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PETROLEUM

PRODUCTION SHARING CONTRACT

FOR BLOCK LB-16



BETWEEN



THE REPUBLIC OF LIBERIA

REPRESENTED BY

THE NATIONAL OIL COMPANY OF LIBERIA,



THE NATIONAL OIL COMPANY OF LIBERIA



AND



REPSOL EXPLORACION S.A



AUGUST 17th, 2005





[margin stripe]AN ACT RATIFYING THE PRODUCTION SHARING CONTRACT WITH ADDENDA FOR OFFSHORE LIBERIA BLOCKS LB- 16 & 17 SIGNED BETWEEN THE REPUBLIC OF LIBERIA REPRESENTED BY THE NATIONAL OIL COMPANY OF LIBERIA (NOCAL)AND REPSOL EXPLORACION S.A.



It is enacted by the Senate and House of Representatives of the Republic of Liberia in Legislature assembled:



SECTION I:

That from and immediately after the passage of this Act, "AN ACT RATIFYING THE PRODUCTION SHARING CONTRACT WITH ADDENDA FOR OFFSHORE LIBERIA BLOCKS LB- 16 & 17 SIGNED BETWEEN THE REPUBLIC OF LIBERIA REPRESENTED BY THE NATIONAL OIL COMPANY OF LIBERIA (NOCAL) AND REPSOL EXPLORACION S.A.", as herein recited below word for word in the authentic English Version be, and the same is hereby ratified.



SECTION II:

SHORT TITLE: This Act to Ratify the Production Sharing Contract with Addenda for Offshore Liberia Blocks LB- 16 & 17 signed between the Republic of Liberia represented by the National Oil Company Of Liberia (NOCAL) And Repsol Exploracion S.A. may also Be officially cited as the PRODUCTION SHARING CONTRACT ACT OF LIBERIA AND REPSOL EXPLORACION S.A.



SECTION III:

That any and all obligations, covenants, terms and conditions as contained in the above mentioned Production Sharing Contract shall be carried to full completion unless otherwise modified, amended or repealed.



SECTION IV:

This Act shall take effect immediately upon the publication into handbill.



ANY LAW TO THE CONTRARY NOTWITHSTANDING.2008



ATTESTATION TO:



"AN ACT RATIFYING THE PRODUCTION SHARING CONTRACT WITH ADDENDA FOR OFFSHORE LIBERIA BLOCKS LB-16 & 17 SIGNED BETWEEN THE REPUBLIC OF LIBERIA REPRESENTED BY THE NATIONAL OIL COMPANY OF LIBERIA (NOCAL) AND REPSOL EXPLORACION S.A."



[signature]

VICE PRESIDENT OF THE REPUBLIC OF LIBERIA/ PRESIDENT OF THE SENATE



[signature]

SECRETARY, LIBERIAN SENATE, R.L.



[signature]

SPEAKER, HOUSE OF REPRESENTATIVES, R.L.



[signature]

CHIEF CLERK, HOUSE OF REPRESENTATIVES, R.L.TABLE OF CONTENTS

ARTICLE | | PAGE

1. | DEFINITIONS | 5

2. | SCOPE OF THE CONTRACT | 7

3. | DURATION OF EXPLORATION PERIODS AND SURRENDERS | 8

4. | EXPLORATION WORK COMMITMENTS | 10

5. | ESTABLISHMENT AND APPROVAL OF ANNUAL WORK PROGRAMS AND BUDGETS | 12

6. | CONTRACTOR'S OBLIGATIONS IN RESPECT OF THE EXPLORATION PERIODS | 13

7. | CONTRACTOR'S RIGHTS IN RESPECT OF THE EXPLORATION PERIODS | 15

8. | ACTIVITY REPORTS DURING THE EXPLORATION PERIODS AND SUPERVISION OF PETROLEUM OPERATIONS | 16

9. | OCCUPATION OF LAND | 18

10. | USE OF FACILITIES | 19

11. | APPRAISAL OF A PETROLEUM DISCOVERY |19

12. | GRANT OF AN EXCLUSIVE EXPLOITATION AUTHORIZATION IN RESPECT OF A COMMERCIAL DISCOVERY | 22

13. | DURATION OF THE EXPLOITATION PERIOD | 23

14. | EXPLOITATION OBLIGATION |24

15. | CONTRACTOR'S OBLIGATIONS AND RIGHTS IN RESPECT OF EXCLUSIVE EXPLOITATION AUTHORIZATIONS | 24

16. | RECOVERY OF PETROLEUM COSTS AND PRODUCTION SHARING | 26

17. | TAXATION | 28

18. | VALUATION OF PETROLEUM | 31

19. | BONUSES | 33

20. | OWNERSHIP AND ABANDONMENT OF ASSETS | 34

21. | NATURAL GAS | 34

22. | FOREIGN EXCHANGE CONTROL | 39

23. | APPLICABLE LAW | 40

24. | MONETARY UNIT | 40

25. | ACCOUNTING METHODS AND AUDITS | 40

26. | IMPORT AND EXPORT | 41

27. | DISPOSAL OF PRODUCTION | 43

28. | PROTECTION OF RIGHTS | 44

29. | PERSONNEL TRAINING AND SOCIAL WELFARE | 44

30. | ACTIVITY REPORTS IN RESPECT OF EXCLUSIVE EXPLOITATION AUTHORIZATIONS | 46

31. | ARBITRATION | 47

32. | FORCE MAJEURE | 47



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|33 | JOINT AND SEVERAL OBLIGATIONS AND | 40 |

| | GUARANTEES | |

|34 | RIGHTS OF ASSIGNMENT | 45 |

|35 | STABILITY OF CONDITIONS | 49 |

|36 | IMPLEMENTATION OF THE CONTRACT | 50 |

|37 | EFFECTIVE DATE | 52 |







APPENDIX



|1 | DELIMITED AREA | |

|2 | ACCOUNTING AND TAX PROCEDURE | |

|3 | TAX CERTIFICATE PROFORMA | |DATED: AUGUST 17th, 2005



PRODUCTION SHARING CONTRACT

BETWEEN

The Republic of Liberia (STATE) represented for the purposes of this Contract by the National Oil Company of Liberia (NOCAL), a company incorporated under the laws of Liberia;



The National Oil Company of Liberia, a company incorporated under the laws of Liberia; ("NOCAL")



AND



Repsol Exploracion S.A. a company incorporated under the laws of Spain,

WHEREAS

* The discovery and exploration of Petroleum are important for the interest and the economic development of the country and its people;

* NOCAL wishes to undertake operations for exploitation, transportation, storage, processing and marketing of Petroleum.

* NOCAL has the mining rights in respect of Petroleum exploration and exploitation over the entirety of available areas in Liberia including the Delimited Area defined hereinafter;

* NOCAL wishes to promote the development of the Delimited Area, and the Contractor wishes to cooperate with NOCAL by assisting in the exploration for and production of the potential resources within the Delimited Area, and thereby encouraging the economic growth of the country, and

* The Contractor represents that it has the financial resources, the technical competence, and the organization capacity to carry out in the Delimited Area the Petroleum Operations specified hereinafter.



NOW< THEREFORE< THE PARTIES HEREBY AGREE AS FOLLOWS:ARTICLE 1.



DEFINITIONS



The following terms used in this Contract shall have the following meaning:



1.1. CALENDAR YEAR means a period of twelve (12) consecutive months beginning January first (1st) and ending on the following December thirty-first (31st), according to the Gregorian calendar.



1.2. CONTRACT YEAR means a period of twelve (12) consecutive months beginning on the Effective Date or on the anniversary thereof.



1.3. FISCAL YEAR means a period of twelve (12) consecutive months beginning January first (1st) and ending on the following December thirty-first (31st).



1.4. BARREL means U.S. barrel, i.e. 42 U.S. gallons measured at a temperature of 60°F and under an atmospheric pressure.



1.5. BUDGET means the itemized cost estimates of the Petroleum Operations described in an Annual Work Program.



1.6. EFFECTIVE DATE means the date on which this Contract comes into force and effect, as defined in Article 37.



1.7. CONTRACTOR means Repsol Exploration SA and any of its successors or any permitted assigness;



1.8. CONTRACT means this Production Sharing Contract and its appendices forming an integral part hereof, together with any extension, renewal, replacement, or modification hereto which maybe mutually agreed between the Parties.



1.9. PETROLEUM COSTS means all expenditures actually incurred or accrued by the Contractor for the purposes of the Petroleum Operations under this Contract, and determined in accordance with the Accounting Procedure attached hereto as Appendix 2.



1.10. DOLLAR means dollar of the United States of America.



1.11. NATURAL GAS means methane, ethane, propane, butane and dry or wet gaseous hydrocarbons, whether or not associated with Crude Oil in gaseous state under standard temperature and pressure conditions, as well as gaseous products extracted in association with Crude Oil, such as, without limitation, nitrogen, hydrogen sulfide, carbon dioxide, helium and water vapor.



(Page 5)1.12. ASSOCIATED NATURAL GAS means Natural Gas which exists in a reservoir in solution with Crude Oil which is or could be produced in association with Crude Oil.



1.13. NON-ASSOCIATED NATURAL GAS means Natural Gas other than Associated Natural Gas.



1.14. FIELD means an accumulation of Petroleum in one of several overlaying horizons.



1.15. PETROLEUM means Crude Oil and Natural Gas.



1.16. PETROLEUM OPERATIONS means all the Petroleum exploration, appraisal, development, production, transportation and marketing operations, abandonment and decommissioning, and more generally, any other operations directly associated therewith, carried out under the Contract.



1.17. PARTIES means the STATE, NOCAL and the Contractor and PARY means either STATE, NOCAL or the Contractor.



1.18 APPRAISAL PERIMETER means any part of the Delimited Area where one or more Petroleum discoveries have been made, and in respect of which NOCAL has granted to the Contractor an exclusive appraisal authorization for the purpose of appraising the extent of said discoveries.



1.19. EXPLOITATION PERIMETER means any part of the Delimited Area in respect of which NOCAL has granted to the Contractor an exclusive exploitation authorization.



1.20. CRUDE OIL means crude mineral oil, asphalt, ozokerite, and al kinds of petroleum and bitumen, either solid or liquid in their natural condition or obtained from Natural Gas by condensation or extraction, including condensates and Natural Gas liquids.



1.21. DELIVERY POINT means the F.O.B. point connecting the loading facilities to the vessel then loading Crude Oil in the Republic of Liberia or any other transfer point mutually agreed between the Parties.



1.22. TOTAL PRODUCTION means the total production of Crude Oil or the total production of Natural Gas obtained from the whole Delimited Area less the quantities used for the requirements of the Petroleum Operations and any losses.



1.23. ANNUAL WORK PROGRAM means the document describing item-by-item, the Petroleum Operations to be carried out during a Calendar Year within the Delimited Area and in each Exploitation Perimeter, if any, established in accordance with the Contract.





61.24 DELIMITED AREA means the area in respect of which NOCAL under this Contract, grants to the Contractor an exclusive exploration right. The areas surrendered by the Contractor in accordance with the provisions of Articles 3.5 and 3.6 shall be deemed as excluded from the Delimited Area which shall be reduced accordingly. Conversely, the Appraisal Perimeter(s) shall be an integral part of the Delimited Area during the interim of the relevant exclusive exploitation authorization.



1.25 AFFILIATED COMPANY means



* a company or any other entity which directly or indirectly controls or is controlled by any entity constituting the Contractor, or



* a company or any other entity which directly or indirectly controls or is controlled by a company or entity which itself directly or indirectly controls any entity constituting the Contractor. Such 'control' means direct or indirect ownership by a company or any other entity of more than fifty percent (50%) of the shares conferring voting rights, forming the stock of another company.



1.26 THIRD PARTY means a company or any other entity, other than the Contractor or an Affiliated Company, NOCAL or the STATE.



1.27 OPERATOR means the company responsible for the direction and execution of the Petroleum Operations pursuant to Article 1.16. Repsol Exploration S.A. shall act as Operator.



ARTICLE 2



SCOPE OF THE CONTRACT



2.1 This Contract is a Production Sharing Contract and includes all the provisions of the agreement between NOCAL and the Contractor.



2.2 NOCAL authorizes the Contractor to be the Operator pursuant to the terms set forth herein and to carry out the Petroleum Operations in the Delimited Area, on an exclusive basis.



2.3 The Contractor undertakes, for all the work necessary for carrying out the Petroleum Operations provided for hereunder, to comply with good international petroleum industry practice and to be subject to the laws and regulations in force in Liberia unless otherwise provided under this Contract.



2.4 The Contractor shall supply all financial and technical means necessary for the proper performance of the Petroleum Operations. 2.5 The Contractor shall bear alone the financial risk associated with the performance of the Petroleum Operations. The Petroleum Costs related thereto shall be recoverable by the Contractor in accordance with the provisions of Article 16.2.



2.6 During the term hereof, in the event of production, the Total Production arising from the Petroleum Operations shall be shared between the Parties according to the terms set forth in Articles 16.2 and 16.3.



2.7 On the Effective Date, the Delimited Area shall be the area as defined in Appendix 1



2.8 The Contractor shall furnish NOCAL with all reports, information and data referred to hereunder, as required by this Contract.



ARTICLE 3



DURATION OF EXPLORATION PERIODS AND SURRENDERS



3.1 The exclusive exploration authorization is hereby granted to the Contractor for a period of eight (8) years defined by three consecutive periods.



A first Exploration period of Four (4) Contract Years, a second Exploration Period of Two (2) Contract Years and a third Exploration Period of Two (2) Contract years in respect of the entire Delimited Area.



3.2 If during the First Exploration period set forth above the Contractor has fulfilled the exploration work commitments defined in Article 4, the exclusive exploration authorization shall, at the Contractor's request, be renewed for a second Exploration period of Two (2 Years) Contract Years.



3.3 If, at the end of such second Exploration period and provided that it has fulfilled its work commitments as set forth above, the Contractor so requests, a third Exploration period shall be authorized for Two (2 Years) Contract years.



3.4 The applications referred to in Articles 3.2 and 3.3 shall be made at least sixty (60) days prior to the exploration of the current exploration period.



3.5 The Contractor shall surrender at least the following surfaces:



(a) twenty five percent (25%) of the initial surface of the Delimited Area at the expiration of the first Exploration Period.



(b) twenty five percent (25%) of the initial surface of the Delimited Area at the expiration of the second Exploration Period.



8Such surrenders shall be constituted by a limited number of perimeters of a simple geometrical shape delimited by north-south, east-west lines or by natural boundaries of the area concerned.



For the purpose of computing the surface to be surrendered, the surface in respect of any Exploitation Perimeter shall be deducted from the initial surface of the Delimited Area.



The surfaces previously surrendered pursuant to the provisions of Article 3.6 shall be deducted from the surfaced to be surrendered.



Subject to its compliance with the above-mentioned requirements, the Contractor shall have the right to determine the size, shape, and location of the area to be surrendered.



The Contractor undertakes to furnish NOCAL with a precise description and a map showing the details of the surrendered areas and those retained, together with a report specifying the work carried out in the surrendered areas from the Effective Data and the results obtained.



3.6 During any exploration period, the Contractor may, at any time, notify NOCAL that it surrenders on the whole or any part of the Delimited Area the rights granted to it by giving sixty (60) days notice to that effect.



No surrender during or at the expiration of any exploration period shall reduce the work commitments and the investment obligations set force in Article 4 for the current exploration period. IN the event of surrender, the Contractor shall have the exclusive right to retain, for their respective term, the Appraisal Perimeters and Exploitation Perimeters which have been granted and to carry out the Petroleum Operation therein.



3.7 At the expiration of the third Exploration period set forth in article 3.3, the Contractor shall surrender the whole remaining Delimited Area except as to any Appraisal Perimeters and Exploitation Perimeters which have been granted or in respect of which an application has then been made.



3.8 If at the expiration of all the exploration periods the Contractor has not obtained or is not applying for an exclusive appraisal authorization or an exclusive exploitation authorization, this Contract shall terminate.



If an exploratory well is operating at the time of expiry of an exploration period, then NOCAl shall grant Contractor an extension of said exploration period of 60 days (after the exploratory well is terminated and the rig released) in order to evaluate results of the well, at Contractor's discretion, apply for an exclusive appraisal authorization or an exclusive exploitation authorization.3.9 The termination of this Contract, whatever the reason thereof, shall not relieve the Contractor of any obligations under this Contract incurred prior to, or arising from, said termination and which shall be fulfilled.



ARTICLE 4



EXPLORATION WORK COMMITMENTS



4.1 The Contractor shall commence the Petroleum Operations within three months from the Effective Date.



4.2 The Contractor, during the first exploration period defined Article 3.1, shall carry out the following minimum work:



- 1,600 square kilometers of 3D Seismic Acquisition

- 400 kilometers of 2D Seismic Acquisition

- Marine Studies

- Geological & Geophysical Studies



4.3 The Contractor, during the second exploration period defined in Article 3.2, shall carry out the following minimum work:



1 exploratory well.



