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CONCESSION AGREEMENT FOR

GAS AND CRUDE OIL

EXPLORATION AND EXPLOITATION

BETWEEN

THE ARAB REPUBLIC OF EGYPT

AND

THE EGYPTIAN NATURAL GAS HOLDING COMPANY

AND

-----------------------------------------AND

----------------------------------------------AND

--------------------------------------IN

----------------------- AREA

--------------------------------------A.R.E.



INDEX

ARTICLE

ARTICLE I

ARTICLE II

ARTICLE III

ARTICLE IV

ARTICLE V

ARTICLE VI

ARTICLE VII

ARTICLE VIII

ARTICLE IX

ARTICLE X

ARTICLE XI

ARTICLE XII

ARTICLE XIII

ARTICLE XIV

ARTICLE XV

ARTICLE XVI

ARTICLE XVII

ARTICLE XVIII

ARTICLE XIX

ARTICLE XX

ARTICLE XXI

ARTICLE XXII

ARTICLE XXIII

ARTICLE XXIV

ARTICLE XXV

ARTICLE XXVI

ARTICLE XXVII

ARTICLE XXVIII

ARTICLE XXIX



TITLE



PAGE



DEFINITIONS ...............................................................................4

ANNEXES TO THE AGREEMENT.............................................10

GRANT OF RIGHTS AND TERM ...............................................11

WORK PROGRAM AND EXPENDITURES

DURING

EXPLORATION PHASE .............................................................23

RELINQUISHMENTS .................................................................29

OPERATIONS AFTER COMMERCIAL DISCOVERY ................32

RECOVERY OF COSTS AND EXPENSES AND PRODUCTION

SHARING ...................................................................................34

TITLE TO ASSETS .....................................................................52

BONUSES ..................................................................................53

OFFICE AND SERVICE OF NOTICES ......................................57

SAVING OF PETROLEUM AND PREVENTION OF LOSS .......57

CUSTOMS EXEMPTIONS .........................................................58

BOOKS OF ACCOUNT; ACCOUNTING AND PAYMENTS ......60

RECORDS, REPORTS AND INSPECTION ...............................61

RESPONSIBILITY FOR DAMAGES...........................................63

PRIVILEGES OF GOVERNMENT REPRESENTATIVES ..........64

EMPLOYMENT RIGHTS AND TRAINING OF ARAB REPUBLIC

OF EGYPT PERSONNEL ..........................................................64

LAWS AND REGULATIONS ......................................................65

STABILIZATION .........................................................................66

RIGHT OF REQUISITION ..........................................................67

ASSIGNMENT ............................................................................68

BREACH OF AGREEMENT AND POWER TO CANCEL ..........70

FORCE MAJEURE .....................................................................71

DISPUTES AND ARBITRATION ................................................72

STATUS OF PARTIES ...............................................................73

LOCAL CONTRACTORS AND LOCALLY MANUFACTURED

MATERIAL ..................................................................................74

TEXT OF THE AGREEMENT .....................................................74

GENERAL ...................................................................................74

APPROVAL OF THE GOVERNMENT .......................................75



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ANNEXES TO THE

CONCESSION AGREEMENT

ANNEX

ANNEX “A”

ANNEX “B”

ANNEX "C"

ANNEX "D"

ANNEX "E"

ANNEX "F"

ANNEX "G-1"

ANNEX "G-2"

ANNEX "G-3"



TITLE



PAGE



BOUNDARY DESCRIPTION OF THE CONCESSION AREA ...76

MAP OF THE CONCESSION AGREEMENT .............................78

BANK LETTER OF GUARANTEE ..............................................79

CHARTER OF THE JOINT VENTURE COMPANY ...................81

ACCOUNTING PROCEDURE ....................................................85

DEVELOPMENT LEASE ABANDONMENT COST RECOVERY

MECHANISM ..............................................................................99

MAP OF THE NATIONAL GAS PIPELINE GRID SYSTEM .....103

MAP

OF

CRUDE

AND

CONDENSATE

PIPELINE

NETWORK. ..............................................................................104

MAP OF LPG PIPELINE NETWORK. ......................................105



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CONCESSION AGREEMENT FOR GAS AND CRUDE OIL

EXPLORATION AND EXPLOITATION

BETWEEN

THE ARAB REPUBLIC OF EGYPT

AND

THE EGYPTIAN NATURAL GAS HOLDING COMPANY

AND

-------------------------------------AND

-------------------------------------------------------AND

----------------------------------------------------IN

------------------------- AREA

----------------------------A.R.E.

This Agreement made and entered on this ------ day of ------20---, by and

between the ARAB REPUBLIC OF EGYPT (hereinafter referred to variously

as the "A.R.E." or as the "GOVERNMENT"), the EGYPTIAN NATURAL GAS

HOLDING COMPANY, a legal entity created by the Prime Minister Decree

No. 1009 of 2001, as amended, and according to Law No. 203 of 1991, as

amended (hereinafter referred to as "EGAS"), --------------------------- a ------------- company organized and existing under the laws of --------------------------- (hereinafter referred to as “---------------”) or CONTRACTOR. -------------------------------------, a --------------- company organized and existing under the

laws of ---------------- (hereinafter referred to as “------------”) and ----------------------, a ----------------- company organized and existing under the laws of -------------- (hereinafter referred to as “----------”). ---------------, ------------ and ------------- shall be hereinafter referred to collectively as "CONTRACTOR" and

individually as “CONTRACTOR Member”.



PREAMBLE

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WHEREAS, all minerals, including Petroleum, existing in mines and quarries

in the A.R.E., including its territorial waters, and in the seabed subject to its

jurisdiction and extending beyond its territorial waters, are the property of the

State;

WHEREAS, EGAS has applied to the GOVERNMENT for an exclusive

concession for the Exploration and exploitation of Gas and Crude Oil in and

throughout the Area referred to in Article II, and described in Annex "A" and

shown approximately on Annex "B", which are attached hereto and made

part hereof (hereinafter referred to as the "Area");

WHEREAS, --------------, ------------ and ------------- agree(s) to undertake their

obligations provided hereinafter as CONTRACTOR with respect to the

Exploration, Development and production of Petroleum in -------------AREA, -------------;

WHEREAS, the GOVERNMENT hereby desires to grant such concession

pursuant to this Agreement; and

WHEREAS, the Minister of Petroleum, pursuant to the provisions of Law No.

66 of 1953 as amended, may enter into a concession agreement with EGAS,

and with--------, ------- and -------- as CONTRACTOR in the said Area.

NOW, THEREFORE, the parties hereto agree as follows:



ARTICLE I

DEFINITIONS

“Affiliated Company” means a company:



(a)

(i)



of which the share capital, conferring a majority of votes at

stockholders' meetings of such company, is owned directly or

indirectly by a party hereto; or



(ii) which is the owner directly or indirectly of share capital conferring a

majority of votes at stockholders' meetings of a party hereto; or

(iii) of which the share capital conferring a majority of votes at

stockholders' meetings of such company and the share capital

conferring a majority of votes at stockholders' meetings of a party

hereto are owned directly or indirectly by the same company.

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(b)



“Agreement” means this Concession Agreement and its Annexes.



(c)



“A.R.E.” means the Arab Republic of Egypt.



(d)



“Barrel” shall consist of forty two (42) United States gallons, liquid

measure, corrected to a temperature of sixty degrees Fahrenheit

(60°F) at atmospheric pressure of 14.696 PSIA.



(e)



“Brent Price” means the simple arithmetic average of the monthly

average price of the Mid of Platts Prices Dated Brent for six (6) months

(t-1, t-2, t-3, t-4, t-5, t-6) immediately preceding the month of delivery

of the sold Gas expressed in U.S. Dollars/Barrel. “Dated Brent” means

the price assessment in US$/bbl (calculated using the average of the

mean of the daily highs and lows of Brent quotations) as published in

Platts Crude Oil Marketwire report.



(f)



“BTU” (British Thermal Unit) means the amount of energy required to

raise the temperature of one (1) pound of pure water by one degree

Fahrenheit (1°F) from sixty degrees Fahrenheit (60°F) to sixty one

degrees Fahrenheit (61°F) at a constant pressure of 14.696 PSIA.



(g)



“Calendar Year” means a period of twelve (12) months from 1st January

to 31st December according to the Gregorian calendar.



(h)



“Commercial Discovery” has the meaning ascribed in Article III (c)



(i)



Commercial Well:

i- “Commercial Gas Well” means the first well on any geological

feature which, after testing for a period of not more than thirty (30)

consecutive days, where practical, but in any event in accordance

with sound and accepted industry production practices and verified

by EGAS, is found to be capable of producing at the average rate

of not less than fifteen million (15000000) Standard Cubic Feet of

Gas per day (SCFPD). The date of discovery of a Commercial Gas

Well is the date on which such well is tested and completed

according to the above.

ii- “Commercial Oil Well” means the first well on any geological feature

which, after testing for a period of not more than thirty (30)

consecutive days, where practical, but in any event in accordance

with sound and accepted industry production practices and verified

by EGAS, is found to be capable of producing at the average rate

of not less than three thousand (3000) Barrels of Oil per day

(BOPD) in case of Oil well. The date of discovery of a Commercial

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Oil Well is the date on which such well is tested and completed

according to the above.

(j)



“Commercial Production” means Petroleum produced and saved for

regular shipment or delivery, as may be applicable for Oil or Gas.



(k)



“Commercial Production Commencement” means the date on which

the first regular shipment of Crude Oil or the first regular deliveries of

Gas are made.



(l)



“Condensate" means a mixture consisting principally of pentanes and

heavier hydrocarbons which is recovered as a liquid from Crude Oil or

Natural Gas in processing and separation facilities.



(m)



“CONTRACTOR” could be one or more companies (each company to

be individually referred to as “CONTRACTOR Member”). Unless

modified in accordance with Article XXI herein, CONTRACTOR under

this Agreement shall mean --------, -------- and ------------.



(n)



“Cost Recovery Petroleum” has

Article VII(a)(1) of this Agreement.



(o)



“Delivery Point” is defined as follows:



the



meaning



ascribed



in



i- In case Gas is sold or disposed of for export the delivery point shall

be agreed upon between EGAS and CONTRACTOR;

ii- In case Gas is sold or disposed of to EGAS, the delivery point shall

be the point specified by this Agreement, unless otherwise agreed

upon between EGAS and CONTRACTOR;

iii-In case Gas is sold or disposed of to third party within the Egyptian

Market, the delivery point shall be agreed upon between EGAS and

CONTRACTOR;

ivIn case of Crude Oil and/or Condensate, delivery point shall be

agreed upon between EGAS/EGPC and CONTRACTOR in

accordance with this Agreement.

(p)



“Development” includes, without limitation, all the operations and

activities pursuant to approved work programs and budgets under this

Agreement with respect to:

i- drilling, plugging, deepening, side tracking, re-drilling, completion

and equipping of development wells and the change of a well status;

and

ii- design, engineering, construction, installation, servicing and

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maintenance of equipment, lines, systems facilities, plants and

related operations to produce and operate said development wells,

taking, saving, treatment, handling, storage, transportation and

delivery of Petroleum, re-pressuring, recycling and other secondary

recovery projects; and

iii-transportation, storage and any other work or activities necessary or

ancillary to the activities specified in (i) and (ii) above.

(q)



“Development Block” means an area the corner points of which have

to be coincident with one (1) minute × one (1) minute latitude and

longitude divisions according to the International Coordinates Grid

System, where possible, or with the existing boundaries of the Area

covered by this Agreement as set out in Annex "A".



(r)



“Development Lease(s)” means rights and obligations under this

Agreement through which an area that covers the Development

Block(s) is converted to a development lease after the approval of the

Minister of Petroleum under Article III(d) of this Agreement. Such area

should cover the geological structure capable of production, the corner

points of which have to be coincident with latitude and longitude

divisions according to the International Coordinates Grid System,

where possible, or with the existing boundaries of the Area covered by

this Agreement as set out in Annex "A".



(s)



“Development Period” has the meaning ascribed in Article III(d)(iii) of

this Agreement.



(t)



“Effective Date” means the date on which this Agreement is signed by

the GOVERNMENT, EGAS and CONTRACTOR after the relevant law

is issued.



(u)



“EGPC” means the Egyptian General Petroleum Corporation, a legal

entity created by Law No. 167 of 1958, as amended.



(v)



“Egypt Upstream Gateway” means, integral digital platform for all

Exploration and Production data (hereinafter referred to as “EUG”), to

preserve legacy data, manage active data and promote the upstream

opportunities and attract new investments through international bid

rounds and through which CONTRACTOR can access, use, trade and

deliver all data, information and geological and geophysical studies for

the upstream activities in Egypt.



(w)



“Exploration” includes such geological, geophysical, aerial and other

surveys as may be contained in the approved Exploration work

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programs and budgets, and the drilling of shot holes, core holes,

stratigraphic tests, drilling Wells for the discovery of Petroleum or the

appraisal of Petroleum discoveries and other related holes and wells,

and the purchase or acquisition of such supplies, materials, services

and equipment therefore, all as may be contained in the approved work

programs and budgets. The verb "explore" means the act of conducting

Exploration and the word “exploratory” means relative to Exploration.

(x)



“Exploration Block” means an area the corner points of which are

coincident with three (3) minutes × three (3) minutes latitude and

longitude divisions according to the International Coordinates Grid

System, where possible, or with the existing boundaries of the Area

covered by this Agreement as set out in Annex "A”.



(y)



“Exploration Work Program and Budget” has the meaning ascribed in

Article IV(c) of this Agreement.



(z)



“Excess Cost Recovery” has the meaning ascribed in Article VII(a)(2)

of this Agreement.



(aa) “Financial Year” means the GOVERNMENT’s financial year according

to the laws and regulations of the A.R.E..

(bb) “Gas” means natural gas both associated and non-associated, and all

of its constituent elements produced from any well in the Area (other

than Liquid Crude Oil) and all non-hydrocarbon substances therein.

(cc) “Gas Sales Agreement” means a written agreement entered into

pursuant to Article VII(e) between EGAS and/or CONTRACTOR (as

sellers) and EGAS or a third party (as buyers), which contains the

terms and conditions for Gas sales from a Development Lease.

(dd) “Joint Venture Company” is a company to be formed in accordance

with Article VI and Annex “D” of this Agreement.

(ee) “Liquid Crude Oil” or “Crude Oil” or “Oil” means any hydrocarbon

produced from the Area which is in a liquid state at the wellhead or

lease separators or which is extracted from the Gas or casing head

Gas in a plant. Such liquid state shall exist at sixty degrees Fahrenheit

(60°F) and atmospheric pressure of 14.696 PSIA. Such term includes

distillate and Condensate.

(ff)



“Liquefied Natural Gas (LNG)” means Natural Gas that has been

liquefied by cooling it to approximately negative two hundred and sixty

degrees Fahrenheit (-260°F) at atmospheric pressure.

-8-



(gg) “Liquefied Petroleum Gas (LPG)” means a mixture of principally butane

and propane liquefied by pressure and temperature.

(hh) “Minimum Expenditure Obligations” means, in relation to a given

Exploration period, the minimum amount of expenditure that

CONTRACTOR is obligated to spend during such Exploration period

as set out, or as may be adjusted, in accordance with Article IV(b) of

this Agreement.

(ii)



“Minimum Exploration Work Obligations” means, in relation to a given

Exploration period, the minimum Exploration works that

CONTRACTOR shall undertake during such Exploration period as set

out, or as may be adjusted, in accordance with Article IV(b) of this

Agreement.



(jj)



“Operator” means CONTRACTOR (if it is one company) or one of the

CONTRACTOR Members (if they are more than one company), as the

case may be, appointed by them to be the entity to which, from which

and in whose name all notifications related to or in connection with this

Agreement shall be made. CONTRACTOR shall notify the name of the

Operator to EGAS.



(kk) “Petroleum” means Liquid Crude Oil of various densities, asphalt, Gas,

casing head Gas and all other hydrocarbon substances that may be

discovered and produced from the Area, or otherwise obtained and

saved from the Area under this Agreement, and all substances that may

be extracted there from.

(ll)



“Production Sharing” has the meaning ascribed in Article VII(b)(1) of

this Agreement.



(mm) “Standard Cubic Foot (SCF)” is the amount of Gas necessary to fill one

(1) cubic foot of space at atmospheric pressure of 14.696 PSIA at a

base temperature of sixty degrees Fahrenheit (60°F).

(nn) “Tax Year” means the period of twelve (12) months according to the

laws and regulations of the A.R.E..

(oo) “Year” means a period of twelve (12) months according to the

Gregorian calendar.



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ARTICLE II

ANNEXES TO THE AGREEMENT

Annex “A” is a description of the Area covered and affected by this

Agreement, hereinafter referred to as the "Area".

Annex “B” is a provisional illustrative map on the scale of approximately (1:

--- --- ---) indicating the Area covered and affected by this Agreement and

described in Annex "A".

Annex “C” is the form of a Bank Letter of Guarantee to be submitted by

CONTRACTOR to EGAS for the sum of ---------------- million U.S. Dollars ($

---000000) after the issuance of the relevant law and before the date of

signature by the Minister of Petroleum of this Agreement, to guarantee the

execution of CONTRACTOR’s Minimum Exploration Work Obligations

hereunder for the first Exploration period of ------ (--) Year(s). In case

CONTRACTOR elects to enter the second Exploration period and third

Exploration period each of ----- (------) Years and ----- (---) Years respectively

in accordance with Article III(b) of this Agreement, two (2) similar Letter(s) of

Guarantee shall be issued and be submitted by CONTRACTOR on the day

the CONTRACTOR exercises its option to enter the second and third

Exploration period(s). The Letter of Guarantee which is related to the second

Exploration period shall be for the sum of ------------ million U.S. Dollars ($ --000000) and the Letter of Guarantee which is related to the third Exploration

period shall be for the sum of ------------ million U.S. Dollars ($ ---000000),

less in both instances any excess expenditures incurred in the preceding

Exploration period permitted for carry forward in accordance with Article

IV(b) third paragraph of this Agreement and approved by EGAS.

In case of any shortfall (the difference between the amount of

CONTRACTOR's Minimum Expenditure Obligations for any Exploration

period and the total amount of expenditures actually incurred and paid by

CONTRACTOR and approved by EGAS for the same Exploration period

plus any carry forward amount approved by EGAS from the previous

Exploration period, if any), EGAS shall notify CONTRACTOR in writing by

the value of such shortfall. Within fifteen (15) days from the date of this

notification, CONTRACTOR shall transfer the amount of the shortfall to

EGAS's account and if CONTRACTOR did not transfer the amount of this

-10-



shortfall within the mentioned fifteen (15) days, EGAS has the right to

liquidate the concerned Letter of Guarantee.

Each letter of the two (2) or three (3) Letters of Guarantee shall remain

effective for six (6) months after the end of the relevant Exploration period

for which it has been issued, except as it may expire prior to that time in

accordance with its terms.

The CONTRACTOR has the right to submit a letter that entitles EGAS to

solidify an amount, from the CONTRACTOR’s dues at EGAS/EGPC, equal

to the financial commitment of the then current Exploration period.

Annex “D” is the form of a Charter of the Joint Venture Company to be

formed as provided for in Article VI hereof.

Annex “E” is the Accounting Procedure.

Annex “F” is the Development Lease abandonment cost recovery

mechanism.

Annex “G” is the following maps of:

1- The National Gas Pipeline Grid System.

2- Crude and Condensate Pipeline Network.

3- LPG Pipeline Network.

Annexes "A", "B", "C", "D", "E", "F" and "G" to this Agreement are hereby

made part hereof, and they shall be considered as having equal force and

effect with the provisions of this Agreement.



ARTICLE III

GRANT OF RIGHTS AND TERM

The GOVERNMENT hereby grants EGAS and CONTRACTOR, subject to

the terms, covenants and conditions set out in this Agreement, which insofar

as they may be contrary to or inconsistent with any provisions of Law No. 66

of 1953, as amended, shall have the force of law, an exclusive concession

in and to the Area described in Annexes "A" and "B".

(a) The GOVERNMENT shall own and be entitled to, as hereinafter

provided, a royalty in cash or in kind of ten percent (10%) of the total

quantity of Petroleum produced and saved from the Area during the

Development Period including its extension, if any. In case EGAS buys

CONTRACTOR’s share, said royalty shall be borne and paid by EGAS

-11-



and shall not be the obligation of CONTRACTOR. In that case the

payment of royalties by EGAS shall not be deemed to result in an

income attributable to the CONTRACTOR.

In case CONTRACTOR disposes all or part of its share of Production

Sharing, by itself to local market after obtaining the Minister of

Petroleum’s approval, CONTRACTOR shall pay to EGAS an amount

equal to the royalty to be paid by EGAS in respect of such Petroleum,

the payment of such royalties by CONTRACTOR shall be deemed to

be non-recoverable cost.

In case CONTRACTOR export all or part of its share of Production

Sharing, solely or jointly with EGAS after obtaining the Minister of

Petroleum's approval, CONTRACTOR shall pay to EGAS an amount

equal to the royalty to be paid by EGAS in respect of the quantities

exported by CONTRACTOR, the payment of such royalties by

CONTRACTOR shall be deemed to be non-recoverable cost.

(b) A first Exploration period of ----- (---) Year(s) shall start from the Effective

Date. Second Exploration period of ----- (--) Years and third Exploration

period of ----- (--) Years, shall be granted to CONTRACTOR at its

option, upon written notice given to EGAS not less than thirty (30) days

prior to the end of the then current Exploration period, as may be

extended pursuant to the provisions of Article V(a), and subject only to

CONTRACTOR having fulfilled its obligations hereunder for that period.

This Agreement shall be terminated if neither a Commercial Discovery

of Oil nor a Commercial Discovery of Gas is established by the end of

the ----- (--th) Year of the Exploration phase, as may be extended

pursuant to Article V(a). The election by EGAS to undertake a sole risk

venture under paragraph (c) below shall neither extend the Exploration

period nor affect the termination of this Agreement as to

CONTRACTOR.

