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PRODUCTION SHARING CONTRACT



EXHIBIT 10.56



AMONG

THE GOVERNMENT OF INDIA

AND

OIL & NATURAL GAS CORPORATION LIMITED

AND

RELIANCE INDUSTRIES LIMITED

AND

ENRON OIL & GAS INDIA LTD.

WITH RESPECT TO CONTRACT AREA

IDENTIFIED AS MID AND SOUTH TAPTI FIELD



TABLE OF CONTENTS

ARTICLE

1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

11.

12.

13.

14.

15.

16.

17.

18.

19.

20.

21.

22.

23.

24.

25.

26.

27.

28.

29.

30.

31.

32.

33.

34.

35.

36.

APPENDICES:



CONTENTS

Preamble

Definitions

Duration

Relinquishment

Work Programme

Management Committee

Operatorship and Operating Agreement

General Rights and Obligations of the Parties

Government Assistance

Discovery, Development and Production

Unit Development

Measurement of Petroleum

Protection of the Environment

Recovery of Costs

Production Sharing of Petroleum between Contractor

and Government

Taxes, Royalties, Rentals, etc.

Payment

Customs Duties

Domestic Supply, Sale, Disposal and Export of Crude Oil

Valuation of Oil

Currency and Exchange Control Provisions

Natural Gas

Employment, Training and Transfer of Technology

Local Goods and Services

Insurance and Indemnification

Records, Reports, Accounts and Audit

Information, Data, Confidentiality, Inspection

and Security

Title to Petroleum, Data and Assets

Assignment of Interest

Guarantee

Termination of Contract

Force Majeure

Applicable Law and Language of the Contract

Sole Expert, Conciliation and Arbitration

Entire Agreement, Amendments, Waiver and Miscellaneous

Certificates

Notices



Appendix A

Appendix B

Appendix C



-



Appendix D



-



Appendix E

Appendix F

Appendix G



-



Appendix H



-



Appendix I



-



Description of Contract Area

Map of Contract Area

Accounting Procedure to Production Sharing

Contract

Calculation of the Investment Multiple for

Production Sharing Purposes

Form of Financial and Performance Guarantee

Equipment

Development Commitment Specified by the

Companies

Production Profile of the Mid and South Tapti

Fields

Payment for Use of Onshore Plant

-----*****-----



This Contract made and entered into as of the 22nd day of December 1994

by and among:

THE PRESIDENT OF INDIA, acting through the the Joint Secretary

(Exploration), Ministry of Petroleum and Natural Gas (hereinafter

referred as Government);

AND

OIL & NATURAL GAS CORPORATION LIMITED (ONGC), a body corporate established under

the provisions of the Companies Act, 1956, which expression shall include its

successors and such assigns as are permitted under Article 28 hereof acting

through its duly authorized Chairman & Managing Director;

AND

RELIANCE INDUSTRIES LTD. ("RIL"), a body corporate established under the laws of

India, which expression shall include its successors and such assigns as are

permitted under Article 28 hereof acting through its duly authorized Chief

Executive Officer (Oil & Gas)

AND

ENRON OIL & GAS INDIA LTD. ("EOGIL"), a body corporate established under the

laws of the Cayman Islands, which expression shall include its successors and

such assigns as are permitted under Article 28 hereof acting through its duly

authorized (Vice) President;

WITNESSETH:

WHEREAS

1.

By virtue of Article 297 of the Constitution of India,

Petroleum in its natural state in the Territorial Waters and

the Continental Shelf of India is vested in the Union of

India;

2.



The Territorial Waters, Continental Shelf, Exclusive Economic Zone And

Other Maritime Zones Act, 1976 (No. 80 of 1976) provides for the grant of

a Lease or letter of authority by the Government to explore and exploit

the resources of the Continental Shelf;



3.



The Oil Fields (Regulation and Development) Act, 1948, (53 of 1948)

(hereinafter referred to as "the Act") and the Petroleum and Natural Gas

Rules, 1959, made thereunder (hereinafter referred to as "the Rules") make

provision inter alia for the regulation of Petroleum Operations and the

grant of petroleum exploration licenses and mining leases for exploration

and development of Petroleum in India;



4.



The Act and the Rules provide for the grant by the Government of mining

leases in respect of the Territorial Waters and the Continental Shelf, and

the Contractor is being duly granted a mining lease to carry out Petroleum

Operations in that area offshore identified as Mid and South Tapti Field,

more particularly described in Appendices A and B;



5.



The Government desires that the Petroleum resources which may exist in the

Contract Area be discovered and exploited with the utmost expedition in

the overall interest of India in accordance with sound international

petroleum industry practices;



6.



The Government is satisfied that it is in the public interest to enter

into this Contract on terms different from those specified in Section 12

of the Oil Fields (Regulations and Development) Act, 1948, and the

Government is entering into this Agreement on the terms and conditions



specified herein.

7.



EOGIL and RIL have represented that they have, or will acquire

and make available, the necessary financial and technical

resources and the technical and industrial competence and

experience necessary for proper discharge and/or performance

of all obligations required to be performed under this

Contract in accordance with good international petroleum

industry practices and will provide guarantees as required in

Article 29 for the due performance of their undertakings

hereunder;



8.



The Parties desire to enter into this Contract with respect to the

Contract Area referred to in Appendices A and B on the terms and

conditions herein set forth.



NOW, THEREFORE, in consideration of the premises and covenants and conditions

herein contained, IT IS HEREBY AGREED between the Parties as follows:

-----*****----2

ARTICLE 1

DEFINITIONS

In this Contract, unless the context requires otherwise, the following

terms shall have the meaning ascribed to them hereunder:

1.1



"Accounting Procedure" means the principles and procedures

of accounting set out in Appendix C.



1.2



"Affiliate" means a company that directly or indirectly controls or is

controlled by a Party to this Contract or a company which directly or

indirectly controls or is controlled by a company which controls a

Party to this Contract, it being understood that "control" means

ownership by one company of more than fifty percent (50%) of the voting

securities of the other company, or the power to direct, administer and

dictate policies of the other company even where the voting securities

held by such company exercising such effective control in that other

company is less than fifty percent (50%) and the term "controlled"

shall have a corresponding meaning.



1.3



"Appendix" means an Appendix attached to this Contract and

made a part hereof.



1.4



"Appraisal Programme" means a programme, approved by the Management

Committee for the appraisal of an Existing or New Discovery of

Petroleum in the Contract Area for the purpose of delineating the

Petroleum Reservoirs to which the Discovery relates in terms of

thickness and lateral extent and determining the characteristics

thereof and the quantity and quality of recoverable Petroleum therein.



1.5



"Appraisal Well" means a Well drilled within the Contract Area pursuant

to an approved Appraisal Programme.



1.6



"Arms Length Sales" means sales of Petroleum made freely on the open

international market, in freely convertible currencies, between willing

and unrelated sellers and buyers and in which such buyers and sellers

have no contractual or other relationship, directly or indirectly, or

any common or joint interest as is reasonably likely to influence

selling prices and shall, inter alia, exclude sales (whether direct or

indirect, through brokers or otherwise) involving Affiliates, sales

between entities comprising the Contractor, sales between governments

and government-owned entities, counter trades, restricted or distress

sales, sales involving barter arrangements and generally any

transactions motivated in whole or in part by considerations other than

normal commercial practices.



1.7



"Article" means an Article of this Contract and the term

"Articles" means more than one Article.

3



1.8



"Associated Natural Gas" or "ANG" means Natural Gas occurring in



association with Crude Oil either as free gas or in solution, if such

Crude Oil can by itself be commercially produced.

1.9



"Barrel" means a quantity or unit equal to 158.9074 litres (forty-two

(42) United States gallons) liquid measure, at a temperature of sixty

(60) degrees Fahrenheit (15.56 degrees Centigrade) under one atmosphere

of pressure (14.7 psia).



1.10



"Basement" means any igneous or metamorphic rock, or rock or any

stratum of such nature, in and below which the geological structure or

physical characteristics of the rock sequence do not have the

properties necessary for the accumulation of Petroleum in commercial

quantities and which reflects the maximum depth at which any such

accumulation can be reasonably expected in accordance with the

knowledge generally accepted in the international petroleum industry.



1.11



"Calendar Month" means any of the twelve (12) months of the

Calendar Year unless specified otherwise.



1.12



"Calendar Quarter" means a period of three consecutive Calendar Months

commencing on the first day of January, April, July and October of each

Calendar Year.



1.13



"Calendar Year" means a period of twelve consecutive months according

to the Gregorian calendar commencing with the first day of January and

ending with the thirty-first day of December.



1.14



"Commercial Discovery" means a Discovery which, when produced, is

likely to yield a reasonable profit on the funds invested in Petroleum

Operations, after deduction of Contract Costs, and which has been

declared a Commercial Discovery in accordance with the provisions of

Article 9 and/or Article 21, after consideration of all pertinent

operating and financial data such as recoverable reserves, sustainable

production levels, estimated development and production expenditures,

prevailing prices and other relevant technical and economic factors

according to generally accepted practices in the international

petroleum industry.



1.15



"Commercial Production" means production of Crude Oil or Natural Gas or

both from a Field within the Contract Area and delivery of the same at

the relevant Delivery Point under a programme of regular production and

sale.



1.16



"Company" means either EOGIL or RIL.



1.17



"Companies" means EOGIL and RIL.



1.18



"Condensate" means those low vapour pressure hydrocarbons

obtained from Natural Gas through condensation or extraction

4

and refers solely to those hydrocarbons that are liquid at normal

surface temperature and pressure conditions (provided that in the event

Condensate is produced from an Oil Field and is segregated and

transported separately to the Delivery Point, then the provisions of

this Contract shall apply to such Condensate as if it were Crude Oil.)



1.19



"Contract" means this agreement and the Appendices attached hereto and

made a part hereof and any amendments made thereto pursuant to the

terms hereof.



1.20



"Contract Area" means the area described in Appendix A and delineated

on the map attached as Appendix B, or any portion of the area remaining

after relinquishment or surrender from time to time pursuant to the

terms of this Contract.



1.21



"Contract Costs" means Exploration Costs, Development Costs, Production

costs, and all other costs related to Petroleum Operations as set forth

in Section 3 of the Accounting Procedure.



1.22



"Contract Year" means a period of twelve consecutive months counted

from the Effective Date or from the anniversary of the Effective Date.



1.23



"Contractor" means EOGIL, RIL and ONGC.



1.24



"Cost Petroleum" means the portion of the total volume of Petroleum

produced and saved from the Contract Area which the Contractor is

entitled to take from the Contract Area in a particular period for the

recovery of Contract Costs as provided in Article 13.



1.25



"Cost Recovery Limit" shall have the meaning given in

Article 13.1.2.



1.26



"Crude Oil" means crude mineral oil, asphalt, ozokerite and all kinds

of hydrocarbons and bitumens, both in solid and in liquid form, in

their natural state or obtained from Natural Gas by condensation or

extraction, including distillate and Condensate when commingled with

the heavier hydrocarbons and delivered as a blend at the Delivery Point

but excluding verified Natural Gas.



1.27



"Delivery Point" means, except as otherwise herein provided or as may

be otherwise agreed between the Government and the Contractor, the

point at which Petroleum reaches the upstream weld of the outlet flange

of the delivery facility, either offshore or onshore and different

Delivery Points may be established for purposes of sales to the

Government, export or domestic sales.



1.28



"Development Area" means that part of the Contract Area corresponding

to the area of an Oil Field or Gas Field delineated in simple geometric

shape, together with a

5

reasonable margin of additional area surrounding the Field consistent

with international petroleum industry practice and approved by the

Management Committee or the Government, as the case may be.



1.29



"Development Costs" means those costs and expenditures

incurred in carrying out Development Operations, as

classified and defined in Section 2 of the Accounting

Procedure and allowed to be recovered in terms of Section 3

thereof.



1.30



"Development Operations" means operations conducted in accordance with

the Development Plan and shall include, but not be limited to, the

purchase, shipment or storage of equipment and materials used in

developing Petroleum accumulations, the drilling, completion,

Recompletion and testing of Development Wells, the drilling, completion

and Recompletion of Wells for Gas or water injection, the laying of

gathering lines, the installation of offshore platforms and

installations, the installation, hook up and commissioning of

separators, tankage, pumps, artificial lifting and other producing and

injection facilities required to produce, process and transport

Petroleum into main oil storage or Gas processing facilities, either

onshore or offshore, including the laying of pipelines within or

outside the Contract Area, storage and Delivery Point or Points, the

installation of storage or Gas processing facilities, the installation

of export and loading facilities and other facilities required for

development and production of the Petroleum accumulations and for the

delivery of Crude Oil and/or Gas at the Delivery Point(s) and also

including incidental operations not specifically referred to herein as

required for the most efficient and economic development and production

of the Petroleum accumulations in accordance with good international

petroleum industry practices.



1.31



"Development Plan" means a plan containing proposals

required under Article 9 or Article 21.



1.32



"Development Well" means a Well drilled, deepened, completed, or

Recompleted after the date of approval of the Development Plan pursuant

to Development Operations or Production Operations for the purposes of

producing Petroleum, increasing production, sustaining production or

accelerating extraction of Petroleum including production Wells,

injection Wells and dry Wells.



1.33



"Discovery" means the finding, during Exploration Operations, of a

deposit of Petroleum not previously known to have existed, which can be

recovered at the surface in a flow measurable by conventional petroleum

industry testing methods, including an Existing Discovery and a New



Discovery.



6



1.34



"Discovery Area" means that part of the Contract Area about which,

based upon Discovery and the results obtained from a Well or Wells

drilled in such part, both the Government and the Contractor are of the

opinion that Petroleum exists and is likely to be produced in

commercial quantities.



1.35



"Effective Date" means the date on which this Contract is

executed.



1.36



"Environmental Clearance" means permission granted in writing by the

Government to the Contractor to perform all activities necessary and

appropriate to conduct Petroleum Operations subject to conditions

specified with regard to protection of the environment and minimizing

Environmental Damage.



1.37



"Environmental Damage" means soil erosion, removal of vegetation,

destruction of wildlife, pollution of groundwater or surface water,

land contamination, air pollution, noise pollution, bush fire,

disruption to water supplies, to natural drainage or natural flow of

rivers or streams, damage to archaeological, palaeontological and

cultural sites and shall include any damage or injury to, or

destruction of, soil or water in their physical aspects together with

vegetation associated therewith, aquatic or terrestrial mammals, fish,

avifauna or any plant or animal life whether in the sea or in any other

water or on, in or under land provided such damage is in violation of

legislation relating to the protection of the environment.



1.38



"Excess ANG" shall have the meaning given in Article 21.4.



1.39



"Existing Discovery" means a Discovery made by ONGC before the

Effective Date and accepted by the Parties as a Commercial Discovery.



1.40



"Exploration Costs" means those costs and expenditures

incurred in carrying out Exploration Operations, as

classified and defined in Section 2 of the Accounting

Procedure and allowed to be recovered in terms of Section 3

thereof.



1.41



"Exploration Operations" means operations conducted in the Contract

Area pursuant to this Contract in searching for Petroleum or in the

course of an Appraisal Programme and shall include but not be limited

to aerial, geological, geophysical, geochemical, palaeontological,

palynological, topographical and seismic surveys, analysis, studies and

their interpretation, investigations relating to the subsurface geology

including structure test drilling, stratigraphic test drilling,

drilling of Exploration Wells or Appraisal Wells and other related

activities such as testing, surveying, drill site preparation and all

work necessarily connected therewith that is conducted in connection

with Petroleum exploration.

7



1.42



"Exploration Well" means a Well drilled for the purpose of searching

for undiscovered Petroleum accumulations on any geological entity (be

it of structural, stratigraphic, facies or pressure nature) to at least

a depth or stratigraphic level specified in the Work Programme.



1.43



"Field" means an Oil Field or a Gas Field in the Contract Area in

respect of which a Development Plan has been duly approved in

accordance with Article 9 or Article 21 hereof.



1.44



"Financial Year" means the period from the first day of April through

the thirty-first day of March of the following Calendar Year.



1.45



"Foreign Company" means a Company within the meaning of Section 591 of

the Companies Act, 1956, as amended from time to time.



1.46



"Gas" means Natural Gas.



1.47



"Gas Field" means an area within the Contract Area consisting of a

single Gas Reservoir or multiple Gas Reservoirs all grouped on or

related to the same individual geological structure or stratigraphic



conditions, designated by the Contractor and approved by the Government

or Management Committee, as the case may be, (to include the maximum

area of potential productivity in the Contract Area in a simple

geometric shape) in respect of which a Commercial Discovery has been

declared or a Development Plan has been approved in accordance with

Article 9 or Article 21 hereof.

1.48



"Investment" shall have the meaning assigned in paragraph 3

of Appendix D.



1.49



"Investment Multiple" means the ratio of accumulated Net Cash Income to

accumulated Investment in the Contract Area, earned by the Companies,

as determined in accordance with Appendix D.



1.50



"LIBOR" means the London Inter-Bank Offering Rate for six-month

deposits of United States Dollars as quoted by the London office of the

Bank of America (or such other Bank as the Parties may agree) for the

day or days in question.



1.51



"Lessee" means any person or body corporate, including the Contractor,

which holds a mining lease under the Petroleum and Natural Gas Rules,

1959, for the purpose of carrying out Petroleum Operations in the

Contract Area and their successors and permitted assigns.



1.52



"Management Committee" means the committee constituted

pursuant to Article 5 hereof.

8



1.53



"Minimum Work Obligation" means the Work Programme related to those

items specified in Appendix G as approved by the Management Committee.



1.54



"Natural Gas" means wet Gas, dry Gas, all other gaseous hydrocarbons,

and all substances contained therein, including sulphur and helium,

which are produced from Oil or Gas Wells, excluding those condensed or

extracted liquid hydrocarbons that are liquid at normal temperature and

pressure conditions, and including the residue Gas remaining after the

condensation or extraction of liquid hydrocarbons from Gas.



1.55



"Net Cash Income" shall have the meaning assigned in

paragraph 2 of Appendix D.



1.56



"New Discovery" means a Discovery made after the Effective

Date.



1.57



"Non Associated Natural Gas" or "NANG" means Natural Gas which is

produced either without association with Crude Oil or in association

with Crude Oil which by itself cannot be commercially produced.



1.58



"Oil" means "Crude Oil".



1.59



"Oil Field" means an area within the Contract Area consisting of a

single Oil Reservoir or multiple Oil Reservoirs all grouped on or

related to the same individual geological structure, or stratigraphic

conditions, designated by the Contractor and approved by the Government

or the Management Committee, as the case may be (to include the maximum

area of potential productivity in the Contract Area in a simple

geometric shape) in respect of which a Commercial Discovery has been

declared and a Development Plan has been approved in accordance with

Article 9 hereof and a reference to an Oil Field shall include a

reference to the production of Associated Natural Gas from that Oil

Field.



1.60



"Operating Agreement" means the Joint Operating Agreement entered into

by the Parties constituting Contractor in accordance with Article 6,

with respect to the conduct of Petroleum Operations.



1.61



"Operating Committee" means the committee established by

that name in the Operating Agreement.



1.62



"Operator" means the Party so designated in Article 6.



1.63



"Participating Interest" means the percentage of participation of the

constituents of the Contractor at any given time in the rights and

obligations under this Contract. Initially the Participating Interest



of the constituents of Contractor are as follows:

9

1.

2.

3.



ONGC

RIL

EOGIL



40%

30%

30%



1.64



"Parties" means the Parties signatory to this Contract including their

successors and permitted assigns under this Contract and the term

"Party" means any of the Parties.



1.65



"Petroleum" means Crude Oil and/or Natural Gas existing in

their natural condition.



1.66



"Petroleum Operations" means, as the context may require, Exploration

Operations, Development Operations or Production Operations or any

combination of such operations, including, but not limited to,

collection of seismic information, drilling and completion and

Recompletion of Wells, construction, operation and maintenance of all

necessary facilities, plugging and abandonment of Wells, environmental

protection, transportation, storage, sale or disposition of Petroleum

to the Delivery Point, Site Restoration and all other incidental

operations or activities as may be necessary.



1.67



"Production Costs" means those costs and expenditures incurred in

carrying out Production Operations as classified and defined in Section

2 of the Accounting Procedure and allowed to be recovered in terms of

Section 3 thereof.



1.68



"Production Operations" means all operations conducted for the purpose

of producing Petroleum from the Contract Area after the commencement of

production from the Contract Area, including the operation and

maintenance of all necessary facilities therefor.



1.69



"Profit Petroleum" means all Petroleum produced and saved from the

Contract Area in a particular period as reduced by Cost Petroleum and

calculated as provided in Article 14.



1.70



"Recompletion" means an operation whereby a completion in one zone is

abandoned in order to attempt a completion in a different zone within

the existing wellbore.



1.71



"Reservoir" means a naturally occurring discrete

accumulation of Petroleum.



1.72



"Section" means a section of the Accounting Procedure.



1.73



"Self-Sufficiency" means, in relation to any Financial Year, that the

volume of Crude Oil and Crude Oil equivalent of Petroleum products

exported from India during that Financial Year either equals or exceeds

the volume of Crude Oil and Crude Oil equivalent of Petroleum products

imported into India during the same Financial Year.

10



1.74



"Site Restoration" shall mean all activities required to return a site

to its state as of the Effective Date pursuant to the Contractor's

environmental impact study or to render a site compatible with its

intended after-use (to the extent reasonable) after cessation of

Petroleum Operations in relation thereto and shall include, where

appropriate, proper abandonment of Wells or other facilities, removal

of equipment and structures (whether installed before or after the

Effective Date), and debris, establishment of compatible contours and

drainage, replacement of top soil, revegetation, slope stabilization,

infilling of excavations or any other appropriate actions in the

circumstances.



1.75



"Subcontractor" means any company or person contracted by

the Operator to provide services with respect to the

Petroleum Operations.



1.76



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

Operations, but does not include a seismic shot hole.



1.77



"Work Programme" means all the plans formulated for the

performance of the Petroleum Operations.



1.78



"Year" means Financial Year.

-----*****----11

ARTICLE 2

DURATION



2.1



The term of this Contract shall be for a period of twenty-five (25)

years from the Effective Date, unless the Contract is terminated

earlier in accordance with its terms, but may be extended on such terms

and conditions as may be mutually agreed by the Parties hereto.

-----*****----12

ARTICLE 3

RELINQUISHMENT



3.1



The Contractor may, with the approval of the Management Committee,

voluntarily relinquish a portion of the Contract Area other than an

area for which a Development Plan has been approved. Contractor shall

give the Government written notice of relinquishments thirty (30) days

prior to the end of any Calendar Year.



3.2



Relinquishment of less than all of the Contract Area shall

be in blocks of not less than one hundred square kilometres

(100 sq. kms.) and be of such shape and location as the

Government may deem appropriate for enabling effective

exploration and exploitation of such area.



3.3



Relinquishment of all or a part of the Contract Area or termination of

the Contract shall not be construed as absolving the Contractor of any

liability undertaken or incurred by the Contractor in respect of the

Contract Area prior to the date of such relinquishment or termination.

-----*****----13

ARTICLE 4

WORK PROGRAMME



4.1



The Contractor shall commence Petroleum Operations not later than six

(6) months from the Effective Date.



4.2



As soon as possible after the Effective Date, in respect of the period

ending with the last day of the Financial Year in which the Effective

Date falls and thereafter ninety (90) days before commencement of each

following Financial Year, the Contractor shall submit to the Management

Committee, through the Operating Committee, the Work Programmes and

budgets relating to Petroleum Operations, including the Minimum Work

Obligations, to be carried out during the ensuing Financial Year.



4.3



The Contractor may propose amendments to the details of an approved

Work Programme and budget in the light of the then existing

circumstances and shall submit to the Management Committee, through the

Operating Committee, modifications or revisions to the Work Programme

and budgets.

-----*****----14

ARTICLE 5

MANAGEMENT COMMITTEE



5.1



For the purpose of proper and expeditious performance of Petroleum

Operations under the provisions of this Contract, there shall be

constituted a committee to be called the Management Committee.



5.2



The Management Committee shall consist of four (4) members, one (1)

member nominated by and representing Government and one (1) member

nominated by and representing each constituent of the Contractor. The

member nominated by ONGC shall act as chairman.



5.3



A representative of the Operator acting as the convenor

shall call the meetings of the Management Committee.



5.4



Government and the Contractor may nominate alternate members with full

authority to act in the absence and on behalf of the members nominated

under Article 5.2 and may, at any time, nominate another member or

alternate member to replace any member nominated earlier by notice to

other members of the Management Committee.



5.5



A quorum of the Management Committee shall consist of three

(3) members.



5.6



The following matters shall be submitted to the Management

Committee for approval:

(a)



annual Work Programmes and budgets and any modifications or

revisions thereto, as proposed by the Operating Committee, for

Exploration Operations, Development Operations and/or Production

Operations;



(b)



proposals for an Appraisal Programme, the declaration of a New

Discovery as a Commercial Discovery and the approval of

Development Plans as may be required under this Contract, or

revisions or additions to an Appraisal Programme or a Development

Plan;



(c)



delineation of a Field and a Development Area;



(d)



appointment of auditors;



(e)



collaboration with lessees or contractors of other

areas;



(f)



claims or settlement of claims for or on behalf of or against the

Contractor in excess of limits specified in the Operating

Agreement or fixed by the Management Committee from time to time;

15



(g)



any proposed mortgage, charge or encumbrance on

petroleum assets, petroleum reserves or production of

Petroleum;



(h)



any other matter required by the terms of this Contract

to be submitted for the approval of the Management

Committee;



(i)



any other matter which the Contractor or the Operating

Committee decides to submit to it.



5.7



The Management Committee shall not take any decision without obtaining

prior approval of the Government, where such approval is required under

this Contract.



5.8



The Management Committee shall meet at least once every three (3)

months or more frequently at the request of any member. Operator shall

convene each meeting by notifying the members at least twenty eight

(28) days prior to such meeting (or a shorter period of notice if the

members unanimously so agree) of the time and place of such meeting and

the purpose thereof and shall include in such notice a provisional

agenda for such meeting. The Operator shall be responsible for

processing the final agenda for such meeting and the agenda shall

include all items of business requested by the members to be included,

provided such requests are received by the Operator at least ten (10)

days prior to the date fixed for the meeting. The Operator shall

forward the agenda to the members at least nine (9) days prior to the

date fixed for the meeting. Matters not included in the agenda may be

taken up at the meeting by any member with the unanimous consent of all

the members.



5.9



The Chairman, and in his absence any other member nominated by ONGC,

shall preside over the meetings of the Management Committee.



5.10



The Operator shall appoint one of the members nominated by the

constituents of the Contractor as secretary to the Management Committee

with responsibility, inter alia, for preparation of the minutes of

every meeting in the English language and provision to every member of

the Management Committee with two (2) copies of the minutes not later

than twenty-eight (28) days after the date of the meeting.



5.11



Within twenty-one (21) days of the receipt of the minutes of a meeting,

members shall notify the Operator and the other members of their

approval of the minutes by putting their signatures on one copy of the

minutes and returning the same to the Operator or by indicating such

approval to the Operator by telex, cable, or facsimile, with copies to

the other members. Any member may suggest any modification, amendment

or addition to the minutes by telex, cable or facsimile to the Operator

and other members or by indicating such suggestions when returning the

copy of the minutes to

16

the Operator. If the Operator or any other member does not agree with

the modification, amendment or addition to the minutes suggested by any

member, the matter shall be brought to the attention of the other

members and resubmitted to the Management Committee for approval at the

next meeting and the minutes shall stand approved as to all other

matters. If a member fails to appropriately respond within the

aforesaid twenty-one (21) day period as herein provided, the minutes

shall be deemed approved by such member.



5.12



The meetings of the Management Committee shall be held in New Delhi,

India unless otherwise mutually agreed by the members of the Management

Committee.



5.13



All matters requiring the approval of the Management Committee shall be

approved by a vote of three (3) or more members of the Management

Committee one (1) of whom shall be the Government representative.

-----*****----17

ARTICLE 6

OPERATORSHIP AND OPERATING AGREEMENT



6.1



EOGIL shall be the Operator for purposes of this Contract.



6.2



No change in operatorship shall be effected without the consent of the

Government, which consent shall not be unreasonably withheld.



6.3



The operating functions required of the Contractor under this Contract

shall be performed by the Operator on behalf of all constituents of the

Contractor subject to, and in accordance with, the terms and provisions

of this Contract, and generally accepted international petroleum

industry practice.



6.4



The constituents of the Contractor shall execute a mutually agreed

Operating Agreement. The Agreement shall be consistent with the

provisions of this Contract and shall provide for, among other things:

(a)



the appointment, resignation, removal and

responsibilities of the Operator;



(b)



the establishment of an Operating Committee;



(c)



functions of the Operating Committee taking into account the

provisions of the Contract, procedures for decision making,

frequency and place of meetings; and



(d)



contribution to costs, default, sole risk, disposal of petroleum

and assignment as between the parties to the Operating Agreement.

