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 Z5C EPCC







EXPLORATION AND PRODUCTION OF PETROLEUM





CONCESSION CONTRACT











Parties





This Exploration and Production Concession Contract ("EPCC") is entered into in accordance with


applicable law on the day of October 2018:





THE GOVERNMENT OF THE REPUBLIC OF MOZAMBIQUE, hereinafter referred to as "the


Government" and herein represented by the Minister of Mineral Resources and Energy; and





EXXONMOBIL MOZAMBIQUE EXPLORATION AND PRODUCTION, LIMITADA, a company


established in accordance with the laws of the Republic of Mozambique hereinafter referred to as





"ExxonMobil" and herein represented by its appointed representative; and





RN ZAMBEZI SOUTH PTE. LTD., a company established in accordance with the laws of the Republic


of Singapore and acting through its a branch registered in accordance with the laws of the Republic


of Mozambique, hereinafter referred to as "Rosneft" and herein represented by its appointed


representative; and





EMPRESA NACIONAL DE HIDROCARBONETOS, E.P., a company established in accordance with


the laws of the Republic of Mozambique, hereinafter referred to as "ENH" and herein represented by





its Chairman and one Director.








ExxonMobil, Rosneft and ENH shall hereinafter be referred to as the "Concessionaires" or individually


as "the Concessionaire" as appropriate. The Concessionaires and the Government shall hereinafter


collectively be referred to as the "Parties" and individually as "Party".





Preamble





WHEREAS, applicable law provides that all Petroleum resources in the soil and the subsoil of the land


territory, in the seabed of internal waters and the territorial sea, in the exclusive economic zone and


on the continental shelf of Mozambique, are the property of the Republic of Mozambique;





WHEREAS, for these purposes, this EPCC was awarded through a competitive bidding process pursuant


to applicable Petroleum law;








WHEREAS, pursuant to applicable law, Government is competent to ensure the implementation of the


policy for Petroleum Operations and has for the purpose of this EPCC appointed the Ministry of


Mineral Resources and Energy, hereinafter referred to as "MIREME", to carry out certain functions for


and on behalf of the Government as hereafter specified;





WHEREAS, the Government desires to award to ExxonMobil, Rosneft and ENH the right to undertake


Petroleum Exploration, Development and Production in certain areas subject to the jurisdiction of t


Republic of Mozambique;














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 Z5C EPCC





WHEREAS, the Concessionaires are willing, on certain terms and conditions stipulated pursuant to the


applicable law to undertake Petroleum Exploration, Development and Production in the EPCC Area


and have for such purpose technical competence and adequate financial resources; and


WHEREAS, the Petroleum Law establishes that Petroleum Exploration, Development and Production


activities shall be performed pursuant to a concession contract.


NOW THEREFORE it has been concluded as follows:





Article 1


(EPCC Documents)


1.1 The EPCC consists of this EPCC main document and the following Annexes, which form an


integral part hereof:





Annex"A" Description of the EPCC Area





Annex"B" Map of the EPCC Area





Annex"C" Accounting and Financial Procedure


Annex "D" Form of Bank Guarantee


Annex"E" Parent Company Guarantee


Annex "F" Joint Operating Agreement





1.2 Subject to the conclusion of the EPCC, the Concessionaires shall submit a signed joint


operating agreement in the form substantially set out in Annex "F", for which Government


approval is a condition under this EPCC.


1.3 In the event of conflict between the provisions of the EPCC main document and its Annexes,


the EPCC main document shall prevail.


Article 2


(Definitions)


Definitions stipulated in the applicable Petroleum Law in force, Law no. 21/2014 of 18 August and


Decree No. 34/2015 of 31 December, apply to this EPCC unless the context otherwise provides,


together with words and phrases used in this EPCC including its Annexes which shall have the following


meanings:


Permitted Assignee" means, for the purpose of this EPCC, the Government or a Mozambican Person


wholly owned and controlled by the Government and/or ENH.EP


Effective Date" means the first day of the month following the date on which the terms stipulated in


Article 3.2 are satisfied.


FOB" as defined by INCOTERMS 2010.


Liquefied Natural Gas" or "LNG" means Natural Gas previously processed, in a liquid state at or below


its boiling point at atmospheric pressure. /7/az





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 Z5C EPCC








"Petroleum Production Tax" means the "Imposto sobre a Produce de Petroleo" as defined by


applicable law.


"INP" means the National Petroleum Institute, the regulating entity responsible for administering and


promoting Petroleum Operations in the Republic of Mozambique.


"Participating interest" means the percentage interest portion, as further described in Article 3.2, held


by each Concessionaire in the rights, privileges, duties and obligations derived from this EPCC and in


an unincorporated joint venture established by the joint operating agreement.


"State Participating Interest" means the share of the Participating Interest owned by an entity holding


such share on behalf of the State.


"MIREME" means the Ministry with authority over the Petroleum sector in the Republic of


Mozambique.


"Exclusive Petroleum Operations" mean those Petroleum Operations carried out pursuant to


applicable law and this EPCC which are chargeable to the account, benefit and liability of less than all


Concessionaires under this EPCC.


"Person" means any natural person or any company, association, partnership, joint venture or entity


which is considered a legal entity under the laws of Mozambique or the laws of the country pursuant


to which such company, association, partnership, joint venture or entity is governed.


"Expatriate Personnel" means any employee of any Concessionaire, Affiliated Company of any such


Concessionaire or of any Subcontractor, provided such employee is not a National Individual and


whose contract of employment provides for the payment or the reimbursement of the cost of his


passage to and from the Republic of Mozambique.


"Development and Production Period" means the period granted to the Concessionaires for the


conduct of Petroleum Operations under a Development Plan approved by the Government.


"Commercial Production" means Production of Petroleum and delivery of the same at the Delivery


Point under a programme of Production and sale as provided for in a Development Plan as amended


from time to time.


"Subcontractor" means any Person other than the Operator, retained by one or more Concessionaire


to carry out any part of Petroleum Operations.





Article 3


(EPCC Rights and their Duration)


3.1 This EPCC is a concession awarded pursuant to Petroleum Law in force, Law No. 21/2014 of


18 August and the Petroleum Operations Regulations issued by Decree No. 34/2015 of 31


December, which;





(a) authorises the conduct of certain Petroleum Exploration, Development and


Production activities in the EPCC Area as defined herein and








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 Z5C EPCC








(b) confers to each Concessionaire, subject to applicable law and the terms and


conditions set forth in this EPCC, an exclusive right to conduct Petroleum Operations


in order to produce Petroleum from resources originating from one or more


Petroleum Deposit in the subsoil within the limits of the EPCC Area.


3.2 a) Prior to this EPCC reaching the Effective Date this EPCC is to be approved by the Council of


Ministers, the appurtenant agreements to this EPCC are to be signed by each Concessionaire,


and the ruling of the Administrative Tribunal has to be obtained.


b) On the Effective Date the respective Participating Interests of:


ExxonMobil is sixty percent (60%)


Rosneft is twenty percent (20%)


ENH is twenty percent (20%)


3.3 The rights and obligations of the Concessionaires shall commence on the Effective Date and


shall subsist:


(a) during the Exploration Period; and


(b) subject to terms and conditions as hereinafter provided, during the period for


Development and Production;


Thus, obligations of the Concessionaires accrued hereunder before the end of any relevant


sub-period of an Exploration Period or a relevant period for Development and Production


shall, notwithstanding that this EPCC has otherwise been cancelled subject to applicable law


or the terms and conditions of this EPCC, continue to be binding on the Concessionaires for


the period provided by the applicable law and for the purpose of any claim in respect thereof,


the provisions of Article 26 shall continue to apply.


3.4 The first sub-period of the Exploration Period shall commence on the Effective Date. Unless


the EPCC is terminated earlier in accordance with its terms, it shall continue for a period of


forty eight (48) months.


3.5 Where the Concessionaires decide to enter into a subsequent sub-period of an Exploration


Period the Concessionaires shall give notification to MIREME. The notification has to be given


not later than thirty (30) days before the expiry of the first sub-period of the Exploration


Period, or any subsequent sub-period, or the Exploration Period would otherwise expire.


Provided that the Concessionaires have fulfilled, or are deemed to have fulfilled, their


obligations under the first and any subsequent sub-period of the Exploration Period, the


Concessionaires are entitled:


(a) at the end of the first sub-period of the Exploration Period, to a second sub-period of


twenty four (24) months; and


(b) at the end of the second sub-period of the Exploration Period, to a third rub-period of


twenty four (24) months;





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 Z5C EPCC








(c) to the rights provided in Article 3.6; and


(d) to such additional period of time that may be necessary to give effect to Article 22 on


force majeure.


3.6 The rights and obligations pursuant to this EPCC shall be retained in the following situations:


(a) Where pursuant to applicable law and this EPCC the Concessionaires have notified INP


that they have made a Discovery, the rights and obligations pursuant to this EPCC shall


not, in respect of the Discovery Area to which that Discovery relates, terminate


provided a proposed Appraisal Programme is timely submitted to INP.


(b) Where INP has approved an Appraisal Programme the rights and obligations pursuant


to this EPCC shall not terminate in respect of the Discovery Area to which that


Appraisal Programme relates provided the appraisal report for such Discovery is


timely submitted to INP;


(c) Where the Concessionaires pursuant to applicable law and this EPCC have timely


submitted the appraisal report, the rights and obligations pursuant to this EPCC shall


not terminate in respect of the Discovery Area to which that appraisal report relates


provided a Declaration of Commerciality is timely submitted.


(d) Where pursuant to applicable law a Commercial Assessment Period has commenced


in respect of a Discovery of non-associated Natural Gas, the rights and obligations


pursuant to this EPCC shall not, in respect of the Discovery Area to which that


Discovery relates, terminate so long as that Commercial Assessment Period continues.


(e) Where the Concessionaires pursuant to applicable law and this EPCC has timely


submitted a Declaration of Commerciality, the rights and obligations of the


Concessionaires in respect of any Development and Production Area defined therein


and to which any such notice relates, shall continue until the Government's approval


of the timely submitted Development Plan by the Concessionaires.


3.7 Where the rights and obligations pursuant this EPCC has been retained pursuant to paragraph


3.6 of this article and the Concessionaires have not in due time submitted the required


notification, programme, report, declaration or plan in accordance with applicable law and


this article, the Concessionaires shall have no further rights to the relevant part of the EPCC


Area (Discovery Area(s) or Development and Production Area(s)), pursuant to this EPCC.


3.8 The period for Development and Production shall commence with respect to each


Development and Production Area on the date on which the Development Plan for that


Development and Production Area has been approved in accordance with applicable law. The


period for Development and Production shall, unless this EPCC is sooner terminated in


accordance with its terms and applicable law, in respect of the Development and Production


Area continue to subsist for period of thirty (30) years and for additional periods that may be


necessary to give effect to Article 22.4.











Page 5 of 44


Z5C EPCC


Article 4


(Work Commitment during Exploration Period)





4.1 The Concessionaires shall carry out the Exploration work commitments stipulated in this


EPCC unless otherwise provided or pay to the Government the sums set forth below in this








Article. The Exploration work commitments may not be performed as Exclusive Petroleum


Operations.


Exclusive Exploration Petroleum Operations may only be carried out after the fulfilment of


the Exploration work commitments under this EPCC.


4.2 The Exploration Period shall be divided into 3 sub-periods.


4.3 During the first sub-period of the Exploration Period of forty eight (48) months, the


Concessionaires shall conduct the following Exploration work commitment:





(a) Complete ten million five hundred thousand United States Dollars (USD


10,500,000.00) of studies;





(b) Acquire one thousand five hundred kilometres (1,500 Km) of 2D seismic;


(c) Acquire two thousand five hundred square kilometres (2,500 Km2) of 3D seismic; and


(d) Drill one (1) Exploration Well to a depth of four thousand four hundred meters from


the mean sea surface at mean tide (4,400 mss) or to a stratigraphic target of


Oligocene, whichever is first encountered.


In case of non-performance of any part of the Exploration work commitment described in


this Article 4.3, save for exemptions listed in this Article, the maximum amount of any


guarantee or the maximum amount to be paid by the Concessionaires to the Government


for this sub-period of the Exploration Period shall be sixty one million eight hundred


thousand United States dollars (USD 61,800,000.00).





4.4 During the subsequent second sub-period of the Exploration Period of twenty four (24)


months, the Concessionaires shall conduct the following Exploration work commitment:





(a) Complete fifteen million United States United States dollars (USD 15,000,000.00) of


studies;





(b) Drill one (1) Exploration Well to a depth of four thousand four hundred meters from


the mean sea surface at mean tide (4,400 mss) or to a stratigraphic target of


Oligocene, whichever is first encountered; and


(c) Drill one (1) Exploration Well to a depth of four thousand four hundred meters from


the mean sea surface at mean tide (4,400 mss) or to a stratigraphic target of


Oligocene, whichever is first encountered.





In case of non-performance of any part of the Exploration work commitment described in


this Article 4.4, save for exemptions listed in this Article, and in the manner provided by this


Article, the maximum amount of any guarantee or the maximum amount to be paid by the





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 Z5C EPCC








Concessionaires to the Government for this sub-period of the Exploration Period shall be


sixty seven million, nine hundred thousand United States Dollars (USD 67,900,000.00).


4.5 During the subsequent third sub-period of the Exploration Period of twenty four (24)


months, the Concessionaires shall conduct the following Exploration work commitment:


(a) Complete ten million United States Dollars (USD 10,000,000.00) of studies; and


(b) Drill one (1) Exploration Well to a depth of four thousand four hundred meters from


the mean sea surface at mean tide (4,400 mss) or to a stratigraphic target of


Oligocene, whichever is first encountered.


In case of non-performance of any part of the Exploration work commitment described in


this Article 4.5, save for exemption in this Article, and in the manner provided by this Article,


the maximum amount of any guarantee or the maximum amount to be paid by the


Concessionaires to the Government for this sub-period of the Exploration Period shall be


thirty seven million, nine hundred thousand United States Dollars (USD 37,900,000.00).


4.6 Should any Well forming part of the Exploration work commitments provided for in Articles


4.3,4.4 and 4.5 be abandoned, for any reason other than a reason specified in Article 4.7 of


this EPCC, before reaching the defined objectives of such Well, the Concessionaires shall drill


a substitute Well. In this event the relevant sub-period of the Exploration Period shall be


extended, by a reasonable period of time as MIREME may agree to allow the drilling and


evaluation of the substitute Well.


4.7 Unless otherwise approved by MIREME, any Well which forms part of the Exploration work


commitments provided for in Articles 4.3, 4.3 and 4.5 shall be drilled to such depth as set


forth in those Articles, unless before reaching the required depth:


(a) further drilling would in the reasonable opinion of the Concessionaires present an


obvious danger, due to such events as, but not limited to, the presence of abnormal


pressure or excessive losses of drilling mud;


(b) impenetrable formations are encountered;


(c) Petroleum bearing formations are encountered which require protecting, thereby


preventing planned depths from being reached; or


(d) MIREME agrees to terminate the drilling operation.


4.8 In circumstances which the Concessionaires are permitted pursuant to Article 4.7 to drill any


Well to a lesser depth than required pursuant to Article 4.3, 4.4, and 4.5, the


Concessionaires shall be deemed to have satisfied all the Concessionaires' obligations in


respect of that Well.


4.9 During the drilling of Exploration Wells hereunder, the Concessionaires shall, in accordance


with this EPCC and applicable law, keep MIREME informed of the progress of each Well and


shall:


(a) as soon as reasonably possible, inform INP of any proposed Well testing programme;





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 Z5C EPCC





(b) test potentially commercially viable horizons, in the opinion of the Concessionaires


and after consultation with MIREME, within the EPCC Area indicated by wireline





logging or by other means of formation evaluation; and


(c) promptly undertake a technical evaluation of the said test results and of all other


relevant subsurface data, and submit the same to MIREME as soon as it has been


completed.





4.10 a) Exploration Work Commitment Bank Guarantee


The Concessionaires shall no later than thirty (30) days after the Effective Date, and prior to


the first day of any sub-period of the subsequent Exploration Period provide, in substantially


the form shown in Annex "D", or as approved by the competent authority, an unconditional


and irrevocable bank guarantee in respect of the guaranteed amount for fulfilling the


Exploration work commitment for the relevant sub-period of the Exploration Period, as the


same may have been reduced by the provisions of Article 4.11.


b) Parent Company Guarantee


Without prejudice to the joint and several liability of all the Concessionaires, each


Concessionaire, except ENH or Permitted Assignees, shall by no later than thirty (30) days


after the Effective Date of this EPCC provide, in substantially the form shown in Annex "E",


or as approved by the competent authority, an unconditional and irrevocable guarantee


from the ultimate parent company, or from a wholly-owned subsidiary of the ultimate


parent of the Concessionaire or from a parent company between the Concessionaire and the


ultimate parent company acceptable to MIREME in respect of all its obligations under this


EPCC beyond the scope of the Exploration work commitment bank guarantee. Where the


entity is a subsidiary of the ultimate parent company but not directly or indirectly a parent


of the Concessionaire, the INP may stipulate necessary additional conditions in Annex "E". A


breach of the guarantor's obligations under the parent company guarantee shall constitute a


breach of the Concessionaires obligations pursuant to this EPCC.











4.11 The amount of any Exploration work commitment bank guarantee given pursuant to Article


4.10(a) shall be reduced by the Concessionaires in discharge of its obligations under Articles


4.3, 4.4 and 4.5 as follows:


(a) during the first sub-period of the Exploration Period:





Ten million five hundred thousand United States Dollars (USD10,500,000.00) at


completion of the Exploration work commitment described in Article 4.3(a);





The greater of three million United States dollars (USD3,000,000.00) or the actual


cost of the Exploration work commitment described in Article 4.3(b);


The greater of seventeen million five hundred United States Dollars


(USD17,500,000.00) or the actual cost of the Exploration work commitment


described in Article 4.3(c);








Page 8 of 44


 Z5C EPCC |


The actual cost of the Exploration Well (in United States Dollars) at completion of the





Exploration work commitment described in Article 4.3(d); and


The payments described in Article 16.2,16.5 and 16.6.








(b) during the second sub-period of the Exploration Period:


Fifteen million United States Dollars (USD 15,000,000.00) at completion of the


Exploration work commitment described in Article 4.4(a);


The actual cost of the Exploration Well (in United States Dollars) at completion of


the Exploration work commitment described in Article 4.4(b);


The actual cost of the Exploration Well (in United States Dollars) at completion of


the Exploration work commitment described in Article 4.4(c); and


The payments described in Article 16.2,16.5 and 16.6.


(c) during the third sub-period of the Exploration Period:


Ten million United States Dollars (USD 10,000,000.00) at completion of the Exploration


work commitment described in Article 4.5(a);


The actual cost of the Exploration Well (in United States Dollars) at completion of the


Exploration work commitment described in Article 4.5(b); and


The payments described in Article 16.2,16.5 and 16.6;


4.12 If, at the end of the first or any subsequent sub-period of the Exploration Period the


Exploration work commitment to be fulfilled by the Concessionaires during that subperiod


pursuant to Article 4.3, 4.4 and 4.5, is deemed by INP as not fulfilled, INP shall notify the


Concessionaires and shall unless the full amount has been met by the Concessionaires within


thirty (30) days of such notification call on the Exploration work commitment bank


guarantee for the payment thereunder of the cost of the fulfilment of the remaining


Exploration work commitment for such sub-period.


4.13 In the event where the number of Wells drilled for the purpose of Exploration by the


Concessionaires and/or the amount of seismic data acquired during any sub-period of an


Exploration Period exceed the number of Wells and/or the amount of seismic data acquired


provided for in the work commitments for that sub-period, as established in Articles 4.3 and


4.4, the number of additional Exploration Wells drilled and/or the additional amount of


seismic data acquired by the Concessionaire during such sub-period of the Exploration


Period may be carried forward and treated as work undertaken in discharge of the


Concessionaires' commitment to drill Exploration Wells and/or acquire seismic data during


the succeeding sub-period of the Exploration Period. If by reason of the provisions of this


Article the Exploration work commitment of the Concessionaires for any sub-period of the


Exploration Period as specified in Articles 4.4 and 4.5 has been fully discharged by the


Concessionaires before that sub-period commences, the Concessionaires, after consultation


Page 9 of 44


 Z5C EPCC





with MIREME, shall adopt a work commitment for the sub-period in question so as to ensure


the continuity of Petroleum Operations in, or in connection with, the EPCC Area during that


sub-period of the Exploration Period.


4.14 Except as otherwise provided, nothing in Article 4.12 or Article 4.13 shall be read or


construed as extinguishing, postponing or modifying any commitment of the


Concessionaires to carry out any Exploration work commitment, including seismic surveys or


to drill Exploration Wells pursuant to this Article


4.15 Appraisal Wells and seismic surveys carried out pursuant to an Appraisal Programme drawn


up pursuant to applicable law and the expenditure incurred by the Concessionaires in


carrying out such Appraisal Programme shall not be treated as discharging in whole or in


part the minimum Exploration work commitment set out in Articles 4.3, 4.4 and 4.5.


4.16 Within sixty (60) days of the Effective Date and thereafter, for so long as the Exploration


Period subsists and at least ninety (90) days prior to the end of each calendar year or at such


other times as may be approved in advance by INP, the Concessionaire shall prepare in


detail and submit to INP an Exploration work programme and budget for the remaining


portion of the calendar year or, for the subsequent calendar year(s), and a proposed


structure for the Concessionaire's organisation for the conduct of Exploration Operations in


the EPCC Area.


4.17 The Exploration work programme and budget prepared by the Concessionaires shall be


consistent with obligations under this EPCC and shall set forth the Petroleum Operations


which the Concessionaires proposes to carry out during the remaining portion of the


calendar year and for subsequent calendar year(s). The Concessionaires shall consider any


recommendations made by INP in respect thereof and, after making such revisions thereto


as the Concessionaire consider appropriate, submit the revised annual Exploration work


programme and budget to INP for information.


4.18 The Concessionaires may at any time amend the Exploration work programme and budget


submitted in accordance with Articles 4.16 and 4.17, provided that the amended work


programme and budget are:


(a) prepared in detail and submitted to INP, once the Concessionaires have made the


appropriate alterations after consideration of recommendations made by INP; and


(b) consistent with the Concessionaires' obligations under this Article.


Article 5


(Conduct of Petroleum Operations)


5.1 Any obligation pursuant to this EPCC shall be a joint and several obligation of all of the


Concessionaires, save forthose obligations which under applicable law or this EPCC constitute


an individual obligation.


5 2 ExxonMobil shall be the Operator. No change of the Operator may take


been approved by MIREME.








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 Z5C EPCC





5.3 A Concessionaire shall no less than thirty (30) days counting from the Effective Date of this


EPCC have and maintain an organized structure that is appropriately staffed and with powers


to manage the petroleum operations and other aspects pursuant to applicable law and related


to this EPCC.


5.4 In fulfilment of the Regulation of Hiring Citizens of Foreign Nationality for Oil and Mining


Sectors, approved by Decree n.s 63/2011 of 7 December, each Concessionaire or any other


Affiliated Company of such Concessionaire or any Subcontractor, is authorized to keep and fill


a global and combined quota for foreign national workers distributed as follows:


(a) Each Concessionaire have the right to hire five (5) foreign national workers, and


(i) In the Exploration phase, the number of additional foreign national workers


to be hired can be up to fifty per cent (50%) of the total number of workers


hired by the Concessionaire, Affiliated Companies and Subcontractors


authorized to do business in Mozambique;


(ii) During the period of Development, for the implementation of the Plan of


Development, the number of additional foreign national workers be hired can


be up to thirty-three per cent (33%) of the total number of workers hired by


such Concessionaire, Affiliated Companies and Subcontractors authorized to


do business in Mozambique;


(b) In case the number of foreign national workers is expected to exceed the proportion


of foreign national workers authorized in i) or ii), any additional hiring is subject to the


prior authorisation of the Minister responsible for labour.


Quotas applicable for the period in which a Plan of Development is being implemented or for the


Production period shall be stipulated in that Plan of Development recognising that the referred


number of foreign national workers will be progressively reduced, as stipulated, as soon as a


Development activity has been implemented and the Mozambican workers have been trained for


technical and services specialized positions.


Article 6


(Commercial Discovery and Development)


6.1 The Concessionaires shall pursuant to applicable law submit to MIREME for Government


consideration and approval a Development Plan for a proposed Development and Production


Area for one or more Discoveries so as to include, so far as the boundaries of the EPCC Area


permit, the entire area of the Petroleum Deposit or Deposits in respect of which a


Declaration of Commerciality has been given. MIREME shall, within twelve (12) months from


receipt of the proposed Development Plan submitted by the Concessionaires, give its views


on the matter.


6.2 If Commercial Production of Petroleum has not commenced within a period specified in an


approved Development Plan, from the date on which the Development Plan is approved, then


the rights and obligations of the Concessionaires over the Development and Production Area


to which the Discovery relates shall be extinguished as though the said area had been


surrendered pursuant to applicable law. Such period may be extended y Of





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 Z5C EPCC





(a) by any period that may be necessary to commence Commercial Production where the


Concessionaires commenced promptly to implement the Development Plan as soon


as the Development Plan was approved and has continued to diligently implement the


Development Plan but at the end of the period (s) prescribed in this Article 6.2, have


not yet commenced Commercial Production; or


(b) by the period of time that the commencement of Commercial Production has been


delayed for lack of any approval or permit required to be obtained from the


Government or any agency thereof after the implementation of the Development Plan


has begun and prior to the commencement of Commercial Production and such delay


is not attributable to actions or omissions which are within the reasonable control of


the Concessionaires; or


(c) by any period that may be necessary to give effect to Article 22.4


Article 7


(Relinquishment of Areas)


Where, at the end of any Exploration sub-period the Concessionaires request to enter into a new


Exploration sub-period, the Concessionaires shall pursuant to the rules of abandonment of areas in


applicable law relinquish its rights to a part of the EPCC Area in the following manner


(a) at the commencement of the second Exploration sub-period in respect of a portion of


the EPCC Area so that the area retained, excluding what is already included in


Development and Production Areas or in Discovery Areas, does not exceed seventy


five per cent (75%) of the EPCC Area on the Effective Date;


(b) at the commencement of the third Exploration sub-period in respect of a portion of


the remaining EPCC Area so that the area retained, excluding what is already included


in Development and Production Areas or/in Discovery Areas, does not exceed fifty per


cent (50%) of the EPCC Area on the Effective Date; and


(c) at the end of the Exploration Period, in accordance with applicable law.


Article 8


(Export of Documentation and Samples)


Subject to applicable law and the approval of INP, each Concessionaire may export for processing or


laboratory examination or analysis documents, samples or other original materials including


documentation under Article 54 of the Petroleum Operations Regulations approved by Decree No.


34/2015 of 31 December; provided that samples equivalent in size and quality or copies of equivalent


quality have first been delivered to INP.





Article 9


(Cost Recovery and Production Entitlement)


9.1 The Concessionaires shall bear and pay all costs incurred in carrying out the Petroleum


Operations in which the Concessionaires participate, and the Concessionaires shall recover


such costs within the limit of sixty per cent (60%) of the Disposable Petroleum ("Cost


Petroleum"), to the extent permitted by the EPCC including the provisions of Annex \'C" of tJH


Page 12 of 44


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EPCC, (hereinafter referred to as "Recoverable Costs"), and shall be remunerated exclusively


by means of an entitlement to quantities of Petroleum to which the Concessionaires are





entitled in accordance with the terms of the Special Tax Law (Law no. 27/2014 of 23


September, as amended by Law No. 14/2017 of 28 December) and of the respective


Regulations approved by Decree no. 32/2015 of 31 December and the IRPC code (Law No.


34/2007 of 31 December).


9.2 (a) For the purpose that the Government or a Concessionaire may elect to take Profit


Petroleum in kind, the Concessionaires shall, for accounting and reporting purposes,


record Cost Petroleum separately:











i. in respect of each Development and Production Area; and


ii. in the form of liquids and gas, on a pro-rata basis relative to the volumes of


Petroleum Produced.


(b) For the purposes of this EPCC, condensate shall be taken in Crude Oil or Natural Gas on


the basis of its character at the Delivery Point.


9.3 The Cost Petroleum for any quarter shall be calculated in the manner aforesaid shall be


increased by:


(a) the amount of any contributions made by the Concessionaires into the Decommissioning





Fund during such quarter; and


(b) the costs incurred by the Concessionaires during such quarter to implement an approved


Decommissioning Plan prepared pursuant to applicable law save to the extent that, such


costs have been funded by withdrawals from the Decommissioning Fund; and


(c) provided that in no event shall the Cost Petroleum exceed sixty per cent (60%) of the


Disposable Petroleum.





9.4 Costs, to the extent permitted by the provisions of Annex "C" of this EPCC, or otherwise


approved by the competent authority, subject to Article 9.6, shall be recovered from Cost


Petroleum:





(a) in respect of costs attributable to Exploration as stipulated in Annex "C" of this EPCC


(hereinafter referred to as "Exploration Costs"), by the recovery of the full amount in


the calendar year in which they were incurred or in the calendar year in which


Commercial Production commences, whichever is later; and





(b) in respect of the amount of Development and Production Capital Expenditures


stipulated in Annex "C" of this EPCC incurred during each calendar year, by the


recovery of such Capital Expenditure, at a maximum yearly rate of twenty five percent


(25%) on a linear depreciation basis beginning in the calendar year in which such


amount is incurred or in the calendar year in which Commercial Production


commences, whichever is later. /








Page 13 of 44


 Z5C EPCC











9.5 Costs, mentioned in article 9.4, incurred by Concessionaires to implement an approved


Decommissioning Plan shall be considered, for the purpose of Corporate Income Tax (IRPC),


as operating costs pursuant to letter e) of article 19 of Law no. 27/2014 of 23 September.


9.6 The quantity of Cost Petroleum to which the Concessionaires are entitled in any year shall be


established on the basis of the value of the Petroleum Produced during such year, and


determined in accordance with applicable law and this EPCC.


9.7 The Profit Petroleum, shall be shared between the Government and the Concessionaires


according to the following scale:





Government's Concessionaires'











R-Factor


Portion Portion














Less than 1 15% 85%


Equal to or greater than 1 25% 75%


And less than 1.5


Equal to or greater than 1.5 35% 65%


and less than 2.0


Equal to or greater than 2 and 50% 50%


less than 2.5


Equal to or greater than 2.5 60% 40%








9.8 The Concessionaires, excluding ENH or a Permitted Assignee, shall pay all costs properly


incurred under this EPCC in relation to the State Participating Interest of twenty per cent (20%)


Participating Interest (herein referred to as "Carry") subject to the following conditions:





(a) In the event of a third party, other than an entity holding a State Participating Interest


(Permitted Assignee), has acquired a Participating Interest in the EPCC from any


Concessionaire other than an entity holding a State Participating Interest, such third


party shall be obliged to take over a proportionate share of the Carry. A State


Participating Interest totally or partially transferred to a non-Permitted Assignee may


only become effective provided all outstanding amounts as set out in Article 9.8(d)


relating to the transferred interest and not yet reimbursed to a Concessionaire subject


to Carry have been paid by the non-Permitted Assignee to the Concessionaires


proportionally to their respective Participating Interests. The share of any future


Carry, to be paid by each Concessionaire subject to Carry, shall be calculated according





Page 14 of 44


 Z5C EPCC





to the new composition of Participating Interest of the Concessionaires subject to


Carry.








(b) The Carry shall be limited to all costs incurred by the Concessionaires in discharging


their obligations under this EPCC, up to and including the date upon which the


Development Plan has been approved.


(c) The Carry shall be used exclusively to pay for costs properly incurred under this EPCC


in relation to the State Participating Interest. Save for in respect of a transfer to a


Permitted Assignee, ENH may not assign directly or indirectly the benefits derived


under the Carry. Any transfer of a Participating Interest subject to the Carry requires


the prior approval of MIREME.


(d) From the date of commencement of Commercial Production, ENH and any entity


designated by the Government to manage the State Participating Interest shall


reimburse in full the Carry in cash or in kind to the Concessionaires (other than ENH


or a Permitted Assignee). Such reimbursement shall be calculated as and taken from


the Cost Petroleum of ENH or a Permitted Assignee having benefited from the Carry.


All Carry amounts owed up to approval of the first Development Plan shall be subject


to payment of interest in United States Dollars, compounded quarterly, calculated at


the LIBOR rate plus one (1) percentage point, from the date such costs are incurred by


the Concessionaires (other than ENH or a Permitted Assignee) until reimbursed in full.


9.9 The Concessionaires may re-inject Natural Gas which is not (i) taken by Government pursuant


to applicable law, (ii) used for Petroleum Operations or processed and sold by the


Concessionaires, or (iii) used by the Concessionaires for Concessionaires' purposes, and the





costs of such re-injection of Natural Gas shall be cost recoverable.


In respect of operating costs attributable to Petroleum Operations stipulated as Operating


Costs in Annex "C" to this EPCC (hereinafter referred to as "Operating Costs") (including any


contributions into the Decommissioning Fund pursuant to applicable law, and including any


costs incurred by the Concessionaires to implement an approved Decommissioning Plan save


to the extent, in either case, that such costs have been funded by withdrawals from the


Decommissioning Fund), by the recovery of the full amount in the calendar year in which they


were incurred.





Article 10


(Valuation of Petroleum)


10.1 The valuation of Petroleum used for the purpose of Petroleum Production Tax, to be settled


pursuant to the terms of the Special Tax Law (Law no. 27/2014 of 23 September, as amended


by Law No. 14/2017 of 28 December) and of the respective Regulations approved by Decree


no. 32/2015 of 31 December, and for Cost Petroleum and Profit Petroleum allocation referred


to in Article 9 and 11 shall, to the extent such Petroleum consists of Crude Oil, be determined


at the end of each calendar month commencing with the calendar month in which Commercial


Production of Crude Oil begins. To the extent that such Petroleum consists of Natural Gas, the


value of Natural Gas shall be determined at the end of each calendar month commencing with


the calendar month in which commercial delivery at the Delivery Point begins.





Page 15 of 44


 Z5C EPCC








10.2 The calculated value for each separate export grade of Crude Oil from Petroleum Deposits


within the EPCC Area for a calendar month shall be:


a) in the case of sales of Crude Oil to non-Affiliated Companies, the weighted average price


per barrel at the Delivery Point of each separate export grade of Crude Oil, at which such Crude


Oil has been sold FOB by the Concessionaire during that calendar month; or


b) if a Concessionaire sells the Crude Oil to a third party on terms different from FOB, then for


the purpose of this EPCC, a calculated net-back FOB price shall be applied. The net-back FOB


price shall be established by deducting from the agreed price the actual and direct costs


incurred by the such Concessionaires in fulfilling the obligations under their sales contract in


addition to those obligations included under a FOB contract.


10.3 In the case of sales of Crude Oil to Affiliated Companies, such price as agreed between MIREME


and the Concessionaires on the basis of adding the following two factors together:


(a) the weighted average calendar month FOB price for Brent rated Crude Oil, or such


other appropriate marker Crude Oil for the production in question for the period in


question. The weighted average shall be based on the days in each calendar month


when a closing price is reported in "Platts Oilgram" price report. Days such as


weekends and holidays with no price reports shall be ignored; and


(b) a premium or discount to the price of the Brent rated Crude Oil, or such other


appropriate marker Crude Oil for the production in question to be determined by


reference to the quality of the Crude Oil Produced from the EPCC Area and the cost of


moving such Crude Oil to the market.


10.4 In any case in which MIREME and a Concessionaire are unable to agree a price under Article


10.3, in order to determine the premium or discount referred to therein the following


procedures shall be undertaken:





(a) MIREME and the Concessionaire shall submit to each other their assessments


of the premium or discount together with an explanation of the key factors taken into





consideration in assessing the premium or discount;


(b) if the premium or discount submitted by each of MIREME and the


Concessionaire are within ten United States cents (10 US C) per barrel of each other


the average will be taken for the purposes of setting the final value of the Crude Oil;


(c) if the premium or discount submitted by each of MIREME and the


Concessionaire differ by more than ten United States cents (10 US C) per barrel each


will resubmit a revised premium or discount to the other on the third (3rd) business


day after the first exchange of information;





(d) if the premium or discount submitted by each of MIREME and the


Concessionaire on the second exchange of information are within ten United States


cents (10 US C) per barrel of each other the average will be taken for the purposes o£


setting the final value of Crude Oil;








Page 16 of 44


 Z5C EPCC








(e) if the premium or discount submitted on the second exchange of information


differ by more than ten United States cents (10 US C) per barrel the matter shall, in


accordance with Article 26.6, be referred for determination by a sole expert who shall


establish a price based on the criteria set out in Article 10.3 but always within the


range established by the Parties under Article 10.4 (d).





10.5 The value calculated for Natural Gas Produced from Petroleum Deposits within the EPCC Area


for a calendar month shall be:


(a) in the case of sales of Natural Gas to non-Affiliated Companies in that calendar month,


the weighted average price per Gigajoule of Natural Gas of commercial specification


at the Delivery Point where such Natural Gas has been delivered by the


Concessionaires during such calendar month; or


(b) in the case of sales to Affiliated Companies:


i. the price stipulated for sales to non-Affiliated Companies, in Article 10.5 (a); or


ii. such price agreed between the Ministries who superintends the petroleum and


the Finance sectors jointly and the Concessionaires.


(c) In the case of sales of Natural Gas delivered as LNG in a calendar month:


i. in the case of sales to non-Affiliated Companies, the weighted average net LNG


sales price in US Dollars per mmbtu calculated as the total revenue due in


respect of all sales of LNG delivered during that calendar month less the


aggregate of the Deductions (as defined in Annex "C" of this EPCC) incurred in


respect of those sales divided by the total volume, in mmbtu of LNG loaded


during the month in respect of such sales; and


ii. in the case of sales to a Concessionaire or any Affiliated Companies, such price


shall be either (i) calculated in the same manner as stipulated in Article 10.5(c)


(i) above for sales to non-Affiliated Companies or (ii) such price agreed between


the Ministries with authority over the Petroleum sector and over the Finance


sector and the Concessionaire.


10.6 In the event that the Government and/or its authorised representative enters into a


commercial sales and purchase agreement for Petroleum with the Concessionaires for the


purchase by the Government, the sales price shall not exceed the price of Petroleum sold to


Affiliated Companies as determined in Article 10.3,10.4,10.5 (b) or 10.5 (c)


10.7 For supply of Petroleum by the Concessionaires to the domestic market, the sales price shall


be based on:


(a) For Crude Oil: The net-back FOB price per barrel of the Crude Oil based on the


reference price as quoted on Platts for the day in question, adjusted with any price


demium or premium as appropriate to the relevant specific quality. If the relevant


reference price is not quoted on Platts on the day in question, the price quoted by


Argus Media shall be used instead.


Page 17 of 44 \ , b


 Z5C EPCC








(b) For Natural Gas: the price of such gas shall be set out in the sales and purchase


contracts to be agreed by the parties. Where the parties to such contract cannot agree


on the price, the price of the Natural Gas shall be calculated with reference to the


average price of Natural Gas in at least five (5) internationally recognised LNG


Markets, netted back to the delivery point for Natural Gas (and net of any liquefaction


costs, as applicable) supplied to the domestic market in Mozambique.








Article 11


(Fiscal Terms and Other Charges)





11.1 Each Concessionaire and its Subcontractors shall, save to the extent they are exempt


therefrom, be subject to applicable legislation of the Republic of Mozambique which impose


taxes, duties, levies, charges, fees or contributions.


11.2 During the five (5) years from the approval of the Development Plan related to this EPCC, each


Concessionaire and its Subcontractors are entitled to the rights of Law No. 27/2014, of 23


September (as amended by Law No. 14/2017 of 28 December), and the respective Regulations


approved by Decree no. 32/2015 of 31 December, regulating tax and fiscal benefits for


Petroleum Operations. Each Concessionaire and its Subcontractors shall be exempt from:





(a) Customs duties with regard to the importation of goods destined to be used in


Petroleum Operations, classified as class "K" in the customs tariff in accordance with








Article 35 of Law No. 27/2014, of 23 September;


(b) Customs duties with regard to importation of explosives, detonators, rakes and similar


machines and devices to blow explosives, as well as equipment and devices for


topographical, geodesic and geological recognition on shore and offshore to be used


for Petroleum Operations and other supplies, equivalent as to those classified as class


"K" in accordance with Annex II, article 35 of the Law No. 27/2014, of 23 September.








11.3 Each Concessionaire and its Subcontractors shall be exempt from duties and custom and fiscal


charges on goods temporarily imported to be used in Petroleum Operations in accordance


with applicable law (Pauta Aduaneira), approved by Law 11/2016 of 30 December.


11.4 The Expatriate Personnel of each Concessionaire and its Subcontractors shall be exempt under


this EPCC from customs duties and other levies payable on the importation of personal and


household effects of Expatriate Personnel and their dependants imported into the Republic of


Mozambique on first arrival, provided that those customs duties shall become payable on such


items upon their sale in the Republic of Mozambique to a person who is not exempt from such


duties. The Expatriate Personnel shall have the right to export from the Republic of


Mozambique free of any customs duties and levies the aforesaid personal and household


effects imported by them, within the conditions stipulated in the General Rules of Goods


Custom Clearance approved by Decree No. 9/2017, of 6 April.











11.5 For the purpose of this EPCC, the matters listed below shall be treated in the following mann<





Page 18 of 44


 Z5C EPCC





(a) The Corporate Income Tax (IRPC), including incidence, rate of tax (32%) and fiscal


benefits in accordance with Law No. 34/2007 of 31 December and as applicable to








this EPCC pursuant to Article 15 (1) of Law No. 27/2014, of 23 September, as amended


by Law 14/2017 of 28 December and as the same may be amended from time to time


but always without prejudice to Article 11.8 of this EPCC, and shall be payable by each


Concessionaire who shall be separately assessed and charged. The following


provisions shall apply to IRPC levied in respect of income derived from Petroleum


Operations hereunder:


(i) In determining the net income of each Concessionaire for the purposes of


calculating IRPC in any fiscal year, in addition to the deductions already made for the


purpose of recovery of costs, and Profit Petroleum and Cost Petroleum calculation


pursuant to Article 9, depreciation shall be deducted at the rates indicated below,


beginning in the year in which the expenditure is incurred or Commercial Production


commences, whichever year is the later:


in respect of expenditure on Exploration, Including the drilling of Exploration and


Appraisal Wells, at one hundred per cent (100%);


in respect of Capital Expenditure on Development and Production at the annual


rate of twenty five per cent (25%) of such expenditure on a linear depreciation


basis;


(ii) For the purpose of calculating liability for IRPC, a loss incurred by the


Concessionaire in any year may be carried forward for up to 5 (five) years after the


year in which such loss is incurred.


(iii) In order to determine IRPC taxable base, the competent authority in the Ministry


with authority over the Finance sector can proceed with correction in accordance with


Law no. 34/2007, of 31 December which approves the IRPC Code, when the prices of


transfer and sub-capitalization resulting from special transactions between Affiliated


Companies differ from those with third parties.


(b) Pursuant to Article 28 of Law no. 27/2014 of 23 September, the Concessionaire shall


by way of payment of income tax on amounts due, withhold at source ten per cent


(10%) of the total amount of any payment made by the Concessionaire to a non-


resident Subcontractor for services contracted for the performance of Petroleum


Operation pursuant to this EPCC. The amount of such income tax withheld by the


Concessionaires shall be paid to the competent entity in the Ministry with authority


over the finance sector in accordance with procedures of applicable law.





Foreign non-resident Subcontractors are not subject to, and shall not be the object of


withholding of any other taxes in relation to any payment made to them, except for


the taxes provided for in this Article 11.5.