(c) Commercial Discovery:

(i)



"Commercial Discovery" whether of Oil or Gas may consist of one

(1) producing reservoir or a group of producing reservoirs which is

worthy of being developed commercially. After discovery of a

Commercial Oil or Gas Well, CONTRACTOR shall, unless

otherwise agreed upon with EGAS, undertake as part of its

Exploration program the appraisal of the discovery by drilling one

(1) or more appraisal wells, to determine whether such discovery is

worthy of being developed commercially, taking into consideration

-12-



the recoverable reserves, production, pipeline and terminal

facilities required, estimated Petroleum prices, and all other

relevant technical and economic factors.

(ii) The provisions laid down herein postulate the unity and indivisibility

of the concepts of Commercial Discovery and Development Lease.

They shall apply uniformly to Oil and Gas, unless otherwise

specified.

(iii) CONTRACTOR shall give notice of a Commercial Discovery to

EGAS immediately after the discovery is considered by

CONTRACTOR to be worthy of commercial development, but in

any event, with respect to a Commercial Oil Well, not later than

thirty (30) days following the completion of the second appraisal

well or twelve (12) months following the date of the discovery of the

Commercial Oil Well, whichever is earlier; or with respect to a

Commercial Gas Well, not later than twenty four (24) months from

the date of the discovery of the Commercial Gas Well (unless

EGAS agrees to extend such period either for a Commercial Oil or

Gas Well). CONTRACTOR shall also have the right to give such

notice of Commercial Discovery with respect to any reservoir(s) if

the well(s), thereon, in its opinion, considered collectively could be

worthy of commercial development after EGAS’s approval.

Without prejudice to the provisions of Article (V)(a) fourth (4th)

paragraph, if CONTRACTOR achieves a Commercial Discovery

either for Oil or Gas within a period less than the period mentioned

above and before the end of the last Exploration period, the

CONTRACTOR should submit to EGAS such notice thirty (30)

days before the end of the last Exploration period, and in case

CONTRACTOR didn’t submit such notice within such period,

EGAS shall have the right to exercise the sole risk venture by any

other means deemed to be appropriate by EGAS and the

CONTRACTOR has no right to have recourse against EGAS for

compensation or expenditures or costs or any share in production.

CONTRACTOR may also give a notice of a Commercial Discovery

of Oil in the event it wishes to undertake a Gas recycling project.

A notice of Commercial Discovery of Gas shall contain all detailed

particulars of the discovery, especially the area containing

recoverable reserves, the estimated production potential and

profile, field life, Gas analysis, the required pipeline and production

-13-



facilities, estimated Development costs, estimated Petroleum

prices and all other relevant technical and economic factors (unless

otherwise agreed upon by EGAS).

“Date of Notice of Commercial Discovery” means the date on which

CONTRACTOR notifies EGAS of (i) the existence of a Commercial

Oil Well or a Commercial Gas Well; or (ii) with respect to any well(s)

in a reservoir if, in its opinion, the reservoir or a group of reservoirs,

considered collectively, could be worthy of commercial

development.

(iv) If Crude Oil or Gas is discovered but is not deemed by

CONTRACTOR to be a Commercial Discovery of Oil or Gas under

the above provisions of this paragraph (c), EGAS shall one (1)

month after the expiration of the period specified above within

which CONTRACTOR can give notice of a Commercial Discovery

of Oil or Gas, or thirteen (13) months after the completion of a well

not considered to be a Commercial Oil Well or twenty five (25)

months after the completion of a well not considered to be a

Commercial Gas Well, have the right, following sixty (60) days

written notice to CONTRACTOR, at its sole cost, risk and expense,

to develop, produce and dispose of all Crude Oil or Gas from the

geological feature on which the well has been drilled. Said notice

shall state the specific area covering said geological feature to be

developed, the wells to be drilled, the production facilities to be

installed and EGAS's estimated cost thereof. Within thirty (30) days

after receipt of said notice CONTRACTOR may, in writing, elect to

develop such area as hereunder provided for in the case of

Commercial Discovery. In such event all terms of this Agreement

shall continue to apply to the specified area.

If CONTRACTOR elects not to develop such area, the specific area

covering said geological feature shall be set aside for sole risk

operations by EGAS, such area to be mutually agreed upon by

EGAS and CONTRACTOR on the basis of good Petroleum

industry practice. EGAS shall be entitled to perform such

operations or, in the event the Joint Venture Company has come

into existence, to have the Joint Venture Company perform such

operations for the account of EGAS and at EGAS's sole cost, risk

and expense or by any other means deemed to be appropriate by

EGAS for developing such discovery. When EGAS has recovered

from the Petroleum produced from such specific area a quantity of

-14-



Petroleum equal in value, pursuant to the valuation principles set

forth in Article VII(c), to three hundred percent (300%) of the cost it

has incurred in carrying out the sole risk operations,

CONTRACTOR shall have the option, only in the event that there

has been a separate Commercial Discovery of Oil or Gas,

elsewhere within the Area, to share in further Development and

production of that specific area upon paying EGAS one hundred

percent (100%) of such costs incurred by EGAS.

Such one hundred percent (100%) payment shall not be recovered

by CONTRACTOR. Immediately following such payment, the

specific area shall either (i) revert to the status of an ordinary

Development Lease under this Agreement and thereafter shall be

operated in accordance with the terms hereof; or (ii) alternatively,

in the event that at such time EGAS or its Affiliated Company is

conducting Development operations in the area at its sole expense

and EGAS elects to continue operating, the area shall remain set

aside and CONTRACTOR shall only be entitled to its share of

Production Sharing percentages of the Crude Oil or Gas as

specified in Article VII(b). The sole risk Crude Oil or Gas shall be

valued in the manner provided for in Article VII(c). In the event of

any termination of this Agreement under the provisions of Article III

(b), this Agreement shall, however, continue to apply to EGAS's

operations of any sole risk venture hereunder, although this

Agreement shall have been terminated with respect to

CONTRACTOR pursuant to the provisions of Article III(b).

(d) Conversion to a Development Lease:

(i)



Following a Commercial Discovery of Oil pursuant to the last

paragraph of Article III(c)(iii), EGAS and CONTRACTOR shall

endeavor with diligence to find adequate markets capable of

absorbing the production of Oil. Thereafter, EGAS and

CONTRACTOR shall meet with a view of assessing whether the

outlets for such Oil and other relevant factors warrant the

Development and production of the Oil in accordance with and

subject to the conditions set forth in Article VII.



(ii) Following a Commercial Discovery of Gas pursuant to the last

paragraph of Article III(c)(iii), EGAS and CONTRACTOR shall

endeavor with diligence to find adequate markets capable of

absorbing the production of the Gas. EGAS shall notify

-15-



CONTRACTOR within one (1) Year from the Date of Notice of

Commercial Discovery of Gas if EGAS requires such Gas for the

local market, and the expected annual schedule of demand for

such Gas. Thereafter, EGAS and CONTRACTOR shall meet with

a view of assessing whether the outlets for such Gas and other

relevant factors such as Gas price warrant the Development and

production of the Gas and, in case of agreement, the Gas thus

made available shall be disposed of to EGAS under a Gas Sales

Agreement in accordance with and subject to the conditions set

forth in Article VII. In case of unavailability of local market capable

of absorbing such Gas; EGAS and/or CONTRACTOR shall

endeavor with diligence to find adequate markets abroad capable

of absorbing the production of such Gas subject to the Minister of

Petroleum’s approval.

Based on the scheme of disposition of Oil or Gas in (i) and (ii)

above, the CONTRACTOR should submit to EGAS the

Development Plan including abandonment plan of the

Development area which shall be contained, for example, but not

limited to, abandonment procedures and estimated cost. The

mechanism for recovering such costs shall be according to

Annex “F”. The Development Lease abandonment cost recovery

mechanism shall be annexed to the Development Lease

application. CONTRACTOR should also submit the Development

Lease application, which should comprise the extent of the whole

area capable of production to be covered by the Development

Lease, the Petroleum reserves and the Commercial Production

Commencement date, in accordance with what was agreed upon

by EGAS and CONTRACTOR.

In case of requesting a Gas Development Lease, the application

should include in addition to what stated above, the Gas price

which was agreed upon by EGAS and CONTRACTOR pursuant to

Article VII(c)(2). Then the Development Lease should be subject to

the Minister of Petroleum’s approval and such area shall then be

converted automatically into a Development Lease without the

issue of any additional legal instrument or permission. The date on

which the Minister of Petroleum approves the Development Lease

Application will be the “Development Lease Approval Date”.

In case CONTRACTOR failed to submit the Development Lease

application within three (3) Years from the Date of Notice of

-16-



Commercial Discovery of Oil or Gas made by CONTRACTOR to

EGAS (unless otherwise agreed upon by EGAS), the

CONTRACTOR is committed to surrender such Oil or Gas reserves

to EGAS.

EGAS can freely elect to develop such specific area covering said

geological structure containing the said Petroleum reserves that

the CONTRACTOR failed to submit the Development Lease

application by any other mean deems to be appropriate by EGAS.

The CONTRACTOR has no right to have recourse against EGAS

for compensation or expenditures or costs or any share in

production.

(iii) The “Development Period” of each Development Lease shall be as

follows:

(aa) In respect of a Commercial Discovery of Oil, it shall be twenty

(20) Years from the Development Lease Approval Date plus

a first Extension Period followed by a second Extension

Period, if any, each of them is subject to the Minister of

Petroleum’s approval; provided that, if after the conversion of

a Commercial Discovery of Oil into a Development Lease,

Gas is discovered in the same Development Lease and is

used or is capable of being used locally or for export

hereunder, the period of the Development Lease shall be

extended only with respect to such Gas, LPG extracted from

such Gas and Crude Oil in the form of Condensate produced

with such Gas for twenty (20) Years from the Date of Notice

of Commercial Discovery of Gas made by CONTRACTOR to

EGAS plus the Extension Period (as defined below); provided

that the duration of such Development Lease based on a

Commercial Discovery of Oil shall not be extended beyond

thirty (30) Years from the Development Lease Approval Date

of such Commercial Discovery of Oil.

CONTRACTOR shall immediately notify EGAS of any Gas

discovery but shall not be required to apply for a new

Development Lease in respect of such Gas.

(bb) In respect of a Commercial Discovery of Gas, it shall be

twenty (20) Years from the Development Lease Approval

Date, plus a first Extension Period followed by a second

Extension Period, if any, each of them is subject to the

-17-



Minister of Petroleum’s approval; provided that, if after the

conversion of a Commercial Discovery of Gas into a

Development Lease, Crude Oil is discovered in the same

Development Lease, CONTRACTOR's share of such Crude

Oil from the Development Lease (except LPG extracted from

Gas or Crude Oil in the form of Condensate produced with

Gas) and Gas associated with such Crude Oil shall revert

entirely to EGAS upon the expiry of twenty (20) Years from

the Date of Notice of Commercial Discovery of Crude Oil plus

the Extension Period (as defined below). Notwithstanding,

anything to the contrary under this Agreement, the duration

of a Development Lease based on a Commercial Discovery

of Gas shall in no case exceed thirty (30) Years from the

Development Lease Approval date of such Commercial

Discovery of Gas.

CONTRACTOR shall immediately notify EGAS of any Crude

Oil discovery but shall not be required to apply for a new

Development Lease in respect of such Crude Oil.

(cc) The notification to EGAS of the discovery of Gas in a

Development Lease based on Commercial Discovery of Oil,

or vice versa, should include all technical information

mentioned in Article III(c)(i) and (iii) above.

(dd) The "Extension Period" means a period of five (5) Years

which may be elected by CONTRACTOR upon six (6) months

prior written request sent by CONTRACTOR to EGAS prior

to the expiry of the relevant twenty (20) Year period and the

first Extension Period, as the case may be, supplemented by

technical studies, including the evaluation of production

period, the expected levels of production during the

Extension Period, CONTRACTOR’s obligations and relevant

economic considerations. The Extension Period is subject to

the Minister of Petroleum’s approval.

(e) Development operations shall, upon the issuance of a Development

Lease granted following a Commercial Discovery of Oil or Gas, be

started promptly by the Joint Venture Company and conducted in

accordance with good Petroleum fields’ practices and accepted

Petroleum engineering principles, until the field is considered to be fully

developed. It is understood that if associated Gas is not utilized, EGAS

-18-



and CONTRACTOR shall negotiate in good faith on the best way to

avoid impairing the production in the interests of the parties.

In the event Commercial Production Commencement of Oil or Gas has

not started from any Oil or Gas Development Lease in accordance with

the items specified in the granted Development Lease, the

CONTRACTOR shall immediately surrender such petroleum reserves

to EGAS and relinquish the relevant Development Lease (unless

otherwise agreed upon by EGAS); without any right to CONTRACTOR

to claim for recovering any expenditures spent by CONTRACTOR or

any compensation relevant to such Petroleum reserves. Such

relinquished area is considered to be contained of the CONTRACTOR’s

relinquishments obligations at the end of the then current Exploration

period, if any.

In the event no Commercial Production of Oil, in regular shipments or

Gas in regular deliveries, is established from any Development Block in

any Oil or Gas Development Lease within four (4) Years from the

Commercial Production Commencement for Oil or Gas, CONTRACTOR

shall immediately relinquish such Development Block at the end of these

four (4) Years, unless it is sharing in production with another

Commercial Discovery of Oil or Gas in the same Development Lease. A

periodical revision shall take place every four (4) Years during

Development Period of the same Development Lease, in order to

relinquish any Development Block not producing or not contributing to

production in the same Development Lease.

In case the production has stopped from any well, and the reproduction

hasn’t started within a period of maximum one (1) year from the date of

such stop, a revision for the Development Lease block(s) will take place

in order to relinquish the Development Block(s) not contributing to

production from such Development Lease (unless EGAS agrees to

extend such period).

Each Development Block in a Development Lease being partly within

the radius of drainage of any producing well in such Development Lease

shall be considered as participating in the Commercial Production

referred to above.

If EGAS deems, or upon application by CONTRACTOR, it is recognized

by EGAS that Crude Oil or Gas is being drained or might be drained

from an Exploration Block under this Agreement into a development

block on an adjoining concession area held by the same

-19-



CONTRACTOR or another contractor, such Exploration Block being

drained or which will be drained from shall be considered as

participating in the Commercial Production of the Development Block in

question and the Exploration Block being drained shall be converted

into a Development Lease with the ensuing allocation of costs and

production (calculated from the Effective Date or the date such drainage

occurs, whichever is later) between the two concession areas. The

allocation of such costs and production under each concession

agreement shall be in the same portion that the recoverable reserves in

the drained geological structure underlying each concession area bears

to the total recoverable reserves of such structure underlying both

concession areas. The production allocated to a concession area shall

be priced according to the concession agreement covering that area.

In case of failure by the CONTRACTOR in this Agreement and the

contractor in adjoining concession area to agree on the allocation of

costs and/or production for such separate Development Leases under

each concession area, such disagreement shall be resolved by expert

determination, the expert to be agreed upon by the two contractors.

EGAS shall have the right to interfere and induce the contractors to fully

cooperate and resolve the drainage matter in expedient manner as per

the expert decision, such that neither contractor shall be unjustifiably

enriched. The cost of the expert shall in no event be recovered.

In case Petroleum reserves exists in one of the geological structures,

that extends between this Area which is located in the exclusive

economic zone of the A.R.E and the exclusive economic zone of one of

the neighboring states, then the CONTRACTOR under this Agreement

shall notify EGAS, as a government’s representative, of the existence

of this Petroleum reserves as a preparation for the competent authority

to take all required procedures to reach an agreement on the modalities

of the exploitation of such petroleum reserves "Unitization Agreement"

whilst taking into account the following:i)



The geographical extension and the geological features for such

extended petroleum reserves and the proposed area for

exploitation and/or the joint development of the said reserves.

ii) The methodology used for the calculation of such petroleum

reserves and its allocation between the parties.

In order to reach Unitization Agreement CONTRACTOR shall cooperate

with EGAS, as a government’s representative, and shall supply EGAS



-20-



with all available data and information it has, in order to keep the rights

of this Agreement’s parties.

(f)



CONTRACTOR shall bear and pay all the costs and expenses required

in carrying out all the operations under this Agreement, but such costs

and expenses shall not include any interest on investment.

CONTRACTOR shall look only to the Petroleum to which it is entitled

under this Agreement to recover such costs and expenses. Such costs

and expenses shall be recoverable as provided in Article VII. During the

term of this Agreement, the total production achieved in the conduct of

such operations shall be divided between EGAS and CONTRACTOR in

accordance with the provisions of Article VII.



(g)

(1) Unless otherwise provided, CONTRACTOR shall be subject to

Egyptian income tax laws in A.R.E. and shall comply with the

requirements of such laws with respect to the filing of returns, the

assessment of tax, and keeping and showing of books and records.

(2) CONTRACTOR shall be liable to prepare the income tax return

statement. CONTRACTOR shall submit the tax return statement to

EGAS at least twenty five (25) days prior to the due date of

submitting thereof to the tax authority. EGAS shall have the right to

review the tax return statement in order to approve the tax

calculation therein. EGAS shall provide comments on such tax

return statement within fifteen (15) days from the date of receiving

the tax return statement from CONTRACTOR. In any case

CONTRACTOR shall be responsible for submitting the tax return

statement to the tax authority within the legal due date.

(3) CONTRACTOR's annual income for Egyptian income tax in A.R.E.

purposes under this Agreement shall be an amount calculated as

follows:

The total of the sums received by CONTRACTOR from the sale

or other disposition of all Petroleum acquired by CONTRACTOR

pursuant to Article VII(a) and (b);

Reduced by:

(i)



The costs and expenses of CONTRACTOR; and



(ii) The value of EGAS's share of the Excess Cost Recovery , if

-21-



any, to be paid to EGAS in cash or in kind as determined

according to Article VII;

Plus:

An amount equal to CONTRACTOR's Egyptian income taxes in

A.R.E. grossed-up in the manner shown in Article VI of

Annex "E".

In case CONTRACTOR pays its own taxes pursuant to the second

or third paragraph of Article III(g)(4), the last addition (gross-up)

shall not be applied to the equation to calculate CONTRACTOR's

annual income for Egyptian income tax.

For purposes of above mentioned tax deductions in any Tax Year,

Article VII(a) shall apply only in respect of classification of costs and

expenses and rates of amortization, without regard to the

percentage limitation referred to in the first paragraph of

Article VII(a)(1). All costs and expenses of CONTRACTOR in

conducting the operations under this Agreement which are not

controlled by Article VII(a) as above qualified shall be deductible in

accordance with the provisions of the Egyptian Income Tax Law.

(4) EGAS shall assume, pay and discharge, in the name and on behalf

of CONTRACTOR, CONTRACTOR's Egyptian income tax in

A.R.E. out of EGAS's share of the Petroleum produced and saved

and not used in Petroleum operations under Article VII. All taxes

paid by EGAS in the name and on behalf of CONTRACTOR shall

be considered as income to CONTRACTOR.

In case CONTRACTOR disposes of all or part of its share of

Production Sharing, by itself to local market and after obtaining the

Minister of Petroleum’s approval, CONTRACTOR shall bear and

pay to EGAS an amount equal to the CONTRACTOR’s Egyptian

income tax, which shall be paid by EGAS, in respect of the value of

such Petroleum, the payment of such tax by CONTRACTOR shall

neither be considered as income nor as recoverable cost to

CONTRACTOR.

In case CONTRACTOR exports all or part of its share of Production

Sharing, solely or jointly with EGAS and after obtaining the Minister

of Petroleum’s approval, CONTRACTOR shall pay to EGAS an

amount equal to the CONTRACTOR’s Egyptian income tax, which

shall be paid by EGAS, in respect of the value of the quantities

-22-



exported by CONTRACTOR, the payment of such tax by

CONTRACTOR shall neither be considered as income nor as

recoverable cost to CONTRACTOR.

(5) EGAS shall furnish to CONTRACTOR the proper official receipts

evidencing the payment of CONTRACTOR's Egyptian income tax

in A.R.E. for each Tax Year within ninety (90) days following the

receipt by EGAS of CONTRACTOR's income tax return statement

for the preceding Tax Year. Such receipts shall be issued by the

proper tax authorities and shall state the paid amount and other

particulars that are customary for such receipts.

(6) As used herein, Egyptian Income Tax in A.R.E. shall be inclusive

of all income taxes payable in the A.R.E. (including tax on tax) such

as the tax on income from movable capital and the tax on profits

from commerce and industry and inclusive of taxes based on

income or profits, including all dividends, withholding with respect

to shareholders and other taxes imposed by the GOVERNMENT of

A.R.E. on the distribution of income or profits by CONTRACTOR.

(7) In calculating its income taxes in A.R.E., EGAS shall be entitled to

deduct all royalties paid by EGAS to the GOVERNMENT and

CONTRACTOR's Egyptian income taxes paid by EGAS on

CONTRACTOR's behalf.



ARTICLE IV

WORK PROGRAM AND EXPENDITURES DURING

EXPLORATION PHASE

(a) CONTRACTOR shall commence Exploration operations hereunder not

later than six (6) months from the Effective Date. CONTRACTOR shall

have the right to use and obtain all seismic, wells and other data with

respect to the Area in EUG's possession and in accordance with the

regulations in such respect.

(b) The first Exploration period shall be of ------ (---) Year(s).

CONTRACTOR may elect to enter one (1) or two (2) successive

period(s), ----- (--) Years for the second Exploration period and ----- (-) Years for the third Exploration period, in accordance with Article III(b),

each of which upon a written application to EGAS at least thirty (30)

-23-



days before the end of the then current Exploration period, subject to

EGAS’s approval and CONTRACTOR’s fulfillment of its minimum

Exploration obligations hereunder for the then current Exploration

period.

For the first Exploration period, CONTRACTOR shall spend a minimum

of

-----------million

U.S.

Dollars

($ ---000000) on Exploration operations and activities related thereto,

which shall be the Minimum Expenditure Obligations for the first

Exploration period of ------ (---) Year(s); provided that the Minimum

Exploration Work Obligations of CONTRACTOR in such period shall be

to acquire -------------- square kilometers (---- km2) of 3D seismic

program, acquire ----------- kilometers (--- km) of 2D seismic program,

reprocess seismic data, carry out technical studies and drill ------ (---)

exploratory well(s).

For the second Exploration period of ------ (---) Year(s) that

CONTRACTOR elects to enter after the first Exploration period, the

Minimum Expenditure Obligations shall be ------- million U.S. Dollars ($

--000000), provided that the Minimum Exploration Work Obligations for

the CONTRACTOR in such period shall be to acquire -------------square kilometers (---- km2) of 3D seismic program, acquire ----------kilometers (--- km) of 2D seismic program, reprocess seismic data, carry

out technical studies and drill ------ (---) exploratory well(s).