-----*****-----



18

ARTICLE 7

GENERAL RIGHTS AND OBLIGATIONS OF THE PARTIES

7.1



7.2



Subject to the provisions of this Contract, the Contractor

shall have, but not be limited to, the following rights:

(a)



the exclusive right during the term hereof to carry out Petroleum

Operations in the Contract Area and to recover costs and expenses

as provided in this Contract;



(b)



the right to use, free of charge, such quantities of Petroleum

produced from any Field as are reasonably required for conducting

Petroleum Operations in the Contract Area in accordance with

generally accepted practices in the international petroleum

industry;



(c)



the right to lay, build, construct or install

pipelines, roads, bridges, ferries, aerodromes,

landing fields, radio telephones, satellite

communications and related communication and

infrastructure facilities and exercise other ancillary

rights as may be reasonably necessary for the conduct

of Petroleum Operations subject to such approvals as

may be required, which shall not be unreasonably

withheld, under the applicable laws and/or regulations

in force from time to time for the regulation and

control thereof;



(d)



the right to have an expatriate work force as required

and necessary together with their required personal

effects;



(e)



the right to flare Gas temporarily when and as necessary,

provided the Operator shall give notice thereof to the Government

within forty-eight (48) hours of the start of such flaring and

the issue shall be discussed in the next meeting of the

Management Committee;



(f)



the right to use all wells, equipment and facilities installed as

of the Effective Date in the Contract Area ("Assets") free of any

additional cost or charges or encumbrances and assignment of such

Assets to Operator on behalf of the Contractor;



(g)



such other rights as are specified in this Contract.



The Government reserves the right to itself, or to grant to the Lessee

or others the right, to prospect for and mine minerals or substances

other than Petroleum within the Contract Area; provided, however, that

if after the Effective Date, the Lessee or others are issued rights, or

the Government proceeds directly to prospect for and mine in the

Contract Area for any minerals or substances other than

19

Petroleum, the Contractor shall use reasonable efforts to avoid

obstruction to or interference with such operations within the Contract

Area and, in either case, the Government shall use reasonable efforts

to ensure that operations carried out do not obstruct or unduly

interfere with Petroleum Operations in the Contract Area. In the event

of any conflict, Petroleum Operations shall take preference.



7.3



The Contractor shall:

(a)



except as otherwise expressly provided in this Contract, conduct

all Petroleum Operations at its sole risk, cost and expense and

provide all funds necessary for the conduct of Petroleum

Operations including funds for the purchase or lease of

equipment, materials or supplies required for Petroleum

Operations as well as for making payments to employees and

Subcontractors;



(b)



conduct all Petroleum Operations within the Contract Area

diligently, expeditiously, efficiently and in a safe and



workmanlike manner in accordance with good international

petroleum industry practice pursuant to the approved Work

Programmes;

(c)



ensure provision of all information, data, samples etc.

which the Contractor may be required to furnish under

the applicable laws;



(d)



ensure that all equipment, materials, supplies, plant and

installations used for Petroleum Operations comply with generally

accepted standards in the international petroleum industry and

are of proper construction and kept in good working order;



(e)



in the preparation and implementation of Work Programmes and in

the conduct of Petroleum Operations, follow good international

petroleum industry practices with such degree of diligence and

prudence reasonably and ordinarily exercised by experienced

parties engaged in a similar activity under similar circumstances

and conditions;



(f)



after the designation of a Field and a Development Area, pursuant

to this Contract, forthwith proceed to take all necessary action

for prompt and orderly development of the Field and the

Development Area and for the production of Petroleum in

accordance with the terms of this Contract;



(g)



appoint a technically competent and sufficiently experienced

representative, and, in his absence, a suitably qualified

replacement therefor, who shall be resident in India and who

shall have full authority to take such steps as may be necessary

to implement this Contract and whose names shall, on appointment

within

20

ninety (90) days after commencement of the first

Contract Year, be made known to the Government;



7.4



(h)



provide acceptable working conditions, living accommodation and

access to medical attention and nursing care in the Contract Area

for all personnel employed in Petroleum Operations and extend

these benefits to other persons who are engaged in or assisting

in the conduct of Petroleum Operations in the Contract Area;



(i)



be always mindful of the rights and interests of India

in the conduct of Petroleum Operations;



The infrastructure such as pipelines as may be developed/established by

the Contractor within the country may, to the extent capacity is

available, be available to the Government or any other entity upon

payment of compensation which shall include, but not be limited to,

cost of operation, repair, maintenance, interest and profit. The

Government and any other entity using any of Contractor's facilities

shall indemnify and hold harmless Contractor from and against any and

all loss, damage or injury arising out of or connected with such use.

-----*****----21

ARTICLE 8

GOVERNMENT ASSISTANCE



8.1



Upon application in the prescribed manner, and subject to compliance

with applicable laws and relevant procedures, the Government will

without any cost to itself:

(a)



provide the right of ingress and egress from the Contract Area

and any facilities used in Petroleum Operations, wherever

located, and which may be within their control;



(b)



use their good offices, when necessary, to assist

Contractor in procurement of facilities and services

required for execution of Petroleum Operations

including necessary approvals, permits, consents,



authorisations, visas, work permits, licenses, rights

of way, easement, surface rights and security

protection, required pursuant to this Contract and

which may be available from resources within the

Government's control;



8.2



(c)



use their good offices to assist in identifying and

making available necessary priorities for obtaining

local goods and services;



(d)



in the event that onshore facilities are required

outside the Contract Area for Petroleum Operations

including, but not limited to, storage, loading and

processing facilities, pipelines and offices, use their

good offices in assisting the Contractor to obtain from

the authorities of the state government in the state in

which such facilities are required, such licenses,

permits, authorizations, consents, security protection,

surface rights and easements as are required for the

construction and operation of the said facilities by

the Contractor;



(e)



in the event there is no economical passage other than through

national parks, sanctuaries, mangroves, wetlands of national

importance, biosphere reserves or other biologically sensitive

areas, assist in obtaining the prior written permission of the

concerned authorities.



ONGC shall provide data, if any, related to the Contract Area to the

Contractor which has not been previously provided.

-----*****----22

ARTICLE 9

DISCOVERY, DEVELOPMENT AND PRODUCTION



9.1



9.2



9.3



If and when a New Discovery is made within the Contract

Area, the Contractor shall:

(a)



forthwith inform the Government of the Discovery;



(b)



promptly thereafter, but in no event later than a period of

thirty (30) days from the date of such Discovery, furnish to the

Government particulars, in writing, of the Discovery;



(c)



promptly run tests to determine whether the New

Discovery is of potential commercial interest and,

within a period of sixty (60) days after completion of

such tests and analysis of results, submit a report to

the Management Committee and the Government containing

data obtained from such tests and its analysis and

interpretation thereof, together with a written

notification to the Government of whether, in the

Contractor's opinion, such New Discovery is of

potential commercial interest and merits appraisal.



If, pursuant to Article 9.1(c), the Contractor notifies the Government

that a New Discovery is of potential commercial interest, the

Contractor shall prepare and submit to the Management Committee, within

one hundred and twenty (120) days of such notification, a proposed

Appraisal Programme with a Work Programme and budget to carry out an

adequate and effective appraisal of such New Discovery designed to

achieve both the following objectives:

(a)



determine without delay, and, in any event, within the period

specified in Article 9.5, whether such New Discovery is a

Commercial Discovery; and



(b)



determine, with reasonable precision, the boundaries of

the area to be delineated as a Field.



The proposed Appraisal Programme for a New Discovery shall be

considered by the Management Committee within forty-five (45) days



after submission thereof pursuant to Article 9.2. The Appraisal

Programme, together with the Work Programme and budget submitted by the

Contractor, revised in accordance with any agreed amendments or

additions thereto, approved by the Management Committee, shall be

adopted as the Appraisal Programme and the Contractor shall promptly

commence implementation thereof; and the Yearly budget adopted pursuant

to Article 4, shall be revised accordingly. Where, in the case of an

Existing Discovery, Contractor desires to carry out additional

appraisal work, the Contractor shall submit its proposed Appraisal

Programme in respect of the Existing Discovery with a Work Programme

and

23

budget to the Management Committee for its approval within one hundred

twenty (120) days of the Effective Date.

9.4



The Contractor shall, unless otherwise agreed, in respect of a New

Discovery of Crude Oil, advise the Management Committee, by notice in

writing within a period of twenty-four (24) months from the date on

which the notice provided for in Article 9.1 was delivered, whether

such New Discovery is a Commercial Discovery or not. Such notice shall

be accompanied by a report on the New Discovery setting forth all

relevant technical and economic data as well as all evaluations,

interpretations and analysis of such data and feasibility studies

relating to the New Discovery prepared by or for the Contractor, with

respect to the Discovery. If the Contractor is of the opinion that

Petroleum has been discovered in commercial quantities, it shall

propose that the Government or Management Committee, as the case may

be, declare the New Discovery as a Commercial Discovery based on the

report submitted. In respect of a New Discovery of Gas, the provisions

of Article 21 shall apply.



9.5



The Management Committee shall, within forty-five (45) days of the date

of the notice referred to in Article 9.4, consider the proposal of the

Contractor and request any other additional information it may

reasonably require so as to reach a decision on whether or not to

declare the New Discovery as a Commercial Discovery. Such decision

shall be made within the later of (a) ninety (90) days from the date of

notice referred to in Article 9.4 or (b) ninety (90) days of receipt of

such other information as may be reasonably required under this Article

9.5. In the case of an Existing Discovery, Contractor shall within

ninety (90) days of the Effective Date propose a Development Plan

following the plan brought out in Appendix G, intended to achieve the

production profile brought out in Appendix H, containing the detailed

information required in Article 9.6, with supporting budget. Where a

Development Plan is so agreed it shall be the approved Development Plan

pursuant to Article 9 hereof.



9.6



If a New Discovery is declared commercial the Contractor shall submit

to the Management Committee, a comprehensive plan for the development

of the Commercial Discovery within two hundred (200) days of the

declaration of the Discovery as a Commercial Discovery. Such plan shall

contain detailed proposals by the Contractor for the construction,

establishment and operation of all facilities and services for and

incidental to the recovery, storage and transportation of the Petroleum

from the proposed Development Area to the Delivery Point together with

all data and supporting information including but not limited to:

24

(a)



Description of the nature and characteristics of the Reservoir,

data, statistics, interpretations, and conclusions on all aspects

of the geology, reservoir evaluation, petroleum engineering

factors, reservoir models, estimates of reserves in place,

possible production magnitude, nature and ratio of Petroleum

fluids and analysis of producible Petroleum;



(b)



Outlines of the development project and/or alternative

development projects, if any, describing the production

facilities to be installed and the number of wells to be drilled

under such development project and/or alternative development

projects, if any;



(c)



Estimate of the rate of production to be established



and projection of the possible sustained rate of

production in accordance with generally accepted

international petroleum industry practice under such

development project and/or alternative development

project, if any, which will ensure that the area does

not suffer an excessive rate of decline of production

or an excessive loss of reservoir pressure;



9.7



(d)



estimates of Development Costs and Production Costs under such

development project and/or alternative development projects, if

any;



(e)



Contractor's recommendations as to the particular

project that it would prefer, if any;



(f)



Work Programme and budget for Development and

Production Operations;



(g)



anticipated adverse impact on the environment and measures to be

taken for prevention or minimization thereof and for general

protection of the environment in conduct of operations; and



(h)



production profiles, financial/commercial analysis of

the project proposal.



Any proposed Development Plan submitted by the Contractor pursuant to

Articles 9.5 and/or 9.6 will be approved by the Management Committee

with such amendments and modifications as may be agreed upon by the

Contractor, within seventy-five (75) days of submission of the

Development Plan, which approval shall not be unreasonably withheld. If

such a Development Plan has not been approved by the Management

Committee within the seventy-five (75) day period, the Contractor shall

have the right to submit such plan directly to the Government for

approval, which approval shall not be unreasonably withheld. The

submission will be answered within sixty (60) days of receipt.

25



9.8



The Management Committee shall obtain such approvals from the

Government as may be required, except where this Contract provides that

the Contractor may obtain such approvals directly.



9.9



If the Management Committee fails to declare a New Discovery of Oil to

be commercial while the Contractor consider that it is commercial or

the Management Committee fails to declare the New Discovery as a

Commercial Discovery within the time limit stipulated in Article 9.5

hereof, the Contractor may declare the New Discovery as a Commercial

Discovery and submit development and production plans in respect of the

Discovery to the Management Committee as per the provisions of Article

9.6 and after such plans have been approved by the Management

Committee, the Contractor shall, acting solely,provide the entire

Development Costs and undertake development of the Oil Field. If,

however, the Field turns out to be non-commercial, the entire

Development Cost of the Field shall be borne solely by the Contractor

and shall not be recoverable as Cost Petroleum from any other Field or

Contract Area but shall be recoverable solely from such Field.



9.10



In the event that the Government considers a New Discovery to be

commercial but the Contractor considers the same as non-commercial, the

Government shall give notice to the Contractor to that effect and

thereafter the Field relating to such New Discovery shall be excluded

from the Contract Area for all purposes. In this event, the Contractor

shall have no claim on the production from such Field.



9.11



Work Programmes and budgets for Development and Production Operations

shall be submitted to the Management Committee, as soon as possible

after the designation of a Development Area and thereafter not later

than 31st December each Calendar Year in respect of the Financial Year

immediately following.



9.12



The Management Committee, when considering any Work Programme and

budget, may require the Contractor to prepare an estimate of potential

production to be achieved through the implementation of the programme

and budget for each of the three (3) Financial Years following the

Financial Year to which the Work Programme and budget relate. If major



changes in Financial Year to Financial Year estimates of potential

production are required, these shall be based on concrete evidence

necessitating such changes.

9.13



Not later than the fifteenth (15) day of January each Calendar Year, in

respect of the Financial Year immediately following, the Contractor

shall determine the "Programme Quantity". The Programme Quantity for

any Financial Year shall be the maximum quantity of Petroleum based on

Contractor's estimates, as approved by the Management Committee, which

can be produced from a Field consistent

26

with sound international petroleum industry practices and minimizing

unit production cost, taking into account the capacity of the producing

Wells, gathering lines, separators, storage capacity and other

production facilities available for use during the relevant Financial

Year, as well as the transportation facilities up to the Delivery

Point.



9.14



Proposed revisions to the details of a Development Plan or an annual

Work Programme or budget in respect of Development and Production

Operations shall, for good cause and if the circumstances so justify,

be submitted to the Management Committee for approval, through the

Operating Committee.

-----*****----27

ARTICLE 10

UNIT DEVELOPMENT



10.1



If a Reservoir in a New Discovery Area is situated partly within the

Contract Area and partly in an area in India over which other parties

have a contract or license/lease to conduct Petroleum Operations, the

Government may, for securing the most effective recovery of Petroleum

from such Reservoir, by notice in writing to the Contractor, require

that the Contractor:

(a)



collaborate and agree with such other parties on the

joint development of the Reservoir;



(b)



submit such agreement between the Contractor and such

other parties to the Government for approval; and



(c)



prepare a plan for such joint development of the Reservoir,

within one hundred and eighty (180) days of the approval of the

agreement referred to in (b) above.



10.2



If no plan is submitted within the period specified in Article 10.1(c)

or such longer period as the Contractor and other parties may agree or,

if such plan as submitted is not acceptable to the Government and the

parties cannot agree on amendments to the proposed joint development

plan, the Government may cause to be prepared, at the expense of the

Contractor and the other parties referred to in Article 10.1, a plan

for such joint development consistent with generally accepted practices

in the international petroleum industry which shall take into

consideration any plans and presentations made by the Contractor and

the aforementioned other parties.



10.3



If the Parties are unable to agree on the plan for joint development,

then any of them may refer the matter to a sole expert for final

determination pursuant to Article 33, provided that the Contractor may

in case of any disagreement on the issue of joint development or the

proposed joint development plan, or within sixty (60) days of

determination by a sole expert, notify the Management Committee that it

elects to surrender its rights in the New Discovery Area in lieu of

participation in a joint development.



10.4



If a proposed joint development plan is agreed and adopted by the

parties, or adopted following determination by the sole expert, the

plan as finally adopted shall be the approved joint development plan

and the Contractor shall comply with the terms of the Development Plan

as if the Commercial Discovery is established.



10.5



The provisions of Articles 10.1, 10.2, 10.3 and 10.4 shall apply

MUTATIS MUTANDIS to a New Discovery of a Reservoir located partly

within the Contract Area, which, although not equivalent to a

Commercial Discovery if developed alone,

28

would be a Commercial Discovery if developed together with that part of

the Reservoir which extends outside the Contract Area to areas subject

to contract or given on license/lease for Petroleum Operations by other

parties.



10.6



If a New Discovery is situated partly within the Contract Area and

partly outside the Contract Area, the area outside the Contract Area

over which, at the time of the making of the New Discovery by the

Contractor, no production sharing contract similar to this Contract has

been granted or is under negotiation and/or no license/lease to conduct

petroleum operations has been granted, the Government will favourably

consider the extension of the Contract Area to include the entire area

of the Reservoir if so requested by the Contractor.

-----*****----29

ARTICLE 11

MEASUREMENT OF PETROLEUM



11.1



The volume and quality of Petroleum produced and saved from a Field

shall be measured by methods and appliances generally accepted and

customarily used in generally accepted international petroleum industry

practice.



11.2



The Government may, at all reasonable times, inspect and test the

appliances used for measuring the volume and determining the quality of

Petroleum, provided that any such inspection or testing shall be

carried out in such a manner so as not to unduly interfere with

Petroleum Operations.



11.3



Before commencement of production in a Field, the Parties

shall mutually agree on:

(a)



methods to be employed to optimize the measurement of

volumes of Petroleum;



(b)



the point at which Petroleum shall be measured and the respective

shares allocated to the Parties in accordance with the terms of

this Contract;



(c)



the frequency of inspections and testing of measurement

appliances and relevant procedures relating thereto;

and



(d)



the consequences of a determination of an error in

measurement.



11.4



The Contractor shall undertake to measure the volume and quality of the

Petroleum produced and saved from a Field at the agreed measurement

point consistent with generally accepted practices in the international

petroleum industry. The Contractor shall not make any alteration in the

agreed method or procedures for measurement or to any of the approved

appliances used for the purpose without the written consent of the

Government.



11.5



The Contractor shall give the Government timely notice of its intention

to conduct calibration operations or any agreed alteration for such

operations and the Government shall have the right to be present and

observe, either directly or through authorized representatives, such

operations.

-----*****----30



ARTICLE 12

PROTECTION OF THE ENVIRONMENT

12.1



The Government and the Contractor recognise that Petroleum Operations

will cause some impact on the environment in the Contract Area.

Accordingly, in performance of the Contract, the Contractor shall

conduct its Petroleum Operations with due regard to concerns with

respect to protection of the environment and conservation of natural

resources. In the furtherance of any laws, regulations and rules

promulgated by the Government, the Contractor shall:

(a)



employ generally accepted industrial standards, including as

required, advanced techniques, practices and methods of operation

for the prevention of Environmental Damage in conducting its

Petroleum

Operations;



(b)



take necessary and adequate steps to prevent Environmental Damage

and, where some adverse impact on the environment is unavoidable,

to minimize such damage and the consequential effects thereof on

property and people; and



(c)



adhere to the guidelines, limitations or restrictions, if any,

imposed by Environmental Clearance as applicable on the Effective

Date and as such Environmental Clearance may be revised, expanded

or replaced as a result of Contractor's application(s) duly

submitted after the Effective Date.



12.2



If the Contractor fails to substantially comply with the provisions of

Article 12.1 or materially contravenes any relevant law, and such

failure or contravention results in substantial Environmental Damage,

the Contractor shall forthwith take all necessary and reasonable

measures to remedy the failure and the effects thereof.



12.3



If the Government has, on reasonable grounds, reason to believe that

any works or installations erected by the Contractor or any operations

conducted by the Contractor are endangering or may endanger persons or

any property of any person, or are causing avoidable pollution, or are

harming fauna and flora or the environment to a degree which is

unlawful, the Government may, pursuant to applicable law, require the

Contractor to take remedial measures within such reasonable period as

may be determined by the Government and, if appropriate, repair such

damage. The Government may, pursuant to applicable law, require the

Contractor to discontinue Petroleum Operations in whole or in part

until the Contractor has taken such action.



12.4



The Contractor shall, within one hundred twenty (120) days of the

Effective Date, cause a person or persons with special knowledge on

environmental matters, approved by the

31

Government, to carry out an environmental impact study in order:



12.5



(a)



to determine, at the time of the study, the prevailing situation

relating to the environment, human beings and local communities,

the wildlife and marine life in the Contract Area and in the

adjoining or neighbouring areas; and



(b)



to establish the likely effect on the environment, human beings

and local communities, the wildlife and marine life in the

Contract Area and in the adjoining or neighbouring areas in

consequence of the relevant phase of Petroleum Operations to be

conducted under this Contract.



The Contractor shall ensure that:

(a)



Petroleum Operations are conducted in an environmentally

acceptable and safe manner consistent with good international

petroleum industry practice and that such Petroleum Operations

are properly monitored;



(b)



the pertinent completed environmental impact studies are made

available to its employees and to its Subcontractors to develop

adequate and proper awareness of the measures and methods of



environmental protection to be used in carrying out the Petroleum

Operations; and

(c)



12.6



the contracts entered into between the Contractor and its

Subcontractors relating to its Petroleum Operations shall include

the provisions stipulated herein and any established measures and

methods for the implementation of the Contractor's obligations in

relation to the environment under this Contract.



The Contractor shall, prior to conducting any drilling activities,

prepare and submit for review by the Government contingency plans for

dealing with oil spills, fires, accidents and emergencies, designed to

achieve rapid and effective emergency response. The plans referred to

above shall be discussed with the Government and concerns expressed

shall be taken into account.

12.6.1



In the event of an emergency, accident, oil spill or fire

arising from Petroleum Operations affecting the

environment, the Contractor shall forthwith notify the

Government and shall promptly implement the relevant

contingency plan and perform such Site Restoration as may

be necessary.



12.6.2



In the event of any other emergency or accident

arising from the Petroleum Operations affecting

32

the environment, the Contractor shall take such action as

may be prudent and necessary in accordance with good

international petroleum industry practice in such

circumstances.



12.7



In the event that the Contractor fails to take necessary action to

comply with any of the terms contained in Article 12.5 and Article 12.6

within a reasonable period specified by the Government, the Government,

after giving the Contractor reasonable notice in the circumstances, may

take any action which may be necessary to ensure compliance with such

terms and recover from the Contractor, immediately after having taken

such action, all costs and expenditures incurred in connection with

such action together with such interest as may be determined in

accordance with Section 1.7 of Appendix C of this Contract.



12.8



Contractor shall notify the Government upon determination by it that

the estimated remaining recoverable reserves of any Field net of

operating costs equal two and one-half (2 1/2) times the estimated

abandonment cost whereupon the Government shall, within sixty (60)

days, take control of the Field and the abandonment obligation or,

failing which, the Contractor may then proceed to recover the

abandonment cost from the remaining production and abandon such Field.



12.9



Any and all costs incurred by Contractor pursuant to this Article shall

be cost recoverable including, but not limited to, sinking funds

established for abandonment.



12.10



The responsibility of the Contractor for the environment hereunder

shall be limited to damage to the environment which:

(a)



occurs after the date of the environmental impact

assessment ("EIA") made to establish the benchmark

condition. The EIA will be conducted as soon after the

Effective Date as is reasonably possible;



(b)



results from an act or omission of Contractor in

violation of existing law; and



(c)



notwithstanding the above, Contractor shall be responsible for

any damage to the environment because of any evidence of Oil

spill, blow-out, fire, etc., during the course of Joint

Operations from the Effective Date.

-----*****----33



ARTICLE 13

RECOVERY OF COSTS

13.1



The Contractor shall be entitled to recover Contract Costs out of the

total volume of Petroleum produced and saved from the Contract Area in

each Financial Year in accordance with the provisions of this Article,

and, in respect of sole risk or exclusive operations, Article VII of

the Operating Agreement.

13.1.1



Development Costs incurred by the Contractor in the

Contract Area shall be aggregated, and the Contractor shall

be entitled to recover out of Cost Petroleum the aggregate

of such Development Costs at the rate of one hundred

percent (100%) per annum, provided, however, that, subject

to the remaining provisions of this Article 13.1, the

Contractor shall not, for the purposes only of determining

the volume of Petroleum to which Contractor shall be

entitled under Article 13.1 as Cost Petroleum, claim as

Contract Costs Contractor's Development Costs incurred

after the Effective Date in connection with Development

Operations under the Development Plan for midand

south-Tapti Fields (as those Fields are determined in the

Development Plan first approved by the Management

Committee) which exceed Contractor's Cost Recovery Limit

(as hereinafter defined).



13.1.2



For the purposes of this Article 13.1,

Contractor's "Cost Recovery Limit" means costs

incurred after the Effective Date relating to the

construction and/or establishment of such

facilities as are necessary to produce, process,

store and transport Petroleum from within the

Existing Discoveries, in order to enable Gas

production of 4.2 million cubic metres per day in

accordance with the Development Plan for the midand south-Tapti Fields. Such costs shall include

costs incurred in relation to those items

illustrated in Appendix "G", including the 30

additional infill wells, and matters in

connection therewith. Appendix G further

describes Companies' development concept based on

an assumed project start date of July 1, 1993,

and Parties understand and agree that the

schedules and activities contained in such

assessment shall be revised, subject to

Management Committee approval, by the Contractor

in Contractor's Development Plan first submitted

pursuant to this Contract.

The Parties agree that for the purposes of this Article

13.1 the Contractor's Cost Recovery Limit shall be the sum

of Five Hundred Forty-five Million U.S. Dollars

(US$545,000,000).

34



13.1.3



The Parties acknowledge that the amount representing

Contractor's Cost Recovery Limit has been agreed by

Contractor on the basis of the following assumptions and/or

factors and/or

information:

(a) Included in calculations for the Cost Recovery Limit

are costs relating to Gas compression offshore

required for delivering Gas into GAIL's pipeline

system and an onshore pig trap; excluded from the Cost

Recovery Limit are Site Restoration and exploration or

appraisal drilling;

(b) the Cost Recovery Limit does not include any costs for

the development of any satellite Fields;

(c) the Contractor being able to obtain all necessary

approvals (including Government and state government



approvals) to enable Contractor to carry out the

Development Operations contemplated by the Development

Plan for the mid- and south-Tapti Fields in accordance

with the timing set out in such plan;

(d) the data relating to the Contract Area provided by

ONGC from time to time prior to the Effective Date

inclusive of the data package pertaining to the

Contract Area prepared by ONGC and made available for

inspection and purchase by the Companies pursuant to

the Government's "Notice Inviting Offers for Joint

Ventures to Develop Medium- Sized Oil and Gas Field in

India, 1992";

(e) international market conditions relating to the

availability and cost of materials and services in the

international petroleum industry in constant 1993

United States Dollars;

(f) the range of physical reservoir characteristics in

respect of the Oil and Gas Fields comprising the

Existing Discoveries not being materially different

from the ranges for such characteristics as revealed

in the data referred to in Article 13.1.3(d)on which

Companies based their assessment as described in Annex

G-1 to Appendix G; and

35

(g) Companies' development concept contemplated use of

existing ONGC-owned facilities for reseparation and

handling of Condensate and Gas upon it's arrival at

Hazira. ONGC and Companies will determine payment,

terms and conditions for the use of processing and

treating facilities owned by ONGC, which payment shall

be based on the principles detailed in Appendix I, or

alternatively the Contractor install the necessary

facilities, the cost of which shall be cost

recoverable and not subject to the Cost Recovery

Limit.

13.1.4



Having regard, inter alia, to the matters referred to in

Article 13.1.3, the Parties agree as follows:

(a) Included in calculations for the Cost Recovery Limit

are costs relating to Gas compression offshore

required for delivering Gas into GAIL's pipeline

system and an onshore pig trap; excluded from the Cost

Recovery Limit are Site Restoration and exploration or

appraisal drilling;

(b) the costs of developing the reserves and/or potential

reserves and/or satellite Fields referred to in

Article 13.1.3(b) shall not be subject to the Cost

Recovery Limit, notwithstanding that the development,

within the Contract Area, of such reserves and/or

potential reserves and/or satellite Fields may include

shared flowlines, injection lines, Gas-lift lines and

other facilities with those constructed as part of the

Development Plan for the mid- and south-Tapti Fields;

(c) in the event that the Contractor's Cost Recovery Limit

is exceeded as a result of:

(i)



(ii)



delays in carrying out the Development

Operations referred to in Article 13.1.3(c)

due to a delay in obtaining any necessary

approval;

material changes to the Development Plan for

the mid- and south-Tapti Fields necessitated

by Contractor's review of data provided, if

any, to the Companies by the Government



and/or ONGC after the Effective Date

36

available prior to the Effective Date then

the Companies, acting reasonably, would have

included such changes in the Development

Plan for the mid- and south-Tapti Fields;

(iii)



(iv)



(v)



a material change to the international

market conditions referred to in Article

13.1.3(e);

a variation to the Development Plan for the

mid- and south-Tapti Fields approved by the

Management Committee; or

an event of force majeure as provided in

Article 31;



then the Management Committee shall, at the request of

the Operator, in a meeting convened under Article 5.8,

promptly consider what, if any, increase should be

made to the Contractor's Cost Recovery Limit to fairly

reflect the circumstances in question PROVIDED THAT in

the case of delays referred to in Article 13.1.3(c)

the Management Committee shall not be obligated to

consider any increase where, and to the extent that,

such delay has been caused by the Companies' failure

to act in a diligent manner.

