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i





I



AGREEMENT



FOR



PETROLEUM EXPLORATION, DEVELOPMENT AND PRODUCTION



IN



BELIZE





lCC,'



1



TABLE OF CONTENTS



Article

I





Definitions



4





II





Grant of rights to the Contractor



8





III





Term



9





IV





Relinquishment



11





V





General obligations of the Contractor



12





VI





Min~um



VII





Obligations of the Government



24





VIII





Royalty/Production payment



25





IX





Recovery of petroleum operations expenditures;



Production sharing



25





X





Valuation and measurements of petroleum



26





XI





Marketing, production payment in kind and



Domestic requirements



28





XII





Payment procedure



31





XIII





Surface rentals



31





XIV





Natural gas



31





xv





Taxes



33





XVI





Exemption from custom duty



34





XVII





Exchange and currency controls



35





XVIII





Title to equipment



36





XIX





Government participation



36





xx





Training and employment



37





XXI





Purchases in Belize



38





XXII





Unitization



39





XXIII





Danger to person, property or Environment



40





work and expenditure obligations



15





,, ,.

I





,

\.



!



I

I





XXIV





Arbitration



40





xxv





Termination



42





XXVI





Books, accounts and audits; records



reports and inspections



43





XXVII





Insurance and indemnification



46





XXVIII





Assignment



47





XXIX





Law of the agreement



47



2



XXXII



Waiver



48



XXXIII



Confidentiality



48



XXXIV



Notices



49



Exhibit A Description of contract area

Exhibit B Map of contract area

Exhibit C Bank Guarantee

Annex 1

Commissioner's Bulletin Income Tax



3



vi



THIS AGREEMENT, made and entered into this ::? day of ~ ,

2000, by and between the GOVERNMENT OF BELIZE, (hereinafter referred

to as the "Government") acting through the Minister of Natural

Resources the Environment and Industry and RSM Production Corporation,

a corporation duly organized and existing under the laws of Texas, USA

(hereinafter referred to as the "Contractor").

WHEREAS, the entire property in, and control over all Petroleum

resources in or under the terri tory of Belize is vested in the

Government on behalf of Belize;

WHEREAS, no petroleum operations shall be conducted in Belize by

any person other than the Government unless such person has entered

into a contract in accordance with the Petroleum Act (No. 8 of 1991);

WHEREAS, the Government wishes to promote the exploration

and production of the petroleum resources in and throughout

contract area, and the Contractor desires to join and assist

Government in accelerating the exploration for and production of

petroleum resources within the contract area;



for

the

the

the



WHEREAS, exploration in the contract area may result in cross­

border reservoirs and concomitant Joint Development Agreement(s)

(JDAs)

AND WHEREAS, the Contractor represents that he has the financial

resources, technical competence and professional skills necessary to

carry out the petroleum operations hereinafter described.

NOW, THEREFORE, the parties hereto hereby agree as follows:

ARTICLE I

DEFINITIONS



1.1 In this Agreement, the following terms

shall have the following meanings:

1.1.1



"affiliated company" shall mean any

entity

directly

or

indirectly

effectively controlling, or effectively

controlled by,

or under direct or

indirect effective common control with,

a specified entity. For the purposes of

this definition, "control", when used

with respect to any specified entity,

means the power to direct, administer

and dictate policies of such entity (it

being understood and agreed that it is

not

necessary

to

own

directly

or

indirectly fifty percent (50%) or more

of such entity's voting securities to

have effective control over such entity,

but ownership, direct or indirect, of

fifty percent (50%) or more of such

entity's

voting

securities

shall

automatically

indicate

effective

control), and the terms "controlling"

and

"controlled"

have

meanings

corresponding to the foregoing;



1.1.2



"appraisal well" shall mean a well

drilled

within

the

contract

area,

following a discovery, for the purpose

of

delineating

the

petroleum

reservoir(s)

to which the discovery

4



relates in terms of thickness and

lateral

extent

and

estimating

the

quantity

of

recoverable

petroleum

therein;

1.1.3



"barrel" shall mean a quantity or unit

of crude oil equal to 158.9874 liters

(forty-two (42) United States gallons)

at a temperature of sixty (60) degrees

Fahrenheit (15.56 degrees Centigrade)

under one atmosphere of pressure;



1.1. 4



"calendar year" shall mean a period of

twelve

(12)

consecutive

months,

according to the Gregorian Calendar,

starting wi th the 1st of January and

ending with the 31st of December;



1.1.5



"calendar month" or "month" shall mean

any of the twelve (12) months of the

calendar year;



1.1.6



"commercial discovery" means a discovery

of petroleum which can. be exploited

commercially in accordance with accepted

practices in the international petroleum

industry;



1.1.7



"continental shelf" shall mean the part

of the seabed and subsoil of the

submarine areas adjacent to the coast of

Belize, but outside the territorial

waters, over which Belize is entitled by

international law to exercise sovereign

rights for the purposes of exploring and

exploiting its natural resources;



1.1.8



"contract area" means a geographical

area which is covered by the contract;

and includes the whole of , or such part

or parts of, the original area awarded

to a Contractor and shall remain at the

disposal of such Contractor from time to

time pursuant to the terms of the

contract;



1.1. 9



"contract year" shall mean a period of

twelve (12) consecutive calendar months,

counted from the first day of the first

calendar month following the effective

date of this agreement or from the

anniversary of such first day of such

month;



1.1.10



"Contractor" means any person with whom

the Government enters into a contract;

and includes his agents, representatives

and assignees;



1.1.11



"crude oil" shall mean petroleum which

is in liquid state at the well head or

gas/oil separator or which is extracted

from natural gas, including distillate

and condensate;



1.1.12



"day" shall mean a calendar day unless

otherwise provided herein;

5



U



~



.....'IIIIi:iiIl . . .



y



~



.



~



,



...



..



_



point which may be agreed

Government and the Contractor;



by



the



1.1.14



"development and production operations"

means operations for or in connection

with the production of petroleum;



1.1.15



"development

and

production

period"

shall mean the period referred to in

paragraph 3.4;



1.1.16



"discovery" in relation to petroleum,

shall mean petroleum not previously

known to have existed, recovered at the

surface

in

a

flow

measurable

by

conventional petroleum industry testing

methods;



1.1.17



"effective date" shall

first above written;



1.1.18



"exploration expenditures" shall mean

expenditures

made

in

conducting

exploration operations hereunder, but

excluding expenditures made within the

area of a field after a commercial

discovery has been declared.

These

expenditures shall be determined in

accordance

with

the

Income

Tax

(Amendment) Act (9 Of 1991) and its

amendments 2000 (7 of 2000) ;



1.1.19



"exploration

operations"

means

operations for or in connection with

exploration for petroleum;



1.1.20



"exploration period"

shall mean the

period referred to in paragraph 3.1;



1.1. 21



"exploration well" shall mean a well

other than an appraisal well drilled in

the course of exploration operations;



1.1.22



"field"

shall

mean

an

area,

as

designated by agreement between the

Government and the Contractor, where a

commercial discovery of crude oil or

natural gas has been declared;



1.1.23



"gross revenues" shall mean the sum of

all proceeds of sales and the monetary

equivalent

of

the

value

of

other

dispositions of petroleum produced and

saved

and

not

used

in

petroleum

operations

and

any

other

proceeds

derived from petroleum operations;



1.1. 24



"income tax" shall mean that tax imposed

on net income pursuant to the Income Tax

Act (Cap 46, as amended and in effect

from time to time);



mean



the



date



6



1.1.25



"initial commercial production" shall

mean the date on which the first regular

shipment of crude oil or natural gas, or

both, is made from, a field under a

program of regular production and sale;



1.1. 26



"Inspector" shall mean the Inspector of

Petroleum appointed under section 4 of

the Petroleum Act (8 of 1991);



1.1.27



"maximum efficient rate" shall mean the

maximum rate of production of crude oil

in a field, without excessive rate of

decline of production or excessive loss

of reservoir pressure, a~d in accordance

with generally accepted practices in the

international petroleum industry and the

provisions of paragraph 6.3;



1.1.28



"Minister"

shall mean

the Minister

responsible for petroleum affairs in the

Government of Belize;



1.1. 29



"natural gas" shall mean all petroleum

which at atmospheric

condi tions

of

temperature and pressure is in a gaseous

state, and includes wet mineral gas, dry

mineral gas, wet gas and residue gas

remaining

after

the

extraction,

processing or

separation of

liquid

petroleum from wet gas, as well as

non-petroleum gas or gases produced in

association with

liquid or gaseous

petroleum;



1.1.30



"net petroleum" shall mean the value of

the total quantity of petroleum produced

and saved in a given calendar year and

not used in petroleum operations after

deduction of the value of the royalties

made in such calendar year and after

recovery

of

petroleum

operations

expenditures pursuant to paragraph 9.1;



1.1.31



"net taxable income" shall mean net

taxable

income

as

dete~ined

in

accordance with the provisions of the

Income

Tax

(Amendment)

Act

(9

of

1991)and amendments, 2000 (7 of 2000) .



1.1. 32



"petroleum" means all natural organic

substances

composed

of

carbon

and

hydrogen; and includes crude oil and

natural gas, and all other mineral

substances, products, by-products and

derivatives

that

are

found

in

conjunction with petroleum;



1.1. 33



"Petroleum Act" shall mean the Petroleum

Act (8 of 1991) and any subsidiary

legislation made thereunder;



1.1. 34



"petroleum

operations"

means

the

operations related to the exploration,

development,

extraction,

production,

field

separation,

transportation,

storage, sale or disposal of petroleum;

7



but does not include any transportation

or other operations (i) beyond the point

of export; or (ii) in the case of

petroleum which is processed within

Belize, beyond the point of entry into a

refinery or liquefaction or natural gas

treatment plant;

1.1. 35





"petroleum

operations

expenditures"

shall mean expenditures incurred in

conducting

petroleum

operations

hereunder, deter.mined in accordance with

the Income Tax (Amendment) Act, (9 of

1991) and its amendments, 2000 (7 of

2000)



1.1. 36



"royalty" shall mean the royalty or

production payment described in Article

VIII;



1.1. 37



"quarter" shall mean a period of

(3) consecutive months commencing

the first day of January, April,

and October,

respectively ,

of

calendar year;



1.1. 38



"well" means any opening in the ground

made or being made by drilling or

boring, or in any

other

manner,

in

connection with exploration operations

or

development

and

production

operations, other than a seismic hole;



1.1.39



"work programme" shall mean an itemized

statement of the petroleum operations to

be carried out in the contract area in

each calendar year, or to be carried out

for specific activities such as drilling

of exploration wells and appraisal wells

and development programmes, all in a

for.m acceptable to the Government;



1.1.40



"work programme budget" shall mean the

estimate of the costs of all items

included in

the

corresponding work

programme, including both capital and

operating budgets,

all

in

a

for.m

acceptable to the Government.



three

with

July

each



ARTICLE II

GRANT OF

RIGHTS TO

THE CONTRACTOR



2.1



The Government grants to the Contractor,

subject to the Ter.ms and conditions set

forth in this agreement, the exclusive

right to conduct petroleum operations

within the contract area for the ter.m of

this agreement. Except as provided in

paragraph 11.3, the Contractor shall

have the right, during the ter.m of this

agreement, to freely lift, dispose of

and export its share of the petroleum

produced hereunder.



