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EXHIBIT 10.84



PRODUCTION SHARING CONTRACT

BETWEEN

THE REPUBLIC OF EQUATORIAL GUINEA

AND

TRITON EQUATORIAL GUINEA, INC.

FOR BLOCK G



Translated by Diego Giordano



TABLE OF CONTENTS

----------------





PAGE







SECTION I. . . . . . . . . . . . . . . . . . SCOPE AND DEFINITIONS

1

SECTION II . . . . . . . . . . . . . . . . . TERM, TERMINATION, AND CANCELLATION

5

SECTION III. . . . . . . . . . . . . . . . . SURRENDER OF AREAS

9

SECTION IV . . . . . . . . . . . . . . . . . WORK PROGRAM AND EXPENDITURES

10

SECTION V. . . . . . . . . . . . . . . . . . CONDUCT OF PETROLEUM OPERATIONS BY

CONTRACTOR

13

SECTION VI . . . . . . . . . . . . . . . . . RIGHTS AND OBLIGATIONS OF THE

PARTIES,DETERMINATION OF

PRODUCTION LEVELS

15



SECTION VII -. . . . . . . . . . . . . . . . RECOVERY OF PETROLEUM OPERATING COSTS,

SHARING OF

PRODUCTION, AND DISTRIBUTION OF

PRODUCTION

19

SECTION VIII . . . . . . . . . . . . . . . . VALUATION OF CRUDE OIL

23

SECTION IX . . . . . . . . . . . . . . . . . BONUSES AND SURFACE RENTALS

25

SECTION X. . . . . . . . . . . . . . . . . . PAYMENTS

26

SECTION XI . . . . . . . . . . . . . . . . . TITLE TO EQUIPMENT

26

SECTION XII. . . . . . . . . . . . . . . . . UNITIZATION

26

SECTION XIII . . . . . . . . . . . . . . . . CONSULTATION AND ARBITRATION

27

SECTION XIV. . . . . . . . . . . . . . . . . BOOKS AND ACCOUNTS AND AUDITS

28

SECTION XV . . . . . . . . . . . . . . . . . ADDITIONAL PROVISIONS

30

SECTION XVI. . . . . . . . . . . . . . . . . LAWS AND REGULATIONS

30

SECTION XVII . . . . . . . . . . . . . . . . FORCE MAJEURE

30

SECTION XVIII. . . . . . . . . . . . . . . . TEXT

31

SECTION XIX. . . . . . . . . . . . . . . . . EFFECTIVENESS

31

ANNEX "A". . . . . . . . . . . . . . . . . . MAP OF CONTRACT AREA

ANNEX "B". . . . . . . . . . . . . . . . . . CONTRACT AREA COORDINATES

ANNEX "C". . . . . . . . . . . . . . . . . . ACCOUNTING PROCEDURE

ANNEX "D". . . . . . . . . . . . . . . . . . LETTER OF PERFORMANCE GUARANTY BY

PARENT FOR CONTRACT

AREA G, THE REPUBLIC OF EQUATORIAL

GUINEA

ANNEX "E". . . . . . . . . . . . . . . . . . COORDINATES FOR THE 200M ISOBATH





PRODUCTION SHARING CONTRACT

BETWEEN

THE REPUBLIC OF EQUATORIAL GUINEA

AND

TRITON EQUATORIAL GUINEA, INC.

FOR BLOCK G



THIS CONTRACT, made and entered into on this ___th day of March, 199_ by

and between the REPUBLIC OF EQUATORIAL GUINEA (hereinafter referred to as the

"STATE"), represented for purposes of this Contract by the MINISTRY OF MINES AND

ENERGY of the REPUBLIC OF EQUATORIAL GUINEA (hereinafter referred to as the

"MINISTRY"), and TRITON EQUATORIAL GUINEA, INC., a corporation organized and

existing under the laws of the Cayman Islands (hereinafter referred to as

"CONTRACTOR"), represented for purposes of this Contract by Thomas G. Finck, its

President. STATE and CONTRACTOR hereinafter are referred to either individually

as "Party" or collectively as "Parties."

W I T N E S S E T H:

WHEREAS, all Hydrocarbons existing within the territory of the Republic of

Equatorial Guinea, including adjacent submerged lands, are national resources

owned by the Republic of Equatorial Guinea; and

WHEREAS, the STATE wishes to promote the development of hydrocarbon

deposits in and throughout the Contract Area and CONTRACTOR desires to join and

assist the STATE in accelerating the exploration and development of the

potential resources within the Contract Area; and

WHEREAS, CONTRACTOR, has the financial ability, technical competence and

professional skills necessary to carry out the Petroleum Operations hereinafter

described; and

WHEREAS, in accordance with the Hydrocarbons Law of the Republic of

Equatorial Guinea, agreements in the form of Production Sharing Contracts may be

entered into between the STATE and foreign investors;

THEREFORE, in consideration of the undertakings and covenants herein

contained, the Parties hereby agree as follows:

I.

1.1



SCOPE AND DEFINITIONS

--------------------Scope

-----



This Contract is a Production Sharing Contract. In accordance with the

provisions herein contained, the MINISTRY shall be responsible for the

supervision of the Petroleum Operations contemplated in this Contract.

CONTRACTOR shall:

---------(a)

be responsible to the STATE for the execution of the Petroleum

Operations in accordance with the provisions of this Contract, and is hereby

appointed and constituted the exclusive company to conduct Petroleum Operations

in the Contract Area for the term hereof;

(b)

provide all necessary capital, machinery, equipment, technology and

personnel necessary for the efficient conduct of Petroleum Operations;

(c)

bear the risk of Petroleum Operations Expenditures required in carrying

out Petroleum Operations and shall therefore have an economic interest in the

rapid development of any commercial hydrocarbon deposits in the Contract Area.

Such costs shall be included in Petroleum Expenditures as recoverable or not

recoverable as provided in Section VII and Annex "C" of this Contract.

During the term of this Contract, the total production achieved in the conduct

of the Petroleum Operations shall be divided between the Parties in accordance

with the provisions of Section VII of this Contract.

1.2



DEFINITIONS



In this Contract, words importing the singular include the plural and vice

versa, and except where the context otherwise indicates, shall have the meanings

set forth in this Section. Words that are not defined herein, but are defined

in the Hydrocarbons Law, shall have the meanings set forth in the Hydrocarbons

Law.

(a)



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

-----association, trust, estate, unincorporated organization of government or any

agency or political subdivision thereof.



(b)



Affiliated Company or Affiliate of any specified Person means any other

-------------------------------Person directly controlling or controlled by or under direct or indirect common

control with such specified Person. For the purposes of this definition,

"control" when used with respect to any specified Person means the power to

direct, administer and dictate policies of such Person, through the ownership of

fifty percent (50%) or more of such Person's voting rights; and the terms

"control" and "controlled" have meanings correlative to the foregoing.

(c)



Crude Oil - means Hydrocarbons which are produced at the wellhead in

---------liquid state at atmospheric pressure and asphalt and ozokerites and the liquid

Hydrocarbons known as condensate obtained from Natural Gas by condensation or

extraction by means of field separation units.

(d)



Natural Gas - means all Hydrocarbons that at atmospheric conditions of

-----------temperature and pressure are in a gaseous state. Included in this definition

are wet mineral gas, dry mineral gas, wet gas and residue gas remaining after

the extraction processing or separation of liquid Hydrocarbons from wet gas.

(e)



Exploration Operations means works to include without limitation

----------------------geological studies; geophysical studies; aerial mapping; investigations relating

to the subsurface geology; stratigraphic test drilling; exploratory and

appraisal wells; and related activities such as drillsite preparation,

surveying, and all work necessarily connected therewith, that is conducted in

connection with exploration for and commercial assessment of Crude Oil and/or

Natural Gas.

(f)



Development and Production Operations means all operations other than

---------------------------------------Exploration Operations, including those to facilitate extraction, production,

local transportation and storage of Crude Oil and Natural Gas produced as part

of the offshore operations.

(g)



Petroleum Operations means all Exploration Operations and Development

--------------------and Production Operations.

(h)



Exploration Expenditures means direct expenditures on Exploration

------------------------Operations and overhead expenses made in connection with exploration and

commercial assessment within the Contract Area. These expenditures shall be

determined in accordance with the Accounting Procedure attached hereto as Annex

"C," but expenditures made within the area of a Field after Commercial Discovery

has been declared shall be excluded.

(i)



Development and Production Expenditures means direct expenditures on

-----------------------------------------Development and Production Operations and general expenses made in connection

with the development of a Field, excluding expenditures made within the area of

a Field before Commercial Discovery has been declared. These expenditures shall

be determined in accordance with the Accounting Procedure attached hereto as

Annex "C."

(j)



Petroleum Operations Expenditures means expenditures made and

----------------------------------obligations incurred in carrying out Petroleum Operations hereunder, determined

in accordance with the Accounting Procedure attached hereto as Annex "C" and

made a part hereof.

(k)



Barrel means a quantity or unit of Crude Oil equal to 158.9874 liters

-----(forty-two (42) United States gallons) at a temperature of 15.56 degrees

Centigrade (sixty (60) degrees Fahrenheit) under one atmosphere of pressure.

(l)



Field means an area within the Contract Area, as determined in

----accordance with Section 2.6.

(m)



Well means any opening in the ground or seabed made or being made by

---drilling or boring, or in any other manner, for the purpose of discovering, and



delineating and/or producing Crude Oil or Natural Gas, or for the injection of

any fluid into an underground deposit, other than a seismic hole or a structure

test hole or stratigraphic test hole.

(n)



Commercial Discovery means a discovery of Hydrocarbons that, in the

--------------------judgment of CONTRACTOR, can be produced commercially, based on its consideration

of all pertinent operating and financial data.

(o)



Work Program means an itemized statement of the Petroleum Operations to

------------be carried out in the Contract Area as set forth in Section IV.

(p)



Budget of Petroleum Operations Expenditures means the estimate of the

---------------------------------------------costs of all items included in the Work Program.

(q)



Calendar Year or Years means a period of twelve (12) months commencing

-----------------------January 1 and ending on the following December 31, according to the Gregorian

Calendar.

(r)



Contract Year means a period of twelve (12) consecutive months according

------------to the Gregorian Calendar, starting from the Effective Date of this Contract or

from the anniversary of such Effective Date.

(s)



Gross Receipts means the sum of all sales proceeds and the monetary

--------------equivalent value of other Hydrocarbons dispositions from the Contract Area in

any given calendar year.

(t)



Income Tax means the tax levied on CONTRACTOR's net income pursuant to

----------the Tax Law of the Republic of Equatorial Guinea.

(u)



Calendar Quarter means a period of three (3) consecutive months

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

September 30 or December 31, respectively.

(v)



Effective Date means the approval date of this Contract by the STATE in

--------------accordance with the provisions of the Hydrocarbons Law as evidenced by

publication of this Contract in the Official Bulletin of the Republic of

Equatorial Guinea or in the national information media (whichever publication

occurs first), after approval of this Contract by the Supreme Court of Justice

of the Republic of Equatorial Guinea and ratification by the President of the

Republic of Equatorial Guinea.

(w)



Foreign Exchange means currency acceptable to the Parties other than that

---------------of the Republic of Equatorial Guinea.



(x)



Hydrocarbons Law means Decree-Law No. 7/1981 of 16 June, as amended.

----------------



(y)



Contract Area means the geographic territory of the Republic of

-------------Equatorial Guinea the subject of this Contract. Such Contract Area is described

in Annex "B" and delineated in Annex "A" attached hereto and incorporated

herein.

(z)



Royalty means for each Field, the percentages listed below corresponding

------to the cumulative production of all the Crude Oil produced, saved and sold from

the said Field and not otherwise utilized in Petroleum Operations:



- -----







CUMULATIVE FIELD PRODUCTION

The first 100 million barrels





ROYALTY

10%



Greater than 100 million barrels to 300 million barrels



12.5%



Greater than 300 million barrels.



