The People's Republic of China

24/03/2005

The text of the contract, annexes and supplementary documents attached shall be written in both Chinese and English, and both versions shall have equal force and effect. The parties agree that both Chinese and English shall be used as working languages. After the effective date of the contract, technical documents and information concerning the petroleum operations shall, in general, be written in English except for technical documents and information available previously and received from third parties. Unless otherwise agreed by China National Offshore Oil Corporation, documents and information in respect of administration shall be written in both Chinese and English. Forms for production and other reports and records shall be printed with headings in both Chinese and English and may be filled out in either Chinese or English.

The contract area as of the date of signature of the contract covers a total area of 7,006 square kilometers, as marked out by the geographic location and the coordinates of the connecting points of the boundary lines in Annex I attached.

Primeline Energy China Limited and Primeline Petroleum Corporation

Contract Area 25/34

Contract Area 25/34

Petroleum

China National Offshore Oil Corporation (CNOOC)

The production period of any oil field and/or gas field within the contract area shall be a period of 15 consecutive years. The exploration period shall consist of 7 consecutive years. The term of the contract shall not go beyond 30 consecutive contract years from the date of commencement of the implementation of the contract.

Production sharing contract

Prior to the submission of the overall development program, Primeline Energy China Limited and Primeline Petroleum Corporation shall entrust a qualified organization to prepare the environmental impact statement.

When competent authorities under the government assign a person to inspect environmental protection and safety within the scope of the petroleum operations according to the laws, decrees, rules and regulations, Primeline Energy China Limited and Primeline Petroleum Corporation shall provide all necessary facilities and assistance to enable the inspectors to carry out such inspection smoothly.

Primeline Energy China Limited and Primeline Petroleum Corporation (Primeline) shall endeavor to: - Minimize the damage and destruction to marine organisms and their living oceanic environments; - Control blowouts promptly and prevent or avoid waste or loss of petroleum discovered in or produced from the contract area; - Prevent petroleum from flowing into low pressure formations or damaging adjacent petroleum-bearing formations; - Prevent water from flowing into petroleum-bearing formations through dry holes or other wells, except for the purpose of secondary recovery; - Prevent land, forests, crops, buildings and other installations from being damaged and destroyed. In the performance of the petroleum operations, Primeline shall be strictly subject to the laws, decrees and regulations on environmental protection and safety promulgated by the government and make its best efforts to prevent pollution and damage to the atmosphere, oceans, rivers, lakes, harbors and land, and secure the safety and health of the operating personnel. Primeline shall use all reasonable endeavors to eliminate promptly any pollution occurring in the performance of the petroleum operations and minimize its consequences. Economic losses caused by any pollution shall be charged to the joint account, unless otherwise provided.

Any non-operator party to the contract shall have the right to audit all Primeline Energy China Limited and Primeline Petroleum Corporation's (Primeline) joint account accounting books and records after the end of each calendar year and give Primeline a written notice of the auditing results. The auditing shall be completed within 24 months after the end of each calendar year. In the absence of any written notice of the exception to the auditing results given by the non-operator party within such period or if the annual joint account accounting books and records of Primeline are not audited by the non-operator party within such period, Primeline’s joint account accounting books and records shall be deemed correct. There shall be no impediment to normal petroleum operations during any audit. The auditors shall be entitled to access to all relevant joint account records, files and other information and may inspect such sites and facilities as necessary.

Primeline Energy China Limited and Primeline Petroleum Corporation shall pay taxes to the government subject to the tax laws and regulations of the People's Republic of China.

5% of the annual gross production of crude oil shall be used for payment of the value added tax and shall be paid in kind to the competent authorities of the Chinese government through China National Offshore Oil Corporation.

