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 SFAX OFFSHORE PERMIT











CONVENTION





{Convention)


AND


APPENDIXES


SCHEDULE OF OBLIGATIONS


(Cahier des Charges)


EXCHANGE REGULATIONS


(Procedure des Changes)


COORDINATES AND MAP OF THE PERMIT


■(Coordonndes et Carte du Permis)





BETWEEN





THE STATE OF TUNISIA





AND


L’ENTREPRISE TUNISIENNE


D’ACTIVITES PEETROLIERES





AND


ATLAS PETROLEUM EXPLORATION


WORLDWIDE, LTD.


AND





EUROGAS INTERNATIONAL INC.








Tunis July 2005


 SFAX OFFSHORE Permit: - CONVENTION Page 1











TABLE OF CONTENTS


Page


CONVENTION............................................................................................................................ 4








APPENDIX A SCHEDULE OF OBLIGATIONS ..................12





ARTICLE 1 Purpose of the Schedule of Obligations...........................................................13





SECTION I EXPLORATION WORK


ARTICLE 2 Delineation of the Permit..................................................................................13


ARTICLE 3 Minimum work obligations during the initial period of validity of the


Permit..................................................................................................................13


ARTICLE 4 Justification of the amount of work performed................................................14


ARTICLE 5 Permit renewal............................ 15


SECTION H DISCOVERY AND EXPLOITATION OF A HYDROCARBON


DEPOSIT


ARTICLE 6 Award of an Exploitation Concession..............................................................15


ARTICLE 7 Exploitation obligation......................................................................................16


ARTICLE 8 Special production at the request of the GRANTING AUTHORITY...........16


ARTICLE 9 Renewal of the Exploration Permit in the event of discovery of a deposit____17


SECTION HI ROYALTY PROPORTIONAL TO THE PRODUCTION OF


HYDROCARBONS


ARTICLE 10 Royalty due on liquid hydrocarbons.................................................................17





ARTICLE 11 Choice of method of payment for the proportional Royalty on production... 18


ARTICLE 12 Cash collection methods for the proportional Royalty on liquid


hydrocarbons......................................................................................................18


ARTICLE 13 Methods for collection in kind of the proportional Royally on liquid


hydrocarbons.......................................................................................................19


ARTICLE 14 Royalty due on gaseous hydrocarbons..............................................................21


SECTION IV EXPLORATION AND EXPLOITATION FACILITIES OF THE


PERMIT HOLDER AND THE CONTRACTOR


ARTICLE 15 Opportunities provided to the PERMIT HOLDER and the


CONTRACTOR for their ancillary facilities...................................................23


ARTICLE 16 Facilities not of a public interest.......................................................................24


SFAX OFFSHORE Permit - CONVENTION Page 2











TABLE OF CONTENTS (cont.1


Page


ARTICLE 17 Use of existing public tools and equipment by the PERMIT HOLDER and


the CONTRACTOR..........................................................................................25


ARTICLE 18 Facilities of a public interest built by the GRANTING AUTHORITY at


the request of the CONTRACTOR...................................................................25


ARTICLE 19 Facilities of a public interest built by the CONTRACTOR, (license or


permit for use of public equipmen t)..................................................................27


ARTICLE 20 Duration of the licenses or permits granted for die ancillary facilities of die


CONTRACTOR................................................................................................28


ARTICLE 21 Various provisions relating to licenses or permits other than the


Hydrocarbon Exploitation Conces sion.............................................................29


ARTICLE 22 Provisions applicable to water reservoirs and conduits...................................; 29


ARTICLE 23 Provisions applicable to railways ....................................................................30


ARTICLE 24 Provisions applicable to maritime facilities for loading and unloading.........31


ARTICLE 25 Provisions applicable to power stations...........................................................32


ARTICLE 26 Mineral substances other than liquid or gaseous hydrocarbons......................32


ARTICLE 27 Miscellaneous facilities................ .32


SECTION V SUPERVISION AND CONTROL


ARTICLE 28 Documentation supplied to the CONTRACTOR by the GRANTING


AUTHORITY.....................................................................................................33


ARTICLE 29 Technical supervision........................................................................................33


ARTICLE 30 Application of the Water Code.........................................................................33


ARTICLE 31 Site access...........................................................................................................34


ARTICLE 32 Obligation to report on the operations..............................................................34


ARTICLE 33 Technical supervision of wells..........................................................................35


ARTICLE 34 Termination of drilling......................................................................................36


ARTICLE 35 Final well report.................................................................................................36


ARTICLE 36 Well tests........................................ 37


ARTICLE 37 Progress report and annual program...................................................................37


ARTICLE 38 Methodical exploitation of a deposit.................................................................38


ARTICLE 39 Supervision of producing wells.........................................................................38


ARTICLE 40 Deposit preservation..................... 38


ARTICLE 41 Coordination of exploration and exploitation carried out on the same


deposit by several different operators...............................................................39


ARTICLE 42 General obligation to provide doc uments.........................................................40


ARTICLE 43 Units of measurement................... 40


ARTICLE 44 Maps and charts............................. 40


SFAX OFFSHORE Permit - CONVENTION Page 3








TABLE OF CONTENTS (cont.1


Page


SECTION VI EXPIRY OF THE CONCESSION AND REVERSION OF


FACILITIES OF THE PERMIT HOLDER TO THE GRANTING


AUTHORITY


ARTICLE 45 Expiry of the term of the Concession...............................................................41


ARTICLE 46 Buy-back option for facilities............................................................................42


ARTICLE 47 Expiry of the Concession by relinquishment...................................................43


ARTICLE 48 Obligation to maintain structures in good condition.......................................43


ARTICLE 49 Penalties applicable in the event of delay in the transfer of the facilities.......43


ARTICLE 50 Expiry of die Concession by forfeiture.............................................................44


ARTICLE 51 Liabilities of the CONTRACTOR towards third parties.................................44





SECTION VII ECONOMIC CLAUSES


ARTICLE 52 Hydrocarbon reserves for the requirements of the Tunisian economy...........44


ARTICLE 53 Sale price of Hydrocarbons...............................................................................45


SECTION vm MISCELLANEOUS PROVISIONS





ARTICLE 54 CONTRACTOR personnel................................................................................46


ARTICLE 55 National Defense and Territoria] Security........................................................46


ARTICLE 56 Case of Force Majeure.......................................................................................46


ARTICLE 57 Transmission of documents for verification.....................................................47


ARTICLE 58 Copies of the documents....................................................................................48





APPENDIX B EXCHANGE REGULATIONS.....................................................................49





ARTICLE 1 Non-resident companies....................................................................................50


ARTICLE 2 Resident companies...........................................................................................52





APPENDIX C COORDINATES AND MAP OF THE PERMIT......................53


SFAX OFFSHORE Permit - CONVENTION Page 4











CONVENTION REGARDING THIS WORK OF EXPLORATION


AND EXPLOITATION OF HYDROCARBON DEPOSITS














BETWEEN THE UNDERSIGNED:


The STATE OF TUNISIA, hereinafter referred to as “the GRANTING AUTHORITY”,


represented by Mr. Afif CHELBI, Minister of Industry, Energy and Small and Medium


Companies,





ON THE FIRST PART,


AND





L’ENTREPRISE TUNISIENNE D’ACHVITES PETROLIERES, hereinafter referred to as


“ETAP”, whose headquarters are located in Tunisia at 27 bis Avenue Khereddine Pacha, 1002


Tunis - Belvedere, represented by Mr. Taieb EL KAMEL, Chief Executive Officer, duly


authorized to sign this Convention;





AND


ATLAS PETROLEUM EXPLORATION WORLDWIDE, LTD., hereinafter referred to as


“APEX”, a company established and governed according to the laws of the state of Delaware,


United States of America, having its head office located at 18000 Groschke Road, Building -


Al, Suite 200, Houston, Texas 77084-5642, Unite:d States of America, and residing in Tunisia


at 10 Rue 7000, 4th Floor, 1002 Tunis-Belvddere, represented by Mr. O. Duane GAITHER n,


President and Chief Operating Officer;





AND


EUROGAS INTERNATIONAL INC., hereinafter referred to as “EUROGAS”, a company


established and governed according to the laws of Barbados, having its head office located at


Ernst & Young Business Services, PO Box 261, Bay Street, Bridgetown, Barbados, and


residing in Tunisia at 10 Rue 7000, 4th Floor, 1002 Tunis - Belvedere, represented by Mr.


Jaffar KHAN, President;





ON THE SECOND PART.








ETAP acting as PERMIT HOLDER.





APEX and EUROGAS acting as CONTRACTOR.


SFAX OFFSHORE Permit - CONVENTION Page 5











IT HAS BEEN ESTABLISHED THAT:


A Protocole d’Accord awarding the Sfax Offshore Prospecting License was signed on 12 July


2003 between the Tunisian State on one hand and ETAP, Gaither Petroleum Corporation


(GPC) and Eurogas International Inc. (EUROGAS) on the other hand.


The Sfax Offshore Prospecting Permit is awarded to ETAP as Titleholder, by a Decree from


the Minister of Industry and Energy dated 28 N ovember 2003 and published in the Tunisian


Official Gazette no. 98 dated 9 December 2003.


By virtue of a Transfer Agreement signed on 3 December 2003 between ETAP on one hand


and GPC, EUROGAS and Atlas Petroleum Exploration Worldwide, Ltd. (APEX) on the other


hand, the latter becoming, jointly with EUROGAS, the Contractor of the Sfax Offshore


Prospecting Permit.


By virtue of the Decree from the Minister of Industry, Energy and Small and Medium


Companies dated 21 February 2005 and published in the Tunisian Official Gazette no. 16


dated 25 February 2005, the surface area of the Sfax Offshore Prospecting Permit was


extended of 428 km2; the total surface area of sa d Permit has become 4104 km2 .


ETAP, APEX and EUROGAS have jointly filed as of 18 June 2005, a request to transform


the Sfax Offshore Prospecting License into an Exploration Permit under the rule of the


Hydrocarbon Code, promulgated by Law No. 99-93 of 17 August 1999 promulgating the


Hydrocarbon Code, as amended and supplemented by Law No. 2002-23 dated February 14,


2002, called “Sfax Offshore Permit” which consists of one thousand and twenty six


elementary perimeters (1026 P.E.) of four square kilometers (4 km2) each, in its entirety, or


four thousand one hundred and four square kilometers (4104 km2).


ETAP by the right conforming to Section VI of the Hydrocarbon Code to conclude a


Production Sharing Contract with a contractor possessing the financial resources and


necessary technical experience.


APEX and EUROGAS have proven that they possess the financial resources and technical


experience required to exercise all of the Hydrocarbon exploration, appraisal, development


and exploitation activities.


ETAP, APEX and EUROGAS have signed a Production Sharing Contract, “PSC”, under


which APEX and EUROGAS shall exercise all the activities subject of this Convention and


its appendixes.


By virtue of this Contract, APEX and EUROGAS may directly deduct a portion of the


petroleum production or natural gas to recover all the exploration, appraisal, development,


and production expenses as well as a portion under the heading of remuneration. ETAP shall


receive the remaining portion of production.


SFAX OFFSHORE Permit- CONVENTION Page 6











THIS BEING ESTABLISHED, IT HAS BEEN AGREED THAT:








ARTICLE 1:


The Exploration Permit, as defined in Article 2 of the Schedule of Obligations appended to


this Convention (Appendix A), shall be granted to ETAP by way of Ministerial Order from


the Ministry governing Hydrocarbons, which shall be published in the Journal Officiel de la


Republique Tunisienne (Official Government Gazette of Tunisia or "JORT”).








ARTICLE 2:


The CONTRACTOR undertakes to execute and finance all exploration and exploitation work


shall conform to the provisions of the Hydrocarbon Code and all regulatory texts adopted for


its enforcement and notably its Section VI, and shall conform to the provisions of the


Productions Sharing Contract and this Convention and its appendixes.