2.2



Title

to

petroleum

to

which

the

Contractor is entitled hereunder shall

pass to the Contractor at the delivery

point

8



2.3



The

Contractor

shall,

except

as

expressly otherwise provided in this

agreement,

conduct

all

petroleum

operations hereunder at his sole risk,

cost and expense. The Contractor shall

look only to the petroleum to which he

is entitled under this agreement to

recover such costs and expenses, and

such petroleum shall be the Contractor's

sole source of compensation thereunder.



2 .4



The Contractor shall be responsible to

the Government for the execution of all

petroleum operations in accordance with

the

provisions

of

this

agreement.

Without prejudice to the Contractor's

position as an independent Contractor

hereunder, the extent and character of

such work to be done by the Contractor

shall

be

subject

to

the

general

supervision, review and approval of the

Government to which the Contractor shall

report and be responsible as herein set

forth.



2.5



The

Contractor

is

authorized

to

construct pipelines, bridges, ferries,

landing fields, radio, telephone and

related communication systems as may be

necessary for petroleum operations but

subject to the laws in force in Belize

from time to time for the regulation and

control of such installations and their

construction.



2.6



The Government reserves the right to

grant licenses to others to prospect

for, explore for and mine minerals other

than petroleum within the contract area,

and further reserves to itself the right

to

so

prospect,

explore

and mine

directly, all subject to the provisions

of paragraph 5.3.

ARTICLE III



TERM



3.1



The Contractor is authorized to conduct

exploration

operations

during

an

exploration

period

which

shall

be

comprised of (i) an initial exploration

period

of

two

(2)

contract

years

("Initial Exploration Period"), and (ii)

subject to the conditions hereinafter

provided, three (3) successive renewal

periods ("First Renewal Period", "Second

Renewal

Period"

and

"Third Renewal

Period") of two (2) years each to the

initial exploration period. Such renewal

periods

shall

be

granted

to

the

Contractor upon the Contractor's request

delivered to the Government in writing

not later than ninety (90) days prior to

the expiration of the then current

period, subject to the Contractor having

fulfilled his obligations hereunder for

the then current period, including the

9



relinquishment provisions of Article IV,

and

havinq

submitted

with

such

application a work proqramme and work

proqramme budqet for the period of

extension which is consistent with the

undertakinqs set forth in paraqraph 6.1.

3.2



If at the end of the exploration period,

no commercial discovery has been made in

any part of the contract area., this

aqreement shall automatically te~inate

in its entirety, provided, however, that

the Government undertakes to qrant an

extension for such period, and for such

area as may be necessary, in the opinion

of the Government and the Contractor,

(i) for the Contractor to complete the

drillinq, testinq, appraisal or pluqqinq

of any well actually beinq drilled,

tested, appraised or pluqqed at the end

of the exploration period and (ii) for

the Government and the Contractor to

dete~ine

that a discovery resultinq

from such a

well is a

commercial

discovery pursuant to paraqraphs under

6.2.



3.3



If a commercial discovery is made in any

portion of the contract area durinq the

exploration period, the Contractor will

commence

development

and

production

operations in that particular portion of

the contract area.



3.4



In the event of a commercial discovery,

the extent of the area capable of

production

of

petroleum

from

the

formation or formations so identified

shall be dete~ined in accordance with

the provisions of the paraqraphs under

6.2

or Article

XIV.

The

area

so

dete~ined shall thereupon be converted

automatically into a field, with effect

from the date of the declaration of the

commercial discovery. The te~ of the

development and production period for

each field shall extend for twenty-five

(25) contract years from the first day

of the first calendar year commencinq

after the date of the declaration of the

commercial discovery in said field. In

the event of a new commercial discovery

as a result of new exploratory drillinq

in fo~ations that underlie and overlie

each other in an existinq field, such

formations shall constitute a sinqle

field and the field shall be redefined

as

necessary

to

incorporate

all

underlyinq and overlyinq fo~ations, the

te~ of the development and underlyinq

and overlyinq formations, and the te~

of the development and production period

for such, redefined field shall extend

for twenty-five (25) contract years from

the first day of the first calendar year

commencinq

after

the

date

of

the

10



declaration of the

discovery therein.



latest



commercial



ARTICLE IV

RELINQUISHMENT





4.1



On or before the end of the first

renewal period, the Contractor shall

relinquish twenty-five percent (25%) of

the original contract area.



4.1.2



On or before the end of the second

renewal period the Contractor shall

relinquish an additional twenty-five

percent (25%) of the original contract

area.



4.2



On or before the end of the third

renewal period the Contractor shall

relinquish an additional area equal to

twenty

five

percent

(25%)

of

the

original contract area.



4.3



At the end of the exploration period,

the Contractor shall relinquish the

remainder of the original contract area

not then converted to a field.



4.4



The size and shape of the portion or

portions to be relinquished shall be

determined by the Contractor, provided

however, that (a) the Contractor shall

advise the Government at least ninety

(90) days in advance of the date of

relinquishment of the description and

area of the portion or portions to be

relinquished, (b) the Contractor shall

consul t with the Government regarding

the shape and size of each individual

portion of the areas being relinquished,

(c) the area being relinquished shall not

be divided into more than two portions,

each of which shall be comprised of, and

be defined by reference to, blocks as

described in Exhibit B, save where no

such area or areas can be identified for

relinquishment in accordance with this

paragraph without including in such area

or areas in whole or in part a field or

area in which a discovery has been made

which the Contractor is not otherwise

required to relinquish hereunder, and

(d) each such relinquished individual

portion shall be not less than twenty

percent

(20%)

of

the

area

being

relinquished at such time with sides

parallel

to the boundaries of the

original contract area, to the extent

that the boundaries of the original

contract area permit,

and with the

longest side not more than three times

as long as the shortest side, and shall

in any event be of sufficient size and

convenient shape to enable petroleum

operations to be conducted thereon or

thereunder.

11



4.5



The Contractor shall not be obliged to

relinquish, pursuant to paragraphs 4.1

and 4.2,

any part of the original

contract area which has been converted

to a field or in which a discovery has

been made which the Contractor is not

otherwise

required

to

relinquish

hereunder.



4.6

Upon at least ninety (90) days written

notice to the Government prior to the

end of any contract year, the Contractor

shall have the right to relinquish all

or any portion of the contract area

effective as of the end of such contract

year,

subject to the provisions of

paragraph 4. 4, and such portion shall

then be credited against that portion of

the contract area which the Contractor

is next required to relinquish pursuant

to the provisions of paragraphs 4.1 and

4.2.



4.7



No relinquishment made in accordance

with this Article IV shall relieve the

Contractor of: (a) its obligations to

make payments due as a result of surface

rentals prior to the effective date of

any such relinquishment, or (b)

the

minimum work and expenditure commitments

undertaken pursuant to paragraphs 6.1.1

and 6.1.2.



4.8



Upon relinquishment of any area, the

Contractor shall. perform all necessary

clean-up activities in accordance with

generally accepted practices in the

international petroleum industry, and

shall take all other action necessary to

prevent hazards to human life or third

party property.

ARTICLE



V



5.1



The Contractor shall be responsible for

conducting all petroleum operations

within the contract area diligently,

expeditiously and efficiently in

accordance

with

generally

accepted

practices in the international petroleum

industry and pursuant to work programmes

approved in accordance with paragraph

5.4. The Contractor shall ensure that

all

equipment,

materials,

supplies,

plant and installations used by himself,

and his Contractors and sub-Contractors

comply with generally accepted standards

in the international petroleum industry

and are of proper construction and kept

in optimal working order.



5.2



Except as otherwise provided in this

agreement, the Contractor shall:



GENERAL



OBLIGATIONS

OF THE

CONTRACTOR



(a) advance

purchase



all necessary

or

lease all



funds and

equipment,

12



materials and supplies required to be

purchased or leased in connection

with petroleum operations;

(b) furnish all the technical expertise

and assistance,

including foreign

personnel, required for the conduct

of petroleum operations;

(c) furnish all other funds for the

performance of petroleum operations

as may be required, including payment

to foreign entities

that perform

services

as

Contractors

or

sub­

Contractors to the Contractor;

(d) appoint a local representative and

in

his

absence,

a

replacement

therefor,

with

respect

to

this

agreement, who shall have an office

and be resident in Belize and who

shall

have

full

authority

to

represent the Contractor for all

purposes of this agreement and whose

names shall, on appointment wi thin

ninety (90) days after the effective

date,

be

made

known

to

the

Government;

(e) provide

acceptable

working

conditions and living accommodations,

and access to medical attention and

nursing

care,

for

all

personnel

employed by him, his Contractors and

sub-Contractors

in

petroleum

operations; and

(f) pay

social

security

for

all

employees as per the Laws of Belize.

5.3



If, after the effective date, others are

granted licenses within the contract

area

authorizing

prospecting

for,

exploration

for

or

mining

of

any

minerals or other substances other than

petroleum, or the Government proceeds

with such prospecting, exploration or

mining directly in its own behalf, the

Contractor shall use his best efforts to

avoid obstruction or interference with

such

licensee's

or

Government's

operations within the contract area. The

Government shall use its best efforts to

ensure that operations of third parties

do

not

obstruct

the

Contractor's

petroleum operations within the contract

area.



5.4



(a) At least ninety (90) days prior to

the beginning of each calendar year, or

at such other time as is mutually agreed

by the patties, the Contractor shall

prepare and submit for approval to the

Government an annual work programme and

work programme budget

of

petroleum

operations

and

petroleum

operations

expenditures

by

quarters

for

the

13



contract

area

setting

forth

the

petroleum

operations

the

Contractor

proposes to carry out during the ensuing

calendar

year.

Such

annual

work

programmes and work programme budgets

shall comply with the minimum work and

expenditure obligations described in

paragraphs

6.1.

Approval

by

the

Government of the proposed annual work

programme budget of petroleum operations

and petroleum operation expenditures

will not be unreasonably withheld or

delayed.

The

Government

and

the

Contractor shall have reached agreement

upon an annual work programme and work

programme budget for the period from the

effective date until the end of the

calendar year in which the effective

date falls or for the ensuing calendar

year if the effective date falls after

the 30th day of September.

(b)

Should the Government wish to

propose revisions to the annual work

programme or work programme budget, it

shall within thirty (30) days after

receipt thereof so notify the Contractor

specifying in reasonable detail its

reasons therefor. Promptly thereafter

the parties shall meet and endeavor to

agree on the revisions proposed by the

Government. If the Contractor and the

Government fail

to agree upon any

revisions proposed by the Government

wi thin sixty (60) days of the receipt of

the Contractor I s proposals, the points

of disagreement shall be resolved as

follows:

(i) all other aspects of the annual work

programme and work programme budget to

which the Government proposes revisions

shall be mutually agreed before such

aspects of the annual work programme and

work programme budget shall be adopted.

(c) It is recognized by the parties that

the details of an annual work programme

may require changes in light of then

existing circumstances. In such event,

the

Contractor

may

introduce

such

changes as may be necessary, following

consultation with and approval by the

Government,

but

subject

to

the

Following:

(i) in the case of changes to an annual

work programme and work programme budget

which relate to exploration operations,

such changes may be implemented to the

extent that

they are not inconsistent

wi th the undertakings

set

forth

in

paragraph 6.1 or the general objective

of such annual work programme;

(ii) in the case of changes to an annual

14



,--



work programme and work programme budget

which relate to the development of a

field, such changes may be implemented

to the extent that they are not

inconsistent

with

the

applicable

development work programme and work

programme budget adopted pursuant to

paragraph 6.2 or the-general objective

of such annual work programme;

(iii) all other changes may be notified

in writing to the Government and sha~~

be mutually agreed before they may be

implemented.