11.6 (a) In accordance with the applicable legislation and unless otherwise instructed pursuant


to Article 11.6 (c), each Concessionaire shall pay in cash to the government a








Page 19 of 44


 Z5C EPCC





Petroleum Production Tax based on the value at the Delivery Point pursuant to the


valuation provisions in Article 10:


(i) in respect of Natural Gas produced from Petroleum Deposits in the EPCC Area, an


amount in cash corresponding to six per cent (6%) of Natural Gas extracted, but


not reinjected;


(ii) in respect of Crude Oil produced from Petroleum Deposits in the EPCC Area, an


amount in cash corresponding to ten per cent (10%) of Petroleum extracted;


The Government may, instead of receiving the Petroleum Production Tax in cash


referred to in Article 11.6 a), by twelve (12) months' notice, require the


Concessionaires to pay each month fully or partly in kind the quantities of the Crude


Oil and the Natural Gas which has been produced, and to which the Government has a


right, from the EPCC Area in that month.


(b) The payments in cash of Petroleum Production Tax for a given calendar month in


respect of Crude Oil and Natural Gas produced during such month shall be made by


the twentieth (20th) day of the following calendar month.


(c) Payment in kind of the percentage specified in the relevant notice given under Article


11.6(a) shall continue until the Government delivers a further written notice as


provided in Article 11.6(a) providing revised instructions to the Concessionaires.


11.7 In the exercise of its rights and benefits regarding the exemption from customs duties on


import and export stipulated under this Article, the Concessionaires shall comply with the


applicable procedures and formalities duly imposed by applicable law.


11.8 The fiscal stability in Article 40 of Law No. 27 /2014 of September 23 of 2014, as amended by


Law No. 14/2017 of 28 December, is applicable for this EPCC.


The option to extend the period of fiscal stability established in Article 40 (3) of Law No.


14/2017 of 28 December shall be exercised during the eighth year after commencement of


Commercial Production.



































Page 20 of 44


 Z5C EPCC





Article 12





(Production Bonuses)


12.1 The Concessionaires are obligated to pay the following Production bonuses, which payments


shall not be considered as Recoverable Costs for the purposes of Annex "C" of this EPCC:





Production Bonuses payable in United


Occurence States Dollars





At the Commencement of Commercial Ten million United Stated Dollars (10,000,000





Production USD)





When Production from the EPCC Area first Twenty million United Stated Dollars





reaches 150,000 BOE per day average for a


(20,000,000 USD)


month





When Production from the EPCC Area first Forty million United Stated Dollars (40,000,000





reaches each further tranche of 300,000 BOE USD





per day average for a month








12.2 For the purpose of the Production bonus calculation:





"Commencement of Commercial Production" means the date on which Commercial


Production has been sustained for a period of thirty (30) consecutive days from the EPCC Area.


Article 13


(Lifting Arrangements)


13.1 a) The Concessionaires shall, subject to provisions regulating the Production and sale of


Petroleum and subject to applicable law and this EPCC, including any right that the


Government may have under the laws of Mozambique for imperative reasons in the national


interest to acquire Petroleum to which the Concessionaires hold title, be entitled to lift


dispose and export freely its entitlement to Petroleum Produced under this EPCC.





b) Each Party shall take its entitlement to Petroleum consistent with Good Petroleum Industry


Practices at an approximately regular rate throughout each calendar year.





c) Not later than ninety (90) days prior to the date scheduled for the commencement of


Commercial Production, the Parties shall establish off-take procedures covering the


scheduling, storage and lifting of Petroleum and such other matters as the Parties shall agre


Such procedures shall be consistent with Good Petroleum Industry Practices. r (








Page 21 of 44


 Z5C EPCC I








Notwithstanding applicable law, the Government may by twelve (12) months' notice given to


the Concessionaires or Operator, instruct the Concessionaires or Operator to sell on behalf of





the Government during the succeeding calendar year(s) the whole or any portion of the


quantity of Petroleum Production Tax taken in kind, and when applicable. Profit Petroleum


not previously committed to which the Government is entitled pursuant to this EPCC during


said succeeding calendar year(s). The quantity of such Petroleum Production Tax taken in kind


and of Profit Petroleum, which the Government desires to sell, shall be specified in said notice.


The Concessionaires or Operator shall sell that quantity of Petroleum on the open market at


the best price reasonably obtainable and shall remit the proceeds of the sale directly and


forthwith to the Government. The Concessionaires or Operator shall not charge any fees


incurred for selling Petroleum of the Government.





Whenever possible, based on results of market research as required under applicable law, the


Parties shall jointly market Natural Gas produced from any Development and Production Area


under this EPCC.








Article 14





(Decommissioning Plan and Decommissioning Fund)





u.1 The Concessionaires shall in accordance with applicable law prepare and submit a


Decommissioning Plan and implement the Government approved Decommissioning Plan.





14.2


At the time of establishment of the account for the Decommissioning Fund the


Concessionaires shall deposit as an opening amount of the account fifty thousand United








States Dollars (USD 50,000.00) or equivalent if an alternative currency is agreed in order to


maintain the account until the date funding is required pursuant to the Decommissioning


solution pursuant to Article 14.3 and Annex C Article 2.6.





Subject to approval by the Bank of Mozambique, a Decommissioning Fund interest bearing


account shall be opened in a bank of international standing licensed to operate in


Mozambique with a longterm debt rating of at least A by Standard & Poor's, or A2 by Moody's


Investors Service, or an equivalent rating by a successor entity to either agency. If, at the time


of opening such account, no bank in Mozambique directly meets these requirements, the


Concessionaires may open the account in a bank licensed to operate in Mozambique whose


parent company bank meets the requirements provided that the parent company bank


provides adequate guarantees for the balance in the account at all times. In case no bank


licensed to operate in Mozambique directly or indirectly meets the aforementioned


requirements, the Concessionaires may establish such account in a bank of its choice subject


to the approval of the Bank of Mozambique.





Should the rating of the bank that holds such Decommissioning Fund interest bearing account


change, the Bank of Mozambique may require the Concessionaires to move such account to a


bank that fulfils the criteria of the previous paragraph.





No alternate currency shall be considered for this account which does not have a significant


history of stable exchange rates as against the US Dollar. In the event such debt rating should


fall below this standard, another bank meeting such standard shall be agreed. Alfinvestment





Page 22 of 44


 Z5C EPCC





for the account shall be using a stable currency selected for the account and in low risk


securities assets approved by the Ministry of Finance with a long term debt rating of at least





A+ by Standard & Poor's, or Al by Moody's Investors Service, or an equivalent rating by a


successor entity to either agency.


14.3 MIREME shall, based on the proposals from the Concessionaires, select a preliminary


Decommissioning solution towards the Decommissioning Plan to form the basis for the


calculation of Decommissioning costs to be covered by a Decommissioning Fund, created for


the purpose of covering these costs.


14.4 For the estimation and proper escalation of the total estimated Decommissioning cost, to be


used as basis for the calculation of payment into the Decommissioning Fund pursuant to


applicable law and this EPCC, the "Producers Price Index for the Drilling of Oil and Gas Wells"


as published by the United States Bureau of Labour Statistics shall be used. The annual index


to be used in year "n" shall be determined by difference between the annual index relating to


the year in which the latest approved estimate is determined and the same annual index


relating such year "n". In the event the United States Bureau of Statistics (Bureau of Labour


Statistics) ceases, for any reason whatsoever, to publish the "Producers Price Index for the


Drilling of Oil and Gas Wells" or when an alternative currency is selected, INP approves upon


proposal by the Concessionaires either an alternative independent internationally recognised


source or an alternative representative index.


14.5 The Concessionaires shall not withdraw money from the Decommissioning Fund without the


prior written approval of the INP and save for the purpose of meeting the costs of


implementing an approved Decommissioning Plan and all statements relating to the


Decommissioning Fund provided by the bank from time to time shall be copied to MIREME.


14.6 Procedures on the administration and the governance of the Decommissioning Fund shall be


proposed by the Concessionaires and subject to the approval of the INP, following the


minimum standards defined in Article 14.2





Any funds which have been cost recovered remaining in the Decommissioning Fund after the


14.7


approved Decommissioning Plan has been completed shall be treated as Profit Petroleum and


the remaining balance shall be shared between the Concessionaires and the Government in


accordance with the provision of Article 9.7. Funds paid from contributions of the


Concessionaires which have not been cost recovered but remain in the Decommissioning Fund


after the approved Decommissioning Plan has been completed shall be shared exclusively


among Concessionaires, proportionate to their respective Participating Interest.


Article 15





(Insurance)





15.1 The Concessionaires shall establish and maintain all insurance required in respect of


Petroleum Operations in accordance with applicable Mozambican law and such other


insurance as imposed by INP observing best practices of the insurance industry applicable to


the oil and gas industry.





15.2 The insurance shall at least include insurance against the following risks:


Page 23 of 44


 Z5C EPCC





(a) loss or damage to all installations and equipment which are owned or used by the


Concessionaires in the Petroleum Operations;





(b) pollution caused in the course of the Petroleum Operations by the Concessionaires for


which the Concessionaire may be held responsible;


(c) property loss or damage or physical injury suffered by any third party in the course of


the Petroleum Operations by the Concessionaires for which the Concessionaires may


be liable to indemnify third parties or the Government;


(d) cost of removing wrecks and cleaning-up operations following an accident in the


course of the Petroleum Operations by the Concessionaires; and


(e) the Concessionaires' and the Operator's liability for its employees engaged in the


Petroleum Operations.


15.3 In relation to Petroleum Operations, the Concessionaires shall submit to INP a programme for


the provision of an "All Risks" insurance which shall without prejudice to applicable law, inter


alia, cover physical damage to the Facilities under construction and installation and liabilities


arising out of the Petroleum Operations.


15.4 The Concessionaires shall, in cooperation with the appropriate insurers capable of performing


insurance activities in Mozambique, procure insurance for civil automotive against third


parties, work accident insurance, work-related illness insurance and by any other mandatory





insurance law, provided such insurance is of general applicability and not specific to Petroleum


Operations.


15.5 The Concessionaires or the Operator shall, when requested by INP, present the insurance


policy or documents proving that all insurance required under this EPCC or applicable law has


been obtained.





15.6 Except as provided for in Article 15.4, any insurance required to be effected by the


Concessionaires pursuant to Articles 15.1 and 15.2 may be provided by one or more of the


following options:





(a) Self-insurance, in which case each Concessionaire or one of its Affiliated Companies


supports the risk and no premium is charged;


(b) insurance through an insurance company being subject to reinsurance through an


insurance company held in whole or in part by the Operator or by a Concessionaire,


in which case the premia charged shall be in accordance with rates as practised in the


international insurance market;


(c) insurance relating to Facilities must be issued by an insurer licensed to carry out


insurance business in Mozambique, including under a fronting regime utilising


captives or non-captives. The Operator shall communicate to INP within twenty-fou^


(24) hours regarding such procurement.








Page 24 of 44


 Z5C EPCC





(d) the Concessionaire utilising for the benefit of Petroleum Operations insurance which


is placed as part of a global coverage in which case the premia charged shall be at the





rates obtained for such global coverage through the mechanisms provided for in


paragraph b) and c).


15.7 The Concessionaire shall competitively tender all renewable insurances at least once every


three (3) years.





15.8 The contracting of insurance outside the Republic of Mozambique is subject to prior





authorization from the Insurance Supervision Institute of Mozambique, at least ten (10)


business days in advance, relative to the date of the contracting of the insurance in question;





the above request must be filed with the following documents:


i. proof of refusal of underwriting of risk by at least three (3) insurance companies


licensed to operate in Mozambique, with the financial capacity to accept high risks, or


proof of the lack of response of three insurance companies in the period of seven (7)


business days to be counted from the respective request for underwriting, in the form


of a statement from the entity that intends to contract the insurance; and


ii. information regarding the foreign insurance company that will be contracted, the


coverage amount and main policy conditions.


15.9 Except in relation to reinsurance or captive insurance relating to Petroleum Operations,


construction or to Facilities, the Concessionaires shall give preference to Mozambican


insurers, when:


(a) the insurance, including fronting arrangements, available from insurers licensed to


carry out insurance business in Mozambique are comparable to international


insurance standards in terms of:





i types of coverages,


ii terms and conditions of such coverages,


iii financial strength of the insurer,


iv claim handling; and


v underwriting capability.





(b) such insurance, including fronting arrangements available from insurers licensed to


carry out insurance business in Mozambique can be placed at prices that do not


exceed the price of comparable insurance coverages by more than ten per cent (10%)


from international insurance markets, inclusive of taxes and related fees.





15.10 Concessionaires shall not be required to utilise local brokers or insurers if their rates exceed


those available in international markets by more than ten per cent (10%). Concessionaires


shall always have the right to utilise international insurance companies when fronted by a


15.11 local broker or insurer.





In the event that any type of insurance coverage necessary for the Petroleum Operations


cannot be procured from or fronted by a Mozambican source as provided in thitf Article, the





Page 25 of 44


 Z5C EPCC





Concessionaires shall have the right to obtain such insurance from the international markets


in a Transparent Jurisdiction.





The Concessionaires shall require its Subcontractors to carry equivalent insurance of the type


15.12


and in such amount as is required by applicable law and standards in the Petroleum industry,


in accordance with Good Petroleum Industry Practices.





Article 16


(Employment, Training, and Institutional and Social Support Programmes)


16.1 Subject to the Governments security review of any individual entering Mozambique and the


procedures and formalities of the law relating to immigration the Government shall provide


the necessary permits or other approvals required for the employment and admission into the





Republic of Mozambique of Expatriate Personnel employed by the Concessionaires or its


Subcontractors for the purpose of this EPCC. The hiring and training of employees for


Petroleum Operations is regulated by the Labour Law, and the Petroleum Operations


Regulations, approved by Decree no. 34/2015 of 31 December.


16.2 During the Exploration Period, the Concessionaires shall pay to INP the amount of five hundred


thousand United States Dollars (USD 500,000) per year, to be spent on training support


programmes for employees in the public institutions involved in Petroleum Operations. The


first payment shall be made to INP within thirty (30) days from the Effective Date and the


subsequent payments shall be made within thirty (30) days of every subsequent anniversary


of the Effective Date.





16.3 Each Concessionaire shall co-operate with MIREME in giving an agreed number of technicians


in the management of petroleum resources, the monitoring and control of Petroleum


Operations the opportunity to participate in training activities provided by the Concessionaire








or any of its Affiliated Companies.


16.4 In order for MIREME to monitor the fulfilment of the employment and training obligations


pursuant to applicable law and this EPCC, the Concessionaires shall annually submit its


recruitment and training programmes to MIREME.


16.5 The Concessionaires shall pay to INP the amount of seven hundred and fifty thousand United


States Dollars (USD 750,000), per year for the duration of this EPCC to be used as institutional


support to the entities involved in the promotion and administration of Petroleum Operations.


The first payment shall be made to INP within thirty (30) days from the Effective Date and the


subsequent payments shall be made on the subsequent anniversaries of the Effective Date.





16.6 The Concessionaires shall pay to MIREME two hundred thousand United States Dollars (USD


200,000) per year for the duration of this EPCC, for social support projects for communities in


areas where Petroleum Operations take place. The Concessionaires may recommend social


support programmes to be financed by the Concessionaires and, where agreed with the


Government, the agreed amount for such financing will be credited to the social support


obligations in the following year. The first payment shall be made to MIREME within thirty (30)


days from the Effective Date and the subsequent payments shall be made withip thirty (30)


days of every subsequent anniversary of the Effective Date.








Page 26 of 44


 Z5C EPCC





16.7 The sums expended by the Concessionaires to satisfy the obligations contained in this Article


are Recoverable Costs for the purpose of Annex "C" of this EPCC.











Article 17


(Indemnification and Liability)


17.1 Each Concessionaire shall indemnify and hold the Government harmless from and against any


and all claims instituted against the Government by third parties in respect of injury, loss or


damage caused by the Concessionaires in the conduct of the Petroleum Operations, provided


that the claims are duly qualified by a third party or the Government. In no case shall the


Concessionaires’ liability under this Article include punitive damages.


17.2 The Government shall indemnify and hold each Concessionaire, its Subcontractors and any of


its Affiliated Companies harmless from and against any and all claims instituted against the


Concessionaire, its Subcontractors and any of its Affiliated Companies by third parties in


respect of injury, loss or damage caused by the acts or omissions of the Government in its


commercial capacity.


17.3 Except as provided for in Article 17.8 no Party hereto shall settle or negotiate any claim for


which another Party is responsible hereunder without the prior written consent of such other


Party, and in the event that it does so, the indemnity aforesaid shall not have effect in relation


to the claim so settled or compromised.


17.4 Unless otherwise provided in Article 17.5 of this EPCC, each Concessionaire, its Subcontractors


and any of its Affiliated Companies carrying out such Petroleum Operations on behalf of the


Concessionaires shall not be liable to the Government and the Government shall not be liable


to a Concessionaire, for consequential loss or damage including but not limited to inability to


produce Petroleum, loss of Production or loss of profit.





17.5 An award for damages, where loss is proven due to (i) partial or full expropriation of the


investment made by a Party, or (ii) breach of Articles 11.8 or 34, may include emerging losses


and foreseeable loss of profits ("danos emergentes e lucros cessantes").





17.6 Subject to Article 17.4, in carrying out Petroleum Operations under this EPCC each


Concessionaire shall be liable for any injury, loss or damage suffered by the Government and


caused by the Concessionaires or by any Affiliated Company or Subcontractor carrying out


Petroleum Operations on behalf of the Concessionaires if the injury, loss or damage is the


result of the Concessionaires', the Affiliated Company's or the Subcontractor's failure to meet


the standards required by this EPCC and the applicable law.





17.7 Any claim pursued by any third parties which would entitle any of the Parties (together the


"Indemnified Party") of this EPCC to be indemnified by any of the other Parties of this EPCC


(together the "Indemnifying Party") shall be promptly communicated by notice to the


Indemnifying Party so that the Indemnifying Party may promptly intervene in the claim and


pursue its defence. The notice shall include a description of the third party claim and shall be


accompanied by copies of all relevant papers received by the Indemnified Party and its counsel


with respect to such third party claim. The Indemnified Party shall cooperate with the


Indemnifying Party and its counsel in contesting such third party claim. If the Irfde/hnified


paee27°f44


 Z5C EPCC





Party fails promptly to communicate by notice as provided above and thereby causes the


Indemnifying Party not to be able to properly pursue its defence, the Indemnified Party shall


lose its rights to the indemnification under this Article.


17.8 If within thirty 30 (thirty) days of receipt of such claim notice, the Indemnifying Party notifies


the Indemnified Party that it elects to assume the defence of such claim, then the


Indemnifying Party shall have the rights to defend, at its cost and expense, such claim by all


appropriate proceedings including compromise or settlement thereof, so long as any


settlement agreement does not provide for or result in any continuing liability or obligation


on the Indemnified Party in respect of such third party claim.


17.9 If the Indemnifying Party fails timely to elect to assume the defence of such claim, then the


Indemnified Party shall have the right to defend at the sole cost and expense of the


Indemnifying Party the third party claim by all appropriate proceedings including any


compromise or settlement thereof.


Article 18


(Title)


18.1 The State and each Concessionaire shall own the Petroleum extracted jointly, and in undivided


shares, until each takes individual title to and delivery of its entitlement of Petroleum


Produced at the Delivery Point.


18.2 The Concessionaires shall finance the cost of all Facilities and equipment used in Petroleum


Operations. Subject to applicable law and this Article each Concessionaire has the right to use


such Facilities and equipment for Petroleum Operations during the term of this EPCC and any


extensions thereof until the EPCC expires, is surrendered or cancelled, in which case the title


to said Facilities and equipment at the option of the Government and without additional


compensation may be transferred to the State.


18.3 The Concessionaires are the owners of Facilities and necessary appurtenant equipment for


the purpose and use in Petroleum Operations under this EPCC unless otherwise approved by


the Government.


The provisions of Article 18.2 above with respect to the title of property passing to the State


shall not apply to Facilities approved by the Government as belonging to third parties,


however rights according to contract to use such Facilities shall pass to the Government if


such use is related to Facilities that if owned by Concessionaires would have passed to the


State. Moveable Facilities and equipment owned by foreign third parties may be freely


exported from the Republic of Mozambique in accordance with the terms of the respective


contract.


18.4 Third parties may subject to terms and conditions stipulated by applicable law and this EPCC


have the right to the use of available spare capacity of Facilities and appurtenant equipment


on terms and conditions to be agreed between the commercial parties and acceptable to the


Government. Such terms and conditions shall include a tariff that shall represent the payment


for the Concessionaires' cost of additional investments required for facilitating such third


party use as well as operational costs and a profit element reflecting the risk taken by the





Page 28 of 44


 Z5C EPCC








owner of the Facilities and appurtenant equipment. The tariff for third party use of Facilities


and appurtenant equipment shall be subject to approval by the Government.


18.5 Subject to Good Petroleum Industry Practices, third party use of Facilities shall only take place


when such third party use is not materially negatively affecting Concessionaires Petroleum


Operations and is feasible from a technical, environmental and safety point of view.


Article 19


(Accounting and audits)


19.1 The Concessionaires shall be responsible for maintaining accounting records of all costs,


expenses and credits of the Petroleum Operations in accordance with the provisions of Annex


"C" of this EPCC. The said accounting records shall be kept in the Republic of Mozambique.


19.2 The competent authorities of the Government have a right to audit and inspect the


Concessionaires' accounting records in accordance with the provisions of Annex "C".


Article 20


(Confidentiality)


20.1 This EPCC, the Documentation and other records, reports analyses, compilations, data, studies


and other materials directly related to the Petroleum Operations conducted pursuant to this


EPCC (in whatever form maintained, whether documentary, computer storage or otherwise)


shall be deemed confidential (hereinafter referred to as "Confidential Information"), to the


extent it contains information which individually or collectively is of strategic commercial


importance or has influence on the position of any of the Concessionaire or its Affiliated


Companies in a competition perspective. Except as authorised by applicable law or this Article


Confidential Information shall not be disclosed to any third party without the prior written


consent of the Parties hereto, which consent shall not be unreasonably withheld or delayed.


20.2 Nothing in this Article shall prevent the disclosure of Documentation, excluding the


Concessionaires' interpretations and assessments, to a third party by MIREME:


(a) if it relates to acreage which is no longer part of the EPCC Area; or


(b) if, in the judgment of Government, the Documentation might have significance for the


assessment of Exploration in an adjoining area over which Government is offering


Exploration rights.


20.3 Restrictions on disclosure imposed by this Article shall not apply to a disclosure made


reasonably:


(a) if it is required for the purpose of any arbitration or legal proceedings or claim relating to this


EPCC or to the Petroleum Operations;


(b) to a Subcontractor, or consultant in connection with the conduct of Petroleum Operations;





(c) by a Concessionaire or Operator to a third party where such disclosure is essential to the safe


conduct of Petroleum Operations;


(d) to an Affiliated Company;


Page 29 of 44


 Z5C EPCC





(e) by a Concessionaire to a third party for the purpose of entering into a contract for data


exchange with another entity operating in Mozambique where all data exchanged relates to


Petroleum Operations within Mozambique;


(f) by any Concessionaire to a bona fide intending assignee of a Participating Interest in this EPCC


or an interest in the Concessionaire;


(g) to a third party in connection with and for the purpose of the sale or proposed sale of


Petroleum from the EPCC Area;


(h) to a third party in connection with the financing or proposed financing of Petroleum


Operations;


(') which is required by any applicable law or by the rules or regulations of any recognised stock


exchange on which shares of the disclosing Party or any of its Affiliated Companies are listed;


or


(j) if, and to the extent that, it is already public knowledge without improper disclosure hereto.


Any Confidential Information disclosed pursuant to paragraphs (b), (d), (e), (f), (g) or (h) of


Article 20.3 shall be disclosed on terms that ensure that such Confidential Information is


treated as confidential by the recipient.


20.4 None of the Concessionaires are required to disclose any of its proprietary technology or that


of their Affiliated Companies or proprietary technology of a third party licensed to the


Concessionaire or the Operator.


Article 21


(Assignment)


21.1 Any assignment of direct or indirect interest in this EPCC or in a Concessionaire holding a


Participating Interest share in this EPCC shall be subject to approval by the Minister with


authority over the Petroleum sector pursuant to applicable law.


21.2 No unitisation pursuant to this EPCC or applicable law or any adjustment to the portion of the


unitised Discovery allocated to the EPCC Area is considered to be an assignment under this


Article.





21.3 A Concessionaire may not assign a Participating Interest that represents less than ten per cent


(10%) of the EPCC total Participating Interest, unless the assignment is to another


Concessionaire to this EPCC or subsequent to a Government approved unitisation.





21.4 Save for the case of unitisation, each Concessionaire shall at any time hold at least a


Participating Interest in this EPCC often per cent (10 %).


21.5


The Concessionaire who has been appointed and assumed position as Operator shall at any


time hold at least a Participating Interest in this EPCC of twenty-five per cent (25%), save ft


the case of unitisation.











Page 30 of 44


 Z5C EPCC


Article 22








(Force Majeure)


22.1 The non-performance or delay in performance, wholly or in part, by the Government or any


Concessionaire of any obligation under this EPCC excepting an obligation to make payments


hereunder, shall be excused if, and to the extent that, such non-performance or delay is


caused by Force Majeure.


22.2 For the purpose of this EPCC, the term Force Majeure means any cause or event beyond the


reasonable control of, and not brought about at the instance of, the Party claiming to be


affected by such event, and which has caused the non-performance or delay in performance.


Without limitation to the generality of the foregoing, events of Force Majeure shall include


natural phenomena or calamities including but not limited to, epidemics, earthquakes, storms,


lightning, floods, fires, blowouts, wars declared or undeclared, transboundary hostilities,


blockades, civil unrest or disturbances, labour disturbances, strikes, quarantine restrictions


and unlawful acts of Government.


22.3 The Party claiming suspension of its obligations under this EPCC on account of Force Majeure:


(a) promptly notifies the other Parties of the occurrence thereof;


(b) takes all actions that are reasonable and if necessary, legal actions, to remove the


cause of Force Majeure but nothing herein shall require the Concessionaires, subject


to applicable law, to resolve any labour dispute except on terms satisfactory to the


Concessionaires; and


(c) upon removal or termination of Force Majeure, promptly notifies the other Parties


and takes all reasonable action for the resumption of the performance of its


obligations under this EPCC as soon as possible after the removal or termination of


Force Majeure.


22.4 Where under this EPCC a Concessionaire is required or has the right to do any act or to carry


out any programme within a specified period, or the rights of a Concessionaire hereunder are


to subsist for a specified period, the specified period shall be extended so as to take


reasonable account of any period during which by reason of Force Majeure the Concessionaire


has been unable to carry out the programme necessary to exercise a right, carry out its


obligations or enjoy its rights hereunder.


22.5 Where a Force Majeure situation continues for more than fifteen (15) consecutive days, the


Parties shall meet forthwith in order to review the situation and to agree on the measures to


be taken for the removal of the cause of Force Majeure and for the resumption in accordance


with the provisions of this EPCC of the performance of the obligations hereunder.


Article 23


(Nature and Extent of Rights of the Concessionaire)


23.1 The right of the Concessionaires to use the land, maritime areas or sea bed is subject to


applicable law and continues to apply to acreage initially included within the EPCC Area, but


subsequently relinquished in accordance with the terms of this EPCC, where such use Is





Page 31 of 44


 Z5C EPCC





reasonably necessary for purposes of conducting Petroleum Operations in the EPCC Area then


remaining under this EPCC.


23.2 Where in the course of conducting Petroleum Operations in the EPCC Area the


Concessionaires causes disturbance to the rights of the lawful occupier of any land or causes


damage to his growing crops, trees, buildings, livestock or works, the Concessionaires shall


pay to the lawful occupier compensation in respect of such disturbance or damage as


Concessionaires may be adjudged liable to pay as a result of final, non-appealable order or


judgement of a court or arbitral body under Mozambican jurisdiction.


23.3 Where in the course of conducting Petroleum Operations in the EPCC Area the


Concessionaires causes disturbance to the rights of a Person having their fishing fields or


grounds occupied, aquaculture activities limited, fishing or aquaculture equipment moved to





less favourable locations from a maritime resource management or commercial point of view,


as well as having their equipment, catch or harvest polluted or damaged the Concessionaires


shall pay to the Person affected such compensation in respect of such demonstrable


disturbance or damage as the Concessionaires may be adjudged liable to pay by final, non-


appealable order or judgement of a court or arbitral body under Mozambican jurisdiction.


23.4 For the purposes described in this Article subject to applicable law, in accordance with the


provisions of the applicable work programme related thereto and with the consent of, and


subject to any terms and condition agreed with any Person having such right, the following





rights are granted to the Concessionaires:


(a) to drill for and have the use of water and impound surface waters and to establish


systems for the supply of water for the Petroleum Operations and for consumption by


its employees and its Subcontractors;


(b) extract, dispose and use minerals for Petroleum Operations in Mozambique, materials


such as gravel, sand, lime, gypsum, stone and clay;


(c) to erect, set up, maintain and operate engines, machinery, pipelines, gathering lines,


umbilicals, storage tanks, compressor stations, pumping stations, houses, buildings


and all other constructions, installations, works, platforms, other facilities and


auxiliary equipment which are required in furtherance of its Petroleum Operations;


(d) to erect, set up, maintain and operate all communication and transportation systems


and Facilities but shall not, save for temporary purposes, do so unless drawings of and


locations for their sites have been submitted to and approved by the Government,


under reasonable conditions of installation and operation of such systems and


Facilities;


(e) to erect, maintain and operate harbours and terminals for use exclusively in


Petroleum Operations, together with the necessary means of communication and


transport between such Facilities and any part of the EPCC Area;


(f) with respect to lands located outside of the EPCC Area, to have the right of way over


land not in the beneficial occupation of any Person and in the case of land in the


beneficial occupation of the State or any State Company, agency or instrumentality of





Page 32 of 44


 Z5C EPCC





the Government to have right of way on such reasonable terms and conditions as the


Government and the Concessionaires may agree; and


(g) with respect to lands located outside of the EPCC Area, to have, otherwise than


aforesaid, the use of land necessarily required for the conduct of Petroleum


Operations with the approval of the Person having an affected right, including a


legitimate occupier of the land or, in the case of unoccupied land or land occupied by


the Government or any State Company, agency or instrumentality of the Government


on such reasonable terms and conditions as the Government shall specify.


23.5 If the use of the rights by the Concessionaires referred to in Article 23.4 is to be of a temporary


nature, not exceeding one (1) year, the Government shall authorise such temporary use upon


deposit by the Concessionaires with the Government of a sum by way of compensation to


such Person holding the right for loss of use and damage to its interest. If the use is to be for


a period longer than one (1) year, the Government shall authorise the use by the


Concessionaire of the right in question upon deposit by the Concessionaires with the


Government of such sum by way of compensation and shall direct appropriate proceedings to


grant the Concessionaires the right to use and legally utilize the right under the applicable law


from time to time in force as if the Petroleum Operations were in all respects a work of public


utility.


23.6 In the event that the Government exercises any right it may have under the laws of


Mozambique to acquire Petroleum for imperative reasons in the national interest, the


Government shall





(a) endeavour to not affect the normal execution of long-term gas sales contracts


approved by Government;





(b) take Petroleum, in the following priority








i any Petroleum taken in kind as Petroleum Production Tax;


ii the Government's Profit Petroleum;





iii ENH's Profit Petroleum;


iv Other Concessionaires' Profit Petroleum;





v Cost Petroleum;





(c) give not less than forty five (45) days' notice in regard of Crude Oil and ninety (90) days


in regard of Natural Gas of the exercise of such right and of the volumes it wishes to


acquire, and the Concessionaires shall supply the volumes so notified from the


Petroleum to which the Concessionaires are entitled under this EPCC at the Delivery


Point or such point that may be agreed or such point within Mozambican jurisdiction


designated by the Government. Additional cost incurred by the Concessionaires in


order to deliver such Petroleum at any other point than the Delivery Point with


facilities and equipment in place shall be reimbursed to the Concessionaires by th<


Page 33 of 44


 Z5C EPCC





Government and the cost of any new facilities and equipment to be used for such


delivery shall be paid by the Government;








(d) pay the Concessionaires the full market value of the Petroleum so acquired


determined in accordance with Article 10.7. Payment for the Petroleum so acquired


in any calendar month shall be made in United States Dollars within thirty (30) days


after the end of that calendar month. The Concessionaires may receive, remit and


retain abroad and freely dispose of all or any part of the sums so paid;


(e) where the normal execution of non-long term sales contracts approved by


Government is affected, such acquisition is subject to compensation of proven


documented foreseeable emerging losses ("danos emergentes"); and


(f) where the normal execution of long-term gas sales contracts approved by


Government are affected, then such acquisition is subject to compensation of proven


documented emerging losses and foreseeable loss of profits ("danos emergentes e


lucros cessantes").





Article 24


(Environmental Protection)


24.1 The provisions of applicable law regarding protection of the environment, prevention of


pollution, and protection of objects of historical, cultural and natural value, shall apply to


Petroleum Operations authorised and conducted pursuant to this EPCC.


24.2 The specific conditions regarding protection of the environment, prevention of pollution and


protection of objects of historical, cultural and natural value, including issues as outlined in


the invitation to apply for Exploration and Production Concession Contracts, shall apply for


Petroleum Operations pursuant to this EPCC.


24.3 If the Concessionaires fail to comply with applicable law and this EPCC with regard to


environmental protection within a reasonable period of time the Government may, after


giving the Concessionaires written notice of such failure to comply and a reasonable period of


time necessary to take corrective action, take any action which may be necessary to cure such


failure, and recover, immediately after having taken such action, all expenditure incurred in


connection with such action from the Concessionaires together with interest at the prevailing


LIBOR rate plus one (1) percentage point compounded quarterly and calculated from the date


such expenditure is made until repaid.





Article 25


(Surrender and Cancellation)


25.1 The Concessionaires may pursuant to applicable law:





(a) surrender its rights in respect of the entire EPCC Area if its obligations in respect of


any Exploration sub-period have been fulfilled, with the consequence that no new


obligations will thereafter accrue; and








Page 34 of 44


 Z5C EPCC





(b) at any time, surrender their rights in respect of any acreage forming part of the EPCC


Area with the consequence that no new obligations will thereafter accrue in respect





of such acreage, provided, however, that no surrender by the Concessionaires of their


rights over any part of the EPCC Area shall relieve the Concessionaire of any of its


obligations as set out in Article 4.


25.2 The Government may revoke this EPCC observing the following procedures:


The Government shall communicate its intention to revoke this EPCC by ninety (90) days prior


notice. Such notice shall be served on the Concessionaires with recorded delivery, stating in








detail the alleged breach relied upon by the Government.


The Concessionaires shall within thirty (30) days from its receipt of such notice as mentioned


above remedy whatever default of the Concessionaires.


A declaration of revocation of this EPCC may be issued for reasons provided in applicable law


and in this EPCC, including the following:


(a) False or inaccurate information deliberately or grossly negligently submitted in


relation to any application for this EPCC, permit, approval of plan, which has been


determinant for the granting of the Petroleum right;


(b) Deviation of the purpose of the EPCC;


(c) Bankruptcy of the Concessionaire;


(d) Substantial or repeated breach or non-compliance with applicable law or the terms


and conditions of the EPCC;


(e) A Concessionaire fails to comply with any final administrative court, arbitral or


independent expert decision;


(f) Where there is only one Concessionaire in this EPCC, and an order is made or a


resolution is passed by a court of competent jurisdiction winding up the affairs of the


Concessionaire unless the winding up is for the purpose of amalgamation or


reorganisation and the Government has been notified of the amalgamation or


reorganisation, or without the approval of the Government, the majority of the shares


in the Concessionaire are acquired by third parties other than an Affiliated Company;


(g) Abandonment of the EPCC Area for a period exceeding three hundred and sixty five


(365) days; and


(h) Other causes set forth in this EPCC.





The Government may by notice require that a Concessionaire that is in breach as provided for


above shall assign its Participating Interest to the Government or to the other Concessionaires


holding Participating Interest.





Where a notice of assignment has been served on a Concessionaire that Concessionaire shall


forthwith, unconditionally, without consideration and free from all encumbrances assign its


undivided Participating Interest to the other Concessionaires in proportion to the undivided


Participating Interest in which the receiving Concessionaires hold their Participating Interest.


Each of the receiving Concessionaires is obliged to accept the assignment. A Concessionaire





Page 35 of 44


 Z5C EPCC








receiving such assignment is not responsible for any obligations of the assigning


Concessionaire which accrued prior to the assignment.


25.3 The Government may revoke this EPCC forthwith if the Concessionaires within sixty (60) days


from Concessionaires' receipt of such notice of breach of law or the EPCC terms and conditions


(a) Have not cured or removed such substantial breach as specified in the notice for


revocation; or


(b) Have not paid the damages demanded by the Government in the notification; or


(c) The Concessionaire has not commenced arbitration proceedings pursuant to Article


26.


Any dispute may be referred to an independent expert, arbitration tribunal on the question of


whether the EPCC may be revoked, whether the requirements of this Article have been


satisfied, whether the Concessionaires have remedied or removed a ground for revocation or


notice of assignment which are impossible to remedy or remove.


Where a dispute has been brought before a court, an independent expert or arbitration


tribunal the EPCC may not be revoked until all matters in dispute have been resolved by final,


non-appealable order or judgment and in that event only if revocation is consistent with the


order or judgement rendered.


Where the existence of a breach of the terms and conditions of the EPCC relates to a matter


in dispute between the Government and the Concessionaires which has been referred for


determination by a sole expert pursuant to the EPCC, a notice served on the Concessionaires


pursuant to this Article may not rely upon that matter as a reason for the intended revocation


of the EPCC until the sole expert has determined the matter and in that event only if to do so


would be consistent with the way in which the matter has been so determined.


Abandonment is deemed to take place whenever the Concessionaires, without justified


reasons and for a period of no less than three (3) months, ceases to conduct Petroleum


Operations in the EPCC Area.


25.4 In the event that there is more than one Concessionaire, and there are justified grounds for


revocation of the EPCC by Government pursuant to applicable law, the Government may not


revoke this EPCC unless the grounds for the revocation apply to all of the Concessionaires. If


the grounds for revocation apply to less than all Concessionaires the Government may only


revoke the respective Concessionaire's Participating Interest of that Concessionaire in


material breach.





Article 26


(Consultation, Arbitration and Independent Expert)


26.1 For the purpose of this article, there are two Parties, the Government and the Concessionaires.


Any dispute between the Parties shall be subject to this Article.


26.2


A dispute shall be resolved, if possible, by negotiation between the Parties. A notice of the


existence of a dispute shall be given by a Party to another in accordance with the provisj6rk


Page 36 of 44


 Z5C EPCC








of notices in Article 35. In the event that no agreement is reached within ninety (90) days after


the date one Party notifies the other that a dispute exists, or such longer period that is


specifically provided for elsewhere in this EPCC, either Party shall have the right to have such


dispute determined by arbitration or an expert as provided for in this Article 26. Arbitration


and expert determination as aforesaid shall be the exclusive method of determining a dispute


under this EPCC.


26.3 Subject to the provisions of this Article 26, and save for any matter to be referred to a sole


expert as provided in Article 26.6, the Parties shall submit any dispute arising out of or in


connection with this EPCC which cannot be resolved by negotiation, including the


compensation for expropriation which may be set by a panel acting pursuant to Article 45 of


the Petroleum Law as provided in Article 26.2 to arbitration as hereinafter provided:








(a) all disputes referred to arbitration shall be finally settled under the United Nations


Commission on International Trade Law ("UNCITRAL") Arbitration Rules in force at the


Effective Date;


(b) the seat of the arbitration shall be Geneva in Switzerland, the administrative law of


the arbitration shall be Swiss law and the substantive law of the arbitration shall be


Mozambican law;





(c) The arbitration shall be conducted in the English language. Notwithstanding Article


28, the English version of this EPCC initialized by the Parties as a supporting document


shall be used as the official translation in arbitral proceedings;





(d) an award by an arbitrator or arbitrators shall be final and binding on all Parties;





(e) the arbitral panel shall be composed of three (3) arbitrators to be appointed in


accordance with the UNCITRAL Rules, provided that, upon mutual agreement of both





Parties, the arbitration is to be conducted by a sole arbitrator appointed under the


UNCITRAL Rules. Unless both Parties have agreed that the dispute shall be settled by


a sole arbitrator, the claimant Party shall nominate in the request for arbitration, and


the respondent Party shall nominate within thirty (30) days of the registration of the


request, one (1) arbitrator pursuant to the UNCITRAL Rules. Within a period of thirty


(30) days from the date when both arbitrators have accepted their appointments the


arbitrators so appointed shall agree on a third arbitrator, who shall act as Chairman of


the arbitral tribunal. If either Party fails to nominate an arbitrator as provided above,


or if the arbitrators nominated by the Parties fail to agree on a third arbitrator within


the period specified above, then the appointing authority, which shall be the


Permanent Court of Arbitration in The Hague, upon request of either Party shall make


such appointments as necessary in accordance with the UNCITRAL Rules. If both


Parties have agreed that the dispute shall be settled by a sole arbitrator, the sole


arbitrator shall be nominated by agreement between them subject to acceptance by


the nominated arbitrator; provided that if the Parties are unable to agree on a


nominee for sole arbitrator within 30 (thirty) days from the date when the notice of


arbitration was given to the respondent Party, then the Secretary-General of the


Permanent Court of Arbitration upon request of either Party shall appoint the sole


arbitrator in accordance with the UNCITRAL Rules; zx/a^'7 Of


Page 37 of 44 K I


 Z5C EPCC





(f) insofar as practicable, the Parties shall continue to implement the terms of this EPCC


notwithstanding the initiation of arbitral proceedings and any pending disputes;


(g) the provisions set out in this Article 26 shall continue after the termination of this


EPCC;


(h) neither any sole expert nor any arbitrator of the arbitral tribunal, as applicable, shall


be of the same nationality as any Party; and


(i) All arbitrators or experts selected must be fluent in both the English and Portuguese


languages.


26.4 An award or a decision, including an interim award or decision, in arbitral proceedings


pursuant to this Article 26 shall be binding on the Parties and judgment thereon may be


entered in any court having jurisdiction for that purpose. Each of the Parties shall hereby


irrevocably waive any defences based upon sovereign immunity and waives any claim to


immunity:


(a) in respect of proceedings in aid of arbitration or to enforce any such award or decision


including, without limitation, immunity from service of process and from the


jurisdiction of any court; and


(b) in respect of immunity from the execution of any such award or decision against the


property of the Republic of Mozambique held for a commercial purpose.


"Parties" in this Article 26.4 shall be understood to include each of the Concessionaires.





26.5 Any matter in dispute of a technical nature not involving interpretation of law or the


application of this EPCC and which is required to be referred to a sole expert for determination


under the provisions of this EPCC, including on valuation in Article 10.4 (e) of this EPCC and


Article 2.1 (e) of Annex "C", or other issues of a substantially equivalent nature to said


provisions, or with respect to any other matter which the Parties may otherwise agree to so


refer, shall be referred to a sole expert for determination by a Party giving notice to such effect


pursuant to Article 35. Such notice shall contain a statement describing the dispute and all


relevant information associated therewith. A sole expert shall be an independent and


impartial person of international standing with relevant qualifications and experience


appointed pursuant to the mutual agreement of the Parties. Any sole expert appointed shall


act as an expert and not as an arbitrator or mediator and shall be instructed to endeavour to


resolve the dispute referred to him within thirty (30) days of his appointment, but in any event


within sixty (60) days of the appointment. Upon the selection of the sole expert, the Party


receiving the notice of referral above shall submit its own statement containing all information


it considers relevant with respect to the matter in dispute. The decision of the sole expert shall


be final and binding and not subject to any appeal, save for fraud, corruption or manifest


disregard of applicable procedure of this EPCC. If the Parties are unable to agree on the


appointment of a sole expert within twenty (20) days after a Party has received a notice of


referral under this Article the sole expert shall be selected by the President of the Institute of


Energy, London, and the person so selected shall be appointed by the Parties.