13.1.5



In the event that:

(a) there is any dispute between the Parties whether or to

what extent a circumstance referred to in Article

13.1.4(c) has arisen or resulted in the Contractor's

Cost Recovery Limit being exceeded; or

(b) the Management Committee is unable to agree whether an

increase should be made to the Contractor's Cost

Recovery Limit or is unable to agree on the amount of

any such increase;

then, at any time after thirty (30) days from the date of

the Management Committee meeting referred to in Article

13.1.4(c), any Party shall be at liberty to refer the

matter to arbitration in accordance with the provisions of

Article 33.



13.1.6



Costs incurred by the Companies prior to the Effective Date

hereof which have been approved by the Government, in

writing, shall be cost recoverable for purposes hereof

after approval of the Management Committee.

37



13.2



Exploration Costs (if any) incurred by the Contractor in respect of the

Contract Area up to the date of Commercial Production of Petroleum from

the Contract Area shall be aggregated, and the Contractor shall be

entitled to recover the aggregate of such Exploration Costs out of the

Cost Petroleum from the Contract Area at the rate of one hundred

percent (100%) per annum of such Exploration Costs beginning from the

date of such Commercial Production.



13.3



The Contractor shall be entitled to recover out of the Cost Petroleum

from the Contract Area the Exploration Costs which it has incurred in

that Contract Area in any Financial Year after the date of Commercial

Production from the Contract Area at the rate of one hundred percent

(100%) per annum of such Exploration Costs beginning from the date such

Exploration Costs are incurred.



13.4



The Contractor shall be entitled to recover Exploration Costs as

provided in Articles 13.2 and 13.3 in relation to the values of the

quantity of Petroleum produced, saved and sold from the Contract Area,

in the relevant year, provided that such Exploration Costs once



recovered shall not be allowable for recovery against any other

contract area.

13.5



Development Costs incurred by the Contractor in the Contract Area up to

the date of Commercial Production from the Contract Area shall be

aggregated, and the Contractor shall be entitled to recover out of the

Cost Petroleum from that Contract Area the aggregate of such

Development Costs at the rate of one hundred percent (100%) per annum

of such Development Costs beginning from the date of such Commercial

Production from the Contract Area.



13.6



The Contractor shall be entitled to recover out of the Cost Petroleum

produced from the Contract Area the Development Costs which it has

incurred on such Contract Area after the date of Commercial Production

from the Contract Area at the rate of one hundred percent (100%) per

annum of such Development Costs beginning from the date such

Development Costs are incurred.



13.7



The Contractor shall be entitled to recover in full during any

Financial Year the Production Costs incurred in the Contract Area out

of the Cost Petroleum.



13.8



If during any Financial Year the Cost Petroleum is not sufficient to

enable the Contractor to recover in full the Contract Costs due for

recovery in that Financial Year in accordance with the provisions of

Articles 13.1 through 13.7, then, subject to the provisions of Article

13.1:

a)



recovery shall first be made of the Production Costs; and

38



b)



recovery shall next be made of the Exploration Costs; and



c)



recovery shall then be made of the Development Costs.



The unrecovered portions of Contract Costs shall be carried forward to

the following Financial Year and the Contractor shall be entitled to

recover such Costs in such Financial Year or the subsequent Financial

Years as if such costs were due for recovery in that Financial Year, or

the succeeding Financial Years, until the unrecovered costs have been

fully recovered out of Cost Petroleum from the Contract Area.

13.9



For the purposes of this Article, as well as Article 14, costs,

receipts and income shall be converted into production unit

equivalents, and vice versa, using the relevant prices established

pursuant to Article 19 for Crude Oil and Article 21 for Natural Gas.



13.10



Pending completion of the calculations required to establish

definitively the Contractor's entitlement to Cost Petroleum from the

Contract Area in any Financial Year, the Contractor shall take

delivery, provisionally, of volumes of Crude Oil and/or Natural Gas

representing its estimated Cost Petroleum entitlement calculated with

reference to estimated production quantities, costs and prices for the

Contract Area as established by the Contractor and approved by the

Management Committee. Such provisional determination of Cost Petroleum

shall be made every quarter on a cumulative basis. Within sixty days of

the end of each Financial Year, a final calculation of the Contractor's

entitlement to Cost Petroleum, based on actual production quantities,

costs and prices for the entire Financial Year, shall be undertaken and

any necessary adjustments to the Cost Petroleum entitlement shall be

agreed upon between the Government and the Contractor and made as soon

as practicable thereafter.



13.11



Nothing herein contained shall provide for the recovery of costs by

ONGC which were incurred prior to the Effective Date.

-----*****----39

ARTICLE 14

PRODUCTION SHARING OF PETROLEUM BETWEEN

CONTRACTOR AND GOVERNMENT



14.1



The Contractor and the Government shall share in the Profit Petroleum

from the Contract Area in accordance with the provisions of this

Article. The share of Profit Petroleum, in any Financial Year, shall be

calculated for the Contract Area on the basis of the Investment

Multiple actually achieved by the Companies at the end of the preceding

Financial Year for the Contract Area as provided in Appendix D.



14.2



Profit Petroleum

14.2.1



When the Investment Multiple of the Companies at the end of

any Financial Year is less than two (2.0), the Government

shall be entitled to take and receive twenty percent (20%)

and the Contractor shall be entitled to take and receive

eighty percent (80%) of the total Profit Petroleum from the

Contract Area with effect from the start of the succeeding

Financial Year.



14.2.2



When the Investment Multiple of the Companies at the end of

any Financial Year in respect of any Contract Area is equal

to or more than two (2.0) but is less than two and one-half

(2.5), the Government shall be entitled to take and receive

forty percent (40%) and the Contractor shall be entitled to

take and receive sixty percent (60%) of the total Profit

Petroleum from the Contract Area with effect from the start

of the succeeding Financial Year.



14.2.3



When the Investment Multiple of the Companies at the end of

any Financial Year in respect of the Contract Area is equal

to or more than two and one-half (2.5) but is less than

three and one- half (3.5), the Government shall be entitled

to take and receive forty-five percent (45%) and the

Contractor shall be entitled to take and receive fifty-five

percent (55%) of the total Profit Petroleum from the

Contract Area with effect from the start of the succeeding

Financial Year.



14.2.4



When the Investment Multiple of the Companies at the end of

any Financial Year in respect of the Contract Area is equal

to or more than three and one-half (3.5), the Government

shall be entitled to take and receive fifty percent (50%)

and the Contractor shall be entitled to take and receive

fifty percent (50%) of the total Profit Petroleum from the

Contract Area with effect from the start of the succeeding

Financial Year.

40



14.3



The value of the Companies' Investment Multiple at the end of any

Financial Year in respect of the Contract Area shall be calculated in

the manner provided for, and on the basis of net cash flows specified,

in Appendix D to this Contract. However, the volume of Profit Petroleum

to be shared between the Government and the Contractor shall be

determined for each quarter on a cumulative basis. Pending finalization

of accounts, delivery of Profit Petroleum shall be taken by the

Government and the Contractor on the basis of provisional estimated

figures of Contract Costs, production, prices, receipts, income and any

other income or allowable deductions and on the basis of the value of

the Investment Multiple achieved at the end of the preceding Financial

Year. All such provisional estimates shall be approved by the

Management Committee. When it is necessary to convert monetary units

into physical units of production equivalents or vice versa, the price

or prices determined pursuant to Articles 19 and 21 for Crude Oil and

Natural Gas, respectively, shall be used. Within sixty (60) days of the

end of each Financial Year, a final calculation of Profit Petroleum

based on actual costs, quantities, prices and income for the entire

Financial Year shall be undertaken and any necessary adjustments to the

sharing of Profit Petroleum shall be agreed upon between the Government

and the Contractor and made as soon as is practicable thereafter.



14.4



The Profit Petroleum due to the Contractor in any Financial Year from

the Contract Area shall be divided between the Parties constituting the

Contractor in proportion to their respective Participating Interests.

-----*****-----



41

ARTICLE 15

TAXES, ROYALTIES, RENTALS, ETC.

15.1



The Companies and the operations under this Contract shall be subject

to all fiscal legislation of India, except where, pursuant to any

authority granted under any applicable law, they are exempt wholly or

partly from the application of the provisions of a particular law or as

otherwise provided herein.

15.2.1



15.4



15.5



For the purpose of computing profits or gains of the

business consisting of the prospecting for or extraction or

production of Petroleum, there shall be made in lieu of the

allowances admissible under the Income Tax Act, 1961, such

allowances as are specified in this Agreement pursuant to

Section 42 in relation to:

(a)



expenditure by way of infructuous or abortive

exploration expenses in respect of any area

surrendered prior to the beginning of Commercial

Production; and



(b)



after the beginning of commercial production, to

expenditure incurred, whether before or after such

Commercial Production, in respect of drilling or

exploration activities or services or in respect of

physical assets used in that connection.



15.2.2



Payments made by the Companies pursuant to Article 16 shall

be deductible for income tax purpose in the year in which

payment is made by the Companies, as permissible under

Section 42 of the Income Tax Act, 1961.



15.3.1



In respect of matters not covered above, deduction shall be

allowed in accordance with other provisions of Income Tax

Act, 1961, and the rules framed thereunder.



15.3.2



The revenue from the Business consisting of Petroleum

Operations shall be determined in accordance with Article

19 for its Participating Interest share of Crude Oil saved

and sold, or otherwise disposed of, from each Field and

from any revenue realized on the sale of ANG or NANG

referred to in Article 21 as well as any other gains or

receipts from Petroleum Operations as reduced by the

deductions as specified within this Article, and, except as

herein provided, all the provisions of the Income Tax Act,

1961, shall apply. 42



The following terms used in Section 42 of the Income Tax Act, 1961, and

Articles 15.2 and 15.3 shall have the meanings corresponding to the

terms used in this Contract and defined in Article 1 as follows:

(a)



"Previous Year" means the year as defined in Section 2(34) of the

Income Tax Act, 1961.



(b)



The other terms used herein and not defined in the Income Tax,

1961 shall have the meaning therein ascribed in Article 1.



Except for income tax as otherwise provided in this Article, the

Government covenants to the Companies that the Companies shall not be

liable for payment of:

(a)



any taxes calculated by reference to income from or

sale of Petroleum; or



(b)



any customs or excise duties, export duties or any other

statutory charge on the import or re-export of machinery, plant,

equipment, materials or supplies imported by or on behalf of

Contractor or its subcontractors solely and exclusively for use

in Petroleum Operations.

Any such payments, if the Companies are made liable shall be

reimbursed by the Government.



15.6.1



The constituents of the Contractor shall be liable to pay

royalties and cess on their Participating Interest share of

Crude Oil and Natural Gas saved and sold in accordance with

the provisions of this Agreement. The royalty on Oil saved

and sold will be paid at Rs. 481 per metric ton and cess on

Oil saved and sold will be paid at Rs. 900 per metric ton.

Royalty on Gas saved and sold will be paid at ten percent

(10%) of the value at wellhead. No cess shall be payable in

respect of Gas. Royalty and cess shall not exceed the

herein above amounts throughout the term of the Contract.

Royalty and cess shall be payable in Indian Rupees. Any

such additional payment shall be made by the Government.



15.6.2



All payments (except income tax) made by Contractor or its

constituents as applicable under appropriate law including,

but not limited to, taxes whether levied by the Central

Government or state government, or any other local or

statutory authority, royalties, cess, levies, duties,

rentals, lease rent, license fees, export duties,

43

countervailing duties, provision for sinking fund for

environmental or abandonment costs, or any other charges

whatsoever, directly attributable to Petroleum Operations.



15.8



If any change in or to any Indian law, rule or regulation by any

authority results in a material change to the economic benefits

accruing to any of the Parties to this Contract after the Effective

Date, the Parties shall consult promptly to make necessary revisions

and adjustments to the Contract in order to maintain such expected

benefits to each of the Parties.

-----*****----44

ARTICLE 16

PAYMENT



16.1



The Companies shall pay to ONGC in consideration of the right to

commence and carry out exploration and drilling activities in the

Contract Area, pursuant to and in accordance with the Notice Inviting

Offers for Joint Ventures to Develop Medium Sized Oil and Gas Fields in

India-1992 and the bid submitted in response thereto, as follows:

(a)



within two (2) days following the Effective Date,

excluding days on which the banks in India or the

United States are closed, Twenty-one Million United

States Dollars (US$21,000,000). EOGIL shall pay Ten

Million Five Hundred Thousand United States Dollars

(US$10,500,000) and RIL shall pay Ten Million Five

Hundred Thousand United States Dollars (US$10,500,000).

ONGC's bank wire transfer instructions are as follows:

ACCOUNT NUMBER: 01 00000 3054

OIL & NATURAL GAS CORPORATION LIMITED

STATE BANK OF INDIA, OVERSEAS BRANCH

VIJAYA BUILDING,

BARAKHAMBA ROAD,

NEW DELHI, INDIA 110 001



(b)



When and if the hereinafter set forth production quantities are

reached, the Companies will within fifteen (15) days following

such attainment pay ONGC in accordance with the following

schedule:

(i)



Another Six Million United States Dollars

(US$6,000,000) after achieving a cumulative

production of five billion cubic meters of

Gas;



(ii)



Another Nine Million United States Dollars

(US$9,000,000) after achieving a cumulative

production of ten billion cubic meters of



Gas; and

(iii)



Another Fifteen Million United States Dollars

(US$15,000,000) after achieving a cumulative

production of fifteen billion cubic meters of Gas.



16.2



Cumulative production shall, for purposes of this Article,

mean Gas produced, saved and sold.



16.3



Each Company shall pay its share of the payment in the

proportion that it received Petroleum.

-----*****----45

ARTICLE 17

CUSTOMS DUTIES



17.1



Machinery, plant, equipment, materials and supplies imported by a

Contractor or its Subcontractors for use in Petroleum Operations shall

be exempted from customs duties subject to compliance with procedures,

if any, as may be determined pursuant to applicable customs duty

legislation, Article 23 and the terms herein specified.



17.2



Contractor shall, from time to time and as required, submit to the

Government a list of Subcontractors who are engaged by it for the

purpose of obtaining the various categories of items pursuant to the

conduct of Petroleum Operations and who may claim exemptions hereunder.



17.3



In order to qualify for the exemption from customs duties as provided

for in Article 17.1, all imported items for which duty exemption is

being claimed shall be certified, by a representative of the

Contractor, to be imported under the terms of this Contract for use in

carrying out Petroleum Operations and shall be certified by a

representative of the Government to be eligible for such exemption

pursuant to the terms of the Contract. In order to expedite such

exemption, Contractor may submit a certified list of qualified items up

to sixty (60) days in advance of anticipated import.



17.4



The Government shall have the right to inspect the records and

documents of the physical item or items for which an exemption is or

has been provided under Article 17.1 to determine that such item or

items are being or have been imported for the purpose for which the

exemption was granted. The Government shall also be entitled to inspect

such physical items wherever located to ensure that such items are

being used or held for the purpose herein specified and any item not

being so used shall immediately become subject to payment of the

applicable customs duties.



17.5



Subject to Article 27, the Contractor and its Subcontractors may sell

or otherwise transfer in India or sell for export all imported items

which are no longer required for Petroleum Operations, subject to

applicable laws governing customs duties and sale or disposal of such

items.

-----*****----46

ARTICLE 18

DOMESTIC SUPPLY, SALE, DISPOSAL AND

EXPORT OF CRUDE OIL



18.1



Until such time as the total availability to the Government and

government companies of Crude Oil from all Petroleum production

activities in India meets the total national demand, as determined by

the Government, each constituent of Contractor shall be required to

offer to the Government or its nominee all of the Contractor's

entitlement to Crude Oil from each Field in order to assist in

satisfying the national demand, provided, however, that nothing

contained in any contract entered into by the Contractor for the

supply, sale or disposal of Petroleum, with any nominee of the

Government pursuant to this Contract shall in any manner abrogate the

obligation of the Government contained herein.



18.2



Pursuant to Article 18.1 and subject to Articles 18.4 and 18.6, each

constituent of Contractor shall offer to sell to the Government (or its

nominee) its total Participating Interest share of Crude Oil to which

it is entitled under Articles 13 and 14 at the price determined in

accordance with Article 19 for sales to Government and the Government

shall have the option to purchase the whole or any portion thereof at

the said price.



18.3



The aforementioned offer shall be made by each constituent of

Contractor, in writing, at least six (6) months preceding the Financial

Year in which the sale is to be made, specifying the estimated

quantities and grade of Crude Oil being offered (based upon estimates

which shall be adjusted within ninety (90) days of the end of each

Financial Year on the basis of actual quantities produced and saved).

The Government shall exercise its option to purchase, in writing, not

later than ninety days (90) preceding the Financial Year in respect of

which the sale is to be made, specifying the quantity and grade of

Crude Oil which it elects to take in the ensuing year. Failure by the

Government to give such notice within the period specified shall be

conclusively deemed an election to take all of the Crude Oil offered

(adjusted as provided herein) in the ensuing Financial Year.



18.4



If, during any Financial Year, India attains Self-Sufficiency, the

Government shall promptly thereafter, but in no event later than the

end of that Financial Year, so advise the Contractor by written notice.

In such event, as from the end of the first quarter of the following

Financial Year, or such earlier date as the Parties may mutually agree,

Government's option to purchase shall be suspended and each constituent

of Contractor shall have the right to lift and export its Participating

Interest share of Crude Oil until such time, if any, as

Self-Sufficiency shall have ceased to exist. If Self-Sufficiency ceases

to exist during a Financial Year, the Government shall recover its

47

option to purchase under Article 18.2 in respect of the following

Financial Year by giving notice thereof to the Contractor as provided

in Article 18.3.



18.5



All payments in respect of sales to the Government pursuant to

provisions of this Article 18 shall be made by the Government within

the period for credit applicable in the calculation of the price

pursuant to Article 19. If no time frame for credit is applicable in

such calculation, payment shall be made within forty five (45) days

from the date the invoice is delivered to the Government. Contractor

shall submit a monthly invoice to the Government for the quantity of

Crude Oil delivered. Payment shall be made in United States Dollars by

bank wire to the credit of the Foreign Company's designated account

with a bank within or outside India. All amounts unpaid by the

Government by the due date shall, from the due date, bear interest

calculated on a day-to-day basis at the LIBOR plus one percentage (1%)

point from the due date compounded daily until paid.



18.6



If full payment is not received by Contractor when due as provided in

Article 18.5, the Contractor shall, at any time thereafter, notify the

Government of the default and, unless such default is remedied within

fifteen (15) days from the date of the notice, the Contractor shall

have the right, unless otherwise agreed, upon written notice to the

Government and without prejudice to the Contractor's right to recover

all costs, charges, expenses and losses, incurred by the Contractor:

a)



to suspend the Government's option to purchase under

Article 18.2 and transport the Petroleum to any onshore

facility and sell as each constituent of Contractor may

in its absolute discretion deem fit;



b)



without prejudice to the foregoing, to freely lift, sell and

export all its Participating Interest share of Crude Oil subject

to the destination restrictions specified in Article 18.7, until

the Government has paid the due amount plus interest as provided

herein;



c)



if the payment plus interest is not received by the

Contractor within one hundred and eighty (180) days



from the date the payment was due, to receive and

export the Government's share of Profit Oil until such

time as either Government has paid all amounts due plus

interest, or the value, based on the price as determined in accordance with Article 19, of Government's

share of Profit Oil so sold is equal to all amounts due

plus interest, whichever first occurs; provided,

however, that if the Government makes a payment to the

Contractor after the Contractor has commenced sale of

Government's share of Profit Oil and such payment

together with the value of Government's share of Profit

Oil sold (based on the price determined in accordance

48

with Article 19) exceeds the amount due plus interest, necessary

adjustment shall be carried out to refund to the Government

forthwith the excess amount received by the Contractor.

18.7



The Contractor shall be entitled to freely lift, sell and export any

Crude Oil which the Government is unable to take or has elected not to

purchase pursuant to this Article 18 subject to Government's generally

applicable destination restrictions to countries with which the

Government, for policy reasons, has severed or restricted trade.



18.8



No later than sixty (60) days prior to the commencement of production

in a Field (or Fields where production is from more than one Field),

and thereafter no less than sixty (60) days before the commencement of

each Financial Year, the Contractor shall cause to be prepared and

submitted to the Parties a production forecast setting out the total

quantity of Crude Oil that it estimates can be produced from a Field

during the succeeding year, based on the maximum efficient rate of

recovery of Crude Oil from that Field in accordance with good petroleum

industry practice. No later than thirty (30) days prior to the

commencement of each Calendar Quarter, the Contractor shall advise its

estimate of production for the succeeding Calendar Quarter and shall

endeavour to produce the forecast quantity for each Calendar Quarter.



18.9



Each Party comprising the Contractor shall, throughout the term of this

Contract, have the right to separately take in kind and dispose of all

its share of Cost Petroleum and Profit Petroleum and shall have the

obligation to lift the Cost Petroleum and Profit Petroleum on a current

basis and in such quantities so as not to cause a restriction of

production or inconvenience to the other Parties.



18.10



The Government shall, throughout the term of this Contract, have the

right to separately take in kind and dispose of its share of Profit

Petroleum and of such portion of the Contractor's share of Petroleum as

is purchased by the Government pursuant to Article 18, subject to

Article 18.6 and shall have the obligation to lift all of the Oil on a

current basis and in such quantities so as not to cause a restriction

of production or inconvenience to the other Parties.



18.11



For the purpose of implementing the provisions of Articles 18.9 and

18.10, a Crude Oil lifting procedure shall be agreed upon by the

Parties as soon as practicable but no later than two (2) months after

the Effective Date of this Contract. Such lifting procedure shall

include, but not necessarily be limited to:

49

(a)



a procedure for notification by the Operator to the

Government, and to each Party comprising the

Contractor, of projected Crude Oil production;



(b)



a procedure for notification by the Government, and by each Party

comprising the Contractor, to the Operator, of its expected

offtake and the consequences of inability or failure to offtake.

-----*****----50

ARTICLE 19

VALUATION OF OIL



19.1



For the purpose of this Contract, the value of Crude Oil shall be based

on the price determined as provided herein.



19.2



A price for Crude Oil shall be determined for each Calendar Month or

such other period as the Parties may agree (hereinafter referred to as

"the Delivery Period") in terms of United States Dollars per Barrel,

FOB Delivery Point for Crude Oil produced and sold or otherwise

disposed of from each Contract Area, for each Delivery Period, in

accordance with the appropriate basis for that type of sale or disposal

specified below.



19.3



In the event that some or all of Contractor's total sales of Crude Oil

during a Delivery Period are made to third parties in Arms Length

Sales, all sales so made shall be valued at the weighted average of the

prices actually received by Contractor, calculated by dividing the

total receipts from all such sales FOB the Delivery Point by the total

number of Barrels of the Crude Oil sold in such sales.



19.4



19.3.1



In the event that a portion of such third party

Arms Length Sales are made on a basis other than

an FOB basis as herein specified, the portion

shall be valued at the prices equivalent to the

prices FOB the Delivery point for such sales

determined by deducting all costs (such as

transportation, demurrage, loss of Crude Oil in

transit and similar costs) incurred downstream of

the Delivery Point, and the prices so determined

shall be deemed to be the actual prices received

for the purpose of calculation of the weighted

average of the prices for all third party Arms

Length Sales for the Delivery Period.



19.3.2



Each constituent of Contractor shall separately

submit to the Government, within fifteen (15)

days of the end of each Delivery Period, a report

containing the actual prices obtained in their

respective Arms Length Sales to third parties of

any Crude Oil. Such reports shall distinguish

between term sales and spot sales and itemize

volumes, customers, prices received and credit

terms, and the constituent of the Contractor

shall allow the Government to examine the

relevant sales contracts.



In the event that some or all of a constituent of Contractor's total

sales of Crude Oil during a Calendar Month are made to the Government,

the price of all sales so made shall, unless otherwise agreed between

the Parties, be determined on the basis of either the FOB selling price

per Barrel of one or more crude oils which, at the time of

51

calculation, are being freely and actively traded in the international

market and are similar in characteristics and quality to the Crude Oil

and/or Condensate in respect of which the price is being determined,

such FOB selling price to be ascertained from Platt's Crude Oil Market

Wire daily publication ("Platt's"), or the spot market for the same

crude oils ascertained in the same manner, whichever price, in the

opinion of the Parties, more truly reflects the current value of such

crude oils. For any Calendar Month in which sales take place, the price

shall be the arithmetic average price per Barrel determined by

calculating the average for the preceding Calendar Month of the mean of

the high and low FOB or spot prices for each day of the crude oil(s)

selected for comparison adjusted for differences in the Crude Oil and

the crude oil(s) being compared for quality, transportation costs,

delivery time, quantity, payment terms, the market area into which the

Crude Oil is being sold, other contract terms to the extent known and

other relevant factors. In the event that Platt's ceases to be

published or is not published for a period of thirty (30) consecutive

days, the Parties shall agree on an alternative daily publication.

19.4.1



Notwithstanding anything herein otherwise provided, the

price paid for such sales shall be, in any Calendar

Month,the FOB selling price for a Marker Crude ("Marker



Crude") which shall be Brent (DTD) on a United States

Dollar per Barrel basis less US$0.10 per Barrel.



19.5



19.4.2



The Marker Crude price will be based on the

previous Calendar Month's average of the daily

low and high quotations of Marker Crude as

published by Platts' Market wire. The average is

to be calculated up to three (3) decimals to

arrive at a United States Dollar per Barrel

price, which will be applicable for the month of

supply.



19.4.3



The Government and/or its nominee shall pay any

and all sales tax payable on the sale of Oil to

the Government or its nominee.



19.4.4



The Government and/or its nominee shall enter into a Crude

Oil sales agreement with the Constituents of the Contractor

which shall contain terms and conditions normally contained

in international Crude Oil sales agreements of a similar

nature.



In the event that in any Delivery Period some but not all of a

constituent of Contractor's sales of Crude Oil from the Contract Area

are made to the Government or a Government company and some but not all

of a constituent of Contractor's sales of Crude Oil from the Contract

Area are

52

made to third parties in Arms Length Sales and the price as established

in accordance with Article 19.4 differs by more than one percent (1%)

from the price as determined in accordance with Article 19.3 for the

same Delivery Period, the Parties shall meet, upon notice from any

Party, to determine if the prices established for the relevant Delivery

Period for sales to the Government should be adjusted taking into

account third party Arms Length Sales made by a constituent of

Contractor of the same or similar Crude Oil from the relevant Field or

other fields and published information in respect of other genuine

third party Arms Length Sales of the same or similar crude oil for that

Delivery Period. Until the matter of an adjustment for the relevant

Delivery Period is finally determined , the price as established in

accordance with this Article will apply for that Delivery Period. Any

adjustment, if necessary, will be made within thirty (30) days from the

date the adjustment for that Delivery Period is finally determined.



19.6



A constituent of Contractor shall determine the relevant prices in

accordance with this Article and the calculation, basis of calculation

and the price determined shall be supplied to the Government and shall

be subject to agreement by the Government before it is finally

determined. Pending final determination, the last established price, if

any, for the Crude Oil shall be used.



19.7



In the event that the Parties fail to reach agreement on any matter

concerning selection of the crude oil(s) for comparison, the

calculation, the basis of, or mechanism for the calculation of the

prices, the prices arrived at, the adjustment of any price or generally

about the manner in which the prices are determined according to the

provisions of this Article within thirty (30) days, or such longer

period as may be mutually agreed between the parties, from the date of

commencement of Commercial Production or the end of each Delivery

Period thereafter, any Party may refer the matter or matters in issue

for final determination by a sole expert appointed as provided in

Article 33.

19.7.1



Within ten (10) days of the said appointment, the Parties

shall provide the expert with all information they deem

necessary or as the expert may reasonably require.



