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 LICENSE








AGREEMENT

















For the Development and Production of Petroleum in


Kucova Oilfield


Between


The Ministry of Economy, Trade and Energy


As represented by


The National Agency of Natural Resources


And


“Albpetrol” Sh. A., Fier


Dated [, 2007


License Agreement for the Development and Production of Petroleum in the Kucova Oilfield



CONTENTS



Art. Pg
1 DEFINITIONS AND INTERPRETATION 5
2 ANNEXES TO THE LICENSE AGREEMENT 13
3 SCOPE OF THE LICENSE AGREEMENT 14
4 TERM 18
5 RELINQUISHMENT 19
6 PA AND OPERATOR 20
7 ANNUAL PROGRAMS AND BUDGETS 23
8 PETROLEUM OPERATIONS AND APPROVAL OF THE DEVELOPMENT PLAN 28
9 LICENSEE'S RIGHTS AND OBLIGATIONS 31
10 ALLOCATION OF AVAILABLE PETROLEUM 34
11 ASSOCIATED GAS 38
12 CUSTOMS EXEMPTION 39
13 LOCAL SUB-CONTRACTORS 40
14 TAX ON PROFIT 41
15 BOOKS OF ACCOUNT, ACCOUNTING AND AUDIT 43
16 RECORDS, REPORTS, INSPECTION AND CONFIDENTIALITY 45
17 TITLE TO AND SALE OF ASSETS 49
18 FINANCIAL RIGHTS 50
19 EMPLOYMENT AND TRAINING OF PERSONNEL 52
20 OFFICE AND SERVICE OF NOTICE 53
21 NATIONAL EMERGENCY OR OTHER TAKINGS 54
22 TRANSFER OF RIGHTS AND OBLIGATIONS 56
23 FORCE MAJEURE 58
24 BREACH OF LICENSE AGREEMENT 59
25 DISPUTES AND ARBITRATION 61
26 GOVERNING LAW 64
27 APPROVAL OF THE LICENSE AGREEMENT 65
28 MISCELLANEOUS 66
A CONTRACT AREA 69
B EVALUATION PERIOD MINIMUM WORK PROGRAM 70
















u
 License Agreement for the Development and Production of Petroleum in the Kucova Oilfield








LICENSE AGREEMENT








THIS LICENSE AGREEMENT is made and entered into this T^day of


2007 v


By and between:


(1) The Ministry of Economy, Trade and Energy (hereinafter called “Ministry”), as


represented by the National Agency of Natural Resources (hereinafter called


“AKBN”), and


(2) “Albpetrol” Sh. A., a state company organized and existing under the laws of


the Republic of Albania (hereinafter called “Albpetrol”).








RECITALS


A. WHEREAS pursuant to the agreement between the Ministry and Albpetrol,


dated 26 July 1993 (the “Albpetrol Agreement”), the Ministry authorized


Albpetrol to perform Petroleum Operations, among other areas, in the Contract


Area. Albpetrol has so far developed and produced Petroleum in the Contract


Area in conformity with the Albanian Law (Legislation);


B. WHEREAS ARTICLE 3 of the law No.7746, dated 28.7.1993 “Petroleum Law


(Exploration and Production)” envisages that all petroleum deposits existing in


their natural condition in strata lying within the jurisdiction of Albania,


including the maritime areas, are the exclusive property of the Albanian State,


represented by the appropriate Ministry and all such resources are to be used for


the benefit of the people of Albania;


C. WHEREAS, pursuant to ARTICLE 12 of the law No.7746, dated 28.7.1993


“Petroleum Law (Exploration and Production)”, the Ministry may grant a


License Agreement which will authorize Albpetrol, under the terms and


conditions defined therein, to lawfully, develop and produce Petroleum in the


Contract Area, and it is intended that such grant be made in this License


Agreement;


D. WHEREAS, pursuant to ARTICLE 12 of the law No.7746, dated 28.7.1993


“Petroleum Law (Exploration and Production)”, and without any prejudice to


the general character of Recital C, this License Agreement may permit


Albpetrol, with the Ministry's approval, to transfer or to delegate all or part of


its rights, title and interests hereunder to a foreign or local juridical person or


international financial institution with which Albpetrol wishes to cooperate in


accordance with the Petroleum Law and the Albpetrol Agreement;














D.aI


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 License Agreement for the Development and Production of Petroleum in the Kucova Oilfield








E. WHEREAS, pursuant to ARTICLE 4 and ARTICLE 12 of the law No.7746,


dated 28.7.1993 “Petroleum Law (Exploration and Production)”, and for


purposes of implementing this License Agreement, Albpetrol may enter into a


Petroleum Agreement with a partner(s) in accordance with this License


Agreement, which petroleum agreement is subject to approval from the Council


of Ministers of Albania;


F. WHEREAS Albpetrol, in conformity with the law No.7746, dated 28.7.1993


“Petroleum Law (Exploration and Production)”, now seeks the authorization to


perform Petroleum Operations in the Contract Area according to the terms and


conditions contained herein;


G. WHEREAS this License Agreement will enter into full force and effect upon


the approval by the Council of Ministers of Albania of a Petroleum Agreement


Albpetrol may enter with its partner(s);


H. WHEREAS the Albanian Government wishes that oil and gas Reservoirs


underlying the Contract Area be exploited with high efficiency and in a rational


manner, in conformity with the generally accepted practices of the international


petroleum industry;


I. WHEREAS LICENSEE agrees to be bound to the terms and conditions of this


License Agreement;


J. WHEREAS this License Agreement is a “license” as mentioned in the Albpetrol


Agreement and will have the effect of a contract between the parties; and


K. WHEREAS AKBN, on the basis of the Decision of the Council of Ministers,


No.547, dated 9 August 2006, will act on behalf of the Ministry and on the


Ministry’s behalf will give necessary approvals and issue the necessary


authorizations to make possible the completion of the Petroleum Operations in


the Contract Area.


NOW THEREFORE, in consideration of the premises and the mutual agreements


contained herein and for other good, valuable and binding consideration, the receipt


and sufficiency of which are hereby acknowledged, and subject to the terms hereto, the


Parties, intending to be legally bound, hereby agree as follows:


























4


 License Agreement tor the Development and Production of Petroleum in the Kucova Oilfield








STATEMENT OF AGREEMENT





ARTICLE 1


DEFINITIONS AND INTERPRETATION





1.1. Defined Terms.


In this License Agreement, including its Recitals and Annexes and this


ARTICLE 1, except where the context otherwise indicates, the following terms


appearing in initial capitalization shall have the respective meanings herein


ascribed.


“Abandonment” means the final abandonment through decommissioning,


removal, and/or disposal of wells, facilities and equipment used for Petroleum


Operations and the rehabilitation of the land in the immediate vicinity of an


abandoned well to a condition not worse than its condition as of the time


immediately before commencement of Petroleum Operations in respect of such


well or facilities, and the term “to Abandon” shall have the corresponding


meaning.


“Abandonment Costs” means costs and expenditures (whether of a capital or


operational nature) incurred or to be incurred in connection with the


Abandonment of wells, facilities or equipment.


“Abandonment Plan” means a plan prepared by the LICENSEE or anyone


designated by and in (on) behalf of the LICENSEE for the Abandonment of the


wells, facilities and equipment used for the Petroleum Operations.


“Accounting Procedure” means the accounting procedure mentioned in


ARTICLE 15, Section 15.5 and set forth as Annex B to the Petroleum


Agreement.


“Affiliate” means a subsidiary company, a parent company or a sister company


to a Party or an entity comprising a Party. For the purposes of the foregoing


definitions:


(a) a subsidiary company is a company controlled by a Party or an entity


comprising a Party;


(b) a parent company is a company that controls a Party or an entity


comprising a Party;














5


 License Agreement for the Development and Production of Petroleum In the Kucova Oilfield





(c) a sister company is a company that is controlled by the same Person as a


Party or an entity comprising a Party.


“Control” means that a Person owns share capital, either directly or


through other Persons, which confers upon it a majority of the votes at


the stockholders’ meetings of the company, which is controlled.


“Albania” means the Republic of Albania.


“Albanian Government” means the Government of Albania.


“Albanian Law” means any law or statute or any judgment, order, decree, rule


or regulation in force in Albania, which the LICENSEE is subject to or is


obliged to follow.


“Albpetrol” has the meaning set forth in the introductory paragraph to this


License Agreement, and shall include its permitted successors and assignees.


“Albpetrol Agreement” means the agreement entered between the Ministry and


Albpetrol, dated 26 July 1993 as it is mentioned in the law No.7746, dated


28.7.1993 “Petroleum Law (Exploration and Production)”.


“Albpetrol Share” has the meaning given to that term in the Petroleum


Agreement entered into between Albpetrol and Contractor.


“Annual Program” means an itemized statement of the Petroleum Operations to


be carried out within or with respect to the Contract Area and the time schedule


thereof.


“Associated Gas” means Natural Gas found in association with Crude Oil if


such Crude Oil can by itself be commercially produced.


“Available Petroleum” has the meaning set forth in ARTICLE 10, Section 10.1.


“Budget” means any estimate of expenses in respect of an Annual Program.


“Calendar Quarter” means a period of three (3) consecutive Months beginning


January 1, April 1, July 1 or October 1 and ending March 31, June 30,


September 30 or December 31, respectively.


“Condensate” means blends mainly consisting of pentanes and heavier


hydrocarbons, directly recovered from the hydrocarbon reservoirs or obtained


from gas conditioning, which are liquid under ambient conditions of


temperature and atmospheric pressure.











6


 License Agreement for the Development and Production of Petroleum in the Kucova Oilfield





“Contract Area” means on the Effective Date, the area described in Annex A,


and thereafter, such area in respect of which at any particular time LICENSEE


continues to have rights and obligations under this License Agreement.


“Contractor” means a Person who may enter into a Petroleum Agreement with


Albpetrol in relation to the Contract Area.


“Cost Recovery Petroleum” has the meaning set forth in ARTICLE 10, Section


10.2(aV


“Crude Oil” has the same meaning ascribed to this term in the law No.7746,


dated 28.7.1993 “Petroleum Law (Exploration and Production)”.


“Delivery Point” means whichever point(s) within Albania as may be agreed


between AKBN and LICENSEE. Such point(s) may or may not be the same as


the Measurement Point.


“Deemed Production” has the meaning given to that term in the Petroleum


Agreement entered into between Albpetrol and Contractor.


“Development” means the Petroleum Operations performed after the approval


of the Development Plan and shall include, but is not limited to:


(a) the drilling, plugging, deepening, side tracking and redrilling, completing


and equipping of development wells, and completing and changing of the


status of a well, and


(b) designing, engineering, construction, procurement and installation of


equipment, lines, system facilities, plants and global changes of panels


and the related operations which will enable LICENSEE to exploit and


operate the said development wells, and the collection, gathering,


processing, manipulation, storing, transportation and delivering of


Petroleum, and the implementation of IOR/EOR Methods on a large scale


throughout the Contract Area.


“Development and Production Operations” means all operations and related


administrative and other activities, within or outside the Contract Area, which


are carried pursuant to an approved Development Plan in connection with the


development, production, extraction, separation, processing, gathering,


transportation, storage and disposition of Petroleum.


“Development and Production Area” has the meaning given to that term in the


Petroleum Agreement entered into between Albpetrol and Contractor.














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 License Agreement for the Development and Production of Petroleum in the Kucova Oilfield





“Development and Production Period” means the period described as such in


Section 8.3.


“Development Plan” means a plan, including the works, relevant activities, and


the budgets therefore setting forth the overall strategy for the development and


production of Petroleum from the Contract Area.


“Effective Date” has the meaning set forth in ARTICLE 27.


“Evaluation” means the evaluation of the technical and economic data produced


pursuant to previous Operations for purposes of determining the commercial


viability of implementing the Development Plan.


“Evaluation Area” has the meaning given to that term in the Petroleum


Agreement entered into between Albpetrol and Contractor.


“Evaluation Operations” means Petroleum Operations related to the Evaluation


of IOR/EOR Methods during the Evaluation Period in the Contract Area.


“Evaluation Program” has the meaning given in Annex B.


“Evaluation Period” has the meaning set forth in ARTICLE 7, Section 7.3(a).


“Expert” means an individual or an entity who is not and has never been


employed by AKBN or LICENSEE and who, by training and extensive


experience, has highly developed knowledge in the technical area wherein lies


the dispute or disagreement which he is to resolve and who is appointed


pursuant to the provision of ARTICLE 25, Section 25.4.


“Fiscal Year” means the period of twelve (12) consecutive months according to


the Gregorian calendar starting January 1st and ending December 31st, both dates


inclusive, for which tax returns or reports are required according to any


applicable income, Profits or other tax law or regulation in accordance with


applicable Albanian Law.


“Improved/Enhanced Oil Recovery Methods” or “IOR/EOR Methods” means


Petroleum Operations which aim at reaching the Maximum Efficient Recovery


from a Reservoir through improving its natural energy system and its


hydrocarbon drainage by applying, without being limited to, recompletion,


reworking, cold heavy oil production methods, steam-assisted gravity drainage


methods, water injection, repressuring, thermal heating, vertical and horizontal


drilling and other enhanced production methods.


“Leke” means the lawful currency of the Republic of Albania.











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 License Agreement for the Development and Production of Petroleum in the Kucova Oilfield





“LICENSEE” means Albpetrol and, in conformity with “Albpetrol Agreement”


provisions, any its permitted transferee, successor or assignee.


“License Agreement” means this document, including the Annexes attached to


it, as the same may be amended or supplemented from time to time.


“Maximum Efficient Recovery” means recovery of Petroleum, which equals the


maximum overall extraction of Petroleum from a Reservoir having regard to


generally accepted international petroleum industry practice.