4.4 The Contractor, during the third exploration period defined in Article 3.3 shall carry out the following minimum work:



1 exploratory well.



4.5 Each of the exploratory wells referred to above shall be drilled to a minimum depth of one thousand (1,000) meters, after deduction of the water depth, or to a lesser depth if the continuation of drilling performed in accordance with good international petroleum industry practice is prevented for any of the following reasons:



(a) the basement is encountered at a lesser depth than the minimum contractual depth;



(b) continuation of drilling presents an obvious danger due to the existence of abnormal formation pressure;



(c) rock formations are encountered the hardness of which prevents in practice, the continuation of drilling by the use of appropriate equipment;



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(d) petroleum formations are encountered the crossing of which requires, for their protection, the laying of casings preventing the minimum contractual depth from being reached.

In the even that any of t he above reasons occurs, the exploratory well shall be deemed to have been dilled to the minimum contractual depth.

Notwithstanding any provision in this Article to the contrary, NOCAL and the Contractor may, at any time, agree to abandon the drilling of a well at a lesser depth than the minimum contractual depth.

4.6. In order to carry out the exploration work defined in Articles 4.2 to 4.4 in the best technical conditions in accordance with good international petroleum industry practice, the Contractor undertakes to spend the following minimum amounts determined with minimum expenditure of:

(a) Eight (8) million US Dollars during the first Exploration period defined in Article 3.1.

(b) Ten (10) million US Dollars during the second Exploration period defined in Article 3.2.

(c) Ten (10) million US Dollars during the third Exploration period defined in Article 3.3.

If during the exploration period the Contractor has performed its work commitments for an amount lesser than the amount specified above, it shall be deemed to have fulfilled its investment obligations relating to that period. Conversely, the contractor shall perform the entirety of its work commitments set forth in respect of an exploration period even if it results in exceeding the amount specified above for that period.

4.7. If at the expiration of any of the three (3) exploration periods defined in Articles 3.1, 3.2, and 3.3 or upon the date of surrender of the whole Delimited Area, or upon the date of termination of this Contract, the Contractor has not fulfilled its work commitments set forth in this Article, it shall pay as compensation to NOCAL, within thirty (30) days after that date of expiration, surrender or termination, the unspent balance of investment obligations above-defined for that current exploration period.

4.8. In a given exploration period, in the event where the Contractor drills, one or more additional exploration wells to those required under Article 4.2, 4.3, 4.4 or exceeds its investment obligations relating to that period, then the excess well(s) or investment expenditure may be carried forward, into the next succeeding exploration period(s) and off-set against any other exploration well work commitments or investment obligations.ARTICLE 5



ESTABLISHMENT AND APPROVAL OF ANNUAL WORK PROGRAMS AND BUDGETS



5.1 At least three (3) months before the beginning of each Calendar Year, or for the first year, within two (2) months from the Effective Date, the Contractor shall prepare and submit for approval to NOCAL an Annual Work Program together with the related Budget for the entire Delimited Area, specifying the Petroleum Operations that the contractor proposes to perform during that Calendar Year and their cost.



5.2 If NOCAL wishes to propose any revisions or modifications to the Petroleum Operations specified in said Annual Work Program, it shall, within thirty (30) days after receipt of that Program, so notify the Contractor, presenting all justifications deemed useful. In that event, NOCAL, and the Contractor shall meet as soon as possible to consider the proposed revisions or modifications and to mutually establish the Annual Work Program and the related Budget in its final form, in accordance with good international petroleum industry practice. However, during the exploration periods, the Annual Work Program and the related Budget established by the Contractor after the above mentioned meeting shall be deemed to be approved provided that they comply with the obligations set forth in Article 4.



Each part of the Annual Work Program and Budget approved by NOCAL shall be carried out by the Contractor with the stated time.



Should NOCAL fail to notify the Contractor of its wish for revision or modification within the period of thirty (30) days above-mentioned, such Annual Work Program and the related Budget submitted by the Contractor shall be deemed to be approved by NOCAL.



5.3 It is agreed by NOCAL and the Contractor that the Contractor may acquire knowledge as and when the work i

s implemented, or certain events may justify changes to the details of the Annual Work Program. In that event, after notification to NOCAL, the Contractor may may make such changes provided that the basic objectives of said Annual Work Program are not modified.



5.4 Whenever NOCAL is required to exercise the discretion or its approval is required, under this Contract, it shall exercise its discretion or grant its approval on the basis of the efficient and economic conduct of Petroleum Operations in respect of the Delimited Area and in accordance with good international oil industry practice.



5.5. At the commencement of the First Exploration Period, NOCAL and the Contractor shall form a Joint Operation Committee ('JOC') consisting of not more than three (3) members and one (1) alternate representative appointed by NOCAL

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and not more than three (3) members appointed and one (1) alternate representative by the Contractor to serve on the JOC. Each Party shall, as soon as possible after the Effective Date of this Contract, give notice in writing to the other Party of the name and address of its representatives and alternate representative. Each Party shall have the right to change its representative and alternate at any time by giving thirty (30) days notice to such effect to the other Parties.



5.6 The purpose of the JOC will be to review present and future Petroleum Operations and report jointly to NOCAL and the Contractor. The JOC is an advisory body to assist NOCAL in the administration of the Contract. The JOC does not exercise any decision making authority in relation to the conduct of the Petroleum Operations.



5.7 The JOC shall meet twice every calendar year or as otherwise agreed by the members. No meeting shall be held unless two (2) members each appointed by the Contractor and NOCAL are present. The Contractor shall appoint the first Chairman of the JOC who shall held office until the second anniversary of the Effective Date. Thereafter NOCAL and the Contractor shall alternate as Chairman of the JOC, who shall hold office for two years.



Members of the JOC shall be entitled to attendance fees (payable by the Contractor) in an amount to be approved by NOCAL and the Contractor for attendance in person at meetings of the JOC and for JOC meetings held outside Liberia, the costs approved by NOCAl and the Contractor, for travel and accommodation of the JOC members will also be payable by the Contractor. The Contractor shall select the location of JOC meetings. All costs of the meetings including attendance fees, travel and accommodation costs shall be recoverable as Petroleum Costs.



ARTICLE 6



CONTRACTOR'S OBLIGATION IN RESPECT OF THE EXPLORATION PERIODS



6.1. The Contractor shall provide all the necessary funds and purchase or hire all the equipment, facilities and materials required to carry out the Petroleum Operations.



6.2. The Contractor shall provide all technical assistance, including the personnel required to carry out the Petroleum Operations.



6.3. The Contractor shall be responsible for the preparation and performance of the Annual Work Programs which shall be carried out in the most appropriate manner i observance of good international petroleum industry practice.



136.4. The Contractor undertakes to take all the reasonable and practical steps in accordance with good international industry practice to



(a)ensure the protection f water-bearing strata encountered during its work;



(b) carry out the tests necessary for determining the value of any hydrocarbon show encountered during drilling and the exploitability of any possible Petroleum discoveries:



(c) avoid losses and discharges of Petroleum produced in the Petroleum Operations.



(d) submit to NOCAL an Environmental Impact Statement (EIS) prior to commencement of exploration and production operations;



(e) Take reasonable preventive,corrective and restorative measures in accordance with latest international petroleum industry codes, standards and practices to protect from pollution, contamination or damages resulting Petroleum Operations, and that any pollution, contamination and damage of such water bodies, land surfaces caused by Contractor and atmosphere hereunder to rectified in accordance with latest international petroleum industry codes, standards and practices.



6.5. All words and facilities erected by the

Contractor hereunder shall, according to their nature and to the circumstances be built, placed, signaled,method, fitted and preserved so as to allow at any time and in safety free passage to navigation within the Delimited Area, and without prejudice to the foregoing, the Contractor shall, in order to facilitate navigation, install the sound and optical device approved or required by the competent authorities and maintain them in a manner satisfactory to said authorities.



6.6. In the exercise of its rights to build, carry out work and maintain all facilities necessary for the purposes hereof, the Contractor shall not disturb any existing graveyard or building used for religious purposes, not cause a presence to any government or public building, except with the prior consent of NOCAL, and shall make good the damage caused by it in that event.



6.7. In its conduct of Petroleum Operations, the Contractor undertakes to take all necessary precautions to prevent marine pollution.



In order to prevent pollution, NOCAL and Contractor agree that the Contractor shall in accordance with the Contractor's environmental management plan, observe the laws of Liberia as may be applicable, as well all existing international environmental conventions to which Liberia is currently a signatory, as well as good oil industry practice. NOCAL and the Contractor shall meet and consider any measure which may be the necessary to preserve the environment.















































































6.8. NOCAL and Contractor shall commission periodic environmental audits when agreed by NOCAL and Contractor as necessary to ensure compliance with the EIS, said audits will be considered as part of Petroleum Operations.



6.9. The Contractor and its subcontractors shall be obligated to give preference to enterprises and goods from Liberia, if conditions or price, quality, delivery time and terms of payment are equivalent.



ARTICLE 7



CONTRACTOR'S RIGHTS IN RESPECT OF THE EXPLORATION PERIODS



7.1. Without prejudice to the provisions thereof, the Contractor shall have the right to carry out the Petroleum Operations within the Delimited Area. Such right includes, inter alia:



(a) full responsibility for, management of and control over all the Petroleum Operations:



(b) authority to exercise any of the rights conferred hereby through agents and independent contractors, and to pay accordingly any of their expenses and costs in the piece and in the currency chosen by the Contractor.



7.2. The Contractor shall have the right to clear the ground, dig, perforate, drill, build, erect, place, supply, operate, manage and maintain ditches, pools, wells,trenches, excavations, dams, canals, water conduits, plants, tanks, basins,maritime and other storage facilities, primary distillation units, first extraction gasoline operator units, sulfur plants, and other facilities for Petroleum production, together with the pipelines, pumping stations, generated units, power plants, high voltage lines, telephone, telegraph, radio and other communication facilities, factories, warehouses, offices employees' housing, hospitals, premises, ports,docks,turbos, diken, jetties, dredges, sea walls, under water plans and other facilities, ships, vehicles, railways, warehouses, workshops, foundries, repair shops and all the auxiliary services which are necessary for or useful to the Petroleum Operations or in connection therewith and all additional facilities which are or may become necessary for or reasonably subsidiary to the carrying out of the Petroleum Operations.





7.3. The agents, employees and representatives of the Contractor or its subcontractors shall have the right, for the purposes of the Petroleum Operations to enter into or leave the Delimited Area and shall have free access to all the facilities set up by the Contractor.



7.4. The Contractor shall have the right, subject to the payment to fees applicable in Liberia, to remove and use the surface soil, mature timber,clay, sand, limestone.









































































































gypsum, stones and other similar materials which may be necessary for the performance of the Petroleum Operations.



With the consent of the competent administrative services, the Contractor may make reasonable use of such materials for the performance of the Petroleum Operations, subject to payment of feesmin Liberia, when they are located on land owned by the STATE and placed in the vicinity of the land where said Operations are taking place.



The Contractor may take or use the water necessary for the Petroleum Operations, provided that existing irrigation or navigation are not impaired and that land, houses or watering places for livestock are not deprived of a reasonable quantity of water.



ARTICLE 8



ACTIVITY REPORTS DURING THE EXPLORATIONS PERIODS AND SUPERVISION OF PETROLEUM OPERATIONS



8.1 NOCAL shall own and may freely use all the original data and documents relating to the Petroleum Operations such as, but without limitation, records, samples, geological, geophysical, petrophysical, drilling and operating reports.



8.2 The Contractor undertakes to furnish NOCAL with the following periodic reports:



(a) daily reports on drilling operations;



(b) weekly reports on seismic operations;



(c) within thirty (30) days after each Calendar quarter, a report on the Petroleum Operations carried out together with a detailed statement on Petroleum Costs in respect of the preceding quarter;



(d) prior to the end of February of each Calendar Year, an annual report on the Petroleum Operations carried out together with a detailed statement on Petroleum Costs in respect on the preceding Calendar Year.



8.3 In addition, the following reports or documents shall be furnished to NOCAL as soon as they are prepared or obtained:



(a) a copy of all geological surveys and syntheses together with the related maps;



(b) a copy of all geophysical surveys, measurement and interpretation reports, map profiles, sections or other documents related therelo as well as at NOCAL's request, the originals of all recorded seismic magnetic tapes;



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(c) a copy of the drilling location and completion report for each well together with a complete set of recorded logs;



(d) a copy of all drill tests or production tests together with any study relating to the flow or production of a well;



(e) a copy of all reports relating to core analyses. All maps, sections, profiles, logs and all other geological or geophysical documents shall be supploed on an appropriate transparent support in view of subsequent reproduction.



A representative portion of the cores and cuttings removed from each well, as well as samples of fluids produced during drill tests or production tests shall also be supplied to NOCAL within a reasonable period.



Upon expiration or in the event of surrender or termination of the Contract, the original documents and samples relating to the Petroleum Operations shall be provided to NOCAL.



8.4. All data, information, documents, reports and statistics, including interpretation and analysis supplied by the Contractor pursuant to this Contract shall be treated as confidential and shall not be disclosed by any Party to any other person without the express written consent of the other Parties within the life of the Exploration, Appraisal or Exploitation authorization period.



8.5. The provisions of this Article 8.4 shall not prevent disclosure:



a) By NOCAL or the STATE



(i) To any agency of the STATE or to any adviser or consultant to NOCAL

(ii) For the purpose of complying with the STATE's international obligations for the submission of statistics and related data.



b) By Contractor



(i) To its Affiliated Company, advisers or consultants;

(ii) To a bona fide potential assignee of all or part of Contractor's interest hereunder;

(iii) To banks or other lending institutions for the purpose of seeking external financing of costs of the Petroleum Operations;

(iv) To Third Parties who shall provide services for the Petroleum Operations, including subcontractors, vendors and other service contractors, where this is essential for their provision of such services;

(v) To government agencies for obtaining necessary rulings, permits, licenses and approvals, or as may be required by



17 applicable law or financial stock exchange, or accounting or reporting practices of any entity comprising the Contractor.



8.6 Any Party disclosing information or providing date to any Third Party under Article 8.5(b), (ii), (iii) and (iv), shall require such persons to undertake the confidentiality of such data.



8.7 The Contractor shall keep NOCAL informed of its activities through the duly designated representative of the latter in particular, the Contractor shall notify NOCAL as soon as possible and in any event at least fifteen (15) days in advance of all geological surveys seismic surveys commencement of drilling and installation of a platform.



In the event the Contractor decides to abandon a drilling operation it shall notify NOCAL, thereof within at least seventy-two (72) hours prior to such abandonment unless operational safety in accordance with international industry practice, demands more urgent reponse.



ARTICLE 9



OCCUPATION OF LAND



9.1. The STATE shall make available to the Contractor, and only for the purposes of the Petroleum Operations, and land which it owns and which is necessary for said operation. The Contractor shall have the right to build and the obligation to maintain, above and below the ground, the facilities necessary for the Petroleum Operations.



The Contractor shall indemnify the STATE for any damage caused to the land by the construction, use and maintenance of its facilities on such land.



The STATE shall authorize the Contractor to build, use and maintain telephone, telegraph and piping systems above and below the ground and along the land not belonging to the STATE, provided that the Contractor pays to the land-owners, a reasonable compensation mutually agreed upon.



9.2. The rights on land owned by private persons, which would be necessary for the carrying out of the Petroleum Operations, shall be acquired by direct agreement between the Contractor and the private person concerned.



In the event of disagreement, the Contractor shall notify the STATE thereof, and the latter shall proceed to expropriation for a public purpose, at Contractor's expense. When determining the value of those property rights, no consideration shall be given to the Contractor's purpose for acquiring them and the STATE agrees that no law or procedure for said acquisition shall have the effect of giving them an excessive value or a confiscation value. Those rights acquired by the



18STATE shall be registered in its name but the Contractor shall be entitled to benefit there from for the purposes of the Petroleum Operations. During the entire term of this Contract, the STATE guarantees that the Contractor shall be protected in the use and occupation of such land just as if it owns the property rights thereto.



ARTICLE 10



USE OF FACILITIES



10.1 For the purposes of the Petroleum Operations, the Contractor shall have the right to use, in accordance with the applicable laws, any railroad, tramway, road, airport, landing strip, canal, river, bridge, waterway and any telephone or telegraph network in Liberia whether owned by the STATE or by any private enterprise, subject to the payment of fees then in effect or mutually agreed upon which will not be in process of the prices and tariffs charged to Third Parties for similar services.



The Contractor shall also have the right to use for the purposes of the Petroleum Operations any land, sea or air transportation means for the transportation of the employees or equipment, subject to compliance with the laws and regulations which generally govern the use of such means of transportation.



10.2 The STATE shall have the right to use for exceptional matters any transportation and communication facility installed by the Contractor, subject to a fair compensation mutually agreed upon which will not be in excess of the prices and tariffs charged to Third Parties for similar services.



10.3 Nothing in this Contract shall limit the STATE's right to build, operate and maintain on, under or along the land made available to the Contractor for the purpose of the Petroleum Operations, roads, railroads, airports, landing strips, canals, bridges, pipelines, useful telephone and telegraph lines, provided that such right is not exceeded in a matter which restricts or hinders the Contractor's rights hereunder, or the Petroleum Operations.