The GRANTING AUTHORITY shall grant to the CONTRACTOR the profit of all of the


advantages and privileges set out by the Hydrocarbon Code, and bf this Convention as well as


its appendixes


The appendixes which form and integral part of the said Convention are:


APPENDIX A: SCHEDULE OF OBLIGATIONS


APPENDIX B: EXCHANGE REGULATIONS


APPENDIX C: DEFINITION AND MAP OF THE PERMIT


ETAP commits to carry out the obligations to which it is subject within the allotted time


granted by virtue of this Convention and its appendixes and the Production Sharing Contract


Hydrocarbon exploration and exploitation work undertaken by the CONTRACTOR in areas


covered by the Exploration Permit shall be subject to the provisions of the Hydrocarbon Code


and all regulatory texts adopted for its enforcement, the provisions of this Convention and its


appendixes, as well as the Productions Sharing Contract








ARTICLE 3:


In accordance with the provisions of the Hydroc arbon Code and the regulatory texts adopted


for its enforcement, the PERMIT HOLDER, hereby agrees to pay the GRANTING


AUTHORITY:


1. The royalty proportional to the production of Hydrocarbons, hereinafter referred to as


“the Royalty”, to the value or the volume of liquid or gaseous hydrocarbons produced


within the scope of this Convention and v/hich are sold or collected by the PERMIT


HOLDER or on his behalf and shall be paid depending on the rates set out in Article


101.2.4 of the Hydrocarbon Code.


 SFAX OFFSHORE Permit - CONVENTION Page 7











The deduction and payment of this Royalty, whether in kind or in cash, shall be carried


out according to the procedures set forth in !>ection III of the Schedule of Obligations.


2. The duties and taxes set out in Article 100 of the Hydrocarbon Code:


It is specified that the said duties, taxes and the Royalty shall be due and payable even in


the absence of any profit.


3. The tax on profits shall follow the rates set out in Article 101 of the Hydrocarbon Code.


The payments made by the PERMIT HOLDER under the heading of the tax on profits


shall replace all taxes which may be in the application of the provisions of the Income


Tax Code for Natural Persons and Corporate: Tax.


The profits subject to tax shall be calculated in accordance with the provisions of Chapter


1 of Section VII of the Hydrocarbon Code.


For the determination of the net profits, tae CONTRACTOR will hold in Tunisia an


account in Tunisian Dinars where all the incurred expenses, expenditures, and charges


will be recorded with respect to the activities subject to this Convention, including the


adjustments necessary to correct the losses; or profits of exchange which would result


without these adjustments, of one or more modifications intervening in the rates of


exchange between the Tunisian Dinar and the national currency of the concerned


CONTRACTOR in which the aforementioned expenses, expenditures and charges were


incurred, being agreed that these adjustments themselves will not be regarded as a profit


or a loss for purposes of the income tax.


The depreciation of tangible capital assets; and expenditures treated as capital assets


pursuant to the Article 109.1 of the Hydrocarbon Code may be deferred, as necessary,


and they may thus be charged to the years showing a profit until the assets are fully


depreciated.


Any non-depreciated balance of the value of any such fixed assets lost or abandoned may


be treated as deductible expenses relating to the fiscal year during which they were lost or


abandoned.


For every year in which there is a profit, the charging and depreciation shall be made in


the following order:


Carry-over of previous losses;


Deferred depreciation;


Other depreciation.


4. The CONTRACTOR shall pay for his normal account and shall account for it under the


heading of recoverable expenses, the duties, taxes and tariffs stated in Article 114 of the


Hydrocarbon Code.


5. The CONTRACTOR is subject to payment of tax on profits as of Article 101.3 of the


Hydiocaibon Code; however, the tax on profits arising from the Hydrocarbons owed by


SFAX OFFSHORE Permit - CONVENTION Page 8











each entity comprising CONTRACTOR under this Convention, shall be taken in full by


the PERMIT HOLDER and paid for the account of each entity comprising


CONTRACTOR and this conforming to the provisions of the Hydrocarbon Code.








ARTICLE 4:


At the end of the month of October each year, the CONTRACTOR is required to inform the


GRANTING AUTHORITY of its proposed exploration and exploitation programs for the


following year, accompanied by expenditure budgets. The CONTRACTOR shall advise the


GRANTING AUTHORITY of any revisions made to these programs.


The CONTRACTOR is required to inform the GRANTING AUTHORITY immediately of


any contracts regarding the supply of services, of work or materials which value exceeds the


equivalent of five hundred thousand U.S. Dollars (U.S. $500,000).


The CONTRACTOR agrees that its contractors and suppliers shall be selected through a call


for tenders and in a manner consistent with current practices in the international oil and gas


industry.


To this end, all contracts or agreements (other than those concerning employment, insurance,


financial instruments and those brought about by a case of Force Majeure), the value of which


exceeds two hundred fifty thousand U.S. Dollars (U.S. $250,000) shall be awarded following


broad requests for quotation, in order to obtain the most advantageous conditions for the


CONTRACTOR, all companies consulted, Tunisian or foreign, being placed on an equal


footing. However, the CONTRACTOR shall be exempted from the obligation to follow this


procedure if it promptly provides reasons justifying this exemption to the GRANTING


AUTHORITY.








ARTICLE 5:


The CONTRACTOR shall conduct all the operations diligently, in accordance with technical


regulations in effect or, failing this, in accordance with appropriate regulations, pursuant to


the proper practices applied in the international oil and gas industry, in order to achieve the


optimum ultimate recovery of the natural resources covered by its Permit and its Concessions


which derive therefrom. The rights and obligations of the CONTRACTOR with respect to the


minimum work obligations, reservoir conservation practices, the renewals, transfers, the


extension in the duration or of area, abandonment, and relinquishment shall be as set out by


the provisions of the Hydrocarbon Code and the: regulatory texts adopted for its enforcement


and as stated in the Schedule of Obligations.


Any assignment, transfer or disposal, whatever form it may take, of the CONTRACTOR'S


rights and obligations deriving from this Convention and its Appendixes shall be in


conformity with the terms and conditions as defined in the Production Sharing Contract


described in the preamble of this Convention.


 SFAX OFFSHORE Permit- CONVENTION Page 9











ARTICLE 6:


The GRANTING AUTHORITY undertakes:


1. to grant to the PERMIT HOLDER the renewals of its Permit under the conditions


established by the Hydrocarbon Code and the regulatory texts adopted for its


enforcement, and by the Articles 3 to 5 inclusive and Article 9 of the Schedule of


Obligations;


2. to award Exploitation Concessions to the: PERMIT HOLDER under the conditions


established by the Hydrocarbon Code and the regulatory texts adopted for its


enforcement, and by the Schedule of Obligations;


3. to not place the PERMIT HOLDER anc/or the CONTRACTOR either directly or


indirectly under a more restrictive regime than the common law regime in effect, within


the scope of carrying out the activities required under this Convention and the Schedule


of Obligations;


4. to not increase the registration or standard fees to which Hydrocarbon titles are subject,


but to fix these fees in accordance with the Hydrocarbon Code at the time of signature of


this Convention except for revision proportional with variations to the general price index


in Tunisia;


5. to allow all the assets and goods imported under exemption in accordance with the


provisions of Article 116 of the Hydrocarbon Code to be re-exported also under


exemption, subject to the restrictions which may be decreed by the GRANTING


AUTHORITY during a state of siege or war;


6. to allow the PERMIT HOLDER and the CONTRACTOR, when refueling their ships and


other vessels, to benefit from the special system designed for the merchant navy;


7. that the PERMIT HOLDER and the CONTRACTOR are subject for the operations


carried out within the scope of this Convention to the exchange regulations set out in


Chapter 2 Section VII of the Hydrocarbon Code, as specified in Appendix B which forms


an integral part to this Convention.








ARTICLE 7:


The PERMIT HOLDER and the CONTRACTOR undertakes to market the Hydrocarbons


extracted under the optimal financial conditions. To this effect, they undertake to sell them


where possible in accordance with the provisions of Article 53 of the Schedule of Obligations.





ARTICLE 8:


Any dispute arising out of or in connection with ihis Convention and its Appendixes between


the GRANTING AUTHORITY and the CONTRACTOR as well as any company who may at


SFAX OFFSHORE Permit - CONVENTION Page 10











a later date accede to it will be conclusively settled according to the Rules of Arbitration of


the International Chamber of Commerce, by three (3) arbitrators named in conformity with


said Rules. The Law and the applicable procedure will be those of Tunisian legislation. The


arbitration will be held in Paris (France) and the language utilized will be French.


The Parties promise to execute the rendered judgment without delay and renounce any appeal


of the decision. The ratification of the judgment in order to execute it may be requested from


any competent court.





ARTICLE 9:


If the execution of the terms and conditions stated herein suffer any delay because of a case of


Force Majeure as defined in Article 56 of die Schedule of Obligations, the timeframe


forecasted for said execution shall be extended by a time period equal to that during which the


case of Force Majeure will have lasted. The Permit or the Exploitation Concession validity


period, as the case may be, shall consequently be extended without penalties.








ARTICLE 10:


The rights and obligations of the PERMIT HOLDER and the CONTRACTOR are those


resulting from the Hydrocarbons Code and the regulatory texts adopted for its enforcement in


effect at the time of signing this Convention and those resulting from die said Convention.








ARTICLE 11:


The Convention and the collection of texts appended there are exempted from stamp duties.


They shall be registered under the system of a standard fee, at the expense of the PERMIT


HOLDER according to the provisions of Article lOO.a of the Hydrocarbon Code.











Made in Tunis, 20 July 2005


in six (6) original copies.











For THE STATE OF TUNISIA








AfifCHELBI


Minister of Industry, Energy and


Small and Medium Companies


SFAX OFFSHORE Permit - CONVENTION Page 11























For L’ENTREPRISE TUNISIENNE For ATLAS PETROLEUM EXPLORATION


D’ACTIVITES PETROLIERES WORLDWIDE, LTD.











Taieb EL KAMEL O. Duane GAITHER H


President Director General President & Chief Operating Officer

















For EUROGAS INTERNATIONAL INC.














Jaffar KHAN


President











Registered at the Finance Department


Cite Mahrajene, 1082 TUNIS


On:0 9 Sept. 2005


N° of voucher: 90364


N° of registration : 05705950


Amount: 3.480,000 Dinars


SFAX OFFSHORE Permit: - CONVENTION Page 12











APPENDIX A




















SCHEDULE OF OBLIGATIONS





 SFAX OFFSHORE Permit: - CONVENTION Page 13











APPENDIX A





SCHEDULE OF OBLIGATIONS














Appended to the Convention granting authority for exploration and exploitation of deposits of


Hydrocarbons in the Permit called “Sfax Offshore”.








ARTICLE 1: Purpose of the Schedule of Obligations


This Schedule of Obligations, which form an integral part of the Agreement granting


authorization for the exploration and exploitation of deposits of Hydrocarbons in the Sfax


Offshore Permit (hereinafter referred to as “the: Permit”), is to specify the conditions under


which the L’ENTREPRISE TUNISIENNE D’ACHVITES PETROLEERES, “ETAP”


hereinafter referred to by the term “the PERMIT HOLDER”, and the companies, EUROGAS


INTERNATIONAL INC., “EUROGAS”, and ATLAS PETROLEUM EXPLORATION


WORLDWIDE, LTD., “APEX”, act as the CONTRACTOR within the scope of the


Production Sharing Contract and hereinafter referred to by the term “the CONTRACTOR”.


1. shall perform the work for the purpose of the exploration of Hydrocarbons;


2. shall proceed, in the case where they discover an economically exploitable deposit, with


development and exploitation of this deposit.











SECTION I


EXPLORATION WORK








ARTICLE 2: Delineation of the Permit


The Permit mentioned in the Article 1 above shall be delineated in accordance with the


provisions of Article 13 of the Hydrocarbon Code and consists of one thousand and twenty six


elementary perimeters (1026 E.P.) or a total initial surface area of four thousand one hundred


and four square kilometers (4104 km2).








ARTICLE 3: Minimum work obligations during the initial period of validity of the


Permit


During the initial period of validity of the Permit fixed at four (4) years, the CONTRACTOR


undertakes to carry the following minimum exploration work program:


SFAX OFFSHORE Permit - CONVENTION - Appendix B, Exchange Controls Page 14














- Interpret two hundred and fifty km (250 km) of existing 2D seismic data.