“Measurement Point” means the point mutually determined by AKBN and


LICENSEE, where appropriate equipment and facilities will be located for the


purpose of performing all volumetric measurements and other determinations,


temperature and other adjustments, determination of water and sediment content


and other appropriate measurements, to establish, for the various purposes of


this License, the volumes of Petroleum. All said measurements and


determinations will be acknowledged in writing by AKBN and LICENSEE’S


representatives at the Measurement Point. The Measurement Point may or may


not be the same as the Delivery Point.


“Natural Gas” means any hydrocarbons or mixture of hydrocarbons consisting


essentially of methane in a gaseous state under normal conditions of pressure


and temperature, extracted from the subsoil separately or together with liquid


hydrocarbons.


“New Evaluation Area” has the meaning set forth in Section 8.4(a).


“New Evaluation Program” has the meaning set forth in Section 8.4(a).


“AKBN” means the National Agency of Natural Resources of Albania as further


specified in Recital K and ARTICLE 3, Section 3.6.


“Operator” has the meaning set forth in ARTICLE 6, Section 6.2(a).


“Party” means AKBN or LICENSEE.


“Person” means any individual, corporation, partnership, joint venture,


association, joint stock company, trust, unincorporated organization, Albanian


governmental authority, or other form of entity.


“Petroleum” means Crude Oil, Condensate and Natural Gas.


“Petroleum Agreement” means a petroleum agreement as defined in the


Petroleum Law and the Albpetrol Agreement, and as described in Recital E and


ARTICLE 6, herein.








9


 License Agreement for the Development and Production of Petroleum in the Kucova Oilfield








“Petroleum Costs” means costs and expenditures incurred for the performance


of or in connection with the Petroleum Operations.


“Petroleum Law” means the Albanian “Petroleum Law (Exploration and


Production)”, No.7746, dated 28.07.1993, as amended by Law No.7853 dated


29.07.1994 “On some changes in Law No.7746 dated 28.07.1993 “Petroleum


Law (Exploration and Production)” and by Law No.8297, dated 4.3.1998


“Amendment of law No.7746, dated 28.7.1993 “Petroleum Law (Exploration


and Production)”, as amended by law No.7853, dated 27.7.1994 “On some


changes in Law No.7746 dated 28.07.1993 “Petroleum Law (Exploration and


Production)”.


“Petroleum Operations” means all or any of the operations including the


Abandonment aimed or authorized by this License Agreement and operated by


the LICENSEE on or after the Effective Date, including without limitation the


testing, development, extraction, production, treatment, transportation and


storage of Petroleum of or from the Contract Area pursuant to this License


Agreement.


“Petroleum Profit Tax” means the tax assessed pursuant to Law 7811 dated


April 12, 1994, as amended by Law 8345 dated May 13, 1998, and as may be


amended from time to time.


“Production” means every type of operations to produce Petroleum and operate


wells, and taking, saving, treating, handling, storing, transporting, metering, and


delivering of Petroleum, and any other type of operation required to obtain


primary and enhanced recovery of Petroleum, and transportation, storage and


any other work or activities necessary or ancillary to such operations. (The verb


“Produce” means conducting Production).


“Profit” has the meaning set forth in ARTICLE 10, Section 10.3(a).


“Project” means the rehabilitation and redevelopment of the Contract Area


through IOR/EOR Methods.


“Project Area” means:


(a) during the Evaluation Period, that portion of the Contract Area which is


designated from time to time as the Evaluation Area;


(b) during the Development and Production Period, that portion the Contract


Area which is designated from time to time as Development and


Production Area; and














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 License Agreement for the Development and Production of Petroleum in the Kucova Oilfield








(c) if LICENSEE undertakes a New Evaluation Program, that portion of the


Contract Area which is designated from time to time as the New


Evaluation Area.





“Reservoir” means a porous and permeable stratum capable of producing


Petroleum and which must be considered, because of the character of the


substances it holds (similitude of physical properties, density, gas-oil ratio,


viscosity and a pressure relationship) as a unit in regard to its natural


exploitation.





“Six Month Period” means, respectively, the period of the first six consecutive


months of the Fiscal Year and the period of the last six consecutive months of


the Fiscal Year.


“Taxes and Duties” means all taxes, duties, tariffs, fees and other payments of


whatever nature payable to the Albanian Government (or to any of its agencies)


or to any of territorial or administrative sub-divisions of Republic of Albania (or


agencies).


“U.S. Dollars” or “USD” means the lawful currency of the United States of


America.





“Willful Default” means, with respect to a Person, an intentional and conscious


or reckless act or omission made by any director, supervisory or managerial


personnel of such Person, its agents or contractors, not justifiable by any special


circumstance, but shall not include any error of judgment or mistake made by


any director, supervisory or managerial personnel, agent or contractor of such


Person, as the case may be, in the exercise, in good faith, of any right conferred


upon such Person under this License Agreement.


1.2. Other Terms.


In this License Agreement, including its Recitals and Annexes and this


ARTICLE 1, unless the context otherwise requires:


(a) words denoting the singular number shall include the plural and vice-


versa;





(b) reference to a law is the same also regarding amendments, modifications


or the replacements made now and then and regarding any legal act


deriving from laws, regulation, rule, order or right delegated by law or


order in compliance with them;

















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 License Agreement for the Development end Production of Petroleum in the Kucova Oilfield





(c) reference to an agreement or instrument shall be deemed to include


references to such agreement or instrument as amended, supplemented or


replaced from time to time;


(d) reference to any Party is to a Party to this License Agreement its


successors and permitted assigns;


(e) references to Recitals, Articles, Sections, Appendices and Annexes are


references to Recitals, Articles, or Sections of, or Appendices or Annexes


to this License Agreement, unless otherwise indicated;


(f) “included”, “other than” and other similar phrases will not be interpreted


as definitions;


(g) reference to numbered or lettered paragraph “above” or “below” is to the


paragraph so numbered or lettered immediately above or below such


reference; and


(h) if not otherwise defined in this License Agreement, the words and


phrases adopted in the Petroleum Law will carry the same meaning in


this License Agreement.


1.3. Headings.


As used herein, the headings are used as a facility and are not part of, and will


be ignored in interpreting this License Agreement.


















































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 License Agreement for the Development and Production of Petroleum in the Kucova Oilfield

















ARTICLE 2


ANNEXES TO THE LICENSE AGREEMENT








2.1 Annexes


The Annexes A and B to this License Agreement are hereby made a part of this


License Agreement and they shall be considered as having equal force and


effect with the provisions of this License Agreement. However, in the event of


any conflict between the Annexes and the body of this License Agreement the


provision as described in the body of this License Agreement shall prevail.


Annex A: CONTRACT AREA


Annex B: EVALUATION PERIOD MINIMUM WORK PROGRAM

























































































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 License Agreement for the Development and Production of Petroleum in the Kucova Oilfield








ARTICLE 3


SCOPE OF THE LICENSE AGREEMENT





3.1. Application of Law and Stability of Terms.


(a) The provisions of this License Agreement shall have full legal effect in


accordance with ARTICLE 27.


(b) Subject to Section 3.1(c) below, to the extent that any provision of


Albanian Law conflicts or is inconsistent with a provision of this License


Agreement, the provision of the Albanian Law shall prevail.


(c) Notwithstanding Section 3.1(b) above, if, as a result thereof, any right or


benefit granted (or which is intended to be granted) to LICENSEE under


this License Agreement is infringed in some way, a greater obligation or


responsibility shall be imposed onto LICENSEE or, in whatever other


way the economic benefits accruing to LICENSEE from this License


Agreement are negatively influenced by Section 3.1(b), and such an event


is not provided for herein, the Parties will immediately amend this


License Agreement, or the Ministry and AKBN will immediately


undertake other necessary actions to eliminate the negative economic


effect on the LICENSEE.


3.2. Grant of Rights.


Pursuant to and in accordance with the terms and conditions of the Petroleum


Law and this License Agreement the Ministry authorizes and grants the


LICENSEE the exclusive right:


(a) to conduct Petroleum Operations in the Contract Area;


(b) to treat, store and transport the Petroleum extracted from the Contract


Area;


(c) to construct and install all facilities and equipment (including storage,


treatment, pipelines and other means of transportation) required for the


Petroleum Operations; and


(d) to use for its own account, sell, exchange, export, realize or possess the


Petroleum extracted from the Contract Area, and take Profit from and


title to such extracted Petroleum.














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 License Agreement for the Development and Production of Petroleum In the Kucova Oilfield








Notwithstanding Section 3.2(a), (b), (c), and (d)1 any other contractor may


conduct petroleum operations for development and production of Petroleum


outside of the Contract Area in accordance with any agreement reached between


a contractor and AKBN. Ministry, AKBN and the contractor shall ensure


LICENSEE that those petroleum operations will not interfere and unreasonably


prevent the normal development of Petroleum Operations of the LICENSEE in


the Contract Area, nor shall LICENSEE unreasonably prevent or interfere with


the petroleum operations of such other contractor.


3.3. The Primary Obligations of the LICENSEE.


(a) The LICENSEE shall:


(i) secure all financial resources and pay one hundred percent (100%)


of all costs and expenses associated with the Petroleum Operations


in respect to the Contract Area subject to the Cost Recovery


Petroleum provisions of this License, and


(ii) secure all technical resources and employ advanced scientific


methods, procedures, technologies and equipment generally


accepted in the international petroleum industry necessary to carry


out Petroleum Operations in compliance with this License


Agreement at its sole risk and cost, and


(iii) indemnify the Albanian Government, the Ministry and AKBN, and


their employees, officials, officers, directors and respective agents,


for all claims by third parties for personal damage or property


damage resulting from the performance of the Petroleum


Operations, including without limitation, reasonable attorneys fees


and costs of defense unless such third party claims are as a direct


or indirect result of any fault or breach of legal duty by the


Albanian Government, the Ministry or the AKBN. In the event of


such claims the LICENSEE shall be notified within thirty (30)


days.


(b) LICENSEE may perform the Petroleum Operations itself or by


employing sub-contractors. LICENSEE shall not be relieved of any


obligation under this License Agreement and Albanian Law by reason of


employing sub-contractors.


(c) If LICENSEE is comprised of more than one party, each such party shall


be jointly and severally liable and responsible for LICENSEE’S


obligations under this License Agreement including without limitation


LICENSEE’S indemnification obligations unless specifically provided


otherwise in this License Agreement.











15


OA/) <3^


 License Agreement for the Development and Production of Petroleum In the Kucova Oilfield








(d) Unless otherwise stated herein or otherwise agreed, LICENSEE shall


receive no compensation for its services, nor any reimbursement of its


expenditures under this License Agreement, except for the share of


Petroleum from the Contract Area to which it may be entitled under


ARTICLE 12.


(e) This License Agreement does not award LICENSEE ownership rights to


the Petroleum in situ in the Contract Area. However, LICENSEE shall


have the right to receive in kind, dispose of and freely export its share of


Petroleum from the Contract Area in accordance with the provisions of


this License Agreement. Title to LICENSEE'S portion of Petroleum


hereunder shall pass to LICENSEE at the relevant Delivery Point.


3.4. Entitlements of LICENSEE.





As of the Effective Date, and during the term of this License Agreement,


LICENSEE will be entitled to use:


(a) exclusively, free of charge, all the existing facilities and equipment in the


Contract Area for the performance of the Petroleum Operations for:





(i) the implementation of the Evaluation Operations and the


Development and Production Operations;


(ii) application of IOR/EOR Methods in the whole Contract Area and


in accordance with the conditions and terms of this License


Agreement; and


(iii) Production of Petroleum in the Contract Area;





(b) free of charge and for the performance of the Petroleum Operations, all


other assets, equipment, means and infrastructure (including roads,


electricity power lines and water, oil and gas pipelines) existing on the


Effective Date of this License Agreement in the Contract Area or


elsewhere as described in ARTICLE 12 of the Petroleum Agreement, on


an "as is" basis and available for delivery, but (unless otherwise agreed


with the supplier) subject to payment, as applicable, on a non-


discriminatory basis, at reasonable cost for electricity, water, oil and gas


used;





(c) under commercially reasonable terms and conditions, the pipelines that


transport the Petroleum produced in the Contract Area to the ports and


refineries in Albania; and














16 \ <


 License Agreement for the Development and Production of Petroleum in the Kucova Oilfield








(d) all technical data available to AKBN pertaining to the Contract Area


provided that LICENSEE shall reimburse AKBN for all reasonable cost


incurred for the preparation of such data transfer and the cost of copying


such data.


3.5. Use of Entitlements.


(a) The Ministry and AKBN shall ensure that there is no change in the


intended use or operation of any of the equipment, means and


infrastructure (including pipelines) referred to in Section 3.4, without


prior approval of the LICENSEE which approval not to be unreasonably


withheld.


(b) The Ministry and AKBN shall ensure that LICENSEE has use of the


railways, roads, highways, water, land surface, timber, electricity,


sanitary structures and other infrastructures in Albania property of the


Albanian state, at commercially reasonable rates and on a non-


discriminatory basis, so as to be able:


(i) to perform the Petroleum Operations in compliance with this


License Agreement; and


(ii) to produce, transport, export and sell Petroleum in or from Albania


as provided in this License Agreement and the Law No.7746 dated


28.07.1993 “Petroleum Law (Exploration and Production)”.


(c) The Ministry and AKBN shall ensure that the LICENSEE is granted, in


accordance with ARTICLES 7 and 10 of the Petroleum Law, all the


rights, permits, licenses, approvals and other authorizations that it may


reasonably require in order to perform the Petroleum Operations in


conformity with this License Agreement, and that any compensation


which LICENSEE may be required to pay, pursuant to ARTICLE 10(2)


of the Petroleum Law, shall be reasonable and non-discriminatory.