ARTICLE 11



APPRAISAL OF A PETROLEUM DISCOVERY



11.1 In the event the Contractor discovers Petroleum, it shall, as promptly as possible notify NOCAL thereof and submit to it, within thirty (30) days after the date of the temporary plugging or abandonment of the discovery well, a report including all information relating to said discovery.



11.2 If the Contractor wishes to undertake appraisal work related to the abovementioned Petroleum discovery, it shall submit for approval to NOCAL, within six (6) months after the date of notification of said discovery, the appraisal work program and the estimate of the related Budget.



10

The provisions of Article 5.1 to 5.4 shall be applicable, mutatis mutandis, to said program as regards its approval and performance, it being understood that the submitted program shall comply with good international petroleum industry practice.



11.3 If the Contractor meets the conditions referred to in Article 11.2 and on request to NOCAL, the latter shall grant to it an exclusive appraisal authorization for a duration of two (2) years from the date of approval of the appraisal work program and the related Budget, in respect of the Appraisal Perimeter specified in said program. Except otherwise provided by this Article, the Contractor shall, during the term of said exclusive appraisal authorization, be subject to the same regime as that applicable to the exclusive exploration authorization.



11.3.1. The Contractor shall then diligently carry out the appraisal work program for the discovery in question in particular it shall drill the appraisal wells and carry out the production tests specified in said program. At the Contractor's request, notified at least thirty (30) days prior to the expiration of the appraisal period above-defined, the duration of said period may be extended by a maximum of six (6) months, provided that such extension is justified by the continuation of the drilling and production tests specified in the appraisal program.



Further extensions of the appraisal period may be requested by the Contractor and granted by NOCAL, in the event that further geological, geophysical subsurface, facilities of commercial work is considered justified by the Contractor in order to establish whether the field corresponding to the Petroleum discovery is commercial.



11.3.2. Within three (3) months after the completion of appraisal work or no later than thirty (30) days prior to the expiration of the appraisal period, the Contractor shall provide NOCAL with a detailed report giving all the information relating to the discovery and the appraisal thereof.



11.3.3. If, after having carried out the appraisal work the Contractor considers that the field corresponding to the Petroleum discovery is commercial it shall submit to NOCAL, together with the previous report, an application for an exclusive exploitation authorization accompanied by a detailed development and production plan for said Field, specifying inter alia;



(a) the planned delimitation of the Exploitation Perimeter applied for by the Contractor, so that it covers the area defined by the seismic closure of the Field concerned, together with all the technical justification with respect to the extent of said Field.



(b) an estimate of the reserves in place; the proven and probable recoverable reserves and the corresponding annual production, together with a study on the







20













methods of recovery and the possible valorization of the products associated with

Crude Oil, such as any Associated Natural Gas;



(c) item by item the description of equipment and work necessary for production,

such as the number of development wells, the number of platforms, pipelines,

production, processing, storage and loading facilities together with their

specifications;



(d) the estimated schedule for its implementation and the projected date of

production start-up;



(e) the estimates of investments and exploitation costs together with an economic

evaluation demonstrating the commercial nature of the discovery in question.



11.3.4. The commercial nature of one or more Petroleum Fields shall be

determined by the Contractor, provided that it shall, at the end of appraisal work,

submit to NOCAL the economic study referred to in Article 11.3.3. (e)

demonstrating this commercial nature of said Field or Fields.



A Field may be declared commercial by the Contractor after taking into account

the provisions of the the Contract and the submitted development and production plan,

the projected incomes and expenses determined in accordance with good

International petroleum industry practice confirm the commercial nature of said

Field.



11.3.5. For the purpose of evaluating the commercial nature said Field or

Fields, NOCAL and the Contractor shall meet within thirty (30) days after the

submission of the development and production plan accompanied by the economic

evaluation.



11.3.6. The development and production plan submitted by the Contractor shall be

subject to the approval of NOCAL. Within ninety (90) days after the submission of

said plan. NOCAL may propose mentions or modifications hereto by notifying the

Contractor thereof with all the useful justifications. In that event, the Parties shall

meet as soon as possible in order to consider the proposed revisions, or

modifications and establish by mutual agreement the plan in its final form; the plan

shall be deemed to be approved by NOCAL upon the date of such agreement.



Should NOCAL, fail to notify the Contractor of its wish for revision or modification

within the above-mentioned ninety (90) day period, the plan submitted by the

Contractor shall be deemed to be approved by NOCAL at the expiration of said

period.



11.4. If for reasons not technically justified, the Contractor, within twelve (12)

months after notification to NOCAL of a Petroleum discovery has not applied for

an exclusive appraisal authorization or if, after its granting, it has not commenced

the appraisal works in respect of said discovery, or if the Contractor, within eighteen







21







(18) months after completion of the appraisal work, does not declare the discovery as commercial, NOCAL may require that the Contractor surrenders all its rights in respect of the area deemed to encompass said discovery without any compensation for the Contractor. If, within sixty (60) days after the above periods and on receipt of NOCALS's written request, the Contractor has not notified its decision, it shall surrender said area and will forfeit all its rights on Petroleum which could be produced from said discovery, and any area so surrendered shall be deducted from the surfaces to be surrendered under Article 3.5 and 3.6.



ARTICLE 12



GRANT OF AN EXCLUSIVE EXPLOITATION AUTHORIZATION IN RESPECT OF A COMMERCIAL DISCOVERY



12.1. A commercial Petroleum discovery shall entitle the Contractor to an exclusive right, if it so request pursuant to the conditions set forth in Article 11.3.3., to obtain, in respect of the Field concerned, an exclusive exploitation authorization covering the related Exploitation Perimeter. Said authorization shall be granted by NOCAL as soon as possible.



12.2. If the Contractor makes several commercial discoveries in the Delimited Area, each such discovery shall, in accordance with the provisions of Article 12.1 give rise to an exclusive exploitation authorization each corresponding to an Exploitation Perimeter. The number of exclusive exploitation authorization and related Exploitation Perimeters within the Delimited within the Delimited Area shall not be limited Contractor shall retain the right to carry out exploration operations within the Exploitation Perimeter.



12.3. If in the course of work carried out after the grant of an exclusive exploitation authorization, if appears that the area defined by the seismic closure of the Field concerned is larger than originally estimated pursuant to Article 11.3.3. NOCAL shall grant to the Contactor, as part of the exclusive exploitation authorization already granted, an additional area so that the entirely of said Field is included in the Exploitation Perimeter, provided, however, that the Contractor supplies NOCAL, together with its application with the technical evidence of the extension so required and provided, further, that the above mentioned extension is an integral part of the Delimited Area as defined at the time of said application.



12.4. Where a Field extends beyond the boundaries of the Delimited Area, NOCAL may require the Contractor to exploit said Field in association with the right holder of the adjacent area under the provisions of a utilization agreement.



Within six (6) months after NOCAL has notified its request, the Contractor shall submit for its approval the development and production plan of the Field concerned which shall be prepared in agreement with the right holder of the adjacent area.



22



ARTICLE 13



DURATION OF THE EXPLOITATION PERIOD



13.1. The duration of an exclusive exploitation authorization during which the Contractor is authorized to carry out the exploitation of a Field declared commercial is set at twenty-five (25) years from its date of issue. If upon expiration of a Field remains possible NOCAL shall authorize the Contractor, at the latter's request submitted at least twelve (12) months prior to said expiration, to continue under this Contract the exploitation of said Field during an additional period of no more than ten (10) years, provided that the Contractor has fulfilled all its obligations during the current exploitation period.



If upon expiration of that additional exploitation period, a commercial exploitation of said Field remains possible, the Contractor may request NOCAL, at least twelve (12) months prior to said expiration that if the authorized to continue the exploitation of said Field under this Contract, during an additional period to be agreed upon.



13.2. The Contractor may, at any time, fully or partially surrender any exclusive exploitation authorization by giving at least twelve (12) months prior notice which may be required with NOCAL's consent. That notice shall be accompanied by the list of steps which the surrendering Contractor undertakes to take, in accordance with good international petroleum industry practices arising out of its surrender.



13.3. Interruption of development work of production of 8 Filed declared commercial, for a consecutive period of at least six (6) months (unless extended by period of Force Majeure), decided by the Contractor without NOCAL's consent, or abandonment of the exploitation of a Field, may give rise to the withdrawal of the exclusive exploitation authorization concerned together with the termination of this Contract.



13.4. Upon expiration surrender or withdrawal of the last exclusive exploitation authorization granted to the Contractor, this Contract shall terminate.



13.5. The termination of this Contract whatever the reason thereof, shall not relieve the Contractor of any obligations incurred prior to or arising from, said expiration or termination and which shall be fulfilled.



23ARTICLE 14



EXPLOITATION15.4. The Contractor may, to the extent and for the duration of the excess capacity of a pipeline or processing, transportation or storage facility built for the purposes of the Petroleum Operations, be obligated to accept the flow of Petroleum coming from exploitations other than that of the Contractor, provided that such flow shall not cause prejudice to the Petroleum Operations, and provided, further, that a reasonable tariff covering a normal remuneration for capital invested in respect of the pipeline of facility concerned shall be paid by the user.



15.5. Following the grant of an exclusive exploitation authorization, the Contractor undertakes to proceed diligently with the carrying out of the development and production plan to ensure, in accordance with good international petroleum industry practice, the maximum economic recovery of the Petroleum contained in the Field in question.



15.6. The Contractor shall, in the conduct of development and production operations, comply with all good international petroleum industry practice which in particular ensures the good conservation of Fields and maximum economic recovery of Petroleum.



The Contractor shall, if deemed appropriate by Contractor and NOCAL, carry out enhanced recovery studies and use such recovery processes if they may lead to an increase in Petroleum recovery rate under economic conditions.



15.7. The Contractor shall provide NOCAL with all the reports, studies, measurement results, tests and documents enabling the monitoring of the proper exploitation of each Field.



The Contractor shall, in particular, carry out the following measures on each producing well:



(a) monthly testing of production and gas/oil ratio;



(b) half-yearly measurement of the Field reservoirs pressure or other methods to monitor reservoir performance as agreed by the Parties.



15.8. The Contractor undertakes to produce every year from each Field quantities of Petroleum in accordance with the provisions of Article 15.6.



The annual production rates of each Field shall be submitted by the Contractor together with the Annual Work Programs for the approval of NOCAL which shall not be withheld provided that the Contractor gives proper technical and economic grounds.



15.9. The Contractor shall measure all Petroleum produced after the extraction of the water and associated substances using, with the agreement of NOCAL, instruments and procedures in keeping with the international petroleum industry methods. NOCAL shall have the right to examine these measurements and to



25inspect the instruments and procedures used. If during exploitation the Contractor wishes to change said instruments and procedures, it shall obtain the prior consent of NOCAL, which will not be unreasonably withheld.



Where the appliances and procedures used therefore have caused an overstatement or understatement of measured quantities, the error shall be deemed to have existed since the date of the last calibration of the appliances, unless the contrary can be justified, and the proper adjustment shall be made for the period of existence of such error.



ARTICLE 16



RECOVERY OF PETROLEUM COSTS AND PRODUCTION SHARING



16.1. From the commencement of regular production of Crude Oil, the Contractor shall market all the production of Crude Oil obtained from the Delimited Area, in accordance with the provisions hereafter defined.



16.2. For the purposes of recovery of the Petroleum Costs, the Contractor may freely take each Calendar Year a portion of the production in no event greater than eighty percent (80%) of the Total Production of Petroleum from the Delimited Area, or only any lesser percentage which would be necessary and sufficient.



The value of such portion of Total Production allocated to the recovery of the Petroleum Costs by the Contractor, as defined in the preceding paragraph, shall be calculated in accordance with the provisions of Article 18.



If during a Calendar Year the Petroleum Costs not yet recovered by the Contractor under provisions of this Article 16.2 exceed the equivalent in value of eighty percent (80%) of the Total Production of Petroleum from the Delimited Area, as calculated above, the balance of the Petroleum Costs which cannot be recovered in that Calendar Year shall be carried forward in the following Calendar Year or Years until full recovery of the Petroleum Costs or until expiration of this Contract.



16.3. The quantity of Petroleum from the Delimited Area remaining during each Calendar Year after the Contractor has taken from the Total Production the portion necessary for the recovery of the Petroleum Costs, hereafter referred to as "Remaining Production" shall be shared between NOCAL and the Contractor as follows:



The Remaining Production shall be shared according to the daily Total Production from the Delimited Adea . Remaining Production shall be shared incrementally on the basis of the following production tranches:







[chart]

Increments of daily Total Production

(In Barrels per day)

from 0 to 100,000

from 100,000 to 150,000

>150,001



NOCAL's shARE

40%

50%

60%



Contractor's share

60%

50%

40%



In the case of natural gas the following production sharing shall apply.



Production of Natural Gas (in Barrels of crude Oil equivalent) per day



NOCAL's share

30%



Contractor's share

70%



[/chart]



For the purpose of this Article, the daily Total Production shall be the average rate of total production during the calendar quarter in question.



For the purpose of tax registration of the Republic of Liberia, the quantity of Petroleum that NOCAL will receive during each Calendar Year pursuant to this Article 16.3 shall be deemed to include the portion necessary to pay any tax(es) of the Contractor in Liberia which will be assessed on its incomes. NOCAL agrees to pay from this portion any income tax on behalf and in the name of the Contractor as and when due and to deliver to the latter official receipts of such payments.



16.4 NOCAL may receive its share of production defined in article 16.3 either in kind or in cash.



16.5 If NOCAL wishes to receive in kind all or part of its share of production defined in Article 16.3 it shall so notify in writing to the Contractor at least 90 (90) days prior to the beginning of the calendar quarter concerned specifying the precise quantity that it wishes to receive in kind during said quarter.



16.6 If NOCAL wishes to receive in cash all or part of its share of production defined in 16.3 or if NOCAL has not notified the Contractor of its decision to receive its share of production in kind pursuant to Article 16.5 the Contractor shall market NOCAL's share of production to be taken in cash for the quarter concerned, in said share during such quarter and pay to NOCAL within thirty (30) days following the date of each lifting, and amount equal to the quantity corresponding to NOCAL's share of production multiplied by the actual sale price of such NOCAL production less the Contractor's reasonable expenses of marketing and selling NOCAL's share as approved by NOCAL.



1NOCAL may require payment, for sales of its share of production sold by the Contractor, in Dollars or in the foreign currency in which the sale has been made.



ARTICLE 17



TAXATION



17.1. Unless otherwise provided for in this Contract the Contractor shall, in respect of its Petroleum Operations, be subject to the laws generally applicable and the regulations in force in Liberia concerning taxes which are or may be levied on incomes, or determined thereto.



It is specifically acknowledged that the provisions of this Article shall apply individually to each entity comprising the Contractor under this Contract. Each party comprising Contractor shall keep separate accounts for each Fiscal Year in respect of the Petroleum Operations, in accordance with the regulations in force in Liberia, enabling in particular the establishment of a profit and loss account as well as a balance sheet showing both the results of said Petroleum Operations and the asset and liability items allocated or related thereto.



17.2. For the purposes of Article 17.1 the Contractor shall in respect of its profit arising from Petroleum Operations, be liable to an income tax under the laws and regulations in force in Liberia.



Income Tax Rate applicable to Petroleum Operations carried out under this Contract shall be thirty five (35%) percent.



In accordance with the provisions of Article 16.3 it is expressly agreed and acknowledged that NOCAL's share of the volume of crude oil shall be deemed to include a volume of crude oil to meet Contractor's Liberian Income Tax liabilities, from which NOCAL shall pay Contractor's income tax. The Contractor shall not be liable for any payment to the STATE (including tax authorities) with respect to said income tax. As regards the tax authorities of Liberia, the share of Crude Oil of Total Production, which the Contractor is entitled to receive under the provisions of Article 16.3 is considered as representing the net profit obtained by the Contractor.



17.3. For the purposes of assessing the total Contractor's taxable income in respect of a Fiscal Year, the profit and loss shall, inter alia, be credited by the following:



(a) the Contractor's annual gross income recorded in its accounting books, arising from the marketing of the quality of Crude Oil to which it is entitled under Articles 18.2 and 18.3 all other incomes or proceeds related to the Petroleum Operations, including inter alia those arising from



* the sale of related substances



28processing, transportation or storage of products for Third Parties in the facilities dedicated to the Petroleum Operations.



17.4. Such profit and loss account shall be debited with all charges necessary for the purposes of the Petroleum Operations in respect of the Fiscal Year concerned, which may be deducted under the applicable laws of Liberia and the provisions of this Contract.



In particular the following items shall be debited from the income of the Fiscal Year:



(a) In addition to the charges specifically set forth below in this Article 17.4, all other Petroleum costs, including the costs of supplies, personnel and manpower expenses, costs of services provided to the Contractor in respect of the Petroleum Operations, provided, however, that costs of supplies, personnel and services rendered by Affiliated Companies shall be deductible provided that they do not exceed those which would be normally charged in arm's length transactions between independent buyer and seller for identical or similar supplies or services.