Page 38 of 44


 Z5C EPCC





26.6 The sole expert shall decide the manner in which any determination is made, including


whether the Parties shall make oral or written submissions and arguments, and the Parties


shall co-operate with the sole expert and provide such documentation and information as the


sole expert may request. All correspondence, documentation and information provided by a


Party to the sole expert shall be copied to the other Party, and any oral submissions to the


sole expert shall be made in the presence of all Parties and each Party shall have a right of


response. The sole expert may obtain any independent professional or technical advice as the


sole expert considers necessary. The English version of this EPCC initialized by the Parties as a


supporting document shall be used as the official translation in any determination by the sole


expert. The fees and expenses of a sole expert appointed under the provisions of Article 26.5


shall be borne equally by the Parties.


26.7 The Parties hereby agree not to exercise any right to institute proceedings to set aside any


interim or final arbitral award made pursuant to this Article 26, except that nothing in this


Article 26.7 shall be read or construed as imposing any limitation or constraint on either


Party's right to seek to contest enforcement of any such interim or final arbitral award (a)


rendered by an arbitral tribunal appointed in accordance with this Article 26 on the limited


grounds and in accordance with the procedure set forth in Article V of the New York


Convention on the Recognition and Enforcement of Foreign Arbitral Awards.


Article 27


(Applicable Law)


This EPCC shall be governed by and construed in accordance with the laws of the Republic of


Mozambique.





Article 28


(Language)


This EPCC is drawn up in four (4) originals in the Portuguese language, for signature by the Government


and the Concessionaires. One signed Portuguese original will be retained by each of the Parties. An


English language translation is to be prepared and initialled, as a supporting document, by the Parties


to this EPCC. However, in case of conflict between the Portuguese original text and the English


translation, the Portuguese original text shall prevail.


Article 29


(Joint Operating Agreement)


29.1 A Joint Operating Agreement shall be signed between the Concessionaires immediately upon


entering into this EPCC. The Joint Operating Agreement (JOA) attached to this EPCC is a


contract between the Concessionaires who are parties to this EPCC, defining the rights and


obligations among the Concessionaires. The Joint Operating Agreement also includes a


dispute resolution process which is distinct from the dispute resolution provisions under this


EPCC.


29.2 The Joint Operating Agreement is subject to the approval of the Government and such an


approval is a condition for the EPCC. Following signature, the Joint Operating Agreement may


only be amended or modified with the approval of the MIREME and shall not be modified,/


revoked or amended unilaterally by any Concessionaire or by the Governnffent. Any act of the


Page 39 of 44 P/W


) -J----


 Z5C EPCC |





Government which negatively impacts any one or more of the Concessionaires rights under


the JOA shall be subject to the provisions of Article 17.5 and 34 of this EPCC and any dispute


in regard to the existence or value of a negative impact on such Concessionaire in regard to


such modification, revocation or amendment shall be submitted for final resolution under


Article 26 of this EPCC and not under the dispute resolution procedure under Article 19.2 of


the JOA.


29.3 The Joint Operating Agreement and every other agreement to be executed relating to the


Petroleum Operations between the Concessionaires shall be consistent with the provisions of


this EPCC and shall be submitted to MIREME for approval as soon as the same has been


executed.


29.4 INP appoints representatives that shall have the right to attend as observers in any meeting


of the Operating Committee established pursuant to the Joint Operating Agreement. The


same shall apply for any sub-committee established under the JOA and the Operating


Committee and any sub-committee established pursuant to an unitisation agreement. The


Operator shall copy the INP all notices and documentation concerning the meetings, including


minutes regarding such meetings. The appointed governmental observers shall only act as


observers and not interfere or participate in any discussions or decisions during such


meetings, or offer advice or views on the issues raised or discussed.


29.5 Each party shall pay their own cost of attending any such meetings.





Article 30





(Future Agreements)


It is understood that any written agreement which may at any time be concluded between the


Concessionaires, on one side, and the Government, on the other, as may be required or desired within


the context of this EPCC shall be deemed to have been approved to the same extent in accordance


with applicable law as if it was originally included in this EPCC.





Article 31





(Foreign Exchange Control)


For the purposes and terms of this EPCC, matters relating to the exchange regime will be governed by


Law No. 11/2009 of March 11, by Notice No. 20 / GBM / 2017 of December 27, as well as by other


regulations issued by the Bank of Mozambique in force at the time of signature of the EPCC.





Article 32





(Prevention of Corruption)


32.1 The Government and the Concessionaires shall cooperate on preventing corruption. The


Parties undertake to take administrative disciplinary actions and rapid legal measures in their


respective responsibilities to stop, investigate and prosecute in accordance with national law


any person suspected of corruption or other intentional resource misuse.


32.2 No offer, gift, payments or benefit of any kind, which constitutes an illegal or corrupt practice


pursuant to applicable law of the Republic of Mozambique, shall be given or accepted, either








Page 40 of 44


 Z5C EPCC





directly or indirectly, as an inducement or reward for the execution of this EPCC or for doing


or not doing any action or making any decision in relation to this EPCC.


32.3 The paragraph above is equally applicable to the Concessionaires, their Affiliated Companies,


agents, representatives, Subcontractors or consultants when such offer, gift, payments or


other benefit of any kind violates:


(a) the applicable laws of the Republic of Mozambique;


(b) the laws of the country of formation or principal place of business of the


Concessionaire's Parent Company exercising direct or indirect control of a


Concessionaire; or


(c) the laws of the country of formation or principal place of business of agents,


representatives, Subcontractors or consultants or any entity exercising direct or


indirect control over such agents, representatives, Subcontractors or consultants; or


(d) any other applicable anti-corruptions laws; or


(e) the principles described in the United Nation Convention on Combating Bribery of


Foreign Public Officials in International Business Transactions, signed in Paris 17


December 1997, and which entered into force 15 February 1999, including the


Conventions commentaries.


Article 33


(Compliance with Law n.° 15/2011, of 10 August and Decree n.° 16/2012, of 4 July)


("Public Private Partnership Law")








Each and every obligation under Articles 33 and 34 of Law No 15/2011 of August 10 and Articles 33,


64, 65, 66,67,68 and 69 of Decree n.° 16/2012, of 4 July 2012 have been met by this EPCC, including


the percentage ranging between five (5) to twenty per cent (20%) local participation already fulfilled


by ENH's twenty per cent (20%) Participation Interest and no further application of these articles of


that law may be applied in regard to this EPCC.


Article 34


(Stability of Economic Benefit)


34.1 In the event of a change in legislation affecting Petroleum Operations that causes a material


adverse impact to the expected economic benefit of the Concessionaires or of the


Government under this EPCC, the Parties shall, following enactment of such change in


legislation, meet to verify and seek agreement on adjustments required to restore the


economic benefit the Concessionaires or the Government would have derived if such change


in legislation had not occurred.


34.2 In the event that a notice of the existence of a dispute is given by a Party in relation to an


agreement on adjustments as set out in Article 34.1, the time limit in Article 26.2 shall be one


hundred and eighty (180) days. r





Page 41 of 44


 Z5C EPCC








34.3 The provisions of this Article are not applicable to (i) changes in legislation that have general


applicability for the petroleum sector or the country and which pertains to health, safety,


labour, social security or the environment and are in line with international best practice or


(ii) the elements that are subject to fiscal stability under Article 11.8 of this EPCC or (iii)


changes in, or new, municipal legislation that is in line with general practice in Mozambican


municipalities.


34.4 For the purposes of this Article 34


(a) "material adverse impact7 shall mean a decrease of annual expected economic


benefits as defined below and under the EPCC of at least twenty-five million United


States Dollars (USD 25,000,000.00) in the annual aggregate.


(b) "expected economic benefits" shall mean the expected net value calculated as the


difference between the total expected revenue and the total expected costs for the


Concessionaires or the government as the case may be.


(c) "legislation" shall mean, subject to Article 34.3, the laws enacted by the Assembly of


the Republic of Mozambique (Assembleia da Republica), and regulations and


decrees issued by the Government and ministerial orders and diploma by members of


Government and municipalities.


Article 35


(Notices)


35.1 All notices, invoices and other communications hereunder shall be deemed to have been


properly given or presented, if delivered in writing in person or by recognised courier service,


confirmed by that recognised service, at the addresses indicated in this Article 35.2 with the


charges associated with the delivery of the notice, invoice or other communication being paid


by the sender. Copy may be sent by facsimile or e-mail.


35.2 All such notices shall be addressed to the Government or the Concessionaire, as the case may


be, as follows:


(a) The Government:


MINIST^RIO DOS RECURSOS MINERAIS E ENERGIA


Predio Montepio, Avenida Fernao de Magalhaes, 34,1st floor


Caixa Postal 4724


Maputo, Mozambique


With Copy: Chairman of the National Petroleum Institute


Rua dos Desportistas, n.9 259, Parcela E, Aterro da Maxaquene, Maputo, Mozambique


Telephone: +258 21320618 zx


Telefax: +258 21320620 \ <











Page 42 of 44


 Z5C EPCC





(b) EXXONMOBIL MOZAMBIQUE EXPLORATION AND PRODUCTION, LIMITADA





Address: Avenida Julius Nyerere, 3412, (R/C)


Ground Floor














Caixa Postal


Maputo, Mozambique


Contact: Jos Evens, General Manager


Telephone: +258 85 8382001


Email: jos.evens@exxomobil.com











(c) RN ZAMBEZI SOUTH PTE. LTD.





Address: AvJulius Nyerere, n.s 3412, 2s andar, Maputo, Mozambique





Contact: Anton Butov, Director





Telephone: + (258) 21241400


E-mail: avbutov@rosneft.ru











(d) EMPRESA NACIONAL DE HIDROCARBONETOS, E.P.





Company Name: Empresa Nacional de Hidrocarbonetos, E.P.


Address: Avenida 25 de Setembro, Time Square, Bloco 1,12 andar


CP 4787


Maputo - Mozambique


Contact: Omar Mitha


Position of contact: Presidente do Conselho de Administrazao


Telephone: +258 21 429456/67


Fax: +258 21 324808





35.3 Subject to Article 35.4 each Party hereto may substitute or change the aforesaid address by


giving written notice thereof to the others.





35.4 Each Concessionaire shall at all times maintain an address in Maputo for the purpose of^


service of notice. /i





Page 43 of 44


Z5C EPCC


IN WITNESS WHEREOF, the Government and each Concessionaire have signed this EPCC in four


(4) Portuguese language originals and initialled four (4) English language originals as of the date


first herein above stated.





THE GOVERNMENT





By:


Ernesto Max Elias Tonela





Minister of Mineral Resources and Energy


Date:


EMPRESA NACIONAL DE HIDROCARBONETOS, E.P.


By:


Omar Mitha


Chairman of the Board of Directors


Date:


By:


Name:


Position:


Date:





EXXONMOBIL MOZAMBIQUE EXPLORATION AND PRODUCTION, LIMITADA





By:


Name:


Position:


Date:





RN ZAMBEZI SOUTH PTE. LTD.


By:


Name:


Position:


Date:





Page 44 of 44


Z5-C EPCC Annex A








ANNEX A











Description of the EPCC Area





Z5-C 5821 Sqkm








Point Longitude Latitude


36° 45’ 00.000" E 19’ 30' 00.000" S


1








2 37° 00' 00.000" E 19° 30' 00.000" S





3 37° 15’ 00.000" E 19° 30’ 00.000" S





4 37° 30’ 00.000" E 19° 30' 00.000" S





5 37° 30’ 00.000" E 19’ 45' 00.000" S





6 37° 30’ 00.000" E 20’ 00' 00.000" S





7 37° 30’ 00.000" E 20’ 15' 00.000" S





8 37° 15‘ 00.000" E 20’ 15' 00.000" S





9 37’ 00’ 00.000" E 20’ 15' 00.000" S





10 37° 00' 00.000" E 20’ 00' 00.000" S





11 36’ 45’ 00.000" E 20’ 00’ 00.000" S





12 36’45' 00.000" E 19’ 45' 00.000" S





Z5-C EPCC AnnexB














ANNEX B


Map of the EPCC Area











SUITE 37-15XFE 37-JOirE 37-4570-E

































































•9’45'0'S-
























































WGS_1984_UTM Zone 36S


Projection: Transverse_Mercator


False_Easting: 500000.0


False_Northing: 10000000.0


Central_Meridian: 33.0


Scale_Factor: 0.9996


Latrtude_Of_Origin; 0.0








0 40


D3MCZZZMMI Km


 Z5-C EPCC Annexe














Annex"C


EPCC Accounting and Financial Procedure








This Annex is attached to and made part of the Exploration and Production Concession Contract


dated 2018 entered into between the Government of the Republic of


Mozambique to ExxonMobil, Rosneft and ENH (hereinafter referred to as "the EPCC").








Section 1 General Provisions





1.1 Definitions


For the purposes of this EPCC Accounting and Financial Procedure the terms used herein which are


defined in applicable law, the EPCC or the Joint Operating Agreement shall have the same meaning


when used in this EPCC Accounting and Financial Procedure.





1.2 Statements required to be submitted by the Concessionaires


1.2 (a) Within ninety (90) days of the Effective Date, the Concessionaires shall submit to the


Government a proposed outline ofcharts of accounts, operating records and reports, which


outline shall be in accordance with applicable law and generally accepted and recognised


accounting principles, used in the international petroleum industry.


Within ninety (90) days of receiving the above submission Government shall either indicate


its approval of the proposal or request revisions to the proposal?


Within one hundred and eighty (180) calendar days after the Government has approved the


Concessionaires' proposals, the Concessionaires and Government shall approve an outline


charts of accounts, operating records and reports which shall describe the basis of the


accounting system and procedures to be developed and used under the EPCC. Following


such approval, the Concessionaires shall expeditiously prepare and provide the Government


with formal copies of the comprehensive charts of accounts related to the accounting,


recording and reporting functions, and allow Government to examine the Concessionaires'


manuals, if any, and to review procedures which are, and shall be, observed under the EPCC.


1.2 (b) Notwithstanding the generality of the foregoing, the Concessionaires are required to


make regular statements relating to the Petroleum Operations. These Statements are as


follows:





(i) Production Statement (see Section 5 of this Annex);


(ii)


 Z5-C EPCC Annexe








(iii) Cost Recovery Statement (see Section 7 of this Annex);


(iv) LNG Price Statement (see Section 7 of this Annex);


(v) Statement of Expenditures and Receipts (see Section 8 of this Annex);


(vi) Final End-of-Year Statement (see Section 9 of this Annex);


(vii) Budget (see Section 10 of this Annex);


(viii) Long Range Plans (see Section 11 of this Annex).


1.2 (c) All reports and statements will be prepared in accordance with the EPCC, applicable


law and, where there are no relevant provisions in either of these, in accordance with


generally accepted and recognised accounting principles used in the international petroleum


industry.


1.3 Language and Units of Account


1.3 (a) Accounts shall be maintained in United States dollars and such other currency as may


be required under the applicable law. For cost recovery purposes, the currency of reference


shall be the US Dollar. Metric units and barrels shall be employed for measurements required


under this Annex.


1.3 (b) Each Concessionaire may, subject to the authorization of the Minister responsible for


the area of Finance, opt for the use of US dollars as presentation currency, and this option shall


not be changed during the life of the project provided that:





(i) the investments realised are equivalent or in excess of United States Dollars


500,000,000.00. Such investments are deemed to include all costs incurred as


per the Cost Recovery Statement, and


(ii) at least 90 per cent of the Concessionaires' transactions are carried out in


United States Dollars. The currency of the transactions is deemed to be the


payment currency for the transactions.





1.3 (c) Once the authorization of the Minister responsible for the area of Finance has been


obtained, the accounting considered will be those in US Dollars, from the Effective Date of the


Contract, and there is no need to convert the accounts in Meticais to US Dollars; and


1.3 (d) For the purposes of the preceding paragraph, the Concessionaires shall submit, from


the Effective Date, to the competent entities of the Government the accounting in Meticais


and in US Dollars. n C\











Page 2 of 21


 Z5-C EPCC AnnexC











1.3 (e) The language used will be English and any other language that may be required under


applicable law. When necessary, for clarification, the Concessionaires may also maintain





accounts and records in other languages, units of measurement and currencies.


1.3 (f) These Accounting and Financial Procedures are intended to ensure that neither the


Government nor the Concessionaires obtain any gain or suffer any loss from the exchange rate


variation to the detriment or benefit of the other. However, should any gain or loss occur as a


result of a currency conversion, it will be credited or debited to accounts under the EPCC.








1.3 (g) Amounts received and costs and expenditures made in Mozambican Meticais or in


United States dollars shall be converted from Mozambican Meticais into United States dollars


or from United States dollars into Mozambican Meticais on the basis of the average of the


buying and selling exchange rates between the currencies in question as published by Banco


de Mozambique or in accordance with the applicable law, prevailing on the actual day of the


transaction on which such amounts are received and costs and expenditures are paid, or as


agreed by the Parties.


1.3 (h) Amounts received and costs and expenditures incurred in currencies other than


Mozambican Meticais or in United States dollars shall be converted into United States dollars


on the basis of the average of the buying and selling exchange rates between the currencies


in question as published by the Wall Street Journal, or if not published by the Wall Street


Journal, then by the Financial Times, prevailing on the actual day of the transaction on which


such amounts are received and costs and expenditures are paid, or as agreed by the Parties.


1.4 Payments


1.4 (a) Except as provided in Subsections 1.4(b) and (c), all payments between the Parties


shall, unless otherwise agreed, be in United States dollars and through a bank designated by


each receiving Party.


1.4 (b) Payment of any tax by a Concessionaire shall be made in accordance with the


provisions of the EPCC and the applicable law.


1.4 (c) Discharge of a Concessionaire's obligation with respect to the Petroleum


Production Tax and the Government's share of Profit Petroleum shall be made in accordance


with the EPCC.


1.4 (d) All sums due and payable in Meticais by a Concessionaire to the Government


under the EPCC during any calendar month shall, for each day such sums are overdue


during such month, bear interest compounded daily at an annual rate as required by


Mozambican law.


1.4 (e) All sums due and payable in other currencies by a Concessionaire to the


Government under the EPCC during any calendar month shall, for each day such &ms are


Ml Ash





Page 3 of 21


 Z5-C EPCC Annexe








overdue during such month, bear interest compounded daily at an annual rate equal to


LIBOR or equivalent plus three (3) percentage points.


1.5 Audit and Inspection Rights of the Government.


1.5 {a} Upon giving the Concessionaires thirty (30) calendar days' notice, the competent


authority of the Government shall have the right to audit the Concessionaires' accounts and


records maintained hereunder with respect to each calendar year within 5 (five) years from


the end of each such calendar year. Notice of any exception to the Concessionaires' accounts


of any calendar year must be submitted to the Concessionaires within five (5) years from the


end of such calendar year. For purposes of auditing, the Government may examine and verify


at reasonable times all charges and credits relating to the Petroleum Operations such as


books of account, accounting entries, material records and any other documents,


correspondence and records necessary to audit and verify the charges and credits.


Furthermore the auditors shall have the right in connection with such audit to visit and


inspect, subject to reasonable notification, all sites, plants, facilities, warehouses and offices


of the Concessionaires serving the Petroleum Operations including visiting personnel


associated with those operations.


1.5 (b) Without prejudice to the finality of matters as described in Subsection 1.5(a) all


documents referred to in that sub-section shall be maintained and made available for


inspection and audit by the Government for such a time as prescribed by the applicable law.


1.5 (c) In the event that Government does not conduct an audit with respect to a calendar


year or conducts the audit but does not issue an audit report within the time specified in


Subsection 1.5 (a) above, Government shall be deemed not to have objected to the Cost


Recovery Statement prepared and maintained by the Concessionaires and such Cost


Recovery Statement shall be considered true and correct for Cost Recovery purposes for such


calendar year save for manifest disregard of applicable procedure, fraud or wilful


misconduct. In case where Government conducts a review and issues an audit report,


Government shall be deemed not to have objected to the Cost Recovery Statement and such


Cost Recovery Statement shall be considered true and correct for Cost Recovery purposes for


such calendar year with respect to each item which is not the subject of an exception in such


audit report, save for manifest disregard of applicable procedure, fraud or wilful misconduct.


Section 2 Classification, Definition and Allocation of Costs and Expenditures


All expenditures relating to the Petroleum Operations shall, subject to applicable law be classified,


defined and allocated as follows:


2.1 Exploration Costs


Are all direct and allocated indirect costs incurred in relation to Exploration in the EPCC Area, Z


including but not limited to: P ( Nl











Page 4 of 21


 Z5-C EPCC AnnexC








2.1 (a) Aerial, geophysical, geochemical, paleontological, geological, topographical and


seismic surveys and studies and their interpretation.


2.1 (b) Core hole drilling and drilling of water-Wells related to the Petroleum Operations.


2.1 (c) Labour, materials and services used in drilling Wells with the object of finding new


Petroleum Deposits or for the purpose of appraising the extent of Petroleum Deposits


already discovered provided such Wells are not completed as Production Wells.


2.1 (d) Facilities used solely in support of these purposes including access roads and


purchased geological and geophysical information.


2.1 (e) Service Costs allocated to the Exploration operations pursuant to applicable law or in


absence of such law agreed to between the Government and the Concessionaires on a


systematic basis and, failing agreement, to be determined by a sole expert in accordance with


Article 26 of the EPCC.


2.1 (f) General and Administrative Expenses allocated to the Exploration Operations


pursuant to applicable law or in absence of such law agreed to between the Government and


the Concessionaires on a systematic basis and, failing agreement, to be determined by a sole


expert in accordance with Article 26 of the EPCC.


2.2 Development and Production Capital Expenditures


These shall consist of all expenditures incurred for Development and Production, including but not


limited to:


2.2 (a) Drilling of Wells which are completed as producing Wells and drilling of Wells for


purposes of Production from a Petroleum Deposits already discovered whether these Wells


are dry or producing.


2.2 (b) Completing of Wells by way of installation of casing or equipment or otherwise after


a Well has been drilled for the purpose of bringing the Well into use as a producing Well.


2.2 (c) Intangible drilling costs such as labour, consumable material and services having no


salvage value which are incurred in drilling and deepening of Wells for Production purposes.


2.2 (d) The costs of construction and installation of Facilities for Petroleum Operations


pursuant to the approved Development Plan, such as: flow lines, Production and treatment


units. Wellhead equipment, subsurface equipment, enhanced recovery systems, offshore


platforms including floating units, onshore or offshore liquefaction, storage and offloading


Facilities, Petroleum storage facilities, export terminals and piers, harbours and related


facilities, access roads for Production activities.


2.2 (e) Engineering and design studies for Facilities for Petroleum Operations











Page 5 of 21


 Z5-C EPCC AnnexC








2.2 (f) Service Costs allocated to Development and Production on a basis determined by


applicable law or in absence of such law agreed to between the Government and the


Concessionaires on a systematic basis and, failing agreement, to be determined by a sole


expert in accordance with Article 26 of the EPCC.


2.2 (g) General and Administrative Expenses allocated to the Development and Production


on a basis determined by applicable law or in absence of such law, agreed to between the


Government and the Concessionaires on a systematic basis and, failing agreement, to be


determined by a sole expert in accordance with Article 26 of the EPCC.


2.3 Operating Costs


These are all expenditures incurred in the Petroleum Operations after the start of the Commercial


Production which are other than Exploration Costs, Development and Production Capital


Expenditures, General and Administrative Expenses and Service Costs, including but not limited to:


2.3 (a) Operating, servicing, maintaining and repairing Production and injection Wells and all


Facilities for Petroleum Operations pursuant to the approved Development Plan, which are


completed during the Development and Production.


2.3 (b) Planning, producing, controlling, measuring and testing the flow of Petroleum and


collecting, gathering, treating, storing and transferring the Petroleum from the Petroleum


Deposits to the Delivery Point.


2.3 (c) The balance of General and Administrative Expenses and Service Costs not allocated


to the Exploration operations or the Development and Production.


2.4 Service Costs


2.4 These are direct and indirect expenditures in support of the Petroleum Operations including


warehouses, offices, camps, piers, marine vessels, vehicles, motorised rolling equipment,


aircraft, fire and security stations, workshops, water and sewage plants, power plants,


housing, community and recreational facilities and furniture, tools and equipment used in


these activities. Service costs in any calendar year shall include the total costs incurred in


such year to purchase and/or construct said facilities as well as the annual costs to maintain


and operate the same. All Service Costs will be regularly allocated as specified in Subsections


2.1(e), 2.2(g) and 2.3 to Exploration Costs, Development and Production Capital Expenditures


and Operating Costs.


2.4 Service Costs incurred during the period commencing with the Effective Date and ending with


the date of approval by MIREME of the first Development Plan for a proposed Development


and Production Area, shall be fully allocated to Exploration Cost. Commencing with the date


of approval by MIREME of the first Development Plan for a proposed Development and


Production Area, and if it becomes necessary allocate Service Costs to or between Petroleum


Operations, such allocation shall be made on an equitable basis in accordance with applicable


law, or in absence of such law, agreed to between the Government and the Concessionaires








Page 6 of 21


 Z5-C EPCC Annexe








on a systematic basis and, failing agreement, the allocation to be determined by a sole expert


in accordance with Article 26 of the EPCC.


2.4 The Concessionaires shall furnish a description of its allocation procedures pertaining to


Service Costs, along with each proposed Development Plan.


2.5 General and Administrative Expenses


2.5 (a) All main office, field office and general administrative costs in the Republic of


Mozambique including but not limited to supervisory, accounting and employee relations


services.


2.5 (b) An overhead charge for services rendered outside the Republic of Mozambique for


managing the Petroleum Operations and for staff advice and assistance including financial,


legal, accounting and employee relations services. This charge shall be five percent (5%) of


contract costs up to five million US dollars (US$5,000,000), three percent (3%) of that portion


of contract costs between five million US dollars (US$5,000,000) and ten million US dollars


(US$10,000,000) and one and one half percent (1.5%) of contract costs which are in excess of


ten million US dollars (US$10,000,000). The contract costs referred to herein shall include all


Exploration Costs, Development and Production Capital Expenditures, Operating Costs and


Service Costs.


2.5 (c) All General and Administrative Expenses will be regularly allocated as specified in


Subsections 2.1(f), 2.2(h) and 2.3 to Exploration Costs, Development and Production Capital


Expenditures and Operating Costs.


2.5 (d) General and Administrative Expenses incurred during the period commencing with


the


Effective Date and ending with the date of approval by the Government of the first


Development Plan for a proposed Development and Production Area, shall be fully allocated


to Exploration Cost. Commencing with the date of approval by the Government of the first


Development Plan for a proposed Development and Production Area, if it becomes necessary


to allocate General and Administrative Expenses to or between Petroleum Operations, such


allocation shall be made on an equitable basis agreed between the Parties in accordance


with applicable law, failing agreement, the allocation to be determined by a sole expert in


accordance with Article 26 of the EPCC.


2.5 (e) Concessionaires shall furnish a description of its allocation procedures pertaining to


General and Administrative Expenses, along with each proposed Development Plan.


2.6 Decommissioning Fund


2.6 (a) For the purpose of costs related to the implementation of a Decommissioning Plan a


Decommissioning Fund shall be established for each Development and Production Area,


commencing from the calendar quarter in whichever of the following situations first occur:











Page 7 of 21


 Z5-CEPCC [ Annex C











i) the Petroleum Produced has reached 50% of the aggregate recoverable


reserves as determined in an approved Development Plan and any successive


reappraisal of such initial recoverable reserves; or


ii) five (5) years prior to the expiry or surrender of this EPCC or the use of any


facility for the purpose of extracting Petroleum from a Production and Development


Area within this EPCC is permanently terminated.


2.6 (b) For every subsequent calendar quarter in which Petroleum is produced, the


Concessionaires shall charge as Operating Costs a portion of the estimated future cost of


Decommissioning.


2.6 (c) The amount to be deposited in the Decommissioning Fund for a calendar quarter


shall be charged as Operating Costs subject to the Cost Recovery limitation stipulated in


applicable law and Article 9.6 of the EPCC and calculated in the following manner:


QD = (ECA X CPP/EPR) - DFB where:


QD is the amount of funds to be transferred to the Decommissioning Fund in respect of


the relevant calendar quarter;


ECA is the estimated cost of Decommissioning pursuant to the preliminary


Decommissioning Plan approved by the Government;


EPR is the estimated remaining Petroleum reserves to be recovered from the


Development and Production Area to which the preliminary Decommissioning Plan apply, at


the end of the calendar quarter in which the Decommissioning Fund was opened;


CPP is the cumulative Production of Petroleum from the Development and Production


Area to which the preliminary Decommissioning Plan apply from the end of the calendar


quarter in which the Decommissioning Fund was opened.


DFB is the Decommissioning Fund balance at the end of the previous calendar quarter.











Section 3 Costs, Expenses, Expenditures and Credits of the Concessionaires





3.1 Costs recoverable without further approval of the Government.





Subject to the provisions of the EPCC and applicable law, the Concessionaires shall bear and pay the


following costs and expenses in respect of the Petroleum Operations. These costs and expenses will


be classified under the headings referred to in Section 2. They are recoverable by the


Concessionaires under the EPCC and include, but are not limited to the following:


3.1 (a) Surface Rights





This covers all direct costs attributable to the acquisition, renewal or relinquishment of


surface rights acquired and maintained in force for the EPCC Area, zy? f\ S’*.





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3.1 (b) Labour and Associated Labour Costs


(i) gross salaries and wages including bonuses and premiums of the


Concessionaire's employees directly engaged in the Petroleum Operations,











irrespective of the location of such employees, it being understood that in


the case of those personnel only a portion of whose time is dedicated to the


Petroleum Operations, only that pro-rata portion of applicable salaries,


wages and fringe benefits will be charged;


(ii) the Concessionaire's costs regarding holiday, vacation, sickness, severance


unless for dismissal of an employee without cause as determined by a court


or arbitral body of competent jurisdiction and disability, retirement and


survival payments applicable to the salaries and wages chargeable under (I)


above. In respect of the severance, retirement, and survival payments


mentioned above, the amount that will be cost recoverable shall be in


proportion of the total time the employee was directly engaged in the


Petroleum Operations on a full time basis to the employee's total tenure with


the Concessionaire and its Affiliates. If it becomes necessary to allocate these


amounts to or between Petroleum Operations, such allocation shall be made


on an equitable basis in accordance with applicable law, in the absence of


such law as agreed between the Government and the Concessionaires and,


failing agreement, the allocation to be determined by a sole expert in


accordance with Article 26 of the EPCC;


(iii) expenses or contributions made pursuant to assessments or obligations


imposed under the applicable law which are applicable to the


Concessionaire's cost of salaries and wages chargeable under (i) above;


(iv) the Concessionaire’s cost of established plans for employees' life insurance,


hospitalisation, pensions, and other benefits of a like nature customarily


granted to the Concessionaire’s employees;


(v) reasonable travel and personal expenses of employees of the Concessionaire


including those made for travel and relocation of the expatriate employees


and their families assigned to the Republic of Mozambique, all of which shall


be in accordance with the Concessionaire's normal practice;


3.1 (c) Transport of employees and materials





The cost for transport of employees, equipment, materials and supplies necessary for the


conduct of the Petroleum Operations.





3.1 (d) Charges for Services


i. Third Party Contracts











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Subject to the rules defined in applicable law, the actual costs of contracts for


technical and other services entered into by the Concessionaires for the Petroleum


Operations, made with third parties other than Affiliated Companies of the


Concessionaires are recoverable, provided that the prices paid by the


Concessionaires are no higher than those generally charged by other international


or domestic suppliers for comparable work and services.


ii. Affiliated Companies of a Concessionaire


Without prejudice to the charges to be made in accordance with Subsection 2.5, in


the case of services rendered to the Petroleum Operations by an Affiliated Company


of a Concessionaire, the charges will be based on actual costs and will be


competitive. The charges will be no higher than the most favourable prices charged


by the Affiliated Company to third parties for comparable services under similar


terms and conditions elsewhere. The Concessionaire shall specify the amount of the


charges which contributes an allocated proportion of the general material,


management, technical and other costs of the Affiliated Company, and the amount


which is the direct cost of providing the services concerned. If necessary, certified


evidence regarding the basis of prices charged may be obtained from the auditors of


the Affiliated Company.


3.1 (e) Materials


i. General


Subject to applicable law and so far as is practicable and consistent with efficient,


economical and internationally accepted operational requirements, only such


material shall be purchased or furnished by the Concessionaires for use in the


Petroleum Operations as may be required for use in the reasonably foreseeable


future and to the extent that such purchase or supply are in accordance with the


EPCC.


ii. Warranty of Material


The Concessionaires do not warrant material beyond the supplier's or manufacturer's


guarantee and, in case of defective material or equipment, any adjustment received


by the Concessionaires from the suppliers/ manufacturers or their agents will be


credited to the accounts under the EPCC.





iii. Value of material charged to the accounts under the EPCC





(a) Except as otherwise provided in (b) below material purchased by the


Concessionaires for use in the Petroleum Operations shall be valued to include


invoice price less trade and cash discounts (if any), purchase and procurement


fees plus freight and forwarding charges between point of supply and point of |


shipment, freight to port of destination, insurance, taxes, customs duties,


consular fees, other items chargeable against importecTmaterial and where v








Page 10 of 21


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applicable handling and transportation expenses from point of importation to


warehouse or operating site, and its costs should not exceed those currently


prevailing in normal arms-length transactions on the open market.











(b) Materials purchased from Affiliated Companies of a Concessionaires shall be


charged at the prices specified in items (1) and (2) hereof.











(1) New material (condition "A") shall be valued at the current


international price which should not exceed the price prevailing in normal


arms-length transactions on the open market.


2) Used material (conditions "B" and "C")


(i) material which is in sound and serviceable condition and is suitable


for reuse without reconditioning shall be classified as condition "B"


and priced at seventy-five percent (75%) of the current price of new


materials defined in 3.1(e)(iii)(b)(l) above.


(ii) material which cannot be classified as condition "B" but which:


(a) after reconditioning will be further serviceable for original


function as good second-hand material condition "B", or


(b) is serviceable for original function but substantially not


suitable for reconditioning, shall be classified as condition


"C" and priced at fifty percent (50%) of the current price of


new material as defined in (1) above. The cost of


reconditioning shall be charged to the reconditioned


material provided that the condition "C" material value plus


the cost of reconditioning does not exceed the value of


condition "B" material.


(iii) material which cannot be classified as condition "B" or condition


"C" shall be priced at a value commensurate with its use.


(iv) material involving erection costs shall be charged at the


applicable percentage, in accordance to its condition, of the


current dismantled price of new material as defined in (1)


above.


(v) when the use of material is temporary and its service to the


Petroleum Operations does not justify the reduction in price as


provided in (2)(ii) hereof, such material shall be priced on a basis


that will result in a net charge to the accounts under the EPCC ft


consistent with the value of the services rendered. r\ / A *











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3.1 (f) Rentals, Duties and Other Assessments


All rentals, taxes, levies, charges, fees, contributions and any other assessments and charges


by the Government or entities of its political subdivisions, agencies and instrumentalities, to


the extent that they have or may acquire the power to do so, in connection with the


Petroleum Operations and paid directly or indirectly by the Concessionaires with the


exception of the Corporate Income Tax imposed on the Concessionaires.


3.1 (g) Insurance and Losses


Insurance premia and costs incurred for insurance arranged in accordance with the EPCC


provided that if such insurance is wholly or partly placed with an Affiliated Company of the


Concessionaires, such premia and costs shall be recoverable only to the extent generally


charged by insurance companies other than an Affiliated Company of the Concessionaires.


Costs and losses incurred as a consequence of events which are, and in so far as, not made


good by insurance obtained under the EPCC are recoverable under the EPCC.


3.1 (h) Legal Expenses


All costs and expenses of litigation and legal or related services necessary or expedient for


the procuring, perfecting, retention and protection of the EPCC Area, and in defending or


prosecuting lawsuits involving the EPCC Area or any third party claim arising out of activities


under the EPCC, or sums paid in respect of legal services necessary or expedient for the


protection of joint interest of the Government and the Concessionaires are recoverable.


Where legal services are rendered in such matters by salaried or regularly retained lawyers of


the Concessionaires or an Affiliated Company of the Concessionaires, such compensation will


be included instead under Subsection 3.1(b) or 3.1(d) above, as applicable.


3.1 (i) Training Costs


All costs and expenses incurred by the Concessionaires in training of its employees located in


Mozambique and engaged in the Petroleum Operations pertaining to activities in the EPCC


Area and such other training as required under the EPCC or applicable law.


3.1 (j) General and Administrative Expenses


The costs described in Subsection 2.5(a) and the charge described in Subsection 2.5(b).


3.1 (k) The costs of any guarantee required by the Government under the EPCC.


3.1 (I) Payments into the Decommissioning Fund and cost incurred for decommissioning


according to applicable law and the EPCC.


3.2 Costs not recoverable under the EPCC


3.2 (a) Petroleum marketing or transportation costs of Petroleum beyond the Delivery Point.


3.2 (b) Costs of arbitration and the independent expert under Article 26 of/the EPCC. I z





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3.2 (c) Petroleum Production Tax and Corporate Income Tax.


3.2 (d) Fines and penalties imposed by any public authority in the Republic of Mozambique














or elsewhere.


3.2 (e) Interests and other financial costs.


3.3 Recoverability and Deductibility


3.3 The determination of whether the costs and expenses set forth herein are recoverable or


non-recoverable shall apply only to this EPCC, and shall not be interpreted to preclude the


Concessionaires from deducting said amounts in computing its net income from the


Petroleum Operations for Corporate Income Tax purposes under applicable law.


3.4 Credit under the EPCC


3.4 The net proceeds of the following transactions will, subject to applicable law, be credited to


the accounts under the EPCC:





3.4 (a) The net proceeds of any insurance or claim in connection with the Petroleum


Operations or any assets charged to the accounts under the EPCC when such operations or





assets were insured and the premia charged to the accounts under the EPCC.


3.4 (b) Revenue received from outsiders for the use of property or assets charged to the


accounts under the EPCC.








3.4 (c) Any adjustment received by the Concessionaires from the suppliers/manufacturers


or their agents in connection with defective material the cost of which was previously


charged by the Concessionaires to the accounts under the EPCC.





3.4 (d) Rentals, refunds or other credits received by the Concessionaires which apply to any


charge which has been made to the accounts under the EPCC.





3.4 (e) The amounts received for inventory materials under the EPCC and subsequently


exported from the Republic of Mozambique without being used in the Petroleum Operations.





3.4 (f) Legal expenses charged to the accounts under Subsection 3.1(h) and subsequently


recovered by the Concessionaires.





3.5 Duplication of Charges and Credits





3.5 Notwithstanding any provision to the contrary in this Accounting and Financial Procedure,


there shall be no duplication of charges or credits in the accounts under the EPCC.





3.6 Priority of Recoverable Costs





Costs recoverable pursuant to applicable Mozambican Petroleum law and thp'EPCC shall be


recovered in the following order of priority:








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(a) Operating Costs pursuant to Section 2.3


(b) Exploration Costs pursuant to Section 2.1;





(c) Development and Production Capital Expenditures pursuant to Section 2.2;


(d) Payments into the Decommissioning Fund pursuant to Section 2.6;


(e) Any other costs recoverable pursuant to Subsection 2.4 and 2.5








Section 3-A Deductions


3-A.l For purposes of Article 10.5 of the EPCC (Valuation of Petroleum), Deductions are the


following items to the extent incurred by Concessionaires:


a) for Petroleum Production Tax, only costs of Transportation, (including loading and


unloading), and insurance for shipping LNG cargos to LNG buyers


b) for Disposable Petroleum:


i) shipping costs (such as payments under charter party agreements for LNG


vessels, including any associated idle shipping charges), if any;


ii) any costs, expenses, losses or liabilities incurred in connection with, or arising


from, performance under relevant LNG sales and purchase agreements with


third party LNG buyers; and


iii) any other deductions as agreed between the Government and the


Concessionaires.


3-A.2 To the extent any of the above amounts are incurred as a result of Gross Negligence or Wilful


Misconduct of Concessionaires, Operator or an Affiliated Company, such amounts are not


permitted as Deductions.


3-A.3 Where a Deduction is an amount payable to an Affiliated Company, in accordance with


Subsection 3.1(d)(ii) shall apply, mutatis mutandis, in determining such Deduction.


3-A.4 Costs incurred by Concessionaires which are within the scope of the overhead charge in


subsection 2.5(b) shall not be charged as Deductions.








Section 4 Records and Valuation of Assets





4 The Concessionaires shall maintain detailed records of property in use for the Petroleum


Operations in accordance with applicable law and normal practice in Exploration and Production


activities of the international petroleum industry. At reasonable intervals but at least once a year


with respect to movable assets with an individual value equal to or greater than US$ 10,000 (teth





Page 14 of 21


 Z5-C EPCC AnnexC








thousand US dollars) per unit and once every five (5) years with respect to immovable assets,


inventories of the property under the EPCC shall be taken by the Concessionaires. The


Concessionaires shall give the INP at least thirty (30) days written notice of its intention to take


such inventory and the INP shall have the right to be represented when such inventory is taken.


The Concessionaires will clearly state the principles upon which valuation of the inventory has


been based. When an assignment of rights under the EPCC takes place a special inventory may


be taken by the Concessionaires at the request of the assignee provided that the costs of such


inventory are borne by the assignee.





Section 5 Production Statement





5.1 Subsequent to the commencement of Commercial Production from the EPCC Area, the


Concessionaires shall submit a monthly Production statement (hereinafter referred to as the


"Production Statement') to the INP showing the following information for each Development


and Production Area:


5.1 (a) The quantity of Crude Oil produced.


5.1 (b) The quantity of Natural Gas produced.


5.1 (c) The quantities of Petroleum used for the purposes of Petroleum Operations, without


prejudice to the specificities of item 5.1 (g) (iii) below.


5.1 (d) The quantities of Natural Gas flared.


5.1 (e) The size of Petroleum stocks held at the beginning of the month.


5.1 (f) The size of Petroleum stocks held at the end of the month;


5.1 (g) Where Natural Gas sold as LNG:


(i) quantities of Natural Gas delivered at the inlet flange, expressed in MMscf /


MMsm3;


(ii) quantities loaded into LNG vessels at the Delivery Point, net of vapour return,


expressed in m3;


(iii) quantities used or lost in the LNG plant, expressed in m3;


(iv) the size of stocks of LNG held at the beginning of the month, expressed in


m3;


(v) the size of stocks of LNG held at the end of the month, expressed in m3;


5.1 (h) Any other relevant information as may be required under the applicable law.





5.2 The Production Statement of each calendar month shall be submitted to the Government no


later than twenty (20) working days after the end of such calendar month.^








Page 15 of 21


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Section 6 Value of Production and Petroleum Production Tax Statement





6.1 The Concessionaires shall prepare and submit to the Ministries with authority over the


Petroleum sector and the finance sector a statement covering the determination of the fair


market value of Crude Oil and Natural Gas (including LNG), respectively, produced during


each calendar month and the value of the Petroleum Production Tax payable to the


Government. This statement shall contain the following information:


6.1 (a) The quantities and prices realised therefor by the Concessionaires a result of sales of


Crude Oil and Natural Gas respectively to third parties made during the calendar month in


question.


6.1 (b) The quantities and the prices realised therefor by the Concessionaires as a result of


sales of Crude Oil and Natural Gas respectively made during the calendar month in question,


other than to third parties.


6.1 (c) The quantity of stocks of Crude Oil and if applicable Natural Gas at the end of the


preceding calendar month.


6.1 (d) The quantity of stocks of Crude Oil and if applicable Natural Gas at the end of the


calendar month in question.


6.1 (e) The total Petroleum Production Tax liability for Crude Oil and Natural Gas


respectively for the calendar month.


6.1 (f) Published information available to the Concessionaires, when requested by the


Government, concerning the prices of Crude Oil or Natural Gas produced by the main


petroleum producing and exporting countries including contract prices, discounts and


premia, and prices obtained on the spot markets.


6.2 The statement of Value of Petroleum Produced and Petroleum Production Tax Statement of


each calendar month shall be submitted to the Ministries with authority over the Petroleum


sector and the finance sector not later than twenty (20) calendar days after the end of such


calendar month.