3.6. AKBN Authority.


On the basis of the Decision of the Council of Ministers, No. 547 dated August


9th 2006, following the Effective Date, AKBN will, on behalf of the Ministry,


provide approval or issue the necessary authorizations for the performance of


the Petroleum Operations in the Contract Area.























17


 License Agreement for the Development and Production of Petroleum In the Kucova Oilfield











ARTICLE 4


TERM





Unless sooner terminated in accordance with the terms hereof, this License


Agreement shall remain in effect during the the Evaluation Period and any


extension hereof (Section 7.3) and any Development and Production Period if


entered pursuant to Section 7.4 and ARTICLE 8.


Pursuant to ARTICLE 5(3)(a)(ii) of the Petroleum Law, at the end of any


Development and Production Period the Parties may agree to further five (5)


year extensions in accordance with the procedures set forth in ARTICLE 8,


Section 8.3(c) hereof.


































































































18


 License Agreement for the Development and Production of Petroleum in the Kucova Oilfield














ARTICLE 5


RELINQUISHMENT





5.1. Relinquishment.





(a) LICENSEE may relinquish its rights under this License Agreement to


conduct Petroleum Operations in all or any part of the Contract Area by


providing AKBN with written notice thirty (30) days in advance of such


relinquishment. Once LICENSEE has notified AKBN of its decision,


(b) LICENSEE shall relinquish all its rights and obligations with regard to


this License Agreement and the Petroleum Agreement.


In case LICENSEE intends to relinquish any part of the Contract Area


the LICENSEE shall provide AKBN with written note describing the


portions of the Contract Area to be relinquished at least thirty (30) days


in advance and shall ensure that each individual portion of the Contract


(c) Area relinquished shall, so far as reasonably possible, be of sufficient


size and shape to enable further petroleum operations to be conducted


thereon.


Upon the date on which any relinquishment is due or is to take effect or


upon the termination of this License Agreement the LICENSEE shall


(d) have no further rights or obligations in regard to the relinquished area(s).





No relinquishment made in accordance with this License Agreement and


this ARTICLE 5 shall relieve LICENSEE from its unfulfilled minimum


commitments or any other unfulfilled obligation accrued prior to such


relinquishment written notice.





K


















































19


 License Agreement for the Development end Production of Petroleum in the Kucova Oilfield








ARTICLE 6


PETROLEUM AGREEMENT AND OPERATOR


6.1. Petroleum Agreement.


In compliance with the Petroleum Law, the Albpetrol Agreement, and this


License Agreement, LICENSEE is authorized to conduct Petroleum Operations


for the Project in the Contract Area only on the basis of a Petroleum Agreement,


which:


(a) shall be in foil accordance with this License Agreement and, in


accordance with ARTICLE 13(2) of the Petroleum Law, will enter into


full force and effect only upon and following the Effective Date;


(b) shall incorporate the exclusive rights to the Contract Area granted in


accordance with this License Agreement;


(c) notwithstanding the definitions set forth within the Petroleum Law, will


contain and/or define, but not be limited to, the following matters:


(i) the obligations and schedules of the Evaluation Period as well as


of other phases of the performance of the Petroleum Operations,


which shall be in conformity with the schedules and obligations of


this License Agreement;


(ii) contents of the procedure of selection and determination of the


Operator by the parties to such agreement and the Operator's


primary rights and duties, provided that replacement of Operator,


if necessary, will be conducted in conformity with ARTICLE 6,


Section 6.2(b) herein;


(iii) the Accounting Procedure, which will be subject to ARTICLE 15,


Section 15.5 of this License Agreement and Annex B of the


Petroleum Agreement;


(iv) the relations among parties to the Petroleum Agreement,


procedures for making and implementing decisions, contributions,


individual and collective liabilities, duties and rights, form and


share of Profit, obligations, and similar matters; and


(v) the organization and performance of the Petroleum Operations.

















20


 License Agreement for the Development and Production of Petroleum in the Kucova Oilfield











6.2. Project Area


In the event LICENSEE is comprised of more than one party, such parties may


provide in the Petroleum Agreement for an area (the "Project Area") within the


Contract Area where Operator will be solely responsible for conducting


Petroleum Operations described herein, separately from Petroleum Operations


conducted in the balance of the Contract Area. The Petroleum Agreement may


provide for the allocation between or among the parties comprising LICENSEE


of the rights, obligations, liabilities and indemnities relating to the Project Area


separately from the balance of the Contract Area. In the event of such


allocation, and notwithstanding anything to the contrary in this License


Agreement:


(a) each of such parties comprising LICENSEE will be separately


responsible for activities in the Project Area and the balance of the


Contract Area to the extent set forth in the Petroleum Agreement; and


(b) Operator shall be liable and responsible only for Petroleum Operations


conducted in the Project Area and not elsewhere (including without


limitation: obligations pertaining to Abandonment; paying costs and


expenses of Petroleum Operations; indemnities; the preparation of the


Development Plan and Annual Programs and Budgets for the Project


Area; the calculation and payment of Petroleum Profit Tax; compliance


with operational and environmental standards; the preparation of baseline


studies; the preparation of books, records and accounts of Petroleum


Costs, Cost Recovery Petroleum and revenues; force majeure and


termination for force majeure; and breach and termination provisions).


6.3 Operator.


(a) “Operator” is defined as the LICENSEE or, subject to ARTICLE 5(2) of


the Petroleum Law and Section 6.3(b) of this License Agreement, as such


other Person duly appointed by the LICENSEE for executing and


implementing the Petroleum Operations in the name of, for the account


of, and under the responsibility of LICENSEE.


(b) Any eventual Operator nomination and/or replacement can be made as


follows:





(i) by way of prior notification of AKBNj if the proposed Operator is


a LICENSEE or an Affiliate of a LICENSEE, and


 License Agreement for the Development and Production of Petroleum in the Kucova Oilfield








(ii) with the prior approval of AKBN, which approval will not be


unreasonably withheld, if the proposed Operator is not a


LICENSEE or an Affiliate of a LICENSEE.


(c) Subject to Section 6.3(a) and (bX LICENSEE shall inform AKBN of the


identity of Operator’s Director General and deputies, all of whom shall


be technically and administratively competent.


(d) LICENSEE shall not be relieved of any intentional and conscious or


reckless act or omission made by any director, technical, supervisory or


managerial personnel of the Operator, its agents or contractors, not


justifiable by any special circumstance.


6.4. Prevailing Document.


Once approved by the Council of Ministers, the Petroleum Agreement, together


with its appendices and exhibits in each of the languages in which it is written


and is valid, shall be provided to AKBN. The provisions of this License


Agreement will prevail in case of a conflict or disagreement with the Petroleum


Agreement provisions.










































































22


 License Agreement for the Development and Production of Petroleum in the Kucova Oilfield








ARTICLE 7


ANNUAL PROGRAMS AND BUDGETS


7.1. Commencement of Petroleum Operations. Advisory Committee.


(a) The Petroleum Operations under this License Agreement will start on the


Effective Date; however, LICENSEE will start the Evaluation


Operations in the Contract Area not later than sixty (60) days from the


Effective Date.


(b) For the purpose of the proper implementation of both this License


Agreement and the Petroleum Agreement, the LICENSEE shall establish


an Advisory Committee which, among others, shall have the rights and


duties as set forth in the Petroleum Agreement.


(c) The Advisory Committee shall meet at least twice each Fiscal Year and


whenever required by each of the Parties composing the LICENSEE.


Operator shall give at least fifteen (15) days prior written notice to


AKBN of each Advisory Committee meeting, which notice shall include


the proposed agenda and supporting materials as distributed to the


Advisory Committee. At its own cost and decision, but however giving


LICENSEE ten (10) days prior written notice, AKBN may attend, but


shall not be entitled to vote, at the Advisory Committee meetings.


7.2. Annual Program and Budget.


(a) No later than sixty (60) days after the Effective Date of this License


Agreement and, thereafter, no later than sixty (60) days before the


beginning of every Fiscal Year, or according to such other schedules as


may be agreed upon by AKBN and LICENSEE, LICENSEE will prepare


and submit to AKBN a proposed Annual Program and Budget providing


the Petroleum Operations to be carried out during the succeeding Fiscal


Year. Unless otherwise provided herein LICENSEE shall only conduct


Petroleum Operations in accordance with the approved Annual Programs


and Budgets pursuant to this License Agreement. Annual Programs and


related Budgets shall be prepared in accordance with good international


oilfield practice.


(b) A proposed Annual Program shall contain, but will not be limited to:


(i) the Petroleum Operations and the related Budget LICENSEE aims


to carry out according to the phase in which LICENSEE happens


to be in that Fiscal Year, such as the conduct of Evaluation or


Development and Production Operations;


 License Agreement for the Development and Production of Petroleum in the Kucova Oilfield











(ii) an appraisal of the investments and activities for the subsequent


fiscal years and for the entire period of performance of the


Petroleum Operations in the Contract Area;


(iii) in the event LICENSEE has concluded the Evaluation Period and


has entered or is conducting the Development and Production


Period, the proposed Annual Program shall be in compliance with


the Development Plan, and shall also include:


an estimate of the capital and operating costs and activities


for the subsequent Fiscal Year that LICENSEE proposes to


perform in the Contract Area;


details and the extent of the Development Area relating to


the said Annual Program and Budget


a description of IOR/EOR Methods selected to be applied


throughout the Contract Area and/or other procedures to be


undertaken;


an appraisal of the Available Petroleum forecasted


production profile for the relevant Fiscal Year, broken


down by Calendar Quarters;


the average daily production planned to be achieved for


each quarter during the said Fiscal Year;


any other data that AKBN may reasonably require from


time to time;


a statement of environmental and safety principles to be


employed in the Petroleum Operations including plans for


environmental impact assessments as part of an


environmental management plan; and


Details of any Crude Oil sales contracts relating to


Production from the Development and Production Area


(c) In accordance with Sections 7.2(a) and 7.2(b), LICENSEE will submit


to AKBN a proposal for an Annual Program within the schedules


designed for each year for the Petroleum Operations during the


Evaluation Period and the Development and Production Period and


AKBN will inform LICENSEE of any amendment to be made to such


proposal and the reasons for it within thirty (30) days of its receipt.


Proposed amendments may only be made to the extent that the Annual


Program does not comply with the Evaluation Program or the


Development Plan as the case may be. If there is a disagreement about


the proposed amendments, then the dispute shall be submitted for


determination to an Expert which would be appointed according to the


proceeding described in ARTICLE 25.4. The Expert shall dispose of


sixty (60) days as of his nomination to come to a decision. Prior to the


 License Agreement for the Development and Production of Petroleum in the Kucova Oilfield








resolution of any such dispute, Operator may continue with existing


operations as previously approved.


If AKBN does not inform LICENSEE of any amendment within thirty


(30) days, such proposal shall be deemed to be approved. LICENSEE


shall take into consideration the amendments, if any, suggested by AKBN


and will reflect those amendments it deems necessary. Thereafter,


LICENSEE will once again forward its proposal to AKBN for approval,


which approval shall not be unreasonably withheld. If AKBN does not


inform LICENSEE of any additional amendments within fifteen (15) days


following such resubmission, such revised proposal shall be deemed to be


approved.


(d) The Parties are aware that the details of an approved Annual Program


may require modifications in light of the circumstances and nothing


herein will limit LICENSEE'S right to make such modifications (with the


prior approval of AKBN, which shall not be unreasonably withheld or


delayed) it deems necessary with the condition that such modifications


should not change the general objective of the approved Annual Program


and Budget, but also providing that nothing herein may limit the right of


the LICENSEE to take actions it deems necessary in the event of


emergencies to protect the safety and welfare of individuals and the


economic viability of the Project. If: (i) Annual Program modifications


have been approved by AKBN; or (ii) there are differences between


budgeted and actual revenues, costs and expenses in implementing the


Annual Program approved by the AKBN, then AKBN approval is not


required for any consequential modifications to the Budget.


7.3. Evaluation Period.


(a) Pursuant to ARTICLE 6, Sections 6.1(c)(i) and this ARTICLE 7, Section


7.1, 7.2 and 7.3(b), LICENSEE will conduct the Evaluation Operations


within or in respect with the Contract Area in compliance with the


generally accepted practices of the international petroleum industry.


(b) The Evaluation Period commences on the Effective Date and shall last


for a period of up to twenty-four (24) months. However, upon written


request of the LICENSEE that a six-month extension is required to


complete the evaluation of results or activities conducted in the Contract


Area, AKBN may approve, which approval will not be unreasonably


withheld or delayed, that the Evaluation Period be extended for an


additional six-month period. Such a written request must be delivered to


AKBN at least forty five (45) days prior to the Evaluation Period


expiration.











25


 License Agreement for the Development and Production of Petroleum in the Kucova Oilfield








(c) During the Evaluation Period the LICENSEE shall carry out the


Evaluation Program as described and detailed in the Annex B, providing


however that if, at the expiration of twenty four months following the


Effective Date or upon termination of this License Agreement, whichever


first occurs, LICENSEE has failed to carry out in accordance with this


License Agreement, in whole or in part, the minimum capital expenditure


stated in Annex B then LICENSEE shall pay to AKBN and amount equal


to the non fulfilled part of the minimum capital expenditure defined in


the Petroleum Agreement according to the Minimum Work Program


stated in Annex B.


(d) If LICENSEE cancels and surrenders this License Agreement during a


Fiscal Year of the Development and Production Period to which an


approved Annual Program and Budget applies, LICENSEE shall pay to


AKBN the amount of any unexpended capital expenditures contemplated


under the Annual Program and Budget for that Fiscal Year.