15%





and ten percent (10%) of all the Natural Gas produced, saved and sold from the

Contract Area and not otherwise utilized in Petroleum Operations.

(ab)



Maximum Efficient Rate means the maximum rate of Hydrocarbons

-----------------------production in a Field, without excessive decline or loss of reservoir pressure,

and in accordance with the norms and practices of the petroleum industry and

Section 6.3 of this Contract.

(ab)



Semester, as used in Section 7.8 means a period of six (6) consecutive

-------months, commencing the first of January and the first of July of each Calendar

Year.

(ac)



Hydrocarbons means all natural, organic substances composed of CARBON

-----------and HYDROGEN including crude oil and natural gas and all other mineral

substances, products, subproducts and by-products encountered in association

therewith.

(ad)



Area of Provisional Discovery is defined in Section 2.4

--------------------------------



(ae)



Tax Law means Decree Law No. 1/1986 of February 10, of the Republic of

-------Equatorial Guinea, as amended prior to the Effective Date.

(af)



Exploration Well means a Well that is not a development, evaluation or

----------------injection well, and its only objective is to determine the existence of

Hydrocarbons in a structure.

(ag)



Evaluation Well means a Well drilled following a discovery of

---------------Hydrocarbons to delineate and locate the reservoir and to estimate the quantity

of recoverable Hydrocarbons.

II.



TERM, TERMINATION, AND CANCELLATION

--------------------------------------



2.1

CONTRACTOR is authorized to conduct Exploration Operations during an

initial exploration period of five (5) years, starting from the Effective Date.

When CONTRACTOR has fulfilled its obligations hereunder for the initial

exploration period, then upon application of CONTRACTOR made not later than

ninety (90) calendar days prior to the fifth, sixth, and seventh anniversary of

the Effective Date, as the case may be, the MINISTRY shall extend the period

when Petroleum Operations may be conducted as follows:

(a)

after the fifth (5th) Contract Year for an additional period of one (1)

Contract Year during which year CONTRACTOR shall drill in areas covered by

waters less than two hundred (200) meters deep at least one (1) Exploration

Well;

(b)

after the sixth (6th) Contract Year for an additional period of one (1)

Contract Year during which year CONTRACTOR shall drill in areas covered by

waters less than two hundred (200) meters deep at least one (1) Exploration

Well;

(c)

if after the fifth (5th) Contract Year CONTRACTOR commits to drill at

least one (1) Exploration Well in an area covered by water deeper than two

hundred (200) meters, for an additional period of two (2) Contract Years; and



(d)

if during the seventh (7th) Contract Year CONTRACTOR encounters a show

of Hydrocarbons that CONTRACTOR believes is sufficient to warrant further

evaluation drilling, for a period of one (1) Contract Year during which year

CONTRACTOR shall drill one (1) Evaluation Well in an area designated by mutual

agreement of MINISTRY and CONTRACTOR.

2.2

Notwithstanding anything contained herein, CONTRACTOR, at its sole

discretion, after fulfilling its minimum Work Program for the first two (2)

Contract Years pursuant to 4.3(a), may terminate this Contract in its entirety

without further obligation except with respect to any obligation under this

Contract due and owing at the time of said termination. Furthermore, CONTRACTOR

shall have the option to extend the exploration period and to conduct Petroleum

Operations beyond the first two (2) Contract Years as indicated below:

(a)

After the second Contract Year, CONTRACTOR may elect to continue this

Contract for an additional period of one (1) year, during which year CONTRACTOR

will fulfill the minimum Work Program under Section 4.3(b)(i);

(b)

After the third Contract Year, CONTRACTOR may elect to continue this

Contract for an additional period of one (1) year, during which year CONTRACTOR

will fulfill the minimum Work Program under Section 4.3(b)(ii);

(c)

After the fourth Contract Year, CONTRACTOR, may elect to continue this

Contract for an additional period of one (1) year, during which year CONTRACTOR

will fulfill the minimum Work Program under Section 4.3(b)(iii);

After fulfilling the minimum Work Program for each of the extension periods

above, CONTRACTOR shall have the right to terminate this Contract in its

entirety without further obligation except with respect to any obligations under

this Contract due and owing at the time of said termination. CONTRACTOR shall

make its election, if any, to extend the exploration period as provided in

Sections 2.2(a), (b) and (c) above not later than ninety (90) calendar days

prior to the second, third and fourth anniversary of the Effective Date, as the

case may be.

2.3

If CONTRACTOR has not elected to terminate this Contract pursuant to

Section 2.2 and no Commercial Discovery has been made, and if CONTRACTOR does

elect to extend the Contract beyond the fifth (5th) Contract Year pursuant to

Section 2.1, then this Contract shall terminate automatically in its entirety

except with respect to Areas of Provisional Discovery, which shall remain part

of the Contract Area pending final determination by the CONTRACTOR as to whether

said Area of Provisional Discovery will be declared a Commercial Discovery.

However, an extension of one (1) year may be granted by the MINISTRY so

CONTRACTOR may finish drilling and testing any Well actually being drilled or

tested at the end of the fifth (5th), sixth (6th), seventh (7th) or eight (8th)

Contract Year.

2.4

Upon encountering indications of a substantial accumulation of

Hydrocarbons in the Contract Area, the CONTRACTOR as soon as possible will

notify the MINISTRY of this fact, indicating in the notice the particular

details of the location, nature and size of the accumulation. After giving such

notification to the MINISTRY, the CONTRACTOR as soon as practicable will submit

to the MINISTRY a report showing the results of any preliminary production tests

carried out, including, when necessary, the estimate of the oil or gas in place

and the recoverable reserves of the accumulation and the approximate extension

of said discovery in the Contract Area (hereinafter referred to as the "Area of

Provisional Discovery"). The decision to delineate the Area of Provisional

Discovery shall be at CONTRACTOR's discretion taking into account a reasonable

interpretation of the data and shall be in accordance with normal petroleum

industry practices.

2.5

Within each Area of Provisional Discovery CONTRACTOR shall carry out

evaluation work, including, as appropriate, seismic work and drilling. As soon

as possible, CONTRACTOR shall determine whether the discovery is a Commercial

Discovery. Provided that if there is insufficient time to properly evaluate the

discovery within the then current exploration period, upon CONTRACTOR's request,

the MINISTRY shall grant CONTRACTOR a reasonable extension to fully evaluate

such discovery.

2.6

When it is determined that the discovery of Hydrocarbons is a Commercial

Discovery in accordance with Section 2.5, CONTRACTOR shall notify the MINISTRY,

and CONTRACTOR shall submit to the MINISTRY, in writing, for its written

approval, which approval will not be unreasonably withheld the following:



(a)

a report including a map showing the extension of the area of Commercial

Discovery within the Contract Area; the area when said report is accepted by

MINISTRY will constitute a Field;

(b)

a Work Program for development of the Field, including an estimate of

the costs of Development and Production Expenditures necessary for the

development of the Field;

(c)

the estimated Maximum Efficient Rate of production (that shall be

established in accordance with Section 6.3) that CONTRACTOR intends to produce

the Field; and

(d)

the schedule of the most accelerated program consistent with good

international petroleum industry practice for implementation of CONTRACTOR's

Work Program.

Any report submitted by CONTRACTOR to the MINISTRY will be deemed accepted by

the MINISTRY ninety (90) calendar days after CONTRACTOR's submittal unless

CONTRACTOR is notified otherwise in such time period by the MINISTRY.

2.7

This Contract will continue in existence with respect to each Field for

a period of thirty (30) years with respect to Crude Oil and for forty (40) years

with respect to Natural Gas starting from the date CONTRACTOR, in accordance

with the provisions of Section 2.6, receives approval from the MINISTRY that the

discovery of Hydrocarbons in such Field is a Commercial Discovery. In case of

new Commercial Discoveries as a result of new exploratory drilling on formations

that underlie or overlie each other or other deposits found within the extension

of the area of the original Commercial Discovery, such formations will

constitute only one Field; and the Field will be defined or redefined as may be

necessary, to incorporate all of the underlying and overlying formations and all

deposits located within the extension of the area of the original Commercial

Discovery, and the provisions of Section 2.6 shall apply mutatis mutandis to any

------- -------such new Commercial Discovery.

2.8

CONTRACTOR shall have the right to terminate this Contract totally or

partially;

(a)

with respect to any part of the Contract Area other than a Field then

producing or that prior thereto had produced Crude Oil or Natural Gas upon

giving ninety (90) calendar days written notice of its intention to do so; and

(b)

with respect to any field then producing or that prior thereto had

produced Crude Oil or Natural Gas, upon giving one hundred eighty (180) calendar

days written notice of its intention to do so.

2.9

Subject to Section 2.10, the STATE shall have the right to cancel this

Contract upon giving sixty (60) calendar days written notice of its intention to

do so, if CONTRACTOR:

(a)

fails to make any monetary payment required by law or under this

Contract for a period of thirty (30) days after the due date for such payment;

(b)

fails to comply with any other material obligation that it has assumed

under this Contract;

(c)

fails to comply with any regulations issued in accordance with this

Contract by the MINISTRY, or any governmental department or agency of the

Republic of Equatorial Guinea materially affecting the Petroleum Operations or

the interests of the STATE referred to in this Contract;

(d)

suspends its payments under this Contract, because of insolvency or

makes a settlement with its creditors; or

(e)

has not commenced production from a Field within the period of time

specified in the development plan according to the terms and conditions

specified in Section 2.5 without reasonable justification;

provided that CONTRACTOR's actions or inactions, as the case may be, have a

material impact on the petroleum Operations and are not in accordance with

industry standards.

2.10

If the circumstance or circumstances that would otherwise result in

cancellation under Sections 2.9(a), (b), (c) or (d) are remedied by CONTRACTOR



or CONTRACTOR begins to remedy the circumstance and proceeds with such remedy

with due diligence within the sixty (60) calendar day period following the

notice of termination as aforesaid, then such termination shall not become

effective. If CONTRACTOR cannot completely rectify or remedy the cause or

causes within the sixty (60) day period, the CONTRACTOR may request from the

MINISTRY an extension or extensions to complete the remedies and the MINISTRY,

according to the criteria generally accepted in the industry, shall not

unreasonably withhold the approval of such extensions if CONTRACTOR is

diligently pursuing the remedies.

2.11

The termination or cancellation of this Contract, for whatever reason,

shall be without prejudice to the obligations incurred and not carried out by

the STATE or CONTRACTOR before the termination of this Contract.

2.12

In the event of cancellation pursuant to Section 2.9, the MINISTRY may

require CONTRACTOR to continue for the account of the STATE Crude Oil or Natural

Gas production activities until the right to continue such production has been

transferred by the MINISTRY to another Person. In this case, all provisions

relevant to CONTRACTOR's entitlement under this Contract will remain in force.

In no event shall CONTRACTOR have any obligations under this Section for more

than ninety (90) calendar days after such termination, unless otherwise agreed

to by the Parties.

2.13

Within ninety (90) calendar days after the termination of this

Contract, unless the MINISTRY has required an extension of this period,

CONTRACTOR shall have the obligation to take any reasonably necessary action as

directed by the MINISTRY, including the cessation or continuation of Petroleum

Operations to prevent pollution, environmental damage or a hazard to human life

or third party property.

III. SURRENDER OF AREAS

-------------------3.1

Subject to Section 3.3, CONTRACTOR shall surrender thirty percent (30%)

of the original Contract Area no later than the end of the third Contract Year.

3.2

Subject to Section 3.3, if CONTRACTOR elects to extend the exploration

period pursuant to Section 2.1 above, CONTRACTOR shall surrender an additional

area equal to twenty percent (20%) of the remaining Contract Area no later than

the end of the fifth Contract Year.

3.3

CONTRACTOR shall not be obligated to surrender any portion of the

original Contract Area declared an Area of Provisional Discovery or a Field.

CONTRACTOR's surrender obligations under Sections 3.1 and 3.2 shall apply to the

area remaining after excluding from the original Contract Area areas declared to

be an Area of Provisional Discovery or a Field and areas previously surrendered

by CONTRACTOR.