The remainder of the annual gross production of crude oil after the allocation of value added tax, royalty and cost recovery oil shall be deemed as "remainder oil". Such ‘‘remainder oil” shall be divided into “share oil" of the Chinese side and "allocable remainder oil". [Calculation of amount of “allocable remainder oil” redacted] The “allocable remainder oil” of each oil field in each calendar year shall be shared by the parties in proportion to their respective participating interests in the development costs, 51% for China National Offshore Oil Corporation (CNOOC) and 49% for Primeline Energy China and Primeline Petroleum Corporation (Primeline), [n the event that CNOOC does not participate in the development of an oil field within the contract area, Primeline shall obtain 100% of the “allocable remainder oil” of that field. In the event that CNOOC participates to an extent less than 51% in the development of an oil field within the contract area, the “allocable remainder oil” of such field in that calendar year shall be shared by the parties in proportion to their actual respective participating interests in such oil field. “Remainder gas” shall be divided into “share gas” of the Chinese side and “allocable share gas” [Calculation of amount of “allocable remainder gas” redacted]

The operating costs for any given calendar year actually incurred by China National Offshore Oil Corporation (CNOOC) and Primeline Energy China Limited and Primeline Petroleum Corporation (Primeline) in respect of each oil field, shall be recovered in kind by the parties out of the crude oil produced from the oil field during that calendar year in accordance with Annex II - Accounting Procedure, after the operating costs have been converted into a quantity of crude oil on the basis of the crude oil price. Unrecovered operating costs shall be carried forward to the succeeding calendar year. The crude oil less the amount of crude oil for payment of royalty shall be “cost recovery oil”. Payment in kind for the operating costs actually incurred but not yet recovered by the parties shall be made after the price of the said “cost recovery oil” has been determined. The remainder of the “cost recovery oil” shall, after payment for operating costs, be deemed as “investment recovery oil”. Such “investment recovery oil” shall be used for the recovery of the exploration costs in respect of the contract area which were incurred and not yet recovered by Primeline, and shall be used for the recovery of the development costs in respect of the oil field itself which were incurred and not yet recovered by the parties and deemed interest. The unrecovered costs shall be carried forward to the succeeding calendar years until fully recovered.

A percentage of the annual gross production of crude oil shall be used for the payment of royalties in accordance with “Regulations on the Payment of Royalty for the Exploitation of Offshore Petroleum Resources" issued by the Ministry of Finance of the People’s Republic of China.

Primeline Energy China Limited and Primeline Petroleum Corporation (Primeline) shall pay all the exploration costs required for the exploration operations. In the event that any oil field and/or gas field is discovered within the contract area, the development costs of such oil field and/or gas field shall be paid by the parties in proportion to their participating interests: 51% by China National Offshore Oil Corporation (CNOOC) and 49% by Primeline. In the event that CNOOC opts to participate at a level less than 51% of the participating interests, or not to participate in the development of the field, Primeline shall pay the remaining development costs necessary for the development of the field.

Primeline Energy China Limited and Primeline Petroleum Corporation (Primeline), in carrying out the petroleum operations, shall give preference to the employment of qualified Chinese personnel. For this purpose, Primeline shall submit in advance to China National Offshore Oil Corporation (CNOOC) and the joint management committee respectively a plan for the employment of Chinese personnel listing the posts and number of the persons involved, indicating those Chinese personnel to be employed directly and those required to be furnished by CNOOC. CNOOC shall, in accordance with the plan, and if so requested by Primeline, provide or assist in recruiting Chinese employee candidates for such employment. For the performance of petroleum operations, Primeline shall have the obligation to employ competent Chinese personnel and to employ those who have become qualified after being trained in accordance with the training program. Primeline shall be given preference in employing the Chinese personnel who have participated in the training program provided by Primeline. In order to facilitate the transfer of the operatorship to CNOOC as early as possible, the operator shall, through the training of the Chinese personnel, gradually increase the percentage of the Chinese personnel including the key personnel while the percentage of the expatriate employees shall be reduced accordingly. By the end of the fifth year of the production, the total number of the Chinese personnel shall be no less than 90% of the total number of personnel. The total number of the Chinese personnel mentioned above shall not include those personnel rendering living services of any third party.