(b) Overhead costs relating to the Petroleum Operations performed under this Contract, including without limitation, those set out in Accounting Procedure, in light of the services rendered to the Petroleum Operations performed in Liberia, of wages and salaries paid to managers and employees residing abroad, and the general and administrative overhead costs of the central services of the Contractor and its Affiliated Companies working for its account, located abroad for their account. Overhead costs paid abroad shall in no event be greater than the limits specified in the Accounting Procedure.



(c) Interest paid to creditors of the Contractor, for their actual amount, subject to the limits specified in the Accounting Procedure.



(d) Losses of materials or assets resulting from destruction or damage, assets which are renounced or abandoned during the year, bad debts, indemnities paid to Third Parties as compensation for damage.



(e) Reasonable and justified reserves made for clearly identified future losses or liabilities which current events render probable.



(f) Any other losses or charges directly related to the Petroleum Operations, including exchange losses realized in connection with the Petroleum Operations as well as bonuses and amounts paid during the Fiscal Year.



(g) Surface rentals as defined in article 17.10.



(h) Rentals for movable and immovable properties as well as insurance premiums.



29(i) Any other Contractor expense recorded according to Accounting Procedure.



17.5 The total Contractor's taxable profit shall be equal to the difference between all the amounts credited and all the amounts debited to the profit and loss account.



PLUS



An amount equal to Contractor's Liberian Income Tax paid by NOCAL on behalf and in the name of the Contractor.



If this amount is negative, it shall constitute a loss that could be carried forward to the following years without any limited period of time.



17.6 NOCAL shall assume, pay and discharge, in the name and on behalf Contractor, Contractor's Liberian Income Taxes out of the sums received by NOCAL from the sale or other disposition of it's share of Crude Oil.



NOCAL shall be responsible for any penalty of interest due to the late payment of the Contractor's Income Tax, and shall assume any cost that this delay may cause to Contractor.



17.7 Within three (3) months after the end of a Fiscal Year, each entity constituting the Contractor shall submit to the competent tax authorities its annual tax return together with financial statements, as required by applicable regulations Contractor shall provide NOCAL with a copy of the Tax return duly submitted to the Tax Authorities.



NOCAL, shall, after receiving the copy of said annual tax return, furnish to the Contractor within a reasonable period (no more than sixty days) that tax receipts evidencing, the payment of Contractors Liberian income tax and all other documents certifying that the Contractor has, for the Fiscal year in question, complied with all its tax obligations with respect to the income tax as defined in this Article. Such receipts shall be issued by the relevant taxing authorities and shall state the amount and other particular circumstances, according to Appendix Three (3) of this Contract.



17.8. Except for the income tax defined in this Article and the bonuses provided for in Article 19, the Contractor shall be exempt from all other levies, duties, taxes or contributions arising from the Petroleum Operations and any revenues related thereto or, more generally, on Contractor's property, activities or actions, including its establishment and its operation hereunder.



In particular, the Contractor, its suppliers, subcontractors and Affiliated Companies shall be exempt from the same levies, duties, taxes or turnover (value added taxes and taxes on services) which would be payable in connection with sales made by, work performed for and services rendered to the Contractor under this Contract



[illegible number]Neither withholding tax nor additional taxes would be applicable on the interest payments, dividends, deemed dividends, transfer of profits or deemed remittance of profits from a Contractor's branch in Liberia to its foreign or head office or in relation to services rendered by subcontracture.



Neither sales taxes nor any other taxes, levies or duties shall be applicable to the Contractor's Petroleum Operations or activities.



17.9. Assignments of any kind between the companies signing this Contract and their Affiliated Companies as well as any assignment made in accordance with this Agreement (even to a Third Party) shall be exempt from any duties or taxes, including Income Tax, payable in such respect.



17.10. Surface rentals shall be payable to NOCAL per square kilometer of the area remaining at the beginning of each Calendar Year as part of the Delimited Area, in the amounts as set out below:



Phase of Operation Surface Rentals Per Annum

First Exploration period US$ 30 per sq km

Second Exploration period US$ 50 per sq km

Third Exploration period US$ 75 per sq km

Development & Exploitation Perimeter: US$ 100 per sq km



ARTICLE 18



VALUATION OF PETROLEUM



18.1. For the purposes of this Contract, the Crude Oil price shall be the F.O.B. "Market Price" at the Delivery Point, expressed in Dollars per Barrel and payable within thirty (30) days after the date of the bill of lading, as determined hereinafter for each quarter.



A Market Price shall be determined for each type of Crude Oil or Crude oil mix.



18.2. The Market Price applicable to lifting of Crude Oil made during a calendar quarter shall be calculated at the end of said quarter and shall be equal to the weighted average of the prices obtained for Crude Oil from the Delimited Area during said quarter by the Contractor and by NOCAL from independent purchasers, as adjusted to take into account the differences in quality and gravity as well as in F.O.B. delivery terms and payment conditions.



18.3. In the event such sales are not made, the Market Price shall be determined on the basis of the prices obtained on the international market during said quarter between independent buyers and sellers for sales of crude oils of contract farm, quantity and quality equivalent to the Crude Oil from the Delimited Area in the same markets as those in which the Liberian Crude Oil would normally be sold, as



31adjusted to take into account the differences in quality, gravity, transportation as well as in sales and payment conditions.



18.4. The following transactions shall, inter alia, be excluded from the calculation of the Market Price of Crude Oil:



(a) sales in which the buyer is an Affiliated Company of the seller as well as sales between entities constituting the Contractor;



(b) sales in the Liberian domestic market;



(c) sales in exchange for other than payment in freely convertible currencies and sales fully or partially made for reasons other than the usual economic incentives involved in Crude Oil sales on the international market (such as exchange contracts, sales from government to government or to government agencies);



18.5. Within ten (10) days following the end of each quarter, the Parties shall advise each other of the prices obtained for their share of production of Crude Oil from the Delimited Area sold to independent purchasers during the quarter in question, indicating for each sale the identity of the purchaser, the quantities sold, the delivery and payment terms.



Within twenty (20) days following the end of each quarter, the Contractor shall determine in accordance with the provisions of Article 18.2 or Article 18.3 as the case may be, the Market Price applicable for the quarter concerned, and shall notify NOCAL of that Market Price, indicating the method of calculation and all data used in the calculation of that Market Price.



Within thirty (30) days following receipt of the notice referred to in the preceding paragraph, NOCAL shall verify that the calculation of Market Price complies with the provisions hereof and shall notify the Contractor of its acceptance or objections. Failing notification from NOCAL within that thirty (30) day period the Market Price provided for in the Contractor's notice referred to in the preceding paragraph shall be deemed to have been accepted by NOCAL.



In the event that NOCAL has notified objections to the Market Price, the Parties shall meet within fifteen (15) days following NOCAL's notification to mutually agree on the Market Price. If the Parties fail to agree on the Market Price applicable to a given quarter within seventy-five (75) days after the end of that quarter, NOCAL or the Contractor may immediately submit to an expert, appointed in accordance with the following paragraph, the determination of the Market Price (including the determination of reference crude oils if the Parties have no determined them). The expert shall determine the price within thirty (30) days after his appointment and his conclusions shall be final and binding on the Parties. The expert shall decide in accordance with the provisions of this Article.





32The expert shall be selected by agreement between the Parties or, if no agreement is reached, by the International Centre of Expertise of the International Chamber of Commerce in accordance with its rules on Technical Expertise, at the request of the most diligent Party. The expertise costs shall be charged to the Contractor and included in the Petroleum Costs.



18.6. In the event it would be necessary to calculate on a provisional basis during a quarter the Crude oil price applicable to the liftings made during said quarter, that price shall be established as follows:



(a) For any sale to independent buyers, the price applicable to that sale shall be the price obtained for the Crude Oil for said sale, as adjusted to take into account the F.O.B. delivery terms and thirty (30) days payment terms.



(b) For any lifting other than these which are the subject of a sale to independent buyers, the price applicable to that lifting shall be the Market Price determined for the preceding quarter or, if that Market Price has not been determined, a price set up by agreement between the Parties or, failing agreement, the last known Market Price.



Once the Market Price for a quarter has been determined on a final basis, adjustments, if required, shall be made within thirty (30) days.



ARTICLE 19



BONUSES



19.1. The Contractor shall pay to NOCAL the following bonuses:



(a) Two million US Dollars (US$2 million) when the Total Production of Crude Oil from the Delimited Area first reaches the average rate of thirty thousand (30,000) Barrels per day during a period of thirty (30) consecutive days.



(b) Three million US Dollars (US$3 million) when the Total Production of Crude Oil from the Delimited Area first reaches the average rate of fifty thousand (50,000) Barrels per day during a period of thirty (30) consecutive days.



(c) First million US Dollars (US$5 million when the Total Production of Crude Oil from the Delimited Area first reaches the average rate of one hundred thousand (100,000) Barrels per day during a period of thirty (30) consecutive days.



Each of the amounts referred to in (a), (b) and (b) above shall be paid within thirty (30) days following the expiration of the reference period of thirty (30) consecutive days. 19.2. The payments referred to in Article 19.1 will be recoverable and, therefore, shall be considered as Petroleum Costs.



ARTICLE 20



OWNERSHIP AND ABANDONMENT OF ASSETS



20.1. Upon expiration, surrender or termination of this Contract, whatever the reason thereof, in respect of all or part of the Delimited Area or at the end of exploitation of a Field, the Contractor shall transfer at no cost to NOCAL the ownership of assets, movables and immovables owned by the Contractor and used for the requirements of the Petroleum Operations carried out in the area so surrendered, located wether inside or outside the Delimited Area, such as wells and their equipment, buildings, warehouses, docks, lands, offices, plants, machinery and equipment, bases, harbors, wharfs, jetties, buoys, platforms, pipelines, roads, bridges, railroads and other facilities. Such transfer of ownership shall cause the automatic cancellation of any security or surely concerning those assets, or which those assets constitute.



However, the Contractor may continue to use those assets beyond the date referred to in the first paragraph, for the requirements mof its Petroleum Operations in Liberia governed by other contracts.



20.2. If NOCAL decides not to accept, for all or part of the assets, the transfer of ownership provided for in Article 20.1. it may, not later than ninety (90) days following the date specified in said Article, require the Contractor, in accordance with good international petroleum industry practice, to perform abandonment operations and to remove, at the cost of the Contractor (the accrued costsmof which shall be cost recoverable), the facilities relating to the surrendered area.



ARTICLE 21



NATURAL GAS



21.1.1. Non-Associated Natural Gas



21.1.1. In the event of a Non-Associated Natural Gas discovery, the Contractor shall engage in discussions with NOCAL, with a view to determining wether the appraised and exploitation of said discovery have a potentially commercial nature.



21.1.2. If the Contractor, after the above-mentioned discussions, considers that the appraisal of such Non-Associated Natural Gas discovery is justified, itnshall undertake the appraisal work program for said discovery.



34The Contractor shall have the right, for the purposes of evaluating the commerciality of the Non-Associated Natural Gas discovery, if it so requests at least thirty (30) days prior to the expiration of the third exploration period set forth in Article 3.3 to be granted an exclusive appraisal authorization concerning the Appraisal Perimeter of the above-mentioned discovery, for a term of three (3) years.



In addition, the Parties shall jointly evaluate the possible outlets for the Natural Gas, both on the local market and for export, together with the necessary means for its marketing, and they shall consider the possibility of a joint marketing of their shares of production in the event the Natural Gas discovery would not otherwise be commercially exploitable. For that purpose, a Consultative Committee for Natural Gas shall be established by the Parties to ensure the coordination of the upstream and downstream components of the Natural Gas project and facilitate its evaluation and implementation.



21.1.3 If despite their reasonable endeavours, the Parties are not able to develop a market for a non-Associated Natural Gas discovery, the Contractor may, prior to the expiry of the term of the exclusive appraisal authorization and NOCAL will not unreasonably withhold its approval for those extensions.



Following completion of appraisal work, in the event the Parties should jointly decide that the exploitation of that discovery is justified to supply the local market, or in the event the Contractor shall submit prior to the expiration of the appraisal period and application for an exclusive exploitation authorization which NOCAL will grant under the terms provided by Article 12.



The Contractor shall then have the right and obligation to proceed with the development and production of that Natural Gas in accordance with the approved development plan referred to in Article 11.3 and the provisions of this Contract applicable to Crude Oil shall apply, mutalis mutande, to Natural Gas, unless specifically provided under Article 21.3 or in other provisions of this Contract.



21.1.4 If the Contractor considers (and informs NOCAL accordingly) that the appraisal of the Non-Associated Natural Gas discovery concerned is not justified, other than due a lack of a market for gas on commercial terms in accordance with international industry practice, NOCAL may, by



35Giving the twelve (12) months prior notice which may be reduced either with Contractor’s consent or automatically in the event the exclusive exploration authorization expires earlier, require the Contractor to surrender its rights in the respect of the area encompassing said discovery.



In the same manner, if the Contractor, after completion of appraisal works, considers (and informs NOCAL accordingly) that the Non-Associated Natural Gas discovery is not commercial, other than dues to a lack of a market for the gas on commercial terms in accordance with the international industry practice, NOCAL may, by giving three (3) months prior notice, unless the exclusive exploration authorization expires earlier, require the Contractor to surrender its rights on the area encompassing said discovery.



In both cases, the Contractor shall forfeit its right to all Non-Associated Natural Gas which could be produced from said discovery, and NOCAL may then carry out, or cause to be carried out, all the appraisal development, production, processing, transportation and marketing work relating to that discovery, without any compensation for the Contractor.



21.1.5 If the Contractor is of the view that Non-Associated Gas discovery in question is non-economic as a standalone development but can demonstrate that there is sufficient prospectivity in the region to support a combined development of current discovered reserves and future exploration prospects as a combined economic development, then the prior notice to be given by NOCAL under Article 21.1.4 (in both paragraphs 1 and 2) will be no less than twenty four (24) months during which time the Contractor will have the same rights as under an exclusive appraisal authorization (and whether or not the Contractor has an exclusive appraisal authorization which is otherwise scheduled to end prior to the expiry of that 24 month period.



21.2 Associated Natural Gas



21.2.1 In the event of a commercial discovery of Crude Oil, the Contractor shall state if it considers that the production of Associated Natural Gas is likely to exceed quantities necessary for the requirements of the Petroleum Operations related to the production of Crude Oil (including re-injection operations), and if it considers that such excess is capable of being produced in commercial quantities. In the event the Contractor shall have informed NOCAL of such an excess, the Parties shall jointly evaluate the possible outlets for the excess of Natural Gas, both on the local market and for export (including the possibility of joint marketing of their shares of production of that excess of Natural Gas in the event such excess would not otherwise be commercially exploitable), together with the means necessary for its marketing.







36











In the event the Parties should decide that the development of the excess

of Natural Gas is justified, or in the event the Contractor would wish to

develop and produce that excess for export, the Contractor shall indicate

in the development and production program referred to in Article 11.3.3

the additional facilities necessary for the development and exploitation of

that excess and its estimate of the costs related thereto.



The Contractor Shall then have the right to proceed with the

development and exploitation of tha excess in accordance with the development and

production program program approved by NOCAL under the terms provided by

Article 11.3.6. and the provisions of the Contract applicable to Crude Oil

shall apply, mutatis mutandis, to the excess of Natural Gas, unless

otherwise specifically provided by Article 21.3.



A similar procedure shall be applicable if the sale or marketing of

Associated Natural Gas is decided during the exploitation of a Field.



21.2.2. In the event the Contractor should not consider the exploitation of the

excess of Natural Gas as justified and if NOCAL, at any time thereafter,

would wish to utilize it, NOCAL shall notify the Contractor thereof, in which

event.



(a) The Contractor shall make available to NOCAL free of charge at the

Crude Oil Natural Gas separation facilities all or part of the

excess that NOCAL wishes to lift;



(b) NOCAL shall be responsible for the gathering, processing,

compressing and transporting of that excess from the above

mentioned separation facilities, and shall bear any Petroleum Costs

related thereto.



(c) the construction of the facilities necessary for the operations referred

to in paragraph (b) above, together with the lifting of that excess by

NOCAL, shall be carried out in accordance with good international

petroleum industry practice and in such a manner as not to hinder the

production, lifting and transportation of Crude Oil by the Contractor.



21.2.3. Any excess of Associated Natural Gas which would not be utilized under

Article 21.2.1. and 21.2.2. shall be reinjected by the Contractor. However,

the Contractor shall have the right to flare said gas in accordance with

good international petroleum industry practice, provided that the

Contractor furnishes NOCAL with a report demonstrating that said gas

cannot be economically utilized to improve the rate of recovery of Crude

Oil by means of reinjection pursuant to the provisions of Article 15.6., and

provided, further, that NOCAL approves said flaring, which approval shall

not be unreasonably withheld.













