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<DOCUMENT>

<TYPE>EX-10.2

<SEQUENCE>7

<FILENAME>d25753_ex10-2.txt

<DESCRIPTION>EXPLORATION CONTRACT

<TEXT>

EXHIBIT 10.2

EXPLORATION CONTRACT

(TRANSLATED FROM RUSSIAN)

-------------------------------------------------------------------------------CONTRACT

for exploration of hydrocarbons in Yuzhny Alibek Oil Field

partially located within the limits of the exploration blocks XXII-23-D,E

in Mugojar District, Aktyubinskaya Oblast',

in accordance with the License AE No 1557 as of 29.04.1999

between

AGENCY OF THE REPUBLIC OF KAZAKHSTAN

ON INVESTMENTS

(Competent Body)

and

JOINT-STOCK COMPANY "KASPIY NEFT'"

(Contractor)



Astana - 2000

-------------------------------------------------------------------------------98

<PAGE>

CONTENTS

Preamble......................................................................

Section 1. Definitions........................................................

Section 2. Purpose of Contract................................................

Section 3. Term of Contract...................................................

Section 4. Contractual Area...................................................

Section 5. Title to property and information..................................

Section 6. Right of the State to acquire and requisition of minerals (oil)....

Section 7. General rights and obligations of the Parties......................

Section 8. Working Program....................................................

Section 9. Exploration Period.................................................

Section 10. Commercial Oil Pool Discovery....................................

Section 11. Accounting and Reporting..........................................

Section 12. Measuring.........................................................

Section 13. Execution of Sub-contractual Works................................

Section 14. Financing.........................................................

Section 15. Taxes and Payments................................................

Section 16. Accountancy.......................................................

Section 17. Insurance.........................................................



Section

Section

Section

Section

Section

Section

Section

Section

Section

Section

Section

Section



18.

19.

20.

21.

22.

23.

24.

25.

26.

27.

28.

29.



Liquidity and liquid fund.........................................

Protection of Subsoil and Environment.............................

Safety of Local Population and Personnel..........................

Force-Majeure.....................................................

Confidentiality...................................................

Assignment of Rights and Obligations..............................

Applicable Law....................................................

Procedure for Settlement of Disputes..............................

Guarantees of Contract Stability..................................

Conditions for Termination and Suspension of Contract.............

Language of Contract..............................................

Additional Provisions.............................................



Appendices:

No 1 - License AE No 1557 as of 29.04.99.

No 2 - Working Program (Exploration Period)

No 3 - Approvals and Experts Conclusions

99

<PAGE>

The present Contract for Exploration of Hydrocarbons in Alibek Yuzhny field

partially located within the limits of the exploration blocks XXII-23-D,E in the

territory of Mugojar District, Aktyubinskaya Oblast', Republic of Kazakhstan was

concluded on the 7th of March, 2000, between Agency of the Republic of

Kazakhstan on Investments (hereinafter referred to as Competent Body) and

Joint-Stock Company "Kaspi Neft'" (hereinafter referred to as Contractor) as a

holder of the License AE No 1557 as of 29.04.1999.

PREAMBLE

WHEREAS

1.



Subsoil and all Mineral Wealth contained are government property

accordance with the Constitution of the Republic of Kazakhstan.



2.



Republic of Kazakhstan is willing to conduct efficient and rational

utilization of Mineral Wealth including exploration and test operation of

Alibek Yuzhny Oil Field.



3.



Contractor is willing and financially

rational exploration works.



4.



Government of the Republic of Kazakhstan has authorized the Agency of the

Republic of Kazakhstan on Investments to conclude and execute the Contract.



5.



Competent Body and Contractor have agreed that their mutual rights and

obligations in Exploration of Hydrocarbons will be regulated by the

Contract.



capable to conduct



efficient



in



and



NOW THEREFORE, Competent Body and Contractor have agreed as follows:

SECTION 1. DEFINITIONS

The terms and definitions not explained in this Section will have the

meaning attached to them in the Decree of the President of the Republic of

Kazakhstan "On Subsoil and Subsoil Use" as of January, 27, 1996, acting as a law

(hereinafter referred to as Decree "On Subsoil") and other legislative acts on

specific minerals and technogenic mineral formations.

1.



State (Republic) shall mean Republic of Kazakhstan.



2.



Governmental



Body shall mean a central



executive



body of the Republic of



Kazakhstan authorized

State (Republic).



to execute



definite



functions



in the name of the



3.



Mining Allocation shall mean a document attached to the License determining

spatial boundaries of the subsoil area allocated for execution of the works

specified in the License.



4.



Contractual Year shall mean a period of 12 (twelve) successive months

according to the Gregorian Calendar; in the context of the Contract it

begins from the effective date of the Contract.



5.



Effective Date of the Contract shall mean the date given in Paragraph 3.1.

of the Contract.



6.



Legislation on Subsoil Use shall mean Decree of the President of the

Republic of Kazakhstan "On Subsoil and Subsoil Use" as of January, 27,

1996, operating as a law and other legislative acts.

100



<PAGE>

7.



Commercial

discovery

shall mean

discovery one or

commercially fit for Production in the Contractual Area.



8.



Competent Body shall mean Agency of the Republic of Kazakhstan on

Investments delegated with the rights directly connected with conclusion

and execution of the Contract.



9.



Contract shall mean the present Contract for Exploration of hydrocarbon raw

materials in Alibek Yuzhny oil field between Competent Body and Contractor

as well as all the Appendices to the Contract.



10.



Contractual Area shall mean the territory specified in the License

(Appendices 1,2,3) by the geographical coordinates and allocated for

execution of exploration works.



11.



License shall mean the License AE No 1557 (oil) as of 29.04.1999 issued by

the Government of the Republic of Kazakhstan to the Joint-Stock Company

"Kaspi Neft'" to conduct exploration of hydrocarbon raw materials in Alibek

Yuzhny Oil Field located in Mugojar District, Aktyubinskaya Oblast',

Republic of Kazakhstan.



12.



Licensing Body shall mean "Licensor" executive body with the competence to

issue licenses in accordance with the applicable law.



13.



License Works

Contract.



14.



Oil Field shall mean Alibek Yuzhny oil

containing a natural accumulation of oil.



15.



Taxes shall mean all the taxes and other compulsory payments

state budget of the Republic of Kazakhstan, local budgets and

Funds.



16.



Tax legislation shall mean Decree of the President of the Republic of

Kazakhstan "On Taxes and other Compulsory Payments to the Budget" No 2235

as of April, 24, 1995, operating as a law, with all amendments and

alterations, and other legislative and legal laws regulating payment of

taxes and fees.



17.



Subsoil shall mean a part of the earth's crust beneath edaphic (soil) layer

and in the absence of the latter - beneath earth surface and floor of water

reservoirs extending down to the depths accessible for Subsoil Use



shall



mean all works



under the



License



field



several



and



or a part



fields



Exploration

of



subsoil



paid to the

non-budget.