3.4

After the mandatory surrenders as set forth in this Section III,

CONTRACTOR shall maintain a reasonable exploration effort with regard to the

remaining portion of the Contract Area.

3.5

Upon at least thirty (30) calendar days written notice to the MINISTRY

prior to the end of the first Contract Year and similarly prior to the end of

any succeeding Contract Year, CONTRACTOR may surrender any portion of the

Contract Area, and such portion shall then be credited against that portion of

the Contract Area CONTRACTOR is next required to surrender under the provisions

of Sections 3.1 and 3.2 hereof.

3.6

CONTRACTOR shall notify the MINISTRY sixty (60) calendar days prior to

the date of surrender, the description of the portion of the area to be

surrendered. The individual portions being surrendered, whenever possible,

shall be of sufficient size and convenient shape, taking into account contiguous

areas already relinquished and not the subject of a further contract, to enable

Petroleum Operations to be carried out thereon and the boundaries of such areas

shall be delineated in exact degrees, minutes and seconds of longitude and

latitude.

3.7

CONTRACTOR shall plug and abandon all Wells drilled by Contractor on the

area to be surrendered in accordance with generally accepted oilfield practices.

3.8

No surrender made in accordance with this Section III shall relieve

CONTRACTOR or its surety of the obligation to pay surface rentals accrued, or

making payments due and payable as a result of exploration and development

activities conducted through the date of surrender.



IV.



WORK PROGRAM AND EXPENDITURES

--------------------------------



4.1

CONTRACTOR shall commence Petroleum Operations hereunder not later than

ninety (90) calendar days after the Effective Date.

4.2

CONTRACTOR shall be entitled to employ any person qualified, in the

judgment of CONTRACTOR, to undertake on its behalf such geological and

geophysical surveys, drillings or similar investigations as it may decide. Any

subcontractor retained by CONTRACTOR shall have the necessary professional

experience to perform the task assigned and shall be required, by written

agreement with CONTRACTOR, to abide by all relevant terms of this Contract and

all applicable laws and regulations of the Republic of Equatorial Guinea.

CONTRACTOR within thirty (30) calendar years and shall advise the MINISTRY of

the name and address of any subcontractor retained.

4.3 During the first five (5) Contract Years, CONTRACTOR agrees to perform the

following minimum Work Program:

(a)FIRST TWO CONTRACT YEARS:

-----------------------(i)



Reprocess approximately one-thousand eight-hundred (1,800) kilometers

of existing seismic data;



(ii) Acquire one-thousand (1,000) kilometers of new seismic data;

(iii) Drill one (1) Well; and

(iv) Prepare and submit an interpretive geologic study of the hydrocarbon

potential of the Rio Muni area.

(b)THIRD, FOURTH AND FIFTH CONTRACT YEARS:

-------------------------------------CONTRACTOR shall perform the following work in the event it exercises the

option to extend pursuant to Sections 2.2(a), 2.2(b) or 2.2(c):

(i)

Drill one (1) Well in third Contract Year contingent upon the

identification of a structure which, in CONTRACTOR's opinion, is a drillable

prospect, and conduct additional geological studies and associated analyses of

technical data as CONTRACTOR deems appropriate;

(ii)

Drill one (1) Well in the fourth Contract Year and conduct additional

geological studies and associated analyses of technical data as CONTRACTOR deems

appropriate;

(iii)

Drill one (1) Well in the fifth Contract Year contingent upon the

identification of a structure, which, in CONTRACTOR's opinion, is a drillable

prospect, and conduct additional geological studies and associated analyses of

technical data, as CONTRACTOR deems appropriate.

4.4

In case the work completed by CONTRACTOR during any phase referred to in

Section 4.3 exceeds the minimum work for that phase, the excess work may be

carried forward and credited against the minimum work obligation in the next

succeeding phase.

4.5

As a condition precedent to the effectiveness of this Contract,

CONTRACTOR shall provide a security by means of a parent company performance

guarantee to the MINISTRY substantially in the form of the guaranty set forth in

ANNEX "D" and corresponding to Four Million United States Dollars (U.S.

$4,000,000) for each Well CONTRACTOR commits to drill and One Million United

States Dollars (U.S. $1,000,000) for other Petroleum Operations CONTRACTOR

commits to conduct during the first two (2) Contract Years. If CONTRACTOR

extends the period for Exploration Operations pursuant to Section 2.1 or 2.2,

then CONTRACTOR on or before the date any such extension becomes effective shall

provide an additional parent company performance guarantee as security

substantially in the form of the guaranty set forth in Annex "D" and

corresponding to an amount to be determined at the time of the extension by the

MINISTRY and CONTRACTOR for Petroleum Operations CONTRACTOR commits to conduct

during the period of any such extension. If at the end of the period of the

phases for Exploration Operations, including any extension thereof made pursuant



to Sections 2.1 and 2.2 hereof, or upon the date of termination of this

Contract, whichever first occurs, CONTRACTOR has not performed the obligations

described in the minimum Work Program, the balance of the security corresponding

to the minimum expenditures for Petroleum Operations and the entirety of the

security corresponding to the Well shall be paid automatically to the STATE in

accordance with the provisions of Annex "D."

4.6

One hundred twenty (120) calendar days prior to the beginning of each

Calendar Year or at such other time as otherwise mutually agreed by the parties,

CONTRACTOR shall prepare and submit for approval to the MINISTRY a Work Program

and Budget of Petroleum Operations Expenditures for the Contract Area setting

forth the Petroleum Operations CONTRACTOR proposes to carry out during the

ensuing Calendar Year. After thirty (30) calendar days and within a period of

ninety (90) calendar days of its submission, the MINISTRY may ask for

clarification of the Work Program and Budget of Petroleum Operations

Expenditures and/or submit proposals for consideration by the Contractor for the

revision of specific features thereof relating to the type and cost of the works

and operations. In the absence of such proposals or a request for

clarification, the Work Program and Budget of Petroleum Operations Expenditures

shall be deemed to have been approved by the Ministry. Approval by the MINISTRY

of the proposed Work Program and Budget of Petroleum Operations Expenditures

will not be unreasonably withheld or delayed. If the Parties cannot agree on

the Work Program and Budget of Petroleum Operations Expenditures, CONTRACTOR is

hereby authorized to begin work necessary to carry out its proposed Work Program

in a timely and practical manner until the Parties reach a mutually acceptable

Work Program and Budget of Petroleum Operations Expenditures. The MINISTRY

shall give a letter to CONTRACTOR authorizing in a provisional manner the

beginning of said provisional Work Program and Budget of Petroleum Operations

Expenditures until the MINISTRY approves the final Work Program and Budget of

Petroleum Operations Expenditures. The Parties shall meet within a period of

fifteen (15) days from date of issuance of the provisional Work Program and

Budget of Petroleum Operations Expenditures from the MINISTRY and use all

diligence to reach a mutually acceptable agreement.

4.7

It is recognized by the Parties that the details of a Work Program may

require changes in the light of unforeseen circumstances and nothing herein

contained shall limit the right of CONTRACTOR to make such changes, provided

such changes do not alter the general objectives of the Work Program.

4.8

The Parties further recognize that in the event of an emergency or

extraordinary circumstances requiring immediate action, either Party may take

actions it deems proper or advisable to protect its interests and those of its

employees and any costs so incurred by CONTRACTOR shall be included in the

Petroleum Operations Expenditures. Costs incurred by CONTRACTOR related to

measures of prevention and protection related to the environment shall be

included as costs of Petroleum Operations Expenditures as cost recoverable.

Costs incurred by CONTRACTOR related to cleaning up pollution or damage to the

environment caused by CONTRACTOR shall not be included in Petroleum Operations

Expenditures and shall not be cost recoverable except the first Two Hundred

Thousand United State Dollars (U.S. $200,000) per occurrence related to such

cleanup or damages per incident shall be included as costs of Petroleum

Operations Expenditures and shall be cost recoverable.

4.9

Within ninety (90) calendar days after the expiration of a Calendar

Year, CONTRACTOR shall submit to the MINISTRY detailed accounts showing the

Exploration and/or Development and Production Expenditures CONTRACTOR has

incurred during the past Calendar Year. The accounts shall be certified by an

independent outside accountant acceptable to both Parties. It is understood

that the MINISTRY retains the authority to review and audit occasionally

CONTRACTOR's books with respect to Petroleum Operations conducted hereunder.

Such audit right will terminate two (2) years after closure of the subject

year's accounts. Any exceptions to Contractor's accounts must be officially

communicated to the CONTRACTOR within three (3) years of the closure of the

subject year's accounts.

4.10

During the term of this Contract, CONTRACTOR in accordance with good

petroleum industry practice shall be responsible for carrying out all the

necessary work in connection with abandonment (which includes the removal,

proper disposal, alternative innovative recycling or salvage) of any Petroleum

Operations Facilities, including, but not limited to, platforms, artificial

structures, wellhead equipment, tubulars, and flowlines deemed by the MINISTRY

to be unusable or no longer required for future operations. CONTRACTOR shall

submit for the MINISTRY's approval detailed work plans for such removal,

disposal or salvage. All costs incurred by CONTRACTOR to remove, dispose or

salvage such facilities shall be cost recoverable. For the purpose of setting



up a financial mechanism to recover such costs earlier in the life of a Field,

CONTRACTOR and the MINISTRY shall agree on a mechanism and modality for setting

aside a reserve on CONTRACTOR's books as part of Petroleum Operations

Expenditures, subject to cost recovery, to be used for such removal, disposal or

salvage operations, no later than two years after commencement of the first

commercial production.

V.



CONDUCT OF PETROLEUM OPERATIONS BY CONTRACTOR

--------------------------------------------------



5.1

CONTRACTOR shall conduct the Petroleum Operations diligently and in

accordance with generally accepted standards of the petroleum industry designed

to enable production at the Maximum Efficient Rate of Crude Oil and at the level

of production of Natural Gas specified in Section 6.3. CONTRACTOR shall ensure

that all equipment, plant and installations used by CONTRACTOR or its

subcontractors comply with generally accepted engineering norms and are of

proper and accepted construction and are kept in optimal working order.

5.2

CONTRACTOR shall in particular take all reasonable steps necessary in

accordance with generally accepted standards of the petroleum industry to:

(a)

without prejudice to Section 5.3, ensure that Crude Oil or Natural Gas

discovered and produced within the Contract Area does not escape or is not in

any other way wasted;

(b)



prevent damage to under or over Crude Oil or Natural Gas-bearing strata;



(c)

prevent the nonintentional entrance of water through Wells to Crude Oil

or Natural Gas-bearing strata;

(d)



Prevent damage to under or over water-bearing strata;



(e)

Conduct all Petroleum Operations under this Contract in accordance with

applicable law and regulations and in a manner that does not conflict with

obligations imposed on the Republic of Equatorial Guinea by international law;

(f)

Take necessary precautions for protection of navigation and fishing and

to prevent pollution of the sea or rivers;

(g)

Indemnify, defend and save the STATE harmless against all claims, losses

and damage of any nature, whatever, including without limitation, claims for

loss or damage to property or injury to persons caused by, or resulting from,

any operation conducted by or on behalf of CONTRACTOR; provided that the

CONTRACTOR shall not be held responsible to the STATE under this subsection for

any loss, claim, damage, or injury caused by, or resulting from any negligent

action of personnel of the STATE including, but not limited to, subcontractors

of the STATE, other than CONTRACTOR, and employees of the State;

(h)

Subject to Section 2.4, drill and produce a Field without regard to

CONTRACTOR's contractual interest, if any, in an adjacent contract area.

5.3

The Natural Gas CONTRACTOR does not utilize in its own operations in the

Contract Area, or sell, shall be reinjected into the subsurface structure. When

the existing technical and financial circumstances require the flaring of

Natural Gas, the MINISTRY may authorize such flaring. The MINISTRY shall,

nevertheless, authorize the flaring of Natural Gas for periods of relatively

short duration during production tests, and in cases when the flaring of

relatively small quantities of Natural Gas is a necessary part of Crude Oil

production and is in accordance with good practice within the petroleum

industry.