19.7.2



Within fifteen (15) days from the date of his

appointment, the expert shall report to the

Parties on the issue(s) referred to him for

determination, applying the criteria or mechanism

set forth herein and indicate his decision

thereon to be applicable for the relevant

Delivery Period for Crude Oil and such decision



shall be accepted as final and binding by the

Parties.

53

19.7.3



Except for the adjustment referred to in

Article 19.5, any price or pricing mechanism

agreed by the Parties pursuant to the provisions

of this Article shall not be changed

retroactively.



19.8



Any sale or disposal to Affiliates or other sale or disposal of Crude

Oil produced from a Field, other than to the Government or Government

companies or to third parties in Arms Length Sales, in any Delivery

Period, shall be valued on the same basis as sales to the Government or

a Government company. In the event of such a sale or disposal by a

Company, such Company shall submit to the Government, within fifteen

(15) days of the end of each Delivery Period, all relevant information

concerning such sales or disposals.



19.9



In the event that in any Delivery Period there is more than one type of

sales referred to in Articles 19.3, 19.4 and 19.8, then, for the

purpose of calculating Cost Petroleum and Profit Petroleum entitlement

pursuant to Articles 13 and 14, a single price per Barrel of Crude Oil

for all the sales for the relevant Delivery Period shall be used. Such

single price shall be the weighted average of the prices determined for

each type of sale, weighted by the respective volumes of Crude Oil sold

in each type of sale in the relevant Delivery Period.



19.10



In this Article the term "Government" shall include any other agency or

nominee of the Government to whom Crude Oil is to be sold.



19.11



The provisions specified above for the determination of the price of

sales of Crude Oil shall apply mutatis mutandis to Condensates.



19.12



The Parties shall meet annually, or sooner upon notice served by any

Party on the others, to review the list of selected Crude Oils or the

mechanism established pursuant to this Article 19 in light of any new

facts since the date of selection of such Crude Oils or establishment

of such mechanism and to determine what adjustment (if any) should be

made to the said selection or mechanism by mutual agreement of the

Parties.

------*****----54

ARTICLE 20

CURRENCY AND EXCHANGE CONTROL PROVISIONS



20.1



Subject to the provisions herein, and to compliance with the relevant

provisions of the laws of general application in India governing

currency and foreign exchange and related administrative instructions

and procedures issued thereunder on a non-discriminatory basis, each

Foreign Company comprising the Contractor shall, during the term of

this Contract have the right to:

(a)



repatriate funds relating to Petroleum Operations abroad, in

United States Dollars or any other freely convertible currency

acceptable to the Government and the Foreign Company;



(b)



receive, retain and use abroad the proceeds of any

export sales of Petroleum under the contract;



(c)



open, maintain and operate bank accounts with reputable banks,

both inside and outside India, for the purpose of this Contract;



(d)



freely import, through normal banking channels, funds

necessary for carrying out the Petroleum Operations;



(e)



convert into foreign exchange and repatriate sums

imported pursuant to (d) above in excess (if any) of

its requirements; and



(f)



make payments of interest and principal outside of India for



purchases, services and loans obtained abroad without the

requirement that funds used in making such payments must come

from or originate in India.

Provided however, that repatriation pursuant to sub-paragraphs (a) and

(e) and payments pursuant to sub-paragraph (f) shall be subject to the

provisions of any treaties or bilateral arrangements between the

Government and any country with respect to payments to that country.

20.2



The rates of exchange for the purchase and sale of currency by the

Contractor shall be the prevailing rates of general application

determined by the State Bank of India or such other financial body as

may be mutually agreed by the Parties and in accordance with prevailing

currency and exchange regulations and, for accounting purposes under

this Contract, these rates shall apply as provided in Section 1.6 of

Appendix C.



20.3



Domestic Companies shall be subject to the relevant provisions of the

applicable laws in India governing currency and foreign exchange and

related administrative instructions and procedures issued thereunder.

-----*****----55

ARTICLE 21

NATURAL GAS



21.1



Subject to Article 21.2, the Indian domestic market shall have the

first call on the utilisation of Natural Gas discovered pursuant to

Petroleum Operations and produced from the Contract Area. Accordingly,

any proposal by the Contractor relating to Discovery and production of

Natural Gas from the Contract Area shall be made in the context of the

Government's policy for the utilisation of Natural Gas and shall take

into account the objectives of the Government to develop its resources

in the most efficient manner and to promote conservation measures.



21.2



Contractor shall have the right to use Natural Gas produced from the

Contract Area for the purpose of Petroleum Operations including, but

not limited to, reinjection for pressure maintenance in the Oil Fields,

Gas lifting and power generation.



21.3



For the purpose of sales to the domestic market pursuant to this

Article 21, the Delivery Point shall be the Delivery Point set forth in

the Gas sales contract entered into by the Contractor.



21.4



ASSOCIATED NATURAL GAS (ANG)

21.4.1



In the event that a New Discovery of Crude Oil

contains ANG, Contractor shall declare in the

proposal for the declaration of the New Discovery

as a Commercial Discovery as specified in

Article 9, whether (and by what amount) the

estimated production of ANG is anticipated to

exceed the quantities of ANG which will be used

in accordance with Article 21.2 (hereinafter

referred to as "the Excess ANG"). In such event

the Contractor shall indicate whether, on the

basis of the available data and information, it

has reasonable grounds for believing that the

Excess ANG could be commercially exploited in

accordance with the terms of this Contract along

with the Commercial Production of the Crude Oil

from the Oil Field, and whether the Contractor

intends to so exploit the Excess ANG.



21.4.2



Based on the principle of full utilization and

minimum flaring of ANG, a proposed development

plan for an Oil Field (or Oil Fields), shall, to

the extent economically reasonable, include a

plan for utilisation of the ANG from the Existing

Discovery and New Discovery, including estimated

quantities to be flared, reinjected, and to be

used for Petroleum Operations; and, if the

Contractor proposes to commercially exploit the



Excess ANG for sale in the domestic market in

56

accordance with Government's policy, or

elsewhere, the proposed plans for such

exploitation.

21.4.3



If the Contractor wishes to exploit the Excess

ANG (whether from an Existing or New Discovery),

such ANG shall first be offered for sale to the

Government (or its nominee) in writing in

accordance with the terms of this Contract. On

receipt of such offer, the Government (or its

nominee) shall, within three (3) months of the

date of receipt thereof, notify the Contractor,

in writing, whether or not it wishes to exercise

its option to purchase the Excess ANG.



21.4.4



If the Government exercises its option to

purchase the Excess ANG as provided in

Article 21.4.3:

(a) the Government shall indicate in the notice exercising

the option, a date, within two (2) years of the date

of the Contractor's offer, for commencement of

purchase of the Excess ANG;

(b) within six (6) months of the date of notification of

the exercise of the Government's option pursuant to

Article 21.4.3., the Contractor and the Government (or

its nominee) shall agree on the terms for the sale to

Government (or its nominee) of the Excess ANG.



21.4.5



If the Government does not exercise its option to purchase

the Excess ANG the Contractor shall be free to explore

markets for the commercial exploitation of the Excess ANG.



21.4.6



Where the Contractor is of the view that Excess ANG cannot

be commercially exploited, and chooses not to exploit ANG,

or is unable to find a market for the Excess ANG pursuant

to Article 21.4.5, the Government shall be entitled to take

and utilise such Excess ANG.



21.4.7



If the Government elects to take the Excess ANG

as provided in Article 21.4.6:



(a)



the Contractor shall deliver such Excess ANG to the

Government (or its nominee) free of cost, at the downstream

flange of the Gas/Oil separation facilities;



(b)



the Government or its nominee shall bear all

costs including gathering, treating, processing

57

and transporting costs beyond the downstream

flange of the Gas/Oil separation facilities;



(c)



21.4.8



the delivery of such Excess ANG shall be subject to

procedures to be agreed between the Government or its

nominee and the Contractor prior to such delivery, such

procedures to include matters relating to timing of

off-take of such Excess ANG, which procedures shall not, in

any way, restrict Oil production.

Excess ANG which is not commercially exploited by

the Contractor, or taken by the Government or its

nominee pursuant to this Article 21, shall be

returned to the subsurface structure or flared

where such flaring is approved in the Development

Plan, which approval shall not be unreasonably

withheld, for the relevant Oil Field or where

reinjection is uneconomical or inadvisable in

accordance with good reservoir engineering prac-



tices.



21.5



21.4.9



Where the Contractor is of the view that there is

economic merit in flaring Gas in the absence of a

Gas transmission system or during such time as

the pipeline is inoperable or lacks capacity to

take all available Gas, Contractor shall have the

right to flare Gas. In any such event,

Contractor shall notify the Management Committee

within forty-eight (48) hours to obtain its

approval for continuing operations.



21.4.10



As soon as practicable after the New Discovery

referred to in Article 21.4.1 or the submission

to the Government of the proposal for the

declaration of the New Discovery as a Commercial

Discovery as therein specified, the Contractor

and the Government or its nominee shall meet to

discuss the sale and/or disposal of any ANG

discovered with a view to giving effect to the

provisions of this Article 21 in a timely manner.



NON ASSOCIATED NATURAL GAS (NANG)

21.5.1



In the event of a New Discovery of NANG, the

Contractor shall promptly report such New

Discovery to the Management Committee and the

provisions of Articles 9.1 and 9.2 shall apply.

The remaining provisions of Article 9 would apply

to the New Discovery and development of NANG only

in so far as they are not inconsistent with the

provisions of Articles 21.5.1 to 21.5.13.



21.5.2



If, pursuant to Article 9.1, the Contractor gives

notification that a New Discovery is of potential

58

commercial interest, the Contractor shall submit to the

Management Committee, within one (1) Calendar Year from the

date of notification of the above New Discovery, the

proposed Appraisal Programme, including a Work Programme

and budget to carry out an adequate and effective appraisal

of such New Discovery, to determine (i) without delay,

whether such New Discovery is a Commercial Discovery and

(ii) with reasonable precision, the boundaries of the area

to be delineated as a Field. Such programme shall be

supported by all relevant data such as Well data,

Contractor's best estimate of reserve range and production

potential and shall indicate the date of commencement of

the proposed Appraisal Programme. Where in the case of an

Existing Discovery, Contractor desires to carry out

additional appraisal work, the Contractor shall submit its

proposed Appraisal Programme with a Work Programme and

budget to the Management Committee within one hundred

twenty (120) days of the Effective Date for approval.



21.5.3



The proposed Appraisal Programme for an Existing

Discovery or a New Discovery shall be considered

by the Management Committee within sixty (60)

days of its submission by the Contractor and the

programme together with the Work Programme and

budget submitted by the Contractor revised in

accordance with any agreed amendments or

additions thereto approved by the Management

Committee, shall be adopted as the Appraisal

Programme and the Contractor shall promptly

proceed with implementation of such programme.



21.5.4.



If on the basis of the results of the Appraisal

Programme, the Contractor is of the opinion that

NANG has been discovered in commercial

quantities, it shall submit to the Management

Committee, as soon as practicable but not later

than five (5) years from the date of notification



of the aforementioned New Discovery, a proposal

for the declaration of the New Discovery as a

Commercial Discovery. Such proposal shall take

into account the Government's policies on Gas

utilisation and propose alternative options (if

any) for use or consumption of the NANG and be

supported by, inter alia, technical and economic

data, evaluations, interpretations and analyses

of such data, feasibility studies relating to the

New Discovery prepared by or on behalf of the

Contractor and other relevant information.

21.5.5



In the case of a New Discovery, simultaneously

with the Contractor's Appraisal Programme,

59

Government and the Contractor shall seek to reach an

agreement on the development, production, processing,

utilisation and sale of the NANG, in the context of Article

21.1, within thirty-six (36) months of the date of

notification of the Discovery referred to in Article 21.5.

If no proposal is submitted to the Management Committee by

the Contractor within five (5) years from the date of

notification of such New Discovery, the Contractor shall

relinquish its rights to develop such New Discovery and the

area relating to such New Discovery shall be excluded from

the Contract Area.



21.5.6



Where the Contractor has submitted a proposal for

the declaration of a New Discovery as a

Commercial Discovery, the Management Committee

shall consider the proposal of the Contractor

with reference to commercial utilisation of the

NANG in the domestic market or elsewhere and in

the context of Government's policy on Gas

utilisation and the chain of activities required

to bring the NANG from the Delivery Point to

potential consumers in the domestic market or

elsewhere. The Management Committee may, within

ninety (90) days, request that the Contractor

submit any additional information on the New

Discovery and the related Appraisal Programme

that it may reasonably require to facilitate a

decision on whether or not to declare the New

Discovery as a Commercial Discovery.



21.5.7



The Management Committee shall make a decision regarding

the declaration of a New Discovery as a Commercial

Discovery within the latter of:

(a) one hundred eighty (180) days of receipt of

such proposal; or

(b) one hundred eighty (180) days of receipt of

the additional information referred to above.



21.5.8



If the Management Committee, with the approval of

the Government, declares a New Discovery a

Commercial Discovery, such declaration shall be

accompanied by an indication of the probable

date(s) by when the market(s) would be ready to

receive the Gas and an estimate of the quantities

of Gas that could be so utilised. The

Contractor, in such an event, shall, within One

(1) Calendar Year of the declaration of the New

Discovery as a Commercial Discovery, submit a

Development Plan for the development of the Gas

Field to the Management Committee for its

approval. Such plan shall be supported by all

60

relevant information including, inter alia, the information

required in Article 9.6. In the case of an Existing



Discovery, Contractor shall within ninety (90) days of the

Effective Date propose a Development Plan following the

plan brought out in Appendix G, intended to achieve the

production profile brought out in Appendix H, containing

the detailed information required in Article 9.6, with

supporting budget and the Management Committee shall render

its decision regarding such proposal within thirty (30)

days of such submittal. Where a Development Plan is so

agreed, it shall be an approved Development Plan pursuant

to this Article.

21.5.9



If the Development Plan has not been approved by

the Management Committee within one hundred and

eighty (180) days of its submission, the

Contractor shall have the right to submit such

plan or plans directly to the Government for

approval, within sixty (60) days of the expiry of

the time provided to the Management Committee to

approve the plan or plans. The Government shall

respond to the submission within ninety (90) days

of receipt thereof. If the Government rejects

the Contractor's proposed plan or plans, the

Government shall state in writing the reasons for

such rejection and the Contractor shall have the

right to resubmit, within sixty (60) days of

written notice of such rejection, such plan or

plans duly amended to meet the Government's

objections thereto. Such right of resubmission

of each proposed plan or plans shall be

exercisable by the Contractor only once. If the

Parties are unable to agree, any Party shall have

the right to submit the matter to arbitration.

If no such plan or plans is/are submitted to the

Government within the aforesaid period, the

Contractor shall relinquish its right to develop

such Gas Field and such Gas Field shall be

excluded from the Contract Area.



21.5.10



If the Management Committee is unable to agree on

the declaration of a New Discovery as a

Commercial Discovery within the time limit

prescribed in Article 21.5.7, the Contractor, or

any of its constituents, shall be entitled to

submit such proposal directly to the Government

for approval. In such event, the Contractor, or

any of its constituents, shall also submit a

comprehensive plan or plans for development of

such New Discovery, which shall detail the

proposed Development Plan for utilisation of the

61

NANG produced in the domestic market giving, inter alia,

the data specified in Article 21.5.8. The proposal for

declaration of the New Discovery as a Commercial Discovery

as well as the proposed Development Plan shall be submitted

to the Government within one hundred and eighty (180) days

of the expiry of the time given to the Management Committee

to reach a decision on the proposal for declaration of the

New Discovery as a Commercial Discovery and Government

shall respond to the said submission within one hundred

twenty (120) days of its receipt. If the Government

disapproves the proposed plan or plans, the Government

shall state in writing the reasons for such disapproval and

the concerned Parties shall have the right to resubmit,

within sixty (60) days, such plan or plans duly amended to

meet the Government's objections thereto. Such right of

resubmission of each proposed plan or plans shall be

exercisable by the Contractor only once. In the event the

Government does not approve such plan or plans, any Party

shall have the right to submit the matter to arbitration.

If no such plan (plans) is (are) submitted to the

Government within the aforesaid period, the Contractor

shall relinquish its rights to develop such Gas Field and

such Gas Field shall be excluded from the Contract Area.



21.5.11



In the event the Management Committee , or

Government, as the case may be, approves the

Contractor's proposal for declaration of the New

Discovery as a Commercial Discovery and also the

comprehensive plan or plans for development of

such New Discovery and for the utilisation of

NANG produced in the domestic market, the Gas

Field shall be promptly developed by the

Contractor in accordance with the approved plan

which shall be the Development Plan for the

Field.



21.5.12



In the event the Contractor does not commence development

of a New Discovery within ten (10) years from the date of

completion of the first Discovery Well, the Contractor

shall relinquish its rights to develop such New Discovery

and the area relating to such New Discovery shall be

excluded from the Contract Area.



21.5.13



The price of the ANG and NANG produced from the Oil or Gas

Field for use in India shall be specified in the Gas sales

contract, which shall be in accordance with the provisions

of this Article 21.5.13, between the Contractor and the

nominee of the Government.

62

(a) Unless the context otherwise requires, the following

words and terms wherever and whenever used or

appearing in this Article 21.5.13 shall have the

following meaning:

(i)



(ii)



"British Thermal Unit" or "BTU" means the amount

of energy required to raise the temperature of

one (1) pound (avoirdupois) of pure water, at

sixty degrees (60(degree)) Fahrenheit, one

degree (1(degree)) Fahrenheit at an absolute

pressure of 14.73 pounds per square inch.

"Buyer" means the Government of India or

its nominee.



(iii)



"Deliverability" means the lesser of the maximum

aggregate rate of all wells in the Contract Area

or the maximum delivery capacity of the

processing facility, subject to generally

accepted international petroleum industry

practices.



(iv)



"Delivery Point" means a point downstream of the

Seller's onshore Gas receiving facility in the

Hazira area and at the upstream weld of the

connection to the Buyer's pipeline in the Hazira

area.



(v)



"Maximum Delivery Pressure" has the

meaning set forth in Article 21.5.13(c).



(vi)



"MMBTU" means one million (1,000,000)

BTU's on a net heating value basis.



(vii)



"Seller" means Contractor.



(b) The Seller agrees to produce and deliver, on

a daily basis, to the Buyer one hundred

percent (100%) of the Deliverability of ANG

and NANG at the Delivery Point and the Buyer,

provided the Gas is made available and

tendered for delivery by the Seller, agrees

to take and purchase, on a daily basis, one

hundred percent (100%) of the Deliverability

of ANG and NANG provided, however, that

Seller, at Seller's sole discretion, subject



to generally accepted operator practices in

the international petroleum industry, may

adjust deliveries to provide for necessary

maintenance, service and testing. Buyer may

63

request that Seller vary deliveries to accommodate

similar circumstances in the Buyer's operation and

Seller's approval shall not be unreasonably withheld.

Communications procedures shall be mutually agreed in

the Gas sales contract in accordance with

internationally accepted industry standards.

(c) The Gas sold hereunder shall be delivered at the

Delivery Point in the Hazira area at the operating

pressure of the Buyer's owned or contracted pipeline

up to a maximum pressure ("Maximum Delivery Pressure")

of one thousand

(1000) psig.

(d) Subject to the provisions hereof, the Buyer shall pay

the Seller for each MMBTU of Gas delivered hereunder,

or for each MMBTU of Gas for which the Buyer is

obligated to pay hereunder, a price calculated as

follows:

The Base Price ("Base Price") in United States Dollars

(US$) per MMBTU is fixed on the basis of ninety-nine

percent (99%) of a Low Sulfur Fuel Oil Basket ("LSFO

Basket") calculated as the average of the daily mean

value for low and high prices of fuel oil taking into

account equal parts of:

(1)



bulk residual fuel oil, containing one percent

(1%) sulfur, quoted for barges at Northwest

Europe, (Barges, FOB Rotterdam); and



(2)



bulk residual fuel oil, containing one percent

(1%) sulfur, quoted for Mediterranean, basis

Italy, (Cargoes, FOB Med, basis Italy); and



(3)



a theoretical blend of residual fuel oil

composed of Singapore Cargoes made up of

seventy-four percent (74%) of LSWR-SR 0.3%,

(three-tenths percent (0.3%) sulfur), and

twenty-six percent (26%) of HSFO 180, three and

one-half percent (3.5%) sulfur, viscosity 180

centistokes.

The Base Price is calculated on the basis of the

arithmetic average of the monthly values of the

prices of the listed products as published in

Platt's Oilgram Price Report for the eighteen

(18) months of May, 1992 through October, 1993,

inclusive. (These values

64

are derived from the mean of the daily ranges on

days the postings are published to give a

monthly value.) For the purpose of this

Contract, Base Price will be equal to

$2.32/MMBTU.



The price of Gas for each MMBTU for each Calendar

Quarter thereafter shall be determined by the

following formula:

Price = Base Price x (A/B)

Where:

A = a value calculated for the HS/LSFO Basket, defined

in this Article 21.5.13 (d), evaluated for the twelve



(12) months preceding the Calendar Quarter using the

method for averaging as described for calculating the

Base Price, and

B = A value calculated for the HS/LSFO Basket, evaluated

for the twelve (12) months April 1993 through March

1994.

The High Sulfur/Low Sulfur Fuel Oil Basket

("HS/LSFO Basket") is valued as equal parts

of:

(1)

bulk residual fuel oil, containing one

percent (1%) sulfur, quoted for

Mediterranean, basis Italy, (Cargoes,

FOB Med, basis Italy); and

(2)



bulk residual fuel oil, containing one percent

(1%) sulfur, quoted for Northwest Europe

Cargoes, CIF, basis ARA, (Cargoes CIF NWE,

Basis ARA), and



(3)



bulk residual fuel oil, Singapore Cargoes,

containing three and one-half percent (3.5%)

sulfur, viscosity 180 centistokes, (Singapore

HSFO, 180 cst), and



(4)



bulk residual fuel oil, Cargoes, FOB Arab

Gulf, viscosity 180 centistokes, (Arab Gulf,

FOB HSFO 180 cst)



using the method for averaging as described

for calculating the Base Price.

The Floor Price ("Floor Price") shall be ninety percent

(90%) of the monthly values of the prices of the LSFO

Basket as published in Platt's Oilgram Price Report for

the eighteen

65

(18) months of May, 1992 through October, 1993,

inclusive. (These values are derived from the mean of

the daily ranges on days the postings are published to

give a monthly value.) For the purpose of this Contract,

Floor Price will be equal to $2.11/MMBTU.

Notwithstanding results of the calculations for price as

shown in this Article 21.5.13 (d), the actual price

shall in no event be less than a Floor Price ("Floor

Price") which is calculated as US$2.11/MMBTU, nor more

than a Ceiling ("Ceiling") of the Floor Price plus

US$1.00/MMBTU, provided that after seven (7) years from

the Date of first delivery, the Seller shall have the

option to revise the Ceiling to one hundred fifty

percent (150%) of ninety percent (90%) of the same or

equivalent basket of fuel oils used in calculating the

Base Price averaged over the immediately preceeding

eighteen (18) months.

Parties agree to convert US$/barrel prices for fuel oil

as published in Platt's Oilgram to US$/MMBTU using a

factor of 6.28.

If Platt's Oilgram is no longer published, an alternate

publication shall be mutually agreed upon.

21.5.14



Nothing contained in any contract entered into by the

Contractor for the supply, sale or disposal of Gas, with

any nominee of the Government shall in any manner abrogate

the obligation of the Government contained herein.



21.5.15



The Government and/or its nominee shall pay any and all

sales tax payable on the sale of Gas to the Government or

its nominee.



-----*****----66

ARTICLE 22

EMPLOYMENT, TRAINING AND TRANSFER OF TECHNOLOGY

22.1



Without prejudice to the right of the Contractor to select and employ

personnel in numbers and with the qualifications as, in the opinion of

the Contractor, are required for carrying out Petroleum Operations in a

safe, cost effective and efficient manner, the Contractor shall, to the

maximum extent reasonably possible, employ, and require the Operator

and Subcontractors to employ, citizens of India having appropriate

qualifications and experience, taking into account the experience

required and the level and nature of the Petroleum Operations.



22.2



Contractor shall offer up to two (2) man months per year of on-the-job

training and practical experience in skilled, management and executive

positions of their ongoing Petroleum Operations to Indian nationals of

the Government's choice.



22.3



Contractor shall associate and involve mutually agreed numbers of

citizens of India designated by the Government, which shall in no event

exceed three (3) people at any one time, in the technological aspects

of the then ongoing Petroleum Operations for up to two man months per

year.

Such aspects shall include:

(a)



seismic data acquisition, processing and

interpretation;



(b)



computerized formation evaluation using well logs;



(c)



computerized analysis of geological data for basin

analysis;



(d)



laboratory core analysis;



(e)



reservoir simulation and modelling;



(f)



geochemistry, including analytical methods, source rock

studies, hydrocarbon generation, modelling;



(g)



measurement-while-drilling techniques;



(h)



stimulation of wells;



(i)



production engineering including, optimization methods

for surface and subsurface facilities (e.g. NODAL

analysis and implementation);



(j)



reservoir engineering and management including gas and

water injection;



(k)



enhanced oil recovery techniques;

67



(l)



gas production technology;



(m)



pipeline technology;



(n)



well design and drilling technology;



(o)



design of offshore facilities.



22.4



Except as herein provided, no Party shall be obliged to disclose by

virtue of this Article 22 any data, process or information, whether

owned by itself, any of its Affiliates or a third party, of a

proprietary nature.



22.5



At the request of the Government the Contractor shall separately

endeavour to negotiate, in good faith, technical assistance agreements

with the Government setting forth the terms by which each constituent

of the Contractor may render technical assistance and make available



commercially proven technical information of a proprietary nature for

use in India by the Government. The issues to be addressed in

negotiating such technical assistance agreements shall include, but not

be limited to, licensing issues, royalty conditions, confidentiality

restrictions, liabilities, costs and method of payment.

-----*****----68

ARTICLE 23

LOCAL GOODS AND SERVICES

23.1



In the conduct of Petroleum Operations, the Contractor

shall:

(a)



give preference to the purchase and use of goods manufactured,

produced or supplied in India provided that such goods are

available on terms equal to or better than imported goods with

respect to timing of delivery, quality and quantity required,

price and other terms;



(b)



employ Indian Subcontractors having the required skills

or expertise, to the extent reasonably possible, in so

far as their services are available on comparable

standards with those obtained elsewhere and at

competitive prices and on competitive terms; provided

that where no such Subcontractors are available,

preference shall be given to non-Indian Subcontractors

who utilise Indian goods to the maximum extent possible

subject however to the proviso in paragraph (a) above;



(c)



cooperate to the extent possible and without financial obligation

with domestic companies in India to enable them to develop skills

and technology to service the petroleum industry;



(d)



ensure that provisions in terms of paragraphs (a) to (c) above

are contained in contracts between the Operator and its

Subcontractors.



23.2



The Contractor shall establish appropriate procedures, including tender

procedures, for the acquisition of goods and services which shall

ensure that suppliers and Subcontractors in India are given adequate

opportunity to compete for the supply of goods and services. The tender

procedures shall include, inter alia, the financial amounts or value of

contracts which will be awarded on the basis of selective bidding or

open competitive bidding, the procedures for such bidding, and the

exceptions to bidding in cases of emergency.



23.3



Within one hundred and twenty (120) days after the end of each Calendar

Year, the Contractor shall provide the Government with a report

outlining its achievements in utilising Indian resources during that

Calendar Year.



23.4



In this Article "goods" means equipment, materials and

supplies.

-----*****----69

ARTICLE 24

INSURANCE AND INDEMNIFICATION



24.1



INSURANCE

24.1.1



The Contractor shall, during the term of this

Contract, obtain and maintain insurance coverage

for and in relation to Petroleum Operations for

such amount and against such risks in accordance

with generally accepted international operating

practices as are set forth herein, and shall

furnish to the Government certificates evidencing

that such coverage is in effect. Such insurance

policies shall include the Government as



additional insured and shall waive subrogation

against the Government. The insurance shall,

without prejudice to the generality of the

foregoing, cover:

(a) Loss or damage to all installations,

equipment and other assets for so long as

they are used in or in connection with

Petroleum Operations; provided, however, if

Contractor fails to insure any such

installation, equipment or assets, it shall

replace any loss thereof or repair any damage

caused thereto;

(b) Loss, damage or injury caused by pollution in

the course of or as a result of Petroleum

Operations;

(c) Loss or damage to property or bodily injury suffered

by any third party in the course of or as a result of

Petroleum Operations for which the Contractor may be

liable;

(d) With respect to Petroleum Operations offshore, the

cost of removing wrecks and cleaning up operations

following any accident in the course of or as a result

of Contractor's Petroleum Operations;

(e) The Contractor's and/or Operator's liability

to its employees engaged in Petroleum

Operations.

24.1.2



The Contractor shall require its Subcontractors to obtain

and maintain insurance against the risks referred to in

Article 24.1.1 relating mutatis mutandis to such

Subcontractors.

