustment of Inventories:

Reconciliation of inventory shall be made by CONTRACTOR

and EGPC, and a list of overages and shortages shall be jointly

determined by Operating Company and CONTRACTOR and

EGPC, and the inventory adjusted by Operating Company.

ARTICLE IV

COST RECOVERY



(a) Statements of Recovery of Costs and of Cost Recovery

Petroleum:

CONTRACTOR shall, pursuant to Article VII of the Agreement,

render to EGPC as promptly as practicable but not later than

fifteen (15) days after receipt from Operating Company of the

Statements for Development and Exploration Activity for the

calendar quarter a Statement for that quarter showing:

1. Recoverable costs carried forward from the previous

quarter, if any.

2. Recoverable costs incurred and paid during the quarter.

3. Total recoverable costs for the quarter (1) + (2).

4. Value of Cost Recovery Petroleum taken and separately

disposed of by CONTRACTOR for the quarter.

5. Amount of costs recovered for the quarter.

6. Amount of recoverable costs carried into the succeeding

quarter, if any.

7. Excess, if any, of the value of Cost Recovery Petroleum

taken and separately disposed of by CONTRACTOR over

costs recovered for the quarter.

Pursuant to Article VII, EGPC shall audit and approve each

Statement of Development and Exploration Activity submitted by the

CONTRACTOR and the total production and pricing related to the

relevant calendar quarter. Any comments made by EGPC shall be

reflected by the CONTRACTOR on the statement produced for the

next calendar quarter.

94



(b)



Payments:

If such Statement shows an amount due EGPC, payment of

that amount shall be made in U.S. Dollars by CONTRACTOR

with the rendition of such Statement. If CONTRACTOR fails to

make any such payment to EGPC on the date when such

payment is due, then CONTRACTOR shall pay interest of

two and one half percent (2.5%) per annum higher than the

London Interbank Borrowing Offered Rate (LIBOR) for three

(3) months U.S. Dollars deposits prevailing on the date such

interest is calculated. Such interest payment shall not be

recoverable.



(c)



Settlement of Excess Cost Recovery Petroleum:

EGPC has the right to take its entitlement of Excess Cost

Recovery Petroleum under Article VII (a) (2) of the Agreement

in kind during the said quarter. A settlement shall be required

with the rendition of such Statements in case CONTRACTOR

has taken more than its own entitlement of such Excess Cost

Recovery Petroleum.



(d)



Audit Right:

EGPC shall have a period of twelve (12) months from receipt

of any Statement under this Article IV in which to audit and

raise objection to any such Statement. EGPC and

CONTRACTOR shall agree on any required adjustments.

Supporting documents and accounts will be available to

EGPC during said twelve (12) month period.

ARTICLE V

CONTROL AND MAJOR ACCOUNTS



(a)



Exploration Obligation Control Accounts:

CONTRACTOR will establish an Exploration Obligation Control

Account and an offsetting contra account to control therein the total

amount of Exploration expenditures reported on Statements of

activity prepared per Article I (b) (1) of this Annex, less any

reductions agreed to by EGPC and CONTRACTOR following written

exceptions taken by a non-operator pursuant to Article I (c) (1) of

this Annex, in order to determine when minimum Exploration

obligations have been met.



(b)



Cost Recovery Control Account:

CONTRACTOR will establish a Cost Recovery Control Account and

an off-setting contra account to control therein the amount of cost

95



(c)



remaining to be recovered, if any, the amount of cost recovered and

the value of Excess Cost Recovery Petroleum, if any.

Major Accounts:

For the purpose of classifying costs, expenses and expenditures for

Cost Recovery as well as for the purpose of establishing when the

minimum Exploration obligations have been met, costs, expenses

and expenditures shall be recorded in major accounts including the

following:

- Exploration Expenditures;

- Development Expenditures other than Operating Expenses;

- Operating Expenses;

Necessary sub-accounts shall be used.

Revenue accounts shall be maintained by CONTRACTOR to the

extent necessary for the control of recovery of costs and the

treatment of Cost Recovery Petroleum.

ARTICLE VI

TAX IMPLEMENTATION PROVISIONS



It is understood that CONTRACTOR shall be subject to Egyptian

Income Tax Laws except as otherwise provided in the Agreement, that

any A.R.E. Income Taxes paid by EGPC on CONTRACTOR's behalf

constitute additional income to CONTRACTOR, and this additional

income is also subject to A.R.E. income tax, that is "grossed up".

“CONTRACTOR's annual income”, as determined in Article III (g) (3) of

this Agreement, less the amount equal to CONTRACTOR's grossed-up

Egyptian income tax liability, shall be CONTRACTOR's "Provisional

Income".

The "gross-up value" is an amount added to Provisional Income to give

"Taxable Income", such that the grossed-up value is equivalent to the

A.R.E. Income Taxes.

THEREFORE:

Taxable Income = Provisional Income plus Grossed-up Value

and

Grossed-up Value = A.R.E. Income Tax on Taxable Income.

If the "A.R.E. Income Tax rate", which means the effective or composite

tax rate due to the various A.R.E. taxes levied on income or profits, is

96



constant and not dependent on the level of income, then:

Grossed-up Value = A.R.E. income tax rate TIMES Taxable Income.

Combining the first and last equations above

Grossed-up Value



=



Provisional income X Tax Rate

_________________________

1 - Tax Rate



Where the tax rate is expressed as a decimal.

The above computations are illustrated by the following numerical

example. Assuming that the Provisional Income is $10 and the A.R.E.

Income Tax rate is forty percent (40%), then the Grossed-up Value is

equal to:

$ 10 X 0.4 = $ 6.67

________________

1 - 0.4

Therefore:

Provisional income

Plus Grossed-up Value

Taxable Income

Less: A.R.E. Income Taxes at 40%

CONTRACTOR's Income after taxes



97



$10.00

6.67

$16.67

6.67

$ 10.00