(d) To the maximum extent practicable,

the

Contractor

shal~

involve

representatives of the Government in the

preparation of the annual work programme

and work programme budget.

(e) Within thirty (30) days after the

end of each quarter, the Contractor

shall submit to the Government a report

describing' and summarizing petroleum

operations carried out, and petroleum

operations expenditures incurred during

such quarter. Such report shall be in a

form acceptable to the Government.

ARTICLE VI

MINIMUM WORK

AND EXPENDITURE

OBLIGATIONS



6.1



The Contractor shall commence petroleum

operations hereunder not later than

ninety (90) days after the effective

date. The amount to be expended by the

Exploration Contractor in conducting

exploration

Period

operations

in

accordance with approved work programmes

during the exploration period, shall not

be less than the following as adjusted

pursuant to paragraph 6.1.4.



6.1.1.1



Initial Exploration Period:

(a) First contract year

(b) Second contract year



6.1.1.2



First renewal period (if requested by

the Contractor pursuant to paragraph

3.1) :

(a) First contract year

(b) second contract year



6.1.1.3



17,500 US$

35,000 US$



35,000 US$

35,000 US$



Second renewal period (if requested by

the Contractor pursuant to paragraph

3.1) :

(a) First contract year

350,000 US$

(b) Second contract year 1,000,000 US$



6.1.1.4



Third renewal period (if requested by

the Contractor pursuant to paragraph

3.1) :

15



(a) First contract year 1,000,000 US$

(b) Second contract year 1,000,000 US$

6.1. 2



The Contractor undertakes to carry out

and comply with the following minimum

work commitments. Each subsequent year's

work programme is contingent upon the

results from the previous years.



6.1.2.1



Initial exploration period:

(a)



First contract year:



Reprocess and reinterpret existing

seismic and other data of the contract

area;

(b)



Second contract year



Carry

out

detailed

soil

geo­

chemical and geo-botanical investigation

in the contract area;

6.1.2.2



6.1.2.3



First renewal period (if requested by

the Contractor pursuant to paragraph

3.1) :

Year 1:



Shoot 2D seismic (at least 100

line kms.)

as required and

interpret the data, provided

that,

Contractor

has

not

commenced

drilling

of

exploratory well (s) in either

of the Blocks A & B.



Year 2:



Shoot additional 2D seismic in

detail on prospects defined by

previous year 1 and interpret.



Second renewal period (if requested by

the Contractor pursuant to paragraph

3.1) :

Year 1:



Shoot and interpret 3D seismic

on

prospect

defined

by

previous years, work.



Year 2:



Drill one well on the most

promising

prospect.

The

programme may be accelerated

to drill the first well in

Year 5 if the results of

previous years are encouraging

and dictate such action.



6.1.2.4



Third renewal period (if requested by

the Contractor pursuant to paragraph

3.1): Details of the work program to be

specified for first and second contract

years.



6.1.3



If, during any contract year in the

exploration

period,

the

Contractor

should expend more than the required

minimum annual exploration expenditures,

the Contractor may subtract an amount

16



equal to the excess amount spent from

the

required

minimum

exploration

expendi tures for the ensuing contract

year in the exploration period. If works

carried out in any contract year exceed

the minimum work commitment relating to

such contract year as provided in

paragraph 6.1.2, the excesses may, with

the Government's prior written consent,

count towards the satisfaction of the

minimum work commitments for the ensuing

contract year.

Compliance with the required minimum

exploration expenditures for a given

contract year shall not relieve the

Contractor of his obligation to comply

with

the

required

minimum

work

commitment, nor shall compliance with

the required minimum work commitment for

a

given contract year relieve the

Contractor of his obligation to comply

with the required minimum exploration

expenditures for such contract year.

6.1.4



(a) Within ninety (90) days of the

effective date and, where this agreement

has been extended pursuant to paragraph

3. 1, on the first day of each extension

period, the Contractor shall provide

security by means of a bank guarantee,

in the form set forth in Exhibit C,

equal to the total unadjusted minimum

exploration expenditures for the initial

exploration period, or, as the case may

be, for the first, second and third

renewal

periods,

as

set

forth

in

paragraph 6.1.1. Upon prior confirmation

by independent accountants acceptable to

both the Contractor and the Government

of the exploration expenditures actually

incurred, such security shall be reduced

at the end of each contract year in the

exploration period to the extent that

the Contractor has spent the prescribed

minimum amounts stipulated in paragraph

6.1.1, provided that the outstanding

balance shall not be less than the

required

minimum

exploration

expenditures for the remaining contract

year of the exploration period in

question, as stipulated in paragraph

6.1.1 and as adjusted pursuant to

paragraph 6.1.4.

(a)

If,

at the expiration of the

exploration period, or upon the date of

termination of this agreement, or upon

relinquishment of the entire contract

area by the Contractor pursuant to

paragraph 4. 6, whichever first occurs,

the Contractor has not expended for

exploration operations sums at least

equal to the total minimum exploration

expenditures,

as

adjusted,

required

hereunder, the balance of the security

corresponding to the unexpended minim

exploration expenditures, as adjusted,

17



,.." ... _, -- ---­

in

the

exploration

period,

the

Contractor

has

not

expended

for

exploration operations sums at least

equal

to

the

minimum

exploration

expenditures,

as

adjusted,

required

hereunder for such contract year, a

portion of the security corresponding to

the

unexpended

minimum

exploration

expenditures, as adjusted,

for such

contract year automatically shall be

paid to the Government.

-



Discovery

And Development

Period



6.2



The terms and conditions relating to the

discovery and development period shall

be as follows.



6.2.1



When

in

the

course

of

petroleum

operations, a discovery of petroleum is

made, the Contractor shall immediately

notify

the

Government

in

writing

accordingly, specifying in such notice

all pertinent information concerning the

discovery.



6.2.2



If the Contractor determines to conduct

a drill-stem or production test, in open

hole or through perforated casing, with

regard to the discovery, he shall notify

the Government of the time of such test

at least twenty-four (24) hours prior to

the proposed test, and the Government

shall have the right to have

a

representative present during such test.

Not later than ninety (90) days after

completion of such test or tests, the

Contractor shall complete the analysis

and interpretation of the data resulting

from such test and submi t a report to

the

Government which

shall

contain

copies of such data and its analysis and

interpretation thereof, and which shall

also contain a written notification of

whether or not, in the Contractor's

opinion, such discovery is of potential

commercial interest. If the Contractor

plugs and abandons

the well which

encountered

such

discovery

without

conducting a drill stem or production

test, or fails to conduct a drill stem

or production test with respect to such

discovery within one hundred and eighty

(180) days from the date on which such

discovery has been made, it shall be

deemed to have notified the Government

that, in the Contractor's opinion, such

discovery is not of potential commercial

interest.



6.2.3



If, pursuant to paragraph 6.2.2, the

Contractor notifies, or is deemed to

have notified, the Government that such

discovery is not of potential commercial

interest, the Government shall have the

18



option, exercisable by notice in writing

to the Contractor,

to require the

Contractor

to

relinquish

the

area

corresponding to such discovery and

forfeit any rights relating to such

discovery and any production therefrom.

The area subject to relinquishment shall

not exceed the prospective producing

area determined by taking into account

the area of the structural closure of

the

prospective

horizon

and

other

relevant technical factors. Any such

relinquishment by the Contractor of the

area relating to such discovery before

the end of the exploration period shall

be carried out in accordance with

paragraphs 4.4, 4.6 and 4.8.

6.2.4



If, pursuant. to paragraph 6.2.2, the

Contractor notifies the Government that

the

discovery

is

of

potential

commercial

interest,

the

Contractor

shall promptly prepare and submit for

approval to the Government a

work

programme and work programme budget for

the appraisal of such discovery. Such

appraisal

work

programme

and

work

programme

budget

shall

include

a

complete

programme

of

appraisal

operations

necessary

to

determine

whether such discovery is a commercial

discovery.



6.2.5



Within fifteen

(15)

days after the

submission

of

the

appraisal

work

programme and work programme budget

pursuant

to

paragraph

6.2.4,

the

Contractor and the Government shall meet

with a view to adopting such work

programme and work programme budget or

mutually agreeing upon amendments or

additions thereto.

Failing agreement

between

the

Contractor

and

the

Government as to such work programme and

work programme budget a t such meeting,

or within fifteen (15) days thereafter,

the original appraisal work programme

and work programme budget submitted by

the Contractor, revised in accordance

with any agreed amendments or additions

thereto, shall be deemed adopted, and

the

Contractor

shall

~ediately

commence

implementation

thereof.

On

adoption of the appraisal work programme

and work programme budget, the annua~

work programme and work programme budget

adopted pursuant to paragraph 5. 6 shall

be revised accordingly.



6.2.6



If, pursuant to paragraph 6.2.2, the

Contractor has notified the Government

that the discovery is of potential

commercial interest, it shall, unless

otherwise agreed:

(a) in respect of a discovery of crude

oil, advise the Government by notice in

19



notified

discovery

interest:



the

was



Provided

discovery of

of more than

be increased

eighteen (18)

months.



Government

that

Sa1Q

of potential commercial



that in respect of a

crude oil in water depths

600 feet, such period may

by mutual agreement from

months to twenty-four (24)



(b) in respect of a discovery of non­

associated natural

gas,

advise

the

Government by notice in writing, whether

or not in its opinion, the discovery is

commercial, within such period as may be

stipulated in an agreement made pursuant

to Article XIV with respect to such

discovery or, in the absence of such

agreement, within thirty-six (36) months

from the date on which the Contractor

notified

the

Government

that

said

discovery was of po ten tial commercial

interest.

6.2.7



If

the

Contractor

notifies

the

Government that the discovery is not

commercial, or fails to notify the

Government

that

the

discovery

is

commercial within the periods prescribed

in paragraphs 6.2.6 (a) and (b), the

Government

shall

have

the

option,

exercisable by notice in writing to the

Contractor, to require the Contractor to

relinquish the area corresponding to

such discovery and forfeit any rights

relating to such discovery and any

production therefrom. The area subject

to relinquishment shall not exceed the

prospective producing area dete~ined by

taking

into

account

the

area

of

structural closure of the prospective

horizon and other relevant technical

factors. Any such relinquishment by the

Contractor of the area relating to such

discovery

before

the

end

of

the

exploration period shall be carried out

in accordance with paragraphs 4. 4, 4 . 6

and 4.8.