70



24.2



INDEMNITY

The Contractor shall indemnify, defend and hold the Government harmless

against all claims, losses and damages of any nature whatsoever,

including without limitation, claims for loss or damage to property or

injury or death to persons caused by or resulting from any Petroleum

Operations conducted by or on behalf of the Contractor.



24.3



ONGC shall indemnify and hold the Companies harmless against all

claims, losses and damages of any nature whatsoever, including, but not

by way of limitation, claims for loss or damage to property or injury

or death to persons or Environmental Damage caused by or resulting from

and attributable to any operations in the nature of Petroleum

Operations conducted by or on behalf of ONGC prior to the Effective

Date.

-----*****----71

ARTICLE 25

RECORDS, REPORTS, ACCOUNTS AND AUDIT



25.1



The Contractor shall prepare and maintain at an office in India

accurate and current books, records, reports and accounts of its

activities for and in connection with Petroleum Operations so as to

present a fair, clear and accurate record of all its activities,

expenditures and receipts. The Contractor shall also keep

representative samples of cores and cuttings.



25.2



Based on generally accepted and recognised accounting principles and

modern petroleum industry practices, records, books, accounts and

accounting procedures in respect of Petroleum Operations shall be

maintained on behalf of the Contractor by the Operator, at its business

office in India.



25.3



The annual audit of accounts shall be carried out on behalf of the



Contractor by a qualified, independent firm of internationally

recognised chartered accountants, registered in India and selected by

the Contractor.

25.4



Accounts, together with the auditor's report thereon, shall be

submitted to the Parties for approval not later than the thirtieth

(30th) September following the Financial Year.



25.5



The Government shall have the right to audit the accounting records of

the Contractor in respect of Petroleum Operations as provided in the

Accounting Procedure.



25.6



The accounting and auditing provisions and procedures specified in this

Contract are without prejudice to any other requirements imposed by any

statute in India, including, without limitation, any specific

requirements of the statues relating to taxation of companies.



25.7



For the purpose of any audit referred to in Article 25.5, the Operator

or the Contractor shall make available to the auditor all such books,

records, accounts and other documents and information as may be

reasonably required by the auditor during normal business hours.

-----*****----72

ARTICLE 26

INFORMATION, DATA, CONFIDENTIALITY, INSPECTION AND SECURITY



26.1



The Contractor shall, promptly after they become available, make

available to the Government in its offices all data obtained as a

result of Petroleum Operations under the Contract including, but not

limited to, geological, geophysical, geochemical, petrophysical,

engineering, well logs, maps, magnetic tapes, cores and production data

as well as all interpretative and derivative data, including reports,

analyses, interpretations and evaluations prepared in respect of

Petroleum Operations (hereinafter referred to as "Data"). Data shall be

the property of the Government, provided however, that the Contractor

shall have the right to make use of such Data, free of cost, for the

purpose of Petroleum Operations under this Contract as provided herein.



26.2



Contractor shall keep the Government currently advised of all

developments taking place during the course of Petroleum Operations and

shall furnish the Government with such progress reports containing full

and accurate information relating to Petroleum Operations (on a

periodic basis) as the Government may reasonably require, provided that

this obligation shall not extend to proprietary technology. Without

prejudice to the generality of the foregoing, the Contractor shall

submit regular statements and reports relating to Petroleum Operations

as provided in Appendix C. Contractor shall meet with the Government at

a mutually convenient location to present the results of all geological

and geophysical work carried out as well as the results of all

engineering and drilling operations as soon as practical after such

Data becomes available to the Contractor.



26.3



All Data, information and reports obtained or prepared by, for or on

behalf of, the Contractor pursuant to this Contract shall be treated as

confidential and, subject to the provisions hereinbelow, the Parties

shall not disclose the contents thereof to any third party without the

consent in writing of the other Parties.



26.4



The obligation specified in Article 26.3 shall not operate

so as to prevent disclosure:

(a)



to Affiliates, Contractors, or Subcontractors for the

purpose of Petroleum Operations;



(b)



to employees, professional consultants, advisers, data processing

centres and laboratories, where required, for the performance of

functions in connection with Petroleum Operations for any Party

comprising the Contractor;



(c)



to banks or other financial institutions, in connection

with Petroleum Operations;



73

(d)



to bona fide intending assignees or transferees of an interest

hereunder of a Party comprising the Contractor or in connection

with a sale of stock of a Party comprising the Contractor;



(e)



to the extent required by any applicable law or in connection

with any legal proceedings or by the regulations of any stock

exchange upon which the shares of a Party comprising Contractor

are quoted;



(f)



to Government departments for, or in connection with, the

preparation by or on behalf of the Government of statistical

reports with respect to Petroleum Operations, or in connection

with the administration of this Contract or any relevant law or

for any purpose connected with Petroleum Operations;



(g)



by a Party with respect to any Data or information which, without

disclosure by such Party, is generally known to the public.



26.5



Any Data, information or reports disclosed by the Parties comprising

the Contractor to any person other than pursuant to Article 26.4 (a),

(b) and (g) shall be disclosed on the terms that such Data, information

or reports shall be treated as confidential by the recipient. Prompt

notice of disclosures made by the Contractor pursuant to Article 26.5

shall be given to the Government.



26.6



Any Data, information and reports relating to the Contract Area, which,

in the opinion of the Government, might have significance in connection

with offers by the Government of open acreage or an exploration

programme to be conducted by a third party in another area, may be

disclosed by the Government for such purposes on conditions to be

agreed upon between the Government and the Contractor.



26.7



Where an area ceases to be part of the Contract Area, the Contractor

shall continue to treat Data and information with respect to the area

as confidential and shall deliver to the Government copies or originals

of all Data and information in its possession with respect to the area.

The Government shall, however, have the right to freely use the Data

and information thereafter.



26.8



The Government shall, at all reasonable times, through duly authorised

representatives, be entitled to observe Petroleum Operations and to

inspect all assets, books, records, reports, accounts, contracts,

samples and Data kept by the Contractor or the Operator in respect of

Petroleum Operations under the Contract, provided, however, that the

Contractor shall not be required to disclose any proprietary

technology. The duly authorised representatives shall be given

reasonable assistance by the Contractor for such functions and the

Contractor shall afford such

74

representatives all facilities and privileges afforded to its own

personnel in the field including the use of office space and housing,

free of charge. The representatives shall be entitled to make a

reasonable number of surveys, measurements, drawings, tests and copies

of documents, take samples, and make a reasonable use of the equipment

and instruments of the Contractor provided that such functions shall

not unduly interfere with the Contractor's Petroleum Operations.



26.9



Contractor shall give reasonable advance notice to the Government, or

to any other authority designated by the Government for such purpose,

of its programme of conducting surveys by aircraft or by ships,

indicating, inter alia, the name of the survey to be conducted,

approximate extent of the area to be covered, the duration of the

survey, the commencement date, and the name of the airport or port from

which the survey aircraft or ship will commence its voyage.



26.10



The Government, or the authority designated by the Government for such

purpose, shall have the right to inspect any aircraft or ship used by

the Contractor or a Subcontractor carrying out any survey or other

operations in the Contract Area and shall have the right to put on

board such aircraft or ship Government officers in such number as may

reasonably be necessary to ensure compliance by the Contractor or the



Subcontractor with the security requirements of India.

26.11



Expatriate employees and Subcontractors shall, for national security

purposes, be subject to the approval of the Government, such approval

not to be unreasonably withheld.

-----*****----75

ARTICLE 27

TITLE TO PETROLEUM, DATA AND ASSETS



27.1



The Government is the sole owner of Petroleum underlying the Contract

Area and shall remain the sole owner of Petroleum produced pursuant to

the provisions of this Contract except that part of Crude Oil or Gas

the title whereof has passed to each constituent of the Contractor or

any other person in accordance with the provisions of this Contract.



27.2



Title to Crude Oil and/or Gas to which each constituent of the

Contractor is entitled under this Contract, and title to Crude Oil

and/or Gas sold to Government or its nominee by the constituents of the

Contractor shall pass to the relevant Party, or as the case may be, to

Government or its nominee at the Delivery Point. Contractor shall be

responsible for all costs and risks prior to the Delivery Point and

each Party shall be responsible for all costs and risks associated with

such Party's share after the Delivery Point. Where the Government or

its nominee purchases all or some of the Contractor's share of Crude

Oil or Condensate, the Government or its nominee shall be responsible

for all costs and risks in respect of the amount purchased, after the

Delivery Point.



27.3



Title to all Data specified in Article 26 shall be vested in the

Government and the Contractor shall have the right of use thereof as

therein provided.



27.4



Assets in place or contracted for use in or on the Contract Area

purchased by the Contractor for use in Petroleum Operations shall be

owned by the Parties comprising Contractor in proportion to their

Participating Interest provided that the Government, or its nominee,

shall have the right to require vesting of full title and ownership

including abandonment obligations, if any, in it, free of cost, charge

and encumbrances, of any or all assets, whether fixed or movable,

acquired and owned by the Contractor for use in Petroleum Operations

inside or outside the Contract Area, except assets required by a Party

for ongoing operations in the nature of Petroleum Operations in India,

such right to be exercisable by the Government, or its nominee, upon

expiry or earlier termination of the Contract.



27.5



Contractor shall be responsible in accordance with international

petroleum standards for proper maintenance, insurance and safety of all

assets acquired for Petroleum Operations for keeping them in good

repair, order and working condition at all times, and the costs thereof

shall be recoverable as Contract Costs in accordance with Appendix C.



27.6



So long as this Contract remains in force, the Contractor shall, free

of any charge for the purpose of carrying out Petroleum Operations

hereunder, have the exclusive use of

76

the assets which have become or are the property of the Government

including, without limitation, those identified in Appendix F.



27.7



Equipment and assets no longer required for Petroleum Operations shall

first be offered free of cost, charge and encumbrance to the

Government, or its nominee, and, if not required by the Government, or

its nominee, will be so indicated in writing within thirty (30) days of

such offer. Failure to so indicate will be deemed to be a rejection of

the offer by the Government.



27.8



Assets not acquired by the Government, or its nominee, may

be sold or otherwise disposed of subject to the terms of

this Contract.



-----*****----77

ARTICLE 28

ASSIGNMENT OF INTEREST

28.1



Subject to the terms of this Article and other terms of this Contract,

any Party comprising the Contractor may assign, or transfer, a part or

all of its Participating Interest, with the prior written consent of

the Government, which consent shall not be unreasonably withheld,

provided that the Government is satisfied that:

(a)



the prospective assignee or transferee has the financial

standing, technical competence, capacity and ability to meet its

obligations hereunder, and is willing to provide an unconditional

undertaking to assume its Participating Interest share of

obligations and to provide a guarantee in respect thereof as

provided in the Contract.



(b)



the prospective assignee or transferee is not a company

incorporated in a country with which the Government, for policy

reasons, has restricted trade or business;



(c)



the prospective assignor or transferor and assignee or transferee

respectively are willing to comply with any reasonable conditions

of the Government as may be necessary in the circumstances with a

view to ensuring performance under the Contract; and



(d)



the assignment or transfer will not adversely affect the

performance or obligations under this Contract or be contrary to

the interests of India.



28.2



An application by a Company for consent to assign or transfer shall be

accompanied by all relevant information concerning the proposed

assignment or transfer including detailed information on the proposed

assignee or transferee and its shareholding and corporate structure, as

was earlier required from the Companies constituting the Contractor,

the terms of the proposed assignment or transfer and the unconditional

undertaking referred to in Article 28.1(a) above. The applicant shall

also submit such information relating to the prospective assignee or

transferee of the assignment or transfer as the Government may

reasonably require to enable proper consideration and disposal of the

application.



28.3



No assignment or transfer shall be effective until the approval of the

Government is received, which approval may be given by the Government

on such terms as it may deem fit. Upon assignment or transfer of its

interest in this Contract, the assignor or transferor shall be released

and discharged from its obligations hereunder only to the extent that

such obligations are assumed by the assignee or transferee with the

approval of the Government.

78



28.4



The assignor shall clearly state in its deed of assignment, that the

assignee shall be liable for all future obligations, under the

Contract, to the extent of assignment.



28.5



Upon prior notice to the Contractor, the Government may assign or

transfer all or any part of its rights and interest under this Contract

to any Government company wholly or partly owned by the Government and

authorised by the Government to explore for and exploit Petroleum in

the Contract Area. Upon prior notice to the Government, a Company may

assign or transfer all or any part of its rights and interest under

this Contract to an Affiliate subject to Article 6.2 and the parent

company guarantee shall apply.



28.6



An assignment or transfer shall not be made so as to reduce the

Participating Interest of a constituent of the Contractor, at any time,

to less than ten percent (10%) of the total Participating Interest of

all the constituents of the Contractor, except where the Government

may, in special circumstances, so permit.



28.7



Nothing herein contained shall prohibit a Company in the normal course



of business from pledging its Participating Interest share for purposes

of financing, such as a mortgage, charge or encumbrance on Petroleum

assets or production of Petroleum at its own risk, cost and

responsibility. The Contractor shall provide the Government with

fifteen (15) days prior written notice before entering into any such

financing arrangements

28.8



No assignment or pledge under this Article shall have the effect of

decreasing the benefits accruing to Government under this Contract in

any manner whatsoever.

-----*****----79

ARTICLE 29

GUARANTEE



29.1



Each of the Companies shall deliver to the Government on

the Effective Date of this Contract:

(a)



a financial and performance guarantee, for the performance of all

obligations under the Contract, in the case of EOGIL from a

parent company of good financial standing acceptable to the

Government, in favour of the Government, in the form and

substance set out in Appendix E;



(b)



a legal opinion from its legal advisors, in a form satisfactory

to the Government, to the effect that the aforesaid guarantee has

been duly signed and delivered on behalf of the guarantors with

due authority and is legally valid and enforceable and binding

upon them.



29.2



If any of the documents referred to in Article 29.1 are not delivered

within the period specified herein, this Contract may be cancelled by

the Government upon ninety (90) days written notice of its intention to

do so.



29.3



Notwithstanding any change in the composition or shareholding of the

parent company furnishing the guarantees herein, it shall, under no

circumstances, be absolved of its obligations contained in the

guarantees provided pursuant to this Article.

-----*****----80

ARTICLE 30

TERMINATION OF CONTRACT



30.1



This Contract may, subject to the provisions hereinbelow and Article

31, be terminated by the Government without any financial liability

upon giving ninety (90) days written notice of its intention to do so

in the following circumstances, namely, that a Company :

(a)



has knowingly submitted any false statement to the

Government in any manner which was a material

consideration in the execution of this Contract; or



(b)



has intentionally and knowingly extracted or authorised

the extraction of any mineral not authorised to be

extracted by the Contract or without the authority of

the Government except such extractions as may be

unavoidable as a result of operations conducted

hereunder in accordance with generally accepted

international petroleum industry practice which, when

so extracted, were immediately notified to the

Government; or



(c)



is adjudged bankrupt by a competent court or enters into any

agreement or scheme of composition with its creditors or takes

advantage of any law for the benefit of debtors; or



(d)



has passed a resolution to apply to a competent court for

liquidation of the Company unless the liquidation is for the



purpose of amalgamation or reconstruction of which the Government

has been given notice and the Government is satisfied that the

Company's performance under this Contract would not be adversely

affected thereby and has given its approval thereto; or

(e)



has assigned any interest in the Contract without the

prior consent of the Government as provided in

Article 28; or



(f)



fails to make any monetary payment required by law or under this

Contract by the due date or within the specified period after the

due date; or



(g)



fails to comply with or contravenes the provisions of

this Contract in a material particular; or



(h)



fails to comply with any final determination or award

made by a sole expert or arbitrators pursuant to

Article 33; or



(i)



has been served a notice of cancellation pursuant to

Article 29.2.



PROVIDED THAT

81

where the Contractor comprises two or more Companies, the Government

shall not exercise its rights of termination pursuant to Article 30.1,

on the occurrence, in relation to one or more, but not all, of the

Companies, of an event entitling the Government to terminate the

Contract, if any other Company or Companies constituting the Contractor

satisfies the Government that it, or they, is/are willing and would be

able to carry out the obligations of the Contractor.

30.2



This Contract may also be terminated by the Government on giving the

requisite notice specified above if the events specified in Article

30.1 (c) and (d) occur with respect to a company which has given a

guarantee pursuant to Article 29 subject, however, to Article 30.3.



30.3



If the circumstances that give rise to the right of termination under

Article 30.1 (f) or (g) or Article 29.2 are remedied by the Contractor

within the ninety (90) day period or such extended period as may be

granted by the Government, following the notice of the Government's

intention to terminate the Contract as aforesaid, such termination

shall not become effective.



30.4



If the circumstance or circumstances that would otherwise result in

termination are the subject matter of proceedings under Article 33,

then termination shall not take place so long as such proceedings

continue and thereafter may only take place when and if consistent with

the arbitral award.



30.5



On termination of this Contract, for any reason whatsoever, the rights

and obligations of the Contractor shall cease but such termination

shall not affect any rights of any Party which may have accrued or any

obligations undertaken, or incurred, pursuant to this Contract, by

Government or the Contractor or any Party comprising the Contractor and

not discharged by the Contractor or the Party prior to the date of

termination.



30.6



In the event of termination pursuant to Articles 30.1 or

30.2:

(a)



the Government may require the Contractor, for a period not

exceeding one hundred and eighty (180) days from the date of

termination, to continue, for the account and at the cost of the

Government, Crude Oil or Natural Gas production activities until

the right to continue such production has been transferred to

another entity;



(b)



A Foreign Company, which is a constituent of the Contractor,

shall, subject to the provisions hereof, have the right to remove

and export all its property which has not vested in the

Government provided that in the event that ownership of any



property is in doubt,

82

or disputed, such property shall not be exported unless and until

the doubt or dispute has been settled in favour of the Foreign

Company.

-----*****----83

ARTICLE 31

FORCE MAJEURE

31.1



Performance by any Party hereto of any of its obligations under this

Contract, or in fulfilling any condition of any lease granted to such

Party, or any lease issued thereunder, shall, except for the payment of

monies due under this Contract or under the Act and the Rules or any

law, be suspended or excused if, and to the extent that, such

non-performance or delay in performance is caused by Force Majeure as

defined in this Article.



31.2



For the purpose of this Contract, the term Force Majeure means any

cause or event, other than the unavailability of funds, whether similar

to or different from those enumerated herein, beyond the reasonable

control of, and unanticipated or unforeseeable by, and not brought

about at the instance of the Party claiming to be affected by such

event, or which, if anticipated or foreseeable, could not be avoided or

provided for, and which has caused the non-performance or delay in

performance. Without limitation to the generality of the foregoing, the

term Force Majeure shall include natural phenomena or calamities,

earthquakes, typhoons, fires, wars declared or undeclared, hostilities,

invasions, blockades, riots, insurrection and civil disturbances.



31.3



Where a Party is claiming suspension of its obligations on account of

Force Majeure, it shall promptly, but in no case later than seven (7)

days after the occurrence of the event of Force Majeure, notify the

other Parties in writing giving full particulars of the Force Majeure,

the estimated duration thereof, the obligations affected and the

reasons for its suspension.



31.4



A Party claiming Force Majeure shall exercise reasonable diligence to

seek to overcome the Force Majeure event and to mitigate the effects

thereof on the performance of its obligations under this Contract

provided, however, that the settlement of strikes or differences with

employees shall be within the discretion of the Party having the

difficulty. The Party affected shall promptly notify the other Parties

as soon as the Force Majeure event has been removed and no longer

prevents it from complying with the obligations which have been

suspended and shall thereafter resume compliance with such obligations

as soon as possible. The period of work commitment or this Contract may

be extended by such additional period as may be agreed by the Parties.



31.5



Notwithstanding anything contained herein, if an event of Force Majeure

occurs and is likely to continue for a period in excess of thirty (30)

days, the Parties shall meet to discuss the consequences of the Force

Majeure and the course of action to be taken to mitigate the effects

thereof or to be adopted in the circumstances.

-----*****----84

ARTICLE 32

APPLICABLE LAW AND LANGUAGE OF THE CONTRACT



32.1



Subject to the provisions of Article 33.12, this Contract

shall be governed and interpreted in accordance with the

laws of India.



32.2



Nothing in this Contract shall entitle the Government or the Contractor

to exercise the rights, privileges and powers conferred upon it by this

Contract in a manner which will contravene the laws of India.



32.3



The English language shall be the language of this Contract and shall

be used in arbitral proceedings. All communication, hearings or visual

materials or documents relating to this Contract shall be in English.

-----*****----85

ARTICLE 33

SOLE EXPERT, CONCILIATION AND ARBITRATION



33.1



The Parties shall use their best efforts to settle amicably all

disputes, differences or claims arising out of or in connection with

any of the terms and conditions of this Contract or concerning the

interpretation or performance thereof.



33.2



Except for matters which, by the terms of this Contract, the Parties

have agreed to refer to a sole expert and any other matters which the

Parties may agree to so refer, any dispute, difference or claim arising

between the Parties hereunder which cannot be settled amicably may be

submitted by any Party to arbitration pursuant to Article 33.3. Such

sole expert shall be an independent and impartial person of

international standing with relevant qualifications and experience

appointed by agreement between the Parties. Any sole expert appointed

shall be acting as an expert and not as an arbitrator and the decision

of the sole expert on matters referred to him shall be final and

binding on the Parties and not subject to arbitration. If the Parties

are unable to agree on a sole expert, the disputed subject matter may

be referred to arbitration.



33.3



Subject to the provisions herein, any unresolved dispute, difference or

claim which cannot be settled amicably within a reasonable time may,

except for those referred to in Article 33.2, be submitted to an

arbitral tribunal for final decision as hereinafter provided.



33.4



The arbitral tribunal shall consist of three arbitrators. The Party or

Parties instituting the arbitration shall appoint one arbitrator and

the Party or Parties responding shall appoint another arbitrator and

both Parties shall so advise the other Parties. The two arbitrators

appointed by the Parties shall appoint the third arbitrator.



33.5



Any Party may, after appointing an arbitrator, request the other

Party(ies) in writing to appoint the second arbitrator. If such other

Party fails to appoint an arbitrator within forty-five (45) days of

receipt of the written request to do so, such arbitrator may, at the

request of the first Party, be appointed by the Secretary General of

the Permanent Court of Arbitration at the Hague, within forty-five (45)

days of the date of receipt of such request, from amongst persons who

are not nationals of the country of any of the Parties to the

arbitration proceedings.



33.6



If the two arbitrators appointed by the Parties fail to agree on the

appointment of the third arbitrator within thirty (30) days of the

appointment of the second arbitrator and if the Parties do not

otherwise agree, the Secretary General of the Permanent Court of

Arbitration at the Hague

86

may, at the request of either Party and in consultation with both,

appoint the third arbitrator who shall not be a national of the country

of any Party.



33.7



If any of the arbitrators fails or is unable to act, his successor

shall be appointed in the manner set out in this Article as if he was

the first appointment.



33.8



The decision of the arbitration tribunal and, in the case of difference

among the arbitrators, the decision of the majority, shall be final and

binding upon the Parties.



33.9



Arbitration proceedings shall be conducted in accordance with the

arbitration rules of the United Nations Commission on International

Trade Law (UNCITRAL) of 1985 except that in the event of any conflict

between these rules and the provisions of this Article 33, the



provisions of this Article 33 shall govern.

33.10



The right to arbitrate disputes and claims under this Contract shall

survive the termination of this Contract.



33.11



Prior to submitting a dispute to arbitration, a Party may submit the

matter for conciliation under the UNCITRAL conciliation rules by mutual

agreement of the Parties. If the Parties fail to agree on a conciliator

(or conciliators) in accordance with the rules, the matter may be

submitted for arbitration. No arbitration proceedings shall be

instituted while conciliation proceedings are pending and such

proceedings shall be concluded within sixty (60) days.



33.12



The venue of conciliation or arbitration proceedings pursuant to this

Article, unless the Parties otherwise agree, shall be London, England

and shall be conducted in the English language. The arbitration

agreement contained in this Article 33 shall be governed by the laws of

England. Insofar as practicable, the Parties shall continue to

implement the terms of this Contract notwithstanding the initiation of

arbitral proceedings and any pending claim or dispute.



33.13



The fees and expenses of a sole expert or conciliator appointed by the

Parties shall be borne equally by the Parties. Assessment of the costs

of arbitration including incidental expenses and liability for the

payment thereof shall be at the discretion of the arbitrators.

-----*****----87

ARTICLE 34

ENTIRE AGREEMENT, AMENDMENTS, WAIVER AND MISCELLANEOUS



34.1



This Contract supersedes and replaces any previous agreement or

understanding between the Parties, whether oral or written, on the

subject matter hereof, prior to the Effective Date of this Contract.



34.2



This Contract shall not be amended, modified, varied or supplemented in

any respect except by an instrument in writing signed by all the

Parties, which shall state the date upon which the amendment or

modification shall become effective.



34.3



No waiver by any Party of any one or more obligations or defaults by

any other Party in the performance of this Contract shall operate or be

construed as a waiver of any other obligations or defaults whether of a

like or of a different character.



34.4



The provisions of this Contract shall inure to the benefit of and be

binding upon the Parties and their permitted assigns and successors in

interest.



34.5



In the event of any conflict between any provisions in the main body of

this Contract and any provision in the Appendices, the provision in the

main body shall prevail.



34.6



The headings of this Contract are for convenience of reference only and

shall not be taken into account in interpreting the terms of this

Contract.

-----*****----88

ARTICLE 35

CERTIFICATES



35.1



A Company shall furnish, prior to execution of this Contract, a duly

authorised copy of a resolution properly and legally passed by the

Board of Directors of the Company specifying the person authorised to

execute this Contract along with a Certificate duly signed by the

Secretary or an Assistant Secretary of the Company under its seal in

this regard and to the effect that the Company has the power and

authority to enter into this Contract and to perform its obligations

thereunder and has taken all necessary action to authorise the

execution, delivery and performance of the Contract.



-----*****----89

ARTICLE 36

NOTICES

36.1



All notices, statements, and other communications to be given,

submitted or made hereunder by any Party to another shall be

sufficiently given if given in writing in the English language and sent

by registered post, postage paid, or by telegram, telex, facsimile,

radio or cable, to the address or addresses of the other Party or

Parties as follows:

a)



To the President of India through the

Secretary to the Government of India

Ministry of Petroleum and Natural Gas

Shastri Bhavan

Dr. Rajendra Prasad Marg

New Delhi 110 001, India

Attention: Joint Secretary

Facsimile No. : 91-11-384-787



b)



The Secretary

Oil & Natural Gas Corporation Limited

Tower II, 8th Floor, Jeevan Bharati

124 Connaught Circus

New Delhi 110 001, India

Facsimile No. : 91-11-331-6413



c)



Reliance Industries Limited

Maker Chambers IV, 3rd Floor

222 Nariman Point

Bombay 400 021 INDIA

Attention: Chief Executive Officer Oil & Gas

Facsimile No. :

022-204-2268



d)



Enron Oil & Gas India Ltd.

Amiya Apartments, 1st Floor

63A Linking Road, Santa Cruz (W)

Bombay 400 054 INDIA

Attention: Managing Director

Facsimile No.:

011-91-22-604-9119

with a copy to:

Enron Oil & Gas India Ltd.

1400 Smith Street

Houston, Texas 77002, U.S.A.

Attention: Vice President, Operations

Facsimile No. :

713-646-8115



36.2



Notices when given in terms of Article 36.1 shall be effective when

delivered if offered at the address of the other Parties as under

Article 36.1 during business hours on working days and, if received

outside business hours, on the next following working day.

90



36.3



Any Party may, by reasonable notice as provided hereunder to the other

Parties, change its address and other particulars for notice purpose.



IN WITNESS WHEREOF, the representatives of the Parties to

this Contract being duly authorised have hereunto set their hands

and have executed these presents this 22nd day of December 1994.

Signed for and on

behalf of the

President of India



By /s/ NAJERB JR. 22-12-94

Najerb Jr.

In the presence of

/s/ V. RAMANI

V. Ramani



Signed for and on behalf

of Oil & Natural Gas

Corporation Limited



By /s/ S. K. MANGLIK 22-12-94

S. K. Manglik

In the presence of

/s/ R. N. DESAI 22-12-94

R. N. Desai



Signed for and on behalf

of Reliance Industries

Limited



By /s/ AKHIL GUPTA 22-12-94

Akhil Gupta

In the presence of

/s/ BA LA SAGRAMANIA

Ba La Sagramania



Signed for and on behalf

of Enron Oil & Gas India Ltd.



By /s/ J. A. KOPECKY 22-12-94

J. A. Kopecky

In the presence of

/s/ E. J. VANDERMARK

E. J. Vandermark

-----*****----91



APPENDIX A

DESCRIPTION OF CONTRACT AREA

The area comprising approximately 1471 sq. km offshore India identified

as Tapti Block described herein and shown under map attached as

Appendix B.