For the third Exploration period of ------ (---) Year(s) that

CONTRACTOR elects to enter after the second Exploration period, the

Minimum Expenditure Obligations shall be ------- million U.S. Dollars ($

--000000), provided that the Minimum Exploration Work Obligations of

CONTRACTOR in such period shall be to acquire -------------- square

kilometers (---- km2) of 3D seismic program, acquire ----------- kilometers

(--- km) of 2D seismic program, reprocess seismic data, carry out

technical studies and drill ------ (---) exploratory well(s).

In case CONTRACTOR spends more than the Minimum Expenditure

Obligations required to be expended or performs works (approved by

EGAS) in excess of the Minimum Exploration Work Obligations during

any Exploration period, the excess expenditure and/or works shall be

subtracted from the Minimum Expenditure Obligations and/or the

Minimum Exploration Work Obligations for any succeeding Exploration

period, as the case may be.



-24-



EGAS may approve CONTRACTOR’s request to enter the succeeding

Exploration period in the event the CONTRACTOR has failed to fulfill

any of its Minimum Exploration Work Obligations of the then current

Exploration period subject to its fulfillment of the Minimum Expenditure

Obligations for such period.

If CONTRACTOR is allowed to enter the succeeding Exploration period

without having fulfilled all of its Minimum Exploration Work Obligations,

the part of the Minimum Exploration Work Obligations which has not

been fulfilled shall be carried forward to the succeeding Exploration

period and CONTRACTOR shall submit a separate letter of guarantee

with the value of the part of such Minimum Exploration Work Obligations

which shall be valid until the end of the succeeding Exploration period.

Such letter of guarantee cannot be reduced by any other expenses that

do not relate to the specific obligation(s) it guarantees.

Such letter of guarantee shall not be returned except after the execution

of the carried forward obligation. EGAS shall have the right to liquidate

the letter of guarantee in case the carried forward obligation is not

executed by the end of the succeeding Exploration period. In such case,

CONTRACTOR shall not be entitled to recover such values as

Exploration expenditures in the manner provided for under Article VII in

the event of Commercial Production.

In case CONTRACTOR surrenders its Exploration rights under this

Agreement as set forth above before or at the end of the first Exploration

period, having expended less than the total sum of the Minimum

Expenditure Obligations for such period on Exploration operations, an

amount equal to the difference between the said Minimum Expenditure

Obligations and the amount actually spent on Exploration and approved

as recoverable cost by EGAS shall be paid by CONTRACTOR to EGAS

at the time of surrendering or within six (6) months from the end of the

first Exploration period, as the case may be.

Any expenditure deficiency by CONTRACTOR at the end of any

successive Exploration period for the reasons stated above shall

similarly result in a payment by CONTRACTOR to EGAS of such

deficiency. Provided that this Agreement is still in force as to

CONTRACTOR, CONTRACTOR shall be entitled to recover any such

payments as Exploration expenditure in the manner provided for under

Article VII in the event of Commercial Production.

-25-



Without prejudice to Article III (b), in case no Commercial Oil Discovery

is established or no notice of Commercial Gas Discovery is given by the

end of the ------ (-----) Year, as may be extended pursuant to Article V(a),

or in case CONTRACTOR surrenders the Area under this Agreement

prior to such time, EGAS shall not bear any of the aforesaid expenses

spent by CONTRACTOR.

(c) At least four (4) months prior to the beginning of each Financial Year

or at such other times as may mutually be agreed to by EGAS and

CONTRACTOR, CONTRACTOR shall prepare an exploration work

program and budget for the Area setting forth the Exploration

operations which CONTRACTOR proposes to carry out during the

ensuing Year “Exploration Work Program and Budget”.

The Exploration Work Program and Budget shall be reviewed by a joint

committee to be established by EGAS and CONTRACTOR after the

Effective Date of this Agreement. This committee, hereinafter referred

to as the "Exploration Advisory Committee", shall consist of six (6)

members, three (3) of whom shall be appointed by EGAS and three (3)

by CONTRACTOR. The Chairman of the Exploration Advisory

Committee shall be designated by EGAS among the members

appointed by it. The Exploration Advisory Committee shall review and

give such advice as it deems appropriate with respect to the proposed

Exploration Work Program and Budget. Following review by the

Exploration Advisory Committee, CONTRACTOR shall make such

revisions and submit the Exploration Work Program and Budget to

EGAS for its approval.

Following such approval, it is further agreed that:

(i)



CONTRACTOR shall neither substantially revise or modify said

Exploration Work Program and Budget nor reduce the approved

budgeted expenditure without the approval of EGAS;



(ii) CONTRACTOR should obtain EGAS’s approvals needed for

executing the items included in the approved Exploration Work

Program and Budget, in accordance with the rules and procedures

applicable in that issue.

(iii) In the event of emergencies involving danger of loss of lives or

property or damage to the environment, CONTRACTOR may

expend such additional unbudgeted amounts as may be required

to alleviate such danger or damage. Such expenditure shall be

considered in all aspects as Exploration expenditure and recovered

-26-



pursuant to the provisions of Article VII hereof.

(d) CONTRACTOR shall advance all necessary funds for all materials,

equipment, supplies, personnel administration and operations

pursuant to the Exploration Work Program and Budget and EGAS shall

not be responsible to bear or repay any of the aforesaid costs.

(e) CONTRACTOR shall be responsible for the preparation and

performance of the Exploration Work Program and Budget which shall

be implemented in a workmanlike manner and consistent with good

Petroleum industry practices.

All geological and geophysical studies, as well as any other studies

related to the performance of this Agreement, shall be made in the

A.R.E., except as is appropriate for the specialized geophysical,

geological, engineering and development studies thereon, that may be

made in specialized centers outside the A.R.E., subject to EGAS’s

approval.

CONTRACTOR shall entrust the management of Exploration operations

in the A.R.E. to its technically competent General Manager and Deputy

General Manager. The names of such General Manager and Deputy

General Manager shall, upon appointment, be forthwith notified to the

GOVERNMENT and to EGAS. The General Manager and, in his

absence, the Deputy General Manager shall be entrusted by

CONTRACTOR with sufficient powers to carry out immediately all lawful

written directions given to them by the GOVERNMENT or its

representative under the terms of this Agreement. All lawful regulations

issued or hereafter to be issued which are applicable hereunder and not

in conflict with this Agreement shall apply to CONTRACTOR.

(f)



CONTRACTOR shall supply EGAS, within thirty (30) days from the end

of each calendar quarter, with a Statement of Exploration Activity

relating to Exploration operations which has been conducted in any

portion of the Area not converted into a Development Lease, showing

costs incurred by CONTRACTOR during such quarter.

CONTRACTOR's records and necessary supporting documents shall

be available for inspection by EGAS at any time during regular working

hours for three (3) months from the date of receiving each Statement

of Exploration Activity.

Within the three (3) months from the date of receiving each Statement

of Exploration Activity, EGAS shall advise CONTRACTOR in writing if it

considers:

-27-



(1) that the record of costs is not correct; or

(2) that the costs of goods or services supplied are not in line with the

international market prices for goods or services of similar quality

supplied on similar terms prevailing at the time such goods or

services were supplied; provided however, that purchases made

and services performed within the A.R.E. shall be subject to

Article XXVI; or

(3) that the condition of the materials furnished by CONTRACTOR

does not tally with their prices; or

(4) that the costs incurred are not reasonably required for operations.

CONTRACTOR shall give written notice on EGAS remarks which

include the reasons and justifications and supporting documents and

shall confer with EGAS in connection with the problem thus presented,

and the parties shall attempt to reach a mutually satisfactory settlement.

If within the time limit of the three (3) month period provided for in this

paragraph, EGAS has not advised CONTRACTOR of its objection to

any statement, such statement shall be considered as approved.

(g) CONTRACTOR shall supply all funds necessary for its operations in the

A.R.E. under this Agreement in freely convertible currency from abroad.

CONTRACTOR shall have the right to freely purchase Egyptian

currency in the amount necessary for its operations in the A.R.E. from

EGAS or EGPC or from any bank authorized by the GOVERNMENT to

conduct foreign currency exchange. Priority shall be given by

CONTRACTOR to purchase the Egyptian currency from EGAS or

EGPC, at the discretion of EGAS, at the same applicable rate and date

as such currency may be purchased from the National Bank of Egypt.

(h) EGAS and EGPC are authorized to advance to CONTRACTOR the

Egyptian currency required for the operations under this Agreement

against receiving from CONTRACTOR an equivalent amount of U.S.

Dollars at the official rate of exchange in A.R.E., such amount in U.S.

Dollars shall be deposited in EGAS’s or EGPC’s account abroad (as the

case may be) with a correspondent bank of the National Bank of Egypt,

Cairo, A.R.E.. Withdrawals from said account shall be used to finance

EGAS's or EGPC’s (as the case may be) and their Affiliated Companies'

foreign currency requirements, subject to the Minister of Petroleum’s

approval.

(i) Any reimbursement due to EGAS out of the Cost Recovery Petroleum,

-28-



as a result of reaching agreement or as a result of an arbitral award, shall

be promptly made in cash to EGAS, plus simple interest at LIBOR plus

two and half percent (2.5%) per annum from the date on which the

disputed amount(s) would have been paid to EGAS according to Article

VII(a)(2) and Annex "E" of this Agreement (i.e., from the date of rendition

of the relevant Cost Recovery Statement) to the date of payment. The

LIBOR rate applicable shall be the average of the figure(s) published by

The Financial Times of London representing the mid-point of the rates

(bid and ask) applicable to one (1) month U.S. Dollars deposits in the

London Interbank Eurocurrency Market on each fifteenth (15th) day of

each month occurring between the date on which the disputed amount(s)

would have been paid to EGAS and the date on which it is settled.

If the LIBOR rate is available on any fifteenth (15th) day but is not

published in The Financial Times in respect of such day for any reason,

the LIBOR rate chosen shall be that offered by Citibank N.A. to other

leading banks in the London Interbank Eurocurrency Market for one (1)

month U.S. Dollar deposits.

If such fifteenth (15th) day is not a day on which LIBOR rates are quoted

in the London Interbank Eurocurrency Market, the LIBOR rate to be used

shall be that quoted on the next following day on which such rates are

quoted.



ARTICLE V

RELINQUISHMENTS

(a) MANDATORY:

At the end of the ------ (----) Year after the Effective Date hereof,

CONTRACTOR shall relinquish to the GOVERNMENT a total of -----percent (---%) of the original Area on the Effective Date, not then

converted into a Development Lease(s). Such relinquishment shall be

in a single unit of whole Exploration Blocks or originally existing parts of

Exploration Blocks not converted into Development Lease(s) (unless

otherwise agreed by EGAS) so as to enable the relinquishment

requirements to be precisely fulfilled.

At the end of the ------ (----) Year after the Effective Date hereof,

CONTRACTOR shall relinquish to the GOVERNMENT an additional -29-



----- percent (---%) of the original Area on the Effective Date, not then

converted into a Development Lease(s). Such relinquishment shall be

in a single unit (unless otherwise agreed by EGAS) of whole Exploration

Blocks or originally existing parts of Exploration Blocks not converted to

Development Lease(s) so as to enable the relinquishment requirements

to be precisely fulfilled.

Without prejudice to Articles III and XXIII and the last three paragraphs

of this Article V(a), at the end of the -------- (----) Year of the Exploration

phase, CONTRACTOR shall relinquish the remainder of the Area not

then converted into Development Lease(s).

It is understood, that at the time of any relinquishment the areas to be

converted into Development Lease(s) and which are submitted to the

Minister of Petroleum by application(s) for his approval according to

Article III(d) shall, subject to such approval, be deemed converted into

Development Lease(s).

CONTRACTOR shall not be required to relinquish any Exploration

Block(s) in respect of which a notice of Commercial Discovery of Oil or

Gas has been given to EGAS, subject to EGAS's right to agree on the

existence of a Commercial Discovery pursuant to Article III(c) and

without prejudice to the requirements of Article III(e).

In the event, that at the end of any Exploration period, a well is already

under drilling or testing, CONTRACTOR shall be allowed up to six (6)

months to enable it to discover a Commercial Oil or Gas Well or to

establish a Commercial Discovery, as the case may be. However, any

such extension of up to six (6) months shall reduce the duration of the

next succeeding Exploration period, if any, as applicable, by that

duration.

(b) VOLUNTARY:

CONTRACTOR may, voluntarily, during any Exploration period

relinquish all or any part of the Area in a single unit of whole Exploration

Blocks or parts of Exploration Blocks; provided that at the time of such

voluntary relinquishment its minimum Exploration obligations under

Article IV(b) have been fulfilled for such period. Such voluntary

relinquishment shall be credited toward the mandatory relinquishment

provisions of Article V(a) above (unless otherwise agreed by EGAS).

Following Commercial Discovery, EGAS and CONTRACTOR shall

-30-



mutually agree upon any area to be relinquished thereafter, except for

the relinquishment provided for above at the end of the total Exploration

periods.

CONTRACTOR may, voluntarily, during the Development Period

relinquish the Area as a single unit if it deems the Petroleum operations in

the Area to be un-economic to CONTRACTOR; provided that:

(1) CONTRACTOR has fulfilled all of its obligations and commitments

under this Agreement including, but not limited to, those concerning

abandonment of the assets and facilities, or provides financial security

(in form and amount as to be agreed between EGAS and

CONTRACTOR) to fulfil such obligations and commitments; and

(2) CONTRACTOR has submitted a written notice of voluntary

relinquishment to EGAS, requesting EGAS confirmation in writing that

CONTRACTOR has fulfilled such obligations and commitments, or

provided such financial security.

Following such notice:

i) if EGAS does not notify CONTRACTOR in writing, either to confirm

or to raise a reasoned objection, within one hundred and eighty (180)

days from EGAS’s receipt of CONTRACTOR’s notice to relinquish

the Area, then the CONTRACTOR's relinquishment of such Area

shall be effective as of the end of the one hundred and eighty (180)

day period; or

ii) if EGAS notifies CONTRACTOR in writing within the one hundred and

eighty (180) day period to confirm that CONTRACTOR has fulfilled

its obligations and commitments under this Agreement, or provides

financial security approved by EGAS, the relinquishment of the Area

will be effective ninety (90) days from the date of CONTRACTOR’s

receipt of such confirmation; or

iii) if EGAS notifies CONTRACTOR in writing within the one hundred and

eighty (180) day period to raise a reasoned objection, the

relinquishment shall not be effective until EGAS confirms that

CONTRACTOR has fulfilled its obligations and commitments under

this Agreement, or provides financial security approved by EGAS.

The CONTRACTOR’s voluntary relinquishment of the Area will be

effective ninety (90) days from the date of CONTRACTOR’s receipt

of EGAS’s confirmation.

At the time of relinquishment of all or any part of the Area, CONTRACTOR

shall undertake and be committed to restore the Area as it was by the time

CONTRACTOR had received it, in accordance with good Petroleum industry

practices (unless otherwise agreed upon between EGAS and

-31-



CONTRACTOR).

During the term of this Agreement and according to Article III (e) and Article

V and in case CONTRACTOR relinquishes any block (blocks) from the Area,

CONTRACTOR shall submit to EUG, all data and information obtained

following Petroleum operations under this Agreement, no later than thirty

(30) days from CONTRACTOR’s relinquishment notification and before

EGAS's approval on this relinquishment.



ARTICLE VI

OPERATIONS AFTER COMMERCIAL DISCOVERY

(a) Upon the approval of the first Development Lease, EGAS and

CONTRACTOR should form in the A.R.E. a company to carry out

operations pursuant to this Article VI and Annex “D” (hereinafter referred

to as the “Joint Venture Company”), which company shall be named by

mutual agreement between EGAS and CONTRACTOR provided that

such name shall be subject to the Minister of Petroleum’s approval. Said

company shall be a private sector joint stock company, subject to the

laws and regulations in force in the A.R.E. to the extent that such laws

and regulations are not inconsistent with the provisions of this

Agreement or the Charter of the Joint Venture Company (the “Charter”).

However, the Joint Venture Company and CONTRACTOR shall, for the

purpose of this Agreement, be exempted from the following laws and

regulations as now or hereafter amended or substituted:

- Law No. 48 of 1978, promulgating the law on the employee

regulations of public sector companies;

- Law No. 159 of 1981, promulgating the law on joint stock companies,

partnership limited by shares and limited liability companies;

- Law No. 97 of 1983, promulgating the law concerning public sector

organizations and companies;

- Law No. 203 of 1991, promulgating the law on public business sector

companies; and

- provisions of part 2 of chapter 6 of Law No. 88 of 2003, organizing

dealings in foreign currencies in accordance with Central Bank of

-32-



Egypt and the A.R.E. banking system law.

(b) The Charter of Joint Venture Company is hereto attached as Annex "D".

The Joint Venture Company will be established within three (3) months

from the date of the Minister of Petroleum's approval of the first

Development Lease whether for Crude Oil or Gas, to carry out the

Development operations in accordance with the approved Development

Plan and the work program and budget for the Exploration,

Development and production from the Development Lease(s), the

Charter shall take effect and the Joint Venture Company shall

automatically come into existence without any further procedures. The

Exploration Advisory Committee shall be dissolved upon the final

relinquishment of all portions of the Area not converted into

Development Lease(s).

(c) Ninety (90) days after the date the Joint Venture Company comes into

existence in accordance with paragraph (b) above, it shall prepare a

work program and budget for further Exploration and Development in

any portion of the Area converted into a Development Lease for the

remainder of the Financial Year of the Development Lease approval .

And not later than four (4) months before the end of the current Financial

Year (or such other date as may be agreed upon by EGAS and

CONTRACTOR) and four (4) months preceding the commencement of

each succeeding Financial Year thereafter (or such other date as may

be agreed upon by EGAS and CONTRACTOR), the Joint Venture

Company shall prepare an annual production schedule and work

program and budget for further Exploration and Development in any

portion of the Area converted into a Development Lease for the

succeeding Financial Year. The production schedule, work program and

budget shall be submitted to the Joint Venture Company’s Board of

Directors for approval.

The Exploration Work Program and Budget for further Exploration

operations in any portion of the Area not converted into a Development

Lease shall be reviewed, approved and implemented in accordance

with Article IV.

(d) Not later than the twentieth (20th) day of each month, the Joint Venture

Company shall furnish to CONTRACTOR a written estimate of its total

cash requirements for expenditure for the first half and the second half

of the succeeding month, expressed in U.S. Dollars, consistent with the

-33-



approved work program and budget. Such estimate shall take into

consideration any cash expected to be in hand at month end.

Payment for the appropriate period of such month shall be made to the

correspondent bank designated in paragraph (e) below on the first (1st)

day and fifteenth (15th) day respectively, or the next following business

day, if such day is not a business day.

(e) The Joint Venture Company is authorized to keep at its own disposal

abroad in an account opened with a correspondent bank of the National

Bank of Egypt, Cairo, A.R.E., the foreign funds advanced by

CONTRACTOR. Withdrawals from said account shall be used for the

payment for goods and services acquired abroad and for transferring to

a local bank in the A.R.E. of the required amount to meet the

expenditures in Egyptian Pounds for Joint Venture Company in

connection with its activities under this Agreement.

Within sixty (60) days after the end of each Financial Year, the Joint

Venture Company shall submit to the appropriate exchange control

authorities in the A.R.E. a statement, duly certified by a recognized firm

of auditors, showing the funds credited to that account, the

disbursements made out of that account and the outstanding balance

at the end of the Financial Year.

(f)



If and for as long during the period of production operations there exists

an excess capacity in facilities which cannot during the period of such

excess be used by the Joint Venture Company, EGAS shall have the

right to use the excess capacity if it so desires without any financial or

operational disadvantage to the CONTRACTOR or the Joint Venture

Company.



ARTICLE VII

RECOVERY OF COSTS AND EXPENSES AND

PRODUCTION SHARING

(a) COST RECOVERY:

(1) Cost Recovery Petroleum:

Subject to the auditing provisions under this Agreement,

CONTRACTOR shall recover quarterly all costs, expenses and

expenditures in respect of all the Exploration, Development and

-34-



related operations under this Agreement and which were approved

by EGAS to the extent and out of ---------- percent (--%) of all

Petroleum produced and saved from all Development Leases

within the Area hereunder and not used in Petroleum operations.

Such Petroleum is hereinafter referred to as "Cost Recovery

Petroleum".

For the purpose of determining the classification of all costs,

expenses and expenditures for their recovery, the following terms

shall apply:

1. “Exploration Expenditures” means all costs and expenses for

Exploration and the related portion of indirect expenses and

administrative overhead and general expenses.

2. “Development Expenditures” means all costs and expenses for

Development (with the exception of Operating Expenses) and

the related portion of indirect expenses and administrative

overhead and general expenses.

3. “Operating Expenses” means all costs, expenses and

expenditures made after the Commercial Production

Commencement, which costs, expenses and expenditures are

not normally depreciable.

However, Operating Expenses shall include work over, repair

and maintenance of assets, but shall not include any of the

following: sidetracking, re-drilling, change of a well status and

plugging and permanent abandonment of a well, replacement

of assets or a part of an asset, additions, improvements,

renewals or major overhauling that extend the life of the asset.

Exploration Expenditures, Development Expenditures and

Operating Expenses shall be recovered from Cost Recovery

Petroleum in the following manner:

(i)



“Exploration Expenditures”, including those accumulated prior

to the Commercial Production Commencement, shall be

recoverable at the rate of -------- percent (---%) per annum

starting either in the Tax Year in which such expenditures are

incurred and paid or the Tax Year in which the Commercial

Production Commencement occurs, whichever is the later

date.



(ii) “Development Expenditures”, including those accumulated

-35-



prior to the Commercial Production Commencement, shall be

recoverable at the rate of -------- percent (---%) per annum

starting either in the Tax Year in which such expenditures are

incurred and paid or the Tax Year in which the Commercial

Production Commencement occurs, whichever is the later

date.

(iii) “Operating Expenses”, which are incurred and paid after the

Commercial Production Commencement, shall be recoverable

either in the Tax Year in which such costs and expenses are

incurred and paid or the Tax Year in which the Commercial

Production Commencement occurs, whichever is the later

date.