Interpret two hundred fifty square km (250 km2) of existing 3D seismic data.


- Drill one (1) exploration well to a depth necessary to evaluate prospective reservoirs) in


the Block.


The amount of expenditures for carrying out this work is estimated at three million five


hundred thousand US Dollars (US$ 3,500,000).


In the case where the CONTRACTOR carries out the work program for the initial period of


validity of the Permit and those of any other renewal period, as defined in Article 5 below, it


will have met its obligations even in the case where the work was carried out at a lower cost


than the estimated cost.


If at the end of any period of validity of the Permit the CONTRACTOR did not carry out its


engagements relating to the work pertaining to die considered period, it shall be bound to pay


to the GRANTING AUTHORITY the amount necessary for the achievement or the


completion of the said exploration work, within the limits of the estimated expenditures.


The said amount as well as the methods of its payment shall be notified by the GRANTING


AUTHORITY to the CONTRACTOR.


In the event of a dispute as to the amount, which shall be raised no later than thirty (30) days


from the date of the notification stipulated above, the GRANTING AUTHORITY and the


CONTRACTOR shall appoint by a mutual agreement, an independent expert to settle the


disagreement in the sixty (60) days following the formulation of the said dispute.


The appointed expert shall return his verdict in the sixty (60) days which follow his


appointment. His sentence is immediately binding.


The expenses and fees of the appointed expert shall be bome, by equal share, by the


CONTRACTOR and the GRANTING AUTHORITY.








ARTICLE 4: Justification of the amount of work performed


The CONTRACTOR is required to justify to the GRANTING AUTHORITY the amount of


expenditures related to the exploration work thereby performed during the period of validity


of the Permit.





ARTICLE 5: Permit renewal


In accordance with the provisions of the Section IV of Title III of the Hydrocarbon Code and


the regulatory texts adopted for its enforcement and subject to satisfying the conditions


provided for by the said Section, the PERMIT HOLDER shall have die right to two (2)


renewal periods of a duration of three years (3) each.


 SFAX OFFSHORE Permit - CONVENTION - Appendix B, Excharge Controls Page 15








For the first renewal period, the CONTRACTOR undertake to carry out the following


minimum work program:


- Drill one (1) exploration well to a depth necessary to evaluate prospective reservoir{s) in


the Block.


The amount of expenditures to carry out this work program is estimated at three million five


hundred thousand US Dollars (US$ 3,500,000).


For the second renewal period, the CONTRACTOR undertake to carry out the following


minimum work program:


Drill one (1) exploration well to a depth necessary to evaluate prospective reservoirs) in


the Block.


The amount of expenditures to carry out this work program is estimated at three million five


hundred thousand US Dollars (US$ 3,500,000).








SECTION n


DISCOVERY AND EXPLOITATION OF A HYDROCARBON DEPOSIT








ARTICLE 6: Award of an Exploitation Concession


If the CONTRACTOR can prove a discovery and if it meets the conditions fixed by the


Hydrocarbon Code and the regulatory texts adopted for its enforcement, the PERMIT


HOLDER shall have the right to obtain the transformation of a part of its Permit into an


Exploitation Concession.


The Exploitation Concession shall be for a term of thirty {30) years and shall be established


according to the provisions of the Hydrocarbon Code and the regulatory texts adopted for its


enforcement and according to the following conditions:


the perimeter shall be chosen according to state-of-the-art practices and by taking into


account the results obtained by the CONTRACTOR;


the perimeter shall not isolate an enclave enc losed within the Concession.


It is agreed that in the event of discoveries located outside the Exploitation Concession but


within its Exploration Permit, the PERMIT HOLDER shall have the right to require the


transformation to the Concession of the perimeter to include each new discovery.


SFAX OFFSHORE Permit - CONVENTION - Appendix B, Exchange Controls Page 16











ARTICLE 7: Exploitation obligation


The CONTRACTOR undertakes to exploit all of its Concessions in accordance with practices


in the international petroleum industry ensuring that optimum recovery is achieved


consistently with economical exploitation, and following terms which, without jeopardizing


its fundamental interests as operator, shall meet the economic interests of Tunisia.


If the CONTRACTOR proves that no exploitation method can help to extract the


hydrocarbons from the deposit at a cost allovdng to get, considering the prices of said


products on the world market, an economic exploitation, the CONTRACTOR shall be


relieved from its exploitation obligation, subject to the limitations stated in Article 8 below.








ARTICLE 8:


1. As with the example stated in Article 7 above, If the GRANTING AUTHORITY,


concerned with ensuring the country’s supplies of Hydrocarbons, decides that an


undeveloped deposit must be exploited, the CONTRACTOR may agree to do so, on the


condition that the GRANTING AUTHORITY guarantees the sale of the Hydrocarbons


produced at a fair market price covering all direct expenses and general exploitation


expenses, capital expenses, taxes of all kinds, a share of the CONTRACTOR'S general


head office expenses and all amounts of previous exploration work (excluding all


exploration costs incurred or to be incurred, for the remainder of the Concession or the


area covered by the Permit), guaranteeing to the CONTRACTOR a net profit margin of


ten percent (10%) of total gross expenditures mentioned above.


2. If, however, the obligation resulting from Paragraph 1 of this article causes


CONTRACTOR to commit startup expenditures that are deemed excessive in view of


normal exploration and exploitation programs or whose normal amortization cannot be


forecast with sufficient certainty, the PERMIT HOLDER, the CONTRACTOR, and the


GRANTING AUTHORITY shall work together to review the financing of the proposed


operation.


In this case, CONTRACTOR shall never be required to unwillingly increase its


investments in a given operation if that operation is not included in its overall exploration


and exploitation programs.


If such an increase in investments becomes necessary, the PERMIT HOLDER, the


CONTRACTOR, and the GRANTING AUTHORITY shall work together to review the


financing thereof, all or part of which the GRANTING AUTHORITY shall be required to


provide.


3. The PERMIT HOLDER and CONTRACTOR may at any time obtain their release from


the obligations set forth in this article by relinquishing the part of the concession to which


they apply, in the conditions provided in Article 47 of this Schedule.


 SFAX OFFSHORE Permit - CONVENTION ■ Appendix B, Exchange Controls Page 17








Similarly, if a concession has not yet been granted, the PERMIT HOLDER may at any


time obtain its release by not applying for 1he concession and abandoning its exploration


permit on the structure involved.





ARTICLE 9: Renewal of the Exploration Permit in the event of discovery of a deposit





Upon expiry of the period covered by the second renewal and if the CONTRACTOR has


made a discovery and has fulfilled the conditions defined in the Hydrocarbon Code and its


work obligations as defined in Article 5 above, the PERMIT HOLDER shall be entitled to a


third renewal of the initial permit for a period of four (4) years.


For the third renewal period, the CONTRACTOR undertakes to carry out the work program


comprising the drilling of one (1) exploration or assessment well.


The amount of the expenditures for the completi on of such work program is estimated at three





million five hundred thousand US Dollars ($3,500,00).











SECTION in


ROYALTY PROPORTIONAL TO THE PRODUCTION


OF HYDROCARBONS








ARTICLE 10: Royalty due on liquid hydrocarbons


1. The Royalty proportional to the quantities of liquid hydrocarbons produced under the


Permit during exploration or exploitation work shall be paid in the case of cash payment


or in the event of payment in kind be delivered free of charge to the GRANTING


AUTHORITY, at a point called “the poini: of collection” defined in Article 12 of this


Schedule of Obligations, with the necessary adjustments made to take into account water


and impurities as well as the temperature and pressure conditions under which these


measurements are made.


2. The liquid production to which account the proportional Royalty is due shall be measured


at the outlet of the storage tanks situated on the production fields. The methods used for


measurement shall be proposed by the CONTRACTOR and approved by tire


GRANTING AUTHORITY. These measurements shall be taken following a work


schedule depending upon on site requirements. The GRANTING AUTHORITY shall be


informed in good time. It may arrange for a representative to be present at the


measurement operations, and to carry out any inspections involving both parties.


3. The proportional Royalty on production shall be paid monthly. It shall be collected


during the first half of the month following the month in which it was due. The PERMIT


HOLDER shall send to the GRANTING AUTHORITY a “statement of the quantities of


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Hydrocarbons subject to the Royalty”, with all appropriate supporting documents in


which the conflicting production measurements shall be taken into consideration.


After verification and correction, where necessary, the above-mentioned statement shall


be approved by the GRANTING AUTHORITY.








ARTICLE 11: Choice of method of payment for the proportional Royalty on


production


The GRANTING AUTHORITY shall choose whether the method of payment of the


proportional Royalty on production shall be in cash or in kind.


With respect to liquid hydrocarbons, the GRANTING AUTHORITY shall inform the


PERMIT HOLDER, no later than June 30 of each year, of its choice of the method of


payment and in the case of payment in kind, also its choice of the points of delivery


mentioned in Articles 13 and 14 of this Schedule of Obligations. This decision shall be valid


for the period beginning from January 1 st to December 31 of the following year.


If the GRANTING AUTHORITY does not notify its decision within the time period


stipulated, it shall be deemed to have chosen the method of payment in kind.


With respect to gas, the GRANTING AUTHORITY and the PERMIT HOLDER shall confer


in order to establish the method of payment and the periods of its application.





ARTICLE 12: Cash collection methods for the proportional Royalty on liquid


hydrocarbons


1. If the proportional Royalty is collected in cash, it shall be paid monthly on the basis of


the following; firstly, the statement approved by the GRANTING AUTHORITY as stated


in paragraph 3 of Article 10 of this Schedule of Obligations and secondly, the value of the


liquid hydrocarbons determined at the outlet of the storage tanks located on the


production field, hereinafter referred to as “collection point”. It is agreed that this


amount shall be established in relation to the actual sale prices, in accordance with Article


53 of this Schedule, after deducting costs of transport but not the customs formalities tax


(''RPD") from said tanks to on board the vessel.


2. The price applied for each category of Hydrocarbons subject to the Royalty shall be the


price mentioned in paragraph 3 of this Article for all quantities sold from the PERMIT


HOLDER during the month in consideration, adjusted as appropriate to bring this price in


line with the conditions of reference set out in paragraph 1 above and adopted for


payment of the Royalty.


3. The sale price shall be the price that the PERMIT HOLDER actually received in


accordance with Article 53 of this Schedule of Obligations and Article 50.1 of the


Hydrocarbon Code, with respect to sales made to cover Tunisian domestic consumption


requirements.


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4. Unit prices to be applied for the month in question shall be computed in accordance with


Article 53 of this Schedule of Obligations and shall be announced by the PERMIT


HOLDER at the time of sending the monthly statement referred to in paragraph 3 of


Article 10 of this Schedule of Obligations.





If the PERMIT HOLDER fails to announce the prices or does not announce them within


the time stipulated, they shall be established automatically by the GRANTING


AUTHORITY, following the principles defined in paragraphs 2, 3 and 4 of this Article,


and on the basis of the items of information in its possession.








ARTICLE 13: Methods for collection in kind of the proportional Royalty on liquid


hydrocarbons


If the proportional Royalty on liquid hydrocarbons is collected in kind, it shall be at the point


of collection defined in Article 12 above. However, it may be delivered to another point


referred to as “the point of delivery”, according to the provisions set out in this Article.


When sending to the GRANTING AUTHORITY the statement referred to in paragraph 3 of


Article 10 above, the PERMIT HOLDER shall also inform it of the quantities of the different


categories of liquid hydrocarbons constituting the proportional Royalty and the exact place


where they shall be stored.


The GRANTING AUTHORITY may choose the point of delivery of the liquid hydrocarbons


constituting the Royalty in kind, either as the point of collection, or as any other point located


at one of the terminals of the main pipelines of the PERMIT HOLDER and the


CONTRACTOR.


The GRANTING AUTHORITY shall arrange at its expense suitable reception facilities at the


point agreed for delivery. These means shall be suitable with respect to size, safety and


method of production of the Hydrocarbon deposit.


The GRANTING AUTHORITY may require the PERMIT HOLDER and CONTRACTOR to


build the aforesaid receiving facilities, but only if they are normal facilities located near the


production fields. It shall then supply the necessary materials and reimburse the PERMIT


HOLDER and CONTRACTOR for their actual outlays in the currency of expenditure.