5.4

If any works or installations erected by CONTRACTOR or any operations

undertaken by CONTRACTOR endanger Persons or third-party property or cause

pollution or harm marine life to an unacceptable degree, the CONTRACTOR, in

consensus with the MINISTRY, shall take opportune remedial measures within a

reasonable period established by the MINISTRY and the CONTRACTOR to repair any

damage to the environment. CONTRACTOR shall, if required by the nature and

severity of the damage, suspend the Petroleum Operations in whole or in part,

until CONTRACTOR has taken such remedial measures or has repaired the damage.

5.5

To ensure that CONTRACTOR shall meet its obligations to third parties or

to government agencies that might arise in the event of damage or injury

(including environmental damage or injury ) caused by Petroleum Operations,

notwithstanding its accidental nature, CONTRACTOR shall maintain in force a



third party liability insurance policy covering its Petroleum Operations.

CONTRACTOR shall provide to the MINISTRY, within thirty (30) calendar days after

the Effective Date, documents that prove the effectiveness of CONTRACTOR's third

party liability insurance covering its Petroleum Operations. To the extent such

third party liability insurance is unavailable, or is not obtained, or does not

cover part or all of any claim or damage caused by or resulting from Petroleum

Operations, including damage to the environment as mentioned in Section 4.8,

CONTRACTOR shall remain wholly responsible and shall defend, indemnify and hold

harmless the MINISTRY and the State against all claims or loss, except for

claims arising from the negligence of the MINISTRY or STATE to their employees

or their subcontractors other than CONTRACTOR.

5.6

If, after the Effective Date of this Contract, others are granted

permits or licenses within the Contract Area for exploration/production of any

minerals other than Crude Oil or Natural Gas, CONTRACTOR shall use his best

efforts to avoid obstruction or interference with such licensees' operations

within the Contract Area. The MINISTRY shall use its best efforts to ensure

that operations of third parties do not obstruct CONTRACTOR's Petroleum

Operations within the Contract Area.

5.7

CONTRACTOR shall provide acceptable working conditions, living

accommodations on offshore installations, and access to medical attention and an

infirmary for all personnel employed by CONTRACTOR or its subcontractors in its

Petroleum Operations.

5.8

CONTRACTOR's Well design and drilling, including, but not limited to,

CONTRACTOR's casing, cementing and drilling programs shall be in accordance with

generally accepted industry practice.

5.9

Every Well shall be identified by a number, and shall be shown on maps,

plans and similar records CONTRACTOR is required to keep. The MINISTRY shall at

once be notified of any change on the identification numbers.

5.10

No Well shall be drilled through any vertical boundary of the Contract

Area. A directional Well drilled to an objective under the Contract Area from a

nearby surface location not covered by the Contract shall be deemed to have the

same effect for all purposes of the Contract as a Well drilled from a surface

location on the Contract Area. In such circumstances and for purposes of this

Contract, production of Crude Oil or Natural Gas from the Contract Area through

a directional Well surfaced nearby, or drilling or reworking of any such

directional Well, shall be considered production or drilling or reworking

operations (as the case may be) on the Contract Area for all purposes of this

Contract. Nothing contained in this paragraph is intended or shall be construed

as granting to the CONTRACTOR any leasehold interests, licenses, easements, or

other rights the CONTRACTOR may have to acquire lawfully under the Hydrocarbons

Law or from the MINISTRY or third parties.

5.11

Before commencing any work on drilling of any Well covered by a Work

Program and Budget of Operating Expenditures or recommencing work on any Well on

which work has been discontinued for more than six (6) months, CONTRACTOR shall

give the MINISTRY seven (7) calendar days written notice; however, if the

estimated amount to be spent on said work is less than One Hundred Thousand

United States Dollars (U.S. $100,000), notice shall not be required.

5.12

Before abandoning any Field, CONTRACTOR shall give ninety (90) calendar

days notice to the MINISTRY of its intention to abandon. Upon receipt of such

notice, the MINISTRY may elect to assume operation of the Well or Wells proposed

for abandonment; however, MINISTRY's operations shall not interfere with those

of CONTRACTOR. The MINISTRY's failure to so elect, by notice to the CONTRACTOR

in writing within the aforementioned ninety (90) day period, shall be deemed

approval of the CONTRACTOR's proposal to abandon.

5.13

CONTRACTOR shall securely plug any Well that it intends to abandon to

prevent pollution, damage to the environment, and possible damages to the

reservoir.

VI.



RIGHTS AND OBLIGATIONS OF THE PARTIES, DETERMINATION OF PRODUCTION

-----------------------------------------------------------------------LEVELS

------



6.1

Subject to the provisions of paragraphs (e) and (f) of this Section 6.1,

CONTRACTOR shall have the following rights and obligations:

(a)



advance all necessary funds and purchase or lease all material,



equipment and supplies required in connection with the Petroleum Operations;

(b)

furnish all technical aid, including foreign personnel, required for the

performance of the Petroleum Operations;

(c)

furnish all such other funds for the performance of the Petroleum

Operations as may be required, including payment to foreign entities performing

services as subcontractors;

(d)

retain control to all leased property paid for with Foreign Exchange and

brought into the Republic of Equatorial Guinea under the rules of temporary

importation, and as such, shall have the right to freely export same from the

Republic of Equatorial Guinea in accordance with the Hydrocarbons Law;

(e)

have the right prior notification to the Ministry to sell, assign,

transfer, convey or otherwise dispose of any part or all of the rights and

interests and obligations under this Contract to any Affiliated Company;

(f)

have the right to sell, assign, transfer, convey or otherwise dispose of

all or any part of its rights and interests and obligations under this Contract

to parties other than Affiliated Companies with the prior written consent of the

MINISTRY, such consent shall not be unreasonably withheld, and shall be deemed

granted if the MINISTRY does not respond to CONTRACTOR within sixty (60)

calendar days of CONTRACTOR's written request for consent;

(g)

have the right at all times to enter and exit the Contract Area and any

facilities used in the Petroleum Operations, wherever located;

(h)

have the right to use and have access to all geological, geophysical,

drilling, Well, production and other information held by the MINISTRY or by any

other governmental agency or enterprise, or enterprise in which the STATE

participates, relating to the Contract Area, including Well location maps. The

MINISTRY must supply the same to the CONTRACTOR;

(i)

submit in an appropriate form to the MINISTRY copies of all such

geological, geophysical, drilling, Well, production and other data, reports,

interpretations and maps, and cuttings of all samples that have been obtained or

compiled during the term hereof;

(j)

include in the Work Program and Budget of Petroleum Operations

Expenditures the following sums to be spent on training personnel of the

MINISTRY and citizens of the Republic of Equatorial Guinea for professional,

skilled and technical jobs in CONTRACTOR's Petroleum Operations. In conjunction

with the preparation of the annual Budget of Petroleum Operations Expenditures,

CONTRACTOR and MINISTRY will jointly agree on a training program where these

sums will be expended. CONTRACTOR agrees to be responsible for the

implementation and direct funding of the referenced training programs, and the

expenditures will be included as cost recoverable in its Petroleum Operations

Expenditures:

(i)

Fifty Thousand United States Dollars (U.S. $50,000) in each of the first

and second Contract Years;

(ii)

Seventy-Five Thousand United States Dollars (U.S. $75,000) in the third

Contract Year and in every year thereafter until a Commercial Discovery is

determined in accordance with Section 2.5. For the year when Commercial

Discovery is determined, the training obligation to be spent under this Section

6.1(j)(ii) will be prorated from January 1 of that year through the date on

which Commercial Delivery is determined;

(iii)

One Hundred Thousand United States Dollars (U.S. $100,000) per year

from the time of determination of Commercial Discovery to the date of first

commercial production. For the year when the training obligation under this

Section 6.1(j)(iii) takes effect, the amount to be spent will be prorated from

the date of determination of Commercial Discovery through December 31 of that

year; and

(iv)

Two Hundred Thousand United States Dollars (U.S. $200,000) per year

from the time of first commercial production and for each year thereafter until

termination of the Contract. For the year when the training obligation under

this Section 6.1(j)(iv) takes effect, the amount to be spent will be prorated

from the date of first commercial production through December 31 of that year.

CONTRACTOR shall make all reasonable efforts to employ and train citizens of the

Republic of Equatorial Guinea in Petroleum Operations. CONTRACTOR may employ



non-citizens, if in the opinion of CONTRACTOR and not contested by the MINISTRY,

no Equatorial Guinean citizens can be found with sufficient skill and technical

qualifications. CONTRACTOR shall make similar requirements of any

subcontractor. At intervals of not more than one year CONTRACTOR shall submit

to the MINISTRY reports detailing the personnel employed and their residence

when employed. CONTRACTOR shall provide, as CONTRACTOR deems necessary,

on-the-job training for citizens of the Republic of Equatorial Guinea to

undertake skilled and technical jobs in the Petroleum Operations. Costs and

expenses of training citizens of Equatorial Guinea as well as costs and expenses

for a program of training for the MINISTRY's personnel, shall be included in

Petroleum Operation Expenditures;

(k)

appoint an authorized representative for the Republic of Equatorial

Guinea with respect to this Contract, who shall have an office in Equatorial

Guinea;

(l)

give preference to goods and services that are produced in the Republic

of Equatorial Guinea or rendered by citizens of the Republic of Equatorial

Guinea, provided such goods and services are offered at equally advantageous

conditions with regard to quality, price, and immediate availability in the

quantities and to the specifications required;

(m)



pay to the STATE the corresponding taxes in accordance with the Tax Law;



(n)

pay to the STATE the corresponding Royalty pursuant to the terms and

conditions of this Contract;

(o)

except as provided in Section 7.10 hereof, have the right during the

term hereof to freely lift, dispose of and export its share of Crude Oil, and

retain abroad the Foreign Exchange proceeds obtained therefrom;

(p) notify the MINISTRY at least forty-eight (48) hours before the abandonment

of any Well.

6.2. THE MINISTRY SHALL:

-----------------(a)

except with respect to CONTRACTOR's obligations to pay the taxes set

forth at paragraph 6.1(m) of this Section VI, assume and discharge all other

taxes CONTRACTOR would otherwise be subject, including transfer tax, import and

export duties on materials, equipment and supplies brought into the Republic of

Equatorial Guinea by CONTRACTOR, its contractors and subcontractors; likewise,

it will comply with all taxes required with regard to property, capital, net

worth, operations, remittances or transactions (whether exacted directly or by

the requirement of stamp taxes on documents or the use of sealed paper),

including any tax or levy on or in connection with operations performed

hereunder by CONTRACTOR in accordance with this Contract. The MINISTRY shall

not be obligated to pay CONTRACTOR's Royalty, Income Tax, nor taxes on tobaccos,

liquor and personal income tax; nor shall it be obligated to pay the Income Tax

and other taxes not listed in the preceding sentence payable by contractors and

subcontractors. The obligations of the MINISTRY hereunder shall be deemed to

have been complied with by the delivery to CONTRACTOR within one hundred and

twenty (120) calendar days after the end of each Calendar Year, of documentary

proof in accordance with fiscal laws of the Republic of Equatorial Guinea that

liability for the above-mentioned taxes has been satisfied, except that with

respect to any of such liabilities that CONTRACTOR may be obligated to pay

directly, the MINISTRY shall reimburse it within sixty (60) calendar days after

receipt of invoice. The MINISTRY shall be consulted prior to payment of such

taxes by CONTRACTOR or by any other party on CONTRACTOR's behalf;

(b)

otherwise assist and expedite CONTRACTOR's execution of the Work Program

by supplying or otherwise making available all necessary visas, work permits,

import licenses, and rights of way and easements as may be required by

CONTRACTOR or its subcontractors and made available from the resources under the

MINISTRY's control;

(c)

have title to all original data resulting from the Petroleum Operations

including, but not limited to, geological, geophysical, petrophysical,

engineering, well logs and completion, status reports, samples and any other

data CONTRACTOR may compile or obtain during the term of this Contract;

provided, however, that CONTRACTOR may retain copies of such data and further

provided that such data shall not be disclosed to third parties by the MINISTRY

without the consent of CONTRACTOR while this Contract remains in effect.