(iv) To the extent that, in a Tax Year, costs, expenses or

expenditures subject to recoverability per preceding

paragraphs (i), (ii) and (iii), exceed the value of all Cost

Recovery Petroleum for such Tax Year, the excess shall be

carried forward for recovery in the next succeeding Tax Year(s)

until fully recovered, but in no case after the termination of this

Agreement, as to CONTRACTOR.

(v) The recovery of costs and expenses, based upon the rates

referred to above, shall be allocated to each quarter

proportionately (one fourth to each quarter). However, any

recoverable costs and expenses not recovered in one quarter

as thus allocated shall be carried forward for recovery in the

next quarter.

(2) Except as provided in Article VII(a)(3) and Article VII(e)(1),

CONTRACTOR shall, each quarter, be entitled to take and own all

Cost Recovery Petroleum, which shall be taken and disposed of in

the manner determined pursuant to Article VII(e). To the extent that

the value of all Cost Recovery Petroleum as determined in

Article VII(c) exceeds the actual recoverable costs and

expenditures, including any carry forward under Article VII(a)(1)(iv),

to be recovered in that quarter, then the value of such excess Cost

Recovery Petroleum (“Excess Cost Recovery”) shall be split

between EGAS and CONTRACTOR according to the following

percentages:

EGAS’s share: --------------- percent (----%);



-36-



CONTRACTOR’s share: -------------- percent (-----%).

EGAS’s total share of such Excess Cost Recovery shall be paid by

CONTRACTOR to EGAS either (i) in cash in the manner set forth

in Article IV of the Accounting Procedure contained in Annex "E",

or (ii) in kind in accordance with Article VII(a)(3).

(3) Ninety (90) days prior to the commencement of each Calendar Year

EGAS shall be entitled to elect by notice in writing to

CONTRACTOR to require payment of up to one hundred percent

(100%) of EGAS's Excess Cost Recovery entitlement and

according to (2) above in kind. Such payment shall be in Crude Oil

from the Area F.O.B. export terminal or other agreed delivery point;

provided that the amount of Crude Oil taken by EGAS in kind in a

quarter shall not exceed the value of Cost Recovery Crude Oil

actually taken and separately disposed of by CONTRACTOR from

the Area during the previous quarter. If EGAS's entitlement to

receive payment of its Excess Cost Recovery in kind is limited by

the foregoing provision, the balance of such entitlement shall be

paid in cash.

(b) PRODUCTION SHARING:

(1) The remaining ----------- percent (----- %) of all Petroleum produced

and saved from the Area hereunder and not used in Petroleum

operations shall be divided quarterly between EGAS and the

CONTRACTOR based on Brent value and according to the

following shares (“Production Sharing”).

i) Crude Oil and Condensate:

BRENT

PRICE

US$/bbl



Less than or

equal to 40

US$



Crude Oil and Condensate produced and

saved under this Agreement and not used

in Petroleum operations. Barrel of Oil

Per Day (BOPD) (quarterly average)

That portion or increment less than or

equal to 5000 BOPD

That portion or increment more than

5000 BOPD and less than or equal to

10000 BOPD

That portion or increment more than

10000 BOPD and less than or equal to

20000 BOPD

That portion or increment more than

20000 BOPD

That portion or increment less than or

equal to 5000 BOPD

-37-



EGAS’s

SHARE (percent

%)



CONTRACTOR’S

SHARE (percent %)



--------(----)



--------(----)



--------(----)



--------(----)



--------(----)



--------(----)



--------(----)

--------(----)



--------(----)

--------(----)



More than 40

US$ and less

than or equal

to 60 US$



More than 60

US$ and less

than or equal

to 80 US$



More than 80

US$ and less

than or equal

to 100 US$



More than 100

US$ and less

than or equal

to 120 US$



More than 120

US$ and less

than or equal

to 140 US$



More than 140

US$



That portion or increment more than

5000 BOPD and less than or equal to

10000 BOPD

That portion or increment more than

10000 BOPD and less than or equal to

20000 BOPD

That portion or increment more than

20000 BOPD

That portion or increment less than or

equal to 5000 BOPD

That portion or increment more than

5000 BOPD and less than or equal to

10000 BOPD

That portion or increment more than

10000 BOPD and less than or equal to

20000 BOPD

That portion or increment more than

20000 BOPD

That portion or increment less than or

equal to 5000 BOPD

That portion or increment more than

5000 BOPD and less than or equal to

10000 BOPD

That portion or increment more than

10000 BOPD and less than or equal to

20000 BOPD

That portion or increment more than

20000 BOPD

That portion or increment less than or

equal to 5000 BOPD

That portion or increment more than

5000 BOPD and less than or equal to

10000 BOPD

That portion or increment more than

10000 BOPD and less than or equal to

20000 BOPD

That portion or increment more than

20000 BOPD

That portion or increment less than or

equal to 5000 BOPD

That portion or increment more than

5000 BOPD and less than or equal to

10000 BOPD

That portion or increment more than

10000 BOPD and less than or equal to

20000 BOPD

That portion or increment more than

20000 BOPD

That portion or increment less than or

equal to 5000 BOPD

That portion or increment more than

5000 BOPD and less than or equal to

10000 BOPD



-38-



--------(----)



--------(----)



--------(----)



--------(----)



--------(----)

--------(----)



--------(----)

--------(----)



--------(----)



--------(----)



--------(----)



--------(----)



--------(----)

--------(----)



--------(----)

--------(----)



--------(----)



--------(----)



--------(----)



--------(----)



--------(----)

--------(----)



--------(----)

--------(----)



--------(----)



--------(----)



--------(----)



--------(----)



--------(----)

--------(----)



--------(----)

--------(----)



--------(----)



--------(----)



--------(----)



--------(----)



--------(----)

--------(----)



--------(----)

--------(----)



--------(----)



--------(----)



That portion or increment more than

10000 BOPD and less than or equal to

20000 BOPD

That portion or increment more than

20000 BOPD



ii)



--------(----)



--------(----)



--------(----)



--------(----)



Gas and LPG:



For the purpose of calculating Production Sharing of Gas and LPG and

the purpose of Production bonuses, all quantities of LPG produced shall

convert into equivalent quantities of Gas and to be added to the

quantities of Gas produced from the Area.

BRENT

PRICE

US$/bbl



Less than or

equal to 40 US$



More than 40

US$ and less

than or equal to

60 US$



More than 60

US$ and less

than or equal to

80 US$



Gas and LPG produced and saved under

this Agreement and not used in Petroleum

operations. Standard Cubic Feet per Day

(SCFPD)(quarterly average).

That portion or increment less than or equal

to 100 Million SCFPD

That portion or increment more than 100

Million SCFPD and less than or equal to

250 Million SCFPD

That portion or increment more than 250

Million SCFPD and less than or equal to

500 Million SCFPD

That portion or increment more than 500

Million SCFPD

That portion or increment less than or equal

to 100 Million SCFPD

That portion or increment more than 100

Million SCFPD and less than or equal to

250 Million SCFPD

That portion or increment more than 250

Million SCFPD and less than or equal to

500 Million SCFPD

That portion or increment more than 500

Million SCFPD

That portion or increment less than or equal

to 100 Million SCFPD

That portion or increment more than 100

Million SCFPD and less than or equal to

250 Million SCFPD

That portion or increment more than 250

Million SCFPD and less than or equal to

500 Million SCFPD

That portion or increment more than 500

Million SCFPD

That portion or increment less than or equal

to 100 Million SCFPD



-39-



EGAS’s

SHARE (percent

%)



CONTRACTOR’S

SHARE (percent %)



--------(----)



--------(----)



--------(----)



--------(----)



--------(----)



--------(----)



--------(----)

--------(----)



--------(----)

--------(----)



--------(----)



--------(----)



--------(----)



--------(----)



--------(----)

--------(----)



--------(----)

--------(----)



--------(----)



--------(----)



--------(----)



--------(----)



--------(----)

--------(----)



--------(----)

--------(----)



More than 80

US$ and less

than or equal to

100 US$



More than 100

US$ and less

than or equal to

120 US$



More than 120

US$ and less

than or equal to

140 US$



More than 140

US$



That portion or increment more than 100

Million SCFPD and less than or equal to

250 Million SCFPD

That portion or increment more than 250

Million SCFPD and less than or equal to

500 Million SCFPD

That portion or increment more than 500

Million SCFPD

That portion or increment less than or equal

to 100 Million SCFPD

That portion or increment more than 100

Million SCFPD and less than or equal to

250 Million SCFPD

That portion or increment more than 250

Million SCFPD and less than or equal to

500 Million SCFPD

That portion or increment more than 500

Million SCFPD

That portion or increment less than or equal

to 100 Million SCFPD

That portion or increment more than 100

Million SCFPD and less than or equal to

250 Million SCFPD

That portion or increment more than 250

Million SCFPD and less than or equal to

500 Million SCFPD

That portion or increment more than 500

Million SCFPD

That portion or increment less than or equal

to 100 Million SCFPD

That portion or increment more than 100

Million SCFPD and less than or equal to

250 Million SCFPD

That portion or increment more than 250

Million SCFPD and less than or equal to

500 Million SCFPD

That portion or increment more than 500

Million SCFPD



--------(----)



--------(----)



--------(----)



--------(----)



--------(----)

--------(----)



--------(----)

--------(----)



--------(----)



--------(----)



--------(----)



--------(----)



--------(----)

--------(----)



--------(----)

--------(----)



--------(----)



--------(----)



--------(----)



--------(----)



--------(----)

--------(----)



--------(----)

--------(----)



--------(----)



--------(----)



--------(----)



--------(----)



--------(----)



--------(----)



where Brent price upon which shares are divided is the quarterly

average price expressed in U.S. Dollars per barrel for Brent quoted

in “Platts Crude Oil Marketwire report”, in the event that such

average cannot be determined because “Platts Crude Oil

Marketwire report” is not published at all during a month, the parties

shall meet and agree the value of Brent by reference to other

published sources. In the event that there are no such published

sources or if the value of Brent cannot be determined pursuant to

the foregoing for any other reason, EGAS and CONTRACTOR

shall meet and agree on a value of Brent.

-40-



Such Production Sharing referred to in Article VII (b) (1) (i) and (ii)

above shall be taken and disposed of pursuant to Article VII (e).

(2) After the end of each contractual Year during the term of any Gas

Sales Agreement entered into pursuant to Article VII(e), EGAS and

CONTRACTOR (as sellers) shall render to EGAS (as buyer) a

statement for an amount of Gas, if any, equal to the amount by

which the quantity of Gas of which EGAS (as buyer) has taken

delivery falls below seventy five percent (75%) of the contract

quantities of Gas as established by the applicable Gas Sales

Agreement (the "Shortfall Gas"), provided that the Gas is available

at the Delivery Point. Within sixty (60) days of receipt of such

statement, EGAS (as buyer) shall pay EGAS and CONTRACTOR

(as sellers) for the amount of the Shortfall Gas, if any. The Shortfall

Gas shall be included in EGAS's and CONTRACTOR's entitlement

to Gas pursuant to Article VII (a) and (b) in the fourth (4 th) quarter

of such contractual Year.

Shortfall Gas shall be recorded in a separate “Take or Pay

Account”. Quantities of Gas which are delivered in subsequent

Years in excess of seventy five percent (75%) of the contract

quantities of Gas as established by the applicable Gas Sales

Agreement ("Make Up Gas"), shall be set against and reduce

quantities of Gas in the “Take or Pay Account” to the extent thereof

and, to that extent, no payment shall be due in respect of such

Make Up Gas. Such Make Up Gas shall not be included in

CONTRACTOR's entitlement to Gas pursuant to Article VII(a) and

(b), CONTRACTOR shall have no rights to such Make Up Gas.

At the end of any contractual Year, if EGAS and CONTRACTOR

(as sellers) fail to deliver seventy five percent (75%) of the annual

contract quantity of Gas as defined in Gas Sales Agreement with

EGAS (as buyer); the difference between seventy five percent

(75%) of the annual contract quantity of Gas and the actual

delivered Gas quantity shall be referred to as the “Deliver or Pay

Shortfall Gas”. EGAS (as buyer) shall have the right to take a

quantity of Gas equals to the Deliver or Pay Shortfall Gas and such

quantity shall be valued with ninety percent (90%) of the Gas price

as defined in the Gas Sales Agreement.

The percentages set forth in Article VII(a) and (b) in respect of LPG

produced from a plant constructed and operated by or on behalf of

-41-



EGAS and CONTRACTOR shall apply to all LPG available for

delivery.

(c) VALUATION OF PETROLEUM:

(1) Crude Oil and Condensate:

i- The Cost Recovery Crude Oil to which CONTRACTOR is

entitled hereunder shall be valued by EGAS and

CONTRACTOR at "Market Price" for each calendar quarter.

ii- "Market Price" means the weighted average price realized from

sales by EGAS or CONTRACTOR during the given quarter,

whichever is higher, provided that the sales to be used in

arriving at the weighted average(s) shall be arm's length sales

of comparable quantities on comparable credit terms in freely

convertible currency from F.O.B. point of export sales to nonAffiliated Companies under all Crude Oil sales contracts then in

effect, but excluding Crude Oil sales contracts involving barter,

and

1) Sales, whether direct or indirect, through brokers or

otherwise, of EGAS or CONTRACTOR to any Affiliated

Company.

2) Sales involving a quid pro quo other than payment in a

freely convertible currency or motivated in whole or in part

by considerations other than the usual economic incentives

for commercial arm's length crude oil sales.

iii- It is understood that in the case of C.I.F. sales, appropriate

deductions shall be made for transport and insurance charges

to calculate the F.O.B. point of export price; and always taking

into account the appropriate adjustment for quality of Crude Oil,

freight advantage or disadvantage of port of loading and other

appropriate adjustments. Market Price shall be determined

separately for each Crude Oil or Crude Oil mix, and for each

port of loading.

iv- If during any calendar quarter, there are no such sales by EGAS

and/or CONTRACTOR under the Crude Oil sales contracts in

effect, EGAS and CONTRACTOR shall mutually agree upon the

Market Price of the Barrel of Crude Oil to be used for such

quarter, and shall be guided by all relevant and available

-42-



evidence including current prices in freely convertible currency

of leading crude oils produced by major oil producing countries

(in the Arabian Gulf or the Mediterranean area), which are

regularly sold in the open market according to actual sales

contracts terms but excluding paper sales and sales promises

where no crude oil is delivered, to the extent that such sales are

effected under such terms and conditions (excluding the price)

not significantly different from those under which the Crude Oil

to be valued, was sold, and always taking into consideration

appropriate adjustments for Crude Oil quality, freight advantage

or disadvantage of port of loading and other appropriate

adjustments, as the case may be, for differences in gravity,

sulphur and other factors generally recognized by sellers and

purchasers, as reflected in crude oil prices, transportation ninety

(90) days insurance premiums, unusual fees borne by the seller,

and for credit terms in excess of sixty (60) days, and the cost of

loans or guarantees granted for the benefit of the sellers at

prevailing interest rates.

It is the intent of the parties that the value of the Cost Recovery

Crude Oil shall reflect the prevailing market price for such Crude

Oil.

v- If either EGAS or CONTRACTOR considers that the Market

Price as determined under sub-paragraph (ii) above does not

reflect the prevailing market price or in the event EGAS and

CONTRACTOR fail to agree on the Market Price for any Crude

Oil produced under this Agreement for any quarter within fifteen

(15) days after the end thereof, any party may elect at any time

thereafter to submit to a single arbitrator the question, what

single price per Barrel, in the arbitrator's judgment, best

represents for the pertinent quarter the Market Price for the

Crude Oil in question. The arbitrator shall make his

determination as soon as possible following the quarter in

question. His determination shall be final and binding upon all

the parties. The arbitrator shall be selected in the manner

described below.

In the event EGAS and CONTRACTOR fail to agree on the

arbitrator within thirty (30) days from the date any party notifies

the other that it has decided to submit the determination of the

Market Price to an arbitrator, such arbitrator shall be chosen by

-43-



the appointing authority designated in accordance with

Article XXIV(e), or such other appointing authority with access

to such expertise as may be agreed to between EGAS and

CONTRACTOR, with regard to the qualifications for arbitrators

set forth below, upon written application of one or both of EGAS

and CONTRACTOR. A copy of such application by one of them

shall be promptly sent to the other.

The arbitrator shall be as nearly as possible a person with an

established reputation in the international petroleum industry as

an expert in pricing and marketing crude oil in international

commerce. The arbitrator shall not be a citizen of a country

which does not have diplomatic relations with the A.R.E. and

the country(ies) of CONTRACTOR. He shall not be, at the time

of selection, employed by, or an arbitrator or consultant on a

continuing or frequent basis to, the American Petroleum

Institute, or the Organization of the Petroleum Exporting

Countries or the Organization of Arab Petroleum Exporting

Countries, or a consultant on a continuing basis to EGAS, or

CONTRACTOR or an Affiliated Company of either, but past

occasional consultation with such companies, or with other

petroleum companies, or governmental agencies or

organizations shall not be a ground for disqualification. He shall

not be, at any time during the two (2) Years before his selection,

an employee of any petroleum company or of any governmental

agency or organization.

Should a selected person decline or be unable to serve as

arbitrator or should the position of arbitrator fall vacant prior to

the decision called for, another person shall be chosen in the

same manner provided for in this paragraph. EGAS and

CONTRACTOR shall share equally the expenses of the

arbitrator.

The arbitrator shall make his determination in accordance with

the provisions of this paragraph, based on the best evidence

available to him. He shall review Crude Oil sales contracts as

well as other sales data and information but shall be free to

evaluate the extent to which any contracts, data or information

is substantiated or pertinent. Representatives of EGAS and

CONTRACTOR shall have the right to consult with the arbitrator

and furnish him written materials; provided that the arbitrator

-44-



may impose reasonable limitations on this right. EGAS and

CONTRACTOR, each shall cooperate with the arbitrator to the

fullest extent and each shall insure such cooperation of its

trading companies. The arbitrator shall be provided access to

crude oil sales contracts and related data and information which

EGAS and CONTRACTOR or their trading companies are able

to make available and which in the judgment of the arbitrator

might aid the arbitrator in making a valid determination.

vi- Pending Market Price agreement by EGAS and CONTRACTOR

or determination by the arbitrator, as applicable, the Market

Price agreed upon between EGAS and CONTRACTOR for the

quarter preceding the quarter in question shall remain

temporarily in effect. In the event that either EGAS or

CONTRACTOR should incur a loss by virtue of the temporary

continuation of the Market Price of the previous quarter, it shall

promptly be reimbursed such loss by the other party plus simple

interest at the LIBOR plus two and one half percent (2.5%) per

annum rate provided for in Article IV(f) from the date on which

the disputed amount(s) should have been paid to the date of

payment.

(2) Gas and LPG:

i- The Cost Recovery Petroleum, Production Sharing and Excess

Cost Recovery, if any, of Gas which is disposed of for local

market, according to the Gas Sales Agreement between EGAS

and CONTRACTOR (as sellers) and EGAS (as buyer) entered

into pursuant to Article VII(e) shall be valued, delivered to and

purchased at a price, to be agreed upon by EGAS and

CONTRACTOR, based on technical and economic factors for

developing the area (including but not limited to water depth,

reservoir depth, the actual expenditure and expected

investments over the Development project lifetime, proven and

probable Gas reserves, internal rate of return on investment to

achieve the interests of the parties and the prevailing applicable

Gas price in comparable concession areas having similar

conditions). Such agreed Gas price shall be stated in the

relevant Development Lease application before the Minister of

Petroleum’s approval according to Article III(d)(ii).

ii- In case CONTRACTOR exports part or all its share of

-45-



Production Sharing of Gas jointly with EGAS, pursuant to

Article VII(e), such exported Gas shall be valued according to

the relevant net back price.

iii- In case CONTRACTOR disposes locally and/or solely exports

part of its share of Production Sharing of Gas to third party then

the following shall apply:

a- CONTRACTOR’s quantities disposed to the third party shall

be valued based on the agreed price between the

CONTRACTOR and such third party.

b- CONTRACTOR’s quantities disposed to EGAS shall be

valued based on gas price agreed by EGAS and

CONTRACTOR according to the basis mentioned above.

iv- In case CONTRACTOR disposes solely all its share of

Production Sharing of Gas locally and/or exports to third party

then the CONTRACTOR’s quantities sold to the third party shall

be valued based on the agreed price between the

CONTRACTOR and such third party.

v- The Cost Recovery Petroleum, Production Sharing and Excess

Cost Recovery, if any, of LPG produced from a plant

constructed and operated by or on behalf of EGAS and

CONTRACTOR shall be separately valued for Propane and

Butane at the outlet of such LPG plant according to the following

formula (unless otherwise agreed between EGAS and

CONTRACTOR):

PLPG= 0.95 × PR

Where:

PLPG = LPG price (separately determined for Propane and

Butane) in U.S. Dollars per metric ton.

PR =The average over a period of a month of the figures

representing the mid-point between the high and low prices in

U.S. Dollars per metric ton quoted in "Platt's LP Gaswire" during

such month for Propane and Butane F.O.B Ex-Ref/Stor. West

Mediterranean.

In the event that "Platt's LP Gaswire" is issued on certain days

during a month but not on others, the value of (PR) shall be

calculated using only those issues which are published during

-46-



such month. In the event that the value of (PR) cannot be

determined because "Platt's LP Gaswire" is not published at all

during a month, EGAS and CONTRACTOR shall meet and

agree to the value of (PR) by reference to other published

sources. In the event that there are no such other published

sources or if the value of (PR) cannot be determined pursuant

to the foregoing for any other reason, EGAS and

CONTRACTOR shall meet and agree the value of (PR) by

reference to the value of LPG (Propane and Butane) delivered

F.O.B. from the Mediterranean area.

Such valuation of LPG is based upon delivery at the Delivery

Point specified in Article VII(e)(2)(iii).

vi- The prices of Gas and LPG so calculated shall apply during the

same month.

vii- The Cost Recovery Petroleum, Production Sharing and Excess

Cost Recovery, if any, of Gas disposed of for export jointly by

EGAS and CONTRACTOR to a third party, pursuant to

Article VII(e), shall be valued according to the net back price.

viii- The Cost Recovery Petroleum, Production Sharing and Excess

Cost Recovery, if any, of LPG disposed of for export jointly by

EGAS and CONTRACTOR pursuant to Article VII(e) shall be

valued at its actual realized price.