6.3 In the case of Natural Gas or LNG sales and delivery on terms other than free on board (FOB),


the Value of Production and Petroleum Production Tax Statement:





(i) shall be based on sales for which the delivery fell in the calendar month in


question;





(H) shall show the quantities of LNG loaded and unloaded, and quantities of LNG


boil-off, used as fuel or lost in transporting LNG and heel quantities, and the


(iii) inventory of LNG afloat; and


shall refer to the statement of Deductions.








Page 16 of 21


 Z5-C EPCC AnnexC











Section 7 Cost Recovery Statement


7.1 The Concessionaires shall prepare and submit to the Ministries with authority over the


sector and the finance sector with respect to each calendar quarter a cost recovery


statement (hereinafter referred to as the "Cost Recovery Statement') containing the


following information:


7.1 (a) Recoverable costs carried forward from the previous quarter, if any.


7.1 (b) Recoverable costs for the quarter in question.


7.1 (c) Total recoverable costs for the quarter in question (Subsection 7.1(a) plus Subsection


7.1(b)).


7.1 (d) Quantity and value of Cost Petroleum taken proportionally in Crude Oil and Natural


Gas (including LNG) by each Concessionaire for the quarter in question.


7.1 (e) EPCC costs recovered for the quarter in question.


7.1 (f) Total cumulative amount of EPCC costs recovered up to the end of the quarter in


question.


7.1 (g) Amount of recoverable EPCC costs to be carried forward into the next quarter.


7.2 The Cost Recovery Statement of each quarter shall be submitted to the Ministries with


authority over the Petroleum sector and the finance sector no later than sixty (60) calendar


days after the end of such quarter.








Section 7A Crude Oil, Natural Gas or LNG Price Statement





7A.1 Where Crude Oil or Natural Gas, including as LNG is delivered, the Concessionaire shall


prepare with respect to each calendar month and submit to the Ministries with authority


over the Petroleum and the finance sector a Price Statement which will include the


following:





(a) the basis on which the price is calculated for each sale under the relevant sales and


purchase agreement;


(b)


Deductions incurred and attribution of Deductions to the calendar month in


question;


(c)


quantities loaded at the Delivery Point; and


(d) a calculation of the value based on (a) to (c) above.








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In the event Concessionaire discovers an error or omission in a previous period, if any, such


adjustment will be made to the following Price Statement.





7A.2 The Price Statement of each calendar month shall be submitted to the Ministries with


authority over the Finance sector and the Petroleum sector within ten {10) business days


after the end of such calendar month.











Section 8 Statement of Expenditure and Receipts


8.1 The Concessionaires shall prepare with respect to each calendar quarter a statement of








expenditures and receipts under the EPCC (hereinafter referred to as the "Statement of


Expenditure and Receipts"). The statement will distinguish between Exploration Costs,


Development and Production Capital Expenditures and Operating Costs and


Decommissioning costs including amounts drawn from the Decommissioning Fund and will


identify major items of expenditures within these categories. The statement will show the


following:


8.1 (a) Actual expenditures and receipts for the quarter in question.


8.1 (b) Cumulative expenditure and receipts for the budget year in question.


8.1 (c) Latest forecast cumulative expenditures at the year end.


8.1 (d) Variations between budget forecast and latest forecast and explanations thereof.


8.2 The Statement of Expenditure and Receipts of each calendar quarter shall be submitted to


the Government no later than thirty (30) calendar days after the end of such quarter.








Section 9 End-of-Year Statement


9 The Concessionaires will prepare an End-of-Year Statement. The statement will contain


information as provided in the Production Statement, Value of Production and Petroleum


Production Tax Statement, Cost Recovery Statement and Statement of Expenditures and Receipts


but will be based on actual quantities of Petroleum produced and expenses incurred. Based


upon this statement, any adjustments that are necessary will be made to the payments made by


the Concessionaires under the EPCC. The End-of-Year Statement of each calendar year shall be


submitted to the Government within ninety (90) calendar days of the end of such calendar year.








Section 10 Budget Statement





10.1 The Concessionaires shall prepare an annual budget statement (hereinafter referred to as t


"Budget Statement"). This will distinguish between Exploration Costs, Development and.


Production Capital Expenditures and Operating Costs and will show the following; Jry








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10.1 (a) Forecast expenditures and receipts for the budget year under the EPCC.


10.1 (b) Forecast cumulative expenditures and receipts to the end of the said budget year.


10.1 (c) A schedule showing the most important individual items included in the forecast


Development and Production Capital Expenditures for the said budget year.


10.2 The Budget Statement shall be submitted to the Government with respect to each budget


year no less than ninety (90) calendar days before the start of the year except in the case of


the first year of the EPCC when the Budget Statement shall be submitted within sixty (60)


calendar days of the Effective Date.


10.3 It is recognised by the Concessionaires and the Government that the details of the Budget


Statement may require changes in the light of existing circumstances and nothing herein


contained shall limit the flexibility to make such changes. Consistent with the foregoing, the


revision of said Statement is provided for annually.


10.4 Where Natural Gas is sold as LNG the Budget Statement shall include forecast Deductions.








Section 11 Long Range Plan and Forecast


The Concessionaires shall prepare and submit to the Government either one or both of the following








two (2) long range plans, whichever is appropriate:


11.1 Exploration Plan


11.1 During the Exploration Period, the Concessionaires shall prepare an Exploration Plan for the


current year and next calendar year commencing as of the first day of January following the


Effective Date (hereinafter referred to as the "Exploration Plan") which shall contain the


following information:


(a) Estimated Exploration Costs showing outlays for each of the calendar years covered


by the Exploration Plan.


(b) Details of seismic operations planned for each such year.


(c) Details of all drilling activities planned for each such year.


(d) Details of infrastructure utilisation and requirements.


11.1 The first such Exploration Plan shall also include the above information for the period starting


on the Effective Date and ending on the last day of December of that calendar year.


11.1 The Exploration Plan shall be revised at the beginning of each calendar year following of the-i /


Effective Date. The Concessionaires shall prepare and submit to the Government the first/ [to


Exploration Plan within sixty (60) calendar days of the Effective Date and thereafter shall ' y





Page 19 of 21


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prepare and submit to the Government no less than ninety (90) calendar days before the end


of each calendar year following the Effective Date a revised Exploration Plan.








11.2 Development Forecast





11.2 The Concessionaires shall prepare a development forecast for each period of five (5) calendar


years (hereinafter referred to as the "Development Forecast') commencing as of the first day


of January following the date when the first Development Plan is approved and the





Concessionaires commences the implementation of such plan.





The Development Forecast shall contain the following information:





11.2 (a) Forecast of Development and Production Capital Expenditures for each of the five (5)


calendar years.





11.2 (b) Forecast of Operating Costs for each such calendar year.





11.2 (c) Forecast of Petroleum Production for each such calendar year.








11.2 (d) Forecast of number and types of personnel employed in the Petroleum Operations in


the Republic of Mozambique.





11.2 (e) Description of proposed Petroleum marketing arrangements and marketing strategy.





11.2 (f) Description of main technologies employed.





11.2 (g) Description of working relationship of the Concessionaires to the Government.





The Development Forecast shall be revised at the beginning of each calendar year


commencing as of the second year of the first Development Forecast. The Concessionaires








shall prepare and submit to the Government the first Development Forecast within one


hundred and twenty (120) calendar days of the date when the first Development Plan is


approved and the Concessionaires commences the implementation of such plan and


thereafter shall prepare and submit a revised Development Forecast to the Government no


later than forty-five (45) calendar days before each calendar year commencing as of the


second year of the first Development Forecast.





11.3 Changes of Plan and Forecast





11.3 It is recognised by the Concessionaires and the Government that the details of the


Exploration Plan and Development Forecast may require changes in the light of existing


circumstances and nothing herein contained shall limit the flexibility to make such changes.





Consistent with the foregoing the revision of said Plan and Forecast is provided for annually.


























Page 20 of 21


 Z5-C EPCC AnnexC








Section 12 Revision of Accounting and Financial Procedures


The provisions of this Accounting and Financial Procedure may be amended only in accordance with


the EPCC. Any such amendments shall be made in writing and shall state the date upon which the


amendments shall become effective.


Section 13 Conflict with the EPCC


In the event of any conflict between the provisions of this Accounting and Financial Procedure and the


EPCC, the provisions of the EPCC shall prevail.

























































































Page 21 of 21


 Z5-C EPCC AnnexD











ANNEX“D”


Bank Guarantee





[Date]


Ministry of Mineral Resources and Energy


The Minister of Mineral Resources and Energy


Av. Fernao de Magalhaes, 34, 1st Floor


Maputo, Mozambique


1. We understand that on 2018, the Government of the Republic of


Mozambique, Empress National de Hidrocarbonetos, (ENH) E.P and [....] (the latter


also the “Guaranteed Party”) entered into an Exploration and Production Concession


Contract for Zambeze Area Z5-C in Mozambique (the “EPCC"). For purposes of this


Bank Guarantee, ENH and the Guaranteed Party are collectively referred to as the


“Concessionaires”. Capitalised words not defined in this Bank Guarantee shall have


the meaning ascribed to them in the EPCC.


2. We, the undersigned [BANK LEGAL NAME] (the “Bank”), hereby, save for the


conditions stipulated below in clause 5, unconditionally and irrevocably guarantee in


favour of the Government of the Republic of Mozambique (the “Government”) the due


and punctual payment of all sums owed to the Government and unpaid by the


Guaranteed Party in respect of the Concessionaires’ failure to fulfil the Exploration


work commitment in relation to the sub-period of the Exploration Period,


up to a maximum of United States Dollars (US$ ,000,000).


3. The guarantee amount referred to in clause 2 above shall be reduced from time to


time upon delivery to the Bank of a certificate from the Guaranteed Party


countersigned on behalf of the Government setting forth the amount of such reduction


based on completion of the corresponding items of the Exploration work commitment


determined according to Article 4 of the EPCC. X 4/





Page 1 of 2


 Z5-C EPCC | AnnexD


4. This Bank Guarantee shall become effective on the Effective Date of the EPCC and





shall terminate on the expiry of the sub-period of the Exploration Period,


or such earlier time as the total of the reductions during such sub-period of the


Exploration Period equal the guarantee amount referred to in clause 2 above.


5. Demands may be made under this Bank Guarantee by the Government by delivering


to the Bank a Government’s written statement setting forth the amount claimed and


certifying that the amount claimed represents the amount due and owed by the


Guaranteed Party in respect of the Concessionaire’s failure under the EPCC to fulfil


the Exploration work commitment in relation to the sub-period of the


Exploration Period, and that:





(a) the Concessionaire has failed to complete the Exploration work commitment in


relation to the relevant Exploration Period;





(b) the Guaranteed Party has been notified, in writing, by the Minister of Mineral


Resources and Energy, by registered letter or courier (a copy of which to be


attached to such written statement), of Concessionaire’s non-compliance and


the details thereof, and has been advised that a drawing is being made against


this unconditional and irrevocable Bank Guarantee; and





(c) the Concessionaire has been provided a minimum of fourteen (14) days to


correct the conditions of non-compliance and has failed to do so.





6. Upon its cancellation or expiry, this Bank Guarantee shall be returned to the


Guaranteed Party.





The duly authorised representative of the Bank has executed this Bank Guarantee on this


day of 20[ ].


Very truly yours,








for and on behalf of


[BANK LEGAL NAME]


Page 2 of 2


 Z5-C EPCC AnnexE














ANNEX "E"





Parent Company Guarantee





THIS GUARANTEE is made the day of 20


BY


(1) [insert Guarantor name] a [corporation] established under the laws of [insert country] (the


"Guarantor"), in favour of


(2) THE GOVERNMENT OF THE REPUBLIC OF MOZAMBIQUE, herein represented by the Minister


for Mineral Resources and Energy (the "Government" and the "Beneficiary''); (each a "Party"


and collectively the "Parties")








WHEREAS





A On , the Government, EXXONMOBIL MOZAMBIQUE EXPLORATION AND


PRODUCTION, LIMITADA, RN ZAMBEZI SOUTH PTE. LTD and EMPRESA NACIONAL DE


HIDROCARBONETOS, E.P. (the "Concessionaires") entered into an Exploration and


Production Concession Contract for Zambeze Area Z5-C, offshore of Mozambique (the


"EPCC").


B The Guarantor is a [parent company] [wholly owned subsidiary of the ultimate parent


company of [insert Company name] (the "Company")


C The Government requires that the due and proper performance of the Company Obligations


shall be guaranteed by the Guarantor under the terms of this Guarantee and the Guarantor


is willing to grant this Guarantee.


NOW IT IS HEREBY AGREED AS FOLLOWS:


1 DEFINITIONS AND INTERPRETATION


1.1 The definitions stipulated in the Petroleum Law, the Petroleum Operations Regulations


and the EPCC main document apply to this document. Words referred to in the singular


shall include the plural and vice versa. The following words and terms including derivatives


thereof shall have the meaning in this Guarantee ascribed to them below:


1.2 "Company Obligations" means all the obligations, including right of recourse against the


Company, that the Company at any time has committed to fulfil and all liability for loss or


damages suffered or incurred by the Government, including claims by third parties against


the Government, under the EPCC and the applicable law and related to or arising out of


the Company's activities or omissions during any period of the EPCC including final


implementation of Decommissioning and disposal of Facilities and related responsibilities


thereto.

Z5-CEPCC i AnnexE





2 GUARANTEE


2.1 The Guarantor irrevocably and unconditionally guarantees, that if the Company fails in whole











or in part to perform any Company Obligations or if the Company is in breach of any Company


Obligations, the Guarantor shall, following a demand made in accordance with clause 3, take


such steps as shall be necessary to:


(a) perform such Company Obligation or remedy such breach of a Company Obligation; or


(b) where such failure or breach is not capable of remedy, restore performance of the


breached Company Obligation.


2.2 This Guarantee shall become effective thirty (30) days after the Effective Date of the


EPCC and shall remain in full force and effect up until and including the date when all


Company Obligations and liabilities have been fulfilled and all relevant Petroleum


Operations subject to the applicable law and the EPCC have been completed, including


the full completion of the Decommissioning Plan.


2.3 Upon termination of this Guarantee the Guarantor shall have no further liability


whatsoever to the Beneficiary under or in connection with this Guarantee save in


respect of any breach notified by the Beneficiary in accordance with clause 3 of this


Guarantee prior to its termination.


Articles 2.4 thru 2.7 are not included in this form as part of this Guarantee if the Guarantor


is the ultimate parent company ora parent company between the Concessionaire and the


ultimate parent company but shall be used where the Guarantor is a wholly-owned


subsidiary of the ultimate parent company of the Concessionaire which is not in the chain


of ownership between the Concessionaire and the ultimate parent company:








2.4 From the date of this Guarantee and for as long as it remains in force the Guarantor shall


remain a wholly owned subsidiary of the ultimate parent company of [the Company].








Notwithstanding the above, where a change in ownership is planned and the effect of such


change is that the Guarantor ceases to be a wholly-owned subsidiary of the ultimate parent


company of [the Company], the Guarantor shall notify the Government immediately, and no


less than thirty (30) days prior to such change taking effect, procure a new guarantee in the


same form and on the same terms and conditions as this Guarantee from the ultimate


parent company of [the Company]. Alternatively, such new guarantee may be provided by


another subsidiary of the ultimate parent company of [the Company], acceptable to the


Government. Such new guarantee shall in either case be subject to the prior approval of the


Government.





2.5 The Guarantor shall maintain at all times its financial capacity to cover the obligations under


this Guarantee and other than make payment pursuant to this Guarantee shall not


intentionally enter into any disposal or other transaction or do anything that places at risk or


reduces its financial capacity. Notwithstanding the previous sentence, any decision or apti/n\


other than make payment pursuant to this Guarantee that might result in a rtftterial I z ' f








2


 %5-CEPCC I Annex E








reduction of financial capacity of the Guarantor shall be subject to the prior approval of the


Government. Alternatively, the Guarantor shall either:


(a) provide an additional guarantee in substantially the same form and on the same terms


andconditions as this Guarantee in order for the combined financial capacity of the


original Guarantee and the additional guarantee to be equivalent to the original


financial capacity of the original Guarantee; or


(b) provide a replacement guarantee in substantially the same form and on the same


terms and conditions as this Guarantee.


Such additional guarantee or replacement guarantee shall also be subject to the prior


approval of the Government.


2.6. Within four (4) months of the end of each Calendar Year, the Guarantor shall provide to


the Government its annual accounts prepared in accordance with U.S. Generally


Accepted Accounting Principles (US GAAP) or International Financial Reporting Standards


(IFRS), and a statement from an international firm of accountants acceptable to the


Government certifying in respect of the relevant financial year:


(a) that no event of the kind specified in clauses 2.4 or 2.5 occurred during that year; and


(b) that the financial capacity of the Guarantor at the end of that year has not materially


changed when compared to the its financial capacity at the end of the previous year.


2.7 Breach of any of the Guarantor's obligations under clauses 2.4, 2.5 and 2.6 constitute a


material breach of the EPCC.


3 DEMANDS


3.1 The Beneficiary shall notify the Guarantor in writing if the Company fails, in whole or in part,


to perform Company Obligations or if a breach of a Company Obligation has occurred and


such notice shall contain a description of such failure to perform or such breach.


3.2 Subject to clauses 4 and 7 of this Guarantee, if the Company fails to perform or remedy a


breach specified in a notice given under clause 3.1 within fourteen (14) days of receipt of


such notice by the Guarantor, the Beneficiary may then make a demand in writing to the


Guarantor that shall (i) set out the alleged failure to perform or breach of the Company


Obligation(s); and (ii) require the Guarantor to take such steps as are provided in clause 2.1


of this Guarantee.











4 RIGHTS AND OBLIGATIONS





4.1. The Beneficiary shall be obliged before exercising any of the rights, powers or remedies


conferred upon it in respect of the Guarantor by this Guarantee or by law:





4.1.1 to notify the Company of the breach of a Company Obligation;





3


 Z5-C EPCC AnnexE





4.1.2 if the Company disputes the failure to perform or the breach or claim notified by the


Government, to have obtained an arbitral award, a determination by an independent





third party expert or a final and binding court decision confirming such failure to


perform or breach by the Company; and


4.1.3 to make or file any claim or proof in winding-up or dissolution of the Company (to


the extent applicable).





5 LIMITATIONS


5.1 The obligations of the Guarantor under this Guarantee shall not be discharged or impaired


by any act or omission or any other event or circumstances whatsoever (whether or not


known to the Company, the Guarantor or the Beneficiary) which would or might (but for this


clause 5) operate to impair or discharge the Guarantor's liability under this Guarantee,


including, but without limitation:


5.1.1 any of the Company Obligations being or becoming illegal or invalid, in any respect;


5.1.2 any granting of time (or other indulgence) to the Company or any other person; or


5.1.3 any amendment to or variation, waiver or release of, any of the terms of the EPCC


to the extent that such amendment, variation, waiver or release is made with the


Guarantor's prior written consent.





6 ASSIGNMENT AND SUCCESSORS


6.1 Any benefit of this Guarantee shall not be assignable by the Beneficiary to any person.





6.2 The Guarantor may not assign its rights and obligations under this Guarantee without the


prior written consent of the Government.





7 LIMITATION AND MAXIMUM LIABILITY OF GUARANTOR





7.1 Notwithstanding any other provisions of this Guarantee, the Guarantor shall have all of the


rights, limitations, and defences including, without limitation, all rights of set off, available to


the Company under the EPCC in relation to any demand made under clause 3.2 of this


Guarantee. In no circumstances shall the Guarantor be liable to pay any amount under this


Guarantee which is greater than the Company would have been liable to pay if the Company


had performed the Company Obligations.





7.2 Notwithstanding any other provision of this Guarantee, the Beneficiary prior to making any


demand or any attempt to collect under this Guarantee, shall first pursue collection from the


Company and shall exhaust all resources against and liquidation of the Company assets,


including but not limited to any applicable insurance coverage available satisfy any


Company Obligations.











4


 Z5-C EPCC Annex E





8 GOVERNING LAW AND DISPUTE RESOLUTION


8.1 This Guarantee shall be governed by and construed in accordance with the laws of the


Republic of Mozambique.


8.2 Any dispute between the Parties to this Guarantee shall be subject to this Article 8.


8.3 A dispute shall be resolved, if possible, by negotiation between the Parties. A notice of the


existence of a dispute shall be given by a Party to another in accordance with the provisions


of notices in Article 10. In the event that no agreement is reached within ninety (90) days after


the date one Party notifies the other that a dispute exists either Party shall have the right to


have such dispute determined by arbitration as provided for in this Article 8. Arbitration shall


be the exclusive method of determining a dispute under this Guarantee.


8.4 Subject to the provisions of this Article 8, the Parties shall submit any dispute arising out of


or in connection with this Guarantee which cannot be resolved by negotiation as hereinafter


provided:





8.4.1 all disputes referred to arbitration shall be finally settled under the United Nations


Commission on International Trade Law ("UNCITRAL") Arbitration Rules in force








at the date of this Guarantee;


8.4.2 the seat of the arbitration shall be Geneva in Switzerland, the administrative law


of the arbitration shall be Swiss law and the substantive law of the arbitration shall


be Mozambican law;


8.4.3 the arbitration shall be conducted in the English language. Notwithstanding


Article 9, the English version of this Guarantee initialized by the Parties as a


supporting document shall be used as the official translation in arbitral


proceedings;


8.4.4 an award by an arbitrator or arbitrators shall be final and binding on all parties;


8.4.5 the arbitral panel shall be composed of 3 (three) arbitrators to be appointed in


accordance with the UNCITRAL Rules, provided that, upon mutual agreement of


both Parties, the arbitration is to be conducted by a sole arbitrator appointed


under the UNCITRAL Rules. Unless both Parties have agreed that the dispute shall


be settled by a sole arbitrator, the claimant Party shall nominate in the request


for arbitration, and the respondent Party shall nominate within 30 (thirty) days of


the registration of the request, 1 (one) arbitrator pursuant to the UNCITRAL Rules.


Within a period of 30 (thirty) days from the date when both arbitrators have


accepted their appointments the arbitrators so appointed shall agree on a third


arbitrator, who shall act as Chairman of the arbitral tribunal. If either Party fails to


nominate an arbitrator as provided above, or if the arbitrators nominated by the


Parties fail to agree on a third arbitrator within the period specified above, then


the appointing authority, which shall be the Permanent Court of Arbitration in The


Hague, upon request of either Party shall make such appointments as necessary


in accordance with the UNCITRAL Rules. If both Parties have agreed that the!


dispute shall be settled by a sole arbitrator, the sole arbitrator shalLhe nominated’


by agreement between them subject to acceptance by the nominated arbitrate^





5


 Z5-CEPCC I AnnexE








provided that if the Parties are unable to agree on a nominee for sole arbitrator


within 30 (thirty) days from the date when the notice of arbitration was given to











the respondent Party, then the Secretary-General of the Permanent Court of


Arbitration upon request of either Party shall appoint the sole arbitrator in


accordance with the UNCITRAL Rules;


8.4.6 insofar as practicable, the Parties shall continue to implement the terms of this


EPCC notwithstanding the initiation of arbitral proceedings and any pending


disputes;


8.4.7 the provisions set out in this Article 8 shall continue after the termination of this


Guarantee;


8.4.8 no arbitrator of the arbitral tribunal shall be of the same nationality as any Party;


and


8.4.9 All arbitrators selected must be fluent in both the English and the Portuguese


language.


8.5 An award, including an interim award, in arbitral proceedings pursuant to this Article 8 shall


be binding on the Parties and judgment thereon may be entered in any court having


jurisdiction for that purpose. Each of the Parties shall hereby irrevocably waive any defenses


based upon sovereign immunity and waives any claim to immunity:


8.5.1 in respect of proceedings in aid of arbitration or to enforce any such award or


decision including, without limitation, immunity from service of process and from


the jurisdiction of any court; and


8.5.2 in respect of immunity from the execution of any such award or decision against


the property of the Republic of Mozambique held for a commercial purpose.


8.6 The Parties hereby agree not to exercise any right to institute proceedings to set aside any


interim or final arbitral award made pursuant to this Article 8, except that nothing in this


Article 8.6 shall be read or construed as imposing any limitation or constraint on either Party's


right to seek to contest enforcement of any such interim or final arbitral award rendered by


an arbitral tribunal appointed in accordance with this Article 8 on the limited grounds and in


accordance with the procedure set forth in Article V of the New York Convention on the


Recognition and Enforcement of Foreign Arbitral Awards.








9 LANGUAGE





9.1 This Guarantee is drawn up in two (2) originals in the Portuguese language, for signature by


the Government and the Guarantor. One signed Portuguese original will be retained by each


of the Parties. An English language translation is to be prepared and initialled as a supporting


document by the Parties to this Guarantee. However, in case of conflict between th,


Portuguese original text and the English translation, the Portuguese original te hall prevail.








6


 Z5-CEPCC Annex E





10 NOTICES


10.1 Any notice to be given by either Party to the other under this Guarantee shall be in writing


and shall be delivered by hand to the Guarantor or the Beneficiary, as the case may be, or


sent to such recipient by recorded delivery letter or facsimile addressed to such recipient at


such address and for the attention of such person as the Guarantor or the Beneficiary, as the


case may be, shall from time to time designate by notice, and until such notice shall be given


the addresses of the Guarantor and the Beneficiary shall be as follows:


The Guarantor








Attention:


Telephone:


Telefax:











The Government








MINISTRY OF MINERAL RESOURCES AND ENERGY


Predio Montepio, Avenida Fernao de Magalhaes, n.s 34,1.2 Andar





Caixa Postal 4724


Maputo, Mozambique





With copy to: National Petroleum Institute


Telephone: +258 21 320 935


Telefax: +258 21430 850





10.2 All notices delivered by recorded delivery or hand shall be deemed to be effective upon


receipt. Notices given by facsimile shall be deemed to have been received where there is





confirmation of uninterrupted transmission by a transmission report and where there has


been no telephonic communication by the recipient to the senders (to be confirmed in


writing) that the facsimile has not been received in legible form within twenty-four (24)


hours of sending.


IN WITNESS WHEREOF this Guarantee has been executed by the Guarantor and has been


accepted by the Government on the date specified above.








for and on behalf of [insert Guarantor]














for and on behalf of








7


Z5-C EPCC AnnexE











THE GOVERNMENT OF THE REPUBLIC


OF MOZAMBIQUE































































































































































































8


 Z5-C EPCC Annex F








"ANNEX F"


JOINT OPERATING AGREEMENT





Between


EXXONMOBIL MOZAMBIQUE EXPLORATION AND PRODUCTION, LIMITADA


and


RN ZAMBEZI SOUTH PTE. LTD.


and


EMPRESA NACIONAL DE HIDROCARBONETOS, E.P.

































































Page 1 of 87


 Z5-C EPCC AnnexF





Table of Contents








Article 1. DEFINITIONS........................................................................................................................6


Article 2. EFFECTIVE DATE AND TERM.............................................................................................10


Articles. SCOPE................................................................................................................................11


Article 4. Ownership, Obligations and Liabilities................................................................... 12


Articles. OPERATOR.........................................................................................................................14


5.1 Designation of Operator........................................................................................................14


5.2 Rights and Duties of Operator.....................................................................................................14


5.3 Health, Safety and Environment ("HSE")...............................................................................17


5.4 Operator Personnel......................................................................................................................19


5.5 Information Supplied by Operator...............................................................................................19


5.6 Settlement of Claims and Lawsuits........................................................................................20


5.7 Limitation on Liability of Operator........................................................................................21


5.8 Insurance Obtained by Operator...........................................................................................21


5.9 Commingling of Funds...........................................................................................................24


5.10 Resignation of Operator........................................................................................................24


5.11 Removal of Operator.............................................................................................................24


5.12 Appointment of Successor.....................................................................................................25


5.13 Assistance of Concessionaires...............................................................................................26


Article 6. OPERATING COMMITTEE.................................................................................................26


6.1 Establishment of Operating Committee................................................................................26


6.2 Powers and Duties of Operating Committee.........................................................................28


6.3 Authority to Vote...................................................................................................................28


6.4 Subcommittees......................................................................................................................28


6.5 Notice of Meeting..................................................................................................................29


6.6 Contents of Meeting Notice..................................................................................................29


6.7 Location of Meetings.............................................................................................................29


6.8 Operator's Duties for Meetings.............................................................................................29


6.9 Voting Procedure...................................................................................................................30


6.10 Record of Votes.....................................................................................................................31


6.11 Minutes..................................................................................................................................31


6.12 Voting by Notice....................................................................................................................32


6.13 Effect of Vote.......................................................................................................... 33





Page 2 of 87


 Z5-C EPCC Annex F





6.14 Unitization Principles.............................................................................................................34


Article 7. WORK PROGRAMMES AND BUDGETS.............................................................................35


7.1 Exploration and Appraisal......................................................................................................35


7.2 Development........................................................................................... 36


7.3 Production....................................................................................................................................37


7.4 Itemization of Expenditures.........................................................................................................37


7.5 Multi-Year Work Programme and Budget................................................... 38


7.6 Contract Awards..........................................................................................................................38


7.7 Authorization for Expenditure ("AFE") Procedure.................................................................40


7.8 Over-expenditures of Work Programmes and Budgets........................................................42


Article 8. EXCLUSIVE PETROLEUM OPERATIONS.............................................................................42


8.1 Limitation on Applicability.................................................... 42


8.2 Procedure to Propose Exclusive Petroleum Operations........................................................43


8.3 Responsibility for Exclusive Petroleum Operations...............................................................45


8.4 Consequences of Exclusive Petroleum Operations................................... 45


8.5 Premium to Participate in Exclusive Petroleum Operations.................................................48


8.6 Order of Preference of Operations........................................................................................49


8.7 Stand-By Costs.......................................................................................................................50


8.8 Special Considerations Regarding Deepening and Sidetracking............................................50


8.9 Use of Property......................................................................................................................51


8.10 Lost Production during Tie-In of Exclusive Petroleum Operation Facilities...............................52


8.11 Production Bonuses.............................................................................................. 52


8.12 Conduct of Exclusive Petroleum Operations.............................................................................53


Article 9. DEFAULT...........................................................................................................................54


9.1 Defa u It a nd Notice.................................................................................................................54


9.2 Operating Committee Meetings and Data..................... 54


9.3 Allocation of Defaulted Accounts..........................................................................................55


9.4 Remedies...............................................................................................................................56


9.5 Survival.........................................................................................................................................59


9.6 No Right of Set Off.......................................................................................................................59


Article 10. DISPOSITION OF PRODUCTION....................................................................................60


10.1 Right and Obligation to Take in Kind................................................................................ 60


Z5-CEPCC Annex F


11.1 Plugging and abandoning of Wells Drilled as Joint Petroleum Operations...........................61


11.2 Plugging and abandoning of Wells drilled as part of Exclusive Petroleum Operations.............62


11.3 Cessation of Petroleum Operations and Decommissioning of Facilities...................................62


11.4 Decommissioning Fund..........................................................................................................62


11.5 Implementation of a Decommissioning Plan.........................................................................63


Article 12. SURRENDER, EXTENSIONS AND RENEWALS................................................................63


12.1 Surrender...............................................................................................................................63


12.2 Extension of the Term............................................................................................................64


Article 13. TRANSFER OF INTEREST OR RIGHTS AND CHANGES IN CONTROL...............................64


13.1 Obligations.............................................................................................................................64


13.2 Rights.....................................................................................................................................67


Article 14. WITHDRAWAL FROM THE JOINT OPERATING AGREEMENT........................................67


14.1 Right of Withdrawal...............................................................................................................67


14.2 Partial or Complete Withdrawal............................................................................................67


14.3 Rights of a Withdrawing Concessionaire...............................................................................68


14.4 Obligations and Liabilities of a Withdrawing Concessionaire................................................68


14.5 Emergency.................................................................................................................................69


14.6 Assignment.................................................................................................................................69


14.7 Approvals...............................................................................................................................69


14.8 Security..................................................................................................................................70


14.9 Withdrawal by All Concessionaires........................................................................................70


Article 15. RELATIONSHIP OF CONCESSIONAIRES AND TAX...........................................................70


15.1 Relationship of Concessionaires................................................................................................70


15.2 Tax..............................................................................................................................................70


15.3 United States Tax Election.........................................................................................................71


Article 16. VENTURE INFORMATION - CONFIDENTIALITY - INTELLECTUAL PROPERTY.................71


16.1 Venture Information..............................................................................................................71


16.2 Confidentiality........................................................................................................................72


16.3 Intellectual Property..............................................................................................................74


16.4 Continuing Obligations...............................................................................................................75


16.5 Trades.........................................................................................................................................75


16.6 Default....................................................................................................................................................75


Article 17. FORCE MAJEURE..........................................................................................................76 /


Article 18. NOTICES.....................................................................................................................’//Vv


Page 4 of 87 x---'


 Z5-CEPCC AnnexF





Article 19. APPLICABLE LAW - DISPUTE RESOLUTION...................................................................78


19.1 Applicable Law.......................................................................................................................78





19.2 Dispute Resolution.................................................................................................................78


Article 20. ALLOCATION OF COST & PROFIT PETROLEUM............................................................81


20.1 Allocation of Total Production...............................................................................................81


20.2 Allocation of Petroleum to Concessionaires..............................................................................81


20.3 Use of Estimates........................................................................................................................82


20.4 Principles....................................................................................................................................82


Article 21. GENERAL PROVISIONS.................................................................................................82


21.1 Conduct of the Concessionaires............................................................................................82


21.2 Conflicts of Interest............................................................................................................ 84


21.3 Public Announcements..........................................................................................................84


21.4 Successors and Assigns..............................................................................................................85


21.5 Waiver........................................................................................................................................85


21.6 Joint Preparation........................................................................................................................85


21.7 Severance of Invalid Provisions..................................................................................................85


21.8 Modifications.............................................................................................................................85


21.9 Interpretation............................................................................................................................86


21.10 Counterpart Execution.............................................................................................................86


21.11 Entirety.....................................................................................................................................86


21.12 No Third Party Beneficiary.......................................................................................................86








Exhibit A: Accounting Procedures





Exhibit B: Form of Counter Guarantee Agreement









































Page 5 of 87





Vs


 Z5-CEPCC Annex F





JOINT OPERATING AGREEMENT


THIS AGREEMENT, an integral part of the Exploration and Production Concession Contract (EPCC),


which includes an Exhibit A (Accounting Procedures) and an Exhibit B (form of Counter Guarantee


Agreement) hereto, is made as of the date whereupon the Exploration and Production Concession


Contract ("EPCC") becomes effective (hereinafter referred to as the "Effective Date") between


EXXONMOBIL MOZAMBIQUE EXPLORATION AND PRODUCTION, LIMITADA, a company established


in accordance with the laws of the Republic of Mozambique (hereinafter referred to as


"ExxonMobil");


RN ZAMBEZI SOUTH PTE. LTD., a company established in accordance with the laws of the Republic of


Singapore and acting through its branch registered in accordance with the laws of the Republic of


Mozambique (hereinafter referred to as "Rosneft"); and


EMPRESA NACIONAL DE HIDROCARBONETOS, E.P., a public company established in accordance


with the laws of the Republic of Mozambique, hereinafter referred to as "ENH" and here represented


by the Chairman of its Board of Directors.


The companies named above, and their respective successors and assignees (if any), may sometimes


individually be referred to as "Concessionaire" and collectively as the "Concessionaires".


WITNESSETH:


WHEREAS, the Concessionaires have been awarded an Exploration and Production Concession


Contract with the Government of the Republic of Mozambique (hereinafter referred to as the


"Government") covering Zambeze Area Z5-C offshore the Republic of Mozambique (the "EPCC");


and


WHEREAS, the Concessionaires sign and effectuate this Agreement which is acceptable to the


Government under the said EPCC prior to the Effective Date;


WHEREAS, The Concessionaires define their respective rights and obligations under this Agreement


with respect to their operations under the EPCC;


NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements and


obligations set out below and to be performed, the Concessionaires agree as follows:











Article 1. DEFINITIONS





The definitions stipulated in the Petroleum Law No 21/2014 of 18 August, the Petroleum Operations


Regulations Decree No 34/2015 of 31 December, and the EPCC main document apply to this


Agreement. In the event of conflict between the provisions of the EPCC main document and this


Agreement, the EPCC main document shall prevail. The following words and terms including


derivatives thereof shall have the meaning in this Agreement ascribed to them below:


1.1. Agreement means this document, together with any Exhibits that are or may be attached


hereto, and any extension, renewal, amendment or addition hereto, agreed in writing by the





Page 6 of 87


 Z5-C EPCC AnnexF





Concessionaires and approved by the Government pursuant to applicable Petroleum Law or


the EPCC.


1.2. AFE means an authorization for expenditure for Joint Petroleum Operations, or as the case


may be Exclusive Petroleum Operations, within the scope of the EPCC.


1.3. Deepening means an operation whereby a Well is drilled to an objective Zone below the


deepest Zone in which the Well was previously drilled, or below the deepest Zone proposed


in the associated AFE (if required), whichever is the deeper.


1.4. Operating Committee means a committee, composed of representatives of each


Concessionaire holding a Participating Interest, and constituted in accordance with Article 6,


that will provide the overall supervision and direction of Joint Petroleum Operations under


the EPCC.


1.5. Completion means an operation intended to complete a Well through the Christmas tree for


Production of Petroleum in one or more Zones, including the setting of Production casing,


perforating, stimulating the Well and Production Testing conducted in such operation.


1.6. Consenting Concessionaire means a Concessionaire who agrees to participate in and pay its


share of the cost of an Exclusive Petroleum Operation.


1.7. Non-Consenting Concessionaire means each Concessionaire who elects not to participate in


an Exclusive Petroleum Operation.


1.8. Joint Account means the accounts maintained by Operator for Joint Petroleum Operations


pursuant to the provisions of this Agreement, including the Accounting Procedure.


1.9. Control means ownership directly or indirectly of more than fifty percent (50%) of:


(i) the voting stock, if the entity is a corporation issuing stock; or


(ii) the controlling rights or interests, if the entity is not a corporation.


1.10. G &G Data means geological, geophysical and geochemical data and other similar


information that is not obtained through a Well bore.


1.11. Environmental Loss means any loss, damages, costs, expenses or liabilities (other than


Consequential Loss) caused by a discharge of Petroleum, pollutants or other contaminants


into the environment, arising out of, relating to, or connected with Joint Petroleum


Operations under the EPCC.


1.12. Commercial Discovery means any Discovery that the Concessionaires consider to be


sufficient to enable the Concessionaires Development Plan and apply for authorization from


the Government to commence Development and Production.


1.13. Sidetracking means the directional control and intentional deviation of a Well from vertical


so as to change the bottom hole location unless the operation is done to straighten the hole


or to drill around junk in the hole or to overcome other mechanical difficulties.











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1.14. Business Day means a day on which the banks in Mozambique are customarily open for


business.


1.15. Security means (i) a guarantee or standby letter of credit issued by a bank; (ii) an on-demand


bond issued by a surety corporation; (iii) a corporate guarantee; (iv) any financial security


required by the EPCC or this Agreement; and (v) any financial security agreed from time to


time by the Concessionaires; provided, however, that the bank, surety or corporation issuing


the guarantee, standby letter of credit, bond or other security (as applicable) has a credit


rating indicating it has a sufficient worth to pay its obligations in all reasonably foreseeable


circumstances.


1.16. Gross Negligence and/or Willful Misconduct means any act or omission to act of any Senior


Supervisory Personnel (whether sole, joint or concurrent) which was intended to cause, or


which was in reckless disregard of or wanton indifference to, harmful consequences such


person knew, or should have known, such act or failure would have on the safety or property


of another person or entity.


1.17. Joint Petroleum Operations means those operations and activities carried out by Operator


pursuant to this Agreement, the costs of which are chargeable to all Concessionaires.


1.18. Exclusive Petroleum Operation means operations conducted by less than all Concessionaires


pursuant to Article 8.


1.19. Consequential Loss means any loss, damages, costs, expenses or liabilities caused (directly or


indirectly) by any of the following arising out of, relating to, or connected with this


Agreement or the operations carried out under this Agreement and the appurtenant EPCC: (i)


reservoir or formation damage; (ii) inability to produce, use or dispose of Petroleum


(including loss due to business interruption); (iii) loss or deferment of income; (iv) punitive


damages; or (v) other indirect damages or losses whether or not similar to the foregoing.


1.20. Development and Production Period means any and all periods of Development and


Production of Petroleum under the EPCC.


1.21. Senior Supervisory Personnel means, with respect to the Operator or any of its Affiliated


Companies providing services for Joint Petroleum Operations, any director or officer of the


Operator or such Operator's Affiliated Company, and any individual who functions at a


management level equivalent or superior to its designated senior business manager and its


designated senior managers for drilling and Production operations or any other activities


under this Agreement.


1.22. Development Well means any Well drilled for the Production of Petroleum pursuant to a


Development Plan approved by the Government.


1.23. Accounting Procedure means the rules, provisions and conditions contained in Exhibit A.


1.24. Joint Property means, at any point in time, all Wells, Facilities, equipment, materials,


information, funds and property (excluding Petroleum) held for use in Joint Petroleum


Operations. /


3.-3


Page 8 of 87


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1.25. Entitlement means that quantity of Petroleum (excluding all quantities used or lost in Joint


Operations) of which a Concessionaire has the right to take delivery pursuant to the terms of


this Agreement and the EPCC, as such rights and obligations may be adjusted by the terms of


any lifting, balancing and other disposition agreements entered into pursuant to Article 10.


1.26. Recompletion means an operation whereby a Completion in one Zone is abandoned in order


to attempt a Completion in a different Zone within the existing wellbore.


1.27. Reworking means an operation conducted in the wellbore of a Well after it is Completed to


secure, restore, or improve Production in a Zone which is currently open to Production in the


wellbore. Such operations include Well stimulation operations, but exclude any routine


repair or maintenance work, or drilling, Sidetracking, Deepening, Completing, Recompleting,


or Plugging Back of a Well.


1.28. Agreed Interest Rate means interest compounded on a monthly basis, at the rate per annum


equal to LIBOR for U.S. dollar deposits plus four (4%) percentage points, applicable on the


first Business Day prior to the due date of payment and thereafter on the first Business Day


of each succeeding calendar month. If the aforesaid rate is contrary to any applicable usury


law, the rate of interest to be charged shall be the maximum rate permitted by such


applicable law.


1.29 "LIBOR" means the London Inter-bank Offered Rate for one (1) month U.S. Dollars deposits as


published electronically by the Intercontinental Exchange's ("ICE") Benchmark Administration


Limited (or its successor) as the official quotation at closing (last trade) London time on the


relevant day in respect of which interest (or an amount equivalent thereto) is to be calculated,


or the next day thereafter for which a rate is so published.


1.30. Plugging Back means a single operation whereby a deeper Zone is abandoned in order to


attempt a Completion in a shallower Zone.


1.31. Testing means an operation which aim is to evaluate the capacity of a Zone to produce


Petroleum.


1.32. Calendar Quarter means a period of three (3) months commencing January 1 and ending on


the following March 31, a period of three (3) months commencing April 1 and ending on the


following June 30, a period of three (3) months commencing July 1 and ending on the


following September 30, or a period of three (3) months commencing October 1 and ending


on the following December 31, all in accordance with the Gregorian Calendar.


1.33. Zone means a stratum of earth containing or thought to contain an accumulation of


Petroleum which may separately be extracted from any other accumulation of Petroleum.


1.34 Affiliated Company means in relation to any Concessionaire, any entity that directly or


indirectly Controls the Concessionaire, or any entity that is directly or indirectly Controlled by


the Concessionaire, or any entity that is under the common Control with the Concessionaire,


save that (i) JSC "Rosneftegaz", the Russian Federation and any company or entity controlled


by either JSC "Rosneftegaz" or the Russian Federation (other than the entities directly or


indirectly controlled by Rosneft Oil Company) shall not be deemed Affiliated Companies of





Page 9 of 87


 Z5-C EPCC AnnexF








Rosneft; and (ii) the Republic of Mozambique and any entity controlled by the Republic of


Mozambique (other than the entities directly or indirectly controlled by ENH) shall not be


deemed Affiliated Companies of ENH.