(e) Payments under the ARTICLE 7.3(c) shall only be due in respect of any


unfulfilled commitment related to the Evaluation Program. Payments


under the ARTICLE 7.3(d) shall only be due in respect of any


unexpended capital expenditures contemplated under the Annual


Program and Budget. In the event of delay in the payment of the


indemnity to be paid to AKBN in application of ARTICLE 7.3(c) or


ARTICLE 7.3(d), the amount owing in this respect will bear interest


calculated from the final date on which the indemnities should have been


paid, and up to the time on which the payment is done by the LICENSEE,


at the annual discount rate of the London Inter Bank Offered Rate


(LIBOR) plus one percent.


7.4. Petroleum Operations Following Evaluation Period.


Within sixty (60) days following the completion of the Evaluation Period or any


extension thereof, the LICENSEE shall either:


(a) inform AKBN that the Evaluation Operations were successful and


provide AKBN with a proposed Development Plan, which may also be an


amendment to an existing Development Plan (which shall include therein


the lands within the Contract Area pertinent to such Development Plan,


the proposed Measurement Point as well as the proposed Delivery Point,


the respective Production costs, the Petroleum production levels and


other data as may be requested by AKBN in compliance with the


generally accepted practices of the international petroleum industry) in


connection with IOR/EOR Methods selected for the development of the


Contract Area and meeting the requirements of ARTICLE 8, Section 8.1.


During the period following the completion of the Evaluation Program


 License Agreement for the Development and Production of Petroleum in the Kucova Oilfield





and prior to the approval of a Development Plan, LICENSEE may


continue the Petroleum Operations which were being conducted during


the Evaluation Program, and this License Agreement shall continue to be


in effect as though the Evaluation Period had been extended; or


(b) inform AKBN that the Evaluation Operations were not successful, but,


nevertheless, LICENSEE wishes to continue the evaluate the Contract


Area using new ideas, as may be stipulated in the Petroleum Agreement,


or LICENSEE may ask AKBN for another extension, in addition to that


set forth in Section 7.3(b), which in any case will not be longer than six


(6) months. At the end of such extension LICENSEE may proceed in


accordance with Section 7.4(a) or 7.4(d); or


(c) inform AKBN that the Evaluation Operations, concluded in conformity


with the terms and conditions of this License Agreement, did not yield


commercial and profitable results for a full scale implementation of


IOR/EOR Methods throughout the Contract Area and LICENSEE is of


the opinion that a change of fiscal system can make the Project


commercially viable, in which case LICENSEE and AKBN (once the


latter is convinced of such a conclusion), shall endeavor to make the


Project commercially viable on the basis of Decree No. 782, dated 22


February 1994, ARTICLE 1(3), provided that, in the event a decision by


the Council of Ministers pursuant to such provision (and acceptable to


LICENSEE) is not issued within six (6) months following completion of


the Evaluation Period, LICENSEE shall have the right to relinquish the


Contract Area at any time thereafter, subject to ARTICLE 5 and upon


seven (7) days notice to AKBN, or


(d) Subject to the requirements of ARTICLE 5, relinquish the Contract Area.


If LICENSEE so relinquishes the Contract Area, all wells, operations and


assets (moveable and immoveable) will be returned to AKBN and


LICENSEE shall be released from all liabilities associated with this


Agreement, except for unfulfilled obligations accrued prior to the


relinquishment.









































27


 License Agreement for the Development and Production of Petroleum in the Kucova Oilfield











ARTICLE 8


PETROLEUM OPERATIONS AFTER APPROVAL OF THE


DEVELOPMENT PLAN





8.1. Development Plan.


(a) Subject to ARTICLE 7, Section 7.4(a), LICENSEE will be entitled to


undertake the Development of the Contract Area and extract Petroleum


from a Reservoir pursuant to the Development Plan with the objective of


achieving extraction of Petroleum at Maximum Efficient Recovery. The


Development Plan shall be prepared on the basis of sound engineering


and economic principles in accordance with generally accepted


international petroleum industry practice.


The Development Plan shall contain but not limited to:





(i) details and the area extent of the proposed Development and


Production Area;





(ii) proposals relating to the spacing, drilling and completion of wells,


the production and storage installations, and transportation and


delivery facilities required for the production, storage and


transportation of Petroleum;





(iii) proposals relating to necessary infrastructure investments;


(iv) a production forecast and an estimate of the investment and





expenses involved;


(v) an estimate of the time required to complete each phase of the


Development Plan;





(vi) the proposed Delivery Point and Measurement Point.


(b) (i) AKBN may, within sixty (60) days following receipt of the





proposed Development Plan submitted by LICENSEE pursuant to


ARTICLE 7, Section 7.4, request LICENSEE of any amendment it


deems necessary to the Development Plan and the reasons


therefore. If AKBN fails to inform LICENSEE of any amendment


within such forty-five (45) days, the proposed Development Plan


shall be deemed to be approved. The LICENSEE shall consider


the amendments (if any) suggested by AKBN and incorporate


those amendments it deems necessary.














28


 License Agreement for the Development and Production of Petroleum in the Kucova Oilfield








(ii) In the event AKBN requests any amendment to the proposed


Development Plan then LICENSEE and AKBN shall meet within


fifteen (15) days of receipt by LICENSEE of AKBN’s written


notifications as to these requested changes to try in good faith to


reach an agreement on the Development Plan. Revision to the


Development Plan, if agreed, within a further period of sixty (60)


days, should be incorporated in a revised plan which shall then be


deemed approved by AKBN.


(iii) If no agreement is reached, pursuant to article 25, Section 25.4,


the dispute shall be submitted for determination to an Expert


which would be appointed according to the proceeding described


in ARTICLE 25.4. The Expert shall dispose of sixty (60) days as


of his nomination to come to a decision.


(c) If LICENSEE desires to materially amend the Development Plan as


approved by AKBN, it will provide AKBN with the proposed


amendments pursuant to the procedures set forth in Section 8.1(b).


8.2. Performance of Petroleum Operations.


During the Development and Production Period the Petroleum Operations will


be performed according to the Annual Programs in conformity with the


Development Plan as set forth in ARTICLE 7, Section 7.2(a).


8.3. The Development and Production Period.


(a) Subject to ARTICLE 4, Section 4.1 and Sections 8.3(b) and 8.3(c), the


Development and Production Period will commence upon approval by


AKBN of the Development Plan and will end on the 25th anniversary of


the Effective Date.


(b) (i) Subject to ARTICLE 5, by providing notification ninety (90) days


in advance, LICENSEE may relinquish all or part of the Contract


Area.


(ii) Following termination of the Development and Production Period


or relinquishing a part of the Contract Area, such portion of the


Contract Area will cease to exist as part of the Contract Area.


(iii) LICENSEE will not be bound to continue Petroleum Operations


with respect to any such portion of the Contract Area which has


ceased to exist as part of the Contract Area.














29


 License Agreement for the Development and Production of Petroleum in the Kucova Oilfield





(c) So long as LICENSEE has not breached any material clause of this


License Agreement, upon the request of LICENSEE and approval of


AKBN (which approval will not be unreasonably withheld or delayed)


the Development and Production Period will be extended for successive


periods of five (5) years each, for as long as any portion of the Contract


Area continues to produce Petroleum in commercial quantities. Every


request for extension should be made to AKBN in writing no later than


one hundred and eighty (180) days prior to the termination of the


Development and Production Period (as it may have previously been


extended). Failure of AKBN to respond to any such request for extension


within sixty (60) days following the date of receipt of such request shall


be deemed to be approval of the requested extension.


8.4 New Evaluation Area(s)


(a) During the implementation of the Development Plan, but no later than


five (5) years from the date of the Development Plan approval,


LICENSEE may further propose and design new evaluation areas within


the Contract Area but outside of any existing Development and


Production Area for a new Evaluation Period. Upon AKBN approval,


which approval will not be unreasonably withheld or delayed, such new


Evaluation Period will have an initial term of twelve (12) months from


commencement, and shall involve a relevant evaluation program (the


"New Evaluation Program") involving a minimum work program and


capital expenditure commitments and an Evaluation area (the "New


Evaluation Area") at LICENSEE'S assessment. The New Evaluation


Program shall be appended to Annex B and the New Evaluation Area


shall be appended to Annex A. The New Evaluation Area may include


the lands within the Contract Area where the new Evaluation and


subsequent development and production activities may occur. After


completion of each new Evaluation Period, an addendum of the


Development Plan must be submitted or the New Evaluation Area


relinquished.


(b) During the new Evaluation Period the LICENSEE shall carry out the


minimum work program and capital expenditure commitments as


described and detailed in the New Evaluation Program and appended to


Annex B, providing however that if, at the expiration of the new


Evaluation Period, or any extension thereof, or upon termination of this


License Agreement, whichever first occurs, LICENSEE has failed to


carry out in accordance with this License Agreement, in whole or in part,


the minimum work program and capital expenditure commitments as


appended to Annex B, then LICENSEE shall pay to AKBN and amount


equal to the non fulfilled part of the minimum capital expenditure


commitment as appended to Annex B.











30


 License Agreement for the Development and Production of Petroleum in the Kucova Oilfield








ARTICLE 9


LICENSEE'S RIGHTS AND OBLIGATIONS


9.1. Conduct of Operations.


LICENSEE shall conduct Petroleum Operations diligently and in accordance


with generally accepted practices of the international petroleum industry.


LICENSEE shall ensure that all equipment and facilities used by LICENSEE


comply with generally accepted engineering rules and standards, are of proper


and accepted construction, and are maintained in proper working order.


LICENSEE shall take all reasonable measures within its control according to


generally accepted standards in the international petroleum industry to prevent


the loss or waste of Petroleum above or under the ground during the


performance of Petroleum Operations.


During the conduct of the Petroleum Operations, LICENSEE will undertake, in


particular, all reasonable measures in conformity with such standards in order to


prevent:


(a) loss or waste of Petroleum;


(b) damage to Petroleum and water-bearing formations close to or adjacent


to the Contract Area; and


(c) non-intentional introduction of water into Petroleum Reservoirs.


9.2. Environment and Safety.


(a) LICENSEE shall conduct Petroleum Operations in a safe and proper


manner in accordance with Albanian Law and generally accepted


international petroleum industry practice.


(b) In the event of an accident or other emergency, LICENSEE shall take all


immediate steps to bring the emergency situation under control and


protect against loss of life and loss of or damage to property and prevent


harm to natural resources and the general environment.


(c) In the event AKBN reasonably determines that any works or installations


erected by LICENSEE or any Petroleum Operations conducted by


LICENSEE endanger or may endanger persons or third party property or


cause pollution or harm the environment to an unacceptable degree,


AKBN may require LICENSEE to take remedial measures within a


reasonable period and to repair any damage to the environment.


 License Agreement for the Development and Production of Petroleum in the Kucova Oilfield











(d) In the event AKBN deems it necessary, it may also require LICENSEE to


discontinue Petroleum Operations in whole or in part until LICENSEE


has taken such remedial measures or has repaired any damage.


(e) In the event that LICENSEE fails to take the remedial measures required


by AKBN within the time period established therefore, AKBN may carry


out such remedial measures for LICENSEE’S account.


(f) LICENSEE shall as soon as reasonably possible after the Effective Date


submit for the approval from the Environmental Authority a report on the


environmental baseline status of the Project Area as at the Effective


Date. With each expansion of the Project Area, LICENSEE shall submit


for the approval from the Environmental Authority a report on the


environmental baseline status of the expanded portion of the Project Area


as at the relevant date. LICENSEE shall not then be liable for any


environmental damages incurred prior to the effective date of the


approved environmental baseline study, and AKBN shall indemnify and


hold harmless LICENSEE from any third-party claims with respect


thereto.


9.3. Abandonment.


(a) At the election of AKBN, any portion or all of the equipment and


immovable (including the wells) in the Contract Area, which are


possessed by the LICENSEE and are exclusively used to conduct the


Petroleum Operations, will become the property of AKBN on the


termination or relinquishment of the Petroleum Operations with respect


to the Contract Area or cancellation of this License Agreement in


accordance with ARTICLE 24, Section 24.1. The Ministry and AKBN


will be held responsible for all obligations arising following the date of


their receipt of such property and will protect, indemnify and hold the


LICENSEE harmless against costs and claims based on such obligations.


(b) Subject to ARTICLE 5, and notwithstanding Section 9.3(a), all


equipment and facilities (including wells) used exclusively in the


Petroleum Operations will be Abandoned, upon AKBN instruction and


approval, in conformity with the generally accepted practices of the


international petroleum industry. However, nothing contained in this


License Agreement will oblige the LICENSEE to Abandon the unused


equipment or facilities in the Petroleum Operations, and AKBN and the


Ministry will protect, indemnify and hold the LICENSEE harmless


against costs and claims based on such obligations.














32


 License Agreement for the Development and Production of Petroleum in the Kucova Oilfield








(c) The Abandonment Costs will be included in the Petroleum Costs. In


order to enable the LICENSEE to recover the Abandonment Costs, five


years prior to the date set by the LICENSEE to Abandon all the


Petroleum Operations in the Contract Area (or at such earlier times as


may be reasonable to obtain such a recovery), the Abandonment Costs


estimated by the LICENSEE and the time of their recovery in compliance


with the following paragraph of this Section 9.3(c) shall be included in an


Abandonment Plan and shall be submitted to AKBN for approval. AKBN


will immediately consider the estimation of the LICENSEE and will not


unreasonably delay or withhold its approval. If, after ninety (90) days of


receipt of the LICENSEE'S estimate, AKBN has failed to forward


comments to the LICENSEE in writing, the estimated Abandonment


Costs proposed by the LICENSEE will be deemed to have been approved


by AKBN.