Longitude and Latitude measurements are as follows:

LATITUDE

A.

B.

C.

D.

E.



LONGITUDE



20(degree)50'00"N

20(degree)50'00"N

20(degree)35'00"N

20(degree)20'00"N

20(degree)20'00"N



71(degree)49'00"E

72(degree)08'00"E

72(degree)08'00"E

71(degree)53'00"E

71(degree)49'00"E



-----*****----92

APPENDIX B

MAP OF CONTRACT AREA

TAPTI BLOCK

-----*****----93

APPENDIX C

ACCOUNTING PROCEDURE

TO

PRODUCTION SHARING CONTRACT

BETWEEN

THE GOVERNMENT OF INDIA

AND

ONGC/RIL/EOGIL

94



TABLE OF CONTENTS

SECTIONS



CONTENT



SECTION 1:

1.1

1.2

1.3

1.4

1.5

1.6

1.7

1.8

1.9

1.10

SECTION 2:

2.1

2.2

2.3

2.4

2.5

2.6

SECTION 3:

3.1



3.2

3.3

3.4

3.5



GENERAL PROVISIONS

Purpose

Definitions

Inconsistency

Documentation and Statements to be Submitted by

the Contractor

Language and Units of Account

Currency Exchange Rates

Payments

Arms Length Transactions

Audit and Inspection Rights of the Government

Revision of Accounting Procedure

CLASSIFICATION, DEFINITION AND ALLOCATION OF

COSTS AND EXPENDITURES

Segregation of Costs

Exploration Costs

Development Costs

Production Costs

Service Costs

General and Administrative Costs

COSTS, EXPENSES, EXPENDITURES AND INCIDENTAL

INCOME OF THE CONTRACTOR

Costs Recoverable and Allowable Without Further

Approval of the Government

3.1.1

Surface Rights

3.1.2

Labor & Associated Costs

3.1.3

Transportation Costs

3.1.4

Charges for Services

(a)

Third Party Contracts

(b)

Affiliated Company Contracts

3.1.5

Communications

3.1.6

Office, Shore Bases and Miscellaneous

Facilities

3.1.7

Environmental Studies and Protection

3.1.8

Materials and Equipment

(a)

General

(b)

Warranty

(c)

Value of Materials Charged to

the Account

3.1.9

Duties, Fees and Other Charges

3.1.10

Insurance and Losses

3.1.11

Legal Expenses

3.1.12

Training Costs

3.1.13

General and Administrative Costs

Costs Not Recoverable and Not Allowable under the

Contract

Other Costs Recoverable and Allowable

Incidental Income and Credits

Non-Duplication of Charges and Credits

95



SECTION 4:

4.1

4.2



RECORDS AND INVENTORIES OF ASSETS

Records

Inventories



SECTION 5:



PRODUCTION STATEMENT AND ROYALTY AND CESS

STATEMENT



SECTION 6:



VALUE OF PRODUCTION AND PRICING STATEMENT



SECTION 7:



STATEMENT OF COSTS, EXPENDITURES AND RECEIPTS



SECTION 8:



COST RECOVERY STATEMENT



SECTION 9:



PRODUCTION SHARING STATEMENT



SECTION 10:



END OF YEAR STATEMENT



SECTION 11:



BUDGET STATEMENT

-----*****----96

ACCOUNTING PROCEDURE

SECTION 1

GENERAL PROVISIONS



1.1



PURPOSE

Generally, the purpose of this Accounting Procedure is to set out

principles and procedures of accounting which will enable the

Government of India to monitor effectively the Contractor's costs,

expenditures, production and income so that the Government's

entitlement to Profit Petroleum, royalty, cess, etc., as well as

Contractor's entitlement to Cost Petroleum and Profit Petroleum can be

accurately determined pursuant to the terms of the Contract. More

specifically, the purpose of the Accounting Procedure is to:

-



classify costs and expenditures and to define which

costs and expenditures shall be allowable for cost

recovery, production sharing and participation

purposes;



-



specify the manner in which the Contractor's accounts

shall be prepared and approved.



This Accounting Procedure is intended to apply to the provisions of the

Contract and is without prejudice to the computation of income tax

under applicable provisions of the Income Tax Act, 1961, as amended.

1.2



DEFINITIONS

For purposes of this Accounting Procedure, the terms used herein which

are defined in the Contract shall have the same meaning when used in

this Accounting Procedure.



1.3



INCONSISTENCY

In the event of any inconsistency or conflict between the provisions of

this Accounting Procedure and the other provisions of the Contract, the

other provisions of the Contract shall prevail.



1.4



DOCUMENTATION AND STATEMENTS TO BE SUBMITTED BY THE

CONTRACTOR

1.4.1



Within thirty (30) days of the Effective Date of

the Contract, the Contractor shall submit to and

discuss with the Government a proposed outline of

charts of accounts, operating records and

reports, which outline shall reflect each of the

categories and sub-categories of costs and income

specified in Sections 2 and 3 and shall be in

accordance with generally accepted standards and

recognized accounting systems and consistent with

97

normal petroleum industry practice and procedures

for joint venture operations.

Within ninety (90) days of receiving the above submission,

the Government shall either provide written notification of

its approval of the proposal or request, in writing,

revisions to the proposal.

Within one hundred and eighty (180) days from the Effective

Date of the Contract, the Contractor and the Government

shall agree on the outline of charts of accounts, records

and reports which shall also describe the basis of the

accounting system and procedures to be developed and used

under this Contract. Following such agreement, the

Contractor shall expeditiously prepare and provide the



Government with formal copies of the comprehensive charts

of accounts, records and reports and allow the Government

to examine the manuals and to review procedures which are,

and shall be, observed under the Contract.

1.4.2



Notwithstanding the generality of the foregoing, the

Contractor shall make regular Statements relating to the

Petroleum Operations as follows :

(i)



(ii)



(iii)



(iv)

(v)



1.4.3



Production Statement and Royalty and

Cess Statement (see Section 5 of this

Accounting Procedure)

Value of Production and Pricing

Statement (see Section 6 of this

Accounting Procedure)

Statement of Costs, Expenditures and

Receipts (see Section 7 of this

Accounting Procedure)

Cost Recovery Statement (see Section 8

of this Accounting Procedure)

Production Sharing Statement (see

Section 9 of this Accounting Procedure)



(vi)



End of Year Statement (see Section 10 of

this Accounting Procedure)



(vii)



Budget Statement (see Section 11 of this

Accounting Procedure)



All reports and statements shall be prepared in accordance

with the Contract and the laws of India and, where there

are no relevant provisions in either of these, in

accordance with generally

98



1.5



accepted practices in the international petroleum

industry.

1.4.4

Each of the entities constituting the Contractor

shall be responsible for maintaining its own

accounting records in order to comply with all

legal requirements and to support all returns or

any other accounting reports required by any

Government authority in relation to the Petroleum

Operations. However, for the purposes of giving

effect to this Accounting Procedure, the

Contractor shall appoint, and notify the

Government in writing thereof, one of the Parties

constituting Contractor who shall be responsible

for maintaining, at its business office in India,

on behalf of the Contractor, all the accounts of

the Petroleum Operations in accordance with the

provisions of the Accounting Procedure and the

Contract.

LANGUAGE AND UNITS OF ACCOUNT

All accounts, records, books, reports and statements shall be

maintained on an accrual basis and prepared in the English language.

The accounts shall be maintained in United States Dollars, which shall

be the controlling currency of account for cost recovery, production

sharing and participation purposes. Metric units and Barrels shall be

employed for measurements required under the Contract. Where necessary

for clarification, the Contractor may also maintain accounts and

records in other languages, currencies and units. Following any new

discovery of Petroleum the Parties shall meet to establish specific

principles and procedures for identifying all costs, expenditures,

receipts and income with respect to the Contract Area.



1.6



CURRENCY EXCHANGE RATES

1.6.1



For translation purposes between United States



1.6.2



Dollars and Indian Rupees or any other currency,

the previous month's average of the daily means

of the buying and selling rates of exchange as

quoted by the State Bank of India (or any other

financial body as may be mutually agreed between

the Parties) shall be used for the month in which

the revenues, costs, expenditures, receipts or

income are recorded. However, in the case of any

single non-US Dollar transaction in excess of the

equivalent of one hundred thousand US Dollars

(US$100,000), the conversion into US Dollars

shall be performed on the basis of the average of

the applicable exchange rates for the day on

which the transaction occurred.

Any realized or unrealized gains or losses from

the exchange of currency in respect of Petroleum

Operations shall be credited or charged to the

accounts. A record of the exchange rates used in

99

converting Indian Rupees or any other currencies into

United States Dollars as specified in Section 1.6.1 shall

be maintained by the Contractor and shall be identified in

the relevant statements required to be submitted by the

Contractor in accordance with Section 1.4.2.



1.7



1.8



PAYMENTS

1.7.1



Subject to the foreign exchange laws and regulations

prevailing from time to time, all payments between the

Parties shall, unless otherwise agreed, be in United States

Dollars and shall be made through a bank designated by each

receiving Party.



1.7.2



Unless otherwise specified, all sums due under the Contract

shall be paid within forty-five (45) days from the date on

which the obligation to pay was incurred.



1.7.3



Unless otherwise specified, all sums due by one Party to

the other under the Contract during any month shall, for

each day such sums are overdue during such month, bear

interest compounded daily at the applicable LIBOR plus one

percentage (1%) point.



ARMS LENGTH TRANSACTIONS

Unless otherwise specifically provided for in the Contract, all

transactions giving rise to revenues, costs or expenditures which will

be credited or charged to the accounts prepared, maintained or

submitted hereunder shall be conducted at arms length or on such a

basis as will assure that all such revenues, costs or expenditures will

be equal to or better than, as the case may be, would result from a

transaction conducted at arms length on a competitive basis with third

parties. For the purposes of clarification, this means revenues would

be equal to or higher and costs would be equal to or lower.



1.9



AUDIT AND INSPECTION RIGHTS OF THE GOVERNMENT

1.9.1



Without prejudice to statutory rights, the

Government, upon at least ninety (90) days

advance written notice to the Contractor, shall

have the right to inspect and audit, during

normal business hours , all records and documents

supporting costs, expenditures, expenses,

receipts and income, such as Contractor's

accounts, books, records, invoices, cash

vouchers, debit notes, price lists or similar

documentation with respect to the Petroleum

Operations conducted hereunder in each Financial

100

Year, within two (2) years (or such longer period as may be

required in exceptional circumstances) from the end of such



Financial Year.

1.9.2



The Government may undertake the conduct of the audit

either through its own representatives or through a

qualified firm of recognized international chartered

accountants, registered in India, appointed for the purpose

by the

Government.



1.9.3



In conducting the audit, the Government or its

auditors shall be entitled to examine and verify,

at reasonable times, all charges and credits

relating to Contractor's activities under the

Contract and all books of account, accounting

entries, material records and inventories,

vouchers, payrolls, invoices and any other

documents, correspondence and records considered

necessary by the Government to audit and verify

the charges and credits. The auditors shall also

have the right, in connection with such audit, to

visit and inspect, at reasonable times, all

sites, plants, facilities, warehouses and offices

of the Contractor directly or indirectly serving

the Petroleum Operations, and to physically

examine other property, facilities and stocks

used in Petroleum Operations, wherever located

and to question personnel associated with those

operations. Where the Government requires

verification of charges made by an Affiliate, the

Government shall have the right to obtain an

audit certificate from an internationally

recognized firm of public accountants acceptable

to both the Government and the Contractor, which

may be the Contractor's statutory auditor. Any

and all such costs shall be for the Government's

account.



1.9.4



Any audit exceptions shall be made by the Government in

writing and notified to the Contractor within one hundred

and twenty (120) days following completion of the audit in

question.



1.9.5



The Contractor shall answer any notice of exception under

Section 1.9.4 within one hundred and twenty (120) days of

the receipt of such notice. Where the Contractor has, after

the one hundred and twenty (120) days, failed to answer a

notice of exception, the exception shall prevail.



1.9.6



All agreed adjustments resulting from an audit

and all adjustments required by prevailing

exceptions shall be promptly made in the

101

Contractor's accounts and any consequential

adjustments to the Government's entitlement to

Petroleum shall be made as promptly as

practicable.



1.9.7



1.10



If the Contractor and the Government are unable

to reach final agreement on proposed audit

adjustments, either Party may refer any dispute

thereon to a sole expert as provided for in the

Contract. So long as any issues are outstanding

with respect to an audit, the Contractor shall

maintain the relevant documents and permit

inspection thereof until the issue is resolved.



REVISION OF THE ACCOUNTING PROCEDURE

1.10.1



By mutual agreement between the Government and the

Contractor, this Accounting Procedure may be revised from

time to time, in writing, signed by the Parties, stating

the date upon which the amendments shall become effective.



-----*****----102

SECTION 2

CLASSIFICATION, DEFINITION AND ALLOCATION

OF COSTS AND EXPENDITURES

2.1



SEGREGATION OF COSTS

Costs shall be segregated in accordance with the purposes for which

such expenditures are made. All costs and expenditures allowable under

Section 3, relating to Petroleum Operations, shall be classified,

defined and allocated as set out below in this Section. Expenditure

records shall be maintained in such a way as to enable proper

allocation.



2.2



EXPLORATION COSTS

Exploration Costs are all direct and allocated indirect expenditures

incurred in the search for Petroleum in an area which is, or was at the

time when such costs were incurred, part of the Contract Area,

including expenditures incurred in respect of:

2.2.1



Aerial, geophysical, geochemical, palaeontological,

geological, topographical and seismic surveys, analyses and

studies and their interpretation.



2.2.2



Core hole drilling and water well drilling.



2.2.3



Labor, materials, supplies and services used in drilling

Wells with the object of finding Petroleum or in drilling

Appraisal Wells provided that if such Wells are completed

as producing Wells, the costs of completion thereof shall

be classified as Development Costs.



2.2.4



Facilities used solely in support of the purposes described

in Sections 2.2.1, 2.2.2 and 2.2.3 above, including access

roads, all separately identified.



2.2.5



Any Service Costs and General and Administrative

Costs directly incurred on exploration activities

and identifiable as such and a portion of the

remaining Service Costs and General and

Administrative Costs allocated to Exploration

Operations determined by the proportionate share

of total Contract Costs (excluding General and

Administrative Costs and Service Costs) represented by all other Exploration Costs.



2.2.6



Geological and geophysical information purchased

or acquired in connection with Exploration

Operations.

103



2.2.7

2.3



Any other expenditure incurred in the search for

Petroleum not covered under Sections 2.3 or 2.4.



DEVELOPMENT COSTS

Development Costs are all direct and allocated indirect expenditures

incurred with respect to the development of the Contract Area including

expenditures incurred on account of:

2.3.1



Drilling Development Wells, whether these Wells are dry or

producing and drilling Wells for the injection of water or

Gas to enhance recovery of Petroleum and Recompletion or

working over of existing or service wells.



2.3.2



Purchase, installation or construction of

production, transport and storage facilities for

production of Petroleum from a Field, such as

pipelines, flow lines, production and treatment

units, wellhead equipment, subsurface equipment,



enhanced recovery systems, offshore and onshore

platforms, export terminals and piers, harbours

and related facilities and access roads for

production activities.



2.4



2.3.3



Engineering and design studies for facilities

referred to in Section 2.3.2.



2.3.4



Any Service Costs, joint Development Plans and

General and Administrative Costs directly

incurred in Development Operations and

identifiable as such and a portion of the

remaining Service Costs and General and

Administrative Costs allocated to development

activities, determined by the proportionate share

of total Contract Costs (excluding General and

Administrative Costs and Service Costs) represented by all other Development Costs.



PRODUCTION COSTS

2.4.1



Production Costs are expenditures incurred on

Production Operations in respect of the Contract

Area after the start of production from the Field

(which are other than Exploration and Development

Costs). The balance of General and Administrative Costs and Service Costs not allocated to

Exploration Costs or Development Costs shall be

allocated to Production Costs.



2.4.2



Production Costs shall include costs for completion of

Exploration Wells by way of installation of casing or

equipment or otherwise or for the purpose of bringing a

Well into use as a producing Well or as a Well for the

injection

104

of water or Gas to enhance recovery of Petroleum and

Recompletion or working over of existing or service wells.



2.5



SERVICE COSTS

Service Costs are direct and indirect expenditures incurred in support

of Petroleum Operations in the Contract Area, including expenditures on

insurance, environmental protection, warehouses, piers, marine vessels,

vehicles, motorized rolling equipment, aircraft, fire and security

stations, workshops, water and sewerage plants, power plants, housing,

community and recreational facilities and furniture and tools and

equipment used in these activities. Service Costs in any Year shall

include the costs incurred in such Year to purchase and/or construct

the facilities as well as the annual costs of maintaining and operating

the same, each to be identified separately. All Service Costs shall be

regularly allocated as specified in Sections 2.2.5, 2.3.4 and 2.4 to

Exploration Costs, Development Costs and Production Costs and shall be

separately shown under each of these categories. Where Service Costs

are made in respect of shared facilities, the basis of allocation of

costs to Petroleum Operations hereunder shall be on the basis of gross

expenditures.



2.6



GENERAL AND ADMINISTRATIVE COSTS

General and Administrative Costs are expenditures incurred on general

administration and management primarily and principally related to

Petroleum Operations in or in connection with the Contract Area, and

shall include:

2.6.1



main office, field office and general

administrative expenditures in India, including

supervisory, accounting and employee relations

services;



2.6.2



an annual overhead charge for services rendered

by the parent company or an Affiliate of the

Operator outside India to support and manage



Petroleum Operations under the Contract, and for

staff advice and assistance including financial,

legal, accounting and employee relations

services, but excluding any remuneration for

services charged separately under this Accounting

Procedure calculated on the basis of one percent

(1%) of expenditures.

2.6.3



The expenditures used to calculate the monthly indirect

charge shall not include the indirect charge (calculated

either as a percentage of expenditures or as a minimum

monthly charge), rentals on surface rights acquired and

maintained for the joint account, guarantee deposits,

105

concession acquisition costs, bonuses paid in accordance

with the Contract, royalties, value added taxes and taxes

paid under the Contract, settlement of claims, proceeds

from the sale of assets (including division in kind)

amounting to more than US$10,000 per transaction, and

similar items mutually agreed upon by the parties.



2.6.3



The expenditures used to calculate the monthly

indirect charge shall not include the indirect

charge (calculated either as a percentage of

expenditures or as a minimum monthly charge),

rentals on surface rights acquired and maintained

for the joint account, guarantee deposits,

concession acquisition costs, bonuses paid in

accordance with the Contract, royalties, value

added taxes and taxes paid under the Contract,

settlement of claims, proceeds from the sale of

assets (including division in kind) amounting to

more than US$10,000 per transaction, and similar

items mutually agreed upon by the parties.

Credits arising from any government subsidy payment and

disposition of joint account property shall not be deducted

from total expenditures in determining such charge.



2.6.4



The indirect charges provided for in this Section may be

amended periodically by mutual agreement between the

Parties if, in practice, these charges are found to be

insufficient or

excessive.

-----*****----106

SECTION 3

COSTS, EXPENSES, EXPENDITURES AND INCIDENTAL

INCOME OF THE CONTRACTOR



3.1



COSTS RECOVERABLE AND ALLOWABLE WITHOUT FURTHER APPROVAL OF

THE GOVERNMENT.

Costs incurred by the Contractor on Petroleum Operations pursuant to

the Contract as classified under the headings referred to in Section 2

shall be allowable for the purposes of the Contract except to the

extent provided in Section 3.2 or elsewhere in this Accounting

Procedure, and subject to audit as provided for herein.

3.1.1



Surface Rights

All direct costs necessary for the acquisition, renewal or

relinquishment of surface rights acquired and maintained in

force for the purposes of the Contract except as provided

in

Section 3.1.9.



3.1.2



Labor and Associated Costs

(a) Costs of all Contractor's locally recruited



employees who are directly engaged in the

conduct of Petroleum Operations under the

Contract in India. Such costs shall include

the costs of employee benefits and Government

benefits for employees and levies imposed on

the Contractor as an employer, transportation

and relocation costs within India of the

employee and such members of the employee's

family (limited to spouse and dependent

children) as required by law or customary

practice in India. If such employees are

engaged in other activities in India, in

addition to Petroleum Operations, the cost of

such employees shall be apportioned on a time

sheet basis according to sound and acceptable

accounting principles.

(b) Assigned Personnel

Costs of salaries and wages, including bonuses,

of the Contractor's employees directly and

necessarily engaged in the conduct of the

Petroleum Operations under the Contract, whether

temporarily or permanently assigned,

irrespective of the location of such employees,

it being understood that in the case of those

personnel only a portion of whose time is wholly

dedicated to Petroleum Operations under the

Contract, only that

107

pro rata portion of applicable salaries, wages

and other costs, as specified in Sections

3.1.2(c), (d), (e)and (f) shall be charged and

the basis of such pro rata allocation shall be

specified.

(c) Expenses or contributions made pursuant to assessments

or obligations imposed under the laws of India which

are applicable to the Contractor's cost of salaries

and wages.

(d) The Contractor's cost of established plans

for employees' group life insurance,

hospitalization, pension, retirement and

other benefit plans of a like nature

customarily granted to the Contractor's

employees provided, however, that such costs

are in accordance with generally accepted

standards in the international petroleum

industry, applicable to salaries and wages

chargeable to Petroleum Operations under

Section 3.1.2(b) above.

(e) Personal Income taxes where and when they are paid by

the Contractor to the Government of India for the

employee, in accordance with the Contractor's standard

personnel policies.

(f) Reasonable transportation and travel expenses

of employees of the Contractor, including

those made for travel and relocation of the

expatriate employees, including their

dependent family and personal effects,

assigned to India whose salaries and wages

are chargeable to Petroleum Operations under

Section 3.1.2(b). Actual transportation

expenses of personnel transferred to

Petroleum Operations from their country of

origin and/or relocation to their country of

origin shall be charged to the Petroleum

Operations. Where such transfer or

relocation is to or from a country other than

the country of origin there shall be no



reimbursement.

Transportation cost as used in this Section shall mean the

cost of freight and passenger service and any accountable

incidental expenditures related to transfer travel and

authorized under Contractor's standard personnel policies.

Contractor shall ensure that all expenditures related to

transportation costs are equitably allocated to the

activities which have benefited from the personnel

concerned.

108

3.1.3



Transportation Costs

The reasonable cost of transportation of equipment,

materials and supplies within India and from outside India

to India necessary for the conduct of Petroleum Operations

under the Contract, including, but not limited to, directly

related costs such as unloading charges, dock fees and

inland and ocean freight charges.



3.1.4



Charges for Services

(a) Third Party Contracts

The actual costs of contract services, services of

professional consultants, utilities and other services

necessary for the conduct of Petroleum Operations

under the Contract performed by third parties other

than an Affiliate of the Contractor, provided that the

transactions resulting in such costs are undertaken

pursuant to Section 1.8 of this Accounting Procedure.

(b) Affiliated Company Contracts

(i)



Professional and Administrative Services

and Expenses

Cost of professional and administrative services

provided by any Affiliate for the direct benefit

of Petroleum Operations, including, but not

limited to, services provided by the production,

exploration, legal, financial, insurance,

accounting and computer services divisions other

than those covered by Section 3.1.4(b)(ii) which

Contractor may use in lieu of having its own

employees. Charges shall be equal to the actual

cost of providing their services, shall not

include any element of profit and shall not be

any higher than the most favorable prices

charged by the Affiliate to third parties for

comparable services under similar terms and

conditions elsewhere and will be fair and

reasonable in the light of prevailing

international petroleum industry practice and

experience.



(ii)



Scientific or Technical Personnel

Cost of scientific or technical

personnel services provided by any

109

Affiliate of Contractor for the direct benefit

of Petroleum Operations, which cost shall be

charged on a cost of service basis. Charges

therefor shall not exceed charges for comparable

services currently provided by outside technical

service organizations of comparable

qualifications. Unless the work to be done by

such personnel is covered by an approved Work

Programme and Budget, Operator shall not

authorize work by such personnel without



approval of the Management Committee.

(c) Equipment, facilities and property owned and

furnished by the Contractor's Affiliates, at

rates commensurate with the cost of ownership

and operation provided, however, that such

rates shall not exceed those currently

prevailing for the supply of like equipment,

facilities and property on comparable terms

in the area where the Petroleum Operations

are being conducted. The equipment and

facilities referred to herein shall exclude

major investment items such as (but not

limited to) drilling rigs, producing

platforms, oil treating facilities, oil and

gas loading and transportation systems,

storage and terminal facilities and other

major facilities, rates for which shall be

subject to separate agreement with the

Government.

3.1.5



Communications

Cost of acquiring, leasing, installing,

operating, repairing and maintaining communication systems

including satellite, radio and microwave facilities between

the Contract Area and the Contractor's base facility,

offices, helicopter bases, port and railway yards.



3.1.6



Office, Shore Bases and Miscellaneous Facilities

Net cost to Contractor of establishing, maintaining and

operating any office, sub-office, shore base facility,

warehouse, housing or other facility directly serving the

Petroleum Operations. If any such facility services

contract areas other than the Contract Area, or any

business other than Petroleum Operations, the net costs

thereof shall be allocated on an equitable and consistent

basis.

110



3.1.7



Environmental Studies and Protection

Costs incurred in conducting the environmental impact

studies for the Contract Area, and in taking environmental

protection measures pursuant to the terms of the Contract.



3.1.8



Materials and Equipment

(a) General

So far as is practicable and consistent with efficient

and economical operation, only such material shall be

purchased or furnished by the Contractor for use in

the Petroleum Operations as may be required for use in

the reasonably foreseeable future and the accumulation

of surplus stocks shall be avoided to the extent

possible. Material and equipment held in inventory

shall only be charged to the accounts when such

material is removed from inventory and used in

Petroleum Operations. Contractor shall be allowed to

recover interest at the LIBOR rate plus one percent

(1%) for reasonable inventories it carries. Costs

shall be charged to the accounting records and books

based on the average cost method.

(b) Warranty

In the case of defective material or equipment, any

adjustment received by the Contractor from the

suppliers or manufacturers or their agents in respect

of any warranty on material or equipment shall be

credited to the accounts under the Contract.



(c) Value of Materials Charged to the Accounts

Under the Contract.

(i)



Except as otherwise provided in

subparagraph (b), materials purchased by

the Contractor and used in the Petroleum

Operations shall be valued to include

invoice price less trade and cash

discounts, if any, purchase and

procurement fees plus freight and

forwarding charges between point of

supply and point of shipment, freight to

port of destination, insurance, taxes,

customs duties, consular fees, other

items chargeable against imported

material and, where applicable ,

111

handling and transportation costs from point of

importation to or from warehouse or operating

site, and these costs shall not exceed those

currently prevailing in normal arms length

transactions on the open market.



(ii) Material purchased from or sold to Affiliates or

transferred to or from activities of the

Contractor other than Petroleum Operations under

the Contract:

(aa)



new material (hereinafter

referred to as condition A)

shall be valued at the current

international price which shall

not exceed the price prevailing

in normal arms length transactions on the open market;



(bb)



used material which is in sound

and serviceable condition and

is suitable for reuse without

reconditioning (hereinafter

referred to as condition B)

shall be priced at not more

than seventy-five percent (75%)

of the current price of the

above mentioned new materials;



(cc)



used material which cannot be

classified as condition B, but

which, after reconditioning,

will be further serviceable for

original function as good

second-hand condition B

material or is serviceable for

original function, but

substantially not suitable for

reconditioning (hereinafter

referred to as condition C)

shall be priced at not more

than fifty per cent (50%) of

the current price of the new

material referred to above as

condition A.



The cost of reconditioning shall be charged to the

reconditioned material, provided that the condition C

material value plus the cost of reconditioning does not

exceed the value of condition B material.

112

Material which cannot be classified as condition B or

condition C shall be priced at a value commensurate with

its use.



Material involving erection expenditure shall be charged at

the applicable condition percentage (referred to above) of

the current knocked-down price of new material referred to

above as condition A.

When the use of material is temporary and its service to

the Petroleum Operations does not justify the reduction in

price in relation to materials referred to above as

conditions B and C, such material shall be priced on a

basis that will result in a net charge to the accounts

under the Contract consistent with the value of the service

rendered.

3.1.9



Duties, Fees and Other Charges

Any duties, levies, fees, charges and any other assessments

levied by any governmental or taxing authority in

connection with the Contractor's activities under the

Contract and paid directly by the Contractor except

corporate income tax payable by the constituents of the

Contractor. If Operator or its Affiliate is subject to

income or withholding tax as a result of service performed

at cost for Petroleum Operations under the Agreement, its

charges for such services may be increased by the amount of

such taxes incurred ("grossed up"), provided such charges

have not been otherwise recovered or a tax credit received.