The liquid hydrocarbons constituting the Royalty in kind, will become the property of the


GRANTING AUTHORITY starting from the “point of collection” and shall be delivered by


the PERMIT HOLDER to the GRANTING AUTHORITY at the point of delivery determined


by the latter.


If the point of delivery is different from the point of collection, i.e., located outside the


PERMIT HOLDER'S and CONTRACTOR'S general transportation system, the GRANTING


AUTHORITY shall reimburse to the CONTRA CTOR the actual cost of the operations of


handling and transport carried out by it between the point of collection and the point of


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delivery, including the portion of depreciation of its facilities and insurance against losses and


pollution which must be obligatorily subscribed.


The lifting of liquid hydrocarbons constituting die Royalty in kind shall be at the rate agreed


each month between the PERMIT HOLDER and the GRANTING AUTHORITY.


Except in event of Force Majeure, the GRANTING AUTHORITY must inform the PERMIT


HOLDER at least ten (10) days in advance of any changes which may affect the planned


loading program.


The GRANTING AUTHORITY shall ensure that the quantities of Hydrocarbons that make


up the Royalty due for the past month are lifted in the normal manner within the thirty (30)


days following delivery by the PERMIT HOLDE R of the information mentioned in paragraph


2 of this Article.


However, a lifting plan involving periods in excess of one month may be decided by mutual


agreement.


If the GRANTING AUTHORITY collects the quantities of Hydrocarbons that make up the


Royalty within a period of thirty (30) days, the PERMIT HOLDER shall not be entitled to any


compensation.


However, the GRANTING AUTHORITY reseives the right to demand from the PERMIT


HOLDER an extension of this period of thirty (30) days for a further period which may not be


more than sixty (60) days.


The relaxation thus granted shall be compensated. The GRANTING AUTHORITY shall pay


to the PERMIT HOLDER an indemnity calculated in accordance with a previously agreed


rate remunerating the additional charges endured for this reason by the PERMIT HOLDER.


In any event, the PERMIT HOLDER cannot be required to extend the relaxation mentioned in


paragraph 5 of this Article beyond a total of ninety (30 + 60) days. After this period, the


uncollected Royalties shall no longer be owed in kind. Consequently, the PERMIT HOLDER


shall have the right to sell the quantities not lifted by the GRANTING AUTHORITY on the


petroleum market with the obligation to pay to the GRANTING AUTHORITY the proceeds


from the sale under the conditions set out in Article 12 above.


In the case where the provisions set out in paragraph 6 of this Article, are enforced more than


two (2) times in the course of the same financial year, the PERMIT HOLDER may demand


that the Royalty be paid in cash until the end of the year in consideration.





ARTICLE 14: Royalty due on gaseous hydrocarbons


1. The PERMIT HOLDER shall pay, in event of payment in cash or delivery free of charge


in event of payment in kind to the GRANTING AUTHORITY, a proportional Royalty on


the production of gaseous hydrocarbons calculated according to the provisions of the


Hydrocarbon Code and the regulatory texts adopted for its enforcement.


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The Royalty will be collected:


either in cash on the quantities of gas sold from the PERMIT HOLDER. The sales


price under consideration is the price applied by the PERMIT HOLDER in


accordance with the provisions of Article 53 of this Schedule of Obligations, after


the necessary adjustments to the quantities considered at the “point of collection”.


This point of collection is the intake of the main gas pipeline of gas transport;


or in kind on the quantities of gas produced from the PERMIT HOLDER, measured


at the outlet of the processing facilities. The methods used for measurement shall be


proposed by the PERMIT HOLDER, and approved by the GRANTING


AUTHORITY.


The GRANTING AUTHORITY shall be informed in due time of the date at which the


measurement of produced gas shall proceed. It may arrange for a representative to be


present during the measuring operations and to cany out any inspections involving both


parties.


The GRANTING AUTHORITY may choose as point of delivery, either the point of


collection as defined in the preceding paragraph, or any other point situated at one of the


terminals of the main pipelines of the PERMIT HOLDER and the CONTRACTOR,


under the same conditions to those mentioned in paragraphs 3 and 4 of Article 13 above.


2. If the PERMIT HOLDER and the CONTRACTOR decide to extract, in a liquid form,


certain Hydrocarbons which could be present in the natural gas, the GRANTING


AUTHORITY shall collect the Royalty after processing. The Royalty on these liquid


products shall be collected either in cash or in kind from a “secondary point of collection”


which shall be where the liquid products are separated from the gas.


In the case where the payment of the Royalty is made in kind, a different point of


delivery may be chosen by mutual agreement. This point of delivery shall necessarily


coincide with one of the delivery facilities specified by the PERMIT HOLDER for its


own needs.


The GRANTING AUTHORITY shall reimburse its share of the handling and


transportation costs under the same conditions as those set out in paragraph 4 of Article


13 above.


In the case where the Royalty is collected in cash, it shall be calculated on the basis of the


actual sale price, corrected by the necessary adjustment to the conditions corresponding


to the secondary point of collection.


The choice of payment of the Royalty, in cash or in kind, shall be made under the same


conditions set out in Article 11 above for liquid hydrocarbons.


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3. Unless justifiably prohibited by the GRANTING AUTHORITY, the natural gasoline


separated by simple pressure reduction and stabilization shall be considered to be a liquid


hydrocarbon, which can be re-mixed with the crude oil.


A lifting plan involving periods of six (6) months may be decided by mutual agreement,


with reference to the Royalty paid in natural gasoline or the volume of the said product


allocated to the requirements of the Tunisian economy.


4. The PERMIT HOLDER and the CONTRACTOR shall not be obliged:


either to extract any more condensate than is necessary in order to make the gas


marketable, if it has found a commercial outlet for said gas;


or to stabilize or store the natural gasoline;


or to cany out any particular treatment or recycling operation.


5. In the case where the GRANTING AUTHORITY chooses to collect the Royalty in kind,


it must provide at its own expense at the agreed points of delivery, suitable means of


reception capable of receiving its share of ti e liquids as and when they become available


following their production or upon their departure from the processing plants. The


GRANTING AUTHORITY shall take charge of the liquids at its own risks from the time


of delivery. It may not require the PERMIT HOLDER or CONTRACTOR to store these


liquids.


6. In the case where the GRANTING AUTHORITY chooses to collect the Royalty in cash,


this Royalty shall be paid monthly according to the provisions of paragraph 3 of Article


10 and Article 12 above.


7. If the GRANTING AUTHORITY is not in a position to receive the Royalty in kind under


the conditions specified in paragraph 5 of this Article, it shall be considered to have


renounced the right to collect in kind either all the quantities corresponding to the


Royalty due or for part of the these quantities for which it does not have adequate means


of reception.











SECTION IV


EXPLORATION AND EXPLOITATION FACILITIES OF THE PERMIT HOLDER


AND THE CONTRACTOR





ARTICLE 15: Opportunities provided to the PERMIT HOLDER and the


CONTRACTOR for their ancillary facilities


In accordance with the provisions of Articles 84 to 90 of the Hydrocarbon Code, the


GRANTING AUTHORITY shall provide the PERMIT HOLDER and the CONTRACTOR


with all opportunities for ensuring at their expense, in a rational and economical manner,


prospecting, exploration, extraction, transportation, storage and removal of the products


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resulting from their exploration and production, and also for any operation designed for the


processing of said products in order to make them marketable.


These opportunities shall concern, as far as possible:


a. the development of storage depots on the production fields, in the shipping ports or near


the processing plants;


b. the natural gas processing facilities;


c. the road, rail, air and sea communications, as well as connections to road, rail, air or sea


networks;


d. the pipelines, pumping stations and any facilities for bulk transportation of


Hydrocarbons;


e. the shipping stations located in the public domain at sea or in public seaports or airports;


f. the telecommunications and their connections to the Tunisian telecommunications


networks;


g. the connections to the public power distribution networks and to private power lines;


h. the supplies of potable and industrial usage water.


ARTICLE 16: Facilities not of a public interest


1. The CONTRACTOR shall set up, at its own expense and risks, all the facilities it requires


for its exploration and production operations which are not of a public interest, whether


these be located inside or outside of the Permit and any ensuing Concessions.


Considered as facilities not of a public interest are:


a. the means of storage on the production fields located on land or sea;


b. the pipelines for taking the crude oil or gas from the wells and ensuring


transportation to the storage or processing tanks;


c. the evacuation pipelines for the transport of crude oil by rail, by road or by sea, as


well as the gas pipelines from the treatment and storage centers to the point of


loading;


d. the storage tanks at the points of loading;


e. the bulk shipping facilities by pipeline for loading ships;


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f. the special water conveyance for which the PERMIT HOLDER should obtain a


license or concession;


g. the private electrical power lines;


h. the runways, service roads and rail lines for land and air access to the sites of the


PERMIT HOLDER and the CONTRACTOR;


i. the telecommunications between the sites of the PERMIT HOLDER and the


CONTRACTOR;


j. in general, the industrial facilities, workshops and offices for the exclusive use of the


PERMIT HOLDER and the CONTRACTOR, and which constitute legal


dependencies of their business;


k. the land, air and sea transport equipment owned by die PERMIT HOLDER and the


CONTRACTOR permitting their access to their sites.


2. For the facilities mentioned in sub-paragraphs c., e., f. and g. of paragraph 1 of this


Article, the PERMIT HOLDER and the CONTRACTOR shall be required, if the


GRANTING AUTHORITY so requests of them, to allow third parties to use the said


facilities subject to the following conditions:


a. the PERMIT HOLDER and the CONTRACTOR shall not be required either to build


or to maintain larger facilities than those: required for their own purposes;


b. the needs of PERMIT HOLDER and the CONTRACTOR shall be given priority


over those of third party users;


c. use of said facilities by third parties shall not hinder the production carried out by the


CONTRACTOR for its own needs and shall be at the sole risk of the third parties;


d. any third party users shall pay the PERMIT HOLDER and the CONTRACTOR a fair


charge for the service provided.


The rates and conditions of use applicable to third party users shall be established by the


Minister in charge of Hydrocarbons upon proposal from the PERMIT HOLDER and the


CONTRACTOR in accordance with the provisions of the Hydrocarbon Code and the


regulatory texts adopted for its enforcement.


3. The GRANTING AUTHORITY reserves the right to require the CONTRACTOR to


enter into agreements with third party Permit or Concession holders designed for jointly


fitting up and using the structures envisaged in sub-paragraphs c., e., f., g. and h. of


paragraph 1 of this Article, if as a result, each of the companies involved would be able to


save on investments.


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4, The GRANTING AUTHORITY, within the scope of current legislation and regulations


in effect, shall make every effort to provide the CONTRACTOR with the authorizations


necessary for carrying out the operations mentioned in paragraph 1 of this Article.








ARTICLE 17: Use of existing public tools and equipment by the PERMIT HOLDER


and the CONTRACTOR


The PERMIT HOLDER and the CONTRACTOR shall be permitted to use all the existing


Tunisian public tools and equipment for their exploration and exploitation, in accordance with


clauses, conditions and rates in effect and on a strictly equal footing with other users.





ARTICLE 18: Facilities of a public interest built by the GRANTING AUTHORITY at


the request of the CONTRACTOR


1. If the CONTRACTOR proves its need to supplement the existing public tools and


equipment or to carry out works of general public interest in order to develop its activity


of exploration and exploitation of Hydrocarbons, it must inform the GRANTING


AUTHORITY.


The GRANTING AUTHORITY, the PERMIT HOLDER and the CONTRACTOR


undertake to confer in order to find the optimum solution for meeting the legitimate needs


expressed by the CONTRACTOR, bearing in mind legislative and statutory provisions in


force concerning the public property and services in question.


2. Except for provisions to the contrary specified in Articles 22, 23 and 24 of this Schedule


of Obligations, the parties agree to apply the following terms:


a. The CONTRACTOR shall inform the GRANTING AUTHORITY of its needs with


respect to the facilities that it requests built.


It shall support its request with a statement justifying the need for the said facilities


and by a detailed construction plan.