Operation with consideration for technological progress.

18.



Subsoil Use Operations shall mean operations relating to exploration works

conducted in the Contractual Area under the License.



19.



Oil Operations shall mean operations relating to Exploration, Production,

Construction and Operation of underground storing capacities and reservoirs

of oil, Construction and Operation of Oil and Gas Pipelines executed in

land within the limits of rivers, lakes and other inland waters as well as

Marine Oil Operations.



20.



Contractor shall mean Subsoil User, i.e. "Kaspi Neft'" Joint-Stock

which has concluded the Contract with the Competent Body.



21.



Government shall mean Government of the Republic of Kazakhstan.



22.



Accompanying Useful Minerals shall mean the components

with the essential mineral.



23.



Positive practice of Oil Field Development shall mean established and

generally accepted world practice of Oil Operations considered as rational,

safe, efficient and necessary in conducting of Oil Operations.



24.



Exploration shall mean operations

fields and their evaluation.



produced



relating to search of useful



Company



together



minerals



101

<PAGE>

25.



Working Program shall mean all types of design work to be implemented

exploration the Contractual Area.



26.



Hydrocarbon Raw Materials shall mean oil, gas and condensate.



27.



Parties shall mean Competent Body and Contractor

collectively.



28.



Subcontractor shall mean a legal body or natural person who has concluded

an agreement

with

Contractor on execution of a specific part of

Contractor's obligations under the Contract.



29.



Third Party

Parties.



30.



Proved Reserves shall mean geological and extractable oil reserves of

Alibek Yuzhny Oil Field evaluated by the state examination.



31.



Bonuses shall mean payments made at the time of specific periods of the

Contract realization: "signing bonus" (for signing of the Contract),

"commercial discovery bonus" (for discovery of a commercial oil field).



32.



Royalty shall mean payments for the right to use subsoil during the process

of hydrocarbon production. In case of test operation, royalty for test

operation shall be specified.



33.



Construction works shall mean operations for construction and operation of

underground facilities of general purpose and for disposal of wastes



34.



Production works shall mean operations relating to extraction of useful

minerals from the subsoil to the land surface and from the technogenic

mineral formations as the state property including all technological

operations up to processing of mineral raw materials.



35.



Rate of discount shall mean the coefficient used for balancing expenditures



shall mean any



for



where they are determined



natural or legal body except for the



Contract



and returns by the beginning of the Contractor's works.

36.



Customs payments shall mean all taxes,

register of customs duties in accordance

Republic of Kazakhstan.



fees and duties specified in the

with normative legal acts of the



SECTION 2. PURPOSE OF THE CONTRACT

2.1.



The purpose of this Contract is execution of efficient geological

exploration as well as determination and legal registration

contractual relations between the Parties in accordance with the

applicable legislation of the Republic of Kazakhstan.

SECTION 3. TERM OF THE CONTRACT



3.1.



The Contract becomes effective from the time of its official

registration in the authorized body and is valid during the time

specified in Paragraph 4 of the License.



3.2.



Term of the

License.



3.3.



The term of the Contract may be extended

the License.



3.4.



When extended the terms and conditions of the Contract may be

changed by written agreement of the Parties if such changes are in

compliance with the provisions of the License.



Contract



expires on the last day of operation of the

only after



extension of



102

<PAGE>

SECTION 4. CONTRACTUAL AREA

4.1.



Contractor carries out exploration of hydrocarbon raw materials

within the limits of the Contractual area in accordance with the

License and provisions of the Contract.



4.2.



If during

exploration

of

hydrocarbon

raw

materials the

geographical boundaries are found to go beyond the Contractual

Area then the issue of its extension shall be decided by making

additional provisions into the Contract.



4.3.



Return of the Contractual Area except for the area

commercial discovery is made will be executed after 2005.



where a



SECTION 5. PROPERTY RIGHTS TO STOCK AND INFORMATION

5.1.



All tangible and intangible assets acquired by the Contractor for

exploration of hydrocarbonic raw materials are property of the

Contractor.



5.2.



Property rights to stock and other property laws indicated in 5.1.

may be put in pledge or encumbered otherwise to the benefit of the

Third Party in order to provide financing of exploration works in

accordance with the legislation of the State.



5.3.



The Contractor shall acquire the Information on Subsoil in the

Contractual Area owned by the State in the Republican Center of

geological information of the Ministry of natural resources and

protection of environment of the Republic of Kazakhstan in the

order established by the legislation of the State.



5.4.



Information on geological structure of the subsoil,

useful

minerals contained, geological parameters of the oil fields,

volume of the reserves, development conditions and other features

of the subsoil contained in geological reports, maps and other

materials are owned by the State if they are obtained from

budgetary allocations and they are owned by the Contractor if they

are obtained from its owned funds.



5.5.



Geological and other information on Subsoil obtained by the

Contractor in the process of exploration of hydrocarbons shall be

duly transferred for storing, systematization and analysis to the

Republican Center of geological information of the Ministry of

Natural Resources and Environmental Protection of the Republic of

Kazakhstan.



5.6.



Utilization of the geological information on Subsoil obtained at

the expense of the Contractor for training, research, commercial

and other purposes and transferred in accordance with Paragraph

5.5 of the Contract shall be determined on the basis of a separate

agreement between Contractor and Republican Center of Geological

Information of the Ministry of Natural Resources and Environmental

Protection of the Republic of Kazakhstan in accordance with the

Decree No 1357 as of 7.11.96. of the Government of the Republic of

Kazakhstan "On approval of Regulations for Geological Information

owned by the State and the order of its use for training,

research, commercial and other purposes".



5.7.



On termination of the Contract all geological information shall be

transferred to the State property. The Contractor is obliged to

transfer all the documents and other material

carriers of

geological

information on a gratis basis including primary

information to the Republican Center of Geological Information of

the Ministry of Natural Resources and Environmental Protection of

the Republic of Kazakhstan.

103



<PAGE>

SECTION 6. RIGHT OF THE STATE TO ACQUIRE AND REQUISITE OF USEFUL MINERALS

6.1.



In case of war, natural disasters or other emergencies stipulated

by the law on emergencies, the Government has the right to

requisite a part or all hydrocarbons owned by the Contractor.

Requisition may be exercised to the extent required for needs of

the State throughout the whole period of the emergency situation.



6.2.



The State guarantees compensation for requested useful minerals in

kind or reimbursing for the cost on the basis of world prices

operating on the day of requisition (for a foreign contractor

reimbursement is made in convertible currency and for a national

contractor - in national currency of the State).



6.3.



The State has the priority right to acquire hydrocarbons from the

Contractor at the prices not higher than existing world prices.

The limiting volume of the acquired hydrocarbons shall be 50% of

all produced hydrocarbons at the prices not lower than cost price.