(d) FORECASTS:

The Joint Venture Company shall prepare (not less than ninety (90)

days prior to the beginning of each calendar semester following first

regular production) and furnish in writing to CONTRACTOR and EGAS

a forecast setting out a total quantity of Petroleum that the Joint Venture

Company estimates can be produced, saved and transported hereunder

during such calendar semester in accordance with good Petroleum

industry practices.

The Joint Venture Company shall endeavor to produce the forecast

quantity during each calendar semester. The Crude Oil shall be run to

storage tanks or offshore loading facilities constructed, maintained and

operated according to GOVERNMENT Regulations, by the Joint

Venture Company, in which said Crude Oil shall be metered or

otherwise measured for royalty and other purposes required by this

Agreement. Gas shall be handled by the Joint Venture Company in

-47-



accordance with the provisions of Article VII(e).

(e) DISPOSITION OF PETROLEUM:

(1) Crude Oil and Condensate:

EGAS and CONTRACTOR shall have the right and the obligation

to separately take and freely export or otherwise dispose of,

currently all of the Crude Oil to which each is entitled under

Article VII(a) and (b). Subject to payment of sums due to EGAS

under Article VII(a)(2) and Article IX, CONTRACTOR shall have the

right to remit and retain abroad all funds acquired by it including the

proceeds from the sale of its share of Crude Oil. Notwithstanding

anything to the contrary under this Agreement, priority shall be

given to meet the requirements of the A.R.E. market from

CONTRACTOR's share under Article VII (a) and (b) of the Crude

Oil produced from the Area and EGAS or EGPC shall have the

preferential right to purchase such Crude Oil at a price to be

determined pursuant to Article VII(c). The amount of Crude Oil so

purchased shall be a portion of CONTRACTOR's share under

Article VII (a) and (b). Such amount shall be proportional to

CONTRACTOR's share of the total production of Crude Oil from

the concession areas in the A.R.E. that are also subject to EGAS's

or EGPC’s preferential right to purchase. The payment for such

purchased amount shall be made by EGAS in U.S. Dollars or in any

other freely convertible currency remittable by CONTRACTOR

abroad.

It is agreed upon that EGAS shall notify CONTRACTOR, at least

forty five (45) days prior to the beginning of the calendar semester,

of the amount to be purchased during such semester under this

Article VII(e)(1).

(2) Gas and LPG:

i- Priority shall be given to meet the requirements of the local

market as determined by EGAS as follows:

• Before the Development Lease approval date, EGAS shall

notify the CONTRACTOR in writing within a year from the

notice of Commercial Discovery of Gas pursuant to

Article III(d)(ii).

• During the Development Lease period EGAS shall notify the

CONTRACTOR in writing no later than six (6) months prior to

-48-



such requirements date.

Taking into consideration the following cases:- In case CONTRACTOR elects to dispose all or part of its

share of Production Sharing of Gas, by itself to the local

market to third party other than EGAS, CONTRACTOR shall

submit an application to EGAS including the Gas price,

quantities and basic terms of a Gas Sales Agreement in order

for EGAS to obtain the Minister of Petroleum’s approval. Such

approval shall entitle CONTRACTOR to enter into a third

party Gas Sales Agreement.

- In case CONTRACTOR exports Gas, solely or jointly with

EGAS, CONTRACTOR or CONTRACTOR and EGAS, as the

case may be, should obtain the Minister of Petroleum’s

approval on the price and quantities allocated for export.

In case CONTRACTOR disposes all or part of its share of

Production Sharing of Gas, by itself, CONTRACTOR shall be

subject to law no. 196 of 2017.

- In case EGAS or EGAS and CONTRACTOR export LPG,

EGAS or EGAS and CONTRACTOR, as the case may be,

should obtain the Minister of Petroleum’s approval on the

price and quantities allocated for export.

ii- In the event that EGAS is the buyer of Gas, the disposition of

Gas as indicated above shall be made by virtue of a Gas Sales

Agreement(s) to be entered into between EGAS and

CONTRACTOR (as sellers) and EGAS (as buyer).

EGAS and CONTRACTOR (as sellers) shall have the obligation

to deliver the Gas at the Delivery Point as indicated below,

where such Gas shall be metered for sales, royalty and other

purposes required by this Agreement.

(a) In the event no LPG plant is constructed to process such

Gas, the processed Gas Delivery Point shall be at the

flange connecting the Development Lease pipeline to the

nearest point on the National Gas Pipeline Grid System

and the Crude and Condensate Delivery Point shall be at

the nearest point on the Crude and Condensate Pipeline

Network as depicted in Annex "G" hereto or as otherwise

agreed by EGAS and CONTRACTOR.

-49-



(b) In the event an LPG plant is constructed to process such

Gas, such Gas shall, for the purposes of valuation and

sales, be metered at the outlet of such LPG plant. However,

notwithstanding the fact that the metering shall take place

at the LPG plant outlet, CONTRACTOR shall through the

Joint Venture Company build a pipeline suitable for

transport of the processed Gas from the LPG plant outlet

to the nearest point on the National Gas Pipeline Grid

System (Gas Delivery Point), the Condensate Delivery

Point shall be at the nearest point on the Crude and

Condensate Pipeline Network and the LPG Delivery Point

shall be at the nearest point on the LPG Pipeline Network

as depicted in Annex "G" hereto, or otherwise agreed by

EGAS and CONTRACTOR. Such pipeline shall be owned

in accordance with Article VIII (a) by EGAS, and its cost

shall be financed and recovered by CONTRACTOR as

Development Expenditures pursuant to this Article VII.

iii- EGAS and CONTRACTOR shall consult together to determine

whether to build LPG plant to recover LPG from any Gas

produced hereunder. In the event that EGAS and

CONTRACTOR decide to build such plant, the plant shall, as is

appropriate, be in the vicinity of the point of delivery as

determined in Article VII(e)(2)(ii). The delivery of LPG for,

royalty and other purposes required by this Agreement shall be

at the outlet of the LPG plant. The costs of such LPG plant shall

be recoverable in accordance with the provisions of this

Agreement, unless the Minister of Petroleum agrees to

accelerated recovery.

iv- EGAS (as buyer) shall have the right to elect, by ninety (90)

days prior written notice to EGAS and CONTRACTOR (as

sellers), whether payment for the Gas which is subject to a Gas

Sales Agreement entered between EGAS and CONTRACTOR

(as sellers) and EGAS (as buyer) and also LPG produced from

a plant constructed and operated by or on behalf of EGAS and

CONTRACTOR, as valued in accordance with Article VII(c), and

to which CONTRACTOR is entitled under the Cost Recovery

and Production Sharing provisions of this Article VII hereunder,

shall be made 1) in cash or 2) in kind.

Payments in cash shall be made by EGAS (as buyer) at

-50-



intervals provided for in the relevant Gas Sales Agreement in

U.S. Dollars, remittable by CONTRACTOR abroad.

Payments in kind shall be calculated by converting the value of

Gas and LPG to which CONTRACTOR is entitled into

equivalent Barrels of Crude Oil to be taken concurrently by

CONTRACTOR from the Area, or to the extent that such Crude

Oil is insufficient, Crude Oil from CONTRACTOR's other

concession areas or such other areas as may be agreed. Such

Crude Oil shall be added to the Crude Oil that CONTRACTOR

is otherwise entitled to lift under this Agreement. Such

equivalent Barrels shall be calculated on the basis of the

provisions of Article VII(c) relating to the valuation of Cost

Recovery Crude Oil.

Provided that:

(aa) Payment of the value of Gas and LPG shall always be

made in cash in U.S. Dollars remittable by CONTRACTOR

abroad to the extent that there is insufficient Crude Oil

available for conversion as provided for above;

(bb) Payment of the value of Gas and LPG shall always be

made in kind as provided for above to the extent that

payments in cash are not made by EGAS.

Payments to CONTRACTOR (whether in cash or in kind),

when related to CONTRACTOR's Cost Recovery

Petroleum, shall be included in CONTRACTOR's

Statement of Recovery of Costs and of Cost Recovery

Petroleum referred to in Article IV of Annex "E" of this

Agreement.

v- The proceeds of sale of CONTRACTOR's share of Gas and

LPG disposed of pursuant to Article VII(e)(2) may be freely

remitted or retained abroad by CONTRACTOR.

vi- In the event that EGAS and CONTRACTOR agree to accept

new Gas and LPG producers to join in an ongoing export

project, such producers shall have to contribute a fair and

equitable share of the investment made.

vii- CONTRACTOR shall not be obligated to surrender a

Development Lease based on a Commercial Discovery of Gas,

if Crude Oil has been discovered in commercial quantities in the

-51-



same Gas Development Lease but CONTRACTOR shall

surrender its rights of such Gas reserves which were not

produced and disposed as stated in the second paragraph of

Article III(e).

(f)



OPERATIONS:

If following the reversion to EGAS of any rights to Crude Oil hereunder,

CONTRACTOR retains rights to Gas in the same Development Lease

area, or if, following the surrender of rights to Gas hereunder,

CONTRACTOR retains rights to Crude Oil in the same Development

Lease area, operations to explore for or exploit the Petroleum, the rights

to which have been reverted or surrendered (Oil or Gas, as the case

may be) shall only be carried out by the Joint Venture Company which

shall act on behalf of EGAS alone, unless CONTRACTOR and EGAS

agree otherwise.



(g) TANKER SCHEDULING:

At reasonable time prior to the commencement of Commercial

Production EGAS and CONTRACTOR shall meet and agree upon a

procedure for scheduling tankers lifting from the agreed upon point of

export.



ARTICLE VIII

TITLE TO ASSETS

(a) EGAS shall become the owner of all CONTRACTOR acquired and

owned assets which assets were charged to Cost Recovery by

CONTRACTOR in connection with the operations carried out by

CONTRACTOR or the Joint Venture Company in accordance with the

following:

1- Land shall become the property of EGAS as soon as it is purchased.

2- (i) Title to fixed and movable assets, which are charged to the

recoverable cost and approved by EGAS, shall be transferred

from CONTRACTOR to EGAS upon the final relinquishment of

all parts of the Area during the Exploration periods.

(ii) Title to fixed and movable assets shall be transferred

automatically and gradually from CONTRACTOR to EGAS as

they become subject to recovery in accordance with the

-52-



provisions of Article VII; however, the full title to fixed and

movable assets shall be transferred automatically from

CONTRACTOR to EGAS when their total cost has been

recovered by CONTRACTOR in accordance with the provisions

of Article VII or at the time of termination of this Agreement with

respect to all assets chargeable to the operations, whether

recovered or not, whichever occurs first.

The book value of the assets created during each calendar

quarter shall be notified by CONTRACTOR to EGAS or by the

Joint Venture Company to EGAS and CONTRACTOR within

thirty (30) days of the end of each calendar quarter.

3- All samples and technical data shall be transferred to EGAS through

EUG once it is completed, requested by EGAS or at the time of

termination of this Agreement.

At the expiry date of this Agreement, EGAS shall, own and be entitled,

through EUG, to all data and information (original and/or copied as

detailed in Article XIV (e) second paragraph) resulting from Petroleum

operations hereunder either charged to recoverable cost or not..

(b) During the term of this Agreement, EGAS, CONTRACTOR and the Joint

Venture Company are entitled to the full use and enjoyment of all fixed

and movable assets referred to above in connection with operations

hereunder or under any other Petroleum concession agreement entered

into by the parties. In that case, proper accounting adjustment shall be

made. CONTRACTOR and EGAS shall not dispose of the same except

with agreement of the other.

(c) CONTRACTOR and the Joint Venture Company may freely import into

the A.R.E., use therein and freely export at the end of such use,

machinery and equipment which they either rent or lease in accordance

with good industry practices, including but not limited to the lease of

computer hardware and software.



ARTICLE IX

BONUSES

(a) CONTRACTOR shall pay to EGAS as a signature bonus the sum of ------ -------- U.S. Dollars ($-----) after the relevant law is issued and before

the Effective Date of this Agreement.

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(b) CONTRACTOR shall pay to EGAS as a Development Lease bonus the

sum of (--------) U.S. Dollars ($-------) for each Development Block (1'×1')

or part of Development Block on the approval date of each Development

Lease.

(c) CONTRACTOR shall pay to EGAS the sum of -----------U.S. Dollars ($ ---------) as a first Development Lease extension bonus on the approval

date of entry into the first Extension Period of each Development Lease

pursuant to Article III(d)(iii)(dd).

CONTRACTOR shall also pay to EGAS the sum of --------- U.S. Dollars

($ -----------) as a second Development Lease extension bonus on the

approval date of entry into the second Extension Period of each

Development Lease pursuant to Article III(d)(iii)(dd).

(d) CONTRACTOR shall pay to EGAS as an assignment bonus on the date

of approval of each assignment requested by CONTRACTOR or any of

the CONTRACTOR Members to any assignee pursuant to Article XXI,

according to the following:

(i)



During any Exploration period, in case CONTRACTOR/

CONTRACTOR Member assigns in whole or in part of its rights,

privileges, duties and obligations to any assignee other than an

Affiliate Company of the same CONTRACTOR/CONTRACTOR

Member, CONTRACTOR or CONTRACTOR Member, as the case

may be, shall pay to EGAS the sum equivalent to ten percent

(10%), valued in U.S. Dollars, of the total Minimum Expenditure

Obligations of the then current Exploration period during which the

assignment is made and according to the assigned percentage.



(ii) During the Development Period, in case CONTRACTOR/

CONTRACTOR Member assigns in whole or in part of its rights,

privileges, duties and obligations to any assignee other than an

Affiliate Company of the same CONTRACTOR/ CONTRACTOR

Member, CONTRACTOR or CONTRACTOR Member, as the case

may be, shall pay to EGAS the sum of ten percent (10%), valued in

U.S. Dollars, of the value of each assignment deal whichever is

applicable :

- In case it is a cash deal, the percentage shall be calculated on

the base of the financial value to be paid by the assignee to the

assignor; or

- In case it is an exchange of shares or stocks deal, the percentage

-54-



shall be calculated on the base of the financial value of shares or

stocks to be exchanged between the assignor and the assignee;

or

- In case it is a reserve swap deal, the percentage shall be

calculated on the base of the financial value of the reserves, to

be swapped between the assignor and the assignee from the

Development Lease(s) areas; or

- In case it is any other type of deals, the value of any assignment

deal to be declared by the assignor.

(iii) During any Exploration period and after a discovery of a

Commercial Oil or Gas Well or after a Development Lease is

granted

to

CONTRACTOR,

in

case

CONTRACTOR/

CONTRACTOR Member assigns in whole or in part of its rights,

privileges, duties and obligations to any assignee other than an

Affiliate Company of the same CONTRACTOR/ CONTRACTOR

Member, CONTRACTOR or CONTRACTOR Member, as the case

may be, shall pay to EGAS the sum of the value of the assignment

bonus as mentioned in (i) and (ii) above.

(iv) In case of an assignment to an Affiliate company of the same

CONTRACTOR/ CONTRACTOR Member during any Exploration

or Development period, CONTRACTOR or CONTRACTOR

Member, as the case may be, shall pay to EGAS one hundred and

fifty thousand U.S. Dollars ($ 150000).

(e) From the Effective date and during any Exploration or Development

period (as it may be extended), CONTRACTOR shall, for each Financial

Year, prepare and carry out specialized training programs abroad to

EGAS’s employees at approved specialized international training

centers for the sum of --------------- U.S. Dollars ($ ----------). For such

purpose, at the beginning of each Financial Year, CONTRACTOR shall

submit to EGAS a training program proposal subject to EGAS’s

approval.

In the case of incapability of training EGAS’s employees at specialized

training centers abroad, or in case of disqualified training programs (not

approved by EGAS), CONTRACTOR shall pay to EGAS the training

bonus or its shortfall (if any), before the end of each Financial Year, to

cover the training of EGAS’ employees.

(f)



CONTRACTOR shall pay to EGAS the sum of ------------U.S. Dollars ($

-55-



---000000) as a production bonus when the total average daily

production from the Area first reaches the rate of five thousand (5000)

Barrels of Oil or equivalent per day as for a period of thirty (30)

consecutive producing days. Payment shall be made within fifteen (15)

days thereafter.

(g) CONTRACTOR shall pay to EGAS the additional sum of ------------U.S.

Dollars ($ ---000000) as a production bonus when the total average daily

production from the Area first reaches the rate of ten thousand (10000)

Barrels of Oil or equivalent per day for a period of thirty (30) consecutive

producing days. Payment shall be made within fifteen (15) days

thereafter.

(h) CONTRACTOR shall pay to EGAS the additional sum of ------------U.S.

Dollars ($ ---000000) as a production bonus when the total average daily

production from the Area first reaches the rate of twenty thousand

(20000) Barrels of Oil or equivalent per day for a period of thirty (30)

consecutive producing days. Payment will be made within fifteen (15)

days thereafter.

(i)



CONTRACTOR shall pay to EGAS the additional sum of ------------U.S.

Dollars ($ ---000000) as a production bonus when the total average daily

production from the Area first reaches the rate of twenty five thousand

(25000) Barrels of Oil or equivalent per day for a period of thirty (30)

consecutive producing days. Payment shall be made within fifteen (15)

days thereafter.



(j)



All the above mentioned bonuses shall in no event be recovered by

CONTRACTOR.



(k) In the event that EGAS elects to develop any part of the Area pursuant

to the sole risk provisions of Article III(c)(iv), production from such sole

risk area shall be considered for the purposes of this Article IX only if

CONTRACTOR exercises its option to share in such production, and

only from the date of such sharing.

(l)



Gas shall be taken into account for purpose of determining the total

average daily production from the Area under Article IX(f-i) by converting

daily Gas delivered into equivalent barrels of daily Crude Oil production

in accordance with the following formula for each unit of one thousand

(1000) standard Cubic Feet of Gas:

Equivalent Barrels of Oil per MSCF = H × 0.167

Where:

-56-



MSCF = one thousand Standard Cubic Feet of Gas.

H



= the number of million British Thermal Units (MMBTUs) per MSCF.



ARTICLE X

OFFICE AND SERVICE OF NOTICES

CONTRACTOR shall maintain an office in the A.R.E. at which notices shall

be validly served.

The General Manager and Deputy General Manager shall be entrusted by

CONTRACTOR with sufficient power to carry out immediately all local written

directions given to them by the GOVERNMENT or its representatives under

the terms of this Agreement. All lawful regulations issued or hereafter to be

issued, which are applicable hereunder and not in conflict with this

Agreement, shall apply to the duties and activities of the General Manager

and Deputy General Manager.

All matters and notices shall be deemed to be validly served if they are

delivered to the office of the General Manager, with adequate proof of

receipt, or if they are sent to him by registered mail to CONTRACTOR's office

in the A.R.E..

All matters and notices shall be deemed to be validly served if delivered to

the office of the Chairman of EGAS, with adequate proof of receipt, or which

are sent to him by registered mail to EGAS's main office in Cairo, A.R.E..



ARTICLE XI

SAVING OF PETROLEUM AND PREVENTION OF LOSS

(a) The Joint Venture Company shall take all proper measures, according

to generally accepted methods in use in the Petroleum industry, to

prevent loss or waste of Petroleum above or under the ground in any

form during drilling or producing or gathering or distributing or storage

operations. The GOVERNMENT has the right to prevent any operation

on any well that it might reasonably expect would result in loss or

damage to the well or the Oil or Gas field.

(b) Upon completion of the drilling of a productive well, the Joint Venture

Company shall inform the GOVERNMENT or its representative of the

time when the well shall be tested and the production rate ascertained.



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(c) Except in instances where multiple producing formations in the same

well can only be produced economically through a single tubing string,

Petroleum shall not be produced from multiple Oil bearing zones

through one string of tubing at the same time, except with the prior

approval of the GOVERNMENT or its representative, which shall not be

unreasonably withheld.

(d) The Joint Venture Company shall record data regarding the quantities

of Petroleum and water produced monthly from each Development

Lease. Such data shall be sent to the GOVERNMENT or its

representative on special forms provided for that purpose within thirty

(30) days after the data has been obtained. Daily or weekly statistics

regarding the production from the Area shall be available at all

reasonable times for examination by authorized representatives of the

GOVERNMENT.

(e) Daily drilling records and the graphic logs of wells shall show the

quantity and type of cement and the amount of any other materials used

in the well for the purpose of protecting Petroleum, Gas bearing or fresh

water strata.

(f)



Any substantial change of mechanical conditions of the well after its

completion shall be subject to the approval of the representative of the

GOVERNMENT, which approval shall not be unreasonably withheld.



ARTICLE XII

CUSTOMS EXEMPTIONS

(a) EGAS, CONTRACTOR and the Joint Venture Company shall be

permitted to import and shall be exempted from customs duties, any

taxes, levies or fees (including fees imposed by Ministerial Decision

No. 254 of 1993 issued by the Minister of Finance, as now or hereafter

amended or substituted) of any nature and from the importation rules

with respect to the importation of machinery, equipment, appliances,

materials, items, means of transport and transportation, electric

appliances, air conditioners for offices, field housing and facilities,

electronic appliances, computer hardware and software, as well as

spare parts required for any of the imported items, all subject to a duly

approved certificate issued by the responsible representative nominated

by EGAS for such purpose, stating that the imported items are required

-58-



for conducting the operations pursuant to this Agreement. Such

certificate shall be final and binding and shall automatically result in the

importation and the exemption without any further approval, delay or

procedure.

(b) Machinery, equipment, appliances and means of transport and

transportation imported by EGAS's, CONTRACTOR's and the Joint

Venture Company’s contractors and sub-contractors temporarily

engaged in any activity pursuant to the operations which are the subject

to this Agreement, shall be cleared under the "Temporary Release

System" without payment of customs duties, any taxes, levies or fees

(including fees imposed by Ministerial Decision No. 254 of 1993 issued

by the Minister of Finance, as now or hereafter amended or substituted)

of any nature, upon presentation of a duly approved certificate issued

by EGAS’s responsible representative nominated by EGAS for such

purpose, stating that the imported items are required for conducting the

operations pursuant to this Agreement. Items set out in Article XII(a)

imported by EGAS's, CONTRACTOR's and the Joint Venture

Company’s contractors and sub-contractors for the aforesaid

operations, in order to be installed or used permanently or consumed

shall meet the conditions for exemption set forth in Article XII(a) after

being duly certified by EGAS's responsible representative to be used for

conducting operations pursuant to this Agreement.