Upon approval of the estimate by AKBN, the estimated Abandonment


Costs will be included in Petroleum Costs and recovered in accordance


with ARTICLE 10 and at the time provided in the estimate. However,


amounts equal to the estimated Abandonment Costs will be deposited in


an interest bearing escrow account in a mutually accepted international


financial institution in London, England, or in such other location as


AKBN and LICENSEE may agree. Once the Abandonment Costs are


covered, LICENSEE will withdraw its Abandonment Costs from the


escrow account. Upon the termination of the Abandonment, any surplus


funds in the escrow account after payment of the Abandonment Costs


shall be released to LICENSEE and taxed under ARTICLE 14.


(d) In the event LICENSEE is comprised of more than one party, such


parties may provide in the Petroleum Agreement for an allocation


between or among them, by way of indemnity or otherwise, of


LICENSEE’S responsibility or liability for Abandonment Costs or claims


and losses related to abandonment activities, including without limitation


with respect to rehabilitation of the land in the immediate vicinity of an


abandoned well. In the event of such allocation, each of such parties will


be individually and jointly responsible for such obligations of


LICENSEE only to the extent set forth in the Petroleum Agreement.


(e) Notwithstanding Section 9.3(c), in any other unpredictable case of


voluntary or obligatory relinquishment or cancellation in accordance with


ARTICLE 5 or ARTICLE 24 of this License Agreement and if there is


not any or enough such funds as predicted under Section 9.3(c)


LICENSEE shall afford all the necessary expenditures from its own


sources and be held responsible in order to abandon Petroleum


Operations in accordance with Sections 9.3(a) and (b).


 License Agreement for the Development and Production of Petroleum in the Kucova Oilfield








ARTICLE 10


ALLOCATION OF AVAILABLE PETROLEUM





10.1. Available Petroleum.


All Petroleum produced and saved, after deducting Deemed Production, and not


used in Petroleum Operations or flared or injected (“Available Petroleum”) will


be delivered by LICENSEE at the Delivery Point.


LICENSEE shall have the right to use free of charge Petroleum produced from


the Contract Area to the extent it considers necessary for Petroleum Operations


under this License Agreement.


Subject to Section 10.3(b)(i), all Available Petroleum may be taken by


LICENSEE, and the title shall pass to LICENSEE and allocated as set forth in


the Petroleum Agreement, at the Delivery Point.


10.2. Cost Recovery. Non recoverable Costs


(a) LICENSEE shall recover all Petroleum Costs under this License


Agreement out of one hundred (100) per cent of the Available Petroleum


after deducting the Albpetrol Share (hereinafter referred to as “Cost


Recovery Petroleum”).


(b) To the extent that, in a Fiscal Year, costs and expenses recoverable


exceed the value of the Cost Recovery Petroleum for such Fiscal Year,


the excess shall be carried forward for recovery in the succeeding Fiscal


Year or Fiscal Years until fully recovered, but will in no case be carried


forward after the termination of this License Agreement.


(c) Costs and expenditures which are incurred as a result of Willful Default


of LICENSEE or Operator shall not be considered as Petroleum Costs


and shall not be recoverable pursuant to this Section 10.2.


(d) The following costs and expenses shall not be recoverable under this


License Agreement:


- cost incurred prior to the Effective Date and related to the performance





of the minimum work commitment, unless approved by AKBN; and


- costs inclined beyond the Delivery Point; and


- donations and contributions, unless approved by AKBN; and


- fines or penalties duly levied by an agency of the government of


Albania and paid by LICENSEE.


- interest expenses.











14


 License Agreement for the Development and Production of Petroleum in the Kucova Oilfield








10.3. Profit.





(a) The difference, if any, in any Fiscal Year between (i) the Available


Petroleum after deducting the Albpetrol Share, and (ii) the Cost Recovery


Petroleum taken by LICENSEE pursuant to Section 10.2(a), shall be the


“Profit” and LICENSEE shall be liable to taxation as mentioned in


ARTICLE 14, Section 14.1.





(b) (i) The portion of Available Petroleum allocated to the Petroleum


Profit Tax in conformity with ARTICLE 14 shall be delivered to


AKBN by LICENSEE at the Delivery Point. However, AKBN


may require to LICENSEE, by written notice at least ninety (90)


days prior to the commencement of each Fiscal Year or at any


other time in accordance with ARTICLE 14, Section 14.2(b), the


portion of the Petroleum Profit Tax to be paid in cash during such


year. In such a case the balance of the entitlements not delivered in


kind to AKBN shall be paid in cash by LICENSEE at the value as


per Section 10.5.


(ii) All costs, risk and obligations incurred in respect of the portion of


Available Petroleum allocated to the Petroleum Profit Tax and


delivered to AKBN will pass to AKBN at the Delivery Point and


AKBN and the Ministry will protect, indemnify and hold


LICENSEE harmless against all such costs, risk and obligation.


Prior to such delivery, all costs, risk and obligations regarding


such portion of the Available Petroleum will be borne by the


LICENSEE.





(iii) The portion of Available Petroleum to be allocated to the


Petroleum Profit Tax shall be estimated for each Calendar Quarter


and delivered in accordance with such estimates. Development


Plans established under this License Agreement, and the


LICENSEE’S proposals thereof, shall include detailed delivery


procedures appropriate to the circumstances, including the


10.4. Export. consequences of AKBN’s failure to accept delivery.





Subject to Section 10.3(b)(i), LICENSEE may freely use, sell, export, realize or


otherwise dispose of all Available Petroleum and keep the income accrued there


from.





10.5. Valuation of Petroleum.


 License Agreement for the Development and Production of Petroleum in the Kucova Oilfield





(a) Petroleum from the Contract Area will be valued in USD at the weighted


average of the sale prices pursuant to Section 10.5(b) (where sales are


made to a third party) and/or base prices determined pursuant to Section


10.5(c) (for non-third party sales).





(b) (i) The value of Petroleum for sales to third parties by a Party


constituting LICENSEE will be determined at the price realized


from F.O.B. point of sales by that Party for such Petroleum.


(ii) Sales to third parties referred to in Section 10.5(b)(i) will mean:





(aa) in respect of sales by a Party concerned other than


Albpetrol, sales to buyers who at the time of the sale are not


Affiliates of the Party concerned or persons with whom the


seller is not related in any manner which affects or is likely


to affect the price paid, and the price of sale converted into


money is the only consideration for the said sale;


(bb) regarding sales by Albpetrol, sales to buyers who at the





time of the sale are not Affiliates of Albpetrol or persons


with whom the seller is not related in any manner which


affects or is likely to affect the price paid, and the price of


sale converted into money is the only consideration for the


said sale.





(c) (i) The base price of Petroleum used or otherwise possessed, besides


sales to third parties, will be determined by AKBN and


LICENSEE. AKBN and LICENSEE shall mutually select, as soon


as possible, at least one reference Petroleum with similar gravity


( and quality to the Petroleum produced under this License





Agreement, after taking account of quality and freight differences.


Every petroleum chosen as a petroleum reference, shall be one that


is sold in considerable amounts in arm’s length transactions, if


suitable and capable of delivery into markets into which Petroleum


produced under this License Agreement is also suitable and


capable of delivery and has a spot assessment published weekly in


Platt’s Oilgram Price Report.


(ii) The base price for each sale of Petroleum from the Contract Area


shall be determined as the arithmetic average of the market


estimation published in Platt’s Oilgram Price Report for each


l petroleum reference for the week prior to and for the week after


the date on the voucher of quantity of Petroleum sold, plus or


minus the respective quality and freight differentials between the














36


 License Agreement for the Development and Production of Petroleum in the Kucova Oilfield





reference Petroleum and Petroleum produced under this License


Agreement.


(iii) In the event AKBN and LICENSEE are unable to establish a base


price in accordance with the procedures of Sections 10.5(c)(i) and


10.5(c)(ii), the base price shall be an average of all of the weekly


Spot F.O.B. prices for OPEC crude oil contained in the Feeder


Crude Table published on page 9 of Platt’s Oilgram Price Report


every Monday. If Platt’s Oilgram Price Report is not published in


a week when market estimation is required, then market estimation


of the next succeeding issue will be applied.











































































































37


 License Agreement for the Development end Production of Petroleum in the Kucova Oilfield














ARTICLE 11


ASSOCIATED GAS





11.1. Reinjection and Use of Associated Gas.





LICENSEE may freely reinject Associated Gas into the subsurface structure of


the Contract Area or use it for other Petroleum Operations under this License


Agreement.


11.2. Flaring.





The LICENSEE may flare the Associated Gas which is not required for use in


Petroleum Operations under Section 11.2 (i) if, in LICENSEE’S opinion, such


Associated Gas production is not economical and commercially viable or (ii)


when it is in accordance with good Oilfield practice. However, if AKBN


believes that such Associated Gas should be utilized, AKBN may take this


Associated Gas free of charge and use it if the costs, risk and expenses for the


installation of equipment, as required in order to deliver Associated Gas to


AKBN, are borne by AKBN, and such delivery causes neither an interruption of


Petroleum Operations nor a negative effect on LICENSEE'S economic benefits.







































































38





L


 License Agreement for the Development and Production of Petroleum in the Kucova Oilfield











ARTICLE 12


CUSTOMS EXEMPTION








According to the Law No. 7811 dated 12 April 1994 “On the Approval with


Amendments of the Decree No. 782 dated 22.2.1994 “On the Fiscal System in


the Petroleum Sector (Exploration-Production)”, as amended by Law No. 8345


dated 13 May 1998 “For a Change to Law No.7811, dated 12.04.94 ‘On the


Approval with Amendments of the Decree No. 782 dated 22.02.94 “On the


Fiscal System in the Petroleum Sector (Exploration-Production)”, the


LICENSEE and its subcontractors engaged in carrying out Petroleum


Operations under this License Agreement shall be permitted to import, and shall


be exempt (with the exception of normal port and warehouse charges of general


application in Albania for actual services rendered to LICENSEE) from Custom


Duties as for the equipments, machineries, materials, etc, to be used in carrying


out Petroleum Operations under this License Agreement.


The same exemption is valid even for the articles of personal use of the foreign


employees of the contractor and its subcontractors, having relations with the


Petroleum Operations.


Nevertheless the LICENSEE and its sub-contractors shall give priority to the


goods and materials produced in Albania if these goods and materials are being


offered under equally favorable conditions regarding the quality, price and


availability, and in the quantities required.

































































39


 License Agreement for the Development and Production of Petroleum in,he Kucova Oilfield











ARTICLE 13


SUB-CONTRACTORS








13.1. The right to employ Sub-Contractors.


LICENSEE may perform the Petroleum Operations itself or by employing sub¬


contractors. LICENSEE shall not be relieved of any obligation under this


License Agreement and Albanian Law by reason of employing sub-contractors.


13.2. Priority to Local Sub-Contractors.


In order to ensure the services required in the Petroleum Operations LICENSEE


can employ sub-contractors, but the LICENSEE shall give priority to services


performed by Albanian sub-contractors if such services are offered under


equally favorable conditions regarding the quality, price and availability they


may be offered by foreign sub-contractors.


13.3. Taxes and Duties.


LICENSEE'S foreign contractors will not be responsible for Taxes and Duties to


the extent that they apply, directly or indirectly, to the Petroleum Operations


LICENSEE'S Albanian sub-contractors will not be discriminated against with


regard to Taxes and Duties to the extent that they apply, directly or indirectly to


the Petroleum Operations.
























































40


 License Agreement for the Development and Production of Petroleum In the Kucova Oilfield














ARTICLE 14


TAX ON PROFIT





14.1. Obligation to Pay Tax.


LICENSEE shall be liable to tax on Profit in conformity with Law No.7811,


date 12.04.1994 “On approval of decree No.782, date 22.2.1994 “On the fiscal


system in the hydrocarbons sector (Exploration-Production)”.


14.2. Payment.


(a) Pursuant to ARTICLE 10, Section 10.3(b)(i) and Section 14.2(b)


LICENSEE shall pay the Petroleum Profit Tax in cash or in kind. AKBN


shall annually notify LICENSEE in writing, no later than October 1st of


each Fiscal Year, whether LICENSEE shall pay Albanian tax on profit


for the immediately following Fiscal Year in cash or in kind. Should


AKBN fail to notify LICENSEE as required by, and within the term


specified in this Section 14.2, LICENSEE will make the payments for the


relevant period in cash.


(b) LICENSEE shall pay tax on Profit for each Fiscal Year, whether in cash


or in kind, as determined under Section 14.2(a), in accordance with the


procedure set forth in Section 10.3(b)(iii).


(c) When required to make payments in kind, and when LICENSEE is


comprised of more than one party, the aforesaid parties will each pay its


tax on Profit in kind to AKBN at the Measurement Point, and AKBN will


transfer this payment to the appropriate Albanian authorities. AKBN will


provide LICENSEE with official documents for the full payment of the


tax on Profit LICENSEE has paid on the basis of the Law mentioned by


Section 14.1.


(d) At the beginning of each Calendar Quarter, the LICENSEE shall prepare


and furnish to AKBN a production forecast setting out the total quantity


of Available Petroleum that is estimated can be produced from the


Contract Area in each of the next four (4) Calendar Quarters based on the


production rate designed to maximize the ultimate recovery of Petroleum


(Maximum Efficient Recovery) from the Contract Area in accordance


with practices generally accepted in the international Petroleum industry.


LICENSEE shall give due consideration to any comments or


recommendations made by AKBN representatives in respect of such


forecast. LICENSEE shall endeavor to produce each Calendar Quarter


the forecasted quantity.