SECTION 7. GENERAL RIGHTS AND OBLIGATIONS OF THE PARTIES



7.1.



CONTRACTOR HAS THE RIGHT:



7.1.1.



To carry out exploration of

on an exclusive basis.



hydrocarbons in the Contractual



Area



7.1.2.



To make any independent legal actions on use of subsoil within the

limits of the Contractual Area in accordance with the provisions

stipulated in the License and the Contract.



7.1.3.



In the Contractual Area and if necessary in other plots of land

allotted to the Contractor in an established order, to construct

objects of

productive

and social

sectors

essential

for

implementation of exploration and production works in accordance

with the applicable laws.



7.1.4.



To use objects and communications of collective use as agreed with

their owners both in the Contractual Area and outside of its

limits.



7.1.5.



To conduct negotiations on extension of the term of the Contract

on a priority basis in accordance with the procedure determined in

Paragraph 3.3. of the Contract.



7.1.6.



To invite Subcontractors for

related to exploration work.



7.1.7.



To assign all or a part of his rights to other persons complying

with the provisions of the Contract and legislation of the State.



7.1.8.



Contractor may appoint Operator of the Contract at any time of the

term of the Contract and both Contractor or any other person may

by appointed as Operator hereby.



7.1.9.



To terminate his activities in accordance with the provisions

stipulated in the Contract and legislation of the State.



7.1.10.



In case of termination of the Contract,

to dispose of his owned property.



7.1.11.



To conduct exploration works strictly in accordance

legislation of the State and Working Program.



implementation



of specific



works



Contractor has the right

with the



104

<PAGE>

7.2.



CONTACTOR IS OBLIGED:



7.2.1.



Within 90 days after registration of the

implementation of the Working Program.



7.2.2.



To use the most efficient methods and technologies in exploration

of hydrocarbons based on the norms and standards accepted in the

world practice.



7.2.3.



To use Contractual Area only for the purposes

License and present Contract.



7.2.4.



Not to prevent other persons to move freely within the limits of

the Contractual Area, to use objects and communications of

collective use or conduct any works including exploration and

extraction of any other natural resources except oil if such

activities do not require special safety measures and they do not

interfere with exploration works.



7.2.5.



To observe duly agreed technological designs and projects for

exploration of hydrocarbons safe for the personnel and local

population.



7.2.6.



To prefer



equipment,



Contract,



to commence



stipulated in the



materials and finished products made in the



State provided that they are competitive ecological and technical

specifications,

prices,

working

parameters

and

delivery

conditions.

7.2.7.



To give priority to the State organizations and institutions in

using services for exploration of hydrocarbons including use of

air, railway and water transport provided that these services are

able to meet competition in price, efficiency and quality.



7.2.8.



In conducting exploration of hydrocarbons, to take part in

development of social sector of the Region and give priority to

local personnel provided that they have proper experience and

qualification.



7.2.9.



To submit

Body.



7.2.10.



To finance (no less than 1% of annual capital cost of the licensed

object) professional training of local personnel used in the works

under the Contract.



7.2.11.



To submit all necessary documents, information and unimpeded

access of the inspecting bodies of the State to the working sites

as they fulfill their duties and eliminate appropriately all the

violations found.



7.2.12.



If required to transfer information related to Exploration to the

third parties only with written consent of the other Party.



7.2.13.



To pay timely all taxes and other compulsory

payments

accordance with the law of the State and the Contract.



7.2.14.



In his activities, to preserve objects of cultural and historical

importance located in the Contractual Area.



7.2.15.



To forecast long-term ecological consequences of his activities

under the Contract and submit these forecasts to the Competent

Body and public organs of environmental protection; the final

forecast to be

submitted

not later than one year before

termination of the Contract.



7.2.16.



To leave the

Contractual

Area

requirements of Mining and Sanitary

subsoil and environment.



7.2.17.



To restore the plots of land and other natural objects damaged as

a result of the activities of the Contractor to the extent

adequate for further

utilization

in

accordance

with the

legislation of the State.



Working



Program and progress



reports to the Competent



in



in the state

meeting the

Supervision and protection of



105

<PAGE>

7.2.18.



To compensate fully damages resulting from the activities of the

Contractor and inflicted on environment, personnel and other

organizations and population.



7.2.19.



Contractor carries out Oil Operations in

License and Working Program agreed with the

supervision of safe procedure of work.



7.3.



OBLIGATIONS OF THE COMPETENT BODY:



7.3.1.



To provide for fulfillment and cancellation of the Contract in the



accordance

Authorized



with the

Body for



order and on the

State.



grounds



envisaged



in the



legislation



of the



alterations



of the



7.3.2.



To submit his proposals on withdrawal

License to the Licensing Body.



or



7.3.3.



To provide for a plot of land

accordance with the License.



Contractor



7.4.



RIGHTS OF THE COMPETENT BODY:



7.4.1.



To represent the State in talks with the

terms and conditions of the Contract.



7.4.2.



In the process of execution of the Contract, to approach the

Licensing Body with proposals on modification of the provisions of

the License.



7.4.3.



To demand regular and sample

provisions of the Contract.



7.4.4.



To carry out inspection of the exploration works of the Contractor

relating to his activity under the Contract.



7.4.5.



To have access to any works in the

Exploration of Hydrocarbons.



to the



reporting



Contractor



on



for



regarding



fulfillment



Contractual



Area



use in



of the



relating to



SECTION 8. WORKING PROGRAM

8.1.



Contractor executes Exploration of Hydrocarbons in accordance with

the Working Program agreed with the Authorized Body on utilization

and protection of subsoil.



8.2.



Contractor may submit proposals on modification and/or addition of

the agreed Working

Program.

Modifications,

amendments and

additions of the Working Program are made in written form if

mutually agreed by the Parties.

SECTION 9. EXPLORATION PERIOD



9.1.



Exploration Period consists of six successive years according to

the License and may be extended twice as mutually agreed by the

Parties with each period of extension as long as two years. Hereby

the Parties shall determine the part of the Contractual Area for

further exploration and make appropriate changes in the Working

Program.



9.2.



As Exploration works proceed, in case of commercial discovery the

Contractor may retain the whole territory for himself.



9.3.



The Contract terminates upon expiry of the Exploration Period with

regard to specific extensions if no commercial discoveries or no

decision on transition to the Production Period were made in the

Contractual Area. If the Contractor refuses to continue operations

under the Contract then he forfeits all the rights on the

106



<PAGE>

Contractual Area and may not

expenses under the Contract.



claim for any



SECTION 10. COMMERCIAL DISCOVERY



compensation



of the



10.1.



If the Contractor makes a discovery of any commercial field of

hydrocarbon

raw

materials

which can be, to his opinion,

economically profitable then he will immediately inform the

Competent Body thereof and within 30-day period develops Working

Program in order to evaluate its reserves and information required

for determination of profitability of the Field.



10.2.