6.2.8



(a) The notice submitted to

the

Government by the Contractor pursuant to

paragraph 6.2.6 (a) and (b) shall be

accompanied by a report on the discovery

setting forth all relevant technical and

economic

data,

including,

but

not

limi ted to, geological and geophysical

information, areas, thickness and extent

of the productive strata, petrophysical

properties of the reservoir fo~ations,

PVT data, the reservoir's productivity

indices for the wells tested at various

rates of flow, pe~eability and porosity

20



~----



-



­ ------"-----"------------­



-



--



of

the

reservoir

formations,

the

rel.evant characteristios and qual.ities

of the petrol.eum discovered, additional.

geol.ogioal. data and eval.uations of the

reservoir, orude oil. and natural. gas

reserves

estimates

and

any

other

rel.evant characteristios and properties

of the reservoirs and



6.2.9





programme budget. As soon as possible

after the submission of the report and

any work programme and work programme

budget pursuant- to paragraph 6.2.8 or

receipt of such additional information

and data,

the

Government

and

the

Contractor shall meet (i) to determine

at such meeting, or at such later date

as

may

be

mutually

agreed,

the

boundaries of the area to be delineated

as a field, and (ii) to adopt a work

programme and work programme budget for

the development of the discovery.

6.2.10





(a)

At

the

meeting

described

in

paragraph 6.2.9 the Contractor shall

carefully consider and take

into

account the proposals of the Government

and the reasons therefor and shall

attempt in good faith to reach an

agreement with the Government on the

points

at

issue

paying

particular

consideration

to

the

objective

of

achieving initial commercial production

expeditiously

taking

into

account

generally accepted engineering practices

and economics

of

the

international

petroleum industry.

(b) If the Government and the Contractor

agree upon the boundaries of the area to

be delineated as a field and upon the

adoption of a work programme and work

programme budget for the development of

the discovery, the date upon which such

agreement is reached, as reflected in

writing signed by both parties, shall be

the date of the declaration of the

commercial discovery for all purposes of

this agreement. The area so determined

shall, on such date, be automatically

converted

into

a

field,

and

the

Contractor

shall,

as

soon

as

is

practicable, commence development and

production operations

in

the field

according to the adopted work programme

and work programme budget. Upon adoption

of the development work programme and

work programme budget, the annual work

programme and work programme budget

adopted pursuant to paragraph 5.6 shall

be revised accordingly.

(a) In the event that no agreement is

reached between the Government and the

Contractor within one hundred and eighty

(180) days from the date of submission

of the report and work programme and

work

programme

budget

pursuant

to

paragraph 6.2.8 as

to

(i)

matters

relating to the adoption of the work

programme and work programme budget for

the development of the discovery or (ii)

the boundaries of the area to be

delineated as a field, the Government or

the Contractor may refer the matter for

determination pursuant to Article XXIV.

22



The determination in accordance- with

Article XXIV shall be final and the work

programme and work programme budget for

the development of the discovery and the

boundaries of the area to be delineated

as a field, as the case may be, shall be

deemed to have been adopted and agreed

as

determined,

except

that

the

Contractor may, within sixty (60) days

of receipt of such determination, notify

the Government that the discovery to

which such work programme and work

programme budget and area so determined

is

no

longer

considered

to

be

commercial.

If

the

Contractor

so

notifies the Government, the provisions

of paragraph 6.2.7 shall apply. Failing

such notification, the date after sixty

(60)

days of the receipt of such

determination shall be deemed to be the

date

of

the

declaration

of

the

commercial discovery for all purposes of

this agreement. The area so determined

shall, on such date, be automatically

converted

into

a

field

and

the

Contractor

shall,

as

soon

as

is

practicable, commence development and

production

operations

in

the

field

according to the work programme and work

programme

budget

so

adopted.

Upon

adoption of

the development work

programme and work programme budget as

aforesaid, the annual work programme and

work programme budget adopted pursuant

to paragraph

5.6

shall be revised

accordingly.



Production

Period



6.2.11





Notwithstanding any other provision of

this agreement,

in the event that

initial commercial production has not

occurred within three (3) years, in the

case of a crude oil discovery on land or

in water depths of less than six hundred

feet (200 m), or five (5) years, in the

case of non-associated natural

gas

discovery, or such longer period as the

Government may have agreed in the

development work programme and work

programme bUdget,

from the date of

declaration of commercial discovery for

a field, the Contractor shall relinquish

the area comprising such field and shall

forfeit any rights relating to such

field and any production therefrom.



6.3



The terms and conditions of the

production period shall be as set out

below.



6.3.1



The Contractor shall produce crude oil

from the contract area at a rate below

the

maximum

efficient

rate.

In

conjunction with the adoption of the

development work programme and work

programme budget pursuant to paragraph

6.2.10,

the

Contractor

and

the

Government shall establish at that time

23



the

max~um

efficient

rate

of

production

for

crude

oil

and

the

production

rate

for

non-associated

natural

qas .

Such

rates

shall

be

reviewed

anJ1ua.l.ly a t

the

t~e

of

submission of the annual work proqramme

by the Contractor pursuant to paraqraph

5.4 and revised,

if necessary,

by

mutual aqreement. In the case of non­

associated natural qas, the production

rate shall not be required by the

Government

to

be

less

than

that

required to satisfy any contracts then

in

existence for the sale of such

natural

qas.

6.3.2



Not less than ninety (90) days prior to

the beqinninq of each calendar year

followinq initial commercial production,

the Contractor shall prepare and furnish

to

the

Government

for

approval

a

forecast statement settinq forth by

quarters the total quantity of crude oil

(by quality, qrade and qravi ty) and

natural

qas

that

the

Contractor

est~ates can

be produced, saved and

transported

hereunder

durinq

such

calendar

year

in

accordance

with

qenerally accepted practices in the

international petroleum industry. The

Contractor shall endeavour to produce in

each

calendar

year

the

forecast

quantity. The crude oil shall be run to

storaqe tanks, constructed, maintained

and operated by the Contractor in

accordance with Government Requlations,

in which such crude

oil

shall

be

metered or otherwise measured for all

purposes required by this aqreement.

ARTICLE



OBLIGATIONS



VII



The Government shall:



OF THE

GOVERNMENT



7.1



assist the Contractor in the execution

of work proqrammes by supplyinq or

otherwise

makinq

available

all

qeoloqical, qeophysical, qeoqraphical,

drillinq, well, production and other

infor.mation,

includinq well location

maps, relatinq to the contract area in

the possession of the Government or

cominq into the possession of the

Government which are classified as non­

confidential.



7.2





prOVide the riqht of inqress to and

eqress from the contract area and any

facilities used in petroleum operations,

and, upon application in the prescribed

manner,

all

necessary

visas,

work

permits, ~port licenses and riqhts of

way and easements as may be required by

the Contractor and his Contractors and

24



7.3



In case of cross-border discoveries, the

Government shall explore all possible

means

of

co-operation

with

the

neighboring country into

which

the

reservoirs extend in order to protect

the Contractor's right to exploit such

cross-border discoveries.



ARTICLE VIII

ROYALTY/

PRODUCTION

PAYMENT



8.1



The Contractor shall pay to the

Government a royalty equal to (i) seven

and a half percent (7.5%) of the value

of the annual gross production of crude

oil produced and saved in each calendar

year and not used or consumed in

petroleum operations

and

(ii)

five

percent (5%) of the value of the annual

gross

production

of

natural

gas

produced,

saved and

sold

in

each

calendar year and not used or consumed

in the conduct of petroleum operations.



8.2



The royalty with respect to crude oil

shall be payable in cash and/or kind at

the option of the Government.

The

royalty with respect to natural gas

shall always be paid in cash.



8 .3



For the purpose of determining the

amount of the royalty due, crude oil and

natural

gas

shall

be

valued

in

accordance with paragraphs 10.1, 10.2

and 14.4,

less such costs as the

Government may reasonably allow for

handling and transportation from the

wellhead to the delivery point as

described in such paragraphs, and the

royal ty shall be payable quarterly

within thirty (30) days of the end of

each quarter on the basis of crude oil

production or natural gas sales which

occur in each such quarter. Payment

shall be accompanied by a certificate

from the Contractor setting forth in

detail the basis for computation of the

royalty. Such certificate shall be in a

form acceptable to the Government.



8.4



If the Government elects to take the

Royal ty with respect to Crude Oil, or

any part thereof, in kind, it shall

notify the Contractor in accordance with

the provisions of paragraph 11.2.

ARTICLE IX



RECOVERY OF



9.1



In each calendar year, after discharging

25



l



10.2.1





By usinq the weiqhted averaqe unit price

received by the Contractor from sales to

third parties at the delivery point, net

of any commissions and brokeraqes paid

in relation to such third party sales,

durinq the ninety (90) days precedinq

such sale, adjusted as necessary for

quality , qrade and qravity , and takinq

into

consideration

any

special

circumstances with

respect

to

such

sales, unless less than fifty percent

(50%), by volume, of crude oil sales

durinq such period are made to third

parties, in which case crude oil sold to

other than third parties shall be valued

in accordance with paraqraph



10.2.2





If no third party sales have been made

durinq such period of t~e, then (a) on

the basis used to value other crude oil

from Belize of s~ilar quality, qrade

and qravity

(or,

if

not

s~ilar,

adjusted as necessary for quality, qrade

and

qravity)

and

takinq

into

consideration any special circumstances

with respect to sales of such crude oil,

or (b) if there is no other crude oil

from Belize, on the basis used to value

crude oil from other sources in Central

America, the Caribbean, Colombia and

Venezuela of s~ilar quality, qrade and

qravity and takinq into consideration

any special circumstance with respect to

sales of such s~ilar crude oil.



10.3



Natural

qas

shall

be

valued

accordance

with

the

provisions

paraqraph 14.4.



10.4



Third party sales referred to in this

Article shall mean sales other than

barter sales made by the Contractor to

purchasers

who

are

not

affiliated

companies of the Contractor in arms

lenqth transactions and with whom (at

the

t~e

the

same

is

made)

the

Contractor has no contractual interest

involvinq directly or indirectly any

joint interest.



10.5



Commissions or brokeraqes incurred in

connection with sales to third parties,

if any, shall not exceed the customary

and prevailinq rate.



10.6



In the event that petroleum operations

involve the seqreqation of crude oils of

different quality, qrade or qravity, and

if the parties do not otherwise mutually

aqree, any and all provisions of this

aqreement concerninq valuation of crude

oil shall separately apply to each

seqreqated

crude

oil.

However,

in

electinq to take crude oil for internal

consumption pursuant to paraqraph 11.7

and to take royalty in kind pursuant to



in

of



27



paragraph 11.2, the Government shall

have the right to receive crude oil of

the quality, grade and gravity of its

choice.

10.7





The Contractor shall supply, operate and

maintain equipment for measuring the

volume and quality of the petroleum

produced and saved hereunder, including

gravity,

density,

temperature

and

pressure measuring devices and any other

devices * that may be required. All

measurement equipment and devices shall,

prior to their installation or usage, be

approved by the Inspector of Petroleum.

Such equipment and devices shall at all

reasonable

times

be

available

for

inspection and testing by the Inspector

of

Petroleum

or

other

authorized

representatives. Any such inspection or

testing shall not interfere with the

normal operation of

the

facili ties

involved. The equipment and devices used

or installed pursuant to this paragraph

shall not be replaced or altered without

the prior approval of the Government.



10.8



The

Contractor

shall

undertake

to

measure the volume and quality of the

petroleum produced and saved hereunder,

consistent

with

generally

accepted

practices in the international petroleum

industry,

with

the

frequency

and

according to procedures which shall be

approved by the Government.



10.9



The Contractor shall give the Inspector

of Petroleum timely notice of its

intention

to

conduct

measuring

operations and the Inspector shall have

the

right

to

be

present

at

and

supervise, either directly or through

authorized

representatives,

such

operations.