1.35 HSE Plan shall have the meaning set out in Article 5.3 A.


1.36 Prohibited Substance means: (i) illicit or unprescribed drugs and controlled substances or


mood or mind altering substances; (ii) prescribed drugs used in a manner inconsistent with the


prescription; or (iii) alcoholic beverages.


1.37 Secondee means an employee of a Non-Operator or its Affiliated Company, who is subject to


Secondment.


1.38 Secondment means the placement under Article 5.4(B) of an employee of a Concessionaire


other than Operator or its Affiliated Company in Operator's organization (including


placement into an Affiliated Company of Operator who is performing services for Operator)


to provide services under a Secondment agreement between Operator and such other


Concessionaire or its Affiliated Companies.


1.39 Under the Influence means: (i) the presence of a Prohibited Substance or metabolites or a


Prohibited Substance in body fluids above the cut-off level established by Operator's HSE


Plan, or other commonly accepted cut-off level; or (ii) the presence of a Prohibited Substance


that affects an individual in any detectable manner (the symptoms of influence may be, but


are not limited to, slurred speech or difficulty in maintaining balance).


1.40 Breaching Concessionaire(s) has the meaning given to it in Article 16.6 of the JOA.


1.41 Breach Period has the meaning given to it in Article 16.6 of the JOA.


1.42 Non-Breaching Concessionaire(s) means all Concessionaires other than the Breaching


Concessionaire(s).


1.43 Trade Laws means with respect to any Concessionaire and their respective Affiliated


Companies all laws, regulations, and/or orders (including the economic sanctions laws,


regulations or executive orders of the United States, Mozambique, the United Kingdom, the


Russian Federation, the European Union or any of its Member States or the United Nations)


imposing economic or financial sanctions, trade sanctions or embargoes on countries,


individuals, or entities and/or regulating the export, re-export, import, transfer, disclosure,


provisions or end use of goods, technology, services or software.











Article 2. EFFECTIVE DATE AND TERM





2.1 This Agreement shall have effect from the Effective Date, and shall continue in effect until


the following occur in accordance with the terms of this Agreement:





a) the EPCC terminates;








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 Z5-CEPCC AnnexF





b) all Facilities, materials, other equipment and property used in connection Joint


Petroleum Operations or Exclusive Petroleum Operations have been properly


decommissioned pursuant to an approved Decommissioning Plan or otherwise


disposed of or removed; and


c) final settlement (including settlement in relation to any financial audit carried out


pursuant to the Accounting Procedure) has been made.


2.2 Notwithstanding the preceding paragraphs:


a) Article 11 shall remain in effect until all Decommissioning obligations under applicable


law and the EPCC have been satisfied; and


b) Article 5.5, Article 5.6, Article 9, Article 16.2, Article 18, Article 19 and the indemnities


under Articles 8.3(A), 15.2 and 21.1 shall remain in effect until all obligations have


been extinguished and all disputes have been resolved.


2.3 Termination of this Agreement shall be without prejudice to any rights and obligations arising


out of or in connection with this Agreement which have vested, matured or accrued prior to


such termination.











Article 3. SCOPE


3.1 Scope


A. The purpose of this Agreement is to establish the respective rights and obligations of


Concessionaires forming an unincorporated joint venture for the purpose of and with regard


to Petroleum Operations and the rights and obligations pursuant to the EPCC.


B. For greater certainty, the Concessionaires confirm that, except to the extent


expressly included in the EPCC, the following activities are outside of the scope of this


Agreement and are not addressed herein:


1. Petroleum Operations related to Facilities and activities downstream from the


Delivery Point as stipulated by an approved Development Plan, except as


expressly provided for in the EPCC and this Agreement;


2. Marketing and sales of Petroleum, except as expressly provided in the EPCC or


this Agreement;


3. Petroleum Operations outside of the EPCC Area, except for Petroleum Operations


related to the use of a Facility owned or controlled by person other than a


Concessionaire, including final processing or treatment of Petroleum for the


purpose of onwards shipment of Crude Oil or Natural Gas in a transmission Oil


Pipeline or Gas Pipeline, or as liquefied Natural Gas or compressed Natural Gas


when such Petroleum Operations are conducted pursuant to the EPCC;











Page 11 of 87


 Z5-C EPCC





4. Petroleum Operations outside of the EPCC Area other than as a consequence of


unitization with an adjoining EPCC area under the terms of the EPCC;


5. Construction, placement and operation of Facilities for the purpose of


Transportation outside the EPCC Area of Petroleum extracted from Petroleum


Deposits located within the EPCC Area, except when such activities are conducted


pursuant to the EPCC; and


6. Exploration for. Development or extraction of any substance other than


Petroleum, inside or outside of the EPCC Area, except for purposes in compliance


with the EPCC and in accordance with applicable law.








Article 4. OWNERSHIP, OBLIGATIONS AND LIABILITIES





4.1 Unless otherwise provided in this Agreement, all the rights and interests in and under the


EPCC, all Joint Property, and all Petroleum Produced from the EPCC Area shall, subject to the


terms of the EPCC, be owned proportionally by the Concessionaires in accordance with their


respective Participating Interests.


4.2 Unless otherwise provided in this Agreement, the obligations of the Concessionaires under


the EPCC and all liabilities and expenses incurred by Operator in connection with Joint


Petroleum Operations shall be charged to the Joint Account and all credits to the Joint


Account shall be shared by the Concessionaires that paid for the costs of the relevant Joint


Petroleum Operation, in accordance with their respective paying Participating Interests.


Joint Account costs paid by the Concessionaires are to be reimbursed promptly pursuant to


Article 9.8 of the EPCC and Article 4.5 of this Agreement.


4.3 Subject to the Carry under the EPCC, each Concessionaire shall pay on the due date, in


accordance with the Accounting Procedure, its Participating Interest share of Joint Account


expenses, including cash advances and interest, accrued pursuant to this Agreement. A


Concessionaire's payment of any charge under this Agreement shall be without prejudice to


its right to later contest the charge.


4.4 Participating Interest


A. The Participating Interests of the Concessionaires as of the Effective Date are:


ExxonMobil 60%


Rosneft 20%


ENH 20%


B. If a Concessionaire transfers all or part of its Participating Interest pursuant to the


provisions of this Agreement and the EPCC, the Participating Interests of the Concessionaire/


shall be revised according to such transfer. I











Page 12 of 87


 Z5-CEPCC AnnexF








4.5 State Participation


A. ENH is a Concessionaire pursuant to Article 3.2 of the EPCC. The Concessionaires


(exclusive of the ENH Participating Interest resulting from the State Participating Interest)


shall contribute in respect to the Carry, in proportion to their respective Participating


Interests (exclusive of the State Participating Interest). All payments received for the


repayment of the Carry shall be credited to the Concessionaires paying the Carry in


proportion to their Participating Interests (exclusive of the State Participating Interest). In


respect of Exclusive Petroleum Operations, only Consenting Concessionaires shall contribute


to the Carry.


B. As the State Participating Interest is limited to twenty percent (20%), in the event of


an Exclusive Petroleum Operations in which ENH (representing the State Participating


interest) is a Consenting Concessionaire ENH can elect either to (i) limit its Participating


Interest in such Exclusive Petroleum Operation to the carried State Participating Interest or


(ii) accept its proportionate share of the available Participating Interest, and pay from its own


funds any costs associated with any additional Participating Interest in excess of the carried


State Participating Interest.


4.6 Guarantees


A. The Concessionaires acknowledge the requirements for guarantees pursuant to


Article 4.10a and 4.10b of the EPCC. Each Concessionaire agrees to furnish and pay the cost


proportionate to each Concessionaire's respective Participating Interest of the unconditional


and irrevocable Exploration work commitment bank guarantee that the Concessionaires shall


provide pursuant to the EPCC Article 4.10a and to furnish the Government with an


unconditional and irrevocable guarantee from the ultimate parent company (or, in the case


of Rosneft, from PJSC Rosneft Oil Company), or from a direct or indirect wholly-owned


subsidiary of the ultimate parent of the Concessionaire (or, in the case of Rosneft, from a


direct or indirect wholly-owned subsidiary of PJSC Rosneft Oil Company) as required pursuant


to EPCC Article 4.10b.


B. The ENH guarantee obligations pursuant to Article 4.10a shall be carried by the


Concessionaires other than ENH in proportion to their respective Participating Interests


(exclusive of the carried State Participating Interest)..


4.7 Counter Indemnification


A. Without prejudice to the joint and several liability of the Concessionaires under the


EPCC, and subject to section 4.8 below, the Concessionaires (other than ENH or a Permitted


Assignee) shall provide that each guarantor providing the parent company guarantee


pursuant to EPCC Article 4.10b shall, by no later than the release of such parent company


guarantee, enter into a cross-indemnity agreement (the "Cross-Indemnity Agreement")


having the same effective date of the parent company guarantee to mutually indemnify each


other in respect of any liability incurred under the parent company guarantees required


pursuant to the EPCC Article 4.10b in excess of the Participating Interest share of the /


respective Concessionaire. v








Page 13 of 87


 Z5-C EPCC AnnexF








B. Failure of a Concessionaire's guarantor to perform its indemnity obligations under


the aforementioned Cross-Indemnity Agreement shall allow the Concessionaire whose


guarantor has not been paid to utilise the remedies under Article 9.4 of this Agreement in


order to recover unpaid amounts.


4.8 State Participating Interest Indemnification


A. Without prejudice to the joint and several liability of ENH, ENH shall by no later than


thirty (30) days after the Effective Date of the EPCC provide an unconditional and irrevocable


counter-guarantee (the "ENH Counter-Guarantee") in respect of ENH's obligations for the


State Participating Interest.


B. In respect of the State Participating Interest which is subject to the Carry the


payment shall be deferred until the date of commencement of Commercial Production.


Carried guarantee payment shall be subject to the same Carry repayment procedure as


Article 9.8 of the EPCC.


C. Failure of ENH to perform its indemnity obligations under the ENH Counter-


Guarantee shall allow the Concessionaire whose guarantor has not been paid to utilise the


remedies under Article 9.4 of this Agreement in order to recover unpaid amounts.


D. This Article 4.8 shall apply mutatis mutandis to any Permitted Assignee.











Article 5. OPERATOR





5.1 Designation of Operator


The Operator shall be as designated in the EPCC or in cases of change of Operator such entity


as appointed and subject to approval by the Minister with authority over the Petroleum


sector.


5.2 Rights and Duties of Operator


A. Subject to the terms and conditions of this Agreement and unless otherwise


specified, Operator shall act on behalf of the Concessionaires to this Agreement, have all of


the rights, functions and duties of Operator under the EPCC and shall have exclusive charge


of all Joint Petroleum Operations and shall conduct and administer all activities under the


EPCC and this Agreement. Operator may, subject to requirements of applicable law and the


EPCC, and within the terms of this Agreement, employ any persons (including Affiliated


Companies) in such relevant Joint Petroleum Operations.


B. In the conduct of Joint Petroleum Operations Operator shall:





1) Perform Joint Petroleum Operations in accordance with applicable law, the EPCC,


this Agreement, and the decisions of the Operating Committee not in conflict with


this Agreement; « [








Page 14 of 87


 Z5-C EPCC AnnexF





2) Conduct and administer all Joint Petroleum Operations in a diligent, safe and


efficient manner in accordance with applicable law and such Good Petroleum





Industry Practices and field conservation principles as are generally followed by


the international petroleum industry under similar circumstances;


3) Exercise due care with respect to the receipt, payment and accounting of funds in


accordance with applicable law, the Accounting Procedure annexed to this


Agreement and Good Petroleum Industry Practices and prudent practices as are


generally followed by the international petroleum industry under similar


circumstances;





4) Subject to provisions of this Agreement and the Accounting Procedure, neither


gain a profit nor suffer a loss as a result of being the Operator in its conduct of








Joint Petroleum Operations;


5) Perform the duties for the Operating Committee set out in Article 6 and prepare


and submit to the Operating Committee proposed work programmes and


budgets, and (if required) AFEs as provided in Article 7;


6) Acquire all permits, consents, approvals, and surface or other rights that may be


required for or in connection with the conduct of Joint Petroleum Operations;


7) Upon receipt of reasonable advance notice, and having regard to operational and


HSE requirements, permit the representatives of any of the Concessionaires to


have, during normal business hours and at their own risk and expense, access to


the Facilities relating to Joint Petroleum Operations with the right to observe all


Joint Petroleum Operations and to inspect all Joint Property and to conduct


financial audits as provided in the Accounting Procedure, HSE compliance audits,


audits of the operations to fulfill any community relocation plans in relation to


fulfillment of the Concessionaires' obligations under Article 42 of the Petroleum


Law and Article 28 of the Petroleum Operations Regulations once such plan is


approved by the Operating Committee and Government and any other audits as


may be approved by the Operating Committee;


8) Maintain the EPCC in full force and effect in accordance with such Good


Petroleum Industry Practices as are generally followed by the international


petroleum industry under similar circumstances. The Operator shall timely pay


and discharge all liabilities and expenses incurred in connection with Joint


Petroleum Operations and use its reasonable endeavours to keep and maintain


the Joint Property free from all liens, charges and encumbrances arising out of


Joint Petroleum Operations;





9) Pay to the Government for the Joint Account, within the periods and in the


manner prescribed by the applicable law and the EPCC, all periodic payments,


taxes, fees and other payments pertaining to Joint Petroleum Operations,


excluding any taxes appertaining to each Concessionaire as stipulated by


applicable law or the EPCC;








Page 15 of 87





/Vj?


 Z5-C EPCC AnnexF








10) Carry out the obligations of Operator pursuant to the EPCC, including preparing


and furnishing such reports, records and information as may be required by the





11) Operating Committee and under the EPCC;


Except in respect to individual chargeable tax liability, have, in accordance with


any decisions of the Operating Committee, the right and obligation to represent


the Concessionaires in dealings with the Government with respect to matters


arising under the EPCC and Joint Petroleum Operations. The Operator shall notify


the other Concessionaires as soon as possible of such meetings. Subject to the


EPCC and any necessary Government approvals. Concessionaires shall have the


right to attend any meetings with the Government with respect to such matters,


but only in the capacity of observers. Nothing contained in this Agreement shall


restrict any Concessionaire from holding discussions with the Government with


respect to any issue peculiar to its business interests arising under the EPCC or


this Agreement, but in such event, the relevant Concessionaire shall promptly


advise the other Concessionaires, if possible, before and in any event promptly


after such discussions, provided that such Concessionaire shall not be required to


divulge to the other Concessionaires any matters discussed to the extent the


same involve proprietary information or matters not affecting those


Concessionaires;


12) In accordance with Article 10 or any decisions of the Operating Committee, assess


alternatives for the disposition of Petroleum from a Discovery;


13) In case of an emergency, including, but not limited to, a significant fire, explosion.


Petroleum or other gas or liquids release or leakage, or sabotage; incident


involving loss of life, serious injury to an employee, contractor, or third party, or








serious property damage; strikes and riots; or evacuations of Operator personnel:


i. take all necessary and proper measures for the protection of life, health,


the environment and property; and


ii. as soon as reasonably practicable, report to Concessionaires the details of


such event and any measures Operator has taken or plans to take in


response thereto;


14) Establish and implement an HSE Plan to govern Petroleum Operations to ensure


compliance with applicable law, the EPCC and this Agreement;


15) Prior to appointing or engaging any independent contractor, conduct appropriate


and proportionate due diligence concerning relevant criteria, including such


contractor's ability to perform the proposed work properly, on time, within


16) budgeted cost, and in compliance with applicable legal and contractual


requirements.


Include, to the extent practical, in its contracts with independent contractors and


to the extent lawful, provisions which: n I








Page 16 of 87





4/5


 Z5-C EPCC AnnexF








A) Establish that such contractors can only enforce their contracts against


Operator;





B) Permit Operator, on behalf of Concessionaires, to enforce contractual


indemnities and warranties against, and recover losses and damages


suffered by them, insofar as recovered under their contracts, from, such


contractors; and


C) Require such contractors to comply with applicable law, the HSE Plan and


the provisions of the EPCC, take insurance as required by such applicable


law and as stipulated in the EPCC and this Agreement.


17) Operator may not delegate its general powers and responsibilities of supervision


and management as Operator pursuant to this Agreement to an Affiliated


Company without prior consent from all of the Concessionaires and subsequent


approval from the Ministry of Mineral Resources and Energy. In such a case, the


Operator shall remain liable for all its obligations as Operator.





5.3 Health, Safety and Environment ("HSE")


A. With the goal of achieving safe and reliable Petroleum Operations in compliance with


applicable Mozambican law regarding health, safety and protection of the environment,


hereinafter referred to as "HSE" (including avoiding significant and unintended impact on the


safety or health of people, on property, or on the environment), Operator shall in the


conduct of Petroleum Operations:


1) Establish and implement an HSE plan, including emergency response plans, in a


manner consistent with Good Petroleum Industry Practice and in accordance with


applicable Mozambican law and the EPCC ("HSE Plan");


2) design and operate Joint Property consistent with the HSE Plan; and


3) conform with applicable Mozambican HSE laws and other HSE-related statutory


requirements that may apply.


B. The Operating Committee shall review details of the Operator's HSE Plan as soon as


it is established and at least annually thereafter as well as Operator's implementation thereof


unless HSE performance warrants a more regular review.


C. In the conduct of Joint Petroleum Operations, Operator shall establish and


implement a program for regular HSE assessments. The purpose of such assessments is to


periodically review HSE systems and procedures, including actual practice and performance,


to verify that the HSE Plan is being implemented in accordance with the policies and


standards of the HSE Plan. Operator shall, as a minimum, conduct such an assessment


before entering into new Petroleum Operations and before undertaking any major changes


to existing Petroleum Operations. Concessionaires shall actively participate in such HSE


assessments.








Page 17 of 87


 Z5-C EPCC Annex F





D. Operator shall require the Concessionaires and its contractors, sub-contractors,


consultants and agents undertaking activities for the Joint Account to manage HSE risks in a














manner consistent with the requirements of this Article 5.3 and applicable law.


E. Operator shall establish and enforce rules consistent with those generally followed in


the international petroleum industry under similar circumstances that, ata minimum,


prohibit within the Concession Contract Area and other designated areas in which Operator


conducts Petroleum Operations the following:


1) Using, possessing, selling, manufacturing, distributing, concealing, or


transporting any of the following items:


a) Any Prohibited Substance;


b) Contraband, including firearms, ammunition, explosives, and other


weapons; or


c) Illicit equipment or paraphernalia


2) Using or possessing any prescription drugs that may cause impairment, except


when all of the following conditions have been met:


a) Prescription drugs have been prescribed by a licensed physician for the


person in possession of the drugs;


b) The prescription was filled by a licensed pharmacist for the person


possessing the drugs; and


c) The individual notifies his/her supervisor that he/she will be in possession


of or using prescription drugs that may cause impairment and appropriate


steps are taken to accommodate the possibility of impairment, including


removal from work for the period of possible impairment.


3) Using or possessing over-the-counter medication that may cause impairment,


except when the individual notifies his/her supervisor that he/she will be in


possession of or using over-the-counter medication that may cause impairment


and appropriate steps are taken to accommodate the possibility of impairment,


including removal from work for the period of possible impairment.


4) Being Under the Influence of a Prohibited Substance while performing any work.


5) Switching or adulterating any urine, blood, or other sample used for testing.


6) Firearms, explosives, or other weapons without the prior written approval of


Operator's senior management.


F. Without prejudice to a Concessionaire's rights under Article 5.2(B)(7), with


reasonable advance notice. Operator shall permit each Concessionaire to have during normal


business hours (and at its own risk and expense) the right to conduct its own HSE audit. I








Page 18 of 87


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5.4 Operator Personnel


A. Operator shall engage or retain only such employees, contractors, secondees,














consultants and agents as are reasonably necessary to conduct activities relevant to Joint


Petroleum Operations. Operator shall determine the number of employees, Secondees (if


any), contractors, consultants and agents, as well as the selection of such persons, their


hours of work, and the compensation to be paid to all such persons, other than Secondees


whose compensation shall be set by the Concessionaire supplying such Secondee, in


connection with Joint Petroleum Operations.


B. The Operator shall enter into a separate agreement with the non-operating


Concessionaires concerning secondment of personnel to work within Operator's


organization. Operator shall not be required to enter into any Secondment without its


consent.


5.5 information Supplied by Operator


A. Subject to Article 16, Operator shall provide all Concessionaires with the following data


and reports in a format agreed among the Concessionaires, to the extent the cost of such


provision is to be charged to the Joint Account or for the purpose of fulfilling obligations


pursuant to applicable law or the EPCC, as they are currently produced or compiled from the


relevant Joint Petroleum Operations:


1) copies of all logs or surveys, including in digitally recorded format if such exists;


2) daily drilling and other 3rd party operational reports;


3) copies of all Tests and core data and analysis reports;


4) final Well recap report;


5) copies of plugging reports;


6) copies of final geological and geophysical maps, seismic sections and shot point


location maps, interpretations and reports


7) engineering studies, development schedules and Quarterly and annual progress


reports on development projects;


8) field and Well performance reports, including reservoir studies and reserve


estimates;


i. copies of all material reports relating to the relevant Joint Petroleum


Operations or the EPCC Area furnished by Operator to the Government;


ii. other material studies and reports relating to such Joint Petroleum


Operations;


iii. progress reports on seismic operations; /


iv. reports required to be provided by the Operator pursuant to the


Accounting Procedure;





Page 19 of 87





A/<


 Z5-C EPCC AnnexF





9) reports required to be provided by the Operator pursuant to Annex C of the EPCC


- the Accounting and Financial Procedures;


10) production and lifting related data and reports, including production forecasts;


11) balancing reports for Natural Gas under agreements provided for in Article 10.3;


12) Petroleum sales and delivery related data and reports;


13) Geotechnical, metocean data and reports


14) such additional information as a Concessionaire may reasonably request, provided


that the requesting Concessionaire pay the costs of preparation of such


information and that the preparation of such information will not unduly burden


Operator's administrative and technical personnel. Only Concessionaires who pay


such costs will receive such additional information; and


15) other reports as required by the Operating Committee.


B. Subject to Article 16, Operator shall, with reasonable notice, give Concessionaires


access during normal business hours to all data and reports, other than data and reports


provided to Concessionaires in accordance with Article 5.5(A), acquired in the conduct of


Joint Petroleum Operations, which a Concessionaire may reasonably request. Any


Concessionaire may make copies of such other data at its sole expense.


5.6 Settlement of Claims and Lawsuits


A. Operator shall promptly notify the participating Concessionaires of any and all claims


or suits that relate in any way to relevant Joint Petroleum Operations. Operator shall


represent the relevant participating Concessionaires and defend or oppose the claim or suit.


Operator may in its sole discretion initiate, compromise or settle (i) any such individual claim


or suit that is not related to any other claim or suit, or (ii) any related series of claims,


counter claims or suits, in each case for an amount not to exceed the equivalent of five


hundred thousand United States dollars (US$ 500,000) exclusive of legal fees. Operator shall


obtain the approval and instructions of the Operating Committee in respect of any claim that


(i) is in excess of the above-stated amount or (ii) is against the Government. Without


prejudice to the foregoing, each Concessionaire shall have the right to be represented by its


own counsel at its own expense in the settlement, compromise or defence of such claims or


suits.


B. Any Concessionaire shall promptly notify the other Concessionaires of any claim


made against such Concessionaire by a third party that relates to, arises out of or may affect


the Concessionaires' Joint Petroleum Operations, and such Concessionaire shall defend or


settle the same in accordance with any directions given by the Operating Committee. Those


costs, expenses and damages incurred pursuant to such defence or settlement which is


attributable to the relevant Joint Petroleum Operations shall be for the Joint Account.





C. Notwithstanding this Article 5.6, each Concessionaire shall have the right to


participate in any such suit, prosecution, defence or settlement conducted in accordance





Page 20 of 87


 Z5-CEPCC Annex F








with said above provisions, at its sole cost and expense; provided always that no


Concessionaire may settle its Participating Interest share of any claim without first satisfying





the Operating Committee that it can do so without prejudicing the interests of the Joint


Petroleum Operations.


5.7 Limitation on Liability of Operator


A. Except as set out in Article 5.7(C), neither Operator nor any other Indemnitee as


defined below shall bear, except as a Concessionaire to the extent of its Participating Interest


share, any damage, loss, cost, expense or liability resulting from performing, or failing to


perform the duties and functions of Operator under this Agreement, and the Indemnitees


are hereby released from liability to Concessionaires for any and all damages, losses, costs,


expenses and liabilities arising out of, incident to or resulting from such performance or


failure to perform, even though caused in whole or in part by a pre-existing defect, or the


negligence, (whether sole, joint or concurrent), Gross Negligence, Wilful Misconduct, strict


liability or other legal fault of Operator, or any such Indemnitee.


B. Except as set out in Article 5.7(C), the Concessionaires shall in proportion to their


Participating Interests defend and indemnify Operator and its Affiliated Companies, and their


respective directors, officers, and employees, (collectively, the "Indemnitees"), from any and


all damages, losses, costs, expenses, including reasonable legal costs, expenses and


attorneys' fees and liabilities incident to claims, demands or causes of action brought by or


on behalf of any person or entity, which claims, demands or causes of action arise out of or


result from Joint Petroleum Operations, even though caused in whole or in part by a pre-


existing defect, or the negligence (whether sole, joint or concurrent) Gross Negligence and/or


Wilful Misconduct, strict liability or other legal fault of Operator (or any such Indemnitee).


C. Notwithstanding Articles 5.7(A) or 5.7(B), if any Senior Supervisory Personnel of


Operator or its Affiliated Companies engage in Gross Negligence and/or Willful Misconduct


which proximately causes the Concessionaires to incur damage, loss, cost, expense or liability


for claims, demands or causes of action referred to in Article 5.7, then, in addition to its


Participating Interest share, Operator shall bear all such damage, loss, cost, expense and


liability.


D. Notwithstanding the foregoing, under no circumstances shall Operator (except as a


Concessionaire to the extent of its Participating Interest as contemplated in Article 5.7(A)) or


any other Indemnitee bear any Consequential Loss or Environmental Loss.





E. Nothing in this Article 5.7 shall be deemed to relieve Operator from its Participating


Interest share of any damage, loss, cost, expense or liability arising out of, or resulting from


Joint Petroleum Operations.


5.8 Insurance Obtained by Operator





A. Operator shall, unless otherwise provided by applicable law, the EPCC or this


Agreement, procure and maintain for the Joint Account all insurance in the types and


amounts required by applicable Mozambican law or the EPCC.








Page 21 of 87





/V^


 Z5-C EPCC AnnexF








B. Operator shall procure and maintain any further insurance, at market based rates,


subject to the requirement and unanimous approval of the Operating Committee











C. Subject to applicable Mozambican Law and the EPCC, each Concessionaire will be


provided the opportunity to underwrite any or all of its Participating Interest share of the


insurance to be obtained by Operator under Articles 5.8.A and 5.8.B, through such


Concessionaire's Affiliated Company insurance company or, if direct insurance is not so


permitted, through reinsurance policies to such Concessionaire's Affiliated Company


insurance company; provided that: (i) the security and creditworthiness of such insurance


arrangements meet the minimum financial criterion of a long term debt rating of at least 'A-'


by Standard & Poor's or 'A3' by Moody's Investor's Service, or equivalent rating, including


ratings by successor entities to either agency; and (ii) the premiums for such insurance or


reinsurance will not be higher than market rate and will be recoverable under the EPCC.


D. Subject to applicable law or the EPCC, any Concessionaire may elect not to


participate in the insurance to be procured by the Operator under Articles 5.8(A) and 5.8(B)


provided such Concessionaire:


1) Gives prompt written notice to that effect to Operator;


2) Does nothing which may interfere with Operator's negotiations for such insurance


for the other Concessionaires;


3) Obtains insurance prior to or concurrent with the commencement of relevant


Joint Petroleum Operations and maintains such insurance, in respect of which a


current certificate of adequate coverage provided at least once a year shall be


sufficient evidence and which the Operating Committee determines to be


acceptable. No such determination of acceptability shall in any way absolve a


non-participating Concessionaire from its obligation to meet each cash call


(except in accordance with Article 5.8(F) as regards the costs of the insurance


policy in which such Concessionaire has elected not to participate) including any


cash call with respect to damages and losses and the costs of remedying the same


in accordance with the terms of law, regulations, the EPCC and this Agreement. If


such Concessionaire obtains other insurance, such insurance shall:





(a) contain a waiver of subrogation in favour of all the other Concessionaires,


the





Operator and their insurers but only with respect to their interests under


this Agreement;


(b) provide that thirty (30) days' written notice be given to Operator prior to


any material change in, or cancellation of, such insurance policy;


(c) be primary to, and receive no contribution from, any other insurance


maintained by or on behalf of, or benefiting Operator or the other


Concessionaires; and I '








Page 22 of 87


 Z5-C EPCC AnnexF








(d) contain adequate territorial extensions and coverage in the location the


Joint Petroleum Operations; and











4) is responsible for all deductibles, coinsurance payments, uninsured or exposures


relating to its interests under this Agreement.


E. If Operator elects, to the extent permitted by the Mozambican applicable law and


the EPCC, to self-insure all or part of the coverage to be procured under Articles 5.8.A and/or


5.8.B, Operator shall so notify the Operating Committee and provide a qualified self-


insurance letter stating what coverages Operator is self-insuring. Any risk to be covered by


insurance to be procured under Articles 5.8.A and 5.8.B, that is not identified in the self-


insurance letter shall be covered by insurance and supported by a current certificate of


adequate coverage. If requested by the Operating Committee from time to time, Operator


shall provide evidence of financial responsibility, acceptable to the Operating Committee,


that fully covers the risks that would be covered by the insurance to be procured under


Articles 5.8.A and 5.8.B.


F. The cost of insurance in which all the Concessionaires are participating shall be for


the Joint Account and the cost of insurance in which less than all the Concessionaires are


participating shall be charged to the Concessionaires participating in proportion to their


respective Participating Interests. Subject to the provisions above, the cost of insurance


with respect to an Exclusive Petroleum Operation shall be charged to the Consenting


Concessionaires.


G. Operator shall, with respect to all insurance obtained under this Article 5.8:


1) Promptly inform the participating Concessionaires when such insurance is


obtained and supply them with certificates of insurance or copies of the relevant


policies when the same are issued;


2) Arrange for the participating Concessionaires, according to their respective


Participating Interests, to be named as co-insureds on the relevant policies with


waivers of subrogation in favour of all the Concessionaires but only with respect


to their interests under this Agreement;


3) Use reasonable endeavours to ensure that each policy shall survive the I default or


bankruptcy of the insured for claims arising out of an event before such default or


bankruptcy and that all rights of the insured shall revert to the Concessionaires


not in default or bankruptcy; and


4) Duly file all claims and take all necessary and proper steps to collect any proceeds


and credit any proceeds to the participating Concessionaires in proportion to their


respective Participating Interests.


H. Operator shall use its reasonable endeavours to make sure all persons, other than


participating Concessionaires, performing work with respect to Joint Petroleum Operations:





1) Obtain and maintain any and all insurance in the types and amounts required b'


applicable law, the EPCC or any decision of the Operating Committee





Page 23 of 87


 Z5-C EPCC AnnexF








2) Name the Concessionaires as additional insureds on the Concessionaire's


insurance policies and obtain from their insurers waivers of all rights of recourse


against Operator, Concessionaires and their insurers; and


3) Provide Operator with certificates reflecting such insurance prior to the


commencement of their services.





5.9 Commingling of Funds





Operator may not commingle with Operator's own funds the monies which Operator receives


from or for the Joint Account pursuant to this Agreement.





5.10 Resignation of Operator





A. Subject to Article 5.12, Operator may resign as Operator at any time by so notifying


the other Concessionaires at least six months prior to the effective date of such resignation.


B. Resignation as Operator requires the approval of the Government. The Operator


shall not be relieved of its responsibilities as Operator pursuant to this Agreement until


approved by Government and the expiry of the aforementioned notice period, whichever


comes last. Operator's right of resignation as provided in this Article 5.10 shall be without


prejudice to its right to retain its Participating Interest including such of its rights, benefits,


duties and obligations as are not related to or are not on account of its being Operator


pursuant to the EPCC and this Agreement.





5.11 Removal of Operator





A. Subject to any legal rights of the Government to require otherwise and subject to


Article 5.12, Operator shall be removed upon receipt by the Operator and the other


Concessionaires of notice from any Concessionaire if:


1) Operator becomes insolvent or bankrupt, or makes an assignment for the benefit


of creditors;


2) An order is made by a court or an effective resolution is passed for the


reorganization under any bankruptcy law, dissolution, liquidation, or winding up


of Operator;


3) A receiver is appointed for a substantial part of Operator's assets;


4) Operator dissolves, liquidates, is wound up, or otherwise voluntarily terminates its


existence; or


5) An assignment by the Operator results in the Operator holding less than the


minimum Participating Interest of twenty five percent (25 %) required for an


Operator pursuant to applicable law and the EPCC.


B. Subject to Article 5.12, Operator may be removed by the decision of the ✓


Concessionaires if Operator has committed a material breach of the EPCC or this Agreement! Yff


and has either failed to commence to cure that breach within thirty (30) days of receipt of a


Page 24 of 87 [/


 Z5-C EPCC AnnexF








notice from Concessionaires detailing the alleged breach or failed to diligently pursue the


cure to completion. Any decision of Concessionaires to give notice of breach to Operator or


to remove Operator under this provision shall be made by an affirmative vote of one (1) or


more of the total number of Concessionaires other than the Operator, holding at least a


simple majority of the combined Participating Interest held by all Concessionaires other than


the Operator. However, if Operator disputes such alleged commission of or failure to cure a


material breach, then Operator shall remain appointed and no successor Operator may be


appointed until the conclusion of dispute resolution proceedings under Article 19.2 in


relation to such breach, subject to the terms of Article 9.3 with respect to Operator's breach


of its payment obligations.


C. If Operator, together with any of its Affiliated Companies, is or becomes the holder


of a Participating Interest of less than twenty-five percent (25%), then Operator shall be


required to promptly notify the other Concessionaires. The Operating Committee shall then


vote within thirty (30) days of such notification on whether or not a successor Operator


should be appointed pursuant to Article 5.12.


D. If there is a direct or indirect change in Control of Operator, Operator shall be


required to promptly notify the other Concessionaires. The Operating Committee shall vote


within thirty (30) days of such notification on whether or not a successor Operator should be


named pursuant to Article 5.12.


5.12 Appointment of Successor


When a change of Operator occurs pursuant to Articles 5.10 or 5.11:


A. The Operating Committee shall meet as soon as possible to appoint a successor


Operator pursuant to the voting procedure of Article 6.9. No Concessionaire may be


appointed successor Operator (i) against its will; and (ii) unless it satisfies the pre-


qualification requirements applicable to a proposed operatorthat were set forth in the Bid


Evaluation Criteria published by the Institute Nacional de Petroleos:





1. Operatorship of at least one petroleum license in water depths in excess of five


hundred (500) metres including drilling of exploration and development wells





2. Total assets and capital greater than five billion United States dollars (USD


5,000,000,000.00)


3. Have proven expertise, technical capacity and financial means to conduct the


required petroleum operations in an efficient manner (Reference Article 29 of the


Petroleum Operations Regulations)


In the event that a successor Operator is not appointed within a period of one hundred and


eighty (180) days from date of resignation or removal of the Operator, the successor


Operator shall be appointed by the Government, subject to the requirements set forth in


the preceding sentence. CrVY











Page 25 of 87


 Z5-CEPCC AnnexF





B. If Operator is removed, other than in the case of Articles 5.11(C) or 5.11(D), neither


Operator nor any Affiliated Company of Operator shall have the right to be considered as a


candidate for the successor Operator.


C. The resigning or removed Operator shall be compensated out of the Joint Account


for its reasonable expenses directly related to its resignation or removal, except in the case


of Article 5.11(B).


D. The resigning or removed Operator and the successor Operator shall arrange for the


taking of an inventory of all Joint Property and Petroleum, and an audit of the books and


records of the resigning or removed Operator. Such inventory and audit shall be completed,


if possible, no later than the effective date of the change of Operator and shall be subject to


the approval of the Operating Committee. The liabilities and expenses of such inventory and


audit shall be charged to the Joint Account.


E. The resignation or removal of Operator and its replacement by the successor


Operator shall not become effective prior to receipt of any necessary Government approvals.


F. Upon the effective date of the resignation or removal of the Operator, the successor


Operator shall succeed to all duties, rights and authority prescribed for Operator. The former


Operator shall transfer to the successor Operator custody of all Joint Property, books of


account, records and other documents maintained by Operator pertaining to the EPCC Area


and to Joint Petroleum Operations. Upon delivery of the above-described property and data,


the former Operator shall be released and discharged from all obligations and liabilities as


Operator accruing after such date.


G. On any Concessionaire becoming Operator pursuant to the foregoing Articles, the


provisions of this Agreement regarding Operator shall apply accordingly to any successor


Operator.


5.13 Assistance of Concessionaires


Upon request of Operator the other Concessionaires shall provide at cost to the Joint


Account assistance as may be reasonably required to obtain any Government approvals,


permits, and other documents necessary to enable Operator to carry out its duties under this


Agreement and the obligations of Concessionaire under the EPCC.











Article 6. OPERATING COMMITTEE





6.1 Establishment of Operating Committee





Each Concessionaire shall appoint one (1) representative and one (1) alternate representative


to serve on the Operating Committee. Each Concessionaire shall as soon as possible after the


date of this Agreement give notice in writing to the other Concessionaires of the name and


address of its representative and alternate representative to serve on the Operating


Committee. Each Concessionaire shall have the right to change its representative and








Page 26 of 87


 Z5-CEPCC ] AnnexF











alternate at any time by giving a ten (10) days prior notice of such change to the other


Concessionaires.

















































































































































































































Page 27 of 87


 Z5-CEPCC AnnexF








6.2 Powers and Duties of Operating Committee


A. Unless otherwise provided, the Operating Committee shall have power and duty to


authorize and supervise Joint Petroleum Operations under the EPCC that are necessary to


fulfil all Concessionaire rights and obligations under the EPCC and properly explore and


exploit the Concession Area under, in accordance with this Agreement, the applicable law


and generally accepted practices of the international petroleum industry and in a manner


appropriate in the circumstances.


B. Without limiting the generality of the foregoing Article 6.2.A, the powers and duties


of the Operating Committee with respect to the Joint Operations shall include:


1. Consideration, revision, and approval of all proposed Work Programs and


Budgets;


2. Consideration, revision, and approval, where applicable, of AFEs submitted by


Operator pursuant to Articles 7.7 and 7.8;


3. Consideration of the recommendations of the subcommittees referred to in


Article 6.4;


4. Decisions on matters relating to relinquishment and abandonment;


5. Subject to Article 5.6, settlement of claims and lawsuits; and


6. Approval of the location, objective, and depth of wells to be drilled and seismic


programs to be performed.


6.3 Authority to Vote


The representative of a Concessionaire, or in his absence his alternate representative, shall


be authorized to represent and bind such Concessionaire with respect to any matter which is


within the powers of the Operating Committee and is properly brought before the Operating


Committee. Each such representative shall have a vote equal to the Participating Interest of


the Concessionaire such person represents. Each alternate representative shall be entitled to


attend all Operating Committee meetings but shall have no vote at such meetings except in


the absence of the representative for whom he is the alternate. In addition to the


representative and alternate representative, each Concessionaire may also bring to any


Operating Committee meetings such technical and other advisors as the Concessionaire may


deem appropriate.


6.4 Subcommittees


The Operating Committee shall establish technical and financial subcommittees, and may


establish such other subcommittees as the Operating Committee may deem appropriate.


The functions of such subcommittees shall be in an advisory capacity or as otherwise


determined unanimously by the Concessionaires. Each Concessionaire shall have the right to-


appoint a representative to each subcommittee. Each Concessionaire may also bring to any!


subcommittee meetings such technical, financial and other advisors as the Concessionaire^ \


may deem appropriate. /J ---yr





Page 28 of 87


 Z5-C EPCC AnnexF








6.5 Notice of Meeting





A. Operator may call a meeting of the Operating Committee by giving notice to the


Concessionaires at least fifteen (15) days in advance of such meeting. A copy of such notice


shall simultaneously be submitted to the INP.





B. Any Concessionaire may request a meeting of the Operating Committee by giving


notice to all the other Concessionaires. Upon receiving such request, Operator shall call such


meeting for a date not less than fifteen (15) days nor more than thirty (30) days after receipt


of the request.


C. The notice periods above may only be waived with the unanimous consent of all the


Concessionaires eligible to cast a vote.


6.6 Contents of Meeting Notice





A. Each notice of a meeting of the Operating Committee as provided by Operator shall


contain:





1) The date, time and location of the meeting;


2) An agenda of the matters and proposals to be considered and/or voted upon; and


3) Copies of all proposals to be considered at the meeting (including all appropriate


supporting information not previously distributed to the Concessionaires).


B. A Concessionaire, by notice to the other Concessionaires given not less than seven


(7) days prior to a meeting, may add additional matters to the agenda for a meeting.





C. On the request of a Concessionaire, and with the unanimous consent of all


Concessionaires, the Operating Committee may consider at a meeting a proposal not





contained in such meeting agenda.


6.7 Location of Meetings


All meetings of the Operating Committee shall be held in Maputo, unless special


circumstances warrants otherwise. If an Operating Committee meeting is to be convened


elsewhere, the location shall be as the Operating Committee unanimously may decide. A


notice of the decision and its justifications shall be submitted to INP. Each Concessionaire


shall bear its own costs associated with participating in Operating Committee meetings.


6.8 Operator's Duties for Meetings


A. With respect to meetings of the Operating Committee and any subcommittee.


Operator's duties shall include:





1) Timely preparation and distribution of the agenda;


2) Organization and conduct of the meeting; and





3) Preparation of a written record or minutes of each meeting.


Page 29 of 87


 Z5-C EPCC AnnexF








B. Operator shall have the right to appoint the chairman of the Operating Committee


and all subcommittees.


6.9 Voting Procedure


A. Except as otherwise provided in this Agreement, all decisions, approvals and other


actions of the Operating Committee on all proposals coming before it shall be decided by the


affirmative vote of two or more Concessionaires which are not Affiliated Companies


collectively holding at least sixty-five percent (65%) of the Participating Interests ("Pass


Mark"), except where there are only two Concessionaire parties, where all such matters will


be decided in favour of a proposal receiving the largest Participating Interest vote. In the


event that this Pass Mark Vote is not achieved for matters subject to Article 6.9.C. a meeting


of the technical or financial (as applicable) subcommittee shall be called no sooner than


within fifteen (15) days to review and discuss all competing proposals. A subsequent


meeting of the Operating Committee may be called no sooner than fifteen (15) days from the


date of such technical or financial (as applicable) subcommittee meeting.


B. Notwithstanding Article 6.9.A, unanimous approval of the representatives of the


Concessionaires shall be required for all decisions of the Operating Committee regarding:





1) The voluntary relinquishment of all or part of the EPCC Area;


2) The voluntary termination of the EPCC;

















3) Any amendment of this Agreement or of the EPCC;


4) Unitization of any part of the EPCC Area;


5) The declaration of a Commercial Discovery; provided that if unanimity cannot be


attained after due efforts and discussions the Exclusive Operations provisions of


Article 8 shall be applicable, according to applicable law;


6) Submitting a Development Plan and the final investment decision for the


Development of any field; provided that if unanimity cannot be attained after due


efforts and discussions the Exclusive Operations provisions of Article 8 shall be


applicable;


7) Material modifications or amendment in the scope of an approved Development


Plan which result in a more than fifteen percent (15%) increase or decrease in the


total cost of the Development Plan, or a fundamental conceptual change to the


approved Development Plan;


8) The location, depth, target, deepening and sidetracking relating to exploratory


wells; provided that if unanimity cannot be attained after due efforts and


discussions the Exclusive Operations provisions of Article 8 shall be applicable;


9) Establishment of an interest bearing account for Joint Account monies, prior to


the approval of the first Development Plan by the Government;








Page 30 of 87


 Z5-CEPCC Annex F





10) Procurement of further insurance pursuant to article 5.8(B) of this Agreement;


and


11) Ownership, licensing and income distribution of Intellectual Property in


accordance with Article 16.3(A).