 License Agreement for the Development and Production of Petroleum in the Kucova Oilfield








(e) For purposes of calculating the monetary value of the amount of


Petroleum delivered to AKBN for payment of CONTRACTORS’ tax on


Profit and the amount of tax on Profit payments in cash, as the case may


be, for any Calendar Quarter, the value of Crude Oil shall be the


weighted average price for said Calendar Quarter determined in


accordance with ARTICLE 10.5.


(d) If LICENSEE is comprised of more than one party, the preceding clauses


of this ARTICLE 14 and the clauses of ARTICLE 10 will apply


separately with respect to each such party and its share of Available


Petroleum as agreed between them and as made known to AKBN, and


despite anything contained elsewhere in this License Agreement,


according to this License Agreement each of such parties will not be


individually responsible for LICENSEE'S entire obligations under this


ARTICLE 14, but will be responsible for such obligations only to the


extent agreed between such parties and made known to AKBN. AKBN


shall be entitled to rely upon the most recent notification of any allocation


of such responsibility between parties comprising LICENSEE,


notwithstanding any dispute between such parties with respect to such


allocation. Any dispute between parties comprising LICENSEE with


respect to any such allocation of responsibility shall not relieve


LICENSEE or the parties of which it is comprised of the obligation to


comply with the requirements of this ARTICLE 14, nor shall the


existence of any such dispute defer LICENSEE’S obligation to make any


payments required under this ARTICLE 14.




































































42


 License Agreement for the Development and Production of Petroleum in the Kucova Oilfield














ARTICLE 15


BOOKS OF ACCOUNT, ACCOUNTING, AUDIT


15.1. Accounting Procedure.


(a) At the Effective Date Parties must have determined in good faith and


agreed on an accounting procedure which will be in conformity with


Albanian Law, Law Nr. 7661, dated January 19, 1993 “On Accounting”


as amended time after time, this License Agreement and the standards of


the international petroleum industry (the “Accounting Procedure”), and


in conformity with Section 6.1(c)(iii) and it will become a constituent


part of (and will be appended to) the Petroleum Agreement.


(b) LICENSEE shall maintain at its business offices in Albania books of


account in accordance with the Law on Accounting, Accounting


Procedure, accounting practices required under Albanian law and


accounting practices generally used in the international petroleum


industry and such other books and records as may be necessary to show


the work performed under this License Agreement, including the amount


of all Available Petroleum. Petroleum Operations in the Contract Area


will be calculated in conformity with the Accounting Procedure. The


clauses of this License Agreement will nevertheless predominate in case


of a conflict or inconsistency with the Accounting Procedure.


(c) For all purposes of this License Agreement, the calculating operations


will be translated into both the U.S. Dollar and the Albanian Leke.


LICENSEE will be obliged to keep in Albania all of the accounting


records which reflect all Petroleum Costs as well as the income arising


from the sale or other disposition of Petroleum, in conformity with the


practice of the international petroleum industry. If necessary, LICENSEE


will keep separate accounting records in conformity with Albanian Law.


Every disagreement on accounting submitted to arbitration pursuant to


ARTICLE 25 will be considered in conformity with the practices of the


international petroleum industry.


15.2. Records Provided to AKBN.


No less than forty five (45) days following the end of each Six Month Period,


LICENSEE will provide to AKBN copies of the accounting records reflecting


Petroleum Costs that LICENSEE incurred in the course of such Six Month


Period. The accounting records provided by LICENSEE will be sufficiently


detailed so as to permit AKBN to defme the regularity of Petroleum Costs


 License Agreement for the Development end Production of Petroleum in the Kucove Oilfield








incurred. In addition to the foregoing, LICENSEE will provide to AKBN


copies of records of main Petroleum Costs as they are incurred.


15.3. AKBN Audit Right.


At the sole expense and cost of AKBN, AKBN shall have the right to inspect


and audit the LICENSEE'S books of account and accounting records with regard


to the Petroleum Operations, but no more than once in a Fiscal Year, except as


otherwise agreed with Operator. Such audit right will cease three (3) years after


closure of such Fiscal Year. Any exception to the LICENSEE'S accounting


records shall be communicated to LICENSEE in written form within three (3)


years from the date on which LICENSEE hands over his accounting records for


such Fiscal Year, otherwise such accounting records shall be deemed to be


correct and, thereafter, may not be subject to objection.


15.4. Declaration of Income and Losses.


LICENSEE will provide AKBN with a declaration on income and losses in a


Fiscal Year no later than ninety (90) days following the end of such Fiscal Year


in order to reveal its net Profit or loss with respect to Petroleum Operations for


that Fiscal Year.








0






























































44


 License Agreement for the Development end Production of Petroleum in the Kucove Oilfield








ARTICLE 16


RECORDS, REPORTS, INSPECTION AND CONFIDENTIALITY


16.1. Records and Reports.


(a) LICENSEE will keep in Albania accurate books and records in order to


reflect Petroleum Operations in a way and in conformity with the practice


of the international petroleum industry.


(b) LICENSEE shall record data on the quantities of Petroleum, water and


sand produced every month from the Contract Area. Such data will be


sent to AKBN, both in hard copy and electronic format, no later than


thirty (30) days after the end of the month concerned. Daily and weekly


statistics and reports on the production and extraction from the Contract


Area shall be available at any reasonable time for examination by AKBN.


(d) LICENSEE will provide AKBN with data and information on Petroleum


Operations in a way that is in conformity with the practice of the


international petroleum industry, and any other data and information as


reasonably requested by AKBN.


16.2. Samples.


LICENSEE will reserve and retain every sample and sludge obtained from the


drilling of a well in the manner, place and time determined by AKBN according


to the regulations in power. All samples obtained by LICENSEE for its own


purposes will be considered subject to inspection by AKBN at any time that


AKBN requests, within the official working time.


16.3. Sub-contractors.


LICENSEE will inform AKBN of the name and address of every sub-contractor


and the identity of its authorized representative, and will provide AKBN with a


copy of the contract within thirty (30) days after this sub-contractor has been


employed by LICENSEE. In its reports on the basis of this ARTICLE 16


LICENSEE will include reports on the work of all sub-contractors. In


conformity with Section 16.7 below, AKBN will keep the confidentiality of all


contracts and information related to them, which the LICENSEE will provide


according to this Section 16.3.


16.4. Export of Data.


Copies of the technical and periodical data can be exported only with the prior


written permission of AKBN.


 License Agreement for the Development and Production of Petroleum in the Kucova Oilfield











16.5. Access to the Contract Area.


LICENSEE will enable AKBN to be fully present in the Contract Area at any


time with the right to observe the Petroleum Operations under way, and to


inspect all the assets, records and data to be retained by the LICENSEE. The


representatives and the employees of AKBN should abide by the regulations on


the LICENSEE'S safety standards when visiting the Petroleum Operations, and


they will reasonably schedule such visits with LICENSEE so as not to hinder or


interfere with the Petroleum Operations. LICENSEE will place at the disposal


of such representatives of AKBN all the equipment, facilities, computers and


instruments which are already installed and are necessary in order to accomplish


their task of inspection and technical, economic and financial control.


16.6. Copy of the Data.


LICENSEE will provide AKBN with a copy, both in hard and electronic format,


of all the data (including, but not limited to, the geological and geophysical


reports, seismic recording tapes, record books and documents of wells, reports


of development and production, any other and all information and interpretation


of such data and all the other information or other work products belonging to


LICENSEE or in possession of the LICENSEE'S Affiliates). LICENSEE will


provide AKBN with extra copies of the above data and information when


requested by AKBN at the latter's expenses.


16.7. Confidentiality.


The terms and conditions in this License Agreement are strictly confidential.


During the term of this License Agreement and for five (5) years thereafter, the


LICENSEE will never and in no circumstance render public the terms and


conditions of this License Agreement or any data or information obtained in


compliance with this License Agreement to a third party without the prior


written approval of the AKBN, which approval will not be unreasonably


withheld. The above will not be applied:


(a) to the extent that a Party that constitutes the LICENSEE is required by


the laws, rules and regulations of a government or a government


department or agency or stock market which has jurisdiction over this


Party or its Affiliates, to disclose this information or data;


(b) to disclose to an Affiliate of a Party that constitutes the LICENSEE,


provided that such Affiliate shall agree that the clauses of this Section


16.7 are binding before such disclosure is made;














46


 License Agreement for the Development and Production of Petroleum in the Kucova Oilfield








(c) in case of a Party that constitutes the LICENSEE, concerning disclosure


to a financial institution, bank, audit, auditing company, legal adviser,


consultant or sub-contractor in the ordinary course of business of the


Parties, including financing purposes, as long as the said financial


institution, bank, audit, auditing company, legal adviser, consultant or


sub-contractor submits, in writing, in a similar way, to maintain such


information and data as confidential;


(d) to a bona fide prospective assignee of LICENSEE, on the condition that


the prospective assignee similarly undertakes in writing to keep


confidential the information and data disclosed;


(e) for purposes of enforcement of any provision of this License Agreement;


or


(f) in the case of AKBN, to disclosure of the data related only to parts of the


Contract Area which the LICENSEE has relinquished before such


disclosure.


A Party may require that any damage resulting from the violation of this Section


16.7 be determined by arbitration.


16.8. Inspection of Measuring Instruments.


During the Petroleum Operations, authorized representatives of AKBN will be


entitled to inspect the devices, machinery and instruments used for measurement


of the Petroleum. This inspection will be performed in a reasonable way so as


not to hinder the safety and efficiency of Petroleum Operations. LICENSEE will


offer the authorized representatives of AKBN reasonable assistance for the


purpose of conducting this inspection. These representatives should abide by the


LICENSEE'S safety rules and standards when visiting the Petroleum Operations,


and will reasonably schedule such visits with LICENSEE so as not to hinder the


operations. LICENSEE will offer such representatives all privileges and


facilities, within reason, accorded to its own employees in the field and will


provide them, free of charge, the use of reasonable office space and of


adequately furnished housing while they are in the field for the purpose of


facilitating the objectives of this Section 16.8.


16.9. Title to Data.


With the termination of this License Agreement, LICENSEE will hand over to


AKBN all original data. All such original data (including but not limited to


seismic, geophysics, geologic, gravimetric, magnetometric, logging, drilling,


production, construction, design, etc.) will be the property of the Albanian


Government.











47


 License Agreement for the Development and Production of Petroleum in the Kucova Oilfield














All intangible property in the possession of AKBN shall be provided to


LICENSEE free of charge.





































































































































































































48


 License Agreement for the Development and Production of Petroleum in the Kucova Oilfield











ARTICLE 17


TITLE TO AND SALE OF ASSETS


17.1 Reporting of Asset Acquisition.


The accounting book value of the assets acquired or created during each Fiscal


Year shall be communicated by LICENSEE to AKBN within ninety (90) days


after the end of such year.


17.2. Title to Assets.


Title to assets in possession of LICENSEE in connection with the Petroleum


Operations shall, by virtue of this License Agreement, be transferred to AKBN


at the time the costs of such fixed and movable assets have been fully recovered


as Petroleum Costs in accordance with ARTICLE 10, Section 10.2, or at the


time of termination or relinquishment of Petroleum Operations in accordance


with ARTICLE 9, Section 9.3(a), whichever first occurs, all such assets being in


good working order, normal wear and tear excepted. In any event, LICENSEE


retains the right to full and free use of the aforementioned assets during the term


of this License Agreement, including those installed before the Effective Date.


Notwithstanding the preceding paragraph, it is expressly agreed that any assets


belonging to a third party or rented by LICENSEE for the purpose of Petroleum


Operations, and any assets owned by LICENSEE'S subcontractors or their


Affiliates, will not become the property of AKBN.


17.3. Sale of Assets .


Any movable asset may be sold to a third party with the prior approval of


AKBN, which approval shall not be unreasonably withheld. The proceeds from


the sale of any asset shall be used by LICENSEE as a recovery of Petroleum


Costs. Income to LICENSEE resulting from the use by third parties of assets


which are charged as Petroleum Costs which become the property of AKBN


shall be credited to Petroleum Costs during the term of this License Agreement.



































49


 ucense Agreement tor me Development and Production of Petroleum in the Kucova Oilfield











ARTICLE 18


FINANCIAL RIGHTS


18.1. Payment and Bank Accounts.


LICENSEE will supply all the funds necessary for the Petroleum Operations in


Albania under this License Agreement, in freely convertible currency from


abroad or as generated from Petroleum Operations. LICENSEE shall have the


right to buy local currency whenever required at the then best rate available


from the National Bank or any other lawful bank for any purchaser of local


currency in Albania. LICENSEE shall have the right to make payments directly


abroad in foreign currencies for goods and services obtained abroad for


Petroleum Operations under this License Agreement and to charge such


payments in accordance with the provisions of this License Agreement without


having first to transfer the funds for such payments to Albania. LICENSEE shall


have the right to open in Albania bank accounts in freely convertible currency


for LICENSEE'S use in making payments under this License Agreement.


18.2. Buying of Foreign Currency.


For the purposes of the ARTICLE 15 LICENSEE shall be entitled to convert,


through lawful banks, local currency (Leke) and any other convertible currency


into USD at the then best rate available from the National Bank or any other


lawful bank, and to freely remit such funds abroad. If such currency is not


available, LICENSEE shall have the right to take the equivalent amount of


Petroleum at the value as determined pursuant to ARTICLE 10. LICENSEE'S


right to convert local currency under this Section 18.2 is limited to currency


conversions related to LICENSEE'S activities under this License Agreement.


18.3. Payment of Contractors.


LICENSEE shall pay local contractors and local suppliers of materials,


equipment, machinery, and consumables in Leke and in compliance with


Albanian regulations. LICENSEE shall have the right to pay foreign experts and


the staff it employs for the Petroleum Operations in USD or other foreign


currencies.