Within Exploration Period, the Contractor will submit Design of

Test Operation

(Exploration) to the Central Commission for

Exploration (CCE).



10.3.



The Contractor will execute Test Operation (Exploration) without

conservation and draw up relevant documents essential for expert

assessment of the field reserves.



10.4.



Commercial Discovery entitles the Contractor with the exclusive

right for conclusion Production Contract provided that provisions

of the License and the Contract are met.



10.5.



If no Commercial Discovery is made in the Process of Exploration

then the Contractor has no right to compensate the expenses

incurred in the process of Exploration.

SECTION 11. ACCOUNTING AND REPORTING



11.1.



The Contractor undertakes to provide for accounting and within a

specified period to keep all documents pertaining to Exploration

under the Contract in accordance with the Legislation of the

State.



11.2.



Prior to the 10th day of the following month, the Contractor will

submit to the Competent Body a detailed report on his business

activity in the preceding quarter.



11.3.



The Contractor will submit reports on his business activity to

relevant state organs in the order and within a specified period

of time according to the Legislation of the State.



11.4.



The Competent Body will have the right to conduct inspection of

adherence of the Contractor to the terms and conditions of the

Contract and may attend, through his representatives, the site of

Exploration conducted by the Contractor.

SECTION 12. MEASUREMENT



12.1.



Measurement and weighing of Crude Oil produced in the Contractual

Area shall be taken by the Contractor in accordance with the

methods and practice accepted in the State.



12.2.



Contractor with the participation of the

conduct annual tests of the equipment and

weighing and measurement of Crude Oil.



12.3.



If the tests or inspection detect any defect of the equipment and

instruments and the time of the defect cannot be determined

properly then the time of the defect is determined as half the

time from the previous measurement to the day of detection of the

defect.



Competent Body shall

instruments used for



107

<PAGE>

12.4.



If the Contractor considers it is essential to make any changes in

the method of measurement or replace the measuring instruments



installed then he must provide notification to the Competent Body

not later than 15 days before so that the representatives of the

Competent Body can be present as these changes or replacement take

place.

SECTION 13. EXECUTION OF SUBCONTRACT WORK

13.1.



Contractor submits to the Competent body a plan of subcontract

work, a list of subcontracts for supply of materials, equipment

and services as a part of the Working Program to be concluded in

the next calendar year with estimated costs of the subcontracts as

well as a list of potential local and foreign subcontractors.



13.2.



In conclusion of all subcontracts, the Contractor will give

priority to services, equipment, materials and finished products

made in the State if they are competitive in their ecological and

technical specifications, prices, working parameters and terms of

delivery.



13.3.



Subcontractors are

competitive basis.



13.4.



Contractor is responsible for execution of subcontract

accordance with the legislation of the State.



invited



by the



Contractor



as a



rule



on a



works in



SECTION 14. FINANCING

14.1.



Contractor shall assume responsibility for full financing of his

activities under the Contract in accordance with the Working

Program agreed by the Parties.



14.2.



Contractor may freely obtain credits for financing his activities

in any currency both in the State and outside if it complies with

the legislation of the State.



14.3.



Contractor may have accounts both in national and foreign currency

in the banks of the State and outside for the purpose of execution

of the Contract in order to receive monetary resources as receipts

and earnings from the Contract.

SECTION 15. TAXES AND PAYMENTS



15.1.



In connection with the activities under the Contract,

the

Contractor undertakes to pay taxes and payments in accordance with

Tax Legislation of the Republic of Kazakhstan and provisions of

the Contract. Whatever the organizational form of the Contractor,

he shall be considered as a single taxpayer for the purposes of

calculation

of taxes and payments in connection

with the

activities under the Contract.



15.2.



Contractor undertakes to pay the following taxes and payments:



15.2.1.



Income tax for legal entities. The Contractor is responsible for

full deduction and transfer to the budget of the income tax

withheld at the source of payment in accordance with Section II of

the Law of the Republic of Kazakhstan "On taxes and other

compulsory payments to budget" No 2235 as of April, 24, 1995

(hereinafter referred to as Tax Code) applicable on the effective

date of the Contract.

108



<PAGE>

15.2.1.1.



Income tax for legal entities shall be paid at the rates specified



in Articles 30-33 and 37 of Tax Code.

15.2.1.2.



The Contractor is responsible for full deduction and transfer to

budget of income tax on legal entities withheld at the source of

payment in accordance with provisions of the Tax Legislation and

international agreements ratified by the Republic and applicable

on the date of emergence of tax obligations with the exclusion of

dividend tax calculated in accordance with the Tax Legislation

applicable on the Effective Date of the Contract. In the case of

establishment of permanent representation of non-resident legal

entity then the Contractor in addition to income tax shall be

imposed with a tax on net income of this permanent representation

calculated in accordance with the Tax Legislation applicable on

the Effective Date of the Contract.



15.2.2.



Value-added tax (VAT). The Contractor shall pay value-added tax in

accordance with Section III of the Tax Code.



15.2.3.



Excises. The Contractor shall pay excises in accordance with

Section IV of the Tax Code. The excisable goods are exclusively

those listed in Article 76 of the Tax Code.



15.2.4.



Special taxes and payments of subsoil users:



15.2.4.1.



Signing Bonus. The Contractor shall pay Signing Bonus in the

amount of 100000 (one hundred thousand) US dollars. The Signing

Bonus shall be paid within 30 days from the Effective Date of the

Contract.



15.2.4.1.1.



The Contractor shall submit the Declaration on the Signing Bonus

to the Regional Tax Department in the place of registration prior

to the 10th day of the month following a reporting one.



15.2.4.2.



Bonus of Commercial Discovery. The amount of the Bonus of

Commercial Discovery shall be determined in the Contract for

Production or for Exploration and Production concluded by the

Contractor for the oil fields located in the Contractual Area.



15.2.4.3.



Royalty. The amount of the Royalty shall be determined in the

Contract for Production or for

Exploration

and Production

concluded by the Contractor for the oil fields located in the

Contractual Area.



15.2.4.3.1.



In the event of test production of hydrocarbons within the limits

of the Contract, the Contractor shall pay royalty at the rate of

2% of the volume of hydrocarbons produced.



15.2.4.3.2.



The object of royalty taxation shall be the volume of the produced

hydrocarbons calculated in cost value on the basis of the average

selling price of the hydrocarbons for the reporting period without

regard of indirect taxes and reduced by the sum of actual expenses

for transportation to the place of sale.



15.2.4.3.3.



In the event of production of common useful

minerals and

underground water, the Contractor shall pay royalty at the rates

and in the order established by the Tax Legislation effective on

the date of emergence of payment obligations.



15.2.4.3.4.



Royalty shall be paid on a monthly basis not later than the 15th

day of the month following a reporting one.



15.2.4.3.5.



A reporting period for royalty is a calendar month.

109



<PAGE>

15.2.4.3.6.