3.1.10



Insurance and Losses

Insurance premia and costs incurred for insurance required

by law or pursuant to Article 24 of the Contract, provided

that such insurance is customary, affords prudent

protection against risk and is at a premium no higher than

that charged on a competitive basis by insurance companies

which are not Affiliates. Actual costs and losses incurred

shall be allowable to the extent not made good by

insurance. Such costs may include, but are not limited to,

repair and replacement of property resulting from damages

or losses incurred by fire, flood, storm, theft, accident

or such other cause.

113



3.1.11



Legal Expenses

All reasonable costs and expenses resulting from the

handling, investigating, asserting, defending, or settling

of any claim or legal action necessary or expedient for the

procuring, perfecting, retention and protection of the

Contract Area and in defending or prosecuting lawsuits

involving the Contract Area or any third party claim

arising out of Petroleum Operations under the Contract, or

sums paid in respect of legal services necessary for the

protection of the joint interest of Government and the

Contractor, shall be allowable. Such expenditures shall

include attorney's fees, court costs, costs of

investigation and procurement of evidence and amounts paid

in settlement or satisfaction of any such litigation and

claims provided such costs are not covered elsewhere in the

Accounting Procedure. Where legal services are rendered in

such matters by salaried or regularly retained lawyers of

the Contractor or an Affiliate, such compensation shall be

included instead under Sections 3.1.2 or 3.1.4(b)(i) above

as applicable.



3.1.12



Training Costs

All costs and expenses incurred by the Contractor in

training as is required under Article 22 of the Contract.



3.1.13



General and Administrative Costs

The costs described in Section 2.6.1 and the charge

described in Section 2.6.2 of this Accounting Procedure.



3.2



COSTS NOT RECOVERABLE AND NOT ALLOWABLE UNDER THE CONTRACT

The following costs and expenses shall not be recoverable or allowable

(whether directly as such or indirectly as part of any other charges or

expenses) for cost recovery and production sharing purposes under the

Contract:

(i)



(ii)



costs and charges incurred before the Effective Date

including costs in respect of preparation, signature or

ratification of this Contract except as otherwise provided

in Article 13.1;

expenditures in respect of any financial transaction to

negotiate, float or otherwise obtain or secure funds for

Petroleum Operations including, but not limited to,

interest, commission, brokerage and fees related to such

114

transactions, and exchange losses on loans or

other financing;



(iii)

(iv)



(v)



(vi)

(vii)

(viii)



expenditures incurred in obtaining, furnishing and

maintaining the guarantees required under the Contract and

any other amounts spent on indemnities with regard to

non-fulfillment of contractual obligations;

attorney's fees and other costs and charges in

connection with arbitration proceedings and sole

expert determination pursuant to the Contract;

fines and penalties imposed by courts of law of

the Republic of India;

donations and contributions;

expenditures for the creation of any partnership

or joint venture arrangement;



(ix)



amounts paid with respect to non-fulfillment of

contractual obligations;



(x)



costs incurred as a result of failure to insure

where insurance is required pursuant to the

Contract;



(xi)



(xii)

3.3



costs of marketing or transportation of Petroleum

beyond the Delivery Point;



costs and expenditures incurred as a result of

wilful misconduct or gross negligence of the

Contractor's supervisory personnel;

payments pursuant to Article 16 of the Contract.



OTHER COSTS RECOVERABLE AND ALLOWABLE.

Any other costs and expenditures not included in Section 3.1 or 3.2 of

this Accounting Procedure but which have been incurred by the

Contractor for the necessary and proper conduct of Petroleum Operations

pursuant to an approved Work Programme and Budget.



3.4



INCIDENTAL INCOME AND CREDITS

All incidental income and proceeds received from Petroleum Operations

under the Contract, including but not limited to the items listed

below, shall be credited to the accounts under the Contract and shall

be taken into account for cost recovery, production sharing and

participation purposes in the manner described in Articles 13 and 14 of

the Contract:

115

(i)



The proceeds of any insurance or claim or judicial awards

in connection with Petroleum Operations under the Contract



or any assets charged to the accounts under the Contract

where such operations or assets have been insured and the

premia charged to the accounts under the Contract;

(ii)



(iii)



(iv)



(v)



(vi)



(vii)



3.5



Revenue received from third parties for the use

of property or assets, the cost of which has been

charged to the accounts under the Contract;

Any adjustment received by the Contractor from the

suppliers/manufacturers or their agents in connection with

defective material, the cost of which was previously

charged by the Contractor to the accounts under the

Contract;

Rentals, refunds or other credits received by the

Contractor which apply to any charge which has

been made to the accounts under the Contract;

Prices originally charged to the accounts under the

Contract for materials subsequently exported from the

Republic of India without being used in Petroleum

Operations under the Contract;

Proceeds from the sale or exchange by the Contractor of

plant or facilities from a Field, the acquisition costs of

which have been charged to the accounts under the Contract

for the relevant Field;

Legal costs charged to the accounts under Section 3.1.11 of

this Accounting Procedure and subsequently recovered by the

Contractor.



NON-DUPLICATION OF CHARGES AND CREDITS

Notwithstanding any provision to the contrary in this Accounting

Procedure, it is the intention that there shall be no duplication of

charges or credits to the accounts under the Contract.

-----*****----116

SECTION 4

RECORDS AND INVENTORIES OF ASSETS



4.1



4.2



RECORDS

4.1.1



The Contractor shall keep and maintain detailed

records of property and assets in use for or in

connection with Petroleum Operations under the

Contract in accordance with normal practices in

exploration and production activities of the

international petroleum industry. Such records

shall include information on quantities, location

and condition of such property and assets, and

whether such property or assets are leased or

owned.



4.1.2



The Contractor shall furnish annually particulars to the

Government, by notice in writing as provided in the

Contract, of all major assets acquired by the Contractor to

be used for or in connection with Petroleum Operations.



INVENTORIES

4.2.1



The Contractor shall:

(a) not less than once every twelve (12) Calendar

Months with respect to movable assets take an

inventory of the controllable assets used for

or in connection with Petroleum Operations in

terms of the Contract and address and deliver

such inventory to the Government with a

statement of the principles upon which

valuation of the assets mentioned in such

inventory has been based. Controllable



assets means those assets the Operator shall

submit to detailed record keeping.

(b) not less than once every three (3) years with

respect to immovable assets, take an

inventory of the assets used for or in

connection with Petroleum Operations in terms

of the Contract and address and deliver such

inventory to the Government together with a

written statement of the principles upon

which valuation of the assets mentioned in

such inventory has been based. Immovable

assets means those assets which are placed in

service and have an original cost in excess

of Fifty Thousand United States Dollars

(US$50,000).

4.2.2



The Contractor shall give the Government at least thirty

(30) days notice in writing in the manner provided for in

the Contract of its intention to take the inventory

referred to in Section 4.2.1

117

and the Government shall have the right to be

represented when such inventory is taken.



4.2.3



When an assignment of rights under the Contract takes

place, a special inventory shall be taken by the Contractor

at the request of the assignee provided that the cost of

such inventory is borne by the assignee and paid to the

Contractor.



4.2.4



In order to give effect to Article 27 of the Contract, the

Contractor shall provide the Government with a

comprehensive list of all relevant assets when requested by

the Government to do so.

-----*****----118



SECTION 5

PRODUCTION STATEMENT AND ROYALTY AND CESS STATEMENT

5.1



From the date of first production, after the Effective Date, of

Petroleum from the Contract Area, the Contractor shall submit a

Production Statement for each Calendar Month to Government showing the

following information separately for each producing field and in

aggregate for the Contract Area:

5.1.1



The quantity of Crude Oil produced and saved.



5.1.2



The quality and characteristics of such Crude Oil

produced and saved.



5.1.3



The quantity of Associated Natural Gas and Non

Associated Natural Gas produced and saved.



5.1.4



The quality, characteristics and composition of

such Natural Gas produced and saved.



5.1.5



The quantities of Crude Oil and Natural Gas used for the

purposes of carrying on drilling and Production Operations

and pumping to field storage, as well as quantities

reinjected.



5.1.6



The quantities of Crude Oil and Natural Gas

unavoidably lost.



5.1.7



The quantities of Natural Gas flared and vented.



5.1.8



The size of Petroleum stocks held on the first

day of the Calendar Month in question.



5.1.9



The size of Petroleum stocks held on the last day

of the Calendar Month in question.



5.1.10



The quantities of Natural Gas reinjected into the

Petroleum Reservoir.



5.1.11



The number of days in the Calendar Month during which

Petroleum was produced from each Field.



5.1.12



The Gas/Oil ratio for each Field for the relevant

Calendar Month.



5.1.13



The water/Oil ratio for each Field for the

relevant Calendar Month, if available.



5.2



All quantities shown in this Statement shall be expressed in both

volumetric terms (barrels of oil and cubic metres of gas) and in weight

(metric tonnes).



5.3



The Government may direct in writing that the Contractor

include other particulars relating to the production of

119

Petroleum in its Production Statement, and the Contractor shall to the

extent possible comply with such direction.



5.4



The Production Statement for each Calendar Month shall be submitted to

Government no later than ten (10) days after the end of such Calendar

Month for Oil and the immediately succeeding Calendar Month for Gas.



5.5



The Contractor shall, for the purposes of Article 15, submit a

statement to Government providing the calculation of the amount of

royalty and cess, separately, paid with respect to each Calendar Month

for each producing Field and in aggregate for the Contract Area. The

statement shall show the following information:



5.6



5.5.1



The quantity of Crude Oil and Condensate produced

and saved.



5.5.2



The quantity of ANG and NANG produced and saved.



5.5.3



The amount of royalty and cess, separately, paid on Crude

Oil and Condensate produced, saved and sold and the

particulars of the calculation thereof.



5.5.4



The amount of royalty paid on ANG and NANG and

the particulars of the calculation thereof.



The Royalty and Cess Statement for each Calendar Month shall be

submitted to Government no later than twenty-one (21) days after the

end of such Calendar Month for Oil and the most recently available

Calendar Month for Gas.

-----*****----120

SECTION 6

VALUE OF PRODUCTION AND PRICING STATEMENT



6.1



The Contractor shall prepare a Statement providing calculations of the

value of Crude Oil produced and saved during each Calendar Month. This

Statement shall contain the following information:

6.1.1



The quantities, prices and receipts realized by the

Contractor as a result of sales of Crude Oil to third

parties (with any sales to Government being separately

identified) made during the Calendar Month in question.



6.1.2



The quantities, prices and receipts realized therefor by

the Contractor as a result of sales of Crude Oil made

during the Calendar Month in question, other than to third

parties.



6.1.3



The quantities of Crude Oil appropriated by the Contractor

to refining or other processing without otherwise being

disposed of in the form of Crude Oil.



6.1.4



The value of stocks of Crude Oil on the first day

of the Calendar Month in question.



6.1.5



The value of stocks of Crude Oil on the last day

of the Calendar Month in question.



6.1.6



The percentage volume of total sales of Crude Oil made by

the Contractor during the Calendar Month that are Arms

Length Sales to third parties.



6.1.7



Information available to the Contractor, in so far as

required for the purposes of Article 19 of the Contract,

concerning the prices of competitive crude oils produced by

the main petroleum producing and exporting countries

including contract prices, discounts and premia, and prices

obtained on the spot markets.



6.2



The Contractor shall prepare a statement providing calculations of the

value of ANG and NANG produced and sold during each Calendar Month for

the most recently available Calendar Month. This Statement shall

contain all information of the type specified in Section 6.1 for Crude

Oil as is applicable to Gas and such other relevant information as may

be required by the Government.



6.3



The Statements required pursuant to Sections 6.1 and 6.2 shall include

a detailed breakdown of the calculation of the prices of Crude Oil,

Associated Natural Gas and Non

Associated Natural Gas.

121



6.4



The Value of Production and Pricing Statement for each Calendar Month

shall be submitted to Government not later than twenty-one (21) days

after the end of such Calendar Month for Oil and the most recently

available Calendar Month for Gas.

-----*****----122

SECTION 7

STATEMENT OF COSTS, EXPENDITURES AND RECEIPTS



7.1



7.2



The Contractor shall prepare with respect to each Calendar Quarter a

Statement of Costs, Expenditures and Receipts under the Contract. The

statement shall distinguish between Exploration costs, Development

Costs and Production Costs and shall separately identify all

significant items of costs and expenditure as itemized in Section 3 of

this Accounting Procedure within these categories. The statement of

receipts shall distinguish between income from the sale of Petroleum

and incidental income of the sort itemized in Section 3.4 of this

Accounting Procedure. If the Government is not satisfied with the

categories, it shall be entitled to request a more detailed breakdown.

The Statement shall show the following:

7.1.1



Actual costs, expenditures and receipts for the

Calendar Quarter in question.



7.1.2



Cumulative costs, expenditures and receipts for

the Year in question.



7.1.3



Latest forecast of cumulative costs, expenditures

and receipts at the Year end.



7.1.4



Variations between budget forecast and latest

forecast and explanations thereof.



The Statement of Costs, Expenditure and Receipts of each Calendar

Quarter shall be submitted to Government not later than sixty (60) days

after the end of such Calendar Quarter.



-----*****----123

SECTION 8

COST RECOVERY STATEMENT

8.1



The Contractor shall prepare with respect to each Calendar Quarter a

Cost Recovery Statement containing the following information:

8.1.1



Unrecovered Contract Costs carried forward from

the previous Calendar Quarter, if any.



8.1.2



Contract costs for the Calendar Quarter in

question.



8.1.3



Total Contract Costs for the Calendar Quarter in

question (Section 8.1.1 plus Section 8.1.2).



8.1.4



Quantity and value of Cost Petroleum taken and

disposed of by the Contractor for the Calendar

Quarter in question.



8.1.5



Contract Costs recovered during the Calendar

Quarter in question.



8.1.6



Total cumulative amount of Contract Costs

recovered up to the end of the Calendar Quarter

in question.



8.1.7



Amount of Contract Costs to be carried forward

into the next Calendar Quarter.



8.2



Where necessary and possible, the information to be provided under

Section 8.1 shall be identified separately Field by Field and also

separately for Crude Oil, Associated Natural Gas and Non Associated

Natural Gas.



8.3



The cost recovery information required pursuant to Subsection 8.1 above

shall be presented in sufficient detail so as to enable Government to

identify how the cost of assets are being recovered.



8.4



The Cost Recovery Statement for each Calendar Quarter shall be

submitted to Government not later than sixty (60) days after the end of

such Calendar Quarter.

-----*****----124

SECTION 9

PRODUCTION SHARING STATEMENT



9.1



The Contractor shall prepare with respect to each Calendar

Quarter a Production Sharing Statement containing the

following information:

9.1.1



The calculation of the applicable net cash flows

as defined in Appendix D for the Calendar Quarter

in question.



9.1.2



The Investment Multiple applicable in the

Calendar Quarter in question.



9.1.3



Based on Section 9.1.2 and Article 14, the appropriate

percentages of Profit Petroleum, if any, for the Government

and Contractor in the Calendar Quarter in question.



9.1.4



The total amount of Profit Petroleum, if any, to be shared

between the Government and Contractor in the Calendar

Quarter in question.



9.1.5



Based on Sections 9.1.3 and 9.1.4, the amount of Profit

Petroleum due to the Government and Contractor as well as

to each constituent of the Contractor in the Calendar



Quarter in question.

9.1.6



The actual amounts of Petroleum taken by the Government and

Contractor as well as by each constituent of the Contractor

during the Calendar Quarter in question to satisfy their

entitlement pursuant to Section 9.1.5.



9.1.7



Adjustments to be made, if any, in future

Calendar Quarters in the respective amounts of

Profit Petroleum due to the Government and

Contractor as well as to each constituent of the

Contractor on account of any differences between

the amounts specified in Sections 9.1.5 and

9.1.6, as well as any cumulative adjustments

outstanding from previous Calendar Quarters.



9.2



Where necessary and if possible, the information to be provided under

Section 9.1 shall be identified separately for each Field and also

separately for Crude Oil as distinct from Natural Gas.



9.3



The Production Sharing Statement shall be submitted to Government not

later than sixty (60) days after the end of such Calendar Quarter.

-----*****----125

SECTION 10

END OF FINANCIAL YEAR STATEMENT



10.1



The Contractor shall prepare a definitive End of Year Statement. The

statement shall contain aggregated information in the same format as

required in the Production Statement and Royalty and Cess Statement,

Value of Production and Pricing Statement, Statement of Costs,

Expenditure & Receipts, Cost Recovery Statement and Production Sharing

Statement, but shall be based on actual quantities of Petroleum

produced, income received and costs and expenditures incurred. Based

upon this Statement, any adjustments that are necessary shall be made

to the transactions concerned under the Contract.



10.2



The End of Year Statement for each year shall be submitted to

Government within ninety (90) days of the end of such Year.

-----*****----126

SECTION 11

BUDGET STATEMENT



11.1



11.2



The Contractor shall prepare a Budget Statement for each

Year. This statement shall distinguish between budgeted

Exploration Costs, Development Costs and Production Costs

and shall show the following:

11.1.1



Forecast costs, expenditures and receipts for the

Year in question.



11.1.2



A schedule showing the most important individual items of

total costs, expenditures and receipts for the Year.



The Budget Statement shall be submitted to Government with respect to

each Year not less than ninety (90) days before the start of the Year

provided that in the case of the Year in which the Effective Date

falls, the Budget Statement shall be submitted within ninety (90) days

of the Effective Date.

-----*****----127

APPENDIX D

CALCULATION OF THE

INVESTMENT MULTIPLE FOR PRODUCTION SHARING PURPOSES



1.



In accordance with the provisions of Article 14, the share

of the Government and the Contractor respectively of Profit

Petroleum from the Contract Area in any Financial Year shall

be determined by the Investment Multiple earned by the

Companies from the Contract Area at the end of the preceding

Financial Year. These measures of profitability shall be

calculated on the basis of the appropriate net cash flows as

specified in this Appendix D.



INVESTMENT MULTIPLE

2.



The "Net Cash Income" of the Companies from the Contract

Area in any particular Financial Year is the aggregate value

for the year of the following:

(i)



Cost Petroleum entitlement of the Companies as

provided in Article 13;

PLUS



(ii)



Profit Petroleum entitlement of the Companies as

provided in Article 14;

PLUS



(iii)



incidental income of the Companies of the type

specified in Section 3.4 of the Accounting

Procedure arising from Petroleum Operations and

apportioned to the Contract Area;

LESS



(iv)



the Companies' share of all Production Costs and

royalty/cess payments incurred on or in the

Contract Area;

LESS



(v)



3.



the notional income tax, determined in accordance with

paragraph 7 of this Appendix, payable by the Companies on

profits and gains from the Contract Area.



The "Investment" made by the Companies in the Contract Area

in any particular Financial Year is the aggregate value for

the year of:

(i)



Exploration Costs incurred by the Companies in the Contract

Area and apportioned to the Contract Area in the same

proportion that said Costs were recovered pursuant to

Articles 13.2 and 13.3.

128

PLUS



(ii)



Development Costs incurred by the Companies in

the Contract Area.



4.



For the purposes of the calculation of the Investment Multiple, Costs

or expenditures which are not allowable as provided in the Accounting

Procedure shall be excluded from Contract Costs and be disregarded.



5.



The Investment Multiple ratio earned by the Companies as at

the end of any Financial Year from the Contract Area shall

be calculated by dividing the aggregate value of the

addition of each of the annual Net Cash Incomes

(accumulated, without interest, up to and including that

Financial Year starting from the Financial Year in which

Production Costs were first incurred or production first

arose after the Effective Date on or in the Contract Area)

by the aggregate value of the addition of each of the annual

Investments (accumulated, without interest, up to and

including that Financial Year starting from the Financial

Year in which Exploration and Developments Costs were first

incurred).



6.



Profit Petroleum from the Contract Area in any Financial Year shall be

shared between the Government and the Contractor in accordance with the

value of the Investment Multiple earned by the Companies as at the end

of the previous Financial Year pursuant to Articles 14.2, 14.3 and

14.4.



GENERAL

7.



In determining the amount of notional income tax to be

deducted in the applicable cash flows specified in paragraph

2 of this Appendix, a notional income tax liability in

respect of the Contract Area shall be determined for each

Company, as if the conduct of Petroleum Operations by the

Company in the Contract Area constituted the sole business

of the Company and as if the provisions of the Income Tax

Act, 1961, with respect to the computation of income tax at

a fifty percent (50%) rate applicable to Petroleum

Operations on the basis of the income and deductions

provided for in Article 15 of this Contract were accordingly

applicable separately to the Contract Area, disregarding any

income, allowances, deductions, losses or set-off of losses

from any other Contract Area or business of the Company.



8.



Sample Calculation is attached in Appendix "D-1".

129

APPENDIX "D-1"

INVESTMENT MULTIPLE CALCULATION - EXAMPLE PROBLEM



The following example is intended to demonstrate the calculation and impact of

the Investment Multiple. The figures shown would be for the Companies and are

fictitious in this example for demonstration purposes. The investment multiple

is calculated individually for the Companies.

RIL OR EOGIL

Investment Multiple at beginning of

Financial Year 11

Profit Oil Shares at beginning of

Financial Year 11

A Cumulative Net Cash Income at

beginning of Financial Year 11

+ Cost Petroleum in Financial Year 11

+ Profit Petroleum in Financial Year 11

+ Incidental Income in Financial Year 11

- Production Costs in Financial Year 11

- Oil Royalty and Cess in Financial Year 11

- Gas Royalty in Financial Year 11

- Notional Income Tax in Financial Year 11

B = Cumulative Net Cash Income at end of

Financial Year 11

C



Cumulative Investment at beginning of

Financial Year 11

+ Exploration Costs in Financial Year 11

+ Development Costs in Financial Year 11

+ Service Costs in Financial Year 11

D = Cumulative Investment at end of

Financial Year 11

Investment Multiple at beginning of

Financial Year 12 = (B / D)

Profit Oil Shares at beginning of

Financial Year 12



1.96

24.00%

US$ MILLIONS

100.00

10.00

1.00

.00

.60

1.57

0.41

2.00

106.42

51.00

0.30

1.50

0.00

52.80

2.02

18.00%



Since the Investment Multiple is calculated to be greater than 2.0 at the

beginning of Financial Year 12, the Profit Petroleum share to be received by RIL

or EOGIL falls from 24% to 18% at the inception of Financial Year 12.

In the event that the Investment Multiple were found to exceed 2.0 during the



financial close of Financial Year 11, the Contractor may have received excess

Profit Petroleum during the first sixty (60) days of Financial Year 12. In this

case, the quantity of excess Profit Petroleum will be calculated and the

accounts will be settled by adjustment to entitlements within sixty (60) days of

the following year (year twelve).

-----*****----130

APPENDIX E

FORM OF FINANCIAL AND PERFORMANCE GUARANTEE

(to be furnished pursuant to Article 29 of the Contract)

WHEREAS ENRON EXPLORATION COMPANY, a Company duly organized and existing under

the laws of Delaware, U.S.A., having its registered office at 1400 Smith Street,

Houston, Texas, U.S.A., (hereinafter referred to as "the Guarantor" which

expression shall include its successors and assigns) is the indirect owner of

100% of the capital stock of ENRON OIL & GAS INDIA LIMITED ("Company") and

direct owner of its parent company; and

WHEREAS Company is signatory to a Production Sharing Contract of even date of

this guarantee in respect of an Offshore area identified as Tapti Block

(hereinafter referred to as "the Contract") made between the Government of India

(hereinafter referred to as "the Government"), Company, RELIANCE INDUSTRIES

LIMITED and OIL & NATURAL GAS CORPORATION LIMITED (hereinafter referred to as

"Contractor" which expression shall include its successors and permitted

assigns); and

WHEREAS the Guarantor wishes to guarantee the performance of Company or its

Affiliate Assignee under the Contract as required by the terms of the Contract;

NOW, THEREFORE, this Deed hereby provides as follows:

1.



The Guarantor hereby unconditionally and irrevocably guarantees

to the Government that it will make available, or cause to be

made available, to Company or any other directly or indirectly

owned Affiliate of Company to which any part or all of

Company's rights or interest under the Contract may

subsequently be assigned ('Affiliate Assignee'), to ensure that

Company or any Affiliate Assignee can carry out its work

commitment as set forth in the Contract.



2.



The Guarantor further unconditionally and irrevocably guarantees to the

Government reasonable compliance by Company or any Affiliate Assignee, of

any obligations of Company or any Affiliate Assignee under the Contract.



3.



The Guarantor hereby undertakes to the Government that if

Company, or any Affiliate Assignee, shall, in any respect, fail

to perform its work commitments under the Contract or commit

any material breach of such obligations, then the Guarantor

shall fulfill or cause to be fulfilled the obligations in place

of Company or any Affiliate Assignee, and will indemnify the

Government against all actual losses, damages, costs, expenses,

or otherwise which may result directly from such failure to

perform or breach on the part of Company. In no event shall

Guarantor be liable for any special consequential, indirect,

incidental or punitive damages of any kind or character,

including, but not limited to, loss of profits or revenues,

loss of product or loss of use arising out of or related to a

131

material breach by Company of its obligations under the

Contract.



4.



This guarantee shall take effect from the Effective Date and shall remain

in full force and effect for the duration of the Contract and thereafter

until no sum remains payable by Company, or its Affiliate Assignee, under

the Contract or as a result of any decision or award made by any expert or

arbitration tribunal thereunder.



5.



This guarantee shall not be affected by any change in the Articles of

Association and by-laws of Company or the Guarantor or in any instrument

establishing the Licensee.



6.



The liabilities of the Guarantor shall not be discharged or

affected by (a) any time indulgence, waiver or consent given to

Company; (b) any amendment to the Contract or to any security

or other guarantee or indemnity to which Company has agreed;

(c) the enforcement or waiver of any terms of the Contract or

of any security, other guarantee or indemnity; or (d) the

dissolution, amalgamation, reconstruction or reorganization of

Company.



7.



This guarantee shall be governed by and construed in accordance

with the laws of India.

IN WITNESS WHEREOF the Guarantor, through its duly authorized

representatives, has caused its seal to be duly affixed hereto and this

guarantee to be duly executed the __________ day of _________ 1994.



The seal of ___________ was hereto duly affixed by ___________this_____ day of

________ 1994 in accordance with its by-laws and this guarantee was duly signed

by ________________ and ______________________

as required by the said by-laws.

- -----------------------Secretary



-------------------Vice President



Witness:

- ---------------------------*****----132

APPENDIX F

EQUIPMENT

All Wells drilled by ONGC and associated equipment whether or not plugged and

abandoned except that no liabilities or obligations shall accrue to Companies

from accepting same unless such liabilities or obligations arise as a result of

actions taken after the Effective Date.

-----*****----133

APPENDIX G

DEVELOPMENT COMMITMENT SPECIFIED BY THE COMPANIES

The development plan, illustrated in Figure G-1 includes, but may not be limited

to:

-



3D reservoir simulation models

6 well platforms at South Tapti

4 well platforms at Mid-Tapti

1 common 5.1 MMm3/day (180 MMCFPD) processing

facility and living quarters at Mid-Tapti

Interfield and intrafield pipelines

1 export gas pipeline

35 Development Wells (directional from well

platforms)

Geophysical, geological and engineering studies

The final configuration of physical facilities will

result from optimization studies to which ONGC will contribute

their knowledge and information.

If drainage area of the 35 primary development wells is

inadequate, an additional 30 (infill) wells may be needed.

Infill wells are not a committed work obligation, but are

included in the Cost Recovery Limit defined in Article 13.1.2.



Annex G-1 shows Companies' development concept based on an assumed project start

date of July 1, 1993.

-----*****----134



APPENDIX - G

FIGURE G-1

Mid and South Tapti Fields

Bombay Offshore Basin

[Chart]

135

Appendix G

Annex G-1

VIIa.



TECHNICAL INFORMATION FOR THE FIELD

aA.



RESERVE ASSESSMENT

Primary objectives in assigning reserves to Mid- and South-Tapti

Fields were two fold: First, verify ONGC's reserves, and second,

assess potential for an increase and a decrease in reserve base.

1.



Verification Methodology

Verification was accomplished by adapting reservoir parameters

and various fluid boundaries utilized by ONGC in pay maps

provided in the "Review of Technological Scheme for

Development of Tapti Field" to the Bidders' revised structure

map on the H-3 Marker (Exhibit VII-1). This approach

incorporated significant effects of a complex and aerially

extensive NW-SE extensional fault system into the

interpretation of the primary gas pool geometries in Mid- and

South-Tapti. Structure maps for the various pools were made

for Pay Zones I, II, IX, and XII in Mid-Tapti and Zones I, II,

and III in South-Tapti.