18.4. Retention of Foreign Currency Abroad.


LICENSEE shall have the right to retain and freely transfer abroad all funds


received for and as a result of Petroleum Operations, including the proceeds


from the sale of Petroleum produced in the Contract Area.


 License Agreement for the Development and Production of Petroleum in the Kucova Oilfield








18.5. Payments by AKBN.


AKBN, or its designated purchaser in Albania, shall pay LICENSEE abroad in


USD for any portion of the Available Petroleum purchased from LICENSEE for


local consumption, at the prices as calculated pursuant to ARTICLE 10.




















































































































51


 License Agreement for the Development and Production of Petroleum in the Kucova Oilfield











ARTICLE 19


EMPLOYMENT AND TRAINING OF PERSONNEL








LICENSEE will select its management and employees according to its discretion, and


shall determine the conditions of employment and the number of employees to be used


for Petroleum Operations. However LICENSEE and its sub-contractors will, to the


extent available, employ qualified Albanians to carry out the Petroleum Operations.


According to the Law No. 7811 dated 12 April 1994 “On the Approval with


Amendments of the Decree No. 782 dated 22.2.1994 “On the Fiscal System in the


Petroleum Sector (Exploration-Production)”, as amended by Law No. 8345 dated 13


May 1998 “For a Change to Law No.7811, dated 12.04.94 ‘On the Approval with


Amendments of the Decree No. 782 dated 22.02.94 “On the Fiscal System in the


Petroleum Sector (Exploration-Production)”, expatriate employees of LICENSEE and


its sub-contractors will not be subject to Taxes and Duties on any income or profit


realized by them, directly or indirectly, from their work in the Petroleum Operations,


nor on the import or re-export of their personal or household belongings, which items


may be freely imported and subsequently exported.
















































































52


 License Agreement for the Development and Production of Petroleum in the Kucova Oilfield











ARTICLE 20


OFFICE AND SERVICE OF NOTICE





20.1. Representatives.


(a) LICENSEE shall notify the AKBN of its address and of the name of its


General Manager and alternative representative, all of whom should be


technically and administratively competent individuals. The General


Manager, or in his absence, the alternative representative, shall be


entrusted with sufficient powers to represent and bind LICENSEE in all


dealings with AKBN or third parties in Albania, to receive all legal


notices to LICENSEE, and to comply with all lawful written directions


given by AKBN or its representative under the terms of this License


Agreement or under any existing or future laws or regulations not in


conflict with this License Agreement.


(b) Any change in the address of LICENSEE'S office or its authorized


representatives shall be notified to AKBN at least ten (10) days prior to


the effective date of the change.


20.2. Notices.





Any notice or other communication required or permitted to be given pursuant


to this License Agreement shall be in writing and may be given by delivering


the same by hand at, or by sending the same by telex or facsimile to the relevant


address, telex number or facsimile number set out below or such other address,


telex number or facsimile number as any Party may, from time to time, notify


for each of the other Parties in accordance with this Section 20.2. Any such


notice, given as aforesaid, shall be deemed to have been given or received at the


time of delivery if delivered by hand, at the time at which “answerback” is


received if sent by telex, or at the time of confirmation if sent by facsimile.


Copy of any notice sent by facsimile shall also be sent by post as soon as


practicable.





AKBN: (Name) Chairman


(Address) AKBN, Blloku Vasil Shanto, Tirane


Tel & Fax: +355 4 257 117;+355 4 257 382





LICENSEE: (Name) Executive Director


(Address) Albpetrol, Lagja 29 Marsi, Patos, FIER


Tel & Fax: + 355 381 3662; + 355 34 220 52

















A


'53


 License Agreement for the Development and Production of Petroleum in the Kucova Oilfield








ARTICLE 21


NATIONAL EMERGENCY OR OTHER TAKINGS








21.1. National Emergency.


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


or internal causes, the Albanian Government may requisition all or a part


of the Available Petroleum from the Contract Area and require


LICENSEE to increase such production to the utmost possible level


which will not result in damage to a Reservoir or otherwise reduce


Petroleum recovery from the Contract Area.


(b) In all cases, such requisition shall not be effected except after inviting


LICENSEE, by registered letter, return receipt requested, to express its


views with respect to such requisition.


(c) The requisition of production shall be effected by Government Decree.





Any requisition of a Field itself or any related facilities shall be effected


in the way and form stipulated by laws in force.





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


taking of LICENSEE'S Petroleum and/or the related facilities, Ministry


shall indemnify LICENSEE in full for the period during which such


taking is maintained, including:





(i) all damages which result from such requisition or taking; and


(ii) full payment each month for all Petroleum extracted and saved at


the amounts and prices as calculated pursuant to ARTICLE 10,


Section 10.5, which Petroleum would otherwise be allocated to


LICENSEE.





21.2. Payment.


Payment pursuant to this ARTICLE 21 shall be made to LICENSEE in USD


remittable abroad.


21.3. Dispute Resolution.


The Ministry confirms that, through the execution of this License Agreement by


AKBN on its behalf, the Albanian Government agrees that any dispute as to the


amount of payments or other remedial measures owing from AKBN to


 License agreement tor me Development and Production of Petroleum in the Kucova Oilfield








LICENSEE due to any requisition or other taking as discussed in this ARTICLE


21 shall be resolved in accordance with ARTICLE 25.


21.4. No Prejudice of Other Rights.





The above clauses are without any prejudice as to each right or other indemnity


that any Person constituting LICENSEE may have under this License


) Agreement, Albanian Law or international law.








































































































55


 License Agreement for the Development and Production of Petroleum in the Kucova Oilfield








ARTICLE 22


ASSIGNMENT AND OBLIGATIONS





22.1. Assignment.


If, as a result of the application of the following paragraphs or some other form,


Albpetrol will have less than forty (40) per cent of the interests under this


License Agreement, then the clauses of Decree No. 782 on tax on income, will


be affected.


(a) LICENSEE will not transfer to any Person, fully or partly, any of its


rights, privileges, duties and obligations under this License Agreement


without the prior written approval by AKBN, which approval shall not be


unreasonably withheld or delayed. Any Person to whom such rights,


privileges, duties and obligations are transferred shall be competent


technically and financially, and such transfer shall otherwise comply with


the requirements of Section 22.2.


(b) Notwithstanding Section 22.1(a), but subject to the requirements of


Section 22.2, LICENSEE will be free to transfer its rights, privileges,


duties and obligations under this License Agreement to an Affiliate


following the expiration of sixty (60) days’ prior written notification to


AKBN of such transfer, provided that LICENSEE provides a written


guarantee of the full performance by such Affiliate of all duties and


obligations under this License Agreement which are to be transferred. At


any time subsequent to such transfer, the former LICENSEE which has


made the transfer may request that AKBN no longer require the


foregoing guarantee, and such request shall not be unreasonably refused


by AKBN upon a showing that the Affiliate to which the transfer has


been made independently possesses the technical and financial


competence to fully perform the duties and obligations which have been


transferred to it. Any transfer by LICENSEE to an Affiliate without the


foregoing written guarantee from LICENSEE shall be subject to the


requirements of Section 22.1(a).


22.2. Assignment Conditions.


With respect to the transfer of LICENSEE'S rights, privileges, duties and


obligations under this License Agreement, the following conditions shall be


met:


(a) LICENSEE’S duties and obligations shall be properly fulfilled until the


date when the request for approval is made, or LICENSEE shall


guarantee, jointly or independently, the accomplishment of any obligation


of which has not been fulfilled as of such date;








56


 License Agreement for the Development and Production of Petroleum in the Kucova Oilfield








(b) the Person to whom the transfer is to be made shall provide to AKBN


reasonable evidence of its financial and/or technical competence; and


(c) the instrument of transfer should include provisions which clearly state


that the LICENSEE is held responsible for all the commitments


contained in this License Agreement and every written modification or


amendment that may be effected until the date of transfer, and should


further declare that LICENSEE does not have any claims for change of


the terms of this License Agreement as a condition for the transfer. The


instrument of transfer shall be subject to review and approval by AKBN,


and AKBN shall not unreasonably withhold or delay such approval.


22.3. Taxes and Duties.


Any applicable Taxes and Duties will be payable by LICENSEE or by the


Person to whom the transfer is made in connection with each transfer effected


under this ARTICLE 22.


22.4. Encumbrances.


LICENSEE may encumber its rights under this License Agreement for the


purpose of increasing of the financing of the Petroleum Operations, with the


prior written consent by the AKBN (which consent shall not be unreasonably


withheld or delayed).


22.5. Separate Application.


The provisions of this ARTICLE 22 will be applied separately in connection


with each Party that comprises the LICENSEE.


22.6. Multiple Parties.


In the event that, subsequent to any transfer made pursuant to this ARTICLE 22,


the LICENSEE is comprised of more than one party, each such party shall be


jointly and severally responsible for LICENSEE’S obligations in accordance


with Section 3.3(c).


22.7. Cease of Rights and Interest.


Upon transfer of all of its rights, privileges, duties and obligations to another


Person in accordance with this ARTICLE 22, the LICENSEE making the


transfer shall cease to have any rights under or interest in this License


Agreement as a LICENSEE.











57


 License Agreement for the Development and Production of Petroleum in the Kucova Oilfield











ARTICLE 23


FORCE MAJEURE





23.1. Acts of Force Majeure.


The failure of any Party to perform any obligation under this License


Agreement, if occasioned by act of God or the public enemy, fire, explosion,


perils of the sea, flood, drought, war, riot, hostilities not amounting to war,


sabotage, accident, embargo, government priority, requisition or allocation, or


other action of any government authority, or by interruption of or delay in


transportation, shortage or failure of supply of materials or equipment from


normal sources, labor strikes, or by compliance with any order or request of any


governmental authority or any officer, department, agency, or committee


thereof, or any other circumstance of like character beyond the reasonable


control of a Party (herein, “Force Majeure”), shall not subject such Party to any


liability to the other Party. In such event, the Party subject to the event of Force


Majeure shall use its reasonable efforts to minimize the effects of such event


and to overcome such event as soon as practicable.


23.2. Force Majeure Notice, Suspension of Obligations.


Except as otherwise provided herein, in the event that by Force Majeure a Party


is rendered unable to carry out its obligations under this License Agreement, the


Party shall give notice and all particulars of such event of Force Majeure in


writing to the other Party within ten (10) days after the occurrence of the cause


relied upon, and the obligations of each Party, so far as the same are affected by


such Force Majeure, shall be suspended during the continuance of such event of


Force Majeure.


23.3. Termination of Agreement in the Event of Extended Force Majeure.


In the event that, for an uninterrupted period of two (2) years following, and as a


result of, an event of Force Majeure, any Party is unable to perform its


obligations under this License Agreement, as a result of such event of Force


Majeure and not of a breach of its obligations hereunder that is unaffected by


such event of Force Majeure, this License Agreement may be terminated on the


second anniversary of such event of Force Majeure by either LICENSEE or


AKBN.


























58


 License Agreement for the Development and Production of Petroleum In the Kucova Oilfield











ARTICLE 24


BREACH OF LICENSE AGREEMENT


24.1. AKBN Right to Cancel.


AKBN will have the right to cancel this License Agreement in the event of the


following:


(a) if LICENSEE knowingly submitted any false statements to AKBN where


such statements were a material consideration for the conclusion and/or


execution of this License Agreement;


(b) if LICENSEE transfers any right, privilege, duty or obligation to a Person


contrary to the provisions of ARTICLE 22 hereof;


(c) if LICENSEE is adjudicated bankrupt by a court of competent


jurisdiction;


(d) if LICENSEE does not comply with any final arbitrage decision;


(e) if LICENSEE intentionally extracts any mineral other than Petroleum or


sulfur, in whatever form, produced in association with Natural Gas, not


authorized by this License Agreement or without the authority of AKBN


except such extractions as may be unavoidable using accepted petroleum


industry practices, and which shall be notified to AKBN or its


representatives as soon as possible;


(f) if LICENSEE commits and material breach of this License Agreement;


and


(g) if LICENSEE repeatedly employs illegal means of applying pressure


upon AKBN in order to hinder it from the regular performance of its


duties.


(h) if LICENSEE unreasonably and repeatedly makes an intentional and


conscious violation of Albanian Law, AKBN instruction or this License


Agreement provisions.


If there is more than one entity constituting LICENSEE, and the action leading


to termination as described above occurs or has been committed by only one


such entity, this License Agreement shall not be terminated if the other entities


or entity take appropriate action to remedy the situation with regard to this


License Agreement.








59


 License Agreement for the Development and Production of Petroleum In the Kucova Oilfield











24.2. Removal of Equipment.


In the event AKBN exercises its right to cancel this License Agreement under


the provisions of this ARTICLE 24 because of a breach on the part of


LICENSEE as mentioned in Section 24.1 above, such cancellation shall take


place without prejudice to any rights which AKBN may have acquired from


LICENSEE in accordance with the provisions of this License Agreement; and in


the event of such cancellation, LICENSEE shall be allowed, subject to


ARTICLE 9, Sections 9.2 and 9.3 and ARTICLE 17, Section 17.2, to remove its


equipment from the Contract Area after settling all claims due to AKBN.