Royalty declaration shall be submitted to the tax body not later

than the 10th day of the month following a reporting one.

Declaration form shall be approved by an authorized state body.



15.2.4.3.7.



Money form of royalty payment may be replaced by payment in kind

in the order established by the legislation with sending a

notification on the order of payment to the Contractor no less

than 60 days prior to the time of replacement.



15.2.4.4.



Compensation of historical expenses.



15.2.4.4.1.



Total Cost of all expenses on prospecting and exploration work

(historical expenses) in the licensed area of the Alibek Yuzhny

oil field incurred for the account of the Budget of the Republic

amounts to 2 831 630 (two million eight hundred and thirty one

thousand and six hundred and thirty) US dollars.



15.2.4.4.2.



The Contractor undertakes to pay 0,5% of the sum specified in

15.2.4.4.1. to the budget of the Republic of Kazakhstan and

amounting to 14 158 (fourteen thousand and one hundred and fifty

eight) US dollars. The order of payment of historical expenses is

determined

in the Agreement on

acquisition

of geological

information

concluded between the Committee of Geology and

Protection of Subsoil and the Contractor as of October, 21, 1999,

No 247.



15.2.4.4.3.



Time and order of payment of the remaining total sum of all

expenses for exploration works specified in 15.2.4.4.1. of the

Contract and amounting to 2 817 472 (two million and eight hundred

and seventeen thousand and four hundred and seventy two) US

dollars shall be determined in the Contract for Production of

hydrocarbon raw materials to be concluded by the Contractor on the

oil fields discovered in the Contractual Area.



15.2.4.4.4.



In the event of setting up a joint

venture with foreign

participation, the Contractor is obliged to pay 5% of the total

cost of historical expenses specified in 15.2.4.4.1. of the

Contract for the right to use the information.



15.2.4.4.5.



Report on the amount of compensation of the historical expenses

shall be submitted to tax authorities in the place of registration

prior to the 20th day of the month following a reporting calendar

quarter.



15.2.4.4.6.



Payments of the sums of compensation of the historical expenses

shall be made prior to the 25th of the month following a reporting

calendar quarter.



15.2.4.4.7.



The Contractor shall be responsible for violation of the order of

calculation and payment of the sums of compensation of the

historical

expenses

envisaged by the Tax

Legislation for

violations of the order of calculation and payment of taxes and

other compulsory payments to the budget.



15.2.4.5.



Excess profits tax. In the event of conclusion of the Production

Contract, the Contractor shall pay excess profits tax at the rates

and in the order established by the Legislation on the date of

conclusion of the Production Contract.



15.2.5.



Fee for registration of securities issue and assignment of

national identification number for issue of the stocks not subject

to state registration. The Contractor shall pay a fee for

registration of securities issue and assignment of national



identification number for issue of the stocks not subject to state

registration in accordance with Section V of the Tax Code valid on

the date of emergence of payment obligations.

110

<PAGE>

15.2.6.



Fees for passage of motor transport facilities in the territory of

the Republic of Kazakhstan

are paid by the Contractor in

accordance with the Legislation of the Republic valid on the date

of emergence of payment obligations.



15.2.7.



Payment for use of radio-frequency resource of the Republic of

Kazakhstan shall be paid at the rates approved by the Decree of

the Government of the Republic of Kazakhstan as of December, 11,

1996, No 1526, valid on the date of emergence of payment

obligations.



15.2.8.



Social Tax. The Contractor shall pay Social Tax in accordance with

Section VII of the Tax Code valid on the effective date of the

Contract.



15.2.9.



Land tax. The Contractor shall pay a land tax in accordance

Section VII of the Tax Code.



15.2.10.



Tax on transport facilities. The Contractor shall pay a tax on

transport facilities in accordance with Section VIII of the Tax

Code.



15.2.11.



Tax on property of legal entities. The Contractor shall pay a tax

on property of legal entities in accordance with Section IX of the

Tax Code.



15.2.12.



Auction fees. The Contractor will pay auction fees in accordance

with the Tax Legislation valid on the date of emergence of payment

obligations.



15.2.13.



Registration fee for legal persons. The Contractor will pay a

registration fee for legal persons in accordance with the Tax

Legislation valid on the date of emergence of payment obligations.



15.2.14.



License fee to acquire the right of carrying out a specified

business activity. The Contractor will pay a license fee to

acquire the right of carrying out a specified business activity

fees in accordance with the Tax Legislation valid on the date of

emergence of payment obligations.



15.2.15.



Customs duties. The Contractor will pay the customs duties in

accordance with the Law of the Republic of Kazakhstan "On Customs

in the Republic of Kazakhstan as of July, 20, 1995, No 2368, with

alterations and additions valid on the effective date of the

Contract.



15.2.16.



Payment for surface water resources. The Contractor will effect a

payment for water used from the surface water resources in

accordance with the Tax Legislation valid on the date of emergence

of payment obligations.



15.2.17.



Tax on forest utilization (forest income). The Contractor will pay

a tax on forest utilization (forest income) in accordance with the

Tax Legislation valid on the date of emergence of the payment

obligations.



15.2.18.



Payments for environmental



pollution.



with



The Contractor will effect



payments for the environmental pollution in accordance with the

Legislation effective on the date of emergence of the payment

obligations.

15.2.19.



Penalties for violation of the law on environmental protection.

Penalties for violation of the law on environmental protection are

paid in accordance with the Legislation valid on the date of

detection of the violation.



15.2.20.



Mandatory contributions to the Pension Fund. The Contractor will

pay mandatory contributions to the Pension Fund in the order and

at the amount determined by the Tax Legislation on Wages Fund for

citizens of the Republic of Kazakhstan.



15.2.21.



State tax. The Contractor will pay state tax in the order and at

the amount

operating on the date of emergence of payment

obligations.

111



<PAGE>

15.2.22.



Payment made by legal and physical persons for use of the symbols

of the City of Almaty in their brands, service and trade marks.

The Contractor will make payments for use of the symbols of the

City of Almaty in their brands, service and trade marks in

accordance with the Legislation valid on the date of emergence of

payment obligations.



15.2.23.



The Contractor will pay a fee for using the words "Kazakhstan",

"Republic", "National" (in full or any derivatives) by legal

persons

(except for the state

offices and

non-commercial

organizations) in their company names, service, brand and trade

marks in accordance with the Legislation valid on the date of

emergence of payment obligations.



15.3.



Taxation of personnel. Personnel of the Contractor will pay taxes

and other payments in accordance with the Tax Legislation valid at

the time of emergence of the tax obligations. The Contractor will

be responsible for the full and correct deduction of an income tax

on natural persons from the source of payment to the budget in

accordance with the Tax Legislation.



15.4.



Taxation of Subcontractors.

The Contractor will advise his

subcontractors which render services to him that they and their

personnel are obliged to pay taxes in accordance with the Tax

Legislation and the Contractor will be responsible for the full

and correct deduction of the taxes from the source of payment to

the budget.