Values from the ONGC pay hydrocarbon volume maps (Sgoh) were

then recontoured to reflect the new structural

interpretations. Major stratigraphic boundaries were also

incorporated in the associated zonal pay maps. At Mid-tapti,

it was necessary to place a generally E-W trending reservoir

pinchout to the north because the MT-3 and MT-4 Wells lie

below the critical structural spill point at the Pay Zone I

and XII levels. A NE-SW trending permeability barrier mapped

by ONGC that separates the MT-3 from adjacent wells in Pay

Zone XII was modified to include the MT-1 Well in the MT-3

Block.

Stratigraphic correlation methods and nomenclature established

by ONGC were utilized in this preliminary evaluation. The

erratic fluviodeltaic depositional character of the sand

bodies and relatively large distances between wells precluded

a more detailed stratigraphic correlation scheme without

additional seismic/well data. A major disagreement in

correlation with ONGC occurs at Pay Zone XII at Mid-Tapti and

will be discussed.

The Bidders are confident that the 3-D seismic survey proposed

in the pre-development work plan will prove to be an excellent

tool for delineation of porous gas-filled reservoirs through

amplitude analysis (DHI).

It will also minimize stratigraphic risk prior to field

development and improve detailed structural definition.



2.



Upside Potential

Verification of base reserves in the Tapti Block is considered

essential by the Bidders. Upside potentials is also important

but not quantifiable in this preliminary evaluation.

Hydrocarbon pay volume values calculated by ONGC are

conservative based on preliminary log analysis of the MT-1,

MT-2, MT-5, C2-5, C2-7 and C2-8 Wells. Average shale-corrected



porosity values calculated by the Bidders vary between 22

percent and 30 percent (25 percent average). Gas effect may

impart a small positive error in the Bidders' porosity

calculation.

In Mid-Tapti, average gas saturation porosity values

calculated by the Bidders were 67 to 72 percent in MT-1, 64 to

71 percent in MT-2 and 73 to 76 percent in MT-5. These higher

gas saturations were calculated utilizing a Waxman-Smit log

analysis model assuming cation exchange capacity (CEC) values

between 5 to 10 meq/100gms. Petrographic analyses suggested to

the Bidders that pervasive clay coating of the sands by a

chlorite mineral (chamosite) could cause relatively high CEC's

of 10 to 40 meq/100gms. This CEC effect could result in

preferential conductivity along the clay linings. This

phenomena would increase calculated gas saturations if taken

into account. For this reason, the attached contoured Sgoh

values are considered to be conservative. Proposed

pre-development work will entail a detailed petrophysical

analysis of existing rock/log data to derive zone-specific

formation evaluation models to determine effective porosity,

permeability, and gas saturation parameters.

Aside from log analysis, the fluid contacts and stratigraphic

limits placed on various Pay Zones have a significant margin

for error. Of the seven pools mapped and discussed below by

the Bidders, four have a structurally defined limit based on a

gas/shale contact (GSC) or lowest known gas (LKG) as defined

by the Bidders. The water contact in Pay Zone I at

South-Tapti, the largest pool in the block, is based on a

water test from a same 20 meters stratigraphically lower than

the proven gas productive zone lying immediately below the H-3

marker. Arbitrary stratigraphic limits were required to

explain the trapping mechanism of Zone I and Zone XII pools at

Mid-Tapti. The pools' actual limits on the north side of the

field have yet to be defined.

aB.



PAY ZONE STRUCTURE AND (Sgoh) MAPS

The zones mapped by the Bidders include the following:

ZONE

---I

I

II

II

III

III

IX

IX

XII

XII



MAP

--------Structure

Sgoh

Structure

Sgoh

Structure

Sgoh

Structure

Sgoh

Structure

Sgoh



FIGURE

-----VII-2

VII-3

VII-4

VII-5

VII-6

VII-7

VII-8

VII-9

VII-10

VII-11



FIELD

--------------Mid/South-Tapti

Mid/South-Tapti

Mid/South-Tapti

Mid/South-Tapti

South-Tapti

South-Tapti

Mid-Tapti

Mid-Tapti

Mid-Tapti

Mid-Tapti



In the following discussion of the various Pay Zones, stratigraphic

correlation is based on the distance the pay sand in question lies

below the H-3 marker. Zones in different wells with overlapping

stratigraphic depth ranges are considered to be equivalent.

Zone I is the most aerially extensive pay in the Tapti area

occurring in both field areas. At South-Tapti, ONGC placed a

gas/water contact at 1807 meters subsea although none of the

observed tests of this interval in the C2-2, C2-4, C2-5, C2-6, and

C2-7 had water recoveries reported. The C2-6 did test a sand at

1843- 52 meters (1820-1829 meters subsea) which produced water. It

occurs 22 meters below the gas bearing Zone I sand at 1820-1825

meters (1797-1802 meters subsea). This provides the only evidence of

significant water production in the gross Zone I interval at

South-Tapti. The Sgoh map honors this water contact. The numerous

cross-cutting faults at South-Tapti were generally not considered to

separate the accumulation except to the south at the C2-7 Well and

in the north where the high Sgoh values in C2-1, C2-4, and C2-6 are

interpreted to be in a separate fault block.

At Mid-Tapti the gas/shale contact or lowest known gas (LKG) was



placed at a -1650 meters subsea based on the MT-3 Well. Successful

tests were reported from MT-1, MT-3, MT-4, and MT-5 Wells. An

arbitrary stratigraphic pinchout was placed on the north side of the

field because structural spill as mapped occurs at -1610 meters.

This limits the productive area to roughly the same size as that

mapped by ONGC. An untested fault trap on the west side of the field

was contoured using Sgoh values similar to those observed in

adjacent wells. Reserves for the untested fault block were risk

discounted at 50 percent probability of success (POS) in this and

subsequently mapped intervals.

Zone II occurs in both field areas but is aerially limited to the

south end of South- Tapti with successful tests in the C2-2 and C2-7

Wells. The pool is interpreted to be stratigraphically limited to

the north and structurally defined by LKG at -1847 meters in the

C2-7 Well. At Mid-Tapti, successful tests were reported in MT-1 and

MT-5. The gas/water contact at -1650 meters is thought to be occurs

at 1676-1679 meters. The base of the sand is at 1650 meters subsea.

MT-2 contains two untested sands at the Zone II stratigraphic level

that appear potentially productive (1656-1670, 1672-1676). This was

apparently considered by ONGC when assigning a relatively high Sgoh

value of 1.47 to the well.

Zone III is restricted to the northern half of South-Tapti Field. A

stratigraphic limit was placed south of the C2-5 Well and LKG at

-1876 meters subsea corresponding to the base of the productive sand

at 1896-1903.5 meters in C2-5. Successful tests include the C2-1 and

C2-5.

Successfully tested zones that were not quantified at South-Tapti in

this preliminary study include Zones IV and V in C2-8, Zone VIII in

C2-1, Zone IX in C2-5, Zone X in C2-6 and C2-8, and Zone XI in C2-2.

At Mid-Tapti, Pay Zone IX had a successful test in the MT-5 Well

with LKG at -1896 meters subsea. An untested apparent log pay zone

occurs in the MT-1 at 1920-1925 meters that is stratigraphically

equivalent to the MT-5 producer and was assigned an Sgoh value of

0.168 by ONGC.

Zone XII at Mid-Tapti is interpreted to consist of two separate sand

bodies that include a mix of ONGC Zones X and XII. In their map of

Zone XII, ONGC separates a prolific test (498,273 m(3)/day) at

2046-2055 meters in the MT-3 Well with a permeability barrier from

the MT-1, MT-2, MT-4, and MT-5 Wells. The Bidders interpret Zone X

in MT-1, which tested at a rate of 446,355 m(3)/day from 1976-1979

and 1984-1987, to be the stratigraphic equivalent of the prolific

MT-3 Zone XII. This prolific sand body, informally called Zone XII A

is not present in the other Mid-Tapti wells. Approximately 60 meters

stratigraphically lower than Zone XII A is another productive sand

body called Zone XII B. It has successful tests in the MT-2 and MT-5

Wells but with lower rates of 107,000 and 85,535 m(3)/day,

respectively. A significant water recovery in the MT-2 test of 1085

bbl/day caused the Bidders to place a gas/water contact at -2040

meters subsea in Zone XII B. The Sgoh map reflects the difference in

pay quality between the two sand bodies and shows a northern

stratigraphic limit which is required because of structural spill.

Zones not mapped and quantified at Mid-Tapti include Zones XIV and

XV in MT- 1.

aC.



ADDITIONAL PAY ZONES NOT MAPPED BY ONGC

In the Bidders' preliminary log analysis, a number of untested

potential pay zones were identified. Future work will integrate all

log defined potential pay zones with 3-D seismic amplitude analysis

and stratigraphic interpretation to provide detailed pay maps.



aD.



RESERVE PARAMETERS

The parameters used for estimating reserves for each interval are

believed to be the same parameters employed by ONGC in reserve

estimates available in one of the documents in the data room.

Preliminary log analysis suggests the possibility for variation,

perhaps towards the positive side. This is a high priority item for

further investigation during the pre-development study phase.



FIELD HORIZON

---------------Mid-Tapti

I

Mid-Tapti

II

Mid-Tapti

IX

Mid-Tapti

XII

South-Tapti I

South-Tapti II

South-Tapti III

aE.



NET PAY

(m)

------6.1

15.6

2.6

8.6

6.0

17.2

8.7



POROSITY

(%)

-------18.0

18.0

18.6

21.8

18.5

19.0

21.0



WATER SATURATION

(%)

---------------65

69

60

57

60

45

40



RESERVES

Figure VII-12 is a reserve uncertainty distribution plot on log

probability scale for Mid and South Tapti fields combined. It shows

the expected reserve range of gas in place in English units for

unrisked and risked reserves. For each pay zone, individual

fault-defined gas accumulations were risk weighted according to the

degree and proximity of well penetrations as described in section B.

Calculated reserves were placed at the P 50% or most likely

position. Based on alternative log analysis models, the maximum (P

10%) value was determined by increasing porosity 40% (i.e. porosity

value of 10% would change to 14%) and decreasing water saturation

40% as well (i.e. Sw of 60% would change to 36%). A summary of the

distribution in metric units is listed below:

Probability

> or =

Minimum

Most Likely

Mean

Maximum



----------90

50

42.5

10



Unrisked

Gas in Place

(MMMm3)

-----------28.32

48.15

50.98

80.71



Risked

Gas in Place

(MMMm3)

-----------20.39

36.82

39.65

62.31



Risked mean gas-in-place reserves of 39.65 MMMm3 calculated from the

reserve uncertainty distribution, are utilized in the current bid

proposal yielding mean recoverable reserves of 31.72 MMMm3.

Detailed evaluation of unrisked most-likely reserves by field and

pay horizon were risk weighted and assessed an 80% recovery factor

to derive recoverable most-likely reserves of 29.46 MMMm3.

These were submitted in the March 30,1993 bid proposal as follows:

FIELD

----------Mid-Tapti

Mid-Tapti

Mid-Tapti

Mid-Tapti

South-Tapti

South-Tapti

South-Tapti



SAND

---I

II

IX

XII

I

II

III



ORIGINAL

RECOVERABLE

GAS IN PLACE GAS RESERVES

MMMm3

MMMm3

-----------------5.607

3.490

7.240

4.682

0.583

0.359

11.828

6.694

7.518

4.939

11.005

6.742

4.563

3.009



The above volumes are before shrinkage from expected condensate

liquids recovered during normal production operations. Furthermore,

potential reserves exist that cannot be evaluated with the

information available. In particular, those associated with

successful well tests at levels IV, V, VIII, IX, X and XI in

South-Tapti and levels XI and XV in Mid-Tapti. The Bidders expect to

quantify this potential during the initial study phase.

The cited pay zones that were not quantified by RIL/EEC amount to 20

to 30% of ONGC's total gas in place. Should ONGC's estimate be

correct, a success "upside case is included in this proposal to

reflect the potential impact of these reserves on the production

profile with the addition of up to 10.57 MMMm3 of gas reserves to

the base case of 31.72 MMMm3 for a total of 42.29 MMMm3.

VIIb.



TECHNICAL INFORMATION FOR GREATER TAPTI EXPLORATION CASE



b1.



Concept

Early in the evaluation of the Tapti fields, RIL/EEC became aware of

ONGC's continuing efforts to explore and appraise additional gas

accumulations in the surrounding gas-prone region of the Surat

Depression. At RIL/EEC's request, ONGC provided an excellent

overview of their efforts and results in the area through a series

of meetings in Bombay. This gracious exchange of ideas provided the

basis for the proposed exploration case.



b2.



Location

Figure VII-13 is a regional map of the Greater Tapti area. The

boundaries of the proposed exploration area were set up to encompass

the known limits of the Early Miocene to Early Oligocene reservoir

interval proven gas productive at Tapti (Figure VII-14). The

proposed coordinates for the Greater Tapti Exploration area are as

follows:

Corner

-----A

B

C

D

E

A



b3.



Latitude

-------------N20(degree)50'

N19(degree)50'

N19(degree)50'

N21(degree)20'

N21(degree)10'

N20(degree)50'



Longitude

-------------E71(degree)30'

E71(degree)30'

E72(degree)50'

E72(degree)50'

E72(degree)10'

E72(degree)10'



Proposed Area Status

It is the intent of RIL/EEC that the Greater Tapti area be considered

under the same terms, conditions and contractual obligations agreed

for the Tapti block proper.



b4.



Stratigraphy and Reservoir Characterization

Figure VII-15 is a sketch map of the net sand isopach for the Early

Miocene-Early Oligocene reservoir interval and associated gas

discoveries and prospects. The map is an attempt to demonstrate the

interpretation shown to RIL/EEC by ONGC. It exhibits a northerly point

source of sand supply that was distributed to the south and southwest

in a large lobate delta-like geometry.

Examination of over 15 Tapti cores in Bombay by RIL/EEC gave

conclusive evidence of a robust tidally-influenced deltaic environment

of deposition similar to the modern Irrawady delta (Figure VII-16).

Reservoirs occur in three major depositional environments (Figure

VII-17).

1.



The highest quality reservoirs with good visualorosity and

permeability are large distributary channel sands up to 25

meters thick. Modern analogs in the Irrawady delta are 2-6 km

wide and 10's of km long.



2.



The second most significant reservoirs are aerially extensive

delta front/chenier-ridge sands that form Pay Zone I at Mid and

South Tapti. They appear to have moderate to

fair visual porosity and permeability with significant amounts

of entrained clay introduced by burrowing organisms.



3.



b5.



Fair to poor quality reservoirs consisting of tidal channels,

tidal creeks and sandy tidal- delta-plain sands comprise the

third and most volumetrically significant portion of the

sedimentary section. They lack reservoir properties necessary

for commercial completion but may provide significant

gas-storage volume to source adjacent channel and delta-front

sands.



Exploration Activity

Exploration activity by ONGC has been focussed on the eastern and

southern portions of the sand system shown in Figure VII-15 playing

structural and combination structural-stratigraphic traps. Identified



structurally-controlled gas discoveries include North Tapti, C-24,

C-22 and B-12. Reserves of approximately 6.0 MMMm3 have been reported

by ONGC for C-24 and C-22. RIL/EEC understand the broad low-relief

B-12 feature has been tested by two wells to date with moderate flow

rates of gas in the 100,000 to 200,000 m3 range. Like the cited C-24

and C-22 discoveries, total net sand thickness at B-12 is

approximately 30% of that observed in the Tapti fields. The more

poorly defined combination traps with tested gas consist of SD-4,

CA-1, SD-1 and CD-1.

An untested high amplitude structure set up by compressional

reverse-fault movement is informally called the NE prospect. The

feature is located in transitional shallow waters with mudbanks that

are emergent at low tide. It requires seismic coverage on it northeast

side through expensive non-conventional acquisition methods to

establish critical dip. The structure appears to lie in a favorable

position within the sand-rich axis of the reservoir system with

upwards of 160 meters of possible net sand not unlike that seen in the

Tapti field area.

b6.



Exploration Results

Aside from the NE prospect which appears to have risky but high

reserve potential, the remaining discoveries were presented by ONGC as

somewhat marginal with smaller reserves and generally thinner and

poorer reservoir quality sands than Tapti. It appears to RIL/EEC that

timely and economic development of these relatively small and

scattered accumulations, outboard of the Tapti block, is not feasible

without linkage to Tapti infrastructure. RIL/EEC are prepared to

design the capacity of the Tapti facilities and pipelines to meet the

additional reserve potential of 15 to 35 MMMm3 envisioned for the

Greater Tapti area.

To insure that rapid exploitation of these discoveries and prospects

can occur, RIL/EEC is prepared to offer an immediate three year work

commitment entailing an estimated $38 million dollars (U.S.) of

expenditure. The plan is detailed in section VIII. To demonstrate the

benefits afforded GOI, an Exploration Case reserve is estimated at 25

MMMm3 for existing prospects and discoveries to provide the basis for

a production profile that can be layered on the Tapti Base and Success

Case Scenarios.



F.



PLAN FOR UTILIZATION OF GAS

The purpose of this application is to exploit the non-associated

natural gas reserves in the block. Therefore, except for gas

consumption required for operations, all the gas produced and

associated condensate fluids will be sold.

The Indian Government gas supply/consumption projections include gas

from this block.

The Bidders desire to produce the natural gas to fulfill the

government plan in the anticipated volumes.



G.



MONITORING SYSTEMS AND RESERVOIR MANAGEMENT

1.



Production Monitoring

Production will be monitored on an individual well basis and on

an aggregate basis consistent with normal good oil field

practices. For effective operational control, production rates

will be monitored frequently and recorded daily; for fiscal

purposes, production will be summarized and reported monthly. We

currently envision installation of a well-test system at each

well platform; however, full well stream "wet" meters may prove

to be a more attractive approach upon further study. Where well

tests are used, individual well production will be ascertained

by allocation on the basis of actual well producing time at a

given choke setting. Key data (e.g., flowing tubing pressure

and, if available, wet meter rate) may be radio transmitted to

the process platform.



2.



Reservoir Management



Reservoir management will be carried out through conventional

surface and down hole monitoring systems such as bottom hole

pressure surveys, production testing and well deliverability

testing on a periodic basis.

This data will be analyzed at least once a year to establish a

record of reservoir performance from which the reservoir drive

mechanisms will be established and the operations adjusted

accordingly to maximize recovery.

It is anticipated that a suitable mathematical reservoir model

will be established early in the exploitation stage and that the

reservoir performance would be monitored by periodically

updating the model with the production and pressure data

gathered.

The model would also be utilized for the purpose of reporting

gas reserves and deliverability projections.

A relatively simple single phase, three-dimensional,

multi-layered reservoir model is planned.

VIIIa. WORK PROGRAM - TAPTI BLOCK

A.



Base Case Development (30 billion cubic meters recoverable reserves)

1.



Seismic Commitment

Mid Tapti 3D Survey



320 km2

4500 km Inline

50 m Crossline Interval



South Tapti 3D Survey



530 km2

11000 km Inline

50 m Crossline Interval



The Mid-Tapti 3D survey acquisition would begin in October

1993, assuming execution of the Letter Agreement in July 1993.

Acquisition, processing and interpretation will require 6-8

months. The South Tapti 3D acquisition would commence in 1994.

2.



Development Commitment

The development plan & schedule are illustrated on Figures

VIII-1, -2, -3 and include:

- 3D reservoir simulation models

- 6 well platforms at South Tapti

- 4 well platforms at Mid-Tapti

- 1 common 5.1 MM3/day processing facility and living

quarters at Mid-Tapti

- Interfield & intrafield pipelines

- 1 export gas pipeline

- 35 Development wells(directional from well platforms)

- Geophysical, geological and engineering studies

- The final configuration of physical facilities will result

from optimization studies to which ONGC will contribute

their knowledge and information.

- If drainage area of the 35 primary development wells is

inadequate, an additional 30 (infill) wells may be needed.

Infill wells are not a committed work obligation



3.



Gas Sales Profiles

RIL/EEC expect (but cannot guarantee) that the Base Case

development plan will result in the gas sales shown in Figure

VIII-4. If the Success Case discussed in Section VII

materializes, the sales volumes should range between those

indicated in Figure VIII-4 and Figure VIII-5. If volumes

available for sale exceed those shown in Figure VIII-4, the

modular Base Case development plan will be augmented to

accommodate the excess gas production over that contemplated

in the Base Case.



VIIIb. WORK PROGRAM - GREATER TAPTI AREA



A.



The RIL/EEC proposal to expand the Tapti block to include the

Greater Tapti area defined above under Addendum Section VIIb is

advantageous to GOI, ONGC and RIL/EEC for reasons shown on Figure

VIII-6.

Seismic and Drilling Commitments shown below are in addition to or

commitments for the Tapti block (Section VIIIa).

Year

------1993-94



1995

1996



Activities

-----------------------1000 km 2D seismic

(primarily in shallow

water "transition zonell

on "NE" and "North Tapti"

prospects.

5 wells

2 wells



Est. Cost

---------5 MM US $



25 MM US $

8 MM US $



In addition, all usable existing seismic data will be reprocessed

and interpreted.

The commitment to spend a minimum 38 MM US Dollars in the Greater

Tapti Area (outside the currently defined block) during 1993 through

1996 shall be borne by ONGC, RIL and EEC in proportion to their

working interest in the Area (currently 40%, 30% and 30%

respectively). These and all subsequent expenditures shall be cost

recoverable. The project including Tapti block containing Mid and

South Tapti plus the area identified in Section VIIb-B shall be

considered as one.

Given success in the Greater Tapti Area outside the current Tapti

block, the Bidders' expectation for addition recoverable reserves is

25 billion cubic meters. Assuming that level of success in the

expanded area and the maximum success Case reserves in the current

Tapti block, the total Greater Tapti Area production profile is

shown on Figure VIII-7. These total reserves, 65 billion cubic

meters, represent a maximum and are neither guaranteed nor expected.

B.



PRODUCTION BUILD UP PHASE (INITIAL FIELD DEVELOPMENT TO REACH A

PRODUCTION PLATEAU)

The Bidder plans to tailor development work to the gas market. No

capital will be expended unless backed by a firm gas purchase

commitment. This is true not only for the initial plateau currently

contemplated in gas consumption projections, but for production

beyond the original plateau if warranted by the results of the study

phase.

It is anticipated that development will be originally concentrated

in the Mid-Tapti area. The development of the second field, or any

other field, will follow to the extent required to satisfy the

market. Deliverability capacity in excess of the market,

approximately 25 percent, will be built into the development plan.

Development is anticipated to consist of directional wells drilled

form several wellhead platforms. The wells will be drilled with a

jack-up rig. Because of sand production, well completions will be

designed to maximize flow rates yet minimize sand production. To

that extent, gravel pack through several extended perforations is

anticipated. Nevertheless, the final design will be consistent with

the results of the study phase.

The well-head platforms will have testing facilities; they will be

unmanned and controlled (monitored) from a central processing

platform via a communication/control system.

Submarine line network (8" - 12" in diameter) will connect the

platforms to the central processing platform.

The central processing platform will have gas processing facilities

of adequate capacity to handle all the anticipated volumes.

Expansion capabilities will be provided for during the initial

design of the processing platform.



Ability to handle and process condensate fluids and water will be

part of the processing package. Water will be disposed of after

appropriate treatment to insure that it is environmentally safe and

meets any existing specifications in this regard.

No gas will be flared except for technical reasons and then only in

minimum quantities.

After measurement using state-of-the-art gas/liquid metering

systems, which independently measures gas and condensate, the gas

and condensate products will be transported via a submarine line to

a connecting point with the existing Bassein-Hazira pipeline, or the

new planned parallel pipeline.

The Bidders believe that with early award of the block, with proper

planning and with the necessary mechanisms built-in to expedite

approvals (single clearance window concept) first production can be

achieved early in 1995 and that the first plateau could be achieved

in 1996.

C.



PLATEAU PRODUCTION AND DECLINE PHASE

Maintenance of the plateau phase for a period of 15 years is

expected to be accomplished by further development drilling and well

recompletions into other sands/reservoirs not originally exposed to

production. These activities will, as explained earlier for the

initial development phase, be tailored to the market demands and

contractual obligations. Depending on future market and provided

enough reserves are proven to safely back-up additional

deliverability, incremental volumes will be added to the original

base plateau. The duration of the incremental volumes will depend

upon reserves and markets.



D.



ABANDONMENT PHASE

At the termination of the PSC period, the wells and facilities will

be fully transferred without cost to the designated government

agency for further operations.

Abandonment of wells for mechanical reasons may occur. Those wells

will be abandoned following accepted industry practices.

Appendix - 5

COMMITTED DEVELOPMENT WORK PROGRAMME

FOR TAPTI BLOCK



1.



2.



SEISMIC COMMITMENT

Mid Tapti 3D Survey



320 km2

4500 km Inline

50 m Crossline Interval



South Tapti 3D Survey



530 km2

22000 km Inline

50 m Crossline Interval



DEVELOPMENT COMMITMENT

- 3D reservoir simulation models

- 6 well platforms at South Tapti

- 4 well platforms at Mid-Tapti

- 1 common 5.1 MM3/day processing facility and living quarters at

Mid-Tapti

- Interfield and intrafield pipelines

- 1 export gas pipeline to Hazira and onshore reseparation facility

- 35 development wells (directional from well platforms)

- Geophysical, geological and engineering studies

- The final configuration of physical facilities will result from

optimization studies to which ONGC will contribute their knowledge

and information; work programme may be adjusted accordingly to, for

example, reroute the export pipe line to the existing 36" line and

possibly eliminate the reseparation facility

If drainage area of the 35 primary development wells proves

inadequate, an additional 30 (infill) wells may be needed. Infill



wells are not a committed work obligation.

Appendix - 6

TAPTI ESTIMATED EXPENDITURE

YEAR

---1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017



CAPEX

$MM

----19.5

122.3

75.3

76.4

67.2

0

34

18

0

20

18

22

42.4

0

0

16

4.5

6

0

0

0

0

0

0

0



OPEX

$MM

----1.1

2.75

8.8

11

12.1

12.1

13.2

13.2

13.2

13.2

13.2

13.2

13.2

13.2

13.2

13.2

13.2

13.2

13.2

13.2

13.2

13.2

13.2

13.2

13.2



541.6



298.7

Appendix - 7 (Contd.)



TAPTI PRODUCTION PROFILE

(4.2 MM m3/day)

YEAR

---1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017



CONDENSATE SALES

MBbL

---------------0

0

526

658

658

658

658

658

658

658

658

658

658

658

658

658

658

572

546

472

350

259

191

152

79

12359



APPENDIX H

PRODUCTION PROFILE OF THE



GAS SALES

MM m3

--------0

0

1240

1551

1551

1551

1551

1551

1551

1551

1551

1551

1551

1551

1551

1551

1551

1355

1287

1111

825

611

449

360

187

29134



MID AND SOUTH TAPTI FIELDS

YEAR



CONDENSATE SALES

(Thousands Barrels)



1993

1994

1995

1996

1997

1997

1998

1999

2000

2001

2001

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019



GAS SALES

(Millions Cubic Meters)



0

0

0

165

658

658

658

658

658

658

658

658

658

658

658

658

658

658

658

658

572

546

472

350

259

191

152

79



0

0

0

388

1551

1551

1551

1551

1551

1551

1551

1551

1551

1551

1551

1551

1551

1551

1551

1551

1355

1287

1111

825

611

449

360

187



-----*****----APPENDIX I

PAYMENT FOR USE OF ONSHORE PLANT

Parties acknowledge that Gas is to be received by GAIL at Hazira downstream of

receiving and separation facilities owned and operated by ONGC. In order to

compensate ONGC for the cost of ownership and operations of these facilities,

Contractor shall make payments to ONGC on the basis of the costs fixed on an

incremental basis by an internationally recognised expert who shall be selected

by two members of the Operating Committee from a panel of three internationally

recognised experts selected by ONGC. In case there is no agreement between the

Companies and ONGC on the advice tendered, the matter shall be referred to

Government. The decision of Government shall be final and binding on all the

Parties.

GRAPHICAL CONTENT APPENDIX

Appendix - B

Appendix G

Figure G-1

Figure VII-1



Map of Contract Area - Tapti Block



Figure VII-2

Figure VII-3

Figure VII-4

Figure VII-5

Figure VII-6

Figure VII-7

Figure VII-8

Figure VII-9

Figure VII-10

Figure VII-11

Figure VIII-2

Figure VIII-4

Figure VIII-3



Mid and South Tapti Fields Bombay Offshore Basin

Mid and South Tapti Fields Structure Map H-3

Seismic Marker

Structure Map on Top Pay I Sand

Sg0h Map Pay I

Structure Contour Map on Top of Pay II Sand

Sg0h Map Pay II

Structure Map Pay Level III

Sg0h Map Pay Level III

Structure May on Pay IX

Sg0h May Pay IX

Structure Map Pay XII

Sg0h Map Pay XII

Enron Exploration Project Schedule Details

Tapti Production Profile

Development Schedule Base Case



Appendix-3



Enron Exploration Project Schedule Details