(c) The expatriate employees of CONTRACTOR, the Joint Venture

Company and their contractors and sub-contractors shall not be entitled

to any exemptions from customs duties and other ancillary taxes and

charges except within the limits of the provisions of the laws and

regulations applicable in the A.R.E.; however, personal household

goods and furniture [including one (1) car] for each expatriate employee

of CONTRACTOR and/or the Joint Venture Company shall be cleared

under the "Temporary Release System" (without payment of any

customs duties and other ancillary taxes) upon presentation of a letter

to the appropriate customs authorities by CONTRACTOR or the Joint

Venture Company approved by EGAS's responsible representative,

stating that the imported items are imported for the sole use of the

expatriate employee and his family and that such imported items shall

be re-exported outside the A.R.E. upon the repatriation of the concerned

expatriate employee.

(d) Items imported into the A.R.E., whether exempted or not exempted from

-59-



customs, duties and other ancillary taxes and charges hereunder, may

be exported by the importing party at any time after obtaining EGAS's

approval, which approval shall not be unreasonably withheld or delayed,

without any export duties, taxes or charges or any taxes or charges from

which such items have been already exempted, being applicable. Such

items may be sold within the A.R.E. after obtaining the approval of

EGAS, which approval shall not be unreasonably withheld. In this event,

the purchaser of such items shall pay all applicable customs duties and

other ancillary taxes and charges according to the condition and value

of such items and the tariff applicable on the date of sale, unless such

items have already been sold to an Affiliated Company of

CONTRACTOR, if any, or EGAS, having the same exemption, or unless

title to such items has passed to EGAS.

In the event of any such sale under this paragraph (d), the proceeds

from such sale shall be divided in the following manner:

CONTRACTOR shall be entitled to reimbursement of its unrecovered cost

in such items, if any, and shall pay the excess, if any, to EGAS.

(e) The exemption provided for in Article XII(a) shall not apply to any

imported items when items of the same or substantially the same kind

and quality are manufactured locally, meet the CONTRACTOR's and/or

the Joint Venture Company’s specifications for quality and safety, and

are available for timely purchase and delivery in the A.R.E. at a price

not higher than ten percent (10%) more than the cost of the imported

item, before customs, duties but after freight and insurance costs, if any,

have been added.

(f)



EGAS and CONTRACTOR shall have the right to freely export the

Petroleum produced from the Area after obtaining the approval of the

competent authorities in A.R.E. pursuant to this Agreement, and such

Petroleum shall be exempted from any customs duties, any taxes, levies

or any other imposts in respect of the export of Petroleum hereunder.



ARTICLE XIII

BOOKS OF ACCOUNT; ACCOUNTING AND PAYMENTS

(a) EGAS, CONTRACTOR and the Joint Venture Company shall each

maintain at their business offices in the A.R.E. books of account, in

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accordance with the Accounting Procedure in Annex "E" and accepted

accounting practices generally used in the Petroleum industry, and such

other books and records as may be necessary to show the work

performed under this Agreement, including the amount and value of all

Petroleum produced and saved hereunder. CONTRACTOR and the

Joint Venture Company shall keep their books of account and

accounting records in U.S. Dollars.

The Joint Venture Company shall furnish to the GOVERNMENT or its

representatives monthly returns showing the amount of Petroleum

produced and saved hereunder. Such returns shall be prepared in the

form required by the GOVERNMENT, or its representatives and shall

be signed by the General Manager or by the Deputy General Manager

or a duly designated deputy and delivered to the GOVERNMENT or its

representatives within thirty (30) days after the end of the month covered

in the returns.

(b) The aforesaid books of account and other books and records referred

to above shall be available at all reasonable times for inspection by duly

authorized representatives of the GOVERNMENT.

(c) CONTRACTOR shall submit to EGAS a profit and loss statement of its

Tax Year not later than four (4) months after the commencement of the

following Tax Year to show its net profit or loss from the Petroleum

operations under this Agreement for such Tax Year.

CONTRACTOR shall at the same time submit a year-end balance sheet

for the same Tax Year to EGAS. The balance sheet and financial

statements shall be certified by an Egyptian certified accounting firm.



ARTICLE XIV

RECORDS, REPORTS AND INSPECTION

(a) CONTRACTOR and/or the Joint Venture Company shall prepare and

keep, at all times while this Agreement is in force, maintain accurate and

current records of their operations in the Area. CONTRACTOR and/or

the Joint Venture Company shall annually furnish the GOVERNMENT

or its representatives, in conformity with applicable regulations or as the

GOVERNMENT or its representatives may require based on good

Petroleum industry practice, with a detailed report includes all technical

data and information and their interpretations, if any, concerning their

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operations under this Agreement which were collected within the Year.

The Joint Venture Company shall perform the functions indicated in this

Article XIV in accordance with its role as specified in Article VI.

(b) CONTRACTOR and/or the Joint Venture Company shall save and keep

a portion presents each sample of cores and cuttings taken from drilling

wells, to be disposed of, or forwarded to the GOVERNMENT or its

representatives in the manner directed by the GOVERNMENT. All

samples acquired by CONTRACTOR and/or the Joint Venture

Company for their own purposes shall be considered available for

inspection at any reasonable time by the GOVERNMENT or its

representatives.

(c) Unless otherwise agreed to by EGAS, in case of exporting any rock

samples outside the A.R.E., samples equivalent in size and quality shall,

before such exportation, be delivered to EGAS as representative of the

GOVERNMENT.

(d) Originals of records shall only be exported with the permission of EGAS;

exporting such data shall be by transferring it digitally, through EUG, for

the purpose mentioned in this paragraph, if possible, provided that a

monitor or a comparable record is maintained in EUG in the A.R.E. and

provided that such exports shall be repatriated to A.R.E. promptly

following such processing or analysis on the understanding that they

belong to EGAS.

(e) During the period in which CONTRACTOR is conducting the Exploration

operations, EGAS's duly authorized representatives or employees shall

have the right to full and complete access to the Area at all reasonable

times with the right to observe the operations being conducted and to

inspect all assets, records and data kept by CONTRACTOR. EGAS's

representatives or employees, in exercising their rights under the

preceding sentence of this paragraph (e), shall not cause any harm to

CONTRACTOR's operations.

CONTRACTOR shall provide EGAS, through EUG, with copies of any

and all data (including, but not limited to, geological and geophysical

reports, logs and well surveys) also all information and interpretation of

such data and other information which is in CONTRACTOR's

possession.



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For the purpose of obtaining new offers or carrying out regional studies,

GOVERNMENT and/or EGAS shall, through EUG, during Exploration

and Development Period, show any third party geophysical, geological

data, information and other technical data or CONTRACTOR's reports

and interpretations with respect to the part or parts adjacent to the

proposed area in the new offers, upon notifying CONTRACTOR and

provided that three (3) years has passed such data, unless

CONTRACTOR agrees shorter period.

CONTRACTOR shall also have the right to show any third party the data

of the Area (subject to EGAS's approval) in case CONTRACTOR desires

to of assign in accordance to Article XXI.



ARTICLE XV

RESPONSIBILITY FOR DAMAGES

CONTRACTOR shall entirely and solely be responsible in law toward third

parties for any damage caused by CONTRACTOR's Exploration operations

and shall indemnify the GOVERNMENT and/or EGAS against all damages

for which they may be held liable on account of any such operations.

However, in the event that any damage results as a consequence of the

issuance of any order, regulation or direction of the GOVERNMENT of the

A.R.E. whether promulgated in the form of a law or otherwise, then EGAS

and/or CONTRACTOR shall be exempted from the responsibility resulting

from the non-performance or delay in performance of any obligation under

this Agreement as long as such non-performance or delay in performance is

arising out of the issuance of such laws, regulations or orders within the limits

imposed by such laws, regulations or orders. EGAS and/or CONTRACTOR

shall be granted the necessary period for the restoration of any damage

resulting from the non-performance or the delay in performance, provided

that such granted period shall be added to the term of the relevant period of

this Agreement at that time and shall be restricted to the block(s) affected by

such laws, regulations or orders and shall not exceed the period of delay

referred to above.



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ARTICLE XVI

PRIVILEGES OF GOVERNMENT REPRESENTATIVES

Duly authorized representatives of the GOVERNMENT shall have access to

the Area covered by this Agreement and to the Petroleum operations

conducted thereon. Such representatives may examine the books, registers

and records of EGAS, CONTRACTOR and the Joint Venture Company and

make a reasonable number of surveys, drawings and tests for the purpose

of enforcing this Agreement. They shall, for this purpose, be entitled to make

reasonable use of the machinery and instruments of CONTRACTOR or the

Joint Venture Company on the condition that no danger or impediment to the

operations hereunder shall arise directly or indirectly from such use. Such

representatives shall be given reasonable assistance by the agents and

employees of CONTRACTOR or the Joint Venture Company so that none of

their activities endanger or hinder the safety or efficiency of the operations.

CONTRACTOR or the Joint Venture Company shall offer such

representatives all privileges and facilities accorded to its own employees in

the field and shall provide them, free of charge, the use of reasonable office

space and of adequately furnished housing while they are in the field for the

purpose of facilitating the objectives of this Article XVI. Without prejudice to

Article XIV(e), any and all information obtained by the GOVERNMENT or its

representatives under this Article XVI shall be kept confidential with respect

to the Area.



ARTICLE XVII

EMPLOYMENT RIGHTS AND TRAINING OF

THE ARAB REPUBLIC OF EGYPT’S PERSONNEL

(a) It is the desire of EGAS and CONTRACTOR that operations hereunder

be conducted in a business-like and efficient manner:

(1) The expatriate administrative, professional and technical personnel

employed by CONTRACTOR or the Joint Venture Company and

the personnel of its contractors for the conduct of the operations

hereunder, shall be granted a residence as provided for in Law

No. 89 of 1960, as amended, and Ministerial Order No. 8180 of

1996, and CONTRACTOR agrees that all immigration, passport,

visa and employment regulations of the A.R.E., shall be applicable

to all expatriate employees of CONTRACTOR working in the

A.R.E..

(2) A minimum of twenty five percent (25%) of the combined salaries

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and wages of each of the expatriate administrative, professional

and technical personnel employed by CONTRACTOR or the Joint

Venture Company shall be paid monthly in Egyptian currency.

(b) CONTRACTOR and the Joint Venture Company shall each select its

employees and determine the number thereof, to be used for operations

hereunder.

(c) CONTRACTOR, shall after consultation with EGAS, prepare and carry

out specialized training programs for all its employees in A.R.E.

engaged in operations hereunder with respect to applicable aspects of

the Petroleum industry. CONTRACTOR and the Joint Venture Company

shall give priority to employ the qualified Egyptians, as they are

available.



ARTICLE XVIII

LAWS AND REGULATIONS

(a) CONTRACTOR and the Joint Venture Company shall be subject to Law

No. 66 of 1953 (excluding Article 37 thereof), as amended and the

regulations issued for the implementation thereof, including the

regulations for the safe and efficient performance of operations carried

out for the execution of this Agreement and for the conservation of the

Petroleum resources of the A.R.E.; provided that no regulations, or

modification or interpretation thereof are contrary to or inconsistent with

the provisions of this Agreement.

(b) CONTRACTOR and the Joint Venture Company shall be subject to the

provisions of the Law No. 4 of 1994 concerning the environment and its

executive regulation, as may be amended, as well as any laws or

regulations that may be issued, concerning the protection of the

environment.

(c) Except as provided in Article III(g) for income taxes, EGAS,

CONTRACTOR and the Joint Venture Company shall be exempted

from all taxes and duties, whether imposed by the GOVERNMENT or

municipalities including among others, sales tax, value added tax and

taxes on the Exploration, Development, extracting, producing, exporting

or transporting of Petroleum and LPG as well as any and all withholding

tax obligation that might otherwise be imposed on dividends, interest,

technical service fees, patent and trademark royalties, and similar items.

-65-



CONTRACTOR shall also be exempted from any tax on the liquidation

of CONTRACTOR, or distributions of any income to the shareholders of

CONTRACTOR, and from any tax on capital.

(d) The rights and obligations of EGAS and CONTRACTOR under, and for

the effective term of this Agreement shall be governed by and in

accordance with the provisions of this Agreement and may only be

altered or amended by the written mutual agreement of the said

contracting parties and according to the same procedures by which the

original Agreement has been issued.

(e) The contractors and sub-contractors of CONTRACTOR and the Joint

Venture Company shall be subject to the provisions of this Agreement

which affect them. Without prejudice to Article XVIII(b) above, if

regulations which are duly issued by the GOVERNMENT apply from

time to time and are not in accordance with the provisions of this

Agreement, such regulations shall not apply to CONTRACTOR, the

Joint Venture Company and their respective contractors and subcontractors, as the case may be.

(f)



EGAS, CONTRACTOR, the Joint Venture Company and their

respective contractors and sub-contractors shall for the purposes of this

Agreement be exempted from all professional stamp duties, imposts

and levies imposed by syndical laws with respect to their documents

and activities mentioned hereunder.



(g) Without prejudice to Article XVIII(b) above, all the exemptions from the

application of the A.R.E. laws or regulations granted to EGAS,

CONTRACTOR, the Joint Venture Company and their contractors and

sub-contractors under this Agreement shall include such laws and

regulations as presently in effect or as thereafter amended or

substituted.



ARTICLE XIX

STABILIZATION

In case of changes in existing legislation or regulations applicable to the

conduct of Exploration, Development and production of Petroleum, which

take place after the Effective Date, and which significantly affect the

economic interest of this Agreement to the detriment of CONTRACTOR or

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which imposes on CONTRACTOR an obligation to remit to the A.R.E. the

proceeds from sales of CONTRACTOR's Petroleum, then CONTRACTOR

shall notify EGAS of the subject legislative or regulatory measure as well as

its consequent effects that may cause the destabilization of the Agreement.

In such case, the parties shall negotiate appropriate modifications to this

Agreement designed to restore the economic balance thereof which existed

on the Effective Date.

The parties shall use their best efforts to agree on the appropriate

amendments to this Agreement within ninety (90) days from the aforesaid

notice.

These amendments to this Agreement shall in any event neither decrease

nor increase the rights and obligations of CONTRACTOR as these were

agreed on the Effective Date.

In the event the parties fail to reach an agreement during the period referred

to above in this Article, such dispute shall be referred to the general rules in

settling the disputes stated in Article XXIV of this Agreement.



ARTICLE XX

RIGHT OF REQUISITION

(a) In case of national emergency due to war or imminent expectation of

war or internal causes, the GOVERNMENT may requisite all or part of

the production from the Area obtained hereunder and require the Joint

Venture Company to increase such production to the utmost possible

maximum. The GOVERNMENT may also requisite the Oil and/or Gas

field itself and, if necessary, related facilities.

(b) In any such case, such requisition shall not be effected except after

inviting EGAS and CONTRACTOR or their representatives by

registered letter, with acknowledgement of receipt, to express their

views with respect to such requisition.

(c) The requisition of production shall be effected by Ministerial Order. Any

requisition of Oil and/or Gas field itself, or any related facilities, shall be

effected by a Presidential Decree duly notified to EGAS and

CONTRACTOR.



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(d) In the event of any requisition as provided for above, the

GOVERNMENT shall indemnify in full EGAS and CONTRACTOR for

the period during which the requisition is maintained, including:

(1) all damages which result from such requisition; and

(2) full repayment each month for all Petroleum extracted by the

GOVERNMENT less the royalty share of such production.

However, any damage resulting from enemy attack is not within the

meaning of this paragraph (d). Payment hereunder shall be made to

CONTRACTOR in U.S. Dollars remittable abroad. The price paid to

CONTRACTOR for Petroleum taken shall be calculated in accordance

with Article VII(c).



ARTICLE XXI

ASSIGNMENT

(a) Neither EGAS nor CONTRACTOR may assign to a person, firm or

corporation, in whole or in part, any of its rights, privileges, duties or

obligations under this Agreement either directly or indirectly (indirect

assignment means, for example but not limited to, any sale, purchase,

transfer of stocks, capital or assets or any other action that would

change the control of CONTRACTOR/CONTRACTOR Member on its

share in the company's capital) without the written approval of the

GOVERNMENT. In all cases priority shall be given to EGAS, if it so

desires, to obtain such interest intended to be assigned except

assignment to an Affiliated Company of the same CONTRACTOR

Member.

(b) Without prejudice to Article XXI(a), CONTRACTOR may assign all or

any of its rights, privileges, duties and obligations under this Agreement

to an Affiliated Company of the same CONTRACTOR Member,

provided that CONTRACTOR shall notify EGAS and the

GOVERNMENT in writing and obtain the written approval of the

GOVERNMENT on the assignment.

In case of an assignment either in whole or in part to an Affiliated

Company, the assignor together with the assignee shall remain jointly

and severally liable for all duties and obligations of CONTRACTOR

under this Agreement provided such Affiliated Company remains in the

same capacity as an Affiliated Company.

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(c) To enable consideration to be given to any request for such

GOVERNMENT's consent referred to in (a) or (b) above, the following

conditions must be fulfilled:

(1) The obligations of the assignor deriving from this Agreement must

have been duly fulfilled as of the date such request is made.

(2) The deed of assignment must include provisions stating precisely

that the assignee is bound by all covenants contained in this

Agreement and any modifications or additions in writing that up to

such date may have been made.

A draft of such instrument of assignment shall be submitted to

EGAS for review and approval before being formally executed,

such approval not to be unreasonably withheld.

(3) The assignor(s) shall submit to EGAS the required documents that

evidence the assignee's financial and technical competence, and

also the required documents that evidence the affiliation of the

assignee to the CONTRACTOR/CONTRACTOR Member (in case

of assignment to an Affiliated Company).

(d) Any assignment, sale, transfer or other such conveyance made

pursuant to the provisions of this Article XXI shall be free of any transfer,

capital gains taxes or related taxes, charges or fees including without

limitation, all Income Tax, Sales Tax, Value Added Tax, Stamp Duty, or

other Taxes or similar payments.

(e) Once the assignor and the proposed third party assignee, other than an

Affiliated Company, have agreed the final conditions of an assignment

(including the details of assignment deal), the assignor shall disclose in

details such final conditions in a written notification to EGAS. EGAS

shall have the right to acquire the interest intended to be assigned, if,

within ninety (90) days from assignor’s written notification, EGAS

delivers to the assignor a written notification that it accepts the same

conditions agreed with the proposed third party assignee. If EGAS does

not deliver such notification within such ninety (90) day period, the

assignor shall have the right to assign the interest notified to be

assigned to the proposed third party assignee, subject to the

GOVERNMENT’s approval under paragraph (a) of this Article.

(f)



As long as the assignor shall hold any interest under this Agreement,

the assignor together with the assignee shall be jointly and severally

liable for all duties and obligations of CONTRACTOR under this

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Agreement.



ARTICLE XXII

BREACH OF AGREEMENT AND POWER TO CANCEL

(a) The GOVERNMENT shall have the right to cancel this Agreement by

Order or Presidential Decree, with respect to CONTRACTOR, in the

following instances:

(1) If it has knowingly submitted any false statements to the

GOVERNMENT which were of a material consideration for the

execution of this Agreement.

(2) If it assigns any interest hereunder contrary to the provisions of

Article XXI.

(3) If it is adjudicated bankrupt by a court of competent jurisdiction.

(4) If it does not comply with any final decision reached as the result of

court proceedings conducted under Article XXIV(a).

(5) If it intentionally extracts any mineral, other than Petroleum, not

authorized by this Agreement or without the authorization of the

GOVERNMENT, except such extractions that may be unavoidable

as the result of the operations conducted hereunder in accordance

with accepted Petroleum industry practice and which shall be

notified to the GOVERNMENT or its representative as soon as

possible.

(6) If it commits any material breach of this Agreement or of the

provisions of Law No. 66 of 1953, as amended; provided that they,

are not contradicted by the provisions of this Agreement.

Such cancellation shall take place without prejudice to any rights which

may have accrued to the GOVERNMENT against CONTRACTOR in

accordance with the provisions of this Agreement and, in the event of

such cancellation, CONTRACTOR shall have the right to remove from

the Area all its personal property.

(b) If the GOVERNMENT deems that one of the aforesaid causes (other

than a Force Majeure cause referred to in Article XXIII) exists to cancel

this Agreement, the GOVERNMENT shall give CONTRACTOR ninety

(90) days written notice personally served on CONTRACTOR's General

Manager, in the legally manner and receipt of which is acknowledged

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by him or by his legal agents, to remedy and remove such cause. But if

for any reason such service is impossible due to un-notified change of

address, publication in the Official Journal of such notice shall be

considered as valid service upon CONTRACTOR. If at the end of the

said ninety (90) day notice period such cause has not been remedied

and removed, this Agreement may be canceled forthwith by Order or

Presidential Decree as aforesaid. Provided however, that if such cause,

or the failure to remedy or remove such cause, results from any act or

omission of one party, cancellation of this Agreement shall be effective

only against that party and not as against any other party hereto.



ARTICLE XXIII

FORCE MAJEURE

(a) The non-performance or delay in performance by EGAS and

CONTRACTOR, or either of them, of any obligation under this

Agreement shall be excused if, and to the extent that, such

non-performance or delay is caused by Force Majeure. The period of

any such non-performance or delay, together with such period as may

be necessary for the restoration of any damage done during such delay,

shall be added to the time given in this Agreement for the performance

of such obligation and for the performance of any obligation dependent

thereon and consequently, to the term of this Agreement, but only with

respect to the Exploration or Development Block(s) affected by such

case.

(b) "Force Majeure" within the meaning of this Article XXIII, shall be any act

of God, insurrection, riot, war, strike, and other labor disturbance, fires,

floods or any cause not due to the fault or negligence of EGAS and

CONTRACTOR or either of them, whether or not similar to the

foregoing, provided that any such cause is beyond the reasonable

control of EGAS and CONTRACTOR, or either of them.

(c) The GOVERNMENT shall incur no responsibility whatsoever to EGAS

and CONTRACTOR, or either of them, for any damages, restrictions or

losses arising in consequence of such case of Force Majeure

hereinafter referred to in this Article.