37





























21.3 Provisions common to Associated and Non-Associated Gas



21.3.1. In addition to the provisions of Article 16, in order to encourage the

exploitation of Natural Gas, NOCAL may grant to the Contractor further

specific benefits when they are duly justified concerning, inter alia, the

recovery of the Petroleum Costs relating to Natural Gas.



21.3.2. The Contractor shall have the right to dispose of the share of production of

Natural Gas, in accordance with the provisions of this Contract. It shall

also have the right to proceed with the separation of liquids from all

Natural Gas produced , and to transport, store as well as sell on the local

market or for export the share of liquid Petroleum so separated which will

be considered as Crude Oil for the purposes of their sharing between the

Parties under Article 16.



21.3.3. For the purpose of cost recovery under this Contract, the Natural Gas

price, expressed in Dollars per million BTU, shall be equal to:



(a) with respect to Natural Gas export sales to Third Parties the price

obtained from purchasers;



(b) with respect to sales on the local market of Natural Gas as a fuel,

such price as NOCAL and the Contractor shall agree.



The above-mentioned equivalent price for the utilization of Natural Gas as

a fuel shall be determined on the basis of the same calorific, value with

respect to commercial gas delivered at the entry point of the main gas

transportation network, if any, or otherwise where delivered to large

consumers. In the event of transfer of the gas at a delivery point located

upstream, the selling price shall be adjusted accordingly.



21.3.4. In the event of the discovery of a Natural Gas field which may not be

commercial at that time, the Contractor shall not be required to proceed with

the appraisal and development of the Natural Gas field until it is commercial

to develop. An exclusive Appraisal Perimeter will be agreed by the Parties

around the discovery of the Natural Gas field. The Contractor shall consult

with NOCAL, every five (5) years from the date of the discovery to examine

alternatives for the economic and efficient development of the field.

Notwithstanding anything in the Contract to the contrary, the Contractor

shall not be required to surrender such Appraisal Perimeter for a period of

five (5) years from the expiration of the exclusive exploration authorization

or the date on which the exclusive Appraisal Perimeter (as it may be

extended in accordance with this Contract) for the discovery ends,

whichever is the later, and provided that, if the discovery is of Non

Associated Natural Gas, the requirements for surrender set out in Article

21.1.4 and 21.1.5 have been met.











38



























21.3.5 Notwithstanding any other provision of the Contract, if after the surrender or relinquishment of any Natural Gas discovery by the Contractor in accordance with this Contract, NOCAL or the State (or any agency or instrumentality of the State) either (a) identifies a market for the said gas or (b) proposes to assign to, transfer to, grant or otherwise permit a Third Party to exercise any rights in relation to the appraisal, development and/or marketing of the gas, NOCAL shall promptly give written notice (the "Marketing Notice") to the Contractor giving detailed particulars of the market (if (a) applies) and the terms on which it is proposed to assign, transfer or otherwise permit a Third Party to exercise any rights in relation to the appraisal, development and/or marketing of the gas (if (b) applies) giving the Contractor the first right of refusal in relation thereto. Within 6 months of receipt of the Marketing Notice, the Contractor shall notify NOCAL whether if elects to pursue the market identified and/or exercise any rights to relation to the appraisal, development and/or marketing of the gas if the Contractor so elects, NOCAL shall within 60 days enter into a contract with the Contractor on the same terms as this Contract as they relate to the appraisal, development and marketing of the Field comprising the Natural Gas discovery.



21.3.6 To the extent of any inconsistency between the provisions of the Article 21 and the provisions of Articles 11, 12 and 13, the provisions of this Article 21 will prevail.



ARTICLE 22



FOREIGN EXCHANGE CONTROL



22.1. The Contractor shall comply with the foreign exchange control regulations, subject to the provisions of this Article.



22.2. The Contractor shall have the right to retain abroad all the foreign currencies arising from export sales of all Petroleum to which it is entitled under this Contract, or from assignments, as well as equity, incomes from loan and more generally, all assets acquired abroad by it, and to freely depose of such foreign currencies or assets to the extent that they may exceed its requirements for its operations in Liberia.



22.3. No restriction shall be exercised on importation by the Contractor of funds intended for the performance of the Petroleum Operations.



22.4. The Contractor shall have the right to purchase currencies or Liberia with foreign currencies, and freely exchange into foreign currencies of its election any funds held by 4 in Liberia in excess of its local requirements at exchange rates which shall not be less favorable than those generally applicable to any other buyer or seller or foreign currencies.



39









ARTICLE 23



APPLICABLE LAW



The laws and regulations in force in the Republic of Liberia and the provisions of

international law as may be applicable to international oil and gas activities shall

apply to the Parties, to this Contract and to the Operations which are the purpose

thereof, unless otherwise provided by the Contract. In the event of any conflict

between the provisions of this Contract and the provisions of any laws and

regulations in force in the Republic of Liberia, the provisions of this Contract shall

prevail.



ARTICLE 24



MONETARY UNIT



24.1. The registers and accounting books relating to this Contract shall be

maintained and recorded in Dollars. Said registers and accounting books shall be

used to determine the Petroleum Costs, gross income, exploitation costs and net

profits for the purpose of the preparation of the Contractor's tax return, they shall

contain, inter alia, Contractor's accounts showing the sales of Petroleum under this

Contract.



24.2. Whenever it is necessary to convert into Dollars expenses and incomes

expressed another currency, the exchange rates to be used shall be equal to the

arithmetic average of the daily closing rates as published in the London Financial

Times for the purchase and sale of said currency during the month when the

expenses were paid and the income received.



24.3. The originals of the registers and accounting books referred to in Article 24.1

shall be kept in Liberia.



The registers and accounting books shall be supported by detailed documents with

respect to receipts and Petroleum Costs.



ARTICLE 25



ACCOUNTING METHODS AND AUDITS



25.1. The Contractor shall maintain its accounts in accordance with the regulations

in force and with the provisions of the Accounting Procedure set but in Appendix 2

attached hereto forming an integral part of this Contract.

















40







25.2. After giving the Contractor notice thereof in writing, the STATE shall have the right to cause the registers and accounting books relating to the Petroleum Operations to be inspected and audited by its own agents or by experts of its election, and shall have a period of two (2) years following the end of each Calendar Year to carry out those inspections or audits relating to said Year and may submit its objections to the Contractor for any contradictions or errors found during such inspection or audits. Should the STATE fail to make any claim within the above-mentioned period of two (2) years, no further objection or claim shall be made by the Liberian administration for the Calendar Year concerned.



ARTICLE 26



IMPORT AND EXPORT



26.1.(a) The Contractor shall have the right to import into Liberia, free of all duties and taxes, in its own name or on behalf of its contractors and subcontractors, all the technical equipment, materials, machinery and tools, goods and supplies necessary in the Contractor's opinion for the proper conduct and achievement of the Petroleum Operations; such imports include but are not limited to drilling, exploration, development, production, transportation, sales and marketing, equipment, pipelines, tanks, geological and geophysical tools, boats, ships, launches, drilling barges, ships and platform, production platforms, civil engineering and telecommunication equipment, power plants and all related equipment, aircraft, automotive equipment and other vehicles, instruments, tools, spare parts, alloys and additives, camping equipment, protective clothing and equipment, medical surgical and sanitary equipment, supplies and instruments necessary for the installation and operation of hospitals and dispensaries, documentation equipment, construction materials of all types, lumber, office furniture and equipment, automobiles, explosives, chemicals, fuels, ship supplies, pharmaceutical products, medicines.



(b) The Contractor shall have the right to import into Liberia, in its own name or on behalf of its contractors or subcontractors, the furniture, clothing, household appliances and all personal effects for all the foreign employees and their families assigned to work in Liberia for the Contractor or its contractors or subcontractors.



(c) However, the Contractor, its agents, contractors and subcontractors undertake not in proceed with the imports mentioned in Article 25.1.(a) insular as such items are available in Liberia under equivalent conditions of quantity, quality, price, delivery and terms of payment, unless specific requirements or technical emergencies are presented by the Contractor.



(d) The Contractor, its agents, contractors and subcontractors shall have the right to re-export from Liberia, free of all duties and taxes and at any time, all the items imported under Article 26.1.(a) and (b) which are no longer used for the petroleum



41







Operations except the items which have become the property of the State under

the provisions of Article 20.



26.2. All the technical materials, machinery and tools, goods and supplies specified

in Article 26.1 which the Contractor, its agents, the contractor and subcontractors,

their foreign employees and their families will have the right to import in one of

more shipments to Liberia, shall be fully exempt of all duties and taxes payable as

a result of the importation ('entry duties and taxes').



As the case may be, the applicable administrative formalities will be those of the

following regimes:



(a) Exceptional temporary admission regime in full suspension of entry duties and

taxes for equipment, materials, machinery and tools, goods and supplies

necessary for the proper progress of the Petroleum Operations, for the entire

duration of their use in Liberia including the continental shall, it being understood

that for the equipment, materials, machinery and tools, goods and supplies

consumed during the operations or left in place, the exceptional temporary

admission discharge will be automatic by simple quarterly declaration and without

payment of duties and taxes.



In the event of a duly justified emergency, the equipment, materials, tools and

machinery, goods and supplies will be placed at the disposal of the users as soon

as they arrive in Liberia and the administrative regularization relating to their

admission will be made later and as soon as possible.



(b) Supply regime for consumable goods and foodstuffs, fuels and lubricants used

at sea, in particular on all ships, aircraft and machinery used for petroleum

exploration and exploitation.



(c) Exempt admission regime according to the regulations in force, for furniture,

clothing, household appliances and personal effects.



26.3. The Contractor its agents, contractors and subcontractors shall, provided

that they inform the STATE in advance of their intent to sell and subject to the

provisions of Article 20, have the right to sell in Liberia, all equipment, materials,

machinery and tools, goods and supplies which they have imported when they are

considered as surplus and no longer necessary for the Petroleum Operations, in

that event, the seller shall be responsible for paying all duties and taxes applicable

on the date of the transaction and for filing all the formalities prescribed by the

regulations in force.



26.4. During the term of this Contract, the Contractor, its customers and their

carriers shall have the right to export freely at the export point selected for that

purpose, free of all duties and taxes and at any time, the portion of Petroleum to

which the Contractor is entitled in accordance with the provisions of this Contract,

after deduction of all deliveries made to the STATE.









42







26.5. NOCAL, will provide all relevant duty exemption documentation NOCAL shall

grant exemptions from the import and export duties and shall ensure that pre-

inspection regulations, if any, are not onerous.



ARTICLE 27



DISPOSAL OF PRODUCTION



26.1 Each Calendar Year, up to a total of ten percent (10%) of the share of Crude

Oil Production to which the Contractor is entitled shall be sold to NOCAL by the

Contractor for the purpose of satisfying the needs of the domestic market of

Liberia. Such contribution of the Contractor shall be in proportion to its share of

production, in the total Crude Oil Production in Liberia.



The quantity of Crude Oil the Contractor shall be obligated to sell to NOCAL shall

be notified to it by NOCAL at least three (3) months prior to the beginning of each

calendar quarter.



27.2. The price of the Crude Oil sold to NOCAL under Article 27.1 for the needs of

the domestic market shall be the Market Price defined in Article 18.2. That Crude Oil

price shall be pavable to the Contractor in Dollars forty five (45) days after

receipt of the invoice unless otherwise agreed between the Parties.



27.3. The transfer of title to, and risk of, the share of Petroleum production to which

each party is entitled shall be made at the Delivery Point, or at any other transfer

point agreed between the Parties.



27.4. Each of the Parties shall have the right and obligation, to dispose of and lift

the share of Petroleum to which it is entitled under this Contract. Such share shall

be lifted on as regular a basis as possible, if being understood that each of the

Parties, within reasonable limits, will be authorized to lift more (overlift) or less

(underlift) than its share of Petroleum produced and unlifted by the lifting day to the

extent that such overlift or underlift does not infringe on the rights of the other Party

and is compatible with the production rate and the storage capacity in the

establishment of the sequence of liftings, priority will be given to the Party with the

largest share of produced and unlifted quantity of Petroleum at a give time. The

Parties shall periodically meet to establish a provisional lifting program on the basis

of the principles above-described and taking into account the wishes of the Parties

as regards the dates and quantities of their liftings, provided that those wishes are

compatible with said principles.

























ARTICLE 28



PROTECTION OF RIGHTS



28.1. The Contractor shall take all necessary steps to achieve the objectives of this Contract in its conduct of Petroleum Operations.



28.2. NOCAL shall take all necessary steps to facilitate the implementation by the Contractor of the objectives of this Contract, and the STATE shall protect the property and operations of the Contractor, its employees and agents in the territory of Liberia.



28.3. At the request of the Contractor, the STATE prohibit the construction of dwelling or business buildings in the vicinity of installations which the Contractor may declare dangerous as a result of its operations. It shall take all necessary precautions to prohibit anchoring in the vicinity of submerged pipelines at river passages, and to prohibit any hindrance to the use of any other installation necessary for the Petroleum Operations whether on land or offshore.



28.4. The Contractor shall take out and cause to be taken out by its contractors and subcontractors, in respect of the Petroleum Operations, all insurances of the type and for such amounts customarily used in the international petroleum industry, including without limitations, third party liability insurance and insurances to cover damage to property, facilities, equipment and materials without prejudice to such insurances which would be required under Liberian legislation.



ARTICLE 29



PERSONNEL, TRAINING, SOCIAL AND WELFARE



29.1. The Contractor shall, for the purposes of the Petroleum Operations, employ nationals of Liberia whomever qualified for requirements of the employment.



Managers, technicians, engineers, accountants, geologists, geophysicists, scientists, chemists, drillers, foremen, mechanics, skilled workers, secretaries and executive employees may be hired outside Liberia if similarly qualified specialists cannot be hired in Liberia.



29.2. Upon commencement of the Petroleum Operations, the Contractor shall organize a training program for Liberian nationals. For that purpose the Contractor shall devote a minimum annual training Budget of



(a) One Hundred Thousand US Dollars (US$ 100,000) during each year of the exploration periods;



44









(b) Two Hundred and Fifty Thousand US Dollars (US$250,000) during each

year of the exploitation periods.



The training expenses borne by the Contractor shall be included in the recoverable

Petroleum Costs.



NOCAL shall submit to Repeat its annual proposal for the petroleum industry

training 6 months after execution of the PSC in the first year and 60 days in

advance of the end of the Calendar Year in subsequent years. The training

program shall be mutually agreed between the Parties but shall not exceed

expenditure levels defined in Article 29.2 (a) and (b) above.



29.3. The entry into Liberia of all foreign personnel shall be authorized and the

STATE shall issue the documents necessary for that entry to all members of the

foreign personnel , such as entry visas, working permits and exit visas, in

compliance with the immigration regulations, in force in Liberia. At the request of

the Contractor, the STATE shall facilitate any immigration formalities with the

Immigration Bureau, at the points of entry into and exit from Liberia in respect of

the Contractor's employees, contractors, subcontractors and agents, and their

families, all without undue delays.



29.4. All the employees required for the conduct of the Petroleum Operations shall

be under the Contractor's authority or that of its contractors, subcontractors and agents, in their capacity as employers. Their work, number of working hours

salaries and any other matters relating to their employment conditions shall be

determined by the Contractor or its contractors, subcontractors and agents.



29.5. Upon commencement of Petroleum Operations the Contractor shall provide

funding for social and welfare programs in Liberia ('Social and Welfare Programs').

For that purpose the Contractor shall devote a minimum annual training Budget of:



(a) One Hundred and Fifty Thousand US Dollars (US$ 150,000) during each

year of the exploration periods;



(b) Two Hundred and Fifty Thousand US Dollars (US$ 150,000) during each

year of the exploration periods.



The Social and Welfare Programs borne by the Contractor shall be included in the

recoverable Petroleum Costs.



NOCAL shall submit to Repsol its annual proposal for the Social and Welfare

Programs 6 months after execution of the PSC in the first year and 60 days in

advance of the Calendar Year in subsequent years. The Social and

Welfare Programs shall be mutually agreed between the Parties but shall not

exceed expenditure levels defined in Article 29.5 (a) and (b) above.











45

















29.6. An escrow account shall be established by both Parties for the purpose of receiving monies and making payment of the monies referred to in Article 29.2 (a), 29.2 (b), 29.5 (a) and 29.5 (b). The signatures of both Parties shall be required for payments made out of the account. Payments to the account shall be made by the Contractor within 30 days of the Effective Date for the first year of the exploration period and on the anniversary of that date thereafter if and as required by Articles 29.2 (a), 29.2 (b), 29.5 (a) and 29.5 (b). For the training program the Contractor may appoint up to 30% of the training candidates (by expenditure) and NOCAL may appoint up to 70%. The Contractor may allow NOCAL, to appoint candidates for part or all of the Contractor's 30% if the Contractor does not have the required candidates.



ARTICLE 30



ACTIVITY REPORTS IN RESPECT OF EXCLUSIVE EXPLOITATION AUTHORISATIONS



30.1. The provisions of Article 12 shall apply, mutatis mutandis, to any exclusive exploitation authorizations. In addition, the following periodic activity reports shall, inter alia, be furnished in respect of each Field:



(a) daily production reports;



(b) monthly reports stating the quantities of Petroleum produced and those sold during the previous month together with information on such sales.