C. Notwithstanding the foregoing provisions of this Article 6.9, if the Operating


Committee has not decided on the measures to be taken for the proper fulfilment of any


minimum work commitment relevant to any Exploration sub-period pursuant to Article 4 of


the EPCC or a proposal for cessation of Petroleum Operations and Decommissioning of


Facilities procedure under Article 11, because of failure to reach the Pass Mark Vote or


unanimous vote, as applicable, then Operator shall convene a meeting of the Operating


Committee within thirty (30) days after the Operating Committee failed to make any such


decision. At that meeting, proposals as may be necessary to fulfil the obligations under


Article 4.1 of the EPCC or for the procedures related to the plugging and abandonment of a


Well or cessation of Petroleum Operations and Decommissioning of Facilities in accordance


with applicable law and the EPCC, if appropriate, shall be considered and voted on by the


Operating Committee. If the Operating Committee fails to reach the Pass Mark Vote or


unanimous vote, as applicable, approval of such proposals shall be decided by a vote of two


(2) or more Concessionaires which are not Affiliated Companies, then having collectively at


least fifty-one percent (51%) of all the Participating Interests. If no proposal receives such


simple majority, then the proposal receiving the highest Participating Interest vote which


includes the vote of two (2) or more Concessionaires which are not Affiliated Companies shall


prevail, if no such vote is achieved, then the Operator shall choose from among the


proposals.


D. The Operator shall consult in good faith with all the Concessionaires in respect of all


decisions, approvals and other actions of the Operating Committee on all proposals coming


before it but, in the event of disagreement, the voting rights set out in Article 6.9 (A) shall


apply. If a transfer of Participating Interest results in a change in the number of


Concessionaires or in the distribution of Participating Interest among Concessionaires in the


EPCC, then the Concessionaires shall submit to the MIREME for approval a proposal for


adjustment of the requirement and procedures for a pass mark vote pursuant to 6.9 (A). If


such proposal is not supported by all Concessionaires, the relevant alternative proposed


voting rules shall also be submitted to MIREME for approval.


6.10 Record of Votes


The chairman of the Operating Committee shall appoint a secretary who shall make a record


of each proposal voted on and the results of such voting at each Operating Committee


meeting. Each Concessionaire's representative shall sign and be provided a copy of such


record at the end of such meeting, and it shall be considered the final record of the decisions


of the Operating Committee.


6.11 Minutes


The secretary shall provide each Concessionaire with a copy of the minutes of the Operating I


Committee meeting within fifteen (15) Business Days after the end of the meeting. Each





Page 31 of 87


 Z5-C EPCC Annex F





Concessionaire shall have fifteen (15) days after receipt of such minutes to give notice to the


secretary of its objections to the minutes. A failure to give notice specifying objection to


such minutes within said fifteen (15) day period shall be deemed to be approval of such


minutes. In any event, the votes recorded under Article 6.10 shall take precedence over the


minutes of the Operating Committee meeting.


6.12 Voting by Notice


A. In lieu of a meeting, any Concessionaire may submit any proposal to the Operating


Committee for a vote by notice. The proposing Concessionaire or Concessionaires shall


notify Operator who shall give each Concessionaire's representative notice describing the


proposal so submitted and whether Operator considers such operational matter to require


urgent determination. Operator shall include with such notice adequate documentation in


connection with such proposal to enable the Concessionaires to make a decision. Each


Concessionaire shall communicate its vote by notice to Operator and each other


Concessionaire within one of the following appropriate time periods after receipt of


Operator's notice:


1) Forty-eight (48) hours in the case of Joint Petroleum Operations which involve the


use of a drilling rig that is standing by in the EPCC Area and such other operational


matters reasonably considered by Operator to require by their nature urgent


determination; and


2) fifteen (15) days in the case of all other proposals.


B. Except in the case of Article 6.12(A)(1), any Concessionaire may, by notice delivered


to all Concessionaires within five (5) days of receipt of Operator's notice, request that the


proposal be decided at a meeting rather than by notice. In such an event, that proposal shall


be decided at a meeting duly called for that purpose.


C. Except as provided in Article 11, any Concessionaire failing to communicate its vote


in a timely manner shall be deemed to have voted against such proposal.


D. If a meeting is not requested, then at the expiration of the appropriate time period,


Operator shall give each Concessionaire a confirmation notice with a copy to INP, stating the


tabulation and results of the vote.


6.13 Effect of Vote





All decisions taken by the Operating Committee pursuant to this Article, shall be conclusive


and binding on all the Concessionaires, except in the following cases:





A. If pursuant to this Article, a Joint Petroleum Operation or Exclusive Petroleum


Operations, as the case may be, has been properly proposed to the Operating Committee


and the Operating Committee has not approved such proposal in a timely manner, then any


Concessionaire that voted in favour of such proposal shall have the right for the appropriate


period specified below to propose, in accordance with Article 8, an Exclusive Petroleum


Operation involving activities essentially the same as those proposed for such Joint


Petroleum Operation.





Page 32 of 87


 Z5-C EPCC AnnexF





1) For proposals related to urgent operational matters, such right shall be


exercisable for twenty-four (24) hours after the time specified in Article 6.12(A)(1)











has expired or after receipt of Operator's notice given to the Concessionaires


pursuant to Article 6.13(D), as applicable.


2) For proposals to develop a Discovery, such right shall be exercisable for thirty (30)


days after the date the Operating Committee was required to consider such


proposal pursuant to Articles 6.6 or 6.12.


3) For all other proposals, such right shall be exercisable for thirty (30) days after the


date the Operating Committee was required to consider such proposal pursuant


to Articles 6.6 or 6.12.


B. If a Concessionaire voted against any proposal which was approved by the Operating


Committee and which could be conducted as an Exclusive Petroleum Operation pursuant to


Article 8, then such Concessionaire shall have the right not to participate in the operation


contemplated by such approval. Any such Concessionaire wishing to exercise its right of non-


consent must give notice of non-consent to all other Concessionaires within five (5) days (or


twenty-four (24) hours for urgent operational matters) following Operating Committee


approval of such proposal. If a Concessionaire exercises its right of non-consent, the


Concessionaires who were not entitled to give or did not give notice of non-consent shall be


Consenting Concessionaires as to the operation contemplated by the Operating Committee


approval, and shall conduct such activities as an Exclusive Petroleum Operation under Article


8; provided, however, that any such Concessionaire who was not entitled to give or did not


give notice of non-consent may, by notice provided to the other Concessionaires within five


(5) days (or twenty-four (24) hours for urgent operational matters) following the notice of


non-consent given by any non-consenting Concessionaire, require that the Operating


Committee vote again on the proposal in question. Only the Concessionaires which were not


entitled to or have not exercised their right of non-consent with respect to the contemplated


activities shall participate in such second vote of the Operating Committee, with voting rights


proportional to their respective Participating Interest. If the Operating Committee approves


again the contemplated activities, any Concessionaire which voted against the contemplated


activities in such second vote may elect to be a Non-Consenting Concessionaire with respect


to such operation, by notice of non-consent provided to all other Concessionaires within five


(5) days (or twenty-four (24) hours for urgent operational matters) following the Operating


Committee's second approval of such contemplated activities.


C. If the Consenting Concessionaires to an Exclusive Petroleum Operation under Article


6.13(A) or Article 6.13(B) concur, then the Operating Committee may, at any time, pursuant


to this Article, reconsider and approve, decide or take action on any proposal that the


Operating Committee declined to approve earlier, or modify or revoke an earlier approval,


decision or action.


D. Once a Joint Petroleum Operation for the drilling. Deepening, Testing, Sidetracking,


Plugging Back, Completing, Recompleting, Reworking, or plugging of a Well has been


approved and commenced, such operation shall not be discontinued without the consent of^


the Operating Committee; provided, however, that such operation may be discontinued if: I








Page 33 of 87


 Z5-C EPCC AnnexF





1) An impenetrable substance or other condition in the hole is encountered which in


the reasonable judgment of Operator causes the continuation of such operation


to be impractical; or


2) Other circumstances occur which in the reasonable judgment of Operator cause


the continuation of such operation to be unwarranted and the Operating


Committee, within the period required under Article 6.12(A) (1) after receipt of


Operator's notice, approves discontinuing such operation


On the occurrence of either of the above, Operator shall promptly notify the Concessionaires


that such operation is being discontinued pursuant to the foregoing, and any Concessionaire


shall have the right to propose in accordance with Article 8 an Exclusive Petroleum Operation


to continue such operation.


6.14 Unitization Principles


A. If the Concessionaires pursuant to applicable Petroleum law pursue unitization with


another adjoining Concession Contract Area under the terms of the EPCC and this


Agreement, the Concessionaires shall in good faith negotiate and conclude the terms of a


unitization agreement with the holders of the adjoining Concession Contract Area.


8. Such unitization agreement shall be subject to the Petroleum Law and based on the


existing EPCC and existing agreements, and shall include the following principles so far as


practicable:





1) Petroleum Operations in the unitized area shall be based on efficient resource


management and maximum economic recovery of Petroleum;








2) The Petroleum Operations in the unitized area shall be conducted by one


Operator, which shall hold a Participating Interest of at least twenty-five percent


(25 %) in one of the relevant EPCCs;


3) The equity determination or re-determination process shall provide for use of all


relevant technical data and Production experience;


4) The equity determination and re-determination process shall include an initial


equity determination and the availability at least one (1) re-determination;


5) With the unanimous agreement of the unit participants, it shall be permissible not


to pursue a scheduled re-determination; and


6) Equity parameters shall be developed on a fair and equitable basis, consistent


with sound engineering, technical, and economic principles, to allow each unit


participant to achieve its fair and equitable share of unit Production.

















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Article 7. WORK PROGRAMMES AND BUDGETS


7.1 Exploration and Appraisal


A. Within sixty (60) days after the Effective Date, Operator shall deliver to the


Concessionaires a proposed work programme and budget detailing the Joint Petroleum


Operations to be performed for the remainder of the current calendar year and, if


appropriate, for the following calendar year. Within thirty (30) days of such delivery, the


Operating Committee shall meet to agree on a work programme and budget.


B. On or before the 1st day of September every year, Operator shall deliver to the


Concessionaires a proposed work programme and budget detailing the Joint Petroleum


Operations to be performed for the following calendar year. Within thirty (30) days of such


delivery, the Operating Committee shall meet to consider and to endeavour to agree on a


work programme and budget.


C. If a Discovery is made. Operator shall, deliver notice of Discovery required pursuant


to applicable law and shall as soon as possible submit to the Concessionaires a report


containing available details concerning the Discovery and Operator's recommendation as to


whether the Discovery merits appraisal. If the Operating Committee determines that the


Discovery merits appraisal, then Operator shall within sixty (60) days, deliver to the


Concessionaires a proposed work programme and budget for the appraisal of the Discovery.


Within thirty (30) days of such delivery, or earlier if necessary to meet any applicable


deadline pursuant to applicable Petroleum law or the EPCC, the Operating Committee shall


meet to consider, modify and then either approve or reject the appraisal work programme


and budget. If the appraisal work programme and budget is approved by the Operating


Committee, Operator shall take such steps as may be required pursuant to applicable law


and the EPCC to secure approval of the appraisal work programme and budget by the


Government. In the event the Government requires changes in the appraisal work


programme and budget, the matter shall be resubmitted to the Operating Committee for


further consideration.


D. The work programme and budget agreed pursuant to this Article shall include at


least the funding of the options under EPCC Article 4.1 required to be carried out during the


calendar year in question pursuant to the EPCC. If within the time periods prescribed in this


Article 7.1 the Operating Committee is unable to agree on such a work programme and


budget, then the proposal capable of satisfying Article 4.1 of the EPCC for the calendar year


in question that receives the applicable percentage under Article 6.9(A) or 6.9(C), whichever


is applicable shall be deemed adopted as part of the annual work programme and budget. If


competing proposals receive equal votes, then Operator shall choose between those


competing proposals. Any portion of a work programme and budget adopted pursuant to


this Article 7.1(D) instead of Article 7.1(B) shall contain only such operations for the Joint


Account as are necessary to maintain the EPCC in full force and effect or fulfil the obligations


of surrender or termination, including such acts as are necessary to fulfil EPCC Article 4.1 as


required for the given calendar year. /


E. Any approved work programme and budget may be revised by the Operating I Mfl


Committee from time to time. To the extent such revisions are approved by the Operating \\


Page 35 of 87 J]


 Z5-C EPCC Annex F








Committee, the work programme and budget shall be amended accordingly. Operator shall


prepare and submit a corresponding work programme and budget amendment to the


Government if as required by the EPCC.


F. Subject to Article 7.8.(C), approval of any such work programme and budget which


includes:


1) An Exploration Well, whether by drilling, Deepening or Sidetracking, shall include


approval for all expenditures necessary for drilling, Deepening, Sidetracking and


Abandonment, as applicable, and, subject to Operating Committee approval,


Testing and Completing an Exploration Well.


2) An Appraisal Well, whether by drilling, Deepening or Sidetracking, shall include


approval for all expenditures necessary for drilling, Deepening, Sidetracking and


Abandonment, as applicable, and, subject to Operating Committee approval,


Testing and Completing such Appraisal Well.


G. Any Concessionaire desiring to propose a Completion attempt, or an alternative


Completion attempt, must do so within the time period provided in Article 6.12(A)(1) by


notifying all other Concessionaires. Any such proposal shall include an AFE for such


Completion costs.


7.2 Development


A. If the Operating Committee determines that a Discovery may be Commercial


Discovery, Operator shall as soon as practicable submit to the Concessionaires a


Development Plan together with the first annual work programme and budget (or a


multiyear work programme and budget pursuant to Article 7.5) and provisional work


programmes and budgets for the remainder of the activities related to the Development of


the Discovery, which shall contain, inter alia:


1) Details of the proposed Joint Petroleum Operations to be undertaken, personnel


required and expenditures to be incurred, including the timing of same, on a


calendar year basis;


2) An estimated date for the commencement of Production;


3) A delineation of the proposed Development and Production Area; and


4) Any other information requested by the Operating Committee.


B. After receipt of the Development Plan and prior to any applicable deadline pursuant


to applicable Petroleum law and the EPCC, the Operating Committee shall meet to consider,


modify and then either approve or reject the Development Plan and the first annual work


programme and budget for the Development of a Discovery, as submitted by Operator. If


the Operating Committee determines that the Discovery is Commercial and approves the


corresponding Development Plan, Operator shall, as soon as possible, deliver the notice of


Commercial Discovery required pursuant to applicable law and take such other steps as may


be required pursuant to the EPCC to secure approval of the Development Plan by the





Page 36 of 87


 Z5-C EPCC AnnexF





Government. In the event the Government requires changes in the Development Plan, the


matter shall be resubmitted to the Operating Committee for further consideration.


C. If the Development Plan is approved by the Government, such Joint Petroleum


Operations as required by the plan shall be incorporated into and form part of annual work


programmes and budgets, and Operator shall, on or before the 1st day of September of


every year submit a work programme and budget for the Production and Development Area,


for the following calendar year. Subject to Article 7.5, within thirty (30) days after such


submittal, the Operating Committee shall endeavour to agree to such work programme and


budget, including any necessary or appropriate revisions to the work programme and budget


for the Development Plan approved by Government.


7.3 Production


A. On or before the 1st day of September of every year Operator shall deliver to the


Concessionaires a proposed Production work programme and budget detailing the Joint


Petroleum Operations to be performed pursuant to an approved Development Plan in


relevant in the Development and Production Area, and the projected Production schedule for


the following calendar year.


B. Within thirty (30) days of such delivery, the Operating Committee shall agree upon a


Production work programme and budget, failing which the provisions of Article 7.1(D) shall


be applied mutatis mutandis.


7.4 Itemization of Expenditures


A. During the preparation of the proposed work programmes and budgets and


Development Plans contemplated in this Article, Operator shall first consult with the


appropriate subcommittees and thereafter the Operating Committee regarding the contents


of such work programmes and budgets and Development Plans.


B. Each work programme and budget and Development Plan submitted by Operator to


the relevant subcommittees and the Operating Committee shall contain an itemized estimate


of the costs of the relevant Joint Petroleum Operations and all other expenditures to be


made for the applicable Joint Account during the calendar year in question and shall, inter


alia:





1) Identify each work category in sufficient detail to afford the ready identification of


the nature, scope and duration of the activity in question;





2) Include such reasonable information regarding Operator's allocation procedures


and estimated manpower costs as the Operating Committee may determine;


3) Comply with the requirements of the EPCC;


4) Indicate items that will be subject to AFE approval and in relation to such items


specify the best estimate with respect to all information listed in Article 7.7(C);


5) Indicate items that the Operator considers not to be cost recoverable in


accordance with applicable law and the EPCC; and \





Page 37 of 87


 Z5-C EPCC AnnexF





6) In relation to any submission of any proposed work programmes and budgets or


the Development Plan by Operator to the Operating Committee, it shall include a


protocol documenting the discussion and decisions of the meeting of the


appropriate subcommittees with respect to such work programme and budget or


Development Plan.


C. The work programme and budget shall designate the portion or portions of the EPCC


Area in which Joint Petroleum Operations itemized in such work programme and budget are


to be conducted and shall specify the kind and extent of such operations in such detail as the


Operating Committee may deem suitable.


7.5 Multi-Year Work Programme and Budget


Any work that cannot be efficiently completed within a single calendar year may be proposed


in a multi-year work programme and budget. Upon approval by the Operating Committee,


such multi-year work programme and budget shall, subject only to revisions approved by the


Operating Committee thereafter: (i) remain in effect as between the Concessionaires (and


the associated cost estimate shall be a binding pro-rata obligation of each Concessionaire)


through the completion of the work; and (ii) be reflected in each annual work programme


and budget. If the EPCC requires that work programmes and budgets be submitted to the


Government for approval, such multi-year work programme and budget shall be submitted


to the Government either in a single request for a multi-year approval or as part of the


annual approval process, according to the terms of the EPCC.


7.6 Contract Awards


A. The Operator shall in accordance with applicable law give preference to the purchase


of Mozambican goods and services..


B. Subject to applicable law and the EPCC, Operator shall award each contract for Joint


Petroleum Operations on the following basis (the amounts stated are in U.S. dollars, inclusive


of taxes):





Procedure A Procedure B Procedure C


Exploration and Appraisal 0 to $1,000,000 > $1,000,000 to > $2,500,000


Operations $2,500,000





Development Operations 0 to $2,500,000 > $2,500,000 to > $5,000,000


$5,000,000


Production Operations 0 to $2,500,000 > $2,500,000 to > $5,000,000


$5,000,000


Decommissioning Operations 0 to $1,000,000 > $1,000,000 to > $2,500,000


$2,500,000














Page 38 of 87


 Z5-CEPCC AnnexF








1) Procedure A


i. Operator shall have the authority to award the contract to a third party











contractor, within the amounts set out in this Procedure A in Article 7.6, to


the best qualified third party contractor, as determined by cost, quality,


safety, environmental performance, and ability to perform the contract


properly, on time, within budgeted cost, and in compliance with applicable


law and contractual requirements, without the obligation to tender and


without informing or seeking the approval of the Operating Committee.


ii. Contracts in excess of the amounts set out in Procedure A in Article 7.6 shall


follow the procedure B or C, below, as applicable, and be competitively bid,


unless the Operating Committee otherwise agrees.


iii. Upon the request of a Concessionaire, Operator shall provide such


Concessionaire a copy of the executed contract.


2) Procedure B


i. Subject to Article 7.6(1), Operator shall have the authority to award the


contract, or a series of related contracts (same contractor, same service or


equipment or same operation) to a third party contractor for aggregate


amounts of less than or equal to the minimum amount set out under


Procedure B in Article 7.6.


ii. Contract awards within the amounts set out in Procedure B shall be


competitively bid, unless the Operating Committee otherwise agrees.


iii. Contract awards in excess of the amounts set out in Procedure B of Article


7.6 shall be subject to Procedure C (Operating Committee approval), unless


otherwise agreed.


iv. Upon the request of a Concessionaire, Operator shall provide such


Concessionaire a copy of the executed contract.


3) Procedure C


i. Operator shall provide the Operating Committee an award


recommendation that contains the following:


(a) A list of the entities whom Operator invited to tender for the said


contract;


(b) A list of other contractors/suppliers considered;


(c) The scope and timing of the work to be executed; and


(d) A competitive bid analysis, stating Operator's recommendation as to the


entity to whom the contract should be awarded, and the reasons


therefore.


ii. After providing an award recommendation under 7.6(3)i., Operator shall


obtain the approval of the Operating Committee of the recommended


award.





Page 39 of 87





A/S


 Z5-C EPCC Annex F





iii. Upon the request of a Concessionaire, Operator shall provide such


Concessionaire with a copy of the final version of the contract.


4) Notwithstanding anything to the contrary in this Agreement Operator shall, to the


extent permitted by applicable law, have the authority to award any contract less


than or equal to five hundred thousand United States dollars (US$500,000) to an


Affiliated Company of Operator, or a series of related contracts (same contractor,


same service or equipment or same operation) for a total amount less than or


equal five hundred thousand United States dollars (US$500,000)to an Affiliated


Company of Operator. Award of any contract or a series of related contracts


(same contractor, same service or equipment or same operation) to Affiliates that


results in a total amount awarded to Affiliates in respect of any contract or a


series of related contracts exceeding five hundred thousand United States dollars


(US$500,000)shall require Operating Committee approval unless the work to be


performed is separately identified in the supporting documentation to an


approved Work Program and Budget and is specifically identified in such


documentation as work to be performed by an Affiliated Company of Operator.


5) Notwithstanding anything to the contrary in this Agreement, Operator shall be


required to obtain the prior approval of the Operating Committee before


awarding any contract to a Non-Operator or an Affiliated Company of a Non-


Operator.


6) The Operating Committee may by vote accept a contract issued without any


tender required above, for reasons stated in the materials provided for such vote.


7) The Operating Committee shall as soon as reasonably possible following the


approval of a Development Plan agree a Procurement Strategy detailing


procedures for Contract Awards in compliance with this Article 7.6, the EPCC and


applicable law, and shall submit this to the INP for approval.


8) All contracts entered into by the Operator shall be available for inspection of non-


operating Concessionaires and the relevant authorities.


9) The annual WP&B shall include an annual procurement plan covering contracts to


be awarded or renewed in the subject budget year.


7.7 Authorization for Expenditure ("AFE") Procedure


A. Prior to incurring any commitment or expenditure for the Joint Account, which are


estimated to be:


1) In excess of two million five hundred thousand United States Dollars (US$


2,500,000) in an exploration or appraisal work programme and budget;


2) in excess of five million United States Dollars (US$ 5,000,000) in a development


work programme and budget; and











Page 40 of 87


 Z5-C EPCC AnnexF








3) in excess of five million United States Dollars (US$ 5,000,000) in a Production or


Decommissioning work programme and budget.











Operator shall send to each Concessionaire an APE as described in Article 7.7(C).


Notwithstanding the above, Operator shall not be obliged to furnish an AFE to the


Concessionaires with respect to any work commitment, work-overs of Wells and general and


administrative costs that are listed as separate line items in an approved work programme


and budget.


B. Prior to making any expenditures or incurring any commitments for work subject to


the AFE procedure in Article 7.7(A), Operator shall obtain the approval of the Operating


Committee to an AFE for cost and technical control purposes. A Concessionaire may vote to


disapprove an AFE issued in furtherance of an approved work programme and budget only if


(i) some or all of the costs described in the AFE exceed the line items in the approved work


programme and budget by more than is permitted under Article 7.8; (ii) the proposed terms


of any third party contract described in the AFE do not approximate fair market terms; or (iii)


in such Concessionaire's good faith opinion, any material technical specifications contained in


the AFE that are not in the approved work programme and budget are imprudent or are not


supported by the known data about the geological formations being drilled. A


Concessionaire's vote shall be considered a vote to approve the AFE unless the


Concessionaire specifically describes one or more of the three reasons listed above as the


basis for its vote of disapproval. If the Operating Committee approves an AFE for the Joint


Petroleum Operations within the applicable time period under Article 6.12(A), Operator shall


be authorized to conduct the Joint Petroleum Operations under the terms of this Agreement.


If the Operating Committee fails to approve an AFE for the Joint Petroleum Operations within


the applicable time period, the activities shall be deemed rejected. Operator shall promptly


notify the Concessionaires if the activities have been rejected, and, subject to Article 8, any


Concessionaire may thereafter propose to conduct the activities as an Exclusive Petroleum


Operation under Article 8. When a Joint Petroleum Operation is rejected under this Article


7.7(B) or an activity is approved for differing amounts than those provided for in the


applicable line items of the approved work programme and budget, the work programme


and budget shall be deemed to be revised accordingly.


C. Each AFE proposed by Operator shall:


1) Identify the Joint Petroleum Operation by specific reference to the applicable line


items in the work programme and budget;


2) Describe the work in detail;


3) Contain Operator's best estimate of the total funds required to carry out such


work;


4) Outline the proposed work schedule;


5) Provide a timetable of expenditures, if known; and


6) Be accompanied by such other supporting information as is necessary for a


decision.








Page 41 of 87


 Z5-CEPCC Annex F





7.8 Over-expenditures of Work Programmes and Budgets


A. For expenditures on any line item of an approved work programme and budget.


Operator shall be entitled to incur without further approval of the Operating Committee an


over-expenditure for such line item up to ten percent (10%) of the authorized amount for


such line item; provided that the cumulative total of all over expenditures for a calendar year


shall not exceed five percent (5%) of the total annual work programme and budget in


question.


B. At such time Operator reasonably anticipates the limits of Article 7.8(A) will be


exceeded, Operator shall furnish to the Operating Committee a supplemental AFE for the


estimated expenditures for the Operating Committee's approval, and Operator shall provide


reasonable details of such over expenditures. The work programme and budget shall be


revised accordingly and the over expenditures permitted in Article 7.8(A) shall be based on


the revised work programme and budget. Operator shall promptly give notice of the


amounts of over expenditures when actually incurred.


C. The restrictions contained in this Article shall be without prejudice to Operator's


rights to make expenditures for urgent operational matters and measures set out in Article


14.5 without the Operating Committee's approval. In case of emergency, Operator may make


such immediate expenditures, incur liabilities and/or take such actions as it deems necessary


for the protection of life, safety, environment and property. Operator shall submit any


necessary budget revision to the Operating Committee for approval and incorporation into


the relevant Work Program and Budget as soon as practicable.


D. Subject to the provisions of this Article 7, Operator may during any calendar year


make expenditures or incur liabilities on behalf of the Concessionaires in respect of Joint


Petroleum Operations for non-budgeted items which in the aggregate do not exceed the


equivalent of five hundred thousand United States Dollars (USD 500,000); provided, that such


items have not been rejected by the Operating Committee. Operator shall, as soon as


practicable, report such expenditures to the Concessionaires where after the said aggregate


amount may, if the Operating Committee agrees, be re-instated as part of the relevant Work


Program and Budget.











Article 8. EXCLUSIVE PETROLEUM OPERATIONS





8.1 Limitation on Applicability





A. No Petroleum Operations may be conducted in furtherance of the EPCC except as


Joint Petroleum Operations under Article 6 or as Exclusive Petroleum Operations under this


Article 8. No Exclusive Petroleum Operation shall be conducted (other than the tie-in of


Exclusive Petroleum Operation facilities with existing production facilities pursuant to Article


8.10) which conflicts with a previously approved Joint Petroleum Operation or with a


previously approved Exclusive Petroleum Operation. Except for Exclusive Petroleum


Operations relating to geophysical operations in excess of the work required to fulfil the


Exploration work commitment during any particular Exploration sub-period pursuant to the





Page 42 of 87


 Z5-C EPCC AnnexF





EPCC, and Deepening, Testing, Completing, Sidetracking, Plugging Back, Recompletions or


Reworking of a Well originally drilled to fulfil the Exploration work obligations, no Exclusive











Petroleum Operations may be proposed or conducted until the Exploration work obligations


for the then current Exploration sub-period are fulfilled.


B. Operations which are required to fulfil the Exploration work commitment during any


particular Exploration sub-period must be proposed and conducted as Joint Petroleum


Operations under Article 6, and may not be proposed or conducted as Exclusive Petroleum


Operations under this Article 8.


C. No Concessionaire may propose or conduct an Exclusive Petroleum Operation under


this Article unless and until such Concessionaire has properly exercised its right to propose an


Exclusive Petroleum Operation pursuant to Article 6.13, or is entitled to conduct an Exclusive


Petroleum Operation pursuant to Article 11.


D. Any operation to be proposed as an Exclusive Petroleum Operation, must initially be


proposed as a Joint Petroleum Operation. For the avoidance of doubt, only the following


Petroleum Operations may, subject to the applicable Petroleum law, the EPCC and provisions


of this Agreement, be carried out as Exclusive Petroleum Operations, subject to the terms of


this Article 8:


1) Drilling, and/or Testing of Exploration Wells and Appraisal Wells;


2) Completion of Exploration Wells and Appraisal Wells not then completed as


productive of Petroleum;


3) Deepening, Sidetracking, Plugging Back and/or Recompletion of Exploration Wells


and Appraisal Wells;


4) Declaration of a Commercial Discovery;


5) Development of a Commercial Discovery in accordance with a Development Plan


submitted pursuant to the EPCC;


6) Seismic or other geological or geophysical operations; and


7) Any operations specifically authorised to be undertaken as an Exclusive Petroleum


Operation under Article 11.


E. For the avoidance of doubt, no Exclusive Petroleum Operation may be conducted in


a Zone from which there has been Production testing or Production of Crude Oil or Natural


Gas, other than a Development of a Discovery by one or more Consenting Concessionaires.


8.2 Procedure to Propose Exclusive Petroleum Operations


A. Subject to Article 8.1, if any Concessionaire proposes to conduct an Exclusive


Petroleum Operation, such Concessionaire shall give notice of the proposed operation to all


Concessionaires, other than Non-Consenting Concessionaires who have relinquished their


rights to participate in such activities pursuant to Article 8.4(B) or Article 8.4(F) and have n





Page 43 of 87


 Z5-C EPCC AnnexF





option to reinstate such rights under Article 8.4(C). Such notice shall specify that such


Petroleum Operation is proposed as an Exclusive Petroleum Operation and include the work


to be performed, the location, the objectives, and estimated cost of such Petroleum


Operation.





B. Any Concessionaire entitled to receive such notice shall have the right to participate


in the proposed Petroleum Operation.








1) For proposals to Deepen, Test, Complete, Sidetrack, Plug Back, Recomplete or


Rework involving the use of a drilling rig that is on location in the EPCC Area, any


such Concessionaire wishing to exercise such right must so notify the proposing


Concessionaire and Operator within twenty-four (24) hours after receipt of the


notice proposing the Exclusive Petroleum Operation.


2) For proposals to develop a Discovery, any Concessionaire wishing to exercise such


right must so notify Operator and the Concessionaire proposing to develop within


sixty (60) days after receipt of the notice proposing the Exclusive Petroleum


Operation.


3) For all other proposals, any such Concessionaire wishing to exercise such right


must so notify the proposing Concessionaire and Operator within thirty (30) days


after receipt of the notice proposing the Exclusive Petroleum Operation.


C. Failure of a Concessionaire to whom a proposal notice is delivered to properly reply


within the period specified above shall constitute an election by that Concessionaire not to


participate in the proposed activities.





D. If all Concessionaires properly exercise their rights to participate, then the proposed


operation shall be conducted as a Joint Petroleum Operation. Operator shall commence such


Joint Operation as promptly as practicable and conduct it with due diligence.


E. If less than all Concessionaires entitled to receive such proposal notice properly


exercise their rights to participate, then:





1) The Concessionaire proposing the Exclusive Petroleum Operation, together with


any other Consenting Concessionaires, shall have the right exercisable for the


applicable notice period set out in Article 8.2(B), to instruct Operator (subject to


Article 8.12(F)) to conduct the Exclusive Petroleum Operation.





2) If the Exclusive Petroleum Operation is conducted, the Consenting


Concessionaires shall bear a Participating Interest in such Exclusive Petroleum


Operation, the numerator of which is such Consenting Concessionaire's





Participating Interest as established in the EPCC and the denominator of which is


the aggregate of the Participating Interests of the Consenting Concessionaires, or


as the Consenting Concessionaires may otherwise agree, subject to Government


approval.


3) If such Exclusive Petroleum Operation has not been commenced within one





hundred and eighty (180) days (excluding any extension specifically agreed by all





Page 44 of 87


 Z5-C EPCC AnnexF





Concessionaires or allowed by the Force Majeure provisions of Article 17) after


the date of the instruction given to Operator under Article 8.2(E)(1), the right to


conduct such Exclusive Petroleum Operation terminates. If any Concessionaire


still desires to conduct such Exclusive Petroleum Operation, notice proposing such


operation must be resubmitted to the Concessionaires in accordance with Article


6, as if no proposal to conduct an Exclusive Petroleum Operation had been


previously made.





8.3 Responsibility for Exclusive Petroleum Operations


A. The Consenting Concessionaires shall bear in accordance with the Participating


Interests agreed under Article 8.2(E) the entire cost and liability of conducting an Exclusive


Petroleum Operation and shall indemnify the Non-Consenting Concessionaires from any and


all costs and liabilities incurred incident to such Exclusive Petroleum Operation (including


Consequential Loss and Environmental Loss) and shall keep the EPCC Area free and clear of


all liens and encumbrances of every kind created by or arising from such Exclusive Petroleum


Operation.


B. Notwithstanding Article 8.3(A), each Concessionaire shall continue to bear its


Participating Interest share of the cost and liability incident to the Petroleum Operations in


which it participated, including plugging and abandoning of Wells, cessation of Petroleum


Operations and Decommissioning of Facilities, but only to the extent those costs were not


increased by the Exclusive Petroleum Operation.


8.4 Consequences of Exclusive Petroleum Operations


A. With regard to any Exclusive Petroleum Operation, for so long as a Non-Consenting


Concessionaire has the option under Article 8.4(C) to reinstate the rights it relinquished


under Article 8.4(B), such Non-Consenting Concessionaire shall be entitled to have access


concurrently with the Consenting Concessionaires to all data and other information relating


to such Exclusive Petroleum Operation, other than data obtained in an Exclusive Petroleum


Operation for the purpose of acquiring G & G Data. If a Non-Consenting Concessionaire


desires to receive and acquire the right to use such G & G Data, then such Non-Consenting


Concessionaire shall have the right to do so by paying to the Consenting Concessionaires its


Participating Interest share as stipulated in the EPCC of the cost incurred in obtaining such G


& G Data.


B. Subject to Article 8.4(C) and Articles 8.6(E) and 8.8, each Non-Consenting


Concessionaire shall be deemed to have relinquished to the Consenting Concessionaires, and


the Consenting Concessionaires shall be deemed to own, in proportion to their respective


Participating Interests in any Exclusive Petroleum Operation:





1) All of each such Non-Consenting Concessionaire's right to participate in further


operations in the Well or Deepened or Sidetracked portion of a Well in which the


Exclusive Petroleum Operation was conducted and on any Discovery made or


appraised in the course of such Exclusive Petroleum Operation; and r\.











Page 45 of 87


 Z5-C EPCC Annex F








2) All of each such Non-Consenting Concessionaire's right pursuant to the EPCC to


take and dispose of Petroleum Produced:





a) From the Well or Deepened or Sidetracked portion of a Well in which such


Exclusive Petroleum Operation was conducted; and


b) From any Wells drilled to appraise or develop a Discovery made or appraised


in the course of such Exclusive Petroleum Operation.





C. A Non-Consenting Concessionaire shall have only the following options to reinstate


the rights it relinquished pursuant to Article 8.4(B):





1) If the Consenting Concessionaires decide to appraise a Discovery made in the


course of an Exclusive Petroleum Operation, the Consenting Concessionaires shall





submit to each Non-Consenting Concessionaire the approved Appraisal


Programme. For thirty (30) days (or forty-eight (48) hours for urgent operational


matters) from receipt of such Appraisal Programme, each Non-Consenting


Concessionaire shall have the option to reinstate the rights it relinquished


pursuant to Article 8.4(B) and to participate in such Appraisal Programme. The


Non-Consenting Concessionaire may exercise such option by notifying Operator


within the period specified above that such Non-Consenting Concessionaire


agrees to bear its Participating Interest share of the expense and liability of such


Appraisal Programme, and to pay such amounts as set out in Articles 8.5(A) and


8.5(B).


2) If the Consenting Concessionaires decide to develop a Discovery made or


appraised in the course of an Exclusive Petroleum Operation, the Consenting


Concessionaires shall submit to the Non-Consenting Concessionaires a


Development Plan substantially in the form intended to be submitted to the


Government under the EPCC. For sixty (60) days from receipt of such


Development Plan or such lesser period of time prescribed by the EPCC, each


Non-Consenting Concessionaire shall have the option to reinstate the rights it


relinquished pursuant to Article 8.4(B) and to participate in such Development


Plan. The Non-Consenting Concessionaire may exercise such option by notifying


Operator within the period specified above that such Non-Consenting


Concessionaire agrees to bear its Participating Interest share of the liability and


expense of such Development Plan and such future operating and producing


costs, and to pay the amounts as set out in Articles 8.5(A) and 8.5(B).





3) If the Consenting Concessionaires decide to Deepen, Complete, Sidetrack, Plug


Back or Recomplete a Well drilled as part of an Exclusive Petroleum Operation and


such further operation was not included in the original proposal for such Well, the


Consenting Concessionaires shall submit to the Non-Consenting Concessionaires


the approved AFE for such further activities. For thirty (30) days (or forty-eight


(48) hours for urgent operational matters) from receipt of such AFE, each Non-


Consenting Concessionaire shall have the option to reinstate the rights it


relinquished pursuant to Article 8.4(B) and to participate in such operation. The


Non-Consenting Concessionaire may exercise such option by notifying Operator





Page 46 of 87


 Z5-CEPCC AnnexF





within the period specified above that such Non-Consenting Concessionaire


agrees to bear its Participating Interest share of the liability and expense of such














further operation, and to pay the amounts as set out in Articles 8.5(A) and 8.5(B).


A Non-Consenting Concessionaire shall not be entitled to reinstate its rights at any other time


or in any other type of operation except as provided for in this Agreement.


D. If a Non-Consenting Concessionaire does not properly and in a timely manner


exercise its option under Article 8.4(C), including paying all amounts due in accordance with


Articles 8.5(A) and 8.5(B), such Non-Consenting Concessionaire shall have forfeited the


options as set out in Article 8.4(C) and the right to participate in the proposed program,


unless such program, plan or operation is materially modified or expanded (in which case a


new notice and option shall be given to such Non-Consenting Concessionaire under Article


8.4(C)).


E. A Non-Consenting Concessionaire exercising its option under Article 8.4(C) shall


notify the other Concessionaires that it agrees to bear its share of the liability and expense of


such further operation and to reimburse the amounts set out in Articles 8.5(A) and 8.5(B)


that such Non-Consenting Concessionaire had not previously paid. Such Non-Consenting


Concessionaire shall in no way be deemed to be entitled to any amounts paid pursuant to


Articles 8.5(A) and 8.5(B) incident to such Exclusive Petroleum Operations. The Participating


Interest of such Non-Consenting Concessionaire in such Exclusive Petroleum Operation shall


be its Participating Interest stipulated in Article 4.2 (A). The Consenting Concessionaires shall


contribute to the Participating Interest of the Non-Consenting Concessionaire in proportion


to the excess Participating Interest that each received under Article 8.2(E). If all


Concessionaires participate in the proposed operation, then such operation shall be


conducted as a Joint Petroleum Operation pursuant to Article 6.


F. If after the expiry of the period in which a Non-Consenting Concessionaire may


exercise its option to participate in a Development Plan, the Consenting Concessionaires


desire to proceed, Operator shall give notice to the Government pursuant to applicable law


and the EPCC requesting a meeting to advise the Government that the Consenting


Concessionaires consider the Discovery to be a Commercial Discovery. Following such


meeting such Operator for such Development shall proceed to prepare and submit a


Development Plan relevant for such Development and such Development and Production


Area. Unless the Development Plan is materially modified or expanded prior to the


commencement of Exclusive Petroleum Operations under such plan, in which case a new


notice and option shall be given to the Non-Consenting Concessionaires under Article 8.4(C),


each Non-Consenting Concessionaire to such Development Plan shall be deemed to have:


1) elected not to apply for an approval of the Development Plan covering such


Development and forfeited all interest in such Development; and





2) forfeited all economic interest in the Development and Production Area of such


Development; and


3)


assumed a duty to exercise its legal interest in such Development and Product


Page 47 of 87 Area for the benefit of the Consenting Concessionaires.





 Z5-CEPCC Annex F





In either case such Non-Consenting Concessionaire shall be deemed to have withdrawn from


this Agreement to the extent it relates to such Development, even if the Development Plan is


modified or expanded subsequent to the commencement of Petroleum Operations under


such Development Plan, and shall be further deemed to have forfeited any right to


participate in the construction and ownership of Facilities outside the Development and


Production Area designed solely for the use of such Development


8.5 Premium to Participate in Exclusive Petroleum Operations


A. Each such Non-Consenting Concessionaire shall within fifteen (15) days of the


exercise of its option under Article 8.4(C), pay in immediately available funds to the


Consenting Concessionaires in proportion to their respective Participating Interests in such


Exclusive Petroleum Operations a lump sum amount payable in the currency designated by


such Consenting Concessionaires. Such lump sum amount shall be equal to such Non-


Consenting Concessionaire's Participating Interest share of all liabilities and expenses that


were incurred in every Exclusive Petroleum Operation relating to the Discovery, or Well


drilled as part of an Exclusive Petroleum Operation as the case may be, in which the Non-


Consenting Concessionaire desires to reinstate the rights it relinquished pursuant to Article


8.4(B), and that were not previously paid by such Non-Consenting Concessionaire.


B. In addition to the payment required under Article 8.5(A), immediately following the


exercise of its option under Article 8.4(C) each such Non-Consenting Concessionaire shall be


liable to reimburse the Consenting Concessionaires who took the risk of such Exclusive


Petroleum Operations in proportion to their respective Participating Interests, an amount


equal to the total of:


1) Five hundred percent (500%) of such Non-Consenting Concessionaire's


Participating Interest share of all liabilities and expenses that were incurred in any


Exclusive Petroleum Operation relating to the obtaining of the portion of the G &


G Data which pertains to the Discovery, and that were not previously paid by such


Non-Consenting Concessionaire; plus


2) Five hundred percent (500%) of such Non-Consenting Concessionaire's


Participating Interest share of all liabilities and expenses that were incurred in any


Exclusive Petroleum Operation relating to the drilling, Deepening, Testing,


Completing, Sidetracking, Plugging Back, Recompleting and Reworking of the


Exploration Well which made the Discovery, in which the Non-Consenting


Concessionaire desires to reinstate the rights it relinquished pursuant to Article


8.4(B), and that were not previously paid by such Non-Consenting Concessionaire;


plus


3) Five hundred percent (500%) of such Non-Consenting Concessionaire's


Participating Interest share of all liabilities and expenses that were incurred in any


Exclusive Petroleum Operation relating to the drilling, Deepening, Testing,


Completing, Sidetracking, Plugging Back, Recompleting and Reworking of the


Appraisal Well(s) which delineated the Discovery, in which the Non-Consenting


Concessionaire desires to reinstate the rights it relinquished pursuant to Article ■ Ml


8.4(B), and that were not previously paid by such Non-Consenting Concessionaire. \\


Page 48 of 87


 Z5-C EPCC AnnexF








C. Each such Non-Consenting Concessionaire who is liable for the amounts set out in


Article 8.5(B) shall within fifteen (15) days of the exercise of its option under Article 8.4(C),


pay in immediately available funds the full amount due from it under Article 8.5(B) to such


Consenting Concessionaires, in the currency designated by such Consenting Concessionaires.