15.5.



Taxation of assignment of rights. The incomes from assignment of

rights will be subject to taxation in accordance with the Tax Code

valid on the date of assignment..



15.6.



Transfer price formation. The Contractor admits that the tax

service may control the prices used by the Contractor in his

commercial and financial operations and correct the Contractor's

income for the purpose of taxation according to the Article 138-1

of the Tax Code.



15.7.



General tax liability. Taxes paid by the Contractor in accordance

with the terms of the Contract will not exempt the Contractor from

the obligations to pay taxes on his business activities not

related to the Contract and established by the legislation of the

Republic.



15.8.



Tax demarcation.

For the purpose of tax calculation,

the

Contractor will not unite the revenues and deductions related to

the Contract with the revenues and deductions outside the scope of

the Contract.



15.9.



Payment and placing of taxes and other payments. Any taxes and

payments determined in this Contract shall be paid by the

Contractor in the order and at the rates determined by the

Legislation of the Republic.



15.10.



All taxes, fees and duties shall be paid in Tenge or other

national currency

subsequently used in the Republic unless

otherwise provided by the Legislation. All taxes and payments

shall be paid as determined by the legislation of the Republic to

the accounts indicated by the tax and financial service of the

Republic.



15.10.1.



Penalties and fines. Penalties and fines for the infringement of

the Tax Legislation and untimely payment of the taxes to the

budget will be applied in accordance with the Tax Legislation

valid at the time of detection of the infringement.

112



<PAGE>

15.10.2.



Fines. Fines for untimely payment taxes and fees to the budget are

applied in accordance with the Tax Legislation valid on the date

of detection of the violations.



15.11.



Stability of tax conditions. Tax conditions determined by the

Contract (Tax regime) will be effective without any changes until

the Contract is terminated with the exclusion of the cases when

the changes of the Tax conditions are mutually agreed by the

Parties of the Contract and do not entail any changes in regard of

the initial economic interests of the Republic of Kazakhstan and

the Contractor.



15.12.



Access to information. The Contractor admits that the tax bodies

of the Republic will have access to any information related to the

accounts of the Contractor including any foreign bank accounts of

the Contractor including the foreign bank accounts. The Contractor

agrees to submit to the tax service of the

Republic any

information related to such accounts and hereby waives the right

of confidentiality which may exist in accordance with the relevant

provisions of the Legislation on bank secrets and other relevant

laws.

SECTION 16. ACCOUNTING



16.1.



The Contractor undertakes to effect full and correct accounting of

all revenues and expenses under the Contract in accordance with

the accounting procedure determined by the Legislation of the

State.



16.2.



All accounting books and documents of the Contractor shall be

accessible for inspection by the Competent Body and official

organs within their competence determined by the Legislation of

the State.

SECTION 17. INSURANCE



17.1.



Within 90 days from the effective date of the Contract, the

Contractor will develop and submit to the Competent Body for



approval the Insurance Program against risks, properties

liabilities related to the Exploration Program and:



and



(1)



transportation and warehousing of the goods delivered to

the site of the Exploration works and test production;



(2)



the property of the Contractor used in the

implementation of the Exploration works;



(3)



the environmental pollution including soil as well as the

expenses on the elimination of the effects of pollution

including melioration and land restoration;



(4)



general civil and legal liability for the third parties.



course



of



17.2.



The Contractor is obliged to effect social insurance of his

employees against production accidents, occupational diseases

including the costs of medical treatment of the employees due to

such cases.



17.3.



The Contractor may choose insurance companies at his discretion in

accordance with the legislation of the State.

113



<PAGE>

SECTION 18. LIQUIDATION AND LIQUIDATION FUND

18.1.



180 days before the expiration date of the Contract the Contractor

will submit to the Competent Body for approval a program of

liquidation of the effects of his activities in the Contractual

area under the Contract including the liquidation expense budget.



18.2.



Abandonment and conservation of oil, gas and other wells shall be

carried out in accordance with the provisions of the "Regulations

on Conservation of Wells in oil and gas fields, underground

storing facilities and thermal water reservoirs" and "Regulations

on the procedure of abandonment of the wells and write-off of the

expenses on their construction".



18.3.



Liquidation Program shall provide for elimination or liquidation

of the facilities and equipment used in the process of activities

of the Contractor in the Contractual Area.



18.4.



In order to provide for full financing of the Liquidation Program,

the Contractor will set up Liquidation Fund in the amount of 1% as

of Feasibility Study of the Exploration Works. The Liquidation

Fund is governed by the Contractor.



18.5.



The allocations to the Liquidation Fund in the amount of 1% will

be effected by the Contractor annually and will be included into

the costs of the Exploration works.



18.6.



If the actual costs of the liquidation exceed the Liquidation Fund

then the

Contractor

effects

additional

financing of the

Liquidation.



18.7.



If the actual costs of the liquidation are less than the

Liquidation Fund then the unused balance will be returned by the

Government to the Contractor and will be included into the taxable

revenue of the Contractor.



18.8.



If the Government decides on his own responsibility to extend

operation of all or a part of the facilities transferred to him by



the Contractor following the expiration date of the Contract then

in this case the Contractor will bear no responsibility for

implementation of the Liquidation Program and will assign to the

State all the rights to use the assets actually saved up in the

Liquidation Fund.

SECTION 19. PROTECTION OF MINERAL WEALTH AND ENVIRONMENT

19.1.



o

o

o

o



In the process of implementation of the Petroleum Operations the

Contractor will be obliged to observe the Legislation of the State

relating to protection of Subsoil and Environment and take all

necessary measures for the following:

protect life and health of local population;

ensure rational and complete utilization of Mineral Wealth;

preservation of natural landscapes and rehabilitation of disturbed lands

and other geo-morphological structures;

preservation of the energetic qualities of the upper layers of the Subsoil

in order to prevent earthquakes, landslips, overflows, terrain subsidence.



19.2.



o

o

o

o



In the process of exploration

the following

requirements

Ecological Requirements:



works conducted by the Contractor,

shall be of first priority: I



preservation of environment;

prevention of technogenic land desertification;

prevention of water and wind erosion of soil;

insulation of lost circulation and fresh horizons in order to prevent their

pollution;

application of non-toxic

re-agents for drilling fluids;

prevention of exhaustion and pollution of underground water;

114



<PAGE>

o

o

o



o

o

o



o

o



o

o



cleaning and re-circulation of drilling mud;

disposal of remnants of drilling materials, fuels and lubricants using

environmentally safe procedures;

II. Requirements for subsoil protection:

to provide for complete and integrated geological study of the Subsoil in

order to carry out a certain evaluation of the quantities and structure of

hydrocarbon raw materials in the oil fields and subsoil sections allocated

for use including those not connected with production;

to ensure rational and complete utilization of the subsoil resources during

all stages of the Exploration works;

reliable accounting of the extracted useful main and accompanying minerals

and products of processing of mineral raw materials and wastes in the

process of the oil field development;

to use subsoil in accordance with the provisions of the Legislation of the

Republic on protection of environment preserving the subsoil from dangerous

technogenic processes during exploration and production of hydrocarbon raw

materials;

protection of subsoil from water invasion, fires, explosions, collapses of

superincumbent rock mass and other natural factors reducing quality of the

subsoil and complicating development and operation of the Oil Field;

to prevent subsoil pollution in the process of exploration of hydrocarbon

raw materials especially in underground storage of oil and gas or other

substances and materials, disposal of hazardous substances and wastes and

effluent discharge;

to observe the procedure stipulated by Section 27 of the Contract for

suspension and termination of exploration of the hydrocarbons.