However, for the purpose of obtaining new offers, the MINISTRY may show any

third party geophysical and geological data with respect to that part or parts



of the Contract Area acquired by CONTRACTOR and adjacent to the area of such new

offers, provided that no such data shall be disclosed that was in the possession

of the MINISTRY for less than eleven (11) months. Notwithstanding the

foregoing, the MINISTRY may show data to advisors and consultants of the

MINISTRY that agree to keep the data confidential;

(d)

have the right at all reasonable times to inspect CONTRACTOR's Petroleum

Operations, Hydrocarbon measuring devices, logs, plans, maps, and records

relating to Petroleum Operations and surveys or investigations on or with regard

to the Contract Area. MINISTRY shall make every effort to coordinate inspection

activities to avoid interference with Petroleum Operations.

6.3

CONTRACTOR shall produce Crude Oil from the Contract Area at the Maximum

Efficient Rate. CONTRACTOR and MINISTRY shall conduct a review of CONTRACTOR's

production programs prior to the commencement of production from any Field and

establish at that time by agreement the Maximum Efficient Rate and the

production rate for Natural Gas and the dates the Maximum Efficient Rate and the

production rate for Natural Gas will be reviewed and established in the future.

In the case of Natural Gas, the production rate shall not be less than that

required to satisfy any contracts then in existence for the sale of Natural Gas.

6.4

Subject to Section 5.2(b), the Crude Oil production rate shall not be

less than that required to satisfy any contract in existence for the sale of

Crude Oil. In no case the production rate shall damage the reservoir or

reservoirs.

VII. RECOVERY OF PETROLEUM OPERATING COSTS, SHARING OF PRODUCTION, AND

----------------------------------------------------------------------DISTRIBUTION OF PRODUCTION

---------------------------CRUDE OIL:

- ---------7.1

The respective production shares of the STATE and the CONTRACTOR of

Crude Oil produced and saved shall be determined in accordance with the

definitions and procedures set forth in this Section VII.

7.2

After making Royalty payments to the STATE, CONTRACTOR shall be entitled

to recover all Petroleum Operations Expenditures out of the sales proceeds or

other disposition of Crude Oil produced and saved hereunder and not used in

Petroleum Operations. Any Crude Oil remaining after making the Royalty payments

to the STATE and after all Petroleum Operations Expenditures are recovered by

CONTRACTOR shall be referred hereinafter as "Net Crude Oil." Net Crude Oil

shall be shared between the STATE and the CONTRACTOR in accordance with the

procedures outlined below, designed to ensure total cost recovery by CONTRACTOR,

followed by an escalation of the STATE's share based on increases in the

CONTRACTOR's pre-tax rate of return:







CONTRACTOR'S PRE-TAX

RATE OF RETURN

OIL)

Less than 18%











TOTAL

TOTAL

STATE SHARE

CONTRACTOR SHARE

(% OF NET CRUDE OIL) (% OF NET CRUDE

0%



100%



Greater or equal to 18% and less than 25%



10%



90%



Greater or equal to 25% and less than 40%



35%



65%



Equal or Greater than 40%



55%



45%





7.3

To determine STATE's share of Net Crude Oil, it shall first be necessary

to calculate Net Cash Flow from Petroleum Operations ("Net Cash Flow"). Net

Cash Flow for any given Calendar Year shall be determined by subtracting Royalty

and Petroleum Operations Expenditures from Gross Receipts.



7.4

To calculate the STATE's Share of Net Crude Oil produced from the

Contract Area, there are hereby established three (3) accounts: First Share

Account ("FSA"); Second Share Account ("SSA"); and Third Share Account ("TSA").

7.4.1 First Share Account:

------------------a. For purposes of calculating the First Share Account, the following

formula shall be used:

FSA(Y) = FSA(Y-1)(1 + .18 + i) + NCF(Y)

Where:



FSA = First Share Account

Y = the Calendar Year in question

NCF = Net Cash Flow



i = the percentage change for the calendar year in

question in the index of U.S. Consumer prices as reported for the first

time in the monthly publication, "International Financial Statistics" of the

International Monetary Fund.

b.

In any Calendar Year when FSA(Y) is negative, the STATE's share of Net

Crude Oil determined with reference to the First Share Account shall be zero.

c.

In any Calendar Year when FSA(Y) becomes positive, the CONTRACTOR for

purposes of this section shall be deemed to have earned a pre-tax rate of return

that is equal to or greater than eighteen percent (18%), and the STATE's share

of Net Crude Oil determined with reference to the First Share Account shall be

valued at an amount of Net Crude Oil equal to ten percent (10%) of FSA(Y).

d.

In any Calendar Year immediately subsequent to a Calendar Year when

FSA(Y) is positive, for purposes of applying the formula set forth in subsection

(a) of this Section 7.4.1, FSA(Y-1) shall be equal to zero.

7.4.2 Second Share Account

a. For purposes of calculating the Second Share Account, the following

formula shall be used:

SSA(Y) = SSA(Y-1)(1 + .25 + i) + (NCF(Y) - GS I(Y))

Where:



SSA = Second Share Account

Y = the Calendar Year in question

NCF = Net Cash Flow

GS I = STATE share of Net Crude Oil determined with

reference to the First Share Account



i = the percentage change for the Calendar Year in

question in the index of U.S. consumer prices as reported for the first

time in the monthly publication "International Financial Statistics" of the

International Monetary Fund.

b.

In any Calendar Year when SSA(Y) is negative, the STATE's share of Net

Crude Oil determined with reference to the Second Share Account shall be zero.

c.

In any Calendar Year when SSA(Y) becomes positive, the CONTRACTOR for

purposes of this section shall be deemed to have earned a pre-tax rate of return

that is equal to or greater than twenty-five percent (25%), and the STATE's

share of Net Crude Oil determined with reference to the Second Share Account

shall be valued at an amount of Net Crude Oil equal to twenty-seven and 778/1000

percent (27.778%) of SSA(Y).

d.

In any Calendar Year immediately subsequent to a Calendar Year when

SSA(Y) is positive, for purposes of applying the formula set forth in subsection

(a) of this Section 7.4.2, SSA(Y-1) shall be equal to zero.

7.4.3 Third Share Account

-------------------



a. For purposes of calculating the Third Share Account, the following

formula shall be used:

TSA(Y) = TSA(Y-1)(1 + .40 + i) + (NCF(Y) - GS I(A) - GS II(Y))

Where: TSA = Third Share Account

Y = the Calendar Year in question

NCF = Net Cash Flow

GS I = STATE share of Net Crude Oil determined with reference

to the First Share Account

GS II = STATE share of Net Crude Oil determined with reference

to the Second Share Account

i =

the percentage change for the Calendar Year in

question in the index of U.S. consumer prices as reported for the first time

in the monthly publication "International Financial Statistics" of the

International Monetary Fund.

b.

In any Calendar Year when TSA(Y) is negative, the STATE's share of Net

Crude Oil determined with reference to the Third Share Account shall be zero.

c.

In any Calendar Year when TSA(Y) becomes positive, the CONTRACTOR for

purposes of this section shall be deemed to have earned a pre-tax rate of return

that is at least forty percent (40%), and the STATE's share of Net Crude Oil

determined with reference to the Third Share Account shall be valued at an

amount of Net Crude Oil equal to thirty and 769/1000 percent (30.769%) of

TSA(Y).

d.

In any Calendar Year immediately subsequent to a Calendar Year when

TSA(Y) is positive, for purposes of applying the formula set forth in subsection

(a) of this Section 7.4.3, TSA(Y-1) shall be equal to zero.

7.4.4



Total STATE Share

-------------------



The total STATE Share of Net Crude Oil in any Calendar Year shall be the sum of

the STATE Share of Net Crude Oil determined with reference to the First Share

Account, the Second Share Account and the Third Share Account for such calendar

year.

7.5

CONTRACTOR, if so directed by the STATE, shall be obligated to market

all crude Oil produced and saved from the Contract Area subject to the

provisions hereinafter set forth.

7.6

Except as provided in paragraph 7.10, CONTRACTOR shall be entitled to

take and receive and freely export Crude Oil allocated for recovery of Petroleum

Operations Expenditures as well as its share of Net Crude Oil.

7.7

Title to the CONTRACTOR's share of Net Crude Oil under this Section VII,

as well as to that portion of Crude Oil exported and sold to recover Petroleum

Operations Expenditures, shall pass to CONTRACTOR at the wellhead.

7.8

If the MINISTRY elects to take any of the STATE's share of Net Crude Oil

in kind, it shall so notify CONTRACTOR in writing not less than ninety (90)

calendar days prior to the commencement of each Semester of each Calendar Year

specifying the quantity that it elects to take in kind, such notice to be

effective for the ensuing Semester of that Calendar Year (provided, however,

that such election shall not interfere with the proper performance of any Crude

Oil sales agreement for Crude Oil produced within the Contract Area that

CONTRACTOR has executed prior to the notice of such election). Failure to give

such notice shall be conclusively deemed to evidence the STATE elects not to

take in kind. Any sale of the STATE's portion of Net Crude Oil shall not be for

a term of more than one Calendar Year without the STATE's consent.

7.9

If the MINISTRY elects not to receive in kind the STATE's share of Crude

Oil, then the MINISTRY may direct the CONTRACTOR to market or buy the STATE's

share of production, whichever CONTRACTOR shall elect to do; provided, however,

the price paid to the MINISTRY for the STATE's share of production shall not be

less than the market price determined in accordance with Section VIII hereof.

CONTRACTOR shall pay the STATE for the STATE's share of the production produced

and saved for each Calendar Quarter; such payment shall be made within thirty



(30) calendar days after the end of the Calendar Quarter when the production

occurred.

7.10

In addition to the State's production share in accordance with the

terms of this Contract, CONTRACTOR is obligated to sell to the STATE at not less

than the market price in accordance with Section VIII hereof, if requested in

writing, a portion of CONTRACTOR's share of Crude Oil for the internal

consumption of the country in accordance with Section 15 of the Hydrocarbons

Law; provided that CONTRACTOR's obligation hereunder does not interfere with any

of CONTRACTOR's contracts with third parties.

7.11

Should the STATE and CONTRACTOR consider that the processing and

utilization of Natural Gas is economical and choose to participate in the

processing and utilization thereof, in addition to that used in secondary

recovery operations, then the construction and installation of facilities for

such processing and utilization shall be carried out pursuant to an approved

Work Program. The recovery of costs of operations, sharing of production, and

handling of production shall be effected according to the same general framework

as that utilized for Crude Oil.

7.12

In the event that CONTRACTOR considers the processing and utilization

of Natural Gas is not economical, the STATE may choose to take and utilize such

Natural Gas that would otherwise be flared in accordance with the provisions of

Section 5.3; all costs of taking and handling will be for the sole account and

risk of the STATE.

VIII. VALUATION OF CRUDE OIL

---------------------8.1



Crude Oil sold to third parties shall be valued as follows:



(a)

All Crude Oil taken by CONTRACTOR including its share and the share for

the recovery of Petroleum Operations Expenditures, and sold to third parties

shall be valued at the net realized price received by CONTRACTOR for such Crude

Oil F.O.B. the Republic of Equatorial Guinea at the point Crude Oil passes

through the inlet flange of the export tanker.

(b)

Except for the Royalty, all of the STATE's Crude Oil taken by CONTRACTOR

and sold to third parties shall be valued at the net realized price received by

CONTRACTOR for such Crude Oil F.O.B. the Republic of Equatorial Guinea at the

point Crude Oil passes through the inlet flange of the export tanker, less costs

incurred by CONTRACTOR related to the sale of STATE's Crude Oil.