It shall mention in the plan the completion times it shall use if entrusted with the


construction work. This schedule must correspond to its general plans for the


development of its operations in Tunisia, as indicated in the reports and statements


which it is required to submit to the GRANTING AUTHORITY in application of


Section V of this Schedule of Obligations.


b. The GRANTING AUTHORITY is required to inform the CONTRACTOR within a


period of three (3) months of its comments concerning the technical provisions


envisaged by the CONTRACTOR, and on its intentions concerning the methods in


accordance with which the work shall be carried out.


It reserves the right to either carry out the work itself or to entrust it to the


CONTRACTOR.


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c. If the GRANTING AUTHORITY decides to perform the requested work itself, it


shall specify whether it intends to finance the capital project itself, or whether it


intends to require the CONTRACTOR to reimburse all or part of its expenditures.


In the latter case, the CONTRACTOR shall be required to reimburse to the


GRANTING AUTHORITY all or an agreed portion of the actual and duly justified


expenditures, on monthly terms that shall begin to run the month following


submission of the accounts, under penalty of default interest calculated at the legal


rate.


d. In the cases mentioned in the sub-paragraph c. of this Article, the construction plans


shall be completed by mutual agreement between the parties, in accordance with the


rules of proper industry practice and following the general conditions, clauses and


particular technical specifications applie d by the GRANTING AUTHORITY.


The plans shall be approved by the Minister in charge of Hydrocarbons, after hearing


the CONTRACTOR. It shall take the c omments of the later into account whenever


practical.


The CONTRACTOR shall be entitled to withdraw its application if it judges that the


financial contribution imposed upon it is too high.


If it accepts the decision of the Minister in charge of Hydrocarbons, the GRANTING


AUTHORITY shall be required to carry out the work diligently and ensure that the


structures are brought into service within a normal period of time, bearing in mind


the legitimate needs expressed by the CONTRACTOR and the means of construction


likely to be implemented.


3. The structures thus carried out shall be made available to the CONTRACTOR in order to


satisfy its requirements, but it may not claim exclusive use thereof.


The GRANTING AUTHORITY or any other public institution, office or agent appointed


by it, shall ensure the use, maintenance and renewal of the structures under conditions


which shall be established at the time of app roval of the construction plans.


4. In return for the use of the said facilities, the CONTRACTOR shall pay to the operator


the usage fees and charges which shall be established, after hearing file CONTRACTOR,


by the Minister in charge of Hydrocarbons. These fees and charges shall be the same as


those applied in Tunisia for similar enterprises or public services, where they exist


Otherwise, they shall be fixed in accordance with the provisions of the sub-paragraph d.


of paragraph 2 of Article 16 of this Schedule of Obligations.


In the case where the CONTRACTOR, as stated in sub-paragraph c. of paragraph 2 of


this Article, has reimbursed all or part of the capital expenditures, this will be taken into


account in the same proportion in the calculation of the charges and fees for use.


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ARTICLE 19: Facilities of a public interest built by the CONTRACTOR (license or


permit for use of public equipment)


In the case mentioned in sub-paragraph b. of paragraph 2 of Article 18 of this Schedule of


Obligations, where the GRANTING AUTHORITY decides to entrust the CONTRACTOR


with construction work of a public interest, the latter shall benefit from a public equipment


license or permit for the work in question.


1. Reference shall be made to legislation on the matter, if it already exists, for the type of


facilities in question.


2. If none exist, and excepting the provisions to the contrary stated in Articles 22,23 and 24


of this Schedule des Charges, the general provisions below shall be applied:


a. The public equipment license or permit shall be granted in a separate certificate,


independent from the Hydrocarbon Exploitation Concession decree.


b. The CONTRACTOR shall construct and exploit the facilities at its own risks.


c. The related plans shall be drawn up by the CONTRACTOR and approved by the


GRANTING AUTHORITY.


d. The GRANTING AUTHORITY shall also approve the measures for safety and use


taken by the CONTRACTOR.


e. The structures built by the CONTRACTOR on the administered property of the


STATE, local administrations or public establishments shall return to the right of the


GRANTING AUTHORITY at the end of the Hydrocarbon Exploitation Concession.


The license or permit for use of public equipment shall entail the obligation on the part of the


PERMIT HOLDER and the CONTRACTOR to make their structures and facilities available


to the GRANTING AUTHORITY and the public, on the understanding that the PERMIT


HOLDER and the CONTRACTOR shall be entitled to give priority to their own requirements


before meeting those of the other users. The rates for use shall be fixed as stated in sub-


paragraph d. of paragraph 2 of Article 16 of this Schedule of Obligations.





ARTICLE 20: Duration of the licenses and permits granted for the ancillary facilities


of the CONTRACTOR


1. The licenses and permits for occupation of public property, use of public equipment and


rental of private property of the STATE, shall be granted to the CONTRACTOR for the


period of validity of the Exploration Permit, in accordance with the procedures in force.


They shall be automatically extended if the PERMIT HOLDER obtains one or more


Hydrocarbon Exploitation Concessions, granted in accordance with Article 6 of this


Schedule of Obligations and until the last of these Concessions expires.


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2. If, however, the structure which is the subject of the license or permit for occupation of


public property or private property of the STATE or the license or permit for use of


public equipment ceases to be used by the CONTRACTOR, the GRANTING


AUTHORITY reserves the rights defined below:


a. When the above-mentioned structure permanently ceases to be used by the


CONTRACTOR, the GRANTING AUTHORITY may automatically announce the


cancellation of the license or permit of use of public equipment or relevant


occupation;


b. Should the CONTRACTOR temporarily stop using the above-mentioned structure


but may later need to resume its use, the GRANTING AUTHORITY shall have the


right to temporarily use it under it’s own responsibility either for it’s own benefit, or


on behalf of a third party it may designate. However, the CONTRACTOR shall


resume using the said structure as soon as this becomes necessary for its exploration


or exploitation activities.








ARTICLE 21: Various provisions relating to licenses or permits other than the


Hydrocarbon Exploitation Concession


In any case, the regulations imposed on the CONTRACTOR concerning the use of a public


service, the occupation of private or public STATE property and licenses or permits or


authorizations of use of public equipment, shall be those in force at the time in question, in


matters pertaining to the safety, preservation and administration of public property and


STATE assets.


The above mentioned licenses and permits shall give rise to payment by the CONTRACTOR


of the registration fees, duties and charges applicable at the time of their granting in


accordance with the procedures in force.


The rates, usage fees and charges shall be those of the general lists in force on the matter. The


GRANTING AUTHORITY undertakes not to impose at the expense of the CONTRACTOR


at the time of issue of the above mentioned licenses or permits, any usage royalties, taxes,


charges, duties or fees which may affect the ancillary facilities of the CONTRACTOR in a


discriminatory manner and constitute additional disguised taxes or charges which no longer


represent just payment for a service provided.








ARTICLE 22: Provisions applicable to water reservoirs and conduits


1. The CONTRACTOR is deemed to be perfectly aware of all the difficulties and problems


involved in the supply of potable water or water used for industry or agriculture, inside


the perimeter covered by the initial Permit as defined in Article 2 of this Schedule of


Obligations.


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2. If the CONTRACTOR so requests, it may take out temporary or permanent subscription


contracts for potable or industrial water public distribution networks, within the limits of


its legitimate needs and of the volumes which these networks may ensure.


The subscriptions shall be granted in accordance with the general conditions, clauses and


rates applicable for the considered public networks.


The connection lines shall be established at the request of the PERMIT HOLDER at its


expense, following plans approved by the pertinent services of the Minister for


Agriculture, in accordance with the technical conditions and clauses applicable to such


connection lines in the administered area.


3. When the CONTRACTOR needs to have ei temporary water supply to its work sites and


particularly its drilling sites, and when the legitimate requirements of the


CONTRACTOR cannot be met economically by using a connection pipe from an


existing public water point or a public water distribution network, the GRANTING


AUTHORITY undertakes to provide the CONTRACTOR with all the technical sind


administrative opportunities within the scope of the provisions contained in the current


Water Code, and subject to the fees which may be paid to third parties, so that it may


carry out the necessary work to collect and carry water from public lands.


The water collection work carried out by the CONTRACTOR in application of the


above-mentioned permits, shall revert to the STATE without compensation, in their


current condition at the time when the CONTRACTOR ceases to use them. Pipeline


works are not included in this provision.


4. If the CONTRACTOR needs a permanent supply to its sites or ancillary facilities and in


the case where it cannot be assured that its legitimate needs will be met in a manner


sufficient, economical, long lasting and certain by a connection pipe from sm existing


public water point or a public water distribution network, the parties agree to collaborate


in finding the manner to meet the legitimate needs of the CONTRACTOR.


5. The CONTRACTOR undertakes to comply with all the regulations and utilization rules


established by the GRANTING AUTHORITY with respect to the water that it can collect


and which belongs to an aquifer system already catalogued and identified in the inventory


of water resources of Tunisia.


If, on the other hand, the drilling by the CONTRACTOR should lead to the discovery of


a new aquifer system which is neither catalogued nor identified in the inventory of water


resources and is not in contact with an already known aquifer system, the GRANTING


AUTHORITY shall reserve a first right of refusal for the CONTRACTOR in the


awarding of any licenses or permits for water collection in the said system.


Nevertheless, it is fully understood that this priority shall neither hinder the public


interest, nor will it extend beyond the quantities of water necessary for the supplying of


the facilities of the CONTRACTOR and of their ancillaries.


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6. Before CONTRACTOR abandons any exploration well, the GRANTING AUTHORITY


may require it to tap any underground water deemed exploitable, it being understood that


the expenditures committed in this connection shall be paid by the STATE.





ARTICLE 23: Provisions applicable to railways


The CONTRACTOR, for the servicing of its sites, its pipelines, its storage facilities and its


loading facilities may, at its own expense, lay out special railway junctions to connect with


the public railway network.


The plans of these junctions will be established by the CONTRACTOR in accordance with


the safety conditions and the technical conditions applicable to the Tunisian public system.


These plans will be approved by the GRANTING AUTHORITY following a Land Titles


search.


The GRANTING AUTHORITY reserves the right to modify the routes proposed by the


CONTRACTOR, to take into account the resul ts of the land titles search and to provide the


shortest possible link, according to state-of-the-art methods, between the facilities of the


CONTRACTOR and the public network.








ARTICLE 24: Provisions applicable to maritime facilities for loading and unloading


1. When the PERMIT HOLDER and the CONTRACTOR have to solve a problem with


respect to maritime loading or unloading, they shall confer with the GRANTING


AUTHORITY in order to set, by common agreement, the provisions to satisfy their


legitimate requirements.


Apart from exceptional cases where the most economical solution would be to fit out


such a loading or unloading station in open harbor, preference shall be given to any


solution involving the use of a port open to trade.


2. The GRANTING AUTHORITY undertakes to provide all opportunities to the PERMIT


HOLDER and the CONTRACTOR under the conditions specified in the legislation in


force on regulating the sea ports and in the special regulations on Tunisian trade ports,


and on an equal footing with respect to other producers of Hydrocarbons, so that it may


have the following if the case arises:


water bodies from public ports;


an adequate number of berths capable of receiving ordinary tankers on mooring piles;


public quaysides at ports necessary for preparing transit or storage facilities.


3. If the solution adopted is that of a loading or unloading station in natural harbor, the


facilities (including floating pipelines) shall be built, marked with buoys and operated by


the CONTRACTOR at its expense under the system of temporary use of public sea


property.


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The provisions adopted and regulations for operation shall be approved by the


GRANTING AUTHORITY following the proposal of the CONTRACTOR.





ARTICLE 25: Provisions applicable to power stations


The power stations and power distribution networks installed by the CONTRACTOR are


considered to be legal appurtenances of the business and shall be subject to all the regulations


and inspections applied to similar facilities for the production and distribution of energy.


The CONTRACTOR generating electric power to supply its sites may sell at cost any power


surplus to its proper needs to a distribution organization designated by the GRAN TING


AUTHORITY.