To ensure proper sanitary and ecological conditions for storing and

disposing of industrial and household wastes in order to prevent their

accumulation in catchment areas and in places of occurrence of underground

waters;



o

o



to ensure reliable and correct evaluation of the volume and structure of

the hydrocarbon raw materials including accompanying components;

The Contractor ensures complete and reliable geological, hydrological,

ecological, engineering and technological studies of the objects of

exploration of hydrocarbon raw materials.



19.3.



Prior to commencement of his activities in subsoil use, the

Contractor shall carry out evaluation of the environmental impact

of the planned operations to be agreed with the State Sanitary

and Epidemiological Service and permitted by the State organs for

Nature Protection.



19.4.



Data on technological monitoring and reports on environmental

impact shall be submitted

to the

authorized

bodies for

environmental protection. 19.5. The Contractor is obliged to

eliminate environmental violations committed by him, carry out

rehabilitation works and fully compensate damage inflicted in the

process of implementation of the Contract.



19.6.



State control for observance of the Legislation on Protection of

Subsoil and Environment is exercised by duly authorized state

bodies. The project shall be agreed with the State Sanitary and

Epidemiological Service.



19.7.



The Contractor shall implement the

Environment in the Contractual Area.



works



on



Protection



of



115

<PAGE>

19.8.



After termination of the Contract or return of the Contractual

Area by stages, the Contractor shall transfer the Contractual

Area in the conditions prior to the operations under the Contract

and suitable for further proper use in accordance with the

Legislation of the State.



19.9.



Any infringements (deterioration) of the environmental conditions

and the Contractual Area itself shall be restored at the expense

of the Contractor up to the point suitable for further proper

use.



19.10.



The Subsoil User is obliged to inform public opinion regarding

ecological situation in the Contractual Area and its changes

resulting from the Exploration works conducted by the Contractor.



19.11.



To make up a balance and organize a monitoring

previously drilled in the Contractual Area.



of the wells



SECTION 20. SAFETY OF LOCAL POPULATION AND PERSONNEL

20.1.



In the course of the implementation of the Exploration works

under the Contract, the Contractor will ensure the observance of

the safety norms and sanitary regulations stipulated in the

Legislation as well as he will take actions for prevention and

elimination of the accidents and occupational diseases.



20.2.



The Exploration works presenting a danger for human life and

health shall be prohibited in accordance with the Legislation.



20.3.



The State Safety Control for observance of the standards of

safety and industrial

sanitary in

implementation

of the

Exploration will be carried out by a specially authorized body of

the Republic.



20.4.



o

o

o

o

o

o

o

o

o



The general

requirements

of safe

implementation

of the

Exploration works are as follows:

to give access to the

Exploration works only to the persons specially trained and

qualified as well as the management of the Exploration Works will

be entrusted only to the persons having proper education and

experience;

to supply the working cloths and the means of individual and collective

protection required for personal safety to all the persons involved in the

Exploration Operations;

to operate the machines, equipment and materials complying with the

applicable standards of safety and sanitary;

proper registration,

storing and consumption of the explosives and

accessories as well as their safe and correct handling;

to carry out technical, geological, geodesic and other monitoring necessary

and sufficient for technological working cycle and forecasting of possible

emergencies;

to renew technical documentation and programs of the average liquidation

which make more precise the borders of the areas safe for work;

observance of the terms and conditions of the project systems of Oil field

Development,

projects

and

technological

designs for

Exploration,

Development and Construction of Oil, Gas and Water fields;

to carry out relevant sanitary and hygienic actions to prevent professional

diseases and professional poisoning;

to create conditions favorable for health;

to organize routine and periodical medical examination of the employees

working in harmful and unfavorable conditions;

116



<PAGE>

o

o



to organize lab instrumental control of the air in the working zone and

monitoring of harmful factors in working stations (noise, vibration,

microclimate, severity and labor intensity etc.);

to provide for sufficient quantity of good potable water and complete set

of sanitary and amenity premises in accordance with the approved standards

and norms.



20.5.



In case of emergence of any direct threat to life and health of

the employees and/or local population, the executive officers of

the Contractor are obliged to stop work immediately and to ensure

evacuation of the people to a safe place and supply complete

information hereof to the Competent Body and regional executive

authorities.



20.6.



To execute all operations under the Contract for Exploration of

Hydrocarbon Raw Materials and Construction of Oil Fields only in

accordance with the project designs positively approved by Mining

Supervision Department of the Agency on Emergency Situations of

the Republic of Kazakhstan.

SECTION 21 FORCE-MAJEURE



21.1.



Neither

Party of the Contract

will be default on their

obligations under the Contract if this default or delay in

fulfillment of their obligations under the Contract occurs due to

the force-majeure circumstances:



21.2.



The circumstances or events which either Party is unable to

foresee and to control include military conflicts, natural

calamities and disasters (fires etc). The given list is not

exhaustive.



21.3.



In the event of



force-majeure



circumstances



the damaged



Party



will notify the other Party at short notice by handing or mailing

a written notification specifying the date of commencement and

description of the force-majeure circumstances.

21.4.



In the event of force-majeure circumstances the Parties will meet

at the earliest possible date in order to find an equitable

solution of the situation and will take all possible measures to

minimize the consequences of the force-majeure.



21.5.



If the Operations under the Contract are completely or partially

suspended due to the force-majeure circumstances then the term of

the Operations will be extended for a period equal to the

duration of this suspension and resumed from the time of ceasing

of force-majeur circumstances.

SECTION 22. CONFIDENTIALITY



22.1.



The information received or acquired by either Party in the

process of implementation of the Contract will be considered

confidential,

and the

Parties

may use the

confidential

information for drawing up reports envisaged by the Legislation

of the Republic.



22.2.



The Parties have no right to transfer confidential information to

the third parties without consent of the other Party with the

exclusion of the following cases:



o

o



if such information is used in court proceedings;

if the information is furnished to the third parties rendering services to

the Contractor provided that such third party assumes the obligation to

regard this information as

117



<PAGE>



o



22.3.



confidential and to use it only for the purposes specified by the Parties

and during the period of time determined by the Parties;

if such

information is furnished to any bank or other

financial

organization from which the Contractor receives financial funds provided

that such a bank or other financial organization assumes the obligation to

consider such information as confidential and use it only for the specified

purposes.