(c)

The MINISTRY shall be duly advised before the sales referred to in

paragraph (b) of this subsection are made.

(d)

Subject to any existing Crude Oil sales agreement, if a more favorable

net realized price is available to the STATE for the Crude Oil referred to in

paragraph (b) of this subsection, then the MINISTRY shall so advise CONTRACTOR

in writing not less than ninety (90) calendar days prior to the commencement of

the deliveries under the State's proposed sales contract. Forty-five (45)

calendar days prior to the start of such deliveries, CONTRACTOR shall notify the

MINISTRY regarding CONTRACTOR's intention to meet the more favorable net

realized price in relation to the quantity and period of delivery pursuant to

said proposed sales contract. In the absence of such notice the STATE shall

market its Crude Oil.

(e)

The STATE's marketing of such Crude Oil as referred to in paragraph (d)

of this subsection shall continue until forty-five (45) calendar days after the

STATE's net realized price on said Crude Oil becomes less favorable.

CONTRACTOR's obligation to market said Crude Oil shall not apply until after the

STATE has given CONTRACTOR at least sixty (60) calendar days advance notice that

the STATE does not desire to continue such sales. As long as the STATE is

marketing the Crude Oil referred to above, it shall notify CONTRACTOR of the

more favorable net realized price.

8.2



Crude Oil sold to other than third parties shall be valued as follows:



(a)

By using the weighted average per unit price received by CONTRACTOR and

the STATE from sales to third parties F.O.B. at the point Crude Oil passes

through the inlet flange of the export tanker in the Republic of Equatorial

Guinea, net of commissions and brokerages paid in relation to such third party

sales, during the three (3) months preceding such sale, adjusted as necessary

for quality, grade and gravity, and taking into consideration any special



circumstances with respect to such sales;

(b)

If no such third party sales have been made during such period of time,

then on the basis used to value Crude Oil of similar quality, grade and gravity

and taking into consideration any special circumstances with respect to sales of

such similar Crude Oil.

8.3

Third party sales referred to in this section shall mean sales by

CONTRACTOR to independent purchasers of CONTRACTOR, entered into in an arm's

length transaction between a willing seller and a willing purchaser on

commercial terms reflecting current international open market conditions.

8.4

Commissions or brokerages incurred in connection with sales to third

parties, if any, shall not exceed the customary and prevailing rate.

8.5

During any given Calendar Year, the handling of production (i.e., the

implementation of the provisions of Section VII hereof) and the proceeds thereof

shall be provisionally dealt with on the basis of the relevant Work Program and

Budget of Petroleum Operations Expenditures based upon estimates of quantities

of Crude Oil to be produced, of internal consumption in the Republic of

Equatorial Guinea, of marketing possibilities, of prices and other sale

conditions as well as of any other relevant factors. Within thirty (30)

calendar days after the end of said given Calendar Year and to comply with the

provisions of this Contract, adjustments and cash settlements between the

Parties shall be made on the basis of the actual quantities, amounts and prices

involved.

8.6

In the event the Petroleum Operations require the segregation of Crude

Oils of different quality and/or grade and if the Parties do not otherwise

mutually agree:

(a)

any and all provisions of this Contract concerning valuation of Crude

Oil shall apply individually to each segregated Crude Oil;

(b)



Crude Oil produced and segregated in a given year shall contribute to:



(i)

the "required quantity" allotted in such year to the recovery of all

Petroleum Operations Expenditures pursuant to Section VII;

(ii)

the "required quantity" of Crude Oil a Party is entitled in such Year

pursuant to Section VII.

with quantities that bear the same proportion to the respective "required

quantity" (referred to in (i) or (ii) above) as the quantity of such Crude Oil

produced and segregated in such given Year bears to the total quantity of Crude

Oil produced in such Year from the Contract Area.

IX.



BONUSES AND SURFACE RENTALS

------------------------------



9.1

On the Effective Date, CONTRACTOR shall pay the STATE the sum of Seven

Hundred Fifty Thousand United States Dollars (U.S. $750,000) as a signature

bonus.

9.2

On the date CONTRACTOR notifies MINISTRY it has made a Commercial

Discovery, CONTRACTOR shall pay the STATE the sum of Seven Hundred Fifty

Thousand United States Dollars (U.S. $750,000).

9.3

CONTRACTOR shall pay the STATE a one-time payment of One Million Five

Hundred Thousand United States Dollars (U.S. $1,000,000) after daily production

from the Contract Area averages for the first time twenty thousand (20,000)

barrels per day for a period of sixty (60) calendar days; CONTRACTOR shall also

pay the STATE a one-time payment of Two Million Five Hundred Thousand United

States Dollars (U.S. $2,500,000) after daily production from the Contract Area

averages for the first time thirty thousand (30,000) barrels per day for a

period of sixty (60) calendar days. Such payments shall be made within thirty

(30) calendar days following the last day of the respective sixty (60) calendar

day period.

9.4

From the Effective Date and throughout the period CONTRACTOR is

conducting Exploration Operations, CONTRACTOR shall pay to STATE an annual

surface rental of One United States Dollar (U.S. $1.00) per hectare for all

parts of the Contract Area covered by less than two hundred (200) meters of

water and Fifty United States Cents (U.S. $.50) per hectare for all parts of the

Contract Area covered by two hundred (200) meters or more of water where



CONTRACTOR is authorized to conduct Exploration Operations. From the expiration

of the Exploration Operations until termination of this Contract, CONTRACTOR

shall pay to the STATE an annual surface rental of Two United States Dollars

(U.S.$2.00) per hectare for all parts of the remaining Contract Area. The

MINISTRY and CONTRACTOR agree that the coordinates shown in Annex "E" attached

hereto represent the boundary where the two hundred (200) meter depth occurs and

the basis for calculating the rental payments. For the year this Contract is

signed, the surface rentals shall be prorated from the Effective Date through

December 31 of that year, and shall be paid thirty (30) calendar days after the

Effective Date. For succeeding years the surface rentals shall be paid in

advance, thirty (30) calendar days before the beginning of each Calendar Year.

9.5

(a)

The production bonus payments required by Section 9.3 hereof

shall be included in Petroleum Operations Expenditures as cost recoverable.

(b)

The signature bonus, Commercial Discovery bonus and surface rentals

required by Sections 9.1, and 9.2, and 9.4 of this Contract shall not be

included as cost recoverable in Petroleum Operations Expenditures.

X.



PAYMENTS

--------



10.1

All payments to be made by CONTRACTOR to the STATE pursuant to this

Contract shall be made to the Treasury of the STATE in United States currency,

or at CONTRACTOR's election, in other currency acceptable to the STATE.

10.2

All payments due CONTRACTOR shall be made in United States Dollars, or

at the STATE's election, in other currency acceptable to CONTRACTOR, at a bank

to be designated by CONTRACTOR.

10.3

Unless otherwise specifically provided herein, any payments required to

be made pursuant to this Contract shall be made within thirty (30) calendar days

following the end of the month when the obligation to make such payments occurs.

10.4

At the end of each accounting period any gain or loss on the

CONTRACTOR's books caused by variations in the exchange rates will be deducted

or added, as the case may be, from its costs and expenses for that period, in

case CONTRACTOR's accounting is done in FCFA (French Africa Confederation

Francs) or in any other currency agreed to by the Parties other than United

States Dollars.

XI.



TITLE TO EQUIPMENT

--------------------



11.1

The equipment and fixed installations purchased by CONTRACTOR for use

in Development and Production Operations becomes the Property of the STATE when

the term of this Contract expires. Nevertheless, the equipment and fixed

installations amortized before the expiration of the Contract, could be used by

the STATE providing such use does not interfere with CONTRACTOR's activities.

11.2

The provisions of Section 11.1 of this Section XI shall not apply to

the equipment of CONTRACTOR or any of its subcontractors that constitute an

indispensable element in the production of Hydrocarbons; such equipment may be

freely exported from the Republic of Equatorial Guinea, if it has not been

amortized.

XII.



UNITIZATION

-----------



12.1

If a Field is designated within the Contract Area and it extends to

other parts of the Republic of Equatorial Guinea where other parties have

obtained a Contract for exploration and production of Crude Oil or Natural Gas,

or where another Contract has been granted to the CONTRACTOR, the MINISTRY may

demand the production of Crude Oil and Natural Gas be carried out in

collaboration with the other contractors. The same rule shall be applicable if

deposits of Crude Oil or Natural Gas, within the Contract Area, not commercially

recoverable are deemed as commercially exploitable if the production includes

those parts of the deposits extending to areas controlled by other contractors.

12.2

If the MINISTRY so orders, CONTRACTOR shall collaborate with other

contractors in preparing a collective proposal for approval by the MINISTRY for

common production of the deposits of Crude Oil or Natural Gas.

12.3

If the proposal for common production has not been presented within the

time period established, or if the MINISTRY does not approve that proposal (such

approval shall not be unreasonably denied or delayed), the MINISTRY may prepare



or cause to be prepared for the account of the parties involved, a plan for

common production. If the MINISTRY adopts such plan, the CONTRACTOR shall

comply with all the conditions established in such plan.

12.4

This Section XII shall also be applicable to discoveries of deposits of

Crude Oil or Natural Gas within the Contract Area that extend to areas not

within the dominion of the Republic of Equatorial Guinea; provided that with

respect to the production of such deposits of Crude Oil or Natural Gas, the

MINISTRY is empowered to impose the special rules and conditions necessary to

satisfy obligations under agreements with international organizations or

adjacent states.

12.5

Within one hundred eighty (180) calendar days following a request by

the MINISTRY, CONTRACTOR shall agree and proceed to operate under any

cooperative or unitary plan for the development and operation of the area, Field

or pool, or a part of the same, including areas covered by this Contract, the

MINISTRY deems feasible and necessary or advisable for purposes of conservation.

If a clause of a cooperative or unitary development plan approved by the

MINISTRY that by its terms affects the Contract Area or a part of the same or

contradicts a clause of this Contract, the clause of the cooperative or unitary

plan shall prevail.

12.6

Notwithstanding Section 12.5, in the event of conflicting clauses

between the terms of the Contract and the cooperative or unitary plan,

CONTRACTOR shall retain the right to conciliation and arbitration under Section

XIII.

XIII.



CONSULTATION AND ARBITRATION

------------------------------



13.1

The STATE and CONTRACTOR hereby consent to submit to the jurisdiction

of the International Centre for Settlement of Investment Disputes (hereinafter

the "Centre") for any dispute arising out of or relating to this Contract or

relating to any investment made under it, for settlement by conciliation

followed, if the dispute remains unresolved within three (3) months of the

communication of the report of the Conciliation Commission to the parties, by

arbitration, pursuant to the Convention of the Settlement of Investment Disputes

between States and Nationals of Other States (hereinafter the "Convention").

13.2

The MINISTRY is a governmental agency of the Republic of Equatorial

Guinea that has been designated to the Centre by the STATE pursuant to Articles

25(1) and 25(3) of the Convention and the Republic of Equatorial Guinea has

notified the Centre that the agreements executed by the MINISTRY do not require

approval (the Government has approved said Consent Agreement by decree

______________________________)

13.3

It is agreed by the Parties to this Contract that CONTRACTOR is a

citizen of the Cayman Islands.

13.4

It is hereby agree by the Parties that the consent to the Centre's

Jurisdiction stipulated above, shall equally bind any successor in interest to

the Government of Republic of Equatorial Guinea and CONTRACTOR to the extent

that Centre can assume jurisdiction over a dispute between the successor and the

other Party.

13.5

It is hereby agreed that the right of CONTRACTOR to request the

settlement of a dispute by the Centre or to take any step as a party to a

proceeding in accordance with this clause shall not be affected by CONTRACTOR

receiving partial compensation, conditional or absolute, from any Third Party

(whether a private person, a state, a government agency or an intentional

organization) with respect to any material loss or injury that is the subject of

the dispute; provided that the Republic of Equatorial Guinea may require

evidence that such third party agrees to the exercise of those rights by

CONTRACTOR.