(d) If the Force Majeure event occurs during the first Exploration period or

any extension in accordance with article V(a) thereof and continues in

effect for a period of six (6) months, CONTRACTOR shall have the

option upon ninety (90) days prior written notice to EGAS to terminate

its obligations hereunder without further liability of any kind.

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ARTICLE XXIV

DISPUTES AND ARBITRATION

(a) Any dispute, controversy or claim arising out of or relating to this

Agreement or the breach, termination or invalidity thereof, between the

GOVERNMENT and the parties shall be referred to the appropriate

courts in A.R.E. and shall be finally settled by such courts.

(b) Any dispute, controversy or claim arising out of or relating to this

Agreement, or the breach, termination or invalidity thereof, between

EGAS and CONTRACTOR shall be settled by arbitration in accordance

with the Arbitration Rules of the Cairo Regional Center for International

Commercial Arbitration (the “Center”) in effect on the date of this

Agreement. The award of the arbitrators shall be final and binding on

the parties.

(c) The number of arbitrators shall be three (3).

(d) Each party shall appoint one (1) arbitrator. If, within thirty (30) days after

receipt of the claimant's notification of the appointment of an arbitrator

the respondent has not notified the claimant in writing of the name of the

arbitrator he appoints, the claimant may request the Center to appoint

the second arbitrator.

(e) The two (2) arbitrators thus appointed shall choose the third arbitrator

who shall act as the presiding arbitrator of the tribunal. If within thirty

(30) days after the appointment of the second arbitrator, the two

(2)arbitrators have not agreed upon the choice of the presiding

arbitrator, then either party may request the Secretary General of the

Permanent Court of Arbitration at The Hague, Netherlands, to designate

the appointing authority. Such appointing authority shall appoint the

presiding arbitrator in the same way as a sole arbitrator would be

appointed under Article 6.3 of the UNCITRAL Arbitration Rules. Such

presiding arbitrator shall be a person of a nationality other than the

A.R.E. or the CONTRACTOR’s nationality(ies) and of a country which

has diplomatic relations with both the A.R.E. and the CONTRACTOR’s

country(ies) and who has no economic interest in the Petroleum

business of the signatories hereto.

(f)



Unless otherwise agreed by the parties to the arbitration, the arbitration,

including the making of the award, shall take place in Cairo, A.R.E..



(g) The decision of the arbitrators shall be final and binding upon the

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parties, including the arbitration fees and all related issues and the

execution of the arbitrators’ decision shall be referred to the competent

courts according to the Egyptian laws.

(h) Egyptian law shall apply to the dispute except that in the event of any

conflict between Egyptian laws and this Agreement, the provisions of

this Agreement (including the arbitration provision) shall prevail. The

arbitration shall be conducted in both Arabic and English languages.

(i)



If, for whatever reason, arbitration in accordance with the above

procedure cannot take place, EGAS and CONTRACTOR will transfer all

disputes, controversies or claims arising out of or relating to this

Agreement or the breach, termination or invalidity thereof shall be

settled by ad hoc arbitration in accordance with the UNCITRAL

Arbitration Rules in effect on the Effective Date.



ARTICLE XXV

STATUS OF PARTIES

(a) The rights, duties, obligations and liabilities in respect of EGAS and

CONTRACTOR hereunder shall be several and not joint or collective, it

is being understood that this Agreement shall not be construed as

constituting an association or corporation or partnership.

(b) Each CONTRACTOR Member shall be subject to the laws of the place

where it is incorporated regarding its legal status or creation,

organization, charter and by-laws, shareholding, and ownership.

Each CONTRACTOR Member's shares of capital which are entirely

held abroad shall not be negotiable in the A.R.E. and shall not be offered

for public subscription nor shall be subject to the stamp tax on capital

shares nor any tax or duty in the A.R.E.. Any procedure carried out by

CONTRACTOR/CONTRACTOR Member in A.R.E. or outside A.R.E.

that leads to change of control of the CONTRACTOR/CONTRACTOR

Member on its share in the company's capital, shall be subject to the

procedures and provisions of Article IX "Bonuses" and Article XXI

"Assignment" CONTRACTOR shall be exempted from the application of

Law No. 159 of 1981, as amended.

(c) All CONTRACTOR Members shall be jointly and severally liable for the

performance of the obligations of CONTRACTOR under this

Agreement.



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ARTICLE XXVI

LOCAL CONTRACTORS AND

LOCALLY MANUFACTURED MATERIAL

CONTRACTOR or the Joint Venture Company, as the case may be, and

their contractors shall:

(a) Give priority to local contractors and sub-contractors, including EGAS's

Affiliated Companies, as long as their performance is comparable with

international performance and the prices of their services are not higher

than the prices of other contractors and sub-contractors by more than

ten percent (10%).

(b) Give preference to locally manufactured material, equipment,

machinery and consumables as long as their quality and time of delivery

are comparable to internationally available material, equipment,

machinery and consumables. However, such material, equipment,

machinery and consumables may be imported for operations conducted

hereunder if the local price of such items at CONTRACTOR's or the

Joint Venture Company’s operating base in the A.R.E. is more than ten

percent (10%) higher than the price of such imported items before

customs duties, but after transportation and insurance costs have been

added.



ARTICLE XXVII

TEXT OF THE AGREEMENT

The Arabic version of this Agreement shall, before the competent courts of

A.R.E., be referred to in construing or interpreting this Agreement; provided,

however, that in any arbitration pursuant to Article XXIV herein above

between EGAS and CONTRACTOR the Arabic and English versions shall

both be referred to as having equal force in construing or interpreting this

Agreement.



ARTICLE XXVIII

GENERAL

The headings or titles to each of the Articles of this Agreement are solely for

the convenience of the parties hereto and shall not be used with respect to

the interpretation of said Articles.



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ARTICLE XXIX

APPROVAL OF THE GOVERNMENT

This Agreement shall not be binding upon any of the parties hereto unless

and until a law is issued by the competent authorities of the A.R.E.

authorizing the Minister of Petroleum to sign this Agreement and giving this

Agreement full force and effect of law notwithstanding any countervailing

governmental enactment, and the Agreement is signed by the

GOVERNMENT, EGAS and CONTRACTOR.

-------------------------------------BY: ................................................



-------------------------------------BY: ................................................



-------------------------------------BY: ................................................

THE EGYPTIAN NATURAL GAS HOLDING COMPANY

BY: ................................................

ARAB REPUBLIC OF EGYPT

BY: ................................................

DATE:............................................



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ANNEX “A”

CONCESSION AGREEMENT

BETWEEN

THE ARAB REPUBLIC OF EGYPT

AND

THE EGYPTIAN NATURAL GAS HOLDING COMPANY

AND

---------------------------------------AND

-------------------------------------AND

-------------------------------------------IN

-------------------- AREA

-----------------------------A.R.E.



BOUNDARY DESCRIPTION OF THE CONCESSION AREA

Annex “B” is a provisional illustrative map at an approximate scale of

(1: --000000) showing the Area covered and affected by this Agreement.

The acreage of the Area measures approximately ---------------- square

kilometers (----- km2). It consists of all or part of Exploration Blocks, the whole

Blocks are defined on three (3) minutes latitude × three (3) minutes longitude

grid.

The delineation lines of the Area in Annex "B" are intended to be only

illustrative and provisional and may not show accurately the true position of

such blocks in relation to existing monuments and geographical features.

Coordinates of the corner points of the Area are given in the following table

which forms an integral part of this Annex "A":



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BOUNDARY COORDINATES

OF

-------------------- AREA

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



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ANNEX “B”

MAP OF THE CONCESSION AGREEMENT

----------------------- AREA

------------------------A.R.E.



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ANNEX "C"

BANK LETTER OF GUARANTEE

Letter of Guarantee No. --- (Cairo ------------ 20--),

EGYPTIAN NATURAL GAS HOLDING COMPANY,

The undersigned, National Bank of Egypt as Guarantor, or any other bank

under supervision of CENTRAL BANK OF EGYPT, hereby guarantees to the

EGYPTIAN NATURAL GAS HOLDING COMPANY, hereinafter referred to

as “EGAS” to the limit of ---------- million U.S. Dollars ($ --------), the

performance by -------------------- “-------------”, ------------------------------------ “------” and ------------------ “------------”,hereinafter referred to as

“CONTRACTOR” of its obligations required for Exploration operations to

spend a minimum of ------------- million U.S. Dollars ($ --------) during the ------- (--) Years of the ------- Exploration period under Article IV of the

Concession Agreement, hereinafter referred to as the “Agreement” covering

that Area described in Annexes “A” and “B” of said Agreement, by and

between the Arab Republic of Egypt, hereinafter referred to as “A.R.E.”,

EGAS and CONTRACTOR, in --------- AREA, ------------------- issued by Law

No….. of 20...

It is understood that this Guarantee and the liability of the Guarantor

hereunder shall be reduced quarterly, during the period of expenditure of

said ---------------million U.S. Dollars ($ --------) by the amount of money

expended by CONTRACTOR for such Exploration operations during each

such quarter and approved by EGAS. Each such reduction shall be

established by the joint written statement to the Guarantor by EGAS and

CONTRACTOR.

In the event of a claim by EGAS of non-performance or surrender of the

Agreement by the CONTRACTOR prior to fulfillment of said Minimum

Expenditure Obligations for the ------- Exploration period under Article IV of

this Agreement, there shall be no liability on the undersigned Guarantor for

payment to EGAS unless and until such liability has been established by

written statement of EGAS setting forth the amount due under the

Agreement.

It is a further condition of this Letter of Guarantee that:

(1) This Letter of Guarantee will become available only provided that the

Guarantor will have been informed in writing by CONTRACTOR and

EGAS that the Agreement between CONTRACTOR, A.R.E. and EGAS

has become effective according to its terms and said Guarantee shall

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become effective on the Effective Date of said Agreement.

(2) This Letter of Guarantee shall in any event automatically expire:

(a) ------------- (--) Years and six (6) months after the date it becomes

effective, or

(b) At such time as the total of the amounts shown on quarterly joint

statements of EGAS and CONTRACTOR equals or exceeds the

amount of said Minimum Expenditure Obligations for the -----Exploration period, whichever is earlier.

(3) Consequently, any claim, in respect thereof should be made to the

Guarantor prior to either of said expiration dates at the latest

accompanied by EGAS's written statement, setting forth the amount of

under-expenditure by CONTRACTOR to the effect that:

(a) CONTRACTOR has failed to perform its Minimum Expenditure

Obligations referred to in this Guarantee, and

(b) CONTRACTOR has failed to pay the expenditure deficiency to

EGAS.

Please return to us this Letter of Guarantee in the event it does not become

effective, or upon the expiry date.

Yours Faithfully,

Accountant: -------------------------------Manager

Date



: -------------------------------: -------------------------------



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ANNEX "D"

CHARTER OF THE JOINT VENTURE COMPANY

ARTICLE I

FORM AND GOVERNING LAW

A joint stock company having the nationality of the ARAB REPUBLIC OF

EGYPT shall be formed with the authorization of the GOVERNMENT in

accordance with the provisions of this Agreement referred to below and of

this Charter.

The Joint Venture Company shall be subject to all laws and regulations in

force in the A.R.E. to the extent that such laws and regulations are not

inconsistent with the provisions of this Charter and the Agreement referred

to hereunder.

ARTICLE II

NAME OF JOINT VENTURE COMPANY

The name of the Joint Venture Company shall be mutually agreed upon

between EGAS and CONTRACTOR on the date of commercial discovery

and shall be subject to the Minister of Petroleum’s approval.

ARTICLE III

LOCATION OF HEAD OFFICE

The Head Office of the Joint Venture Company shall be in Cairo, A.R.E..

ARTICLE IV

OBJECT OF THE JOINT VENTURE COMPANY

The object of the Joint Venture Company is to act as the agency through

which EGAS and CONTRACTOR, carry out and conduct the Development

operations required in accordance with the provisions of the Agreement for

Gas and Crude Oil Exploration and Exploitation in --------- AREA, ---------------, A.R.E. (hereinafter referred to as the “Agreement”) entered into by and

between the Arab Republic of Egypt (hereinafter referred to as the “A.R.E.”),

EGAS and CONTRACTOR issued by Law No. -------- of 20--.

Following the Minister of Petroleum’s approval date to the Development

Lease the Joint Venture Company shall also be the agency to carry out and

conduct Exploration operations, in any portion of the Area converted into a

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Development Lease, pursuant to work programs and budgets approved in

accordance with the Agreement.

The Joint Venture Company shall keep account of all costs, expenses and

expenditures for such operations under the terms of the Agreement and

Annex "E" thereto.

The Joint Venture Company shall not engage in any business or undertake

any activity beyond the performance of said operations unless otherwise

agreed upon by EGAS and CONTRACTOR.

ARTICLE V

CAPITAL

The authorized capital of the Joint Venture Company is twenty thousand

(20000) Egyptian Pounds divided into five thousand (5000) shares of

common stock with a value of four (4) Egyptian Pounds per share having

equal voting rights, fully paid and non-assessable.

EGAS and CONTRACTOR shall each pay for, hold and own, throughout the

life of the Joint Venture Company, one half of the capital stock of the Joint

Venture Company provided that only in the event that either party should

transfer or assign the whole or any percentage of its ownership interest in

the entirety of the Agreement to another party, may such transferring or

assigning party transfer or assign any of the capital stock of the Joint Venture

Company and, in that event, such transferring or assigning party (and its

successors and assignees) must transfer and assign a stock interest in the

Joint Venture Company equal to the transferred or assigned whole or

percentage of its ownership interest in the entirety of the said Agreement,

without prejudice to Article XXI of the Agreement.

ARTICLE VI

ASSETS

The Joint Venture Company shall not own any right, title, interest or estate

in or under the Agreement or any Development Lease created there under

or in any of the Petroleum produced from any Exploration Block or

Development Lease there under or in any of the assets, equipment or other

property obtained or used in connection therewith, and shall not be obligated

as a principal for the financing or performance of any of the duties or

obligations of either EGAS or CONTRACTOR under the Agreement. The

Joint Venture Company shall not make any profit from any source

whatsoever.

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ARTICLE VII

ROLE OF THE JOINT VENTURE COMPANY

The Joint Venture Company shall be no more than an agent for EGAS and

CONTRACTOR. Whenever it is indicated herein that the Joint Venture

Company shall decide, take action or make a proposal and the like, it is

understood that such decision or judgment is the result of the decision or

judgment of EGAS and/or CONTRACTOR as may be required by the

Agreement.

ARTICLE VIII

BOARD OF DIRECTORS

The Joint Venture Company shall have a Board of Directors consisting of

eight (8) members, four (4) of whom shall be designated by EGAS and the

other four (4) by CONTRACTOR. The Chairman shall be designated by

EGAS and shall also be a Managing Director. CONTRACTOR shall

designate the General Manager who shall also be a Managing Director.

ARTICLE IX

VALIDITY OF BOARD RESOLUTIONS

Meetings of the Board of Directors shall be valid if a majority of the Directors

are present and any decision taken at such meetings must have the

affirmative vote of five (5) or more of the Directors; provided, however, that

any Director may be represented and vote by proxy held by another Director.

ARTICLE X

SHAREHOLDERS’ MEETINGS

General meetings of the shareholders shall be valid if a majority of the capital

stock of the Joint Venture Company is represented thereat. Any decision

taken at such meetings must have the affirmative vote of shareholders

owning or representing a majority of the capital stock.

ARTICLE XI

PERSONNEL AND BY-LAWS

The Board of Directors shall approve the regulations covering the terms and

conditions of employment of the personnel of the Joint Venture Company

employed directly by the Joint Venture Company and not assigned thereto

by CONTRACTOR and EGAS.

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The Board of Directors shall, in due course, draw up the By-Laws of the Joint

Venture Company and such By-Laws shall be effective upon being approved

by a General Meeting of the shareholders, in accordance with the provisions

of Article X hereof.

ARTICLE XII

DURATION OF THE JOINT VENTURE COMPANY

The Joint Venture Company shall come into existence within three (3)

months from the date of the Minister of Petroleum’s approval of the first

Development Lease whether for Crude Oil or Gas.

The duration of the Joint Venture Company shall be for a period equal to the

duration of the Agreement, including any extension thereof.

The Joint Venture Company shall be wound up if this Agreement is

terminated for any reason as provided for therein.

--------------------------BY: ................................................

------------------------------------BY: ................................................

----------------------------BY: ................................................

THE EGYPTIAN NATURAL GAS HOLDING COMPANY

BY: ................................................



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ANNEX "E"

ACCOUNTING PROCEDURE

ARTICLE I

GENERAL PROVISIONS

(a) Definitions:

The definitions contained in this Agreement shall apply to this

Accounting Procedure and have the same meaning.

(b) Statements of Activity:

(1) CONTRACTOR shall, pursuant to Article IV of this Agreement,

render to EGAS within thirty (30) days of the end of each calendar

quarter a Statement of Exploration Activity reflecting all charges

and credits related to the Exploration operations conducted in any

portion of the Area not converted into a Development Lease for that

quarter, summarized by appropriate classifications indicative of the

nature thereof.

(2) Following its coming into existence, the Joint Venture Company

shall render to EGAS and CONTRACTOR within fifteen (15) days

of the end of each calendar quarter a Statement of Development

and Exploration Activity reflecting all charges and credits related to

the Development and Exploration operations conducted in any

portion of the Area converted into a Development Lease for that

quarter, summarized by appropriate classifications indicative of the

nature thereof, provided that items of controllable material and

unusual charges and credits shall be detailed.

Pursuant to Article VII, EGAS shall audit and approve each

statement of Development and Exploration Activity submitted by

the CONTRACTOR or the Joint Venture Company (as the case

may be). Any comments made by EGAS shall be reflected by the

CONTRACTOR or the Joint Venture Company (as the case may

be) on the Statement produced for the next calendar quarter.

(c) Adjustments and Audits:

(1) Each quarterly Statement of Exploration Activity pursuant to

Article I(b)(1) of this Annex shall conclusively be presumed to be

true and correct after three (3) months following the receipt of each

Statement by EGAS, unless within the said three (3) month period

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EGAS objects in writing with its remarks thereto pursuant to Article

IV(f) of the Agreement. During the said three (3) month period

supporting documents will be available for inspection by EGAS

during working hours.

CONTRACTOR shall have the same audit rights on the Joint

Venture Company Statements as EGAS under this sub-paragraph.

(2) All Statements of Development and Exploration Activity for any

calendar quarter pursuant to Article I(b)(2) of this Annex, shall

conclusively be presumed to be true and correct after three (3)

months following the receipt of each Statement of Development

and Exploration Activity by EGAS and CONTRACTOR, unless

within the said three (3) month period EGAS or CONTRACTOR

objects in writing with its remarks thereto. Pending expiration of said

three (3) month period EGAS or CONTRACTOR or both of them

shall have the right to audit the Joint Venture Company’s accounts,

records and supporting documents for such quarter, in the same

manner as provided for in Article IV(f) of the Agreement.

(d) Currency Exchange:

CONTRACTOR's books for Exploration and the Joint Venture

Company’s books for Development and Exploration, if any, shall be kept

in the A.R.E. in U.S. Dollars. All U.S. Dollars expenditures shall be

charged in the amount expended. All Egyptian currency expenditures

shall be converted to U.S. Dollars at the applicable rate of exchange

issued by the Central Bank of Egypt on the first day of the month in

which expenditures are recorded, and all other non-U.S. Dollars

expenditures shall be converted into U.S. Dollars at the buying rate of

exchange for such currency as quoted by National Westminster Bank

Limited, London, at 10:30 a.m. G.M.T., on the first day of the month in

which expenditures are recorded. A record shall be kept of the exchange

rates used in converting Egyptian currency or other non-U.S. Dollars

expenditures into U.S. Dollars.

(e) Precedence of Documents:

In the event of any inconsistency or conflict between the provisions of

this Accounting Procedure and the provisions of the Agreement treating

the same subject differently, then the provisions of the Agreement shall

prevail.

(f)



Revision of Accounting Procedure:

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By mutual agreement between EGAS and CONTRACTOR, this

Accounting Procedure may be revised in writing from time to time in the

light of future arrangements.

(g) No Charge for Interest on Investment:

Interest on investment or any bank fees, charges or commissions

related to any bank guarantees shall not at any time be charged as

recoverable costs under the Agreement.

ARTICLE II

COSTS, EXPENSES AND EXPENDITURES

Subject to the provisions of the Agreement, CONTRACTOR shall alone bear

and directly or through the Joint Venture Company, pay the following costs

and expenses, which costs and expenses shall be classified and allocated

to the activities according to sound and generally accepted accounting

principles and treated and recovered in accordance with Article VII of this

Agreement:

(a) Surface Rights:

All direct cost attributable to the acquisition, renewal or relinquishment

of surface rights acquired and maintained in force for the Area.

(b) Labor and Related Costs:

(1) Salaries and wages which were approved by EGAS of

CONTRACTOR's or Joint Venture Company’s employees, as the

case may be, directly engaged in the various activities under the

Agreement, including salaries and wages paid to geologists and

other employees who are temporarily assigned to and employed in

such activities.

Reasonable revisions of such salaries and wages shall be effected

to take into account changes in CONTRACTOR's policies and

amendments of laws applicable to salaries. For the purpose of this

Article II(b) and(c) of this Annex, salaries and wages shall mean the

assessable amounts for A.R.E. Income taxes, including the salaries

during vacations and sick leaves, but excluding all the amounts

corresponding to the other items covered by the percentage fixed

under (2) below.

(2) For expatriate employees permanently assigned to A.R.E.:

1)



All allowances applicable to salaries and wages;



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2)



Cost of established plans; and



3)



All travel and relocation costs of such expatriate employees

and their families to and from the employee's country or point

of origin at the time of employment, at the time of separation,

or as a result of transfer from one location to another and for

vacation (transportation costs for employees and their families

transferring from the A.R.E. to another location other than their

country of origin shall not be charged to A.R.E. operations).



Costs under this Article II(b)(2) shall be deemed to be equal to sixty

percent (60%) of basic salaries and wages paid for such expatriate

personnel including those paid during vacations and sick leaves as

established in CONTRACTOR's international policies, chargeable

under Article II(b)(1), (i), (k)(1) and (k)(3) of this Annex.