10.10



If it is determined,

following an

inspection or test carried out by the

Government or its representatives, that

the equipment, devices or procedures

used for measurement are inaccurate and

exceed the permissible tolerances which

shall

be

established

by

agreement

between

the

Government

and

the

Contractor, and such determination is

verified by an independent surveyor

acceptable

to

both

parties,

such

inaccuracy shall be deemed to have

existed for one-half of the period since

the last previous such inspection or

test, unless it is proved that such

inaccuracy has been in existence for a

longer or shorter period. Appropriate

adjustments covering such period shall

be made within thirty (30) days from the

date of such determination.



28



ARTICLE XI

MARKETING,

ROYALTY IN



11.1



The Contractor shall be obligated to

market all crude oil produced and saved

from the contract area, subject to the

provisions hereinafter set forth.



11.2



If the Government elects to take the

royalty payment on crude oil in kind, it

shall so notify the Contractor in

writing not less than sixty (60) days

prior to the commencement of each six

month semester of each calendar year

specifying the quantity, and designating

the grade and quality that it elects to

take in kind, based upon estimates,

including

those

contained

in

the

forecast statement furnished pursuant to

paragraph 6.3.2. Final adjustments shall

be made wi thin ninety (90) days of the

end of each calendar year on the basis

of actual quantities. Such notice shall

be effective for the ensuing six month

semester of that calendar year. Failure

to

give

such

notice

shall

be

conclusively deemed to indicate the

election by the Government not to take

in kind.



11.3



Any sale by the Contractor of any part

of the Government's share of crude oil

production shall not be for a term

expiring more than six (6) months after

the date of execution of the sales

contract

without

the

Government's

written consent. If the Government so

consents,

the

Government

shall not

exercise its rights to receive crude oil

in kind pursuant to paragraph 11.2



11.4



Any sale by the Contractor of any part

of its share of the crude oil produced

and saved from the contract area shall

not be for a term expiring more than

twelve (12) months after the date of

execution of the sales contract without

the Government's written consent. if the

Government so consents, the Government

shall not exercise its rights under

paragraph 11.7 to require the Contractor

to satisfy the internal consumption

requirements of Belize from crude oil

which is subject to such contract.



11.5



Crude oil which the Government has

elected to take in kind shall be

delivered by the Contractor, free of

cost to the Government, at regularly

spaced intervals at the delivery point

or

to

the

Government's

storage

facilities in the field, or both, at the

option of the Government. The Government

shall provide at such delivery points,

at its sole expense,

all. storage,

transportation

and

other

facilities

necessary to receive such crude oil,

provided,

however,

that

if

the



KIND AND



DOMESTIC

REQUIREMENTS



Government

requests,

the

Contractor

shall

provide

adequate

storage

facilities at such places, free of

charge, at the risk of the Government,

for a quantity of the Government's crude

oil not exceeding one hundred thousand

(100,000) barrels for each field. If

storage exceeds one hundred thousand

(100,000) barrels per field at any time,

the

Government

shall

pay

to

the

Contractor a reasonable storage charge

for such excess.

11.6



If the Government elects to meet all or

part of the requirements of the domestic

market

of

Belize

from

crude

oil

production in Belize, it shall use its

share of production from all crude oil

production in Belize to do so. If in any

year there is domestic demand in excess

of the Government I s

share of such

production, the Government may require

the Contractor to sell crude oil in

Belize on a pro rata basis with other

producers in Belize, according to the

quantity of crude oil production of each

producer in each year. The Government

shall give the Contractor at least three

(3) months notice in advance of such

requirement and the term of supply will

be on an annual basis. The price for

such sales shall be the price as

calculated pursuant to paragraph 10.2

above.



11. 7



If the Government elects to exercise its

rights under paragraph 11.6, it shall

notify the Contractor in accordance with

the

provisions

of

paragraph

11.2

relating to the Government's election to

take royalty payment in kind.

The

amounts to be taken shall be based upon

estimates, including those contained in

the forecast

statement

furnished

pursuant to paragraph 6.3.2, and final

adjustments shall be made within ninety

(90) days of the end of each calendar

year on the basis of actual quantities.



11.8



Not less than twelve (12) months prior

to initial commercial production in any

field, the Contractor shall submit to

the Government for approval, proposed

procedures

and

related

operating

regulations and financial terms covering

the scheduling, storage and lifting of

crude

oil

from

such

field.

The

procedures, regulations and terms shall

comprehend the subjects necessary to

efficient

and

equitable

operations

including, but not limited to: rights of

parties, notification time, maximum and

minimum quantities, duration of storage,

scheduling,

conservation,

spillage,

liabilities

of

the

parties,

and

penalties for over and under lifting,

safety and emergency procedures.

30



ARTICLE XII



PAYMENT

PROCEDURE



12.1



~l



12.2



~l



12.3



Except as otherwise expressly provided

herein, all payments required to be made

pursuant to this agreement shall be made

within

thirty

(30)

days

following

the-end of the calendar month in which

the obligation to make such payment

occurs.



12.4



If any payment is not made when due,

such unpaid amount shall bear interest

from and after the due date at an

interest rate compounded annually at two

percent (2%) greater than the interest

rate charged by any Commercial Bank in

Belize to pr~e commercial customers for

ninety (90) day loans as in effect from

t~e to t~e until the date of payment

or, by mutual agreement, at LIBOR in

effect at the t~e.



payments due to the Government

hereunder shall be made in United States

dollars at a bank to be designated by

the Government, or at the Contractor's

election, such other currency as is

acceptable to the Government.

payments due to the Contractor

hereunder shall be made in United States

dollars at a bank to be designated by

the Contractor, or, at the Government's

election, such other currency as is

acceptable to the Contractor.



ARTICLE XIII

SURFACE



RENTALS





13.1



The Contractor shall be liable for

payment of such fees and surface rentals

as are stipulated in the Petroleum

Regulations 1992. The fees payable for

each year shall be paid in advance and

in accordance with paragraph 12. 3 . The

fees for the first year shall be paid

within one (1) month with reference to

the effective date of this agreement.

ARTICLE XIV



NATURAL GAS





14.1



The Contractor shall have the right to

use associated Natural gas for petroleum

operations, including re-injection for

pressure maintenance in the field or

adjacent

fields

of

the

Contractor.

Associated natural gas which is, in the

opinion of both the Contractor and the

Government, not economical, shall be

returned to the subsurface structure, or

may be flared with the consent of the

Government.

In the event that

the

31



\O:iJw . . . . . . . . . . .'-'>• • _



_



_





soon as practicable thereafter, meet

together with a view to reaching

an

agreement on the production, processing

and sale of such gas. in the event the

Contractor chooses not to process and

sell

associated

natural

gas,

the

Government may elect to off-take at the

outlet flange of the gas-oil separator

and use such associated natural gas

which is not required for petroleum

operations. There shall be no charge to

the Government for

such associated

natural gas, provided that the cost to

gather such associated natural gas in

the field at the point of being flared

and to process and utilize it shall be

for the account of the Government.

14.2



Where non-associated natural gas is

discovered in the contract area and the

Contractor has, pursuant to paragraph

6.2 informed the Government that the

discovery is of potential commercial

interest,

the

Government

and

the

Contractor will, on completion of the

appraisal programme relating to such

discovery, or sooner if so agreed, meet

together with a view to reaching an

agreement

on

the

development,

production,

processing,

utilization,

disposition or sale of such gas.



14.3



in the event that the development,

production,

processing,

utilization,

disposition or sale of natural gas from

the contract area is determined by the

parties to be economically feasible in

accordance with this Article (XiV), the

costs of development and production of

the same from the reservoir to the

delivery point, and the revenue derived

therefrom,

shall,

unless

otherwise

agreed pursuant to paragraphs 14.1 and

14.2, be included in

petroleum opera­

tions expenditures and gross revenues,

respectively, for all purposes of this

Agreement, subject to the accounting

procedure outlined in the Bulletin of

the income Tax Commissioner (Annex 1) .



14.4



The price to be paid for natural gas, or

the value to be attributed thereto shall

for sales to third parties, be equal to

the net realized price obtained by the

Contractor for such Natural Gas at the

delivery point;



14.4.1



For sales other than to third parties,

be determined by agreement between the

Government and the Contractor, provided,

however, that such price or value shall

reflect the following: (i) the quality

32



and quantity of the natural gas (ii) the

price at which sales of natural gas from

other sources in Belize, if any, are

then being made, (iii) the price at

which sales, if any, of natural gas

imported into Belize are being made,

(iv) the purpose for which the natural

gas is to be used,

and

(v)

the

international market price of competing

or alternative fuels or feedstocks.

14.4.2



Third party sales shall mean sales as

described in paragraph 10.4

ARTICLE XV



TAXES



15.1



The Contractor and his Contractors and

sub-Contractors shall be obligated to

pay income tax for

the applicable

calendar year upon net taxabl.e income

derived

from

petroleum

operations

pursuant to the Income Tax Act.



15.2



In each calendar year, the Contractor's

income tax shall be payable to the

Government in installments on the last

day of each quarter on the basis of the

estimate, and quarterl.y updates thereto,

provided

to

the

Government.

The

estimated unpaid liability for income

tax for each calendar year as of the

current estimate or quarterly update

shall be payable equally over the

remaining quarterly installments for

such calendar year. Adjusting payments

or refunds, as the case may be, shall be

made within ninety (90) days of the end

of the calendar year based upon the

detailed accounts submitted for such

calendar year pursuant to paragraph 26.2

as approved by the Government.



15.3



(a) The Contractor shall within ninety

(90) days of the end of each calendar

year, notify the Government of any and

all amounts paid to its Contractors with

respect to operations carried out by

them in Bel.ize and in turn shal.l. notify

its Contractors that they must similarly

advise the Government within ninety (90)

days after the end of each calendar year

of any and all amounts paid to their

sub-Contractors

with

respect

to

operations carried out by them in

Bel.ize.

(b) The Contractor shall also advise

each of its Contractors, and shall

require such Contractors to l.ikewise

notify their sub-Contractors that for

every six (6) months such Contractors

and sub-Contractors shall furnish to the

Government a list of all their Belizean

and expatriate personnel, along with the

remuneration received by each of such

personnel,

and that they shall. be

33



required, prior to leaving Belize to

establish to the satisfaction of the

Government that the necessary income

taxes have been paid.

15.4



The Contractor and his Contractors and

sub-Contractors and their respective

personnel shall be obligated to pay such

reasonable transfer taxes and stamp

taxes as may be in effect from t~e to

t~e at the rates which are generally

applicable to all persons or entities in

Belize.



15.5



Except as may be otherwise agreed in

writing between the Government and the

Contractor, all transactions giving rise

to revenues, costs or expenses which

will be credited or charged to the

books, accounts, records and reports

prepared,

maintained

or

submitted

hereunder shall be conducted at arm's

length or on such a basis as will assure

that

all

such

revenues,

costs

or

expenses will not be higher or lower, as

the case may be, than would result from

a transaction conducted at arm's length

on a

competitive basis with third

parties.