Unless the Contractor gives its written consent, the information relating to a Field under exploitation, except statistical data about activity, shall be considered as confidential by the Parties during the term of this Contract.



30.2. The Contractor shall forthwith notify the STATE of any material damage whatsoever caused to the Petroleum Fields or facilities, and shall take all necessary steps to terminate it and carry out the necessary repairs.



30.2. From the year of granting an exclusive exploitation authorization, the annual report referred to in Article 8.2 shall also include the following:



(a) Information on all development and production operations carried out during the previous Calendar Year, including the quantities of Petroleum produced and those sold, if any;



(b) Information on all transportation and sales operations together with the location of the main facilities built by the Contractor, if any;



46(c) a statement specifying the number of employees and workers, their qualifications and their nationality, together with a report on the medical care and training provided to them.



ARTICLE 31



ARBITRATION



31.1 In the event of any dispute between the STATE or NOCAL and the Contractor relating to, or arising out of, the interpretation or executions of the provisions of this Contract, the Parties shall make their best efforts to settle such dispute amicably.



If within three (3) months from the date of notice of such dispute by either Party to the other, the Parties have not reached settlement, the dispute shall, at the request of the most diligent Party, be referred for arbitration to the international Chamber of Commerce in accordance with its rules and regulations.



31.2 The arbitration shall be held in London, England. The language used during the procedure shall be the English language. The arbitration shall be determined by three (3) arbitrators. The arbitrators shall not have the same nationality as the Parties.



The arbitration tribunal's award shall be final, it shall be binding on the Parties, and that shall be enforceable in any court of appropriate jurisdiction.



31.3 The expenses of any arbitration shall be borne equally by the Parties, that is to say, each Party shall pay the expenses of its own arbitrator and the expenses of the third arbitrator in equal shares, and any expenses imposed by the international Chamber of Commerce shall be shared equally by the Parties.



The performance by the Parties of their obligations under this Contract shall not be suspended during the course of this arbitration.



ARTICLE 32



FORCE MAJEURE



32.1 No delay or default of a Party in performing any of the obligations resulting from this Contract shall be considered as a breach of this Contract if such delay default is caused by a case of Force Majeure.



If in the event of Force Majeure the performance of any of the obligations under this Contract is delayed, that delay extended by the period of time required to repair the damage caused during such a delay and to resume the Petroleum



47Operations, shall be added to the period provided by this Contract for the performance of said obligation and the exclusive exploration or exploitation authorizations shall be extended by that period as regards the area concerned by Force Majeure.



32.2. Force Majeure means any event unforeseeable and beyond the ressonable control of a Party, such as earthquake, flood, accident, strike, lockout, riot, delay in obtaining the rights-of-way, insurrection, civil disturbances, sabotages, acts of war or conditions attributable to war, or any other cause beyond its control, similar to or different from those already mentioned.



32.3. Where a Party considers it is prevented from performing any of the obligations by the occurrence of Force Majeure, it shall forthwith notify the other Party thereof by specifying the grounds for establishing Force Majeure, and take all necessary and useful steps to ensure the normal resumption of the performance of the concerned obligations upon termination of the event constituting the Force Majeure.



Obligations other than those affected by Force Majeure shall continue to be performed in accordance with the provisions of this Contract.



ARTICLE 33



JOINT AND SEVERAL OBLIGATIONS AND GUARANTEES



33.1. All the clauses, conditions and provisions of this Contract shall be binding on the Parties and their respective successors and assignees. This Contract constitutes the only agreement between the Parties and no previous communication, promise or agreement, whether oral or written, between the Parties, related to the purpose of this Contract may be asserted to amend the clauses hereof.



The STATE certifies and guarantees that there is no other applicable agreement with respect to the petroleum rights within the Delimited Area, that it will perform its obligation in fairness and good faith and that this Contract will not be cancelled, amended or modified except by agreement between the Parties.



33.2. Where the Contractor is constituted by several entities, the obligations and liabilities of those entities under this Contract shall be joint and several.





[illegible number]Article 34



RIGHTS OF ASSIGNMENT



341. All or part of the rights and obligations arising from this Contract may be assigned by any of their entities constituting the Contractor to Third Parties whose technical and financial reputation is well established; the assignees with the other entities constituting arising from this Contract.



The terms of any assignment shall be subject to the prior approval of NOCAL, which approval should not be unreasonably withheld.



If within thirty (30) days following notification to NOCAL of a projected assignment accompanied by all the related information and the draft assignment deed, NOCAL has not given its decision, that assignment shall be deemed to be approved by NOCAL.



From the date of approval of an assignment, the assignee shall comply with the terms and conditions of this Contract.



34.2. All or part of the joint and several rights and obligations arising from this Contract may be freely assigned at any time by any of the entities constituting the Contractor.



ARTICLE 35



STABILITY OF CONDITIONS



35.1 This Contract is executed between the Parties in accordance with the laws and regulations in force at the date of its signing and on the basis of the provisions of said laws and regulations, as regards, inter alia, the economic, fiscal and financial provisions of this Contract.'



35.2 Consequently, should new laws or regulations modify the provisions of the laws and regulations in force at the date of signing of this Contract and should those modifications bring about a material change in the respective economic situation of the Parties, resulting from the original provisions of said Contract, the Parties shall in good faith enter into an agreement with a view to modifying those provisions in order to restore the economic balance of the Contract as intended at the signing thereof.



35.3. In the event of adverse material changes in circumstances other than those mentioned in Article 35.2 above, from those existing at the Effective Date, that



49have and adverse material effect on the terms of this Contract (Profound Changes in Circumstances), either NOCAL or the Contractor shall at the request of the other Party consult together. If it is established that such Profound Changed in circumstances have occurred, then the Parties shall effect such changes in or clarifications to this Contract that they agree are necessary. The Parties shall meet in good faith to make the necessary revisions and adjustments to this Contract in order to maintain such expected economic benefits to each party, provided that the economic benefits to the Parties shall not be reduced as a result of exercising the terms of this Article. For the purposes of this Contract the term "Profound Changes in Circumstances" shall mean such adverse material changes in the economic conditions of the petroleum industry world wide or in Liberia or such changes that result in such an adverse material and fundamental alteration of the conditions and assumptions relied upon by the parties at the Effective Date of this Contract (or the time after any subsequent review under this Article)to the effect that the overall balance of equities and benefits reasonably anticipated by the Parties will no longer be achievable.



ARTICLE 36



IMPLEMENTATION OF THE CONTRACT



36.1. The Parties agree to cooperate in every possible manner to achieve the objectives of this Contract.



NOCAL shall facilitate the Contractor's performance of its activities by granting any permits, licenses, access rights necessary for the performance of the Petroleum Operations and by making available to it any appropriate services and facilities so that the Parties can obtain the best benefit from a sincere cooperation. However, the Contractor shall observe the applicable procedure and formalities and shall apply to the competent Ministries and/or Agencies of the Administration.



36.2 Any notices or other communication under this Contract shall be deemed to have been made when they are delivered to an authorized representative of the Party concerned at the location of said Party's principal office in Liberia, or sent by telegram, cable or facsimile with all expenses paid, or deposited in registered letters with the Postal administration of Liberia with postage prepaid. Notifications shall be deemed to have been made on the date when the addressee shall receive them.



Notices to NOCAL should be sent to:



President and CEO

National Oil Company of Liberia

Episcopal Church Plaza, 3rd Floor

Corner Ashmun and Randall Streets

1000 Monrovia10 Liberta

Fax: +231 226 364

Tel: +231 551 0519



Notices to Repsol Exploration

Europe, Africa and Asia

REPSOL EXPLORACION SA

278-280 Paseo de la Castellana

Madrid 26046 Spain

Fax: 0034 91 348 9428

Tel: 0034 91 348 7391



36.3 If NOCAL considers that the Contractor has committed a breach in the performance of any of its obligations, it shall so notify the Contractor in writing and the Contractor shall have sixy (60) days to remedy the breach or refer the matter to an arbitrator in accordance with the Contract.



36.4 The terms and conditions of this Contract may be modified only in writing and by mutual agreement between the Parties.



36.5 Unless otherwise specified in writing, NOCAL shall represent the STATE under this Contract and is empowered to grant, in the name and on behalf of the STATE, any consent necessary or useful for the implementation of this Contract.



36.6 Headings in this Contract and inserted for the purposes of convenience and reference and in no event shall define, restrict, or describe the scope of object of the Contractor or of any of its clauses.



36.7 Appendices 1 and 2 attached hereto shall form and integral part of this Contract.



36.8 Any waiver by any party concerning the performance of any obligation of the Contractor shall be in writing and signed by the representative of the Party, and no waiver shall be implied if the Party does not exercise any of its rights to which it is entitled under this Contract.



36.9 Any Party that now or hereafter has a right to claim immunity for itself or any of its assets hereby waives any such immunity to the fullest extent permitted by the lats of any applicable jurisdiction. This waiver includes immunity from (i) any expert determination, mediation, or arbitration proceeding commenced pursuant to this Contract; (ii) any judicial, administrative, or other proceedings to aid the expert determination, mediation, or arbitration commenced pursuant to to this contract and (iii) any effort to confirm, enforce, or execute any decision, settlement, award, judgement, service of process, execution order or attachment (including pre-judgment attachment) that results from an expert determination.





51mediation, arbitration or any judicial or administrative proceedings commenced pursuant to this Contract. Each Party acknowledges that its rights and obligations hereunder are of a commercial and not a governmental nature.



ARTICLE 37



EFFECTIVE DATE



The Effective Date shall be the date on which NOCAL delivers to Contractor written evidence of the enactment of the legislature of the Republic of Liberia giving this agreement the full force of the law in the Republic of Liberia.



IN WITNESS WHEREOF, the Parties have signed this Contract on the date as set forth below:



[Strike out]On Behalf of Republic of Liberia Date[Strike out]



[SIGNATURE]

----------------------- 18-08-05

President of NOCAL Date



[SIGNATURE]

----------------------- 18-08-05

Repsol Exploration S.A Date





[SIGNATURE]

----------------------- 18-08-05

Witnessed By: Date

Chairman of Board of Directors of NOCAL



-----------------------

Attested by:

Minister of Justice, Republic of Liberia Date

..............................................

Approved:

Chairman National Transitional Government of Liberia







..............................................

Ratified

National Transitional Legislative AssemblyAPPENDIX 1



Attached to and made part of this Contract



DELIMITED AREA



On the Effective Date, the Delimited Area, designated as BLOCK LB-16, is formed by the area included inside the perimeter constituted by the points indicated on the attached map below.



The geographical coordinates of those points are included below, with reference to the Greenwich meridian.



Those coordinates are only given for purposes of illustration and shall not be considered as the boundaries of the national jurisdiction of Liberia.



The surface of the Delimited Area above-defined is deemed to be equal to about 3,225 sq. km.



[map]



APPENDIX 2



Attached to and made part of this Contract.



ACCOUNTING AND TAX PROCEDURE



Article 1 - General Provisions



1.1 Object



This Accounting Procedure shall be followed and observed in the performance of the obligations under the Contract to which this Appendix is attached.



The purpose of this Accounting Procedure is to establish the principles of accounting which shall reflect the Operator's actual costs relating to Petroleum Operations to the end that the Operator shall, subject to the provisions of the Agreement, neither gain nor lose by reason of the fact that it acts as Operator.



1.2 Definitions



The definitions contained in Article 1 of the Agreement shall apply to this Accounting Procedure and shall have the same meanings when used herein. In addition certain terms used herein are defined as follows:



Accrual Basis shall mean that basis of accounting under which costs and benefits are regarded as applications to the period in which that liability for the cost is incurred or the right to benefits arises regardless of when invoiced, paid or received.



Controllable Material shall mean items of Material which in the petroleum industry are subject to record, control and inventory.



Exclusive Operation Account shall mean the accounts maintained by Operator to record all expenditures, receipts and other transactions of Parties participating in Operations by less than all Parties.



Material shall mean the personal property, including but not limited to equipment and supplies acquired and held for use in Petroleum Operations.



1.3 Accounts and statements



The registers and accounting books of the Contractor shall be in conformity with accounting rules and regulations for business applicable in Liberia. However, the Contractor may apply the accounting rules including accrual basis and procedures customarily used in the petroleum industry, insofar as none of these are contrary to the rules and regulations referred to above.



In accordance with the provisions of Article 25 of the Contract, accounts, booksand registers shall be maintained in English language and in U.S. dollars and in such other language and currency as may be required by the laws of Liberia Conversions of currency shall be recorded at the rate actually experienced in conversion. Currency translations for expenditures and receipts shall be recorded in accordance with the provisions of the Contract and Operators normal procedures. Any gain or loss resulting from the translation or exchange of currency shall be credited or charged to the Joint Account. These accounts shall be used, inter alia, to determine the amount of Petroleum Costs, the recovery of said Costs, the production sharing, as well as for the purposes of Contractor's Income Tax return.



The Contractor shall record all operations connected with he Petroleum Operations in accounts separate from those relating to any other activities which may carry out in the Republic of Liberia. All accounts, books, records and statements, together with documents supporting expenses incurred, such as invoices and service contracts, shall be kept in the Republic of Liberia in order to be provided at the request of the competent authorities of Liberia.



L4. Interpretation

In the event of any conflict between the provisions of this Accounting Procedure and the Contract, the provisions of the Contract shall prevail.



L5. Modifications

The provisions of this Accounting Procedure may be modified by mutual agreement between the Parties.



If any method established herein proves unfair or inequitable to the parties, both shall meet and in good faith endeavor to agree on changed in methods deemed necessary to correct any unfairness or inequity.



Article II - Petroleum Costs



11.1 Petroleum Costs Account



The Contractor shall maintain a "Petroleum Costs Account" which will record in detail the expenses incurred by the Contractor directly relating to the Petroleum Operations carried out under this Contract, and which will be recoverable in accordance with the provisions of Article 16 of the Contract.



This Petroleum Costs Account shall, inter alia, record separately, by Appraisal Perimeter or Exploitation Perimeter, if any, the following expenses:

(a) exploration expenditures;

(b) appraisal expenditures;

(c) development expenditures;

(d) exploitation expenses;(e) financial costs;

(f) overhead costs in Liberia;

(g) overhead costs abroad



The Petroleum Costs Account shall enable, inter alia, to identify at any time:



(a) The total amount of Petroleum Costs since the Effective Date;

(b) the total amount of Petroleum Costs recovered;

(c) the total amount credited to the Petroleum Costs Account pursuant to Article11.4 (b) below;

(d) the total amount of Petroleum Costs which remain to be recovered;

(e) the calculation of Taxable Income



For the purposes of Article 16 of the Contract, Petroleum Costs shall be recovered in the following sequence:

(a) explanation expenses in respect of a Field incurred and paid from the date of commencement of regular production;

(b) financial costs;

(c) other Petroleum Costs



In addition, within each of the foregoing categories, the costs shall be recovered in the sequence in which they are incurred. Unless otherwise provided for in this Accounting Procedure the intent of the Parties is not to duplicate any item of the credit or debit of the accounts maintained under the Contract.



11.2 Items debited to the Petroleum Costs Account



The following expenses and costs shall be debited to the Petroleum Costs Account, and shall also be deductible for Income Tax return, according with article 17.



11.2.1 Personnel expenses



The actual costs of personnel employed by the Operator and personnel seconded by Operator's Affiliates to the Operator, who are directly engaged in the conduct or Petroleum Operation, whether permanently or temporarily assigned and irrespective of where such personnel are located, and not otherwise covered in following section. Such costs shall include:



Salaries and wages, including everything constituting the employees' total compensation



To the extent not included in salaries and wages, the Joint Account shall also be charged with the cost to Operator of holiday,vacation, sickness.disability benefits, living and housing allowances, travel time, houses dependent schooling, language courses, company cars, hardship allowances and other customary allowance applicable to the salaries and wages chargeable hereunder, as well as costs to Operator for employee benefits including but not limited to employee group insurance, medical insurance, hospitalization, pension retirement, and other benefit plans of a like nature.



Expenditures or contributions made pursuant to assessments imposed by any governmental authority for payments with respect thereto or on account of such employees.



Expenses incurred by the employees which are paid or reimbursed by Operator in accordance with applicable personnel polices including travelling and relocation expenses and living allowance(when paid in lieu of hotel expense for visits to site) and those expenses incurred in connection with the families of personnel where appropriate.



Actual costs incurred by Operator for training pursuant to its training policy or as required by the Country of Operations regulations for employees permanently assigned to the Petroleum Operations.



Any other costs related to personnel in accordance with Operator's and/or its Affiliates standard personnel polices or contractual agreements applicable to employees.



Actual cost of salaries, wages and related benefits incurred by Operator for Personnel seconded from any Non-Operator. Personnel hired from third Parties shall be changed at the net cost paid by Operator.



If employees are engaged in other activities in addition to the Petroleum Operations, the cost of such employees shall be allocated on ab equitable basis.