D. The Non-Consenting Concessionaire exercising its option under Article 8.4(C) shall, in


accordance with Article 20, be entitled to all Cost Petroleum derived from reimbursements


made under Article 8.5(A). Such Non-Consenting Concessionaire shall not be entitled to Cost


Petroleum associated with payments made under Article 8.5(B), unless applicable law or the


EPCC require otherwise. Each Consenting Concessionaire shall have the right to refuse to


accept all or any portion of its share of amounts paid under Articles 8.5(A) and 8.5(B). In such


case the refused amount shall be distributed to each non-refusing Consenting Concessionaire


on a pro-rata basis.


8.6 Order of Preference of Operations


A. Except as otherwise provided in this Agreement, if any Concessionaire desires to


propose the conduct of a Petroleum Operation that will conflict with an existing proposal for


an Exclusive Petroleum Operation, such Concessionaire shall have the right exercisable for


five (5) days (or twenty-four (24) hours for proposals involving the use of a drilling rig that is


on location in the EPCC Area) from receipt of the proposal for the Exclusive Petroleum


Operation, to deliver such Concessionaire's alternative proposal to all Concessionaires


entitled to participate in the proposed activities. Such alternative proposal shall contain the


information required under Article 8.2(A).


B. Each Concessionaire receiving such proposals shall elect by delivery of notice to


Operator and to the proposing Concessionaires within the appropriate response period set


out in Article 8.2(B) to participate in one of the competing proposals. Any Concessionaire not


notifying Operator and the proposing Concessionaires within the response period shall be


deemed to have voted against the proposals.


C. The proposal receiving the largest aggregate Participating Interest vote shall have


priority over all other competing proposals. In the case of a tie vote. Operator shall choose


among the proposals receiving the largest aggregate Participating Interest vote. Operator


shall deliver notice of such result to all Concessionaires entitled to participate in such


Petroleum Operation within five (5) days (or twenty-four (24) hours for urgent operational


matters).


D. Each Concessionaire shall then have two (2) days, or twenty-four (24) hours for


urgent operational matters, from receipt of such notice to elect by delivery of notice to


Operator and the proposing Concessionaires whether such Concessionaire will participate in


such Exclusive Petroleum Operation, or will relinquish its interest pursuant to Article 8.4(B).


Failure by a Concessionaire to deliver such notice within such period shall be deemed an


election not to participate in the prevailing proposal.


E. Notwithstanding the provisions of Article 8.4(B), if for reasons other than the


encountering of any practically impenetrable substance or any other condition in the hole-x f


rendering further operations impracticable, a Well drilled as an Exclusive Petroleum \


Page 49 of 87 1/ * /


(a/<;


 Z5-C EPCC AnnexF





Operation fails to reach the deepest objective Zone described in the notice proposing such


Well, Operator shall give notice of such failure to each Non-Consenting Concessionaire who


submitted or voted for an alternative proposal under this Article 8.6 to drill such Well to a


shallower Zone than the deepest objective Zone proposed in the notice under which such


Well was drilled. Each such Non-Consenting Concessionaire shall have the option exercisable


for forty-eight (48) hours from receipt of such notice to participate for its Participating


Interest share in the initial proposed Completion of such Well. Each such Non-Consenting


Concessionaire may exercise such option by notifying Operator that it wishes to participate in


such Completion and by paying its Participating Interest share of the cost of drilling such Well


to its deepest depth drilled in the Zone in which it is completed. All liabilities and expenses


for drilling and Testing the Well drilled as part of an Exclusive Petroleum Operation below


that depth shall be for the sole account of the Consenting Concessionaires. If any such Non-


Consenting Concessionaire does not properly elect to participate in the first completion


proposed for such Well, the relinquishment provisions of Article 8.4(B) shall continue to


apply to such Non-Consenting Concessionaire's interest.


8.7 Stand-By Costs


A. When a Petroleum Operation has been performed, all tests have been conducted


and the results of such tests furnished to the Concessionaires, stand by costs incurred


pending response to any Concessionaire's notice proposing an Exclusive Petroleum Operation


for Deepening, Testing, Sidetracking, Completing, Plugging Back, Recompleting, Reworking or


other further operation in such Well (including the period required under Article 8.6 to


resolve competing proposals) shall be charged and borne as part of the Petroleum Operation


just completed. Stand by costs incurred subsequent to all Concessionaires responding, or


expiration of the response time permitted, whichever first occurs, shall be charged to and


borne by the Concessionaires proposing the Exclusive Petroleum Operation in proportion to


their Participating Interests, regardless of whether such Exclusive Petroleum Operation is


actually conducted.


B. If further Petroleum Operations related to urgent operational matters are proposed


while the drilling rig to be utilized is on location, any Concessionaire may request and receive


up to five (5) additional days after expiration of the applicable response period specified in


Article 8.2(B)(1) within which to respond by notifying Operator that such Concessionaire


agrees to bear all stand by costs and other costs incurred during such extended response


period. Operator may require such Concessionaire to pay the estimated stand by costs in


advance as a condition to extending the response period. If more than one Concessionaire


requests such additional time to respond to the notice, stand by costs shall be allocated


between such Concessionaires on a day-to-day basis in proportion to their Participating


Interests.


8.8 Special Considerations Regarding Deepening and Sidetracking


A. A Well drilled as part of an Exclusive Petroleum Operation shall not be Deepened or


Sidetracked without first affording the Non-Consenting Concessionaires in accordance with


this Article 8.8 the opportunity to participate in such operation.








Page 50 of 87


 Z5-C EPCC AnnexF





B. In the event any Consenting Concessionaire desires to Deepen or Sidetrack a Well


drilled as part of an Exclusive Petroleum Operation, such Concessionaire shall initiate the


procedure contemplated by Article 8.2. If a Deepening or Sidetracking is approved pursuant


to such provisions, and if any Non-Consenting Concessionaire to the Well drilled as part of an


Exclusive Petroleum Operation elects to participate in such Deepening or Sidetracking, such


Non-Consenting Concessionaire shall pay such amounts set out in Article 8.5(B), and such


Non-Consenting Concessionaire's payment pursuant to Article 8.5(A) shall be such Non-


Consenting Concessionaire's Participating Interest share of the liabilities and expenses


incurred in connection with drilling the Well (including all liabilities and expenses for Testing


and Completing or attempting Completion of the Well) from the surface to the depth


previously drilled which such Non-Consenting Concessionaire would have paid had such Non-


Consenting Concessionaire agreed to participate in such Well.


8.9 Use of Property


A. The Concessionaires participating in any Deepening, Testing, Completing,


Sidetracking, Plugging Back, Recompleting or Reworking of any Well drilled under this


Agreement shall be permitted to use (free of cost) all casing, tubing and other equipment in


the Well that is not needed for operations by the owners of the wellbore, but the ownership


of all such equipment shall remain unchanged. On Decommissioning of a Well in which


operations with differing participation have been conducted, the Concessionaires


decommissioning the Well shall account for all equipment in the Well to the Concessionaires


owning such equipment by tendering to them their respective Participating Interest shares of


the value of such equipment, if any, less the cost of salvage.


B. Any Concessionaire, whether owning interests in the Facility or not, shall be


permitted to use spare slots in a Facility constructed pursuant to the EPCC for purposes of


drilling Exploration Wells and/or Appraisal Wells and running tests in the EPCC Area. No


Concessionaire except an owner of a Facility may drill Development Wells or run Production


from a Well (except Production resulting from initial Well tests) from the Facility without the


prior written consent of all Facility owners. If all owners of the Facility participate in the


drilling of a Well, then no fee shall be payable under this Article 8.9(B). Otherwise, each time


a Well is drilled from a Facility, the Consenting Concessionaires in the Well shall pay to the


owners of the Facility, until all Wells drilled by such Concessionaires have been plugged and


abandoned in accordance with applicable law, a monthly fee equal to (1) that portion of the


total cost of the Facility including costs of material, fabrication, transportation and


installation, divided by the number of months of useful life established for the Facility under


the tax law of the host country, that one Well slot bears to the total number of slots on the


Facility plus (2) that proportionate part of the monthly cost of operating, maintaining and


financing the Facility that the Well drilled under this Article 8.9(B) bears to the total number


of Wells served by such Facility. Consenting Concessionaires who have paid to drill a Well


from a Facility under this Article 8.9(B) shall be entitled to Deepen or Sidetrack that Well for


no additional charge if done prior to moving the Facility off of location.


C. Any Concessionaire who, for purposes of Production from the EPCC Area, desires to


use spare capacity in Facilities and equipment that is constructed pursuant to this Agreemeerb


and used for processing or Transportation of Petroleum after it has passed through primary\





Page 51 of 87


 Z5-C EPCC Annex F





separators and dehydrators (including treatment Facilities, shall notify Operator and all


owners of such Facilities and equipment of the capacity so desired for such purpose. The


Concessionaires owning interests in such Facilities agree to negotiate in good faith with any


Concessionaire so desiring to use such spare capacity in an attempt to enter into a definitive


agreement for production handling, processing and Transportation or other similar


agreement for use of such capacity for a fee and on such other terms and conditions as may


be mutually satisfactory to such Concessionaires.


D. Payment for the use of a Facility under Article 8.9(B) or the use of a Facility and


appurtenant equipment under Article 8.9(C) shall not result in an acquisition of any


additional interest in the Facility or equipment by the paying Concessionaires. However,


such payments shall be included in the costs which the paying Concessionaires are entitled to


recoup under Article 8.5.


E. Concessionaires electing to use slots in a Facility pursuant to Article 8.9(B) shall


indemnify the owners of the equipment or Facility against any and all costs and liabilities


incurred as a result of such use, (including any Consequential Loss and Environmental Loss)


incurred by the user Concessionaire, but excluding costs and liabilities for which Operator is


solely responsible under Article 5.6.


F. Any Concessionaire engaged in Exclusive Petroleum Operations shall be entitled to


use Joint Property, provided such use is not detrimental to Joint Petroleum Operations and


subject to the further condition that any such use of Joint Property shall be provided on a


reasonable, market-related commercial basis.


8.10 Lost Production during Tie-In of Exclusive Petroleum Operation Facilities


If, during the tie-in of Exclusive Petroleum Operation Facilities with the existing Production


Facilities of another Petroleum Operation, the Production of Petroleum from such other pre-


existing operations is temporarily lessened as a result, then the Consenting Concessionaires


shall compensate the Concessionaires and Concessionaires to such existing operation for


such loss of Production in the following manner. Operator shall determine the amount by


which each day's Production during the tie-in of Exclusive Petroleum Operation Facilities falls


below the previous month's average daily Production from the existing Production Facilities


of such operation. The so-determined amount of lost Production shall be recovered by all


Concessionaires who experienced such loss in proportion to their respective Participating


Interest. Upon completion of the tie-in, such lost Production shall be recovered in full by


Operator deducting up to one hundred percent (100%) of the Production from the Exclusive


Petroleum Operation, prior to the Consenting Concessionaires being entitled to receive any


such Production


8.11 Production Bonuses


The bonus payable by the Concessionaires under the EPCC shall be charged to the Joint


Account if there is no Petroleum Production from an Exclusive Petroleum Operation at the


time they are incurred. If there is Petroleum Production from one or more Exclusive x


Petroleum Operations, then any Production Bonus which becomes payable under the EPCCCVy/


shall be borne by the Concessionaires participating in each such Exclusive Petroleum \





Page 52 of 87


 Z5-C EPCC AnnexF





Operation in accordance with their Participating Interest and in the proportion that its


average daily Production of Petroleum bears to the total average daily Production of


Petroleum from the EPCC Area during the sixty (60) day period preceding the date on which


liability for the Production Bonus is incurred. The Concessionaires in a Development and


Production Area shall bear the Production Bonus allocated to that Development and


Production Area in accordance with their Participating Interests in that Development and


Production Area, as of the date on which liability for the Production Bonus was incurred.


Only types, grades and qualities of Petroleum used for the determination of the Production


Bonus under the EPCC shall be utilized in the calculations in this Article.


8.12 Conduct of Exclusive Petroleum Operations


A. Each Exclusive Petroleum Operation shall be carried out by the Consenting


Concessionaires acting as the Operating Committee, subject to the applicable provisions of


this Agreement applied mutatis mutandis to such Exclusive Petroleum Operations and


related Operating Committee matters and subject to the terms and conditions of applicable


law and the EPCC.


B. The computation of liabilities and expenses incurred in Exclusive Petroleum


Operations, including the liabilities and expenses incurred by the Operator for conducting


such operations, shall be made in accordance with the principles set out in this Agreement,


and the Accounting Procedure annexed to this Agreement.


C. The Operator of Exclusive Petroleum Operations shall maintain separate books,


financial records and accounts for the Exclusive Petroleum Operations which shall be subject


to the same rights of audit and examination as the Joint Account and related records, all as


provided in the Accounting Procedure annexed to this Agreement. Said rights of audit and


examination shall extend to each of the Consenting Concessionaires and each of the Non-


Consenting Concessionaires so long as the latter are, or may be, entitled to elect to


participate in such Exclusive Petroleum Operations.


D. Operator, if it is conducting an Exclusive Petroleum Operation for the Consenting


Concessionaires, regardless of whether it is participating in that Exclusive Petroleum


Operation, shall be entitled to request cash advances and shall not be required to use its own


funds to pay any cost and expense and shall not be obliged to commence or continue


Exclusive Petroleum Operations until cash advances requested have been made, and the


Accounting Procedure annexed to this Agreement shall apply to Operator in respect of any


Exclusive Petroleum Operations conducted by it.


E. If Operator is a Non-Consenting Concessionaire to an Exclusive Petroleum Operation


to develop a Discovery, then Operator may resign as Operator for the Development and


Production of such Discovery. If Operator so resigns, the Consenting Concessionaires shall


select a Consenting Concessionaire to serve as Operator for such Exclusive Petroleum


Operation only. Any such resignation of Operator and appointment of a Consenting


Concessionaire to serve as Operator for such Exclusive Petroleum Operation shall be subject


to the Concessionaires having first obtained any necessary Government approvals. f











Page 53 of 87


 Z5-C EPCC AnnexF





Article 9. DEFAULT





9.1 Default and Notice





A. Any Concessionaire that fails to:


1) pay when due its share of Joint Account expenses, including cash advances and








interest;


2) obtain and maintain any Security required of such Concessionaire pursuant to


applicable Petroleum law, the EPCC or this Agreement; or


3) perform its indemnity obligations under the EPCC or this Agreement


Shall be in default under this Agreement (hereinafter referred to as a "Defaulting


Concessionaire"). Operator, or any non-defaulting Concessionaire in case Operator is the


Defaulting Concessionaire, shall promptly give notice of such default (hereinafter referred to


as the "Default Notice") to the Defaulting Concessionaire and each of the non-defaulting


Concessionaires, and to INP.


B. For the purposes of this Article, "Default Period" means the period beginning five (5)


Business Days from the date that the Default Notice is issued in accordance with this Article


9.1 and ending on the date when all the Defaulting Concessionaire's defaults pursuant to this


Article 9.1 have been remedied in full.





9.2 Operating Committee Meetings and Data





A. Notwithstanding any other provision of this Agreement, the Defaulting


Concessionaire shall have no right, during the Default Period, to:





1) Call or attend Operating Committee or subcommittee meetings;


2) Vote on any matter coming before the Operating Committee or any





subcommittee;





3) Access any data or information relating to any Petroleum Operations under this


Agreement;


4) Consent to or reject data trades between the Concessionaires and third parties,


nor access any data received in such data trades;





5) Transfer (as defined in Article 13.1) all or part of its Participating Interest, except


to non-defaulting Concessionaires in accordance with this Article 9;





6) Consent to or reject any Transfer (as defined in Article 13.1) or otherwise exercise


any other rights in respect of Transfers under this Article 9 or under Article 13;





7) Receive its Entitlement in accordance with Article 9.4;





8) Withdraw from this Agreement under Article 14; or











Page 54 of 87


 Z5-C EPCC AnnexF





9) Take assignment of any portion of another Concessionaire's Participating Interest


in the event such other Concessionaire is either in default or withdrawing from


this Agreement and the EPCC.


B. Notwithstanding any other provisions in this Agreement, during the Default Period:


1) Unless agreed otherwise by the non-defaulting Concessionaires, the voting


interest of each non-defaulting Concessionaire shall be equal to the ratio such


non-defaulting Concessionaire's Participating Interest bears to the total


Participating Interests of the non-defaulting Concessionaires;


2) Any matters requiring a unanimous vote or approval of the Concessionaires shall


not require the vote or approval of the Defaulting Concessionaire;


3) The Defaulting Concessionaire shall be deemed to have elected not to participate


in any activities that are voted upon during the Default Period, to the extent such


an election would be permitted by Article 6.13 and Article 8; and


4) The Defaulting Concessionaire shall be deemed to have approved, and shall join


with the non-defaulting Concessionaires in taking, any other actions voted on


during the Default Period.


9.3 Allocation of Defaulted Accounts


A. The Concessionaire providing the Default Notice pursuant to Article 9.1 shall include


in the Default Notice to each non-defaulting Concessionaire and the INP a statement of: (i)


the sum of money that the non-defaulting Concessionaire shall pay as its portion of the


amount in Default; and (ii) if the Defaulting Concessionaire has failed to obtain or maintain


any Security required of such Concessionaire in order to maintain the EPCC in full force and


effect, the type and amount of the Security the non-defaulting Concessionaires shall post or


the funds they shall pay in order to allow Operator on behalf of the non-defaulting


Concessionaires, or (if Operator is in default) the notifying Concessionaire, to post and


maintain such Security. Unless otherwise agreed, the obligations for which the Defaulting


Concessionaire is in default shall be satisfied by the non-defaulting Concessionaires in


proportion to the ratio that each non-defaulting Concessionaire's Participating Interest bears


to the Participating Interests of all non-defaulting Concessionaires. The INP shall be copied on


any written communication between the defaulting Concessionaire and Operator, or


between the Operator and any other Concessionaire, relating to the default situation or


procedure.


For the purposes of this Article:


"Amount in Default" means the Defaulting Concessionaire's share of Joint Account expenses


which the Defaulting Concessionaire has failed to pay when due pursuant to the terms of this


Agreement (but excluding any interest owed on such amount); and





"Total Amount in Default" means the following amounts:





the Amount in Default;





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ii. third-party costs of obtaining and maintaining any Security incurred by the non-


defaulting Concessionaires or the funds paid by such Concessionaires in order to


allow Operator to obtain or maintain Security, in accordance with Article


8.3(A)(ii); plus


iii. any interest at the Agreed Interest Rate accrued on the amount under (i) from the


date this amount is due by the Defaulting Concessionaire until paid in full by the


Defaulting Concessionaire and on the amount under (ii) from the date this


amount is incurred by the non-defaulting Concessionaires until paid in full by the


Defaulting Concessionaire.


B. If the Defaulting Concessionaire remedies its default in full before the Default Period


commences, the notifying Concessionaire shall promptly notify each non-defaulting


Concessionaire and the INP by facsimile or telephone and by email, and the non-defaulting


Concessionaires shall be relieved of their obligations under Article 9.3(A). Otherwise, each


non-defaulting Concessionaire shall satisfy its obligations under Article 9.3(A)(i) before the


Default Period commences and its obligations under Article 9.3(A)(ii) within ten (10) days


following the Default Notice. If any non-defaulting Concessionaire fails to timely satisfy such


obligations, such Concessionaire shall thereupon be a Defaulting Concessionaire subject to


the provisions of this Article 9. The non-defaulting Concessionaires shall be entitled to


receive their respective shares of the Total Amount in Default payable by such Defaulting


Concessionaire pursuant to this Article.


C. If Operator is a Defaulting Concessionaire, then all payments otherwise payable to


Operator for Joint Account costs pursuant to this Agreement shall be made to the notifying


Concessionaire instead until the default is cured or a successor Operator appointed. The


notifying Concessionaire shall maintain such funds in a segregated account separate from its


own funds and shall apply such funds to third party claims due and payable from the Joint


Account of which it has notice, to the extent Operator would be authorized to make such


payments under the terms of this Agreement. The notifying Concessionaire shall be entitled


to bill or cash call the other Concessionaires in accordance with the Accounting Procedure


enclosed as Exhibit A to this Agreement for proper third party charges that become due and


payable during such period to the extent sufficient funds are not available. When Operator


has cured its default or a successor Operator is appointed, the notifying Concessionaire shall


turn over all remaining funds in the account to Operator and shall provide Operator and the


other Concessionaires with a detailed accounting of the funds received and expended during


this period. The notifying Concessionaire shall not be liable for damages, losses, costs,


expenses or liabilities arising as a result of its actions under this Article 9.3(C), except to the


extent Operator would be liable under Article 5.7.


9.4 Remedies





A. During the Default Period, the Defaulting Concessionaire shall not have a right to its


Entitlement, which shall vest in and be the property of the non-defaulting Concessionaires.


Operator, or the notifying Concessionaire if Operator is a Defaulting Concessionaire, shall be


authorized to sell such Entitlement in an arm's-length sale on terms that are commercially


reasonable under the circumstances and, after deducting all costs, charges and expenses








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incurred in connection with such sale, pay the net proceeds to the non-defaulting


Concessionaires in proportion to the amounts they are owed by the Defaulting














Concessionaire as a part of the Total Amount in Default, (in payment of first the interest and


then the principal), and apply such net proceeds toward the establishment of the Reserve


Fund (as defined in Article 9.4(C)), if applicable, until all such Total Amount in Default is


recovered and such Reserve Fund is established. Any surplus remaining shall be paid to the


Defaulting Concessionaire, and any deficiency shall remain a debt due from the Defaulting


Concessionaire to the non-defaulting Concessionaires. When making sales under this Article


9.4(A), the non-defaulting Concessionaires shall have no obligation to share any existing


market or obtain a price equal to the price at which their own Entitlement is sold.


B. If Operator disposes of any Joint Property or if any other credit or adjustment is


made to the Joint Account during the Default Period, Operator, (or the notifying


Concessionaire if Operator is a Defaulting Concessionaire), shall be entitled to apply the


Defaulting Concessionaire's Participating Interest share of the proceeds of such disposal,


credit or adjustment against the Total Amount in Default,against first the interest and then


the principal, and toward the establishment of the Reserve Fund as defined in Article 9.4(C),


if applicable. Any surplus remaining shall be paid to the Defaulting Concessionaire, and any


deficiency shall remain a debt due from the Defaulting Concessionaire to the non-defaulting


Concessionaires.


C. The non-defaulting Concessionaires shall be entitled to apply the net proceeds


received under Articles 9.4(A) and 9.4(B) toward the creation of a reserve fund (the "Reserve


Fund") in an amount equal to the Defaulting Concessionaire's Participating Interest share of:


i. the estimated cost to abandon any Wells and other property in which the


Defaulting Concessionaire participated;


ii. the estimated cost of severance benefits for employees upon cessation of


operations; and


iii. any other identifiable costs that the non-defaulting Concessionaires anticipate will


be incurred in connection with the cessation of operations.


Upon the conclusion of the Default Period, all amounts held in the Reserve Fund shall be


returned to the Concessionaire previously in Default.


D. If a Defaulting Concessionaire fails to fully remedy all its defaults by the thirtieth


(30th) day following the date of the Default Notice, then, without prejudice to any other


rights available to each non-defaulting Concessionaire to recover its portion of the Total


Amount in Default, each non-defaulting Concessionaire shall have the right, exercisable at


any time thereafter during the Default Period, to require that the Defaulting Concessionaire


completely withdraw from this Agreement and the EPCC. Such right shall be exercised by


notice to the Defaulting Concessionaire and each non-defaulting Concessionaire. If such right


is exercised, the Defaulting Concessionaire shall be deemed to have transferred, pursuant to


Article 14.6, effective on the date of the non-defaulting Concessionaire's or Concessionaires'


notice, its Participating Interest to the non-defaulting Concessionaires. Notwithstanding the


terms of Article 14, in the absence of an agreement among the non-defaulting








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Concessionaires to the contrary, any transfer to the non-defaulting Concessionaires following


a withdrawal pursuant to this Article 9.4(D) shall be in proportion to the Participating











Interests of the non-defaulting Concessionaires exercising the said right.


E. In addition to the other remedies available to the non-defaulting Concessionaires


under this Article 9 and any other rights available to each non-defaulting Concessionaire to


recover its portion of the Total Amount in Default, in the event a Defaulting Concessionaire


fails to remedy its default within thirty (30) days of the Default Notice, the non-Defaulting


Concessionaires may elect to enforce a security interest on the Defaulting Concessionaire's


Participating Interest as set forth below, subject to applicable Mozambican law and the EPCC.


1) Each Concessionaire grants to each of the other Concessionaires, in pro rata


shares based on their relative Participating Interests, a security interest on its


Participating Interest, whether now owned or hereafter acquired, together with


all products and proceeds derived from that Participating Interest (collectively


referred to as the "Collateral") as security for (i) Concessionaire's payment


obligations, including interest and costs of collection, under this Agreement; and


(ii) any Security which such Concessionaire is required to provide pursuant to


applicable law and the EPCC.


2) Should a Defaulting Concessionaire fail to remedy its default by the thirtieth


(30th) day following the date of the Default Notice, then, each non-defaulting


Concessionaire shall have the right, exercisable at any time thereafter during the


Default Period, to foreclose its security interest against its pro rata share of the


Collateral by any means permitted under applicable Mozambican law and the


EPCC, and to sell all or any part of that Collateral in public or private sale after


providing the Defaulting Concessionaire and other creditors with any notice


required by applicable Mozambican law and the EPCC, and subject to the


provisions of Article 13. Except as may be prohibited by applicable Mozambican


laws or the EPCC, the non-defaulting Concessionaire that forecloses its security


interest shall be entitled to become the purchaser of the Collateral sold and shall


have the right to credit toward the purchase price the amount to which it is


entitled under Article 9.4. Any deficiency in the amounts received by the


foreclosing party shall remain a debt due by the Defaulting Concessionaire. The


foreclosure of security interests by one non-defaulting Concessionaire shall


neither affect the amounts owed by the Defaulting Concessionaire to the other


non-defaulting Concessionaires nor in any way limit the rights or remedies


available to them. Each Concessionaire agrees that, should it become a Defaulting


Concessionaire, it waives the benefit of any appraisal, valuation, stay, extension or


redemption law and any other legal defense or protection that otherwise could be


invoked to prevent or hinder the enforcement of the security interest granted


above.


3) Each Concessionaire agrees to execute such memoranda, financing statements


and other documents, and make such filings and registrations, as may be


necessary to perfect, validate and provide notice of the security interests granted


by this Article 9.4(E). .








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F. For purposes of Articles 9.4(D) and 9.4(E), the Defaulting Concessionaire shall,


without delay following any request from the non-defaulting Concessionaires, do any act


required to be done by applicable Mozambican law in order to render the transfer of its


Participating Interest legally valid, including obtaining all governmental consents and


approvals, and shall execute any document and take such other actions as may be necessary


in order to effect a prompt and valid transfer. Any penalties, damages, losses, costs (including


reasonable legal costs and attorneys' fees), and liabilities incurred by the Concessionaires in


connection with any withdrawal and assignment shall be borne by the Defaulting


Concessionaire. The Defaulting Concessionaire shall be obligated to promptly remove any


liens and encumbrances which may exist on its assigned Participating Interests. In the event


all Government approvals are not timely obtained, the Defaulting Concessionaire shall hold


the assigned Participating Interest in trust for the non-defaulting Concessionaires who are


entitled to receive it. Each Concessionaire constitutes and appoints each other


Concessionaire its true and lawful attorney to execute such instruments and make such


filings and applications as may be necessary to make such transfer legally effective and to


obtain any necessary consents of the Government. Actions under this power of attorney


may be taken by any Concessionaire individually without the joinder of the others. This


power of attorney is irrevocable for the term of this Agreement and is coupled with an


interest. If requested, each Concessionaire shall execute a form prescribed by the Operating


Committee setting forth this power of attorney in more detail.


G. The non-defaulting Concessionaires shall be entitled to recover from the Defaulting


Concessionaire all reasonable attorneys' fees and all other reasonable costs sustained in the


collection of amounts owing by the Defaulting Concessionaire.


H. The rights and remedies granted to the non-defaulting Concessionaires in this Article


shall be cumulative, not exclusive, and shall be in addition to any other rights and remedies


that may be available to the non-defaulting Concessionaires, whether at law, in equity or


otherwise. Each right and remedy available to the non-defaulting Concessionaires may be


exercised from time to time and so often and in such order as may be considered expedient


by the non-defaulting Concessionaires in their sole discretion.


9.5 Survival


The obligations of the Defaulting Concessionaire and the rights of the non-defaulting


Concessionaires shall survive the surrender of the EPCC, Decommissioning of Petroleum


Operations and termination of this Agreement.


9.6 No Right of Set Off


Each Concessionaire acknowledges and accepts that a fundamental principle of this


Agreement is that each Concessionaire pays its Participating Interest share of all amounts


due under this Agreement as and when required. Accordingly, any Concessionaire which


becomes a Defaulting Concessionaire undertakes that, in respect of either any exercise by


the non-defaulting Concessionaires of any rights under or the application of any of the


provisions of this Article 9, such Concessionaire hereby waives any right to raise by way of set


off or invoke as a defence, whether in law or equity, any failure by any other Concessionaire


to pay amounts due and owing under this Agreement or any alleged claim that such





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Concessionaire may have against Operator or any Concessionaire, whether such claim arises


under this Agreement or otherwise. Each Concessionaire further agrees that the nature and


the amount of the remedies granted to the non-defaulting Concessionaires hereunder are


reasonable and appropriate in the circumstances.











Article 10. DISPOSITION OF PRODUCTION





10.1 Right and Obligation to Take in Kind


Each Concessionaire shall have the right and obligation to own, take in kind and dispose of its


Entitlement in accordance with the EPCC and this Agreement.


10.2 Disposition of Crude Oil


If Crude Oil is to be produced pursuant to an approved Development Plan from a


Development and Production Area, the Concessionaires shall in good faith, and not less than


six (6) months prior to the anticipated first delivery of Crude Oil, as promptly notified by


Operator, negotiate and conclude the terms of a lifting agreement to cover the offtake of


Crude Oil produced under the EPCC from such area. The Government may, if necessary and


practicable, also be party to the lifting agreement; If the Government is party to the lifting


agreement, the principles set forth in this Article 10.2 shall be reflected in such agreement.


The lifting agreement shall, to the extent consistent with the Development Plan and subject


to the terms of the EPCC, make provision for:


A. The Delivery Point as defined in the approved Development Plan, at which title and


risk of loss of each Concessionaire's Entitlement of Crude Oil shall pass to such


Concessionaire;


B. Operator's regular periodic advice to the Concessionaires of estimates of total


available Production of Crude Oil for succeeding periods, quantities of each type and/or


grade of Crude Oil and each Concessionaire's Entitlement for as far ahead as is necessary for


Operator and the Concessionaires to plan lifting arrangements. Such advice shall also cover,


for each type and/or grade of Crude Oil, the total available Production of Crude Oil and


deliveries for the preceding period, and overlifts and underlifts;


C. Nomination by the Concessionaires to Operator of acceptance of their shares of total


available Production of Crude Oil for the succeeding period. Such nominations shall in any


one period be for each Concessionaire's entire Entitlement of available Production of Crude


Oil during that period, subject to operational tolerances and agreed minimum economic


cargo sizes or as the Concessionaires may otherwise agree;


D. Timely mitigation of the effects of overlifts and underlifts and any related


reallocation of Cost Petroleum and Profit Petroleum;


E. If offshore loading or a shore terminal for vessel loading is involved, risks regarding


acceptability of tankers, demurrage and (if applicable, availability of berths);








Page 60 of 87


 Z5-C EPCC AnnexF





F. Distribution to the Concessionaires of available grades, gravities and qualities of


Crude Oil to ensure, to the extent Concessionaires take delivery of their Entitlements as they


accrue, that each Concessionaire shall receive in each period Entitlements of grades, gravities


and qualities of Crude Oil from each Development and Production Area in which it


participates similar to the grades, gravities and qualities of Crude Oil received by each other


Concessionaire from that Development and Production Area in that period;


G. To the extent that distribution of Entitlements on such basis is impracticable due to


availability of Facilities and minimum cargo sizes, a method of making periodic adjustments;


and


H. The right of the other Concessionaires to sell an Entitlement which a Concessionaire


fails to nominate for acceptance pursuant to Article 10.2(C) above or of which a


Concessionaire fails to take delivery in accordance with applicable agreed procedures,


provided that such failure either constitutes a breach of Operator's or such Concessionaire's


obligations under the terms of the EPCC, or is likely to result in the curtailment or shut-in of


Production. Such sales shall be made only to the limited extent necessary to avoid disruption


in Petroleum Operations. Operator shall give all Concessionaires as much notice as is


practicable of such situation and that a right of sale option has arisen. Any sale shall be of


the un-nominated or undelivered Entitlement, (as the case may be) and for reasonable


periods of time (and is in no event to exceed twelve (12) months). Payment terms for


Production of Crude Oil sold under this option shall be established in the lifting agreement.


If a lifting agreement has not been entered into by the date of first delivery of Crude Oil, the


Concessionaires shall nonetheless be obligated to take and separately dispose of such Crude


Oil as provided in Article 10.1 and, in addition, shall be bound by the principles set forth in


this Article 10.2 until a lifting agreement is executed by the Concessionaires.


10.3 Disposition of Natural Gas


In the event of the Development of Natural Gas from a Discovery the Concessionaires may,


subject to the approval of MIREME, enter into such contractual arrangements as required for


the sale or disposition of Natural Gas, which are consistent with applicable Petroleum law,


the EPCC and an approved Development Plan, and in which the principles of Article 10.2 of


this Agreement are applied mutatis mutandis. No such contractual arrangement shall require


that a Concessionaire or its Affiliated Company act in violation of any applicable law,


including the competition laws applicable to such Concessionaire, its Affiliated Companies or


its ultimate parent company.








Article 11. DECOMMISSIONING





11.1 Plugging and abandoning of Wells Drilled as Joint Petroleum Operations





A. A decision to plugging and abandoning any Well which has been drilled as a Joint


Petroleum Operation shall require the approval of the Operating Committee.








Page 61 of 87


 Z5-C EPCC AnnexF








B. Should any Concessionaire fail to reply within the period prescribed in Article


6.12(A)(1) or Article 6.12(A)(2), whichever is applicable, after delivery of notice of Operator's


proposal for cessation of Petroleum Operations, plugging and abandoning of such Well, such


Concessionaire shall be deemed to have consented to the proposed activity.


C. If the Operating Committee approves plugging and abandoning of any Exploration


Well or Appraisal Well, subject to applicable law, any Concessionaire voting against such


decision may propose within the time periods allowed by Article 6.13(A) to conduct an


alternate Exclusive Petroleum Operation in the wellbore. If no Exclusive Petroleum


Operation is timely proposed, or if an Exclusive Petroleum Operation is timely proposed but


is not commenced within the applicable time periods under Article 8.2, such Well shall be


plugged and abandoned.


D. Any Well drilled pursuant to the EPCC and this Agreement shall be plugged and


abandoned in accordance with applicable law and the EPCC and at the cost, risk and expense


of the Concessionaires who participated in the cost of drilling such Well.


11.2 Plugging and abandoning of Wells drilled as part of Exclusive Petroleum Operations


This Article 11 shall apply mutatis mutandis to the plugging and abandoning of a Well drilled


as part of an Exclusive Petroleum Operation or any Well in which an Exclusive Petroleum


Operation has been conducted (in which event all Concessionaires having the right to


conduct further operations in such Well shall be notified and have the opportunity to


conduct Exclusive Petroleum Operations in the Well in accordance with the provisions of this


Article 11).


11.3 Cessation of Petroleum Operations and Decommissioning of Facilities


A. The Operator shall, with due consideration of the time limits and procedural


provisions stipulated in applicable Petroleum law, submit to the Operating Committee for


approval a proposed Decommissioning Plan. The Operator shall after the approval by the


Operating Committee of any Decommissioning Plan or amended Decommissioning Plan,


submit such Decommissioning Plan with related Documentation to MIREME and other


relevant Government entities pursuant to applicable law. The Operator shall in the


preparation of the Decommissioning Plan consult with INP and other relevant Government


entities and take such other steps as may be required pursuant to applicable law to secure


Government approval of the Decommissioning Plan. In the event that any relevant


Government entity requires changes in the Decommissioning Plan, the matter shall be


resubmitted to the Operating Committee for further consideration.


B. This Article 11.3 shall apply mutatis mutandis to the cessation of Petroleum


Operations and Decommissioning of Facilities conducted as part of Exclusive Petroleum


Operation.


11.4 Decommissioning Fund





A. The Operator shall establish the Decommissioning Fund pursuant to applicable


Petroleum law and the EPCC.





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B. The Operator shall, with due consideration of the time limits stipulated by applicable


Petroleum law for the establishment of a Decommissioning Fund, prepare and submit to the


Operating Committee for approval, the outline of alternatives and the preferred


decommissioning solution and appurtenant Documentation required pursuant to applicable


Petroleum law related to the selection of a preliminary Decommissioning solution on which


the calculation of estimated cost of Decommissioning to be covered by the Decommissioning


Fund shall be based.


C. The Operator shall upon the approval by the Operating Committee submit the


prepared Documentation of alternative proposed and preferred decommissioning solutions


and appurtenant Documentation to MIREME pursuant to applicable Petroleum law.


D. The Operator shall, based on the selection of the MIREME of the preliminary


Decommissioning solution or an approved Decommissioning Plan, prepare and submit to the


Operating Committee for approval a schedule for amounts payable to the Decommissioning


Fund by each Concessionaire pursuant to applicable Petroleum law and the EPCC. Such


schedule shall be updated annually, and approved by the Operating Committee as part of the


annual budget.


E. Each Concessionaire shall be obliged to pay into the Decommissioning Fund its share


of the estimated future cost of Decommissioning based on its Participating Interest in the


EPCC pursuant to the approved schedule for such payments and the Accounting Procedure


enclosed as Exhibit A to this Agreement


11.5 Implementation of a Decommissioning Plan


A. Upon the approval by the MIREME of the Decommissioning Plan, the Operator shall


present to the Operating Committee a proposal for the implementation of the approved


plan.


B. The Operating Committee may within the limits of applicable Petroleum law, adopt


or reject the Operator's proposal for implementation of the approved Decommissioning Plan.


C. The Operating Committee shall make a final decision on the Operator's proposal for


the implementation of the approved Decommissioning Plan within three months of receiving


the proposal, if no such decision is made, the Operator's proposal shall be deemed to be


adopted.


D. The provisions of Article 6 shall apply as appropriate for the budget concerning the


cost of implementation of an approved Decommissioning Plan.








Article 12. SURRENDER, EXTENSIONS AND RENEWALS





12.1 Surrender





A. Operator shall advise the Operating Committee of requirements pursuant to


applicable law or the EPCC for surrender of any portion of the EPCC Area at least one








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 Z5-CEPCC AnnexF





hundred and twenty (120) days in advance of the earlier of the date for filing irrevocable


notice of such surrender or the date of such surrender. Prior to the end of such period, the








Operating Committee shall determine pursuant to Article 6 the size and shape of the


surrendered acreage, consistent with the requirements of applicable law and the EPCC. If a


sufficient vote of the Operating Committee cannot be attained, then the proposal supported


by a simple majority of the Participating Interests shall be adopted. If no proposal attains the


support of a simple majority of the Participating Interests, then the proposal receiving the


largest aggregate Participating Interest vote shall be adopted. In the event of a tie, Operator


shall choose among the proposals receiving the largest aggregate Participating Interest vote.


The Concessionaires shall execute any and all documents and take such other actions as may


be necessary to effect the surrender. Each Concessionaire renounces all claims and causes of


action against Operator and any other Concessionaires on account of any area surrendered in


accordance with the foregoing but against its recommendation if Petroleum is subsequently


discovered in the surrendered area.


B. A surrender of all or any part of the EPCC Area which is not required by applicable


law shall require the unanimous consent of the Concessionaires.


12.2 Extension of the Term


A. A proposal by any Concessionaire to enter into or apply for extending the term of


any sub-period of the Exploration Period or Development and Production Period or any


phase of the EPCC, or a proposal to apply for extending the term of the EPCC, shall be


brought before the Operating Committee pursuant to Article 6.


B. Any Concessionaire shall have the right to enter into or apply for the extending of the


term of any. Exploration sub-period or Development and Production Period or any phase of


the EPCC or to apply for the extension of the term of the EPCC, regardless of the level of


support in the Operating Committee. If any Concessionaire takes such action, any


Concessionaire not wishing to enter into or apply for extending such period, sub-period or


term shall be required to withdraw from this Agreement and the EPCC, subject to the


requirements of Article 14.











Article 13. TRANSFER OF INTEREST OR RIGHTS AND CHANGES IN CONTROL


13.1 Obligations





A. Subject always to the requirements of applicable Petroleum law and the EPCC, the


transfer of all or part of a Concessionaire’s Participating Interest shall be effective only if it


satisfies the terms and conditions of this Article 13.





B. Except in the case of a Concessionaire transferring all of its Participating Interest, no


transfer shall be made by any Concessionaire which results in the transferor or the transferee


holding a Participating Interest of less than the minimum Participating Interest for


Concessionaires pursuant to the EPCC often percent (10%). No transfer shall be made by the


Operator resulting in the Operator holding less than twenty-five percent (25 %) of the total of








Page 64 of 87





a/<


 Z5-CEPCC Annex F








the Participating Interests held by all Concessionaires, unless a transfer or reassignment of


Operatorship is approved pursuant to EPCC Article 21 and subject to Article 5.11 (A) of this


Agreement.


C. The transferring Concessionaire shall, notwithstanding the transfer, be liable to the


other Concessionaires for any obligations, financial or otherwise, which have vested,


matured or accrued under the provision of the EPCC or this Agreement prior to such transfer.


Such obligations shall include, without limitation, any proposed expenditure approved by the


Operating Committee, prior to the transferring Concessionaire notifying the other


Concessionaires of its proposed transfer.


D. The transferee shall have no rights in and under the EPCC, or this Agreement unless


and until any necessary approvals are obtained from the Government and the transferee


expressly undertakes in writing to perform the obligations of the transferor under the EPCC


and this Agreement in respect of the Participating Interest being transferred to the


satisfaction of the Concessionaires and furnishes any guarantees required by applicable


Petroleum law, a Government decision, the EPCC or under this Agreement.


E. The transferee shall have no rights in and under the EPCC, or this Agreement unless


each Concessionaire has consented in writing to such transfer, which consent shall be denied


only if the transferee fails to establish, to the reasonable satisfaction of each Concessionaire,


its financial capability, including enforceability of remedies under this Agreement against


such transferee, to perform its payment obligations under the EPCC and this Agreement, its


technical capability to contribute to the planning and conduct of Joint Operations, and its


ability to comply with the provisions of Article 21.1.


F. Nothing contained in this Article shall prevent a Concessionaire from mortgaging,


pledging, charging or otherwise encumbering all or part of its interest in the EPCC or an EPCC


Area in and under this Agreement for the purpose of security relating to finance provided


that:


1) Such Concessionaire shall remain liable for all obligations relating to such interest;


2) The encumbrance shall be subject to any necessary approval of the Government


and be expressly subordinated, to the rights of the other Concessionaires under


this Agreement; and


3) Such Concessionaire shall ensure that any such mortgage, pledge, charge or


encumbrance shall be expressed to be without prejudice to the provisions of this


Agreement.