ARTICLE XVI



EXEMPTIONS

FROM CUSTOMS

DUTIES



16.1



The Contractor and his non-Belizean

Contractors and sub-Contractors engaged

in conducting petroleum operations under

this agreement shall be permitted to

~port upon application to and approval

by

the

~nister

of

Finance

for

exemptions from customs duties with

respect

to

the

~portation

of,

machinery,

equipment,

spare

parts,

materials, supplies, consumable items,

moveable property, and any other items

or articles connected with petroleum

operations, subject to the provisions of

paragraph 16.2.



16.2



The exemptions provided in paragraph

16.1 shall not apply to any ~ported

item when, in the reasonable opinion of

the Government, items of the same, or

substantially the same, kind and quality

are manufactured

locally

and

are

available

for

purchase

and

t~ely

delivery at the Contractor's operating

base in Belize at a price equal to the

cost of the ~ported item(s) .



16.3



The Government reserves the right to

inspect the records, documentation or

the physical item or items for which an

exemption is or has been provided under

paragraph 16.1 to determine that such

item or items are being or have been

34



16.4



The item or items exemp-c J: rom CUl:I ,,"v_...

duties hereunder shal.l. not be sol.d to

third parties (who are not in their own

right exempt from such customs duties)

for use or consumption in Bel.ize unl.ess

prior written authorization is obtained

from the Government and the importing

party pays

the tax or duty due on the

assessed val.ue of such item or items at

the t~e of sal.e.



16.5



Any of the i tems



into Bel.ize,

whether

exempt

or

non-exempt

from

customs duties, may be exported by the

importing party at any t~e without the

payment of any export duties, taxes or

~ported



~posts.



16.6



"Custom duties" as used herein shal.l.

incl.ude al.l. duties, taxes or ~posts

(except those charges, as may be in

force from t~e to t~e, paid to the

Government for actual. services rendered

such as normal. handl.ing and storage

charges) which are payabl.e as a resul.t

of the importation of the item or items

under consideration.



16.7



The Contractor shal.l. be exempted from

any duty, fee or any other financial.

imposts (except those charges paid to

the

Government

for

actual.

services

rendered such as normal. handl.ing and

storage charges, if any) in respect of

the export of petrol.eum to which the

Contractor is entitl.ed hereunder.



16.8



The Contractor shal.l. not, directl.y or

indirectl.y,

export

any

petrol.eum

produced from the contract area to any

country or person which the Government

has by l.aw or official. pronouncement

decl.ared to be hostil.e or unfriendl.y.



ARTICLE XVII

EXCHANGE AND



CURRENCY

CONTROLS



17.1



The Contractor shal.l. be subject to the

appl.icabl.e exchange control. l.egisl.ation

and regul.ations in effect from t~e to

t~e in Bel.ize, provided, however, that:

(i) the Contractor shal.l. be permitted to

freel.y dispose of any crude oil.

produced

after

satisfying

its

obl.igations of payment of taxes,

bonuses, royal.ties and other fees to

the Government and with the prior

approval. of the Central. Bank of

Bel.ize to receive and hol.d the

proceeds

from

the

sal.e

of

any

petrol.eum, crude oil., natural. gas

35



and

casinghead

petroleum

spirit

produced therefrom in its offshore

banking account;

(ii) the Contractor shall be permitted

to remit any profits, dividends,

capital, or sums owed in repayment

of loans including sums owed to

affiliates, which are not required

for

conducting

the

petroleum

operations, to their home office or

non-resident shareholder free of any

charges, taxes, imposts or other

duties;

(iii) the Contractor shall have the

right to establish and maintain

local bank accounts which may be

denominated in Belize dollars or,

subject to the prevailing conditions

of the Central Bank of Belize in US

dollars which may be utilized as

necessary

for

payment

of

Contractor's obligations in Belize;

(iv) no restriction shall be placed on

the importation by the Contractor of

funds necessary for carrying out the

petroleum operations stipulated in

this agreement;

(v) the Contractor shall have the right

to pay directly outside of Belize

from

its

offices

abroad

for

purchases or services for petroleum

operations

hereunder,

provided,

however, that no such payments shall

be made to residents of Belize or to

firms using Belize as their main

base of operations (whether natural

or juridical) contrary to the Laws

of Belize.

ARTICLE XVIII

TITLE TO

EQUIPMENT



18.1



A1l equipment and assets which are fixed

installations and are not exported by

the Contractor under paragraph 16.6

shall

become

the

property

of

the

Government without cost as soon as this

agreement is terminated.

ARTICLE XIX



GOVERNMENT

PARTICIPATION



19.1



The Government shall have the option

to (a) acquire for itself or for its

designee an undivided and unencumbered

working interest of up to five percent

(5%)the total interest of the Contractor

in this agreement and in return therefor

shall furnish its participating interest

share of the funds,and/or (b) to acquire

for itself or or its designee a carrie

interest of up to two and a half percent

(2.5%) of the total interest of the

36



Contractor in this agreement and in

return

therefor

shall

furnish

its

participating Interest share of the

funds as provided in paragraphs 19.3.

19.2



Within ninety (90) days following the

date of

declaration

of

commercial

discovery for any field, the Government,

by written notice to the Contractor, may

exercise its option to participate in

this

agreement.

If

the

Government

exercises its option to participate in

option (a), above, in Section 19.1, (a)

it shall as soon as circumstances allow,

reimburse the Contractor, within ninety

(90) days, an amount equal to five

percent

(5%)

of

all

exploration

expenditures incurred prior to the date

of declaration of commercial discovery

for such field and (b) the Contractor

(or each corporation,

individual or

entity comprising the Contractor at that

time pro rata) shall assign and transfer

to the Government or its designee the

percentage interest that the Government

has opted to acquire provided that, the

Contractor shall lodge all receipts and

other

documented

evidence

of

all

exploration expenditures incurred, post

date of execution of Production Sharing

Agreement.

The

Government

or

its

designee shall assume all rights and

obligations of the Contractor pro rata

with its participating interest,

in

connection with this agreement.



19.3



The Government may, upon giving the

Contractor ninety

(90)

days written

notice for option (b) in Section 19.1,

above, require the Contractor to lend

the Government

up

to

one

hundred

percent (100%) of the funds required to

pay the Government's pro-rata share of

expenditure.

The

loan

shall

bear

interest at u. S.

prime

plus

three

percent (U. S. prime + 3%) or LIBOR by

mutual agreement. The Government shall

make repayments of such loan (s) on a

quarterly basis. Repayments of the loan

shall be applied first to accrued and

unpaid interest and the balance shall be

applied in reduction of the outstanding

principal balance



ARTICLE XX

TRAINING AND

EMPLOYMENT



20.1



The Contractor agrees to train and

employ qualified nationals of Belize in

its petroleum operations and,

after

initial

commercial

production,

will

undertake the schooling and training of

nationals of Belize for staff positions,

including administrative and executive

management positions.

The Contractor

will require his Contractors and sub­

37



""S, ...- - - - - - -



---------­



become available. An annual programme

for training and phasing in of Nationals

of Belize shall be established by the

Contractor and shall be submitted for

approval

to

the

Government.

Such

programme shall be included in the

annual work programmes submitted by the

Contractor pursuant to paragraph 5.4.

Within thirty (30) days of the end of

each calendar year, the Contractor shall

submit

a

written

report

to

the

Government describing the number of

personnel employed, their nationali ty ,

their positions and

the

status

of

training programmes for nationals of

Belize.

20.2



The Contractor shall also be required to

establish a programme, satisfactory to

the Government, to train personnel of

the Government to undertake skilled and

technical jobs in petroleum operations

for the Government. Such programme shall

also include provisions for involving

representatives of the Government in

preparation of the annual work programme

and work programme budgets as required

by paragraph 5.4 (d).



20.3



The Contractor shall be responsible for

on-the-job

training

of

Belizean

nationals during the exploration and

development

periods

pursuant

to

paragraphs 20.1 and 20.2. Commencing

with the first contract year following

initial commercial production in the

first

field,

the

Contractor

shall

undertake the responsibility of training

not less than two (2) Belizean nationals

per each calendar year in accordance

with paragraphs 20.1.

ARTICLE XXI



PURCHASES IN

BELIZE



21.1



In procurement, the Contractor shall

give preference to goods which are

produced or available in Belize and

services which are rendered by nationals

of Belize and companies of Belize,

provided such goods and services are

offered on ter.ms equal to or better than

imported goods and services with regard

to quality, price and availability at

the time and in the quantities required.



21.2



Locally produced or available equipment,

materials and supplies shall be deemed

equal in price to imported items if the

local cost of such locally produced or

available items at the Contractor's

operating base in Belize is not more

than ten percent (10%) higher than the

38



cost of such ~ported items before

customs duties but after transportation

and insurance costs have been added.

ARTICLE XXII

UNITIZATION





22.1



If a field is designated within the

contract area and

such field extends

beyond the contract area to other areas

of Belize over which other parties have

the

right

to

conduct

exploration,

development and production operations

the Government may require that the

development of

the

field

and

the

production of petroleum therefrom be

carried out in collaboration with the

other Contractors. The same rule shall

be applicable if deposits of petroleum

within the contract area, although not

equivalent to a commercial discovery if

developed alone, would be deemed to be a

commercial discovery if developed with

those parts of the deposits which extend

to

areas

controlled

by

other

Contractors.



22.2



If the Government so requests,

the

Contractor shall collaborate with other

Contractors in preparing a collective

proposal for common development and

production of the deposits of petroleum

for approval by the Government.



22.3



If the proposal for common development

and production has not been presented

within ninety (90) days of the request

described in paragraph 22.2, or if the

Government

does

not

approve

such

proposal, the Government may prepare or

cause to be prepared, for the account of

the Contractor and the other Contractors

involved, a reasonable plan for common

development and production.

If

the

government

adopts

such

plan,

the

Contractor

shall

comply

with

all

conditions established in such plan.



22.4



The Contractor may within twenty-eight

(28) days from the date on which notice

in writing of such plan has been given

to h~ by the ~nister refer the matter

to arbitration pursuant to Article XXIV.

In such event the plan shall not be

implemented until the tribunal renders a

decision or the parties agree on a

compromise plan, whichever occurs first.



22.5



This

Article

XXII

shall

also

be

applicable to discoveries of deposits

of petroleum within the contract

area

which extend to areas that are not

within the dominion of Belize, provided

that in these cases

the

Government

shall be empowered to ~pose the special

rules and conditions which may be

necessary to satisfy obligations

under

39



any

agreements

with

international

organizations or adjacent states with

respect

to

the

development

and

production

of

such

deposi ts

of

petroleum.

22.6



Within ninety 90) days foll.owing the

approval or adoption of a unitization

plan

for

common

development

and

production, the Contractor shall proceed

to operate under any such pl.an. If a

clause of a cooperative or unitary

development and production plan which by

its te~s affects the contract area or a

part of the same, contradicts a cl.ause

of this agreement, the clause of the

cooperative

or

unitary

plan

shall

prevail.

ARTICLE XXIII



DANGER TO

PERSONS,

PROPERTY OR

ENVIRONMENT



23.1



Within ninety (90) days of approval of

License

application

the

Contractor/

Licensee

shall.

submit

three

(3)

originals of an environmental assessment

of the expl.oratory work proposed by the

Contractor/Licensee based on guidel.ines

and standards acceptable to practices of

the International Petroleum Industry and

subject

to

final

approval

of

the

Government of Belize.