ARTICLE 26: Mineral substances other than liquid or gaseous hydrocarbons


If, during the exploration and production of Hydrocarbons, the CONTRACTOR extracts


mineral substances other than liquid or gaseous hydrocarbons, without being able to separate


the extraction of Hydrocarbons, the GRANTING AUTHORITY, the PERMIT HOLDER and


the CONTRACTOR shall confer in order to decide whether or not said mineral substances


must be separated and saved.


However, the CONTRACTOR shall not be required to produce, separate or save the products


other than liquid or gaseous hydrocarbons if their separation and saving operations would be


too costly or too difficult.





ARTICLE 27: Miscellaneous facilities


The following shall not be considered to be legal appurtenances of the business of the


CONTRACTOR:


facilities for the processing of liquid, solid or gaseous hydrocarbons and in particular


refineries;


facilities for the distribution of liquid or gaseous fuels to the public.


However, the status of legal appurtenances of Ihe business of the CONTRACTOR shall be


given to facilities for the preliminary preparation of the extracted Hydrocarbons, built by the


PERMIT HOLDER for transportation and marketing of the said Hydrocarbons, and


particularly facilities for the extraction of “condensate” from natural gas.


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SECTION V


SUPERVISION AND CONTROL








ARTICLE 28: Documentation supplied to the CONTRACTOR by the GRANTING


AUTHORITY


The GRANTING AUTHORITY shall supply the CONTRACTOR with the documentation in


its possession concerning the following:


cadastral survey and topography;


general geology;


geophysics;


hydrology and inventory of water resources;


wells.


However, the GRANTING AUTHORITY shall not supply it with information that is secret


from the point of view of National Defense or confidential information supplied by holders of


valid permits and/or concessions and which cannot be divulged to third parties without the


consent of the interested parties.





ARTICLE 29: Technical supervision


The CONTRACTOR shall be subject to the supervision of the GRANTING AUTHORITY in


accordance with the provisions set out in the Hydrocarbon Code in the conditions specified in


Articles 31 to 44 below.








ARTICLE 30: Application of the Water Code


In both its exploration and production operations, the CONTRACTOR shall comply with the


provisions of Tunisian legislation in force relating to public water and the conditions specified


by the provisions of this Schedule of Obligations.


The water, which the CONTRACTOR may discover during the course of its operations, shall


remain classified as public property. It is only open to permanent use by the CONTRACTOR


in accordance with the permit or license procedure mentioned in the Water Code.


The CONTRACTOR shall take all the appropriate measures agreed with the appropriate


service of the Ministry of Agriculture in order to protect the water tables.


The Ministry in charge of Agriculture reserves the right to stop or ban any drilling if the


arrangements made cannot guarantee preservation of the water tables.


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The CONTRACTOR shall be required to give the appropriate service of the Ministry in


charge of Agriculture all the information which it may obtain while drilling concerning the


water tables thereby encountered (position, static level, analyses, volume of flow) in the form


prescribed.








ARTICLE 31: Site access


The GRANTING AUTHORITY may at any time, delegate on the work sites of the


CONTRACTOR, and at its cost, an agent who shall have free access to all the facilities and


their legal appurtenances in order to check the progress of the operations, carry out


measurements and gauging of the Hydrocarbons, and in general, check that the rights and


interests of the GRANTING AUTHORITY are being protected.








ARTICLE 32: Obligation to report on the operations


1. The CONTRACTOR shall send to the GFLANTING AUTHORITY, at least thirty (30)


days before starting the operations:


the planned geophysical prospecting program, which shall notably include a map


showing the grid to be used and also the number of kilometers to be acquired and the


date of commencement of the operations and their approximate duration;


a start-up report for any exploration well and a program concerning each


development well. The set-up report shall specify the following:


• the exploration objectives of the well and the planned depth;


• the location of the planned well, defined by its geographical coordinates with an


attached map extract;


• the geological prognosis concerning the encountered formations;


• the minimum coring and logging program;


• a brief description of the equipment used;


• the program envisaged for the casing;


• the provisions envisaged for the water supply;


• the possible procedures which the CONTRACTOR intends to use to start


production of the well(s).


2. The CONTRACTOR shall send to the GR/kNTING AUTHORITY a progress report on


the work in progress such as seismic survey, drilling and construction as such may be


appropriate.


It must submit a copy of the recordings carried out, as soon as possible


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3. Drilling Log


CONTRACTOR shall be required to keep a paginated and initialed drilling log at each


drilling site in a format accepted by the ISSUING AUTHORITY, in which the conditions


of work performance shall be noted as the work progresses, without blanks or strike-


overs, including but not limited to:


the type and diameter of the bit;


the progress of the drilling;


the drilling parameters;


the type and duration of the maneuvers and special operations such as coring,


reaming, bit changing and instrumentation;


any significant indices and incidents.


The drilling log shall be kept on site and shall be available to agents of the GRANTING


AUTHORITY.





ARTICLE 33: Technical supervision of wells


1. Outside the coring and well monitoring operations envisaged in the start-up report


mentioned in Article 32 above, the CONTRACTOR must ensure that all appropriate


measures are taken in order to determine the characteristics of the encountered


formations.


2. A collection of well cuttings and possible cores shall be established by the


CONTRACTOR and kept by it in a place agreed to in advance at the disposal of the


agents of the GRANTING AUTHORITY.


The CONTRACTOR shall have a right to take samples from the cores and the well


cuttings, on which it will need to carry out analyses and examinations or to have these


carried out.


As far as possible, such sample taking shall affect only part of the cores and cuttings


having the same characteristic, so that the rest of the sample may remain in the collection


and be examined by the GRANTING AUTHORITY’S agents. Except when not practical,


the sample shall not be taken until after having been examined by a qualified


representative of the GRANTING AUTHORITY.


In the case where this prior examination is not practical, a special report shall be given to


the GRANTING AUTHORITY.


Furthermore, if the unique sample has not been destroyed, it shall be returned to the


collection by the PERMIT HOLDER or by the GRANTING AUTHORITY after being


subjected to examinations or analyses. The CONTRACTOR shall take good care of the


rest of the cuttings and cores so that the GRANTING AUTHORITY may in turn trite


samples for its own collection, examinations and analyses.


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The CONTRACTOR shall keep all cores and well cuttings remaining after the above-


mentioned samples have been taken for as long as it sees fit. They shall be made available


to the GRANTING AUTHORITY at the latest upon expiry of the Permit.


3. The CONTRACTOR shall give the GRANIING AUTHORITY sufficient advance notice


to arrange for its representation, of all important operations such as logging, casing,


cementing and production tests.


The CONTRACTOR shall advise the GRANTING AUTHORITY of any serious


difficulty which is liable to compromise the continuation of a well or to significantly


change the conditions of its completion.


4. The CONTRACTOR shall supply to the GRANTING AUTHORITY a copy of the


reports on the examinations carried out on the cores and well cuttings and also on drilling


operations, including the special activities m entioned in paragraph 3 of this Article.








ARTICLE 34: Termination of drilling


The PERMIT HOLDER may only permanently stop drilling a well after notifying die


GRANTING AUTHORITY. Except for special circumstances, this notice shall be given a


minimum seventy-two (72) hours in advance.


The CONTRACTOR shall submit, whether it is a definite abandonment or a temporary


abandonment of the well, a program which shall be in conformity with the technical


legislation in force or, failing that, to the most recent standards published by the American


Petroleum Institute.


However, if the GRANTING AUTHORITY has not made its comments known within


seventy-two (72) hours following the filing of the drilling abandonment program by the


CONTRACTOR, it shall be deemed accepted.





ARTICLE 35: Final well report


Within a maximum period of three (3) months after the end of drilling, the CONTRACTOR


shall send the GRANTING AUTHORITY a fina l report, called “Final Well Report”.


The Final Well Report shall at least include:


a. a copy of the complete profile of the said well, giving a cross-section of the encountered


formations, the observations made and measurements taken during drilling, an outline of


the casing remaining in the well, logs and results of production tests;


b. a report containing the geophysical and geological information referring directly to the


well under consideration.


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ARTICLE 36: Well tests


1. If during drilling the CONTRACTOR feels it necessary to cany out a test on a formation


interval which it believes may produce Hydrocarbons, it shall, if practicable, notify the


GRANTING AUTHORITY at least twenty-four (24) hours before beginning such a test.


2. Apart from the exceptions mentioned in paragraphs 3 and 5 of this Article, the


CONTRACTOR shall decide to undertake or repeat a test.


3. During the well drilling, and at the request of the duly qualified representative of the


GRANTING AUTHORITY, the CONTRACTOR shall be required to test any formation


interval likely to contain Hydrocarbons, on the condition, however, that such a test may


be carried out without hindering the normal progress of the work of the CONTRACTOR.


4. In the case where the performance or repetition of one of the tests carried out at the


request of the GRANTING AUTHORITY, and despite the contrary opinion of the


CONTRACTOR, the CONTRACTOR incurs a loss or expenditure, such a loss or


expenditure shall be paid:


by the CONTRACTOR if said test identifies a potentially exploitable hydrocarbon


deposit;


by the GRANTING AUTHORITY if said test did not lead to a potentially


exploitable hydrocarbon deposit.


5. When the drilling operations on a development well reasonably result in the assumption of


the existence of a sufficiently large hydrocarbons zone not yet recognized, the


CONTRACTOR shall be required to take every technically pertinent action to complete


the reconnaissance of such zone.





ARTICLE 37: Progress report and annual program


Before the 1st of April every year, the CONTRACTOR shall be required to provide a general


progress report on its activity during the preceding year in accordance with the provisions of


the Hydrocarbon Code.


This progress report shall indicate the results obtained during the year in question and also the


exploration and exploitation expenditures incurred by the CONTRACTOR.


This progress report will be written in the forms agreed to in advance by the GRANTING


AUTHORITY and the CONTRACTOR.








ARTICLE 38: Methodical exploitation of a deposit


Any exploitation of a deposit must be rational and conducted following the generally accepted


practices of the international petroleum industry. Its implementation shall ensure an optimum


production level guaranteeing a maximum recovery of Hydrocarbons.


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At least three (3) months before starting regular exploitation of a deposit, the CONTRACTOR


must inform the GRANTING AUTHORITY of the exploitation outline. This outline must


include the final destination for each of the effluents.


In wells producing liquid hydrocarbons, the production of gas must be reduced to a minimum


within the allowable limits for optimum recover}' of liquids. In wells which produce only gas,


it is prohibited to allow discharge outside the gas network.


Waivers of the above rules may be granted by the GRANTING AUTHORITY at the duly


justified and reasoned request of the CONTRACTOR.


Any major change to the provisions of the initial outline shall be immediately brought to the


attention of the GRANTING AUTHORITY.








ARTICLE 39: Monitoring of producing wells


On each producing well, or each group of producing wells, the CONTRACTOR shall have


devices for monitoring regularly, unambiguously and in accordance with the international


petroleum industry practices, the parameters of production of these wells.


All documents concerning these controls shall be made available to the GRANTING


AUTHORITY and at whose request the CONTRACTOR shall supply copies.





ARTICLE 40: Deposit preservation


The CONTRACTOR shall carry out the work., measures or tests necessary for the best


understanding possible of the deposit.


The CONTRACTOR may be reminded by the GRANTING AUTHORITY to observe the


rules of good practice, and to regulate the flow from the wells, so that the maximum reserve


recovery is achieved.








ARTICLE 41: Coordination of exploration and exploitation carried out on the same


deposit by several different operators


If the same deposit extends over the perimeters of several different exploitation concessions


granted to different beneficiaries, the CONTRACTOR undertakes to conduct its exploration


and production operations on its respective part of the deposit in conformity with a


comprehensive plan.


This comprehensive plan shall be drawn up under the following conditions:


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1. The GRANTING AUTHORITY shall invite each of the permit holders involved in the


same deposit to collaborate in drawing up a single unique exploration and production


plan applicable to the entire deposit.


This plan shall specify, if necessary, the bases in accordance with which the


Hydrocarbons extracted shall be shared among the permit holders.


If appropriate, it shall specify the methods according to which a “Unitization Committee”


shall be appointed to direct the joint exploration and production.


The GRANTING AUTHORITY may arrange for its own representation at meetings of


said Committee.