13.6

Since the Republic of Equatorial Guinea is not a signatory to the

Convention, it is hereby agreed that Section XIII shall be in force on the

effective date of the convention as regards this STATE, and that date shall be

considered as the date the Parties consented to submit disputes to the Centre.

Until thirty (30) days after the ratification of the Convention by the Republic

of Equatorial Guinea of the procedures for settlement of disputes provided for

in this Section, all disputes shall be settled by procedures similar to those

applicable under the Convention, except that the proceedings shall be initiated

by direct communication between the Parties, and if the Tribunal is not

constituted within ninety (90) calendar days following the receipt of such



communication, either party may request the Centre's Secretary General to

appoint any arbitrators not yet appointed.

Any Tribunal constituted regarding a dispute submitted to the Centre pursuant to

this Section shall consist of one arbitrator appointed by each Party, and an

arbitrator appointed by the Centre's Chairman of the Administrative Council who

shall be President of the Tribunal.

13.7

Any Tribunal constituted pursuant to this Contract shall apply the law

of the Republic of Equatorial Guinea. Such Tribunal constituted pursuant to

this Contract shall have the power to decide a dispute ex aequo et bono.

13.8

Notwithstanding Section 13.6, if conciliation or arbitration under the

Convention are unavailable because the jurisdictional requirements ratione

personae of Article 25 of the Convention is unfulfilled at the time a proceeding

is instituted pursuant to this Section XIII, the Parties agree to conciliation

or arbitration, as the case may be pursuant to Section 13.1, in accordance with

the Arbitration (Additional Facility) Rules of the Centre.

13.9

The place of arbitration shall be Washington, D.C., United States of

America, and the arbitration shall be held at the seat of the Centre. The

language of the proceedings shall be Spanish.

XIV. BOOKS AND ACCOUNTS AND AUDITS

----------------------------CONTRACTOR shall be responsible for keeping books and accounts reflecting all

Petroleum Operations Expenditures as well as revenue received from the sale of

Crude Oil and Natural Gas, consistent with modern petroleum industry practices

and proceedings as described in Annex "C" attached hereto. Such books and

accounts shall be maintained in United States Dollars. Should there be any

inconsistency between the provisions of this Contract and the provisions of

Annex "C," the provisions of this Contract shall prevail.

14.2



AUDITS

------



The STATE shall have the right to inspect and audit CONTRACTOR's books and

accounts relating to this Contract in accordance with Section 4.9 If

CONTRACTOR's books and accounts are not available for inspection in the Republic

of Equatorial Guinea, the STATE shall have the right to audit the CONTRACTOR's

books and accounts at the CONTRACTOR's headquarters; in this case, the expenses

of the audit shall be paid by the CONTRACTOR. Moreover, the STATE will require

CONTRACTOR to engage independent accountants to examine, in accordance with

generally accepted auditing standards, CONTRACTOR's books and accounts relating

to this Contract for any Calendar Year or perform auditing procedures as deemed

appropriate by the STATE. A copy of the independent accountant's report or any

exceptions shall be forwarded to the STATE within sixty (60) calendar days

following the completion of such audit. Any cost incurred by CONTRACTOR in

complying with this requirement by the STATE shall be included in Petroleum

Operations Expenditures and shall be cost recoverable. CONTRACTOR's books and

accounts shall be deemed accepted by the STATE twenty-four (24) months after the

end of the Calendar Year when the cost was incurred, unless the MINISTRY

notifies CONTRACTOR otherwise within such time.

XV.



ADDITIONAL PROVISIONS

--------------------15.1

NOTICES

------Any notices required or given by either Party to the other, shall be deemed to

have been delivered when properly acknowledged for receipt by the receiving

Party.

All such notices shall be in Spanish and shall be addressed to :

MINISTRY OF MINES AND ENERGY

---------------------------Malabo-Bioko Norte

Republica de Guinea Ecuatorial

Telephone: (240)-9-3567, -3405, -2086

Facsimile: (240)-9-3353

Telex: GBNOM 5405 EG

CONTRACTOR

----------



Triton Equatorial Guinea, Inc.

Wellington House, 5th Floor

125 Strand Street

London, WC2R 0AP

United Kingdom

Attn: Project Coordinator

Telephone: 44-171-533-7000

Facsimile: 44-171-533-9000

Telex: None

Either party may substitute or change such address on written notice thereof to

the other.

XVI LAWS AND REGULATIONS

-------------------16.1

For purposes of this Contract, the laws of the Republic of

Equatorial Guinea shall govern in accordance with generally accepted principals

of international law.

16.2

In the event of changes in the legislation regarding Petroleum

Operations, and if as a consequence of their implementation, said changes cause,

to the detriment of any of the Parties, the reduction of rights or an increase

in the economic obligations contained in this Contract, the Parties shall meet

and take the suitable measures to achieve the necessary economic balance at any

time during the Effectiveness of this Contract.

XVII. FORCE MAJEURE

-------------17.1

Except as otherwise provided in this Subsection 17.1, each Party shall

be excused from complying with the terms of this Contract, except for the

payment of monies then due, if any, for so long as such compliance is hindered

or prevented by irresistible circumstances or beyond the reasonable control of

the Party concerned, including, but not limited to, change of government,

violent storms, cyclones, thunderstorms, navigation dangers, destruction of

machinery or whatever kind of installations, hostilities, blockades, embargoes,

criminal disturbances, national emergencies, the inability to obtain, import or

use any of the required materials, equipment or services, and the inability to

obtain the necessary rights of passage, riots, strikes, wars (declared or

undeclared), insurrections, rebellions, terrorist acts, civil disturbances,

dispositions or orders of governmental authority, whether such authority be

actual or assumed, acts of God, such circumstances being herein sometimes called

"Force Majeure"; provided, however, inability to obtain equipment, supplies or

fuel shall not be a cause of Force Majeure, unless caused by one of the factors

described in this Subsection 17.1. If any failure to comply is occasioned by a

governmental law, rule, regulation, disposition or order of the Government of

the Republic of Equatorial Guinea as aforesaid and the affected Party is

operating in accordance with good petroleum industry practice in the Contract

Area and is making reasonable efforts to comply with such law, rule, regulation,

disposition or order, the matter shall be deemed beyond the control of the

affected Party. In the event that either Party hereto is rendered unable,

wholly or in part, by any of these causes to carry out its obligations under

this Contract, it is agreed that such Party shall give notice and details of

Force Majeure in writing to the other Party within seven (7) calendar days after

its occurrence. In such cases, the obligations of the Party giving the notice

shall be suspended during the continuance of any inability so caused, and the

term of the Contract shall be extended to coincide with the duration of the

condition of Force Majeure. Both Parties shall do all within their power to

remove such cause.

XVIII.



TEXT

----



18.1

This Contract is written in the Spanish and English languages. In the

event of a controversy between the two texts, the Spanish text shall prevail.

XIX.



EFFECTIVENESS

-------------



19.1



This Contract shall come into effect on the Effective Date.



19.2

This Contract shall not be annulled, amended or modified in any

respect, except by the mutual consent in writing of the Parties or their



successors hereto. Nevertheless, the MINISTRY when requested by CONTRACTOR,

once all works described in Section 4.3(i)(ii) are completed, shall approve

within sixty (60) calendar days from said request an amendment authorizing

CONTRACTOR to transfer the minimum drilling obligation described in Section 4.3

from this Block to Block "F" including all the obligations and rights associated

with said drilling. CONTRACTOR shall be entitled to recover the costs

associated with drilling on the Block where the well is drilled. Any amendments

or modifications agreed to in writing by the Parties shall not require approval

by the Supreme Court of Justice of the Republic of Equatorial Guinea or

ratification by the President of the Republic of Equatorial Guinea.



IN WITNESS WHEREOF, the Parties hereto have executed this Contract, in

triplicate and in the Spanish language, as of the day and year first above

written.

THE REPUBLIC OF EQUATORIAL GUINEA

REPRESENTED BY THE MINISTRY OF

MINES AND ENERGY OF THE REPUBLIC

OF EQUATORIAL GUINEA

By:___________________________________

Minister of Mines and Energy

TRITON EQUATORIAL GUINEA, INC.

By:___________________________________

Thomas G. Finck, President



ANNEX "B"

DESCRIPTION OF CONTRACT AREA

BLOCK G



CORNER POINTS LATITUDE NORTH LONGITUDE EAST

A



1 41' 05"



9 37' 34"



B



1 41' 07"



9 25' 37"



C



1 40' 15"



9 25' 37"



D



1 40' 15"



9 17' 41"



E



1 34' 38"



9 17' 41"



F



1 34' 34"



9 00' 25"



G



1 15' 00"



8 51' 38"



H



1 15' 00"



9 23' 47"



From corner point H the Block is defined by the coast in low tide until the

intersection with corner point A at latitude North 1 41' 05" and 9 37' 34"

longitude East

ANNEX "C"

ACCOUNTING PROCEDURE

Attached to and made an integral part of the Production Sharing Contract

(the "Contract") for Block G between the REPUBLIC OF EQUATORIAL GUINEA,



represented for purposes of this Contract by the Ministry of Mines and Energy,

and TRITON EQUATORIAL GUINEA, INC., CONTRACTOR, dated the 26th day of March,

1997.

Article I

General Provisions

1.



Purpose. The accounting procedure herein provided and attached to the

------Contract is to be followed and observed in the performance of either Party's

obligations under the Contract.

2.



Accounts and Statements. CONTRACTOR's accounting records and books will

-----------------------be kept in accordance with generally accepted and recognized accounting systems,

consistent with modern petroleum industry practices and procedures. Books and

reports will be maintained and prepared in accordance with methods established

by the MINISTRY. The chart of accounts and related account definitions will be

prescribed by the MINISTRY. Reports will be organized for the use of the

MINISTRY in carrying out its management responsibilities under the Contract.

Article II

Petroleum Operations Expenditures

1.



Definition for Purposes of the Recovery of Costs and Calculation of

-------------------------------------------------------------------the Income Taxes. For any year when commercial production occurs, Petroleum

- -----------------Operations Expenditures shall consist of a) current year's non-capital costs, b)

current year's capital costs, and c) current year allowed recovery of prior

year's unrecovered Petroleum Operations Expenditures.

2.



Non-Capital Expenditures. Non-capital expenditures means those

------------------------Petroleum Operations Expenditures, whether related to Crude Oil or Natural Gas.

or relating to current year's operations. Moreover, non-capital expenditures

shall also include the sums agreed and designated by the MINISTRY and CONTRACTOR

for the abandonment of the Petroleum Operations. In addition to costs relating

only to current operations, U.S. $93,000 spent by CONTRACTOR for data acquired

prior to the Effective Date shall be classified as non-capital expenditures

authorized in writing by the MINISTRY, and the costs of surveys and the

intangible costs of drilling exploratory and development wells, as described in

paragraph (c), (d) and (e) below, will be classified as non-capital costs.

Non-capital expenditures include, but are not limited to the following:

(a)

Labor, materials and services used in day to day crude oil well

operations, crude oil field production facilities operations, secondary recovery

operations, natural gas well storage, handling, transportation, and delivery

operations, natural gas field production facilities operations, natural gas

transportation and delivery operations, natural gas processing auxiliaries and

utilities, cleaning up pollution or related damages as set forth in Section 4.8

of this Contract, and other operating activities, including maintenance, all of

which comprise Petroleum Operations.

(b)

Office, services and general administration - General services including

overhead allocation, insurance premiums, technical and related services,

material services, transportation, rental of heavy engineering equipment, site

rentals and other rentals of services and property, personnel expenses, public

relations, and other expenses abroad.

(c)

Development and production drilling - Labor, materials and services used

in drilling wells with the object of penetrating a proven reservoir, including

the drilling of delineation wells as well as redrilling, deepening or

recompleting wells, and access roads, if any, leading directly to wells.

(d)

Exploratory drilling - Labor, materials and services used in the

drilling of wells with the object of finding unproven reservoirs of crude oil

and natural gas, and access roads, if any, leading directly to wells.