24.3. Notification to Repair.


If AKBN deems that one of the aforesaid clauses (other than ARTICLE 23)


exists to cancel this License Agreement, AKBN shall give LICENSEE written


notice personally served to LICENSEE informing LICENSEE that LICENSEE


is in breach of one or more of the provisions of this License Agreement, and


specifying the precise cause and nature of the breach. LICENSEE shall attempt


to repair such breach within ninety (90) days. If such breach is not cured within


the ninety (90) days, this License Agreement shall be terminated in conformity


with terms and provisions herein.







































































60


 License Agreement for the Development and Production of Petroleum In the Kucova Oilfield














ARTICLE 25


DISPUTES AND ARBITRATION








25.1. Negotiation.


Parties establish their relations in connection with this License Agreement on


the principles of good will and good faith. All disputes arising out of or relating


to this License Agreement shall be settled, if possibly, by friendly negotiation of


the Parties. If settlement cannot be amicably reached within a period of thirty


(30) days, or such other period as may be mutually agreed upon by the Parties,


the dispute shall be decided by arbitration pursuant to Section 25.2 or Section


25.3, as applicable. With respect to a dispute involving a technical matter, the


Parties may, pursuant to Section 25.4, mutually agree upon a sole technical


expert to assist the Parties resolve such dispute.





25.2. Arbitration Between AKBN and Albpetrol Alone.


All disputes arising in connection with this License Agreement between AKBN


and Albpetrol alone shall be finally settled by binding arbitration taking place in


Tirana in accordance with Albanian legislation. Notwithstanding the foregoing,


in the event LICENSEE consists of Albpetrol and a foreign partner and such


foreign partner gives notice in writing to AKBN and to Albpetrol that, in its


reasonable judgment, a dispute between Albpetrol and AKBN affects such foreign


partner’s interests under this License Agreement, any such dispute, whether


having just arisen or already the subject of pending arbitration under this Section


25.2, shall be resolved in accordance with Section 25.3. In such event, at the


request of either Albpetrol or AKBN the arbitration under Section 25.3 shall


include a determination of whether the foreign partner was reasonable in its


assertion that the dispute affected its interests. If it is determined that such


assertion was not reasonable, the arbitrage award shall include a determination of


the costs of the arbitration which are in excess of those which would have been


incurred by Albpetrol and AKBN had such arbitration taken place or been


concluded under Section 25.2, and the foreign partner shall be responsible for the


payment of all such excess costs.


25.3. Arbitration Between AKBN, Albpetrol and Foreign Partner(s).


(a) All disputes arising in connection with this License Agreement between


AKBN, Albpetrol and foreign partner(s) shall be finally settled under the


Rules of Conciliation and Arbitration of the International Chamber of


Commerce (“ICC”). Said arbitration shall be carried out by, in the case


of mere technical matters, one (1) arbitrator and, in the case of all other


disputes, three (3) arbitrators, appointed by the ICC Court of Arbitration


 License Agreement for the Development and Production of Petroleum In the Kucova Oilfield








in accordance with said Rules and their interpretation by said Court. In


that regard, the Parties hereto waive the right each to nominate an


arbitrator and as of now accept the appointment made by the ICC Court


as it deems best. Consistent with the Parties desire to have an expedited


arbitration proceeding the appointment of the arbitrator(s) shall occur


within ten (10) days from the date in which a Party hereof delivers to the


other a written notice requesting that the dispute be submitted to


arbitration, which written notice shall clearly state the issue in dispute,


and any other relevant fact. Notwithstanding the foregoing, no arbitrator


shall be Albanian or a national of the country of LICENSEE, nor shall


any arbitrator be related to, employed by or have (or had) a substantial or


ongoing business relationship with any Party hereto or any of their


respective Affiliates. Shortened time limits for the procedural aspects of


the proceeding, including but not limited to discovery and submission of


prehearing briefs, shall be imposed, in consultation with the Parties, by


the arbitrator(s).


(b) The arbitration proceeding shall take place in Zurich, Switzerland and


shall be conducted in the English language. All documents submitted


therein and the award of the arbitral panel shall also be in English.


(c) Clauses of this License Agreement related to arbitration will continue to


be in force despite the termination of this License Agreement.


(d) The Ministry and AKBN irrevocably waive any right of immunity or any


right to object to this arbitration agreement, any arbitration award, any


judgment regarding the enforcement of an arbitration award of the


execution of any arbitration award against or in respect of any of its


property whatsoever it now has or may acquire in the future in any


jurisdiction.


(e) The Party that loses an arbitration decision shall pay all expenses


incurred in connection with such arbitration, including, but not limited to,


the fees and expenses of the arbitrator(s). All such costs and expenditures


shall not be considered as Petroleum Costs and shall not be recoverable


under this License Agreement.


(f) Each Party hereto agrees that any arbitral award rendered against it


pursuant to this Section 25.3 may be enforced against its assets wherever


they may be found and that a judgment upon the arbitral award may be


entered in any court having jurisdiction thereof.








0^





rMs





62


 License Agreement for the Development and Production of Petroleum In the Kucova Oilfield











25.4 Expert


(a) Any matter in dispute between AKBN and LICENSEE which in terms of


this License Agreement is to be referred to an Expert, shall be referred


for determination by a sole expert.


(b) The Expert shall be given terms of reference which shall be mutually


agreed between the Parties. The Expert shall be appointed by agreement


between AKBN and LICENSEE. If AKBN and LICENSEE fail to


appoint the expert within thirty (30) days after agreement on the terms of


reference has been reached, either Party may apply to the International


Chamber of Commerce Centre for Technical Expertise, Paris, France, for


appointment of an expert in accordance with its Rules. The Expert shall


make his determination in accordance with the provisions contained


herein based on the best evidence available to him. Representatives of


AKBN and LICENSEE shall have the right to consult with the Expert


and furnish him with data and information, provided the Expert may


impose reasonable limitations on this right. Any such data and


information has to be submitted to the other Party to the dispute at the


same time. The Expert shall be free to evaluate the extent to which any


data, information or other evidence is substantiated or pertinent. The


Expert's fees and expenses, and the costs associated with an appointment,


if any, made by the International Chamber of Commerce Centre for


Technical Expertise, shall be borne equally by AKBN and LICENSEE.


The Expert's determination shall be final and binding upon the Parties,


subject to any manifest error in his determination.



























































63


 License Agreement for the Development and Production of Petroleum in the Kucova Oilfield











ARTICLE 26


GOVERNING LAW





26.1. Governing Law.


(a) Subject to Section 26.1(b), the activities of LICENSEE in performing the


Petroleum Operations shall be governed by and conducted in accordance


with the requirements of the Albanian Law.


(b) All questions with respect to the interpretation or enforcement of, or the


rights and obligations of the Parties under, this License Agreement and


which are the subject of arbitration in accordance with ARTICLE 25:


(i) shall be governed by the laws of the Republic of Albania in the


case of a dispute subject to resolution under ARTICLE 25, Section


25.2; or


(ii) shall be governed by the laws of England in the case of a dispute


subject to resolution under ARTICLE 25, Section 25.3.

































































64


 License Agreement for the Development and Production of Petroleum in the Kucova Oilfield














ARTICLE 27


APPROVAL OF THE LICENSE AGREEMENT





27.1. Approval.


This License Agreement shall be binding upon each of the Parties hereto from


the date when the Council of Ministers issues a decision approving the


Petroleum Agreement, reached on the basis of this License Agreement, between


LICENSEE and a foreign company selected in accordance with the Petroleum


Law. The date the decision approving the Petroleum Agreement carries shall be


the “Effective Date”.





































































































65


 License Agreement for the Development and Production of Petroleum in the Kucova Oilfield








ARTICLE 28


MISCELLANEOUS





28.1. Further Assurances.


Each of the Parties agrees to do and perform all such acts, matters and things as


are appropriate or as may be necessary to give full effect to the provisions and


intention of this License Agreement.


28.2. Non-Waiver.


None of the provisions of this License Agreement shall be considered as waived


by any Party unless such waiver is given in writing by such Party. No such


waiver shall be a waiver of any past or future default or breach of any of the


provisions of this License Agreement, unless expressly set forth in such waiver.


28.3. Severability.


If any of the provisions of this License Agreement is found to be void or


unenforceable, such provision shall be deemed to be deleted from this License


Agreement and the remaining provisions of this License Agreement shall


continue in full force and effect provided that the Parties shall, in such event,


then meet to negotiate in good faith and seek to agree a mutually satisfactory


valid and enforceable provision to be substituted for the provision so found to


be void or unenforceable.


28.4. Complete Agreement; Amendment.





This License Agreement, including the Annexes hereto, constitutes the entire


agreement among the Parties and supersedes all agreements, representations,


warranties, statements, promises and understandings, whether oral or written,


with respect to, but only to the extent of, the subject matter hereof, and no Party


hereto shall be bound by nor charged with any oral or written agreements,


representations, warranties, statements, promises or understandings not


specifically set forth in this License Agreement, including the Annexes hereto.


This License Agreement may not be amended, altered or modified except by a


writing signed by each Party.


28.5. No Agency.


Except as expressly provided herein, no provision of this License Agreement


shall be construed as authorizing one Party to act as an agent of another Party


and no Party shall represent, through words or conduct, that it is an agent of any


other Party. Each of the Parties is, in all of their capabilities hereunder, acting


under this License Agreement as an independent contractor.


 License Agreement for the Development and Production of Petroleum in the Kucova Oilfield











28.6. Prevailing Language.


(a) This License Agreement is originally executed in the Albanian language


and, subject to Section 28.6(b), such Albanian language version shall


govern in all matters relating to this License Agreement.


(b) In the event that, pursuant to an assignment made in accordance with


ARTICLE 22, LICENSEE will be comprised of Albpetrol and a foreign


partner, an English language translation of this License Agreement shall


be appended to the instrument of transfer. By execution of such


instrument of transfer, the parties to such instrument of transfer


(including AKBN acting in accordance with its authority under this


License Agreement to approve such transfer) shall agree that such


English language version is an accurate translation of this Albanian


language version, and that such English language version shall prevail


over the Albanian language version in all matters related to this License


Agreement, including any amendments, notices and communications, for


so long as LICENSEE includes such foreign partner. In such event, all


information, notices and communications to be given or delivered


hereunder shall be in both the Albanian and the English languages, or


accompanied by an English translation.


28.7. Counterparts.


This License Agreement has been executed in three (3) counterparts, each of


which is an original and all of which shall constitute one and the same


agreement.


28.8. Insurance.


LICENSEE shall maintain a reasonable level of insurance coverage relative to


the risks inherent in Petroleum Operations under this License Agreement, if


such insurance is required by AKBN in accordance with Albanian Law. Such


insurance may be acquired by LICENSEE from Albanian or international


insurance institutes. Once LICENSEE enters into such insurance contracts to


cover all or any portion of the aforementioned insurance requirements, if any,


LICENSEE shall provide AKBN with sufficient information describing the


insurer's financial capabilities to provide the relevant coverage.








[SIGNATURE PAGE FOLLOWS]

















67


License Agreement for the Development and Production of Petroleum in the Kucova Oilfield

IN WITNESS WHEREOF, this License Agreement has been executed by the duly
authorized representatives of the Parties on the date first written at the beginning of
this License Agreement.
 
THE MINISTRY OF PUBLIC ECONOMY AND PRIVATIZATION,





Title:


Sh. A. “ALBPETROL”


Name:

Title:








68
 License Agreement for the Development and Production of Petroleum in the Kucova Oilfield











ANNEXA


CONTRACT AREA




















Aneksi A





Zona e Kontrates dhe Koordinatat








fi^uS^-Kiu^r UTMW6S 1984. Zan&34v«rt Herd. Cent. 21d£





Hr X Y X Y


i 45 22 600 44 02 550 45 20 711047 40 2 590.609


2 45 24 300 44 04 350 45 22 410537 404 389.859





3 45 24 900 44 11 950 45 23 010087 411986.692


4 45 22 000 44 11 000 45 20 111.297 411037.088


5 45 18 000 44 09 000 45 16 112.966 409 037.922


6 45 17 200 44 05 250 45 15 313300 4 05 289.484


7 45 10 200 44 04 100 45 14 313.717 404 139.964


8 45 17 650 44 03 150 45 15 763.112 403 190.359
























































































































































f t





0/ib"








 License Agreement for the Development and Production of Petroleum in the Kucova Oilfield








ANNEX B





EVALUATION PERIOD MINIMUM WORK PROGRAM


1. The Evaluation Period will last twenty-four (24) months from the Effective Date


with the option for six months extension upon written request of Contractor and


Albpetrol to AKBN.


2. Re-activation or re-completion of ten (10) wells in the Kucova Oilfield. Contractor


will re-enter and clean out the existing well bores and replace or refurbish the


production tubing as necessary. It is contemplated that new pumps of the


progressive cavity type will be placed in the well bore appropriately sized as per


the productive capability of the well. The pumps will be connected to small


generator sets which will activate if the electrical power supplied to the pump is


interrupted for any reason, thus ensuring 24 hour operation of the pump. The work


to be done on each well shall be at the sole discretion of the Contractor.


3. Equip and tie-in ten (10) wells that are currently not producing but are capable of


production. In addition to the work contemplated above these wells will be re¬


activated after all the available information for each well has been evaluated and


the well judged to be a suitable candidate for reactivation. Reactivation of the well


may include the shutting off of perforated zones that are no longer producing oil


and the re-perforating of existing producing zones and/or the perforating of new


zones judged capable of producing oil. The work to be done on each well shall be


at the sole discretion of the Contractor.


4. Evaluate the production, reserves and reservoir performance of the Kucova


Oilfield and provide a further engineering report.


5. Review and report on the application of Sand Control Technology.


6. Review gas conservation and utilization within the Plan of Development.


7. Production and/or pressure test selected wells.


8. Carry out an update of the existing reserves certification.


9. Increase water disposal capacity by adding an additional water disposal well, if


necessary.


10. Evaluation of existing and future infrastructure for development and


commercialization of production from the Kucova Oilfield for internal and


possible export markets.


11. Complete a Plan of Development for the Kucova Oilfield for the Production and


Development Period.