However, salaries and wages during vacations, sick leaves and

disability are covered by the foregoing percentage. The percentage

outlined above shall be deemed to reflect CONTRACTOR's actual

costs as of the Effective Date with regard to the following benefits,

allowances and costs :1. Housing and utilities allowance.

2. Commodities and services allowance.

3. Special rental allowance.

4. Vacation transportation allowance.

5. Vacation travel expense allowance.

6. Vacation excess baggage allowance.

7. Education allowances (children of expatriate employees).

8. Hypothetical home country tax offset (which results in a

reduction of the chargeable percentage).

9. Storage of personal effects.

10. Housing refurbishment expense.

11. Property management service fees.

12. Recreation allowance.

13. Retirement plan.

14. Group life insurance.

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15. Group medical insurance.

16. Sickness and disability.

17. Vacation plans paid (excluding allowable vacation travel

expenses).

18. Savings plan.

19. Educational assistance.

20. Military service allowance.

21. Home country social security and medical care contributions.

22. Workman's compensation.

23. Federal and state unemployment insurance.

24. Personnel transfer expense.

25. National insurance.

26. Any other costs, allowances and benefits of a similar nature as

established in CONTRACTOR's international policies.

The percentages outlined above shall be reviewed at intervals of

three (3) Years from the Effective Date and at such time

CONTRACTOR and EGAS shall agree on new percentages to be

used under this Article II(b)(2).

Revisions of the percentage shall take into consideration variances

in costs and changes in CONTRACTOR's international policies

which modify or exclude any of the above allowances and benefits.

The revised percentages shall reflect as nearly as possible

CONTRACTOR's actual costs of all its established allowances and

benefits and of personnel transfers.

(3) For expatriate employees temporarily assigned to the A.R.E. all

allowances, costs of established plans and all travel and/or

relocation costs for such expatriates as paid in accordance with

CONTRACTOR's international established policies. Such costs

shall not include any administrative overhead other than what is

mentioned in Article II(k)(2) of this Annex.

(4) Expenditure or contributions made pursuant to law or assessment

imposed by any governmental authority which are applicable to

labor cost of salaries and wages as provided under paragraphs

(b)(1), (b)(2), (i), (k)(1) and (k)(3) of Article II of this Annex.

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(c) Benefits, allowances and related costs of national employees:

Bonuses, overtime, customary allowances and benefits on a basis

similar to that prevailing for oil companies operating in the A.R.E., all as

chargeable under Article II(b)(1), (i), (k)(1) and (k)(3) of this Annex.

Severance pay shall be charged at a fixed rate applied to payrolls which

shall equal an amount equivalent to the maximum liability for severance

payment as required under the A.R.E. Labor Law.

(d) Material:

Material, equipment and supplies purchased and furnished as such by

CONTRACTOR or the Joint Venture Company.

(1) Purchases:

Material, equipment and supplies purchased shall be accounted for

at the price paid by CONTRACTOR or the Joint Venture Company

plus any related cost and after deduction of all discounts actually

received.

(2) Material furnished by CONTRACTOR:

Material, required for operations shall be purchased directly

whenever practicable, except that CONTRACTOR may furnish

such material from CONTRACTOR's or CONTRACTOR's Affiliated

Companies stocks outside the A.R.E. under the following

conditions:

1)



New Material (Condition "A"):

New Material transferred from CONTRACTOR's or

CONTRACTOR's Affiliated Companies warehouses or other

properties shall be priced at cost, provided that the cost of

material supplied is not higher than international prices for

material of similar quality supplied on similar terms, prevailing

at the time such material was supplied.



2)



Used Material (Conditions "B" and "C"):

a) Used Material which is in sound and serviceable condition

and is suitable for re-use without reconditioning shall be

classified as Condition "B" and priced at seventy five

percent (75%) of the price of new material.

b) Used Material which cannot be classified as Condition "B"

but which is serviceable for original function but

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substantially not suitable for re-use without reconditioning,

shall be classified as Condition "C" and priced at fifty

percent (50%) of the price of new material.

c) Used Material which cannot be classified as Condition "B"

or Condition "C" shall be priced at a value commensurate

with its use.

d) Tanks, buildings and other equipment involving erection

costs shall be charged at applicable percentage of

knocked - down new price.

(3) Warranty of material furnished by CONTRACTOR:

CONTRACTOR does not warrant the material furnished beyond or

back of the dealer's or manufacturer's guarantee, and in case of

defective material, credit shall not be recorded until adjustment has

been received by CONTRACTOR from the manufacturer(s) or its

(their) agents.

It is understood that the value of the warehouse stock and spare

parts shall be charged to the Cost Recovery category defined

above, only when used in operations.

(e) Transportation and Employee Relocation Costs:

(1) Transportation of material, equipment and supplies necessary for

the conduct of CONTRACTOR's or the Joint Venture Company’s

activities.

(2) Business travel and transportation expenses to the extent covered

by CONTRACTOR’s established policies of or with regard to

expatriate and national employees, as incurred and paid by, or for,

employees in the conduct of CONTRACTOR's or the Joint Venture

Company’s business.

(3) Employees transportation and relocation costs for national

employees to the extent covered by established policies.

(f)



Services:

(1) Outside services: The costs of contracts for consultants, services

and utilities procured from third parties.

(2) Cost of services performed by EGAS or by CONTRACTOR, or their

Affiliated Companies in facilities inside or outside the A.R.E.

regular, recurring, routine services, such as interpreting magnetic

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tapes and/or other analyses, shall be performed and charged by

EGAS and/or CONTRACTOR or their Affiliated Companies, as well

as, geological and geophysical studies relevant to the Concession

area purchased by CONTRACTOR, through EUG, for example at

an agreed contracted price. Major projects involving engineering

and design services shall be performed by EGAS and/or

CONTRACTOR or their Affiliated Companies at an agreed contract

amount.

(3) Use of EGAS's, CONTRACTOR's or their Affiliated Companies'

wholly owned equipment shall be charged at a rental rate

commensurate with the cost of ownership and operation, but not in

excess of competitive rates then prevailing in the A.R.E. .

(4) CONTRACTOR's and CONTRACTOR's Affiliated Companies'

rates shall not include any administrative or overhead costs other

than what is mentioned in Article II(k)(2) of this Annex.

(g) Damages and Losses:

All costs or expenses, necessary to replace or repair damages or losses

incurred by fire, flood, storm, theft, accident or any other cause not

controllable by CONTRACTOR or the Joint Venture Company through

the exercise of reasonable diligence. CONTRACTOR or the Joint

Venture Company shall furnish EGAS and CONTRACTOR with a

written notice of damages or losses incurred in excess of ten thousand

U.S. Dollars ($10000) per occurrence, as soon as practicable after

report of the same has been received by CONTRACTOR or the Joint

Venture Company.

(h) Insurance and Claims:

The cost of insurance against any public liability, property damage and

other insurance against liabilities of CONTRACTOR, the Joint Venture

Company and/or the parties or any of them to their employees and/or

outsiders as may be required by the laws, regulations and orders of the

GOVERNMENT or as the parties may agree upon. The proceeds of any

such insurance or claim collected, less the actual cost of making a claim,

shall be credited against operations.

If no insurance is carried for a particular risk, in accordance with good

international Petroleum industry practices, all related actual

expenditures incurred and paid by CONTRACTOR or the Joint Venture

Company in settlement of any and all losses, claims, damages,

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judgments and any other expenses, including legal services.

(i)



Indirect Expenses:

Camp overhead and facilities such as shore base, warehouses, water

systems, road systems, salaries and expenses of field supervisory

personnel, field clerks, assistants and other general employees

indirectly serving the Area.



(j)



Legal Expenses:

All costs and expenses of litigation, or legal services otherwise

necessary or expedient for the protection of the Area, including

attorney's fees and expenses as hereinafter provided, together with all

judgments obtained against the parties or any of them on account of the

operations under the Agreement, and actual expenses incurred by any

party(ies) hereto in securing evidence for the purpose of defending

against any action or claim prosecuted or urged against the operations

or the subject matter of the Agreement. In the event actions or claims

affecting the interests hereunder are handled by the legal staff of one or

more of the parties hereto, a charge commensurate with the cost of

providing and furnishing such services shall be made to operations.



(k) Administrative Overhead and General Expenses:

(1) While CONTRACTOR is conducting Exploration operations, the

cost of staffing and maintaining CONTRACTOR's head office in the

A.R.E. and/or other offices established in the A.R.E. as appropriate

other than field offices, which shall be charged as provided for in

Article II(i) of this Annex, and excepting salaries of employees of

CONTRACTOR who are temporarily assigned to and directly

serving on the Area, which shall be charged as provided for in

Article II(b) of this Annex.

(2) CONTRACTOR's administrative overhead and General Expenses

outside the A.R.E. applicable to Exploration operations in the

A.R.E. shall be charged each month at the rate of five percent (5%)

of total Exploration expenditures, provided that no administrative

overhead of CONTRACTOR outside the A.R.E. applicable to

A.R.E. Exploration operations shall be charged for Exploration

operations conducted by the Joint Venture Company. No other

direct charges as such for CONTRACTOR's administrative

overhead outside the A.R.E. shall be applied against the

Exploration obligations. Examples of the type of costs

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CONTRACTOR is incurring and charging hereunder due to

activities under this Agreement and covered by said percentage

are:

1- Executive - time of executive officers.

2- Treasury – financial and exchange problems.

3- Purchasing - procuring materials, equipment and supplies.

4- Exploration and Production - directing, advising and controlling

the entire project.

5- Other departments such as legal, controlling and engineering

which contribute time, knowledge and experience to the

operations.

The foregoing does not preclude charging for direct service under

Article II(f)(2) of this Annex.

(3) While the Joint Venture Company is conducting operations, the

Joint Venture Company’s personnel engaged in general clerical

and office work, supervisors and officers whose time is generally

spent in the main office and not the field, and all employees

generally considered as general and administrative and not

charged to other types of expenses shall be charged to operations.

Such expenses shall be allocated each month between Exploration

and Development operations according to sound and practicable

accounting methods.

(l)



Taxes:

All taxes, duties or levies paid in the A.R.E. by CONTRACTOR or the

Joint Venture Company with respect to this Agreement other than those

covered by Article III(g)(1) of the Agreement.



(m) Continuing CONTRACTOR Costs:

Costs of CONTRACTOR activities required under the Agreement and

incurred exclusively in the A.R.E. after the Joint Venture Company is

formed. No sales expenses incurred outside or inside the A.R.E. may

be recovered as a cost.

(n) Other Expenditures:

Any costs, expenses or expenditures, other than those which are

covered and dealt with by the foregoing provisions of this Article II,

incurred by CONTRACTOR or the Joint Venture Company under

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approved work programs and budgets.

ARTICLE III

INVENTORIES

(a) Periodic Inventories, Notice and Representation:

At reasonable intervals as agreed upon by EGAS and CONTRACTOR

inventories shall be taken by the Joint Venture Company of the

operations materials, which shall include all such materials, physical

assets and construction projects. Written notice of intention to take

inventory shall be given by the Joint Venture Company to EGAS and

CONTRACTOR at least thirty (30) days before any inventory is to begin

so that EGAS and CONTRACTOR may be represented when any

inventory is taken. Failure of EGAS and/or CONTRACTOR to be

represented at an inventory shall bind the party who failed to accept the

inventory taken by the Joint Venture Company, who shall in that event

furnish the party not represented with a copy thereof.

(b) Reconciliation and Adjustment of Inventories:

Reconciliation of inventory shall be made by CONTRACTOR and

EGAS, and a list of overages and shortages shall be jointly determined

by the Joint Venture Company and CONTRACTOR and EGAS, and the

inventory adjusted by the Joint Venture Company.

ARTICLE IV

COST RECOVERY

(a) Statements of Recovery of Costs and of Cost Recovery Petroleum:

CONTRACTOR shall, pursuant to Article VII of the Agreement, render

to EGAS as promptly as practicable but not later than fifteen (15) days

after receipt from the Joint Venture Company of the Statements for

Development and Exploration Activity for the calendar quarter a

"Statement” for that quarter showing:

1- Recoverable costs carried forward from the previous quarter, if any.

2- Recoverable costs incurred and paid during the quarter.

3- Total recoverable costs for the quarter (1) + (2).

4- Value of Cost Recovery Petroleum taken and separately disposed of

by CONTRACTOR for the quarter.

5- Amount of costs recovered for the quarter.

6- Amount of recoverable costs carried forward into the succeeding

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quarter, if any.

7- Excess, if any, of the value of Cost Recovery Petroleum taken and

separately disposed of by CONTRACTOR over costs recovered for

the quarter.

Pursuant to Article VII, EGAS shall audit and approve each Statement

of Development and Exploration Activity submitted by the

CONTRACTOR and the total production and pricing related to the

relevant calendar quarter. Any comments made by EGAS shall be

reflected by the CONTRACTOR on the statement produced for the next

calendar quarter.

(b) Payments:

If such Statement shows an amount due to EGAS, payment of that

amount shall be made in U.S. Dollars by CONTRACTOR with the

rendition of such Statement. If CONTRACTOR fails to make any such

payment to EGAS on the date when such payment is due, then

CONTRACTOR shall pay interest of two and a half percent (2.5%) per

annum higher than the London Interbank Borrowing Offered Rate

(LIBOR), for three (3) months U.S. Dollars deposits prevailing on the

date such interest is calculated. Such interest payment shall not be

recoverable.

(c) Settlement of Excess Cost Recovery:

EGAS has the right to take its entitlement of Excess Cost Recovery

under Article VII(a)(2) of the Agreement in kind during the said quarter.

A settlement shall be required with the rendition of such Statements in

case CONTRACTOR has taken more than its own entitlement of such

Excess Cost Recovery.

(d) Audit Right:

EGAS shall have the right within a period of twelve (12) months from

receipt of any Statement under this Article IV in which to audit and raise

objection to any such Statement. EGAS and CONTRACTOR shall agree

on any required adjustments. Supporting documents and accounts will

be available to EGAS during said twelve (12) month period.

ARTICLE V

CONTROL AND MAJOR ACCOUNTS

(a) Exploration Obligation Control Accounts:

CONTRACTOR shall establish an Exploration Obligation Control

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Account and an offsetting contra account to control therein the total

amount of Exploration expenditures reported on Statements of activity

prepared in accordance with Article I(b)(1) of this Annex, less any

reductions agreed to by EGAS and CONTRACTOR following written

remarks taken by a non-operator pursuant to Article I(c)(1) of this Annex,

in order to determine when Minimum Exploration Work Obligations have

been met.

(b) Cost Recovery Control Account:

CONTRACTOR shall establish a Cost Recovery Control Account and

an off-setting contra account to control therein, the amount of cost

remaining to be recovered, if any, the amount of cost recovered and the

value of Excess Cost Recovery, if any.

(c) Major Accounts:

For the purpose of classifying costs, expenses and expenditures for

Cost Recovery Petroleum as well as for the purpose of establishing

when the Minimum Exploration Work Obligations have been met, costs,

expenses and expenditures shall be recorded in major accounts

including the following:

 Exploration Expenditures;

 Development Expenditures other than Operating Expenses;

 Operating Expenses;

Necessary sub-accounts shall be used.

Revenue accounts shall be maintained by CONTRACTOR to the extent

necessary for the control of recovery of costs and the treatment of Cost

Recovery Petroleum.

ARTICLE VI

TAX IMPLEMENTATION PROVISIONS

It is understood that CONTRACTOR shall be subject to Egyptian income tax

laws, except as otherwise provided for in the Agreement, that any A.R.E.

income taxes paid by EGAS on CONTRACTOR's behalf constitute additional

income to CONTRACTOR, and this additional income is also subject to

A.R.E. income tax, that is "grossed-up".

“CONTRACTOR's annual income”, as determined in Article III(g)(2) of this

Agreement, less the amount equal to CONTRACTOR's grossed-up Egyptian

income tax liability, shall be CONTRACTOR's "Provisional Income".

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The "Grossed-up Value” is an amount added to Provisional Income to give

"Taxable Income", such that the Grossed-up Value is equivalent to the

A.R.E. income taxes.

THEREFORE:

Taxable Income = Provisional Income + Grossed-up Value

and

Grossed-up Value = A.R.E. income tax ÷ Taxable Income

If the "A.R.E. income tax rate", which means the effective or composite tax

rate due to the various A.R.E. taxes levied on income or profits, is constant

and not dependent on the level of income, then:

Grossed-up Value = A.R.E. income tax rate × Taxable Income

Combining the first and last equations above

Provisional income × Tax Rate

Grossed-up Value =

1 - Tax Rate

where the tax rate is expressed as a decimal.

The above computations are illustrated by the following numerical example.

Assuming that the Provisional Income is $10 and the A.R.E. Income Tax rate

is forty percent (40%), then the Grossed-up Value is equal to:

$ 10 × 0.4

=



$ 6.67



1 - 0.4

Therefore:



Provisional income



$10.00



+ Grossed-up Value



6.67



= Taxable Income

-



$16.67



A.R.E. Income Taxes at 40%



= CONTRACTOR's Income after taxes



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6.67

$ 10.00



ANNEX "F"

DEVELOPMENT LEASE ABANDONMENT

COST RECOVERY MECHANISM

Reference to Concession Agreement ………. Area issued by Law No. … of

…….. (“Agreement”), and to the Notice of Commercial Gas Discovery of well

…………. sent to EGAS on …………… according to article III(d)(ii) of the

Agreement, the parties under the Agreement hereby agreed the mechanism

for recovering the abandonment cost, which shall be attached to

“…………….. Development Lease”.

1. Abandonment Financial Procedures and Costs Funding:

The Joint Venture Company will open a bank account in a bank approved

by EGAS and CONTRACTOR, for the purpose of managing the

abandonment fund, such bank account currency shall be in U.S. Dollars.

The bank account shall be opened upon a notice by the CONTRACTOR.

The Joint Venture Company may appoint another bank during the

Development Lease Period upon approval of EGAS and CONTRACTOR.

EGAS shall set the terms for administration of the “……….. abandonment

fund”, the account shall be dedicated for the sole purpose of the

implementation of the Development lease abandonment.

CONTRACTOR shall commence paying contributions to the ………..

abandonment fund in the Calendar quarter in which a percentage of fifty

percent (50%) of Petroleum reserves has been recovered.

The reference for the abandonment fund estimate shall be in accordance

to the ………. plan of Development, and shall be revised by the

CONTRACTOR and agreed by EGAS after ten (10) years from the

Development Lease signature. Afterwards, CONTRACTOR and EGAS

shall perform a periodical update of the abandonment cost every five (5)

years or upon any significant change in the estimated cost.

The reference for the Petroleum reserves shall be as identified in the

……….. Gas Sales Agreement, in consistency with the Development

Lease and shall be updated in accordance to the …………. Gas Sales

Agreement amendments, if any.

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2. Abandonment Fund Cost Recovery:

Without prejudice to Article VII of the Agreement, all monies paid by

CONTRACTOR in the account of ………. abandonment fund shall be

recovered as Development Expenditures starting in the Tax Year in which

such contribution is incurred and paid.

3. The Contributions:

At the tenth (10th) day of the beginning of each Calendar quarter,

CONTRACTOR shall pay, in the account of “…………. abandonment fund”

an amount of fund (X) calculated according to the following formula:

X = {(A/B) x (C)} - Y

Where:

• X = The amount of contribution to be transferred to the account of ………

abandonment fund in respect of the relevant Calendar quarter.

• A = the latest estimated cost of abandonment operations.

• B = the estimated Petroleum reserves remaining to be recovered from

the end of the Calendar quarter in which the abandonment fund account(s)

was opened until the Calendar quarter in which the ………. Development

Lease will expire.

• C = the cumulative Production of Petroleum from …… Development

Lease starting from the end of the Calendar quarter in which the

abandonment fund account was opened.

• Y = the abandonment fund bank balance at the end of the previous

Calendar quarter.

4. The Implementation of the Abandonment

Five years before the expiration of the …….. Development Lease, EGAS

and CONTRACTOR shall meet to discuss, considering the last

abandonment costs estimate performed by the CONTRACTOR and EGAS

and the foreseen production potentials of the …….. Development Lease

the implementation operations of the abandonment of ………. existing

wells and facilities.



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i) In case the production from ……… field expected to cease before or on

the expiration date of the …….. Development Lease (as may be

extended):

• CONTRACTOR and EGAS shall agree on the details of the

abandonment implementation and shall consult together on whether

to assign the abandonment implementation operations to the Joint

Venture Company or to evaluate other options;

• In case actual abandonment costs are higher than the abandonment

fund including matured banking interest, CONTRACTOR shall bear

the difference in costs; and

• In case the total contributions in the abandonment fund including any

matured banking interest thereon is higher than the actual

abandonment cost following completion of all abandonment

operations, then the excess shall revert to recover the carry forward

situation (if any) for the CONTRACTOR resulting from the actual

funding of the abandonment fund, then any excess amount including

any matured banking interest shall be fully transferred to EGAS.

ii) If EGAS decided that the production from ……… field will be continued

by any entity other than CONTRACTOR after the expiration of the

Development Lease (as may be extended in accordance to the

Agreement):

a) the account of ……… abandonment fund shall belong to EGAS

including any accrued banking interest thereon;

b) EGAS shall be responsible for the implementation of the

abandonment operations of …... field with no responsibility or liability

on CONTRACTOR.

5. Any other points which are not covered by this document shall be agreed

upon by EGAS and CONTRACTOR in a manner consistent with the

provisions of the Agreement and this Annex “F.”

For: ................................................

……………(Signature) ...................

By: Mr. ..........................................

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……………..(Title) .........................



For: ................................................

……………(Signature) ...................

By: Mr. ..........................................

……………..(Title) .........................



For: the Egyptian Natural Gas Holding Company (EGAS)

……………(Signature) ...................

By: Mr. ..........................................

……………..(Title) .........................

Approved By:

……………(Signature) ...................

H.E. ..............................................

Minister of Petroleum and Mineral Resources

DATE:............................................



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ANNEX "G"

1- MAP OF THE NATIONAL GAS PIPELINE

GRID SYSTEM



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2- MAP OF CRUDE AND CONDENSATE

PIPELINE NETWORK.



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3- MAP OF LPG PIPELINE NETWORK.



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