(e)

Surveys - Labor, materials and services used in aerial, geological,

topographical, geophysical and seismic surveys, and core hole drilling.

(f)

Other exploration expenditures - Auxiliary or temporary facilities

having useful lives of one year or less used in exploration and purchased

geological and geophysical information.



(f)

The bonus payments payable in accordance with Section 9.3 of the

Contract. All payments made in accordance with Section 9 of the Contract shall

be deductible for purposes of calculation of Income Tax.

(h)

Interest on loans shall be considered non-capital expenditures for tax

purposes; however, three percent (3%) shall be cost recoverable in accordance

with Article III.3 of this Annex "C".

3.



Capital Expenditures. Capital expenditures means expenditures made for

--------------------items that normally have a useful life beyond the year incurred. Capital

expenditures include, but are not limited to, the following:

(a)

Construction utilities and auxiliaries - Work shops, power and water

facilities, warehouses, and field roads other than the access roads mentioned in

paragraphs 2(c) and 2(d) above. Cost of oil jetties and anchorages, treating

plants and equipment, secondary recovery systems, gas plant and steam systems.

(b)

Construction housing and welfare - Housing, recreational facilities and

other tangible property incidental to construction.

(c)

Production facilities - Offshore platforms (including the costs of

labor, fuel, hauling, and supplies for both the offsite fabrication and onsite

installation of platforms, and other construction costs in erecting platforms

and installing submarine pipelines), wellhead equipment, subsurface lifting

equipment, production tubing, sucker rods, surface pumps, flow lines, gathering

equipment, delivery lines and storage facilities.

(d)

Movables - Surface and subsurface drilling and production tools,

equipment and instruments, barges, floating craft, automotive equipment,

aircraft, construction equipment, furniture and office equipment and

miscellaneous equipment.



Article III

Accounting Methods To Be Used to Calculate Recovery

of Petroleum Operations Expenditures and Income Taxes

As indicated below, the following accounting methods shall be used to

calculate the recovery of Petroleum Operations Expenditures and Income Taxes.

1.



Depreciation. Depreciation will be calculated from the year in which

-----------the asset is placed into service, with a full year's depreciation allowed the

initial year. Depreciation of Capital Costs, for purposes of Income Tax

calculation and cost recovery, will be calculated over a period of four (4)

years using the straight line method.

The lives to be used for items for which Capital Expenditures are incurred

shall be four (4) years. The undepreciated balance of assets taken out of

service will not be charged to Petroleum Operations Expenditures but will

continue to depreciate based upon the lives described above, except where such

assets have been subjected to unanticipated destruction, for example, by fire or

accident.

2.



Overhead Allocation. General and administrative expenditures, other

------------------than direct charges, allocable to this operation should be determined by a

detailed study, and the method determined by such study shall be applied each

year consistently. The method selected must be approved by the MINISTRY. Either

the MINISTRY or CONTRACTOR may request by notification of the other Party that

the method selected be changed; provided, however that only one change to the

method be allowed in any given Calendar Year.

3.



Interest Recovery. Interest on loans obtained by a Party from

-----------------Affiliated Companies, or parent companies, or from third parties non-affiliated

may not be recoverable as Petroleum Operations Expenditures, except for the

three percent (3%) interest, but the interest may be deductible from income for

the purposes of calculating CONTRACTOR's Income Tax. The interest on said loans

cannot be over the prevalent commercial rates for Petroleum Operations

investments. Details of any sums to be financed shall be included in each year's



Budget of Petroleum Operations Expenditures for the review of the MINISTRY.

Notwithstanding anything to the contrary contained herein or in any law

regulation rule order or decree of the STATE, non-resident lenders shall not be

subject to withholding tax or other income tax.

4.



Natural Gas Costs. Petroleum Operations Expenditures directly

------------------associated with the production of Natural Gas will be directly chargeable

against Natural Gas revenues in the manner agreed by the Parties. Petroleum

Operations Expenditures incurred for production of both Natural Gas and Crude

Oil will be allocated to Natural Gas and Crude Oil as agreed by both Parties.

5.



Inventory Accounting. The costs of non-capital items purchased for

-------------------inventory will be recoverable in the year the items have been landed in the

Republic of Equatorial Guinea. The CONTRACTOR shall present two types of

inventories, one for non-capital assets or articles and another for capital

assets or articles.

6.



Insurance and Claims. Petroleum Operations Expenditures shall

---------------------include premiums paid for insurance normally required to be carried for the

operations relating to CONTRACTOR's obligations conducted under the Contract and

shall also include expenditures incurred and paid by CONTRACTOR in settlement of

any and all losses, claims, damages, judgments, and other expenses, including

monies relating to CONTRACTOR's obligations under the Contract. Any sums

CONTRACTOR receives for settlements from insurance carried for the benefit of

the Petroleum Operations shall be deducted from Petroleum Operations

Expenditures for the year any such settlement is received.



ANNEX "D"

LETTER OF PERFORMANCE GUARANTY BY PARENT

FOR CONTRACT AREA G, THE REPUBLIC OF EQUATORIAL GUINEA

WHEREAS, Triton Energy Limited, a company validly existing under the laws

of the Cayman Islands ("Parent"), with its principal place of business c/o

Caledonian House, Mary Street, Post Office Box 1043, Georgetown, Grand Cayman,

Cayman Islands; and

WHEREAS, Triton Equatorial Guinea, Inc., a company validly constituted under

the laws of the Cayman Islands ("Company"), is a wholly owned subsidiary

of the Parent; and

WHEREAS, Company has contemporaneously herewith entered into that

certain Production Sharing Contract (the "Contract") with the Republic of

Equatorial Guinea (the "STATE") for Contract Area G; and

WHEREAS, Company holds the participating interest as specified in the

Contract; and

WHEREAS, the STATE desires that the performance by Company under the

Contract be guaranteed; and

WHEREAS, the Parent accepts that it fully understands and assumes

the legal contractual undertakings of the Company under the Contract;

and

NOW THEREFORE, it is hereby agreed and stipulated as follows:

1.

Parent shall be bound as Guarantor by virtue of this Letter of

Performance Guaranty by Parent (this "Guaranty") to the STATE for the

fulfillment of the obligations assumed by the Company in accordance with Section

4.3(a) of the Contract.

2.

In accordance with Section 4.5 of the Contract, the amount of any

guaranty by Parent hereunder in the then Contract Year phase shall be discharged

of the minimum expenditure obligation for such Contract Year phase when the

minimum expenditure obligation for such phase has been satisfied. If at the end,

the Exploration Expenditures incurred by Company during the two (2) first years

of the Contract is less than the minimum expenditure obligation described in

Section 4.5 of the Contract, then Parent agrees it shall pay to the STATE on



first demand without proof or conditions the balance of the amounts not

incurred. The STATE's first demand shall be given within thirty (30) calendar

days from the end of the related initial exploration period. Failure by the

STATE to make a timely demand as provided above shall discharge Parent from its

liabilities under this Guaranty. Demand shall be made by an original written or

faxed statement from the Ministry of Energy and Mines of the Republic of

Equatorial Guinea ("Ministry") certifying that "Triton Equatorial Guinea, Inc.

did not comply with the work program in the Contract covering Block G." The

Ministry shall state specifically how Triton failed to comply with such work

commitment. The Minister shall deliver the demand to the Parent at 6688 N.

Central Expressway, Dallas, Texas, 75206 U,S.A.; or fax number 1-214-691-0198.

3.

This Guaranty shall be governed by and construed in accordance with the

laws of Equatorial Guinea.

4.

This Guaranty shall expire at the earlier of two (2) years and

thirty (30) consecutive days from the Effective Date of the Contract or the date

when Company and/or its permitted assignee has been recognized by the Ministry

of Mines and Energy of the Republic of Equatorial Guinea to have fulfilled its

minimum expenditure obligations for the initial exploration period pursuant to

the Contract.

5.

Said act to be effective in the Republic of Equatorial Guinea shall

be previously elevated to a public deed by a notary or other competent authority

named by the Principal, and said public deed shall comply with all legal

requisites. The costs incurred for said process shall be the responsibility of

the Company, and shall not be recoverable.

IN WITNESS WHEREOF, Parent and Company have signed this Guaranty on ______

day of _______, 1997.

PARENT:

TRITON ENERGY LIMITED



By:___________________________

Name:______________________

Title:_____________________

COMPANY

TRITON EQUATORIAL GUINEA, INC.



By:___________________________

Name:______________________

Title:_____________________

STATE OF TEXAS

COUNTY OF DALLAS

BEFORE ME, the undersigned Notary Public in and for the State of Texas, on

this day personally appeared _________________________, ____________________ of

TRITON ENERGY LIMITED, and acknowledged to me that he executed the foregoing

instrument for the purposes and consideration therein expressed, as the act and

deed of TRITON ENERGY LIMITED, and that he has the capacity to make such

authorization.

WITNESS MY HAND AND SEAL OF OFFICE this ____ day of ____________, 19___.

___________________________________________

Notary Public in and for the State of Texas

___________________________________________

Printed Name



My Commission Expires:



_______________



STATE OF TEXAS

COUNTY OF DALLAS

BEFORE ME, the undersigned Notary Public in and for the State of Texas, on

this day personally appeared _________________________, ____________________ of

TRITON EQUATORIAL GUINEA, INC., and acknowledged to me that he executed the

foregoing instrument for the purposes and consideration therein expressed, as

the act and deed of TRITON EQUATORIAL GUINEA, Inc., and that he has the capacity

to make such authorization.

WITNESS MY HAND AND SEAL OF OFFICE this ____ day of ____________, 19___.

___________________________________________

Notary Public in and for the State of Texas

___________________________________________

Printed Name

My Commission Expires:



_______________

ANNEX "E"



COORDINATES FOR THE 200M ISOBATH

The MINISTRY and CONTRACTOR agree the following coordinates represent the

boundary for the 200 meter water depth for purposes of calculating the rental

payments due pursuant to Section 9.4 of the Contract.

Offshore Equatorial Guinea, Block G:

Coordinates for the 200m isobath



Latitude (Decimal deg.) Longitude (Decimal deg)

1.669636050000000



9.420002540000000



1.718255996704102



9.432461738586430



1.736657977104187



9.442479133605960



1.746453046798706



9.449187278747560



1.778007030487061



9.461318016052250



1.833732008934021



9.487948417663570



1.852141976356506



9.498534202575680



1.915503978729248



9.540432929992680



1.933310031890869



9.548749923706050



1.962574005126953



9.560340881347660



1.999791979789734



9.569559097290040



2.018069982528687



9.571042060852050



2.034588098526001



9.569132804870610



2.048221111297607



9.564983367919920



2.074255943298340



9.550439834594730



2.119595050811768



9.529401779174800



2.174201011657715



9.517924308776860



2.206674098968506



9.514681816101070



2.240891933441162



9.513693809509280



2.265940904617310



9.509973526000980



2.314485073089600



9.513362884521480



2.421205043792725



9.515472412109380



2.438366889953613



9.518675804138180



2.475511074066162



9.522773742675780



2.587642908096313



9.544161796569820



2.606426000595093



9.541087150573730



2.621166944503784



9.534647941589360



2.642630100250244



9.519592285156250



2.651741027832031



9.518342018127440



2.657460927963257



9.519410133361820



2.695396900177002



9.538861274719240



2.729363918304443



9.560067176818850



2.744920969009399



9.570688247680660



2.777837038040161



9.598164558410640



2.789410114288330



9.609403610229490



2.794575929641724



9.611616134643550



2.804290056228638



9.612635612487790



2.807696104049683



9.611455917358400



2.810491085052490



9.607439041137700



2.814825057983398



9.591453552246090



2.818197965621948



9.587999343872070



2.822141885757446



9.584536552429200



2.826673030853271



9.582205772399900



2.850533008575439



9.575085639953610



2.951327085494995



9.561904907226560



2.976335048675537



9.555339813232420



3.001311063766479



9.546500205993650