2. If an amicable agreement cannot be reached among the interest holders within ninety (90)


days from the GRANTING AUTHORITY’S invitation, they shall be required to submit


their individual exploration or production plans to the GRANTING AUTHORITY.


The GRANTING AUTHORITY shall propose arbitration by the Minister assigned to


Hydrocarbons on the single exploration and exploitation plan, the bases for sharing the


hydrocarbons, and the possible creation of a Unitization Committee.


3. Unless one of the permit holders involved w ould be seriously prejudiced as a result, the


arbitration decision must attempt to follow as closely as possible the proposals made by a


permit holder, or group of permit holders, representing at least three fourths (3/4) of the


interests in question, especially bearing in mind the reserves in place.


The evaluation of interests and the reserves in place shall be assessed on the basis of the


data acquired concerning the deposit at the time of announcement of the arbitration


decision.


The unitization plan may be reviewed at the initiative of any of the interested parties or of


the Minister in charge of Hydrocarbons if the subsequent progress achieved in the


understanding of the deposit results in a modification of the assessment of interests


involved and of the reserves in place.


4. The interested parties shall be required to c omply with the arbitration decisions of the


Minister in charge of Hydrocarbons as soon as they have been notified of these decisions.








ARTICLE 42: General obligation to provide documents


In addition to the documents listed in this Section, the CONTRACTOR shall be required to


supply to the GRANTING AUTHORITY, upon request, the statistical information concerning


the production, processing and possibly storage and movement of the hydrocarbons extracted


during the exploration and production, stocks of equipment, personnel, as well as copies of


documents such as maps, recording charts, statements, register or report extracts to support


the information provided.


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ARTICLE 43: Units of measurement


Information, figures, statements, maps and charts shall be supplied to the GRANTING


AUTHORITY using the units of measurement or scales approved by the GRANTING


AUTHORITY.


However, any system may be used by the internal departments of the CONTRACTOR





provided the corresponding metric conversions are given.





ARTICLE 44: Maps and charts


1. Maps and charts shall be supplied by the CONTRACTOR using the base maps or charts


of the Tunisian survey department, or using the base maps or charts drawn up by other


survey departments on the condition they are approved by the GRANTING


AUTHORITY.


If not, after the CONTRACTOR has conferred with the GRANTING AUTHORITY and


the survey department, these maps and charts: may be drawn up by the CONTRACTOR at


its expense, using the scales and procedures most suitable for the exploration objective.


In all cases, they shall follow the general Tunisian triangulation and land surveying


networks.


2. The GRANTING AUTHORITY and the CONTRACTOR shall confer in order to


establish the conditions under which the latter may carry out the work involved in


compiling survey maps, mapping, aerial photographs, photogrammetric restitution and


whatever is necessary for its exploration or exploitation requirements.


If the CONTRACTOR entrusts said work to contractors other than the Tunisian Survey


Department, it shall be required to ensure a liaison with the Tunisian Survey Department,


so that the surveys carried out may be given and used by it.


The CONTRACTOR shall forward to the Tunisian Survey Department two prints of the


aerial photographs it has taken or has arranged to have taken on its behalf.


3. The GRANTING AUTHORITY undertakes, within the limits of the restrictions and


encumbrances imposed by the Ministiy of National Defense, to grant the


CONTRACTOR all rights of way and authorizations for the over-flight of aircraft or for


taking aerial photographs, to enable it to carry out the topographical work in question.


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SECTION VI


EXPIRY OF THE CONCESSION AND REVERSION OF FACILITIES OF THE


PERMIT HOLDER TO THE GRANTING AUTHORITY








ARTICLE 45: Expiry of the term of the Concession


1. Without prejudice to the provisions of Article 61 of the Hydrocarbon Code, the buildings


in accordance with Articles 53-1 of the Hydrocarbon Code shall revert to the


GRANTING AUTHORITY upon expiry of the term of the Concession in their existing


condition. This provision is particularly applied to the following buildings and real


property:


a. the land purchased or leased by the PERMIT HOLDER;


b. the property leases or temporary occupation rights of the PERMIT HOLDER;


Leases and contracts related to the locations or occupation of lands shall carry a


clause explicitly reserving the right of the GRANTING AUTHORITY to take the


place of the PERMIT HOLDER.


Similarly, the same shall hold for all contracts for power or water or special bulk


transportation of Hydrocarbons.


A statement of condition and an inventory of the assets cited by this Article shall be


drawn up after input from the parties in the six (6) months preceding the expiry of


the Exploitation Concession.


c. wells, water wells and industrial buildings;


d. Access roads and trails, water intakes including piping and pumping facilities, power


transportation lines including transformer, switch gear, and metering stations, and


telecommunications resources belonging the PERMIT HOLDER;


e. buildings belonging to the PERMIT HOLDER, that it either uses for office or


warehouse; the residential buildings foi accommodating staff assigned to production


and their additions; the property lease or occupation rights the PERMIT HOLDER


may have on buildings belonging to third parties which it uses for the above


mentioned purposes;


f. private rail connection lines serving the PERMIT HOLDER’S sites, or linking these


to the public network;


It is understood that the facilities falling within the categories as listed above, and limited


to this list, shall revert to the GRANTING AUTHORITY even though they may be


situated outside the perimeter of the Concession, if they are essential for the functioning


of this exclusive Concession.


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2. If all or part of the facilities to revert to the GRANTING AUTHORITY under the


conditions indicated in this Article are necessary or useful for the exploitation of other


current Concessions or Permits of the PERMIT HOLDER, the conditions under which


these facilities shall be used jointly by the PERMIT HOLDER and the GRANTING


AUTHORITY proportionally to their respective requirements shall be decided by mutual


agreement before their transfer to the GRANTING AUTHORITY.


Conversely, the same applies to the PERMIT HOLDER’S facilities which are not turned


over to the GRANTING AUTHORITY and the use of which is essential to the latter for


the normal progress of exploitation of the Concession which it has recovered.





ARTICLE 46: Buy-back option for facilities


1. Upon expiry of term of the Concession, the GRANTING AUTHORITY shall have the


option to purchase for its own benefit, or where appropriate, for the benefit of a new


permit holder of a concession or exploration permit which it shall designate, all or part of


the assets listed hereinafter, other than those cited in Article 45 of this Schedule of


Obligations and which would be necessary for the fulfillment of file exploitation and


extraction of the Hydrocarbons collected:


a. the consumables, movables and real estate belonging to the PERMIT HOLDER;


b. the facilities and tools required for the exploitation, handling and storage of the crude


Hydrocarbons.


The decision of the GRANTING AUTHORITY specifying the facilities cited above and


on which it intends to exercise the buy-back option shall be communicated to the


PERMIT HOLDER no less than six (6) months prior to the expiry of the corresponding


Concession.





2. The buy-back price shall correspond to the net accounting value of said assets. This price


must be paid to the PERMIT HOLDER within two (2) months following expiry of the


Concession, under penalty of default interest calculated at the legal rate, and without the


need for prior formal notice.


In the event of exercising the buy-back right, the GRANTING AUTHORITY may





require the PERMIT HOLDER, either on its own behalf or on behalf of a new permit or


concession holder thereby appointed, to ensure that the facilities in question are made


available, following the provisions contained in paragraph 2 of Article 45 above.





3. However, those assets cited in paragraph 1 of this Article shall not be the subject of a


buy-back when they are, either in total or in part, necessary to the PERMIT HOLDER to


allow it to carry out its exploitation on one of its Concessions which has not yet reached


its expiry date.


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ARTICLE 47: Expiry of the Concession by relinquishment


If the CONTRACTOR wishes to exercise its right to relinquish all or only part of one of the


Concessions, it is obliged to notify the GRANTING AUTHORITY no later than twelve (12)


months before the date of relinquishment.


The respective rights of the GRANTING AUTHORITY, the PERMIT HOLDER and the


CONTRACTOR shall be governed in accordance with the provisions set out in the


Hydrocarbon Code and Articles 45 and 46 of this Schedule of Obligations.


In the event of a partial relinquishment of the Concession, the provisions of the Hydrocarbon


Code and this Schedule of Obligations shall continue to govern the rest of the Concession.





ARTICLE 48: Obligation to maintain structures in good condition


Until the end of the Concession, the CONTRACTOR shall be required to maintain the


buildings, structures of any kind, petroleum facilities and legal appurtenances in good


working condition and in particular to carry ou t the maintenance on existing wells and their


pumping and control facilities.








ARTICLE 49: Penalties applicable in the event of delay in the transfer of the facilities


In the cases cited in Article 45 above, any delay on the part of the PERMIT HOLDER in the


transfer of all or part of the facilities to be turned over to the GRANTING AUTHORITY, and


following formal notice which has not been fulfilled within the space of one (1) month, shall


provide the latter with the right to the payment of a penalty equal to one percent (1%) for the


value of the facilities which are not transferred, per month that they are delayed.








ARTICLE 50: Expiry of the Concession by forfeiture


If one of the cases of forfeiture set out by Article 57 of the Hydrocarbon Code should arise,


the Minister in charge of Hydrocarbons shall give the CONTRACTOR formal notice to


remedy the situation within a period which may not exceed six (6) months.


If the CONTRACTOR in question has not remedied the situation within the given period of


time, or if it has failed to provide satisfactory justification, the forfeiture shall be declared.


In this case, the Concession, buildings and related furniture cited in Article 53 of the


Hydrocarbon Code shall revert to the GRANTING AUTHORITY free of charge.








ARTICLE 51: Liabilities of the CONTRACTOR towards third parties


Upon the expiry of the Concession by completion of the term, in the event of relinquishment,


or in the event of forfeiture, the CONTRACTOR shall at the request of the GRANTING


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AUTHORITY subscribe to insurance covering a period of ten (10) years the risks resulting


from its activity and possible to arise after ihe reversion of the said Concession to the


GRANTING AUTHORITY.








SECTION vn


ECONOMIC CLAUSES








ARTICLE 52: Hydrocarbon reserves for the requirements of the Tunisian economy


1. The priority right to purchase a share of production of liquid hydrocarbons extracted by


the PERMIT HOLDER from its Concessions in Tunisia shall be exercised in order to


meet Tunisia’s domestic consumption requirements and this, in accordance with the


provisions of the Hydrocarbon Code and the following provisions:


a. the obligation on the part of the PERMIT HOLDER to supply a share of its


production in order to meet the requirements of the Tunisian domestic market, shall


be independent of the proportional Royalty provided for in Article 101 of the


Hydrocarbon Code;


b. if the PERMIT HOLDER produces several qualities of crude oil, the purchasing right


shall apply to each of these qualities, without exceeding, except with formal


agreement of the PERMIT HOLDER, the maximum as provided for in the


Hydrocarbon Code;


2. Delivery may be made in the form of finished product, at the choice of the PERMIT


HOLDER. In the case of delivery in finished product obtained by refining carried out in


Tunisia, delivery shall be made to the GRANTING AUTHORITY at the refinery exit.


The quality and proportions of refined products to be delivered shall be determined in


relation to the results which would be obtained from the crude Hydrocarbons of the


PERMIT HOLDER if they were treated in a Tunisian refinery, or in a European coastal


refinery.


The prices shall be determined by reference to those for the same types of products which


would be imported into Tunisia under normal conditions, reduced by an amount


calculated to correspond to a reduction of ten percent (10%) of the value of the crude oil


from which they would have been refined, with this value calculated in accordance with


the provisions of the Hydrocarbon Code.


However, this reduction shall not apply to those products which are intended for export


The GRANTING AUTHORITY undertakes to provide all opportunities in order to allow


the PERMIT HOLDER to set up a refiner/ whose products will be destined for export


and/or a natural gas liquefaction plant and/or petrochemical plants for treating


Hydrocarbons or their derivatives.


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3. CONTRACTOR shall have no obligation to meet any of Tunisia’s domestic consumption


requirements.








ARTICLE 53: Sale price of Hydrocarbons


For liquid hydrocarbons, the PERMIT HOLDER and the CONTRACTOR shall be bound to


apply a sale price at export which is not lower than the “normal sale price” defined below, yet


still allows them to find an outlet for all of their production.