G. Any direct or indirect transfer of all or a portion of Participating Interest other than


(i) with or to an Affiliated Company or (ii) a mortgage, pledge, charge or other encumbrance


which is consistent with the provisions of Article 13.1.F, shall be subject to the following


procedure:


1) Once the transferor Concessionaire and a proposed transferee, being a third party C\rv/


or a Concessionaire, have fully reached agreement on terms and conditions of a A \V


Page 65 of 87


 Z5-C EPCC AnnexF





transfer, such final terms and conditions shall be disclosed in detail to all


Concessionaires in a written notification from the transferor. Each Concessionaire








shall have the right to acquire the Participating Interest from the transferor on the


same terms and conditions agreed to by the proposed transferee if, within forty


five (45) days of transferor's written notification, such Concessionaire delivers to


all other Concessionaires a counter-notification that it accepts the agreed upon


terms and conditions of the transfer without reservations or conditions. If no


Concessionaire delivers such counter-notification, the transfer to the proposed


transferee may be made, subject to the other provisions of this Article, under


terms and conditions no more favourable to the transferee than those set forth in


the notice to the Concessionaires, provided that the transfer shall be concluded


within one hundred eighty (180) days from the date of the notice plus such


additional period as may be required to secure approval from the Government.


No Concessionaire shall have a right under this Article 13.1(G) to acquire any asset


other than a Participating Interest, nor may any Concessionaire be required to


acquire any asset other than a Participating Interest, regardless of whether other


properties are involved in the transfer.


2) If more than one Concessionaire counter-notifies that it intends to acquire the


Participating Interest which is the subject of the proposed transfer, then each


such Concessionaire shall acquire a proportion of the Participating Interest to be


transferred equal to the ratio of its own Participating Interest to the total


Participating Interests of all the counter-notifying Concessionaires, unless they


otherwise agree.


3) In the event that a Concessionaire's proposed transfer of part or all of its Interest


involves consideration other than cash or involves other properties included in a


wider transaction (package deal), then the consideration payable for the


Participating Interest exclusively shall be allocated a reasonable and justifiable


cash value by the transferor in any notification to the other Concessionaires. Such


other Concessionaires may satisfy the requirements of this Article by agreeing to


pay such cash value in lieu of the consideration payable in the third-party offer.


H. The following transactions shall be excluded from the provisions of this Article 13 in


respect of an assignment:


1) as a result of an Assignment Notice served on a Defaulting Participant under this


Agreement except for provisions of Articles 13.1(C) and 13.1(D) which shall apply;


or


2) to an Affiliated Company, except for provisions of Articles 13.1(C), 13.1(D),


13.1(E), 13(F) and 13.2 which shall apply; or


3) on account of a change in control of such assignor's ultimate parent company














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13.2 Rights





Each Concessionaire shall have the right, subject to applicable law, the EPCC and the


provisions of this Article, to transfer its Participating Interests to an Affiliated Company. The


Concessionaires agree that the provisions of this Article 13 and the provisions of the EPCC


regarding transfers and assignment shall apply (i) in case of a transfer of issued shares, share


quotas or voting rights of any Concessionaire that may result in such Concessionaire ceasing


to be an Affiliated Company of its ultimate parent company; or (ii) if a transfer of issued


shares, share quotas or voting rights or of a Participating Interest is made by any


Concessionaire to an Affiliated Company and the transferee subsequently ceases to be an


Affiliated Company of its ultimate parent company.











Article 14. WITHDRAWAL FROM THE JOINT OPERATING AGREEMENT





14.1 Right of Withdrawal


A. Subject to the provisions of this Article and the EPCC, any Concessionaire not in


default may at its option withdraw from this Agreement and the EPCC by giving notice to all


other Concessionaires stating its decision to withdraw. Such notice shall be unconditional


and irrevocable when given, except as may be provided in Article 14.7. A Concessionaire may


not withdraw from this Agreement and the EPCC before its obligations in respect of any


exploration sub-period have been fulfilled. If a Development Plan has been submitted to the


Government for approval, a Concessionaire participating in the Development Plan may not


withdraw from this Agreement and the EPCC before such approved Development Plan has


been implemented.


B. The effective date of withdrawal for a withdrawing Concessionaire shall be the end


of the calendar month following the calendar month in which the notice of withdrawal is


given, provided that if all Concessionaires elect to withdraw, the effective date of withdrawal


for each Concessionaire shall be the date determined by Article 14.9.


14.2 Partial or Complete Withdrawal





A. Within thirty (30) days of receipt of each withdrawing Concessionaire's notification,


each of the other Concessionaires may also give notice that it desires to withdraw from this


Agreement and the EPCC. Should all Concessionaires give notice of withdrawal, the


Concessionaires shall proceed to cease Petroleum Operations and Decommission Facilities in


accordance with the approved Decommissioning Plan if applicable, abandon the EPCC Area


and terminate the EPCC and this Agreement. If less than all of the Concessionaires give such


notice of withdrawal, then the withdrawing Concessionaires shall take all steps to withdraw


from the EPCC and this Agreement on the earliest possible date and execute and deliver all


necessary instruments and documents to assign their Participating Interest to the


Concessionaires which are not withdrawing, without any compensation whatsoever, in


accordance with the provisions of Article 14.6.











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B. Any Concessionaire withdrawing under Article 12.2 or 14 shall at its option, and


subject to the EPCC: (i) withdraw from the entirety of the Concession Contract Area; or (ii)


withdraw only from all Exploration Operations under the EPCC, but not from any Exploitation


Area, Commercial Discovery, or Discovery (whether appraised or not) made before such


withdrawal. Such withdrawing Concessionaire shall retain its rights in Joint Property, but


only insofar as they relate to any such Exploitation Area, Commercial Discovery, or Discovery,


and shall abandon all other rights in Joint Property.


14.3 Rights of a Withdrawing Concessionaire


A withdrawing Concessionaire shall have the right to receive its Entitlement produced


through the effective date of its withdrawal. The withdrawing Concessionaire shall be


entitled to receive all information to which such Concessionaire is otherwise entitled under


this Agreement until the effective date of its withdrawal. After giving its notification of


withdrawal, a Concessionaire shall not be entitled to vote on any matters coming before


the Operating Committee, other than matters for which such Concessionaire has financial


responsibility.


14.4 Obligations and Liabilities of a Withdrawing Concessionaire


A. A withdrawing Concessionaire shall, following its notification of withdrawal, remain


liable only for its share of the following:





1) Costs of Joint Petroleum Operations, and Exclusive Petroleum Operations in which


it has agreed to participate, that were approved by the Operating Committee or





Consenting Concessionaires as part of a work programme and budget (including a


multi-year work programme and budget under Article 7.5) or AFE prior to such


Concessionaire's notification of withdrawal, regardless of when they are incurred;


2) Any EPCC Article 4 obligation for the current period or phase of the EPCC, and for


any subsequent period or phase which has been approved pursuant to Article


12.2 prior to the notification of withdrawal;


3) Expenditures described in Articles 5.2(B)(13) and 14.5 related to an emergency


occurring prior to the effective date of a Concessionaire's withdrawal, regardless


of when such expenditures are incurred;


4) All other obligations and liabilities of the Concessionaires, with respect to acts or


omissions under this Agreement prior to the date of such Concessionaire's


withdrawal for which such Concessionaire would have been liable, had it not


withdrawn from this Agreement; and


5) In the case of a partially withdrawing Concessionaire, any costs and liabilities


concerning Exploitation Areas, Commercial Discoveries and Discoveries from


which it has not withdrawn.


6) The obligations and liabilities for which a withdrawing Concessionaire remains


liable shall specifically include its share of any costs of plugging and abandoning /


Wells or portions of Wells in which it participated (or was required to bear a shard





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of the costs pursuant to Article 14.4(A)(1)) to the extent such costs of plugging


and abandoning are payable by the Concessionaires under the EPCC. Any


mortgages, liens, pledges, charges or other encumbrances which were placed on


the withdrawing Concessionaire's Participating Interest prior to such


Concessionaire's withdrawal shall be fully satisfied or released, at the withdrawing


Concessionaire's expense, prior to its withdrawal. A Concessionaire's withdrawal


shall not relieve it from liability to the non-withdrawing Concessionaires with


respect to any obligations or liabilities attributable to the withdrawing


Concessionaire under this Article merely because they are not identified or


identifiable at the time of withdrawal.





B. Notwithstanding the foregoing, a Concessionaire shall not be liable for any


operations or expenditures it voted against (other than operations and expenditures


described in Article 14.4(A)(2) or Article 14.4(A)(3)) if it sends notification of its withdrawal


within five (5) days (or within twenty-four (24) hours for urgent operational matters) of the


Operating Committee vote approving such operation or expenditure. Likewise, a


Concessionaire voting against voluntarily entering into or extending of an Exploration Period,


an Exploration sub-period, a Development and Production Period or any phase of the EPCC or


voluntarily extending the EPCC shall not be liable for the EPCC Article 4 obligation associated


therewith provided that it sends notification of its withdrawal within thirty (30) days of such


vote pursuant to Article 12.2.


14.5 Emergency


If a Well goes out of control or a fire, blow out, sabotage or other emergency occurs prior to


the effective date of a Concessionaire's withdrawal, the withdrawing Concessionaire shall


remain liable for its Participating Interest share of the costs of such emergency, regardless of


when they are incurred.


14.6 Assignment


A withdrawing Concessionaire shall assign its Participating Interest free of cost to each of the


non-withdrawing Concessionaires in the proportion which each of their Participating


Interests (prior to the withdrawal) bears to the total Participating Interests of all the non-


withdrawing Concessionaires (prior to the withdrawal), unless the non-withdrawing


Concessionaires agree otherwise. The expenses associated with the withdrawal and


assignments shall be borne by the withdrawing Concessionaire.


14.7 Approvals


A withdrawing Concessionaire shall promptly join in such actions as may be necessary or


desirable to obtain any Government approvals required in connection with the withdrawal


and assignments. The non-withdrawing Concessionaires shall use reasonable endeavours to


assist the withdrawing Concessionaire in obtaining such approvals. Any penalties or


expenses incurred by the Concessionaires in connection with such withdrawal shall be borne


by the withdrawing Concessionaire.








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14.8 Security


A Concessionaire withdrawing from this Agreement and the EPCC pursuant to this Article


shall provide Security satisfactory to the other Concessionaires to satisfy any obligations or


liabilities for which the withdrawing Concessionaire remains liable pursuant to Article 14.4,


but which become due after its withdrawal, including Security to cover the costs of


Decommissioning, if applicable.


14.9 Withdrawal by All Concessionaires


In the event all Concessionaires decide to withdraw from the EPCC and this Agreement, the


Concessionaires agree that they shall be bound by the terms and conditions of this


Agreement for so long as may be necessary to wind up the affairs of the Concessionaires with


the Government, to satisfy any requirements of applicable law and to facilitate the sale,


disposition or abandonment of property or interests held by the Joint Account, all pursuant


to the provisions of effective date and term of this Agreement Article 2.








Article 15. RELATIONSHIP OF CONCESSIONAIRES AND TAX


15.1 Relationship of Concessionaires


This Agreement shall not be deemed or construed to authorize any Concessionaire to act as


an agent, servant or employee for any other Concessionaire for any purpose whatsoever


except as explicitly set forth in this Agreement. In their relations with each other under this


Agreement, the Concessionaires shall not be considered fiduciaries except as expressly


provided in this Agreement.


15.2 Tax





Each Concessionaire shall be responsible for reporting and discharging its own tax measured


by the profit or income of the Concessionaire and the satisfaction of such Concessionaire's


share of all EPCC obligations under the EPCC and under this Agreement. Each Concessionaire


shall protect, defend and indemnify each other Concessionaire from any and all loss, cost or


liability arising from the indemnifying Concessionaire's failure to report and discharge such


taxes or satisfy such obligations. The Concessionaires intend that all income and all tax


benefits (including deductions, depreciation, credits and capitalization) with respect to the


expenditures made by the Concessionaires hereunder will be allocated by the Mozambican


Government tax authorities to the Concessionaires based on the share of each tax item


actually received or borne by each Concessionaire. If such allocation is not accomplished due


to the application of applicable Mozambican law or other Government action, the


Concessionaires shall attempt to adopt mutually agreeable arrangements that will allow the


Concessionaires to achieve the financial results intended. Operator shall provide each


Concessionaire, in a timely manner and at such Concessionaire's sole expense, with such


information with respect to Petroleum Operations as such Concessionaire may reasonably


request for preparation of its tax returns or responding to any audit or other tax proceedin








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If a Concessionaire transfers, assigns, withdraws or in any way changes the ownership of its


interest in the EPCC, any capital gains tax due on the transfer, assignment, withdrawal or


change in ownership interest is to be fully born and paid by the Concessionaire that


undertook the transfer, assignment, withdrawal or change in its ownership interest, and will


indemnify the remaining Concessionaires for all Taxes due on that transaction.


15.3 United States Tax Election


Notwithstanding the provisions of the applicable Mozambican law, the rights, duties,


obligations and liabilities of the Concessionaires shall be several and not joint or collective,


and each Concessionaire shall be responsible only for its obligations as set out herein, it


being the express purpose and intention of the Concessionaires that this Agreement shall not


be construed as creating a relationship of partnership or an association for profit between or


among the Concessionaires hereto. Notwithstanding the preceding if for U.S. federal income


tax purposes this Agreement and the Petroleum Operations hereunder are regarded as a


partnership, each Concessionaire hereby elects to be excluded from Subchapter "K", Chapter


1, Subtitle A of the US IRS Code. No Concessionaire shall give any notices or take any other


action inconsistent with the election made hereby. In making the foregoing election, each


Concessionaire states that the income derived by such Concessionaire from Petroleum


Operations hereunder can be adequately determined without the computation of


partnership income.








Article 16. VENTURE INFORMATION - CONFIDENTIALITY - INTELLECTUAL PROPERTY





16.1 Venture information





A. Each Concessionaire may use all information it receives under Article 5.5, hereinafter


referred to as the "Venture Information", without the approval of any other Concessionaire,


subject to any applicable restrictions and limitations set forth in this Article 16 and the EPCC.


For purposes of this Article 16, the right to use shall entail the right to copy and prepare


derivative works, subject only to any applicable data licensing agreement.





Subject to Article 16.1B, Concessionaire(s), other than ENH or its Permitted Assignee,


designated under U.S. or EU Trade Laws as a sanctioned person or entity such that the


export, reexport, import, transfer, disclosure, provision or diversion of certain information to


or by such Concessionaire or its Affiliated Companies is prohibited or restricted by the


applicable Trade Laws, shall not at any time during the term of this Agreement or the EPCC,


disclose to or use for the benefit of any other person whatsoever, (including but not limited


to any project, company, firm, or corporation (including Affiliated Companies, non-


Mozambican institutions or governments other than the Mozambican government) any


Venture Information (or any derivative works) made available by, disclosed by or received


from the Operator or any information related to Joint Petroleum Operations or Exclusive


Petroleum Operations made available by, disclosed by or received from the Operator.


Concessionaire(s), other than ENH or its Permitted Assignees, designated under U.S. or EU


Trade Laws as sanctioned person or entity such that the export, reexport, import, transfer, [


disclosure, provision or diversion of certain information to or by such Concessionaire or its \





Page 71 of 87


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Affiliated Companies is prohibited or restricted by the applicable Trade Laws shall restrict the


use of Venture Information (or any derivative works) or information related to Joint


Petroleum Operations or Exclusive Petroleum Operations to only the exploration,


exploitation or production undertaken under the EPCC.


B. Each Concessionaire may, subject to any applicable restrictions and limitations set


forth in the EPCC or this Article 16, extend the right to use Venture Information to each of its


Affiliated Companies which are obligated to terms not less restrictive than this Article 16.


Concessionaire(s), other than ENH or is Designated Assignee, designated under U.S. or


EUTrade Laws as a sanctioned person or entity such that the export, reexport, import,


transfer, disclosure, provision or diversion of certain information to or by such


Concessionaire or its Affiliated Companies is prohibited or restricted by the applicable Trade


Laws may, subject to any applicable restrictions and limitations set forth in the EPCC, disclose


to and allow use of Venture Information (or any derivative works) or information related to


Joint Petroleum Operations or Exclusive Petroleum Operations by each of its Affiliated


Companies solely for the purpose of meeting Concessionaire's obligations under this


Agreement if such respective Affiliated Companies are obligated to terms not less restrictive


than this Article 16.


C. The disclosure, use, acquisition or development of Venture Information (or any


derivative works) or information related to Joint Petroleum Operations or Exclusive


Petroleum Operations (in this paragraph collectively referred to as "Combined (Venture


Information") under terms other than as specified in this Article 16, shall require the


approval of the Operator. The request for approval submitted by a Concessionaire shall be


accompanied by a description of, and summary of the use and disclosure restrictions which


would be applicable to the Combined Venture Information; a certification from


Concessionaire, in a form acceptable to Operator (such acceptance shall not be unreasonably


withheld or delayed), that the Combined Venture Information shall not be exported, re-


exported, transferred, or diverted in violation of applicable Trade Laws; and any such


Concessionaire will be obligated to use all reasonable efforts to arrange for rights to use


which are not less restrictive than specified in this Article 16. Operator shall not


unreasonably withhold or delay its approval of a Concessionaire's request under this


paragraph.


D. All Venture Information received by a Concessionaire under this Agreement is


received on an "as is" basis without warranties, express or implied, of any kind. Any use of


such Venture Information by a Concessionaire shall be at such Concessionaire's sole risk


16.2 Confidentiality


A. Subject to the provisions of applicable law, the EPCC and this Article 16, the


Concessionaires agree that all information in relation to Joint Petroleum Operations or


Exclusive Petroleum Operations shall be considered confidential and shall be kept


confidential and not be disclosed until the expiry of five (5) years from the termination of the


later of: (i) the EPCC; and (ii) this Agreement, to any person not a Concessionaire to this


Agreement, except: r








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 Z5-CEPCC AnnexF





1) To an Affiliated Company pursuant to Article 16.1(B);


2) To a governmental agency or other entity when required by applicable law or the





EPCC;


3) To the extent such information is required to be furnished in compliance with


applicable law, or pursuant to any legal proceedings or because of any order of


any court binding upon a Concessionaire;


4) To prospective or actual attorneys engaged by any Concessionaire where


disclosure of such information is essential to such attorney's work for such


Concessionaire;


5) To prospective or actual contractors and consultants engaged by any


Concessionaire where disclosure of such information is in compliance with Article


16.1A. and essential to such contractors' or consultants' work for such


Concessionaire;


6) To a bona fide prospective transferee of a Concessionaire's Participating Interest


to the extent appropriate and for the sole purpose of prospective transferee's


assessment of such Participating Interest (including an entity with whom a


Concessionaire and/or its Affiliated Companies are conducting bona fide


negotiations directed toward a merger, consolidation or the sale of a majority of


its or an Affiliated Company's shares);


7) To a bank or other financial institution to the extent appropriate to a


Concessionaire arranging for funding;


8) To the extent such information must be disclosed pursuant to any rules or


requirements of any government or stock exchange having jurisdiction over such


Concessionaire, or its Affiliated Companies; provided that if any Concessionaire


desires to disclose information in an annual or periodic report to its or its


Affiliated Companies' shareholders and to the public and such disclosure is not


required pursuant to any rules or requirements of any government or stock


exchange, then such Concessionaire shall comply with Article 21.3;


9) To its respective employees for the purposes of Joint Petroleum Operations or


Exclusive Petroleum Operations as the case may be, subject to each


Concessionaire taking customary precautions to ensure such information is kept


confidential; and its use restricted to Petroleum Operations; and


10) Any information which, through no fault of a Concessionaire, becomes a part of


the public domain.


B. Disclosure as pursuant to Articles 16.2(A)(5), (6), and (7) shall not be made unless


prior to such disclosure the disclosing Concessionaire has obtained a written undertaking


from recipient party to keep the information strictly confidential until the expiry of five (5)


years from the termination of the later of: (i) the EPCC; and (ii) this Agreement, and to use





Page 73 of 87


 Z5-CEPCC AnnexF





the information for the sole purpose described in Articles 16.2(A)(5), (6), and (7), whichever


is applicable, with respect to the disclosing Concessionaire.


16.3 Intellectual Property


A. Subject to the restrictions in this Article 16.3 and 16.5 and unless provided otherwise


in the EPCC, all intellectual property rights developed by the Joint Account in the Venture


Information shall be Joint Property. Subject to the restrictions in this Article 16.3, each


Concessionaire and its Affiliated Companies have the right to use, export, reexport, import,


transfer, disclose, or provide all such intellectual property rights in their own operations


(including joint operations or a production sharing arrangement in which the Concessionaire


or its Affiliated Companies has an ownership or equity interest) without the approval of any


other Concessionaire, but, in regard to any Concessionaire other than ENH or its Permitted


Assignee, only to the extent that such use, export, reexport, import, transfer, disclosure, or


provision of such intellectual property rights will not cause any other Concessionaire or its


Affiliated Companies to violate or be in violation of, or be subject to the imposition of fines,


penalties or sanctions under, any applicable Trade Laws. Decisions regarding obtaining,


maintaining and licensing such intellectual property rights shall be made by the Operating


Committee and the costs thereof shall be for the Joint Account. Upon unanimous consent of


the Operating Committee as to ownership, licensing rights, and income distribution, the


ownership of intellectual property rights in the Venture Information may be assigned to the


Operator or to a Concessionaire; provided each Concessionaire and its Affiliated Companies


shall have a perpetual, royalty-free, irrevocable license for their own operations (including


joint operations or a production sharing arrangement in which a Concessionaire or its


Affiliated Companies has an ownership or equity interest, or a contractual right to produce or


operate hydrocarbon interests) and each Concessionaire, other than ENH or its Permitted


Assignee, agrees that it and its Affiliated Companies shall use, export, reexport, import,


transfer, disclose, or provide such intellectual property rights or license subject to and in


compliance with applicable Trade Laws and such Concessionaire's and its Affiliated


Companies use, export, reexport, import, transfer, disclosure or provision of such intellectual


property rights or license shall not cause any other Concessionaire or its Affiliated Companies


to violate or be in violation of, or be subject to the imposition of fines, penalties or sanctions


under any applicable Trade Laws. However, where confidential information and intellectual


property has been patented or is subject to a pending patent application by a Concessionaire


or an Affiliated Company, and is utilized for the benefit of the Joint Account on Joint Property


such intellectual property and confidential information shall remain the property of that


Concessionaire. Concessionaires will enter into appropriate agreements prior to the use of


such patented confidential information and intellectual property.


B. Nothing in this Agreement shall be deemed to require a Concessionaire to (i) disclose


proprietary technology to any of the other Concessionaires; or (ii) grant a license or other


rights under any intellectual property rights owned or controlled by such Concessionaire or


its Affiliated Companies to any of the other Concessionaires.


C. If in the course of carrying out activities charged to the Joint Account, a


Concessionaire or an Affiliated Company of a Concessionaire makes or conceives any (


inventions,, or improvements which primarily relate to or are primarily based on the \





Page 74 of 87


 Z5-C EPCC AnnexF








proprietary technology of such Concessionaire or its Affiliated Companies, then all


intellectual property rights to such inventions, discoveries, or improvements shall belong


exclusively to such Concessionaire and each other Concessionaire shall have a perpetual,


royalty-free, irrevocable license to use such inventions, discoveries, or improvements, but


only in connection with the Joint Petroleum Operations.


D. Subject to Article 5.7(B), all costs and expenses of defending, settling or otherwise


handling any claim which is based on the actual or alleged infringement of any intellectual


property right shall be for the account of the Petroleum Operation from which the claim


arose, whether Joint Petroleum Operations or Exclusive Petroleum Operations.


16.4 Continuing Obligations


Any Concessionaire ceasing to own a Participating Interest during the term of this Agreement


shall nonetheless remain bound by the obligations of use, disclosure, and confidentiality in this


Article 16, and any disputes in relation thereto shall be resolved pursuant to Article 19.2.


16.5 Trades


Operator may, subject to approval of INP and the Operating Committee, make data trades


and trade other information resulting from Petroleum Operations for the benefit of the


Concessionaires, with any data so obtained to be furnished to all Concessionaires who


participated in the cost of the data that was traded; provided, that treatment of such data


shall be subject to its obligations under Article 16.1 and 16.2. Operator shall cause any third


party to such trade to enter into an undertaking to keep the traded data confidential and to


comply with all applicable Trade Laws regarding the export, reexport, import, transfer,


disclosure, provision or end use of such data.


16.6 Breach


A. If a dispute over a breach, by a Concessionaire, other than ENH or is Permitted


Assignee, designated under U.S. or EU Trade Laws as a sanctioned person or entity, of Article


16 obligations specific only to such Concessionaire results in a final arbitration award that


such Concessionaire breached its Article 16 obligations, then for the period (the "Breach


Period”) from the date of that final arbitral award until such Concessionaire has satisfied in


full the final arbitral award and notwithstanding any other provision of this Agreement to the


contrary the Concessionaire responsible for that breach of Article 16 obligations (the


"BreachingConcessionaire") shall have no right, during the Breach Period, to:


1) Call or attend Operating Committee or subcommittee meetings;


2) Vote on any matter coming before the Operating Committee or any


subcommittee;


3) Access any data or information relating to any Petroleum Operations under this


Agreement; or


4) Consent to or reject data trades between the Concessionaires and


nor access any data received in such data trades.





Page 75 of 87





 Z5-CEPCC Annex F








B. Notwithstanding any other provisions in this Agreement, during the Breach Period:


1) Unless agreed otherwise by the Non-Breaching Concessionaires, the voting





interest of the Non-Breaching Concessionaires shall be equal to the ratio such


Non-Breaching Concessionaire's Participating Interest bears to the total


Participating Interests of the Non-Breaching Concessionaires;


2) Any matters requiring a unanimous vote or approval of the Concessionaires shall


not require the vote or approval of the Breaching Concessionaire;


3) The Breaching Concessionaire shall be deemed to have elected not to participate


in any operations that are voted upon during the Breach Period, to the extent


such an election would be permitted by Article 6.13 and Article 8; and


4} The Breaching Concessionaire shall be deemed to have approved, and shall join


with the Non-Breaching Concessionaires in taking, any other actions voted on


during the Breach Period.


Articles 16.6 (A) and (B) shall not be construed as limiting any rights or powers of the


Operator during the period prior to or after any Breach Period and shall not be applicable to


Concessionaires who are not designated under U.S. or EU Trade Laws as sanctioned person


or entity.








Article 17. FORCE MAJEURE


If as a result of Force Majeure any Concessionaire is rendered unable, wholly or in part, to





carry out its obligations under this Agreement, other than the obligation to pay any amounts


due or furnish Security, then the obligations of the Concessionaire giving such notice, so far


as and to the extent that the obligations are affected by such Force Majeure, shall be


suspended during the continuance of any inability so caused and for such reasonable period


thereafter for the Concessionaire to put itself in the same position that it occupied prior to


the Force Majeure, but for no longer period.


The Concessionaire claiming Force Majeure shall notify the other Concessionaires of the


Force Majeure within a reasonable time after the occurrence of the facts relied on and shall


keep all Concessionaires informed of all significant developments. Such notice shall give


reasonably full particulars of the Force Majeure and also estimate the period of time which


the Concessionaire will probably require to remedy the Force Majeure. The affected


Concessionaire shall use all reasonable diligence to remove or overcome the Force Majeure


situation as quickly as possible in an economic manner but shall not be obligated to settle


any labour dispute except on terms acceptable to it, and all such disputes shall be handled


within the sole discretion of the affected Concessionaire.


For purposes of this Agreement, "Force Majeure" shall have the same meaning as in the


EPCC. For clarity:


1) where a Concessionaire owned or Controlled by a government is prevented from


performance under this Agreement due to an act or inaction of that government,





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 Z5-C EPCC AnnexF





that act or inaction of that government will not be considered an event Force


Majeure unless the act or inaction by that government is of universal application


and





2) the inability of all Concessionaires to declare Force Majeure under the EPCC due


to an act or inaction of a government applying to less than all of the


Concessionaires shall not prevent the Concessionaires from declaring Force


Majeure under the EPCC by a normal pass mark vote.











Article 18. NOTICES





18.1 Except as otherwise specifically provided, all notices authorized or required between the


Concessionaires by any of the provisions of this Agreement shall be in writing (in English).


Notices shall be delivered:


1 In person or by a recognized international courier service maintaining records of


delivery;


2. By facsimile, provided that the sender provides written evidence of successful and


complete transmission; or


3. By e-mail, provided that the recipient confirms in writing successful receipt of the


notice sent.





Oral communication does not constitute notice for purposes of this Agreement, and


telephone numbers for the Concessionaires are listed below as a matter of convenience only.


With respect to facsimile and/or e-mail communication, automated delivery receipts shall


not be evidence of a notice being delivered for purposes of this Agreement.


A notice under this Agreement shall be deemed delivered only when received by the


Concessionaire to whom such notice is directed. "Received" shall mean actual delivery of the


notice by the methods and to the address of the Concessionaire specified in Article 18.2 or to


the most current address specified in a notice under Article 18.3.


18.2 All such notices shall be addressed to the respective Concessionaires, as the case may be, as


follows:


ENH





Address: Avenida 25 de Setembro, Time Square, Bloco 1, l9 andar





CP 4787





Maputo - Mozambique


Contact: Omar Mitha, Presidente do Conselho de Administrazao





Telephone: +258 21429456/67


Fax: +258 21 324808 /


Email: omar.mitha@enh.co.mz '





Page 77 of 87


 Z5-C EPCC AnnexF














ExxonMobil





Address: Avenida Julius Nyerere, 3412, R/C, Maputo, Mozambique


Contact: Jos Evens, General Manager





Telephone: +258 85 8382001








Email: jos.evens@exxomobil.com











Rosneft








Address: AvJulius Nyerere, n.9 3412, 29 andar,Maputo, Mozambique





Contact: Anton Butov, Director





Telephone: + (258) 21241400


E-mail: avbutov@rosneft.ru














18.3 Subject to this Article 18 each Concessionaire hereto may substitute or change the aforesaid


address by giving written notice thereof to the others.








18.4 The Concessionaires shall at all times maintain an address in Maputo for the purpose of


service of notice.





Article 19. APPLICABLE LAW - DISPUTE RESOLUTION





19.1 Applicable Law





This Agreement shall be governed by and construed in accordance with the Laws of the


Republic of Mozambique.





19.2 Dispute Resolution





A. Other than a dispute arising from Article 29.2 of the EPCC, any dispute, including


regarding performance, breach, termination or invalidity thereof, arising out of or relating to





this Agreement (hereinafter referred to as a "Dispute") shall be settled in accordance with


the dispute resolution procedures provided in this Agreement, unless otherwise agreed in


writing by the Concessionaires. A Concessionaire may commence the dispute resolution


process under this Agreement by giving written notice to the other Concessionaires of a


Dispute in accordance with Article 18 (hereinafter referred to as a "Notice of Dispute"). The


Notice of Dispute shall state the Concessionaires to the Dispute, the nature of the Dispute,


and the relief requested. Within thirty (30) days of receipt of a Notice of Dispute, senior











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executives of the Concessionaires with authority to settle the Dispute shall meet in Geneva,











Switzerland, in an effort to reach an amicable settlement of all or part of the Dispute.


B. If for any reason the Dispute has not been resolved by an agreement in writing


within thirty (30) days of receipt of a Notice of Dispute, the Dispute (save for any matter


referred to a Sole Expert as provided in Article 19.2.M) shall be finally resolved by binding


arbitration under the Rules of Arbitration of the International Chamber of Commerce (the


"Rules") then in force, to the extent such Rules are not inconsistent with the provisions of


this Agreement.


C. Except as provided by this clause, the nomination and confirmation of the arbitrators


shall be made in accordance with the relevant provisions of the Rules. The arbitral tribunal


shall be composed of three arbitrators (the "Tribunal"). In the request for arbitration, the


Concessionaire or Concessionaires requesting arbitration (the "Claimant" or "Claimants")


shall nominate one arbitrator. The Concessionaire or Concessionaires named as Respondent


or Respondents by the Claimant (the "Respondent" or "Respondents") shall nominate one


arbitrator within thirty (30) days of the receipt of the request for arbitration. The two


arbitrators nominated by the Claimant or Claimants and Respondent or Respondents shall


together nominate the third arbitrator, who shall be the chairman of the Tribunal, by mutual


agreement within thirty (30) days of the nomination of the second arbitrator. In the event


there are multiple Claimants or multiple Respondents, the multiple Claimants jointly and the


multiple Respondents jointly shall nominate an arbitrator. In the event the multiple


Claimants or multiple Respondents are unable to agree on a joint nomination, all three


arbitrators will be appointed by the ICC Court.


D. Neither any arbitrator nor the Chairman of the arbitration tribunal, as applicable,


shall be of the same nationality as any Concessionaire.





E. The place of arbitration under these provisions shall be Geneva, Switzerland, the


substantive law of the arbitration shall be Mozambican law, and the language of arbitration


or expert determination shall be English.


F. The Concessionaires waive their rights to claim or recover from each other, and the


arbitral tribunal shall have no power to award, any punitive, multiple, or other exemplary


damages (whether statutory or common law), or Consequential Losses, except to the extent


such damages or Consequential Losses have been awarded to a third party and are subject to


allocation between or among the parties to the Dispute, and as specified in Article 8.3.





G. Except to the extent necessary for proceedings relating to enforcement of the


arbitration agreement, the award or other, related rights of the Concessionaires, the fact of


the arbitration, the arbitration proceeding itself, all evidence, memorials or other documents


exchanged or used in the arbitration and the arbitrators' award shall be maintained in


confidence by the Concessionaires to the fullest extent permitted by applicable law.


However, a violation of this covenant shall not affect the enforceability of this agreement to


arbitrate or of the Tribunal's award.





H. The Tribunal shall designate a prevailing Concessionaire (or Concessionaires) in its


final award. Pursuant to this determination, the Tribunal shall award to the prevailing








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Concessionaire (or Concessionaires) its attorneys' fees, costs and expenses of the arbitration


(including the arbitrators' fees and expenses) in full.


I. The award shall include interest, unless the Tribunal determines it is not appropriate.


Interest shall run from the date of any breach or violation of this Agreement, which shall be


determined by the Tribunal in its award. If the Tribunal cannot determine such date or fails


to specify such date in its award, interest shall run from the date of filing of the request for


arbitration. Interest as determined by the Tribunal shall continue to run from the date of the


Tribunal's award until the award is paid in full.


J. Insofar as practicable, the Concessionaires shall continue to implement the terms of


this Joint Operating Agreement, notwithstanding the initiation of arbitral proceedings and


any pending disputes.


K. The provisions set out in this Article 19.2 shall survive termination of this Agreement.


L. Any award or a decision, including an interim award or decision, in arbitral


proceedings pursuant to this Article 19.2, shall be binding on the Concessionaires and


judgment thereon may be entered in any court having jurisdiction for that purpose. Each


Party hereby irrevocably waives any defences based upon sovereign immunity and waives


any claim to immunity in respect of proceedings in aid of arbitration or in respect of the


validity and enforceability of any such award or decision including, without limitation,


immunity from service of process and from the jurisdiction of any court.


M. The Concessionaires may agree that a matter in dispute of a technical nature not


involving interpretation of law or the application of this Agreement (or with respect to any


other matter which the Concessionaires may otherwise agree to so refer) shall be referred to


a third party by a Concessionaire giving notice to such effect pursuant to Article 18. In such


case, all Concessionaires that are party to the Dispute must agree in writing before expert


determination may be undertaken. Such notice shall contain a statement describing the


Dispute and all relevant information associated therewith. A Sole Expert shall be an


independent and impartial person of international standing with relevant qualifications and


experience and not of the same nationality as any Concessionaire and shall be appointed


pursuant to the mutual agreement of the Concessionaires that are party to the Dispute. Any


Sole Expert appointed shall act as an expert and not as an arbitrator or mediator and shall be


instructed to endeavour to resolve the Dispute referred to him within thirty (30) days of his


appointment but in any event within sixty (60) days of his appointment. Upon the selection


of the Sole Expert, the Concessionaire receiving the notice of referral above shall submit its


own statement containing all information it considers relevant with respect to the matter in


dispute. The decision of the Sole Expert shall be final and binding and not subject to any


appeal, save for fraud, corruption or evident partiality. If the Concessionaires are unable to


agree on the appointment of a Sole Expert within twenty (20) days after a Concessionaire has


received a notice of referral under this Article the Sole Expert shall be selected by the ICC


International Centre for ADR and the person so selected shall be appointed by the


Concessionaires.


N. The Sole Expert shall decide the manner in which any determination is made, I


including whether the Concessionaires shall make oral or written submissions and arguments h f


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and the Concessionaires shall co-operate with the Sole Expert and provide such


documentation and information as the Sole Expert may request. All correspondence,





documentation and information provided by a Concessionaire to the Sole Expert shall be


copied to the other Concessionaire, and any oral submissions to the Sole Expert shall be


made in the presence of all Concessionaires and each Concessionaire shall have a right of


response. The Sole Expert may obtain any independent professional or technical advice as


the Sole Expert considers necessary. The English version of this Agreement signed by the


Concessionaires shall be used as the official translation in any determination by the Sole


Expert. The fees and expenses of a Sole Expert appointed under the provisions of Article


19.2.M shall be borne equally by the Concessionaires.


0. The Concessionaires hereby agree not to exercise any right to institute proceedings


to set aside any interim or final arbitral award made pursuant to this Article 19.2, except


nothing in this Article 19.2.0 shall be read or construed as imposing any limitation or


constraint on either Concessionaires' right to seek to nullify or set aside any such interim or


final arbitral award rendered by an arbitral tribunal pursuant to the Rules on the limited


grounds and in accordance with the procedure provided in the arbitration law at the seat of


arbitration.











Article 20. ALLOCATION OF COST & PROFIT PETROLEUM





20.1 Allocation of Total Production





A. The total quantity of Petroleum Produced and measured pursuant to the EPCC at the


Delivery Point as determined in the approved Development Plan from each Development and








Production Area and to which the Concessionaires are collectively entitled pursuant to


applicable law and the EPCC shall be composed of Cost Petroleum and Profit Petroleum in


accordance with the provisions of applicable law and the EPCC.


B. Operator shall develop and the Operating Committee shall approve procedures for


allocating such Cost Petroleum and Profit Petroleum during each Calendar Quarter among


the individual Development and Production Areas based upon the following principles.


1) Cost Petroleum and Profit Petroleum shall first be allocated to Development and


Production Areas based on the principle that an earlier established operation shall


not be enhanced or impaired in any way through the subsequent establishment of


any Development and Production Area, whether the subsequently established


Development and Production Areas are Exclusive Petroleum Operations or Joint


Petroleum Operations.


2) All allocations made pursuant to this Article shall incorporate adjustments to


reflect differences in value if different qualities of Petroleum are produced.





20.2 Allocation of Petroleum to Concessionaires





Cost Petroleum and Profit Petroleum allocated to Development and Production Areas


pursuant to Article 20.1 shall be allocated to the Concessionaires in proportion to their





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payments made which are recoverable costs pursuant to the EPCC in each such Development


and Production Area. Notwithstanding anything to the contrary contained in this Article, and


to the extent allowed under the EPCC, Cost Petroleum which are not specifically attributable


to an Development and Production Area, if any, shall be allocated to the Concessionaires in


proportion to their respective participation in the operations which underlie any such Cost


Petroleum, provided, however, that the rights of a Concessionaire to Cost Petroleum or Profit


Petroleum from an Development and Production Area to which it is a participant shall not be


impaired by the rights of any other Concessionaire to recover Cost Petroleum which are not


specifically attributable to such Development and Production Area. To the extent that


Operator, on behalf of the Concessionaires, or the Concessionaires themselves, receive


reimbursement or refund of expenses (including taxes and levies) from the Government in


the form of additional Petroleum, such Petroleum shall be allocated to the Concessionaires in


proportion to the Participating Interests applicable at the time of the related overpayment.


20.3 Use of Estimates


Initial distribution of Petroleum pursuant to this Article shall be based upon estimates


furnished by Operator pursuant to Article 10, with adjustments for actual figures to be made


in kind within forty-five (45) Days after the end of the Calendar Quarter and at any later date


when adjustments must be made with the Government pursuant to applicable law and the


EPCC.


20.4 Principles


If no allocation procedure is approved by the Operating Committee in accordance with Article


20.1, the Concessionaires shall nonetheless be bound by the principles set forth in this Article


with regard to the allocation of Cost Petroleum and Profit Petroleum.


Article 21. GENERAL PROVISIONS


21.1 Conduct of the Concessionaires


A. Each Concessionaire warrants that it and its Affiliated Companies or any of their


directors, officers, employees, personnel, or any service providers of such Concessionaire (i)


have not made, offered, or authorized and (ii) will not make, offer, or authorize, in each case


to the extent related to the activities under or in connection with this Agreement, any


payment, gift, promise or other advantage, whether directly or through any other person or


entity, to or for the use or benefit of any public official (i.e., any person holding a legislative,


administrative or judicial office, including any person employed by or acting on behalf of a


public agency, a public enterprise or a public international organization) or any political party


or political party official or candidate for office, where such payment, gift, promise or


advantage would violate





(i) applicable Mozambican law;











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(ii) the law of the country of incorporation of such Concessionaire or such


Concessionaire's ultimate parent company and of the principal place of business of








such ultimate parent company; or


(iii) the principles described in the Convention on Combating Bribery of Foreign Public


Officials in International Business Transactions, signed in Paris on December 17,


1997, which entered into force on February 15,1999, and the Convention's


Commentaries.


B. Each Concessionaire shall defend, indemnify and hold the other Concessionaires or


their Affiliated Companies harmless from and against any and all claims, damages, losses,


penalties, costs and expenses arising from or related to, any breach by such first


Concessionaire or its Affiliated Companies, or any of their directors, officers, employees,


personnel, or any service providers of such Concessionaire of such warranty. Such indemnity


obligation shall survive termination or expiration of this Agreement. Each Concessionaire


shall as soon as possible notify the other Concessionaires of any investigation or proceeding


initiated by a governmental authority in regard to acts which may be a violation of the


warranty in Article 21.1(A) by such Concessionaire, or its Affiliated Companies, or any of their


directors, officers, employees, personnel, or any service providers of such Concessionaire or


its Affiliated Companies, concerning operations and activities under this Agreement. Each


Concessionaire shall in good time (i) respond in reasonable detail to any notice from any


other Concessionaire reasonably connected with the above-stated warranty; and (ii) furnish


dapplicable documentary support for such response upon request from such other


Concessionaire.


C. Each Concessionaire agrees to (i) maintain adequate internal controls, including in


regard to the subject matter of Article 21.1.A; (ii) establish and prepare its books and


records, and prepare its periodic statement of accounts, in relation to activities of this


Agreement in accordance with generally accepted accounting practices applicable to such


Concessionaire and to properly record and report all transactions in reasonable detail; (iii)


retain such books and records in accordance with each Concessionaire's record


management guidelines, but for not less than three (3) Calendar Years and (iv) comply


with the laws applicable to it. Each Concessionaire must rely on the other


Concessionaires' system of internal controls, and on the adequacy of full disclosure of the


facts, and of financial and other data regarding the Petroleum Operations undertaken


under this Agreement. No Concessionaire is in any way authorized to take any action on


behalf of another Concessionaire that would result in an inadequate or inaccurate


recording and reporting of assets, liabilities or any other transaction, or which would put


such Concessionaire in violation of its obligations under the laws applicable to the


Petroleum Operations conducted pursuant to the EPCC and this Agreement.





D. Notwithstanding anything in this Agreement to the contrary, each Concessionaire


undertakes to use commercially reasonable endeavours to cooperate with each other


Concessionaire in complying with all applicable law relating to Joint Petroleum Operations


or Exclusive Petroleum Operation and to the respective corporate structures of each


other Concessionaire and its Affiliate Companies. Each Concessionaire expressly


acknowledges that each other Concessionaire and its Affiliate Companies are subject to,


and must comply with, applicable law relating to their respective corporate structures,





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