23.2



If the Government reasonably dete~ines

that any works or installations erected

by the Contractor or any operations

conducted by the Contractor endanger or

may endanger persons or third party

property or cause

pollution or ha~

wild-life or the environment to an

unacceptable degree, the Government may

require the Contractor to take remedial

measures within a

reasonable

period

established by the Government and to

repair any damage to the environment. If

the Government deems it necessary, it

may also require the Contractor to

discontinue

petroleum

operations

in

whole or in part until the Contractor

has taken such remedial. measures or has

repaired any damage. In the event that

the

Contractor

fails

to

take

the

remedial

measures

required

by

the

Government

within

the

time

period

establ.ished by the Government,

the

Government may carry out such remedial

measures for the Contractor's account.



ARTICLE XXIV

ARBITRATION





24.1



If any time during the continuance of

this contract or any renewal thereof or

after the te~ination

thereof

any

question, disagreement or dispute shal.l

40



arise regarding this contract or any

matter or thing connected therewith or

the breach thereof or the powers,

duties, or liabilities of the parties

thereunder,

the parties shall first

attempt to amicably solve the question,

disagreement

or

dispute

between

themselves by consulting and negotiating

with each other in good faith. If the

Government and the Contractor are not

able

to

amicably

resolve

their

differences

wi thin

a

period

of

forty-five

(45)

days

after

such

difference arises, then the dispute or

differences shall be finally settled by

arbi tration

in accordance with

the

Arbitration Rules of the United Nations

Commission on International Trade Law

hereinafter referred to as UNCITRAL

Arbitration rules) .

24.2



The number of arbitrators shall be three

(3). The Government shall appoint one

(1) and the Contractor shall appoint one

(1) .

The two

(2)

arbitrators

thus

appointed

shall

choose

the

third

arbitrator who will act as the Presiding

Arbitrator.

If

the

two

arbitrators

cannot come to an agreement on the

designation of the third, the third

arbitrator

shall

be

designated

in

accordance with the UNCITRAL Arbitration

Rules.



24.3



place of arbitration shall be

Belize if at the t~e of such

arbitration, Belize is recognized as a

member state of the 1958 Convention on

the Recognition

and

Enforcement

of

Foreign Arbi tral Awards

( "New York

Convention"). If Belize is not a member

state of the New York Convention at that

t~e, the place of arbitration shall be

Mexico City, Mexico.



The



Be~opan,



24.4



The

language

to

be

used

in

the

arbitration proceeding shall be English.



24.5



The arbitral tribunal shall decide all

questions presented on the basis of:

(a) the laws and regulations of Belize

applicable to this agreement and other

relevant

laws,

both

national

and

international;

(b) the provisions of the agreement, and

(c) trade usages and customs of

international petroleum industry.



24.6



the



Arbitral awards shall be final and

the

binding upon the

parties

from

upon

date they are made and judgement

41



the award may be entered in any court

having jurisdiction.



ARTICLE XXV

TERMINATION





25.1



The Government shall have the right to

ter.minate this agreement upon giving

thirty (30) days written notice of its

intention to do so if the Contractor (a)

fails to make any monetary payment

required by law or under this agreement

for a period of thirty (30) days after

the due date for such payment, (b) fails

to comply with any other material

obligation that he has assumed under

this agreement, (c) fails to comply with

the petroleum Act (8 of 1991) and any

lawful Acts, Regulations ,

orders or

instructions issued by the Government or

any

department

or

agency

of

the

Government, or (d) becomes bankrupt, or

goes

into

liquidation

because

of

insolvency or makes a composition with

its creditors.



25.2



If the circumstance or circumstances

that

result

in

ter.mination

under

paragraph 25.1 (a),

(b) or (c) are

remedied by the Contractor within the

thirty (30) days period following the

notice of ter.mination as aforesaid, such

ter.mination shall not become effective.



25.3



If the circumstance or circumstances

that

would

otherwise

result

in

ter.mination under paragraph 25.1 (b) or

(c) are the result of force majeure,

then ter.mination shall not take place so

long as such force majeure continue and

for

such period thereafter as

the

Government

may

deter.mine

to

be

reasonable.



25.4



The ter.mination of this agreement for

whatever

reason

shall

be

without

prejudice to the obligations incurred

and not discharged by the Contractor

prior to the date

of ter.mination.



25.5



In the event of ter.mination pursuant to

paragraph 25.1 or 25.7, the Government

may require the Contractor, for a period

not to exceed one hundred eighty (180)

days, to continue, for the account of

the Government, crude oil or natural gas

production activities until the right to

continue

such

production

has

been

transferred to another entity.



25.6



Within ninety

(90)

days after the

ter.mination of this agreement pursuant

42



to paragraph 25.1 or paragraph 25.7,

unless the M1nister has granted an

extension of this period, the Contractor

shall complete any reasonably necessary

action as directed by the Government to

remedy the environmental damage or a

hazard to human life or third party

property.

25.7





The Contractor shall have the right to

terminate this agreement 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) 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) days

written notice of its intention to do

so. Upon termination, the provisions of

paragraphs 4.7 and 4.8 shall apply.

ARTICLE XXVI



BOOKS, ACCOUNTS

26.1

AND AUDITS, RECORDS,

REPORTS AND INSPECTIONS



The Contractor shall be responsible for

keeping complete accounts, books and

records

reflecting

all

petroleum

operations

expenditures

and

gross

revenues

consistent

with

generally

accepted procedures and standards in the

international petroleum industry and in

accordance with the accounting procedure

outlined in the Bulletin of the Income

Tax Commissioner (Annex 1) .



26.2



Within ninety

(90)

days after the

expiration of each calendar year, the

Contractor

shall

submi t

to

the

Government detailed accounts showing all

petroleum operations expenditures and

all gross revenues during the past

calendar year. Before submission to the

Government,

the

accounts

shall

be

audited and certified by an independent

chartered accountant or certified public

accountant acceptable to both parties,

at the expense of the Contractor. It is

understood that the Government retains

the authority to review and audit the

Contractor's accounts, books and records

with respect to petroleum operations

conducted hereunder either directly or

through an accountant designated by the

Government.



26.3





The Government and its duly authorized

representatives shall have full and

complete access to the contract area at

all reasonable times with a right to

observe petroleum operations and shall

have the right to inspect all assets,

records, books, accounts and data kept

by the Contractor relating to petroleum

43



operations and this aqreement. In doinq

so,

the

Government

and

its

representatives

shall

not

unduly

interfere

with

the

Contractor's

petroleum

operations.

However,

the

Government and its representatives may

make a reasonable number of surveys,

drawinqs,

tests and copies for the

purpose of ~plementinq this aqreement.

In so doinq, the Government and its

representatives shall be entitled to

make reasonable use of the equipment and

instruments of the Contractor provided

that no damaqe to the equipment or

instruments

or

~ped~ent

to

the

petroleum operations hereunder shall

result from such use. The Government

shall

indemnify

and

reimburse

the

Contractor for any loss or damaqe which

may in fact result from any such use of

equipment and instruments, provided that

such loss or damaqe is reported to the

Government within twenty-four (24) hours

from the t~e of such inspection. The

Government and its representatives shall

be qiven reasonable assistance by the

Contractor for such functions, and the

Contractor

shall

afford

to

the

Government and its representatives all

facilities and privileqes afforded to

its own personnel in the field.

26.4



The

Contractor

shall

prepare

and

maintain accurate and current records of

its activities in the contract area

hereunder. The Contractor shall furnish

the Government in conformity with the

applicable requlations,

and as

the

Government

may

reasonably

require,

information, reports and data concerninq

its activities and operations under this

aqreement.



26.5



The Contractor shall save and keep for

the duration of this aqreement all

unused cores and samples taken from the

wells drilled, which shall be forwarded

to the inspector of Petroleum or his

authorized representatives at such t~e

and in the manner directed by the

Government.

All

cores

and

samples

acquired by the Contractor shall be

available for inspection

by

the

Inspector of Petroleum or his authorized

representatives at all reasonable t~es.

Unless previously

forwarded

to

the

Government

pursuant

to

instructions

qiven

under

this

paraqraph,

the

Contractor

shall

forward

to

the

Government all

remaininq cores

and

samples

upon

the

expiration

or

termination of this aqreement.



26.6



Unless otherwise aqreed to by the

Government, in the case of

exportinq

any rock or petroleum samples from

44



Belize for the purpose of testing and

analysis, samples equivalent in size and

quantity shall, before such exportation,

be

delivered

to

the

Inspector

of

Petroleum.

26.7





Originals of records and other data can

be exported only with the pe~ission of

the Government, provided, however, that

magnetic tapes and any other data which

must be processed or analyzed outside

Belize may be exported if a comparable

record is maintained in Belize and

provided that such exported records and

data shall be repatriated to Belize.



26.8





The Contractor shall provide to the

Inspector of petroleum in appropriate

fo~ all

original data resulting from

petroleum operations, including, but not

limited to,

geological,

geophysical,

petrophysical, engineering, well logs,

production data and completion status

reports and any other data which the

Contractor may compile during the te~

hereof, including all reports, analyses,

interpretations, maps and evaluations

thereof prepared by the Contractor and

any

Contractors,

sub-Contractors

or

consultants to the Contractor or by

affiliated companies, and cuttings of

all samples that have been obtained or

compiled

during

the

te~

hereof

("data").

The Government shall have

title to all such data. Such data shall

not be disclosed to third parties by the

Government prior to relinquishment of

the area to which they relate, or prior

to the end of the exploration period if

such area is not sooner relinquished,

provided, however, that the Government

may

make

copies

available

to

professional consultants, legal counsel,

accountants, underwriters, lenders and

such Government entities as may need to

be made aware thereof or have the right

to require disclosure. In any event, the

Contractor may retain copies of all such

data. The Contractor shall not disclose

such data to any third parties without

the Government's prior written consent,

provided, however, that the Contractor

may

make

copies

available

to

professional consultants, legal counsel,

accountants,

underwriters,

lenders,

affiliated companies and Contractors and

sub-Contractors of the Contractor and

such government entities as may need to

be made aware thereof or have the right

to require disclosure. Any data which

are disclosed by the Government or the

Contractor to third parties pursuant to

this paragraph (26.8) shall be disclosed

on te~s which ensure that such data are

treated

as

confidential

by

the

recipient. To the extent that there is

any inconsistency between the provisions

45



of

this

paragraph

(26.8)

and

the

provisions

of

Article

XXXIII,

the

provisions of this paragraph

(26.8)

shall govern.

ARTICLE XXVII

INSURANCE

27.1

AND INDEMNIFICATION



To ensure that the Contractor shall meet

his obligations to third parties, or to

Government agencies, that might arise in

the event of damage or injury (including

environmental damage or injury, removal

of wrecks and cleaning up caused by

accidents)

caused

by

petroleum

operations,

notwi thstanding that the

damage is accidental, the Contractor

shall maintain in force a third party

liability insurance policy covering the

activities of himself, his Contractors

and sub-Contractors and the employees of

all such parties. Such insurance policy

shall include the Government as an

additional

insured,

shall

waive

subrogation against the Government, and

shall provide that it may not be

cancelled except upon thirty (30) days

prior written notice to the Government.

A certificate evidencing such insurance

policy

shall

be

furnished

to

the

Government within ninety (90) days of

the

effective

date .