Relocation costs to and from the Country of Operations or location where the employees will reside or work, whether permanently or temporarily assigned to the Petroleum Operations. Such relocation costs shall include transportation of employees, families, personal and household effects of the employee and family

and all other related costs in accordance with the Operators and its Affiliated usual practice. However, relocation costs of employees from the Petroleum Operations to the other foreign operations of the Operator or its Affiliates shall not be chargeable to the Joint Account unless such foreign location is the point of origin of the employee.





B.2.2 Transportation













- Transportation and business related travel expenses of personnel as

required in the conduct of Petroleum Operations.



11.2.3 Overhead costs in Liberia



Wages and salaries of the Contractor's personnel directly engaged in the

Petroleum Operations in the Republic of Liberia, whose work time is not directly

allocated in the programs, as well as costs of maintaining and operating in //

a main and administrative office and sub-offices necessary for the Petroleum

Operations.



11.2.4. Overhead costs abroad



The Contractor shall add a reasonable amount as overhead paid abroad,

connected to the carrying out of the Petroleum Operations by the Contractor or its

Affiliated companies, such amounts representing the estimated cost of services

directly rendered for the benefit of the said Petroleum Operations.



The amount charged shall be provisional amounts established on the basis of the

experience of the Contractor, and shall be annually adjusted according to the

actual costs borne by the Contractor.



However, overhead costs paid abroad shall be charged only within the following

limits:



(a) prior to the grant of an exclusive exploitation authorization three percent (3%)

of the expenses charged to the Petroleum Costs Account excluding overhead

costs for the year in question;



(b) from the grant of the first exclusive exploitation authorization three percent (3%)

of the expenses charged to the Petroleum Costs

Account excluding overhead costs for the year in question.





11.2.5 Buildings and Miscellaneous Facilities



Construction, maintenance expenses, as well as rents paid for all offices,

suboffices camps, houses, warehouses, communication systems and other

utilities, facilities and buildings of other types, including housing for employees, and

cost of equipment, furniture, and fittings necessary for the operation of those

buildings directly required for the performance of the Petroleum Operations.



11.2.6 Damages and Losses



All costs and expenses necessary for the repair or replacement of Joint

Property resulting from damages and losses incurred by fire, flood, storm,

theft, accident, or any other cause. Operator shall furnish Non-Operators









































written notice of damages and losses incurred in excess of one hundred thousand U.S. dollars (US $ 100.000) for each incident as soon as practicable after a report thereof has been received by the Operator. The Operator shall furnish to any Non-Operaor, in respect of any damage and loss, such information and documentation as may be reasonably requested.



8.2.7. Insurance and Claims



Premiums to affiliate companies or Third Parties for any insurance required by law or the Contract.



Premiums for insurance required by the Parties, except that a Party not participating in such insurance shall not share in the costs.



Expenditures incurred in the settlement of all losses, claims, damages, judgements, and other expenses for the benefit of Petroleum Operations.



Credits for settlements received from insurance and others, except that a Party not participating in the insurance shall not share in any such settlements.



8.2.8 Legal Expenses



All costs or expenses of litigation and legal services necessary or expedient for the handling, investigation, defending, and selling litigation or claims arising by reason of Petroleum Operations, or which are necessary to protect or recover Joint Property, including but not limited to, attorneys fees, court costs, cost of investigation or procuring evidence and amounts paid in settlement of satisfaction of any such litigation or claims. Unless otherwise expressly provided under this Agreement, costs or expenses of disputes between the Parties shall not be charged to the Joint Account.



If the Parties shall so agree, actions or claims affecting the Petroleum Operations may be handled by the legal staff of one or any of the Parties hereto; and a charge commensurate with the reasonable costs of providing and furnishing such services rendered may be made by the Party providing such service to Operator for the Joint Account, but no such charges shall be made until approved by the Parties.



8.2.9 Services



Costs of services related to Petroleum Operations rendered by subcontractors and consultants, as well as as any costs directly related to services rendered by the STATE or NOCAL or any other authorities of the Republic of Liberia.



Costs of services directly related to Petroleum Operations rendered by Affiliated Companies, provided that such costs shall not exceed those normally charged by independet companies for an identical or similar service.



7

















Examples of such services include, but are not limited to the following:



* Geological Studies and Interpretation.

* Seismic Data Processing.

* Well Log Analysis, Correlation and interpretation.

* Well Site Geology.

* Laboratory Services.

* Ecological and Environmental Engineering.

* Abandonment Studies.

* Projet Engineering.

* Source Rock Analysis.

* Petrophysical Analysis.

* Geochemical Analysis.

* Drilling Supervision.

* Development Evaluation.



Such services shall be charged at cost and supported by time records and

any other relevant information.



11.2.10. Financial Costs



All loan fees, finance establishment costs and interests paid by the Contractor in

respect of the loans from Third Parties and advances obtained from Affiliated

Companies provided that those loans and advances shall be for the purpose of the

financing of Petroleum Costs related only to the development of Petroleum

Operations in respect of a Field in the event such financing is provided by

Affiliated Companies, the allowable interest rates shall not exceed the rates

customarily used in the international financial markets for loans of a similar nature.

For the purposes of this Article 11.2.10 "development" means (i) any work referred

to in, or required to carry out the requirements of any development and production

plan or any Annual Work Program applying to the exploitation period for any Field,

and (ii) any other work carried out by the Contractor during an exploitation period

for the exploitation of a Field. In this Article 11.2.10 "work" means any services

performed or goods supplied, by the Contractor or by its agents, Contractors or

subcontractors.



11.2.11. Other Expenses



Any other expenses incurred and paid by the Contractor for the purposes of the

necessary and proper conduct of the Petroleum Operations under the approved

Annual Work Programs and Budgets, other than the expenses covered and deal

with by the fore-going provisions of this Article and other than the expenses

excluded from the Petroleum Costs.



11.2.12. Ecological and Environmental Charges











8













































All costs incurred for the benefit of the Joint Property and other Property under the

Agreement as a result of government or regulatory requirements and/or

Operator's policies to comply with environmental rules applicable to Operations.

These costs may include periodic environmental audits, ecological or

archaeological surveys and pollution control procedures required by the applicable

laws and regulations.



11.3 Expenses not chargeable to the Petroleum Costs Account



The expenses which are not directly necessary for the performance of the

Petroleum Operations, and the expenses excluded by the provisions of the

Contract or this Accounting Procedure as well as by the regulations in force in

Liberia, are not chargeable to the Petroleum Costs Account and shall therefore not

be recoverable. Notwithstanding the above, such expenses shall be considered as

deductible expenses for Income Tax purposes.



Such expenses shall include, without limitation.



(a) expenses relating to the period before the Effective Date.



(b) any expenses relating to the operations carried out beyond the Delivery Point,

such as transportation and marketing costs;



(c) Financial costs relating to the financing of exploration Petroleum Operations.



11.4 Items credited to the Petroleum Costs Account



The following incomes and proceeds shall, inter alia, be credited to the Petroleum

Costs Account:



(a) any other incomes or proceeds related to the Petroleum Operations, specifically

those arising from:



* sales of related substances:



* any services rendered to Third Parties using the facilities dedicated to the

Petroleum Operations, including but not limited to, processing,

transportation and storage of products for Third Parties in those facilities.



Article III - Costs Evaluation Basis For Services, Materials and Equipment



Used in the Petroleum Operations



III.1. Technical services



A reasonable rate shall be charged for the technical services rendered by the

Contractor or its Affiliated Companies for the direct benefit of the Petroleum

Operations carried out under the Contract such as gas, water, core analysis and

any other analyses and tests, provided that such charges shall not exceed those

normally charged by independent Petroleum Operations companies and laboratories for

similar services.















































III.2. Valuation of materials and equipment purchased by Contactor



Materials and equipment purchased from Third Parties and directly necessary for the performance of the Petroleum Operations carried out under the Contract shall be charged to the Petroleum Costs Account at "Net Cost" incurred by the Contractor "Net Cost" shall include but shall not be limited to such items as taxes, shipping agent fees, transportation, loading and unloading costs, license fees, related to the supply of materials and equipment as well as transit losses not recovered through insurance.



III.3. Depreciation of equipment and facilities owned exclusively by the Contractor, for Tax purposes



Only for tax purposes, equipment and facilities owned by the Contractor and used directly for the Petroleum Operations shall be depreciated with Unit of Production method, that is customary used in the petroleum industry. It is also understood that any expense regarding maintenance, repairs and services required for the performance of the Petroleum Operations shall be deductible.



Maintenance repairs, and services required for the performance of the Petroleum Operations shall be charged to the Petroleum Costs Accounts as operating expenses.



III.4. Valuation of materials



All materials transferred to Liberia from the Contractor's warehouses, or from those of any entity constituting the Contractor or their Affiliated Companies, shall be valued as follows:



(a) New Material



New material (condition "A") means new material which has never been used; one hundred percent (100%) of the current market price, which corresponds to the price normally charged for similar supplies in arm's length transactions between buyer and seller.



Material in good condition (condition "B") means material in good condition which is still usable for its original purpose without repair, at a maximum of seventy-five percent (75%) of the price of new material.



(b) Other used material



Other used material



Other used material (condition "C") means material still usable for its original purpose, but only after repairs and reconditioning at a maximum of fifty percent (50%) of the price of new material.



(c) Material in poor condition



Material in poor condition (condition "D") means material no longer usable for its





10











original purpose but still usable for other purposes: at a maximum of twenty-five

percent (25%) of the price of new material.



(d) Scrap material



Scrap material (condition "E") means material beyond usage and repair: prevailing

price of scrap material.



III.5. Warranty of Material



The Operator does not warrant the Material charged to the Joint Account beyond

the manufacture's or supplier's guarantee, express or implied, in the case of any

such Material which is defective a credit shall not pass to the Joint Account until an

adjustment has been received by the Operator from the manufacturer or supplier.



III.6. Materials and equipment disposed by the Contractor



Materials and equipment purchased by all the entities constituting the Contractor

shall be valued in accordance with the principles defined in Article III.4 above



Materials and equipment purchased by all the entities constituting the Contractor or by

Third Parties shall be valued at the received sale price, which shall in the event be

less than the price determined in accordance with the principles defined in Article

III.4 above.



The corresponding amounts shall be credited to the Petroleum Costs Account.



Article IV - Inventories



IV.1. Period



The Contractor shall keep a permanent inventory both in quantity and value of all

normally controllable materials used for the Petroleum Operations and shall

proceed at reasonable intervals, but at least annually, with the physical inventories

an required by the Parties.



IV.2. Notice



A Written notice of intention to take an inventory shall be sent by the Contractor at

least thirty (30) days prior to the commencement of said inventory so that the

STATE and the entities constituting the Contractor may be represented at their

own expenses during the inventory operations.



IV.3. Information



In the event the STATE or any entity constituting the Contractor shall not be

represented at an inventory, such Party of Parties shall be bound to accept the

inventory taken by the Contractor which shall furnish to such Party or Parties a

copy of said inventory.



Article V - Financial and Accounting Statements



The Contractor shall furnish the STATE and NOCAL with all the reports, records

and statements provided by the provisions of the Contract and the applicable









11







































regulations and, inter alia, the following financial and accounting statements.



V.1. Statement of exploration work obligations



Such annual statement shall be submitted not later than one (1) month after the end of each Contractual Year in respect of the exploration periods.



It shall present with details the exploration work and expenditures carried by the Contractor to fulfill its obligations set forth in Article 4 of the Contract, excluding specifically appraisal wells and related appraisal expenditures as well as development expenditures, exploitation expenses, overhead costs and bonuses.



V.2. Statement of recovery of Petroleum Costs



A quarterly statement shall be submitted not later than one (1) month after the end of each Calendar Quarter. It shall present the following items of the Petroleum Costs Account:



(a) the amount of Petroleum Costs which remain to be recovered at the beginning of the quarter;



(b) the amount of Petroleum Costs in respect of that quarter and recoverable under the provisions of the Contract;



(c) the quantity and the value of the production of Petroleum taken by the Contractor during the quarter for the purpose of recovery of the Petroleum Costs;



(d) the amount of incomes or process credited for the purpose of Article II.5.(b) above during the quarter;



(e) the amount of Petroleum Costs which remain to be recovered at the end of the quarter.



In addition, an annual statement of the recovery of Petroleum Costs shall be submitted prior to the end of February of each Calendar Years.



V.3. Statement of production



After commencement of production, such monthly statement shall be submitted not later than fifteen (15) days after the end of each month.



It shall present for each month the detailed production of each Exploitation Perimeter and, inter alia, the quantities of Petroleum:



(a) stored at the beginning of the month;



(b) lifted during the month;



(c) lost and used for the requirements of the Petroleum Operations;



(d) stored at the end of the month;





12APPENDIX 3

Attached to and made part of this Contract



Tax Certificate



Republic of Liberia

Ministry of Finance



RECEIPT OF TAX PAYMENT



The Tax Authorities of the Republic of Liberia certifies that REPSOL EXPLORACION........ S.A is a chargeable person under the Liberian Income Tax Law (LAW n⁰...../2000).



Further more, the Tax Authorities of the Republic of Liberia also certifies that the National Oil Company of Liberia (NOCAL) has settled in the name and on behalf REPSOL EXPLORACION........ S.A. The income Tax due to the STATE under the Petroleum Production Sharing Contract dated ___/___/_____ and in accordance with the New Petroleum Law of Liberia. The amounts paid for the period from 01/01/______ to 31/12/______ are as follows:

Income Tax__________

Total Amount________



The Tax Authorities also certifies that the Contractor has, for the Fiscal Year in question, complied with all its tax obligations with respect to the Income Tax.



Ministry of Finance:

Name: ____________________________________

Title:____________________________________

Date: ____________________________________







13 LIBERIA PSC BLOCK LB-16

Income Tax Return for the year ended December 31,



Revenues



Cost recovery oil

Excess oil

Production sharing oil

sale of related substances

Services rendered of Third Parties





Total Revenues



Deductible Expenditures



Petroleum Costs

Personnel expenses

Overhead Costs ( in Liberia and abroad)

Materials and Rentals

Depreciation of Buildings and equipment

Services

Insurance Premiums

Legal expenses

Finance Costs related to the development activity



Other deductible expenses

Bonus

Provision

Exchange losses

Assets losses

Surface Rentals

Other financial expenses



Total deductible expenses



NET PROFIT

Gross up value



Taxable Income



Tax at %



14





ADDENDUM TO PRODUCTION SHARING CONTRACT BETWEEN THE NATIONAL OIL COMPANY OF LIBERIA AND REPSOL EXPLORACION S.A. BLOCK LB-16

BETWEEN

The Republic of Liberia, represented for the purposes of this Addendum by the National Oil Company of Liberia NOCAL., a company duly organized, existing and doing business under the laws of Liberia; represented by its Chairman of the board and President/CEO, hereinafter referred to as "NOCAL".

AND

Repsol Exploracion, S.A., a company incorporated under the laws of Spain, hereinafter referred to as ("the Contractor")

WITNESSETH:

WHEREAS a Production Sharing Contract (hereinafter, the "Contractor") was entered into by and between NOCAL and the Contractor on August 17, 2005;

WHEREAS, the conditions of Article 37 of the Contract have not been satisfied up to and including the date hereof;

WHEREAS, pursuant to Article 33 of the Contract, the Parties have mutually agreed to amend the Contract on the terms and conditions set further herein;

NOW THEREFORE, for and in consideration of the exchange of promises, the parties herein and mutually agree to amend the articles and sub-articles of the Contract as follows:



ARTICLE 3



DURATION OF EXPLORATION PERIODS AND SURRENDERS



3.1 The exclusive exploration authorization is hereby granted to the Contractor for a period of eight (8) consecutive years defined by three (3) consecutive periods.



A first Exploration period of four (4) Contract Years, a second Exploration Period of two (2) Contract Years and a third Exploration Period of two (2) Contract Years in respect of the entire Delimited Area.



[signature]

[signature]

[signature]3.3 If during the first exploration period set forth above the Contractor has fulfilled the exploration work commitments defined in Article 4, as ascertained by the Government, the exclusive exploration authorization shall, at the Contractor's request, be renewed for a second exploration period of two (2) Contract Years.



ARTICLE 4

EXPLORATION WORK COMMITMENTS



4.2 The Contractor, during the first exploration period defined in Article 3.1, shall carry out a minimum work programme at a cost of no less than either (8) million Dollars which includes a 3D Seismic Survey of 1500 square km.



Contingent on a successful 3D seismic acquisition program and subsequent interpretation of the data, the Contractor undertakes to make reasonable efforts to drill one (1) exploratory well in the first period, but in any event not later than the middle of the second exploratory period, thereby satisfying the second exploration period minimum well commitment.



4.4 The Contractor, during the third exploration period defined in Article 3.1, shall carry out a minimum work programme at a cost of no less than twenty (20) million Dollars which includes the drilling of two (2) exploratory wells.