Primeline Energy China Limited and Primeline Petroleum Corporation (Primeline), in carrying out the petroleum operations, under the conditions of such factors as quality, price, delivery time and services are competitive, shall give preference to the goods, equipment and service provided within the territory of People’s Republic of China. The engineering design corporations under China National Offshore Oil Corporation (CNOOC) shall have the right to participate in the master designs and engineering designs made by Primeline for the purpose of the implementation of the contract. Engineering design companies within the territory of the People’s Republic of China shall be given preference in entering into the subcontracts for the aforesaid master designs and engineering designs provided that their technical level, price and delivery time are competitive. After Primeline signs equipment leasing contracts, service contracts or subcontracts with CNOOC or its affiliates, Primeline shall endeavor to provide technical assistance to CNOOC or its affiliates, at the request of CNOOC, so as to enable them to meet the needs of operations to be undertaken. The expenses so incurred shall be borne by CNOOC or its affiliates.

During the performance of the petroleum operations, Primeline Energy China Limited and Primeline Petroleum Corporation (Primeline) shall transfer its technology to the Chinese personnel and train them. In the implementation of the contract, Primeline or its affiliates including each company comprising Primeline shall, apply in the petroleum operations their appropriate and advanced technology and managerial experience, including their proprietary technology. At the same time, Primeline shall have the obligation to transfer its technology and managerial experience including their proprietary technology. At the same time, the companies comprising Primeline shall have the obligation to transfer their technology and experience and the necessary data and/or information for mastering that technology and experience, to China National Offshore Oil Corporation (CNOOC) and its affiliates. Provided however, such technology to be transferred shall be proprietary to Primeline and if the transfer of any of such technology is restricted in any way during the term of the contract, Primeline shall, to the extent reasonably possible, endeavor to obtain permission for the transfer to such restricted technology. Primeline shall, after the consultation with CNOOC, complete and submit a training and technology transfer program for the Chinese personnel in the development period and the corresponding budget for review and approval, and upon approval, put it into practice. Primeline shall, after consultation with CNOOC complete and submit training and technology transfer programs and corresponding budgets for the Chinese personnel in the production period for review and approval before the date of commencement of commercial production, and upon approval, put them into practice in time so as to have ample time in advance for such training and technology transfer. The purpose, requirement, fields of specialization, scope of personnel, specified job categories, type, method and etc. of the training of Chinese personnel and technology transfer shall be determined through consultation by the parties. The expenses and costs incurred for performing the training and technology transfer program shall be charged to the development costs if such costs are incurred after the date of approval of the overall development program of the first oil field and/or gas field and before the date of commencement of commercial production of the first oil field and/or gas field, or shall be charged to the operating costs if such costs are incurred after the date of commencement of commercial production of the first oil field and/or gas field.

All assets purchased, installed and constructed under the work program and budget for each oil field and/or gas field within the contract area shall be owned by China National Offshore Oil Corporation (CNOOC) from the date on which all the development costs actually incurred by Primeline Energy China Limited and Primeline Petroleum Corporation (Primeline) in the development period of each oil field and/or gas field have been fully recovered or from the date on which the production period expires, even though the costs have not been fully recovered. In the production period, Primeline can use these CNOOC-owned assets free of charge for performing the petroleum operations.

All assets purchased, installed and constructed under the work program and budget for each oil field and/or gas field within the contract area shall not be used in any operations other than the petroleum operations or in any operations by third parties without the written consent of the parties.

Primeline Energy China Limited and Primeline Petroleum Corporation shall fulfill the minimum exploration work commitment for each phase of the exploration period in accordance with the following provisions: First, second and third phase minimum exploration obligations and expenditures redacted.

Primeline Energy China Limited and Primeline Petroleum Corporation and China National Offshore Oil Corporation shall make their best efforts to settle amicably through consultation any dispute arising in connection with the performance or interpretation of any provision. Any dispute that has not been settled through such consultation within 90 days after the dispute arises may be referred to arbitration at the request of and by either party to the contract. The arbitration shall be conducted in accordance with the following provisions: If agreed upon by the parties, such dispute shall be referred to arbitration conducted by the China International Economic and Trade Arbitration Commission in accordance with its arbitration proceeding rules. If the parties fail to reach an agreement on the arbitration arrangement the parties shall establish an ad hoc arbitration tribunal to conduct arbitration in accordance with the following provisions: - The ad hoc arbitration tribunal shall consist of 3 arbitrators - The place of arbitration shall be determined by the parties through consultations or, failing the agreement of the parties within 60 days after the appointment of the third arbitrator, by the majority of arbitrators of the ad hoc arbitration tribunal. - The ad hoc arbitration tribunal shall conduct the arbitration in accordance with the arbitration rules of the United Nations Commission on International Trade Law (‘UNCITRAL”) of 1976. However, if the above-mentioned arbitration rules are in conflict with these provisions, including the provisions concerning appointment of arbitrators, these provisions shall prevail. - Both the Chinese and English languages shall be official languages used in the arbitral proceedings. - Any award of the arbitration tribunal shall be final and binding upon the parties. - The right to arbitrate disputes under the contract shall survive the termination of the contract.