The

1imits ,

coverage, deductib1es and other terms

thereof shall be subject to approval in

writing by the Government. To the extent

that

such

third

party

liability

insurance is unavailable or is not

obtained, or does not cover part or all

of any claims or damage caused by or

resulting from petroleum operations, the

Contractor

shall

remain

fully

responsible and shall defend, indemnify

and hold the Government harmless against

all such claims, losses and damages of

any nature whatsoever.



27.2





The Contractor shall indemnify, defend

and hold the Government harmless against

all claims, losses and damages of any

nature whatsoever, including, without

limitation, claims for loss or damage to

property or injury or death to persons,

caused

by

or

resulting

from

any

petroleum operations conducted by or on

behalf of the Contractor, provided that

the

Contractor

shall

not

be

held

responsible to the Government under this

paragraph (27.2) for any loss, claim,

damage or injury caused by or resulting

from any negligent action of personnel

of the Government.



27.3





The

Contractor

shall

contribute

one/tenth of a percent (0.1%) of the

value of the annual gross production of

crude oil and/or natural gas produced

and saved in each calendar year and not

46



used or consumed in petroleum operations

to a Common Fund to be held in trust by

the Government and managed for the sole

purpose of indemnification against any

or all environmental damages caused

during the petroleum operations.

27.4



Nothing contained in paragraph (27.3)

above shall be construed to relieve the

Contractor

of

his

obligations

of

indemnification as set

out

in

this

agreement.



ARTICLE XXVIII

ASSIGNMENT



28.1



The Contractor may assign, transfer,

conveyor otherwise dispose of any part

or all of its rights or interest under

this agreement with the prior written

consent of the Government, which consent

shall not be unreasonably withheld.



28.2



Notwithstanding

the

provisions

of

paragraph

28.1,

if

the

Contractor

assigns to any affiliated company, the

Contractor shall remain fully liable for

the performance of this agreement and

shall

be

fully-liable

for

the

performance of any such assignee.



28.3



In the case of an assignment to any

non-affiliated company, the Contractor

shall provide to the Government an

unconditional

undertaking

by

the

assignee to assume all obligations of

the Contractor under this agreement.

Notwithstanding such undertaking, the

Contractor shall remain

jointly and

severally liable with the assignee for

performance of the obligations of the

Contractor unless the Contractor assigns

his

entire

interest

under

this

agreement.



ARTICLE XXIX

LAW OF THE



29.1



AGREEMENT



This agreement shall be construed under,

governed

by

and

interpreted

in

accordance with the laws of Belize and

such principles of international law as

may be applicable.



ARTICLE XXX



FOR C E

MAJEURE



30.1



Except as otherwise provided in this

Article, each party shall be excused

from complying with the terms of this

agreement, except for the payment of

monies

due,

for

so

long

as

such

compliance is prevented by strikes, wars

(declared or undeclared), acts of God or

by any act or cause that is reasonably

beyond the control of such party, such

causes being herein sometimes called

47



"force majeure".

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 agreement, such party shall

give notice and details of force majeure

in writing to the other party wi thin

seven (7) 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. Such party shall do all that

is reasonably within its power to remove

such cause.



ARTICLE XXXI

ENTIRE

AGREEMENT



31.1



AND



AMENDMENTS



This agreement emb04ies the entire

agreement and understanding between the

Contractor and the Government relative

to the subject matter hereof, and

supersedes and replaces any provisions

on the same subject in any other

agreement between the parties, whether

wri tten or oral, prior to the date of

this agreement. This agreement may not

be

amended,

modified,

varied

or

supplemented except by an instrument in

writing signed by the Contractor and the

Government.



ARTICLE XXXII

WAIVER



32.1



Performance of any

condition

or

obligation to be performed hereunder

shall not be deemed to have been waived

or postponed except by an instrument in

writing signed by the party which is

claimed to have granted such waiver or

postponement.



32.2



No waiver by any party of anyone or

more obligations or defaults by any

other party in the performance of this

agreement shall operate or be construed

as a waiver of any other obligations or

defaults whether of a like or of a

different character.

ARTICLE XXXIII



CONFIDENTIALITY



33.1



This agreement and any confidential

information of any party hereto which

Becomes known to the other party in

connection with the performance of this

agreement shall not be published or

disclosed to third parties without the

former party's written consent, except

as

otherwise

provided

herein,

and

provided however that such other party

may communicate confidential information

to legal counsel, accountants, other

professional consultants, underwriters,

lenders agents, Contractors or shipping

48



companies to the extent necessary in

connection with this agreement, with the

obligation of the parties receiving such

information to maintain confidentiality,

or to an agency of the Government of the

country of

the

Contractor

having

authority to require such disclosure.

The term "confidential information" as

used herein

shall

mean

information

identified as "confidential" by the

party originally in possession of it and

disclosed to the other party, excluding

information which is publicly known

(except through disclosure of the other

party in violation of this Article

XXXIII) or information that comes into

the legitimate possession of such other

party.

33.2



The confidentiality obligations of this

Article

XXXIII

shall

expire

upon

relinquishment of the area to which the

information relates.



ARTICLE XXXIV

NOTICES





34.



All notices and other communications

required or permitted hereunder or any

notices that one party may desire to

give to the other party shall be in

writing in the English language and

deemed to have been properly delivered

if personally handed to an authorized

representative of the party for whom

intended, or sent by registered airmail,

facsimile, or by cable or telex, at or

to the address of such party for whom

intended, or such other addresses as any

party may from time to time designate by

notice in writing to the other party.



49



IN WITNESS WHEREOF,

hereunto set their hands

before written.



the Government and the Contractor have

and seal.s the day and year first herein



SIGNED, SEALED AND DELIVERED BY



Industry.



for and on behal.f

the Government

of Bel.ize in the

presence of:



Resources



Ll--~~~_~~



SIGNED, SEALED AND DELIVERED BY

For and on behal.f of

RSM PRODUCTION CORPORAT

-~

in the presence of:

\.~~e.ct:r28~



A-~ - h,,- ~\I\.- ~



Jack J. Grynberg

President



t:i""



9J~



WITNESS



0,,~

~ P:~;~~ ~

,#



34/33 U r~.y

..., OJ.va. J

• "., :



BefrnoI:xm

Ge<,'togy



I,

sign, seal. and

deed.



:~~



,

I



J ri /





~ ~/



of Belmop



,hereby acknowl.edqe that I did

as my act and



~=-~~l.n-written document



Acknowl.edged at BELMOPAN this



day



~J 2000

e t and Industry



Before me,

PEEOO~-;tT



BE IT REMEMBERED, that on the

.3 vJ

day of

personal.l.y appeared before me the within-named

and acknowl.edged before me that he/she did sign, seal. and del.iver

within- written instrument as his act and deed and that the

signature of

-JO fM e~l c6ilO

is in his writing.

TARY



50



I,



~



OATH AND SAY as follows:



1.

I am a subscribing witness to the

./



execution of this deed by

~ (] k


2.



I was present and did see



duly affix the common seal of the said company to this Deed.





"



~ LJ~



c:::-::J:Ce'

~



~



3.

The signature "

is in the proper handwr



'I- U-.Je



"

. g of'

. 4J ),G- ~~,"",and signature

" i s my own proper handwriting.



SWORN at BELMOPAN

THIS



rs J



DAY OF



2000



Before me,



PE

BE IT REMEMBERED



~~)



that on the



day of



2000



personally appeared before me the within-named



qu~ <-;j- L~



and



made oath that she was a subscribing witness to the execution of

this DEED by



~ Gk~ l~cJ-&..'Y


was present and did see



~ (3J_~l~e.e1c:vb!:J




this DEED and that the signatures"



cff v~



i



~ ~ ~ a r e in their respective prog



~



and



and writings



51



EXHIBIT - "A"



DESCRIPTION OF CONTRACT AREA



BELIZE EXPLORATION BLOCK B COORDINATES



BLOCK B

7.



17° 45' 00" N



88° 45' 19" W



8.



17° 49' 11" N



88° 53' 11" W



9.



17° 49' 11" N



88° 47' 27" W



10.



17° 51' 26" N



88° 47' 27" W



11.



17° 51 ' 26" N



88° 50' 51" W



12.



17° 53' 16" N



88° 50' 51" W



13.



88° 52' 20" W



14.



17° 53 ' 16" N

17° 54' 05" N



88° 52' 20 11 W



15.



17° 45' 00" N



89° 09' 00" W



Total area of BLOCK B 816 Km2 • or 201,638 acres



52



EXHIBIT "B"





MAP OF CONTRACT AREA BLOCK - B





202



201



1



~~I----- ----I---~

/99



I



/98



:~---I



~.20-



._+-­!



Aor+­

!



I

199







eRe

198



I



I

I



I



53



r-



I hereby certify that I have counted the within-written document and that it

contains two hundred twenty seven (227) folios of seventy-two words each

and forty-six (46) words over and no more.



RD



AS WITNESS my hand this 3 day of April, 2000.



THIS DOCUMENT was prepared in the Petroleum Office for the Inspector of

Petroleum for and on behalf of the Government of Belize.



INSPECTOR OF PETROLEUM





54





BELIZE:



AN AGREEMENT made on the



/



qf"'-



day of July, 2007; by and



between the GOVERNMENT OF BELIZE, (hereinafter referred to as the

"Government") acting through the Minister of Natural Resources and the

Environment and RSM PRODUCTION CORPORATION, a corporation duly

organized and existing under the laws of Belize with registered address at 35 New

Road, P.O. Box 1846, Belize City, Belize (hereinafter referred to as the

"Contractor").

WHEREAS the Government and the Contractor entered into Production

Sharing Agreements (hereinafter referred to as the "PSAs") with effective date of

October 23, 2000 for the exploration of areas in Belize set forth in Exhibit B to

the PSAs.



~/



AND WHEREAS the Contractor has by letter requested and the

Government has consented to amend the terms of Article 3.1 of the said PSAs so

as to extend the "Third Renewal Period".



-'"



NOW THIS AGREEMENT is as follows:



1.



The parties hereby agree to delete in Article 3.1 of the said PSAs,

the words "The Contractor is authorized to conduct exploration

operations during an exploration period which shall be comprised

of (i) an initial exploration period of two (2) contract years ("Initial

Exploration Period"), and (ii) subject to the conditions hereinafter

provided, three (3) successive renewal periods ("First Renewal

Period", "Second Renewal Period" and "Third Renewal Period")

of two (2) years each to the initial exploration period." and to

replace them with the following words:







"The Contractor is authorized to conduct exploration operations

during an exploration period which shall be comprised of (i) an

initial exploration period of two (2) contract years ("Initial

Exploration Period"), and (ii) subject to the conditions hereinafter

provided, three (3) successive renewal periods (a "First Renewal

Period" and a "Second Renewal Period" of two (2) years each and

a "Third Renewal Period" of four (4) years) to the initial

exploration period."



IN WITNESS WHEREOF, the Government and the Contrac r have

hereunto set their hands and seals the day and year first herein before wri en.



SIGNED SEALED and DELIVERED

by FLORENCIO MARlN, Minister of

Natural Resources and the Environment

for and on behalf of the Government of

Belize in the presence of:



(



)



~



)



/_­

FLORENCIO MARIN



)



SIGNED SEALED and DELIVERED

)

by JACK GRYNBERG for and on behalf of)

RSM Petrolewn Corporation in the

)

presence of:

)



JAC~R&a~G f



.



President of RSM Petrolewn

Corporation



2