In accordance with the Legislation of the Republic, the Parties

will determine the time for keeping information confidential as

per all

documents,

information

and

reports

related to

implementation of the Exploration Operations in the Contractual

Area.

SECTION 23. ASSIGNMENT OF RIGHTS AND OBLIGATIONS



23.1.



Assignment of the rights and obligations under the Contract to

the third party except for an associated

company of the

Contractor may be permitted only with a written consent of the

Licensing Body.



23.2.



The expenses

connected with assignment of the rights and

obligations under the Contract shall be born by the Contractor

and shall not be compensated by the State.



23.3.



For as long as the Contractor continues to take any part in the

Contract, he and the third party to which he assigned the rights

and obligations shall be collectively

responsible for the

Contract.



SECTION 24. APPLICABLE LAW

24.1.



Legislation of the State will be applied for the purpose of the

Contract and other agreements signed on the basis of the

Contract.



24.2.



The Contractor assumes an obligation to fulfill the international

obligations of the State for protection of environment in the

Contractual Area and land sections linked with it.

SECTION 25. PROCEDURE FOR SETTLEMENT OF DISPUTES



25.1.



The Parties will take all

disputes and

differences

negotiations.



necessary actions to settle the

under the Contract by means of



25.2.



If any dispute cannot be settled by means of negotiation within

60 (sixty) days from the date of its emergence then the Parties

may transfer the disputable matter to the courts of the State

authorized to consider such disputes.

GUARANTEES OF STABILITY OF THE CONTRACT



26.1.



Terms and conditions of the Contract will

throughout the effective term of the Contract.



remain



the



same



26.2.



Alterations and amendments unfavorable for the Contractor and

adopted after conclusion of the Contract shall not be applied to

the Contract.



26.3.



In the case of such alterations and amendments specified in 27.2.

the Parties will be guided by Paragraph 15.11. of the present

Contract.

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<PAGE>

TERMINATION AND SUSPENSION OF THE CONTRACT

27.1.

o

o

27.2.

o

o

o

o

o

27.3.



The Competent

if:



Body shall suspend the Contract in a binding order



The License is suspended;

There is a direct threat to life or health of the people working

residing in a zone influenced by the operations under the Contract;



or



The Competent Body has the right to suspend the Contract in the

following cases:

the Contractor executes the operations not provided for in the Working

Program;

in the process of his activities, the Contractor violates the legislation

of the State pertaining to protection of subsoil, environment and safe

operation;

in the process of his activities, the Contractor violates the procedure of

payment of taxes and other compulsory payments specified in the Contract;

the Contractor is declared bankrupt in accordance with the legislation of

the State;

the above-mentioned list may be added as mutually agreed by the Parties.

In case of suspension of the Contract, the Competent Body gives a

written notification to the Contractor on the reasons of such

suspension

and

determines

a

reasonable

term for their



elimination.

27.4.



The Contract will be renewed after the notice of

the reasons for suspension of the Contract.



27.5.



The Contract may be early terminated only in the following cases:



o

o

o

o

o

o

o

o

o

o



elimination



of



when the Contractor refuses to eliminate the reasons responsible for

suspension of the Contract or fails to eliminate them by the date specified

by the Competent Body;

in the case of early termination of the License;

when the Contract is declared invalid in accordance with the Legislation on

Subsoil;

if any fact of violation of the Legislation of the State in signing and

registration of the Contract is established in legal form;

if any fact of essential departure of the terms and conditions of the

Contract from the provisions of the License or competitive conditions on

the basis of which the License was granted to the Contractor;

if the Contractor assigns all or a part of his rights under the Contract to

the third party in defiance of Section 24 of the Contract;

if any fact of intended furnishing of false information on implementation

of Exploration in the Contractual Area to the Competent Body or other

official body by the Contractor is established in legal form;

if the Contractor effects repeatedly the actions responsible for the

previous suspension of the Contract;

if the Contractor discontinues his operations under Working Program for a

term of more than 90 days except for the events caused by the circumstances

of force-majeur;

if the provision for confidentiality of information under the Contract is

violated.



27.6.



The Contract may be terminated due to the reasons specified in

27.5. within 30 days after the date of receipt of written

notification of early termination of the Contract from the

Competent Body.



27.7.



The Parties shall not be exempted from their current liabilities

under the Contract which remain unfulfilled by the time the

notification of termination of the Contract is received by the

Contractor.

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<PAGE>

SECTION 28. LANGUAGE OF THE CONTRACT

28.1.



The text of the Contract, appendices and supplemented documents

are made up in Kazakh and Russian and both copies are identical



28.2.



If any differences or disputes arise between Kazakh and Russian

texts then the Russian text will be given a preference.



28.3.



The Parties agree that Russian will be used as a language of

communication. From the effective date of the Contract, all

technical documentation and information on Exploration Operations

will be made up in Russian.



28.4.



Documentation

and information

pertaining to administrative

activities will be made up in Russian or Kazakh language.

SECTION 29. ADDITIONAL PROVISIONS



29.1.



All notifications and document required as per execution of this

Contract will be considered as duly submitted or received by



either Party only if they are actually submitted or received.

29.2.



All notifications and documents shall be handed over personally

or transmitted by mail, registered air mail, fax, telex or

telegraph to the following addresses:



Address of the Competent Body



Address of the Contractor



Astana, Mira Str., 10

Tel.:118 161, 118 152

Fax:32-12-70

Agency

Of the Republic of Kazakhstan

On Investments,

Chairman



480100 Republic of Kazakhstan,

Atyrau, Lenina Str., 4.

tel., fax: 63-66-44

"Kaspi Neft'" Company,

President



D.O.Kuanyshev



K.M.Shanenov



29.3.



If the address under the Contract changes then the Party involved

will give a notice thereof to the other Party.



29.4.



All appendices to the Contract shall be considered as integral

parts of the Contract. With any differences or discrepancies

between the provisions of the appendices and the Contract itself,

the latter will be given a preference.



29.5.



Any amendments or additions to the Contract not conflicting with

the provisions of the License will be drawn up upon written

consent of the Parties. Such an agreement will be an integral

part of the Contract.



The present Contract is concluded by the duly authorized

Parties as of March, 7, 2000, Republic of Kazakhstan.



representatives of the



120

<PAGE>

Agency of the Republic of Kazakhstan

On Investments



Contractor



By: /S/ D.O.Kuanyshev

signature



By: /S/ K.M.Shanenov

signature



Agency

of the Republic of Kazakhstan

on Investments,

Chairman



"Kaspi Neft'" Company,

President



D.O.Kuanyshev



K.M.Shanenov

121



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