4.5 Each of the exploratory wells shall be drilled to a minimum depth of two thousand (2000) meters, after deduction of the water depth, or to a lesser depth if the contamination of drilling performed in accordance with good international petroleum industry practice is prevented for any of the following reasons:



(a) The basement is encountered at a lesser depth than the minimum contractual depth;



(b) Continuation of drilling presents an obvious danger due to the existence of abnormal formation pressure;



(c) Rock formations are encountered the hardness of which prevents, in practice, the continuation of drilling by the use of appropriate equipment;



(d) Petroleum formations are encountered the crossing of which requires, for their protection, the laying of casings preventing the minimum contractual depth from being reached.



In the event that any of the above reasons occurs, the exploratory well shall be deemed to have been drilled to the minimum contractual depth.

Not withstanding any provision in this Article to the contrary, NOCAL and the Contractor may, at any time, agree to abandon the drilling of a well at a lesser depth than the minimum contracted depth.





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[signature]In order to carry out the exploration drilling defined in Articles 4.3 and 4.4 in the beat technical conditions ins accordance with good international petroleum industry practice, the contractor undertakes to make the expenditure required to meet the objectives of the well work programme which will include drilling and, aas appropriate, testing



4.7 if at the expiration of any of the three (3) exploration periods defined in Articles 3.1, 3.2 and 3.3 or upon the date of surrender of the whole Delimited Area, or upon the date of the termination of this contract, the Contractor has not fulfilled its work commitments set forth in this Article, it shall pay a compensation to NOCAL, within thirty (30) days after the date of expiration, surrender or termination, the unspent balance of investment obligations above- defined for that current exploration period.



4.8 In a given exploration period, in the event where the Contractor drills, one or more additional exploration wells to those required under 4.2, 4.3 and 4.4 or exceeds its investment obligations relating to that period, then the excess well(s) or investment expenditure may be carried forward, into the next succeeding exploration period(s) and off-set against any other exploration well work commitments or investment obligations.



ARTICLE 6

CONTRACTOR'S OBLIGATION IN RESPECT OF THE

EXPLORATION PERIODS AND ENVIRONMENTAL

MANAGEMENT



6.4 The Contractor further undertakes to carry out all Petroleum Operations in accordance with the Environmental Protection and Management Laws of Liberia and all international environmental protocols. In this respect, the Contractor shall



(a) Submit to the Government, through NOCAL, an Environmental Impact Statement (EIS) prior to the commencement of exploration and production



(b) Take reasonable preventative, corrective and restorative measures to protect from pollution, contamination or damage resulting from Petroleum Operations to water bodies, land surfaces and the atmosphere, and that any pollution, contamination and damage of such water bodies, land surfaces and atmosphere herunder be rectified.



Subject to the foregoing, and at the conclusion of Petroleum Operations in the Delimited Area, the Contractor will undertake reasonable efforts to restore the Delimited Area to the state in which it was before the Petroleum Operations. However the Contractor shall have no liability for any environmental damages caused after the transfer of such assets as per article 20.1



6.9 The Contractor and its subcontractor shall be obligated to give preference to enterprises and goods from Liberia, if conditions of proven experience, price, quality, delivery time and





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terms of payment are similar to those from other countries or from non-Liberian sources. If the above conditions are met, the Contractor commits itself to award to only Liberians, supply, construction or service contracts, the estimated value of which is under Two Hundred Thousand United States Dollars (US$200,000.00). Subject to the above conditions in the event that the contract for supply, construction or service is above Two Hundred Thousand United States Dollars (US$200,000.00), and is awarded to a Non-Liberian contractor, then and in that event, such Non-Liberian contractor shall enter into a partnership arrangement with a Liberian company(ies).



ARTICLE 16

RECOVERY OF PETROLEUM COSTS AND PRODUCTION SHARING



16.2For the purposes of recovery of the Petroleum Costs, the Contractor may freely take each Calendar Year a portion of the production in no event greater than seventy percent (70%) of the Total Production of Crude Oil or Gas from the Delimited Area, or only any lesser percentage which would be necessary and sufficient to recover remaining cost.



The value of such portion of Total Production allocated to the recovery of the Petroleum Costs by the Contractor, as defined in the preceding paragraph, shall be calculated in accordance with the provisions of Article 18.



If during a Calendar Year the Petroleum Costs not yet recovered by the Contractor under provisions of this Article 16.2 exceed the equivalent in value of seventy percent (70%) of the Total Production of Crude Oil or Total Production of Gas from the Delimited Area, as calculated above, the balance of the Petroleum Costs which cannot be recovered in that Calendar Year shall be carried forward in the following Calendar Year or Years until full recovery of the Petroleum Costs or until the expiration of this Contract.



16.3 The Remaining Oil Production shall be shared between NOCAL and the Contractor as follows:



Increments of daily oil | NOCAL's Share | Contractor's Share



Total Production

(in Barrels per day)



from 0 to 100,000 | 40% | 60%



from 100,001 to 150,000 | 50% | 50%



over 150,000 | 60% | 40%



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In case of natural gas, NOCAL's share shall be 30% and Contractor 70% of barrels of crude oil

equivalent per day.



The last paragraph of Article 16.3 of the Contract is void and of no further force and effect.







ARTICLE 16

TAXATION



17.1 Unless otherwise provided for in this Contract, the Contractor shall, in respect of its

Petroleum Operations, be subject to the lawa generally applicable and the regulations in force

in Liberia concerning taxes which are or may be levied on incomes, or determined thereto.



It is specifically acknowledged that the provisions of this Article shall apply solely to the

Contractor under the Contract.



The Contractor shall keep separate accounts for each Fiscal Year in respect of the Petroleum

Operations, in accordance with the regulations in force in Liberia , enabling in particular the

establishment of a profit and loss account as well as a balance sheet showing both the results

of said Petroleum Operations and the asset and liability items allocated or related thereto.



17.2 For the purposes of Article 17.1 the Contractor shall in respect of its net profit arising from

Petroleum Operations, be liable to corporate income tax under the lawa and regulations in force

in Liberia. Income tax rate applicable to Petroleum Operations carried out under this

Contract shall be thirty (30%) percent, which shall be paid directly by the Contractor to the

Government of Liberia.



Notwithstanding, the above, as a further incentive to the Contractor, the Government of

Liberia specifically grants to the Contractor a tax holiday (waiver) on its corporate income

tax for ten(10) consecutive years from the day of the first commercial production from the

Delimited Area. Thereafter, the provisions of Article 17.2, shall apply and shall take effect.



The last Paragraph of Article 17.2 of the Contract its void and of no further force and effect.



The Paragraph of Article 17.5 commencing with PLUS to the Contractor is void and of no further

force and effect.



Paragraph 17.6 is void and of no further force and effect.



Paragraph 17.8 insert the words "During the Exploration Period", before In Particular.















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ARTICLE 19

BONUSES AND HYDROCARBON

DEVELOPMENT FUND



19.1 The Contractor shall pay to NOCAL the following bonuses:



(a) Two (2) million Dollars when the Total Production of Crude Oil from the

Delimited Area first reaches the average rate of thirty thousand (30,000) Barrels per day during a period of thirty (30) consecutive days.



(b) Three (3) million Dollars when the Total Production of Crude Oil from the Delimited Area first reaches the average rateof fifty thousand (50,000) Barrels per day during a period of thirty (30) consecutive days.



(c) Five (5) million Dollars when the Total Production of Crude Oil from the Delimited Area first reaches the average rate of one hundred thousand (100,000) Barrels per day during a period of thirty (30) consecutive days.



Each of the amounts referred to in (a), (b) and (c) above shall be paid within thirty (30) days following the expiration of the reference period of thirty (30) consecutive days.



19.2 These bonuses shall not be recoverable and therefore shall not be treated as Petroleum Costs.



19.3 HYDROCARBON DEVELOPMENT FUND



19.3.1 To stimulate research in the field of hydrocarbon, most especially in continental areas, and to assist the Government in its overall goal of achieving energy sustainability, a Hydrocarbon Development Fund, to be managed by NOCAL, has been established.



Consequently, the Contractor shall make a contribution of Five Hundred Thousand US Dollars (US$500,000.00) to this fund. The aforementioned amount shall be contributed by the Contractor in four (4) equal installments of One Hundred and Twenty-five Thousand US Dollars (US$ 125,000.00) each, over the first exploration period, the first of which will be paid within thirty (30) days of the Effective Date of this Contract. Thereafter, installment payments shall be made within thirty (30) days of each subsequent anniversary of the first exploration period.



19.3.2 The contribution of the Hydrocarbon Development Fund referred to in Article 19.3.1 will be recoverable and therefore, shall be considered as Petroleum Costs.



19.3.3 The Parties agree that all payments made under this Contract shall be made in accordance with protocols laid down by the Extractive Industries Transparency Initiative (EITI)



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Article 29

PERSONNEL AND TRAINING



29.2 Upon commencement of the Petroleum Operations, the Contractor shall provide funding for Training Programmes and for that purpose the Contractor shall devote an annual Training Budget of





(a) One Hundred Thousand United States Dollars (US$100,000,00) during each year of the exploration period;



(a) Two Hundred Thousand United States Dollars (US$200,000,00) during each year of the exploitation period;



Additionally, the Contractor shall make an annual contribution of Seventy-five Thousand United states Dollars (US$75,000,00) to the University of Liberia for the enhancement of programmes in Geology, Mining Engineering and Environmental Studies.



29.3 Upon commencement of the Petroleum Operations, the Contractor shall provide funding for Social and Welfare Programmes in Liberial and for that purpose the Contractor shall devote an annual Social and Welfare Budget of:



(a) One Hundred Fifty Thousand United States Dollars (US$150,000,00) during each year of the exploration period;



(a) Two Hundred Fifty Thousand United States Dollars (US$250,000,00) during each year of the exploitation period;



As provided in Article 19.3.3, all payments made under this Contract shall be made in accordance with protocols laid down by the Extractive Industries Transparency Initiative(EITI)



29.4 An escrow account shall be established by the Parties for the purpose of receiving money and paying for the Programmes detailed in Article 29.2 and 29.3 and they shall both be signatories to such account, except for the contributions to the University of Liberia which shall be paid by the Contractor through NOCAL to the institution.



The training requirements shall be developed by both Parties with the understanding that NOCAL shall provide 70% of the training candidates and the Contractor shall provide 30% of the candidates.



The Training and Social and Welfare Programmes shall be manually agreed by the Parties.



The Training and Social and Welfare expenses borne by the Contractor shall be included in recoverable Petroleum Costs. Funding for the Training and Social Welfare Programmes





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shall be paid within thirty (30) days of the Effective Date of the Contract. Thereafter, payments shall be made within thirty (30) days of each subsequent anniversary of the Contract.



29.5 The entry into Liberia of all foreign person nel shall be authorized and the STATE shall issue the documents necessary for that entry to all members of the foreign personnel, such as entry visas, working permits and exit visas, in compliance with the immigration regulation in force in Liberia.



At the request of the contractor, the STATE shall facilitate any immigration formalities with the Immigration Bureau, at the points of entry into and exit from Liberia,in respect of the Contract's employees, contractors, subcontractors and agents, and their families, all without undue delays.



29.6 All the employees required for the conduct of the Petroleum Operations shall be under the Contractor's authority or that of its contracters, subcontractors and agents.



Article 32a

TERMINATION



32a.1 Termination by the Contractor. During the Exploration and Exploitation Periods, the Contractor may surrender, by not less than sixty (60) days notice to NOCAL, all of its rights and obligations hereunder in respect of all or any part of the Delimited Area, and the operator shall be relieved of all obligations to NOCAL in respect of the area so surrendered except those obligations arising out of or related to the surrender.



32a.2 Termination by NOCAL. Subject to the provisions of Article 31, NOCAL shall have the right bto terminate this Agreement if any of the following events (hereinafter called "Events of Default") shall occur and be continuing.



(a) Where the Contractor shall fail to make any of the payments described in this Contract on the due payment date, and such default is not cured within ninety (90) days after notice by NOCAL or within such longer periods as may be specified in said notice.



(b) Where the Contractor shall materially fail to comply with its work commitments and other conditions in this Contract and such failure is not cured within ninety (90) days after notice by NOCAL or within such longer period as may be specified in the notice.

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(c) Where the Contractor shall (i) voluntarily dissolve, liquidate or wind up its affairs, or

make an assignment of all or substantially all of its assets for the benefit of creditors

other than an assignment made to secure indebtedness incurred in the ordinary course

of business; (ii) file a petition or application to any tribunal for the appointment of a

trustee or receiver for all or any substantial part of the Contractor's assets; (iii)

commence any proceedings for its bankruptcy, reorganization, arrangement,

insolvency or readjustment of debt under the laws of any jurisdiction, whether now or

hereafter in effect, or if any such petition or application is filed, or any such

proceedings are commenced against it, shall indicate its approval thereof, consul

thereto or acquiescence therein, or (iv) if any order is enforced appointing any such

trustee or receiver, or adjudicating the Contractor bankrupt or insolvent, or approving

the petition in any such proceedings, and provided that the Contractor shall fail to

take corrective measure (s) to have such order removed or lifted within sixty (60)

days;



(d) Where the Contractor shall fail to carry out Exploration as required by Article 4, or

censes Exploration for a period of twelve (12) consecutive months of cease

Production with respect to all Production Areas for a period of twenty four (24)

consecutive months, unless such failure or cessation is consented to by NOCAL or is

caused by a state of force majeure.



32a.3 Opportunity to Cure. In the case of an alleged Event of Default described above, NOCAL,

before taking any further action, shall provide Notice to the Contractor of the alleged

occurrence of such Event of Default and of NOCAL's views in that regard and shall offer the

Contractor a fair opportunity to consult with NOCAL to resolve the matter. If, after a

reasonable period of time of consultation, NOCAL is of the reasonable opinion that the

matter cannot be resolved by further consultation, NOCAL may then send to the Contractor

Notice of NOCAL's intention to terminate this Contract. If the Event of Default is not cured

within ninety (90) days after said Notice, or within such longer period as may be necessary to

allow a reasonable of time to effect such cure, then this Contract shall be terminated.



321.4 Disputes Regarding Events of Default, Notwithstanding the provision of Article 32a.2, if

the Contractor disputes whether there has been an Event of Default described above and,

within ninety (90) days after receipt by the Contractor of NOCAL's of its intention

to terminate this contract, refers such dispute to arbitration in accordance with Article 31,

accordance with, an arbitration award.





ARTICLE 35



STABILITY OF CONDITIONS



35.3 Periodic Review. In the event of changes in circumstances from those existing at the

Effective Date, that have an adverse material effect on the terms of this Contract (Profound

Changes in Circumstances), either NOCAL or the Contractor shall at the request of the other.









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consult together. If it is established that such Profound Changes in Circumstances have occurred, then the Parties shall effect such changes in or clarifications to this Contract that they agree are necessary. The Parties shall meet in good faith to make the necessary revisions and adjustments to the Contract in order to maintain such expected economic benefits to each of the Parties, provided that the economic benefits to the Parties shall not be reduced as a result of exercising the terms of this Article. For purposes of this Contract, the term "Profound Changes and Circumstances" shall mean such changes in the economic conditions of the petroleum industry world wide or in Liberia or such change that result in such a material and fundamental alteration of the conditions and assumptions relied upon by the Parties at the Effective Date of this Contract (or the time after any subsequent review under this Article) to the effect that the overall balance of the equities and benefits reasonably anticipated by the Parties will no longer be achievable.



ARTICLE 37

EFFECTIVE DATE



The Effective Date of the Contract shall be the date on which all of the Parties have signed the Addendum and the Addendum is approved by the President of the Republic of Liberia, and notification to and receipt thereof by the Contractor.



GENERAL PROVISIONS



Except as specifically amended herein, all the remaining terms and conditions of the Contract shall remain in full force and effect. In the event of inconsistency between the Contract and the Addendum, the Addendum shall apply.



Capitalized terms used in this Addendum that are defined in the Contract and not otherwise defined herein shall have the respective meanings ascribed to them in the Contract.



This Addendum modifies the Contract and shall have effect from the date of signing by all of the Parties.



[signature]

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10 IN WITNESS WHEREOF, the Parties have signed this Addendum to the Contract on the date as set forth below.



On Behalf of NOCAL:



[signature]

Dr. Fodee Kromah

President/CEO of NOCAL



November 14, 2007

Date



[signature]

Hon.Clemenceau B. Ureg

Chairman of the Board, NOCAL



November 14,2007

Date



[signature]

Dr. Eugene H. Shanon

Minister of Lands, Mines & Energy, R.L.



November 14, 2007

Date



[signature]

Dr. Antoinette M. Sayeh

Minister of Finance, R.L.



March 1, 2008

Date



[signature]

Hon. Richard V. Tolbert

Chairmam, National Investment Comm.



2/2/08

Date



On behalf of Repsol Exploracion S.A.



[signature]

Marcos Mozetic Bidmar

Director Exploration



November 14, 2007





11Attested by:



[SIGNATURE]

Hon Philip A.Z Banks

Counseliong-Law & Minister of Justice, R.L



03-03-08

Date



11-03-08

Data



Approved:

[SIGNATURE]

President, Republic of Liberia



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