China National Offshore Oil Corporation (CNOOC) shall, in conformity with applicable laws and regulations of the government on confidentiality and by taking into account international practice, determine the confidentiality periods for which the contract and all documents, information, data and reports related to the petroleum operations within the contract area shall be kept confidential. Without the written consent of the other party, no party to the contract shall disclose, during such confidentiality periods, the contract, documents, information, data and reports or any other information regarded by the joint management committee as confidential, to any third party except those specified here and to any affiliate not directly connected with the implementation of the contract, and no party to the contract shall otherwise transfer, donate, sell or publish them in any way within the confidentiality periods. However, if the department or unit decides to invite any third party to conduct cooperative exploration and development of petroleum in the sedimentary basin in which the contract area is located and/or other adjacent areas, CNOOC may furnish the following original data and information or interpretation with respect to the contract area to the relevant third parties: (a) original data and information held by CNOOC for over 2 years; and (b) interpretations to the original data and information held by CNOOC for over 3 years. CNOOC shall require relevant third parties to undertake to keep confidential the data, information, and interpretations thereof furnished to them by CNOOC. CNOOC shall, in conformity with relevant provisions of laws and regulations of the People's Republic of China and requests of relevant government departments and units, provide them with all documents, information, data and reports as mentioned. During the term of the contract and after the termination of the contract, CNOOC shall not disclose to any third party any patent, know-how or proprietary technology transferred to CNOOC by Primeline Energy China Limited and Primeline Petroleum Corporation (Primeline) without the written consent of Primeline except for any technology, the patent of which has expired and any proprietary and confidential technology which have entered the public domain. After the termination of the contract or after any assignment of rights and/or obligations of the contract, Primeline and any assignee shall, within the confidentiality periods, continue to be obligated to keep confidential documents, information, data and reports except for official documents and information published with the consent of the parties. For the implementation of the contract, CNOOC and each company comprising Primeline may, after review by the joint management committee and CNOOC, furnish the necessary documents, information, data and reports to third parties and affiliates related to the petroleum operations. The third parties and affiliates include: - Potential investors,, banks or other credit institutions from which financing is sought by any party to the contract for the implementation of the contract; - Third parties and affiliates which provide services for the petroleum operations, including subcontractors and other service contractors; and - An assignee or assignees to whom the rights and/or obligations under the contract may be assigned. Necessary information, documents, data and reports may be furnished by the parties in accordance with the laws of their home countries to the governments and stock exchanges, provided that the parties report to the joint management committee in advance. CNOOC and each company comprising Primeline when furnishing the documents, information, data and reports to third parties and affiliates shall require them to assume the confidentiality obligations as set forth herein, or shall bear full responsibility for any violation.

The validity, interpretation and implementation of the contract shall be governed by the laws of the People's Republic of China. Failing the relevant provisions of the laws of the People's Republic of China for the interpretation or implementation of the contract, the principles of the applicable laws widely used in petroleum resource countries acceptable to the parties shall be applicable.

If a material change occurs to Primeline Energy China Limited and Primeline Petroleum Corporation's (Primeline) economic benefits after the effective date of the contract due to the promulgation of new laws, decrees, rules and regulations or any amendment to the applicable laws, decrees, rules and regulations made by the People's Republic of China, the parties shall consult promptly and make necessary revisions and adjustments to the relevant provisions of the contract in order to maintain Primeline's reasonable economic benefits.