The “normal sale price” of a liquid hydrocarbon in accordance with this Schedule of


Obligations shall be that which, bearing in mind other relevant factors such as insurance and


freight, is equivalent on markets constituting a normal outlet for Tunisian production, to a


price comparable to that of liquid hydrocarbons from other sources and of comparable quality


also competing to provide the normal supply of the same markets.


For gaseous hydrocarbons, the PERMIT HOLDER and the CONTRACTOR are bound to


apply a sale price at export which is not lower than the normal sale price.


The normal sale price shall be obtained by the PERMIT HOLDER and the CONTRACTOR


in their gas sales contracts.


The rates considered for the determination of the normal sale price shall be the rates normally


applied in ordinary commercial transactions, excluding:


direct or indirect sales of the seller through sale brokers to an affiliate company;


exchanges, a barter transaction implying restrictions, forced sales and in general any sale


of Hydrocarbons entirely or partly motivated by considerations other than those normally


prevalent in a sale;


sales resulting from agreement between governments or between governments and


government controlled companies.








SECTION vm


MISCELLANEOUS PROVISIONS








ARTICLE 54: CONTRACTOR personnel


The CONTRACTOR is bound to abide by the legislation and regulations in force in Tunisia


concerning labor and social security.


The CONTRACTOR shall be free to employ such personnel as it deems necessary and


appropriate to meet its obligations under this Convention and the PSC.


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The CONTRACTOR shall be bound to contact the employment offices and local authorities


including ETAP in order to hire unskilled or skilled personnel who may be recruited in


Tunisia.


CONTRACTOR shall be bound to accept candidates offered by the said offices that the


CONTRACTOR deems qualified for specific necessary jobs.


The proportion of Tunisians within the total staff of the CONTRACTOR shall be submitted to


the GRANTING AUTHORITY for approval, it being agreed that the said employment shall


be in accordance with the provisions of Article 62.2 of the Hydrocarbon Code.





ARTICLE 55: National Defense and Territorial Security


The CONTRACTOR shall obey the measures taken by the civil or military authorities in


matters of National Defense or Territorial Securi ty of the Tunisian Republic.


The above-mentioned measures could have the effect of suspending the application of certain


clauses of this Schedule of Obligations and of the Convention to which they are annexed.


In any case, the permanent benefits that this Schedule of Obligations and the Convention to


which they are annexed have been given to the CONTRACTOR, will remain in effect and


will not be modified in their basic form.


The CONTRACTOR will not have any compensatory recourse concerning the decisions


outlined above, such as those that will be applied by the ongoing legislation to any Tunisian


company liable to be affected by similar measures.








ARTICLE 56: Case of Force Majeure


The CONTRACTOR shall not have defaulted on the obligations resulting from this Schedule


of Obligations if it proves that its failure to fulfill said obligations is due to a case of Force


Majeure as provided in Article 62.1 of the Hydrocarbon Code.


Shall be considered a case of Force Majeure any external event that is both unforeseeable and


irresistible and prevents the affected party from performing all or part of its obligations under


the Agreement and the Schedule of Obligations, such as the following:


a. any natural phenomenon, including flood, fire, storm, explosion, lightning, landslides, or


earthquakes;


b. war, revolution, revolt, riot, or blockade;


c. strikes, except those by the CONTRACTOR'S personnel;


d. government restrictions.


SFAX OFFSHORE Permit - CONVENTION ■ Appendix B, Exchange Controls Page 46











Delays due to Force Majeure shall not entitle the CONTRACTOR to any indemnity.


However, they may entitle it to an equivalent extension of the term of validity of the Permit or


the Exploitation Concessions on which such delay s have occurred.


ARTICLE 57: Supply of Documentation for Oversight


The CONTRACTOR shall be obligated to make available to the GRANTING AUTHORITY


all pertinent documents for the implementation of STATE oversight of the obligations


accepted by the CONTRACTOR in this Schedule of Obligations and the Convention to which


they are appended.








ARTICLE 58: Copies of Documents


Within one (1) month at the latest after signature of the Agreement, the CONTRACTOR shall


give the Minister assigned to Hydrocarbons fifty (50) copies of such Convention, the


Schedule of Obligations, and the appended documents as registered.


The same applies to any amendments and additional documents which may be drawn up at a


later date and to be joined to this Convention and this Schedule of Obligations.


Made in Tunis, 20 July 2005


in six (6) original copies.


For THE STATE OF TUNISIA








AfifCHELBI


Minister of Industry , Energy and


Small and Medium Companies





For L’ENTREPRISE TUNISIENNE For ATLAS PETROLEUM EXPLORATION


D’ACTTVITES PETROLIERES WORLDWIDE, LTD.








Taieb EL KAMEL O. Duane GAITHER II


President Director General President & Chief Operating Officer








For EUROGAS INTERNATIONAL INC.








Jaffar KHAN


President


SFAX OFFSHORE Permit - CONVENTION - Appendix B, Exchange Controls Page 47





























APPENDIX B























EXCHANGE REGULATIONS





SFAX OFFSHORE Permit - CONVENTION - Appendix B, Exchange Controls Page <8











APPENDIX B


PROCEDURE CONCERNING EXCHANGE CONTROLS APPLICABLE TO





THE SFAX OFFSHORE PERMIT














The currency exchange operations concerning Hydrocarbon exploration and exploitation


activities of ATLAS PETROLEUM EXPLORATION WORLDWIDE, LTD. and of


EUROGAS INTERNATIONAL INC, the companies comprising CONTRACTOR, referred to


hereinafter as “the COMPANIES”, shall be governed by the following provisions:








ARTICLE 1: Non-resident companies


1. The COMPANIES are authorized to pay in foreign currencies, directly from their own


available funds outside of Tunisia, all exploration and exploitation expenses, subject to


the following provisions:


the COMPANIES will pay companies re sident in Tunisia fully in Tunisian Dinars;


the COMPANIES may be paid in foreign currencies foreign contractors not residing


in Tunisia that are specialized in hydrocarbons exploration and exploitation for the


needs of the contracts made in the context of this Convention. If such contractors are


fully paid abroad, they must agree to repatriate to Tunisia the amounts necessary for


their local expenditures.


2. The COMPANIES assume the obligation to transfer to Tunisia during the exploration and


development phases the currencies required 1o pay their expenses in Tunisian Dinars.


3. The COMPANIES shall, subscribe to insurance relative their activities as required in


accordance with Article 44 of the Insurance Code, promulgated by Law no. 92-24 of 09


March 1992.


The COMPANIES will be allowed to freely cash, dispose of and re-export in foreign


currencies their quota of the payments received from insurance companies in


compensation of accidents occurring under the following conditions:


If the damaged facilities are repaired or replaced, the amounts expensed as a result of


this will be reimbursed in foreign currencies and/or Tunisian Dinars in accordance


with the expenditures actually incurred.


If the damaged facilities are neither repaired nor replaced the reimbursements will be


made in the same currencies as the initial investments and in the same proportions..


 SFAX OFFSHORE Permit - CONVENTION - Appendix B, Exchange Controls Page 49











The insurance indemnities received in compensation for payments or investments


made in Tunisian Dinars will be in Tunisian Dinars. Such compensation could be


used to cover local expenses.


4. With respect to the salary paid to persons of foreign nationality who are employed by the


COMPANIES in Tunisia, a reasonable porion of such salary shall be paid in Dinars in


Tunisia and the balance, plus the benefits payable to such persons in the country where


they have their residence, may be paid outside Tunisia in foreign currency.


Persons of foreign nationality employed by contractors and sub-contractors of the


COMPANIES, for a period not to exceed six (6) months, may be paid outside Tunisia in


foreign currencies in the case where the expenses for their stay in Tunisia are borne by


their employer. After this six (6) month period, they will benefit from the same treatment


granted to the COMPANIES employees pursuant to the provisions of the preceding


paragraph.





It is understood that all foreign employees of the COMPANIES and of their contractors


and sub-contractors employed in Tunisia shall be subject to income tax in Tunisia in


accordance with the laws in force.


5. The COMPANIES shall not be authorized to resort to any form of financing from banks


resident in Tunisia, except in the case of short-term overdrafts due to delays involving


conversion into Tunisian Dinars of the available currencies in Tunisia.


6. The COMPANIES shall first request transfe r of credit balances in Tunisian Dinars. If the


transfer does not take place within the month following the request, following notification


to the contrary from the Banque Centrale de Tunisie concerning any part of the


COMPANIES credit balance in Tunisian Dinars, only the amount contested shall not be


transferred or withheld from subsequent repatriations. The amount contested will then be


submitted, during the month following the justified notification from the Banque Centrale


de Tunisie to a Conciliation Board consisting of three (3) members, the first representing


the Banque Centrale de Tunisie, the second representing the COMPANIES and the third


appointed by the two parties; this third member must be of a different nationality from


that of the two parties.


The decision of this Board shall be binding for the parties and must be pronounced within


four (4) months following the justified notification by the Banque Centrale de Tunisie.





These provisions will be valid for the entire duration of this Convention and all


amendments and additions which may be made later.





ARTICLE 2: Resident companies


Any resident company part or which would become part to this Convention and its


appendixes, undertakes to comply with the Tunisian exchange control regulations as arranged


by the following provisions:


SFAX OFFSHORE Permit - CONVENTION - Appendix B, Exchange Controls Page SO








1. The company is authorized to open professional accounts in currencies by the authorized


intermediaries. These accounts will be fed up to 100% of its receipts in foreign currencies


and will function in accordance with the exchange control regulations in force.


2. The company can freely carry out transfers related with payments of its committed


recurring expenses in foreign currencies for its supply of goods and services within the


framework of its activities of exploration and exploitation, as well as for the distribution


of dividends belonging to its nonresident associates, by domiciling to one or more


authorized intermediaries all its operations on the matter. The intermediary is bound for


this reason to address to the Central Bank of Tunisia an information sheet supported by


the suitable documents in proof for each transfer carried out.


3. The company can buy freely in Tunisian Dinars to the travel agencies established in


Tunisia on presentation of the appropriate documents in proof, the prepaid tickets for the


seconded non-resident personnel or personnel on mission in Tunisia by way of foreign


technical assistance within the framework of the application execution of this


Convention.


4. The payment of the imports can be carried out, when it is required, before the arrival of


the goods in Tunisia on presentation to the authorized intermediary of a proforma


invoice. A final invoice approved by the customs authorities shall be provided to the


authorized intermediary for the auditing of the file.


5. Non-resident contractors can freely transfer the amount from the economies which they


could make on their wages by domiciling their contracts of employment to only one


authorized intermediary who is bound for this reason to address to the Central Bank of


Tunisia an information sheet supported by the suitable documents in proof for each


transfer carried out.


SFAX OFFSHORE Permit: - CONVENTION Page 51











APPENDIX C




















COORDINATES AND MAP OF PERMIT


SFAX OFFSHORE Permit - CONVENTION - Appendix C, Coordinates and Map of Permit














SFAX OFFSHORE EXPLORATION PERMIT


ETAP / APEX / EUROGAS











COORDINATES OF THE VERTEXES


OF THE ELEMENTARY PERIMETERS (E.P.)





SURFACE AREA = 4104 Km2 soit 1026 P.E.








Reference Points


Coordinates





X Y


1 380 544


2 386 544


3 386 554


4 396 554


5 396 560


6 394 560


7 394 562


8 396 562


9 396 564


10 402 564


11 402 562


12 406 562


13 406 560


14 408 560


15 408 554


16 426 554


17 426 550


18 430 550


19 430 554


20 448 554


21 448 546


22 464 546


23 464 526


24 460 526


25 460 524


26 448 524


27 448 518


28 446 518


29 446 506


30 454 506


31 454 504


32 452 504


33 452 502


34 450 502


35 450 500


36 444 500


37 444 498


38 442 498


39 442 484


40 422 484


41 422 494


42 410 494


43 410 506


44 3S8 506


45 368 516


46 380 516


47/1 3E0 544


SFAX OFFSHORE Permit ■ CONVENTION - Appendix C, Coordinates and Map of Permit Page 53

















//Map of the Sfax Offshore Exploration Permit





ETAP/APEX /EUROGAS//